What is The Definition of Voidable Contracts?
We enter into several contracts throughout our life. Hired for a job? That’s an employment contract. Getting married? You’ll need to sign a marriage contract with your partner on your wedding day. Buying your first house or property? There’s a real estate contract with your name on it for your signature.
Contracts are always between two parties who have the legal capacity to enter into such agreements and mutually agree to the terms. The agreement will revolve around a promise made by one party for adequate consideration (payment or something of value) from the other. For instance, an employment contract is between the employer and the employee, exchanging service for salary; a real estate contract is between a seller and a buyer, exchanging money for a certain property; and so on. All contracts must meet certain elements, including capacity, offer, consideration, acceptance, mutual assent, and legality, to be legally binding and enforceable by law.
If any of these elements is missing, you’ll be dealing with a defective contract. For example, contracts with a minor or a mentally incompetent person are legally problematic. Defective contracts differ in the degree of the defect and can be considered void, voidable, and unenforceable contracts.
We will be talking about voidable contracts here.
What is a Voidable Contract?
A voidable contract is a valid agreement, which means it can be legally enforced. However, it contains a flaw which can make it void. These flaws include:
- An undisclosed material fact
- Fraud, errors, or misrepresentation in the contract
- A breach of contract occurs
- A party doesn’t have the legal capacity to enter into a contract
- A party was forced to sign the contract or was under undue influence
- The contract has one or more unconscionable terms
As it is originally written, a voidable contract is valid and legally enforceable, though only one party is bound by it. If the other party discovers the contract’s defects, it can choose to reject or void the contract through disaffirmance, wherein the disadvantaged party asks the court to cancel or void the contract.
Disaffirmance is a legal right of the disadvantaged party to renounce a contract. The party must indicate that they will not be bound by the contract’s terms explicitly or implicitly. The contract will become void once the party manifests or declares in writing that they will not be bound by the agreement or if they choose not to abide by the terms.
Note, however, that you cannot choose or select parts or portions of the contract to disaffirm. If you are the disadvantaged party and you want to exercise this right, you must disaffirm the entire agreement. There are exceptions to this rule, however, and these special cases mostly deal with contracts involving minors. Most states don’t allow minors to disaffirm a contract that involves necessities, such as food, shelter, and clothing. So, a minor cannot disaffirm a real estate contract, for example.
On the other hand, there are instances when both parties want to push through with their contractual relationship and in this situation, they can do so by ratifying the contract. Ratification is a legal remedy which results in a valid contract between the parties. Ratifying a contract means the parties agree to new terms, which remove the defective part of the agreement.
So, a voidable contract is basically a “sick contract” that only has two endings: either it is ratified, or it is canceled.
Voidable vs. Void Contracts: How Are They Different?
People easily confuse voidable and void contracts, but in legal practice, the two are different. While a voidable contract is valid and can be enforced, a void contract is not legally valid from the start, i.e., not valid from inception, and cannot be lawfully enforced.
In short, the term “void contract” is an oxymoron because there is no legal contract to begin with. As the contract does not exist at all in the eyes of the law, the court can’t enforce any legal obligation because the parties are not entitled to any protective laws.
A void contract results from the following situations:
- Terms are illegal or violate public policy
- The agreement violates a party’s rights
- A party was not of legal age or a minor
- A party is mentally ill or not of sound mind at the time of signing
- The terms are impossible to satisfy
An example of a void contract is an agreement involving any illegal activity, such as one between an illegal drug supplier and a drug dealer. Because the sale of illegal drugs is prohibited by law, their contract is illegal in nature and cannot be enforced.
How to Legally Deal with a Voidable Contract
If you find yourself with a voidable contract, immediately request the court for an official analysis. This step is critical because it will enlighten you on whether or not the contract can be legally enforced or, for instance, whether you are eligible for damages as is the case of a breach of contract.
If you suffered from any damages due to a voidable contract, you can file a suit so you should keep copies of all relevant documents, such as bills and receipts. These will serve as important evidence to support your case. Contact a contract lawyer to assist you with all the legal proceedings.
However, prevention is still better than cure. The best thing you can do to avoid entering into a voidable contract is to consult a business lawyer before agreeing to any oral contract or signing any written contract.
Either way, a contract lawyer will be able to provide you with the necessary legal support you need to successfully deal with a voidable contract.
Steve Crane Jr handles all disputes involving Contract Disputes, from all stages of litigation, including pre-trial orders, summary-disposition orders, jury, and non-jury trial judgments, and post-trial orders.
He represents businesses and individuals in lawsuits involving a variety of areas, including complex business and commercial litigation, arbitration, real estate disputes, employment law, probate litigation, and criminal defense.
If you have a Contract Dispute, you should contact Steve. He and his team can assess the facts of your case and help you determine the best course of action to move forward.
To schedule a discrete and confidential consultation about your matter, email or call us at (248) 963-6300.