Void vs voidable contracts

Void vs voidable contracts

Certain essential elements must be present before a contract is binding, including: the offer, acceptance, mutual assent consideration, capacity, legality, and other elements. Contracts are typically in writing and signed to prove all of those elements are present.

Void vs voidable contracts

Occasionally, one hears of a contract being “void” or “voidable”. What’s the difference?

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voidable contract is legal to begin with, but can later be declared by one of the parties (or in a court of law) to be no longer in effect.

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Legal flaws of a void contract

In legal terms, something that is void is legally unenforceable. A void contract is legally invalid from the moment the two parties sign it because it’s illegal or violates public policy.

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. For example, a contract where two companies agree to fix prices is void because it violates antitrust laws, and a contract to charge different prices for products depending on race or gender would be void because it would violate laws against discrimination.

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. If the contract states that the homeowner can terminate the agreement if the homeowner doesn’t get a loan from her bank to pay for the work, and the loan doesn’t come through, the homeowner could terminate or “void” the contract before any work is done.

While it may seem like void contracts and voidable contracts are the same, there are differences you need to understand. You should never try to be your own lawyer, but it’s always a good idea to learn enough law to understand the advice your lawyer gives you.

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