Void, avoidable and unenforceable contracts

 

In general, there are three classifications of contracts that are not binding:

o Void: If a contract is held to be void, the contract has never come into existence.

For example, a contract is void if it is based on an illegal purpose or contrary to public policy ; the classic example is a contract with a hit man . Such a contract will not be recognized by a court, and cannot be enforced by either party.

o Avoidable: A contract is avoidable if one of the parties has the option to terminate the contract. Contracts with minors are examples of avoidable contracts.

o Unenforceable: If a contract is unenforceable, neither party may enforce the other's obligations. For example, in the United States, a contract is unenforceable if it violates the Statute of frauds . An example of the above is an oral contract for the sale of a motorcycle for US$ 5,000 (because in the USA any contract for the sale of goods over US$500 must be in writing to be enforceable).

Uncertainty and incompleteness

If the terms of the contract are uncertain or incomplete, the parties cannot have reached an agreement in the eyes of the law. An agreement to agree does not constitute a contract, and an inability to agree on key issues, which may include such things as price, may cause the entire contract to fail.

However, a court will attempt to give effect to commercial contracts where possible, by construing a reasonable construction of the contract (see Hillas v. Arcos Ltd (1932) 147 LT 503).

Courts may also look to external standards, which are either mentioned explicitly in the contract ( Whitlock v. Brew (1968) 118 CLR 445) or implied by common practice in a certain field ( Three Rivers Trading Co., Ltd. v. Gwinear & District Farmers, Ltd. (1967), 111 Sol. J. 831). In addition, the court may also imply a term; if price is excluded, the court may imply a reasonable price, with the exception of land, and second-hand goods, which are unique.

If there are uncertain or incomplete clauses in the contract, and all options in resolving its true meaning have failed, it may be possible to sever and void just those affected clauses. The test of whether a clause is severable is an objective test - whether a reasonable person would see the contract standing even without the clauses.

This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Contract"