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.
Termination of the deal
First, let's talk about cases when a valid transaction is terminated. The Civil Code of the Russian Federation states that if this happens, then the parties do not have the right to demand back what has already been performed. Simply put, termination of a contract is the interruption of its operation in time. For example, a lease agreement was concluded between the parties. The tenant stopped paying money to the landlord. The latter insisted on terminating the contract. The same Civil Code gives him this right, indicating that a significant violation of the terms of the contract is grounds for its termination. What happened? All those relations that existed before the termination of the contract are considered legal. That is, for example, the lessor cannot demand the return of all rent payments made. The tenant may demand payment of the debt under the contract and compensation for losses. In addition, the parties may demand the fulfillment of other obligations provided for in the contract and not fulfilled.
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.
Is it possible to challenge a terminated contract?
Specific reasons, deadlines and procedures have been established for challenging transactions. Despite this, there are many questions in the area of recognizing the invalidity of transactions. One of them is the question of the possibility of challenging terminated transactions.
There is no direct answer to this in the legislation. Therefore, in practice there are different points of view on this matter. One of them considers it impossible to establish the invalidity of the contract, since the relationship between its parties has already been terminated, and the subject of the dispute does not exist.
According to the second, termination of the contract from a legal point of view does not in any way prevent it from being declared invalid. After all, termination terminates the relationship of the parties for the future, while everything performed and received up to this point cannot be returned.
The transaction is recognized as invalid from its very conclusion, therefore it involves returning the parties to their original position. This means that they must return to each other everything that they acquired during the transaction. If it is impossible to return the item, then compensation for its value is paid.
It turns out that to invalidate a terminated contract , but the issue of filing such a claim should be decided after studying all the circumstances of a particular case. Our company's lawyers have extensive experience in dealing with invalid transactions.
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.
Labor wars: is it possible to invalidate an employment contract?
The dismissed employees collected monetary compensation from the employer in court for unused additional vacations. These holidays were guaranteed to them in accordance with previously concluded employment contracts with the employer. The employer filed a counterclaim in court. In it, he demanded that the terms of employment contracts on additional leave be invalidated, as well as the return of all compensation paid to employees.
On the agenda
: Determination of the First Cassation Court of General Jurisdiction dated November 16, 2020 No. 88-23978/2020.
Background
: dismissed employees in court recovered monetary compensation from the employer for unused additional vacations. These vacations were guaranteed to them in accordance with previously concluded employment contracts with the employer. The employer filed a counterclaim in court. In it, he demanded that the terms of the employment contracts on additional leave be invalidated, as well as the return of all compensation paid to these employees.
Standards involved
: Art. Art. 5 and 61 of the Labor Code of the Russian Federation.
What were they arguing about?
: 155,897 rubles.
In support of the stated requirements, the employer indicated that the conditions that provided for the provision of additional leaves to employees were included in the contracts unreasonably. Namely, as a result of a technical error made by employees of the organization’s personnel department. These conditions were contained only in the employment contracts of two employees of the organization. All other contracts concluded with other employees did not provide for such conditions. In addition, the employer’s local regulations also did not provide for the provision of additional paid leave to any employees.
During the period of validity of the employment contracts, no applications were received from employees for the provision of such leaves, which indicated their ignorance of such conditions of employment contracts. When signing the contracts, the employer was also unaware of the presence of controversial conditions in their text. In this regard, in the opinion of the employer, the terms of the agreements on additional leave are invalid and cannot be applied.
Having considered the case materials, the court found the employer’s arguments unfounded and refused to satisfy his claims.
The court explained that an employment contract is a voluntary agreement between an employer and an employee, according to which the employer undertakes to provide the employee with work and wages, and the employee undertakes to personally perform a labor function in the interests, under the management and control of the employer. The parties to the employment contract are the employer and the employee (Article 56 of the Labor Code of the Russian Federation). In addition to the mandatory conditions established in Art. 57 of the Labor Code of the Russian Federation, the employment contract may also provide for additional conditions that do not worsen the employee’s position in comparison with those established by labor legislation.
The employment contract comes into force from the day it is signed by the employee and the employer. The employee is obliged to begin performing his job duties on the date specified in the employment contract. If the employment contract does not specify the start date of work, the employee must begin work on the next working day after the contract enters into force. If the employee does not start work, the employer has the right to cancel the employment contract. A canceled employment contract is considered not concluded (Article 61 of the Labor Code of the Russian Federation).
At the same time, labor legislation does not contain a mechanism for invalidating an employment contract. That is, unlike civil transactions, which can be declared invalid with reference to violation of the procedure for their conclusion, an employment contract cannot be declared invalid.
The same applies to certain terms of employment contracts, which do not worsen the situation of workers in comparison with the current Labor Code of the Russian Federation. At the same time, the regulation of labor relations by civil law norms contradicts Art. 5 of the Labor Code of the Russian Federation and is not provided for in Art. 2 Civil Code of the Russian Federation.
Having provided for additional holidays in the contracts, the employer was obliged to provide them to employees. Without providing them with such leave, the employer had to pay the employees appropriate monetary compensation. In this regard, the court found that the employer was justifiably charged compensation for additional vacations unused by employees.
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.
Procedure
Quite often clients come to our company who need help in invalidating a contract for the provision of services.
Important! This type of agreement can only be declared invalid through a court!
- The first thing to do is to draw up a statement and submit it to the judicial authorities. According to the accepted procedure, the document is submitted to the authority located territorially at the location of the defendant. The claim must contain an indication of why the contract should be declared invalid;
- Do not forget about the evidence - it must be clear and reasoned;
- The application shall indicate the addresses of the parties, the name of the judicial authority, the full names of the parties or a representative;
- It is imperative to make references to legislation that supports the requirements of one of the parties;
- The very last line indicates the list of attached documents.
When filing a claim, you must clearly formulate your requirements. Separately, it should be noted that it to invalidate a service agreement . This is especially true when this requirement is associated with a subjective factor - for example, misrepresentation. Consequently, independent actions may lead to a court decision not being in your favor. That is why it is best to entrust the preparation of a claim and representation of interests in court to our experienced lawyers.
