Void vs Voidable: Contracts are the cornerstone of great business relationship. If you aren’t using them, you should and you should have an idea of basic contract law. These tangible agreements ensure that both parties know their rights and obligations.
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. Some contracts have flaws that could render them unenforceable. 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.
What Is a Void Contract?
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.
Several reasons could render a contract null or void, such as unfair or illegal terms, mutual mistakes, incapacity to enter a contract, etc. It’s important to remember that void contracts weren’t enforced from the beginning, meaning no party can sue for not performing their obligations under a void contract.
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.
What Makes a Contract Void?
As mentioned above, several reasons could nullify a contract. These reasons vary from jurisdiction to jurisdiction, but some of the most common include:
- Illegal Subject Matter: If the object or subject matter of the contract is against the law, then the contract will be deemed void.
- Lack of Capacity: If one party cannot enter into a legally binding contract due to age, mental incapacity, or other reasons, the contract is void.
What Is a Voidable Contract?
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.
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.
Other common grounds for voiding an enforced contract are:
- Misrepresentation of facts
- Legal incapacity
- Unconscionable terms
- Undue influence
- Mistakes in the contract
- Breach of contract
Examples of a Voidable Contract
An example is a contract signed under duress. 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. This would be rare in this circumstance but to illustrate, this could still be enforced by the party under duress.
Ratification is the process of confirming or accepting a contract that was initially voidable. Through this process, both contract parties can negotiate and agree to make changes or corrections to the contract, making it legally binding again.
The Difference Between Void and Voidable Contract
There are two primary differences between a void and voidable contract. First is the validity. Void or nullified contracts are invalid from the start, while voidable contracts are initially valid but can be later deemed void by one of the parties involved.
The second difference is the remedies. You can’t enforce void contracts at any point, and both parties are relieved from their obligations under the contract. In contrast, voidable contracts could be corrected and ratified through mutual agreement or terminated if either party chooses to void the agreement.
What Does This Mean for You?
Drafting legal documents can be tricky without proper guidance. When it’s your first time writing a legal contract from scratch, you might want to dump all your terms and limitations to cover all the bases. However, you might overlook some essential elements, such as legality and fairness, that could render your contract void or voidable.
Consulting a legal professional before drafting and signing a contract is always advisable. A lawyer can help you ensure that the terms of your agreement are fair, valid, and enforceable, protecting your interests in the long run.
Unfortunately, hiring a lawyer can be expensive. 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.
Get Legally-Verified Contracts for Your Business
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Our collection of legal templates is drafted and reviewed by legal professionals to ensure that your contracts are legally binding and enforceable. Browse our legal templates today and protect your business and clients with a vetted legal template.
PS. You can also get a business law firm to provide you customized advice.