SU 2 Chapter 6 - Legality Flashcards
(20 cards)
What is freedom of contract?
Entails parties may conclude contracts on any terms that they prefer, as long as the public interest is protected.
What are the forms of illegality? (3)
Conclusion of contract illegal (violates statute)
Performance illegal (Supplier hiring minors)
Purpose of contract illegal (drug business)
What are the sources of legality? (3)
Legislation
Good Morals
Public interest in broader sense.
What rules of thumb have been developed as tools to assist courts in determining when behaviour is prohibited by statute? (2)
Ask whether contract undermines the purpose of the statutory provision.
If contract contains Penal provision (penalty for breach or noncompliance), must be asked whether legislator did not intend that this penalty would be sufficient.
What are contracts in restraint of trade?
An agreement that restricts a person’s ability to engage in business or employment within a certain industry, location or time.
What principles come into conflict with regards to restraint of trade? (2)
Sanctity of contract (persons should feel free to conclude contract on own terms.)
Freedom of trade (Freedom to exercise trade or profession)
When will restraint of trade contract be applicable?
When restraint goes against public interest if it is unreasonable between parties to contract, is restraint reasonable between both parties?
What are the elements in determining reasonableness with regards to restraint of trade? (2)
Does person enforcing contract have a legitimate interest?
(Only legit interests may be protected)
Does restraint attempt to protect the legitimate interest?
What are important interests that need protection in a sale of business?
Goodwill (Brand reputation, customer loyalty etc)
What contracts do restraints normally appear in? (2)
Sale of business and employment contract.
What are important interests that need protection in employment contract? (2)
Trade secrets and customers employees have influence over.
What does unreasonableness as grounds for illegality entail?
You can’t escape a contract merely because it is unfair. Only if it is so unfair it offends public interest would it become illegal.
What does Severance of contracts entail?
If part of contract illegal and void, entire contract will be affected unless legal part can be separated from illegal part.
What questions should be asked with regards to severance? (2)
Are the different parts physically separate? (Can illegal parts be taken out without changing meaning)
Did the parties intend to keep legal and illegal parts separate and would the parties have contracted only on the legal part?
How is a restraint of trade clause an exception of severance?
Courts often do not sever an unreasonable restraint and may invalidate the clause as a whole
What is return of performances?
Where performance has been made but contract is illegal, performance may be claimed back by means of an enrichment claim
What are the requirements for return of performances via enrichment claim? (2)
Contract must be void.
Where contract is only unenforceable (missing requirements), performance cannot be claimed, but if it is made void, it is valid.
When will courts not allow restitution of performance?
When it is against public interest (Pari delicto rule applies- cases where both parties acted illegally are equally as blameworthy)
What are the exceptions to the Pari delecto rule? (2)
When one person has nothing to do with the illegality
When contract goes against statute but only prohibits actions of one party.
When both parties are involved in illegality of performance, when can performance still be claimed back?
It is not against public interest
It to the principles of simple justice between man and man.
