Legal Definitions - action en declaration de simulation

Action en declaration de simulation

This legal term refers to a lawsuit initiated to reveal the true nature of a legal transaction that appears to be one thing on the surface but is, in reality, something else entirely, or even nothing at all. It is brought when parties have created a simulated act – an apparent legal agreement or contract – but their true intention, often documented in a secret counter-agreement, is different from what is publicly declared. The purpose of this action is to ask a court to declare the apparent act null and void, or to recognize the true, hidden agreement as the one that legally binds the parties.

Here are some examples:

• Example 1: Asset Protection Scheme

  A business owner facing significant financial difficulties and potential lawsuits decides to "sell" their valuable vacation home to a close friend for a fraction of its market value. Publicly, it appears to be a legitimate sale. However, they have a secret, written agreement stating that the friend will hold the property in trust and return it to the business owner once their financial troubles are resolved, with no actual money changing hands for the "sale."

  How it illustrates the term: A creditor of the business owner could initiate an action en declaration de simulation to prove that the sale of the vacation home was not a genuine transaction but a simulated act designed to hide assets from creditors. If successful, the court would declare the sale void, allowing the creditor to pursue the property to satisfy the owner's debts.

• Example 2: Disguised Gift

  An elderly parent wishes to transfer a significant portion of their wealth, specifically a valuable art collection, to their child without incurring high gift taxes or triggering certain inheritance rules. Instead of making a direct gift, they draw up a formal "sale agreement" for the art collection, stating that the child will purchase it for a nominal sum, far below its actual value. Secretly, both parties understand that no payment is ever expected, and the transaction is purely a transfer of ownership.

  How it illustrates the term: If tax authorities or other heirs suspect the true nature of the transaction, they could bring an action en declaration de simulation. They would seek to demonstrate that the "sale" was merely a simulated act, and the true intention was an outright gift, which might have different tax implications or affect the distribution of the parent's estate.

• Example 3: Sham Business Contract

  Two companies, Company A and Company B, are involved in a complex legal dispute. To create a false impression of Company A's financial stability and active operations, they enter into a large "consulting services" contract where Company A is to provide extensive services to Company B for a substantial fee. However, a confidential side agreement (a counter-letter) specifies that no actual consulting services will be rendered, and the contract is purely for show, perhaps to influence ongoing litigation or attract investors.

  How it illustrates the term: An investor or a party in the legal dispute could file an action en declaration de simulation. They would aim to prove that the consulting contract is a simulated act, not reflecting any genuine business transaction, and that the true agreement (or lack thereof) is found in the secret counter-letter. A successful action would expose the contract as a sham, potentially impacting the legal dispute or investor confidence.