Illegal Contract

Case Examples

• In Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 77, 102 S. Ct. 851, 856, 70 L. Ed. 2d 833 (1982), the court stated, “the authorities from the earliest time to the present unanimously hold that no court will lend its assistance in any way towards carrying out the terms of an illegal contract.” In that case, Kaiser had brought a claim against the mine workers’ union, claiming that paying wages based on the amount of coal produced breached antitrust and labor laws. Therefore, the collective bargaining agreement was an illegal and unenforceable contract. The Court disagreed and found that the contract was not illegal and was thus enforceable.
• Illegality can also be brought as an affirmative defense by a defendant in a breach of contract case. A defendant can raise the defense of illegality “if the contract obligates the parties to perform an action that is forbidden by the law of the place where the action is to occur.” ROKiT Drinks, L.L.C. v. Landry's Inc., No. 23-20506, 2025 WL 2269783, at *3 (5th Cir. Aug. 8, 2025). In ROKIT, the parties entered into a contract to promote certain products. This agreement violated Texas law and, therefore, Landry's was able to assert the defense of illegality.
• Further, parties cannot sue to recover profits under a contract that has been deemed illegal. In Packard v. OCA, Inc., 624 F.3d 726, 730 (5th Cir. 2010), an orthodontist worked in conjunction with a professional organization to practice orthodontics. However, the court found that the organization did not hold the proper licensure and was therefore practicing dentistry without a license. As a result, the contract between them was deemed illegal, so the doctor could not be paid under the contract.