In this week's Freedom Friday blog and email newsletter, I want to answer a question that I get on occasion from clients, and that's “Can I void a contract?” The first thing I need to say is that there are two concepts here which are often confused. One is the concept of a “void contract,” and the other is a “voidable contract.” A “void contract” is a contract that is unenforceable from the beginning. This means that there really never was a contract to begin with, because the subject of the contract involves illegal activity (like prostitution or gambling), the contract is against public policy, its impossible to perform the obligations of the contract, or the contract involved a party who is not legally competent (for instance, children under the age of 18 cannot enter a legally binding contract).
On the other hand, there are reasons why a contract may be voidable. In other words, under these types of situations, the contract could still be performed, but there are legal defects which would cause the contract to be canceled, especially in court proceedings. Here are four (4) reasons why a court can void a contract:
1. Fraud or Misrepresentation
The first reason why a court might void a contract is fraud or misrepresentation. If a contract is created under fraudulent circumstances, a court might find the contract to be invalid and void the contract. In Oklahoma, fraud is required to be alleged specifically. There are different types of fraud, including selling a fraudulent product, or if a party to a contract claims to be someone who they are not, then that's fraud, too. Similarly, misrepresentation from one of the parties to a contract may also be a reason to void the contract. For instance, if a car dealership sells you a vehicle, they make certain representations about the car being sold to you. If one of those representations is incorrect, then that might be a reason for a court to void the contract.
2. Unconscionable Terms
The second reason why a court might void a contract is unconscionable terms. What does “unconscionable” mean? “Unconscionable” means the terms of a contract are so extremely unjust, or overwhelmingly one-sided in favor of the party who has superior bargaining power, that they are contrary to good conscience. An example of an unconscionable contract is when one party is an experienced dealer in a type of business, while the other party is an average consumer. If the business dealer requires the consumer to sign a contract, and within the contract, the business dealer buries very complicated and technical language that most people wouldn't understand, using a very small font and inserting the clause in a way that would mislead the consumer to sign on unfair terms, then the contract might be declared unconscionable due to the unequal bargaining power between the parties. This might be grounds for a court to void the contract since one party might be taking advantage of the other.
3. Duress or Undue Influence
The third reason why a court might void a contract is duress or undue influence. What is duress, what is undue influence, and what is the difference between the two? Duress is when a third party literally forces you to sign a contract. For example, someone holds a gun to your head, or threatens you with bodily harm if you won't sign a contract. That's duress. Undue influence is a little different. Undue influence is a form of abuse, as it is the abusive act of applying emotional, psychological, or even physical pressure on another person to get them to enter into a contract when they might not do so otherwise, and usually to the benefit of the person exercising undue influence. A good example of this occurs in what banks call “financial exploitation of the elderly.” Many times an adult child will take advantage of their elderly parent in order to enter into a contract, sometimes even in a fraudulent manner.
4. Mutual Mistake
The fourth reason why a court might void a contract is mutual mistake. A mutual mistake is when the parties to a contract are both mistaken about the same material fact within their contract. There was a meeting of the minds, but the parties were both mistaken. This is usually involving a mistake of fact, which would be any mistaken belief other than a mistake of law. Examples might be the definition of a term, or the identity of some person or location.
If you have a question about a contract anywhere in Oklahoma, please contact me at [email protected] to schedule a FREE strategy session.
For more information about Liberty Legal Solutions, LLC, please visit our website at http://www.libertylegalok.com/