Civil Transactions
Civil Transactions Law (7): Annulment and Nullity of the Contract
In accordance with the Civil Transactions Law, a party entitled to annul a contract may waive such right either expressly or implicitly. The law also permits any interested party to serve notice upon the party entitled to annulment, requiring them to declare their intent to either affirm or annul the contract within a period not less than ninety (90) days from the date of the notice.
A claim for annulment shall not be heard after the lapse of one (1) year from the date on which the cause for annulment became known, or from the date on which legal capacity was attained, or coercion ceased, whichever is applicable. Except in cases of lack of capacity, a claim for annulment shall not be heard if ten (10) years have passed since the date of contract formation.
With regard to nullity, if the contract is void, any interested party may invoke such nullity, and the court may declare it sua sponte (on its own motion). Unlike annulment, nullity cannot be remedied by ratification. A claim for nullity shall not be heard after ten (10) years from the date of the contract; however, any interested party may raise the defense of nullity at any time.
As a consequence of annulment or nullity, the contracting parties shall be restored to the status quo ante (the condition they were in before the contract) or be compensated if restitution in kind is impossible.
In cases where annulment or nullity arises from a party’s lack or absence of legal capacity, that party shall not be obligated to return anything beyond the actual benefit derived from the performance of the contract, provided such benefit is legally recognized.
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