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Art. 1390. The following contracts are voidable or
annullable, even though there may have been no damage to the contracting parties:
1. Those where one of the parties is incapable of giving consent to a contract;
2. Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification.
--- Voidable Contracts
Voidable Contracts – contracts in which all of the essential elements for validity are present, although the element of consent is vitiated either by lack of legal capacity of one of the contracting parties, or by mistake, violence, intimidation, undue influence, or fraud.
– Voidable contracts are binding until annulled. Characteristics of Voidable Contracts
1. Their defect consists in the vitiation of consent of one of the contracting parties;
2. They are binding until they are annulled by a competent court;
3. They are susceptible of convalidation by ratification or by prescription;
4. Their defect or voidable character cannot be invoked by third persons.
Voidable and Rescissible Contracts, Distinguished
Voidable Contracts Rescissible Contracts
As to Character of Defect
Defect is intrinsic because it consists of a vice which vitiates consent
Defect is external because it consists of damage or prejudice either to one of the contracting parties or to a third person
As to Necessity of Damage or Injury
Damage or injury to a contracting party or to a third person is not necessary. The contract is still voidable even without such damage
Damage or injury is indispensable
As to Basis
The annullability of the contract is based on law. Annulment is not only a remedy but also a sanction
The rescissibility of the contract is based on equity. Rescission is a mere remedy.
As to Causes
Different from rescission Different from annulment
As to Susceptibility to Ratification
Susceptible to ratification Not susceptible to ratification
As to Persons who may Invoked
Annulment may be invoked
only by a contracting party Rescission may be invoked by either a contracting party or by a third person who is prejudiced
Contracts which are Voidable
1. Those where one of the contracting parties is incapable of giving consent to a contract;
2. Those where consent is vitiated by mistake, violence, intimidation, undue influence, or fraud.
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Art. 1391. The action for annulment shall be brought
within four years. This period shall begin:
In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases.
In case of mistake or fraud, from the time of the discovery of the same.
106 MAGHIRANG, Ariel | REFERENCES: Jurado, Tolentino | 2011 Civil Law Reviewer: Obligations and Contracts. And when the action refers to contracts entered into by
minors or other incapacitated persons, from the time the guardianship ceases.
--- Prescriptive Period
The action for annulment must be commenced within a period of four years.
a. If contract refers to one entered into by an incapacitated person, the period shall be counted from the time guardianship ceases;
b. If it refers to those where consent is vitiated:
By violence, intimidation, or undue influence, the period shall be counted from the time such violence, intimidation, or undue influence ceases or disappears;
By mistake or fraud, the period shall be counted from the time of the discovery of such mistake or fraud.
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Art. 1392. Ratification extinguishes the action to annul a
voidable contract.
Art. 1393. Ratification may be effected expressly or
tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right.
Art. 1394. Ratification may be effected by the guardian of
the incapacitated person.
Art. 1395. Ratification does not require the conformity of
the contracting party who has no right to bring the action for annulment.
Art. 1396. Ratification cleanses the contract from all its
defects from the moment it was constituted.
--- Ratification
Ratification – the act or means by virtue of which efficacy is given to a contract which suffers from a vice of curable nullity. Ratification presupposes the existence of a vice in the contract.
Requisites of Ratification
1. The contract should be tainted with a vice which is susceptible of being cured;
2. The confirmation should be effected by the person who is entitled to do so under the law;
3. It should be effected with the knowledge of the vice or defect of the contract;
4. The cause of the nullity of defect should have already disappeared
Forms of Ratification
Ratification requires no specific form. Hence, it may be effected expressly or tacitly (impliedly).
Effect of Ratification – Ratification extinguishes the action to annul the contract. Ratification also cleanses the contract of its defects from the moment it was constituted. ---
Art. 1397. The action for the annulment of contracts may
be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract. --- Persons who may Institute the Action
There are two requisites required to confer the necessary capacity for the exercise of the action for annulment: (1) that the plaintiff must have an interest in the contract; and (2) that the victim and not the party responsible for the vice or defect must be the person who must assert the same.
Consequently, a third person who is a stranger to the contract cannot institute an action for its annulment. Exception: a third person not a party obliged principally or subsidiarily under a contract may exercise an action for annulment of the contract if he is prejudiced in his rights with respect to one of the contracting parties,a dn can show detriment which would positively result to him from the contract in which he has no intervention.
Also, person capacitated cannot invoke the incapacity of the person with whom they contracted.
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Art. 1398. An obligation having been annulled, the
contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law.
In obligations to render service, the value thereof shall be the basis for damages.
Art. 1399. When the defect of the contract consists in the
107 MAGHIRANG, Ariel | REFERENCES: Jurado, Tolentino | 2011 Civil Law Reviewer: Obligations and Contracts. is not obliged to make any restitution except insofar as
he has been benefited by the thing or price received by him.
--- Effects of Annulment
Annulment of the contract, if the contract has not yet been consummated, releases the parties from the obligations arising from the contract.
Obligation of Mutual Restitution Upon the annulment of the contract:
a. If the prestation consisted in obligations to give, the parties shall restore to each other the things which have been the subject of the contract, with their fruits, and the price with its interest, except in cases provided by law.
b. If the prestation consisted in obligations to do or not to do, there will have to be an apportionment of damages based on the value of such prestation with corresponding interests.
Rule in Case of Incapacity
The principle of mutual restitution is modified by the rules under Article 1399 which states that when the defect of the contract consists in the incapacity of one of the contracting parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him.
Benefit means that there has been a prudent and beneficial use by the incapacitated person of the thing which he has received. In order to determine this, it is necessary to determine his necessities, his social position as well as his duties as a consequence thereof.
However, in the absence of proof, it is presumed that no benefit has accrued to the incapacitated person. ---
Art. 1400. Whenever the person obliged by the decree of
annulment to return the thing cannot do so because it has been lost through his fault, he shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date.
Art. 1401. The action for annulment of contracts shall be
extinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings.
If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall
not be an obstacle to the success of the action, unless said loss took place through the fraud or fault of the plaintiff.
Art. 1402. As long as one of the contracting parties does
not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him.
--- Effect of Failure to Make Restitution
As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him.
If the loss is due to the fault of the defendant, he shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date. If the loss is due to the fault of the plaintiff, the action
for annulment shall be extinguished.
If the loss is due to fortuitous event, the contract can still be annulled, but the defendant can be held liable only for the value of the thing at the time of the loss without interest. The defendant, not the plaintiff, must suffer the loss because the defendant was still the owner of the thing at the time of the loss. The same is true if it is the plaintiff who cannot return the thing because it has been loss through fortuitous event.