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Voidable Contract: Definition, Example and Related Terms

What is a Voidable Contract ?

A voidable contract is a valid agreement that one of the parties can choose to enforce or void. This means that while the contract appears to be valid on its face, circumstances exist that allow one party to reject or rescind the contract if certain conditions are met. These conditions often involve issues like fraud, misrepresentation, undue influence, or mistakes that occurred during the formation of the agreement.

For instance, if someone was coerced into signing a contract, they could later decide to void the contract on the grounds of undue influence. Similarly, if one party misrepresented a crucial fact or omitted important information, the deceived party might have the option to void the contract. The key factor here is that a voidable contract remains valid and enforceable until action is taken to void it.

Understanding the concept of a voidable contract is crucial in contract law, as it helps identify agreements that, while seemingly legitimate, may have underlying issues that affect their enforceability. This knowledge is particularly important for negotiating and drafting contracts, as well as for recognizing potential risks and liabilities.

To summarize, a voidable contract is different from a void contract, which is invalid from the outset and cannot be enforced by either party. Conversely, a voidable contract remains enforceable unless and until the aggrieved party decides to void it.

Example(s)

  • Scenario Description
    A real estate contract where one party failed to disclose an important defect in the property. The contract could be voidable by the buyer if they discover the defect after the purchase. The buyer can choose to rescind the contract based on the non-disclosure of crucial information, rendering the agreement unenforceable.
    An employment contract signed by an individual under duress. If it's proven that the individual was coerced into signing the contract, they can void the agreement, claiming it was executed under undue influence. This renders the contract unenforceable against them, although it was valid on its face.