IRAC ANALYSIS:

Regazzoni Vs. KC Sethia (1944) Ltd.

([1957] 3 All E.R. 286)

FACTS:
The appellant, who resided in Switzerland, brought the action out of which
this appeal arose against the respondents claiming damages for breach of
contract. He alleged that the respondents had agreed to sell and deliver to
him September/October, 1948, c.i.f. Genoa 500,000 jute bags of the quality
and standard known in the trade as new B twills and that they had
wrongfully repudiated the agreement.

ISSUE:
The said contract, if any, was to the [appellant's] knowledge an illegal
contract and/or was void and unenforceable in that it had for its purpose an
object which was illegal and/or contrary to public policy.

RULE:
Since no specific section can be explicitly applied and since it is working on
common law principles, the following precedents should be considered:
Vita Food Products Inc. v. Unus Shipping Co. Ltd.
Boucher v. Lawson
Holman v. Johnson

APPLICATION:

Vita Food Products Inc. v. Unus Shipping Co. Ltd.

Where English law is the proper law, the courts will only refuse to
enforce a contract on the ground of foreign illegality where the
contract for its performance requires a party to it to do an act in a
foreign country which is illegal according to the place of performance.

Holman v. Johnson

A violation of foreign law may be contemplated by the parties as

incidental to the contract but not part of it. There is also a distinction
between intention and active participation.

Boucher v. Lawson
Where there is mere incidental illegality involving the violation of
foreign law the English courts will disregard the foreign law, always
assuming that the foreign country in question is not the place of the
performance of the contract.

Foster
v.
Driscoll
The United States Government considered "rum-running" very grave
and attached a heavy penalty to it. Here, though both parties knew
that it was unlawful to export jute from India to South Africa, the
courts found no more than that; they did not find that the parties
agreed to make a false statement; in fact the parties were intending to
rely on finding an Indian shipper who would not ask too many
questions. For all the appellant knew, the Indians might already have
released the goods, which might be on the high seas. To hold a
contract unenforceable on the ground of public policy one must find
moral turpitude in both the parties

CONCLUSION:
Assuming that the findings as to illegality by Indian law were right, the Court
of Appeal were wrong in treating that as affecting the enforceability of the
contract because:
(1)
Here the proper law of the contract was English law.
(2)
The contract did not necessitate or require one of the parties to
do an act which was unlawful by Indian law in the performance of the
contract.
(3)
If and so far as active participation in an illegality is an element
in the unenforceability of the contract, there was no active
participation so far as concerned the appellant or the respondents.
The contract was unenforceable since an English court will not enforce a
contract, or award damages for its breach, if its performance would involve
doing an act in a foreign and friendly State which violates the law of that

State. Dismissing an action by the appellant against the respondents, K. C.

Sethia (1944) Ltd., an English company, for damages for breach of a
contract made in September, 1948, and ordered that the appellant pay the
costs of the appeal.