LEGAL PROVISIONS ON CIVIL TRANSACTIONS INVALID
I. What is an invalid civil transaction?
Civil transactions which fail to satisfy any one of the conditions specified in Article 117 of Civil Code 2015 Amendment and Supplement 2017 shall be invalid.
Conditions for effective civil transactions
1. A civil transaction shall be effective when it satisfies all of the following conditions:
a) Participants in the transaction have legal personality and/or legal capacity in conformity with such transaction;
b) Participants in the transaction act entirely voluntarily;
c) The purpose and contents of the transaction are not contrary to the law and/or social ethics.
2. The forms of civil transactions shall be the conditions for its effectiveness in cases where it is so provided for by law.
II. Causes of invalid civil transactions:
1. Invalidity of civil transactions due to breach of legal prohibitions or contravention of social ethics
- Civil transactions with objectives and contents which breach legal prohibitions or which contravene social ethics shall be invalid.
- Legal prohibitions mean provisions of law which do not permit entities to perform certain acts.
- Social ethics are common standards of conduct as between persons in social life, which are recognized and respected by the community.
2. Invalidity of civil transactions due to falsification
- If the parties falsely enter into a civil transaction for the purpose of concealing another transaction, the false transaction shall be invalid and the concealed transaction remains valid, unless it is also invalid under the provisions of this Code or relevant laws.
- If the parties enter into a civil transaction falsely for the purpose of evading responsibilities to a third person, such transaction shall be invalid.
3. Invalidity of civil transactions established and performed by minors or legally incapacitated persons or persons with limited cognition and behavior control or persons with limited legal capacity
- When a civil transaction is established or performed by a minor, a legally incapacitated person, a person with limited cognition and behavior control, or a person with limited legal capacity, a court shall, at the request of the representative of that person, declare such transaction invalid, if it is provided for by law that such transaction must be established and performed by or with the consent of the representative of that person, except for the cases prescribed in Clause 2 of this Article.
- A civil transaction of a person prescribed in Clause 1 of this Article shall not be invalid in any of the following cases:
+ The civil transaction of a child less than 6 years of age or a legally incapacitated person established for his/her daily needs;
+ The civil transaction only either arising rights or exempting from obligations for the minor, the legally incapacitated person, the person with limited cognition and behavior control, the person with limited legal capacity and their contracting parties;
+ The civil transaction of which validity is recognized by the person established such transaction that become an adult or restore his/her legal capacity.
4. Invalidity of civil transactions due to misunderstanding
- If there is a misunderstanding in a civil transaction that make a party or the parties fails to meet the objectives of the transaction establishment, the mistaken party shall have the right to request a court to declare such transaction invalid, except for the case prescribed in Clause 2 of this Article.
- A civil transaction having misunderstanding shall not be invalid if the parties may meet the objectives of the transaction establishment or the parties may correct the misunderstanding resulting in the achievement of the objectives of the transaction establishment.
5. Invalidity of civil transactions due to deception, threat or compulsion
- Any party entering into a civil transaction as a result of deception, threat or compulsion has the right to request a court to declare such transaction invalid.
- Deception in a civil transaction means an intentional act of a party or a third person for the purpose of misleading the other party as to the subject, the nature of the entity or contents of the civil transaction which has caused the other party to enter into such transaction.
- Threat or compulsion in a civil transaction means an intentional act of a party or a third person which compels the other party to conduct the civil transaction in order to avoid danger to the life, health, honor, reputation, dignity and/or property or that of its relatives.
6. Invalidity of civil transactions established by person lacking in cognition and behavior control
A person who has legal capacity but has entered into a civil transaction at the time of he/she is lacking in cognition and behavior control shall have the right to request a court to declare such civil transaction invalid.
7. Invalidity of civil transactions due to non-compliance with form
A civil transaction violating conditions for validity pertaining to form shall be invalid, except for any of the following cases:
- If the form of a civil transaction, required to be established in writing, does not comply with regulations of law, but a party or the parties has/have fulfill at least two third of the obligations in the transaction, a court, at his/her/their request(s), shall issue a decision on recognition of the validity of such transaction.
- If the form of a civil transaction, required to be established in writing, violates against regulations on notarizing or authorization, but a party or the parties has/have fulfill at least two third of the obligations in the transaction, a court, at his/her/their request(s), shall issue a decision on recognition of the validity of such transaction. In this case, the parties need not perform the notarizing or authorization.
III. Partially invalid civil transactions
A civil transaction shall be partially invalid when one part of the transaction is invalid but such invalidity does not affect the validity of the remaining parts.
IV. Legal consequences of invalid civil transactions
1. An invalid civil transaction shall not give rise to, change or terminate any civil rights and obligations of the parties as from the time the transaction is entered into.
2. When a civil transaction is invalid, the parties shall restore everything to its original state and shall return to each other what they have received.
If the restitution is not able to make in kind, it may paid in money.
3. A bona fide person in receiving yield and/or income is not required to return such yield and/or income.
4. The party at fault which caused damage must compensate therefore.
5. The settlement of consequences of invalid civil transactions regarding personal rights shall be prescribed in this Code and relevant laws.
V. Time limit for requesting court to declare civil transactions invalid
1. The time limit within which a request may be made to a court to declare a civil transaction invalid as specified in Articles 125 thru 129 of Civil Code 2015 Amendment and Supplement 2017 shall be two years as from the date on which:
a) The representative of a minor, a legally incapacitated person, a person with limited cognition and behavior control or a person with limited legal capacity knows and should know the ward established and/or performed the transaction himself/herself.
b) The mistaken or cheated person in a transaction knows and should know that such transaction is established due to misunderstanding or cheating;
c) The person that threatened or compelled other persons in a transaction put an end to such acts;
d) The person lacking in cognition and behavior control establishes his/her transaction;
đ) The civil transaction is established in non-compliance with form.
2. After the time limit prescribed in Clause 1 of this Article, if there is still no request for declaring civil transaction invalid, such transaction still remains valid.
3. For civil transactions specified in Articles 123 and 124 of Civil Code 2015 Amendment and Supplement 2017, the time limit for requesting a court to declare such civil transactions invalid shall not be restricted.
VI. Protection of the interests of bona fide third parties with regard to invalid civil transactions
- In cases where a civil transaction is invalid but the transacted property being a moveable property is not required to be registered and such property has already been transferred to a bona fide third party through another transaction, the transaction with the third party shall remain valid, except for the case specified in Article 167 of Civil Code 2015 Amendment and Supplement 2017.
- In cases where a civil transaction is invalid but the transacted property is registered at a competent authority and such property has already been transferred to a bona fide third party through another transaction which is established according to that registration, such transaction shall remain valid.
In cases where the transacted property which is required to be registered has not registered at a competent authority, the transaction with the third party shall be invalid, except for cases the bona fide third party received such property through an auction or a transaction with an another party being the owner of such property pursuant to a judgment or decision of a competent authority but thereafter such person is not the owner of the property as a result of the judgment or decision being amended or annulled.
- The owner of a property shall have no right to reclaim the property from the bona fide third party if the transaction with such party remains valid as prescribed in Clause 2 of this Article, but the owner may proceed against the party at fault to refund appropriate expenses and compensate for his/her damage.
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