Under the law, contracts can be either void, voidable, or unenforceable. A void contract is one that is not enforceable from the very beginning as it was created illegally or against public policy. On the other hand, a voidable contract is one that can be legally terminated by one or both parties due to specific circumstances or defects. In this article, we will take a closer look at voidable contracts and the circumstances that make them annullable.
What is a Voidable Contract?
A voidable contract is one that can be declared void (annulled) by one or both parties due to a valid reason. The contract might be voidable if there are any defects in the formation of the agreement, such as error, fraud, misrepresentation, duress, undue influence, or mutual mistake. In such cases, one or both parties may have the option to rescind the agreement, effectively rendering it void.
The party seeking to rescind the contract must act within a reasonable timeframe and within the statute of limitations. The timeframe for rescinding the contract will vary based on the type of defect involved. For example, a party that has been coerced into signing a contract under duress might have a shorter timeframe to rescind the agreement than one that has been misled by fraudulent representations.
What Contracts are Voidable or Annullable?
1. Fraudulent Contracts
A contract that was formed based on fraudulent misrepresentations or concealment of material facts can be declared voidable. In such cases, one or both parties can void the contract and seek damages for any losses incurred due to the fraudulent misrepresentation.
2. Contracts made under Duress
Contracts made under duress are voidable. Duress refers to situations where one or both parties are forced into signing a contract due to fear, threats, or undue pressure from the other party. The party that has been coerced into signing the contract can declare it voidable.
3. Contracts with an Incapacitated Party
Contracts made with an incapacitated party, such as a minor, an individual with a mental disability, or an individual under the influence of drugs or alcohol, are voidable. The incapacitated party has the right to void the contract if they were incapable of understanding the terms or if the other party took advantage of their incapacity.
4. Mutual Mistake
If both parties enter into a contract under a mutual mistake, it can be voidable. A mutual mistake is a situation where both parties have the same understanding of the contract, but it is later discovered that their understanding was incorrect.
5. Undue Influence
Contracts entered into under undue influence are also voidable. Undue influence refers to situations where one party takes advantage of the other party`s weakness, such as their emotional or physical state, to influence them into signing the contract.
It is important to be aware of the circumstances that can make a contract voidable to avoid any legal issues in the future. If you find yourself in a situation where you believe that a contract is voidable, seek legal advice as soon as possible. Remember, the party seeking to rescind the contract must act within a reasonable timeframe and within the statute of limitations.