Voidable Contract: Definition & Example

KEY TAKEAWAYS

• A contract is voidable if it can be terminated or changed for certain legal justifications.
• Not all contracts are voidable; there must be a legal precedent to release parties from obligation.
• A frequent technique to terminate a contract is to discover a flaw in it.
• It is easiest to nullify a contract if all parties concur that doing so is the wisest course of action.

What Is a Voidable Contract?

A voidable contract is a formal contract between two parties that could become void on a variety of legal grounds. A voidable contract is initially viewed as legitimate and binding but may be revoked by one party if it is shown to contain flaws.

Disaffirmance is the legal option to void such a contract.

When Is a Contract Voidable?

A contract may be voidable for a number of reasons. These reasons include:

• Failure to disclose a crucial fact by one or both parties
• A blunder, false statement, or scam
• Excessive pressure or coercion
• Legal ineligibility of one party to enter a contract (e.g., a minor)
• A term or phrase that is offensive
• A breach of contract

How Do Voidable Contracts Work?

The agreement is nonetheless enforceable and legal if a party with the authority to reject it chooses not to do so notwithstanding the flaw.

Agreeing to a voidable contract in which one party fails to identify the misrepresentation or fraud perpetrated by the other party typically only has a negative impact on that party.

Voidable vs. Void Contracts

When one of the relevant parties would not have initially accepted the contract if they had known the real nature of all of its components prior to initial acceptance, the contract is voidable. The aforementioned party shall have the right to reject the contract after the fact upon the presentation of new information. A contract may also be voidable if one or both parties were not of legal age to enter into it, such as when one party is a juvenile.

A void contract, on the other hand, cannot be enforced at all. A contract may be void if it requires one or both parties to engage in criminal activity or if one party becomes unable to fulfill the contract’s obligations, such as in the case of one person’s death.

A contract that is declared to be voidable may be amended through the ratification procedure. For a contract to be ratified, the parties concerned must concur on new terms that, in essence, resolve the underlying issue of conflict that existed in the original contract.

For instance, a party may decide to ratify the agreement once they are judged legally capable if it is later determined that they were unable to enter into a binding agreement when the original was approved.

Examples of a Voidable Contract

Examples of contracts that are voidable include a contract involving a minor. Although minors are able to sign contracts, they are also free to choose to break them without facing any consequences. Other participants, such as those who lacked the necessary mental ability, were intoxicated, or were under the influence of narcotics at the time the contract was drafted, are also ineligible to enter into a binding agreement. 

Summary

A contract must be legally binding, consensual, and have a stated consideration in order to be legally enforceable. This document, which represents the exchange of value between the parties, must be signed by two adults who are of sound mind and intend to abide by the contract terms.

A contract that has the potential to be voided is one that cannot be upheld.