DEFECTIVE CONTRACTS
RESCISSIBLE VOIDABLE
Meaning -are valid because all the
essential requisites of a contract
exist but by reason of injury or
damage to one of the parties or
to third persons, such as
creditors, the contract may be
rescinded.
Contracts under each 1. Those which are entered into
kind by guardian 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
representation of absentees, if
the latter suffer the lesion stated
in the preceding number;
3. Those undertaken in fraud of
creditors when the latter cannot
in any other manner collect the
claims due them;
4. Those which refer to thing
under litigation if they have
been entered into by the
defendant without the
knowledge and approval of the
litigants or of competent judicial
authority;
5. All other contracts specially
declared by law to be subject to
rescission.
UNENFORCEABLE
- are those which possess all the -are those that cannot be enforced in
essential requisites of a valid court or sued upon by reason of
contract but one of the parties is defects provided by law until and
incapable of giving consent, or unless they are according to law.
consent is vitiated by mistake,
violence, intimidation, undue
influence, or fraud.
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.
VOID OR INEXISTENT
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 Frauds 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, of the agreement
cannot be received without the
writing, or a 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, 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,
chattlels, or things in action, at a price
not less than five hundred pesos,
unless the buyer accept and receive
-are those which, because of
certain fact, generally produce
no effect at all.
Inexistent Contract-refer to
agreements which lack one or
some or all of the elements or
don not comply with formalities
which are essential for the
existence of a contract.
1. Those whose cause, object or
purpose is contrary to law,
morals, good customs, public
order or public policy;
2. Those which are absolutely
simulated;
3. Those whose cause or object
did not exist at the time of the
transaction;
4. Those whose object are
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 contact
cannot be ascertained;
7. Those expressly prohibited or
declared void by law.

Defect Defect is caused by injury Defect is caused by vice of consent Defect is caused by lack of form,
damage either to one of the
parties or to a 3rd person
Effect Valid and enforceable until Valid and enforceable until annulled Cannot be enforced by a proper action
rescinded by a competent court by a competent court
Prescription Action to claim for rescission
may prescribe-within 4 years.
For persons under
guardianship-period of four
years shall begin at the
termination of the incapacity.
For Absentees-period of four
years shall begin until the
domicile of the latter is known
Ratification Need not be ratified
part of such goods and chattels, or the
evidences, 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 persons on whose
account the sale is made, it is 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 consent to a
contract.
Defect is caused by lack of
authority, or capacity of both parties essential elements or illegality
not cured by prescription.
Do not, as a general rule produce
in court any legal effect
Action for annulment or defense of Corresponding action for recovery, if Action for the declaration of
annulability may prescribe-Shall be there was total or partial performance nullity or inexistence or defense
brought within 4 years which shall of the unenforceable contract under of nullity or inexistence does not
begin: No. 1 or 3 of Article 1403 may prescribe.
1. In cases of intimidation, violence prescribe.
or undue influence-from the time the
defect of the consent ceases.
2. In cases mistake or fraud-from the
time of the discovery of the same.
3. In cases of contracts entered into
by minors or other incapacitated
persons-from the time the
guardianship ceases.
Can be ratified Can be ratified Cannot be ratified
Cure Cured by prescription
Assailability by third Assailed by a contracting party
persons and a third person who is
prejudiced or damaged by the
contract.
-Assailed directly only
Parties entitled to bring To rescind:
action 1. The injured party or the
defrauded creditor;
2. His heirs, assigns, or
successors in interest; or
3. the creditors of the above
entitled to subrogation
Cured by prescription
Assailed only by a contracting party
-Assailed directly or collaterally
To annul:
1. by all who are thereby obliged
principally or subsidiarily.
REQUISITES:
1. the plaintiff must have an interest
in the contract; and
2. The victim and not the party
responsible for the defect is the
person who must assert the same.
Not cured by prescription except in Not cured by prescription
case of Art. 1403 nos. 1 or 3
Assailed only by a contracting party Assailed by a contracting party
and a third person whose interest
-Assailed directly or collaterally is directly affected
-Assailed directly or collaterally
-since unenforceable contracts,
although valid, are unenforceable they
can only be subject to ratification to be
enforceable.

Who may ratify:

Restitution Return the things which are:
1. The object of the contract;
2. their fruits;
3. the price with its interest.
1. In case of contract entered into by
incapacitated person:
a. The guardian; or
b. the injured party himself provided
he is already capacitated.
2. In cases on the ground of mistake,
etc., ratification can be made by the
party whose consent is vitiated.
Return the things which are:
1. The object of the contract;
2. their fruits;
3. the price with its interest.

Restitution by incapacitated person

- only to the extent the extent that he
was benefited by the thing or price
received by him.
Distinguish:
VOID
Absence of essential
element/s of a contract
No effect even if not set aside
Cannot be ratified
Nullity can be set up against
any person asserting right
arising from it, and his
successors in interest not
protected by law
Action to declare nullity does
not prescribe
VOID CONTRACT
Those where all the requisites
of a contract are present, but
the cause, object or purpose is
contrary to law, morals, good
customs, public order or
public policy or the contract
itself is prohibited or
declared prohibited.
Principle of in pari delicto is Principle of in pari delicto
applicable.
isnot applicable.
VOIDABLE
Consent is vitiated or there is
incapacity to give consent
Valid contract until set aside
Can be ratified
Nullity can be set up only
against a party thereto
Action to annul contract
prescribes in 4 years
INEXISTENT CONTRACT
Those where one or some of the
requisites which are essential
for validity are absolutely
lacking
VOID RESCISSIBLE
Defect is inherent in the contract itself Defect is in its effects, either against one of the
parties or a third person
Nullity is a matter of law and public Based on equity and matter of private interest
interest
No legal effects even if no action is filed Produces legal effects and remains valid if no
to set it aside action is filed
Action to declare its nullity does not Action to rescind prescribes within 4 years (Art.
prescribe (Art. 1410, NCC) 1389, NCC; Pineda, Obligations and
Contracts, 2000 ed, p. 605)
VOID CONTRACT UNENFORCEABLE
CONTRACT
Cannot be the basis of actions to enforce compliance
Can never be ratified and Can be ratified and thereafter
become enforceable enforced
There is no contract at all There is a contract which,
however, cannot be enforced
unless properly ratified.