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(m) Reynell v. Sprye (1852) 1 D. leaves the original contract in force:

M. G. 660, 672, 21 L. J. Ch. 633, City of Memphis v. Broicn (1873) 20

per Knight Bruce, L. J. Wallace (Sup. Ct. TJ. S.) 289.

(n) Goppock v. Bower (1838) 4 M. (q) Fraserv. Hill (1853) 1 McQu.

&W. 361. 392.

(o) Lord Hou'den v. Simpson (1839) (r) Armstrong v. Armstrong (1834)

10 A. & E. 793, 818. 3 M. & K. 45, 64, 13 L. J. Ch. 101,

ip) A subsequent agreement to s. c. nom. Armstrong v. Lewis (1834)

vary the performance of a contract in Ex, Ch. 2 Cr. & M. 274, 297.



358 UNLAWFUL AGREEMENTS.

of the law in the particular transaction in which they
were earned (s). Where a duly enrolled deed wter vivos
purported to create a rent-charge for charitable purposes,
but the deed remained in the grantor's keeping, no pajonent
was made during his lifetime, nor was the existence of the
deed communicated to the persons interested, and the
conduct of the parties otherwise showed an understanding
that the deed should not take effect till after the grantor's
death, it was set aside as an evasion of the Mortmain
Act (t). Again, an agreement is not unlawful merely
because something remains to be done by one of the
parties in order to make the performance of the agreement
or of some part of it lawful, such as obtaining a licence
from the Crown (u). On the same principle it is not
illegal for a highway board to give a licence to a gas com-
pany to open a highway within the board's jurisdiction, for
it must be taken to mean that they are to do it so as not
to create a nuisance (x).
Waugh V. In Waugh v. Morris (y) it was agreed by charter-party
Material that a ship then at Trouville should go thence with a cargo
on the of hay to London, and all cargo was to be brought and
intent ion taken from the ship alongside. Before the date of the
whether charter-party an Order in Council had been made and
know the published under the Contagious Diseases (Animals) Act,
law, 1869, prohibiting the landing of hay from France in this

country. The parties did not know of this, and the master
learnt it for the first time on arriving in the Thames. In
the result the charterer took the cargo from alongside the
ship in the river into another vessel and exported it, as he
lawfully might, but after considerable delay. The ship-
owner sued him for demurrage, and he contended that the
contract was illegal (though it had in fact been lawfully

(s) Sharp v. Taylor (1849) 2 Ph. ca. 1 Co. Rep. 25 a, the like as to a

801. condition in a devise.

(() Way V. East, 2 Drew. 44, 23 {x) Edgwnre Highway Board v,

L. J. Ch. 109. Harrow Gas Co. (1874) L. R. 10 Q.

(m) Sewell V. Royal Exch. Assurance B. 92, 44 L. J. Q. B. 1.

Co. (1813) 4 Tauat. 856 ; Haines v. (y) (1873) L. R. 8 Q. B. 202, 42

Busk (1814) 5 ib. 521; cp. Porter's L. J. Q. B. 57.



EVIDENCE OF UNLAWFUL PURPOSE. 359

performed), as the parties had intended it to be performed
by means which at the time of the contract were unlawful,
viz. landing the hay in the port of London. The Court
however refused to take this view. It was true that the
plaintiff' contemplated and expected that the hay would be
landed, as that would be the natural course of things. But
the landing was no part of the contract, and if the plaintiff
had had before him the possibility of the landing being for-
bidden, he would probably have expected the defendant not
to break the law ; as in fact he did not, for no attempt was
made to land the goods.

" We quite agree that where a contract is to do a thing which cannot be
performed without a violation of the law it is void, whether the parties knew
the law or not. But we think that in order to avoid a contract which can
be legally performed on the ground that there was an intention to perform
it in an illegal manner, it is necessary to show that there was the wicked
intention to break the law ; and if this be so, the knowledge of what the
law is becomes of great importance " (?).

But on the other hand where an agreement is prima Where
facie illegal, it lies on the party seeking to enforce it to ^Imafacie
show that the intention was not illegal. It is not enough unlawful,
to show a mere possibility of the agreement being lawfully enough to
performed in particular contingfent events. " If there be ^'^°^, ™®''®

^ ^ ... possibility

on the face of the agreement an illegal intention, the of lawful
burden lies on the party who uses expressions prima facie ance^"^™'
importing an illegal purpose to show that the intention
was legal " (a).

We now come to the rule, which we will first state As to
provisionally in a general form, that money or property baclJ^""^
paid or delivered under an unlawful agreement cannot be money or

property.

recovered back.



(z) (1873) L. R. 8 Q. B. 207-8. prohibent, si perpetuam causam ser-

(fl) Holland v. Hall (1817) 1 B. & vaturum est, cessat obligatio . . .

Aid. 53, per Abbott J. ; Allkins v. quamquam etiam sinon sit perpetua

Jupe (1877) 2 C. P. D. 375, 46 L. causa . . . idem dicendum est,

J. C. P. 824. The same principle quia statim contra mores sit." D.45.

is expressed in a different form by 1. de v. o. 35 § 1.
Paulus : " Item quod leges fieri



300



UNLAWFUL AGREEMENTS.



Lord
Mans-
field's ex-
planation
of the
rule.



This rule (which is subject to exceptions to be pre-
sently stated) is the chief part, though not quite the
whole, of what is meant by the maxim In pari delicto
'potior est condicio defendentis (h). To some extent it
coincides with the more general rule that money voluntarily
paid with full knowledge of all material facts cannot be
recovered back. However the principle proper to this
class of cases is that persons who have entered into
dealings forbidden by the law must not expect any assist-
ance from the law, save so far as the simple refusal to
enforce such an agreement is unavoidably beneficial to the
party sued upon it. As it is sometimes expressed, the
Court is neutral between the parties. The matter is thus
put by Lord Mansfield :

"The objection, that a coDtract is immoral or illegal as between plaintiff
and defendant, sounds at all times very ill in the mouth of the defendant.
It is not for his sake, however, that the objection is ever allowed, but it is
founded in general principles of policy, which the defendant has the
advantage of contrary to the real justice as between him and the plaintiff,
by accident, it I may say so. The principle of public policy is this: ex dolo
malo noil oritur actio. No Court will lend its aid to a man who founds his
cause of action upon an immoral or an illegal act. If from the plaintiff's
own stating or otherwise the cause of action appears to arise ex turpi causa,
or the trauRgression of a positive law of this country, there the Court says
he has no right to be assisted. It is upon that ground the Court goes; not
for the sake of the defendant, but because they will not lend their aid to
such a plaintiff. So if the plaintiff and defendant were to change sides,
and the defendant was to bring his action against the plaintiff, the latter
would then have the advantage of it ; for where both are equally in fault,
potior est conditio defendentis " (c).



The test for the application of the rule is whether the
aintiff can make out his case otherwise than " through
the medium and by the act of an illegal transaction to

It is not confined to



Plaintiff

recover plaintiff Can make out his case otherwise than " through

■where his
own un-
lawful which he was himself a party " {d).

part of his ^^^® ^^^^ ^^ actual money payments, though that is the most
own case, common. Where the plaintiff had deposited the half of a



(h) Cp. D. 50. 17. de reg. iuris,
154, C. 4. 7. de condict. ob tnrpem
causam, 2.

(r) Ilolrtwn v. Johnson (1775)



Cowp. 341, 343.

(d) Taylor v. Chester (1869) L. R.
4 Q. B. 309, 314, 38 L. J. Q. B. 225.



WHEN PAYMENTS CAN BE RECOVERED. 861

bank note with the defendant by way of pledge to secure
the repayment of money due for wine and suppers supplied
by the defendant in a brothel and disorderly house kept
by the defendant for the purpose of being consumed there
in a debauch, and for money lent for similar purposes, it
was held that the plaintiff could not recover, as it was
necessary to his case to show the true character of the
deposit. (This is apparent by the course of the pleadings ;
the declaration was on a bailment of the half-note to be
re-delivered on request, and in detinue. Pleas, in effect,
that it was deposited by way of pledge to secure money due.
Replication, the immoral character of the debt as above) (e).
The Court inclined also to think, but did not decide, that
the plaintiff's case must fail on the more general ground
that the delivery of the note was an executed contract by
which a special property passed, and that such property
must remain (/).

The rule is not even confined to causes of action ex
contractu. An action in tort cannot be maintained when
the cause of action springs from an illegal transaction to
which the plaintiff was a party, and that transaction is a
necessary part of his case {g).

Independently of the special grounds of this rule, a
completely executed transfer of property, though originally
made upon an unlawful consideration or in pursuance of
an unlawful agreement, is afterwards valid and irrevoc-
able (li).

The rule is not applicable in the following classes of
cases, most of which however cannot properly be called
exceptions.

An agent is not discharged from accounting to his prin- Duty of
cipal bv reason of past unlawful acts or intentions of the f-sents and

(e) L. R. 4 Q. B. at p. 312. 501, 513, 15 L.J. C. P. 125,apecu-

(/) Compare Ex parte Caldecott liar and apparently .solitary example.

(1876) 4 Ch. Div. 150, 46 L. J, Bk. [h) Ai/erst v. Jenkins (1873) 16 Eq.

14, p. 31 6, above ; Begbie v. Phosphate -llf), 42 L. J. Ch. 690. Cp. M'Callan

Sewage Co. (1875) L. R. 10 Q. B. 491, v. Mortimer (1842) (Ex. Cb.) 9 M.

500, affd. in C. A. 1 Q. B. Div. 679. & W. 636.
(g) Fivaz v. Nicholls (1846) 2 C. B.



362



UNLAWFUL AGREEMENTS.



account to
principals
notwith-
standing
collateral
illegality.



principal collateral to the matter of the agency. If A.
pays money to B. for the use of C, B. cannot justify a
refusal to pay over to C. by showing that it was paid
under an unlawful agreement between A. and C. (i).
Again, if A. and B. make bets at a horse-race on a joint
account and B. receives the winnings, A. can recover his
share of the money or sue on a bill given to him by B. for
it : here indeed there is nothing illegal in any part of the
business (/>;). For the same reason an agent employed to
bet and collect winnings is bound to account to his prin-
cipal for what he collects, though the losers could not have
been compelled to pay (l). In like manner the right to an
account of partnership profits is not lost by the particular
transaction in which they were earned having involved a
breach of the law (7)1). Nor can a trustee of property refuse
to account to his cestui que trust on grounds of this kind :
a trust was enforced where the persons interested were the



(i) Tenant v. Elliott (1797) 1 B.
&P. 3.

(k) Johnson v. Lansley (1852) 12
C. B. 468. And where B. uses
moneys of his own and A.'s in bet-
ting, on the terms of dividing win-
nings in certain proportions, A. can
sue B. on a cheque given for his
share of winnings : Beeston v. Beestoii
(1875) 1 Ex. D. 13, 45 L. J. Ex.
230. Cp. and dist. Higginson v.
Simpson (1877) 2 C. P.D. 76, 46
L. J. C. P. 192, where the transac-
tion in question was held to be in
substance a mere wager. Where an
agent is employed to bet in his own
name and receive winnings or pay
losses, the authority to pay losses
becomes irrevocable on the bet being
made ; Read v. Andersoyi (1884) 13 Q.
B. Div. 779, 53 L. J. Q. B. 532 ( Bowen
and Fry L. JJ. affirming Hawkins J.,
diss. Brett M. R. ). The ground taken
by the majority is that, under the
conditions of betting as commonly
practised and known to the parties,
the employment of the plaintiff
must imply an indemnity against
all payments made in the regular
course of business. A fine distinc-
tion has been taken in two recent



cases of purchase of bank shares
through brokers, where the contract
note omitted to specify the num-
bers of the shares as required by
Leeman's Act, 30 & 31 Vict. c. 29,
8. ]. The brokers, if they had not
completed the contracts, might have
been declared defaulters, and ex-
pelled from the Stock Exchange.
In Seymour v. Bridge (1885) 14 Q. B.
D. 460, Mathew J. held that the
principal could not repudiate ; in
Ferry v. Barnett (1885) 15 Q. B. Div.
388, 54 L. J. Q. B. 466, it was held
(distinguishing the case from Bead
V. Anderson and Seymour v. Bridge),
that, if he did not know the usage
of the Stock Exchange, he could.

(?) Bridger v. Savage (1884) 15 Q.
B. Div. 363, 54 L. J. Q. B. 464: the
contract of agency is not a gaming or
wagering contract. But he cannot
be liable for failing to make bets or
collect winnings, for the collection is
precarious: Cohen v. Kittell (1889)
22 Q. B. D. 681, 58 L. J. Q. B. 241.

(m) Sharp v. Taylor (1849) 2 Ph.
80i. Of course it is not so where
the main object of the partnership
is unlawful.



RECOVERY FROM AGKNT OR STAKEHOLDER. 363

members of an unincorporated trading association, though
it was doubtful whether the association itself was not
illegal (;n). So, if A. with B.'s consent effects a policy for
his own benefit on the life and in the name of B., having
himself no insurable interest, the policy and the value of it
belong, as between them, to A. (o). If a man entrusts
another as his agent with money to be paid for an unlaw-
ful purpose, he may recover it at any time before it is
actually so paid ; or even if the agent does pay it after
having been warned not to do so (p); the reason of this,
clearly put in one of the earlier cases (g), is that whether
the intended payment be lawful or not an authority may
always be countermanded as between the principal and
agent so long as it is not executed (r). It is the same
where the agent is aizthorized to apply in an unlawful
manner any part of the moneys to be received by him on
account of the principal ; he must account for so much of
that part as he has not actually paid over (r). The
language of the statute 8 & 9 Vict. c. 109, s. 18, which
says that no money can be recovered " which shall have
been deposited in the hands of any person to abide the
event upon which any wager shall have been made " does
not prevent either party from repudiating the wager at
any time either before or after the event and before the
money is actually paid over and recovering his own deposit
from the stakeholder (s).

Where money has been paid under an unlawful agree- Money re-
ment, but nothing else done in performance of it, the back,
money may be recovered back. But in the decision which ^^^^^

1 T. , , . . agreement

establishes this exception it is intimated that it probably not exe-
cuted.

(ft) Sheppard v. Oxenford (1855) (s) Digyle v. Higgs (1877) 2 Ex.

1 K & J. 491. Div. 422, 46 L. J. Ex. 721 ; Hampden

(o) Worthington v. Curtis (1875) v. Walsh (1876) 1 Q. B. D. 189, 45

1 Ch. Div. 419, 45 L. J. Ch. 259. L. J. Q. B. 2-S8, where former

{p) Hastelow v. Jackson (1828) 8 authorities are collected and con-

B. & C. 221, 226. f-idered; Trimble v. Hill (1879) (J.C.)

(5) Taylor v. Lendey (1807) 9 East on a colonial statute in the same

49. terms, 5 App. Ca. 342, 49 L. J. P.

(r) Bone v. Ekless (1860) 5 H. & C. 49.
N. 925, 29 L. J. Ex. 438.



364 UNLAWFUL AGREEMENTS.

would not be allowed if the agreement were actually
criminal or immoral (t). In general, " if money is paid or
goods delivered for an illegal purpose, the person who has
so paid the money or delivered the goods may recover
them back before the illegal purpose is carried out ; but if
he waits till the illegal purpose is carried out, or if he seeks
to enforce the illegal transaction, in neither case can he
maintain an action " (u). And the action cannot be main-
tained by a party who has not given previous notice that
he repudiates the agreement and claims his money back (x).
In Taylor v. Boivers (;u) A. had delivered goods to B.
under a fictitious assignment for the purpose of defrauding
A.'s creditors. B. executed a bill of sale of the goods to
C, who was privy to the scheme, without A.'s assent. It
was held that A. might repudiate the whole transaction
and demand the return of the goods from C. In Symes v-
Hughes (y), a case somewhat of the same kind, the plain-
tiff had assigned certain leasehold property to a trustee
with the intention of defeating his creditors ; afterwards
under an arrangement with his creditors he sued for the
recovery of the property, having undertaken to pay them
a composition in case of success. The Court held that, as
the illegal purpose had not been executed, he was entitled
to a reconveyance. It will be observed however that the
plaintiff was in effect suing as a trustee for his creditors, so
that the real question was whether the fraud upon the
creditors should be continued against the better mind of
the debtor himself. The cases above mentioned as to
recovering money from agents or stakeholders are also put
partly on this ground, which however does not seem neces-
sary to them (z).

{t) Tappemlen v. Randall (1801) (x) Palyart v. Leclie (1817) 6 M.

2 B. & P. 467. & S. 290.

(u) Per Mellish L.J. Taylor v. (y)(1870)9Eq.475,39L. J.Ch.304.

Bowers (1876) 1 Q. B. Div. 291, at (z) Hastdow v. Jackson (1828) 8

p. 300 ; in Herman v. Jeuchner B. & C. 221. Mearing v. HelLings

(1885) 15 Q. B. Div. 561, some (1845) 14 M. & W. 711, 15 L. J.

doubt is thrown on the first branch Ex, 168, where that case was

of this statement, but the ground of doubted, decides only this : A man

the decision was that an illegal pur- cannot sue a stakeholder for the

pose had in fact been carried out. whole of the sweepstakes he has



WHEN PAYMENTS CAN BE RECOVERED. 865

In certain cases the parties are said not to be m pari Parties

„ , 11 not m pan

delicto, namely where the unlawful agreement and the delicto.

payment take place under circumstances practically ^^^^^

amounting to coercion. The chief instances of this kind tor's assent

in courts of law have been payments made by a debtor by pog^t^n,

way of fraudulent preference to purchase a particular

creditor's assent to his discharge in bankruptcy or to a

composition. The leading case is now Atkinson v.

Denhy {a). There the defendant, one of plaintiff's

creditors, refused to accept the composition unless he had

something more, and the plaintiff paid him bOl. before he

executed the composition deed. It was held that this

money could be recovered back. " It is true," said the

Court of Exchequer Chamber, " that both are in delicto,

because the act is a fraud upon the other creditors, but it

is not par delictum, because the one has the power to

dictate, the other no alternative but to submit." On the

same ground money paid for compounding a penal action

contrary to the statute of Elizabeth may be recovered

back (5). But where a bill is given by way of fraudulent

preference to purchase a creditor's assent to a composition,

and after the composition the debtor chooses to pay the

amount of the bill, this is a voluntary payment which

cannot be recovered (c).

In equity the application of this doctrine has been the I^'^e

. i 1 1 . , . . . doctrine

same m substance, though more varied m its circumstances, of equity.
The rule followed by courts of equity was thus described
by Knight Bruce L.J. : " Where the parties to a contract
against public policy or illegal are not in pari delicto (and
they are not always so) and where public policy is
considered as advanced by allowing either, or at least the



won in a lottery, and then reply to 934, 31 L. J. Ex. 362 : the chief

the objection of illegality that if the earlier ones are Smith v. Bromley

whole thing is illegal he must at (1760) 2 Doug. 695, Smith v. Cuff

all events recover his own stake. (1817) 6 M. & S. 160.

AUegans contraria non est audien- (h) Williams v. Uedley (1807) 8

dus. East, 378.

(a) (1860) 6 H. & N. 778, 30 L. (c) Wilson v. Ray (1839) 10 A. &

J. Ex. 361, in Ex. Cb. 7 H. & N. E. 82.



366 UNLAWFUL AGREEMENTS.

more excusable of the two, to sue for relief against the
transaction, relief is given to him, as we know from various
authorities, of which Osborne v. WilUaTns [see below] is
one " (d).
Special On this principle relief was given and an account

ofTeUef decreed in Osborne v. Williams (e), where the unlawful
sale of the profits of an office was made by a son to his
father after the son had obtained the office in succession to
his father and upon his recommendation, so that he was
wholly under his father's control in the matter. In Reynell
V. Sprye (/) an agreement bad for champerty was set aside
at the suit of the party who had been induced to enter
into it by the other's false representations that it was a
usual and proper course among men of business to advance
costs and manage litigation on the terms of taking all the
risk and sharing the property recovered. In a later case a
mortgage to secure a loan of money which in fact was lent
upon an immoral consideration was set aside at the suit of
the borrower on the ground that the interest of others
besides parties to the corrupt bargain was involved (g). A
wider exception is made, as we have seen above, in the
case of agreements of which the consideration is future
illicit cohabitation between the parties. The treatment
of this kind of agreements is altogether somewhat anoma-
lous and ill-defined, and may perhaps be considered open
to review. Apart from this particular question, there
seems to be no reason (at all events since the Judicature
Acts) why the analogy of the cases in equity where agree-
ments have been set aside should not apply to the legal
right of recovering back money paid. If this be correct,
the rule and its qualifications will be to this effect :

Statement 7. Money paid or property delivered under an unlawful
as quali- ^ agreement cannot be recovered back, nor the agreement
fied. set aside at the suit of either party —

(d) Reynell v. Sprye (18.''»2) ID. (/) 1 D. M. G. 660, 679.

M. G. 660, at p. 679. (g) W. v. B. (1863) 22 Beav. 574.

(e) (1811) 18 Ves. 379.



CONFLICT OF LAWS. 367

unless nothing has been done in the execution of the
unlawful purpose beyond the payment or delivery itself
(and the agreement is not positively criminal or im-
moral ?);

or unless the agreement was made under such circum-
stances as between the parties that if otherwise lawful it
would be voidable at the option of the party seeking
relief {h) ;

or, in the case of an action to set aside the agreement,
unless in the judgment of the Court the interests of third
persons require that it should be set aside.

8. Where a difference of local laws is in question, the 8. Conflict
lawfulness of a contract is to be determined by the law apace,
governing the substance of the contract (that is, according Lex loci
to the Enp-lish authorities, the law of the place where the ''<"^'''<^^"«

o ' ^ prevails :

contract is made, subject to the consideration of matters
showing a different intention, for example, if the contract
is wholly to be performed in some other place) (i).

Exception 1. — An agreement entered into by a citizen unless
in violation of a prohibitory law of his own state cannot in by pro-
anv case be enforced in any court of that state. hibitory

•^ . "^ municipal

Exception 2. — An agreement contrary to common prin- law of the
ciples of justice or morality, or to the interests of the state, or™ni "
cannot in any way be enforced. the agree-

What we here have to do with is in truth a fragment of contrary to
a much larger subject, namely, the consideration of the common
local law governing obligations in general {k). interests

(h) This form of expression is not pared by Willes J.; Jacobs v. Credit

positively warranted by the authori- Lyonnais (1884) 12 Q. B. Div. 589

ties, but is submitted as fairly re- 600, 53 L. J. Q. B. 156.
presenting the result. {k) For the treatment of it in this

(i) Westlake, 234,237 ; per Erie connexion, see Saviguv, Syst. 8. 269-

C.J. Branhy v. ,S'. E. R. Co. (1862) 278 (g 374 C.) ; Story, Conflict of

12 C. B. N. S. at p. 72 : "As a Laws, §§ 243 sqq 258 sqq. ; Whar-



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