In the world of business and commerce, contracts are an essential aspect of any relationship. They provide a legal framework that ensures both parties honor the terms of their agreement. While contracts can be a useful tool for businesses and individuals, not all contracts are enforceable.
Article 1403 of the Civil Code of the Philippines outlines the conditions that make a contract unenforceable. The article states that a contract is voidable or unenforceable if it is:
– Entered into by a person who is incapable of giving consent
– Obtained through fraud, mistake, or undue influence
– Against public policy or morals
– Beyond the powers of the representative
Let`s explore each of these conditions in detail.
Incapacity to Give Consent
Incapacity to give consent refers to a situation where one party is physically or mentally unable to understand the terms of the contract fully. For instance, a contract signed by a minor or a person of unsound mind is unenforceable.
Fraud, Mistake, or Undue Influence
A contract is also unenforceable if one party obtained it through fraudulent means. Fraudulent activities might include lying or hiding material information from the other party, making false promises or misrepresenting the facts.
Mistake, on the other hand, refers to an error made by one or both parties in the contract. If both parties enter into the contract based on an incorrect assumption or understanding, the contract might be unenforceable.
Undue influence occurs when one party uses their position of power to coerce the other party into signing a contract. For instance, if a company boss makes an employee sign a contract under duress, the contract is unenforceable.
Against Public Policy or Morals
Contracts that violate public policy or morality are unenforceable. For instance, a contract that requires one party to engage in illegal activities or harms the public is not binding.
Beyond the Powers of the Representative
Finally, a contract entered into by a representative who exceeds their power is unenforceable. For example, if a company`s manager signs a contract that their position doesn`t permit them to sign, the contract is unenforceable.
In conclusion, while contracts are an essential aspect of any business relationship, not all contracts are enforceable. Article 1403 of the Philippine Civil Code outlines the various conditions that make a contract unenforceable, and businesses and individuals should pay attention to these conditions to avoid legal disputes.