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Business Law for a New Century
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Quote of the Day
“Gambling is the child of avarice, the
brother of iniquity, and the father of
mischief.”
George Washington,
United States President
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Business Law for a New Century
Contracts that May
Violate a Statute
 Wagers
• Investments
• Insurance
 Licensing Statutes
 Usury
These types of contracts will be
discussed further on the next slides.
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Business Law for a New Century
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Wagers
 A gambling contract is illegal unless it is
specifically authorized by state statute.
 In some cases, wagers have been
disguised as “investments” where the
gambler places a bet on the price of
stock, but never actually buys the stock.
 Someone taking out a policy on the life
of another must have an insurable
interest in that person -- or else it
becomes a “wager” on their life.
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Business Law for a New Century
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Licensing Statutes
 When a licensing requirement protects
the public, any contract made by an
unlicensed worker is unenforceable.
 When a licensing requirement is
designed merely to raise revenue, a
contract made by an unlicensed person
is generally enforceable.
Usury
 Usury laws prohibit charging excess
interest on loans.
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Business Law for a New Century
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Contracts that May Violate
Public Policy
 Restraint of Trade
 Exculpatory Clauses
 Bailment Cases
 Unconscionable Contracts
 Adhesion Contracts
These types of contracts will be
discussed further on the next slides.
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Business Law for a New Century
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Restraint of Trade
 To be valid, an agreement not to
compete must be ancillary to a
legitimate bargain.
 Sale of a Business
• When a noncompete agreement is ancillary
to the sale of a business, it is enforceable if
reasonable in time, geographic area, and
scope of activity.
 Employment
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Exculpatory Clauses
Part of a contract that attempts to release
you from liability for injury to another party.
 Generally enforceable when
• the affected activity is in the public interest,
such as medical care, public transportation,
or some essential service.
 Generally unenforceable when
• it attempts to exclude an intentional tort or
gross negligence.
• the parties have generally unequal
bargaining power.
• it is not clearly written and readily visible.
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Bailment Cases

Bailment means giving possession and
control of personal property to another
person.
 The person giving up possession is the
bailor, and the one accepting
possession is the bailee.
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Business Law for a New Century
Unconscionable Contracts
 An unconscionable contract is one that
a court refuses to enforce because of
fundamental unfairness.
 The two factors that most often led a
court to find unconscionability were:
• oppression -- meaning that one party used
its superior power to force a contract on the
weaker party; and
• surprise --meaning that the weaker party
did not fully understand the consequences
of its agreement.
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Business Law for a New Century
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Adhesion Contracts
 Adhesion contracts are standard form
contracts prepared by one party and
given to the other on a “take it or leave
it” basis.
 They are generally enforced when the
two parties are of equal power, but
when the parties are unequal, the
contract may be ruled unconscionable.
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“No matter how profitable a
particular contract clause may
appear to be, it is worthless if
it is illegal. Make sure your
agreement is lawful.”
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Business Law for a New Century
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Business Law for a New Century
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