Void and Illegal Contracts
Void and Illegal Contracts
Void Contracts
Void contracts are basically those which contravene a provision in a statute or are contrary to public policy at common law but to which the ex turpi causa principle does not apply.
Void by Statute
A statute may declare expressly that a particular contract is void, eg s 45 of the Trade Practices Act 1974 which provides that clauses purporting to exclude, restrict, or modify the liability of a corporation imposed by Division 2 Part V of the Act (that is the implication of terms such as an implied condition of merchantability and of fitness for purpose) are void. The effect is a question of statutory interpretation.
Void at Common Law on the Grounds of Public Policy
Restraint on Trade
A restraint on trade is a promise by one party, the covenantor, to give up a freedom that he would otherwise enjoy in relation to his or her trade, for the benefit of another party, the covenantee: Amoco Aust v Rocca Bros Motor Engineering Co.
Trading activities will include employment, operating a business and restrictive practices such as agreeing to obtain supplies exclusively from one supplier for a lengthy period of time.
While prima facie all restraints of trade are void, a restraint is valid if it can be shown to be reasonable in the interests of (Nordenfelt v Maxim Nordenfelt Guns and Ammunition): 1. the parties; and 2. the public.
The onus is on the covenantee to show the restraint is reasonable in the interests of the parties. If successful, it will shift to the covenantor to show that it is unreasonable in the interest of the public: Amoco Aust v Rocca Bros Motor Engineering Co.
The validity of a restraint must be decided as at the date of the agreement: Lindner v Murdock 's Garage.
Interests of the Parties
If a restraint is to be reasonable between the parties the covenantee must have a legitimate interest which the restraint goes no further than is necessary to protect: Amoco Aust v Rocca Bros
Void Contracts
Void contracts are basically those which contravene a provision in a statute or are contrary to public policy at common law but to which the ex turpi causa principle does not apply.
Void by Statute
A statute may declare expressly that a particular contract is void, eg s 45 of the Trade Practices Act 1974 which provides that clauses purporting to exclude, restrict, or modify the liability of a corporation imposed by Division 2 Part V of the Act (that is the implication of terms such as an implied condition of merchantability and of fitness for purpose) are void. The effect is a question of statutory interpretation.
Void at Common Law on the Grounds of Public Policy
Restraint on Trade
A restraint on trade is a promise by one party, the covenantor, to give up a freedom that he would otherwise enjoy in relation to his or her trade, for the benefit of another party, the covenantee: Amoco Aust v Rocca Bros Motor Engineering Co.
Trading activities will include employment, operating a business and restrictive practices such as agreeing to obtain supplies exclusively from one supplier for a lengthy period of time.
While prima facie all restraints of trade are void, a restraint is valid if it can be shown to be reasonable in the interests of (Nordenfelt v Maxim Nordenfelt Guns and Ammunition): 1. the parties; and 2. the public.
The onus is on the covenantee to show the restraint is reasonable in the interests of the parties. If successful, it will shift to the covenantor to show that it is unreasonable in the interest of the public: Amoco Aust v Rocca Bros Motor Engineering Co.
The validity of a restraint must be decided as at the date of the agreement: Lindner v Murdock 's Garage.
Interests of the Parties
If a restraint is to be reasonable between the parties the covenantee must have a legitimate interest which the restraint goes no further than is necessary to protect: Amoco Aust v Rocca Bros