illegality, frustration and force majeure

Question 1

pacta illicita meaning

Answer 1

deals with agreements to do something which is either impossible or illegal at the time the contract is entered into.

Question 2

illegality when it comes unenforceable contracts

Answer 2

• Agreements to commit a crime or a wrong (delict) are illegal
• Immoral contracts can’t be enforced either.
• For example, contracts that encourage sexual immorality used to be unenforceable — but what counts as immoral is always evolving.
• If both parties are equally to blame (in pari delicto) for an illegal contract, then the court won’t help either of them.
  → Basically: you made your bed, you lie in it.
  The Latin saying for this is:
• if one party is less at fault (an “innocent” party, meaning they didn’t act with bad intent or serious wrongdoing), they might be able to get compensation under unjustified enrichment — especially if they already did part of what the contract asked for (partial performance).
  If someone receives money or property through an illegal contract, the other person might be able to claim it backusing the law of unjustified enrichment — but only if they weren’t equally to blame (in pari delicto) for the illegal deal.
  The remedies for unjustified enrichment are based on what’s fair (equitable) — though not in exactly the same way as English courts use the word.

Question 3

what is restrictive covenant?

Answer 3

It’s a contract clause that limits what one party can do next — especially when it comes to making new business deals.Party A agrees to only trade with Party B, not with any competitors.

Question 4

terms for a restrictive covenant

Answer 4

1. It protects a legitimate interest of the person who benefits from it (Party B);
   
   2. It’s reasonable between the two parties (not too harsh or unfair); and
   3. It doesn’t harm the public interest (e.g. doesn’t restrict trade too much).

Question 5

case; sale of business

Answer 5

Nordenfelt v Maxim Nordenfelt [1894
]Nordenfelt was a weapons inventor.
He sold his business to Maxim’s company and agreed not to compete with them anywhere in the world for 25 years.
Later, Nordenfelt tried to work for a rival company.
Maxim’s company sued, saying Nordenfelt had broken their agreement.
courts ruled only valid if reasonable

Question 6

what is a penalty test?

Answer 6

Courts use a “penalty test” to check if a contract term is fair or unfair.

A clause will be seen as a penalty (and not allowed) if:

The punishment is way too harsh compared to the real harm caused by the breach.
The amount is much bigger than needed to properly protect the innocent party’s real interests.

Question 7

what is a force majeure

Answer 7

A force majeure clause is a part of a contract that says what happens if something big and unexpected (like a natural disaster or war) makes it impossible to do what was promised.

Question 8

supervening illegality meaning

Answer 8

This happens when a contract becomes illegal after it was made — either because a new law is passed or circumstances change making it unlawful to carry it out

Question 9

case; supervening illegality

Answer 9

James B Fraser v Denny Mott and Dickson (1944): War regulations made it illegal to continue a supply contract

Question 10

supervening impossibility meaning

Answer 10

This is when something happens after the contract is made that makes it impossible to perform — like if the thing the contract is about gets destroyed, or a key person dies.

Question 11

case; supervening impossibility

Answer 11

Taylor v Caldwell (1863) 3 B & S 826
hired a music hall from Caldwell to host concerts.
Before the concerts started, the hall burned down in a fire (no one’s fault).
Taylor sued for breach of contract.
What the court said:
The contract was not broken, because it had become impossible to perform.