Section 518. Voidable contracts

1) A contract which, at the initiation of its party, may be declared void by the court shall be deemed to be a voidable contract.

2) The person aggrieved by any of the following contracts may get the contract voided by the court:

(a) A contract concluded by coercion,

Explanation: If a person detains or threatens to detain any property of another person or threatens to put that other person’s body, life, or prestige in peril or commits or threatens to commit any other act forbidden by law, with the intention of causing that other person to enter into a contract against his or her will, the person is said to commit coercion.

(b) A contract concluded by undue influence,

Explanation:

(1) Undue influence means an influence exercised by a person over another person who is under his or her influence or who may be employed according to his or her will with the intention of taking any unfair advantage for his or her interest or concern.

(2) Without prejudice to the generality of clause (1), the following person is deemed to be under the influence or who may be employed according to his or her will:

(a) A person who is under his or her guardianship, curatorship, or custody,

(b) A person who is incapable of representing his or her interest for the time being or forever by reason of age, illness, or physical or mental distress,

(c) A person who may be subjected to the financial or positional influence of that other person.

(c) A contract concluded by fraud,

Explanation: A party to a contract or his or her agent is said to commit fraud when he or she, with intent to deceive another party thereto or his or her agent, makes the suggestion, as to a fact, of that which is not true which he or she does not believe it to be true or does any act that is likely to make the other party or his or her agent believe it, or knowingly conceals a fact which is in his or her knowledge or does any such act as the law declares to be fraudulent.

(d) A contract caused by misrepresentation.

Explanation: Misrepresentation means any of the following acts:

(1) Presenting a false description of any matter or fact without a reasonable basis,

(2) Misleading any party to his or her detriment,

(3) Causing a mistake as to any matter of the contract,

(4) Making assurance to have concluded a contract in one subject, but causing it to be entered into in another subject.

3) In the case of a voidable contract under this Section, the following matters shall be governed as follows:

(a) The party caused to enter into a contract may, instead of having the contract voided, demand that his or her position be restored to the position that would have been had the contract not been concluded.

(b) If a contract is made with the person who is under his or her influence and whose will can be dominated by him or her, the party who claims that he or she has not exercised such undue influence shall have the onus to prove that the contract has not been caused by undue influence.

4) A voidable contract shall, before it is voided, be enforceable as if it were a lawful contract.

5) If the court voids a voidable contract under this Section, it shall not affect the act done under such contract before the voidance.

6) If any contract is voided pursuant to this Section, the legal right or interest of a bona fide third party shall not be prejudiced merely by the reason of such voidance.