I run a non-conventional business and I am currently creating contract to use in the running of the business. I was told that there are some situations in which a contract will be regarded as being an illegal contract under UK law. I never knew this was possible?
Is this true, can you please explain under what circumstances a contract can be regarded as being illegal under UK law?
The Answer from Solicitors Online
Contracts illegal under UK law
A contract will be regarded as illegal in the UK, if the contract was made for a purpose that is contrary to UK law or goes against public interest.
Contract made illegal by legislation
Contracts that are prohibited by legislation are illegal. An example of this is the Competition Act 1988 that prohibits collective contracts between manufacturers to regulate the resale prices of goods, which distorts competition.
Another example is the Gambling Act 1845 which prevents a party to a contract from pursuing Gambling debts through the court, despite what the parties involved may have contractually agreed.
Contracts to commit crime
A contract to commit a crime or an act of fraud is illegal. If you enter into a contract that causes either party to commit a crime in order to fulfill the terms of the contract, that contract will automatically be illegal and made void.
Sexually immoral contracts
Any contract that is for sexually immorality will be regarded as illegal and automatically void. The decision on what counts as sexually immorality will most likely be made in court, if there is a dispute about such a contract.
Contracts contrary to Public Safety
Contracts that go against public safety will be regarded as illegal and void. An example of this is a contract with a foreign nation that the UK is at war with.
Contracts which prevent the Jurisdiction of UK courts
Any contract that try’s to exclude the power and authority of the UK courts from resolving a dispute regarding the contract in the UK is automatically illegal.
Contracts for Marriage matchmaking
A contract for marriage that provides someone with a husband or wife is illegal.
Contracts promoting corruption
Contracts that are for corrupt means involving state organisations are illegal.
The effect of illegal contracts is that they are unenforceable by both of the parties. If one of the parties to the contract is innocent in regards to creating the illegal terms in the contract, then they may be entitled to compensation from the other party that created the illegal terms of the contract.
If you need legal advice on the legality of a contract, you can speak to one of our Solicitors online right now.