Illegal Agreements and the Lesser Evil Principle

When parties enter into an illegal agreement and bring a dispute arising from the transaction before a court, the court finds itself in a difficult position. The court is faced with two competing interests: the importance of both upholding and protecting the dignity of the law and honoring inherent principles of U.S. contract law - freedom of contract and individual autonomy. There exists a common misconception that courts, when presented with illegal contracts, follow the rule of non-enforcement. However, an examination of case law indicates that courts are instead concerned with the consequences of their choices, and have consistently followed "the lesser evil principle." In reviewing a dispute, courts evaluate the evil of enforcing an illegal agreement as compared to the evil of departing from individual autonomy.

Moving forward, courts should look to explicitly adopt the lesser evil principle in contract law as it has been adopted in both criminal and tort law. Although the lesser evil principle is not without its shortcomings, its explicit adoption would enable courts to refine the substantive standards for the resolution of illegal agreement disputes and create more certainty in the marketplace.