Certified Residential Appraiser Practice Exam

In what scenario would a voidable contract typically arise?

1. When both parties understand all terms

2. When one party is a minor

3. When the contract has been fully executed

4. When both parties fail to meet their obligations

The correct answer is: When one party is a minor

A voidable contract typically arises in situations where one party has the legal right to void or cancel the contract due to certain conditions, and one common scenario for this is when one party is a minor. Contracts involving minors are considered voidable at the minor's discretion, meaning that they can choose to enforce the contract or void it upon reaching the age of majority or within a reasonable time thereafter. In this context, the fact that one party is a minor is significant because the law recognizes that minors may not have the same level of understanding or maturity when entering into agreements, thereby allowing them the option to disaffirm the contract. This ensures protection for minors in contractual dealings and highlights the importance of capacity in contract law. In contrast, if both parties understand all terms, the contract would likely be enforceable. A fully executed contract indicates that all parties have fulfilled their obligations and has no implications for its validity. Similarly, a scenario where both parties fail to meet their obligations would generally lead to a breach rather than a voidable contract situation. Thus, the correct answer effectively highlights the unique legal considerations associated with minors and contract enforceability.