Illegal Contracts Act 1970

Reprint
as at 3 December 2007

Coat of Arms of New Zealand

Illegal Contracts Act 1970

Public Act1970 No 129
Date of assent1 December 1970
Commencement1 December 1970

Note

Changes authorised by section 17C of the Acts and Regulations Publication Act 1989 have been made in this reprint.

A general outline of these changes is set out in the notes at the end of this reprint, together with other explanatory material about this reprint.

This Act is administered by the Ministry of Justice.


An Act to reform the law relating to illegal contracts

1 Short Title
  • This Act may be cited as the Illegal Contracts Act 1970.

2 Interpretation
  • In this Act, unless the context otherwise requires,—

    Act means any Act of the Parliament of New Zealand; and includes any Act of the Parliament of England, of the Parliament of Great Britain, or of the Parliament of the United Kingdom, which is in force in New Zealand

    court means, in relation to any matter, the court, tribunal, or arbitral tribunal by or before which the matter falls to be determined

    enactment means any provision of any Act, regulations, rules, bylaws, Order in Council, or Proclamation; and includes any provision of any notice, consent, approval, or direction which is given by any person pursuant to a power conferred by any Act or regulations

    property means land, money, goods, things in action, goodwill, and every valuable thing, whether real or personal, and whether situated in New Zealand or elsewhere; and includes obligations, easements, and every description of estate, interest, and profit, present or future, vested or contingent, arising out of or incident to property.

    Section 2 Act: amended, on 1 January 1987, pursuant to section 29(2) of the Constitution Act 1986 (1986 No 114).

    Section 2 court: replaced, on 19 December 2002, by section 3 of the Illegal Contracts Amendment Act 2002 (2002 No 82).

3 Illegal contract defined
  • Subject to section 5, for the purposes of this Act the term illegal contract means any contract governed by New Zealand law that is illegal at law or in equity, whether the illegality arises from the creation or performance of the contract; and includes a contract which contains an illegal provision, whether that provision is severable or not.

    Section 3: amended, on 19 December 2002, by section 4 of the Illegal Contracts Amendment Act 2002 (2002 No 82).

4 Act to bind the Crown
  • This Act shall bind the Crown.

5 Breach of enactment
  • A contract lawfully entered into shall not become illegal or unenforceable by any party by reason of the fact that its performance is in breach of any enactment, unless the enactment expressly so provides or its object clearly so requires.

6 Illegal contracts to be of no effect
  • (1) Notwithstanding any rule of law or equity to the contrary, but subject to the provisions of this Act and of any other enactment, every illegal contract shall be of no effect and no person shall become entitled to any property under a disposition made by or pursuant to any such contract:

    provided that nothing in this section shall invalidate—

    • (a) any disposition of property by a party to an illegal contract for valuable consideration; or

    • (b) any disposition of property made by or through a person who became entitled to the property under a disposition to which paragraph (a) applies—

    if the person to whom the disposition was made was not a party to the illegal contract and had not at the time of the disposition notice that the property was the subject of, or the whole or part of the consideration for, an illegal contract and otherwise acts in good faith.

    (2) In this section, disposition means—

    • (a) any conveyance, transfer, assignment, settlement, delivery, payment, or other alienation of property, whether at law or in equity:

    • (b) the creation of a trust:

    • (c) the grant or creation of any lease, mortgage, charge, servitude, licence, power, or other right, estate, or interest in or over any property, whether at law or in equity:

    • (d) the release, discharge, surrender, forfeiture, or abandonment, at law or in equity, of any debt, contract, or thing in action, or of any right, power, estate, or interest in or over any property; and for this purpose a debt, or any other right, estate, or interest, shall be deemed to have been released or surrendered when it has become irrecoverable or unenforceable by action through the lapse of time:

    • (e) the exercise of a general power of appointment in favour of any person other than the donee of the power:

    • (f) any transaction entered into by any person with intent thereby to diminish, directly or indirectly, the value of that person's own estate and to increase the value of the estate of any other person.

    Section 6(2): replaced, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).

7 Court may grant relief
  • (1) Notwithstanding the provisions of section 6, but subject to the express provisions of any other enactment, the court may in the course of any proceedings, or on application made for the purpose, grant to—

    • (a) any party to an illegal contract; or

    • (b) any party to a contract who is disqualified from enforcing it by reason of the commission of an illegal act in the course of its performance; or

    • (c) any person claiming through or under any such party—

    such relief by way of restitution, compensation, variation of the contract, validation of the contract in whole or part or for any particular purpose, or otherwise howsoever as the court in its discretion thinks just.

    (2) An application under subsection (1) may be made by—

    • (a) any person to whom the court may grant relief pursuant to subsection (1); or

    • (b) any other person where it is material for that person to know whether relief will be granted under that subsection.

    (3) In considering whether to grant relief under subsection (1), and the nature and extent of any relief to be granted, the court shall have regard to—

    • (a) the conduct of the parties; and

    • (b) in the case of a breach of an enactment, the object of the enactment and the gravity of the penalty expressly provided for any breach thereof; and

    • (c) such other matters as it thinks proper;

    but shall not grant relief if it considers that to do so would not be in the public interest.

    (4) The court may make an order under subsection (1) notwithstanding that the person granted relief entered into the contract or committed an unlawful act or unlawfully omitted to do an act with knowledge of the facts or law giving rise to the illegality, but the court shall take such knowledge into account in exercising its discretion under that subsection.

    (5) The court may by any order made under subsection (1) vest any property that was the subject of, or the whole or part of the consideration for, an illegal contract in any party to the proceedings or may direct any such party to transfer or assign any such property to any other party to the proceedings.

    (6) Any order made under subsection (1), or any provision of any such order, may be made upon and subject to such terms and conditions as the court thinks fit.

    (7) Subject to the express provisions of any other enactment, no court shall, in respect of any illegal contract, grant relief to any person otherwise than in accordance with the provisions of this Act.

    Section 7(3): amended, on 19 December 2002, by section 5 of the Illegal Contracts Amendment Act 2002 (2002 No 82).

8 Restraints of trade
  • (1) Where any provision of any contract constitutes an unreasonable restraint of trade, the court may—

    • (a) delete the provision and give effect to the contract as so amended; or

    • (b) so modify the provision that at the time the contract was entered into the provision as modified would have been reasonable, and give effect to the contract as so modified; or

    • (c) where the deletion or modification of the provision would so alter the bargain between the parties that it would be unreasonable to allow the contract to stand, decline to enforce the contract.

    (2) The court may modify a provision under paragraph (b) of subsection (1), notwithstanding that the modification cannot be effected by the deletion of words from the provision.

9 Jurisdiction of District Courts
  • [Repealed]

    Section 9: repealed, on 19 December 2002, by section 6 of the Illegal Contracts Amendment Act 2002 (2002 No 82).

9A Jurisdiction of Disputes Tribunals
  • [Repealed]

    Section 9A: repealed, on 19 December 2002, by section 6 of the Illegal Contracts Amendment Act 2002 (2002 No 82).

10 Application of Act
  • This Act shall apply to contracts whether made before or after the commencement of this Act:

    provided that nothing in section 6 shall apply to contracts made before the commencement of this Act.

11 Savings
  • (1) Except as provided in section 8, nothing in this Act shall affect the law relating to:

    • (a) contracts, or provisions of contracts, which are in restraint of trade; or

    • (b) contracts, or provisions of contracts, which purport to oust the jurisdiction of any court, whether that court is a court within the meaning of this Act or not.

    (2) [Repealed]

    (3) Nothing in this Act shall affect the rights of the parties under any judgment given in any court before the commencement of this Act, or under any judgment given on appeal from any such judgment, whether the appeal is commenced before or after the commencement of this Act.

    Section 11(2): repealed, on 3 October 1975, by section 6(7) of the Domestic Actions Act 1975 (1975 No 53).


Contents

  • 1General

  • 2Status of reprints

  • 3How reprints are prepared

  • 4Changes made under section 17C of the Acts and Regulations Publication Act 1989

  • 5List of amendments incorporated in this reprint (most recent first)


Notes
1 General
  • This is a reprint of the Illegal Contracts Act 1970. The reprint incorporates all the amendments to the Act as at 3 December 2007, as specified in the list of amendments at the end of these notes.

    Relevant provisions of any amending enactments that contain transitional, savings, or application provisions that cannot be compiled in the reprint are also included, after the principal enactment, in chronological order. For more information, see http://www.pco.parliament.govt.nz/reprints/ .

2 Status of reprints
  • Under section 16D of the Acts and Regulations Publication Act 1989, reprints are presumed to correctly state, as at the date of the reprint, the law enacted by the principal enactment and by the amendments to that enactment. This presumption applies even though editorial changes authorised by section 17C of the Acts and Regulations Publication Act 1989 have been made in the reprint.

    This presumption may be rebutted by producing the official volumes of statutes or statutory regulations in which the principal enactment and its amendments are contained.

3 How reprints are prepared
  • A number of editorial conventions are followed in the preparation of reprints. For example, the enacting words are not included in Acts, and provisions that are repealed or revoked are omitted. For a detailed list of the editorial conventions, see http://www.pco.parliament.govt.nz/editorial-conventions/ or Part 8 of the Tables of New Zealand Acts and Ordinances and Statutory Regulations and Deemed Regulations in Force.

4 Changes made under section 17C of the Acts and Regulations Publication Act 1989
  • Section 17C of the Acts and Regulations Publication Act 1989 authorises the making of editorial changes in a reprint as set out in sections 17D and 17E of that Act so that, to the extent permitted, the format and style of the reprinted enactment is consistent with current legislative drafting practice. Changes that would alter the effect of the legislation are not permitted.

    A new format of legislation was introduced on 1 January 2000. Changes to legislative drafting style have also been made since 1997, and are ongoing. To the extent permitted by section 17C of the Acts and Regulations Publication Act 1989, all legislation reprinted after 1 January 2000 is in the new format for legislation and reflects current drafting practice at the time of the reprint.

    In outline, the editorial changes made in reprints under the authority of section 17C of the Acts and Regulations Publication Act 1989 are set out below, and they have been applied, where relevant, in the preparation of this reprint:

    • omission of unnecessary referential words (such as of this section and of this Act)

    • typeface and type size (Times Roman, generally in 11.5 point)

    • layout of provisions, including:

      • indentation

      • position of section headings (eg, the number and heading now appear above the section)

    • format of definitions (eg, the defined term now appears in bold type, without quotation marks)

    • format of dates (eg, a date formerly expressed as the 1st day of January 1999 is now expressed as 1 January 1999)

    • position of the date of assent (it now appears on the front page of each Act)

    • punctuation (eg, colons are not used after definitions)

    • Parts numbered with roman numerals are replaced with arabic numerals, and all cross-references are changed accordingly

    • case and appearance of letters and words, including:

      • format of headings (eg, headings where each word formerly appeared with an initial capital letter followed by small capital letters are amended so that the heading appears in bold, with only the first word (and any proper nouns) appearing with an initial capital letter)

      • small capital letters in section and subsection references are now capital letters

    • schedules are renumbered (eg, Schedule 1 replaces First Schedule), and all cross-references are changed accordingly

    • running heads (the information that appears at the top of each page)

    • format of two-column schedules of consequential amendments, and schedules of repeals (eg, they are rearranged into alphabetical order, rather than chronological).

5 List of amendments incorporated in this reprint (most recent first)