Voidable Contract

What is a Voidable Contract?

A Voidable contract Meaning is a contract or an agreement that is breakable at the will of any one of the parties. As per section 2 sub-clause (i) of Indian Contract Act 1872, a Voidable Contract is an agreement that can be enforced by the law by one party but not at the other parties option. 

Simply because a contract exists, it is not confirmed that the contract is enforceable and should be followed. In case, there are some inconsistencies with the contract, for example, if one of the parties is a minor, or if there was some kind of coercion or influence used to get the consent of a party, then the contract will be voidable at the will of the affected parties. 

One simple voidable contract example is a contract with a minor. If one of the parties is a minor, that is, below the age of 18 years, the contract with that minor will be voidable at the will of either the minor or his/ her guardian or parents. But if the minor reaches the age of 18 years which is the age of maturity, and the contract has not been revoked until then, the contract hence becomes legally binding and enforceable.

When Does a Contract Become Voidable?

There are several reasons why a contract can become voidable. These are as follows:

• Minor

If the party to a contract is below 18 years of age, he is not competent to enter into a contract. Competency is defined under section 11 of the Indian Contract Act. it states that a person should be 18 years of age to be competent to enter into a contract. If the person is below 18 years of age, he is considered a minor and hence a contract with him is only an agreement that can be legally enforceable only when he reaches 18 years of age. 

In the case of Mohiri Bibi vs. Dharmodas Ghosh, Dharmodas Ghosh was a minor when he mortgaged his property to the defendant. The court held that since Dharmodas Ghosh was a minor at the time of the creation of a contract, he is not bound by the contract.

• Mistake of Fact

When the facts of the contract are mistaken by both the parties, it becomes a mistake of fact and hence is voidable. But keep in mind that the mistake must be mutual and simply reading the contract incorrectly is not a mistake of fact.

• Consent of the party

If the consent of the party is obtained either by fraud, coercion, undue influence, or misrepresentation, the aggrieved party has the right to infringe the contract. Thus, this kind of contract becomes voidable at the will of the suffering party.

• Lack of Capacity

Section 11 of the Contract Act states the competency to enter into a contract. It states that a person should be major, of sound mind, and not restricted by the law to enter into a contract. If any of these criteria is unfulfilled then the contract is not enforceable. Hence, if a person is either drunk or not in his sound mind then the contract entered into by him becomes voidable at his or his guardian’s will.

Types of Voidable Contract:

There are three kinds of voidable contracts. They are discussed below:

• Voidable initially

Section 19 and section 19 A state the initially voidable contract. The contracts which are entered into by fraud, coercion, or misrepresentation are initially voidable. This means that when undue influence is exercised to obtain the consent of a party, then the contract becomes voidable at the will of the suffering party. This kind of contract is voidable from the beginning itself.

In the landmark case of William vs. Bayley, a son used fake signatures of his father on promissory notes. The bank found out and threatened his father to mortgage his house to pay for the money his son took or else watch his son be prosecuted. The father agreed. However, the court held that since the bank used undue influence and scared the father into taking out the mortgage, the agreement is voidable at the will of the father.

• Voidable Subsequently

The kind of contract that starts as a valid contract but later turns into a voidable contract is known as subsequently voidable. The reasons could be that one of the parties is not performing their end of the contract, has broken a promise, or has not performed a task within the period specified in the contract. The contract becomes voidable. These reasons are specified in sections 39, 53, and 55 of the ICA.

Conclusion

Therefore, to make a contract legally enforceable, all the conditions for a valid contract as per the Indian Contract Act 1872 must be met. If not, then either the contract becomes void or voidable.