Void and Illegal Contracts

2948 Words May 5th, 2011 12 Pages
Void and Illegal Contracts
Void Contracts
Void contracts are basically those which contravene a provision in a statute or are contrary to public policy at common law but to which the ex turpi causa principle does not apply.

Void by Statute
A statute may declare expressly that a particular contract is void, eg s 45 of the Trade Practices Act 1974 which provides that clauses purporting to exclude, restrict, or modify the liability of a corporation imposed by Division 2 Part V of the Act (that is the implication of terms such as an implied condition of merchantability and of fitness for purpose) are void. The effect is a question of statutory interpretation.

Void at Common Law on the Grounds of Public Policy

Restraint on Trade
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Contracts will be judged strictly in relation to duration.

An agreement between employers restricting the employment of each other 's former employees may be void: Kores Co. Ltd v Kolok Co Ltd.

Sale of Business
Restraints are more readily upheld as ti allows the vendor to obtain full value for the business bing purchased and enables the purchaser to obtain exactly what he or she is bargaining for: Esso Petroleum v Harpers Garage. will be judged strictly in relation to duration.

The purchaser is only entitled to protect the business bought: Nordenfelt v Maxim Nordenfelt Guns Ltd

“Solus” (Exclusive dealing) agreements
Courts tend to uphold the restraint where the parties have bargained at arms length.

Factors such as length and an obligation to purchase minimum quantities regardless of market condition may render an exclusive dealing arrangement unreasonable: Qld Cooperative Milling Association v Pamag.

Interests of the Public
Public interest often follows private interest, but may have independent significance: Amoco Australia v Rocca Bros Motor Engineering.

Statute
Section 45 of the TPA prohibits corporations from entering into or giving effect to any contract arrangement or understanding which is an exclusionary provision or which has the purpose or would likely to have the effect of substantially lessening

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