Defective Contracts

1. Rescissible (Article 1380 – 1389)

2. Voidable (Article 1390 – 1402)
3. Unenforceable (1403 – 1408)
4. Void (Article 1409 -1422)
Recission – a process to render inefficacious a contract
validly entered into and normally binding, by reason of
external conditions, causing economic prejudice and to a
party.

Requisites of Rescission

1. There exists a valid contract;

2. There is lesion or economic/financial prejudice.
Rescissible Contracts
1. Those entered into by guardians whenever the wards whom they
represent suffer lesion by more than one-fourth of the value of
the things which are the object thereof;
2. Those agreed upon in misrepresentation of the absentees, when
the latter suffer lesion by more than one fourth;
3. Those undertaken in fraud of the creditors;
4. Those things which are under litigation;
5. All contracts specially declared by law to be rescissible.
Voidable Contracts – valid until annulled.

1. One of the parties is incapable of giving consent;

2. One where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud.
 Annulment v. Rescission
 Basis of action is incapacity to give  Basis is lesion or damage
consent; damage is not important;
 Defect is intrinsic  Defect is extrinsic
 Annulment is a principal action;  Rescission is subsidiary
 Public interest governs  Rescisison is a remedy
 Private interest
Unenforceable Contracts

1. Those entered into in the name of another person by one

who has not authority or legal representation, who has
acted beyond his powers;
2. Those that do not comply with the statute of fraud;
3. Those where both parties are incapable of giving consent;
Statute of Fraud – a law that requires certain acts and
contracts to be in writing to be valid.

Unenforceable contract cannot be sued upon or

enforced unless ratified. As if they have not effect at
all.
The following contracts should always in writing:
1. An agreement that by its term is not to be enforced within the
year;
2. A special promise to answer for the debt, default, or miscarriage
of another;
3. An agreement made in consideration of marriage, other than
mutual promise to marry;
4. An agreement for the sale of goods, chattels, or things in action
the amount of which exceeds Php500.00
5. Lease agreement for more than a year;
6. A representation as to the credit of a third person;
Void contracts – have no force and effect for failure to
meet the essential requisites of contracts or because of being
unlawful illegal.
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. Absolutely simulated or fictitious contract;
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
contract cannot be ascertained.
 Void distinguish from Unenforceable Contract

Void Unenforceable Contract

 Cannot be ratified;
 No contract at all;
 Can be directly assailed by
anybody;
 May be ratified;
 There is a contract but it cannot
be enforced by a court action;
 Cannot be assailed by third
parties.
 Characteristics of a Void Contract
1. The defense of illegality cannot be waived;
2. The action or defense for their declaration as inexistent does not
prescribed;
3. Defense of illegality is not available to third persons whose
interest are not directly affected;
4. It cannot give rise to a contract;
5. Generally, produces no effect;
6. No action to declare it void is needed;
7. Cannot be ratified
 Void distinguished from Rescissible Contract
Void Rescisssible
 Produces no effect;  Valid unless rescinded;
 Defect is incapacity of the parties or  Defect consists in damage or lesion
lack of essential elements; to one of the parties;
 Action to declare illegality does not  Action prescribes;
prescribe;  Rescissible character may be
 Cannot be assailed by a third person. assailed by third person.
 Void Distinguish from Voidable Contract

Void Voidable Contract

 Can not be ratified;
 Produces no effect at all;
 Public policy is militated against;
 No action is required;
 Does not prescribe;
 Absolute nullity.
 May be ratified
 Produces effect until annulled
 Defect consists of incapacity or
vitiated consent;
 Action to annul is required;
 May prescribe;
 Conditional nullity