RESCISSIBLE CONTRACTS
3) The party alienating must be in BAD FAITH (that is, he knew
The Four Kinds of Defective Contracts
(a) RESCISSIBLE- valid until rescinded
(b) VOIDABLE- valid till annulled
(c) UNENFORCEABLE- cannot be sued upon or enforced, unless
it is ratified
(d) VOID (which may be inexistent or illegal) - no effect at all
ART. 1380. CONTRACTS VALIDLY AGREED UPON MAY BE
RESCINDED IN THE CASES ESTABLISHED BY LAW.
RESCISSION- It is a relief to protect one of the parties or a third
person from all injury and damages which the contract may
cause, to protect some preferential right.
REQUISITES FOR RESCISSION
(a) There must be at the beginning either a valid or a voidable
contract (not a void one);
(b) But there is an economic or financial prejudice to someone
(a party or a third person);
(c) Requires mutual restitution.
TWO KINDS OF RESCISSION
The rescission mentioned in The rescission mentioned in
Art. 1380 Art. 1191 (resolution)
It is based on lesion or fraud It is based on non-
upon creditors; performance or non-fulfilment
of the obligation;
The action is instituted by either The action may be instituted
of the contracting parties or by only by the injured party to the
third persons; contract;
The courts cannot grant a period In some cases, the courts may
or term within which to comply; grant a term;
Non-performance by the other Non-performance by the
party is immaterial. other party is important.
ART. 1381. THE FOLLOWING CONTRACTS ARE RESCISSIBLE:
(1) THOSE WHICH ARE ENTERED INTO BY THE 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;
(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 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;
(5) ALL OTHER CONTRACTS SPECIALLY DECLARED BY LAW
TO BE SUBJECT TO RESCISSION.
FIRST CASE — IN BEHALF OF WARDS:
Lesion — damage or injury to the party asking for rescission
Effect of contracts entered into in behalf of ward:
1) If an act of ownership, court approval is required; otherwise,
contract is unenforceable.
2) If merely an act of administration —
a) If with court approval — valid, regardless of lesion.
b) If without court approval — rescissible, if lesion is more than
one-fourth.
SECOND CASE — IN REPRESENTATION OF ABSENTEES:
Another contract which may be rescinded on the ground of
lesion is a partition of inheritance, when the lesion is 1/4 or
more for one heir.
THIRD CASE — “THOSE UNDERTAKEN IN FRAUD OF
CREDITORS, WHEN THE LATTER CANNOT IN ANY OTHER
MANNER COLLECT CLAIMS DUE THEM”
(a) The action to rescind contracts made in fraud of creditors is
called “accion pauliana.”
(b) Requisites before accion pauliana can be brought:
1) There must be a creditor who became such PRIOR to the
contract sought to be rescinded (whether the party asking for
rescission is a judgment creditor already or not, is likewise
immaterial).
2) There must be an alienation made subsequent to such credit.
that damages would be caused his creditors whether or not he
intended to cause such damage).
4) There must be no other remedy for the prejudiced creditor —
“inability to collect the claims due them.”
ART. 1382. PAYMENTS MADE IN A STATE OF INSOLVENCY
FOR OBLIGATIONS TO WHOSE FULFI LLMENT THE DEBTOR
COULD NOT BE COMPELLED AT THE TIME THEY WERE
EFFECTED, ARE ALSO RESCISSIBLE.
REQUISITES:
(a) The debtor-payer must have been insolvent (the insolvency
need not be a judicially declared one);
(b) The debt was not yet due and demandable.
ART. 1383. THE ACTION FOR RESCISSION IS SUBSIDIARY; IT
CANNOT BE INSTITUTED EXCEPT WHEN THE PARTY
SUFFERING DAMAGE HAS NO OTHER LEGAL MEANS TO
OBTAIN REPARATION FOR THE SAME.
ART. 1384. RESCISSION SHALL BE ONLY TO THE EXTENT
NECESSARY TO COVER THE DAMAGES CAUSED.
ART. 1385. RESCISSION CREATES THE OBLIGATION TO
RETURN THE THINGS WHICH WERE THE OBJECT OF THE
CONTRACT, TOGETHER WITH THEIR FRUITS, AND THE
PRICE WITH ITS INTEREST; CONSEQUENTLY, IT CAN BE
CARRIED OUT ONLY WHEN HE WHO DEMANDS RESCISSION
CAN RETURN WHATEVER HE MAY BE OBLIGED TO
RESTORE.
NEITHER SHALL RESCISSION TAKE PLACE WHEN THE
THINGS WHICH ARE THE OBJECT OF THE CONTRACT ARE
LEGALLY IN THE POSSESSION OF THIRD PERSONS WHO DID
NOT ACT IN BAD FAITH.
IN THIS CASE, INDEMNITY FOR DAMAGES MAY BE
DEMANDED FROM THE PERSON CAUSING THE LOSS.
REQUISITES BEFORE THE ACTION FOR RESCISSION CAN BE
BROUGHT:
(a) Generally, the plaintiff must be able to RETURN what has
been received by virtue of the rescissible contract. (Exception:
prejudiced creditors.)
(b) The thing object of the contract is not in the legal possession
of third persons in good faith.
(c) There must be no other legal remedy.
(d) The action must be brought within the proper prescriptive
period. 4 years from where the contract has been entered.
ART. 1386. RESCISSION REFERRED TO IN NOS. 1 AND 2 OF
ARTICLE 1381 SHALL NOT TAKE PLACE WITH RESPECT TO
CONTRACTS APPROVED BY THE COURTS.
ART. 1387. ALL CONTRACTS BY VIRTUE OF WHICH THE
DEBTOR ALIENATES PROPERTY BY GRATUITOUS TITLE
ARE PRESUMED TO HAVE BEEN ENTERED INTO IN FRAUD
OF CREDITORS, WHEN THE DONOR DID NOT RESERVE
SUFFI CIENT PROPERTY TO PAY ALL DEBTS CONTRACTED
BEFORE THE DONATION.
ALIENATIONS BY ONEROUS TITLE ARE ALSO PRESUMED
FRAUDULENT WHEN MADE BY PERSONS AGAINST WHOM
SOME JUDGMENT HAS BEEN RENDERED IN ANY INSTANCE
OR SOME WRIT OF ATTACHMENT HAS BEEN ISSUED. THE
DECISION OR ATTACHMENT NEED NOT REFER TO THE
PROPERTY ALIENATED, AND NEED NOT HAVE BEEN
OBTAINED BY THE PARTY SEEKING THE RESCISSION.
IN ADDITION TO THESE PRESUMPTIONS, THE DESIGN TO
DEFRAUD CREDITORS MAY BE PROVED IN ANY OTHER
MANNER RECOGNIZED BY THE LAW OF EVIDENCE.
PRESUMPTIONS OF FRAUD:
GRATUITOUS ALIENATIONS: when the debtor did not reserve
sufficient property to pay all debts contracted BEFORE the
donation.
ONEROUS ALIENATIONS: when made by persons:
1) Against whom some judgment has been rendered in any
instance (thus, even if not yet a final judgment);
2) Or against whom some writ of attachment has been issued.
BADGES OF FRAUD
1) The fact that the consideration of the conveyance is fictitious
or inadequate;
2) A transfer made by a debtor after suit has been begun and
while it is pending against him;
3) A sale upon credit by an insolvent debtor;
4) The transfer of all or nearly all of his property by a debtor,
especially when he is insolvent or greatly embarrassed
financially;
5) Evidence of large indebtedness or complete insolvency;
6) The fact that the transfer is made between father and son
(when this fact is considered together with preceding
circumstances);
7) The failure of the vendee to take exclusive possession of all
the property.
ART. 1388. WHOEVER ACQUIRES IN BAD FAITH THE
THINGS ALIENATED IN FRAUD OF CREDITORS, SHALL
INDEMNIFY THE LATTER FOR DAMAGES SUFFERED BY
THEM ON ACCOUNT OF THE ALIENATION, WHENEVER, DUE
TO ANY CAUSE, IT SHOULD BE IMPOSSIBLE FOR HIM TO
RETURN THEM.
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.
AND WHEN THE ACTION REFERS TO CONTRACTS ENTERED
INTO BY MINORS OR OTHER INCAPACITATED PERSONS,
FROM THE TIME THE GUARDIANSHIP CEASES.
If the action has prescribed, the contract can no longer be set
aside.
ART. 1392. RATIFICATION EXTINGUISHES THE ACTION TO
ANNUL A VOIDABLE CONTRACT.

IF THERE ARE TWO OR MORE ALIENATIONS, THE FI RST
ACQUIRER SHALL BE LIABLE FI RST, AND SO ON
SUCCESSIVELY.
(a) If the first transferee is in good faith, the good or bad faith of
the next transferee is not important.
(b) If the first transferee is in bad faith, the next transferee is
liable only if he is also in bad faith.
ART. 1389. THE ACTION TO CLAIM RESCISSION MUST BE
COMMENCED WITHIN FOUR YEARS.
FOR PERSONS UNDER GUARDIANSHIP AND FOR
ABSENTEES, THE PERIOD OF FOUR YEARS SHALL NOT
BEGIN UNTIL THE TERMINATION OF THE FORMER’S
INCAPACITY, OR UNTIL THE DOMICILE OF THE LATTER IS
KNOWN.
GENERAL RULE — 4 years from the date the contract was
entered into.
EXCEPTIONS:
1) Persons under guardianship — 4 years from termination of
incapacity
2) Absentees — 4 years from the time the domicile is known.
WHO CAN BRING THE ACTION?
(a) The injured party (or the defrauded creditor).
(b) His heir or successor-in-interest.
(c) Creditors of (a) and (b) by virtue of Art. 1177 of the Civil Code
(accion subrogatoria).
VOIDABLE CONTRACTS
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 INFL UENCE OR FRAUD.
THESE CONTRACTS ARE BINDING, UNLESS THEY ARE
ANNULLED BY A PROPER ACTION IN COURT. THEY ARE
SUSCEPTIBLE OF RATIFI CATION.
CONFIRMATION — to cure a defect in a voidable contract
RATIFICATION — to cure the defect of lack of authority in an
authorized contract (entered into by another).
ACKNOWLEDGMENT — to remedy a deficiency of proof
EFFECTS OF RATIFICATION
(a) The action to annul is extinguished thus, the contract
becomes a completely valid one.
(b) The contract is cleansed of its defect from the beginning.
REQUISITES OF RATIFICATION
(a) The contract must be a voidable one.
(b) The person ratifying must know the reason for the contract
being voidable (that is, the cause must be known).
(c) The cause must not exist or continue to exist anymore at the
time of ratification.
(d) The ratification must have been made expressly or by an act
implying a waiver of the action to annul.
(e) The person ratifying must be the injured party.
ART. 1393. RATIFI CATION MAY BE EFFECTED EXPRESSLY
OR TACITLY. IT IS UNDERSTOOD THAT THERE IS A TACIT
RATIFI CATION 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.
KINDS OF RATIFICATION
(a) Express (oral or written)
(b) Tacit (implied — as from conduct implying a WAIVER).
ART. 1394. RATIFICATION MAY BE EFFECTED BY THE
GUARDIAN OF THE INCAPACITATED PERSON.
Ratification can be made by the injured party himself, provided
he is capacitated, or has become capacitated.
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.

Distinctions between a Rescissible and a Voidable Contract ART. 1397. THE ACTION FOR THE ANNULMENT OF
RESCISSION ANNULMENT CONTRACTS MAY BE INSTITUTED BY ALL WHO ARE
The basis here is lesion The basis here is vitiated consent THEREBY OBLIGED PRINCIPALLY OR SUBSIDIARILY.
(damage). or incapacity to consent. HOWEVER, PERSONS WHO ARE CAPABLE CANNOT ALLEGE
The defect here is external or The defect here is intrinsic (in the THE INCAPACITY OF THOSE WITH WHOM THEY
intrinsic. meeting of the minds). CONTRACTED; NOR CAN THOSE WHO EXERTED
The action is subsidiary. The action is principal INTIMIDATION, VIOLENCE, OR UNDUE INFL UENCE, OR
This is a remedy. This is a sanction. EMPLOYED FRAUD, OR CAUSED MISTAKE BASE THEIR
Private interest governs. Public interest governs ACTION UPON THESE FL AWS OF THE CONTRACT.
Equity predominates. Law predominates
Plaintiff may be a party or a Plaintiff must be a party to the The creditors of the victim cannot ask for annulment for they are
third person. contract (whether bound not bound by the contract.
principally or subsidiarily).
ART. 1398. AN OBLIGATION HAVING BEEN ANNULLED, THE
There must be damage to the Damage to the plaintiff is
CONTRACTING PARTIES SHALL RESTORE TO EACH OTHER
plaintiff. immaterial.
THE THINGS WHICH HAVE BEEN THE SUBJECT MATTER OF
To prevent rescission, To prevent annulment,
THE CONTRACT, WITH THEIR FRUITS, AND THE PRICE
ratification is not required. ratification is required.
WITH ITS INTEREST, EXCEPT IN CASES PROVIDED BY LAW.
IN OBLIGATIONS TO RENDER SERVICE, THE VALUE
GROUNDS FOR ANNULMENT (DECLARATION OF NULLITY) THEREOF SHALL BE THE BASIS FOR DAMAGES.
(a) Incapacity to consent
(b) Vitiated consent EFFECTS OF ANNULMENT
(a) If the contract has not yet been complied with, the parties
ART. 1391. THE ACTION FOR ANNULMENT SHALL BE are excused from their obligations.
BROUGHT WITHIN FOUR YEARS. (b) If the contract has already been performed, there must be
MUTUAL RESTITUTION (in general) of: 1) the thing, with fruits;
THIS PERIOD SHALL BEGIN: 2) the price, with interest.
ART. 1399. WHEN THE DEFECT OF THE CONTRACT
CONSISTS IN THE INCAPACITY OF ONE OF THE PARTIES,
THE INCAPACITATED PERSON IS NOT OBLIGED TO MAKE
ANY RESTITUTION EXCEPT INSOFAR AS HE HAS BEEN
BENEFI TED BY THE THING OR PRICE RECEIVED BY HIM.
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.
Reason Why One Party Cannot Be Compelled if Other Party
Does Not Restore: A reciprocal obligation of restitution has
been created.
UNENFORCEABLE CONTRACTS
Unenforceable contracts cannot be sued upon or enforced
unless ratified; thus, it is as if they have no effect yet. But they
may be ratified; hence, they can have in such a case the effect of
valid contracts. In one sense, therefore, they may be called
validable.
Voidable and rescissible contracts, upon the other hand,
produce legal effects until they are annulled or rescinded.
KINDS OF UNENFORCEABLE CONTRACTS
(a) Unauthorized contracts.
(b) Those that fail to comply with the Statute of Frauds.
(c) Those where both parties are incapable of giving consent to
a contract.
ART. 1403. THE FOLLOWING CONTRACTS ARE
ENFORCEABLE, UNLESS THEY ARE RATIFIED:
(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;
(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,
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, CHATTELS
OR THINGS IN ACTION, AT A PRICE NOT LESS THAN FI VE
HUNDRED PESOS, UNLESS THE BUYER ACCEPT AND
RECEIVE 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 PERSON ON WHOSE
ACCOUNT THE SALE IS MADE, IT IS A 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.
UNAUTHORIZED CONTRACTS: These are “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.”
THE STATUTE OF FRAUDS: to prevent fraud, and not to
encourage the same. Thus, certain agreements are required to
be in writing so that they may be enforced.
Since memory is many times unreliable, oral agreements may
sometimes result in injustice. To aid human memory, to prevent
the commission of injustices due to faulty memory, to
discourage intentional misrepresentations, are the principal
aims of the Statute of Frauds.
GENERAL RULES OF APPLICATION OF STATUTE OF FRAUDS:
1) The Statute of Frauds applies only to executory contracts
(contracts where no performance has yet been made) and not
partially or completely executed (consummated contracts).
2) The Statute of Frauds cannot apply if the action is neither for
damages because of the violation of an agreement nor for the
specific performance of said agreement.
3) The Statute of Frauds is exclusive, that is, it applies only to the
agreements or contracts enumerated herein.
4) The defense of the Statute of Frauds may be waived.
5) The Statute of Frauds is a personal defense, that is, a contract
infringing it cannot be assailed by third persons.
6) Contracts infringing the Statute of Frauds are not void; they
are merely unenforceable.
7) The Statute of Frauds is a Rule of Exclusion, i.e., oral evidence
might be relevant to the agreements enumerated therein and
might therefore be admissible were it not for the fact that the
law or the statute excludes said oral evidence.
8) The Statute of Frauds does not determine the credibility or
weight of evidence. It merely concerns itself with the
admissibility thereof.
9) The Statute of Frauds does not apply if it is claimed that the
contract does not express the true agreement of the parties. As
long as the true or real agreement is not covered by the Statute
of Frauds, it is provable by oral evidence.
ART. 1404. UNAUTHORIZED CONTRACTS ARE GOVERNED
BY ARTICLE 1317 AND THE PRINCIPLES OF AGENCY IN
TITLE X OF THIS BOOK.
ART. 1405. CONTRACTS INFRINGING THE STATUTE OF
FRAUDS, REFERRED TO IN NO. 2 OF ARTICLE 1403, ARE
RATIFI ED BY THE FAILURE TO OBJECT TO THE
PRESENTATION OF ORAL EVIDENCE TO PROVE THE SAME,
OR BY THE ACCEPTANCE OF BENEFI TS UNDER THEM.
RATIFICATION OF CONTRACTS INFRINGING THE STATUTE
OF FRAUDS:
(a) Failure to object to the presentation of oral evidence (this is
deemed a waiver).
(b) Acceptance of benefits under them (thus, the statute does
not apply to executed or partially executed or performed
contracts).
ART. 1406. WHEN A CONTRACT IS ENFORCEABLE UNDER
THE STATUTE OF FRAUDS, AND A PUBLIC DOCUMENT IS
NECESSARY FOR ITS REGISTRATION IN THE REGISTRY OF
DEEDS, THE PARTIES MAY AVAIL THEMSELVES OF THE
RIGHT UNDER ARTICLE 1357.
ART. 1407. IN A CONTRACT WHERE BOTH PARTIES ARE
INCAPABLE OF GIVING CONSENT, EXPRESS OR IMPLIED
RATIFI CATION BY THE PARENT, OR GUARDIAN, AS THE
CASE MAY BE, OF ONE OF THE CONTRACTING PARTIES
SHALL GIVE THE CONTRACT THE SAME EFFECT AS IF ONLY
ONE OF THEM WERE INCAPACITATED. IF RATIFICATION IS
MADE BY THE PARENTS OR GUARDIANS, AS THE CASE MAY
BE, OF BOTH CONTRACTING PARTIES, THE CONTRACT
SHALL BE VALIDATED FROM THE INCEPTION.
ART. 1408. UNENFORCEABLE CONTRACTS CANNOT BE
ASSAILED BY THIRD PERSONS.
VOID OR INEXISTENT CONTRACTS (f) Generally, no action to declare them void is needed, since
they are inexistent from the very beginning.
VOIDABLE AND VOID CONTRACTS DISTINGUISHED (g) They cannot be ratified.

VOIDABLE VOID ART. 1410. THE ACTION OR DEFENSE FOR THE

May be ratified
produces effects 'til annulled
defect is due to incapacity
or vitiated consent
valid 'til annulled
may be cured by
prescription
defense may be invoked
only by the parties (those
principally or subsidiarily
liable), or their successors
in interest and privies
referred to as relative or
conditional nullity
UNENFORCEABLE AND VOID CONTRACTS DISTINGUISHED
UNENFORCEABLE
may be ratified
there is a contract but it
cannot be enforced by a
court action
cannot be assailed by third
parties
ART. 1409. THE FOLLOWING CONTRACTS ARE INEXISTENT
AND VOID FROM THE BEGINNING:
(1) THOSE WHOSE CAUSE, OBJECT OR PURPOSE IS
CONTRARY TO LAW, MORALS, GOOD CUSTOMS, PUBLIC
ORDER, OR PUBLIC POLICY;
Cannot be ratified DECLARATION OF THE INEXISTENCE OF A CONTRACT DOES
generally, effects are not NOT PRESCRIBE.
produced at all
the defect here is that ART. 1411. WHEN THE NULLITY PROCEEDS FROM THE
ordinarily, ILLEGALITY OF THE CAUSE OR OBJECT OF THE CONTRACT,
public policy is militated AND THE ACT CONSTITUTES A CRIMINAL OFFENSE, BOTH
against PARTIES BEING IN PARI DELICTO, THEY SHALL HAVE NO
void from the very ACTION AGAINST EACH OTHER, AND BOTH SHALL BE
beginning PROSECUTED. MOREOVER, THE PROVISIONS OF THE PENAL
so generally, no action is CODE RELATIVE TO THE DISPOSAL OF EFFECTS OR
required to set it aside, INSTRUMENTS OF A CRIME SHALL BE APPLICABLE TO THE
unless THINGS OR THE PRICE OF THE CONTRACT.
the contract has already
been performed THIS RULE SHALL BE APPLICABLE WHEN ONLY ONE OF THE
cannot be cured by PARTIES IS GUILTY; BUT THE INNOCENT ONE MAY CLAIM
prescription WHAT HE HAS GIVEN, AND SHALL NOT BE BOUND TO
defense may be availed of by COMPLY WITH HIS PROMISE.
anybody, whether he is a
party to the contract or not, THE ‘PARI DELICTO’ RULE REFUSES LEGAL REMEDY TO
as long as his interest is EITHER PARTY TO AN ILLEGAL AGREEMENT AND LEAVES
directly affected. THEM WHERE THEY WERE: Ours are courts of both law and
referred to as absolute equity –– they compel fair dealing and do not abet clever
attempts to escape just obligations.
nullity
ART. 1412. IF THE ACT IN WHICH THE UNLAWFUL OR
FORBIDDEN CAUSE CONSISTS DOES NOT CONSTITUTE A
CRIMINAL OFFENSE, THE FOLLOWING RULES SHALL BE
VOID
OBSERVED:
cannot be ratified
no contract at all (1) WHEN THE FAULT IS ON THE PART OF BOTH
CONTRACTING PARTIES, NEITHER MAY RECOVER WHAT HE
HAS GIVEN BY VIRTUE OF THE CONTRACT, OR DEMAND
can be assailed by anybody THE PERFORMANCE OF THE OTHER’S UNDERTAKING;
directly affected
(2) WHEN ONLY ONE OF THE CONTRACTING PARTIES IS AT
FAULT, HE CANNOT RECOVER WHAT HE HAS GIVEN BY
REASON OF THE CONTRACT, OR ASK FOR THE FULFI
LLMENT OF WHAT HAS BEEN PROMISED HIM. THE OTHER,
WHO IS NOT AT FAULT, MAY DEMAND THE RETURN OF
WHAT HE HAS GIVEN WITHOUT ANY OBLIGATION TO
COMPLY WITH HIS PROMISE.

(2) THOSE WHICH ARE ABSOLUTELY SIMULATED OR TWO KINDS OF ILLEGAL CONTRACTS
FICTITIOUS; (a) Those where there is a criminal offense;
(1) Those where both parties are guilty (in pari delicto);
(3) THOSE WHOSE CAUSE OR OBJECT DID NOT EXIST AT (2) Those where only one is guilty and the other is innocent.
THE TIME OF THE TRANSACTION; Effects:
a) Since they are in pari delicto, they shall have no action against
(4) THOSE WHOSE OBJECT IS OUTSIDE THE COMMERCE OF each other.
MEN; b) Both shall be prosecuted.
c) The effects or the instruments of the crime (things or price of
(5) THOSE WHICH CONTEMPLATE AN IMPOSSIBLE the contract) shall be confiscated in favor of government.
SERVICE;
(b) Those where there is no criminal offense.
(6) THOSE WHERE THE INTENTION OF THE PARTIES (1) Those where both are guilty.
RELATIVE TO THE PRINCIPAL OBJECT OF THE CONTRACT (2) Those where only one is guilty or at fault.
CANNOT BE ASCERTAINED; Effects:
a) The guilty party cannot recover what he has given by reason
(7) THOSE EXPRESSLY PROHIBITED OR DECLARED VOID BY of the contract, or ask for the fulfillment of what had been
LAW. promised him.
b) The party not at fault may demand the return of what he has
THESE CONTRACTS CANNOT BE RATIFIED. NEITHER CAN given, without any obligation to comply with his promise.
THE RIGHT TO SET UP THE DEFENSE OF ILLEGALITY BE
WAIVED. THE PARI DELICTO DOCTRINE
(a) If the two parties to a contract are in pari delicto, the doctrine
TWO KINDS OF VOID CONTRACTS: applies even to the spouse of one of them, who although not a
(a) The inexistent ones signatory to the contract, has sufficiently manifested by
(b) The illegal or illicit ones affirmative acts her unequivocal concurrence to the contract in
controversy.
SIMULATED CONTRACTS: b) The doctrine does not apply to fictitious or absolutely
(a) If absolutely simulated, the contract is void for utter lack of simulated contracts.
consent. (c) The doctrine does not apply where a superior public policy
(b) If relatively simulated, the hidden or intended contract is intervenes. Thus, even if a homestead owner sells it within the
generally binding. prohibited period and with presumed knowledge that it is
illegal, still the owner or his heir may sue for its recovery, for the
SOME CHARACTERISTICS OF VOID CONTRACTS: purpose of the law is to grant land to said owner or his heir.
(a) The right to set up the defense of illegality cannot be waived (d) The “pari delicto” rule does not apply in case of void
and may be considered on appeal even if not raised in the trial contracts which are simulated to circumvent a law.
court.
(b) The action or defense for their declaration as inexistent does ART. 1413. INTEREST PAID IN EXCESS OF THE INTEREST
not prescribe. ALLOWED BY THE USURY LAWS MAY BE RECOVERED BY
(c) The defense of illegality of contracts is not available to third THE DEBTOR, WITH INTEREST THEREON FROM THE DATE
persons whose interests are not directly affected. OF THE PAYMENT.
(d) Cannot give rise to a contract; thus “a contract which is the
direct result of a previous illegal contract is also void and ART. 1414. WHEN MONEY IS PAID OR PROPERTY
inexistent.” DELIVERED FOR AN ILLEGAL PURPOSE, THE CONTRACT
(e) Generally produces no effect. MAY BE REPUDIATED BY ONE OF THE PARTIES BEFORE THE
PURPOSE HAS BEEN ACCOMPLISHED, OR BEFORE ANY
DAMAGE HAS BEEN CAUSED TO A THIRD PERSON. IN SUCH
CASE, THE COURTS MAY, IF THE PUBLIC INTEREST WILL
THUS BE SUBSERVED, ALLOW THE PARTY REPUDIATING
THE CONTRACT TO RECOVER THE MONEY OR PROPERTY.

ONE INSTANCE WHERE RECOVERY CAN BE HAD EVEN IN

THE PRESENCE OF PARI DELICTO:
(a) If the purpose has not yet been accomplished;
(b) Or if damage has not been caused any third person.

ART. 1415. WHERE ONE OF THE PARTIES TO AN ILLEGAL

CONTRACT IS INCAPABLE OF GIVING CONSENT, THE
COURTS MAY, IF THE INTEREST OF JUSTICE SO DEMANDS,
ALLOW RECOVERY OF MONEY OR PROPERTY DELIVERED
BY THE INCAPACITATED PERSON.

ART. 1416. WHEN THE AGREEMENT IS NOT ILLEGAL PER SE

BUT IS MERELY PROHIBITED, AND THE PROHIBITION BY
THE LAW IS DESIGNED FOR THE PROTECTION OF THE
PLAINTIFF, HE MAY, IF PUBLIC POLICY IS THEREBY
ENHANCED, RECOVER WHAT HE HAS PAID OR DELIVERED.

Illegal per se contracts are those forbidden because of public

interest.

Merely prohibited contracts are those forbidden because of

private interests. Here recovery is permitted, provided that:
(a) The contract is not illegal per se,
(b) The prohibition is designed for the protection of the plaintiff,
(c) And public policy would be enhanced by allowing the
recovery.

ART. 1417. WHEN THE PRICE OF ANY ARTICLE OR

COMMODITY IS DETERMINED BY STATUTE, OR BY
AUTHORITY OF LAW, ANY PERSON PAYING ANY AMOUNT IN
EXCESS OF THE MAXIMUM PRICE ALLOWED MAY RECOVER
SUCH EXCESS.

ART. 1418. WHEN THE LAW FI XES, OR AUTHORIZES THE

FIXING OF THE MAXIMUM NUMBER OF HOURS OF LABOR,
AND A CONTRACT IS ENTERED INTO WHEREBY A LABORER
UNDERTAKES TO WORK LONGER THAN THE MAXIMUM
THUS FI XED, HE MAY DEMAND ADDITIONAL
COMPENSATION FOR SERVICE RENDERED BEYOND THE
TIME LIMIT.

ART. 1419. WHEN THE LAW SETS, OR AUTHORIZES THE

SETTING OF A MINIMUM WAGE FOR LABORERS, AND A
CONTRACT IS AGREED UPON BY WHICH A LABORER
ACCEPTS A LOWER WAGE, HE SHALL BE ENTITLED TO
RECOVER THE DEFI CIENCY.

ART. 1420. IN CASE OF A DIVISIBLE CONTRACT, IF THE

ILLEGAL TERMS CAN BE SEPARATED FROM THE LEGAL
ONES, THE LATTER MAY BE ENFORCED.

ART. 1421. THE DEFENSE OF ILLEGALITY OF CONTRACTS IS

NOT AVAILABLE TO THIRD PERSONS WHOSE INTERESTS
ARE NOT DIRECTLY AFFECTED.

ART. 1422. A CONTRACT WHICH IS THE DIRECT RESULT OF

A PREVIOUS ILLEGAL CONTRACT, IS ALSO VOID AND
INEXISTENT.