Tiếng Việt
Table of Contents
1. What is a simulated contract?
2. Time-limit for requesting a declaration of invalidity of a simulated contract.
3. How does the law regulate simulated contract?
1. What is a simulated contract?
Vietnamese law does not have regulations on the concept of simulated contracts. However, according to Article 124 of the 2015 Civil Code, where parties enter into a civil transaction falsely for the purpose of concealing another civil transaction, such false transaction shall be invalid.
Based on the above regulations, a simulated contract is understood as a type of civil contract established in a fake manner to conceal another civil transaction. A simulated contract has no legal value and does not create rights and obligations for parties.
2. Time-limit for requesting a declaration of invalidity of a simulated contract.
Pursuant to Article 132 of the 2015 Civil Code on the statute of limitations for requesting the Court to declare a civil transaction invalid, accordingly:
“Article 132. Time-limit for requesting court to declare civil transaction invalid
1. The time-limit within which a request may be made to a court to declare a civil transaction invalid in articles 125, 126, 127, 128 and 129 of this Code shall be two years as from the date:
(a) The representative of a minor, a person who has lost the capacity for civil acts or has restricted capacity for civil acts, or a person who has difficulty in awareness or control of his or her acts knew or should have known that the principal himself or herself established or performed the transaction;
(b) The misunderstanding or deceived person knew or should have known that the transaction was established due to the misunderstanding or deception;
(c) The threatening or coercing person ceases the act of threat or coercion;
(d) The person incapable of being aware of or controlling his or her acts establishes the transaction;
(dd) The civil transaction is established, in the case the civil transaction did not conform to provisions on its form.
2. If there is no request for declaration of a civil transaction invalid upon the expiry of the time-limit prescribed in clause 1 of this article, the civil transaction is valid.
3. There is no restriction on the time-limit within which a request may be made to a court to declare a civil transaction invalid for the civil transactions prescribed in articles 123 and 124 of this Code.”
According to the above provisions in Clause 3, Article 132 of the 2015 Civil Code, which stipulates civil transactions prescribed in Article 124 of this Code (Civil transactions invalid due to forgery), the statute of limitations for individuals and organizations to request the Court to declare the civil transaction invalid is not limited.
3. How does the law regulate simulated contract?
3.1 A simulated contract is a type of sham transaction
Pursuant to Article 124 of the 2015 Civil Code, which stipulates invalid civil transactions:
“Article 124. Invalidity of civil transactions due to falsification
1. Where parties enter into a civil transaction falsely for the purpose of concealing another civil transaction, such false transaction shall be invalid; notwithstanding, the transaction which is concealed shall be valid, unless it is also invalid pursuant to provisions of this Code or other relevant laws.
2. Where a civil transaction is falsely entered into for the purpose of evading responsibilities to a third person, such civil transaction shall be invalid.
3.2 Legal consequences of simulated contracts
“Article 131. Legal consequences of invalidity of civil transactions
1. An invalid civil transaction shall not give rise to civil rights and obligations with respect to the parties or to changes and termination of such rights and obligations as from the time the transaction is entered into.
2. Where 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 restitution is not able to be made in kind, it shall be valued in terms of money to return.
3. The bona fide party in collecting benefits or income is not required to return such benefits or income.
4. The party at fault which caused loss and damage must compensate.
5. Resolution of consequences of invalid civil transactions relating to personal rights is provided by this Code and other relevant laws.”
Thus, for these types of simulatedcontracts, there will be no rights and obligations among parties. The law does not recognize and protect the rights of parties when participating in this type of transaction. This contract is invalid according to the provisions of law.