Defective Contracts RECESSIBLE CONTRACTS

Binding Force Valid and enforceable although subject to rescission by the court when there is economic damage or prejudice to one of the parties or to a third person. There is no defect at all but by reason of some external facts, its enforcement would cause injustice.

Contracts Contracts entered into in behalf of wards. Contracts agreed upon in representation of absentees. Contracts undertaken in fraud of creditors. Contracts which refer to things under litigation. Other instances (Art.1098 and Art. 1659) Those where one of the parties is incapable of giving consent to a contract. Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.

Third Person The clause he who demands rescission applies also to a third person that if the latter has nothing to restore, the Art. 1385 does not apply.

Mutual Restitution When the court declares a contract rescinded, the parties must return to each other (1) the object of the contract with its fruits and (2) the price thereof with legal interest.

VOIDABLE CONTRACTS

They are valid and binding between the parties unless annulled by a proper action in court. Once ratified, they become absolutely valid and can no longer be annulled.

The defense of illegality of contracts is not available to third persons whose interests are not directly affected.

(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 and (b) the price thereof with legal interest. (2) In personal obligations where service had already been rendered, the value thereof with the corresponding interest, is the basis for damages.

UNENFORCEABLE CONTRACTS

It is valid in court unless they are cured or ratified. Once ratified, these contracts may then be enforceable.

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. Those that do not comply with the Statute of Frauds.

Third persons are not allowed to bring an action to annul or to assail, as the case may be, said contracts.

VOID/ INEXISTENT CONTRACTS

Absolutely null and void.

Contracts whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; Those which are absolutely simulated or fictitious; Those whose cause or object did not exist at the time of the transaction; Those whose object is outside of commerce of men; Those which contemplate an impossible service; Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; Those expressly prohibited or declared void by law

Even a third person may avail of the defense of illegality or set up is nullity as long as his interest is directly affected by the contract.