What Is a Voidable Contract?
Let me tell you directly: a voidable contract is a formal agreement between two parties that starts out as legal and enforceable, but it can be made unenforceable for various legal reasons. These reasons might include one or both parties failing to disclose a key fact, or there could be a mistake, misrepresentation, or outright fraud involved. You might also see undue influence or duress at play, or perhaps one party lacks the legal capacity to enter the contract, like if they're a minor. Unconscionable terms or a breach of contract can make it voidable too. The right to void it is called disaffirmance, and that's your key to rejecting it if you're the affected party.
Key Takeaways
- A voidable contract can be canceled or changed for valid legal reasons.
- Not every contract is voidable; it depends on the specifics.
- You need legal precedent to release someone from responsibility.
- Spotting a defect is a common path to voiding a contract.
- The easiest way to void it is if both parties agree that's best.
How Voidable Contracts Work
Understand this: a voidable contract begins as a fully legal and enforceable document. But if you discover defects later, one party can reject it. If the party who could reject it decides not to, despite the issue, the contract stays valid and enforceable. Typically, only one party suffers from agreeing to it, often because they didn't spot a misrepresentation or fraud by the other side. The straightforward way to void it is for both parties to agree it's the right move—they might end the whole relationship or just fix the contract. You can correct a voidable contract through ratification, where everyone agrees to new terms that eliminate the original problem. If someone wasn't legally capable at the time but later becomes so, they can choose to ratify it then.
Voidable vs. Void Contracts
Here's the difference you need to grasp: a voidable contract happens when one party wouldn't have agreed if they'd known the full truth about the contract's elements beforehand. That party can reject it after learning the facts. It can also be voidable if one or both parties aren't legally able to enter the agreement, such as a minor. On the other hand, a void contract is unenforceable right from the start. It might be void if it requires illegal acts or if a party becomes unable to fulfill it, like due to death. Remember, a contract could be ruled null and void if it involves illegality or incapacity to meet the terms.
Examples of Potentially Voidable Contracts
Consider this example: some smartphone apps start free but later push in-app purchases for money, especially those aimed at kids. A minor might accept terms that allow these purchases, leading to a lawsuit against Apple in 2012 claiming those transactions formed a voidable contract. Another case from 2018 in New Mexico accused Vivint Solar of defrauding customers with 20-year contracts for buying electricity from home solar systems, with rates jumping over 72% in that time. The lawsuit aimed to make those contracts voidable for affected homeowners wanting out, though it wasn't part of the 2021 settlement with the attorney general.
What Is Disaffirmance?
Disaffirmance is your right to renounce a contract you've entered. To do it, you indicate you won't be bound by its terms, either directly like in writing or indirectly by not performing your duties. If you can prove you lacked legal capacity, you can disaffirm it.
What Is a Void Contract?
A void contract is unenforceable from creation because it was never legally valid due to its writing or terms. It could be void if a party couldn't understand it fully or was a minor at signing. Contracts with illegal activities are also void.
What Are Some Reasons a Contract Would Be Voidable?
Contracts become voidable for legal reasons like failing to disclose material facts, misrepresentations, or mistakes. Fraud, unconscionable terms, or breaches can qualify too. If one party lacks legal capacity at signing, that's another reason.
The Bottom Line
In summary, a voidable contract is one that either party can cancel for qualifying legal reasons, or they might amend it instead. Reasons include omitting material facts, mistakes, misrepresentations, breaches, or a party's lack of legal qualification. This contrasts with void contracts, which are unenforceable from the outset, like those requiring illegal acts. A voidable one is legal until challenged on valid grounds.
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