Brief Fact Summary. Plaintiff Robert Bovard sold Defendant corporation, American Horse Enterprises, Inc., to James Ralph, who signed several promissory notes in connection with the sale. Plaintiff sued when Defendant failed to pay on the notes. During the course of the trial, the evidence revealed that Defendant is in the business of manufacturing drug paraphernalia, primarily bongs and roach clips, used to smoke marijuana.
Synopsis of Rule of Law. Whether a contract is contrary to public policy is a question of law to be determined from the circumstances of the particular case.
Issue. Is the contract for the sale of the corporation void as against public policy?
Held. Yes. Determining whether a contract is in violation of public policy involves a degree of subjectivity. Even though the manufacture of drug paraphernalia is not itself unlawful, enforcing this contract is clearly against public policy. A refusal to enforce the contract will put manufacturers of drug paraphernalia on notice that the judicial system will not protect them.
A different rule applies where a contract is held unenforceable because of illegality.View Full Point of Law