19156970 OBLICON Defective Contracts Matrix

DEFECTIVE CONTRACTS Professor E. A. Labitag DEFECTIVE CONTRACTS

RESCISSIBLE (Arts 1381 – 1389) Economic prejudice or damage to: - owner - 3rd person - litigant Can generally be ASSAILED and CURED by: Injured Party EFFECTS: Mutual restitution

AS TO NATURE OF DEFECT Contracts of  guardians (acts of  administration) when wards they represent suffer lesion of more than 25% of the value of thing Contracts in representation of  absentees when latter suffers lesion of  more than 25% of  value of thing

Contracts entered into by debtor who is a state of insolvency, i.e. contracts entered into in fraud of  creditors (Accion Pauliana)

Contracts which refer to things in litigation without the knowledge and approval of litigants or competent judicial authority All other contracts declared by law to be subject of  rescission E.g. Art 1098 Partition

EFFECT ON CONTRACT

ASSAILABLE? HOW?

 YES but only through DIRECT action for rescission VALID No rescission if: until rescinded a. plaintiff has other legal means to obtain reparation (subsidiary) b. plaintiff cannot return what must be restored VALID c. object in the hands until rescinded of 3rd persons in good faith d. Contract approved by court (Art 1386)

VALID until rescinded  YES but only through DIRECT action for rescission No rescission if: a. plaintiff has other legal means to obtain reparation VALID (subsidiary) until rescinded b. plaintiff cannot return what must be restored c. object in the hands of 3rd persons in good faith VALID until rescinded

WHO CAN ASSAIL?

WHEN TO ASSAIL?

CURABLE? HOW?

WHO CAN CURE?

WHEN TO CURE?

By ward Or by guardian ad  litem of ward during incapacity of ward in action against original guardian

By absentee

By plaintiffcreditor By heirs of  creditor BY creditors of  creditors injured (accion subrogatoria) By

Within 4 years from gaining (minor) or regaining (insane) capacity

 YES By ratification (Confirmation by the ward)

By ward

Within 4 years from (re)gaining capacity

Within 4 years from knowledge of domicile of  absentee

 YES By prescription

By absentee

Within 4 years from knowledge of domicile or knowledge of  fraudulent contract

Within 4 years from knowledge of fraudulent contract

 YES By prescription

By creditor

Within 4 years from knowledge of fraudulent contract

Within 4 years from knowledge of fraudulent contract

 YES By prescription

By party litigant

Within 4 years from knowledge of fraudulent contract

other third parties prejudiced by the contract

By party litigant

DEFECTIVE CONTRACTS

VOIDABLE (Arts 1390 – 1402) Vitiated consent EFFECT: Cleanses defect of  contract Does not prejudice right of 3P prior to ratification Mutual restitution

AS TO NATURE OF DEFECT

EFFECT ON CONTRACT

ASSAILABLE? HOW?

Want of capacity - age - insanity

Consent is vitiated by: - mistake or error - violence and intimidation (duress) - undue influence - fraud, misrepresentation

VALID until annulled by court action

 YES. Both through direct and collateral attacks. Action for annulment

WHO CAN ASSAIL?

WHEN TO ASSAIL?

All who are obliged principally or subsidiarily (i.e. guarantors and sureties)

Within 4 years from cessation of  (re)gaining capacity

Incapacitated party; not the party with capacity Victim; not the party who cause the defect

Within 4 years from: - cessation of  intimidation, violence, undue influence (consensual defect) - discovery of  mistake or fraud

CURABLE? HOW?  YES By ratification By prescription  YES 1 By ratification - Express - Implied (silence or acquiescence, acts showing approval or adoption of  contract, acceptance and retention of  benefits)

WHO CAN CURE?

By parties themselves By guardian in behalf of an incapacitated party during existence of  incapacity

2 By prescription

UNENFORCEABL E (Arts 1403 – 1408)

Contract entered into name of  another without authority or in excess of authority

VALID but cannot be ENFORCED by a proper action in court

Contracts covered by Statute of Frauds and not complying with requirement of a written memo

VALID but cannot be ENFORCED by a proper action in court

 YES. Not by direct action but by DEFENSE of  unenforceability of  contract through motion to dismiss complaint on the ground that contract is unenforceable  YES. Not by direct action but by DEFENSE of  unenforceability of  contract either through: 1. motion to dismiss complaint on the ground that contract is unenforceable 2. objection to presentation of  oral evidence to prove contract

By owner of  property

At any time one party attempts to enforce contract against the other through a court action

By ratification

Person in whose name the contract was entered into

By other party By his privies (heirs, representatives and assigns)

At any time one party attempts to enforce contract against the other through a court action

By acknowledgement By performance of oral contract

By party against whom the contract is being enforced

By failure to object seasonably to presentation of  oral evidence By acceptance of  benefits under the contract

WHEN TO CURE? Within 4 years from cessation of  (re)gaining capacity Within 4 years from: - cessation of  intimidation, violence, undue influence (consensual defect) - discovery of  mistake or fraud

Both parties are legally incapacitated to act

DEFECTIVE CONTRACTS VOID or INEXISTENT (Arts 1409 – 1422)

AS TO NATURE OF DEFECT

VALID but cannot be ENFORCED by a proper action in court

EFFECT ON CONTRACT

 YES. Not by direct action but by DEFENSE of  unenforceability of  contract through motion to dismiss complaint on the ground that contract is unenforceable

ASSAILABLE? HOW?

By other party By his privies (heirs, representatives and assigns) By guardian

WHO CAN ASSAIL?

Cause, object or purpose of contract contrary to law, good customs, morals, public order or public policy (Art 1401, Par 1)

DOES NOT CREATE RIGHTS AND CANNOT IMPOSE OBLIGATION

 YES. By an action for declaration for nullity By defense of  nullity

By innocent party

One or some of  essential requisites of valid contract lacking in fact or in law a. Absolutely simulated b. Those whose cause or object did not exist c. Object outside the commerce of man d . C on te mp la te an impossible service e. Where intention of  parties re: principal object of  contract cannot be ascertained (Art 1402 Pars 2 to 6)

DOES NOT CREATE RIGHTS AND CANNOT IMPOSE OBLIGATION

 YES. By an action for declaration for nullity By defense of  nullity

By any of the contracting parties By 3rd persons whose interests are directly affected

At any time one party attempts to enforce contract against the other through a court action

WHEN TO ASSAIL?

By parents or guardians of both parties By confirmation Both parties after (re)gaining capacity to act

CURABLE? HOW?

WHO CAN CURE?

WHEN TO CURE?

Imprescriptible

Cannot be cured

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Imprescriptible

Cannot be cured

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By 3rd persons whose interest are directly affected (If in pari delicto, neither has an action against each other)

Contracts expressly prohibited by law (Art 1409 Par 7)

DOES NOT CREATE RIGHTS AND CANNOT IMPOSE OBLIGATION

 YES. By an action for declaration for nullity By defense of  nullity

By party whose protection the prohibition of the law is designed By 3rd party whose interests are directly affected

Imprescriptible

Cannot be cured

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