Are You Sure You Want the Contract To Be “Null and Void”?

The terms “null and void” or “void ab initio” are commonly used in various real estate contracts. These terms are typically used to express the same concept: the contract will be considered to have never come into existence. Occasionally these terms are used when “terminate” is probably a better expression of the parties’ true intent. Generally speaking, when a contract is terminated, the contract stops. Despite the termination, however, the contract is still considered to have been effective and enforceable prior to the termination, which could give rise to pre-termination liability.

A recent real estate case, Bannum, Inc. v. Mees, No. 07-12-00458-CV, 2014 Tex. App. LEXIS 6804 (Tex. App.—Amarillo June 24, 2014) provides an illustration of the potential unintended effect of using the terms “null and void” or “void ab initio” instead of “terminate” (opinion available here). That case arose after a failed attempt to purchase a building for use as a half-way house. The sales contract was contingent on (1) the buyer, Bannum, winning a bid with the Bureau of Prisons to operate the half-way house, and (2) Bannum actually beginning performance of those services. If either of those contingencies failed to occur, “for any reason, then [the] contract [was rendered] null and void.” Although Bannum won his bid, the Bureau of Prisons ultimately terminated the agreement. Bannum and the seller subsequently sued each other asserting various claims including breach of contract. Of relevance here, the trial court granted the seller’s motion for summary judgment on Bannum’s breach of contract claim.

On appeal, the Amarillo Court of Appeals affirmed the trial court’s decision based on the operation of the term “null and void.” The court explained that before one can sue for breach of contract, an enforceable contract susceptible to a breach must exist. But an agreement rendered “null and void” is not such a contract, according to the court, “because a void contract never came into existence.” In this case, it was undisputed that Bannum did not fulfill the second contingency noted above, and therefore, the agreement was rendered null and void. As a result, the court concluded that Bannum had no legally viable breach of contract claim because “one cannot legally enforce rights under an agreement that never was.”

Bannum would not have faced this legal obstacle if the contract had used termination language in place of the “null and void” language, such as the following: “if either of the contingencies fail to occur, then the contract shall immediately terminate.” If that language had been used, Bannum could have sought to enforce the contract despite the fact that it ultimately was terminated. This is just something you may want to consider the next time you come across the terms “null and void” or “void ab initio.”

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