Voidable Contract

AAA

DEFINITION of 'Voidable Contract'

A formal agreement between two parties that may be rendered unenforceable for a number of legal reasons. Reasons that can make a contract voidable include failure by one or both parties to disclose a material fact; a mistake, misrepresentation or fraud; undue influence or duress; one party's legal incapacity to enter a contract; one or more terms that are unconscionable; or a breach of contract.

INVESTOPEDIA EXPLAINS 'Voidable Contract'

A voidable contract can be legally rejected by one party and is said to have a defect. If the party with the power to reject the contract chooses not to reject the contract despite the defect, the contract becomes valid and enforceable.


It is usually only one of the two parties who would be adversely affected by agreeing to a voidable contract if they had recognized the misrepresentation or fraud made by the other party. For example, the first party would not have agreed to the contract originally and has the opportunity to reject it after the fact. In contrast, a void contract is inherently unenforceable. An example would be a contract that violates the law, such as a murder for hire contract.

RELATED TERMS
  1. Void Contract

    A formal agreement that is illegitimate and unenforceable from ...
  2. Implied Contract

    A legal substitute for a contract. An implied contract is an ...
  3. Oral Contract

    A type of business agreement that is spoken, not memorialized ...
  4. Adhesion Contract

    A contract in which one party has substantially more power than ...
  5. Breach Of Contract

    Violation of any of the agreed-upon terms and conditions of a ...
  6. Assignable Contract

    A futures contract with a provision permitting the contract holder ...
Related Articles
  1. Understanding Your Insurance Contract
    Insurance

    Understanding Your Insurance Contract

  2. Moral Hazards: A Bump In The Contract ...
    Options & Futures

    Moral Hazards: A Bump In The Contract ...

  3. Create A Pain-Free Postnuptial Agreement
    Retirement

    Create A Pain-Free Postnuptial Agreement

  4. Educating Your Clients About Cybersecurity
    Investing News

    Educating Your Clients About Cybersecurity

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center