Nevada Timeshare License Practice Exam

How is a voidable contract defined?

1. A contract that is always invalid

2. A valid contract until action is taken to void it

3. A contract that cannot be enforced

4. A contract with no legal effect

The correct answer is: A valid contract until action is taken to void it

A voidable contract is indeed defined as a valid contract until one party takes action to void it. This characteristic means that the contract remains enforceable and binding on the parties involved unless one party chooses to exercise their right to withdraw from the agreement. This situation often occurs due to certain conditions, such as misrepresentation, undue influence, or a lack of capacity to contract (like in the case of minors or mentally incapacitated individuals). Until a party decides to void the contract, it remains legitimate and can be enforced in a court of law. In contrast, a void contract is inherently invalid from the moment it is created, meaning it holds no legal effect and cannot be enforced by either party. Understanding these distinctions is crucial when dealing with contracts, particularly in the context of timeshare agreements, where situations may arise that could render a contract voidable.