Parties cannot be allowed to enforce agreements that are contrary to the law. The most obvious type of illegal contract is one in which the parties agree to perform some unlawful activity.
Some activities that are neither crimes nor torts have been made illegal by specific statutory enactments. Chief among these activities are usurious agreements, wagering agreements, unlicensed agreements, unconscionable agreements.
The illegal practice of charging more than the amount of interest allowed by law is called usury. To protect borrowers from excessive interest charges, jurisdictions have passed laws that specify the rate of interest that may be charged in lending money.
Any agreement or promise concerning gambling or a wager is invalid and may not be enforced. States make exceptions when bets are placed in accordance with laws that permit horse racing, lotteries, church-related or charitable games of bingo, and gambling casinos regulated by government authority.
Certain businesses and professions must be licensed before they are allowed to operate legally. One reason for requiring a license is to provide a source of revenue, part of which is used to supervise the business or profession being licensed. Another objective of licensing is to provide supervision and regulation of businesses and professions that might inflict harm on the public if they were allowed to operate without such controls. In this category are physicians, nurses, dentists, attorneys, engineers, architects, and others in public service who must be closely supervised for the protection of the public. Courts distinguish between a license for revenue and a license for protection of the public. If a license is required simply to raise revenue, the lack of a license will not necessarily void a contract. In contrast, if a licensing requirement is designed to protect the public, it is likely that unlicensed people will not be able to enforce their contracts.
A court is not required to enforce a contract or any part of a contract that it feels is unconscionable. An agreement is considered unconscionable if its terms are so grossly unfair that they shock the court's conscience. If the court so desires and if it can do so to avoid the unfair consequences, it can also limit how the unconscionable clause in an agreement is carried out.
The government has the power to regulate the health, safety, welfare, and morals of the public. Any action that tends to harm the health, safety, welfare, or morals of the people is said to violate public policy. Public policy is a general legal principle that says no one should be allowed to do anything that tends to injure the public at large. Agreements most commonly invalidated, as contrary to public policy are those to
