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a) Unauthorized contracts
b) Those that fail to comply with the Statute of Frauds
c) Those wherein both parties are incapable of giving consent to a contract
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:
UNAUTHORIZED CONTRACTS
These 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.”
Example:
Without my authority, my brother sold my car, in my name, to X. The
contract is unauthorized and cannot affect me unless I ratify the same
expressly or implicitly, as by accepting the proceeds of sale.
Mere lapse of time, no matter how long, is NOT the ratification required
by law of an unenforceable contract. (Tipton vs. Velasco, 6 Phil 67)
Without ratification, the “agent” assumes liability. (2 Am. Jur. 251)
THE STATUTE OF FRAUDS
1st Principle
The Statute of Frauds applies only to executory contracts (contracts
where no performance has yet been made) and not to partially or
completely executed
(consummated contracts).
Example 1:
A sold to B real estate for a stipulated price. The agreement was oral. A
has not yet delivered the real estate. B has to not yet paid the price. B offered
to buy, but A refused to go ahead with the agreement.
ANS.: No. The agreement being merely executory, the agreement cannot
be proved. Therefore also, A cannot be compelled to deliver.
Example 2:
Answer : Yes, since the contract has already been partially executed.
Example 4:
Through the failure of the would-be buyer, the Manila Railroad Co., to
accept the deed after having orally offered to buy the house subjected the
plaintiff (would-be seller) to much trouble and annoyance and may therefore
be subject to criticism.
Still , plaintiff has no cause of action for the Statute of Frauds has been
timely pleaded in defense by the Manila Railroad Company.
Example 5:
Both the extensions of the period of repurchase and the extensions of the
lease contracts are no longer executory, because they have been performed
and consummated.
Example 6:
In Babao v. Perez, it has also been held that an oral contract partially
performed must be proven clearly in court, thus:
“The contract must be fully made and completed in every respect except
for the writing required by the statute, in order to be enforceable on the
ground of part performance. The parol agreement relied on must be certain,
definite, clear, unambiguous, and unequivocal in its terms, particularly
where the agreement is between parent and child, and be clearly established
by the evidence.
The requisite of clearness and definiteness extends to both the terms and
the subject matter of the contract. Also, the oral contract must be fair,
reasonable, and just in its provisions for equity to enforce the oral agreement,
or its specific enforcement would be harsh or oppressive upon the defendant,
equity will withhold its aid.
2nd Principle
The Statute of Frauds cannot apply if the action is neither for damages
because of the violation of an agreement nor for the specific performance
of said agreement.
(See Lim v. Lim, 10 Phil. 635; and Facturan v. Sabanal, 81 Phil. 512)
Example 1:
Example 2:
Example 3:
Where the complaint does not contain allegations that the plaintiff has
taken possession of land, due to the verbal contract he had with the
defendant to purchase it, nor is there any allegation that has made
improvements thereon.
It alleges that the plaintiff occupied the land as tenant, the alleged
transaction comes under Statute of Frauds.
3rd Principle
(See Quintos v. Morata, 54 Phil. 481; also the rule of Statutory Construction
which states: Inclusio unius est exclusio alterius” ― what the law does not
include, it excludes. Or, the enumeration of certain things excludes. Or, the
enumeration of certain things excludes all those not so enumerated.)
The Statute of Frauds is exclusive, that is, it applies only to the agreements
or contracts enumerated therein:
4th Principle
(Art. 1405, Civil Code: Contracts infringing the Statute of Frauds, referred
to in No. 2 of Art. 1403, are ratified by the failure to object to the failure to
object to the prestation of oral evidence to prove the same, or by the
acceptance of benefits under them.)
5th Principle
Example:
6th Principle
Contracts infringing the Statute of Frauds are not void; they are merely
unenforceable.
Example:
A and B entered into an oral executory sale. The sale is not void, for
if this were so, it cannot be ratified. The contract of sale had also some
effect, namely, that the tenant cannot refuse to pay rent to the new
landlord-buyer.
7th Principle
Example:
A orally sold B a piece of land. Agreement was still executory. A
asked for payment, B refused, setting up Statute of Frauds. In court, A
presented 2 witnesses to testify.
8th Principle
The Statute of Frauds does not determine the credibility or the weight
of evidence. It merely concerns itself with the admissibility thereof.
Example:
To prove an oral sale, X presented cabinet members to testify, all of
whom are men of integrity, still their testimony is will not be admitted,
although may be very truthful.
9th Principle
The Statute of Frauds does NOT apply if it is claimed that the contract
does not express the true agreement of the parties.
Example:
A orally sold a ring to B allegedly for a price of 700. The contract is
unenforceable, but if A insists that the price was only P400, oral evidence is
allowed.
ANS: No, because under the terms of the contract, the sale was to be
performed at the end of three years. It should have been, therefore, made in
writing. The Statute recognizes the frailty of man's memory, and apparently
only one year is the limit.
Had the agreement been that performance would be made within three
months, the agreement, even if oral, would have been enforceable. (See
Boydell v. Drummond, 11 east 143)
A and B, neighbors, orally agreed that from that day, B would not
erect a garage on his property till after three years. A week later, B began to
erect the garage in violation of the agreement. A complains and B sets up the
Statute of Frauds.
c. Note that the law says “sale”, not other contracts. (Engel, et al.
v. Velasco & Co., 47 Phil. 115)
5. “An agreement for the leasing for a longer period than one year, or
for the sale of real property or of an interest therein.” (Art. 1403, No.
2-e, Civil Code)
Thus, a contract of lease for two years must be in writing to
be enforceable.
A sale of real estate must likewise be in writing to be
enforceable, but it need not be notarized or in a public
document to be effective between the parties.
Notarization is needed only to bind third persons, and so that
the proper registry of property can accept the deed or contract
for registration.
Example of Specific Agreement #5
a. Two kinds of agreements are referred here:
a) Lease of real property for more than one year (note of
personal property)
b) Sale of real property (regardless of price)
b. Example:
A is B’s tenant. Lease is for six months. If oral, lease is still
enforceable, for the period does not exceed one year.
c. If lease of real property is exactly one year, the contract may
be oral, since here the period does not exceed one year.
The third kind of unenforceable contract is one where both parties are
incapacitated to give consent.
Example:
A contract entered into by two minors without parental consent.
New Jurisprudence
Unless otherwise provided by law, a contract is obligatory in
whatever form it is entered into, provided that all the essential requisites are
present.
Example:
1. Contracts infringing the Statute of Frauds are ratified when the
defense fails to object, or asks questions on cross-examination.
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.
Provides that the agreements are in written form and are therefore
enforceable.
May compel each other to observe the form once the contract is
perfected.
The right of one party to have the other execute the public
document needed in registration is only when the contract is both
valid and enforceable.
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.
Example:
A and B, both 15 years old, entered into a contract. The contract is
unenforceable because both parties cannot give consent. Now, if the
guardian or parent of A ratifies expressly or impliedly the contract, it
becomes voidable, valid unless annulled by guardian or parent of B.
However, if the guardian or parent of ratifies, the contract is validated right
from the start it was entered into.
UNENFORCEABLE CONTRACTS
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