Every company utilizes contracts and agreements as a tool to forge connection when two people begin to work together. Contracts and agreements are both vital for a company’s smooth functioning as they form a record of commitments between two parties. Most contracts or agreements are formed because they are mutually beneficial for both parties and they help to mitigate conflicts and minimize risks. A void agreement is one which is null and void since the time it is formed and thus it cannot be enforced according to law. Whereas, a void contract is valid at the time it was created but becomes void and unenforceable due to certain consequences later in time. Let’s delve further into the differences between void agreements and void contracts.
Definitions and meanings
A void agreement is not enforceable by law since the time of its creation and is said to be void or null. This implies that it cannot be acted out and does not bind any single party nor can it be enforced forcefully by one party on another. According to section 2(g) of Indian Contract Act, 1872, these agreements do not confer any rights to either party and cannot be tested in the court. Thus a void agreement can never change into a binding contract.
To become enforceable an agreement is required to follow the essentials of a valid contract according to section 10 of the act. Since these conditions are not met since the beginning of the agreement the agreement becomes void. The following are agreements which are deemed void: An agreement whose object or requirement is illegal, an agreement that restricts marriage and trade, a wagering agreement, or an agreement forged with a minor, lunatic or alien enemy.
Example: John asks a laborer Tim to supply 100 kilograms of cement at a future date on a certain location but Tim who is a minor is unable to do so. Since the agreement is between a minor now John cannot sue Tim. Similarly if party A wants party B to supply cocaine, which is an illegal drug, to a certain locality the agreement is treated as void since it has unlawful and potentially harmful targets.
Void contracts are defined as contracts that are legally binding at the time of their creation but result in annulment later in time as mentioned in Section 2 (j) of the Indian Contract Act, 1872 .These contracts cannot be enforced after their annulment and normally there are no legal implications but there are some occasions where participants suffer legal consequences such as when a binding party is unable to perform and is liable according to law to suffer damages or pay compensation fees etc.
At the initiation of the contract, they are valid and legally binding as all the essentials of validity are met but due to the impossibility to perform on a later occasion they become null or void. There are several occasions that can result in the nullification of the contract such as, repudiation of voidable contract, the parties involved engage in illegal actions, change of law of that country, impossibility to perform due to consequences outside the reach of parties involved and, contingent contracts etc.
Example: Party A buys cattle from Party B but unfortunately, the cattle die before the supplying date thus the contract becomes void due to the impossibility to perform and is not legally binding any more.
Difference between void agreement and void contract
The five main points of difference between void agreement and void contract are listed below:
Void agreement is void ab-initio meaning it is null since it was created and holds no legal implications. Void contact is a contract that is deemed invalid at a later stage but was legally binding at the time of initiation.
Void agreement is deemed unenforceable according to law since its creation but a void contract is enforceable in the eyes of law at the time of its creation but is deemed invalid at a later stage.
3. Legality or legal stance
A void agreement is not legally binding on both sides since its beginning. Whereas void contract is legally binding at the beginning but subsequently becomes invalid.
4. Legal consequences when it nullifies
Void agreements are unenforceable thus the question of legal consequences or compensation does not arise in the case of non-performance by the involved parties. In the case of void contracts legal consequences or damages may occur if the participating party is liable according to law.
5. Main causes of invalidation
In a void agreement, the prerequisite conditions are not met if there is impossibility to perform or the contract is with minor, lunatic or alien enemy. In the case of a void contract it becomes invalid when the participating party becomes incapable to perform or participates in an illegal act or there is change of law of the country involved, it results in the annulment of the contract.
Void agreement vs void contract – tabular comparison
A tabular comparison of void agreement and void contract is outlined below:
|Void agreement is void ab-initio and is null or invalid since it was created
|Void contract is valid at creation but becomes invalid later due to uncontrollable circumstances.
|Is unenforceable since its creation.
|Is enforceable since its creation but subsequently lacks enforceability.
|There are no legal implications involved.
|Is legally binding at the initiation of the contract but becomes unbinding later on.
|Legal consequences on annulment
|Void agreements are null and do not confer any rights to any party thus there are no legal consequences.
|There might be legal consequences when the contract becomes invalid like fee penalties etc.
|Main cause of annulment
|Impossibility to perform since the beginning or if the contract is done with a minor, alien enemy or lunatic.
|Change in the country’s law, supervening impossibility or inclusion of unlawful object.
Conclusion- void agreement vs void contract
It is important to clearly understand the differences between these two terms as contracts form a significant part of everyday work-life. Contracts and agreements form the basis of communication and collaboration between two parties. While they help organizations maintain compliance within the company they also help employees obtain their fair share of benefits and prevent potential conflicts between them.