Chapter 12: Legal Aspects of Contracts: Wagers, Licensing, Usury & Public Policy

What types of contracts may violate statutes?

Wagers, insurance, licensing statutes, usury, and credit cards.

Are gambling contracts legal?

Gambling contracts are illegal unless authorized by state statute.

What is required for someone to take an insurance policy on another's life?

The person must have an insurable interest in that individual.

What happens to contracts made by unlicensed workers?

They are unenforceable if licensing requirements protect the public.

What do usury laws prohibit?

Charging excessive interest on a loan.

How do lenders often avoid limits on interest rates for credit cards?

They may use the rate of their own state or that of the consumer, whichever is higher.

What is a restraint of trade?

An agreement not to compete that must be ancillary to be a legitimate bargain.

What conditions make a non-compete agreement enforceable in a sale of business?

It must be reasonable in time, location, and scope of activity.

What is an exculpatory clause?

A clause that attempts to release a party from liability during an injury to another party.

When is an exculpatory clause unenforceable?

When it affects public interest, excludes intentional tort or gross negligence, involves unequal bargaining power, or is not clearly written.

What is bailment?

The act of giving possession and control of personal property to another person.

Who are the parties involved in a bailment?

The bailor (giving up possession) and the bailee (accepting possession).

What defines an unconscionable contract?

A contract that is fundamentally unfair and can be refused enforcement by the court.

What are the two main factors of unconscionability?

Oppression (superior power forcing a contract) and surprise (weaker party not understanding the agreement).

What are adhesion contracts?

Standard form contracts prepared by one party and given to another on a 'take it or leave it' basis.

When are adhesion contracts enforced?

When both parties have equal power; otherwise, they are not enforced.

What is an example of a bailment situation?

Valet services or auto repair shops where possession of property is transferred.