CHAPTER 7 - VOIDABLE CONTRACTS (ART. 1390 - 1402) Flashcards
Is one that is defective by reason of the incapacity or vitiated consent of one to the parties
Voidable Contract
It is binding unless annulled by a proper action in court. It is susceptible of ratification
Voidable Contract
What are the following voidable or annullable contracts?
- Those where one of the parties is incapable of giving consent to contract.
- Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
- Those where consent is given in a state of drunkenness. (Art. 1328)
- Those where consent is given during a hypnotic spell. (Art. 1328.)
What are the following incapable of giving consent to a contract?
a. Unemancipated minors.
b. Insane or demented persons.
c. Deaf-mutes who do not know how to write. (Art. 1327)
A, who is a minor enters into a contract with B. What type of defective contract is this?
Voidable Contract
Both A and B are minors who entered into a contract. What type of defective contract is this?
Unenforceable Contract
A and B entered into a contract because B employed intimidation against A, and forced A to sell a parcel of land to B. And if he will not, B will kill A’s wife. What type of defective contract is this?
Voidable Contract
A and B entered into a contract because B employed intimidation against A, and forced A to sell a parcel of land to B. And if he will not, B will kill A’s wife. Here, the contract is voidable. Why is it not void?
Because there is still a consent, however the consent is vitiated. If there was total absence of consent, then the contract is void.
This is base on lesion or damage
Rescission
This is base on vitiated consent or incapacity to consent
Annulment
Defect is external, the action is subsidiary and to prevent it, ratification is not required
Rescission
Defect is intrinsic, the action is principal and to prevent it, ratification is required
Annulment
Is the action brought to set aside a voidable contract
Annulment
Annulment is a sanction where the law predominates. Rescission is a remedy where equity predominates.
True or False?
True
Annulment is available only to the parties, whether bound principally or subsidiarily. Rescission is available not only to the contracting parties but also to third persons whose interests are affected.
True or False?
True
What is the rules on annulment of voidable contracts?
- When action must be brought (prescriptive period); otherwise the contract can no longer be set aside
The action for annulment must be brought within four (4) years which period shall begin:
a. In cases of intimidation, violence or undue influence, from the time the defect in the consent ceases.
b. In case of mistake or fraud, from the time of discovery of the same.
c. In cases of minority or other incapacity of a party, from the time guardianship ceases.
P was intimidated into signing a contract on Jan 1,2020. The intimidation continued until Dec 1, 2020. From what time should we compute the 4-year period for annulment of contract?
From Dec 1, 2020, when intimidation ceases
Jan 1,2020, P and G entered into a contract. Jan 1, 2021, G discovers the fraud employed by P in seeking her consent for the contract. From what time should we compute the 4-year period for annulment of contract?
4 years from Jan 1,2021, when fraud was discovered
Is the adoption or affirmation of a contract which is defective because of a party’s vitiated consent or incapacity.
Ratification
Under the rules of ratification, what is the effect of ratification?
a. It extinguishes the action to annul a voidable contract.
b. It cleanses the contract from all its defects from the moment it was constituted. In other words, the contract is validated from inception.
Under the rules of ratification, how ratification is made?
a. Express - This takes place when a person states either orally or in writing that he intends to be bound by the contract that he entered into while he was incapacitated or at a time when his consent was vitiated.
b. Implied or tacit - There is tacit ratification if with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it executes an act which necessarily implies an action to waive his right. (Art. 1393)
S, 17 years old, sold his computer to B, 25, for P50,000.00 payable in 10 equal monthly installments. When S turned 18 years old, 6 installments were still due. If S continues to collect the remaining installments instead of suing for annulment, what is the effect of the contract?
He is deemed to have ratified the contract.
P, a minor, bought a land. Upon reaching the age of majority, he sold the land to B. What is the effect of the contract?
Here, the action to file for annulment of contract was extinguished
P, a minor, sold his land to G. Upon reaching the age of majority, he collected the unpaid balance. What is the effect of the contract?
Here, the action to file for annulment of contract was extinguished
What are the requisites for ratification?
- The contract must be voidable
- Ratification must be made with knowledge of the cause
- At the time of ratification, the cause has already ceased to exist
- The ratification must have been made expressly or impliedly
- The person ratifying must be the injured party
Ratification may be effected by the guardian of the incapacitated person.
True or False?
True
Under the rules of ratification, who may ratify a contract?
a. The guardian of the incapacitated person during the latter’s incapacity.
b. The incapacitated person after he has attained capacity.
c. The party whose consent is vitiated by mistake, violence, intimidation, undue influence or fraud (hence, the person who employed such vices of consent cannot ratify).
[Note: Ratification does not require the conformity of the person who has no right to bring the action for annulment. (Art. 1395)]
Who may bring action for annulment?
The action for annulment may be instituted by all who are thereby obliged principally or subsidiarily. (Art. 1397) Hence, it cannot be brought by third persons. It may be brought by the following:
a. The guardian of the incapacitated person during the latter’s incapacity.
b. The incapacitated person after he has attained capacity.
c. The party whose consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
Thus, persons who employed such vices of consent cannot base their actions on such flaws or defects of the contract. This is based on the principle that “(H)e who comes to court must come with clean hands.” This principle applies also to capacitated persons who cannot seek the annulment of the contract on the ground of the incapacity of the other party.
May creditors of a party to a contract file an action to annul the contract?
NO, because the creditor of the injured party is not within persons allowed by law to file an annulment
Under the effects of annulment, what are the obligations created by annulment?
1) In obligations to give, the contracting parties shall restore to each other, except in cases provided by law, the following:
a) The things which have been the subject matter of the contract, with their fruits.
b) The price with its interest.
2) In obligations to render service, the value thereof shall be the basis of damages.
3) Restitution when one of the parties is incapacitated
4) When the thing is lost through the fault of the party obliged by the decree of annulment to return it
The said party shall return the following:
a) Fruits received.
b) Value of the thing at the time of the loss.
c) Interest from the time of the loss.
5) Mutual restitution
If one party cannot restore what he is bound to return in the decree of annulment, the other cannot be compelled to comply with what is incumbent upon him.
GR: The incapacitated person is not obliged to make any restitution
Except: Insofar as he has been benefited by the thing or price received by him.
True or False?
True
P forced G to sell her house and lot to him. G brought an action for annulment of contract. P was ordered by the court to return to G whatever he has received, but the house was already destroyed due to his fault. What should P return?
The fruits or the rentals he may received from the time the house was given to him until the house was destroyed
Value of the house at the time it was lost
The interest of the value of the house at the time of loss
What is the effect of loss of thing while in the possession of the party who has right to bring the action for annulment?
a. If lost through his fault, the action for annulment is extinguished, whether such party is incapacitated or his consent is vitiated.
b. If lost without his fault and such party is incapacitated, he can still bring an action for annulment. However, he will be required to return the value of the thing and its fruit (Art. 1398) and only up to the extent that he has been benefited. (Art. 1399)
P was forced to sign a contract with G, granting P a house. P destroyed the house given to him. May P still bring the action for annulment?
No, P’s act of destroying the house extinguishes his right to file for annulment of contract
G sold her house to P, who is a minor. The house was destroyed due to a fortuitous event. May P still annulled the contract so as to recover the money he paid for the house plus the interest?
Yes, because P is not in fault
P forced to exchange cars with G. G asked for annulment. Court ordered that each party should return whatever they received. G refuses to return the car of P. Can P also be compelled to bring back the car of G?
No, P cannot be compelled to comply with what is incumbent upon him.
