Features of regulation of invalidity of the agreement in the Civil Code of Ukraine

Abstract

This article is devoted to the peculiarities of regulating the invalidity of the agreement in Ukraine. The Central Committee of Ukraine embodies an approach in which the provisions on invalid transactions (§ 2 of Chapter 16) are general in nature, and they should apply to both unilateral transactions and contracts. Moreover, there is no doubt that most of these rules are designed to apply to an invalid contract [for example, paragraph 2 of Art. 216(1) of the Civil Code of Ukraine, hereinafter CCU]. In turn, certain norms devoted to certain agreements (subsection 1 of section III of book 5 CCU) provide grounds for challenging the condition [Art. 668(1) CCU], the invalidity of the contract [Art. 661(2), Art. 698(4) CCU, etc.], the grounds for contesting (Art. 998) or the invalidity of the contract [Art. 719(3), Art. 981(2), etc.], the legal consequences of the invalidity of the contract or condition [Art. 1057-1, Art. 1111(2), Art. 1119(4) CCU]. The Supreme Court of Ukraine noted the difference between the invalidity of the contract and the obligation, emphasizing the admissibility of the invalidity of the obligation. He pointed out that the invalidation of the contract and the invalidation of the obligation are not identical concepts, because, by the direct indication of the law, the contract declared invalid by the court is invalid from the moment of its conclusion, and invalidation of obligations under this  agreement such an agreement. The decision of the Commercial Court of Cassation of the Supreme Court in case № 201/8412/18 (March 10, 2021) states that the existence of grounds for invalidation of the contract should be established by the court at the time of its conclusion, and not as a result of non-performance or improper performance. Failure to perform or improper performance of obligations arising under the disputed contract is not grounds for its invalidation.

According to Articles 16, 203, and 215 of the Civil Code of Ukraine, for a court to declare a disputed transaction invalid, it is necessary to sue one of the parties to the transaction or another interested person; the existence of grounds for contesting the transaction; establishing whether the subjective civil right or interest of the person who applied to the court is violated (not recognized or disputed). This understanding of invalidating a transaction as a means of protection is well-established in judicial practice. According to Art. 263(4) Civil Procedure Code of Ukraine when choosing and applying the rule of law to the disputed legal relationship, the court takes into account the conclusions on the application of the relevant rules of law, set out in the decisions of the Supreme Court. The decision of the Supreme Court of the Joint Chamber of the Civil Court of Cassation of 5 September 2019 in case № 638/2304/17 concluded that ‘the invalidity of the contract as a private law category designed to prevent or suppress violations of civil rights and interests or in essence, initiating a dispute over the invalidity of a contract not to protect civil rights and interests is unacceptable’.