Contract must be contemplating an illegal purpose
Northwestern Salt v Electrolytic Alkali Co '41, HL
Courts may raise illegality of the transaction on their own - even if neither party raises it
Pickering v McConville 2003, CA
St. John Shipping Corp v Joseph Rank Ltd '57
Illegal performance of a legal contract doesn't taint it w/ illegality
A.L. Barnes v Time Talk 2003
Principles
General
Re Mahmoud & Ispahani '21
St. John Shipping Corp v Joseph Rank Ltd '57
Ship carrying grain, took on more cargo than authorised
Ship owner was fined
Shipping contract itself wasn't illegal, just performed illegally
General
prohibition
Illegal performance vs. Illegal contract
Somali found illegal immigrants for a law firm
Mohamed v Alaga & Co '98
Paid a fee for each illegal immigrant
Statute forbids fee-sharing betwn solicitor and non-solicitor
Mohamed couldn't enforce the contract, but entitled to Quantum Meruit
What isn't illegal
What is the effect
What is illegal
Questions
Sale of a horse on Sunday contrary to Sunday trading legislation
Statute
Trying to enhance Criminal Law
When is it a good idea to aim for injustice
Courts offended by being involved
Seller gave 'duff' warranty as to age/condition of horse
Bloxsome v Williams 1824
Only one party prohibited
Held
Purpose
Legislation aimed at sellers, not buyers
Buyer tried to enforce
Buyer could enforce contract
P bought 3 million pounds of shares through D
Hughes v Asset
Managers plc '95
Statute only imposes
a criminal sanction
Holman v Johnson 1775
Mansfield L: In an illegal contract the Defendant wins - P unable to get contract enforced if D breaches
Generally unenforceable
Pearce v Brooks
But only criminal sanction
Contrary to statute, D didn't have a trading license
No remedy therefore for P
Shares eventually sold for 1 million pounds
Mohamed v Alega
Rental payments overdue, SCT sought repossession
SCT hires Capt. Howard to retrieve planes
Contract for use of 2 planes in Nigeria
Controlled by special legislation
H sues SCT
Would normal Englishmen be offended by enforcement of such a contract
Gambling
Howard v Shirlstar
Container Transport '90
H gets 1 plane, breaches every Nigerian airspace rule, lands in Ivory Coast, plane impounded and returned to Nigeria
Test
Answer - No. Howard wins
Public
Conscience
test
Establishes that the 'public conscience' test doesn't exist
Title in plaintiff T's name, but both treated house as joint property
Scheme to defraud the government, reason why title in T's name only
T and M, lovers in longterm relationship, purchased a B&B
Generally, courts will declare a contract illegal if contrary to public poicy - but generally reluctant to do that
Richardson v Mellish 1824
General
cases
Tinsley v
Milligan '93
If 2 parties contribute to a matrimonial home, there's a resulting trust
Property may pass pursuant to an illegal contract
General
Insurers pleaded illegal contract to avoid honouring insurance claim
2nd contract, insurance contract, not tainted by illegality
There were 2 contracts
Commit crimes/civil wrongs
Illegality
Held
Sincock promises to get necessary license
Main contract for conversion is legal
2nd contract, to get license, was illegal
Contract contemplating committing a civil wrong also unenforceable
Two Contracts
Builder S contracts w/ architect Sincock to do bldg conversion
Clay v Yates 1856
Strongman (1945)
Ltd v Sincock '55
Held
Contract to print a book containing libellous dedication
Contract to commit an illegal act in a foreign country is illegal
Selling jute bags from India to S. Africa
Regazzoni v Sethia '58, HL
Denning: If smne does smthg illegal and induced to do so through representation or promise of
another, then can recover damages for fraud, breach of promise or warranty as appropriate
Prejudice to ForRelations
De Wutz v Hendricks 1824
Question of the role of the foreign state's foreign policy
Common Law
Public Policy
Statue only prohibits one party
This was illegal in India - apartheid sanctions
Contract hostile to a friendly foreign state is also illegal
Effect of
Illegality
Re Mahmoud & Ispahani
Bloxsome v Williams
From the start, parties intended to violate exchange controls
Contract to indemnify smne from their criminal act will be unenforceable
Sued for wrongful death, B sought insurance cover
Barr killed Gray (his wife's lover)
Gray v Barr '71
Any indemnity for a criminal act is unenforceable
08/01/2007 - v9
License only valid for 1/3 of the work required
Breach of exchange control regulations
Bigos v Bousted '51
Euro-Diam v
Bathurst '88
Diamonds were stolen enroute - decided to claim on insurance
Denning L With a good man in the saddle, the unruly horse can be kept in control.
It can leap the fences put up by fictions and come down on the side of justice
Concern based on illegality of purpose rather than the carrying into effect of a crime
Tax fraud
Alexander v Rayson '36
Signed rent and lease to show lower property value
Ways
Around
One contract found to be illegal, the other not
P agreed to sell diamonds to a German buyer, agreed to insure through D
Sir George Jessel MR: Intelligent adults should have utmost liberty of contracting,
and contracts entered voluntarily shall be sacred and enforced by the courts
Printing & Numerical v Sampson 1875
Enderby Town FC v FA '71, CA
Courts can escape effect of illegality by finding that there are 2 contracts rather than 1
Ex - Hiring a hit man
Burrough J: Public policy is a v. unruly horse, and when you get astride it you never know where it will carry you.
Held
M had equitable interest and entitled to 1/2 of the interest in the house on that basis
Agreed scheme to avoid German customs duty
Betting shops, etc.
No need to know more for exam
Lemenda Trading v African ME Petroleum '98
Trading with the Enemy Act '39
Generally unrecoverable, UNLESS:
Holman v Johnson 1775
Parkinson v College of Ambulance '25
If you repent in time, before contract performed, courts may allow you to recover money in pursuance of an illegal contract
Scheme to defraud creditors, mortgaged stock to Bowers, who knew about the fraud
Taylor v Bowers 1876
b/c repented in time, Taylor could recover stock
Fraud was carried out (partial performance), so couldn't recover
Tenant able to recover premiums paid
Kiriri Cotton v
Dwani '60, HL
Denning L: if law puts duty on one, esp. if to protect the other, than the money can be recovered back
LIfe insurance contract - 1 party told other that the scheme wasn't illegal
Premium could be recovered
Prejudicial to morality
B employed as PR man at casino
Fraud
Coral Leisure Group v Barnet '81
Held
I own goods even though no longer in my possession
Legal ownership
Approaches
Recovery of
Money/Property
Right to ownership in equity
> Illegal to bribe to get an honour
Complicated concept as the notion of public morality changes over time
Contract for use of a carriage
Pearce knew Brooks was a prostitute and would use carriage to ply her trade
Pearce v Brooks 1866
Brooks didn't pay
Contract held to be immoral and unenforceable
Class protection
Hughes v Liverpool Victoria Legal Friendly Society '16
Aim was to get a knighthood
Lemenda Trading
Repentance
cf Kearley v Johnson 1890
Landlord made tenant pay premium above the rent-controlled level
Parkinson made major donation to the CofA
Leading to public corruption
Real job was finding prostitutes for casino customers
During employment dispute, CLG pleaded Pearce v Brooks
Contract was legal when formed (as PR man)
Subsequent illegal performance didn't render contract illegal
Ideas from the past may differ from ideas today
Miss H contracted w/ Mr C for him to introduce men to her, help her find a husband
S wanted to buy a lorry from A, but S didn't have a driving license. Planned to use A's license
After contract formed, A stole lorry from S. S sued to recover lorry
Property can be transferred under an illegal contract
Ownership had passed to C
Singh v Ali '60, HL
Held: S was the true owner at law
T gave C 1/2 of 50 pounds for use of prostitute. Sought to recover the money
Question of what happens when possession passes through an illegal contract
Return machines to Bowmaker
Barnet got possession of machines
Held
DuParcq LJ - A man is entitled to his own property. It's not a principle that if possession
through hire purchase agreement
passes to another through unlawful dealings that the true owner can't recover them
Illegality of the contract irrelevant - if P acquired legal title under it, that's enough
Common understanding that they owned the house equally - P didn't have to prove WHY the
house in D's name only. Illegality emerged only b/c D raised it to avoid sharing property
Illegality.mmp
Hermann v Charlesworth '05
Browne-Wilkinson
L - 3 points
Prejudicial to family
Taylor v Chester 1869
No need to
rely on
illegal
contract
Miss H entitled to recover her 52 pounds
Complicated contract prior to marriage regarding marriage breakdown
Cartwright v Cartwright 1853
Arbitration Act 1979
Prejudicial to admin of justice
Bowmakers v Barnet
Instruments '45
This work is based on the lectures of John Halladay and is licensed under the
Creative Commons Attribution-NonCommercial-ShareAlike License. To view a
copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/2.0/
Tinsley v Milligan '93
Contract held void as contrary to public policy
Early pre-nuptial agreement
Contract held void
ADR rules
Contracts which oust the jurisdiction of the court are illegal
Everyone has the right to have their disputes settled in court