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Legal Memorandum: Enforcement of Illegal Contracts in CA

Issue: Whether California courts will enforce contracts that may be illegal elsewhere.

Area of Law: Business Organizations & Contracts
Keywords: Illegal contract; Enforceability; Unjust enrichment
Jurisdiction: California
Cited Cases: 118 Cal. App. 4th 531
Cited Statutes: None
Date: 05/01/2008

California courts have often carved out exceptions to statutory and judicial language that illegal contracts are void and unenforceable.  See Kashani v. Tsann Kuen China Enterprise Co. (2004) 118 Cal. App. 4th 531, 541, 13 Cal. Rptr. 3d 174.  An illegal contract may be enforced in California if the defendant would be unjustly enriched, or the plaintiff would be subject to a harsh penalty if the contract were not enforced.  Id., 118 Cal. App. 4th at 541.  Although “[m]any contracts cannot lawfully be performed without securing a permit, license, or approval from some governmental officer or board, . . . the contracts are not deemed illegal” in the absence of that formality, and “[t]he fact that a party agrees to do an act which will be illegal unless governmental permission is obtained does not make such an agreement illegal.”  Id. at 549 (citations omitted). 

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