What is an Unenforceable Contract?

 By failure to object to the presentation of oral

evidence to prove an oral contract or by accepting the
An unenforceable contract or transaction is one that is valid, but which benefits under the contract
the court will not enforce. Unenforceable is usually used in
contradistinction to void (or void ab initio) and voidable. If the parties
perform the agreement, it will be valid, but the court will not compel 3. Those where both parties are incapable of giving consent to a
them if they do not. contract.

What are Unauthorized Contracts? If only one party is incapable, this will fall under Voidable Contract
under Article 1390, paragraph 1.
1. Those entered into in the name of another person by one, who
has been given no authority or legal representation or who has a. Who can assail?
acted beyond his powers;  By the person whose contract is being enforced or his
privies;
a. Who can assail?  Parents or guardians of that person.
 By the person whose name the contract was entered
into. b. How to cure defect?
 By the owner of the property.  Ratification by parents or guardians of the person
against whom the contract is being enforced
b. How to cure defect?  Subsequent ratification upon attainment of majority
 Ratification by the person whose name the contract age (in case of minority)
was entered into.  Subsequent ratification upon regaining sanity (in case
of insanity)

2. Those that do not comply with the Statute of Frauds The case of Badillo vs. Ferrer, 152 SCRA 407

a. Who can assail? Article 1390 renders a contract voidable if one of the parties is
 By the person whose contract is being enforced or his incapable of giving consent to the contract or if the contracting party’s
privies; consent is vitated by mistake, voilence, intimidation, undue influence or
fraud.
b. How to cure defect?
 Ratification by the party whom the contract is being
enforced Surviving widow has no authority or has acted beyond her powers in
conveying to the vendees the undivided share of her minor children in

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the property, as her powers as the natural guardian covers only
matters of administration and cannot include the power of disposition,
and she should have first secured court approval before alienation of
the property.
Since the minors never ratified the deed, and in fact questioned its
validity, the contract remained unenforceable or unauthorized, and
restitution by the minors as to the portion of the purchase price which
pertains to their share is not legally sanctioned.
Statute of Frauds defined (Article 1403, paragraph 2) requires that
certain contracts be in writing, and that they be signed by all parties to
be bound by the contract. Although there can be significant variation
between jurisdictions, the most common types of contracts to which a
statute of fraud applies is:
o Contracts in consideration of marriage.
o Contracts which cannot be performed within one year.
o Contracts for the sale of an interest in land.
o Contracts by the executor of a will to pay a debt of the estate
with his own money.
o Contracts for the sale of goods above a certain value.
o Contracts in which one party becomes a surety (acts as
guarantor) for another party’s debt or other obligation.
The case of Diwa vs. Donato, 234 SCRA 608
It is settled that the Statute of Frauds applies only to executory and not
to completed, executed or partially executed contracts. Thus as early
as 1925, we held that where the land has been delivered under the
oral contract of sale, and the vendees have already paid part of the
purchase price, the heirs of the vendor cannot invoke the status of
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frauds in a proceeding where the vendees seek to have the land
registered in their names.
Agreements for the sale of real property shall be unenforceable by
action unless the same or some note or memorandum thereof be in
writing and subscribed by the part charged or by his agent. Non-
compliance with this provision, while not invalidating the contract which
is not in writing, makes ineffective the action for specific performance.
How to satisfy the requirements?
Typically, to satisfy the requirements of the statute, the writing must
identify the contracting parties, recite the subject matter of the contract
such that it can reasonably be identified, and present the essential
terms and conditions of the parties’ agreement. (Under the Uniform
Commercial Code, to satisfy the statute, the writing for the sale of
goods need only be signed by the party to be charged, and a quantity
term.)
Please note that, even without respect to the Statute of Frauds, it is
good practice to reduce the essential terms of any contract to a signed,
written agreement. Even when a Statute of Frauds does not apply to
an oral contract, it may be very difficult to prove and enforce the
contract in the absence of a written agreement.
The purpose of Statute of Frauds
The purpose of a “statute of frauds” is, as the name suggests, to
prevent injury from fraudulent conduct. There is some criticism of the
continued existence of these statutes, as they are often used by parties
who freely entered into fair contracts yet wish to avoid having to fulfill
their agreements. At the same time, the abuses these statutes were
designed to prevent are quite real, so a strong argument remains to
keep them in place. It is also arguably good public policy to require that
parties to certain significant transactions, such as those of long
duration or which involve real estate, reduce their agreements to
writing. Writing will both reduce the chance of future litigation, and also
give the parties the opportunity to take a second look at the terms and
conditions of their agreement before it becomes final.
As previously noted, if all parties agree that they are bound by the
contract, the contract will remain enforceable despite the statute of
frauds.
Exceptions in applying Statute of Frauds
An agreement may be enforced even if it does not comply with the
statute of frauds in the following situations:

The Effect of a Statute of Frauds

A statute of frauds does not of itself render a contract void. The statute
makes certain contracts “voidable” by one of the parties, in the event
that the party does not wish to follow through on the agreement. (A
contract that is “void” cannot be enforced. A contract that is “voidable”
remains valid unless one of the parties chooses to void the contract.)
Sometimes, a party to a contract that would otherwise be invalid under
a “statute of frauds” will nonetheless be able to enforce it, on the basis
of “partial performance” or “promissory estoppel“. Where “partial
performance” exists, a party who has accepted partial performance by
another party under the contract will typically be barred from asserting
the “Statute of Frauds” in order to avoid meeting its own contractual
obligations. “Promissory estoppel” exists where significant inequities
(unfairness) would result from releasing a party from the contract, and
the party seeking release knew or reasonably should have known that
those inequities would be created at the time of the original agreement.
For example, where the party which seeks to be released knew that
the other party would incur significant expense in obtaining materials
which cannot be transferred to other work, a court may find that under
the circumstances the contract should be enforced despite the statute
of frauds.
o Merchant’s Firm Offer, under the UCC. If one merchant sends a
writing sufficient to satisfy the statute of frauds to another
merchant, the merchant has reason to know of the contents of
the sent confirmation and the receivor does not object to the
confirmation within 10 days, the confirmation is good to satisfy
the statute as to both parties.
o Admission of the existence of a contract by the defendant under
oath,
o Part performance of the contract. The agreement is enforceable
up to the amount already paid, delivered, etc.
o The goods were specially manufactured for the buyer and the
seller either 1) began manufacturing them, or 2) entered into a
third party contract for their manufacture, and the manufacturer
cannot without undue burden sell the goods to another person in
the seller’s ordinary course of business– for example, t-shirts
with a baseball team logo or wall-to-wall carpeting for an odd-
sized room.