Treitel on The Law of Contract by Edwin Peel G. H. Treitel

Author:Edwin Peel, G. H. Treitel
Language: eng
Format: epub, pdf
Publisher: Sweet & Maxwell - M.U.A

(iii) De facto enforcement

11–128

Remedy for enforced performance. A contract which is illegal may be enforced de facto in the sense that one party may secure compliance with its terms by using or threatening to use some form of economic pressure. Such measures may be taken in good faith, and the question then arises whether the party who is thus induced to perform a contract that was not binding on him has any remedy in respect of loss suffered in consequence. In Shell UK Ltd v Lostock Garage Ltd711 a garage proprietor was in effect compelled to observe the terms of a solus agreement by the oil company’s threats that, if other suppliers were to sell petrol to him, it would sue them for inducing a breach of the solus agreement. Lord Denning MR held that the solus agreement was unenforceable and that the garage proprietor was entitled to damages in respect of the loss he had suffered through being nevertheless compelled to observe it.712 Ormrod LJ held that no such damages were available,713 while Bridge LJ awarded them on the different ground that the oil company was in breach of an implied term of its contract with the garage proprietor.714 Lord Denning held that no such term could be implied,715 so that the damages awarded by him cannot have been for breach of contract. His award seems rather to have been based on the novel principle, that the de facto enforcement of an illegal contract can, if it causes loss, give rise to a claim for damages.

11–129

Prevention of de facto enforcement. The above discussion is based on the assumption that performance of the illegal contract has actually been secured. Before this has happened, the court may be able to intervene to prevent such performance, e.g. by an injunction to restrain a party from drawing on a letter of credit issued to secure payment under an illegal contract. Since the effect of such a remedy is to prevent illegality, it may be granted even to the guilty party.716

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