The LawBiteFree Essentials Planacts as your very own legal assistant, ready to provide expertise and guidance on the common legal issues that SMEs and businesses face. Voidable contracts arise in many real-world situations where one party has been unfairly influenced or misled during the formation of the contract. Coercion, duress, and undue manipulation are all grounds for voiding a contract. Once the law can prove one of the signatories is not in the right mental state, the contract loses validity. This means that the agreement is not null and void yet, but any of the parties could initiate the cancellation process. We’ll also explore their key differences and how to handle such contracts.
In contrast, voidable contracts could be corrected and ratified through mutual agreement or terminated if either party chooses to void the agreement. A void contract is a null contract, meaning this contract isn’t enforceable from the start. This type of contract is considered invalid and has no legal force or binding power. A void contract cannot be enforced by law and doesn’t give rise to any legal rights or obligations for either party involved.
Void contracts are agreements that are not valid from the start and cannot be legally executed or enforced. Void contracts generally lack one or more of the necessary elements of a contract to make it legally binding. Certain contracts may be required to meet specific formalities, such as being in writing or signed by authorized parties, to be legally enforceable. When a contract is voidable, it remains valid until the party with the power to void it exercises their right to do so. If the contract is voided, the innocent party is typically entitled to be restored to their original position before entering into the contract.
In other cases, the other party may not agree to your proposal, and you will have to seek a court judgment in your favor. An example of a void real estate contract is an agreement by a seller who does not legally own the property. Such a contract is void because the seller lacks the legal authority to transfer ownership.
When Is a Contract Considered Void or Voidable?
A void contract is a contract that is considered invalid from the beginning and has no legal effect. It lacks the essential elements required to create a legally binding agreement, such as legality or capacity. A void contract is essentially treated as if it never existed, and neither party can enforce its terms. On the other hand, a voidable contract is a valid contract that can be either affirmed or rejected by one or both parties involved. It is initially binding, but one or both parties have the option to void or cancel the contract due to certain legal reasons, such as fraud, duress, or misrepresentation. The party with the right to void the contract can choose to either enforce it or terminate it, depending on their decision.
A contract is an agreement between two parties that creates mutual legal obligations. The legal obligations are enforceable by law.The contract can be oral or written, however oral contracts are much harder to enforce and they should be avoided. Making the contract written and clear with all the terms and conditions is the best way to make sure the agreement is respected if you need to enforce it by law. And that brings us to the differences between void and voidable contracts.
Typically, only the party who has been wronged or disadvantaged in the contract formation (e.g., due to fraud, misrepresentation, or duress) has the right to void a voidable contract. The other party is usually bound by the terms unless the affected party chooses to void it. For instance, if a real estate contractor refuses to allocate your property, the original contract can be voidable.
It means it’s not valid from the start, and it could be illegal or not to respect all the elements that make contracts valid. Don’t let your business suffer from conflicting terms and invalid contracts. Use legally verified contract templates from reputable sources like Drafted Legal. Most of the time, you can get away with a vetted legal contract template, especially for standard contracts such as employment agreements, non-disclosure agreements, or lease agreements. A party may contest to void a contract due to some defect or lack of legal capacity when entering into the contract. For example, if one party was under duress or induced by fraud into signing the contract, they may have grounds to void it.
Void vs voidable contract: Similarities and differences
With Enty by your side, you’ll not only avoid missteps but turn agreements into opportunities for growth. Entering into a void contract can lead to automatic cancellation of the contract, while a voidable contract offers an opportunity for correction or cancellation. If you’re unsure of the enforceability of your contract or want help negotiating a contract, you should speak to a legal expert.
Always seek legal advice before voiding a contract under these provisions. To help you understand validity, we’ll compare the following terms — viable, void, and voidable. If you can’t fulfill the end of your contract for any reason, you should contact the other party or parties involved and let them know your reasons. Sometimes, the court may allow parts of the contract to be rewritten instead of voided. For example, in a case involving a breach of contract, the non-defaulting party often must choose between a remedy at law and an equitable remedy.
Root cause of invalidity
Navigating the domain of contracts can feel like stepping into a Quentin Tarantino movie without void vs voidable contract context—who’s trustworthy, who’s not, and what’s the intended plot twist? Much like deciphering the motives of your favorite movie villains, comprehending contracts is crucial for your business survival. They define agreements, set obligations, and ensure that Tom from accounting doesn’t run off with the office coffee machine (or worse, company funds).
What is Void Agreement?
- Understanding the differences between void and voidable contracts is crucial for individuals and businesses when entering into agreements.
- Such contracts can lead to legal disputes, as the wronged party may choose to void the agreement and seek damages.
- This contract is voidable at the business owner’s discretion because they entered into the agreement under duress.
- If the contract is voided, the innocent party is typically entitled to be restored to their original position before entering into the contract.
For instance, returning a defective product after uncovering fraud is a common resolution. The simplest way to void a voidable contract is for both parties to mutually agree to cancel it. This is often the most practical and straightforward resolution, as it avoids lengthy legal battles and disputes. Whereas a voidable contract can still be enforceable if the party wants it to, a void contract is simply void regardless of intent of parties. This happens when the party with the right to void the contract decides to confirm and accept the terms, often after discovering any defects such as fraud or duress.
Difference Between Void Contract and Voidable Contract
- When a contract is voidable, it remains valid until the party with the power to void it exercises their right to do so.
- The legal obligations are enforceable by law.The contract can be oral or written, however oral contracts are much harder to enforce and they should be avoided.
- In most cases, parties to a contract agree to void the contract without involving the courts.
- For instance, returning a defective product after uncovering fraud is a common resolution.
A void contract is invalid or entirely against the law, so no one involved can say it’s enforceable under the law. Though void contracts and voidable contracts seem similar and are sometimes used interchangeably, they have distinct meanings. Imagine a business contract in which one party agrees to supply illegal materials. This contract is void from the start because it involves illegal activity and is therefore unenforceable. A void contract, as the name suggests, is a contract that is unenforceable from the outset. Such contracts are considered null and void – as if they never existed in the first place.
While a void contract is not valid at face value, a voidable contract is valid, but can be declared invalid at any time. Contracts are lengthy and complex documents and manual creation often leads to errors and inaccuracies that can lead to disputes and legal ramifications. Using contract automation software like Docupilot can minimize the downsides of manual contract creation, reduce costs, and streamline the contract creation process. Drawing a line between void and voidable contracts is crucial, much like knowing whether a villain has a redemption arc or not. Seek legal counsel immediately upon discovering undue influence, misrepresentation, or other voidable factors. If part of the contract has already been executed, it may still be voided, but the aggrieved party may need to offer restitution for any benefits received.
Real-World Examples of Void Contracts
A contract can become void if it involves any illegal activity, if the contract is made in such a way that it cannot be executed, or if the contract is not properly structured. An example of a void contract is a contract between a drug dealer and a buyer. In the case of a void contract, no performance is possible, whereas it is possible in a voidable contract.