The Fundamental Principles of English Law - Essay Example

?It is a Fundamental Principle of English Law that the Courts Will Not Enforce an Illegal Contract A contract is said to be a legally binding document or an agreement made between two or more persons. The rights in the contract are acquired by one or more acts on the part of the other/s. An agreement is reached upon when there exist an offer and acceptance from both parties involved. An offer happens when there is a will to do or desist from doing something, which is capable of being transformed by acceptance into a legally binding contract (The Law Commission 2011). Acceptance, on the other hand, is the agreement to the terms of an offer that transforms the offer into a legally binding contract. Acceptance involves an action on the part of the offeree. It is vital to emphasise that minors and mentally disordered people lack the capacity to enter into a legally binding agreement. Although a contract exists in many different forms, there are also some illegal contracts. These illegal contracts are those to which the principle applies. This may occur where the law forbids the contract, or where there is a violation of public policy at common law where the contract is for an illegal purpose (The Law Commission 2011). With the English law in place, the courts are not supposed to enforce any contract that is contrary to the policy of the law. The reasons for this are that the performance of a contract, as stated earlier, does not involve the breaking of a legal provision and it is not essentially a good reason for regarding the contract as invalid. Additionally, there are cases where a contract does not involve the breach of any specific legal provision. The aim of the legal restrictions on contracts is varied. It is at times aimed at protecting the weaker parties against exploitation from the stronger parties. This leads to a commonality in force that is laid out to both parties (Youngs 1998, p. 378). Illegal contracts are defined as contracts or agreements that are prohibited or forbidden by a statute or illegal at common law based on the public policy (Haigh 2004, p. 158). Pritchard and Hinds (2008, p. 1) define an illegal contract as one which is based on or entails criminal wrongdoing. For instance, in the United Kingdom (UK), gaming contracts (contracts created in respect to gambling) cannot be enforced. Another important class of illegal contracts are those contracts or agreements which can be defined as unconscionable or unfair in relation to the legislation of the nation, i.e. the laws that govern the contract. For instance, in UK employment contracts, parties may not eliminate liability for severe injury (Haigh 2004, p. 158). In addition, the majority of employment contracts implying illegality entail schemes to defraud Inland Revenue or workers who lack the rights to work in the United Kingdom (Pritchard & Hinds 2008, p. 1). Performance of Contracts The common rule is that a party must execute what they undertook to attain the contract. However, the contracts can vary based on the mutual agreement. Alternatively, where an entity approves an appeal of the other entity, that second entity is said to have waived their right to demand performance in a way that was originally agreed. The entities are then put within the terms of the waiver, and there is the absence of consideration to support it (Haigh 2004, p. 158). Illegal Contracts It is important to state that illegality is the most puzzling area in the law of contract, and this is attributed to the fact that it lacks structure. Some authors have indicated that the law in this section is full of contradictions and altogether unsatisfactory. As aforementioned, there are contracts rendered illegal by the common law or a statute. A contract can be expressly prohibited by a statutory provision. Certain contracts or agreements are rendered illegal at common law based on the fact they would be harmful or dangerous to the society and thus contrary to public policy. The following are some of the contracts that are rendered illegal by the common law or statute (Tufal 2000, p. 1). If the object of a contract is the deliberate commission of a crime, the court cannot enforce it because it is illegal. Similarly, if the aim of the contract is to intentionally commit a civil wrong, it is, therefore, illegal and unenforceable. Conversely, if the entities are unaware of the fact that by the contract, they are conducting a civil wrong, it is legal. If one of the entities to the contract is aware that the contract or agreement is illegal, only the innocent entity is entitled to depend on the contract (Tufal 2000, p. 1). Contracts that tend to lead to corruption in public life are rendered illegal. A contract for the sale of public office or the attainment of a title of honour will be illegal, for instance in the case Parkinson v College of Ambulance (1925). A contract, which indirectly or directly encourages sexual immorality, is illegal. For instance, the letting of a carriage to a well-known prostitute so that she might practice her trade more efficiently was regarded illegal unless the hirer was unaware of the anticipated use in the case of Pearce v Brooks [1866] (Tufal 2000, p. 1). A contract inclining to influence the administration of justice is void and illegal, for instance a contract ‘not to appear at the public examination of a bankrupt nor to oppose his discharge’ (Tufal 2000, p. 1). The Trading with the Enemy Act of 1939 indicates that it is an offence to attempt to trade with the enemy. These types of contracts are considered illegal. Where the contract aims at performing an act, which is illegal, based on the law of a friendly foreign nation, it is void and illegal as seen in the case of Foster v Driscoll of 1929 (Tufal 2000, p. 1). The following are other examples of contracts that would offend public policy, such as contracts or agreements to defraud the Inland Revenue (the case of Miller v Karlinski of 1945) and excessively restricting individual liberty (the case of Horwood v Millar’s Timber of 1917) (Tufal 2000, p. 2). A contract can be lawful in its creation but conducted by the entities in an illegal way. Therefore, the contract becomes unlawful. Anderson v Daniel (1924) and Archbolds (Freitage) Ltd v Spanglett Ltd (1961) are two contrasting cases. The assessment for determining the illegality or legality of a contract that would else be lawful, but its performance entailed the breach of a statute, was stipulated in the case of St John’s Shipping Corp v Rank Ltd (1957). In this case, it is not clear whether the statute intended to prohibit the contract, or it also intended to penalise only the conduct (Tufal 2000, p. 2). Forms of Illegality There are two forms of illegality that may influence the enforceability of a contract and they include an illegal purpose and an illegal performance. In an illegal purpose, the aim of the contract is illegal and the court cannot accept it and no entity can enforce it. This is regardless of whether the entity did not recognise that the contract was not legal or will lose property or money as a result. In illegal performance, the contract is legal; however, it has been executed in an illegal way (for instance, because one entity has committed a criminal act in executing it), and the courts will not permit the entity responsible for the illegal performance to implement the contract (Ottley & Rush 2006, p. 129). The majority of contracts are illegal because of the fact that are they are forbidden by the statute. For instance, the 1998 Competition Act forbids contracts between businesses that considerably restrict competition in the United Kingdom (or a significant portion of the United Kingdom). An agreement or a contract between a retailer and a manufacturer requiring the retailer not to trade goods below the manufacturer’s RRP (recommended retail price) would normally be viewed as illegal under the aforementioned act. If the manufacturer finds out that the retailer is trading goods at less than the RRP and sued for damages, the agreement will not be upheld by the court and the claim by the manufacturer will fail considerably. This form of price fixing can result in the Office of Fair Trading fining the manufacturer (Ottley & Rush 2006, p. 129). The common law can recognise a contract to be illegal, for instance in the case of Parkinson v College of Ambulance Ltd and Harrison (1925), a charity of ?3,000 was offered and in return, the donor was promised that it would be offered a knighthood. It is important to state that no statute existed that defined such an agreement as illegal. However, the court stated that the contract was against public policy because it entailed an assurance by the charity to bribe the public officials. When Parkinson failed to get his knighthood and prosecuted for refund of the money, the court declined to permit the contract to be implemented (Ottley & Rush 2006, p. 129). Youngs (1998, p. 379) states that in regards to the statutory laws of England, the illegal contracts are divided into two: implied prohibition and expressed prohibition. In implied prohibition, the author states the statutory provision may relate to the formation of the contract. An example was the requirement that a written statement shall be provided when goods are sold. The courts were to find out whether the law was to protect the public and thus render it illegal. Additionally, if the law was aimed at raising revenue, it meant that the contract could not be affected. Some of the claimants may not be having a clue of what the law states (Youngs 1998, p. 379). A good example is the case that involved Archbolds ltd vs. Spanglett Ltd (1961). It is evident that the plaintiff’s goods were delivered using the defendant’s van, yet it was not authorised to carry the goods. The goods were stolen, but the plaintiff could not claim for the loss of the goods since money or goods cannot be generally recovered under illegal contracts. In express prohibition and under the Resale Prices Act of 1976, the restrictive practices court, for instance, has the jurisdiction to deal with the resale price maintenance arrangements and decide whether they are in the public interest (Youngs 1998, p. 379). How Illegality Affects a Contract Some sections in contracts are void or empty because they are illegal. However, they do not constitute the contract in total, for instance in the case of Steelcraft v Ellis (2008), a section in a contract, which stated that the contract was not projected to make legally enforceable rights, was believed to be void under the Section 203 Employment Rights Act of 1996. However, the remainder of the contract was declared valid. However, in cases where the aim of the contract entails criminal activities, the courts are not willing to permit the entities to possess any rights under it. Therefore, the courts are viewed as not condoning illegality and will deem the entities to a contract stained with illegality to have lost their rights of legal redress. This is attributed to their complicity in activities that are illegal (Pritchard & Hinds 2008, p. 1). However, in the law of employment where the livelihood of an individual is affected, considerable injustice can be as a result of rigid rule and the courts have stated that ‘“a middle course between two unacceptable positions” should be steered where possible (Saunders v Edwards (1987) 1WLR)’ (Pritchard & Hinds 2008, p. 1). The same sentiments were conveyed in the case of Euro Diam Limited v Bathurst (1988) where it specified that at times there is a need to balance reprehensible behaviour between the employee and the employer (Pritchard & Hinds 2008, p. 1). An individual who is employed in an illegal contract is unable to possess any legal rights through the same contract. Therefore, the individual will possess a number of employment rights as in the case of Sharma v Hindu Temple (Emir 2012, p. 70). References Emir, A 2012, Selwyn’s law of employment, Oxford University Press, Oxford. Haigh, R 2004, Legal English, Routledge, London. Ottley, M & Rush, J 2006, Business law, Cengage Learning EMEA, Mason. Pritchard, J & Hinds, B 2008, Illegal contracts and employment claims, PJH Solicitors, viewed 12 April 2013, . The Law Commission 2011, Illegal transactions: the effect of illegality on contracts and trusts, viewed 12 April 2013, http://lawcommission.justice.gov.uk/docs/cp154_Illegal_Transactions_Consultation.pdf. Tufal, A 2000, Illegality, viewed 12 April 2013, . Youngs, R 1998, English, French and German comparative law, Routledge, London. Read More