The Nature and Conditions of Contract Transformation

The invalidity of the contract is directly linked to the economic order of society, and the nullity of contracts causes damage to parties and disrupts the economic order of Society. Therefore, in addition to adhering to general policies to consolidate trades and reduce uncertainty, some legal systems have foreseen mechanisms that, if canceled despite all the legal arrangements, would eliminate the uncertainty and bring it into the life cycle. One of these solutions is the theory of contract transformation, which is rooted in German law. This means that if the contract is invalid but inside a valid contract, the new contract is the criterion. The main challenge facing the theory of contract transformation entity is that after the transformation, the parties must be bound by the effects of the new contract which was not the result of their real will. According to this theory, contract development relies on the hypothetical will of the parties, which is inferred by the judge, on the basis of the terms of the contract and the circumstances governing it, and in particular the economic objectives beyond it. Unlike the laws of Germany and most of Arab countries, in Iranian law such an institution is not considered as a general rule, but numerous examples of its application are found in law and jurisprudence.