LEGAL PRINCIPLE: CONTRACT LAW – Illegality of Contract – Court Will Not Lend Aid to Enforce Illegal Transaction
PRINCIPLE STATEMENT
Where a transaction is illegal under the Exchange Control Act, the court will not lend its aid to enforce obligations arising from it, as the entire transaction is illegal and unenforceable.
RATIO DECIDENDI (SOURCE)
Per Kutigi, JSC, in Alao v. African Continental Bank Ltd. (1998) NLC-141995(SC) at p. 11; Paras D–E.
"I believe it must be clear beyond doubt that the plaintiff upon the combined effect of Section 3(1) and 7(c) of the Exchange Control Act, cannot seek the aid of the Court to have the reliefs he has sought. The entire transaction from the pleading and evidence of the plaintiff is illegal and the so called obligations arising out of the procurement of the banker’s drafts are equally illegal and unenforceable."
EXPLANATION / SCOPE
Courts will not enforce illegal transactions, whether the illegality is statutory or common law. The principle applies to transactions prohibited by the Exchange Control Act. The court will not assist a party to recover under an illegal contract. The rule applies to both the contract and any obligations arising from it. The court may raise illegality suo motu. The parties are left where they are found. The principle is based on public policy. The exception is where the illegality is not central. The burden of proving legality rests on the party seeking enforcement.