Difference between Void Agreement and voidable contract

The following points of distinction are worth noting:

(1) Legality:

A void agreement is without any legal effect and hence cannot be enforced by either party. A voidable contract, on the other hand, can be enforced by the party at whose option it is voidable.

(2) Enforceability:

A void agreement is unenforceable from the very beginning, whereas a voidable contract becomes unenforceable only when the party at whose option the contract is voidable’ rescinds it.

Examples:

(i) A pays B Rs 10,000 in consideration of B’s promise to sell him some goods. The goods had been destroyed at the time of promise. The agreement is void and thus unenforceable.

(ii) A, a doctor, by exercising undue influence over his patient B induces him to sell his car worth Rs 1,50,000 for Rs 1,00,00. It is a voidable contract at the option of B. If B rescinds the contract, it becomes unenforceable; but if he does not, then the contract is enforceable.

(3) Compensation:

Under a voidable contract, any person who has received any benefit must compensate or restore it to the other party. The question of compensation in the event of non-performance of a void agreement does not arise, as it is unenforceable from the very beginning.

(4) Effect on collateral transaction:

A voidable contract does not affect collateral transaction. But if the agreement is void on account of the object or consideration being illegal or unlawful, the collateral agreement will also become void.