No court will lend its aid to a man who founds his

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no court will lend its aid to a man who founds his cause of action upon an immoral or illegal act. Illegality, therefore, in its legal sense extends beyond simple criminal illegality. It encompasses both illegal contracts (those prohibited by law) and void contracts (those which, whilst not actually prohibited, are nevertheless not enforced because they are considered socially undesirable). Contracts will be illegal or void if statute declares them to be so or if the common law regards them as illegal or void — usually on public policy grounds. Contracts illegal because prohibited by statute
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© Stephen Graw 2012 Statutes may forbid certain contracts either expressly or by implication. Express prohibition occurs where the statute expressly declares the contract to be illegal and unenforceable. Implied prohibition occurs where the contract is not expressly made illegal but the behaviour which may be involved in its performance is. In such cases the contract may be impliedly prohibited if the courts can see that, in prohibiting the behaviour, parliament also intended to prohibit contracts that necessarily involved that behaviour. Contracts illegal at common law on public policy grounds There are six categories of contract which are illegal at common law on public policy grounds. They are: contracts to commit crimes, torts or frauds; contracts directly or indirectly promoting immorality; contracts promoting corruption in public life; contracts prejudicial to the public safety — including contracts with alien enemies in wartime and contracts detrimental to a country’s foreign relations; contracts prejudicial to the administration of justice, including contracts compromising criminal prosecutions; and contracts designed to defraud the revenue. Consequences of illegality The consequences of illegality under both statute and common law are broadly the same. The effect depends upon whether the contract was illegal as formed or merely as performed. If it was illegal as formed the contract is totally void, no party may sue on it and money paid or property transferred under it is generally irrecoverable. Where the contract is illegal as performed the consequences depend upon whether the illegal performance was part of or merely incidental to the contractual obligation. If the illegal performance was an essential part of the contract no-one privy to that illegality can enforce the contract or seek any remedy for its non-performance. For example, in North v Marra Developments Ltd (1981) 148 CLR 42, Marra wanted to mount a takeover bid for another company (Scottish). For the takeover to succeed, Marra’s share price had to rise. Marra arranged for its broker, North, to buy large quantities of its shares at artificially inflated prices. Marra subsequently refused to pay North’s fees. North sued and failed. The High Court held that the aim of the parties’ contract had been to deceive and defraud the public in general and Scottish’s shareholders in particular. As such
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