The Idea of a Fictitious Contract in the Legal Theory

The meaning of the word fictitious in the Cambridge Dictionary is invented and not true or not existing or false. The definition of fictitious contract (al-‘Aqd al-Suri) is a contract that have offered and accepted by the parties but there is no intention to conclude the contract. The person who are crazy, not age of majority, drunk, sleeping or unconscious, those are the example of person that might have made offer and acceptance of the contract, and their expressions of offer and acceptance is not valid as they unable to make a proper intention (irada’ batinniyah) in the contract. Acts and contracts that intended as a joke or not said seriously also not valid except for the marriage, divorce, ruj’ and swearing.

Fictitious contact is considered if the contract is made for an unlawful purpose. Unlawful purpose such as giving gift to people in authority or repurchase sale. Based on The Manila Times, Associate Justice Jose Mendoza stated: “In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be bound by it. “The main characteristic of an absolute simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the parties. ” “As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract. ”

For an example based on the case in Philippine between Carlo and Aries’s father, Carlo had borrowed from Aries’s father a Torrens Title covering land in Isabela. Her father verbally agreed in lending the Torrens Title to him since Carlo is his nephew, and he trusted him that much. A part of their agreement is the execution of a Deed of Sale, so that the title will be cancelled and be transferred in the name of Carlo. After the transfer, Carlo obtained a loan from a bank and mortgaged the property. In 2010, he paid his loan with the bank, but he refused to reconvey the property to Aries’s father. He now claims full ownership over the property because it was already titled in his name. Based on this case, there is no contract of sale between Aries’s father and Carlo. Under Article 1458 of the New Civil Code of the Philippines, it is stated, “By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. ”

The requisites of a contract are found under Article 1319 of the same code, which are as follows:(1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; and (3) Cause of the obligation which is established. ” The contract entered by Aries’s father and his nephew, Carlo, is not valid because it lacks consideration and cause. Moreover, the same is not a contract of sale because the parties do not intend any transfer of ownership over the land. The contract of sale is absolutely simulated.

Under Article 1345 of the New Civil Code of the Philippines, “simulation of contract maybe absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement. ” Correlative thereto, Article 1346 of the same law also provides that “an absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy, binds the parties to their real agreement. ”Applying this decision in the case, the contract of sale between Aries’s father and Carlo is void, because this is a simulated sale. Aries’s father did not really intend an absolute transfer of ownership of the property to Carlo. Aries’s father may recover the property by filing a civil action for the nullification of the deed of sale and certificate of title in the name of Carlo, alleging and proving that he merely lent the Torrens Title of the land and has no absolute intention to transfer it to the latter. The opinion may vary when the facts are changed or elaborated.

Effects of contract

The Hanafi School classified the legal effects into three, which is Sahih (Valid), Bathil (Void) and Fasid (Irregular). Bey' is Bathil when the pillars of the contract are breached, or when its cause is imperfect. If one or more of the pillars are breached, such as when the contract issues from an insane person or a person lacking in competence, the contract is Bathil as though it has never been formed (Ghayru Muta'aqqid). Similarly, if the underlying cause (Sabab) of the contract is dissolved, and it concerns the object of sale as, for example, when it constitutes one of the unlawful objects, then the contract will also be considered as Bathil. Void contract has no legal effects at all and it can never be validated. Fasid contract, on the other hand, is defined as when something in the contract, other than the pillars or the foundations, is defective. In other words, the contract is lawful in respect of its essence, but not with respect of its quality. An example of this is when a defector imbalance (Khalal) occurs in the price. Thus a Fasid sale of a commodity is binding (Shahih) except for the irregular condition which constitutes the price; this renders the contract valid upon the passing of possession. The buyer must pay its value in a lawful form.

Fasid contracts can be validated through their ratification by the interested party, or because of prescription of the action which obstructs their validity. It can also be invalidated through the nullification of contract by either of the parties to the contract before the invalidating factor is removed. It shall be noted that the distinction is only applicable in contracts having the effect of transferring the ownership/title; or the contract establishing the duty upon both parties to the contract. For an example in a contract of sale, contract of employment, gift, loans, hiwalah, partnership and many more. On the other hand, no distinction is drawn between a void and irregular contract where the contract does not relate to the transfer of ownership. The best example for this will include the contract of agency, wills, and marriage. Similarly the contract relating to the transfer of ownership which does not give rise to obligation from both parties to the contract. For an example is divorce, waqaf, guarantee and oath, as no distinction may be drawn in these examples between the void and irregular contract. Other scholars said there are two types of contract that is valid and invalid.

Contract is considered valid when all of its pillars and conditions are satisfied. The first one is a valid contract has the legal effects whereby the contract is binding upon the parties with immediate effect after the contract has been concluded. The second thing is Invalid contract as a contract which its foundation is not legally recognised. When one of the necessary elements of a valid contract is missing the contract will be then invalid. Hence, when one of the pillars of contracts or its conditions is unsatisfied, the contract will have no legal effect. No title may be passed neither the ownership nor price of the goods. The best example of this kind of contract is the sale of dead animals, blood, liquor, and pork.