Story Case

While Maine was a "dry" state King Bainter made the following contract with William L. Tate:

"In consideration of $35 to be given, I, King Bainter, promise to sell to William L. Tate in the city of Bangor, one barrel of the whiskey which I have now in ray house in said city of Bangor.

(Signed) King Bainter".

After receiving the money, Bainter refused to deliver the whiskey. He alleged, as a reason, that the sale of liquor in Maine was unlawful. Tate, however, sued him for breach of contract to deliver the whiskey. He argued that the plea of illegality was not open to Bainter, since Bainter knew when he made the contract that it was illegal. Which party should win?

Ruling Court Case. Bukly Vs. Humason, Volume 50 Minnesota Reports, Page 195

Humason was the owner of property in the city of Chicago. He went to Buckly, who was in the real estate business in Chicago, and requested him to find a purchaser for his Chicago property. Humason promised to pay him a certain per cent commission if a sale of the property was made. Buckly, in the course of a few weeks, sold the property and demanded his commission. This, Humason refused to pay. Suit was then brought by Buckly upon the agreement to pay him compensation for his services.

Humason defended on the ground that the contract was illegal by virtue of a statute in the State of Illinois, in pursuance of which the City of Chicago had passed the following ordinance: "It shall be unlawful for any person to exercise within the City of Chicago the business of real estate broker without a license."Buckly had no license, and, therefore, the contract was illegal.

Decision

Business transactions, in violation of law, cannot be made the foundation of a valid contract; and the general rule is that where a statute makes a particular business unlawful generally, or for unlicensed persons, any contract made in such business by any one not authorized is void. So here Buckly, not having a license, was engaged in an unlawful undertaking when he made the contract to sell the property and a court of law will give him no assistance whatsoever in his attempt to collect from the person to whom he rendered the services".

Judgment was given for Humason in this action.

Ruling Law. Story Case Answer

If the object of an agreement is illegal, no contract results. A contract may be illegal because it violates some positive rule of law, or because the effect of such a contract is evil, and, therefore, contrary to public policy. Where a statute forbids certain kind of contracts, any agreement made in violation of such a statute is void. Thus, in the Story Case, there was a statute which prohibited the making of contracts for the sale of liquor. In consequence, any agreement which conflicted with that statute was void. Therefore, judgment should be given against Tate. In case of an illegal contract, the law will assist neither party to enforce any rights under the contract.