VocabuLaw

Illegal Agreement

What is it and what does it mean?

Description of the legal term Illegal Agreement:

An illegal agreement in the context of British law refers to a contract that is forbidden by law or that involves the commission of a criminal act. Such agreements are void ab initio, which means they are considered never to have existed because they lack legal enforceability from the outset. The illegality of an agreement can stem from a variety of factors, such as the purpose of the agreement being expressly prohibited by legislation, being inherently immoral or against public policy, or involving the performance of an act that is illegal.

The consequences of entering into an illegal agreement are severe. Courts will not assist the parties in enforcing such contracts, which means that any benefits or money exchanged under the terms of the illegal contract are typically not recoverable. If property or assets have changed hands under an illegal agreement, the legal owner may be barred from recovering them. The principle aims to deter illegal activity by ensuring that parties cannot profit from wrongdoing and that the justice system is not used to reinforce unlawful conduct.

When assessing an agreement for legality, courts will look beyond the wording of the contract to the intent and actions of the parties involved. If the purpose of the agreement was to facilitate or conceal an illegal act, it will likely be deemed illegal. Moreover, even if only part of a contract is illegal, it can taint the entire agreement, depending on how central the illegal part is to the contract as a whole.

Legislation such as the Sale of Goods Act 1979 and the Unfair Contract Terms Act 1977 gives statutory backing to the illegality of certain types of agreements. These statutes, among others, prevent the creation of contracts that are unjust, disproportionately advantageous to one party, or damaging to the general public.

Legal context in which the term Illegal Agreement may be used:

An example of an illegal agreement would be a contract for the sale of controlled drugs. If two parties draw up a written agreement for one to sell heroin to the other, this contract would be illegal due to the nature of the goods involved. In British law, the sale of controlled drugs like heroin is a criminal offence under the Misuse of Drugs Act 1971. Consequently, even if the seller delivers the drugs and the buyer fails to pay, neither party can seek help from the courts to enforce the agreement or recover the drugs or payment, as the original agreement was to commit a criminal act.

Another context could involve a contract designed to evade tax payments. For instance, an employer and employee may enter into a contract where the employee agrees to be paid ‘under the table’, thereby avoiding income tax and national insurance contributions. Such an agreement would be illegal because it involves a deliberate act to defraud the government of due taxes, which is against the laws under the Income Tax (Earnings and Pensions) Act 2003 and the Social Security Contributions and Benefits Act 1992. In these circumstances, the courts will refuse to enforce the terms, and the parties could be subject to legal penalties.

Understanding the concept of an illegal agreement is vital for the functioning of the legal system. It is a protective mechanism that upholds the integrity of the law by invalidating contracts that could harm society. This tenet reinforces legal principles and ethics within the British justice system, helping to preserve the social order and deter individuals and entities from engaging in or facilitating illicit activities.

This website is for informational purposes only and may contain inaccuracies. It should not be used as a substitute for professional legal advice.