Who is at fault in an illegal transaction?

Question

Suppose we have an illegal exchange which takes place- is there a rule of thumb for who is at fault, the buyer or the seller?

For example, I have three situations.

1- A buyer purchases illegal drugs off of an unlicensed dealer, both are aware of the illegality of the purchase

2- A buyer purchases a car at what they believe to be a legitimate used-car dealer, however the car is actually stolen. The dealer is aware the car is stolen.

3- A hospital purchases an expensive software system from a company to serve some purpose. The software fails to comply with some governmental regulation which would be non-obvious to either the software producer nor the hospital.

Answer 1

It's not clear what you mean by "illegal transaction." In the last two cases, for instance, the transactions are probably not illegal, they're just transactions of property that has some connection to a violation of law.

It's also not clear what you mean by "at fault." That could mean fault for the illegality of the transaction itself, fault for problems with the product, etc.

If you're just talking about whether these exchanges would be invalid for some reason, that's a different question. Here's how I think a court would treat each of them:

1. This transaction is itself illegal. When a transaction is illegal or for an illegal purpose, courts will not intervene and will just let the parties live with whatever happened. So if I bought a bag of pot from you and got home to discover oregano, a court wouldn't care -- at least not if we came in on a breach-of-contract case. Of course, there would be separate criminal sanctions possible.
2. Under the Uniform Commercial Code, the buyer would have several theories by which he could recover the price of the vehicle from the dealer: warranty of title, unilateral mistake, fraud, etc. But the buyer might not actually want to do that. Because he's what the UCC considers a "bona fide purchaser" he may be able to keep the car, even if the original owner tried to recover it.
3. The fact that the software doesn't comply with regulations probably doesn't make the sale itself illegal. If the hospital is required to use software that complies with the regulation, it would probably be able to obtain a refund because the software violates the implied warranty of merchantability, and maybe also because the contract to sell it was premised on a mutual mistake.