UNENFORCEABLE CONTRACTS (n)
require certain classes of contracts to be in writing. The effect of
ART. 1403. The following contracts are unenforceable, unless
they are ratifi ed:
(1) Those entered into the name of another person by one who
has been given no authority or legal representation, or who has
acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum thereof, be in writing, and
subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be
performed within a year from the making thereof;
(b) A special promise to answer for the debt, default,
or miscarriage of another;
(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 suffi cient memorandum;
(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;
(f) A representation as to the credit of a third
person.
(3) Those where both parties are incapable of giving consent to
a contract.
Unenforceable contracts are those that cannot be enforced in court
or sued upon by reason of defects provided by law until and unless
they are ratifi ed according to law.
While rescissible and voidable contracts are valid and enforceable
unless they are rescinded or annulled, unenforceable contracts,
although valid, are unenforceable unless they are ratifi ed.
lapse of time will not give effect to the contract since defect is of
permanent nature unless ratified by the person in whose name it
was executed.
A party to an unenforceable contract may bring an action to
enforce it subject to the defense of the lack of the required form
(Statute of Frauds) or absence of authority or in excess thereof.
The law expressly provides that such a contract cannot be
assailed by a third person.
Unauthorized contracts are those entered into in the name of
another person by one who has been given no authority or legal
representation or who has acted beyond his powers.
Statute of Frauds
The term “statute of frauds’’ is descriptive of statutes which
non-compliance is simply that no action can proved unless the
requirement is complied with.
The Statute of Frauds has been enacted not only to prevent fraud
and perjury in the enforcement of obligations depending for their
evidence on the unassisted memory of witness but also to guard
against the mistakes of honest men by requiring that certain
agreements specifi ed must be in writing signed by the party to be
charged; otherwise, they are unenforceable by action in court
Since the Statute of Frauds was enacted for the purpose of
preventing frauds, it should not be made the instrument to further
them. ) Thus, where a party has entirely complied with his
obligations under an oral contract, the other cannot avoid the fulfi
llment of those incumbent upon him under the same contract by
invoking the Statute of Frauds. Equity demands that oral evidence
be admitted to prove the contract because the statute aims to
prevent and not to protect fraud
Application.
(a) The application of the Statute of Frauds presupposes the
existence of a perfected contract and requires only a note or
memorandum be executed in order to compel judicial enforcement
thereof. Where there is no perfected contract, there is no basis for
the application of the statute
(b) The Statute of Frauds refers to specifi c kinds of transactions
and cannot apply to any other transaction that is not enumerated
therein.
exThus, the purchaser of a parcel of land may prove the oral
contract of sale in a subsequent action for ejectment against a third
person who is in possession of the property
(c) It is applicable only to executory contracts (where no
performance has as yet been made by both parties) and not to
contracts which are totally (consummated) or partially performed.
The reason is that partial performance, like the writing, furnishes
reliable evidence of the intention of the parties or the existence of
the contract. A contrary rule would result in injustice or unfairness
to the party who has performed his obligation, for it would enable
the other to keep the benefi ts already derived by him from the
transaction, and at the same time evade the obligations assumed or
contracted by him thereby. So that when the party concerned has
pleaded partial performance, such party is entitled to a reasonable
chance to establish by parol evidence the truth of his allegations, as
well as the contract itself. The partial performance may be proved
by either oral or documentary evidence.
Where the facts alleged in the complaint are constitutive of a
consummated contract of sale, oral evidence is not forbidden by
the statute and may not be excluded in court.
(d) It is not applicable where the contract is admitted, by the failure
to deny specifi cally its existence, no further evidence thereof
being required
(e) It is not applicable where a writing does not express the true
agreement of the parties. This is so because the Statute cannot be
used as a shield for fraud or as a means for the perpetration of it.
(f) It does not declare that contracts infringing it are void and of no
effect but merely unenforceable. The form required is for
evidential purposes only.
(g) It does not determine the credibility or weight of evidence but
merely regulates the admissibility thereof.
(h) The defense of the Statute of Frauds is subject to waiver
(i) The defense of the Statute of Frauds is personal to the parties
and cannot be interposed by strangers to the contract.
Agreements within the scope of the Statute of Frauds
///(1) Agreement not to be performed within one year from the
making thereof. — In order that this provision be applicable, it
must appear that the parties intended when they made the contract
that it should not be performed within a year. In other words, that a
contract cannot be performed within a year means not a natural or
physical impossibility but an impossibility by the terms of the
contract itself or by the understanding and intention of the parties
to the contract. 1 yr and a 1sec included
The broad view is that the Statute applies only to agreements not to
be performed on either side within a year from the making thereof.
According to this view, agreements to be fully performed on one
side within the year are taken out of the operation of the Statute.
Ex: x to deliver y car next year
////(2) Promise to answer for the debt, default, or miscarriage of
another. — In a guaranty, the promise is merely subsidiary or
collateral to the promise of another (the original or principal
debtor). If the promise is an original or an independent one, that is,
if the promisor becomes thereby primarily liable for the payment
of the debt, the promise is not within the Statute and may be
proved by oral evidence
Ex: D owes C P1,000.00 with G as guarantor. Here, G has a special
promise to answer for the debt of D in case D fails to pay the same.
This promise is unenforceable unless it is in writing signed by G.
If the promise of G is to pay C what D owes him (C), G’s promise,
even if verbally made, is enforceable as it is not a collateral
“promise to answer for the debt, default, or miscarriage of
another.”
///(3) Agreement in consideration of marriage other than a mutual
promise to marry. — Where the marriage is a mere incident, and
not the end to be attained by the agreement, it is not deemed to be
the consideration. Where there is some other consideration suffi
cient to support the oral agreement, in addition to marriage, such
agreement is not covered by the Statute and oral evidence is
admissible to prove the same
Ex: X agrees to build a house worth P500,000.00 for Y if Y will
marry X. This must appear in writing to be enforceable unless X
ratifi es the agreement. The Statute applies even when the promise
to build the house is made by a third person to Y.
But a mutual promise of X and Y to marry each other need not be
in writing. For breach of the mutual promise to marry, the injured
party may prove the promise by oral evidence in an action for
damages
The law states no period for performance unlike in the case of the
agreement referred to in No. 1. Hence, an oral mutual promise to
marry may be proved by parol evidence although the marriage is to
be celebrated beyond one (1) year.
Note: Marriage settlements (also called ante-nuptial contracts) are
agreements entered into the future spouses before the celebration
of marriage and in consideration thereof, for the purpose of fi xing
the conditions of their property relations both with respect to their
present and future property. (See Arts. 74-76, Family Code.)
Donations propter nuptias or donations by reason of marriage are
those which are made before its celebration, in consideration of the
same and in favor of one or both of the future spouses. (Art. 82,
Ibid.)
Both are agreements made in consideration of marriage and are,
therefore, covered by the Statute of Frauds.
///(4) Agreement for sale of goods, etc. at price not less than
P500.00. —
EXAMPLES:
(1) X and Y mutually promised to buy and sell a piano
at a price of P4,000.00. This contract must be in writing to be
enforceable against either party unless there is delivery or partial or
full payment, in which case, it is taken out of the operation of the
Statute of Frauds and the contract may be enforced even if it was
made orally.
(2) If Y denies a contract of sale of goods worth
P500.00 but X claims the price is only P450.00 (which is less than
P500.00), oral evidence of the sale is admissible inasmuch as the
true agreement claimed is not covered by the Statute
///(5) Agreement for leasing for a longer period than one year.
Ex: R agreed to lease his house to E for two (2) years. Again, this
agreement must appear in writing to be enforceable unless it is
partially executed.
///(6) Agreement for the sale of real property or of an interest
therein. — No law or jurisprudence prescribes that the contract of
sale be put in writing before such contract can validly cede or
transmit rights over a certain real property between the parties
themselves. However, in the event that a third party disputes the
ownership of the property, the person against whom the claim is
brought cannot present any proof of sale and, hence, has no means
to enforce the contract. Thus, the Statute was precisely devised to
protect the parties in a contract of sale of real property so that no
such contract is enforceable unless certain requisites, for purposes
of proof are met
EXAMPLES:
(1) S orally sold his land or his right or usufruct in said land to B.
The agreement is also unenforceable, unless it has been partially
executed.
(2) S agreed in a private document to sell his land to B. The
document was given to B who lost it. May B prove the agreement
by oral evidence? Yes. Here, what is to be proved is not an oral but
a written contract of sale. It is necessary, however, that B fi rst
presents proof that the written agreement really existed
///(7) Representation as to the credit of a third person. —
Ex: D is seeking a loan from C. T represents to C that D is solvent
and has a good credit reputation. Relying upon this representation,
C extends a loan to D who, actually, is insolvent.
The representation of T, which was made to induce the extension
of credit to D, must be in writing to be enforceable.
///(8) Express trusts concerning an immovable or any interest
therein. - — Under Article 1443 (see Note 1.), a writing is
necessary, not for purposes of validity, but to prove such trusts. An
express trust over personal property or any interest therein, and an
implied trust, whether involving real or personal property, may be
proved by oral evidence.
Modes of satisfaction of the Statute. >500
The Statute specifi es three ways in which a contract of sale of
goods within its terms may be made binding, namely:
(1) the giving of a note or memorandum;
(2) acceptance and receipt of part of the goods (or things in action)
sold; and
(3) payment at the time some part of the purchase price
For a note or memorandum to satisfy the statute, it must be
complete in itself and cannot rest partly in writing and partly in
parol,/ and it must contain the names of the parties, the terms and
conditions of the contract, and a description of the property suffi
cient to render it capable of identifi cation./ Also to be binding on
the person to be charged, it must be signed by the said party or by
his agent duly authorized in writing/
The requirement of a memorandum is obviously suitable either for
a contract to sell or a sale. The other two modes of satisfaction
seem more naturally to apply to sales than to executory contracts
The Statute of Frauds applies not only to sale of goods but to
things in action as well. (see Art. 1402[2, d].) Thus, an assignment
of credit more than P500.00 is within the operation of the statute.
Test as to whether promise is original or a collateral one
determined from the evidence as to the language used in making
the promise and the circumstances under which it was made.
Effect of Statute of Frauds where contract divisible/indivisible.
Chattel – personal property other than real estate
The enforceability of a contract for the sale of chattels when
affected by the Statute of Frauds often depends on whether it is
severable or inseverable. (see Art. 1420.) This question may arise
in two (2) ways:
First, the separate chattels may each sell below P500.00 but the
sum total of the price of all the chattels sold may amount to or
exceed such limit. In this case, if the sales are separate, each sale
for a price below the statutory limit is not affected by the Statute.
If, however, the transaction is one entire sale and the price amounts
to or exceeds P500.00, the Statute applies, though separate chattels
are sold, and though delivery is to be made in installments, and
though the price of each chattel is estimated separately
Second, part of one lot of chattels sold may be received and
accepted, or they may be paid for in part. Does this satisfy the
Statute as to other chattels sold between the same parties? The
answer depends on whether the sales amount to one transaction or
not. If separate chattels are sold under one contract, any act or
receipt and acceptance or part payment which satisfi es the Statute
as to one chattel, satisfi es it as to all
Whether a contract is divisible or not depends primarily on the
intention of the parties as shown by the terms of the contract and
the facts of the particular case.
EXAMPLES:
S (seller) and B (buyer) entered into an oral contract for the sale of
two distinct articles, at separate prices for each: item 1 for P400.00
and item 2 for P500.00.
(1) Transaction is one entire sale. — The receipt (or payment) by B
of item 1 takes the contract as to item 2 also out of the Statute, and
vice versa. The rule is the same where the price of item 2 is less
than P500.00 but the total consideration amounts to or exceeds
P500.00. Of course, the Statute is not applicable if the sum total of
the price is below P500.00.
(2) Sales are separate. — The contract as to item 1 (for P400.00) is
not covered by the Statute. Hence, the receipt by B of item 1 does
not satisfy the Statute as to item 2 (for P500.00). If B receives
possession of item 2, then both sales may be proved by parol
evidence: as to item 1, the Statute does not apply, and as to item 2,
the receipt thereof satisfi es the Statute as to the same.
Suffi ciency of note or memorandum.
(1) No particular form of language or instrument is necessary to
constitute a note or memorandum in writing under the Statute of
Frauds.
Must state all the essential elements of the contract with reasonable
certainty, and which is signed by the party to be charged or his
lawfully authorized agent, is a suffi cient note or memorandum
An exchange of written correspondence between the parties may
constitute suffi cient writing to evidence the agreement for
purposes of complying with the statute of frauds
(2) It need not state the consideration for the contract since the
existence of this element is presumed, unless the debtor proves the
contrary. But it must be subscribed or signed by the party charged
or at least by a person who had authority to bind him.
(3) When a sale is made by auction the entry made by the
auctioneer in his sales book at the time of sale, of the details
mentioned in the law (Art. 1403[2, d].), is a suffi cient
memorandum even if such entry is not signed by the party sought
to be charged.
(4) The note or memorandum required by the Statute of Frauds
need not be contained in a single document, nor, when contained in
two or more papers, need each paper to be suffi cient as to contents
and signature to satisfy the Statute. Two or more writings properly
connected may be considered together, matters missing or
uncertain in one may be supplied or rendered certain by another,
and their suffi ciency will depend on whether taken together, they
meet the requirements of the Statute as to contents and as to
signature, as considered separately. Both if joined must satisfy
statute
Enforceability of electronic transactions
R.A. No. 8792, otherwise known as the “Electronic Commerce Act
of 2000,7 gives legal recognition to electronic commercial and
non-commercial transactions which include domestic and
international dealings, arrangements, contracts and exchanges and
storage of information.
(1) Legal recognition of electronic data message. — Information
shall not be denied validity or enforceability solely on the ground
that it is in the form of an electronic data message purporting to
give rise to such legal effect, or that it is merely incorporated by
reference in that electronic data message. (Sec. 6, Ibid.)
(2) Legal recognition of electronic documents.8 — Electronic
documents shall have the legal effect, validity or enforceability as
any other document or legal writing. (Sec. 7, Ibid.; on this
particular topic, see other provisions under Article 1358.)
(3) Legal recognition of electronic signatures. — An electronic
signature on the electronic document shall be equivalent to the
signature of a person on a written document if the signature is an
electronic signature and proved by showing that a prescribed
procedure, not alterable by the parties interested in the electronic
document, existed under which — (a) A method is used to identify
the party sought to be bound and to indicate said party’s access to
the electronic document necessary for his consent or approval
through the electronic signature;
(b) Said method is reliable and appropriate for the purpose for
which the electronic document was generated or communicated, in
the light of all circumstances, including any relevant agreement;
(c) It is necessary for the party sought to be bound, in order to
proceed further with the transaction, to have executed or provided
the electronic signature; and
(d) The other party is authorized and enabled to verify the
electronic signature and to make the decision to proceed with the
transaction authenticated by the same. (Sec. 8, Ibid.)
“Electronic signature’’9 refers to any distinctive mark,
characteristic and/or sound in electronic form, representing the
identity of a person and attached to or logically associated with the
electronic data message or electronic document or any
methodology or procedures employed or adopted by a person and
executed or adopted by such person with the intention of
authenticating or approving an electronic data message or
electronic document
(4) Admissibility and evidential weight of electronic data messages
or electronic documents. — In any legal proceedings, nothing in
the application of the rules on evidence shall deny the admissibility
of an electronic data message or electronic document in evidence
— themselves of the right under Article 1357.
(a) On the sole ground that it is in electronic form, or
(b) On the ground that it is not in the standard written form, and the
electronic data message or electronic document meeting, and
complying with the requirements under Sections 6 to 7 of the Act
(Legal recognition of electronic data messages and electronic
documents) shall be the best evidence of the agreement and
transaction contained therein.
In assessing the evidential weight of an electronic data message or
electronic document, the reliability of the manner in which it was
generated, stored or communicated, the reliability of the manner in
which its originator was identifi ed, and other relevant factors shall
be given due regard. (Sec. 12, Ibid.)
(5) Recognition by parties of electronic data message or electronic
document. — As between the originator and the addressee of an
electronic data message or electronic document, a declaration of
will or other statement shall not be denied legal effect, validity or
enforceability solely on the ground that it is in the form of an
electronic data message or electronic document. (Sec. 17, Ibid.)
A contract shall not be denied validity or enforceability on the sole
ground that it is in the form of an electronic data message or
electronic document, or that any or all of the elements required
under existing laws for the formation of the contract is expressed
demonstrated and proved by means of electronic data messages or
electronic documents.10
ART. 1404. Unauthorized contracts are governed by Article
1317 and the principles of agency in Title X of this Book
Article 1317. No one may contract in the name of another without
being authorized by the latter, or unless he has by law a right to
represent him.
A contract entered into in the name of another by one who has no
authority or legal representation, or who has acted beyond his
powers, shall be unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.
ART. 1405. Contracts infringing the Statute of Frauds,
referred to in No. 2 of Article 1403, are ratifi ed by the failure
to object to the presentation of oral evidence to prove the same,
or by the acceptance of benefi ts under them
Modes of ratifi cation under the Statute.
(1) by failure to object to the presentation of oral evidence to prove
the contract. The failure to so object amounts to a waiver and
makes the contract as binding as if it had been reduced to writing
Cross examination of a witness testifying orally on the contract
with respect to matters inadmissible under the Statute amounts to
failure to object
(2) by acceptance of benefi ts under the contract. In this case, the
contract is no longer executory and, therefore, the Statute does not
apply. It is also an indication of a party’s consent to the contract as
when he accepts partial payment or delivery of the thing sold
thereby precluding him from rejecting its binding effect.
ART. 1406. When a contract is enforceable under the Statute
of Frauds, and a public document is necessary for its
registration in the Registry of Deeds, the parties may avail
Article 1357. If the law requires a document or other special form,
as in the acts and contracts enumerated in the following article, the
contracting parties may compel each other to observe that form,
once the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract
For the application of this provision, there must be a valid
agreement and the agreement must not infringe the Statute of
Frauds.
Ex:
(1) Accordingly, a party to an oral sale of real property cannot
compel the other to put the contract in a public document for
purposes of registration because it is unenforceable (Art. 1403[2,
e].) unless, of course, it has been ratifi ed
(2) Similarly, the right of one party to have the other execute a
public document is not available in a donation of realty when it is
in a private instrument because the donation is void.
ART. 1407. In a contract where both parties are incapable of
giving consent, express or implied ratifi cation 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 ratifi cation is made by the parents or guardians, as the case
may be, of both contracting parties, the contract shall be
validated from the inception.
2 incap 1 guardian ratifies = voidable
Both guard rats = valid
ART. 1408. Unenforceable contracts cannot be assailed by
third persons.
The benefi t of the Statute can only be claimed or waived by one
who is a party or privy to the oral contract, not by a stranger. An
action for rescission may be brought by a third person.