Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties:
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Professor Ruben F. Balane
Page 338 of 354(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.
Art. 1391. The action for annulment shall be brought within four years.
This period shall begin:
In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases.
In case of mistake or fraud, from the time of the discovery of the same.
And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardianship ceases.
Art. 1392. Ratification extinguishes the action to annul a voidable contract.
Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right.
Art. 1394. Ratification may be effected by the guardian of the incapacitated person.
Art. 1395. Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment.
Art. 1396. Ratification cleanses the contract from all its defects from the moment it was constituted.
Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily.
However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract.
Art. 1398. An obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law.
In obligations to render service, the value thereof shall be the basis for damages.
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Professor Ruben F. Balane
Page 339 of 354Art. 1399. When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him.
Art. 1400. Whenever the person obliged by the decree of annulment to return the thing can not do so because it has been lost through his fault, he shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date.
Art. 1401. The action for annulment of contracts shall be extinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings.
If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an obstacle to the success of the action, unless said loss took place through the fraud or fault of the plaintiff.
Art. 1402. As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him.
A voidable contract is a contract in which all of the essential elements for validity are present, but the element of consent is vitiated either by lack f legal capacity of 1 of the contracting parties or by mistake, violence, intimidation, undue influence, or fraud.
Voidable contracts are binding unless they are annulled by a proper action court. They are susceptible to confirmation.
There is a difference between confirmation and ratification.
Confirmation is the process of curing the defect of a voidable contract.
Ratification is the process of curing contracts which are defective because they were entered into without authority.
The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties
a. Those where one of the parties is incapable of giving consent to a contract
The following cannot give consent to a contract (Article 1327):
i. Unemancipated minors
Where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefore. Necessaries include everything that is indispensable for sustenance, dwelling, clothing, and medical attendance.
Contracts effected by minors who have already passed the age of puberty and adolescence and are near the adult age, when they pretend to have already reached the age of
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Professor Ruben F. Balane
Page 340 of 354majority, while in fact they have not, are valid, and cannot be permitted afterwards to excuse themselves from compliance with obligations assumed by them or seek their annulment. This is in consonance with the rules of estoppel.
(Mercado vs. Espiritu).
However in Braganza v, De Villa, the SC said that the misrepresentation of an incapacitate person does not estop him from denying that he was of age, or from asserting that he was under age, at the time he entered into the contract.
According to Professor Balane, this view is very logical. If the minor is too young to enter into contracts, he is too young to be estopped.
ii. Insane or demented persons, and deaf mutes who do not know how to write
Art. 1328. Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable.
Art. 1329. The incapacity declared in article 1327 is subject to the modifications determined by law, and is understood to be without prejudice to special disqualifications established in the laws.
b. Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud
Art. 1330. A contract where consent is given through mistake, violence, intimidation, undue influence or fraud is voidable.
i. Mistake
Art. 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract .
Mistake as to the identity or qualification of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract.
A simple mistake of account shall give rise to its correction.
Art. 1332. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former.
Art. 1333. There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract.
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Professor Ruben F. Balane
Page 341 of 354Art. 1334. Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent.
Art. 1342. Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual.
Art. 1343. Misrepresentation made in good faith is not fraudulent but may constitute error.
ii. Violence
Art. 1335, 1st ¶. There is violence when in order to wrest consent, serious or irresistible force is employed.
Violence shall annul the obligation, although it may been employed by a 3rd person who did not take part in the contract (Article 1336).
Requisites of Violence
1. Irresistible physical force is employed
2. The force is the determining cause for giving consent iii. Intimidation
Art. 1335, 2nd ¶. There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent.
Requisites of Intimidation
1. The threat must be the determining cause for giving consent 2. The threatened act is unjust and unlawful
A threat to enforce one’s claim through competent authority, if the claim is just or legal, does not vitiate consent (Article 1335, 4th ¶).
The threat to enforce a right, should not be aimed at a result which is contrary to law or morals, or which is unjust and contrary to good faith. Although it is lawful to exercise rights, it is not always lawful to use them for purposes different from those for which they were created. Thus, although it is lawful to report crimes, the threat to report it may be illicit if the purpose is not to cooperate in the discovery and prosecution of the crime, but to obtain some prestation from the culprit which otherwise could not be obtained and which does not constitute indemnity for damages for the crime committed.
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Professor Ruben F. Balane
Page 342 of 354 Thus, the rule is, generally, a threat to do something lawful does not constitute intimidation.
Example: If you don’t marry my daughter, I’ll report you to the IBP. This is not unlawful because the person did commit immorality.
Sometimes, though, it may constitute intimidation.
Example: A saw B commit murder. A threatened B that he will report him to the police unless B gives A his house. This is intimidation because there is no connection between the crime and the contract.
3. The threat is real and serious
For example the threat must be to kill you or burn your house and not merely to pinch you.
4. The threat produces a well-grounded fear that the person making it can and will inflict harm
To determine the degree of intimidation, the age, sex, and condition of the person shall be borne in mind (Article 1335, 3rd ¶).
For example, a 75year old man who is bed ridden and says that he will kill you does not produce a well-grounded fear.
Intimidation shall annul the obligation, although it may have been employed by a 3rd person who did not take part in the contract (Article 1336).
iv. Undue influence
Art. 1337. There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the confidentiality, family, spiritual and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weakness, or was ignorant or in financial distress.
v. Fraud
Art. 1332. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former.
Art. 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.
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Professor Ruben F. Balane
Page 343 of 354 This is known as deceit or dolo causante. This is different from dolo incidente which means fraud on things which would not prevent you from entering into a contract but may hold the other liable for damages.
Requisites of Fraud
1. Fraud is employed by 1 party on the other (Articles 1342, 1344)
2. The other party was induced to enter into the contract (Article 1338)
3. The fraud must be serious (Article 1344) 4. There is damage or injury caused
Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.
Art. 1340. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent.
Art. 1341. A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former’s special knowledge.
Art. 1342. Misrepresentation by a 3rd person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual.
Art. 1343. Misrepresentation made in good faith is not fraudulent but may constitute error.
Art. 1344. In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties.
Incidental fraud only obliges the person employing it to pay damages.
If a 3rd person should commit violence or intimidation on 1 of the contracting parties and this vitiates the contracting party’s consent, then the contract may be annulled (Article 1336). By analogy, if a 3rd person should exert undue influence on 1 of the contracting parties and this vitiates the consent of the contracting party, then the contract may be annulled. However, if the 3rd party commits fraud, damages is the only remedy unless the fraud committed by the 3rd person has created a mutual substantial mistake (Article 1342).
Rules Regarding Voidable Contracts
a. Voidable contracts are effective unless set aside (Article 1390).
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Professor Ruben F. Balane
Page 344 of 354b. The validity of a voidable contract can only be assailed in a suit for that purpose (i.e. complaint or counterclaim).
The action for annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused ,mistake base their action upon these flaws of the contract (Article 1397).
The action for annulment shall be brought within 4 years. This period shall begin
i. Intimidation – from the time the defect of the consent ceases ii. Violence – from the time the defect of the consent ceases
iii. Undue influence – from the time the defect of the consent ceases
iv. Mistake – from the time of the discovery of the mistake v. Fraud – from the time of the discovery of the fraud
The 4 year prescription period to annul contracts entered into by minors or other incapacitated persons shall begin from the time the guardianship ceases (Article 1391, 4th ¶).
An obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law (Article 1398, 1st ¶).
In obligations to render service, the value thereof shall be the basis for damages (Article 1398, 2nd ¶).
When the defect of the contract consists in the incapacity of 1 of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him (Article 1399).
What if the Thing to Be Returned is Lost i. Loss due to Fault of Defendant
Defendant has to pay the plaintiff 1. Value of the thing loss
2. Fruits if any 3. Interest
ii. Loss due to a Fortuitous Event or due to a 3rd party
Defendant has to pay the plaintiff 1. Value of the thing loss
2. Fruits if any
iii. Loss due to Fault or Fraud of Plaintiff
The plaintiff loses the right to annul (Article 1401).
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Professor Ruben F. Balane
Page 345 of 354 There is fault on the part of the plaintiff once the plaintiff regains capacity.
iv. Loss without Fault on the Plaintiff’s Part
Commentators have a difference of opinion
1. The right to annul is extinguished unless the plaintiff offers to pay the value of the object at the time of loss
2. The plaintiff is entitled to annul without having to pay anything.
As long as 1 of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him (Article 1402).
The action for annulment will not prosper in the following:
i. If the contract has been confirmed (Article 1392) ii. If the action to annul has prescribed (Article 1391)
iii. When the thing which is the object of the contract is lost through the fault or fraud of the person who has a right to institute the proceedings (Article 1401, 1st ¶)
iv. Estoppel
c. Voidable contracts can be confirmed.
Confirmation extinguishes the action to annul a voidable contract (Article 1392).
Confirmation is the proper term for curing the defect of a voidable contract.
Confirmation cleanses the contract from all its defects from the moment it was constituted (Article 1396).
Requisites of Confirmation
1. That the contract is a voidable or annullable contract
2. That the ratification is made with knowledge of the cause for nullity
3. That at the time the ratification is made, the cause of nullity has already ceased to exist
Confirmation may be effected expressly or tacitly. It is understood that there is tacit confirmation if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right (Article 1393).
d. Voidable contracts can be confirmed only by the party whose consent was vitiated
Confirmation does not require the conformity of the contracting party who has no right to bring the action for annulment (Article 1395).
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Professor Ruben F. Balane
Page 346 of 354 Confirmation may be effected by the guardian of the incapacitated person (Article 1394).