Legality

ESSENTIAL
ELEMENTS OF
A VALID
CONTRACT
Dr Innocent Maja/Walter
Makhuyana
8. LEGALITY
 An agreement has to comply with the
provisions of the law for it to be
enforceable
 A contract the violates the law is
deemed to be illegal, void and
unenforceable
 Illegality can caused by contravening
a statute (statutory illegality) or
contravening common law (common
law illegality)
A. STATUTORY ILLEGALITY
 A statute may expressly prohibit a certain type
of contract and declare such a contract void,
invalid or of no force or effect. Such a contract
is unenforceable.
 A statute may expressly prohibit a certain type
of contract but make no express provision about
its validity. Here, court usually look at the
intention of the legislature to determine
validity or otherwise. The intention can be
gleaned from (a) use of peremptory terms, (b)
use of discretionary terms and (c) whether
declaring a contract illegal solves the mischief
that the statute aimed to prevent.
 A statute may not expressly prohibit a specific
type of contract but make it a criminal
offence. Here, courts ascertain the intention
of the legislature to ascertain whether the
statute intended the criminal sanction to be
the only sanction.
 Parties, conscious of the statutory
prohibition, may draft a contract in such a
way as to circumvent the statutory provision.
Courts usually take a 3 pronged approach (a)
grammatical interpretation, (b) Does the
contract fall within the ambit of the statute?
(c) was the contract designed craftily to
circumvent the statute?
B. COMMON LAW ILLEGALITY
Refers to contracts that contravene common law or
public policy (community interests or public morality,
social or economic expedience)
1. Contracts tendering to injure the state or public
service e.g. trading with the enemy, corruption, etc
2. Contracts injurious to the administration of justice
e.g ousting the jurisdiction of the court, collusion,
contracts injurious to the institution of marriage,
contracts to defraud creditors, pactum successorium (a
contract that curtails freedom of testation by
promising to bequeath property to a third part)
Pactum commissorium
 This is a contract where one borrows money from
another, pledges property as security for
repayment of debt and agrees that in the event of
default, the creditor can take full ownership of the
pledged property without a court order.
 A pactum commissorium is illegal and
unenforceable (see Oceaner (Pvt) Ltd and Ano v
Upperclass Enterprises (Pvt) Ltd and Anor 2001 (2)
ZLR 130 (h)
 Kufandirori v Chipuriro and Ors 2004 (1) ZLR 74
emphasized that the creditor cannot take
ownership without a court order.
Covenant in restraint of trade
 It is an agreement that limits one’s ability to carry
out a particular occupation, profession or business
within a specified area and for a specified period of
time after termination of contract.
 It is meant to protect an employer, business
partner or buyer’s specialized knowledge, business
contacts, and trade secrets.
 It is not meant to protect their investment or
protect them from competition (Basson v Chilwans
1993 (3) SA 742)
i. A covenant in restrain of trade is prima
facie valid. This protects sanctity of
contract (Book v Davidson 1988 (1) ZLR 365
ii. A covenant in restrain of trade cannot be
enforced if it is contrary to public policy or
unreasonable in terms of geographical
scope and time frame (Mangwana v
Muparadzi 1989 (1) ZLR 79 S)
iii. The party trying to run away from the
restraint of trade has the onus to prove
that it is unreasonable (Magna Alloys and
Research SA Pty Ltd v Ellis 1984 (4) SA 874
893.
iv. The reasonableness or otherwise of the
covenant in restraining of trade is determined
at the time the court makes a decision and not
when the parties entered into the contract.
v. The court has the power to enforce the
reasonable parts and eliminate the
unreasonable parts of the covenant in
restraint of trade (Mangwana v Muparadzi
1989 (1) ZLR 79 S). This is called the
severability or blue pencil test.
 This has raised concerns over the court’s
power to make contracts for parties (which
potentially hampers sanctity of contract)
CONSEQUENCES OF ILLEGALITY
1. Exturpi cause rule – no action arises from an illegal
contract. You cannot enforce an illegal contract. This is
absolute and admits no exceptions (see Mega Pak
Zimbabwe Pvt Ltd v Global Technologies Central Africa
Pvt Ltd 2008 (2) ZLR 195 (H)
 Chipunza v Muzangaza NO 2004 (1) ZLR 377 (H)
held that courts will not enforce an illegal
agreement that has not yet been performed (either
in part or in whole)
2. In pari delicto rule – where parties are equally in the
wrong and value (property or money) has exchanged
hands as a result of the illegal contract, loss lies where
it falls
 Jajbhay v Cassim 1939 AD 537 544-545 held that
the court can relax the rule to prevent injustice by
‘doing justice between man and ma.’
 When relaxing the rule, Courts usually consider
public policy, moral blameworthiness of parties’
conduct, unjust enrichment, etc
 Courts have relaxed the in pari delicto rule on the
basis of unjust enrichment in Dube v Khuman 1986
(1) ZLR 103 & Matsika v Jumvea Zim Pvt Ltd & Ano
2003 (1) ZLR 71 (H)
3. Severing a part of the contract – courts can cut out the illegal parts of a
contract and enforce the legal parts taking into account the intention of the
parties
 Niri v Coleman & Ors 2002 (2) ZLR 580 (H) 588 and Muleya v Bulle 1994 (2)
ZLR 202 (H) held that the charging of excessive interest prohibited by the
law does not disentitle the lender from recovering the debt together with
lawful interest
 Sibanda v Nyathi & Ors 2009 (2) ZLR 171 (H) held that the court has the
power to sever an illegal part of the purchase price and declare the true
purchase price to reflect true agreement
4.General unjust enrichment action – Industrial Equity
v Walker 1996 (1) ZLR accepted the unjust enrichment
as part of Zimbabwean law. Requirements are
 Defendant must be enriched
 The enrichment must be at the expense of the
Plaintiff
 The enrichment must be unjustified
 The case must not come under the scope of one of
the classic enrichment actions
 There should be no positive rule of law that refuses
an action to the impoverished.

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