“A person who finds that he cannot enforce an illegal contract can instead try to recover any money paid or properties transferred to the other party in lieu of Section 66 of the Contracts Act 1950.
What is meant by illegal contract can be found in our Contracts Act 1950 under Section 24, 27, 2, 29, !0 and !1" Section 24 touches on the la#fulness of a consideration or ob$ect of an agreement" Section 27 %ro&ides for agreements in restraint of marriage, section 29 %ro&i %ro&ides des for agreem agreemen ents ts in restr restrai aint nt of legal legal %rocee %roceedin dings, gs, secti section on !0 %ro&id %ro&ides es for for agreements &oid for uncertainty and section !1 %ro&ides for agreement by #ay of #ager" 'he thing thing about about ille illegal gal contra contract ct is that that the the agreem agreement ent is &oid &oid and and &oid &oid agreem agreement ent is not enforceable" Any relief obtainable is the restoration of the ad&antage recei&ed by a %arty under the agreement under section (( of the Contracts Act 1950" Section Section (( of the Contract Contractss Act 1950 %ro&ides %ro&ides that #hen #hen an agreement agreement is &oid or becomes &oid, the %arty #ho is at ad&antaged has to restore or ma)e com%ensation to the %arty from #hom he recei&ed" 'o obtain o btain relief under section ((, the %erson see)ing relief must not be a %arty to the illegality (in pari delicto) because the court #ill not entertain a man #ho #ho found found his his cause cause of actio action n u%o u%on n an immoral immoral or illega illegall act (ex dolo malo non oritur action)" 'he ma*im +he #ho see)s euity must come to court #ith clean hands- .ex turpi causa non oritur actio / also a%%lies" Another im%ortant thing is, the %arty see)ing relief under
section (( must not be a#are of the illegality at the time the contract #as entered into and the illegality #as only disco&ered subseuently" subseuently" 'his can be seen in the case of Ng Siew San v Menaka #here in this case the ederal Court held that since the res%ondent #as not a#are
of the illeg illegali ality ty of the agreem agreement ent at the the time time they they e*ecut e*ecuted ed it, it, hence hence,, sectio section n (( #as #as a%%licable and the igh Court #as right to order the return of 319,400 to the res%ondent" or the reco&ery of %ro%erties %ro%erties transferred to the other %arty based on illegal contract, contract, under the common la#, neither %arty can reco&er #hat they had transferred to the other %arty" e&ertheless, if the %laintiff can establish a cause of action #ithout ha&ing to rely on the illegal illegal transactio transaction, n, he can reco&er the %ro%erty %ro%erty"" n Sajan Singh v Sardara Ali , the 6ri&y Council held that although the transaction bet#een the %arties #as illegal, but, it had been fully e*ecuted and carried out and #as ca%able of %assing the %ro%erty in the lorry to the %laintiff"
“! " do not thin# the $nglish cases are applica%le as the Contracts &'alay States( )rdinance 1950 is not %ased on the $nglish law of contracts. Section *+ is ,uite clear. $-cept in respect of the three e-ceptions every agreement %y which anyone is restrained from e-ercising a lawful profession is to that e-tent void. /er ashim . in 2rigglesworth v. 2ilson Anthony 31964 ' *69.
Section 2 of the Contracts Act 1950 %ro&ides for agreement in restraint of trade" 'his section #as borro#ed from the raft Ci&il Code of the State of e# 8or)" ence, its %osition is different from the common la#" 'he common la# %osition is that all restraints are prima facie &oid sub$ect to a test of reasonableness" Section 2 of the Contracts Act on the other
hand, all restraints are &oid unless it falls #ithin any of the three e*ce%tions %ro&ided" Agreements in restraint of trade under the common la# are prima facie &oid unless it is sho#n that the restraint is reasonable in the interests of the %arties and of the %ublic" 'his can be illustrated in the leading case of Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co #here in this case the a%%ellant entered into a contract #ith the res%ondent com%any
#hereby the res%ondent #as to %urchase the good#ill of the a%%ellant business" 'he a%%ellant agreed not to engage in any trade #hich #ould be in com%etition #ith the res%ondents business for a term of 25 years" o#e&er, the a%%ellant then contended that the restraint #as unreasonable as it #as unrestricted to s%ace" 'he ouse of :ords held that the co&enant in restraint of trade #as &alid and enforceable" Section 2 of the Contracts Act 1950 on the other hand, is different from the common la# in a #ay that, all agreements in restraint of trade are, to that e*tent &oid, unless it comes #ithin the three e*ce%tions %ro&ided" 'he three e*ce%tion under section 2 are i/ agreements not to carry out similar business #ithin the local limits, ii/ agreements not to carry out similar business #ithin local limits among %artners before the dissolution of %artnershi% and iii/ agreement that they #ill not carry on any business besides the %artnershi%, during the continuance of the %artnershi%" ;nli)e the common la#, section 2 has no o&erall test of reasonableness e*ce%t for the limited test reasonableness to ascertain the local limits in e*ce%tions 2 and !" Section 2 also %ro&ides that the agreement is