A contract is illegal if it involves doing something that is a criminal act or a civil wrong, or against the public good. For example, it is an offence to sell a firearm to a person not licensed to hold one, so a contract to sell a firearm in these circumstances is illegal. A contract whose purpose is to get the party to it to break another legally binding contract that the party has made already is also illegal. Moreover, a contract which otherwise would be legal is illegal if its subject matter is to be used for an unlawful purpose. So, if a firearm dealer were to agree to sell a firearm to a person licensed to hold a firearm knowing that the buyer intends to use it to kill someone, that contract would be illegal.
Courts will not enforce an illegal contract. Money paid or property transferred under an illegal contract cannot normally be recovered. There are exceptions however. For example, where a contract is made illegal by a statute passed for the protection of a class of people, a member of that class can get back money paid or property transferred by her or him under the contract. So a tenant would be able to recover money paid to a landlord which the landlord is prohibited by an Act to collect.
The law about illegal contracts is very complex. If there is any doubt about the legality of a contract, seek legal advice.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.