The possibility of consequences of an illegal contract now arises from a value judgment essentially based on the particular circumstances of illegality, the offended law, the other factors of assessment of the result. Challenging a contract means undermining the integrity of the treaty. One way to do that is to treat the treaty as unenforceable. A contract can be classified as unenforceable if it violates the statute of limitations or the law on the declaration of goods. The more serious or deliberate the illegality, the more the approach a court is likely to take to deny corrective action is tougher. The criminal courts are there to punish criminal behaviour on behalf of society: fines and penalties are imposed on behalf of society. The illegality contained in a clause of a contract may be sufficient to distort an entire contract if it cannot be dissociated from the contract to eliminate illegality. The assessment of whether part of a contract can be withdrawn in order to protect the contract from illegality is called severance pay. The Case of David Taylor – Son v Barnett Trading Co  gives us the example of a contract considered illegal at the time of its creation. In this case, Barnett Trading agreed to sell David Taylor Irish Steak for delivery between April and July at a specified price. At the time of the contract, a contract prevented the purchase or sale of meat at a certain price (exceeded by the contract) was in effect. When Barnett Trading did not deliver, Mr. Taylor sought damages.
At trial, the arbitrators ordered Barnett Trading to pay Mr. Taylor compensation for non-delivery. During the appeal process, the Court of Appeal found that the contract was illegal at the time of its establishment, since the prices set had exceeded legal limits, and therefore quashed the award on the basis of an illegal contract. The difference between an inconclusive agreement and an unenforceable contract can be considerable. Several important factors must be considered before, during and after signing a contract to ensure its applicability. Make sure you do research and always have a contract management plan in place to ensure that any agreement you make is in the best interest of your company or customer. In Canada, a case of non-performance based on illegality is cited: Royal Bank of Canada v. Newell, 147 D.L.R (4.) 268 (N.S.C.A.), in which a woman forged her husband`s signature on 40 cheques worth more than $58,000. To protect them from prosecution, her husband signed a letter of intent from the bank, in which he agreed to assume ”all responsibilities and responsibilities” for forged cheques. However, the agreement was unenforceable and was repressed by the courts because of its essential objective of ”stifling criminal prosecution”. Due to the illegality of the contract and the cancelled status, the bank was forced to return the husband`s payments.
There can be big differences between the fact that a contract is an uncon concluded agreement or that it is simply unenforceable.