Ch. 13 - Void and Inexistent Contracts Flashcards
(Art. 1409) The following contracts are inexistent and void from the beginning:
- Those 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 the 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
(Art. 1409) Void and inexistent contracts cannot be
ratified, neither can the right to set up the defense of illegality be waived
What is a void or inexistent contract?
one which lacks, absolutely either in fact or in law, one or some of the elements which are essential for its validity. It is one which has no force and effect from the very beginning, as if it had never been entered into; it produces no effect whatsoever either against or in favor of anyone.
Distinguish a rescissible contract from a void contract
A contract which is null and void is no contract at all and hence could not be the subject of rescission
What is an absolutely stimulated contract?
There is a colorable contract but without any substance, because the parties have no intention to be bound by it. An absolutely stimulated contract is void, and the parties may recover from each other what they may have given under the contract.
What is a relatively stimulated contract?
The parties state a false cause in the contract to conceal their real agreement, such a contract is relatively stimulated. Here, the parties real agreement binds them.
(Art. 1410) The action or defense for the declaration of inexistence or nullity of a contract does not?
It does not prescribe
(Art. 1411) When the nullity proceeds from the illegality of the cause or object of the contract, and the 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.
(Art. 1411) 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
What is the principle of in pari delicto or “in equal fault”
is a universal doctrine which holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation;
and where the parties are in pari delicto, _________________ will be given to one against the other
no affirmative relief of any kind
What are the exceptions to the rule on in pari delicto?
Exceptions that permit the return of that which may have been given under a void contract to:
1. The innocent party;
2. The debtor who pays usurious interest
3. The party repudiating the void contract before the illegal purpose is accomplished or before the damage is caused to a third person and if public interest is subserved by allowing recovery
4. The incapacitated party if the interest of justice so demands
5. The party for whose protection for prohibition by law is intended if the agreement is not illegal per se but merely prohibited and if public policy would be enhanced by permitting recovery; and
6. The party for whose benefit the law has been intended such as in price ceiling laws
(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:
- When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of contract, or demand the performance of the other’s undertaking
- When only one 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 his promise
(Art. 1413) Interest paid in excess of the interest allowed by the usury laws may be
recovered by the debtor, with interest thereon from the date of the payment
(Art. 1414) When money is paid or property delivered for an illegal purpose, the contract may be
repudiated by one of the parties before the purpose has been accomplished, or before any damage has been caused to a third person. In such case, the courts may, if the public interest will thus be subserved, allow the party repudiating the contract to recover the money or property
(Art. 1415) Where one of the parties to an illegal contract is incapable of giving consent, the courts may, if the interest of justice so demands
allow the recovery of money or property delivered by the incapacitated person
(Art. 1416) When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designated for the protection of the plaintiff, he may, if public policy is thereby enhanced,
recover what he has paid or received
What is public policy?
as that principle of the law which holds that no citizen or subject can lawfully do that which has a tendency to injurious to the public or against the public good. Thus, whenever public policy is advanced by either party, they may be allowed to sue for relief against the transaction
(Art. 1417) When the price of any article or commodity is determined by the statute, or by authority of law, any person paying amount in excess of the maximum price allowed may
recover such excess
(Art. 1418) When the law fixes, or authorizes the fixing of the maximum number of hours of labor, and a contract is entered into whereby a laborer undertakes to work longer than the maximum thus fixed, he may
demand additional compensation for service rendered beyond the time limit
(Art. 1419) When the law sets, or authorizes the setting of a minimum wage for laborers, and a contact is agreed upon by which a laborer accepts a lower wage, he shall
be entitled to recover the deficiency
(Art. 1420) In case of a divisible contract, if the illegal terms can be separated from legal ones,
the latter may be enforced
(Art. 1421) The defense of illegality of contract is not available to
third persons whose interests are not directly affected
(Art. 1422) A contract which is the direct result of a previous illegal contract, is
also void and inexistent
