Question from a reader:
I have a question about Article 96, Paragraph 2 of the Civil Code. I understand that if a third party commits fraud, the other party can only cancel the declaration of intent if they know about the fact or could have known about it. Specifically, if third party C threatens declarant A and A enters into a
contract with the other party B, can A cancel that contract? What happens if B was acting in good faith and was not in collusion with C? Article 1 states that declarations made under duress can be canceled, but since Paragraph 2 includes the term “only,” I am a bit confused. I would appreciate your guidance.

Legal Analysis of Article 96, Paragraph 2 of the Civil Code and Fraud

Recently, I have been deepening my understanding of civil law while studying law. In particular, the section on fraud in Article 96, Paragraph 2 of the Civil Code is an important theme that affects everyday life. This time, based on a reader’s question, I will delve into how this provision functions.

Understanding Article 96, Paragraph 2 of the Civil Code

First, let’s review the content of Article 96, Paragraph 2. This provision states that when a third party commits fraud, the other party can cancel the declaration of intent only if they know about the fact or could have known about it. The use of the term “only” is noteworthy. Let’s consider a specific example. If third party C threatens declarant A and A enters into a contract with the other party B, can A indeed cancel that contract? The key point here is whether B is in collusion with C. If B is acting in good faith and was unaware of C’s actions, what happens to A’s rights?

Differences Between Duress and Fraud

First, let’s clarify the difference between duress and fraud. Duress involves unlawfully threatening another person, applying psychological pressure to force a declaration of intent. In contrast, fraud involves deceiving the other party to obtain a declaration of intent. Article 96, Paragraph 1 of the Civil Code states that declarations made under duress can be canceled, while Paragraph 2 imposes conditions for cases of fraud.

Considering the Relationship Between C and B

For A to cancel the contract, it is necessary that B is aware of C’s fraud or is in a situation where they could have known about it. In this case, if B is acting in good faith, meaning they were completely unaware of C’s wrongful actions, it becomes difficult for A to cancel the contract. This is because the law has provisions to protect good faith third parties. If we imagine a real business scenario, if good faith B enters into a contract, it is not easy for A to invalidate that contract. This is because B is unaware of C’s wrongful actions and it is unlikely that they would consider themselves to be harmed as a result.

Considering a Concrete Example

Let’s think about a specific scenario. Suppose A wants to sell a product. C pressures A to sell that product to B. B, completely unaware of C, buys the product in good faith. Later, when A learns about C’s existence and the threatening behavior, they wish to cancel the contract. In this case, B would likely argue, “I entered into the contract in good faith.” In this situation, can A assert the cancellation of the contract against B? The answer is “it depends.” Considering the conditions of “knowledge” and “ability to know” in Article 96, Paragraph 2, it is highly likely that A’s cancellation will not be recognized since B is unaware of C’s actions.

Legal Perspectives and Psychological Approaches

In law, there are many provisions to protect good faith third parties. This is to ensure the safety of transactions in society as a whole. The contracts and agreements we make in our daily lives always assume a level of trust in the other party. When that trust is broken, how to respond becomes an important theme. From a psychological perspective, such situations are very interesting. Particularly when B is acting in good faith, the moral dilemma is serious. Although entering into the contract should have been beneficial for B, the existence of C’s wrongdoing behind it may lead B to doubt whether their judgment was wrong.

Conclusion and Personal Opinion

In conclusion, if A knows about C’s threatening behavior and asserts a cancellation based on that contract, it is unlikely that A’s claim will be recognized if B was acting in good faith. This is evident from the legal intent to “protect good faith third parties.” However, interpretations of the law can vary depending on various circumstances in real situations, so it cannot be said definitively. Nevertheless, this understanding is likely to be the general trend. Finally, legal discussions often involve emotional elements. As I deepen my knowledge of the law, I realize the importance of balancing theory and practice. While the law is often perceived as strict and cold, it is essential to remember that human emotions and trust underpin it. I hope to continue standing at the intersection of law and psychology, pursuing a deeper understanding.