MANGMT 3540 1st Edition Lecture 12 Outline of Last Lecture I Capacity to Contract Levels of Competence II Disaffirmance III Ratification IV Liability for necessaries V Minors VI Intoxicated Persons VII Incompetent Persons Outline of Current Lecture VIII Illegal Agreements IX Contracts Against public policy X Results of illegality or violations of public policy XI Introduction XII Sale of Interest in Land XIII Performance Beyond One Year Current Lecture I Illegal Agreements A Defined i An agreement whose purpose or performance is illegal These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute B Five Types of Illegal Agreements i Violation of usury laws laws which set a maximum interest rate on loans or credits 1 Typically cannot collect interest 2 Some states can t collect on entire contract ii Gambling laws 1 Missouri Sec 434 010 a gambling contract is void but the loser has a short time to sue to recover losses three month statute of limitations iii Blue laws Sabbath laws certain contracts prohibited on Sundays 1 History 2 Contracts for food and medicine were usually exceptions 3 Now very few contracts are illegal on Sunday iv Contract by unlicensed professionals 1 I e a quack practicing medicine 2 For licensed professions from surgery to cutting hair a license is required v Contract to perform illegal acts 1 Contracts to sell or transport contraband such as drugs 2 Hiring a hit man to dispose of your wife 3 Contracts for sexual services II Contracts Against public policy A Exculpatory contracts i Attempt to escape liability culpability of the party at fault ii Employers generally may not exempt themselves from liability to employees Professionals generally may not exempt themselves from liability to clients or patients iii More likely to be against public policy if the exculpatory clause is placed in the contract by person with much greater B Three types of Agreements in Restraint of Trade i Price fixing schemes are against public policy ii Markey divisions are against public policy iii Covenants not to compete are enforceable only if 1 The covenant is made in connection with the sale of a business or in connection with the contract of employment 2 The covenant not to compete protects a legitimate business interest of the employer or the person buying the business 3 The time and geographic area restrictions specified in of the covenant not to compete are reasonable neither too long nor too broad in its territorial coverage C Discriminatory contracts i Racial religious or sexual discrimination in contracts unconstitutional violation by courts of equal protection under the law ii Race related restrictive covenants D Torts i Contracts involving commission of a tort are against public policy ii Example hiring someone to defame a candidate III Results of illegality or violations of public policy A General Rule i The contract is void ii None of the parties may enforce the contract even the injured party iii Theory In Pari Delicto In equal fault B Exception i Protected classes such as minors or employees may typically enforce illegal contracts ii Examples can always sue to get minimum wage IV Introduction A Formalities i A defense to enforceability of an otherwise valid contract ii An oral agreement which should be in writing is classified as unenforceable B Statute of Frauds Defined i A statute which requires certain types of contracts to be in writing to be enforceable C History and Origins i The fraud corrected by the statute of frauds was the fraud of perjury not fraud in deceiving another person into entering a contract ii Interested parties could not testify at early common law so contracting parties would hire a false witness to tell their side of the story iii The first Statute of Frauds in 1677 allowed interested parties to testify but also required important contracts to be in writing D Terminology i If a contract must be in writing for enforceability it is said to be inside or within the statue of frauds ii If an oral contract is enforceable the contract is said to be outside the statute of frauds V Sale of interest in land A Entire Interest i If ownership of land may be divided into various parts the entire interest is the parts possible B Easements i The permanent right to use a portion of land without owning it ii Examples roadway and utility easements C Profits i The right to come onto the land and removing something from it ii Examples mineral rights and timber rights D Mortgages i A lien on land a lien is an interest which allows a sale of property to collect a debt ii A mortgage five the rights to foreclose on land if an obligation is breached E Life Estate i The right to exclusive possession of land for a term based upon someone s lifespan ii Example a man allowing his widow to live in his house until she dies VI Performance beyond one year A Defined i If performance of a contract must take more than one year from the date it is made the contract must be in writing to be enforceable B Possibility of Performance i The mere possibility of performance within one year however unlikely takes the contract outside the statute so an oral agreement is enforceable ii Construction may be presumed to be possible to be performed within one year even though this would be highly unlikely C One Year is calculated from the MAKING of the Contract i The measurement of the one year under this rule starts the day the contract is made not when performance begins