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The secretary of the College of Ambulance promised Col. Parkinson that, if he made a large donation to the college, which was a charitable institution, he would receive a knighthood. The colonel made a large donation, and, not receiving his knighthood, he sued for the return of his money.

HELD: The action failed, because the contract was against public policy and illegal. (d) Agreements to Pervert the Course of Justice

Contracts under this heading usually comprise agreements not to disclose crimes, or not to prosecute for criminal offences. They are unenforceable but, in addition, by virtue of the Criminal Law Act 1967, concealing an “arrestable offence” is itself a criminal offence. “Concealing” is committed if a person accepts a price, other than merely making good loss caused by the offence, for not disclosing the offence.

(e) Agreements Tending to Abuse the Legal Process

These largely comprise the acts of “maintenance” and “champerty”.

Maintenance is the supporting (usually financially) of litigation in which the person maintaining has no legitimate interest.

Champerty is where a person assists in litigation in exchange for a share in any proceeds gained from it – e.g. a solicitor representing a client for a percentage of the damages awarded to his client. English law has always frowned on champerty but it is the common practice in many foreign jurisdictions.

Both maintenance and champerty were, at common law, both torts and crimes. The Criminal Law Act 1967 abolished these, but contracts in respect of both are still contrary to public policy.

Another type of abuse of the legal process is collusion in divorce. Nowadays, however, this is more honoured in the breach!

(f) Agreements Contrary to Good Morals

Contracts which are for immoral purposes will not be enforced. Pearce v. Brooks (1866)

A firm of coach builders hired to a prostitute a coach with an interesting design. It was known to the firm that it would be used by her in plying her trade. She failed to pay the hire.

HELD: The contract would not be enforced.

(g) Contracts in Restraint of Marriage which Affect the Due Discharge of Parental Duty It is against public policy to restrain the freedom of marriage, or to promote for a fee the marriage between one person and another.

Likewise, agreements for a fee to promote a separation or divorce are unenforceable, or those to transfer rights and duties in respect of a child from its parents.

(h) Agreements which Oust the Jurisdiction of the Courts

From a commercial point of view, this category is important. It is the right of every subject of the Queen to have his rights determined by the ordinary courts. Hence, any agreement to oust the courts is void.

Arbitration agreements to refer any dispute arising under a contract to arbitration have long been acceptable, provided that the agreement did not preclude the parties from referring any point of law to the courts. In Scott v. Avery (1855), it was held that a clause in a contract providing that it should be a condition precedent to any course of action accruing that an arbitrator should have made an award was not contrary to public policy (even nowadays, such provisions are called “Scott v. Avery clauses”).

The principle that parties to an arbitration could refer a point of law to the court was enshrined in the Arbitration Act 1934. The principle has been eroded, but not done away with, by the Arbitration Act 1979, which provides that the parties may agree to exclude the right of appeal to the court. If they do not so agree, then the right remains.

(j) Agreements in Undue Restraint of Trade

These also form a most important category of contracts which are contrary to public policy – but also one which contains fine distinctions. The problem is that, prima facie, any agreement is void if the purpose of it is to restrict the liberty of a person in the future to carry on trade with persons who are not parties to the contract – that is to say, to restrain trade. But, at the same time, a person has every right to protect his interests and his business from unfair competition. There is an obvious clash between these two propositions. So, the principle is that a person may restrict the right of another to trade, only so far and to the extent that is necessary and reasonable to protect his legitimate interests.

Each case must be considered separately, and the general rule is that every contract in restraint of trade is prima facie void unless the restraint(s) can be shown to be reasonable as between the parties, and not injurious to the public interest.

Contracts in restraint fall into a number of categories.

! Employer and Employee

This occurs where an employer inserts in a contract of employment clauses restricting his employee from engaging in a competing business after he has left the employment concerned. For example, a company may legitimately wish to prevent a salesman from trying to take away all the customers on whom he calls, and transfer their custom to a rival company, if it later employs him. On the other hand, the salesman has a right, which the law will respect, to earn his living in the manner of his choice.

So, a covenant will be enforced which seeks to prevent an employee from competing after he leaves that employment, provided it is no wider in geographical area and in time than is reasonably necessary to protect the employer’s legitimate interests. What is “reasonable” in a given case will depend on the status of the employee, and on the rights which need protecting.

Sir W C Leng & Co. Ltd v. Andrews (1909)

A junior reporter on a provincial newspaper was required not to be connected with any other newspaper within 20 miles of Sheffield.

HELD: The constraint was unreasonably wide. Foster & Sons Ltd v. Suggett (1918)

A works manager was not permitted to engage in glass-making anywhere in the UK. HELD: It was reasonable, as the employee was trained in trade secrets which were applicable throughout the country.

Littlewoods Organisation Ltd v. Harris (1978)

Harris was a director of the mail-order side of Littlewoods’ business. His contract precluded him from working for any other mail-order company for 12 months after leaving Littlewoods’ employment. He wished to join GUS Ltd – a rival mail-order business.

HELD: The restraint was reasonable, in the sense that mail-order business is highly skilled and very competitive. Harris was a director, and in a position to know and supply many trade secrets.

In determining what constitutes reasonableness the courts occasionally adopt a common sense approach. In Clarke v. Newland (1991) a doctor in general practice was prevented by his contract from “practising” locally for three years after leaving the practice. He claimed that this restraint was unreasonable since it could prevent him from working in a hospital since that could constitute “practising”.

HELD: The restraint was intended to apply to general practice only and would be valid to that extent. He could therefore be restrained from starting in a rival general practice. If the employer is himself in breach of contract he will not be allowed to enforce it even though the restraint in itself is reasonable and the employee is in breach of the restraint. In Briggs v. Oates (1990) the employee had been wrongfully dismissed by his employer. His contract forbade him practising as a solicitor within a specified area. It was held that since the employer had broken the contract by dismissing the employee he could not be allowed to enforce it.

If the courts decide that the employer is simply trying to prevent reasonable competition then they will declare the restriction invalid. So in Faccenda Chicken Ltd v. Fowler (1986) Fowler, an ex-employee, used information as to prices and products sold by the company to set up in competition. The company tried to argue that he was misusing confidential information. The court held that the employer was simply trying to prevent competition. The information which the employee was using could not be described as confidential since most of it, e.g. prices and products, was already public knowledge. The decision shows that the courts will not automatically take the employer’s view of any situation. It is for the employer to prove that he is genuinely trying to protect himself against unfair competition by the ex-employee.

! Sale of Goodwill of a Business

If the restraint is merely to stop competition without protecting the business sold, it will be unenforceable.