How Defective Contracts Are Classified

Defective contracts can be classified in several ways:

 Voidable and Annullable Contracts: These can be defective if one party was
incapable of giving consent or if consent was granted by mistake, threat, violence,
fraud, or undue influence.
 Unenforceable contracts: These are contracts that can't be enforced for a variety
of reasons.
 Void or Inexistent Contracts: These have no legal effect because they don't legally
exist.

Other defective contracts include those that are partially ineffective and partially valid. They
don't fall under any of the above classifications, are only ineffective with respect to certain
persons, but can be effective to other parties. These are known as Relatively Ineffective
Contracts.

Distinctions in Defective Contracts

Contracts become defective typically by:

 Defect itself
 Damage or prejudice
 Effect
 Remedy

Contracts that are void due to defect itself include:

 Void contracts that are caused by illegality or lack of essential elements.

 Voidable contracts that are defective because of their methods of consent.
 Rescissible contracts that are caused by damages or lesion to one of the contract
parties or another third party.
 Unenforceable contracts that lack authority, capacity, or both parties' consent.
 Contracts that are not compliant with the Statute of Frauds or entered into on behalf
of another party without their authority.

Void contracts cannot be ratified, but voidable contracts can be ratified in some
circumstances. Rescissible contracts might be subject to convalidation, but not official
ratification. Unenforceable contracts are also subject to ratification in some cases.
Under Article 1410, void contracts cannot be cured by prescription, but voidable ones can.
Rescissible contracts can also be cured by prescription while unenforceable ones cannot.

Obligations Created by Contract Rescission

Rescinding a contract creates something called mutual restitution. Mutual restitution is not
applicable if a creditor received nothing from the contract and the thing owed is already in
possession of a party in good faith. It is subject to indemnification only if two more
alienations of liability exist from the first party in violation.
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