4.1 Introduction

In the previous chapter, the illegality defence in tort law was considered and it is clear that the application of this defence in insurance law is closely connected to common law rationales, and that the illegality rules in tort law have been modified in order to cope with the speciality of insurance law. In this chapter, the illegality defence in contract law will be examined. Unlike the illegality defence in tort law, the illegality issue in contract law is far more complex, since in tort circumstances only the performance of the contract can be included, but when dealing with the illegality issue in contract law, both the construction and performance of the contract are involved and both statutory illegality and common law illegality are considered. This chapter will consider the origins of the illegality defence under contract law and both statutory and common law illegality. Furthermore, reasons for the differences between statutory illegality and common law illegality and the impact of the division on insurance law will also be examined, since it is obvious that the factors considered by the courts may be different when dealing with different kinds of illegalities.