Exam 16: Legality and Public Policy

Which of the following agreements represent(s) an unreasonable restraint of trade?

It generally is incorrect to use the phrase "illegal contract" because, if an agreement is illegal, the courts do not recognize it as a contract and the agreement is void.

An unlicensed insurance broker who cannot personally recover a fee because of the absence of a license can effectively circumvent the statutory requirements by having a friend who is a licensed broker bill for the services and collect the payment for him.

Where a court recognizes an agreement to be illegal, a lawsuit based on that agreement may be dismissed by the court even if neither plaintiff nor defendant raised the issue of illegality.

In every contract there exists an expressed covenant of good faith and fair dealing.

Sam Wilson often goes to the horse races, participates in his state's lottery, and invests heavily in the stock of major U.S. companies. At work, Wilson is approached by his coworkers and asked to participate in a football pool. "It's totally based upon skill," his friends claim. In addition, Wilson's philanthropic club is holding a raffle in which an individual could win a new car. Are these activities gambling and therefore illegal activities?

The validity of a contract is not affected by:

Art and Mary were good friends who went through high school and college together. Art eventually became a college philosophy professor and Mary went into the business world. Mary became a senior vice-president of a management firm and learned many of the company's trade secrets. Both Art and Mary signed one-year contracts with their respective employers. The contracts contained clauses that provided that they would not compete against their former employers for a period of one year after leaving their jobs. The area covered by the restrictions for both Art and Mary was a radius of 500 miles from the place of employment. Both Art and Mary resigned and within two months took other jobs. Art went to work for another college 50 miles away, teaching philosophy. Mary took a job 75 miles from her former employment. Her new position was similar to her former job. The former employers sued to enforce the anticompetitive covenants in the original contracts. Discuss the probable outcome of the lawsuits.

An agreement that calls for the commission of a civil wrong is illegal and void.

Which of the following is not an example of a state penalty for violating usury law?

A contract that is deemed to be too harsh or oppressive to one of the contracting parties may be unenforceable under the concept of:

Agreements that are illegal are:

Private lotteries, which generally are held to be illegal, involve three elements:

Agreements not to compete are always void.

The social consequences of a contract are important in determining the contract's validity.

An agreement is illegal when either its formation or performance is a crime or a tort, or it is contrary to public policy.

Unconscionability and fraud are synonymous terms.

Dealing honestly, reasonably, and in good faith:

Even if part of a contract is illegal, the court may enforce a divisible, legal part of the contract.

Unconscionability is determined in the light of the circumstances existing at the time that the contract was made.