Disputes Over Invalid Civil Transactions: How to Identify and Resolve Them

In civil litigation practice in Vietnam, disputes involving invalid civil transactions are not uncommon. Many people mistakenly equate “invalid contracts” with “terminated contracts.” However, in reality, their nature, consequences, and resolutions are quite different. In this article, we summarize the latest legal provisions and practical experiences to help you identify invalid civil transactions and choose the appropriate resolution strategy.

1. What is an Invalid Civil Transaction?

1.1. Definition and Legal Basis

According to Article 122 of the 2015 Civil Code:

“A civil transaction is invalid when it does not create, change, or terminate the civil rights and obligations of the parties from the time it is established.”

This means that once a transaction is declared invalid, it is deemed to have never legally existed (unless otherwise stipulated by law). The rights and obligations one party tries to enforce based on such a transaction will not be recognized.

In contrast, a “contract termination” applies only to a previously valid contract, and termination can occur before full performance. With an invalid transaction, there is no “before–after” sequence like that.

The grounds for declaring a transaction invalid stem from its failure to meet the “validity conditions” set out in Article 117 of the 2015 Civil Code.

1.2. Validity Conditions for Civil Transactions

To be legally valid (and conversely, to avoid invalidation), a civil transaction must meet the following conditions (Article 117):

• Legal capacity of the parties: Parties must have legal and civil act capacity appropriate to the transaction.

• Voluntary will: The transaction must be established on a voluntary basis, without deception, coercion, threats, mistakes, or mental incapacity.

• Purpose and content: The transaction must not violate legal prohibitions or contravene social ethics (Article 123).

• Form: Where the law requires a transaction to be in writing, notarized, certified, or registered, the formality must be complied with.

Failure to meet any of the above — unless exceptions apply — can result in the transaction being declared invalid under Article 122.

1.3. Common Grounds for Invalidation

Here are frequent scenarios in which civil transactions are declared invalid:

• Violation of legal prohibitions or social ethics (Article 123).

• Fictitious transactions to disguise other transactions or evade obligations (Article 124).

• Invalid subject: Minors, incapacitated persons, or persons lacking representation.

• Mistake, fraud, coercion, or threat during formation (Articles 127 & 128).

• Failure to comply with required form (e.g., real estate transactions without notarization, in breach of Article 129).

• Partial invalidity: If only part of the transaction violates the law, the court may invalidate just that portion while preserving the rest (Article 130).

2. How to Resolve Disputes Over Invalid Civil Transactions

When a transaction shows signs of invalidity, the aggrieved party must know how to protect their rights and seek intervention from competent authorities.

2.1. Who Can Request a Transaction Be Declared Invalid?

• Involved parties: The injured party has the right to file a lawsuit requesting the court to declare the transaction invalid.

• Third parties: In some cases, a third party affected by the transaction may also request invalidation — for instance, if the transaction violates legal prohibitions and harms them (per Article 132(2) and Article 123).

• Only a court can declare invalidity: It cannot be done unilaterally by sending a notice; a valid court judgment or decision is required.

2.2. Time Limit to File for Invalidation

Determining the time limit is critical — missing it may result in the transaction being deemed valid despite violations.

According to Article 132, the statute of limitations to request invalidation due to form violations, mistake, fraud, or coercion is 2 years from the date the requester knew or should have known their rights were infringed.

However, no time limit applies in two situations:

• Fictitious transactions (Article 124).

• Transactions violating legal prohibitions or social ethics (Article 123).

If no invalidation is requested within 2 years for transactions violating form requirements, the transaction may be presumed valid.

2.3. Litigation or Court Petition Procedure

The typical process to resolve disputes over invalid transactions includes:

Gathering evidence:

• Contracts, agreements

• Documents proving violations (e.g., missing required notarization)

• Delivery records, proof of performance

• Emails, texts, and correspondence

Determining jurisdiction:

• District or provincial court, based on parties' residence or place of transaction

• Verify the statute of limitations

Filing the lawsuit or petition:

• Clearly state the request to declare the transaction invalid and restore the original state

• Request compensation if the other party is at fault

Court proceedings:

• The court may mediate during the process

• If accepted, a judgment declaring invalidity will be issued, along with orders for restitution or compensation

Enforcement:

• Forced compliance if the liable party refuses to return property or pay damages

2.4. Legal Consequences of an Invalid Transaction

If the court declares a transaction invalid, the following outcomes apply:

• No legal rights or obligations arise from the transaction.

• Restoration to original state: Each party returns what they received; if in-kind return is impossible, monetary compensation applies.

• Compensation for damages (if at fault): The violating party must compensate the other or affected persons.

• Good-faith third parties: If the asset was transferred to a third party who acted in good faith, their rights may be protected (Article 133).

• Partial invalidity: If part of the transaction is separable and valid, the court may uphold that portion (Article 130).

3. Practical Experience & Tips for Resolving Invalid Transaction Disputes

• Identify the type of violation first: Form, content, subject, or fictitious nature? This determines how the matter should be handled.

• Act promptly: Especially in form violations, failure to act within 2 years may forfeit your right to invalidate.

• Do not self-declare invalidity: Only courts can declare a transaction invalid through a judgment.

• Focus on evidence: Contracts, memos, emails, and messages are key to proving violations or intent.

• Consider third parties: If property has passed to a good-faith third party, their rights must be considered.

• Be strategic in your lawsuit: Combine invalidation requests with claims for damages and restitution to save time and cost.

4. Conclusion

Disputes over invalid civil transactions are legally complex. They require evaluating the transaction's legality, the cause of invalidity, time limits, consequences, and the involvement of third parties. Identifying signs of invalidity and selecting the right approach will determine whether your legal interests can be protected and recovered.

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