What Is the Difference Between Void and Voidable Contracts?
A void contract has no legal effect from the start and cannot be enforced by either party. A voidable contract is valid until the injured party chooses to cancel it.
Key Takeaways
- A void contract has no legal effect from the start and cannot be enforced by either party.
- A voidable contract is valid until the injured party chooses to cancel it.
Contracts on the Real Estate Exam
The distinction between void and voidable contracts appears on every state's real estate exam. You will see scenario questions where you need to classify a contract based on the circumstances. Getting this right is worth easy points because the rules are clear once you understand them.
Understanding Contracts: Key Concepts
What It Means
The difference between void and voidable is one of the most important distinctions in contract law, and it comes up repeatedly on real estate exams.
A void contract is one that never had any legal effect. It cannot be enforced by either party, cannot be ratified, and is treated as though it never existed. The most common examples in real estate are contracts with an unlawful object (for example, an agreement to use property for an illegal purpose) and contracts signed by a person who has been legally declared mentally incompetent by a court.
A voidable contract, on the other hand, is a valid contract that can be cancelled (disaffirmed) by one party due to some defect in its formation. Until the injured party chooses to cancel, the contract remains in full force. The key examples are contracts signed by a minor (under 18), contracts entered into under duress, undue influence, menace, or fraud, and contracts that violate the Statute of Frauds (oral when they should be in writing).
The critical difference is choice. With a voidable contract, the injured party has the option to either enforce the contract or cancel it. With a void contract, there is no contract to enforce, and neither party has a choice.
One common exam trap: a contract signed by someone who is intoxicated or mentally impaired (but not court-declared incompetent) is voidable, not void. Only a court declaration of incompetency makes the contract void from the start.