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IurisConsulting Property Lawyers Void and Voidable Contracts |
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The mere fact that all of the rules of formation of a contract have been complied with does not make a contract perfect. For instance, where a party has contracted on the basis of false information, this is a denial of freedom of contract. That party may clearly have been unprepared to enter the contract if only he had known the true facts. Thus, even though the various requirements of formation might have been fully met, a party may still have legal rights and remedies because of other defects that are later discovered, that are to do with other imperfections at the time the contract was formed. Indeed, contracts affected in such a way are often referred to as “imperfect contracts”. The defects in question are generally known as vitiating factors. A vitiating factor is one that may operate to invalidate an otherwise validly formed contract, that is a contract that conforms to all the rules of formation already identified. To “vitiate” basically means to impair the quality of, to corrupt or to debase. In contractual terms, this means that factors present at the time of the formation of the contract, possibly unknown to one or either party, mean that the contract lacks the essential characteristic of voluntariness, is based on misinformation or is a type frowned on by the law. As a result, the role of the law is to provide a remedy to the party who may not have wished to enter the contract given full knowledge of the vitiating factor at the time of formation. There can be two effects if a contract is vitiated: it may be void or it may be voidable. Whether the contract is void or voidable in a given case depends on the type of vitiating factor that is complained of. Void Contracts In the case of certain vitiating factors the effect of demonstrating the presence of the vitiating factor to the court’s satisfaction is to render the contract void. It is though the contract has never been. Stating that a contract is void is in many ways the same as stating that the contract does not exist. This is because identifying a contract as void is identifying it as having no validity and therefore no enforceability in law. Voidable Contracts Where a contract is voidable there are different possibilities. The vitiating factor is identified and acknowledged but this does not necessarily mean that the contract is at an end. A party who has entered a contract that is voidable for a vitiating factor can continue with the contract if that is to his benefit. On the other hand, that party can avoid their responsibilities under the contract and in effect set the contract aside. Classes of vitiating factorsThere are essentially four classes of vitiating factors: misrepresentation, where a contract has been formed but as the result of false information about its substance the innocent contracting party who is the victim of the misrepresentation can avoid the contract; mistake, where the contract has been formed on the basis of mistakes abut contracting terms made by either party or both parties; if the mistake is operative, then the contract is void; duress or undue influence, where the contract has resulted from actual or threatened violence and the contract is void; and, finally, illegality, where the type of contract will not be accepted at all as being legitimate and enforceable, usually for reasons of public policy.
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