The defendants held a bill of lading for part of the cargo carried on the plaintiffs’ vessel from Mobile, Alabama, to Birkenhead. The vessel was over laden and the plaintiffs were guilty of an offence under the 1932 Act. The defendants relied on the plaintiffs’ illegality in the performance of the contract as a ground for refusal to pay the freight otherwise due. The court was concerned with a breach of statute, and the performance of a contract in breach of that statute.
Held: The mere fact that the vessel was over laden did not preclude the plaintiffs from enforcing their claim for freight The question was answered in relation to performance by asking whether the statute intended to prohibit the type of contract sued on. On the construction of the relevant statute that it did not. There are two types of case where illegality renders a contract unenforceable from the outset. One is where the contract is entered into with the intention of committing an illegal act; the other is where the contract is expressly or implicitly prohibited by statute.
Devlin J said: ‘There are two general principles. The first is that a contract which is entered into with the object of committing an illegal act is unenforceable. The application of this principle depends on proof of the intent, at the time the contract was made, to break the law; if the intent is mutual the contract is not enforceable at all, and, if unilateral, it is unenforceable at the suit of the party who is proved to have it.’
. . And ‘Persons who deliberately set out to break the law cannot expect to be aided in a court of justice, but it is a different matter when the law is unwittingly broken. To nullify a bargain in such circumstances frequently means that in a case – perhaps of such triviality no authority would have felt it worthwhile to prosecute – a seller, because he cannot enforce his civil rights, may forfeit a sum vastly in excess of any penalty that a criminal court would impose; and the sum forfeited will not go into the public purse but into the pockets of someone who is lucky enough to pick up the windfall or astute enough to have contrived to get it. It is questionable how far this contributes to public morality.’ and ‘In the statutes to which the principle has been applied, what was prohibited was a contract which had at its centre – indeed often filling the whole space within its circumference – the prohibited act; contracts for the sale of prohibited goods, contracts for the sale of goods without accompanying documents when the statutes specifically said there must be accompanying documents; contracts for work and labour done by persons who were prohibited from doing the whole of the work and labour for which they demanded recompense.’
Judges:
Devlin J
Citations:
[1957] 1 QB 267, [1956] 3 All ER 683
Statutes:
Merchant Shipping (Safety and Load Line Conventions) Act 1932 44 57
Jurisdiction:
England and Wales
Citing:
Cited – Anderson Ltd v Daniel 1924
A claim for the price of goods was held to be unenforceable because the seller had failed to give the buyer an invoice containing details which the seller was required to give him by statute. . .
Cited by:
Cited – Hall v Woolston Hall Leisure Limited CA 23-May-2000
The fact that an employment contract was tainted with illegality of which the employee was aware, did not deprive the employee of the possibility of claiming rights which were due to her under a statute which created rights associated with but not . .
Cited – Colen and Another v Cebrian (UK) Limited CA 20-Nov-2003
The company paid the claimant sales commission. Part was diverted and paid to his wife to reduce the tax payable. The employer had appealed a finding of unfair disamissal, the company arguing that the contract was illegal.
Held: The contract . .
Cited – Skilton v Sullivan CA 18-Mar-1994
The seller of a quantity of Koi carp sent the buyer an invoice for trout. The supply of Koi carp is chargeable to VAT but the supply of trout is not. When the seller sued for the price, he was met with a plea that the contract was illegal as being a . .
Cited – 21st Century Logistic Solutions Limited (In Liquidation) v Madysen Limited QBD 17-Feb-2004
The vendor sold computers to the defendant, intending not to account to the commissioners for the VAT. The seller went into liquidation, and the liquidator sought payment. The purchaser had been unaware of the intended fraud and resisted payment. . .
Cited – Royal Boskalis Westminster NV and others v Mountain and others CA 28-Feb-1997
Effect of illegality on a contract.
Held: Reversed . .
Cited – Soleimany v Soleimany CA 4-Mar-1998
The parties were Iranian Jews, father and son. The son arranged to export carpets from Iran in contravention of Iranian law. The father and son fell into dispute about their contracts and arranged for the issues to be resolved by the Beth Din . .
Cited – Garbutt and Another v Edwards and Another CA 27-Oct-2005
The client challenged his opponent’s solicitors bill of costs, saying that the other side had not been given an estimate of costs. The solicitor acted on several matters for the client and had not given a formal estmate.
Held: The absence of . .
Cited – Hughes v Asset Managers Plc CA 13-May-1994
The appellants had entered into discretionary investment management agreements wth the respondent. The investments made a substantial losss which the appellants sought to recover, saying that the agreements were void under the 1958 Act.
Held: . .
Cited – Joseph and Others v Spiller and Another CA 22-Oct-2009
The claimants, members of a rock band, alleged defamation by the defendants on their web-site. The defendants provided booking services. They said that the claimants were unreliable in failing to meet their contractual obligations. Their terms . .
Cited – Parkingeye Ltd v Somerfield Stores Ltd CA 17-Oct-2012
The claimant company operated parking management for the defendant, charging customers for overparking. The defendant came to believe that the claimant’s behaviour was over-aggressive, and the use of falsehoods, and terminated the contract. The . .
Cited – Patel v Mirza SC 20-Jul-2016
The claimant advanced funds to the respondent for him to invest in a bank of which the claimant had insider knowledge. In fact the defendant did not invest the funds, the knowledge was incorrect. The defendant however did not return the sums . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 02 May 2022; Ref: scu.189938