Difference Between Void and Voidable Contract – A contract happens to be the backbone of any legal agreement or transaction. One can ensure that each party by the contract is bound by a set of obligations as well as rights. However, all contracts are not enforceable. Of all the types of contracts, two that might work to affect the validity of an agreement are void and voidable contracts. A party dealing with legal agreements must understand the difference between a void and voidable contract, which dictates whether the contract is enforceable or not, and also, the rights of the parties dealing.
In this blog, we will look at the meaning and characteristic features of both void and voidable contracts, as well as points of differences associated with both contracts, which should be relevant to the world of law.
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What is a Void Contract?
A void contract is one that is not enforceable legally in the very first stage of the contract. Such a contract has inadequate fundamentals of a valid contract. It lacks its legality, consideration, or mutual assent, and thus it becomes non-binding in nature. Void contracts are null and void from the very beginning of the contract. It has no legal implication, and neither party is liable for implementing the terms of such a contract.
Features of Void Contracts
Lack of Legality: A void contract often contravenes public policy or the parties involved will be doing something illegal as such a contract is void.
Lacks Legal Obligations: In the case of an unenforceable contract, neither party can legally enforce any obligations against the other.
Cannot Be Rectified: A void contract cannot be rectified or become binding by either of the parties' consent.
No Remedy: In case of a void contract, generally, the parties cannot claim any kind of remedy or compensation for the loss suffered by the failure of the contract.
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What is a Voidable Contract?
A voidable contract, though initially valid and enforceable, is one that later on can be declared void at the option of one of the parties. Such a contract may be made voidable by the party having such power to fulfill any condition, like fraud, misrepresentation, coercion, or undue influence. It remains valid and binding until the party exercises his right to void the contract.
Features of Voidable Contracts
Option to Void: A voidable contract is valid until the wronged party elects to void it.
Legal Obligation: The contract places legal obligations on parties as long as it has not been voided.
Enforceability: It is enforceable in courts unless the party with the right to void it exercises that option.
Compensation Available: If a voidable contract has been annulled because one party acted wrongly, the other party may claim compensation.
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Key Differences Between Void and Voidable Contracts
It is important to know about the distinction between these two types of contracts to determine the rights and obligations of the parties involved. For your convenience, the following are the key differences between void and voidable contracts:
1. Definition
Void Contract: A contract not capable by law and is void ab initio
Voidable Contract: A contract initially valid but can be made void at the option of a party to it
2. Enforceability
Void Contract: It is not enforceable in a court of law as it lacks the basic constituents of a valid contract.
Voidable Contract: The contract is enforceable unless the party to whom damages are awarded chooses to void the contract.
3. Legal Effect
Void Contract: The parties are not bound by its terms and it has no legal effect .
Voidable Contract: A contract is legally binding and fully effective until the party entitled to void it does so.
4. Creation
Void Contract: The essential elements like consent, legality, or consideration do not exist from the very beginning of a contract.
Voidable Contract: A voidable contract is valid at first but then becomes void. This can be because of false representations, coercion, fraud, etc.
5. Examples
Void Contract: A crime such as drug trafficking or a contract without consideration, like one party offering something and the other party offering nothing.
Voidable Contract: A contract executed under compulsion or where one party misrepresented facts, giving the aggrieved party the right to void the contract.
6. Parties Responsibilities
Void Contract: There exists no legal responsibility owed from a void contract. Neither party can enforce any obligations in place, nor is compensation given for damages incurred.
Voidable Contract: Legal obligations exist until the party with the right to void the contract exercises that option. If the contract is thus voided, the party who suffered losses can be entitled to claim compensation.
7. Remedies
Void Contract: No remedy could be claimed by either party since the law treats the contract as something that never existed.
Voidable Contract: The aggrieved party may have remedies such as compensation of damages, in particular on account of wrongful conduct attributable to the other party.
8. Possibility of Rectification
Void Contract: A void contract can never be rectified or made enforceable because it is inherently invalid.
Voidable Contract: The voidable contract can be remedied when the aggrieved party does not decide to annul and both parties agree to the fulfillment of the contract.
9. Character of the Contract
Void Contract: The contract is null and void from its very inception and has no legal existence.
Voidable Contract: The contract has a legal existence till the aggrieved party decides to annul.
10. Right to Rescind
Void Contract: No further step is required to rescind the void contract because a void contract remains ab initio.
Voidable Contract: A voidable contract can be rescinded or canceled if the wronged party was compelled, defrauded, or deceived by the other party.
AspectVoid ContractVoidable ContractDefinitionA contract that is invalid from the beginning and unenforceable.A contract that is valid initially but can be voided by one party.EnforceabilityNot enforceable by law at any time.Enforceable unless the aggrieved party chooses to void it.Legal EffectHas no legal effect; treated as if it never existed.Legally binding until the aggrieved party voids it.CreationInvalid due to lack of essential elements like consent or legality.Initially valid but becomes void due to factors like fraud or coercion.Parties’ ObligationsNo legal obligations arise for any party.Legal obligations exist until the contract is voided.Possibility of RectificationCannot be rectified as it is void from inception.Can be rectified if the aggrieved party does not void the contract.Right to VoidNo right to void as the contract is inherently invalid.One party has the right to void the contract.CompensationNo compensation or remedies are available.The aggrieved party can seek compensation if the contract is voided.ExamplesA contract for illegal activities, such as drug trafficking.A contract signed under duress or misrepresentation.RemediesNo remedies are available.Remedies like compensation may be available to the aggrieved party.Legal StandingLacks legal standing from the start.Has legal standing until voided by one of the parties.Right to RescindNo need to rescind, as the contract is already void.The aggrieved party has the right to rescind (void) the contract.
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Legal Consequences of Void and Voidable Contracts
Understanding the legal implications of void and voidable contracts is an important step in protecting the interests of all parties concerned about the agreement. The enforceability of the contract, the right to rescind, and the remedies available are critical factors that go into choosing by entering into or terminating a contract.
Legal Consequences of Void Contracts
Since it has no legal existence, a void contract cannot be enforced in any court of law. Parties cannot recover remedies for non-performance since it is not a validly formed agreement. For instance, contracts that involve illegal activities, lack consideration, or involve minors (under certain conditions) are usually classified as voidable.
Legal Consequences of Voidable Contracts
However, voidable contracts are recognized under the law until such time that a party decides to void the agreement. Generally, a party aggrieved by fraud, undue influence, or misrepresentation has a right to void a contract. Until this right is exercised, the contract remains binding. If it is then voided, then that party can claim damages and other legal remedies.
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Conclusion
Such a difference between a void and a voidable contract would be essential in establishing that the contract is enforceable and, more importantly, falls within the purview of the law. The former can never be enforced at any point because it does not meet the validity envisioned by the contract, whereas the latter is always enforceable until one party to that contract wishes to void the contract. This knowledge helps individuals and businesses feel confident enough when entering into agreements with assurances that they will protect their legal rights and minimize the risks related to those agreements.
Difference Between Void and Voidable Contract FAQs
Q1. What is the difference between a void and a voidable contract?
A void contract is said to be void ab initio, that has no existence at all in legal eyes and has no legal existence or effect, whereas a voidable contract is initially valid but may turn into a void one if one party declares it to become so due to certain grounds such as coercion or fraud.
Q2. Is it an enforceable contract?
No, a void contract is not capable of being enforced at law. Because of this, it is defective from the very beginning, and hence neither party has any duty of performance.
Q3. Is there any remedy available by way of damages for a void contract?
No, parties to a void contract cannot claim damages as the contract is not considered to be valid under law.
Q4. Can a voidable contract be rectified?
Yes, even a voidable contract can be rectified if the party holding the right to void it chooses not to exercise the said option. It allows the contract to still be enforceable.
Q5. What are illustrations of void contracts?
Illustrations of the voidable contract will include contracts about illegal activities, consideration-free contracts, or contracts made under specific circumstances by a minor.
