Illegality Illegal contracts These are contracts which involve the commission of a legal wrong, example a crime or a tort, or the breach of regulations, statutory provisions, or provision of indemnity for breaking the law. The principle of the freedom of contract is limited in these cases. Rationale for unenforceability Not often explicitly stated. Usually said to be a matter of public policy. Illegality may be raised by the court without it being pleaded by a party. Two main reasons for the law's intervention- Atiyah and Enonchong- 'deterrence' and 'protecting the integrity of the judicial system' (the courts do not want to assist claimants who have broken the law). Categories of illegality Two main categories: - The agreement itself is illegal. - The agreement becomes illegal because of the way in which it is performed. A third category is where the contract is to indemnify a person for the consequences of illegal behaviour. Agreement itself is illegal • Contracts which constitute crime. • Contracts which are forbidden but are not criminal. • Contracts to commit a tort. Contracts which constitute crime Example is an agreement to commit murder- so A contracts with B, asking B to kill C, the consideration from A being a sum of money. Such an agreement will amount to the offence of conspiracy to murder under the Criminal Law Act 1977 and will be unenforceable. Some contracts are made illegal by statute, example the Obscene Publications Act 1959 makes it unlawful to sell an obscene article. Contracts forbidden but not criminal Contracts forbidden by delegated legislation, example the rules of a professional body, are also treated as illegal. Mohamed v Alaga [1999]- breach of the Solicitors' Practice Rules 1990 as regards sharing of fees, the agreement was held to be illegal and unenforceable. Awwad v Geraghty & Co [2000]- solicitor agreed to act on a conditional fee basis, the client refused to pay eventually and the court held in favour of the client that the agreement was contrary to the Solicitors' Practice Rules and was therefore unenforceable. Contracts to commit a tort
A contract to commit an intentional tort example assault or fraud, will be illegal in the same way as a crime. However, a contract which involves the unintentional commission of a tort will not generally be illegal. The agreement becomes illegal because of the way it is performed • Performance is contrary to Statute Performance is contrary to Statute Here, the contract is legal on the face of it, but, the way in which it is performed is illegal. Re Mahmoud and Ispahani [1921]- the contract was for the sale of linseed oil and the statute required that both seller and buyer should be licensed. Seller was licensed, and buyer told seller he was licensed, but actually was not. Buyer refused to take delivery and when seller sued, it was held that seller could not enforce the contract due to illegality. Contrast with Hughes v Asset Managers Plc [1995]. A Performance Contd. St Johns