4 KINDS OF DEFECTIVE CONTRACTS
1.
RESCISSIBLE –
valid until rescinded; has ALL essential (a) Entered into by guardian guardian whenever ward suffers damage by more than 1/4 requisites but because of injury/damage to one of the of value of object parties, the contract may be rescinded.
2.
– valid until until annulled annulled;; has ALL essentia essentiall more than ¼ of value of property requisit requisites es but because because of defect in consent, contract may be annulled. VOIDABLE
(b) Agreed upon in representation of of absentees, if absentee suffers lesion by
(c) Contracts where rescission is based on fraud committed on creditor (accion pauliana)
3.
sued/enforce rced d unless UNENFORCEABLE – cannot be sued/enfo eectt !"# !"# but but may may ta$e ta$e eect eect upon upon ratifed ; no eec rati%cation.
&.
VOID –
!" eect at all; cannot be ratifed/validated.
(d) Objects of litigation; contract entered into by defendant defendant w/o knowledge or approval of litigants or judicial authority (e) Payment by an insolvent – on debts w/c are not yet due; due; prejudices claim of others
KINDS OF DEFECTIVE CONTRACTS: (f) Provided for by law – art 1526, 1526, 1534, 1538, 1539, 1539, 1542, 1556, 1560, 1560, 1567 Those which which have caused caused a partic particula ularr and 1659 RESCISSIBLE RESCISSIBLE CONTRACTS CONTRACTS – Those economic damage either to one of the parties or to a 3 rd person and which may be set aside even if valid. It may be set aside in whole or in part, to the extent ii.Under art 1382 – Payments made in a state of insolvency of the damage caused’ b. Plaintiff has no other means means to obtain obtain reparation
REQUISITES: 1.
2.
Plaintiff Plaintiff must must be able to to return return whatever whatever he may be oblige obliged d to return return due to rescission
3.
The thin things gs must must not not have have been been passed passed to to 3rd parties who did not act in bad faith
4.
It must must be be made made within within the prescri prescribed bed period period
Contra Contract ct must must be resci rescissib ssible le
(1) Under art 1381: i. Contracts entered into by persons exercising fiduciary capacity
OBLIGATION CREATED BY CONTRACT: Mutual Restitution
THE
RESCISSION
OF
THE --------------------------------
1.
Things w/c are the objects of the contract & their fruits
2.
Price with interest
VOIDABLE CONTRACTS – intrinsic defect; valid until annulled; defect is due to vice of consent or legal incapacity CHARACTERISTICS:
Note: Mutual restitution N.A. when: 1.
1.
creditor did not receive anything from contract
2. 2. thing already in possession of party in good faith; subject to indemnity only; if there are 2 or more alienations – liability of 1 st infractor
1.
Effective until set aside
2.
May be assailed or attacked only in an action for that purpose
3.
Can b e c onfirmed ( Note: CONFIRMATION IS THE PROPER TERM FOR CURING THE DEFECT OF A VOIDABLE CONTRACT )
4.
Can be assailed only by the party whose consent was defective or his heirs or assigns
Note: Can be cured by Prescription WHAT CONTRACTS ARE VOIDABLE: Art. 1389 The action to claim rescission must be commenced within 4 years.
1.
THOSE WHERE ONE OF THE PARTIES IS INCAPABLE OF GIVING CONSENT TO A CONTRACT (legal incapacity)
Minor (under guardianship) – 4 years from the attaining the age of (1) minors ( below 18 ) majority Absentee – 4 years from the time the domicile is known. Insane – from the time insanity ceases.
(2) insane unless acted in lucid interval (3) deaf mute who can’t read or write (4) persons specially disqualified: civil interdiction
(5) in state of drunkenness
5.
Error as to legal effect – when mistake is mutual and frustrates the real purpose of parties
(6) in state of hypnotic spell (2) violence – serious or irresistible force is employed to wrest consent 2.
THOSE WHERE THE CONSENT IS VITIATED BY MISTAKE, VIOLENCE, INTIMIDATION, UNDUE INFLUENCE OR (3) intimidation – one party is compelled by a reasonable & well-grounded fear of an imminent & grave danger upon person & property of himself, FRAUD (vice of consent) spouse, ascendants or descendants (moral coercion) (4) undue influence – person takes improper advantage of his power over will of another depriving latter of reasonable freedom of choice (5) fraud – thru insidious words or machinations of contracting parties, other is induced to enter into contract w/o w/c he will not enter (dolo causante) PERIOD TO BRING ACTION FOR ANNULMENT
(1) mistake – false belief into something Intimidation, violence, undue influence
4 years
Incapacity
From t
REQUISITES: 1.
Refers to the subject of the thing which is the object of the contract
2.
Refers to the nature of the contract
3.
Refers to the principal conditions in an agreement
4.
Error as to person – when it is the principal consideration of the contract
4 years from
Mistake, fraud
EFFECTS OF ANNULMENT: 1.
Obligation to give – mutual restitution
2.
Obligation to do – value of service
PRESCRIPTION IN ACTION FOR ANNULMENT OF VOIDABLE CONTRACTS: Failure to comply with Statute of Frauds: Intimidation/Violence/undue Influence
1.
Agreement to be performed within a year after making contract
2.
Special promise to answer for debt, default or miscarriage of another
UNENFORCEABLE CONTRACT – valid but cannot compel its execution unless ratified; extrinsic defect; produce legal effects only after ratified; CANNOT be enforced by court action; applies to EXECUTORY CONTRACTS; action for specific performance when there one party wants to enforce the contract to compel the other party.
3.
Agreement made in consideration of promise to marry
4.
Agreement for sale of goods, chattels or things in action at price not less than 500; exception: auction when recorded sale in sales book
KINDS/VARIETIES:
5.
Agreement for lease of property for more than 1 year & sale of real property regardless of price
6.
Representation as to credit of another
Mistake/Fraud Contracts entered into by minors/incapacitated persons --------------------------------------
1.
Unauthorized/No sufficient authority – entered into in the name of another when: 1.
no authority conferred
2.
in excess of authority conferred ( ultra vires )
2 WAYS OF CURING UNENFORCEABLE CONTRACTS: 1.
Failure of defendant to object in time, to the presentation of parole evidence in court, the defect of unenforceability is cured
2.
Acceptance of benefits under the contract. If there is performance in either part and there is acceptance of performance, it takes it out of unenforceable contracts; also estoppel sets in by accepting performance, the defect is waived
Note: Curable by RATIFICATION 1.
Both parties incapable of giving consent -2 minor or 2 insane persons
Note: Curable by ACKNOWLEDGEMENT
> File a motion to dismiss on the ground of statute of frauds
> If denied, raise such defense in the answer
(a) Those w/c are absolutely simulated or fictitious – no cause
> Object any presentation of oral agreements
(b) Those which cause or object did not exist at the time of the transaction – no cause/object (c) Those whose object is outside the commerce of man – no object (d) Those w/c contemplate an impossible service – no object
VOID OR INEXISTENT – of no legal effect CHARACTERISTICS: 1.
It produces no effect whatsoever either against or in favor of anyone
2.
There is no action for annulment necessary as such is ipso jure. A judicial declaration to that effect is merely a declaration
(e) Those w/c intention of parties relative to principal object of the contract cannot be ascertained
2) 3.
Prohibited by law
It cannot be confirmed, ratified or cured
4.
If performed, restoration is in order, except if pari delicto will apply
5.
The right to set up the defense of nullity cannot be waived
6.
Imprescriptible
(f) Those expressly prohibited or declared void by law – Contracts w/c violate any legal provision, whether it amounts to a crime or not 3) Illegal/Illicit ones – Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy ; Ex: Contract to sell marijuana
Anyone may invoke the nullity of the contract whenever its juridical KINDS OF ILLEGAL CONTRACTS effects are asserted against him CONTRACT CONSTITUTE CRIMINAL OFFENSE KINDS OF VOID CONTRACT: 7.
1) Those lacking in essential elements: no consent, no object, no cause (inexistent ones) – essential formalities are not complied with ( ex: donation propter nuptias – should conform to formalities of a donation to be valid )
CONTRACT DOES NOT CONSTITUTE CRIMINAL OFFENSE BUT IS ILLEGAL OR UNLAWFUL PER
SE Parties are in pari delicto
confiscated in favor of govt •
No action for specific performance •
•
•
•
•
•
Only one party is guilty
No action for restitution on either side. The law will leave you where you are
•
Both shall be prosecuted
•
No action for specific performance
Guilty party is not entitled to restitution
No action for restitution on either side. The law will leave you where you are
PARI DELICTO DOCTRINE -both parties are guilty, no action against each other; those who come in equity must come with clean hands; applies only to illegal contracts & not to inexistent contracts; does not apply when a superior public policy intervenes EXCEPTION TO PARI DELICTO RULE
No confiscation
•
No action for specific performance
Requisites:
Innocent party is entitled to restitution
a)
•
Innocent party is entitled to restitution
Thing/price to be confiscated in favor of government
•
•
No action for specific performance
Guilty party is not entitled to restitution
•
Guilty party will be prosecuted
•
Instrument of crime will be
1.
If purpose has not yet been accomplished & If damage has not been caused to any 3rd person
contract is for an illegal purpose
b) contract must be repudiated by any of the parties before purpose is accomplished or damage is caused to 3rd parties c) court believes that public interest will be served by allowing recovery (discretionary upon the court ) – based on remorse; illegality is accomplished when parties entered into contract; before it takes effect – party w/c is remorseful prevents it
1.
Where laws are issued to protect certain sectors: consumer protection, Exception: No recovery can be had in cases where nullity of contract arose labor, usury law from illegality of contract where parties are in pari delicto; except:
a) Consumer protection – if price of commodity is determined by statute, any person paying an amount in excess of the maximum price allowed may recover such excess
1.
incapacitated – not obliged to return what he gave but may recover what he has given
2.
other party is less guilty or not guilty
b) Labor – if law sets the minimum wage for laborers, any laborer who agreed to receive less may still be entitled to recover the deficiency; if law set max working hours & laborer who undertakes to work longer may demand additional compensation c) Interest paid in excess of the interest allowed by the usury law may be recovered by debtor with interest from date of payment 7 VOID/INEXISTENT CONTRACTS 1.
1.
If one party is incapacitated, courts may allow recovery of money, property delivered by incapacitated person in the interest of justice; pari delicto cannot apply because an incapacitated person does not know what he is entering into; unable to understand the consequences of his own action If agreement is not illegal per se but merely prohibited & prohibition is designated for the protection of the plaintiff – may recover what he has paid or delivered by virtue of public policy
MUTUAL RESTITUTION IN VOID CONTRACTS General Rule: parties should return to each other what they have given by virtue of the void contract in case where nullity arose from defect in essential elements 1.
return object of contract & fruits
2.
return price plus interest
1.
Those w/c are ABSOLUTELY simulated/fictitious.
2.
Those w/c contemplate an impossible service.
3.
Those whose OBJECT is outside the commerce of man.
4.
Those whose CAUSE/OBJECT did not exist at time of transaction.
5.
Those whose CAUSE/OBJECT/PURPOSE is contrary to law, morals, good customs, public order, or public policy.
6.
Those where INTENTION of parties to principal object CANNOT be ascertained.
7.
Those expressly prohibited/declared VOID by law.
principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted. The following are the essential elements of laches:
ESTOPPEL LACHES is the failure or neglect, for an unreasonable and unexplained length of time, to do that which b exercising due diligence could or should ha!e been done earlier" it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the part entitled to assert it either has abandoned it or declined to assert it# The doctrine of laches or of stale demands is based upon grounds of public policy which requires, for the peace of society, the discouragement of stale claims and . . . is
(1) Conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation complained of (!) "elay in asserting complainant#s right after he had $nowledge of the defendant#s conduct and after he has an opportunity to sue
(%) &ac$ of $nowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit and (') nury or preudice to the defendant in the event relief is accorded to the complainant. 32 *nder the present circumstances, all of the aforegoing elements are attendant in this case.
