Elaboration on Void Contracts
Void contracts are defective contracts that have no effect at all from the very beginning. They are considered inexistent or illegal.
Characteristics of Void Contracts
A void contract cannot be ratified. It generally produces no effects, not even generally. The defect in a void contract is ordinarily one that violates public policy.
Distinction from Other Defective Contracts
Void contracts are one of the four kinds of defective contracts, alongside rescissible, voidable, and unenforceable contracts. Unlike voidable contracts which are valid until annulled, void contracts are void from the very beginning. An action for the declaration of nullity of a void or inexistent contract is imprescriptible.
Grounds for Void Contracts
Contracts are inexistent and void from the beginning for various reasons:
- 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 of the contract cannot be ascertained.
- Those expressly prohibited or declared void by law.
Contracts that are prohibited by the Constitution may also be considered void. A sale of a parcel of land entered into in the name of another person who has no authority or legal representation is not void but merely unenforceable, unless it is ratified. However, based on Heirs of Delos Reyes, the court declared such a contract void ab initio due to the absence of consent from the owner.
Pari Delicto Principle
The principle of pari delicto applies to contracts with an illegal cause, object, or purpose. Under this principle, if both parties are equally at fault in entering into an illegal agreement, the law will not aid either party; they will be left where they are. However, there are exceptions to this rule, allowing recovery in certain instances like when the innocent party repudiates the void contract or when public interest is enhanced.
Action for Declaration of Nullity
The action or defense for the declaration of the inexistence or absolute nullity of a contract is imprescriptible. Generally, no action is required to set aside a void contract from the beginning, unless it has already been performed. An action for declaration of nullity of contract is necessary when there has been performance. It is the judgment of the court that terminates the effects of a void contract.