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23 Cards in this Set

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  • Back
Illegal Contracts
1. violation of a regulatory scheme. Either legislature or administrative agency decides we need some type of regulations. Ex. SEC, FTC, licensing of professionals. Two types
a. consumer protection
b. professional trade and licensing. 574. subissue is- what is purpose of regulation. If it is to control conduct, more likely to have contract violating scheme set aside as illegal. if purpose is to raise money, less likely to have K set aside for illegality.
2. K's effecting marriage relationship. A lot of issues with this right now.
3. negative covenants/restrictive covenants
4. wagering/gaining K's.
5. contracts tending to corrupt. Lobbyists
6. contracts for facilitating an illegal purpose.
7. contracts effecting the administration of justice.
What happens if in pari delicto, petior lot condition defendatis
- IN pari delicto, petior lot condition defendatis (in cases of equal fault the position of the D is stronger) – if the partys are illegally guilty we are not going to let any party stand. Leave them where we find them.
o If your not “in pari delicto”
o Locus poenitentiae- if you withdraw from the illegal contract before the illegal conduct you might get some relief.
ILLEGALITY

The Effect of Illegality-

Regulatory Scheme

Bennet v. Hayes
An automotive repairman brought action for breach of written contract and for recovery of an agreed price. The defendant customer prevailed in the Municipal Court, Southern Judicial District, County of San Mateo, Roy W. Seagraves, J., and, on certification by the Superior Court, Appellate Department, the appeal was ordered transferred. The Court of Appeal held that under a statute requiring an automotive repair dealer to give a written estimate, as the statute read in 1973 and thereafter following amendment, the dealer, who could easily have complied by giving written estimate but did not do so, could not recover specific sums mentioned in the conversation between the dealer and the customer, nor could the dealer recover on quantum meruit, particularly where he did not advance such theory in his pleadings nor offer evidence of reasonable value.
- statute – if you fail to get a statement bars recovery
- if the D payed 500 dollars do you think the car owner would have gotten it back. IN this case the car owner is not at equally fault.
Regulatory Scheme

Licenses
Problem 121
- There is nothing he can do because he can be treated as an outlaw
- Is the purpose to regulated conduct? It is an illegal contract
Regulatory Scheme

Licenses
Problem 122
- Yes, because the purpose was to raise revenue
- Less likely to hold it to be an illegal contract
Society favors marriage. It has been considered a foundation block of civilized society. These are no longer illegal where.
• If A is separated from B. In the processes of divorce and A promises to marry C. That promise is illegal.
• Carnes- Michigan has abolished a promise to marry
• Agreement between a partent and a child. If the parent said if you don’t get married until 25 I will give you 50,000. That is illegal because it is restricting marriage
• They said that if they get a divorce there kids can be any religion. This is not legal because it might encourage divorce.
Meretricious relationship- of or relating to a prostitute. If you are in a conservative state it is a relationship based on sex.

Carenes v. Sheldon
Collective bargaining unit for school district's supervisory employees brought action against school district alleging that district committed unfair labor practices entitling collective bargaining unit to injunctive relief and damages when district divested seven positions of their administrative functions without engaging in collective bargaining. The District Court, Hennepin County, Jonathan Lebedoff, J., entered summary judgment directing school district to meet and negotiate with collective bargaining unit regarding a procedure for reorganizing district's administrative staff. School district appealed. The Supreme Court, Peterson, J., held that school district's procedure for determining which supervisory positions were to be divested of administrative functions was a matter of inherent managerial policy, and school district was not, therefore, obligated to meet and negotiate with collective bargaining unit concerning procedure.
- she failed to show an express agreement that they were going to share the property
- If we allow this this is reinstating common law marriage and we don’t want to do that in Michigan
- The consideration is meretricious- Michigan won’t let a K be validated by Sex.
- Exception- eventhough they aren’t married they might sustain the agreement if there was independent consideration. Ex. One of them is the book keeper for the business, so if there is a business relationship in addition to the sex.
- Palamony- alimony for a pal. Mrs Carnes wasn’t palimony in Michigan.
- Louisiana community property state- if the marriage ends all assets are distributed equally between the husband and the wife. Marvin v. Marvin they look at property law.
- However they do not get that recovery here.
- She gets nothing.
NEGATIVE/RESTRICTIVE COVENENATS
- show up in sale and business
- also in employee contracts
o you have given the employee valuable training
o you are in a business were a great deal of the business is between the customer and the employee so when they leave they take customers with them
o the employee has some trade secrets
o Concerned that you will give trade secrets to the competitor.
- you are not permited to enter into a contract that restraints competition
NEGATIVE/RESTRICTIVE COVENENATS
Test
1- is there a need for the negative covenant (I will not do something)
2- is the negative covenant reasonable
 extent of the restriction
 the spacial (geographical limitation)
 temporal (time) limitation
NEGATIVE/RESTRICTIVE COVENENATS

Editing
Heart surgon- “I agree not to practice medicine and or heart surgery in lansing for two years.”
- generally 1 or 2 years is ok
- practice anykind of medicine is too broad. In the blue pencil rule you can edit out what makes it unreasonable.
- Under the traditional one all you could do is delete you could not add language.

Bug Man- “I agree not to engage in termite control anywhere in Mississippi for two years”
- anywhere in Mississippi is over broad
- under the tradition rule this would fail the restriction is to broad .. because they can’t delete Mississippi
- new rule, you can delete and add. For example add Jackson.

both the white case and the sidemand case talk about the blue pencil rule look at 576.
- that is the color of pencil editor’s used to do with they were edited.
NEGATIVE/RESTRICTIVE COVENENATS

White v. Fletcher/Mayo
Former vice-president of advertising company brought suit for declaration that certain noncompetition covenants he agreed to were unenforceable as against public policy. The Superior Court, DeKalb County, Curtis V. Tillman, J., "blue penciled" the covenants, and declared them enforceable as rewritten, and vice president appealed. The Supreme Court, Bell, J., held that vice-president's bargaining capacity was not significantly greater than that of mere employee and, thus, covenant would be treated like covenant ancillary to employment contract and would not be enforced
- it never gives us the content of the covenant
- but everyone agrees that it is not reasonable
- everyone agrees that it is reasonable
- a court is more likely to strick down a covenant because they don’t want to strick an individual’s ability to make a living.
- This is more like an employee than it is a busniness covenant.
- There is a danger using blue pencil in these type of employment cases. Often we like to maximize our position by having every employee we have sign a neg covenant.
o You have concerns
o It can be abusive of the employees
- if you have employers that over draft. The neg covt will be sustained as written or edited to make it reasonable
- so there is no incentive to write a negative covenant that is unreasonable.. encourages employor not to overdraft because we are not going to blue pencil them and restrict your employees right to employment
NEGATIVE/RESTRICTIVE COVENENATS

BDO Seidman v. Hirshberg
BDO Seidman v. Hirshberg

Accounting firm brought action to enforce restrictive covenant contained in accountant's employment agreement. The Supreme Court, Erie County, John A. Michalek, J., granted summary judgment in favor of accountant. Firm appealed. The Supreme Court, Appellate Division, affirmed. Firm appealed by permission. The Court of Appeals, Levine, J., held that: (1) restrictive covenant was overbroad to the extent it applied to accountant's personal clients and to those clients that he had not served to any significant extent while employed at firm; (2) partial enforcement of restrictive covenant was warranted; and (3) it was necessary to remit on issue of validity of liquidated damages provision.
Affirmed as modified; remitted.
- threw it out for being overbroad
- test in new york it different from what he gave us
- more defference to professionals
- footnote one pg 583
- except for the
o Test is there a need for neg cov?
o Is the neg covenant reasonable?
 Extent of the restriction
 Spacial (geographical) limit
 Temporal (time limitation)
Illegal Gaming or wagering contracts
- insurance policies are kept from being illegal K’s is an insurable interst. You can not take out a homeownerst policy on another’s home
- 50/50 raffles
- There are some that are hiding
Contracts are hidden to corrupt
- lobbyist- there are requirements
o REGISTER
o Submit documents
Contracts facilitating an illegal purpose
- selling cigarettes
- to invade the tax laws
In Peri Delicto- if this goes down wrong leave the parties alone
Two Exceptions:
1. If the parties were not equally at fault
a. Ex, Jewish citizens of germ during world war two.
2. A time for repentance- if you withdraw from the illegal contract before the accomplishment of the illegal the purpose. You might get some relief.
a. Fellow lost 335 dollars in an illegal craps game. You are expected to pay before you leave the game. P gave him a 500 dollar watch and I will pay you the money later. Next day g refused.
Contracts adversely affecting the admistration of justice:
*Maintenance- you pay the cost so someone else can sue, unnecessarily generating litigation. You have no interest in it.

*Champerty- you don’t have an interest you share the cost and you pay for the recovery.
* at common law were crimes

Contingent fee- an agreement between the attorney and the client and the attorney has not real interest in the lawsuit. But they will recover. The attorney can not pay the expenses of the litigation the only thing they can do it not pay for his time. Travel, faxing, zeroxing, the problem arises if you lose the litigation. But you the client will still be liable for filing fees. You can not have in criminal law or in divorce. If you have a contingent fee in divorce you would only get paid if there was a divorce. Crim law- only get paid if crime gets off.
Incapacity
Minors
Minors- someone who has not reached the age of majority, contracts are not void they are voidable but only by the minor. This is done when the minor disaffirms the K by saying no I am not going to be bound by that.
Exception-
Contract involves a necessity.
1. Food
2. Clothing
3. Shelter
Why? In local parentis- either you are eighteen or not eighteen.
Incapacity
Minors

Valencia v. White
Minor commenced action seeking injunctive relief to prohibit enforcement of an artisan's lien against truck used in his trucking business. The garage which repaired the truck filed a counterclaim on an open account for repairs to the truck. The Superior Court, Santa Cruz County, Cause No. 8809, Roberto C. Montiel, J., permitted the minor to disaffirm the contract of repairs and ordered the parties restored to status quo by requiring the return of the amounts paid by the minor on the open account. The garage appealed. The Court of Appeals, Birdsall, J., held that: (1) contract for repair of trucks used in minor's trucking business was not contract for necessity; (2) filing of complaint by minor did not constitute ratification of contract; and (3) minor was required to pay benefits of contract he disaffirmed in order to restore both parties to status quo.
- majority rule status quo- minor keeps the truck, he gets back the 7,000 paid. Minor not liable for the 13,000 balance.
- minority is the benefit rule- minor still keeps the struck, white keeps the 7, 000, the balance has to pay the balance.
- Point of the case is to show that there are several ways to determine the remedy in one of these diaffirmace case
- Pg 595.. how long do you have to disaffirm.
Incapacity
Minors
Problem 123
What if you lie about
pg 442 - you can always bring in evidence that the statement of you age is incorrect.

Proof is going to be excluded because of the Parole evidence rule.
Regulatory Scheme
if a contract violates a regulatory scheme, important factors are whethers the regulatory scheme is disigned to REGULATE CONDUCT or GENERATE REVENUE
Mental Infirmity
How necessary is the contract
How fair is the contract
Did the other side know or should have known of the incompetence
How great a hardship would it be if it was disaffirmed.
Mental Infirmity
Problem 124
How necessary is the contract – no
How fair is the contract- no
Did the other side know or should have known of the incompetence- yes
How great a hardship would it be if it was disaffirmed. – prob not that great
Set aside?
What about the Car?

Now it is used care an there would be more hardship.


Problem 125
Set Aside?
No if it is incompentency is a presumption that could be rebutted

Problem 126