An agreement that fails to satisfy the essentials of a valid contract or is expressly declared ‘void’ under various sections of the Act does not constitute a valid contract. It is ‘voidable’ when one party holds the authority to make it ‘void’ due to various reasons, which are discussed subsequently. A voidable contract occurs when one of the involved parties would not have agreed to the contract originally if they had known the true nature of all of the elements of the contract prior to original acceptance. With the presentation of new knowledge, the aforementioned party has the opportunity to reject the contract after the fact. Alternatively, a contract is voidable when one or both parties were not legally capable of entering into the agreement—for example, when one party is a minor.

To conclude, a void agreement and voidable contract have distinct connotations and legal consequences. A void agreement is a dead agreement as it lacks any legal backing, whereas a voidable contract may be legally enforceable. Some kinds of agreements are declared void by law due to them being unlawful and opposed to public policy, and also to protect the life and liberty of individual persons. Not only that, but it also aims to protect persons who are vulnerable to be exploited, such as ‘minors’ and ‘lunatics’. Likewise, some ‘agreements’ are designated as ‘voidable’, to allow a party autonomy to repudiate their consent if it were caused by fraud, misrepresentation, coercion, and undue influence. For example, if a person in a position to dominate another person causes that person to execute a contract, the same can be repudiated by the dominated party.

Void Contract

The contract becomes void due to the change in any law or any government policy for the time being in force in India. Along with that, the contracts which are opposed to public policy also ceases its enforceability. Contracts with incompetent persons are also declared void like minor, persons of unsound mind, alien enemy or convict, etc. Section 2 of the Indian Contract Act, 1872 defines Void Contract as a contract that no longer remains a valid contract and cannot be enforced in the court of law.

A void vs voidable contractable contract, unlike a void contract, is a valid contract which may be either affirmed or rejected at the option of one of the parties. The unbound party may repudiate the contract, at which time the contract becomes void. The main difference between void and voidable contracts concerns when the contract becomes invalid. Whereas, a voidable contract is initially valid, but may become void later when a dispute occurs. To clarify the major differences, void contracts are invalid from the start, while voidable contracts can be canceled or kept as they are by one of the parties. Similarly, many people unlawfully induce or persuade the will of another person to enter into a contract, which becomes voidable at the option of the party whose consent was so induced.

The court ruled that the contract was vague because there was no process in place to determine how the horse would bring luck to the party. Esso Petroleum Co Ltd v. Harper’s Garage Ltd, – In this case, the Lordships struck down an exclusive dealing agreement because it extended to a period of 21 years, which was unreasonable. In holding that the doctrine applied to exclusive dealing agreements they opened up the possibility that it might be extended to every sort of contract because all contracts must involve a restraint of some sort. Agreements entered into by minors or for illegal activities may also be rendered void. Tazeen Ahmed is a first-year law student at Jamia Millia Islamia, New Delhi, inquisitive about Constitutional Law, Family Law, Corporate Law, Human Rights Law, and Criminal Law.

Meaning of Contract, Nature and Scope of Contract

The contract can also be considered void if an unlawful object or consideration is involved in the agreement. This can include the promise of sex, an illicit substance, or anything else causing one or both parties to break the law. In the simplest terms, a void contract was never legal in the first place, so it isn’t valid even if the two parties have reached mutual assent on all the other essential elements of a contract. By contrast, a voidable contract is legal to begin with, but can later be declared by one of the parties to be no longer in effect.

Voidable contracts are valid until one of the parties decides to cancel or revoke them for legal reasons. John likes the house as it is, especially the way the garage was turned into a home gym. The contract states the house should remain as it is, but Mark turns the home gym back into a garage. Now the contract is voidable, and John has the option to void the contract and cancel the deal or keep it valid and accept the new garage.

The definition of the act states that a voidable contract is enforceable by law at the option of one or more parties but not at option of the other parties. A voidable contract may be considered valid if it is not cancelled by the aggrieved party within a reasonable time. A void contract is a contract that isn’t legally enforceable, starting from the time it was created. While both a void and voidable contract are null, a void contract cannot be ratified. In a legal sense, a void contract is treated as if it was never created and becomes unenforceable in court.

Under What Circumstances Does A Contract Become Invalid?

To further clarify the difference between the two, a void contract can no longer be performed under the law, while a voidable contract can. However, the unbound party to the contract may choose to void it before the other party can perform. Such contracts would be considered “void on its face.” What this means is that the contract is voided as written, and cannot be changed or amended. Generally speaking, the court will entirely cancel such contracts.

If these prerequisites are not met then the agreement is null and void. Any contract agreement created between two parties for illegal actions is also considered a void contract. For example, a contract between an illegal drug supplier and a drug dealer is unenforceable from the onset due to the illegal nature of the agreed-upon activity. Void contracts can occur when one of the involved parties is incapable of fully comprehending the implications of the agreement. For example, a mentally impaired individual or an inebriated person may not be coherent enough to adequately grasp the parameters of the agreement, rendering it void. Furthermore, agreements entered into by minors may be considered void; however, some contracts involving minors that have acquired the consent of a parent or guardian may be enforceable.

If there has been prior performance before the contract has been deemed invalid, the return of goods, payment or relevant compensation will need to be made. Subject matter of the contract involves an unlawful consideration, goes against public policy or is illegal. An invalid contract is unenforceable and can either be void or voidable depending on the cause of invalidity. While a contract may not be void at the time of its creation, it may become void due to other circumstances. New laws may be enacted that render a contract null and void instantly. Furthermore, information that was previously unknown to the contracting parties can render the contract unenforceable.

Written and Verbal

Essentially, the parties will walk away as if the contract never existed. If a contract is voidable, however, this means that one or both of the parties have an opportunity to void the contract. For example, if the court indicates that the contract is voidable by either party, the parties in the contract can choose to either void the contract or continue with the agreement and perform under the agreement. If one of the parties chooses to void the contract, but the other party doesn’t, then the contract will still be deemed void. The terms “void” and “voidable” contracts are often used interchangeably but are completely different in nature. While a void contract is completely unenforceable by law, a voidable contract is a valid agreement.

Lastly, the parties must have legal capacity to enter the contract. Legal capacity means that the parties must be at least 18 years of age, mentally competent, and not under the influence of alcohol or drugs when having signed the contract. Also due to the criminal aspects of illegal contracts, they are punishable under the law.

A voidable contract is a contract where breaches exist that can render the contract invalid. If it is believed that a contract was not made in good faith, it is up to the aggrieved party to decide if it is good and valid and therefore enforceable. A voidable contract will remain valid unto the point that it is declared void once a breach has been determined. A contract that is voidable sort of works the same way, but there is an option for the parties to enforce the terms even though an element is missing, or some other issue exists with the terms. In a voidable contract, one of the parties is legally bound to honor the contract. So, a voidable contract can be executed, even though there is an element missing, if the party not legally bound agrees to move forward.

Alternatively, you may decide to consult with a contract attorney prior to entering into a contract. An attorney can review the terms of the contract to ensure they are in your best interests, and advise you against signing anything that could be unenforceable later on. An experienced and local contract attorney will be best suited to understanding your state’s laws regarding the matter, and how that may affect your case moving forward. If you find yourself needing to have a contract voided, you should refer to your copy of the contract, as well as any other important documents from the contract formation process.

A contract is an enforceable agreement in which the parties seek legal backing and certain regulations are laid down that need to be followed. Examples of a void contract include contracts where the parties agree to do something illegal, like committing a crime, or otherwise against the law even if the thing agreed upon isn’t a crime. Normally, a void agreement or contract does not give rise to compensation.

This can be understood through the illustration- ‘A and B ran the same type of business in the same Calcutta neighborhood. B agreed to pay A a certain sum if A closed his business in that area. After closing his business, A filed a lawsuit against B to recover the promised amount.

• The better explanation including examples are unquestionable on the subject matters….
• Generally speaking, only one party is bound to the contract terms contained within a voidable contract.
• The word void means something isn’t valid and it isn’t legally binding.
• While both a void and voidable contract are null, a void contract cannot be ratified.

Voidable contracts differ from void contracts in that they can be carried out legally if both parties wish to do so. A contract that’s legal when it was written and signed can later become void if the law or other circumstances change. For example, let’s say a homeowner and a general contractor sign an agreement to have the contractor remodel the homeowner’s house. Avoid void contracts by collecting e-signatures online with Jotform Sign. Void contracts give no option to both parties while voidable contracts give options to one of the parties.

Voidable Contract is the contract which can be enforceable only at the option of one of the two parties to the contract. In this type of contract, one party is legally authorized to make a decision to perform or not to perform his part. The right may arise because the consent of the concerned party is influenced by coercion, undue influence, fraud or misrepresentation, etc. While the parties might properly have an offer, acceptance, and consideration, this doesn’t necessarily mean that the contract is valid at this point. The parties must have entered into the contract voluntarily and without threat, force, or coercion.

She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. Voidable means it COULD be void, and it also means one of the parties has the option to void it or keep it as it is. The simplest way to void a contract is for both parties to agree that voiding is the best option. As a member, you’ll also get unlimited access to over 88,000 lessons in math, English, science, history, and more. Plus, get practice tests, quizzes, and personalized coaching to help you succeed.

Metropolitan Water Board v Dick Kerr & Co Ltd – a firm was given the task of building a water tank within 6 months. While it was being built, an order was passed by the military that the work needed to be stopped. The Court said that, in the contract, the term “within 6 months” was important.

A voidable contract binds one party and the other party has the option to change their mind. The party that isn’t bound by the contract has the control in this type of contract. A mutual mistake on the part of both parties to a contract makes it voidable. If one or more pieces of material information are omitted from the contract, that also makes it voidable.

If there were no such provision, it would lead to gross injustice and unfairness. Hence, any contract formed inadvertently, involuntarily, or by illegal means is unenforceable in a court of law. The terms void and voidable are frequently misunderstood and used interchangeably. While there are some parallels between void and voidable contracts, there are significant distinctions that must be understood. This article aims to highlight other significant differences and define the kinds of contracts which are void, and those which are voidable.

• This could be done with regard to certain provisions of the contract that might otherwise be unfair to one of the parties.
• He afterward entered into an agreement with another manufacturer of guns and ammunition and the company brought an action to restrain him.
• If the contract were brought to court, the contract would be illegal and unenforceable.
• Within 24 hours experienced local lawyers review it and evaluate if you have a solid case.

Additionally, you should keep records of receipts, bills, and other documents proving any losses that you have incurred as a direct result of being involved with the contract. The terms “void” and “voidable” are often confused for each other, or used interchangeably. Although these two types of contract seem similar, they are quite different. Not all contracts are voidable; legal precedent must exist to absolve responsibility.

A contract that restricts a party’s right to a legal remedy or limits the amount of time a right can be enforced in a court of law is void. The only exception is that the parties may include an arbitration clause to send existing or future conflicts to arbitration. According to Section 27, any agreement prohibiting anybody from engaging in a lawful profession, trade, or business of any type is null and void to that extent.