Void Contract

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DEFINITION of 'Void Contract'

A formal agreement that is illegitimate and unenforceable from the moment it is created. A void contract could be considered void for a number of reasons. Common causes of a void contract are contract terms that are illegal or become illegal due to changes in law; one party to the contract lacks the capacity to enter into a contract because he is a minor or mentally incapacitated; and it is legal but declared null by the courts because it violates a fundamental principle.

BREAKING DOWN 'Void Contract'

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 that 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.

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