Colorable Transaction Law and Legal Definition

A colorable transaction is an apparently valid transaction that may really be unlawful or illusory. It is a sham transaction appearing to be authentic. Courts may set aside such transactions because such transactions are pretended transactions.

A colorable transaction is one which presents an appearance which does not correspond with the reality, and in the sense contended for, an appearance intended to conceal or to deceive. [Osborn v. Osborn, 102 Kan. 890 (Kan. 1918)].