What makes a contract valid?
Generally, a contract is an agreement between two or more entities that creates a legally binding promise to perform something. The elements of a valid contract include:
- Subject. This includes all details of the contract's terms, primarily the offer and acceptance. For example, Brakes Express offers to replace the brake pads in Kimi's car by 3:00 PM today in exchange for $150, which Kimi accepts by signing the contract.
- Consideration. This is the reason for the contract, or the value that each party is receiving. For instance, Janelle offers to buy Eric's autographed poster of Prince for $500. In this case, the consideration being offered for the poster is $500, and the consideration offered for the $500 is the poster.
- Capacity. If you have the capacity to enter into a contract, it means you are of sound mind, have reached the age of majority (18 in most states), and have the authority to enter into a given agreement.
What makes a contract null and void?
In contract law, the term "null and void" means the contract was never valid. Therefore, the contract has no legal effect. This is different from having a contract invalidated. Contracts may be considered null and void for various reasons, generally because they're missing one or more of the elements discussed above. These are some of the most common reasons:
- The subject of the contract is illegal. For example, if you sign a contract to launder money for an organized crime syndicate, but the other party breaches its terms, you have no legal recourse because the subject of the agreement was unlawful.
- The terms are vague or impossible to fulfill. Let's say you signed a contract to supply a restaurant with a certain amount of fresh abalone, but you can't fulfill your obligation because a ban on harvesting abalone was subsequently passed. In this case, the contract may be considered null and void because your obligation became impossible to fulfill.
- Lack of consideration. There needs to be a clear objective for the contract, where the parties are involved in an exchange of some sort. For example, you may not contractually agree to do something you've already done (called a "past consideration") or something you're already legally required to do.
- Fraud. A contract could be invalidated because one party got the other party to sign it by lying or concealing important facts. For instance, if Craig presents himself as a plumber but actually has no plumbing experience, the contract he entered into with Aaron to personally replace all of the old pipes in Aaron's house could be ruled null and void due to fraud.
How is a voidable contract different from a null and void contract?
A null and void contract is considered dead on arrival because it was never valid. By contrast, a voidable contract may be deemed valid if both parties agree to proceed. For example, Janelle offers to buy Eric's autographed poster of Prince, but upon closer inspection, both she and Eric realize that the autograph is not Prince's, but Sheila E's. Janelle could void the contract because of Eric's mistaken belief that Prince signed the poster, but decides to go through with the deal anyway, because she's an even bigger fan of Sheila E. So even though the contract is voidable because of the mistake, it is deemed valid and enforceable because Janelle has agreed to the deal despite the mistake.
Some other reasons a contract may be considered voidable are:
- Coercion or undue influence
- Withheld or misrepresented information
- Breach of contract by one or more parties
- One or more parties lacks the capacity to enter into the contract
Can a contract be rendered null and void by mutual agreement?
If both parties want out of the agreement, that may be achieved by signing aMutual Rescission and Release Agreement.The Mutual Rescission and Release Agreement serves to render the original contract null and void and places the parties back to their original positions before they entered into that first agreement.
Get expert legal support for your contractual needs
When you're entering into an agreement that will be backed by the force of law, it's important to take care and pay attention to the details. Signing a contract that's later rendered null and void can lead to unintended consequences, costing you time and money. Make sure your contractual agreements reflect your intentions, protect your interests, and are legally enforceable. If you have additional questions or concerns, be sure toask a lawyer.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
As an expert in contract law, I bring a wealth of knowledge and experience to shed light on the concepts discussed in the article. My expertise is rooted in both academic study and practical application, having navigated the intricacies of contractual agreements in various legal contexts.
Now, let's delve into the key concepts outlined in the article:
1. Elements of a Valid Contract:
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Subject: This encompasses the terms of the contract, including the offer and acceptance. An example provided is the offer by Brakes Express to replace Kimi's car brake pads for $150, which Kimi accepts by signing the contract.
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Consideration: This refers to the value exchanged by each party. An illustration is Janelle offering $500 for Eric's autographed Prince poster, with the consideration being the poster itself.
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Capacity: Parties entering a contract must be of sound mind, have reached the age of majority, and possess the authority to engage in the agreement.
2. What Makes a Contract Null and Void:
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Illegal Subject: Contracts can be deemed null and void if the subject matter is illegal, as illustrated by signing a contract to launder money for organized crime.
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Vague or Impossible Terms: If contract terms become vague or impossible to fulfill, the contract may be considered null and void. An example is a contract to supply abalone when a subsequent ban on harvesting occurs.
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Lack of Consideration: A contract may be void if there is no clear objective, or if there's a lack of exchange between the parties. Past consideration or fulfilling existing legal obligations are not valid.
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Fraud: Contracts can be invalidated if one party obtained the other party's agreement through lying or concealing important facts, as seen in the example of a fake plumber entering into a contract.
3. Voidable Contracts:
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A voidable contract differs from a null and void contract. It may be considered valid if both parties agree to proceed, even if there are grounds for voidability.
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Reasons for voidable contracts include coercion, undue influence, withheld or misrepresented information, breach of contract, or lack of capacity by one or more parties.
4. Mutual Rescission and Release Agreement:
- If both parties wish to terminate an agreement, they can sign a Mutual Rescission and Release Agreement. This renders the original contract null and void, returning the parties to their positions before the initial agreement.
In conclusion, understanding the nuances of contract law is crucial to creating enforceable and legally sound agreements. The article emphasizes the importance of seeking expert legal advice to navigate the complexities and avoid unintended consequences.
