UNIT 3
CONTRACT LAW AND
THE APPLICATION OF ETHICS
ANSWERS TO DISCUSSION QUESTIONS
1. The doctrine of impossibility of performance is based in part on the ethical question of
whether one party should suffer economic loss when it is impossible to perform a contract. The rule that
one is “bound by his or her contracts” is not followed when performance becomes impossible. Holding a
party in breach of contract when performance has become impossible through no fault of the party does
not coincide with society’s notions of fairness. But the doctrine applies only when the parties did not
2. The Statute of Frauds requires that certain contracts be in writing to be enforceable. The
primary purpose of requiring a writing is to provide reliable evidence of the contract—a writing signed
by the party against whom enforcement is sought. Abolishing or repealing the Statute of Frauds would
mean that these contracts would not need to meet the writing requirement to be enforceable. But there
3. A common ethical assumption in our society is that individuals should be responsible for
the consequences of their actions, Another common assumption in our society is that individuals should
not harm one another by their actions. These principles are often balanced in the application of contract
law. At times, courts hold that the principle of freedom of contract—which is evident in the principle of
4. Knowledge learned on the job, including trade secrets, has become a more valuable
commodity in the digital age. To prevent this knowledge from falling into the hands of competitors,
more and more employers are requiring their employees to sign covenants not to compete. Determining
whether covenants not to compete in the employment context should be enforced involves balancing
the interests of the employer against the interests of the employee. Employers have a legitimate inter-
