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UNENFORCEABLE CONTRACTS Ts one, which, though possessing all the essenllal requisites of] contracts, has caused a particular economic damage either to one of| the contracting parties or te a third person, fz one in which the consent of one party is defective, either Because ‘of want of capaci use consent is vitiated is one that cannot be sued upon or enforced uniess they are rated [is one which suffers from absence of object or cause and is therefore an absolute nullity and produces no effect. Unenforceable contracte are nearer absolute nullity than resciesible and voidable ‘contracts. (Report of the Code Commission, p.130) Rescissible and Voidable Contracts vs. Unenforceable Contract Resciseible ond Voldable Contracts | Unenferceatle Contracts ~ Valid and produce legal offeae Cannot be enforced and products ‘they! are rescinded or po legal effect unless ratified. annulled, “Unenforceable contracts are those which cannot be enforced by a proper action In court, unless they are ratified, because either they are entered into without or in exess of authority or they do not comply with the Statue of frauds or boik of the contracting parties do not passes the required legal capacity. An inenforceable contract may be ratified, expressly or impliedly, by the person in whose behalf it has been executed, before itis revoked by the other contracting party.” (Mercado v, Allied Banking Corp., GR. No. 171460, July 24, 2007) Kinds of Unenforceable Contracts (Overview) a. Unauthorized contracts, — lack or in excess of authority or legal representation b. Those that fail to comply with the Statute of Frauds. cc. Those where both parties are incapable of giving consent to 2 contract. (Civil Code of the Philippines, Article 1403) A party to an unenforceable contract may bring an action to enforce it subject to the defense of the lack of the requized form (Statute of Frauds) or absence of authority ‘or in excess thereof. The law expressly provides that such a contract cannot be assailed bya third person. (Article 1408) ‘The mere lapse of time cannot give effect to such a contract, The defect is of permanent nature and will exist as long as the unenforceable contract is not duly ratified by the person in whose name the contract was executed. (Tipton v. Velasco, 6 Phil. 67) Article 1409. The following contracts are unenforceable, unless they are ratified: (2) Those ont no authority oF 1d into in the name of another person by one who has be al representation, or who has acted beyond his powers; given (2) Those that do not comply with the Statute of Frauds asset 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 ibseribed by the party charged, or by his agent; evidence, therefore, of the ‘agreement canaot be received without the writing, or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof; (0) 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 te marry; (4) An agreoment for the sale of goods, chattels or things in action, at « price not less than five hundred pesos, unless the buyer accept and receive part of auch 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; (c} An agreement for the leasing for a longer period than one year, or for the sale ‘of real property or of an interest therein; (4) A representation as to the credit of a third person, (3) Those where both parties are incapable of giving consent to a contract. 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. They are governed by Article 1317 and the principles of agency. “Art, 1917, No one may contract in the namo of | Requlte for « Person to Contract In the another without being authorized by the latter, | Name of Another ‘orunless he has by law aright to represent him, |°- ems eduls authorize expresiy or imi bi Hamat have be ta sch to epeesent bys oe ne authority or legal |" jin” guaran or administrator representation, or who has acted beyond ls |< The contract must be. subsequently Fetified, expressly or impliedly. by the person | wardriy'asat Pn fon whose behalf ithas been executed, before {t ‘les mony: Ore 24 i 9) [Is revoked by the ether contracting party.” “As for any obligation whecein the agent has excected his | ‘The contract is unenforceable potwer, the prinipal is nor bound except when he r ‘shother the autherity is only Hexpresely or tacith.” (Article 1910, par.2) recoded or abeoltely abecn Ratification cleanses the contract from all its defects from the moment the co as entered into. (Aricle 1396) Hence, there is a retroactive effeet. (Tacalinar v, Como, 34 Phil. 898) For example: Quennie, in Ryan's name bat without consent, sald his makeup set to Marjoerie. Here the sale ofthe makeup set is urautherized, thereore, unenforceable However, it will now be a diferent story if Ryan subsequently ratified the sale. Tau it can now be enforced Statute of Frauds ‘The ratlonale of the requirement in the Statue of Frauds that the comtracts therein enumerated must be in writing is that the frailty of human memory, or, more frequently perhaps, the mischief of fraud, con impede the honest and accurate enforcement of a contract entered into merely orally. The Statute of Frauels isa cautious ‘qualification to the general rule that contracts, no matter in what form they are entered into, are valid and enforceable ‘The purpose of the Statute is to prevent fraud and in the enforcement o obligations depending for their evidence on the unassisted memony of witnesses, bi requiring certain enumerated contracts end wansactiens to be evidenced by a writin Signed by the party to be charged Tae Statute requires certain contracts to be evidenced by some note or memorandum in order to be enforceable, (Asia Productions Co., Inc. v Pao, G.R. No. 51058, January 27, 1992) Statute of Fravds is applicable only to executory contracts, not to partially or totally executed or performed contracts. It may be invoked in actions for damages for breach of said agreement or for specific performance therecf, and not in any ather matter. (Pacturan . Sabandal, 81 Phil. 512) In executory contracts there is a wide fleld for fraud because unless they be in ‘writing there is no palpable evidence of the intention of the contracting parties. The statute has precisely deen enacted to prevent fraud, (Comments on the Rules of Court, by Moran, Vol. Ill {1957 ed, p. 178.) ‘Anthony Orda, et al, vs. Bdaardo J, Puentebella, ot al G.R. No, 176841, June 29,2010, ‘The Statute of Frauds expressed in Article 1403, par. (2), of the Civil Code, provides that ‘contract for the sale of real propery eof an interest therein shall be unenferceable unless the ‘ale or some nete or memorarsdum thereo isin writing and subscribed by the party or hie agent However, where the verbal_contract_of sale-has-been. partially executed through. the partial payments made by one party duly received by the vendor, asin the present case, the contract is taken out of the scope of the Statute. ‘The purpese of the Stanute i to prevent fraud ané perjury in the enforcement of obligations depending for their evidence on the unassisted memory of winesses, hy requiring certain enumerated contracts and transactions to be evidenced br a writing signed by the party to be charged, The Statute requires certain contracts. 10 be evidenced by some note or rmemeranduim in order to be enforceable. The term “Statute of Frauds” is descriptive of ‘statutes that requize certain classes of contracts to be in writing. The Statute does aot ‘deprive the parties of the right to contract with respect to the matters therein involved, ‘but merely repulates the formalities of the contract necessary te render It enforceable. Since contracts are generally obligatory in whatever form they may have been entered into, provided al the essential requisites fr their validity are present, the Statute simply provides the method by which the contracts enumerated in Art. 1403 (2) maybe proved but dors not ‘declare. them invalid because they-are-nol reduced to-writing, In fine, the form required unser the Statute is for convenience or evidentiary purposes only. ‘There can be no serious argument about the partial execution ofthe ssle in question, ‘The records show that petitioners had, on separate occasions, given Gabriel Sr. and Gabriel J. sums of money as partial payments of the purchase price. Lest it be overlooked, a contract that infringes the Statute of Frauds is ratified by the accepiance of benefits under the contract. Evident, Gabriel, Jr., as his father earlier, had benefited fom the partial payments made by the petitioners. Thus, nether Gabriel Jr. ror the bother respondents—successive purchasers of subject lots—could plausibly et up the Statute of Frauids to thwert peittoners’ efforts towards establishing their lawful right over the subject lot land removing any cloud ln their te. As it were, petloners need only to pay the oulstanding balance of the purchase price and that would complete the execution of the oral sale, Contracts Falling Under Statute of Frauds ‘The first statute pertains to an agreement whose terms are not to be performed ‘within a year from its making, In Viewmaster Construction Corporation v, Rovas (G.R No. 133576, 13 July 2000), the Supreme Court found that a verbal agreement to act as guarantor for a loan ~~ only after the borroner sells fifty percent of his shareholdings in @ corporation; and undertake a joint venture over two real estate properties —- was clear to be performed more than a year from the making thereof.