Voidable Contracts: Is Your Contract Enforceable?
Think there is something not quite above board in a contract? Perhaps your contract is voidable. Learn about them here.
Do you think there was something that negatively impacted the contract formation? Perhaps you feel that you didn’t truly consent to the contract? Perhaps your contract is voidable, allowing you to end the contract and cease your duties under it. Learn about voidable contracts, so you can know your rights and avoid creating contracts that are voidable.
What Is a Voidable Contract?
A contract that can be ended by the ‘innocent’ party is known as a voidable contract. However, with the consent of the parties, specifically the ‘innocent’ party, the contract can still be legally valid. A voidable contract is usually void ab initio, i.e. from the start. The contract will be rescinded and therefore the rights and duties of the contract will not have to be performed. Moreover, parties are usually returned to their initial position if the contract is voidable.
Is It Different to a Void Contract?
Yes, a void contract cannot be enforced by either party as they are terminated automatically. Contracts may be void because they are against public policy, a mistake in one of the terms or other factors. Importantly, voidable contracts can be enforced but a void contract cannot be enforced.
Why Might a Contract Be Voidable?
Contracts may be voidable for many reasons. Contracts that are individual who doesn’t have capacity will be voidable. Certain contracts that are with minors may be voidable, depending on which state you are in. Also, contracts entered with people with limited mental capacity are voidable. Contracts can also be voidable if there is duress, physical or economic, upon one of the parties to the contracts. Another reason is that there is misrepresentation in the creation of the contract.
Can I Still Perform the Contract?
If you are the ‘innocent’ party then yes you can still choose to enforce the contract. You will have to perform your duties under the contract if you enforce a voidable contract. So if you are considering terminating the contract because it is voidable, it is important sooner rather than later.
Conversely, if you are the ‘guilty’ party, then you will not have the right to terminate a voidable contract. Be careful when creating and enforcing the contract to minimise the potential for your contracts to be found voidable.
By knowing about voidable contracts, you can better protect yourself and make sure the contracts you enter into are legally valid. If you are unsure whether a contract you are in can be found to be voidable for either party, get in touch with a contract lawyer for advice.
Thinking a contract you have may be voidable? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.
Lachlan is an intern at Lawpath as part of the content team. He is currently studying a Juris Doctor at the University of Sydney. Lachlan has a keen interest in corporate law and commercial litigation.