An agreement that is unenforceable from the moment it is created is void ab initio (or void from the outset). Examples would be that the contract did not possess any one of the essentialia of a valid contract as at the time of conclusion and therefore a contract could never have been created.

The following are requirements for a contract to be valid:

  • Consensus (a meeting of the minds)
  • Legal capacity
  • Lawful
  • Possibility
  • Formalities (compliance of any specific formalities required in law)

If anyone of more of the above were not present at the time of conclusion the contract is void.

An agreement which may be rendered unenforceable for a number of other legal reasons is voidable at the instance of the prejudiced party. Examples of grounds of voidability include failure to disclose a material fact, mistake, misrepresentation or fraud, undue influence or duress or unconscionable terms (this is not a closed list).

There is some overlap on the grounds that may make a contract void and the grounds that may make a contract voidable. The fundamental difference is that a void contract is not legally valid or enforceable at any point in time as it is void from the outset whereas a voidable contract can be legal and enforceable depending on how the contract defect is handled and whether or not the prejudiced party chooses to exercise the election to void the contract.  

If such an election is not exercised on a contract that a voidable by the prejudiced party, the contract will remain legally valid,  enforceable and binding.