Contracts and Their Legal Implications
Void Contracts – Legally Invalid from the Beginning
A void contract is an agreement that was never legally valid and has no legal effect from its inception. This means neither party can enforce the contract, and it is treated as if it never existed.
Common Reasons a Contract is Void in Condominium Management:
Illegal Activities – If a contract involves activities prohibited by law, it is automatically void.
Contravention of Public Policy – If a contract violates public policy (e.g., fraud, discrimination), it is unenforceable.
Failure to Meet Legislative Requirements – If a management agreement attempts to bypass statutory obligations, it is void.
Example:
A condominium board signs a contract with a management company that eliminates the board’s right to terminate the contract (contrary to the the Real Estate Act Rules). This contract would be void because it conflicts with statutory law.
Voidable Contracts – Initially Valid, But Can Be Cancelled
A voidable contract is legally valid at the time of signing, but one party has the right to void (cancel) it due to specific legal reasons.
Common Reasons a Contract is Voidable in Condominium Management:
Misrepresentation – If false information influenced the signing of the contract.
Undue Influence – If one party was pressured or coerced into signing.
Lack of Capacity – If the person signing the contract did not have legal authority.
Example:
A condominium manager pressures a newly elected board member into signing a service agreement with unfair terms without allowing time for review. If the board can prove coercion, they may be able to void the contract.
Unenforceable Contracts – Legally Valid, But Cannot Be Enforced
An unenforceable contract is one that meets legal requirements but cannot be enforced in court due to procedural or technical reasons.
Common Reasons a Contract is Unenforceable in Condominium Management:
Failure to Meet Writing Requirements – Some contracts must be in writing to be legally enforced.
Statute of Limitations Expired – A claim is brought too late and is no longer legally valid.
Ambiguous or Missing Terms – If the contract terms are unclear or incomplete, a court may refuse to enforce it.
Example: Under the Condominium Property Act, management agreements must be in writing. If a verbal agreement is made between a board and a contractor, it is unenforceable.
Assessing Contract Validity in Condominium Management
To avoid void, voidable, or unenforceable contracts, condominium managers must carefully review and assess agreements before execution.
Key Factors to Assess:
Compliance with the Condominium Property Act
The Condominium Property Regulation requires certain obligations, such as a corporation’s right to terminate a management agreement within 12 months of the first independently elected board.
If this statutory right is not included in a contract, the agreement may be void.
Proper Execution of the Contract
Contracts must be signed by authorized individuals (e.g., board directors).
If unauthorized persons sign an agreement, it may be voidable or unenforceable.
Clarity of Contract Terms
Contracts should clearly state:
Scope of work
Payment terms
Duration and termination conditions
Dispute resolution mechanisms
Proper Documentation
All contracts should be in writing and include amendments, addendums, and approvals.
Verbal agreements are unenforceable in most cases.
Example:
A condominium board signs a handwritten service contract with unclear termination terms. Later, they want to terminate the agreement but realize there is no provision to do so. The contract may be unenforceable due to vagueness and ambiguity.
Risk Mitigation Strategies for Contract Validity
To prevent contract issues, condominium managers should implement the following best practices:
Develop a Contract Compliance Checklist
Before signing, verify that the contract:
Meets all legal requirements under Alberta’s Condominium Property Act.
Clearly defines the scope, obligations, and payment structure.
Contains proper termination and dispute resolution clauses.
Is signed by authorized representatives.
Establish a Clear Approval Process
Ensure all contracts go through a formal review process before approval:
The board reviews and approves all major agreements.
Contracts are legally reviewed if necessary.
Signing authority is clearly defined in corporate bylaws.
Example:
A board creates a policy requiring two board signatures on all contracts over $10,000, ensuring proper authorization.
Educate Board Members and Managers
Regular training on contract management should be provided to:
Help board members understand their legal responsibilities.
Ensure managers are aware of statutory requirements.
Prevent mistakes that could result in unenforceable contracts.
Example: A new board member wants to sign a service contract immediately but is unaware of termination rights under the Condominium Property Act. Training helps them identify potential issues before signing.
Have Contracts Reviewed by Legal Counsel
For high-value or complex contracts, consult a lawyer to:
Identify any illegal or unenforceable terms.
Ensure compliance with Alberta condominium laws.
Protect the corporation from future legal disputes.
Example:
Before signing a five-year condominium management contract, the board has a lawyer review it to confirm compliance and fair contract terms.
