Third-party protection through the relative nullity in bankrupt merchant contracts

Document Type : Original Article

Authors

1 Associate Professor, Faculty of Law, Shahid Beheshti University

2 Department of Law and Theology, Islamic Azad University, Semnan Branch, Semnan, Iran.

Abstract

Bankruptcy judgment has the greatest effect on the trader's transactions before and after the date of stop of payment, Article 423 of the Commercial Code adopted in 1311 has annulled the legal actions of the trader in case of reduction or restriction of his property. The basis for the invalidity of these legal acts after the date of cessation is the prohibition of the trader from making a transaction with the intention of evading the payment of creditors' debts, which is rooted in public order. According to the provisions of the Bankruptcy Law in Articles 418, 423, and 557 of the Commercial Code and the legal doctrine and jurisprudence, it can be found that some transactions of the trader after the date of cessation are relatively void; That is, the transaction between the two parties is valid; But it cannot be relied on against creditors and can be revoked. Others, as mentioned in Article 557 of the Commercial Code, are absolutely invalid. In this article, while explaining the rules for recognizing relative and absolute invalidity in the transactions of a bankrupt trader and the different dimensions of these rules, the consequences of each of these institutions in relation to the trader with the parties to the transaction and their relationship with creditors are tried. In particular, third parties should be investigated during and after the liquidation, and the effect of the invalidity of the transactions of the bankrupt trader shall be considered limited to both parties to the contract and the third party shall be protected from the adverse effects of these transactions in good faith.

Keywords

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Journal of Studies in Islamic Law & Jurisprudence
Volume 15, Issue 31
August 2023
Pages 7-32

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