c. Unenforceable Contracts

When Remedy NOT Allowed

• Simple, unconditional donations inter vivos;
• Wills;
• When the agreement is void; (Art. 1366, NCC)
• When an action to enforce the instrument is filed (by doctrine of estoppel);
• If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties; and Note: If no contract was formed, there is no contract to annul. Annulment may be sought if a contract was formed but consent was vitiated.
• When the contract is unenforceable because of failure to comply with the statute of frauds.

Characteristics of unenforceable contract

• It cannot be enforced by a proper action in court;
• It may be ratified;
• It cannot be assailed by third person; and
• May only be assailed as a way of defense, not by direct action.
• The defect of an unenforceable contract is of a permanent nature and it will exist as long as the contract is not duly ratified. The mere lapse of time cannot give efficacy to the contract.

NOTE: An unenforceable contract cannot be enforced by action unless ratified; it is not necessarily void and may produce legal consequences, including upon ratification (Civil Code, Arts. 1403–1408).

Kinds of unenforceable contracts

The following contracts are unenforceable unless they are ratified:

• Those entered into the name of another person by one who has been given no authority/legal representation or acted beyond his powers; “Unauthorized contracts”;

A sale of land through an agent is void if the agent’s authority to sell is not in writing. (NCC, Art. 1874) If the agent has written authority but acts beyond its scope, the contract is unenforceable unless ratified. (NCC, Art. 1403(1))

• Those that do not comply with the Statute of Frauds; and
• Those where both parties are incapable of giving consent to a contract. (NCC, Art. 1403)

VOID / INEXISTENT CONTRACTS

A void or inexistent contract is one which has no force and effect from the very beginning as if it had never been entered into, and which cannot be validated by either by time or ratification. This definition includes not only those contracts in which one of the essential requisites is totally wanting but also those which are declared by positive provision of law or statute. A void or inexistent contract is equivalent to nothing; it is absolutely wanting in civil effects.