Unenforceable Contracts.docx

UNENFO RCEABLE CONTRACTS

UNENFORCEABLE CONTRACTS DISTINGUISHED VOIDABLE AND RESCISSIBLE CONTRACTS:

FROM

 Unenforceable contracts cannot be sued upon or enforced unless ratified: thus, it is as if they have no effect yet.  In one sense, they may be validable.  Voidable and rescissible contracts are valid until annulled or rescinded.  Thus, unenforceable contracts are nearer absolute nullity than the other two.

KINDS OF UNENFORCEABLE CONTRACTS:

a) Unauthorized contracts b) Those that fail to comply with the Statute of Frauds c) Those wherein both parties are incapable of giving consent to a contract

Art. 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 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:

a) An agreement that by its terms is not to be performed within a year from the making thereof; b) A special promise to answer for the debt, default, or miscarriage of another; c) An agreement made in consideration of marriage, other than a mutual promise to marry;

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 person on whose account the sale is made, it is a sufficient memorandum; e) An agreement of 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.

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

UNAUTHORIZED CONTRACTS These are “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.”

Example: 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 sale.

Bumanlag vs. Alzate G.R. No. 39119, September 26, 1986

A compromise agreement signed in behalf of the client by his lawyer who did so without authorization of said client is merely unenforceable (not void) and may therefore, be ratified by said party expressly or implicitly.  Mere lapse of time, no matter how long, is NOT the ratification required by law of an unenforceable contract. (Tipton vs. Velasco, 6 Phil 67)  Without ratification, the “agent” assumes liability. (2 Am. Jur. 251)

THE STATUTE OF FRAUDS

a) The purpose of the Statute of Frauds is to prevent fraud, and not to encourage the same. Thus, certain agreements are required to be in writing so that they may be enforced. b) How the Statute of Frauds prevents Fraud?  Since memory is unreliable, oral agreements may result in injustice. To aid human memory, to prevent the commission of injustices due to fault memory to discourage intentional misrepresentation, are the principal aims of the Statute of Frauds. (Facturan vs. Sabanal, 81 Phil 512)

c) First country to enact statute (England in 1676)  England was the first country to adopt the Statute of Frauds. In 1676, the English Parliament passed a law or statute requiring certain agreements to be in writing. Since then the statute has been called the Statute of Frauds. (National Bank vs Phil. Vegetable Oil Co., 49 Phil 857) d) History, Chief Characteristic and Object of the Statute of Frauds: 1. The Statute of Frauds is a name of a celebrated English statute which has been modified and adopted in the United States and the Philippines. 2. Its chief characteristic is the provision that no suit or action shall be maintained on certain classes of contracts or engagements unless there is a note or memorandum thereof in writing signed by the party to be charged or by his authorized agent. 3. Its object was to close the door to the numerous frauds which were believed to be perpetrated and the perjuries which were believed to be committed when such obligations could be enforced upon no other evidence than the mere recollection of the witness. 4. It is more fully named as “The Statute of Frauds and Perjuries.”

GENERAL RULES OF APPLICATION 1st Principle

The Statute of Frauds applies only to executory contracts (contracts where no performance has yet been made) and not to partially or completely executed (consummated contracts). (See Almirol & Carino v. Monserrat, 48 Phil.67; Asturias Sugar Central, Inc. v Montinola, 69 Phil. 725; and Facturan v. Sabanal, 81 Phil. 512).  The Statute of Frauds applies only to executory contracts.

Example 1:

A sold to B real estate for a stipulated price. The agreement was oral. A has not yet delivered the real estate. B has to not yet paid the price. B offered to buy, but A refused to go ahead with the agreement.

Under the Statute of Frauds, to be enforceable, an agreement for the sale of real estate must be in writing (Art. 1403, [2e]); B sued for specific performance. A’s attorney objected, setting up the Statute of Frauds as the reason for objection.

May the contract be proved by oral evidence? ANS.: No. The agreement being merely executory, the agreement cannot be proved. Therefore also, A cannot be compelled to deliver.

(See Santos v. Rivera, 33 Phil 1)

Example 2:

Question : Why is the Statute of Frauds applicable only to executory contracts and not to those fully or partially informed? Answer : This is so because the possibility for fraud in executory contracts is much greater. As a result, were the rule otherwise, many would perjure themselves on the witness stand. (See Hernandez v. Andal, 78 Phil. 1196)

Example 3:

By virtue of an oral contract of sale, seller delivered to a buyer a piece of land which was partially paid. May seller recover balance of price? Answer : Yes, since the contract has already been partially executed.

(See Almirol & Carino v Monserrat, 48 Phil. 67)

Example 4:

Through the failure of the would-be buyer, the Manila Railroad Co., to accept the deed after having orally offered to buy the house subjected the plaintiff (would-be seller) to much trouble and annoyance and may therefore be subject to criticism.

Still , plaintiff has no cause of action for the Statute of Frauds has been timely pleaded in defense by the Manila Railroad Company.

(See Barreto v. Manila Railroad Cp., 46 Phil. 964)

Example 5:

Statute of Frauds applies only to executory contracts and their enforcement.

Both the extensions of the period of repurchase and the extensions of the lease contracts are no longer executory, because they have been performed and consummated. (See Goejin v. Libo, L-4250, Aug. 21, 1953)

Example 6:

A Contract of Sale of Real Property in installment is NOT within the Statute of Frauds, even though it is not in writing, if the first installment has

already been a partial performance of the contract by the buyer. In Babao v. Perez, it has also been held that an oral contract partially performed must be proven clearly in court, thus: “The contract must be fully made and completed in every respect except for the writing required by the statute, in order to be enforceable on the ground of part performance. The parol agreement relied on must be certain, definite, clear, unambiguous, and unequivocal in its terms, particularly where the agreement is between parent and child, and be clearly established by the evidence. The requisite of clearness and definiteness extends to both the terms and the subject matter of the contract. Also, the oral contract must be fair, reasonable, and just in its provisions for equity to enforce the oral agreement, or its specific enforcement would be harsh or oppressive upon the defendant, equity will withhold its aid.

Clearly, the doctrine of part performance taking an oral contract out of the statute of frauds does not apply so as to support a suit for specific performance where both the equities and the statute support the defendant’s case.” (49 Am. Jur., p. 729) 2nd Principle

The Statute of Frauds cannot apply if the action is neither for damages because of the violation of an agreement nor for the specific performance of said agreement.

(See Lim v. Lim, 10 Phil. 635; and Facturan v. Sabanal, 81 Phil. 512) Example 1:

A tenant and a landlord who had an oral contract of lease which stipulates that half of the crops belongs to the tenant; the other half, to the landlord. Landlord in violation of the agreement, sold all the crops and refused to give the tenant his share.

Statute of Frauds is NOT applicable in this case. The tenant can recover, although it should be in writing, the damages asked was not through the breach of the contract of the lease. The tenant in this case is asking for damages, because of the violation of the agreement of the crops.

(See Lim vs. Lim, 10 Phil. 635)

Example 2:

Where the purpose of action was to enforce an alleged verbal agreement to sell, which is claimed to have been occupied by the plaintiff as a tenant, the court dismissed the case on motion to dismiss, under the Statute of Frauds, said verbal agreement cannot be enforced, nor evidence thereof proven, because it was not done in writing, nor in any note or memorandum, as required by said Statute.

(See Pascual vs. Realty Investment Inc., 91 Phil. 257)

Example 3:

Where the complaint does not contain allegations that the plaintiff has taken possession of land, due to the verbal contract he had with the defendant to purchase it, nor is there any allegation that has made improvements thereon.

It alleges that the plaintiff occupied the land as tenant, the alleged transaction comes under Statute of Frauds. 3rd Principle

The Statute of Frauds is exclusive, that is, it applies only to the agreements or contracts enumerated herein. (See Quintos v. Morata, 54 Phil. 481; also the rule of Statutory Construction which states: Inclusio unius est exclusio alterius” ― what the law does not include, it excludes. Or, the enumeration of certain things excludes. Or, the enumeration of certain things excludes all those not so enumerated.)

The Statute of Frauds is exclusive, that is, it applies only to the agreements or contracts enumerated therein:

1. A loan of P1,000 does not have to be in writing to be enforceable because the contract of loan is not one of those enumerated in the Statute. 2. An oral sale of less than P500 is valid and enforceable. 3. A defect in the attestation clause of a will cannot be cured by oral evidence, although no objection has been made. As the Statute of Frauds refers only to certain agreement and contracts whereas wills and testaments and formalities are governed by a separate and specific provisions of a law. 4. A mutual promise to marry is NOT governed by the Statute of Frauds

4th Principle

The defense of the Statute of Frauds may be waived. (Art. 1405, Civil Code: Contracts infringing the Statute of Frauds, referred to in No. 2 of Art. 1403, are ratified by the failure to object to the failure to object to the prestation of oral evidence to prove the same, or by the acceptance of benefits under them.)

The defense of Statute of Frauds may be waived.  In an oral executory contract of sale, if one party fails to timely object to oral evidence presented, it is as if there was a waiver, and the agreement considered valid, provided all the essential requisites for the transactions are present.

There are two ways to waive this defense: 1. Timely failure to object to the presentation of oral evidence to prove the oral agreement. 2. Acceptance of benefits under them.

When must the timely objection made? Either after the question about the agreement is made answer to said question is made.

or after the

(See Abrenica vs. Gonda, et al. 34 Phil. 739) 5th Principle

The Statute of Frauds is a personal defense, that is, a contract infringing it cannot be assailed by third persons.

(Art. 1408, Civil Code)

The Statute of Frauds is a personal defense, that is, an agreement infringing it cannot be assailed by third persons.

Example: “A tenant was occupying the landlord's house on a lease contract when the landlord sold the house orally to the buyer. The buyer has not yet given the price and seller has not yet delivered the house. Buyer asks the tenant to pay him rent, tenant refuses on the ground that the sale is unenforceable.”  The tenant's contention will not prosper, as he is not a party to said sale, he cannot set up the Statute of Frauds. 6th Principle

Contracts infringing the Statute of Frauds are not void; they are merely unenforceable. (Art. 1403, Civil Code)

Example: A and B entered into an oral executory sale. The sale is not void, for if this were so, it cannot be ratified. The contract of sale had also some effect, namely, that the tenant cannot refuse to pay rent to the new landlord-buyer.

7th Principle

The Statute of Frauds is a Rule of Exclusion, such that oral evidence might be relevant to the agreements therein and might therefore be admissible were it not for the fact that the law or the statute excludes said oral evidence.

(See Jones on Evidence, Sec. 1425)

Example: A orally sold B a piece of land. Agreement was still executory. A asked for payment, B refused, setting up Statute of Frauds. In court, A presented 2 witnesses to testify.

Their testimony is indeed relevant, but should the timely objection on B's attorney, their evidence would be inadmissible because Statute of Frauds excludes such testimony on a matter like this. 8th Principle

The Statute of Frauds does not determine the credibility or the weight of evidence. It merely concerns itself with the admissibility thereof.

Example: To prove an oral sale, X presented cabinet members to testify, all of whom are men of integrity, still their testimony is will not be admitted, although may be very truthful. 9th Principle

The Statute of Frauds does NOT apply if it is claimed that the contract does not express the true agreement of the parties.

As long as the true or real agreement is not covered by the Statute of Frauds, it is provable by oral evidence.

(See Cayugan v. Santos, 34 Phil. 100)

Example: A orally sold a ring to B allegedly for a price of 700. The contract is unenforceable, but if A insists that the price was only P400, oral evidence is allowed.

THE SPECIFIC AGREEMENTS

There are six agreements referred under the Statute of Frauds. 1. “An agreement that by its terms is not to be performed within a year from the making thereof.” (Art. 1403, No. 2-a, Civil Code)  Hence, an agreement orally entered into on 1987, for a person to commence the painting of a portrait in 1989, cannot be enforced unless such contract is in writing.  Also, if a contract stipulates that a certain type of activity shall be commenced within the year from the making of the contract, but can only be accomplished after one (1) year from the same, it will fall within the Statute of Frauds.  If the contract stipulates that the contract shall be executed immmediately upon the signing of the agreement, although it has been reset to another date by agreement of the parties so that it can be finished only beyond one year, the contract is not within the statute.

Example of Specific Agreement #1: A and B, neighbors, orally agreed that A would sell and B would buy A's transistor radio for P200 three years from the date of the agreement. At the end of three years, A refused to hand over the radio although B was willing to pay. Is the agreement enforceable under the Statute of Frauds?

ANS: No, because under the terms of the contract, the sale was to be performed at the end of three years. It should have been, therefore, made in writing. The Statute recognizes the frailty of man's memory, and apparently only one year is the limit.

Had the agreement been that performance would be made within three months, the agreement, even if oral, would have been enforceable. (See Boydell v. Drummond, 11 east 143)

A and B, neighbors, orally agreed that from that day, B would not erect a garage on his property till after three years. A week later, B began to erect the garage in violation of the agreement. A complains and B sets up the Statute of Frauds.

ANS: A is correct in complaining. This agreement does not come under the Statute of Frauds, becacuse here the performance was to begin right on that day they agreed, namely, the obligation not to construct. This is not an agreement that will be performed after a year; the performance was to begin right away. 2. “A special promise to answer for the debt, default, or miscarriage of another.” (Art. 1403, No. 2-b, Civil Code)  The word “special promise” is meant to limit the “statutory provision to express and tacit promises in fact made and does not apply in cases where the duties are created by law without any promissory assent.”  The promise must be made to the promisee and not to the debtor.  The phrase “debt, default, and miscarriages” includes all legal obligations under which a person can come, contractual or non-contractual, requiring a money payment or any other kind of performance.  The commitment of the promisor to pay the debt of another should not immediately discharge the debtor from the his debt at the time of the making of the promise; otherwise, there will be a novation which will not fall under the Statute of Frauds.Hence, if one merely promises to pay the obligation of another once the debt becomes due, such promise does not fall under the Statute of Frauds.  In case the obligation is joint, there is no “special promise” as contemplated in the Statute of Frauds.  However, in solidary obligations, it will depend on whether or not the promisor knew that only of the solidary debtors will truly be benefited by the payment.

Example of Specific Agreement #2 a. A borrowed money from B, with C as guarantor. The contract of guaranty between B, the creditor, and C, the guarantor, must be in writing to be enforceable. (See Gull v. Lindsay, 4 Ech. 45) b. “Special promise” refers to a subsidiary or collateral promise to pay, like a contract or guaranty. (See Brown v. Coleman Dev. Co., 34 Ont. L-210)

c. A was having his house repaired by B, who needed certain materials. So A told storeowner (of materials), “Give B the materials, I shall be responsible. I shall stand good.” This was orally made. Is this a special promise? Is this oral agreement enforceable? i. ANS: This is not a special promise. This is not a guaranty. Only A obligated himself. Since this is not a guaranty, the contract is enforceable, so that the seller can properly sue A and prove the oral agreement by parol evidence, over and above A's objection. (See Reiss v. Memije, 15 Phil. 350.) 3. “An agreement made in consideration of marriage, other than a mutual promise to marry.” (Art. 1403, No. 2-c, Civil Code)  Ante-nuptial agreements or marriage settlements must be in writing to be enforceable.  However, this rule has been modified by Article 77 of the Family Code, which provides that ante-nuptial agreements or marriage settlements or any modifications thereof shall be in writing, signed by the parties and executed before the marriage.  This legal requirement is mandatory in nature. Hence, violation of this mandatory provision of the Family Code will make the marriage settlement not only unenforceable but null and void pursuant to Article 5 of the Civil Code, which pertinently provides that acts executed against the provision of mandatory laws shall be void.  On the other hand, a mutual promise to marry will not fall under the Statute of Frauds because a breach of such promise per se is not actionable.

Example of Specific Agreement #3

a. Examples of agreements made in consideration of marriage: i. marriage settlements. (Art. 122, Civil Code) ii. donations propter nuptias. (Art. 127, Civil Code) b. When the law says “in consideration of marriage,” it really means “by reason of the marriage.” Thus, the cause of the donation by propter nuptias is not the marriage but the liberality or the generosity of the giver. c. Note that the law says “other than a mutual promise to marry.” Hence, an oral mutual promise to marry is not embraced by the Statute of Frauds. The injured party may present oral evidence of the promise in an action to obtain actual damages for breach thereof. (Cabague v. Auxilio, 92 Phil. 294)

Example of the Exception  A and B mutually promised to marry each other. The promise need not be in writing unless the marriage be deferred till after the lapse of one (1) year from the agreement. (See Atienza v. Castillo, et al., 71 Phil. 589) 

For breach of a mutual promise to marry, the groom may sue the bride for actual damages and oral evidence of such mutual promise is admissible. (Cabague v. Auxilio, supra)

4. “An agreement for the sale of goods, chattels, or things in action, at a price not less than five hundred pesos unless…(Art. 1403, No. 2-d, Civil Code)  Hence, a contract of sale of a fountain pen worth P5,000 must be in writing to be enforceable.  In an auction sale, the recording of the sale in the sales book is enough memorandum so as to remove the contract from the Statute of Fraud.

Example of Specific Agreement #4 a. A sold B his pen for P400.00 orally. Contract was still executory. This is unenforceable unless B gets the pen or pays fully or partially for the price. (See Engel, et al. v. Velasco & Co., 47 Phil. 115)

b. Meaning of “things in action”: incorporated or intangible personal property. (Example: credit) c. Note that the law says “sale”, not other contracts. (Engel, et al. v. Velasco & Co., 47 Phil. 115)

d. Note also that if the price is exactly P500.00, the contract must be in writing to be enforceable.

e. Partial payment takes the contract away from the Statute except if said part payment corresponds to the part delivered, in which case, if the contract is divisible, the remainder is covered by the Statute.

f. Rule in case of auction sale: “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: I. The amount and kind of property sold; II. The terms of the sale; III. The price; IV. The names of the purchasers and persons on whose account the sale is made - the entry is considered a SUFFICIENT memorandum (even if the same is not signed by the party sought to be charged)

5. “An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein.” (Art. 1403, No. 2-e, Civil Code)  Thus, a contract of lease for two years must be in writing to be enforceable.  A sale of real estate must likewise be in writing to be enforceable, but it need not be notarized or in a public document to be effective between the parties.  Notarization is needed only to bind third persons, and so that the proper registry of property can accept the deed or contract for registration.

Example of Specific Agreement #5 a. Two kinds of agreements are referred here: a) Lease of real property for more than one year (note of personal property) b) Sale of real property (regardless of price)

b. Example: A is B’s tenant. Lease is for six months. If oral, lease is still enforceable, for the period does not exceed one year. c. If lease of real property is exactly one year, the contract may be oral, since here the period does not exceed one year. d. “Interest” in real property may include easement or usufruct.

e. A verbal agreement was made between A and B whereby A agreed to sell and B agreed to buy A’s farm for P100,000.00. The price was paid. Possession was not given nor was the deed delivered, both being refused. B comes to you and wants to know if he can compel A to give him the deed and possession. What would you advise?

ANS.: I would advise B to sue for specific performance and also ask A to execute the deed of conveyance. The Statute of Frauds refers only to purely executory contracts; hence the statute will not apply in this case. (See Art. 1403, No. 2[e]; See also Facturan v. Sabanal, 81 Phil. 512) Since the contract is valid and enforceable; we can now apply Art. 1357 of the new Civil Code which states that: “If the law requires a document or other special form, as in the acts and contracts enumerated in the following Article, the contracting parties may compel each other to observe that form, once the contract has been perfect. This right may be exercised simultaneously with the action upon the contract. 6. “A representation as to the credit of a third person.” (Art. 1403, No. 2-f, Civil Code)  Under Article 21 of the Civil Code, it is provided that “every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due and observe honesty and good faith.”

 A representation therefore of the credit worthiness of another, which turns out to be untrue may be a cause of action for damages if the same were given in bad faith.

Express Trust Concerning Real Property It will be observed that while the Statute of Frauds makes no mention of it; still under Art. 1443 of the Civil Code, “no express trusts concerning an immovable or any interest therein may be proved by parol (oral) evidence.” Hence, we can safely conclude that the Statute of Frauds also applies to such express (conventional) trust.

Duty of the Attorney for the Defendant If an agreement violates the Statute of Frauds, but an action is nevertheless brought against one of the parties, his attorney can do the following:

a. File a motion to dismiss. (Rule 16, 1997 Rules of Civil Procedure);

b. Plead the Statute of Frauds as an affirmative defense. (Sec. 6, Rule 6, New Rules of Civil Procedure);

c. Make a timely objection in the course of the trial. (See Art. 1405, Civil Code)

Duty of the Attorney for the Plaintiff

a. Present the written agreement or contract;

b. If this cannot be done, as when the contract is lost, present a memorandum or note in writing where the important details of the contract are set forth such the names of the parties, description of the property.

c. If the written agreement has been lost and there is no note or memorandum, present secondary evidence of the agreement.

Problem on “Sufficient Memorandum” Example: A telegram was sent advising a would be buyer to come to a certain place to complete the purchase of a parcel of land verbally promised to said buyer. But---

A. The telegram did not state purchase price; B. The telegram did not describe the property; C. The telegram had not been signed by any individual in behalf of the seller.

Question: Is the sale enforceable? No. It is not enforceable because the telegram, as a note or memorandum is clearly insufficient for the details above-mentioned were not placed. (See Basa v. Roque 45 Phil 655)

Formal Requirements of Sufficient Memorandum The Supreme Court, consistent with the established doctrine, has held that no particular form of language or instrument is necessary to constitute a memorandum or note in writing under the contract of Statute of Frauds.

Any document or writing under the contract or for another purpose, which complies with all the statutory requirements of statute as contents and signature, maybe considered as sufficient. (See Berg v. Magdalena, 92 Phil 110)

Rule on Authority of the Agent to Sell Land or any interest therein Under the Civil Code, when a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise the sale shall be void. Note that the law says “void”, not merely unenforceable.

Oral Promise to Put in Writing An oral promise to put in writing an agreement that is covered by the Statute of Frauds is itself enforceable. (37 C.J.S 745)

INCAPACITY OF BOTH PARTIES TO ENTER INTO A CONTRACT

The third kind of unenforceable contract is one where both parties are incapacitated to give consent. Example: A contract entered into by two minors without parental consent.

New Jurisprudence Unless otherwise provided by law, a contract is obligatory in whatever form it is entered into, provided that all the essential requisites are present.

When a verbal contract has already been complete, executed or partially consummated, its enforceability will not be barred by the Statute of Frauds, which applies to an executory agreement.

Case: Gerardo Cordial v. David Miranda G.R. No. 135492, December 14, 2000

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

Two ways of ratification of contracts infringing the Statute of Frauds: 1. Failure to object to the presentation of oral evidence to prove the contract. (See Domalagan v. Bolifer, 33 Phil. 471) 2. Acceptance of benefits under them. (See Hernandez v. Andal, 78 Phil. 196) Example: 1. Contracts infringing the Statute of Frauds are ratified when the defense fails to object, or asks questions on cross-examination. As no timely objection or protests was made to the admission of the testimony of the plaintiff with respect to the contract [defendants] tacitly waived there right to have it stricken out.

Limketkai Sons Milling v. CA G.R.118509, 1 December 1995

2. A sold to G a particular real property, and A benefited from the transaction by already obtaining the purchase price.

Art. 1406. 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.  Provides that the agreements are in written form and are therefore enforceable.  The law also requires it to be transformed into a public document, for its registration in the Registry of Property.  May compel each other to observe the form once the contract is perfected.  May exercise this right simultaneously with the action upon contract. 

The right of one party to have the other execute the public document needed in registration is only when the contract is both valid and enforceable.

Case: Almirol vs. Monserrat, G.R. No. 23717

By virtue of a verbal sale, the applicant came into actual possession of the land, where said applicants sought the registration of the subject lot already in their possession, the oppositors claimed that oral proof of the contract cannot be adduced in court where the registration being questioned.

Art. 1407. 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 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.  In cases where both of the contracting parties are incapacitated, and the guardians of one of the incapacitated persons ratifies the contract, it shall be transformed into a voidable or annullable contract.  If the ratification is made by the parents or guardian of both parties, the contract shall be completely valid as if it has not been visited by any defect or infirmity at all.

Example: A and B, both 15 years old, entered into a contract. The contract is unenforceable because both parties cannot give consent. Now, if the guardian or parent of A ratifies expressly or impliedly the contract, it becomes voidable, valid unless annulled by guardian or parent of B. However, if the guardian or parent of ratifies, the contract is validated right from the start it was entered into.

Art. 1408. Unenforceable contracts cannot be assailed by third persons.  Strangers cannot attack the validity of voidable contracts, so also they cannot attack a contract because of its unenforceability. The Statute of Frauds cannot be set as a defense by strangers to the transaction. (Ayson v.CA 97 Phil. 965)

REPORT ON CHAPTER 8 CIVIL CODE OF THE PHILIPPINES

UNENFORCEABLE CONTRACTS

OBLIGATIONS AND CONTRACTS

Presented To:

Atty. Fitzgerald Macalalag

Presented By:

CATALUÑA, Charles Angelo GORANTES, Nieva Francesca GEGANZO, Gerelyn MELLIZA, Ronald John VARON, Joefritz

March 30, 2019