Void Ab Initio Agreement: Everything You Need To Know

A void ab initio agreement is Latin for "void from the beginning." This means that legally, a contract was void as soon as it was created.3 min read

A void ab initio agreement is Latin for "void from the beginning." This means that legally, a contract was void as soon as it was created. The parties of the contract are not legally related based on what was written in the agreement because the agreement in question was never valid. However, certain exceptions do apply. This type of agreement can never be void because it was never a legal contract to begin with.

Impossibility of Performance

With any contract, unforeseen circumstances can occur that make it difficult or impossible for the terms of the agreement to be fulfilled. This situation is quite common within contract law. This is known as impossibility of performance and under the doctrine of frustrate will result in discharge of the contract duties. Unlike with void ab initio contracts, when impossibility of performance occurs, the parties are responsible for expenses associated with discharge and termination.

Valid Contract

A contract that can be legally enforced is considered valid. In this type of contract, a party is compelled by the other party to either do or not do something. Each party is legally required to perform based on the terms of the contract or can be subject to a remedy ordered by the court. For example, if you sell an acre of land to another farmer for $50,000 but fail to allow him or her to occupy the land, you can be sued to recover payment.

Void Contract

A contract that cannot be legally enforced by either party is considered void. Characteristics of a void contract include:

  • Not legally enforceable
  • Does not create legal rights or obligations for either party
  • May be against the law or public policy
  • Does not require compensation to be paid to either party
  • May occur if either party signed under duress

For example, if your company enters a vendor relationship with a person who dies, the contract becomes void. Neither party is legally responsible to fulfill the contract and must return any benefits he or she received.

Voidable Contract

If either party can opt not to have a contract legally enforced, the contract is considered voidable but not necessarily void. Characteristics of this type of contract include:

  • One or more parties has the option to enforce.
  • This party must have been subject to undue influence, misrepresentation, coercion, or fraud.
  • A party can receive compensation if he or she rightfully revokes the contract.