American Contract Law for a Global Age, 2017a

Unit 16
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CONTRACT DEFENSES
Part Four
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Policy-Based Defenses
FOCUS OF THIS UNIT
Enforceability is what makes a contract different from a mere agreement.
Enforceability means that the parties can enlist the coercive power of the government
to make the breaching party do what it promised to do (in some cases), or pay
damages for failing to do so (in far more cases). As a consequence, the “private”
agreement between the parties has a “public” aspect to it. While the private ordering
agreed to by the parties predominates, the public at large actually has some interest
in those things to which the private parties can and cannot agree. For these reasons
several defenses to otherwise enforceable contracts are what we call “policy-based.”
There is some enforcement that the government simply will not do.
Enforcement is Good, Except When It Isn’t. The common-law system of
contracts rests on a general premise that enforcing private agreements is a good thing
and is therefore an important public policy of the state. Governments have many
other policies, however, and sometimes those policies conflict with the policy that
parties should be free to contract as they see fit.
Illegal Contracts. Very early on, for example, courts would not uphold
contracts that were themselves illegal (such as contracts to fix prices in violation of
antitrust law), or that called for the commission of crimes or torts (such as murder or
property damage), or that violated public morals (such as gambling or prostitution).
The basic rule with respect to such contracts is that they are void (not merely
voidable). This means that if A has paid B $10,000 to kill C, and B fails to do so, A
cannot bring a contract claim to recover the payment. If a customer fails to pay a
prostitute or a drug dealer for goods or services, or a prostitute or drug dealer fails to
deliver what was promised, no contract remedy generally exists. We will see later
that in some cases courts may order restitution of benefits conferred in some more
technical categories of illegality (which would not include murder, prostitution, or
illegal drugs).
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UNIT 16: POLICY-BASED DEFENSES 307