Nullity of Contracts
Explanation
A contract can be dissolved before its term and before its full execution for two different reasons. The first reason is the presence of a defect in the contract at the time of its creation, and in this case, the contract is annulled (annulment [la nullité]). The second reason is due to circumstances that occurred after the creation of the contract, and here the contract is cancelled or resolved (resolution [la résolution]).
The annulment of a contract is always the result of an original defect that accompanied it at its formation. These defects include mistake (mistake [l'erreur]), fraud (fraud [le dol]), duress (duress [la violence]), lesion (lesion [la lésion]), and incapacity (incapacity [l'incapacité]). No entity other than the court has the right to rule on the annulment of the contract. Pending this judicial ruling, the contract remains valid and continues to produce its normal effects.
When the court rules for annulment, this ruling has a retroactive effect (retroactive effect [effet rétroactif]). The right to file an action for annulment lapses after ten years (prescription [la prescription]), unless the law specifies another time limit for a special case. This time limit does not begin from the date of the contract's creation, but rather from the day the defect ceases to exist.
The start of the prescription period varies according to the type of defect. In the cases of mistake and fraud, the time limit begins from the day the injured party discovers the defect. In the case of duress, it begins from the day it ceases. As for the case of lack of capacity, it begins from the day it completely disappears. If the contracting party was insane, the time limit begins when they realize the contract they previously concluded.
The passage of ten years is considered a presumed implicit confirmation of the contract, as if the right holder has abandoned their claim. The contract can also be actually confirmed (confirmation [la confirmation]), either explicitly or implicitly. Explicit confirmation requires the existence of a document containing the substance of the contract, the defect present in it, and the intention to waive the action for annulment. As for implicit confirmation, it is inferred from any action or situation indicating the right holder's waiver of their claim.
Official legal articles
Think deeper
Why does the prescription period in an action for annulment begin from the date the defect ceases to exist rather than from the date of the contract's creation, and how does this relate to the concept of presumed implicit confirmation?
Flashcards
What is the difference in law between the annulment of a contract and its resolution or cancellation?
A contract is annulled for a defect at creation, while it is resolved or cancelled for subsequent circumstances (Article 232).
Who has the authority to rule on the annulment of a contract?
No one other than the court may rule on the annulment.
What is the status of a defective contract before the court declares its annulment?
The contract remains valid and continues to produce its normal effects as long as the annulment has not been judicially declared.
When does the prescription period begin in an action for annulment based on duress?
The time limit begins from the day the duress ceases.
What are the three conditions for an explicit confirmation of a contract to be effective?
The confirmation document must contain the substance of the contract, the defect that was in it, and the intention to abandon the action for annulment.
How is the actual implicit confirmation of a contract inferred?
It is inferred from every situation and every conduct from which it is understood that the holder of the action for annulment has abandoned it.
Practice questions
Which of the following situations leads to the annulment of a contract and not its resolution?
A contract is annulled due to a defect that affected it at the time of its creation, whereas it is cancelled or resolved due to circumstances that followed its creation (Article 232).
What is the effect produced by a court ruling annulling a contract?
A court ruling annulling a contract has a retroactive effect going back to the time of its creation (Article 233).
When does the prescription period begin if the cause of annulment is fraud?
The prescription period in cases of mistake and fraud begins from the day the injured party discovers this defect (Article 235).
What is the basis upon which the ten-year prescription in an action for annulment rests?
The prescription is based on the presumption of implicit confirmation of the contract by the holder of the action for annulment, so they are considered to have abandoned it (Article 235).
Which of the following defects was not explicitly mentioned in the law as an example of an original defect affecting the contract?
The law explicitly mentions mistake, fraud, duress, lesion, and incapacity as original defects, and illicit cause was not mentioned in this text (Article 233).
Case problems
Zaid concluded a contract while in a state of insanity in 2005. The state of insanity continued until 2012, when he fully regained his awareness and understood the contract he had previously created. In 2020, Zaid filed an action to annul the contract. The other party argued that the action had lapsed by prescription because 15 years had passed since the contract. Is Zaid's action accepted?
Model answer
Yes, Zaid's action is accepted and is not considered lapsed by prescription.
The right to file an action for annulment lapses after ten years (Article 235).
The time limit does not begin from the day of the creation of the defective contract but from the day the defect ceased to exist (Article 235).
If the contracting party was insane, the ten-year time limit begins only from the time they realize the contract (Article 235).
Since Zaid regained his awareness in 2012, the ten-year time limit begins from this date and ends in 2022.
Therefore, his action filed in 2020 came within the legal time limit.
Self-grading rubric
Rima bought a plot of land and discovered a week later that the seller had led her into a substantial mistake. Rima sent a written letter to the seller saying: 'I have discovered the mistake that occurred in the land purchase contract, and despite this, I waive my right to file an action for annulment against you'. Two months later, Rima changed her mind and filed an action for annulment. Does she have the right to do so?
Model answer
Rima does not have the right to file the action for annulment because she explicitly confirmed the contract.
Explicit confirmation is effective if the document contains the contract substance, the defect, and the intention to abandon the action (Article 236).
In this case, Rima's written letter contained the substance of the contract which is purchasing the land.
It also contained the defect that was in it which is the mistake.
It explicitly contained the intention to abandon the action for annulment by waiving her right.
Consequently, this is considered an actual explicit confirmation that forfeits her right to demand the annulment of the contract.