V

Voidable contracts are a type of defective contract. They are valid until they are annulled. The defect is due to a vice of consent or the incapacity of one of the parties. These contracts are binding unless annulled by a proper action in court. Voidable contracts are susceptible to ratification.

Characteristics of Voidable Contracts

• May be ratified.
• Produce effects until annulled.
• Defect is due to incapacity or vitiated consent.
• Valid until annulled.
• May be cured by prescription.
• Defense may be invoked only by the parties (those principally or subsidiarily liable), or their successors in interest and privies.
• Referred to as relative or conditional nullity.
• Exist, are valid, and binding, although they can be annulled because of a defect in the form of vitiation of consent or lack of legal capacity of one of the parties.

Grounds for Voidability

A contract is voidable or annullable if one of the contracting parties is incapable of giving consent, or if the consent is vitiated by mistake, violence, intimidation, undue influence, or fraud. Even if there is no damage to the contracting parties, such contracts are voidable.

Specifically, grounds for annulment include:

• Incapacity to consent.
• Vitiated consent by mistake, violence, intimidation, undue influence, or fraud.

Mistake can vitiate consent, but a simple mistake of account shall only give rise to its correction. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract. There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and serious injury to himself or his person, property, or to that of his spouse, descendants or ascendants, to give his consent. Undue influence exists when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. Fraud exists when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.

Ratification of Voidable Contracts

Voidable contracts are susceptible of ratification. Ratification extinguishes the action to annul a voidable contract. Ratification can be express or implied. Tacit ratification exists with knowledge of the reason which renders the contract voidable and the person who has a right to invoke it having ceased. Ratification cleanses the contract from all its defects from the moment it was constituted. Annulment is based on the original defects, but ratification causes annulment based on the original defects to no longer prosper. Ratification may be done by the guardian of the incapacitated person or by the injured party himself once he has become capacitated or has become capable of giving consent.

Annulment

Voidable contracts are binding unless annulled by a proper action in court. Annulment is the remedy for voidable contracts. Annulment is based on intrinsic defects related to the meeting of the minds. The action for annulment is principal. Annulment is a sanction. Public interest governs annulment. Law predominates in annulment. The nullity in a voidable contract is based on a vice of consent which invalidates the former; the former is compatible with the perfect validity of the contract. An action for annulment of contracts is extinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings. If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an obstacle to the success of the action, unless said loss took place through the fraud or fault of the plaintiff. The action for annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable of giving consent cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract.

Distinction from other Defective Contracts

• Rescissible vs. Voidable: Rescission is based on lesion (damage), while annulment is based on vitiated consent or incapacity. The defect in rescissible contracts is external, while the defect in voidable contracts is intrinsic (in the meeting of the minds). The action for rescission is subsidiary, while the action for annulment is principal. Rescission is a remedy, while annulment is a sanction. Private interest governs rescission, while public interest governs annulment. Equity predominates in rescission, while law predominates in annulment. A rescissible contract is valid until rescinded, while a voidable contract is valid till annulled. Rescissible contracts may be attacked collaterally, while voidable contracts cannot be attacked collaterally. Damage to the plaintiff is essential for rescission but is immaterial for annulment. Indemnity for damages is a bar to rescission but not to annulment. Compatibility with the perfect validity of the contract is an issue for rescission but not for annulment (the nullity of a voidable contract is compatible with its perfect validity). To prevent rescission, ratification is not required, while to prevent annulment, ratification is required.

• Unenforceable vs. Voidable: Unenforceable contracts cannot be sued upon or enforced unless ratified. Voidable contracts are binding unless annulled. Unenforceable contracts cannot be enforced by a court action. Voidable contracts can be cured by prescription, unenforceable contracts may be cured by prescription if they are oral contracts for a certain period of time. Unenforceable contracts cannot be assailed by third parties, while the right to set up the defense of nullity of a voidable contract is limited to parties, successors, and privies.

• Void vs. Voidable: Void contracts have no effect at all and cannot be ratified or validated. Voidable contracts are valid until annulled and may be ratified. In void contracts, the defect is that which is ordinarily, public policy is militated against. In voidable contracts, the defect is due to incapacity or vitiated consent. No action is required to set aside a void contract, unless it has already been performed. Void contracts cannot be cured by prescription, while voidable contracts may be. The defense of nullity of a void contract may be availed of by anybody, whether he is a party to the contract or not, as long as his interest is directly affected. Void contracts are referred to as absolute nullity, while voidable contracts are referred to as relative or conditional nullity. A void contract does not give rise to a valid one.