Question

“It is important that the involved parties be cautious when entering into such contracts as these contracts could lead to a loss due to it being void.”

Based on the Contract Act 1950 and the decided cases, discuss THREE (3) situation of a void contract.

Answer 1

Reasons that can make a contract voidable include the following:

• Failure by one or both parties to disclose a material fact
• A mistake, misrepresentation or fraud
• Undue influence or duress
• One party's legal incapacity to enter a contract
• One or more terms that are unconscionable
• A breach of contract

In contrast, a void contract is inherently unenforceable. A contract may be deemed void should the terms require one or both parties to participate in an illegal act, or if a party becomes incapable of meeting the terms as set forth, such as in the event of one party’s death.

A contract that is deemed voidable can be corrected through the process of ratification. Contract ratification requires all involved parties to agree to new terms that effectively remove the initial point of contention present in the original contract.

For example, if it was later discovered that one of the parties was not capable of entering into a legally enforceable contract when the original was approved, that party can choose to ratify the contract when they are deemed legally capable.

Example of a Potentially Voidable Contract

Certain smartphone apps, categorized as freemium apps, begin as free downloads that allow for in-app purchases costing real currency. Those freemium apps that are geared toward children may result in a minor accepting the terms and conditions associated with gameplay, although those terms may allow for the later solicitation of in-app purchases.

This type of activity led to a lawsuit against Apple (AAPL) in 2012, which suggested the transactions were part of a voidable contract.