WHEN parties enter into a contract, it is with the view that the contract be enforceable. They enter into a contract with the intention of performing and executing it.
However, the truth of the matter is that not every contract is valid just because the parties have agreed to it.
There are legal requirements that need to be satisfied before a contract can truly be deemed to be legal and therefore, enforceable.
In this article, I will explore the difference between void contracts and voidable contracts, with a view to making sure that the public is educated on the different rights and obligations that attach to the two types of contracts.
For a contract to be valid, it should:
– be lawful,
– possible of performance,
– be signed by parties with capacity,
– show demonstrable intention to contract (often called animus contrahendi),
– show a meeting of the minds (also called consensus ad idem),
– be clear and unequivocal;
– show that the intention of both parties has been communicated.
Where any one of the essential elements of a contract is missing, it becomes void. In other situations, a contract might show on the face of it that it satisfies the requirements, but is still capable of being challenged by one of the parties. In such a scenario, it then becomes voidable.
A void contract is a formal agreement that is effectively illegitimate and unenforceable from the moment it is created. A void contract differs from a voidable contract because, while the void contract is one that was never legally valid to begin with, (and will never be enforceable at any point in the future), voidable contracts may be legally enforceable once underlying contractual defects are corrected.
The most common reason for a contract being void is that it is either illegal in nature or violates notions of fairness and public policy.
An example of a void contract is found in the case of Hativagone & Anor v CAG Farms (Private) Limited & Ors SC 42/15, which dealt with a contract that was in violation of a clear statutory position. The Supreme Court remarked that the courts do not give effect to illegal agreements. The fact that the parties did not object to the contract does not make the contract any less of a breach of a clear statutory provision.
A voidable contract is a formal agreement between two parties that may be rendered unenforceable for a number of legal reasons. The common reasons are mistake, capacity and undue influence.
Mistake
The contract can be cancelled on the grounds of a mutual mistake or fact. If there is a fact underpinning the contract, which is misunderstood by both parties, then this could be deemed a mistake of fact that invalidates the contract entirely.
For example, parties may contract for the manufacture and delivery of “plates”.
The contract might actually be referring to paper plates. However, one party might believe it to mean ceramic plates. This would be a mistake of fact going to the root of the contract.
The court explained how the concept of mistake works in the case of Madzima v Mate HH 86/2017, where Dube J (as she then was) stated that in a case where parties enter into an agreement and labour under a mistake as to a matter of fact essential to the agreement, the mistake renders the agreement void.
In this case, one party had purported to sell a stand, which she did not have rights and title to. In deciding that the contract of sale was void, the learned judge stated that no valid agreement of sale came into existence. The defendant had no capacity to dispose of a right in a stand which she did not hold.
The person must have the legal ability to form a contract in the first place. A person who is intoxicated or suffers from a mental impairment for instance, does not have capacity to enter into a contract because they do not understand what they are doing when they sign a contract.
Such a contract becomes voidable when it comes to light but at the time of signing, the party or parties had no capacity to do so.
In the case of companies, the signatory must have due authority from the board of directors to sign on behalf of the company.
Undue influence
Where one party gets the consent of another party to sign a contract through means of coercion, misrepresentation or frauds, that contract is deemed to be voidable. The victim of the unfairness can approach a court of law so that the contract be deemed void on account of the unfairness.
Getting your contracts reviewed by a legal practitioner is a sensible step towards figuring out whether your contract is void or voidable.
The proverb “a stitch in time saves nine” rings true because a simple contract review can save parties from financial loss, as well as legal exposure on account of it being void or voidable.
Muza is a duly admitted lawyer with expertise in business law, labour law and commercial litigation. He writes in his personal capacity. For feedback, email him at hilarykmuza@gmail.com or call on +263719042628.