Arthur R. Lehman, L.L.C.

What can invalidate a business contract in New York State?

Though the validity of most business contracts is clear to all parties involved, sometimes one of the parties later refuses to honor the terms of a contract. New York businesses generally can go to court to enforce a contract if it chooses to. But not all contracts are as rock-solid as they appear.

There are two categories of contracts that shaky at best, and worthless at worst. Contracts can be “void” or “voidable,” and a smart business owner will want to avoid either scenario.

Under New York law, a void contract is one that the court will consider not to exist -- it is a “mere nullity.” A voidable contract, on the other, will continue to be in force until one of the parties takes action. But at least one of the parties does have the right to “avoid or validate” the contract because of some defect.

Reasons that a contract may be void or voidable for reasons such as one of the parties only agreeing to the contract under duress; fraud on the part of one of the parties; and theft.

When a business buys or sells goods in good faith under a void or voidable contract, it may have to return the goods or the compensation it received. Litigation may be able to resolve the contract dispute in the business’ favor, but as with most things it is better to work to prevent problems before they happen.

The guidance of a business law attorney can help business owners avoid the pitfalls that lead to a contract being voided in court.

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