Deadline: July 6, 2021

Article 1403: The following contracts are unenforceable unless they are ratified:
(1) Those entered in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his power
(2) Those who do not comply with statutes of frauds
(3) Those where both parties are incapable of giving consent to a contract

Unenforceable Contract: Those contracts that cannot be enforced in court or sued

upon by reasons of defect provided by law until and unless they are ratified according to
law; Valid but not enforceable unless ratified.

Unauthorized Contracts: Contracts entered into the name of another person by one
who has been given no authority or legal representation; acted beyond his/her power.

Statues of Fraud: Descriptive of statues which requires certain classes of contracts to

be in writing. It merely regulates the formalities of the contract necessary to render it
enforceable. Non-compliance creates the inability to right to action.
(a.) Agreement not to be performed within one year from the making
thereof - For this provision to be applicable, it must appear that the parties intended
when they made the contract that it should not be performed within a year.
(b.) Promise to answer for debt, default, or miscarraige of another - In a
guaranty, the promise is merely subsidiary or collateral to the promise. (if a third person
or a guarantor has a special promise to pay for another or the debtor in case said debtor
fails to pay.) It is applicable with the statute of fraud.
(c.) Agreement in consideration of marriage other than a mutual promise to
marry- To make contracts or other considerations of marriage to be enforceable it must
be made in writing unless ratified. (unless there is partial fulfillment)
(d.) Agreement for sale of goods, etc. at price not less than P500 - Sales of
goods at price 500 and above must be made in writing for it to be enforceable.
(e.) Agreement for leasing for a longer period than one year - In contracts to
lease a property for more than one year, It must be made in writing for it to be
enforceable. (unless its is partially executed)
(f.) Agreement for the sale of real property or of an interest therein -
(g.) Representation as to the credit of a third person - Representation as to
credit of a third person must be made in writing to be enforceable.
(h.) Express trust concerning an immovable or any interest therein - Writing
is necessary to prove trust concerning an immovable or any interest therein.

Mode of satisfaction of the Statute

Three specific ways in which a contract of sale of goods within its terms may be
made binding:
(a.) The giving of note or memorandum
(b.) Acceptance and receipt of part of the goods or things in action sold
 (c.) Payment at the time some parts of the purchase price

Article 1404: Unauthorized contracts are governed by article 1317 and the principles of
agency in Title X of this book

Article 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 benefits under them

Article 1406
Article 1407
Article 1408

Article 1409
ART. 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is 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.

Void Contracts - are those which, because of certain defects, generally produce no effect at all.
They are considered as inexistent from its inception or from the very beginning.

Inexistent Contracts - 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.

In a legal sense, a void contract is treated as if it was never created and becomes
unenforceable in court. For example, a contract between an illegal drug supplier and a drug
dealer is unenforceable from the onset due to the illegal nature of the agreed-upon activity.
Void/Inexistent Contracts distinguished from other defective contracts
VOID RESCISSIBLE

Defect is inherent in the contract itself Defect is in their effects, either to one of the
parties or to a 3rd party

Matter of law and public interest Based on equity and more a matter of private
interest

No legal effects even if no action is taken to No action, remains valid and produces all its
set it aside effects

Action to declare nullity of void contracts Action to rescind prescribes in 4 years

never prescribes

VOID UNENFORCEABLE

Cannot be the basis of actions to enforce compliance

Can never be ratified and become Can be ratified and thereafter enforced
enforceable

There is no contract at all There is a contract which, however, cannot

be enforced unless properly ratified

VOID VOIDABLE

One of those essential requisites is wanting, Essential requisites for validity is present,
either in fact or in law or is declared void by BUT consent is vitiated
statute

No contract, but only appearance of one, Valid until set aside, validity may only be
produces no effect even if not set aside by assailed directly, never by a 3rd person
direct action (collateral attack allowed)

Not susceptible of ratification May be rendered perfectly valid by ratification

Action to declare nullity does not prescribe, Action for annulment prescribes in 4 years
permanent, even if the cause of nullity ceased
to exist

The characteristics of a void contract are as follows:

(1) Generally, it produces no effect whatsoever, being void or inexistent from the beginning;
(2) It cannot be cured or validated either by time or ratification;
(3) The right to set up the defense of illegality, inexistence, or absolute nullity cannot be waived;
(4) The action or defense for the declaration of its illegality, inexistence, or absolute nullity does
not prescribe;
(5) The defense of illegality, inexistence, or absolute nullity is not available to third persons
whose interests are not directly affected;
(6) It cannot give rise to a valid contract; and
(7) Its invalidity can be questioned by anyone affected by it.

Instances of Void or Inexistent Contracts

(1) Those whose cause, object or purpose is contrary to law, morals, good customs,
public order or public policy;
The contract of the parties must conform with the law in force at the time it is executed. But the
right of a party under such a contract cannot be affected by a subsequent law removing or
eliminating such right.

Article 1410
Article 1411

Article 1412
Article 1413

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.

An exemption to the rule, in pari delicto in Articles 1411-1412 which states no recovery is
allowed to any of the parties. In Article 1414, recovery can only be done if the purpose or the
illegal act has not yet been accomplished and there is no damage caused to third persons.

Example: If Blue paid Black, in advance to murder Pink, an illegal purpose, Blue can recover
what he paid before the purpose has been accomplished, or before killing Pink.

But if the purpose is already been done, no recovery and both Blue and Black must be
persecuted for murder.

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.
Another exemption to in pari delicto rule, but this only applies if one of the parties is
incapacitated such as being a minor or being insane.

Using the previous example, assuming that Blue is a minor, then Blue is entitled for recovery of
reward given that the purpose has not yet been done. But if already done, Blue cannot recover
and Black should be persecuted for murder. Bluecan skip from persecution since he is a minor
and exempted from criminal liability.

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.

Another exemption when both parties are in pari delicto. Recovery may still be allowed given
that the purpose is not illegal, just merely prohibited, the prohibition is designed for the
protection of the plaintiff, and public policy would be enhanced by allowing the plaintiff to
recover what he has paid or delivered.

For example, Blue donated to Pink everything that he possessed and owned, having nothing left
for himself. This is prohibited, but not necessarily illegal. Since public policy would enhance if
Blue is able to recover, then Blue will be permitted to do so, he can recover at least enough to
support himself and his family.

Article 1417
Article 1418
Article 1419

Article 1420. In case of a divisible contract, if the illegal terms can be separated from the
legal ones, the latter may be enforced.

(1) When the consideration is entire and single, the contract is indivisible so that if part of
such consideration is illegal, the whole contract is void and unenforceable.
(2) Where the contract is divisible or severable, that is, the consideration is made up of
several parts, and the illegal ones can be separated from the legal portions, the latter
may be enforced.

Example: A sneakerhead went abroad and made a deal with nike that he would pay them a
thousand dollars monthly and that the company would deliver to him firsthand limited edition
shoes. In this case, their contract is indivisible because there is no way you can separate this
one whole contract. However, the obligation of nike is divisible because they can choose what
time of the month they would send him the shoes, which kind of shoes, and whose shoes would
be sent.

Article 1421. The defense of illegality of contracts is not available to third persons whose
interests are not directly affected.
  In voidable contracts and unenforceable contracts, third persons are not allowed to bring
an action of illegality of the contract whose interest are not directly affected.

Article 1422. A contract which is the direct result of a previous illegal contract, is also
void and inexistent.

Example: Mr. A made up a contract to Mr. B selling a parcel of land, which   was the truth is an
illegally acquired Title of a Land, then later on Mr. B sold the Title to Mr. C, later on Mr. C
learned that the title for the parcel of land he bought was illegally acquired.
 Mr. C cannot sue Mr B but both of them can sue Mr A because he is the origin of the
illegally acquired contract.