Collusion: Definition, Example and Related Terms

Collusion is a secret agreement or cooperation between two or more parties to deceive or defraud others, typically to gain an unfair advantage. In contract law, it's considered a serious breach of good faith and can make contracts void or voidable. It's like a hidden handshake between parties who appear to be competing but are actually working together against others' interests.

For example, if two companies that appear to be competitors secretly agree to fix prices or divide up markets between themselves, that's collusion. This practice is not only unethical but often illegal, particularly under antitrust or competition laws.

In the context of contracts, collusion can take many forms. It might involve bid rigging, where parties coordinate their bids to ensure a predetermined winner. Or it could involve price fixing, where competitors agree to set prices at certain levels rather than allowing market forces to determine them.

When collusion is discovered in a contract, it typically renders the agreement void ab initio (void from the beginning), as it violates public policy and the fundamental principle of fair dealing. The parties involved may face serious legal consequences, including fines, damages, and in some cases, criminal charges.