Illegal Contracts in Singapore: Understanding the Basics

Contracts are the backbone of any business transaction, providing a legal framework for the exchange of goods and services. However, not all contracts are created equal. Some may be deemed illegal, and as a result, unenforceable. In Singapore, the law surrounding the validity of contracts can be complex, and it is essential to understand the basics of illegality in contract law.

What is an illegal contract?

An illegal contract is a legal document that is against the law or public policy. It can be deemed illegal if it violates any statute, regulation, or common law principle. For instance, a contract that requires someone to perform an act that is illegal (such as stealing) or that goes against public policy (such as promoting racial hatred) is considered illegal.

What are the consequences of an illegal contract?

An illegal contract is unenforceable, meaning that neither party can claim any legal remedy for any breach of the contract. In other words, if a contract is deemed illegal, it is as though the contract never existed in the first place. This means that any money paid or goods exchanged under the illegal contract cannot be recovered.

Exceptions to the illegality rule

There are exceptions to the illegality rule that may allow a party to claim legal remedies even if the contract is deemed illegal. For example, if one party was innocent and did not know that the contract was illegal, that party may be able to recover any money paid or goods exchanged under the contract.

Another exception is the doctrine of severance. Under this doctrine, a court may sever or remove the illegal part of the contract and enforce the remaining legal parts of the agreement. For example, if a contract for the sale of narcotics is illegal, but the sale of non-narcotic items was also included, a court may sever the illegal part of the contract and enforce the sale of non-narcotic items.

Conclusion

Illegal contracts can have serious consequences for both parties involved, as they are unenforceable under the law. To avoid any legal issues, it is essential to ensure that any contracts entered into are valid and legal. If you are unsure of the legality of a contract, seek legal advice to protect your interests. Remember, prevention is always better than cure when it comes to the law.