Case Law on Illegal Contracts

The second group is relevant to this work, governed by Article 1418(1)(.c.c). This rule is derived from Article 134 of the Civil Code (BGB) [53] of 1900, according to which contracts against mandatory provisions[54] are void, unless otherwise provided by law. [55] The Italian model of nullity was influenced by the German model, which included nullity on the category of nullity in order to protect the interests of the other party, while nullity was considered a defence of the public interest. [56] An example of the latter approach can be found in various “model laws”. [42] For example, the UNIDROIT Principles of International Commercial Contracts (PICC), art. 3.3.1, Contracts that violate mandatory regulations provide that if the mandatory rule does not expressly prescribe the effects of a breach on a contract, the parties have the right to exercise such remedies under the contract as long as the circumstances are reasonable. [43] Different criteria should be considered in determining what is appropriate. [44] Thus, in the event of a breach of a mandatory provision, ordinary remedies may be granted to one or both parties available under valid contracts (including the right to performance) or other remedies, such as the right to treat the contract as invalid – the adaptation of the contract or its termination to conditions to be determined. [45] A party may be able to claim under the “quantum meruit” the value of goods or services that were already considered illegal before the contract was accepted. Although the law does not promise that a party can be paid for services provided illegally under a contract prohibited by law, the party may be able to claim in monetary terms if the following conditions can be met: The parties were sellers and buyers of artificial fertilizers. The Fertilizers and Feed Act of 1906 had made it illegal to sell artificial fertilizers without submitting an invoice listing the chemicals they contained.

This is exactly what the seller did and the buyers refused to pay for the goods, arguing that the entire contract itself had become illegal. The court investigated the purpose of the law (protecting the public by prohibiting the sale of artificial fertilizers without chemical analysis) and ruled that the contract between the parties was definitely illegal due to the non-compliance since its inception. If, however, the partnership agreement contained in the letter set out above is in fact part of a comprehensive agreement containing totally illegal provisions, then this action cannot be maintained within one of the authorities. On the contrary, the desire to find a balance struggles to be satisfied, on the one hand, if one stops at a simple formal qualification, which, as has been pointed out, is not very fruitful, of the treaty itself as “illegal” or “immoral”, and on the other hand, when the court hides behind Latin maxims, which, although repeated incessantly as a mantra, do not help in any way, understand the political reasons for the decisions taken. On the other hand, the provision can be interpreted as meaning that neither party attaches value to the illegal machine, since the price should be the same, even if the district authorities have determined that the machines are not functional. According to this view, the buyer paid $50,000 only for the legal consideration. This interpretation suggests that the judgment should have been rendered without discount for the entire amount due on the obligation. However, in both interpretations, the judgment of the court of first instance must be upheld, since the sellers have not appealed against the judgment and in fact admit in their application to that court that the surrender was appropriate. The parties were involved in a scam in which someone pretended to be a serious businessman, bought a car with a bad check, and then quickly sold it to someone else. Once the scam was revealed, the sellers argued that the contract they had with the scammer was invalid. The court concluded (controversially) that the false identity case invalidated the contract from the outset.

The presumption in personal transactions that people intend to enter into a contract with the person in front of them was rebutted by the fact that the seller had attempted to confirm the alleged identity of the fraudster. Although the legal framework of nullity is complex (it cannot be dealt with in its entirety here), it should be noted that the distinction between nullity[77] and nullity is found in the Italian legal system. [78] However, in the context of contracts that violate mandatory provisions (Art. 1418 para. 1 lit.c.c. It.), cancellation plays no role. Only nullity can be declared with all its effects and particularities – the action for annulment can be brought by any interested party; it may also be declared by the court sua sponte (“ex officio”). In addition, a void contract can only be validated if the law so provides, and the application for nullity is not subject to prescription.

The declaration of nullity affects the contract from the outset as if the contract had never existed. [79] [4] In this case, the trial court found that the market value of the illegal portion of the consideration provided by the sellers was $4,600. This conclusion is supported by substantial evidence. The defendant Blum testified that the market values of these machines were published monthly in a national trade magazine similar to the “Blue Book” used by used car dealers and that the average total list price of the illegal machines at the time of sale was $4,600. In Italy, the rule against return is codified in Article 2035c.c. According to which if a contract is contrary to morality (a smaller subset of illegal contracts) and the parties involved are in pari causa turpitudinis, a refund is not available. It is important to point out that the Italian Civil Code limits this approach to immoral contracts and not to other illegal contracts. The historical origins of Roman law sanctioning treaties contra bon os mores [101] are obvious[102], and this principle has been codified mainly in European civil codes, which contain general clauses stipulating that contracts contrary to public order or morality are null and void. [103] Although public order[104] and immorality are at the same level in common law countries (although most of the case law on “immorality” refers to sexual immorality)[105], these two distinct concepts (i.e. public policy and morality) may have different effects in some civil law countries (including Italy).

[106] In the Italian legal order, both contracts against public policy and against morality are null and void. .