Valid, Void, Voidable, and Unenforceable Contracts

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  • 0:06 Valid and Void Contracts
  • 1:59 Voidable and…
  • 4:22 Lesson Summary
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Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

There are several kinds of contracts. Some bind parties wholly, while others do not. The terms of the contract determine whether a contract can be fully executed.

Valid and Void Contracts

A valid contract is a written or expressed agreement between two parties to provide a product or service. There are essentially six elements of a contract that make it a legal and binding document. In order for a contract to be enforceable, it must contain:

  • An offer that specifically details exactly what will be provided
  • Acceptance, or the agreement by the other party to the offer presented
  • Consideration, or the money or something of interest being exchanged between the parties
  • Capacity of the parties in terms of age and mental ability
  • Intent of both parties to carry out their promise
  • Object of a contract is legal and not against public policy or in violation of law

In other words, a contract is enforceable when both parties agree to something, back the promise up with money or something of value, both are in sound mind and intend to carry out their promise and what they promise to do is within the law.

So, if Dennis offers to sell a puppy to Jean for the sum of $500 and Jean delivers the cash for the canine, providing Jean and Dennis are of age, the dog is rightfully Dennis' to sell and there is nothing illegal about the transaction, the parties have a valid contract. There are contracts that do not contain all of the elements, and for those contracts, the courts make the determination as to whether the contract can be enforced.

A void contract is missing an element. In this case, the contract does not have to be terminated in court. It simply does not have to be executed, and both parties can walk away. Suppose Dennis offers to sell his neighbor's dog to Jean. This would make the contract between the parties void because Dennis does not actually own the pooch. This means the sixth element, legal object, wasn't present. It is illegal to sell another person's personal property without permission.

Voidable and Unenforceable Contracts

A contract that is voidable sort of works the same way, but there is an option for the parties to enforce the terms even though an element is missing, or some other issue exists with the terms. The decision to enforce the contract is between the parties. In a voidable contract, one of the parties is legally bound to honor the contract. So, a voidable contract can be executed, even though there is an element missing, if the party not legally bound agrees to move forward.

Let's say Jean and Dennis negotiated the dog sale over a few cocktails. This may change things. Capacity is an element that requires parties to be of mature age, free of mental illness and not intoxicated. If Jean wakes the next morning to the bark of a dog and doesn't remember making the purchase, the contract may be voidable. In fact, there are several ways a contract may be voidable:

  • One or both of the parties wish to terminate the contract because an element was not present
  • One of the parties was coerced into the contract

In this case, Jean may ask Dennis to take the dog back and return her money. Dennis can return the cash and take the pup, or he can ask the court to decide. A good defense for Dennis may be to argue that Jean was not intoxicated at the time of the sale. Jean may contend that she was coerced by Dennis' offer to buy her several cocktails during negotiations.

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