Voidable Contracts
If one of the parties has been induced into entering the contract on the basis of misrepresentation, whether innocent, negligent or fraudulent, that party may be entitled to void the contract. If the misrepresentation was innocent, generally only the contract can be cancelled and any money returned, and no damages can be recovered in court. If there is negligent or fraudulent misrepresentation, however, not only can the contract be cancelled, but damages can also be recovered in court. For example, if the vendor was going to provide vendor-back financing and relied on representations of the purchaser concerning his creditworthiness and ability to pay, and prior to completion of the transaction (by doing a credit check and/or other investigation) the vendor finds out that the purchaser is a terrible credit risk, then that could be deemed to be negligent or fraudulent misrepresentation. For that reason the contract could be cancelled. To give another example, if the purchaser finds out before completion that the representation of the vendor or the vendor’s agent is grossly untrue (e.g., that zoning has been approved for subdivision purposes, and investigation shows that no application has been made for subdivision purposes), then the purchaser could get out of the contract and sue to recover damages, if any can be proven.
These are just some illustrations of the types of factors that could impact on the validity or enforceability of the contract. You can see how competent legal advice in advance from a skilled real estate lawyer is necessary to minimize potential problems.
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