Rescissible

DEFECTIVE CONTRACTS Voidable

Unenforceable
ATTY. ADRIAN R. MONTEMAYOR, LL.M.
Void
COMPARISON OF DEFECTIVE
CONTRACTS
Unenforceabl
Rescissible Voidable
e

Valid but subject Valid but subject Valid but cannot

V to rescission by to annulment by be enforced in
the court within 4 the court within 4 court by either V
A years years party
O
L
Defect is caused Defect is caused
Defect is caused I
I by inequity or by incapacity or
by improper
injustice to one vitiated consent
form, mutual D
D of the parties or of one of the
incapacity, or
lack of legal
to a third person parties
authority
RESCISSIBLE CONTRACTS
These are contracts validly agreed upon because all the essential requisites
exist. They are not defective per se but due to certain factors, their
enforcement would cause injustice. They are legally effective, but in cases
established by law, they may be rescinded in the interest of equity, i.e., in
order to prevent damage or prejudice to one of the parties or to a third person
when no other legal remedy is available, as long as mutual restitution is
possible.
Rescission by court action would restore the status of the parties prior to the
perfection of the contract.
RESCISSIBLE CONTRACTS
Some contracts subject to rescission: (1381)
 Those entered into by guardians when the wards suffer lesion by more than ¼ (or
25%) of the value of the property covered
 Those entered into by representatives of absentees when the latter suffer lesion by
more than ¼ (or 25%) of the value of the property covered
 Those undertaken in fraud of creditors when the latter cannot in any other manner
collect their claims (i.e., necessitating Accion Pauliana as a last resort)
 Those covering things under litigation, if made by the defendant without the
knowledge and approval of the litigants or of the court
Prescription: 4 years from date, or from resumption of ward’s legal
capacity, or from discovery of domicile of absentee (1389)
VOIDABLE CONTRACTS
These are contracts that possess all the essential requisites, except that there
is a defect in the consent given by one of the parties. They are legally
effective until they are annulled by court action. If they are ratified by the
party whose consent was defective, they become absolutely valid and can no
longer be invalidated. It must also be noted that only the party who gave
defective consent is permitted to commence annulment proceedings. The
other party who gave perfect consent is barred from pursuing annulment.
Moreover, the annulment of a voidable contract does not require pecuniary
prejudice, lesion, or damage to any party.
Annulment by court action would restore the status of the parties prior to the
perfection of the contract.
VOIDABLE CONTRACTS
Contracts subject to annulment: (1390)
 Those where one of the parties is incapable of giving valid consent to a contract,
e.g., insane or demented person (1327, 1328, 1329)
 Those where the consent is vitiated by fraud, mistake, violence, intimidation, or
undue influence, i.e., “the vices of consent” (1330 to 1344)
Prescription: 4 years from the time of discovery of fraud or mistake; or
from the time the violence, intimidation, or undue influence ceased; or
from the time the guardianship ended (1391)
UNENFORCEABLE
CONTRACTS
These are contracts that cannot be enforced in court due to defects provided
by law unless and until they are properly ratified. Although they are
considered valid as between the parties, they cannot be enforced through
court action by either party who wishes to compel the other to perform his
obligation.
There is no prescriptive period because unlike in the case of rescission and
annulment, no court action is needed to declare a contract unenforceable. Its
unenforceability is merely used as a legal defense by the party sued when the
other party attempts to legally enforce an obligation arising from their
agreement.
UNENFORCEABLE
CONTRACTS
Contracts that cannot be enforced: (1403)
 Those entered into in the name of another by one without authority or acting
beyond his authority (1317) (Mercado v. Allied Bank, G.R. No. 171460)
 Those that do not comply with the Statute of Frauds (which requires that the
contract be written and signed):
 An agreement to be performed more than a year later
 A special promise to answer for the debt or default of another, e.g., a guaranty contract
 An agreement made in consideration of marriage, e.g., a “prenuptial” agreement
 An agreement for the sale of goods for at least P500
 Those where both parties are incapable of giving valid consent
VOID CONTRACTS
These are contracts that produce no effect at all. They are considered
inexistent from the very beginning due to reasons provided by law. Thus, a
“void” contract is actually not a contract from the legal standpoint. It creates
no legal rights and duties for the parties, there being no juridical tie really
connecting them.
There is no prescriptive period for declaring the invalidity of a void contract.
Any party thereto can bring an action to declare it void anytime, and anyone
against whom its provisions are sought to be enforced can invoke its nullity
as a legal defense. Formalizing it in a private instrument or even having it
notarized will not make it valid.
VOID CONTRACTS
Contracts that are void from the beginning: (1409)
 Those whose cause, object or purpose is unlawful
 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