CONTRACTS

Classes of Defective Contracts

CODE COMMISSION
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Classes of Defective Contracts

DEGREE OF EFFECTIVENESS OF CONTRACTUAL

RELATIONS

NOTE: A great deal of confusion has been created by the faulty

terminology used by the Spanish Code as regards defective
contracts. There is no sufficient clarity as to ‘contratos nulos’ and
‘contratos anulables’ — void and voidable contracts.

REASON: In order to put an end to the foregoing uncertainty and

other ambiguities in the Spanish Code, the project in a clear-cut
and unequivocal way classifies and defines the various kinds of
defective contracts, and states their consequences. There are,
under the recommended plan, four kinds of such contracts,
namely (in the order of defectiveness):
- (1) rescissible;
- (2) voidable;
- (3) unenforceable; and
- (4) void or inexistent contracts.

REASON: It is NOT wise and NOT just that parties should be left in
doubt
- as to the degree of effectiveness of their contractual
relations.

- The legal profession is entitled to know in a positive and

unequivocal manner what contracts are:
- (1) rescissible;
- (2) voidable;
- (3) unenforceable; and
- (4) void or inexistent.

REASON: It is hoped that this clarification of the law on this most

far-reaching subject will go far toward forestalling many
controversies and litigations
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rescissible contracts voidable contracts unenforceable contracts void or inexistent contracts

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(a) In rescissible contracts,
there is damage or injury
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- to one
contracting parties
- or to third persons;
(a) The first are
considered valid
enforceable
until they are rescinded by a
competent court;
(a) In the first,
the action for rescission
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may prescribe;
Article 1389. The action to claim
rescission must
be commenced within 4 years.
(a) The first are
not susceptible of ratification;
(a) The first maybe assailed
- by a contracting party
and
- by a third person
- who is prejudiced or
damaged by the
contract;
(a) The first may be assailed
1. As to defect:
(b) In voidable contracts, (c) In unenforceable contracts, (d) In void or inexistent
contracts,
there is
there is there is lacking
- vitiation of consent - legally incapacity - one or some of the
- or legal incapacity essential requisites of
a valid contract
- either in fact or in law.
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-------------------------------------------- - of both contracting
of the - of one of the parties
contracting parties;
or the contract is entered into in
excess or without any authority,
or does not comply with the
Statute of Frauds,
2. As to effect
(b) The second are (c) The third (d) The fourth
and considered valid and cannot be enforced do not, as a general rule,
enforceable produce any legal effect.
until they are annulled by a by a proper action in court;
competent court;
3. As to prescriptibility of action or defense:
(b) In the second, (c) In the third, (d) In the fourth,
the action for annulment or the the corresponding action for - the action for
defense of annulability recovery, declaration of nullity or
inexistence or
- the defense of nullity
or inexistence
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may prescribe; may prescribe. does not prescribed
Article 1391. The action for if there was total or partial
annulment shall be performance
brought within 4 years. - of the unenforceable
This period shall begin: contract under No. 1
or No. 3 of Art. 1403,
4. As to susceptibility of ratification:
(b) The second are (c) The third are (d) The fourth are
susceptible of ratification; susceptible of ratification; not susceptible of ratification.
5. As to who may assail contracts:
(b) The second may be assailed (c) The third may be assailed (d) The fourth may be assailed
only by a contracting party;
only by a contracting party; by a contracting party
and
- by a third person
- whose interest is
directly affected.
6. As to how contracts may be assailed:
(b) The second may be assailed (c) The third may be assailed (d) The fourth may be assailed
2
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directly or collaterally;
directly only, directly or collaterally; directly or collaterally.

6. Legal Incapacity

(a) N/A (b) One party (c) both parties (d) one or both parties, in a
contract of marriage