What Is Voidable Contract? Everything You Need to Know
A voidable contract is a formal agreement between at least two parties that may not be legally enforceable.3 min read
2. Voidable vs. Void Contracts
3. Examples of Voidable Contracts
4. Examples of Void Contracts
5. What to Do If a Contract Is Void or Voidable
What is voidable contract? This is a formal agreement between at least two parties that may not be legally enforceable. A contract can be deemed voidable if:
- One or both parties has not disclosed a material fact.
- The contract includes misrepresentation, errors, or fraudulent statements.
- The contract was signed under duress or undue influence.
- One or both parties could not legally enter into a contract.
- The contract contains one or more unconscionable terms.
- Breach of contract occurs.
A contract with one or more of these issues can still be considered legally enforceable if both parties decide to honor its terms anyway. The adversely affected party may fail to recognize the existence of an issue with the contract but can opt to void the contract if such an issue is discovered.
Ratification of a Voidable Contract
Ratification is the procedure to correct a voidable contract and requires all parties to the contract to negotiate new terms that eliminate the issue that made it voidable. For example, if one party was unable to legally sign a contract because he or she was underage, the contract can be ratified when he or she turns 18. If one or both parties no longer wishes to be bound by the contract, it can be voided on the grounds that one party could not legally sign.
Voidable vs. Void Contracts
It's important to understand the difference between contracts that are voidable and those that are void. While a voidable contract can still be enforced if both parties agree to the terms despite flaws in the agreement, a void contract is never legally enforceable. Contracts that are void include those that require either or both parties to commit illegal activity to fulfill their terms. Previously valid contracts become void after one party has died or becomes otherwise unable to fulfill the contract terms. A change in applicable laws or public policy can also void a contract.
Parties to a void contract cannot sue the other party for not fulfilling the contract and must restore any benefit they received to the original party. With voidable contracts, the party negatively affected by the issue can sue for damages.
Examples of Voidable Contracts
Minors who have signed a contract can walk away at any time because they did not have the legal ability to enter this agreement. If one party was tricked or forced into signing, the contract is voidable. It is also voidable if one or more parties was under the influence of drugs or alcohol when signing.
Examples of Void Contracts
Void contracts may:
- Pertain to illegal activity such as prostitution, gambling, or another crime
- Be signed by a minor or another person deemed mentally incompetent to enter a contract
- Depend on the occurrence of an impossible event or feat
- Go against public policy
- Restrain someone from performing certain legal activities such as working or choosing a spouse
What to Do If a Contract Is Void or Voidable
Consult a contract lawyer before agreeing to any written or oral contract. He or she can help make sure the contract in question is neither void or voidable. If you do end up as a party to a voidable or void contract, the first step is usually to request an official analysis by the court. This can help you determine whether the contract would be legally enforced and whether you are eligible for damages, such as in the case of a breach of contract.
If your contract is voided, you should keep copies of all relevant documents as well as bills, receipts, and other supporting paperwork. These documents will provide important evidence if you sue for damages incurred from a void or voidable contract.
If you need help with determining whether a contract is voidable or void, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only 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 such as Google, Menlo Ventures, and Airbnb.