Contracts are agreements between two or more parties that are legally binding. However, not all contracts are valid or enforceable under the law. If a contract is found to be unlawful or illegal, it will not be enforceable in a court of law. In this article, we will discuss the circumstances when a contract could be considered unlawful or illegal.
1. Contracts That Violate Public Policy
The first circumstance when a contract could be considered unlawful or illegal is when it violates public policy. A contract that goes against public policy is one that is harmful to society or goes against the values and morals of a community. For instance, contracts that promote discrimination, encourage criminal activities, or prevent an individual from exercising their legal rights are considered void under the law.
2. Contracts That Are Formed Under Duress or Undue Influence
Another circumstance that makes a contract unlawful or illegal is when it is formed under duress or undue influence. Duress occurs when one party uses threats or force to make another party sign the contract. On the other hand, undue influence occurs when one party takes advantage of their position of power over the other party to get them to sign the contract. Contracts formed under such circumstances are considered voidable, and the aggrieved party can rescind the contract.
3. Contracts That Lack Consideration
Consideration is a legal term that refers to the benefit that each party gets from the contract. For a contract to be valid, both parties must receive something of value from the contract. If one party fails to offer any consideration, the contract is considered unenforceable.
4. Contracts That Are Against Statutory Law
A contract that goes against statutory law is also considered unlawful or illegal. Statutory law is the law that is enacted by the government, and it covers a wide range of legal issues. Contracts that involve the sale of illegal drugs, gambling, prostitution, or any other activities that are prohibited by law are considered void.
5. Contracts That Are Fraudulent
A contract that is formed through fraudulent means is also considered unlawful or illegal. Fraud occurs when one party intentionally misrepresents or conceals important information to induce the other party to sign the contract. Contracts formed under such circumstances are voidable, and the aggrieved party can rescind the contract.
In conclusion, a contract is considered unlawful or illegal if it violates public policy, is formed under duress or undue influence, lacks consideration, goes against statutory law, or is fraudulent. If you are entering into a contract, it is essential to ensure that it is legally binding and enforceable. It is always advisable to seek legal advice before signing any contract to avoid any legal issues in the future.