Legal consequences of invalid civil transactions in Vietnam

What is civil transaction?

Pursuant to Article 116 of the Civil Code 2015, civil transaction is a contract or a unilateral legal act which gives rise to, changes or terminates civil rights and/or obligations.

A civil transaction shall be effective when it satisfies all of the following conditions:

- Participants in the transaction have legal personality and/or legal capacity in conformity with such transaction;

- Participants in the transaction act entirely voluntarily;

- The purpose and contents of the transaction are not contrary to the law and/or social ethics.

The forms of civil transactions shall be the conditions for its effectiveness in cases where it is so provided for by law.

Legal consequences of invalid civil transactions in Vietnam (Internet image)

Legal consequences of invalid civil transactions in Vietnam

Pursuant to Article 131 of the Civil Code 2015, regulations on the legal consequences of invalid civil transactions are as follows:

- 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.

- 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.

- A bona fide person in receiving yield and/or income is not required to return such yield and/or income.

- The party at fault which caused damage must compensate therefore.

- The settlement of consequences of invalid civil transactions regarding personal rights shall be prescribed in the Civil Code 2015 and relevant laws.

Protection of the interests of bona fide third parties with regard to invalid civil transactions in Vietnam

The protection of the interests of bona fide third parties with regard to invalid civil transactions in Vietnam specified in Article 133 of the Civil Code 2015 is as follows:

- 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 the Civil Code 2015.

- 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 Article 133 of the Civil Code 2015, but the owner may proceed against the party at fault to refund appropriate expenses and compensate for his/her damage.

Mai Thanh Loi

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