Keith Mack
Contracts are an essential part of business and personal relationships, outlining the terms and conditions of an agreement between two or more parties. However, certain circumstances may render a contract void, meaning it is no longer valid or legally enforceable. A contract can be deemed void if it is not enforceable as originally written, or if it contains terms that are considered illegal or unreasonable in a specific jurisdiction. For example, a contract may be void if it involves a minor, or if one party was under the influence of drugs or alcohol when signing. Changes in laws or regulations after a contract is made but before it is fulfilled can also result in a contract becoming void. If you believe you have a valid reason to void a contract, it is important to seek legal advice and determine your options.
| Characteristics | Values |
|---|---|
| Enforceability | A contract is void if it is not enforceable as originally written |
| Illegality | A contract is void if it contains terms that are illegal or unreasonable in a certain jurisdiction |
| Capacity | A contract is void if one or more parties lack the legal capacity to enter into the agreement, e.g. due to being a minor, or being under the influence of drugs or alcohol |
| Misrepresentation | A contract is void if one party intentionally provides false information or conceals relevant information |
| Duress or Undue Influence | A contract is void if one party is coerced into signing through threats or manipulation |
| Unconscionability | A contract is void if it is so one-sided that it would be unfair to one party |
| Impossibility or Impracticability | A contract is void if it becomes impossible to perform |
| Mistake | A contract is void if it is based on a mutual misunderstanding |
| Change in Law | A contract is void if there is a change in laws or regulations after the agreement is made but before the contract is fulfilled |
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What You'll Learn
Lack of capacity
A contract can be voided if one or more parties to the contract lack the legal capacity to enter into the agreement. This could be due to a lack of contractual capacity, which is a legal term referring to the minimum mental capacity required to enter into an agreement. Individuals who lack contractual capacity are presumed to not understand the implications of the contract and can, therefore, void or set aside the contract.
There are three categories of individuals who lack the capacity to contract:
- Minors: In most states, minors can void a contract for lack of capacity only while they are still under the age of majority. Once a minor turns 18, if they have not taken any steps to void the contract, it can no longer be voided. A minor can disaffirm or set aside a contract by stating their intention not to honour it, either verbally, in writing, or through actions.
- Individuals under the influence of drugs or alcohol: If an individual is under the influence of drugs or alcohol, they might not be in a position to understand the terms of the contract, and it may be considered void.
- Individuals with mental deficiencies: People with mental deficiencies are defined as those who are unable to act in a legal manner. A contract with an individual who falls into this category is voidable by the party who lacks capacity but is enforceable against the party with legal capacity.
It is important to note that the specific laws and tests regarding contractual capacity may vary depending on the jurisdiction. For example, some states use the cognitive test, which assesses whether the party understood the meaning and effect of the contract, while others use the affective test, which considers whether a party was able to act in a reasonable manner.
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Fraud or misrepresentation
Fraudulent misrepresentation is a statement of fact made without knowing the truth. It is a false statement made by a party that is either known to be untrue or disregards the probability of it being false. This type of misrepresentation is made fraudulently, and it is a qualifying legal reason for a contract to be voidable. Innocent misrepresentation is when a person makes a false statement but believes that the statement is true. This may be due to outdated or incorrect information, and it is also a qualifying legal reason for a contract to be voidable.
In addition to fraud and misrepresentation, other reasons for a contract to be void or voidable include: illegality, unconscionable terms, lack of capacity, duress or undue influence, mistake, impossibility or impracticability, and breach of contract. If you believe that you have a valid reason to void a contract, it is important to seek legal advice to determine your options.
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Duress or undue influence
A contract can be deemed void if it is not enforceable as originally written. Void contracts are often called "void agreements", and they typically involve agreements that are either illegal or violate principles of fairness or public policy.
There are two types of duress: physical duress and duress by improper threat. A contract induced by physical violence is void. If a person is forced into entering a contract under threat of physical harm, they are a victim of physical duress. Duress by threat is more common than physical duress, and occurs when the perpetrator threatens the victim, who feels there is no reasonable alternative but to assent to the contract.
Whether a threat is improper depends on the circumstances. For example, if a replacement part is readily available and affordable, threatening to withhold it may not be improper. However, if the part is urgently needed and the recipient cannot afford the cost, the threat could be improper and the contract voidable.
If there has been undue influence, the contract is typically voidable by the party that has been unfairly persuaded. The determination of whether a contract is voidable due to undue influence hinges on a host of variables, including the unfairness of the bargain, the unavailability of independent advice, and the susceptibility of the person persuaded.
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Unconscionable terms
A contract can be deemed void if it is not enforceable as originally written. Void contracts are typically agreements that are either illegal or violate principles of fairness or public policy.
Courts commonly describe unconscionable contracts or contract terms as those that "shock the conscience". This means that it is so remarkably unfair that it would be wrong to uphold it. Types of contracts or terms a court may invalidate for unconscionability will probably evidence severe unfairness, unequal bargaining power, and lack of notice. For example, a contract may be unconscionable if a business dealer uses a very small font and inserts a clause to purposefully mislead the consumer into signing a contract that contains unfair terms.
To avoid entering an unconscionable agreement, it is important to thoroughly read all the contract terms and consult a contract attorney to review contracts before signing to ensure fairness. If an individual is unsure or unsatisfied with any contract provisions, it is important to bring this up during negotiations and attempt to reach a more satisfactory agreement.
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Illegality
A contract can be considered illegal and, therefore, void if it involves illegal activities or breaches the law. This includes contracts that require illegal actions or conduct from one or both parties. For example, a contract between an illegal drug supplier and a drug dealer is unenforceable due to its illegal nature. Even if the performance under the contract is not explicitly illegal, the contract can still be deemed illegal if it involves activities that are discouraged by the public and violate public welfare.
Statutory and common law illegality are two key types of illegality considered by courts when evaluating contracts. Statutory illegality occurs when a contract directly violates laws or regulations, such as unlicensed business transactions. Common law illegality relates to agreements that go against public policy, such as committing fraud or other unethical acts. Courts evaluate these cases based on the nature of the illegality and its impact on the agreement.
In certain jurisdictions, the entire contract may be voided if any part of the consideration or object is unlawful. This is based on the doctrine of illegality, which states that if any part of the consideration for multiple objects or multiple considerations for a single object is unlawful, the entire contract is void. However, there are exceptions where courts may uphold parts of an agreement. For example, if an illegal provision can be removed without altering the core intent of the contract, courts may enforce the remaining parts.
It is important to note that once a contract is deemed void due to illegality, it is treated as if it never existed, and the court will refuse to enforce it. This defence of illegality or "void as against public policy" is often used by defendants to avoid liability. Therefore, parties seeking to enforce contracts must be cautious when drafting and entering into agreements to avoid potential issues with illegality.
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Frequently asked questions
A void contract is a contract that isn't legally enforceable, starting from the time it was created. A void contract can be deemed void if it's not enforceable as originally written.
A contract can be void for several reasons, including if one or more parties to a contract lack the legal capacity to enter into the agreement, such as a minor or an individual under the influence of drugs or alcohol. A contract can also be void if there is a change in laws or regulations after the agreement is made but before the contract is fulfilled.
A void contract is not legally enforceable, whereas a voidable contract starts off as valid and can be enforced if both parties agree. However, in a voidable contract, while one party is bound by the contract, the other can back out legally.
If you want to void a contract, you should first review the contract for terms or factors that may cause it to be invalid. Then, determine a legal reason why the contract should be void and collect documents and information to support this.
A void contract is treated as though it never existed, and there are no legal consequences for not following the contract rules.
