Voidable Contract: Everything You Need to Know
A voidable contract is an agreement between two people deemed unenforceable for one or more legal reasons. Just because a contract exists doesn't mean it's always enforceable. 3 min read
2. Ratification of Voidable Contracts
3. How Voidable and Void Contracts Differ
4. Examples of Void Contracts
A voidable contract is an agreement between two people deemed unenforceable for one or more legal reasons. Just because a contract exists doesn't mean it's always enforceable. A voidable contract appears to be a legal contract when it's made; however, it can be annulled or rescinded in court.
Reasons a Contract Might Be Voidable
There are a variety of reasons the court might deem a contract unenforceable, including:
- Misrepresentation or fraud.
- Duress of undue influence.
- Legal incapacity to enter into contract.
- Breach of contract.
- Unconscionable terms.
- Failure to disclose a material fact.
A contract can be canceled due to a mutual factual mistake. However, failure to read a contract does not make it voidable. Lack of capacity might include intoxication at the time the contract was signed or mental impairment that keeps someone from understanding the contract terms.
Minors lack legal capacity to enter into a contract, as well. If a minor did not get a parent or guardian's consent, the contract can be voided. However, if the minor reaches the age of consent, which is 18 in most states, and doesn't request to cancel the contract within a reasonable amount of time, a judge might determine the contract to be binding.
Contracts can be deemed voidable due to coercion, fraud, misrepresentation, and undue influence. Victims of coercion and these other scenarios have the right to ask for the contract to be voided.
Essentially, a voidable contract was at one time legal and enforceable. If one party discovers the contract has one or more defects, they can request it be deemed a voidable contract. The contract will remain enforceable and valid if the party with the power to have it declared voidable chooses not to reject it despite the defect. Unfortunately, the person who could have the contract deemed voidable is often unaware of the fraud or misrepresentation.
You can save a contract if only one or two parts are voidable. This is called severance.
Ratification of Voidable Contracts
If you have a voidable contract, you can have it ratified to correct the issues. To go through the ratification process, the contract parties must agree to new terms. These terms will have removed the problem with the initial contract.
For example, if a person lacked capacity at the time he or she entered into the original contract, that individual can opt to ratify the original contract once he or she has legal capacity. Another example is if one party was under the influence of a mind-altering substance at the time the contract was executed. This would render the original signature invalid. If that party wants to move forward with the contract, he or she can ratify it when in a mindset that provides legal capacity.
How Voidable and Void Contracts Differ
People often use the terms “voidable” and “void” to mean the same thing when talking about contracts; however, they are extremely different:
- A void contract is completely unenforceable, and the law looks at the contract as though it never existed.
- A voidable contract can still be enforceable if the parties so desire.
The court can deem a contract void if the contract terms require one or both parties to participate in an illegal act or if one party dies and therefore is unable to complete the contract terms. The best way to look at void versus voidable is that a void contract cannot be legally fulfilled, whereas a voidable one can. The “unbound” party, however, has the right to void it before the other party acts on the contract terms.
Examples of Void Contracts
Examples of void contracts include:
- Those that involve an illegal subject matter, such as prostitution, criminal acts, and gambling.
- Those that are deemed to be too unfair because they are against public policy.
- Any contract that restricts an individual's right to marry, live somewhere, work, etc.
It's a good idea to consult with a business contract lawyer before entering into any oral or written agreement. A contract lawyer can help draft a valid contract that will be binding and enforceable, so you don't have to stress over whether the contract might be void or voidable.
If you need help with a voidable contract, you can post your legal need on UpCounsel's marketplace. UpCounsel only accepts the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.