Void Contract: Everything You Need to Know
A void contract is one that is not legally enforceable. Certain circumstances render some contracts immediately void based on some aspect of the law. 3 min read
A void contract is one that is not legally enforceable. Certain circumstances render some contracts immediately void based on some aspect of the law. With void contracts, both parties are released from the contractual obligations set forth in the original agreement.
Void contracts often center around illegal activities, are patently unfair, or violate public policy. Other void contract situations might involve someone who is not competent to enter into a legal contract or contain terms that are impossible to complete. You might be able to salvage contracts that are void in only one or two parts by a process known as severance.
When Does a Contract Become Void?
After declaring a contract void, it will no longer be valid and cannot be enforced under federal or state laws. A contract can become void when:
- It is unfairly one-sided.
- It goes against public policy.
- Its subject matter is illegal.
- It is impossible to perform.
- It unfairly restricts one side's actions (such as the right to work).
- One of the parties is not legally competent to enter into a binding contract.
If someone is permanently disabled and deemed incapable of understanding a contract or its implications when entering into the agreement, that agreement can be declared void. If the person is a minor but has a parent's or legal guardian's consent, then the contract might be enforceable. In situations where there is a law change after an agreement was made but before the contract was completed, the contract can be deemed void if the agreed-upon activities are now illegal.
Some issues essentially make the contract “void on its face.” This means the contract is void as is and cannot be changed or amended to make it enforceable. In these cases, the court will likely cancel it in its entirety.
Steps to Void a Contract
In a situation where you suspect a contract should be voided, there are certain steps you can take:
- Review the contract to determine which elements or sections might render it invalid.
- Decide on the main reason the contract is void (e.g., it is impossible to perform or violates public policy).
- Start by collecting documents and other information that support your position that the contract is void.
- Decide whether a new contract should be created or whether you wish to abandon the contract entirely.
Every state has different laws regarding contracts and business matters. This is because state laws might differ in how they regulate commerce and commercial transactions. If you choose to have a contract declared void, neither party will benefit in any way from the exchange that was to take place.
Differences Between Void and Voidable Contracts
Void and voidable are often used interchangeably, but they cover different issues when it comes to contracts. Voidable contracts are legally valid contracts and can be enforced in some cases. Typically, only one party is bound to the terms in a voidable contract situation. The other party can cancel the contract, which makes it void.
A void contract is unenforceable from the start. The law treats it as though the contract never existed. The biggest difference is a void contract cannot be legally executed under the law whereas a voidable contract can. The “unbound” party, however, has the right to request it be voided before it's fulfilled.
Examples of Void Contracts
Void contracts typically involve illegal acts such as:
- Committing a crime
Take, for example, a contract for an illegal drug deal between a drug supplier and a local dealer. This contract would be void because it involves illegal goods. It's unenforceable from the start because it doesn't serve a legal purpose. Another example is a contract that restricts certain activities, such as who a person can marry or one's right to work for a living.
A voidable contract might be one in which someone was tricked into entering the contract or one party was incapacitated (e.g., under the influence of alcohol or drugs) at the time.
Consult with a lawyer before entering into a verbal or written contract. He or she can help draft a legally binding contract, so you don't have to worry about it being void or voidable.
If you need help with a void contract, you can post your legal need on UpCounsel's marketplace. UpCounsel only accepts the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.