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Introduction

Contracts can be unenforceable


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

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