Many people use the terms “void contract” and “voidable contract” interchangeably.
Under Malaysian contract law, however, they mean very different things.
Understanding the distinction is important because it affects whether a contract is legally enforceable, whether it can be cancelled, and what remedies are available if a dispute arises.
What Is a Void Contract?
A void contract is one that has no legal effect. In other words, the law treats the agreement as unenforceable.
A contract may be void from the beginning or become void because of events recognised by law.
The Contracts Act 1950 contains several situations where this may happen. Common examples include:
- both parties are mistaken about a fact essential to the agreement (section 21);
- the agreement involves an unlawful object or consideration;
- the agreement is expressly declared void by the Contracts Act 1950; or
- the contract becomes impossible to perform under section 57.
Where a contract is void, neither party can generally insist on enforcing it.
What Is a Voidable Contract?
A voidable contract is different.
It remains valid and legally binding unless and until the party entitled to avoid it chooses to do so.
Under the Contracts Act 1950, a contract commonly becomes voidable where one party’s consent was not freely given. This includes situations involving:
- coercion;
- undue influence;
- fraud; or
- misrepresentation.
These are dealt with principally under sections 15 to 19 of the Contracts Act 1950.
Unlike a void contract, a voidable contract continues to operate unless the innocent party elects to rescind it.
Need Help Understanding Your Contractual Rights?
If you need help understanding your contractual rights or interpreting a contract under Malaysian law, feel free to get in touch. You can also explore Contract Law in Malaysia: A Practical Guide to Contracts, Agreements and Legal Rights for practical articles covering everything from contract formation to breach of contract and legal remedies.
Void vs Voidable: The Key Differences
| Void Contract | Voidable Contract |
|---|---|
| Has no legal effect or becomes unenforceable by operation of law. | Remains legally effective unless the innocent party chooses to avoid it. |
| Neither party can generally enforce the contract. | The innocent party may either affirm or rescind the contract. |
| Usually arises because the agreement is fundamentally defective or prohibited by law. | Usually arises because one party’s consent was not freely given. |
| Example: Both parties are mistaken about a fact essential to the agreement. | Example: A contract induced by fraud or undue influence. |
Can a Voidable Contract Become Fully Binding?
Yes.
One feature of a voidable contract is that the innocent party has a choice.
If, after discovering the fraud, misrepresentation or other defect, that party continues performing the contract or otherwise indicates that they accept it, they may be regarded as having affirmed the contract.
Once affirmed, the right to rescind may be lost.
Similarly, an unreasonable delay in taking action or the intervention of third-party rights may also prevent rescission in appropriate cases.
What Remedies Are Available?
The remedies depend on whether the contract is void or voidable.
For a void contract, the agreement cannot generally be enforced, although the law may require benefits received under the agreement to be returned through the principle of restitution.
For a voidable contract, the innocent party may generally:
- rescind the contract;
- seek restitution where appropriate; and
- depending on the facts, pursue other remedies such as damages for fraud or breach of contract.
The appropriate remedy will always depend on the circumstances and the legal basis of the claim.
A Practical Example
I’ll use the following examples to illustrate different scenarios where a contract may be void or voidable. Imagine you agree to buy an antique car.
Scenario 1 – Void Contract
Unknown to both parties, the car had already been destroyed during shipment before the contract was signed.
Because both parties were mistaken about a fact essential to the agreement, the contract may be void.
Scenario 2 – Voidable Contract
The car arrives safely and exists, but the seller falsely tells you that it is an original by a famous car builder when they know it is a replica.
If you relied on that statement when entering into the agreement, the contract may be voidable for fraud.
The difference is significant.
In the first example, there was never an enforceable agreement because of the fundamental mistake.
In the second, there was a valid agreement, but the innocent party has the right to set it aside because their consent was improperly obtained.
Frequently Asked Questions
1. Is a void contract the same as an illegal contract?
Not always.
While many illegal agreements are void, not every void contract is illegal. For example, a contract may be void because of a common mistake or frustration, even though neither party has done anything unlawful.
2. Can a void contract be enforced?
Generally, no. A void contract has no enforceable legal effect.
3. Can I choose to keep a voidable contract?
Yes. The innocent party may choose to affirm the contract instead of rescinding it.
4. Which is more serious: a void or voidable contract?
Neither is necessarily “more serious”. They simply produce different legal consequences. A void contract is unenforceable from a legal perspective, while a voidable contract remains binding unless the innocent party elects to avoid it.
Final Thoughts
The difference between a void and a voidable contract is one of the most important distinctions in Malaysian contract law.
A void contract has no legal effect because the law does not recognise it as enforceable. A voidable contract, on the other hand, remains valid until the innocent party decides whether to continue with the agreement or set it aside.
Understanding the difference between void and voidable contracts is only one part of Malaysian contract law. If you’re looking to learn more about offer and acceptance, consideration, misrepresentation, breach of contract, damages, specific performance, and your legal rights under the Contracts Act 1950, explore Contract Law in Malaysia: A Practical Guide to Contracts, Agreements and Legal Rights.
Whether you’re a business owner, employer, landlord, tenant or simply signing an important agreement, this comprehensive guide explains Malaysian contract law in plain English with practical examples and references to the Contracts Act 1950 and leading Malaysian court decisions.
