Transcript Business Law: Ch 10

Legal Purpose and Proper Form
 Agreements
that involve contracting for
an illegal act generally are void and
unenforceable
 Illegal
Lotteries
• Three elements
1. Prize – something of value for one or more
winners
2. Chance – winner decided solely by luck
3. Consideration – payment is required to
participate

Wager – is a bet on the uncertain
outcome of an event
 Casinos
– permits traditional games
such as keno, blackjack, roulette and the
like
 Pari-mutuel betting – form of betting
where the winner of the horse race share
the total prize pool
 State-run lotteries – winner split the
jackpot
 Bingo games and pull-tab betting
 Agreements
to pay usurious interest
• Lenders of money may not charge more than a
specified interest rate
• 18% is the common maximum but it may vary
from state to state
• Usury – lending money at a rate higher then
state allows
• State allow higher rates for “payday” loans –
under $1500.
 Agreements
involving illegal
discrimination
 Agreements
that obstruct legal
procedures
• Pay non-expert witnesses in a trial to testify or
pay for false testimony
• Bribe jurors
• Compound a Crime – Refrain from informing on
or prosecuting an alleged crime in exchange for
money
 Agreements
made without a required
competency license
• License required for people of certain
occupations and businesses – must pass exam
• Person who lacks license may not enforce the
contracts that make
• Revenue Raising License – license people who
raise money
 Contracts are valid
 Agreements
that affect marriage
negatively
• Pay someone to promise to marry you
• Pay someone not to marry
• Pay someone to divorce
 Agreements
that restrain trade
unreasonably
• Price Fixing – Competing firms agree on the
same price
 Unenforceable
• Bid Rigging – Competitors agree that one bidder
will have the lowest bid
• Resale Price Maintenance
• Allocation of Markets – divide the market are
illegal and unenforceable
 Protected Victims
 The
Excusably Ignorant – Can enforce legal
part of contract or obtain restitution
• Excusably ignorant is:
1. Does not know the contract is illegal
2. The other party knows the transaction is illegal
3. The illegality is minor


Rescission Prior to Illegal Act
Divisible Contracts – Contain combination
of legal and illegal provisions
 Occurs
when there is a grossly unfair
contract parties under ordinary
circumstances would not accept
 The
victim must show:
1. He or she was presented with a take it or leave
it contract
2. The other party had overwhelming bargaining
power
3. There is no viable alternative in the
marketplace
4. Injustice can only be avoided by holding
certain terms or the whole contract
unconscionable.
 Required
1.
2.
3.
4.
5.
to be in writing
Contracts to buy and sell goods for a
price over $500
Contracts to buy and sell real property
or any interest in real property
Contracts that require more than one
year to complete
Promises to stand good for the debts of
another or of an estate
Promises to give something of value in
return for a promise of marriage
A
contract that has been fully performed
• Both parties have done all they
promised to do
 Contract
that has not been fully
performed
 Something agreed upon remains to be
done
 If the contract falls within statute of fraud
in unenforceable
 Any consideration exchanged can be
recovered by suing based on QuasiContract
 Exists
when some element of an
enforceable contract is missing, yet the
courts award money to prevent the unjust
enrichment of one party
 Writing
need not utilize any special form
to satisfy the Statute of Frauds as long as
the writing contains certain key elements
Names of the parties
A description of the subject matter
Prices
Quantity
Signature
Other essential terms
1.
2.
3.
4.
5.
6.
•
•
•
•
Time or method of delivery
Terms of payment
Method of financing
Date for transfer of possession
1.
2.
The quantity of goods
That a contract has been created
between the parties
 Under
the Statutes of Frauds, only the
parties whose signatures actually appear
on the contract may be sued for
enforcement
 Under the UCC, a contract proposal in
writing signed by one party and sent to
the other is enforceable against the other
party unless the other party objects to
the terms within 10 days of receipt.
Contract for the Sale of Goods for $500
or more
1.
•
Modification of a contract that was below $500
and now the total price is above $500, then it
must be in writing
UCC exceptions to the Statute of Frauds:

•
•
•
•
When goods are ordered to be specially
manufactured and they are not suitable to be
sold to others
When goods have been ordered and paid for
and the seller has accepted payment
When goods have been received and accepted
by the buyer
When the party against whom enforcement is
sought admits during legal proceedings that an
oral contract was made
Contracts to Sell an Interest in Real
Property
2.
Includes land and buildings permanently
attached to the land
Transfer of title, ownership of real property,
or of lesser interests, must be in a properly
signed writing to be enforceable.
•
•

1.
2.
3.
Exception:
Made partial or full payment
Occupied the land
Made substantial improvements to the land
Contracts that require more than one
year to complete
3.
•
Begins at the time the contract is made, not at
the time contractual performance is to begin
4. Contracts to pay a debt or answer for
another’s debt or the debt of an estate
• Collateral Promise – Promise to pay a
debt or default of another
• Primary Promise – Promise to pay
another’s debt that is not conditioned
upon the other person’s failure to pay.
• Exception: Main Purpose Rule – Third
party is responsible for an oral
promise that serves the promisor’s
own interest
5. Contracts for which the consideration
is marriage
• A signed writing is required for
agreements in which one party
promises to marry in return for
something more than the other’s
promise to marry.
• If one party breaches either an oral or
written contract to marry, the victim of
the breach may successfully sue for
damages
 Acknowledgement
of Final Agreement
• Issues develop involving preceding oral
agreements not reflected in the ultimate
contract.
• Contract clause stating both parties agree that
the terms in the written contract constitute the
entire and final agreement
 Specific
Rules of Interpretation
• Court will interpret the contract in terms of the
parties’ principal objective
• Court can see which clauses should prevail over
others
• If agreement can be interpreted in two ways, the
courts will choose the way that renders the
agreement a contract
 Conflicting Terms
• If there is a conflict between a printed form
contract and something typewritten or
handwritten theron, the later writings, not the
conflicting typeset print, determines the
contracts meaning
 Words
• The plain and normal meaning of ordinary words
will be used to determine the meaning of the
contract
• Prior relationships may indicate how the words
should be interpreted
 Ambiguities
– Things that can be
understood in two or more possible ways
• Courts will interpret against the party who
drafted the contract
• Implied Reasonableness
 Contracts often include implied terms as a
matter of reasonableness
 When no time for performance is
mentioned, a reasonable time is allowed
• Parol Evidence Rule
 Makes the final writing the source of
evidence about the terms of the contract
 Exceptions to Parol Evidence Rule:
1. To clarify ambiguities in the written
agreement
2. If the written contract was not intended to be a
complete agreement
3. If a condition necessary to the existence of the
contract never occurred
4. To show the parties reached another
agreement or terminated the contract under
consideration after executing the written
contract
5. To show that the contract is voidable because
a party lacked contractual capacity