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Contractual CapacityContractual Capacity

Chapter 5: Contract Capacity & ConsiderationChapter 5: Contract Capacity & Consideration

Understanding Business and Personal Law

Contractual Capacity Contractual Capacity Section 7.1Section 7.1

Capacity to Contract

What You’ll Learn

How to explain the legal concept of How to explain the legal concept of minority (p. 148)minority (p. 148)

How to identify the rights of minors in How to identify the rights of minors in relation to contracts (p. 150) relation to contracts (p. 150)




What You’ll Learn

How to identify contracts that are voidable How to identify contracts that are voidable by a minor (p. 151)by a minor (p. 151)

How a person can ratify a contract made How a person can ratify a contract made in minority (p. 154)in minority (p. 154)




What You’ll Learn

How to identify others, besides minors, How to identify others, besides minors, who can rescind contracts (p. 157)who can rescind contracts (p. 157)




Why It’s Important

Understanding the rights afforded to minors Understanding the rights afforded to minors in contract law will enable you to exercise in contract law will enable you to exercise your rights and help others.your rights and help others.




The Requirement of Capacity Section OutlineSection Outline

Minor’s Rights and Obligations Definition of MinorityMisrepresentation of Age




Contracts of MinorsSection OutlineSection Outline

Voidable ContractsRatification of Minors’ ContractsContracts for NecessariesSpecial Statutory Rules




Other Contractual Capacity Rules Section OutlineSection Outline

Mentally Impaired PersonsIntoxicated PersonsOther Capacity Limitations




Pre-Learning Question Pre-Learning Question

What is capacity?




CapacityCapacity, one of the six elements , one of the six elements of a contract, is the legal ability to of a contract, is the legal ability to enter a contract.enter a contract.Capacity relates directly to the Capacity relates directly to the involvement of minors in contracts.involvement of minors in contracts.

The Requirement of CapacityThe Requirement of Capacity




When people enter into contracts, When people enter into contracts, they are permitted by law to presume they are permitted by law to presume that the other party or parties have the that the other party or parties have the capacity to contract.capacity to contract.

Minor’s Rights and Obligations Minor’s Rights and Obligations




This presumption, known as a This presumption, known as a rebuttable presumptionrebuttable presumption, can be , can be challenged in court.challenged in court.





The presumption of capacity plays a The presumption of capacity plays a key role in contracts made by minors key role in contracts made by minors because the law permits minors, because the law permits minors, within certain limits, to rescind or void within certain limits, to rescind or void their contracts.their contracts.





The court has established specific The court has established specific standards regarding who is standards regarding who is considered a minor and what the term considered a minor and what the term minority means.minority means.






How would you define a minor?




The age of legal adulthood is known The age of legal adulthood is known as the age of as the age of majoritymajority..A person who has not yet reached A person who has not yet reached majority is considered a majority is considered a minorminor and and is still in his or her is still in his or her minorityminority..

Definition of Minority Definition of Minority




In 1972 the voting age was lowered In 1972 the voting age was lowered from 21 to 18. At this time many states from 21 to 18. At this time many states lowered the age of majority from 21 to lowered the age of majority from 21 to 18.18.

Legal Age Legal Age




For many years, the age of majority For many years, the age of majority was also the age at which a person was also the age at which a person could begin to buy alcoholic could begin to buy alcoholic beverages.beverages.

Legal Age Legal Age




Now, however, the age of majority is Now, however, the age of majority is 18 nationwide, but most states have 18 nationwide, but most states have raised the legal drinking age to 21.raised the legal drinking age to 21.

Legal Age Legal Age




For legal purposes, people turn 18 at For legal purposes, people turn 18 at the beginning of the day before their the beginning of the day before their 1818thth birthday. birthday.

Legal Age Legal Age




Some states have declared that Some states have declared that minors who are no longer under the minors who are no longer under the control of their parents are control of their parents are emancipatedemancipated..This means they are responsible for This means they are responsible for their contracts.their contracts.

Emancipation and Abandonment Emancipation and Abandonment




A minor who marries or leaves home, A minor who marries or leaves home, giving up all rights to parental support, giving up all rights to parental support, is considered emancipated and is said is considered emancipated and is said to have to have abandonedabandoned the protection the protection afforded him or her as a minor. afforded him or her as a minor.

Emancipation and Abandonment Emancipation and Abandonment




If a minor claims to be over the age If a minor claims to be over the age of majority, then he or she has of majority, then he or she has committed fraud.committed fraud.Fraud is a wrongful act, and minors Fraud is a wrongful act, and minors are responsible for their wrongful are responsible for their wrongful acts.acts.

Misrepresentation of Age Misrepresentation of Age




Some states allow the other party to Some states allow the other party to sue a minor who has misrepresented sue a minor who has misrepresented his or her age for fraud. Other states his or her age for fraud. Other states do not.do not.





However, it is illegal to lie about your However, it is illegal to lie about your age in order to buy age-restricted age in order to buy age-restricted products, such as alcohol.products, such as alcohol.






Why would the contracts of minors be different from the contracts of adults?




Contracts of Minors Contracts of Minors

The law shields minors when they The law shields minors when they make contracts to protect them from make contracts to protect them from unscrupulous adults. Minors may be unscrupulous adults. Minors may be vulnerable because ofvulnerable because of

ImmaturityImmaturityInexperienceInexperience

Lack of educationLack of educationNaïvetéNaïveté




Voidable Contracts Voidable Contracts

Contracts made by minors are Contracts made by minors are voidable by the minor. voidable by the minor.

This means that minors may disaffirm, This means that minors may disaffirm, or avoid, their contracts if they so or avoid, their contracts if they so choose.choose.





To disaffirm a contract means to show To disaffirm a contract means to show the intent not to live up to the contract the intent not to live up to the contract by a statement or some other act.by a statement or some other act.





By permitting minors to have the By permitting minors to have the privilege of disaffirming contracts, the privilege of disaffirming contracts, the law provides young people with a law provides young people with a second chance when they use poor second chance when they use poor judgment.judgment.




Returning the Merchandise Returning the Merchandise

If a minor still has the merchandise he If a minor still has the merchandise he or she received upon entering a or she received upon entering a contract, that merchandise must be contract, that merchandise must be returned when the contract is returned when the contract is disaffirmed. disaffirmed.




Disaffirming the Whole Contract Disaffirming the Whole Contract

A minor may not affirm parts of a A minor may not affirm parts of a contract that are favorable and contract that are favorable and disaffirm the unfavorable parts.disaffirm the unfavorable parts.




Disaffirming Contracts MadeDisaffirming Contracts Madewith Other Minorswith Other Minors

When two minors enter into a contract When two minors enter into a contract with each other, both parties have the with each other, both parties have the right to disaffirm the contract.right to disaffirm the contract.




Why does the law shield minors when making contracts?




ANSWERANSWER

To protect the minor from an unscrupulous adult who might take advantage of him or her.




Ratification of Minors’ Contracts Ratification of Minors’ Contracts

After reaching the age of majority, a After reaching the age of majority, a person can person can ratifyratify, or approve, , or approve, contracts made during minority.contracts made during minority.




7.17.1

Ratification Ratification

11

22

33 44

A business advertisement in a newspaper can constitute an offer of sale, even if the advertisement is aimed toward minors.

OfferOffer

If a minor agrees to the terms of an offer, then a voidable contract is created.

AcceptanceAcceptance

Reaching Majority Reaching Majority

When a minor reaches the age of majority, his or her contracts can be ratified.

Ratification Ratification

Using or selling an item obtained by contract for a reasonable time after reaching the age of majority has the effect of ratifying the contract. Ratification can also be accomplished orally or in writing.




Contracts for Necessaries Contracts for Necessaries

A minor is held responsible for the A minor is held responsible for the fair value of necessaries.fair value of necessaries.NecessariesNecessaries, or necessities, , or necessities, include food, clothing, shelter, and include food, clothing, shelter, and medical care.medical care.




Special Statutory Rules Special Statutory Rules

There are many differences in state There are many differences in state statutes regarding minors.statutes regarding minors.Minors should check the statutes of Minors should check the statutes of their own state to find out about their own state to find out about special contractual capacities that special contractual capacities that they may be allowed.they may be allowed.





What other classes of persons may be able to avoid contracts? Why?




Other Contractual Other Contractual Capacity RulesCapacity Rules

Other classes of persons are also able Other classes of persons are also able to avoid contracts.to avoid contracts.

Mentally impaired personsMentally impaired personsIntoxicated persons Intoxicated persons




Mentally Impaired Persons Mentally Impaired Persons

Mentally impaired persons also have Mentally impaired persons also have the right to disaffirm contracts the right to disaffirm contracts because they are considered unable because they are considered unable to make sound judgments.to make sound judgments.




Mentally Impaired Persons Mentally Impaired Persons

Before a Before a guardianguardian is appointed to is appointed to look after the affairs of a mentally look after the affairs of a mentally impaired person, his or her contracts impaired person, his or her contracts are voidable.are voidable.




Intoxicated Persons Intoxicated Persons

Persons who are intoxicated by Persons who are intoxicated by alcohol or drugs at the time they enter alcohol or drugs at the time they enter a contract are sometimes able to a contract are sometimes able to disaffirm those contracts.disaffirm those contracts.




Intoxicated Persons Intoxicated Persons

To disaffirm a contract for this reason, To disaffirm a contract for this reason, a person must have been so a person must have been so intoxicated at the time of the intoxicated at the time of the contracting that he or she did not contracting that he or she did not understand the purpose, nature, or understand the purpose, nature, or effect of the transaction.effect of the transaction.




Other Capacity Limitations Other Capacity Limitations

Other classes of persons lack the Other classes of persons lack the capacity to enter into certain types of capacity to enter into certain types of contracts. contracts.

1.1. Convicts—people convicted of a Convicts—people convicted of a crime. crime.




2.2. AliensAliens—people who are living in —people who are living in this country but owe their allegiance this country but owe their allegiance to another country.to another country.

3.3. Enemy aliens—certain foreign-born Enemy aliens—certain foreign-born persons designated as such during persons designated as such during time of war.time of war.

Other Capacity Limitations Other Capacity Limitations




Reviewing What You Learned

1. What does it mean to be a minor?

Section 7.1 Assessment





A minor is a person who has not yet reached the age of legal adulthood.


Answer





2. What rights do minors have in relation to contracts?






Minors may disaffirm, or avoid, the contracts if they so choose.


Answer





3. What contracts are voidable by a minor?






In essence all contracts are voidable by a minor; however, minors may still have some responsibilities when avoiding contracts and some states may have special statutory rules regarding minors and contracts.


Answer





Upon reaching majority, a person can ratify a contract by approving of the contract orally, in writing, or by some action.


Answer





Critical Thinking ActivityMisrepresenting Your Age Should the act of misrepresenting your age if you are a minor be considered fraud? Why or why not?


Contractual CapacityContractual CapacityEnd of Section 7.1End of Section 7.1


Contractual CapacityContractual CapacitySection 8.1Section 8.1




What You’ll Learn

How to explain the legal concept of How to explain the legal concept of consideration (p. 164)consideration (p. 164)

How to explain the types of How to explain the types of consideration (p. 166)consideration (p. 166)




What You’ll Learn

How to identify certain problems regarding How to identify certain problems regarding consideration (p. 169)consideration (p. 169)

How to identify the principles that apply to How to identify the principles that apply to consideration in everyday life (p. 172)consideration in everyday life (p. 172)





By understanding the concept of By understanding the concept of consideration, you will be able to avoid consideration, you will be able to avoid problems that frequently result when problems that frequently result when agreements lack this important contractual agreements lack this important contractual element.element.




Requirements of Consideration The Legal Concept of ConsiderationThe Characteristics of Consideration

Section OutlineSection Outline




Types of Consideration Section OutlineSection Outline

Money as ConsiderationProperty and Services as ConsiderationA Promise Not to SueCharitable Pledges




Problems with Consideration Section OutlineSection Outline

Disputed AmountsUndisputed Amounts

Consideration in Your Everyday Life





Why is consideration one of the six elements of a legally binding contract?




The law has always refused to The law has always refused to enforce most enforce most gratuitousgratuitous, or free, , or free, agreements. agreements. Parties to an agreement must Parties to an agreement must surrender something of value in surrender something of value in exchange for something else of exchange for something else of value.value.

Requirements of Consideration Requirements of Consideration




This exchange, or the promise to This exchange, or the promise to exchange things of value, is what exchange things of value, is what binds the parties to each other in a binds the parties to each other in a contractual relationship. contractual relationship.

This binding element is known as This binding element is known as consideration.consideration.





Consideration distinguishes a legally Consideration distinguishes a legally binding agreement from other types of binding agreement from other types of agreements, such as social agreements, such as social agreements that contain an offer and agreements that contain an offer and an acceptance.an acceptance.





ConsiderationConsideration is the exchange of is the exchange of benefits and detriments by parties to benefits and detriments by parties to an agreement. an agreement.

The Nature of Consideration The Nature of Consideration




A A benefitbenefit is something that a party is something that a party was not previously entitled to was not previously entitled to receive.receive.A A detrimentdetriment is any loss suffered. is any loss suffered.





8.18.1

ConsiderationConsideration




There are three types of There are three types of consideration.consideration.


1.1. Giving up or promising to give up Giving up or promising to give up something that you have the legal something that you have the legal right to keep.right to keep.




2.2. Doing something or promising to do Doing something or promising to do something that you have the legal something that you have the legal right not to do.right not to do.

3.3. Not doing something that you have Not doing something that you have the legal right to do, which is known the legal right to do, which is known as as forbearanceforbearance..





Consideration must involve these key Consideration must involve these key characteristics:characteristics:

The Characteristics of The Characteristics of Consideration Consideration

1.1. Bargained-for exchangeBargained-for exchange2.2. Something of valueSomething of value3.3. Legal benefits and detriments Legal benefits and detriments




What is the difference between a benefit and a detriment?




ANSWERANSWER

A benefit is something that a party was not previously entitled to receive, and a detriment is any loss suffered.




An agreement involves a bargained-An agreement involves a bargained-for exchange when a promise is made for exchange when a promise is made in return for another promise, an act, in return for another promise, an act, or a promise not to act.or a promise not to act.

Bargained-for Exchange Bargained-for Exchange




Something of Value Something of Value

The law has no specific value The law has no specific value requirements on consideration.requirements on consideration.All that matters is that the parties All that matters is that the parties agreed freely on the value and the agreed freely on the value and the price. price.




Something of Value Something of Value

Usually the courts will not even Usually the courts will not even consider whether the value of the consider whether the value of the consideration is adequate.consideration is adequate.However, a contract may be However, a contract may be deemed deemed unconscionableunconscionable, when the , when the courts believe the consideration is courts believe the consideration is completely out of line.completely out of line.




Legality of Consideration Legality of Consideration

The courts require that the The courts require that the consideration involved in an consideration involved in an agreement be legal. If the agreement be legal. If the consideration is illegal, the contract is consideration is illegal, the contract is invalid.invalid.




Types of Consideration Types of Consideration

These include:These include:

MoneyMoneyPropertyPropertyServicesServicesPromises not to suePromises not to sueCharitable pledges Charitable pledges




Money as Consideration Money as Consideration

Unless price limits have been placed Unless price limits have been placed on certain transactions by on certain transactions by administrative regulations, legislative administrative regulations, legislative fiat, or executive ruling, parties to a fiat, or executive ruling, parties to a contract are free to exchange any contract are free to exchange any amount of money that they negotiate.amount of money that they negotiate.




Property and Services as Property and Services as Consideration Consideration

Before money was accepted as a Before money was accepted as a medium of exchange, it was common medium of exchange, it was common to use property and services as to use property and services as consideration. consideration.




Property and Services as Property and Services as Consideration Consideration

Some parties still prefer to engage in Some parties still prefer to engage in barter agreements that involve goods barter agreements that involve goods and services.and services.




A Promise Not to Sue A Promise Not to Sue

If one party has the right to sue If one party has the right to sue another party but gives up that right in another party but gives up that right in exchange for something of value, the exchange for something of value, the court will generally uphold the court will generally uphold the exchange as valid consideration.exchange as valid consideration.




A Promise Not to Sue A Promise Not to Sue

Pending lawsuits are frequently Pending lawsuits are frequently settled in this manner.settled in this manner.

When a person accepts an offer and When a person accepts an offer and agrees not to sue, he or she is asked agrees not to sue, he or she is asked to sign an agreement, which is called to sign an agreement, which is called a a releaserelease..




Charitable Pledges Charitable Pledges

Charitable organizations and nonprofit Charitable organizations and nonprofit institutions often depend upon institutions often depend upon contributions. contributions.

This dependency has led the court to This dependency has led the court to enforce charitable pledges just as if enforce charitable pledges just as if they were contracts.they were contracts.





What do you think happens when the parties to a contract cannot agree as to the actual amount of money owed?




Problems with ConsiderationProblems with Consideration

When parties disagree about the When parties disagree about the amount of money that the debtor owes amount of money that the debtor owes the creditor, a problem has arisen the creditor, a problem has arisen over the consideration involved.over the consideration involved.




Disputed Amounts Disputed Amounts

If the parties to a contract cannot If the parties to a contract cannot agree as to the actual amount owed, agree as to the actual amount owed, the amount is said to be in dispute.the amount is said to be in dispute.





A dispute can be settled by A dispute can be settled by accord and satisfactionaccord and satisfaction if the if the creditor accepts a payment that is less creditor accepts a payment that is less than the amount due as full payment.than the amount due as full payment.





The acceptance by the creditor of The acceptance by the creditor of less than what has been billed to less than what has been billed to the debtor is the debtor is accordaccord..The agreed-to settlement as The agreed-to settlement as contained in the accord is the contained in the accord is the satisfactionsatisfaction..





The dispute must be real, must occur The dispute must be real, must occur in good faith, and must not be trivial.in good faith, and must not be trivial.




Undisputed Amounts Undisputed Amounts

If the parties have mutually agreed to If the parties have mutually agreed to a set amount of money in the contract, a set amount of money in the contract, then the amount cannot be disputed.then the amount cannot be disputed.




Consideration in Your Consideration in Your Everyday Life Everyday Life

Consideration distinguishes a Consideration distinguishes a legally binding agreement from all legally binding agreement from all other types of agreements.other types of agreements.Consideration must be legal. Consideration must be legal.




Consideration in Your Consideration in Your Everyday Life Everyday Life

Paying a debt in advance is Paying a debt in advance is consideration for settling the debt consideration for settling the debt for a lesser amount.for a lesser amount.To be consideration, the act or To be consideration, the act or promise must be bargained for.promise must be bargained for.





1. What is consideration?






Exchange or the promise to exchange things of value in a contract; binds parties to each other in the contractual relationship.


Answer





2. What are the types of consideration?






Money, property, services, promises not to sue, and charitable pledges.


Answer


Contractual CapacityContractual CapacitySection 9.1Section 9.1




What You’ll Learn

How to explain what makes a How to explain what makes a contract illegal (p. 186)contract illegal (p. 186)

How to identify the consequences How to identify the consequences of illegality in relation to contract of illegality in relation to contract law (p. 186)law (p. 186)




What You’ll Learn

How to identify contracts that are illegal by How to identify contracts that are illegal by statutory law (p. 188)statutory law (p. 188)

How to identify different types of licenses How to identify different types of licenses (p. 191)(p. 191)





By understanding the concept of illegality in By understanding the concept of illegality in contract law, you will be able to avoid contract law, you will be able to avoid problems that might arise when you problems that might arise when you consider entering a contract.consider entering a contract.




The Nature and Consequences of Illegality

Illegality in Entire AgreementIn Pari Delicto and Divisible Contracts

Section OutlineSection Outline




Section OutlineSection OutlineAgreements that Violate Statutes

Civil and Criminal StatutesUsury StatutesGambling StatutesSunday StatutesLicensing Statutes





What are the consequences of being party to an illegal contract?




Legality is the last of the six Legality is the last of the six elements that make up a valid elements that make up a valid contract.contract.Even if a contract has all the other Even if a contract has all the other elements, it may still be invalid if it elements, it may still be invalid if it lacks a legal purpose.lacks a legal purpose.

The Nature and Consequences The Nature and Consequences of Illegality of Illegality




A contract can be made illegal in A contract can be made illegal in many ways. It may be illegal if it many ways. It may be illegal if it involves an agreement to do involves an agreement to do something that violates statutory law. something that violates statutory law.





Making the agreement itself could be Making the agreement itself could be illegal. For example, individuals who illegal. For example, individuals who agree to commit crimes for a promised agree to commit crimes for a promised consideration are involved in what consideration are involved in what criminal law calls criminal law calls conspiracyconspiracy. .





Illegality in Entire Agreement Illegality in Entire Agreement

If it’s impossible to separate a contract If it’s impossible to separate a contract into isolated promises and acts, each into isolated promises and acts, each of which can be performed of which can be performed independently of the others, then the independently of the others, then the entire contract is rendered illegal.entire contract is rendered illegal.




Illegality in Entire Agreement Illegality in Entire Agreement

If any part of the agreement is If any part of the agreement is contaminated by illegality, a valid contaminated by illegality, a valid contract cannot result.contract cannot result.




In Pari DelictoIn Pari Delicto and and Divisible Contracts Divisible Contracts

If certain promises and actions in a If certain promises and actions in a contract can be successfully contract can be successfully performed by themselves, then the performed by themselves, then the contract is said to be divisible.contract is said to be divisible.





In such cases, the courts may enforce In such cases, the courts may enforce those parts of the agreement that are those parts of the agreement that are legal and revoke the parts that are legal and revoke the parts that are not.not.





Parties are said to be Parties are said to be in pari delictoin pari delicto (in (in equal fault) if they both know that the equal fault) if they both know that the agreement is illegal. In such cases, agreement is illegal. In such cases, the court will aid neither party.the court will aid neither party.





However, if one of the parties is However, if one of the parties is unaware of wrongdoing, then the unaware of wrongdoing, then the parties are not parties are not in pari delictoin pari delicto and and courts may grant relief to the innocent courts may grant relief to the innocent party.party.





What type of agreements do you think would violate state statutes?




Agreements that Violate Statutes Agreements that Violate Statutes

State legislatures pass laws declaring State legislatures pass laws declaring that certain types of agreements are that certain types of agreements are illegal and void because they violate:illegal and void because they violate:

Civil and criminal statutesCivil and criminal statutesUsury statutes Usury statutes




Agreements that Violate Statutes Agreements that Violate Statutes

Gambling statutesGambling statutesLicensing statutesLicensing statutesSunday statutesSunday statutes




Civil and Criminal Statutes Civil and Criminal Statutes

Agreements that require one party Agreements that require one party to commit a tort or a crime are to commit a tort or a crime are illegal.illegal.Agreements to protect one party Agreements to protect one party from the consequences of torts or from the consequences of torts or crimes committed are also illegal.crimes committed are also illegal.




What does in pari delicto mean and how does it relate to illegal contracts?




ANSWERANSWER

It means “in equal fault” and refers to both parties of a contract who know that an agreement is illegal.




Usury Statutes Usury Statutes

Each state sets a maximum interest Each state sets a maximum interest rate that lenders can charge for loans rate that lenders can charge for loans by statute.by statute.

Interest Interest is the fee the borrower pays is the fee the borrower pays to the lender for using the money.to the lender for using the money.




Usury Statutes Usury Statutes

The interest rate the lender and The interest rate the lender and borrower agree upon must not exceed borrower agree upon must not exceed the maximum rate allowed by state the maximum rate allowed by state law. law.

Charging more than the maximum Charging more than the maximum legal interest rate is legal interest rate is usuryusury..




Gambling Statutes Gambling Statutes

State statutes also prohibit gambling State statutes also prohibit gambling agreements—agreements in which agreements—agreements in which one party wins and another party one party wins and another party loses, even if some skill may be loses, even if some skill may be involved.involved.





Gambling agreements include:Gambling agreements include:

Playing cards for money.Playing cards for money.Money wagers or bets on elections Money wagers or bets on elections or sports events.or sports events.Buying tickets in a sports pool.Buying tickets in a sports pool.





In the past, most states prohibited In the past, most states prohibited gambling. gambling.

Recently, however, many states Recently, however, many states changed their laws to allow some changed their laws to allow some regulated gambling, such asregulated gambling, such as





Betting at racetracks.Betting at racetracks.Certain forms of off-track betting.Certain forms of off-track betting.State-run lotteries. State-run lotteries.





A A lotterylottery is a game that consists of is a game that consists of drawing lots, typically tickets with drawing lots, typically tickets with different combinations of numbers different combinations of numbers printed on them, in which prizes are printed on them, in which prizes are distributed to the winners among distributed to the winners among persons buying a chance.persons buying a chance.




Sunday Statutes Sunday Statutes

In some states, it is illegal to make In some states, it is illegal to make or perform contracts on Sunday.or perform contracts on Sunday.These are called Sunday statutes or These are called Sunday statutes or blue laws.blue laws.The statutes vary greatly from state The statutes vary greatly from state to state.to state.




Licensing Statutes Licensing Statutes

A A licenselicense is a legal document stating is a legal document stating that the holder has permission from that the holder has permission from the proper authorities to carry on a the proper authorities to carry on a certain trade or profession.certain trade or profession.





All states have statues that require All states have statues that require persons to have a license to practice persons to have a license to practice certain trades or professions and certain trades or professions and engaging in such a trade or profession engaging in such a trade or profession without a license is illegal.without a license is illegal.





Some licenses are designed to Some licenses are designed to protect the public from dealing with protect the public from dealing with unqualified persons.unqualified persons.Some state statutes require Some state statutes require licenses simply to raise revenue.licenses simply to raise revenue.





In most states the following trade and In most states the following trade and professional workers must be professional workers must be licensed:licensed:

NursesNursesSurveyorsSurveyorsFuneral directors Funeral directors

BarbersBarbersPlumbers Plumbers





1. What makes a contract illegal?






Illegal contracts may be created in many ways. A contract may be illegal if it involves an agreement to do something that violates statutory law.


Answer





2. What are the consequences of illegality in relation to contract law?






If the contract cannot be separated into isolated promises and acts that can be performed independently, the entire contract is rendered illegal. If any part of the agreement is illegal, a valid contract cannot result.


Answer





If the contract is divisible the court may enforce the legal parts of the agreement and revoke the illegal parts.


Answer





3. What contracts are illegal by statutory law?






Contracts that violate a state’s civil or criminal statutes, usury statutes, gambling statutes, licensing statutes, or Sunday statutes.


Answer





4. What are the different types of licenses?






Some licenses raise revenue, other are designed to protect the public.


Answer

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