LEGAL PRINCIPLE: CONTRACT LAW – Illegality – Recovery Under Illegal Contract – In Pari Delicto Potior Est Conditio Defendentis
PRINCIPLE STATEMENT
Whether or not a party can recover under an illegal contract may depend on whether that party was aware or privy to the illegality because it is unfair, in equity, for the guilty party to hold the innocent party bound by an act of illegality that he is wholly unaware of. The result is that generally, money paid or property transferred under illegal contract is irrecoverable where both parties are equally guilty of the fact of illegality. This is also buttressed by the maxim in pari delicto potior est conditio defendentis and means that where the parties are both at fault, the condition of the defendant is better.
RATIO DECIDENDI (SOURCE)
Per Achike, JSC, in Pan Bisbilder Nigeria Ltd. v. First Bank of Nigeria Ltd. (2000) NLC-1141991(SC) at p. 7; Paras A–B.
"Whether or not a party can recover under an illegal contract may depend on whether that party was aware or privy to the illegality because it is unfair, in equity, for the guilty party to hold the innocent party bound by an act of illegality that he is wholly unaware of. The result is that generally, money paid or property transferred under illegal contract is irrecoverable where both parties are equally guilty of the fact of illegality. This is also buttressed by the maxim in pari delicto potior est conditio defendentis and means that where the parties are both at fault, the condition of the defendant is better."
EXPLANATION / SCOPE
Where both parties are equally at fault (in pari delicto), the defendant’s position is better—money paid under an illegal contract is irrecoverable. The court will not assist either party to recover. However, if one party was innocent and unaware of the illegality, equity may grant relief to prevent the guilty party from benefiting. The maxim recognizes that when fault is equal, the court leaves the parties where they stand. When fault is unequal, the court may intervene to prevent injustice. This protects innocent parties while denying relief to equally guilty parties. The burden of proving innocence lies on the claimant.