Fake contract is a fairly new concept to Vietnamese people, we often hear the concept of fake contract more often. But in fact, in essence, the two concepts are one. Through the article below, Pham Consult will help us better understand the fake contract.
1. What is a fake contract?
Currently, Vietnamese law does not have specific provisions on the concept of “false contract”. In fact, a “fake contract” is a fake civil transaction in order to conceal another civil transaction. This type of contract is often used in transactions of buying, selling, transferring or borrowing property… It can be understood that there will exist at least two civil transactions about an object targeted by the parties, including fake civil transactions and real civil transactions. The real purpose of the contract of the parties is only shown in one civil transaction, while the other is in order to conceal the real civil transaction.
2. Are fake contracts recognized in all cases?
The reason the parties use “fake contract” is to conceal a real civil transaction, which may stem from the desire to evade tax obligations, to conceal the true purpose of the transaction or to achieve binding terms that are unfavorable or more favorable than the real transaction.
In case the parties use a “false contract” to declare a “virtual” price in the transfer contract in order to evade or reduce tax, such act is a violation of the law. Depending on the seriousness of the violation, the act may be administratively sanctioned or penalized for tax evasion in accordance with law.
In addition, according to the provisions of Clause 1, Article 124 of the Civil Code 2015, when the parties establish a fake civil transaction in order to conceal another civil transaction, the fake transaction will be invalidated, while the concealed civil transaction will still be valid, unless otherwise prescribed by law. Or in case a fake civil transaction is established to evade obligations to a third party, such civil transaction will also be invalid.
3. Legal consequences of fake contracts
Article 124 of the 2015 Civil Code stipulates that when the parties artificially establish a civil transaction in order to conceal another civil transaction, the fake civil transaction will be invalidated, while the concealed civil transaction will still be valid, unless such transaction is also invalid under the provisions of this Code or other relevant laws. If the concealed civil transaction is also invalid under the provisions of the Civil Code 2015 or other relevant laws (Article 124 of the Civil Code 2015), the Court will declare the contract invalid and deal with the consequences of the invalid contract.
The essence of a fake contract is that a civil transaction is void. Pursuant to Article 131 of the 2015 Civil Code, an invalid civil transaction has the following legal consequences:
An invalid civil transaction does not give rise to, change or terminate the civil rights and obligations of the parties from the time the transaction has been established. That is, an invalid civil transaction is a transaction that has no legal value right from the time of signing and establishing the transaction.
When a civil transaction is invalidated, the parties must restore the original state and return to each other what they have received. The parties will have to return what was received before and after signing the invalid civil contract to restore the original status quo. If it cannot be returned in kind, it will be refunded in cash.
However, not all cases of voidable contracts must be rolled back at the original time of the transaction. We can divide civil transactions into 2 types based on the invalidity cases: relative civil transactions and absolute civil transactions.
Relatively invalid civil transactions: If a part of a civil transaction is invalidated, that part is considered to have no legal effect and the parties will have to return to the original starting point, and both parties must return all obligations to each other. The rest, which is not invalidated, will remain in effect and the parties must continue to perform according to the agreement entered into before. The court will decide which part of the contract is void and which part is still in effect
Civil transaction is absolutely void: This transaction does not give rise to the legal effect, rights and obligations of the parties even after the contract has been signed. With this transaction, all rights and obligations of the parties performed in relation to the transaction are invalid and must return to each other what has been received.
– The righteous party (third party) in the collection of profits and profits is not required to return such yields and profits.
– The party at fault causing damage must compensate
– The settlement of consequences of invalid civil transactions related to moral rights shall be regulated by the Civil Code 2015 and other relevant laws.
Thus, through the article on Pham Consult, it has been clarified more about this type of contract. Hope this information will help your work. If you have any questions, please contact us for more answers!
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