Lecture Notes: Illegality and Public Policy in Contracts

Introduction

• Discussion on contracts that, despite meeting all elements of a contract, may be unenforceable due to illegality or being contrary to public policy.
• Illegality can occur at the inception or performance stage of the contract.

Examples of Illegality in Contracts

• Contracts interfering with justice, promoting corruption, or immigration considered illegal.
• Consequences: Recovery of paid money or transferred property depends on several factors, including a change of heart (locus poenitentiae) before substantial performance.
• Courts may allow recovery if parties are not equally guilty (in pari delicto).

Developments in Legal Approach

• UK Law Reform Commission's recommendations.
• Structured approach suggested by Supreme Court in City and Country Waste Limited vs. Metropolitan Assembly.
• Case highlighted the importance of evaluating case circumstances before deciding on recoverability.

Restraint of Trade in Contracts

• Employment contracts may include clauses preventing employees from working with competitors post-employment.
• Sale of business contracts often include clauses preventing the seller from starting a similar business nearby.
• Contracts may have a supplier exclusivity clause (solus agreement).

Key Considerations

• Public policy promotes the right to earn a living without unreasonable restrictions.
• reasonability tests: protect legitimate interests, and reasonableness in scope and duration.

Notable Case Discussions

1. Littlewoods Organization Ltd. vs. Harris

   • Validity of restraint clause protecting confidential information.
   • The importance of proprietary interest protection.

2. Herbert Morris Ltd. vs. Saxelby

   • Distinction between protecting trade secrets and non-protectable acquired skills.

3. Fitch vs. Dewes

   • Lifetime restraint for a solicitor's clerk considered valid due to client influence.

4. Mason vs. Provident Clothing and Supply Co. Ltd.

   • Restraint clause void due to excessive geographical scope.

5. Commercial Plastics Ltd. vs. Vincent

   • Restraint clause void due to excessive worldwide scope.

6. Fellows and Sons vs. Fisher

   • Five-year restraint deemed too long and void.

Restraint in Sale of Business

• Restraint clauses in the sale of a business must ensure genuine sale of goodwill and reasonable scope.

Case Example

• British Reinforced Concrete vs. Schelff - Clause on manufacturing enforcement was too broad.

Solus Agreements

• Agreements limiting a trader's suppliers to one to prevent unfair competition need to pass a reasonableness test.
• Esso Petroleum vs. Harper’s Garage - 21-year tie deemed excessive.

Other Considerations

• Contracts must balance fair competition and freedom of trade.
• Scooter Music Publishing Co. Ltd. vs. Macaulay - Music publishing contract void due to unfair terms.

Q&A Session

• Open floor for questions regarding discussed topics.

These notes provide a structured overview of the key points discussed in the lecture regarding illegality and public policy in contracts, the validity of restraint clauses, and their implications.