General principles of contracts series; (part 7) Legal possibility

The fourth requirement for a valid contract is legal possibility. This part of the series is very relevant and important for the music industry, so please pay close attention.

Certain contractual terms that might be physically possible to perform are nevertheless sometimes regarded as legally impossible by the law. This means that the law closes its eyes to these terms and does not regard them as possible in the eyes of the law, (as opposed to possible in reality, which they might well be). When this applies, the effect is the same - the contract will be void. There are two factors that might render a contract legally impossible. The first one is clear, but the second is a little more subject to debate. They are:

(i) illegality in the pure sense, and

(ii) public policy.

Let's take a closer look at them.

Illegality in the pure sense

There's really nothing difficult about this. When one of the contractual terms involves an illegal act, the entire contract is void. So here's an obvious example: Susan, whose music career is suffering, hires Sing Sing, a local hit-man, to bump off her manager, Sol. She agrees to pay Sing Sing R50 000 provided Sol is dead by 1st April. Is this a binding contract? (i.e. can Sing Sing sue Susan for the money, and can Susan sue Sing Sing to force him to perform the hit as agreed?)

Even though there was clear consensus, all the rules of offer and acceptance have been satisfied, and even though the contract is physically possible, an agreement to murder someone is obviously not legally possible. Therefore it is void and neither party can successfully sue the other to perform. This is enshrined in a legal maxim called "the ex turpi causa rule." The full Latin maxim is "ex turpi causa non oritur actio." (Literal translation: "from a base cause, no action arises." In more sophisticated language: from an illegal contract, no action can be brought by one party to make the other party perform as he promised).

Even where the parties do not know that one of the terms is illegal, the term will still be void. This is one of the few cases in South African law where "ignorance of the law is no excuse." (In criminal law, ignorance of the law is an excuse). Drug deals, stolen goods purchases, agreements to evade tax, financing for illegal operations (e.g. brothels) - all these contracts are void for illegality, whether both parties knew this or not, and neither party can sues the other party for specific performance (i.e. to force him to perform as promised), because of the ex turpi causa rule.

Now let's use a common music industry example: Robert, who has some money to spare, makes an agreement with Ronald, a sound engineer. Ronald is currently working on the new Springbok Nude Girls album. The agreement is that Ronald will give Robert a copy of the final mix in return for R 30,000 so that Robert can sell bootlegs if the album through his network of street-sellers. Whether or not Ronald knows what Robert's intentions are, the contract is void for illegality (copyright infringement). Thus, in accordance with the ex turpi causa rule, Robert cannot sue Ronald to deliver the mix copy, and Ronald cannot sue Robert for the R 30,000.

But what if Robert has already paid Ronald the R 30,000 and Ronald, realising the error of his ways, backs out of the deal? This is where the second Latin maxim comes in. It is called the "par delictum" rule. The full Latin maxim is "in pari delicto potior est conditio possidentis/defendentis." Literally translated, it means: "in equal guilt, stronger is the position of the possessor/defendant." In more understandable English, this means that the legal position of the party in possession of the performance (in this case R 30,000) is stronger.

Yes, you heard me right - it means that even though Ronald (the possessor or defendant) has not delivered the mix copy, Robert cannot successfully sue him for return of the R 30,000 that he has paid him.

It might sound unfair, but the par delictum rule is a classic case of the law not recognising illegal agreements and refusing to assist someone who has suffered loss because of an illegal contract where he was as guilty as the other party. (And the opposite would also apply: if Ronald had delivered the mix copy and Robert had not paid him, Ronald could not sue for the return of the mix copy).

The law just closes its eyes and refuses to assist the party who has performed in an illegal contract in recovering the performance. Now, this is the general rule, and you can take it as being applicable, but courts have, on occasions, made exceptions to the par delictum rule, for the sake of fairness and equity. But I wouldn't count on this happening (discretionary exceptions like this are rare, hard to get, expensive and depend on many things) - if you get involved in an illegal contract and you perform, take it as a general rule that the law will not help you get your performance back when the other party doesn't keep his promise.

That covers contracts that are illegal in the pure sense. The next section is not as clear-cut, but is very, very important for musicians.