QUERY: We know that contracts must have a legal purpose in order to be valid and enforceable, so the question becomes what makes a contract illegal?

*A contract is illegal if its performance is criminal, tortious or otherwise violative of public policy.

*In determining whether a contract to commit a crime is void, courts distinguish between contracts which are mala in se (evil of themselves) and mala prohibita (forbidden by statute).

a) Mala In Se Contracts

*exs/ contracts to commit assault, kill, burn a house, defraud.

*Courts consider that these types of contracts are automatically void.

b) Mala Prohibita Contracts

*These are contracts which violate statutes but that courts do not automatically consider void. Instead, they look at the circumstances of each case. Examples of mala prohibita contracts are as follows:

i. Price Fixing Agreements

ii. Performances of Services without a license

iii. Sunday Laws

iv. Wagering statutes

v. Usury Statutes - When money is loaned at a greater than 18% interest.

*The general rule is that contracts made to commit a tort (ex/ contract to defraud) are void.

*There is a trend in the law for judges to declare that a contract is voidable because it is against public policy. Hence, public policy frequently becomes an alternative ground for finding illegality. Examples of contracts which may violate public policy are as follows:

a) Covenants Not To Compete (a/k/a "Restrictive Covenants")

*In Florida, courts will not uphold restrictive covenants if 1) they are unreasonable as to time and geographic scope; 2) the former employer is unable to show irreparable injury. If these two conditions are not met, courts will either void the agreement or rewrite the covenant so that it is reasonable.

b) Exculpatory Contracts

*Contracts where one party tries to limit its liability in advance.

QUERY: Are there any contracts which are illegal, but which courts still elect to enforce?

*Yes. The following are examples:

1. Contracts where one of the parties is not in pari delicto

*This means that one of the parties is less guilty than the other party

*(ex/ Joan works for a photographer who does not have a license as required by local ordinance. She can still recover the wages due her if she is unaware of her boss's noncompliance.)

2. Repentance

*If a person rescinds the illegal bargain before consummation.

3. Partial Illegality

*If a contract has several parts (some of which are illegal) a court may elect to separate the illegal and enforce the legal.

QUERY: We know that in order to enforce a contract, both parties must have genuinely assented to the contract, so the issue arises as to what constitutes genuine assent.

*"Genuine Assent" - An contract knowingly entered into and agreed upon by the parties.

*Your book explores the concept of genuine assent by looking at instances where one of the parties did not have genuine assent.

QUERY: What are examples of contracts where one of the parties lacked genuineness of consent?

1. Contracts Involving Fraud

*"Fraud" - Consists of the following:

a) A false statement (with knowledge of its falsity or reckless indifference);

*This does not include predictions or opinions

*NOTE: Sometimes silence can constitute this element

b) Of a material fact;

*A fact is "material" if the party thought it was important when deciding whether to enter the contract.

c) With knowledge of its falsity ("scienter")

c) With an intent that the listener rely thereon;

d) The listener does, in fact, rely thereon.

e) The listener suffered injury

2. Contracts Involving Misrepresentation

*"Misrepresentation" involves the same elements outlined above, except the injured party does not need to prove that the speaker had knowledge of the falsity.

*Generally, misrepresentation (regardless of innocence of the speaker) will be grounds for a court to avoid the contract.

3. Contracts Involving Mistake

1) Unilateral Mistake:

*A mistake by only one of the parties to the contract.

*Generally, does not affect the contract unless the other party knew or should have known that the mistake was being made.

2) Bilateral Mistake:

*When both parties make the same mistake of fact, the contract may be avoided.

4. Contracts Involving Pressure

1) Duress

a) Physical -- Violence or threat of violence (to self or loved one) which deprives the person of free will to make a contract (ex/ gun in back).

*If proven, contract may be avoided.

b) Economic -- Economic pressure on a contracting party

*If proven, contract may be avoided

2) Undue Influence

*Whenever a dominating person obtains a benefit from a contract made with a dominated person (ie... person making the contract does not exercise free will. (ex/ elderly millionaire leaves his entire estate to a young, pretty waitress who pays him attention. His heirs may claim that she unduly influenced him).

*If undue influence is proven, a court may avoid the contract

QUERY: Who lacks capacity to contract?

1. Minors

*Minors may enter into contracts. If they do, they may later seek to avoid the contract because of incapacity. *According to Florida law, "infants" cannot contract. "Infants" are described as anyone < 18. There are exceptions to this rule:

a) Married persons < 18

b) Educational loans

c) Home, farm and business loans

d) Medical services for their children

e) Necessities (all things absolutely necessary for the sustenance and shelter of the minor)

f) If a minor affirms or ratifies the contract (by words or conduct) upon reaching 18.

*Additional notes regarding FL law with respect to minors contracting:

a) Other party to the contract may not seek to avoid the contract because the one party was a minor. ONLY the minor may seek to avoid.

b) Fact that the minor misrepresented their age does not affect the minor's power to avoid the contract.

c) Parents are not liable for the contracts of their children unless they co-sign on a loan.

2. Insane Person

*Florida law refers to this as "incompetency". According to the law, if a person was incompetent at the time he entered into the contract, a court may later declare the contract void. There are two exceptions to this rule:

a) If the incompetent was contracting for a necessity

b) Ifthe contract is later ratified during a lucid interval.

3. Intoxication

*According to Florida law, a contract may be avoided if the other party knew or should have known about the party's serious intoxication.