Unenforceable Contracts in the Philippines: What You Need to Know
Contracts are essential agreements that bind two or more parties into a legal obligation. In the Philippines, these agreements fall under the jurisdiction of the Civil Code, which sets the standards for enforceability. However, not all contracts are valid in the eyes of the law. There are instances where a contract is deemed unenforceable, making it unenforceable in a court of law. In this article, we’ll explore what unenforceable contracts are and what you need to know about them in the Philippines.
What is an Unenforceable Contract?
In simple terms, an unenforceable contract is a contract that cannot be enforced in court. Unlike void or illegal contracts, unenforceable contracts are not invalid from the outset. Instead, they are considered enforceable before a court of law until a triggering event renders them unenforceable. Most commonly, this occurs when a court determines that a contract violates public policy or a legal requirement.
Some examples of unenforceable contracts include agreements for the commission of a crime, contracts with minors, contracts based on fraudulent conduct, agreements that violate public policy, and any deals resulting from undue influence or coercion. The list goes on, and the courts have the power to invalidate a contract for any reason deemed unacceptable or unenforceable.
What Makes a Contract Unenforceable in the Philippines?
In the Philippines, the Civil Code specifically states provisions that make a contract unenforceable. These provisions can be found under Article 1409, which lists the following:
- Contracts that are illegal or against public policy
- Contracts that are impossible or violate the law
- Agreements that are fraudulently obtained or entered into
- Contracts that lack consideration
- Agreements that are voidable due to incapacity or undue influence
- Agreements that contain ambiguous or uncertain terms
It`s important to note that these provisions are not exhaustive, and the courts can render other contracts unenforceable if it finds that it is in violation of public policy or any legal requirement.
What Happens to Unenforceable Contracts?
When a contract is deemed unenforceable, it is as if the agreement never existed in the first place. The parties involved are no longer legally bound by the terms of the contract. However, this does not mean that one party can simply walk away from the contract without any consequences. Both parties may still be responsible for any performance or obligations that were incurred before the contract was deemed unenforceable.
For example, if a contract is deemed unenforceable due to a lack of consideration, any performance made before the contract becomes unenforceable remains binding. In other words, any goods or services exchanged before the contract was nullified still need to be paid for.
Final Thoughts
Contracts are an essential part of doing business in the Philippines. They ensure that parties are held accountable for their obligations and provide a framework for resolving disputes. However, not all contracts are valid, and some can be deemed unenforceable. Understanding what makes a contract unenforceable and the repercussions that arise is essential for anyone entering into an agreement. If you have any questions or concerns about unenforceable contracts, it is best to seek legal advice.