CHAPTER 13 – VOID OR INEXISTENT − Party can always bring a court action to

CONTRACTS declare it V/I

− Party against whom a void contract is sought
Art. 1409. The following contracts are inexistent and to be enforced can always raise defense of
void from the beginning: nullity
− DESPITE PASSAGE OF TIME
(1) Those whose cause, object or purpose is contrary to  Defect (permanent & incurable): action or
law, morals, good customs, public order or public defense does not prescribe (walang
policy; statue yata)
(2) Those which are absolutely simulated or fictitious;
 No need for judicial declaration to
(3) Those whose cause or object did not exist at declare VOID: unnecessary
the time of the transaction; − Within right of a party to unilaterally cancel
and treat as avoided a V−contract
(4) Those whose object is outside the commerce
 HAJIMAN: action to declare non−existence can
of men;
be maintained: plaintiff may recover what he
(5) Those which contemplate an impossible service; has given
− Better: judicial declaration of nullity be secure
(6) Those where the intention of the parties relative
− To give peace of mind and avoid taking of law
to the principal object of the contract cannot be
into parties’ own hands
ascertained;

(7) Those expressly prohibited or declared void by law. Art. 1411. When the nullity proceeds from the illegality
of the cause or object of the contract, and the act
These contracts cannot be ratified. Neither can the
constitutes a criminal offense, both parties being in pari
right to set up the defense of illegality be waived.
delicto, they shall have no action against each other,
and both shall be prosecuted.
Void Contracts
− Because of certain defects, generally Moreover, the provisions of the Penal Code relative to
produce no effect at all the disposal of effects or instruments of a crime shall be
− Considered inexistent from very beginning applicable to the things or the price of the contract.

This rule shall be applicable when only one of the

Inexistent Contracts parties is guilty; but the innocent one may claim what
− Agreements: lack one or some or all he has given, and shall not be bound to comply with his
of elements (consent, object, cause) promise. (1305)
− Do not comply with formalities: essential
for existence of contract RULES: contract is illegal & act constitutes criminal
offense & both parties ate in pari delicto (in = fault)
CHARACTERISTICS OF VOID OR INEXISTENT CONTRACT
1. Produces no effect whatsoever 1. Parties shall have no action against each
2. Cannot be validated either by time other, or as stated in the legal maxim. In pari
or ratification melior est condition defendentis: Where the
3. The right to set up defense of illegality, parties are equally at fault, the situation of
inexistence or absolute nullity cannot be the defendant is the more favorable.
waived
4. defense of illegality, inexistence or 2. Both shall be prosecuted
absolute nullity does not prescribe 3. The things or price of contract, as effects or
5. defense of illegality, inexistence or absolute instruments of crime, shall be confiscated
nullity is not available to thirds whose in favor of the govt
interests are not directly related
6. cannot give rise to valid contract RULES: contract is illegal & act constitutes criminal
offense BUT ONLY ONE PARTY IS GUILTY
− IF: only one party is guilty, or not equally
 EFFECT: void or inexistent contract guilty (delicto, but not pari delicto)
− No effect either against or in favor of anyone − ABOVE RULE (paragraph 1) applies only to
− Vests no rights | creates no obligations guilty party / more guilty
− Does not create, modify, or extinguish − Innocent / less guilty: may claim what he has
juridical relation to which it refers given | not be found to comply w/ his
promise
Art. 1410. The action or defense for the declaration of
the inexistence of a contract does not prescribe
(free/voluntary).

 Action stated: CAN BE FILED ANY TIME

Art. 1412. If the act in which the unlawful or forbidden Art. 1415. Where one of the parties to an illegal
cause consists does not constitute a criminal offense, the contract is incapable of giving consent, the court may, if
following rules shall be observed: the interest of justice so demands, allow recovery of
money or property delivered by the incapacitated
(1) When the fault is on the part of both person.
contracting parties, neither may recover
what he has given by virtue of the contract, Art. 1416. When the agreement is not illegal per se
or demand the performance of the but is merely prohibited, and the prohibition by the
other’s undertaking; law is designed for the protection of the plaintiff, he
may, if public policy is thereby enhanced, recover
(2) When only one of the contracting parties is at what he has paid or delivered.
fault, he cannot recover what he has given by
reason of the contract, or ask for the fulfillment REQUISITES FOR ART 1416
of what has been promised him. The other, 1. Agreement is not illegal per se but is
who is not at fault, may demand the return of merely prohibited
what he has given without any obligation to 2. Prohibition is designed for protection of
comply with his promise. (1306) the plaintiff
3. Public policy would be enhanced by allowing
 RULES: contract is unlawful / forbidden but plaintiff to recover what he has paid /
not a criminal offense (PARI DELICTO) delivered
1. Neither may recover what he has given
by virtue of contract Art. 1417. When the price of any article or commodity is
2. Neither may demand performance of determined by statute, or by authority of law, any
other’s undertaking person paying any amount in excess of the maximum
3. No relief can be granted to either, law price allowed may recover such excess.
will leave them where they are
Reason for rule:
 RULES: contract is unlawful / forbidden but − To curb the evils of profiteering
not a criminal offense (one is guilty) or blackmarketing
1. Guilty party (GP) loses what he has given
by reason of contract Art. 1418. When the law fixes, or authorizes the fixing
2. GP cannot ask for fulfillment of other’s of the maximum number of hours of labor, and a
undertaking contract is entered into whereby a laborer undertakes
3. IP may demand return of what he has given to work longer than the maximum thus fixed, he may
4. IP cannot be compelled to comply with demand additional compensation for service rendered
this promise beyond the time limit.

Art. 1413. Interest paid in excess of the interest Art. 1419. When the law sets, or authorizes the setting
allowed by the usury laws may be recovered by the of a minimum wage for laborers, and a contract is
debtor, with interest thereon from the date of the agreed upon by which a labourer accepts a lower wage,
payment. he shall be entitled to recover the deficiency.

Art. 1414. When money is paid or property delivered Art. 1420. In case of a divisible contract, if the illegal
for an illegal purpose, the contract may be repudiated terms can be separated from the legal ones, the latter
by one of the parties before the purpose has been may be enforced.
accomplished, or before any damage has been caused
to a third person. In such case, the courts may, if the  EFFECT OF ILLEGALITY: contract is divisible
public interest will thus be subserved, allow the party Divisible / severable – consideration is made up
of several parts
repudiating the contract to recover the money or
 IF: illegal ones can be separated from legal
property.
portions without doing violence to
intention
REASONS for rule:
− Legal can be enforced
− Permitting recovery when agreement is
RULE: SUBJECT TO CONTRARY INTENTION OF PARTIES
still merely executory IS FOR:
− Encouragement of abandonment of illegal
Art. 1421. The defense of illegality of contracts is not
agreements & prevention of violation of
available to third persons whose interests are not
law
directly affected.
REQUISITES FOR APPLICATION OF ART 1414
− Action above is available to thirds ONLY IF
1. Contract is for an illegal purpose
his interest is directly affected by contract
2. Contract is repudiated (denied / refused)
before purpose has been accomplished or
before any damage has been cause to a third
3. Court considers that public interest will
be subserved by allowing recovery