The term contract refers to an agreement between two private parties which creates mutual legal obligations. A contract can be either oral or written, although oral contracts are more challenging to enforce. There are specific types of contract agreements which must be in writing in order to be legally enforceable. An example of this would be contracts involving a significant amount of money, generally over $500. It is imperative to understand the rules governing contracts in order to ensure that your contract is legally valid.
Regarding contracts, the terms void and voidable are often used interchangeably and confused for each other. Although these two contract types seem similar, they are actually completely different. The biggest difference between the two is that a void contract cannot be performed under the law, while a voidable contract can still be performed. However, the unbound party to the contract can choose to void the contract before the other party performs.
To further distinguish between the two terms, a contract that is void cannot be enforced by either party. The law treats a void contract as if it had never been formed. An example of when a contract will be considered void is when it requires one party to perform an act that is impossible, or illegal.
Alternatively, a voidable contract is a valid contract and can be enforced. Generally speaking, only one party is bound to the contract terms in a voidable contract. The unbound party is allowed to cancel the contract, which renders the contract void.
What Are the Required Elements for a Legally Valid Contract?
All valid contracts must include the following elements in order to be legally enforced:
- An offer, such as one party paying $1,000 to another party for 1,000 items;
- An acceptance of the offer presented, such as the other person accepts $1,000 for 1,000 items;
- A promise to perform, meaning, the other person says they will perform;
- A valuable consideration, or $1,000 in this ongoing example;
- A time or an event in which the performance must be made, such as 1,000 items exactly two weeks from the specified date;
- Terms and conditions for the performance, such as the items must be a specific flavor and specific coloring; and
- Performance of the agreed terms, which in this case is the 1,000 items are delivered, and the person is paid $1,000.
To clarify, there are five elements that are required for any contract. First, the contract must have a legal purpose and cannot be used for illegal purposes. An example of this would be contracting to commit a crime, such as hiring a hitman.
Second, there must be a mutual agreement between the parties. This is also referred to as the meeting of the minds. One party must have offered an offer to another party for acceptance. An example of this would be a signing of a contract which shows that there is a mutual agreement among the parties, and everyone is on the same page.
Some offers may not have an expiration period, in which case the offer remains open for a “reasonable” amount of time. Offers can also be revoked until the acceptance occurs. Acceptance generally refers to agreeing to the terms of the offer, and if there is any change to the terms in the acceptance, it would be considered a counteroffer.
The third element, consideration, is crucial in order for the contract to be valid. Consideration refers to when both parties agree to provide something of value in exchange for a benefit. Consideration can be a car, money, or even manual labor. Whatever it is, it has to be something of actual value.
There is also a distinct difference between gifts and promises. An example of this would be if someone gifts a handbag, it is not considered a contract. However, a contract exists when the handbag is being exchanged for completing a task promised by the other party.
Fourth, the parties must be legally competent. Minors and those who are mentally impaired cannot validly contract. Additionally, the party must be of a sound mind while contracting, and without the influence of drugs or alcohol. Finally, all parties must come to an agreement based on their own will. Contracts will be void if there is a mistake, duress, or fraud by one or more parties.
What Are Some Examples of Void and Voidable Contracts?
A void contract is considered to be unenforceable by law. Even if one party breaches the contract, the nonbreaching party cannot recover anything due to the fact that there was, essentially, no valid contract. This can happen for several reasons, such as:
- The contract required one party to perform acts that are impossible or depend on impossible events;
- The contract is against public policy determinations;
- The subject matter of the contract involves illegal matters such as drug dealing, gambling, and other types of crimes; and/or
- The contract unreasonably restricts rights and activities, such as the right to work, or a person’s right to marry someone of their own choosing.
Voidable contracts are valid agreements. However, one or both of the parties to the contract may void the agreement at any point in time. Factors that might make a contract voidable, as in not immediately void, often include:
- Agreements in which one party is still a minor;
- Contracts involving fraud, deceit, or other forms of trickery; or
- Contracts made when one party was drunk, incapacitated, or not of legally sound mind to form a contract.
What If I Need to Void a Contract?
No matter if a contract is void or voidable, it is generally necessary to file a request with the court to have the contract reviewed and analyzed. This will assist in determining whether the contract is void, or simply voidable, and what other remedies might be available. An example of this would be how a damages award may be available in some cases for extra losses caused by a breach of contract.
If you find that you need to void a contract legally, some steps you should take could include:
- Reviewing the contract in order to understand which terms or factors might be rendering the contract invalid;
- Determining the basic reason why the contract should be void, such as if the contract was formed when the other party was drunk;
- Begin collecting relevant documents and information that can help support your reasoning for voiding the contract; and
- Begin thinking about whether a new contract must be formed, or if you simply wish to abandon the agreement efforts altogether.
You should maintain copies of the contract, as well as any other documents that were instrumental in the contract formation process. Keep records of receipts, bills, and any other documentation showing any losses that you have incurred because of the contract. Such documentation will assist in providing evidence and support during any trials or hearings.
It is important to note that each state may have slightly differing laws in terms of contracts and other business matters. This is due to the fact that each state has different laws responsible for the regulation of commerce, and each state has unique commercial needs. If you choose to void a contract, neither party will be able to benefit from any exchange that would have occurred through the contract.
Do I Need a Lawyer If I Have a Void or Voidable Contract?
If you are going to be entering into a contract, or if you believe you have a void or voidable contract, you should consult with a skilled and knowledgeable contract lawyer. An experienced attorney that specializes in contract law can assist you in contract drafting.
An attorney can also assess your current contracts and determine whether they may be void or voidable. Additionally, a business attorney will also be able to represent you in court as needed should any issues arise.