Simulation (muvazaa)

Legal meaning

In determining the type and content of a contract, the parties’ real and common intention is taken as the basis rather than the words they used. An apparent transaction tainted by simulation, which does not reflect the parties’ real and common intention, is invalid. The hidden transaction, on the other hand, may produce effects if it meets its own validity and form requirements.

Raising and proving simulation may be subject to different rules depending on whether the claim is raised by one of the parties or by a third person. In cases concerning immovables with title deeds, claims of diverting assets from heirs, and disputes about diverting assets from creditors, it should not be confused with special types of action.

In a claim of simulation against an instrument by a party to the transaction, Articles 200–201 of the Code of Civil Procedure (HMK) and the rules of evidence are taken into account. Claims of simulation by third persons, however, are among the exceptions to the requirement of proof by instrument under HMK Article 203/1-d. This possibility of the third person cannot be applied automatically to a party to the transaction.

Key elements and practical criteria

• The apparent transaction differs from the real intention.
• A distinction is made between absolute and relative simulation.
• The validity conditions of the hidden transaction are examined separately.
• Rules of proof may vary according to the person raising the claim.

Practical importance

Looking only at the official or written appearance of a transaction may conceal the real legal relationship. The flow of payment, use, the conduct of the parties, the economic purpose and other documents must be assessed together.

Commonly confused concepts

• In simulation the discrepancy between intention and declaration is created knowingly and jointly; in a defect of intent, there is a party’s mistake, deception or duress.
• In a fiduciary transaction, the transfer of ownership is really wanted for a certain purpose of trust; it differs from simulation.

Practical example

In the allegation that an immovable that was in reality meant to be donated was made to look like a sale in order to divert assets from heirs, the apparent sale, the hidden donation and the form requirements are examined together.

Frequently asked questions

Does a transaction tainted by simulation become valid by itself?

No. The legal nature and validity conditions of the apparent transaction and of the hidden transaction are assessed separately.

Can simulation be proved only by witnesses?

The method of proof varies according to whether the claim is raised by a party to the transaction or by a third person, and according to the specific case.