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 1.
Unenforceable Contracts
Which of the following is not true?

a. b. c.
Cannot be enforced by an
The contract exist and may
The contract does not action for specific
be voluntarily performed by
produce any legal effect performance, unless
the parties
ratified.
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 1a.
The contract does not produce any legal effect
Unenforceable contracts produces legal effect. However, if breached, it cannot be enforced by judicial
action, unless it is ratified

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UNENFORCEABLE
CONTRACTS
ARTICLE 1403 OF THE CIVIL CODE
 Contracts that cannot be
UNENFORCEABLE enforced by an action for
specific performance unless
CONTRACTS it is ratified in the manner
provided by law.
Types of Unenforceable Contracts

Unauthorized Contracts between Contracts in breach

Contracts two incapacitated of the Statute of
persons Frauds
 • Element of consent is present
• Consent of one of the parties is
given through a representative

UNAUTHORIZED • Representative does not possess

the authority or exceeded the
CONTRACTS authority given to him
• Once ratified, the defective
contract is cured
Napoleon Neri vs Heirs of Spouses Uy

 The Court declared the Extra Judicial Settlement of the Estate of

Anunciacion Neri null and void
 The Court declared the Absolute Deed of Sale in favor of spouses Uy as
regards the 13/16 total shares of the late Enrique Neri, Naapoleon Neri,
Alicia Neri, Visminda Neri and Rosa Neri, VALID.
Iglesia Filipina Independiente vs Heirs of Taeza

 The Court held that when Supreme Bishop Rev. Ga executed the contract
of sale of IFI’s lot despite the opposition made by the layman’s committee,
he acted beyond his powers. Hence, the contract is unenforceable.
 Taeza had already obtained a TCT in his name over the subject property.
Since the person who transferred ownership was not authorized to do so,
the property had been acquired by mistake.
 The Court held that petitioner’s complaint was filed well within the
prescriptive period and it is only just that the subject property be returned
to its rightful owner.
 • Not absolutely nullified
• Remedy: Ratification
CONTRACT • Effect of Ratification
BETWEEN TWO • Ratification by:
Both Contracting Parties
INCAPACITATED
•

• Only ONE Contracting Party

PERSONS or on behalf of only ONE of
the contracting parties
• Duly authorized guardians
 • Purpose
• Required Form
Written
STATUTE OF FRAUD
•

• Signed by the parties

• Some note or memoranda
Limitations on Application of SOF

 Only to actions for specific performance

 Timely Invoked
Written Form

 Note or Memorandum
o No Specific Form or Language Required
o Any form of writing
o Necessary Contents
▪ Names of Parties
▪ Description of Subject Matter
▪ Basic terms and conditions of agreement
▪ Date and place of execution
▪ Signature of the parties
Limketkai Sons Milling vs Court of Appeals

 Issue: Whether or not contract of sale of the subject parcel of land existed
between Limketkai and BPI.
 Ruling:
 No. Limketkai failed to follow the strict requirements of SOF.
 Absent of any deed of sale conveying subject property from BPI to Limketkai.
 Limketkai: According to Limketkai, E,G,I are the proof of perfected Sale
 Not subscribed by Party Charged
 Did not constitute the memoranda or notes needed.
 Oral testimony cannot take place
Limketkai Sons Milling vs Court of Appeals

 Ruling:
 Irregular (by lower court) to admit in evidence testimonies to prove existence
 There is persistent objection by private respondents
 Objection at proper time do not apply in this case
 Direct testimonies in affidavit-form
 If purpose of the affidavit form of testimony is to prevent opposing counsel from
objecting timely, it failed.
 There’s objection already in first hearing.
Limketkai Sons Milling vs Court of Appeals

 Ruling:
 SOF applies only to purely executory contracts
 Contracts not performed at all
 If contract been executed, SOF no longer applicable
 Where parcel of land been delivered under oral contract of sale, SOF is no longer applicable.
 Buyer already has a right to compel seller to execute deed of sale
 Risk of fraud or perjury is minimized in contracts partly or wholly performed

 In the case at bar, contract was not performed yet

Carbonnel vs Poncio and Infantes

 Issue:
 Whether or not the contract falls within SOF.
 Whether or not the oral testimony of Carbonnel must be allowed.
Carbonnel vs Poncio and Infantes

 Ruling:
 No, SOF applies only to executory contracts.
 Sufficient part performance by purchaser under a parol contract for sale of real
estate removes contract from operation of SOF.
 If contract been totally or partially performed, exclusion of parol evidence
would promote fraud or bad faith
 Would Enable the defendant to keep benefits already denied by him from
transaction in litigation
Carbonnel vs Poncio and Infantes

 Ruling:
 Party is not required to establish partial performance by documentary proof
before he could have the opportunity to introduce oral testimony.
 Oral testimony is unnecessary if there were documents proving partial
performance.
 Rejection of any and all testimonial evidence on partial performance would nullify
the rule that SOF is inapplicable to contracts partly executed.
 It is fraud upon plaintiff if defendant is permitted to escape performance of oral
agreement after he has permitted plaintiff to perform.
Carbonnel vs Poncio and Infantes

 Ruling:
 Oral evidence is admissible to prove both contract and part performance of it.
 Upon submission of case to the court, if record fails to prove clearly that there
has been partial performance, court should apply SOF.
 SC:
 Poncio admitted that Carbonnel offered several times to purchase his land.
 Exhibit A: Document signed by Poncio in Batanes Dialect, one spoken by him.
 Allegation of Poncio that he signed Exhibit A in the belief that it was just a permit for
him to remain the property in the event he decided to sell the property.
 Did not believed by The Court
 If he had not decided to sell, there’s no reason for him to get said permit from Carbonnel.
 Carbonnel vs Poncio and Infantes

 Ruling:
 If Carbonnel’s purpose is to mislead Poncio, why is the document drafted in
Poncio’s diaclect?
 Poncio’s signature on Exhibit A suggests that he is not illiterate nor ignorant.
 Meonada read it to him and gave him a copy before he signed it.
 Defendants: The paid amount of Php 247.00 cannot be determined if it is for the
purchase price of the property. It may have been a payment for a usurious loan or
accommodation. It is also not a competent or satisfactory evidence to prove that
there is a conveyance of land by the mere fact that Carbonnel has the bank book
account of Poncio.
 How can we determine these if Carbonnel will not be allowed to explain it in the witness
stand?
 Carbonnel is entitled to an opportunity to introduce parol evidence in support of
her allegations.
Heirs of Leandro and Juliana Natividad vs
Juana and Mauricio Natividad

 Issue:
 Whether or not the agreement between Leandro and Sergio is covered by
SOF.
 Whether or not Juana and Jean should transfer ownership of property to Heirs
of Leandro or reimburse them instead.
Heirs of Leandro and Juliana Natividad vs
Juana and Mauricio Natividad

 Ruling:
 It is correct that there is no document which shows that Juana and Jean
agreed to transfer the property share in the name of Leandro.
 2nd to the last paragraph of the settlement: Shows that the heirs of Sergio divided
the property EXCLUSIVELY among themselves.
 Heirs of Leandro and Juliana Natividad vs
Juana and Mauricio Natividad

 Ruling:
 The claim of the Heirs of Leandro that the verbal agreement between Leandro and
Sergio is not covered by SOF is erroneous.
 They claim that the execution of Juana and Jean of the Extrajudicial Settlement
constitutes partial execution.
 It is erroneous as Heirs of Leandro fails to prove the existence of the verbal agreement in
the first place.
 Even there is a verbal agreement, transfer of the title to Heirs of Leandro as
reimbursement is still wrong without written contract stating the same.
 Under SOF, conveyance of real properties is unenforceable if there is no written note or
memorandum.
 The evidence of the Heirs of Leandro which is the acknowledgement of Juana and Jean of the
loan of Sergio from DBP and the cash voucher which represents the payment of the taxes for the
property is not the written note or memorandum that the law talks about.
 Heirs of Leandro and Juliana Natividad vs
Juana and Mauricio Natividad

 Ruling:
 Since Juana and Jean acknowledged the loan of Sergio from DBP, they are liable
to reimburse the amount to Leandro or his heirs.
 Defense that they are not parties to the loan is not acceptable.
 They succeed not only on the rights of Sergio but also for his obligations.
 • PURPOSE
• To prevent fraud and perjury in
the enforcement of obligations
(De Leon, Obligations &
Contracts, supra at 763, citing
PNB vs. Phil. Vegetable Oil Co.
STATUTE OF FRAUD Inc, Jan. 1927)
• To guard against the mistakes of
honest men by requiring that
certain agreements specified
(Art. 1403, No. 2[a-f].)
Contracts covered by the SOF
(1PM-GLSR)

a) An agreement that by its terms is NOT TO BE PERFORMED WITHIN 1 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, xxx
e) An agreement for 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.
Note or Memorandum

➢ Evidence of the contract.

➢ No specific form or language required.

➢ MUST CONTAIN THE FOLLOWING INFORMATION:

a. Names of the parties
b. Description of the subject matter
c. Basic terms and conditions of the agreement
d. Date and place of execution
e. Signature of the parties
PAROL
EVIDENCE RULE
The rule applies only to
contracts which the parties
have decided to set forth in
writing. Hence, parol
evidence does not apply to
oral contracts.

Rule 130, Sec. 10, 2019 Amendments

to the Revised Rules on Evidence
 Swedish Match, et al. vs. CA, et al.

 The term “Statute of Frauds” is descriptive of statutes which require

certain classes of contracts to be in writing.
 For a note or memorandum to satisfy the Statute, it must be complete in
itself and cannot rest partly in writing and partly in parol.
Deferred
Performance

EXAMPLE:
On May 24, 2022, X entered
into an oral contract with Y for
the construction of Y’s house
to begin on May 25, 2023. The
contract must be in writing to
be enforceable.
_UA_ANTO_

• binds himself solidarily with

the principal debtor to pay
the latter’s debt.
• he cannot and should not
complain that the creditor
should thereafter proceed
against him to collect his
credit.
 Guaranty of
another’s debt
EXAMPLE:
• D owes C P1,000.00 with G as
guarantor. Here, G has a special
promise to answer for the debt of
D in case D fails to pay the same.
This promise is unenforceable
unless it is in writing signed by G.
• If the promise of G is to pay C
what D owes him (C), G’s promise,
even if verbally made, is
enforceable as it is not a collateral
“promise to answer for the debt,
default, or miscarriage of another
Agreements in
consideration of
marriage
EXAMPLE:
X agrees to build a house worth
P500,000.00 for Y if Y will marry X.
This must appear in writing to be
enforceable unless X ratifies the
agreement.
The Statute applies even when
the promise to build the house is
made by a third person to Y.
 Jorge Domalagan vs. Carlos Bolifer

 The contract made in consideration of marriage is covered by the SOF

even if the promisor is a third party, provided that the promise is made to
one of the contracting parties to the marriage.
 Thus, a promise made by the father of the future groom to be the future
bride that he would give a gift to his son upon their marriage is covered
by the SOF.