Void vs Voidable Contract: Difference and Comparison

A void contract is inherently invalid from the beginning. It lacks legal effect, while a voidable contract is initially valid but can be declared void at the option of one of the parties due to factors such as fraud, coercion, or incapacity.

Key Takeaways

  1. A void contract is a contract that is not legally binding from the beginning and cannot be enforced by either party.
  2. A voidable contract is a contract that is binding until one party chooses to void the warranty due to a legal defect or misrepresentation.
  3. A void contract is considered invalid, while a voidable one is considered valid until voided.

Void vs Voidable Contract

A void contract is a legal agreement that has no legal effect from the beginning and therefore cannot create any rights or obligations for the parties involved. A voidable contract is a legal agreement that is initially valid and enforceable but can be voided by the parties involved.

Void vs Voidable Contract
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Void means ‘Voi ab ignition in law terms, null or void.

Void agreements are nullified from the beginning, while voidable contracts are valid and can get void later on.

A void agreement is considered valid only at the time when it was created but later can be considered invalid. In contrast, the voidable contract is considered to remain active until one of the parties calls it off or the stipulated time of the validity of a contract ends.

No parties can claim damages that occur per the void agreement, but the claim can be made in the voidable contract as they are legalized.


 

Comparison Table

FeatureVoid ContractVoidable Contract
ValidityLegally considered invalid from the outsetInitially valid, but one party can choose to cancel it
Reason for InvalidityLack of essential elements like mutual consent, capacity, lawful consideration, or legality of purposeMisrepresentation, undue influence, coercion, mistake, or incapacity
Right to EnforceNeither party can enforce the contract in courtThe innocent party (not at fault) has the right to rescind the contract
Automatic EffectAutomatically null and void, no legal obligation existsRemains valid unless the innocent party chooses to rescind
Time Limit for RescissionNo timeframe, cannot be rescindedSpecific timeframe for rescinding the contract (varies depending on jurisdiction)
ExampleContract signed by a minor for a high-interest loanContract entered into due to fraudulent misrepresentation of the property’s condition

 

What is Void Agreement?

In contract law, a void agreement is a type of agreement that lacks legal validity right from its inception, rendering it unenforceable by law. Such agreements are deemed as if they never existed, and they cannot create legal rights or obligations for the parties involved. Void agreements are considered void ab initio, meaning “from the beginning.”

Characteristics of a Void Agreement

Several factors can lead to an agreement being classified as void:

  1. Contrary to Law:
    • A void agreement may violate existing laws, whether statutory or common law. Any contract that involves illegal activities, such as committing a crime or going against public policy, is automatically void.
  2. Consideration or Object is Unlawful:
    • If the object or consideration of the agreement is illegal or against public policy, the entire agreement becomes void. For example, contracts promoting fraud, harm, or any activity deemed morally or legally wrong are void.
  3. Impossible or Uncertain Objects:
    • An agreement with an object that is impossible to perform or is vague and uncertain is considered void. The law requires that the object of an agreement must be possible and clearly defined.
  4. Agreements Restraining Legal Proceedings:
    • Agreements that attempt to restrict a party’s right to enforce legal remedies, such as seeking legal action in case of a breach, are void. However, reasonable limitations in the form of legitimate arbitration clauses are enforceable.

Examples of Void Agreements

  1. Agreements in Restraint of Marriage:
    • Contracts that prevent an individual from marrying altogether or restrict the choice of a spouse are considered void as they infringe upon a fundamental right.
  2. Agreements Restraining Trade:
    • Contracts that unreasonably restrict trade or competition are void as they are against public policy. However, reasonable restrictions may be upheld, such as non-compete clauses for a limited duration and within a specific geographical area.
  3. Agreements Based on Fraud:
    • It is considered void if an agreement is induced by fraud, misrepresentation, or undue influence. The principle is that parties should enter into contracts with genuine consent.

Legal Consequences of a Void Agreement

Since void agreements lack legal validity, they are unenforceable, and the parties cannot seek remedies through the legal system. Any benefits received under a void agreement may need to be returned. Additionally, a void agreement does not confer rights or obligations to the parties involved.

void agreement
 

What is Voidable Contract?

A voidable contract is a type of contract law agreement initially considered valid and enforceable. Still, it possesses inherent flaws or defects that give one of the parties the option to void or affirm the contract. Unlike a void contract, which is invalid from the beginning and lacks legal effect, a voidable contract is valid until the party with the option to void it chooses to do so.

Formation of a Voidable Contract

A voidable contract may arise for various reasons, including fraud, undue influence, misrepresentation, duress, or the incapacity of one party. For instance, if one party uses deceitful tactics to induce the other party to enter into the contract, the contract becomes voidable at the option of the deceived party. The party with the right to void the contract can either affirm it or declare it void.

Conditions for Voidability

  1. Misrepresentation or Fraud: If one party makes a false statement or conceals material facts intending to deceive the other party, the contract may be voidable.
  2. Undue Influence: When one party exercises excessive influence over the other, undermining their free will, the affected party may have the option to void the contract.
  3. Duress: If a party enters a contract due to coercion or threats, the contract is considered voidable.
  4. Incapacity: Contracts entered into by individuals lacking the legal capacity, such as minors or mentally incapacitated persons, are voidable.

Exercise of the Option

The party with the right to void the contract must act promptly upon discovering the grounds for voidability. The contract becomes void once the option is exercised, and both parties are released from their contractual obligations. However, if the party chooses not to void the contract after discovering the defect, the contract remains valid and enforceable.

Legal Consequences

Voidable contracts are subject to legal scrutiny, and if the option to void is properly exercised, the contract is treated as if it never existed. Restitution may be required to restore the parties to their pre-contractual positions. Courts may intervene to protect the interests of the party seeking to void the contract.

voidable contract

Main Differences Between Void and Voidable Contracts

  1. Validity:
    • Void Contract: A void contract is not valid from the beginning. It lacks legal effect, and neither party is bound by its terms. It is as if the contract never existed. Examples of void contracts include agreements that are illegal or against public policy.
    • Voidable Contract: A voidable contract is initially valid, but one party can void (cancel) the contract due to certain defects or issues. The contract is considered valid unless the party with the power to void decides to do so.
  2. Enforceability:
    • Void Contract: Since a void contract is inherently invalid, it is not enforceable by either party. The court will not recognize or enforce any rights or obligations arising from a void contract.
    • Voidable Contract: A voidable contract is enforceable unless and until the party with the power to void decides to exercise that right. The contract remains valid and enforceable if the right to void is waived or not exercised within a reasonable time.
  3. Grounds for Invalidity:
    • Void Contract: Void contracts are void due to illegality, impossibility, or a fundamental flaw that makes the contract illegal from its inception.
    • Voidable Contract: Voidable contracts may be voided for fraud, duress, undue influence, misrepresentation, mistake, or incapacity. These are defects that arise after the formation of the contract.
  4. Party’s Rights:
    • Void Contract: Both parties can treat a void contract as if it never existed. Its terms do not bind them, and any consideration given can be recoverable.
    • Voidable Contract: The party with the power to void can enforce or void the contract. If the right to void is exercised, the contract becomes void, and any consideration given may need to be returned.
  5. Timeframe for Avoidance:
    • Void Contract: A void contract can be challenged and declared void at any time, even years after its formation, because it is considered void from the beginning.
    • Voidable Contract: The party with the power to void must do so within a reasonable time or before the contract is ratified, affirmed, or third parties’ rights are affected.
References
Difference Between X and Y 18
  1. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/modlr27&section=34
  2. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/soaf72&section=12
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