- •§1. Place op contract in jurisprudence. 3
- •§ 2. Obligation.
- •§2. Place of contract in jurisprudence. 5
- •§2. Place of contract in jurisprudence. 9
- •§ 2. Acceptance must he absolute, and identical ivith the terms
- •§ I. Agreement,
- •§ 3. II proposal which has not been accepted does not affect the Till accept-
- •§ 5. It proposal may lapse otherwise tJian by revocation as
- •§ 6. Proposal and Acceptance need not necessarily he written Contracts
- •§ 7. A proposal need not be made to an ascertained person,
- •§ I. Contracts of Record.
- •§ 2, Contract under Seal,
- •§ 3. Simple Contracts required to be in writing.
- •§ 4. ConsideItATiaN.
- •§ I. Political or Professional Status,
- •§ 2. Infants,
- •§ 3. Married women.
- •§ 4. Corporations.
- •§ 5. Lunatic and drunken persons.
- •§ 2. MlSbepbesentation.
- •§ 3. Fraud.
- •§ 4. Duress.
- •§ 5. UamuE Influence.
- •§ I. Nature of Illegality m Contract.
- •§ 18 Upon Stock ExchiEknge transactions is well summarised in the
- •§ 2. Effect of Illeoalitt upon Contracts in
- •§ I. Assignment by act of the parties.
- •§ 2. Assignment of contractual rights and liabilities by
- •§ I. Froof of Document,
- •§ 2. Evidence as to /act cf Agreement.
- •§ 3. Evidence as to the terms of the Contract,
- •§ I. General Rales,
- •§ 2. Rvlea 0/ Law and Equity as to Time and Penalties,
- •§ I. Waiver.
- •§ 2. Svhstituted Contract
- •§ 3. Provisions for DischcMrge,
- •§ 1. Position op pabties whebe a Contbact
- •§ 2. Forms of Discharge bt Breach.
- •§ 3. Eemedies fob breach of Contract.
- •§ 4. DiSghaboe of RiOht of AcTion abisiNa
§ I. Nature of Illegality m Contract.
The modes in which the law expresses its disapproval of i. What is
certain objects of contract may roughly be described as* ^ *^
follows : —
(i) Prohibition by Statute,
(ii) Prohibition by express rules of Common Law.
(iii) Prohibition through the interpretation by the Courts
of what is called ' the policy of the law.*
So that illegal agreements may be (i) agreements in breach
of Statute, (2) agreements in breach of express rules of Com-
mon Law, (3) agreements contrary to public policy.
u 2
1^4 FOUHATIQN OP gOHTI|ACT. P«lU.
These two last are not always very easy to distinguish, for
frequent decisions upon certain matters of public policy have
caused tolerably definite and express rules regarding them
to grow up ; and these are in effect rules of Common Law
as express, or nearly so, as those with which we shall deal
under class 2.
(i) Contracts which axe ma^ in breach of Statute.
Illegality ^ statute may render %a (i^eement illegal in on,e of
torv pro- two ways — by express prohibition, pr by penalty. H may
hibition. gg^y^ j^ g^j many i^ords, that contrficta of a certain sort a^r^
illegal, or void, or both ; an4 where it thus expressly avoids
a contract or makes i^ illegal^ no doubt can arise as to th^
intentions of the Legidiature.
Illegality But where the statute 4pesi np more than impose a penalty
s^tion^of^ upon the carrying ou^ of tl\e objects of a contract, a questioi^
penalty, may arise whether or no (he penalty amounts to a prohi-
how ascer- bitiou. Two marks may assist us tp determine the intention
^^ ' i^i the Legislature. Tfhe firetij of these ia the object of tfe^
penalty. If it be ' a protectjion, to the public 9s well as th^
torown V. revenue,' if it be designed to further objects of public policy
10 B. & c. 43. in relation to some trade or business, then a penalty amounts,
Is penalty without doubt, to a prohibition. If it be solely to facilitate
revenue °^ ^^^ secure the coUecidoD of the revenue, then it is possible
purposes? that the contract, though penalised, is not prohibited. The
soundness of this diatii\ction ha.s however been callevk i,9
Per Parke. B.. qucstiou, and a more important mark is to be found in the
in Cope r. '•
f Sl'& w. 149. continuity of the penalty.
Is it con- Where a statute forbids the carryipg on of a tra^e except
tmuous? umjer certain conditions, on pain of incurring a specified
Smith V. penalty once for all, it has been held that contracts made
Mawhood, x >/
14M.&W.463. in breach of such provisions are not vitiated. But where
the penalty is recurrent upon every breach of the provisions
of the statute, then there can be no cloubt that the pbjepifS
Cjha'p. V. § u t^GALITY OF OBJECT. ^§5
6t the bohtr^ct hi^ iiitend^ t6 be Regarded as illegal, and
the contttict itsi^lf void;
Hie liaw upott this Jwirit may then be Conveniently sum- Result of
tnaiised thu6. Where a penalty is inflicted by statute upon
tiie tSLiryiag on of a ttade or busiiiess in a particular manner,
we may assume ^md facie that contracts made ih breach of
ettch statutory proVisic^ns ai*6 illegal and void. But if it appear
that the penalty is ittkposed, Hot for the benefit of the publib
ih geiiel:^!, b\it for the Security of the revenUe, it is pdssibU
that the contract was only intended to be penalised and not
jytohilnted. And if, in addition to this, it appear that the
penalty is imposed once for all iipon the offending trader, and
not upon each successive contt^ct continuously, it is highly
pircbabUf if not eertain, that contracts so made at*e not in-
tended to be vitiated.
It is not necessary or desirabb to discuss here in any Objects of
detail the various statutes by which certain contracts are prohibition.
ptt>hibited ot* pehalised. ^They relate (i) to the security of
the revenue ; (2) to the pl^otection of the public in dealing
With certain articles ot eoinmerce, (3) or in dealing with
(Certain classes of trader^ ; (4) to the regulation of the con-
duct of eertain kinds of business. An excellent summary
of statutes of this nature ite to be found ih the work of Ml*.
Pollock, and it iri not ptt)posed to deal further with them Pouock.
* *• pp. 342-345-
hei^.
There is hoWevei* one dass of eohtracts which, frbfai its
peculiar character, and froin the various forms in ^hich it
has been dealt with by the Legislature, it is worth while to
examine more particularly. These contracts are Wagerihg Wagering
contrsLCts
Obhtracts. Thfe subject has been somewhat confused by the
use of the word wAgel- ad a term of reptoach, so that some
6ohtlractB not p^^hiitted by law have been called Pagers, as
opposed to others M^hich, While precisely similar in their
hature, (Comply with certain special conditiohs and SO ehable
Courts of Law to ehfbh^ thtdm.
l66 FORMATION OF CONTBACT. Part II,
What is a A wager is a promise to pay money, or transfer property
^'^^^^ upon the determination or ascertainment of an uncertain
event; the consideration for such a promise is either a
present payment or transfer by the other party, or a pro-
mise to pay or transfer upon the «yent determining in a
particular way.
The event may be uncertain because it has not happened,
or it may be uncertain because it is not ascertained, at any
rate to the knowledge of the parties. Thus a wager may
be made upon the length of St. Paul's, or upon the result
of an election which has already happened, though the par-
ties do not know in whose favour it has gone. The uncer-
tainty then resides in the minds of the parties, and the sub-
ject of the wager may be said to be rather the accuracy of
each man's judgment than the determination of a particular
event.
It is obvious that a wager may be a purely gambling or
sporting transaction, or it may be directed to commercial
Marine in- objects. A man who bets against his horse winning the
a wager, Derby is precisely in the same position as a man who bets
against the safety of his own cargo. Yet we should not
hesitate to call the one a wager, while the other is called a
contract of marine insurance. A has a horse likely to win
the Derby, and therefore a prospect of a large return for
money laid out in rearing and training the horse, in stakes
and in bets ; he wishes to secure that he shall in no event
be a loser, and he agrees with X that, in consideration of X
promising him £4000 if his horse loses, he promises X £7000
if his horse wins.
The same is his position as owner of a cargo : here too
he has a prospect of large profits on money expended upon
a cargo of silk, here too he wishes in no event to be a
loser, and he agrees with X, an underwriter, that in con-
sideration of his paying X £ — , X promises to pay him
if his cargo is lost by certain specified perils.
Chap. V. § I. LEGALITY OF OBJECT. 167
The law forbids A to make such a contract unless he has though
there be
what is called ' an insurable interest ' in the cargo, and con- < insurable
tracts in breach of this rule have been called mere wagers, ^'^^c'^^
while those which conform to it have been called contracts
of indemnity. But such a distinction is misleading. It is
not that one is and the other is not a wager : a bet is not
the less a bet because it is a hedging bet; it is the fact
that one wagering contract is and the other is not permitted
by law which makes the distinction between the two. Apart
from this there is no real difference in the nature of the
contracts.
A life insurance is in like manner a wager. Let us com- Life insu-
pare it with an imdoubted wager of a similar kind. A is ^ager.
about to commence his innings in a cricket match, and he
agrees with X that if X will promise to give him £1 at the
end of his innings, he will pay X a shilling for every run he
gets. A may be said to insure his innings as a man insures
his life ; for the ordinary contract of life insurance consists
in this, that A agrees with X that if X will promise to pay
a fixed sum on the happening of an event which must
happen sooner or later, A will pay to X so much for every year
that elapses until the event happens. In each of these cases
A sooner or later becomes entitled to a sum larger than any
of the individual sums which he agrees to pay. On the
other hand, he may have paid so many of these sums before
the event takes place that he is ultimately a loser by the
transaction.
Let us now turn to the history of the law respecting History of
w-gering contract. ^^^-,3
At Common Law wagers were enforceable, and, until the to wagers ;
latter part of the last century, were only discouraged by the ^^lepve
Courts by the imposition of some trifling difficulties of^^^'p-ss^-
pleading. Gradually however the Courts, finding that fri-
volous and sometimes indecent matters were brought before
them for decision, established the rule that a wager was not
168 POEMATIOK OF CONTBACT. Part IK
enfottieitble if it 1^ to indecent eyidente, or Was ealcalbled
t0 injure ^t pain b third person ; and in some cases ^enend
notions of public policj were introduced to the effect that
any wagef which tetopted a man to ofiend against the law
was illegal. Strange, and sometimes ludi^ous, results fol^
lowed frotn these efforts of the Courts- to discourage the liti<-
gation of wagerb. A bet upon the duration of the life of
sykeMrsia) Nttpoleon was held to be tinenfoiteable^ as tending, on the
16 East. 15a' one side, to weieiken the patriotism of an Englishiiian, en the
other, to encourage the idea of thb assassination of a foreign
ruler, and so to provoke retaliation upon the person of our
own sovereign. But it is evident that the substantial motive
which pressed upon the judges Was ^ the inconvenience of
countenancing idle wagers in courts of justice,' the feeling
Pej,Bayiey. J., that * it would bo a good rule tb postpone the trial of every
sykes. cu^tion upon idle wagers till the Court had hothing else to
attend to/
of statute as Meantime the Legislature dealt with various foitns bf
' wagering contracitis. As regak'd^ purely sporting wagers the
history of legislation extends over a centu^ and a half. The
j6Car. II. C7 1 6 Car. II. c. 7 enacted that any sum exceeding £ioo lost
in frying at g&mes or pastimes, or in betting on the playeib^
should be irrecoverable) and that all iormh of security given
Anne. c. 14. for moucy so lost should be void. The 9 Anne, o. 14 eatried
the law upon this point a stage further, enactitag that secu-
rities of eveiy kind, given foi^ any sum lost in playing at
games, or betting on the players, or knowingly advanced for
such purposes, should be void ; and that the loser of £id or
more might recover it back, if paid, by action of debt brought
within Uiree months of payment.
The Working of this Act was found to pi*odUce consider-
able hardship. It often happened that securities thus aVoid^
were purchased from the holders of them by perisons ignorant
of their illegal origin. These persons^ when they sought to
enforce them against the giver of the Security, discovered tdo
Chip. V. § I. LEGALITY OF OBJECT. 169
late that thiey bad paid value for all inBtrameiit which was void
as against tho party losing at play. The 5 ft 6 Will. IV.
c. 41 therefore repealed the Act of Anne so fat as )*egatded
the avoidance of securities as specified in that Act) and pro-
vided that they shoiild henceforth be taken to have been .
originally given upon an illegal consideration. The effect of 5 & « wdl iv.
thifi was, that the holder of such an instrument, if it were
established, after ptoof of its ilie^l inception, that he was a
* bond yid9 holder for vAlu©/ oould enforce it even against see Pan m.
the man who had given the security in payment of an illegal
bet.
The hmt enactment relating to wagerb of this claes h the
8 & 9 Vict. C; 109, which provides,
* That all contracts or agreements, whether by parole or
in writing, by way of gaming or wagering, shall be null and
void ; and that no suit shall be brought or maintained in any
Court of Law or Equity for tecovering any sum of money
or valuable thing which shall have been deposited in the
hands of any person to abide the event on which any wager
shall have been made. Provided always that this enactment
shall not be deemed to apply to any subscription or contri-
bution or agreement to subscribe oi* contribute for ot* towards
any plates, prizes, or sum of money to be awarded to the
winner or winners of any lawful Game, Sport, Pastime, or
Exercise.' s&gvict.
c. 109. s. 18.
I'he 8 ft 9 Vict. c. 1^9 further repeals so mucii o^ th«
statutes of Chbrles &nd Anne ab Was not niodified by 5 & 6
Will. IV. c. 41, and WAgers Are thus divisible into two
dasdes : thosd which i^re illegal under the old statutes Effect of
adopted into 5 & 6 Will. IV. c. 41, aad those which arei^tuJ^s.
bimply void under the Act of VietoHa. The difierence is
best illustrated in the case of secuHties giten in payment of
wagers of those two kinds.
A promissdry note given in payment of a bet mAde upon Consider-
a cricket match is tainted with illegality at the 6UtAet ; ndt fiJ^^
only is ii Void bjb between the ori^nAl parties to it^ but every
170 FORMATION OP CONTRACT. Part 11.
subsequent purchaser may be called on to show that he gave
value for the note; and if it can be shown that he knew
of the illegal consideration for which it was first given, he
may be disentitled to recover upon it.
Promise A promissory note given in payment of a wager upon the
^^* * result of a contested election would, as between the parties
to it, be given on no consideration at all, inasmuch as it is
given in discharge of an obligation which does not exist. But
the wager is not illegal, it is simply void ; and if the note
be endorsed over to a third party, it matters nothing that he
was aware of the circumstances under which the note was
originally given ; nor does it lie upon him to show that he
^'itchjv.jonts, gave value for the note.
5 E. & B. 24S °
As regards wagering contracts entered into for commer-
cial purposes, there are three important subjects with which
the Legislature has dealt. These are Stock Exchange trans-
actions, marine insurance,, and insurance upon lives or other
events.
The first of these subjects was dealt with by Sir John
7 Geo. II. c. 8 Barnard's Act, 7 Geo. II. c. 8, which was more particularly
(Sirjohn Bar- ' * ' a. ¥
nanfs Act), directed to wagers on the price of stock, or, as they are some-
times called, * agreements to pay differences.' These originate
in some such transaction as this: A contracts with X for
the purchase of fifty Eussian bonds at £78 for every £100
bond. The contract is to be executed on the next settling
day. If by that date the bonds have risen in price, say to
X80, X, unless he has the bonds on hand, must buy at £80
to sell at £78 ; and if he has them on hand, he is obliged
to part with them below their market value. If, on the
other hand, the bonds have gone down in the market^ A
will be obliged to pay the contract price which is in excess
of the market value.
It is easy to see that such a transaction may be made tbe
medium of purely wagering speculations ; that A may never
intend to buy nor X to sell the bonds in question ; that they
Chap.V. §1. LEGALITY OP OBJECT. 17 1
maj intend no more than that the winner should receiye
from the loser the difference between the contract price and
the market value on the settling day. And yet such a pay-
ment of differences may be perfectly bond fide ; A may have
found so much better an investment for his money between
the date of the contract and the settling day that it is well
worth his while to pay a difference in X's favour to be ex-
cused performance of the contract. Sir John Barnard's Act
was repealed by 23 Vict. c. 28, and contracts of this nature,
if proved to be simple wagers, fall under the 8 and 9 Vict, gj'jjj""**^ *•
c. 109. §l8^ x.c\s38.
Marine insurance is dealt with by 19 Geo. 11. c. 37, the Marine
effect of which is to avoid all insurances on British ships or j^q^u^ *
merchandise laden on board such ships unless the person ^^'
effecting the insurance is interested in the thing insured.
What is an insurable interest, that is to say such an interest
as entitles a man to effect an insurance, is a question of mer«
cantile law with which we are not here concerned.
The subject of insurance generally was dealt with by 14 Insurance
Gleo. m. c. 48, from which Act, however, marine insurance x4g«).iii.
is excepted. The Act forbids insurances on the lives of any ^
persons, or on any events whatsoever in which the person
effecting the insurance has no interest; it further requires
that the names of the persons interested should be inserted
in the policy, and provides that no sum greater than the
interest of the insured should be recovered by him. A
creditor may thus insure the life of his debtor, and a lessee
for lives may insure the lives upon which the continuance
of his lease depends.
^ TraoBactions on the Stock Exchange are not in practice bo simple
as they are here described. The interposition of a broker, and the
peculiar relations of the principal, broker, and jobber, make the law
on this subject extremely intricate. The effect of 8 and 9 Vict. c. 10^.