Illegality: Overview, definition and example
What is illegality?
Illegality in a contract refers to a situation where the contract’s subject matter, terms, or performance is prohibited by law or public policy. If a contract is based on illegal activities or requires one of the parties to engage in unlawful actions, it is considered void and unenforceable. Illegality can render an entire contract or specific provisions of it invalid, as courts will not enforce agreements that involve illegal conduct or violate public laws.
For example, a contract for the sale of illegal drugs or one that requires a party to break the law would be considered illegal and unenforceable.
Why is illegality important?
Illegality is important because it ensures that contracts cannot be used to enforce actions or agreements that are against the law. Contracts that involve illegal acts or purposes undermine the integrity of the legal system and can result in significant penalties, including criminal charges or fines. By including provisions that address illegality, contracts help ensure that the terms of the agreement are lawful and do not expose the parties to legal risk.
Including a clause on illegality in contracts serves as a reminder that any agreement must comply with all applicable laws and regulations to be enforceable.
Understanding illegality through an example
A company enters into a contract with a supplier to purchase counterfeit goods. The contract is deemed illegal because it involves the sale of goods that violate intellectual property laws. As a result, the contract is unenforceable, and both parties would be unable to seek legal remedies if the agreement is breached.
An example of an illegality clause
Here’s how an illegality clause might appear in a contract:
“If any provision of this Agreement is found to be illegal, void, or unenforceable under applicable law, such provision shall be severed from the Agreement, and the remainder of the Agreement shall continue in full force and effect. Both Parties agree not to engage in any illegal activity or conduct that violates applicable laws or regulations in connection with the performance of this Agreement.”
Conclusion
Illegality is a critical consideration in contracts, ensuring that agreements are based on lawful actions and objectives. Contracts that involve illegal conduct are unenforceable and may expose the parties to significant legal risks. A well-drafted illegality clause helps ensure that the contract adheres to the law, offering protection to the parties involved and promoting compliance with applicable legal standards.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.