thousand dollars to be paid to the said John H. Blackheath, his executors, administrators, or assigns, on February 10, 1906; to which payment I bind myself, my executors and administrators by these presents.

Witness my hand and seal this tenth day of February, one thousand nine hundred and five. WILLIAM BLACKHEATH. [Seal] This is a bond. Although made as a gift, John may enforce it at common law.

V. LEGALITY OF OBJECT

24. Contracts made illegal by statute. The statutes may declare a contract to be illegal, may prohibit it, or may simply penalize it. It is a question of construction whether prohibited and penalized contracts are illegal.

1. Certain contracts are declared by statute to be illegal. Such are contracts for gambling or wagering, contracts for usury, in some states contracts for work labor or any unnecessary act to be performed on Sunday, and in some states any contract made on Sunday even though performance is to be made on a secular day.

2. Certain acts are prohibited by statute. A contract to perform a prohibited act, or involving such an act, would be an illegal contract.

Example 1. The statute prohibits prize fighting. A contract to engage in a prize fight is illegal. Again, the statute prohibits any person from engaging in the practice of medicine without first obtaining a license. An unlicensed physician cannot recover compensation for professional services. A teacher cannot recover for his services in a public school unless he is duly licensed.

3. Certain acts are penalized by statute but are not in terms prohibited. In such cases it is a question of construction whether a contract to do the act is illegal.

Examples: 2. The statute provides that any one who sells a lot in a plat in any city without first recording the plat in the appropriate public office shall pay a penalty of $50 for each offense. A sells B a lot in an unrecorded plat. B afterwards refuses to take the lot and pay the purchase price. Is the contract of sale of this lot an illegal contract? It has been held not, because the court thought it was not the object of the statute to

B sells

prohibit such sales but merely to make it so expensive to deal in lots in unrecorded plats that landowners would be induced to record the plats. 3. The statute fixes a penalty for the sale of adulterated foods. to C a quantity of adulterated foods. C is not bound. He may refuse to take the goods and pay the price on the ground that B's contract is illegal. The intent of the statute is to prevent the sale of adulterated goods.

25. Wagering contracts. A wagering contract is an agreement to give money or property upon the determination or ascertainment of an uncertain event. The consideration for such promise may be either a like promise or something given outright.

Examples: 1. A and B contract that if A's horse wins a race with B's horse, B shall pay A $100; but if B's horse wins, A shall pay B $100.

2. A promises to pay B $100 in case B's horse wins, provided B pay A in hand $20. If B's horse wins, A would pay B $100 and would be $80 out of pocket; if B's horse loses, A has his $20 and B is that much out of pocket.

3. A, B, C, etc., each pay an entrance fee as a condition of competing for a purse or prize at a horse-racing contest. This is not a wager unless the competitors are the sole contributors to the purse and thus practically bet each against the others, or unless this form is adopted as a subterfuge to conceal a wager.

It seems that by the common law of England wagering contracts were not illegal. Judges later regretted that the law was not otherwise, and became very astute in finding reasons for holding particular wagers illegal, as, for example, that a wager on the life of Napoleon was illegal because it gave one wagerer an interest in keeping the king's enemy alive and the other an interest in compassing his death by means other than lawful warfare. But even with such refinements as these the courts felt bound to enforce many wagers. In New York wagers were held to be legal. In Massachusetts, however, the courts refused to follow the English rule and held them to be illegal. Now, by statute, they are generally declared to be illegal in all jurisdictions.

Wagers on the rise and fall of prices. The form of this wager is that one party sells another grain or stock for future delivery at a specified price; but in fact neither party intends an actual delivery, and both intend to settle on the delivery day

the difference between the contract price and the market price in money. It is equivalent to betting that the market price on a certain day will be so much. Often these take the form of "options" as well as "futures," that is, A sells B the option to call for wheat on a certain day at a certain price, or A sells B the option to deliver wheat on that day at a certain price, or A may sell B the option to call at one price or deliver at another; the first is termed a "call," the second a "put," and the third a "spread" or a "straddle." Whenever the intent is merely to settle the gain or loss in money, and there is no intent to deliver or receive the article itself, the transaction is a gambling contract and illegal.

Examples: 4. "I have sold John Doe 100 shares of stock in the X.Y. Co. at 85 per cent, payable and deliverable at seller's option in 30 days. RICHARD ROE." This may be a valid contract giving the seller the right to deliver the stock at any time within 30 days at $85 a share (par value $100); or it may be intended that on any day when that stock is worth say $80 a share, the transaction shall be closed by the buyer paying the seller $500. The transaction must be closed at the end of 30 days, if not closed earlier. 5. "For value received the bearer may call on me for 10,000 bushels of wheat at 70 cents a bushel on Sept. 1, 1905. RICHARD Roe.” This is a "call." The buyer on September I will "call" for the wheat if it is more than 70 cents a bushel, but not if it is less. If it is more, he makes the excess, less what he paid for the option; if it is less, he loses what he paid for the option. When the differences are intended to be settled in money this is a gambling contract, but is perfectly valid if actual delivery is intended.

6. "For value received the bearer may deliver to me 10,000 bushels of wheat at 70 cents a bushel on Sept. 1, 1905. RICHARD ROE." This is a "put." If wheat is 60 cents a bushel on September 1, the seller will " "put it on Roe, who must pay 10 cents a bushel to the seller. The latter thereby makes $1000, less what he paid for the option. If it is more than 70 cents a bushel, the seller will not "put" it, and he loses what he paid for the option. But this contract is valid if actual delivery is intended.

7. "For value received the bearer may call on me for 10,000 bushels of wheat at 80 cents a bushel any time in 60 days from date; or the bearer may, at his option, deliver the same to me at 75 cents a bushel. RICHARD ROE." This is a "spread." If the call and put prices were the same, it would be a "straddle." If actual delivery is intended (as it rarely is), this would be a valid contract. But if it is intended to settle gains or losses in money, it is a gambling contract.

Insurance. Insurance was at one time a favorite wagering contract. Thus persons not at all interested in a ship or its cargo would take out insurance upon it, in order that if it was lost they might recover the amount named in their policies. Very often insurance was taken upon lives in which the policy holder had no interest. This is in general made illegal by statute. In order that an insurance policy may be legal, the one insured must have some insurable interest in the property or the life covered by the policy. Even in such cases the insurance contract is a kind of wagering contract, but it is one permitted by the policy of the law.

26. Contracts illegal at common law. The common law has indicated a very considerable number of instances in which it will regard contracts as illegal because contrary to public policy. Only a few of them can be enumerated.

I. Contracts to commit crimes or civil wrongs (torts) are illegal. Thus, a contract to commit an assault would be illegal for both reasons, since an assault is both a crime and a tort.

2. Contracts to do acts which injure the public service or interfere with the administration of justice are illegal. A contract to obtain a public office or vote for another for office, to influence legislative action by "lobbying," to quiet competition for public contracts, to stifle the prosecution for a public offense, to carry on a suit as an attorney at the expense of the attorney and share the proceeds (champerty), to suborn witnesses, and the like, are all illegal.

3. Contracts which affect the freedom or security of marriage are illegal. Such is a contract to procure a collusive divorce; and such is a marriage brokerage contract, that is, a contract by A to procure or bring about a marriage between B and C for a consideration paid or to be paid by either B or C to A.

4. Contracts in restraint of trade may be legal or illegal according as the restraint is reasonable or unreasonable. Such a contract is reasonable when it is reasonably necessary to protect the promisee in a business not involving a public franchise or "impressed with a public trust." Beyond this point it is unreasonable and illegal.

Examples: 1. A buys B's retail shoe store in the city of Ithaca, and B agrees not to engage again in the shoe trade in Ithaca. This is reasonably necessary to protect A against B's competition, and is held to be not so injurious to the public as to render it against public policy. If B agrees not to engage in the retail shoe trade in the state of New York, this would be obviously a greater restraint than is reasonably necessary and would be illegal. If he agrees not to engage in the retail shoe trade in the county in which Ithaca is situated, this might be reasonable or unreasonable according to circumstances. Some states hold any restraint which includes the whole of the state to be unreasonable, but this is contrary to modern tendencies.

2. The maker of guns and heavy ordnance of which governments were the chief purchasers sold his business and agreed that for twenty-five years he would not engage in a like business anywhere in the world. It was held by the English court that this restraint was reasonably necessary to protect the purchaser, since a manufactory of such guns anywhere in the world would be a competitor.

3. If the business is one carried on under a public franchise (as a franchise to lay gas pipes in public streets), or if it is impressed with a public trust or interest (as the business of a common carrier who must serve all members of the public on equal terms), the courts may hold even a local restraint unreasonable, not as to the promisee but as to the public whom the parties are bound to serve.

4. Agreements to combine for the purpose of lessening competition, limiting the output, regulating prices, dividing the territory in which business shall be done, and the like, are illegal because detrimental to the public welfare.

27. Effect of illegality upon contracts in which it exists. In determining the effect of illegality upon a contract in which it exists, it is necessary to determine whether the contract is divisible or indivisible, and if divisible, whether the legal may be separated from the illegal portion.

I. If a contract is indivisible, that is, if it has one indivisible promise or act on one side and one on the other, the whole contract must fail if one of these be illegal.

Example 1. A agreed to work for B for a specified sum per month, and to take charge of B's barroom and bar. It was illegal to maintain a bar for the sale of intoxicating liquors. A performed various services including the sale of liquors at the bar. A cannot recover the agreed price for his services because A's promise to perform the services is an indivisible one and is tainted with illegality. He cannot recover for the legal services, that is, those not connected with the sale of liquors, because the promise of B is not apportioned but entire, and the promises and acts of A are also entire. The whole contract must therefore be regarded as illegal and unenforceable.