Ch. 13 - Void and Inexistent Contracts

Question 1

(Art. 1409) The following contracts are inexistent and void from the beginning:

Answer 1

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

Question 2

(Art. 1409) Void and inexistent contracts cannot be

Answer 2

ratified, neither can the right to set up the defense of illegality be waived

Question 3

What is a void or inexistent contract?

Answer 3

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.

Question 4

Distinguish a rescissible contract from a void contract

Answer 4

A contract which is null and void is no contract at all and hence could not be the subject of rescission

Question 5

What is an absolutely stimulated contract?

Answer 5

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.

Question 6

What is a relatively stimulated contract?

Answer 6

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.

Question 7

(Art. 1410) The action or defense for the declaration of inexistence or nullity of a contract does not?

Answer 7

It does not prescribe

Question 8

(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

Answer 8

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.

Question 9

(Art. 1411) This rule shall be applicable when only one of the parties is

Answer 9

guilty; but the innocent one may claim what he has given, and shall not be bound to comply with his promise

Question 10

What is the principle of in pari delicto or “in equal fault”

Answer 10

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;

Question 11

and where the parties are in pari delicto, _________________ will be given to one against the other

Answer 11

no affirmative relief of any kind

Question 12

What are the exceptions to the rule on in pari delicto?

Answer 12

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

Question 13

(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:

Answer 13

1. 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
2. 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

Question 14

(Art. 1413) Interest paid in excess of the interest allowed by the usury laws may be

Answer 14

recovered by the debtor, with interest thereon from the date of the payment

Question 15

(Art. 1414) When money is paid or property delivered for an illegal purpose, the contract may be

Answer 15

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

Question 16

(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

Answer 16

allow the recovery of money or property delivered by the incapacitated person

Question 17

(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,

Answer 17

recover what he has paid or received

Question 18

What is public policy?

Answer 18

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

Question 19

(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

Answer 19

recover such excess

Question 20

(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

Answer 20

demand additional compensation for service rendered beyond the time limit

Question 21

(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

Answer 21

be entitled to recover the deficiency

Question 22

(Art. 1420) In case of a divisible contract, if the illegal terms can be separated from legal ones,

Answer 22

the latter may be enforced

Question 23

(Art. 1421) The defense of illegality of contract is not available to

Answer 23

third persons whose interests are not directly affected

Question 24

(Art. 1422) A contract which is the direct result of a previous illegal contract, is

Answer 24

also void and inexistent