The Remedy of Contracts with Illegal Purpose as a Means to Protect Traditional and Economic Public Policy

The legal status of contracts with illegal purpose is one of the most important issues raised in law and Islamic jurisprudence which in different legal systems is analyzed under the topic of motive. As far as this issue is concerned, three situations have been distinguished in Iranian law: The first situation is where the illegal purpose has entered the contractual scope, the second is where the illegal purpose is merely in the mind of one contracting party, and the last situation is where only the other party is aware of the illegal purpose. Under Iranian law, an illegal purpose makes a contract void, only if entered the contractual scope. Article 217 of the Iranian Civil Code appears to declare the contract as void only if the illegal intention is explicitly stipulated in the contract; nevertheless, there is controversy among Iranian legal scholars as to the interpretation of this article; the question is: When an illegal intention renders the contract void? The study of these scholar's different opinions, while considering their foundations in Imamia jurisprudence, prepares the ground for an exact and correct interpretation of article 217 of the Iranian Civil Code based on realities of the society.
Theoretical Framework: The purpose of a contract is the main motive of one party which has, explicitly or implicitly, entered the contractual scope.
Purpose of contract must be distinguished from similar concepts such as cause of contract which is typical in all cases of a certain contract, regardless of each party's personal motives. Object of contract is another concept which must be distinguished from purpose of contract. The latter, as the main motive of the contract, enables the parties to achieve the object of contract.
By illegal purpose, it is meant each case where the purpose is contrary to public policy, ethics and religious rules, even if there is no specific legal provision on it.
Public policy, generally, is a status in which the main frameworks and redlines of legal rules are respected.
The authors, after defining the main terms used in this article (the theoretical framework), applying an analytic-descriptive method, discuss different opinions offered by legal scholars and Imami jurists about the remedy of illegal contracts and criticize and study the justifications put forward for those opinions.
The Iranian legislator has, in article 217 of the Iranian Civil Code, made the effectiveness of illegal purpose of a contract subject to its explicit stipulation in the contract. According to article 217 of the Iranian Civil Code, "it is not necessary to stipulate the purpose of contract but in case it is stipulated, it must be legal, otherwise the contract would be void". The results of the present article show that a category of Iranian legal scholars, following the famous opinion of the Imami jurists and by means of a literal interpretation, believe that illegal purpose makes the contract void if communicated by the party with such a motive, to the other; the adherents to this opinion see it in favour of legal certainty and security of legal relationships. On the contrary, a group of Iranian legal scholars, following the lesser known opinion of the Imami jurists, consider the above said interpretation inconsistent with the philosophy behind the enactment of article 217 of the Iranian Civil Code and treat the contract as void in case one party is aware of the illegal motive of the other.
Conclusions & Suggestions: The authors believe that the lesser known opinion of Imami jurists and legal scholars is more consistent with legal and economic interests of the society. This issue is, nowadays, of special importance with regard to contracts affecting the economic field, since believing that only explicitly stipulated purpose makes contracts void is harmful to the society and paves the way for conclusion of contracts made with the intention to disrupt public policy.