What Are the Differences Between a Void Contract and a Voidable Contract?

What Are the Differences Between a Void Contract and a Voidable Contract?

When dealing with contracts, the terms "void" and "voidable" are often confused. Even though these two contract types seem similar, they are actually completely different.

A contract that is "void" cannot be enforced by either party., The law treats a void contract as if it had never been formed. A contract will be considered void, for example, when it requires one party to perform an act that is impossible or illegal.

A "voidable" contract, on the other hand, is a valid contract and can be enforced. Usually only one party is bound to the contract terms in a voidable contract. The unbound party is allowed to cancel the contract, which makes the contract void. 

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.                                                                                                                        

What Are Some Examples of Void and Voidable Contracts?

Void contracts are unenforceable by law. Even if one party breaches the agreement, you cannot recover anything because essentially there was no valid contract. Some examples of void contracts include:

Contracts involving an illegal subject matter such as gambling, prostitution, or committing a crime.

Contracts entered into by someone not mentally competent (mental illness or minors).

Contracts that require performing something impossible or depends on an impossible event happening.

Contracts that are against public policy because they are too unfair.

Contracts that restrain certain activities (right to choose who to marry, restraining legal proceedings, the right to work for a living, etc.).

Voidable contracts are valid agreements, but one or both of the parties to the contract can void the contract at any time. As a result, you may not be able to enforce a voidable contract:

Contracts entered into when one party was a minor. (The law often treats minors as though they do not have the capacity to enter a contract. As a result, a minor can walk away from a contract at any time.)

Contracts where one party was forced or tricked into entering it.

Contracts entered when one party was incapacitated (drunk, insane, delusional).

Do I Need a Lawyer If I Have a Void or Voidable Contract?

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.

What is a bilateral contract?

When most people think of contracts, bilateral agreements come to mind. In its most basic form, a bilateral contract is an agreement between at least two people or groups. Most business and personal contracts fall into this category.

Examples of bilateral contracts are present in everyday life. You're entering this type of agreement every time you make a purchase at your favorite store, order a meal at a restaurant, receive treatment from your doctor or even checkout a book at your library. In each circumstance, you've promised a certain action to another person or party in response to that person or party's action.

What is a unilateral contract?

The easiest way to understand unilateral business contract is by analyzing the word 'unilateral.' In its simplest terms, unilateral contracts involve an action undertaken by one person or group alone. In contract law, unilateral contracts allow only one person to make a promise or agreement.

You might see examples of unilateral contracts every day, too; one of the most common instances is a reward contract. Pretend you've lost your dog. You place an advertisement in the newspaper or online offering a $100 reward to the person who returns your missing pooch. By offering the reward, you're offering a unilateral contract. You promise to pay should anyone fulfill the obligation of returning your dog. You're the only person who has taken any action in this contract, as no one is specifically responsible or obligated to finding your dog passed on this interaction.

Another common example of a unilateral contract is with insurance contracts. The insurance company promises it will pay the insured person a specific amount of money in case a certain event happens. If the event doesn't happen, the company won't have to pay.

How are bilateral and unilateral contracts alike?

Both unilateral and bilateral contracts can be breached. Consider the term 'breach' synonymous with 'break.' This means breach of contract can be defined as a broken contract, stemming from failure to fulfill any term of a contract without a justifiable, lawful excuse.

Common examples of broken unilateral contracts might include any situation in which the person promising the pay in exchange for a completed act refuses. For example, if you offer $100 for the return of your dog, but then refuse to pay because you think the person who brought the dog back stole him, you'd likely be in breach of contract because you broke your word about the payment. Bilateral contracts can also be breached. A bilateral contract might be broken if a coworker refuses to complete his or her portion of a job; when an employee does something prohibited by his or her job contract; or even when a customer prevents the contractor from satisfying the obligation or finishing the project at hand.

You also need to prove the same criteria should you decide to enforce a bilateral or unilateral contract in court. In each situation, you need to establish:

The contract existed.

The contract was broken.

You suffered a loss.

The person you're challenging was responsible.

What's the difference between bilateral and unilateral contracts?

At first glance, the most obvious difference between bilateral and unilateral contracts is the number of people or parties promising an action. Bilateral contracts need at least two, while unilateral contracts only obligate action on one part.

The other differences might be a bit more subtle. Look at what's being offered. In unilateral contracts, one offering the deal promises to pay when a certain act or task is complete, but bilateral contracts allow for an upfront exchange.

 What works best?

Both unilateral and bilateral contracts are enforceable in court. For example, a unilateral contract is enforceable when someone chooses to begin fulfilling the act demanded by the promisor. A bilateral contract is enforceable from the get-go; both parties are bound the promise.