A contact to be legally binding it should be legal. The contracts which are against the law or the public policy are consider as illegal contracts. Courts do not enforce illegal contracts and treated as void contracts. There are four major criteria to decide the illegality of a contract.
Contracts declared illegal by statute law.
Statute law consists of both statutes and ordinance which had been legislated by the parliament of the country. Every contact should adhere to the statutes prepared by the parliament. If an element of a contract exceeded any statue that contract becomes illegal. A contract does not need to be a criminal offence in order to be decided as an illegal contract. For an example if there is a minimum price placed for a certain product by a statute such as “consumer protection act” and when a contract that goes beyond the price element fixed by the statute, then it becomes illegal thus court can void such a contract.
Contracts that go against common law.
In Sri Lanka, the Roman-Dutch law is considered as the common law. It is important to note that Roman-Dutch law only acts as a residuary law which contents only five present of the contract law. In respect of the three civil marriage laws, that is kandyan marriage law Muslim marriage law and thesawalame law the Roman-Dutch law acts as a residuary law. That means regarding a particular issue, if three local laws are silent, Roman-Dutch law comes to enact as a residuary law. And some of the property always belongs to the government. Which means no can claim, own or destroy? Some recourse, for an example costs, forest and rivers always remain with state. Therefore if two parties get together and carried out a contract to cut-down trees in a forest, it becomes illegal since such a contract goes beyond the common law.
Contracts void for being against the public policy.
Sometime there may be situations where contracts may not break any laws but still they may become...