CHAPTER 7- FORMS OF CONTRACTS Flashcards
is that remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or committed.
- Reformation
If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.
ART.1370
4 KINDS OF DEFECTIVE CONTRACTS
RESCISSIBLE, VOIDABLE, UNENFORECEABLE, VOID
A contract that has caused a particular damage to one of the parties or to a third person and which for EQUIT ABLE REASONS may be set aside even if valid.
- RESCISSIBLE CONTRACTS-
is a remedy granted by law to the contracting parties and even to third persons, to secure reparation for damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior to the celebration of said contract.
- Rescission
REQUISITES OF RESCISSION
- There must be at the beginning either a valid or a voidable contract (not a void one);
- But there is an economic or financial prejudice to someone (a party or a third person);
- Requires mutual restitution.
- The injury which one of the parties suffers by virtue of a contract which is disadvantageous for him. To give rise to rescission, the lesion must be known or could have been known at the time of making of the contract
LESION
WHAT CONTRACTS ARE RESCISSIBLE?
- Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof.
- Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;
- Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;
- Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority;
Who may institute the action for Rescission?
- The person who is prejudiced
- Their representatives
- Their heirs
- Their creditors by virtue of subrogatory action
Effects of Rescission
- Obligation of Mutual Restitution
- Abrogation of contract
WHAT IS THE PERIOD FOR FILING AN ACTION FOR RESCISSION?
- The action for rescission must be commenced within 4 years
- A contract in which CONSENT of one of the parties is defective, either because of WANT OF CAPACITY or because it is VITIATED, but which contract is VALID until JUDICIALLY set aside.
- VOIDABLE CONTRACTS
WHAT CONTRACTS ARE VOIDABLE?
- 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.
- To cure the defect of lack of authority in an authorized contract (entered into by another)
RATIFICATION
EFFECTS OF RATIFICATION
- The action to annul is extinguished thus, the contract becomes a completely valid one.
- The contract is cleansed of its defect from the beginning.
WHAT SHOULD AN ACTION FOR ANNULMENT BE BROUGHT?
- The action for annulment shall be brought within 4 years
- A contract that for some reason CANNOT BE ENFORCED, UNLESS RATIFIED in the manner PROVIDED BY LAW.
UNENFORCEABLE CONTRACTS
WHAT ARE INSTANCES WHEN A CONTRACT IS UNENFORCEABLE?
- Contract entered into without authority
- Those which did not comply with the Statute of Frauds
- Those where both parties are incapable of giving consent to a contract
Without my authority, my brother sold my car, in my name, to X. The contract is unauthorized and cannot affect me unless I ratify the same expressly or implicitly, as by accepting the proceeds of the sale.
UNAUTHORIZED CONTRACTS
STATUTES OF FRAUDS
- An agreement that by its terms is not to be performed within a year from the making thereof.
- A special promise to answer for the debt, default, or miscarriage of another.
- An agreement made in consideration of marriage other than a mutual promise to marry.
- An agreement for the sale of goods, chattels, or things in action, at a price not less than Php500
- An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein.
- A representation as to the credit of a third person.
A contract entered into by two unemancipated minors without parental consent.
UNEFORCEABLE
- A contract which lacks absolutely either in fact or in law one or some of the elements which are essential for its validity.
VOID OR INEXISTENT CONTRACTS
WHAT CONTRACTS ARE VOID?
- 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
CHARACTERISTICS OF A VOID CONTRACT
(a) cannot be ratified
(b) generally, effects are not produced at all
(c) the defect here is that ordinarily, public policy is militated against
(d) void from the very beginning so generally, no action is required to set it aside, un- less the contract has already been performed
(e) cannot be cured by prescription
(f) defense may be availed of by anybody, whether he is a party to the contract or not, as long as his interest is directly affected.
(g) referred to as absolute nullity
- Latin for “in equal fault”, which connotes that two or more people are at fault or are guilty of a crime.
PARI IN DELICTO
Effects of pari in delicto?
a) Since they are in pari delicto, they shall have no action against each other.
b) Both shall be prosecuted.
c) The effects or the instruments of the crime (things or price of the contract) shall be confiscated in favor of government
