The Validity of Derivatives Contracts. Legal Doctrine as a Vehicle of Dialogues over ‘Speculation’

31 Pages Posted: 1 Sep 2023

Date Written: September 1, 2023


Derivatives contracts are essential for financial markets, and supported by market practice and regulation. And yet, courts in different jurisdictions are recurringly confronted with cases where the claim is that derivatives are ‘void’ or unenforceable. Legal doctrines used in such cases can differ, including ‘capacity’, ‘illegality’, ‘mistake’, ‘causa’ or ‘object’. Yet, this article suggests that their common denominator is the complex relationship between law and financial ‘speculation’. Whereas speculation has achieved respectability in academia and regulation, this is the result of a complex, shifting and controversial balance of ideas. Courts are often called arbitrate a conflict with wider ramifications, despite lacking major responsibilities over derivatives supervision. They use legal doctrines to shape the broader conflict into a constructive dialogue, and to accommodate competing interests while preserving legal consistency. The choice of doctrine can decisively influence the outcome, and the impact in the market and the legal system. The article provides a general framework, and uses a comparative analysis of case law in the United Kingdom, Germany, Portugal, Italy or Spain to identify suitable and riskier doctrinal choices, while drawing some general conclusions about the meaning of derivatives’ adjudication and courts’ role in it.

JEL Classification: K12, K22, K23, K41, K42

Suggested Citation

Muñoz, David Ramos, The Validity of Derivatives Contracts. Legal Doctrine as a Vehicle of Dialogues over ‘Speculation’ (September 1, 2023). European Banking Institute Working Paper Series 2023 - no. 153, Available at SSRN: or

David Ramos Muñoz (Contact Author)

Charles III University of Madrid ( email )

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