Details matter. Especially in legal agreements.
Every term, condition, and individual facet of a legally binding contract can make a world of difference. Wording can make or break obligations, definitions can simplify the language or confuse, and missing or included elements can be the difference between a valid or void contract.
A null and void contract is an illegitimate agreement unenforceable by the law. These contracts aren't executed due to missing required elements.
If you deal with various contracts, understanding what makes a contract null and void is essential. Additionally, consider using contract management software to simplify the entire process of creating, tracking, and monitoring contracts.
Writing a contract is a lot of work, and it’s a huge bummer when you can’t follow through with the agreement because the contract is null and void. It’s crucial that your contract management strategy includes methods and procedures to refrain from creating contracts that can’t be enforced because it’s missing an important element or wasn’t properly reviewed.
To take extra precautions, you need to understand the necessary elements of a contract, what makes a contract void or voidable, how to avoid null and void contracts, and how to terminate an agreement with the other party.
Defining what makes a contract null and void first requires an explanation of the elements of a valid contract. While the detailed contents of a contract will differ depending on the subject matter, a contract must include the following six elements to be legally binding and enforceable.
Contractual capacity refers to an individual’s ability to enter into an enforceable contract. People who are underage, mentally disabled, or intoxicated lack legal capacity and can’t be held liable for their end of the agreement. They can choose to move forward with the agreement if they wish, but they can also exit the contract at any time without breaching.
An offer is the initial draft of a contract that includes the terms of the contract to which the offeror is willing to be bound. Most offers – and contracts for that matter – include a promise to act or not act in a certain way or an exchange of promises. If the offer is accepted and signed, it becomes legally binding at that moment.
Acceptance, in reference to the offer made, is an agreement to abide by the terms and conditions in the contract provided by the offeror. An offers acceptance must be made in the manner specified by the contract, or, if not specified, in a way that is seen as reasonable for that situation. If an offer is accepted, it is approved of to its entirety. If not, the offeree can send the offeror a counter offer, which is simply a modified version of the original contract. The process then starts over with that new offer and the roles are reversed.
Legality simply refers to whether or not the terms, conditions, and overall agreement abide by the law and public policy. If the subject matter of a contract isn’t legal, it isn’t enforceable. For the agreement to be valid, the deal must be legal.
Consideration, in regard to contracts, is the exchange of one thing for another. Contract law states that both parties in the agreement need to provide something of value for the agreement to be valid. Consideration can include money, an item, or completing a certain action for someone.
Mutuality is a contract element that states both parties need to be bound to the agreement for it to be valid. If one party isn’t legally bound, then neither are. Mutuality is an issue in situations where one party has the ability to exit or cancel the contract and the other doesn’t. Those types of agreements lack mutuality and aren’t valid.
Now that we know what makes a contract valid, let’s take a look at what makes one void and voidable. While the roots of those words are the same, they have different meanings when applied to contracts.
A void contract is one that is illegitimate and unenforceable no matter what. Contracts are void because of the way they were drafted. Typically, these agreements don’t abide by the six elements of a contract listed above. A contract can also be considered void if all obligations have been fulfilled and there is no longer anything to enforce.
For example, if Tom and Mike enter a contract stating that Mike will pay Tom to rob a bank and share the profits, this contract is void and unenforceable from the start because the subject matter is illegal.
Although the name may lead you to believe differently, a voidable contract is actually a valid agreement that can be enforced if both parties decide to move forward with it. However, as the agreement moves forward, the contract can become void later on at the option of one of the parties.
The affected party can either decide to exit the contract without committing a breach of contract or continue with it if they wish. For example, if a minor signed a contract with a business, they can choose to exit the contract without penalty if they wish. Or if they want to move forward with the agreement, they can do that as well.
The key difference between a void and voidable contract is the time at which the agreement is considered void. A void contract is unenforceable from the beginning when it was created, and a voidable contract starts as valid but might become enforceable later on.
The contract workflows can be lengthy, from sending offers to drafting and adhering to terms. And to do all of that for the contract to be void or terminated is even worse. Here are some tips on reviewing a contract so you can avoid unenforceable contracts, legal trouble, or both.
This is arguably the most important part of entering any legal agreement. Before you send or when you receive an offer, make sure you take the time to read it carefully. Don’t skip ahead to the terms and conditions, and never assume you know everything included in the contract. These documents can get lengthy and confusing, but it’s better to take more time to go over everything with a fine-tooth comb than sign something that includes details you aren’t aware of.
Always verify that all parties are legally competent to enter into a binding contract. Ensure that all individuals and entities are of sound mind, of legal age, and have the authority to enter into binding agreements.
Whether you are writing the original contract offer or redrafting another version to send a counteroffer, it’s necessary to be as clear as possible. Contracts are not a time to play games or try to trick people. Every term, condition, description, and detail of the contract must be as clear and definitive as possible. A lot of contracts will include a section that defines any terms that could have multiple meanings or are too jargony.
When reading through the contract, you might come across some terms, clauses, or entire sections that aren’t very clear to you. If this is the case, always clarify things that don’t make sense. Again, it’s best to take more time to reach a final contract draft that everyone is comfortable with. Make sure the other party is doing this as well.
Oral contracts are valid agreements, but they can be a bit difficult to enforce. Details can be forgotten, and when it comes down to handling conflict, it’s one party’s word against the other’s. Written versions of contracts include all details of the deal and evidence that the agreement actually exists. Putting a contract in writing isn’t always necessary, but as the agreement becomes more detailed, it becomes more relevant. You can utilize a standard contract template for agreements that require minimal changes, which can save time and simplify the process.
No matter the deal, it’s always a good idea to get to know the other party. And the more serious and long-term the agreement, the more important this becomes. Make sure the other party is trustworthy and able to hold up their end of the bargain. While part of entering a contract is to offer someone else something of value, it can’t just be a one-way exchange.
You don't have to do it yourself. Engage a qualified legal professional to review the contract for any errors, ambiguities, or unfair terms that may impact your rights.
Besides those tips, there are a few extra questions you should be asking yourself before sending an offer or signing on the dotted line:
If you have entered a voidable contract and have assumed the position of the party looking to end the agreement, you have to properly terminate the contract. If you don’t, you might be held liable for breaching the contract. Or even if you are simply in a contract that you want to end early, you can also implement one of these termination methods to avoid issues later on.
The agreement you’ve made with someone might be simple, but things can get a bit complicated once you formalize it with a contract. It’s never a bad idea to run through your contract again to ensure you won’t encounter the possibility of it becoming void. Read it, understand it, and then read it again (just for good measure).
Now that you've understood what makes a contract null and void, check out what are the risks of breaching a contract and how to avoid it.
This article was originally published in 2020. It has been updated with new information.
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