Essential points 133(ii)Contracts tending to impede the administration of justice. A contract to make sure that a
person is not prosecuted would be illegal and void. However, a contract not to pursue
a civil action is perfectly valid. Disputes are often settled in this way and this is known
as settling out of court (see p. 59).
(iii)Contracts to trade with enemy nations. In times of war, certain nations become enemy
nations. A contract to trade with a person voluntarily living in an enemy nation is
generally void.
(iv)Contract to commit a tort, fraud or crime. A strange example is provided by Everettv
Williams (1725). One highwayman tried to sue another on an agreement to rob a
stagecoach. The highwayman failed in this action. (Both the claimant and the defendant
were hanged and the solicitors were fined £50 for bringing the case!)
(v)Contracts tending to promote sexual immorality. An example is provided by Pearcev
Brooks (1866), where a prostitute hired a carriage which the owner knew was to be
used for immoral purposes. The prostitute refused to pay for the hire of the carriage but
the owner was not allowed to recover the agreed payments.
(vi)Contracts to defraud the Revenue. In MillervKarlinski (1945)a contract was made to
defraud the Revenue. The claimant sued for ten weeks’ wages and £21 travelling
expenses. Of the travelling expenses, £17 should have been paid as wages. The claimant
and the employer agreed to say they were travelling expenses to avoid paying income
tax on the £17. The Court of Appeal held that the whole agreement was unenforceable.
Therefore, the claimant could not recover anything, not even the proper wages or the
£4 genuine travelling expenses.
Many statutes also make certain types of contracts illegal. The contracts concerned are so
numerous that it is beyond the scope of this book to attempt to list them.
Contracts which contravene public policy
A contract which contravenes public policy will be void. The most important type of such
a contract is a contract in restraint of trade. Contracts in restraint of trade attempt to prevent
a person from working or carrying on a business. Such contracts are void unless they can
be proved to be reasonable. They tend to arise where a person who sells a business agrees
not to compete with the new owner. When considering whether such agreements in
restraint of trade are reasonable or not, the court will consider the length of time for which
the agreement was to last, the extent of the area in which competition was prohibited and
the type of competition which was prohibited. Contracts in restraint of trade are also found
where an employee agrees not to compete with the employer’s line of business after leaving
the employment. A contract in restraint of trade which attempts to prevent an ex-employee
from working for another employer can be valid only if it was necessary to protect trade
secrets, trade connections or confidential information.
Essential points
n A term is part of a contract and if a term is breached this is breach of contract.
n A representation is a statement which persuaded another person to make a
contract.