in some cases" to the equities of the matter as between the parties. A covenant might be fair as between the parties and yet injurious to the public interest. In such a case it [1894] A. C. would be held void.1 519. It remains to note that at one time it was thought that the courts would inquire into the adequacy of the consideration given for the promise not to trade. But this was disavowed by the Exchequer Chamber in Hitchcock v. 6 A. & E. Coker, and seems to resolve itself into the rule which requires the promisee to satisfy the court that the transaction is reasonable. [*206] *§ 2. EFFECT OF ILLEGALITY UPON CONTRACTS IN WHICH IT EXISTS. 438. is the effect of The effect of illegality upon the validity of contracts in (2) What which it exists, must needs vary according to circumstances. It may affect the whole or only a part of the contract, and illegality. the legal part may or may not be severable from the illegal. One of the parties may be ignorant of the illegal object which the contract is intended to serve, or both may be ignorant of any illegal intention. The contract may be discouraged in the sense that the law will not enforce it, or prohibited in such a way as to taint collateral contracts and securities given for money advanced to promote an illegal transaction or paid to satisfy a claim arising out of such a transaction. 14 Ch. D. 351. a Note the comments of Bowen, L.J., in the Nordenfelt case, upon the judg- 3 Beav. 883, ments in Whittaker v. Howe, and Rousillon v. Rousillon, and the rejoinder to these comments by Lord Macnaghten, [1894] A. C. p. 563 et sq. 1 Such are cases where the covenantor is exercising a public franchise or engaged in a business impressed with a public trust.' Gibbs v. Consolidated Gas Co., 130 U. S. 396, 408–9. Agreements to combine for the purpose of lessening competition are illegal as opposed to the public welfare. Oliver v. Gilmore, 52 Fed. Rep. 562; Santa Clara &c. Co. v. Hayes, 76 Calif. 387, H. & W. 376; Richardson v. Buhl, 77 Mich. 632; More v. Bennett, 140 Ill. 69. Cf. Central Shade Roller Co. v. Cushman, 143 Mass. 353. See 26 U. S. St. at L. 209. (i) Divis ible contract. Legal parts of contract to be possible from I will endeavour to state some rules which may enable the reader to work his way through a complex branch of the law. (i) When the contract is divisible. A contract may consist of several parts; it may be divisible into several promises based on several considerations, and then the illegality of one or more of these considerasevered if tions will not avoid all the promises if those which were made upon legal considerations are severable from the others. This is an old rule and is set forth in Coke's Reports, That if some of the covenants of an indenture. or of the conditions endorsed upon a bond are against law, and some good and lawful; that in this case the covenants or conditions which are against law are void ab initio, and the others stand good.' illegal. Pigot's Case, Co. Rep. 11. 27 b. Maleverer v. 1 Mod. 35. Per Willes, J., in Pickering v. Ilfracombe The rule holds whether the illegality exist by statute or at common law, though at one time the judges thought differently, and fearing lest statutes might be eluded, laid it down that the statute is like a tyrant, where he comes he makes all void, but the common law is like a nursing father, makes only void that part where the fault is and preserves the rest.' *The rule in its modern form may be thus stated: [*207] 'Where you cannot sever the illegal from the legal part of a covenant the contract is altogether void, but where you can sever them, whether the illegality be created by statute or common law, you may L. R. & C. P. reject the bad part and retain the good.' Railway, 250. L. R. 7 H. L. 653. Illustrations of the rule are to be found in cases where a corporation has entered into a contract some parts of which are ultra vires, and so, in a sense, unlawful; a or a These cases may serve as an illustration of the proposition before us, but it must be borne in mind that Lord Cairns, in The Ashbury Carriage Co. v. Riche, has pointed out that contracts of this nature are invalidated not so much by the illegality of their object as by the incapacity of the corporation to bind itself by agreement for purposes beyond its statutory powers. where it is possible to sever covenants in restraint of trade of this nature which are, and of covenants which are not (ii) When the contract is indivisible. Where there is one promise made upon several con- contract. siderations, some of which are bad and some good, the promise is wholly void, for it is impossible to say whether the legal or illegal portion of the consideration most affected the mind of the promisor and induced his promise.2 An old case which may be quoted in its entirety will illustrate this proposition: v. Hutchinson, Cro. Eliz. 199. 'Whereas the plaintiff had taken the body of one H. in execution Fetherston at the suit of J. S. by virtue of a warrant directed to him as special bailiff; the defendant in consideration he would permit him to go at large, and of two shillings to the defendant paid, promised to pay the plaintiff all the money in which H. was condemned. Upon non assumpsit it was found for the plaintiff. It was moved in arrest of judgment, that the consideration is not good, being contrary to the 1 If there are two promises, one legal and one illegal, resting upon one legal consideration, the promisee may waive the illegal promise and enforce the legal one. Erie Railway Co. v. Union Loc. and Exp. Co., 35 N. J. L. 240, H. & W. 373; United States v. Bradley, 10 Pet. (U. S.) 343, 360-64; Gelpcke v. Dubuque, 1 Wall. (U. S.) 221; Dean v. Emerson, 102 Mass. 480; Pelz v. Eichele, 62 Mo. 171; Smith's Appeal, 113 Pa. St. 579. But noɩ, it would seem, if the illegal act is highly immoral or highly detrimental to the public good. Lindsay v. Smith, 78 N. C. 328; Santa Clara &c. Co. v. Hayes, 76 Calif. 387, H. & W. 376. 2 If there is one legal promise resting upon two considerations, one of which is legal and the other illegal, the promisee cannot enforce the promise, for he cannot (legally) perform the consideration. Bixby v. Moor, 51 N. H. 402, H. & W. 378; Bishop v. Palmer, 146 Mass. 469, H. & W. 380; Handy v. St. Paul Globe Co., 41 Minn. 188, H. & W. 318. It will be observed that an illegal contract might be enforced, so far as legal, by one party, but not by the other. Bishop v. Palmer, supra. statute of 23 Hen. VI., and that a promise and obligation was all one. And though it be joined with another consideration of two shillings, yet being void and against the statute in part it is void in all.' (iii) Avoid- *(iii) Comparative effects of avoidance and ille ance and illegality distinguished. A contract may be penalised, avoided, forbidden. gality. [*208] When there is no divisibility of promises or consideration, we have to consider first what was the attitude of the law towards the transaction contemplated, and next what was the mind of the parties towards the law. The law may deal with a contract which it would discourage in one of three ways. It may impose a penalty without avoiding the contract. avoid the contract. It may It may avoid, and penalise or prohibit. In this last case we must take the word 'penalise' to mean not merely the imposition of a penalty, but the liability to damage for a wrong, or to punishment for a crime. A statutory penalty is merely a suggestion of prohibition. Whether it is prohibitory or not is, in every case, a question of construction. Thus we may suppose the state to say to the parties as regards these three kinds of transactions: (a) You may make the contract if you please, but you will have to pay for it. (b) You may make the agreement if you please, but the courts will not enforce it. (c) You shall not make the agreement if the law can prevent you. There is a With the first case we are not concerned. valid contract though it may be expensive to the parties. As to the second and third, difficulties can only arise. as regards collateral transactions, for in neither case can the contract be enforced. The intentions of the parties we will postpone for the present. They must be assumed to know the law. agree It may be stated at once that there is a clear distinction Illegal between agreements which are illegal and agreements ments which are merely void: between agreements which the law will not aid, and agreements which the law desires to prohibit: and that this distinction comes out, not in the comparative validity *of the two, for both are [*209] void, but in the effect which their peculiar character imparts to collateral transactions. collateral trans No contract, however innocent in itself, is good, if taint designed to promote an illegal transaction, whether the illegality arises at common law, or by statute. actions. 213. In Pearce v. Brooks a coach-builder sued a prostitute R.1 Ex. for money due for the hire of a brougham, let out to her with a knowledge that it was to be used by her in the furtherance of her immoral trade. It was held that the coach-builder could not recover.1 434. In McKinnell v. Robinson the plaintiff lent money to M. & W. the defendant to play at hazard, knowing that the money was to be so used. Hazard is forbidden," and the players rendered subject to a penalty by 12 Geo. II. c. 28. It was held that the lender could not recover.2 Nor is a contract valid which is intended to carry into effect a prohibited transaction. Cannan was the assignee of a bankrupt, and sued Bryce to recover the value of goods given to him by the bankrupt in part satisfaction of a bond, which in its turn had been given to Byrce by a Certain games with cards or dice are forbidden by 12 Geo. II. c. 28 and by 18 Geo. II. c. 34; these are, Ace of Hearts, Hazard, Pharaoh, Basset, and Roulet, otherwise Roly Poly. These acts are prohibitory and penal: they do not merely make winnings at such games irrecoverable or invalidate securities given for money lost. They forbid the games and penalise the players. 1 Ernst v. Crosby, 140 N. Y. 364. held insufficient; there must be an But mere knowledge is generally intent to aid in the accomplishment of the illegal purpose. Tyler v. Carlisle, 79 Me. 210, H. & W. 390. Cf. Graves v. Johnson, 156 Mass. 211, H. & W. 391. object is of a heinous nature. 2 Tyler v. Carlisle, supra. S Unless the known Hanauer v. Doane, 12 Wall. (U. S. ) 342. Cannan v Bryce, 3 B. & Ald. 179. |