Law
Legal transactions
10 May, 2012
Legal transactions

Judge  Lasha  Kalandadze  is today answering our questions on the types, facets and specificities of legal transactions in civil law.

 

NBR – What is a legal transaction and what is its role in civil relations?

L.K. – According to the functioning Civil Code of Georgia, legal transaction is a unilateral, bilateral or multilateral declaration of intent, aimed at creating, changing or terminating civil relations. It is essential not to forget - legal transactions are the means by which a legal subject can

change the legal position of itself or the legal position of other person or persons intentionally. Typical examples within the civil law are contracts, termination of contracts, testaments (last wills), transfer of rights, and creation of rights in rem, such as usufruct and mortgage and so on. It should also be noted that in case of interpretation of the declaration of intent, it is necessary to ascertain the true intention rather than literal meaning of its wording.

NBR – Forgive my ignorance please but all these terms sound like Greek to me.

L.K. – I can understand that although you don’t sound ignorant at all in legal matters in general.

NBR – Thank you but I am going to ask you to embark on additional explanatory details so that the ideas behind these words become clearer to a lay person like me?

L.K. – I am afraid I am going to throw in a certain number of additional legal terms. A unilateral (one-sided) transaction is a transaction in which one party makes a promise or undertakes a performance without reciprocal (mutual) agreement, but of course it requires an acceptance from the other party. Unilateral transactions for instance are testament, promise of a reward, donation, etc. As for the bilateral transactions, the parties in such a case exchange mutual promises. It is also called a two-sided contract because of the two-way promises made by parties are involved in the contract. Purchase, loan, rent, lease, gratuitous lending, piece-work, suretyship (guarantee), life annuity are the types of bilateral transactions.

NBR – Could you please provide us with information about transaction forms?

L.K. – I can certainly try. In compliance with our civil legislation, transactions can be made orally or in writing. Georgian civil code determines in detail what kind of transactions must be made in written form (plain or notarial). A legal transaction that lacks the form prescribed by code is void. It should be noted that our functioning civil law envisages the existence of a void and voidable transactions.

NBR – Can you explain the difference between them?

L.K. – A void transaction is not actually a transaction – it cannot be enforced by law. The difference between them is that voidable transactions may be (but not necessarily will be) nullified only by the request of an interested party.

NBR – Please, tell us more about void and voidable transactions. Details might help to understand the subject better. Thank you!

L.K. – Legal transaction, contradicting the public policy (unlawful and immoral), sham, fraudulent, transaction, lacking seriousness of intention, legal capacity, mental disorder, the one which is made without the observance of the form prescribed by statute or by reason of abuse of power are void transactions – void from the moment of its making. It should also be said that if a void legal transaction fulfills the requirements of another legal transaction, then the latter is deemed to be valid, if it may be assumed that its validity would be intended if there were knowledge of the invalidity.

NBR – Does partial invalidity of a transaction mean the invalidity of the entire transaction?

L.K. – Interesting point! If a part of a legal transaction is void, then the entire legal transaction is void unless it is to be assumed that it would have been made even without the void part.

NBR – What happens if a party of a transaction makes confirmation of a void legal transaction?

L.K. – According to our civil law, if a void legal transaction is confirmed by the person who undertook it, the confirmation is to be seen as a renewed undertaking. After making confirmation the person loses the right to void transaction. I would add here that confirmation can be valid only if a transaction is not contrary to the principles of morality and general requirements of public policy and order. (To be continued).

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