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Rescissible Voidable Unenforceable Void/inexistent

1. Definition Validly agreed upon because Valid, binding contracts that Cannot be enforced, no legal Have no force and effect from
all of the essential elements can be subsequently annulled effects unless ratified in the the very beginning as if it had
exist and therefore, legally because of want of capacity manner provided by law never been entered into.
effective, but in cases or vitiated consent Cannot be validated by time
established by law, the or ratification; absolute nullity
remedy of recission is
granted in the interest of
equity

A contract that has caused a


particular damage to one of
the parties/3rd person and
which for equitable reasons
may be set aside even if valid

Requisites:
1. Contract is
rescissible
2. The party asking for
rescission has no
other legal means to
obtain reparation
3. He is able to return
whatever he may be
obliged to restore if
rescission is granted
4. The object of the
contract has not
passed legally to the
possession of a 3rd
person acting in good
faith
5. The action is brought
within prescriptive
period of 4 years
2. Kinds/Example 1. entered into by (1) Those where one of the (1) Those entered into in (1) Those whose cause,
guardians whenever parties is incapable of giving the name of another object or purpose is contrary
the wards suffer consent to a contract; person by one who to law, morals, good customs,
lesion by more than has been given no public order or public policy;
of things object (2) Those where the consent authority or legal
2. agreed upon in is vitiated by mistake, representation, or (2) Those which are
representation of violence, intimidation, undue who has acted absolutely simulated or
absentee, suffer influence or fraud. beyond his powers; fictitious;
lesion by more than (unauthorized contracts)
of the value of These contracts are binding, (2) Those that do not comply (3) Those whose cause or
things object unless they are annulled by a with the Statute of Frauds as object did not exist at the time
3. in fraud of creditors proper action in court. They set forth in this number. In the of the transaction;
who cannot collect are susceptible of ratification. following cases an agreement
claims due them hereafter made shall be (4) Those whose object is
4. things under unenforceable by action, outside the commerce of
litigation, without unless the same, or some men;
knowledge and note or memorandum,
approval of plaintiff or thereof, be in writing, and (5) Those which contemplate
of competent judicial subscribed by the party an impossible service;
authority charged, or by his agent;
5. specially declared by evidence, therefore, of the (6) Those where the intention
law to be subject of agreement cannot be of the parties relative to the
rescission received without the writing, principal object of the contract
or a secondary evidence of its cannot be ascertained;
contents:
(7) Those expressly
(a) An agreement that by its prohibited or declared void by
terms is not to be performed law.
within a year from the making
thereof; These contracts cannot be
(b) A special promise to ratified. Neither can the right
answer for the debt, default, to set up the defense of
or miscarriage of another; illegality be waived.

(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; 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 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.

(contracts covered by statute


of frauds)

(2) Those where both


parties are incapable
of giving consent to a
contract.
(contracts executed by
parties who are both
incapable of giving consent to
a contract)
3. Damage to contracting party Want of capacity, vitiated In excess/lack of authority Not only wanting of essential
Source of defect or a 3rd party consent requisites but also declared
Non-compliance with statute void by provision of law or
of frauds statute

Both parties incapable of


consent
4. Necessity of The action for rescission is No damage to parties needed No damage necessary Not necessary but provision
damage/prejudice subsidiary; it cannot be on claiming damages are
instituted except when the present
party suffering damage has
no other legal means to
obtain reparation for the
same.
5. Curability by Yes, 4 years Yes, 4 years No. only ratification No. The action or defense for
prescription the declaration of the
For guardianship: must start In case of intimidation, inexistence of a contract does
from termination of violence, undue influence: not prescribe.
incapacity; from time defect of consent
ceases
Absentee: when domicile is
known In case of mistake or fraud:
from time of discovery
6. Characteristics 1. Their defect consists 1. Their defect consists 1. Cannot be enforced 1. Void from the
in injury or damage in the vitiation of by proper action in beginning
either to one of the consent of one of the court 2. Produces no effect
contracting parties or contracting parties 2. They are susceptible 3. Cannot be confirmed
3rd person of ratification or validated neither
2. They are binding until 3. They cannot be can the right to set up
2. They are valid before they are annulled by assailed by 3rd the defense of
rescission a competent court persons illegality be waived
4. No action for
3. They can be attacked 3. They are susceptible annulment is
directly only and not of convalidation by necessary
collaterally ratification or by 5. If it has been
prescription performed, the
4. They can be attacked restoration of what
only either by a has been given is in
contracting party or order
by a 3rd persons who 6. The action or defense
is injured or for the declaration of
defrauded its illegality or
absolute nullity
5. They can be cannot be waived
validated only by 7. The action or defense
prescription and not for the declaration of
by ratification its illegality or
absolute nullity does
not prescribe
8. The action or defense
for the declaration of
its illegality or
absolute nullity is not
available to 3rd
persons whose
interest are not
directly affected
9. Its invalidity can be
questioned by
anyone affected by it
4. Effects Extent: Rescission shall be Cleanses the contract from all No legal effect No legal effect, no recovery of
only to the extent necessary of its defects from the what has been given for party
to cover the damages moment it was constituted at fault
caused. (retroactive effect) but does
not prejudice rights of 3rd
Effect: Rescission creates the persons acquired before the
obligation to return the things ratification
which were the object of the
contract, together with their Mutual restitution of subject
fruits, and the price with its matter, fruits and price with
interest; consequently, it can interest
be carried out only when he
who demands rescission can When one of the parties is
return whatever he may be incapacitated: not obliged to
obliged to restore. make any restitution except in
so far as it has benefitted him
Neither shall rescission take
place when the things which When the thing is lost through
are the object of the contract the fault of the party obliged
are legally in the possession to return the same: return
of third persons who did not fruits and value of the thing at
act in bad faith. the time of loss with interest
from the same date but if due
In this case, indemnity for to fortuitious event: pay the
damages may be demanded value of the thing lost but not
from the person causing the fruits and interests.
loss.
5. Remedy Mutual restitution with fruits Annulment/ratification Ratification Action to declare nullity
and interests for damages (extinguishes the action to
annul a voidable contract)

6. Nature of action Rescission/direct Can be directed or as a Ratification, direct action Declaration of nullity
defense to an action
enforcing the
same/annulment
7. Who may file action Injured person, heirs of these All who are obliged principally Only contracting parties. When the nullity proceeds
(in remedy) persons, their creditors or subsidiary Cannot be assailed by 3rd from the illegality of the cause
persons. or object of the contract, and
Requisites of annulment: the act constitutes a criminal
1. Interest in the offense, both parties being in
contract there must pari delicto, they shall have
be legal capacity no action against each other,
2. Victim and not the and both shall be prosecuted.
party responsible for Moreover, the provisions of
the defect 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.
This rule shall be applicable
when only one of the parties
is guilty; but the innocent one
may claim what he has given,
and shall not be bound to
comply with his promise.

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;

(3) 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 he
has given without any
obligation to comply
his promise.x

Not available to 3rd persons


8. Susceptibility to Cannot Yes, requisites: Yes Cannot be ratified
ratification 1. Contract is
voidable/annullable Unauthorized contracts are
2. Ratification is made governed by Article 1317 and
with knowledge of the the principles of agency in
cause for nullity Title X of this Book.
3. At the time of
ratification, the cause Contracts infringing the
of nullity has already Statute of Frauds, referred to
ceased to exist in No. 2 of Article 1403, are
Forms: ratified by the failure to object
1. Express/implied to the presentation of oral
2. By parties evidence to prove the same,
themselves or by the or by the acceptance of
guardian in behalf of benefit under them.
incapacitated person
Effects: In a contract where both
1. Action to annul is parties are incapable of giving
extinguished consent, express or implied
2. The contract is ratification by the parent, or
cleansed retroactively guardian, as the case may
from all its defects be, of one of the contracting
from the time it was parties shall give the contract
constituted 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.
9. Prescriptive period 4 years The action for annulment none Does not prescribe
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.

Incapacity: from the time


guardianship ceases