The Invalidity Of The Mutual Fictitious Declaration Of Intention (Simulation) And The Protection Of Third Parties

Autonomy of will is one of the basic principles of the later and modern civil law,which is almost recognized by all legal systems. In order to balance the public policyand the autonomy of will, as well as to ensure that every party involved in civilactivities can express their true intentions freely, most legal systems have set up aninstitution of judging the validity of the declaration of intention or the juristic act(Rechtsgesch ft in Deutsch). However, such an institution might bring a lot of risks tothe present society in which transactions happen frequently. Especially, if a third party,who has not been engaged in the legal relation between the contracting parties, placeshis reliance upon the outcome of the prior transaction, his interests might be seriouslyharmed as a result of the invalidity of the former declaration of intention. Thesituation is much more apparent and even worse under the circumstances of therebeing mutual fictitious declaration of intentions (simulation in French, hereaftermentioned as MFDI) between the contracting parties.This paper shall analyze how to protect the interests of the bona fide third partyunder the circumstances of invalidity of the juristic act by taking MFDI as an goodexample. First of all, this paper shall clarify the concept of MFDI by exploring itsdefinition, characteristics and types. Apart from that, Chapter One shall also discussthe basic legal effects of MFDI between the contracting parties who forged it.Secondly, this paper shall introduce how article1321of the Code Napoleon, as theorigin of the rule "the invalidity of simulation shall not be set up against a bona fide third party", is interpreted and used in France and Louisiana, with the intention touncover the real face of this rule back in its mother country. Besides, this paper shallalso discuss how the interests of the third party is protected in Germany by means ofscattered legal institutions such as bona fide acquisition instead of a general rule of"No Setting Up Against Third Parties". After that, a comparison between the Frenchmode and the German mode of protecting bona fide third parties is also fruitful.Thirdly, this paper shall discuss the confusions and perplexities during theinterpretations and applications of article87of the civil code of Chinese Taiwan,which are brought about because of the combination of the French mode and theGerman mode. At last, the standpoints of Chinese scholars and courts on how toprotect third parties’ interests under the circumstances of MFDI shall also bementioned. As a conclusion, this paper shall put forward several legislative proposalson the foundations of comparative study.