Summary of "Contracts 6: Unenforceable Contracts (Defective Contracts)"

Main ideas / lessons (unenforceable vs. void vs. valid)

• The video explains unenforceable (but not automatically invalid) contracts in a contracts series.
• These contracts are considered valid in formation (i.e., essential elements like consent, object, and cause are present), but they cannot be enforced in court until certain conditions occur—most notably ratification.

Three kinds of “unenforceable contracts” discussed

1) Unauthorized contracts

Concept

A contract entered in another person’s name without that person’s authority—either:

• by someone acting without legal representation/authority, or
• by someone acting beyond the scope of the powers granted.

Governing legal basis (as stated)

• Article 1317 (Civil Code) and agency law.

Agency principles (method/logic given)

• An agent binds the principal only if:
  • the agent is clothed with authority/power by the principal, and
  • the agent acts within the scope of that authority.
• If the agent acts outside the scope or without authority:
  • the agent cannot bind the principal, and
  • the contract becomes unenforceable.
• If the agent acts within scope and has express power:
  • the agent’s knowledge is treated as the principal’s knowledge (the agent described as an “extension” of the principal’s personality).

Core takeaway

• A person cannot be bound by a contract made by a third party without the person’s knowledge or consent.

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2) Contracts that fall under the Statute of Frauds

Concept

• These contracts are valid, but cannot be enforced in court unless the required writing/form requirement is met.
• The purpose is to:
  • prevent fraud
  • guard against mistakes by requiring certain agreements to be in writing.

Legal basis mentioned

• Article 1403(2) (Civil Code) — “statute of frauds”
• Article 1356 (Civil Code): contracts are obligatory in whatever form, unless the law requires a particular form for validity/enforceability.
  • If a particular form is required for enforceability/validity, it is absolute; failure to comply makes the contract unenforceable.

Key methodological points (Statute of Frauds as a “rule on evidence”)

• Described as primarily a rule on evidence, not outright invalidity.
• Applies only to executory contracts (contracts not yet performed).
• Does not apply if the contract is:
  • partially performed, or
  • fully performed/consummated (because performance provides evidence of intent).

How it functions as a defense (personal and waivable)

• It is a personal defense:
  • can be invoked only by one of the parties
  • not by third parties with no interest in the contract.
• It is waivable:
  • if the party does not object to the evidence used to prove the contract, the effect is described as waiver.
  • the video equates waiver with ratification of the unenforceable contract.

Example logic given (ratification by failure to invoke the defense)

• Characters used: Vegeta and Goku
• Scenario:
  • They enter an oral contract covered by the statute of frauds.
  • When sued, Goku can invoke the statute of frauds to avoid enforcement because it wasn’t in writing.
• Waiver mechanism:
  • If Vegeta presents evidence of the oral agreement,
  • and Goku fails to object (i.e., fails to invoke “not in writing / statute of frauds”),
  • then Goku is treated as having impliedly ratified, and both are bound.

When the Statute of Frauds does NOT apply (3 instances listed)

1. If the court action is not for violation/breach or not for specific performance (per the video’s phrasing).
2. If the contract is admitted:
   • expressly, or
   • impliedly (e.g., by failure to deny the contract’s existence).
3. If the “writing” does not express the true agreement:
   • the statute is described as not usable as a shield to commit fraud.

Remedy described (if writing is required)

• If the contract meets the conditions needed for enforcement, the remedy is to:
  • invoke Article 1357, and
  • compel the other party to observe the required legal form.

Exclusive list of agreements covered by the Statute of Frauds (as stated)

The video states the list is exclusive—the statute applies only to these enumerated agreements:

• Obligation/agreement not to be performed within one year from making the contract
  • Example: agreement that one party builds a house within the following year.
• Special promise to answer for the debt, default, or miscarriage of another
  • Commonly known as a guarantee (suretyship-type promise).
• Promise/agreements made in consideration of marriage, other than a mutual promise to marry
  • Example concept: a parent promising to build a house for X and Y if X and Y get married.
• Sale of goods/chattel (or things in action) with a price of at least 500 pesos
  • Also noted: an entry in an auctioneer’s sales entry book can serve as a valid memorandum/evidence.
• Lease for more than one year
• Sale of real property or an interest therein
  • The video notes that oral agreements may be valid, but enforcement in court depends on conditions like partial/full performance.
• Representation as to the credit of a third person
  • Listed as another category under the statute.

Extra clarification provided

• The statute of frauds is about enforcement/proof in court, not “validity.”
• If the contract is partially performed or fully performed, enforcement/proof becomes possible—so the statute of frauds is not the barrier.

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3) Unenforceable contracts due to incapacity of both parties to give consent

Concept

• Both parties are incapable of giving consent.
• (The video directs viewers to a prior discussion on voidable contracts for deeper incapacity details.)

Ratification and how unenforceability changes

• A parent/guardian (or the incapacitated person, such as a minor reaching legal age) may ratify the unenforceable contract.
• If only one party ratifies:
  • the contract becomes voidable (per the video’s rule).
• If both parties ratify:
  • the contract becomes validated.
  • validity is described as retroacting to the date the contract was executed.

Core takeaway

• Incapacity can be cured by ratification, changing the contract’s enforceability status.

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Speakers / sources featured

Speaker

• “Attorney Vlogger” / the channel host (no name given in the subtitles).

Legal sources cited

• Civil Code – Article 1317
• Civil Code – Article 1403(2) (Statute of Frauds)
• Civil Code – Article 1356 (Form of contracts)
• Civil Code – Article 1357 (Remedy to compel required form)

Referenced videos (by the speaker)

• Speaker’s video on voidable contracts (linked in description; about ratification/incapacity)
• Speaker’s episode on SPA and agency (linked in description; about agency)
• Speaker’s episode on guarantee (linked in description; about surety/guarantee category)

Example characters used in hypotheticals

• Vegeta and Goku (fictional examples).

Category

Educational

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