Common law illegality

Established rules:
1. Limits on interest:
a. Usuary
b. In duplum
- Total amount
2. Champetry/ pacta de quota litis

3. Restraints of trade
- There are normal reasons for divorcing restraint of trade, interest of
public or person who is bound by restraint of trade. They should be
productive members of society and is supported by section 22 (right to
choose trade). But it may be limited
- Because of 2 competing policies there has been questions aboyt which
one weighs more heavily:
a. Restraint of trade is invalid unless its unreasonable (NO LONGER
VALID)
b. New one says restraint of trade is valid unless its against public policy,
and the person bearing onus of proof is the person WHO WANTS TO
ESCAPE restraint of trade.
o Onus of proof is important as if court can’t decide then the person
who has assumption on their side, they will WIN THE CASE.
o Look at whether its against public policy at time of enforcement,
restraint can be valid at one point in time and invalid at another
o Courts look at whether they can sever parts that’s against public
policy. They look at whether they can cut down extent of restraint
to make it fall within public policy (so they make it narrower)
- Trade secrets must be something that is kept as a secret and is not
available to the public in general.
- The fact that the person trying to enforce restraint of trade claims that
because they train you they can enforce restraint but they can’t
- Buyer who pays extra for good will and then puts trade on seller for
restraint of trade based on good will, thus the seller cannot start a new
business based on good will
A. Interests of community
1. Pacta sun servanda
2. Freedom of trade
3. Other public policy
4. Competition
5. Constitution
B. INTERESTS OF PARTIES
1. Legitimate interests
- Courts will reduce their expectations, they sever the parts of the restraint
of trade to make it a more narrower scope
Near approach is valid unless public policy
4. Outsing jurisdiction
 a. Conslusive proof
b. Time bar
c. Preventing debt relief
d. Parate executie (self-help)

Exercise 5.6
Andile has a business specialising in dry cleaning and mending of clothes. The business is
situated in the Freeland Shopping Centre in Braamfontein. Andile sells the business to
Bongi, who requires that the following restraint of trade be contained in the contract of
sale:
‘Andile undertakes not to open or operate a business doing dry cleaning and clothing repair
in the area of Braamfontein for the next 20 years.’
Although Andile signed the contract containing this clause because he intended to retire, he
later changed his mind and wanted to open a dry cleaning business with his son in
Braamfontein, in a street about 5 km from the Freeland Shopping Centre. He now wants to
challenge the validity of the restraint of trade clause.
(a) According to the ‘old’ approach, how would a court go about deciding the validity of this
restraint?
(b) How would this be different after the decision in Magna Alloys?
Look at how many others, there is specialized skills but he is the only person that can do
this. Then no one else can access relevant skills. To enforce re

Issue: restraint of trade issue

Principles of applying test: look at each factors and apply
1. Interest of community (*pacta in survanda)
- What it means and why it is important
2. Freedom of trade
- Explain what it means and that it weighs against calidity as it restricts
interest of trade, its in interest of community that he opens the store
3. Competition
- Law would support free and fair competition, unless there is a legitimate
interest to justify the limitation of competition
4. Constitution
- Right to freedom of movement as “he may npt do so anywhere in south
africa’ this unjustifiably limits his right.

Interests of the parties

1. Legitimate interest
- He claims they going to steal his clientele, he might just see the clients list
which is enough to form an opposition if he starts a new company and
uses his previous clients list
- Trade secrets= its in the public domain, but confidential information like
the clients contract. The most successfully created company would be
one using the client base of his previous company. Thus establishing a
restraint of trade is necessary, as even oif he broihjytb
2. Reciprocal obligations
- There was a contract established between then
 3. Bargaining powers
- Jobs are scarce and he has been rejected from many companies
- Necessity = employment is a necessity

4. Extemt of restraint of trade

- He cant practice in south Africa ss he would be competing for the same
clients as they would be using but his previous firm was not operatom om
the whole of SA.
- The time duration being 5 years is also a very lomg time, so the area is
TOO big and the time period is TOO long. It is the time period necessary
to protect the legitimate interests
- Because they have a legitimate interest the court can order the scope to
be smaller of the ROT so it can be brought down to 2 years and the area
can be narrowed to like cape town ect

Consequences of legality
1. Illegal consequences
a. Ex turpi cause
- Never enforced
b. Par delictum
- No claim for other relief
- Unless relaxed jajbhay v cassim
2. Severance

3. Is the illegal part of the contract severable

a. Illegal part
b. Legal part
- Valid contract

Severance
-usually courts try to sever the illegal parts and then keep the legal parts in the contract
Test: parties concluded contract without illegal parts
-look at whether both parties concluded a legal contract if the illegal parts were taken out

Turpi causa
-you can never enforce illegal contracts
-you cannot enforce an illegal contract so it can never be breached
-turpi applies to
Claim for enforcement: claim that parties carry out their obligations in terms of contract

Par delictum
-applies to other relief
-only one of these rules can apply to this particular claim, must say this is a claim for
enforcement thus the turpi causa rule applies.
-NO CLAIM FOR OTHER RELIEF, discretion to relax
-applies to anything that is not ENFORCEMENT OF CONTRACT, claim for damages can also
be enforcement
-rule is flexible, as discretion to relax aims to create harmony between man and mand

Discretion to relax
1. Public policy considerations
a. How and why these contracts illegal, how much do we as a society disapprove of
these types of contracts
-if you cant get back what you want this will have a direct deterrent effect.
b.constitutional right to property as you cant get your performance back that
infringes the right to property as ypu effectively lose right, look at if its justified for
making this type of contract legal
2. relative moral blameworthiness
- comparison of moral blameworthiness as 2 parties enter into contract knowing of illegality,
where one party enters into contract with good faith while the other party acted badly and
aimed to defraud the party
- in this case the party will be able to claim back as there is a discretion to relax

3. Indirect enforcement
- claim for other relief in order to get the initial relief wanted.
- relax rule in circumstances
Eg: you cant get house back

4. Justice between parties

-If one of the parties would be unjustifiably enriched, when one party pays but gets no
product in return, thus there would be an unjustifiable enrichment

Exercise 5.8

On 1 January 2021, Busisiwe loaned R2 000 to Natasha. In terms of their contract, Natasha
will pay interest on the loan at the end of each month at a rate of 10% per month. In
addition, Natasha has to repay the loan on 31 December 2021.
(a) Determine the total amount of interest that Natasha is legally required to pay if she
fails to pay any interest during 2021 but on 31 December 2021, she repays the
original loan of R2 000.
- For real interest the maximum interest you can claim is equal to the maximum amount

(b) Determine the total amount of interest that Natasha is legally required to pay if she
duly paid the interest owing at the end of each month for the months of January to
July 2021, but fails to pay anything thereafter. It is now 31 March 2022. (You may
assume that Natasha has failed even to repay the original loan amount.)
- she payed up to the end of july, so she paye RR1 600, while the credit can claim full
R1 600 as its not more than the actual loan amount

(c) Determine the amount of interest that Natasha is legally required to pay if she duly
paid the interest at the end every month as it becomes due and on 31 December
2021, she also repays the original loan of R2 000.
 - R2 400 induplum doesn’t apply as it only applies when it falls behind with
your banks, money claimed when you fall into arrears is is usuary

Exercise 5.11
Court says par delictim rule does not apply as he is not claiming the rental, enforcement of
lease. But he is claiming return for property, the outcome of par delictum

Exercise 5.13
1. He can’t enforce the delivery of condense milk, terpi causa applies as its
enforcement, illegal contracts can never be legal.
2. Par delictum also applies as he wants to claim his money back, the effect of par
delictum
a. Considerations of public policy
- Public policy would go against him claiming money back as this would
encourage theft as he stole it
b. Relative moral blameworthiness
- They both morally blameworthy as they entered the contract knowing its
stolen property,
c. Indirect enforcement
- Compare what are parties obligations in terms of contract, ask is this the
same. If it’s the same then its indirect enforcement if it’s not then its not
indirect. Will it have the same consequences if there if enforced
d. Jusctive between parties
- Connor has the money and he delivered bricks to William and its an
enrichment of connor if he keeps the money without having to deliver in
terms of contract

Exercise 5.14
This is statutory illegality as it refers to a specific statute – paying someone to be your
surrogate, you can pay for medical expenses.
Agreement cab be divided into 2 parts:
1. Payments for being a surrogate
- No claim for this is enforceable so you don’t need to go into what is valid
and enforceable
- Can we severe the legal from the illegal, so you can severe payment for
being a surrogate for the contract to be legal. She is not doing it out of
the goodness of her heart so the contract is not divisible and the
consequences apply to the whole THING.
2. Payment for medical expenses and

3. (a) Advise Wanda whether she can insist on payment of the surrogacy fee.

- Turpi causa as she wants to enfprce the payment of the surrogacy fee but this will not
apply

4. (b) Assume for the purposes of this question that Wanda’s right to the surrogacy fee of R50 000 is not
valid and enforceable against Buhle and Andile. In light of this, advise Andile and Buhle whether they
would be able to demand reimbursement from Wanda for the deposit they paid her and having paid her
medical expenses.

- Par delictum you cant claim unless the rule is relaxed, so that they get there money back.

- She is not enriched by the medical expemses without the payment of being a surrogate,
and she is not doing it out of the goodness of her heart