What is a 'Void Contract'
A void contract is a formal agreement that is illegitimate and unenforceable from the moment it is created. There is some overlap in the causes that can make a contract void and the causes that can make it voidable. The fundamental difference between these two types of contracts is a void contract is not legally valid or enforceable at any point in its existence, while a voidable contract can be legal and enforceable depending on how the contract defect is handled.
BREAKING DOWN 'Void Contract'A contract may be deemed void if it is not enforceable as it was originally written. In these instances, void contracts, also referred to as void agreements, involve agreements that are illegal in nature or in violation of fairness or public policy. Void contracts can be agreements made with those not deemed capable of fully comprehending the implications of the agreement, whether permanently, as with a disability, or temporarily, as with those in an inebriated state. Agreements made with a minor can also be considered void, but agreements involving a minor with the consent of the appropriate parent or guardian may be enforceable.
A contract can also become void if a change in law or regulation, occurring after the agreement was reached but before the contract was fulfilled, leads the activities previously agreed upon to be illegal or considered in violation of fairness.
Once a contract is fulfilled, it can also be considered void. Once complete, there are no longer any actions required based on the terms of the contract. This causes nothing to remain that can be enforced, as all of the terms are considered satisfied.
While a void contract is often considered not executable by design, a contract may be deemed voidable if the agreement is actionable, but the circumstances surrounding the agreement are questionable in nature. This includes agreements made while one party was withholding information or intentionally providing inaccurate information. Failure to disclose items as required by law, misrepresenting information or violations of free will may make the contract voidable but do not automatically make it void.
Void Contract Example
Any contract agreement created between two parties for illegal actions is considered a void contract. The most common example of a void contract is a contract between an illegal drug supplier for a specified supply of drugs provided to an illegal drug dealer. This type of formal agreement is illegitimate since it involves illegal goods and is considered unenforceable from its creation since it does not seek to serve a legal purpose.