because it is illegal Illegal Contracts [Statute] Express Prohibition - Intention of Parliament is clear that contracts are prohibited - Contracts are illegal in their formation - Re Mahmoud and Ispahani: = Seeds, Oils and Fats Order 1919 [Sale prohibited unless both buyer and seller has licence] = Claimant has licence [Defendant untruthfully claim he did] = Claimant agree to sell but defendant later refuse = Claimant brought action for non-acceptance = Court held contract for sale prohibited under statute [Unenforceable] Illegal Contracts [Statute] Implied Prohibition - Contract created legitimately - Later carried out in illegal manner [Performance] - St John Shipping Corporation v Joseph Rank: = Claimant carried grain for defendants from Alabama to England = Claimant overloaded ship [Load line was submerged] = Merchant Shipping (Safety and Load Lines Conventions) Act 1932: > Offence to load ship to extent that load line is below water = Defendant withhold partial payment = Plaintiff allowed to full payment = Illegal act was merely incidental to the performance of contract = Performance did not render contract illegal Illegal Contracts [Common Law] Contract to commit crime/civil wrong: - Everett v Williams: = Two highwayman agree to share spoils of crime = One man try to evade agreement [Another attempt to sued for his share] = Unsuccessful [Particular interest is illegal at common law]
Contracts intend to promote corruption: - Parkinson v College of Ambulance Ltd and Harrison: = Claimant given charity of 3,000 = Wanted assurance that could secure him knighthood = Not allowed to claim money back due to illegality Illegal Contracts [Common Law] Contracts to deceive public authorities: - Miller v Karlinski: = Agreement between employer / employee = Agree party of salary hidden to defraud the Revenue = Agreement has no criminal conspiracy between parties = Consider illegal as it was against public policy
Contracts against public morals: - Pearce v Brooks: = Claimant hired carriage to prostitute knowing she uses it to see clients = Unable to enforce contract when she failed to pay hire charge Effect of illegal contracts - in pari delicto potior est conditio defendentis - If both parties are in the wrong, a defence is set up - Party own conduct is mutally wrong, court cant do anything about it - Keir v Leeman: = Plaintiff cant sue on counter promise = Contract was illegal [Damage administration of justice]
- Exceptions to the rule [cessante ratione legis cessat ipsa lex] - The law itself ceases if the reason of the law ceases: - A party can recover money if not in pari delicto [Not in equal fault] - Kiriri Cotton Co v Dewani: = Uganda Land Registration Ordinance 1949 = Protection to tenants [Place burden of observing on landlord] = Parties not on equal fault [Landlord can recover premium paid] Void Contract [Statute] - Contract is void, if statute provides that it is void i) Gambling Act 2005 [Section 335]: - Contracts that concern gambling are legal provided comply with general contractual rules discussed in the book]
ii) Life Insurance Act 1774: - If person takes insurance policy on the life of person in whom the person taking out the insurance policy has no insurable interest
Void Contract [Common Law] - Contract void if contravene public policy [Adapt to changing economy / social conditions] - Restraint of trade contravene the concept of laissez-faire [Free Market] - Contracts that restrict freedom of trade are prima facie void: > Prevent people from signing away livelihood at request from people with strong bargaining power > Avoid depriving public of people's expertise - Exception to restraint of trade [Allow restraint]: - Nordenfelt v The Maxim Nordenfelt Guns & Ammunation Co Ltd = Lord MacNaghten [Reasonable]: > Between parties [Restraint no wider than to protect legitimate interest] > Public interest [Restraint not unduly limit public choice] Effect of Void Contract - All of contract need not be void, only the offending clause - Severance: = Possible to divide illegal part of contract from rest = Enforce provisions which are not affected by illegailty - Goldsoll v Goldman: = Claimant bought business of defendant [Traded imitation jewellery in UK] = Term in contract [Defendant would not trade imitation / real jewellery in UK] = Court of Appeal state it was unreasonableness for claimant to restrict defendant from trading in real jewellery = Unreasonable parts could be severed / remaining agreement could be enforced