Business Law Chapter 15

What makes an agreement illegal?

if a law makes that kind of agreement illegal, if the agreement calls for behavior that violates a law, or if the agreement is contrary to a general rule of public policy

when determining the legality of an agreement, what do courts presume?

parties intended a legal result

what does it mean that courts take a hands-off approach to illegal agreements?

they will not enforce it and will not grant any relief to the parties involved

when is recovery allowed in cases of ignorance of law?

for performance rendered before the parties learned of the illegality and only if the illegality does not involve immoral behavior or pose a serious threat to the public welfare

When else are exceptions made for illegal contracts?

those entered due to misrepresentation, fraud, duress, or undue influence

what do courts use to encourage people to cancel illegal agreements?

allowing parties to recover any consideration they have given if they rescind an illegal agreement before anyone performs an illegal act

What does it mean if an illegal contract is divisible?

the legal parts can be separated and enforced

if acts are individually lawful, but net effect is criminal, what does that make the agreement?

illegal

What is true regarding state regulation on gambling?

All states have statutes prohibiting or regulating gambling

illegal wager

when parties create a new risk for the sole purpose of bearing it

if the parties agree who shall bear an existing risk

it is a legal risk-shift agreement

What’s the difference between illegal wagers and stock market target transactions?

parties to stock/commodities transactions are legally bound to the purchase agreement

what do usury laws prohibit

charging more than a stated amount of interest for the use of money

what are typical penalties for violations for the usury laws?

forfeiture of excess interest, all interest, or interest and principal depending on the state

sunday laws (or blue laws) prohibit

the performance of certain kind of work and the transaction of certain business on Sunday

What is the purpose of licensing statues?

protecting the public from dishonest or unskilled persons

revenue-raising statutes

where the sole purpose of a licensing statue is to raise revenue, and the failure to obtain one does not affect the legality of an agreement

regulatory statutes

require proof of character and skill; impose a penalty for violation

what 3 types of agreements with public officials are illegal?

agreements to pay public servants more/less than lawful salary; agreements to create conflict between public servant’s personal interests and public duties; agreements to pay public servants to influence decisions

exculpatory clause

a provision in a contract that attempts to relieve one party to the contract from liability for the consequences of their own negligence

What do courts look at agreements that attempt to limit competition to determine?

whether the restraint imposed is reasonable or should be struck down as contrary to public policy

Courts also consider the degree of hardship that agreements not to compete would have on who?

the public and party being restrained

in what two ways have modern courts responded to unequal bargaining power?

increasing legal restrictions on private contracts AND recognizing the idea of unconscionable contracts

when section of the UCC recognizes the idea of unconscionable contracts?

Section 2-302

How does the UCC define unconscionable?

it does not; it leaves courts to determine it