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Agreements that Violate StatutesAgreements that Violate StatutesSection 9.1Section 9.1
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Section 9.1Section 9.1Agreements that Violate Statutes Agreements that Violate Statutes
Section 9.2Section 9.2Agreements Contrary to Public Policy Agreements Contrary to Public Policy
99ChapterChapter LegalityLegality
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
What You’ll Learn
How to explain what makes a How to explain what makes a contract illegal (p. 186)contract illegal (p. 186)
How to identify the consequences How to identify the consequences of illegality in relation to contract of illegality in relation to contract law (p. 186)law (p. 186)
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
What You’ll Learn
How to identify contracts that are illegal by How to identify contracts that are illegal by statutory law (p. 188)statutory law (p. 188)
How to identify different types of licenses How to identify different types of licenses (p. 191)(p. 191)
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Why It’s Important
By understanding the concept of illegality in By understanding the concept of illegality in contract law, you will be able to avoid contract law, you will be able to avoid problems that might arise when you problems that might arise when you consider entering a contract.consider entering a contract.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Legal Terms
conspiracy (p. 186)conspiracy (p. 186)interest (p.189)interest (p.189)usury (p. 189)usury (p. 189)lottery (p. 190)lottery (p. 190)license (p. 191)license (p. 191)
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
The Nature and Consequences of Illegality
Illegality in Entire AgreementIn Pari Delicto and Divisible Contracts
Section OutlineSection Outline
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Section OutlineSection OutlineAgreements that Violate Statutes
Civil and Criminal StatutesUsury StatutesGambling StatutesSunday StatutesLicensing Statutes
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Pre-Learning Question Pre-Learning Question
What are the consequences of being party to an illegal contract?
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Legality is the last of the six Legality is the last of the six elements that make up a valid elements that make up a valid contract.contract.Even if a contract has all the other Even if a contract has all the other elements, it may still be invalid if it elements, it may still be invalid if it lacks a legal purpose.lacks a legal purpose.
The Nature and Consequences The Nature and Consequences of Illegality of Illegality
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
A contract can be made illegal in A contract can be made illegal in many ways. It may be illegal if it many ways. It may be illegal if it involves an agreement to do involves an agreement to do something that violates statutory law. something that violates statutory law.
The Nature and Consequences The Nature and Consequences of Illegality of Illegality
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Making the agreement itself could be Making the agreement itself could be illegal. For example, individuals who illegal. For example, individuals who agree to commit crimes for a promised agree to commit crimes for a promised consideration are involved in what consideration are involved in what criminal law calls criminal law calls conspiracyconspiracy. .
The Nature and Consequences The Nature and Consequences of Illegality of Illegality
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Illegality in Entire Agreement Illegality in Entire Agreement
If it’s impossible to separate a contract If it’s impossible to separate a contract into isolated promises and acts, each into isolated promises and acts, each of which can be performed of which can be performed independently of the others, then the independently of the others, then the entire contract is rendered illegal.entire contract is rendered illegal.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Illegality in Entire Agreement Illegality in Entire Agreement
If any part of the agreement is If any part of the agreement is contaminated by illegality, a valid contaminated by illegality, a valid contract cannot result.contract cannot result.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
In Pari DelictoIn Pari Delicto and and Divisible Contracts Divisible Contracts
If certain promises and actions in a If certain promises and actions in a contract can be successfully contract can be successfully performed by themselves, then the performed by themselves, then the contract is said to be divisible.contract is said to be divisible.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
In Pari DelictoIn Pari Delicto and and Divisible Contracts Divisible Contracts
In such cases, the courts may enforce In such cases, the courts may enforce those parts of the agreement that are those parts of the agreement that are legal and revoke the parts that are legal and revoke the parts that are not.not.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
In Pari DelictoIn Pari Delicto and and Divisible Contracts Divisible Contracts
Parties are said to be Parties are said to be in pari delictoin pari delicto (in (in equal fault) if they both know that the equal fault) if they both know that the agreement is illegal. In such cases, agreement is illegal. In such cases, the court will aid neither party.the court will aid neither party.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
In Pari DelictoIn Pari Delicto and and Divisible Contracts Divisible Contracts
However, if one of the parties is However, if one of the parties is unaware of wrongdoing, then the unaware of wrongdoing, then the parties are not parties are not in pari delictoin pari delicto and and courts may grant relief to the innocent courts may grant relief to the innocent party.party.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Pre-Learning Question Pre-Learning Question
What type of agreements do you think would violate state statutes?
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Agreements that Violate Statutes Agreements that Violate Statutes
State legislatures pass laws declaring State legislatures pass laws declaring that certain types of agreements are that certain types of agreements are illegal and void because they violate:illegal and void because they violate:
Civil and criminal statutesCivil and criminal statutesUsury statutes Usury statutes
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Agreements that Violate Statutes Agreements that Violate Statutes
Gambling statutesGambling statutesLicensing statutesLicensing statutesSunday statutesSunday statutes
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Civil and Criminal Statutes Civil and Criminal Statutes
Agreements that require one party Agreements that require one party to commit a tort or a crime are to commit a tort or a crime are illegal.illegal.Agreements to protect one party Agreements to protect one party from the consequences of torts or from the consequences of torts or crimes committed are also illegal.crimes committed are also illegal.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
What does in pari delicto mean and how does it relate to illegal contracts?
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
ANSWERANSWER
It means “in equal fault” and refers to both parties of a contract who know that an agreement is illegal.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Usury Statutes Usury Statutes
Each state sets a maximum interest Each state sets a maximum interest rate that lenders can charge for loans rate that lenders can charge for loans by statute.by statute.
Interest Interest is the fee the borrower pays is the fee the borrower pays to the lender for using the money.to the lender for using the money.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Usury Statutes Usury Statutes
The interest rate the lender and The interest rate the lender and borrower agree upon must not exceed borrower agree upon must not exceed the maximum rate allowed by state the maximum rate allowed by state law. law.
Charging more than the maximum Charging more than the maximum legal interest rate is legal interest rate is usuryusury..
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Gambling Statutes Gambling Statutes
State statutes also prohibit gambling State statutes also prohibit gambling agreements—agreements in which agreements—agreements in which one party wins and another party one party wins and another party loses, even if some skill may be loses, even if some skill may be involved.involved.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Gambling Statutes Gambling Statutes
Gambling agreements include:Gambling agreements include:
Playing cards for money.Playing cards for money.Money wagers or bets on elections Money wagers or bets on elections or sports events.or sports events.Buying tickets in a sports pool.Buying tickets in a sports pool.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Gambling Statutes Gambling Statutes
In the past, most states prohibited In the past, most states prohibited gambling. gambling.
Recently, however, many states Recently, however, many states changed their laws to allow some changed their laws to allow some regulated gambling, such asregulated gambling, such as
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Gambling Statutes Gambling Statutes
Betting at racetracks.Betting at racetracks.Certain forms of off-track betting.Certain forms of off-track betting.State-run lotteries. State-run lotteries.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Gambling Statutes Gambling Statutes
A A lotterylottery is a game that consists of is a game that consists of drawing lots, typically tickets with drawing lots, typically tickets with different combinations of numbers different combinations of numbers printed on them, in which prizes are printed on them, in which prizes are distributed to the winners among distributed to the winners among persons buying a chance.persons buying a chance.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Sunday Statutes Sunday Statutes
In some states, it is illegal to make In some states, it is illegal to make or perform contracts on Sunday.or perform contracts on Sunday.These are called Sunday statutes or These are called Sunday statutes or blue laws.blue laws.The statutes vary greatly from state The statutes vary greatly from state to state.to state.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Licensing Statutes Licensing Statutes
A A licenselicense is a legal document stating is a legal document stating that the holder has permission from that the holder has permission from the proper authorities to carry on a the proper authorities to carry on a certain trade or profession.certain trade or profession.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Licensing Statutes Licensing Statutes
All states have statues that require All states have statues that require persons to have a license to practice persons to have a license to practice certain trades or professions and certain trades or professions and engaging in such a trade or profession engaging in such a trade or profession without a license is illegal.without a license is illegal.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Licensing Statutes Licensing Statutes
Some licenses are designed to Some licenses are designed to protect the public from dealing with protect the public from dealing with unqualified persons.unqualified persons.Some state statutes require Some state statutes require licenses simply to raise revenue.licenses simply to raise revenue.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Licensing Statutes Licensing Statutes
In most states the following trade and In most states the following trade and professional workers must be professional workers must be licensed:licensed:
NursesNursesSurveyorsSurveyorsFuneral directors Funeral directors
BarbersBarbersPlumbers Plumbers
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Reviewing What You Learned
1. What makes a contract illegal?
Section 9.1 Assessment
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Reviewing What You Learned
Illegal contracts may be created in many ways. A contract may be illegal if it involves an agreement to do something that violates statutory law.
Section 9.1 Assessment
Answer
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Reviewing What You Learned
2. What are the consequences of illegality in relation to contract law?
Section 9.1 Assessment
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Reviewing What You Learned
If the contract cannot be separated into isolated promises and acts that can be performed independently, the entire contract is rendered illegal. If any part of the agreement is illegal, a valid contract cannot result.
Section 9.1 Assessment
Answer
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Reviewing What You Learned
If the contract is divisible the court may enforce the legal parts of the agreement and revoke the illegal parts.
Section 9.1 Assessment
Answer
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Reviewing What You Learned
3. What contracts are illegal by statutory law?
Section 9.1 Assessment
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Reviewing What You Learned
Contracts that violate a state’s civil or criminal statutes, usury statutes, gambling statutes, licensing statutes, or Sunday statutes.
Section 9.1 Assessment
Answer
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Reviewing What You Learned
4. What are the different types of licenses?
Section 9.1 Assessment
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Reviewing What You Learned
Some licenses raise revenue, other are designed to protect the public.
Section 9.1 Assessment
Answer
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Section 9.1 Assessment
Critical Thinking ActivityIllegal Contracts Why does the law usually refuse to uphold illegal contracts?
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Section 9.1 Assessment
Answers will vary, but should recognize that in the eyes of the law, an illegal agreement is void. It has no legal effect.
Critical Thinking Activity AnswerIllegal Contracts
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Section 9.1 Assessment
Legal Skills in ActionDiscouraging Illegal Contracts Inez and Chris have been in business together for three years. Their business is doing badly, so Chris comes up with a plan.
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Section 9.1 Assessment
Legal Skills in ActionDiscouraging Illegal Contracts The plan involves contractual arrangements with illegal aliens willing to work for low pay. How would you help Inez talk Chris out of this scheme?
Understanding Business and Personal Law
Agreements that Violate Agreements that Violate Statutes Statutes
Section 9.1Section 9.1
Legality
Section 9.1 Assessment
Answers will vary, but should recognize that an agreement to hire illegal aliens is illegal, and there would be no valid contract.
Legal Skills in Action AnswerDiscouraging Illegal Contracts
Agreements that Violate StatutesAgreements that Violate StatutesEnd of Section 9.1End of Section 9.1
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