Some thoughts on the consequences of illegal contracts
| Citation | 2021 Acta Juridica 177 |
| Date | 23 August 2021 |
| Published date | 23 August 2021 |
| DOI | https://doi.org/10.47348/ACTA/2021/a7 |
| Pages | 177-202 |
177
https://doi.org/10.47348/ACTA/2021/a7
Some thoughts on the consequences of
illegal contracts*
JACQUES DU PLESSIS†
Few topics in the law of cont ract have generated as much debate
as determ ining t he eects of contracts that infringe statutor y or
common-law rules. While South Af rican law ha s in some respects
adopted remarkably progressive positions in these debates, especial ly
by displaying exibil ity in determining when part ies may clai m
restitut ion, it also sti ll applies some construct s, rules or maxim s in
a manner th at impedes determin ing the appropriate consequences
of infr inging rules or illegal ity. In this reg ard it is argued (i) that
the concept of an ‘i llegal contract’ should be treated with caution,
since dierent commentator s automatica lly lin k it to dierent
consequences; (ii) that the continued reference to a constr uct styled
the par delictu m rule is not helpful when determ ining whether duties
of restitut ion arise from these contrac ts; and (iii) that the ex turpi
maxi m creates the m isleading impression that tainted contracts a re
invariably unenforceable, whereas the real ity may be quite dierent.
I IN TRODUC TIO N
Contracts are concluded within a legal order and therefore must
comply with its demands. Sometimes parties agree to a contract
that infringes a leg al rule, which could arise f rom either a statute
or the common law. In judgments and academic commentar y,
these agreements are usual ly called ‘illegal contracts’1 or, more
* I a m honoured by the i nvitation to c ontribute to t his speci al edition of
Acta Juridica dedicated t o Dale Hutchi son. Our asso ciation goe s back as far a s
1999, when Dale invit ed me to teach hi s contract law le ctures wh ile he was on
sabbatica l. He most helpfully g ave me his lecture notes , and this i ntroduced me
to his rem arkably lucid a nd logical s tyle, devoid of an y pretence or desi re to
be fashion able. Throug h the years I h ave come to appreciat e that the quest fo r
a principle d development of the law i s a hallm ark of his s cholarsh ip. Final ly, I
wish to ex press my gra titude to the referees for t heir feedback.
† B Com LLB LLM (Ste ll) PhD (Aber deen); disti nguishe d professor of law,
Stellen bosch Univer sity.
1 Ja jbhay v Cassim 1939 AD 537 contain s one of the earl iest references t o the
term ‘i llegal contr act’, while more recent exa mples include Absa Bank Ltd v M oore
2017 (1) SA 255 (CC) para 48 n 34; MEC for L ocal Gover nment and Traditional
2021 Acta Juridica 177
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178 TH E FUTURE OF TH E LAW OF CONTR ACT
https://doi.org/10.47348/ACTA/2021/a7
rarely, ‘unlawful contracts’.2 The purpose here is to reect on
some problems relating to the consequences of a contract that
infringes the law or is ‘ illega l’. The focus is not on how illega lity
itself is determined. Whether a contract infringes a statute requires
interpretat ion of the statute and its terms. The common law in
turn traditionally required d ierentiation between rather complex
standards, such as public policy, public interest and public moral ity,
to determine illegality. However, after some bold judicial Gordian
knot-cutting, there is now less need for such dierentiation, a nd
public policy has emerged as an overarching general pr inciple
or standard.3 In determ ining whether both statutor y and
common-law illegality exists, considerable uncertainty remains
about the relevance of the Constit ution and und erlyin g constitut ional
values such as good faith and ubuntu.4 Ultimately, much remains
to be done in determining the underlying justications for the
law to stand in the way of parties’ freely concluded agreements
being enforced.
However, these questions, vital as they may be, wi ll not be
considered fur ther. It will be assumed that we are dealing w ith a
Academic l iteratu re often refer s to ‘ille gal contr acts’, or contracts b eing ‘il legal’
– see eg GB Brad eld Christie’s Law o f Contract in South A frica 7 ed (2016) 391;
D Hutchison & C Pr etorius (eds) T he Law of Contrac t in South Afri ca 3 ed (2017)
181–2; L van Huyssteen et a l Contract – General Prin ciples 6 ed (2020) 208.
2 S ee Natio nal Credit Regulat or v Opperma n 2013 (2) SA 1 (CC) para 14.
‘Unlawf ul contrac t’ is more preva lent when an adm inist rative provi sion is
contravened. F or examples, s ee Municipal Man ager: Qaukeni L ocal Munic ipality v
FV General Trading CC 2010 (1) SA 356 (SCA) para 2 6; Bualo City Metropolitan
Municipality v A SLA Constru ction (Pty) Ltd 2 019 (4) SA 331 (CC) para 144.
Sometime s ‘illeg al contra ct’ and ‘unl awful cont ract’ are u sed intercha ngeably
in the same jud gment: see D epartment of Transpor t v Tasima (Pty) Ltd 2 017 (2 )
SA 622 (CC) para s 162 and 177; Allpay Consolidated Inve stment Holdings (P ty) Ltd
see n 47), para 70. Son nekus tra nslates t he Afri kaans leg al term ‘ong eoorloof ’
with ‘unl awful’, rather th an the more customar y ‘illega l’: J Sonnekus Unjustied
Enrichme nt in South Afric an Law 2 ed (2017) 221.
3 S ee Sasn (Pty) Ltd v Beuke s 1989 (1) SA 1 (A) 7–9. On the interchan geable
use of ‘public pol icy’ and ‘public interest’ s ee Van Huyssteen et a l (n 1) 211–12.
4 S ee J du Plessis ‘Fair ness and diversit y in the South Afr ican law of contrac t’
in J Meir & S Donl an (eds) Comparativ e Law: Mixes, Movem ents, and Metaph ors
(2 019) 4 7.
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