9 Illegality and Breach Flashcards
cases
Tinsley v Milligan [1994]
- House in one name when parties split up
- The house was in Tinsley’s name so that Milligan could claim benefits
- So the contract had a fraudulent purpose
- Milligan had confessed her fraud to Social Security but Tinsley argued that it still meant that Milligan could not claim equal ownership
- CoA rejected illegality defence
- HoL upheld the decision – trust argument rather than the fraudulent activity
Highlights the difficulties found in the defence of illegality and was singled out for criticism
Patel v Mirza [2016]
Introduced the multi-factoral approach
- Transaction relied on insider information – illegal under statute
- No announcement was made and the bets were not placed
- Mirza retained the money and Patel sued to recover it – Mirza argued that the money was not recoverable as it was an illegal arrangement
- High Court upheld defence
- CoA held that it did not apply due to loucs poenitentiae and stated the requirement for a more flexible approach as recommended by the Law Commission
- Supreme Court also rejected the illegality claim -6/9 judges held illegality should be decided on a multi-factoral approach
- Disenting judges said the majority judges decisions might prove more problematic than has the troubled doctrine of ex turpi causa itself – claimant is unable to pursue a claim in relation to his own illegal actions
Hounga v Allen [2014]
• Claimant was a Nigerian national who was offered a job as a home help in the UK
• She entered the UK on a visitor’s visa and began working illegally
• She sued the defendants for unfair dismissal and unpaid wages, as well as for the tort of unlawful racial discrimination
• The first two were unsuccessful, but the latter claim succeeded in the Supreme Court
• The balance favoured racial discrimination law, to hold otherwise would encourage employments to enter into illegal contracts of employment
The Supreme Court held that the correct approach was not to ask whether she needed to rely on the illegal contract, but to take a more flexible approach balancing the public policy underlying racial discrimination law against the public policy underlying immigration law
What are the factors in the multi-factoral approach found in Patel v Mirza
(1) The court must consider the policy underlying the prohibition that gives rise to the potential illegality – what do they intend to serve etc
(2) The court must consider any other matters of public policy which might be affected by a decision to deny relief. Will any other public policy be affected?
(3) It must consider whether a denial of relief will be proportionate to the nature and degree of the illegality involved
Esso Petroleum Co Ltd v Harper’s Garage (Stourport) [1968]
- It was held that a line must be drawn between contracts in restraint of trade and contracts which ‘merely regulate the normal commercial relations between the parties’.
- So the principle of restraint of trade will not apply to ordinary commercial contracts for the regulation and promotion of trade during the existence of the contract
Nordenfelt v Maxim Nordenfelt Guns and Ammunition [1894]
The desire not to interfere in legitimate commercial transactions has been implicit in the law since at least the 19th century decision of the HoL
• Nordenfelt made heavy weaponry. He held a number of patents
• He sold the business and his patents to the Maxim Nordenfelt company
• He agreed to a covenant that for a 25 year period he would not engage with any competitors
• In view of the quantum involved, the court held that the restriction was reasonable
Dany Lions Ltd v Bristol Cars Ltd [2013]
Highlights the importance of careful contract design - conditional/ unconditional
• Bristol Cras promised to restore a vintage car
• He could not complete the work
• Dany Lions brought an action for breach of contract
• The obligation to achieve that result was set out in the contract was not conditional
• A failure to achieve the agreed result was a breach of contract
Cutter v Powell (1795)
Entire obligations and construction of contract
• A wage to be paid at the end of the voyage
• Cutter died around halfway through the voyage and his widow sought to recover a proportionate amount of the agreed wage
• The Court of King’s Bench held that she could not recover because the wording of the contract suggested that his obligations under the contract were entire
• He did not complete the voyage
H Dakin & Co v Lee [1916]
Severable obligations
• H Dakin & Co agreed to carry out repairs to a house
• The repairs did not comply with the agreed specifications on a few matters
• They were all remediable and did not involve any danger to the house
• The CoA held that the builders were entitled to the contract price, subject to a deduction for the cost of remedying the defects
Shipton, Anderson & Co v Weil Bros & Co [1912]
- High Court held that the deviation of weight of wheat was so small as to be trivial - deviation was 0.000496 per cent
- Highlights how narrow the de minimis rule is
Regant ohG Aisetadt & Barig v Francesco of Jermyn Street Ltd [1981]
Anticipatory breach
• Claimants did not perform their obligation to deliver the suits
• The defendants prevented them from doing so by refusing to accept them
• Their tender of performance claim was successful as the obligations were severable
Arcos v Ronaasen [1933]
The need for the introduction of innominate terms
• The parties contracted for wooden staves that were measured accurately
• Some staves were slightly thicker but were perfectly fit for the purpose for which they were purchased
• The defendant was held to be in breach
• Because the term breached was a condition, the buyer was held entitled to terminate the contract
• This outcome is considered problematic because the claimant suffered no loss
White and Carter (Councils) Ltd v McGregor [1962]
Affirming the contract
• Defendants purported to cancel the contract on the same day
• Claimants refused
• Contract contained a clause that the whole amount would become payable in the event of non-payment of an instalment
• The claimants sued for the complete amount
• HoL held that the claimants were entitled to affirm the contract, perform their obligations under it, and claim the full price
• Controversial case
