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Illegal Contracts

| May 31, 2023 | Contracts

A contract that violates an express provision of law or is against public policy won’t be enforced by the courts.

The subject matter, consideration, object, and purpose of a contract must also be lawful. If a contract violates any constitutional or statutory provisions or is against public policy, it will be deemed unenforceable.

For instance, parties cannot alter the rules of evidence through a private contract. Courts are not obligated to interpret the intent of the parties from an illegal contract.

However, unless an illegal contract is on its face, there is a presumption of its legality.


A contract is not void merely because a party used the contracted-for item illegally.

De Lage Landen Fin. Services, Inc. v. Cricket’s Termite Control Inc., 942 So. 2d 1001 (Fla. 5th DCA 2006) (Pest control company leased automatic telephone dialing machine to dial potential customers at random and play a recorded sales solicitation, was illegal both in state where machine was used and in state whose law governed contract.

Pest control company defaulted on payments; the court ruled the lease agreement valid even if the use of the subject matter was illegal.)

A. Contracts in Violation of Constitution, Statute, or Ordinance

If a contract goes against the law or the constitution, it is not valid. This includes contracts that indirectly go against the law or the constitution, as well as contracts that defeat the purpose of laws or the constitution.

For example: Federal Arbitration Act preempts invalidation of a class action waiver because the waiver contained in a cash advance agreement was void as against public policy. See McKenzie Check Advance of Florida, LLC v. Betts, 112 So. 3d 1176, 1188 (Fla. 2013).

Another example: where cosmetics sale marketing program encouraged sellers to seek out persons to become distributors in exchange for a finder’s fee and when program required $2,000 to become a “supervisor” in exchange for access to discounted inventory, such scheme was a “security” that had to be registered with the state. See Bond v. Koscot Interplanetary, Inc., 276 So. 2d 198, 198 (Fla. 4th DCA 1973).

Have a License.

If a license is required for an activity

– to practice law, or practice medicine, or to be a stockbroker, or to be an architect, and the like – the court will not compensate an unlicensed impostor for services performed.

Thus, if a building contractor doesn’t have a license, they can still be paid for the materials and labor they provided, but they can’t be paid for profit or for supervising the work.

This is because the Florida legislature has decided that it is important to regulate the construction industry, and that this regulation is more important than the right of unlicensed contractors to be paid for their work.

In Florida, a contract with an unlicensed contractor is not valid, and no lien or bond claim will exist in favor of the unlicensed contractor for any labor, services, or materials provided under the contract.

This is because the state legislature has declared that it is against public policy to allow unlicensed contractors to enter into contracts.

This is to protect consumers from being taken advantage of by unlicensed contractors who may not have the skills or experience to do the work properly.

See Full Circle Dairy, LLC v. McKinney, 467 F. Supp. 2d 1343 (M.D. Fla. 2006) (under Florida law, unlicensed roofing contractors were statutorily barred from seeking equitable relief to recover costs incurred in a construction project).

There are a few exceptions to this rule. For example, if the work does not require a license, or if the contractor was licensed when the contract was signed, the contract may be valid.

The critical dates for determining whether a contractor was unlicensed are:

  • The effective date of the original contract.
  • The date the last party to the contract executed it.
  • The first date upon which the contractor provided services, labor, or materials under the contract.

Here are some additional things to keep in mind:

  • If you hire an unlicensed contractor and they do not do the work properly, you may have a difficult time getting them to fix the problems or to pay you back for the money you paid them.
  • You may also have difficulty getting your insurance company to cover any damage that is caused by the unlicensed contractor’s work.
  • If you are injured by an unlicensed contractor, you may have a difficult time getting them to pay for your medical bills or other damages.

If you are considering hiring a contractor, it is important to check to make sure they are licensed by visiting the Florida Department of Business and Professional Regulation website.

If a Statutory Penalty is Imposed

If a statute sets a penalty for an act, any contract based on that act is invalid, even if the statute doesn’t specifically say so or prohibit it.

For example: sale of realty to city of Stuart by corporation was void under city charter where at time of sale a stockholder of corporation was serving on city commission.

See City of Stuart v. Green, 23 So. 2d 831 (Fla. 1945).

However, some recent cases have suggested that the impact of such a statute depends on the legislature’s intent.

To determine whether a contract made in violation of a penal statute is illegal and void, the statute as a whole must be examined to see if it was the intention of the legislature that it have that effect.

B. Contracts Against Public Policy

A contract that goes against the law or the public interest is void.

For example: after their stillborn son was delivered, a patient and her husband filed a medical malpractice lawsuit against their medical provider.

The provider requested arbitration, but after appeals, the court determined that the arbitration agreement, which required both parties to share costs equally, went against the public policy outlined in the Medical Malpractice Act.

As a result, the agreement could not be enforced. See Hernandez v. Crespo, 211 So. 3d 19 (Fla. 2016).

Courts will look at the law and court decisions to determine if a contract is against public policy. If a contract is against public policy, it is unenforceable.

Here are some examples of contracts that may be considered against public policy:

  • A contract to commit a crime.
  • A contract to defraud someone.
  • A contract that is unfair or oppressive.
  • A contract that is in restraint of trade.
  • A contract that is against public morals.

If you are considering entering into a contract, it is important to make sure that it is not against public policy. If you are unsure, you should consult with an attorney.

Sex in Exchange? Best Not

A contract that is based on a promise to engage in sexual intercourse is illegal.

However, if the parties to the contract are already married, or if the contract is based on something other than sexual intercourse, then the contract is not illegal.

For example: If two people who are not married agree to live together and share expenses, and they do agree not to have sex, then the contract is legal.

However, if the parties agree to have sex in exchange for one party paying the other’s rent, then the contract is illegal.

Shorten Statute of Limitation? May Be

Generally, a contract that shortens the statute of limitations is void.

However, if the contract is between parties in different states and the parties agree that the law of another state will govern the contract, then the shorter statute of limitations may be enforceable.

Exculpatory Clauses? Disfavored

An exculpatory clause is a clause in a contract that attempts to limit one party’s liability for negligence.

Exculpatory clauses are disfavored by the law because they shift the risk of injury to the party who is probably least equipped to take the necessary precautions to avoid injury.

However, if an exculpatory clause is clear and unambiguous, it may be enforceable.

Here are some things to keep in mind about exculpatory clauses:

  • Exculpatory clauses are generally not enforceable if they attempt to limit liability for intentional torts, such as assault or battery.
  • Exculpatory clauses are generally not enforceable if they attempt to limit liability for gross negligence.
  • Exculpatory clauses are generally not enforceable if they attempt to limit liability for violations of public policy, such as discrimination or environmental damage.

If you are considering signing a contract with an exculpatory clause, it is important to consult with an attorney to make sure that the clause is enforceable.

Limiting Someone’s Trade? Problematic

If a contract restricts a person from engaging in a lawful profession or business, it is not valid, unless certain exceptions apply.

For example, a buyer can limit the seller’s ability to start a similar business, or an employer can restrict the employee’s right to engage in the same line of work, as long as such limitations are reasonable and time bound.

Generally, contracts that limit or prevent competition during or after a restrictive covenant period are enforceable, if they are reasonable in terms of time, area, and business type.

“Consultancy Fee” to a City Employee That Oversees Your Work? Nope

A contingency fee arrangement cannot be enforced in a city highway project’s consultant payment, as it goes against public policy aimed at eliminating improper influence and arrangements that encourage unfair fee payments.

This policy aims to ensure that project funding awards are fair and that fees paid are reasonable for services provided.