What is the primary distinction between void and voidable contracts?

The primary distinction between void and voidable contracts lies in the legal effects each type of contract has. A void contract is one that is without legal effect from the moment it is created. This means that the contract cannot be enforced by either party, and it is as if the contract never existed. Examples of void contracts include agreements that involve illegal activities or contracts that lack essential elements, such as consideration or mutual consent.

On the other hand, a voidable contract is an agreement that is valid and enforceable on its face but contains certain conditions that allow one party to cancel or void the contract if they choose to do so. The key aspect of a voidable contract is that it remains valid until the party entitled to void it elects to do so. Common situations that can lead to a voidable contract involve issues such as misrepresentation, fraud, undue influence, or a party being a minor.

The understanding of these definitions is crucial in real estate and contract law, as it helps individuals navigate their rights and obligations within agreements. Recognizing the difference enables parties to understand when they can affirm a contract or seek to terminate it based on the circumstances surrounding its formation.