What is a voidable contract? Definition, examples, and how to use one

A voidable contract is a valid, legally binding agreement that one or both parties can choose to cancel because of a defect. These defects can include fraud, misrepresentation, duress, undue influence, or lack of capacity.

A simple definition of a voidable contract is an agreement between two parties that one or both parties can legally cancel.

Voidable contracts allow courts to assess a contract's fairness in light of the circumstances surrounding its formation.

Courts can determine whether someone was unfairly forced or coerced into signing a contract they wouldn't have signed under normal circumstances.

This guide will cover what makes a contract voidable, the most common circumstances, and more.

Key takeaways

• A voidable contract will remain valid and enforceable until the party with the right to cancel it chooses to void it.

• Common grounds to void a contract include misrepresentation or fraud, duress or coercion, undue influence, lack of capacity, unconscionable terms, and mutual mistake.

• Ratification makes a voidable contract fully valid when the party who could void it knowingly chooses to affirm it.

• Timing matters: waiting too long to act can waive the right to void, and the rules vary by jurisdiction.

Voidable vs. void contract: the short version

A void contract is invalid from the outset and unenforceable. This is usually because it lacks an essential element or has an illegal purpose.

A voidable contract is valid and enforceable at first, but it has a defect, like misrepresentation or duress, that lets one party cancel it. Until they do, it remains enforceable.

For a full comparison, read our guide on differentiating between a void and a voidable contract.

When is a contract voidable?

A contract becomes voidable when certain specific circumstances or defects exist that give one or both parties the option to cancel or void the contract.

These circumstances or defects can undermine one party's voluntary and informed consent, making the contract potentially unfair or unjust.

Here are some common situations when a contract may be considered voidable:

Misrepresentation or fraud

If one party makes false statements or misrepresents essential facts that induce the other party to enter into the contract, the deceived party may have the right to void the contract.

This typically involves a material misrepresentation, meaning a false statement that significantly influenced the decision to enter into the contract.

Duress or coercion

When one party is forced, threatened, or pressured into signing the contract against their will, the contract may be voidable.

Duress or coercion undermines the agreement's voluntary nature.

Undue influence

If one party has significant power or influence over the other and uses that influence to compel the weaker party to enter the contract, the contract may be voidable.

Undue influence often occurs in situations involving relationships of trust, such as between family members, caregivers, or legal guardians.

Lack of capacity

Contracts may be voidable if one party lacks the mental capacity, legal competence, or understanding to enter into a contract.

This could involve individuals who are minors, mentally incapacitated, intoxicated, or suffering from a cognitive impairment.

Unconscionable terms

When a contract's terms are so one-sided, unfair, or oppressive that they shock the conscience, a court may consider the contract voidable.

Such terms can include exorbitant fees, hidden clauses, or terms that heavily favor one party.

Mistake

In cases where both parties make a genuine mistake about a fundamental aspect of the contract, it may be voidable.

This often involves a mutual misunderstanding or a material misunderstanding of the contract's terms.

The party seeking to void the contract must act promptly after discovering the issue.

Delay in asserting the right to void the contract may result in a waiver of that right.

Additionally, specific legal requirements may vary by jurisdiction, so seek legal advice when you encounter such situations to ensure compliance with local laws and regulations.

Voidable contract examples

Here are some real-life examples of voidable contracts to further illustrate the concept:

Example 1. Contract under duress

Imagine Sarah signs a contract with a construction company to renovate her home.

However, the construction company's representative uses aggressive, threatening tactics and complex contract terminology to force Sarah to sign.

Sarah feels she has no choice but to agree because of the duress.

In this case, Sarah may have the option to void the contract because it was entered into under duress.

Example 2. Misrepresentation of product quality

John purchases a used car from a dealership based on the dealer's representation that the vehicle has low mileage and has never been in an accident.

After a few weeks, John discovers the car's odometer had been rolled back and that the dealer failed to disclose a previous accident.

The misrepresentation of the car's condition could make the contract voidable, and John might be able to cancel the contract.

Example 3. Contract with a minor

A bicycle shop sells a high-end bicycle to a teenager without realizing that the buyer is under the legal age of majority.

Later, the teenager decides they no longer want the bicycle and returns it to the shop.

Because minors typically lack the legal capacity to enter into binding contracts, the minor may void the bicycle shop's standardized contracts.

Example 4. Undue influence in a will

An elderly individual, Susan, creates a will, leaving her entire estate to her caregiver, Lisa.

Susan's family becomes concerned that Lisa manipulated Susan into changing her will to benefit her unfairly.

If it can be proven that Lisa exercised undue influence over Susan in creating the will, the will may be voidable, and Susan's previous will could be reinstated.

In each example above, the contract may be voidable because specific circumstances or defects raise questions about the parties' voluntary consent or fairness.

Voidable contracts provide a legal mechanism for parties to address situations where they may have been unfairly coerced, misled, or taken advantage of during the contract formation process.

Read more:

Best practices for making your contract management successful

How a voidable contract can become valid (ratification)?

A voidable contract may become valid through ratification.

Ratification occurs when one or both parties to a voidable contract, who initially had the option to void it, decide to affirm the contract's terms and continue with the agreement.

Here's how a voidable contract can become valid through ratification.

Affirmative action

To ratify a voidable contract, one or both parties must take affirmative action to demonstrate their intent to continue with the contract.

This action typically involves acting as though the contract is valid, such as making payments or fulfilling contractual obligations.

Informed consent

The party or parties ratifying the contract must do so with full knowledge of the defects or circumstances that initially made the contract voidable.

They should be aware of their right to void the contract and willingly choose to proceed.

Express or implied ratification

Ratification can be either expressed or implied.

Express ratification occurs when the party explicitly states its intent to affirm the contract's terms.

Implied ratification arises from the party's conduct and actions that indicate acceptance of the contract's validity.

No duress or undue influence

Ratification must occur without any further coercion, duress, or undue influence.

If the initial defect resulted from these factors, ratification would not be valid.

No new consideration required

Ratification generally does not require new consideration (additional benefits or obligations) beyond what was already agreed upon in the original contract.

Parties can reaffirm the contract's terms without renegotiating the deal.

Clear intent

The intent to ratify the contract must be clear and unambiguous.

Courts typically look for evidence that the party voluntarily and knowingly affirmed the contract.

Time limitations

Some jurisdictions may impose time limitations on the ability to ratify a voidable contract.

Parties seeking to ratify should do so within a reasonable time frame.

Example of ratification

Suppose Sarah entered into a contract with John to buy her antique piano.

Later, Sarah discovers that John misrepresented the piano's value, leading her to believe it was worth much less than it actually was.

Initially, Sarah could void the contract due to misrepresentation.

However, after further consideration, Sarah decides to keep the contract.

She informs John that she will affirm the contract's terms and proceed with the sale, knowing the piano's actual value.

In this case, Sarah's affirmative action to proceed with the contract, with full awareness of the misrepresentation, constitutes ratification, making the initially voidable contract valid.

How to void a contract

Voiding a contract involves legal steps and time-sensitive requirements. You usually need to identify valid grounds, act quickly before you risk waiving your right to void, and get an attorney’s input if the other party disputes it.

If you want to learn how to end a contract, see our guide on voiding a contract legally in five steps. 

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