Article 1409

The following contracts are inexistent and void from the beginning:

1.) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;

2.) Those which are absolutely simulated or fictitious;

3.) Those whose cause or object did not exist at the time of the transaction;

4.) Those whose object is outside the commerce of men;

5.) Those which contemplate an impossible service;

6.) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;

7.) Those expressly prohibited or declared void by law.

These contracts cannot be ratified.  Neither can the right to set up the defense or illegality be waived. (n)

Ang mga sumusunod na kontrata ay walang bisa sa simula’t sapul:

1.) Mga kontrata na ang dahilan, layunin, at intensyon ay labag sa batas, moral, mabuting pamantayan, pampublikong utos o pampublikong patakaran;

2.) Mga kontrata na walang dudang kunwarian or gawa-gawa lamang;

3.) Mga kontrata na may dahilan at layunin na hindi umiiral sa panahon ng transaksiyon;

4.) Mga kontrata na ang layunin ay labas sa komersyo ng sangkatauhan;

5.) Mga kontrata na nagmumungkahi ng imposibleng gawain;

6.) Mga kontrata na kung saan ang intensiyon ng bawat partido tungkol sa pangunahing layunin nito ay hindi matiyak;

7.) Mga kontrata na hayagang ipinagbabawal o dineklarang walang bisa ng batas.

Ang mga kontrata na ito ay hindi maaaring ma-ratify, at ang karapatan na itaguyod ang depensa o pagiging ilegal nito ay hindi matatalikdan.

Discussion:

Distinctions between Void and Rescissible Contracts

Basis	Void Contract	Rescissible Contract
1. Nature of defect	The defect is inherent in the contract itself.	The defect is in its effects, which is either against once of the parties or a third person.
2. Interest served	Nullity is a matter of law and public interest.	It is based on equity and is more a matter of private interest.
3. Consequences when no action is filed	There are no legal effects even if no action is filed to set it aside.	Contract remains valid if no action is filed. It produces legal effects.
4. Prescription	Action to declare its nullity does not prescribe (Art. 1410)	Action to rescind contract prescribes within four (4) years (Art. 1389).

Distinctions between Void and Voidable Contracts

Basis	Void Contract	Voidable Contract
1. Cause of defect	Absence of essential element/s of a contract.	Consent is vitiated or there is incapacity to give consent.
2. Effect	It has no effect even if not set aside, because it is non-existent.	It is a valid contract until it is set aside.
3. Ratification	It cannot be ratified.	It can be ratified.
4. Against whom nullity can be set up	Its nullity can be set up against any person asserting right arising from it, and his successors in interest not protected by law.	Its nullity can be set up only against a party thereto.
5. Prescription	Action to declare nullity of contract does not prescribe (Art. 1410).	Action to annul contract prescribes within four (4) years (Art. 1391).

Distinctions between Void and Unenforceable Contracts

Basis	Void Contract	Unenforceable Contract
1. Status	There is no contract at all	There is a contract but which cannot be enforced.
2. Ratification	It is not subject to ratification.	It is subject to ratification.
3. Attack by third persons	It can be assailed by third persons whose interests are directly affected.	It cannot be assailed by third persons.
4. Causes	Causes of nullity are those enumerated in Article 1409.	Causes of unenforceability are enumerated in Article 1403 (par.2)

(Pineda, Ernesto L. Obligations and Contracts, 2009)

Case Illustration: GoChan vs. Young (354 SCRA 207)

Article 1410

The action or defense for the declaration of the inexistence of a contract does not prescribe.

Ang aksyon o depensa sa deklarasyon ng pagiging walang bisa ng isang kontrata ay hindi nagtatapos at pwedeng idulog sa korte sa anumang oras.

Discussion:

The action for the declaration of inexistence or the defense on such is imprescriptible. The mere lapse of time does not validate a void contract, unlike in voidable contracts, which, if not assailed within the specific period provided by law, shall remain valid.

It is not necessary to go to the court to declare the nullity of a void contract if both parties agree that it is void and henceforth, on their own volition, change it. However, to avoid instances where one party refuses to restore what he has received out of a void contract, it is better to go to the court first to avoid inconvenience or to avoid taking the law into his own hands. Taking the law into one’s hands may lead to coercion which is a criminal offense.

Laches:

Laches has been defined as the failure or neglect, for an unreasonable length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it (Lim Tay vs CA 293 SCRA 634).

The right to have a contract declared void ab initio may be barred by laches although not barred by prescription.

It is an application of equity, based upon the grounds of public policy which require for the peace of society, discouraging stale claims. It is however exercised on the discretion of the court, its application controlled by equitable considerations.

Case Illustration: Metropolitan Waterworks and Sewerage System vs Court of Appeals, 297 SCRA 287 (1998)

 

Article 1411

When the nullity proceeds from the illegality of the cause or object of the contract, and the set constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract.

This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given, and shall not be bound to comply with his promise.

Kapag ang pagpapawalang bisa ay mag tungo sa ilegalidad ng sanhi o bagay sa kontrata, at ang pagtatakda ay bumuo ng criminal offense, ang parehong partido ang may pagkakamali, sila ay walang aksyon laban sa isat isa, at pareho silang uusigin. Moreover, ang probisyon ng Revised Penal Code katulad sa pagaalis ng epekto o instrumento sa krimen ay dapat angkop sa bagay o sa halaga ng kontrata.

Ang patakaran na ito dapat angkop kapag ang isang partido ay nagkasala; ngunit ang kainosentehan ng isa ay maaring kunin ang kanyang binigay, at hindi dapat nakatali para maisakatuparan ang kanyang pangako.

If the contract is still on its executory stage, they cannot compel one another to fulfill their respective promises; and

If the contract was already executed, they cannot get back what they had already paid or delivered to one another. The law will leave them where they are.

Case Illustration: Fausta Batarra vs. Francisco Marcos