In civil relationships, all transactions in general, and contracts in particular, must not violate the fundamental principles of civil law, one of which is the establishment, execution, and termination of rights and obligations of contract must be based on voluntariness. A contract contrary to the principle of voluntariness may be declared invalid. Through this article, TNTP provides readers with legal knowledge regarding invalid contracts.
1. Voluntariness in Contracting
Voluntariness is understood as the ability to do what one desires without being influenced or coerced by external factors. In other words, voluntariness exists only when there is a combination between the genuine internal will and its external expression through actions or non-actions. The internal will consists of the thoughts, desires, and true objectives that the parties wish to achieve when entering into a contract. The external expression of the will is when that desire is realized through specific actions.
Therefore, a contract is considered to achieve voluntariness when there is consistency between genuine intentions and actual actions. If the establishment of a contract between the parties does not ensure free will and expression of intention or disrupts the unity of these two elements, it cannot be considered voluntary. In such cases, one of the parties may request the court to declare a contract invalid.
2. Cases of Invalid Contract Due to Violations of Voluntariness
2.1 Invalid Contract Due to Deception
According to Article 127 of the Civil Code 2015, deception in entering into a contract occurs when:
– One party or a third party intentionally provides misleading information about the subject, nature of object or contents of a contract, and the other party is unaware of the discrepancy; and
– The receiving party relies on that information to decide to enter into a contract.
In this case, deception must be the decisive factor for one party’s participation in a contract. If there is no intentional misrepresentation by one party or a third party that leads to a misunderstanding, a contract may not be established in reality. Deceiving another party to achieve personal goals in entering into a contract violates the principle of voluntary contract participation.
When a party enters into a contract due to deception, the deceived party has the right to request the court to declare the civil transaction invalid within two years from the time the deceived party becomes aware, or should have been aware, that the contract was formed due to deception.
2.2 Invalid Contract Due to Misunderstanding
According to Article 126 of the Civil Code 2015, a contract is determined to have a misunderstanding when it has the following factors:
– At the time of contract formation, one or more parties have an incorrect or incomplete understanding of elements related to a contract; and
– The mistake results in one or more parties suffering damage and/or failing to achieve their objectives in entering into a contract.
While the deceived party’s misjudgment of a contract’s contents is due to influence from another party or a third party, the mistake in the misunderstanding case arises from the subjective perception of the mistaken party. Thus, a contract formed under misunderstanding does not accurately reflect the true desires and intentions of the mistaken party.
If entering into a contract due to a misunderstanding causes damage to one or more parties, the mistaken party has the right to request the court to declare a contract invalid within two years from the time the mistaken party becomes aware, or should have been aware, that a contract was established due to the mistake unless the parties have rectified the mistake and the objectives of a contract have been achieved.
2.3 Invalid Contract Due to Threat or Coercion
According to Article 127 of the Civil Code 2015, threats and coercion in contract formation are understood as follows:
– One party or a third party threatens or coerces by physically attacking or applying psychological pressure on the threatened or coerced party;
– The threat or coercion is the decisive factor forcing the threatened party to enter into the contract to avoid danger to their life, health, honour, reputation, dignity, or property, or that of their relatives or friends.
Thus, when one party threatens or coerces the other party to enter into a contract according to their objectives, the coerced party is forced to participate in a contract without the opportunity to act according to their true desires or will. Consequently, the Civil Code 2015 recognizes this as one of the cases leading to the invalidity of a contract. Specifically, the party that entered into a contract due to threats or coercion has the right to request the court to declare a contract invalid within two years from the time the threatening or coercive conduct ends.
2.4 Invalid Contract Due to Fictitious Contract
According to Article 124 of the Civil Code 2015, a fictitious contract occurs when both parties simultaneously establish two contracts as follows:
– One contract accurately reflects their true intentions and desires but is concealed and not made public for various reasons, such as affecting the rights and interests of a third party or violating the law;
– One contract is established and made public to conceal the other contract, referred to as a sham contract.
This is also a distinctive aspect of a fictitious contract, as there is an agreement on the intention of both parties; however, the intention recorded in this contract is not their genuine desire. In other words, this is a contract that both parties “voluntarily” participate in, but neither party intends to implement this contract in practice.
Therefore, the legal consequences of a fictitious contract are also unique, as this type of contract is always invalid in all cases, while the concealed contract remains effective unless the transaction is also invalid under the provisions of the Civil Code 2015 or other relevant laws.
The above is TNTP’s article on “Voluntariness in Contracting and Cases Leading to Invalid Contract”. TNTP hopes this article is helpful to readers.
Sincerely,
