10 Legality of Object and Form
Learning objectives
By the end of this Chapter, you should be able to:
- Explain why some contracts are void or made illegal by statute and its effect on the contract.
- Explain the types of contracts that are illegal and types of contracts that are void.
- Describe a restraint of trade and explain situations where such restraints are reasonable and legally enforceable.
- Explain what ‘form’ is and its effect on a contract.
Key Terms
An understanding of the following terms will help you understand the material in this chapter on legality and form:
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- Form: in the sense it is used in contract law, those statutory procedural requirements that need to be satisfied for some contracts to be enforceable
- Restraint of trade: an agreement in which a party agrees to restrict or restrain their activities in the future to carry on their trade, profession or business with other persons who are not a party to the contract
- Void: of no legal effect
- Voidable: an agreement that may be affirmed or rejected at the option of one of the parties
Introduction
- In the last two chapters we looked at the questions of capacity to contract (Chapter 8) and genuine consent (Chapter 9). In this chapter we will look at the questions of legality and form and once we have answered these questions, we will know whether the contract we created in Chapters 5 to 7 is valid. If it isn’t, then what is it? Is it voidable, void or unenforceable contract?
- In this chapter we are concerned with two questions:
- Was the purpose of the contract legal (the question of legality)? If it is not, we have a problem.
- Are there any statutory requirements that need to be met (form)?
In this chapter consider the legal position of the parties where the contract we created is illegal or void by statute or common law. Because of the importance of restraint of trade to business, it is very useful for you to have a knowledge of it in business. Of particular importance are the restraint of trade clauses in contracts of employment and the restraints imposed on the seller (vendor) of a business.
This chapter then completes the question about the validity of the contract that you created. However, this is not the end of the story. You still need to know what has been agreed to, that is, what are the terms of the contract (Chapter 11) and what happens if you, or the party you contracted with, don’t carry out what has been agreed to in the contract, as in, has there been a breach (Chapter 12).
Step 6: Is the purpose of the contract legal?
If you are satisfied that there is no issue with the questions of either capacity or consent, then the last of the factors you must consider is illegality and form. Are the objects, or purpose, of the contract that we created legal, and are there any statutory requirements that we need to satisfy?
Because some contracts, and certain clauses in some contracts, may be void or illegal at statute or common law, it is important to understand