April 17, 2016
In case of annulment of contract containing an arbitration clause the annulment shall extend to all clauses of the contract including the arbitration clause.
The plaintiff in the case requested annulment of the contract including its liability to finance and develop building and to take rental value of building for thirty years.
The plaintiff submitted that the request for annulment of contract was made because the manager of the defendant who had signed the contract did not have the power/authority to enter into such contracts. The plaintiff also submitted that the contract was not stamped by the defendant despite the internal rules of the defendant's corporation requiring that such documents bear the corporate stamp.
The Court of First Instance accepted the claim and ruled to have the contract annulled.
Appeal and the Court of Appeal's ruling
The respondent in the case appealed the decision of the Court of First Instance. The Court of Appeal overturned the ruling of the Court of First Instance and ruled that the contract shall be valid.
The issue was then brought to the Court of Cassation. The court ordered that the case be returned back to the Court of appeal. On re-examination of the case the Court of Appeal revised its previous decision and upheld the judgment of the Court of First Instance and ruled that the contract shall be annulled.
Court of Cassation judgment
The judgment was appealed and the case was brought to the Court of Cassation. The court held that as long as the dispute presented to the court is nullity of the contract concluded by parties, and the subject matter of the dispute is not dispute over agreement on the arbitration clause, as included in the contract requested to be adjudged as null and void, the court shall have territorial jurisdiction in the settlement of such disputes. The court further propounded that if a contract is nullified, such effect of nullification shall extend to all clauses and conditions contained in the contract.