To better understand these concepts, let’s look at real-life examples of void and voidable contracts. Furthermore, a contract without consideration—something each party gives or receives—may also be considered void. For example, if your business agrees to supply products to a supplier without any payment or benefit in return, it stands on shaky legal ground. Consideration forms the backbone of any valid contract, ensuring each party has a stake in its existence. If one party was forced into signing the contract against their will, they could contest and void the agreement later. For example, if someone threatens you with physical harm or blackmails you to sign a contract, the contract can be deemed void.
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. Later, laws change or something else changes to make fulfilling the contract impossible, beyond the capacity of imagination or the control of the involved parties. The party with the right to void a contract must act promptly upon discovering the grounds for voidability. They typically have the option to either affirm the contract and proceed with its terms or rescind it by notifying the other party of their intention to void the agreement. If a party enters into a financial contract based on fraudulent statements or misrepresentations made by the other party, the deceived party can void the contract.
Voidable contract examples
Also, if one party breaches the terms of a valid contract, the other party may be able to end the agreement and seek financial compensation for any losses caused. Financial agreements facilitating illegal activities, such as money laundering or fraud, are void because they violate the law. A party can reject a contract if they discover a defect, such as fraud, after entering into the agreement. The party disadvantaged by the defect can also decide to continue with the contract, in which case the contract remains valid. Both parties can also decide to remove the defect by modifying the contract.
A business owner signs a contract with a supplier after being threatened by a competitor to do so. This contract is voidable at the business owner’s discretion because they entered into the agreement under duress. They can choose to void the contract if they prove that their consent was not freely given. This contract is void from the beginning because the subject matter is illegal. Even if one party fails to deliver the drugs, the other cannot sue for breach of contract because the agreement itself is not enforceable. When we say a contract is void, it’s null and void and not backed by the force of law, meaning it’s unenforceable.
Void vs. Voidable Contracts Confusing? Here’s the Difference
In a void contract, remedies are nonexistent because there’s no legal standing to begin with. For example, if two parties create a contract to sell illegal goods, neither can sue the other for breach because the contract itself has no legal validity. Conversely, a voidable contract remains effective unless the aggrieved party chooses to nullify it.
Unlike a void contract, a voidable contract is legally enforceable until one party decides to void it. The key difference lies in the fact that voidable contracts are considered valid and enforceable unless and until they are voided. Understanding the differences between void and voidable contracts is crucial for individuals and businesses when entering into agreements. It is essential to ensure that contracts are valid, enforceable, and aligned with legal requirements to avoid potential disputes or legal complications. Contracts are an essential part of any legal system, providing a framework for individuals and businesses to enter into agreements. Some contracts may be deemed void or voidable, which means they lack legal enforceability or can be canceled or voided under certain circumstances.
Video: Void Contract Vs Voidable Contract
No damages are available for breach of a void contract because under the law, there was no contract to breach. In summation, the difference between a void and voidable contract comes down to enforceability. Below is a closer look at each contract and the types of situations in which they are applicable to better illustrate void vs. voidable contract.
Remedies for void contracts
- Suppose a teenager buys shares only to later realize the financial burden it brings.
- Always seek legal advice before voiding a contract under these provisions.
- Voidable contracts are legally binding on both parties until the innocent party seeks to rescind such contract.
- The choice to void or ratify the contract lies entirely with the affected party.
- For example, if two parties create a contract to sell illegal goods, neither can sue the other for breach because the contract itself has no legal validity.
- Void contracts are agreements that are not valid from the start and cannot be legally executed or enforced.
This lack of enforceability is absolute and applies to both parties involved. For example, if two businesses create a contract for an illegal activity, the law treats the agreement as though it never existed. A voidable contract is a valid agreement between two or more parties that can be legally voided or affirmed by one or more of the parties involved. Voidable contracts represent a unique category of agreements where one party retains the power to either enforce or terminate the contract. Unlike void contracts, which are inherently unenforceable, voidable contracts are considered legally valid until the disadvantaged party exercises their right to void them.
- A contract that is void cannot be enforced by either party, has no legal effect, and can be disregarded entirely without any action by the innocent party.
- The minors can enter into contracts but they can breach the terms without legal repercussions since they don’t have the legal age.
- If one party was forced into signing the contract against their will, they could contest and void the agreement later.
According to contract law, a voidable contract can be legally canceled, and there are ways to recognize such contracts before attempting to contest them in court. A voidable contract is a type of contract that can be canceled legally by either party involved. Void contracts, being legally unenforceable, have no valid legal remedies. Either participating party can amend, correct, or cancel the contract for valid legal reasons. If the contract requires one or both parties to do something illegal, it can also be deemed void. With voidable contracts covered under the law, only one party can decide whether to continue or rescind it.
Key Differences Between Voidable and Void Contracts
This misrepresentation can be intentional or unintentional, but it must be material to the contract and relied upon by the deceived party. Since you might not be a legal expert, it is always a good idea to consult a lawyer to develop a strategy for canceling a contract. If you review the contract and find misrepresentation, duress, failure to meet conditions, unconscionability, or any other defect, and can prove it, you have solid grounds for voiding it. Olga is a Senior Web Analytics Manager at PandaDoc who has been working in the Digital Marketing field for the past 15 years. Olga had roles driving marketing campaigns in document automation, contracts, invoices, and agreements. In her daily life, she is a big fan of traveling and connecting with new people.
A voidable contract is a contract a party can enforce or choose to void later. Unlike a void contract that is not enforceable no matter what, a voidable contract can either be enforced or declared void. In many jurisdictions, contracts entered into by minors void vs voidable contract (people under the age of 18) are voidable at the minor’s discretion. For example, if a minor signs a contract to purchase a car, they may later decide to void the contract, as they lacked the legal capacity to enter into the agreement. A voidable contract starts out as viable and valid but becomes invalid due to legal reasons.
Void contracts often fail to meet basic requirements for legality or enforceability, making them invalid from the outset. Voidable contracts are not inherently flawed but can present challenges depending on the circumstances. Having proper tools and guidance to identify and manage voidable agreements is essential for businesses.
Contract law can be complex which is why you want well thought and attorney drafted agreements so you don’t have to think about this. A void or voidable contract could hurt your business or personal finances, so it’s crucial to understand what they are and how they occur to prevent these issues. Companies must ensure that all contracts they enter into are legally valid and enforceable. Void contracts can result in wasted time and resources, as the business cannot enforce the terms or seek legal remedies.