Contract law is a fundamental aspect of business, and it allows parties to engage in mutually beneficial agreements that are legally binding. However, despite the legal frameworks established to govern contracts, violation of contract terms is common. This may occur due to a lack of understanding of the terms of the agreement, or in some circumstances, illegal elements that render the contract void and unenforceable.
Illegality in contract law refers to the presence of unlawful elements that compromise the legality of a contract. In this article, we will discuss some of the essential elements that can make a contract illegal.
1. Contracts Made Under Duress
Duress occurs when one party uses force or coercion to compel the other party to enter into a contract against their will. Contracts made under duress are illegal and unenforceable in a court of law. Situations such as blackmail, threats, or other forms of intimidation that make one party feel compelled to sign the agreement are examples of duress.
2. Contracts Based on Fraud
Fraud occurs when one party deliberately makes false representations to another to induce them to enter into a contract. This may include providing false information, hiding relevant information, or making misleading statements. Contracts based on fraud are void and unenforceable. A contract made under fraud can be canceled by the aggrieved party, or they may choose to sue for damages.
3. Illegality of Consideration
Consideration is a crucial element of a contract. It refers to the price or value exchanged by both parties in a contract. If the consideration being offered is illegal, the contract is void and unenforceable. For example, attempting to sell illegal drugs or stolen goods would make a contract void as the consideration being offered is illegal.
4. Contracts that Violate Public Policy
Contracts that violate public policy are generally illegal. Public policy refers to the principles and morals that are considered essential for the smooth functioning of society. Contracts that encourage illegal activities or are against the public interest are not legally binding. For example, contracts seeking to limit freedom of speech or promoting discrimination are considered against public policy and, therefore, illegal.
5. Contracts that Breach Statutory Provisions
Contracts that breach statutory provisions or laws passed by the government are void and unenforceable. For instance, if two parties agree to engage in illegal business practices that violate a state or federal law, the contract would be illegal and unenforceable.
In conclusion, when drafting a contract, it is essential to ensure that all the elements are within the legal framework of the law. Contracts that contain illegal elements are void and unenforceable, and parties involved in such contracts may face legal consequences. Therefore, it is crucial to engage the services of a qualified legal professional to ensure that your contract is legally binding and does not contain any illegal elements.