There is an implied warranty that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner. This applies to all policies regardless of the nature of the subject-matter insured and the policy whether it be for time or voyage. This may be divided into two parts: the legality of the adventure and the performance of the adventure.
Legality of the Adventure
It has to be said that it is not always easy to answer the question whether a contravention of a particular rule or regulation would render an adventure illegal. Naturally, not all breaches of rules and regulations would automatically cause the adventure to become illegal.
Legality in the performance of the adventure
Not only must the adventure be lawful, but its performance must also be lawful. The second implied warranty is qualified with the term ‘so far as the assured can control the matter’.
Supervening illegality
An adventure could well start off as lawful, but become unlawful later as a result of war or a change of events. However, should the assured choose to flout the law by continuing with the voyage, he would be in breach in having failed to exercise control over the matter to ensure that ‘the adventure shall be carried out in a lawful manner’.
Legal effect of breach
Under ordinary contract law, no court, either of law or equity, will lend its assistance to give effect to a contract which is illegal.
Language to the effect that such a contract is void, void in toto, nugatory, ineffective and unenforceable have been used to describe its effect. It has been said that if the illegality is ‘so reprehensible’, the contract is void in toto. But if the illegality is merely undesirable, the taint of illegality will not destroy all legal remedies. The Chief Justice in the case of Redmond v Smith stated that ‘A policy on an illegal voyage cannot be enforced; for it would be singular, if, the original contract being invalid and therefore incapable to be enforced, a collateral contract founded upon it could be enforced. It may be laid down, therefore, as a general rule, that, where a voyage is illegal, an insurance upon such voyage is invalid’.
There is a whole world of difference in saying that a contract is void, or voidable, or that the insurer is ‘discharged’ from liability. In the case of a ‘discharge’ which is now to be read as ‘automatic discharge’ in the light of The Good Luck, the insurer is discharged from liability only as from the date of the breach: all rights and liability accrued before the breach are preserved.
Breach of the implied warranty of legality cannot be waived
Though a breach of warranty may be waived, nevertheless, it has to be pointed out that a breach of the implied warranty of legality is an exception to the rule. No court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the court, and if the person invoking the aid of the court is himself implicated in the illegality.
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