(- RFBT-05-04- 70 Which one or more persone bind themselves in favour of ancther or others, cr rediprecally, to the fulflment of a prestation to give, to éo or not to cb. 2) Principles on Obligations arising from Contract Obligations arising from contracts have the force of law between contracting parties. (Obligations arising from contracts stould be comoled within good fat. Stages of Contract 2) Conception or preparation or generation stage isthe fist stage of contract that involves preliminary negotiations and bargaining, discussion of terms and condtions, with ro arval yet (of definite acreement. Ths stage endsat the moment of agreement ofthe parties b) Perfection or birth stage is the second stage of contract when there is meeting of minds between the parties on a definte subject matter and vald use. It is the moment when the partes come to agree cn the terms of the contrac. ©) Termination or consummation stage Is the last stage of contact when the contract has been fuflled resutng in its accomplshrent It refers tothe performance ofthe terms agreed. Characteristics of Contracts 2) Obligatory force of contract means that the contractual agreement cinsttutes the law as between the partes Italso means thatthe parties are bound not only to the fulfilment of what has Been expressly stipulated in the coniract ut also to all the consequences which, according tother nature, may bein keeping with good falth, usage and lw. 2) Mutuality of contract means thatthe validity o camplance of contract cannot be let to the wil of only one ofthe raties. The contract must bind both contracting partes. i, Determination of the performance of contract 1. The determination or vallty or complarce of 2 contrac: cannot be left to the Judgment of cne the parties only because i violates mutuality of contract. 2. The cetermination of the perfomarce of contract may be left toa third person, whose ‘ecison shall not be binding until it has been made known to both contracting paris. 3, If the determination of the performance of the contract of a third person designated by the contract partes evidently nequtable, the curt shal decde what is equitable Under the circumstances b) Relativity of contract means that contract Is binding only upon the contracting partes and their socessors such as ther heirs and assignees. |. Principles on Relativity of Contract 1. The heirs are liable to the debts of the decedent but only up to the extent of the property they inherited. It's ony the natural obligation ofthe hels to pay the unpaid debts oftheir predecessors beyend the value of the properties they inherited. 2 As a general rule, rights and obligations arising from contracts are transmissible. However, the following are the exceptional rights and ‘obligations arising from contracts which are intransmissible: 2). Those rights which are provided by law to be iniransmissble. 1. Example: Right fo vote in natona or cal elecion 1) Those rights which are stipulated inthe conract to be intrensmissible Example: Membership in SNR Exclusive Stopping Those rights which are purely personal in nature, | et (3) ) TL, Exceptions to Relativity of Contract — The following are the instances wherein thd partes may be bound or may be affected by contrac a 11. Stipulation in favor of third person or stipulation pour autrul a) Requisites of stipulation pour autrut or stipulation in favor of third person “There must be stipuation in fevor ofa third parson. “The stipuation should be @ par, nt the whol, of the contract. “The contracting parties must have clearly and deliberately confered a favor upon a thd person and not a mere incidental beneft or interest. \v. The favorable stpulaton shoud not be condtuoned or compensated by any kind of cbigation whatever. The third person must have communicated his acceptance to the obligor beore ts revocation, Yi One of the contracting parties does not bear the legal representation or authorization ofthe third party. 1b) Concepts of stipulation Pour Autrul |. stipulaton in favor of third person tas no binding effect i tse before ts ‘acceptance by the party favored. Before acceptance by the third person, the contracting partes; by mutual agreemert, may modify the contract revoke it LA mere incidental interest or benefit isnot within the doctrine of stipulation our aur 'v. The stipulation pour autrul does not exist the contract is considered null and vol 2 Contracts creating real rights wich are registered with Registry of Deeds uch as registered real estate morigage or registered pacto de retro saie/ le with a Fight to repurchase ~ The reisvation to Registy of Propery/Deeds is considered 2 constuctve nobie tothe whole world. Any person who wil acquire Sich psery wil be bound by ie anrotated ten, 3. Cilatracts intended to defraud creditor ~ The defrauced creitor may fle an ‘action for cancellation of eotract entered by the debtor to delraud the creditor. 4. When third person induces a party to the contract to violate the contract ~ A contracting party may file an action for éamages against a third person whoinduced a contracting party to violate a contract. Void contract that directly affected a third person — A third person directly affeced by a void contract may fle an action for dectaration of nulity of such contract In order to protect is right li, Contracts that may be not assailed by a third person 4. Perfectly vald contract 2. Voidoble contract 3. Unenforcentle contact> (a 6) “Legality of contract means that contracts should not be contrary to law. 2. Types of Elements of Contract 0 2) Essential elements refer to those which ae requis inorder fora contract to exist. They are necessary for valid of contract and may not be waved by the parties. Absence of any ofthe fescenial elements will make the eoctract void the remedy cf which of injured party is ‘Secretion of rly, Consensual Contract 1, Consent of the contracting partes 2. Object certain which isthe subject matter of the contract, 5. Cause ofthe chagation which is estabishes Real Contract 1 Concent ofthe contracting parties 2. Object cortin wich is the subject matter of the contract 5. Cause ofthe otagaton which estabishes 4. Deivery ofthe subject matter ‘Solemn or Formal Contract 1. Consent of the contracting parties 2. Object certain whch is the subject matter of the contract 3, Geise of the obagaton wich s estabished 44. Formalty oF sokemety requires by law by Natural elements refer to those wich already est In certain contract kness set aside or ‘suppressed bythe parties. They may be waived by te parties as long as the waver Is made in ‘good fat. Warranty apainst eviction in a contract of sae. | Warranty against hidden defects in a contrac f sale. 55, Wrrany for merchantabitty in.a contract of sae |. Warranty against heden and unregistered encumbrance ina contract of ste. ©) Accidental elements refer to those tat donot nermaly exit in 2 contact unless stipulated ‘9 provides by the parties. i "Terms of payment in 2 contract of sale. 4 Conveetiona interest in a contrat of tan, 3. Types of Contracts 2) Aso Perfection of Contract Consensual contract isa contract perfected by mere cansentor bythe mesting of minds ofthe contracting parties, {.corerac of lease 2-Conmract of sale $Ficonsract of partnership ‘Contract of egenoy 5. Contract of reel ate mortgane {.Contact of commnon earier Raat contract Isa contract perfected by the dlivery af the ject of eaeerct 1LCostract of lan or mut Zicortact of comenadatum 5 Conmact of deoost 4.Contact of pledgece (le) CG ICARE Accountancy Review = “ i, Solemn or Formal contract is 2 contract perfected by the execution ofthe formality solemety reqited byl 1. Negotiable instruments must be mode sticty lo the form provided by the Negotiable Insruments: Law in ordered to be considered negotabi. However, non regotobie Instruments eeman to be vas ad big. 2, Contract of marriage must have al the Salers requted by Fmiy Code of the PPsippines fort to be vad such as marrage loans, capscy of contacting partes, ‘bahorky of solemnting ofcer and persona appearance of contracting partes. 3. Comtract of donation of personal property in excess of P5,000-must be made ‘aed aceepted in wing to be vai 4. Contract of danation of real property must be made and accepted ln public Irezuments to be vale. The notarized coeds of donation and acceptance may Be mace ia singe document or separate documents. 5. Comtract of antichresis requires that the agreement of anticress including the Drecial and iteest of secured contract f lan a must be specified in wing to Be 6, Agreement or stipulation to pay Interest in contract of loan must be in writag Ir order for such agreement tobe val, However, contact of loan nat required bein witing tobe vad because 62 rea cnvac. 7. Contract of chattel mortgage requies i o be registered with Chttel Mortgage Regity tobe val 8, Contract of partnership to wich real properties or relight ore contributed mast ben a pubse instrument, with a inventory of real property attached thereto, forthe Cenivact of partnership to be va 9, Sale ofa piece of land by the agent in the name ofthe principal, the authority of the age to sal the land mst ben won for the contrat sale ouch and to Be vad 10, Sale of community or conjugal property by one of the spouses, there must be axthorty given bythe ether spas tothe saling spouse. However, the sale made By the one spas wou he ater ee her cnsaes 3 contig fer en he iter, Form of Contract ” » Contracts shal be obligatory, In whatever form they may have been entered ito, prowed a ‘he esse raqulites forthe oly are preset. However, when Une law requis tht 8 ceiract be in some form In order the It may be vad or enforceable, or that @ contrac Be ‘rove ina certain way, tis requirements absolte and inckspensable, in such cases, the rab ofthe partes to compel the other party to obseve the formelty required by law for mere Convenlence cannot be xacised. Tr the law fequres 9 document or cer specal fom, af inthe acts and contracts, for the convenience of the conractng partes, the contain parties may compel each other %2 cbserve fat form, once the contract has been perfected. This right may be exersad ‘Smutaneousiy withthe ction upon the cntoct. ‘Remedy to compel the other party to observe the formality required by law for mere ‘convenience Is 2 legal remedy avellabi ony Ifthe contract 1s veld and enforceable, This lege ‘2eton wl ot prosper Ifthe contrat Es ether unenforceable oF vos. » Contracts required to be in Public Document for mere convenience but not for wvallaity |. Ads or contracts which have for their object the creation, transmision, modieation ‘extngashment or rea ights over immovable groper. 1, The cession, repudiation or renaciaton of heedtary rights of of thase ofthe conus Partneip of goin. li. The poner to atminister property, or any other power which has for & object an act _agpearna or which should appear fa pubic document, or should prejudice 3 thr eran5S. Remedy to compel the other party to observe the formali}: required bby law for mere ‘convenience « 3 legal remedy available only the contract is les and enforceable, This lap ‘ection wil not prasper If the contract is ether unenforceeble or void 8) Contracts required to be in Public Document for mere convenience but not for validity |. Acts or contracts wich have For their object the creation, transmission, madiiction or ‘extinguishment or real rights over immovable property. “The cess, repudiation or renunciation of hereditary rights or of those of the conjugal partnersiop of gains. ‘The power to administer property, er any other power which has for Bs object an act ‘appearing or which should appear ina pubic dacurment, or should prejudice a third person |. The cession of actions or rights procecding from an actappewring la. pusic document RLAEO/OSALESINVALOERRAMA ICARE Accountancy Review 1B) Contracts required to be in written instrument, whether public Instrument or private instrument, for mere convenience but nat for validity 1k Contracts where the amount involved excaeds five hundred pesos ©) Note: The formality provided in letter (a) ond (b) i neither for validity nor enforceability but for mere cenwenienee, Thus, the contracts mantioned above are parfected by mare: eansent ‘Therefore, the contracting parties may compel each other to observe that form, once the contract hes been perfected, 6. Aste Cause of the Contract 2} Onerous contract is 2 contract whereby there is an exchange of valuable consideration, For ich epetvartney ety. Hi env bs odin ar Win taretion 2F thier aw cies ByOjmew (alaj) 4208) »@) —= = 1) Contracts requirad tobe in written instrument, whether public instrument or private Instrument, for mere convenience but not for validity 1. Contras where the amount inated exreds fhe hundred pesos ©) Note:The formality provided inlets (a) and (b) nether for valty nor enforeabty tut fer mere convenience. Thus, the carats mentioned above ae perfected by mere conser ‘Therefore, the contracting paris may combe each other to choerve that form, once the Contract hasbeen perfec 6. -Asto Cause of the Contract 28) Onerous contract Is 2 contract whereby thee is an exchange of valuable consideration For ‘ech cotvactng party, the cause is the preston cr the promise of a ting or service by the omer re Contact of sle 4. Conret of ease i, Conret of barter ©) Gratuitous contract is a contract whereby one party reccie>'no equivalent consideration, “These contacts ae refered to. as contacts Of pure beneficenc, the cause of which Is the erly or generosty ofthe benefacr 1. Contac of donation fi, Contact of commode 1) Remuneratory contract is a contract whéreby the cause her isthe service or bene Contato service i, Contato empeyment 7. ther Contracts 28) Prinelpal contracts a contract that can standby sl 1 Contoct of ele 1. Contac ean ) Accessory contract is 2 contract whose exitence depends upon another contrat kaown 2: Pineal cera contrac of sedge 1 Contract of chattel mortage 1. Contact of antchess Iv Contract of real estate morgage 1 Contact of guarantee ©) Preparatory contrac s2 contact which seves as means by which other contacts may be ‘reread ts contact of spency 1 Contact of partnership 4) Nominate contract i contract which has a name under the Qt Cade o spec a 1 Contac of sle | Contact of agency "Contac of partnership he Contract of surance Contract of marriogeBaye 6090 C) 1) Commutative contract i contract whereby the parties give almost equivalent values; hence, ‘there ls real filmer, Contract of ale Contract of lease fh Contract of barter 5) Aleatory contract is 9 contract whose fulfilment depends upon chance 1 contrat of surance hy Unilateral contract is e contract whereby Only One of the parties is abligated te give oF to-do ‘something. |, Contract ‘of cammociatum (balee) 1k Contract of gretultous depost (depositary) 1) Bilateral contract isa contract whereby both parties are require’ to give or todo something. Contract of ele Contract of lease 3) Reciprocal contract is 2 contract wharaby the cause on the [har party isthe abject on the ‘ether party. 1. Contract of sie 1 Contract of barter ) Auto-contractis a contract wherein one person contracts with ims. |) Contract of adhesion is 9 contract wherein one party has already prepared the form of the ‘contract, containing the stipulations he desires, an he simply asks tether party to agree to ‘em IF he want to enter ito the contac. In case of emblguty or doubt, shal be construed ‘sicly against the preparer of the cocument of the contrac. Iti also krown as “ine print contract” or“take tr leave corte” Contract of reurance Contact of ewralment 1m) Executory contract is 2 contract that has not yet been performed. Certain execitory contract: ‘re covered by Statute of Fraud and required to be in wring In order for them to be ‘enforceable 1) Executed contract is 2 contact vtich has been performed, Its @ contract not covered by ‘Statute of Fraud. 8. Moment of Perfection of Contract 8) In case of consensual contract, upon consent of contracting parties ypon meeting of ‘minds of contracting parses b) In case of real contract, upon delivesy ofthe subject matter (©) In case of formal contractor solemn contract, upon execution of formalities or solemnitis ‘required by ian 9. Extent of Binding Effect of Contract 8) The paties are bound not oaly to the fulllment of what has been expressly stipuated in the contract but also to al te consequences whieh, secording tothe nature, May be In keeping ‘wih good fot, usage and aw. frase RUAGO/DSALESINVALDERRAMA Or ICARE Accountancy Review oe =a ee JPage jG » |Q) 2, rey 4 16, wy. 18 19 20, [Nature of contract The nature of contract is determined by the principles of law. ‘Consent is one ofthe essential elements of context It refers to the meting of minds betwen the contraing partes as regards the objec and cause of conrad. Principles of Consent 2} "Consent is manifested by the meeting af the offer and the acceptance upon the thing and the ‘cause hich ae to const the contract b) The offer must be eartam and the acceptance abel, ©). A qualified acceptance constitutes a counteroffer. 4) Consent may be expressed or implied. Binding Effect of Acceptance Through Telegram 8) The contract entered into though telegram is pefected from the time the accertance came to ‘he knowledge ofthe offer also known as Cognitive Theory, Place of Pertection of Contract entered Through Telegram, Letter or Telephone 2} The place of perfection of contract entared through telegram, letter er telephone is disputaly resumed by aw to be entered inthe place where the offer was made. ‘Requisites of an Offer in Order to have Mecting of Minds or Consent 2) Iemist be definite, ») Termust be certain. ©) Remust be complete 4) emus beintertional Concepts conceming Acceptance a) An acceptance may be expressed o mpi. ) The person making the afer may fax the time, place end manner of acceptance, al of which ‘qust be complied with. 1} Anoffer made tough an agent's accepted from the time acceptance Is communicated to the ‘agent not necessaely Co the rica 4) When the offerer has alowed the offrse a cerain period t accept, the affer may be ‘withdrawn at any time before acceptance by communicating such withdrawal, xcept when the ‘Sption is Founded upon a eansiderabon, orncthing rad or promise, Instances which if happened to either Offerer or Acceptor before acceptance will make the offer ineffective resulting to nullity of contract 2) Civlinterdction ) Insanity ©) Death 8) Insolvency Principles of Acceptance 2) An option contrac supported by consideration or option premium is valid and Binding and my ‘ot be wit, b) Business advertisements a mere invitations to make an offer (©) Advertisements for bidders ae simply imitations to make propasas. Incapacitated Persons to give Consent to 2 Contract 8). Unemancpsted minors or persons below 18 years of age b) Insane excest during lcs interval ©) Demented persons 4) ‘DesFmutes who do not kxow how to read and wie Drunken pe-son 1) Hypnotied person ‘Status of Contract entered into by Incapacitated Persons to give Consent te a Contract 2). Only one party i incapasie, (Voidable onthe part of incpactates person) 1) Both partes are incapable. (Unenforceable unt ried by the guardian ofthe incapactated ‘contracting parties)RFBT-05-04-Law- wrecore. (ETal(G) ZIG »@) S ICARE Accountancy Review = 21, Difference between contract wherein consent of either oF Bath contracting partes is ‘wanting and contract wherein consent of one ofthe contracting partes is uated 2) The contract's vod ithe consent wanting requing dedaration of nly of cote 1). The contracts vldabe the consent vated requrng anurment of contre. 22, Requsites of Consent to Make the Contract Perfect Valid and Not Voidable or Unenforoeabie 2) Sd be tigen, 2) shal be re ©) Reh be sportaneaus 6) Teshoulé no be ites. qT 23, Vices of Consent (FUMIV) which make the contract voidable 5) There wolence hen in oder to wrest consent, sous or iresstible force s employed |.” Requisites of violence to vtiate consent 1. There must be physical ore. 2. The physical force must be trestle, 5, The peal force must be the determining cause 9 ging the consent to the 1) Thare is intimidation when one of the contracting patos is compelled by a reasonable ard well-grounded fear of an imminent ard grave ev upon his person or property, or upon the ‘Berton or property af his spouse, descandants or ascendant, to ve his consent. 1 Requistes of intimidation ta vitate consent 1, The intimidation must be the determining couse ofthe consent, 2, The trentanet act must be unjust or una 5, The teat mus be real and serious. |The teat mus produce reasonable ana well rounded far ©). Thete is undue influence when @ person takes improper adwertage of his power over the wl of another, depring theater of @ reasonable freedom of chooe- €) Thre s causal fraud wen, through sous wars oF machinations of one ofthe contacting ures, the other fs induced to enter into a contact which, wbx them, he would no have read to ie Requleites of fraud to vitiate consent 4." emust have ben employe by one ofthe contracting partes ony. 2, emt have lnced the eter party to eer int the cna est have bean serous, ‘8° Remay of may ot result to damage or iy to the contracting partes. Presence of ngayon the complainant s ok necessary for the acten for annuiment of voit corat'0 rome ©) Mistake which shoud be substantia 1 istates that may wate consent resulting to volabity of contract ‘sake which std refer the substance ofthe ting which le the object ofthe comeoct 2, Mistake which should refer to those condtions which have pinopaly moved one or beth parties to enter into the contract. 3. Mistake as to identity or quaifications of one ofthe pares wherein such identity or qualifications have been the penal cause ofthe contact. 44. Paul ertor as to the egal effec: of an agreement when the real purpose ofthe pares is frustrated,Page wera” (a) @ S a Treg OORT oF ETATION Si, Impossible objector prestation Objector prestation cutie the commerce of men Y. Object or prestation Sat id nat exist atthe time ofthe transection Vi. Future inhertance vi, Vain hope 20, 30 3 Ea ICARE Accountancy Review Pod (Cause of contract i¢ one of the essential elements vs emakes to the immediate and ‘raimate purpose of whe contract or the essential reason which impels the cartracting parties to enter into it and which expains and justifies the creation of the oblgatin through such contract. 2) Causes of cifferant types of contract in Th omerous contrect the cause is understand to be, for each contracting party, the Prestation or promise of @ thing er service By the other. There 16 valuable consaeration i ‘8n onerous contrac. 5, In remuneratory contract, the cause isthe service or bene which is remunerated. Ji, In contract of pure beneficence or gratuitous contract, the cause the me fy. ‘The cause of accessory contract is the very cause or consideration of the princi! contract Difference between cause and motive 2) Contracts without cause or with unlawiul cuse produce no effect whatever and are considered ll ane wos ') Contracts without motive ar with uniawéul motive remain to be valk Principles concerning cause 2) The statement ofa false cause In contracts shall render them void, ft should not be proved ‘that Dey were founded upon another cause whichis tue and fant ') Athough the couse fs ot stated in We conract, Is presumed that I exsts ancl 6s fawful ‘unless the debtor proves the contrary. ©) AS.a general ule, lesion or inadequacy of cause does not invalidate 2 contact. The pater mes of he pees emai no contract are cere fom te cose c [Reformation of instrument isthe legal remedy availble: to the injured party in a contract wen the instrument or document that serves as tangible evidence of the contract does not express the ‘bue intention ofthe contracting partes. However, if mistake, fraud, inequitable conduct or accisent bas prevented 2 meeting ofthe minds ofthe parties, the proper remedy is not reformation of {che instrument but annulment of the contract. ®) Instances wherein reformation ofthe Instrument i the proper remedy ‘When 2 mutual mistake of the partes resuts tothe failure of the Instrument to disclose thelr real agreement. Aone party wos mstaken and the ether acted fraudlenty or nequitabiy Ia such 9 wey thatthe Instrument does not show their true Intestin, Ji, When one erty was mistaken ad the other knew oF believed thatthe istument didnot ‘ata ther real agement, bit concealed that fact from the former. |v. When thugh the imarance, lack of ski, negiigence or bad faith on the part ef the person ‘rafting the instrument or of the clerk of typist, the instrument does not express the true Intenton ofthe partes.Pageant Gis) (®) 4E) my rm SOMOS TH mara i. Last wal and testament whether holographic wil or etal wil We When the real agreements wold ©) Parties who may ask for the reformation of an instrument |. Ether party ithe mistake is mutual. 4. Injures party Successors n interest hls and assigns of injured party 4) Action for reformation of instrument and Action to enforce the instrument are Inconsistere remedies ae the complainant cannot have both toPoce RLAC O/DEALES/NVALDERRAMA L } ICARE Accountancy Review = 3 * Rules on Interpretation of Contract: 2) Ifthe tems of a contract are dear and leave no doubt upon the intention ofthe contracting partis, th iteral meaning shall be apaied by the court. b) Tr there is confet betwnen event Intron and words oF contrac, the intern ofthe partes shall prev 1) The interpretation of obscure words or stipulations in contact shal not fave the party who caused the sbscunty. 4) Tmedental creumstanices ofa gratuous contract shal be Interpreted wit the leas Wansmisson of rights ong interest ©) Incidental crcumstances of an onerous contract shal be interpreted with greatest reciprocity of interest. In case of doubt whether the contract & one of lan with martgage or one of pact reo se, it shall be interpretec as loan wth equitable mortgage in favor of sadal juice. @) Ifthe doubts are cast upon the princoal objet of the contract in such a way that it cannot be ‘von what may hve ean th inensan or Wil the parts, the contrac sll h) In arder to judge the intention of the contracing partes ther “contemporancous nd Subsequert acs sal be pricipaly considered ') However gzeral the tems of a carat may be, they shall not be understond to comprehend ‘things that ae dtinct and cases that are diferent fom thase upon which the pares. mended to agree. 1) If some stipulation of any contract should admit several meanigs, It sal be understood 2s bearing that import which Is most adequate to render in effectual. 1) The various stpuetions of @ contrac shall be Interpreted togeter,otributing to the doubt Cones that sense which may result from ai of them taken jit 1) Words wich may have ferent signicaions shel be understood in that which Is most in ‘Keeping wth the nate end object of re contrat. rm) The usage a custom of te place shal be bore In mind in the interpretation ef the ambiguities cf a contact, and sal fl the omissions of stipulations which are orinarily established, ‘Types of Defective Contracts from Least Defective to Most Defective 2)” Resciasble contract 3 defective contrat thet valid anc Sading until rescinded by the Court. I's 2 contract that has caused a particular damage to one of the partes orto a'thrd ‘eson, and which for equtable reasons may be se aide even Fits valid. The proper lesl remedy is action for rescission of rescscble contrac. ») Voldable or annullable contract % 0 defectve contract tht 's valid ond binding vet ‘annulled by the contrac. Is @ ctrct In which the orwent of one party Is cefective, tr(wre one sa mee oS OF SoPUIRS Wi Fe cranes, ‘Types of Defective Contracts from Least Defective to Most Defective a > ° o ‘Rescissible contract 8 detective contac that vad and binding until rescinded by the ‘our, Its @ contact tht nas coused a particular damage to one of the partes oto ad ‘eon, and which for equtabe reasons ray be: et aside even Is vai. The Proper kpal ‘amedy i action for rescsion of rescssble contrac Voidable or annullable contract © a defecive contract tht & vali and binding wt ‘anil by the contra I a contract In which the consort of one party i defective, eer ‘Because of want of capanty or because tis lated, but which contort vad unl sat ase ‘bya competent cout. Th proper leva remedy is acon for annuiment of voile contract Unenforceable contracts 2 defeci contact thats val although not bing unrated. 1S a cartract that for some reason cannot be erorced, unless is raid n the manoer _rovded by lve, There sno lgal vemedy required but to eave the contract ass. old or inexistent contract 2 defective cto thats valid and therefore not boing. I {san absolute nulty and produces no elect, asf had never been executed oF entered int ard ‘cannot be rtd, The xoper egal remedy is ation for decaration of nulty of void contract