VOID CONTRACTS

Void contracts are those which, because of certain defects, generally produce no effect at all. They are
considered as inexistent from its inception or from the very beginning.

CHARACTERISTIC OF VOID CONTRACTS

They are as follows:

(1) Generally, it produces no effect whatsoever, being void or inexistent

from the beginning,

(2) It cannot be cured or validated either by time or ratification;

(3) The right to set up the defense of illegality, inexistence, or absolute nullity cannot be waived

(4) The action of defense for the declaration of its illegality, inexistence, or absolute nullity does not
prescribe

(5) The defense of illegality, inexistence, or absolute nullity is not available to third persons whose
interests are not directly affected:

(6) It cannot give rise to a valid contract, and

(7) Its invalidity can be questioned by anyone affected by it.

INEXISTENT CONTRACTS

refer to agreements which lack one or some or all of the elements (i.e.,consent, object, and cause) or do
not comply with the formalities which are essential for the existence of a contract.

ARTICLE 1409

The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or
public policy,

(2) Those which are absolutely simulated or fictitious;

(3) Those whose cause or object did not exist at the time of the transaction

(4) Those whose object is outside the commerce of men,

(5) Those which contemplate an impossible service:

(6) Those where the intention of the parties relative to the principal object of the contract cannot be
ascertained
(7) Those expressly prohibited or declared void by law.

These contracts cannot be ratifi ed. Neither can the right to set up the defense of illegality be waived.

ARTICLE 1410

The action or defense for the declaration of the inexistence of a contract does not prescribe.

If a contract is null and void, the action to declare it existence does not prescribe. The action can be filed
anytime. The mere laps of time does not validate a void contract unlike voidable contracts if not assailed
within the specific period provided by law shall remain valid. A valid contract remains void even if no
court has declared its in-existence or illegality. However, there are certain contracts the nullity of which
is not apparent on their faces.

ARTICLE 1411

When the nullity proceeds from the illegality of the cause or object of the contract, and the act
constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each
other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal
of effects or instruments of a crime shall be applicable to the things or the price of the contract

This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what
he has given, and shall not be bound to comply with his promise (1305),

In Pari Delicto-in-equal fault, a universal doctrine which holds that no action arises, in equity or at law,
from an illegal contract.

The rule that parties to an illegal contract will not be aided by law This rule adopts the principle of "One
who seeks equity and justice must come to court with clean hands.

ARTICLE 1412

if the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the
following rules shall be observed:

ARTICLE 1413

Interest paid in excess of the interest allowed by the usury laws may be recovered by the debtor, with
interest thereon from the date of the payment.

Usury is the illegal act of charging for a loan a higher rate of interest than that which is allowed by law.
Recovery of usurious interest Any rate of interest in excess of the maximum allowed under the Usury
Law is usurious and if paid, may be recovered together with interest thereon from the date of payment
in a proper action for the same. (Art. 1413)
A stipulation for the payment of usunous interest is void, The person paying the usurious interest can
recover in an independent civil action not only the interest in excess of that allowed by the usury laws,
but the whole interest paid.

ARTICLE 1414

When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one
of the parties before the purpose has been accomplished, or before any damage has been caused to a
third person. In such case, the courts may, if the public interest will thus be subserved, allow the party
repudiating the contract to recover the money or property. Recovery where contract for an illegal
purpose. The law allows recovery by one of the parties even though both of them have acted contrary to
laws. Requnites A contract that is for an illegal purpose The contract is repudiated before the purpose
has been accomplished OR before any damage has caused to a third person The court considers that
public interest will be subserved by allowing recovery

ARTICLE 1415

Where one of the parties to an illegal contract is incapable of giving consent, the courts may, if the
interest of justice so demands allow recovery of money or property delivered by the incapacitated
person.

Recovery by an incapacitated person,

This article is another exception to the in pari delicto rule in Articles 1411-1412 Recovery can be allowed
if one of the parties is incapacitated and the interest of Justice so demands. It is not necessary that the
illegal purpose has not been accomplished or that no damage has been caused to a third person. (see
Art. 1414)

ARTICLE 1416

When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is
designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he
has paid or delivered.

Article 1416 is another exception to the rule that where both parties are in pari delicto, they will be left
where they are without relief

Recovery is permitted provided

(1) The agreement is not illegal per se but is merely prohibited,

(2) The prohibition is designed for the protection of the plaintiff, and

(3) Public policy would be enhanced by allowing the plaintiff to recover what he has paid or delivered
ARTICLE 1417

When the price of any article or commodity is determined by statute, or by authority of law, any person
paying any amount in excess of the maximum price allowed may recover such excess.

This article refers to the ceiling price. If a ceiling price for a certain commodity has been determined by
statute by law or competent authority who pays any amount more than what has been determined may
recover such excess. This is usually applies to basic needs and during an emergency or crisis. Prices of
can goods, noodles etc.

ARTICLE 1418

When the law fixes, or authorizes the fixing of the maximum number of hours of labor, and a contract is
entered into whereby a laborer undertakes to work longer than the maximum thus fixed, he may
demand additional compensation for service rendered beyond the time limit.

Basis of Minimum Wage Rates

The basis of the minimum wage rates is not more than eight hours daily labor in the case of employees
working in non-agricultural enterprises, and not more than the customary hours of work in the case of
agricultural workers. (Article 1, Section 3, Code of Rules and Regulations to Implement the Minimum
Wage Law, as Amended.

ARTICLE 1419

When the law sets, or authorizes the setting of a minimum wage for laborers, and a contract is agreed
upon by which a laborer accepts a lower wage, he shall be entitled to recover the deficiency.

If the laborer has agreed to receive a wage lower than the minimum wage foxed by law he is not barred
from recovering the deficiency. Such contract or agreement is void under the minimum wage law.

ARTICLE 1420

In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be
enforced.

This article applies if there are several stipulations in a contract and is not applicable by if it is in the
nature of the contract, the terms thereof are indivisible. Effect of illegality where contract is indivisible
or divisible: When the consideration is entire and single, the contract is indivisible so that if the part of
such consideration is illegal, the whole contract is void and unenforceable. Where the contract is
divisible or severable, that is, the consideration is made up of several parts, and the illegal ones can be
separated from the legal portions, the latter may be enforced. This rule, however, is subject to the
contrary intention of the parties.
ARTICLE 1421

The action or defense for the declaration of the inexistence of a contract does not prescribe.Persons
entitled to raise defensie of illegality.Third persons are NOT allowed to bring an action to annul OR assail
a voidable and unenforceable contracts HOWEVER, if the contract is illegal OR void even a third person
may avail of the deliense of illegality or set up its illegality as long as his interest is directly affected by
the contract