Home
Civil Law

Void and Voidable contract with examples

What is a Voidable Contract: Difference between Void and Voidable contract

Overview:

A contract is voidable when one of the parties has the right to void or cancel the contract. This may occur due to certain legal defects or circumstances that exist at the time the contract is formed, such as if one party is under duress,

if one party is a minor, if one party lacks the capacity to understand the terms of the contract, or if one party has been deceived by the other party. A party may also have the right to void a contract if it was induced by fraud, misrepresentation, or nondisclosure of material facts. In these cases, the party that was defrauded or misled may choose to void the contract and seek damages from the other party. It is important to note that a contract may only be voidable if a legal defect or circumstance exists at the time the contract is formed. If a legal defect or circumstance arises after the contract has been formed, the contract is generally not voidable.

Void vs Voidable contract with examples

Void Contract:

According to Section 2(i) of the Contract Act, a contract that ceases to be enforceable by law becomes void. A void contract is strictly a contradiction in terms because if an agreement is truly void it is not a contract, but the term is a useful one and well understood by lawyers. Thus there is a sharp difference between a void agreement and a void contract.

If you want to Learn about the void contract, we have published a detailed article on it

Voidable Contracts:

A voidable contract is one Where one or more parties thereto have the power, by the manifestation of election to do so, to avoid the legal relations created by the contract; or by affirmation of the contract to extinguish the power of avoidance. Contracts may be voidable, e.g., for misrepresentation, duress, undue influence, minority, unsoundness of mind, drunkenness, or under the statute.
According to Section 2(i) “An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.” It lies midway between a valid and a void contract.

Example of Voidable Contracts:

Here are a few examples of voidable contracts:

(a) Contracts entered into by a minor:
In many jurisdictions, a contract entered into by a minor (a person under the age of 18) is voidable by the minor, who can choose to either enforce or cancel the contract.
(b) Contracts entered into under duress:
If a person is forced or coerced into entering a contract, the contract may be voidable by that person.
(c) Contracts entered into by someone who is mentally incapacitated:
If a person is unable to understand the nature and consequences of the contract due to mental incapacitation, the contract may be voidable.
(d) Unconscionable contracts:
A contract may be voidable if it is extremely one-sided or oppressive, such that it is considered unconscionable.
(i) A, in order to deceive B, falsely states that 500 mounds of indigo are produced annually at A’s factory and thus induces B to buy the factory, the contract is voidable at the option of B. but B may continue with it if he wishes, (i) A contracts with B that A shall white-wash B’s house for Rs. 10,000. A is ready “to white-wash but B prevents him from doing 80. This contract, being voidable at B’s option, may be avoided by B.

What is the difference between void and voidable contracts:

The Differences between Void And Voidable Contracts are given below in the tabular form.

Void Contract

 

Voidable Contract

Meaning and Scope

In the Law of Contracts, the term “void” may mean several different meanings. The three most popular senses in which it is used are as follows:

(a) In one sense, a void contract means one merely ineffective; of no force and effect; it is not a contract whatever.
(b) In the second sense, it is said that an illegal agreement/ contract is void.
(c) Used in a third sense, while as a matter of entire technical accuracy, “void” can only be properly applied to those contracts that later on become of no effect.

A “voidable contract” is defined as an agreement that, at his option, one of the parties is entitled to treat it as never having been binding on him; a contract void as to the wrongdoer but not void as to the wronged party unless he so elects to treat it.

Ratification and Confirmation

The word “void” in the strict or accurate sense means “absolutely null” that is to say incapable of ratification or confirmation. A commonplace instance of a void act or transaction in the sense of absolute nullity is an agreement by a person under a legal disability, e.g., a minor or a person of unsound mind. Such an act is void ab initio and is incapable of ratification or confirmation. Law forbids the enforcement of such a transaction even if the minor were to ratify it after attaining a majority.

The word “voidable” on the other hand is something that could be avoided or confirmed and is not absolutely void. A contract merely voidable is capable of being confirmed or ratified by the party having the right to avoid it, and such ratification may be either express or implied. Ratification of a contract involves the same elements as the making of a new contract; there must be intent, and full knowledge of all material facts and circumstances, unless one purposely shuts his eyes to means of information and ratifies deliberately.

Oral acknowledgment and a promise to perform constitute sufficient ratification.
Ratification requires no new consideration, provided the original contract is based on consideration. It extends back to ‘the inception of the contract and makes it valid from the beginning. A voidable contract once ratified cannot be recalled.

Grounds

An agreement/contract is ab initio void if made;
(a) by incompetent parties;
(b) in restraint of marriage, trade, or legal proceedings;
(c) for an unlawful consideration and object;
(d) without consideration;
(e) with uncertain meaning; or
(f) by way of wager; and a contract becomes void where:
(g) parties agree to rescind or alter it with a new one;
(h) its subject matter is destroyed; or
(i) its performance becomes illegal or Impossible,
Whereas an agreement is voidable where fraud, undue influence, mistake, misrepresentation, or coercion has been practiced to obtain the consent of any of the parties by another party.

Remedies

The remedies against a void contract are a recovery of damages, cancellation of the instrument, declaration that the agreement is void, or/and restitution of benefits.

Whereas a party at whose option the contract is voidable can avoid the contract by way of rescission, and for this purpose, he may get the recession, adjudged by the court. In such a case, he may avail all the remedies available to a party in case of a void agreement or contract. But if chooses not to avoid the contract, he may seek specific performance of the agreement by the court.

Legal Efficiency

Avoid contact, according to Salmond, is one which fails to receive legal recognition or sanction, the declared will of the parties being wholly destitute of legal efficacy.

Whereas a voidable contract has conditional legal efficacy dependent on the option of only one party.

Creation of Legal Rights

No rights of any character in favor of anyone vest under a void contract. It is binding on neither party.

On the other hand, rights are created but conditional to and dependent on the exercise of the option of only one party. If he chooses to avoid the contract the other party is devoid of any right secured under the contract but if he elects to carry on with it the position would be otherwise.

Stranger’s interference

A void agreement or contract may be attacked as invalid by strangers.

But a voidable contract cannot be so attacked or interfered with by a person stranger to the contract.

Illegal contracts

A void agreement on a contract may be illegal.

While a contract that is ascribed as voidable cannot be illegal. In other words, an illegal contract is never voidable. But it can be void.

Obligations

A void agreement never imposes any obligation. A void contract creates obligations only so long as it becomes void, but after that, the obligations are discharged

Unless rescinded a voidable contract imposes the same obligations as though not voidable. The obligations are however determined according to the exercise of the right of option to avoid it.


In this Article, the expressions “void contract” and “void agreement” are used synonymously to distinguish both from the voidable contract. 

When a person can void a contract for duress

A contract can be voided for duress if one party was forced to enter into the contract under the threat of physical harm or other forms of coercion. Duress can be either physical duress, where one party is threatened with physical harm if they do not enter into the contract, or economic duress, where one party is threatened with financial harm if they do not enter into the contract.

To successfully void a contract for duress, the party seeking to void the contract must show that the other party used unlawful or improper pressure to force them to enter into the contract and that they did not have a fair opportunity to negotiate the terms of the contract or to seek legal advice.

It is important to note that not all forms of pressure or persuasion will be considered duress. For example, simply using strong or aggressive negotiation tactics or making a take-it-or-leave-it offer is not generally considered duress. The key is whether the pressure applied was improper or unlawful and whether it was sufficient to overcome the free will of the party seeking to void the contract.

Read also:
Highly accomplished, meticulously organized, and detailed Attorney with a proven track record of success in conducting legal research, analysis, trial preparation, and document drafting.