LAWS104 Study Guide - Final Guide: Susan Crennan, Susan Kiefel, William Gummow
25 Jun 2018
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ILLEGALITY – STATUTORY ILLEGALITY
-The validity and subsequent enforceability of contracts is often affected by legislative intervention in
the form of statutes, regulations, ordinances, and by-laws
-The affectation by statute may make the contract illegal and void or it may just make it unenforceable
Contracts expressly prohibited by statute
-When a statute expressly prohibits the making of a particular contract, a contract made in breach of the
prohibition will be illegal, void, and unenforceable, unless the language of the statute either expressly
or impliedly provides otherwise (Yango)
Yango Pastoral v First Chicago Australia
-Gibbs ACJ set out the proper approach that needs to be taken by the court
-Where a statute imposes a penalty upon the making or performance of a contract, it is a question of
construction whether the statute intends to prohibit the contract in this sense, that is, to render it void
and unenforceable, or whether it intends only that the penalty for which it provides shall be inflicted if
the contract is made or performed
-The question whether a statute, on its proper construction, intends to vitiate a contract made in breach
of its provisions, is one which must be determined in accordance with the ordinary principles that
govern the contraction of statutes… one consideration that has been regarded as important… is whether
the object of the statute – or one of the objects – is the protection of the public
-The question whether the statute was passed for the protection of the public is one test of whether it
was intended to vitiate a contract made in breach of its provisions, but… it is not the only test. It would
be contrary to reason and principle to allow one circumstances to override all other consideration in the
interpretation of a statute
Contracts impliedly prohibited by statute
-Sometimes a statute does not expressly prohibit a contract
Smith v Mawhood a statute prohibited the sale of tobacco by sellers who did not have a licence. The court
considered that the object of the statute as intended by parliament was to raise revenue from licence fees and
from fines the statute did not invalidate contracts. This meant that any contract made by sellers without a licence
was enforceable
Archbolds (Freightage) v S Spanglett the defendants had contracted with the plaintiffs to transport goods
belonging to a third party. The goods were stolen in transit and it transpired that the defendants did not have the
appropriate licence required by the English Road and Rail Traffic Act 1933. The issue was whether the Act
prohibited the contract. The plaintiff claimed damages against the carrier for the loss of the goods. The carrier
argued that the contract as illegal and no cause of action could arise from an illegal contract. The English Court
of Appeal held that the contract was enforceable as a policy objective of the legislation was to ensure an orderly,
efficient and comprehensive transport service.
Public policy of a statute rendering a contract illegal (Nelson v Nelson)
-Relates to cases where the statute treated a contract as unenforceable because it was associated with
some illegal purpose
-In the absence of some express or implied statutory prohibition relating to the contract, the court has to
consider whether the legislative purpose of the statute will be fulfilled without regarding the contract as
void and unenforceable
-In these cases, illegality flows from the principles of the common law as to illegality that are informed
by the scope and purpose of the relevant statute
-Thus, there is a quest to determine whether there is some public policy associate with the statute that
renders the contract unenforceable because it is one that pursues some illegal purpose
Nelson v Nelson (Deane and Gummow JJ)
-‘In this…class of case, the courts act not in response to a direct legislative prohibition but, as it is said,
from ‘the policy of the law’
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
The validity and subsequent enforceability of contracts is often affected by legislative intervention in the form of statutes, regulations, ordinances, and by-laws. The affectation by statute may make the contract illegal and void or it may just make it unenforceable. When a statute expressly prohibits the making of a particular contract, a contract made in breach of the prohibition will be illegal, void, and unenforceable, unless the language of the statute either expressly or impliedly provides otherwise (yango) Gibbs acj set out the proper approach that needs to be taken by the court. The question whether the statute was passed for the protection of the public is one test of whether it was intended to vitiate a contract made in breach of its provisions, but it is not the only test. It would be contrary to reason and principle to allow one circumstances to override all other consideration in the interpretation of a statute.
