Category Archives: obligations and contracts

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Breach of a Contract of Sale

What are the remedies of the seller for breach of contract of sale according to the law?

When the seller is prejudiced due to the breach of contract by the buyer, the following provisions of the law shall govern:

  1. Action for payment of the price

Art. 1595. Where, under a contract of sale, the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract of sale, the seller may maintain an action against him for the price of the goods.

*The seller may maintain an action for payment of the price when the ownership of the goods sold already passed to the buyer and he fails to pay in a wrongful manner attributable to him.

Where, under a contract of sale, the price is payable on a certain day, irrespective of delivery or of transfer of title and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price although the ownership in the goods has not passed. But it shall be a defense to such an action that the seller at any time before the judgment in such action has manifested an inability to perform the contract of sale on his part or an intention not to perform it.

*The seller may also demand payment when he likewise fails to pay and neglects wrongfully the date certain for its payments, irrespective of delivery and the transfer of title to the buyer.

Although the ownership in the goods has not passed, if they cannot readily be resold for a reasonable price, and if the provisions of article 1596, fourth paragraph, are not applicable, the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to receive them, may notify the buyer that the goods are thereafter held by the seller as bailee for the buyer. Thereafter the seller may treat the goods as the buyer’s and may maintain an action for the price. (n)

*The seller may ask for payment of the price if the goods cannot be resold for a reasonable price and the buyer refuses to accept them even before the ownership to goods has passed.

  1. Action for damages for non-acceptance of the goods

Art. 1596. Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for nonacceptance.

The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s breach of contract.

Where there is an available market for the goods in question, the measure of damages is, in the absence of special circumstances showing proximate damage of a different amount, the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept.

If, while labor or expense of material amount is necessary on the part of the seller to enable him to fulfill his obligations under the contract of sale, the buyer repudiates the contract or notifies the seller to proceed no further therewith, the buyer shall be liable to the seller for labor performed or expenses made before receiving notice of the buyer’s repudiation or countermand. The profit the seller would have made if the contract or the sale had been fully performed shall be considered in awarding the damages. (n)

*The seller may demand for damages when the buyer fails to accept the goods without lawful case and fails to pay the price agreed upon. He may also demand damages when the ownership has not yet passed and the seller cannot recover the price of the goods. He also has an action for damages when the goods are not yet identified at the time of the contract. The damages may be measured by the labor performed and expenses incurred for the materials or the profit that would have been realized have it not for the non-acceptance of the buyer.

  1. Action for rescission

Art. 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. (n)

*The remedy afforded by this provision is applicable in the sale of goods which have not yet been delivered to the buyer and the buyer repudiated the contract of sale, manifested his inability to perform his obligations or there is mere breach of the provisions of the contract of sale. The notice of rescission must be given by the seller. The breach must not be slight or casual but must be substantial enough to defeat the very essence of the contract.

What are the remedies of the buyer for breach of contract of sale according to the law?

When the buyer is prejudiced due to the breach of contract by the seller, the following provisions of the law shall govern:

  1. Action for specific performance

Art. 1598. Where the seller has broken a contract to deliver specific or ascertained goods, a court may, on the application of the buyer, direct that the contract shall be performed specifically, without giving the seller the option of retaining the goods on payment of damages. The judgment or decree may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as the court may deem just. (n)

* The buyer may, without giving the seller the option to retain the goods on payment of damages, may ask for specific performance. However there may be instances in a court decision the judgment maybe unconditional, or upon such terms and conditions as to the payment of damages, payment of the price and otherwise, the court may order whatever it may deem just.

  1. Action for rescission or damages for breach of warranty

Art. 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:

(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the price;

(2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty;

(3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty;

(4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid. 

When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without prejudice to the provisions of the second paragraph of Article 1191.

Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale.

Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. If the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after an offer to return the goods in exchange for repayment of the price.

Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure payment of any portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1526.

(5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. (n)

* In case of recoupment, the buyer may accept the goods and set up the seller’s breach to reduce or extinguish the price. He may accept or not the goods and in both cases, maintain an action for damages for breach of warranty. In rescission, he may do such if there is refusal to receive the goods; or if goods have already been received, return them and recover what was paid or any part of it concurrently with return or immediately after it.

These remedies are alternative, without prejudice to paragraph 2 of Art. 1191 (that a party may still seek rescission after choosing specific performance if the latter is impossible). Buyer cannot rescind if he is knowledgeable of the breach and still accepted the goods without protest, or fails within reasonable time to notify the seller of his election to rescind, or fails to return or offer to return the goods in substantially as good condition as it was. If seller refuses to accept an offer to return the goods and the buyer elected rescission, buyer shall be deemed to hold the goods as bailee for the seller subject to lien to secure payment of any portion of the price which has been paid. There is loss, in case of breach of warranty of quality, when there was a difference between value of the goods at the time of delivery and value they would have had if they had answered to the warranty.

What are the remedies of the seller in case of default in payment of price?

  1. Anticipatory breach- The seller has reasonable grounds to believe that the property sold will be lost so he may rescind the sale
  2. Failure of the buyer to pay the purchase price-In the sale of immovable property even though it may have been stipulated that rescission will only take place upon failure to pay the price, he may still demand payment until the judicial or extrajudicial rescission of the contract.

What are the remedies of the buyer in case of disturbance in the property and in condominium projects?

  1. Suspension of payment-If the buyer gets disturbed in the possession and ownership or has a reasonable grounds to fear such disturbance of the property, by a vindicatory action or a foreclosure of mortgage, the buyer may suspend payment until the disturbance is removed by the seller or seller gives security for the return of the price in proper case unless otherwise stipulated.
  2. Subdivision and condominium projects-PD 957 provides that when the owner or developer of the condominium project fails to develop it according to the approved plan and within the time limit for complying with the same, the buyer who pays in installment may desist from paying further provided he gives due notice to the seller. The law also allows the buyer to be reimbursed of all the amount paid.

What is Equitable Mortgage?

Pacto de retro is presumed to be Equitable Mortgage when:

Art. 1602: The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.

What are the effects when the thing sold is lost?

  1. Loss before perfection of the contract- Contract is void
  2. Loss at the time of perfection of contract of sale-Contract is Void
  3. If thing is partially lost-the vendee may choose between withdrawing from the contract and demanding the remaining part, paying its price in proportion to the total sum agreed upon
  4. Loss after perfection of the contract of sale
  • After delivery to buyer- buyer bears the loss
  • Before delivery to the buyer

-Non fungible/ fungible thing without consideration as to its weight, number or measure- buyer bears the loss

-fungible thing for a price fixed in accordance with its weight, number or measure-seller bears the loss

 

References

De Leon, H. (2010). Comments and Cases on Sales. Quezon City: Rex Printing Company, Inc.

New Civil Code of the Philippines

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Contracts

What is a contract?

According to the New Civil Code:

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (1254a)

*A contract is the manifestation of the will of one or more parties which takes a legal form wherein they bind themselves in favour of the other, reciprocally to fulfil an action to give, to do or not to do.

What are the characteristics of contracts?

  1. Relativity
  2. Obligatory Force and Consensuality
  3. Mutuality
  4. Autonomy
  1. A contract is relative wherein it would only be binding to the parties of the contract and to their successors, assignees and heirs in proper cases.
  2. It has an obligatory force and consensual because a contract functions as a law between the parties and needs the consent of both parties so as to be binding to them. Contracts are perfected by mere consent and from that moment the parties are bound not only to the fulfilment of what has been expressly stipulated but also to all consequences, which according to their nature may be in keeping with good faith, usage and law.
  3. A contract is mutual because its validity and performance cannot be left to the will of one of the parties. The contract must bind both parties; its validity or compliance should be agreed thereto by both parties.
  4. A contract is autonomous because the parties are free to stipulate anything they deem convenient provided that they are not contrary to law, morals, good customs, public order and public policy.

What are the essential elements of a contract?

The essential elements of a contract are cannot be absent or else no contract would exist. These are the following:

  1. Consent (as discussed in this article *insert hyperlink*)
  2. Object (as discussed in this article *insert hyperlink*)
  3. Cause/Consideration (as discussed in this article *insert hyperlink*)

References:

Tolentino, A. (2002). Commentaries and Jurisprudences on the Civil Code of the Philippines. Quezon City: Central Lawbook Publishing Co.., Inc.

Jurado, D. (1999). Civil Law Reviewer. Quezon City: Rex Printing Company, Inc.

The New Civil Code of the Philippines

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Essential Requisites of a Contract

CONSENT

A consent is manifested by the concurrence of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The very essence of consent is the conformity of the parties in the stipulations laid down in the contract. The moment there is meeting of the minds and their acceptance of the contract is made known to each other makes the contract come to life and binds them accordingly. Consent is best described in this article:

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. (1262a)

*Offer is understood as a proposal made by one party to enter into a contract and it must be certain or definite, complete and intentional. However acceptance      is the manifestation by the offeree of his assent to the terms of the offer and it must be absolute, a qualified acceptance constitutes counter-offer.

Who are the persons incapacitated to give consent?

According to this article, the following cannot give their consent to a contract:

Art. 1327. The following cannot give consent to a contract:

  • Unemancipated minors;

*Unemancipated minors cannot enter into a valid contract and those already entered cannot be made binding upon them unless they reach the age of majority and afterwhich, they ratify the same. The contract entered by the unemancipated minor will become voidable.

  • Insane or demented persons, and deaf-mutes who do not know how to write. (1263a)

*The law recognizes that the insanity of the party must be existent at the time of the entering of the contract. However if the contract is entered into during a lucid interval or the period where the proper reasoning, judgement and mental capacity is restored, then the contract is enforceable and binding. As for the case of deaf-mutes, they must be accompanied by their incapacity to write.

What are the vices of consent?

These provisions lay down the vices of consent and its effect to the contract:

Art. 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. (1265a)

*These mentioned by the law are the defects of the will of the party which when proven would make the contract voidable. Consent must be intelligent or with the knowledge of the stipulation in the contract, free and spontaneous. However if the consent is vitiated by these causes then it would render the consent given questionable. It is used with insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which without them he would have not agreed to.

-Causal fraud- fraud was used to obtain consent and would make the contract voidable

-Incidental fraud- fraud was present in the performance of the obligation and would incur damages

-the failure to disclose facts when there is a duty to reveal them as when the parties are bound by confidential relations also constitutes fraud

-silence when there is a duty to speak may constitute fraud

-a mere expression of an opinion does not signify fraud unless made by an expert and the other party, has relied on the former’s special knowledge

 Art. 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract.

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.

A simple mistake of account shall give rise to its correction. (1266a)

*Mistake can be mistake of the object which must refer to the substance of the thing and to render the contract void, it must be proven that without such mistake, the consent would have not been given. Mistake can also be towards the person the consenting party is contracting with. It must not only be on the name of the person but on the considerable character of that party which would concern the confidence or trust of the other. It must be the principal cause of the other party for entering in to the contract.

 

OBJECT

The Object of a contract pertains to the thing, right or service which is the subject matter of the obligation arising from the contract

Things which cannot be the OBJECT of Contract

  1. Things which are outside the commerce of men
  2. Intransmissible rights
  3. Future inheritance, except in cases expressly authorized by law
  4. Services which are contrary to law, morals, good customs, public order, public policy
  5. Impossible things or service
  6. Objects which are not possible of determination as to their kind

 

CAUSE OR CONSIDERATION

The cause or consideration of a contract is the immediate, direct and most proximate reason which explains and justifies the creation of the obligation. It is the cause of the contract; or the reason or the purpose why the parties entered in to the contract. It is the moving basis of the parties resorting in to making a contract. It is also supported by this article:

Art. 1350. In onerous contracts the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by the other; in remuneratory ones, the service or benefit which is remunerated; and in contracts of pure beneficence, the mere liberality of the benefactor. (1274)

What are the requisites of the cause or consideration of the contract?

  1. Cause should be in existence at the time of the celebration of the contract

Art. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy. (1275a)

*Contract must be, at the time of entering, contain a cause or consideration. The parties must have an intrinsic or juridical reason to enter into a contract. Absence of which would want cause and would be render the contract null and void.

  1. Cause should be true

Art. 1353. The statement of a false cause in contracts shall render them void, if it should not be proved that they were founded upon another cause which is true and lawful. (1276)

*The cause should not be fictitious or simulated, such as when the parties agree among themselves to consider a fact true when in reality it is not, because this false consideration would also render the contract null and void.

  1. Cause should be licit or lawful

Art. 1354. Although the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary. (1277)

*The presumption of validity and lawfulness of the contract is in good faith and it is sufficient in the absence of proof to the contrary.

References:

The New Civil Code of the Philippines

Tolentino, A. (2002). Commentaries and Jurisprudences on the Civil Code of the Philippines. Quezon City: Central Lawbook Publishing Co.., Inc.

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Forms of Contract

What are the forms of a contract?

Contracts as a general rule, shall be obligatory in whatever form they may have been entered into, provided all the essential requisites which is consent, object and cause, for their validity are present. The law upholds the content or spirit of the contract over form thus giving validity to contracts which may even be oral. As expounded on this article:

Art. 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised. (1278a)

However, there are certain cases when the law or the parties may require a certain form of a contract. As mentioned in this article:

 Art. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract. (1279a)

 *Some instances include when the law requires that a contract be in some form in order that it may be valid, when the law requires that a contract be in some form in order that it may be enforceable and when the law requires that a contract be in some form for the convenience of the parties or for the purpose of affecting third persons.

What are the forms for validity?

  1. Donation of a real property must be in a public document
  2. Donation of personal property the value of which exceeds Php 5,000 must be at least in writing.
  3. The authority of the agent to sell a piece of land must be in writing
  4. Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property
  5. The cession, repudiation or renunciation of hereditary rights or those of conjugal partnership of gain
  6. The power to administer property or any other power which has for its object an act appearing or which should appear in a public document or should prejudice a third person
  7. The cession of actions or rights proceeding from an act appearing in a public document

 What are the forms for enforceability and convenience?

Statue of fraud. The writing provides for more reliable proof.

If the form for validity is complied with but the law requires another form then the parties must observe that form.

 What is a contract of adhesion?

Contract of adhesion where one party prepares the stipulations while the other affixes his signature or his adhesion thereto. These are binding as ordinary contracts and the party who adheres is free to reject its entirety.

References:

The New Civil Code of the Philippines

Tolentino, A. (2002). Commentaries and Jurisprudences on the Civil Code of the Philippines. Quezon City: Central Lawbook Publishing Co.., Inc.

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Defective Contracts

DEFECTIVE CONTRACTS

Defective contracts are those which may be relatively ineffective in relation to certain parties. The following are the kinds of defective contracts:

  1. Rescissible Contracts
  2. Voidable Contracts
  3. Unenforceable Contracts(as discussed in this article)
  4. Void or inexistent contracts(as discussed in this article)

RESCISSIBLE CONTRACTS

Rescissible Contracts are those validly agreed upon but, by reason of lesion or economic prejudice may be rescinded in cases established by law. These are contracts which can be rescinded as a remedy given by law to prevent damage by restoration of their condition at the moment prior to time of the celebration of the contract.

Art. 1380. Contracts validly agreed upon may be rescinded in the cases established by law. (1290)

What contracts are rescissible?

Art. 1381. The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof;

*Lesion is the injury which one of the parties may suffer by virtue of a contract disadvantageous to him. The lesion must be made known or could have been made known at the time of the making of the contract for contract to be rescinded. Guardians must only manage the property of the ward and must resort to guardianship court for any acts of administration.

(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;

*Legal representatives of absentees have the same powers and duties with guardians.

(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;

*The contract must have been executed with the intention of prejudicing the rights of creditors. This intention must be proved since, despite causing damage if the fraudulent intent is not present then the contract cannot be rescinded.

(4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority;

*This contract refer to those that are executed by defendants involving ownership or possession of a thing and such contract is made without the knowledge or approval of the plaintiff or the court.

(5) All other contracts specially declared by law to be subject to rescission. (1291a)

 VOIDABLE CONTRACTS

Voidable contracts are those in which all of the essential elements for validity are present, although the element of consent is vitiated. A contract will be voidable of annullable due to certain instances such as when there is want of capacity or consent. Until invalidated, the contract remains to be valid and binding between the parties. The law expressly provides that:

Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. (n)

What contracts are voidable?

  1. Those where one of the parties is incapable of giving consent to a contract;
Art. 1327. The following cannot give consent to a contract: (1) Unemancipated minors; (2) Insane or demented persons, and deaf-mutes who do not know how to write. (1263a)
  1. Those where the consent is vitiated by
Art. 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. (1265a)

UNENFORCEABLE CONTRACTS

Unenforceable contracts are those which cannot be enforced by proper action in court unless they are ratified. This kind of contract does not produce any legal effect unless ratified.

What contracts are unenforceable?

The following article is an enumeration of what are unenforeceable contracts:

Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof; (b) A special promise to answer for the debt, default, or miscarriage of another; (c) An agreement made in consideration of marriage, other than a mutual promise to marry; (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; (e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein; (f) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract.

What is the Statute of Frauds?

The Statute of Frauds is a legal provision which requires agreements for the sale of real estate to be in writing in order to be enforceable.The contracts/agreements under the Statute of Frauds require that the same be evidenced by some note, memorandum or writing, subscribed by the party charged or his agent, otherwise, the said contracts shall be enforceable.The Statute of Frauds apply only to executory contracts, not to those that are partially or completely fulfilled.

VOID CONTRACTS

Void contracts are those where all of the requisites of a contract are present but the cause, object or purpose is contrary to law, morals, good customs, public order or public policy, or contract itself is prohibited or declared void by law.

What contracts are void?

The following article is an enumeration of what are void contracts:

Art. 1409. The following contracts are inexistent and void from the beginning: (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; (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. 

What are inexistent contracts?

Inexistent contracts those where one or some or all of the requisites essential for the validity of a contract are absolutely lacking. This is equivalent to nothing like that of a void contract. It is absolutely wanting in civil effects. Void and inexistent contracts are terms which may be interchanged.

References:

Tolentino, A. (2002). Commentaries and Jurisprudences on the Civil Code of the Philippines. Quezon City: Central Lawbook Publishing Co., Inc.

Jurado, D. (1999). Civil Law Reviewer. Quezon City: Rex Printing Company, Inc.

The New Civil Code of the Philippines