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Business Law and the Legal Environment for a New Century Alternate Edition

Quote of the Day

“Gambling is the child of avarice, the brother of iniquity, and the father of mischief .” George Washington, United States President

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Business Law and the Legal Environment for a New Century Alternate Edition

  

Contracts that May Violate a Statute

Wagers • Investments • Insurance Licensing Statutes Usury These types of contracts will be discussed further on the next slides.

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Business Law and the Legal Environment for a New Century Alternate Edition

Wagers

 A gambling contract is illegal unless it is specifically authorized by state statute.

 In some cases, wagers have been disguised as “investments” where the gambler places a bet on the price of stock, but never actually buys the stock.

 Someone taking out a policy on the life of another must have an insurable interest in that person -- or else it becomes a “wager” on their life.

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Business Law and the Legal Environment for a New Century Alternate Edition

 

Licensing Statutes

When a licensing requirement protects the public, any contract made by an unlicensed worker is unenforceable.

When a licensing requirement is designed merely to raise revenue, a contract made by an unlicensed person is generally enforceable.

Usury

 Usury laws prohibit charging excess interest on loans.

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Business Law and the Legal Environment for a New Century Alternate Edition

Contracts that May Violate Public Policy

     Restraint of Trade Exculpatory Clauses Bailment Cases Unconscionable Contracts Adhesion Contracts These types of contracts will be discussed further on the next slides.

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Business Law and the Legal Environment for a New Century Alternate Edition

Restraint of Trade

 To be valid, an agreement not to compete must be ancillary to a legitimate bargain.

 Sale of a Business • When a noncompete agreement is ancillary to the sale of a business, it is enforceable if reasonable in time, geographic area, and scope of activity.

 Employment

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Business Law and the Legal Environment for a New Century Alternate Edition

Exculpatory Clauses

Part of a contract that attempts to release you from liability for injury to another party.



Generally enforceable when

• the affected activity is in the public interest, such as medical care, public transportation, or some essential service.



Generally unenforceable when

• it attempts to exclude an intentional tort or gross negligence.

• the parties have generally unequal bargaining power.

• it is not clearly written and readily visible.

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Business Law and the Legal Environment for a New Century Alternate Edition

Bailment Cases

  Bailment means giving possession and control of personal property to another person.

The person giving up possession is the bailor , and the one accepting possession is the bailee .

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Business Law and the Legal Environment for a New Century Alternate Edition

Unconscionable Contracts

 An unconscionable contract is one that a court refuses to enforce because of fundamental unfairness.

 The two factors that most often led a court to find unconscionability were: • oppression -- meaning that one party used its superior power to force a contract on the weaker party;

and

• surprise --meaning that the weaker party did not fully understand the consequences of its agreement.

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Business Law and the Legal Environment for a New Century Alternate Edition

Adhesion Contracts

 Adhesion contracts are standard form contracts prepared by one party and given to the other on a “take it or leave it” basis.

 They are generally enforced when the two parties are of equal power, but when the parties are unequal, the contract may be ruled unconscionable.

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Business Law and the Legal Environment for a New Century Alternate Edition

“No matter how profitable a particular contract clause may appear to be, it is worthless if it is illegal. Make sure your agreement is lawful.”

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Business Law and the Legal Environment for a New Century Alternate Edition