Illegality in Contract Law in Malaysia: Understanding the Consequences

Contract law is a fundamental aspect of Malaysian law, and it governs the relationships between two or more parties who have entered into an agreement. However, not all contracts are legal and enforceable. In Malaysia, the doctrine of illegality in contract law is a crucial principle that can render a contract null and void, leading to consequences that can be severe for all parties involved.

What is illegality in Contract Law?

Illegality in contract law refers to the situation where the object or consideration of a contract is prohibited by law or is against public policy. A contract that involves illegal activities or that contravenes the law is deemed unenforceable and void. This means that the contract is not legally binding or enforceable, and it does not have the force of law.

The consequences of illegality

Illegality in contract law can have severe consequences for all parties involved. When a contract is deemed unenforceable and void, the parties can no longer be held accountable for their promises. This means that the parties cannot sue each other for non-performance or breach of contract. Additionally, any money that has been paid under the contract cannot be recovered.

In some cases, the consequences of illegality in contract law can go beyond the parties involved. For example, if a contract involves illegal activities such as drugs or other criminal activities, the parties may face criminal charges and prosecution. This can lead to imprisonment, fines, or both, depending on the nature and severity of the offense.

The Doctrine of Public Policy

In Malaysia, the doctrine of public policy is a crucial aspect of the illegality doctrine in contract law. The doctrine of public policy is a principle that refers to the concept that certain types of contracts are prohibited because they are against the public interest. The Malaysian courts have held that public policy is not a static concept but an evolving one that reflects the values and needs of society. Therefore, the courts have adopted a flexible approach to public policy, where the concept is subject to change over time.

Examples of illegality in Contract Law

Currently, Malaysia has a number of laws in place that govern contract law, including the Contracts Act 1950 and the Sale of Goods Act 1957. Some examples of illegality in contract law include:

1. Contracts that violate the law: Contracts that involve illegal activities such as drug trafficking or gambling are considered void and unenforceable.

2. Contracts that are against public policy: Contracts that violate public policy, such as contracts that involve bribery or corruption, are deemed unenforceable.

3. Contracts that are immoral or contrary to good morals: Contracts that involve immoral activities or that are against good morals are considered void.

4. Contracts that are fraudulent: Contracts that involve fraud or deceit are considered void.

Conclusion

Illegality in contract law is a crucial principle that underpins the legal system in Malaysia. It is essential that parties are aware of the consequences of illegality and ensure that their contracts are legal and enforceable. Failure to abide by the laws governing contract law can have severe consequences, including criminal prosecution and imprisonment. Therefore, it is important to ensure that contracts are drafted in compliance with Malaysian law and that they are in line with the values of society.