Contracts are vital to most businesses, as they serve as a legally binding agreement between two parties. Contracts can range in types, and one of the most important ways to classify contracts is on the basis of validity. Contracts can be classified into five types on the basis of validity: valid, void, voidable, unenforceable, and illegal.
A valid contract is one that meets all the essentials of a contract, such as offer and acceptance, consideration, and the capacity to contract. When a contract has all these requirements, it is considered to be legally enforceable. The parties involved in a valid contract have legal obligations to fulfill their terms, and if they fail to do so, they can face legal consequences.
A void contract is one that is not enforceable by law, and it does not create any legal obligations for the parties involved. This type of contract is considered null and void from the beginning, and the parties cannot seek legal remedies in case the other party fails to perform. A void contract can occur in situations where the subject matter is illegal, or one of the parties lacks legal capacity, or the contract is against public policy.
A voidable contract is one that is legally enforceable, but the aggrieved party can choose to void the contract if they desire to do so. This type of contract is created when one of the parties enters into the agreement under duress, fraud, or coercion. The party that has been coerced or deceived has the right to either cancel the contract or enforce it.
An unenforceable contract is one that cannot be enforced by law, even though it may appear valid on the surface. The reasons behind this type of contract may include problems with the form of the contract or the statute of limitations. For instance, if the contract is not in writing, it may be unenforceable in certain situations and jurisdictions.
An illegal contract is one that involves an illegal act or subject matter. Such contracts are not enforceable by law, and the parties cannot seek remedies in case of a breach. Examples of illegal contracts include those that involve engaging in criminal activity or attempting to influence a public official illicitly.
In conclusion, there are various types of contracts that businesses can enter into, and it is important to understand these classifications on the basis of validity. It is also crucial to ensure that contracts are properly drafted and legally binding to avoid disputes and legal consequences in the future. A professional can play a key role in ensuring that contracts are free of errors in language, style, and format, which can help to prevent misunderstandings and legal disputes.