What are the Illegality of Contracts

A contract may be ruled to be illegal by any court of law. Illegality can become an issue even if the normal requirements of acceptance of offers, consideration, contractual capacity, are present. Illegal contracts typically do not result in any liability for the involved parties. The courts may rule an illegal contract exists regardless of whether or not the parties involved in the suit raise the issue, even if the two parties believe the contract to be legal.

Severable and/or Divisible Contracts

A severable or divisible contract may be formed by the parties to the contract or may result from actions of the courts. The parties can create a severable contract by including a severence clause into the original contract. A severance clause is a clause which states that if there is one other contractual clause that would cause the contract to be considered illegal, then the offending phrase should be stricken from the contract, so long as the removal of the clause does not substantially alter the original nature of the contract.

Divisible contracts are similar contracts entered into by the same parties which have similar terms but can be completed independently of each other. A court may form a severable contract by utilizing a blue pencil test. If the offending phrase in a contract can be removed from the contract without enacting any change besides turning an illegal contract into a legal one, then the change passes the blue pencil test.

Fast Overview on Fraudulent Misrepresentation

Fraudulent misrepresentation can be shown where the party engaging in fraud had knowledge that not sharing the information would compel action by the other party. The omission of material facts can only be considered a fraudulent misrepresentation if it was intentional and the information was known to the accused.

Fraudulent misrepresentation by silence may result during a long contract negotiation if one of the parties to the contract withholds material information they learned during the negotiation process.

Discover Contracts Contrary to Statute

There are several reasons the legality of a contract may be in question. The first is if the contract violates a statute. Contracts that are contrary to statute are considered void.

Usury contracts contrary to statute are formed when a contract exists that charges interest rates above the rate that State or local laws permit. Nearly every State has distinct usury laws. In some states a usurious loan is automatically void. In states that declare usury contracts void ab initio, the lender forfeits the principle as well as the interest if the courts become involved.

Other states allow a usurer to recover both the principle loaned, as well as the interest up until the amount that would have been permitted under the law. In still other states, an usury contract only permits an individual to recoup the initial principle. Usurious rates depend upon the particular type of loan. If an usurious loan is not challenged, the person who has taken out the loan is usually obliged to repay the full amount.

Gambling contracts are void when they occur outside of the legally-approved methods of gambling. As with what level of interest constitutes usury in a particular State, each State has different ga

Understanding Severable and or Divisible Contracts

A severable contract is a contractunenforceable that can still remain in effect despite those provisions which are void. In order for the blue pencil test to be satisfied, the phrase stricken by the court must not result in a change to the purpose for which the contract was created by the parties. The contract must still make grammatical sense after the edits have been made to the contract. Otherwise the contract will not be considered to have become a severable contract.

A severable contract can be formed if the parties who entered into the contract do not consider it essential that all the actions be performed together. Divisible contracts may exist if a convenience store orders the soda, chips and candy it sells from the same company in three separate clauses. An indivisible contract is formed if the store hired a vendor to provide the soda, chips, and candy in a single clause.

Whether divisible contracts or indivisible contracts have been formed can often be determined by examining the terms under which consideration has been provided. If the set of contracts provide the consideration in a lump sum, it is usually an indivisible contract. If consideration is itemized for each thing exchanged, a severable contract often exists.

If a contract contains both legal and illegal clauses, the court will attempt to enforce only the legal clauses in the event the contract is already a severable contract. If the court can employ a blue pencil test to create a severable contract, it will.

What You Didn’t Know About Restraining Trade

Contract laws generally prohibit contracts that restrain trade. Contracts restraining trade are defined as contracts that reduce the level of competition involved in the commercial exchange of goods or services. Contracts that restrain trade are considered a classification of contracts that are contrary to public policy.

These kinds of contracts are sometimes defined by contract laws as covenants not to compete and sometimes as non-competition contracts. Whichever they are known as, though, they are illegal and are thus considered unenforceable.

Elements of contracts that restrain trade are generally permissible if they are limited in scope or duration. A contract is permissible if it compels a party to the contract to relinquish the right to make a particular thing, but not if it attempts to force one of the parties to the contract to not compete with the other in any way in the future.

Contracts are permitted to contain non-competition clauses if the clause exists in order to protect business secrets of the employer, or if the non-competition element of the contract seeks to limit a former employee from utilizing business contacts which are considered essential to the operations of the company with which the original contract was signed.

Knowing the Exculpatory Clause

An exculpatory clause is a clause of a contract in which one of the parties releases the other party from liability for their actions. An exculpatory clause may or may not be considered contrary to the public interest depending upon what field the party seeking the release of liability typically operates.

A contractual clause which limits liability is not automatically grounds that the contract will be declared unenforceable during a contract dispute. Limited liability clauses are permitted in many contracts. The only time they may become an issue is if the contract dispute involves an exculpatory clause that seeks to invalidate the liability claim regardless of which party is at fault.

An exculpatory claim in which the liability for all personal injury or monetary damage will frequently be upheld if the party seeking relief is a private business, such as an amusement park, health club, or general recreational facility. Relief is often granted from suits filed against parties that are not considered essential to the public good or involved in public health. For these types of companies, exculpatory clauses are generally held to be enforceable.

A contract dispute with a public utility company, a bank, or a company which carries public goods in which an attempt is made to invoke an exculpatory clause is usually bound for failure. The courts have generally invalidated exculpatory clauses in these contracts because of the belief that allowing these companies to escape liability would be detrimental to the public good.

If a lease contains an exculpatory clause it may be enforceable or unenforceable depending on the purpose for which the property is leased. If an exculpatory clause is present when there is a contract dispute regarding the lease of a commercial property, the exculpatory clause will usually be enforced.

If the property is residential, the exculpatory clause in the contract dispute will usually be considered unenforceable by the courts. This distinction is made because it is generally considered more detrimental to the public good to inflict harm against individuals than is harming a commercial enterprise.

What You Need to Know About Withdrawing Acceptance

An offer and acceptance is the analysis of a traditional approach in contract law that is used to determine whether an agreement is valid between two parties. The term “agreement” consists of an offer by a party or individual (known as the “offeror”) to another entity known as the “offeree.”

The two sides enter negotiations based on the contract and its explicit stipulations. When the two sides agree on the intricacies associated with the agreement, a contract becomes realized.

When an offeree accepts the stipulations of an agreement or a contract, they are held responsible for fulfilling the intended roles of their agreement. If the offeree withdraws acceptance, depending on the form of the agreement, they will be held liable to fulfill the underlying terms of the agreement. There are instances where the offeree will be able to terminate the agreement, but a violation or a reneged stipulation must be present in the agreement.

Legality

What You Need to Know About Withdrawing Acceptance

What are the Blue Laws

What are the Illegality of Contracts

Fast Overview on Fraudulent Misrepresentation

Discover Contracts Contrary to Statute

Understanding Severable and or Divisible Contracts

What You Didn’t Know About Restraining Trade

Knowing the Exculpatory Clause

What You Need to Know About Withdrawing Acceptance

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