Assignment on Business Ethics & Legal

Environment
Title: All Contracts are Agreements, but all Agreements are not
Contracts

Course: Business & Legal Environment (EMBA 510)

Submitted to
Debashis Saha
Lecturer
Department of Finance & Banking
Faculty of Business Studies

Submitted by
Md. Tanim Hossain
ID - 20152105
Batch: 12th (Finance & Banking)
Program: MBA

Jahangirnagar University
Submission Date: December 31, 2016

Difference between Void Contract and Voidable

Contract

Introduction
Void contract and voidable contract, they almost seems same sound and for this reason is very
usual that people get easily confused between this two different types of contract. In sort, Void
Contract is the contracts that cannot be enforceable, but the Voidable Contract is the contract in
which one party has the right to enforce or rescind the contract. Form the definition we can easily
see

that

there

is

huge

difference

between

them.

Definition of Void Contract

A void contract is a formal agreement that is illegitimate and unenforceable from the moment it
is created. At the time of formation of the contract, the contract is valid as it fulfills all the
necessary conditions required to constitute a valid contract, for an example we can say about free
consent, capacity, consideration, a lawful object, etc. But due to a subsequent change in any law
or impossibility of an act, which are beyond the imagination and control of the parties to the
contract, the contract cannot be performed, and hence, it becomes void. Further, no party cannot
sue the other party for the non-performance of the contract.
The contract becomes void due to the change in any law or any government policy for the time
being in force in India. Along with that, the contracts which are opposed to public policy also
ceases its enforceability. Contracts with incompetent persons are also declared void like minor,
persons of unsound mind, alien enemy or convict, etc.
An agreement may be void if any of the following:

 Made by incompetent parties

Has a material bilateral mistake
Has unlawful consideration
Concerns an unlawful object
Has no consideration on one side
Restricts a person from marrying or remarrying
Restricts trade
Restricts legal proceedings
Has material uncertain terms
Incorporates a wager, gamble, or bet
Contingent upon the happening of an impossible event
Requires the performance of impossible acts

Example of Void Contract

Any contract agreement created between two parties for illegal actions is considered a void
contract. The most common example of a void contract is a contract between an illegal drugs
suppliers for a specified supply of drugs provided to an illegal drug dealer. This type of formal
agreement is illegitimate since it involves illegal goods and is considered unenforceable from its
creation since it does not seek to serve a legal purpose.

Definition of Voidable Contract

Voidable Contract is the contract which can be enforceable only at the option of one of the two
parties to the contract. In this type of contract, one party is legally authorized to make a decision
to perform or not to perform his part. The aggrieved party is independent to choose the action.
The right may arise because the consent of the concerned party is influenced by coercion, undue
influence, fraud or misrepresentation, etc.
The contract becomes valid until the aggrieved party does not cancel it. Moreover, the party
aggrieved party has the right to claim damages from the other party.

Key Differences between Void Contract and Voidable Contract

There are some key differences between void contract and voidable contract which are given on
the bellow:

A contract which lacks enforceability is Void Contract. A contract which lacks the free
will of one of the parties to the contract is known as Voidable Contract.

Void Contract is defined in section 2 (j) while Voidable Contract is defined in Section 2
(i) of the Indian Contract Act, 1872.

A void contract was valid at the time when it is created, but later on, it becomes invalid.
Conversely, the voidable contract is valid until the aggrieved party, does not revoke it
within stipulated time.

When it is impossible, for an act to be performed by the parties, it becomes void, as it

ceases its enforceability. When the consent of the parties to the contract is not free, the
contract becomes voidable at the option of the party whose consent is not free.

In void contract, no party can claim any damages for the non-performance of the contract.
On the other hand, the aggrieved party can claim damages for any loss sustained.

Comparison Chart
BASIS

FOR

VOID CONTRACT

VOIDABLE CONTRACT

COMPARISON

Meaning

The type of contract The contract in which

which

cannot

enforceable

is

be one of the two parties

known has

as void contract.

the

Nature

(j)

Section

Indian

Contract

of

as

contract.
the Section 2
Act, Indian

voidable
(i)

of

Contract

the
Act,

1872.
1872.
The contract is valid, The contract is valid,
but

subsequently until the party whose

becomes invalid due to consent

Reasons

to

enforce or rescind it, is

known

Defined in

option

is

not

free,

some reasons.
does not revokes it.
Subsequent illegality or If the consent of the
impossibility of any act parties
which

is

performed

to
in

is

not

be independent.
the

Rights to party

future.
No

Suit for damages

aggrieved party.
Not given by any party Damages
can

Yes, but only to the

be

to another party for the claimed

non-performance,

by

the

but aggrieved party.

any benefit received by

any

party

must

be

restored back.
Conclusion
There are many contracts which are valid, but sometimes due to certain circumstances, they
cease to be enforceable which makes them a void contract because it is impossible that the
contract is to be further executed. Similarly, many people unlawfully induce or persuade the will
of another person to enter into a contract, which becomes voidable at the option of the party
whose consent was so induced.