Difference Between Void and Illegal Agreement

Edited by Diffzy | Updated on: July 01, 2023

       

Difference Between Void and Illegal Agreement

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Introduction

Sometimes people create agreements that are against their country’s law. Void agreements and illegal agreements come under the list of agreements outside the law. Void agreements have no legal merit. They do not hold up in a court of law. People have no requirement to follow and fulfil a void agreement. An illegal agreement, in contrast, is unlawful. People face punishments for involvement in illegal agreements.

This article explores both void and illegal agreements. It also explains the differences between the two agreements.

Void Agreement vs Illegal Agreement

A void agreement has no legal component. You cannot enforce a void agreement according to the law. If a person is part of a void agreement, they have no obligation to fulfil the conditions. They can terminate the agreement at any time without facing negative consequences. A void agreement will not hold up in a court of law. There is no legal penalty for being part of a void agreement or breaching it. However, you will lose money, assets, and relationships.

An illegal agreement is against the law and regulations of a country. Participating in an illegal agreement is punishable by law. Illegal agreements often require the participant's involvement in criminal activities like drug trafficking and money laundering. When the authorities catch you taking part in an illegal agreement you have to pay compensation and may even face imprisonment. In addition, you will lose relationships, money, reputation, etc.

Difference Between Void Agreement and Illegal Agreement in Tabular Form

Parameters of ComparisonVoid AgreementIllegal Agreement
MeaningA document which does not have a legal qualityAn agreement whichis against the law
After EffectsA void agreement loses its credibility and legality when introduced in court.The creation of an illegal document can result in criminal punishment
IPC ProhibitionNoYes
PenaltyNo penalty for creating void agreementsPeople who make illegal agreements are penalized
Legal consequenceNo legal consequenceLegally punished, the offender will be asked to pay fines or may even get imprisoned.
ExamplesSome examples are agreement in restraint of marriage, agreement with minors, agreement in restraint of trade, etc.Some examples are an agreement to commit acts against the law, an agreement to murder someone, etc.

What is Void Agreement?

An agreement, which has no legal quality, is void. In simple terms, it is "void" of anything of consequence. If an individual introduces a void agreement in a court of law, it will have no justification. The court will declare the document void and having no value. A void agreement lacks legal enforceability.  

The creation of a void agreement is not punishable by law. However, it is against public policy.

When a person creates a void agreement, he does not gain legal status. Even if he can get another person to sign the document or agree to it, it does not give the first person any rights. The second person also has no obligation to follow the statements of a void agreement. If a person is pressuring you to adhere to a void agreement, you can go to court. the court will declare the agreement as void. The agreement will then lose all legally binding status.

Neither of the parties in a void agreement can receive any legal compensation for breaches of the agreement by the other person. Since the agreement is void, no one has any obligation to fulfil the conditions. They can follow the rules of the agreement or decide not to follow it. Either way, there won’t be any negative consequences.

The Indian Contract Act has declared certain agreements void. Some of these agreements are as follows,

  • Agreement in restraint of marriage
  • Agreement with minor
  • Agreement in restraint of trade
  • Agreement whose objective or consideration is unlawful
  • Agreement in restraint of legal proceeding
  • Wagering agreement

Pros of Void Agreement

Absence of legal obligations

Void agreements have no legality. Hence, neither party involved in the agreement has to hold up their end of the agreement. They can decide whether to follow the agreement or not. If one party decides not to fulfil the conditions of the void agreement, he would not experience any negative consequences for backing out.

Absence of negative legal consequences

There are no negative legal consequences for not following a void agreement. If one person in the agreement decides to break the agreement, the other person cannot force him to fulfil the terms. He cannot take the first person to court, as the court will nullify the agreement. The second person cannot ask for compensation or punishment for the offending party. He cannot force the first person to agree to fulfil the agreement either. There are no legal remedies for nullifying a void agreement.

Absence of punishments

Since a void agreement has no legal standing, neither party can hold the other accountable for damages incurred from the agreement. Even if you back out of it halfway, there is no punishment because the agreement cannot function in a court of law.

Protects illegal agreements

Void agreements are not legally binding. Hence, if the agreement mentions illegal conditions, you can back out. There is nothing in a void agreement to force a person to perform illegal actions or actions against public policy. Hence, void agreements protect illegal agreements.

Helps to avoid unwanted agreements

If one of the parties involved in the void agreement discovers the void nature of the agreement, they can terminate the entire process without facing any legal consequences. Hence, void agreements help people to escape from unwanted agreements.

Absence of need for court involvement

A void agreement has no standing in a court of law. Hence, you do not need to take the agreement or the person to court to nullify the agreement. It is void by nature and does not require a legal authority to declare it as such. If you discover that the agreement you took part in is void, stop functioning according to the conditions of the agreement.

Cons of Void Agreement

You Can Lose Your Investments

People may not be aware of the void nature of the agreement when they agree to it. They spend time, effort and personal resources on the agreement. People may also invest a lot of money and assets into an agreement, which later turns out to be void. Hence, void agreements can negatively affect a person's financial situation.

Confusion

A void agreement may not mention the conditions, obligations, and rules. Since the person involved does not know of the void nature of the agreement, he can experience a lot of confusion and uncertainty.

Negative Consequences on Relationships

Even though there are no negative legal consequences for creating a void agreement, it is still against public policy. When you agree to an agreement and later find out it is void, it can damage your relationship with the other person. Alternatively, when people find out the agreement they are involved in is void, they tend to breach the agreement or terminate it altogether. This can damage relationships. It can also destroy trust in the involved parties.

Difficulty Finding Proof Of The Void Nature Of The Agreement

Sometimes, a void agreement may have every quality likening it to a legally valid agreement. It may list all the conditions and obligations neatly. It may also include all the correct and necessary information. In such cases, it is difficult to prove that the agreement is void. This situation can lead to lengthy court battles. Challenging anything in court is an expensive approach, you will need to pay legal fees and other necessary fees. Hence, proving the void nature of an agreement can cause financial problems for the parties involved.  

Loss of Potential Benefits

People may get into an agreement because of the potential benefits the agreement offers. When the agreement turns out to be void, the parties will lose the potential benefits they would have received if the agreement were legal.

Negative Effect on the Reputation

When an agreement you have drafted turns out to be void, it can seriously damage your reputation. It can affect all your future dealings. People will refuse to get into another agreement with you. In contrast, if you were an unaware party that agreed to a void agreement, it can also affect your reputation. When you get into a void agreement and later discover its void nature, you will terminate the agreement. This termination or breach of the agreement can affect your prospects. Other people may only know of the fact that you are in breach of an agreement. Hence, it can affect your future chances of getting into a potentially beneficial agreement.

What is an Illegal Agreement?

An agreement, which is against the law of the country in which it exists, is illegal. Such agreements are illegal, immoral, or against the policies. The creation of such agreements is criminal and is punishable by law. People creating illegal agreements receive punishment under the Indian Penal Code.

Illegal agreements are void since their creation. This void nature means any additional agreements related to the illegal agreement also automatically become void.  

Certain factors can make an agreement illegal. Some of them are as follows,

  • An agreement which does not mention the terms and conditions
  • An agreement to commit acts against the law
  • An agreement to murder someone

Pros of Illegal Agreements

Easier to Execute

Illegal agreements do not need to follow legal procedures. It does not require formal documentation. Anyone can create it as they like. Hence, they are easier to execute than legal agreements, which adhere to lawful processes.

Flexibility

Illegal agreements do not need to follow laws and regulations. Hence, the people involved can create obligations, clauses, and rules as they see fit. Therefore, illegal agreements are more flexible than legal agreements.

No Tax Or Other Fees

Since illegal agreements are not lawful, people do not report their transactions and profits from the agreement to the government. Hence, illegal agreements help to avoid paying taxes on financial gains.

People involved also do not have to pay the legal fees for enforcing the agreement.

Discretion

Illegal agreements are punishable by law. Hence, the parties involved often keep it a secret. Therefore, illegal agreements can provide discretion and protect the privacy of everyone.

No Legal Liability

Illegal agreements have no legal validity. Therefore, you cannot present it in court for breach of agreement. Hence, if a person decides he does not want to continue fulfilling the obligations of the illegal agreement, he can do so without fear of persecution in court.

More Profits

Illegal agreements often involve criminal actions. Some examples are drug trafficking, money laundering, etc. Participating in such activities can bring consequences if caught. However, if you can escape discovery by the law, the illegal agreement can bring you huge profits.

Lack of Oversight

Illegal agreements do not involve the government or other legal authority figures. The activities are secret. Hence, the people involved in the agreement can escape government oversight of their business.

More Control Over The Agreement

Illegal agreements do not have to follow the rules and regulations set by the government of a country. Hence, the people involved in illegal agreements do not face any legal restrictions. The participants in the agreement have more control over what they include in the agreement.

No Competition

Since illegal agreements involve activities that are not lawful, there will be less competition in the field. Most people will avoid illegal actions because the consequence and punishments will be too much to bear.

Cons of Illegal Agreements

Criminal Prosecution

Illegal agreements are unlawful. They go against the laws and regulations of a country. In addition, they often include illegal activities. Hence, if the concerned authorities catch you participating in an illegal agreement, they can punish you. You will have to face criminal charges and imprisonment. The consequences may even affect your family.

Loss of Assets

When the authorities know about your involvement in an illegal agreement, they can confiscate your assets and properties. You may also lose assets battling the case in court. Hence, illegal agreements can cause damage to a person's financial status.

Loss of Reputation

Even though you may try to keep your involvement in an illegal activity a secret, there is always the risk of discovery. When other people discover your involvement, they will develop negative representations about you. You will receive the label of a criminal. You will not be able to participate in another agreement. You will also face problems with employment in the future.

Possibility of Violence

Illegal agreements often involve criminal activities. Activities such as drug trafficking and money laundering come with a violent nature. Hence, when you are part of an illegal agreement, you will also experience exposure to this violence.

Damage to Trust

Participating in illegal agreements can destroy relationships. You will lose the trust of your friends and family.

No Legal Protection

Since illegal agreements are not lawful, they do not offer the protection that a lawful agreement offers. The persons involved in the agreement can lose assets or face accusations of involvement in illegal activities. The law cannot protect the participants in an illegal agreement.

Problems In Enforcing The Agreement

Since an illegal agreement has no legality, you cannot use the law to enforce the agreement. There is no lawful method to ensure the other person adheres to the agreement.

No Dispute Resolution

Illegal agreements can lead to disputes and conflicts between the parties involved. There will be no formal way to resolve the disputes.

Risk Of Being Involved In Other Illegal Activities

An illegal agreement is tricky. The person can trick you into being involved in other illegal activities. When you agree to one activity, you may have to agree to another later.

Main Difference Between Void Agreement and Illegal Agreement (in Points)

  • A void agreement is an agreement which has no legal standing. An illegal agreement goes against the laws of the country.
  • A void agreement may not be illegal. An illegal agreement is always illegal.
  • Participating in a void agreement does not result in legal consequences. If you are part of an illegal agreement, you are punishable by law.
  • The IPC does not prohibit void agreements. Illegal agreements face prohibition by the IPC.
  • If you find out the agreement you are involved in is void, you can take the matter to court. The court will nullify the agreement. You cannot take an illegal agreement to court, as you will receive punishment for your involvement.
  • Void agreements often do not require you to take part in illegal activities. Illegal agreements involve activities like money laundering and drug trafficking, which are criminal.
  • It is not a criminal offence to partake in a void agreement. Involvement in an illegal agreement is a criminal offence.
  • Examples of void agreements involve Agreement in restraint of marriage, Agreement with a minor, Agreement in restraint of trade, etc. Examples of illegal agreements are an agreement to commit acts against the law, an agreement to murder someone, etc.
  • Participation in illegal agreements often has higher negative consequences for the parties involved than those in void agreements.

Conclusion

In short, neither void agreements nor illegal agreements are lawful. Even though void agreements are against public policy, they lead to fewer problems than illegal agreements. If you are part of an illegal agreement, the law will punish you. Both agreements can lead to a loss of money, trust, and relationships. Hence, it is advisable to not partake in either agreement.


Category

Law


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"Difference Between Void and Illegal Agreement." Diffzy.com, 2024. Mon. 15 Jul. 2024. <https://www.diffzy.com/article/difference-between-void-and-illegal-agreement>.



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