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Void and voidable – what’s the difference?

On Behalf of | Sep 29, 2021 | Business Law

A mistake a company may make is entering a lawsuit over a valid contract. A company may want to sue for various reasons: invoice disputes, project below acceptable standards, etc. However, a company not meeting expectations isn’t a legal dispute, it is business.

There are a few circumstances in which a contract could be considered void. Knowing when can save a company valuable time and money.

Terminating a contract

There is a large legal difference between a contract that is considered void and one that is considered voidable. If a void contract is breached, it cannot legally be enforced. On the other hand, a voidable contract may be terminated by either side at any time. This can be due to a voidability clause or some other legal nuance.

Causation of voided contracts

Creating an agreement by contract would almost always seem legally binding. However, there are a few cases in which a contract may be deemed void from its genesis — not capable of being legally enforced. Three such cases are:

  • Incompetence – if one party was found to have been incapable of signing the contract at the time
  • Illegal services or benefits – if the contract stipulates one party to break the law
  • Impossible deliverables – when part of the agreement becomes impossible for either side to carry out

Voidable contracts

There are some instances where a contract can be challenged in court and be legally remanded. Arguments against validity of a contract can be made if there are legal defects or where one party learns something about the contract that would have precluded them from signing in the first place.

If either company in the agreement discovers defects or receives new information about the contract but does not object to the contract as it then is, the agreement is still legally binding.