Illegal Contracts

This chapter distinguishes between two central questions: When is a contract illegal? What are the effects for the parties of the illegality of the contract? At least in Scots law, the two issues have sometimes been confused, particularly in respect of factors which strictly speaking ought to be relevant only to one issue or the other, notably the intention of the parties. Intention is strictly irrelevant to the issue of illegality itself, and should be confined to the issue of effects, in particular the application of the par delictum rule. The difficult case is the one where there is a contract which is legal in itself, but where one of the parties has an illegal purpose to be achieved through the contract or intends to perform the contract in an illegal way. This situation may be described as 'performance illegality'. In both Scotland and South Africa the courts will not assist a party to achieve an illegal purpose or carry out an illegal performance, but it is not clear that this makes the contract itself illegal, and it certainly remains enforceable at the instigation of an innocent party.