Introductory Business Law CLEP Exam 2025 – Your All-in-One Guide to Master the Test!

The statement that a void contract is unenforceable, while a voidable contract is legally binding, accurately captures the essential difference between these two types of contracts.

A void contract is one that is not legally valid from the moment it is created. This could result from various factors, such as illegality, lack of capacity, or an agreement made under duress or fraud. Since it lacks any legal effect, neither party can enforce its terms, and it cannot become valid at any time.

In contrast, a voidable contract is a valid agreement that can be enforced until one party decides to void it due to certain circumstances, such as misrepresentation, undue influence, or the lack of capacity (e.g., a minor). This contract is binding and can be enforced by the aggrieved party until they choose to void it. Thus, it holds the potential for enforceability if the party with the option to void does not exercise that right.

This distinction highlights the different legal standings of void and voidable contracts: one offers no enforceability, while the other maintains a temporary validity that can be contested.