A lie is just a lie right? Nnnnoooope. If a lie is told in a situation involving a contract, it could actually render that contract completely void, contingent upon the circumstances under which the agreement was entered into. And, if the contract is ultimately determined to be void, it subsequently holds little more value than whatever paper it happens to be printed on. (You might as well gift it to your 5 year old niece or nephew for some imaginative doodling……or maybe even as materials with which to craft up a few paper airplanes).
Before we actually dive into the 8 most prevalent causes of contract invalidation, first we have to establish the difference between void and voidable (because there is DEFINITELY a difference). Then, we have to talk about assent for a little bit…because assent is effectively what makes a contract a contract. Don’t worry, we’ll be sure to keep this short and sweet…
Void Contract – This is a contract that never actually was a contract to begin with because it lacked one of the four essential legal elements of a contract (click here to learn more about what those are)
Voidable Contract – A contract in which all of the essential elements are present…HOWEVER, one or more of the elements may have been “corrupted” in some way shape or form at the time the agreement was made.
Mutual Assent – Mutual agreement between parties (i.e. – a “meeting of the minds”).
Genuine Assent – All parties having entered into the contract did so of their own free will, absent of: fraud, misrepresentation, duress, menace, or undue influence. (to be discussed in greater detail, below)
Now…with that out of the way, here are the 8 scenarios that cause contracts to be either void or voidable:
1 : INNOCENT MISREPRESENTATION
A misrepresentation made by someone who had reasonable grounds for believing that his false statement was true. Basically…they lied, but didn’t know you were lying. Voidable.
2 : FRAUD
Now, this is an outright lie with mal intent. Wrongful or criminal deception intended to result in financial or personal gain. Void.
3 : MUTUAL MISTAKE
A mutual mistake occurs when the parties to a contract are both mistaken about the same material fact within their contract. Void.
4 : DURESS / MENACE
Easy example to understand…if someone holds a gun to your head and tell you to give them your house, you would not have really made that decision of your free will now, would you? #rhetorical We kind of have an illegal contract, here. Voidable.
5 : UNDUE INFLUENCE
This is where one person is taking advantage of a position of power over another person. For instance, a relative or caretaker of an elderly person leverages that trusting relationship for personal gain to the detriment of that elderly person. Voidable.
6 : MENTAL INCOMPETENCE
A legal declaration of mental incompetence. Key word: LEGAL. Void.
7 : INTOXICATION
Under the influence of alcohol or drugs. Voidable.
8 : MINORS
Under the age of majority. This is a state based designation. But yes, it is 18 throughout most of the U.S. Voidable.
– – – > So saith The JD PALLAS REALTORS ®