CHAPTER 7

VOIDABLE CONTRACTS
DEFINITION
Voidable contracts may be defined as those 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 one of the contracting parties, or by mistake, violence, intimidation, undue
influence, or fraud.
ESSENTIAL ELEMENTS
A. Common or those present in all contracts, namely, consent, object, and cause
(Art. 1318).
B. Special or those not common to all contracts or those which must be present only
in, or peculiar to, certain specified contracts, and such peculiarity may be:
1. As regards to form, as for example, public instrument in donation of
immovable property (Art. 749), delivery in real contracts (Art. 1316),
registration in real estate mortgage (Art. 2125), chattel mortgage (Art. 2140),
etc., or
2. As regards the subject matter, as for example, real property in antichresis
(Art.2132), personal property in pledge (Art. 2094), etc., or
3. As regards the consideration or cause, as for example, price in sale (Art.
1458) and in lease (Arts. 1643, 1644), liberality in commodatum (Art. 1935),
etc.
A valid contract is one that manifests all the essential elements of a contract.
ELEMENT OF CONSENT
CHARACTERISTICS
1. Their defect consists in the vitiation of consent of one of the contracting parties.
2. They are binding until they are annulled by a competent court. (The most essential
feature of a voidable contract is that it is binding until it is annulled by a competent
court. Consequently, once it is executed there are only two possible alternatives left to
the party who may invoke its voidable character -- to attack its validity or to
convalidate it.)
A. to attack its validity
Its validity may be attacked either directly by means of a proper action in court or
indirectly by way of defense. The action itself is called annulment in order to distinguish
it from an action for the rescission of rescissible contracts or from an action for the
declaration of absolute nullity or inexistence of void or inexistent contracts, while the
defense itself is called annulability or relative nullity in order to distinguish it from the
defense of absolute nullity or inexistence in void or inexistent contracts or the defense of
unenforceability in unenforceable contracts.
 B. to convalidate it
3. They are susceptible of convalidation
There are three ways or modes of convalidating a voidable contract.
a. ratification or confirmation (Art. 1392-1396), or
b. by prescription of the action for annulment (Art. 1391), or
c. by the loss of the thing which is the object of the contract through the fraud or
fault of the person who is entitled to institute the action for the annulment of the
contract (Art. 1401)
DISTINGUISHED FROM RESCISSIBLE CONTRACTS

Voidable Rescissible
Defect (Art. 1381, 1390) Intrinsic because it consists External because it consists
of a vice which vitiates of damage or prejudice
consent. either to one of the
contracting parties or to a
third person.
Damage No need for damage or Needs damage or prejudice.
prejudice.
Annulability/ Based on the law. Not only Based on equity. Mere
Rescissibility a remedy but a sanction. remedy. Private interest.
Public interest
predominates.
Causes
Susceptibility to Yes No
ratification
Annulment/ Rescission Invoked only by a Invoked either by a
contracting party contracting party or by a
third person who is
prejucdiced.

Article 1390. The following contracts are voidable or annullable, even though there
may have been no damage to the contracting parties:
Note that the existence of economic damage is not essential for their annulment as
in the case of rescissible contracts. Whether a contract which the law considers as
voidable has already been consummated or is merely executory is immaterial; it can
always be annulled by a proper action in court.
*Kinds of voidable contracts (or grounds for annulment or general classes of
voidable contracts).
 A contract otherwise legal in object and operation is voidable because of a defect
caused by either:
(1) Those where one of the parties is incapable of giving consent to a contract;
Legal incapacity to give consent,
Those who are incapacitated to give consent
Article 1327. The following cannot give consent to a contract:
(1) Unemancipated minors (Five Exceptional cases where a contract entered into by
an unemancipated minor may have all the effects of a valid contract.);
(2) Insane or demented persons, and deaf-mutes who do not know how to write.
(1263a)

Article 1328. Contracts entered into during a lucid interval are valid. Contracts
agreed to in a state of drunkenness or during a hypnotic spell are voidable. (n)

-Other Incapacitated Persons.

-Contract of Sale (Conjugal partnership)

(2) Those where the consent is vitiated by mistake, violence, intimidation, undue
influence or fraud.
Violation of consent.

*Binding force of voidable contracts.

These contracts are (valid and) binding (between the parties), unless they are
annulled by a proper action in court (by the injured party).

-Action to bring: Positive redress (action must be filed otherwise contract will remain
binding)

*Meaning of annulment.
Annulment is a remedy provided by law, for reason of public interest, for the
declaration of the inefficacy of a contract based on a defect or vice in the consent of one
of the contracting parties in order to restore them to their original position in which they
were before the contract was executed.

*Period for filing action for annulment (or prescriptive period).

The four-year period for bringing an action for annulment of a voidable contract is
reckoned:
Article 1391. The action for annulment shall be brought within four years.
This period shall begin:
In cases of intimidation, violence or undue influence, from the time the defect of
the consent ceases.
In case of mistake or fraud, from the time of the discovery of the same (Article
1393).
And when the action refers to contracts entered into by minors or other
incapacitated persons, from the time the guardianship ceases. (1301a)

-Effect of prescription- If the action has prescribed, the contract can no longer be set
aside.

*Party entitled to bring an action to annul.

Article 1397. The action for the annulment of contracts may be instituted by all
who are thereby obliged principally or subsidiarily. However, persons who are
capable cannot allege the incapacity of those with whom they contracted; nor can those
who exerted intimidation, violence, or undue influence, or employed fraud, or caused
mistake base their action upon these flaws of the contract. (1302a)

Two different requisites are necessary in order that a person may institute the action
for the annulment of a voidable contract.
1. In the first place, the plaintiff must have an interest in the contract in the sense that
he is obliged thereby either principally or subsidiarily; and

Principle of relativity of contracts:

Article 1311. Contracts take effect only between the parties, their assigns
and heirs, except in case where the rights and obligations arising from the
 contract are not transmissible by their nature, or by stipulation or by provision
of law. The heir is not liable beyond the value of the property he received from
the decedent.
If a contract should contain some stipulation in favor of a third person, he
may demand its fulfillment provided he communicated his acceptance to the
obligor before its revocation. A mere incidental benefit or interest of a person is
not sufficient. The contracting parties must have clearly and deliberately
conferred a favor upon a third person. (1257a)

2. In the second place, the victim and not the party responsible for the vice or defect
is the person who must assert the same. (This is based on the well-known
principle of equity that whoever goes to court must do so with clean hands.)

-Misrepresentation of a minor about his age.

*Right of strangers to bring action.

One who is not a party to the contract or an assignee thereunder, or does not
represent those who took part therein, has no legal capacity to challenge the validity of
such contract.
Exception: Supreme Court in several cases has held that a person, who is not a party
obliged principally or subsidiarily under a contract, may bring an action for annulment of
the contract if he is prejudiced in his rights with respect to one of the contracting parties,
and can show detriment with which would positively result to him from the contract in
which he has no intervention.
E.g. Thus, where the remaining partners of a partnership, which is heavily indebted
to several creditors, executed a chattel mortgage of practically all properties of the
partnership in favor of a former partner to secure an obligation, undoubtedly, the contract
of chattel mortgage has prejudiced the rights of the creditors of the partnership.
Consequently, if such creditors can prove or show the detriment which would positively
result to them, they can ask for the annulment of the contract of chattel mortgage.
(Singson vs. Isabela Sawmill, 88 SCRA 623.)

*Effects of annulment:
If the contract has not yet been consummated, it is evident, although the Code does
not expressly say so, that the contracting parties shall be released from the obligations
arising therefrom. However, if the contract has already been consummated, the rules
provided for in Arts. 1398 to 1402 of the Code shall govern.
General Rule:
*Duty of mutual restitution upon annulment.

Article 1398. An obligation having been annulled, the contracting parties shall
restore to each other the things which have been the subject matter of the contract, with
their fruits, and the price with its interest, except in cases provided by law. In obligations
to render service, the value thereof shall be the basis for damages. (1303a)

Upon the annulment of the contract, if the prestation thereof consisted in obligations:
1. Obligation to give
a. the parties shall restore to each other the things which have been the 1) subject matter
of contract with its fruits and 2) the price thereof with legal interests, except in cases
provided by law.
2. The prestation consisted in obligations to do or not to do, there will have to be an
apportionment of damages based on the of such prestation with corresponding interests.
In personal obligations (see Art. 1156) where the service had already been rendered, the
value thereof with corresponding interest, is the basis for damages (par. 2) recoverable
from the party benefited by the service.
Upon annulment the contracting parties should be restored to their original position
by mutual restitution.
-Restitution applies only to other voidable contracts like fraud, intimidation,
violence, undue influence, mistake and other voidable contracts and not incapacity
by one of the contracting parties.
-Rescission based on lesion (Art. 1385 (1)) and general effect of annulment in Art.
1398.

Exceptions:

1. Article 1399. When the defect of the contract consists in the incapacity of one of
the parties, the incapacitated person is not obliged to make any restitution except insofar
as he has been benefited by the thing or price received by him. (1304)

*Restitution by an incapacitated person.

 The incapacitated is obliged to make restitution only to the extent that he was
benefited by the thing or price received by him. The guilty party is still bound to return
what he has received whether he was benefited or not.
Benefit spoken of is sufficient if there has been a prudent and beneficial use by the
incapacitated person of the thing received.

Natural obligation:
2. Article 1427. When a minor between eighteen and twenty-one years of age, who
has entered into a contract without the consent of the parent or guardian, voluntarily
pays a sum of money or delivers a fungible thing in fulfillment of the obligation, there
shall be no right to recover the same from the obligee who has spent or consumed it in
good faith. (1160A)

-Good Faith refers to the knowledge as to the age of the incapacitated person.

*Delivery by minor of money or fungible thing in fulfillment of obligation.

“Fungible thing” nevertheless it may also apply to things that are nonconsumable
when they have been lost without fault of the obligee or in case of alienation by him to a
third person who did not act in good faith. The obligee shall be liable for damages if he is
guilty of fault or bad faith at the time of spending or consumption.
Article is applicable only if the minor is between 18-21 years of age.

Article 1400. Whenever the person obliged by the decree of annulment to return the
thing can not do so because it has been lost through his fault, he shall return the fruits
received and the value of the thing at the time of the loss, with interest from the same
date. (1307a)

*Effect of loss of thing to be returned.

1) If thing to be returned is lost without fault of the person obliged to make restitution
(defendant), there is no more obligation to return such thing. But in such a case,
the other cannot be compelled to restore what in virtue of the decree of annulment
he is bound to return.
 Article 1402. As long as one of the contracting parties does not restore what in
virtue of the decree of annulment he is bound to return, the other cannot be
compelled to comply with what is incumbent upon him. (1308)

*Effect where a party cannot restore what he is bound to return.

-Contract annulled=Reciprocal obligation of restitution

Article 1191. The power to rescind obligations is implied in reciprocal

ones, in case one of the obligors should not comply with what is incumbent
upon him.
The injured party may choose between the fulfillment and the rescission
of the obligation, with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons
who have acquired the thing, in accordance with articles 1385 and 1388
and the Mortgage Law. (1124)

-This is true even if the loss is due to a fortuitous event. (see Art. 1400)

2) Lost through his fault, obligation is not extinguished but is converted into an
indemnity for damages. The value of the thing at the same time of the loss with interest
from the same date and the fruits received from the time the thing was given to him to the
time of its loss.

Article 1401. The action for annulment of contracts shall be extinguished when the
thing which is the object thereof is lost through the fraud or fault of the person who has a
right to institute the proceedings.
If the right of action is based upon the incapacity of any one of the contracting
parties, the loss of the thing shall not be an obstacle to the success of the action, unless
said loss took place through the fraud or fault of the plaintiff. (1314a)
*Extinguishment of action for annulment (loss is through the fault or fraud of the
plaintiff).
1) When the thing which is the object thereof is lost through the fraud or fault of the
person who has a right to institute the proceedings and cannot restore the thing,
the action for annulment shall be extinguished. If loss is not due to his fault or
fraud, Art. 1402 applies.

Article 1402. As long as one of the contracting parties does not restore what in
virtue of the decree of annulment he is bound to return, the other cannot be
compelled to comply with what is incumbent upon him. (1308)

2) Whether the loss occurred during the plaintiff’s incapacity or after he had acquired
capacity, the action for annulment would still be extinguished in accordance with
the rule stated in the first paragraph.

*Loss is due to fortuitous event.

They are susceptible of ratification. (n)

Once ratified, they become absolutely valid and can no longer be annulled. (see
comments under Arts. 1327, 1328, 1330.)
MEANING OF RATIFICATION OR CONFIRMATION
Ratification or confirmation means that one voluntarily adopts or approves some
defective or unauthorized act or contract which, without his subsequent approval or
consent, would not be binding on him. It indicates an intention on the part of the ratifier
to be bound to the provisions of the contract.
It is known in the Spanish Civil Code as the act or means by virtue of which efficacy
is given to a contract which suffers from a vice of curable nullity.
RATIFICATION OR CONFIRMATION REQUIRES THE CONCURRENCE OF
THE FOLLOWING REQUISITES.
First: The contract should be tainted with a vice which is susceptible of being cured.
Second: The confirmation should be effected by the person who is entitled to do so under
the law (Arts. 1394 and 1395).
Third: It should be effected with knowledge of the vice or defect of the contract (Art.
1393).
Fourth: The cause of the nullity or defect should have already disappeared.
Article 1392. Ratification extinguishes the action to annul a voidable contract.
(1309a)
KINDS OR FORMS OF RATIFICATION
Article 1393. Ratification may be effected expressly or tacitly. It is understood that
there is a tacit ratification if, with knowledge of the reason which renders the contract
voidable and such reason having ceased, the person who has a right to invoke it should
execute an act which necessarily implies an intention to waive his right. (1311a)
They are:
1. Express-when the ratification is manifested in words or in writing; or
2. Implied or tacit-it may take diverse forms, such as by silence or acquiescence; by acts
showing adoption or approval of the contract; or by acceptance and retention of benefits
flowing therefrom.
EFFECTS OF RATIFICATION
1. Article 1396. Ratification cleanses the contract from all its defects from the
moment it was constituted (Effect of ratification is retroactive.). (1313)

In other words, the effect of ratification is to make the contract valid from its
inception subject to the prior rights of third persons.

2. The contract thus becomes valid, (Art. 1390.)

3. Hence, the action to annul is extinguished. (Art. 1392.)

WHO MAY RATIFY
Article 1394. Ratification may be effected by the guardian of the incapacitated
person. (n)
1. A contract entered into by an incapacitated person may be ratified by:
a. The guardian; or
b. The injured party himself provided he is already capacitated.
 As legal representative of their wards, guardians have the power to contract on their
behalf. Hence, they may also ratify contracts entered into by their wards.

Article 1407. In a contract where both parties are incapable of giving

consent, express or implied ratification by the parent, or guardian, as the
case may be, of one of the contracting parties shall give the contract the
same effect as if only one of them were incapacitated.
If ratification is made by the parents or guardians, as the case may be,
of both contracting parties, the contract shall be validated from the
inception.

-Both parties are incapable (Unenforceable)

-One party is incapable (Voidable)
-Both are capable (Valid)

2. In case the contract is voidable on the ground of mistake, etc., ratification can be made
by the party whose consent is vitiated.

Article 1395. Ratification does not require the conformity of the contracting party
(guilty party) who has no right to bring the action for annulment. (1312)

*Conformity of guilty party to ratification not required.

Ratification is unilateral act by which a party (injured party) waives the defect in his
consent. The consent of the guilty party is not required; otherwise, he can conveniently
disregard his contract by the simple expedient of refusing to give his conformity.