When Is a Contract Considered Void or Voidable?

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 What is a Contract?

A contract is an oral or written agreement between two or more parties that creates mutual legal obligations between the parties. To be valid and enforceable, a contract must include:

  • An offer (e.g., “I offer you $150,000 for your house”)
  • An acceptance of the offer presented (e.g., “I accept your offer of $150,000 for my house”)
  • A promise on each side to perform their contractual duties (“I will pay you the money” and “I will sell you the house”)
  • Valuable consideration from each party. “Consideration” means something each party will either give up or do. For example, in a contract to buy a car, the buyer’s consideration is the money for the car, and the seller’s consideration is turning over ownership of the car

In addition to these clauses, most contracts also contain the following provisions:

  • A date or time when the performance must be made (“Closing will be within 20 days of the signing of the sales contract”)
  • Terms and conditions for the performance (“Payment must be by certified check or money order”)
  • Performance – the parties exchange the money for the house

Based on a law called the statute of frauds, some contracts must be in writing, or the court will not enforce them. Examples of such contracts include:

  1. Any contract for the sale or transfer of land
  2. Any contract involving the sale of more than $500 worth of goods
  3. A contract promising to pay someone else’s debts
  4. A contract where performance cannot be completed within one year
  5. Any marriage contract
  6. A contract where an executor of an estate agrees to pay off the debts of the estate personally.

What Is the Difference Between Void and Voidable? When Is a Contract Considered Void or Voidable?

“void” and “voidable” are often mistakenly used interchangeably. Although these terms may seem similar, they are quite different.

A contract held to be void cannot be enforced by either party. An example of a void contract would be a contract requiring one party to perform an act that is either impossible or illegal. Such a contract is considered “void on its face.” Nothing has to be done to render such a contract unenforceable – if there is any attempt to enforce it, it is treated by the law as though it simply never existed. The contract is voided as written and cannot be changed or amended. No damages are available for breach of a void contract because under the law, there was no contract to breach.

Some examples of void contracts include:

  • Contracts involving an illegal subject matter, such as drug dealing, illegal gambling, or committing a crime
  • Contracts which are entered into by someone not mentally competent, such as people with severe mental illness
  • Contracts that require an impossible performance or the performance is dependent on an impossible event happening
  • Contracts that are against public policy
  • Contracts that restrain certain activities, such as the freedom to choose whom to marry

A voidable contract is a valid contract that can still be enforced. However, in a voidable contract, one of the parties has the right to cancel the contract. Some examples of voidable contracts include:

  • Contracts were entered into when one party was a minor. The minor can void the contract, but the other party does not. Since they are considered an innocent victim, the minor does not have to perform their obligations under the contract if they do not want to.
  • Instances where one party was forced or tricked into entering the contract
  • At the time they entered into the contract, one party was incapacitated in some way, such as drunk or high, or insane or delusional

Sometimes, the court may allow parts of the contract to be rewritten instead of voided. Legal remedies will vary, depending on the circumstances of the contract, but will be ordered in the amount needed to put the plaintiff back in the case they were in before entering into the contract.

What Steps Must I Take if I Need to Void a Contract?

Generally speaking, whether a contract is void or voidable, the process is the same. It is necessary to file a request with the court to have the contract reviewed. This will help the court determine whether the contract is void or simply voidable and what other remedies could be available. An example of this would be how a damages award may be available for extra losses caused by a breach of contract, but only in specific circumstances.

If you find yourself needing to have a contract voided, you should refer to your copy of the contract, as well as any other important documents from the contract formation process. Additionally, you should keep records of receipts, bills, and other documents proving any losses you have incurred as a direct result of being involved with the contract in case you are entitled to monetary damages.

In court, the process of having a contract voided generally follows these steps:

  • A judge will review the contract for terms or factors that may cause it to be invalid
  • The judge will look for any other legal reason as to why the contract should be void, such as duress at the time of signing.
  • The judge will review any collection of documents and information supporting that reason.
  • A determination will be made as to whether an entirely new contract is needed or if, instead, portions of the contract should be rewritten. Alternatively, the contract may be abandoned altogether.

Each state maintains different laws regarding contracts, business matters, and commerce regulation. This is because each state has different commercial needs. It is a good idea to consult with a qualified local contract lawyer about this complex contract issue. A local lawyer will know just what is needed to get the result you desire.

Note that death does not void all contracts. The death of a party to the contract does void certain contracts, but not all. Some examples of contracts that may still be valid after the death of a party include:

  • Conditions of a Decedent’s Will: If a donation to be paid overtime is outlined, this creates a contract. In this contract, the estate must continue making the donations, even after the individual’s death and
  • Joint Contract: The most common example of this would be where two individuals, such as a married couple, have a mortgage on a home. When one spouse dies, the living spouse must continue making mortgage payments.

Do I Need a Lawyer for Assistance With Void or Voidable Contracts?

If you are involved in a contract dispute and need to know if the contract is void or voidable, you should consult a local contract lawyer. In the case of a dispute, an attorney is in the best position to advise you about the strengths and weaknesses of each party’s position. Your attorney can also represent you in negotiations, mediation, arbitration, and court if it comes to that.

An even better idea is to consult with a contract attorney before entering into the contract. An attorney can review the terms of the contract to ensure they are in your best interests and advise you against signing anything that could be unenforceable later on.

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