Differences Between Void and Illegal Contract: There is a thin line between void and illegal contract. While a void contract is an agreement which may not be prohibited by the law, an illegal contract on the other hand is a contract that is strictly prohibited under the law and the parties involved in the contract can be sanctioned for participating in such a contract.
There are no legal repercussions for a void contract because it is null from the onset. On the other hand, illegal contract does not have any legal backing right from when it was entered into by the parties involved. All illegal contracts are void but not all void contracts are illegal. Also, when an agreement has been found to be illegal, all other agreements directly connected to it are void.
It is important to know the distinction between these two seemingly related contracts so as to figure out which one is unlawful or illegal and which is just void. Keep scrolling to find out what you need to know about the disparity between void and illegal contracts.
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Table of Content
What is a Contract?
A contract is simply an agreement which the law will enforce. Every contract is an agreement but not all agreements are contracts. Some of the necessary ingredients of a valid contract include: offer, acceptance of the offer and furnishing of adequate consideration.
Meaning of Void Contract/Agreement
The word ‘void’ means that there is no legal bindingness while ‘agreement’ means consensus between parties in respect of a course of action. In short, a void contract is an agreement which haa no legal bindingness. It is an agreement which lacks legal enforceability.
Once an agreement is declared void, it loses its legal bindingness. This type of agreement does not vest any rights or obligations on the parties involved. Also, they are not recognized by the law. Other contracts or agreements collateral to or associated with the original contract are however not necessarily void.
Certain contracts are void ab initio.
Examples of some of these contracts which are void from the very onset of the contract include:
a. Agreement restraining a legal proceeding or court activities
b. Agreement restrainting trade or commerce
c. Agreement whose object or consideration is unlawful
d. Gambling or Wagering agreements
e. Agreement restraining a person or number of persons from marriage
f. Agreement entered into with a minor for non-necessaries and so on.
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What is an Illegal Contract?
An illegal contract or agreement is a contract or agreement that contravenes any extant law or one that is criminal by its nature. It also includes a contract that is averse to the tenets of public policy or promotes immorality. Contracts or agreements under this category are void ab initio. For this reason, the agreements related to such contracts or agreements are likewise void.
When we talk about contracts or agreements related or collateral to the illegal contract, we mean those transactions that are associated with or incidental to the original contract entered into by the parties.
Classification of Illegal Contracts
This various types of illegal contracts can be classified into the following headings, namely:
a. Contracts that are illegal at common law
b. Contracts that are illegal under the statute
c. Contracts that are void at common law
The law frowns heavily on illegal contracts. For this reason, entering into an illegal contract is a grievous offence punishable under the law.
The parties involved in an Illegal contract are made to face the wrath of the law for entering into such a contract.
Examples of illegal contracts include: agreement to harm a person (to kill or cause pain), agreement to steal, agreement to destroy government or private property without authorization, and so on.
Major Differences Distinguishing Void Contracts From Illegal Contracts
Now that we have explored what void contracts are as well as what constitutes an illegal contract, we shall now go further to examine the two types of contracts to see what makes one different from the other.
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The discrepancies between void contract and illegal contract are clearly summarized as follows:
1. A void contract is an agreement which loses its legality or legal status and is thus unenforceable while an illegal contract is one which is not permitted by the law because it is against the law.
2. Some void contracts are void ab initio, that is, from the time they were made while some agreements only become void at the time when they lose their legal bindingness. On the flip side, an illegal contract is void right from the very beginning of the agreement.
3. There are usually no provisions of the law prohibiting void contracts (neither the penal code in the North nor the criminal code in the South) but an illegal contract is strictly prohibited by the law. It is a defined offence under the law and punishment for it is spelt out in the laws as well.
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4. The concept of void contracts is wider in scope than that of illegal contract when compared. You will find that while all illegal contracts are void even from the time they were entered into by the respective parties, not all void contracts are illegal.
5. There are no provisions for punishment of parties who are involved in void contracts. Agreements found to be void are not punishable under the law but illegal agreements or contracts attract punishments or penalties as prescribed by the law for such offences.
Every party who is involved in an illegal contract is liable to the stipulated punishment for that offence under the law.
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6. Collateral contracts or contracts associated with a void contract may be void or not. This means that there are chances that such void contracts may be valid after all.
However, contrastingly, any agreement incidental to an illegal agreement cannot be enforced by law as all such agreements or contracts are deemed by law to be void ab initio.
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After x-raying the foregoing points, it is clear as day that void contracts and illegal contracts are not the same at all. One of the key factors that marks out a void contract or agreement is the illegality of the contract. Once a contract is illegal, it is also automatically void. Take for instance, a contract whose object or consideration is an unlawful one. Albeit, in both types of contract or agreements, there is one unifying factor— the two contracts or agreements are unenforceable under the law.
Edeh Samuel Chukwuemeka ACMC, is a Law Student and a Certified Mediator/Conciliator in Nigeria. He is also a Developer with knowledge in HTML, CSS, JS, PHP and React Native. Samuel is bent on changing the legal profession by building Web and Mobile Apps that will make legal research a lot easier.