Termination and Nullity in Light of the Civil Code

A void contract represents the negative aspect of a valid contract, and the study of void contracts is essentially an exploration of the consequences of the absence of its elements and conditions. The theory of contract nullity has occupied a significant portion of legal studies, primarily focusing on the degrees of nullity. There are two main theories regarding this: the traditional theory, which is divided into two approaches—one dividing the void contract into absolute and relative, and the other dividing it into nonexistent, absolute, and relative; and the modern theory of nullity, which presents different perspectives, categorizing nullity into two degrees using the interest criterion as a standard for this division.

Nullity is a civil sanction applied to a contract due to the absence of one of its elements or the failure of one of its conditions (such as consent given by an incompetent person, an impossible or undefined object or purpose, or an illegal purpose). As a result, nullity leads to the retroactive annulment of the contract due to the failure of one of its essential conditions, which are consent, object, purpose, and form in formal contracts. This constitutes a void contract. A voidable contract, on the other hand, is one that lacks a condition for its validity, such as capacity and the absence of defects in consent like mistake, fraud, duress, and exploitation.

A contract is considered void if it contravenes public order and public morals. Such a contract has no legal existence or effect for the contracting parties or even for third parties. It is considered as non-existent, and any interested party can invoke it, as can the judge ex officio.

Regarding termination, it is established that in bilateral contracts, if one of the contracting parties fails to fulfill his obligation, the other party may demand the execution of the contract or its termination. Thus, termination acts as a penalty for the party failing to execute his obligation, resulting in the destruction of the contract during its execution phase and the dissolution of the contractual bond, which was validly established with all its elements and conditions for validity.

Termination is based on the principle of interdependence between reciprocal obligations in bilateral contracts. The nature of these contracts requires that one party’s obligation is linked to the other’s. Consequently, it is just that if one party fails to fulfill his obligation, the other party may be relieved of his obligation by terminating the contract.

Termination can occur through a court ruling or by agreement. The default is that termination does not occur except through a judicial decision—this is known as judicial termination, regulated by Article 183 of the Civil Code. However, the contracting parties may agree in the contract that it shall be deemed terminated automatically if one party fails to fulfill his obligation. This is known as consensual termination, according to Article 184 of the Civil Code.

Termination is the penalty for non-performance of the contract, and the law imposes on the contracting parties the obligation to adhere to the contract terms. However, it allows one of the parties to be relieved of his obligations if the other party breaches any of the reciprocal obligations through the system of termination, provided that its conditions are met.