For an agreement to be recognised and enforced as a binding contract in England and Wales, it must contain several key elements. These include an offer, acceptance, intention to create legal relations, and certainty of terms. Crucially, the agreement must also be supported by lawful consideration and have a lawful object. If either the consideration exchanged or the ultimate purpose of the contract is illegal, the contract will generally be deemed void and unenforceable. This essay will explain the principles of lawful consideration and lawful object, demonstrating through case law how illegality affects the validity of a contract.
The Requirement of Lawful Consideration
Consideration is often described as the ‘price of the promise’ and is a fundamental requirement for the formation of a simple contract (McKendrick, 2021). It is the benefit that one party receives, or the detriment that the other party suffers, in exchange for their promise. While the law insists that consideration must be 'sufficient', meaning it must have some value in the eyes of the law, it does not need to be 'adequate', meaning its economic value can be far less than the promise it is exchanged for (Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87).
However, an essential aspect of sufficiency is that the consideration must be lawful. A promise to do something that is forbidden by law, whether by statute or common law, cannot constitute valid consideration. For example, if A promises to pay B £1,000 in return for B assaulting C, B’s promise to commit an assault is not lawful consideration. The entire agreement would be void from the outset because it is founded on a criminal act. An early, though apocryphal, illustration is Everet v Williams (1725), where one highwayman allegedly sued another for an account of their shared profits from robberies. The court was said to have dismissed the claim, holding that it would not assist parties in enforcing an agreement based on illegal activities. This demonstrates the court's refusal to recognise any rights arising from consideration that is illegal in itself.
The Legality of the Contractual Object
Beyond the consideration, the overall purpose, or ‘object’, of the contract must also be lawful. The law will not enforce a contract whose object is to achieve an illegal end, even if the consideration on both sides appears lawful on its face. The doctrine of illegality can be divided into two main categories: contracts that are illegal by statute and those that are illegal at common law on grounds of public policy.
Contracts may be expressly or impliedly prohibited by a statute. Where a statute is enacted to protect the public, a contract made in breach of its provisions is likely to be considered illegal and void. In Re Mahmoud and Ispahani [1921] 2 KB 716, a statute made it an offence to buy or sell linseed oil without a licence. The defendant, who did not have a licence, contracted to buy oil from the claimant, falsely claiming he had one. When the defendant refused to accept delivery, the claimant sued. The court held that the contract was illegal and unenforceable because the statute was intended to prohibit such unlicensed contracts entirely for the public benefit.
Secondly, contracts can be illegal at common law because they are contrary to public policy. This is a more flexible category, as concepts of public policy change over time. Established categories include contracts to commit a crime or a tort, contracts promoting sexual immorality, and contracts prejudicial to the administration of justice. For example, in Pearce v Brooks (1866) LR 1 Ex 213, the owner of a carriage could not recover the hire fee from a prostitute who he knew intended to use the decorative carriage to attract clients. The court found the object of the contract was to assist in an immoral purpose, rendering it unenforceable. Similarly, an agreement to stifle a criminal prosecution by promising not to give evidence in exchange for payment would be void as it perverts the course of justice (Elliot and Quinn, 2017). The courts will not lend their enforcement powers to agreements that undermine the legal and moral foundations of society.
In conclusion, the principles of lawful consideration and lawful object are essential safeguards within contract law. They ensure that the judicial system is not used to facilitate or reward conduct that is prohibited by statute or is contrary to public policy. While consideration need only be sufficient, its legality is non-negotiable. Likewise, the ultimate aim of any agreement must be lawful for the courts to recognise it as a valid and enforceable contract. Where an agreement is tainted by illegality in either its consideration or its object, the general rule is that the courts will not assist any party to it, reflecting the maxim ex turpi causa non oritur actio – no action arises from a disgraceful cause.
References
- Elliot, C. and Quinn, F. (2017) Contract Law. 11th edn. Pearson.
- McKendrick, E. (2021) Contract Law: Text, Cases, and Materials. 10th edn. Oxford University Press.
- Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87
- Everet v Williams (1725) 9 LQR 197
- Pearce v Brooks (1866) LR 1 Ex 213
- Re Mahmoud and Ispahani [1921] 2 KB 716
