Gibbs v. Smith

115 Mass. 592, 1874 Mass. LEXIS 265

• Court: Massachusetts Supreme Judicial Court
• Decided: September 26, 1874
• Status: Published

Opinion

Devens, J.

An agreement between two or more persons that one shall bid for the benefit of all upon property about to be sold at public auction, which they desire to purchase together, either because they propose to hold it together, or afterwards to divide it into such parts. as they wish individually to hold, neither desiring the whole, or for any similar honest or reasonable purpose, is legal in its character and will be enforced; but such agreement, if made for the purpose of preventing competition and reducing the price of the property to be sold below its fair value, is against public policy and in fraud of the just rights of the party offering it, and therefore illegal. Phippen v. Stickney, 3 Met. 384, 387. 1 Story Eq. Jur. § 293. Story Sales, § 484.

The contract in the present case is manifestly of the latter class. The labor of the. inmates of the house of correction was to be sold at auction. The plaintiffs contracted with the defendant not to bid for it if the defendant would pay them a certain sum if he obtained it. The only consideration for the defendant’s promise was that the plaintiffs should abstain from bidding. Competition would thus be destroyed so far as these parties were concerned, and the labor might thus be obtained at a rate lower than its fair market value. The contract thus made being against public policy, no action can be maintained upon it by the parties thereto. Fuller v. Dame, 18 Pick. 472. Rice v. Wood, 113 Mass.

Nor is it any answer to show that no injury has been done to the party selling. That which renders the contract illegal is not the injury the parties have actually occasioned, but the purpose which they must have contemplated when it was made ; its validity is tested not by its results, but by its objects as shown by its terms. Exceptions overruled.