An illegal transaction in which both parties are equally at fault is described as what?

• A. Accord and satisfaction
• B. In pari delicto agreement
• C. Gratuitous promise
• D. Insurable interest

Answer: (B)

When both parties are equally at fault in an illegal transaction, the doctrine of in pari delicto applies. This Latin phrase means “in equal fault,” and it leads to the contract being void and unenforceable; the courts will not aid either party or allow recovery because the agreement itself violates the law and public policy. This concept directly matches the scenario described.

The other terms refer to different ideas: an accord and satisfaction is about settling a dispute by substituting a new performance for the old claim; a gratuitous promise is a promise made without consideration; insurable interest is the requirement that the insured have a stake in the subject of the insurance.