Contracts are a crucial part of conducting business, but not all contracts are created equal. It`s important to understand the differences between void, voidable, and unenforceable contracts to ensure that your business affairs are conducted legally and ethically. In this article, we`ll dive into what sets these types of contracts apart.
Void Contracts
A void contract is a contract that is completely invalid from the beginning. These types of contracts are not legally binding and cannot be enforced by a court of law. This can happen if the contract violates the law or public policy, or if one of the parties entered the contract under duress or coercion. For example, a contract to sell drugs or commit a crime is void and unenforceable.
Voidable Contracts
A voidable contract is a contract that is initially valid, but can be cancelled by one or both parties in certain circumstances. For example, if one party was under the age of 18 when they signed the contract, they can choose to void the contract when they turn 18. Other reasons for a contract being voidable might include fraud, misrepresentation, undue influence, or mistake.
If one party decides to void the contract, this must be done in a timely manner and with proper notice to the other party. Once the contract is voided, it is no longer legally enforceable and both parties are released from their obligations.
Unenforceable Contracts
An unenforceable contract is a contract that is valid but cannot be enforced by a court of law. This might happen if the contract fails to meet certain legal requirements or formalities. For example, a contract for the sale of real estate must be in writing and signed by both parties to be enforceable. If the contract is not properly executed, it may be unenforceable.
Other reasons why a contract might be unenforceable include if it violates the statute of frauds, which requires certain types of contracts to be in writing, or if the contract involves an illegal activity. Unenforceable contracts are not void, but they cannot be enforced through legal action.
Conclusion
Understanding the differences between void, voidable, and unenforceable contracts is important if you want to conduct business legally and ethically. A void contract is invalid from the beginning, while a voidable contract is initially valid but can be cancelled by one or both parties. An unenforceable contract is valid but cannot be enforced by a court of law.
If you`re unsure about the validity of a contract, it`s always best to consult with a lawyer who can provide guidance on your legal rights and obligations. By being aware of these distinctions, you can ensure that your business activities are conducted in accordance with the law.