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Void vs. voidable contracts: How courts determine validity

On Behalf of | May 1, 2024 | Business & Commercial Litigation |

Contracts are important legal documents that form the basis of many business relationships. However, not all contracts are created equal. Some agreements are enforceable, while others are not.

In Georgia, courts use several criteria to determine the validity of a contract.

Georgia law on contract validity

The Georgia Code establishes the legal framework for contracts in Georgia. According to the Code, a contract is a legally binding agreement between two or more parties. To be enforceable, a contract must meet certain criteria, such as having a lawful purpose and mutual assent.

Void contracts

A void contract is one that is fundamentally flawed and unenforceable from the outset. For example, a contract that involves illegal activities or an agreement that is impossible to perform would be considered void. The courts will not enforce a void contract, and it is as if the contract never existed.

Voidable contracts

A voidable contract, on the other hand, is an agreement that appears to be valid but has a defect that gives one party the right to cancel or rescind the contract. For example, contracts signed under duress, misrepresentation, or fraud are voidable. A contract can also be voidable if one of the parties lacks the legal capacity to enter into a contract, such as a minor or someone who is mentally incapacitated.

How the courts determine contract validity

When a contract dispute arises, the courts will consider several factors to determine whether the contract is valid. These include:

  1. Mutual assent: Did both parties agree to the terms of the contract?
  2. Consideration: Did both parties receive something of value in exchange for their promises?
  3. Capacity: Were both parties capable of entering into the contract?
  4. Legality: Does the contract have a lawful purpose and is it not against public policy?
  5. Formalities: Was the contract properly executed and signed?

Georgia courts use a variety of criteria to determine the validity of a contract. It is important to ensure that your contracts meet the legal requirements to avoid potential disputes and litigation.