illegality of contracts Flashcards
when will a contract be declare illegal ?
A contract will be declared illegal because of the kind of activity or action that is required by it, or closely linked to it.
There are two justifications that the justify the the courts refusing to enforce a contract on the grounds of illegality
Describe the first justification
The first justification was made by John Stuart Mill who justified interference in contracts on the basis of what is called the ‘harm principle’ he observed that:
The only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others
There are two justifications that the justify the the courts refusing to enforce a contract on the grounds of illegality
describe the 2nd justification
The second justification relied by the courts is the “wrong doing” justification. This is a manifestation of the principle that a man shall not be allowed profit from his wrongdoing.
on what basis will the Courts decline to enforce a contract tainted with illegality
Courts will decline to enforce a contract tainted with illegality on the basis that the ‘dignity of the courts may suffer
what are the two types of statutory illegality ?
express illegality and when a contract is illegal under statute by implication
describe express illegality
express illegality , concerns the situation where an act is prohibited by statute and the parties enter into a contract to do that act.
If an act is illegal under statute , then a contract to do that act will also be illegal and will therefore be unenforceable.
describe when a contract is illegal under statue of implication
In this situation an act is prohibited by statute.
The parties have formed a contract that touches on the prohibited act but is not a contract to deliberately do the prohibited act.
give examples of express illegality
the Family Home protection Act 1976 in s 3(1) prohibits a spouse from convening an interest in the family home without prior written consent of the other spouse. Therefore, a contract to convey the family home in this matter is void as illegal.
The Gaming and Lotteries Acts 1956 - 1986 expressly provide that every contract by way of gaming or wagering is void.
give an example when a contract is illegal under statue of implication
A perfect example of illegality by implication would be the case of St John Shipping v Joseph Rank. The plaintiffs agreed to transport cargo belonging to the defendants. Contrary to legislative requirements, the plaintiff’s ship was deliberately overloaded, the plaintiff’s reasoning that the excess profit would outweigh any possible fine it might incur.
The courts conducted, on a reading to the particular statute , that the contract was enforceable .The contract itself was not contrary to law, though there was illegality in the manner in which it was performed.
what are the facts of the case Mares v Trant
the defendant sold what though described as spring wheat , was in fact winter wheat. The defendant having failed to supply an invoice with the delivery, the contract was deemed illegal.
If both parties intended an otherwise legal contract to be performed illegally , then that contract is unenforceable and no damages will be awarded for its breach.
what does this phrase mean “ A contract becomes illegal because the means of its execution are unlawful”
A contract that is legal on its face but illegal as performed may be unenforceable if both parties intended the illegal performance.
However, where one of the parties is innocent of any wrongful intent , the contract may be enforced by that party, provided she took steps to repudiate the contract on discovering the illegal performance
what are the facts of the case Ashmore v Dawson
In Ashmore v Dawson, the plaintiffs owned some heavy equipment that was to be used to transported by lorry. The defendants were hauliers who agreed to transport the machinery.
The contract was obviously legal in its formation. However the contract was illegal as performed.
The defendants intended to use a lorry that did not meet statutory requirements as to capacity. The plaintiff’s transport manager was present and so he was held to know that the statutory requirements were not being fulfilled.
Joint illegal intent was present and so the contract was unenforceable.
what are the facts of the case everet v Williams
In everet v Williams , for instance a contract between two highway robbers to divide the proceeds of their robbery was deemed unenforceable.
what are the facts of the case In Devine v scott
In Devine v scott, rent on a premises knowingly let for the purposes of illegal gambling was deemed irrecoverable, as the contract was illegal.
what are the fats of the case lewis v squash Ireland ltd
In lewis v squash Ireland ltd, for instance, an employment contract under which a salary top- up was misrepresented as “expenses” was deemed unenforceable as it was designed deliberately to evade tax.
