Contracts

What Are Abusive or Illegal Contracts?

Contracts are made all the time, and they're usually perfectly legal and everyone's happy. Sometimes, contracts aren't legal, and usually that means someone not only doesn't get what he wanted, but also gets a lot of legal problems he didn't want.

Lady Gaga

When Stefani Germanotta, who's better known as Lady Gaga, is one of today's most popular singing artists, counter-filed a lawsuit against her former business partner, she claimed there was an illegal contract between the two of them, which made it invalid.

Her former business partner and ex-boyfriend, first filed a lawsuit against her in New York Supreme Court in Manhattan. The suit claims Lady Gaga boke a contract between the two of them by not paying Fusari, her former boyfriend, for his services and help in making her career. He wanted about $35 million for helping create Lady Gaga's name and image and for co-writing songs on her hit album, "The Flame."

Lady Gaga didn't write Fusari a check. Instead, she filed a counterclaim, that is, she sued him. She claims the contract was "illegal" and "financially abusive" and shouldn't be enforced. On top of that, she wants Fusari to pay her millions of dollars in damages.

Illegal Contracts

Claiming a contract is illegal is one of several defenses to a broken contract. This usually come up in situations just like the Fusari-Lady Gaga case: One side or "party" wants the other side to honor the agreement, but the other side doesn't want to or doesn't feel it should be honored.

Although there are many ways a contract may be "illegal," the defense usually involves a claim that the contract was made for an unlawful purpose. In many cases, it's claimed the contract violates a specific law or statute. For example:

  • If gambling is illegal in your state, a court won't enforce a contract or "IOU" someone gave you for a gambling debt
  • An employment contract with a minor may violate state or federal child labor laws that don't allow minors to work

Lady Gaga claims her contract with Fusari is illegal because it's designed to give him compensation - a portion of Lady Gaga's earnings as an artist and royalties on songs he co-wrote - for work he wasn't legally permitted to do. She claimed Fusari is an "employment agent" and he doesn't have a license required by the laws of New York City and/or New York State.

Abusive?

Lady Gaga's claim that the contract is "financially abusive" most likely stems from the same argument that the contract is illegal because Fusari was an unlicensed agent. However, it also touches on another contract defense called "unconscionability." Basically, a court won't enforce a contract if it's clearly and grossly unfair or one-sided and the party the contract favors had more bargaining power when the contract was made.

According to Fusari's lawsuit, at the time the Fusari-Gaga contract was made, Lady Gaga was about 18 years old and a relatively unknown artist. Fusari was about 38 years old and a veteran in the music business. Lady Gaga claims Fusari took advantage of his experience and her inexperience and lured her into a contract that gave him the rights to a substantial portion of her future earnings.

Know What You're Getting Into

Contracts are two-sided. Someone gets something in exchange for giving something to another person. No matter which side of the contract you're on, you need to take steps to protect yourself:

  • Find out everything you can about the person or business you're dealing with. Search the internet, go to the library, or call the Better Business Bureau (BBB). You may find the other side has a history that may impact your decision to sign a contract
  • Read the entire contract and do it carefully. Make sure you understand exactly what everyone's responsibilities are
  • If at all possible, have an attorney, or someone familiar with the business or subject matter of the contract, read the contract
  • If you have any questions, don't sign it until you get an explanation from the other party, or in the best case scenario, from an attorney
  • If you feel like you're being pressured into a contract or you're getting the short-end of the deal, don't sign the contract. Try to negotiate a better contract or find someone else to do business with

Although most of us don't the fame and fortune involved in the Fusari-Gaga contracts, contracts are a part of most of our lives. If you know what you're getting into before you sign one, you can avoid many of the problems that come up when a contract is broken.

Questions for Your Attorney

  • Is every contract signed by a minor illegal?
  • Can I cancel a contract if I change my mind after signing it?
  • I realized after I signed a contract that it's not the same deal the other person and I discussed. Can I get out of the contract?
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