The General Principles Regarding Unenforceability of Illegal Contracts in California
In Kashani v. Tsann Kuen China Enterprise Co. (2004) 118 Cal.App.4th 531, the court summarized the general principles regarding illegal contracts:
"As one authority has noted, 'the law has a long history of recognizing the general rule that certain contracts, though properly entered into in all other respects, will not be enforced, or at least will not be enforced fully, if found to be contrary to public policy.' (15 Corbin on Contracts (2003) 79.1, p. 1 (Corbin); see also Wong v. Tenneco, Inc. (1985) 39 Cal.3d 126, 135, 216 Cal. Rptr. 412 . . . ' " 'No principle of law is better settled than that a party to an illegal contract cannot come into a court of law and ask to have his illegal objects carried out . . . .' " '; Lewis & Queen v. N. M. Ball Sons (1957) 48 Cal.2d 141, 150 . . . 'the courts generally will not enforce an illegal bargain or lend their assistance to a party who seeks compensation for an illegal act'; .) Such agreements are 'traditionally referred to as "illegal contracts," ' even though they 'are functionally described as contracts unenforceable on grounds of public policy.'
"California statutes require that a contract have 'a lawful object.' (Civ. Code, 1550, subd. (3); see Civ. Code, 1596.) Otherwise the contract is void. (Civ. Code, 1598.) Civil Code section 1668 provides that a contract that has as its object a violation of law is 'against the policy of the law.' Civil Code section 1667 states that 'unlawful' is '1. Contrary to an express provision of law; 2. Contrary to the policy of express law, though not expressly prohibited; or, 3. Otherwise contrary to good morals.' (See also Civ. Code, 1441 'A condition in a contract, the fulfillment of which is . . . unlawful . . . is void', 1608 'If any part of a single consideration for one or more objects, or of several considerations for a single object, is unlawful, the entire contract is void'.) California courts have stated that an illegal contract 'may not serve as the foundation of any action, either in law or in equity' , and that when the illegality of the contract renders the bargain unenforceable, ' "the court will leave them the parties where they were when the action was begun" ' ." (Kashani v. Tsann Kuen China Enterprise Co., supra, 118 Cal.App.4th at pp. 540-541.)
The general rule of unenforceability of illegal contracts is based on the rationale that the public importance of discouraging illegal transactions outweighs any equitable considerations of possible injustice between the contracting parties. (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 436.)