Comment to article 159. Grounds for invalidity of transactions of the Civil Code of the Republic of Kazakhstan  

The article, which is one of the largest in the Civil Code, is devoted to the formulation of specific grounds for invalidating transactions, indicating who has the right to demand such recognition: a person expressing a public interest, or another participant in the transaction, whose interests are violated by this transaction.

Depending on this, it is customary in the legal literature to divide transactions (in the Civil Code of the Russian Federation this is fixed by the text of the relevant articles) into insignificant and disputed.  

Unlike paragraph 1 of Article 158 of the Civil Code, which provides a general reference to the illegal nature of the transaction, all paragraphs of the commented article provide for specific facts of violation of the law, leading to the recognition of the transaction as invalid.

A necessary condition for carrying out certain types of entrepreneurial activity is to obtain a license, that is, a special permit from a competent state body (see art. 10 of the Civil Code and its commentary). It is an offense to perform actions that require licensing without obtaining a license. A transaction made in cases when the license was prematurely revoked, suspended (for the period of suspension) or declared invalid should be recognized as a similar offense (see Articles 21, 22 of the Decree on Licensing).

A transaction that pursues the goals of unfair competition or violates the requirements of business ethics should be recognized as a transaction that does not comply with art. 11 of the Civil Code. Plaintiffs in such cases may be not only persons whose interests have been violated by the transaction, but also state antimonopoly authorities.

A transaction made by a teenager under the age of 14 should not be executed. These consequences do not apply to small transactions that a minor has the right to make independently (see art. 23 of the Civil Code).

Minors over the age of 14 make transactions themselves, but with the consent of their parents (adoptive parents, guardians). Consent can also be given after the transaction has been executed. Such a teenager has the right to make some transactions independently (see art. 22 of the Civil Code and the commentary to it).  

If a minor who has reached the age of 14 commits a transaction without the consent of his parents (adoptive parents, guardians), it is recognized as invalid only at the request of the latter. It remains legally binding without such a requirement.  

An adult participant in a transaction who knew or should have known that he was entering into it with a minor, that is, was guilty of a transaction prohibited by law, bears an additional obligation to reimburse the minor for the costs associated with the transaction. For example, transportation costs, the cost of repairing property returned to a minor that was damaged during transportation, etc. The guilt of the adult party to the transaction is assumed, and in order to be exempt from additional costs, he must prove that he did not know and, due to the circumstances of the case, should not have known that he had concluded a deal with a teenager.

Neither the teenager, nor his parents (adoptive parents, guardians, trustees) are obliged to reimburse the expenses of an adult. Things damaged by a minor, received by him under a transaction and returned to the original owner, spent money, etc. may remain uncompensated.  

The expression of the will of incapacitated persons has no legal significance (see Article 26 of the Civil Code and the commentary to it), therefore, the transaction they made is invalid. The guardian's attitude towards this transaction does not affect its invalidity.

When deciding whether to invalidate a transaction on this basis, the court does not clarify the mental state of the incapacitated person at the time of the transaction. Even if this period was marked by an improvement in mental health, the threat of invalidation of the transaction persists until the day when the court again recognizes him as legally capable.  

The commented article, however, makes an exception. Transactions made by incapacitated persons, as well as transactions made by teenagers under the age of 14, can be recognized as valid if they are made to the benefit of these persons.  

The basis for invalidity is also the conclusion of a transaction by a person whose legal capacity is limited due to alcoholism or drug addiction (see art. 27 of the Civil Code and commentary to it), if there was no consent to the transaction by the trustee of the said person. The restrictions also apply to the disposal of wages. The transaction is recognized as invalid only at the request of the trustee.

A transaction may be declared invalid even if, by the time it is completed, the citizen has renounced the abuse of alcoholic beverages or drugs until the restrictions on legal capacity are lifted by court.  

Unlike paragraphs 5 and 6 of the commented article, paragraph 9 refers to persons who are not limited by the court in their legal capacity, but who were in such an intellectual and strong-willed state at the time of the transaction when they did not understand their actions and could not direct them. For example, a citizen's illness that caused a temporary mental eclipse. There are other causal circumstances, such as severe mental shock, intoxication, etc.

Unlike paragraphs 5 and 6 of the commented article, according to which the very fact of a citizen's incapacity or limitation of his legal capacity at the time of the transaction is sufficient to invalidate it, therefore, clarification of the mental state of the person who made the transaction is not required, paragraph 9 of the commented article requires an indispensable clarification of this condition, because initially it is assumed that the citizen acted with full understanding the case. The fact of a temporary mental eclipse and its degree must be proved by the one who demands the recognition of the transaction as invalid.  

From the exact text of Article 51 of the previously valid Civil Code of the Kazakh SSR, it followed that a claim for invalidation of such a transaction could only be filed by the citizen who committed it, after his mental state was restored. The commented article grants the right to file such a claim to other interested parties, but only after the death of the said citizen. So, one of the courts in Almaty, considering the case on the claim of M. and R. to S. for recognition of the will drawn up by R-n (M.'s father and R.) in favor of S., invalid, established that the testator was in a state of deep mental disorder at the time of making the will, did not recognize anyone around him, could not sign the will himself, could not even name the person to whom he was entrusting it, pointed his finger at one of those present, a few hours after the will was certified He died as a doctor on duty. The will was declared invalid.

An error is understood as an incorrect, erroneous idea of a person about the nature and elements of the transaction he is making. For example, a citizen, when purchasing a thing, mistakenly believes that it belongs to rare specimens. The seller thinks the same thing. Experts, however, have identified their mistake.

Not every misconception can serve as a basis for invalidating a transaction, but only a significant one. We believe that the materiality of the error should be objective and lead to such a distortion of the idea of the transaction, without which an ordinary participant in the business turnover would not have concluded such a transaction. An error that is not significant (for example, the buyer of the coat made a mistake in determining the grade of the lining fabric) cannot serve as a basis for invalidating the transaction.  

The source of the misconception does not matter. They may have poor knowledge of the language in which the transaction was negotiated, errors in reference publications, vagueness of the designation of features that individualize the thing, etc. What matters is not the source of the misconception, but its nature and severity.  

Misconceptions about the motives that guided a person when concluding a transaction cannot serve as a basis for invalidating it, since they do not relate to the subjects, the nature, or the terms of the transaction. For example, a citizen, mistakenly expecting to get a job in another city, prepares to move and sells furniture. You cannot then demand that the furniture sale agreement be declared invalid, citing the fact that you failed to get a job and the relocation plans have changed.

The commented article explicitly states that an error in motives can serve as a basis for invalidating a transaction only if such a motive is included in its content as a suspensive or canceling condition. Among the widespread examples are founding agreements on the formation of joint ventures, in which foreign participants, having defined their rights and obligations, agree that they will be implemented if the Government of the Republic of Kazakhstan approves the terms of the agreement or if the necessary bank loan is obtained.  

In other cases, on the contrary, changes in the market situation, the introduction of restrictions on contracts with foreign partners and other similar circumstances that are not included in the content of the contract as its condition should not affect the validity of the transaction, which is especially important for business transactions. For example, an Almaty-based joint-stock company negotiated with a Turkish contractor for the construction of a hotel and commissioned a law firm to draft a contract. When the order was completed, the joint-stock company refused to pay for the work, citing the fact that negotiations with the Turkish company had failed to reach an agreement in principle on the construction, and therefore there was no need for a draft contract. Thus, the company, having made a mistake in its motives, considered the transaction (order) invalid. Such an opinion is erroneous, because the motive was not included in the order as its condition. Note that P. 9 of the commented article explicitly states the refusal to recognize an invalid transaction concluded under the influence of a misconception, if such is covered by the business risk of the mistaken participant.  

The article under review covers cases of discrepancies between the true will of the party making the transaction and the external expression of will that manifests itself in the transaction, and the other party is intentionally guilty of the discrepancy.

Deception as a means of inducing a transaction consists in deliberately creating a misconception among its participant about the nature of the transaction, its subjects, subject matter or other conditions. One of the participants in the transaction, for example, convinces the other that he is selling him a gold watch, knowing well that the metal is an imitation of gold. The people's court considered the case of invalidation of the contract for the purchase and sale of a fur coat from a column. It was found that the seller had managed to convince the buyer that the fur coat was made of more valuable fur. The court recognized the existence of deception.  

Deception can consist in taking active actions (asserting non-existent qualities of a thing, presenting false documents, etc.) or in conscious inaction when one participant in the transaction, realizing that the other made a mistake, uses this mistake to his advantage.  

Deception differs from delusion (paragraph 11 of the commentary) in that it is always an act of deliberately creating a misconception about the transaction.  

Deceptive motives of another person to commit an unprofitable transaction can acquire the degree of a socially dangerous act, that is, a crime. Criminal prosecution may be combined with the recognition of the transaction as invalid according to the rules of the commented article.  

Violence as a means of forcing a person to make a deal that is not profitable for himself consists in physically influencing him (beatings, deprivation of the opportunity to communicate with loved ones, restriction of freedom, etc.). Violence can be applied not only to the person from whom the transaction is being sought, but also to people close to him.

Unlike violence, a threat is a form of mental influence used to achieve a deal in which the threatening party is interested. A threat usually involves the use of violence if the person does not comply with the threat's demands. The threat may be combined with violence that has already occurred.  

There are cases of threats aimed at destroying property, disclosing information capable of denigrating the citizen from whom the transaction is being sought, his relatives (blackmail), etc. For example, T. demanded that her sister renounce the inheritance in favor of T., threatening in case of disagreement to inform her sister's husband of the circumstances of her personal life hidden from him. The court considered this threat to be a sufficient reason to invalidate the refusal of inheritance.  

A legitimate threat, that is, a threat to commit actions that are not prohibited by law, may also serve as the basis for the invalidity of the transaction. Only the threat to exercise the rights that the threatening person already possesses in relation to the threatened one (for example, to demand payment of alimony, division of property, etc.) is not taken into account.  

The article should not be applied in case of a frivolous or unrealistic threat. For example, it is impossible to recognize as the basis for the invalidity of a transaction a frivolous threat (to stop correspondence) or an unrealistic one (to seek help from evil spirits).  

The use of threats for personal gain can also turn into a criminal offense - extortion.  

A malicious agreement between a representative of one party and another takes place where the representative, neglecting the interests of the one who commissioned him to make the transaction, negotiates with the other party to benefit at the expense of the represented. For example, a citizen, traveling to another city, instructs a friend to sell a house, that is, gives him the authority of a representative (see art. 163 of the Civil Code and commentary to it); the representative finds a buyer willing to pay 190 thousand tenge for the house, and agrees with him that he will take 170 thousand from him, and include in the text of the contract 150 thousand tenge. Thus, both the buyer and the representative receive 20 thousand tenge at the expense of the seller.

An agreement can be considered malicious only if the representative had the opportunity to conclude a deal on more favorable terms for the represented, but for his own malicious reasons chose other conditions that violate the interests of the represented. If a transaction that violates the interests of the representative was concluded due to the lack of more favorable offers, insufficient activity of the representative, even his negligent attitude to the execution of the order, but without malicious intent, such a transaction cannot be declared invalid.  

A transaction that a person was forced to make on extremely unfavorable terms due to a combination of difficult circumstances is sometimes called bonded. Bondage can serve as a basis for invalidating a transaction if there are several circumstances at the same time: a) the terms of the transaction are extremely unprofitable for one of the parties (there were cases when a good house was sold for several thousand tenge, a valuable library for 1,200 tenge, etc.); b) the party makes the transaction only under the pressure of difficult circumstances (for example, hunger, urgent need for expensive treatment); c) the other party to the transaction, knowing about these circumstances, uses them for enrichment.

In the commented article, paragraph 11 was amended in order to clarify the terms of invalidation of the transaction for the reasons set out in this paragraph.

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The commentary was prepared within the framework of the scientific and practical research program of the Scientific Research Center of Private Law of the Kazakh State Law University.  

Head of the working group on the preparation of the draft Civil Code of the Republic of Kazakhstan, Corresponding Member of the Academy of Sciences of the Republic of Kazakhstan, Professor Suleimenov M.K.

Deputy head Professor Basin Yu.G.