Contractual Inefficiency: Nullity, Voidability, and Dissolution
The Invalidity (Absolute Nullity)
It is characterized as automatic, absolute, structural, original, and irremediable. Absolute nullity occurs when an essential element of the contract is missing or when the contract contravenes imperative rules. A radically null contract does not produce any legal effect.
Various causes can lead to the declaration of absolute nullity:
- Lack of any of the essential requirements: consent, object, and cause of the contract.
- Breach of any of the requirements of the contract’s subject: legality, opportunity, and determination.
- The illegality of the cause.
- Breach of the required form of the agreement.
- The illegality of the contract, exceeding the limits on the freedom of individuals.
- Acts of gratuitous title on marital property made by one spouse without the consent of the other.
Action: The declaration of nullity occurs automatically, without the need for a judicial statement. However, as the contract creates an appearance of validity, a party or an interested party may bring an action of nullity to destroy it. This action is essential and does not expire.
Effects of the declaration: Upon the declaration of nullity, the contracting parties must exchange the things that had been the object of the contract, along with the price and interest.
The Nullity (Voidability or Relative Nullity)
It is characterized as relative, not automatic, temporary, and rectifiable. Voidable contracts are those that meet all essential requirements for their validity but suffer from some defect capable of producing their inefficiency. The difference with absolute nullity is that a voidable contract may be canceled, and while it is not challenged, it produces full legal effect.
Various causes may lead to the declaration of a contract as voidable:
- When a vice of consent has occurred during the conclusion of the contract: violence, error, etc.
- When the cause is incorrect.
- When one of the contracting parties does not have legal capacity.
- In onerous contracts entered into by a spouse without the consent of the other, when the consent of both is required.
Action of nullity: Only the injured party may bring the action to contest the contract within four years. This period begins from the moment the intimidation ceased, from the moment of the error or falsehood of the cause, from the termination of guardianship or upon reaching the age of majority in the case of minors or disabled individuals, or from the lack of marital consent.
The four-year period is a term of limitation because if the action is not brought within this time, nullity can no longer be invoked. Voidability does not have an automatic effect; it requires a judicial statement. Until it is declared invalid, the contract is practically valid. It has the same effects as absolute nullity.
Dissolution
Dissolution is a type of contractual inefficiency that operates when a validly concluded contract causes economic harm to one of the parties or a third party. According to the Civil Code, a contract is terminated due to injury, except in the following cases:
- Contracts entered into by guardians without judicial authorization, where the ward has suffered an injury of more than a quarter of the value of the things under contract.
- Contracts celebrated in representation of absentees, with the same injury.
- The partition of inheritance, if the injury is greater than a quarter.
- Other cases where there is fraud against creditors.
It is a subsidiary remedy, only exercised when the injured party lacks another legal recourse to repair the damage. The limitation period is four years. Its restitutory effects are retroactive, attempting to restore the situation to its former state.