Contracts are essential in business transactions, and it`s important to understand the types of contracts that exist. Two types of contracts that may seem similar, but have contrasting implications are voidable and void contracts. In this article, we`ll explore the difference between these two types of contracts.
Voidable Contracts
A voidable contract is a contract that is legally binding but can be voided or canceled at the discretion of one or both parties involved. This type of contract is valid and enforceable until it is voided. Voidable contracts typically occur when one party has an option to cancel the contract due to a legal defect or lack of capacity.
For instance, a contract signed under duress or in a state of intoxication is voidable because the person signing was unable to offer proper consent. In most cases, voidable contracts also have a time limit for cancellation. If the affected party decides not to void the contract within the specified timeframe, the contract becomes legally binding, and both parties have to fulfill their obligations.
Void Contracts
Void contracts are contracts that are unenforceable under the law. This means that the contract has no legal effect from the outset. A void contract cannot be enforced by either party because it was affected by a legal defect at the time of formation. Some of the reasons that can make a contract void include:
– The contract was not legally formed or was not done in the right format.
– The subject matter of the contract is not lawful, such as a contract for the purchase of illegal drugs.
– One or both parties lacked the legal capacity to enter into the agreement, such as a minor.
In summary, void contracts lack the legal force to bind parties, and any obligation arising from the contract remains unenforceable. It is worth noting that a void contract cannot be ratified, meaning that the parties cannot agree to uphold its terms later.
Conclusion
In conclusion, voidable and void contracts have contrasting implications, and it`s necessary to understand the difference between them. Voidable contracts are legally binding until canceled by one or both parties, while void contracts have no legal effect and are unenforceable from the start. As a business, it`s crucial to ensure that all contracts comply with the law to avoid any disputes that may arise from legal defects.