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Defective Contracts - WCAranas (Reasearched)

The document discusses different types of defective contracts under Philippine law. Voidable contracts can be annulled by court action if consent was impaired, such as by mistake, violence, or fraud. They are valid unless annulled. Unenforceable contracts cannot be enforced in court due to defects, but can become enforceable through ratification. Void contracts are considered nonexistent due to issues like an illegal purpose, nonexistent object, or violation of mandatory laws. They cannot be ratified or enforced.

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Wally Aranas
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59 views2 pages

Defective Contracts - WCAranas (Reasearched)

The document discusses different types of defective contracts under Philippine law. Voidable contracts can be annulled by court action if consent was impaired, such as by mistake, violence, or fraud. They are valid unless annulled. Unenforceable contracts cannot be enforced in court due to defects, but can become enforceable through ratification. Void contracts are considered nonexistent due to issues like an illegal purpose, nonexistent object, or violation of mandatory laws. They cannot be ratified or enforced.

Uploaded by

Wally Aranas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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DEFECTIVE CONTRACTS

VOIDABLE CONTRACTS
ARTICLE 1390
Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the
contracting parties:
1) Those where one of the parties is incapable of giving consent to a contract;
2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts
are binding, unless they are annulled by a proper action in court. They are susceptible of ratification.

Three Ways or Modes of Convalidating a Voidable Contract


1) By prescription of the action for annulment (Art.1391)
2) By ratification or confirmation (Art. 1392-1396)
3) By loss of the thing which is the object of the contract through the fraud or fault of the person who is entitled to
institute the action for the annulment (Art.1401)

ARTICLE 1391
Art. 1391. The action for annulment shall be brought within four years.
This period shall begin:
 In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases.
 In case of mistake or fraud, from the time of the discovery of the same.
 And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the
guardianship ceases.

UNENFORCEABLE CONTRACTS
ARTICLE 1403
Art. 1403. The following contracts are unenforceable, unless they are ratified:
1) Those entered into in the name of another person by one who has been given no authority or legal representation,
or who has acted beyond his powers;
2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement
cannot be received without the writing, or a secondary evidence of its contents:
a. An agreement that by its terms is not to be performed within a year from the making thereof;
b. A special promise to answer for the debt, default, or miscarriage of another;
c. An agreement made in consideration of marriage, other than a mutual promise to marry;
d. An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos,
unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of
such things in action or pay at the time some part of the purchase money; but when a sale is made by
auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale
is made, it is a sufficient memorandum;
e. An agreement of the leasing for a longer period than one year, or for the sale of real property or of an
interest therein;
f. A representation as to the credit of a third person.
3) Those where both parties are incapable of giving consent to a contract.

Definition of Unenforceable Contracts: Those that cannot be enforced in court or sued upon by reason of certain defects
provided by law until and unless they are ratified according to law [De Leon].

Kinds of Unenforceable Contracts:


1) Unauthorized contracts – those entered into by one who has no authority or legal representation or who has acted
beyond his powers [Art.1403, par.1].
2) Those which did not comply with the Statute of Frauds [Art.1403, par.2].
3) Those where both parties are incapable of giving consent to a contract [Art.1403, par.3].

General Rules of Application of Statute of Frauds


1) The Statute of Frauds is a Rule of Exclusion, i.e. oral evidence might be relevant to the agreements enumerated
therein and might therefore be admissible were it not for the fact that the law excludes said oral evidence.
2) The defense of the Statute of Frauds may be waived [Art.1405].
3) Applies only to executory contracts, not partially or completely executed (consummated) contracts.
4) The Statute of Frauds cannot apply if the action is neither for damages because of the violation of an agreement
nor for the specific performance of said agreement [Lim vs. Lim, 10 Phil 635].
5) The Statute of Frauds is exclusive, that is, it applies only to the agreements or contracts enumerated therein [See
Quintos v. Morata (1930)].
6) The Statute of Frauds is a personal defense, that is, a contract infringing it cannot be assailed by third persons
[Art.1408].
7) Contracts infringing the Statute of Frauds are not void, they are merely unenforceable [Art.1403].
8) The Statute of Frauds does not determine the credibility or weight of evidence. It merely concerns itself with the
admissibility thereof.
9) The Statute of Frauds does not apply if it is claimed that the contract does not express the true agreement of the
parties. As long as the true or real agreement is not covered by the Statute of Frauds, it is provable by oral
evidence [Cayuga v.Santos].

VOID CONTRACTS
ARTICLE 1409
Art. 1409. The following contracts are inexistent and void from the beginning:
 Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
 Those which are absolutely simulated or fictitious;
 Those whose cause or object did not exist at the time of the transaction;
 Those whose object is outside the commerce of men;
 Those which contemplate an impossible service;
 Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;
 Those expressly prohibited or declared void by law.
 These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

Definition of Void Contract [De Leon]: Those which, because of certain defects, generally produce no effect at all. They are
considered as inexistent from its inception or from the very beginning.

Special Classification of Void Contracts (Paras)


1) INEXISTENT CONTRACTS: like those where essential formalities are not complied with
a) Example: A donation of land in a private instrument
b) This produces no effect whatsoever.
2) ILLEGAL OR ILLICIT CONTRACTS:
a) Example: A donation made because of an immoral condition, such as illicit sexual intercourse
b) In some way, the donation produces some effect in that that he who gave the donation cannot get back
what he has given.

Non-Existing Cause or Object [Paras]


Paragraph 3 speaks of contracts “whose object or cause did not exist at the time of the transaction.” This is not exactly
correct because there can be valid contracts involving future property; example, sale of future or after-acquired property.
Thus, Mr. Justice J. B. L. Reyes notes: “Did not exist at the time of the transaction” should be “Could not come into
existence because the object may legally be a future

ARTICLE 1346
Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third
person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the
parties to their real agreement.
Effect of Simulated Contract
a. If ABSOLUTELY simulated, the contract is void for utter lack of consent.
b. If RELATIVELY simulated, the hidden or intended contract is generally binding (Onglengco v. Ozaeta).

Stipulations must not be contrary to MANDATORY AND PROHIBITIVE LAWS.


1) Pactum commissorium [Arts. 2088, 2130, 1390] A stipulation in a contract of mortgage or pledge which provides
that the mortgagee will automatically own the property mortgaged in case the mortgagor fails to pay the loan is
VOID [Art. 2088]
2) Pactum de non alienando [Art. 2130] A stipulation forbidding the owner from alienating the immovable mortgaged
shall be VOID [Art.2130].
3) Pactum leonina [Art. 1799] A stipulation which excludes one or more partners from any share in the profits or
losses is VOID [Art.1799]

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