When a contract is void

Nullity for circumvention of the law, an impossible subject matter or breach of good morals

1. Circumvention of the law

Article 26(1), second alternative, of the Bulgarian Obligations and Contracts Act presupposes a specific statutory prohibition that the parties circumvent. The situation discussed involves at least two transactions. If there were only one transaction and its legal consequences were prohibited, it would be void under the first alternative of Article 26(1). Each transaction taken separately is lawful and is not void for conflict with the law. Taken together, however, the transactions achieve a legal result that the law prohibits or does not permit. The unlawful result is not the immediate legal effects, which are not themselves prohibited, but the consequences achieved through them. The participants are aware that by carrying out the transactions they are achieving an aim forbidden by law.

2. Impossible subject matter

The subject matter is impossible if the object of the legal relationship — the benefit in respect of which the parties intend their rights and obligations to arise — is impossible in fact or in law. The impossibility must exist from the outset.

3. Breach of good morals

Under Article 26(1), third alternative, of the Act, contracts that offend good morals are void. This is an objective ground of nullity. It is sufficient that the contract objectively conflicts with generally accepted moral standards; the parties’ attitudes, including whether they knew they were violating those standards, are immaterial. These informal, unwritten rules govern social relations alongside rules of law. For this ground of nullity to apply, the content, purpose or manner of concluding the contract must manifestly conflict with moral standards generally applicable to almost everyone. The conflict must involve an infringement or restriction of fundamental human rights or freedoms, a breach of generally accepted moral rules or an adverse effect on the foundations of relations in a state governed by the rule of law.

This article does not provide a legal opinion or advice about any particular person or situation. For assistance with a similar case, consult a lawyer practising in civil or commercial law.