Exam 13: Illegal Bargains

a. Explain the meaning of "public policy" in the context that an agreement is void because it violates public policy. b. List the most common forms of agreements that violate public policy.

Some states require the lender to forfeit two or three times the amount of usurious interest charged.

An exculpatory clause may excuse one party from liability for her own tortious conduct.

Where a stipulation in restraint of trade is part of the sale of a business, it may be valid if the restraint is within reasonable limitations to protect the business's goodwill.

Andria, an attorney, has a personal injury case which is set for trial next week. She needs a good doctor to testify on behalf of her client, so she contacts Dr. Wood who agrees to testify on behalf of Andria's client at the trial. In return for Dr. Wood's testimony, Andria agrees to pay Dr. Wood $10,000 if they win the case, and $5,000 if they lose. Dr. Wood agrees. The agreement between Andria and Dr. Wood is unenforceable.

Mel has a neighborhood grocery store that he would like to sell. Casey is interested in purchasing the business, but he is concerned because he knows that Mel has built up a lot of goodwill over the years, and he wonders whether Mel might not just open another store down the block and take all of the business from the old store with him. Casey asks for and receives from Mel a clause in the sale agreement that Mel will not open another grocery store within a 150-mile radius of the old store for a period of at least ten years. a. What is this agreement called? b. Is the negotiated clause a valid one? Explain why or why not. c. What guidelines would a court ordinarily use in determining whether to enforce such a clause?

Under which of the following circumstances would a court be unlikely to enforce the illegal contract?