BSL212 Chapter 13 Study Guide
BSL212 Chapter 13 Study Guide BSL212
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This 5 page Study Guide was uploaded by Taylor Ross on Wednesday March 11, 2015. The Study Guide belongs to BSL212 at University of Miami taught by in Spring2015. Since its upload, it has received 85 views. For similar materials see Intro to Business Law in General at University of Miami.
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Date Created: 03/11/15
BSL212 Chapter 13 Illegal Bargains contract technically agreement or bargain under which neither party can recover law does not provide remedy for breach of unenforceable agreement illegal bargain is made unenforceable 1 to discourage such undesirable conduct in the future AND 2 to avoid the inappropriate use of the judicial process in carrying out the socially undesirable bargain courts will not enforce an agreement declared illegal by statute quotwagering or gambling contractsquot are speci cally declared unenforceable in most states agreement induced by criminal conduct will not be enforced o require formal authorization to engage in certain trades professions or businesses 0 ex lawyers doctors dentists accountants brokers plumbers contractors 0 some mandate schooling andor examination while others require only nancial responsibility andor good moral character 0 whether a person who has failed to comply with a licensing requirement may recover for services rendered depends on the terms or type of licensing statute statute may expressly provide that an unlicensed person engaged in a business or profession for which a license is required shall not recover for services rendered where there is no express statutory provision courts commonly distinguish between regulatory statutes and those enacted merely to raise revenue through the issuance of licenses a measure designed to protect the public from unquali ed practioners o if statute is regulatory person cannot recover for professional services unless he has the required license as long as the public policy behind the regulatory purpose clearly outweighs the person s interest in being paid for his services 0 some courts balance the penalty suffered by the unlicensed party against the bene t received by the other party 0 examples licenses issued under statutes prescribing standards for those who seek to practice law or medicine those to engage in the construction business 0 serves simply to raise money not to protect against incompetent or unquali ed practitioners 0 example statute requiring license of plumbers but not establishing standards of competence for those who practice the trade 0 courts regard this as a taxing measure lacking any expression of legislative intent to prevent unlicensed plumbers from enforcing their business contracts 0 prohibit which are agreements that one party will win and the other lose depending on the outcome of an event in which their only interest is the gain or loss 0 US courts generally refuse to recognize the enforceability of a gambling agreement some states now permit certain kinds of regulated gambling wagering conducted by governmental agencies principally stateoperated lotteries has come to constitute an increasingly important source of public revenues a law establishing a maximum rate of permissible interest for which a lender and borrower of money may contract 0 recently limiting or relaxing these statutes 0 maximum permitted rates vary greatly state to state and among types of transactions 0 typically general in their application and certain types of transactions are exempted completely example 0 many states impose no limit on the rate of interest that may be charged on loans to corporations some states permit the parties to contract for any rate of interest on loans made to individual proprietorships or partnerships for purpose of carrying on a business not many protections remaining for typical consumer transactions including those involving credit cards 0 in addition to exceptions affecting certain designated types of borrowers a number of states have exempted speci c lenders example majority of states have enacted installment loan laws permitting eligible lenders a higher return on installment loans than would otherwise be permitted under the applicable general interest statute 0 these speci c lender usury statutes which have all but eliminated general usury statutes vary greatly but generally encompass small consumer loans retail installment sales acts corporate loans loans by small lenders real estate mortgages and numerous other transactions 0 for a transaction to be usurious courts usually require evidence of 1 a loan 2 of money 3 that is repayable absolutely and in all events 4 for which an interest charge is exacted in excess of the interest rate allowed by law nevertheless law does not permit certain expenses or charges in addition to the maximum legal interest such as payments made by a borrower to the lender for expenses incurred or for services rendered in good faith in making a loan or in obtaining security for its repayment permissible expenses commonly incurred by a lender include 0 costs of examining title 0 investigating the borrower s credit rating 0 drawing necessary documents 0 inspecting the property if not excessive such expenses are not considered in determining the rate of interest under the usury states 0 however payments made to the lender from which he derives an advantage are considered if they exceed the reasonable value of services he actually rendered o the legal effect of a usurious loan varies from state to state in a few states lender forfeits both principal and interest in some jurisdictions lender can recover the principal but forfeits all interest in other states only that portion of interest exceeding the permitted maximum is forfeited in still other states the amount forfeited is a multiple double or treble of the interest charged 0 how states deal with usurious interest already paid also varies some states do not allow borrower a policy or concept that affects the public either good or bad contracts raising questions of public policy include agreements that o restrain trade any contract or agreement that eliminates or tends to eliminate competition or otherwise obstructs trade or commerce a type of restraint of trade to refrain from entering into a competing trade profession or business 0 enforceable if the purpose of the restraint is to protect a property interest of the promisee AND the restraint is no more extensive than is reasonably necessary to protect that interest 0 typically arise in two situations the sale of a business 0 seller frequently promises not to compete in that particular business in a de ned area for a stated period of time in order to protect the business s goodwill an asset that the buyer has purchased courts enforce such a covenant promise if the restraint is within reasonable limitations depending on the geographic area period for which it is to be effective and the hardship it imposes on the promisor and the public employment contracts salespeople management personnel and other employees are frequently required to sign employment contracts prohibiting them from competing with their employers during their employment and for some additional stated period after their termination OOOOOOO also frequently true among corporations or partnerships involving professionals such as accountants lawyers investment brokers stockbrokers or doctors although courts readily enforce a covenant not to compete during period of employment they subject a promise not to compete after termination of employment excuse or exculpate a party from liability for his own negligence are unconscionable involve tortious conduct tend to corrupt public officials or impair the legislative process tend to obstruct the administration of justice impair family relationships
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