Contracts are fundamental to every business, and they form the foundation for a successful business operation. In most cases, contracts are legally binding, which means that if any of the parties breach the terms of the accord, they are legally accountable. The law recognizes two types of contracts, void and voidable contracts, which are distinct in nature. In this article, we will explain the differences as well as the similarities between a void and voidable contract.
First, let us define what a void contract is. A void contract is an agreement between two parties that has no legal effect and cannot be enforced by a court of law. The contract is deemed to be null and void, which means that it never existed in the first place. Void contracts are usually created when the agreement itself is in contravention of the law, public policy, or the agreement lacks essential elements such as consideration or capacity.
On the other hand, a voidable contract is an agreement between two parties that can be enforced, but the aggrieved party has the option to void or cancel it. The contract may be voided if it was entered into under duress, undue influence, misrepresentation, or fraud. Voidable contracts are valid until they are canceled by the aggrieved party.
Differences between Void and Voidable Contracts
The primary difference between void and voidable contracts is that a void contract is considered null and void, while a voidable contract is valid until it is canceled. A void contract is so fundamentally flawed that it is not legally enforceable, while a voidable contract is generally enforceable until one of the parties exercises their right to cancel it. Void contracts cannot be ratified, while voidable contracts can be ratified if the party chooses to do so.
Another difference is that void contracts do not create any legal obligations. This means that neither party has any legal duty to perform under the contract. In contrast, voidable contracts create legal obligations for the parties involved.
Similarities between Void and Voidable Contracts
Both void and voidable contracts are created when there is an agreement between two parties. The two types of contracts require an offer, acceptance, and consideration. They are also both governed by the principles of contract law and are subject to the same legal requirements.
Conclusion
In conclusion, while both void and voidable contracts share some similarities, they differ in fundamental ways. A void contract lacks legal effect from the outset, while a voidable contract is valid until one of the parties cancels it. A void contract creates no legal obligation for the parties involved, while a voidable contract does. As a business owner, it is essential to know these differences to avoid entering into contracts that could be void or voidable.