Illegality Breach of Contract

29 Mar Illegality Breach of Contract

Illegality Breach of Contract: What it Means and How to Avoid it

Contracts are legally binding agreements that govern the relationship between two or more parties. However, sometimes unforeseen circumstances may arise that render a contract illegal and unenforceable. This is known as an illegality breach of contract.

An illegality breach of contract occurs when the performance of a contract becomes illegal due to changes in the law or unforeseen circumstances. For example, a contract to sell illicit drugs would be illegal from the outset and therefore unenforceable. However, an otherwise legal contract may become illegal due to changes in the law, such as a change in regulations or the passing of new legislation.

In such cases, the party who has breached the contract may not be held liable for damages as the contract was unenforceable. This can result in significant financial losses and reputational damage, particularly for businesses.

So, how can you avoid an illegality breach of contract? Here are some tips to keep in mind:

1. Stay up to date with legal changes: Keep a close eye on changes in relevant laws and regulations. It is important to regularly review contracts to ensure they remain legal and enforceable.

2. Include a force majeure clause: A force majeure clause can protect parties from unforeseen circumstances that make the performance of a contract illegal. This clause can excuse performance if events beyond the control of the parties occur, such as natural disasters or government actions.

3. Conduct due diligence: Before entering into a contract, conduct due diligence on the other party to ensure they are legally permitted to perform the contract. This can involve verifying licenses, permits or other regulatory approvals.

4. Seek legal advice: It is always advisable to seek legal advice before entering into a contract or making changes to an existing contract. A lawyer can help identify potential illegality risks and suggest measures to mitigate them.

In conclusion, an illegality breach of contract can have serious consequences for businesses and individuals. However, by staying up to date with legal changes, including a force majeure clause, conducting due diligence and seeking legal advice, parties can avoid the risks of illegality breaches and protect themselves from financial and reputational harm.