Legal consequences of invalidity of a loan contract

Economy and Finance, 2015/1.

In recent years the courts have examined innumerable aspects of the invalidity of foreign currency loan contracts. However, to date there has been no examination of how the legal consequences of invalidity of a loan contract must be drawn in the event that the contract cannot be declared valid. A loan contract qualifies as a legal relationship aimed not at the transfer of the right of ownership of something, but at the use of another’s money, so that restitutio in integrum – the restoration of the original state of affairs – is impossible due to the irreversibility of the contract’s performance from the outset. As a consequence of the 2008 economic crisis, in the overwhelming majority of lawsuits – due to the nature of the legal relationship – the impossibility of restitutio in integrum due to retroactive irreversibility must be established, since the party seeking restitutio in integrum would not be capable of repaying the received loan. Ultimately, the impossibility of restitutio in integrum ensues anyway due to the (partial) lapse of claims deriving from the legal relationship. As a consequence of the impossibility of restitutio in integrum – if the court cannot retroactively remedy the harm caused by the invalidity of the agreement – the contract must be declared to be in force until a judgment has been reached. In such cases, the court determines the debtor’s outstanding principal in its judgment, taking the money of account as a basis, and compels the debtor to pay this amount accordingly.