Audio Lecture. Unenforceable Contracts.Art. 1403-1408. Defective Contracts. Obligations & Contracts.

Unenforceable contracts cannot be assailed or questioned by third persons or strangers to the contract.

Unenforceable contracts have no legal effect unless ratified. Ratification of contracts infringing the Statute of Frauds can occur in two ways: failure to object to the presentation of oral evidence in court or acceptance of benefits under the contract.

When an enforceable contract under the Statute of Frauds requires a public document for registration (e.g., for real property), parties can compel each other to execute the necessary instrument for convenience.

The lecture begins by defining unenforceable contracts as those that cannot be enforced in court due to defects until they are ratified according to law. Once ratified, they gain the legal effects of valid contracts.

Article 1403 enumerates three types of unenforceable contracts: unauthorized contracts, those failing to comply with the Statute of Frauds, and those where both parties are incapable of giving consent.

Unauthorized contracts are agreements made in the name of another person without authority or acting beyond one's power. These require ratification to become enforceable. An example is selling property without the owner's consent or a duly signed special power of attorney.

The Statute of Frauds requires certain contracts to be in writing to prevent fraud and mistakes due to unreliable memory. These contracts are only applicable to executory contracts.

This section details specific contracts that must be in writing: agreements not to be performed within a year, special promises to answer for another's debt, agreements made in consideration of marriage (excluding mutual promises to marry), and agreements for the sale of goods worth 500 pesos or more.

Agreements for leasing for more than one year or for the sale of real property (regardless of price) must be in writing to be enforceable. Oral leases for one year or less, even for real property, are enforceable.

A representation as to the credit of a third person must also be in writing to be enforceable. An oral assurance of someone's creditworthiness causing a bank to lend money makes the guarantor not liable if the borrower defaults.

If both parties in a contract are incapable of giving consent (e.g., two minors), the contract is unenforceable. If only one party is incapacitated, the contract is voidable.

Unauthorized contracts are governed by Article 1317 (which discusses contracts entered into in the name of another without authority) and the principles of agency.

If both parties are incapable of giving consent and one party's guardian/parent ratifies the contract, it becomes voidable. If both guardians/parents ratify, the contract is validated from its inception.