4.2. Contract Terminology

4.2. Contract Terminology: Status and Validity

PART A: CONCEPT & TERMINOLOGY

In Legal English, not all "bad" contracts are the same. We must distinguish between contracts that never existed in the eyes of the law and those that are valid but can be cancelled.

1. Void Contract A contract that has no legal effect from the moment it was made. It is "null and void." Legally, it never existed. Example: A contract to sell illegal drugs or a contract signed by a person adjudicated as mentally incompetent.

2. Voidable Contract A contract that is valid and enforceable, but one party has the option to cancel (avoid/disaffirm) it. If that party chooses not to cancel, the contract remains valid. Example: A contract signed by a minor (under 18) is voidable by the minor. Contracts induced by fraud or duress are also voidable by the victim.

3. Executory Contract A contract where one or both parties still have obligations to perform. The duties are "pending". Example: You sign a contract today to buy a car, but delivery and payment will happen next week.

4. Executed Contract A contract where all parties have completely fulfilled their obligations. The deal is "done". Example: You buy a newspaper, pay cash, and take the paper. Nothing is left to do.

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PART B: INTERACTIVE EXERCISES

Exercise 1: Matching Definitions

Match the legal term with the correct definition.

1. Void	-- Select Definition -- A. Duties remain to be performed. B. Valid but can be cancelled. C. No legal force; a nullity. D. All parties completely performed.
2. Executed	-- Select Definition -- A. Duties remain to be performed. B. Valid but can be cancelled. C. No legal force; a nullity. D. All parties completely performed.
3. Voidable	-- Select Definition -- A. Duties remain to be performed. B. Valid but can be cancelled. C. No legal force; a nullity. D. All parties completely performed.
4. Executory	-- Select Definition -- A. Duties remain to be performed. B. Valid but can be cancelled. C. No legal force; a nullity. D. All parties completely performed.

Exercise 2: Void or Voidable?

Read the scenario and select the status.

1. Ahmet (16) buys a luxury watch on installment. Two weeks later, he wants to return it.

VOID

VOIDABLE

Reason: Minors generally lack capacity, making the contract voidable at their option.

2. Two parties sign a contract to smuggle antique artifacts (a crime).

VOID

VOIDABLE

Reason: Contracts for an illegal purpose (Malum in se) are void.

3. A company forces an owner to sign by holding a gun to his head (Physical Duress).

VOID

VOIDABLE

Reason: Physical duress usually renders a contract void because there is no intent.

Exercise 3: Executed vs. Executory

Analyze the timeline status.

1. You ordered a laptop and paid, but it hasn't shipped yet.

EXECUTED

EXECUTORY

2. You buy a coffee, pay $5, drink it, and leave.

EXECUTED

EXECUTORY

3. A tenant signs a 1-year lease. 11 months of rent are still future.

EXECUTED

EXECUTORY

Exercise 4: Contract Anatomy

Identify the highlighted parts of this contract clause using the dropdowns.

CONTRACT FOR SALE OF GOODS

THIS AGREEMENT is made on 1st June 2023 [ Identify this part ] Consideration (Price) The Parties Subject Matter Date of Agreement , between ABC Corp and XYZ Ltd [ Identify this part ] Consideration (Price) The Parties Subject Matter Date of Agreement .

WHEREAS, Seller desires to sell and Buyer desires to buy 100 Units of Industrial Steel [ Identify this part ] Consideration (Price) The Parties Subject Matter Date of Agreement .

THEREFORE, in consideration of the mutual promises herein...
1. Price: Buyer shall pay $5,000 [ Identify this part ] Consideration (Price) The Parties Subject Matter Date of Agreement to Seller.

Exercise 5: Gap Fill

Complete the summary. Choose the best word.

"A contract entered into by a minor is usually (1) ... ratified void voidable capacity executed , meaning the minor can choose to cancel it. However, if the minor turns 18 and continues to use the item, the contract may be (2) ... ratified void voidable capacity executed (approved) and become fully binding. In contrast, a contract to commit a crime is (3) ... ratified void voidable capacity executed from the beginning. Once both parties have finished all their duties, the contract is described as (4) ... ratified void voidable capacity executed . One must have legal (5) ... ratified void voidable capacity executed to enter into a valid contract."

CLICK TO SHOW ANSWER KEY

Exercise 1: 1-C, 2-D, 3-B, 4-A.

Exercise 2: 1. Voidable, 2. Void, 3. Void.

Exercise 3: 1. Executory, 2. Executed, 3. Executory.

Exercise 4: 1. Consideration, 2. Parties, 3. Subject Matter, 4. Date.

Exercise 5: 1. voidable, 2. ratified, 3. void, 4. executed, 5. capacity.