When Is a Contract Invalid? Everything You Need to Know
Wondering when is a contract invalid? Contracts are legal documents formed between two or more parties that legally bind the parties.3 min read
Updated July 2, 2020:
Wondering when is a contract invalid? Contracts are legal documents formed between two or more parties that legally bind the parties. A contract must include all legally required elements to be enforced under state and federal laws and to not be deemed invalid. When elements are not met or are missing, it may make the contract invalid. This should be avoided.
Elements of a Contract
There are four main elements that make up a valid and enforceable contract.
1. Offer and Acceptance
A valid contract contains two basic elements: offer and acceptance. The offer contains an outline of the contract specifics laid out by one party. The acceptance occurs when the other party agrees to the terms of the offer, normally in writing. Typically, a negotiation process will take place to fine-tune the details of the contract so both parties are satisfied.
2. Legal Object and Capacity of Parties
To be valid, the contract must include legal subject matter and both parties must:
- Agree to the terms fully
- Be over the age of legal consent
- Have the mental capacity to carry out the agreement
If these three elements are not met, a contract can be deemed invalid.
For a contract to be deemed valid, an element of consideration must be agreed upon by both parties and exchanged for completing the action described in the contract. A consideration, either price or value, does not only have to be money. A consideration can be a right, interest, or benefit; must benefit both parties; and be of monetary value. An example of a consideration is the sale of a vehicle. One party — the seller — receives money while the buyer receives the vehicle.
4. Written and Verbal
In some instances, an oral agreement may be enforced, but the norm is that most contracts are required to be in writing to be valid. Written contractual agreements are needed in situations where a considerable amount of time will pass before the contract is honored, such as a last will and testament which includes a high value or amount of consideration, debts, and/or property.
When Does a Contract Become Void?
A void contract means the contract:
- Cannot be enforced under state or federal laws
- Becomes null from the date of origination
Once a contract is void, neither contract is responsible for the terms of the contract.
When Does a Contract Become Voidable?
A contract becomes voidable when the following instances occur:
- A party was threatened or coerced into signing the agreement
- A party was under the influence
- A party is not mentally competent which can mean mentally ill or the party is a minor
- A breach of contract terms occurs
- There are mistakes on the part of both parties
- There is fraudulent information in the form of missing or falsified information or the intent to carry out the contract
- Misrepresentation or false statement of fact has occurred
The Contract Law
United States Code, Section 10 states: All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void”.
Executing a Contract
When entering a contract, there are several tips to follow to properly execute a contract.
- Read it fully to avoid missing any complex stipulations or information.
- Confirm the terms of the contract are specific and clearly stated.
- Verify that any phrasing, definitions, or terms are understood and clear.
- Write down the full terms of the contract and avoid oral agreements.
- Note important dates and deadlines.
- Vet the person you are going into contract with by checking references and confirming their identity.
- Review and contemplate all portions of the contract to avoid later legal issues.
Contracts, many times, are deemed void or voidable when the document is illegal, one of the parties is being taken advantage of, or false information was included.
Time For a Lawyer?
Contract law can be cumbersome to understand without proper prior knowledge. To avoid a contract that may be deemed void or voidable, hiring a business lawyer to help with the creation, drafting, or editing a contract is recommended. With proper guidance, the issue of breach of contract or violation of contract laws will decrease but also allows for proper legal representation if court meetings are required.
If you need help with contracts, 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.