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by law required to be in writing signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied, and may in the same manner be varied or discharged. (ii) Any contract which if made between private persons would by law be valid although made by parol only and not reduced into writing, may be made by parol on behalf of the company by any person acting under its authority, express or implied, and may in the same manner be varied or discharged.
CONVICTS AND BANKRUPTS
Convicts are incapable of suing in an action or of making a contract, except when at large on licence. By a convict is meant a person against whom judgment of death or penal servitude has been pronounced.
Under the Bankruptcy Act, 1914, Section 155, a person who has been adjudged bankrupt and is still undischarged is not altogether incapacitated from contracting, but he must not trade under a different name from that used when he was adjudged bankrupt, without disclosing to all persons with whom he deals the name under which he was so adjudged; and he must not obtain credit to the extent of £10 or above from any person without informing that person that he is an undischarged bankrupt. A bankrupt cannot sue or be sued upon his contracts, but actions are brought by or against the trustee of his estate.
Barristers cannot sue for their fees, but solicitors may; and under the Medical Act, 1886, Fellows of the Royal College of Physicians are prohibited by a by-law of the College from recovering at law their fees and charges; but all other classes of physicians and surgeons may do so. As regards fees in respect of dentistry (as distinct from supplying, e.g., a set of false teeth) a dentist cannot recover unless he is registered, and a similar rule applies to veterinary surgeons. Accountants may enter into and enforce contracts relating to their profession.
LEGALITY AND POSSIBILITY
To be enforceable, Contracts must be legal.
Illegal contracts are absolutely void, that is, those which are unlawful in their terms, or which are agreements to perform anything unlawful or in aid of an unlawful purpose, or which the courts will not enforce as they offend against public policy, or because forbidden by some statute. But there are some void
contracts which are not necessarily illegal in themselves, e.g., gaming and wagering contracts.
The court always presumes in favour of the validity of a contract, and, if there is real doubt, will incline towards supporting it rather than otherwise. But when the contract is clearly illegal, the court, as in Scott v. Brown (1892), will refuse to enforce it, even if the illegality be not specially pleaded by the defendant. If there be in an agreement an illegal stipulation which does not affect the contract as a whole, such stipulation will not necessarily avoid the whole contract. "The general rule is that where you cannot sever the legal from the illegal part, the contract is altogether void; but where you can sever them, whether the illegality be created by statute, or by the common law, you may reject the bad and retain the good." (WILLES J., in Pickering v. Ilfracombe Rail Co. (1868).)
Illegal contracts need not necessarily be criminal, although obviously an agreement to commit an offence, whether criminal or civil, would fall under the heading of illegal contracts; as also would a contract to accept or give consideration in aid of an illegal purpose, e.g., the compounding of a felony by accepting payment to refrain from prosecuting an offender; or even a contract to lend to another money to be applied to such a purpose. Similarly, contracts relating to lotteries, or with the intention of defrauding third parties, are void. Reference should be made also to Ford v. Radford, previously cited (s). There are many contracts which are recognized by the Common Law as illegal; amongst these, as already stated (t),
(1) Contracts of an immoral nature;
(2) Agreements to commit a crime or civil wrong;
(3) Agreements for the sale of public offices;
(4) Agreements to impede justice or defraud the revenue; (5) Trading with the enemy;
(6) Marriage brokage contracts;
(7) Contracts in undue restraint of trade; (8) Maintenance and Champerty.
Maintenance, as defined in CHITTY'S Contracts, is "When one officiously intermeddles in a suit depending in any court, which no way belongs to him, by maintaining or assisting either party with money or otherwise, to prosecute or defend it. Champerty is a bargain by some person, with a plaintiff or defendant, to divide the land or other matter sued for between them, if they prevail at law; whereupon that person, who is called the
(s) See ante, p. 24.
Champertee, agrees to carry on the party's suit at his own expense.' But maintenance is lawful where the person maintaining has a legal interest in the subject matter of the action, and a charitable supply of funds is not unlawful; and taking an interest in litigation as security is not champerty.
Contracts opposed to Public Policy.
The inclination, referred to above, against the upsetting of a contract, has recently been more strongly marked in relation to contracts alleged to be contrary to public policy, that is, those which are deemed to be opposed to the public interest and which, therefore, it is impolitic to enforce. A judge has not unfettered discretion in declaring a contract opposed to public policy. "Judges are more to be trusted as interpreters of the law than as expounders of what is called public policy." (CAVE J. in In re Mirams (1891).) "It is always an unsafe and treacherous ground of legal decision." (DAvey L.J. in Janson v. Driefontein Consolidated Mines Limited (1902).) "You have this paramount policy to consider that you are not lightly to interfere with the freedom of contract." (JESSEL M.R. in Printing and Numerical Co. v. Sampson (1875).) contracts include
(1) Agreements to trade with alien enemies, without a licence from the Crown.
(2) Contracts in undue restraint of trade.
(3) Those which stipulate for the payment of penalties. Under this last head would fall contracts wherein it is agreed that in the event of a breach of the conditions, a stated sum of money is to be paid as "liquidated damages." If the court is of opinion that such sum is more than the amount of damage suffered, and is in fact a penalty, it will grant relief.
Contracts in Restraint of Trade.
The courts view with great suspicion a contract in restraint of trade, that is, one restricting a person from the full exercise of his trade or profession. At one time agreements in general restraint of trade were held to be void, but by degrees it has been established that agreements in partial restraint may be allowed, and in certain cases even a restraint unlimited as to area or time will be allowed provided the restraint is reasonably necessary and not contrary to the public interest. In the case of Nordenfelt v. Maxim Nordenfelt Gun and Ammunition Co. (1894), the patentee of guns and ammunition for war purposes transferred his patents and his business to a company and
covenanted that he would not engage, except on behalf of the company, in the business of manufacturing guns or ammunition for a period of twenty-five years. It was held that the restriction was valid, as although this restraint was unlimited as to space, yet having regard to the nature of the business and the limited number of likely customers, it was not wider than was necessary for the protection of the company, nor was it injurious to the public interest. But in an unreported case in 1920 it was held that a restriction not to act as a meat agent in the United Kingdom was too wide. The territorial limits of partial restraint are now usually allowed a wider application than formerly, owing to the easier and more speedy means of communication. Many business firms require that an employee shall covenant that, on leaving their service, he will not carry on a similar business within a certain area for a fixed period. But in such a case it has been decided, if the employer should repudiate the contract by the wrongful dismissal of the employee, as in General Billposting Co. v. Atkinson (1908), that the restrictive clause is not binding; and it should be noted that the compulsory winding up of a joint stock company is equivalent to wrongful dismissal. In Measures Brothers Limited v. Measures (1910) A agreed to act as director of the company for seven years and not to engage in any competing business for seven years after ceasing to hold office as director. The company was ordered to be wound up, and it was held that the winding-up order operated as a wrongful dismissal of A and he was relieved of his agreement not to compete with the company.
An interesting case recently decided was Bowler and Blake v. Lovegrove (1921), where the defendant had covenanted that he would not for one year after leaving plaintiff carry on or be interested in any way in the business of auctioneer and estate agent in Portsmouth borough or Gosport town. He became an estate agent only, within a year and within the area prescribed. It was held that as estate agent there was no breach of a covenant not to carry on as auctioneer and estate agent, and that the clause was prima facie invalid as being a covenant between employer and employee and that there were no special circumstances which made the covenant reasonable.
A condition of this nature is almost invariably included in a sale of the goodwill of a business. A contract in restraint of trade is regarded as part of the goodwill of a business and, in the absence of a contrary provision, is assignable, the purchaser being able to enforce the contract in his own name. Such agreements will be enforced unless considered, under all the circumstances, to be unreasonable and harsh. They may have terms easily separable, and if so, some may be good and some
may be bad.
Contracts of this kind will be enforced much more readily by the Courts when made between vendor and purchaser of a business than when made between employer and employee, because in the former case the parties to the contract are more at arm's length than in the latter.
In Elliman v. Carrington (1901), the plaintiffs sold embrocation to defendants under a contract whereby defendants agreed not to sell the embrocation at less than a stated price and, further, that they would enter into similar agreements with any retail traders whom they might supply; but the defendants did not procure such agreement from the retail traders. It was held that plaintiffs had good cause of action for breach of the contract, as it was not in restraint of trade.
It should be noted that a contract in restraint of trade, even though under seal, requires consideration to support it.
Many contracts are invalid because forbidden by various Acts of Parliament. There appears to be some doubt as to what is the rule determining whether certain acts are forbidden by statute, and it was held in Johnson v. Hudson (1809) that the act is not forbidden if a penalty is inflicted merely for revenue purposes, but that if the act is forbidden for the protection of the public the contract would be illegal.
The following contracts are void by statute
Truck Acts, 1831 and 1887. All those offending against the Truck Acts, by which it is forbidden to pay the wages of workmen otherwise than in money.
Sunday Observance Act, 1677. Those opposed to the almost obsolete provisions of the "Lord's Day Act," which forbid trading on Sunday in the course of the contractor's ordinary calling. As a rule, contracts made in the course of such trade are unenforceable. But it should be noted that, by the Bills of Exchange Act, 1882, Section 13, bills of exchange, promissory notes, and cheques dated on a Sunday are good.
Gaming and Wagering Contracts.-By the Gaming Act, 1845, Section 18
"All contracts or agreements, whether by parol or in writing, by way of gaming or wagering, shall be null and void; and no suit shall be brought or maintained in any court of law or equity for recovering any sum of money or valuable thing alleged to be won upon any wager, or which shall have been deposited in the hands of any person to abide the event on which any wager shall have been made."
"The essence of gaming and wagering is that one party is