Insurance policy not enforceable if taken out for building which insured does not own or have any financial interest in Licensing Statutes • Require person who engage in certain professions, trades, or businesses to be licensed • Recovery by unlicensed person varies by state o If state statute is regulatory (for protection of general public against unqualified persons) then contract is illegal and recovery denied o If statute is revenue raising recovery is allowed i.e. a corporation that has merely failed to obtain a license to do business in a particular city is still permitted to enforce its contracts bc city licensing ordinances applicable to corporations are normally enacted for revenue raising purposes Usury • Usury - charging interest in excess permitted rate • Interest ceiling varies by state o Some kinds of loans (e.g. loans to corporations) are not governed by state statutes o Specific kinds of loans are permitted to charge higher rates of interest (e.g. credit cards) • Effect of usury also varies by state o Many states permit usurious lender to recover principal and interest at lawful rate but not excess interest o In other states, lender permitted to recover principal only o In a few states, lender forfeits both interest and principal Contracts Contrary to Public Policy Contracts in Restraint of Trade • Covenants in restraint of trade/not to compete are lawful if: o Agreement is of ancillary nature – subsidiary or auxiliary part of a larger agreement Reasonableness – sale of business contracts
Reasonableness – employment contracts ◊ Restriction is reasonably necessary to protect the employer ◊ Restriction is “not unreasonably excessive” as to the employee o Promisee has legitimate business interest that warrants temporary protection from competition o Agreement is reasonable in its scope and does not limit competition more than is reasonably necessary to protect the promisee’s legitimate interest • Will the courts rewrite the contact? o “Blue pencil” rule – courts finding that contract’s restrictions on competition serve an employer’s legitimate interests but are unreasonably broad (either in terms of geography or time), will simply rewrite the covenant so that restrictions are reasonable in scope then will enforce them to that extent Exculpatory Clauses • Used to excuse businesses and others from liability resulting from negligence only • Generally held to be contrary to public opinion and unenforceable • The public interest inquiry o Exculpatory clause not enforceable if involves goods or services that are essential to daily life o Otherwise, exculpatory clause may be enforced if: Either very conspicuous or specifically called to attention of potential plaintiff Written in a way that clearly informs potential plaintiff that drafter of clause seeks to be relieved from liability for its negligence or the negligence of its employees Bailment Contracts • In bailments, exculpatory clauses are highly suspect in eyes of the law •
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- Spring '08