Illegal Contract in UK Law

Another effect of illegality is to prevent a plaintiff from recovering under a contract if in order to prove his rights under it he has to rely upon his own illegal act; he may not do that even though he can show that at the time of making the contract he had no intent to break the Law and that at the time of performance he did not know that what he was doing was illegal.

In our view, an enforcement judge, if there is prima facie evidence from one side that the award is based on an illegal contract, should enquire further to some extent. Has the arbitrator expressly found that the underlying contract was not illegal? Or is it a fair inference that he did reach that conclusion? Is there anything to suggest that the arbitrator was incompetent to conduct such an enquiry? May there have been collusion or bad faith, so as to procure an award despite illegality?

But if he does not have to do so, then in my view the question is whether the method of performance chosen and the degree of participation in that illegal performance is such as to "turn the contract into an illegal contract" (see the dictum of Jenkins LJ in B and B Viennese Fashions v Losane [1952] 1 All E R 909 at 913 cited by Scarman LJ in Ashmore Benson Ltd VA v Dawson Ltd [1973] 1 WLR 828 at 836, and the language of para 34 in Hall quoted above).

Where the plaintiff's action in truth arises directly ex turpi causa, he is likely to fail, as he did in Alexander v. Rayson, [1936] 1 King's Bench 182; J.M. Allan (Merchandising) Ltd v. Cloke, [1963] 2 Queen's Bench 340; Ashmore, Benson, Pease & Co, Ltd. v. A.V. Dawson Ltd. [1973] 1 Weekly Law Reports 828; and Thackwell v. Barclays Bank plc, [1986] 1 All England Reports, 676. Where the plaintiff has suffered a genuine wrong, to which allegedly unlawful conduct is incidental, he is likely to succeed, as he did in Bowmakers Ltd. v. Barnet Instruments Ltd.

In cases where the contract of employment is neither entered into for an illegal purpose nor prohibited by statute, the illegal performance of the contract will not render the contract unenforceable unless in addition to knowledge of the facts which make the performance illegal the employee actively participates in the illegal performance. It is a question of fact in each case whether there has been a sufficient degree of participation by the employee.

To analyze the difference it is convenient to distinguish between an "agreements", which requires no more than a consensus an idem between the parties, and a "contract", which is an agreement plus something more. Where an agreement is wholly unenforceable because it is contrary to English law, it may, if the proper law of the agreement is itself English law, accurately be said to be void as a contract, that is, not to be a contract at all.

It was dealing with the effect of illegality on title to property. It established the general principle that, once title has passed, it cannot be attacked on the basis that it passed pursuant to an illegal transaction.