Understand the key differences between voidable and void contracts. This includes their legal implications and how they affect the enforceability of agreements. 5 min read updated on September 04, 2024
A void contract is illegal and unenforceable, while a voidable contract is legal and can be enforced. There is a lot more nuance to the differences between these types of contracts, and we will explore them in depth in this article.
The difference between void and voidable contracts is that a void contract is illegal and unenforceable, while a voidable contract is legal, and the parties can enforce it.
A void contract is invalid or entirely against the law, so no one involved can say it's enforceable under the law. Voidable contracts are valid and legally enforceable.
A voidable contract binds one party, while the other party can choose to continue enforcing the contract or rescind it. This means they can cancel the contract anytime they want — the party that isn't bound by the contract has control over it.
In contract law, a bilateral mistake occurs when both parties misunderstand some of the contract’s terms, making the contract potentially voidable. An example would be if material information is omitted from the contract so neither party was aware of it.
A contract involving a minor is another example of what is typically a voidable agreement. Minors can enter contracts, but if they decide to breach the contract terms, no legal action can be taken against them. This makes minors unbound parties in the contract.
Another example of an unbound party in a contract is someone who's either under the influence or not mentally capable of entering into a contractual agreement.
The word void means something isn't valid or legally binding. When we say a contract is void, it's null and void and not backed by the force of law, meaning it’s unenforceable.
If anyone breaches an unenforceable contract, the other party to the contract has no legal recourse against them.
A contract can be valid when formed and later become void. This happens when the contract fulfills all the necessary conditions of a valid contract when it's formed.
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. At that time, it becomes void.
Both void contracts and voidable contracts are forms of legal contracts. However, they have several important differences.
The necessary elements to establish a valid contract are:
A void contract is invalid from the very beginning because it regards an illegal act, including a lack of any of the above elements. Conversely, a voidable contract becomes invalid when one party cancels it for legal reasons.
A void contract can't be made into a valid one by two parties agreeing to the contract because you can't legally agree to do something illegal.
However, a voidable contract can be made valid by the party who isn't bound if they agree to give up the right to rescind the contract.
A voidable contract is legal and valid until canceled or revoked.
However, a void contract can't be enforced legally—no law supports a void contract as valid. Neither obligations nor rights are associated with a void contract.
When a contract is no longer enforceable, it becomes void. When a tactic like coercion, misrepresentation, or fraud is used in establishing a contract, it becomes voidable.
With voidable contracts covered under the law, only one party can decide whether to continue or rescind it.
Legal liability can't be assessed on either party to the contract if it's void, but the voidable contract is upheld until the party with the option to rescind chooses to do so.
When a contract is ruled null and void, the court treats it as if it never existed. When a contract is ruled voidable, it can become void based on the conditions in place when it was formed.
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.
Void contracts, being legally unenforceable, have no valid legal remedies.
However, several different remedies exist for voidable contracts. The appropriate options vary depending on the contract's enforceability, the extent of the breach of contract, and many other factors.
Restitution means restoring the parties to their pre-contractual position. It aims to prevent unjust enrichment.
According to the old legal principle that ‘no man may profit from his own wrong,’ when a contract is rendered voidable, neither party can benefit at the expense of the other.
This remedy orders the party concerned to perform specific contractual obligations.
Specific performance is often used in real estate cases, where damages would not adequately remedy the breach.
It can oblige a buyer to follow through with a purchase if they want to withdraw after the terms and conditions of the contract have already been signed.
Reformation in contract law is an equitable remedy that amends the contract to give effect to the parties' true intentions. It is an alternative to equitable remedies, including monetary damages.
For example, in a case involving a breach of contract, the non-defaulting party often must choose between a remedy at law and an equitable remedy.
If a voidable contract is breached before being rescinded, the injured party may claim compensatory damages (i.e., losses due to the breach). This would help the injured party return to its position if the contract had been performed as agreed.
Navigating contract law is a difficult process without expert legal guidance.
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