Which scenario describes a voidable contract?

A voidable contract is one that remains valid and enforceable unless one party opts to void or cancel it. In the scenario where one party decides to cancel the agreement, this reflects the essence of a voidable contract. The choice indicates that while the contract was initially valid and binding, one party has the legal right to choose to withdraw from it due to specific circumstances, such as misrepresentation, coercion, undue influence, or lack of capacity.

In contrast, scenarios where both parties agree to the terms or where all parties fulfill their obligations typically describe valid contracts that are enforceable and effective. A contract declared illegal falls into a different category as it is not enforceable at all; it is void from the outset and does not provide any legal rights to the parties involved. Thus, the first option accurately represents the characteristics of a voidable contract.