5 March 2018
When is a contract rendered unenforceable as a result of illegality? It is a question that goes to the heart of every commercial transaction and is a notoriously knotty problem. On one hand, the law has to deter contractual parties from engaging in illegal conduct; but on the other there is a need to avoid injustice where a party obtains an undeserved windfall from an unenforceable contract. The Supreme Court decision in Patel v Mirza  UKSC 42 favoured the exercise of a discretionary decision by the court based on analysis of a range of factors to determine whether or not to allow the illegality defence. A recent case in Singapore confirmed that the English law approach is not to be followed and provided some clarity on the issue - as a matter of Singapore law, there is now a clear test for the application of the illegality defence.