If a contract between two parties is avoided:
A.both parties are released from it.
B.both parties must fully perform their obligations under it.
C.the parties’ contractual obligations are postponed.
D.the parties are bound to negotiate another contract on the same subject.
The correct answer and explanation is :
The correct answer is A. both parties are released from it.
Explanation:
When a contract is “avoided,” it means that the contract is legally nullified or canceled, as though it never existed. This can occur for various reasons, such as mutual consent, fraud, misrepresentation, duress, or undue influence. The legal effect of avoiding a contract is that it discharges the parties from their respective obligations and responsibilities under the contract.
Here’s a breakdown of why “A. both parties are released from it” is correct:
- Release from obligations: When a contract is avoided, both parties are effectively released from performing any of the obligations they had under the contract. The avoidance acts as a legal cancellation or termination of the agreement, so neither party is required to fulfill the terms initially agreed upon. This is a typical consequence of a contract being avoided.
- Contract avoidance: The concept of “avoiding” a contract typically arises in situations where one party has the legal right to cancel or rescind the agreement, often because of factors such as fraud or undue influence, which invalidate the contract. In such cases, the avoidance releases both parties from the legal requirements of performing under the contract.
Now, let’s address why the other options are incorrect:
- B. both parties must fully perform their obligations under it: This is incorrect because, once a contract is avoided, the obligations do not need to be performed. Instead, they are nullified, and both parties are released from them.
- C. the parties’ contractual obligations are postponed: Avoiding a contract does not postpone obligations; it cancels them. Postponing obligations would involve delaying performance rather than negating the agreement.
- D. the parties are bound to negotiate another contract on the same subject: This is also incorrect because avoiding a contract does not create an obligation for the parties to negotiate a new one. If a contract is avoided, there is no requirement to create a new agreement unless both parties voluntarily choose to do so.
Thus, avoiding a contract means that both parties are no longer bound by it, and they are released from their contractual obligations.