ILLEGALITY AND

PUBLIC POLICY

LECTURE BY
EUNICE APPIAH-ASARE 1
 OUTLINE
INTRODUCTION

SOURCES OF ILLEGALITY

ILLEGALITY AND PUBLIC POLICY UNDER THE COMMON LAW

CONTRACTS WHICH ARE ILLEGAL ON GROUNDS OF PUBLIC

POLICY

EFFECTS AND CONSEQUENCES OF ILLEGALITY

RECOVERY OF MONEY OR PROPERTY TRANSFERRED UNDER

2
 INTRODUCTION
Affect the validity of contract.

Under the common law, an illegal agreement, is

one that the courts will not enforce because the
purpose or object of the agreement is to achieve
an illegal end.

The illegal end must result from the contract or

performance of the contract itself. Eg contract for
murder 3
• A contract may be lawful in its formation
but performance by the parties in an
illegal manner will render the contract
unlawful

• It considers the complex effect of

illegality on contracts including criminal
and civil wrongdoing and other activities
regarded as contrary to public policy
4
• The policy of illegality is summed up by Lord Mansfield in
the English case of Holman v Johnson 1775  1 Cowp 341

• “No court will lend its aid to a man who founds his cause of
action upon an immoral or illegal act. If from the plaintiffs
own stating or otherwise, the cause of action appears to
arise ex turpi causa (ex turpi causa non oritur actio: from a
dishonourable cause an action does not arise. Meaning: a
plaintiff will be unable to pursue legal remedy if it arises in
connection with his own illegal act), or the transgression of
a positive law of this country, there the court says he has
no right to be assisted. It is on this ground that the court
goes; not for the sake of the defendant, but because they
will not lend their aid to such a plaintiff”
5
 SOURCES OF ILLEGALITY
Two source:
1. Prohibition by law

2. Against public good or interest

Contracts contrary to general policy of law

makes up a small proportion on cases on
illegality 6
 ILLEGALITY AND PUBLIC POLICY
UNDER THE COMMON LAW

Under the common law, any contract which is

contrary to public policy is prohibited. No
court will enforce such contracts if breached.

Courts will not assist a plaintiff who seeks

relief for a breach of contract if the court view
the claim as injurious to society
7
Public policy defined?

No one definition. Any contract

which does not promote economic
or social interest of any
community can be said to be
against public policy
8
Public policy and its substance change over
time in accordance with changes in society.
– It is usually particular to a society or a country.
What might be against public policy in Ghana
might not necessarily be against public policy
in another country.

However the principles, seen in certain

categories of related cases, remain relatively
the same. Some of the categories of cases will
be looked at.
9
 CONTRACTS WHICH ARE ILLEGAL
ON GROUNDS OF PUBLIC POLICY
Contract to commit a Crime , Tort or Fraud
on Another Party:

– Any contract which has its object or purpose

to commit a crime, tort or fraud on another
party is unenforceable as being contrary to
public policy. Such cases are straight
forward.
• Cases 10
Allen v Rescous (1676) 2 Lev 174

• Allen gave Rescous money to beat up a 3rd

party. Rescous promised that if he did not beat
up this 3rd party that he would give Allen
double the original money. Rescous did not
beat up the 3rd party and Allen sued for his
money.
• It was held that the action must fail because
the contract was illegal and void.

11
Beresford v Royal Insurance Co. Ltd (1937) 2 AER
243
• A Major Rowlandson had insured his life for
£50,000. He ran out of money and had debts. To
pay the debts he committed suicide so that his
creditors could benefit from the insurance policy.
At this time suicide was a crime in England.
• The court held that his executors could not
recover from the insurance company because the
court would not enforce a transaction which
would enable criminal or personal
representatives to recover fruits of his crime.
12
Berg & Sadler v Moore [1937] 2KB 158

Brown Jenkinson & Co v Percy Dalton [1957]

2 QB 621; 2 All ER 846

Addy v Irani [1991] 2 GLR 30

Baidoo v Sam [1987-88] 2 GLR 666 CA

13
Contracts Which Promote Sexual Immorality

• Any contract which directly or indirectly involves

sexual immorality / contra bonos mores (against
good morals) is illegal on grounds on public policy.
• Perception and meaning of immorality has changed
and narrowed considerably over the years. For
instance, in some countries agreements involving
homosexuality was unenforceable but now
enforceable. In other countries too, is still
unenforceable.
• Any contract or agreement which promotes
immorality will not be enforced by the courts. 14
Sutton v Mischon De Reya (2003)

• A solicitor was instructed to draft a ‘slavery

agreement’ between a male prostitute and
his willing ‘slave’ had not been negligent in
advising that such an agreement would be
unenforceable, nor for failing to come up
with a way of devising enforceable slavery
arrangements.

15
Pearce v Brooks (1866) LR 1 Ex 213; 14 LT 288
• A carriage owner hired a coach to a prostitute
who used the coach for her trade. She failed
to pay for the hire and the coach builder
brought an action against her to claim back
his money.
• The plaintiff failed to recover his money
because the contract was contrary to public
policy. Presumably the courts took a broader
view to discourage carriage owner from
refraining from making such agreements
16
• Cowman v Milbourn [1867] LR 2 Exch 230
• Milbourn let a room to the plaintiff. He then
discovered that the room was to be used to
the purpose of delivering blasphemous
lectures ie advocating atheism, so he told the
plaintiff that he would not allow him to use
the room. The plaintiff then claimed damages
for breach of contract.
• It was held that the plaintiff could not recover
damages as he had intended to use the room
for an unlawful purpose.
17
• Upfill v Wright (1911) 1 KB 506
• Upfill let a flat to Miss Wright. Upfill knew that
Miss Wright was the mistress of a certain man
and that the man would be giving her money
to pay the rent. Upfill sued Miss Wright for
arrears of rent.
• It was held that as the landlord knew that the
flat was to be used for an immortal purpose
the lease was tainted with immorality and the
landlord could not recover.
18
Contracts Which Interfere With Regulations
On Foreign Countries
• Contract which promote the performance of
an act in a foreign country or friendly country
which is illegal or obstructive to that country
is unenforceable because is against public
policy.
• For instance, if an agreement is made
between two parties in Ghana to go and
undermine the authority in Togo, such
contract will not be enforceable as is contrary
to public policy. 19
• Forster v Driscoll [1929] 1KB 470
• Forster a British politician, entered into contracts
with various parties to finance an undertaking for the
supply of 500 cases of whiskey into the United States
which was against US laws. Bills of exchange were
presented for payment but were dishonoured. Foster
then sought rescission of the contract.
• In the Court of Appeal Lawrence LJ held "I am clearly
of opinion that a partnership formed for the main
purpose of deriving profit from the commission of a
criminal offence in a foreign and friendly country is
illegal". Accordingly the court dismissed all of the
claims and counterclaims, without any order as to
costs.
20
Contracts Prejudicial To The Administration Of
Justice
• A contract to pervert the course of justice or
compromise a public prosecution is contrary to
public policy hence not enforceable.
• For instance, a contract to discontinue legal
proceedings, such as legal proceedings of a criminal
nature.
• The most important element here is public concern
at prosecuting the accused.
• Contracts or agreement to suppress evidence are
contrary to public policy, as contracts to oust the
jurisdiction of the courts. 21
Keir v Leeman [1946] 9 QB 371
• A group of people assaulted and ejected a Sheriff’s
officer and his assistant while they were levying an
execution in respect of a judgment debt. Before the
trial, some of the defendants agreed to pay the
amount of the debt to the prosecutor if he stopped
proceedings. The defendants who agreed with the
prosecutor were later sued on the agreement.
• Held: ‘In the present instance the offence is not
confined to personal injury, but it is accompanied
with riot and obstruction of a public officer in
execution of his duty. These are matters of public
concern and therefore not legally subject of a
compromise.’ 22
Kearsley v Thomson [1890] 24 QBD 742 (ca)
• The defendants were solicitors who were acting on
behalf of a creditor petitioning against a bankrupt. The
plaintiff, a friend of the bankrupt, agreed to pay the
defendants their cost if they did not appear at the public
examination of the bankrupt and if they did not oppose
the order of discharge against the bankrupt. The money
was paid and the solicitors did not appear at the public
examination. However, before the application to
discharge the bankrupt, the plaintiff repented and sought
to recover the money but he could not recover. The
contract was illegal since it interfered with the
administration of justice and as the defendants had
partially performed the contract, the plaintiff’s
repentance was too late. 23
Contracts Leading To Inefficiency And
Corruption In Public Life

• The public has interest in individuals who

occupy public positions therefore these
individuals must perform their duties properly
and must be fit for the positions they occupy.

• This include the sale of public titles. So a

contract or agreement which has it object to sell
a public office or title is illegal hence
unenforceable and contrary to public policy. 24
Parkinson v College of Ambulance Ltd [1925] 2
KB 1; 133 LT135
• Colonel Parkinson was told by the secretary
of the College of Ambulance that if he made a
large donation to the charity that the charity
would get him a knighthood. Parkinson
donated £3,000. He never got the knighthood
and he sued to recover his money. It was held
that his action would fail because a contract
for the purchase of a title was illegal and
void.
25
Kwarteng v Donkor [1962] 1GLR 20

• An agreement between the parties that if

a certain chief was distooled and the
defendant could see to it that the
plaintiff’s nephew was elected. Nephew
elected but not enstooled. Plaintiff
brought an action to recover the debt.

26
• Okantey v Kwaddey [1975] 1 GLR 193
 
• Mahama v Barclays Bank of Ghana ltd
[1978] GLR 264
 
• Elluah v Ankumah [1968] GLR 795
 
• Kessie v Charmant [1973] 2GLR 193

27
Contracts To Deceive Public Authorities

• Any contract which has as its object to

directly or indirectly to deceive public
authorities will be unenforceable

28
Alexander v Rayson [1936]
• Alexander rented a flat in Picadilly to Mrs Rayson
for £1,200 p.a. However, in order to lower the
rateable value of the flat, Alexander gave her 2
agreements. 1) A lease of the flat for £450. 2) A
contract for services for £750. After a
disagreement Alexander sued for money owed
under the agreement.

• It was held that the agreement constituted a fraud

upon the Revenue and that Alexander could not
recover under either agreement. 29
Miller v Karlinski (1945) 62 TLR 85
• Miller was employed by Karlinski. Miller was to be
paid £10 a week and expenses. But it was also
agreed that under ‘expenses’ he could include his
income tax liability. Miller later sued to recover 10
weeks arrears of salary plus £21 in expenses. It
emerged at the trial that about £17 of the £21 really
represented his liability for income tax.

• It was held that the whole contract was illegal since

it constituted a fraud upon the revenue. Therefore,
the court held that Miller could not recover his
expenses or his salary.
30
Contracts To Oust The Jurisdiction Of
The Courts

• Any contract which tries to oust the

jurisdiction of the courts is contrary to
public policy and so unenforceable.

31
Baker v Jones [1856] 5 HLC 811
• There was a dispute within an
unincorporated weightlifting association
about an alleged misuse of its funds. 
Held: Words in an agreement are void to
the extent that they seek to oust the
jurisdiction of the court.

In re Ghana Private Road Transport

Union ; Tetteh v Essilfie [2001-2002
32
Contracts To Use Official Positions Or
Public Office To Secure Private Reward

• Any agreement or contract that it object is

to use official position or public office to
secure private reward or gain is
unenforceable for it is contrary to public
policy.
 
• Ampofo v Fiorini [1981] read 257
• Kessie v Charmant [1973] GLR 829 33
Contracts In Restraining Of Trade
• Contracts and contractual terms in restraint of trade
are usually void and unenforceable. Restraint of trade
is a contractual undertaking whereby one party
agrees to restrict his freedom to trade or to conduct
his business or profession in a particular area for a
special period of time.

• Lord Diplock in Petrofina (Great Britain) Ltd v Martin

(1966) suggested that restraint of trade is ‘one in
which a party (the covenantor) agrees with any other
party (covenantee) to restrict his liberty in the future
to carry on trade with other persons not parties to the
contract in such manner as he chooses’.
34
• Restrict in trade usually are found in agreements
between vendors and purchasers and employers and
employees. It happens where businesses are sold or
employee leave their employment.

• Principles are set up in Nordenfelt v Maxim Nordenfelt

Guns & Ammunition Company Limited [1894] AC 535
Thorsten Nordenfelt a manufacturer specialising in
armaments, had sold his business to Hiram Stevens
Maxim. They had agreed that Nordenfelt ‘would not
make guns or ammunition anywhere in the world, and
would not compete with Maxim in any way for a period
of 25 years’.
35
• The House of Lords held that the restraint was
reasonable in the interests of the parties.
They placed emphasis on the £200,000 that
Thomas Nordenfeldt had received as full value
for his sale. 

36
Restraint of trade clauses were prima
facie void at common law, but they may be
deemed valid if three conditions are met:

1. the terms seek to protect a legitimate

interest.
2. the terms are reasonable in scope from the
viewpoint of the parties involved.
3. the terms are reasonable in scope from the
viewpoint of public policy.

37
Circumstances where restraint to trade will be
held enforceable

1. Sale of business:
– Not setup another business in competition with
the purchaser
– Reasonable for parties to agree that some
restraint be impose on vendor. In Nordenfelt
restraint held to be reasonable.

• Ronbar Enterprise Ltd v Green [1954]2 All ER 266

38
2. Employment
– Employee agrees with employer not to compete
with him after leaving employment
– Will be upheld if reasonable to protect trade
secrets.
– Protection against mere competition will not
suffice

• Herbert Morris v Saxelby [1916] AC 688

• Kores Manufacturing Ltd v Kolok Manufacturing Ltd
• Mason v Provident Clothing and Supply Co Ltd
[1913] AC 724, 734 39
Faccenda Chicken Ltd v Fowler Doman [1987]
ch117
• The appellant company had employed the
defendant as sales manager. The contract of
employment made no provision restricting use
of confidential information. He left to set up in
competition. The company now sought to
prevent him using confidential information for
this purpose. 
Held: The information and the advantage
flowing from it was obtained through
dishonesty.  40
EFFECTS AND CONSEQUENCES OF
ILLEGALITY
Illegal at its inception

• There are two types of case where illegality

renders a contract unenforceable from the
outset.
1. Where the contract is entered into with the
intention of committing an illegal act.
2. Where the contract is expressly or
implicitly prohibited by statute.  41
• If an act is illegal under statute then a contract
to do that act will also be illegal and
unenforceable.

Gray v Cathcart (1899) 33 I.L.T.R 35

• An agreement to lease unsanitary premises was
deemed unenforceable on the ground that it was
an offence under statue to occupy unsanitary
lodgings.
 

Re Mahmoud & Ispahani 42

Illegal in its performance

• This is where the breach arises in the course

of performance.

• Contract usually legal at inception or

formation but one party performs it illegally.
For instance the hire vehicle case with
smuggling textiles

43
• Party responsible for the illegality will not be
able to enforce the contract or rely on any
rights for remedy
Anderson v Daniel

• The innocent party will be entitled to enforce

the contract and rely on the availability of
remedies if is proved that he did not
participate or condone in the illegality
Archibold v spanglett
44
St. John Shipping v Rank (1957) 1 Q.B. 267
• The plaintiffs agreed to transport cargo belonging
to the defendants. Contrary to the legislative
requirements , the plaintiff’s ship was
deliberately overloaded, the plaintiff reasoning
that the excess profit would outweigh any
possible fine it might occur.
• The court concluded, on a reading of particular
statute, that the contract was enforceable.The
contract itself was not contrary to law, though
there was illegality in the manner in which it was
performed. Such illegality was not fatal to the
enforcement to the contract. 45
 RECOVERY OF MONEY OR
PROPERTY TRANSFERRED UNDER
AN ILLEGAL CONTRACT
• General rule: Monies or properties transferred under
an illegal contract are not recoverable especially
where plaintiff relies on illegality to establish claim.

• Principle behind general rule: is ‘pari delicto est

conditio defendentis’ ( in equal fault, the stronger is
the situation of the defendant)
• Parkinson v College Ambulance Ltd
• Taylor v Chester 46
 EXCEPTIONS TO GENERAL RULE THAT
MONIES PAID AND PROPERTY
TRANSFERRED UNDER AN ILLEGAL
CONTRACT ARE RECOVERABLE

1. CLAIM NOT FOUNDED ON ILLEGAL ACT

– Party can recover money or property transferred to
one party if claim to recover property or money is
not made based on the illegal contract. Can make
up cause of action independent of the illegal
contract in a way that he will not have to disclose
the illegal contract.
47
Bowmakers Ltd v Barner Instrument [1945] KB
65; [1944] 2 All ER 579
• Machine tools had been let out under hire-
purchase agreements which were illegal as they
contravened wartime maximum price and
licensing regulations. The hirers failed to pay the
instalments due under the agreements, sold
some of the goods and kept the rest. The owners
successfully claimed damages for the conversion
of the goods. They did not have to found their
claim on the illegal contract or plead its illegality
in order to support their claim, but relied simply
on their title. 48
Amar Singh v Kulubya

• Ugandan case where a lease contract

was made contrary to an existing law.
Relied on his leasehold interest to
recover his land but not the illegal
contract he made with the whiteman.

49
2. WHERE PLANTIFF IS NOT IN PARI DELICTO
(equally guilty) WITH DEFENDANT
• Where the parties are not equally guilty i.e not
in pari delicto, the court may allow the
innocent party to recover property or money
transferred under the contract.

• It is usually granted if the innocent party or

plaintiff can proof that he was induced to
enter the contract by fraud, duress or
oppression by the defendants.
50
• If the parties are not in pari delicto
( equally to blame), the courts may allow
the less- blameworthy party to recover
what he had given to the other party
under the contract.

• It is necessary for the party who seeks

to be allowed to do this to prove that he
had been the victim of fraud, duress or
oppression on the part of the defendant.
51
• Schandorf v Zeini [1976] 2 GLR 418
• Kwartey v Donkor [1962] 1GLR 20
• Addy v Irani [1962] 1GLR 30

Hughes v Liverpool Victoria Friendly Society

[1966] KB 482:
• Plaintiff took life insurances policies from the
defendant on people he had no insurable
interest. She was induced by the fraudulent
misrepresentation of the defendant. Held she
was not in pari delicto with the def. so was
able to recover premium she paid.
52
3. CLASS PROTECTING STATUES

• Courts may also grant relief where the

illegality comes from a statute which has the
aim to benefit a protected class of people
when the less blame -worthy party is a
member of this class. These Statutes are
class protecting statutes.

• For instance, Conveyancing Decree, 1971 and

Hire Purchase Decree, 1972 (NRCD 292)
53
Kiriri Cotton Co Ltd v Dewani (1960) 1 AER 177
• A prospective tenant paid a premium to a
landlord in order to secure the lease of a flat.
This was contrary to an ordinance which had
been passed for the protection of tenants.
However, neither the landlord nor the tenant
knew of this ordinance.The tenant later sued to
recover the premium.

• It was held that Dewani could recover the

premiums since the parties were not in pari
delicto. 54
4. WHERE ONE PARTY TO AN EXECUTORY
CONTRACT REPENTS BEFORE PERFORMANCE
• The doctrine of locus poenitentiae: If a party
genuinely repents entering into a contract whose
purpose is illegal, it is possible for that party to
recover what has been transferred unless the
contract has already been partially performed.

• It is the situation where money has been paid or

property transferred for an illegal purpose but the
party changes his mind or repents before the
contract is performed
55
• Kearley v Thomson (1980) QBD 742
• The plaintiff had a bankrupt friend. He paid the
def. 40 pounds in return for their undertaking not
to appear at the bankrupt’s public examination
and not oppose his discharge. The def. duly
absented themselves. But before any application
had been made for the bankrupt discharge the
plaintiff claimed back the money. His claim failed
because the contract had partially been carried
out. However, on appeal, the Court of Appeal
stated that because no creditors had been
defrauded the party could ‘repent’ and be
reimbursed, notwithstanding the illegality. 56
Bigos v Boustead [1951] 1All ER 92
• The defendant sought to send his family abroad for his
daughter’s health, but wanted to provide more money
than would be allowed under exchange controls. He
entered into an unlawful arrangement with the plaintiff
an Italian national to get around the controls, providing
security for his repayment. The plaintiff sought to
enforce the security, but abandoned that claim for its
illegality. The defendant sought the return of his security
saying that since the contract was yet executory, it was
not yet illegal. It was held that the reason it had not
gone ahead was not due to any repentance of its
illegality, but rather frustration by the plaintiff. The
parties were in pari delicto, and the court would not
come to aid to recover the security deposited. 57
RECAP

58