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Certain contracts unlawful.

Penalties void.

Contract fixing

damages, void.

Exception.

2. Contrary to the policy of express law, though not expressly prohibited; or,

3. Otherwise contrary to good morals.3

'The law makes no distinction in this respect between
malum prohibitum and malum in se (Pennington v.
Townsend, 7 Wend., 276; Leavitt v. Palmer, 3 N. Y.,
19; De Groot v. Van Duzer, 20 Wend., 390; Pratt v.
Adams, 7 Paige, 653; Seneca Co. Bk. v. Lamb, 26
Barb., 595).

Bell v. Leggett, 7 N. Y., 176, 181; Gray v. Hook, 4 N.
Y., 449.

3 Lady Cox's Case, 3 Peere Wms., 339; Walker v. Per-
kins, 3 Burr., 1568; Gray v. Matthias, 5 Ves., 291;
see Trovinger v. McBurney, 5 Cow., 253; Wait v.
Day, 4 Den., 446. The law does not avoid acts
merely dishonorable or discreditable (Moore v. Rem-
ington, 34 Barb., 427).

S828. All contracts which have for their object, directly or indirectly, to exempt any one from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law. See Smith v. N. Y. Central R. R., 24 N. Y., 222; Perkins v. Same, id., 213.

$829. Penalties imposed by performance thereof, are void.

contract for any nonBut this section does

not render void such bonds or obligations, penal in form, as have heretofore been commonly used; it merely rejects and avoids the penal clauses.

1 See Lampman v. Cochran, 16 N. Y., 275; Dennis v. Cummins, 3 Johns. Cas., 297; Spear v. Smith, 1 Den. 464; Richards v. Edick, 17 Barb., 260; Mills v. Fox, 4 E. D. Smith, 220; Beale v. Hayes, 5 Sandf., 640.

S830. Every contract, by which the amount of damage to be paid, or other compensation to be made, for a breach of an obligation, is determined in anticipation thereof, is to that extent void, except as expressly provided by the next section.

S831. The parties to a contract may agree therein upon an amount which shall be presumed to be the

amount of damage sustained by a breach thereof,
when, from the nature of the case, it would be im-
practicable or extremely difficult to fix the actual
damage.

The use of the phrase "liquidated damages" leads fre-
quently to an evasion of the law in respect to penalties.
The courts, not venturing to declare such contracts
void, constantly discourage them. They are oppres-
sive and unconscientious, except in the cases permitted
above, and ought not to be allowed. The restrictions
imposed by this section are, however, new (see Bag-
ley v. Peddie, 16 N. Y., 469; Lampman v. Cochran,
id., 275).

S832. Every stipulation or condition in a contract, Restraints upon legal by which any party thereto is restricted from enforc- proceed ings. ing his rights under the contract by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void.

The first part of this section is acknowledged law. A
covenant in a contract, not to sue for a breach there-
of, is void. The latter provision is new. The question
involved has been variously decided in different tri-
bunals, with a preponderance of opinion in favor of
the right to limit the time of commencing actions, as a
matter of law, but with frequent disapprobation of the
practice. In support of the right, see Fullam v. N. Y.
Ins. Co., 7 Gray, 6; Brown v. Roger Wms. Ins. Co.,
5 R. I., 394; North Western Ins. Co. v. Phoenix O. & C.
Co., 31 Penn. St., 448; Portage Ins. Co. v. West, 6
Ohio St., 599; Wilson v. Etna Ins. Co., 27 Verm.,
99; also Ames v. N. Y. Ins. Co., 14 N. Y., 266.
Against it, see Eagle Ins. Co. v. Lafayette Ins. Co., 9
Ind., 443; French v. Lafayette Ins. Co., 5 McLean, 461..
The law itself, and the law alone, should regulate the
limitations of actions.

or

in restraint

of trade

$833. Every contract by which any one is re- Contract strained from exercising a lawful profession, trade business of any kind, otherwise than as provided by the next two sections, is to that extent void.

Contracts in restraint of trade have been allowed, by
modern decisions, to a very dangerous extent. In Dun-
lop v. Gregory (10 N. Y., 241), a contract not to run a
certain steamboat above Saugerties, on the Hudson,
was enforced, although there was no sale of a good

void.

Exception in favor of

will.

will, nor any circumstance to justify the contract, except that it was made upon a sale of the vessel by an association of persons who had previously used it to run above Saugerties, and wished to avoid competition. In Whittaker v. Howe (3 Beav., 387), a contract not to practice law anywhere in England, was specifically enforced. Such a contract manifestly tends to enforce idleness, and deprives the state of the services of its citizens.

S834. One who sells the good will of a business Bale of good may agree with the buyer to refrain from carrying on a similar business within a specified county, so long as the buyer, or any person deriving title to the good will from him, carries on a like business therein. The district, within which a party may exclude himself from carrying on business, should be accurately defined by law; and no division of the state appears to the commissioners to be more reasonable or convenient, for this purpose, than a county. And no one should be allowed to prevent another from carrying on a business, unless he himself provides the public with the same advantages, in the same county.

Exception

in favor of

arrange

ments.

S835. Partners may, upon or in anticipation of a partnership dissolution of the partnership, agree that none of them will carry on a similar business within the same city or town where the partnership business has been transacted, or within a specified part thereof.

Contract

in restraint

An agreement of this description, operating equally upon all the partners, gives to all an opportunity to start anew in business upon equal terms. In such cases, an agreement excluding them all from the county, would be too broad. It may even be doubted whether "ward" should not be substituted for "city" in the text.

$836. Every contract in restraint of the marriage

of marriage of any person, other than a minor, is void.

void.

Contracts in general restraint of marriage are certainly void (Lowe v. Peers, 4 Burr., 2225; Hartley v. Rice, 10 East, 22; Baker v. White, 2 Vern., 215; Sterling v. Sinnickson, 2 South., 756; see Conrad v. Williams, 6 Hill, 444). Perhaps a contract, simply in restraint of remarriage of the wife of one of the parties, would be held valid, in analogy to the rule concerning wills; but experience has shown that such stipulations tend to immorality. Restraints upon the marriage of minors are promotive of prudence, without being burdensome.

TITLE V.

EXTINCTION OF CONTRACTS.

CHAPTER I. Contracts, how extinguished.
II. Rescission.

III. Alteration and Cancellation.

CHAPTER I.

CONTRACTS, HOW EXTINGUISHED.

how extin

$837. A contract may be extinguished in like Contract, manner with any other obligation, and also in the guished. manner prescribed by this Title.

See Title III, of Part I, of this Division.

CHAPTER II.

RESCISSION.

SECTION 838. Rescission extinguishes contract.

839. When party may rescind.

840. When stipulations against right to rescind do not defeat it.
841. Rescission, how effected.

$838. A contract is extinguished by its rescission. Rescission

S 839. A party to a contract may rescind the same in the following cases only:

1. If the consent of the party rescinding, or of any party jointly contracting with him,' was given by mistake, or obtained through duress, menace, fraud or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party;

2. If, through the fault of the party as to whom he rescinds, the consideration for his obligation fails, in whole or in part;3

extinguishes contract. When party may rescind.

When sti

pulations against right to rescind do

3. If such consideration becomes entirely void* from any cause ;5

4. If such consideration, before it is rendered to him, fails in a material respect, from any cause; or, 5. By consent of all the other parties."

'City Bank of Columbus v. Bruce, 17 N. Y., 514.

2

3

Sherman v. White, How. App. Cas., 29; Winter v. Liv

ingston, 13 Johns., 54.

Petry v. Christy, 19 Johns., 53; see Duncan v. Edgerton, 6 Bosw., 36; Morange v. Morris, 34 Barb., 311. Harmon v. Bird, 22 Wend., 113.

Head v. Stevens, 19 Wend., 411; Cross v. Huntley, 13 id., 386; Putnam v. Westcott, 19 Johns., 73; Tappen v. Van Wagenen, 3 Johns., 465.

Benedict v. Field, 16 N. Y., 595. Perhaps this rule is at present confined to executory contracts (see Des Arts v. Leggett, 16 N. Y., 582, 589.)

James v. Cotton, 7 Bing., 266. Such consent is implied from a refusal or disability on the part of the other party to perform on his part (Withers v Reynolds, 2 B. & Ad., 882; see Fletcher v. Button, 4 N. Y., 396; Lawrence v. Taylor, 5 Hill, 107; Van Benthuysen v. Crapser, 8 Johns., 257; Prickett v. Badger, 1 C. B. [N. S.], 296; De Bernardy v. Harding, 8 Exch., 822).

S840. A stipulation that errors of description shall not avoid a contract, or shall be the subject of com

not defeat it pensation, or both, does not take away the right of

Rescission,

how effected

rescission for fraud, nor for mistake, where such mistake is in a matter essential to the inducement of the contract,1 and is not capable of exact and entire compensation.2

1 Robinson v. Musgrave, 8 Carr. & P., 469; Dobell Hutchinson, 3 Ad. & El., 355.

2 Sherwood v. Robbins, 3 Carr. & P., 339.

S841. Rescission, when not effected by consent, can be accomplished only by the use, on the part of the party rescinding, of reasonable diligence' to comply with the following rules:

1. He must rescind promptly, upon discovering the facts which entitle him to rescind,3 if he is free from duress, menace, undue influence, or disability, and is aware of his right to rescind; and,

4

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