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25 Cards in this Set
- Front
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Illegal Contract |
-Any contract expressly of impliedly prohibited by statute is illegal and therefore void. -Or, the courts may find that the purpose of a statute is the protection of the public or on public policy grounds Cope v Rowlands - Seen as so damaging to society that the usual principle of fredom of contract doent apply |
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Examples of Illegal Ctts |
- Contracts to commit a crime, fraud or tort - Immorality - Defraud the revenue - Ctts collateral to illegal ctts |
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Public Policy |
- However, illegality based pn public policy is subjevt to change along with change in the public policy itself, public opinion and social norms. -Cowan v Milbourn 1867 compared to Bowman v Secular Society 1917 |
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Immoral Ctts |
- Courts seem only to deal with extra-marital sexual relations Benyon v Nettleford -Leasing a flat to a hooker that wasnt being used for business was held to be legal |
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Cases for Immoral Ctts |
Devine v Scott - Renting property for illegal gambling Pearce v Brooks - Carriage used to transport hooker Armhouse Lee v Chappell - Telephone sex lines (allowed) However its not likely that immorality will void a ctt these days |
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Collateral Grounds |
- Any contract which arises from an illegal one, even if it is itself entirely illegal, will be deemed illegal and therefore void -"it may be contagious" |
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Consequences of Illegality |
Two types of illegal contract 1. Illegal in itself 2. Illegal in its performance |
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Illegal in Itself |
- When prohibited by statute or at common law - Also, where it appears lawful on its face but both parties know it is intended for an illegal purpose -Void ab initio and both parties lose all rights and remedies - Losses will lie as they fall |
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Illegal in its Performance |
- When it is legal on its face but where one party, unknown to the other, intends to exploit for an unlawful purpose - Wrongdoer loses all rights and remedies - Whitecross Potatoes v Coyle - Cannot claim illegality of ctt as a defence |
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Contracts in Retraint of Trade |
- "One which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons not associated with the contract" - Two types of restrictions 1. Employment agreements 2. Sale of Businesses |
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Employment Agreements |
- Where the employee promises not to set up in competition with his employer if he were to leave his employment |
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Sale of a Business |
- Contracts for the sale of a business, including goodwill, in which the seller promises not to compete Nordenfelt v Maxim Nordenfelt British Concrete v Schleff -Only the busines sold is entitled to protection |
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Courts and Restraint of Trade |
- Courts will uphold restrictions if they find that they are reasonable or in the public interest - The onus is on the person alleging reasonableness to show it Mitchel v Reynolds Nordelfelt v Maxim Nordenfelt Mason v Provident Clothing *Esso Petroleum v Harpers Garage |
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Mitchel v Reynolds |
- Est. General restraints as void, and - Partial restraints as prima facie valid -This persisted until Nordenfelt |
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Nordenfelt v Maxim Nordenfelt |
- Changed the default position of the court towards general and partial restraints - Both were held to be prima facie void until proven otherwise - Upheld by Mason v Provident Clothing |
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Mason v Provident Clothing |
- Court is more likely to uphold restraints with regard to sale of a business as parties would be dealing at arms length and presumably on equal footing so deserving of less protection from the courts |
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Esso Petroleum v Harper's Garage |
- Leading case on restraint of trade - Asked three questions 1. Does the restraint go further than to afford adequate protection to the arty in whose favour it was granted? - If so, it is prima facie void. 2. Can it be justified as being in the interests of the party restrained? 3. Is it contrary to public interest? - Onus is on the one alleging invalidity in this point |
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Employment Agreemements |
- Prima facie void unless the employer can prove that it was justified 1. He has proprietary interests to protect 2. Clause is reasonable in circumstances |
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Proprietary Interests |
- An interest in protecting trade secrets or business connections |
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Trade Secrets |
- Seeks to avoid exploitation of secrets gained during employment, may be justified - Necessary tp prove that they gained substantial knowledge of a secret process Commercial Plastics v Vincent |
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Business Connections |
- Employee must have special relationship with employees Oates v Romano - eg. solicitors, estate agents, brokers, etc |
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Reasonableness |
Area and Time |
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Area |
- Area; The area which cannnot be worked in cannot be larger than necessary to protect interests
Nordenfelt - Worldwide restraint was reasonable as it was the largest gun manufacturere in the world vs Empire Meats v Patrick - 5 mile radius restriction on a butcher setting up shop deemed excessive, 2 miles was deemed more reasonable |
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Time |
Time; must not operate any longer than necessary to protect legitimate interests |
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Consequences of Invalidty |
1. Only void to the extent it contravenes public policy 2. Void portion is severed, remaining contract is valid - However, if severing the void clause would render the remainder of the ctt nonsense then the whole ctt is void Attwood v Lamont Empire Meats v Patrick 3. Money paid or property transferred is recoverable |
