agreements contrary to public policy section 9.2

Agreements Contrary to Public PolicyAgreements Contrary to Public PolicySection 9.2Section 9.2

Understanding Business and Personal Law

Agreements Contrary to Agreements Contrary to Public Policy Public Policy

Section 9.2Section 9.2

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What You’ll Learn

How to explain the legal doctrine of How to explain the legal doctrine of public policy (p. 194)public policy (p. 194)

How to identify agreements that are How to identify agreements that are contrary to public policy (p. 195) contrary to public policy (p. 195)




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What You’ll Learn

How to identify contracts that involve an How to identify contracts that involve an unreasonable restraint of trade (p. 196)unreasonable restraint of trade (p. 196)

How to explain the nature of a restrictive How to explain the nature of a restrictive covenant (p. 197)covenant (p. 197)




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Why It’s Important

By understanding public policy and By understanding public policy and contracts that are contrary to public policy, contracts that are contrary to public policy, you will be able to avoid common problems you will be able to avoid common problems associated with violations of this important associated with violations of this important legal doctrine.legal doctrine.




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Legal Terms

restraint of trade (p. 195)restraint of trade (p. 195)restrictive covenant (p. 197)restrictive covenant (p. 197)price fixing (p. 197)price fixing (p. 197)competitive bidding (p. 197) competitive bidding (p. 197)




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The Nature of Public PolicyViolations of Public Policy

Agreements that Unreasonably Restrain Trade

Agreements to Obstruct JusticeAgreements Inducing Breach of Duty or

FraudAgreements Interfering with Marriage

Section OutlineSection Outline

Effect of Illegality




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Illegal Contracts Illegal Contracts

A contract may be illegal if it involves A contract may be illegal if it involves an agreement to do something that an agreement to do something that violates statutory law. In addition, a violates statutory law. In addition, a contract may be illegal if it violates contract may be illegal if it violates public policy.public policy.




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9.29.2

Illegal ContractsIllegal Contracts

violate statestatutes

• civil and criminal statutes• usury statutes• gambling statues• Sunday statutes• licensing statutes

• agreements that unreasonably restrain trade

• agreements to obstruct justice• agreements inducing breach of duty or fraud• agreements interfering

with marriage

Illegal contracts thatIllegal contracts that

violate publicpolicy




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Pre-Learning Question Pre-Learning Question

What is public policy?




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The Nature of Public PolicyThe Nature of Public Policy

Public Policy is a time-honored legal Public Policy is a time-honored legal doctrine. The basis for making public doctrine. The basis for making public policy decisions is the underlying policy decisions is the underlying principle that nobody should get away principle that nobody should get away with doing something that harms the with doing something that harms the public at large.public at large.




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How would some agreements violate public policy?




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Violations of Public Policy Violations of Public Policy

If an activity harms the health, safety, If an activity harms the health, safety, welfare, or morals of the public, that welfare, or morals of the public, that activity violates public policy.activity violates public policy.




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The most common agreements that The most common agreements that violate public policy include:violate public policy include:

Agreements that unreasonably Agreements that unreasonably restrain trade restrain trade contracts not to competecontracts not to compete price fixing agreementsprice fixing agreements agreements to defeat competitive bidding agreements to defeat competitive bidding




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More common agreements include: More common agreements include:

Agreements to obstruct justiceAgreements to obstruct justiceAgreements inducing breach of duty Agreements inducing breach of duty or fraudor fraudContracts interfering with marriage Contracts interfering with marriage




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Agreements that Unreasonably Agreements that Unreasonably Restrain Trade Restrain Trade

The law protects our rights to make The law protects our rights to make a living and do business in a market a living and do business in a market economy.economy.A restraint of trade is a limitation on A restraint of trade is a limitation on the full exercise of doing business the full exercise of doing business with others.with others.




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Agreements that Unreasonably Agreements that Unreasonably Restrain Trade Restrain Trade

Three types of contracts that violate Three types of contracts that violate this rule: this rule: 1.1. Agreements not to competeAgreements not to compete2.2. Price fixingPrice fixing3.3. Agreements to defeat competitive Agreements to defeat competitive

bidding bidding




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Outright Contracts Outright Contracts Not to Compete Not to Compete

When a business owner sells a When a business owner sells a business, sometimes the sales business, sometimes the sales contract will include a provision called contract will include a provision called a a restrictive covenantrestrictive covenant, which is a , which is a promise not to compete.promise not to compete.




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This means that the seller of the This means that the seller of the business will not open a competing business will not open a competing business within a certain area for a business within a certain area for a period of time after the sale.period of time after the sale.




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The court will uphold such a restriction The court will uphold such a restriction if it is reasonable in time and if it is reasonable in time and geographic location.geographic location.




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Promises not to compete are also Promises not to compete are also sometimes found in employment sometimes found in employment contracts. contracts. Such contracts are enforced only as Such contracts are enforced only as necessary to protect the former necessary to protect the former employer from unfair competition.employer from unfair competition.




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Price Fixing Price Fixing

Price fixingPrice fixing occurs when occurs when competitors agree on certain price competitors agree on certain price ranges within which they set their ranges within which they set their prices. prices. Price fixing discourages competition Price fixing discourages competition and raises prices.and raises prices.




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Are restrictive covenants legal? Why or why not?




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ANSWERANSWER

Yes, if it is reasonable in time and geographic location.




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Agreements to DefeatAgreements to DefeatCompetitive Bidding Competitive Bidding

A bid is an offer to buy or sell goods or A bid is an offer to buy or sell goods or services at a stated price. Laws often services at a stated price. Laws often require governments to construct public require governments to construct public works or buy goods and services works or buy goods and services through through competitive biddingcompetitive bidding..




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In the process of competitive bidding, In the process of competitive bidding, rivals submit bids for a project. The rivals submit bids for a project. The firm with the lowest qualified bid wins firm with the lowest qualified bid wins the contract. the contract.




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If the bidders get together and agree If the bidders get together and agree not to bid lower than a certain price, not to bid lower than a certain price, then they are not bidding fairly. These then they are not bidding fairly. These agreements and contracts are not agreements and contracts are not enforceable. enforceable.




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Agreements to Obstruct Justice Agreements to Obstruct Justice

Any contract that interferes with the Any contract that interferes with the administration of justice is illegal. administration of justice is illegal. Such agreements include:Such agreements include:

Protecting someone from arrestProtecting someone from arrestEncouraging lawsuits Encouraging lawsuits Giving false testimonyGiving false testimonyBribing a juror Bribing a juror




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Agreements Inducing Agreements Inducing Breach of Duty or Fraud Breach of Duty or Fraud

Congressional and state Congressional and state representatives and all other public representatives and all other public officials hold positions of trust. officials hold positions of trust.

These officials owe a duty to work for These officials owe a duty to work for the best interest of the public.the best interest of the public.




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Agreements Inducing Agreements Inducing Breach of Duty or Fraud Breach of Duty or Fraud

Any contract that tries to influence the Any contract that tries to influence the representatives to use their positions representatives to use their positions for private gain is unenforceable. for private gain is unenforceable.

This rule also applies to private This rule also applies to private persons who are in positions of trust.persons who are in positions of trust.




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Agreements Interfering Agreements Interfering with Marriage with Marriage

The law encourages marriages and The law encourages marriages and protects family relationships. protects family relationships.

Contracts that discourage, harm, or Contracts that discourage, harm, or interfere with good family relationships interfere with good family relationships are illegal and unenforceable in court.are illegal and unenforceable in court.




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Agreements Interfering Agreements Interfering with Marriage with Marriage

For example, a contract promising For example, a contract promising money in exchange for not marrying money in exchange for not marrying would be void.would be void.




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How does the illegality of a contract affect the parties to that contract?




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Effect of Illegality Effect of Illegality

In general, a court will not aid either In general, a court will not aid either party to an illegal contract. party to an illegal contract. Neither party can enforce the Neither party can enforce the agreement.agreement.Nor can they receive aid from the Nor can they receive aid from the court. court.




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Reviewing What You Learned

1. What is the legal doctrine of public policy?

Section 9.2 Assessment




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No one should be permitted to do anything that harms the public at large.


Answer




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2. What contracts are considered to be agreements that are contrary to public policy?





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Agreements that involve an unreasonable restraint of trade, agreements to obstruct justice, agreements inducing fraud or breach of duty; and contracts interfering with marriage.


Answer




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3. What types of contracts involve an unreasonable restraint of trade?





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Contracts not to compete, price fixing, and agreements to defeat competitive bidding.


Answer




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4. What is a restrictive covenant?





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Agreement by the seller of a business not to open a competing business within a certain geographic area for a certain period of time.


Answer




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Critical Thinking ActivityPhilosophy of Law What is the legal philosophy behind public policy?




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Critical Thinking Activity AnswerPhilosophy of Law The belief that no one should be permitted to do anything that harms the public at large.




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Legal Skills in ActionRestrictive Employment Covenants Your Uncle Larry has just been offered a job at a computer software company.




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Legal Skills in ActionRestrictive Employment Covenants His employer asked him to sign a restrictive covenant that would not permit him to work for another software company located anywhere in the United States for the next seven years.




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Legal Skills in ActionRestrictive Employment Covenants Write a letter to your uncle telling him whether this restrictive employment covenant would be upheld in court.




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Legal Skills in Action AnswerRestrictive Employment Covenants Answers will vary, but should address whether the geographic region and time periods specified would be considered reasonable.

Agreements Contrary to Public PolicyAgreements Contrary to Public PolicyEnd of Section 9.2End of Section 9.2

agreements contrary to public policy section 9.2

Documents

public policy section

public policy slide

public policy decisions

trade agreements

fraud agreements

justice agreements

understanding business

marriage section