What Can Make a Contract Void?
Be sure to read this article to learn the mistakes that may lead to your contract becoming void.
A void contract is one that is not enforceable under law. This, in turn, means the contract is invalid due to the manner in which the contract was originally drafted. Accordingly, the contract has failed in some way to adhere to the contract principles of offer, acceptance and consideration. In this sense, the law treats a void contract as one that had never been formed in the first place. Below are situations that may constitute a void contract and the difference between a void and voidable contract.
Elements That May Make a Contract Void
Typically, these situations may render a contract void:
- One or more of the parties did not have the capacity to enter into the contract;
- The contract opposes public policy;
- There is a material mistake in the terms of the contract or material uncertain terms;
- The purpose of the contract is unlawful or the consideration is unlawful;
- The contract involves a gamble, wager or bet;
- Consideration by a party is not given;
- The contract restricts trade or legal proceedings or impedes certain rights or actions;
- The contract depends upon an impossible event or requires a party to perform an impossible act.
In these situations, contracts have no possibility of being amended and are immediately void. This means the court will cancel the contract entirely releasing all parties from their obligations. As the contract is said to have never existed, you will not be able to recover any compensation even if a party is in breach.
Moreover, a contract may be void after being properly drafted in these circumstances:
- A similar contract exists but does not contradict or modify the main contract;
- A previous valid agreement is incorrectly referenced in the contract;
- A party unilaterally modifies a term in the contract.
It should be noted that a contract may be void simply by being satisfied. So if a condition of the contract is fulfilled before the due date the contract is still void but was successfully adhered to. The main point to consider is when the drafting of the contract renders it void due to the aforementioned situations.
Difference Between Voidable Contracts
There is often confusion between void and voidable contracts. A voidable contract is a contract that is valid but may be voided by one of the parties. Although, if all parties agree to it, a voidable contract may be enforceable. At most, one party will be bound to the contract but other parties have the option to void the contract by rejecting it. Contracts are usually voidable due to: undue influence, duress, misrepresentation or fraud. Also, depending on the circumstances, a court may allow a voidable contract to be rewritten or amended. Therefore, the main difference is that a voidable contract may still be performed under the law.
To prevent your contracts from becoming void it is essential to draft the terms of your contract correctly. Ensure your parties are competent and every term and purpose of the contract abides by the law. Also, continue to correctly adhere and take note of situations that may lead to voidability. If you are unsure as to whether a specific term may invalidate your contract it is recommended to consult a contract lawyer.
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Jakub is a legal intern at Lawpath as part of the content team. He is currently studying a Bachelor of Laws at Macquarie University. His main interest is on the integration of legal and technological services.