Legality refers to the requirement that a contract must have a lawful purpose in order to be enforceable. This principle ensures that agreements made between parties do not violate any laws or public policy, as contracts founded on illegal activities are deemed void and unenforceable. The concept of legality serves as a fundamental pillar in contract formation, as it protects the interests of society and maintains the integrity of the legal system.
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For a contract to be valid, its purpose must be legal; if it involves illegal acts, it cannot be enforced by law.
Contracts that violate public policy, such as agreements that restrain trade or promote illegal activities, are also considered illegal.
If any part of a contract is deemed illegal, the entire contract may be rendered void, depending on the jurisdiction and specifics of the case.
Legality must be assessed at the time the contract is formed, meaning that even if an activity becomes legal later, it does not validate an earlier illegal agreement.
Certain contracts may have legal purposes but still be unenforceable due to being against public policy, highlighting the importance of both legality and ethical considerations in contract law.
Review Questions
How does legality impact the enforceability of a contract between two parties?
Legality directly impacts whether a contract can be enforced by law. If a contract has an unlawful purpose or involves illegal activities, it is deemed void and unenforceable. This means that even if both parties agree to terms, if those terms contravene the law or public policy, no party can seek legal recourse in case of a breach. This reinforces the importance of ensuring that all contracts are based on lawful activities.
What are some examples of contracts that would violate public policy, and why are they considered unenforceable?
Contracts that restrict trade or competition, such as non-compete agreements that are excessively broad or long-lasting, often violate public policy. Other examples include agreements for illegal gambling or contracts related to criminal activities like drug trafficking. These contracts are deemed unenforceable because they go against societal interests and principles designed to promote fair competition and protect public welfare. The legal system will not support agreements that undermine these values.
Evaluate the consequences for parties entering into an illegal agreement and how this affects their legal rights.
When parties enter into an illegal agreement, they face significant legal consequences since such agreements are void ab initio—meaning they were never valid from the outset. This leaves parties with no legal recourse if one party fails to fulfill their obligations, leading to a loss of rights associated with enforcement. Moreover, engaging in illegal contracts can expose parties to criminal liability or civil penalties. Thus, understanding legality is crucial for anyone looking to create binding and enforceable contracts.