Defective

Contract

Grounds

Who may file

1. Reformation

1) When a mutual mistake of

the parties causes the
failure of the instrument
to disclose their real
agreement. (Art. 1361,
NCC)
2) If one party mistaken and
the other acted
fraudulently in such way
the instrument does not
show their true intention.
(Art. 1362, NCC)
3) When one party was
mistaken and the other
knew or believed that the
instrument did not state
their real agreement, but
concealed that fact from
the former. (Art. 1363,
NCC)
4) When through the
ignorance, lack of skill,
negligence, or bad faith
on the part of the person
drafting the instrument or
of the clerk or typist, the
instrument does not

Refer to the grounds:

Circumstances that
may prevent parties
from filing
The following
instruments cannot be
reformed:

For No. (1): The party

who can bring the
action is either party or 1) Simple donations
his successors in
inter vivos wherein
interest
no condition is
imposed;
For Nos. (2), (3), (4),
2) Wills; and
(5): The party who can 3) Those where the
bring the action is the
real agreement is
injured party or his
void. (Art. 1366,
heirs and assigns.
NCC)

Prescriptive period

Consequence

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The right of
reformation is
necessarily an
invasion or limitation
of the parol evidence
rule since, when a
writing is reformed,
the result is that an
oral agreement is by
court decree made
legally effective.
Consequently, the
courts, as the
agencies authorized
by law to exercise the
power sparingly and
with great caution and
zealous care.
Reformation is that
remedy in equity by
means of which the
instrument is
amended to conform
to the real intention of
the parties.

express the true intention

of the parties. (Art. 1364,
NCC)
5) If two (2) parties agree
upon the mortgage or
pledge of real or personal
property, but the
instrument states that the
property is sold
absolutely, or with a right
of repurchase. (Art. 1365,
NCC)
2. Annulment

The following contracts are

3) The plaintiff must
voidable or annullable, even
have an interest in
though there may have been
the contract in the
no damage to the
sense that he is
contracting parties:
obliged thereby
either principally or
1) Those where one of the
subsidiarily.
parties is incapable of
4) The victim and not
giving consent to a
the party
contract;
responsible for the
2) Those where the consent
vice or defect must
is vitiated by mistake,
be the one who
violence, intimidation,
must assert the
undue influence or fraud
same
These contracts are binding,
unless they are annulled by

1) By prescription of
the action for
annulment (Art.
1391, NCC)
2) By ratification or
confirmation (Art.
1392-1396, NCC)
3) By the loss of the
thing which is the
object of the
contract through
the fraud or fault of
the person who is
entitled to institute
the action for
annulment of the
contract. (Art.

The action for

annulment of a
voidable contract must
be commenced within
a period of four (4)
years.
1) If the action refers
to contracts
entered into be
incapacitated
persons, the period
shall commence
from the time the
guardianship
ceases;
2) If it refers to those
where consent is

Cancellation of
contract; but can be
cured through
ratification

a proper action in court.

3. Nullity

1) Those which lack

absolutely either in fact
or in law one or some or
all of those elements
which are essential for its
validity.
2) Those where all of the
requisites prescribed by
law for contracts are

1401, NCC)

vitiated by
violence,
Strangers to a contract
intimidation or
cannot sue either both
undue influence,
of the contracting
the period shall be
parties to annul and
counted from the
set aside that contract
time such violence,
intimidation, or
undue influence
ceases or
disappears;
1) 3) And if it refers to
those where
consent is vitiated
through mistake or
fraud, the period
shall be counted
from the time of
the discovery of
such mistake or
fraud.
Any person may invoke When both parties are There is no period of
the inexistence of the
at fault or in pari
prescription. In other
contract whenever
delicto, the law
words, the action is
juridical effects
refuses them every
imprescriptible.
founded thereon are
remedy and leaves
asserted against him.
them where they are.
This rule which
embodied in Arts.
1411 and 1412 of the

Cannot be cured;
Declaration of nullity

present, but the cause,

object or purpose is
contrary to law, morals,
good customs, public
order or public policy, or
they are prohibited by
law.
3) Those which lack
absolutely one or some
or all of those requisites
which are essential for
validity.
4. Rescission

1) Those 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

The action for

rescission may be
instituted by the
following:
1) The person who is
prejudiced, such as
the person
suffering the lesion
in rescissory
actions based on
lesion, the creditor
who is defrauded in
rescissory actions
based in fraud, and
other persons
authorized to

NCC is what commonly

known as the principle
of in pari delicto. It is a
rule which is
expressed in the
maxims: Ex dolo
malo non oritur actio
and In pari delicto
potior est conditio
defendentis. The law
will not aid either
party to an illegal
agreement; it leaves
them where they are.
Ratification
extinguishes the
action to annul a
voidable contract.
Ratification is defined
as the act of curing
the defect which made
the contract
annullable. It may be
expressly or tacitly
given.

1) As a general rule,
the action to claim
the rescission must
be commenced
within four (4)
years.
2) For persons under
guardianship, the
period begins from
the time the
incapacity
terminates and the
aggrieved party
has unsuccessfully
exhausted all other
legal remedies to

Cancellation of
contract due to
damages incurred.

other manner collect the

claims due to 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 (Art. 1381,
NCC)
6) 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. (Art. 1382,
NCC)

exercise the same

in other rescissory
actions.
2) Their
representatives;
3) Their heirs;
4) Their creditors
by virtue of the
subrogatory
action defined in
Art. 1177 of NCC.

be able to enforce
his or her rights or
recover what has
been lost. Hence, if
the person is a
minor, the period
begins from the
time he reaches
the age of majority
which is 18 years of
age, and has
unsuccessfully
exhausted all legal
remedies;
3) For absentees, the
period begins from
the time he learns
of the contract and
has unsuccessfully
exhausted all other
legal remedies to
be able to enforce
his rights or
recover what has
been lost
4) For contracts
entered into frauds
of creditors, he
period begins from
the time of the

5.
Unenforceable

1) Those entered into in the

xxxx
name of another person
by one who has been
given no authority or legal
representation, or who
has acted beyond his

xxxx

discovery of the
fraud and after he
or she has
unsuccessfully
exhausted all other
remedies.
5) For contracts
entered into with
respect to things
under litigation
without the
knowledge and
approval of the
litigants or of
competent judicial
authority, the
period begins from
the time of
knowledge of the
transaction and
unsuccessful
exhaustion of all
other legal
remedies.
xxxxxx

Contract may not be

forced upon the
execution of the
person.

powers;
2) Those that do not comply
with the Statute of Frauds
as set forth in this
number. In the following
cases an agreement
thereafter shall be
unenforceable by action,
unless the same, or some
note or memorandum
thereof, be in writing and
subscribed by the party
charged, or be his agent;
evidence, therefore, of
the agreement cannot 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;
(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 of
things in action, at a price
not less than five hundred
pesos, unless the buyer
accepts and receives part
of such goods and
chattels, or the evidence,
or some of them, of such
things in action or pay it
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 whose
account the sale is made,
it is a sufficient
memorandum;
(e) An agreement for the
leasing for a longer period
than one year, or sale of a
real property or 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.