Chapter 15 – Illegality
Illegality refers to a vitiating factor that renders a contract unenforceable. It focuses on
whether the content, purpose, or performance of a contract is unlawful or against
public policy
If a contract is legal, courts may:
- Refuse to enforce it
- Declare it void
- Sometimes allows recovery of money or property
Why illegality matters?
Courts do not want to help people who:
- Break the law
- Encourage wrongdoing, or
- Benefit from immoral behaviour
Basic principle: “No one should profit from their own wrongdoing”
Types of Illegal Contracts
A.Contracts are illegal by statute
A contract is unlawful if Parliament says so
Examples
- Contracts to commit a crime (e.g. selling illegal drugs)
- Contracts that break statutory regulations
- Breaching statutory trading laws
Effects
- Courts will not enforce the contract
- Parties may lose the right to recover money paid under the contract
The impact depends on:
1. Whether the statute expressly bans the contract
2. Whether the statute’s purpose implies the contract should be unenforceable
, B.Contracts illegal at common law
Some contracts are not banned by statute but are considered harmful to society.
Examples include:
1. Contracts to commit a crime, tort, or fraud
- Paying someone to injure another person
- Agreements to conceal evidence
- Insider trading arrangements
2. Immoral contracts
Historically included sexual or immoral arrangements.
Modern courts rarely rely on ‘immorality’ except where exploitation is clear
3. Contracts prejudicial to the administration of justice
- Paying witnesses
- Agreements interfering with court processes
4. Contracts illegal due to corruption or bribery
- Bribes
- Procurement corruption
5. Contracts in restraint of trade
These aren’t automatically illegal but may be void unless reasonable
Illegality refers to a vitiating factor that renders a contract unenforceable. It focuses on
whether the content, purpose, or performance of a contract is unlawful or against
public policy
If a contract is legal, courts may:
- Refuse to enforce it
- Declare it void
- Sometimes allows recovery of money or property
Why illegality matters?
Courts do not want to help people who:
- Break the law
- Encourage wrongdoing, or
- Benefit from immoral behaviour
Basic principle: “No one should profit from their own wrongdoing”
Types of Illegal Contracts
A.Contracts are illegal by statute
A contract is unlawful if Parliament says so
Examples
- Contracts to commit a crime (e.g. selling illegal drugs)
- Contracts that break statutory regulations
- Breaching statutory trading laws
Effects
- Courts will not enforce the contract
- Parties may lose the right to recover money paid under the contract
The impact depends on:
1. Whether the statute expressly bans the contract
2. Whether the statute’s purpose implies the contract should be unenforceable
, B.Contracts illegal at common law
Some contracts are not banned by statute but are considered harmful to society.
Examples include:
1. Contracts to commit a crime, tort, or fraud
- Paying someone to injure another person
- Agreements to conceal evidence
- Insider trading arrangements
2. Immoral contracts
Historically included sexual or immoral arrangements.
Modern courts rarely rely on ‘immorality’ except where exploitation is clear
3. Contracts prejudicial to the administration of justice
- Paying witnesses
- Agreements interfering with court processes
4. Contracts illegal due to corruption or bribery
- Bribes
- Procurement corruption
5. Contracts in restraint of trade
These aren’t automatically illegal but may be void unless reasonable
