Story Case

J. F. Gooderl, a druggist, sold a box of Havana cigars and a bottle of whiskey to Martin Cox; charging $4 for the cigars and $0.75 for the whiskey. Owing to the local option liquor law, the sale of the whiskey was illegal. Cox refused to pay for either the cigars or the whiskey and Gooderl sued him for the price of both. Cox defended on the ground that the whole transaction was tainted with the illegality of the liquor sale, and that, as a result, neither the price of the whiskey nor of the cigars was recoverable.

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Ruling Court Case. Union Locomotive Company Vs. Erie Railway Company, Volume 35 New Jersey Law Reports, Page 240

The Union Locomotive Company was engaged in the business of manufacturing locomotives for sale. It entered into an agreement with the Erie Railway Company, the principal terms of which are as follows: The Erie Railway Company agreed to furnish motive power to the locomotive company for transporting its engines at a certain rate; the locomotive company agreed to furnish its own cars, on which the engines were to be transported, and to bear the expense of loading and unloading the locomotives. The Erie company also agreed that it would not carry the engines of any other company than the Union Locomotive Company. But afterwards the Erie Railway Company refused to furnish the motive power to the Union Locomotive Company and this action was brought for damages.

The Erie Railway Company entered the defense that it was an illegal agreement, because it had promised not to transport a certain kind of freight for any other company. This, it claimed, was illegal because the company was a public service company, and bound to give service to all alike who applied for it. But the Union Locomotive Company insisted, that, even assuming this contention to be correct, the contract was severable, and might be enforced in part; and that it was entitled to have the contract enforced so far as it related to the furnishing of motive power.

Decision

Where the whole object of a contract is illegal,the contract is utterly void and incapable of being enforced. If a part of the contract only is illegal, but that which is illegal is so completely tied up with that which is legal that they cannot be separated, the whole contract fails. But if the contract is severable, and that which is legal can be separated from that which is illegal, then that part which is legal will be enforced. In this case the Erie Railway Company promised to do two things: To furnish motive power, and to transport engines for the Locomotive Company only. These two things are easily separated, and the Court was of the opinion that the fact that the latter promise was illegal did not render the contract wholly void.

Judgment was given for the Union Locomotive Company.

Ruling Law. Story Case Answer

We have just learned that a contract which is illegal is unenforcible. But now suppose that a part of the contract is legal and a part is illegal, what then will the court do with such a contract? It is generally held that if that part which is legal can be separated from that part which is illegal, the legal part will be enforced and the illegal part will not be. Stated in other words, if that part of the contract, which is not tainted with fraud, can be readily separated from that part which is tainted with fraud, the untainted part will be enforced. This is illustrated by the Court Case of the Union Locomotive Company vs. Erie Railway Company. In this case the contract contemplated the doing of two things; one of the things was illegal, and the other was legal. They were readily separable and the court enforced that part which was legal. The same may be said of the Story Case. The sale of liquor though illegal, did not affect the sale of the cigars and therefore that part which related to the sale of the cigars may be enforced.