CIVIL TRANSACTIONS ARE INVALID DUE TO FORGERY

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Forgery in contracting is quite common. Both civil Code 2015 and 2005 stipulate that forgery transactions are invalid. Let us study about the concept of forgery, concealment, types of creating forgery transactions, concealing other transactions or avoiding obligations to third party.

Article 124 of the 2015 Civil Code or Article 129 of the 2005 Civil Code have provisions on civil transactions that are invalid due to forgery: “1. When the parties enter into a civil transaction artificially in order to conceal another civil transaction, the forgery civil transaction shall be invalidated, while the concealed civil transaction shall still be valid, except for the case where the concealed civil transaction is also void under the provisions of this Code or other relevant laws. 2. In case a forgery civil transaction is established in order to evade obligations towards a third party, such civil transaction shall be invalid.”

Intentions of the parties in the forgery transaction

In establishing a transaction, both parties want to create a forgery transaction. If only one party wishes to create a forgery transaction, while the other party does not intentionally do it, then the transaction may be invalidated by mistake or deception.

For example, in the judgment No. 32/2018/DS-PT dated April 13, 2018 of the People’s Court of Binh Phuoc: “Thus, at the time of establishing the land use right transfer contract between Mr. Mai Tuong T and Ms. Pham Thi H, intentions of the parties is to secure the property loan contract. Compared to the provisions in Article 318 of the 2005 Civil Code: measures to secure property: 1. Pledge of property; 2. Mortgage of property; 3. Deposit; 4. Security collateral; 5. Escrow deposit; 6. Title retention; 7. Guarantee; 8. Fidelity guarantees; 9. Lien on property; there is no measure to make a transfer contract to ensure the performance of civil obligations, Article 292 of the Civil Code 2015 also does not have this measure. Therefore, the agreement to make a transfer contract to ensure the performance of this obligation by both parties is not in accordance with the provisions of law. Although intentions of the parties when participating in this transaction is voluntary, it clearly shows that the signing of the notarized land use right transfer contract between Mr. Mai Tuong T and Ms. Pham Thi H on September 6, 2012 was forgery contract in order to conceal the property loan contract between the parties”.

Establishing a transaction falsely

False according to the Vietnamese dictionary is “unreal, because it is created in an unnatural way”. The establishment of a false transaction can be in the way of forging signature of someone. For example, in Judgment No. 750/2015/DSPT dated June 25, 2015: Regarding contracts for the transfer of land use rights made on November 9, 2006, it shows that the transferor – Mrs. Nguyen Thi To and the transferee – Nguyen Thi Chi. However, according to the assessment conclusion No. 914 dated May 24, 2010 of the Criminal Science Sub-Institute of the Ministry of Public Security, the signature “To” in Nguyen Thi To’s name of the contract is not Mr. To’s signature. On the other hand, at the appellate court, Mr. BD Tien and Mr. BD Chi declared that these contracts were only a form of Mr. BD Chi’s name on behalf of Mr. BD Tien, because Mr. BD Tien was residing abroad, not recognized land use rights in Vietnam. In fact, Mr. BD Chi did not receive land transfer and did not pay Mr. To. Therefore, the Court of First Instance and the Court of Appeal determined that the land use rights transfer contracts between Mr. To and Mr. BD Chi were false contracts and the cancellation of the above-mentioned contracts was proper”.

Forgery transactions are normally not performed in reality 

According to Vietnamese Dictionary: concealing is to keep from revealing to others. In the hearing practice, the nature of the forgery transaction will not be carried out in reality. In Judgment No: 283/2018/DS-PT dated September 19, 2018 of the High Court of Ho Chi Minh City on failure to perform the contract: From this analysis, the first-instance court accepted the petition of the plaintiff that the transaction to be declared as invalid was correct. Because a forgery transaction is a transaction that will not be performed by the parties to the transaction, this is the basic point to determine the invalid civil transaction due to forgery. The defendant argued that the contract was not invalid due to forgery, but there was no evidence to prove that the contents of the contract were performed over a period of many years (delivering money and receiving land).

Evading obligations towards a third party

The third person here can be construed as individuals, organizations or the State. The parties may establish the forgery transactions in order to evade civil obligations to third party or to evade tax and administrative obligations towards the State.

For example, in a judgment that stated: “The written agreement on private property established by Mr. Nghia and Ms. BD Loan on June 12, 2012 did not violate the legal regulations on the notarization process, but because the involved parties established this agreement to avoid performing civil obligations, so according to the provisions of Article 1 of this document, the agreement of the transaction parties is invalid”.

In another judgment that stated: “Based on the 2003 Law on corporate income tax, which took effect from January 1, 2004 to January 1, 2009, individuals with rental properties must pay income tax (Clause 2. Article 3) and have obligations to fully pay income tax (Articles 4 and 11). The false declaration of the rental price of the rental contract of Mr. ND_Binh, Ms. ND_Sang and Mr. BD_Thinh in order to avoid fulfilling the tax obligations is a violation of the law, so the transaction between the two parties is a forgery civil transaction. According to the provisions of Article 129 of the 2005 Civil Code, “When the parties enter into a forgery civil transaction  in order to conceal another transaction, the forgery transaction is invalid, while the concealed transaction is still valid, except where such transaction is also invalid under the provisions of this Code”.

In addition, forgery transactions established to reduce and avoid administrative procedures are also invalid. For example, the Court stated in a judgment: “For the land purchase document dated October 27, 2013, Mr. T1 and Ms. H1 both determined that there was no land transfer between Mr. C and Mr. T1, but only because he wanted to formalized contract in order to reduce administrative procedures, Mr. C rewrote the transfer document for Mr. T1, in fact, Mrs. H1 still manages and uses the above field land. Therefore, it is determined that the civil transaction is invalid according to the provisions of Article 138 of the Civil Code 1995 “Invalid transaction due to forgery”

Consequences of civil transactions due to forgery

According to the provisions of the Civil Code 2015 or 2005, a forgery transaction to conceal another transaction or evade obligations to a third party or an obligation to the State is invalid. The concealed transaction is still valid.

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