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Legality in business law


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Legality in business law

Legality in business law

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  • 1. Legality CHAPTER 13
  • 2. Quote of the Day
    • “ Gambling is the child of avarice, the brother of iniquity, and the father of mischief .”
    • George Washington,
    • United States President
  • 3. Contracts that May Violate a Statute
    • Wagers
      • Investments
      • Insurance
    • Licensing Statutes
    • Usury
    These types of contracts will be discussed further on the next slides.
  • 4. 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.
  • 5. 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.
  • 6. 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.
  • 7. 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
  • 8. Exculpatory Clauses
    • 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.
    Part of a contract that attempts to release you from liability for injury to another party.
  • 9. 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 .
  • 10. 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.
  • 11. 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.
  • 12. “ 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.”