Recovering Value Transferred Under an Illegal Contract

Abstract

The theory of this article is that the attitude to illegality has so dramatically changed that it is no longer possible, except in extreme cases, to say that illegality as such is a defense to restitutionary claims arising under illegal contracts. The objection to an otherwise good action in unjust enrichment is not illegality but stultification: to recognize an entitlement to restitution would make nonsense of the refusal to enforce the contract. It is true that the restitutionary action nearly always does prima facie have this stultifying tendency, for it will often operate as a safety net reducing the risks of illegal dealing or as a lever indirectly enforcing the illegal contract. However, this stultifying tendency can be neutralized by restricting the class of plaintiffs able to bring the restitutionary action and can be overridden if the effect of denying the restitutionary action would be to perpetrate a greater evil, as for instance by inflicting a wholly disproportionate penalty for the illegality. A stultification is an inexplicable contradiction. In cases such as these the seeming stultification is explained away. Restitution can then be allowed.