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    1. State the effect of illegality on an

    agreement.

    2. Illustrate agreements to commit illegal orwrongful acts.

    LEGALITY

    Chapter Outcomes:

    Chapter 11

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    3. Cite agreements that are illegal by statute.

    4. Describe some agreements that are opposed

    to public policy.

    5. Explain the consequences of illegal

    agreements.

    LEGALITYChapter 11

    Chapter Outcomes (continued):

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    Agreements to Engage inUnlawful Activity

    Agreements to Engage in

    Criminal Activity

    Agreements to Engage in

    Tortious Activity

    Agreements made Illegal by

    Statute

    1111--11

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    LawLINKS

    Chapter 11Chapter 11

    Information on the Consumer Credit

    Protection Act can be found at

    http://www.law.cornell.edu/uscode/15/ch41.

    html

    The site is maintained by the CornellUniversity Law School Legal Information

    Institute.

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    1111--11

    1. The illegal practice of charging

    more than the amount of

    interest allowed by law iscalled usury.

    Topic Quiz

    TRUE

    Answer the following true/false questions:

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    1111--11

    2. All states have made all wagering

    agreements illegal.

    Topic Quiz

    FALSE

    Answer the following true/false questions:

    Exceptions are horse racing, lotteries,

    bingo, and casinos in some states!

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    1111--11

    3. If a license is required to raise revenue

    the lack of a license will always void acontract.

    Topic Quiz

    FALSE

    Answer the following true/false questions:

    Not necessarily.

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    Agreements Contrary to PublicPolicy

    Agreements to Obstruct Justice

    Agreements to Interfere with Public

    Service

    Agreements to Defraud Creditors

    Agreements to Escape Liability

    Agreements in Restraint of Trade

    1111--22

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    LawLINKS

    Chapter 11Chapter 11

    Sources of information about employment

    law can be found at

    http://www.law.indiana.edu/law/

    v-lib/labor.html

    The site is named Labor and Employment

    Law from the WWW Virtual Law Library.

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    A Question of EthicsSuppose in example 11-8, the members of theboard of directors of Hawthorne Savings and

    Loan Association knew the jobAngelitis had

    taken with the Lithuanian Savings and Loan

    Company would not in any way realistically hurttheir business. Suppose further that the

    Hawthorne board members knew Angelitis had

    been out of work for five weeks and that he and

    his family had many past due bills that they couldnot pay unless Angelitis remained at Lithuanian.

    Legally, the Hawthorne board members can

    prevent Angelitis from working for Lithuanian.

    However, would it be ethical for them to do so?

    Explain.

    1111--11

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    1111--22

    1. Exculpatory clauses are generally

    favored by the law.

    Topic Quiz

    FALSE

    Answer the following true/false questions:

    No, because they generally permit less

    than acceptable standards.

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    1111--22

    2. A restraint of trade is a

    limitation on the full exercise

    of doing business with others.

    Topic Quiz

    TRUE

    Answer the following true/false questions:

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    1111--22

    3. Restrictive covenants are never upheld

    by the courts.

    Topic Quiz

    FALSE

    Answer the following true/false questions:

    They will be upheld if reasonable in

    time and geographic area.

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    Consequences of Illegality

    Illegality in Entire Agreementsand Divisible Contracts

    In Pari Delicto

    1111--33

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    1111--33

    1. A contract must violate criminal law to

    be invalid.

    Topic Quiz

    FALSE

    Answer the following true/false questions:

    Agreements that do not violate criminal

    law may also be invalid.

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    1111--33

    2. If a contract is partly legal and partly

    illegal, the entire contract will always bestruck down by the courts.

    Topic Quiz

    FALSE

    Answer the following true/false questions:

    Not if it can be separated.

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    1111--33

    3. When the parties to an illegal

    contract are not in paridelicto,

    relief will often be granted if

    sought by the more innocent

    party.

    Topic Quiz

    TRUE

    Answer the following true/false questions:

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    1111--11 An agreement might have offer, acceptance,

    mutual assent, competent parties, and

    consideration and still be invalid if the

    objective of the agreement is to do something

    that is illegal.

    Agreements to commit crimes or torts are

    illegal and void.

    SUMMARY

    Some agreements are made illegal by statute

    even though the activities are neither crimes

    nor torts.

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    1111--22 Public policy is a general legal

    principle stating that no one should

    be allowed to do anything that hurts

    the public at large.

    SUMMARY(continued)

    Contracts that involve illegal

    agreements are invalid.

    1111--33

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    Chapter 11Chapter 11

    Key TermsAgreements in restraint of trade blue laws

    conspiracy exculpatory clause

    in pari delicto local option

    public policy restraint of trade

    restrictive covenants usury

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    Investigating on the Internet

    Chapter 11Chapter 11

    Sources of information about contract law

    can be accessed at

    http://www.law.indiana.edu/law/v-

    lib/contracts.html

    As a research assignment, access thiswebsite and report those sources of

    information that might concern illegal

    contracts.

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    End of Presentation