Unenforceable Contracts

Unenforceable ContractsChapter 8 Group 5Montes, Zoren JakeLim, Germaine RicaEspaol, AlainLim, Gladley MaeBuena, Rica PatriciaMarimon, Divine

Article 1403The following contracts are unenforceable, unless they are ratified:Those entered into 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 of Frauds as set forth in this number. In the following cases, an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:Article 1403

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;Article 1403

(d) An agreement for the sale of goods, chattels, or things in action, at a price not less than Five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and persons on whose account the sale is made, it is sufficient memorandum;Article 1403

(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;(f) A representation as to the credit of a third person.Article 1403

(3) Those where both parties are incapable of giving consent to a contract.Article 1403

Those that cannot be enforced in court or sued upon by reason of certain defects provided by law until and unless they are ratified according to law.Unenforceable Contracts

While rescissible and voidable contracts are valid and enforceable unless they are rescinded or anulled, unenforceable contracts, although valid, are unenforceable in court unless they are cured or ratified. Once ratified, these contracts may then be enforceable.Binding force of unenforceable contracts

Under Article 1403, the following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another by one without, or acting in excess of, authority;Kinds of unenforceable contracts

(2) Those that do not comply with the Statute of Frauds;

(3) Those where both parties are incapable of giving.

The above contracts indicate the three types of defects that render them unenforceable.Kinds of unenforceable contracts

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.

They are governed by Article 1317 and the principle of agency.Unauthorized Contracts

https://www.youtube.com/watch?v=tNwAFgdpLJM13

In 1677, the English Parliament enacted a statute to counter giving false testimony in actions founded on certain kinds of contracts

It has been adopted in modified form in the PhilippinesHistory of the Statute of Frauds

It made specified contracts unenforceable unless evidenced in a prescribed manner by a written memorandum signed by the party against whom liability under the contract was sought to be enforced.Statute of FraudsThe statute of frauds refers to the requirement that certain kinds of contracts be memorialized in a writing, signed by the party to be charged, with sufficient content to evidence the contract.15

To prevent fraud

To guard against the mistakes of honest men by requiring that certain agreements specified in Art. 1403, No. 2 [a-f], that are susceptible to fraud must be in writing; otherwise, are unenforceable by action in courtPurpose of the Statute of Frauds16

Unless the agreement be in writing, there may be no palpable evidence of the intention of the contracting parties and the court must perforce rely upon no other evidence than the mere recollection or memory of witnesses, which is many times faulty or unreliable.Purpose of the Statute of Frauds?Unless the agreement be in writing, there may be no palpable evidence of the intention of the contracting parties and the court must perforce rely upon no other evidence than the mere recollection or memory of witnesses, which is many times faulty or unreliable.

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The Statute of Frauds is not applicable in actions which are neither for damages because of a violation of a contract, nor for the specific performance thereof. Thus, the purchaser of a parcel of land may prove the oral contract of sale in a subsequent action for ejectment against a third person who is in possession of the property.Application of the Statute of Frauds

It is applicable only to executory contracts and not to contracts which are totally or partially performed. The reason is that partial performance, like the writing, furnishes reliable evidence of the intention of the parties or the existence of the contractApplication of the Statute of FraudsExecutory contract - where no performance has as yet been made by BOTH parties)

A contrary rule would result in injustice or unfairness to the party who has performed his obligation, for it would enable the other to keep the benefits already derived by him from the transaction, and at the same time evade the obligations assumed or contracted by him thereby. Furthermore, these contracts cannot be categorized as unenforceable where the parties themselves have enforced them with partial execution or by accepting benefits thereunder.19

It is not applicable where the contract is admitted expressly, or implied by the failure to deny specifically its existence, no further evidence thereof being required in such case.Application of the Statute of Frauds20

It is applicable only to the agreements enumerated therein. Thus, an agreement creating an easement of right of way is not covered by the Statute since it is not a sale of real property or of an interest therein.Application of the Statute of Frauds

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It is not applicable where a writing does not express the true agreement of the parties. This is so because the Statute cannot be used as a shield for fraud or as a means for the perpetration of it.Application of the Statute of Frauds

Perpetration means to do something that is illegal22

It does not declare that contracts infringing it are void but merely unenforceable.

The defense of the Statute of Frauds may be waived.Application of the Statute of Frauds

Perpetration means to do something that is illegal23

The defense of the Statute of Frauds is personal to the parties and cannot be interposed by strangers to the contract.Application of the Statute of Frauds

Perpetration means to do something that is illegal24Agreement within the scope of the Statute of Frauds

Statute of frauds requires certain contracts to be in writing and signed to be enforceable. -A contract involving an interest in land. -A contract that by it terms cannot be performed within one year of execution. -Collateral contracts to answer for the debt of another. -Prenuptial Agreement -Contracts for sale of goods over P500.00.Agreements within the scope of the Statute of Frauds

Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this BookArticle 1404

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Contracts infringing the Statute of Frauds, referred to in No. 2, Article 1403, are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them.Article 1405

By failure to object to the presentation of oral evidence to prove the contract. The failure to so object amounts to a waiver and makes the contract as binding as if it has been reduced to writing. The requirement of a written form is for evidential purpose only; and Modes of Ratification Under the Statute

By acceptance of benefits under the contract. In this case, the contract is no longer executory and, therefore, the Statute does not apply. This rule is based upon the familiar principle that one who has enjoyed the benefits of a transaction should not be allowed to repudiate its burdens.Modes of Ratification Under the Statute

When a contract is enforceable under the Statute of Frauds, and a public document is necessary for its registration in the registry of deeds, the parties may avail themselves of the right under Article 1357.Article 1406

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For the application of this provision, there must be a valid agreement and the agreement must not infringe the Statute of Frauds.Right of a party where contract enforceable

(1) Accordingly, a party to an oral sale of real property cannot compel the other to put the contract in a public document for purposes of registration because it is unenforceable unless, of course it has been ratified.

(2) Similarly, the right of one party to have the other execute a public document is not available in a donation of realty when it is in a private instrument because the donation is void.

In a contract where both parties are incapable of giving consent, express or implied ratification by the parent, or guardian, as the case may be, of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated.

If a ratification is made by the parents or guardians, as the case may be, of both contracting parties, the contract shall be validated from the inception.Article 1407

Where both parties to a contract are incapable of giving consent, the contract is unenforceable.However, if the parent or guardian, as the case may be, of either party, or if one of the parties after attaining or regaining capacity, ratifies the contract, it becomes voidable.When unenforceable contract becomes a voidable contract.

If the ratification is made by the parents or guardians, as the case may be, of both contracting parties, or by both contracting parties after attaining or regaining capacity, the contract is validated and its validity retroacts to the time it was entered.When unenforceable contract becomes a valid contract.

Unenforceable contracts cannot be assailed by third persons.Article 1408

Strangers to a voidable contract cannot bring an action to annul the same (see Art.1397); neither can they assail or question a contract because of its unenforceability.Rights of third person to assail an unenforceable contract.

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