Defective Contracts

Kinds
Concept

Rescissible
validly agreed upon but
in the cases established
by law rescission is
granted in the interest
of equity.

Voidable
has the essential requisites
but 1.one of the parties is
incapable of giving consent
or 2.consent is vitiated by
mistake, violence, intimidation
undue influence or fraud.

Defect

Damage to a party or to
a third person

Vitiation of consent

Nature of
contract
Remedy
Kinds

Valid until rescinded

Valid until annulled

Rescission
C-GROL

Annulment or Ratification
VI

1. Those which are

entered into by
guardians whenever
the wards whom they
represent suffer lesion
by more than onefourth 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

1.Those where one of the

parties is incapable of giving
consent to a contract.Such as
unemancipated minors, insane
persons, deaf mutes who do
not how to write
Those where the consent is
vitiated by mistake, violence,
intimidation, undue influence
or fraud.

Unenforceable
1.those that cannot been
enforced in court or sued upon
unless they are ratified
according to law.
2.Contracts entered into in the
name of another person
without authority
3. or one who has acted
beyond his authority unless
ratified.
Acted without or in excess of
authority or does not comply
with statute of frauds or both
parties are incapacitated
Cannot be enforced by court
action
Ratification
FEW

Void
Void contracts are
those which, because
of certain defects,
generally produce no
effect at all.

1.Those executed by one in

the name of another without
any authority or in excess of
such .
2. Those that do not comply
with the Statute of Frauds.
Those that do not comply with
the Statute of Frauds.
Form required of the
contracts under the
Statute of Frauds
In writing or there should be a
note or memo subscribed by

1.contracts whose
cause, object or
purpose is contrary to
law
2.contracts which are
absolutely
simulated or fictitious
3.contracts without
cause or object
4.contracts where the
intention of the
parties relative to the
object cannot be

Absolute lack of
essential requisites in
fact or in law
Does not produce
effects
None
LAWIPE

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
things under
litigation if they have
been entered into by
the defendant without
the knowledge and
approval of the litigants
or of component judicial
authority;
5. All other contracts
specially declared by
law to be subject to
rescission.

the party charged or his

agent.
The SOF apply only to
executory contracts
The following contracts fall
under the SOF LRRONS
1.contracts which will not be
performed in one year
2.special promse to answer
for the debt,default or
miscarriage of another
3.donations propter nuptias
4.agreement for the sale of
goods at a price not less than
P500.00
5.an agreement for the
leasing for a longer period
than one year 6.for the sale
of real property or interest
therein
6.representation as to the
credit of a third person

ascertained.
5.contracts which are
expressly prohibited
or declared by law as
void.
6.those whose cause
or object did not exist
at the time of the
transaction.

Features
of the
contract

before rescission they

are valid and effective
their defect consists in
injury or damage either
to one of the
contracting parties or
to a third person
susceptible of
validation by
prescription
can be attacked directly
by
contracting party who
suffers injury or a third
person who is defrauded

binding until annulled by

the court
attacked or assailed by third
persons
defect lies in vitiation of
consent
susceptible of validation
either by ratification or
prescription

they are without effect

unless ratified
they cannot be sued upon
unless ratified
the defect is not curable by
the lapse of time
such contract gives rise to a
defense against their
enforcement but not to an
action to set aside the
contract
the defect may not be
invoked by strangers

Remedy

Rescission

Annulment

Ratification

Concept

remedy granted by the

law to the contracting
parties and sometimes
even to third persons in
order to secure
reparation for
damages caused them

remedy granted by the law for

reason of public interest for
the declaration of the
inefficacy of a contract
based on a defect or vice in
the consent of one of the
contracting parties in order to

1) by failure to object to
the presentation of oral
evidence to prove the
contract. The failure to so
object amounts to a waiver
and makes the contract as
binding as if it has been
3

1.can not be ratified

2.the right to set up
the defense of
illegality cannot be
waived
3.action or defense
for the declaration of
its inexistence does
not prescribe
4.the defense of
illegality is
available to third
persons whose
interests are directly
affected
5.a contract is void
and inexistence if it is
the direct result of a
previous illegal
contract
6.it can not give rise
to a valid contract
7.no action to declare
them void is needed
8.Generally, it
produces no effect
whatsoever

by a contract even if the

contract be valid by
means of the restoration
of things to their
condition prior to the
celebration of said
contract.

restore them to their original

position before the contract
was executed.
Period for filing: 4 YEARS
1.in case of intimidation,
violence or undue influence
from the time the
intimidation ceases
2.in case of mistake or fraud
from the time it is
discovered
3.contracts entered by minors
from the time the
guardianship ceases
Who may bring the action
for annulment
1.guardian of incapacitated
2.incapacitated person
upon attaining capacity
3.party whose consent is
vitiated mistake,violence,
intimidation,undue influence
or fraud
Effect of annulment
1.in obligations to give the
parties shall restore to each
other the subject matter
and its fruits and the price
with interest
2.in obligations to render
service the value shall be the
basis of damages
3.restitution when one of the
parties is incapacitated
4.when the thing is lost
through the fault of the party
4

reduced to writing; and

2) by acceptance of
benefits under the contract.
In this case, the contract is no
longer executory and,
therefore, the Statute does not
apply.

obliged by the decree of

annulment to return it
5.mutual restitution
Effect of loss of thing while
in possession
1.if lost through his fault
the action for annulment is
extinguished whether such
party is incapacitated or his
consent is vitiated
2.If lost without his fault
and such party is
incapacitated he can still
bring an action for
annulment. However he will
be required to return the value
of the thing and its fruits and
only up to the extent that he
has been benefited.
3. If due to fortuitous event
the contract can still be
annulled, unless if the
innocent party could no longer
restore what in virtue of the
decree of annulment he is
bound to return.
Other effects of annulment
if the contract is executory
the parties are not bound to
comply with their
obligation
if the contract is already
executed the parties shall
restore to each other the
object of the contract.
5

Requisites of
rescission
1.the contract must be
validly agreed upon
2.there must be lesion
or pecuniary prejudice
to one of the
contracting parties
3.must be based upon a
case especially
provided by law
4.there must be no
other remedy to
obtain reparation for
the damage
5.the party asking for
rescission must be
able to return what
he is obliged to restore
by reason of the
contract
7.the object of the
contract must not
legally be in the
possession of third
person who did not
know of the defect of
the contract or who
acted in good faith
8.the period for filing
the action must not
have prescribed.
The prescriptive
period is 4 years from
the date of the
contract except

Ratification act or means by

virtue of which efficacy is
given to a contract which
suffers from vice of curable
nullity
Requisites of Ratification:
The contract must be voidable
The person ratifying knew the
reason why the contract is
voidable.
The ratification must have
been made expressly or
impliedly.
the reason which renders the
contract voidable should have
disappeared
the ratification should be done
by the person entitled to The
ratification is made by the
injured party.
the contract should have been
tainted with vice
it should be effected with the
knowledge of the reason
which renders the contract
voidable.
Who may ratify:
1,the guardian
2.incapacitated person after
he has attained capacity
3.the party who consent has
been vitiate by mistake,
violence, intimidation, undue
influence or fraud
Effects of ratification
1.extinguishes the right to
6

Guardianship 4 years
from termination of
incapacity
Absentee -4 years from
the time the absentees
domicile is known
Effect of rescission
Return to the original
status quo.
When rescission is
not allowed
if
the
party
who
demands
rescission
cannot return what he
is obliged to restore
under the contract
If the property is
legally
in
the
possession of a third
person who acted in
good faith

annul the contract

2.cleanses the contract of its
defects from the moment it
was constituted
3.it retroacts to the moment
it was executed making it
valid from its inception