--

Law on
obligations and
contracts
 Title II:
ARTS. 1305-1422

Chapter 1:

General provisions
LAW ON contracts
Chapter 2:

Essential requisites of contracts

Chapter 3:

Form of contracts
 Title II:
ARTS. 1305-1422

Chapter 4:

REFormation of instruments
LAW ON contracts
Chapter 5:

Interpretation of contracts

Chapter 6:

Rescissible contracts
 Title II:
ARTS. 1305-1422

Chapter 7:

Voidable contracts
LAW ON contracts
Chapter 8:

Unenforceable contracts

Chapter 9:

Void or inexistent contracts

INTERPRETATION OF CONTRACTS
(articles 1370-1379)
ART. 1370

If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its
stipulations shall control.

If the words appear to be contrary to the evident intention of the

parties, the latter shall prevail over the former. (1281)
ART. 1371

In order to judge the intention of the contracting parties, their

contemporaneous and subsequent acts shall be principally considered.
(1282)
ART. 1372

However general the terms of a contract may be, they shall not be
understood to comprehend things that are distinct and cases that are
different from those upon which the parties intended to agree. (1283)
ART. 1373

If some stipulation of any contract should admit of several meanings, it

shall be understood as bearing that import which is most adequate to
render it effectual. (1284)
ART. 1374

The various stipulations of a contract shall be interpreted together,

attributing to the doubtful ones that sense which may result from all of
them taken jointly. (1285)
ART. 1375

Words which may have different significations shall be understood in

that which is most in keeping with the nature and object of the contract.
(1286)
ART. 1376

The usage or custom of the place shall be borne in mind in the

interpretation of the ambiguities of a contract, and shall fill the
omission of stipulations which are ordinarily established. (1287)
ART. 1377

The interpretation of obscure words or stipulations in a contract shall

not favor the party who caused the obscurity. (1288)
ART. 1378

When it is absolutely impossible to settle doubts by the rules established in

the preceding articles, and the doubts refer to incidental circumstances of a
gratuitous contract, the least transmission of rights and interests shall prevail.
If the contract is onerous, the doubt shall be settled in favor of the greatest
reciprocity of interests.

If the doubts are cast upon the principal object of the contract in such a way
that it cannot be known what may have been the intention or will of the
parties, the contract shall be null and void. (1289)
ART. 1379

The principles of interpretation stated in Rule 123 of the Rules of Court

shall likewise be observed in the construction of contracts. (n)
 MEANING OF INTERPRETATION OF CONTRACTS

Interpretation of a contract is the determination of the

meaning of the terms or words used by the parties in
their contract.

Determining the intent of the parties is usually what

courts say it is when they interpret a contract’s language
in particular cases.
 Literal meaning controls when language clear.

Valid and enforceable contracts, being the private laws of the contracting parties,
should be fulfilled according to the literal sense of their stipulations as they appear
on the face of the contract. The words used therein should be given their natural and
ordinary meaning unless a technical meaning was intended.
 Evident intention of parties prevails over terms of contract.
(1) Where terms in conflict with manifest intention. — When the words of a contract
are clear and readily understandable, there is no room for construction. (Vda. de
Macoy vs. Court of Appeals, 206 SCRA 244 [1992].)

(2) Determination by court of true intention. — The words used by the parties to
project that intention, all the words not just a particular word or two, and words in
context not words standing alone, must be looked into. (Fernandez vs. Court of
Appeals, 166 SCRA 877 [1988].)
 Rules in case doubts are impossible to settle.
(1) Gratuitous contract. — If the doubts refer to incidental circum- stances of a
gratuitous contract (see Art. 1350.), such interpretation should be made which
would result in the least transmission of rights and interests.

(2) Onerous contract. — If the contract in question is onerous (see Art. 1350.), the
doubts should be resolved in favor of the greatest reciprocity of interests. (see
Rodriguez vs. Belgica, 1 SCRA 611 [1961].)
 Rules in case doubts are impossible to settle.
(3) Principal object of contract. — If the doubt refers to the principal object of the
contract and such doubt cannot be resolved, thereby leaving the intention of the
parties unknown, the contract shall be null and void.
 Rule where doubt involves a contract of sale.
(1) Greatest reciprocity of interests. — If there is doubt for example, in a contract of
sale, which is essentially onerous, the same shall be settled in favor of the
greatest reciprocity of interests.

(2) Least transmission of rights. — If the doubt is whether the transaction is one of
sale or another contract, the one entered into should be deemed that which
would effect “the least transmission of rights”.
 Rule where doubt involves a contract of sale.
(3) An equitable mortgage. — In view of “the countless injustices, oppressive
transactions, and violations of law which have been committed in connection with
the contract of sale with pacto de retro.” (Report of the Code Commission, p. 63.)
Article 1603 expressly provides that “in case of doubt, a contract purporting to be a
sale with a right to repurchase shall be construed as an equitable mortgage.”
 Principles of interpretation in the Rules of Court applicable.
(1) The language of a writing shall have the legal meaning it bears in the place
of execution, unless the parties intended otherwise. (Sec. 10; see Art. 1370.)
(2) An instrument with several provisions or particulars shall be construed so
as to give effect to all. (Sec. 11; see Art. 1373.)
(3) In case of conflict between a general and a particular provision, the latter
shall prevail; so a particular intent will control a general one that is
inconsistent with it. (Sec. 12; see Arts. 1370, 1372.)
(4) The circumstances under which the instrument was made, including the
situation of the subject thereof and of the parties to it, may be considered in
its interpretation. (Sec. 13; see Art. 1371.)
 Principles of interpretation in the Rules of Court applicable.
(5) Terms are presumed to have been used in their ordinary and generally accepted meaning
unless intended to have been used in a different sense. (Sec. 14; see Art. 1375.)
(6) In case of conflict, the written words prevail over the printed form. (Sec. 15.)
(7) Experts and interpreters may be asked to declare the characters or the meaning of the
language when such characters are difficult to decipher or the language is not understood by
the court. (Sec. 16.)
(8) Of two constructions, that sense is to prevail against the party in which he understood it
or which is most favorable to the party in whose favor the provision was made. (Sec. 17; see
Art. 1377.)
(9) Of two constructions, one in favor and the other against natural right, the former is to be
adopted. (Sec. 18.)
(10)Usage may be the basis to determine the true character of an instrument. (Sec. 19; see
Art. 1376.)
DEFECTIVE CONTRACTS
RESCISSIBLE CONTRACTS
(articles 1380-1389)
ART. 1380

Contracts validly agreed upon may be rescinded in the cases

established by law. (1290)
ART. 1381

The following contracts are rescissible:

(1) Those which are entered into by guardians whenever the wards whom they represent suffer
lesion by more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the
preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect
the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the defendant
without the knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission. (1291a)
ART. 1382

Payments made in a state of insolvency for obligations to whose

fulfillment the debtor could not be compelled at the time they were
effected, are also rescissible. (1292)
ART. 1383

The action for rescission is subsidiary; it cannot be instituted except

when the party suffering damage has no other legal means to obtain
reparation for the same. (1294)
ART. 1384

Rescission shall be only to the extent necessary to cover the damages

caused. (n)
ART. 1385

Rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest; consequently, it
can be carried out only when he who demands rescission can return whatever he
may be obliged to restore.

Neither shall rescission take place when the things which are the object of the
contract are legally in the possession of third persons who did not act in bad faith.

In this case, indemnity for damages may be demanded from the person causing the
loss. (1295)
ART. 1386

Rescission referred to in Nos. 1 and 2 of Article 1381 shall not take

place with respect to contracts approved by the courts. (1296a)
ART. 1387

All contracts by virtue of which the debtor alienates property by gratuitous title are presumed
to have been entered into in fraud of creditors, when the donor did not reserve sufficient
property to pay all debts contracted before the donation.

Alienations by onerous title are also presumed fraudulent when made by persons against
whom some judgment has been issued. The decision or attachment need not refer to the
property alienated, and need not have been obtained by the party seeking the rescission.

In addition to these presumptions, the design to defraud creditors may be proved in any other
manner recognized by the law of evidence. (1297a)
ART. 1388

Whoever acquires in bad faith the things alienated in fraud of creditors,

shall indemnify the latter for damages suffered by them on account of
the alienation, whenever, due to any cause, it should be impossible for
him to return them.

If there are two or more alienations, the first acquirer shall be liable
first, and so on successively. (1298a)
ART. 1389

The action to claim rescission must be commenced within four years.

For persons under guardianship and for absentees, the period of four
years shall not begin until the termination of the former's incapacity, or
until the domicile of the latter is known. (1299)
 Meaning of rescissible contracts.

Rescissible contracts are those validly agreed upon

because all the essential elements exist and, therefore, legally
effective, but in the cases established by law, the remedy of
rescission is granted in the interest of equity.
 Binding force of rescissible contracts.

They are valid and enforceable although subject to rescission by the court when there
is damage or prejudice to one of the parties or to a third person. In a rescissible
contract, there is no defect at all but by reason of some external facts, its
enforcement would cause injustice.

A rescissible contract is valid until rescinded. It is defective only in the sense that it
causes economic prejudice or damage to one of the parties or to a third person.
 Meaning of rescission.

Rescission is an equitable remedy granted by law to the contracting parties and

sometimes even to third persons in order to secure reparation of damages caused
them by a valid contract, by means of the restoration of things to their condition prior
to the celebration of said contract. (see 8 Manresa 748-749.)
 Requisites of rescission.

(1) The contract must be validly agreed upon (Art. 1380; see Onglengco vs. Ozaeta and Hernandez, 70
Phil. 43 [1940].);
(2) There must be lesion or pecuniary prejudice or damage to one of the parties or to a third person
(Art. 1381.);
(3) The rescission must be based upon a case especially provided by law (Arts. 1380, 1381, 1382.);
(4) There must be no other legal remedy to obtain reparation for the damage (Art. 1383.);
(5) The party asking for rescission must be able to return what he is obliged to restore by reason of the
contract (Art. 1385, par. 1.);
(6) The object of the contract must not legally be in the possession of third persons who did not act in
bad faith (Ibid., par. 2.); and
(7) The period for filing the action for rescission must not have prescribed. (Art. 1389.)
 Circumstances denominated as badges of fraud.

(1) The fact that the consideration of the conveyance is fictitious or inadequate;
(2) A transfer made by a debtor after suit has been begun and while it is pending against him.
(3) A sale upon credit by an insolvent debtor;
(4) The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly
embarrassed financially;
(5) Evidence of large indebtedness or complete insolvency;
(6) The fact that the transfer is made between father and son, when there are present some or any of
the above circumstances;
 Circumstances denominated as badges of fraud.

(7) The failure of the vendee to take exclusive possession of the property sold (Oria vs. McMicking,
supra.), unless such failure is with legal basis or practical reason, as where there exists what appears to
be a genuine lessor-lessee relationship between the vendor and the vendee (Union Bank of the Phils.
vs. Ong, 491 SCRA 581 [2006].);
(8) At the time of the conveyance, the vendee was living with the vendor and the former knew that
there was a judgment against the latter;
(9) It was known to the vendee that the vendor had no properties other than that sold to him (Cabaliw
vs. Sadorra, supra.);
(10) The certificate of title covering the lands sold remained in the name of the vendor who declared
them for taxation purposes and paid the taxes, a duty assumed by his heirs after his death (Castro vs.
Escutin, 90 SCRA 349 [1979].);
 Circumstances denominated as badges of fraud.

(11)Where the mortgagor-vendor and mortgagee-vendee are bosom friends with long history
of trust and intimacy and the element of trust is further accentuated by the execution between
them in addition to the two instruments (i.e., mortgage and subsequently, sale of the property)
in question, of two secret documents known as counter-receipt (contra recibo).
(12)Where the seller and the buyer are half-brothers and the sale was executed and registered
about one month after a decision was rendered against the seller.
(13)Where it appears, among others, that: (a) the sale was in English, the alleged vendor being
illiterate; (b) his wife did not join the sale; (c) the price was inadequate; (d) the notarization of
the sale was made on the day following the alleged thumb marking of the document; (e) the
boundaries of the lot sold were not stated; and (f) the sale was registered more than five (5)
years later. (Yanas vs. Acaylar, 136 SCRA 52 [1985].)
VOIDABLE CONTRACTS
(articles 1390-1402)
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)
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)
ART. 1392

Ratification extinguishes the action to annul a voidable contract.

(1309a)
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)
ART. 1394

Ratification may be effected by the guardian of the incapacitated

person. (n)
ART. 1395

Ratification does not require the conformity of the contracting party

who has no right to bring the action for annulment. (1312)
ART. 1396

Ratification cleanses the contract from all its defects from the moment it
was constituted. (1313)
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. (1302a)
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)
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)
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)
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)
 Meaning of voidable contracts.

Voidable or annullable contracts are those which possess all the es- sential requisites
of a valid contract but one of the parties is legally incapable of giving consent, or
consent is vitiated by mistake, violence, intimidation, undue influence, or fraud.
 Binding force of voidable contracts.

hey are existent, valid and obligatory unless annulled or set aside by a proper action
in court, i.e., an action instituted for that purpose.

Once ratified, they become absolutely valid and can no longer be an- nulled. (see
comments under Arts. 1327, 1328, 1330.)

The existence of damage is not essential for their annulment as in the case of
rescissible contracts.
 Meaning of annulment.

Annulment is a remedy as well as a sanction provided by law, for reason of public

interest, for the declaration of the inefficacy of a contract based on a defect or vice in
the consent of one of the contracting parties in order to restore them to their original
position in which they were before the contract was executed.
 Meaning and effect of ratification.

(1) Ratification means that one under no disability voluntarily adopts and gives sanction to some defective or
unauthorized contract, act, or proceeding which, without his subsequent sanction or consent, would not be
binding or him. It is this voluntary choice, knowingly made, which amounts to a ratification of what was
theretofore unauthorized and becomes the authorized act of the party so making the ratification. (see
Maglucot-Aw vs. Maglucot, 329 SCRA 78 [2000]; Coronel vs. Constantino, 397 SCRA 128 [2003].)

(2) Ratification cleanses the contract from all its defects from the moment it was constituted. (Art. 1396.) The
contract thus becomes valid. (Art. 1390.) Hence, the action to annul is extinguished. (Art. 1392; Tan Ah Chan
vs. Gonzalez, 52 Phil. 180 [1928].)
UNENFORCEABLE CONTRACTS
(articles 1403-1408)
ART. 1403

The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person 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 as set forth in this number. In
the following cases an agreement hereafter made shall be unenforceable by action,
unless the same, or some note or memorandum, thereof, be in writing, and subscribed
by the party charged, or by his agent; evidence, therefore, of the agreement cannot
be received without the writing, or a secondary evidence of its contents:
ART. 1403

(a) An agreement that by its terms is not to be performed within a year from the
making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;

(c) An agreement made in consideration of marriage, other than a mutual promise to

marry;

(d) An agreement for the sale of goods, chattels or things in action, at a price not less
than five hundred pesos, unless the buyer accept and receive part of such goods and
chattels, or the evidences, or some of them, of such things in action or pay at the time
some part of the purchase money; but when a sale is made by auction and entry is
made by the auctioneer in his sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the purchasers and person on
whose account the sale is made, it is a sufficient memorandum;
ART. 1403

(e) An agreement of the leasing for a longer period than one year, or for
the sale of real property or of an interest therein;
(f) A representation as to the credit of a third person.

(3) Those where both parties are incapable of giving consent to a

contract.
ART. 1404

Unauthorized contracts are governed by Article 1317 and the principles

of agency in Title X of this Book.
ART. 1405

Contracts infringing the Statute of Frauds, referred to in No. 2 of Article

1403, are ratified by the failure to object to the presentation of oral
evidence to prove the same, or by the acceptance of benefit under
them.
ART. 1406

When a contract is enforceable under the Statute of Frauds, and a

public document is necessary for its registration in the Registry of
Deeds, the parties may avail themselves of the right under Article 1357.
ART. 1407

In a contract where both parties are incapable of giving consent,

express or implied ratification by the parent, or guardian, as the case
may be, of one of the contracting parties shall give the contract the
same effect as if only one of them were incapacitated.

If ratification is made by the parents or guardians, as the case may be,

of both contracting parties, the contract shall be validated from the
inception.
ART. 1408

Unenforceable contracts cannot be assailed by third persons.

 Meaning of unenforceable contracts.

Unenforceable contracts are those that cannot be enforced in court or sued upon by
reason of defects provided by law until and unless they are ratified according to law.
 Binding force of unenforceable contracts.

While rescissible and voidable contracts are valid and enforceable unless they are
rescinded or annulled, unenforceable contracts, although valid, are unenforceable
unless they are ratified.

The mere lapse of time cannot give effect to such a contract. The defect is of a
permanent nature and will exist as long as the unenforceable contract is not duly
ratified by the person in whose name the con- tract was executed.
 Kinds of unenforceable contracts.
Under Article 1403, the following contracts are unenforceable:

(1) Those entered into in the name of another by one without or acting in excess of authority;
(2) Those that do not comply with the Statute of Frauds; and
(3) Those where both parties are incapable of giving consent.

A party to an unenforceable contract may bring an action to enforce it subject to the defense of
the lack of the required form (Statute of Frauds) or absence of authority or in excess thereof. The
law expressly provides that such a contract cannot be assailed by a third person. (Art. 1408.)
 Meaning of unauthorized contracts.

Unauthorized contracts are those entered into in the name of another person by one
who has been given no authority or legal representation or who has acted beyond his
powers.
 Statute of Frauds.

The term “statute of frauds’’ is descriptive of statutes which re- quire certain
classes of contracts to be in writing. This statute does not deprive the parties
of the right to contract with respect to the matters therein involved, but
merely regulates the formalities of the contract necessary to render it
enforceable. The effect of non-compliance is simply that no action can
proved unless the requirement is complied with.

Thus, they are included in the provisions of the New Civil Code regarding
unenforceable contracts, more particularly Art. 1403(2).
 Agreements within the scope of the Statute of Frauds.

(1) Agreement not to be performed within one year from the making thereof.
(2) Promise to answer for the debt, default, or miscarriage of another.
(3) Agreement in consideration of marriage other than a mutual promise to marry.
(4) Agreement for sale of goods, etc. at price not less than P500.00.
(5) Agreement for leasing for a longer period than one year.
(6) Agreement for the sale of real property or of an interest therein.
(7) Representation as to the credit of a third person.
(8) Express trusts concerning an immovable or any interest therein.
VOID OR CONTRACTS
(articles 1409-1422)
ART. 1409

Art. 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;
ART. 1409

(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 of illegality be waived.
ART. 1410

The action or defense for the declaration of the inexistence of a

contract does not prescribe.
ART. 1411

When the nullity proceeds from the illegality of the cause or object of the contract,
and the act 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.
(1305)
ART. 1412

If the act in which the unlawful or forbidden cause consists does not constitute a
criminal offense, the following rules shall be observed:

(1) When the fault is on the part of both contracting parties, neither may recover what
he has given by virtue of the contract, or demand the performance of the other's
undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has
given by reason of the contract, or ask for the fulfillment of what has been promised
him. The other, who is not at fault, may demand the return of what he has given
without any obligation to comply his promise. (1306)
ART. 1413

Interest paid in excess of the interest allowed by the usury laws may be
recovered by the debtor, with interest thereon from the date of the
payment.
ART. 1414

When money is paid or property delivered for an illegal purpose, the

contract may be repudiated by one of the parties before the purpose
has been accomplished, or before any damage has been caused to a
third person. In such case, the courts may, if the public interest will thus
be subserved, allow the party repudiating the contract to recover the
money or property.
ART. 1415

Where one of the parties to an illegal contract is incapable of giving

consent, the courts may, if the interest of justice so demands allow
recovery of money or property delivered by the incapacitated person.
ART. 1416

When the agreement is not illegal per se but is merely prohibited, and
the prohibition by the law is designated for the protection of the
plaintiff, he may, if public policy is thereby enhanced, recover what he
has paid or delivered.
ART. 1417

When the price of any article or commodity is determined by statute, or

by authority of law, any person paying any amount in excess of the
maximum price allowed may recover such excess.
ART. 1418

When the law fixes, or authorizes the fixing of the maximum number of
hours of labor, and a contract is entered into whereby a laborer
undertakes to work longer than the maximum thus fixed, he may
demand additional compensation for service rendered beyond the time
limit.
ART. 1419

When the law sets, or authorizes the setting of a minimum wage for
laborers, and a contract is agreed upon by which a laborer accepts a
lower wage, he shall be entitled to recover the deficiency.
ART. 1420

In case of a divisible contract, if the illegal terms can be separated from

the legal ones, the latter may be enforced.
ART. 1421

The defense of illegality of contract is not available to third persons

whose interests are not directly affected.
ART. 1422

A contract which is the direct result of a previous illegal contract, is also

void and inexistent.
 Meaning of void contracts.

Void contracts are those which, because of certain defects,

generally produce no effect at all. They are considered as
inexistent from its inception or from the very beginning.
 Meaning of inexistent contracts.

On the other hand, inexistent contracts refer to agreements

which lack one or some or all of the elements (i.e., consent,
object, and cause) or do not comply with the formalities which
are essential for the exis- tence of a contract.
 Characteristics of a void or inexistent contract.
(1) Generally, it produces no effect whatsoever, being void or inexistent from the beginning;
(2) It cannot be cured or validated either by time or ratification1 (Art. 1409, par. 2.);
(3) The right to set up the defense of illegality, inexistence, or absolute nullity cannot be waived (Ibid.);
(4) The action or defense for the declaration of its illegality, inexistence, or absolute nullity does not
prescribe (see Art. 1410.);
(5) The defense of illegality, inexistence, or absolute nullity is not available to third persons whose
interests are not directly affected (see Art. 1421.);
(6) It cannot give rise to a valid contract. (see Art. 1422.); and
(7) Its invalidity can be questioned by anyone affected by it. (see Nazareno vs. Court of Appeals, 343
SCRA 637 [2000].)
 Effects of a void or inexistent contract.
A void contract produces no effect whatsoever either against or in favor
of anyone. It vests no rights and creates no obligations; hence, it does
not create, modify, or extinguish the juridical relation to which it refers.
The parties have no rights which they can enforce and the court cannot
lend itself to its enforcement. void or inexistent contract is equivalent to
nothing. There is nothing to ratify. If a void contract has already been
performed, the restoration of what has been given is in order.
 Instances of void or inexistent contracts.
(1) Contracts whose cause, object or purpose is contrary to law, etc.
(2) Contracts which are absolutely simulated or fictitious.
(3) Contracts without cause or object.
(4) Contracts whose object is outside the commerce of men.
(5) Contracts which contemplate an impossible service.
(6) Contracts where the intention of the parties relative to the object cannot be
ascertained.
(7) Contracts expressly prohibited or declared void by law.
End.