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ART. 1390. The following contracts are voidable

or annullable, even though 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. (n)

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Meaning of voidable contracts.
Voidable or annullable contracts are those which possess all the essential
requisites of a valid contract but one of the parties is legally incapable of giving
consent, or consent is vitiated by mistake, violence, intimidation, undue
influence, or fraud.

Binding force of voidable contracts.

They are valid and binding between the parties unless annulled by a proper
action in court by the injured party.
Once ratified, they become absolutely valid and can no longer be annulled.
Note that the existence of economic damage is not essential for their
annulment as in the case of rescissible.

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Kinds of voidable contracts.
A contract otherwise legal in object and operation is
voidable because of a defect caused by either:
(1)Legal incapacity to give consent, where one of the parties
is incapable of giving consent to the contract; or
(2)Violation of consent, where the vitiation is done by
mistake, violence, intimidation, undue influence, or
fraud.

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Meaning of Annulment.
Annulment is a remedy as well as a sanction provided by
law, for reason of public interest, for the declaration of the
inefficacy of a contract based on a defect or vice in the consent
of one of the contracting parties in order to restore them to
their original position in which they were before the contract
was executed.

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 ART. 1391. The action for annulment shall be
brought within four years.
This period shall begin:
In cases of intimidation, violence or undue influence,
from the time the defect of the consent ceases.
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 persons, from the time
the guardianship ceases. (1301a)
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Period for filing action for annulment
The four-year period for bringing an action for annulment is reckoned:
(1)In case of intimidation, violence, or undue influence, from the time
the intimidation, etc. ceases. Before that time, the consent is still being
vitiated and, therefore, the victim cannot be expected to bring an
action in court.
(2)In case of mistake or fraud, from the time it is discovered. This must
be so because before the time of discovery, the innocent party is
unaware of the reason which renders the contract voidable (Art. 1393.)
and cannot also be expected to bring an action in court. Furthermore,
the guilty party should not be rewarded for successfully hiding the
mistake or fraud.
(3)In the case of contracts entered into by minors or other incapacitated
persons, from the time the guardianship ceases. An incapacitated
person has no capacity to sue. 7
 ART. 1392. Ratification extinguishes
the action to annul a voidable contract.
(1309a)

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Meaning and effect of ratification
(1)Ratification means that one voluntarily adopts or
approves some defective or unauthorized act or contract
which, without his subsequent approval or consent,
would not be binding on him. It indicates an intention
on the part of the ratifier to be bound to the provisions
of the contract.
(2)Ratification cleanses the contract from all its defects
from the moment it was constituted. (Art. 1396) The
contract thus becomes valid. (Art. 1390) Hence, the
action to annul is extinguished. (Art. 1392)
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 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)

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Kinds of ratification.
They are:
(1) Express. — when the ratification is manifested in words
or in writing; or
(2) Implied or tacit. — It may take diverse forms, such as by
silence or acquiescence; by acts showing adoption or
approval of the contract; or by acceptance and retention
of benefits flowing therefrom.

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Requisites of ratification.
(1) The requisites for implied ratification are the
following:
(a) There must be knowledge of the reason which
renders the contract voidable;
(b) Such reason must have ceased; and
(c) The injured party must have executed an act which
necessarily implies an intention to waive his right.
(2) The requisites for express ratification are the same as
those for implied ratification except that the former is
effected expressly.

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EXAMPLES:
(1) S, a minor, sold his land to B. Upon reaching the age
of majority, S, with full knowledge of his rights in the premises,
instead of repudiating the contract, disposed of the greater part
of the proceeds, or collected the unpaid balance of the purchase
price from B.
In this case, there is tacit ratification by S.

(2) In an action for annulment of a contract of sale, S

alleged that the sale was executed by him through the threat and
intimidation of B. It appears, however, that S deposited the
check for the purchase price and withdrew the money from time
to time.
The contract is deemed ratified.
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 ART. 1394. Ratification may be effected by
the guardian of the incapacitated person. (n)

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Who may ratify.
(1) A contract entered into by an incapacitated person may
be ratified by:
(a) the guardian; or
(b) the injured party himself, provided, he is already
capacitated.
As legal representatives of their wards, guardians have the
power to contract on their behalf. Hence, they may also ratify
contracts entered into by their wards. (see Art. 1407.)

(2) In case the contract is voidable on the ground of

mistake, etc., ratification can be made by the party whose
consent is vitiated.
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 ART. 1395. Ratification does not require the
conformity of the contracting party who has no right
to bring the action for annulment. (1312)

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Conformity of guilty party to ratification not required.

Ratification is a unilateral act by which a party

waives the defect in his consent. The consent of the guilty
party is not required; otherwise, he can conveniently
disregard his contract by the simple expedient of refusing
to give his conformity.

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

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Effect of ratification retroactive.

Ratification purges the contract of all its defects (Art.

1390.) from the moment it was executed. It extinguishes the
action to annul. (Art. 1392.) In other words, the effect of
ratification is to make the contract valid from its inception
subject to the prior rights of third persons.

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EXAMPLES:

(1) B forced S to sell the latter’s horse. Later, the horse

gave birth to a colt. If S should ratify the contract after the
birth of the colt, who is entitled to the colt? B, because
ratification has a retroactive effect. It validates the
contract from the date of its execution.
If the horse had been sold by B to C who acted in good
faith, the subsequent ratification by S of the sale to B
cannot prejudice C.

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 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)

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Duty of mutual restitution upon annulment.

(1) If the contract is annulled, the parties, as a general

rule, must restore to each other (a) the subject matter of the
contract with its fruits (see Art. 544, et seq.) and (b) the price
thereof with legal interest.
Like in rescission (see Art. 1385.), the purpose of the
law is to restore the parties to their original situation by
mutual restitution. The fruits must be returned because the
party who received them had no right to enjoy the same.
Legal interest must be paid because the party who received
the money had no right to use it.

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 (2) In personal obligation (see Art. 1156) where the service
had already been rendered, the value thereof with the
corresponding interest, is the basis for damages (par. 2)
recoverable from the party benefited by the service.

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ART. 1403. The following contracts are unenforceable, unless they are
ratified:
(1) Those entered into the name of another person by one who has been
given no authority or legal 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 hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by 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; 25
 (d) An agreement for the sale of goods, chattels, or things in
action, at a price not less than Five hundred pesos, unless the buyer
accept and receive part of such goods and chattels, or the evidences,
or some of them, of such things in action, or pay 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 on 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 for the sale of real property or of 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.
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Meaning of unenforceable contracts.
Unenforceable contracts are those that cannot be enforced in
court or sued upon by reason of defects provided by law until
and unless they are ratified according to law.

Binding force of unenforceable contracts.

While rescissible and voidable contracts are valid and
enforceable unless they are rescinded or annulled, unenforceable
contracts, although valid, are unenforceable unless they are
ratified. Once ratified, these contracts may then be enforceable.

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Kinds of unenforceable contracts.
Under Article 1403, the following contracts are unenforceable:
(1) Those entered into in the name of another by one without
or acting in excess of authority;
(2) Those that do not comply with the Statute of Frauds; and
(3) Those where both parties are incapable of giving consent.
The above contracts indicated the three (3) types of defects that
render them unenforceable.

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Meaning of unauthorized contracts.

Unauthorized contracts are 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.
They are governed by Article 1317 and the principles of
agency. (Art. 1404; see Arts. 1868, 1869, 1881, 1882, 1883,
1900, 1901.)

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Agreements within the scope of the Statute of Frauds.
To be enforceable, a contract does not have to be in writing. In fact,
most contracts made orally are legally enforceable. However, there are
agreements which fall within the scope of the statute of frauds enumerated
below, which are not legally enforceable in court although valid, unless the
same be in writing. In other words, if either party refused to comply with
their agreement, the same could not be enforced.
(1) Agreement not to be performed within one (1) year from the making thereof.
Example:
On October 10, 2014, S entered into an oral contract with B for
construction of B’s house to begin on October 20, 2015. the contract must
be in writing to be enforceable.
In order that this provision be applicable, it must appear that the parties
intended when they made the contract that it should not be performed
within a year from the date it is to be effective. A contract is within the
Statute if the time for the full performance of the contract exceeds a year,
although the excess is ever so little (e.g., one [1] day). 30
 (2) Promise to answer for the debt, default, or miscarriage of another.
Example:
D owes C P50,000 with G as guarantor. Here, G has a special promise to
answer for the debt of D in case D fails to pay the same time. This promise is
unenforceable unless it is in writing signed by G.
Note that in a guaranty, the promise is merely subsidiary or collateral to the
promise of another ( the original or principal debtor). If the promise is an
original or an independent one, that is, if the promisor (surety) becomes thereby
primarily liable for the payment of the debt, the promise is not within the
Statute and may be proved by oral evidence.
Thus, in the same example, if the promise of g is to pay C what D owes him
(C), G ‘s promise, even if verbally made, is not enforceable as it is not a
collateral “promise to answer for the debt, default, or miscarriage of another.”
This type of agreement is as suretyship under which the surety binds himself
directly and primarily responsible with the principal debtor on the original
contract. 31
 (3) Agreement in consideration of marriage other than mutual promise to marry.
Example:
M agrees to build a house worth P5,000,000.00 for W if W will marry M.
This must appear in writing to be enforceable unless M ratifies the agreement.
The Statute applies even when the promise to build the house is made by a
third person to W.
But a mutual promise of M and W to marry each other need not be in
writing. For breach of the mutual promise to marry, the injured party may
prove the promise by oral evidence in an action for damages.
Note that the law states no period for performance unlike in the case of
the agreement referred to in No. 1. Hence, an oral mutual promise to marry
may be proved by parol evidence although the marriage is to be celebrated
beyond one (1) year.

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 The Agreement within the scope of the Statute does not relate to the
marriage itself but to agreements or promises (engagement contracts)
made by parties prior to marriage. Marriage settlements (see Arts. 74-76,
Family Code.) and donations propter nuptias (Art. 82, Ibid.) are
agreements made in consideration of marriage.
Note: Marriage settlements (also called ante-nuptial contracts) are
agreements entered into the future spouses before the celebration of
marriage and in consideration thereof, for the purpose of fixing the
conditions of their property relations both with respect to their present
and future property. (See Arts. 74-76, Family Code.)
Donations propter nuptias or donations by reason of marriage are those
which are made before its celebration, in consideration of the same and
in favor of one or both of the future spouses. (Art. 82, Ibid.)

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 (4) Agreement for sale of goods, etc. at price not less than P500.00. —
Example:
S and B mutually promised to buy and sell a piano at a price of
P12,000.00.
This contract must be in writing to be enforceable against either party
unless there is delivery or partial or full payment, in which case, it is taken
out of the operation of the Statute of Frauds and the contract may be
enforced even if it was made orally.

(5) Agreement for leasing for a longer period than one year. —
Example:
R agreed to lease his house to E for two (2) years. Again, this
agreement must appear in writing to be enforceable unless it is partially
executed.

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 (6) Agreement for the sale of real property or of an interest therein.
Examples:
(1)S orally sold his land or his right or usufruct in said land to B. The
agreement is also unenforceable, unless it has been partially
executed.
(2)S agreed in a private document to sell his land to B. The document
was given to B who lost it. May B prove the agreement by oral
evidence?
Yes. Here, what is to be proved is not an oral but a written contract
of sale. It is necessary, however, that B first presents proof that the
written agreement really existed

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 (7) Representation as to the credit of a third person. —
Example:
D is seeking a loan from C. T represents to C that D is solvent and
has a good credit reputation. Relying upon this representation, C extends
a loan to D who, actually, is insolvent.
The representation of T, which was made to induce the extension of
credit to D, must be in writing to be enforceable. Here, there is no
promise by T to answer for the debt of D. Note that there is no
agreement involved.

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 ART. 1407. In a contract where both parties are
incapable of giving consent, express or implied
ratification by the parent, or guardian, as the case
may be, of one of the contracting parties shall give
the contract the same effect as if only one of them
were incapacitated. If ratification is made by the
parents or guardians, as the case may be, of both
contracting parties, the contract shall be validated
from the inception.

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When unenforceable contract becomes a voidable contract.
Where both parties to a contract are incapable of giving consent, the
contract is unenforceable. (Art. 1403[3].) However, if the parent or guardian,
as the case may be, of either party, or if one of the parties after attaining or
regaining capacity, ratifies the contract, it becomes voidable. (see Arts. 1390,
1394.)

When unenforceable contract becomes a valid contract.

If the ratification is made by the parents or guardians, as the case may be,
of both contracting parties, or by both contracting parties after attaining or
regaining capacity, the contract is validated and its validity retroacts to the
time it was entered into. (see Art. 1396.)

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 ART. 1408. Unenforceable contracts
cannot be assailed by third persons.

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Right of third persons to assail an unenforceable contract.
Strangers to a voidable contract cannot bring an action to annul the
same (see Art. 1397.); neither can they assail a contract because of its
unenforceability. The benefit of the Statute can only be claimed or waived
by one who is a party or privy to the oral contract, not by a stranger.
It is a personal defense. (Ayson vs. Court of Appeals, 97 Phil. 965.)

Example:
S sells a parcel of land to B. The contract is oral. C binds himself in
writing for the performance by B of his obligation.
In an action by S to recover the purchase price, C cannot assail that the
contract between S and B for being unenforceable under the Statute of
Frauds. C is a stranger to the contract.

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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.
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Meaning of void contracts.
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. The expression ‘‘void contract” is, therefore, a contradiction
in terms. However, the expression is often loosely used to refer to an
agreement tainted with illegality.

Meaning of inexistent contracts.

On the other hand, 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.
An illegal contract may produce effects under certain circumstances
where the parties are not of equal guilt. (see Arts. 1411-1412)
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Characteristics of a void or inexistent contract.
They 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
ratification1 (Art. 1409, par. 2.);
(3) The right to set up the defense of illegality, inexistence,
or absolute nullity cannot be waived (Ibid.);
(4) The action or defense for the declaration of its illegality,
inexistence, or absolute nullity does not prescribe (see
Art. 1410.);
(5) The defense of illegality, inexistence, or absolute nullity
is not available to third persons whose interests are not
directly affected (see Art. 1421.);
(6) It cannot give rise to a valid contract. (see Art. 1422.)
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Instances of void or inexistent contracts.
Void and inexistent contracts are not enforceable from the very beginning,
regardless of the intentions of the parties.
(1) Contracts whose cause, object or purpose is contrary to law, etc. —
See comments and examples under Art. 1306,and1416.
(2) Contracts which are absolutely simulated or fictitious. —
See comments and examples under Art. 1345 and 1346. A contract of sale is
void where the price, which appears thereon as paid, has in fact never been paid.
(Catindig vs. Heirs of Catalina Roque, 74 SCRA 83.)
(3) Contracts without cause or object. —
The phrase “did not exist at the time of the transaction” does not apply to a
future thing which may legally be the object of a contract.
See comments and examples under Articles 1347, 1352, and 1353.
(4) Contracts whose object is outside the commerce of men. —
See comments and examples under Articles 1347 and 1348.
(5) Contracts which contemplate an impossible service. —
See comments and examples under Articles 1347 and 1348.
(6) Contracts where the intention of the parties relative to the object cannot be ascertained. —
See comments and example under Article 1378, par. 2.
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(7) Contracts expressly prohibited or declared void by law.
Below are examples of contracts which are prohibited or declared void by law.
(a) Contracts upon future inheritance except in cases expressly authorized by law. (Art.
1347.)
(b) Sale of property between husband and wife except when there is a separation of
property. (Art. 1490.)
(c) Purchase of property by persons who are specially disqualified by law (like guardians,
agents, executors, administrators, public officers and employees, judges, lawyers, etc.) because
of their position or relation with the person or property under their care. (Art. 1491.)
(d) “Every donation between the spouses during the marriage shall be void except
moderate gifts which the spouses may give each other on the occasion of any family
rejoicing.” (Art. 87, Family Code.)
(e)“A testamentary provision in favor of a disqualified person, even though made under
the guise of an onerous contract, or made through an intermediary, shall be void.” (Art.
1031.)
(f) “Any stipulation that household service is without compensation shall be void.” (Art.
1689.)
(g) Under the Constitution (Sec. 14, Art. VI.), members of Congress are prohibited from
being financially interested, directly or indirectly, in any contract with the government or any
subdivision or instrumentality thereof. (see also Arts. 1782, 1874, 2035, 2088, 2130.)
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 ART. 1410. The action or defense for the
declaration of the inexistence of a contract
does not prescribe.

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 ART. 1411. When the nullity proceeds from the
illegality of the cause or object of the contract, and the
act constitutes a criminal offense, both parties being in
pari delicto, they shall have no action against each
other, and both shall be prosecuted. Moreover, the
provisions of the Penal Code relative to the disposal of
effects or instruments of a crime shall be applicable to
the things or the price of the contract.
This rule shall be applicable when only one of the
parties is guilty; but the innocent one may claim what
he has given, and shall not be bound to comply with his
promise. (1305)
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Rules where contract illegal and the act constitutes a criminal offense.

(1) Where both parties are in pari delicto. — The following are the effects of a
contract whose cause or object constitutes a criminal offense and both
parties are equally guilty in pari delicto:
(a) The parties shall have no action against each other;
(b) Both shall be prosecuted; and
(c) The things or the price of the contract, as the effects or
instruments of the crime, shall be confiscated in favor of the government.
(par. 1; Art. 48, Revised Penal Code.)
Example:
S sold to B contraband articles for P10,000. B paid only P1,000 and S did
not deliver all the articles agreed upon. In case, neither party has a right of
action against each other. The law will leave them where it finds them.
Both shall be prosecuted and the price and the articles shall be
confiscated.
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 (2) Where only one party is guilty. — If only one party is guilty or both
parties are not equally guilty (in delicto, but not in pari delicto), the rule
in paragraph 1 applies only to the guilty party or the more guilty party.
The innocent one or the less guilty may claim what he has given and
shall not be bound to comply with his promise. (par. 2.)
Example:
In the preceding example, if B was in good faith, he can claim the
return of the price of P1,000; or if he has not yet paid S, he shall not be
bound to comply with his promise. The law will render relief to the more
innocent party.
S shall be prosecuted and the contraband articles sold by him shall be
confiscated.

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 ART. 1412. If the act in which the unlawful or
forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting
parties, neither may recover what he has given by
virtue of the contract, or demand the performance of
the other’s undertaking;
(2) When only one of the contracting parties is at fault,
he cannot recover what he has given by reason of the
contract, or ask for the fulfillment of what has been
promised him. The other, who is not at fault, may
demand the return of what he has given without any
obligation to comply with his promise. (1306)
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 ART. 1421. The defense of illegality of
contracts is not available to third persons
whose interests are not directly affected.

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Persons entitled to raise defense of illegality or nullity.
In voidable (Art. 1397.) and unenforceable contracts (Art.
1408.), third persons are not allowed to bring an action to annul
or to assail, as the case may be, said contracts. If the contract is
illegal or void, however, even a third person may avail of the
defense of illegality or set up its illegality as long as his interest is
directly affected by the contract.

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

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Void contract cannot be novated.
This provision is based on the requisites of a valid
novation. (see comments and examples under Art. 1298.)
An illegal contract is void and inexistent and cannot,
therefore, give rise to a valid contract.
For example, a contract of repurchase is dependent on
the validity of the contract of sale. If the latter is itself
void because the seller is not the owner, the former is also
void because it presupposes a valid contract of sale
between the same parties.

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56
 ART. 1423. Obligations are civil or natural.
Civil obligations give a right of action to compel
their performance. Natural obligations, not
being based on positive law but on equity and
natural law, do not grant a right of action to
enforce their performance, but after voluntary
fulfillment by the obligor, they authorize the
retention of what has been delivered or rendered
by reason thereof. Some natural obligations are
set forth in the following articles.

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Concept of natural obligations.
The above article defines natural obligations.
According to the Code Commission:
“Natural obligations originated in the Roman law where they
grew in importance in order to temper with equity and justice the
severity of the jus civile. In that ancient system of law, there were two
kinds of obligations: the civil and the natural. The latter could not be
enforced by a civil action but it had certain juridical consequences.
In the old Spanish law, there were many instances of natural
obligations, among them being the cases of incapacity of one of the
contracting parties, and where a contract could not be sued upon
because it was not in the form required by law.” (Report of the Code
Commission, p. 56.)

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Civil obligations and natural obligations distinguished.
Article 1423 gives the distinctions between civil obligations
and natural obligations, viz.:
(1) Civil obligations arise from law, contracts, quasi-
contracts, delicts, and quasi-delicts (Art. 1157.), while natural
obligations are based not on positive law but on equity and
natural law; and
(2) Civil obligations give a right of action in courts of
justice to compel their fulfillment or performance (Art. 1156.),
while natural obligations do not grant such right of action to
enforce their performance.

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