What happens to contracts if directors breach their obligations?

When directors breach their obligations, the contracts that they have entered into as part of their responsibilities can indeed become voidable. This means that the affected parties may choose to invalidate the contract due to the breach of fiduciary duty by the directors. A breach could involve self-dealing, failing to act in the best interest of the corporation, or not adhering to the terms of the contract, which erodes trust and can call into question the legitimacy of the agreement.

The concept of voidability allows the non-breaching party to legally rescind the contract, depending on the circumstances of the breach. They have the option to affirm the contract, but the presence of a breach gives them the right to choose to void it, thereby protecting their interests.

In contrast, contracts remaining enforceable, being automatically renewed, or requiring approval are not directly linked to the director’s breach of obligations, as they overlook the impact of the breach on the validity or status of the contracts involved. In essence, the ability to void the contract reflects a legal remedy available to ensure accountability for directors and protect the entities they serve.