CONTRACTS Chapter 7

Voidable Contracts These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of
Voidable contracts may be defined as those in which all of the essential elements for validity are present, ratification.
although the element of consent is vitiated either by
lack of legal capacity of one of the contracting parties, or by mistake, violence, intimidation, undue Concept of voidable contracts
influence, or fraud. It must be observed that in a voidable contract all of the essential requisites for validity are present,
although the requisite of consent is defective because one of the contracting parties does not possess the
Note: The most essential feature of a voidable contract is that it is binding until it is annulled by a necessary legal capacity, or because it is vitiated by mistake, violence, intimidation, undue influence or
competent court. Its validity may be attacked either directly by means of a proper action in court or fraud.
indirectly by way of defense.
Consequently, if consent is absolutely lacking or simulated, the contract is inexistent, not voidable.
Characteristics
(1) Their defect consists in the vitiation of consent of one of the contracting parties; Note: Whether a contract which the law considers as voidable has already been consummated or is
(2) They are binding until they are annulled by a competent court. merely executory is immaterial; it can always be annulled by a proper action in court.
(3) They are susceptible of convalidation by ratification or by prescription.
(4) Their defect or voidable character cannot be invoked by third persons. Jurisprudence
Felipe vs Heirs of Aldon
Voidable vs Rescissible contracts According to Art. 1390 of the Civil Code, among the voidable contracts are “Those where one of the
Voidable Rescissible parties is incapable of giving consent to the contract.” (Par. 1.) In the instant case Gimena had no
The defect is intrinsic because it consists of The defect is external because it consists of capacity to give consent to the contract of sale. The capacity to give consent belonged not even to the
a vice which vitiates consent. damage or prejudice either to one of the husband alone but to both spouses.”
contracting parties or to a third person.
Art. 1391. The action for annulment shall be brought within four years.
Contract is voidable even if there is no Contract is not rescissible if there is no
damage or prejudice. damage or prejudice.
This period shall begin: In cases of intimidation, violence or undue influence, from the time the defect of
Annulability of the contract is based on the Rescissibility of the contract is based on the consent ceases.
law equity.
Annulment is not only a remedy but a Rescission is a mere remedy. In case of mistake or fraud, from the time of the discovery of the same.
sanction.
Affects public interest Affects private interest And when the action refers to contracts entered into by minors or other incapacitated persons, from the
Cause are different from rescission Cause is different from annulment time the guardianship ceases.

Susceptible of ratification Not susceptible of ratification Note: If the action is not commenced within such period, the right of the party entitled to institute the action
shall prescribe.
Annulment may be invoked only by a Rescission may be invoked either by a
contracting party. contracting party or by a third person who Jurisprudence
is prejudiced. Carantes vs Court of Appeals
“The weight of authorities is to the effect that the registration of an instrument in the Office of the Register
Art. 1390. The following contracts are voidable or annullable, even though there may have been no of Deeds constitutes constructive notice to the whole world, and, therefore, discovery of the fraud is
damage to the contracting parties: deemed to have taken place at the time of the registration.”
(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. Braganza vs Villa Abrille

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 CONTRACTS Chapter 7
Apparently, his right to interpose the defense has already prescribed. It has been held, however, that
where minority is used as a defense and no positive relief is prayed for, the four-year period (Art. 1391, There is a tacit confirmation, if, with knowledge of the reason which renders the contract voidable and
Civil Code) does not apply. such reason having ceased, the person who has a right to invoke it should execute an act which
necessarily implies an intention to waive his right.
According to the Civil Code, actions for annulment of voidable contracts shall prescribe after four years.
In the case of contracts which are voidable by reason of minority or incapacity, the four-year period shall Effect of ratification
be counted from the time the guardianship ceases (Art. 1391, Civil Code). The same rule should also be • It extinguishes the action to annul the contract; and
applied to the defense. • It cleanses the contract of its defects from the moment it was constituted.

Art. 1392. Ratification extinguishes the action to annul a voidable contract. Art. 1397. The action for the annulment of contracts
may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are
Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratify capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted
cation if, with knowledge of the reason which renders the contract voidable and such reason having ceased, intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon
the person who has a right to invoke it should execute an act which necessarily implies an intention to these flaws of the contract.
waive his right.
Requisite
Art. 1394. Ratification may be effected by the guardian of the incapacitated person. • That the plaintiff must have an interest in the contract; and
• That the victim and not the party responsible for the vice or defect must be the person who must
Art. 1395. Ratification does not require the conformity of the contracting party who has no right to bring
assert the same.
the action for annulment.
o Doctrine of unclean hands.
Art. 1396. Ratification cleanses the contract from all its defects from the moment it was constituted.
Jurisprudence
Ibañez vs. Hongkong & Shanghai Bank
Ratification-the act or means by virtue of which efficacy is given to a contract which suffers from a vice
“xxx for according to the precedents established by the courts the person who is not a party to a contract,
of curable nullity.
or who has no cause of action or representation from those who intervened therein, is manifestly without
right of action and personality such as to enable him to assail the validity of the contract.”
Requisites:
(1) The contract should be tainted with a vice which is susceptible of being cured;
General Rule: Third person who is a stranger to the contract cannot institute an action for its annulment.
(2) The confirmation should be effected by the person who is entitled to do so under the law;
a. Incapacitated
Exceptions: Person who is not a party obliged principally or subsidiarily under a contract may exercise
i. Incapacitated person when he attains age of majority
an action for annulment of the contract if he is prejudiced in his rights with respect to one of the
ii. His guardian
contracting parties, and can show detriment which would positively result to him from the contract in
b. Contracts executed through mistake, violence, intimidation, undue influence or fraud
which he has no intervention.
i. Only by the innocent party.
(3) It should be effected with knowledge of the vice or defect of the contract; and
Art. 1398. An obligation having been annulled, the contracting parties shall restore to each other the
(4) The cause of the nullity or defect should have already disappeared.
things which have been the subject matter of the contract, with their fruits, and the price with its interest,
except in cases provided by law.
Forms of ratification
There is an express confirmation if, with knowledge of the reason which renders the contract voidable
In obligations to render service, the value thereof shall be the basis for damages.
and such reason having ceased, the person who has a right to invoke it should expressly declare his
desire to convalidate it, or what amounts to the same thing, to renounce his right to annul the contract.

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 CONTRACTS Chapter 7
Art. 1399. When the defect of the contract consists in the incapacity of one of the parties, the incapacitated If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the
person is not obliged to make any restitution except insofar as he has been benefited by the thing or price thing shall not be an obstacle to the success of the action, unless said loss took place through the fraud or
received by him. fault of the plaintiff.

Effects of annulment Art. 1402. As long as one of the contracting parties does not restore what in virtue of the decree of
If the contract has not yet been consummated, it is evident, although the Code does not expressly say so, annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him.
that the contracting parties shall be released from the obligations arising therefrom. However, if the
contract has already been consummated, the rules provided for in Arts. 1398 to 1402 of the Code shall Effect of failure to make restitution
govern. Where loss is due to the fault of the defendant
• He shall return the fruits received and the value of the thing at the time of the loss, with interest
Obligation of mutual restitution from the same date.
• To give (Except in cases provided by law) • Loss shall not, therefore, extinguish the action for annulment.
o Thing + fruits
o Price + Interest Where the loss is due to the fault of the plaintiff
• To do or not to do • Action for annulment shall be extinguished.
o Apportionment of damages based on the value of such prestation with corresponding
interests. Where loss is due to fortuitous events
• If the person obliged by the decree of annulment to return the thing cannot do so because it has
Mutual restitution: Rules in case of incapacity been lost through a fortuitous event, the contract can still be annulled, but with this difference
When the defect of the contract consists in the incapacity of one of the contracting parties, the o The defendant can be held liable only for the value of the thing at the time of the loss,
incapacitated person is not obliged to make any restitution except insofar as he has been benefited by but without interest thereon.
the thing or price received by him.
• If it is the plaintiff who cannot return the thing because it has been lost through a fortuitous event,
The benefit spoken of in Art. 1399 which obliges the incapacitated person to make restitution does not the contract may still be annulled, but with this difference
necessarily presuppose a material and permanent augmentation of fortune; it is sufficient if there has o he must pay to the defendant the value of the thing at the time of the loss, but without
been a prudent and beneficial use by the incapacitated person of the thing which he has received. interest thereon.
Burden of proof and presumption Three modes whereby action for annulment is extinguished:
It is, however, clear that the proof of such benefit is cast upon the person who has capacity, since it is (1) Prescription;
presumed in the absence of proof that no such benefit has accrued to the incapacitated person. (2) Ratification; and
(3) The loss of the thing which is the object of the contract through the fraud or fault of the person
Note: It must be observed that Art. 1399 cannot be applied to those cases where the incapacitated person who is entitled to institute the action.
can still return the thing which he has received.

Art. 1400. Whenever the person obliged by the decree of annulment to return the thing can not do so
because it has been lost through his fault, he shall return the fruits received and the value of the thing at
the time of the loss, with interest from the same date.

Art. 1401. The action for annulment of contracts shall be extinguished when the thing which is the object
thereof is lost through the fraud or fault of the person who has a right to institute the proceedings.

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