Legal Definitions - voidable agreement

A voidable agreement is an agreement that is initially valid and legally binding, but one or more parties have the legal right to cancel or "void" it. Until that party chooses to exercise their right to cancel, the agreement remains enforceable. The power to void the agreement typically arises due to a defect in its formation, such as one party lacking the legal capacity to contract, or if consent was obtained through misrepresentation, duress, or undue influence.

Here are some examples to illustrate this concept:

• Example 1: Agreement with a Minor

  Imagine a 17-year-old, who is a minor in most jurisdictions, signs a contract to purchase a brand new motorcycle from a dealership. The dealership delivers the motorcycle, and the minor begins making payments.

  This agreement is voidable at the minor's discretion. While the contract is initially valid and the minor can choose to honor it, they also have the legal right to cancel it, typically within a reasonable time after reaching the age of majority (18 years old). The dealership, however, is generally bound by the contract unless the minor decides to void it. If the minor chooses to void the contract, they would return the motorcycle, and the dealership would return any payments made.

• Example 2: Misrepresentation in a Sale

  A homeowner sells their house to a buyer, explicitly stating during negotiations that the house's foundation was professionally reinforced last year and is in perfect condition. Relying on this statement, the buyer proceeds with the purchase. A few months after moving in, the buyer discovers significant, pre-existing structural issues with the foundation that would have been apparent before the sale, indicating the seller's statement was false.

  This sales agreement is voidable by the buyer. Because the seller made a material misrepresentation that induced the buyer to enter the contract, the buyer has the legal right to cancel the agreement. Until the buyer takes action to void the contract (e.g., by suing for rescission), the agreement remains valid and enforceable.

• Example 3: Agreement Under Duress

  A small business owner is threatened by a competitor with severe financial harm to their family if they do not sign a contract agreeing to sell their business at a significantly undervalued price. Fearing for their family's safety and financial well-being, the owner signs the contract.

  This agreement is voidable by the business owner. Their consent to the contract was not freely given but was obtained under duress (coercion or threat). The agreement is valid on its face, but the business owner has the legal right to challenge and cancel it due to the improper pressure applied. If they successfully prove duress, a court would likely void the contract, restoring both parties to their original positions.