Void Contract: Definition, Example and Related Terms
What is a Void Contract ?
A 'Void Contract', in simple terms, is a contract that is not legally enforceable. Imagine you and your friend make a promise to each other, but there is no legal way to make sure that promise is kept. That's what a void contract is like in the business world. It's a contract that, for one reason or another, the law will not enforce.
This can happen for several reasons, but the most common ones are because the contract is about something illegal, or one or both parties were not able to make a legal decision (like if they were under age or did not understand what they were agreeing to). For a contracts manager, it's important to avoid void contracts because they can't be used to protect your company if something goes wrong. Since the legal system won't enforce a void contract, if the other party breaks their promise, there's not much your company can do about it.
See our article on Void, Voidable and Invalid Contracts, What You Should Know for more information.
Example(s)
Scenario Description A company enters into a contract with a supplier to purchase goods. However, the supplier is not old enough to enter into contracts legally. In this example, the contract would be void because the supplier is underage. Even though the company and the supplier agreed to the terms of the contract, the legal system would not enforce it because one of the parties (the supplier) is not legally allowed to make that kind of decision. A business signs a contract to buy stolen goods. In this case, the contract would be void because it's about something illegal. Even if both parties agreed to the terms and signed the contract, the legal system would not enforce it because the subject of the contract (stolen goods) is against the law.