Contract Based on Misrepresentation Voidable, Not Void

On November 27, 2017, Justice Livote of the Queens County Commercial Division issued a decision in Harmony Rockaway LLC v. Gelwan, 2017 NY Slip Op. 51743(U), holding that a contract based on a misrepresentation of fact was not void, but only voidable, explaining:

As a threshold matter, the lease was based on a material, albeit innocent, misrepresentation that the premises had suitable zoning. A contract based on a misrepresentation is not void, but voidable. If a contract is voidable because of a misrepresentation and, before notice of an intention to avoid the contract, the facts come into accord with the assertion, the contract is no longer voidable unless the recipient has been harmed by relying on the misrepresentation.

In the instant case, defendants elected to proceed with the contract notwithstanding that it was entered into based on a material misrepresentation. When the mayoral override was granted, the facts come into accord with the assertion, and the defendants lost their right to void the contract on the grounds that the zoning was misrepresented.

(Internal quotations and citations omitted).

A key component of complex commercial litigation is contract law. This decision relates to one of the more esoteric aspects of contract law. We routinely litigate contract issues--both basic and complex or esoteric--as part of our commercial litigation practice. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client faces a dispute involving a commercial contract.