Question

Case Problem Analysis: Legality of Contracts

Felipe is interested in opening up a franchise of a popular restaurant. Felipe and the owner sign franchise paperwork that says Felipe will pay a certain amount of money and a certain amount of the profits each month to the owner. The owner gives Felipe permission to use the company name and logo. Both parties are older than the age of majority, both are sober, and both are of sound mind. In the final paperwork, the owner includes a statement that Felipe will not hire employees who speak an Asian language as a first language. The owner believes that customers in Felipe’s location will complain about the accents and language barriers. Do the parties have an enforceable contract? (Select the correct word in bold)

There are four elements to a contract. First, there must be an offer and an acceptance, also known as the agreement/contract. Second, there must be something of value passing between the parties, known as consideration/payment. Third, the parties must have the mental ability to sign a contract, known as capacity/age. Finally, the subject matter of the contract must be legal/illegal.

When analyzing legality of a contract, there are several issues to evaluate. A contract for a franchise is not/is legal. There is no mention of interest rates that are too high, also known as exculpatory clauses/usury. There is/is not a violation of a licensing statute. There is not a clause that waives liability, known as usury/exculpatory clause. There is not/is a discriminatory provision in the contract.

The provision in this contract is not/is related to one of the protected classes of people. Provisions like this one are not/are considered violations of usury/exculpatory clauses/public policy.

Because this provision is not/is a violation of usury/public policy/exculpatory clauses , the contract is/is not enforceable.

What If the Facts Were Different?

Assume that the contract does not mention Asian speakers but instead says that Felipe cannot hire people with doctorate degrees because the company owner worries that they will seem too smart and will chase away customers. This contract does/does not have a provision that discriminates. The provision does not/does affect a protected class of people. As such, the contract is/is not enforceable as written.

Answer 1

The contract between Felipe and the franchise owner is initially valid, meeting key legal requirements, but a provision prohibiting the hiring of employees who speak an Asian language as their first language raises concerns of discrimination.

Step-by-step explanation:

When analyzing the legality of contracts, elements such as agreement, consideration, capacity, and legality are essential.

For Felipe's scenario, the contract initially meets the first three criteria: there is an agreement between Felipe and the owner, there is consideration with a payment and profit-sharing arrangement, and both parties have the capacity to enter into a contract, being of sound mind and majority age.

However, the legality of the contract comes into question due to the discriminatory provision.