Void vs Voidable Contract
The legal status of Void and Voidable Contract is what makes the difference between them. The terms void and voidable are commonly heard and used in relation to contracts. Common tendency is to equate the two terms primarily due to the fact that they look and sound similar. However, this is inaccurate, as the two terms have entirely different meanings. Perhaps a basic distinction is necessary at this point. Think of a Void Contract as a contract that is entirely illegal and cannot be made valid at any point. A Voidable Contract, on the other hand, is a legal contract but may be avoided or cancelled later on by one of the parties to the contract.
What is a Void Contract?
The term Void is defined as something that is null and completely without legal force or binding effect. Therefore, a Void Contract is a contract that is null and without legal effect. This means that the contract is unenforceable by law and such a contract cannot be enforced by any of the parties to the contract. Thus, the parties do not have the power to make such a contract legal. Sometimes such contracts are classified as Void ab initio. This means that the contract was void from the beginning. Legally, Void Contracts are treated as though they never existed or were never created. If there is a breach of contract one party cannot file an action against the breaching party primarily because there was no contract to begin with, or rather, the contract was void from the outset. There are many instances or situations that render a contract void.
A contract involving illegal activity such as drugs, gambling, and prostitution, or contracts involving the performance of an illegal act (committing a crime), constitute Void Contracts. If a contract is entered into by persons who are mentally incompetent or lack the capacity to contract; for example, minors (those under the age of majority) or mentally impaired persons, it will be void. Further, contracts that require the performance of some impossible act or depend upon the occurrence of an impossible event are Void Contracts. Void Contracts can also include contracts that are against public policy and those that unfairly restrain or restrict certain activities such as restricting a person from marrying, restricting trade, or legal proceedings.
What is a Voidable Contract?
A Voidable Contract, as mentioned above, is a legal contract. The term Voidable is defined as something that is not fully or completely void but may be avoided. Thus, a Voidable Contract is valid, binding and enforceable by law. It remains so until one party to the contract avoids it or declares it void. A Voidable Contract is called voidable because the contract contains some form of defect in it. If the party entitled to reject the contract chooses to cancel or revoke the contract, then the contract becomes void. However, if the same party opts not to reject the contract despite the defect, then the contract remains valid and enforceable. There are a few grounds on which a legally enforceable contract may become Voidable.
If a contract was entered into when one party was a minor, meaning that the party did not have capacity to contract, then the minor or his/her guardian can either affirm or reject the contract at any time. Contracts that are made on the grounds of fraud, misrepresentation, undue influence or duress, entitle the affected parties (victims) to cancel such contracts. Thus, contracts that were entered into based on false or misleading statements, threats, or coercion can be rejected by the party who was subjected to such conduct. Other grounds to render a contract Voidable include contracts entered into when one party was either intoxicated, or mentally impaired and thereby lacked the capacity to make the contract. Further, a Voidable Contract also includes contracts that were made on a mutual mistake of fact or non-disclosure of one or more material facts by one party.
What is the difference between Void and Voidable Contract?
• The primary distinction between a Void and Voidable Contract is that the former is illegal and invalid from its creation while the latter is a legal contract but may become invalid if one party opts to cancel or revoke the contract.
• A Void Contract is unenforceable by law and the law does not recognise its existence at any point in time. This means that the performance of a Void Contract is impossible.
• Further, a Void Contract typically refers to contracts that involve illegal activity or the performance of some illegal act, or contracts that were entered into by persons who lacked the capacity to contract (for example, minors).
• In contrast, a Voidable Contract is valid in law and enforceable by the parties to the contract. Thus, the performance of the contract is possible. Such a contract becomes Voidable only if one party chooses to reject or cancel the contract based on some defect within the contract. Such defects refer to instances where the contract was made on grounds of fraud, misrepresentation, duress or undue influence, or contracts that were made based on a mutual mistake of fact.