Ace the Arizona Real Estate Exam 2025 – Unlock Your Property Dreams!

In this scenario, the oral contract between Martin and Fred is identified as void because it involves an illegal act. Contracts that require a party to engage in illegal activity, such as committing arson to collect insurance, lack a lawful purpose and, consequently, cannot be enforced by law.

A void contract is one that has no legal effect from the beginning; it is as if the contract never existed. Since the agreement is for an illegal act, it does not meet the legal criteria necessary for a valid contract. Therefore, regardless of any agreement made between the parties, the contract holds no weight in a legal context.

The other options represent different categories of contracts. A valid contract is one that is legally enforceable, a voidable contract is one that may be enforced or invalidated at the option of one of the parties, and an invalid contract refers to agreements that do not satisfy the criteria for a valid contract. In this case, however, the nature of the act in question categorizes the contract firmly as void.