Contracts and agreements are integral to business transactions and personal interactions. However, not all agreements are enforceable by law. Some agreements are considered void, meaning they are not legally binding from the outset. Void agreements lack enforceability due to various factors, such as illegality or failure to meet essential elements of a valid contract.
In this article, we will explore the seven types of void agreements, providing a clear understanding of what makes these agreements unenforceable and how they differ from valid contracts.
1. Illegal Agreements
An illegal agreement is one where the subject matter or the terms of the contract involve illegal actions. Since these agreements require participants to engage in unlawful activities, they are automatically void. Courts will refuse to enforce any contract involving illegal actions, regardless of whether the parties involved agreed to the terms in good faith.
Characteristics of Illegal Agreements:
Contravene Law or Public Policy: The agreement requires actions that violate statutory law or established public policy.
No Legal Enforceability: Courts will not enforce agreements involving illegal subject matter.
Void from the Start: These agreements are void ab initio, meaning they are considered invalid from the very beginning.
Examples of Illegal Agreements:
A contract to sell illegal drugs.
Agreements to commit fraud or any other illegal activity.
Contracts for the sale or purchase of stolen goods.
These agreements are void because they involve actions that violate legal principles or public morality.
2. Agreements Without Consideration
In contract law, consideration refers to the exchange of something of value between the parties to a contract. It is an essential element of a valid contract. An agreement that lacks consideration is void, as one party is not offering anything of value in exchange for the other party’s obligations.
Characteristics of Agreements Without Consideration:
Lack of Exchange: One party provides no value in exchange for the other party’s performance or promise.
No Binding Obligation: Without consideration, there is no mutual obligation between the parties.
Void from the Start: These agreements are considered void and unenforceable.
Examples of Agreements Without Consideration:
A promise to make a gift without any reciprocal obligation from the recipient.
A contract where one party promises to perform a service without receiving anything in return.
Without consideration, the agreement is essentially a one-sided promise and lacks the binding force of a valid contract.
3. Agreements Made by Persons Without Legal Capacity
For a contract to be valid, the parties entering into the agreement must have legal capacity. This means they must be of sound mind and legal age to understand and agree to the contract’s terms. An agreement entered into by a person lacking legal capacity, such as a minor or someone with a mental impairment, is void.
Characteristics of Agreements by Persons Without Legal Capacity:
Lack of Understanding: The person lacks the capacity to understand the nature and consequences of the agreement.
Void or Voidable: Contracts with minors are generally voidable, while contracts with individuals who lack mental capacity may be void.
Lack of Consent: The law assumes that individuals without legal capacity cannot give valid consent.
Examples of Agreements Without Legal Capacity:
A contract signed by a minor for non-essential goods or services.
An agreement entered into by an individual suffering from a mental illness who cannot comprehend the terms of the contract.
In such cases, the law protects individuals who lack the capacity to enter into a binding agreement, rendering the contract void or voidable.
See also: 3 Common Reasons Contracts Become Void
4. Agreements in Restraint of Marriage
An agreement that places unreasonable restrictions on an individual’s right to marry is considered void. The freedom to marry is a fundamental right, and any agreement that directly or indirectly restrains this right is unenforceable under contract law.
Characteristics of Agreements in Restraint of Marriage:
Restrictive Nature: The agreement imposes conditions that prevent or hinder an individual from marrying.
Void and Unenforceable: These agreements are void as they violate public policy.
Invalid from Inception: The agreement has no legal effect from the moment it is created.
Examples of Agreements in Restraint of Marriage:
A contract that requires a person to remain unmarried for a certain period.
An agreement where one party promises to pay another if they refrain from marrying.
Since such agreements infringe on personal rights, they are void and cannot be enforced by law.
5. Agreements in Restraint of Trade
An agreement in restraint of trade is one that prevents or restricts a party from engaging in lawful business or trade activities. While certain reasonable non-compete clauses in employment contracts are enforceable, overly broad restrictions are typically considered void.
Characteristics of Agreements in Restraint of Trade:
Unreasonable Restrictions: The agreement unreasonably limits a party’s ability to engage in their profession or business.
Void if Unjustified: If the restraint is excessive or not in the public interest, the agreement is void.
Must Be Reasonable: Certain non-compete clauses may be enforceable if they are reasonable in terms of time, geography, and scope.
Examples of Agreements in Restraint of Trade:
A contract that prevents a person from opening a business for an indefinite period.
An agreement that prohibits a former employee from working in the same industry across an entire country.
Courts will not enforce agreements that impose unreasonable restrictions on trade or business, rendering them void.
6. Agreements to Perform Impossible Acts
A contract that involves the performance of an impossible act is inherently void. If it is impossible for a party to fulfill their obligations under the agreement due to physical or legal constraints, the contract cannot be enforced.
Characteristics of Agreements to Perform Impossible Acts:
Inherently Impossible: The contract requires an act that is impossible to perform at the time the contract is made.
Void Due to Impossibility: Since performance is impossible, the agreement is void and unenforceable.
No Legal Obligation: Neither party is obligated to fulfill the terms of the contract.
Examples of Agreements to Perform Impossible Acts:
A contract that requires a person to travel to a place that no longer exists.
An agreement to sell a car that has already been destroyed.
If the subject matter of the contract becomes impossible to perform, the agreement is considered void.
7. Wagering Agreements
A wagering agreement is a contract based on uncertain events, where the performance or non-performance of the agreement depends on the outcome of an event, usually involving betting or gambling. Most legal systems consider such agreements void, as they are based on chance rather than legal obligations.
Characteristics of Wagering Agreements:
Based on Chance: The agreement’s outcome depends entirely on the occurrence of a future uncertain event.
Void in Many Jurisdictions: Courts generally consider wagering agreements void as they lack legal enforceability.
No Legal Rights: Neither party can enforce the agreement in court.
Examples of Wagering Agreements:
A bet on the outcome of a sports match.
An agreement where one party promises to pay the other based on the results of a horse race.
Since wagering agreements are speculative and lack legitimate legal obligations, they are considered void.
Conclusion
Understanding the different types of void agreements is essential for individuals and businesses entering into contractual relationships. A void agreement is not enforceable from the outset due to its failure to meet essential legal requirements. The seven types of void agreements—illegal agreements, agreements without consideration, agreements made by persons without legal capacity, agreements in restraint of marriage, agreements in restraint of trade, agreements to perform impossible acts, and wagering agreements—are void due to their failure to comply with legal standards.
By recognizing these types of void agreements, parties can avoid entering into unenforceable contracts, thus protecting themselves from legal disputes and ensuring that their agreements are valid under the law. Whether you are drafting, reviewing, or entering into a contract, it is always wise to seek legal advice to ensure that the agreement meets all the necessary legal requirements to be valid and enforceable.