A voidable contract can be declared void by one party for legal reasons, but remains valid until terminated. The entitled party can also affirm the contract. Examples include contracts with minors, fraud, misrepresentation, or duress. Void contracts cannot be legally enforced, such as those involving illegal actions or impossible obligations.
A voidable contract is an agreement made by two or more parties that can be declared void by one party for a legal reason. Usually, only one party has the right to withdraw from the contract. Until such party terminates the contract, it remains valid and binding on all parties. Instead of canceling the contract, the party who is entitled to cancel it also has the option of asserting the contract. When the affirmation takes place, the contract becomes valid and the person entitled no longer has the right to cancel it.
For example, suppose John sells Suzy a car for $2,000 United States Dollars (USD) a month before Suzy turns 18 and comes of age. This contract would be an example of a contract that can be voided because there is a legal flaw: minors generally cannot enter into legal contracts. Even if there is a defect, the contract would remain legally binding on both parties until Suzy rejects it. If she refuses him, John has no remedy. If Suzy turns 18 and then agrees to pay the $2,000 for the car, the contract is ratified and Suzy loses the right to rescind the contract.
Contracts may become voidable in the event of fraud, misrepresentation or error. Voidable contracts also include those concluded by an incapacitated person or by a person who entered into the contract under duress or undue influence. Also, a voidable contract can arise in a situation where one of the contracting parties is a trustee and abuses its power in that role. In these situations, the contract is not terminated until the party who has legal grounds to withdraw from the contract formally invalidates it. Alternatively, the party may choose to ratify the contract, in which case it becomes an enforceable contract.
Generally, a contract entered into by a minor is a voidable contract. In most jurisdictions, if you marry a minor or an incapacitated person, the marriage is void. A minor can choose to have the marriage annulled or to affirm the marriage once the minor is of age. In the case of an incapacitated person, the person can affirm the marriage if he becomes competent.
A voidable contract is different from a voidable contract. Void contracts are contracts that cannot be legally enforced between the parties. If two parties enter into an agreement to perform an illegal action, for example, the contract would be considered void. A contract can also become void if the fulfillment of the contractual obligations becomes impossible.
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