5. Art.

1403(2)(e) -

“(2) x x x x x x x x x
(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;”

The amount involved in the sale of the realty is immaterial for the transaction
to fall under the Statute of Frauds.

The writing that is required for the sale of the real property, so that the
requirement of the Statute of Frauds is fulfilled, is, ordinarily, the written
contract of sale itself. But the sense of the statute is broad enough to include
some note or memorandum of the agreement. Thus, in City of Cebu v. Heirs
of Rubi (306 SCRA 408[1999]), the requirement of writing was deemed met
by the fact that, although no deed of sale was ever formalized, there was an
exchange of correspondence between the parties in which the object and the
price had been agreed upon.

Not all agreements affecting realty fall under the Statute of Frauds. The
statute refers only to “sales of real property or of an interest therein.” Thus,
in Hernandez v. CA (160 SCRA 821 [1988]), the Court held:

“x x x. Under the Statute of Frauds, Article 1403(2)(e) of the Civil

Code, such formality is only required of contracts involving leases for longer
than one year, or for the sale of real property or of an interest therein.
Hernandez’s testimony is thus admissible to establish his agreement with Fr.
Garcia as to the boundary of their estates.”

Similarly, the Statute of Frauds was held inapplicable to an agreement of

partition among co-owners of parcels of land (Espina v. Abaya, 196 SCRA
312 [1991]) or to one creating an easement of right of way (Western
Mindanao Lumber v. Medalle, 79 SCRA 703 [1977]). More recently, it has
been held that a right of first refusal relating to the purchase of a house-and-
lot need not be written to be enforceable (Rosencor v. Inquing, 354 SCRA
119 [2001]).

1. Art. 1403(2)(f) –

“(2) x x x x x x x x x
(f) A representation as to the credit of a third person.”

This paragraph is misplaced here—the act referred to is not a contract. The

representation, if made the basis of liability, is quasi-delictual in nature.

Instead of par. (f), Art. 1443 should have been included in the enumeration:

“Art. 1443. No express trusts concerning an immovable or any interest therein

may be proved by parol evidence.”

IV. Void Contracts

Fourth in the enumeration of defective contracts are

the void or inexistent contracts, the most seriously defective of all:

“Art. 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is a 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.
These contracts cannot be ratified. Neither can the right to set up the defense
of illegality be waived.”

A. Characteristics of Void Contracts

The following rules regarding void contracts may be mentioned:

1. They produce no effect whatsoever either against or in favor of

anyone (Quod nullum est nullum producit effectum).
2. No action for annulment is necessary. Their nullity
exists eo ipso and therefore any judgment of nullity is merely declaratory.
3. They can neither be confirmed nor ratified. (Art. 1409)
4. If performance is made, restoration of what has been delivered
is required, except when the pari delicto rule is applicable.
5. The right to set up the defense of nullity cannot be waived.
(Art. 1409)
6. The action or defense of nullity does not prescribe. (Art.
1410)
 7. The defense of nullity may be invoked by anyone against
whom the effects of the contract are asserted. (Art. 1421; Tongoy v. CA, 123
SCRA 99 [1983])

B. The Pari Delicto Rule

A word on the pari delicto rule. The old maxim says: In pari delicto non
oritur actio,or Ex dolo malo, non oritur actio, or In pari delicto potior est
condicio defendentis. Basically the pari delicto rule mandates that in a void
contract, if both parties are at fault, neither can maintain an action for
performance nor recover what he has delivered. The law, in short, will leave
the parties exactly where they are.

The rationale of the pari delicto rule has been expressed as follows

“The principle of pari delicto is grounded on two premises — first that courts
should not lend their good offices to mediating disputes among wrongdoers;
second, that denying relief to an admitted wrongdoer is an effective means of
deterring illegality. This principle of ancient vintage is not a principle of justice
but one of policy as articulated in 1775 by Lord Mansfield…” (Acabal v.
Acabal, 454 SCRA 555 [2005]).

Thus provide Arts. 1411, par. 1 and the first two paragraphs of 1412:

“Art. 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.”

“Art 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;”

In Yu Bun Guan v. Ong (367 SCRA 559 [2001]), the Supreme Court
reiterated the settled doctrine that the pari delictorule applies to cases where
the nullity of the contract arises from the illegality of the object or cause
(Vide Modina v. CA, 317 SCRA 696 [1999]; Castro v. Escutin, 90 SCRA 349
[1979]). The statement in these cases that the pari delictorule does not apply
to void or inexistent contracts is, to put it kindly, less than accurate. There are
some void contracts to which it applies and others to which it does not. The
correct formulation of the rule is contained in Vasquez v. Porta (98 Phil. 490
[1956]):

“…the maxim applies only in case of existing contracts with illegal

consideration, and is not applicable to simulated or fictitious contracts nor to
those that are inexistent for lack of an essential requisite.”

Importance of classification

Thus are defective contracts classified in our Code. We should be

reminded that the categories are well-defined and mutually exclusive. It is
necessary to bear this in mind because the nature, effects, and consequences
of these defective contracts are essentially different and distinct. For example,
a contract cannot be both voidable and void, since a voidable contract can be
cured of its defect while a void contract is irremediable. Jurisprudence has
often, but not always, been helpful. Some cases can be somewhat perplexing.
The case of Comelec v. Padilla (the Photokina case) (398 SCRA 353 [2002])
is well-known. The issue there was clearly stated by the Court: “May a
successful bidder compel a government agency (i.e., the Commission on
Elections [COMELEC]) to formalize a contract with it notwithstanding that its
bid exceeds the amount appropriated by Congress for the project?”

Photokina’s winning bid far exceeded the amount of funds

appropriated for the purpose. COMELEC had issued a Resolution approving
the Notice of Award to Photokina, which in turn accepted the same. As things
turned out, the transaction did not carry through, owing to objections raised by
the Chairman of the COMELEC. In refusing to grant Photokina’s petition, the
Decision variously characterizes the contract as “void” (p. 18, Decision), and
as “unenforceable” (Ibid.). At the same time, the Decision in effect states that
there was as yet no perfected contract (“We cannot accede to PHOTOKINA’s
contention that there is already a perfected contract.” [p. 20, Decision]). Then
the Decision reiterates that the contract is “inexistent and void ab initio.” (p.
25, Decision). Then it goes back to the concept of unenforceable contracts
(“otherwise stated, the proposed contract is unenforceable as to the
Government.” [p. 26, Decision]). To round things out, the Decision closes with
the statement: “In fine, we rule that…the proposed contract is not binding
upon the COMELEC and is considered void.” (p. 26, Decision).

Conclusion
The foregoing paper, almost purely expository in nature, is meant to give a
basic presentation of an aspect of Philippine contract law.

It may also provide a little window on how the private law of the
Philippines has acquired the blended character that it possesses:
predominantly civil (Roman) law, but marked by features of the common
(Anglo-American) law tradition.
1 The distinctions drawn by Justice JBL Reyes in the UFC case—as to the nature, purpose, and requisites of rescission (resolution) under
Art. 1191 and rescission under Arts. 1380-1389—have since been reiterated and confirmed in subsequent decisions: Ong v. CA, 310 SCRA
1 [1999]; Velarde v. CA, 361 SCRA 57 (2001); Cannu v. Galang, 459 SCRA 80 [2005]; Raquel-Santos v. CA, 592 SCRA 169 [2009];
and Quirong v. DBP, 606 SCRA 543 [2009].

2 A threat to carry out a lawful act, such as a prosecution for estafa (swindling) does not constitute the kind of intimidation that would vitiate
consent (Spouses Binua v. Ong, 727 SCRA 59 [2014]). It may be observed, however, that the threat to carry out a lawful act may
constitute intimidation if such threat amounts to an abuse of right, as when the threatened act has no relation to the contract sought to be
executed.