IMPLIED STATUTORY PROHIBITION OF CONTRACTS*
| Date | 01 September 1975 |
| DOI | http://doi.org/10.1111/j.1468-2230.1975.tb01429.x |
| Published date | 01 September 1975 |
IMPLIED STATUTORY PROHIBITION
OF
CONTRACTS
*
THE
question of in what circumstances a contract will be held to
have been impliedly prohibited by
a
statute which imposes criminal
liability on one
or
both of the parties to it is one which, in view of
the proliferation of regulations affecting commercial life, has
become increasingly important in recent years. There appears to be
a widespread feeling, however, that this branch of the law is devoid
of principle and heavily charged with fiction. It is believed to operate
in an arbitrary fashion
so
as to provide a mischievous trap for con-
tracting parties which it is the duty of the rational judge or legal
adviser to circumvent. In the opinion
of
the present writer this
criticism is inspired more by the high degree of vagueness and
ambiguity which often seems to cloud discussion of this branch of
the law than by any manifest substantive defects. In particular the
precise nature of the distinction between
"
implied statutory
illegality
"
and situations of
"
common law
"
illegality, in which the
parties have nevertheless committed
a
statutory criminal offence,
has tended to remain obscure. Indeed some writers appear to regard
the phrase
"
implied prohibition
"
as
a
legitimate term to use to
denote the whole gamut of contractual situations in which unlawful
behaviour rendered criminal by statute is in some way involved.'
Others use it to denote
a
narrower range of situations but the manner
in which a statutory prohibition is to be made out has not, with
respect, been made clear.2 The purpose of this article is to demon-
strate that the notion of
"
implied statutory prohibition
''
is capable
of
a
precise and consistent meaning. It will also be suggested that if
the decisions on this branch of the law are examined the majority
of
them reveal a principle which, while not perfect, nevertheless
serves
a
useful purpose in
a
limited field and
has
been unjustly
criticised. In addition, it is hoped to show that
if
the doctrine of
implied prohibition is confined within a narrow sphere the prospects
for
a
more liberal approach to illegality problems outside this sphere
are correspondingly improved.
CONTRACTUAL BASIS
OF
PROHIBITION
It is submitted that a contract can only properly be said to have been
impliedly prohibited by statute when the very statute which penalises
acts done in the performance
of
the contract necessarily contem-
*
This article originally formed part of a thesis submitted to Oxford University
for the degree of D.Phil. The writer is indebted to his supervisor, Mr. Michael
Furmston
of
Lincoln College, for encouragement and help. The writer is, however,
alone responsible for the views expressed and for any errors.
1
See
k.g.
Professor Gellhorn-in his article
"
Contracts and Public Policy
"
(1935)
2
See
e.g. Cheshire
and
Fifoot
on
Contract,
8th ed. p.
312
er
seq.
35
Co1.L.R.
679.
535
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