First Principles of Business Law

7.1. Illegal transactions

7.1. The effect of illegality on a transaction

Normally, a transaction is enforceable at law provided it is a lawful one. The courts will not lend their weight and authority to assist in the enforcement of a transaction that is unlawful (illegal). The courts treat such transactions as either void ab initio (non-existent), or as legally unenforceable. In practice, illegality is usually raised as a defence when an action is brought to enforce a transaction. If the defendant can establish that the transaction was illegal, the court will refuse to assist the plaintiff.

It can be difficult to decide whether a particular transaction is illegal or not. In this section, the examples illustrate what factors are relevant in establishing illegality either under the common law, or under statute.

The examples also illustrate the different effects of illegality in particular circumstances.