A void ab initio agreement is Latin for "void from the beginning." This means that legally, a contract was void as soon as it was created. The parties of the contract are not legally related based on what was written in the agreement because the agreement in question was never valid. However, certain exceptions do apply. This type of agreement can never be void because it was never a legal contract to begin with.

Impossibility of Performance

With any contract, unforeseen circumstances can occur that make it difficult or impossible for the terms of the agreement to be fulfilled. This situation is quite common within contract law. This is known as impossibility of performance and under the doctrine of frustrate will result in discharge of the contract duties. Unlike with void ab initio contracts, when impossibility of performance occurs, the parties are responsible for expenses associated with discharge and termination.

Valid Contract

A contract that can be legally enforced is considered valid. In this type of contract, a party is compelled by the other party to either do or not do something. Each party is legally required to perform based on the terms of the contract or can be subject to a remedy ordered by the court. For example, if you sell an acre of land to another farmer for $50,000 but fail to allow him or her to occupy the land, you can be sued to recover payment.

Void Contract

A contract that cannot be legally enforced by either party is considered void. Characteristics of a void contract include:

  • Not legally enforceable
  • Does not create legal rights or obligations for either party
  • May be against the law or public policy
  • Does not require compensation to be paid to either party
  • May occur if either party signed under duress

For example, if your company enters a vendor relationship with a person who dies, the contract becomes void. Neither party is legally responsible to fulfill the contract and must return any benefits he or she received.

Voidable Contract

If either party can opt not to have a contract legally enforced, the contract is considered voidable but not necessarily void. Characteristics of this type of contract include:

  • One or more parties has the option to enforce.
  • This party must have been subject to undue influence, misrepresentation, coercion, or fraud.
  • A party can receive compensation if he or she rightfully revokes the contract.
  • The party whose consent is caused has the contract void option.

For example, if you sign a contract to purchase a car and later find that the condition of the vehicle was misrepresented by the salesperson, you can choose to have the contract declared legally void. You will have your money returned and will not be required to buy the car.

If you decide to cancel the contract, however, you must do so in a reasonable amount of time. You must also prove that misrepresentation, coercion, or fraud took place; if you are unable to do the contract will not be void.

Unenforceable Contract

This type of contract is declared invalid by the court because of either a lack of formality or technical difficulty.

Invalid Contract

This is a catch-all term for various reasons for which a contract cannot be enforced, including but not limited to illegal promises, fraud, insufficient consideration, and duress.

Contract Discharge Examples

Contract discharge can occur by agreement, breach, performance, or frustration. The latter happens only under the circumstances of impossibility of performance. If the subject of a contract becomes illegal after the contract is signed, the contract will also be voided. This can be determined either by common law or case law. Case law is more commonly required because the word impossibility is not defined by common law.

Taylor vs. Caldwell established case law for the doctrine of frustration. The plaintiff rented day use of Surrey Gardens and music hall from the defendants. Before the date in question, a fire destroyed the venue. The plaintiff sued for breach of contract, but the court held that the contract was discharged for frustration because the hall was destroyed and thus the terms could not be enforced.

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