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Reconsidering the defence of illegality in unjust enrichment

Lloyd's Maritime and Commercial Law Quarterly

Reconsidering the defence of illegality in unjust enrichment Duncan Sheehan * There is no agreement in the legal academy as to the purposes behind the illegality doctrine. Three main views are canvassed here—Jaffey’s punishment view, Virgo’s view that the effect of illegality must be minimised and Birks’ stultification view. The paper very briefly attempts to distil a distinction between obligations which are properly illegal and those which are merely void. Having done so, it suggests that a “stultification” view is appropriate and that the substantive normative disapproval of the content of the contract leading to the illegality must be given full effect. It suggests that the policies pursued by other areas of the law, such as criminal law, need to be considered, and will have an impact on when relief is available in civil proceedings. The paper concludes by examining the relationship between natural, void, and illegal obligations. * Senior Lecturer in Law, University of East Anglia. I am grateful to Vanessa Sims, Graham Virgo and Peter Jaffey for their kind comments on the penultimate draft, and equal thanks go to the anonymous referee. All errors are of course my own. This paper was presented at the Obligations IV conference at the National University of Singapore on 23 July 2008. The following abbreviations are used in the footnotes: BCLRC: British Columbia Law Reform Committee, Illegal Contracts (1983); Birks, Unjust Enrichment : P B H Birks, Unjust Enrichment , 2nd edn (Oxford, 2005); Birks & Swadling: P B H Birks and W J Swadling, “Restitution”, ch 21 of [1999] All ER Annual Review 312; Buckley, Illegality : R A Buckley, Illegality and Public Policy (London, 2002); Burrows: A S Burrows, The Law of Restitution , 2nd edn (London, 2002); Burrows, McKendrick & Edelman: A S Burrows, E McKendrick and J Edelman, Cases and Materials on the Law of Restitution , 2nd edn (Oxford, 2007); Clerk & Lindsell : Clerk and Lindsell on Torts , 19th edn (London, 2006); Dworkin: R Dworkin, Taking Rights Seriously (London, 1977); Enonchong: N Enonchong, Illegal Transactions (London, 1997); Goff & Jones : G Jones (ed), Lord Goff and G Jones The Law of Restitution , 7th edn (London, 2007); Hedley: S Hedley, A Critical Introduction to Restitution (London, 2001); Jaffey, Nature : P Jaffey, The Nature and Scope of Restitution (Oxford, 2000); Jaffey, Private Law : P Jaffey, Private Law and Property Claims (Oxford, 2007); Krebs: T Krebs, Restitution at the Crossroads (London, 2001); LCCP 154: Law Commission, Illegal Transactions: The Effect of Illegality in Contract and Trusts Law : LCCP No. 154 (1999); LCCCLT: Law Commission Commercial and Common Law Team, Illegality in Contract (2002) at (accessed 9 June 2008); Meier: S Meier, “Restitution after Executed Void Contracts”, ch 6 of P B H Birks and F D Rose (eds), Lessons of the Swaps Litigation (Oxford, 2000) 168; Smith & Hogan : D Ormerod (ed), Smith and Hogan’s Criminal Law , 10th edn (Oxford, 2006); Treitel : E Peel (ed), Treitel’s Law of Contract , 12th edn (London, 2007); Virgo, “Illegality”: G Virgo, “The Effect of Illegality on Claims for Restitution in English Law”, ch 6 of W J Swadling (ed), The Limits of Restitutionary Claims (London, 1997) 144; Virgo, Principles : G Virgo, The Principles of the Law of Restitution , 2nd edn (Oxford, 2006). LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY 320

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