Invalidation of a transaction: procedure, assistance of a lawyer

Recognizing a transaction as invalid entails a number of consequences (primarily property) for its parties. The main consequence of the invalidity of a transaction is restitution, i.e. the emergence of obligations on the part of the parties to return to each other the received assets (and if such return is impossible, to reimburse their value). In this article we will tell you what types of restitution exist and what other consequences may result from declaring a transaction invalid.

Grounds and general consequences of invalidating a transaction
Special consequences of declaring a transaction invalid
Compensation for unjust enrichment
Interests of third parties
Invalidity of a transaction as a tool for protecting business reputation

Grounds for invalidating a transaction

for example, the basis for declaring an apartment purchase and sale agreement invalid may be the plaintiff’s proven fact of misleading him when concluding the transaction (you were provided with false information or concealed any facts regarding the condition of the apartment, which subsequently resulted in the impossibility of using it as a residential premises) . However, please note that if your intentions for the further use of the purchased apartment have changed on their own and without the fault of the seller, then you will not be able to cancel the transaction (read more about challenging the purchase and sale agreement due to lack of money at the link).
Satisfaction of a claim to invalidate an apartment exchange agreement can be achieved based on Article 170 of the Civil Code of the Russian Federation, proving the sham of the transaction. For example, if the exchange was formalized only on paper, but did not actually take place.
the gift agreement loses its force if, according to Article 179 of the Civil Code of the Russian Federation, it is proven that it was signed under the threat of violence. There are other grounds for challenging the concluded gift agreement, so you should not rush to get upset, you need to think it over carefully and decide to start acting towards protecting your rights as an owner.
Increasingly, facts of concluding transactions on enslaving conditions have begun to appear, when one party, taking advantage of the distress and acute need for money of the other party, imposes obviously unfavorable conditions and purchases real estate at prices significantly lower than those currently existing on the housing market.
if the transaction was concluded in violation of the law
the contractual relationship is imaginary or feigned
the purpose of concluding a transaction is contrary to the rules of law and moral principles
the concluded transaction contradicts the goals of the legal entity – Article 173 of the Civil Code of the Russian Federation
when concluding a transaction, the representative violates the interests of the person whose interests he represents - Article 174 of the Code
contractual relations are concluded in relation to property that is prohibited or pledged
when concluding a major transaction - if the procedure for its completion, provided for in paragraph 4 of Article 46 of the Law on Limited Liability Companies, is violated.

Of course, not all cases where defense is possible when challenging transactions are listed above. The grounds for challenge provided for by current legislation apply to any type of transaction and are not presented in this article in exhaustive form.

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Cases in which an oral transaction is permitted

Civil legislative norms regulate the possibility of concluding orally those transactions that require written form. Such cases are possible provided that the moment of fulfillment of obligations coincides with the moment of the agreement. In such cases, it is important that failure to comply with the written form does not entail the invalidity of the transaction.

Thus, a transaction that must be accompanied by the fulfillment of established conditions may be oral. In this case, objects, subjects and transaction price are not taken into account.

The most common case of concluding oral contracts is the sale and purchase. In this case, the purchase price may exceed ten times the minimum wage, and the seller or buyer may be an individual or legal entity. Oral purchase and sale agreements are considered valid from the moment a special document is issued to the buyer (sales receipt or any paper that confirms payment for the goods or services).

If the buyer does not have documents confirming the transaction, then he is not deprived of the opportunity during the proceedings to refer to the testimony of witnesses in order to confirm the fact of concluding an oral contract. This rule is due to the fact that in most cases the transfer of goods or the provision of services occurs at the moment when the purchase and sale agreement is concluded.

The procedure for invalidating a transaction

In order to challenge the transaction itself, you must go to court with an appropriate claim, but please note that you must have the right to do this. That is, the concluded deal, or its consequences, must affect your interests.

In addition, if a claim is filed against you regarding such a transaction (failure to comply with its terms, etc.), that is, you are the defendant, you can file counterclaims to declare the transaction invalid or object to the satisfaction of the claim due to its invalidity.

Defense in arbitration court in the case of invalidation of a transaction

By virtue of Art. 61.4 of the Bankruptcy Law establishes that transactions for the transfer of property and the assumption of obligations or duties, carried out in the ordinary course of business activities carried out by the debtor, cannot be challenged on the basis of paragraph 1 of Article 61.2 and Article 61.3 of the Bankruptcy Law, if the price of the property transferred one by one or several interrelated transactions, or the amount of accepted obligations or liabilities does not exceed one percent of the value of the debtor’s assets, determined on the basis of the debtor’s financial statements for the last reporting period

Transactions of the debtor aimed at fulfilling obligations for which the debtor received an equivalent counter-fulfillment of obligations immediately after the conclusion of the contract can be challenged only on the basis of paragraph 2 of Article 61.2 of the Bankruptcy Law (suspicious transaction).

To prove “ordinary business activities”, it is advisable that you have previously worked with the customer on similar terms under other contracts.

Alexey Lobanov

Head of Legal Bureau

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A suspicious transaction is usually understood as a transaction that was made for the purpose of deliberately causing harm to the property rights of other creditors (deliberate withdrawal of funds before bankruptcy and the other party to the transaction knew about it).

Question for a lawyer

Is the transfer of funds a transaction?

Indeed, there are always contradictions in the classification of funds transfers. On the one hand, the transaction was completed earlier by signing a contract or additional agreement, specification, etc. And the transfer of funds is a way to fulfill obligations under the transaction. Judicial practice has a history in which the courts sided with the contractor, pointing out that in this case, based on the provisions of Art. 5 of the Federal Law of December 2, 1990 N 395-1 “On Banks and Banking Activities”, the transfer of funds by payment order is not a transaction within the meaning of Art. 153 of the Civil Code of the Russian Federation, but a banking operation, in connection with this, the provisions of Art. 166 - 168 of the Civil Code of the Russian Federation on the invalidity of transactions.

However, some courts act differently. If you look at the content of paragraph 1 of Art. 5 of the Federal Law “On Banks and Banking Activities,” which lists banking operations, it is clear that they represent transactions (loan, bank deposit, transfer, etc.).

Alexey Lobanov

Head of Legal Bureau

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In my opinion, a payment order is not a transaction; otherwise, all the rules of the Civil Code on transactions should be applied to the payment order, as a transaction, without any reservations.

Question for a lawyer

There is no case on the court website where my company is the defendant, but there is a decision

The fact is that disputes regarding the invalidation of a transaction are considered within the framework of a bankruptcy case. In this case, only the debtor himself is indicated as a defendant. You can find out about the consideration of the case only by receiving a statement of claim by mail from the bankruptcy trustee or a ruling on acceptance of the petition for consideration from the arbitration court.

Claim to invalidate the transaction

As a rule, such claims are considered by the arbitration court at the location of the defendant or the place where the transaction was completed. File a claim in court according to the rules of jurisdiction and jurisdiction in accordance with procedural requirements.

Before sending it, if you ask the court to oblige the defendant to return the money paid to you under such an agreement, you must follow the pre-trial procedure for resolving the dispute and send a pre-trial claim to the party. Otherwise, it is not necessary to file a claim - part 5 of article 4 of the Arbitration Procedure Code of the Russian Federation.

The application must be accompanied by documents confirming the stated requirements, documents confirming the authority of the person who signed it, the constituent documents of the company or individual entrepreneur, an extract from the Unified State Register of Legal Entities, a receipt for payment of the state fee, confirmation of sending a copy of the claim to the defendant.

USEFUL: watch more tips on filing a claim in the video from the YouTube channel

Deadline for invalidating a transaction

In accordance with paragraph 1 of Article 181 of the Civil Code, this period is three years. And it is calculated depending on who submitted the application:

Party to the contractual relationship - from the moment the contract comes into force or the beginning of its execution/acceptance of execution.

Another person whose rights are affected by the controversial contractual relationship - from the moment when this person became aware of the execution/commencement of execution. In this case, the limitation period, or rather its period, cannot exceed a ten-year period, and its course begins no earlier than 09/01/2013, and applies no earlier than 09/01/2023. This provision follows from the position of the Plenum of the Armed Forces of the Russian Federation set out in paragraph 27 of Resolution No. 43 of September 29, 2015.

If the contractual relationship is disputed in part, then the period begins from the period when this part began to be fulfilled.

Important: if the contractual relationship is not fulfilled, then the period for recognizing such a transaction as invalid does not expire. This directly follows from the explanation of the Plenum of the RF Armed Forces - paragraph 101 of Resolution No. 25 of June 23, 2015.

Consequences of invalidity of a transaction due to misconception

If a transaction made due to a mistake is declared invalid, the consequences in this case will be general, which are provided for in Art. 167 of the Civil Code of the Russian Federation, namely:

such a transaction does not entail legal consequences
the transaction is invalid from the moment it is completed
if the parties received something under the transaction, then they are obliged to return everything to each other. If it is not possible to return something under the transaction to the other party, the cost of what was received under the transaction is reimbursed
a person who filed a lawsuit to declare a transaction invalid is obliged to compensate the other party for the actual damage caused to it as a result. The exception is that the other party knew about the mistake of the person who filed the claim.
a person who has applied to the court with a claim for the invalidity of a transaction, and on whose claim the transaction is declared invalid, may demand that the other party compensate it for the losses caused. However, in this situation it will be necessary to prove that the misconception arose due to circumstances for which the other party was responsible

Response to the claim to invalidate the transaction

To the Arbitration Court of the Sverdlovsk Region.

From

TO.

Objection

on a statement of claim to declare the transaction invalid

In your proceedings there is a civil case on the claim of D. against LLC, K. for the invalidation of the purchase and sale agreement, for the invalidation of the right of ownership, for the eviction of K. from non-residential premises No. 1-14 in Yekaterinburg.

I believe that these claims cannot be satisfied for the following reasons:

The plaintiff’s first demand is to recognize the purchase and sale agreement for built-in non-residential premises No. 1 of a store in building letter A, with a total area of 277.2 sq.m., concluded between LLC and LLC as invalid. The plaintiff believes that this transaction was made with interest, since the participant of the LLC and the director at the time of the transaction was K. are siblings. In this case, when making such demands, the plaintiff does not take into account the fact that in order to recognize such a transaction as invalid, establishing the presence of an interest alone is not enough; it is necessary to provide evidence of the presence of adverse consequences, losses as a result of the transaction for the plaintiff or for the LLC. The need to provide such evidence is also confirmed by the position of the Supreme Arbitration Court in the ruling dated July 30, 2008 No. 9087. Since the plaintiff did not provide evidence of adverse consequences as a result of the transaction, therefore, this requirement cannot be satisfied.
The plaintiff’s second demand is to invalidate K.’s ownership of the built-in non-residential premises No. 1 of the store in building letter A, with a total area of 277.2 sq.m. In this case, it should be noted that K. acquired the specified premises as a result of a purchase and sale agreement, the seller is LLC. When making such a claim, the plaintiff did not prove that K. is an unscrupulous purchaser of this building. It is necessary to prove this circumstance by virtue of the Resolution of the Constitutional Court of April 21, 2003 No. 6-P. Also, the plaintiff did not present evidence of the authority of the statement of such a claim, since the claims arising from real rights by virtue of Art. 302 of the Civil Code of the Russian Federation can only be declared by the owner or other owner of the property, but not by the LLC participant.

In connection with the above circumstances, the requirement to evict K. from the built-in non-residential premises No. 1 of the store in building letter A, with a total area of 277.2 sq.m., cannot be satisfied.

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The plaintiff’s demand is to recognize the LLC’s ownership of the built-in non-residential premises No. 1 of the store in building letter A, with a total area of 277.2 sq.m. By virtue of Art. 4 of the Arbitration Procedure Code of the Russian Federation: “an interested person has the right to apply to an arbitration court for the protection of his violated or disputed rights and legitimate interests in the manner established by this Code. In cases provided for by this Code, other persons also have the right to apply to the arbitration court.” Based on the provisions of these norms, D. must prove the authority to submit such a claim in favor of another person, namely LLC. Since claims in defense of other persons can be filed by virtue of direct instructions in the law. Since no evidence of this has been presented, therefore, this requirement also cannot be satisfied.

On the basis of the above

ASK:

To satisfy D.'s claims against LLC, K. for invalidating the purchase and sale agreement, for invalidating the right of ownership, for eviction of K. from non-residential premises No. 1-14, refuse in full.

Date, signature

Defense in arbitration court in the case of invalidation of a transaction

To prove “ordinary business activities”, it is advisable that you have previously worked with the customer on similar terms under other contracts.

Alexey Lobanov

Head of Legal Bureau

Ask a Question

Question for a lawyer

Is the transfer of funds a transaction?

Alexey Lobanov

Head of Legal Bureau

Ask a Question

In my opinion, a payment order is not a transaction; otherwise, all the rules of the Civil Code on transactions should be applied to the payment order, as a transaction, without any reservations.

Question for a lawyer

There is no case on the court website where my company is the defendant, but there is a decision

Consequences of declaring a transaction invalid

According to the general rules, this is the return by the parties of what was transferred under such a transaction (property, money, etc.), however, the parties may provide (agreed on) other consequences (by mutual agreement).

In addition to the above, the party whose rights have been violated may demand from the other party the amount of unjust enrichment, as well as interest for the use of other people's funds.

As a rule, the consequences of declaring a transaction invalid are applied by the court at the request of the parties, but the court can apply them independently if public interests have been affected, as well as in other cases - paragraph 4 of Article 166 of the Civil Code of the Russian Federation.

Grounds for refusal to invalidate a transaction

The previous subheading specifies the grounds on which a transaction may be invalidated due to an error that was material. However, for certain reasons the plaintiff will be denied recognition of the transaction as invalid due to misconception, namely:

if the party was mistaken about the legal consequences of the transaction. For example, a person transferred property into the common ownership of the farm, and the legal consequence was that the person lost the right to individually dispose of the transferred property
when the party was not mistaken about the circumstances on the basis of which he is challenging the transaction. For example, a person has rented a premises and can only use half of its area, but pay for the whole. These circumstances were known to the person when concluding the lease agreement, therefore the agreement cannot be invalid due to the tenant’s misconceptions
if a party fails to exercise normal business prudence. For example, a person entered into a lease agreement for non-residential premises, which he had the opportunity to inspect before concluding the agreement. Having received an extract from the Unified State Register of Real Estate, the person learned that the premises, according to their characteristics, belonged to the basement. It is impossible to challenge the contract due to a mistake, since the person could inspect this premises, find out about the condition, but did not show the necessary diligence

The given grounds for refusal to recognize the invalidity of a transaction are indicated in the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 10, 2013 No. 162, dedicated to the practice of application by arbitration courts, including Art. 178 Civil Code of the Russian Federation.

USEFUL : read more about challenging transactions on the website of AB “Katsailidi and Partners”