The defence of illegality and unjust enrichment: a case for flexibility in breach of contract cases

Abstract

Several considerations affect litigants in enforcement of contracts, one of these is the illegality defence. In applying illegality, unjust enrichment is one such harsh consequence that ensues from strict application of the ex tupi causa rule. ‘Unjust enrichment’ is the result of court not allowing restitution or denying enforceability of a contract tainted by illegality. Although unjust enrichment may also be used as a cause of action, it is used in this study to denote a situation of nonrecovery of consideration and loss owing to a party’s inability to enforce any rights arising under an illegal contract. Given that illegality defences are common to breach of contract cases, unjust enrichment may result upon denial of restitution and/or non-enforcement of obligations to the loss of a party aggrieved by breach of contract. This research sought to examine why, despite the flexibility trends in contract law, unjust enrichment is still an unjust result resulting from judge’s abstention in adjudicating contracts tainted by illegality. I present the results of a qualitative study involving active Ugandan Supreme Court judges, Court of Appeal judges and High Court judges located within Kampala who offer insights on flexible approaches to illegal contracts. I argue that although courts attempt to eliminate injustice of unjust enrichment by requiring strict proof of illegality among others, the lack of a principled approach/framework to illegal contracts is the major cause for such unjustified enrichment in breach of contract cases. Lack of a principled framework for flexibility in approaching illegal contracts, the harsh expected outcome of non-restitution (no enforcement); therefore, unless addressed, the illegality defence may continue to be a conduit for unjust enrichment in Uganda’s jurisprudence.