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

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.

Understanding Intent to Deceive

In order for an allegation of fraudulent misrepresentation to be sustained there must be an intent to deceive on behalf of the accused party. The element of intent also requires that the deceiver must know that the information they are spreading is false or that the withholding of the information would constitute a fraudulent action.

The technical term for this intent to do wrong is known as scienter. Scienter is related etymologically to the word science. Both words refer to the possession of knowledge.

Laws concerned with fraud in contracts may find that scienter exists if one of the parties to the contract knows that one of the material facts that affect the contract in question is not true as they are stated in the contract.

Scienter is also determined by laws governing contracts to exist if one of the parties to the contract makes statements without any regard to whether the statements they utter are true or false. Laws regard this willful ignorance of the validity of the individual’s statements to rise to the level of fraudulent representation.

Scienter may also be found to exist if the party accused has claimed that their statements are based on personal knowledge or research when this knowledge or research has no actual basis in reality.

All You Need to Know About Duress

As a legal concept, duress has a long tradition. Duress is related to the concept of undue influence. Duress exists when there is a threat of bodily harm, and the threat is immediate and cannot be avoided. Duress also exists in criminal law proceedings. In order for duress to exists in a contract law court proceeding there must be a wrongful or illegal threatened act.

A contract also cannot normally be made voidable because one of the parties is suffering from economic duress. Claims of duress are filed by parties to a contract seeking to prove that their assent to a contract was not genuine, and thus did not fulfill the essential requirements needed to form a contract.

A contract cannot be invalidated by a party to that contract who claims duress because the other party threatened to sue them for a larger amount, because the filing of a law suit is a legally permitted action. A claim of duress is distinct from instances where the consideration offered by one of the parties is the forbearance of an action.

Duress can be invoked if the party claiming they were acting under duress was in fear for their safety. An example of duress would be if a person is told to sign a contract or their family or they themselves would be harmed. This qualifies as duress because the consideration of forbearance is to forbear from doing an illegal act. If it is a wrongful or illegal threatened act then it constitutes an instance of duress.

A claim of economic duress is not usually permitted. Individuals are usually only able to successfully invoke a claim of economic duress if the other party in the contract is the immediate cause of the economic duress. Sometimes the courts permit a claim of economic duress to be filed in contracts which involve one party claims they are suffering from economic difficulties which are not caused by the other party in the contract, although such claims of economic duress are not usually accepted.

Economic duress does not exist simply if exorbitant prices are charged for goods or a service. However, if the high prices are charged by the same party that created the need for the good or service then a claim of economic duress may be permitted by the courts.

If the individual claiming the contract was formed under duress is able to prove their claim, then the courts may declare the contract voidable.

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.

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.

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

The Secret to Undue Influence