Public Policy Law

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 What Does Public Policy Mean in Law?

Public policy is the collection of legal and social guidelines that function as a community’s common sense. Contracts that violate these common sense guidelines cannot be legally enforced.

Demonstrating that a contract violates public policy is one defense to a breach of contract claim.

Who Makes Public Policy?

Public policy is made at all levels of government and from all governmental entities. This may include:

  • Legislatures;
  • Courts;
  • Bureaucratic agencies; and
  • Executive offices at the state, local, and national levels.

Decisions regarding public policy are also made at all levels of government, including federal, state, and municipal. These policies are developed on behalf of the public.

Public policies at the national level are developed by the executive and legislative branches of government. All levels of government may be influenced by:

  • Voters;
  • Lobbyists; and
  • Other community groups that advocate for public policy agendas.

Why Is Public Policy Important?

Public policy is an essential part of governance, as there are policies that are enacted by governments at every level that affect almost every aspect of an individual’s life. Public policy shapes the way individuals live as well as how they interact with their surroundings, including healthcare, education, taxation, and transportation.

Public policy also serves an important role in driving social and economic development.

What Is An Illegal Contract?

Contracts may be considered to be illegal contracts when the subject matter of the contract is associated with a purpose that is illegal, or violates the law. A contract is considered to be illegal if the formation or performance of the agreement will cause the parties to participate in an illegal activity.

It is important to note that the illegality has to relate directly to the contents of the contract and not to another intervening force. An agreement or contract that is considered to be illegal will not be considered to be a contract.

Because of this, courts will not enforce them, as illegal contracts are void or unenforceable, meaning that the court will treat the contract as if it never existed. If either of the parties breaches the contract, they will not be entitled to remedies.

An illegal contract may be a useful defense against a breach of contract claim. This defense is called the defense of illegality.

One example of this would be if one of the parties tried to sue the other party for breach of contract, but the court determines that the contract is illegal. The party that is bringing the lawsuit will not receive damages and the breaching party will not be liable for the breach because the contract itself was prohibited by law.

It is also important to note that, depending on the situation as well as the contents of the contract, a court may enforce an illegal agreement if removing the illegal terms would allow the rest of the contract to be legal and enforceable. Examples of illegal contracts may include, but are not limited to:

  • Contracts made for selling or distributing controlled substances, for example drugs or drug paraphernalia;
  • Agreements that were made for an illegal activity, for example, gambling or prostitution; and
  • Employment contracts that permit hiring underage workers.

Contracts may refer to subject matter that is not specifically prohibited by law but, instead, is a contract against public policy and principles of fair dealing. These types of contracts also fall under the category of illegal contracts and cannot be enforced.

One example of a contract that is void because it violates public policy is if the covenant not to compete is overly broad in scope and would violate the notion of freedom of competition between businesses.

What Types of Contracts Are Invalid Due to Public Policy?

Social values as well as laws define what is considered good public policy. There are some contracts, even those that fulfill all of the legal requirements, are deemed invalid based on the substances of the contract, for example:

  • Illegal contracts: This type of contract is one that involves:
    • buying illegal weapons;
    • murder for hire contracts; and
    • contracts to buy drugs are unenforceable contracts;
  • Unfair competition: If a contract results in an unfair disadvantage to other companies or consumers, it violates public policy;
  • Custody of a child: No contract can be made involving the custody of a child;
    • For example, a mother cannot contract with another party to give up custody of her child; and
  • Covenants not to compete: These clauses are legal and used in many contracts. However, once this type of clause becomes overbroad, it may violate public policy, or freedom of competition, as noted above.

Can You Breach An Illegal Contract?

If either of the parties to a contract fail to fulfill their legal obligations under that contract, the party has breached the contract. If a party violates the contract, the other party may suffer economic losses.

One example of this would be if an individual hired a construction company to complete a project by a certain deadline and the company fails to do so. The individual who hired them would likely suffer financial losses due to the company’s failure to fulfill their obligations.

There are several options that may be available to compensate an individual for their losses, including:

In some cases, it can be difficult to prove if a contract is illegal. One general rule is that, if the contract requires either of the parties to do something illegal, it will generally not be enforced.

In addition, an illegal contract prevents recovery for damages other than monetary damages. This means that recovery will not be permitted for specific performance, restitution, or contract rescission.

What Is Wrongful Termination in Violation of Public Policy?

Employers are not allowed to terminate employees if the termination would violate public policy. Public policy can be violated when an employee is terminated for engaging in an activity that is protected by either a statute or a constitutional right.

One of the more common types of terminations that occur in violation of public policy is when an employee is terminated for reporting alleged unlawful conduct of the employer. This protected activity is called whistleblowing.

When Does a Wrongful Termination Violate Public Policy?

As noted above, wrongful termination arises when an employer terminates an employee in an illegal manner. Wrongful termination may fall into one of several categories, including:

  • Violation of statutes: This occurs when the termination of the employee involved a violation of a law or statute, for example, discrimination or retaliatory discharge against the employee;
  • Breach of contract: This occurs when the termination of the employee was based on a breach of a provision or provisions that were contained in the employment contract, such as terms regarding hiring or wages;
  • Violation of public policy: This arises when the termination of the employee was wrongful because it violated public policy. For example, if an employee was terminated because they refused to participate in an illegal act;
  • Retaliatory termination: This arises when an employer terminated an employee because the employee engaged in a protected activity and their termination was in retaliation for engaging in that protected activity; and
  • Whistleblowing: When an employee reports an employer’s unlawful conduct and is terminated.

Employees who are wrongfully terminated can recover damages for their losses that are connected to their termination, which may include:

  • Recover their lost wages;
  • Get their old position back; or
  • Require the employer to revise their employment policies.

Can an Attorney Help Me?

If you believe you may be involved in a contract that is not legally enforceable, it is important to consult with a contract lawyer. It is also important to consult with a lawyer if you are in the process of drafting or negotiating a contract to ensure that the contract does not violate public policy or any other applicable laws.

If you have drafted a contract already, your public policy attorney can help redraft or rewrite your contract if it violates public policy.

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