influence was, in fact, exercised. If this can be shown the courts will give relief. 6 may be proved. The principle applies to every case where influence is acquired and abused, where confidence is reposed and betrayed. The relations with which the Court of Equity most ordinarily deals are those of trustee and cestui que trust, and such like. It applies specially to those cases, for this reason and for this reason only, that from those relations the court presumes confidence put and influence exerted. Whereas in all other cases where those relations do not subsist, the confidence and the influence must be proved extrinsically; but where they are proved extrinsically, the rules of reason and common sense Kay, and the technical rules of a court of equity are just as applicable in the one case as the other.' *The words quoted are those of Lord Kingsdown: [*182] the case was one in which a young man, only just of age, had incurred liabilities to the plaintiff by the contrivance of an older man who had acquired a strong influence over him, and who professed to assist him in a career of extravagance and dissipation. It was held that influence of this nature, though it certainly could not be called parental, spiritual, or fiduciary, entitled the plaintiff to the protection of the court. Smith v. 7 H. L. C. 779. 736. Similar in character is the recent case of Moreley v. Loughnan, an action brought by executors to recover [198] 1 Ch money paid by the deceased to a man in whose house he had lived for some years. Wright, J., in giving judgment for the plaintiffs, said that it was unnecessary to decide whether a fiduciary relation existed between the deceased and Loughnan, or whether spiritual influence had determined the gifts. 'The defendant took possession, so to speak, of the whole life of the deceased, and the gifts were not the result of the deceased's own free will, but the effect of that influence and domination.'1 1 For a discussion of the principles governing the cases where the parties are in a fiduciary relation, see 2 Pomeroy, Eq. Jurisp., §§ 955– 63; Bigelow on Fraud, pp. 261 et seq. See also Hall v. Perkins, 3 Wend. (N. Y.) 626; Leighton v. Orr, 44 Iowa, 679; Connor v. Stanley, 72 Cal. 556; Cowee v. Cornell, 75 N. Y. 91. Rescission. The right to rescind contracts and to revoke gifts made under undue influence is similar to the right of rescinding contracts induced by fraud. Such transactions are voidable not void. So soon as the undue influence is withPresumed drawn, the action or inaction of the party influenced becomes liable to the construction that he intended to affirm the transaction. affirma tion 8 Q. B. D. 587. 36 Ch. D. 145. depends on cessation of Thus in Mitchell v. Homfray a jury found as a fact that a patient who had made a gift to her physician determined to abide by her gift after the confidential relation of physician and patient had ceased, and the Court of Appeal held that the gift could not be impeached. In Alleard v. Skinner the plaintiff allowed five years to elapse before she attempted to recall gifts made to a sisterhood from which she had retired at the commencement of that time; during the whole of the five years she was in communication with her solicitor and in a position to know and exercise her rights. In this case also the Court of Appeal held that the conduct of the donor amounted to an affirmation of the gift. [*183] But the affirmation is not valid unless there be an entire cessation of the undue influence which has brought influence. about the contract or gift. The necessity for such a complete relief of the will of the injured party from the dominant influence under which it has acted is thus set forth in Moxon v. Payne: 8 Ch. 881. In re Fry, 40 Ch. D. at p. 324. 'Fraud or imposition cannot be condoned; the right to property acquired by such means cannot be confirmed in this court unless there be full knowledge of all the facts, full knowledge of the equitable rights arising out of those facts, and an absolute release from the undue influence by means of which the frauds were practised.' The same principle is applied where a man parts with a valuable interest under pressure of poverty and without proper advice. Acquiescence is not presumed from delay: on the contrary, it is presumed that the same distress which pressed him to enter into the contract prevented him from coming to set it aside.' CHAPTER V. Legality of Object. THERE is one more element in the formation of contract which remains to be considered the object of the parties. Certain limitations are imposed by law upon the freedom of contract. Certain objects of contract are forbidden or discouraged by law; and though all other requisites for the formation of a contract be complied with, yet if these objects are in contemplation of the parties when they enter into their agreement the law will not enforce it. Two matters of inquiry present themselves in respect of Two subthis subject. The first is the nature and classification of the objects regarded by law as illegal. The second is the effect of the presence of such objects upon the contracts in which they appear. § 1. NATURE OF ILLEGALITY IN CONTRACT. The objects of contract may be rendered illegal by express statutory enactments or by rules of common law. And the rules of common law may be more or less precisely defined. We may arrange the subject in the following man ner: A contract may be illegal because (1) its objects are forbidden by statute; (2) its objects are defined by the common law as constituting an indictable offence or civil wrong; (3) its objects are discouraged by the common law as contrary to public policy. [*185] *But the two latter heads of illegality are in fact two forms, one more and one less precise, of com jects of in quiry: (1) the nature, (2) the effects of illegality. (1) What is illegality? (i) Statutory illegality. (a) Effects of statu tory prohi bition. Brown v. 10 B. & C. 98. Cope v. 2 M. & W. Smith v. Mawhood, 14 M. & W. 464. mon law prohibition. The broad distinction is between contracts illegal by statute and contracts illegal at common law, and it is thus that I propose to treat the subject. (i) Contracts which are made in breach of statute. A statute may declare that a contract is illegal or void. There is then no doubt of the intention of the legislature. that such a contract should not be enforced. The difference between an illegal and a void contract is important as regards collateral transactions, but as between the parties the contract is in neither case enforceable. But a statute may impose a penalty on the parties to a contract, without declaring it to be either illegal or void. In such a case we have to ascertain whether the legislature intended merely to discourage the contract by making it expensive to both parties; or to avoid it, so that parties would acquire no legal rights under it; or to prohibit it, so that any transactions entered into for its furtherance would be tainted with an illegal purpose. If the penalty was imposed for the protection of the revenue, it is possible that the contract is not prohibited, that the legislature only desired to make it expensive to the parties, in proportion as it is unprofitable to the revenue.1 The soundness of this distinction has however been called in question. A better test is to be found in the continuity of the penalty. If the penalty is imposed once for all, and is not recurrent on the making of successive contracts of the kind which are thus penalised, or if other circumstances would make the avoidance of the contract a punishment disproportionate to the offence, it may be argued that such contracts are not to be held void. But where the penalty recurs upon the making of every con 1 Larned v. Andrews, 106 Mass. 435. tract of a certain sort, we may assume (apart from revenue cases, as to which there may yet be a doubt) that the contract thus penalised is avoided as between *the parties. Whether it is rendered illegal, so as to taint collateral transactions, must be a question of the construction of the statute.1 [*186] tory prohi I will not discuss here in any detail the various statutes (b Objects by which certain contracts are prohibited or penalised. of statuThey relate (1) to the security of the revenue; (2) to bition. the protection of the public in dealing with certain articles of commerce, (3) or in dealing with certain classes of traders; (4) to the regulation of the conduct of certain kinds of business. An excellent summary of statutes of this nature is to be found in the work of Sir 1 "While, as a general rule, a penalty implies a prohibition, yet the courts will always look to the language of the statute, the subject matter of it, the wrong or evil which it seeks to remedy or prevent, and the purpose sought to be accomplished in its enactment; and if, from all these, it is manifest that it was not intended to imply a prohibition or to render the prohibited act void, the courts will so hold, and construe the statute accordingly." Pangborn v. Westlake, 36 Iowa, 516, H. & W. 315, where a statute imposing a penalty for the sale of each and every lot in any addition to a city unless the plan of such addition was duly recorded, was held not to render such sales illegal. It will be observed that this case escapes the test proposed by the author. There are many other American cases where statutes penalizing or even forbidding certain transactions have been construed to the same effect. Harris v. Runnels, 12 How. (U. S.) 79; Wheeler v. Hawkins, 116 Ind. 515, 520; National Bank v. Matthews, 98 U. S. 621; Niemeyer v. Wright, 75 Va. 239. The following statutes have been construed as rendering contracts made without compliance with the statute void: requiring a license as a condition precedent to engaging in a specified vocation, Gardner v. Tatum, 81 Cal. 370 (physician); Hittson v. Browne, 3 Colo. 304 (lawyer, cf. Harland v. Lilienthal, 53 N. Y. 438); Buckley v. Humason, 50 Minn. 195 (broker); Wells v. People, 71 Ill. 532 (public school teacher); requiring weights and measures to be sealed as a condition precedent to sale of goods by merchant, Bisbee v. McAllen, 39 Minn. 143; cf. Eaton v. Kegan, 114 Mass. 433; requiring goods to be inspected, labelled, or stamped, Baker v. Burton, 31 Fed. Rep. 401; Braunn v. Keally, 146 Pa. St. 519. |