Unenforceable

contracts

CHAPTER 8
 Reporters

Nepomuceno, angel marie

gomez, shiela mae
monteverde, kyla marie
 ARTICLE 1403

The following contracts are

unenforceable, unless they are
ratified:
#1 Those entered into the name of another person by one
who has been given no authority or legal representation, or
who has acted beyond his powers;

#2 Those that do not comply with the Statute of Fraud as set

forth in this number. In the following cases, an agreement
hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum thereof, be in writing,
and subscribed by the party charged, or by his agent;
evidence, therefore, the agreement cannot be received
without the writing, or secondary evidence of its contents:
(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, chattels, or things in
action, at a price not less than Five hundred pesos, unless the
buyer accepts and receives part of such goods and chattels,
or the evidence, or some of them, of such things in action, or
pay at the time some part of the purchase money; but when a
sale is made by auction and entry is made by the auctioneer
in his sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is made, it
is a sufficient memorandum;
(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.

#3 Those where both parties are incapable of giving con?sent

to a contract.
 Article 1403 of the Philippine Civil Code pertains to
contracts that are considered unenforceable. Specifically, it
states that certain contracts are voidable or unenforceable
either because of the absence of essential elements or due to
defects such as lack of capacity, illegality, or violation of
public policy.
 EXAMPLE
Consider a contract where a minor (someone below the legal
age of 18) enters into a real estate agreement to purchase a
property. Since a minor lacks the legal capacity to enter into a
contract of this nature, the contract would be considered
unenforceable under Article 1403 of the Philippine Civil Code.
In this case, the minor has the option to disaffirm the contract
upon reaching the age of majority, rendering it voidable. The
lack of legal capacity makes the contract unenforceable until
the party with legal incapacity decides whether to affirm or
disaffirm it.
 aRTICLE 1404
Unauthorized contracts are governed
by Article 1317 and the principles of
agency in Title X of this Book.
Article 1404 of the Philippine Civil Code specifically
deals with the prescription of actions to annul a
voidable contract. It doesn't directly address
unenforceable contracts. However, I'll provide an
example related to voidable contracts, as that's the
focus of Article 1404:
 EXAMPLE
Imagine a situation where a person, due to undue
influence, convinces an elderly individual to sign a
contract to sell their valuable property at an
extremely low price. The elderly person, being
under duress or undue influence, may later want to
annul or void the contract.
In this case, if the elderly person wishes to annul the
contract, they must do so within the prescribed
period stated in Article 1404. Failure to bring an
action within the specified timeframe could result in
the contract becoming unassailable, and the undue
influence may no longer be a valid ground for
annulment. This emphasizes the importance of
timely legal actions in dealing with voidable
contracts under Article 1404.
 ARTICLE 1405
Contracts infringing the Statute of
Frauds, referred to in No. 2 of Article
1403, are ratified by the failure to
object to the presentation of oral
evidence to prove the same, or by the
acceptance of benefits under them.
MODES OF RATIFICATION UNDER THE
STATUE

The ratification of contracts

infringing the Statute of Frauds may
be effected in two ways:
 (1) by failure to object to the presentation of
oral evidence to prove the contract.

The failure to so object amounts to a waiver

and makes the contract as binding as if it had
been reduced to writing. (see Domalagan vs.
Bolifer, 33 Phil. 471 [1916]; Conlu vs. Araneta,
15 Phil. 587 [1910].)
 EXAMPLE
Sarah orally agrees to sell her antique car to John for
$10,000, a transaction that falls under the Statute of
Fraud. However, when Sarah later sues John for breach
of contract, John doesn't object to presenting witnesses
who testify about the terms of their agreement. By not
objecting to this oral evidence, John inadvertently waives
the requirement for a written contract, making the
agreement binding as if it were in writing.
 (2) by acceptance of benefits under the
contract.

In this case, the contract is no longer executory,

and, therefore, the Statute does not apply. This
rule is based upon the familiar principle that
one who has enjoyed the benefits of a
transaction should not be allowed to repudiate
its burdens. (see Rodriguez vs. Court of
Appeals, 29 SCRA 419 [1969].)
 EXAMPLE
David orally agrees to lease his warehouse to Emma for a
year, violating the Statute of Frauds. Emma moves in and
starts using the warehouse, paying the agreed-upon rent.
Later, when David tries to claim that the lease isn't valid
due to lack of a written contract, the court might hold
that by accepting the benefits of using the warehouse and
paying rent, Emma has effectively ratified the contract,
making it enforceable despite the lack of a written
agreement.
 ARTICLE 1406
When a contract is enforceable under
the Statute of Frauds, and a public
document is necessary for its
registration in the Registry of Deeds,
the parties may avail themselves of
the right under Article 1357.
 RIGHT OF A PARTY WHERE
CONTRACT IS ENFORCABLE

For the application of this provision,

there must be a valid agreement and
the agreement must not infringe the
Statute of Frauds.
(1) Accordingly, a party to an oral sale of
real property cannot compel the other to
put the contract in a public document for
purposes of registration because it is
unenforceable (Art. 1403[2, e].) unless, of
course, it has been ratified. (Art. 1405.)
 EXAMPLE
Sarah and John agree orally to sell a piece of land, which falls
under the Statute of Frauds. As per Article 1403, this oral
contract is unenforceable unless ratified. Sarah, being aware of
the requirement for a public document for the sale's
registration, cannot compel John to convert the oral agreement
into a public document for the purpose of registering the sale,
as it is initially unenforceable due to being oral (Art. 1403[2,
e]). However, if John later ratifies the oral agreement under
Article 1405, making it binding, then Sarah can demand the
execution of a public document for registration.
 (2) Similarly, the right of one party to
have the other execute a public document
is not available in a donation of realty
when it is in a private instrument because
the donation is void. (Art. 1356.)
 EXAMPLE
Emma wishes to donate a piece of real estate to her friend,
David, but they create a private written document for this
purpose. However, according to Article 1356, donations of
realty in private instruments are void. Consequently, David
cannot enforce Emma to execute a public document for
registration since the donation itself, being in a private
instrument, is considered void. Thus, the right to demand the
creation of a public document for registration is not available
in this scenario.
 ARTICLE 1407
In a contract where both parties are incapable of giving 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 of them were incapacitated.
If ratification is made by the parents or guardians, as the case
may be, of both contracting parties, the contract shall be
validated from the inception.
 WHEN UNENFORCEABLE CONTRACT
BECOMES A VOIDABLE CONTRACT

Where both parties to a contract are incapable of giving

consent, the contract is unenforceable. (Art. 1403[3].)
However, if the parent or guardian, as the case may be, of
either party or if one of the parties after attaining or
regaining capacity, ratifies the contract, it becomes
voidable. (see Arts. 1390, 1394.)
 WHEN UNENFORCEABLE CONTRACT
BECOMES A VALID CONTRACT

If the ratification is made by the parents or guardians, as

the case may be, of both contracting parties, or by both
contracting parties after attaining or regaining capacity,
the contract is validated and its validity retroacts to the
time it was entered into. (see Art. 1396.)
 EXAMPLE
Two teenagers, let’s call them Alex and Bailey, both under
the age of 18, decide to enter into a contract to buy a used
car from a third party. Since they are both minors, they
are legally incapable of giving consent to the contract.
However, they proceed with the transaction and pay the
third party for the car.
Later, Alex’s parents come to know about this transaction
and decide to ratify the contract. According to Article
1407, this ratification gives the contract the same effect as
if only Bailey were incapacitated. This means that the
contract is now binding on Alex but not on Bailey.
 Now, if Bailey’s parents also come to know about the
transaction and decide to ratify the contract, the contract
will be validated from the inception. This means that the
contract is now binding on both Alex and Bailey, just as if
they were both capable of giving consent at the time of the
transaction.
 ARTICLE 1408

Unenforceable contracts cannot be assailed by

third persons.
 RIGHT OF THIRD PERSON TO
ASSAIL AN UNENFORCABLE CONTRACT

Strangers to a voidable contract cannot bring an action to annul

the same (see Art. 1397.); neither can they assail a contract
because of its unenforceability. The benefit of the Statute can
only be claimed or waived by one who is a party or privy to the
oral contract, not by a stranger. (Ayson vs. Court of Appeals, 97
Phil. 965 [1953].) An action for rescission may be brought by a
third person.
 EXAMPLE
Let's say there are three individuals: *Alice*, *Bob*, and *Charlie*.
Alice and Bob enter into an agreement where Alice will sell her car to
Bob for PHP 600,000. However, they don't put this agreement in
writing, and Bob doesn't pay any part of the purchase money or
receive any part of the car at the time of the agreement. According to
the provisions of Article 1403¹, this agreement is unenforceable
because it's an agreement for the sale of goods at a price not less than
five hundred pesos, and the buyer didn't accept and receive part of
such goods or pay at the time some part of the purchase money¹.
 Now, Charlie, who is a third person and not a party to the
agreement, learns about this deal. He knows that Alice's car is
valuable and decides he wants to buy it. Charlie approaches the
court and tries to assail the agreement between Alice and Bob,
arguing that it's unenforceable and therefore he should be
allowed to buy the car instead.
 However, according to Article 1408, unenforceable contracts
cannot be assailed by third persons. This means that Charlie, as
a third person, cannot challenge the agreement between Alice
and Bob in court. Even though the agreement is unenforceable,
it's still valid between Alice and Bob unless they choose to ratify
it. Therefore, Charlie's attempt to assail the contract would not
be successful.
QUESTIONS
 QUESTION #1
Which of the following is NOT considered an unenforceable
contract according to Article 1403 of the Philippine Civil
Code?

a) Contracts entered into by someone without proper

authority
b) Contracts that do not comply with the Statute of Frauds
c) Contracts where both parties are capable of giving
consent
 QUESTION #2
How can contracts infringing the Statute of Frauds be
ratified according to Article 1405?

a) By signing a written document

b) By failure to object to oral evidence presented in court
c) By acceptance of partial benefits under the contract
d) By getting approval from a third party
 QUESTION #3
According to Article 1407, when can an unenforceable
contract between two minors become a valid contract?

a) When one minor ratifies the contract after turning 18

b) When the parents of both minors ratify the contract
c) When the contract terms are modified
d) When one minor remains a minor
 QUESTION #4
What is the right of a party under Article 1406 if a contract
is enforceable under the Statute of Frauds?

a) To compel the other party to execute a public document

b) To terminate the contract within 30 days
c) To make changes to the contract terms
d) To receive partial payment for benefits received
 QUESTION #5
According to Article 1408, who can assail an unenforceable
contract?

a) Either party to the contract

b) A third party not involved in the contract
c) Depends on the terms of the contract
d) The court can assail the contract sua sponte
Thank
You