Analysis of the Transaction with the Intention of Evading Debt Payment from the Perspective of the Basic Principles of Contract Law

A transaction conducted with the intention of evading debt payment is a legal act that poses challenges to ensuring judicial justice. By engaging in such a transaction, the obligee practically diminishes their financial power, rendering their previous obligation non-binding according to debt-related provisions. This situation leads to losses for creditors who have entered into long-term transactions with the debtor, as they trusted the debtor's property as collateral. Conversely, it allows the trader to unjustly and illegitimately benefit from legal protections meant for debtors. The purpose of these protection provisions is to assist genuine debtors who did not willingly expose themselves to debt, not those who exploit these protections to escape their obligations.
The prevalence of such transactions, which result in the appearance of formal transactions without substance and transactions lacking the intention of implementation, poses a problem for contract law and the provision of judicial justice. The issue can be explained by examining the status of any contract in two stages. First, there is the stage of identification and legitimization, where the contract is evaluated based on social interests and the general objectives of contract law. If the transaction aligns with the underlying principles, it will be recognized as part of the structure of contractual rights; otherwise, it will be deemed prohibited. For instance, Gharari transactions are not recognized in Islamic law as they contradict the fundamental principles. Once a deal passes this stage, it enters the second stage, which involves validating the contract in specific circumstances and in relation to the parties involved. This assessment determines whether the concluded contract meets the conditions of correctness. Therefore, the conformity of a transaction with the general rules and goals of contract law is referred to as legitimacy, while its non-compliance is considered illegitimacy, resulting in its nullity.
It is worth noting that although numerous books and articles have analyzed this issue from the perspective of validity and invalidity, this article examines it from the standpoint of transactional legitimacy. It explores whether a transaction with the intention of evading debt payment can be considered legitimate, considering the principles of respecting creditors' rights, fostering trust in the market, and promoting social benefits while resolving conflicts. In Iran's contract law, the "transaction with the intention of evading debt payment" has become a legal issue in contractual relations. Article 218 of the Civil Code considers such a transaction valid and enforceable, while criminal regulations allow for its prosecution under fraud and other criminal charges. This article adopts an analytical-descriptive approach to delve into the principles of contract law, differentiate between superstructure and underlying principles, and investigate the status of this transaction in light of the basic principles from which contractual rules are derived.
The main research question addressed in this study is: What is the legal status of transactions with the intention of evading debt payment from the perspective of the basic principles of contract law? From a Sharia perspective, it seems that the invalidity of such transactions is warranted due to their detrimental consequences, including harm to creditors' income, erosion of trust in the Muslim market, and an increase in contract disputes—all of which are considered illegitimate according to Sharia arguments. Furthermore, the findings of this research indicate that transactions with the intention of evading debt payment are inconsistent with the principles of justice, contractual security (which necessitates fulfilling obligations and paying debts), and the legitimacy of the transactional purpose. Therefore, due to their lack of authenticity and validity, they cannot be considered legitimate according to principles like the rule of dominion and the principle of the sovereignty of will.
While freedom of contract and the sovereignty of will are fundamental principles in contract law, their real function is to establish a foundation and create a framework for the rules of contract law. Contract law comprises two categories of principles: basic principles and governing principles (superstructure). A transaction with the intention of evading debt payment does not necessarily conflict with fundamental principles of contract law, such as the principle of authenticity, as these principles primarily govern the relationship between the parties involved in the contract. However, in terms of basic principles such as the principle of security, the necessity of fulfilling obligations and paying debts, closing legal avenues for evading execution and fulfillment, ensuring justice in legal relations, and preventing support for illegitimate goals, a transaction with the intention of evading debt payment contradicts these principles and cannot be supported.
Such a transaction also goes against the goals of contract law as it has illegitimate objectives and purposes. The philosophy underlying contract law is to uphold legitimate goals while preventing illegitimate ones. Therefore, it is necessary to revise the judicial and legal approach to such transactions in Iran's contract law. Based on the underlying principles, transactions with the intention of evading debt payment should be unequivocally deemed illegitimate and void.