Which statement best describes a voidable contract?

A voidable contract is one that may initially be valid but contains elements that allow one or more parties to void it under certain conditions. For example, if one party was misled, coerced, or not of sound mind at the time of agreement, they have the option to affirm or void the contract. This means that the contract holds legal validity until the party with the right to void it chooses to do so. Thus, the correct understanding is that a voidable contract may be valid under specific circumstances, depending on the actions and decisions of the parties involved.

In contrast, a contract described as having no legal effect would be classified as void, meaning it is not recognized under law from the moment of its creation. An automatically enforceable contract, on the other hand, suggests a level of obligation that does not align with the characteristics of a voidable contract, as voidable contracts rely on the choices of the affected party. Lastly, while mutual consent is indeed important in forming a contract, it does not specifically define a voidable contract, as it can be a requirement for all types of contracts, not uniquely for those that are voidable.