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I. DEFINITION OF OBLIGATION (ART.1156): an obligation is a juridical necessity to give, to do or not to do.

a. Elements of Obligation (REQUISITES)


1. Juridical or legal tie - which binds the parties to the obligation; source of the obligation

2. Active subject: obligee or creditor


3. Passive subject: obligor or debtor
4. Fact / prestation: to give, to do, or not to do

b. Kinds of Obligation (ART.1179-1230)


1. Pure and Conditional (art1179-1192)
2. With a period (art1193-1198)
3. Alternative and Facultative (1199-1206)
4. Joint and Solidary (art1207-1222)
5. Divisible and Indivisible (art1223-1225)
6. With a penal clause (1226-1230)

7. Real and Personal


8. Determinate and Generic
9. Positive and Negative
10. Unilateral and Bilateral
11. Individual and Collective
12. Accessory and Principal

II. SOURCES OF OBLIGATION (ART. 1157)


a. LAW (ART1158) - imposed by law itself
1. Pelayo v Lauron: medical bills payment; husband is bound to pay bills of wife, not in-laws

2. Leung Ben v O’Brien: W/N to restore money lost at gaming is an obligation, it is.

3. Dela Cruz v Northern Theatrical Enterprise: employers are not legally bound to give legal assistance to
employees

b. CONTRACTS (ART1159) – arise from stipulations of the parties: meeting of the minds / formal agreement
1. Gaw v IAC: once the terms of an agreement have been reduced, its deemed to contain all terms, nothing
more.

2. Perla Compania de Seguros, Inc v CA: terms of the contract constitute the measure of the insurer’s
liability & compliance therewith is a condition precedent to the insured’s right to recover from the insurer.
3. Telefast Coms v Castro: (ART1170) “…in the performance of their obligation guilty of…delay…liable for
damages”

4. RCPI v CA: (ART1170) “…guilty of negligence…” gross negligence of employees involving telegrams

c. QUASI-CONTRACTS (ART1160) - arise from lawful, voluntary and unilateral acts and which are enforceable to
the end that no one shall be unjustly enriched or benefited at the expense of another

1. Negotorium gestio (ART.2144): somebody voluntarily manages the property of another without their
consent

2. Solutio indebiti (ART.2154): something is received when there is no right to demand it

3. Equitable PCI Bank v Ong: unjust enrichment of respondent & awarding of damages by fault of petitioner
bank

4. Lacson v Lacson: express demand for familial support is not necessary as it is inherent upon the father to
do so

5. Sps. Villalva v RCBC Savings Bank: spouses were not unjustly enriched; fault of bank

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d. DELICT(ART1161, 2206) - arise from civil liability which is the consequence of a criminal offense
1. People v Sendaydiego:

2. People v Bayotas: ART89(1) “death of convict…liability is extinguished if death occurred before final
judgment”

3. Sarmiento v CA: civil action may proceed independently of the criminal proceedings

4. See also ART100, RPC: civil liability of a person guilty of a felony


5. ARTS 29, 30, 35, CCP: civil action & damages in a criminal case
6. RULE 111 (1), RULES OF COURT

e. QUASI-DELICTS (ART1162, 2176) - arise from damage caused to another through an act or omission, there
being no fault or negligence, but no contractual relation exists between the parties
1. Elcano v Hill: acquittal from a criminal case does not bar a civil action for damages

2. Diana v Batangas Transaction Co.: a quasi-delict is a separate legal institution under the Civil Code

III. DUTIES OF OBLIGOR


a. Prestation TO GIVE
1. Diligence of a good father to a family (ART1163) - ordinary care which a reasonably prudent man would
do

2. Duty to deliver fruits (ART1164)


i. When the obligation to deliver arises:
• When there is demand
• Quasi-delict
• Quasi-contracts
• Pure and Conditional Obligations

ii. Kinds of delivery


• Tradicion symbolica: constructive delivery is symbolic when to effect the delivery the parties make use of
a token symbol to represent the thing delivered.

• Tradicio longa manu; it takes place by mere consent or agreement of the contracting parties as when the
vendor merely points to the thing sold shall thereafter be at the control and disposal of the vendee

• Tradicio brevi manu: delivery by the short hand; that kind of delivery whereby a possessor of a thing not
as an owner, becomes the possessor as owner. (ei. Tenant buys the house he is renting)

• Constitutum possessorium: opposite of brevi manu; the delivery whereby a possessor of a thing as an
owner, retains possession no longer as an owner, but in some other capacity.
Leonco v Go Inqui:

iii. Real and Personal Right


Adorable v CA: personal right, petitioners have no real right over property nor legal preference

3. Duty to deliver Determinate and Indeterminate Thing (ART1165)


i. Remedies of creditor if there is non-delivery of determinate thing
• Specific performance
• Damages
• Rescission or cancellation

ii. Remedies of creditor if there in non-delivery of indeterminate thing

iii. Effects of fortuitous event on determinate or indeterminate thing


(ART1165,par3; 1174)

4. Duty to deliver accessions and accessories (ART 1166)


i. Accession is not the same as accessories
ii. Accession discreta: refers to the right over the fruits or products of a thing
iii. Accession continua (natural and industrial): accession things which have been incorporated/attached to a thing

b. Prestation TO DO

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1. Duties of a debtor in a prestation to do (ART1167)
i. Creditor may do it or another person, at the expense of the debtor
ii. Indemnification for damages
Chavez v Gonzales: (ART1170) negligence and delay of Gonzales to repair the typewriter

c. Prestation NOT TO DO
1. Duty of a debtor in a prestation not to do (ART1168)
i. Remedy to undo what was done plus damages
ii. Indemnification for damages

d. DELAY (ART1169) - default or tardiness in the performance of an obligation after it has been due and demandable

• Mora solvendi– delay on the part of the debtor to fulfill his obligation

• Mora accipiendi– delay on the part of the creditor to accept the performance of the obligation

• Compensation morae – delay of the obligors in reciprocal obligation

1. GENERAL RULE: No demand, no delay

Exceptions:
i. Obligation or law expressly declares
CIR v Yuseco: tax case; when it is expressed by law, nonpayment of tax on time incurs in delay

ii. Designated time is controlling


Barzaga v CA: non-performance of a reciprocal obligation; delay incurred by ART 1169(2)

iii. Demand is useless (subject matter destroyed)


iv. Obligation expressly provides
CASES:
• Rose Packing Co. v CA: a contract of loan is a reciprocal obligation; respondent bank did not fulfill its part in the contract

• SSS v Moonwalk Dev’t and Housing Co.: no demand, no delay; once debtor’s debts extinguished it can’t be retracted

• de la Rosa v BPI: mere contest rules does not have a binding power like a contract

• Smith, Bell & CFO v Sotelo Matti: conditional contract; ART1174 forces majeure, petitioner not liable

• Palmartes v CA: Suretyship & Guaranty. Surety: an insurer of the debt; Guarantor: an insurer of the solvency of the debtor

Suretyship: an undertaking that the debt shall be paid; Guaranty: undertaking that the debtor shall pay

2. PAY DAMAGES (ART1170-1174)

Except – payment of sum of money (ART2209)


Piczon v Piczon: if in the contract stipulates when interest will be counted, there is delay ART1169 (1)

• Fraud or Bad faith • Negligence


• Delay • Violation of terms of contract

i. Kinds of Damages:
• Actual (ART2199): pecuniary loss; indemnification…also of profits which the obligee failed to obtain (2200)

• Moral (ART2217): include physical suffering, mental anguish, etc; incapable of pecuniary computation

• Nominal (ART2221): adjudicated in order that a right which was violated, be vindicated and recognized

• Temperate (ART2224):may be recovered when the court finds that some pecuniary loss has been suffered

• Liquidated (ART2226): those agreed upon by the parties to a contract, to be paid in case of breach

• Exemplary (ART 2229): corrective damages; way of example to the public good

Rakes v Atlantic Gulf & Pacific Co: contributory neg; neglience not the determining cause of the accident

3. Reciprocal Obligations
Tanguilig v CCA: ART 1174 is untenable, fault of petitioner why the windmill collapsed

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e. Fortuitous events (ART1174)
CASES:
• UST v Descals: the deterioration of the house was foreseen, thus its destruction was caused by forces majeure

• Nakpil v CA: building collapsed due to faulty, substandard materials, architects & contactors liable under ART1723

• Victorias Planters Assoc v Victorias Milling Co.: WWII; period stipulated in contract doesnt stop while obligation is suspended

• Sweet Lines v CA: bypassed of a port; mechanical defects not considered as forces majeure, petitioner acted in bad faith

• Ponce de Leon v RFC:

IV. Usury Law (ART1175)


a. Repealed or suspended? SUSPENDED, Circular No. 905 of the Central Bank has expressly removed the interest ceilings
Medel v CA: high interest rates may be regulated or removed by judicial review

b. Presumption of interest (ART 1176)


c. Presumption of prior installments
Manila Trading and Supply Co v Medina: receipts may be based on as presumption if there was payment

V. Remedies of Creditor against Debtor (ART1177)


a. Exact payment
b. Exhaust all properties of debtor through attachment and
execution except those exempted by law. (See Rule 39, Sec13, Rules of Court)
c. Accion subrogatoria – an action where the creditor whose claims had not been fully satisfied, may go after the debtors (3rd
person) of the defendant debtor
d. Accion paulina – an action where the creditor files an action in court for the RESCISSION of acts or contracts entered into by
the debtor designed to defraud the former

cases: Regalado v Luchsinger: accion subrogatoria


Adorable v CA: personal right, petitioners have no real right over property nor legal preference

VI. Transmission of Rights (ART1178): genrule: rights acquired through an obligation, are transmissible in character.

Exceptions: purely personal right; by stipulation of the parties; by operation of law

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VII. Different Kinds of Obligations
a. PURE OBLIGATION (ART1179)
DEFINTION: obligation which doesn’t contain any condition or term upon which the fulfillment is made to depend;
immediately demandable

CASES:
• Pay v Vda. De Palance:

• Estate of Mota v Sera:

b. CONDITIONAL OBLIGATION
DEFINITION: an obligation subject to a condition; not immediately demandable

1. Suspensive condition (ART1181): its fulfillment gives rise to an obligation; the demandability of the
obligation or the effectivity of the contract can take place only after the condition has been fulfilled
• Taylor v Uy Tieng Piao: employment was terminated because of a resolutory condition in the
contract

** Effects of fulfillment of suspensive condition:


-retroactive application to date of constitution of obligation (ART1187)

2. Resolutory condition (ART1181): its happening extinguishes the obligation which is already existing
3. Potestative condition –sole will of the debtor, it is void; if at the creditor’s, still valid.
4. Casual condition – the condition depends upon chance or the will of a third person; chance or will of third
person
5. Mixed condition – partly upon will of a party and partly upon chance or will of a third person (ART1182)
• Romero v CA:

6. Possible condition (ART1183): capable of actualization according to nature, law, public policy or good
customs
7. Impossible condition (ART1183): the obligor knows his obligation cannot be fulfilled
8. Positive condition (ART1184): refers to the fulfillment of an event or performance of an act
9. Negative condition (ART1185): refers to the non-fulfillment or non-performance of an act
10. Divisible condition: when the condition is susceptible of partial realization
11. Indivisible condition: when the condition is not susceptible of partial realization
12. Conjunctive condition: when there are several conditions, all of which must be realized
13. Alternative condition: when there are several conditions, but only one must be realized
** Rules in Case of Improvement, Loss, Deterioration of the thing during pendency of condition (art1189)
** Power to RESCIND (ART1191)
CASES:
• Marin v Adil:

• Seva v Berwin:

• Phil. Amusement Enterprises v Natividad:

• Sps. Velarde v CA:

• Ayson Simon v Adamos:

c. OBLIGATIONS WITH A PERIOD – a future and certain event upon the arrival of which the obligation is subjected to
1. Suspensive period [ex die ] – obligation arises when an event occurs
• Gaite v Fonacier: plaintiff lost his benefit of the period as given in 1198

2. Resolutory period [in diem ] – obligation is extinguished when an event occurs


**ART1189 applies to obligation with a period (ART1194)
**Rules in case of payment/delivery before arrival of period (ART1195)
**When court may fix a period (ART1197). See also ART1180

• Araneta v Phil. Sugar Estates Development:

**When debtor loses benefit of period (ART1198): insolvency; no surety/guaranty; by his own acts; he absconds

d. ALTERNATIVE OBLIGATIONS: the debtor is required to fulfill only one of several prestations to extinguish the obligation
**Rule if some or all objects are lost or destroyed:
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Qualify if right of choice belongs to debtor or creditor

• Legarda v Miailhe:

e. FACULTATIVE OBLIGATION: the debtor is bound to perform only one prestation, with a reserved right to choose another
prestation as SUBSTITUTE for the principal
**Rule if principle or substitute is lost

f. JOINT AND SOLIDARY OBLIGATION:


**When solidary obligation exists (ART1824, 1911)
1. Joint: entire obligation is to be paid or performed proportionately by the debtors
2. Solidary: each one of the debtors are obliged to pay the entire obligation, each one of the creditors has
the right to demand from any of the debtors, the fulfillment of the entire obligation

CASES:
• PNB v Sta. Maria:

• Republic v CA:

• Ronquillo v CA:

• Imperial Insurance v David:

** connect with ART94 AND 121, Family Code: ARTS. 1822, 1823, 1894, 1895, 2146, 2194

**Effects of remission in solidary obligation (ART1220)

g. DIVISIBLE/INDIVISIBLE OBLIGATION (ART1224)


1. Divisible obligation: the object to be delivered or performed, is capable of partial fulfillment
2. Indivisible obligation: the object to be delivered or performed, is NOT capable of partial fulfillment
**how to determine partiality: the purpose of the obligation or the intention of the parties
**an obligation is presumed indivisible, where there is only one creditor and one debtor.

Kinds of Divisions: Kinds of Indivisibility:


i. Qualitative division i. Legal indivisibility: a law prohibits its divisibility
ii. Quantitative division ii. Conventional indivisibility: parties decide its indivisible
iii. Intellectual division iii. Natural indivisibility: the thing itself is indivisible

h. OBLIGATION WITH A PENAL CLAUSE (ART1226)


- AN OBLIGATION WITH A PENAL CLAUSE is one which contains an accessory undertaking to pay a previously
stipulated indemnity in case of breach.
- PENAL CLAUSE is an accessory undertaking attached to an obligation to assume greater liability in case of breach

- Penalty will substitute the indemnity for damages and the payment of interests in case of non-compliance;
- Penalty may be enforced only when it is demandable in accordance with the provisions of this Code;
- ART1230: nullity of penal clause doesn’t carry with it the principal ob; nullity of principal ob carries with it the
penal c.

Principal obligation void = penal clause void


Nullity of PO due to BF of debtor = penal clause valid
Penal clause void = principal obligation valid

i. Principal obligation: one which can stand by itself and doesn’t depend for its validity and existence
ii. Accessory obligation: one which is attached to a principal obligation and it can’t stand alone

PURPOSE:
i. To insure performance
ii. To substitute a penalty for the indemnity for damages
iii. To punish debtor for non-fulfillment
iv. Reparation and Punishment

Origin Purpose Demandability or effect


Legal it is provided by Compensatory Penalty takes the place Subsidiary or Only the penalty
penal clause law penal clause of damages alternative penal clause can be enforced
Conventional provided for by Punitive Penalty imposed merely Joint or cumulative Both the principal
penal clause stipulation of penal clause as punishment for penal clause ob. and penal

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the parties breach clause can be
enforced

CASES:
• Lambert v Fox:

• Sps. Solangon v Salazar:

VIII. Extinguishment of Obligation


a. Payment/Performance: ARTS. 1232, 1236, 1237, 1238, 1240, 1241

CASES:
• Panganiban v Cuevas:

• BaPI v CA:

Special forms of payment:


i. Dacion en Pago (ART1245). See ART1249. Conveyance of ownership of a thing as an accepted equivalent
performance; not an ordinary way of extinguishing an obligation; payment by way of alienation of a property

**Read RA 8183: repealed RA529 “An Act to Assure the Uniform Value of Philippine Coin and Currency”

CASES:
• Caltex v IAC:
• Bustamante v Rosel:
• Far East Bank v Diaz Realty:

• Filipino Pipe and Foundry Corp v NAWASA:

ii. Application of payment (ARTS 1252, 1254)


• Bachrach v Golingco:

Persons from whom creditor must accept payment (1236) Persons to whom payment by debtor shall be made (1240)
DEBTOR CREDITOR
Any third person who has an interest His successor in interest (heirs)
Any third person who has NO interest Any person authorized to receive it

REQUISITES:
- ONE debtor and ONE creditor
- Two or more debts
- Debts must be the same kind
- The debts to which payment made by the debtor has been applied must be due
- Payment made must not be sufficient to cover all the debts

iii. Payment by cession (ART1255): it is the assignment or abandonment of all the properties of the debtor for
the benefit of the creditors.

REQUISITES:
- TWO or more CREDITORS
- Debtor must be (partially) INSOLVENT
- The cession must be accepted by the creditors

Effect: the debtor is still liable if there is a balance

Dation in payment (ART 1245) Cession (ART 1255)


Usually ONE creditor SEVERAL creditors
Does not presuppose insolvency of debtor Insolvency of debtor is known
Does not involve ALL the property of debtor Extends to all the property of the debtor subject to execution
Creditor becomes to owner of thing given by the debtor Creditor only acquire rights to sell the thing
Act of novation Not an act of novation

iv. Tender of payment and consignation (ART1256)


Tender of payment: offering to the creditor the thing or amount due; always extrajudicial

Consignation: the act of depositing the thing amount due with the proper court when the creditor does not
desire or cannot receive it; always judicial

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REQUISITES FOR A VALID TENDER OF PAYMENT:
- Tender of payment must comply with the rules on payment
- It must be unconditional and for the whole amount.
- It must be actually made.

REQUISITES OF A VALID CONSIGNATION:


- Existence of a valid debt
- Tender of payment by the debtor and refusal w/o justifiable reason by the creditor
- Previous notice of consignation to persons interested in the fulfillment of the obligation
- Consignation of the thing or sum due
- Subsequent notice of consignation made to the interested parties

**tender of payment not necessary before the debtor can consign the thing due with the court
**prior notice to persons interested is required otherwise it is void (ART 1257)
**consignation, by depositing the thing/sum due with the proper judicial authority, is necessary to effect payment.
**consignation is for the benefit of the creditor

• Adelfa Properties Inc v CA:

• Soco v Militante: irregular payment of rent w/o receipts by respondent who also violated the contract

b. Lost of thing due (ART1262): when it PERISHES, goes out of commerce, disappears & its existence is unknown

Loss of thing due extinguished an obligation to give


- Thing to be delivered is a specific or determinate thing
- Loss of the thing occurs w/o the fault of the debtor
- Debtor is not guilty of delay

Loss of thing will not extinguish liability


- When the law so provides (generic thing never perishes, genus nunquam perit)
- When the stipulation so provides
- When the nature of the obligation requires the assumption of risk
- When the obligation to deliver a specific thing arises from a crime

** partial loss of a specific thing, the court is given the discretion in case of disagreement between the parties
**presumption of fault in case of loss of thing in possession of debtor, except in natural calamities.
**IMPOSSIBILITY: Legal impossibility (ART1266); and physical impossibility (ART1267)

c. Condonation or Remission (ART1270): is the gratuitous abandonment by the creditor of his right against the debtor
REQUISITES:
- It must be gratuitous
- It must be accepted by the obligor
- The parties must have capacity
- It must not be excessive
- If expressly: must comply with the forms of donations

Kinds of Remission
- Extent: partial and complete
- Form: express and implied
- Date of effectivity: inter vivos and mortis causa

**ART1273. The renunciation of the principal debt shall extinguish the accessory obligations; but waiver of the
latter shall leave the former in force.

d. Merger/Confusion (ART1275): the characters of creditor and debtor are merged in the same person.
Requisites of confusion:
- Takes place between the principal debt and creditor
- It must be complete
A owes-> B owes -> C owes -> D owes -> A, A is now extinguished of his liability as A can’t be debtor-creditor of one’s self

• Chittick v CA:

e. Compensation (ART1278): the parties become debtor and creditor of each other. [A(d) owes B(c), later B(d) owes A(c)]

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Compensation is the extinguishment to the concurrent amount of the debts of two persons who, in their own right, are
debtors and creditors of each other; it involves the simultaneous balancing of two obligations; cancelling out each other.
Kinds of compensation:
Extent
- Total: both obligations are extinguished (ART1281)
- Partial: obligations of different amounts and a balance remains
Origin
- Legal: by operation of law (ARTS1279, 1290)
- Judicial: by court order in a litigation (ART1283)
- Voluntary: by agreement of the parties (ART1282)
- Facultative: can be set up only by one of the parties (ART1287[1], 1288)

Requisites for Legal Compensation (ART1279)


- The parties are principal creditors and principal debtors of each other
- Both debts consist in a sum of money, or of consumable things of the same kind and quality
- The two debts are due and demandable
- The two debts are liquidated
- No retention or controversy commenced by a third person

CASES:
• Soriano v Compana General de Tabacos de Filipinas:
• Compania Maritima v CA:

• Metropolitan Bank v Tonda:

ELEMENTS COMPENSATION CONFUSION


NO. of parties Two persons are involved, each of whom is a Only one person who is a creditor and debtor of
debtor and creditor of the other himself
NO. of obligations There are two obligations There is only one obligation
Mode of payment There is indirect payment There is impossibility of payment
f. Novation (ART1291): the modification of the obligation or elements of the contract and then the creation of a new
contract in place of the old.
- Novation is not presumed, it must be established by express agreement or by the
incompatibility of the 2 obligations
- Insolvency if new debtor does not revive the action against the old debtor
(expromision/delegacion), except when it was publicly known prior to the change (although unknown to old debtor), or
insolvency was existing & known by OD.
- If principal obligation is extinguished by novation, accessory obligation will subsist so long it
benefits a third person

ELEMENTS:
- Valid contract
- Change of debtor by guarantor
- Subrogation of the rights of the creditor to another
- Valid NEW contract

KINDS OF NOVATION:
ORIGIN:
- Conventional: agreement of the parties (ART1301; 1302, 1224)
- Legal: operation of law (ART 1300, 1302)

CONSTITUTION:
- Express: declared in unequivocal terms
- Implied: the old and the new obligations are essentially incompatible with each other

EFFECT:
- Total or extinctive: old obligation completely extinguished (ART1303)
- Partial or modificatory: old obligation merely modified (ART1304)

SUBJECT:
- Real or objective: change of subject/thing
- Personal or subjective: change/substitution of debtor/creditor
a. Substitution: debtor is substituted (ART1291[2])
i. Expromision: third person doesn’t notify the original/against the will of debtor
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ii. Delegacion: creditor accepts the third person in place of the debtor; all must
agree

b. Subrogation: creditor’s rights is subrogated by a third person (ART1300)


i. Conventional: express agreement of the original parties & the third person
ii. Legal: takes place w/o agreement but by operation of law
- Mixed: change of subject with the change of debtor/creditor

CASES:
• Ajax Marketing v CA:
• Garcia v CA:
• Lim Tay v CA:

• Chempil v CA:

** Change of Debtor (ART1291[2]): Expromision AND Delegacion


** Subrogation (ART1302-1303): Conventional AND Legal

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CONTRACTS
I. DEFINTION OF CONTRACT (1305): it 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.
a. Elements of a contract
1. Essential
i. Common (comunes): those present in all contracts >consent, object, subject, and cause
ii. Special (especiales): present only in certain contracts > delivery in real contracts or form in solemn
contracts
iii. Extraordinary or peculiar (especialisimos): peculiar to a specific contract > i.e. price in contract of sale

2. Natural – derived from the nature of the contract; they are presumed by law.
3. Accidental – those which exist only when parties expressly provide for theem for the purpose of limiting or
modifying the normal effects of the contract; i.e. conditions, terms, or modes.

b. Characteristics of a contract
1. The obligatory force or character of contracts (obligatoriedad del contrato)
2. The autonomy of contracts
3. The mutuality of contracts, or what amounts to the same thing, the essential equality of the contracting parties
4. The relativity of contracts (relatividad del contrato) (1311)

c. Classifications of contract
1. According to their relation to other contracts 5. According to their subject matter
a. Preparatory a. Things
b. Principal b. Services
c. Accessory c. Rights

2. According to their perfection (1315) 6. According to the nature of the vinculum


a. Consensual: mere consent which they produce
a. Unilateral
b. Real: perfected only until delivery of thing
b. Bilateral
c. Solemn: compliance with formalities of law
7. According to their cause
3. According to their form (1356) a. Onerous: parties reciprocally obliged
a. Common or informal b. Remunerative: to reward the service
b. Special or formal
c. Gratuitous: liberality of the giver
4. According to their purpose
a. Transfer of ownership 8. According to their risks
b. Conveyance of use a. Commutative
c. Rendition of services b. Aleatory

9. According to their names or norms


a. Nominate: contract with a name/label
b. Innominate: contract w/o a name/label

 Contracts must not be contrary to: law, morals, good customs, public order, or public policy (1306)
 Limitations: LAW and POLICE POWER (^morals, etc ^)
 Innominate contracts (1307)
o Do ut des (I give that you may o Facto ut des (I do that you may give)
give) o Facto ut facias (I do that you may do)
o Do ut facias (I give that you may
do)

d. Persons affected by a contract (ART1311): Contracting parties; their assigns, and heirs (GENRULE)
- Exceptions (not transmissible): nature, stipulation, and provisions of law
- Strangers or third persons may not be affected by a contract, EXCEPT:
 Contracts containing a stipulation in favor of a third person (stipulation pour auturi) (1311[2])
o Stipulation intended for the sole benefit of the third person, “donee beneficiary”
o Obligation is due from the promisee to the third person, “creditor beneficiary”
o REQUISITES OF Stipulation Pour Auturi
1)
Contracting parties by their stipulation must have clearly and deliberately conferred a
favor upon a third person
2) The third person must have communicated his acceptance to the obligor before its
revocation by the obligee or the original parties
3) The stipulation in favor of the third person should be a part, not the whole, of the
contract
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4) The favorable stipulation should not be conditioned or compensated by any kind of
obligation
5) Neither of the contracting parties bears the legal representation or authorization of the
third party for otherwise, the rules on agency will apply

 In contract creating real rights (1312)


 In contract entered into to defraud creditors (1313)
 In contracts which have been violated at the inducement of a third person (1314)

e. Stages in the Life of a Contract: PPC


1. Preparation or negotiation: steps taken, process of negotiating; no final or definite agreement yet
2. Perfection or birth: parties have come to an agreement or “meeting of the minds”
3. Consummation or termination: parties have performed their respective obligations; contract is fully accomplished
II. Essential REQUISITES of contracts (ART1318)

1. CONSENT (ARTS 1319-1346): is the conformity or concurrence of wills; it is the agreement of the will of one
contracting party with that of another, upon the object and terms of the contract.
Acceptance: the manifestation of acceptance of the offer; w/o acceptance = no contract; it must be absolute
(1320) an acceptance may be express or implied
Forms of acceptance:
- Express acceptance: oral or written
- Implied acceptance: inferred from act or conduct

Offer: the proposal made by one party to another to enter into a contract; offer must be certain
(1321): the offerer may fix the time, place, and manner of acceptance – all of which must be complied with
Causes of Ineffective Offers (1323): Insanity, Death, Civil Interdiction, Insolvency (IDCII)
Other causes of IO: expiration of period to accept offer (1324); destruction of the thing before acceptance (1262)

ART1325. Business ads of things for sale are not definite offers, but mere invitations to make an offer
ART1326. Ads for bidders are simply invitations

ART1327. The following cannot give consent to a contract:


i. Unemancipated minors **REASON: they can easily be victims of fraud and
ii. Insane or demented persons incapable of understanding
iii. Deaf-mutes who don’t know how to **EXCEPTION: they may contract only through a parent
write or guardian

ART1330. …consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable.
Characteristics of Consent: Intelligent, Free and voluntary, Conscious or spontaneous IFC

Vices of Consent
- Error or mistake (1331): false notion of a thing or a fact material to the contract; mistake of fact &
mistake of law
Mistake of fact: substance of the thing; conditions which principally moved the parties; identity or qualifications
Mistake of law: ignorance of law or erroneous interpretation of its meaning; it doesn’t invalidate (ART3, CC)

EXCEPT: mistake regarding object not of principal consideration ->unless cause by fraud;
mistake as to quantity or amount ->only correction
error as regards the motives of the contract ->unless it’s the condition
mistake as regards the identity or qualifications ->unless it requires personal qualifications

- Mutual error (1334): mistake of fact; EXCEPT when it arises out of a question of law, construction, or
application.

REQUISITES: Error is mutual;


It must be a to the legal effect of an agreement
It must frustrate the real purpose of the parties

- Violence or force (1335): violence requires the employment of physical force; external
- Intimidation, threat, or duress (1335): reasonable, imminent and grave, evil upon his person/property;
internal

EXCEPT: reverential fear: fear of displeasing a person to whom respect is due = contract valid
Threat of a court action: it is justifies as a means to enforce a just or legal claim

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- Undue influence (1337): influence overpowers the mind of a party; if gained by kindness = not vitiate
consent
- Fraud or deceit (1338): causal fraud committed by one party to induce the other to consent;
misrepresentation

REQUISITES: Misrepresentation(1339) or Concealment(1339)


It must serious
It must have been employed by only one of the contracting parties
It must be made in bad faith or with intent to deceive
It must have induced the consent
It must be alleged and proved by clear and convincing evidence

EXCEPT: Usual exaggerations in trade (1340)


Expression of opinion (1341)
Misrepresentation by a third person (1342) -> unless it created substantial mistake
Misrepresentation made in good faith (1343) -> constitutes error only

ART1345-1346. Simulation of a contract may be absolute or relative

ABSOLUTE: takes place when the parties do not intend to be bound at all (1345); a fictitious contract = void (1346)
RELATIVE: the parties conceal their true agreement (1345); it does not prejudice a third person and is not intended
for any purpose contrary to law, it binds the parties to their real agreement (1346)

2. OBJECT (ARTS 1347-1349): objects may be things, rights, and services.


Requisites of THINGS as object:
- Thing must be within the commerce of men, it can legally be a subject of transaction (1347)
- It must not be impossible (1348)
- It must be determinate or determinable w/o the need of a new contact between parties (1349)
- It must be in existence or capable of coming into existence (1461, 1493, 1495)

Requisites of SERVICES as object:


- Service must be within the commerce of men
- It must not be impossible
- It must be determinate

Rights as object: GENRULE: all rights may be the object of a contract.


Except when they are intransmissible by their nature, stipulation, or by provision of law (1311 [1])

- Future inheritance is any property or right, not in existence at the time of the contract, that a person may
inherit.
- GENRULE: A contract concerning future inheritance is VOID, except when expressly authorized by law.
(1409[7])

3. CAUSE (ARTS 1350-1355): more proximate purpose which the contracting parties have in view at the time of
entering into the contract
Requisites of CAUSE:
- It must exist at the time the contract is entered into (1352, 1409[3])
- It must be lawful (1352)
- It must be true or real (1353)

Classification of contracts according to cause: ORG


- Onerous: the cause is the prestation or promise of a thing or service; they are reciprocally
obligated to each other.
- Remunerative: the cause is the service or benefit which is remunerated; “reward of service”
- Gratuitous: the cause is the liberality of the giver

CAUSE MOTIVE
Immediate or direct reason Remote or indirect reason
Always known to the other contracting party Motive is unknown
An essential element of a contract Not an essential element
Illegality of the cause affects the validity of a contract Illegality of one’s motive does not render the contract void

- Failure of Cause does not render a contract void (1169)


- Illegality of Cause implies that there is a cause but the same is unlawful and are considered NULL and VOID
(1353)

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- Inadequacy of Cause is not a ground for relief (1355)
- 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)
- LESION (1355): is any damage caused by the fact that the price is unjust; doesn’t invalidate a contract, EXCEPT:
When there has been fraud, mistake, or undue influence (1355); In cases specified by law (1381)

III. Forms of contracts: refers to the manner in which a contract is executed or manifested; it could be oral, in writing, or mixed

ART1356. 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 articles cannot be exercised.

Classification of contracts according to form:


- Informal or common contract: refers to consensual contracts; it may be oral or written
- Formal or solemn contract: that which required by law for its efficacy to be in a certain form

Rules regarding form of contracts


- GENRULE: contracts are binding and the three essential requisites are present
- EXCEPTIONS: form is required in the following cases:
a. When the LAW requires that a contract be in some form to be valid
b. When the LAW requires that a contract be in some form to be enforceable
c. When the LAW requires that a contract be in some form for convenience

Form for validity of contract, EXAMPLES:


- Donation of real property: must be a public instrument
- Donation of personal property value exceeds P5,000: donation & acceptance be in writing
- Sale of land through an agent: authority of agent in writing; otherwise void
- Stipulation to pay interest: must be in writing; otherwise no interest is due
- Contract of partnership
ART1357. If the law requires a document or other special form, parties can compel each other to observe
ART1358. Must appear in a public document: acts & contracts; cession; power to administer; cession of actions
IV. Reformation of instruments: remedy by means which a written instrument is amended of rectified so as to express or
conform to the real agreement or intention of the parties.

ART1359. Where, there having been a meeting of the minds of the parties to a contract, their
true intention is not expressed in the instrument purporting to embody the agreement, by reason
of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation
of the instrument to the end that such true intention may be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the
parties, the proper remedy is not reformation of the instrument but annulment of the contract.

ART1360. The New Civil Code prevails over the principles of the general law on reformation.

Requisites of reformation
- There is a meeting of the minds
- The written instrument does not express the true agreement or intention of the parties
- The failure to express the true intention is due to MFICA
- The facts upon which relief by way of reformation is sought are put in issue by pleadings
- There is a clear and convincing evidence of MFICA

Forms of reformation
ART1361. Mutual mistake of the parties causes the failure of the instrument to disclose their real agreement
REQUISITES: mistake of fact; mistake is mutual; mistake is clear and convincing; it caused the failure of the
instrument, EXCEPT: mistake of law >>annulment

ART1362. If one party was mistaken and the other acted fraudulently
ART1363. When one party was mistaken and the other knew or believed that the instrument did not state their
real agreement; concealment >> reformation
ART1364. Ignorance, lack of skill, negligence or bad faith on the part of the third person drafting the instrument
ART1365. If two parties agree upon the mortgage or pledge of real/personal property, but the instrument states
that the property is sold absolutely or with a right of repurchase

EXCEPTIONS
ART 1366. There shall be no reformation in the following cases:
1. Simple donations inter vivos no condition is imposed
wherein 2. Wills

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3. When the real agreement is void

ART1367. When one of the parties has brought an action to enforce the instrument; based on estoppel (1431)

ART1368. Party entitled to reformation


1. Either parties, if the mistake is mutual
2. In all other cases, the injured party
3. The heirs or successors in interest, in lieu of the party entitled
**the effect of reformation is retroactive from time of execution of the original contract**

ART1369. The procedure for the reformation of instruments shall be governed by rules of court to be promulgated by
the Supreme Court.

V. Interpretation of contracts: the determination of the meaning of the terms or words used by the parties in their contract.
ART1370. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control.

If the words appear to be contrary to the evident intention of the parties, the latter shall prevail
over the former. (intentions win over words)

 Literal meaning controls when language is clear -> the question is not what existed in the minds, but the intention
 1370: Evident intention of parties prevails over terms of contract
 1371: In order to judge the intention…subsequent acts shall be principally considered
 1372: Special intent prevails over a general intent when the two cannot stand together
 1373:..stipulation of any contract should admit of several meanings..which is most adequate to render it effectual
 1374: ..various stipulations of a contract shall be interpreted together..
 1375: Word with different significations shall be understood it should keep within the meaning of the nature/object
 1376: Resort to usage or customs as aid in interpretation when there are ambiguities of a contract
 1377: Interpretation of obscure words not in favor of the party who caused it
 1377: In case of doubt, a written agreement should be interpreted against the party who has drawn it
 1378: Rules in case doubts are impossible to settle
o Gratuitous contract: incidental circumstances > interpretation be made to result in the least transmission of
rights and interest
o Onerous contract: doubts should be settled in favor of the greatest reciprocity of interests
o Principal object of the contract: doubt cant be resolved thereby leaving the intention of the parties unknown,
the contract shall be null and void
 1379: The principles of interpretation stated in Rule123 of the Rules of Court shall also be observed in the
construction of contract

VI. Kinds of Defective Contracts (RV-UV)

ELEMENTS RESCISSIBLE VOIDABLE CONTRACTS UNENFORCEABLE VOID/INEXISTENT


CONTRACTS (1380) (1390) CONTRACTS (1403) CONTRACTS (1409)
DEFINITION Those which possess all Those that cannot be
Those validly agreed Those which because
essential requisites but one enforced in court or sued
upon because all certain facts, produce
of the parties is incapable upon by reason of
essential elements exist no effect at all
of giving consent defects provided by law
DEFECT Without or in excess of Absolute lack either in
Damage or injury to one Vitiation of consent or one authority, or does not fact or in law of one,
of the parties or to a of the parties is comply with the Statute some, or all essential
third person incapacitated of Frauds, or both requisites of a contract;
parties are incapacitated prohibited by law; N/V
EFFECT VALID until rescinded VALID until annulled Cannot be enforced by Does not produce
court action effects
REMEDY ANNULMENT; Declaration of Absolute
RESCISSION RATIFICATION
RATIFICATION Nullity or Inexistence
PRESCRIPTION 4 years (1389) 4 years (1391) No prescription No prescription (1410)
RATIFICATION Cannot be Ratified May be Ratified May be Ratified Cannot be Ratified
REQUISITES 1. Contract is valid 1. Knowledge of the reason 1. Those entered into in 1. Contracts whose
2. There is lesion/ why contract is voidable the name of another COC, purpose
pecuniary prejudice 2. Injured party must’ve 2. Those that don’t contrary to law
3. No other legal executed an act which comply with the 2. Simulated/Fictitious
remedy implies his waiver Statute of Fraud 3. Contracts w/o COC
4. Object not in legal 3. Those wherein 4. Contracts prohibited
possession of both parties are by law
another incapable of giving
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5. Period to file
ASSAILABILITY Assailable by party or
Assailable by party or
BY THIRD Assailable by party only Assailable by party only third person who is
third person
PERSONS directly affected
(1381) (1390) (1403[1][2][3]) (1409)
1. Those entered into by 1. Those where one of the 1. Those entered into in 1. Contracts whose
guardians whenever parties is incapable of the name of another cause, object or
the wards suffer giving consent by one without, or purpose is contrary
lesion by more than ¼ acting in excess, of to law, etc
of the value of the 2.Those where the consent authority 2. Simulated/Fictitious
thing is vitiated by Mistake, 2. Those who do not 3. Those w/o cause or
2. Representatives of Violence, Intimidation, comply with the object
absentees Undue Influence, Fraud Statute of Frauds 4. Contracts whose
KINDS
3. Those undertaken in 3. Those where both object is outside the
fraud of creditors parties are incapable commerce of men
OF
when the latter can’t of giving 5. Contracts which
collect the dues contemplate an
CONTRACT
4. Thing under litigation impossible service
entered into w/o 6. The intention of the
knowledge of it parties relative the
5. Contracts specially object can’t be
declared by law to be ascertained
subject to ratification 7. Contracts expressly
prohibited/declared
void by the law

DISTINCTIONS GUARANTY SURETY


Degree of Liability SUBSIDIARY (secondary) liability PRINCIPAL (primary) liability
Privity in the Contract Guarantor assumes liability by virtue of an
Surety assumes liability as a regular
independent agreement to pay the
party to the undertaking of contract
obligation if principal fails to do so
Nature of Liability Liability is collateral (pays if debtor cant) Liability is original (pays if debtor doesn’t)
What is insured Insurer of insolvency of debtor Insurer of debt
Availment of the benefit of Guarantor can avail of benefit of excussion
excussion and division in case creditor proceeds Surety cannot
against him

Contract of Guaranty: contract where a person called as guarantor, binds himself to a creditor to fulfill the obligation of the
principal debtor in case the latter should fail to do so.
Contract of Surety: contract where a person binds himself solidarily with the principal debtor to fulfill the obligation.
Benefit of Excussion: right by which the guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the
property of the principal debtor, and has resorted to all of the legal remedies against such debtor.
EXCEPTIONS: ART2059: Benefit of Excussion inapplicable;
ART2071: Guarantor may proceed against principal debtor even before payment.
a. Rescissible contracts (1380) VALID until rescinded
All the essential requisites exist but by reason of injury/damage to one of the parties, contract may be rescinded
Rescission cannot be availed of if the party who demands it cannot return what he is obliged to restore (1385[1])
Rescission shall not take place if the property is legally in the possession of a third person who acted in good faith (1385[2])

ART1380. Contracts validly agreed upon may be rescissible in the cases established by law
ART1381. The following contracts are rescissible…
ART1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be
compelled at the time of they were effected, are also rescissible.
ART1383. The action for rescission is subsidiary, can be instituted only when there are no other legal remedies left
ART1384. Rescission shall be only to the extent necessary to cover the damages caused
ART1385. Rescission creates obligation of mutual restitution; debtor & creditor must return to each other the things
ART1386. ART1381(1)(2) shall not take place with respect to contracts approved by the courts
ART1387. Alienation of properties presumed in fraud of creditors; alienation by gratuitous title & by onerous title
ART1388. Whoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter for damages
ART1389. The action to claim rescission must be commenced within four years;
guardianship/absentees: 4yrs from termination of incapacity / domicile is known

b. Voidable contracts (1390) VALID until ANNULLED


The defect is caused by vice of consent
Annulment: remedy provided by law, for the declaration of the inefficacy of a contract based on defect/vice of the consent
Ratification: one voluntarily adopts some defective/unauthorized act or contract which, w/o his consent, wouldn’t bind him
**When a contract is annulled, a reciprocal obligation of restitution is created

ART1390. The following contracts are voidable or annullable, even though there may have been no damage…

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ART1391. Action for annulment shall be brought within four years:
In case of IVUI-TD; mistake of fraud: from discovery; minors & incapacitated: guardianship ceases
ART1392. Ratification extinguished the action to annul a voidable contract
ART1393. Ratification may be effected expressly or tacitly
ART1394. Ratification may be effected by the guardian of the incapacitated person
ART1395. Ratification does not require the conformity of the contracting party who had no right to bring action
ART1396. Ratification cleanses the contract from all its defects from the moment it was constituted
ART1397. Action for annulment of contracts may be instituted by all who are thereby obliged principally or
subsidiarily
ART1398. Obligation having been annulled, the contracting parties shall restore to each other everything
ART1399. The defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not
obliged to make any restitution except insofar as he has been benefited by the thing or price received by him
ART1400. Effect of loss of thing to be returned: w/o fault = obligation extinguished; with fault = obligation still exist
ART1401. Action for annulment of contracts shall be extinguished when the thing which is the object is lost through
fraud/fault of the person who has a right to institute the proceedings.
ART1402. as long as one of the contracting parties doesn’t restore what is ordered, the other can’t be compelled to
comply with what is incumbent upon him

c. Unenforceable contracts (1403) could be VOID or VOIDABLE


Cannot be sued upon or enforced unless they are ratified; it occupies an intermediate ground bet. a voidable & void contract

ART1403. The following contracts are unenforceable, unless they are RATIFIED:
(1). Those entered into the name of another person by one who had been given no authority or legal
representation, or who has acted beyond his powers;
ART1403 (2). Those that don’t comply with the Statute of Frauds as set forth in this number: unenforceable
a) An agreement that by its terms is not to be performed w/in a year from 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 P500,
unless the buyer accepts and receive a 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 sale book, at the time of the sale, of the
amount and the kind of property sold, terms of sale, price, names of the purchasers and persons on
whose account the sale is made, it is sufficient memorandum;
e) An agreement for the leasing for a longer period than one year, or for the sale of real property or
an interest therein
f) A representation as to the credit of a third person
ART1403 (3). Those where both parties are incapable of giving consent to a contract

ART1404. Unauthorized contracts are governed by ART1317 and the principles of agency in Title X of this Book
ART1405. Contracts infringing the Statute of Frauds, referred to ART1403(2), are ratified by the failure to object to the
presentation of oral evidence to prove the same, or by the acceptance of benefits under them
ART1406. When a contract is enforceable under the Statute of Frauds, and a public document is necessary for its
registration in the Registry of Deeds, the parties may avail themselves of the right under ART1357
ART1407. Unenforceable contracts become
voidable: when parent or guardian ratifies the contract of incapable parties;
valid: parents or guardians of both able parties, ratify the contract, the contract is validated and retroacts
ART1408. Unenforceable contracts cannot be assailed by third persons

d. Void or inexistent contracts (1409) VOID


Void contracts are absolutely null and void, it has no effect and cannot be ratified.

ART1410. The action or defense for the declaration of the inexistence of a contract does not prescribe
ART1411. Rules: contract is illegal & the act is a criminal offense > pari delicto: no action; 1 party guilty: other will claim
ART1412. If the act is which the unlawful or forbidden cause consists does not constitute a criminal offense, rules:
ART1413. Interest paid in excess of the interest allowed by the usury law may be recovered by the debtor, with interest
thereon from the date of the payment
ART1414. When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one of the
parties before the purpose has been accomplished, or before any damage has been caused to a third person.
In such case, the courts may, if the public interest will thus be subserved, allow the party repudiating the
contract to recover the money or property
ART1415. Where one of the parties to an illegal contract is incapable of giving consent, the courts may, if the interest of
justice so demands, allow recovery of money or property delivered by the incapacitated person
ART1416. When the agreement is not illegal per se but is merely prohibited, an the prohibition by the law is designed for
the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or
delivered
ART1417. When the price of any article or commodity is determined by statute, or by authority of law, any person paying
any amount in excess of the maximum price allowed may recover such excess

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ART1418. When the law fixes, or authorizes the fixing of the maximum number of hours of labor, and a contract is
entered into whereby laborer undertakes to work longer than the maximum thus fixed, he may demand
additional compensation for service rendered beyond the time limit
ART1419. When the law sets, or authorizes the setting of a minimum wage for laborers, and a contract is agreed upon by
which a laborer accepts a lower wage, he shall be entitled to recover the deficiency
ART1420. In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be
enforced
ART1421. The defense of illegality of contracts is not available to third persons whose interests are not directly affected
ART1422. A contract which is the direct result of a previous illegal contract, is also void and inexistent

Quick Notes

General Rule: No Demand, No Delay (1169) Articles that protect creditor from accepting
Solidary obligation is more onerous than a joint obligation substandard performance/ payment:
Obligation, presumption is always pro-debtor
1199(2): C can’t be compelled to receive part of one
Modes of Payment 1236: C may refuse payment by a third person
Joint and solidary: Plurality of Parties 1244: C can’t be compelled to receive a different thing
Obligation: with parties and prestation 1246: generic thing of medium quality
1248: C can’t be compelled to receive partial prestation
Obligation demandable at once:
When it is pure (1179[1])
When it is subject to a resolutory condition (1179[2])
When it is subject to a resolutory period (1193[2])

ELEMENTS OF A DEFINITE OFFER:


Intention to sell: target population
Completeness of details
Definite information given

CONSENSUAL CONTRACT: there is a meeting of the minds; ie. simple sale


REAL CONTRACT: perfected only upon the actual delivery of the object or property; ie. Deposit
FORMAL CONTRACT: perfected upon the signing of the instrument as required by law

Contract, required it to be in writing for validity, convenience of the parties, and covered by the Statute of Frauds
Contract, needed to be in writing: real properties, personal properties, donation more than P500

SIMULATED CONTRACT(1345-1346): RELATIVE: valid; ABSOLUTE: parties really did not intend to be bound to each other

(1191) Rescission in obligations in general  principal action


(1380) Rescission as a remedy in contracts  subsidiary action

ESTOPPEL: it might refer to an action or word uttered where a third person shall relay on.
LACHES: “sleeping dragon”; a right to action is left unattended for a long period of time

MARRIAGE CONTRACT: special contract; can’t have other stipulations other than as provided in an ante-nuptial agreement

1273: PRIN.OB extinguished ACC OB also


Waiver of ACC OB. PRIN, OB shall be in force

1299: ORIG OB with sus/res condition, NEW OB be in


the same condition

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QUESTIONS AND ANSWERS

What is the juridical tie?


It is the one that binds one party to another, like a contract.

PRESTATION TO DO

Can creditor demand specific performance?


NO, creditor can’t demand as it would violate debtor’s right against involuntary servitude under Art III Sec 18 (2) of the
1987 Constitution. Creditor’s remedy would be to file for damages.

DELAY (1169)

Civil law student fails to pay on time the remaining balance of his tuition. Is the student considered in
delay?
YES, ART 1169 exceptions paragraph 2 and 4 can apply. The date specified is a controlling factor, ad it is a reciprocal
obligation because the University already fulfilled their part of the obligation, thus it is incumbent upon the student to also perform
his part of the obligation, to pay for the tuition.

FORTUITOUS EVENT (1174)

Boat capsized due to bad weather, many died. Owner of the ship allowed overloading of passengers.
Owner liable to pay for damages because of gross negligence.

OBLIGATIONS: INDIVISIBLE

If the object is indivisible, is it automatic that the obligation is solidary?


NO, because solidarity is more onerous than just obligation.

Why are obligations presumed as joint obligations and not solidary obligation?
It is presumed because it is less burdensome.

EXTINGUISHMENT OF OBLIGATION

Payment made by a third party, is it valid?


YES, as provided for by ARTS 1237 and 1238
1237: whoever pays debt of debtor has the right to subrogate
1238: whoever pays debt w/o intent to be paid back, considered as donation

Payment made to a third person, is it valid?


YES, as provided for by art1240.
1240: payment must be made to person in whose favor the obligation has constituted, heirs, and authorized persons.

In what currency should the obligation be paid in?


It depends on the stipulation agreed by the parties. If it is expressly stated in the contract that the debtor should pay in a
certain currency then it is honored, otherwise the legal tender of the country shall be implemented. General rules stated in Art 1249
and 1250.

Is check a valid mode of payment to extinguish an obligation?


YES, as long as it has been encashed, otherwise it is valid.

CONTRACTS

What does advertisements, like print ads about review classes, stand for?
The advertisement is an invitation to make an offer only as provided for in ART1325.

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1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

REQUISITES:
• The condition is SUSPENSIVE;
• The obligor ACTUALLY PREVENTS the fulfillment of the condition;
• He acts VOLUNTARILY.

Malice or fraud is not required, as long as his purpose is to prevent the fulfillment of the condition.
No person shall profit by his own wrong.

1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give,
the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency
of the condition:

LOSS
• debtor without fault – obligation is extinguished
• debtor with fault – obligation to pay damages

DETERIORATION
• debtor without fault – impairment is to be borne by the creditor
• debtor with fault – creditor chooses: rescission of obligation, fulfillment, indemnity

IMPROVEMENT
• by nature or time – improvement: inure to the benefit of the creditor
• at the expense of the debtor – granted to the usufructuary

1191. The power to rescind obligations is implied in reciprocal ones…


The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become
impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance
with Articles 1385 and 1388 and the Mortgage Law.

Power to rescind obligations is implied in reciprocal ones


Creditor either: sues for specific performance / + damages; rescinds/ + damages; SP + rescission + damages

1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes.

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.
A day certain is understood to be that which must necessarily come, although it may not be known when.

If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated
by the rules of the preceding Section.

A PERIOD is future and a certain event, physically and legally possible

1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing
that the obligation has become due and demandable, may be recovered, with the fruits and interests.

Burden of proof lies on the DEBTOR, that he has no knowledge of the due period.
Debtor presumed aware of period

1196. Whenever in an obligation a period is designated, it is presumed to have been established for the benefit of both
the creditor and the debtor, unless from the tenor of the same or other circumstances it should appear that the period
has been established in favor of one or of the other.
General rule: benefit for both creditors and debtors
Exceptions:
1. Term is for the benefit of the debtor alone – cannot be compelled to pay prematurely, but he can if he desires to do so
2. Term is for the benefit of the creditor – may demand fulfillment even before the arrival of the term but the debtor
cannot require him to accept payment before the expiration of the stipulated period

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1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period
was intended, the courts may fix the duration thereof.

The courts shall also fix the duration of the period when it depends upon the will of the debtor.
In every case, the courts shall determine such period as may under the circumstances have been probably
contemplated by the parties. Once fixed by the courts, the period cannot be changed by them.

GENERAL RULE: Court cannot fix the period:


1. If there is a period agreed upon by the parties and it has already lapsed or expired.
2. From the very moment the parties give their acceptance and consent to the period fixed by the court, it becomes a
law governing their contract

EXCEPTION: Court will fix a period:


1. When no period is mentioned, but it is inferable from the nature and circumstances of the obligation that a period
was intended by the parties.
2. When the period is dependent upon the will of the debtor.

1198. The debtor shall lose every right to make use of the period:

(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the
debt;
(2) When he does not furnish to the creditor the guaranties or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a
fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;
(5) When the debtor attempts to abscond.

ALTERNATIVE OBLIGATIONS

1199. A person alternatively bound by different prestations shall completely perform one of them.
The creditor cannot be compelled to receive part of one and part of the other undertaking.

1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor…

The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have
been the object of the obligation.

1201. The choice shall produce no effect except from the time it has been communicated.

1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound, only one
is practicable.

1203. If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation, the latter
may rescind the contract with damages.

1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, all the things
which are alternatively the object of the obligation have been lost, or the compliance of the obligation has become
impossible.
The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the
service which last became impossible.
Damages other than the value of the last thing or service may also be awarded.

JOINT AND SOLIDARY OBLIGATIONS

1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply
indivisibility.

1211. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the
same periods and conditions.

The solidarity of the debtors is not affected even if different terms and conditions are made applicable to them.

1213. A solidary creditor cannot assign his rights without the consent of the others.

Assign – transfer of right

The assignee does not become a solidary creditor, and any payment made upon him by the debtor does not extinguish the
obligation. He is considered a STRANGER, and his acts are not binding to the solidarity.

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1218. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if such payment is
made after the obligation has prescribed or become illegal.

No reimbursement if:

Obligation PRESCRIBES: The creditor did not make any demand for more than 10 years.
Obligation becomes ILLEGAL: Law has been passed, making such prestation illegal.

PRESCRIPTION: 10 YRS (ART1144) PRESCRIPTION: 6 YRS (ART1145) PRESCRIPTION: 4 YRS (ART1146)


Written contract Oral contract Injury to the rights of the plaintiff
Obligation created by law Quasi-contract Quasi-delict
Upon a judgment

1219. The remission made by the creditor of the share 1220. The remission of the whole obligation, obtained by
which affects one of the solidary debtors does not release one of the solidary debtors, does not entitle him to
the latter from his responsibility towards the co-debtors, reimbursement from his co-debtors
in case the debt had been totally paid by anyone of them
before the remission was effected.

1221. Rule when thing has been lost or prestation became impossible

Loss of the thing or impossibility of prestation –

1. NO FAULT, before delay – solidary debtors  obligation is extinguished


2. FAULT – any one of them  all are liable because of their mutual agency
3. FORTUITOUS EVENT, without delay – solidary debtors  not liable
4. FORTUITOUS EVENT, after delay - delay on the part of the debtors  all will be liable

DIVISIBLE AND INDIVISIBLE OBLIGATIONS

1225. For the purposes of the preceding articles, obligations to give definite things and those which are not susceptible
of partial performance shall be deemed to be indivisible.
When the obligation has for its object the execution of a certain number of days of work, the accomplishment of work
by metrical units, or analogous things which by their nature are susceptible of partial performance, it shall be divisible.
However, even though the object or service may be physically divisible, an obligation is indivisible if so provided by law
or intended by the parties.
In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in each
particular case.

The following are considered INDIVISIBLE obligations:


Obligation to give definite things
Obligations which are not susceptible of partial performance
Even though the object or service may be physically divisible, it is indivisible if:
the law so provides
when the parties intended it to be indivisible

The following obligations are deemed DIVISIBLE:


When the object of the obligation is the execution of a certain number of days of work
When the object of the obligation is the accomplishment of work measured in units
When the object of the obligation is susceptible of partial compliance
When the object of the obligation is such that the debtor is required to pay in installments

If the contract is divisible, and a part of it is illegal, the illegal part is void, and the rest shall be valid and enforceable.
If the contract is indivisible, and a part of it is illegal, the entire contract is void.
Partial performance of an indivisible obligation is tantamount to non-performance.

1231. obligations are extinguished:


1. by payment or performance (1232) Dation in payment (1245)
2. by loss of the thing due (1261) Application of payment (1253)
3. by the condonation or remission of the debt (1270) Payment by cession (1255)
4. by the confusion or merger of the rights of creditor and debtor (1275) Tender of payment & consignation (1256)
5. by compensation (1278)
6. by novation (1291)

other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and
prescription, are governed elsewhere in this Code.
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