Defective Grounds
Contract
1. Reformation 1) When a mutual mistake of
the parties causes the
failure of the instrument
to disclose their real
agreement. (Art. 1361,
NCC)
2) If one party mistaken and
the other acted
fraudulently in such way
the instrument does not
show their true intention.
(Art. 1362, NCC)
3) When one party was
mistaken and the other
knew or believed that the
instrument did not state
their real agreement, but
concealed that fact from
the former. (Art. 1363,
NCC)
4) When through the
ignorance, lack of skill,
negligence, or bad faith
on the part of the person
drafting the instrument or
of the clerk or typist, the
instrument does not
Who may file Circumstances that Prescriptive period Consequence
may prevent parties
from filing
Refer to the grounds: The following xxxxxxxxxx The right of
instruments cannot be reformation is
For No. (1): The party reformed: necessarily an
who can bring the invasion or limitation
action is either party or 1) Simple donations of the parol evidence
his successors in inter vivos wherein rule since, when a
interest no condition is writing is reformed,
imposed; the result is that an
For Nos. (2), (3), (4), 2) Wills; and oral agreement is by
(5): The party who can 3) Those where the court decree made
bring the action is the real agreement is legally effective.
injured party or his void. (Art. 1366, Consequently, the
heirs and assigns. NCC) courts, as the
agencies authorized
by law to exercise the
power sparingly and
with great caution and
zealous care.
Reformation is that
remedy in equity by
means of which the
instrument is
amended to conform
to the real intention of
the parties.
 express the true intention
of the parties. (Art. 1364,
NCC)
5) If two (2) parties agree
upon the mortgage or
pledge of real or personal
property, but the
instrument states that the
property is sold
absolutely, or with a right
of repurchase. (Art. 1365,
NCC)

2. Annulment The following contracts are 3) The plaintiff must 1) By prescription of The action for Cancellation of
voidable or annullable, even have an interest in the action for annulment of a contract; but can be
though there may have been the contract in the annulment (Art. voidable contract must cured through
no damage to the sense that he is 1391, NCC) be commenced within ratification
contracting parties: obliged thereby 2) By ratification or a period of four (4)
either principally or confirmation (Art. years.
1) Those where one of the subsidiarily. 1392-1396, NCC) 1) If the action refers
parties is incapable of 4) The victim and not 3) By the loss of the to contracts
giving consent to a the party thing which is the entered into be
contract; responsible for the object of the incapacitated
2) Those where the consent vice or defect must contract through persons, the period
is vitiated by mistake, be the one who the fraud or fault of shall commence
violence, intimidation, must assert the the person who is from the time the
undue influence or fraud same entitled to institute guardianship
the action for ceases;
These contracts are binding, annulment of the 2) If it refers to those
unless they are annulled by contract. (Art. where consent is
 a proper action in court.
3. Nullity 1) Those which lack
absolutely either in fact
or in law one or some or
all of those elements
which are essential for its
validity.
2) Those where all of the
requisites prescribed by
law for contracts are
1401, NCC) vitiated by
violence,
Strangers to a contract intimidation or
cannot sue either both undue influence,
of the contracting the period shall be
parties to annul and counted from the
set aside that contract time such violence,
intimidation, or
undue influence
ceases or
disappears;
1) 3) And if it refers to
those where
consent is vitiated
through mistake or
fraud, the period
shall be counted
from the time of
the discovery of
such mistake or
fraud.
Any person may invoke When both parties are There is no period of Cannot be cured;
the inexistence of the at fault or in pari prescription. In other
contract whenever delicto, the law words, the action is Declaration of nullity
juridical effects refuses them every imprescriptible.
founded thereon are remedy and leaves
asserted against him. them where they are.
This rule which
embodied in Arts.
1411 and 1412 of the
 present, but the cause,
object or purpose is
contrary to law, morals,
good customs, public
order or public policy, or
they are prohibited by
law.
3) Those which lack
absolutely one or some
or all of those requisites
which are essential for
validity.
4. Rescission 1) Those entered into by
guardians whenever the
wards whom they
represent suffer lesion by
more than one-fourth of
the value of the things
which are the object
thereof;
2) Those agreed upon in
representation of
absentees, if the latter
suffer the lesion stated in
the preceding number;
3) Those undertaken in
fraud of creditors when
the latter cannot in any
NCC is what commonly
known as the principle
of in pari delicto. It is a
rule which is
expressed in the
maxims: “Ex dolo
malo non oritur actio”
and “In pari delicto
potior est conditio
defendentis.” The law
will not aid either
party to an illegal
agreement; it leaves
them where they are.
The action for Ratification 1) As a general rule, Cancellation of
rescission may be extinguishes the the action to claim contract due to
instituted by the action to annul a the rescission must damages incurred.
following: voidable contract. be commenced
1) The person who is within four (4)
prejudiced, such as Ratification is defined years.
the person as the act of curing 2) For persons under
suffering the lesion the defect which made guardianship, the
in rescissory the contract period begins from
actions based on annullable. It may be the time the
lesion, the creditor expressly or tacitly incapacity
who is defrauded in given. terminates and the
rescissory actions aggrieved party
based in fraud, and has unsuccessfully
other persons exhausted all other
authorized to legal remedies to
 other manner collect the exercise the same be able to enforce
claims due to them; in other rescissory his or her rights or
4) Those which refer to actions. recover what has
things under litigation if 2) Their been lost. Hence, if
they have been entered representatives; the person is a
into by the defendant 3) Their heirs; minor, the period
without the knowledge 4) Their creditors begins from the
and approval of the by virtue of the time he reaches
litigants or of competent subrogatory the age of majority
judicial authority; action defined in which is 18 years of
5) All other contracts Art. 1177 of NCC. age, and has
specially declared by law unsuccessfully
to be subject to exhausted all legal
rescission (Art. 1381, remedies;
NCC) 3) For absentees, the
6) Payments made in a period begins from
state of insolvency for the time he learns
obligations to whose of the contract and
fulfillment the debtor has unsuccessfully
could not be compelled exhausted all other
at the time they were legal remedies to
effected are also be able to enforce
rescissible. (Art. 1382, his rights or
NCC) recover what has
been lost
4) For contracts
entered into frauds
of creditors, he
period begins from
the time of the
 discovery of the
fraud and after he
or she has
unsuccessfully
exhausted all other
remedies.
5) For contracts
entered into with
respect to things
under litigation
without the
knowledge and
approval of the
litigants or of
competent judicial
authority, the
period begins from
the time of
knowledge of the
transaction and
unsuccessful
exhaustion of all
other legal
remedies.
5. 1) Those entered into in the xxxx xxxx xxxxxx Contract may not be
Unenforceable name of another person forced upon the
by one who has been execution of the
given no authority or legal person.
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
thereafter shall be
unenforceable by action,
unless the same, or some
note or memorandum
thereof, be in writing and
subscribed by the party
charged, or be 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 of
things in action, at a price
not less than five hundred
pesos, unless the buyer
accepts and receives part
of such goods and
chattels, or the evidence,
or some of them, of such
things in action or pay it
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 whose
account the sale is made,
it is a sufficient
memorandum;
(e) An agreement for the
leasing for a longer period
than one year, or sale of a
real property or 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.