RAC LAW BLOG ™
Void -versus- Voidable Contracts
Know the difference between Void and Voidable contracts
A contract that is void is illegal and unenforceable; whereas, a contract that is voidable is legal and the parties can enforce it.
What makes a contract void?
The term void means that something is not valid and therefore not legally binding or enforceable. If something were to go wrong, there would be no remedy as the contact is invalid.
A contract that was initially valid when it was formed can later become void. An example in which this might occur is if the contract fulfills the necessary conditions of a valid contract but later the law changes, then that shifts the position and the contract become void. A common example of a void contract is where the contract involved illegal activity.
What makes a contract voidable?
A voidable contract allows the option for one of the parties to get out of the contract or decide to continue the contract where the party who fails to satisfy the exact agreed terms of the contract and seeks to vary the contract. The “innocent” party can then decide to end the contract or accept the new terms.
An example of this: Anna, a purchaser orders a custom dress from Brandon who is the seller. Brandon has agreed to make the dress and Anna agreed to buy the dress for $150. Anna then paid a deposit for the production of the dress. Brandon received the deposit and subsequently realized that he was out of stock of the fabric that Anna selected for the dress. After realizing this, Brandon contacted Anna and informs her that he is unable to make the dress using the fabric that she selected as he was out of stock of that fabric. He then told her that he can still make the dress but using an alternative fabric. Anna in this instance is the “innocent” party and Brandon is the offending party as he cannot fulfill his obligations of the contract. The contract here becomes voidable, as Anna has the option of cancelling the contract and she may seek remedies or she can agree to continue the contract and allow Brandon to make the dress but using the alternative fabric.
Summary
In void contracts, there is no remedy for either party and the contract is treated as if it never happened. The courts cannot enforce void contract.
In contrast, voidable contracts gives the innocent party the choice whether to end the contract or continue with the contract.
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