The Doctrine of Public Policy in Canadian Contract Law

26 / Annual Review of Civil Litigation
called them their `understandings'... Surely what is immoral may be judged by
the current standards of morality of the community.' 29 [emphasis added]
Another type of contract which falls within the head of "sexual immorality"
is one involving the provision of assistance to a prostitute. It has been
held that an agreement to tender products or services to a prostitute or brothel
which are intended to be used in the pursuit of an immoral purpose is contrary
to public policy,"" although where the innocent party has no knowledge that
such products will be used for prostitution, the contract is still enforceable.
Contracts involving the sale or bailment of necessities to a prostitute are also
enforceable,"' provided there is no "evidence specifically to connect the contract
with the prostitution."'" Despite such caveats, it would appear that the
courts will still refuse to enforce contracts which promote prostitution."3
Although, as noted above, the general academic consensus with respect
to immoral contracts is that "the law in this connection appears to concern itself
only with what is sexually reprehensible,"" it seems appropriate to treat the
recent emergence of discrimination as a head of public policy that falls within
the general category of immorality. As late as 1948, in the case of Noble, it was
held by the Ontario Court of Appeal that a restrictive covenant accompanying
the sale of land in a summer resort which prohibited its subsequent transfer to
a person of "Jewish, Hebrew, Semitic, Negro or coloured race or blood" was
valid having regard to public policy.'35 However, this position seems to have
reversed itself, as the Ontario Court of Appeal held in the 1990 decision of
Canada Trust that a condition in a scholarship trust which excluded applicants
who were not "Christians of the White Race" was, in fact, contrary to public
policy. Similar decisions may be found in England (where it was held that the
actions of a trade association in refusing membership to a woman were contrary
129 [1973] Qd.R. 93 (S.C.) at 102 and 104. Similar reasoning was applied in Armhouse Lee
Ltd. v. Chappell, The Times (7 August 1996) (Eng. C.A.), where the Court declined to
find that a contract which bound the respondent to pay for certain telephone sex advertisements
was so immoral that it should be declared contrary to public policy. Note,
however, that such agreements may still potentially infringe the obscenity provisions of
the Criminal Code, R.S.C. 1985, c. C-46, and thus be invalidated on the basis of statutory
illegality.
130 Pearce v. Brooks (1866), L.R. 1 Ex. 213 (Eng. Exch.). See also Dominion Fire Insurance
v. Nakata (1915), 52 S.C.R. 294.
131 Bowty v. Bennet (1808), 1 Camp. 348.
132 Chitty, supra note 6, at 977.
133 Armhouse Lee Ltd. v. Chappell, The Times (7 August 1996) (Eng. C.A.). For a contrary
view, see Judd, supra note 19 at 691-692. Such contracts may also be invalid on the
basis of statutory illegality given s. 213 of the Criminal Code.
134 Cheshire, supra note 7 at 413.
135 See also Clayton v. Ramsden, [1943] A.C. 320 (H.L.). An early decision to the contrary
may be found in Wren, Re, [1945] O.R. 778, 1945 CarswellOnt 62 (H.C.J.) at paras. 20-
23.