How Do You Know if the Contract is Void or Voidable?

•  April 18, 2023
•  8:33 am

In most situations, it is courts have the discretion to determine whether a contract is void or voidable. When determining whether a contract will be treated as void or voidable courts consider a variety of factors. Here are some of the factors that courts may consider:

1. Lack of Capacity: If a party lacks the capacity to enter into a contract, courts will consider the following factors to determine whether the contract is voidable or void:

• The nature and extent of the incapacity
• The level of understanding of the party lacking capacity
• The fairness and equity of allowing the contract to be enforced
• The effect of the contract on the party lacking capacity

2. Fraud: If a party has made a false representation or has failed to disclose a material fact, courts will consider the following factors to determine whether the contract is voidable or void:

• The nature of the misrepresentation or omission
• The reliance of the other party on the misrepresentation or omission
• The effect of the misrepresentation or omission on the other party
• The intention of the party making the misrepresentation or omission
• The knowledge or recklessness of the party making the misrepresentation or omission

3. Mistake: If the parties to the contract make a mistake about an essential fact that goes to the heart of the agreement, courts will consider the following factors to determine whether the contract is void or voidable:

• The nature and extent of the mistake
• The effect of the mistake on the parties
• The knowledge or recklessness of the parties with respect to the mistake
• The level of diligence exercised by the parties in entering into the contract
• The availability of information that could have corrected the mistake

4. Illegality: If the subject matter of the contract is illegal, courts will consider the following factors to determine whether the contract is void or voidable:

• The nature and extent of the illegality
• The intention of the parties
• The effect of the illegality on the public interest
• The effect of the illegality on the parties
• The knowledge or recklessness of the parties with respect to the illegality

5. Undue Influence: If a party has been coerced or unduly influenced into entering into the contract, courts will consider the following factors to determine whether the contract is voidable or void:

• The relationship between the parties
• The nature of the influence exerted
• The vulnerability of the party being influenced
• The effect of the influence on the other party
• The intention of the party exerting the influence
• What Should You Do if You Believe Your Contract is Void or Voidable?

The practical implications of having a contract determined to be void or voidable are significant. If a contract is void, it never existed. This can result in financial losses, damaged relationships, and a legal dispute. If a contract is voidable, one of the parties merely has the right to cancel the contract, which can also result in financial losses and damaged relationships, but the parties may seek to remedy the situation by curing the legal defect or negotiating a new agreement.

While both void and voidable contracts are not legally binding, the key difference between the two is that a void contract is considered to be null and void from the beginning, while a voidable contract is considered to be valid, but one or more parties have the option to either enforce or void it. When seeking either enforcement of or defense of a contract, you should consult with a legal professional to determine your options for re-negotiation, cure, enforcement, or defense of the contract.

If you have questions about whether your contract is void or voidable, contact us today to schedule a consultation.

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