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Defective Contracts
law in obligations and contracts (Polytechnic University of the Philippines)
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Castor, Karylle M.
Prof. Pearlito Campanilla
BSMA 1-6
Oblicon
RESCISSIBLE CONTRACTS
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They are considered s valid because they contain all the essential elements of a
contract, therefore, it is enforceable. These are type of contracts that can be
subject to rescission by court because there is a presence of damage to one of
the parties or upon a third person. (Article 1380)
Rescission is a subsidiary remedy granted by law to the involved parties to
secure the damages caused due to a valid contract. It means to make the valid
contract ineffective.
According to Article 1381, the following contracts are rescissible:
1. Those which are entered into by guardians whenever the wards whom they
represent suffer lesion by more than one-fourth of the value of the things
which are the object thereof.
Example: A is the guardian of B, ward. A sold to C the property of B for
P250,000. The value of the property is P500,000. It is rescissible because the
lesion is more than one-fourth of the original price of the property.
2. Those agreed upon in representation of absentees, if the latter suffer the
lesion stated in the preceding number.
Example: A is the guardian of B, absentee. A sold to C the property of B for
P250,000. The value of the property is P500,000. Same with the first example,
the sale is rescissible because the lesion suffered by B is more than one-fourth of
the original value of the property.
3. Those undertaken in fraud of creditors when the latter cannot in any other
manner collect the claims due them.
Example: To defraud A, B sells his only property to C knowing B’s intention. The
sale is rescissible because it shows that C shows bad faith. However, if C shows
good faith, meaning he didn’t know the fraudulent intention of B, therefore, the
contract is not rescissible.
4. Those which refer to things under litigation if they have been entered into
by the defendant without the knowledge and approval of the litigants or of
competent judicial authority.
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Example: A sues B for the recovery of a parcel of land. While the case was
pending, B without the authority of the court or consent of A, sold the parcel of
land to C who was aware that the land was a subject for litigation. Therefore, the
contract of sale is rescissible.
VOIDABLE CONTRACTS
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Voidable contracts are valid, binding, and enforceable because they possess all
the essential requisites of a valid but one of the parties is incapable of giving
consent or consent is vitiated by mistake, violence, intimidation, undue influence
or fraud.
These are the following scenarios that can are voidable or annullable:
1. When one of the parties is incapable of giving consent. However, there is an
exception if the contract involves necessities such as food, water, education,
shelter, clothing, and etc.
The following are incapable of giving consent:
a. Unemancipated minor
b. Insane or demented persons
c. Deaf-mutes who do not know how to write
2. When the one or more of the vices of content is present such as mistake,
violence intimidation, undue influence, or fraud
Example:
a. A asks B to buy food for P300. B refused. A then punches B in the face until
he agreed to buy it. (violence)
b. A asks B to lease B’s land or else he will set B’s house into fire. (Intimidation)
c. A sold a gold necklace to B. Later on, both of them found out it is fake.
(mistake)
d. A offers B a diamond ring. B asks A if it is genuine, and A responded that he
thinks it is. However, A is an expert. (Fraud)
e. A is a student and her professor B, asks to marry A. However, A said yes
because she’s afraid that the professor might fail her in the class. (undue
influence)
3. When consent is given in a state of drunkenness.
4. When consent is given during hypnotic spell.
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UNENFORCEABLE CONTRACT
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These are contracts are valid because all essential elements for their validity are
present however these cannot be enforced unless ratified.
These are the following scenarios that are unenforceable:
1. Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers.
(Unauthorized contracts)
- Based on Article 1317, no person can enter a contract in the name of another
without being authorized unless the law declares.
Example: A, representing himself as agent of B, sold B’s land to C. A is not an
authorized person of B.
2. Those that do not comply with the Statute of frauds.
- If the following contracts are in an oral or verbal agreement, these are
considered as unenforceable:
1. Contracts not to be performed within a year.
Example: A and B verbally agreed to form a partnership after 13 months.
2. A special promise to answer for the debt, default, or miscarriage of
another.
Example: A is indebted to C. B orally guaranteed A’s debt.
3. Agreement in consideration of marriage
Example: A orally obliged himself to give B a piece of land if B marries his
daughter, C.
4. Sale of personal property for 500 pesos or more
5. Lease of real property for more than 1 years
6. A representation as to the credit of a third person
Example: A is an insolvent and in need of cash. A asked B for help. B
represented A orally, as having good credit to C who extends a loan to A
because of B’s representation.
7. Sale of real property (Article 1358)
Exception: Partially Executed Contracts
3. Those where both parties are incapable of giving.
- It means that both of the parties are incapacitated. However, there is an
exception if both of the parties ratified the contract.
Example: Both A and B are minor. A sold his smartphone to B. It is
unenforceable because the contracting parties are still a minor.
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VOID CONTRACTS
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These are contracts which generally produce no effect at all due to certain
defects.
It is also known as a void agreement.
These contracts cannot be enforced by law.
There are two kinds of void contracts: inexistent contracts and illegal
contracts.
Inexistent Contracts – these refers to the agreements that did not comply with the
elements of a contracts such as consent, object, and cause.
Illegal Contracts – an agreement that carry out an illegal act.
These are the following characteristics of void contacts.
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 or fictitious
3. Those whose cause or object did not exist at the time of the transaction
4. Those whose object is outside the commence 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.
Example: A contract of sale between a drug dealer and its buyers. It is automatically
considered as a void contract because the terms of the contact are illegal or contrary to
the law. Neither of the party can enforce the contract in the court due to their act.
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