A contract has a penalty depending on choices made by unrelated 3rd party Suppose a contract is signed by two parties, Party A and Party B. Suppose that the contract stipulates a severe financial penalty to be paid by Party A depending on whether or not an unrelated party, Party C, performs some action. Party A has no control whatsoever over Party C. If Party C chooses of his own accord to perform the prohibited action, does Party A have to pay the penalty? To me, such a contract sounds more like a form of insurance (or maybe gambling). It seems like it might be invalid simply as a business agreement between two parties who are not in the insurance or gambling businesses. But such a case is at the heart of a threatened lawsuit, so I thought it was worth checking here to see if anyone knows of case law that might weaken the threat against Party A.
A contract is about risk allocation. One of the risks a contract can allocate is events outside the control of the contracting parties. For example, who is responsible if government regulations change, if it rains, if a structure collapses and if a third party does or does not do any particular thing. This does not make the contract an insurance contract or a contract for gambling. An insurance contract involves indemnification against all third parties. A gambling contract is primarily for wagering on an outcome i.e. the consideration from both parties is a bet. If you are unwilling to take the risk as allocated don't enter the contract. Now, no contract can have a penalty clause - these are unenforceable. However, being required to cover someone's actual or estimated costs is not a penalty clause.
Ethics and morality aside, does the situation cross over into a general legal understanding of extortion? No. Extortion necessarily includes coercion. An offer to tell what is wrong (and from the point of view of the target — only allegedly wrong) is neither threat nor force, therefore no coercion. It would have been coercion (and therefore extortion) if the guy said along the lines "If you don't pay I will exploit the vulnerability, and/or tell a bunch of bad guys about it — they will be sooo thankful to me". Provided that the guy does not say/imply he will do something if not paid, there are no legal issues here.
The company can't force you to settle out of court. But if it pays you what it says you owe it in an unconditional payment, it can cause your claim to fail on the merits at trial for a lack of damages. A company might want to do this to avoid the collateral estoppel consequences of a judicial determination of your liability. The doctrine of collateral estoppel would make judicial determinations on the merits on particular issues resolved in the case against it binding on the company in future lawsuits against other plaintiffs. A company cannot simply pay to defeat a claim on the merits, however, in a class action suit, without paying all of the amounts owed to all members of the proposed class. Some states also have procedural penalties such as costs or attorney fee shifting when a settlement offer is refused and the outcome at trial is not significantly better than the settlement offer, but I don't know if Florida has such a provision. If it did, your net win could easily be converted to a net loss.
There have been cases in the UK where paying someone's legal bills was interpreted as joining their case. So when A with no money libels someone, and B with deep pockets pays A's lawyer, then B risks being held liable for damages if A gets convicted. So B should be very careful. Just giving you money is probably the safest. But attorney-client privilege is between attorney and client. I have been laid off twice with my company asking me to take an employment lawyer and paying for it. (Interestingly each time the bill was exactly the maximum amount the company was willing to pay :-) It would have been absurd if my company could demand information that is under attorney-client privilege just because they paid the bill. Why did two companies pay the lawyers bill? Because that way they ensure that the separation is without problems. The lawyer explained the settlement contract and what it meant exactly. They also checked that the contract didn’t contain anything unacceptable which the company would have fixed. So if I had tried to sue them later I would have no chance to win (but there was no reason to sue). Another reason not to sue was that the company offered I settlement that was very significantly more than was legally required, but if you sued them you would only get what you got in court - most likely less than you would get without suing. So basically they paid to make sure I would have no reason to sue them later.
Minors can negotiate and enter contracts. The idea they can’t is a myth - if they couldn’t, they wouldn’t be able to ride the bus or buy an ice cream as these are both contracts. However, unless the contract is for necessities, the minor can void it at any time while they remain a minor (and for a reasonable time after their majority) so they carry considerable risk for the adult party. Of course, a contract that has been completed can’t be voided. If a third person (like a guardian) is involved then either they are entering into the contract as well and would be (typically) jointly and severally liable with the minor or they would be standing as guarantor for the minor's performance of the contract and would be liable if the minor didn't perform - which it is will depend on the construction of the contract. However, the minor can still void the contract on their own behalf leaving the co-signer on the hook.
This depends on the representations that were made at the time of forming the contract, the prior knowledge of possible interference, and the nature of the interference by the third party. If the interference, or likely interference was known: To you, the vendor, and you made representations that your service would work despite this, or you did not disclose this, then you may have sold a product that was not fit for purpose and the client may be entitled to statutory relief, or may not be required to fulfil their contractual obligations To you and the client, and you notified them that this may prevent use of your service, and despite your advice they decided to enter into the contract, then the client is unlikely to be entitled to relief and must fulfil their contractual obligations To only the client, then they are unlikely to be entitled to relief and must fulfil their contractual obligations If the interference is of a nature such that the third party was aware of your contractual relationship, caused such an interference resulting in a breach of contract, and was not entitled to create such a breach, then the third party may have committed the tort of economic interference (generally known as tortious interference) and either you or your client may be entitled to seek damages, if any.
What's the use of contracts if you can't take a contract violator to court? A clear, thoughtful contract can be a deterrent to misconduct, and Australia is one of many jurisdictions where pro se litigation is allowed. Self-represented litigants certainly have to undergo a steep learning curve and are expected to comply with a code of conduct, procedural law, and so forth, but my point is that hiring a lawyer is not compulsory. Even if for some reason the defrauded party declines to sue the tortfeasor (thereby forfeiting the recovery of the losses), there is a societal obligation to alert others about the tortfeasor's misconduct. Making the contract available to others facilitates alerting them on objective grounds so they don't become the tortfeasor's next victim, and it simultaneously helps for setting the record straight that the damages/losses were not one's own fault. Without a contract, it would be more difficult for others get a sense of whether misconduct occurred at all. Or worst, halfway down the line, you don't have any money left to pay your lawyers, and they leave the case. Hence the importance to litigate in pro per from the start. It is easy for a person retaining a lawyer to postpone (be it due to family obligations, workload, and so forth) his learning of the law. But that postponement only makes the client more vulnerable to his lawyer's subsequent withdrawal when court proceedings are midway: the client would have the dilemma of either finding another lawyer to resume the case --predictably at a higher cost--, or cram the learning curve in trying to keep up with the proceedings.
A contract that tells one party or another to do an illegal thing is void ab initio: courts will not recognize it or give force to it. A contract which doesnt explicitly tell either party to do something illegal but if during the course of fulfilling either party's end of the bargain they commit an illegal act it is up to the courts discretion what happens, whether to find the contract void or to maintain the contract (its a matter of public policy whether they allow the contract to continue existing, or if the contract was such that illegal acts were expected to be commited then the court will likely remder it void) Either way, you cannot indemnify someone for committing an illegal act.