CONTRACT ILLEGALITY:

A contract to commit murder is an example of a common law illegality and

statutory illegality includes for example a situation where the operator of a
business venture requires a licence to operate same but does not have a
licence. This latter group will include: doctors, pharmacists, restaurant
operators, hairdressers, etc. There is further distinction between contracts
which are illegal as formed such as a contr.act to engage in prostitution or
murder and contracts which are legal as formed but illegal as performed by a
taxi man without a licence to operate in that capacity.
Generally, an illegal contract will not be enforeced by the court and neither
will they facilitate the recovery of benefits received by an illegal contract.
The attitude of the court can be explained as listed: to discourage persons
from engaging in such a conduct to penalise wrongdoers to preserve the
dignity of the court to support public policy.
Contracts that are illegal as formed:
A contract may be void ab initio. That is, it is illegal as formed and the
illegality exists from the beginning of the contract.
As statute, for example, may expressly prohibit a certain type of contract.
Re Mahmound v. Ispahani (1921): Lord Atkin did not allow the plaintiff to
enforce a contract which was expressly prohibited by statute. However, in
Mohamed v. Alaga & Co., the Court of Appeal found that while any contract
to introduce refugees was prohibited by legislation, it might be possible to
recover on a quantum meruit basis for the translation services provided in
relation to the refugees. Translation services were not covered by the
legislation and public policy would not be offended by allowing such a
recovery.
Contracts that are illegal as performed:
The birth of a contract may be legal, that is, legal in its formation but illegal
as to how it is performed. An example of this can be seen in St. Johns
Shipping Corporation v. Joseph Rank Ltd. (1957). A contract for the carrying
of goods by sea was lawful in its formation but was performed illegality when
the ship-owner overloaded his ship in carrying the goods. The overloading
was a statutory offence and the master of the ship was prosecuted and fined
for this offence. The court held that the ship owner was entitled to the
recover the monies owed for the freight.

Common Law Illegality:

Common law illegality concerns cases involved in the commission of a legal

wrong. These include for example, the contract to commit murder (Alexander
v. Rayson) and (Beresford v. Royal Exchange Assurance). There are cases
also that involve contracts contrary to public policy (Pearce v. Brooks). It is
always difficult to define public policy because of its constantly changing
nature. As a result, it is difficult to determine whether or not a contract
offends it. It therefore means that older precedents must be treated with
great care. The contract in Pearce v. Brooks (1866) to supply a carriage to
the defendant for use in her trade as a prostitute could now be a difficult
decision since public policy is somewhat divided on the feelings toward
prostitution.
Courts have found that public policy can be offended in such a way as to
make the contract illegal in a number of different areas. This, a contract
which is contrary to good public morals may be illegal. (Pearce v. Brooks and
Franco v. Bolton (1797). At one point in time, contracts between cohabiting
couples who were not married were contrary to public policy. The attitude of
society has now changed since even legislation has now accommodated
decision of unmarried, cohabiting couples.
Franco v. Bolton: involved payment by a man to a woman to become his
mistress. A contract which was found to be illegal. Contracts to promote
sexual immorality are now less likely to be found to be illegal due to the
changing public views of immorality.
Contracts which are found to be prejudicial to family life are affected by
illegality (Lowe v. Peers) and (Hermann v. Charlesworth). Thus contracts in
which there was an agreement to restrain the freedom to marry, or some
agreement to separate are illegal. In addition, courts are particulary
suspicious of agreement to oust the jurisdiction or authority of the court.
Contracts which tend to injure the State in the relations with other States is
another area in which contracts have offended public morals. A contract with
an alien enemy is illegal in time of war and contracts which contemplate
hostile action to a friendly foreign country are also illegal.
The effects of illegality
A contract may have both legal and illegal terms. Where this exists and it is
possible to remove an illegal term or an illegal part of a term, the court will
do so and leave the remainder of the contract binding.
The court will generally not enforce an illegal contract, but it may be able to
provide an injured party with a remedy in some other manner. In Strongman
v. Sincock (1955) the plaintiffs were unable to sue on the contract, but the
court allowed them to recover the value of work done on the basis of the

breach of a collateral warranty. In Shelley v. Paddock the injured innocent

party was allowed damages for the fraudulent misrepresentation.
There is also the issue of whether a party can be permitted to recover a
benefit conferred upon the other party to an illegal contract. Again, the
general rule is that courts will not permit recovery under an illegal contract
(Holman v. Johnson) but there are cases which illustrate methods by which
recovery may be allowed. For example, where the parties are equally guilty,
the public policy considerations in preventing illegal contracts are equally be
outweighed by the desire to prevent the other party from retaining a benefit
which constitutes an unjust enrichment. Thus in Kiriri Cottons v. Dewani, the
innocent party to an illegal contract was able to recover the money paid
pursuant to the illegal contract. The party was innocent in the sense that he
was unaware that the contract was illegal.
There is also the possibility where the innocent party has been allowed to
recover a benefit where he withdraws from the contract before the illegality
has been committed.

Discharge of Contract:
-Performance
-Agreement
-Breach
-Frustration