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When a contract is voidable

We have discussed contracts a couple of times before in this blog. Simply put, very few businesses can survive without contracts, whether they are with clients, employees, vendors or other parties that allow the business to function.

However, just because a business contract exists does not mean that it is legally enforceable in court. Sometimes, one of the parties to a contract can successfully argue that the document is either void or voidable.

Those words mean similar things, but a void contract is not the same thing as a voidable one. A void contract is one that is automatically invalid under the law, even if all the parties wish to enforce it. The court will treat a void contract as if it never existed.

In contrast, a voidable contract is one that a party can cancel if he or she chooses to. Possible reasons a contract is voidable include:

  • Mutual mistake. This means that both parties were mistaken about a relevant fact when they signed the contract.
  • A party lacked legal capacity to sign a contract. This can refer to a party who is mentally disabled, or was intoxicated at the time of signing, to the point that he or she did not understand what he or she was doing.
  • One of the parties was forced or tricked into signing against their will. Things such as coercion, undue influence, misrepresentation and fraud can make a contract voidable.
  • One of the parties was a minor. However, once the minor reaches the age of majority, he or she must generally cancel the contract within a reasonable period of time.

Having a contract voided in court is relatively rare, but it can happen if the parties are not careful. A business law attorney can help by reviewing a prospective contract and advising a business whether it is legally sound.

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