UNENFORCEABLE CONTRACTS
UNENFORCEABLE CONTRACTS
(Arts. 1403-1408, NCC)
Art.1403. The following contracts are
unenforceable, unless they are ratified:
(1) 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;
(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 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.
(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
ratified according to law (De Leon).
TYPES OF UNENFORCEABLE CONTRACTS
1. Those entered into in the name of another
person by one without or acting in excess of
authority (Art. 1403[1])
2. Those that do not comply with the Statute
of Frauds (Art. 1403[2])
3. Those where both parties are incapable of
giving consent (Art. 1403[3])
Note: Above stated contracts are unenforceable,
unless they are ratified.
CHARACTERISTICS
1. Cannot be enforced by proper action in court.
2. Susceptible of ratification
3. Cannot be assailed by third persons (Art.
1408)
(1) UNAUTHORIZED CONTRACTS
These 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.” (Art. 1403, No. 1)
Examples:
 Without my authority, my brother sold my car,
in my name, to X. The contract is
unauthorized and cannot affect me unless I
ratify the same expressly or implicitly, as by
accepting the proceeds of the sale.
 A compromise agreement signed in behalf of
the client by his lawyer who did so without
authorization of said client is merely
unenforceable (not void) and may therefore,
be ratified by said party expressly or implicitly
(Bumanlag v. Alzate, G.R. No. 39119, Sept.
26, 1986)
Mere lapse of time, no matter how long, is not
the ratification required by law of an unenforceable
contract (Tipton v. Velasco, 6 Phil. 67).
Without ratification, the “agent” assumes
personal liability (2 Am. Jur. 251).
Art. 1404. Unauthorized contracts are governed
by Article 1317 and the principles of agency in
Title X of this Book
HOW TO CURE THE DEFECT - Ratification by the
person on whose behalf it has been executed
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Ratification cures an unauthorized contract.
Unless ratified, the contract has no effect.
(Tagaytay Dev. Co. v. Osorio, 69 Phil. 180)
(2) STATUTE OF FRAUDS
DEFINITION - The term Statute of Frauds is
descriptive of statutes which requires certain
classes of contracts to be in writing. They are
included in the provisions of the Civil Code,
particularly in Article 1403(2). Evidence of the
agreement cannot be received without the writing,
or a secondary evidence of its contents (De Leon).
PURPOSE – The Statute of Frauds has been
enacted not only to prevent fraud in the
enforcement of obligations but also guard against
the mistakes of honest men (De Leon).
HOW THE STATUTE OF FRAUDS PREVENTS
FRAUD - Since memory is many times unreliable,
oral agreements may sometimes result in injustice.
To aid human memory, to prevent the commission
of injustices due to faulty memory, to discourage
intentional misrepresentations, are the principal
aims of the Statute of Frauds. (Facturan v.
Sabanal, 81 Phil. 512 [1948])
APPLICATION, BASIC and FUNDAMENTAL
PRINCIPLES
a. It presupposes the existence of a perfected
contract and requires only a note or
memorandum be executed in order to compel
judicial enforcement thereof.
b. It refers to specific kinds of transactions and
cannot apply to any other transaction not
enumerated therein. In other words, it is
exclusive only to the agreements or contracts
enumerated therein. It is not applicable in
actions which are neither for damages
because of a violation of a contract, nor
specific performance thereof. (Facturan v.
Sabanal, 81 Phil. 512)
c. Applicable only to executory contracts, not to
consummated or partially performed.
d. It is not applicable where the writing does not
express the true intention of the parties.
e. The defense of the Statute of Frauds may be
waived.
f. It is a personal defense. A third person cannot
assail it.
g. Contracts infringing the Statutes of Frauds are
not void but merely unenforceable.
Examples of scenarios where the statute of
frauds is not applicable include:
 When there is no perfected contract
(Villanueva vs CA, 267 SCRA 892)
 Action for recovery of a partial payment of the
consideration of an oral contract to sell a
building, since there is partial execution (Asia
Production Co., Inc. vs Paño, 205 SCRA
458)
 A partition among heirs of real property,
since it is not within the definition of
conveyance of real property (Barcelona vs
Barcelona, 100 Phil 251)
 Conveyance of real property in settlement for
services rendered (Cruz vs. J.M. Tuazon &
Co., Inc. and G. Araneta Inc., 76 SCRA 543)
AGREEMENTS COVERED
a. An agreement that by its terms is not to
be performed within a year from the making
thereof
Example: On August 10, 2017, A entered into
an oral contract with B for the construction of
B’s Apartment to commence on August 15,
2018. In this case, the contract is
unenforceable since it was made orally only. It
must be noted that it must appear that the
parties intended that the contract should not be
performed within a year in order that the
provision be applicable.
b. A special promise to answer for the debt,
default, or miscarriage of another
Example: A owes B Php 25,000.00 with C as
guarantor. C’s liability is subsidiary as
guarantor. The guarantee constitutes to a
special promise to answer for the debt of A in
the case he fails to pay the same. This
promise is unenforceable unless it is put into
writing and signed by C. “Special promise”
refers to subsidiary or collateral promise to
pay, like a contract of guaranty. (Brown v.
Coleman Dev. Co., 34 Ont. L-210)
c. An agreement made in consideration of
marriage, other than a mutual promise to marry
Examples of agreements made in
consideration of marriage:
a. Marriage settlements (Art. 122, Civil Code)
b. Donations propter nuptias (Art. 127, Civil
Code)
When the law says “in consideration of
marriage,” it really means “by reason of
marriage.” (Paras) An oral mutual promise to
marry is not embraced by the Statute of
Frauds. (Cabague v. Auxilio, 92 Phil. 294)
d. Sale of goods, chattels or things in action, at a
price not less than five hundred pesos
Example: C sold D his bag for Php 500.00. The
sale is unenforceable unless it is made in
writing or D has partially or fully paid the price
or C has delivered the bag to D.
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e. Leasing for a longer period than one year
Example: A entered into an oral contract with
B to lease B’s house for four months. The lease
is considered enforceable as the period of
lease does not exceed one year. If the oral
contract is for exactly one year, it is still
enforceable.
f. Sale of real property or of an interest
therein
Example: C sold his land or his right of usufruct
in the said land to B orally. The sale is
considered unenforceable, unless it has been
partially executed.
g. Representation as to the credit of a third
person
Example: A is seeking a loan from B. C
represents to B that A has the capacity to pay
the loan and has a good credit reputation. With
the representation of C, B extends a loan to A.
The representation as to the credit should be
in writing to be enforceable against C. It must
be noted that in this case, there is no promise
to answer for the debt of A. C does not take
part in the contract proper. His assurance to B
may be considered as some form of an
agreement.
RATIFICATION
Art. 1405. Contracts infringing the Statute of
Frauds, referred to in No. 2 of article 1403, are
ratified by the failure to object to the
presentation of oral evidence to prove the same,
or by the acceptance of benefit under them.
Article 1405 enumerates two ways of ratifying
contracts infringing the Statute of Frauds:
1. By the failure to object to the presentation of
oral evidence to prove the contract. This
amounts to a waiver and makes the contract
binding as if it has been reduced to writing (De
Leon).
2. By acceptance of benefits under the contract.
This is in consonance with the principle that
one who has enjoyed the benefits of a
transaction should not be allowed to repudiate
its burdens (De Leon).
ENFORCEABILITY OF ELECTRONIC
DOCUMENTS
Republic Act 8792 or the Electronic Commerce
Act gives legal recognition to electronic
transactions. This includes domestic and
international dealings, arrangements, contracts
and exchanges, and storage of information.
A. Legal Recognition of Electronic Data
Messages - Information shall not be denied
legal effect, validity or enforceability solely on
the grounds that it is in the data message
purporting to give rise to such legal effect, or
that it is merely referred to in that electronic
data message (Sec. 6, RA 8792).
B. Legal Recognition of Electronic Documents -
Electronic documents shall have the legal
effect, validity or enforceability as any other
document or legal writing, and where the law
requires a document to be in writing, that
requirement is met by an electronic document
if the said electronic document maintains its
integrity and reliability and can be
authenticated so as to be usable for
subsequent reference (Sec. 7, RA 8792).
C. 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 that
signature is proved by showing that a
prescribed procedure, not alterable by the
parties interested in the electronic document
(Sec. 8, RA 8792).
D. 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 (Sec. 12,
RA 8792).
E. 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 (Sec. 17, RA 8792).
(3) CONTRACTS WHERE BOTH PARTIES ARE
INCAPABLE OF GIVING CONSENT
RECALL Art. 1327. The following cannot give
consent to a contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-
mutes who do not know how to write.
Example: A and B, both 15 years old, entered into
a contract. The contract is unenforceable because
both parties cannot give consent. Now if the
guardian or parent of A ratifies expressly or
impliedly the contract, it becomes voidable, valid
unless annulled by the guardian or parent of B.
However, if the guardian or parent of B also
ratifies, the contract is validated right from the time
it was first entered into. (Paras)
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HOW TO CURE THE DEFECT - Ratification of contract between S and B for being unenforceable
party against whom the contract is being enforced; under the Statute of Frauds. C is a stranger to the
or his privies; or parents or guardians. contract.

Art. 1407. In a contract where both parties are
incapable of giving consent, express or implied
ratification 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 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.
(2) Under a verbal contract, S sells a parcel of land
to B. In an action for ejectment by B against C, the
person in possession, the latter cannot set up the
defense of the Statute of Frauds.
(3) In the preceding example, suppose C
maliciously induces S not to sell the land to B so
that S sells the land to another. In an action by B
against C for damages (see Art. 1314.), the latter
cannot also plead the Statute of Frauds.

CONTRACT WHERE BOTH PARTIES ARE

INCAPACITATED
When ratified, an unenforceable contract
where both parties are incapacitated becomes a:
1. VOIDABLE CONTRACT- if the ratification
is made by the parent or guardian of either
party or if the ratification is made by one of
the parties after attaining or regaining
capacity.

2. VALID CONTRACT- if the ratification is

made by the parents or guardians of both
contracting parties or if the ratification is
made by both contracting parties after
attaining or regaining capacity.

ADDITIONAL PROVISIONS

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 themselves of the
right under Article 1357.

The right of one party to compel the other to

execute the needed instrument (public document)
for convenience in registration, is given only when
the contract is both valid and enforceable (See Art.
1357).

Art. 1408. Unenforceable contracts cannot be

assailed by third persons.

The benefit 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. Indeed, the Statute of
Frauds cannot be set up as a defense by strangers
to the transaction.

Examples:

(1) S sells a parcel of land to B. The contract is

oral. C binds himself in writing for the performance
by B of his obligation. In an action by S to recover
the purchase price, C cannot assail that the

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