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?
- Duress to the Person;
- Mistake;
- Illegality (except where the illegality is trading with the enemy).
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 rescinds it. They can do so by:
- Communicating to the other party that they are terminating the contract; or
- Taking reasonable and unequivocal steps to communicate that they are terminating the contract (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: Leaf v International Galleries [1950] 2 KB 86.
