Illegal contracts

A contract which breaks the law is illegal. The general rule is that no claim can be brought by a party to an illegal contract, though in some circumstances money or property transferred may be recovered. The contract may be either expressly prohibited by statute, or implicitly prohibited by the common law. Illegal contracts include:

• contracts prohibited by statute;

• contracts to defraud the Inland Revenue;

• contracts involving the commission of a crime or a tort;

• contracts with a sexually immoral element, although contemporary attitudes mayhave changed in this respect

• contracts against the interest of the UK or a friendly State;

• contracts leading to corruption in public life; and

• contracts which interfere with the course of justice.

Void contracts

A void contract does not give rise to any rights or obligations. The contract is void only in so far as it is contrary to public policy; thus, the whole agreement may not be void. Severance is the procedure whereby the void part of a contract is excised, permitting the remainder to be enforced. Contracts may be void under statute or at common law.

Wagering contracts

A wagering contract is an agreement that, upon the happening of some uncertain event, one party shall give something of value to the other, the party who has to pay being dependent on the outcome of the event. Such contracts are governed by the Gaming Acts 1835–1968.

Anti-competitive practices

Certain agreements relating to matters such as price fixing and minimum resale prices may be void and unenforceable under the Competition Act 1998.

Contracts void at common law

• Contracts to oust the jurisdiction of the court

Any contractual agreement which seeks to deny the parties the right to submit questions of law to the courts is void as being contrary to public policy. Agreements which provide for compulsory arbitration can be enforceable.

• Contracts prejudicial to the status of marriage

It is considered a matter of public policy that the institution of marriage be maintained. Hence, any contract which seeks to restrain a person’s freedom to marry, or undermines the institution of marriage in any way, will be considered void.

 Contracts in restraint of trade

One area of particular importance which is subject to the control of the common law is contracts in restraint of trade. A contract in restraint of trade is an agreement whereby one party restricts their future freedom to engage in their trade, business or profession. The general rule is that such agreements are prima facie void, but they may be valid if it can be shown that they meet the following requirements:

• the person who imposes the restrictions has a legitimate interest to protect;

• the restriction is reasonable as between the parties; and

• the restriction is not contrary to the public interest.

The doctrine of restraint of trade is flexible in its application and may be applied to new situations when they arise. Bearing this in mind, however, it is usual to classify the branches of the doctrine as follows.