Key Takeaways

  • A voidable contract is valid but may be legally canceled by one party due to issues like fraud, coercion, or lack of capacity.
  • Common reasons for voidability include misrepresentation, undue influence, legal incapacity, and mutual mistake.
  • Ratification can make a voidable contract binding once the defect is corrected.
  • Unlike void contracts, voidable ones are enforceable unless rescinded by the unbound party.
  • Voidable contracts may arise in personal relationships, business transactions, and contracts involving minors or intoxicated individuals.

A voidable contract is an agreement between two people deemed unenforceable for one or more legal reasons. Just because a contract exists doesn't mean it's always enforceable. A voidable contract appears to be a legal contract when it's made; however, it can be annulled or rescinded in court.

Reasons a Contract Might Be Voidable

There are a variety of reasons the court might deem a contract unenforceable, including:

  • Misrepresentation or fraud.
  • Duress of undue influence.
  • Legal incapacity to enter into contract.
  • Breach of contract.
  • Unconscionable terms.
  • Failure to disclose a material fact.

A contract can be canceled due to a mutual factual mistake. However, failure to read a contract does not make it voidable. Lack of capacity might include intoxication at the time the contract was signed or mental impairment that keeps someone from understanding the contract terms. 

Minors lack legal capacity to enter into a contract, as well. If a minor did not get a parent or guardian's consent, the contract can be voided. However, if the minor reaches the age of consent, which is 18 in most states, and doesn't request to cancel the contract within a reasonable amount of time, a judge might determine the contract to be binding.

Contracts can be deemed voidable due to coercion, fraud, misrepresentation, and undue influence. Victims of coercion and these other scenarios have the right to ask for the contract to be voided.

Essentially, a voidable contract was at one time legal and enforceable. If one party discovers the contract has one or more defects, they can request it be deemed a voidable contract. The contract will remain enforceable and valid if the party with the power to have it declared voidable chooses not to reject it despite the defect. Unfortunately, the person who could have the contract deemed voidable is often unaware of the fraud or misrepresentation.

You can save a contract if only one or two parts are voidable. This is called severance.

Common Scenarios Where Voidable Contracts Arise

Voidable contracts frequently occur in the following real-world situations:

  • Minors entering contracts without parental consent.
  • Contracts signed under duress, such as pressure or threats.
  • Agreements made while intoxicated or mentally impaired.
  • Business contracts with concealed information, such as hiding key financial liabilities.
  • Employer-employee contracts involving coercion or unbalanced power dynamics.
  • Consumer agreements signed based on deceptive advertising or false claims.

These examples underscore the importance of clear, informed consent and mental capacity at the time of contract formation.

Ratification of Voidable Contracts

If you have a voidable contract, you can have it ratified to correct the issues. To go through the ratification process, the contract parties must agree to new terms. These terms will have removed the problem with the initial contract. 

For example, if a person lacked capacity at the time he or she entered into the original contract, that individual can opt to ratify the original contract once he or she has legal capacity. Another example is if one party was under the influence of a mind-altering substance at the time the contract was executed. This would render the original signature invalid. If that party wants to move forward with the contract, he or she can ratify it when in a mindset that provides legal capacity.

Legal Consequences of Not Addressing Voidable Contracts

Failing to address a voidable contract can result in serious consequences:

  • Unenforceable obligations: If one party later rescinds the contract, obligations or expectations may vanish.
  • Financial losses: A party may suffer economic harm if the contract is voided after they’ve already performed.
  • Litigation risks: Disputes over contract validity may result in legal battles and added legal fees.
  • Business uncertainty: In business contexts, unresolved voidable contracts can disrupt operations or partnerships.

Early identification and resolution—whether through ratification or rescission—can help avoid these risks.

How Voidable and Void Contracts Differ

People often use the terms “voidable” and “void” to mean the same thing when talking about contracts; however, they are extremely different:

  • A void contract is completely unenforceable, and the law looks at the contract as though it never existed.
  • A voidable contract can still be enforceable if the parties so desire.

The court can deem a contract void if the contract terms require one or both parties to participate in an illegal act or if one party dies and therefore is unable to complete the contract terms. The best way to look at void versus voidable is that a void contract cannot be legally fulfilled, whereas a voidable one can. The “unbound” party, however, has the right to void it before the other party acts on the contract terms.

Who Can Void a Voidable Contract?

Only the party who lacks full legal consent or was harmed by the contract formation can void a voidable contract. This includes:

  • The minor in a minor-adult contract.
  • The coerced party in a duress situation.
  • The defrauded individual in cases of misrepresentation.

The other party cannot unilaterally cancel the contract unless both agree. If the injured party chooses not to act, the contract remains enforceable. This right to rescind is often time-limited, depending on state laws and the nature of the contract.

Examples of Void Contracts

Examples of void contracts include:

  • Those that involve an illegal subject matter, such as prostitution, criminal acts, and gambling.
  • Those that are deemed to be too unfair because they are against public policy.
  • Any contract that restricts an individual's right to marry, live somewhere, work, etc. 

It's a good idea to consult with a business contract lawyer before entering into any oral or written agreement. A contract lawyer can help draft a valid contract that will be binding and enforceable, so you don't have to stress over whether the contract might be void or voidable.

Key Characteristics of a Voidable Contract

A contract is considered voidable if it meets the following criteria:

  • Valid on the surface: It appears legally binding when formed.
  • Enforceable until voided: The contract remains active unless one party rescinds it.
  • Correctable: The flaw (e.g., coercion or incapacity) can often be addressed through ratification.
  • Subject to personal decision: Whether to void rests with the harmed or disadvantaged party.

This differs from a void contract, which is invalid from inception and has no legal effect.

Frequently Asked Questions

  1. What makes a contract voidable instead of void?
    A voidable contract is initially valid but can be canceled by one party due to legal defects like coercion, fraud, or incapacity. A void contract is never valid.
  2. Can a voidable contract be enforced in court?
    Yes, unless the disadvantaged party chooses to void it. Courts typically enforce voidable contracts if no action is taken to cancel them.
  3. Who has the right to void a voidable contract?
    Only the party harmed by coercion, fraud, incapacity, or misrepresentation can void the contract.
  4. Is a contract signed by a minor always voidable?
    Generally, yes. A minor can void the contract unless it has been ratified upon reaching the age of majority.
  5. How long do I have to void a voidable contract?
    It depends on the applicable state law, but prompt action is recommended once the defect is known to avoid losing the right to rescind.

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