Public policy refers to the social and legal guidelines that act as a community’s “common sense.” Contracts that violate this “common sense” cannot be legally enforced. Showing that a contract violates public policy is a defense to a breach of that contract.
Laws and social values define “good” public policy. Some contracts, even if it fulfills all legal requirements, are invalid because of the substance of the contract. Here are some examples:
- Illegal contracts – Contracts involving the buying illegal weapons, murder for hire contracts, and contracts to buy drugs are unenforceable contracts.
- Unfair competition – Some contracts that result in unfair disadvantages to other companies or consumers violate public policy.
- Custody of a child – No contract can affect the custody of a child. For example, a mother cannot contract with another party to give up custody of her child.
- Covenants not to compete – These clauses are legal and used in many contracts. However, once the clause becomes overbroad, it may violate public policy (e.g., freedom of competition).
If a contract violates public policy, it’s not legally enforceable. If you are in the process of drafting a contract, contact a business attorney to make sure your finished contract does not violate public policy (or anything else!). An experienced attorney can rewrite or redraft your contract if it is in violation of any public policy.