The Philippine Statute of Frauds: Perfected

Contracts
by Atty. Joseph Plazo | Oct 12, 2015 | Civil Law, Commercial Law | 0 comments

In the Philippines- when something isn’t in writing- it often isn’t honored. Indeed locals, unlike the
Japanese, tend to devalue their word. Now here’s the shocker: the law tells a very different thing.
From the legal perspective, a contract is deemed perfected or given force when the components of
consent, object and consideration are present. When a seller offers to sell goods at an offer price
plus a buyer agrees to the cost, there’s a perfected contract of sale. But, the consummation of a
contract is already considered absolute in the sense of consensual contracts – those that no longer
requisite the procurement of special forms to be valid and enforceable. Enforceability means the
party can bring the case to any competent court of justice to make certain the other party’s
performance of the duty.

Some contracts don’t achieve enforceability unless they’re in writing, along with the three
components mentioned previously. All these are covered by the Statute of Frauds.
The intention behind the Statute is to prevent fraud and perjury in the enforcement of obligations
that rely on evidence of the vague memory of witnesses. These special agreements require specific
enumerated transactions to be evidenced by a writing signed by the party to be charged. A note,
memorandum and other private in addition to public instruments may suffice. These contracts are
enumerated under Chapter 8, Articles 1403 paragraph (2) of the Civil Code of the Philippines.
They comprise:

1. An agreement that by its provisions isn’t to be performed within a year from the making thereof;
2. A unique promise to answer for the debt, default, or miscarriage of another;
3. An arrangement made in consideration of union, other than a mutual promise to marry;
4. An arrangement for the selling of products, chattels or things in action, at a cost not less than
five hundred pesos;
5. An arrangement for the leasing for a longer period than one year, or for the selling of real property
or of an interest therein;
6. A representation regarding the credit of a third person.

Contracts not covered above are considered perfected and absolute upon the meeting of the minds.
Again, in order that contracts entered into via the 6 ways aforementioned may be enforceable, they
need to be in written form and subscribed by the party charged. Subscription by the latter’s
representative is satisfactory. It should be noted however, that the unenforceability employs only to
executory contracts. By executory, this means that either of the party is yet to perform his duties to
the contract. If by any means one party has already rendered or carried through his portion of the
duty, then the other party has to officially perform his portion of the duty, the deficiency in the
understanding (i.e. only in oral form) however.

Let’s take a case. On June 1, 2015, Dan and Paulo entered into an arrangement whereby Dan,
being an fish vendor, sell Paulo fish on June 9 2015. The deal was only verbal and neither a note
nor an acceptance letter was performed. Come June 9 2015, Paulo couldn’t bring an action for
performance against John should the latter refuse due to the deficiency in the type of the contract.
But if Dan has already received payment from Paulo, he’s bound to sell fish.

Rule of Thumb:
Think like a Japanese. Once you give your word, and both parties agree, the contract is deemed
enforceable even not in writing- unless the value of the transaction exceeds P500 and partial
fulfillment had not been rendered.
Under the Statute of Fraud, which contracts or
agreements are required by law to be in writing?

From the legal viewpoint, a contract is deemed perfected or given birth when the
elements of consent, object or subject matter and consideration are present.
When a seller offers to sell goods at an offer price and a buyer agrees to the
price, there is a perfected contract of sale. However, the birth of a contract is only
achieved when we speak of consensual contracts – those that no longer require
that the agreement be in specific form to be valid and enforceable. Enforceability
means that the party can bring the case to any competent court of justice to
ensure the other party’s performance of the obligation.

Some contracts do not acquire enforceability unless they are in writing, in

addition to the three elements mentioned above. These are covered by the
Statute of Frauds. According to the Wiki Law Project, “the purpose of the Statute
is to prevent fraud and perjury in the enforcement of obligations depending for
their evidence on the unassisted memory of witnesses, by requiring certain
enumerated contracts and transactions to be evidenced by a writing signed by
the party to be charged.” A note, memorandum and other private as well as
public instruments may suffice. These contracts are enumerated under Chapter
8, Articles 1403 paragraph (2) of the Civil Code of the Philippines. They include:

1. An agreement that by its terms is not to be performed within a year from the
making thereof;

2. A special promise to answer for the debt, default, or miscarriage of another;

3. An agreement made in consideration of marriage, other than a mutual promise

to marry;

4. An agreement for the sale of goods, chattels or things in action, at a price not
less than five hundred pesos;

5. An agreement for the leasing for a longer period than one year, or for the sale
of real property or of an interest therein;

6. A representation as to the credit of a third person.

Again, in order that the agreements or contracts entered into in the manner
presented above may be enforceable, they must be in written form and
subscribed by the party charged. Subscription by the latter’s agent is sufficient. It
must be noted however, that the unenforceability applies only to executory
contracts. By executory, this means that either of the party is yet to perform his
obligations to the contract. If by any means one party has already rendered or
fulfilled his part of the obligation, then the other party has to legally perform his
part of the obligation, the defect in the agreement (i.e. only in oral form)
notwithstanding.

For instance, on May 1, 2011, John and Carl entered into an agreement whereby
John, being an architect, will design the house of Carl on June 2012. The
agreement was merely verbal and neither a note nor an acceptance letter was
executed. Come June 2012, Carl could not bring an action for performance
against John should the latter refuse because of the defect in the form of the
contract. However, if John has already received payment from Carl, he is bound
to design the latter’s house.