Contract invalidity under the new rules: introducing avoidance

Disputes over whether a contract is valid are among the longest in civil practice. The current Civil Code almost invites them: it distinguishes absolute and relative invalidity, and even a minor breach of the law is treated as a ground for invalidity, even when the breached legislation does not seek to address private law consequences. The new Civil Code reverses this approach.

Validity as the rule, invalidity as the exception

According to the recodification commission’s materials, the preference for absolute invalidity of legal acts is abandoned. Validity is preferred wherever consistent with the parties’ intentions, and court interventions declaring acts invalid should be minimised. Invalidity will mean only what is currently associated with absolute invalidity. Before finding it, the court will examine the purpose and meaning of the prohibiting rule, rather than mechanically invalidating an act for every breach of law. Established case-law conclusions are also codified, such as the rule that conflict with another contract does not itself cause invalidity.

Avoidance replaces relative invalidity

Relative invalidity disappears from the code, replaced by avoidance, primarily for defects of consent: unlawful threats, fraud and mistake, with fraud regulated separately from mistake. A key practical change is that the right to seek avoidance will expire after a shorter period than currently results from the unsystematic application of limitation to invoking relative invalidity. Expiry means the right is extinguished entirely once the deadline passes. Consistent with case law, protection of good-faith third parties is also strengthened: a person who honestly acquired rights should not suffer for defects they did not know about.

What this means for businesses

For ordinary commercial dealings, this is good news: transactions gain greater certainty that a formal defect will not overturn them years later. The other side is that anyone wishing to rely on a defect must act faster. A waiting strategy that sometimes works with relative invalidity will end with the expiry deadline. Templates also deserve attention: invalidity and severability clauses drafted for today’s dual system will need to be adapted.

When will the change arrive?

The government approved the draft Civil Code on 6 May 2026, and Parliament advanced it to second reading on 9 June 2026. The anticipated effective date is 1 July 2027. The wording may still change, but the direction is clear.

To understand how the new approach affects your templates and general terms, see our preparation for the new Civil Code. If you need a contract designed to handle the transition with minimal changes, we can prepare a bespoke commercial contract.