"For several reasons, the contract was not signed by two managers. Therefore from a legal point of view, it is not valid," explained Wolfsburg's Klaus Allofs, who took charge as sporting director in November.
"We will sit down with Diego and his adviser during the week and discuss it."
Benaglio signed a contract extension with the 2009 German champion in April 2012 while Felix Magath, who was sacked last October, was in charge as both coach and director of sport.
Because of Magath's unusual joint role, the contract was not signed by a second senior figure, namely Wolfsburg's finance manager Wolfgang Hotze.
The contract is reported to also contain a 'Magath Clause' meaning Benaglio can leave the club for a fee of 6 million euros ($7.59 million) if Magath is no longer coach.
Benaglio has refused to discuss details of his contract, but Allofs is confident of keeping the 29-year-old in Wolfsburg, having joined the Bundesliga side in 2008.
"I think Diego has a good environment here and is well paid," he said.
"He has done well from a sporting perspective and hasn't said anything about not working together in the future."