While reading, pay close attention to the various ways in which an agreement may not be legal, including instances of usury, gambling, violation of Sabbath laws, agreements made to commit a crime or tort, and agreements made by a party without proper licensure. To be enforceable, contracts must have legal subject matter and must be able to be performed legally. They cannot violate either state or federal law. A contract overturned for illegal subject matter or for being illegal to perform is generally declared void. A contract need not be in violation of a statute to be illegal; agreements against generally accepted public policy are also illegal and unenforceable. Read the case below and answer the accompanying questions. Eugene's dream is to open his own restaurant. The only problem is he does not have the financial backing for this endeavor. He repeatedly tries to get a loan from a bank or other commercial lender, but he's denied each time. Desperate for the funds, Eugene gets the contact information for a loan shark and decides to enter into a private loan agreement. The only catch is that Eugene will have to pay an interest rate of 20 percent, which is double the maximum allowed interest rate in his state. Although Eugene has some reservations about entering into the agreement, he accepts anyway. The situation in the case study above is an example of what type of generally illegal agreement? Explain why this type of agreement is generally illegal.
Yes this type of agreement is generally illegal in nature as the above stated agreement is opposed to the public policy as the loan shark is charging 20% interest rate on the lending amount to Eugene which is opposed to public policy as only 10% maximum interest rate can be levied on the lending amount in that state. Hence the loan shark is charging double interest than generally accepted maximum percentage of interest rate charged from the borrowers. Hence such private loan agreement is illegal in nature due to opposed to the Public policy.
Moreover, Loan shark is taking undue advantage of the Eugene's situation as he wants to open his restaurant and need initial and working capital funds to establish the restaurant. However charging double interest rate from the borrower is against the interest of public policy. Due to this reason this private loan agreement is generally illegal agreement and void in nature as it is the violation of the rules of the state.
Loan shark and Eugene has violated the rules of state by entering into private loan agreement as the Eugene has to repay the entire borrowed funds with 20% interest rate which is not accepted in that State (only 10% interest rate is accepted) thus such agreements are illegal and unenforceable.
While reading, pay close attention to the various ways in which an agreement may not be...
30.a. What exception is there in the rule that an agreement is illegal if it tends to compensate a person for the consequences of his own wrongdoing? A) The main exception to this rule is at the level of cancellable contracts. B) The main exception to this rule is in insurance contracts. C) The main exception to this rule is at the level of promises to pay a gambling debt. D) The main exception to this rule is at the...
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