Whether a contract vitiated by illegality is wholly unenforceable depends on all the circumstances of the contract and whether the considerations discussed above are weighed against other considerations. This cautious, case-by-case approach was demonstrated more than half a century ago by Justice Masten in Steinberg v. Cohen, 1929 CanLII 419 (ON CA), [1930] 64 O.L.R. 545, [1930] 2 D.L.R. 916 (H.C.J.), where he stated at p. 558 O.L.R., P. 928 D.L.R.: The legal purpose is that insurance companies do not end up insuring criminal activities. Without them, the crime rate could increase due to the lower financial risk. Legal issues requiring the legality of object and purpose are numerous and often available to deal with a specific issue of illegality or immorality, as well as the general principle of unenforceable agreements.
The principle was developed in Complete Access Lift & Mobility Ltd. v. Riggi, 2010 CanLII 100648, which stated: The circumstances of this case do not require going beyond the parameters of the case law that give a general influence on the scope of the nullity of private contracts. It is generally accepted that a contractual provision whose ultimate purpose is to commit fraud against a public tax authority is contrary to public policy and unenforceable (see Alexander v. Rayson (1935), [1936] 1 K.B. 169); Müller v. Karlinski (1945), 62 T.L.R. 85 (German Board); and Napier v.
National Business Agency Ltd., [1951] 2 All E.R. 264). If the judge`s conclusion that the indemnity clause was included in the agreement between the parties with the ulterior motive of tax evasion is defensible, its objective can only be considered fraud on the part of the provincial government. In this case, there is clear precedent for declaring the provision inapplicable because, as the judge held, it is contrary to public policy. An agreement is lawful and enforceable only if it is in accordance with the law of the land and public order. The essential element of a contract law agreement. Any agreement is not legally binding if it is intended for illegal purposes. A common situation of contract illegality (such as above the failure to enter into a legitimate contract in good faith and therefore enforceable) that arises are such attempts at contract when an object, purpose or condition in the agreement is to avoid taxes, essentially fraud for the government, as discussed in Jabbaz v.
Muammar, 2003 CanLII 2317, which stated: [21] I was arrested by the applicant in Bursey v. Bursey (1999), 1999 CanLII 19021 (NL CA), Carswell NL 141, 99 G.T.C. 7190, 174 Nfld. & P.E.I.R. 391, 533 A.P.R. 291, 47 R.F.L. (4.) 1. Bursey v. Bursey concerned the enforceability of a provision in a domestic contract requiring the wife to compensate the husband for half of the retail sales tax payable on equipment owned by his business during the marriage. The husband had deliberately failed to pay the tax. He assured the woman that she would not have to compensate him unless she reported it to Revenue Canada. The purpose of the compensation clause was to dissuade the wife from reporting to the competent authorities the non-payment of taxes by her husband.
The Newfoundland Court of Appeal wrote at paragraph 25: A contract is a legally binding exchange of promises or agreements between the parties that is legally enforceable. In contract law, the legal object is the requirement that the object or reason of the contract be lawful. Do you need an example of legality in contracts to solidify your understanding? Let`s take a look at one below: Here are six reasons why legality is essential in contracts: Here is an article that deals with the legality of the object in contract law. There must be a legal reason and purpose for the performance of the contract; For example, the policyholder must have an insurable interest in the insured. The legality of purpose in contract law consists of the terms of legal documents that are legally binding and enforceable. They often contain mutually agreed obligations and requirements. Any enforceable contract must have the legality of the object. What do you think about the requirement that a contract must have a legitimate purpose? Can you imagine situations where this requirement can lead to an unfair result for the parties? Should there be a sliding scale to determine the enforceability of contracts that are contrary to public policy or illegal? Why or why not? Contracts with an illegal or immoral object or purpose or conditions can and are likely to be considered unenforceable; However, tort issues and possibly equity law issues, including claims for unjust enrichment, may be litigated in court.