GHANA INSTITUTE OF MANAGEMENT AND PUBLIC ADMINISTRATION

(GIMPA)
COURSE CODE: FLAW
COURSE NAME: LAW OF CONTRACT II
 DEVELOPING A MORE BALANCED FRAMEWORK FOR
DEALING WITH STATUTORILY ILLEGAL CONTRACTS

CHRISTINE DOWUONA HAMMOND

What is the thrust of the article

Do you agree with the authors approach in dealing with the illegality
problem
INTRODUCTION:

The traditional common law rules governing the effects of illegality on contracts have been widely
criticized as uncertain and arbitrary in their application (Shand, 1972).

It tends to produce gross injustice in certain cases as because of their all or nothing impact.

The supreme court of Ghana has described the existing legal regime on the effect of contractual
illegality as unduly rigid and technical in urgent need for reform
(City & Country waste ltd v. Accra Metropolitan Association).

As a general rule, the courts will not enforce a contract which is illegal
or contrary to public policy
(City & Country waste ltd v. Accra Metropolitan Association).
 THRUST / OBJECTIVES

Whether or not there should be a total and absolute ban on the

enforceability of statutorily illegal contracts without regards to the factors
such as the relative blameworthiness of the parties, the degree of
illegality or the extent to which the claim would undermine or further the
purpose of the statute
(ie the challenging process of determining when a contract is impliedly prohibited
by statute ).
 SCOPE OF THE ARTICLE
PART I COMMON LAW POSITION

Determining implied Statutory Illegality;

A contract may be deemed illegal either because its formation or performance involves a
violation of a statue or Because its falls within any recognized categories of contracts to be
illegal on grounds of public policy Where a prohibition is not explicitly stated, establishing
a source of an alleged illegality intended to render a contract illegal is a dicey decision
(i.e. resorting to convoluted judicial interpretations sometimes
resulting in decisions which are confusing and irreconcilable
[Grodecki J.K, 1955, City & Country waste ltd v. Accra
Metropolitan Association])
CASES
Shaw v. Groom
St John Shipping Corporation v. Joseph Rank Ltd
Olatiboye v Captain
Cope v. Rowlands
Vita food product inc. v. Unus shipping co ltd
Hughes v. Asset Managers Plc

In reviewing the cases, it is clear that the courts have taken a more realistic view that, vacating contracts

because they are implied by statute as illegal and depriving all parties any reliefs does not further the

purpose of the statues and thus this could not be the objective of the statue.
THE PERSPECTIVE OF THE GHANAIAN COURTS ON IMPLIED
STATUTORY ILLEGALITY:

Its worth knowing that the Ghanaian judicial approach has been increasingly more
flexible and pragmatic, carefully balancing the various policy considerations before
arriving at the conclusion that a contract is impliedly prohibited by a statue.

City & Country Waste ltd v. Accra Metropolitan Assembly

The supreme court of Ghana stated that; the principle would seem to be that, before
a statute is construed to have impliedly prohibited a contract, a purposive
interpretation of statute must have yielded a serious and sufficient public policy
reason for the prohibition. The need for a policy reason for the prohibition is the
broad criterion, in the application of which the courts apply various subsidiary
tests, none of which is by itself decisive (pg 426-427).
Where a the court ascertains that a statutory provision was purposively designed for the protection or
furtherance of some public interest or policy , a contract made in contravention of such a statute is likely
to be struck down. However before arriving at such a decision, a purposive interpretation of the statute
must reveal significant public policy reason.
Other subsidiary issues considered after public policy;
Unjust enrichment
Purpose of the statutory provision
Proportionality between the breach of the statue and the loss ensuing from non-enforcement.

Ahenfie cloth sellers association v. Mensah Dood, Afriyie & Others

From the case;
it exemplifies the dilemma that the courts face in dealing with cases involving implied statutory illegality. Under the
existing rules, a finding that a loan agreement or contract was statutorily illegal would have led to the conclusion that
the contract was void and unenforceable to both parties, immediately denying the lender of his right to repayment of the
loan. This it appears was a conclusion that the court sort to avoid by taking the only route available that is by finding
that the contract was not prohibited by the statute.
In conclusion, the settled principle that a contract tainted with illegality from the inception is absolutely
unenforceable by both parties tends to be problematic, hash and sometimes unjustifiable.
PART II

Effect on enforceability;

Review the existing legal framework governing the consequences of

illegality and highlight its practical limitation.

Existing legal framework

The absolute position of the law is that from a dishonorable cause, an action does not
exist, Ex turpi causa non oritur actio (Anderson v. Daniel, Archibold v. Spanglett,
Ashmore & othrs v. Dawson).

The General Rule/ Common law Position :

Neither party can claim any right or remedy whatsoever under an illegal contract.
 Exceptions To The General Rule

In determining whether money, property or other benefit transferred under an illegal contract is
recoverable, the common law applies the Latin maxim I n pari delicto potior est conditio defendentis (ie
where the parties are equally blameworthy, the defendants, has the stronger position). Therefore the
claimant will be allowed to recover if him or her is the less blameworthy party.
Claims of a restitutionary nature aimed at recovering money, property or any other benefit transferred
under an illegal contract may be allowed under the following conditions:

1. The claim can be established without reliance on illegal contract

2. The parties are not pari delicto
3. The contract is rendered illegal by a class protecting statues, in which case a member of the protected
class is allowed to recover money or property transferred by him or her under the contract
4. One party to an executory contract repents or changes his mind before the purpose of the illegal contract
is substantially fulfilled.
Practical limitations
In practice, enforcement may lead to; -Unjust enrichment of the party responsible for
the illegality (Re Mohamod & Ispahani)
Unjust effect of this rule in some cases on the rights of innocent contracting party is
quite manifest Instances where the court holds that the effect on the rights of the
innocent party would be so unfair that the legislature could not have intended to
render the contract illegal in the first place
PART III
Adopting the existing rules;

Outline the progressive paths that the courts are charting to promote
fairness on a case-by-case basis and considers some approaches which
have been adopted in other jurisdictions in managing the effects of
contractual illegality.

Alternative Approaches to dealing with statutorily illegality contracts

United States;
New Zealand;
PART IV

Introducing statutory discretion for the courts in Ghana;

Making specific proposals for the adoption of legislation in ghana to

grant the court structured discretion in awarding relief under statutorily
illegal contracts.

Preliminary Issues to consider;

Proposal for enactment of an illegal contract act for Ghana;
CONCLUSION

whether or not i agree with the Author's approach to dealing with the
illegality problem