I. RESCISSIBLE II. VOIDABLE
III. UNENFORCEABLE IV. VOID OR INEXISTENT
I. Rescissible Contracts (Arts. 1380-1389)
What are the rescissible
contracts? (Art 1381; see also Art 1382)
Contracts of guardians
Contracts in representation
of absentees
Contracts are entered into to defraud existing
creditors
Contracts refer to things in
litigation What makes it
defective?
When the acts of administration cause LESION or damage to the
WARD they
represent by more than 25% of the value of the thing
When the acts of administration cause LESION or damage to the ABSENTEE they represent by more than 25% of the value of the thin
When the creditors cannot in any other manner collect the claims due them
If entered into by the defendant
without the
knowledge &
approval of the litigants or competent judicial authority
Effect on the Contract
Valid until rescinded (Art 1380) How to rescind? Direct Action (different from action for
rescission under Art 1191) NO rescission if:
1. Injured party has other legal means to obtain reparation (Art 1383).
2. Plaintiff cannot return his part of the obligation (Art 1385 par 1) 3. Object of the contract is in the
hands of third person, onerously acquired by him in good faith (Art 1385 par 2)
4. If the court approves the contracts under Art 1381 par 1 and 2 (Art 1386)
Accion Pauliana for Contracts in Fraud of Creditors
NO rescission if:
1. Injured party has other legal means to obtain reparation (Art 1383)
2. Plaintiff cannot return his part of the obligation (Art 1385 par 1)
3. Object of the contract is in the hands of third person, onerously acquired by him in good faith (Art 1385 par 2)
Who can rescind? In general, by injured party By ward, or by guardian ad litem of ward during incapacity of ward in an action
against the
original guardian
By absentee By creditor(s) By party litigant
When to rescind (Art 1389)
Within four years from [re-] gaining capacity
Within 4 years from knowledge of domicile of absentee
Within 4 years from
knowledge of
fraudulent contract
Within 4 years from knowledge of fraudulent contract
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CONTRACTS
II. Voidable Contracts (Arts. 1390-1402)
What makes it defective? (Art 1390)
Incapacity of one party to the contract
Consent vitiated by mistake, violence, intimidation, undue influence or fraud Effect on the
Contract
Valid until annulled by competent court (Art 1390 last par) How to annul? 1. Directly, by an action for annulment
2. Indirectly, by counterclaim asking for positive action of the court to set aside the contract
Annulment cannot proceed when:
1. the object of the contract is lost through fraud or deceit of the person with right to institute proceedings (art 1401 par 1);
2. the right of action is based upon the incapacity of any one of the contracting parties and the thing is lost through the fault or fraud of the plaintiff (Art 1401 par 2)
Who can/cannot annul?
(Art 1397)
1. Parties who are obliged principally or subsidiarily
2. Persons who are capable cannot allege the incapacity of those with whom they contracted
3. Persons who exerted intimidation, violence, or undue intimidation, or employed fraud, or caused mistake, cannot base their action upon these flaws of the contract
When? (Art 1391) Within four years after guardianship of minors or incapacitated persons ceases
Within four years
1. After intimidation, violence or undue influence ceases
2. From the time of discovery of mistake or fraud
Effect of
Annulment
1. Mutual restitution of the things delivered, along with fruits and price paid with interest (Art 1398)
2. Damages to be paid by party who caused defect of the contract, by virtue of Article 20 and 21 of the Civil Code
How to Cure
Defect? (Arts 1392 - 1396)
1. Express (written or oral manifestation) or tacit ratification (acts or conduct) by injured party, or guardian of incapacitated person.
- Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment (Art 1395)
CIVIL LAW REVIEWER Chapter VI. DEFECTIVE CONTRACTS
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CONTRACTS
III. Unenforceable Contracts (Arts. 1403-1408)
What are the unenforceable contracts? (Art 1403)
Contract entered into without authority of, or in excess of authority given by owner
Contracts covered by Statute of Frauds which did not comply with the written memorandum requirement
(See Art 1403 par 2)
Contract where both parties are incapable of giving consent to contract
Effect on the Contract
No effect unless ratified. Cannot be enforced by a proper action in court.
How to assail? Not by direct action.
1. As a defense, by motion to dismiss the complaint on the ground that the contract is unenforceable
Not by direct action.
1. As a defense, by motion to dismiss the complaint on the ground that the contract is unenforceable;
2. Objection to the presentation of oral evidence to prove an oral contract (See Art 1405)
Not by direct action.
1. As a defense, by motion to dismiss the complaint on the ground that the
contract is
unenforceable
Who can assail?
*an
unenforceable contract cannot be assailed by third persons (Art 1408)
By person whose name the contract was entered into; By owner of property.
By party against whom the contract is being enforced;
or his privies.
By party against whom the contract is being enforced; or his privies;
or parents or guardians persons, as it is a personal defense When? When a party asks the court to enforce the contract
How to Cure
Defect? (Art 1403)
1. Ratification by person
whose name the
contract was entered into
1. Ratification by party against whom the contract is being enforced
2. By failure to object to the presentation of oral evidence to prove an oral contract or by the acceptance of benefits under the contract (Art 1405)
1. By ratification of party against whom the contract is being enforced; or his privies; or parents or guardians
The ratification by one party converts the contract into a voidable contract (Art 1407)
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IV. Void or Inexistent Contracts (Arts. 1409-1422)
What makes it defective?
Contract’s Cause, Object of Purpose is contrary to morals, good customs, public order or public policy
(Art 1409 par 1)
Inexistent contracts, or contracts whose essential elements are absent (Art Art 1409 par 2, 3, 4,5)
Contracts expressly prohibited or declared void by law (Art 1409 par 7); contracts which are direct results of a previous illegal contract (art 1422)
Contracts which are inconsistent and void from the beginning (Art 1409)
1.Those whose Cause, Object of Purpose is contrary to 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
How to assail? 1. File for action for declaration of inexistence or nullity of contract
2.As a defense during trial (Art 1409 last par). Such defense not available to third persons not directly affected by contract (Art 1421)
3.In pari delicto applies when cause or object of contract constitutes a criminal offense (Art 1411)
Who can assail? 1. Innocent party Art 1411 par 2; Art 1412 par2)
2. Less-guilty party, upon court discretion
3. Incapacitated person who is a party to an illegal contract, upon court discretion (Art 1415)
4. Any person whose interests are directly affected by the contract (Art 1421)
1. Any of the parties 2. Any person whose
interests are directly affected by the contract (Art 1421)
1. Any person whose interests are directly affected by the contract Art (1421)
2. By party for whose protection the prohibition of the law is designed (Art 1416)
When? The action or defense does not prescribe (Art 1410)
end of Contracts