Question

(Business Law)

Explain the differences and similarities of the categories used to classify contracts by their enforceability: valid, unenforceable, voidable, void.

Answer 1

1. Valid Contracts

If a contract has all of the required elements, it is valid and enforceable in a court of law. Then such contracts is called valid contracts.

2. Unenforceable Contracts -

An unenforceable contract is a contract which cannot be enforced in a court of law. This could happen because the terms of the contract are ambiguous, if one party has a voidable contract or if the Statute of Limitations has expired or because of the Doctrine of Laches. The statute of limitations requires that lawsuits be filed within a certain period of time following a breach. Doctrine of Laches principal states that a court has determined a contract is unenforceable due to needless delay or neglect in filing a claim even though the statute of limitations may not have expired. Usually unenforceable contract suffers from some technical defect which may be insufficient stamp etc. and hence, after rectification of such technical defect, it becomes enforceable or valid contract.

3. Voidable Contracts -

A voidable contract is a contract which may appear to be valid and has all of the necessary elements to be enforceable, but has some type of flaw which could cause one or both of the parties to void the contract. The contract is legally binding, but could become void. If there is an injured party involved, the injured party or the defrauded must take action, otherwise the contract is considered valid. The validity and enforceability of the voidable contract depend on the choice of the unbound party. If the unbound party decides to repudiate the contract it becomes void. The right to rescind a voidable contract is retained by the unbound party. So voidable contracts can be a valid contract too.

4. Void Contracts -

A void contract is not a contract and has no effect in a court of law and cannot be enforced in a court of law. Most commonly, a void contract will be missing one or all of the essential elements needed for a valid contract. Neither party needs to take action to terminate it, since it was never a contract. This type of contract can’t grant any rights or considerations to any of the involved parties. Void contracts can never be a valid contract.