Contracts of silence violate Public Policy - Timeshare

Regulating Contracts of silence directly when the sale of a party's silence should violate public policy

Contracts of silence can be unenforceable because of their content. Even in the absence of formation problems or personal defences such as fraud and duress, a court can still deny enforcement because the substance of a contract violates public policy. While freedom of contract might exist, there is no freedom to use contracts to undermine important societal values.

We address this content-based limitation on contracts of silence. The central concern here is whether the "sale" of a party's silence in a contract should ever constitute a violation of public policy, rendering unenforceable either the promise of silence provision or the entire contract. In the vocabulary of legal scholarship, the question is whether the right to sell one's silence should be market - alienable - is silence something that a party should be able to trade lawfully in a contract exchange or should its trading be prohibited?

The power of courts to deny enforcement to a contract on public policy grounds is not only indisputable, but also open-ended. Under the Restatement (Second) of Contracts, a contract or term will be unenforceable when public policy considerations against enforcement clearly outweigh the interests in favour of enforcement. By not explicitly limiting what public policies a court can consider in this balance, the restatement allows courts to derive public policy by considering other laws as well as their own sense of what restrictions are needed to protect the public welfare.

This Part applies the Restatement balancing analysis to determine when, if ever, courts should deny enforcement to contracts of silence. Initially, however, there is little doubt that some contracts of silence, like a contract to conceal a crime, are unenforceable on public policy grounds. Nor is there any doubt that some contracts of silence, like a contract to protect trade secrets, do not violate public policy.

The uncertainty only arises when one ventures beyond such extreme examples into the middle ground occupied by contracts like the U.S. Healthcare contract, settlement agreements, and prenuptial agreements.

The advice on this is that courts should carefully monitor all contracts of silence on public policy grounds and recommends that courts deny enforcement to contracts of silence whenever there is an overriding public interest in the dissemination of the suppressed speech. To help courts determine whether a contract of silence violates public policy, this proposes a test that extrapolates principles from the extreme examples.

Another question is whether the rule barring enforcement of a contract to conceal a crime should apply equally to minor and major violations of law. On this point, there is no lack of certainty-the Restatement and the Model Penal Code both condemn contracts to conceal crimes regardless of the nature of the crime. Comments to the first Restatement provide that "the rule stated... is applicable whether the crime in question is a crime or a misdemeanour, and whether the accused is innocent or guilty of the crime. A modernity of any Penal Code similarly indicates that its compounding provision applies to "any" offense. The breadth of this rule combined with the breadth of law in the UK suggests that in many instances parties cannot legitimately contract for the suppression of speech to inhibit the reporting of a crime to law enforcement authorities.

Finally, there is an open question as to whether a contract between a victim of a crime and its perpetrator should be unenforceable. The restatement of contracts is unequivocal on this matter. While expressly acknowledging that a victim may contractually settle any civil claim, he also has a criminal complaint, thus the first restatement nevertheless indicates that such a contract is unenforceable if part of the consideration consists of a victim's promise to conceal or compound the offense. The criminal may hope that a civil settlement would lead the victim to drop criminal charges, but the parties may not expressly include this as part of the consideration.