Introduction
It can be confusing to understand the difference between voidable and unenforceable contracts when the terms are sometimes used interchangeably. We’re going to try and demonstrate the distinction by explaining the role of vitiating factors in contract law. Then we’ll explain in a bit of detail what voidable contracts and unenforceable contracts are. Finally, at the end, we’ll sum it all up for you.
Vitiating factors
A vitiating factor is something which undermines the legal effect of a contract. According to orthodox contract theory, these factors go to the consent of parties. Basically, a valid contract is built on the voluntary agreement of two or more parties to be bound by it. Most vitiating factors violate this voluntary aspect of a contract. Specifically, the main ones are misrepresentation, duress, undue influence, unconscionable conduct, and mistake. For example, a misrepresentation may mean that the ‘deceived’ party wasn’t consenting to the true nature of the contract. The main remedy for an innocent party in a contract affected by a vitiating factor is rescission. Additionally, some also include illegality as a vitiating factor. While illegality can affect the validity of a contract, it doesn’t exactly go to the consent of the parties. We’ll explain this in a bit more detail later (see ‘Unenforceable contracts’ below).
Voidable contracts
As we already mentioned, almost all of the vitiating factors give rise to rescission as a remedy. Another way of saying this is that these vitiating factors can make a contract voidable. A voidable contract is basically one where a party can elect to undo a contract right from the beginning. If they do so, the contract will be ‘void ab initio’. This of course also means that they can alternatively ‘affirm’ the contract. If they do so, the contract will be enforceable through remedies like specific performance. Additionally, non-performance by the other party can therefore amount to a breach and give rise to damages claims.
This option of enforcement is why we sometimes distinguish voidable contracts from unenforceable ones. Additionally, electing to undo a contract is also enforceable, so the description ‘unenforceable’ could be misleading in any case.
Unenforceable contracts
An unenforceable contract is basically one which you can’t enforce in a court. This means that it may actually still be valid. Good examples of unenforceable contracts are those involving illegality. Contracts which are illegal by their very nature are of course not enforceable as the law prohibits them. However, contracts which you make properly and the law doesn’t prohibit can still be unenforceable. For example, you might only be able to perform the contract through an illegal act, or the agreement in the contract may be furthering an illegal purpose. Another example of an unenforceable contract is where it doesn’t comply with formal requirements. For example, sales of land typically have to be in writing. A failure to do this will mean that it is unenforceable. Finally, sometimes people refer to voidable contracts as unenforceable where the party at fault is trying to enforce it.
Conclusion
In conclusion, a contract may be invalid if it is affected by a vitiating factor. This can render the contract voidable, which means the innocent party can undo it from the beginning. Alternatively, it can render the contract unenforceable, meaning the party at fault or both parties can’t enforce it in court. For further help in understanding the distinctions between void, voidable, and unenforceable contracts, we recommend getting in touch with a lawyer.
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