To be valid, an agreement not to compete must be ancillary to a legitimate bargain.

Legality

Wagers

Insurance policies

Licensing statutes

Usury

Credit Card

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

A gambling contract is illegal unless it is specifically authorized by state statute.

Internet gambling sites often operate from a legal location, but most states outlaw online betting.

Someone taking out a policy on the life of another must have an insurable interest in that person -- or else it becomes a “wager” on their life.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

When a licensing requirement protects the public, any contract made by an unlicensed worker is unenforceable.

When a licensing requirement is designed merely to raise revenue, a contract made by an unlicensed person is generally enforceable.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

Usury laws prohibit charging excess interest on loans.

Credit card debt:

Even if a state’s usury statute applies to credit cards, savvy lenders can often avoid limits on interest rates. The Supreme Court has ruled that when national banks issue a credit card, they can use the rate of their own state or of that of the consumer, whichever is higher.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

Restraint of Trade

Exculpatory Clauses

Bailment Cases

Unconscionable Contracts

Adhesion Contracts

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

To be valid, an agreement not to compete must be ancillary to a legitimate bargain.

Sale of a Business

When a noncompete agreement is ancillary to the sale of a business, it is enforceable if reasonable in time, geographic area, and scope of activity.

Employment

A noncompete clause in an employment contract is generally enforceable only if it is essential to the employer, fair to the employee and harmless to the general public.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

Generally unenforceable when

the affected activity is in the public interest, such as medical care, public transportation, or some essential service.

it attempts to exclude an intentional tort or gross negligence.

the parties have greatly unequal bargaining power.

it is not clearly written and readily visible.

Part of a contract that attempts to release you from liability for injury to another party.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

Exculpatory clauses are very common in bailment cases.

Bailment means giving possession and control of personal property to another person.

The person giving up possession is the bailor, and the one accepting possession is the bailee.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

With the creation of the Uniform Commercial Code (UCC), the law of unconscionability got a boost. The Code explicitly adopts unconscionability as a reason to reject a contract.

Although the Code directly applies only to the sale of goods, its unconscionability section has proven to be influential in other cases as well.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

An unconscionable contract is one that a court refuses to enforce because of fundamental unfairness.

The two factors that most often lead a court to find unconscionability are:

oppression - one party used its superior power to force a contract on the weaker party; and

surprise - the weaker party did not fully understand the consequences of its agreement.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

Adhesion contracts are standard form contracts prepared by one party and given to the other on a “take it or leave it” basis.

They are generally enforced when the two parties are of equal power, but when the parties are unequal, the contract may be ruled unconscionable.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.

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