What characterizes an unenforceable contract?

An unenforceable contract is characterized by having no legal effect in the sense that it cannot be enforced by either party in a court of law. This can happen for various reasons, such as the statute of limitations expiring, the parties lacking the legal capacity to contract, or the subject matter being illegal. However, the term "unenforceable" does not imply that the contract is invalid or non-existent; it simply means that while the contract may exist and have been agreed upon, it cannot be enforced through legal proceedings.

Option B accurately captures this notion by stating that the contract has no legal effect but is still valid. This means the agreement can be acknowledged by the parties involved, but they cannot compel the other to fulfill the terms outlined within it.

The other options do not accurately reflect the characteristics of an unenforceable contract. Some contracts may be considered unenforceable without being illegal, and validity does not vary by state in this context, nor can unenforceable contracts typically be enforced under specific conditions.