Circumstances That May Make Contracts Void or Cancellable
It may be possible for some owners to challenge the legality of their timeshare contracts and to argue successfully that their contracts are void for that reason.
It may be possible for a consumer to challenge the legality of a contract where they are the victim of breaches of consumer protection legislation that are also criminal offences, which may render the contract void.
Vitiating factors that may void a contract include a mistake,70 duress (for example, where the business has pressured the consumer into entering an agreement) or undue influence.
In such cases the contract may be set aside, returning the parties to their original pre-contract positions and returning the benefits each has received from the other. However, traditionally, the courts have been very reluctant to allow a party to avoid a contract simply for these reasons.
Misrepresentation would be relevant where the consumer argued that they were induced into agreeing to the contract by an untrue statement of fact or law made by the business upon which the consumer relied.
If a consumer can prove they entered into the contract because of a misrepresentation and that they have suffered loss as a result, the contract is voidable by the injured party and may be rescinded (returning the parties to their original, pre-contractual positions).
The consumer may also be able to seek damages for their losses where the misrepresentation can be shown to be fraudulent or negligent (a court cannot award both rescission and damages in cases of innocent misrepresentations).
We consider that examples of untrue statements by a business that may constitute a misrepresentation include:
- That the purchase of the timeshare is an investment that will appreciate in value over time (if this view is not honestly held)
- That timeshare rights can be freely and easily exchanged, transferred and sold (if this is not the case)
- That the owner will be able to sell their timeshare back to the developer at any time and/or without penalty (if this is not the case)
- That the timeshare accommodation is 'five-star' when it is not
- That the management fees associated with the timeshare will only ever rise in line with changes in inflation (if this is not true or if the statement is a partial non-disclosure, for example, where changes in other variables will also affect fees)
- That the consumer is buying a legal interest in land if in fact they are buying a 'right to use' only
The misrepresentation argument may be used by a consumer as a defence to a claim by the business (for example, for unpaid fees) or as a claim brought by the consumer to end the contract.
However, if the consumer wants to bring a claim, they can only do so within six years of the date of the misrepresentation (due to limitation periods applying to these types of claim). Refer to our1974 consumer credit act page in relation to the above statement . Section 75 of the consumer credit act has caveats based around purchases paid for using a linked finance agreements.
If a consumer relies on misrepresentation as a defence to a claim by the business, a defence is not a cause of action, so limitation periods are unlikely to apply to it, provided the consumer is not making a cross-claim.
However, these defences may only be used on a case-by-case basis and provided that the consumer has not 'affirmed' the breach.
Broadly speaking, where a party can show that they have entered into an agreement with another party on the basis of fraud (for example the business's deceit), the contract may be voidable and set aside by the injured party and they can claim for their losses. Such claims carry a very high burden of proof and are therefore difficult to establish. Refer to our page on successful Timeshare claims.
However, in circumstances where a contract may be voidable and set aside by the injured party, this remedy may be lost, for example: if the injured party has chosen to affirm the agreement and continue, if there has been a considerable lapse in time since the conclusion of the contract, or where it is practically impossible to restore the parties to their original, pre-contract positions.
Finally, it may be the case that the business has committed a serious breach of contract that is so fundamental to the agreement that it permits the consumer to terminate, in addition to seeking damages.
The consumer must elect to terminate the contract and make their decision known to the business in good time, otherwise they may be taken to have waived the breach and affirmed the contract.
However, wrongly treating a contract as terminated could itself be a breach of contract, entitling the business to sue the consumer for damages. Ultimately, in the event of a dispute, the courts will decide whether or not the business's breach was sufficiently serious to justify termination.
Examples of acts by a business that may constitute a fundamental breach of contract include:
- Failing to provide the consumer with a reasonable standard of accommodation or the standard stipulated in the contract
- Moving the consumer to a different unit or resort where the consumer has a right to use a specific unit or a specific resort
In summary, a consumer may be able to void or terminate their contract in limited circumstances. However, such claims are difficult to prove and establish. Businesses must ensure they do not induce consumers into entering contracts though untrue statements or commit fundamental breaches of their agreement with the consumer.