Contract Law, Laws Relating to Legality - Essay Example

? Contract Law Introduction A contact can be defined generally as an agreement between two or more parties that islegally abiding. The rights and obligations that are created by a contact are enforceable in the courts of law. In case one party breaches the contact, they are likely to face an action of damage. Alternatively, the court may direct the party who have bleached the contract to a performance. In most cases, a contract is usually commercial in nature and it involves sales of certain goods or services. A contact is reached when one party makes an offer and the other one accepts that offer. It is imperative to note that a deal is considered an offer only when the party making that offer shows intention of being bound. This is different to an invitation to treat (Poole, 2012). Invitation to treat is just an invitation for an offer but it is not legally binding. An example of an invitation to treat is where goods are displayed on a shop. Contacts could be either legal or illegal. An illegal contact cannot be enforced by a court of law according to the English laws. There are laws that offer guidance in determining which laws are legal and which ones are illegal. Forming an illegal contract has its consequences under the English law. This essay will explain the laws that relate to legality of a contract. It will give an explanation of illegal contracts as well as the consequences of forming illegal contracts. The essay will conclude by giving recommendations on the importance of the reforming the laws of contract. Laws relating to legality This section of the law is said to be one of the most confusing are of contract law. One of the major reasons as to why it is never clear is the fact that it lacks structure. It is usually very difficult for authors to classify the various heads of illegality. This area of law is said to be unsatisfactory and is usually very contradicting. According to the principle of legality, all laws are supposed to be clear, they should be easy to ascertain and should not be retrospective. Laws should allow decision makers to be certain in whatever decisions they make by applying laws that are declared before. In addition, laws should allow the decision makers to make decisions without altering the legal situations through discretionary divergence from the established law (Poole, 2012). Contracts which are rendered illegal A contact that does not meet statutory requirement is rendered illegal. Such contracts are regarded as illegal if they are likely to cause harm to the public or to the society (Poole, 2012). Any person who is accused of being involved in an illegal contract is likely to face consequences before the court of law. It is important to note that a contract may be lawful by itself but the parties who make an agreement may do it in an illegal manner. The following contracts are rendered illegal under common law; a) Contracts to commit a crime or to commit a civil wrong There are contracts that are aimed at committing a crime or something that is not according to the law. A contract that is deliberately aimed at committing a crime cannot be enforced by the law. However, there are situations where the parties are not aware that the contract they are about to engage in will lead to a civil wrong. Such a contract is not considered as illegal and is enforced by the law. In addition, there are situation where one party is aware that the contract will lead to a civil wrong and the other party is innocent. In such a situation, the innocent party will not be at fault by relying on the contract (Poole, 2012). b) Contracts that lead to corruption acts in public life These are contracts that are aimed at committing a corrupt act in the public office. For instance, it a contract is aimed at selling a public land or public property, then that contract is illegal and is not enforceable. In addition, a contract that is aimed at acquiring a tittle of honour illegally is also considered illegal and is not enforceable. c) Contracts that Promote Sexual Immorality Whether a contact directly or indirectly promotes sexual immorality, it is considered illegal. Sexual immorality is a vice in the society and is not supported by the law. For instance, a contract that involves hiring a cab to a prostitute so as to help her conduct her trade effectively is considered illegal. However, this is exceptional in case the hirer is not aware that the contract is leading to sexual immorality (Chen-Wishart, 2007). d) A contract that is prejudicial to administration of Justice These are contacts that are likely to influence the administration of justice. Justice should not be interfered with and any attempt to do that will be punishable under the law. A contract that hinders administration of justice is enforceable. An example is a case where two parties reach an agreement not to turn up at the court for a case will interfere with administration of justice and is enforceable (Chen-Wishart, 2007). e) A contract that is Prejudicial to Public Safety Attempting to trade with an enemy is an offence and any contract that is entered for the purposes of such a trade is considered illegal. The Trading with the Enemy Act 1939 explains that illegality of trading with an enemy. Another example is the case Foster v. Driscoll, (1929) 1 KB 470 where some people combined to trade whisky in the United States (Jennings, 1956). Import of alcohol was illegal at the time and therefore the contract was not enforced by the English court since it was a breach of the American Law. f) Unlawful manner of a contract There are situations where is usually legal but the parties involved may perform it in an illegal manner. By virtual of the contract being performed in an illegal manner, it becomes illegal and cannot be enforced under by the law. Such a contract was found in the case Archbolds (Freitage) Ltd v Spanglett Ltd (1961) where the defendants had used their vehicle illegally but this did not debar damages recovery by the plaintiffs (Koffman & Macdonald, 2007). Archbold’s were not aware of the illegality in the contract which involved goods carriage by road and therefore they recovered damages. g) A contract that attempts to remove the jurisdiction of courts A contract that is aimed at removing a jurisdiction from a court which the court is supposed to have is considered to be null. In the case Hyman v Hyman (1929) AC 601 it was decided by the House of Lords that a wife cannot contract validly with her husband on a divorce not to apply for maintenance (Blom-Cooper, Dickson & Drewry, 2009). Such a contract does not prevent the wife from applying for a divorce. h) Contracts in restraint of trade Under common law, any contract that is in restraint of trade is not enforceable and is null. Such contracts can only become enforceable if they are in the interest of the public or they are seen to be reasonable between the parties (Tufal, n.d). Consequences of Forming an Illegal Contract Forming an illegal contract is faced with consequences under the law. The consequences are categorised into two parts namely Enforcement and Restitution. Enforcement Under the English law, an illegal contract cannot be enforced. By enforcing an illegal contract, the court would be ordering the parties to do things that are unlawful and hence the court can never allow that to happen. There are situations where the parties involved are in a position to claim damages for the contract. As a result of these uncertainties, the issue of illegal contract and the related laws becomes a complex question. The following are the consequences of an illegal contract under enforcement (Williams, 1942). a) Position of the Guilty Party When a party is guilty, he or she cannot enforce an illegal contract. A person may engage in an illegal contract knowingly and then at some point may want to sue the other party. Such a contract cannot be enforced and hence the party cannot sue. For instance, if a landlord lets his or her premises with a guilty intention, then he or she cannot sue the tenant for rent. This was the case in Alexander v Rayson (1936) (Poole, 2012). The law in this case will prevent the guilty party from enforcing a contract. However, in case of tort the law does not hinder the recovery of damages by the guilty party. If one party intends to commit an unlawful act before contracting, the other party might not be in a position to sue on that contract. b) Position of innocent party The innocent person is considered to be mistaken or to be ignorant about the facts or about the law regarding the contract. This does not give the court a right to enforce the resultant contract if it is affected by illegality. However, there are some cases where the party was unaware of the illegality where the right to enforce such contracts have been upheld though in some other cases the right have been denied (Tufal, n.d). Restitution If a person cannot enforce a contract, he or she may claim restitution in respect to the services they rendered under the contract, or to the money paid or even in respect to the transfer of property. However, as a general rule such money or properties are irrecoverable but there are exceptions to this rule. a) Class protection statutes A contract may be made illegal by a law that has been created with the aim of protecting a class of people. In such a case, a member of the class being protected can recover the property transferred or he money paid under that contract. For example, under the Rent Act 1977 of the English law, paying premium so that one can be granted tenancy is considered an offence. However, the tenant can recover that money (Tufal, n.d). b) Oppression If a party in an illegal contract was forced into it by another party, such an act is considered as oppression. The oppressed party can recover the money he paid or the property he transferred under such a contract (Tufal, n.d). c) Mistake Where the party entering into an illegal contract mistaken a fact, he is able to recover the money he paid or the property he transferred under the contract even in situations where the mistake does not give him a right to enforce that contract (Tufal, n.d). d) Misrepresentation A person may enter into an illegal contract due to misrepresentation by the other party that the contract is legal. In such a situation, the person who was misrepresented can recover the money or property he transferred under such a contract (Tufal, n.d). e) Repudiation of the Illegal Purpose If the party in an illegal contract repudiates the illegal purpose of the contract in time, he might be able to recover his money or property transferred under that contract. However, the repudiation must be in time and should be voluntary (Tufal, n.d). Recommendations for reforming the law The law can be reformed to make the issue of illegal contract more clear and certain. In the recommendations given herein, the current law on what an illegal contract is remains unchanged. The enforceability of the illegal contract should be given in court discretion. The courts should be given the mandate to decide the factors which matters in enforceability of an illegal contract and the factors which do not matter. This is referred to as the Israeli solution (Law Reform Committee, 2002). The other recommendation that can be of importance in reforming the law is the found in the New Zealand act where an illegal contract has no effect and the court is given the mandate to give the contracting parties including any other affected party a relief through restitution, compensation or validation of that contract in a manner the court thinks is just. Finally, when the court is exercising discretion relief, it should not consider the magnitude of the illegality involved. It should also not consider the intentions of the party who is seeking to recover any benefits that are conferred under the illegal contract or whether denial of the claim will have an effect on the illegality of the contract (Law Reform Committee, 2002). Conclusion Law of contract is a very wide and important topic. The laws regarding illegality of contracts have been criticized due to their lack of clarity, their uncertainty and failure to be satisfactory. Illegal contracts are those contracts that are not enforceable under the law and the party involved in such contracts cannot recover any money they paid under the contract. However, there are situations where the parties in such contracts recover their benefits. Such situations are usually not clear and this creates uncertainty of illegal contract laws. The law should therefore be reformed to make it more certain. Reference List Blom-Cooper, L. J., Dickson, B., & Drewry, G, 2009, The Judicial House of Lords 1876-2009, Oxford: Oxford University Press. Chen-Wishart, M. 2007, Contract law, Oxford: Oxford University Press. Jennings, R, Y, 1956, Conflict of Laws—Contract Illegal by Foreign Law—Whether Enforceable in England, The Cambridge Law Journal, Vol. 14 Issue 02, pp 141-143 Koffman, L., & Macdonald, E. 2007, The law of contract, Oxford: Oxford University Press Law Reform Committee, 2002, Relief from Unenforceability of Illegal Contracts and Trusts, [online] Accessed from On April 11, 2013 Poole, J. 2012, Textbook on contract law, Oxford: Oxford University Press. Tufal, A, n.d., Illegality, [online] Accessed from on April 11, 2013 Williams, G. L., 1942, The Legal Effect of Illegal Contracts, The Cambridge Law Journal, Vol. 8, Issue 1, pp 51-69. Read More