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CHAPTER 10
ILLEGAL AGREEMENTS
Answers to Learning Objectives
1. A contract for an unlawful purpose or a purpose achieved illegally is void.
2. Gambling contracts, Sunday contracts (in certain states), usurious contracts, contracts of an
Lesson Outline
1. If the performance of the act called for in the contract is illegal, the contract is void; or, if the
act is legal but the means of carrying it out are illegal, the contract is void.
4. Some states prohibit only work on Sunday; others prohibit both labor and business
transactions. If business transactions on Sunday are prohibited, a contract made on Sunday is
void. These laws are usually not strictly enforced.
5. Usurious contracts consist of charging a higher rate of interest than that allowed by law.
a. The maximum contract rate is the highest rate that may be charged.
b. The legal rate applies to all situations in which interest may be charged but in which the
parties were silent as to rate.
Chapter 10 Illegal Agreements
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Comments on Cases
(p. 101) The court stated that the parties were not authorized to bypass the village code by making
private arrangements that were contrary to the regulatory scheme of the village. Failure
to apply for a license transfer went against the purpose of the code to promote the public
safety. Village Taxi Corp. v. Beltre, 933 N.Y.S.2d 694 (Sup. Ct., App. Div.)
(p. 104) The fact that Halbach performed the contract from Scottsdale, Arizona, using telephone
and e-mail to contact potential buyers did not mean it was not required to be licensed in
Florida. Since Halbach solicited Florida purchasers for a Florida business, Halbach
engaged in brokerage activities in Florida. Meteor Motors, Inc. v. Thompson Halbach &
Associates, 914 So.2d 479 (Fla. App.)
Answers to Questions
(Page 108)
1. No. A contract void for illegality may consist merely of a private wrong.
2. If a contract is indivisible illegality in one part of it renders the whole contract invalid. If the
contract is divisible the legal parts of the contract are enforceable.
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the seller.
7. A contract to divide up trade territory that affects interstate commerce is declared illegal by
the Sherman Antitrust Act or the Clayton Act.
8. A contract to seek a divorce for a consideration is void as against public policy.
9. Any contract that may obstruct our legal processes will be void when it has the tendency to
obstruct justice even if justice is not actually obstructed.
Answers to Case Problems
(Chapter 109)
1. Yes. The court said the provision prohibited Murphree from initiating action to compete
with Yancey by contacting former clients. However it did not prevent him from accepting
unsolicited business from the former clients. As a result the provision was reasonable and
enforceable. Murphree v. Yancey Bros. Co., 716 S.E.2d 824 (Ga. App.)
3. No. The court held that the agreement not to bid was an unreasonable restraint on trade. As
such it was illegal and therefore unenforceable. Pines Grazing Ass’n, Inc. v. Flying Joseph
Ranch LLC, 265 P.3d 1136 (Idaho)
4. Yes. If the landlord knew of the intended illegal use and acted to further that illegal use, as
alleged here, the landlord would not be allowed to enforce the lease. McMahon v. Anderson,
Hibey and Blair, 728 A.2d 656 (D.C.)
Chapter 10 Illegal Agreements
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7. No. Since the criminal charges were dismissed in return for Lawlor signing the note this was
an agreement contrary to public policy. As such it was void. Allen Foods, Inc. v. Lawlor, 94
S.W.3d 436 (Mo. Ct. App.)