Void Contract Definition and What Happens

Void Contract Definition and What Happens

Andrew Bloomenthal has 20+ years of editorial experience as a financial journalist and as a financial services marketing writer.

A void contract is an unenforceable agreement.

A void contract is different from a voidable contract. A void contract is never legally valid or enforceable, while a voidable contract may be valid until one party rejects the terms. Voidable contracts can be enforceable after any defects are corrected. However, both void and voidable contracts can be nullified for similar reasons.

Key Takeaways:

– A void contract is an illegitimate and unenforceable agreement.

– A void contract differs from a voidable contract, although both can be nullified.

– A contract may be void if it is not enforceable as originally written.

– Void contracts can occur when one party is incapable of fully understanding the agreement.

– Agreements involving minors or illegal activities are generally void.

Understanding Void Contracts

A contract can be void if it’s not enforceable as originally written. Void contracts are illegal, unfair, or against public policy. A valid contract must have clear offer and acceptance, consideration, a legal purpose, clear and certain terms, and consenting parties with legal capacity. Some contracts must be in writing, especially for major transactions.

Instances when a contract would be void include:

– Illegal contracts for criminal activities.

– Contracts for impossible actions.

– Contracts where a party lacks understanding, such as minors or intoxicated individuals.

– Contracts formed under duress, threats, undue influence, or fraud.

– Contracts with vague terms that are difficult to enforce.

Understanding the meaning of void contracts is crucial in financial or business situations to ensure agreements are legally sound.

Voidable Contract vs. Void Contract

A void contract is usually not enforceable from its inception. A contract may be voidable if its circumstances are questionable. Voidable contracts involve actions that allow one party to cancel the contract, such as illegal or unfair actions by the other party.

For example, contracts can be voidable if one party withholds information or provides inaccurate information. Agreements with minors give them the right to void the contract until reaching adulthood. In a voidable contract, the party subjected to duress, fraud, undue influence, or other factors can choose to enforce or void the contract.

Can a Void Contract Become Valid If It’s Corrected?

No, a void contract can’t be made valid by mutual agreement. Once a contract is deemed void, it ceases to exist legally.

How Can You Nullify a Voidable Contract?

A contract can be nullified if it contains illegal or unreasonable terms. Courts may also invalidate a contract if one party was incapable of entering into a legal contract at the time of signing.

Exceptions for Enforcing Void Contracts

Void contracts are unenforceable due to flaws. However, some jurisdictions allow for "severability," where problem parts are removed and the remaining sections are enforceable.

How Do You Void a Check?

To void a check, write "VOID" on both sides. This prevents others from using the check.

What Happens If a Contract is Considered Void After Completion?

When a contract is deemed void, it legally ceases to exist. Actions taken under the void contract are generally not recoverable.

The Bottom Line

"Void" is the legal term for an unenforceable contract. It may contain aspects not allowed under the law or have vague or impossible terms.