CHAPTER 7

VOIDABLE CONTRACTS

Art. 1390. The following contracts are voidable or annullable, even though there may have
been no damage to the contracting parties
 (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. (n)

Nature of Voidable Contracts

 They are valid until annulled. – All the requisites of a valid contract are present, which
are consent, object and cause or consideration. Hence before annulment, a voidable
contract is binding and enforceable.

 There is a defect in the element of consent. – The defect is either (TWO TYPES OF
DEFECTIVE CONSENT):
1. One of the parties is incapacitated to give consent. The following are incapable of
giving consent:
 Unemancipated Minors (18 years old and below and unmarried or living
with the parents, persons with special needs who depend on their parents
even if older than 18 years)
 Insane or demented persons
 Deaf-mutes who do not know how to read and write
2. Consent is obtained through mistake, violence, intimidation, undue influence or
fraud.

 They are susceptible to convalidation through acknowledgement, ratification or

confirmation or prescription to cure the defect in the contract.

VICES OF CONSENT
 Characteristics of Consent:
1. Intelligent
2. Real
3. Spontaneous
4. Free

 These vices of consent make a contract voidable:

1. Duress, where there is violence (force employed to wrest consent) or intimidation
(compulsion by a reasonable well-grounded fear of an imminent or grave evil
upon a person, his property or those of his spouse, ascendants, descendants).
 In this, the consent is not free and intelligent.
2. Undue Influence, where there is an improper advantage over the will of another
which deprives him of a reasonable free choice.
 In this, the consent is not spontaneous and free.

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3. Mistake or error, where there is an inadvertent and excusable disregard of a
circumstance material to a contract. Mistake must refer to substantial things or
conditions which moved the parties to enter into the contract.
 In this the consent is not intelligent.
 Three kinds of mistake:
 MISTAKE OF FACT - The party suffering from the mistake of
fact would not have entered in the contract if he had known the
true facts such as: 1.) Error in corpore or mistake as to the identity
of the object of the contract; 2.) Error in substantia or error in the
substance of the object; 3.) Error in qualitate or error in the
principal qualities of the object; 4.) Error in quantitate or error in
the quantity of the object - but error in the account gives rise to
correction only; 5. Error in negotio or error in the nature of the
transaction.
 MISTAKE OF LAW - General Rule: Ignorantia Legis Neminem
Excusat. Exception: When there is mutual error in the legal effect
of an agreement, when the real purpose in frustrated, consent may
be vitiated. However, error of law may be considered to have been
made in good faith when the mistake is founded upon a doubtful or
difficult question of law.
 OTHER ERRORS - 1.) When one of the parties is unable to read,
the person enforcing the contract must show that the terms have
been fully explained to the former; 2.) There is no mistake if the
party alleging it knew the doubt, risk or contingency affecting the
object of the contract.
4. Fraud, where insidious words or machinations are employed to induce the party to
enter into a contract, without which, he would not have entered into. Usual
exaggerations of trade when the other party had the opportunity to know the facts
are not fraudulent (LET THE BUYER BEWARE - Caveat Emptor). Mere
expression of opinion does not signify fraud unless made by an expert and the
other party relied on the former‘s special knowledge.
 In this case, consent is not intelligent.
 Status of sale of conjugal property by only one of the spouses:
 Accdg to DE LEON: The sale of conjugal property requires the
consent of both the husband and wife. The absence of the consent
of one renders the sale null and void, not merely voidable. (see Art.
124, Family Code.) Article 1390, par. 2, refers to contracts vitiated
by vices of consent, not those where consent is totally inexistent or
absent. (Guiang vs. Court of Appeals, 291 SCRA 372 [1998].)
 Accdg to JURADO: Note: There are others who believe that when
a wife sells or encumbers conjugal land without the consent of her
husband, the contract is unenforceable, not voidable. According to
them, the defect of the contract consists of lack of authority, not
incapacity. Therefore, No. (1) of Art. 1403 of the Civil Code is
applicable.
 In the case of Mercedes Canullas v. Hon Willelmo Fortun : If a
house is built with conjugal funds of the spouses, the husband’s
sale of the house and lot without his wife’s consent is voidable

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  Two Kinds of Fraud:
 DOLO CAUSANTE refers to fraud which is serious in character,
which induces the party to enter into a contract. This fraud affects
consent. It renders the contract voidable.
 Example: Eddie asked Boy, his boss, to sign a blank piece
of paper, for the contract of loan of Php20,000 that they
agreed upon. Eddie converted the paper into a contract of
loan for Php50,000.00. The fraud here is Dolo Causante.
 DOLO INCIDENTE refers to fraud which is not serious in
character and is not the cause which induces the party to enter into
a contract. This fraud affects the performance of a contract. It
renders the party liable for damages
 Example: Eddie sold Boy a gold necklace but delivered
only a gold-plated necklace. The fraud here is Dolo
Incidente.

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. (1301a)

 This article is a substantial reinstatement of Art. 1301 of the old Civil Code with the ff.
changes:
1. Undue influence was added to the 3rd paragraph
2. 4th paragraph of the old Civil Code provides: “ In those of error or deceit or
falsity of consideration, from the date of the consummation of the contract”
3. Married woman is no longer classified together with persons no incapacitated to
give consent

 Two types of attacking validity

1. Directly/ annulment - proper court action instituted to question validity of the
contract
 Example: A minor, after attaining the age of majority, questions before the
court a contract of loan he entered into while he was still a minor.
2. Indirectly/ defense - questioning the voidable nature of the contract/ relative
nullity of the contract as a matter of defense when enforced against a party
 Example: A contract of loan was being enforced by a person against
another which was entered into while the latter was still a minor. The latter
may interpose the defense of the voidability of the contract.
 Example: A creditor is enforcing a debt against a debtor but the
promissory note was signed while there was a gun pointed at the debtor.
The debtor may set up the defense that his consent was vitiated in the
promissory note.

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  Modes of curing the defect in contracts:
1. Ratification/Acknowledgement/Confirmation - Under the New Civil Code,
confirmation, ratification, and acknowledgment were all uniformly referred as
RATIFICATION
 Confirmation- to cure a defect in a voidable contract (Art. 1396, CC)
 Ratification- to cure the defect of lack of authority in an authorized
contract (Art. 1317 and 1405, CC)
 Acknowledgement- to remedy a deficiency of proof (Art. 1405)
 Example: An oral loan may be put into writing, or when a private
instrument is made a public instrument
2. Prescription (in voidable contracts) – when the party suffering from the defect in
consent does not annul the contract within the time prescribed which is FOUR
YEARS from the time:
 The violence or intimidation or undue influence ceases;
 The fraud or mistake is discovered; and
 The guardianship over minors or other incapacitated persons ceases.
 In Fabie v. Yulo, 24 Phil 240, it was held that remaining silent for
a certified period of time ratifies such a contract.

 Grounds for Annulling a Voidable Contract:

1. Consent was vitiated
2. One of the parties was incapacitated to give consent
 Repentance is not a ground for annulment. - It is not the function of the
law to protect or relieve a man from the consequences of a bad bargain.

 Effect of Annulment - The declaration of the inefficacy of a contract based on a defect in

order to restore them to their original position in which they were before the contract was
executed.

 Difference of Annulment and Rescission

RESCISSION ANNULMENT

1. The basis here is lesion (damages) 1. The basis here is vitiated consent or
incapacity to consent
2. The defect here is external or 2. The defect here is intrinsic (meeting of the
intrinsic minds)
3. The action is subsidiary 3. The action is principal
4. This is a remedy 4. This is a sanction
5. Private interest governs 5. Public interest governs
6. Equity predominates 6. Law predominates
7. Plaintiff may be a party or a third 7. Plaintiff must be a party to the contract
person (principally or subsidiarily)
8. There must be damage to the 8. Damage to the plaintiff is immaterial
plaintiff 9. Indemnity here is no bar to the prosecution of
9. If plaintiff is indemnified, the action
rescission cannot prosper
10. Compatible with the perfecrt 10. Here, defect is presupposed

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validity of the contract
11. To prevent rescission, ratification 11. To prevent annulment, ratification is required
is not required

Art. 1392. Ratification extinguishes the action to annul a voidable contract. (1309a)

 Remedies available to a voidable contract:

1. Ratification
2. Annulment

 Ratification and annulment are alternative remedies. If ratification has been selected, the
contract can no longer be annulled. If annulment has been chosen and a decree of
annulment of the contract has been obtained, the contract can no longer be ratified
because there is nothing to ratify. Annulment based on the original defects, after
ratification, cannot prosper. (Tan Ah Chan v. Gonzales, 52 Phil. 180)

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. (1311a)
RATIFICATION
 Types of Ratification:
1. Express ratification/confirmation/acknowledgment - when confirmation is manifested
in words or writing.
 Example: Jose loaned Php 100,000.00 to Wally. They executed a contract of
loan but the amount was left blank. Suddenly, Jose was trying to enforce a
contract of loan amounting to Php 200,000.00. Since Wally has a lot of money
and he knows that Jose badly needs the money for his sick daughter, he just
acknowledged the contract of loan as his own voluntary act despite the fraud.
2. Implied confirmation - an adoption of an unauthorized act which takes diverse forms
such as silence/acquiscence/retention of the benefits of the contract. This is equivalent
to waiver of right.
 Examples:
1. A minor sold a land and upon reaching 21, he disposed the greater part
of the proceeds of the land
2. The sale was through the threat and intimidation of . However, S
deposited the check for the purchase price and withdrew money from
time to time.

3. The injured part does voluntary performance after the cause of nullity
was known to him.

 Requisites of a Valid Ratification:

1. The contract must be a voidable one.
2. The person ratifying must know the reason for the contract being voidable (the cause
must be known). – If there are more than one causes and only one cause is known,

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 the person ratifying may file for annulment based on the cause which he has not
known before ratification.
3. The cause must not exist or must continue to exist anymore at the time of ratification
4. The ratification must have been made expressly or by an act implying a waiver of the
action to annul.
5. The person ratifying must be the injured party.

Art. 1394. Ratification may be effected by the guardian of the incapacitated person. (n)

 Who can ratify contracts entered by incapacitated persons?

 The incapacitated person, when the incapacity has ceased (such as when a minor
reaches the age of majority or when an insane person enters into a contract while
insane and ratifies it during a lucid interval)
 The guardians acting on behalf of the incapacitated persons since the person
entitled to ratify is still incapacitated.

Art. 1395. Ratification does not require the conformity of the contracting party who has no
right to bring the action for annulment. (1312)

 The person whose consent is not vitiated or who is not incapacitated need not conform to
the ratification of the one suffering from a vice of consent or the incapacity. As to him,
there is no defect in his consent when the contract was entered into. The guilty party’s
consent is not needed otherwise he may find a way of getting out of the contract.
o Example: Alfredo forced Carbonara to sell him his house for which they executed
a deed of sale. Afterwards, Carbonara won in the PCSO Lotto and decided that he
no longer needs the house that Alfredo forced him to sell. Besides, the house was
put up on a fault line. Carbonara ratified that the sale is his voluntary act. In this
case, Alfredo does not need to signify his acceptance of the ratification.
Carbonara may still collect the purchase price from Alfredo and Alfredo cannot
avoid paying the price by saying that he is not accepting the ratification of
Carbonara.

Art. 1396. Ratification cleanses the contract from all its defects from the moment it was
constituted. (1313)

 Retroactive Effect of Ratification: Confirmation makes the contract valid from its
inception. Hence, the ratification shall not prejudice the rights accrued to third persons.
 Example: On May 1, 2016, Don Henrico forced Volante to grant him a loan
amounting to Php 100,000.00 by pointing a gun at him. They executed a Loan
Contract where Vizcos signed as guarantor. On May 30, 2016, Volante ratified
the contract. However, Don Henrico cannot be located so he enforced the loan
against Vizcos. Vizcos paid. When Vizcos was collecting from Don Henrico, the
latter contended that the loan was voidable and that it was only ratified on May
30, 2016. In this case, the contention of Don Henrico is not tenable because the
loan is considered valid from its constitution and the rights accrued while it was
still voidable shall not be impaired by the ratification.

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

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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. (1302a)

 Who may annul voidable contracts?

 Any party principally or subsidiarily obliged, whose consent was vitiated
 The guardians of incapacitated persons
 The incapacitated person, when the incapacity has ended

 Who may not annul voidable contracts?

a. The party who employs violence, intimidation, undue influence, or
fraud or caused the mistake – He who comes to equity must come with
clean hands
b. The capacitated person, as to the incapacity of the other party
 Example: Floyd lent Php 10,000.00 to Manny, a minor. Floyd
cannot annul the contract by reason of Manny’s minority. Only
Manny can annul the contract.
c. The incapacitated person, while still incapacitated
 Example: Jessie entered into a contract of loan with James, 15
years old. James cannot annul the contract until he is 18 years
old. However, his guardian may annul the contract on his behalf.
d. Either party when both parties are incapacitated. The contract is
unenforceable and annulment is not the proper remedy.
 Example: Pantaleon, an insane person, and Leila, a minor,
entered in a contract of loan. Neither party can annul the
contract.
e. A minor who misrepresents his age and the other party is misled as
to his age, the minor cannot sue later for annulment by reason of estoppel.
 Example: Amihan, 16 years old, loaned Php 10,000.00 from
Danaya. Amihan told Danaya that she was 20 years old and
Danaya believed her. Amihan cannot annul the contract by virtue
of her minority because she misrepresented her actual age.
f. The creditors of the party whose consent was vitiated
 Example: A was forced by B to sign a contract. C, a creditor of
A, wants to annul the contract. Is C allowed to do so? No. C is
not allowed to do so. If the contract prejudices him, and A has no
other property, then C may ask for the rescission of the contract,
not its annulment. C cannot ask for annulment because he is not
obliged by the terms of said contract, either principally or
subsidiarily.

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. (1303a)

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Art. 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. (1304)

 Effects of Annulment:
 The contract shall be declared void by the Court.
 The rights and obligations arising from the contract shall be extinguished.
 General Rule: If the contract has already been performed, there shall be mutual
restitution of the things received by each party.
 Exception 1: If the prestation is to render service, the value of the service
shall be the basis for damages.
 Exception 2: If the defect is on the incapacity of one of the parties, there
shall be restitution only insofar as the incapacitated party was benefited.
 Example: Mike loaned Php 10,000.00 to Mel, an insane person.
Mel kept the Php 1,000.00 and threw away the Php 9,000.00. After
Mel was cured of insanity, she sought to annul the contract. She is
liable to return only Php 1,000.00 pesos because that was the
extent to which she was benefited.
 Exception to the exception: If the incapacitated person has
benefited but the thing is lost through fraud or fault of the
incapacitated person, the annulment will no longer prosper.
However, if the thing is lost through fortuitous event, the
annulment of the contract may prosper.
 There shall be return of the fruits, and the price with interests.
 The party who was capacitated has the burden to prove that the incapacitated
person benefited by the proceeds of the contract.

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. (1307a)

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. (1314a)

 Effect of the loss of the thing that must be returned:

 Annulment by reason of vitiation of consent:
 If the thing lost without fault of the person obliged/guilty party, there is no
more obligation to return such thing but there shall still be annulment. If
he is in bad faith, pay for the value of the thing/damages.
 If the thing is lost through the fault of the guilty party, the obligation to
restore is not extinguished but converted into an obligation to pay:
1. Indemnity for damages
2. The value of the thing at the time of the loss
3. Interest from the same date

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 4. Fruits received from the time it was given to the time of the
loss
2. Annulment by reason of incapacity:
 Loss through fortuitous event - this shall not be an obstacle to the success
of the action for annulment
 Loss through fault, negligence - the right to institute annulment is
extinguished.
 Example: An insane person cannot sue for annulment of he had
squandered the proceeds while insane (Answer of the Code of
Commission which contradictory to the above mentioned article)
 Example: A minor cannot be guilty of fraud if he sold a house
which was latter destroyed by a fortuitous event

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. (1308)

 Restitution must be MUTUAL. Therefore, if one of the parties is not able to restore the
thing because the thing is lost through his fault, the action for annulment is extinguished.
 Example: A forced B to take A’s car in exchange for B’s ring. B asked for
annulment, and the court gave the decree of annulment ordering each to return
what had been received. B refused to give A the car. A then cannot be compelled
to give back the ring.

 If a party cannot restore because of loss in a fortuitous event but such party offers to pay
the value of the thing with the fruits received (without fault), the other party can be
required to make restitution.
 Example: Pedro forced Inggo to give him his dog. In exchange, Pedro gave Inggo
a cellphone. Inggo had the contract annulled and mutual restitution was ordered.
However before the dog could be returned, it was struck by lightning causing its
death. Pedro offered to give Php 5,000, which is the value of the dog. Inggo can
be obliged to give back the cellphone.