However, there is a useful purpose for illegal contracts, and that is when they are used as a defense against an infringement claim. This is called «defending illegality.» If a minor wishes to terminate a contract when he or she reaches the age of majority, in most States he or she must do so within a reasonable time after reaching the age of majority. For example, returning a car purchased two weeks after the age of 18 was enough to be considered a destatement. [4] The minor had the right to refuse even if the car had lost value, demonstrating that the parties contract with minors at their own risk. Under Texas law, a contract entered into with intent to violate the laws of another country — even if it does not otherwise violate the laws of the forum or place where the contract is entered into — is illegal and will not be enforced. Before learning what makes a contract illegal, it may be helpful to first understand what the basic legal definition of a contract is. If a ground of default is invoked for non-payment for services rendered, the plaintiff would almost always have to raise a cause of action on behalf of quantum meruit in order to preserve its right to recovery. If one party initiates infringement litigation against the other party because the other party did not pay for services already provided by the plaintiff, the plaintiff should always plead for recovery of the quantum meruit, especially if the defendant brings an action for illegality of the contract. Essentially, a contract is an agreement between two or more parties that describes certain legal obligations that the parties must perform for each other.
For example, you sign a contract that the other person will make you a handmade dining table. When they finish the dining table, you promise in the contract that you will pay for it when it is finished. Incapacity and illegality are two of the best-known reservations about the applicability of contracts. These defensive measures help to prevent injustices that could result from the enforceability of contracts that are contrary to public policy. An illegal contract is an agreement that violates the law because its execution requires the parties to engage in illegal activities. Such a contract is void and unenforceable from the outset. Thus, in case of breach of contract, neither party is entitled to compensation or is liable. Quantum Meruit In certain circumstances, a party may recover from Quantum Meruit the fair value of the goods or services provided, even if a contract is later found to be illegal or void. «The law does not imply a commitment to pay for services provided unlawfully under a contract expressly prohibited by law.
However, if the services provided by one party on the basis of a void contract were not in themselves unlawful and the other party does not provide them voluntarily, the first party may, like a quantum meruit, recover what the second party actually received in value, although no recovery from the contract is possible. (Trumbo v. Bank of Berkeley (1947) 77 Cal.App.2d 704, 710). A contract is typically used for various transactions, such as the sale of land, goods, or services. Some common examples are employment contracts and sales contracts (for example, contracts between a buyer and seller of products). Therefore, even if the subject matter of the contract is not expressly mentioned in any law, a court may treat them as if they were unlawful if they create circumstances contrary to public policy. If such a scenario occurs, the court will not perform the contract. It is important to note that a contract can be illegal without breaking the law.
This may be the case, for example, if a contract relates to certain activities, such as gambling or prostitution, which are not expressly prohibited by law, but which are discouraged due to breaches of public order. Sometimes a contract refers to an object that is not expressly prohibited by law, but is nevertheless contrary to public policy and the principles of fair trade. These contracts also fall into the category of «illegal contracts» and are also unenforceable. Going back to the blackjack dealer example, if his employer doesn`t pay him for the work he did as a blackjack dealer, the dealer has no way to recover his lost wages for the job because the entire employment contract is illegal. The employer will be released for breach of contract and payment to the employee, and the blackjack dealer has no recourse available. A severable contract may be concluded either by the parties to the contract or as a result of court actions. In order to establish a termination contract, the parties may include a specific termination clause in the contract. The clause itself will state that if there is another clause that deems the contract illegal, that clause will be removed from the contract until the deletion radically changes the performance of the contract.