Isbn-13: 978-84-16399-11-6 Index
Total Page：16
File Type：pdf, Size：1020Kb
ISBN-13: 978-84-16399-11-6 INDEX: FIRST CHAPTER: OBLIGATIONS 1) Defective Contracts in Philippine Law, by Rubén Belane 2) Inefficacy of contracts: Different categories, by Yolanda Bergel Sainz-Baranda. SECOND CHAPTER: PROPERTY LAW 3) Indigenous Peoples and Their Right to Ancestral Domain, by Sedfrey M. Candelaria 4) An introduction to English and Spanish property law from a comparative perspective, by Juan Pablo Murga Fernández 5) Acquisition from a non domino in Spanish civil law, by José Manuel de Torres Perea THIRD CHAPTER: CIVIL LIABILITY 6) The Philippine Civil Code Chapter on Human Relations and Contemporary Challenges, by Dean Perry Pe 7) Pre-contractual liability, by Teresa Rodríguez de las Heras Ballell 8) Torts in the family sphere, by José Manuel de Torres Perea FOURTH CHAPTER: FAMILY LAW 9) Philippine Law on Paternity and Filiation, by Danilo Concepción 10) Inter Country Adoption, by Maria Gabriela Roldan 11) Private law of the Philippines and Spain scientific congress. Child protection system in Spain, by Julieta Moreno-Torres Sánchez FITTH CHAPTER COMMERCE LAW: 12) Roots of modernity grounded on tradition: Select Civil Law concepts ingrained in Commercial Law, by Nilo Divina 13) Relations between the Spanish and Philippine Commercial Codes, by Eugenio Olmedo Peralta 14) Mortgage foreclosure and unfair terms in banking contracts, by Yolanda de Lucchi López Tapia, 15) Bankruptcy, an arrangement with creditors, by Nieves Jiménez López 16) How to secure the enforcement of penalties in international commercial contracts, by Ignacio Marín García DEFECTIVE CONTRACTS IN PHILIPPINE CIVIL LAW Prof. Rubén F. Balane Abstract: In the Spanish Civil Code, contracts can be rescinded in certain cases and certain contracts are considered defective for want of any of the three essential requisites—consent, subject-matter, and cause. The Philippine Civil Code, enacted in 1949, sought to refine this by providing a more finely tuned classification of these defective contracts. Thus, in the Philippine Civil Code, defective contracts are enumerated in a more or less meticulously graduated order of irregularity: (1) the rescissible, (2) the voidable, (3) the unenforceable, and (4) the void or inexistent. In this paper, the author discusses the four kinds of defective contracts in the Philippine legal system. Along with discussing the requisites for the applicability of each defective contract, the author outlines the important Philippine jurisprudential guidelines that evolved since the Philippine Civil Code’s enactment about six-and-a-half decades ago. Keywords: Philippines, Philippine Civil Code, Defective Contracts, Rescissible Contracts, Voidable Contracts, Unenforceable Contracts, Void Contracts, Inexistent Contracts. Introduction The word “contract” literally means a drawing together (cum-trahere). In the Philippine Civil Code a contract is defined as “a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.” (Article 1305, Civil Code). In Philippine civil law it is elementary that all contracts have three common requisites: consent, subject-matter, and cause. (Spouses Lequin v. Spouses Vizconde, 603 SCRA 407 [2009]). Art. 1318 accordingly provides: “Art. 1318. There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established.” 1 A lack or vitiation of any of these three results in some kind of defect in the contract. In addition, there is a special group of contracts which, though possessed of all the essential requisites, cause a particular kind of economic damage and are, for that reason, treated by law as defective. In the civil law tradition, the concept of defective contracts goes back very far. It was already known in the ancient Roman law. Contracts in the Roman law could be set aside for total want of capacity (as in the case of children below seven), or if entered into through force or fear (vis or metus) or fraud (dolus), or mistake (error), or for an illegal object or purpose, and so forth. The Civil Code of Spain—which was also our law until 1950—likewise already regulated defective contracts. Thus, contracts could be rescinded in certain cases (Art. 1291, Spanish Code), and certain contracts defective for want of any of the three essential requisites were invalid. There was some ambiguity in the old code, however, between contratos that were referred to as nulos and those referred to as anulables. When, in 1947 (just a year after the birth of the Philippine Republic, following more than three centuries of Spanish rule and half-a-century of American sovereignty), a Code Commission was created to draft a Civil Code for the infant Republic, one of the features proposed by the codifiers was a clearer distinction of the defective contracts. The result was the categorization of such contracts into four: (1) the rescissible, (2) the voidable, (3) the unenforceable, and (4) the void. The defective contracts These defective contracts are arranged, presented, and regulated (Articles 1380 to 1422) in ascending order of defectiveness. The classification has been done with a not inconsiderable amount of effort and an attempt at thoroughness. Thus, each of these defective contracts has its own requisites and consequences. Ideally, one would suppose, the distinctions should serve as water-tight compartments. For the most part — but not always — they have functioned well in the jurisprudence that has been laid down in the six-and-a-half decades since the effectivity of the Code. A rescissible contract is one, which, though possessing all the essential requisites of contracts, has caused a particular economic damage either to one of the contracting parties or to a third person. A voidable contract is one in which the consent of one party is defective, either because of want of capacity, or because consent is vitiated. 2 An unenforceable contract is one that, for lack of authority or of the required writing, or for incompetence of both parties, cannot be given effect unless properly ratified. A void contract is one which suffers from absence of object or cause and is therefore an absolute nullity and produces no effect. I. Rescissible Contracts A rescissible contract has all the requisites required by law for valid contracts (Art. 1380). What makes it rescissible is economic damage, not just any economic damage, but those kinds of economic damage enumerated under Arts. 1381 and 1382. For a contract to be rescissible, four requisites are required: 1. it must fall under either Art. 1381 or 1382 (Causapin v. CA, 233 SCRA 615 [1994]); 2. the party seeking rescission must have no other legal means to obtain reparation for damages suffered by him (Art. 1383); 3. the party seeking rescission must be able to return whatever he may have obtained by reason of the contract (Art. 1385, par. 1); and 4. the things object of the contract must not have passed legally to a third person in good faith (Art. 1385, pars. 2 and 3). Let us now take the requisites one by one. A. The contract must be one of those enumerated under Art. 1381 or 1382. “Art. 1381. The following contracts are rescissible: (1) Those which are 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 other manner collect the claims due 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; 3 (5) All other contracts specially declared by law to be subject to rescission.” “Art. 1382. 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.” a) The first two contracts enumerated in Art. 1381 are entered into by representatives (guardians on behalf of wards, and administrators representing absentees) where the ward or absentee suffers lesion exceeding 25% of the value of the property which he parts with. Lesion has been defined as the “injury which one of the parties suffers by virtue of a contract which is disadvantageous to him” (IV ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 574 (1987), citing 3 Camus 205-06). For the contract to be rescissible, the lesion must exceed 25% of the value of the thing owned by the ward or absentee. The theory of lesion is simple enough but its application has been strongly criticized. Foremost among the critics is Justice JBL Reyes, perhaps the Philippines’ greatest civilist, who, in his comments on the Civil Code, observed: “Modern doctrine does not regard favorably the rule of economic prejudice (lesion) being a ground of rescission, considering that goods do not have a fixed true value because value is always variable and fluctuating, being a function of supply and demand. The modern codes tend to view lesion of certain proportions (1/4, etc.) as merely raising a presumption of undue influence, that vitiates consent and renders the contract voidable…whenever the lesion is coupled with exploitation of one party by the other. (cf. German Civ. C., Art. 138; Mexico, Art. 17).” (JBL Reyes, Observations on the New Civil Code, Fifth Installment, LAWYERS J., JAN. 31, 1951; [c.f. RUBEN F. BALANE, JBL IPSE LOQUITUR 239 (2002)]). This provision on lesion had been hotly debated by the framers of the French Code, the reason for its final inclusion being the personal intervention of Napoleon Bonaparte.