Restatement (Second) of Contracts · Section § 178
This section addresses the enforceability of contracts that are contrary to public policy.
Source: Restatement Restatement (Second) of Contracts § § 178
A promise or a term of an agreement is unenforceable if it is contrary to public policy.
Section 178 states that a contract or any part of it can be unenforceable if it violates public policy. Essentially, if a contract's terms are harmful to the public's interest or morals, the law will not enforce it.
Contracts that are illegal or promote illegal activities are unenforceable.
Courts will consider the broader social implications and values when determining if a contract is contrary to public policy.
Illustration 1
A contract for the sale of illegal drugs is unenforceable under § 178.
Illustration 2
A non-compete agreement that excessively restricts a person's ability to work is also likely unenforceable due to public policy concerns.
This case exemplified how certain contracts were found unenforceable due to violation of public policy.
Understanding § 178 is crucial for contract drafters to avoid terms that may be deemed unenforceable. Legal practitioners must evaluate the implications of public policy when advising clients on contract terms.