Chapter 6 of Practical Contract Law for Paralegals
Chapter 6
Unenforceable – violations of statute, tort, contrary to public policy; malum in se
Disbarred attorney, asked to prepare doc – unenforceable
Pyramid scheme – form of gambling
Confession of judgment prohibited
Even if there is no statute prohibiting it, courts will make agreements contrary to public policy to be unenforceable.
Exculpatory clause to excuse liability for tortious conduct is okay; subject to certain factors:
- Was it conspicuous and clear
- What is the relationship between the parties
- To what degree can the parties protect themselves
Exculpatory clause for intentional and reckless conduct is unenforceable
Exculpatory clause only binds parties. Party A shall not be liable for my own acts of negligence is only between them.
Covenant not to compete – not enforceable independently; they can only be enforced as part of a larger agreement; for example when it appears in a contract for the sale of a business; there should be time limit, geographic locations, and scope of activity
Reasonable: depends on the nature of business; and what is necessary to protect the buyer’s legitimate interest
Employment contract subject to scrutiny. Time limit and geographical limitations and related to the employer’s legitimate interest.
- A contract provision that inhibits free trade is subject to scrutiny in court.
- The most common form of provision that might restrain trade is a covenant not to compete.
Blue Penciling
Court edits parts of a contract
In pari Delicto
The parties are equally at fault
Arms Length Transaction
Relationship where parties have equal power to negotiate terms
Sunday Statute
Prohibits certain transactions on Sundays; see Blue Law; like sale of liquor
Blue Law
Prohibits certain transactions on Sundays
Slander
False statements that hurt the reputation of another
Exculpatory Clause
Provision that attempts to excuse a party from liability for that party’s torts
Acceleration Clause
Causes payments to become immediately due upon the happening of stated event
Pyramid Scheme
Multi-level arrangement in which money is made by recruiting new people
Hold Harmless Clause
One party agrees to compensate other for losses arising from contract; see Indemnification Clause
Contrary to Public Policy
Not good for society
Insurable Interest
Legitimate financial interest in a person
Severable
Remainder of agreement can be enforced without unenforceable provision contained in the agreement
Malum Prohitum
Not inherently bad; less serious
Confession of Judgment
A clause that permits immediate entry of judgment without notice or an opportunity to present defenses
Indemnification Clause
One party agrees to compensate the other for losses arising from the contract; see Hold Harmless Clause
Malum Per Se
Inherently bad
Tortious
Constituting a tort
Consumer Loan
Loan for personal or family purposes
Usurious Contract
Charges an illegal rate of interest on a loan
Covenant Not to Compete
Provision under which party agrees to refrain from engaging in specified business activities (“non-compete”)