Summary
Illegal when formed or performed
A contract may be illegal in either of the following situations:
- when it is formed – Re Mahmoud and Ispahani
- when it is performed – Anderson v Daniel.
Cause of illegality
A further division arises between cause of the illegality:
- statute – Re Mahmoud and Ispahani
- common law – Everet v Williams.
Illegal or void
Yet another division arises over the undesirable nature of contracts. They
may be:
- illegal in the criminal sense, as in Everet v Williams
- not in the interest of society, and therefore unenforceable, as in
Parkinson v College of Ambulance.
Restraint of trade
A contract which restricts a person’s freedom to trade or earn a living is
against public policy and therefore void, unless justified by:
- Protection of a trade secret – Forster v Suggett.
- Protection of a range of clientele – Mason v Provident Clothing, Fitch
v Dewes. - Need to enable business to be carried on – Nordenfelt v Maxim
Nordenfelt. - Showing reasonableness in exclusive dealing arrangements – Schroeder
Music v Macaulay, Esso v Harper’s Garage.
The effect of a restraint of trade clause:
- The clause itself is void, or unenforceable, if against public policy and
not proved reasonable. - The whole contract is not necessarily void, and severance may be possible.
- The court may strike out offending words leaving the rest intact.
- A slightly more relaxed approach may now interpret the clause in a way
that makes it reasonable – Littlewoods v Harris.
206 Contract law