First Principles of Business Law

1. Making a legal transaction 'void'

1.1. The effect of making a transaction void

There are many different kinds of legal transaction - for example, a contract; or a transfer of property; or bringing about a change of personal status. Such transactions bring about binding legal consequences. Sometimes, however, a transaction is carried out in circumstances that affect its legal validity. For example, a decision by one party to enter into a contract (either at all or on particular terms) may have been brought about by improper behaviour on the part of the other party and this behavior may invalidate (make 'void') the attempted transaction.

When a legal transaction is made void, it is as though that transaction had never been entered into at all. It is wiped out as from its very beginning (ab initio). All the legal obligations that were created by that transaction are discharged, and any money already paid or property transferred must be given back, so that neither party retains any benefit. Clearly, this is a very radical event.

Circumstances that make a legal transaction void are known as 'vitiating circumstances', because they invalidate or 'vitiate' the affected transaction.