Kinds of Defective Contracts

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  KINDS OF DEFECTIVE CONTRACTS 1.   Rescissible Contracts 2.   Voidable Contracts 3.   Unenforeceable Contracts 4.   Void and inexistent Contracts CHAPTER 6 –  RESCISSIBLE CONTRACTS ART 1380. Contracts validly agreed upon may be rescinded in the cases established by law. RESCISSION –   is a relief which law grants on the premise that the contract is valid for the protection of one of the contracting parties and third persons from all injury and damage the contract may cause, or to protect some incompatible and preferential right created by the contract. EFFECT OF RESCISSION Rescission has the effect of “unmaking a contract, or its undoing from the beginning and not merely its termination”. Hence, rescission creates obligationtoreturntheobjectofthecontract. ARTICLE 1381. The following contracts are rescissible: 1.   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;2.   Thoseagreeduponintherepresentationofabsentees,ifthelattersufferthelesionstatedintheprecedingnumber;3.   Thoseundertakeninfraudofcreditorswhenthelattercannotinanyothermannercollecttheclaimsduethem;4.   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;5.    Allothercontractsspeciallydeclaredbylawtobesubjecttorescission. WARD  –   a person usually a minor, who is under a guardian’s  charge or protection. ABSENTEE  –  a person who disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property. ELEMENTARY    –  is the principle that the validity of a contract does not preclude its rescission. ARTICLE 1385. RESCISSION creates the obligation to return the things which were the object of the contract together with their fruits and the price with its interest; consequently it can be carried out only when he who demands rescission can return whatever he may obliged to restore.   Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. In this case indemnity for damages may be demanded from the persons causing the loss. MUTUAL RESTITUTION –   entails the return of the benefits that each party may have received as a result of the contract. This means bringing the parties back to their srcinal status prior to the inception of the contract. ARTICLE 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors when the donor did not reserve sufficient property to pay all debts contracted before all donation. Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been issued. The decisions or attachment need not refer to the property alienated and need not have been obtained by the party seeking the rescission. ACCION PAULIANA –  the action to rescind contracts in fraud of creditors. REQUISITES: 1.   The plaintiffaskingforrescissionhasacredit   prior to the alienation, although demandable later; 2.   The debtor has made asubsequentcontract   conveying a patrimonial benefit to a third person. 3.   The creditor has no other legal remedy to satisfy his claim; 4.   The act being impugned is  fraudulent;  5.   The third person who received the property conveyed, if it is by onerous title, has been an accompliceinthefraud  . ACCION PAULIANA thus presupposes the following: 1.   A judgment; 2.   The issuance by the trial court of a writ of execution for the satisfaction of the judgment, and; 3.   The failure of the sheriff to enforce and satisfy the judgment of the court. ARTICLE 1389. The action to claim rescission must be commenced within four years.   For persons under guardianship and for absentees the period of four years shall not begin until termin tion of the former’s inc p city or until the domicile of the l tter is known. EXCEPTIONS: 1.   For persons under guardianship Within four years from the time of the termination of the incapacity of the ward. 2.   For absentees Within four years from the time the domicile of the absentee is known. CHAPTER 7. VOIDABLE CONTRACTS ARTICLE 1390. The following contracts are voidable or annullable even though there may have been no damage to the contracting parties: 1.   Those where one of the parties is incapable of giving consent to a contract; 2.   Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. VOIDABLE OR ANNULLABLE CONTRACTS –   are existent, valid, and binding, although they can be annulled because of want of capacity or vitiated consent of one of the parties, but before annulment, they are effective and obligatory between parties. Hence, it is valid until it is set aside and its validity may be assailed only in an action for the purpose. They can be confirmed or ratified. RATIFICATION –   ratification, or confirmation, is defined as the act due or means by virtue of which efficacy is given to a contract which suffers from a vice of curable nullity. CHAPTER 8. UNENFORCEABLE CONTRACTS ARTICLE 1403. The following contracts are unenforceable unless they are ratified: 1.   Those entered into in the name of another person by one who has been given no authority or legal representation or who has acted beyond his powers; 2.   Those that do not comply with the Statute Unenforceable Contracts- a valid contract that, because of some technicaldetect, cannot be fully enforced; a contract that has some legal consequences but that may not be enforced in an  action for damages or specific performance in the face of certain defenses, such as the Statute of Fraud.
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