As mentioned above, if a contract is found to be illegal, the contract will become invalid (unenforceable) and it will be as if it had never been formed. The court will normally leave the parties in the same condition as at the time of the offence. Neither party will be able to compensate for the losses, because here too, the court essentially states: “There is no contract here”. For example, if one party attempts to sue the other party for breach of contract, but the court finds that the contract is illegal for any reason, the party bringing the claim will not receive damages and the infringing party will not be held liable for any breach because the agreement itself is prohibited by law. Where a plea contrary to the contract is raised for non-payment for the services provided, the claimant should almost always rely on a quantum meruit means in order to safeguard his right to recovery. In Bovard v. American Horse Enterprises (1988),[1] the California Court of Appeals for the Third District refused to perform a contract for the payment of promissory notes used to purchase a company that manufactured drug accessories. Although the items sold were not really illegal, the court refused to perform the contract on grounds of public policy. Under Texas law, a contract to do something that cannot be performed without a violation of the law is generally void. Sometimes a contract refers to an object that is not expressly prohibited by law, but is nevertheless contrary to public order and the principles of fair trade. These contracts also fall into the category of “illegal contracts” and are also unenforceable.
Unlike contracts concluded by persons who do not have the legal capacity to enter into contracts that are merely questionable by those persons, illegal contracts are void. Thus, neither party can enforce such contracts. Thus, even if the elements of a contract exist – that is, (1) a valid contract exists; (2) the applicant has provided or offered the service prescribed by contract; (3) the defendant has breached the contract by failing to provide or offer the required service; and (4) the plaintiff suffered damage as a result of the breach – but a court may refuse to perform the contract. The purpose of this rule is not to protect or punish either party, but to profit and protect the public. However, a contract that could have been legally performed will not be declared void, illegal and unenforceable simply because it may have been performed unlawfully or because illegal acts were committed in the performance. A contract is usually used for various transactions, such as the sale of land, goods or services. Some common examples are employment contracts and purchase contracts (for example, contracts between a buyer and a seller for products). California Civil Code § 1608 codifies the doctrine of illegality and provides that “[i]f it is illegal for a part of a single consideration for one or more objects or multiple consideration for a single object, the entire contract is void.” According to article 1667 of the Civil Code, the term “illegal” is generally defined as what contradicts an express legal provision; contrary to the express law policy, although not expressly prohibited; or, otherwise contrary to good morals. In determining illegality, the extent of enforceability and the remedy granted depend on various factors, including the policy of ignorance of the law, the nature of the illegality and the particular facts.
( Asdourian v. Araj (1985) 38 Cal.3d 276, 282). Under Texas law, an illegal purpose is an affirmative defense against a breach of contract claim. To defend the “illegal aim”, the contract would be inapplicable for reasons of public order. In general, consensual, legally valid contracts that include consideration and are concluded by two adults in a good mood are considered valid. But if the illegality does not appear at first sight of the contract, it will not be annulled, unless the facts proving its illegality are before the courts. As a result, it can sometimes be difficult to prove whether a contract is illegal or not. A general rule to follow is this: if the contract requires one of the parties to do something illegal, it will usually not be enforceable.
In other words, if the object or purpose of a contract is illegal, the contract may be “void” in the eyes of the legal system – and therefore unenforceable. Conclusion When analyzing infringement issues (or when drafting contracts), you should always analyze in depth whether there is a problem of illegality. A party may have a case of breach of contract in which the existence of the contract, the breach and the damage are clearly established. However, if illegality is an issue, there is a chance that the customer will not end up with anything. Note, however, that if a potential contract is unenforceable because it is void, the inapplicability of the contract is a defense against claims of unauthorized interference. In principle, contracts are illegal if the conclusion or performance of the contract results in the participation of the parties in illegal activities. Illegality must relate directly to the content of the contract and not to another intervening force. A valid contract must contain a value or price called a consideration element. It can also be a benefit, an interest or a right. Both parties must benefit from the agreement.
In other words, such a contract is not enforceable, although it is supported by consideration. In addition, you should also consult a contract lawyer before entering into any type of contract or agreement. An experienced lawyer will be able to draft and review the contract and ensure that the contract is legally enforceable and that your rights under the contract are adequately protected. However, there is a useful purpose for illegal contracts, and that is when they are used as a defense against a breach of contract claim. This is called a “defence of illegality”. Other common examples of illegal contracts include: Courts will not enforce an illegal contract. Money paid for or transferred under an illegal contract usually cannot be recovered. However, there are exceptions. For example, if a contract is declared illegal by a law protecting a class of persons, a member of that class may recover money paid for under the contract or property transferred. Quantum Meruit In certain circumstances, a party may claim the reasonable value of goods or services exported under quantum meruit, even if a contract is subsequently found to be illegal or void. “The law does not imply a promise to pay for services provided unlawfully under a contract expressly prohibited by law.
But if the services provided by one party under a void contract were not in themselves illegal and the other party does not voluntarily provide on its side, the former may claim as a quantum meruit what the latter actually received in value, although no claim on the contract can be made. (Trumbo v. Bank of Berkeley (1947) 77 Cal.App.2d 704, 710). Under Texas law, a contract entered into with the intent to violate the laws of another country – even if it does not otherwise violate the laws of the place or place where the contract is entered into – is illegal and will not be enforced. The illegality of a contract is governed by (1) the law of the State governing the contract and (2) the law of the place of performance. Depending on the law of the respective country(ies), different rules apply. An illegal contract is an agreement that violates the law because its execution obliges the parties to engage in illegal activities. Such a contract is void and unenforceable from the outset. Therefore, in the event of a breach of contract, neither party is entitled to compensation or will be held liable.
It is important to note that a contract can be illegal without breaking the law. This may be the case, for example, if a contract deals with certain activities, such as gambling or prostitution, which are not expressly prohibited by law but are discouraged due to breaches of public order. The law does not give any guarantee of compensation for services provided illegally under a contract but which are not expressly prohibited by law. But in cases where the services provided by one party under an illegal contract are not illegal in nature and the other party does not voluntarily provide on its side, it is possible that the first party may, as part of a quantum symbol for the real value of what the other party has received, is compensated. In order to safeguard his right to recovery in the event of breach of contract, the plaintiff must always raise a plea of action against quantum meruit if a breach of contract is caused by non-payment for services or goods provided. Consequences of an illegal contract The consequences of an illegal contract can be serious. Once a contract is found to be illegal and void, the court will refuse to perform the contract and leave the parties as it sees fit.
