Transactions can be valid, that is, valid, and invalid, that is, ineffective. The Russian Civil Code distinguishes between two types of invalid transactions:
- voidable - declared invalid by the court at the request of the interested party;
- void - invalid in themselves, regardless of the court's decision.
An invalid transaction (void or voidable) is invalid from the moment of its completion. It has no legal consequences, the exception being the consequences that arose due to the fact that it was declared invalid.
After a transaction is declared invalid, its participants must return everything that was received under such a transaction in kind and reimburse the cost of property that cannot be returned.
Grounds for voidability of a contract and nullity of a transaction
The Civil Code lists the reasons for declaring a contract invalid. You can challenge it in the following cases:
- in case of violation of the requirements of the law or other legal act;
- in the absence of permission from a third party, including a government body, if it is provided for by law;
- when the person who signed the agreement exceeds his authority;
- when a transaction is made by a minor aged 14 to 18 years, or by a person with limited legal capacity, or by a citizen unable to understand the meaning of his actions or manage them, or made under the influence of a material misconception;
- when concluding an agreement under the influence of deception, violence, threat or due to a combination of difficult circumstances.
Nullity does not require the court to establish this circumstance. The grounds for recognizing a contract as void from the moment of its conclusion are the completion of a transaction:
- for a purpose that is obviously contrary to the foundations of law and order or morality (see Determination of the Constitutional Court dated 06/08/2004 No. 226-O);
- just for show or to cover up another action (imaginary or feigned agreement);
- an incompetent citizen or a minor under 14 years of age;
- in violation of the prohibition or restriction on the disposal of property arising from legislation, including bankruptcy.
The concept of invalidity of a transaction. In order for a transaction to give rise to the legal consequences that the parties sought when concluding it, the requirements established by law must be met. These requirements also apply to the subject matter of the transaction, its form and content, as well as to the will and expression of the parties.
Failure to comply with these requirements may result in the invalidity of the transaction, i.e., the non-occurrence of the legal consequences inherent in this type of transaction by force of law. For example, a gift agreement concluded by an incapacitated person does not give rise to the “done”’s right of ownership to the transferred thing. An invalid transaction does not cause the legal result desired by the parties, but negative consequences provided for by law, since an invalid transaction is an illegal action.
Article 168 of the Civil Code of the Russian Federation establishes as a general rule that a transaction that does not comply with the requirements of the law or other legal acts is invalid.
At the same time, violation of the law does not always cause the transaction to be invalid: Art. 168 also establishes that the law may provide for other consequences. For example, by virtue of paragraph 1 of Art. 162 of the Civil Code of the Russian Federation, failure to comply with a simple written form does not entail the invalidity of the transaction, but deprives the parties of the right to refer to witness testimony in support of it. An extra-statutory transaction of a legal entity cannot be declared invalid if the other party did not know and obviously should not have known about the illegality of the transaction (Article 173 of the Civil Code of the Russian Federation). The foregoing indicates that in a number of cases the legislator, despite the presence of an offense, recognizes the force of a transaction behind the committed action. The invalidity of a transaction as a sanction for an offense occurs due to non-compliance with the most significant legislative provisions.
Taking into account the general permissive orientation of the method of civil law regulation, the freedom of subjects to determine their rights and obligations, the legislator, under certain conditions, gives the opportunity to the parties to an invalid transaction (or their legal representatives) to carry out a kind of reorganization of such a transaction by filing a lawsuit to recognize it as valid. For example, at the request of the parents (adoptive parents, guardian) of a minor citizen, the transaction concluded by him may be recognized by the court as valid if it was made to his benefit.
Classification of invalid transactions. Article 166 of the Civil Code of the Russian Federation divides all invalid transactions into void and voidable.
Transactions that are invalid by virtue of the law itself are recognized as void (or absolutely invalid). They are such from the moment of their conclusion and do not give rise to rights and obligations for the parties, regardless of whether or not a claim is filed in court to declare them invalid.
A statement of claim can be filed by any interested person. The subject of the claim is a demand to apply the statutory consequences of the invalidity of a void transaction, and not to declare it invalid, since it is void by force of law and does not need such recognition. The court has the right to apply the consequences of a void transaction on its own initiative.
Unlike void ones, voidable (relatively invalid) transactions give rise to rights and obligations for the parties from the moment of conclusion (i.e., they are valid), but due to challenge on the grounds provided for by the Civil Code of the Russian Federation, they can be declared invalid by the court.
If the parties simply have the right not to execute a void transaction, since it does not entail legal consequences (except for those related to its invalidity), then the parties are obliged to perform a voidable transaction before it is declared invalid by the court.
And, finally, the last difference between a voidable transaction and a void one is that the subject of the claim in relation to a voidable transaction is, first of all, the requirement to recognize it as invalid, and not only to apply the consequences of invalidity. At the same time, the court may recognize such a transaction as invalid if the existence of circumstances established by law as grounds for such recognition is proven (for example, misconception or deception when concluding a transaction).
In addition to the already discussed gradation of invalid transactions into void and voidable, they can be classified according to the defect that the transaction suffers from.
Just as the conditions for the validity of a transaction are combined into four groups (requirements for subject composition, form, content, will and expression of will), all invalid transactions can be divided into four types: transactions with defects of the subject composition, transactions with defects of form, transactions with defects of will , deals with vices of content. The moment from which the transaction is considered invalid. Clause 1 of Art. 167 of the Civil Code of the Russian Federation contains a general rule according to which an invalid transaction is considered invalid from the moment of its completion. This rule applies to both void and voidable transactions.
With regard to void transactions, the above provision of the law is obvious, since they do not give rise to any rights and obligations from the moment of completion, with the exception of those related to their invalidity.
Voidable transactions, as stated, give rise to rights and obligations for the parties. Therefore, a court decision to recognize such a transaction as invalid is given retroactive force, as if it had been made already at the time the invalid transaction was completed.
At the same time, there are cases when it is impossible to declare a voidable transaction invalid from the moment of its conclusion due to the peculiarities of its content and the fact that it has already been executed. For example, plastic surgery was performed under a contract for the provision of medical services. In such cases, in accordance with clause Zet. 167 of the Civil Code of the Russian Federation, the court, declaring a transaction invalid, terminates its effect for the future, and the rights and obligations of the parties that arose previously remain in legal force and are subject to protection. Consequences of invalidity of part of the transaction. Violations of legal norms may not concern the transaction as a whole, but only its individual parts. In such a situation, the question arises about the legal fate of the transaction. In order to ensure the stability of civil circulation, Art. 180 of the Civil Code of the Russian Federation contains a rule according to which the invalidity of a part of a transaction does not entail the invalidity of the transaction as a whole, if it can be assumed that it would have been completed without the inclusion of such a part. For example, under the influence of a threat, a clause regarding an exorbitantly high penalty is included in the contract; in this case it is possible to invalidate it.
To recognize a transaction as partially invalid, certain conditions must be met.
Firstly, violation of the law should not concern its subject composition and form, since such grounds for invalidity discredit the transaction as a whole. Partial invalidity may occur in transactions with defects in content (see § 9), when one or more conditions do not comply with the requirements of the law, as well as in cases where the inclusion of one or another condition was a consequence of a defect of will (deception, violence, etc. .).
Secondly, there must be the possibility of separation and independent existence of the actual part of the transaction.
Thirdly, it is necessary that even after the invalid part of the transaction is excluded, it retains the ability to satisfy the interests of the parties and achieve the goals set at its conclusion. This is precisely the meaning that the legislator puts into the wording of Art. 180 of the Civil Code of the Russian Federation: “if it can be assumed that the transaction would have been completed without the inclusion of its invalid part.”
In some cases, the legislation contains a direct indication of the invalidity of part of the transaction. So, paragraph 2 of Art. 977 of the Civil Code of the Russian Federation establishes the invalidity of a condition in an agency agreement that limits the rights of the parties to withdraw from the agreement at any time. Special rules sometimes define differently the grounds and consequences of declaring a transaction partially invalid. As a rule, in such cases, no importance is attached to the possibility of isolating the actual part of the transaction and its ability to satisfy the interests of the parties. For example, in accordance with paragraph 1 of Art. 16 of the Law of the Russian Federation “On the Protection of Consumer Rights”, the terms of the contract that infringe on the rights of consumers in comparison with the rules established by law are recognized as invalid. The transaction remains valid regardless of the fact that it may not correspond to the interests of the seller after eliminating invalid conditions from it.
Basic and additional property consequences of invalid transactions.
In cases where an invalid transaction is not only completed, but also executed, it becomes necessary to determine the legal fate of the performed execution. The application of certain property consequences depends on the grounds for invalidity of the transaction.
The property consequences of the invalidity of a transaction are divided into main and additional.
The main ones include bilateral and unilateral restitution, as well as seizure of property of both parties to the income of the Russian Federation (confiscation).
Bilateral restitution means that the parties who made and executed the invalid transaction are restored to their original position. Each party is obliged to return to the other party everything received under the transaction, and if it is impossible to return what was received in kind (when the property is consumed, lost, or if what is received is expressed in the use of property, work performed or service provided) - to reimburse its value in money (clause 2 Article 167 of the Civil Code of the Russian Federation).
Bilateral restitution is a general rule and always applies, unless other (more serious) consequences are specified by law. Bilateral restitution is applied not only when such consequences are directly indicated in the law (for example, in paragraph 1 of Article 171 of the Civil Code of the Russian Federation), but also in the absence of such instructions. For example, in Art. 173 of the Civil Code of the Russian Federation does not name the legal consequences of an extra-statutory transaction, which means that it is necessary to apply the general rule (clause 2 of Article 167 of the Civil Code of the Russian Federation) on bilateral restitution.
Bilateral restitution applies to all transactions with defects of form and subject composition, as well as to three types of transactions with defects of will: transactions made under the influence of delusion, transactions of a capable citizen who, at the time of their commission, could not account for or direct his actions, as well as transactions made in excess of authority.
Unilateral restitution is possible only in cases expressly specified in the law, and consists in the fact that only one of the parties is restored to its previous position, receiving back what was executed. A punitive sanction is applied to the other party: everything transferred by it under the transaction (or what should be transferred) turns into the income of the Russian Federation.
Unilateral restitution applies to enslaving transactions, transactions concluded under the influence of deception, threat, violence, malicious agreement of a representative of one party with the other party, as well as transactions made for a purpose contrary to the foundations of law and order or morality (if one of the parties has the intention of such transactions). It is easy to see that the use of unilateral restitution is limited to cases where one of the parties intentionally violated the law when concluding a transaction. It is she who is subject to punitive sanctions. The innocent party returns to its original position.
Seizure of the property of both parties for the benefit of the Russian Federation (confiscation - Part 2 of Article 169 of the Civil Code of the Russian Federation) applies to transactions made for a purpose contrary to the foundations of law and order or morality if there is intent on both sides and the transaction is executed in full or in part at least one of them . Consequences of the impossibility of withdrawing what was received in kind Art. 169 of the Civil Code of the Russian Federation are not defined. However, neither consumption nor alienation of illegally obtained goods under such a transaction should exempt the perpetrators from liability to the state. Therefore, it seems possible to apply by analogy to the law, paragraph 2 of Art. 179 of the Civil Code of the Russian Federation, i.e., to recover the cash equivalent from the income of the Russian Federation.
Additional property consequences of invalidity include the obligation to compensate for losses caused by the fact of the completion and execution of the transaction. Additional property consequences apply only in cases expressly established by law: in transactions involving defects of will
(except for transactions made in excess of authority) and in transactions with defects in the subject composition (except for extra-statutory transactions provided for in Article 173 of the Civil Code of the Russian Federation).
Since compensation for damages is a form of civil liability, the corresponding obligation should be assigned to the party responsible for the invalidity of the transaction. In transactions involving incapacitated, partially capable or minor citizens, the obligation to compensate for losses rests solely with the capable party, provided that he knew (i.e. acted intentionally) or should have known (guilt in the form of negligence) about the insufficient level of legal capacity of the other party.
In enslaving transactions, as well as in transactions made under the influence of threat, violence, malicious agreement between a representative of one party and the other party, the damage to the victim is compensated by the offender who acted intentionally.
And only for transactions concluded under the influence of error, the legislator established an exception to the principle of guilt as a basis for liability. Due to the fact that a mistake can arise due to circumstances beyond the control of the parties, the obligation to compensate for damage falls on the party that requested the recognition of the transaction as invalid.
The obligation to compensate for losses caused by the conclusion and execution of an invalid transaction is limited to actual damage.
Limitation periods for invalid transactions. The law (Article 181 of the Civil Code of the Russian Federation) establishes special limitation periods for invalid transactions.
A shortened period of one year is established for the requirements. on recognizing a voidable transaction as invalid and applying the legal consequences of its invalidity. It is calculated from the day when the person entitled to bring a claim learned or should have learned about the circumstances serving as the basis for recognizing the transaction as invalid. As an exception to this rule, a requirement to invalidate a transaction made under the influence of a threat or violence may be brought within one year from the date of termination of the violence or threat.
A longer period than the general one (three years - Article 196 of the Civil Code of the Russian Federation) is a period of ten years established for claims to apply the consequences of the invalidity of a void transaction. It is calculated from the day when the execution of the invalid transaction began.
Procedure
The right to invalidate a transaction is granted by the Civil Code of the Russian Federation only to the court, which makes an appropriate decision upon the application of the injured party or other interested parties. Depending on the jurisdiction, such cases are considered by courts of general jurisdiction or by an arbitration court. A demand for invalidation of a void transaction may also be made by a party to the agreement, and in cases provided for by law, by another person. The application is sent to the court at the place of residence (for citizens) or location (for legal entities) of the defendant in order to restore the violated rights of the other party or other persons.
The law establishes that a declaration of invalidity has no legal significance if the person referring to the invalidity of the transaction himself acts in bad faith, in particular, if his behavior after the conclusion of the agreement gave grounds for other persons to consider it valid.
Example of use on "Secret"
“Price is an essential condition of the purchase and sale agreement. Understating it means concealing the real price, which entails the invalidity of the transaction . Both parties will suffer - both the seller and the buyer. Smart people work at the tax office; they know very well the schemes for selling an apartment at the same price, because the seller will still file a declaration even with zero tax.”
(Director of the real estate agency Sisters Realty, Yulia Melnikova, talks about common mistakes when buying real estate in Russia.)
Consequences
In accordance with Art. 167 of the Civil Code of the Russian Federation, an invalid transaction does not entail legal consequences and is invalid from the moment of its completion: there are no consequences for recognizing the contract as void or voidable. Accordingly, according to general principles, bilateral restitution applies to counterparties, i.e. the parties must return to each other everything received under the agreement. Such return is carried out in kind, and if it is impossible (including when what is received is expressed in the use of property, work performed or service provided), they are obliged to reimburse its cost, unless other consequences are provided for by law. It is also possible that the contract may be partially invalidated. In this case, if the agreement could have taken place without a voidable condition, it is permissible to recognize the clause of the agreement as invalid without prejudice to the remaining contractual obligations that remain in force.
Data
Not only the entire transaction, but also part of it can be declared invalid. For example, the lease agreement contains a clause that releases the owner from liability in the event of flooding. The arbitration may recognize this condition as void if the emergency occurred due to the fault of the lessor - he did not repair the roof. As a result, the tenant will recover damages from the owner.
You can understand whether a transaction is voidable or void based on the wording in the law. If it is indicated that the transaction is invalid, then it is void. If it is said that a transaction can be declared invalid by a court, then such an agreement is voidable.
Arbitrage practice
Of the variety of grounds for the invalidity of transactions, two grounds can be identified on which lawsuits are most often filed in court.
For citizens, this is challenging the alienation of property by offended relatives who claim that the citizen at the time of concluding the contract was not able to understand the meaning of his actions or manage them, or challenging on this basis wills drawn up by the testator during the period when he suffered from some illness. However, judicial practice proceeds from the fact that the presence of a disease, even a mental disorder, in itself is not a basis for considering a donation or will invalid. It is necessary that the party challenging the deed of gift or will prove that the donor or testator at the time of signing the documents did not understand the significance of his actions or could not direct them.
For legal entities, it is quite common to recognize a transaction as void when it was made with the aim of causing harm to creditors in bankruptcy or is aimed at withdrawing funds on corporate grounds.
According to established arbitration practice, in such cases a contract can be declared invalid only if it actually violates the rights of the applicants. Please note that it will not be possible to conclude a settlement agreement to invalidate the contract after filing an application with the court. The court simply will not accept it from you, since the parties do not have the right to decide on the invalidity of the contract; this is the prerogative of the court.
Unilateral restitution and non-restitution
Events upon the occurrence of which unilateral restitution or its prevention is used are established by Art. 169 of the Civil Code of the Russian Federation.
There are two options for the development of events:
- both parties to civil relations had purposeful intent and entered into an agreement that contradicted the fundamentals of the rule of law, moral and constitutional order - non-admission of restitution is applied (according to the concept - the benefit received by both parties to the transaction is recovered into the income of the Russian Federation);
- one of the parties had intent and entered into an agreement with the other party on the grounds specified above, intentionally misleading the counterparty - unilateral restitution is applied (on the part that violated the right, all losses are recovered to the income of the Russian Federation).
Unilateral restitution is also applicable to void and voidable transactions carried out in the following manner:
- use of violence, threats by one side to the other side of the process;
- intentionally committed for selfish reasons;
- concluding contracts on terms that are absolutely unfavorable for one party.
