Simulation of contract

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Simulation of contract may be absolute or relative.

An absolutely simulated contract is no contract at all. It is one where the contracting parties do not intend to be bound by the contract at all, thus the contract is void.

In a relatively simulated contract, the real transaction is hidden. The contracting parties conceal their true agreement. The contract still binds the parties to their real agreement when it does not prejudice third persons or is not intended for any purpose contrary to law, morals and public policy (i.e., not void for other reasons). If the concealed contract is lawful, it is absolutely enforceable, provided it has all the essential requisites: consent, object, and cause. As to third persons without notice, the apparent contract is valid for purposes beneficial to them.

As to third persons with notice of the simulation, they acquire no better right to the simulated contract than the original parties to the same.