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COMPARATIVE CHART OF DEFECTIVE CONTRACTS RESCISSIBLE Rescission is a process designated to render inefficacious a contract validly entered into and normally binding, by reason of external conditions, causing an economic prejudice to a party or to his creditors. (Scaevola) VOIDABLE A voidable contract is a contract in which all of the essential elements for validity are present, but the element of consent is vitiated either by lack of legal capacity of 1 of the contracting parties or by mistake, violence, intimidation, undue influence, or fraud. UNENFORCEABLE An unenforceable contract is a contract which is either: a. Entered into without or in excess of authority, or b. They do not comply with the Statute of Frauds, or c. Both the contracting parties do not possess the required legal capacity. It cannot be enforced by a proper action in court, unless they are ratified. VOID A void contract is an absolute nullity.

Definition

Status/Effect

Valid because it contains all the essential requisites prescribed by law, but which is defective because of injury or damage to either of the contracting parties or 3rd persons. As a consequence, it may be rescinded by a proper action for rescission.

Binding unless they are annulled by a proper action court. They are susceptible to confirmation* [i.e., the process of curing the defect of a voidable contract] - They are voidable/annullable, even though there may have been NO damage to the contracting parties. *NOTE: On the other hand, ratification is the process of curing contracts which are defective because they were entered into without authority.

The contract produces no effect whatsoever either against or in favor of anyone. It CANNOT be ratified. Neither can the right to set up the defense of illegality be waived. A judgment of nullity would be merely declaratory. There is no action for annulment necessary as such is ipso jure. However, even when the contract is void or inexistent, an action is necessary to declare its inexistence, when it has already been fulfilled. Nobody can take the law into his own hands.

Kinds and Requisites

1.

2.

3.

4.

The contact must be a rescissible contract under Article 1381 or Article 1382 The person asking for rescission must have no other legal means to obtain reparation for the damages suffered by him (Art. 1383) The person demanding rescission must be able to return whatever he may be obliged to restore if rescission is granted (Art. 1385, 1st par) The action for rescission must be brought within the prescriptive period of 4 years (Article 1389)

The following contracts are voidable or annullable: 1. Where one of the parties is incapable of giving consent to a contract [i.e., due to Minority, Insane or demented persons, Deaf mutes who do not know how to write, Drunkenness, Hypnotic spell] Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.

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 where both parties are incapable of giving consent to a contract. 3. Those that do not comply with the Statute of Frauds (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;

a.

b. c.

2.

Mistake refers only to mistake of FACT. May be as to: a. Substance of the thing b. Nature of the contract c. Prin. conditions of the

d. e.

Those whose cause, object or purpose is contrary to law, morals. Good customs, public order or public policy Those which are absolutely simulated or fictitious Those whose cause or object did not exist [could not come into existence] at the time of the transaction o There can be a contract over a future thing. o Examples of could not come into existence are tangerine flying elephants and cars running on urine. Those whose object is outside the commerce of men Those which contemplate an impossible service

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d. e.

contract As to person (when id/qualifications was the principal cause of K. Mutual error as to the legal effect of agreement (frustrates real purp.)

Violence and Intimidation BOTH constitute force: Violence [physical] i. Irresistible physical force is employed ii. The force is the determining cause for giving consent Intimidation [psychological] i. The threat must be the determining cause for giving consent ii. The threatened act is unjust and unlawful iii. The threat is real and serious iv. The threat produces a well-grounded fear that the person making it can and will inflict harm NOTE: If employed by 3rd P. NOT a party, shall likewise annul the obligation. Influence when it is such as to control ones volition and induce him to enter into a contract, which he otherwise would not have. Fraud [Dolo Causante] i. Fraud is employed by 1 party on the other ii. The other party was induced to enter into the contract [which he would not have agreed to] iii. The fraud must be serious iv. There is damage or injury caused NOTE: Misrepresentation by a 3rd person does not vitiate consent, unless it has created substantial mistake and the same is mutual.
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(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; (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. NOTE: when applying SoF: a. It does NOT apply to actions which are not for specific performance or contractual breach; b. It does NOT make the contract void [can be cured] c. Once there has been [even partial] performance on either side, it falls outside the statute. 2 ways in which parole evidence is admitted: i. failure to object ii. acceptance of benefits

f.

g.

o Here, there is no object. Those where the intention of the parties relative to the principal object of the contract cannot be ascertained o This is similar to being void for vagueness. Those expressly prohibited or declared void by law o i.e., sale between husband and wife, subject to exceptions (Art. 1490), donations bet. spouses (Art. 87)

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Culpa Contractual Only ER/owner liable EE cannot be held liable Presumption of Fault/Negli. arises from mere contract Exculpatory F/E

Culpa Aquilania Can sue EE/ER OR both EE is not indispensable EE fault/negli must be proved ER rebuttable presumption of negli. in selection/supervision PROVE due diligence in selection/supervision

Civ. liability for Delict Only EE directly liable ER only subsidiarily liable if EE insolvent

Diligence is not a defense.

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