Supervening illegality of the contract refers to a situation in which a contract becomes illegal after it has been formed. This can happen due to changes in the law, regulations, or unforeseen circumstances that make the performance of the contract illegal or impossible. In such a case, the contract may become void and unenforceable, and parties may be released from their contractual obligations.
Supervening illegality is a common issue that arises in many industries. For instance, a contract between a manufacturer and a distributor may become illegal if the government imposes a ban on the use of certain materials in the manufacturing process. Similarly, a contract between a landlord and a tenant may become illegal if the government enacts rent control laws that limit the amount of rent a landlord can charge.
The principle of supervening illegality is based on the legal maxim ex turpi causa non oritur actio, which means that a party cannot enforce a contract that is based on an illegal or immoral act. This principle is a fundamental aspect of contract law, and it aims to protect the public interest and prevent parties from benefiting from illegal or unethical behavior.
In the event of supervening illegality, parties to the contract may be released from their obligations, and any payment made under the contract may be recoverable. However, the parties may still be liable for any damage caused by their breach of the contract before the supervening illegality occurred.
To avoid the risks associated with supervening illegality, parties to the contract should always ensure that the contract complies with the law and regulations in force at the time of formation. It is also important to include provisions in the contract that address the possibility of changes in the law or regulations that could render the contract illegal or impossible to perform.
In conclusion, supervening illegality is an issue that can arise in any contract. It is important for parties to be aware of the risks and take necessary precautions to mitigate the impact of any changes in the law or regulations that could affect the legality of the contract. By doing so, parties can protect their interests and ensure a smooth and mutually beneficial contractual relationship.