VOID OR INEXISTENT CONTRACTS*
arguments based only on equity. If there is law, law should apply
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 fi ctitious;
(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 ratifi ed. Neither can the right to set
up the defense of illegality be waived.
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.
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 existence of a contract
Characteristics of a void or inexistent contract
1. no effect
2. cannot be validated either by time or ratif
3. The right to set up the defense of illegality, inexistence, or
absolute nullity cannot be waived
4. action or defense to declare its nullity does not prescribe
5. defense of nullity not available to 3rd persons whose interest is
not directly affected
6. cannot give rise to a valid contract
7. Its invalidity can be questioned by anyone affected by it
Effects
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. If a void contract has
already been performed, the restoration of what has been given is
in order.
An illegal contract, however, may produce effects under certain
circumstances where the parties are not of equal guilt.
Equity as ground to uphold void contract.
Equity, which has been aptly described as “justice outside
legality,’’ is applied only in the absence of and never against
statutory law or judicial rules of procedure. When applicable,
positive rules should pre-empt and prevail over all abstract
Instances of void or inexistent contracts.
(1) Contracts whose cause, object or purpose is contrary to law,
etc. ex: marijuana note: laws have no retroactive effect
(2) Contracts which are absolutely simulated or fi ctitious
(3) Contracts without cause or object - The phrase “did not exist at
the time of the transaction” does not apply to a future thing which
may legally be the object of a contract . A contract without
consideration is void. A transferor can recover the object of such
contract by accion reinvindicatoria and any possessor may refuse
to deliver it to the transferee, who cannot enforce the transfer
(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. X contract of sale w/ y for x’s car. X
has 5 cars
(7) Contracts expressly prohibited or declared void by law. —
Where the illegality of the contract proceeds from an express
prohibition or declaration by law, and not from any intrinsic
illegality, the contract is not illegal per se. Below are examples of
contracts which are prohibited or declared void by law.
(a) Contracts upon future inheritance except in cases
expressly authorized by law. (Art. 1347.)
(b) Sale of property between husband and wife except
when there is a separation of property. (Art. 1490.)
(c) Purchase of property by persons who are specially
disqualifi ed by law (like guardians, agents, executors,
administrators, public offi cers and employees, judges, lawyers,
etc.) because of their position or relation with the person or
property under their care. (Art. 1491.)
(d) Compromise agreement with respect to the civil
status of persons (see Vda. de Castellvi vs. Castellvi, 77 SCRA 88
[1977].), validity of a marriage or a legal separation, any ground
for legal separation, future support, the jurisdiction of courts, or
future legitime
(e) Sale of lands acquired under free patent or
homestead provisions within fi ve (5) years after the date of
issuance of the patent or grant.
(f) A contract which is the direct result of a previous
illegal contract.
(g) “A testamentary provision in favor of a disqualifi ed
person, even though made under the guise of an onerous contract,
or made through an intermediary, shall be void.”
(h) “Any stipulation that household service is without
compensation shall be void.
(i) “Every donation or grant of gratuitous advantage,
direct or indirect, between the spouses during the marriage shall be
void except moderate gifts which the spouses may give each other
on the occasion of any family rejoicing. The prohibition shall also
apply to persons living together as husband and wife without a
valid marriage.’’
(j) Under the Constitution (Sec. 14, Art. VI.), members
of Congress are prohibited from being fi nancially interested,
directly or indirectly, in any contract with the government or any
subdivision or instrumentality thereof
ART. 1410. The action or defense for the declaration of the
inexistence of a contract does not prescribe.
1This action or defense should not be confused with an action for
the annulment of a voidable contract.
The defect being permanent and incurable, the action or defense
does not prescribe. ) Mere lapse of time cannot give effi cacy to a
void contract neither can it be cured by ratifi cation.
It has been held that the right to fi le an action for reconveyance on
the ground that the certifi cate of title was obtained by means of a
fi ctitious deed of sale is virtually an action for the declaration of
its nullity. An action for reconveyance based on a void contract
(e.g., forged deed of sale) is imprescriptible.
(2) Necessity of judicial declaration. — Since a void contract has
no effect at all, it is, therefore, unnecessary to bring an action to
declare it void. It is well within the right of a party to unilaterally
cancel and treat as avoided a void contract. It is better that a
judicial declaration of nullity be secured not only to give peace of
mind to the parties but also to avoid the taking of the law into their
own hands. To recover what was given as well
(3) Rule where contract not void but merely voidable. — Voidable
contracts can only be annulled by a proper action in court. (Art.
1390, last par.) within four (4) years from the time the cause of
action accrues.
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
Generally, parties to a void agreement cannot expect the aid of the
law; the courts leave them as they are, because they are deemed in
pari delicto, or “in equal fault.’’ In pari delicto is “a universal
doctrine which holds that no action arises, in equity or at law, from
an illegal contract; no suit can be maintained for its specifi c
performance, or to recover the property agreed to be sold or
delivered, or money agreed to be paid, or damages for its violation;
and where the parties are in pari delicto, no affi rmative relief of
any kind will be given to one against the other.’’ Indeed, one who
seeks equity and justice must come to court with clear hands
This rule, however, is subject to exceptions (Arts. 1411-1419.) that
permit the return of that which may have been given under a void
contract
Rules where contract illegal and the act constitutes a criminal
offense.
Under Article 1411, it must be shown that the nullity of the
contract proceeds from an illegal cause (e.g., desire to evade the
payment of taxes) or object, and the act of executing said contract
constitutes a criminal offense
effect(1) Where both parties are in pari delicto.4
(a) The parties shall have no action against each other, or as stated
in the legal maxim: In pari delicto melior est conditio defendentis;
(b) Both shall be prosecuted; and
(c) The things or the price of the contract, as the effects or
instruments of the crime, shall be confi scated in favor of the
government.
The application of the pari delicto principle is not absolute, as there
are exceptions to the application. (infra.) One of these exceptions is
where the application of the rule would violate well established
public policy. Another exception is when the principle is invoked
with respect to inexistent contracts
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 fulfi llment 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 with his promise
(3) Where both parties are not guilty. — If both parties have no
fault or are not guilty, the restoration of what was given by each of
them to the other is in order. This is because the declaration of
nullity of a contract which is void ab initio operates to restore
things to the state and condition in which they were found before
the execution thereof.
When pari delicto rule not applicable.
(1) Breach of warranty cases. — It is an elementary principle of
law (see Arts. 1495, 1547, and 1555.), as well as of justice and
equity that, unless a contrary intention appears, the vendor
warrants his title to the thing sold, and that, in the event of
eviction, the vendee shall be entitled to the return of the value
which the thing sold has at the time of the eviction, be it greater or
less than the price of the sale. Cases involving breach of warranty
arising from a valid contract of sale are governed in particular by
the provisions on Sales, especially by the aforesaid Articles 1495,
1547, and 1555, and Article 1544, regulating the effects of double
sale
Art. 1495. The vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the sale
(2) Simulated contracts. — The maxim does not apply to simulated
or fi ctitious contracts or to inexistent contracts which are devoid
of consideration. It applies only in case of existing contracts with
illegal consideration
Articles 1411 and 1412 presuppose that there is a cause but the
same is unlawful.
(3) Parties not equally guilty. — Where the parties are not equally
guilty, and where public policy is considered, as advanced by
allowing the more excusable of the two to sue for relief against the
transaction, relief is given to him. For the pari delicto rule to apply,
the fault on both sides must be, more or less, equivalent
(4) Against the government. — It is a cardinal principle of law and
well-settled in jurisprudence that the government is not estopped
by the neglect or omission of its offi cers
(5) Prohibited conveyances under the law. — An alienation or sale
of a homestead executed within the 5-year prohibitory period
provided under the Public Land Act is void. (supra.) The doctrine
may not be invoked in a case of this kind since it would run
counter to an avowed fundamental policy of the State that the
forfeiture of a homestead is a matter between the State and the
grantee or his heirs, and that until the State had taken steps to annul
the grant and asserts title to the homestead, the purchaser is, as
against the vendor or heirs, no more entitled to keep the land than
any intruder. This is particularly true where the vendors of the
homestead are unlettered members of a tribe belonging to the
cultural minorities.
The contract being void, must be given no effect at all and the
parties must be placed in status quo which was the condition
prevailing before the execution of the contract
(6) Constitutional prohibition against alien landholding. — The
Supreme Court has ruled that where a Filipino citizen sells land to
an alien who later sells the land to a Filipino, the invalidity of the fi
rst transfer is corrected by the subsequent sale, to a citizen.
Similarly, where the alien who buys the land subsequently acquires
Philippine citizenship, the sale was validated since the purpose of
the ban to limit ownership to Filipinos (Sec. 7, Art. XII,
Constitution) has been achieved.
In short, the law disregards the constitutional disqualifi cation of
the buyer to hold land if the land is subsequently transferred a
qualifi ed party, or the buyer himself becomes a qualifi ed party.
(7) Other exceptions. — Articles 1411 and 1412 embody the
general principle that when both parties are in pari delicto, the law
refuses them every remedy and leaves them where they are.
However, there are exceptions to this rule. American jurisprudence
has provided an excellent pattern on this subject, for it has laid
down many exceptions, some of which are contained in Articles
1413 to 1419.
The exceptions in Articles 1411 and 1412 may be invoked by a
party who is innocent or less guilty
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.
Any rate of interest in excess of the maximum allowed under the
Usury Law is usurious (see comments under Art. 1175.) and if
paid, may be recovered together with interest thereon from the date
of payment in a proper action for the same
A stipulation for the payment of usurious interest is void. The
person paying the usurious interest can recover in an independent
civil action not only the interest in excess of that allowed by the
usury laws, but the whole interest paid
Suspended
In a usurious loan transaction, the borrower is not relieved of the
obligation to pay the principal of the loan on the assumption that a
usurious contract, while void as to the interest, is valid as to the
principal
Nevertheless, a usurious loan is not a complete nullity but merely a
nullity with respect to the agreed interest. The rule is that the
nullity or extinguishment of the accessory obligation does not carry
with it that of the principal obligation.
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.
“Article 1414 is one instance (the other is Art. 1416.) when the law
allows recovery by one of the parties even though both of them
have acted contrary to law.”
(1) The contract is for an illegal purpose;
(2) The contract is repudiated before the purpose has been
accomplished or before any damage has been caused to a third
person; and
(3) The court considers that public interest will be subserved by
allowing recovery
X sells y GSM phone for 1k. x changed his mind. X may recover
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.
It is not necessary that the illegal purpose has not been
accomplished or that no damage has been caused to a third person
X buys GSM from Y for 1k. X 14yrs old
ART. 1416. When the agreement is not illegal per se but is
merely prohibited, and the prohibition by the law is designed
for the protection of the plaintiff, he may, if public policy is
thereby enhanced, recover what he has paid or delivered.
Article 1416 is another exception to the rule that where both parties
are in pari delicto, they will be left where they are without relief.
Recovery is permitted provided:
(1) The agreement is not illegal per se but is merely prohibited;
(2) The prohibition is designed for the protection of the plaintiff;
and
(3) Public policy would be enhanced by allowing the plaintiff to
recover what he has paid or delivered
Prohibited sale of land
Under the doctrine of pari delicto, the parties have no action
against each other when they are both at fault. (Art. 1412[1].) The
rule, however, has been interpreted as applicable only where the
fault on both sides is, more or less, equivalent. It does not apply
where one party is literate or intelligent and the other one is not.
(1) A land sold in violation of the constitutional prohibition against
the transfer of lands to aliens may be recovered. The public policy
to conserve lands for the Filipinos would be defeated and its
continued violation sanctioned if instead of setting the contract
aside and ordering the restoration of the property, the general rule
on pari delicto would be applied.
(2) The principle of pari delicto is not applicable to a homestead
which has been illegally sold within the prohibited period of fi ve
(5) years in violation of the homestead law. (Sec. 118, C.A. No.
141 [Public Land Act].) The policy of the law is to give land to a
family for home and cultivation; consequently, the law allows the
homesteader or free patent holder to reacquire the land even if it
has been sold within the prohibited period.
The right to recover the same cannot be waived, and such sale
being null and void, the action to recover does not prescribe. This
is without prejudice to such appropriate action as the Government
may take should it fi nd that violations of the public land laws were
committed and sanctions are in order
Contract illegal per se and contract against public policy
distinguished.
An act or contract that is illegal per se is one that by universally
recognized standards is inherently or by its very nature bad,
improper, immoral or contrary to good conscience. On the other
hand, what is contrary to public policy, like public interests,
whether expressed in a Constitution or in any statute or offi cial
declaration of the duly constituted authorities, or evinced from the
situation or circumstances of the time concerned, is something
dictated by the conditions obtaining within each country or nation.
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.
A statute fi xing the maximum price of any article or commodity is
usually known as the ceiling law. It can also be determined by
authority of law, as by Executive Order of the President. Its
purpose is to curb the evils of profi teering or blackmarketing.
ART. 1418. When the law fi xes, or authorizes the fi xing 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 fi xed, he may demand additional compensation
for service rendered beyond the time limit
P25.00 upon such delivery, the contract is divisible. The
obligations of the parties are likewise divisible.
ART. 1421. The defense of illegality of contracts is not
available to third persons whose interests are not directly
affected.
In voidable (Art. 1397.) and unenforceable contracts (Art. 1408.),
third persons are not allowed to bring an action to annul or to
assail, as the case may be, said contracts.
If the contract is illegal or void, however, even a third person may
avail of the defense of illegality or set up its illegality as long as his
interest is directly affected by the contract
ART. 1422. A contract which is the direct result of a previous
illegal contract, is also void and inexistent.
Void contract cannot be novated. This provision is based on the
requisites of a valid novation. (see comments and examples under
Art. 1298.) An illegal contract is void and inexistent and cannot,
therefore, give rise to a valid contract.
In novation, there are four (4) essential requisites, namely: (1) The
existence of a previous valid obligation; (2) The intention or
agreement and capacity of the parties to extinguish or modify the
obligation; (3) The extinguishment or modifi cation of the
obligation; and (4) The creation or birth of a valid new obligation

Presidential Decree No. 442, as amended, otherwise known as the

Labor Code, sets forth that the normal hours of work of any
employee shall not exceed eight (8) hours a day

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 defi ciency.

If an employee or worker receives less than the minimum wage

rate, he can still recover the defi ciency with legal interest (see Art.
128, Pres. Decree No. 442, as amended.), and the employer shall
be criminally liable.

537.00 a day 15k mo

ART. 1420. In case of a divisible contract, if the illegal terms

can be separated from the legal ones, the latter may be
enforced.

(1) S sold to B his car and shabu, a prohibited drug, for

P200,000.00. The contract is wholly void and unenforceable
because there is only one consideration for both the car and the
shabu. However, if the price of the car is P150,000.00 and that for
the drug is P50,000.00, the contract, being divisible, is valid as to
the sale of the car

Divisible contract distinguished from divisible obligation.

It must be noted that Article 1420 speaks of a divisible contract

and not of a divisible obligation. The test of the former is the
divisibility of its cause while the latter, its susceptibility of partial
fulfi llment. The former, therefore, refers to the cause, while the
latter, to the prestation or object.

Ex: S paid P1,000.00 as annual subscription to a weekly magazine

to be delivered every week. The contract is indivisible but the
obligation of the publisher is divisible. If the agreement is that the
publisher will deliver the magazine every week and S will pay