Since the obligation in quasi contract arises as soon as the recipient of the benefit learns that he ought to make restitution (ante, Sec. 32), one who refuses to perform an illegal contract but who nevertheless retains the benefit of the other party's performance is obviously not entitled to notice or demand before suit.1 But it has been contended that one who has not refused to perform should not be sued until he has been notified of the determination of the other party to withdraw from the illegal transaction and to have back that which he has given, or its value. "Why," says Professor Keener, "should one who has not refused to do that which the plaintiff stipulated for, be liable to an action for not doing something else which he had no reason to suppose the plaintiff desired him to do?"2 In answer it may be pointed out that an illegal contract is not voidable merely; that one ought not to accept a benefit under it; and that having accepted a benefit under it one is under a moral duty, regardless of what he supposes to be the desire of the other party, to refuse to carry out his engagement and to tender a return of that which he has received. It has been held, accordingly, that a demand is not a prerequisite to the commencement of an action for restitution.3 This rule works no hardship where the recipient of the benefit is aware of the illegality of the contract, or is chargeable with notice of its illegality. For example, a corporation, since it is chargeable with notice of the extent of its lawful powers, is not entitled to a demand before being sued for money paid to it under an ultra vires contract.4 Where the recipient of the benefit, on the other hand, is ignorant of the unlawful character of the contract and is not chargeable with knowledge, a demand ought in fairness to be made.
1 See Brooks v. Martin, 1863, 2 Wall. (U. S.) 70, (buying soldiers' claims for land warrants : virtually overruled by McMullen v. Hoffman, 174 U. S. 639, 668; 19 S. Ct. 839); Mitchell v. Fish, 1911, Ark. ; 134 S. W. 940 ; Willson v. Owen, 1874, 30 Mich. 474, (racing); Gilliam v. Brown, 1870-71, 1 Morris (43 Miss.) 641; Pfeuffer v. Maltby, 1881, 54 Tex. 454; 38 Am. Rep. 631, (illegal traffic during war); McDonald v. Lund, 1896, 13 Wash. 412 ; 43 Pac. 348, (faro and crap games).
2 1879, 11 Ch. Div. 170, 196, (Association in violation of the Companies Act, 1862. "It is not sufficient," says Jessel, M.R., "to say that the transaction is concluded as a reason for the interference of the Court. If that were the reason, it would be lending the aid of the Court to assert the rights of the parties in carrying out and completing an illegal contract. ... It is no part of the duty of a Court of Justice to aid either in carrying out an illegal contract, or in dividing the proceeds arising from an illegal contract, between the parties to that illegal contract.").
3Bartle v. Nutt, 1830, 4 Pet. (U. S.) 184, (defrauding government in building contract); Chateau v. Singla, 1896, 114 Cal. 91; 45 Pac. 1015; 33 L. R. A. 750; 55 Am. St. Rep. 63, (letting for prostitution); Craft v. McConoughy, 1875, 79 111. 346; 22 Am. Rep. 171, (combination in restraint of trade); Smith v. Richmond, 1902; 114 Ky. 303; 70 S. W. 846; 102 Am. St. Rep. 283, (bribery); Martin v. Seabaugh, 1911, 128 La. ; 54 So. 935, (partnership to conduct gambling) ; Jackson v. McLean, 1890, 100 Mo. 130; 13 S. W. 393, (construction contract); Morrison v. Bennett, 1898, 20 Mont. 560; 52 Pac. 553 ; 40 L. R. A. 158, (fake horse race); Woodworth v. Bennett, 1871, 43 N. Y. 273; 3 Am. Rep. 706, (illegal bidding agreement); Vandegrift v. Vandegrift, 1910, 226 Pa. St. 254; 75 Atl. 365, (liquor); Wiggins v. Bisso, 1898, 92 Tex. 219; 47 S. W. 637; 71 Am. St. Rep. 837, (combination in restraint of trade); Atwater v. Manville, 1900, 106 Wis. 64; 81 N. W. 985, (grain on margin). See, for additional cases, Wald's Pollock, "Contracts" (Williston's ed.), 500.
Where demand is not a prerequisite to the commencement of an action for the recovery of money paid under an illegal contract, interest should be allowed from the day of the receipt of the money by the defendant (ante, Sec. 34) ,5 and the statute of limitations should run from that date (ante, Sec. 33).
1 See Dill v. Wareham, 1844, 7 Met. (Mass.) 438, (ultra vires contract of town).
2 " Quasi-Contracts," p. 266.
3 White v. Franklin Bank, 1839, 22 Pick. (Mass.) 181, (ultra vires contract of bank with depositor).
4 See Dill v. Wareham, 1844, 7 Met. (Mass.) 438. 5 But see Brennan v. Gallagher, 1902, 199 111. 207; 65 N. E. 227, (ultra vires contract of a building and loan association).