Source: https://chestofbooks.com/business/law/Handbook-Law-Of-Contracts/Prohibition-Effect-Of-Penalty.html
Timestamp: 2019-05-20 23:17:16
Document Index: 9744100

Matched Legal Cases: ['§ 105', '§ 478', '§ 107', '§ 479', '§ 107', '§ 479', '§ 107', '§ 479', 'art 4']

Prohibition - Effect Of Penalty
A statute may render an agreement illegal by express prohibition or by imposing a penalty without an express prohibition. Where the statute expressly provides that a violation thereof shall constitute a misdemeanor, a contract in violation of it is illegal, although the statute does not in express terms prohibit the contract nor declare it void.20
Some cases hold that, whenever a statute imposes a penalty for an act or omission, it impliedly prohibits it;21 but, according to the weight of authority, the imposition of a penalty is only prima facie evidence of an intention to prohibit.22 The intention of the legislature will always govern, and the court will look to the language and subject-matter of the act and to the evil which it seeks to prevent. A consideration which receives weight is whether the object of the penalty is protection to the public and not merely revenue; for if the penalty is designed to further the interests of public policy, as to protect the public against fraud or imposition, or to protect health or morals, safety or good order, it amounts to a prohibition;23 but if it is designed solely for revenue purposes, a contract in violation of the statute is not necessarily prohibited.2* The propriety of applying a different rule to statutes designed for revenue purposes, however, has been questioned.20 Another consideration, which sometimes receives weight, is whether the penalty is recurrent upon every breach of the provisions of the statute; for, if it is recurrent, the inference is that the penalty amounts to a prohibition.26
19 Bank of U. S. v. Owens, 2 Pet. 527, 539, 7 L. Ed. 508; Bensley v. Big-wold, 5 Barn. & Ald. 335; Aubert v. Maze, 2 Bos. & P. 371; White v. Buss, 3 Cush. (Mass.) 448; Puckett v. Alexander, 102 N. C. 95, 8 S. E. 767, 3 L. R. A. 43; Penn v. Bornman, 102 I11. 523; Lewis v. Welch, 14 N. H. 294; William Wilcox Mfg. Co. v. Brazos, 74 Conn. 208 50 Atl. 722. See "Contracts," Dec. Dig. (Key-No.) § 105; Cent. Dig. §§ 478-497.
20pinney v. First Nat. Bank, 68 Kan. 223, 75 Pac. 119, 1 Ann. Cas. 331; Smith v. Robertson, 106 Ky. 472, 50 S. W. 852, 45 L. R. A. 510; Beecher v. Peru Trust Co., 49 Ind. App. 184, 97 N. E. 23. And see Leuthold v. Stickney, 116 Minn. 299, 133 N. W. 856, 39 L. R. A. (N. S.) 231, Ann. Cas. 1913B, 405 (holding that the owner of a building who is guilty of a misdemeanor in failing to equip it with fire escapes as required by statute cannot maintain an action for the rent thereof). See "Contracts," Dec. Dig. (Key-No.) § 107; Cent. Dig. § 479.
21Miller v. Post, 1 Allen (Mass.) 434; Hallett v. Novion, 14 Johns. (N. Y.) 273, 290; Pray v. Burbank, 10 N. H. 377; Doe v. Burnham, 31 N. H. 426; Durgin v. Dyer, 68 Me. 143; Kleckley v. Leyden, 63 Ga. 215; McConnell v. Kitchens, 20 S. C. 430, 47 Am. Rep. 845; Bacon v. Lee, 4 Iowa, 490; Randall v. Tuell, 89 Me. 443, 36 Atl. 910, 38 L. R. A. 143; Sandage v. Manufacturing Co., 142 Ind. 148, 41 N. E. 380, 34 L. R. A. 363, 51 Am. St. Rep. 165; Edgerly v. Hale, 71 N. H. 138, 51 Atl. 679. See "Contracts," Dec. Dig. (Key-No.) § 107; Cent. Dig. § 479.
22Bensley v. Bignold, 5 Barn. & Ald. 335; Cope v. Rowlands, 2 Mees. & W. 149; Griffith v. Wells, 3 Denio (N. Y.) 226; Hunt v. Knickerbacker, 5 Johns. (N. Y.) 327; President, etc., of Springfield Bank v. Merrick, 14 Mass. 322; Siedenbender v. Charles' Adm'rs, 4 Serg. & R. (Pa.) 151, 8 Am. Dec. 682; Penn v. Bornman, 102 I11. 523. See, also, cases in note 18, supra. See "Contracts," Dec. Dig. (Key-No.) § 107; Cent. Dig. § 479.
The absence of a penalty or the failure of the penal clause in the particular instance will not prevent the court from giving effect to an express prohibition.27
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