Certified Residential Appraiser Practice Exam

Which type of contract does not involve any legal obligations due to its nature?

1. Implied contract

2. Executed contract

3. Voidable contract

4. Bilateral contract

The correct answer is: Voidable contract

The correct answer, which identifies a type of contract that does not create legal obligations, is a voidable contract. A voidable contract is one that is valid and enforceable on the surface but may be legally voided or rejected by one of the parties involved. This could be due to a variety of reasons, such as misrepresentation, undue influence, fraud, or lack of capacity. Because one party retains the right to withdraw from the agreement, it inherently lacks full legal obligation until it is ratified. In contrast, an implied contract is a legally recognized agreement inferred from actions or circumstances rather than words, and it does create obligations based on the conduct of the parties involved. An executed contract refers to an agreement that has been fully performed by all parties, and therefore, it entails clear legal obligations. A bilateral contract involves two parties making mutual promises to each other, which establishes enforceable obligations. Thus, while these other types of contracts create specific rights and duties, a voidable contract allows for the possibility of nullification, which makes it distinct in that it can exist yet remain unenforceable at the discretion of one party.