Illegal Agreement – Simple Understanding (CA Foundation Law)
An illegal agreement is one that is not allowed by law. It is not just void (invalid), but also forbidden. This means the law does not recognize it at all, and no legal rights can arise from it.
In simple words, if the purpose or object of an agreement is unlawful, it becomes an illegal agreement. For example, agreements related to committing a crime, fraud, or something against public policy are illegal.
The important point to remember is:
👉 All illegal agreements are void, but not all void agreements are illegal.
One special feature of an illegal agreement is that it also makes related agreements (collateral transactions) invalid. For example, if A borrows money from B to do an illegal activity, even the loan agreement between A and B becomes unenforceable.
So, whenever you see an agreement, ask yourself:
✔ Is the purpose lawful?
✔ Does it violate any law or public policy?
If the answer is no, then the agreement is illegal.
This concept is very important for exams, so focus on understanding the difference between “void” and “illegal” clearly rather than just memorizing definitions.