LAW 11 - Defective Contracts

DEFECTIVE CONTRACTS RESCISSIBLE (Arts 1381 1389) Economic prejudice or damage to: - owner - 3rd person - litigant Can
n generally be ASSAILED and CURED by: Injured Party EFFECTS: Mutual restitution
AS TO NATURE OF DEFECT
EFFECT ON CONTRACT
ASSAILABLE? HOW?
YES but only through DIRECT action for rescission No rescission if: a. plaintiff has other legal means to obtain reparation (subsidiary) b. plaintiff cannot return what must be restored c. object in the hands of 3rd persons in good faith d. Contract approved by court (Art 1386)
WHO CAN ASSAIL?

By ward Or by guardian ad litem of ward during incapacity of ward in action against original guardian
WHEN TO ASSAIL?
CURABLE? HOW?
YES By ratification (Confirmation by the ward)
WHO CAN CURE?
WHEN TO CURE?
Contracts of guardians (acts of administration) when wards they represent suffer lesion of more than 25% of the value of thing
VALID until rescinded
Within 4 years from gaining (minor) or regaining (insane) capacity
By ward
Within 4 years from (re)gaining capacity
Contracts in representation of absentees when latter suffers lesion of more than 25% of value of thing
By absentee
Within 4 years from knowledge of domicile of absentee
YES By prescription
By absentee
Within 4 years from knowledge of domicile or knowledge of fraudulent contract
Contracts entered into by debtor who is a state of insolvency, i.e. contracts entered into in fraud of creditors
(Accion Pauliana)
Contracts which refer to things in litigation without the knowledge and approval of litigants or competent judicial authority All other contracts declared by law to be subject of rescission E.g. Art 1098 Partition
YES but only through DIRECT action for rescission No rescission if: a. plaintiff has other legal means to obtain reparation (subsidiary) b. plaintiff cannot return what must be restored c. object in the hands of 3rd persons in good faith
By plaintiff-creditor By heirs of creditor BY creditors of creditors injured (accion subrogatoria) By other third parties prejudiced by the contract
Within 4 years from knowledge of fraudulent contract
YES By prescription
By creditor
By party litigant
YES By prescription
By party litigant
DEFECTIVE CONTRACTS VOIDABLE (Arts 1390 1402) Vitiated consent EFFECT: Cleanses defect of contract Does not prejudice right of 3P prior to ratification Mutual restitution
Want of capacity - age - insanity
EFFECT ON CONTRACT
ASSAILABLE? HOW?
WHO CAN ASSAIL?
WHEN TO ASSAIL?
CURABLE? HOW?
YES By ratification By prescription YES 1 By ratification - Express - Implied - (silence or acquiescence, acts showing approval or adoption of contract, acceptance and retention of benefits) 2 By prescription
WHO CAN CURE?
WHEN TO CURE?
Consent is vitiated by: - mistake or error - violence and intimidation (duress) - undue influence - fraud, misrepresentation
VALID until annulled by court action
YES. Both through direct and collateral attacks. Action for annulment
All who are obliged principally or subsidiarily (i.e. guarantors and sureties) Incapacitated party; not the party with capacity Victim; not the party who cause the defect
Within 4 years from cessation of (re)gaining capacity
Within 4 years from cessation of (re)gaining capacity By parties themselves By guardian in behalf of an incapacitated party during existence of incapacity Within 4 years from: - cessation of intimidation, violence, undue influence (consensual defect) - discovery of mistake or fraud
Within 4 years from: - cessation of intimidation, violence, undue influence (consensual defect) - discovery of mistake or fraud
DEFECTIVE CONTRACTS
Contract entered into name of another without authority or in excess of authority
EFFECT ON CONTRACT
VALID but cannot be ENFORCED by a proper action in court
ASSAILABLE? HOW?
YES. Not by direct action but by DEFENSE of unenforceability of contract through motion to dismiss complaint on the ground that contract is unenforceable YES. Not by direct action but by DEFENSE of unenforceability of contract either through: 1. motion to dismiss complaint on the ground that contract is unenforceable 2. objection to presentation of oral evidence to prove contract
WHO CAN ASSAIL?
WHEN TO ASSAIL?
At any time one party attempts to enforce contract against the other through a court action
CURABLE? HOW?
WHO CAN CURE?
By owner of property
By ratification
Person in whose name the contract was entered into
By acknowledgement By performance of oral contract By other party By his privies (heirs, representatives and assigns) At any time one party attempts to enforce contract against the other through a court action By failure to object seasonably to presentation of oral evidence By acceptance of benefits under the contract By other party By his privies (heirs, representatives and assigns) By guardian By innocent party At any time one party attempts to enforce contract against the other through a court action By confirmation Both parties after (re)gaining capacity to act By parents or guardians of both parties By party against whom the contract is being enforced
UNENFORCEABLE (Arts 1403 1408)
Contracts covered by Statute of Frauds and not complying with requirement of a written memo
Both parties are legally incapacitated to act
YES. Not by direct action but by DEFENSE of unenforceability of contract through motion to dismiss complaint on the ground that contract is unenforceable
Cause, object or purpose of contract contrary to law, good customs, morals, public order or public policy (Art 1401, Par 1) One or some of essential requisites of valid contract lacking in fact or in law a. Absolutely simulated b. Those whose cause or object did not exist c. Object outside the commerce of man d. Contemplate an impossible service e. Where intention of parties re: principal object of contract cannot be ascertained (Art 1402 Pars 2 to 6) Contracts expressly prohibited by law (Art 1409 Par 7)
DOES NOT CREATE RIGHTS AND CANNOT IMPOSE OBLIGATION
YES. By an action for declaration for nullity By defense of nullity
By 3rd persons whose interest are directly affected (If in pari delicto, neither has an action against each other)
Imprescriptible
Cannot be cured
--
VOID or INEXISTENT (Arts 1409 1422)
By any of the contracting parties By 3rd persons whose interests are directly affected
Imprescriptible
Cannot be cured
--
By party whose protection the prohibition of the law is designed By 3rd party whose interests are directly affected
Imprescriptible
Cannot be cured
--

LAW 11 - Defective Contracts

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DEFECTIVE CONTRACTS RESCISSIBLE (Arts 1381 1389) Economic prejudice or damage to: - owner - 3rd person - litigant Can

WHO CAN ASSAIL?

WHO CAN CURE?

VALID until rescinded

Within 4 years from gaining (minor) or regaining (insane) capacity

Within 4 years from (re)gaining capacity

VALID until rescinded

Within 4 years from knowledge of domicile of absentee

Within 4 years from knowledge of domicile or knowledge of fraudulent contract

VALID until rescinded

VALID until rescinded

Within 4 years from knowledge of fraudulent contract

Within 4 years from knowledge of fraudulent contract

Within 4 years from knowledge of fraudulent contract

Within 4 years from knowledge of fraudulent contract

VALID until rescinded

WHO CAN ASSAIL?

WHO CAN CURE?

VALID until annulled by court action

Within 4 years from cessation of (re)gaining capacity

WHO CAN ASSAIL?

WHO CAN CURE?

Person in whose name the contract was entered into

UNENFORCEABLE (Arts 1403 1408)

VALID but cannot be ENFORCED by a proper action in court

Both parties are legally incapacitated to act

VALID but cannot be ENFORCED by a proper action in court

DOES NOT CREATE RIGHTS AND CANNOT IMPOSE OBLIGATION

YES. By an action for declaration for nullity By defense of nullity

VOID or INEXISTENT (Arts 1409 1422)

DOES NOT CREATE RIGHTS AND CANNOT IMPOSE OBLIGATION

YES. By an action for declaration for nullity By defense of nullity

DOES NOT CREATE RIGHTS AND CANNOT IMPOSE OBLIGATION

YES. By an action for declaration for nullity By defense of nullity

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