Voidable contracts are legally valid contracts which may be affirmed or rescinded by the ‘innocent’ party to the contract, as a result of issues that can be said to invalidate the contract. In this way, a voidable contract rescinded by the innocent party is generally viewed as void ab initio, namely, void from the outset.
How do void contracts differ from voidable contracts?
Unlike voidable contracts, contracts deemed to be void are invalid and unenforceable. As such, the parties are not bound by the terms of the agreement and the contract can be automatically terminated. Contracts can be declared void for a variety of reasons, including for a violation of public policy, a miscommunication in the terms of the agreement, a lack of mental capacity in signing the contract or as a result of illegality.
Why is a contract deemed voidable?
Contracts can be voidable due to a range of vitiating factors, including:
- Undue influence
- Duress
- Misrepresentation of information
- Mistake
If any of the above instances are identified in the contract, the innocent party can decide to reject the contract. As a result, the duties and obligations set out in the contract do not need to be fulfilled. This in turn, returns the parties to the positions they were in before the contract was entered into.
Can a minor enter into an enforceable contract?
As a general rule, contracts entered into by minors (under 18) regarding necessities (i.e. food, shelter, education etc.) or employment are voidable. Therefore, a contract cannot be enforced against a minor, despite their default on the contract.
Can a voidable contract still be enforceable?
Where the innocent party decides to enforce the voidable contract, often through the remedy of specific performance, the duties and obligations outlined in the contract must still be performed.
Conclusion
Ultimately, it is important to note the differences between void and voidable contracts. A contract can be deemed voidable as a result of a vitiating factor. As a result, the innocent party can either elect to affirm or rescind the contract, determining whether the duties and obligations outlined in the contract need to be performed.
If you need to clarify whether a contract is voidable, then reach out to us via the contact form or by calling 1300 337 997.
Chloe is studying a Bachelors of Law and a Bachelors of Security Studies at Macquarie University. Her interests are in commercial law and privacy law.
Phil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.
