Contract 5 - Performance is illegal

Question 2

What was the traditional approach to contracts involving illegal acts before 2016?

Answer 2

They were automatically void and unenforceable under English law.

Question 3

What were the facts in Patel v Mirza?

Answer 3

Mr. Patel paid Mr. Mirza to bet on stock prices using insider information. The bet never occurred, and Patel sought to recover the money. Mirza argued the contract was illegal due to insider trading.

Question 4

What did the Supreme Court decide in Patel v Mirza?

Answer 4

That Patel could recover his money. Illegality did not automatically bar the claim.

Question 5

What principle did the Supreme Court introduce in Patel v Mirza?

Answer 5

Courts must assess whether enforcing the claim would cause ‘inconsistency and disharmony’ with the law, rather than applying a blanket rule.

Question 6

What are the three key factors courts must consider post-Patel v Mirza?

Answer 6

1. Purpose of the prohibition – Does denying the claim support the law behind the illegality?
2. Other relevant public policies – Are there broader policy concerns for allowing/denying the claim?
3. Proportionality – Is denying the claim a fair and proportionate response?

Question 7

Where should punishment for illegal conduct primarily be handled?

Answer 7

In the criminal courts, not by denying civil claims unless justified.