ILLEGALITY

WEEK FIVE ASSIGNMENT

1. What approach does contract law take to contracts that are found to be in restraint
of trade?
Restraint of trade is a doctrine that seeks to enforce the contractual restrictions in a
business. A contract undertaking not to trade is void and unenforceable against the promisor if
it contrary to the public policy of promoting trade, unless it is reasonable so as to protect the
interests of the purchaser of a business. 1 The court seeks to ensure that the restraints are
reasonable as to the viewpoint of the contracting parties, that the restraints seeks to
protect the interests of the purchaser of the business sold and that the restraint does not
violate the public policy. Where the restraint of trade is reasonable it is enforced by the
court of law.
In Mitchel v Reynolds, Reynolds was a baker at St Andrew which include both Lincoln’s
inn and Gray’s inn. He therefore chose to rent his bakery shop to the plaintiff Mitchel for
a period of five years and a bond of 50 pounds with the condition that the agreement will
be void if Reynolds acted as a baker in the parish within the next five years and Mitchel
sued on the bond. The court of appeal held that the restraint of trade was reasonable and
therefore lawful although the general restraints were unlawful.
In Esso petroleum Co Ltd v Harper’s garage Ltd, Harpers garage agreed to accept all
petrol for its two stations from Esso for a long period of time. It agreed to keep the garage
open at all reasonable hours and not to sell it without ensuring that the buyer entered a
similar agreement. One agreement was for five years while the other one was for 21 yrs.
The court of appeal held that the one for five years was valid while the one for 21 yaers
was invalid. There was legitimate interests of the suppliers to protect and the restraints
were more than adequate for the purpose.2
2. What was the effect of the decision in Radmacher v Granatino?
The plaintiff and the defendant were married in London in 1998, the husband being French while
the wife was German. The two had a prenuptial agreement before a notary in Germany three
months before the marriage at the instigation of the wife to whom a further portion of her
family’s considerable wealth would be transferred if the agreement was signed.3 The agreement
was subject to German law which suggested that neither party would benefit financially in case
they divorced or separated.4 The husband

who worked as a banker did not seek legal advice on the matter. The parties separated in
October 2006 the marriage being 8 yrs long. The two have two daughters and the husband left
banking and embarked on research at the oxford university. the husband sought financial relief,
at first he was awarded a relief of over 5.5m pounds, a house and periodical payments by the
court but after the wife appealed to the court of appeal the relief was revoked.5
1
https://en.wikipedia.org/wiki/Restraint_of_trade
2
Chris Turner, Unlocking contract law (Hooder Education, 2013)
3
https://www.familylawweek.co.uk/site.aspx?i=ed68495
4
https://www.familylawweek.co.uk/site.aspx?i=ed68495
5
https://www.lexology.com/library/detail.aspx?g=299f69e9-2bd3-4446-9fdc-d9d79fbf8e83
The court of appeal held that the pre-nuptial agreement they had was binding and should be
given decisive weight. Although the court still provided the husband with some housing and
other payments to provide for the children’s maintenance on the basis that he had the role of a
father to perform. The husband appealed once again to the Supreme Court but his appeal was
dismissed. The Supreme Court held that “parties to a pre-nuptial agreement would be held by
the agreement provided they freely entered the agreement with full knowledge of its implications,
unless the circumstances prevailing it would not be fair to hold the parties to the agreement.” 6

Therefore, provided a prenuptial agreement is fair in its procedure and has substantive fairness
then the contract is binding to both parties.

3. In Parkinson v College of Ambulance Ltd, why was the contract illegal?

A contract is held to be void or unenforceable if its terms tend to promote corruption in
the public life. In Parkinson v College of Ambulance Ltd the plaintiff was told by the
defendant that if he contributed to the college then he would obtain a knighthood but
never happened as it was promised.7 And so he sought action against the defendant. The
court held that the contract was illegal as it was contrary to the public policy. The
donation therefore was considered a gift to the college hence was irrecoverable.8 The
contract would only have been declared void by disclosure of the consideration given for
it that is the promise of knight hood.9 However the plaintiff’s action could have been
enforced as a breach of contract but since the consideration given was contrary to the
public policy then the contract was rendered illegal.

4. Joe contracts with Jane to deliver a parcel for him by motorbike. Jane says, ‘I can
get there quicker if I take the back roads and break the speed limit’ and Joe
enthusiastically agrees, as he wants the parcel delivered quickly. The parcel is not
secured properly; it falls off the bike and the contents are damaged. Can Joe claim
damages?
The contract between Joe and Jane is legally unenforceable as it is illegal at the time of
its formation. It is against the law to break the speed limits and therefore as it is that
contracts that go against the law are unenforceable.
Therefore Jane is not entitled to claim damages on the parcels, since their contract is
illegal at the time of formation.
In Mohamed v Alaga & Co, the plaintiff climed that the defendant solicitor agreed to pay
him 50% of the relevant legal aids in return for introducing Somali asylum seekers in the
preparation and presentation of their claims. The defendants accepted that the plaintiff
had been engaged to work as an interpreter and translator but denied the existence of the
6
https://www.lexology.com/library/detail.aspx?g=299f69e9-2bd3-4446-9fdc-d9d79fbf8e83
7
https://www.coursehero.com/file/6893205/Parkinson-v-College-of-Ambulance-Ltd/
8
https://www.coursehero.com/file/6893205/Parkinson-v-College-of-Ambulance-Ltd/
9
https://www.coursehero.com/file/6893205/Parkinson-v-College-of-Ambulance-Ltd/
 agreements as alleged. He claimed that it was against rule 3 and 7 of the Solicitor’s
Practice rules 1990 made under s 31 of the Solicitor’s Act 1974, the court of Appeal held
that the contract was void and unenforceable since it was against the Rules. In conclusion
, contracts which are illegal at their time of formation are void whether both parties are
equal to blame or not.

5. In terms of illegality, what does it mean to say a contract is severable?

When a contract is severable then it means that if the illegal part of the contract is
unimportant then it can be extracted from the contract without any rewording and then
the other important part of the contract can be enforced. But in cases where a contract
cannot be severed then the whole contract is void.10
In Goldsoll v Gold man (1915) the plaintiff bought the business of imitation jewelry in
the UK from the defendant. In the contract there was a term stating that the defendant
would not trade in either imitation or real jewelry in the UK or a number of the specified
foreign countries11.
The court of Appeal held that it was unreasonable to restrict the defendant from trading in
real jewelry or any type of jewelry abroad since the business interests he sought to protect
were limited to that of selling imitation jewelry in the UK. It was said that this did not
make the agreement void but severable since the unreasonable part could be set aside and
the rest of the agreement enforced.12
Therefore a contract is said to be severable if the unreasonable parts of the contract can
be set aside and the reasonable part enforced.
6. Crafty Chems Ltd is a chemicals manufacturer. They contract with Dodgy
Deliveries to deliver a load of 20 drums of chemicals. The law says that these drums
should not be stacked on top of each other, which means the delivery needs two
lorries, costing £500. Crafty Chems asks if Dodgy Deliveries will ignore this, and
take the whole load in one lorry, for which they will pay £300. Crafty Chems agree.
On the journey, the driver crashes the lorry, and the chemicals spill out. Crafty
Chems want to sue Dodgy Deliveries for the cost of the wasted chemicals.
Dodgy Deliveries find themselves in court again, when a former employee, Vedhika, sets up
a new business. Vedhika’s contract said:
‘Should the employee leave the company, they agree not to set up a business undertaking
motorcycle or lorry deliveries, operating in the UK, France, Germany, Italy or Holland, for
20 years.’
Dodgy Deliveries do not offer motorcycle deliveries, and their lorry deliveries only operate
in the UK. Vedhika’s new business offers motorcycle deliveries across the UK and Europe,
10
https://www.academia.edu/33291257/contract_law_elliot_pdf
11
https://www.academia.edu/33291257/contract_law_elliot_pdf
12
https://www.academia.edu/33291257/contract_law_elliot_pdf
including all the countries listed in the restraint clause. She hopes that, within the UK, she
can pick up some clients who would otherwise have used Dodgy Deliveries, because she is
faster and cheaper. Dodgy Deliveries sue her for breach of her contract.
Advise Dodgy Deliveries.
In the first case of the contract between Dodgy deliveries and Crafty Chems, the contract violates
the law that the drums should not be stacked together. And therefore the agreement between the
two parties that Dodgy deliveries should stack the drums is contrary to the law. The general rule
is that the law will not enforce an illegal contract and that where both parties are at fault, the
position of the defendant is strong and may enforce the contract. that in this case, the law does
not seek to make contracts against the statute void but to impose punishment on the party which
breaches a statute. The court may also sever the illegal parts of the contract and enforce the other
part of the contract.
In St John Shipping Corp v Joseph Rank Ltd, a ship carrying grain from the US port to the UK
was overloaded, contrary to the provisions of the merchant Shipping Act 1932, although the
overloading earned the ship an extra of 2,295 pounds a statutory fine of 1200 pounds was levied
with the result that the statute was ineffective in removing the incentive to overload. The
plaintiffs sued to recover some of the withheld freight. The defendants argued that they plaintiffs
had carried the contract in an illegal manner, and they were not entitled to recover any part of the
freight due. The court held that the plaintiffs were entitled to recover the freight from the
defendants. Even though the plaintiffs engaged in an illegal act they did so to perform a legal
contract.
Therefore in this case the illegal parts of the contracts can be severed and the legal part of the
contract be enforced. Crafty chems can sue for damages on the goods on the basis of breach of
contract.
In the second case between Dodgy deliveries and Vedhika, the contract is void and cannot be
enforced. In cases where employers restrain their employees it should be done so that the
restraints are reasonable and seek to protect the legitimate interests of the employer and that they
are not contrary to the interests of the public. In this case it would be reasonable if Dodgy
deliveries restricted Vedhika to not opening a lorry delivery business in the UK only for a certain
period of time. But it is also unreasonable for them to restrict her from not opening a motorcycle
deliveries, a service which they do not offer. The restraint on the geographical place is too wide
and unreasonable. It is clear that in this case Dodgy Deliveries does not seek to protect its
legitimate interests but prevent competition from any company.
In Mason v Provident clothing and supply limited, the court held that where an employer had
exacted a covenant with the employee and that the restraints applied are over wide and broader
than expected then the court will come to the rescue of the employee
7. In Nordenfelt v Maxim Nordenfelt Guns and Ammunitions Co, the court talked
about the ‘blue pencil test’. What is it?
 The blue pencil test is the legal concept whereby the court finds that other parts of a
contract are unenforceable while other parts are enforceable. This test allows that the
enforceable and the legal terms be enforced while the legally void are nullified.13
In Nordenfelt v maxim Nordenfelt and Ammunitions Co, the plaintiff who was a
manufacturer who specialized in making armaments had sold his business to the
defendant. The contract contained the terms that the plaintiff 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.14
The issue that arose whether the terms sought to protect legitimate interests, whether the
terms were reasonable in the view of both parties and whether the terms were reasonable
with the viewpoint of the public policy.
The House of Lords held that the restraint of trade was reasonable in the interests of the
parties considering the amount that Nordenfelt had received as full value for his sale. The
question of severability was whether the reasonable restriction could be enforced when it
was the same contract as an unreasonable restriction. Therefore the court used the blue
pencil doctrine to rule out the unreasonable clause ‘and would not compete with Maxim
in anyway’ leaving behind other terms that were reasonable and could be enforced.15

8. Jack agrees to sell his plumbing business in Wetherbridge to Nicola for £10,000. The
written contract between them includes a term stating that Jack will not open a rival
plumbing business within 25 miles of Wetherbridge for ten years, nor, during that
period, will he approach any customers of the business now owned by Nicola. Jack
does not read the contract until after he has signed it. Five years later, Jack plans to
set up a plumbing business in Maltham, five miles from Wetherbridge.
Advise Nicola.
Jack sells his business to Nicola and that means he receives the full sales of the business. They
enter into unenforceable contract with Nicola even though Jack does not read the contents of the
contract. The restraint clauses in the contract do not make the contract void. Since the court will
prove three things that is the reasonableness of the clauses, the legitimate interest of the
restricting party and whether the restraint is contrary to the interests of the public. The restraint
clauses meet the requirements in that the period of time and the geographical place, it is also
upon Nicola interests that she seeks to protect, that in the event that Jack sets up a similar
business then it is foreseen that his previous customers will still come to him and therefore it
would be a loss on Nicola’s side. Therefore in the event that Jack sets up another similar business
then Nicola should sue and claim damages for breach of contract.

13
https://en.wikipedia.org/wiki/Blue_pencil_doctrine Accessed on 15th February 15, 2021
14
https://en.wikipedia.org/wiki/Nordenfelt_v_Maxim_Nordenfelt_Guns_and_Ammunition_Co_Ltd Accessed on
15th February 15, 2021
15
https://en.wikipedia.org/wiki/Nordenfelt_v_Maxim_Nordenfelt_Guns_and_Ammunition_Co_Ltd Accessed on
15th February 15, 2021
In Nordenfelt v maxim Nordenfelt and Ammunitions Co, the plaintiff who was a manufacturer
who specialized in making armaments had sold his business to the defendant. The contract
contained the terms that the plaintiff 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.16
The issue that arose whether the terms sought to protect legitimate interests, whether the terms
were reasonable in the view of both parties and whether the terms were reasonable with the
viewpoint of the public policy.
The House of Lords held that the restraint of trade was reasonable in the interests of the parties
considering the amount that Nordenfelt had received as full value for his sale.

16
https://en.wikipedia.org/wiki/Nordenfelt_v_Maxim_Nordenfelt_Guns_and_Ammunition_Co_Ltd Accessed on
15th February 15, 2021