DEFECTIVE CONTRACT RESCISSIBLE
Economic damage or lesion to Incapacity of one of the parties
either one of the parties or to 3rd
persons; declaration by law.
ARTICLE 1381
1. Those which are entered
into by the 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;
2. Those agreed upon in
representation of
absentees, if the latter
suffer the lesion stated in
the preceding number;
3. Those undertaken in fraud
ORIGIN OF THE DEFECT OR of creditors when the latter
NATURE OF DEFECT cannot in any manner
collect the claims due them
(Accion Pauliana);
4. Those which refer to things
under litigation if they
have been entered into by
the defendant without the
knowledge and approval
of the litigant or of
competent judicial authority;
5. All other contracts specially
declared by law to be
subject to rescission.
VOIDABLE
Entered without authority or in
to give consent or vitiated
consent.
ARTICLE 1390
1. Those where one of the
parties is incapable of giving
consent to a contract;
(Minority, insanity)
2. Those where the consent is
vitiated by mistake, violence,
intimidation, undue influence
or fraud.
UNENFORCEABLE
Illegality (void) or absence of
excess thereof; non-compliance
with Statute of Frauds;
incapacity of both parties to give
consent.
ARTICLE 1403
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
VOID
any essential requisites of any
contract (inexistent).
ARTICLE 1409
1. Those who 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.

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 for 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.

NECESSITY OF DAMAGE OR Suffered by - either one of the As to the other contracting party
Not necessary. Not necessary.
PREJUDICE parties or 3rd person. - not necessary.
Valid and enforceable unless Valid and enforceable unless Valid but unenforceable in court Absolutely null and void or not
EFFECT OF THE CONTRACT
judicially rescinded. judicially annulled. unless they are cured or ratified. legal effect.
NATURE OF ACTION ASSAILABLE but only through ASSAILABLE. ASSAILABLE. ASSAILABLE.


DIRECT action for rescission. Both through DIRECT AND Not by direct action but by • By an action for declaration
DEFENSE of unenforceability for nullity
COLLATERAL attacks.
No rescission if: of contract either through: • By defense of nullity
a) Plaintiff has other legal 1. Motion to dismiss
means to obtain reparation complaint on the ground
(subsidiary). that contract is
b) Plaintiff cannot return what unenforceable (Art 1403 (1),
must be restored. (2), and (3))
c) Object in the hands of 3rd 2. Objection to presentation
persons in good faith. of oral evidence to prove
d) Contract approved by court contract (Art 1403 (2))
(Article 1386)
INDIRECT attack allowed
REMEDY Rescission or rescissory action Action for annulment; ratification Ratification; personal defense Declaration of nullity of contract.
GR: Contracting party Contracting party Contracting party Contracting parties
XPN: Defrauded creditors
o All who are obliged o By owner of property o By innocent party (Art 1409
o by ward, or by guardian ad principally or subsidiarily o By other party (1))
litem of ward during (i.e. guarantors and o By his privies (heirs, o By contracting parties (Art
incapacity of ward in action sureties) representatives and 1409 (2-6))
against original guardian; o Incapacitated party; not the assigns) o By 3rd persons whose
o by absentee; party with capacity interest are directly affected
WHO CAN FILE THE ACTION
o by plaintiff-creditor; o Victim; not the party who (Art 1409 (1-7))
o by heirs of creditor; cause the defect § (If in pari delicto,
o by creditors of creditors neither has an action
injured (accion against each other)
subrogatoria); (Art 1409 (1))
o by other third parties o By party whose protection
prejudiced by the contract; the prohibition of the law is
o by party litigant designed (Art 1409 (7))
Curable by prescription Curable by ratification and Curable by: Not curable
prescription 1. Ratification
2. Acknowledgement;
3. Performance of oral
contract;
4. Failure to object seasonably
CURABLE
to presentation of oral
evidence;
5. Acceptance of benefits
under the contract; or
6. Confirmation.

PRESCRIPTION OF ACTION ARTICLE 1389 ARTICLE 1391 Action for recovery; specific Imprescriptible


4 years 4 years performance or damages
prescribes
• Written contract - 10 years
• Oral contract - 6 years
GR: Four years from the date 1. In cases of intimidation, From the time the right of action --
the contract was entered into. violence or undue influence, accrues
XPN: from the time the defect of
1. Persons under guardianship the consent ceases.
– four years from 2. In case of mistake or
termination of capacity; fraud, from the time of the
RECKONING POINT OF 2. Absentees – four years from discovery of the same.
PRESCRIPTION the time the domicile is 3. And when the action
known. refers to contracts entered
into by minors or other
incapacitated person, from
the time the guardianship
ceases.

Within 4 years from reckoning Within 4 years from reckoning At any time one party attempts Imprescriptible
WHEN TO ASSAIL point point to enforce contract against the
other through a court action.
Cannot be ratified Can be ratified Can be ratified Cannot be ratified
o Express
o Implied
§ silence or acquiescence
RATIFICATION § acts showing approval
or adoption of contract
§ acceptance & retention
of benefits

ASSAILABILITY BY THIRD Assailable No; by parties only No; by parties only Assailable if their interest is
PERSONS directly affected.