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Rajah Lehal

Contracts contrary to public policy from a statue

October 27, 2016

Ensure that you have understood all the rules, regulations, statues, and law that apply to your business before entering into any contracts. Hire counsel if necessary.

Historically, courts have refused to intervene in cases where a contract has been found to be unenforceable on the grounds of illegality (because it is contrary to a statue or regulation) even if the non-intervention resulted in unjust enrichment for either party.

For example, in Kingshot v Brunskill [1953], the Defendant entered into a contract with the Plaintiff to purchase non-graded apples. The contract contravened The Farm Products Grade and Sales Act Regulation *3, which provided that no person could sell or offer for sale any produce unless it had been graded. The Defendant owed the Plaintiff over $700 for apples which he had received but had not paid for. The Plaintiff sued to recover this amount. The court, reluctantly, held that because the contract contravened the above regulation, it was unenforceable. The action was dismissed and the Plaintiff could not recover the money he was owed. However, since *Kingshot v Brunskill, courts have developed three exceptions to the general rule that the Court will not order the return of property transferred under any illegal contract. The exceptions are: (1) where the party claiming is less at fault; (2) where the party claiming repents before the contract is performed; and (3) where the party claiming has an independent right to recover (source: Berne Development Ltd. v. Haviland, 1983 CarswellOnt 629, para 37).

Contract Drafting
Case Law

Written by Rajah. Rajah Lehal is Founder and CEO of Clausehound.com. Rajah is a legal technologist and technology lawyer who is, together with the Clausehound team, capturing and sharing lawyer expertise, building deal negotiation libraries, teaching negotiation in classrooms, and automating negotiation with software.