RAVAGO PRIMER DEFECTIVE CONTRACTS!

Any contract, unilateral or reciprocal valid. all essential requisites are present, but theres lesion valid until annulled, unless ratied cannot be sued/enforced, unless ratied absolutely null and void! no effect at all! not ratiable Effective from moment of novation

Only reciprocal Effective from moment of notication

Rescissible

Voidable Unenforceable Void

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What contracts are rescissible?! WL AL FOC TUL SDL SOI (6)! 1. entered into by guardians, wards suffer lesion by more than 1/4 of value! 2. in representation of absentees, absentees suffer lesion more than 1/4! 3. undertaken in fraud of creditors! a. when creditors cant in any manner collect! 4. things under litigation! a. w/out knowledge or approval of litigants or judicial authority! 5. contracts specially declared by law! a. partition, judicial or extra! i. coheirs receive value less by 1/4! b. lessor/lessee obligations! c. lack in area of real estate sold be not less than 1/10 of stated! d. inferior value of thing sold exceeds 1/10 of price agreed upon! e. thing deteriorates thru debtor (1189)! f. power to rescind in reciprocal obligations is implied (1191)! 6. payments made in state of insolvency to whose fullment the debtor couldn't be compelled (1382)! i. no sufcient properties! ii. judicial insolvency not necessary! iii. obligations not due & demandable! iv. those not legally demandable! 1. natural obligations! 2. prescribed obligations!

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How shall reformation be instituted?! Through special civil action for declaratory relief! RESCISSIBLE CONTRACTS! Remedy granted by law to the contracting parties, and even to 3rd persons! 1. to secure reparation of damages! 2. restoration of things to their condition prior! 3. in the interest of equity! Requisites of rescission! 1. contract validly agreed upon! 2. lesion or pecuniary prejudice! a. to one of the parties, or to 3rd person! 3. based upon a case provided by law! 4. no other legal remedy! 5. party asking must be able to return what he is obliged to restore! a. object, fruits, price + interest! b. this clause doesnt apply to 3rd person! i. in fraud of creds, cred no obligation to return anything since he has received nothing! 6. object not legally in possesion of 3rd person in good faith! a. indemnity of damages instead! 7. period not prescribed!

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NOTE: if damaged/lesion repaired, no more rescission! Nature of Action for Rescission! 1. Subsidiary! 1.1. cannot be instituted except when the injured party has no other means for reparation! 1.2. availed of as last resort, after all legal remedies have been exhausted! When should it be led?! Must commence w/in 4 years! guardianshp - from termination of incapacity! absentees - from time domicile is known! from discovery of fraud! in certain contracts of sale, period is 6 mos or 40 days. counted from day of delivery!

Distinguished:! Rescission Party and 3rd persons Lesion, fraud, and others specied by law Resolution Party only Only ground is failure of one party to comply what is incumbent on him

No power for court to grant Power to grant if there is extension of time just cause

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RAVAGO PRIMER Not voidable!

Who may le?! 1. injured/prejudiced party! 2. heirs assigns or sii, or representatives! 3. their creditors by virtue of subrogation! Rescission shall only be to the extend necessary to cover the damages caused (1384)! 1. partial rescission! 2. only to the extent of the creditors unsatised credit! 3. policy of law is to preserve the contract, not to extinguish! When rescission not allowed! 1. party who demands cannot return! 2. property in 3rd person w/ good faith! a. e.g. when registered! 3. contracts approved by courts!

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Decedent, during his lifetime, entered into a contract with another in order to defraud him of his legitime. Can heir rescind after death of decedent?! Yes. Right of a compulsory heir to his legitime is similar to right of a creditor with respect to his credit.! In rescissory actions based on fraud, how is fraud or intent to defraud proven?! Law presumes there is fraud of creditors in:! 1. alienations of property by gratuitous title! 1.1. if debtor has not reserved sufcient property to pay all his debts! 2. alienations of property by onerous title! 2.1. if made by a debtor whom some judgment has been render or some wryt of attachment has been issued. Decision/attachment need not refer to property alienated.!

In Fraud of Creditors! 1. gratuitous - donor did not reserve sufcient property! 2. onerous - decision or attachment issued! a. need not refer to property alienated! b. need not have been obtained by party seeking rescission! 3. law of evidence (badges of fraud)! a. cause or consideration is inadequate! b. suit pending during transfer! c. sale on credit by insolvent debtor! d. insolvent debtor or evidence of large indebtedness! e. transfer of all, or nearly all, property, when he is insolvent or greatly embarrassed nancially! f. father and son transfer! g. failure of vendee to take exclusive possession of prop!

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BUT, it is disputable.! See page 876 of Jurado for case.! If fraud or intent to defraud cant be established, it may still be proved in accordance with ordinary rules of evidence through the badges of fraud.! Distinguished:! Voidable intrinsic damage not an element based on law remedy and sanction public interest yes ratication invoked only by party Rescissible external consists in damage or prejudice based on equity mere remedy private interest no ratication party or 3rd person prejudiced

What requisites must concur before in fraud of creditors can be rescinded?! 1. credit existing prior to celebration of contract! 2. fraud, or intent to commit fraud, to the prejudice of creditor asking rescission! 3. creditor cannot in any other legal manner collect! 4. object not legally in possession of 3rd person in good faith!

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Purchaser in bad faith! 1. return the object! 2. if not, DUE TO ANY CAUSE, indemnity for damages to creditor! Cases:! Contract/Deed of Sale w/c violates right of rst refusal! Valid but rescissible!

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VOIDABLE CONTRACTS! Those which all essential elements for validity but the element of consent is vitiated. IV! 1. incapacity to give consent!

RAVAGO PRIMER 2. consent is vitiated through mistake, violence, undue 1. contract gained with a vice! inuence or fraud. MVIUF! 2. effected by person entitled to do so! 3. effected with knowledge of reason which renders Binding unless annulled by proper court action! contract voidable! Voidable even if no damage! 4. reason which renders contract voidable should have disappeared.! How may a voidable contract be convalidated? PRL! 2 distinct effects of ratication EC! 1. prescription of action for annulment! 1. extinguishes action to annul! 2. ratication or conrmation! 2. cleanses contract of its defects! 3. loss of thing which is object of contract, through fraud or fault of person entitle to institute! 1394 Who may ratify?! Who may institute?! 1. guardian! 1. all thereby obliged principally or subsidiarily! a. as legal representative, guardians have power to a. plaintiff must have an interest! contract and power to ratify! b. victim must assert! 2. incapacitated or vitiated person! i. assignee, rep or SII! 2. persons capable cannot allege incapacity of other 1397 Requisites for capacity to annul ! party! 1. plaintiff must have interest in the contract! 3. nor those who exerted force, duress base their action 2. VICTIM is the one who must assert the same! upon said aws.! Exception:! 1. person who is not a party, if he is PREJUDICED in his *Right of redemption (right of 3rd person w/ interest), if rights! exercised, annuls the contract.! 2. and can show DETRIMENT would result!

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1392 Ratication extinguishes the action annul a voidable contract! The act by virtue of which efcacy is given to a contract which suffers from a vice of curable nullity.! 1393 Forms of ratication! Once ratied, absolutely valid and can no longer be annulled! 1. one voluntarily adopts! 2. cleanses from its defects RETROACTIVELY (1396)! 2.1. subject to prior rights of 3rd persons such as if subsequently sold in good faith p.404! 3. action to annul extinguished! 4. consent of guilty party not required, its a UNILATERAL act (1395)! 5. express or tacit! 5.1. words or writing! 5.2. silence, acquiesence, acts, retention of benets, acceptance!

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When is the period of prescription?! Prescription: 4 years! Shall begin:! IVU, From time defect ceases! MF, From time of discovery! MOI, From time guardianship ceases! If As guardian fraudulently transfers property, A must wait until guardianship ceases before he can le! 1398 Duty of mutual restitution upon annulment! 1399 Restitution by an incapacitated person! 1400 Effect of loss of thing to be returned! 1401 Extinguishment of action for annulment! After annulment! 1. restore to each other! a. subject, fruits, price w/ interest! i. except in cases provided by law! ii. incapacitated not obliged to make restitution except insofar as he has been beneted. (also, 1427)! iii. if lost w/out fault, no more obligation. cant compel other.! iv. if w/fault, converted into indemnity for damages (fruits, value at time of loss + interest)!

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Requisites of tacit ratication KCA! 1. knowledge of the reason w/c renders it voidable! 2. reason must have ceased! 3. injured party must have executed an act w/c implies an intention to waive right! Requisites of ratication!

RAVAGO PRIMER v. if lost thru person who has right to institute, He cannot be absolved entirely. Under NCC, even if action to annul extinguished.! written contract is voidable because of minority, he shall 1. rule applies to incapacitated persons make restitution to the extent he may have been (1401 par 2)! beneted by money he received.! 2. if lost, he could not have beneted! 3. if lost thru his own fault, case led by Where minority is used as a denes and no positive relief incapacitated for annulment will be is prayed for, 4-year period does not apply. ! dismissed! (Braganza vs Abrille)! b. if service, value thereof as basis for damages!

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! *As long as one does not restore what he is bound to return, the other cant be compelled (1402)!

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Restitution is reciprocal.! Principle of mutual restitution! incapacitated oerson is not obliged to make restitution except insofar he has been beneted.! *Like rescission, purpose is to restore the parties to original situation! If not consummated = parties released! If consummated = restore w/ fruits and price w/ interest! If to do/not to do = damages based on value w/ interest!

Remaining partners of a partnership which is heavily indebted to several creditors, executes a chattel mortgage of all properties in favor of a former partner! Chattel prejudiced rights of creditors ! Such creditors, if they ca prove detriment, can ask for annulment of chattel! X entered into contract with Y a minor! X knew Ys age! May X demand annulment?! No. True it is voidable. But law is categorical as to who may institute action. Party who has capacity cant assail incapacity.!

Case:! After death of X, children of 1st and 2nd marriage executed an extrajudicial partition. At that time, D, E, F were minors. 17, 14, 12. They were made to believe that unless they sign the document, they will not get any share.! HELD:! Voidable. Minor heirs were not properly represented AT THE TIME they contracted.! Action for annulment based on fraud may be brought within 4 years from discovery.!

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Pedro sold land to nephew Quintin, a minor! One month later Pedro died! Pedros heirs brought an action to annul on ground that Quintin is minor.! No annulment. Persons who are capable cant allege incapacity of those with whom they contracted.! Principle of relativity. Contract takes effect also with assigns and heirs.!

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Requisites of annulment! 1. plaintiff must have interest! 2. victim must assert the same! Annulment is prospective! Ratication is retroactive! UNENFORCEABLE CONTRACTS! those which cannot be enforced by proper court action, unless ratied! entered into without or in excess of authority! or they dont comply with Statute of Frauds! or both parties dont posses required legal capacity!

S borrowed 20k from PG! She and her minor son signed note! Note did not say anything about capacity! S made partial payments little by little! She died leaving balance of 10k! When PG demanded, Son raised denes that he was still a minor when he signed note.!

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HELD:! Sustained. Mario cant be bound by his signature because he had no capacity. No active fraud when there is mere silence.! If note says Mario is of age, estoppel would apply.! Note is voidable! BUT!

Distinguished:! Unenforceable cant be enforced by proper court action Rescissible valid and unenforceable unless rescinded

RAVAGO PRIMER 1. an agreement that by its terms is not to be performed susceptible of ratication not susceptible within a year from making thereof! 2. special promised to answer for debt default or cant be assailed by 3rd assailed by 3rd persons miscarriage of another! persons 3. agreement made in consideration of marriage, other Distinguished:! than a mutual promise to marry! 4. agreement for sale of goods chattels or things at a Unenforceable Voidable price not less than 500php, unless buyer accept and cant be enforced by binding and enforceable receive part of such, or the evidence, or some of proper court action until annulled 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 auctioneer in his Unenforceable Voidable sales book, it is sufcient memorandum! 4.1. amount! may produce effects does not produce effects 4.2. kind of property sold! 4.3. terms! 4.4. price! 4.5. names! What contracts are unenforceable?! 5. agreement for leasing for a period longer than a year! 6. representation as to credit of 3rd person! 1. no authority or legal representation, or acted beyond powers! SOF does not apply to right of rst refusal! 2. do not comply with Statute of Frauds! It may be proven by oral evidence! 2.1. unless the same, or some note thereof, be in writing and subscribed by party charged. B purchase from A parcel of land! evidence therefore cant be received without the Paid a part of agreed price.! writing, or a secondary evidence of its contents! W/ the understanding that he will pay balance upon 3. where both parties are incapable of consent! execution deed of conveyance! Defendants contend that the contract is unenforceable under SOF! C, husband of D, sold paraphernal property in her name without Ds consent.! SOF applicable only to executory contracts! and not where there is total or partial performance! Sale is unenforceable. Entered into without authority In effect there is ratication by acceptance of benets! or legal representation or acted beyond powers. ! Unenforceable unless it is ratied, expressly or O verbally leased his house to L for 2 years at 250! impolitely, before it is revoked by other contracting After 1 year, O demanded rental of 500! party.! L refused to vacate! O brought action to eject! Verbal contract of land! O deneied that they agreed lease for 2 years! Vaild so long as there is agreement with object and purchase price, but unenforceable.! Lessee L may testify on verbal contract of lease! Action for specic performance will not prosper, until Partial performance is present through payment of ratied.! rent, hence not covered by SOF.! Cant be enforced by proper court action.! In effect there is ratication by acceptance of benets by receiving of rent.! Statute of Frauds!

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T1 SPM S500 L1 RPC3 (7)! Those which require certain classes of contracts to be writing! To prevent fraud and perjury! Merely regulates the formalities to render it enforceable!

Not all agreements affecting land must be put in writing to be enforceable! setting up of boundaries! oral partition of real property! contract of right of way! RIght of rst refusal not a contract of sale, but merely a contractual grant. not part of SOF.!

RAVAGO PRIMER Oral contract of sale. Property not yet deliver but buyer void may produce effects, but inexistent does not.! paid 10% of purchase price! Distinguished:! SOF applicable only to executory contracts! Void Rescissible and not where there is total or partial performance! In effect there is ratication by acceptance of benets! no effect valid until rescinded

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Oral contract which by its terms is not to be performed within one year from execution thereof, one of the contracting parties has already complied within a year, can the other party avoid fullment by invoking SOF?! No. SOF aims to prevent fraud. One which has already been fully performed on one side within a year is taken out of the operation of the statute.!

one/some/all elements defective based on law imprescriptible cant be assailed by 3rd, unless directly affected

defect is lesion/damage based on equity prescribes assailable

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Special promise to answer for debt in SOF must be collateral, not independent or original. Such as the undertaking of a guarantor or surety.! How may contracts infringing SOF be ratied? FA! 1. failure to object to presentation of oral evidence! 2. acceptance of benets! If both parties are incapacitated:! ratication express/implied by parent or guardian! Conrmation! the act by w/c a voidable contract was cured of its defect or vice! tends to cure a vice of nullity! Ratication! exclusively to designate the act by w/c a contract entered into by a person in behalf of another or in excess of authority is cured of its defect! giving authority to a person who previously acted without! Ratication is a specie of conrmation.!

Distinguished:! Void no effect not ratiable imprescriptible cant be assailed by 3rd, unless directly affected Voidable binding until annulled ratiable prescribes not assailable by 3rd persons

Distinguished:! Void no contract at all diff causes not ratiable cant be assailed by 3rd, unless directly affected Unenforceable valid but unenforceable diff causes ratiable not assailable by 3rd persons

VOIDABLE CONTRACTS! those which lack absolutely either in fact or in law! one or some or all elements essential for validity! void are those where all requisites prescribed by law are present but the cause, object or purpose is contrary to law, morals, good customs, public order or public policy, or prohibited by law or declared by law as void.! inexistent are those which lack absolutely one or some or all of those requisites which are essential for validity.! in pari delicto applies in void, not in inexistent.!

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What contracts are void or inexistent?! CADO - ISIP - EPDV - DRNCF (10)! The followng are inexistent and void from the beginning (void ab initio):! 1. cause, object or purpose is contrary to law morals good customs public order and public policy! 2. absolutely simulated or ctitious!

RAVAGO PRIMER 3. cause or object did not exist at time of transaction! 5. contract where labourer undertakes longer hour! 4. outside commerce of men! 5.1. may demand OT pay! 5. impossible service! 6. contract where labourer accepts lower wage! 6. intention of parties as to principal object cant be 6.1. may demand deciency! ascertained! 7. expressly prohibited or declared void by law! 8. direct results of previous illegal contracts! Deed of sale to circumvent prohibition against donations 9. no concurrence between offer and acceptance with between spouses = illicit purpose = null and void.! regard to object and cause! 10. those that dont comply with required from where such After 28 years = laches. In pari delicti applies. It cannot form is essential for validity! be denied that she had knowledge of the nullity because she was a party thereto.!

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Iniquitous or unconscionable interest = contrary to moral = void ! Nullity of stipulation on usurious interest does not affect lenders right to recover principal! Legal interest of 12% per annum will be added in place! Right to foreclose mortgage remains with creditors!

Donated parcel of land on condition that she shall become a mistress = illegal cause = void! Liguez vs CA Doctrine! While it is true that the cause of a contract must not be confused with motives of the parties, there is an exception. The motive may be regarded as cause when it predetermined the purpose of the contract.!

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BUT if interest is excessive, iniquitous and exorbitant, foreclose proceeding cannot be given effect and will be considered invalid.!

Sole heir of PC who had just died brings action for recovery of property. That PC, then very old and with weak eyesight was tricked by JG into signing Deed of Sale upon fraudulent misrepresentation that said document was only a contract of lease.! No cause no consideration = void! Fictitious deed of sale is void and inexistent.! What is in pari delicto?! When defect of a void contract consists in the illegality of the cause or object, and both parties are at fault, the law refuses them every remedy and leaves them where they are.! What are the exceptions to in pari delicto?! IINI-EHW! 1. payment/deliver for an illegal purpose! 1.1. where party who paid repudiates contract before purpose is accomplished! 1.2. courts may allow if public interest will be served! 2. payment/delivery by an incapacitated person! 2.1. courts may allow if interest of justice demands! 3. agreement/contract not illegal per se but is merely prohibited by law! 4. payment in excess the max price xed by law! 4.1. may recover excess!

Where C was only 16 yrs old at time of donation, rule of pari delicti is not applicable. Minors occupy a privileged position under our law! Nullity of contracts due to illegal cause or object, when executed (and not merely executory) will produce the effect of barring any action by a guilty party to recover what he has already given under contract.!

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A borrowed 20k from B at clearly usurious interes. Can B recover anything from A?! Yes. Creditor can recover the principal, legal interest on principal from date of demand, legal interest from judicial demand, and attorneys fees.! In contracts of loan there are two stipulations! 1. to pay principal! 2. to pay interest! 1420: if illegal terms may be separated from legal ones, latter may be enforced.! 24% per annum.! In declaring void the stipulations authorising excessive interest, SC declared that although Usury Law is repealed, it does not grant lenders carte blanche authority to raise interest to levels which will enslave their borrowers.! Homestead patent sold to X by A! Heirs A les action to recover on ground that it is contrary to law! X contends in pari delicto!

RAVAGO PRIMER HELD:!

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In pari delicto not applicable! Public policy dictates that homesteader or his heirs should be allowed to reacquire land even if it has been sold.! Pari delicto applies to products and improvements, however. In other words, heirs cant recover from the vendee the value of products realized by vendee from the land.! Neither can the vendee recover from the vendor the value of improvements made by them on the land.!

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JS blind, crippled and 90 yrs of age enters contract with W, a chinese national.! Terms: 50 yerars, and option to buy on condition that lessee must become Filipino citizen! insidious pattern to circumvent prohibition by the constitution! terms show virtual transfer of ownership! in pari delcto does not apply however! Exception:! when the agreement is not illegal per se but is merely prohibited, he may, if public policy is enhanced, recover what he has paid or delivered! Public policy to conserve land for Filipinos! Contracts in question are annulled.!

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Memorize by heart:! Rescission ! 3rd person may le Ratiable Restitution Need for economic damage 4 yrs Annulled 3rd person may le Ratiable Restitution NO Void 3rd person may le NO Restitution NO Unenforcea ble NO Ratiable

4 yrs

NO