BM2304

UNENFORCEABLE CONTRACTS
There are four (4) defective contracts under the Civil Code to wit:

1. Rescissible Contract
2. Voidable Contract
3. Unenforceable Contract
4. Void Contract
Each of them has different effects and grounds, which make the contract defective.

Definition of Unenforceable Contracts (Article 1403)

Unenforceable contracts are valid contracts, the defect of which lies in the non-conformity of the contracts to
the requirement/s of the law. Unenforceable contracts are legally defined as “those that cannot be enforced
or given effect in a court of law or sued upon because of certain defects provided by law until and unless they
are ratified according to law.” However, once ratified, these contracts may be enforceable as if no defect
existed.

Reasons for Unenforceability of Contracts

There are three (3) kinds of unenforceable contracts:
1. Those entered into in the name of another by one without, or acting in excess of, authority or legal
representation, or who has acted beyond his powers.
A person in representation of another enters into this contract, but the truth is that there was really
no authority given. Or even if authority was given, the representative acted beyond the scope of that
given authority.

This type of unenforceable contract is called an “unauthorized” contract.

There are two (2) scenarios here:
1) Acting on behalf of another without the latter’s authority; and
2) Acting on behalf of another with authority, but he/she exceeded that authority.

2. Those that do not comply with the Statute of Frauds

The Statute of Frauds embodied in Article 1403, paragraph (2), of the Civil Code requires certain
contracts enumerated therein to be evidenced by some note or memorandum to be enforceable. The
term “Statute of Frauds” is descriptive of statutes that require certain classes of contracts to be in
writing.

The statute aims to prevent fraud and perjury in the enforcement of obligations depending on their
evidence on the unassisted memory of witnesses. It requires certain enumerated contracts and
transactions to be evidenced in writing and signed by the party to be charged.

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 BM2304

Application of the Statute of Fraud

The Statute of Frauds applies only to executory contracts, not those executed fully or partially. Partial
execution is even enough to bar the application of the statute.

Agreements that are covered by the Statute of Fraud

In the following agreements or cases, the contract must be in writing or some notes or memorandum.
Otherwise, these agreements are unenforceable, namely:
a. An agreement that by its terms is not to be performed within a 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, chattel, or things in action, at a price not less than five (5)
hundred pesos, unless the buyer accepts and receives part of such goods and chattels, or the
pieces of evidence, or some of them, of such things in action or pay at the time some part of
the purchase money.

e. An agreement for leasing for a longer period than one (1) year, or the sale of real property or
an interest therein; and

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

3. Those where both parties are incapable of giving consent

If one of the contracting parties cannot consent, the contract is voidable. However, if both parties are
incapable of giving consent, such as those entered between minors or incapacitated persons, then the
contract is unenforceable.

Ratification made by the parents or guardians

In a contract where both parties cannot give consent, express or implied ratification by the parent or guardian,
as the case may be, one of the contracting parties shall give the contract the same effect as if only one was
incapacitated.

If the parents or guardians make ratification, as the case may be, of both contracting parties, the contracting
parties, the contract shall be validated from the inception.

References
De Leon, H. S. & De Leon Jr., H. M. (2014). The law on obligations and contracts. Rex Book Store.
Paras, E. (2016). Civil Code of the Philippines annotated prescription (Volume IV) obligations
and contracts. Rex Book Store.
Cagurangan, T. (2022). Essentials in Law on Obligations and Contracts

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