Concept of Inexistent Contracts
Inexistent contracts are those which produce no effect whatever from the very beginning. The terms "void contracts" and "inexistent contracts" are generally used interchangeably. These contracts do not create a binding juridical relation.
Basis of Inexistence
Contracts are considered inexistent and void from the beginning due to a lack of one or some of the essential requisites (consent, object, and cause) required under Article 1318 of the Civil Code. Article 1409 of the Civil Code enumerates specific contracts that are inexistent and void from the beginning.
The following contracts are inexistent and void from the beginning:
- Those whose cause, object or purpose is contrary to law, morals, good customs, public order, or public policy.
- Those which are absolutely simulated or fictitious.
- Those whose cause or object did not exist at the time of the transaction.
- Those whose object is outside the commerce of men.
- Those which contemplate an impossible service.
- Those where the intention of the parties relative to the principal object cannot be ascertained.
- Those expressly prohibited or declared void by law.
Legal Effects
Inexistent contracts have no effect whatsoever. This is based on the principle quod nullum est nullum producit effectum (that which is null produces no effect).
Ratification and Validation
Inexistent contracts cannot be ratified or validated. Time does not give efficacy to a void contract.
Defense of Inexistence
No action is required to set aside an inexistent contract as it is void from the beginning. The defense of inexistence or absolute nullity can be availed of by anybody directly affected. The action or defense for the declaration of absolute nullity of a void or inexistent contract is imprescriptible.
Distinction from Voidable Contracts
Unlike voidable contracts, which are valid until annulled by a proper court action and are susceptible of ratification, inexistent contracts are void from the beginning and cannot be ratified. The action for annulment of a voidable contract is subject to a four-year prescriptive period, whereas the action to declare absolute nullity of an inexistent contract is imprescriptible. The defect in an inexistent contract is intrinsic (lack of essential elements or contrary to law), while the defect in a voidable contract is intrinsic (vitiated consent or incapacity).