What Makes a Contract Voidable?
A contract voidable is important knowledge not just for business owners but for anybody. This information is essential for drafting proper legal agreements.3 min read
What makes a contract voidable is important knowledge not just for business owners but for anybody. This information is essential for drafting proper legal agreements as well as protecting oneself from being bound by unfair contract terms.
What Makes a Contract Valid?
For a contract to be valid and enforceable under the law, it must be consensual and legal, it must have a clearly defined “consideration” (value exchanged between the parties), and it must be signed by two adult parties of sound mind intending to satisfy the terms of the contract.
What Is a Voidable Contract?
A voidable contract is a legal agreement that could become unenforceable if any of the following scenarios occur:
- Either or both parties withheld important information.
- Either or both parties made a mistake.
- The information was misrepresented.
- A fraud occurred.
- Undue influence or duress was exercised over a party.
- A party was legally incapable to enter a contract.
- The terms of the contract are unconscionable.
- A breach of contract occurred.
If any of such defects are discovered in the contract, a party can reject the contract. If not rejected, the contract remains voidable contract can be ratified if parties are able to remove the found defect and create new terms that both can agree to. For example, if one of the parties signed the agreement while intoxicated, thus invalidating the signature, the contract may be resigned later when the party is in sound state of mind.
How Are “Void” and “Voidable” Contracts Different?
A void contract is not a valid contract. Such a contract is impossible to enforce from the very beginning, so the parties involved remain unbound by its terms. Contracts that requires parties to engage in some type of illegal activity are inherently void as well as contracts signed by minors. Also, when the terms of a contract become impossible to meet, such as in case of a party's death, the contract becomes void. The following situations void a contract:
- The agreement's terms are either illegal or violate public policy.
- At the time of signing, a party was not of sound mind.
- A party was not of legal age.
- The terms of the contract are impossible to satisfy.
- The contract violates a party's rights.
By contrast, a voidable contract is valid and enforceable until one of the parties rejects it for a certain flaw found in the contract after signing. Such a contract remains valid if both parties decide to proceed regardless of the defect. In voidable contracts, one party is bound by the terms, while another one is free to cancel the contract any time. The unbound party's rejection of the contract makes it voidable. The following circumstances can deem a contract voidable:
- A party was forced or threatened to sign the contract.
- A party was under undue influence.
- A party was mentally incompetent, such as a minor or a person suffering from mental illness.
- A breach of contract occurred.
- Mistakes were made by both parties. Note that this is different from simply not reading a contract, which does not make a contract voidable.
- A fraud was committed (withholding or falsifying information or having no intention to deliver on the terms of the contract).
- Facts were misrepresented.
Six Steps to Execute a Contract Properly
- Read the entire document thoroughly.
- Make sure the terms of the contract are described clearly and in details.
- Make sure you understand the terms of the agreement. Clarify all phrases and definitions that are not clear.
- Make sure to have your contract in writing so you have proof in case of any disputes in the future.
- Be attentive to the acceptance details, such as an expiration date.
- Always confirm the identity of the other party.
Do You Need a Lawyer for Any Contract Issues?
Because of their specificity and numerous nuances, contract laws are not easy to comprehend. A seasoned business lawyer can help you create your contract and avoid mistakes that could make it void or voidable. In case of a breach of contract, your attorney will be your legal representative in court.
If you need more information about what makes a contract voidable, 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 like Google, Menlo Ventures, and Airbnb.