Question 1 Critically advise the senior partner of your law firm on the rules relevant to recovering damages and property whether the contract is illegal from inception or illegal during performance. ________________________________________ Lord Mansfield in Holman v Johnson reiterates the basic principle as it regards to the law’s treatment of contracts illegal at common or statutory law-“ No Court will lend its aid to a man who founds his cause of action upon an illegal or immoral act.” This has been reaffirmed by Lord Goffe and Lord Browne-Wilkinson in Tinsley v Milligian. However, in determining the consequences of illegal acts carried out pursuant to a contract, the Courts will distinguish between those contracts that are said to be illegal at their inception, and those that are illegal through performance, when assessing whether a party can recover property transferred under the illegal contract or receive damages. Contracts - Illegal at the Time of Inception Damages Whether either statue or common law has declared that a particular class of contract will be legal if it is made, then such a contract can never be either legally formed or performed and will be illegal from the moment of its formation( contract void ab initio). Neither party can therefore sue on it, not even the one who was unaware of the facts which has made it illegal. This is the basic rule of ex turpi causa: the court will not enforce a contract which is tainted with illegality or immorality. An example of application of this principle at statutory law is the case of Re Mahmoud and Isaphani (1921). Here the court held that a contract to supply linseed oil was unenforceable because the purchaser committed an offence by supplying the goods without the requisite licence required by the Seeds, Oils and Fats Order Act. Another example of this being applied at common law Upfill v Wright. The court held that a contract for the rental of flat was illegal and unenforceable because the plaintiff rented it to the defendant knowing that it was going to be used to promote a sexually immoral purpose. Therefore his action to recover arrears of rent failed. There is, however, an exception to this general principle. A contract that is illegal from formation may be enforceable where the party claiming bases his cause of action outside/without reliance on the illegality. This rule is illustrated in the case of Tinsley v Milligian. T and M jointly purchased a home but legal title was registered in Tinsley's name alone, in order to perpetrate a fraud. Relations between the couple later soured, and Milligan claimed a share by way of resulting trust, but was met with an ex turpi causa defence. It was held that in Milligan's resulting trust claim was not defeated by her fraud, since the trust arose by presumption, and she did not need to rely on her fraud. This was also illustrated in the case of Skilton v Sullivan. The seller of a quantity of Koi carp sent the buyer an invoice for trout. The supply of Koi carp is chargeable to VAT but the supply of trout is not. When the seller sued for the price, he was met with a plea that the contract was illegal as being a fraud on the Revenue. Held: At the time the contract was entered into there was no intention to defraud the Revenue and although the subsequent sending of the invoice for trout was an unlawful act, the seller was not relying on that act to recover the price. Recovery of Property As it relates to recovery of property under contracts that are illegal from inception, the maxim in pari delicto potior est condition possidentis: a party who has transferred property under an illegal contract cannot recover the property if in order to found his claim, he must rely on the illegal con