In the Indian contract act 1872, there are different types of contracts that can be used to make the trade with another party. The phrase “All the contracts are agreements but all agreements are not contracts” talks about the essential elements of a valid contract which made the contract different from the agreement. In the eyes of law, the agreement can be considered as a void contract that is illegal or not enforceable by law. An agreement that is legal and enforceable by law is a valid contract. There are various types of contracts like valid contracts, void and voidable contracts etc.
The term “void and voidable contract” usually confuse the readers. The person considers these two as the same because void and voidable contracts have some similarities. However, void and voidable contracts are two different types of contracts. At the time of the formation of a company or any other deal with another party, it becomes important to know about the difference between void and voidable contract. It can help the person to choose the correct form of contract which is good for him.
To know about the difference between void and voidable contracts, lets us discuss the definitions of void and voidable contracts.
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Void contract meaning
According to the definition of void contract, the “contract which is void ab inito is known as void contract”. To understand this definition of a void contract, we must know about the term void ab initio which means void from the very beginning.
In simple words, a contract of an agreement that is null and void at the time of its formation is known as a void contract. The void contract is not enforceable by law. There can be many reasons for the contract to become void contract such as a contract without consideration is void.
The law provides the 5 usual Remedies for Breach of Contract for the breach of a valid contract. But if a person breaches the unenforceable contract (void contract), another party cannot use the remedies for breach of contract against that person.
A valid contract can also become a void contract at a later stage. The parties make the contract which follows the essential elements of a valid contract which are:
If any of the essential elements become impossible at a later stage the contract will become a void contract.
For example- A made contract with B that he will buy his Horse after two days at a cost of $2000. But the horse dies before two weeks. The contract will become a void contract.
Void contract example
- Aman made a contract with Shyam to buy the bike at the cost of $3000. The Shyam is not a sound mind. This is a void contract because Shyam is not capable to make contact. According to the Indian contract act, a person who is not sound mind cannot make the contract.
- Amit made a contract with Sunil that he will buy his bike and give him a packet of cannabis as consideration. The contract is void as the consideration is not lawful.
- Rahul made a contract with Ricky and sell him fake currency of $1000 and took his house into consideration, here the fake currency is illegal which make the contract void.
These are some examples of void contracts.
An agreement is a voidable contract when it is enforceable by law only at the option of one party from the parties of a contract. It means the party can make the contract void at any time.
The voidable contracts are considered valid contracts and enforceable by law till the time the party has cancelled the contract. But, if the party is willing to keep the contract valid, then it will be legal and enforceable by law.
There can be many reasons for the contract to become voidable contract which are:
- Fails to disclose the material facts
If one party of both parties are failed to disclose the material facts about the contract, the contract is voidable.
- A mistake in the contract
Any of the parties have done any mistake during the formation or after the formation of the contract.
- Fraud or misrepresentation
Either of the parties has done fraud during the fulfilment of the contract.
- Undue influence of party
If one party is in the dominant position of another party.
- Party is not legally capable
The competence of parties is important essential to a valid contract. A contract where the party is not capable of the contract becomes a void or voidable contract. A contract with a child who does not attain the age of majority is a voidable contract.
- The consent is not free
A contract made by taking the consent forcefully is not free consent and the contract becomes voidable at the option of the party whose consent is not free consent.
- Breach of contract
There are various types of Breach of Contract under the Indian contract act. If a party to the contract makes the breach, the other party has the option to make the contract void. This contract is a voidable contract. But if the minor has done any breach of contract, the other party has no remedy for breach of contract.
Voidable contract example
- Aman made a contract with Shyam to buy the bike at the cost of $3000. The Shyam is minor. This is a voidable contract because Shyam is not capable to make contact. According to the Indian contract act, a person who is not major or attains the age of 18 cannot make the contract.
- Rohit made a contract of bailment with Ram to take his 100 goods at a price of $300. Ram sold his good to him but half of the goods are of poor quality. Now, Rohit has the option to make the contract void because Ram did not tell him this fact.
- Rahul forcefully marries Neha. This is the example voidable contract and it comes under Void and Voidable Marriage. Neha has the right to make the contract of marriage void as it was not her free consent to marry Rahul.
Difference between Void and Voidable Contract
After reading about the definition of void and voidable contract, let us know about the difference between void and voidable contract:
- The void contract is void from the starting and it is not enforceable by the law. But, the voidable contract is not void from the beginning and it is enforceable by law at the option of one party.
- Section 2(j) of the Indian contract act deals with the void contract whereas the definition of a voidable contract is given under section 2(i) of the Indian contract act.
- Once the contract becomes void, neither party can enforce it. But voidable contracts are enforceable at the option of the aggrieved party.
- A void contract can be valid from the time of its formation but it becomes a void contract due to some reasons whereas, the voidable contract remains valid till the time the aggrieved party cancel the contract.
- No party can ask for the claim for the loss that occurred due to the void contracts. But, under the voidable contract, the aggrieved party can ask for the damages incurred by the fault of another party.
The void and void contract is different from each other. It is important to know the difference between void and voidable contract. Under the Void contract, we cannot ask for compensation for damages incurred due to the void contract whereas the aggrieved party in the voidable contract can ask for the compensation by cancelling the contract. The voidable contracts are enforceable by law but the void contract is void ab initio.