Gates v. Rivers Constr. Co.

515 P.2d 1020

 

RULE:

Absent some exception to the general rule, a party to an illegal contract cannot recover damages for its breach.

FACTS:

An employee was a Canadian citizen who worked for an American employer located in Alaska. Because federal immigration laws prevented the employee, a noncitizen, from working in the United States, the employer periodically deposited funds into a trust in order to withhold his compensation until he was eligible for legal status in the United States. When the employee was fired, he sued the company for the money that was collected in a trust. The employer argued that the employment contract was not enforceable because it was an illegal contract.

ISSUE:

Can a party recover damages for breach of an illegal contract so long as enforcement of the illegal contract is not against public policy?

ANSWER:

Yes.

CONCLUSION:

Generally, a party to an illegal contract cannot recover damages for its breach. The present contract is not unenforceable despite being illegal under the federal immigration laws because Congress did not intend the statute to enable employers to knowingly participate in illegal transactions with noncitizens and then refuse to pay them. This would be against public policy.

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