Differences Between Void & Voidable Contracts & Agreements

Introduction

Legal agreements and contracts play a fundamental role in the world of business and personal relationships. These documents help establish the terms, rights, and obligations of the parties involved. However, not all agreements and contracts are created equal. Some are considered void, while others are voidable. Understanding the difference between void and voidable agreements and contracts is crucial for anyone entering into legal arrangements.

Void Agreements and Contracts

A void agreement or contract is one that is fundamentally unenforceable from the outset due to its inherent flaws or legal invalidity. These agreements lack the basic elements required for a legally binding contract. Key factors that render an agreement or contract void include:

1. Lack of Legal Capacity: If one or more parties to the agreement lack the legal capacity to contract (e.g., minors, mentally incapacitated individuals), the contract is considered void.
2. Illegality: Agreements that involve illegal activities or go against public policy are void. For example, contracts for illegal drugs or activities that promote discrimination or harm are void.
3. Uncertainty: Agreements that are so vague or uncertain that their terms cannot be determined with reasonable certainty are void. A contract must have clear terms for it to be enforceable.
4. Impossibility: If the performance of the contract is impossible or becomes impossible due to unforeseen circumstances, the contract may be declared void.
5. Mistake: If both parties are mistaken about a fundamental element of the contract, such as the subject matter or price, the contract can be voided.
   
   

Void Agreement

A void agreement is one that is inherently invalid and cannot be enforced by law from the beginning. It lacks the essential elements required for a valid contract and is considered null and void. The parties involved are not bound by any of its terms. Common reasons for an agreement to be void include a lack of legal capacity, illegality, uncertainty, impossibility, mistake, or a combination of these factors. Courts will not enforce a void agreement, and it is treated as if it never existed in the eyes of the law.

Voidable Agreement

A voidable agreement, on the other hand, is initially valid and enforceable, but due to certain defects, one party has the option to either affirm the contract or void it. While the contract is valid until it is voided, the party with the power to void it has the choice to proceed with the agreement or cancel it based on specific circumstances. Grounds for a voidable agreement include coercion, undue influence, fraud, misrepresentation, lack of free consent, or other factors that affect the voluntariness of one of the parties. Until the right to void is exercised, the contract remains in force. If the injured party chooses to void it, the contract becomes unenforceable.

Key Differences

The following are some of the key differences between void and voidable agreements;

1. Inherent Validity: Void agreements are invalid from the beginning, while voidable agreements start as valid but can be invalidated under certain conditions.
2. Enforceability: Void agreements cannot be enforced at any point, whereas voidable agreements are enforceable until the right to void is exercised.
3. Initiator of Action: In void agreements, the lack of validity is apparent from the start, whereas in voidable agreements, the party with the option to void must take action to do so.
   
   

Void Contracts

A void contract is one that is inherently invalid from the beginning and lacks the essential elements necessary for a legally binding agreement. Void contracts are unenforceable, and the parties involved are not bound by any of its terms. The court will not recognize or uphold the contract. Common reasons for a contract to be void include a lack of legal capacity, illegality, uncertainty, impossibility, mistake, or a combination of these factors. A void contract is treated as if it never existed, and any actions or obligations arising from it are considered null and void.

Voidable Contracts

In contrast, a voidable contract is initially valid and enforceable, but due to certain defects or circumstances, one party has the option to either affirm the contract or void it. Until the right to void is exercised, a voidable contract is legally binding and enforceable. The party with the power to void can choose to proceed with the contract or render it unenforceable.

Grounds for a contract to be voidable include coercion, undue influence, fraud, misrepresentation, lack of free consent, or other factors that affect the voluntariness of one of the parties. If the party with the right to void decides to exercise that right, the contract becomes voidable, and it is treated as if it were never valid. The other party may lose the right to enforce the contract.

Key Differences

The following are some of the key differences between void and voidable contract;

1. Initiation of Action: Void contracts are inherently invalid and do not require any action to be taken for their nullification. Voidable contracts, however, require the party with the right to void to take specific actions to render the contract unenforceable.
2. Enforceability During Existence: Void contracts lack enforceability throughout their existence, while voidable contracts are enforceable until the right to void is exercised.
3. Legal Status: Void contracts are considered null and void ab initio (from the beginning), whereas voidable contracts are valid until an action is taken to make them void.
   
   

Conclusion

Understanding the distinction between void and voidable agreements and contracts is crucial for individuals and businesses engaging in legal relationships. While void agreements are fundamentally unenforceable due to inherent defects, voidable agreements are initially valid but may be voided if certain grounds are met. Legal guidance is often necessary to navigate the complexities of contracts, ensuring that one's rights and obligations are protected. For more information related to void and voidable agreements and contracts, it is recommended to consult a corporate lawyer in India.