CHAPTER 9 - VOID CONTRACTS (ART. 1409 - 1422)

Question 1

May be ratified, may be cured by prescription, defense may only be availed by those who are principally or subsidiarily liable and it is relative or conditional nullity.

Answer 1

Voidable contracts

Question 2

Cannot be ratified, produces no effects at all; void at the very beginning; no action is required unless it is already performed, cannot be cured by prescription, defense may be availed by anybody and is absolute nullity.

Answer 2

Void Contracts

Question 3

May be ratified, there is a contract but it cannot be enforced by court action and it cannot be assailed by third parties.

Answer 3

Unenforceable contracts

Question 4

Cannot be ratified, no contract at all and it can be assailed by anybody who is directly affected.

Answer 4

Void contracts

Question 5

Is one which has no force and effect from the very beginning, as if it had never been entered into, and which cannot be validated either by time or ratification.

Answer 5

Void contracts

Question 6

It is equivalent to nothing; it produces no civil effect. It does not create, modify or extinguish a juridical relation.

Answer 6

Void contracts

Question 7

What are the characteristics of a void contract?

Answer 7

1. A void contract cannot be ratified. (Art. 1409)
2. The right to set up the defense of illegality cannot be waived. (Art. 1409)
3. The action or defense for the declaration of the inexistence of a contract does not prescribe.
4. The defense of illegality of contracts is not available to third persons whose interests are not directly affected.
5. A contract is void and inexistent if it is the direct result of a previous illegal contract.

Question 8

Unlike in an unenforceable contract, a void contract remains void even if a down payment has been made or a benefit has been accepted by a party.

True or False?

Answer 8

True

Question 9

What are the following contracts that are void from the very beginning?

Answer 9

1. Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy. (Art. 1347,1352)
2. Those which are absolutely simulated or fictitious. (Art. 1356)
   - Lack of consent, the parties does not have the intention to be bound at all
3. Those whose object or cause did not exist at the time of the transaction.
4. Those whose object is outside the commerce of men. (Art. 1347)
5. Those which contemplate an impossible service. (Art. 1347, 1348)
6. Those where the intention of the parties relative to the principal object of the contract cannot be ascertained. (Art. 1378, par. 2)
7. Those expressly prohibited or declared void by law. (Art. 1409)

The following are some contracts declared void by law:

a. A contract of donation between spouses during the marriage (except moderate ‘ones made on the occasion of a family rejoicing.) (Art. 87, Family Code.)
b. A contract of sale between spouses (except when there is separation of property). (Art. 1490)
c. A contract which stipulates that household service shall be without any compensation. (Art. 1689)
d. A contract upon future inheritance (except in cases provided by law such as in the marriage settlements).

Question 10

The action or defense for the declaration of the inexistence of a contract does not prescribe.

True or False?

Answer 10

True

Question 11

Is a universal doctrine which holds that no action arises, in equity or 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;

Answer 11

Pari Delicto

Question 12

Where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other. (In pari delicto, Latin for “in equal fault.”)

True or False?

Answer 12

True

Question 13

Pari delicto applies only when there is equal guilt, and not when one party is more guilty than the other.

True or False?

Answer 13

True

Question 14

What are the kinds of illegal contracts and effect of illegality?

Answer 14

1. Where the contract is a criminal offense
   a. If both parties are guilty (in pari delicto)
   1) They shall have no right of action against each other.
   2) Both shall be criminally prosecuted.
   3) The effects and instruments of the crime (the things and price of the contract) shall be confiscated in favor of the government.

b. If only one party is guilty
1) The guilty party will be criminally prosecuted.
2) Neither one may compel the other to comply with his undertaking.
3) The instruments will be confiscated in favor of the government.
4) The innocent party shall not be bound to comply with his promise if he has not yet given anything, and if he had given, he may claim for its return.

2. Where the contract is not a criminal offense
   a. If both parties are guilty
   Neither party may recover what he has given or demand the performance of the other’s undertaking.

b. If only one party is guilty
1) The guilty party cannot recover what he has given nor can he ask for the fulfillment of what has been promised him.
2) The innocent party may demand the return of what he has given without any obligation to comply with his promise.

Question 15

S sold to B 10 sticks of marijuana at P50.00 per stick. S initially delivered 3 sticks to B who paid P150.00. Can B compel S to deliver? Can S compel B to pay?

Answer 15

No, B cannot compel S to deliver the remaining 7 sticks and S cannot compel B to pay the balance of P350.00. S and B will be criminally prosecuted, and the 3 sticks and P150.00 will be confiscated in favor of the government.

Question 16

B is buying a bale of tobacco leaves from S. However, S delivers to B a bale of marijuana leaves which B believes to be tobacco. What will happen to the contract?

Answer 16

S will be prosecuted and he cannot compel B to pay the price. If B has paid the price, he may recover it. The marijuana leaves will be confiscated in favor of the government.

Question 17

W, a woman, agreed to live with M, a man, as M’s wife without the benefit of marriage in consideration of M’s giving a monthly support to W. Both M and W are single. What will happen to the contract?

Answer 17

The contract is illegal for being immoral but the illegality does not constitute a crime. Neither party may ask for the fulfillment of the other’s promise nor recover what he has given. If M has already given support to W. M cannot recover it.

Question 18

S sold and delivered to B for P3,000.00 a cow which S knew was suffering from contagious disease. What will happen to the contract?

Answer 18

The sale is void under Art. 1575 of the Civil Code.

However, the illegality does not constitute a crime. If B, the innocent party, had paid the price, he can recover it. And if he had not paid it yet, he cannot be compelled to make the payment. S, the guilty party, cannot recover the cow. Since the animal is suffering from a contagious disease, it shall be taken by the authorities for proper disposition.

Question 19

What is the general rule of pari delicto?

Answer 19

As a rule, when the contract is unlawful, whether or not it constitutes a criminal offense, recovery by either party is not allowed if both parties are in pari delicto.

Question 20

What are the exceptions to the rule of pari delicto?

Answer 20

The following are the cases when recovery may be made despite the parties being in pari delicto:

1. The payor may recover interest he paid in excess of the interest allowed by usury laws together with interest from the date of payment.
   a. Law governing usurious transactions
   b. Usury legal inexistent
2. A party may recover, if public interest will be subserved, money or property delivered for illegal purpose provided he repudiates the contract before the purpose has been accomplished or before any damage has been caused to a third person.
3. An incapacitated person who is a party to an illegal contract may recover, if the interest of justice so demands, money or property delivered by him.
4. A person may recover, if public policy is thereby enhanced, what he has paid or delivered, if the agreement is not illegal per se but is merely prohibited, and the prohibition by law is designed for his protection.
5. Any person may recover any amount he has paid in excess of the price fixed by law for any article or commodity.
6. A laborer may demand additional compensation for service rendered beyond the maximum number of hours of labor in a contract where he undertakes to work longer than the maximum hours fixed.

7.A laborer may recover the deficiency in a contract where he accepts a wage lower than the minimum wage set by law.

Question 21

A hired B to kill X by giving P20,000.00 to B. Later, A changed his mind and told B not to kill X anymore. Can A recover the amount he had paid?

Answer 21

Yes, A may be allowed by the court to recover the amount he gave to B.

Question 22

A, a minor of 17 years, gave P10,000.00 to B for a dangerous drug. Can the court allow to recover the amount A gave?

Answer 22

Yes, the court may allow A to recover the amount he gave if the interest of justice so demands.

Question 23

Thus, F, a Filipino, is allowed to recover a piece of land (located in the Philippines) he sold to A, an alien, because the restoration of the land to him would enhance the public policy to conserve lands for Filipinos.

True or False?

Answer 23

True

Question 24

What is the rule when contract is divisible or indivisible and there are illegal terms?

Answer 24

1. If divisible - The legal terms may be enforced; the illegal terms are void, hence, they may not be enforced. (Art. 1420)
2. If indivisible - The whole contract is void; hence, no part thereof may be enforced. (Art. 1420)

Question 25

S sells to B one carton of “Fortune” cigarettes and 20 sticks of marijuana for a consideration of P500.00. Is the contact void?

Answer 25

Yes, The sale is indivisible because there is only one consideration for the “Fortune” cigarettes and the 20 sticks of marijuana. Accordingly, the whole contract is void because that which is legal cannot be separated from that which is illegal.

Question 26

B paid S P200.00 for the “Fortune” cigarettes and P300.00 for the marijuana. Is the whole contract void?

Answer 26

No, only the sale of the “Fortune” cigarettes may be enforced. Here, the sale is divisible with the part that is legal being capable of separation from that which is illegal.

Question 27

H sells his land to W, his wife. Is the sale void?

Answer 27

Yes, the sale is void, unless it falls under the exceptions.

Note: T. a third person cannot assail the nullity of the sale unless his interests are directly affected such as if he is a creditor of H and he cannot collect from the latter because H has no more property.