How Defective Contracts Are Classified Defective contracts can be classified in several ways: Voidable and Annullable Contracts: These can be defective if one party was incapable of giving consent or if consent was granted by mistake, threat, violence, fraud, or undue influence. Unenforceable contracts: These are contracts that can't be enforced for a variety of reasons. Void or Inexistent Contracts: These have no legal effect because they don't legally exist. Other defective contracts include those that are partially ineffective and partially valid. They don't fall under any of the above classifications, are only ineffective with respect to certain persons, but can be effective to other parties. These are known as Relatively Ineffective Contracts. Distinctions in Defective Contracts Contracts become defective typically by: Defect itself Damage or prejudice Effect Remedy Contracts that are void due to defect itself include: Void contracts that are caused by illegality or lack of essential elements. Voidable contracts that are defective because of their methods of consent. Rescissible contracts that are caused by damages or lesion to one of the contract parties or another third party. Unenforceable contracts that lack authority, capacity, or both parties' consent. Contracts that are not compliant with the Statute of Frauds or entered into on behalf of another party without their authority. Void contracts cannot be ratified, but voidable contracts can be ratified in some circumstances. Rescissible contracts might be subject to convalidation, but not official ratification. Unenforceable contracts are also subject to ratification in some cases. Under Article 1410, void contracts cannot be cured by prescription, but voidable ones can. Rescissible contracts can also be cured by prescription while unenforceable ones cannot.How Defective Contracts Are Classified Defective contracts can be classified in several ways: Voidable and Annullable Contracts: These can be defective if one party was incapable of giving consent or if consent was granted by mistake, threat, violence, fraud, or undue influence. Unenforceable contracts: These are contracts that can't be enforced for a variety of reasons. Void or Inexistent Contracts: These have no legal effect because they don't legally exist. Other defective contracts include those that are partially ineffective and partially valid. They don't fall under any of the above classifications, are only ineffective with respect to certain persons, but can be effective to other parties. These are known as Relatively Ineffective Contracts. Distinctions in Defective Contracts Contracts become defective typically by: Defect itself Damage or prejudice Effect Remedy Contracts that are void due to defect itself include: Void contracts that are caused by illegality or lack of essential elements. Voidable contracts that are defective because of their methods of consent.

1. Defective
Contracts
Presented by:
Efrenica Gamboa
Mark Ian Earl C.Larican
Prench MC Z. Padilla
CHAPTER VII

2. TYPES OF DEFECTIVE
CONTRACTS
VOID/
INEXISTENT
UNENFORCEABLE
VOIDABLE
RESCISSIBLE

3. Objectives
At the end of this lesson,
the students should be able
to:
1.Define the defective
contracts.
2.Learn to differentiate
the types of defective
contracts.

4. Defective contracts are those
which failed to meet or
partially meet the legal test of
validity because:
● lack some essential element
● the parties thereto lack the
capacity to contract
● a vice in the consent of one
of the parties
● lesion in certain case

5. RESCISSIBLE
capable of being rescinded(revoke,
cancel, or repeal).
01
(Civil Code Art. 1380-1389)

6. Concept and requisites of rescission.
Rescission is a remedy granted by law
to the contracting parties or their
successors in interest and even to third
persons, in order to secure reparation
of damages caused them by a contract,
even if a contract is valid.

7. ELEMENTS THAT MUST CONCUR TO AVAIL
RESCISSION OF A CONTRACT.
(1) A case specially provided by law;
(2) mutual restitution of what the parties have
received under the contract;
(3) object of the contract must not be in the
possession of a third person who acquired it in
good faith and for value; (4) no other legal
remedy except by rescission;
(5) action has not prescribed.

8. THE FOLLOWING CONTRACTS ARE RESCISSIBLE:
1. Those which are 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;
Example: G is the guardian of W, ward.
G sold to X the property of W for
P250,000. The value of the property is
P500,000.

9. THE FOLLOWING CONTRACTS ARE RESCISSIBLE:
2. Those agreed upon in
representation of absentees, if the
latter suffer the lesion stated in
the preceding number;
Example: R is the
representative of A, absentee. R
sold to X the property of A for
P250,000. The value of the property
is P500,000.

10. THE FOLLOWING CONTRACTS ARE RESCISSIBLE:
3. Those undertaken in fraud of creditors when
the latter cannot in any other manner collect
the claims due them;
Example: D is a debtor of C, creditor.
Fearing that he won't be able to pay his debt to
C and his land levied, D sold his land to X
without the intention of using the proceeds to
pay C.

11. THE FOLLOWING CONTRACTS ARE RESCISSIBLE:
4. Those which refer to things under
litigation if they have been entered into by the
defendant without the knowledge and approval of
the litigants or of competent judicial
authority;
Example: S sues B for the recovery of a
parcel of land. In this case, the land is a
"thing under litigation."Supposed B sold to X
the parcel of land.
5. All other contracts specially declared by

12. EXTENT OF RESCISSION (Art. 1384)
Rescission shall be only to the extent
necessary to cover the damages caused.
Example: G is the guardian of M, a minor with
two parcels of land valued at P200,000.00 each.
G sold the two properties to B for only
P200,000.00. In this case, M can only rescind
the contract for the other land because G only
sold the 2 lands for 200k meeting the condition
for only one parcel of land which is 200k.

13. ACQUISITION OF THIRD PERSON IN
BAD FAITH (Art. 1388)
Example:
To defraud C, S sold to B his car. B knows S's
purpose. (B is Bad Faith)
To defraud C, S sold to B his car. B knows S's
purpose. B sold to D, bad faith, and D sold to E,
good faith. (B and D is Bad Faith)
To defraud C, S sold to B his car. B doesn't know
S's purpose. B sold to D, bad faith, and D sold to E,
bad faith. (D and E is Bad Faith)

14. PRESCRIPTION OF RESCISSION
(Art. 1389)
The action to claim rescission must be commenced
within four years.
For persons under guardianship and for absentees, the
period of four years shall not begin until the
termination of the former's incapacity, or until the
domicile of the latter is known.

15. VOIDABLE
02
capable of being voided; specifically :
capable of being adjudged void.

16. VOIDABLE
Voidable contracts are those that
possess all the requisites of a valid
contract, namely: consent, object
certain and consideration, but have a
defect or vice because the consent is
vitiated by mistake, violence,
intimidation, undue influence and fraud,
or that one of the contracting parties
is incapable of giving consent.

17. Juan threatened Mario to
injured him. If Mario wont sell
his bike to Juan. So Mario
signed the contract to avoid
getting hurt.

18. VOIDABLE
voidable contract is valid
until it is voided in court.
Its validity becomes absolute
once it is ratified or not
annulled within four years

19. Jimmy sold to
Bryan (17 y/o) a
car. Upon reaching
18 years old, Bryan
can avail annulment
within 4 years
until his last day
being 22 years old.
VOIDABLE

20. Difference between:
RESCISION ANNULMENT
Used to invalidate a rescissible contract Used to invalidate a voidable contract
Subsidiary remedy Principal remedy
Rescission is availed by injured person
even if not a party to contract
Annulment is availed by parties to a
contract

21. 1. Incapacitated persons (upon
ceasing of incapacity)
2. Persons whose consent were
vitiated
Persons who may ask for annulment?

22. 1. When the object of the
contract is lost through the
fault of the person who may annul
the contract
2. When the contract is
ratified
When annulment cannot proceed?

23. Ratification of Voidable Contracts
Ratification can be done
orally, in writing, or may be
implied.

24. Supposed Susie sold his
car to Basilio (minor) in
installment. Upon reaching
18 years old, Basilio
continued to pay Susie.

25. UNENFORCEABL
E
(especially of an obligation or law)
impossible to enforce.
03

26. WHAT IS UNENFORCEABLE
CONTRACTS?
A contract is unenforceable
when it cannot be sued upon or
enforced in court unless it is
"ratified"

27. WHAT MAKES A CONTRACT UNENFORCEABLE?
3 CATEGORIES UNDER ARTICLE 1403
● UNAUTHORIZED CONTRACTS
Those entered into in the name of another person by one
who has been given no authority or
legal representation, or who has acted beyond his powers.
● BOTH PARTIES ARE INCAPACITATED
Those where both parties are incapable of giving consent
to a contract.
● TRANSACTIONS UNDER STATUTE OF FRAUDS
A statute which requires certain types of contracts to be
in writing in order to be enforceable.

28. 1. UNAUTHORIZED CONTRACTS
Example #1:
A,representing himself as agent of P,sold P's land to B.
Example #2:
A sold P's land to B.
Example #3:
A, agent of P, sold P's land to B in installments.
A is only authorized to sell P's land in cash.

29. 1. UNAUTHORIZED CONTRACTS
Example #1:
A, representing himself as
agent of P, sold P's land to B.
Exception: When P "ratified"
the sale.

30. 2. BOTH PARTIES ARE INCAPACITATED
Example:
A, minor, sold his bicycle to B, minor.
Exception: If the guardians of both A and
B ratified the contract

31. 3. STATUTE OF FRAUDS
● Contracts not to be performed within a year
Example:
X and Y verbally agreed to form a partnership
after 13 months.
● A special promise to answer for the debt,
default, or miscarriage of another
Example:
D is indebted to C. Gorally guaranteed D's
debt.

32. 3. STATUTE OF FRAUDS
● Agreement in consideration of marriage
Example:
Z orally obliged himself to give Y, a piece
of
land if Y marries his daughter, X.
● Sale of personal property for 500 pesos or
more
● Lease of real property for more than 1 year

33. 3. STATUTE OF FRAUDS
● A representation as to the credit of a
third person
Example:
A (insolvent) is in need of cash. A asked B
for help. B represented A as having good credit
to C who extends a loan to A because of B's
representation.
● Sale of real property (Art. 1358)
Exception: Partially Executed Contracts

34. VOID OR
INEXISTENT
03

35. VOID OR INEXISTENT CONTRACTS
A void or inexistent contract is one
which is absolutely without legal force and
effect. Unlike a voidable or an unenforceable
contract, void or inexistent contract is not
susceptible of ratification. It is a formal
agreement that is effectively illegitimate
and unenforceable from the moment it is
created.

36. The following contracts are inexistent and void
from the beginning: (Art. 1409)
(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
(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.

37. ILLEGAL AND CRIMINAL
CONTRACTS
RULES WHERE CONTRACT IS ILLEGAL AND THE ACT CONSTITUTES
A CRIMINAL OFFENSE (Article 1411)
A. WHERE BOTH PARTIES ARE IN PARI DELICTO
1. The parties shall have no action against each other.
2. Both shall be prosecuted.
3. The things or the price of the contract, as the
effects or instruments of the crime, shall be confiscated
in favor of the government.

38. ILLEGAL AND CRIMINAL
CONTRACTS
For instance: Czarina, Bryan Pogi, and Prench enters
a contract to operate online jueteng in Marikina, which is
a prohibited game. Supposed they agreed that the capital
shall be 500,000php. Pursuant to the contract, and owing
to lack cash, Czarina contributed a panel car worth
50,000php and 100k in cash, Bryan contributed his E-bike
worth 50K and 100k cash, and Prench contributed in full
cash 200k. After 6 months operation, they were discovered
by the authorities and their operations stopped.

39. ILLEGAL AND CRIMINAL
CONTRACTS
B. WHERE ONLY ONE PARTY IS GUILTY (IN DELICTO, BUT NOT
IN PARI DELICTO)
1. The guilty party will be prosecuted.
2. The instrument of the crime or object of the
contract will be confiscated.
3. The innocent one may claim what he has given; or if
he has not yet given anything, he shall not be bound to
comply with his promise.

40. ILLEGAL AND CRIMINAL
CONTRACTS
For Instance: Czarina, a minor,
lives in with a married man for a
price and he promised to Czarina to
give her a house and lot. After a
sometime, the authority found out
about the contract and the married man
being guilty while Czarina which is a
minor being innocent all the time.

41. ILLEGAL AND CRIMINAL
CONTRACTS
(The married man will lose what he
has given to Czarina because it will
be confiscated then he will also be
prosecuted while Czarina may claim
what she has given and she shall not
be bound to comply with her
promise.)

42. Comparison between
Defective Contracts

43. VALID BINDING ENFORCEABLE
Rescissible
Voidable
Unenforceable
Void

44. BASIS RESCISSIBLE VOIDABLE UNENFORCEABLE VOID
Why
Deffective?
Causes damage
to 3rd Person
Consent is
Defective
Lack of Authority or
Form
Missing Essential
Element/s
Can be Ratified? Yes Yes Yes No
Applicable
Provisión
Art 1381 Art 1390 Art 1403 Art 1409
Remedy to avoid Rescission Annulment N/A N/A

45. Keywords
fictitious – not real or true, being imaginary or having been
fabricated.
illegitimate - not authorized by the law; not in accordance with
accepted standards or rules.
incapacity - legal disqualification
in pari delicto - A Latin phrase commonly used in tort and contract
law which means “in equal fault.”
lesion - to loss from another's failure to perform contract
litigation - is a legal proceeding; it is essentially a process
where someone is taking legal actions against something such as a
lawsuit, legal case, and/or a judicial dispute.

46. Keywords
ratify - to approve or enact a legally binding act that would not
otherwise be binding in the absence of such approval.reparation - the
making of amends for a wrong one has done, by paying money to or
otherwise helping those who have been wronged.
remedy - a way of using the legal system to make sure that
someone's rights are not taken away from them
rescission - the revocation, cancellation, or repeal of a law,
order, or agreement
unenforceable - (especially of an obligation or law) impossible to
enforce
vices - defects or flaws in the subject matter of a sale that
entitle the buyer to return the item and recover the purchase price.

47. Thank
you !