Summary of Bovard v. American Horse Enterprises, Inc.
Court of Appeal, Third District, California.
Facts: D agreed to buy American Horse Enterprises, Inc. from P and he signed several promissory notes. D failed to pay on some notes and D sued. At trial it was discovered that P’s company, in addition to manufacturing jewelry, also manufactured bongs and roach clips that aided in the use of illegal drugs like marijuana.
Procedure: The trial court refused to enforce the K between P and D because it considered the K to be against public policy. The court reasoned that while manufacture of drug paraphernalia was not itself illegal at the time the contract was entered into, a public policy against the manufacture of drug paraphernalia was implicit in a state statute making the possession, use and transfer of marijuana unlawful.
Issue: Did the trial court err by refusing to enforce the K?
Rationale: According to the court, the process of determining whether a K violates public policy involves certain level of subjectivity. Only in cases where the K is clearly repugnant to the public policy can the court refuse enforcement. The court applied Restatement 2d §178 and ruled that the interests in enforcing the K were very low but the factors favoring a public policy against manufacturing paraphernalia to facilitate the use of marijuana were strong. Affirmed.