The law of contract is a set of rules governing the relationship, content and validity of an agreement between two or more persons (individuals, companies or other institution) regarding the sale of goods, provision of services or exchange of interests or ownership. While this is a wide definition it does not cover the full ambit of situations in which contract law will apply. The reason for this is due to the vast number of examples in which contracts can arise in everyday life.
A valid contract requires: (1) an agreement; (2) an intention to create legal relations (Balfour v Balfour); and (3) consideration (unless the Contract is made by deed). Whilst each of these three requirements receives separate treatment, they must in reality be looked at together.
nb. In business matters the intention to create legal relations is presumed (Rose Frank v Compton Brothers)
When a contact is illegal it cannot be enforced by a court or tribunal. A contract that exists for an illegal purpose is void, it will not be enforced by the courts. Mistakes and misrepresentations may also make a contract voidable. Assets transferred under an illegal contract cannot normally be recovered although there are some specific exceptions.
There is a difference between a void contract and a voidable contract. A void contract is not a contract because it cannot be enforced by law. Voidable contracts are considered contracts for the will not necessarily be annulled. An agreement between persons on how to carry out an illegal act will be a void contract because neither party can go to court to enforce the contract.
A general principle exists that the court will not enforce an illegal contract, but the courts will differentiate between situations where the purpose of the contract is an illegal act and where the law has been infringed by bringing into effect the terms of a contract which may be valid at the instance of the party who was unaware of the violation or who could have caused it inadvertently. The innocent party will not in general be affected by the illegal intentions of the guilty party. This could provide them with a remedy.
This part of the law is complex and there are a lot of rules and exceptions. If you have a specific legal problem it is recommended you seek the assistance of a solicitor
Ask your legal question using the box below and have a response from solicitor or barrister within minutes.