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As a business owner who frequently enters into contracts, you may want to know whether your contract is voidable. A voidable contract gives you the right to end your legal relationship with the other party. This can be particularly useful if you end up in a dispute with another party, and wish to cancel the contract you had with them.
This article will explain what a voidable contract is, when you may have the right to void your contract and some alternative options that may be available to you.
What is a Voidable Contract?
Put simply, a voidable contract is a contract that a party has the right to rescind. Rescinding a contract occurs when you put the contract aside and make it ineffective. Despite being voidable, this type of contract is still a legally valid contract which gives rise to rights and obligations.
To rescind a contract, a person can either:
- tell the other party that they are rescinding the contract; or
- ask a court to order rescission.
To be able to rescind a contract, you must do it within a reasonable period of time from when you have the right to rescind. When you rescind a contract, you will have the right to refuse further performance of your obligations. However, if you do not rescind the contract correctly, you may be taken to have affirmed the contract.
Affirming a contract is where you acknowledge your right to rescind, but choose to continue to perform the contract. Choosing to affirm the contract means that you cannot then rescind it.
What is a Void Contract?
Importantly, a voidable contract is different from a void contract. A void contract is a contract which was never a valid contract in the first place. This means that none of the two parties can enforce the contract using legal action. The contract also cannot transfer legal title to anyone, including an innocent third party.
Usually, a contract might be declared void by a court during a dispute for a number of reasons. These are outlined below.
| Reason for Void Contract | Example |
| The contract was not formed properly | This can occur if the subject matter of the contract was uncertain, or there was no intention to enter into a legally binding contract. |
| The parties made a mistake | Such a mistake can occur regarding, for example, the agreed-upon terms or either party’s identity. |
| Either party did not possess the requisite legal capacity to enter into a contract | If either party does not possess the mental capacity to enter into a contract, it is void. |
| Either party entered the contract on behalf of someone else without proper authorisation. | For example, if an employee enters into a contract in their employer’s name without authorisation, the contract will be void. |
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What Happens if I Rescind a Contract?
If you successfully rescind a voidable contract, a court will put you in the same position as if you had never entered into the contract in the first place.
The legal consequences for the rescinding party will be to return any benefits they have received from the other party. For example, title to a property or monetary payments must be returned.
When Will a Contract be Voidable?
Certain conditions can give rise to a voidable contract. For example:
- duress, such as where someone pressures you into entering into a formal agreement by using illegal force;
- undue influence, such as when one person takes advantage of their power to make you enter into a promise;
- misrepresentation, such as when the other party twists the material facts to make a false representation so that you enter into an agreement;
- when you enter into a contract with a person under 18 years old; and
- where one person does not have the mental capacity to enter into a valid contract.
As a result, a lawyer will have to assess how the facts of your case match up with contract law requirements for certain remedies. On the whole, taking your case to court to argue for rescission can be beneficial if you wish to get out of the contract that you have entered into.
Key Takeaways
As a business that is unhappy with a contract agreement with another party, you might want to explore your options in rescinding the contract. Rescission is where you set aside the contract, and it is usually available if your contract is voidable. If you have a voidable contract, you will be able to choose whether to affirm or rescind it.
A contract is usually voidable if the contract agreement involves duress, undue influence, or a false representation. To know if you have the right to rescind, it is a good idea to talk to a lawyer who is familiar with contract law and the material facts of your case.
If you have any questions about the voidability of your contract, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A contract is a legally binding promise, and it has a number of requirements to be legally valid, including mental capacity, offer and acceptance, and consideration.
A false representation is where a person misrepresents a set of facts to you, where the facts are an important reason for you entering into the contract.
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