Ireland: Illegality And The Enforcement Of Contract

Last Updated: 3 November 2015
Article by John Breslin

Regulation is a fact of life for every financial service provider ("FSP"). FSPs face an ever-increasing volume of regulation. Regulatory requirements range from those which go to the root of the FSP's business (solvency, fitness and probity, proper governance) to more technical requirements (such as financial reporting and record keeping). What is the effect of a breach of a regulatory provision on an FSP's rights to enforce a contract with its customer or counterparty? If the FSP breaches a regulatory provision associated with a transaction is the underlying contract unenforceable by it? If this is a loan does it mean that the FSP lender cannot compel repayment, or enforce security? If it is a trade in securities or derivatives does it mean that the FSP cannot compel its counterparty to complete? It is clear that the answer will often have significant commercial implications.

The question is simple but the answer is complicated. The key difficulty facing the FSP is that it has (in legal terms) put a foot wrong and yet it is looking to the law (and ultimately a court of law) to assist it to compel the customer or counterparty to perform obligations it has signed up to. Like many complex legal doctrines there is an elegant Latin phrase to summarise it – ex turpi causa non oritur actio. A related doctrine is that where each party is in breach of the law, the defendant is always in a better position – the pari delictu doctrine. The main policy will be referred to in this article as the "ex turpi policy".

The ex turpi policy can cause injustice. (The case law makes it clear that this policy is not about doing justice between the parties.) A regulatory breach may cause no loss or prejudice to the FSP's customer or counterparty. The FSP's regulator may well impose sanctions on the FSP for the breach. However to allow the customer or counterparty to exploit the breach so as to resile from its contractual obligations is unfair. This unfairness is exacerbated where the FSP has been subject to a fine or other penalty for in that case the FSP suffers a "double whammy" – the regulatory sanction, and the inability to recover what is otherwise contractually due from the customer or counterparty.

The law dealing with these issues has never been clear. A contract can be affected by illegality in many different factual circumstances. Therefore it is difficult to find a common thread in all of the relevant case law.

Irish Supreme Court decision - overview

However a recent decision of the Irish Supreme Court helps in understanding how a court should resolve such dilemmas. In brief, there are two key messages:

  • the ex turpi policy has to be tempered in the light of the sheer volume of regulation prevalent in modern commercial life; and
  • in many cases justice is achieved by upholding the contract rather than declaring it to be unenforceable by reason of the regulatory breach.

In more detail

In Quinn v Irish Bank Resolution Corporation Limited [2015] IESC 29 guarantors of loans made by Anglo Irish Bank ("Anglo") sought to repudiate their liability because they claimed that the loans which they had guaranteed had an illegal purpose – namely a scheme by Anglo (then a listed company) to prop up its share price. It was alleged that the Anglo loans were used by the borrowers to purchase shares in Anglo thereby creating a false market. The borrowers were companies in the Quinn group. The guarantors were the spouse and children of the controller of the Quinn Group, Sean Quinn. (By the time the litigation was commenced Anglo had been nationalised and changed its name, and eventually went into special liquidation and was acting through its joint liquidators.)

If a listed company lent money to third parties to enable them to buy shares in the company so as to prop up its price on the stock exchange this would be illegal on a number of fronts. First, it would amount to market manipulation. Secondly, it would amount to unlawful financial assistance by a company in connection with/for the purpose of the purchase of its own shares. Market manipulation and unlawful financial assistance are criminal offences.

Anglo sought trial of a preliminary issue – namely whether the Quinns could rely on Anglo's alleged illegal conduct to support their claim that their guarantees were invalid. The High Court held that they could. Anglo appealed to the Supreme Court. The Supreme Court held that even if it was proved that the underlying loans had an illegal purpose, it did not follow that the Quinns' liability as guarantors would be unenforceable.

The Supreme Court held that the effect of any breach of law is determined primarily by reference to the intention of the legislature in outlawing the particular act or omission. In this regard, a key question is whether the legislature intended that contracts sufficiently connected with the illegality must be regarded as unenforceable.

The Supreme Court described the outcome in each case as "statute specific but ... not case specific". Accordingly, the outcome will depend on analysis of the particular statute which has been breached. The ex turpi policy is not an absolute rule: much will depend on the nature of the wrongdoing concerned. The court will be mindful that commercial entities operate in a highly regulated environment.

Where the statute spells out the statutory consequences of a breach, then the result is predictable. However, many (if not most) statutes do not do so. The court will then have to see if the legislature implied that certain consequences were to follow. The court will also bear in mind that public policy, understood in the widest sense, may at times be better served by upholding a contract rather than declaring it to be unenforceable. The court will also consider how closely connected the transaction is to the relevant illegality. Further the absence of a provision stipulating that a contract entered into in breach of the statute is to be rendered void or unenforceable could itself suggest that a court should not treat it to be so.


In conclusion, the Quinn judgment cautions against the automatic application of the ex turpi policy. The court's role should be more nuanced: unlike the ex turpi policy, it should engage with the legislative intent and the justice of the case. The primary role of the court is to give effect to the legislation in question. If the legislation does not provide a clear answer then the court will balance the ex turpi policy with the risk of an injustice should the contract be declared unenforceable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.