Wednesday, April 7, 2010

Voidable Contracts

Art. 1390. The following contract are voidable or annullable, eventhough there may have been no damage to the contracting parties:
[1] Those where one of the parties is incapable of giving consent to a contract;
[2] Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
These contracts are binding unless they are annulled by a proper action in court. They are susceptible of ratification.

Voidable Contracts – they are those which possess all the essential requisites of a valid contract but one of the parties is incapable of giving consent, or consent is vitiated by mistake, intimidation, undue influence or fraud.

Nullity – it is that imperfection of a contract derived from the determinate vices of a capacity or of the consent of the parties which gives rise to an action of nullity which if it is exercised successfully produces the destruction of the act with retroactive effect.

Contracts w/c are voidable eventhough there mat have been no damage to the contracting parties:

a) those were one of the parties is incapable of giving consent to a contract;

b) those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action of the court. They are susceptible of ratification.

Voidable Contract is not Void Ab Initio – a contract where consent is vitiated, such as by violence or intimidation, is not void ab initio but only voidable, and is binding upon the parties unless annulled by proper action in court.


Art. 1391 The action for annulment shall be brought within four years.

This period begin: In cases of intimidation, violence or undue influence, from the time the defect of the consent cases.

In case of mistake or fraud, from the time of the discovery of the same.

And when the action refers to contracts entered into by minors or other incapacitated person, from the time the guardianship ceases.

Effect of Prescription – If the action has prescribed, the contract can no longer be set aside.

Art. 1392. Ratification extinguishes the action to annul a voidable contract. (1309a)

Ratification – when one voluntarily adopts some defective or unauthorized act or contract which, without his subsequent approval or consent, would not be binding on him.
- it cleanses the contract from all its defects from the moment it was constituted. The contract thus becomes valid. Hence, the action to annul is extinguished.

Effects of Ratification

a) the action to annul is extinguished (Art 1392, CC);
b) the contract is cleansed of its defect from the beginning (Art 1396, CC).

Requisites of Ratification

a) the contracts must be a voidable one.
b) the person ratifying must know the reason for the contract being voidable (i.e., the cause must be known)
c) the cause must not exist or continue to exist anymore at the time of ratification.
d) the ratification must have been made expressly or by an act implying a waiver of the action to annul.
e) the person ratifying must be the injured party.

Confirmation – is the act of purging the voidable contracts of the defect through the renunciation of the action of nullity made by the person who can invoke the vice or defect of said contract.

Acknowledgement – is the act of remedying the deficiency of proof as when in a document an agreement made verbally is admitted or a private document is made a public document.

Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. (1311a)

Kinds of Ratification

a) Express (oral or written)

b) Tacit (implied – as from conduct implying a waiver)

Art. 1394. Ratification may be effected by the guardian of the incapacitated person. (n)

- The guardian may act in behalf of the incapacitated person entitled to ratify the contract. Ratification can be made by the injured party himself, provided he is capacitated, or has become capacitated. This article does not refer to rescissible contract entered into by the guardian in behalf of his ward.

Art. 1395. Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment. (1312)

- The guilty party’s consent is not needed otherwise he may find a way of getting out of the contract by the simple expedient of refusing to ratify.

Art. 1396. Ratification cleanses the contract from all its defects from the moment it was constituted. (1313)

Effect of Ratification Retroactive

- Ratification cleanses the contract of all its defects from the moment it was executed. It extinguishes the right of action to annul. In other words, the effect of ratification is to make the contract valid from its inception subject to the prior rights of third person.

Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsdiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract. (1302a)

Persons entitled to file an action to annul

a) the plaintiff must have an interest in the contract;

b) the victim and not the party responsible for the defect is the person who must assert the same.

Art. 1398. An obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law.

In obligations to render service, the value thereof shall be the basis for damages. (1303a)

[e.g. M, a minor, misrepresented himself to be of age, entered into a contract with C, a person who is capacitated. May M later ask for annulment? – The age of the minor in this case is 17 years old. We can conclude that a minor if guilty of misrepresentation cannot ask for annulment because under the rules of statutory construction the latest decision shall prevail]

Art. 1399. When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him. (1304)

Effect of annulment of a voidable contract

a) if the contract is executory, the parties are not bound to comply with their prestation.

b) if the contract is already executed, the parties shall restore to each other the object of the contract, that is, the money plus interest, the property together with its fruits. However, if the ground for annulment is incapacity of the other party, the party incapacitated is bound to return to the extent he was benefited.

No Restitution by Incapacity Party

a) this applies if the defect is incapacity.
b) this constitutes an exception to the obligation of mutual restitution under Art. 1398.
c) Restitution is only to the extent of enrichment (pecuniary or otherwise).

Art. 1400. Whenever the person obliged by the decree of annulment to return the thing cannot do so because it has been lost through his fault, he shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date. (1307a)

Loss of the thing while in the possession of the party at fault

a) If due to his fault
- to return the value of the thing at the time of loss
- interest on the value of the thing
- fruits
b) if due to fortuitous event
- the value of the thing at the time of loss but no interest
- fruits received

If the loss is due to the fault of A is answerable to the following

a) the value at the time of loss.
b) the interest on the value at the time of loss.
c) fruits received.

If the loss is due to the fault of A is answerable to the following

a) value at the time of loss.
b) fruits received.

Art. 1401. The action for annulment of contracts shall be extinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings.

If the right of action is based upon the incapacity of anyone of the contracting parties, the loss of the thing shall not be an obstacle to the success of the action, unless said loss took place through the fraud of fault of the plaintiff (1314a)

Loss of the thing while in the possession of the party who can annul the contract

a) if due to his fault – the right to annul is extinguished in short, the party has no more right to annul.
b) if due to fortuitous event – the contract can still be annulled, unless if the innocent party could no longer restore what in virtue of the decree of annulment he is bound to return.

Extinguishment of action for annulment

a) if the person who has a right to institute an action for annulment, will not be able to restore the thing which he may be obliged to return in case the contract is annulled because such thing is lost through his fraud or fault, his right to have the contract annulled is extinguished. If the loss is not due to his fault or fraud, Art 1402 applies.

The action for annulment shall be extinguished only if the loss if through the fault or fraud of the plaintiff. The right of action is based upon the incapacity of any one of the contracting parties. Whether the right of action is based upon incapacity or not, the rule is the same.

Art. 1402. As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him. (1308)

One party cannot be compelled if other party does not restore

A reciprocal obligation of restitution has been created.
Effect of loss through fortuitous event

[e.g. Suppose the innocent party cannot restore because of a loss through a fortuitous event, may he still compel the other to return what he had given? – No, because before annulment, the contract is valid, and the innocent party being the owner of the thing lost by a fortuitous event must bear the loss. There is however, an exception, and it occurs when he offers to give the value of the thing. He does not give interest in view of the fortuitous event. He must be allowed this remedy, otherwise, he would be in a worse position than one who had destroyed the thing through his fault. Once he exercise this remedy, he can recover from the other what has been previously given]

Originally cited from the book of Atty. Saguinsin

4 comments:

Rah said...

Thanks for posting this.

CHESTER B. CABALZA said...

Thanks Rah for visiting my site :-)

Anonymous said...

Hi chester.can I ask a favor please?can you give example for each article of chapter 7?thank you so much.I really need it for my final exam

Justin Pecho said...

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