An agreement which contemplates a wrong to a third person, or to undefined members of the public, whether trespass, breach of trust, or fraud, is illegal. Such is an agreement to print a book in violation of another's copyright;52 or a contract to sell goods, known to be held by the seller in trust for a third person. Neither could be enforced by one who was cognizant of the facts.
A sale or agreement to sell any article which is so deleterious to public health as to be inimical to the public welfare, or is so deceptively labelled or prepared as to be likely to defraud persons subsequently induced to buy it, is invalid.53 Whether an agreement to sell goods which to the buyer's knowledge the seller her own judgment, and to interfere with natural rights and interests of third parties, and offered an incentive to exert for a money consideration undue and improper influences contrary to sound morality.
50 McNair v. Parr, 177 Mich. 327, 143 N. W. 42.
51 See Alpers v. Hunt, 86 Calif. 78, 24 Fac. 846, 9 L. R. A. 483, 21 Am. St. 17; Bollman v. Loomis, 41 Conn. 581; DeBoer v. Harmsen, 131 Mich. 91, 90 N. W. 1036; Torpey v. Murray, 93 Minn. 482, 101 N. W. 609; Smith v. Rose, 192 Mo. App. 580, 184 S. W. 910; Ridgely v. Keene, 134 N. Y. App. D. 647, 119 N. Y. S. 451; Simon v. Garlitz (Tex. Civ. App.), 133 S. W. 461. Cf. Higgins v. Hill, 56 L. T. (N. S.) 426.
52 Nichols v. Ruggles, 3 Day, 145, 3 Am. Dec. 262. But in Edward Thompson Co. v. Pakulski, 220 Mass. 96, 107 N. E. 412, where the infringer of a copyright had made a settlement for the infringement, he was allowed to recover the price of the infringing work.
53 Church v. Proctor, 66 Fed. 240, 33 U. S. App. 1,13 C. C. A. 426 (agreement to sell menhaden to be resold as mackerel); Materne v. Horwitz, 101 N. Y. 469, 5 N. E. 331 (agreement for the sale of falsely labelled sardines); Warshaw v. Mwood, 83 Conn. 430, 76 Atl. 531 (agreement to purchase inferior goods, falsely label them, sell them as " bankrupt stock " of superior goods, and divide the profits).
was under contract to sell to another would be illegal and unenforceable is not clear;54 but a contract of employment which, as the parties know can be fulfilled only by violating an existing contract of employment with another has been held invalid.55 So-called "endless chain" agreements also have been held unlawful, as likely to defraud guileless persons. Generally in these, in return for a promissory note, a license is given to make sales within a certain territory, and a privilege of making similar bargains with others who in turn shall have the same privilege, and so on.56 Similarly the "Bohemian Oats" agreements, in which for an excessive price paid or promised, the seller of seed oats agrees to sell to others a specified number of bushels of the oats raised by the first buyer, have been held unlawful.57
54 Sir Frederick Pollock apparently considers any agreement illegal which involves a breach of contract. Cf. Citizens' State Bank v. Rosenberger, 40 S. Dak. 266, 167 N. W. 154; Wald's Pollock, Contracts (3d ed.), 376.
55 Wanderers' Hockey Club v. Johnson (Brit. Col.), 25 Western Law Rep. 434. In Rhoades v. Malta Vita Pure Food Co., 149 Mich. 235, 112 N. W. 940, the plaintiff sued for a promised salary. It appeared that at the time of his employment by the defendant he was under an unexpired contract of employment with the Force Food Company, a rival in business, and that the purpose of the defendant in inducing the plaintiff to enter into its service was to further a plan to "put Force out of business." It was held that the plaintiff could not recover, because the contract on which he sued was illegal. It may perhaps be assumed that the same result would have been reached had the defendant for the purpose of embarrassing the Force Food Company induced a manufacturer to contract to sell machinery, which he was under previous contract to sell to the Force Food Company. See also Driver v. Smith, 89 N. J. Eq. 339, 104 Atl. 717.
56 Contracts of this type were held illegal in Couch v. Hutchinson, 2 Ala. App. 444, 57 So. 75; Saylor v. Crooker, 97 Kan. 624, 156 Pac. 737, Ann. Cas. 1918 D. 473; Hubbard v. Freiberger, 133 Mich. 139, 94 N. W. 727; Ozark Bank v. Hanks, 142 Mo. App. 110, 125 S. W. 221; Twentieth Century Co. v. Quilling, 130 Wis. 318, 110 N. W. 174.
"Schmueckle v. Waters, 125 Ind. 265, 25 N. E. 281; Merrill v. Packer, 80 la. 542, 45 N. W. 1076; Shipley v. Reasoner, 80 la. 548, 45 N. W. 1077; McNamara v. Gargett, 68 Mich. 454, 36 N. W. 218, 13 Am. St. 355.
In Boston Piano, etc., Co. v. Seck-inger, 198 Mich. 312, 164 N. W. 263, an agreement signed by the defendant for the purchase from the plaintiff of a piano and other articles necessary to put into operation a so-called advertising campaign, wherein the piano was to be given away to successful contestants, was held invalid, since the scheme furnished by the plaintiff as part of the contract of sale, involved deception on the part of the defendant to procure trade.
In Neville v. Dominion of Canada News Co., Ltd.,  3 K. B. 556, the plaintiff was a director of a company fraudulent bargain seeks to recover the property, the situation is somewhat different, for while the grantor or seller is necessarily a participant of the fraud in a fraudulent conveyance, the grantee or buyer is not. If the buyer was ignorant of the fraud there is no reason why he should not enforce his rights to the same extent as any other buyer. Whether mere knowledge of a wrongful intent on the part of the seller would deprive him of a right to enforce the bargain involves a question much in dispute in regard to illegal contracts generally; namely, whether mere knowledge by one party to the contract of an illegal purpose of the other in entering into the transaction so taints the former party with the illegality as to preclude recovery by him, or whether to produce this result it is necessary that he should have intended to forward the illegal purpose, not merely known that the designs of the other party were illegal. The buyer's right to enforce an executory contract where the seller intended to defraud his creditors should be governed by the principles applied to other cases of contracts where the plaintiff has guilty knowledge.61 But the courts which allow recovery of the price by a fraudulent seller would doubtless generally allow an action against the seller by the buyer or grantee whatever the extent of his participation in the fraud.62 If, however, the title to the property has passed to the buyer and possession only has been retained by the seller, the buyer even though a party to the fraud to the fullest extent may recover the property. He is in such a case not suing on the illegal contract but enforcing a property right.63