FORMALITY OF A CONTRACT

NOTE: IF LAW REQUIRES A SPECIAL FORM

OF CONTRACT, THE PARTIES MAY
COMPEL EACH OTHER TO OBSERVE THE
FORM ONCE CONTRACT IS PERFECTED. ART. 1357
A. SOLEMN CONTRACTS- NOT VALID AND
BINDING BETWEEN THE PARTIES UNTIL
THE FORM PRESCRIBED BY LAW IS
OBSERVED.

B. CONTRACTS WHICH MUST BE IN A PUBLIC

INSTRUMENT TO BE ENFORCEABLE ART. 1358.

1.
CONTRACTS
FOR
THE
CREATION,
TRANSMISSION, MODIFICATION, OR EXTINGUISHMENT OF REAL RIGHTS OVER IMMOVABLE
PROPERTY. cmet
EXCEPT: (a) SALE OF REALTY
(b) LEASE FOR MORE THAN 1 YEAR.
2. ASSIGNMENT, REPUDIATION, WAIVER OF
HEREDITARY RIGHTS OR OF THE CONJUGAL
PARTNERSHIP OF GAINS. WAR

3. POWER TO ADMINISTER PROPERTY OR OTHER

POWER W/C SHOULD APPEAR IN PUBLIC
INSTRUMENT OR PREJUDICE THIRD PERSON.
4. CESSION OF ACTION OR RIGHTS ARISING FROM
AN ACT CONTAINED IN A PUBLIC INSTRUMENT.

C. CONTRACTS COVERED BY THE STATUTE OF

FRAUD. ART. 1403
D. CONTRACTS WHERE AMOUNT EXCEEEDS FIVE
HUNDRED PESOS MUST BE IN WRITING.

REFORMATION REMEDY WHEN THE TRUE

INTENTION OF THE PARTIES IS NOT EXPRESSED
IN THE CONTRACT BY REASON OF MISTAKE,

FRAUD, INEQUITABLE CONDUCT OR ACCIDENT.

- RELATIVE SIMULATION.
CASES WHEN REFORMATION NOT APPLICABLE:
(a) SIMPLE DONATIONS INTER VIVOS.
(b) WILLS
(c ) REAL AGREEMENT IS VOID.

RESCISSIBLE CONTRACTS- ART. 1381

(a) ENTERED BY GUARDIAN WHEN THE WARD HE

REPRESENTS SUFFER LESION BY MORE THAN
ONE-FOURTH OF THE VALUE OF THE THING.
(b) AGREED UPON IN REPRESENTATION OF
ABSENTEES IF LATTER SUFFER LESION BY
MORE THAN ONE-FOURTH OF THE VALUE OF
THE THING.

(c ) UNDERTAKEN IN FRAUD OF CREDITORS WHEN

LATTER CANNOT COLLECT THE CLAIM DUE THEM.
(d) REFER TO THINGS UNDER LITIGATION IF
ENTERED BY DEFENDANT W/O KNOWLEDGE AND
APPROVAL OF LITIGANTS.
(e) CONTRACTS DECLARED BY LAW SUBJECT TO
RESCISSION.
CODE: CGLAD

DISTINCTION BETWEEN RESCISSION UNDER ART.

1191 AND ART. 1380
RESCISSION UNDER
ART. 1380

RESCISSION UNDER
ART. 1191

1. CONTRACTING PARTIES AND 3RD PERSON.

INJURED PARTY ONLY

2. BASED ON LESION OR
FRAUD OF CREDITORS

NON-FULFILLMENT OF
OBLIGATION

3. NO PERIOD FOR
COMPLIANCE.

COURTS MAY GRANT A

PERIOD.

WHAT IS THE PRESCRIPTIVE PERIOD FOR FILING AN

ACTION FOR RESCISSION?
GEN. RULE: 4 YEARS FROM CELEBRATION OF
CONTRACT.

EXCEPTIONS: (a) PERSONS UNDER GUARDIANSHIP, 4

YEARS FROM TERMINATION OF INCAPACITY;
(b) ABSENTEES, 4 YEARS FROM TIME
DOMICILE IS KNOWN.

WHAT IS THE EFFECT OF RESCISSION OF A

CONTRACT?

1. THING MUST BE RETURNED WITH THE FRUITS AND

THE PRICE WITH THE INTEREST (ART. 1385).
2. IF RETURN IS NOT POSSIBLE, TRANSFEREE MUST
PAY INDEMNITY FOR DAMAGES (ART. 1388).
3. IF THERE ARE SEVERAL ALIENATIONS, THE FIRST
ACQUIRER SHALL BE LIABLE FIRST (ART. 1388).

DISTINCTIONS BETWEEEN VOID

AND VOIDABLE CONTRACTS

VOID CONTRACTS

VOIDABLE CONTRACTS

MAY BE INVOKED BY
ANY PERSON

MAYBE INVOKED ONLY

BY THE PARTIES

CANNOT BE CONFIRMED AND DOES

NOT PRESCRIBE
DUE TO VIOLATION
OF PUBLIC POLICY

CAN BE RATIFIED AND

ACTION PRESCRIBES

VOID FROM THE

BEGINNING

VALID UNTIL ANNULLED

DUE TO VICES OF
CONSENT

GROUNDS FOR ANNULMENT (ART. 1390):

1.

INCAPACITY OF ONE PARTY IN GIVING CONSENT.

2.

CONSENT IS VITIATED BY VIOLENCE,

INTIMIDATION, UNDUE INFLUENCE, MISTAKE,
FRAUD.

PRESCRIPTIVE PERIOD: 4 YEARS FROM CESSATION

OF DURESS; FROM DISCOVERY OF FRAUD;
FROM REMOVAL OF INCAPACITY (ART. 1391).

EFFECT OF ANNULMENT:
1.

IF CONTRACT WAS NOT YET PERFORMED, PARTIES ARE RELEASED FROM THEIR OBLIGATIONS.

2. IF CONTRACT WAS ALREADY PERFORMED,

MUTUAL RESTITUTION (ART. 1398)- OF THE THING WITH THE FRUITS; AND
- OF THE PRICE WITH INTERESTS.

IN OBLIGATIONS TO RENDER SERVICE, THE VALUE

SHALL BE BASIS FOR DAMAGES.

EFFECT OF RATIFICATION:
RATIFICATION RETROACTS TO THE TIME THAT THE
CONTRACT WAS ENTERED INTO AND PURGES THE
CONTRACT OF THE DEFECT GIVING RISE TO
NULLITY.
UNENFORCEABLE CONTRACTS CONTRACTS BY
REASON OF STATUTORY DEFECTS DO NOT
CONFER ANY ACTION TO ENFORCE THE SAME
UNTIL THEY ARE RATIFIED IN THE MANNER
PRESCRIBED BY LAW.

CLASSES OF UNENFORECEABLE CONTRACTS:

1.
2.
3.

CONTRACTS UNDER STATUTE OF FRAUDS.

CONTRACTS IN EXCESS OF AUTHORITY.
CONTRACTS WHERE BOTH PARTIES ARE
INCAPACITATED.

NOTE: CONTRACTS COVERED BY THE STATUTE OF

FRAUD ART. 1403
VOID CONTRACTS ART. 1409

DISTINCTIONS BETWEEN DEFECTIVE CONTRACTS

VOID

VOIDABLE

RESCISSIBLE UNENFORCEABLE

CAUSED BY
LACK OF
ELEMENT

VICE OF
CONSENT

LESION

LACK OF FORM,
AUTHORITY,
CAPACITY OF
PARTIES

NOT CURED CURED BY

BY PRESPRESCRIPTCRIPTION
ION

CURED BY
PRESCRIPTION

NOT CURE BY
PRESCRIPTION

CANNOT BE
RATIFIED

CAN BE
RATIFIED

NEED NOT BE CAN BE RATIFIED

RATIFIED

NOT
BINDING

BINDING
UNTIL
ANNULLED

BINDING
UNLESS
RESCINDED

BINDING

 NATURAL OBLIGATIONS

- ART. 1423

- BASED ON EQUITY AND NATURAL LAW.

- AFTER VOLUNTARY FULFILLMENT,
RETENTION OF WHAT HAS BEEN DELIVERED OR
RENDERED IS AUTHORIZED.
ARTS. 1424- 1430

POSSIBLE QUESTIONS
I. ON MARCH 5, 2000, JUAN WROTE A LETTER TO
PEDRO OFFERING TO HIM THE SALE OF A LOT IN
PASAY CITY. ON MARCH 6, 2000, AT 1:00 PM,
PEDRO SENT A LETTER TO JUAN ACCEPTING THE
FORMERS OFFER WHICH JUAN RECEIVED THE
FOLLOWING DAY AT 8:00 AM. HOWEVER, BEFORE
JUAN RECEIVED THE LETTER OF ACCEPTANCE OF
PEDRO, HE WITHDREW HIS OFFER BY SENDING A
LETTER OF WITHDRAWAL WHICH PEDRO RECEIVED 9:00AM OF MARCH 7, 2000. WAS THE
CONTRACT PERFECTED?

ANSWER:
NO. THE CONTRACT WAS NOT PERFECTED.
ACCORDING TO THE CIVIL CODE, THE CONTRACT IS
PERFECTED ONLY FROM THE MOMENT THAT THE
OFFEROR
HAS
KNOWLEDGE
OF
THE
ACCEPTANCE BY THE OFFEREE (ART. 1319).

IN THE INSTANT CASE, PEDRO SENT A LETTER TO

JUAN ACCEPTING THE FORMERS OFFER WHICH
JUAN RECEIVED THE FOLLOWING DAY AT 8:00 AM.
HOWEVER, BEFORE JUAN RECEIVED THE LETTER
OF PEDRO, JUAN ALREADY WITHDREW HIS OFFER
BY SENDING A LETTER OF WITHDRAWAL TO
PEDRO. CONSEQUENTLY, ALTHO JUAN AT 8:00
AM
OF
MARCH
7
RECEIVED
PEDROS
ACCEPTANCE, THERE WAS NO MORE OFFER. THE
CONTRACT WAS NOT PERFECTED SINCE THERE
WAS NO CONCURRENCE BETWEEN OFFER AND
ACCEPTANCE.

II.

FE, ESPERANZA AND CARIDAD EXECUTED A

PROMISSORY NOTE PROMISING TO PAY THEIR
OBLIGATION IN THE AMOUNT OF P50,000.00 TO
MARIO ON OR BEFORE FEB. 14, 2000. CAN MARIO
COMPEL FE TO PAY THE ENTIRE OBLIGATION ON
FEB. 14?

ANSWER #1. NO. MARIO CANNOT COMPEL FE TO

PAY THE ENTIRE OBLIGATION ON FEBRUARY 14.
ACCORDING TO ART. 1207 OF THE CIVIL CODE, THE
OBLIGATION IS PRESUMED TO BE JOINT. IN THIS
TYPE OF OBLIGATION, A DEBTOR CASN ONLY BE
COMPELLED TO PAY HIS PROPORTIONATE SHARE
OF THE OBLIGATION.

ALTERNATIVE ANSWER: IT DEPENDS. IF THE

PARTIES EXPRESSLY STIPULATED THAT THE
LIABILITY WOULD BE SOLIDARY, THEN MARIO
CAN COMPEL FE TO PAY THE ENTIRE OBLIGATION
ON FEB. 14. IN A SOLIDARY OBLIGATION, THE
CREDITOR CAN DEMAND FROM ONE DEBTOR THE
FULFILLMENT OF THE ENTIRE OBLIGATION (ART.
1207).
ON THE OTHER HAND, THERE IS NO EXPRESS
STIPULATION, THE CIVIL CODE PRESUMES THAT
THE LIABILITY OF THE DEBTORS IS JOINT AND
UNDER A JOINT OBLIGATION, A DEBTOR CAN
ONLY
BE
COMPELLED
TO
PAY
HIS
CORRESPONDING SHARE.