Business Law: Illegality
Ch. 15 Illegality
-An agreement is illegal either bc legislature had declared that particular contract to be unenforceable bc the agreement violate public policy developed by courts.
-In determining whether to hold an agreement illegal a court will consider the importance of the public policy involved
-An agreement will be upheld if the losing party would be subject to very harsh and unreasonable bc the contract was unenforced
Categories of illegal agreements
1)that violate statutes (break laws or are directly assisting in broken laws) 2)violate public policy 3)unconscionable agreements and contracts of adhesion
Noncompetition clauses
1) Clause must serve a legitimate business purpose 2) The restriction on competition must be reasonable in time, geographic area and scope.3) The clause should not impose any undue hardship..
-Very general noncompetition clauses are often unenforced or often adjusted to be more specific
Exculpatory clauses(liability waivers)(only protects against negligence)
-Exculpatory clauses involving statutes where one party has certain obligations to contract for the benefit for the other party. Such clauses are not enforced. For instance, an employee cannot sign an exculpatory clause reliving his employer from workers comp. liability.
-Exculpatory clauses must be of knowing consent to be enforced. The fact that a clause is in complex language or fine print increases its chances of NOT being enforced
-Exculpatory clauses signed for frivolous recreation activities are more likely to be enforced.
Unconscionability-the absence of meaningful choice together with terms unreasonably advantageous to one of the parties
1)Procedural unconscionability-unfairness in the bargaining process. Like, use of fine print, complex language or high pressure sales techniques. LACK OF VOLUNTARINESS.
-Mere existence of unequal bargaining power does NOT make a contract unconscionable
2) Substantive unconscionability-the contract terms
-An agreement is illegal either bc legislature had declared that particular contract to be unenforceable bc the agreement violate public policy developed by courts.
-In determining whether to hold an agreement illegal a court will consider the importance of the public policy involved
-An agreement will be upheld if the losing party would be subject to very harsh and unreasonable bc the contract was unenforced
Categories of illegal agreements
1)that violate statutes (break laws or are directly assisting in broken laws) 2)violate public policy 3)unconscionable agreements and contracts of adhesion
Noncompetition clauses
1) Clause must serve a legitimate business purpose 2) The restriction on competition must be reasonable in time, geographic area and scope.3) The clause should not impose any undue hardship..
-Very general noncompetition clauses are often unenforced or often adjusted to be more specific
Exculpatory clauses(liability waivers)(only protects against negligence)
-Exculpatory clauses involving statutes where one party has certain obligations to contract for the benefit for the other party. Such clauses are not enforced. For instance, an employee cannot sign an exculpatory clause reliving his employer from workers comp. liability.
-Exculpatory clauses must be of knowing consent to be enforced. The fact that a clause is in complex language or fine print increases its chances of NOT being enforced
-Exculpatory clauses signed for frivolous recreation activities are more likely to be enforced.
Unconscionability-the absence of meaningful choice together with terms unreasonably advantageous to one of the parties
1)Procedural unconscionability-unfairness in the bargaining process. Like, use of fine print, complex language or high pressure sales techniques. LACK OF VOLUNTARINESS.
-Mere existence of unequal bargaining power does NOT make a contract unconscionable
2) Substantive unconscionability-the contract terms