interest and privies interest is directly

CONTRACTS affected. (Art. 1421,

Civil Code).

Classes of Defective Contracts (g) referred to as (g) referred to as

---------------------------------------------------------
relative or conditional nullity absolute nullity
VOID/INEXISTENT CONTRACTS

RULE: In the case of Liguez v. Lopez, 102 Phil. 577, the Supreme
UNENFORCEABLE VOID
Court, thru Mr. Justice J.B.L. Reyes, stated that there are two
kinds of VOID contracts: (a) there is a contract but it (a) no contract at all
cannot be enforced by a
DEFINITION: INEXISTENT CONTRACTS [essential formalities are not court action
complied with]
- refer to agreements which lack one or some or all of (b) cannot be assailed by (b) generally, effects are not
the elements (i.e., consent, object, and cause) or do third parties produced at all (2004)
not comply with the formalities which are essential for
the existence of a contract.
- (like those where essential formalities are not complied Distinguish briefly but clearly between Inexistent contracts and
with; example: a donation of land in a private annullable contracts.
instrument; this produces no effect whatsover). INEXISTENT CONTRACTS are considered as not having been
entered into and, therefore, void ob initio. They do not create
DEFINITION: VOID CONTRACTS [illegal or illicit ones] any obligation and cannot be ratified or validated, as there is
- are those which, no agreement to ratify or validate.
- because of certain defects,
- generally produce no effect at all. On the other hand, ANNULLABLE or VOIDABLE CONTRACTS are
- They are considered as inexistent from its inception valid until invalidated by the court but may be ratified.
(from the very beginning)
- (like a donation made because of an immoral As to defect, in the former, one or more requisites of a valid
condition, such as illicit sexual intercourse). contract are absent. In the latter, all the elements of a contract
- (Here, in some way, the donation produces are present except that the consent of one of the contracting
some effect in that he who gave the parties was vitiated or one of them has no capacity to give
donation cannot get back what he has consent.
given.)
---------------------------------------------------------
CHAPTER 9 Void and Inexistent Contracts
the right to set up the defense of illegality
RULE:
[cannot] be waived. Article 1409. The following contracts are
inexistent and void from the beginning:
VOIDABLE VOID

(1) Those whose cause, object or purpose is

(a) may be ratified (a) cannot be ratified.
contrary to law, morals, good customs, public
(b)produces effects 'til (b) generally, effects are not order or public policy;
annulled produced at all (2) Those which are absolutely simulated or
fictitious;
(c) defect is due to (c) the defect here is that
ordinarily,
(3) Those whose cause or object did not exist at
the time of the transaction;
incapacity or vitiated public policy is militated (4) Those whose object is outside the commerce
consent against of men;
(5) Those which contemplate an impossible
(d) valid 'til annulled (d) cannot be cured by
prescription service;
(6) Those where the intention of the parties
(f) defense may be invoked (f) defense may be availed relative to the principal object of the contract
of
cannot be ascertained;
only by the parties (those
(7) Those expressly prohibited or declared void
by anybody, whether he is a
principally or subsidiarily party to the contract or not, by law.
liable), or their successors in - as long as his
• __

These contracts cannot be ratified. Neither can
the right to set up the defense of illegality be
waived.
---------------------------------------------------------
VOID/INEXISTENT CONTRACTS
2 CLASSES OF INEXISTENT CONTRACTS
RULE: Nos. 2 and 3 refer to contracts which are inexistent.
DEFINITION: INEXISTENT CONTRACTS [essential formalities are not
complied with]
- refer to agreements which lack one or some or all of
the elements (i.e., consent, object, and cause) or do
not comply with the formalities which are essential for
the existence of a contract.
- (like those where essential formalities are not complied
with; example: a donation of land in a private
instrument; this produces no effect whatsover).
(2) SIMULATED CONTRACTS
RULE: absolutely simulated or fictitious;
(a) If absolutely simulated, the contract is void for utter lack of
consent.
law in force at the time it is executed.
- RULE: But the right of a party under such a contract
cannot be affected by a subsequent law removing
or eliminating such right.
- EXAMPLE: Thus, where at the time the contract was
entered into there was as yet no statute fixing a
ceiling on rentals and prohibiting the landholder
from demanding an increase thereof,
- the landholder has a right to demand
- an increase to the limit authorized by law.
(Cabatan vs. Court of Appeals, 95 SCRA
323 [1980].) See comments and examples
under Articles 1306, 1352, and 1353.
object is outside the
CONTRACTS WHOSE:(4)
commerce of men;
Article 1347: The object should be within
the commerce of men;
- in other words, it should be
- REQUISITE: [appropriability] susceptible of
appropriation and
- REQUISITE: [transmissibility] transmissible from one
person to another.
- EXCEPTION: All rights which are not
intransmissible may also be the
object of contracts

(b) If relatively simulated, the hidden or intended contract is OBJECTS OUTSIDE THE COMMERCE OF MEN
generally binding. (Onglengco v. Ozaeta, 70 Phil. 43).
(1) those things
- which are such by their very nature [sacred things,
(3) NON-EXISTING CAUSE OR OBJECT res nullius [nobody's property]
- such as common things like the air or the
RULE: did not exist at the time of the transaction; sea,
- “could not come into existence - and
- because the object may - property belonging to the public
- legally be a future thing.” (See Arts. 1347, 1461, Civil domain;
Code; Lawyer’s Journal, Jan. 31, 1951).
(2) those
Paragraph 3 speaks of contracts “whose cause or object did - which are made such
not exist at the time of the transaction.” - by special prohibitions established by
- This is not exactly correct because there can be law,
valid contracts involving future property; example: - such as poisonous substances, drugs, arms,
sale of future or after-acquired property explosives, and contrabands;

--------------------------------------------------------- (3) those rights which

VOID/INEXISTENT CONTRACTS - are intransmissible because either
- they are purely personal in character,
5 CLASSES OF VOID CONTRACTS - such as those arising from the
relationship of husband and
RULE: It must be observed, however, that Nos. 1, 4, 5, 6 and 7 wife, like jus consortium,
refer to contracts which are void - or from the relationship of paternity and
filiation,
- like patria potestas,
CONTRACTS WHOSE: (1) cause,object or purpose is - or
contrary to law, morals, good customs, public - they are honorary or political in
order or public policy; character,
- such as the right to hold a
DE LEON: The contract of the parties must conform with the

2
• __
public office and the right of
suffrage.
RULE: Thus, in this jurisdiction, it has been held that
communal things, such as public plazas, sidewalks, streets,
rivers, fountains and other things for public use cannot be
sold or leased because they are by their very nature
outside the commerce of men
CONTRACTS THAT: (5) contemplate an impossible
service;
RULE:Impossible things or services cannot be the
object of contracts. [Article 1348]
- Thus, if the parties enter into a contract with respect
to an impossible thing:
- like a mythical bird or animal
- or with respect to an impossible service like
a trip to some distant planet or galaxy,
- RESULT: the contract is void or inexistent.
ABSOLUTE IMPOSSIBILITY RELATIVE IMPOSSIBILITY
which arises from the very which arises from the
nature or essence circumstances or
qualifications
of the act or service itself, of the obligor
rendering him incapable of
executing the act or
service,
renders the contract void allows the perfection of the
contract,
- although the
fulfillment thereof is
hardly probable
When the impossibility is Thus, as a consequence, in
permanent, however, as in a contract of partnership
the case of a person who is where one of the partners
unable to perform the obligates himself to
service which he has contribute to the common
contracted because of fund an amount which is
total blindness, the contract beyond his means, the
is void.16 contract is not void
because the impossibility
may disappear.
CONTRACTS WHERE: (6) the intention of the parties
relative to the principal object of the contract
cannot be ascertained;
ARTICLE 1378
RULE: Doubt as to the Principal Object
the contract shall be null and void
RULE: DOUBT in such a way that it cannot be
known what may have been the intention or
will of the parties
Example: X promised to give Y this (___________).
- Since the object is unknown,
- it is clear that there could not have been any
meeting of the minds.
CONTRACTS: (7) expressly prohibited or declared
void by law.
EXAMPLE: In the case of Jose C. Aquino, et al. v. Pilar Chaves
Conato and the Workmen’s Compensation Commission, L-
18333, Dec. 29, 1965, it was held that under Sec. 7 of Act 3428,
as amended (The Workmen’s Compensation Law), any
contract, devise of any sort, or waiver intended to exempt the
employer from all or part of the liability created by said Act is
null and void.
RULE: Where the illegality of the contract
- proceeds from an express prohibition or declaration
by law,
- and not from any intrinsic illegality,
- the contract is not illegal per se. 3
(EPG Construction Co. vs. Vigilar, 354 SCRA 566 [2001]; Dept.
of Health vs. C.V. Cachuela, 475 SCRA 218 [2006]; see Art.
1416.) Below are examples of contracts which are prohibited
or declared void by law.
a) Contracts upon future inheritance except in cases
expressly authorized by law. (Art. 1347.)
(b) Sale of property between husband and wife except when
there is a separation of property. (Art. 1490.)
(c) Purchase of property by persons who are specially
disqualifi ed by law (like guardians, agents, executors,
administrators, public offi cers and employees, judges,
lawyers, etc.) because of their position or relation with the
person or property under their care. (Art. 1491.)
---------------------------------------------------------
Article 1410. The action or defense for the
declaration of the inexistence of a contract does
not prescribe.
---------------------------------------------------------
VOID/INEXISTENT CONTRACTS
action or defense for the declaration of the
inexistence
DOES NOT PRESCRIBE
3
• __
RULE: The action or defense for the declaration of its illegality,
inexistence, or absolute nullity does not prescribe. (see Art.
1410.);
RULE: Action or defense imprescriptible. —
- If a contract is void, a party thereto can always bring a
court action to declare it void or inexistent; and a party
against whom a void contract is sought to be
enforced, can always raise the defense of nullity,
despite the passage of time.
- The defect being permanent and incurable, the action
or defense does not prescribe. (see Constantino vs.
Estenzo, 65 SCRA 675 [1975]; Tipton vs. Velasco, 6 Phil.
67 [1906]; Trigal vs. Tobias, 2 SCRA 1154 [1961]; Ruiz vs.
Court of Appeals, 79 SCRA 525 [1977].) M
RULE: Since a void contract has no effect at all, it is, therefore,
unnecessary to bring an action to declare it void. It is well within
the right of a party to unilaterally cancel and treat as avoided a
void contract. (G. Razon, Inc. vs. Philippine Ports Authority, 151
SCRA 233 [1988].) In fact, such action cannot logically exist.
RULE: However, an action to declare the non-existence of the
contract can be maintained and in the same action, the
plaintiff may recover what he has given by virtue of the
contract. (Rongavilla vs. Court of Appeals, 294 SCRA 289 [1998].)
It is better that a judicial declaration of nullity be secured not
only to give peace of mind to the parties but also to avoid the
taking of the law into their own hands.
---------------------------------------------------------
ILLEGAL CONTRACTS
---------------------------------------------------------
VOID CONTRACTS
DEFINITION: VOID CONTRACTS [illegal or illicit ones]
- are those which,
- because of certain defects,
- generally produce no effect at all.
- They are considered as inexistent from its inception
(from the very beginning)
- (like a donation made because of an immoral
condition, such as illicit sexual intercourse).
- (Here, in some way, the donation produces
some effect in that he who gave the
donation cannot get back what he has
given.)
---------------------------------------------------------
Article 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.
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. (1305)
---------------------------------------------------------
VOID CONTRACTS
PARI DELICTO RULE / ILLEGAL CONTRACTS DEFENSE
(THERE IS CRIMINAL OFFENSE)
RULE: illegality of the cause or object
RULE: the act constitutes a criminal offense
RULE: both parties being in pari delicto
EFFECT: they shall have no action against each
other
EFFECT: both shall be prosecuted
RULE: illegality of the cause or object
RULE: the act constitutes a criminal offense
RULE: when only one of the parties is guilty
guilty party
EFFECT: no action against the other
EFFECT: shall be prosecuted
innocent one
EFFECT: innocent one may claim what he has
given
shall not be bound to comply with his
EFFECT:
promise.
---------------------------------------------------------
Article 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
4
• __
has given by virtue of the contract, or demand the
performance of the other's undertaking;
(2) 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. (1306)
---------------------------------------------------------
VOID CONTRACTS
PARI DELICTO RULE / ILLEGAL CONTRACTS DEFENSE
(THERE NO CRIMINAL OFFENSE)
RULE: unlawful or forbidden cause
RULE: doesnot constitute a criminal offense
RULE: When the fault is on the part of both
contracting parties
EFFECT:neither may recover what he has given by
virtue of the contract
EFFECT: nor demand the performance of the
other's undertaking;
RULE: unlawful or forbidden cause
RULE: does not constitute a criminal offense
RULE: When only one of the contracting parties is
at fault
THE ONE at fault,
recover what he has
EFFECT: THE ONE AT FAULT CANNOT:
given by reason of the contract
EFFECT: THE ONE AT FAULT CANNOT: ask for the
fulfillment of what has been promised him
The other, who is not at fault
may demand the
EFFECT: THE ONE NOT AT FAULT CAN:
return of what he has given
EFFECT: without any obligation to comply his
promise.
EXCEPTIONS TO PARI DELICTO [Where
both parties cannot recover]
---------------------------------------------------------
Article 1413. Interest paid in excess of the interest
allowed by the usury laws may be recovered by
the debtor, with interest thereon from the date of
the payment.
---------------------------------------------------------
VOID CONTRACTS
PARI DELICTO RULE (EXCEPTION) / ILLEGAL
CONTRACTS DEFENSE (EXCEPTION)
RECOVERY OF USURIOUS INTEREST ALLOWED
DEFINITION: USURIOUS INTEREST
- Any rate of interest in excess of the maximum allowed
under the Usury Law is usurious (see comments under
Art. 1175.)
RULE:Interest paid in excess of the interest allowed
by the usury laws may be recovered by the debtor
with interest thereon from the date of the
RULE:
payment.
RULE: Thus, in Angel Jose Warehousing Co. vs. Chelda55 the
Supreme Court declared that, in reality, there is no confl ict
between the Civil Code and the Usury Law. Under the latter, in
Sec. 6, the debtor may recover the whole interest paid. Under
the Civil Code, in Art. 1413, “interest paid in excess of the interest
allowed by the usury laws may be recovered by the debtor, with
interest thereon from the date of payment.” When the Code
speaks of “interest paid in excess of that allowed by the usury
law,’’ it means the whole USURIOUS INTEREST
EXAMPLE: Thus, if the loan is P1,000.00, with interest of 20% per
annum or P200 per year, and the borrower paid P200, the whole
P200 is the usurious interest. The only change effected, therefore,
by Art. 1413 of the Civil Code is not to provide for the recovery of
the interest paid in excess of that allowed by law, which the
Usury Law already provided for, but to add that the same can
be recovered “with interest thereon from the date of payment.”
---------------------------------------------------------
Article 1414. When money is paid or property
delivered for an illegal purpose, the contract may
be repudiated by one of the parties before the
purpose has been accomplished, or before any
damage has been caused to a third person. In
such case, the courts may, if the public interest
will thus be subserved, allow the party
repudiating the contract to recover the money or
property.
---------------------------------------------------------
VOID CONTRACTS
PARI DELICTO RULE (EXCEPTION) / ILLEGAL
CONTRACTS DEFENSE (EXCEPTION)
BEFORE PURPOSE / BEFORE DAMAGE
MAY RECOVER
5
• __
REQUISITES (WHAT KIND OF CONTRACT?)
(1) money is paid or property delivered for an
illegal purpose
RULE:(a) before the purpose has
accomplished
RULE: (b) before any damage has been caused to a
third person
RULE: (c) The court considers that public interest will
thus be subservedby allowing recovery
allow the party repudiating the contract to
EFFECT:
recover the money or property.
---------------------------------------------------------
Article 1415. Where one of the parties to an illegal
contract is incapable of giving consent, the
courts may, if the interest of justice so demands
allow recovery of money or property delivered by
the incapacitated person.
---------------------------------------------------------
VOID CONTRACTS
PARI DELICTO RULE (EXCEPTION) / ILLEGAL
CONTRACTS DEFENSE (EXCEPTION)
LEGAL INCAPACITY
MAY RECOVER
REQUISITES (WHAT KIND OF CONTRACT?)
(1) illegal contract
Where one of the parties to an illegal
RULE: (a)
contract is incapable of giving consent
RULE: (b) if the interest of justice so demands
EFFECT:allow recovery of money or property
delivered by the incapacitated person.
---------------------------------------------------------
Article 1416. When the agreement is not illegal
per se but is merely prohibited, and the
prohibition by the law is designed for the
protection of the plaintiff, he may, if public policy
is thereby enhanced, recover what he has paid or
delivered.
---------------------------------------------------------
VOID CONTRACTS
PARI DELICTO RULE (EXCEPTION) / ILLEGAL
CONTRACTS DEFENSE (EXCEPTION)
MERELY PROHIBITED CONTRACTS
been
MAY RECOVER
Illegal Per Se Merely Prohibited
Illegal per se contracts are Merely prohibited contracts
those forbidden because of are those forbidden because
public interest. of private interests.
RULE: (a) agreement is not illegal per se
RULE: (b) the prohibition by the law is designed
for the protection of the plaintiff
RULE: (c) if public policy is thereby enhanced
EFFECT: [he may] recover what he has paid or
delivered.
---------------------------------------------------------
Article 1417. When the price of any article or
commodity is determined by statute, or by
authority of law, any person paying any amount in
excess of the maximum price allowed may
recover such excess.
---------------------------------------------------------
VOID CONTRACTS
PARI DELICTO RULE (EXCEPTION) / ILLEGAL
CONTRACTS DEFENSE (EXCEPTION)
CONTRACT BEYOND CEILING PRICE
MAY RECOVER
price of any article or commodity is
RULE: (a)
determined by statute, or by authority of law
person paying any amount in excess of
RULE: (b)
the maximum price allowed
EFFECT: may recover such excess.
---------------------------------------------------------
Article 1418. When the law fixes, or authorizes the
fixing of the maximum number of hours of labor,
and a contract is entered into whereby a laborer
undertakes to work longer than the maximum
thus fixed, he may demand additional
compensation for service rendered beyond the
time limit.
6
• __

--------------------------------------------------------- VOID CONTRACTS

VOID CONTRACTS
PARI DELICTO RULE (EXCEPTION) / ILLEGAL
PARI DELICTO RULE (EXCEPTION) / ILLEGAL CONTRACTS DEFENSE (EXCEPTION)
CONTRACTS DEFENSE (EXCEPTION)
DIVISIBLE CONTRACTS
CONTRACT BEYOND MAXIMUM NUMBER OF HOURS
OF LABOR MAY BE ENFORCED
RULE: If indivisible the whole contract is void, even if only some
terms are illegal.
MAY DEMAND ADDITIONAL COMPENSATION

RULE: (a) divisible contract,

RULE: (a)When the law fixes, or authorizes the
fixing of the maximum number of hours of labor
RULE: (b)if the illegal terms can be separated
RULE: (b) a contract is entered into from the legal ones

EFFECT: the latter [legal parts] may be enforced.

RULE: (c)whereby a laborer undertakes to work
longer than the maximum thus fixed
EFFECT:he may demand additional compensation
for service rendered beyond the time limit.
NOTE: He who wants to enforce a contract must show how
much of the cause is legal; otherwise, if partly legal and partly
illegal, it will result in the contract being considered as wholly
void. (Lichauco v. Martinez, 6 Phil. 594).

---------------------------------------------------------
Article 1419. When the law sets, or authorizes the
setting of a minimum wage for laborers, and a
contract is agreed upon by which a laborer
accepts a lower wage, he shall be entitled to
recover the deficiency.
---------------------------------------------------------
VOID CONTRACTS
---------------------------------------------------------
Article 1421. The defense of illegality of contract
is not available to third persons whose interests
are not directly affected.
---------------------------------------------------------
VOID CONTRACTS
ILLEGAL CONTRACTS DEFENSE (EXCEPTION)

PARI DELICTO RULE (EXCEPTION) / ILLEGAL RULE: defense of illegality of contract

CONTRACTS DEFENSE (EXCEPTION)
RULE: isnot available
CONTRACT BELOW MINIMUM WAGE - to third persons whose interests are not
directly affected.
---------------------------------------------------------
MAY RECOVER
Article 1422. A contract which is the direct result
of a previous illegal contract, is also void and
RULE: (a)When the law sets, or authorizes the
inexistent.
setting of a minimum wage for laborers
---------------------------------------------------------
RULE: (b) contract is agreed upon VOID CONTRACTS

RULE: (c) by which a laborer accepts a lower wage ILLEGAL CONTRACTS DEFENSE
EFFECT: he shall be entitled to recover the
deficiency.
RULE: (a) A contract which is the direct result
---------------------------------------------------------
Article 1420. In case of a divisible contract, if the RULE: (b) of a previous illegal contract
illegal terms can be separated from the legal
ones, the latter may be enforced. EFFECT: is also void and inexistent.
--------------------------------------------------------- ---------------------------------------------------------

7
• __