Voidable Contracts: All You Need to Know
Voidable Contracts: All You Need to Know
1. Definition of Voidable Contract
A voidable contract is a valid contract which is enforceable at the option of one or more parties but may be rescinded or avoided by the aggrieved party due to certain defects in consent.
Unlike a void contract (which is invalid from the start), a voidable contract is valid and operative until avoided.
2. Legal Position Under Indian Contract Act
Section 2(g) of the Indian Contract Act, 1872 defines a voidable contract as:
“An agreement which is enforceable by law at the option of one or more parties, but not at the option of the other or others, is a voidable contract.”
Voidable contracts usually arise due to defects in free consent (such as coercion, undue influence, fraud, misrepresentation, or mistake).
3. Characteristics of Voidable Contracts
| Characteristic | Explanation |
|---|---|
| Valid Contract | Initially valid and enforceable |
| Option to Avoid | Can be avoided (rescinded) by the aggrieved party |
| Defect in Consent | Consent affected by coercion, fraud, undue influence, misrepresentation |
| Binding Until Avoided | Contract remains binding until voided |
| Right of Rescission | Aggrieved party can rescind contract |
| Right of Damages | Aggrieved party can claim damages if contract avoided |
| Not Void ab initio | Unlike void contracts, it’s not null from the beginning |
4. Grounds for Voidability
Coercion (Section 15): Contract induced by threat or force.
Undue Influence (Section 16): Exploitation of dominant position.
Fraud (Section 17): Intentional deception.
Misrepresentation (Section 18): False statement without intent to deceive.
Mistake (Section 20, 21): Mutual mistake as to the subject matter.
5. Rights and Duties in Voidable Contracts
The party whose consent was defective has the right to either affirm or rescind the contract.
If the aggrieved party chooses to affirm, the contract remains valid and binding.
If they choose to avoid, the contract becomes void from the date of avoidance and parties are restored to their original position.
The other party cannot rescind the contract on these grounds.
6. Effect of Avoidance
Once avoided, the contract is treated as void, and parties cannot enforce the terms.
The aggrieved party may also claim damages for any loss suffered.
However, if the aggrieved party delays in avoiding the contract, it may amount to affirmation, losing the right to rescind.
7. Important Case Laws
a) Raghunathrao Ganpatrao v. Lakshmanrao Madhavrao (AIR 1952 Bom 243)
The court held that a contract induced by coercion is voidable at the option of the victim.
The party coerced can repudiate the contract but the other party cannot.
b) Clemens v. Clemens (1905) ILR 32 Mad 538
The court elaborated on undue influence, holding that when a contract is induced by abuse of trust, it is voidable.
c) Derry v. Peek (1889) 14 App Cas 337 (UK)
Defined fraud and held that a contract induced by fraudulent misrepresentation is voidable.
d) Chikkam Ammiraju v. State of Andhra Pradesh AIR 1973 SC 296
The Supreme Court clarified that the right to avoid a voidable contract must be exercised promptly.
8. Voidable vs Void Contracts
| Feature | Void Contract | Voidable Contract |
|---|---|---|
| Validity | No legal effect from beginning | Valid until avoided |
| Consent | Absent or illegal subject matter | Defective consent (coercion, fraud, etc.) |
| Enforceability | Not enforceable | Enforceable until avoided |
| Right to Avoid | No option to avoid | One party can avoid |
| Effect of Avoidance | No contract exists | Contract becomes void from avoidance date |
9. Practical Implications
Voidable contracts provide a protective remedy to the party subjected to unfair practices.
Protects contractual fairness by allowing rescission when free will is compromised.
The party seeking avoidance must act promptly and clearly communicate rescission.
Courts require clear proof of coercion, fraud, or undue influence to declare a contract voidable.
10. Summary
| Aspect | Explanation |
|---|---|
| Definition | Contract valid until avoided by aggrieved party |
| Grounds | Coercion, undue influence, fraud, misrepresentation, mistake |
| Option to Avoid | Only aggrieved party can avoid |
| Effect of Avoidance | Contract becomes void; parties restored to original position |
| Legal Protection | Safeguards consent and fairness |
| Key Cases | Raghunathrao Ganpatrao, Clemens v. Clemens, Derry v. Peek |
11. Conclusion
Voidable contracts form a critical part of contract law by balancing freedom of contract with protection against unfairness. They ensure that contracts entered into without free and informed consent can be rescinded by the injured party, thereby upholding justice and equity in contractual dealings.
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