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Legality in business law


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Legality in business law

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Legality in business law

  1. 1. Legality CHAPTER 13
  2. 2. Quote of the Day <ul><li>“ Gambling is the child of avarice, the brother of iniquity, and the father of mischief .” </li></ul><ul><li>George Washington, </li></ul><ul><li>United States President </li></ul>
  3. 3. Contracts that May Violate a Statute <ul><li>Wagers </li></ul><ul><ul><li>Investments </li></ul></ul><ul><ul><li>Insurance </li></ul></ul><ul><li>Licensing Statutes </li></ul><ul><li>Usury </li></ul>These types of contracts will be discussed further on the next slides.
  4. 4. Wagers <ul><li>A gambling contract is illegal unless it is specifically authorized by state statute. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul>
  5. 5. Licensing Statutes <ul><li>When a licensing requirement protects the public, any contract made by an unlicensed worker is unenforceable. </li></ul><ul><li>When a licensing requirement is designed merely to raise revenue, a contract made by an unlicensed person is generally enforceable. </li></ul>Usury Usury laws prohibit charging excess interest on loans.
  6. 6. Contracts that May Violate Public Policy <ul><li>Restraint of Trade </li></ul><ul><li>Exculpatory Clauses </li></ul><ul><li>Bailment Cases </li></ul><ul><li>Unconscionable Contracts </li></ul><ul><li>Adhesion Contracts </li></ul>These types of contracts will be discussed further on the next slides.
  7. 7. Restraint of Trade <ul><li>To be valid, an agreement not to compete must be ancillary to a legitimate bargain. </li></ul><ul><li>Sale of a Business </li></ul><ul><ul><li>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. </li></ul></ul><ul><li>Employment </li></ul>
  8. 8. Exculpatory Clauses <ul><li>Generally enforceable when </li></ul><ul><ul><li>the affected activity is in the public interest, such as medical care, public transportation, or some essential service. </li></ul></ul><ul><li>Generally unenforceable when </li></ul><ul><ul><li>it attempts to exclude an intentional tort or gross negligence. </li></ul></ul><ul><ul><li>the parties have generally unequal bargaining power. </li></ul></ul><ul><ul><li>it is not clearly written and readily visible. </li></ul></ul>Part of a contract that attempts to release you from liability for injury to another party.
  9. 9. Bailment Cases <ul><li>Bailment means giving possession and control of personal property to another person. </li></ul><ul><li>The person giving up possession is the bailor , and the one accepting possession is the bailee . </li></ul>
  10. 10. Unconscionable Contracts <ul><li>An unconscionable contract is one that a court refuses to enforce because of fundamental unfairness. </li></ul><ul><li>The two factors that most often led a court to find unconscionability were: </li></ul><ul><ul><li>oppression -- meaning that one party used its superior power to force a contract on the weaker party; and </li></ul></ul><ul><ul><li>surprise --meaning that the weaker party did not fully understand the consequences of its agreement. </li></ul></ul>
  11. 11. Adhesion Contracts <ul><li>Adhesion contracts are standard form contracts prepared by one party and given to the other on a “take it or leave it” basis. </li></ul><ul><li>They are generally enforced when the two parties are of equal power, but when the parties are unequal, the contract may be ruled unconscionable. </li></ul>
  12. 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.”