Illegality Flashcards
What approach does a court now adopt when dealing with contracts involving illegality?
Following the decision in Patel v Mirza, a court now adopts a discretionary approach, applying principles of public policy and proportionality.
What was the general rule in English law regarding contracts for illegal acts prior to the decision in Patel v Mirza?
The general rule in English law prior to the decision in Patel v Mirza was that a contract to perform an illegal act or a contract contrary to public policy would be declared void and unenforceable.
What was the nature of the contract between Mr. Patel and Mr. Mirza in the case of Patel v Mirza?
In the case of Patel v Mirza, Mr. Patel paid a large sum of money to Mr. Mirza for betting on changes in share prices. Mr. Mirza expected to receive ‘inside information’ about the shares, making the agreement between them illegal as they were pursuing ‘insider dealing’.
What was the outcome of the case of Patel v Mirza in relation to the defense of illegality?
All nine Supreme Court judges agreed that the defense of illegality should not apply to defeat Mr. Patel’s claim for the return of his money.
What trio of necessary conditions did the Supreme Court identify when determining whether illegality should apply to deny a claim?
The Supreme Court identified the following trio of necessary conditions: a) considering the underlying purpose of the prohibition and whether denying the claim would enhance that purpose, b) considering any other relevant public policy impacted by the denial of the claim, and c) considering whether denial of the claim would be a proportionate response to the illegality, with punishment being a matter for the criminal courts.
