Illegality in Contract Law: Everything You Need to Know
Illegality in contract law is a concept which indicates that a contract is illegal, and therefore, unenforceable.3 min read
Illegality in contract law is a concept which indicates that a contract is illegal, and therefore, unenforceable. Even if the other requirements of a contract are present–the offer, acceptance, consideration, and mental capacity–a court could still deem that the contract is illegal. Moreover, even if the parties to the contract aren’t questioning the legality of the agreement, the court could still determine that it is illegal. If such agreements are in fact deemed illegal, then the entire contract will be void.
Illegal Contract: An Overview
Generally, an illegal contract is one that is made for an illegal purpose, and for that reason, violates law. For example, a contract that requires some sort of illegal act or conduct on the part of one or both parties, will be deemed illegal in entirety. However, a contract can be deemed illegal even if the performance under the contract wouldn’t otherwise violate law. There are certain activities that might not be prohibited by law, but would still be discouraged by the public. Such activities could also deem a contract illegal.
The illegality itself must relate to the contract, whether it be what is included in the contract or how the contract was entered into. If a court determines that the contract is illegal, it will no longer exist. Thus, it becomes void or unenforceable.
Arguing that the contract is illegal can be a defense to a breach of contract should such a suit arise. Therefore, if the other party brings a legal suit against you for breach of contract, you as the defendant can argue that the contract itself is illegal, and therefore, the entire contract is void.
Proving an Illegal Contract
It could be rather difficult to prove that a contract is illegal, particularly if the illegal conduct isn’t related to the agreement. But, if the contract requires either party to act illegally, then you know that you’ll have an argument to make for its illegality.
A severable contract can be formed either by the parties involved in the contract or as a result of the court’s actions. In order to create a severance contract, the parties can include a specific severance clause in the contract. The clause itself will indicate that if there is any other clause that would deem the contract to be illegal, then that clause would be removed from the contract so long as the removal wouldn’t drastically alter the performance under the contract.
A party might be able to recover under “quantum meruit” the value of the goods or services that were already performed prior to the contract being deemed illegal. While the law doesn’t promise that one party can be paid for services that were illegally rendered under a contract that is prohibited by statute, the party might be able to recover monetarily if the following can be met:
- The services that were previously given weren’t intrinsically illegal
- The other party intentionally failed to perform
While the one party could potentially recover for the services that he already rendered, he cannot recover on the contract itself since it was deemed illegal. Of course, this is determined on a case-by-case basis depending on the circumstances of the parties and contract.
Whenever one party brings a breach of contract dispute against the other party due to the other party’s failure to pay for services that the plaintiff already rendered, the plaintiff should always argue for quantum meruit in an attempt to recover, particularly if the defendant brings a claim for illegality of the contract.
Do I Need a Lawyer to Help Me Prove Illegality?
While you aren’t required to hire a lawyer in a contract dispute, it is always a good idea to speak to a qualified contract attorney who can answer your questions regarding the contract. Note that you might find yourself defending a lawsuit, which could cost time and money. Therefore, it is best to speak to an experienced attorney who can inform you whether or not the contract is illegal.
If you need help learning more about the illegality of a contract, or if you need legal assistance with determining whether or not your contract is illegal, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.