Chapter 15 Illegality Certain contracts are illegal and therefore unenforceable Three Categories of Illegal Contracts An agreement that violates public policy An agreement that violates a statute o Example A woman wants a child in her life but does not want a man in her life She solicits her male friends to impregnate her She finally finds a willing victim he agrees to impregnate her in exchange for her agreement that if there is a child he is not responsible financially Draw up an agreement sign it they have sex she gets pregnant and has a child She has a change of heart and wants him to help her financially He says no they had a deal and signed a contract She takes him to court She wins the case he does have to pay because the contract was illegal because it violated the public policy that parents are responsible for paying for their kids It is public policy so that everyone else does not have to pay for their kids o Contracts declared illegal by statute some statutes that say explicitly that the contract is illegal Example Surrogacy paid to carry a child then hand the child over at birth What happens when the surrogate wants to keep the child Some states state that a surrogate contract is illegal and therefore unenforceable o Contract that violates the public policy of a statute Example contract to kill someone violates the murder statute so it is illegal under both contract law and criminal law o Contract that promotes the violation of a statute Example a rich guy allegedly murdered his wife injected her with an overdose of insulin she lapses into a coma recovers and he injects her again she lingers in the coma for a while and then dies Where did he get the insulin Suppose neighbor golfing buddy tells him what he wants to do He gives him the insulin which he uses to inject and kill his wife This is an agreement that promotes the violation of a statute A contract that is unconscionable or a contract of adhesion sometimes illegal o Unconscionability is designed to prevent oppression and unfair surprise not to relieve people of the effects of bad bargains two kinds Procedural where the bargaining process is unfair For example if there is duress used during bargaining process use of fine print Would be illegal Substantive where the contract itself is grossly unfair or one sided o Contracts of adhesion take it or leave it contract usually preprinted someone presents you a contract here is the deal take it or leave it You have no say on the terms Not automatically unenforceable or illegal They are illegal if the contract is grossly unfair or if it includes a term that would not Licensing Laws typically be included Some occupations require licenses to carry out the job o Example lawyers doctors electricians What happens if you don t have the license but perform services Is that an illegal contract that is unenforceable o Suppose you let your license lapse but continue to perform services and enter into contracts o Is it unenforceable because you don t have the license you re supposed to have Suppose client did not pay you and you sue Two kinds of basic situations 1 If the statute is primarily regulatory then an agreement by an unlicensed person is unenforceable If the client doesn t pay you you cannot sue to get the money back Primarily regulatory when the primary purpose is to protect the public against dishonest and incompetent people 2 If the main purpose of statute is to raise money then any agreement an unlicensed person enters into is still enforceable Suppose you have a contract with a lawyer who is licensed to practice law in her state and met all of her state s educational testing and character requirements but neglected to pay her annual registration fee and therefore is not licensed If you refuse to pay her after she renders services and she sues you the court will generally find the contract enforceable o How do we know the primary purpose Depends on the intent of the state legislature when they adopt the law Riggs Case o Trying to get out on basis of restrictive employment covenant go work for a company sign an agreement saying if you leave the company for 1 2 3 years after you leave you cannot compete with them in the same line of work sometimes valid o Ends up losing this is example of second situation primary purpose was to raise revenue and because of this although there were unlicensed people the contract was still enforceable Exculpatory Clauses An agreement in a contract which permits one person to get off the hook if there is some kind of injury General rule cannot exculpate yourself get off the hook for anything more than negligence o Example cannot get off the hook for an intentional act o Example Ron Altest started fighting with some of the fans some of the fans were injured Fans could sue Ron could they sue the arena when their ticket said we are not responsible for anything that happens to you Yes Intentional act Effect of Illegality General rule no remedy for breach of illegal agreements a court will refuse to enforce an illegal agreement and will also refuse to permit a party who has fully or partially performed her part of the agreement to recover what she has parted with o The reason for this rule is to serve the public interest not to punish the parties
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