Contracts/Illegality
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Template:Contract law An illegal agreement, under the common law of contract, is one that the courts will not enforce because the purpose of the agreement is to achieve an illegal end. The illegal end must result from performance of the contract itself. The classic example of such an agreement is a contract for murder.
However, a contract that requires only legal performance on the part of each party, such as the sale of packs of cards to a known gambler, where gambling is illegal, will nonetheless be enforceable. A contract directly linked to the gambling act itself, such as paying off gambling debts (see proximate cause), however, will not meet the legal standards of enforceability. Therefore an employment contract between a blackjack dealer and a speakeasy manager, is an example of an illegal agreement and the employee has no valid claim to his anticipated wages if gambling is illegal under that jurisdiction.
A famous example in the United States is Bovard v. American Horse Enterprises (1988),[1] in which the California Court of Appeal for the Third District refused to enforce a contract for payment of promissory notes used for the purchase of a company that manufactured drug paraphernalia. However, the items sold in this contract were not actually illegal, but the court refused to enforce the contract for public policy concerns.
In Canada, one cited case of lack of enforceability based on illegality is Royal Bank of Canada v. Newell, 147 D.L.R (4th) 268 (N.S.C.A.), in which a woman forged her husband's signature on 40 cheques, totalling over $58,000. To protect her from prosecution, her husband signed a letter of intent prepared by the bank in which he agreed to assume "all liability and responsibility" for the forged cheques. However, the agreement was unenforceable, and struck down by the courts, because of its essential goal, which was to "stifle a criminal prosecution." Because of the contract's illegality, and as a result voided status, the bank was forced to return the payments made by the husband.
Contracts in restraint of trade are a variety of illegal contracts and generally will not be enforced unless they are reasonable in the interests of the contracting parties and the public.
Contracts in restraint of trade if proved to be reasonable can be enforced. When restraint is placed on an ex-employee, the court will consider the geographical limits, what the employee knows and the extent of the duration. Restraint imposed on a vendor of business must be reasonable and is binding if there is a genuine seal of goodwill. Under common law, contracts to fix prices are legal. Solus agreements are legal if reasonable. Contracts which contravene public policy are void.
An agreement may also be illegal directly under statutory law, such as in California when statutes forbids certain types of contracts,[2][3][4] as well as indirectly by statutory adoption of specified common law, as has been done in many US states such as Wyoming.[5]
See also
References
- ↑ Bovard v. American Horse Enterprises, 201 Cal. App. 3d 832, 247 Cal. Rptr. 340 (1988).
- ↑ CAL. CIV. CODE § 1667: That is not lawful which is: 1. Contrary to an express provision of law; 2. Contrary to the policy of express law, though not expressly prohibited; or, 3. Otherwise contrary to good morals.
- ↑ CAL. CIV. CODE § 1668: All contracts which have for their object, directly or indirectly, to exempt any one from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.
- ↑ CAL. CIV. CODE § 1953
- ↑ Wyo. Stat. § 8-1-101: The common law of England as modified by judicial decisions, so far as the same is of a general nature and not inapplicable, and all declaratory or remedial acts or statutes made in aid of, or to supply the defects of the common law prior to the fourth year of James the First (excepting the second section of the sixth chapter of forty-third Elizabeth, the eighth chapter of thirteenth Elizabeth and ninth chapter of thirty-seventh Henry Eighth) and which are of a general nature and not local to England, are the rule of decision in this state when not inconsistent with the laws thereof, and are considered as of full force until repealed by legislative authority.
