Voidable Contract

Definition: Voidable contract is that form of a contract, wherein one party to the contract has the right to put it to an end if it is discovered that the contract contains some defects, concerning the lack of free consent.

This means that the party, whose consent is influenced, is in a position to deny performing his obligation, then such an agreement is called a voidable contract.

Nevertheless, if the option is not exercised within a reasonable time, it becomes a legally binding contract. As well as if the aggrieved party chooses not to repudiate the contract, then despite the fact it remains valid and enforceable as per the court of law.

What is Free Consent?

In simple words, when the parties to the contract, agree upon the content of the agreement, in the intended sense, it is known as free consent.

If a fundamental error is made by the contracting parties, concerning the nature of the deal, or concerning the party they are dealing with or concerning the subject matter of the contract, then we cannot say that the consent of the parties is free. And in such a case the contract becomes voidable at the option of the aggrieved party.

Now we will look at the elements that impair the free consent of the parties:

Coercion

Coercion refers to performing an act or threatening someone to perform a certain action which is prohibited by the Indian Penal Code. Further, detaining of property against the law or threatening the other party to detain any of his/her assets with an intention to damage, so as to compel him/her to enter into an agreement.

When coercion is employed in a contract, it is voidable at the option of the aggrieved party. Further, if any of the parties has received any benefits, they have to restore or refund the same.

Undue Influence

When the parties to the contract, are in such a relation that one of the parties can dominate the other, so as to get undue advantage over the other. It encompasses moral or mental pressure.

A person is said to dominate the will of the other person, when he/she holds an obvious right over the other (such as employer and employee), or when one person is in a fiduciary relationship with the other (such as father and son, lawyer and client), or when one party makes a contract with another party who is mentally incompetent (such as old person who is not literate).

Fraud

Fraud refers to the act of hiding facts which are material to the contract, by one party who knows or believes the fact, or a promise made to another party with no real intention of keeping it, or any suggestion, any act intended to deceive the other party or any act or omission which is declared fraudulent by law.

It should be noted that mere silence with respect to the facts that can influence the willingness of the person is not considered as fraud, except if the conditions are such that the disclosure of facts is a must, or if the silence itself is equivalent to speech.

Misrepresentation

Misrepresentation implies the positive statement of fact which is not at all true, will amount to misrepresentation, when the person making the same, is of the view that it is true, however, it is not justified by the information that the party possesses.

Further, if there is a breach of duty by a party but having no such intention to deceive, which transfers certain advantage to him. In addition to this, if any of the party innocently causes the another to the agreement to make a mistake, concerning the subject matter.

Hence, when the consent of the party to a contract is influenced by coercion, undue influence, fraud or misrepresentation, the contract becomes voidable at the option of the party whose consent was influenced.