Illegal Agreement vs. Unlawful Agreement

While studying the Indian Contract Act, 1872, we come across a lot of agreements, and while understanding about it, these two terms - "unlawful agreement" and "illegal agreement", often make us scratch our heads and become a topic of discussion.

It is said - "Every illegal agreement is unlawful, but not every unlawful agreement is illegal."

Though they sound similar, they have different meanings and consequences. All illegal agreements are unlawful because they break the law. However, not all unlawful agreements are illegal—they may violate public policy or ethical standards without necessarily being a crime.

This blog will break down the differences in easy-to-understand language so you can grasp the concepts clearly.

What is an Agreement?

An agreement, in simpler words, is when two or more parties come to a mutual promise to do or not to do something.

In legal terms, an agreement becomes a contract when it meets certain specific conditions, like -

• an offer to do something,

• Acceptance of the offer,

• and Consideration (something of value, like money or services) between the parties.

For ex- if Raj offers to sell his car to Simran, and Simran accepts the offer and agrees to pay a certain amount, this forms an agreement. Once all legal conditions are met, it becomes a binding contract that both parties must honour.

Note: Not all agreements are contracts, but all contracts begin with an agreement. If an agreement meets legal requirements, it becomes enforceable under the law. However, agreements that involve illegal or unlawful activities cannot become valid contracts.

What is an Illegal Agreement?

An illegal agreement is one that involves actions or intentions that are against the law. These agreements can lead to serious legal consequences, such as fines or even imprisonment in some cases.

In short, Illegal agreements are considered to involve criminal activities or actions that harm the public interest by breaking the law.

Some examples of Illegal Agreements include:

• Murder: An agreement to murder someone is an example of an illegal agreement. 

• Selling illegal drugs: A contract to sell illegal drugs is illegal because the subject matter of the contract is illegal. 

• Price-fixing: An agreement between competitors to set the same prices for goods or services is illegal.

Features of Illegal Agreements:

1. Void ab initio: This means that illegal agreements have no legal validity, they are considered invalid right from the beginning!

2. Consequences: Engaging in an illegal agreement can result in criminal charges, fines, or even imprisonment.

3. No legal protection: If someone enters into an illegal agreement, they can't go to court to claim damages or enforce the terms. The principle of ex turpi causa applies, meaning the law does not help anyone involved in something illegal or morally wrong.

What is an Unlawful Agreement?

An unlawful agreement may not break a specific law, but it is considered to go against public policy, ethical standards, or legal rules practised in the country. These agreements are not enforceable in court because they conflict with societal values, but they do not always lead to criminal penalties.

Examples of unlawful agreements include: If a company agrees not to hire employees from a certain race, this agreement violates public policy and anti-discrimination laws. It’s an unlawful agreement because it promotes unethical behaviour, but it’s not criminal in the same sense as dealing drugs or committing fraud. However, it still cannot be enforced in court.

Features of Unlawful Agreements:

• Not always criminal: Unlike illegal agreements, unlawful agreements don’t always involve breaking the law in a criminal sense. They might just violate rules that protect public interest or ethical standards.

• Consequences: Even though unlawful agreements may not lead to criminal penalties, they can result in civil consequences, such as lawsuits or financial penalties.

• No law enforcement: The law won't enforce unlawful agreements, so if one party doesn't fulfil their part of the deal, the other party can't seek legal remedies.

Unlawful Agreement vs. Illegal Agreement:

Conclusion

Understanding the difference between illegal agreements and unlawful agreements is crucial for anyone studying contract law or entering into agreements. Illegal agreements involve criminal activity and are void from the start, with serious legal consequences. Unlawful agreements may violate public policy or ethical norms but are not criminal. Also both types of agreements are unenforceable in court.

FAQs

1. Are Illegal Agreements Void or Void Ab Initio?

Yes, illegal agreements are void ab initio, meaning they are void from the very beginning. From the moment such an agreement is made, it has no legal effect, and the courts will not enforce it. This protects the legal system from being used to enforce deals involving illegal activities.

2. What about Consideration in Illegal Agreements?

In contract law, consideration is something of value exchanged between the parties involved. For a contract to be enforceable, there must usually be consideration. However, even if an illegal agreement has consideration, it still cannot be enforced. For example, if someone promises to pay for illegal goods, even though money (consideration) is exchanged, the illegal nature of the contract makes it void.

3. Can you get legal help for an Illegal Agreement?

No, you cannot seek legal help for an illegal agreement. If you’re involved in an illegal contract, the law won’t assist you in enforcing it, even if the deal has been completed. The legal system upholds justice and fairness and won’t support anyone involved in an illegal activity.

4. What are the types of agreements?

Valid agreement, void agreement, wagering agreement, contingent agreement, void agreement, voidable agreement, express and implied agreement, illegal agreement. 

5. What is an example of an illegal agreement?

• Murder: An agreement to murder someone is an example of an illegal agreement. 

• Selling illegal drugs: A contract to sell illegal drugs is illegal because the subject matter of the contract is illegal. 

• Price-fixing: An agreement between competitors to set the same prices for goods or services is illegal.

6. What is the purpose of an illegal agreement?

 To achieve some unlawful end.