Also known as: voidable contracts · avoidable contract
Written by attorneys · grounded in primary & secondary sources — see below
A contract that one or more parties may elect to avoid, thereby terminating the legal relations it created, or may ratify, thereby extinguishing the power of avoidance. The election to avoid or to ratify is manifested by words or conduct after the circumstances creating the power have arisen. A voidable contract remains fully effective unless and until the power is exercised.
Vincent Valdez, age seventeen, electronically signed a margin trading agreement with Apex Investments authorizing credit purchases. After a market drop produced a margin call, Vincent notified Apex that he disaffirmed the agreement on the ground of minority and refused further payment. Because the contract was voidable at his option, the disaffirmance released him from liability for the unpaid balance.
Violet Vidal signed a severance agreement with her municipal employer while recovering from injury and medication that impaired concentration. She deposited the settlement check and used the funds for living expenses, then remained silent for four months before seeking to rescind. Her acceptance and retention of the benefits constituted ratification that extinguished the power to avoid the agreement.
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A void contract is a legal nullity from the outset with no enforceable obligations for either party. A voidable contract is valid and binding unless the protected party elects to avoid it. The distinction determines whether any party can enforce the agreement or whether one party alone holds the power to terminate it.
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Ratification occurs when the party with the power of avoidance manifests an election to be bound, such as by accepting and retaining benefits tied to the contract or by prolonged silence after the opportunity to disaffirm. Once manifested, the election extinguishes the avoidance power and renders the contract fully enforceable.
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A beneficiary's rights are subject to any infirmity that rendered the contract voidable at formation. The beneficiary steps into the shoes of the promisee and cannot enforce rights the promisee itself could not enforce once the power of avoidance is exercised.
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A minor's contract remains voidable until the minor disaffirms or, after reaching majority, ratifies it by express promise or conduct inconsistent with disaffirmance. Mere performance while still a minor does not constitute ratification.
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