top of page


3 November 2022

The Supreme Court reminds that agreeing to transfer a non-existent thing does not make the contract invalid. Ukrainian law does not condition a contract’s validity on the existence of its subject matter. But the presumed transferor may face a breach of contract claim. 

If you thought that selling a nonexistent thing (and not simply a future one) makes the contract invalid, think again. The Supreme Court has called attention to the correct view – fairly evident from the Civil Code as it is – that this is not so. Trying to sell a nonexistent thing does not invalidate the contract, although any intended transfer obviously fails.


This legal determination (having, under Ukrainian law, precedential value for similar future cases) by the Supreme Court comes from its ruling on an incidental question in a more complex bankruptcy case. The situation, in particular, involved an assignment of a claim by a party who held no such claim. While the lower courts found the assignment invalid, the Supreme Court indicated that this should not be the outcome, as the invalidity finding did not fit any of the grounds set out in the law. 


But if the law is reasonably clear, why is this even an issue? The point bears repeating given that some still believe that selling nonexistent property voids the contract.


The problem is that to an outsider the law still may seem to leave room for doubt. It lists the instances of contract invalidity, but nowhere does it expressly say that nonexistence of contractual subject matter is not one of them. One could thus suppose (given the intuitive irregularity of transferring something that does not exist) that other grounds might be brought into play, including this one. But that is not so, one reason being that Ukrainian law strictly separates contract from ownership.


Under Ukrainian law a contract may be invalid for a number of reasons. It is invalid where its contents (the terms and conditions) are against the law, or if it is not in proper form (e.g., not in writing or notarized) and if the prescribed form is an express condition of its validity. A contract is also invalid if it is entered into for an illegal purpose (e.g., a contract against public policy, such as one involving the commission of a crime) or a party’s intent to enter into the contract is defective in some respect (e.g., affected by mistake or fraud). Finally, a contract is invalid where a party lacks the capacity to contract (e.g., in the case of children).

Nonexistent subject matter is not among these grounds, and the Civil Code’s other provisions make it clear – by attaching different legal effects to situations where subject matter is lacking – that no invalidity is involved in such a case.

Take the Code’s provisions dealing with a sale of nonexistent goods (including future ones). They embody the distinction between an obligation to deliver the goods and a seller’s actual ability to do so when the performance falls due. Nor is a seller required to have title to the goods; ownership and the obligation to transfer are handled separately. What this means is that pending delivery the seller still has a chance to acquire the thing, and, in any event, it is his risk if he fails to do so. There is no reason why a buyer should suffer (by being faced with an invalid contract and the related frustrated expectations and possibly costs) on account of the seller’s failure to find the promised goods, let alone bad faith on his part (where he knew there were no goods). Here treating the contract as invalid would only benefit the defaulting seller, amounting to a get-out clause for him. In short, if a seller fails to deliver the promised goods, even if nonexistent, he (assuming the absence of proper defenses) ends up in breach of the contract and should be liable for damages.

A caveat is in order, though. Sometimes the lack of a subject matter may affect a contract’s validity indirectly. This is the case, for example, where a seller misrepresents the goods’ existence, resulting in fraud or the buyer’s mistake. Here the buyer may – if he finds it more advantageous – challenge the agreement as invalid. But he would do so not for a lack of subject matter, but for fraud or mistake, both specific invalidity grounds provided by statute. 

A larger point is that while it is true that a valid contract cannot contradict the law, Ukrainian law does not contain an outright prohibition against the transfer of a thing of another (a situation similar to that of nonexistent subject matter). In fact, such transfers are permitted in various circumstances, such as the acquisition of title by adverse possession or from an unauthorized transferor where the transferee acts in good faith. Besides, various instances can be cited where a party in physical possession of a thing is entitled to sell it without the consent of an owner (e.g., where the customer fails in a timely manner to collect from the contractor the object left with him, e.g., for repairs).


What does this all mean in practice? Normally, in situations like these, one would want to deal with a seller who is in breach, and so (potentially) liable for damages, than be stuck with an invalid contract for which no one is responsible. The Supreme Court’s ruling helps greatly in this respect, by making it clear that the seller cannot dismiss the contract as invalid, but must face the consequences of his nonperformance.

Back to legal updates

bottom of page