Overview of Voidable Contract Examples
Voidable contracts refer to the type of contract under the category or division based on validity. However, it can be mixed with the term void contract as well. Therefore, for a complete explanation let’s get a clear understanding of a few basic terms first like what is a contract (required for the study of voidable contracts), its kinds, etc.
Introduction to contract
A contract is termed as an agreement ( a promise with the accepted proposal) enforceable by the law that creates mutual legal obligations between two parties that can be written or oral. However, oral contracts are not preferred since there are no records maintained and avoided. There are certain elements required for a contract.
- The contract cannot be used for illegal purposes and have a legal objective.
- There must be a mutual agreement between the two parties. There can be a situation where one party offers the other any proposal.
- Consideration is necessary to call the contract to be a valid one. Consideration explains that the parties agree on providing something of value to each other for a benefit.
- Another element says that the parties should be legally competent. This explains that the minor, mentally impaired, or unsound mind can not hold a contract.
- Lastly, the agreement should be based on the will of the party or free consent and will be considered void if there is fraud, duress, or a mistake by anyone.
Breach of Contract
If any one of the parties fails to complete their legal obligations as discussed in the contract, the specific party has breached the contract. If one party violates, the other might suffer economic losses.
For example, if an individual hires a company for construction to complete a project within a given deadline but the company is unable to fulfill it, then the person might face losses.
However, there are various ways to compensate for losses. The individual can sue for damages, terminate the contract, or demand for a different performance. As a result, the court decides the amount of compensation and the outcome.
Types of Contract
There are various types of contracts depending based on validity, information, and execution. Therefore, they are explained as follows:
Based on Validity
- Valid contract: An agreement that contains all the elements discussed above for a contract is termed a valid contract. However, they can be enforceable by law as well.
- Void contract: An agreement that is an unenforceable contract example by law is referred to as void. A contract can originally be valid and binding on parties which might subsequently become void. A contract that gets ceased or stopped to be enforceable by law.
- Voidable contract: An agreement enforceable by law at the option of one or more of the parties but not at the option of others, is termed a voidable contract. In brief when the contract’s consent is not free. However, the contract is valid until it gets repudiated by the aggrieved party which will be explained with a further voidable contract.
- Illegal contract: Illegal contracts are the ones that are forbidden by law. Moreover, if permitted, would defeat the provisions or is fraudulent. Implies or involves injury to a property or a person or court stands it as opposed to public policy or immoral. These acts get punishable by law termed as void-ab-initio. This is also said that “ all illegal agreements are void agreements but all void agreements are not illegal”.
- Unenforceable contract: When a contract is good enough in substance but due to some technical defect it cannot be enforceable by law is regarded as an unenforceable contract example. This kind is neither voidable nor void. The defect can be the absence of registration, writing, or time-barred by the law of limitation, etc.
Based on Execution
- Executory contract: It describes the situation where one or both parties still have to carry out their obligations. Such considerations are future contracts that will be carried out in some time. For example, X purchases a car from Y worth Rs. 1,00,000. Presently, X just made an installment of Rs. 60000 and Y has not moved the agreement. Therefore it is an executory contract where the gatherings have to meet the commitment made.
- Executed contract: When both parties fulfill their required obligations under the contract, it is known as an executed contract. In many cases, promises are made and immediately executed by the other party. For example, when a book retailer sells a book for money.
- Unilateral contract: These are considered one-sided contracts. The unilateral promise is made from one side only and intended to induce some action from the other party. The promisee is not bound by the act since he did not agree from his side. In brief, an act done in response to an offer is a consideration where it is a response to a request.
- Bilateral contract: A legally bounded contract that is completed with the exchange of reciprocal promises. Each party is a promisor and a promisee. Here an offer made is accepted as a counter-promise because there is a mutuality of obligation.
Based on information
- Implied contract: The terms of the contract here are not expressed as oral or written but are inferred from their conduct. A proposal or acceptance is made where a contract is made under their conduct between the parties. For example, If a family takes a table in a restaurant, it is assumed by the waiters who serve to provide them with freshers and a menu.
- Express contract: Contracts, where the promises made, have to be expressed by the parties. The contract has to be either written or oral. For example, when we visit a salon, one has to mention the kind of service he wants.
- Quasi-contract: These contracts occur not by the virtue of conduct under any proper agreement but because the law recognizes or interferes, with these contracts under special circumstances or cases. There are situations in which justice requires a certain person to fulfill an obligation, although he did not break any contract. This can just be done to stop the enrichment of one at the cost of another.
A voidable contract is a valid contract, which might be either rejected or affirmed at the option of one of the parties ( called contracting or aggrieved party). Anyone from the unbound party may repudiate at the point it becomes void.
Therefore, the voidable contract example explains a sort of formal understanding between two gatherings. In the account of the voidable contract, the court of law does not hold any gatherings to act in a specific or characterized way.
Without the free consent of the party, a contract entered is termed a voidable contract. The definition explains that a contract is enforceable by law at the option of one or more parties but not at the option of the other parties. However, a voidable contract can turn up being valid if not canceled by the aggrieved party within the given time.
There is a formal agreement between parties that might be enforceable by law. However, a contract can be deemed voidable in the following cases:
- The contract has errors, misrepresentation, or fraud
- One of the parties can not legally enter into a contract
- Breach of contract occurs
- One or both have not disclosed a material fact
- The contract is signed under undue influence or duress
- The contract holds an unconscionable term
A contract that holds one or more of the above-discussed issues, can be considered legal if both parties agree to honor its terms in any way. The adversely affected party can however show opt to void the contract if such an issue occurs.
Grounds for contract to become voidable
The Grounds for a contract to become voidable can be simply undue influence, coercion, mental incompetence, misrepresentation, intoxication or fraud as discussed:
Intentional misstatement of materials. Fraud explains one party’s to use cheat another party by providing wrong information or other means. Therefore, it makes a contract or agreement void or invalid in nature.
Another common name can be distortion. Misrepresentation is the material error of the reality that instigates one person to depend on the announcement. As a result, a party may void the agreement if he knows the deception of the material.
Coercion being the technical name implies the utilization or risk of power to persuade a person to act as told by one’s desires. The agreement is voidable whenever the party is subject to pressure.
Taking unwanted advantage of a position of trust, confidence, power, or money is referred to as undue influence. It describes unfair behavior or exploitation from one party. The influenced party may have been pressured to enter into the contract or unduly obligated to enter because of the fear of destroying the relationship.
A mistake by a single party or both parties regarding facts or circumstances related to the contract may turn up the contract as a voidable contract example. However, a one-sided mistake (unilateral mistake) can also be a part of a voidable contract if the affected party knows about the misstep.
Ratification is termed as the correction of a voidable contract and needs all parties involved in the contract to negotiate new terms that eliminate the issue of being voidable. For example, if one party was underage and not able to sign the contract, then they might wait until he attains the age of majority.
Voidable contract Examples
- A minor signing the contract (someone who is temporarily incapacitated)
- If one of the parties was under the influence of drugs or alcohol then such a situation is considered a voidable contract
- Other voidable contract examples are lawyer contracts, real estate contracts, etc.
- Contract signed by misleading the party
What is Void Contract?
The contract that is an unenforceable contract example gives a brief about what is a void contract. In void contracts, both parties are released from the contractual obligations set in the original agreement. A void contract example cannot be ratified and therefore treated as if it was never created. They usually revolve around illegal activities, ones that violate public policy or are patently unfair. Other circumstances involve someone who is not competent to enter into a legal contract or includes terms and conditions that are impossible to meet. The answer to what is void contract can be salvaged in one or two parts by a process termed severance.
Situations Where the Contract becomes Void
After a contract becomes void, it cannot be enforced by state or federal laws and is no longer valid. A contract becomes void in the following:
- It is against public policy
- Impossible to perform
- One party is not legally competent to enter into a contract
- Unfairly one-sided
- The subject matter is illegal
- Restricts unfairly one side’s actions ( like a right of work)
If an individual is deemed incapable or disabled of understanding a contract and its implications while entering an agreement, then it is declared void. However, if a person is a minor but has a legal guardian’s or parent’s consent, then a contract can be enforceable.
Moreover, where the law changes after the agreement but before the completion of the contract, it can be deemed void if agreed-upon things are now illegal. Few contracts cannot be amended and the court will likely cancel them wholely.
Steps to Void a Contract
In circumstances where an individual suspect that a contract should be voided, the following steps can be chosen:
- Deciding the main reason why the contract is void
- Discussing whether a new contract needs to be created or the entire contract is wished to abandon.
- Review the contract to know which sections render to being invalid
- Start collecting information that supports the position of the contract being void
However, if an individual chooses that a contract is declared void, neither party benefits from the exchange that was to take earlier.
Void Contract Example
- The best-quoted void contract example can be illegal activities such as prostitution, gambling, and committing a crime. For example, a drug deal between a supplier and a local would be considered void since it involves illegal goods in the contract. It does not serve any legal purpose, therefore is an unenforceable contract example from the start.
- Another void contract example can be a restriction on certain activities like one’ right to work for a living or who a person can marry.
- Avinash agrees with a music label to split royalties for his album in 60/40. However, during the contract, he was drunk and inebriated. Therefore, since Avinash was incompetent at the time of the agreement, it is a void contract example.
Difference between Void and Voidable Contract
The difference between void and voidable contracts is majorly enforceability. A void contract is illegal and unenforceable while voidable contracts is initially legal and valid. Although these terms are used interchangeably still there are yet many points that explain the difference between void and voidable contracts discussed below:
|In a void contract, no right arises or obligation or accrues to parties from a void contract. Such contracts are not covered by the law.
|A voidable contract continues at the option of one party; it is the desire of one party either to rescind it or continue. It is enforceable at the option of one party and is covered by the law.
|A void contract example can give rise to no legal liability.
|A voidable contract remains valid until rescinded.
|A void contract cannot confer any right.
|A voidable contract confers enforceable rights till is not essential.
|The contract becomes void when it ceases to be enforceable.
|A contract becomes voidable only when consent is obtained by misrepresentation, undue influence, coercion, or fraud.
|A void contract cannot be made valid by parties to the contract by their consent.
|The voidable contract can be made valid by the aggrieved party who has a right to rescind it by giving up his right to rescind it.
Frequently Asked Questions (FAQs)
What are voided contract examples?
Some of the voided contract examples are:
- Contracts dealing with illegal activity, such as gambling, prostitution, or committing a crime.
- Contracts are signed by an individual who is not mentally competent.
- Contracts stating impossible terms.
- Contracts that violate public policy.
What Are The examples of a voidable contract?
Examples of a voidable contract are: If one party was tricked or forced into signing, the contract is voidable. It is also voidable if one or more parties were under the influence of drugs or alcohol when signing.
What is voidable in the contract?
An agreement enforceable by law at the option of one or more of the parties but not at the option of others is termed a voidable contract.
What is a void and voidable contract?
A void and voidable contract is referred to a contract that is invalid or entirely against the law, so no one involved can say it’s enforceable under the law. Contracts that are voidable are valid and legally enforceable.
What are examples of voidable contracts?
Examples of voidable contracts are any contracts in which any of the parts were forced to sign the contract or single or both the parties were under the influence of drugs, or alcohol when signing.