DEFECTIVE CONTRACTS

Defective contracts are those which may be relatively ineffective in relation to certain parties.
The following are the kinds of defective contracts:

1. Rescissible Contracts
2. Voidable Contracts
3. Unenforceable Contracts(as discussed in this article)
4. Void or inexistent contracts(as discussed in this article)

RESCISSIBLE CONTRACTS

Rescissible Contracts are those validly agreed upon but, by reason of lesion or economic
prejudice may be rescinded in cases established by law. These are contracts which can be
rescinded as a remedy given by law to prevent damage by restoration of their condition at the
moment prior to time of the celebration of the contract.

Art. 1380. Contracts validly agreed upon may be rescinded in the cases established by law.
(1290)

What contracts are rescissible?

Art. 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;

*Lesion is the injury which one of the parties may suffer by virtue of a contract disadvantageous
to him. The lesion must be made known or could have been made known at the time of the
making of the contract for contract to be rescinded. Guardians must only manage the property of
the ward and must resort to guardianship court for any acts of administration.

(2) Those agreed upon in representation of absentees, if the latter suffer the lesion
stated in the preceding number;

*Legal representatives of absentees have the same powers and duties with guardians.

(3) Those undertaken in fraud of creditors when the latter cannot in any other manner
collect the claims due them;
 *The contract must have been executed with the intention of prejudicing the rights of creditors.
This intention must be proved since, despite causing damage if the fraudulent intent is not
present then the contract cannot be rescinded.

(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;

*This contract refer to those that are executed by defendants involving ownership or possession
of a thing and such contract is made without the knowledge or approval of the plaintiff or the
court.

(5) All other contracts specially declared by law to be subject to rescission. (1291a)

 VOIDABLE CONTRACTS

Voidable contracts are those in which all of the essential elements for validity are present,
although the element of consent is vitiated. A contract will be voidable of annullable due to
certain instances such as when there is want of capacity or consent. Until invalidated, the
contract remains to be valid and binding between the parties. The law expressly provides that:

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
influence or fraud.

These contracts are binding, unless they are annulled by a proper action in court. They
are susceptible of ratification. (n)

What contracts are voidable?

1. Those where one of the parties is incapable of giving consent to a contract;

2. Those where the consent is vitiated by

Art. 1330. A contract where consent is given through mistake, violence, intimidation,
undue influence, or fraud is voidable. (1265a)

UNENFORCEABLE CONTRACTS

Unenforceable contracts are those which cannot be enforced by proper action in court unless
they are ratified. This kind of contract does not produce any legal effect unless ratified.

What contracts are unenforceable?

The following article is an enumeration of what are unenforeceable contracts:

Art. 1403. The following contracts are unenforceable, 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 five 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 of 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.

What is the Statute of Frauds?

The Statute of Frauds is a legal provision which requires agreements for the sale of real estate
to be in writing in order to be enforceable.The contracts/agreements under the Statute of Frauds
require that the same be evidenced by some note, memorandum or writing, subscribed by the
party charged or his agent, otherwise, the said contracts shall be enforceable.The Statute of
Frauds apply only to executory contracts, not to those that are partially or completely fulfilled.

VOID CONTRACTS

Void contracts are those where all of 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 contract
itself is prohibited or declared void by law.

What contracts are void?

The following article is an enumeration of what are void contracts:

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; (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 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 contract
cannot be ascertained; (7) Those expressly prohibited or declared void by law. These
contracts cannot be ratified. Neither can the right to set up the defense of illegality be
waived. 

What are inexistent contracts?

Inexistent contracts those where one or some or all of the requisites essential for the validity of
a contract are absolutely lacking. This is equivalent to nothing like that of a void contract. It is
absolutely wanting in civil effects. Void and inexistent contracts are terms which may be
interchanged.