Illegality in contracts - Cyprus law approach

This article discusses the concept of illegality in contracts from a Cyprus case law perspective.

According to the law as applies in Cyprus, if a contract is illegal, then it is considered null and void, and no enforceable rights arise from it.

This is the Latin doctrine known as ex turpi causa non oritur actio.

In the case of Nikos Englezou & Others v. Haris Kafarides Estate Ltd, Civ. App. No. 295/2018, dated 28/3/2024, the Court of Appeal noted the following in respect of this matter:

“The illegality invoked by the appellants to support their position for non-payment of rent and the application of the Latin maxim ex turpi causa non oritur actio, as well as the decisions they rely on, do not appear to support their argument. This is because both the doctrine and the cited decisions revolve around the involvement of the respondent in criminally punishable behavior. The case Alexander v. Rayson concerned a lease for an illegal purpose, and there was relevant reference also in The Gas Light and Coke Company v. Turner 133 E.R. 127 [1840], where again the purpose of the disputed lease was illegal. In Christodoulou v. Vraets, the court again emphasized the principle that courts refuse to provide relief for claims arising from contracts void due to illegality. In that case, the agreement involved the purchase of uncut diamonds from Angola, to be exported illegally from there, having been purchased on the black market. Both parties knew that the purchase and transport of the diamonds through Europe to their final destination in Antwerp, Belgium, was illegal.

In the present case, there is no illegality in the lease agreement, since its purpose—renting a restaurant—is entirely legitimate and lawful. The fact that some required permits, including the planning permit, were not issued is due, according to the trial court’s findings, to reasons related to the conduct of the respondents themselves.

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The above actions, though unlawful, did not render the lease agreement itself illegal, so as to trigger the principle ex turpi causa non oritur actio, which is the key distinguishing point from the case law cited by the appellants' counsel. At no point was there illegality in the lease agreement, which was always for a lawful purpose."

According to the law, the illegality must be evident and based on solid facts indicating unlawfulness at the inception of the contract or on indisputable data (Nikos Nikolaou v. Eka Rock Designs Ltd (2016) 1 C.L.R. 2943). Furthermore, as pointed out in the case of George Christodoulou and another v. Antonius H.F.M. Vraets (2009) 1 C.L.R. 802, the law shall deny relief to any party involved in illegal actions, even if such party seeks to establish a claim on alternative legal grounds.

Also, under common law, where an illegal contract has been fully or substantially executed, and property or benefits have been transferred from one party to another under the illegal agreement, in any litigation, the court will not assist the plaintiff in reclaiming the transferred property or benefits (Joseph El Alam v. Christoforos Toumazides (1998) 1(B) C.L.R. 968). An agreement made in violation of the law is illegal and void, regardless of the extent of either party’s involvement in its creation (Glamor Development v. Christodoulou (1984) 1 C.L.R. 444).

Essentially, money paid under an evidently illegal agreement cannot be recovered unless the claim can be based on a cause of action independent of the illegality (see Halsbury’s Laws of England, 4th Ed., Vol. 9, p. 305 para. 436; Chitty on Contracts, 26th Ed., Vol. I, p. 780 para. 1259).

If you are concerned about whether a contract you entered into is illegal or void, consider seeking legal advice.

This article has been written by Chara Palekythriti, Lawyer - Legal Consultant ©

Disclaimer: This article is for informative purposes only and does not constitute legal advice, opinion or otherwise.