4 KINDS OF DEFECTIVE CONTRACTS

1. RESCISSIBLE valid until rescinded; has ALL essential (a)Enteredintobyguardianwheneverwardsuffersdamagebymorethan1/4

requisites but because of injury/damage to one of the ofvalueofobject
parties, the contract may be rescinded.
(b) Agreedupon inrepresentationofabsentees,ifabsentee sufferslesion by
2. VOIDABLE valid until annulled; has ALL essential
morethanofvalueofproperty
requisites but because of defect in consent, contract
may be annulled.
(c)Contractswhererescissionisbasedonfraudcommittedoncreditor(accion
pauliana)
3. UNENFORCEABLE cannot be sued/enforced unless
ratified; no effect NOW but may take effect upon (d)Objectsoflitigation;contractenteredintobydefendantw/oknowledgeor
ratification.
approvaloflitigantsorjudicialauthority
4. VOID NO effect at all; cannot be ratified/validated.
KINDSOFDEFECTIVECONTRACTS:

(e)Paymentbyaninsolventondebtsw/carenotyetdue;prejudicesclaimof
others

(f)Providedforbylawart1526,1534,1538,1539,1542,1556,1560,1567
RESCISSIBLE CONTRACTS Those which have caused a particular and1659
economicdamageeithertooneofthepartiesortoa3 rdpersonandwhichmay
besetasideevenifvalid.Itmaybesetasideinwholeorinpart,totheextent ii.Underart1382Paymentsmadeinastateofinsolvency
ofthedamagecaused
REQUISITES:
1.

Contractmustberescissible

(1)Underart1381:

b.Plaintiffhasnoothermeanstoobtainreparation
2.

Plaintiffmustbeabletoreturnwhateverhemaybeobligedtoreturn
duetorescission

3.

Thethingsmustnothavebeenpassedto3 rdpartieswhodidnotactin
badfaith

4.

Itmustbemadewithintheprescribedperiod

i.Contractsenteredintobypersonsexercisingfiduciarycapacity

OBLIGATION CREATED BY THE RESCISSION OF THE

CONTRACT:MutualRestitution

1.

Thingsw/caretheobjectsofthecontract&theirfruits

2.

Pricewithinterest

VOIDABLECONTRACTSintrinsicdefect;validuntilannulled; defectis
duetoviceofconsentorlegalincapacity
CHARACTERISTICS:

Note:MutualrestitutionN.A.when:

1.

Effectiveuntilsetaside

2.

Maybeassailedorattackedonlyinanactionforthatpurpose

1.

1.creditordidnotreceiveanythingfromcontract

3.

2.

2. thingalreadyinpossessionofpartyingoodfaith;subjectto
indemnityonly;ifthereare2ormorealienationsliabilityof1 st
infractor

Can be confirmed ( Note: CONFIRMATION IS THE PROPER

TERM FOR CURING THE DEFECT OF A VOIDABLE
CONTRACT)

4.

Canbeassailedonlybythepartywhoseconsentwasdefectiveorhis
heirsorassigns

Note:CanbecuredbyPrescription
Art.1389Theactiontoclaimrescissionmustbecommencedwithin4
years.

WHATCONTRACTSAREVOIDABLE:
1.

THOSEWHEREONEOFTHEPARTIESISINCAPABLEOF
GIVINGCONSENTTOACONTRACT(legalincapacity)

Minor(underguardianship)4yearsfromtheattainingtheageof
(1)minors(below18)
majority
Absentee4yearsfromthetimethedomicileisknown.

(2)insaneunlessactedinlucidinterval

Insanefromthetimeinsanityceases.

(3)deafmutewhocantreadorwrite
(4)personsspeciallydisqualified:civilinterdiction

(5)instateofdrunkenness

5.

Errorastolegaleffectwhenmistakeismutualandfrustratesthereal
purposeofparties

(6)instateofhypnoticspell
2.

(2)violenceseriousorirresistibleforceisemployedtowrestconsent
THOSEWHERETHECONSENTISVITIATEDBYMISTAKE,
VIOLENCE, INTIMIDATION, UNDUE INFLUENCE OR (3) intimidation onepartyiscompelledbyareasonable&wellgrounded
fear of an imminent & grave danger upon person & property of himself,
FRAUD(viceofconsent)
spouse,ascendantsordescendants(moralcoercion)

(4)undueinfluencepersontakesimproperadvantageofhispoweroverwill
ofanotherdeprivinglatterofreasonablefreedomofchoice
(5)fraudthruinsidiouswordsormachinationsofcontractingparties,other
isinducedtoenterintocontractw/ow/chewillnotenter(dolocausante)
PERIODTOBRINGACTIONFORANNULMENT

(1)mistakefalsebeliefintosomething

Intimidation,violence,undueinfluence
Mistake,fraud
Incapacity

REQUISITES:
1.

Referstothesubjectofthethingwhichistheobjectofthecontract

2.

Referstothenatureofthecontract

3.

Referstotheprincipalconditionsinanagreement

4.

Error as to person when it is the principal consideration of the

contract

EFFECTSOFANNULMENT:
1.

Obligationtogivemutualrestitution

2.

Obligationtodovalueofservice

4yearsfrom
4years

Fromti

PRESCRIPTION IN ACTION FOR ANNULMENT OF VOIDABLE

CONTRACTS:
FailuretocomplywithStatuteofFrauds:
Intimidation/Violence/undueInfluence
Mistake/Fraud

1.

Agreement to be performed within a year after making

contract

2.

Specialpromisetoanswerfordebt,defaultormiscarriageof
another

UNENFORCEABLECONTRACTvalidbutcannotcompelitsexecution
unless ratified; extrinsic defect; produce legal effects only after ratified;
CANNOT be enforced by court action; applies to EXECUTORY
CONTRACTS;actionforspecificperformancewhenthereonepartywantsto
enforcethecontracttocompeltheotherparty.

3.

Agreementmadeinconsiderationofpromisetomarry

4.

Agreementfor saleofgoods,chattelsorthingsinactionat
price not less than 500; exception: auction when recorded
saleinsalesbook

KINDS/VARIETIES:

5.

Agreementforleaseofpropertyformorethan1year&sale
ofrealpropertyregardlessofprice

6.

Representationastocreditofanother

Contractsenteredintobyminors/incapacitatedpersons

1.

Unauthorized/Nosufficient authority enteredintointhenameof

anotherwhen:
1.

noauthorityconferred

2.

inexcessofauthorityconferred(ultravires)

Note:CurablebyRATIFICATION
1.

Bothpartiesincapableofgivingconsent2minoror2insanepersons

Note:CurablebyACKNOWLEDGEMENT

2WAYSOFCURINGUNENFORCEABLECONTRACTS:
1.

Failureofdefendanttoobjectintime,tothepresentationofparole
evidenceincourt,thedefectofunenforceabilityiscured

2.

Acceptanceofbenefitsunderthecontract.Ifthereisperformancein
eitherpartandthereisacceptanceofperformance,ittakesitoutof
unenforceable contracts; also estoppel sets in by accepting
performance,thedefectiswaived

>Fileamotiontodismissonthegroundofstatuteoffrauds

>Ifdenied,raisesuchdefenseintheanswer

(a)Thosew/careabsolutelysimulatedorfictitiousnocause

>Objectanypresentationoforalagreements

(b)Thosewhichcauseorobjectdidnotexistatthetimeofthetransactionno
cause/object
(c)Thosewhoseobjectisoutsidethecommerceofmannoobject
(d)Thosew/ccontemplateanimpossibleservicenoobject

VOIDORINEXISTENTofnolegaleffect
CHARACTERISTICS:
1.

Itproducesnoeffectwhatsoevereitheragainstorinfavorofanyone

2.

Thereisnoactionforannulmentnecessaryassuchisipsojure.A
judicialdeclarationtothateffectismerelyadeclaration

3.

Itcannotbeconfirmed,ratifiedorcured

4.

Ifperformed,restorationisinorder,exceptifparidelictowillapply

5.

Therighttosetupthedefenseofnullitycannotbewaived

6.

Imprescriptible

(e) Thosew/c intentionofpartiesrelativetoprincipalobjectofthecontract

cannotbeascertained

2)Prohibitedbylaw
(f)ThoseexpresslyprohibitedordeclaredvoidbylawContractsw/cviolate
anylegalprovision,whetheritamountstoacrimeornot
3)Illegal/IllicitonesThosewhosecause,objectorpurposeiscontraryto
law,morals,goodcustoms,publicorderorpublicpolicy;Ex:Contracttosell
marijuana

Anyonemayinvokethenullityofthecontractwheneveritsjuridical KINDSOFILLEGALCONTRACTS
effectsareassertedagainsthim
CONTRACTCONSTITUTE
CRIMINALOFFENSE
KINDSOFVOIDCONTRACT:
7.

1) Those lacking in essential elements: no consent, no object, no cause

(inexistentones)essentialformalitiesarenotcompliedwith(ex:donation
propternuptiasshouldconformtoformalitiesofadonationtobevalid)

CONTRACTDOES
NOTCONSTITUTE
CRIMINAL
OFFENSEBUTIS
ILLEGALOR
UNLAWFULPER

SE
Partiesarein
paridelicto

Onlyone
partyis
guilty

confiscatedinfavorofgovt

Noactionforspecificperformance

Noactionforspecificperformance

Noactionforrestitutiononeither
side.Thelawwillleaveyouwhere
youare

Innocentpartyisentitledto
restitution

Bothshallbeprosecuted

Guiltypartyisnotentitledto
restitution

Thing/pricetobeconfiscatedin
favorofgovernment

Noactionforspecificperformance

Noactionforrestitutiononeither
side.Thelawwillleaveyouwhere
youare

PARIDELICTODOCTRINEbothpartiesareguilty,noactionagainsteach
other;thosewhocomeinequitymustcomewithcleanhands;appliesonlyto
illegalcontracts&nottoinexistentcontracts;doesnotapplywhenasuperior
publicpolicyintervenes
EXCEPTIONTOPARIDELICTORULE

Noconfiscation

Noactionforspecificperformance

Requisites:

Innocentpartyisentitledto
restitution

a)contractisforanillegalpurpose

Guiltypartyisnotentitledto
restitution

Guiltypartywillbeprosecuted

Instrumentofcrimewillbe

1.

Ifpurposehasnotyetbeenaccomplished&Ifdamagehasnotbeen
causedtoany3rdperson

b) contract must be repudiated by any of the parties before purpose is

accomplishedordamageiscausedto3rdparties
c) court believes that public interest will be served by allowingrecovery
(discretionaryuponthecourt)basedonremorse;illegalityisaccomplished
when parties entered into contract; before it takes effect party w/c is
remorsefulpreventsit

1.

Wherelawsareissuedtoprotectcertainsectors:consumerprotection, Exception:Norecoverycanbehadincaseswherenullityofcontractarose
labor,usurylaw
fromillegalityofcontractwherepartiesareinparidelicto;except:

a)Consumerprotectionifpriceofcommodityisdeterminedbystatute,any
personpayinganamountinexcessofthemaximumpriceallowedmayrecover
suchexcess
b) Laborif lawsetstheminimumwageforlaborers,anylaborerwho
agreedtoreceivelessmaystillbeentitledtorecoverthedeficiency;iflawset
maxworkinghours&laborerwhoundertakestoworklongermaydemand
additionalcompensation
c) Interestpaidinexcessoftheinterestallowedbytheusurylawmaybe
recoveredbydebtorwithinterestfromdateofpayment
1.

1.

Ifonepartyisincapacitated,courtsmayallowrecoveryofmoney,
propertydeliveredbyincapacitatedpersonintheinterestofjustice;
paridelictocannotapplybecauseanincapacitatedpersondoesnot
knowwhatheisenteringinto;unabletounderstandtheconsequences
ofhisownaction
Ifagreementisnotillegalpersebutmerelyprohibited&prohibition
isdesignatedfortheprotectionoftheplaintiffmayrecoverwhathe
haspaidordeliveredbyvirtueofpublicpolicy

MUTUALRESTITUTIONINVOIDCONTRACTS
GeneralRule:partiesshouldreturntoeachotherwhattheyhavegivenby
virtueofthevoidcontractincasewherenullityarosefromdefectinessential
elements
1.

returnobjectofcontract&fruits

2.

returnpriceplusinterest

1.

incapacitated notobligedtoreturnwhathegavebutmayrecover
whathehasgiven

2.

otherpartyislessguiltyornotguilty

7VOID/INEXISTENTCONTRACTS
1.

Thosew/careABSOLUTELYsimulated/fictitious.

2.

Thosew/ccontemplateanimpossibleservice.

3.

ThosewhoseOBJECTisoutsidethecommerceofman.

4.

ThosewhoseCAUSE/OBJECTdidnotexistattimeoftransaction.

5.

ThosewhoseCAUSE/OBJECT/PURPOSEiscontrarytolaw,morals,
goodcustoms,publicorder,orpublicpolicy.

6.

ThosewhereINTENTIONofpartiestoprincipalobjectCANNOTbe
ascertained.

7.

Thoseexpresslyprohibited/declaredVOIDbylaw.

principally a question of the inequity or unfairness of

permitting a right or claim to be enforced or asserted.
The following are the essential elements of laches:

ESTOPPEL
LACHES is the failure or neglect, for an
unreasonable and unexplained length of time, to do
that which by exercising due diligence could or
should have been done earlier; it is negligence or
omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to
assert it either has abandoned it or declined to
assert it.
The doctrine of laches or of stale demands is based upon
grounds of public policy which requires, for the peace of
society, the discouragement of stale claims and . . . is

(1) Conduct on the part of the defendant, or of one under

whom he claims, giving rise to the situation complained
of;
(2) Delay in asserting complainant's right after he had
knowledge of the defendant's conduct and after he has
an opportunity to sue;
(3) Lack of knowledge or notice on the part of the
defendant that the complainant would assert the right
on which he bases his suit; and
(4) Injury or prejudice to the defendant in the event relief is accorded to
the complainant. 32
Under the present circumstances, all of the aforegoing elements are
attendant in this case.