Public Policy

Definition

Public policy refers to the principles and standards that guide governmental decisions and actions, particularly in relation to laws and regulations that affect society as a whole. It acts as a foundation for determining what contracts may be deemed enforceable or unenforceable based on their compatibility with societal interests and values. In legal contexts, public policy ensures that agreements do not contravene the ethical and moral standards upheld by society.

5 Must Know Facts For Your Next Test

1. Contracts that violate public policy are considered void and unenforceable by law, meaning they cannot be legally upheld in a court of law.
2. Examples of contracts contrary to public policy include agreements that promote illegal activities, such as drug trafficking or human trafficking.
3. In cases involving minors, public policy plays a role in protecting their interests by rendering contracts voidable if they are entered into by individuals who have not reached the age of majority.
4. Courts often assess whether a contract is contrary to public policy on a case-by-case basis, taking into account the specific circumstances surrounding the agreement.
5. Public policy considerations are important in employment contracts, particularly those with non-compete clauses, which may restrict an individual's right to work in their chosen field.

Review Questions

• How does public policy influence the enforceability of contracts involving minors?
  • Public policy significantly influences the enforceability of contracts involving minors by prioritizing their protection. Since minors are often deemed to lack the necessary capacity to make informed decisions, agreements they enter into can be declared voidable at their discretion. This principle ensures that minors cannot be taken advantage of in contractual situations and that any agreements made with them must align with societal interests and ethical standards.
• Discuss how courts determine whether a contract is contrary to public policy and provide examples.
  • Courts determine whether a contract is contrary to public policy by evaluating the nature of the agreement in relation to societal norms and values. This involves examining the intent behind the contract and its potential impact on society. For example, a contract that incentivizes illegal activities or imposes unreasonable restraints on trade may be deemed unenforceable due to public policy concerns. Courts look at precedents and specific case details to arrive at these decisions.
• Evaluate the role of public policy in shaping contract law and its implications for businesses.
  • Public policy plays a critical role in shaping contract law by establishing boundaries within which agreements must operate to be considered enforceable. This ensures that contracts reflect societal values and do not undermine legal principles. For businesses, understanding public policy is essential because entering into contracts that violate these principles can lead to significant legal consequences, including loss of enforceability and potential litigation. Thus, awareness of public policy helps businesses navigate contractual obligations while maintaining compliance with ethical standards.

Related terms

Illegality: A condition where an agreement is against the law, leading to its unenforceability in court.

Capacity:

The legal ability of parties to enter into contracts, which can be affected by age, mental competency, and other factors.

Restraint of Trade: Provisions in contracts that limit a party's ability to conduct business freely, often scrutinized under public policy.