CHAPTER 9

Void and Inexistent

Contract
Prepared by:
Abdendan, Genesis / Alba, Jonathan / Atay, Maria Marizza
Diano, Lay Jean / Dumayaca, Nikki Shynn / Magallon, Agusto
Pitogo, Anna Mae / Suryaga, Mary ann / Torrequimada, Aiza
ABENDAN, GENESIS

Article 1409
The following contracts are inexistent and void from the
beginning
(1)Those whose cause, objective ore 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.
 Meaning of Void Contract
Void contracts are those which, because of certain
defects, generally produce no effect at all. They are
considered as inexistent from its inception or from the
very beginning
 Meaning of Inexistent Contract

Inexistent contracts refer to agreements which lack one

or some or all of the elements (i.e., consent, object, and
cause) or do not comply with the formalities which are
essential for the existence of a contract.
 CHARACTERISTICS OF A VOID CONTRACTS

(1) Generally, it produces no effect whatsoever, being void or inexistent from the
beginning;

(2) It cannot be cured or validated either by time or ratification;

(3) The right to set up the defense of illegality, inexistence, or absolute nullity cannot
be waived;

(4) The action or defense for the declaration of its illegality, inexistence, or absolute
nullity does not prescribe;
 CHARACTERISTICS OF A VOID
CONTRACTS

(4) The action or defense for the declaration of its illegality, inexistence, or
absolute nullity does not prescribe;
(5) The defense of illegality, inexistence, or absolute nullity is not available
to third persons whose interests are not directly affected;
(6) It cannot give rise to a valid contract; and
(7) Its invalidity can be questioned by anyone affected by it.
 VOID AND VOIDABLE CONTRACTS
DISTINGUISHED
VOIDABLE VOID
a. May be ratified a. Cannot be ratified
b. Produces effects until annulled b. Generally, effects are not produced at all
c. Defect is due to incapacity c. The defect here is that ordinarily, public
policy is militated against
d. Valid until annulles
d. Void from the very beginning so generally,
e. May be cured by prescription no action is required to set it aside. Unless
f. Defense may be invoked only by the parties the contract has already been performed.
(those principally or subsidiarily liable), or e. Cannot be cured by prescription
their successors in interest and privies f. Defense may be availed of by anybosy,
g. Referred to as relative or conditional nullity whether he is a party to the contract or no, as
long as his interest is directly affected. (Art.
1421 civil code.
g. Referred to as absolute nullity
Illustration
( 1 ) Those whose cause, object or purpose is contrary to law ,
good customs, public order or public policy;

Contrary to Law
An agreement whereby Anna is to render service as a servant to
Ben without compensation as long as Anna has not paid his debt is
reprehensible and censurable.
 Illustration
( 1 ) Those whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy;

Contrary to Morals
contract, whereby Anna promised to live as the common-law wife of Ben without
the benefit of marriage in consideration of P50,000.00, is immoral and, therefore,
void.
 Illustration
( 1 ) Those whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy;

Contrary to Good Customs

Anna entered into a contract whereby Anna binds herself to slap his father. This
contract is void because it is a against the good custom of showing respect to our
parents.
Illustration

( 1 ) Those whose cause, object or purpose is contrary to law, morals,

good customs, public order or public policy;

Contrary to Public Order

A stipulation in a contract of lease whereby the landlord can use force to
eject the tenant In case of failure of the latter to pay the rent agreed upon is
void as being against public order.
 Illustration
(2) Those which are absolutely simulated or fictitious;
Anna is indebted to Ben. Upon learning that Ben is going to enforce her credit, Anna
pretended to sell her land to Felimon, his father-in-law. Anna did not receive a single centavo
for the deed of sale she executed and she continued in possession of the land as the contract
was merely simulated or fictitious.

(3) Those whose cause or object did not exist at the time of the transaction;
Sandra sells to Ben a parcel of land. In the deed of sale, P 100,000.00 is stated as the price of
the land. If this statement is false, then there is no contract of sale.
(4) Those whose object is outside the commerce of men;
If the object is outside the commerce of man, such as sidewalks or public plazas or
public bridges, they cannot be the object of contracts of alienation (but may be the
object, for example, of a contract for repair).

(5) Those which contemplate an impossible service;

If a blind man enters into a contract which requires the use of his eyesight, the contract
is void although in this particular case, we have only a relative impossibility. This is
because here, the relative impossibility is not merely temporary.
(6) Those where the intention of the parties relative to the principal object of
the contract cannot be ascertained;
Anna sold his land to Ben. Anna has many lands. It cannot be determined which
land was intended by the parties to be the subject of the sale.

(7) Those expressly prohibited or declared void by law.

Contracts upon future inheritance except in cases expressly authorized by law.
ATAY, MARIA MARIZZA

Article 1410
The action or defense for the declaration of
the inexistence of a contract does not
prescribe.
ILLUSTRATION:

Alaska sells Bearbrand the Pagsanjan Falls and Bearbrand gives Alaska the
money. Of course, this contract is null and void, but suppose Alaska refuses to
return to Bearbrand the money, stating that there is nothing Bearbrand wrong do.
with He should the contract, file an action whafshouldin court to declare the
inexistence of the contract. This right of Bearbrand to brine the action does not
prescribe. The defect in this kind of contract cannot be cured by prescription or by
ratification.
ANNA MAE PITOGO

Article 1411
When the nullity proceeds from the illegality of the cause or object
of the contract and the act constitutes a criminal offense, both parties
being in pari delicto, they shall have no action against each other
and both shall be prosecuted.
Moreover, the provisions of the Penal Code relative to the disposal
of effects or instruments of a crime shall be applicable to the things
or the price of the contract.
Rules where contract is illegal and the act constitutes a
criminal offense.

1 . When both parties are in pari delicto;( equally at fault) Result:

a) The parties shall have no action against each Other;
b) Both shall be prosecuted;
c) The things or the price of the stipulated contract as the effect or
instrument of the crime shall be confiscated in favor of the government.
ILLUSTRATION:

Renel sold unlicense firearms to Emerson amounting 10,000.

Emerson paid only 3,000 and Renel delivered only the fire arms
with out magazine.

In this case the parties have no right of action to other.

Rules where contract is illegal and the act constitutes
a criminal offense.
2. When only one party is guilty;
In the preceding example, if Emerson is in good faith believing that
the firearms was a legal one, he can claim the 3,000 to Renal, or if he
did not yet paid Renel he shall not be bound to comply with his
promise. Renel shall be prosecuted and the object sold by him shall
be confiscated.
SURYAGA, MARY ANN

Article 1412.
If the act in which the unlawful or forbidden cause consists
does not constitute a criminal offense, the following rules
shall be observed:
(1 ) When the fault is on the part of both contracting parties, neither
may recover what he has given by virtue of the contract, or demand the
performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot
recover what he has given by reason of the contract, or ask for the
fulfillment of what has been promised him. The other, who is not at
fault, may demand the return of what has given without any obligation
to comply his promise.
DUMAYACA, NIKKI SHYNN

Article 1413
Interest paid in excess of the interest allowed by the usury
laws may be recovered by the debtor, with interest thereon
from the date of the payment.
 Usury Law

Usury is the illegal act of charging for a loan a higher rate of interest
than that which is allowed by law. Recovery of usurious interest Any
rate of interest in excess of the maximum allowed under the Usury
Law is usurious and if paid, may be recovered together with interest
thereon from the date of payment in a proper action for the same.
(Art. 1413.)
DUMAYACA, NIKKI SHYNN

Article 1414
When money is paid or property delivered for an illegal
purpose, the contract may be repudiated by one of the parties
before the purpose has been accomplished, or before any
damage has been caused to a third person. In such case, the
courts may, if the public interest will thus be subserved, allow
the party repudiating the contract to recover the money or
property.
Recovery where contract for an illegal purpose
• The law allows recovery by one of the parties even though both of them
have acted contrary to laws.
• Requisites:
 A contract that is for an illegal purpose
 The contract is repudiated before the purpose has been accomplished OR before
any damage has caused to a third person
 The court considers that public interest will be subserved by allowing recovery
ILLUSTRATION:
Nikki is accused of murder.
Anna Mae paid P100,00 to Aiza to hide Nikki
Before Aiza could hide Nikki, Anna Mae changed his mind.
The court may allow Anna Mae to recover the P100,000 given to
Aiza
ATAY, MARIA MARIZZA

Article 1415
Where one of the parties to an illegal contract is incapable of giving
consent, the courts may, if the interest of justice so demands allow
recovery of money or property delivered by the incapacitated person.
Recovery by an incapacitated person

This article is another exception to the in pari delicto rule in Articles

1411-1412. Recovery can be allowed if one of the parties is
incapacitated and the interest of justice so demands. It is not
necessary that the illegal purpose has not been accomplished or that
no damage has been caused to a third person. (see Art. 1414.)
ILLUSTRATION:

Jonathan, an insane but crazy rich person, paid Lay Jean $1 million
dollars to hide Agusto, who is currently accused of murder. Under
Art. 1415, the court may allow Jonathan to recover the money paid
by him if the interest of justice so demands.
DIANO, LAY JEAN

Article 1416
When the agreement is not illegal per se but is merely prohibited, and
the prohibition by the law is designed for the protection of the
plaintiff, he may, if public policy is thereby enhanced, recover what
he has paid or delivered.
Article 1416 is another exception to the rule that where both parties are in
pari delicto, they will be left where they are without relief.

Recovery is permitted provided:

(1) The agreement is not illegal per se but is merely prohibited; (2) The
prohibition is designed for the protection of the plaintiff; and
(3) Public policy would be enhanced by allowing the plaintiff to recover
what he has paid or delivered.
ILLUSTRATION:
Ms Lovely donated to the Charity everything that she (Ms. Lovely)
possessed and owned, leaving nothing for herself. This is prohibited
but not illegal per sew Since public policy is hereby enhanced, Ms
Lovely will be allowed to recover, at least that necessary for her
own support and the support of her relatives.
TORREQUIMADA, AIZA

Article 1417
When the price of any article or commodity is determined
by statute, or by authority of law, any person paying any
amount in excess of the maximum price allowed may
recover such excess.
Explanation:
This article refers to the ceiling price. If a ceiling price for a certain
commodity has been determined by statute by law or competent
authority who pays any amount more than what has been determined
may recover such excess
This is usually applies to basic needs and during an emergency or crisis.
Prices of can goods, noodles etc.
ILLUSTRATION:
A regulation was promulgates by the government fixing the maximum
price of a particular brand of rice at 2,500.00 pesos per sack.
Angelyn a buyer paid 3000 pesos per sack whether or not he knew the
regulation he is allowed to recover the excess of 500.00 which he paid
for the price of each sack.
TORREQUIMADA, AIZA

Article 1418
When the law fixes, or authorizes the fixing of the maximum
number of hours of labor, and a contract is entered into whereby a
laborer undertakes to work longer than the maximum thus fixed, he
may demand additional compensation for service rendered beyond
the time limit.
Basis of Minimum Wage Rates
The basis of the minimum wage rates is not more than eight hours
daily labor in the case of employees working in non-agricultural
enterprises, and not more than the customary hours of work in the case
of agricultural workers. (Article 1, Section 3, Code of Rules and
Regulations to Implement the Minimum Wage Law, as Amended.
ILLUSTRATION:
Maria works in Toshiba Company in Canlubang, Laguna. She works
from Monday to Saturday from 8am to 5pm as the maximum working
hours. However, s she works from Monday, Wednesday, and Friday
from 8am to 7pm exceeding two hours beyond the maximum
working hours.
ALBA, JONATHAN

Article 1419
When the law sets, or authorizes the setting of a minimum wage for
laborers, and a contract is agreed upon by which a laborer accepts a
lower wage, he shall be entitled to recover the deficiency.
If the laborer has agreed to receive a wage lower than
the minimum wage fixed by law he is not barred from
recovering the deficiency. Such contract or agreement
is void under the minimum wage law.
ILLUSTRATION:
Mary ann the owner of a candy factory in Manila executed a contract with
Genesis as a laborer. When the pay day comes Genesis reacted for the sum of
money that he received because the amount that he received is only P380.00/
day instead of P480.00, therefore Genesis can recover for the deficiency that he
received from Mary ann which stated on this art. that "When the law sets, or
authorizes the setting of a minimum wage for laborers, and a contract is agreed
upon by which a laborer accepts a lower wage, he shall be entitled to recover
the deficiency. "
ALBA, JONATHAN

Article 1420
In case of a divisible contract, if the illegal terms can be
separated from the legal ones, the latter may be enforced.
MAGALLON, AGUSTO

Article 1421
The defense of illegality of contract is not available to
third persons whose interests are not directly affected.
Persons entitled to raise defense of illegality
• Third persons are NOT allowed to bring an action to annul OR
assail a voidable and unenforceable contracts.
 HOWEVER, if the contract is illegal OR void, even a third person
may avail of the defense of illegality or set up its illegality
 as long as his interest is directly affected by the contract.
ILLUSTRATION:
Jonathan sold his parcel of land to his wife, Maria.
Under the law, husband and wife CANNOT sell property to each other.
Such sale is illegal and void.
If Lay Jean, a third person, became a creditor of Jonathan before the transaction, he
can question the sale for the reason that his right OR interest is directly affected.
HOWEVER, if he became a creditor after the transfer, the defense of illegality is NOT
available to him.
MAGALLON, AGUSTO

Article 1422
A contract which is the direct result of a previous illegal
contract, is also void and inexistent.
Void contract cannot be novated
This provision is based on the requisites of a valid novation. An
illegal contract is void and inexistent and cannot, therefore, give
rise to a valid contract.
ILLUSTRATION:
BSBA sells a yellow Chevrolet Camaro to BSOA. The two parties also signed a
repurchase contract wherein BSBA has the right to buy back the car within two
years. It turned out that the Yellow Chevrolet Camaro was rightfully owned by
BSCRIM, and not by BSBA. Under Art. 1422, the contract of repurchase is
dependent on the validity of the contract of sale. Since the contract of sale is void
because BSBA, the seller, is not the owner, the subsequent contract of repurchase
is also void because it presupposes a valid contract of sale between the same
parties. One can repurchase only what he has previously sold.
SURYAGA, MARY ANN

In the context of business law, the chapter on void and inexistent contracts delineates crucial distinctions between these two types of
agreements, emphasizing their legal implications and characteristics.
Void Contracts: These are agreements that lack any legal effect from the outset (ab initio). They are unenforceable due to various reasons,
such as:
Illegality: Involvement in illegal activities.
Lack of Capacity: Parties unable to understand the contract due to age or mental incapacity.
Mistakes: Fundamental misunderstandings regarding essential terms or identities.
Impossibility: Contracts requiring impossible actions or services.
Because void contracts are considered non-existent in the eyes of the law, they cannot be ratified or validated, and any obligations arising
from them are unenforceable.
Inexistent Contracts: These refer to agreements that fail to meet essential elements required for a valid contract, such as consent, object,
and cause. They might be completely lacking in one or more of these elements or fail to comply with necessary formalities. Like void
contracts, inexistent contracts produce no legal effects and cannot be enforced.

Legal Status: Void contracts are inherently unenforceable, while inexistent contracts never come into being.
Correctability: Void contracts cannot be corrected or ratified; inexistent contracts similarly lack the foundation for legal recognition and
cannot be validated.
In conclusion, both void and inexistent contracts serve as important concepts in contract law, highlighting scenarios where agreements fail to
achieve legal enforceability. Understanding these distinctions helps parties navigate contractual obligations and avoid potential legal pitfalls.