What are Voidable Contracts:- A voidable contract is one that may be revoked or modified in accordance with certain legal requirements. 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. A formal agreement between two parties that is voidable on a number of legal reasons is known as a voidable contract.
Types of Contracts:-
- Valid contract
An agreement that is legally enforceable is regarded as a valid contract, according to Section 2 (h) of the ICA.
- Void contract
An agreement that is not legally enforceable is deemed void, according to Section 2(g) of the ICA.
- Voidable contracts
According to Section 2(i) of the ICA, a contract is voidable if it can only be enforced by law at the request of one or more of the parties thereto, but not at the request of another party or parties.
What are Voidable Contracts:-
The adjective “voidable” means “capable of being void.” 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 in spite of the defect, the contract continues to be valid and enforceable.
In most cases, entering into a voidable contract only harms one of the parties since that party doesn’t recognise the other party’s dishonesty or fraud.
Definition of Voidable Contract:-
A voidable agreement is one that is legal as long as one or both parties can decide 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 permission.
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 if coercion, fraud, undue influence, and other factors were present.
Essentially, there are three categories of voidable contracts:
- initially voidable
- Subsequently voidable
- Contracts that are voidable under the law (e.g., those that are nullified under section 8 of the Hindu Minority Act)
Sections 19 and 19 (A) of the ICA apply to these kinds of contracts. Agreements entered into by pressure, fraud, or deception are covered by Section 19.
According to this section, a contract that is entered into between parties without each party’s free consent and that consent was obtained through coercion, fraud, or misrepresentation is voidable at the discretion of the party whose consent was obtained through those methods.
According to the clause, if the person whose permission was obtained through fraud or misrepresentation wants the contract to continue, he will be placed in the same situation as he would have been in if the misrepresentation made to him had been accurate.
This section has the following two exceptions:
- The contract is not deemed to be voidable if the party whose assent was influenced by misrepresentation or silence to a fact, which is stated to fall under the definition of fraudulent under section 17, and the party has adequate means of learning the truth under the normal course of events.
- The contract is not voidable if the concerned party’s permission was not obtained by fraud or deceit. Coercion, fraud, and misrepresentation are the three factors mentioned by section 19 that make a contract voidable. In sections 15, 17, and 18, these concepts are covered in further detail.
Subsequently Voidable Agreement
These types of contracts are known as subsequently voidable contracts since they begin as lawful agreements with the opportunity for one of the parties to revoke it or continue with it at a later time. Sections 39, 53, and 55 of the ICA all deal with contracts like this.
Section 39 states that a contract may be terminated if one of the parties has completely abstained from performing it, unless the other party expressly or tacitly indicates his desire to continue.
Muralidhar Chatterjee. v. International Film Co. Ltd.
The plaintiffs and the defendants (a company of movie importers) made a deal for each party to receive three films over the course of three months. Plaintiffs were required to pay a set amount of money. On account of this, Rs 2000 was paid, and one film was delivered. However, the film was returned due to certain technical issues. In other words, the money was transferred without the movie being shown.
The plaintiffs therefore believed that the delay and contract breach constituted a breach of the agreement. They filed a lawsuit against the business to get their money back. In its ruling, the privy council stated that section 64 of the ICA requires the money to be refunded.
What you should know about voidable contracts
- A contract that is initially valid but becomes voidable as a result of the identification of voidability grounds is said to be voidable.
- A contract may be void from the start or subject to voidability after execution.
- A void contract is one that contravenes the law and wasn’t ever meant to be executed.
- A contract that the parties initially believed to be legitimate is voidable if it is later determined to be unenforceable against one of the parties for good reason.
The following events may result in the cancellation of a contract:
- Undue influence,
- Misrepresentation, and lack of legal ability.
- The ability of the party who feels it is not bound by the contract, known as the unbound party, to accept or reject it is a fundamental component of a voidable contract.
- If the released party agrees to the contract, it becomes enforceable against both parties.
- The freed party will assert that the contract is not enforceable against him or her if it rejects it.
- A lawsuit or other legal dispute is typically the outcome of this.
By assigning weight to the parties’ willingness to enter into the agreement, the idea of a voidable contract respects the parties’ freedom as we get to the conclusion of this article.
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-fulfillment.