Illegality of Contracts - types of Illegal contract Key themes . Link between Illegality and Public Policy . In both cases, performance of the contract will impugn wider public interest. Illegality or reasons of public interest may justify the courts intervening in a contract on its own motion and not just in response to parties' pleadings. . Courts do not only protect the interest of the parties but the wider public interest. · Scope of the doctrine changes overtime as public policy develops. Two Rationales for unenforceability of Illegal Contracts: · Deterrence. . Reinforce the approach of criminal law and tort and ensure a person does not benefit from their own wrongdoing. Making contracts unenforceable deters further engagement in illegal conduct. . Integrity of the Courts. . Protects the integrity of the legal system. Courts would be seen as condoning something illegal or morally reprehensible behaviour and this would bring the court into disrepute. · This provides a more general explanation why innocent parties cannot enforce illegal contracts. . Yet need to ensure justice is done can lead to conflict and confusion General approach of Courts: · Tinsley v Milligan fi1994) · Parties agreed to purchase a house using joint money but registering the property in the name of Tinsley only. This will allow Milligan to continue to claim social security benefits that will otherwise stop. Subsequently, parties fell out and Tinsley argued that Milligan should not be entitled to an interest in the house because of her illegal behaviour. . CA held the test was whether it would be an afront to public conscience to grant the relief. . HOL rejected this and held in favour of Milligan on grounds that if claim could succeed without relying upon illegality, then claim would succeed. Courts used the 'reliance test' i.e., court will not uphold an illegal contract if a party rely on the illegal act in his claim. Leading case on general approach: Patel v Mirza fi2016)
. Mirza was a city of London trader and Mr Patel transferred £620,000 to Mirza to be used for betting on the price RBS in respect of a pending government policy. Mirza expected to obtain insider trader fian illegal act) information from his contact at RBS in respect of government policy which did not materialise, and the money was never used to purchase shares. Mr Patel sought to recover the money, but Mirza refused. Patel's claim was framed in terms of unjust enrichment. SC held that Patel's claim for restitution should succeed. They articulated some tests, but it was not applied with clarity to the facts of the case. . SC departed from the rigid approach in Tinsley fiwhere Lord Goff said that the principle is not a principle of justice but a principle of public policy), but took a more flexible approach, i.e., whether public interest will be affected. Thereby introducing much more flexibility and greater scope to consider fairness in the outcome of decisions. Patel v Mirza fi2016) · Agreement to