Introductory Business Law CLEP Prep Practice Exam

What is the difference between a void and a voidable contract?

1. A void contract is unenforceable, while a voidable contract is legally binding

2. A voidable contract is unenforceable, while a void contract is legally binding

3. A void contract is enforceable, while a voidable contract is not

4. A voidable contract is enforceable, while a void contract is not

The correct answer is: A voidable contract is enforceable, while a void contract is not

The distinction between a void and a voidable contract is fundamental in contract law. A void contract is one that is treated as if it never existed in the eyes of the law. This means that neither party can enforce it, and it cannot be validated by either party. Examples of situations that can lead to a void contract include contracts that involve illegal activities or agreements that lack the necessary elements of a contract, such as capacity or consideration. In contrast, a voidable contract is valid and enforceable unless one of the parties decides to void it. This right to void the contract typically arises from certain circumstances, such as misrepresentation, undue influence, duress, or when one party is a minor. Until a party chooses to void the contract, it remains legally binding and enforceable. Thus, the correct answer highlights that a voidable contract is indeed enforceable until a party elects to exercise their option to void it, while a void contract is not enforceable at all. This distinction is crucial for understanding how different types of contracts function within the legal system.