If you are in a business situation that concerns the transfer of goods and services, you may want to know the difference between a void contract and a voidable contract. As most business transactions involve a written contract, knowing your rights under both can prevent confusion in the formation and enforcement of your contracts.
The problem arises, and the contract is void, if the contract is for an illegal good or service; you are a minor under the age of 18; you are over the age of 18, but found to legally lack the mental capacity to enter into a contract; the terms of the contract become illegal due to laws passing while the contract is in progress; or the contract violates a fundamental principal of law. With a void contract, there was never a valid contract, title to the item does not pass and the contract is legally unenforceable. For example, if you enter into a contract to buy an illegal drug, like cocaine, pay for it but receive baby powder instead, the courts will not enforce the contract for the seller to give you cocaine, as buying cocaine is illegal.
A voidable contract can start out as a valid contract and later become voidable. This happens because one party to the contract, through no fault of his own, is unable to perform. For example, if you enter into a contract to sell a boat and a hurricane destroys the boat, you can no longer supply the boat, so either you or the buyer can void the contract due to the impossibility of performance. A voidable contract is binding on one party but the other party can decide whether to void or ratify the contract. For example, a minor signs a contract for the gym several days before his birthday. As the contract was entered into while he was a minor, the gym must provide the membership if he desires, although if the minor chooses he can void, or cancel, the contract without penalty. However, the minor can also ratify, or accept, the gym contract once he becomes of age, making this a valid contract.
There are many reasons attributed to a voidable contract. It is a situation where one party of the contract may repudiate it. A contract involving minors is an example of voidable contract. Although minors can enter into contracts, these agreements cannot be enforced, as minors are at liberty to change their stand.
While a void contract is nonexistent and cannot be upheld by any law, a voidable contract is an existing contract, and is binding to at least one party involved in the contract.
The main difference between the two is that a void contract cannot be performed under the law, while a voidable contract can still be performed, although the unbound party to the contract can choose to void it before the other party performs.
Before entering into any written or oral agreement, you should first always consult a lawyer. A contract lawyer can help you draft a contract that will ensure both parties will be bound to the contract so that you do not have to worry about your contract being void or voidable.