Voidable Contract: Meaning and Types

There must be a legal precedent in order to discharge an obligation because not all contracts are voidable. Finding a defect in a contract is a common way to get out of it. When both parties agree to the voiding of the contract, it is easiest to do so, and this is usually the wisest course of action. However, in certain condition, one party legally can reject to perform his or her part and declare the contract void.

What are Voidable Contracts?

The word "voidable" denotes the condition to be revoked. A voidable contract is initially believed to be legitimate and binding, but if flaws are found, one party may reject it. If a party having the power to reject the contract elects not to do so despite the defect, the contract continues to be valid and enforceable. In most cases, entering a voidable contract only harms one of the parties since that party doesn't recognise the other party's dishonesty or fraud.

A formal agreement between two parties that is voidable under several legal theories is known as a voidable contract. These theories include −

• A party or parties failing to disclose a key fact

• An error, a false statement, or a swindle.

• Force or undue influence.

• The legal inability of one party to engage in a contract (e.g., a minor).

• At least one or more offensive terms.

• A breach of the contract.

Voidable Contracts Based on Formation Defects

If a contract was not created in accordance with the law, it can be void. Basically, for a contract to be enforceable in court −

• Offer and Acceptance

• Free consent

• Legal object

• Consideration

• Legal capacity.

Voidable Contracts Under the Indian Contract Act, 1872

A voidable agreement is one that is legal as long as one or both parties can opt to void it, according to Section 2(i) of the Indian Contract Act, 1872. In the majority of circumstances where a contract is voidable, one of the parties did not give their consent. As a result, the contract is only enforceable if both parties agree to its conditions; otherwise, it is void. An important factor in deciding whether a contract is voidable at either party's discretion is whether coercion, fraud, undue influence, and other factors were present.

Types of Voidable Contracts

Basically, there are three categories of voidable contracts −

Initially Voidable Contracts

The Indian Contract Act, 1872, addresses agreements established through coercion, fraud, or dishonesty under Section 19. According to this clause, a contract entered into by the parties without the consent of any party or consent obtained by duress, fraud, or deception is voidable at the discretion of the party whose consent was obtained in this manner. The individual whose consent was obtained by fraud or deception must be placed in the same situation as they would have been in if the misrepresentation made to them had been true if they want the contract to continue.

There are two exceptions to the aforementioned clause, namely −

• The contract is not stated to be voidable if the party whose assent was produced by silence on a fact or by misrepresentation, which is claimed to be fraudulent under Section 17 of the Indian Contract Act, 1872, and the party has adequate means of learning the truth in the normal course of events,

• The contract is not voidable if the relevant party's permission wasn't gained by fraud or deceit. As previously established, the three things listed under Section 19 that make a contract voidable are coercion, fraud, and misrepresentation.

Subsequently, Voidable Contracts

Hence, voidable contracts are those forms of contracts that become voidable after specific circumstances have occurred. Since they can be terminated or continued later by one of the parties, these contracts are known by this name. These agreements are governed by Sections 39, 53, and 55 of the Indian Contract Act of 1872.

• Section 39 (Impact of a party's refusal to fully perform a promise)

• Section 53 (Liability of party preventing the event on which the contract is to take effect)

• Section 53 (Liability of party preventing the event on which the contract is to take effect)

Contracts are Voidable by Law

The other party to the contract is released from any obligation to carry out any promises made therein to which the former is a promisor when the person whose option renders a contract voidable rescinds it. If a party cancels a voidable contract and obtains anything from another party to the contract, he is required to return that thing as much as he can to that person. The transmission or revocation of a voidable contract's rescission may be made in the same manner and under the same circumstances as those governing those actions.

Can a voidable contract be legally binding?

• The contract may become legally binding if the injured party does not reject or repudiate it within a reasonable amount of time after becoming aware of the reasons why it is void. Hence, you should raise it as soon as practical if you find evidence after a contract has been signed that you think justifies the contract's unenforceability. A voidable contract may be explicitly approved or accepted by the released party. There's a chance the acceptance goes unacknowledged.

• Once a fair amount of time has passed, a contract may become legally enforceable if the party who was wronged by it continues to abide by its terms despite learning of the other party's deceitful or fraudulent behaviour.

• Depending on the specifics and circumstances of each case, a voidable contract may nevertheless end up being enforceable. On the other side, a void contract is never enforceable.

Conclusion

It is obvious to say that the idea of a voidable contract respects the freedom of the parties to the contract by giving weight to the parties' willingness. It's interesting to note that Section 75 of the Indian Contract Act, 1872, supports this notion by stating that parties who are properly rescinding a contract are entitled to compensation for the loss they have experienced as a result of the contract's non-fulfilment.

This fundamental idea of a voidable contract also sheds light on the significance of "free consent" in the jurisprudence of contract law. It will therefore be accurate to say that one of the foundational principles of contract law is the idea of a voidable contract.

Frequently Asked Questions

Q1. What is an example of a voidable contract?

Ans. Minors who have signed a contract are free to withdraw at any time because they lack the legal capacity to enter into this arrangement. The contract is voidable if one party was duped or coerced into signing it.

Q2. What is the meaning of "voidable"?

Ans. The meaning of voidable is able to be made void." A misrepresentation by one party makes the contract voidable if the other party so decides.

Q3. What are the two kinds of voidable contracts?

Ans. Contracts signed without legal competence and agreements made without both parties' consent fall under the two categories of voidable agreements. A contract must contain two essential legal components in order to be enforceable: capacity and mutual assent.