Void or Inexistent Contracts; Articles 1409 – 1422 of the New Civil Code

No contract to speak with!

No contract to speak with!

What are Void or Inexistent Contracts?

A void contract, also known as a void agreement, is not actually a contract. A void contract cannot be enforced by law. Void contracts are different from voidable contracts, which are contracts may be (but not necessarily will be) nullified.

An agreement to carry out an illegal act is an example of a void contract or void agreement. For example, a contract between drug dealers and buyers is a void contract simply because the terms of the contract are illegal. In such a case, neither party can go to court to enforce the contract, although some drug users mistakenly believe the opposite, and therefore take their disputes to court.

Lack of Essential Elements

Inexistent and void contracts cannot be ratified neither can the right to set up the defense of illegality be waived, they are the following:

  1. Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
  2. Those which are absolutely simulated or fictitious;
  3. Those whose cause or object did not exist at the time of the transaction;
  4. Those whose object is outside the commerce of men;
  5. Those which contemplate an impossible service;
  6. Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;
    1. This relates to Indeterminate object under Article 1349 of the New Civil Codewhich states;
      1. “The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties.
  7. Those expressly prohibited or declared void by law.

Prohibited Contracts

This relates to the following persons who cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another under article 1491 paragraph four (4) and five (5) of the New Civil Code which states;

”Public officers and employees, the property of the State or of any subdivision thereof, or of any government owned or controlled corporation , or institution, the administration of which has been entrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;”

”Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.”

What is it to be filed in court?

In order to follow the rules of law regarding void or inexistent contract, the action to be filed in court is an “Action for the Declaration of Nullity”.

According to Article 1410 of the New Civil Code:

“The action or defense for the declaration of the inexistence of a contract does not prescribe.”

However, it does not apply to last will and testaments.

How Illegal Contracts with Criminal Offense should be treated?

Article 1411 of the New Civil Code states:

“When the nullity proceeds from the illegality of the cause or object of the contract, and the act constitute a criminal offense, both parties being in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract.

This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given, and shall not be bound to comply with his promise.”

The rule mentioned in the above second paragraph of Article 1411 of the New Civil Code is related to Article 45 of the Revised Penal Code which states:

“Confiscation and forfeiture of the proceeds or instruments of the crime: Every penalty imposed for the commission of a felony shall carry with it the forfeiture of the proceeds of the crime and the instruments or tools with which it was committed.

Such proceeds and instruments or tools shall be confiscated and forfeited in favor of the Government, unless they be the property of a third person not liable for the offense, but those articles which are not subject of lawful commerce shall by destroyed.”

How Illegal Contracts without Criminal Offense should be treated?

Article 1412 of the New Civil Code states:

“If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:

1. When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other’s undertaking;

2. When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not a fault, may demand the return of what he has given without any obligation to comply with his promise.”

No Consideration: Restitution after Void Contracts (pp 195-234)

Those who transfer value under void contracts have no remedy in contract and little to expect from the law of property, since nullity does not in general prevent property passing. However, it has been recently held in litigation following void interest swaps that the value transferred under a void contract, because it passes for ‘no consideration’, becomes an unjust enrichment of the recipient at the transferor’s expense, so that restitution must follow even where the void contract has been fully executed on both sides.

Restitution for ‘no consideration’ is alien to the law of unjust enrichment in the common law. In particular:

  1. Parties to a fully executed contract, though it be void, have no substantial reason for restitution;
  2. Failure of consideration’, property understood, can explain all cases of restitution where the defendant has not completed his part;
  3. Cases advanced as warranting a new ground for restitution, called ‘no consideration’ and distinct from failure of consideration, turn out on closer inspection not to go beyond failure of consideration;
  4. The new doctrine creates an unacceptable discontinuity with the past, unsettling the foundations on which leading cases have been argued and decided, departing from the previous treatment of void contracts and contradicting the leading treatise on restitution.

These arguments notwithstanding, it will be true that in a jurisdiction which allows restitution for mistake of law, the results illegitimately attained through ‘no consideration’ will be largely attainable through mistake.

Nevertheless, the further progress of ‘no consideration’ should be resisted because it constitutes a standing invitation to borrow the language of civilian systems (‘sine causes’, ‘sans cause’, ‘ohne Rechtsgrund’), and civilian terminology can only do harm if it is imported without civilian substance.

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7 responses to “Void or Inexistent Contracts; Articles 1409 – 1422 of the New Civil Code

  1. Thousands of us were fired under an illegal contract.The target was high senority.13 years to 29 in a jointness program.The Absentee Program.Attached agreement Memoranum of Understanding.This was a discriminatory clause leaving the door wide open for the employer to fire or retaliate knowing the union took “hands off”.We were told nothing we could do cuz it was ratified by the membership.They took our dues ^ sold us out.I told them they can’t ratify an illegal contract.Does this mean we are fired under a contract that isn’t binding?It was covered up in our state by all Officials & government agencies.What help can we get & where?

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