Regulation

First and foremost, foreign investors need to determine the cases of invalid civil transactions. Civil code 2015 stipulates these cases as follow: 

• Invalidity of civil transactions due to breach of legal prohibitions or contravention of social ethics;
• Invalidity of civil transactions due to falsification;
• Invalidity of civil transactions due to non-compliance with form

• 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;
• Invalidity of civil transactions due to misunderstanding;
• Invalidity of civil transactions due to deception, threat or compulsion;
• Invalidity of civil transactions established by person lacking in cognition and behavior control

According to Article 131 Civil Code about the 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 be made in kind, it may be 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”.

Analysis

Time of invalidation: An invalid civil transaction does not give rise to, change or terminate the civil rights and obligations of the parties from the time the transaction is established.

Legal consequences of invalid civil transactions:

• Does not give rise to, change or terminate the civil rights and obligations of the parties from the time the transaction is established, whether such transaction has been performed or not. Therefore, the possession and use of property by the parties in an invalid civil transaction is considered to be possession and use of property without a legal basis, so the obligation to repay due to possession arises. using property without a legal basis as prescribed in Articles 579 to 583 of the Civil Code 2015.
• Restoring the original state: Clause 2, Article 131 of the 2015 Civil Code stipulates that “When a civil transaction is invalidated, the parties will restore the original state and return to each other what they have received. In case it is not possible to refund in kind, it must be refunded in cash”. In principle, the object of a transaction is an object, when the transaction is invalid, the receiving party is obliged to return that object to the obligee. Return of property is one of the common practical measures to deal with the consequences of an invalid civil transaction in order to restore it to its original state. In civil transactions, returning to the original state is understood as the parties returning to the time when the parties signed the contract and have not yet performed the transaction. However, in reality, the returned property does not always have its original value at the time of signing, usually it is changed due to the impact of natural and social factors that make it no longer intact. First value. Therefore, the problem of returning assets to each other with the assets that are the object of the transaction is very difficult and complicated. When returning assets, the parties must prove the assets they have delivered when performing the transaction.

In cases where the parties cannot return each other in kind, the value of that object shall be converted into money for refund and the price of the object shall be determined at the time of first-instance trial (not the time when the parties are involved). transaction and can be determined by agreement of the parties, if any).

The Civil Code 2015 also adds Clause 5 with the content “The settlement of consequences of invalid civil transactions related to moral rights shall be prescribed by this Code and other relevant laws”.

• The issue of yield and/or income

From the time a civil transaction is established to the time it must be returned due to the invalidity of the civil transaction, the property may generate yields and income. When civil transactions are invalid, it is necessary to resolve the fate of these yields and come. Clause 3, Article 131 of the 2015 Civil Code stipulates that “the righteous party in the collection of yields and income is not required to return such yields and income”. This means that the return or non-return of yields and income depends on the good faith or insincerity of the recipient of the property, such as the provisions on the return of property due to illegal possession. .

• Compensation for damage 

Regarding the issue of compensation for damage, the Civil Code 2015 has not changed compared to the previous Civil Code, still stipulating in the direction that “the party at fault causing damage must compensate” (Clause 4, Article 131). Civil Code 2015). Determining the price of assets in a transaction is also a notable issue to determine liability for damages. In principle, the person at fault causing the damage must compensate. In it, there may exist the fault of one party or the fault of two parties. In case the fault of two parties makes the civil transaction invalid, the degree of fault of the parties must be determined in order to see the specific damage in order to assign corresponding compensation liability according to each party’s fault.

The party at fault in the transaction relationship such as cheating, threatening, forcing others to participate in the civil transaction, when the transaction is declared invalid, the party participating in the transaction against his will voluntarily suffers damage, the party cheating, threatening or forcing compensation.

Thus, invalid civil transactions can lead to problems: return of property, problems of damage, problems of agreement of the parties when the transaction is invalid, problems of protecting the rights of the parties. righteous third person. In the return of property, depending on each specific case of violation, the Court may force the parties to bear the consequences in different ways.

Above is our consultancy about this issue. If you need more detailed advice and answers as well as how to access this service, please contact directly the Deputy Director of Sales: Lawyer Nhat Nam via hotline: 0912.35.65.75, 0912.35.53.53 or call the free legal consultation hotline 1900.6575 or send a service request via email: lienheluathongbang@gmail.com

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