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Understanding Contracts Against Public Policy and Performance Issues in Agreements

This document explores the intricate concepts surrounding contracts that violate public policy, including covenants not to compete and the implications of illegality. It highlights how agreements involving some illegality can still be enforced under certain circumstances, especially when one party is innocent. The paper also delves into performance challenges, such as mistakes—both bilateral and unilateral—and the legal principles of impossibility, impracticability, and frustration of purpose that can hinder contract fulfillment.

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Understanding Contracts Against Public Policy and Performance Issues in Agreements

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  1. Contracts, Fall 2008 Class 25

  2. Agreements Against Public Policy • Covenants not to compete • Other • Illegality • ‘gross’ illegality – murder, gambling, etc. • Agreements involving some illegality, often only on one side (next slide)

  3. Agreements against public policy • Agreements involving some illegality, often only on one side • innocent party (homeowner who contracts with unlicensed plumber) may be able to enforce • even ‘non-innocent’ party (unlicensed plumber who did work and didn’t get paid for it) may be able to get quasi-contractual relief • no bar to enforcement if license requirement is for revenue raising and not for public interest • example of bar dues

  4. b) Other Grounds: Reasons why A Party’s Performance Might not be Due • Mistake • Present is not what one or both parties thought • Bilateral mistake • Unilateral mistake • Changed Circumstances • Future is not what one or both parties thought • Impossibility • Impracticability • Frustration of purpose

  5. Mistake: present in not what one or both parties thought • Bilateral mistake: both parties are mistaken as to basic assumption on which contract was made, and mistake has a material effect on agreed exchange of performances. • Adversely affected party can void unless it bears the risk of mistake

  6. Mistake: present in not what one or both parties thought • Unilateral mistake – one party is mistaken. • mistake-maker can void if it doesn’t bear the risk of mistake and • enforcement would be unconscionable or • it’s the other’s fault or the other had reason to know of the mistake

  7. When does a party bear the risk of mistake? • Allocation by agreement • Party treats limited knowledge as sufficient • Court allocates risk to the party

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