Contract: Void and Voidable Transactions

Void & Voidable

Void ab Inititio Contracts

What is a Void ab Initio Contract?

A contract which is void ab initio is treated as never existing. This means that neither party is entitled to rely on the contract’s terms. Several defences to contract can render a contract void in this manner.

Which Defences Render a Contract Void ab Initio?

What is a Voidable Contract?

What is a Voidable Contract?

A contract which is voidable is not automatically treated as never existing. Rather, it is treated as existing until the innocent party communicates that they are terminating the contract or take reasonable and unequivocal steps to do so (such as by reporting the goods stolen if the defendant has vanished): Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525.

Once the innocent party validly terminates the contract, it is treated as having never existed. After that point, neither party can rely on the terms of the contract. If the innocent party chooses not to terminate the contract, both parties can rely on its terms. Some defences render a contract voidable.

Which Defences Render a Contract Voidable?
When is the Right to Void a Voidable Contract Lost?

Because the contract is not terminated automatically, it is possible that the innocent party will lose the right to void a voidable contract. If so, the contract remains valid. The main circumstances under which a person can lose the right to void a voidable contract include:

Restitutio in Integrum is Impossible

Since voiding the contract is designed to return the parties to their pre-contractual position, the right to void the contract is lost if this is no longer possible (for example, because the goods have been destroyed): Clarke v Dickson (1858) EB & E 148.

Third Party Rights

Where a third party has acquired property in the subject matter of the contract for consideration and without notice of the voidable nature of the seller’s title, it is no longer possible to void the contract: Lewis v Avery [1971] 3 WLR 603.

The Contract was Affirmed

If the claimant, with full knowledge of the breach which makes the contract voidable, communicates to the other party that the contract is still on, or behaves as if it is still valid, the right to void is lost: Sharpley v Louth [1876] 2 Ch D 663. Lapse of time can evidence affirmation, though it is enough on its own: Clough v London and North Western Railway (1871) LR 7 Exch 26.

Laches

Excessive delay can also bar the right to void the contract in its own right under the doctrine of laches: Leaf v International Galleries [1950] 2 KB 86.


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Voiding Contracts Quiz

Test yourself on the principles which determine when a contract is void.

1 / 10

Complete this sentence: The defence of mistake renders the contract...

2 / 10

Complete this sentence: The defence of illegality renders the contract...

3 / 10

A person enters into a contract to sell a car, and later discovers the contract is voidable. However, before they can end the contract, they discover that the car has been destroyed. Can the contract be voided?

 

4 / 10

Complete this sentence: The defence of economic duress renders the contract...

5 / 10

A person enters into a contract to sell a car, and later discovers the contract is voidable. However, before they can end the contract, they discover that the car has been sold to a third-party who was unaware of the defect in title. Can the contract be voided?

 

6 / 10

Complete this sentence: The defence of misrepresentation renders the contract...

7 / 10

Complete this sentence: The defence of undue influence renders the contract...

8 / 10

Complete this sentence: The defence of duress to the person renders the contract...

9 / 10

If a contract is void ab initio, can either party rely on its terms?

10 / 10

If a contract is voidable, can either party rely on its terms?

Your score is