RESCISSIBLE CONTRACTSVOIDABLE CONTRACTSUNENFORCEABLE CONTRACTSVOID OR INEXISTENT CONTRACTS

DEFINITIONRescissible contract is a contract which is valid because it contains all of the essential requisites prescribed by law, but which is defective because of injury or damage to either of the contracting parties or to third persons.Voidable contract is a contract in which all the essential elements for validity are present, but the element of consent is vitiated either by lack of legal capacity of one of the contracting parties, or by mistake, violence, intimidation, undue influence or fraud.Unenforceable contracts are those which cannot be enforced by a proper action in court, unless they are ratified because they are entered into without authority or legal representation or with excess of powers, or those that do not comply with the Statute of Frauds or those both of the contracting parties are incapable of giving consent to a contract.VOID CONTRACTSVoid contracts are contracts where all the requisites prescribed by law for contracts are present, but the cause, object or purpose is contrary to law, morals, good customs, public order or public policy, or they are prohibited or declared by law to be void.

INEXISTENT CONTRACTSInexistent contracts are those where one or some or all of those requisites which are essential for validity are absolutely lacking.

GROUNDS

In rescissible contracts, there are several causes or grounds such as lesion, fraud and others expressly specified by law.In voidable contracts, the defect consists in the vitiation of consent or in the legal capacity of one of the contracting parties.In unenforceable contracts, the grounds of unenforceability are based on contracts entered without or in excess of authority, did not comply with the Statute of Frauds, or when the contract is entered by both incapacitated persons. In void or inexistent contract, the defect is based in absolute lack in fact or in law of one or some or all of the essential elements of a contract.

EFFECTSRescissible contracts are valid until rescinded.Voidable contracts are valid and binding until annulled by a competent court.Unenforceable contracts are contracts that are not binding until ratified.A void contract is neither valid nor binding; it produces no effect. In an inexistent contract, it is void ab initio.

WHO CAN BRING ACTIONAn action for rescission can be attacked directly by a contracting party who has suffered injury or by a third person who is defrauded.An action for annulment can be invoked by the injured party or by the third person who is prejudiced.Note that the enforcement of this type of contract cannot be done through a proper action in court, unless ratified. Third persons cannot assail the enforcement of unenforceable contracts.Generally, there is no action needed to declare them void since they are inexistent from the beginning.

Note that third persons cannot assail void contracts, unless their interests are directly affected.

NULLITY BASED ONRescissible contracts are based on equity.Voidable contracts are based on the law.Unenforceable contracts are based on law, e.g. Statute of Frauds, etc.Void and inexistent contracts are based on law.

CONVALIDATIONRescissible contracts are susceptible only to prescription:1. An action for rescission, as a general rule, should be instituted four years from the date the contract was entered into;2. In cases of persons under guardianships, four years from the termination of incapacity; and3. In cases of absentees, four years from the time the domicile is known.Voidable contracts are susceptible to prescription:1. An action for annulment, as a general rule, should be instituted within four years;2. In cases of intimidation, violence or undue influence (IVU), from the time the defect of the consent ceases;3. In cases of mistake or fraud (MF), from the time of the discovery of the defect ceases;4. In cases of contracts entered by minors or other incapacitated persons, from the time guardianship ceases.

Voidable contracts are susceptible to ratification, either expressly or tacitly. It may be ratified by guardians of incapacitated persons or by the injured party himself, provided that he is capacitated or has become capacitated.

It is also extinguished by the loss of the thing which is the object of the contract through the fraud or fault of the person who is entitled to institute the action for the annulment of the contract.Unenforceable contracts are only susceptible to ratification:1. When both parties are incapacitated to give consent to a contract, a parent or guardian of either parties can ratify it;2. In infringement of Statute of Frauds, the contract is ratified when:a. There is failure to object to the presentation of evidence; orb. There is acceptance of benefits under them.

Void or inexistent contracts can neither be ratified nor does not prescribe.

WHAT CONTRACTS ARE:The following contracts are rescissible contracts:1. Those entered by guardians when the wards they represent suffered lesion by more than one-fourth of the value of the things which are the object;2. In representation of absentees, if the latter suffered lesion stated in the preceding number;3. Undertaken in fraud of creditors when the latter cannot in any manner collect claims due to them;4. Things under litigation if they have been entered into by the defendant without knowledge and approval of the litigants or of competent authority;5. Specially declared by law to be subject of rescission; and6. Payments made in state of insolvency where the debtor cannot be compelled to fulfill his obligations at the time when they were effected are also rescissible.The following contracts are voidable contracts: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.The following contracts are unenforceable, unless they are ratified: 1. Entered into another persons name 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;3. Those where both parties are incapable of giving consent to a contract. The following contracts are void or inexistent:1. Whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;2. Absolutely simulated or fictitious;3. Whose cause or object did not exist at the time of the transaction;4. Whose object is outside the commerce of men;5. Which contemplate an impossible service;6. Where the intention of the parties relative to the principal object of the contract cannot be ascertained; 7. Expressly prohibited or declared void by law.