Illegality of Contracts in New South Wales, Australia

Illegality of Contracts in New South Wales, Australia

Whether a contract is illegal, or simply avoid or unenforceable must depend on the circumstances of the case. The contract may be illegal because it is prohibited by statute, or because it infringes rule of public policy. It should not, however, be thought that wherever stitcher requirements are not fulfilled the resulting contract, if indeed one results, is necessarily illegal or affected by illegality. For example, where the parties to a contract failed to comply with the requirement of writing, the contract although unenforceable is not illegal. Similarly, although it might be said, in a very general sense, that it is illegal for a person or corporation who lacks full contractual capacity to enter into a contract except in accordance with the applicable statutory or common-law rules, this is not what is ultimately underscored by the concept of illegality.

In relation to statutes the concern is with situations where contravention amounts to an offence, which penalties imposed. The issue is whether, in the circumstances the contract is prohibited by statute. This depends on the intention of the legislature. Similarly, the relevant public policy is a concern with the upholding of community standards, rather than the protection of disadvantaged person such as minors. The contract will only be illegal if it is of a sufficiently heinous nature. Perhaps the most basic general of the principle of contract entered into with the object of committing an illegal act will not be enforced. The application of this principle depends upon the proof of the intent, at the time the contract was made, to break the law. This principle applies not only to a contract entered into with the object of infringing statute, but also to a contract to infringe common-law rule. If both parties possessing intent the contract is in fact a criminal conspiracy. Such a contract is clearly illegal.

The effect of statute law contracts varies as between statutes. What must be emphasised is that each act raises its own issues of construction. An act may prohibit the making of contracts or a particular description or more broadly agreements, arrangements or understandings. Many acts which, while lacking language of express prohibition, penalise the making of contracts of a particular description, fall within this first class. Parliament May, while stopping short of express or implied prohibition declare contracts of a particular description to England for it. Parliament manually declare void a particular class of contractual provision, such as exclusion clause. Parliament may render them void in whole or in part as against third party only one not touching the validity of contracts as between the parties.

This is a very general overview of the law of illegality in relation to the terms of contracts. If you need more detailed advice and analysis please contact a lawyer who is qualified to practice in the jurisdiction in which you operate.

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