Illegal agreements and collateral agreements

Illegal agreements refer to agreements that are forbidden by law. Such agreements are not enforceable by the courts. Collateral agreements, on the other hand, are agreements that are separate from the main agreement, but are related to it in some way. For example, a collateral agreement may be a side agreement between two parties that outlines the terms and conditions of a loan or lease.

Validity of collateral agreements in case of illegal agreements

In case of illegal agreements, collateral agreements are considered void. This means that they are not enforceable by the courts, just like the main agreement. The reason for this is that collateral agreements are dependent on the main agreement. If the main agreement is illegal, then any collateral agreements related to it are also illegal.

For example, if two parties enter into an illegal agreement to engage in insider trading, and they also have a collateral agreement regarding the distribution of profits, that collateral agreement would be considered void. This is because the main agreement is illegal, and any agreements related to it are also illegal and unenforceable.

Conclusion

In conclusion, collateral agreements are considered void in case of illegal agreements. This is because they are dependent on the main agreement, and if the main agreement is illegal, then any collateral agreements related to it are also illegal and unenforceable. It is important for parties to ensure that their agreements are legal and enforceable, and to seek legal advice if they have any doubts about the legality of their agreements.