Property sale without transfer of ownership: Contract fraud can be revoked

Compiled from: Nanfeng Court, Jiangxi Province
 
Case review
At the end of 2019, Chen signed a "House Sale and Purchase Contract" with Jie, and they agreed on matters such as the house transaction price, cost allocation, house delivery time, property rights transfer, and liability for breach of contract. When signing the contract, Chen paid Jie a deposit of 20,000 yuan, and later paid Jie another 200,000 yuan, for which Jie issued a receipt to Chen. Afterwards, Chen repeatedly sought Jie to handle the house transfer registration, but Jie avoided him. At this point, Chen discovered that the house had already been mortgaged to a bank for a loan and had been seized by the court.

 

 
Is this 'House Sale and Purchase Contract' valid?
一、有效。
Both Chen and Jie are fully capable of civil conduct. At the time of signing the contract, it was based on the true intention of both parties. The terms of the signed contract do not violate mandatory provisions of laws or administrative regulations. The subject of the contract is clearly the house, and the house sale contract also meets the formal requirements required by law. All the conditions for the contract to take effect are satisfied. Although the house has been sealed by the court, this only prevents the transfer of ownership and does not affect the validity of the contract. As long as Jie repays the bank loan, the court seal can be lifted, and the house can still be transferred. Therefore, the contract is valid.
 
二、无效。
According to Article 52 of the Contract Law of the People's Republic of China: contracts that violate mandatory provisions of laws and administrative regulations are null and void. The Urban Real Estate Administration Law of the People's Republic of China stipulates that real estate that has been sealed or otherwise restricted in terms of rights by judicial or administrative authorities according to law cannot be transferred. The house sale contract agreed upon between Chen and Jie includes provisions regarding the transfer of the house, and therefore violates the mandatory provisions of Chinese law, which constitutes one of the situations in which a contract is invalid. Therefore, the contract is void.

 

 
[1] The author's perspective
The author believes that this 'House Sale and Purchase Contract' is valid, but revocable.
 
In this case, as the owner of the house, Jie clearly knew that his house had been seized by the court due to unpaid bank loans and could not be transferred or have the ownership registration completed. Jie not only failed to inform Chen of the true situation but instead concealed the situation and continued to sign a house sale contract with Chen. Based on a mistaken understanding and against his true intention, Chen signed the contract and paid 220,000 yuan. Later, after repeatedly being unable to complete the ownership transfer through Jie, Chen finally learned that the house had been seized by the court. This discovery was made by Chen himself, not voluntarily disclosed by Jie. Therefore, if Chen had not discovered the fact, Jie would have continued to conceal the fraud. Based on Jie's behavior, I believe that Jie's actions constitute contract fraud, deliberately hiding the fact that the house had been seized by the court, and signing the House Sale Contract with Chen to maliciously defraud Chen of his money.
 
According to Article 148 of the General Principles of Civil Law: If one party uses fraudulent means to cause the other party to engage in a civil legal act against their true intention, the party subjected to the fraud has the right to request the people's court or an arbitration institution to revoke it. Therefore, the "House Sale and Purchase Contract" can be revoked.