Even if you have signed a contract, it is possible that you and the other party do not fully agree on what you have signed. There may be circumstances that affected the formation of the contract, such as misrepresentation or duress, and as a result, you may be able to get out of the contract. This article will explain your rights and how you can void a contract.
What is the Difference Between a Void and Voidable Contract?
You may have heard of ‘void’ and ‘voidable’. Although they seem the same, they have two different legal meanings.
A void contract is one that neither party can enforce from the moment it is formed. In other words, a court will treat it as though the parties never created it.
On the other hand, a voidable contract means that there are factors which may entitle one party to end the contract. The key factors are:
- misrepresentation of facts
- duress; or
- undue influence.
However, unlike a void contract, you can still enforce a voidable contract.
The Reasons to Void a Contract
|Mistake||There are instances when parties can make mistakes when entering into a contract. Mistakes are made when there is a misunderstanding that is not caused by the other party. The mistake may be:
The remedy available is rescission which puts you and the other party back to the position that you were in before you entered into the contract.
|Misrepresentation of facts||
Misrepresentation occurs when the other party persuades you to enter into a contract based on something they said or represented that is untrue. For example, if the other party told you that a set of speakers were brand new but they were actually five years old, this is a misrepresentation.
This misrepresentation can be intentional or unintentional. If it is intentional or made recklessly, it is called fraudulent misrepresentation. If it is unintentional, it is considered innocent misrepresentation. The remedies available may vary but the contract is voidable because it does not represent the true agreement of the parties. Consumer law also deals with misleading and deceptive conduct and provides other remedies like compensation.
|Duress and Undue Influence||The crucial aspect of duress and undue influence is that you have not genuinely consented to the contract. Duress and undue influence occur when the other party wants to enforce the contract but they have illegally obtained consent from you, either due to:
When Would You Want to Void a Contract?
Generally, you would want to void a contract if it does not reflect the true agreement between you and the other party for any of the factors explained above.
However, if you have a void contract, it is important to keep in mind that you have no choice whether to void the contract or not. It is simply not enforceable even if you want to keep the contract going. On the other hand, if you have a voidable contract, you can choose whether to keep the contract going or not.
If you can be restored to your position before the contract, then you may choose to void the contract. However, it is generally rare for a court to declare that a contract is void from the beginning, mainly because it is often impossible to restore you to your previous position.
Rescission is the main remedy for a void contract. It involves reversing the contract so that each party is restored to its original position. If you have a voidable contract, rescission doesn’t happen automatically. You must choose to do so. The main consideration with this remedy is whether it is possible to restore you to your positions before the contract. This may be impossible because:
- goods may have changed hands;
- there may have been third parties involved who did not sign the contract.
If it is not possible, you may seek other remedies depending on the reason for voiding the contract. For example, the Australian Consumer Law enables terms within contracts to be declared void if they are unfair and in some instances, compensation may be available.
If you are preparing to enter into a contract or would like to end a contract, it is important to be aware of how to void a contract and the difference between a void and voidable contract. If you want to void a contract because it does not represent a ‘true agreement’, there are different reasons you can do so, including:
- duress; and
- unconscionable conduct.
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