The Indian Contract Act, 1872 has made it clear that there is a thin line of difference between void and illegal agreement. A void agreement is one which may not be prohibited under law, while an illegal agreement is strictly prohibited by law and the parties to the agreement can be penalized for entering into such an agreement.
A void agreement has no legal consequences, because it is null from the very beginning. Conversely, illegal agreement is devoid of any legal effect, since it is started. All illegal agreement are void, but the reverse is not true. If an agreement is illegal, other agreements related to it are said to be void.
By learning the distinction between the two types of agreement, you will be able to understand that which one is void and which is unlawful i.e. illegal. So, take a read of the given article carefully.
| Basis for Comparison | Void Agreement | Illegal Agreement |
|---|---|---|
| Meaning | An agreement, which lacks legal enforceability is void agreement. | An agreement whose creation is forbidden by the court of law is an illegal agreement. |
| Consequence | An agreement becomes void when it loses its enforceability by law. | An illegal agreement is void ab initio i.e. void from the very beginning. |
| Prohibition by IPC | No | Yes |
| Scope | Wide | Narrow |
| Penalty | Parties to void agreement are not liable for any penalty under law. | Parties to illegal agreement are penalized. |
| Connected agreements | May not necessarily be void, they may be valid also. | All connected agreements are void. |
The term ‘void’ means no legal binding and ‘agreement’ means consensus between parties regarding a course of action. To simply, put a void agreement is an agreement which is not legally binding, i.e. an agreement which lacks enforceability by law is void.
A void agreement loses its legal binding nature when declared void. Such agreement does not create any rights and obligation for the parties, as well as the parties, do not get any legal status. The transactions associated with the void transaction would be valid.
Certain agreements are void ab initio as per Indian Contract Act, which are – Agreement in restraint of marriage, agreement in restraint of trade, agreement in restraint of legal proceeding, agreement with minor, agreement whose object or consideration is unlawful, wagering agreement, etc.
An agreement that violates any law or whose nature is criminal or is opposed to any public policy or immoral is an illegal agreement. These agreements are void ab initio, and so the agreements collateral to the original agreement are also void. Here collateral agreement refers to the transaction associated or incidental to the main agreement.
The law strictly prohibits such agreements, hence entering into an illegal agreement is called a punishable offence in the eyes of law. Therefore, the parties are penalised for the same, under Indian Penal Code. Some examples of an illegal agreement are like an agreement whose terms are not certain, or an agreement to kill someone, etc.
The difference between void and illegal agreement can be drawn clearly on the following grounds:
After reviewing the above points, it is quite clear that the void and illegal agreement are very different. One of the factors that make an agreement void is the illegality of the contract, such as contract whose object or consideration is unlawful. Moreover, in both the two agreements loses its enforceability by law.
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