When Does a Voidable Contract Become Void: Understanding the Legal Terminology
Contracts are legally binding agreements that are made between two or more parties. When parties enter into a contract, they expect that the agreement will be honored. However, what happens when a mistake is made, or one party wants to back out of the agreement?
In such cases, a voidable contract comes into play. Voidable contracts refer to agreements that can be avoided or declared invalid based on certain conditions. A voidable contract may be terminated at the option of one of the parties due to a defect or irregularity in the agreement.
However, not all voidable contracts are void. But when does a voidable contract become void? This article will help you understand the legal terminology and the conditions under which a voidable contract may become void.
Voidable vs. Void Contracts
Before we dive into when a voidable contract becomes void, it`s essential to understand the difference between voidable and void contracts. A void contract is an agreement that is invalid from the start. It has no legal effect, and no party can enforce it.
In contrast, a voidable contract is a valid contract that is subject to rescission by one of the parties involved. The party with the right to rescind the contract can choose to either enforce or avoid the agreement.
A voidable contract becomes void when the right to rescind expires, or the contract is ratified.
When Does a Voidable Contract Become Void?
A voidable contract may become void in the following ways:
1. Rescission: Rescission is the act of cancelling or terminating the contract. When a voidable contract is rescinded, it becomes void. The right to rescind a voidable contract may be exercised by the party who has been defrauded, coerced, or misled into entering into the agreement.
2. Ratification: Ratification is the act of adopting or affirming a contract that was initially flawed. When the party with the right to rescind ratifies the contract, the right to rescind becomes void. The contract is then binding on both parties.
3. Time Limit: The right to rescind a voidable contract becomes void when the time allowed for rescission expires. The time limit may be set by law or by the terms of the contract.
For example, in some states, the right to rescind a contract due to fraud may expire after three years. Similarly, if the contract states that the right to rescind expires after a certain period, the party with the right to rescind cannot exercise that right once the deadline has passed.
4. Waiver: Waiver refers to the intentional abandonment of a right. If the party with the right to rescind the contract waives that right, the contract becomes binding and cannot be considered void.
Voidable contracts are valid agreements that are subject to rescission. When a voidable contract is rescinded or ratified, it becomes void. The right to rescind a voidable contract may expire after a certain period, depending on the terms of the contract or the law.
Understanding when a voidable contract becomes void is crucial in ensuring that you honor the terms of the agreement and avoid any legal disputes. If you are unsure about the terms of a contract, seek legal advice to protect your rights and interests.