When The Doctrine of Ex Turpi Causa Against Illegal Contracts Does Not Admit an Exception

When The Doctrine of Ex Turpi Causa Against Illegal Contracts Does Not Admit an Exception.

By Muhibudeen, Qosim Atanda

It is an elementary principle of law that for every general rule of law, an exception or a set of exceptions may necessarily follow. While exceptions are by law (common law doctrines or statutory enactments) and/or equity created to impede the operation of the general rule of law, they must satisfy the requirement of the law. Their operationality is confined to the circumstance; they could be sustained by the court. Such is the doctrine of exturpi causa non oritur actio as a general principle of law.

The long-standing rule of law (the common law) is that illegal contracts or contracts entered into illegally are void ab initio and not enforceable at law. The doctrine of ‘ex turpi causa non oritur actio‘, meaning ‘an action does not arise from a wrongful consideration’,[1] plays a vital role in regulating contractual dealings. Private law as a class of law remains that set of laws applicable to and regulating humans’ conduct in their interpersonal dealings, conferring status, rights and obligations on individuals and juristic persons. While private law regulates private arrangements between persons privy to a private arrangement, it still overlaps with the instruments of public law in that public law (either by statutes, common law principles or equity doctrines) still stipulates some regulations in the form of rules, doctrines or enactments which must be observed.

The doctrine enjoys great affinity with contracts declared by law to be illegal or void. Meaning, the doctrine of ex turpi causa becomes operational where the issue of illegality or voidability arises concerning a contractual arrangement between the party asserting a right and the other party standing in defence against the assertion. The doctrine of ex turpi causa is exemplified in instances: (a) where the law refuses to assist, in any way, a person who found his cause of action upon an arrangement coloured by law as illegal or (b) where the law negates the legal recognition which ought to be ascribed or given to an agreement.[2]

Understanding what illegality connotes, the Supreme Court in Total (Nig.) Plc v. Ajayi[3] held that “[a]n illegal contract may be said to be a contract which contravenes our statutory laws or which the contemplated action in it is contrary to statutory law or against public policy”. A void contract, on the other hand, is that which is not expressly prohibited, and its formation is never followed by a sanction.[4] By law, whether an arrangement or claim is caught up by illegality or voidable, the principle of ex turpi causa still applies, though with varying degrees which lie in the strength of the two implications in law.

An illegal contract, summarily, includes contractual arrangements:

1. made in contravention of statutory prohibitions on certain types of contracts, such as money lending authorisation, as decided in Uzoukwu v. Il;[5]
2. made in contravention of the regulations of a particular transaction with peculiarity to its formation and performance[6] and the aim of the regulation.[7]
3. made in contravention of a statute seeking to protect a class of people or the general public, such as the presumption created in favour of an illiterate by the Illiterates Protection Laws[8] and the various requirements under the Money Lenders Laws.
4. made to actualise the commission of a crime, tort or fraudulent activities, such as an agreement to beat up a third party or to defame or to perpetrate a fraud upon some consideration.[9]
5. made in prejudice of the essentials of marriage, such as an agreement requesting party A to seek divorce from party B in order to validate the intimacy between party A and C, whether or not consideration has been
6. made to perpetrate and advance corrupt practices.[10]

Contrawise, void contracts include:

1. contract to oust the jurisdiction of the court as decided in L.A.C. v. A.A.N. Ltd.[11]
2. contract to advance sexual immorality.
3. contract involving unjustifiable restraints in business transactions and commercial dealings as held in Tanksale v. Robee Medical Centre Ltd.[12]

The doctrine of ex turpi causa non oritur actio remains applicable, except for fewer exceptions recognised by law. These exceptions are consequently briefly annotated hereunder:

1. Plaintiff’s innocence or non-privity to the formation of the illegal contract and repentance from the illegal intent: This is anchored on illegality as to performance where the plaintiff was not in pari delicto with the defendant in the formation of the illegal contract ab initio. It may be proved on the basis of fraud, duress or complete ignorance of the illegal aspect of the contract. By extension, it applies where a party was ignorant of the illegal aspect of the contract at the time of entering into the same but repudiated the same on becoming aware of the illegal circumstance of the contract. Equally, where a plaintiff who initially had intent to facilitate an illegal transaction voluntarily (in the absence of any frustrating circumstances) gives up the furtherance of the illegal purpose before any execution, whether in part or in whole.
2. Establishment of fiduciary relationship: This is where the plaintiff, in its action against the defendant, who is by law in a fiduciary relationship with the plaintiff, proves that it only reposes its trust and confidence in the defendant’s best judgement.
3. Protective intent or purpose of the law: If the purpose of a statute such as the Money Lenders Act and the Illiterate Protection Act is to protect a class of persons to which the plaintiff belongs from the people in the position of the defendant, the doctrine of ex turpi causa does not apply.
4. Existence of a ground independent of the illegal contract for the plaintiff’s claim: Though an agreement appears illegal in its formation, a plaintiff may get absolved of ex turpi causa if he could base his cause of action on a ground or grounds entirely independent of the illegal contract.
5. Possibility of severance: Where a plaintiff proves that it is convenient for the court, without altering the contract, to excise the void terms contained in the agreement from its valid terms, the doctrine of ex turpi causa may be exempted from applying.

In all of these, where any of the exceptions outlined above are sufficiently pleaded and argued by a plaintiff, it serves as a defence. That is, the implicative doctrine of in pari delicto, potior est conditio possidetis (meaning ‘where both parties are equally guilty, the condition of the party in possession – of the money paid or other property transferred – is the better one’), applicable to contractual arrangements caught by ex turpi causa non oritur actio, becomes suspended by the court where any of the above defences are efficiently established by the party asserting enforceability.

Moving further, even though there are exceptions to the application of the doctrine of ex turpi causa as expounded above, it depends on the facts and circumstances of each case and how convincing it is to the court. The court is equally imbued with the power of raising illegality and voidability suo motu (by itself) without parties necessarily pleading it or bringing it to the attention of the court. For instance, the lack of knowledge of the other party, where it is appropriately pleaded, does not ipso facto (by mere fact) mean the party asserting the same will automatically or surely be relieved and remedied. As an illustration, in the case of Ekeremor LGC v. Omie,[13] the Supreme Court held, inter alia, that:

1. the careless act of the Respondent lending out a sum of money to the Appellant without ensuring due diligence is at the peril of the respondent and cannot be saved in an attempt to blame it all on mere technicalities;
2. the withdrawal of N13,000,000.00 and N12,000,000.00 by the respondent from a bank in contravention of the Money Laundering Act, which not only limited and prohibited but also criminalised the making or acceptance of cash payments in excess of N5,000,000 in the case of an individual and N10,000,000 for a body corporate, is not merely unlawful but also prima facie criminal, thus rendering the entire transactions illegal.

Interestingly, in this case, not only will the respondent fail in his claim of a refund against the appellant for lack of authorisation by the appellant’s decision-making body but also against the ex-officials who engineered the transaction for assuming the role of a money lender without authorisation, though the rigid position on money lender’s qualifiers taken by the court had been altered in its subsequent decision in Uzoukwu v. Idika[14]. It is further noted that even while the court‘s view on who a money lender is in the case had been held to be wrongly reached and, of course, upturned by its later decision, he would still have not been successful on another ground of the lawful maximum withdrawal by the fact that the cash withdrawal made to facilitate the loan exceeded the amount stated in section 2(1) of the Money Laundering Act, as noted by the court. Recourse could have been conveniently made personally against the ex-officials who engineered the transaction even without due diligence carried out by the respondent on the ground of authorisation raised, but the presence of other ex turpi causa instances still bars the respondent from successfully laying a claim for refund.

In a coda, the rule of ex turpi causa non oritur actio evolved to make a balance between human discretionary power to contract on any terms and the protection of society’s well-being and condone contractual arrangements inimical to societal governance and public policy. However, the law on this point is not a straitjacket. The professional advice of a legal practitioner will surely be more than necessary for necessary due diligence, among other things, to avoid a story that touches the heart.

About the Author:

Qosim, a graduate of Common and Islamic Law from the prestigious Faculty of Law, Bayero University, Kano, is an avid legal researcher and technology enthusiast with expertise in web development and a strong interest in litigation practice, alternative dispute resolution, corporate practice & compliance, employment law, maritime law, tech law and Islamic finance. He can be reached via: +2349037074761 OR [email protected]

[1] Bryan A. Garner, Blacks Law Dictionary (11^th ed) 1718

[2] See I.E. Sagay, Nigerian Law of Contract, 2nd Edn, Sweet and Marxwell 359.

[3] (2004) 3NWLR (Pt. 860) 270 at 291.

[4] Corporate Ideal Ins. Ltd. v. Ajaokuta Steel Co. Ltd (2014) 7 NWLR (Pt. 1405) 165.

[5] (2022) 3 NWLR (Pt. 1818) 403

[6] Anaeze v. Ayanso (1993) 5 NWLR (Pt. 291) 1.

[7] Wilson v. Oshin (1994) 9 NWLR (Pt. 366) 90

[8] Ibid

[9] Ajaokuta Steel Co. Ltd, v. Corp. Ins. Ltd. (2004) 16 NWLR (Pt. 899) 369.

[10] Ibid

[11] (2006) 2 NWLR (Pt. 963) 49.

[12] (2013) 12 NWLR (Pt. 1369) 548

[13] (2022) 4 NWLR (Pt. 1819) 129.

[14] Supra

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