Signing a contract is a common way of trading in business activities. Sometimes, however, the parties may want to revoke a contract that has already been signed due to various reasons. So, under what circumstances can a contract be rescinded?This article will detail the various situations in which a contract can be voided.
In many cases, one or both parties may choose to rescind a contract when they believe that it was entered into for improper reasons such as misunderstanding, fraud, coercion, etc. This requires both parties to reach an agreement through negotiation and confirmed in writing.
If the term is specified in the contract, then after the expiration of the period, the contract automatically lapses unless otherwise agreed by the parties. In this case, the contract is no longer legally valid and can therefore be considered a voidable contract.
If the performance of the contract would cause serious damage to another person, and the damage could have been avoided, then the affected party has the right to request rescission of the contract. For example, if a contract for the transfer of toxic and hazardous substances is carried out in a way that would result in serious environmental pollution, the affected environmental protection authority may request that the contract be revoked.
Force majeure refers to unforeseeable, unavoidable and insurmountable objective circumstances, such as natural disasters, wars, etc. If the performance of the contract is seriously hampered or cannot be completed due to force majeure, then the affected party can request to rescind the contract. In such cases, the court will usually uphold the rescission of the contract, as long as the statutory conditions are met.
A change of circumstances is one in which the circumstances faced at the time of the conclusion of the contract have changed materially from the circumstances at the time of its formation, making it impossible to achieve the original purpose or becoming manifestly impractical. If this change of circumstances occurs within a certain period of time after the conclusion of the contract (the exact time is determined by the law of each region), then the affected party can request to rescind the contract. However, the change of circumstances must be due to the fact that the original purpose could not be achieved or became manifestly impractical, and the other party must be notified within a reasonable time.
If a third party makes a claim on the content of the contract that makes the performance of the original contract unlawful or manifestly unfavorable to one of the original parties, the affected party may request to rescind the contract. In such cases, the court will usually decide whether the contract should be rescinded based on the third party's claims and the nature of the original contract.
In short, there are many situations under which a contract can be revoked, and how to revoke a contract needs to be based on the actual situation.