Option of party instance to An owner of property who has contracted to sell or let innocent it, but finds afterwards that the other party means to use in the first it for an unlawful purpose, is entitled (if not bound) to rescind the contract; nor is he bound to give his reason at the time of refusing to perform it. He may justify the refusal afterwards by showing the unlawful purpose, though he originally gave no reason at all, or even a different reason (a). avoid the contract on discovering such in tention. But an executed But a completely executed transfer of property or an transfer of interest in property, though made on an unlawful conpossession sideration, or, it is conceived, for an unlawful purpose remains good. Insurance void where voyage illegal to known to both parties, is valid both at law and in equity (), and cannot afterwards be set aside. And an innocent party who discovers the unlawful intention of the other after possession has been delivered under the contract is not entitled to treat the transaction as void and resume possession (c). As with contracts voidable on other grounds, this rule applies, it is conceived, only where an interest in possession has been given by conveyance or delivery. The vendor who had sold goods so as to pass the general property, but without delivery, or the lessor who had executed a demise to take effect at a future day, might rescind the contract and stand remitted to his original possession on learning the unlawful use of the property designed by the purchaser or lessee (d). On the same principle an insurance on a ship or goods is void if the voyage covered by the insurance is to the knowledge of the owner unlawful (which may happen by knowledge the omission of the statutory requirements enacted for the of owner. protection of seamen and passengers, as well as in the (a) Cowan v. Milbourn, L. R. 2 Ex. 230, see per Bramwell, B. ad fin. (b) Ayerst v. Jenkins, 16 Eq. 257. (c) Feret v. Hill, 15 C. B. 207, 23 L. J. C. P. 185, where an interest in realty had passed; but qu. if the lessor could not have had the lease set aside in equity. As to chattels, contra per Martin, B. in Pearce v. Brooks, L. R. 1 Ex. 217; but this seems unsupported: see L. R. 4 Q. B. 311, 315. (d) Cp. Cowan v. Milbourn, L. R. 2 Ex. 230. case of trading with enemies or the like). "Where the object of an Act of Parliament is to prohibit a voyage, the illegality attaching to the illegal voyage attaches also to the policy covering the voyage," if the illegality be known to the assured. But acts of the master or other persons not known to the owner do not vitiate the policy, though they may be such as to render the voyage illegal (e). An agreement may be made void by its connexion with Agreean unlawful purpose, though subsequent to the execution of it. ments connected with but subse quent to ful trans Such unless an unlawful Cases in To have that effect, however, the connexion must be something more than a mere conjunction of circumstances an unlawinto which the unlawful transaction enters so that without action. it there would have been no occasion for the agreement. agreement It must amount to a unity of design and purpose such not void that the agreement is really part and parcel of one entire integral unlawful scheme. This is well shown by some cases part of decided in the Supreme Court of the United States, and design. spreading over a considerable time. They are the more Supreme worth special notice as they are unlike anything in our Court, own books. In Armstrong v. Toler (f) the point, as put Armby the Court in a slightly simplified form, was this: "A. strong v. Toler, &c. during a war contrives a plan for importing goods on his own account from the country of the enemy, and goods are sent to B. by the same vessel. A. at the request of B. becomes surety for the payment of the duties [in fact a commuted payment in lieu of confiscation of the goods (e) Wilson v. Rankin, L. R. 1 Q. B. 163 (Ex. Ch.); Dudgeon v. Pembroke, L. R. 9 Q. B. 581, 585, per Quain, J., and authorities there referred to. Cp. further, on the general head of agreements made with an unlawful purpose, Hanauer v. Doane, 12 Wallace (Sup. Ct. U. S.) 342 in Sprott v. U. S. 20 ib. 459, it was held that a buyer of cotton from the Confederate Government, knowing that the purchase money would be applied in support (f) 11 Wheaton 258, 269. U. S. Fisher v. themselves] which accrue on the goods of B., and is compelled to pay them; can he maintain an action on the promise of B. to return this money?" The answer is that he can, for the "contract made with the government for the payment of duties is a substantive independent contract entirely distinct from the unlawful importation." But it would be otherwise if the goods had been imported on a joint adventure by A. and B. In McBlair v. Gibbes (g) an assignment of shares in a company was held good as between the parties though the company had been originally formed for the unlawful purpose of supporting the Mexicans against the Spanish Government before the independence of Mexico was recognized by the United States. In Miltenberger v. Cooke (h) the facts were these. In 1866 a collector of United States revenue in Mississippi took bills in payment when he ought to have taken coin, his reason being that the state of the country made it still unsafe to have much coin in hand. In account with the government he charged himself and was charged with the amount as if paid in coin. Then he sued the acceptors on the bills, and it was held there was no such illegality as to prevent him from recovering. If the mode of payment was a breach of duty as against the Federal government, it was open to the government alone to take any objection to it. We return to our own Courts for a case where on the other hand the close connexion with an illegal design was established and the agreement held bad. In Fisher v. Bridges (i) the plaintiff sued the defendant on a simple covenant to pay money. The defence was that the covenant was in fact given to secure payment of part of the purchase-money of certain leasehold property assigned by the plaintiff to the defendant in pursuance of an unlawful agreement that the land should be resold by lottery contrary to the statute (k). The Court of Queen's Bench held (g) 17 Howard 232. (h) 18 Wallace 421. (i) 2 E. & B. 118, 22 L. J. Q. B. 270; in Ex. Ch. 3 E. & B. 642, 23 L. J. Q. B. 276. (k) 12 Geo. 2, c. 28, s. 1. unanimously that the covenant was good, as there was nothing wrong in paying the money, even if the unlawful purpose of the original agreement had in fact been executed and the case was likened to a bond given in consideration of past cohabitation. But the Court of Exchequer Chamber unanimously reversed this judgment, holding that the covenant was in substance part of an illegal transaction, whether actually given in pursuance of the first agreement or not. "It is clear that the covenant was given for payment of the purchase-money. It springs from and is a creature of the illegal agreement; and as the law would not enforce the original contract, so neither will it allow the parties to enforce a security for the purchase-money which by the original bargain was tainted with illegality." They further pointed out that the case of a bond given for past cohabitation was not analogous, inasmuch as past cohabitation is not an illegal consideration but no consideration at all. But "if an agreement had been made to pay a sum of money in consideration of future cohabitation, and after cohabitation, the money being unpaid, a bond had been given to secure that money, that would be the same case as this; and such a bond could not under such circumstances be enforced." of the The principle of this judgment has been criticized by Principle considerable authority as "vague in itself and dangerous judgment. as a precedent" (7). The actual decision, however, does not appear to require anything wider than this-that where a claim for the payment of money as on a simple contract would be bad on the ground of illegality, a subsequent security for the same payment, whether given in pursuance of the original agreement or not, is likewise not enforceable: or, more shortly for pay 5. Any security for the payment of money under an 5. Security unlawful agreement is itself void, even if the giving of ments the security was not part of the original agreement. (1) 1 Sm. L. C. 400. under unlawful the original agreement. To this extent at least the principle of Fisher v. Bridges agreement is equally has been repeatedly acted on (m). In Geere v. Mare (m) void with a policy of assurance was assigned by deed as a further security for the payment of a bill of exchange. The bill itself was given to secure a payment by way of fraudulent preference to a particular creditor, and accepted not by the debtor himself but by a third person. It was held, both on principle and on the authority of Fisher v. Bridges, that the deed could not be enforced. Again in Clay v. Ray (m) two promissory notes were secretly given by a compounding debtor to a creditor for a sum in excess of the amount of the composition. Judgment was obtained in an action on one of these notes. In consideration of proceedings being stayed and the notes given up a third person gave a guaranty to the creditor for the amount: it was held that on this guaranty no action could be maintained. 5a. Bond with This is a convenient place to state a rule of a more special kind which has already been assumed in the discussion of various instances of illegality, and the necessity of which is obvious: namely: 5a. If the condition of a bond is unlawful, the whole unlawful bond is void (n). condition is wholly void. 6. Illegality may always be Rules of Evidence and Procedure touching Unlawful Agreements. 6. Extrinsic evidence is always admissible to show that the object or consideration of an agreement is in fact shown by illegal. (m) Grame v. Wroughton, 11 Ex. 146, 24 L. J. Ex. 265; Geere v. Mare, 2 H. & C. 339, 33 L. J. Ex. 50; Clay v. Ray, 17 C. B. N. S. 188. (n) Co. Lit. 206 b, Shepp. Touch. 372; where it is said that if the matter of the condition be only malum prohibitum, the obligation is absolute (as if the condition were merely impossible): but this distinction is now clearly not law: see Duvergier v. Fellows, 10 B. & C. 826. |