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What are “valid contracts”, “enforceable contracts”, “void contracts”, and “voidable contracts”?
There are several common characteristics of contracts that dictate whether a contract actually exists and whether it is enforceable in a court of law. The following vocabulary is important for characterizing these aspects of a contract.
Valid and Invalid – A contract is valid when all of the elements essential to forming a legal contract are present. Conversely, a contract is invalid (or rather, there is no contract) if any of the essential elements of a contract are missing. The elements to forming a valid contract (offer, acceptance, consideration, and a meeting of the minds) are discussed further below.
- Example: One person announces that she will sell her cell phone for a reasonable price. Another person quickly says, “I will buy it”. In this case there is not a valid contract because there is not enough specificity in the consideration. As such, a critical piece of the contract is missing. While the parties might think they have a contract, if a challenge to the contract arises, a court is likely to hold it to be invalid.
Enforceable and Unenforceable Contract – An enforceable contract is one that can be enforced in court of law. That is, the law allows for enforcement of the contract. An enforceable contract must always be valid. A valid contract may, however, be unenforceable. That is, even though all of the essential elements of a contract are present, a court will not enforce the contract.
- Example: An oral contract may be valid, but the court will not enforce it because that specific type of contract is required to be in writing under the state’s law. Contracts that are required to be in writing are discussed further below.
Discussion: Why do you think there is a distinction between a invalid contract and contract that is unenforceable against a party? Are there any reasons or justifications for treating them as one in the same?
Practice Question: Gayle arrives at work one morning and says to all of her colleagues, “I am tired of my piece of junk car. I would sell it right now for $500.” Bert thinks about Gayle’s statement and determines that it would be a good buy. After lunch, Bert approaches Gayle and says, “I will buy your car” and extends $500 in cash. Gayle, surprised by Bert’s actions, replies that she is not willing to sell her car. If Bert sues Gayle for breach of contract, what will be the likely result?
- For any agreement to be valid, it has to meet all the elements of a contract. This means that one person has to make an offer, the offer must be accepted, and there has to be a clear consideration being exchanged between the parties. The offer by the party should be clear and be distinguished from a remark or a simple statement or even a wish. In case of a sale for instance, the offer to sell must be made clearly as the owner willing to sell and not just a simple remark made out of frustration, boast, or jest. Gayle obviously made the statement out of frustration. There was never an offer to contract. Also, there is likely no meeting of the minds, and thus no offer or acceptance. Even if the court held that contract to be valid, it is likely not enforceable. Contracts for the sale of goods with a value of $500 or more must be in writing. If this were a valid contract, it does not meet this requirement and is thus unenforceable.