Contract made under the influence of misunderstanding is declared invalid by the court

According to the loan agreement submitted to the court, the plaintiff lent the defendant 100,000 manats. The defendant admitted that the signature on the agreement belonged to him, but stated that he had signed not on the loan agreement, but on another document whose contents he was not familiar with. After a long dispute, it was proven that no legal relationship of obligation arising from a valid loan agreement had arisen between the parties. The loan agreement submitted as evidence in the case was assessed as the defendant's conclusion of an agreement that he did not wish to make as a result of a mistake, and the agreement was considered invalid.

According to the legal position expressed in the decision of the Constitutional Court of the Republic of Azerbaijan dated April 2, 2022, “On the interpretation of Articles 337, 339.6, 346.1 and 354 of the Civil Code of the Republic of Azerbaijan in a coherent manner”, in accordance with Article 337 of the Civil Code of the Republic of Azerbaijan, when considering disputes related to deals, if the invalidity of the deals (with the exception of disputed deals) is discovered, regardless of whether the parties make a claim to this effect, the courts must take this into account. It is determined from the aforementioned decision that when considering the claims under the contract, the validity of that contract must be verified by the court hearing the case.

If the will of the person concluding the contract is impaired, such deals are considered disputed deals. The grounds for the impairment of the will are provided for in Articles 339.1-339.4 and 347 of the Civil Code of the Republic of Azerbaijan. The decision of the Constitutional Court stated that in cases where the expression of the will of the party is impaired as a result of abuse of power, deception, violence, threat, essential and significant mistake, etc., the transactions become invalid upon being disputed, and thus the scope of disputed transactions was indicated. An important feature that distinguishes this type of invalid deals from other cases of invalidity is that until the person whose will is impaired disputes the deal, the deal is considered valid and leads to appropriate legal consequences. However, when concluding a deal, the party whose will is impaired is given the right to dispute the deal within the periods provided for by law (Civil Code, Article 354.2), thereby making the deal invalid. In other words, even if the will is defective, the legally recognized validity is violated by the dispute (vulnerable validity). The dispute applies retroactively, ensuring that the contract is considered invalid from the moment it was concluded.

The legal reason that renders a disputed contract invalid is not a court decision, but the fact of the dispute itself. The Constitutional Court's decision, "When a contract is disputed, the contract is considered invalid from the moment it is concluded. ... the invalidity of both disputed and insignificant contracts does not arise as a result of a court decision." Legal positions such as "There is no need to file a claim in court to declare a disputed contract invalid, the fact of the dispute (outside the claim and the court) creates the result of the invalidity. Because, if invalidity is a result, that result is ensured by the action of the person who has the right to dispute the contract. With this action, that is, by notifying the other party of the expression of will, the result of the invalidity is created according to the law. For this, the legal system of Azerbaijan does not require additional conditions - filing a claim, issuing a court decision, etc. However, when a dispute arises between the parties regarding these issues, that dispute is resolved by the court.

In such a case, when the court, while examining a dispute based on a contract, proves that the will of the party was impaired and therefore challenged the contract, or when the court determines this based on the circumstances of the case, it must take into account the result of invalidity and decide accordingly, regardless of whether a specific claim is made.