CHAP 9: VOID CONTRACTS

NO RATIFICATION
Art. 1409. The following contracts are inexistent and void A void contract cannot be ratified.
from the beginning: cs Deo im in pro
1. Those whose Cause or object is contrary to law, Art. 1410 IMPRESCRIPTIBLE
morals, good customs, pub order or pub policy (+ defense of illegality may be invoked on
2. Those which are absolutely Simulated or fictitious appeal even when not raised in RTC –
3. Those whose cause or object Did not Exist at the jurisprudence)
time of the transaction MODES OF RECOVERY from VOID Contracts
4. Those whose object is Outside the commerce of Art. 1411 Illegal cause/object = CRIMINAL
men
5. Those which contemplate an impossible service PARI DELICTO: no action may arise, law
6. Those where the intention of the parties relative to leaves the parties as they are
the principal object of the contract cannot be (in pari delicto non oritur actio)
ascertained Art. 1412
ONLY ONE AT FAULT: innocent party may
7. Those expressly prohibited or declared void by law claim/ demand return of what he has
These contracts cannot be ratified. Neither can the right to given and not be bound to comply with
set up the defense of illegality be waived. his promise

Illegal cause but NOT criminal

Art. 1409, No. 1 – contrary to law: Art. 1413 Illegal INTEREST
If interest is void – return entire interest BUT
TWO types of VOID contracts: principal remains valid
Liguez v CA, GR No. L-11240, December 18, 1957
1. Inexistent – essential requisites were not complied, Art. 1414 ILLEGAL CONTRACTS
e.g. donation in a private doc GEN: no action may arise in pari delicto.
 here, NO EFFECT at all EXCEPT: contract may be repudiated:
2. Illegal or illicit – e.g. donation made with an illicit 1. When the purpose has not yet been
cause such as sexual intercourse accomplished, or
 here, contract produced SOME EFFECT in that the 2. No damage was caused to a 3rd
donor in bad faith cannot get back what he has given person
and the donee
Art. 1415 3. If 1 party is INCAP, he may be
VOID contracts in terms of fault allowed to recover what he has
 In pari delicto non oritur actio – if both parties are delivered “if the interest of justice
at fault, no action may arise – court leaves parties as so demands”
they are
 If only one party is at fault – party at fault may not Art. 1416 4. Contract is MERELY PROHIBITED
recover that he has given and party who is not at provided that it is:
fault may demand the return of what has been given  Not “illegal per se” (prohibited
– in this Liguez case, donee was just a minor when for pub interest); “merely
the donation with illicit causa was made, hence, prohibited” (prohibited for
donee falls within this category – Art. 1411 private interest)
 Prohibition is designed to
Art. 1409, No. 2 – absolutely simulated: protect plaintiff
 Recovery enhances pub policy
TWO types of simulation
1. Absolutely simulated – utter lack of consent
2. Relatively simulated – the hidden or intended Art. 1417 5. PROFITEERING – one may recover
contract is generally binding amount in excess of the allowed
price

Art. 1418 6. FORCED OVERTIME – now

regulated by the Labor Code;
laborer entitled to overtime pay

Art. 1419 7. BELOW minimum wage - laborer

entitled to recover deficiency

Grounds of a void contract: Art. 1420 DIVISIBLE contracts

Cs deo im in pro - if the illegal terms can be separated from
legal ones, latter may be enforced
Art. 1409 NO WAIVER
Defense of illegality of a void contract
Hence, in INDIVISIBLE contracts
cannot be waived.
- if only one term is illegal, whole contract is
void

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 CHAP 9: VOID CONTRACTS

Art. 1421 3rd PERSONS paid or delivered, if the public interest will thus be subserved
Defense of illegality cannot be invoked by 3rd (NCC, Art. 1414).
persons whose interests are not directly
affected 3. Payment of money or delivery of property by an
(e.g. Mrs. Henry Harding v. Commercial incapacitated person. In such case, the courts may allow such
Union Assurance, 1918) person to recover what he has paid or delivered, if the
interest of justice so demands (NCC, Art. 1415).

Art. 1422 ILLEGAL CONTRACT² 4. Agreement or contract which is not illegal per se but is
Contract which is a direct result of an illegal merely prohibited by law, and the prohibition is designed for
contract is void and inexistent. the protection of the plaintiff. In such case, such plaintiff, if
public policy is thereby enhanced, may recover what he has
paid or delivered (NCC, Art. 1416).
EX: donating everything to another without leaving
any to one’s self is not illegal but contrary to public policy

Voidable Void 5. Payment of any amount in excess of the maximum price of

EFFECT: Valid until annulled EFFECT: No effect at all; Void any article or commodity fixed by law. In such case, the buyer
ab initio may recover the excess (NCC, Art. 1417).

May be ratified
Prescribes
Defect is due to vitiated
consent or incap
Cannot be attacked collaterally
Defense may be invoked by
parties primarily and
subsidiarily liable and their
successors in interest
Cannot be ratified
Do not prescribe
due to contravention of pub
policy
Can be attacked collaterally
Defense may be invoked by
anybody whose interest is
directly affected
6. overtime pay; Contract whereby a laborer undertakes to
work longer than the maximum number of hours fixed law.
In such case, the laborer may demand for overtime pay (NCC,
Art. 1417).
7. Contract whereby a laborer accepts a wage lower than the
minimum wage fixed by law. In such case the laborer may
demand for the deficiency (NCC, Art. 1418).

Contracts prohibited by law

Urine ow
a. Pactum commisorium – the creditor appropriates to
himself the things given by way of pledge or mortgage to
fulfill the debt.
EX: debtor paying 10k per month for 11 months to
pay off P100 k debt is also asked to mortgage his property
with a stipulation stating that his default will automatically be
deemed a sale of his property to the creditor – stipulation is a
pactum commisorium, void and null under Art. 2088, NCC

b. Pactum de non alienando – an agreement prohibiting the

owner from alienating the mortgaged immovable.

c. Pactum leonina – a stipulation in a partnership agreement

which excludes one or more partners from any share in the
profits or losses.

d. Illegal or illicit contracts (e.g. contract to sell marijuana)

Exceptions to pari delicto principle
1. usurious interest; interest paid in excess of the interest
allowed by usury laws may be recovered by the debtor, with
interest thereon from the date of payment (NCC, Art. 1413).
When in pari delicto rule not applicable
1. Breach of warranty cases;
2. Simulated contracts;
3. When parties are not equally guilty;
4. Against the government;
5. Prohibited conveyances under the law;
6. Constitutional prohibition against alien landholding.

2. Payment of money or delivery of property for an illegal

purpose, where the party who paid or delivered repudiates
the contract before the purpose has been accomplished, or
before any damage has been caused to a third person. In such
case, the courts may allow such party to recover what he has
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CHAP 9: VOID CONTRACTS

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