Don’t Get Caught Up in Illegal Contracts: Understanding When Agreements Go Against the Law
Contracts form the backbone of countless agreements, but what happens when an agreement brushes against the law? Understanding illegal contracts can save you from trouble.
Illegal Contracts at Formation:
A contract is considered illegal from the start if:
- Both parties know it’s illegal and intend to be bound by it anyway.
- The intended performance itself is illegal, like a contract to commit a crime.
Ignorance Isn’t Always Bliss:
Even if a contract seems potentially legal, if its ultimate goal is illegal, it can still be unenforceable.
What Makes a Contract’s Purpose Illegal?
A contract’s purpose can be illegal if it aims to achieve something against the law, regardless of whether one or both parties are aware of it. The illegality doesn’t even need to be explicitly stated – the true nature of the activity can render it void.
Beyond Formation: Illegality During Performance
A contract initially legal can turn sour if its performance becomes illegal. This can happen if:
- The parties perform the contract illegally, even if they weren’t aware at the outset.
- A new illegal purpose emerges during performance.
Sources of Illegality:
Contracts can be illegal due to:
- Statutory violations: Breaking a specific law through the contract.
- Common law or public policy concerns: Going against established legal principles or public interest.
The takeaway? Be cautious when entering contracts, and consult a legal professional if you have any doubts about its legality. A seemingly simple agreement can turn into a legal headache if it crosses the line.
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