Illegal Contracts are Void

by | Commercial Transactions, Court Disputes

A Contract may be invalid for a number of technical or practical reasons but what of a contract that is completely valid according to normal contractual requirements but it is nevertheless void? This can happen with the contractual doctrine against illegality.

Illegality often comes from a conflict between the terms of the contract and legislation. Or, it can come from a conflict between contract and public policy.

Examples:

  1. A Contract or Deed agrees that in return for a sum of money, a sacked worker grants a release to the ex-employer in respect of dismissal or injury claims.  Void – workers’ compensation legislation makes it illegal to contract out of or waive statutory rights to an injury claim without certain official consents.
  2. A contract allows the buyer of a house to purchase over time, in instalments.  Void – land sale legislation makes this illegal.
  3. A contract provides additional salary to a worker in return for waiver of certain penalty rates, overtime etc.  Void – Fair Work legislation makes this illegal.
  4. A contract document records a loan agreement but an unwritten ‘side deal’ sets terms for interest payments ‘under the table’.   Void – contrary to public policy as a conspiracy to defraud a third party and prohibited under Tax Assessment legislation.
  5. Jack agrees with Carlos to sell Carlos certain supplies in bulk. However, Carlos is an official of the Government of Ruritania, with whom Australia is at war.  Void – the contract whilst perfectly valid per se is illegal under Defence legislation and against public policy.

There are many other examples of Contracts or Deeds that would otherwise be perfectly valid and binding upon the parties.  The key point is that drawing a contract needs general legal skills and knowledge, not just an understanding of the rules of formation of contracts.

For further information please contact Peter on 8362 6400 or email Peter JakobsenJoin our mailing list to receive updates and advice on current issues.

  • Peter Jakobsen

    About the author: Peter Jakobsen

    Peter has a wealth of experience in many areas of the law but practises primarily in the areas of civil and commercial litigation including employment matters, negligence, defamation, leasing and contractual disputes and debt collection.

    Peter is a skilled and clever advocate that brings all of his intelligence and significant Court room experience to each and every matter to achieve excellent results for his clients.

    Call on 8362 6400 or email Peter.

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