Defective Contracts

Contract Classification| Basis of Defect| Status of Contract| Legal Effects| Prescriptive Period| Ratifiability| A. Rescissible1. Contracts entered into in behalf of wards 2. Contracts agreed upon in representation of absentees 3. Contracts undertaken in fraud of creditors a. existing credit prior to the contract to be rescinded b. fraud on the part of the debtor c. creditor cannot recover his credit in any other manner 4. Contracts which refer to things under litigation 5. All other contracts specially declared by law to be subject to rescission| There is damage or injury either to one of the contracting parties or to a third person.

| Valid| Considered valid and enforceable until they are rescinded by a competent court. | The action for prescription may prescribe. | NO| B. Voidable1. Contracts signed without capacity2. Contracts signed without mutual assent| There is vitiation of consent or legal incapacity of one of the contracting parties. | Valid| Considered valid and enforceable until they are annulled by a competent court. | The action for annulment or the defense of annulability may prescribe. | YES| C. Unforceable1. 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.

2. hose 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. 3. Those where both parties are incapable of giving consent to a contract. | The contract is entered into in excess or without any authority,or does not comply withthe Statute of Frauds, or both contracting partiesare legally incapacitated. | Valid| Cannot be enforced by a proper action in court.

| The corresponding action for recovery, if there was total or partial performance of unenforceable contract under No. 1 of No. 3 of Article 1403, may prescribe. | YES| D. Void1. Those lacking in essential elements: no consent, no object, no cause2. Prohibited by law3. Illegal/Illicit ones| One or more of the essential requisites of a valid contract are lacking either in fact or in law. | Void| Do not produce any legal effect. | The action for declaration of nullity or inexistence or the defense of nullity or inexistence does not prescribed. | NO| LORENZO N. LABAYABSA – 2LAW 1 (6:31 – 8:01 TTh)