Contracts need to be executed properly in order to be legally binding. Below you can find information about the key elements that make up a valid agreement, when a contract is considered void or reasons it can become voidable, and the steps you can take to make sure your contract is carried out correctly.
The Basic Elements of a Valid Contract
A valid contract is enforceable under state and federal laws, and contains all the required elements.
Offer and Acceptance
The two basic elements of a valid contract are “offer” and “acceptance”.
One party makes an offer (outlines what is provided), and the other party accepts the terms of the offer (usually in writing). Acceptance can take time, whereby the negotiation process takes place until an agreement is reached.
Legal Object and Capacity of Parties
The subject matter of the agreement must be legal and both parties must:
- Freely agree to the terms
- Be over the age of consent
- Be able to mentally carry out the agreement
Consideration
A valid contract must have the element of consideration (a price or value) exchanged in the agreement. Consideration is not limited to money, and can include a right, interest, or benefit. Both parties must benefit in some form.
For instance, when one party sells their vehicle to another party, the seller receives money, and in exchange, the buyer receives the vehicle.
Written and Verbal
There are oral agreements that can be enforced, but some contracts are not valid unless they are in writing. Usually those that involve a large amount of consideration or debts, real property, or contracts that won’t be carried out for quite some time (e.g. a Last Will and Testament), need to be in written form.
In summary, a contract is valid if the agreement is consensual, legal, backed up with a promise of consideration, and it is executed by two adult parties who are in sound mind—both of which intend to hold up their end of the bargain.
What is the Difference Between “Void” and “Voidable” Contracts?
When a contract is void, it is not valid. It can never be enforced under state or federal laws. A void contract is null from the moment it was created and neither party is bound by the terms. Think of it as one that a court would never recognize or enforce because there are missing elements.
A contract can be void for the following reasons:
- The terms of the agreement are illegal or against public policy (unlawful consideration or object)
- A party was not of sound mind while signing the agreement
- A party was under the age of consent
- The terms are impossible
- The contract restricts the rights of a party
Example: If an individual is hired by an employer and the terms of the Employment Contract list illegal job responsibilities, this contract is void because it is against the law and does not adhere to valid contract elements.
Alternatively, a voidable contract is valid and may be enforceable in certain situations if both parties agree to move forward. One party is bound to the terms of the contract, whereas the other party can oppose the contract for legal reasons if they so choose. Therefore if the unbound party rejects the contract, it becomes voidable.
A contract can become voidable under the following circumstances:
- A party was coerced or threatened into signing the agreement
- A party was under undue influence (one party is able to dominate the will of another)
- A party is not of sound mind or mentally competent (minor or mentally ill)
- The terms of the contract were breached
- Mutual mistakes on behalf of both parties
- The contract is fraudulent (omitting or falsifying facts or information, or the intention to not carry out the promise in the contract)
- Misrepresentation occurs (a false statement of fact)
Example: A minor signs a Residential Lease Agreement with a landlord.
Tips for Executing a Contract Correctly
Read it fully
When entering into an agreement with someone, it’s important to read through the document completely. Documents can be lengthy and may include several complex clauses. By taking the time to review its contents, you have proactively avoided missing any important information.
Clearly state the offer
The terms of the contract, including what is being offered, must be clear and specific. In the case of selling a vehicle, there must be a detailed description of the vehicle, including the make, model, year, etc.
Understand and clarify
Make the effort to fully understand what you are agreeing to and ask questions about any phrasing, definitions, or unclear terms.
Write it down
While oral contracts are enforceable in some locations, written documents are the only sure way to prove that an agreement was made. Contracts serve as guidelines for actions, such as payment or services, and also act as proof of agreement if any disputes arise later.
Pay attention to acceptance details
If there is an acceptance date on the contract, make sure to accept or deny the offer before its expiration. As the one who created the offer, you may revoke it if the other party has not yet accepted, only if you have not included an expiration date in the contract.
Know who you are dealing with
Whenever you do business with another individual, whether it’s leasing a property, entering into a partnership, or simply buying/selling an item, confirm the other party’s identity before signing anything to make sure they are who they say they are.
Think Before You Sign
Knowing the differences between a valid, void, and voidable contract can help you to better navigate your legal future and protect yourself before entering into any type of agreement.
Many of the reasons contracts are void or voidable are due to the illegal nature of the document, being taken advantage of by another party, or being presented with false information. Avoid having any involvement with parties you do not trust. It could save you or your family from future distress, legal fees, or agreeing to something you will later regret.
If you suspect that you entered a voidable contract, consult with a contract lawyer for guidance.
[…] in the form of money, but it can also include land or other property, or an exchange involving a “right, interest, or benefit.” A contract also needs to be consistent with a few other legal stipulations: First, it needs to be […]
Would our Birth Certificates be considered a Contract?
Hi there,
A birth certificate documents the birth of a child. It does not contain all the basic elements of a valid contract.
In contract law, if a contract runs out but is then charged and paid for 6 months later. Does the original contract and it’s content still stand?
Thank you.
Hi there, we recommend contacting a local attorney with your specific question as we cannot offer legal advice. Thank you!
Hi.. is the contract legal if the other party signature appear in photocopy only??
Hi Mimi, please refer to this article for more information: https://www.lawdepot.com/law-library/faq/legal-faq/#question1_0 or consult with a lawyer directly for guidance. Thank you.
We entered into a contract with a pest contol service 100% guranteed but 3 attempts on first spraying didn’t work at all, they came back three times with no results. Same amount of mosquitoes and bugs. Is the contract null and void.
Hi David, you may want to consider contacting a local attorney to review your contract, including any clauses regarding termination. Thank you.
If a car loan company changes the due date without a new contract, does that voids the old contract.
If you break a term of a contract because the other person verbally ok’d it, can they come after you a year later after allowing and fully knowing about the breech? Or is that term void?
Hi Monta, the following article discusses minor vs. major contract modifications: https://contracts.lawyers.com/contracts-basics/contract-modification.html. For more information, please contact a local attorney. Thank you.
Hi Betty, please refer to the following article for information about making verbal changes to a written agreement: https://www.priorilegal.com/blog/oral-contract-modifications-what-to-know-when-making-changes-to-existing-agreements or consult with an attorney for advice on your specific situation.
Hi please what are some of the factors that will disqualify a person from entering into a contract
Hi Emmanuel, as stated in the blog post, parties must be of sound mind, over the age of 18, and freely agree/consent to the terms in order to enter into a contract.
If you ask someone a specific question and he verbally lies, but you sign the contract based on that misrepresentation, is it a voidable contract? The contract is not clear on the question.
Hi Maria, you can refer to the following article for more information about misrepresentation: https://lawshelf.com/courseware/entry/misrepresentation-nondisclosure-duress-and-undue-influence including the example given. Unfortunately, we are not a law firm and cannot offer legal advice. Please contact a local attorney for advice regarding your specific situation. Thank you.
So if both parties fail to comply with the terms of the contract, is it void or can a party still be punished?
If a person does not speak or read English and signs a contract written in English can it be void?
Hi Tori, we recommend contacting a local attorney for advice related to your situation. Thank you.
Hi Ana, we cannot offer legal advice and recommend that you consult with a local attorney for the answer to your question. Thank you!
If you have a contract can they come up with other things and it’s not in the contract
Hi Maria, you may want to review your contract for any clauses regarding modifications or amendments, or refer to this article for more information: https://www.lawyers.com/legal-info/business-law/business-law-basics/contract-modification.html If you require legal advice, please contact an attorney in your area. Thank you.
If you have a contract can they write up another piece of paper and say that’s a part of the contract
Hi I have a question what can I do when someone else sign a contract with my name and I didn’t give them the permission??
Hi Laura, you can refer to the following article for more information: https://www.sapling.com/10004817/somebody-signs-signature-you or contact legal counsel for advice regarding your situation. Thank you.
Hi, I signed a contract which stated I cannot take annual leave during certain months of the year. My position within the company changed and I was given another contract. I have not signed the new contract as yet. Is the clause of when I can/cannot take annual leave still valid as in the first contract?
Hi Laetitia, you may want to contact a lawyer directly for an answer to your question. We are not a law firm and cannot offer legal advice. Thank you.
Can a company hold you to a contract that you never signed. The retailer before me signed a contract with a cleaning service company, when I tried to cancel the service they told I couldn’t as the contract
Is for that site. I never signed the contract and would never have as their fees are very expensive.
Hi Nancy, unfortunately we cannot provide legal advice on your situation. You may wish to consult with a lawyer or your commercial landlord if you are a business tenant for more information. Thank you.
Is a contract valid if the identifying information of one of the parties is incorrect? My boyfriend and I had an internet contract (in his name with his passport number), and they are saying that we owe them money because we never cancelled it; however, when we called to cancel it, they couldn’t find any information about the contract in their system (it was a 12-month contract, so we just assumed that, after 12 months, it expired, especially since they no longer had the information in the system). However, since they are now trying to claim more money, we have found out through the debt collection company that they have the incorrect passport number on the contract, which is why they couldn’t find the information when we called. As such, we’re wondering if they even have a legal leg to stand on because the identifying information in the contract is incorrect. Just to be clear, the reason that we couldn’t cancel the contract was because THEY put the wrong information on the contract, and, therefore, couldn’t find the information in their system to cancel it when we gave their customer service line the CORRECT identifying information. Thanks for any help you can give us!
Does an incorrect date on a contract void the contract?
Hi Christina, sorry to hear about your situation. We wish we could provide more assistance, but unfortunately we are not a law firm and cannot offer legal advice. It’s recommended you speak to a lawyer in your area, or you can refer to this article for more information: https://gowlingwlg.com/en/insights-resources/articles/2015/back-to-basics-what-to-do-if-document-execution
Hi Bec, you may want to contact a lawyer for an answer to your question, or you can review this article about contract mistakes for more information: https://www.hg.org/article.asp?id=43434
If a consumer knowingly signed a contract with an invalid name, would that make it impossible to enforce the contract on them?
Hi Dylan, if you’re unsure about the validity of a signature or contract, it’s best to contact a lawyer near you for advice on your situation. Thank you.