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.
Art. 1404. Unauthorized contracts are governed by article 1317 and the principles of agency in Title X of this Book.
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 the acceptance of benefit under them.
LECTURE NOTES ON CIVIL LAW
Professor Ruben F. Balane
Page 347 of 354Art. 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.
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.
Art. 1408. Unenforceable contracts cannot be assailed by third persons.
An unenforceable contract is a contract which cannot be enforced by a proper action in court, unless they are ratified, because either they are entered into without or in excess of authority or they do not comply with the Statute of Frauds or both the contracting parties do not possess the required legal capacity.
The following contracts are unenforceable unless they are ratified (Article 1403)
a. Those entered into in the name of another person by 1 who has been given no authority or legal representation, or who has acted beyond his powers
Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party.
When a person enters into a contract for and in the name of another, without authority to do so, the contract does not bind the latter, unless he ratifies the same.
The agent, who has entered into the contract in the name of the purported principal, but without authority from him, is liable to 3rd persons upon the contract.
The proper term for this case is “ratification”.
Example: In a sale, Y claimed that he was an agent of X, even if not. The contract cannot be enforced against X. Another example is when the agent is authorized to lease the property but the agent instead sells the property. The principal is not bound.
LECTURE NOTES ON CIVIL LAW
Professor Ruben F. Balane
Page 348 of 354b. Those that do not comply with the Statute of Frauds
This is the most famous variety.
i. An agreement that by its terms is not to be performed within a year from the making thereof
In Babao vs. Perez, the Supreme Court interpreted the phrase
“not be to performed within a year” to mean that the obligation cannot be finished within 1 year. Professor Balane does not agree with this interpretation. According to Professor Balane the phrase “not to be performed within a year” should mean that the obligation cannot begin within a year. For practical reasons, the contract must be in writing since the parties might forget. This rule was made to guard against fallibility (forgetfulness) of man and fraud.
According to Professor Balane, the Supreme Court’s interpretation is incorrect. If the obligation cannot be finished within 1 year, the contract is not within the Statute of Frauds because of partial performance.
ii. A special promise to answer for the debt, default or miscarriage of another
The test as to whether a promise is within the statute has been said to lie in the answer to the question whether the promise is an original or collateral one. If the promise is an original one or an independent one, that is, if the promisor becomes thereby primarily liable for the payment of the debt, the promise is not within the statute.
If the promise is collateral to the agreement of another and the promisor becomes merely a surety or guarantor, the promise must be in writing.
iii. An agreement made in consideration of marriage, other than a mutual promise to marry
A mutual promise to marry does not fall within the Statute of Frauds since they are not made in writing.
Agreements made in consideration of marriage other than the mutual promise to marry are within the Statute of Frauds.
In Cabague vs. Auxilio, the father of the groom promised to improve his daughter-in-law’s father’s house in consideration of the marriage. The father of the groom made improvements on the house. The wedding did not take place. The Supreme Court said that the father of the groom could not sue on the oral contract which as to him is not “mutual promise to marry”.
Professor Balane disagrees with the Supreme Court. According to Professor Balane, the father of the groom should be able to sue since there was partial performance.
iv. An agreement for the sale of goods, chattels or things in action, at a price not less than P500, unless the buyer accepts and receives part of such goods and chattels, or the evidence, or some of them, of such things in action, or pay at the time some part of the
LECTURE NOTES ON CIVIL LAW
Professor Ruben F. Balane
Page 349 of 354purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of 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
The requirement of a written instrument or a memorandum for sales of personal property for a price not less than P500, covers both tangible and intangible personal property. It also covers the assignment of choses in action.
Where a contract for the sale of goods at a price not less than P500 is oral, and there is neither partial payment or delivery, receipt, and acceptance of the goods, the contract is unenforceable, and cannot be the basis of an action for the recovery of the purchase price, or as the basis of an action for damages for breach of the agreement.
Where there is a purchase of a number of articles which taken separately does not have a price of P500 each, but taken together, the price exceeds P500, the operation of the statute of frauds depends upon whether there is a single inseparable contract or a several one. If the contract is entire or inseparable, and the total price exceeds P500, the statute applies. But if the contract is separable, then each article is taken separately.
v. An agreement of lease for a period of more than 1 year, or the sale of real property or of an interest therein
As long there is a sale of real property, the sale must be in writing. There is no minimum.
An oral contract for a supplemental lease of real property for longer period than 1 year is within the Statute of Frauds.
An agreement to enter into an agreement is also within the Statute of Frauds.
vi. A representation as to the credit of a 3rd person
A wants to borrow money from C. C does not know A. C goes to B to ask about A’s credit standing. B says that A’s credit standing is satisfactory even though B knows that A is insolvent.
Under Article 1403, C can go after B if B’s representation was in writing.
Professor Balane thinks that this does not belong in the Statute of Frauds. There is no contract between C and B. B did not bind himself to pay C. What we have here is an unenforceable tort.
According to Professor Balane, “a representation as to the credit of a 3rd person” should be replaced by Article 1443. Article 1443 provides that no express trusts concerning an immovable or any interest therein may be proved by parol evidence.
When the express trust concerns an immovable or an interest therein, a writing is necessary to prove it. This writing is not
LECTURE NOTES ON CIVIL LAW
Professor Ruben F. Balane
Page 350 of 354required for the validity of the trust. It is required only for purposes of proof. When the property subject to the express trust, however is not real estate or an interest therein, then it may be proved by any competent evidence, including parol evidence.
c. Those where both parties are incapable of giving consent to a contract
Neither party or his representative can enforce the contract unless it has been previously ratified. The ratification by 1 party, however, converts the contract into a voidable contract – voidable at the option of the party who has not ratified; the latter, therefore, can enforce the contract against the party who has ratified. Or, instead, of enforcing the contract, the party who has not ratified it may ask for annulment on the ground of his incapacity.
The proper term is “acknowledgement” (and not ratification).
2 Principles in the Statute of Frauds
a. Parol evidence is not admissible. However, there are 2 ways of bringing it out.
2 Ways in Which Parol Evidence is Admissible
i. Failure to object by the opposing lawyer when parol evidence is used (Article 1405)
If there is no objection, then parol evidence is admitted.
ii. Acceptance of benefits (Article 1405)
If there has been performance on 1 side and the other side accepts, then the Statute of Frauds is not applicable. Also, estoppel sets in so by accepting performance, the defect is waived.
b. The Statute of Frauds applies only to executory contracts and not to those which have been executed in whole or in part.
“Executed” here means there has been performance in part and acceptance by the other.