Void vs. Voidable Contract Lawyers
What is the Difference between a Void versus a Voidable Contract?
When dealing with contract matters, confusion often arises as to the terms void and voidable. They may appear similar, but they are completely different ways to classify a contract.
A “void” contract is not recognized by law because the agreement cannot be enforced by either party. Technically, a void contract is a “no contract” situation- it is as if a contract was never formed, and neither party will be able to recover in the event of a breach. The contract is invalid from the beginning, even at the negotiation or signing stage. This usually involves performing a duty that is illegal or impossible to perform.
On the other hand, a “voidable” contract is a valid contract. Usually only one party is bound to the contract terms in a voidable contract. The unbound party is allowed to repudiate (cancel) the contract, at which time the contract becomes void. This typically involves situations where only one party has committed a breach.
The main difference between the two is that a void contract cannot be performed under law, whereas with a voidable contract, performance is still possible, although contract can be “voided” at the election of the unbound or non-breaching party.
What are some Examples of Void and Voidable Contracts?
Void contracts are unenforceable by law: even if one party breaches the agreement, damages cannot be recovered since basically there was no valid contract. Some examples of void contracts include:
- Contracts for illegal subject matters such as gambling, prostitution, or the execution of crimes
- Contracts made by incompetent parties who do not have the legal capacity to make decisions (such as mentally disabled persons or some minors)
- Contracts that were not supported by adequate consideration, or where the consideration was unlawful
- Contracts for the performance of impossible acts
- Contracts that are unconscionable
- Contracts that are contingent upon the occurrence of an impossible event
- Contracts involving fraud in the factum
- Contracts which restrain certain activities such as:
- Decisions on a person’s choice of marriage
- Restraint of trade or commerce
- Restraints on legal proceedings or hearing
Voidable contracts are valid agreements, but the unbound party can “elect to disaffirm” the contract. Performance will still be forthcoming for the other party. Some common examples of voidable contracts include:
- Contracts where one party was of minor age (they may elect to disaffirm the contract once they reach the age of majority; if the other party is an adult, they will usually be bound to perform)
- Contracts which were made under conditions of duress
- Contracts involving fraud in the inducement
- Contracts which where one party was incapacitated, such as situations involving intoxication or insanity
Finally, a contract is usually void due to the subject matter or the actual agreement of the contract. In contrast, voidable contracts usually present issues regarding the surrounding circumstances of the agreement, such as the conditions under which the contract was signed.
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Last Modified: 08-31-2011 02:58 PM PDT