Those where both parties are incapable of giving consent to a contract.

Unenforceable contracts – those that cannot be enforced in court or sued upon by reason of defects provided by law unless they are ratified according to law

*while rescissible and voidable contracts are valid until they are annulled, unenforceable contracts, while valid, cannot be enforced until they are ratified. Kinds of Unenforceable Contracts

1. those entered into the name of another by one acting without or in excess of authority 2. those that do not comply with Statute of Frauds

Unauthorized contracts – those entered into the name of another by one who has been given no authority or legal representation or acted beyond his powers. (governed by article 1317 and the principles of agency)

Statute of Frauds

1. history – 1677, English Parliament enacted laws to counter the evil practice of giving false testimony.

2. purpose – Statute of Frauds has been enacted to not only prevent fraud but also guard against the mistakes of honest men by requiring certain agreements be in writing, otherwise, unenforceable in court because there is no hard evidence other than witnesses who may be unreliable.

3. application –fundamental principles are:

a. SOF applicable only in actions for damages because of a violation of contract or for the specific performance

b. Applicable only to executory contracts (where no performance of both parties) and not to contracts which are totally or partially performed because partial performance implies the existence of the contract. Injustice to the one who already performed his part because the other would keep the benefits and evade his part of the obligation.

c. Not applicable where the contract is admitted expressly/impliedly by failure to deny its existence

d. Applicable only to agreements enumerated above. An agreement creating an easement of right of way is not covered by SOF since it is not a sale of property or of interest.

e. Not applicable where writing does not express true agreement of parties since SOF cannot be used as a shield for fraud f. Does not declare that contracts breaking it are void but merely unenforceable

g. Defense of SOF may be waived

h. Defense of SOF is personal to parties and cannot be introduced by strangers to contract Agreements within the scope of the Statute of Frauds

*agreements that must be in writing to be enforceable

1. agreement not to be performed within one year from the making thereof – if I entered an oral contract with you that you will build my house one year from now, it should be in writing to be enforceable.

2. promise to answer for the debt, default or miscarriage of another – if you owe Maria and I am your guarantor, our agreement should be in writing to be enforceable. If my promise is to pay Maria without your failure to pay, then I am no longer just guarantor but a principal party in the obligation to Maria. No need for written contract to be enforceable.

3. agreement in consideration of marriage other than a mutual promise to marry – if I promise to build your house if you marry me, then there must be written agreement unless you ratify it. if we both agreed to marry, no need for written agreement even if marriage is to be celebreated beyond one year.

a. Marriage settlement – pre-nuptial entered by people who are about to get married for the purpose of fixing conditions of their relations b. Donations propter nuptias or donations by reason of marriage – agreements made before marriage in consideration of the same and in favor

of one or both spouses

4. agreement for sale of goods at a price not less than 500 – if what I am selling is more than 500, contract must be in writing. If less than 500, oral evidence of sale is enough

5. agreement for leasing for a longer period than one year – if period is more than a year, must be in writing.

6. agreement for sale of real property or of an interest therein – sale of property or anything related to the property (usufructuary) must be in writing to be enforceable or if there is partial performance.

7. representation as to the credit of a third person – if Maria is trying to borrow from me and you represent Maria as having a good credit standing and I loan to Maria money who is actually insolvent, your representation of Maria must be in writing to be enforceable.

Article 1404. Unauthorized contracts are governed by article 1317 and the principles of agency in Title X of this Book.

Article 1405. Contracts infringing the Statue of Frauds, referred to in No. 2, 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 Statute

1. failure to object to the presentation of oral evidence to prove the contract. Failure to object means waiver and makes contract binding. 2. by acceptance of benefits under the contract, one who enjoyed benefits must not be allowed to repudiate (reject) its burdens

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. (n)

RIGHT OF PARTY WHEN CONTRACT IS ENFORCEABLE

*there must be valid agreement and agreement must not infringe the SOF

1. 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 if is unenforceable unless it was ratified.

2. right 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.

Article 1407. In a contract when both parties are incapable of giving consent, express or implied ratification by the parent or guardian, as the case may be, of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated.

NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER.

THIS SPECIAL PRIVILEGE IS STRICTLY FOR BMS MEMBERS ONLY!!!

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.

*where both parties are incapable of giving consent, contract is unenforceable. However, if one guardian or one party who has gained capacity ratifies the contract, contract becomes voidable.

*if both parties (guardian or both gains capacity) ratifies the contract, contract is valid and retroacts from the day it was entered into.

Article 1408. Unenforceable contracts cannot be assailed by third persons.

*strangers to a voidable contract cannot bring action to annul the contract. Neither can they question a contract because of its unenforceability. The SOF can only be claimed by one who is a party to the oral contract. It is a personal defense.