Final answer:
A void contract is inherently invalid, while a voidable contract can be rejected by one party. A court ruling on the contract's status has implications for third parties who may have relied on the contract's validity, with third parties generally having no recourse for void contracts but potential protections in the case of voidable contracts.
Step-by-step explanation:
Difference Between Void and Voidable Contracts
The main difference between a void contract and a voidable contract lies in their validity and enforceability. A void contract is one that is not legally valid from the beginning and therefore cannot be enforced by any of the parties involved. It is as if it never existed. On the other hand, a voidable contract is a legal contract which may appear valid but can be rejected by one of the parties for certain legal reasons. Unlike void contracts, voidable contracts are considered valid and enforceable until one party chooses to void it.
Significance of Void and Voidable Contracts to Third Parties
When a court holds a contract to be void or voidable, it has a significant impact on innocent, subsequent, third parties for value. If a contract is declared void, third parties who have acted in reliance on the contract, unaware of the invalidity, generally have no recourse because the contract was never valid. However, if a contract is voidable, and a third party has given value in reliance on the validity of that contract, they may be protected under certain conditions, especially if they are considered to be in 'good faith' and without knowledge of the reasons making the contract voidable. This distinction aims to prevent harm to innocent parties and preserve the integrity of contractual transactions.