ObliCon / Defective Contracts
1. Rescissible
2. Voidable
3. Unenforceable
4. Void
1.) Rescissible Contracts
- Valid, until rescinded
- Economic damage to one of the parties or third person (lesion)
Remedy: Rescission to Court
Period of filing: 4 years
Exception: Incapacitated persons (begins from the termination of incapacity)
Absentees (when the domicile is known)
Note: Restitution is applied. The parties go back to their original state.
When the object of the contract is in the possession of a third person in good
faith, rescission cannot be done.
2.) Voidable Contracts
- Valid, until annulled
Contracts that are unenforceable
A. Incapacity of one of the parties
B. Vitiation of consent
a. Error/ mistake
b. Fraud
c. Undue Influence
d. Violence
e. Intimidation
Annulment
- Declaration of Inefficacy of a contract
- Period of filing shall be within 4 years
a. Intimidation, Violence, Undue Influence- from the time it ceases/ ends
b. Mistake or Fraud- from the time it was discovered
c. Incapacitated- from the time guardianship ceases/ ends
Ratification
- Contra-action for annulment
- It cleanses all the defects of a contract
- The contract becomes valid, hence, the action to annul is extinguished
3.) Unenforceable Contracts
- valid, but not binding and enforceable
Contracts that are unenforceable
a. Contracts into name who’s without authority
b. Not complying with Statute of Frauds (Form of writing)
c. Both parties are Incapacitated
Exception: Ratification
A. Without Authorization
Note: Contract of sale of the agent without authority of the principal
NOT contract of sale with the name of the agent
Another example: Mode of payment is modified without the authority of the
principsl
(Cash – Installment)
Note: can be effective once approved or ratified by the principal
B. Statute of Frauds
- Must be in writing
Scope/ Cases of Statute of Frauds
a. Agreement which will not be performed within 1 year
- Contracts na hindi agada gad gagawin sa loob ng 1 year
- To be enforceable, the contract must be in writing
b. Promise to answer for the debt of another/ Guarantor of debts
- To be enforceable, the promise to answer the debt must be in writing
- Subsidiary (not primarily liable) In case lang na hindi mabayaran nung
supposed payer
- If the promise is independent (primary liable), oral evidence is enough
(not within the statute of frauds)
c. Agreement in consideration of marriage
- Promise to one another if they are going to be married
- Must be in writing to be enforceable
Note: A mutual promise to marry each other is not necessarily to be in writing
- Injured party may provide oral evidence for damages
d. Agreement of sale of goods NOT less than P500 (more than P500)
- Prices P500 and up must be in a form of writing to be enforceable
Exception: when there is partial or full payment
e. Agreement of leasing for more than 1 year
- Must be in writing
f. Immovable object (real property)
Example: sale of land
- To be enforceable, it must be in writing
Note: In case a private document has been lost, it can be proved by oral evidence
- What to be proved is the written document, that it really existed
g. Representation as to a credit of a third person
- The representation must be in writing
C. Mutual Incapacity
Example: A minor sold a bicycle to a minor
Effect: Unenforceable, unless ratified by the guardian of the parties
Modes of Ratification in Statute of Frauds
a. Failure to present oral evidence
b. By acceptance of the benefits received
Public Document in the Registration of Deeds
- To be in a public document, the contract must not infringe the statute of
frauds (must be in writing)
Example: Oral sale of real property cannot compel the other to put it in a public
document
Unenforceable contracts become voidable contracts
- Only one of the guardians of two minors in the contracting parties ratified,
and the other guardian did not
- Its effect is like as if only one is incapacitated or with the effect of voidable
contracts
Note: Voidable- only one is incapacitated
Unenforceable- both parties are incapacitated
Unenforceable contracts become a valid contract
- If both guardians ratified, the contract is validated and retroacts to the
time it was entered.
Unenforceable Contracts cannot be questioned by third persons
4.) Void Contracts (either inexistent or illegal)
- Absolute nullity
- NO contracts at all
- cannot be ratified
Article 1409: Contracts that are inexistent and void from the beginning
1. Those whose cause and object are invalid (contrary to law, morals, customs,
public order and public policy)
2. Those which are absolutely simulated or fictitious
- Lack of consent
- No intention to be bound
3. Those whose object or cause did not exist at the time of transaction
- Sale of Future Inheritance
4. Those whose object is outside the commerce of men
- Cannot be an object of a contract
- For public use
5. Those which contemplate an impossible service
6. Those where the intention of the parties cannot be ascertained
7. Those expressly prohibited by Law
Void Contracts- linked with illegality
Inexistent Contracts- lack of some or all the elements/ non-compliance with
formalities
Illegal Contracts- may produce effects if the parties are not of EQUAL GUILT
Void or Inexistence Contracts instances
- Not enforceable from the very beginning
Case no (7)
Contracts expressly prohibited by Law
(a) Upon future inheritance
(b) Sale of property between husband and wife
(c) Purchase by persons who are disqualified by law
(d) Donation between spouses
(e) ?
(f) Stipulation that household services are without compensation
(g) Members of congress to enter government contracts
Article 1410: The Action for declaration of inexistence of a contract DOES NOT
PRESCRIBE
Article 1411: Contract is illegal due to Criminal Offense
1. Both parties are guilty (In pari delicto)
- both shall be prosecuted
- Neither has the right to sue each other
- The things/price of the contract shall be confiscated in favor of the
government
2. Where only one party is guilty (delicto)
- The innocent or less guilty may claim what he has given
- No longer bound to his promise
Article 1412: Contract is illegal, but not criminal offense
1. Pari delicto
- Neither party may recover nor demand
2. Delicto
- The guilty party loses what he has given
- He cannot ask for fulfillment
- Innocent party may ask for return; he cannot be compelled by the guilty
party
Article 1413
