ISLAMIC UNIVERSITY IN UGANDA

NAME: AJAMBO FAITH LAURA

REG NO. : 121-053011-25422
COURSE UNIT: CONTRACT LAW
TASK: TEST
 Illegality involves some forms of moral weakness which society in
general seeks to control. Section 19 of the Contracts Act defines what amounts to
illegality. In sub-section 1 it states “a consideration or an object of an agreement
is lawful, except where the consideration or object
a) is forbidden by law
b) is of such nature that, if permitted would defeat the provisions of any law
c) is fraudulent
d) involves or implies, injury to a person or the property of another person
or;
e) is declared immoral or against public policy by court.
Illegality is also defined as ex turpi causa non oritur actio which means that court
will not allow a party to base a cause of action upon an illegal act.
It is also defined as ex dolo malo no oritur actio. That is to say that no court will
lend its aid to a man who founds his cause of action upon an illegal or immoral
act.
There are different types of illegal contracts and they include contracts rendered
void by statute or common law and public policy.
Contracts rendered void by statute include;
1) Contracts to commit a civil wrong
If a contract has as its object the deliberate commission of a crime then it is illegal
and courts will not enforce it. These may include contracts to defraud revenue,
perform an illegal act, among others. This is illustrated in the case of Dann v.
Curzon (1910) 104 LT 66 where the claimant had been hired to start a riot in a
theatre. When he sued for the unpaid sum of 20 pounds he was unsuccessful.
Court held that the action could not succeed as it was an agreement to commit a
crime and against public policy. Thus a contract made to deliberately commit a
civil wrong is by all means unenforceable and illegal.
However, that being the general rule, there is an exception to it that if the parties
are ignorant to the fact that by the contract they are committing a civil wrong,
then it is not illegal. Also if one of the parties knows that the contract is illegal
then only the innocent part is entitled to rely on the contract.
 2) Immoral contracts
A contract which directly or indirectly promotes sexual immorality is illegal. Take
for instance, if a man promises to pay a woman money in exchange for sexual
pleasure and later doesn’t pay, the woman cannot sue for the unpaid sum
because such illicit intercourse is illegal and the contract is unenforceable.
In Uganda laws have been enacted that make prostitution and living on the
earnings of prostitution an offence.
This is well illustrated in the case of Pearce v Brooks (1866) where a prostitute
hired carriages for conducting her trade. She engaged in this trade with the full
knowledge of the other party. She failed to pay the fee owed, the other party
sued for the unpaid sum and he was unsuccessful because the contract was for
immoral purposes which both parties had full knowledge about.
3) Contracts to impede administration of justice
Courts will not enforce or recognize an agreement which has the effect of
withdrawing from the ordinary course of justice and it is a well-established rule.
Thus any agreement or contract to prevent or compromise prosecution is
automatically void and illegal. These include contracts relating to criminal
procedure and bankruptcy, maintenance and champarte.
This is illustrated in the case of Miller v. Karlinski (1945) 62 TLR 85
4) Contracts tending to injure public service
Contracts that have material influence to diminish the respectability,
responsibility and purity of public officers are illegal.
This was illustrated in the case of Parkinson v. The College of Ambulance Limited
and Harrison (1925) where the defendant was a charitable institution that
fraudulently represented to the plaintiff that the charity would obtain him honor
if he could only make a suitable donation which he did. No such honor was
obtained for the plaintiff and his suit was unsuccessful and court held that the
contract was unenforceable.
5) Contracts to defraud revenue
A contract whose terms are directly or impliedly designed to defraud revenue
whether national or local is illegal and enforceable by court.
Portrayed in the case of Napier v. National Business Agency (1951) where the
defendant engaged the plaintiff as their employee at a salary of 13 pounds and an
additional 6 pounds per week for expenses. Both parties were aware that weekly
expenses could not exceed 1 pound. Income tax was deducted on 13 pounds and
nothing was deducted on the 6 pounds as it was taken as a reimbursement of
expenses. The plaintiff was summarily dismissed and claimed payment in lien of
the notice. Court held that the claim could not succeed because the contract of
employment was tainted with an element of fraud.
6) Unlawful manner of performance
There may occur a scenario where a contract may be lawful in its formation but
performed by the parties in an illegal manner.
This was illustrated in the case of Parkinson v. The College of Ambulance Limited
and Harrison (1925) 2 KB1
Contracts rendered void on ground of public policy
1) Contracts that oust the jurisdiction of courts
Any contract that attempts to deprive the court of a jurisdiction which they
otherwise would have is void. In the case of Bennet v. Bennet a wife agreed not
to apply for maintenance in court in return for a promise by the husband to give
her a certain allowance. It was held that the agreement was contrary to public
policy since it usurped the statutory power of the courts over the matter.
However there is an exception that an agreement requiring arbitration before
recourse to the courts is valid. In the case of Scott v. Avery a clause requiring
arbitration in the first instance was upheld since it did not purport the avert the
jurisdiction of the court but simply to lay down at what stage the cause of action
upon which that jurisdiction might be exercised arose.
2) Contracts prejudicial to the status of marriage
A contract that attempts to restrain a party from marrying is void and against
public policy.
In Lowe v. Peers (1768) the defendant covenanted that if he married any person
except the plaintiff he would pay her 1000 pounds within three of the marriage. It
was held that the contract was void.
Also there includes contracts that restrict personal liberty. Contracts that restrict
personal liberty are void. This is illustrated in that case of Horwood v Millers
Timbre Co Ltd.
3) Contracts in restraint of trade.
All covenants in restraints of trade are prima facie void and unenforceable at
common law as evidenced in section 21 (1). They only become enforceable if they
are shown to be reasonable as between the parties and to be in the public
interest.
This is elaborated in the case of Nordenfelt v. Nordenfelt Guns and Ammunition
Co. (1894). The appellant sold his gun manufacturing company to the
respondents and agreed to enter a restrictive covenant. The respondents brought
an action to enforce the covenant by injunction to the House of Lords. The
appellant argued that the clause was a restraint of trade clause and had to be
reasonable to be upheld, and a worldwide geographical limitation was
unreasonable. While the respondents argued that the restraint was only such as
was necessary to protect themselves.
4) Contracts for protection of propriety interest
An agreement between an employer and a labor organization whereby the
employer, the labor organization and the workers agree to refrain from engaging
in activities that may result in conflict of the employer’s operations.
Morris and others v. Rayners Enterprises Incorporated and another. A deposit in
a bank which had been given charge to the bank to secure the liabilities of a third
party was not a mutual arrangement, and therefore there was no statutory set off
applied and the funds were reclaimed. The House of Lords considered that a man
cannot have a propriety interest in a debt or other obligation which he owes
another.

There are various consequences of illegality and they are classified into
enforcement and restitution.
Under enforcement, the court will never enforce an illegal contract in the sense of
ordering a party actually to do something that is unlawful or contrary to public
policy. However there are circumstances where a party may be able to claim
damages on the contract. One of the things considered is the;
The position of the guilty party
An illegal contract cannot be enforced by a guilty party illustrated in the case of
Cowan v Milbourn (1867) where court held that the publication of such doctrine
was blasphemy, and the contract therefore illegal and unenforceable by the guilty
party.
This rule only prevents a party from enforcing an illegal contract but it doesn’t
prevent him from recovering damages in tort and it was shown in the case of
Saunders v. Edwards (1987)
There is some latitude in determining in determining who is a guilty party where
illegality lies in the method of performance, and this was illustrated in the case of
St. John Shipping Corp. v Rank Ltd.
The position of the innocent party
A person may be innocent because he is mistaken or ignorant about either the
law or the facts. Ignorance of law does not in general give a party the right to
enforce a contract which is affected by illegality but when one is mistaken about a
fact giving rise to illegality, the right of that party to enforce the contract has been
upheld like in the case of Bloxsome v. Williams (1824)

Restitution. The person who cannot enforce an illegal contract may instead claim
restitution in respect of money paid, property transferred or services rendered
under the contract.
In Atkinson V Denby the plaintiff was allowed to recover back the money on the
ground that he had been forced to agree to defraud the other creditors, therefore
this was a convenient way of avoiding the general rule which would have led to
the undesirable result of enabling one creditor to keep more than his fair share of
the assets of the insolvent debtor.
Under misrepresentation, in Hughes V Liverpool Victoria Legal Friendly Society
the plaintiff was able to recover back the premiums she had paid as she had been
induced to make the contract by fraudulent representation of the defendants’
agent that the policy was valid.
Under mistake, in Oom V Bruce it was held that the plaintiff could get back his
premium as he was not guilty of any fault or blame in entering into the illegal
contract. Therefore a mistake of fact can be a ground for recovery of money or
property even where it does not give the mistake party the right to enforce the
contract.
In repudiation of illegal purpose ,a person may be able to reclaim money paid or
property transferred under an illegal contract if he repudiates the illegal purpose
in time and this operates under two conditions which must be satisfied that is to
say;
  Repudiation on time as illustrated in Taylor V Bowers where the decision is
based on the fact the illegal purpose had not been carried out , no creditor
had been defraud .
 Voluntary repudiation illustrated Bigos V Bousted , the whole transaction
failed and the defendant sought recovery of his share certificates . The
court would not aid the defendant to recover his share certificates as the
whole transaction was illegal.
In conclusion, the above discuss the fundamental aspects involved in illegality.