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What Are the Different Types of Voidable Contracts?

Someone under the influence of alcohol may lack capacity to enter into a valid contract.
All parties signing a contract must do so of their own free will.
Wedding rings on top of a marriage contract.
Contracts that are ambiguous can be deemed unenforceable or voidable, so it is important that a contract is reviewed for clarity before it is signed.
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  • Written By: Terry Masters
  • Edited By: Allegra J. Lingo
  • Last Modified Date: 25 August 2014
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The two types of voidable contracts are contracts signed without capacity and contracts signed without mutual assent. Capacity and mutual assent are two indispensable legal elements of a valid and enforceable contract. Examples of voidable contracts reflect instances where a person would be at a distinct disadvantage in making a decision to enter into any binding agreement or where his ability to understand the consequences of his actions are in question.

A contract is a binding agreement between two or more parties with a form and function that is prescribed by law. In most jurisdictions with a common law legal system, a contract must satisfy certain elements to be valid and enforceable by the court. Contracts that are typically valid under the law are made between two or more parties with the capacity to enter into a contract and who do so by mutual assent and for valuable consideration. In other words, the agreement must be between right-minded legal adults who sign the contract under their own free will and are exchanging things of value to each.

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The two types of unenforceable contracts are void and voidable contracts. Void contracts lack an element needed to make a valid contract. It is void immediately because it was never legally valid in the first place. Voidable ones are only unenforceable at the request of one of the parties. Though voidable contracts contain all of the legal elements of a valid contract, when some outside factor is applied to the circumstances surrounding the making of the contracts, the court can decide it is unenforceable.

A claim of lack of capacity will make a contract voidable, but only at the option of the party lacking capacity, not at the option of the other party to the agreement. Minors lack the capacity to contract. Any minor individual who enters into a contract before the age of legal majority has the option of voiding the contract once he becomes a legal adult. The mentally incompetent also lack the capacity to contract unless the contract is ratified by a legal guardian. A person who is drunk, on drugs, or under the influence of any intoxicating substance can claim a lack of capacity once returned to his senses.

Mutual assent is also a necessary element in an enforceable contract. A lack of meaningful assent on the part of one of the parties will make the contract voidable at the option of the party who was harmed. Whenever a person is determined to have signed a contract under duress, under undue influence, or because of fraud in the inducement, the court will find there was never a true meeting of the minds regarding the desire to enter into a contract. An example of this type of voidable contract is a marriage contract entered into by a person induced by misrepresentations regarding the spouse’s identity.

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Discuss this Article

Monika
Post 4

@dautsun - Interesting way to look at it. It's always best to do the right thing, but it never hurts to have some incentives in place for people to behave as they should. I don't think I would want to sign a contract with someone that could void the contract at any time!

dautsun
Post 3

It's interesting that there's a difference between a void contract and voidable contracts. It seems like a voidable contract could still be legally binding, as long as the person who has the option to void the contract doesn't. But a contract that is void is basically void from the beginning.

So basically someone who is a minor could sign a contract, and either decide to void it or not. It seems like in this case, the person who doesn't have capacity really has all the power. Very interesting! And that should give the other party a good reason not to sign a contract with someone lacking in capacity.

sunnySkys
Post 2
@starrynight - That's a pretty good example of a voidable contract. And I could see that happening in real life too. I swear, it seems like some people will stop at nothing to get one over on others for their own benefit. I guess that's why we have laws about this kind of thing!
starrynight
Post 1
I think it's great that there is a part of contract law that's designed to protect people who enter into contracts that are basically illegal. If these protections weren't in place, I bet a lot of people would take advantage of others as far as contracts were concerned.

For example, I could see an employer taking a potential employee out for a business lunch and getting the future employee a little sauced. Then, the employer could convince the future employee to sign an employment contract that's more advantageous to the employer. At least under the current law, the employee could void the contract once he or she sobered up.

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