The Concept Of Collusion And Its Comparison With Similar Legal Institutions

Introduction

The principle of freedom of contract in private law allows individuals to establish legal relationships according to their own will. However, this freedom is limited by the principle of good faith and mandatory legal provisions. When parties conceal their true intentions and create an apparent legal transaction with the purpose of deceiving third parties, this is referred to as collusion (simulation).

Collusion is a legal institution frequently encountered in property transfers, inheritance law, fraudulent asset transfers to avoid creditors, and commercial transactions, and it often gives rise to significant legal disputes in practice.

To fully understand the concept of collusion, it is essential to distinguish it from similar legal institutions. Confusing collusion with concepts such as mistake, fraud, exploitation, or fiduciary transactions may lead to incorrect legal assessments and consequences.

I. The Concept of Collusion (Simulation)

The primary legal basis for collusion in Turkish law is Article 19 of the Turkish Code of Obligations. According to this provision, in determining the nature and content of a contract, the parties' genuine and common intention prevails over the literal wording of their declarations.

Collusion refers to a situation where the parties intentionally execute an apparent legal transaction that does not reflect their true intentions, with the aim of misleading third parties.

According to legal doctrine and the established case law of the Court of Cassation, three essential elements must coexist for collusion to exist:

• The parties conclude an apparent legal transaction.
• They mutually agree that this transaction is not intended to produce legal consequences.
• They act with the intention of deceiving third parties.

Collusion is generally classified into two categories: absolute collusion and relative collusion (qualified simulation).

In absolute collusion, the parties execute an apparent legal transaction without intending any legal consequences whatsoever. A typical example is a fictitious sale of property solely intended to shield assets from creditors.

In relative collusion, the parties perform an apparent transaction while concealing another genuine legal transaction behind it. The most common example is a property transfer registered as a sale although the parties actually intend it to be a donation. In such cases, the apparent sale agreement is invalid, whereas the concealed transaction may produce legal effects if it satisfies all statutory validity requirements.

II. Legal Consequences of Collusion

The principal consequence of collusion is that the apparent legal transaction is considered invalid because it does not reflect the parties' true intentions. The apparent transaction is deemed absolutely null and void, and its invalidity may be invoked at any time by both the parties and third parties.

In cases of relative collusion, however, the concealed transaction remains valid provided that it fulfills all legal requirements, including any mandatory formalities prescribed by law. If the concealed transaction fails to satisfy these formal requirements, it will likewise be invalid.

This issue is particularly significant in property donations, where Turkish law requires an official form for validity. Accordingly, donations disguised as sales often fail to meet the statutory formalities and are therefore considered invalid.

In Turkish judicial practice, transfers of immovable property made by a deceased person with the intention of depriving heirs of their inheritance are evaluated under the doctrine of muris collusion (inheritance collusion), which has been consistently developed through the decisions of the Turkish Court of Cassation.

III. Comparison Between Collusion and Similar Legal Institutions

1. Collusion and Mistake

A mistake occurs when a person's declaration of intent is based on an incorrect understanding or misconception. In such cases, the person unintentionally enters into a legal transaction that does not correspond to their actual intention.

In collusion, however, the discrepancy between intention and declaration is deliberate. The parties knowingly create an apparent transaction that differs from their true intentions.

2. Collusion and Fraud

Fraud exists where one party, or a third person, intentionally deceives another party into entering into a legal transaction. The deceived party's consent is therefore defective.

Collusion differs fundamentally because no party to the transaction is deceived. All parties are fully aware that the apparent transaction does not reflect reality and jointly participate in misleading third parties.

3. Collusion and Exploitation (Lesion)

Exploitation (lesion) arises when there is a significant imbalance between the performances of the parties, and one party takes unfair advantage of the other's distress, inexperience, or imprudence.

In collusion, no such exploitation exists. Instead, the parties act jointly and intentionally to create an apparent legal transaction. While exploitation concerns defective consent, collusion concerns a mutually agreed fictitious transaction.

4. Collusion and Fiduciary Transactions

In fiduciary transactions, the parties genuinely intend the legal transaction to produce its legal consequences. They additionally conclude a fiduciary agreement providing that the transferred right will be returned once certain agreed conditions are fulfilled.

Unlike collusion, the transfer in a fiduciary transaction fully reflects the parties' actual intentions. Consequently, fiduciary transactions cannot be regarded as collusive transactions.

5. Collusion and Circumvention of Mandatory Law

Circumvention of mandatory law occurs when parties use lawful legal mechanisms to achieve a result prohibited by mandatory legal rules. In such cases, the legal transaction is genuine and intended to produce legal effects.

In collusion, by contrast, the apparent transaction is never intended to have legal consequences. It merely serves as a tool to deceive third parties. This distinction represents the primary difference between the two legal institutions.

Conclusion

Collusion refers to the deliberate creation of an apparent legal transaction by parties seeking to conceal their true intentions and deceive third parties. Pursuant to Article 19 of the Turkish Code of Obligations, legal transactions are interpreted according to the parties' genuine intentions rather than the wording they employ. Consequently, collusive transactions are not protected by the legal system.

Although collusion shares certain characteristics with mistake, fraud, exploitation, fiduciary transactions, and circumvention of mandatory law, it differs substantially in both its legal nature and its consequences. The parties' common intention to deceive third parties constitutes the defining feature distinguishing collusion from other defects of consent.

In legal practice, particularly in disputes concerning immovable property transfers and inheritance collusion (muris collusion), understanding these distinctions is essential for protecting the rights of interested parties and ensuring legal certainty.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.