Difference Between Void and Voidable Contract

Introduction

Before moving to the depth discussion, it's important to understand that a void contract is invalid from the beginning, meaning it has no legal effect and cannot be enforced by either party. There are several reasons why an agreement might be considered void, such as if it involves illegal activities, is against public policy, or is entered into by a person who lacks legal capacity (such as a minor or someone who is mentally incapacitated).

On the other hand, a voidable contract is initially valid and enforceable but can be legally canceled or voided by one or both parties due to certain circumstances. For example, if one party entered into the Contract under duress, coercion, or fraud, they may be able to void the Contract.

In conclusion, it's important to note that a void contract is always considered invalid, regardless of whether or not the parties involved realize it when entering it. In contrast, a voidable contract may be initially regarded as valid and enforceable but can be voided by one or both parties under certain circumstances.

Void Contract

A "void contract" is an agreement considered unenforceable by law. This means that the parties involved in the Contract cannot legally enforce the terms of the agreement, and the Contract is deemed null and void from the beginning. Void contracts differ from voidable contracts, which can be implemented but can also be canceled by one of the parties involved.

There are various reasons why a contract may be considered void, including:

• Illegality

Let's define what we mean by a "void" contract. A void contract is not legally enforceable if the Contract never existed in the first place. And one of the main reasons an agreement might be considered void is if it involves illegal activities or goes against the law somehow.

Let's have an example to illustrate this. Say you and a friend decide to start a business selling drugs. You draw up a contract outlining the terms of your partnership, including how you'll split the profits and your roles and responsibilities.

Now, selling drugs is illegal. So, even though you have a contract, it's considered void because it involves illegal activity. And if you were to try and enforce that Contract in court, you'd be out of luck because the court can't help you with something that's against the law. Another example might be a contract requiring someone to commit a crime to fulfill its terms. Let's say you hire an assassin to take out your business rival, and you have a contract outlining the terms of the hit. That Contract is also considered void because it involves illegal activity.

Now, it's important to note that not all contracts that involve illegal activities are necessarily void. For example, if you hire a contractor to build an illegal gambling den, the agreement might not be considered void. However, if the contractor doesn't fulfill their end of the bargain, they can't exactly take you to court to enforce the Contract.

So, there you have it! Contracts that involve illegal activities or violate the law are generally considered void, meaning they're not legally enforceable. Hopefully, this helps clear things up a bit!

• Capacity

Capacity in the context of contracts refers to the legal ability of parties involved to enter into a binding agreement. This means that if one of the parties lacks the legal capacity to agree, the Contract may be considered void.

Let's take the example of a minor. In most countries, minors are not considered to have the legal capacity to enter into a contract. This means that any agreement they make, even in writing, is not binding. For instance, if a 16-year-old enters into a contract with a music store to buy a guitar, the agreement would be considered void, and the store would not be able to enforce it.

Another example could be a mentally incompetent person. If a person is deemed mentally unfit by a court of law, they may not have the legal capacity to enter into a contract. This could happen if the person has a mental illness or disability that impairs decision-making abilities. For instance, if a person with a severe mental illness agrees to sell their house to someone for a very low price, the Contract would be considered void as they could not make an informed decision.

• Misrepresentation

If one of the parties involved in the Contract has provided false information or has misled the other party, the agreement may be considered void.

• Duress

If one of the parties involved in the Contract has been forced to agree with threats or coercion, the Contract may be considered void.

• Mistake

If there has been a mistake in terms of the Contract, such as a typographical error, the agreement may be considered void.

It is important to note that a void contract cannot be enforced by either party, even if one of the parties has performed their obligations under the agreement. Any money or property exchanged under a void contract must be returned.

Regarding legality, a void contract is not legally binding and cannot be enforced by a court of law. However, if any illegal activity is involved in the agreement, the parties involved may still be subject to legal penalties.

It is important to carefully consider the terms of any contract before agreeing to ensure that it is legally binding and enforceable. Additionally, seeking legal advice can help ensure a contract is valid and protects all party's interests.

Voidable Contract

A voidable contract is initially valid and enforceable but can be legally canceled or voided by one or both parties due to certain circumstances. These circumstances can include situations where one party was under duress, coercion, or undue influence when the Contract was signed or was misled or defrauded into entering into the Contract.

For example, let's say you were looking to buy a car from a dealership, and the salesperson told you that the car had never been in an accident. Based on this information, you decided to purchase the car and signed a contract agreeing to pay the purchase price. However, after taking possession of the car, you discovered that it had been in an accident and had significant damage that had not been disclosed to you. In this case, you may be able to void the Contract due to the misrepresentation by the salesperson.

Another example of a voidable contract is entered into by a person who lacks capacity, such as a minor or mentally incapacitated. In this case, the Contract can only be voided by the party who lacked capacity, not the other party.

It's important to note that voidable contracts can be canceled or voided by either party, depending on the circumstances. However, the ability to void the Contract may be limited by certain legal requirements, such as a time limit for bringing a legal action or providing notice of the intention to void the Contract.

If you believe you may have entered into a voidable contract, speaking with a qualified legal professional who can advise you on your rights and options is important. They can help you determine whether or not you have a valid claim to void the Contract and can assist you in taking the necessary legal steps to do so if appropriate.

Key Facts About Void Contract

• A void contract is not legal from the initial phase of its making or agreement.
• A contract may be void in the case when either of the party is either a minor or a mentally-illegitimate person.
• Any contract made for the output of an illegal activity is also considered void.
• When the Contract was made based on past laws and rules of the government, but now, if the rules have changed, the agreement is also considered void in this case.
• Since the Contract is already void or not legal according to the law of the land, then, in this case, neither of the party has the right or obligations, nor can they claim anything from a court of law in case of distrust.
• Void contracts differ from voidable contracts, which are initially valid but can be voided by one of the parties due to certain reasons, such as undue influence, coercion, or fraud.
• The parties may form or plan to form a void contract in the case when they have no intention to make it legal or they have a social contract.
• A contract may be considered void if there was a mistake in conditions or terms at the time of formation.
• A contract may be void when there is an exchange of value between the parties involved.
• A party in a void contract cannot sue another party for not pertaining to the contract terms.

Key points about Voidable Contract

• Valid but can be voided: A voidable contract is initially valid, but it can be voided by one of the parties due to certain reasons such as undue influence, coercion, or fraud.
• Time limit to void: The party seeking to void the Contract must do so within a reasonable time after discovering the basis for voiding the Contract.
• Ratification: A voidable contract can be ratified, which means that the parties can agree to continue with the Contract despite its initial defect.
• Different from void Contract: A void contract is separate from a voidable contract. A void contract is not legally valid from the outset, while a voidable contract is initially valid but can be voided.
• Rescission: When a voidable contract is voided, it is rescinded, which means the parties are released from their obligations under the Contract.
• Restitution: If one party had benefited from the voidable Contract before it was voided, the other party might be entitled to reimbursement or compensation for any losses incurred.
• Duress: A contract may be voidable if one of the parties was under duress or threatened with harm when entering into the Contract.
• Minors: Contracts with minors are generally voidable by the minor, but not by the other party.
• Mental incapacity: If one of the parties lacks the mental capacity to understand the terms of the Contract at the time of entering into it, the Contract may be voidable.

Differences between Void and Voidable Contracts