II.

CONTRACTS
(Read Arts. 1305-1422)
A. General Provsons
1. !e"nton
Art#le 1305. A #ontra#t s a $eetn% o" $nds
&et'een t'o (ersons ')ere&* one &nds
)$sel"+ 't) res(e#t to t)e ot)er+ to %ve
so$et)n% or to render so$e serv#e.
,alane: thinks that the definition in Art. 1305 is inaccurate.
The term persons should be substituted by the term parties.
Also, contracts may be multilateral there can be more than !
parties in"ol"ed #i.e. partnership$.
SANC-./-RO0AN1 a %uridical con"ention manifested in
le&al form, by "irtue of 'hc one or more parties bind
themsel"es in fa"or of one another or others, or reciprocally, to
d fulfillment of a prestation to &i"e, to do or not to do.
Tolentno: (ontracts ')reciprocal *s e+cluded by d def.
Q: An agreement was made betw. A & B. Was a
created?
A: ,,. A&reement to &o to church to&ether is not a -.
Q: May a be perfected as to an Agreement no to
do? YES
./: not to en&a&e in business #pro"ided not in perpetuity$
Q: MAYeed of sa!e s"gned by on!y # party?
A: 0es, in auto-
A2TO-CONTRACT1
1s a - e+ecuted by one person only, but in
such e+ecution he represents at least ! parties
.+ecuted by one person, either:
1. 'hen a person in his capacity as rep, of
himself, or
2. 'hen as a rep of ! diff persons he brin&s abt
a - bet his principals by -2in& ')himself
34: "alid, e+c. 1561.
./: - of A3.,(0 #4ead art. 1760$
Art#le 1340. 1f the a&ent has been empo'ered to borro'
money, he may himself be the lender at the current rate of
interest. 1f he has been authori8ed to lend money at interest, he
cannot borro' it 'ithout the consent of the principal.
A%ent #an &e lender &5t )e $a* not &e
t)e &orro'er.
9 1n :ales #art. 1561$: one party can ne"er "alidly &i"e
consent.
Art#le 1441. The follo'in& persons cannot ac;uire by
purchase, e"en at a public or %udicial auction, either in person
or throu&h the mediation of another: (CAPACIT6 TO ,26
OR S.77)
#1$ The %5ardan, the property of the person or
persons 'ho may be under his &uardianship
#!$ A%ents, the property 'hose administration or
sale may ha"e been intrusted to them, unless the
consent of the principal has been &i"en
#3$ .8e#5tors and ad$nstrators, the property
of the estate under administration
#5$ P5&l# o""#ers and ..s, the property of the
:tate or of any subdi"ision thereof, or of any
&o"ernment<o'ned or controlled corporation, or
institution, the administration of 'hich has been
intrusted to them this pro"ision shall apply to %ud&es
and &o"ernment e+perts 'ho, in any manner
'hatsoe"er, take part in the sale
(5) 95st#es+ :5d%es+ (rose#5tn% attorne*s+
#ler;s o" s5(eror and n"eror #o5rts+ and
ot)er o""#ers and ..s connected 'ith the
administration of %ustice, the property and ri&hts in
liti&ation or le"ied upon an e+ecution before the court
'ithin 'hose %urisdiction or territory they e+ercise
their respecti"e functions this prohibition includes
the act of ac;uirin& by assi&nment and shall apply to
la'yers, 'ith respect to the property and ri&hts 'hich
may be the ob%ect of any liti&ation in 'hich they may
take part by "irtue of their profession
(<) An* ot)ers s(e#all* ds=5al"ed &* la'.
,avera1
,os. 1<3 are "oidable contracts ,os. 5<= are
"oid contracts.
The reason 'hy those enumerated under Art.
1561 ha"e relati"e incapacity to enter into a contract of
sale is that they possess a fiduciary relationship ') the
o'ner of the properties mentioned, such that the la'
pre"ents them fr. bein& tempted to take ad"anta&e of
their positions.
The prohibition rests on the fact that &reed
mi&ht &et the better of loyalty. The la' does not trust
human nature to resist the temptations likely to arise
out of the anta&onism bet'een the interest of the seller
9 the buyer.
An a&ent 'ho has renounced the a&ency 9 is a
%ud&ment creditor of his principal may ac;uire the
latter2s property in a public sale.
The prohibition a&ainst la'yers is intended to
curtail any undue influence the la'yer may ha"e o"er
his client on account of their confidential association.
:uch sales are "oid 9 cannot be ratified. >ublic interest
9 public policy remain paramount 9 do not permit
compromise 9 ratification.
Q: W$en "s a t$"ng deemed to be t$e s%b&ect of
!"t"gat"on?
,ot only if there is some contest or liti&ation
in court, but also fr. the moment it becomes sub%ect to
%udicial action.
(ontin&ent fee< not contrary to la' as it 'ill
encoura&e the la'yer to 'ork harder to 'in the case in
order to earn the said fee. thus, it is to the client2s
ad"anta&e. ?ut the court may reduce the fee is found to
be unconscionable.
#@, A.A:. @B 4C4AA A,D C4?A, AA,D:$
Art#le 1<4<. The persons dis;ualified to buy referred to in
articles 1560 and 1561, are also dis;ualified to become lessees
of the thin&s mentioned therein
TO7.NTINO1
All -s under 1561 are "oid by reason of >>
1n (ode of commerce, #Art.!=E$ a
#o$$sson a%ent ')o permission of principal
cannot buy for himself or for another, nor to sell 'hat
he ou&ht to buy.
(2) .7.0.NTS O> CONTRACTS
a) .::.,T1AA
b) ,ATC4AA
c) A((1D.,TAA
bern.carrasco
1
(a) .ssental .le$ents
The essential elements are those 'ithout
'hich there can be no contract. #indispensable
r;mts.$
These elements are, in turn, subdi"ided into:

1.) #o$$on #comm%nes$ those 'hich are
present in all contracts, such as #onsent+ o&:e#t
#ertan+ and #a5se
2.) s(e#al #espec"a!es$ are present only in
certain contracts, such as delver* in real contracts,
or "or$ in solemn ones.
3.) e8traordnar* #espec"a!"ss"mos$ are
those 'hich are peculiar to a specific contract #i.e.
(r#e in sales$.
(&) NAT2RA7 .7.0.NTS
those 'hich are deri"ed from the nature of
the contract and ordinarily accompany the same.
They are presumed by la', althou&h they can
be e+cluded by the contractin& parties if they so
desire.
. r%)t to resolve (Art. 1141)
. 'arrantes n sales #ontra#ts+ $(led
Q: Is warranty a natural of ? Not always
A: only implied 'arranty are natural, not e+press ones
#c$ A##dental .le$ents
The accidental elements are those 'hich
e8st onl* ')en t)e (artes e8(ressl* (rovde
"or t)e$ for the purpose of limitin& or modifyin& the
normal effects of the contract #i.e. conditions, terms,
modes$
Q: St"p%!at"on as to "nterest "n a of 'oan( w$at
)"nd of *?
A: Accidental 1nterest must al'ays be e+pressed)'ritten to be
&i"en effect.
BA+,-E'E. /s ,B 44 SCRA 451
RATIO: Monetary Boards do not create s bet. ,B &
do!!ar earner.
,. GO?.RNING 7A@ A 92RIS!ICTION1
130B - innominate (2s &o"erned by:
i. St(5laton o" (artes
ii. 7a' on O&lCon
iii. Analo%o5s #ontra#ts
iv. C5sto$s
13B0 C ntenton o" (artesD &ased on
#onte$(oraneo5s E s5&se=. A#ts
Q: What may not be SM of of Sale?
A1 serv#e
Q: that is perfected at the negotiation stage?
A1 O(ton F a (reFGal H
C. C-ARACT.RISTICS A PRINCIP7.S O>
CONTRACTS1
(1) (onsensuality
(2) Autonomy
(3) Futuality
(4) @bli&atory Borce
(5) 4elati"ity

(1) ,01SE1S2A'3+Y 04 ,01+.A,+S
Art#le 1305. A contract is a meetin& of minds
bet'een t'o persons 'hereby one binds himself, 'ith
respect to the other, to &i"e somethin& or to render
some ser"ice.
Art#le 131B. ,o one may contract in the name of
another 'ithout bein& authori8ed by the latter, or
unless he has by la' a ri&ht to represent him.
A contract entered into in the name of
another by one 'ho has no authority or le&al
representation, or 'ho has acted beyond his po'ers,
shall be unenforceable, unless it is ratified, e+pressly
or impliedly, by the person on 'hose behalf it has
been e+ecuted, before it is re"oked by the other
contractin& party.
Consent vtated voda&le
I" &* Re( a5t)ort* s vod 5nen"or#ea&le
Q: -ow "s consent g"/en?
A: by a mt& of the offer and acceptance, upon the
thin& 'hc is to constitute the - and as to the cause.
The follo'in& contracts are 5nen"or#ea&le 5nless t)e* are
rat"ed (Art. 1403)1
5a6 t$ose entered "nto "n t$e name of anot$er person
by one w$o $as been g"/en no a%t$or"ty or !ega!
representat"on( or w$o $as acted beyond $"s powers
5r7t Art.#8#96
CONTRACT O> A!-.SION1
Ghere one party has already prepared the
form of a -, containin& stips. he desires, and he
simply asks the other party to a&ree to them if he
'ants to continue ')d -
The party 'ho adheres to the - is in reality
free to re%ect it entirely, but if he does, he consents
1n case of doubt in interpretation of stip in
-, such 'ill be construed "s. d party 'ho prepared
such stip.
H: - of adhesion is bein& disputed on the &round of lack of
consent of the other party. 1s this tenableI
A: :( held no, - is "alid. #ng !iu "# $%$
.E:2B'3, /( :'+ + 2< SCRA <20
RATIO: 4reedom of part"es to st"p%!ate ; >arties can
not be coerced to enter into a contract 'here no a&reement is
had bet'een them as to the principal terms and conditions of
the contract. Breedom to stipulate such terms and conditions
is of the essence of our contractual system, and by e+press
pro"ision of the statute, a contract may be annulled if tainted
by "iolence, intimidation, or undue influence (Art#les
130<+ 133<+ 133B+ CC).
,0.:2S /. ,A + 43 SCRA 424
RATIO:
An atty<c!"ent re!. can be created by "mp!"ed
agreement( as w$en t$e atty. Act%a!!y rendered
!ega! ser/"ces for a person w$o "s a c!ose fr"end.
+$e = of s%c$ a person to pay atty>s fees "s based on
bern.carrasco
2
t$e !aw of >s concept of fac"o %t des 53 do and yo%
g"/e6.
5?6 A2+010MY 04 ,01+.A,+S:
Art. 130<. The contractin& parties may establish such
stipulations, clauses, terms and conditions as they may
deem con"enient, pro"ided they are not contrary to la',
morals, &ood customs, public order or public policy.
.+: unconscionable)usurious interest #Jurado$
autonomy of 'ill Aiberty of -s)Breedom to
contract
CONSTI 1on<"mpa"rment ,!a%se+
le&isture nor (ourts may not prescribe the terms of a
le&al -, Kfreedom to - ')o prior restraint
>arties may freely stipulate #as lon& as not
contrary to A)F)3()>@)>>$ but the %uridical
relations created by their - 9 the rts 9 *s arisin&
therefrom are det. ?y Aa' #.+: a &acto de 'etro :ale
may be construed by court to be loan ')mort&a&e
after lookin& at the substance of d - 9 not merely its
form or name.
Breedom to - limited by the common &ood
#>olice >o'er$
./: a >, 'hc constitute a &amblin& debt is
unenforceable
(ompromise A&reement appro"ed by court,
'here a &rantee of public land promised to sell to
another, 'ithin the 5<yr prohibitory period, e"en if
sale 'as made after such period and 'as appro"ed by
:ec. of A&ric. is null and L@1D ab initio. #Mambales ".
(A$
7$tatons n >reedo$ to Contra#t1
1n A&ency, a stipulation 'hich e+cludes one or more partners
from any share in the profits or losses is "oid. #Art#le 1B44)
1n >led&e)mort&a&e The creditor cannot appropriate the
thin&s &i"en by 'ay of pled&e or mort&a&e, or dispose of them.
Any stipulation to the contrary is null and "oid. #Art#le
2033)
Art#le 2130. A stipulation forbiddin& the o'ner from
alienatin& the immo"able mort&a&ed shall be "oid.
>arties may not A&ree on a ceilin& price of
mort&a&ed prop.in e+ecution b)c such shd be made to
d hi&hest bidder #Garner ", Jaucian$ nor stipulate
that upon non<payment, creditor may approp.
Fort&a&ed prop. Cpon himself this is called pact%m
comm"sor"%m+ contrary to Art. !077.
T)ere are #ertan $atters ')ere $an+
&* nat5re $5st )ave "reedo$ o" de#son+ t)5s
$a* not valdl* &e &o5nd &* FGal H+ s5#) as1
1. promise to marry or not, to secure le&al sep,
or to adopt a child
2. promise to chan&e citi8enship, professions,
reli&ion or domicile
3. promise not to hold public ofc, or limit perf
or ofc duties
4. promise to %oin a poli.party or separate fr it.
5. - not to en&a&e in 'ork, labor
6. to "ote for a candidate,
7. to do, at the risk of life,
8. to pay money for an immoral cause N i.e.
commit a crime bribe a public ofc marry testify
in court.
,23 @. A.E''A10 A##? :-3' #8B 5#CD#6E
:T1>CAAT1@, (@,T4A40 T@ >.>.
4AT1@: S+3:2'A+301 W-E.EBY S+2E1+
,A110+ +.A1S4E. +0 A10+-E. S,-00' W70
.E42131F S,-0'A.S-3: ,AS-( 12'' A1
@03.
S#)olars)(s are a'arded n re#o%nton o"
$ert E NOT to ;ee( st5dents n s#)ool to &olster
(rest%e. As for the Def., scholarship a'ard is a business
scheme desi&ned to increase the business potential of an
educational institution.
SA2.A /. S313,0 + 10B P- 33<
S+3:2'A+301 ,01+.A.Y +0 :.:.
RATIO:
Among t$ose t$at may not be t$e s%b&ect
matter 5ob&ect6 of contracts are certa"n r"g$ts of
"nd"/"d%a!s( w$"c$ t$e !aw and p%b!"c po!"cy $a/e
deemed w"se to eGc!%de from t$e commerce of man.
7.A7 v. IAC+ 155 SC 344
RATIO1 ,ontracts are genera!!y
b"nd"ng between t$e part"es( t$e"r ass"gns and $e"rsH
$owe/er( %nder Art. #?BB of t$e ,"/"! ,ode of Spa"n(
w$"c$ "s app!"cab!e "n t$"s "nstance( pacts( c!a%ses(
and cond"t"ons w$"c$ are contrary to p%b!"c order
are n%!! and /o"d( t$%s( w"t$o%t any b"nd"ng effect.
Annotat"ons on t"t!e: pro$"b"t"on to se!!
property to t$"rd part"es w$c "s "ndef"n"te &
%n!"m"ted as to t"me( w$c s$a!! cont"n%e to be
app!"cab!e beyond t$e !"fet"me of t$e or"g"na! part"es
to t$e ( "s a n%!!"ty.
.edempt"on: ."g$t to redeem m%st be
eGpress!y st"p%!ated "n t$e of sa!e to $a/e !ega!
eG"stence.
(3) M2+2A'3+Y :.31,3:'E:
+$e contract m%st b"nd bot$ contract"ng
part"esH "ts /a!"d"ty or comp!"ance cannot be !eft to
t$e w"!! of one of t$em #Art. 1307$.
The determination of the performance may be left to a
3
rd
person, 'hose decision shall not be bindin& until it has been
made kno'n to both contractin& parties #Art. 1306$.
The determination shall not be obli&atory if it is
e"idently ine;uitable. 1n such case, the courts shall decide
'hat is e;uitable under the circumstances #Art. 1310$.
An e+ample of a determination made by a 3
rd
person
#Art. 1306$ is the fi+in& of the price by the 3
rd
person.
bern.carrasco
3
The contract may be re"oked if there is mutual
dissent.
The condition can ne"er depend solely upon the 'ill
of the debtor. 1f the condition depends solely on the 'ill of the
debtor, the obli&ation is "oid #Art. 1132$.
The obli&ation is "oid because there is no "inculum
(uris. The creditor could ne"er compel the debtor to perform
the *. ((otestatve s5s(ensve H t)at de(ends on sole
'll o" !&)
Q: A st"p. +$at may be term"nated by # party(
/a!"d?
A: 0es, does not "iolate mutuality, b)c the latter
pertains to "alidity)performance, not termination
#&hilban)ing "# *ui She$
ACC.7.RATION C7A2S.
EI: 3n - of :ale by 1nstallment basis
Cpon non<payment of amort., the 'hole balance 'ill
automatically be due, or rescind.
.SCA7ATION C7A2S.
Ad"ancin& maturity under certain conditions
are "alid (3ns%!ar Ban) /s. Sa!aJar)
1t is pro"ided by the parties, to ad%ust
compensation)consid. upon the happenin& of an
e"ent.
Aimitation of ((2s liability for loss of
passen&er2s ba&&a&e that 'as under declared by the
latter, "alid. (0ng Y"% /. ,A)
I.s#alator #la5seJ
Lalid if not potestati"e solely on the 'ill of one of the
parties #"iolates mutuality$
.K1 - of Aoan) - of G@4O)ser"ice)pro%ect<
independent -in&
Q: w+o de,escalation clause- will still be "alid?
A1 *esD onl* t)e es#alaton #la5se 'll not &e
%ven e""e#t
BA1,0 43'3:310 SA@31FS @S 1A@A..0+ 152 SC
34< (G3B)
RATIO1 A contract w$"c$ embod"es an
Esca!at"on ,!a%se a%t$or"J"ng a%tomat"c "ncrease "n
"nterest rates "n t$e e/ent a K!aw "ncreas"ng t$e
!awf%! rates of "nterest t$at may be c$argedL( does
not "nc!. a ,B ,"rc%!ar( w$c( a!t$o%g$ $a/"ng t$e
face & effect of !aw( "s not str"ct!y a stat%te or a !aw.
An Esca!at"on ,!a%se to be /a!"d m%st "nc!%de
a de<esca!at"on c!a%se. ; IT)ere #an &e an n#. n nt.
" n#Gd. &* la' or &* t)e 0onet.,oardDJ n order "or
s5#) st(. To &e vald+ t $5st n#l. a (rovson "or t)e
red5#ton o" t)e st(Gd. nterest n t)e event t)at t)e
a((l#a&le $a8$5$ rate o" nt. s red5#ed &* la' or
&* t)e 0,.
4'0.E10 @S ,A + 2<5 SC <B3 (G4<)
RATIO1
A #ontra#t #ontann% a #ondton ')#)
$a;es ts "5l"ll$ent de(endent e8#l5svel* 5(on t)e
5n#ontrolled 'll o" one o" t)e #ontra#tn% (artes+ s
vod
The 5nlateral deter$naton and $(oston
o" n#reased nterest rates &* t)e )eren res(ondent
&an; s o&vo5sl* volatve o" t)e pr"nc"p!e of
m%t%a!"ty of contracts ordaned n Art#le 1303 o" t)e
Cvl Code.
Esca!at"on c!a%ses are /a!"d st"p%!at"ons "n
commerc"a! contracts to ma"nta"n f"sca! stab"!"ty
and to reta"n t$e /a!%e of money "n !ong term
contracts.
4. 0B'3FA+0.Y 40.,E 04 ,01+.A,+S:
O&l%atons arsn% "ro$ #ontra#ts )ave t)e "or#e o"
la' &et'een t)e (artes and s)o5ld &e #o$(led 't)
n %ood "at) #Art. 1156$
(ontracts are perfected by mere consent, and from that
moment the parties are bound not only to the fulfillment of
'hat has been e+pressly stipulated but also to all the
conse;uences 'hich, accordin& to their nature, may be in
keepin& 'ith &ood faith, usa&e and la' #Art. 1315$.
G.N R27.: (ontracts are perfected by mere consent N the
principle of consens%a!"ty #Art. 1315$
.KC.PTION: 4eal contracts, such as deposit, pled&e, and
commodatum are not perfected until the delver* of the ob%ect
of the obli&ation #Art. 131<$
H: >erfection of - &oes into 'hat principleI
A: @bli&atory force of -, 'hen parties became bound
!onaton o" $$ova&les (Art. B44)
The donation must be in a public instrument.
The acceptance must either be in the same public
instrument or in a different public instrument.
Acceptance shall not take effect unless it is done
durin& the lifetime of the donor.
1f the acceptance is made in a separate public
instrument, the donor shall be notified thereof in an
authentic form, and this step shall be noted in both
instruments
B. .E'A+3@3+Y 04 ,01+.A,+S
G.N R27.: The contract is bindin& only upon the parties
and their successors #Art. 1311$.
Po'e"er, if the contract is purely personal
#"nt%"t% personae$, then the contract 'ill not bind
assi&ns and heirs. #intransmissible rts.$
Tol1 GR1 4ts. 9 *s under a - are transmitted to the heirs of
the parties. Peirs can2t be considered as 3>, bec. there is
pri"ity of interest bet. them 9 their predecessor.
Q: W$o are bo%nd by s?
A: parties)successors<in<int) heirs)assi&ns
GR1 2nder t)e Prn#(le o" Prvt* o" Fs, assi&ns 9
heirs are bound
.KC: intransmissible rts or *s created by la')
nature ) stip
Intrans$ss&le -s1 those ')c are purely personal, either by
(1) (rovson o" la', such as in cases of
partnership 9 a&ency ) usufructuary rts
(2) by the "ery nat5re o" t)e Hs arisin& therefr.,
such as those re;uirin& special personal ;ualifications
of the obli&or - of ser"ice, det
bern.carrasco
4
(3) or by st( o" (artes i.e. pacto de retro sale
'here only the party may redeem not anyone else
!
nd
par. permits a 3> to a"ail himself of a benefit e+tended to him
by its terms. !o#trne o" st(5latons po%r a%tr%" #SPA$.
Re=5stes o" SPA1
(1) stip. in fa"or of 3>
(2) stip. shld. be a part, not the 'hole, of the -
(3) clearly 9 deliberately conferred by -2in&
parties
(4) not be conditioned or compensated by any
kind of * 'hate"er
(5) 3> must ha"e communicated his acceptance
to obli&or before re"ocation
(6) neither of the -2in& parties bears the le&al
representation or authori8ation of the 3>
#:>A$ A##e(tan#e &* 3P1 no (art#5lar "or$.
?efore acceptance, the -2in& parties, by mutual a&reement, may
modify the - or re"oke it.
#:>A$ :ince 3>2s rt. is based directly on the -, it is also sub%. to
all defenses a"ailable ". the -, such as those affectin& its "alidity.
,av: A #ons%nee+ t)o5%) not str#tl* a (art* n t)e F o"
trans(o+ #an s5e+ on t)e F+ t)e #o$$on #arrer.
Reason1 T)ere s a st(. n )s "avor.
1n Art. 1314, Any 3> 'ho induces another to
"iolate his - shall be liable to the other contractin&
party.
Tol1
Re=s. o" a8n 5nder t)s art#le1
e+istence of a "alid -
kno'led&e by 3> of -2s e+istence
interference by 3> in the -2al relation ')o
le&al %ustification
Ghate"er may be the char. of the liability ')c
a stran&er to a - may incur by ad"isin& or assistin& one
of the parties to e"ade perf., such stran&er can2t become
more e+tensi"ely liable in dama&es for non<perf. of the
- than the party in 'hose behalf he intermeddles.
To hold the stran&er liable for dama&es in
e+cess of those that could. be reco"ered ". the
immediate. party 'ould. lead to results &rotes;uely
un%ust.
3>2s liability. is solidary ') non<perf.. party,
bec. he commits a tortuous act or a ;<delict.
,A71
.KC.PTION1 3 (artes are a""e#ted &* t)e #ontra#t n
t)e "ollo'n% nstan#es and #an ta;e a((ro(rate
a#ton1
#i$ acc"on pa%!"ana #Art. 11BB$
A rescissory action in"ol"in& a contract in fraud of
creditors.
(reditors are protected in cases of contracts intended
to defraud them #Art. 1313$.
#ii$ acc"on d"screta #Arts. 1<52+ 1B24$
A direct #not
subro&atory$ action by the creditor a&ainst his debtor2s
debtor, a remedy 'hich &i"es the creditor the prero&ati"e
to act in his o'n name, such as the actions of the lessor
a&ainst the sublessee #Art. 1<52$
the laborer of an
independent contractor a&ainst the o'ner)principal .4
#Art. 1B24$
the principal
a&ainst the suba&ent #Art. 1763$ and
the "endor<a<
retro a&ainst the transferee of the "endee #Art. 1<03$.
1n contracts creatin& real ri&hts, 3
rd
persons 'ho come
into possession of the ob%ect of the contract are bound
thereby, sub%ect to the pro"isions of the Fort&a&e Aa' and
the Aand 4e&istration Aa's #Art. 1312$ purchaser in &ood
faith
?.7ASCO ?S CA+ 45 SC <1<
RATIO: 3n t$e eed of Q%"tc!a"m "n M%est"on
w$ere"n 'a"go .ea!ty wa"/ed "n fa/or of FS3S "ts
rts "n fa/or of t$e s%bd"/"s"on "n M%est"on ar"s"ng
o%t of "ts de/t and ass%med to pay t$e c!a"ms of any
contractor( mater"a! f%rn"s$er( !ot b%yer( etc.
$a/"ng connect"on w7t$e sa"d de/t( t$e FS3S was
not re!"e/ed of any !"ab"!"ty to pet. 4or cost of
mater"a!s & !abor t$e !atter "nc%rred "n b!dg t$e
s%bd/ $o%ses "f 'a"go "s %nab!e to pay t$em.
(Soldar* la&lt* o" Prn#(al .R+ 'A:o& #ontra#tor
')en ..s 'a%es not (ad.)
La5""$an v. Natonal ,an;+ 42 P)l 132
4AT1@: A stipulation in fa"or of a 3> cannot be re"oked by the
obli&ated party alone, ')o the conformity of the other
contractin& party.
B0134A,30 B.0S. @. M0.A( ?N S,.A ?D#
.A+30: ,01+.A,+S +AOE E44E,+ 01'Y BE+. +-E
:A.+3ES +-E.E+0.
4'0.E1+310 @. E1,A.1A,301
RATIO1
A st"p%!at"on po%r a%tr%" "s a st"p%!at"on "n fa/or of a
t$"rd person conferr"ng a c!ear and de!"berate fa/or
%pon $"m( and w$"c$ st"p%!at"on "s mere!y a part of a
contract entered "nto by t$e part"es( ne"t$er of w$om
acted as agent of t$e t$"rd person( and s%c$ t$"rd
person and demand "ts f%!f"!!ment pro/o)ed t$at $e
comm%n"cates $"s to t$e ob!"gor before "t "s re/o)ed
The acceptance does not ha"e to be in any particular
form, e"en 'hen the stipulation is for the third person an act of
liberality or &enerosity on the part of the promisor or promise.
1t need not be made e+pressly and formally.
,otification of acceptance, other than such as is in"ol"ed in the
makin& of demand, is unnecessary.
T)e re=5stes are1
./0 that the stipulation in fa"or of a third person should be a
part- not the whole- of the contract1
.20 that the fa"orable stipulation should not be conditioned
or compensated by any )ind of obligation whate"er1 and
.30 neither of the contracting bears the legal represented or
authori4ation of third person#
W$"!e a st"p%!at"on "n fa/or of a t$"rd person
$as no b"nd"ng effect "n "tse!f before "ts acceptance by
t$e party fa/ored( t$e !aw does not pro/"de w$en t$e
t$"rd person m%st ma)e $"s acceptance. As a r%!e(
t$ere "s no t"me at s%c$ t$"rd person $as after t$e
t"me %nt"! t$e st"p%!at"on "s re/o)ed.
BA1O 04 AME.3,A /s. 3A,
bern.carrasco
5
RATIO1 ,ontract between fore"gn ban) &
!oca! ban) as)"ng t$e !atter to pay an amo%nt to a
benef"c"ary( "s a S:A.
MA.3M:E.30 /s. ,A
RATIO1 A party w$o $as not ta)en part "n t$e
cannot s%e or be s%ed for t$e performance or
cance!!at"on t$ereof( %n!ess $e $as a rea! "nterest
affected t$ereby.
3n a of s%b!ease( t$e persona!"ty of t$e
!essee does not d"sappear & t$e s%b!ease genera!!y
does not $a/e any d"rect act"on aga"nst t$e owner of
t$e prem"ses as !essor.
!A6@A7T ?S CORP !. PP AG2STINOS
RATIO1 W$ate/er may be t$e c$aracter of t$e
!"ab"!"ty w$"c$ a stranger to a contract may "nc%r by
ad/"s"ng or ass"st"ng one of t$e part"es to e/ade
performance( t$ere "s one propos"t"on %pon w$"c$
a!! m%st agree. +$"s "s( t$at t$e stranger cannot
become more eGtens"/e!y !"ab!e "n damages for t$e
nonperformance of t$e contract t$an t$e party "n
w$ose be$a!f $e "ntermedd!es.
F3',-.3S+ /s. ,2Y
.A+30: 0ne w$o wrongf%!!y
"nterferes "n a contract between ot$ers( and( for t$e
p%rpose of ga"n to $"mse!f "nd%ces one of t$e part"es
to brea) "t( "s !"ab!e to t$e party "n&%red t$erebyH and
$"s cont"n%ed "nterference may be gro%nd for an
"n&%nct"on w$ere t$e "n&%r"es res%!t"ng w"!! be
"rreparab!e
-.7!1
3n&%nct"on "s t$e proper remedy to pre/ent a
wrongf%! "nterference w"t$ contract by strangers to
s%c$ contracts w$ere t$e !ega! remedy "s "ns%ff"c"ent
and t$e res%!t"ng "n&%ry "s "rreparab!e.
ES+. 04 O.-. -EMAY /s. '2P01 S2.E+Y
RATIO1 A partyQs contract%a! r"g$ts and
ob!"gat"ons are transm"ss"b!e to t$e s%ccessors.
S0 :31F B21 /s. ,A
RATIO1 W$ere t$ere was no ma!"ce "n t$e
"nterference of a contract( and t$e "mp%!se be$"nd
oneQs cond%ct !"es "n a proper b%s"ness "nterest
rat$er t$an "n wrongf%! mot"/es( a party cannot be a
ma!"c"o%s "nterferer. W$ere t$e a!!eged "nterferer "s
f"nanc"a!!y "nterested( and s%c$ "nterest mot"/ates
$"s cond%ct( "t cannot be sa"d t$at $e "s an off"c"o%s
or ma!"c"o%s "ntermedd!er
!. C7ASSI>ICATION O> CONTRACTS
1. ACCOR!ING TO !.GR.. O> !.P.N!.NC.
a. (re(arator*
A (re(arator* #ontra#t is one 'hich has
for its ob%ect the establishment of a condition in
la' 'hich is necessary as a preliminary step
to'ards the celebration of another subse;uent
contract #i.e. partnership, a&ency$.
b. (rn#(al
A (rn#(al #ontra#t is one 'hich can
subsist independently from other contracts and
'hose purpose can be fulfilled by themsel"es #i.e.
sales, lease$.
c. a##essor*
An a##essor* #ontra#t is one 'hich can
e+ist only as a conse;uence of, or in relation 'ith,
another prior contract #i.e. pled&e, mort&a&e$.
2. A##ordn% to Per"e#ton
a. #onsens5al
A #onsens5al #ontra#t is one 'hich is
perfected by mere a&reement of the parties #i.e.
sales, lease$.
b. real
A real #ontra#t is one 'hich re;uires not
only the consent of the parties for their
perfection, but also the delver* of the ob%ect by
1 party to the other #i.e. commodatum, deposit,
pled&e$.
3) A##ordn% to t)er >or$ or sole$nt*1
a. Co$$on or n"or$al
An informal contract is one 'hich does not
re;uire some particular form #i.e. loan, lease$.
b. S(e#al or "or$al
A formal contract is one 'hich re;uires some
particular form #i.e. donation, chattel mort&a&e$.
4) A##ordn% to P5r(ose
a. transfer of o'nership #i.e. sale$
b. con"eyance of use #i.e. commodatum$
c. rendition of ser"ice #i.e. a&ency$
5) A##ordn% to t)e Nat5re o" t)e O&l%aton
a. &lateral
A bilateral contract is one 'hich &i"es rise to
reciprocal obli&ations for both parties #i.e. sale,
lease$.
&. 5nlateral
A unilateral contract is one 'hich &i"es rise
to an obli&ation for only 1 of the parties #i.e.
commodatum, &ratuitous deposit$.
<) A##ordn% to Ca5se
a. onero5s
An onerous contract is one in 'hich each of
the parties aspires to procure for himself a benefit
throu&h the &i"in& of an e;ui"alent or
compensation #i.e. sale$.
b. %rat5to5s
A &ratuitous contract is one in 'hich one of
the parties proposes to &i"e to the other a benefit
'ithout any e;ui"alent or compensation #i.e.
commodatum$.
bern.carrasco
6
B) A##ordn% to Rs;
a. #o$$5tatve
A comm%tat"/e contract is one in 'hich
each of the parties ac;uires an e;ui"alent of his
prestation and such e;ui"alent is pecuniarily
appreciable and already determined from the
moment of the celebration of the contract #i.e.
lease$.
b. aleator*
An a!eatory contract is one in 'hich each
of the parties has to his account the ac;uisition of
an e;ui"alent prestation , but such e;ui"alent,
althou&h pecuniarily appreciable, is not yet
determined, at the moment of the celebration of
the contract, since it depends upon the happenin&
of an uncertain e"ent, thus char&in& the parties
'ith the risk of loss or &ain #i.e. insurance$.
3) A##ordn% to Na$e
a. no$nate
A nom"nate contract is one 'hich has a
name and is re&ulated by special pro"isions of
la' #i.e. sale, lease$
b. nno$nate
An "nnom"nate contract is one does not
ha"e a name and is not re&ulated by special
pro"isions of la'.
1nnominate contracts shall be re%5lated &*
the
1$ stipulations of the parties,
!$ pro"isions of obli&ations and contracts,
3$ rules &o"ernin& the most analo&ous nominate
contracts, and
5$ customs of the place #Art. 130E$.
4 Classes o" Inno$nate Contra#ts
i# I do- you do
ii# I do- you gi"e
iii# I gi"e- you do
i"# I gi"e- you gi"e
4) A##ordn% to S5&:e#t 0atter
a. thin& #i.e. sale, deposit, pled&e$
b. ri&ht
c. ser"ice #i.e. a&ency, lease of ser"ices$
.. STAG.S O> CONTRACTS
#. 1EF0+3A+301
>reparation, conception, or &eneration,
'hich is the period of ne&otiation and bar&ainin&,
endin& at the moment of a&reement of the parties
CONTRACT O> OPTION1
Art. 13241 Ghen the offerer has allo'ed the offeree a certain
period to accept, the offer may be 'ithdra'n at any time before
acceptance by communicatin& such 'ithdra'al, e8#e(t ')en
t)e o(ton s "o5nded 5(on a #onsderaton+ as
so$et)n% (ad or (ro$sed.
Art. 15E6. A promise to buy 9 sell a determinate thin& for a price
certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thin& for a price certain is bindin& upon the promissor if the
promise is supported by a consideration distinct fr. the price.
Article 157!. Ghene"er earnest money is &i"en in a contract of
sale, it shall be considered as part of the price and as proof of the
perfection of the contract.
5a": The parties could stipulate other'ise 9 that the earnest
money 'ill be forfeited, as in the (A?
Ghen there is a ri&ht of first refusal, at the
time the offer is made, the o'ner still has not yet
decided to sell, but in case he does, the holder of the
ri&ht has the priority to accept it. Distin&uished fr. an
option to sell, 'here there is a continuin& offer to sell
on the part of the o'ner.
SA1,-EP @S. .3F0S
As Justice ?en&8on e+plained, an o(ton is
5nlateral a (ro$se to sell at the (r#e "8ed 'hene"er
the offeree should decide to e+ercise his option ')in the
specified time. After acceptin& the promise 9 before he
e+ercises his option, the holder of the option is not bound to
buy. Pe is free either to buy or not to buy later...ho'e"er, upon
acceptin& herein petitioner2s offer, a bilateral promise to sell 9
to buy ensued, 9 the resp. ipso facto assumed the obli&ation of
a purchaser. Pe did not %ust &et the ri&ht subse;uently to buy
or not to buy. 1t 'as not a mere option then it 'as a bilateral
- of sale.
1f the option is &i"en ')o a consideration, it is a mere
offer of a contract of sale, ')c is not bindin& until accepted. 3f
$owe/er( acceptance "s made before a w7drawa!( "t
const"t%tes a b"nd"ng of sa!e( e/en t$o%g$ t$e
opt"on was not s%pported by a s%ff"c"ent
cons"derat"on.
,A?I.RA1
M1 !stn%5s) &et'een Art. 14B4 E 1324N
14B4 1324
Applies if - has ,@T been
A((.>T.D
A consideration other than
the purchase price is
re;uired to make the
unilateral promise bindin&
This is the 3.,.4AA 4CA.
on (@,T4A(T:: 1f
A((.>T.D, the a&reement
becomes ?1,D1,3 #G@,
there is a consideration
other than the purchase
price$
In order t)at a 5nlateral (ro$se $a*
&e &ndn% 5(on t)e (ro$ssor+ Art. 14B4
re=5res t)e #on#5rren#e o" t)e #ondton t)at
t)e (ro$se &e Is5((orted &* a #onsderaton
dstn#t "r. t)e (r#e.J A##ordn%l*+ t)e
(ro$see #annot #o$(el t)e (ro$sor to
#o$(l* 'A t)e (ro$se+ 5nless t)e "or$er
esta&ls)es t)e e8sten#e o" sad dstn#t
#onsderaton. T)e (ro$see )as t)e &5rden o"
(rovn% s5#) #onsderaton. #$ronco "# 6ua4on$
Conventonal Rede$(ton
Art. 1=01. (on"entional redemption shall take place 'hen the
"endor reser"es the ri&ht to repurchase the thin& sold, ') the
obli&ation to comply ') the pro"isions of Art. 1=1= 9 other
stipulations ')c may ha"e been a&reed upon.
Art. 1=1=. The "endor cannot a"ail himself of the ri&ht of
repurchase ')o returnin& to the "end the price of the sale , 9 in
addition:
#1$ The e+penses of the contract, 9 any other le&itimate
payments made by reason of the sale
#!$ The necessary 9 useful e+penses made on the thin& sold.
bern.carrasco
7
,avera1
1n an e=5ta&le $ort%a%e, the property must still
first be foreclosed before o'nership passes to the seller.
Distin&uished fr. a pacto de retro sale, 'here o'nership already
passes to the buyer upon perfection of the contract, but if the
ri&ht to redeem is e+ercised, then o'nership re"erts to the seller.
:acto de retro, or #onventonal rede$(ton, is
"avored &* #redtors, bec. it does a'ay ') the necessity of a
foreclosure, in case the debtor fails to pay the loan. All that the
creditor has to do is to e+ecute an affida"it consolidatin&
o'nership in himself 9 re&ister the same in the 4e&ister of
Deeds. The price in a pacto de retro sale is naturally lesser than
that in an absolute sale, bec. the sale is sub%ect to a resolutory
condition, 9 also to facilitate redemption. Thus, the mere fact
that the price is not the true "alue of the property does not %ustify
the conclusion that the contract is one of mort&a&e.
I" t)e seller 'ants to redee$+ )e $5st
%ve t)e &5*er t)e (r#e t)e e8(enses o" t)e
#ontra#t an* ot)er le%t$ate (a*$ents $ade
&* reason o" t)e sale t)e ne#essar* e8(enses
$ade on t)n% sold.
.=5ta&le 0ort%a%e
Art. 1=0!. The contract shall be presumed to be an e;uitable
mort&a&e in any of the follo'in& cases:
#1$ Ghen the price of the sale ') ri&ht to repurchase is unusually
inade;uate
#!$ Ghen the "endor remains in possession as lessee or
other'ise
#3$ Ghen upon or after the e+piration of the ri&ht to repurchase
another instrument e+tendin& the period of redemption or
&rantin& a ne' period is e+ecuted
#5$ Ghen the purchaser retains for himself a part of the purchase
price
#5$ Ghen the "endor binds himself to pay the ta+es on the thin&
sold
#=$ 1n any other case 'here 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 obli&ation.
1n any of the fore&oin& cases, any money, fruits, or
other benefit to be recei"ed by the "endee as rent or other'ise
shall be considered as interest ')c shall be sub%ect to usury la's.
Art. 1=03. 1n case of doubt, a contract purportin& to be a sale ')
ri&ht to repurchase shall be construed as an e;uitable mort&a&e.
Paras1
An eM%"tab!e mortgage is one ')c, thou&h
lackin& in some formality or other re;uisites demanded
by la', re"eal an intention of the parties to char&e a
real property as security for a debt 9 constrains nothin&
impossible or contrary to la'.
Art 1=0=. The ri&ht referred to in Art. 1=01, in the absence of an
e+press a&reement, shall last four years fr. date of the contract.
:hould there be an a&reement, the period cannot e+ceed ten
years.
Po'e"er, the "endor may still e+ercise the ri&ht to repurchase
')in thirty days fr. the time final %ud&ment 'as rendered in a
ci"il action on the basis that the contract 'as a true sale ') ri&ht
to repurchase.
,avera1
An a%ree$ent to re(5r#)ase becomes an o(ton to &5*
'hen entered into after the time to redeem stipulated in a pacto
de retro sale had already e+pired, bec. then the "endee a retro
became absolute o'ner of the thin& sold, 9 the subse;uent &rant
of the ri&ht to repurchase is a ne' a&reement. ?ut 'here the
period to repurchase has not e+pired, 9 another a&reement is
entered into &rantin& the "endor a retro the ri&ht to repurchase
the ob%ect of the contract at any time, the subse;uent a&reement
is not a promise to sell but is an e+tension of the period to
redeem, ')c cannot e+ceed 10 years.
Reason "or t)e 10-*ear l$taton1 A pacto de retro is a
suspension of title, 9 it is a&ainst public interest to permit such
uncertainty to continue for a lon& time.
Co5ntn% o" 4-*ear (erod: Brom the e+ecution of the
contract. ?ut if the ri&ht is suspended by a&reement that it shall
be e+ercised only after a certain time or condition arises, then
the period shall be counted only fr. the time such ri&ht could be
e+ercised, but not e+ceedin& 10 years fr. e+ecution.
,ot sufficient that a "endor a retro manifests his desire to
redeem. This must be accompanied by an actual or
simultaneous tender of payment of the redemption price. ?ut if
"endee refuses, then "endor may file a suit a&ainst him 9
consi&n the amount in court.
?. :E.4E,+301
>erfection or &rt) o" t)e #ontra#t, 'hich
is the moment 'hen the parties come to a&ree on the
terms of the contract
3., 4CA.: (ontracts are perfected by mere
consent N the principle of consensuality #Art. 1315$
./(.>T1@,: 4eal contracts, such as
deposit, pled&e, and commodatum are not perfected
until the deli"ery of the ob%ect of the obli&ation #Art.
131=$
8. :E.40.MA1,E
R. ,01S2MMA+301
(onsummation or death, 'hich is the
fulfillment or performance of the terms a&reed upon
>. .SS.NTIA7 .7.0.NTS O> CONTRACTS1
1. CONS.NT o" t)e #ontra#tn% (artes1
Consent is the manifested by the meetin& of offer and
acceptance upon the thin& and the cause 'hich are to
constitute the contract #Art. 1316, 1
st
par$.
.le$ents o" Consent1
a. plurality of sub%ects
b. capacity #le&al$
c. intelli&ent and free 'ill
d. e+press or tacit manifestation of the 'ill
e. conformity of the internal 'ill and its manifestation
CONS.NT is the concurrence of 'ills of the offerer 9 the
acceptor as to the thin& 9 the cause 'hc constitute a contract
O>>.R manifestation of a 'illin&ness to enter into a bar&ain
so made as to %ustify another in understandin& that his assent
to that bar&ain is in"ited 9 'ill conclude it.
@ffer ne&otiation imperfect promise policitation
,o acceptance no concurrence of 'ills no consent no -Q
Contra#t to Sell s a &lateral F+ 'here there is merely an
offer by one party ')o acceptance on the other party, no
consent. #:alon&a ". Barrales, July 10, 1671$
An o""er is a unilateral proposition 'hich 1 party makes to the
other for the celebration of a contract.
Re=5stes o" O""er1
1. def"n"te
The offer must be definite, so that upon acceptance,
an a&reement can be reached on the 'hole contract.
bern.carrasco
8
2. comp!ete
The offer must be complete, indicatin& 'ith sufficient
clearness the kind of contract intended and definitely
statin& the essential conditions of the proposed
contract as 'ell as the non<essential ones desired by
the offeror.
3. "ntent"ona!
An offer 'ithout seriousness, made in such manner
that the other party 'ould not fail to notice such lack
of seriousness, is absolutely 'ithout %uridical effects
and cannot &i"e rise to a contract #i.e. must not be
made in %est, or a prank$.
A##e(tan#e must be affirmati"ely and clearly made 9 must be
e"idenced by some acts or conduct communicated to offeror,
either in formal or informal manner, 9 may be sho'n by
conduct, acts, 'ords, by acceptin& party that clearly manifest
the intention to buy or sell. #Art. 1316 %delfa &roperties "# $%$
Re=5stes o" A##e(tan#e1
1. 5ne=5vo#al
2. 5n#ondtonal
o 1f the acceptance is ;ualified, then that is a
#o5nter-o""er.
o An amplified acceptance may or may not be
an acceptance of the ori&inal offer. 1t depends on the
circumstances.
o Bor e+ample, A is sellin& 1000 k&s. of
cement. ? says he 'ants to buy !000 k&s of cement.
There is no acceptance of the offer if ? 'ill only buy
!000 k&s and nothin& less.
0an"estaton o" A##e(tan#e1
o An acceptance may be e+press or implied
#Art. 1320$.
o :ilence is ambi&uous. @ne must look at the
circumstances to determine if the silence is a form of
acceptance.
o A
and ? are o'n stalls 'hich sell rice. ( deli"ers 1000
k&s of rice to A e"ery :unday. 1f A is not there, ( %ust
lea"es it to A2s assistant. ( tries to do business 'ith ?.
? is not there thou&h. ( lea"es rice 'ith ?2s assistant.
? does not call (. ?oth A and ? are silent. A
acceptance the rice because of the arran&ement. 1f A
did not 'ant to accept the rice, then A should ha"e
called. ?2s silence is not acceptance.
Q: $ould there be a perfected contract in a unilateral promise
to sell?
A: 0es, a (er"e#ted #ontra#t o" o(ton is an accepted
unilateral promise 'hc specifies the thin& to be sold and the
price to be paid, ')en #o5(led 't) a val5a&le
#onsderaton dstn#t and se(arate "ro$ t)e (r#e.
(Art. 1324)
OPTION is a contract &rantin& a pri"ile&e to buy or sell at a
determined price ')in an a&reed time #Ang Y"% As%nc"on /.
,A, Dec. !, 1665$
,0F13+301 +$eory
Acceptance made by letter of tele&ram does not bind the offer
e+cept from the time it came to his kno'led&e #Art. 1314, !
nd
par$.
This is kno'n as the (o&nition Theory
1f the parties are face to face, then there is no problem
since there is no time &ap.
The problem arises 'hen there is a time &ap. Cnder
Art. 1316, there is perfection of the contract 'hen there is
kno'led&e of the other party2s acceptance). This has serious
conse;uences.
Bor e+ample, the offer 'as made in Da"ao on Beb. 1.
The offer 'as sent throu&h mail 'hich is recei"ed in
Fanila on Beb. 5. @n the same day, the offer is accepted.
Fail is sent to Da"ao on Beb. 5 si&nifyin& acceptance. @n
Beb. 7, the party in Fanila becomes insane. @n Beb.13 the
mail reaches Da"ao. Accordin& to >rof. ?alane, under Art.
13!3, there is no contract since there 'as no contractual
capacity.
O""ers T)ro5%) A%ents
An offer made throu&h an a&ent is accepted from the
time acceptance is communicated to him #Art. 13!!$.
.""e#t o" !eat)+ Insant*
An offer becomes ineffecti"e upon the death, ci"il
interdiction, insanity or insol"ency of either party before
acceptance is con"eyed #Art. 13!3$.
@t)dra'al o" t)e O""er
Ghen the offerer has allo'ed the offeree a cetain
period to accept, the offer may be 'ithdra'n at any time before
acceptance by communicatin& such 'ithdra'al, e+cept 'hen
the option is founded upon consideration, somethin& paid or
promised #Art. 13!5$.
./: A offers to ? by mail on Beb.1 The offer reaches
? on Beb. 5. ? accepts "ia mail. The mail reaches A
on Beb. 7. @n Beb. 7, A also decides to 'ithdra' the
offer. Ghich 'ill take effectI 1f the mail of ? reaches
A first, then A cannot 'ithdra' the offer. The
problem here is e"identiary.
Art. 13!5 is related to Art. 15E6, par. !. They actually
say the same thin&.
./: ? offers to sell a car to J for >300,000. J needs to think
about it, and so J asks for 30 days. J pays ? earnest money
'orth >5,000. The payment of >5,000 is a distinct
consideration from the price of the car. This distinct
consideration of >5,000 is payment for the 30 days. J is payin&
for time. The option contract is separate from the contract of
sale. ? cannot sell the car to anybody else 'ithin that 30 day
period.
./: ? offers to sell a car to J for >300,000. J needs to think
about it, and so J asks for 30 days. J does not pay ? for time,
but ? promises to &i"e J 30 days. 1n this case there is no option
contract. Po'e"er, in :anche8 ". 4i&os, the :( said that e"en if
there 'as no option contract, ? must still communicate the
'ithdra'al of the offer to J. 1f ? does not communicate his
'ithdra'al, that is tantamount to a continuin& offer. >rof.
?alane does not a&ree 'ith this. Accordin& to him, if there is
no "alid option contract, there should be no continuin& offer.
Accordin& to >rof. ?alane, the :( should ha"e e+plained that.
./: ? offers to sell a car to J for >300,000. J needs to think
about it, and so J asks for 30 days. J pays earnest money 'orth
>5,000. J decides to buy the car 'ithin 30 days. The car is not
sold to anybody else. ? does not 'ant to sell the car to J. J can
sue ? for specific performance N compel ? to sell him the car.
./: ? offers to sell a car to J for >300,000. J needs to think
about it, and so J asks for 30 days. J pays earnest money 'orth
>5,000. J decides to buy the car 'ithin 30 days. ?efore J is
able to buy the car, ? sells the car to /. J can sue ? for
dama&es. J cannot sue for specific performance since the car
has been sold to an innocent purchaser.
A r%)t o" "rst re"5sal vs. o(ton #ontra#t1
r%)t o" "rst re"5sal o(ton #onta#t
ri&ht to ha"e first opportunity tolimits the promissor2s po'er to
bern.carrasco
9
purchase or the ri&ht to meet
any other offer
re"oke an offer
not co"ered by the (i"il (ode Art. 1324+ CC
1n 78uatorial "# Mayfair the
ri&ht of first refusal 'as "iolated
'hen the "endor sold the ob%ect
to another person < an action for
specific performance may be
filed.
1n %ng !u "# $%, the :( said
that an action for specific
performance 'ill not lie a&ainst
the promissor. Po'e"er, a
complaint under Art. 16 for
dama&es may be filed if the
actions of the promissor are
'himsical.

RIG-T O> >IRST R.>2SA7
The basis of the ri&ht of first refusal must be the current
offer to sell of the seller or offer to purchase of any
prospecti"e buyer. Onl* a"ter t)e o(tonee "als to
e8er#se ts r%)t o" "rst (rort* 5nder t)e
SA0. ter$s E 'An t)e (erod #onte$(lated+
#o5ld t)e o'ner valdl* o""er to sell t)e
(ro(ert* to a 3rd (erson+ a%an+ 5nder t)e
sa$e ter$s as o""ered to t)e o(tonee.
#&%'%N%Q97 :IN;S 7N67'&'IS7S "s# $%$
SA1,-EP @. .3F0S
1t should be noted that:
1. Art. 1324 a((les to Fs n %eneral, 'hereas the !nd par
of Art. 15E6 refers to RsalesR in particular, 9, more specifically,
to an Raccepted unilateral promise to buy or to sell.R Art.
14B4 s #ontrolln% n t)e #ase at &ar.
!. 1n order that said unilateral promise may be bindin& upon
the promisor, Art. 15E6 re;uires the concurrence of a
condition, namely, t)at t)e (ro$se &e Os5((orted &* a
#onsderaton dstn#t "r. t)e (r#e. 1n other 'ords, the
promise, e"en if accepted, may be ')dra'n if there is no
consideration distinct fr. the price. #:G :u&ar case$
1n a r%)t o" "rst re"5sal, there is no definite offer
since the "endor has to option of decidin& not to sell the ob%ect.
Also, in a ri&ht of first refusal, there is no need for a separate
consideration. 1n an option contract, there is a definite offer.
Accordin& to >rof. ?alane, the ri&ht of first refusal is inferior to
an option contract since there is no definite offer. >rof. ?alane
does not understand 'hy an action for specific performance is
allo'ed in "iolations of ri&hts of first refusal but not in the case
of option contracts 'hen the ob%ect is sold to another person.
Ghy is the :( &i"in& &reater le&al effect to a ri&ht of first
refusal 'hich is more tentati"eI Also, 'here the :( &et these
rules since the ri&ht of first refusal is not co"ered by the (i"il
(ode.
A!?.RTIS.0.NTS1
Cnless it appears other'ise, business ad"ertisements
of thin&s for sale are not definite offers, but mere in"itations to
make an offer #Art. 13!5$
Ad/ert"sements for b"dders are s"mp!y "n/"tat"ons to
ma)e proposa!s, and the ad"ertiser is not bound to accept
the hi&hest or lo'est bidder, unless the contrary appears #Art.
13!=$.
Fost ad"ertisements are simply in"itations to make
an offer and are not offers in themsel"es since not all the
necessary terms can fit in the ad"ertisement.
."en if the ad had all the necessary terms, it2s still an
in"itation to make offer since there is no definite person to
'hom the offer is bein& made #public offer$.
S$5lated Contra#ts
a. A&sol5tel* S$5lated ( contrato s"m%!ado )
Absolute simulation of a contract takes place 'hen the
(artes do not ntent to &e &o5nd at all #Art. 1355$.
./: / pretends to sell his car to a"oid ta+ liability.
Po'e"er / has no real intention to sell the car.
An absolutely simulated or fictitious contract is vod #Art.
135=$
&. Relatvel* S$5lated ( contrato d"s"m%!ado )
4elati"e simulation of a contract takes place 'hen the
(artes #on#eal t)er tr5e a%ree$ent #Art. 1355$.
1n a relati"ely simulated contract, the parties enter
into a contract but dis&uise it as another.
./: / has many creditors, and they are &oin& after /2s
car. / cannot donate his car to 0 since the creditors
'ill %ust resort to accion pauliana. :o, / antedates a
contract of sale, sellin& his car to 0, e+cept that /2s
intention is to donate his car to 0.
A relati"ely simulated contract, 'hen it does not
pre%udice a 3
rd
person and is not intended for any purpose
contrary to la', morals, &ood customs, public order or public
policy binds the parties to their real a&reement #Art. 135=$.
The la' 'ill apply the rules of the true contract and
not the ostensible contract.
Art#le 3B. 95rd#al #a(a#t*, 'hich is the fitness to be the
sub%ect of le&al relations, is inherent in e"ery natural person
and is lost only throu&h death.
Ca(a#t* to a#t, 'hich is the po'er to do acts 'ith le&al
effect, is ac;uired and may be lost.
Art#le 33. 0nort*+ nsant* or $&e#lt*+ t)e state o"
&en% a dea"-$5te+ (rod%alt* and #vl nterd#ton
are mere restrictions on capacity to act, and do not e+empt the
incapacitated person from certain obli&ations, as 'hen the
latter arise from his acts or from property relations, such as
easements.
Art#le 34. The follo'in& circumstances, amon& others,
modify or limit capacity to act: a%e+ nsant*+ $&e#lt*+
t)e state o" &en% a dea"-$5te+ (enalt*+ (rod%alt*+
"a$l* relatons+ alena%e+ a&sen#e+ nsolven#* and
tr5stees)(. The conse;uences of these circumstances are
&o"erned in this (ode, other codes, the 4ules of (ourt, and in
special la's. (apacity to act is not limited on account of
reli&ious belief or political opinion.
Art#le B34. The follo'in& donations shall be "oid:
#1$ Those made bet'een persons 'ho 'ere &uilty of
adultery or concubina&e at the time of the donation
#!$ Those made bet'een persons found &uilty of the
same criminal offense, in consideration thereof
#3$ Those made to a public officer or his 'ife,
descendants and ascendants, by reason of his office.
1n the case referred to in ,o. 1, the action for declaration of
nullity may be brou&ht by the spouse of the donor or donee
and the &uilt of the donor and donee may be pro"ed by
preponderance of e"idence in the same action.
Art#le 14B<. 1n the case of a sale by auction:
+++
#5$ Ghere notice has not been &i"en that a sale by
auction is sub%ect to a ri&ht to bid on behalf of the
seller, it shall not be la'ful for the seller to bid himself
or to employ or induce any person to bid at such sale
bern.carrasco
10
on his behalf or for the auctioneer, to employ or
induce any person to bid at such sale on behalf of the
seller or kno'in&ly to take any bid from the seller or
any person employed by him. Any sale contra"enin&
this rule may be treated as fraudulent by the buyer.
Art#le 1440. The husband and the 'ife cannot sell property
to each other, e+cept:
#1$ Ghen a separation of property 'as a&reed upon in
the marria&e settlements or
#!$ Ghen there has been a %udicial separation of
property under article 161.
Art#le 1441. The follo'in& persons cannot ac;uire by
purchase, e"en at a public or %udicial auction, either in person
or throu&h the mediation of another:
#1$ The &uardian, the property of the person or persons 'ho
may be under his &uardianship
#!$ A&ents, the property 'hose administration or sale may ha"e
been intrusted to them, unless the consent of the principal has
been &i"en
#3$ .+ecutors and administrators, the property of the estate
under administration
#5$ >ublic officers and employees, the property of the :tate or
of any subdi"ision thereof, or of any &o"ernment<o'ned or
controlled corporation, or institution, the administration of
'hich has been intrusted to them this pro"ision shall apply to
%ud&es and &o"ernment e+perts 'ho, in any manner
'hatsoe"er, take part in the sale
#5$ Justices, %ud&es, prosecutin& attorneys, clerks of superior
and inferior courts, and other officers and employees
connected 'ith the administration of %ustice, the property and
ri&hts in liti&ation or le"ied upon an e+ecution before the court
'ithin 'hose %urisdiction or territory they e+ercise their
respecti"e functions this prohibition includes the act of
ac;uirin& by assi&nment and shall apply to la'yers, 'ith
respect to the property and ri&hts 'hich may be the ob%ect of
any liti&ation in 'hich they may take part by "irtue of their
profession
#=$ Any others specially dis;ualified by la'
Art. 1533 ((ar.5). The seller is bound to e+ercise
reasonable care and %ud&ment in makin& a resale, and sub%ect
to this re;uirement may make a resale either by public or
pri"ate sale. Pe cannot, ho'e"er, directly or indirectly buy the
&oods.
Art#le 1<4<. The persons dis;ualified to buy referred to in
articles 1560 and 1561, are also dis;ualified to become lessees
of the thin&s mentioned therein
Art#le 1B32. >ersons 'ho are prohibited from &i"in& each
other any donation or ad"anta&e cannot enter into uni"ersal
partnership.
Art#le 1404. The follo'in& contracts are ine+istent and "oid
from the be&innin&:
+++
#E$ Those e+pressly prohibited or declared "oid by
la'.
These contracts cannot be ratified. ,either can the ri&ht to set
up the defense of ille&ality be 'ai"ed.
Art#le 5. Acts e+ecuted a&ainst the pro"isions of mandatory
or prohibitory la's shall be "oid, e+cept 'hen the la' itself
authori8es their "alidity.
P>C1 ..O. 204Q
Art. 3B. ."ery donation or &rant of &ratuitous ad"anta&e,
direct or indirect, bet'een the spouses durin& the marria&e
shall be "oid, e+cept moderate &ifts 'hich the spouses may &i"e
each other on the occasion of any family re%oicin&. The
prohibition shall also apply to persons li"in& to&ether as
husband and 'ife 'ithout a "alid marria&e.
Se#ton 5. Ad$nstraton o" t)e Con:5%al Partners)(
Pro(ert*
Art. 124. The administration and en%oyment of the con%u&al
partnership shall belon& to both spouses %ointly. 1n case of
disa&reement, the husbandSs decision shall pre"ail, sub%ect to
recourse to the court by the 'ife for proper remedy, 'hich
must be a"ailed of 'ithin fi"e years from the date of the
contract implementin& such decision.
1n the e"ent that one spouse is incapacitated or
other'ise unable to participate in the administration of the
con%u&al properties, the other spouse may assume sole po'ers
of administration. These po'ers do not include disposition or
encumbrance 'ithout authority of the court or the 'ritten
consent of the other spouse. 1n the absence of such authority or
consent, the disposition or encumbrance shall be "oid.
Po'e"er, the transaction shall be construed as a continuin&
offer on the part of the consentin& spouse and the third person,
and may be perfected as a bindin& contract upon the
acceptance by the other spouse or authori8ation by the court
before the offer is 'ithdra'n by either or both offerors.
.0ANCIPATION AN! AG. O> 0A9ORIT6
Art. 234. .mancipation takes place by the attainment of
ma%ority. Cnless other'ise pro"ided, ma%ority commences at
the a&e of t'enty<one years.
.mancipation also takes place:
#1$ ?y the marria&e of the minor or
#!$ ?y the recordin& in the (i"il 4e&ister of an
a&reement in a public instrument e+ecuted by the
parent e+ercisin& parental authority and the minor at
least ei&hteen years of a&e. :uch emancipation shall
be irre"ocable.
TRA No. <304U
4epublic Act ,o. =706, 'hich reduced the
a&e of ma%ority to e%)teen (13) *ears 'as
appro"ed only on 13 !e#e$&er 1434 and became
effecti"e t'o 'eeks after publication in t'o
ne'spapers of &eneral circulation.
143B CONSTIT2TION1 ARTIC7. KII - NATIONA7
.CONO06 AN! PATRI0ON6
Se#ton B. :a"e in cases of hereditary succession, no pri"ate
lands shall be transferred or con"eyed e+cept to indi"iduals,
corporations, or associations ;ualified to ac;uire or hold lands
of the public domain.
Se#ton 3. ,ot'ithstandin& the pro"isions of :ection E of this
Article, a natural<born citi8en of the >hilippines 'ho has lost
his >hilippine citi8enship may be a transferee of pri"ate lands,
sub%ect to limitations pro"ided by la'.
2. O,9.CT #ertan ')#) s S0 o" F
The ob%ect of the contract is the prestation. Thus, it is
al'ays the conduct 'hich is to be obser"ed. 1t is not a concrete
ob%ect like a car. 1n a contract of sale, the ob%ect is the deli"ery
of the ob%ect and not the ob%ect itself.
The pro"isions on ob%ect ho'e"er blur the distinction
bet'een the ob%ect of the contract, the prestation, and the
ob%ect of the prestation. Accordin& to >rof. ?alane, these
pro"isions are not fatal thou&h.
Re=5stes o" O&:e#t1
1. the ob%ect must be 't)n t)e #o$$er#e o" $an+
either already e+istin& or in potency (Art. 134B)
bern.carrasco
11
Githin the #o$$er#e o" $an means that
the ob%ect is capable of appropriation and
transmission
The term n (oten#* means that the
ob%ect 'ill come into e+istence in the future
3enerally, in reciprocal contracts particularly
sales, the sale of future thin&s is allo'ed. Bor
e+ample, it is possible to sell the future har"est of a
farm.
The comin& into bein& of the future thin& is a
suspensi"e condition.
Empt"o re" speratae is a conditional sale.
There is a suspensi"e condition. 1f the future thin&
does not come into e+istence, then there is no contract
of sale.
Empt"o spe" is the sale of a hope. ."en if
the future thin& does not materiali8e, the buyer must
pay since the buyer is takin& a chance. #i.e. sale of
lotto ticket$. Pope is a present thin&.
:ome future thin&s are not allo'ed to be
ob%ects of the prestation. T)e la' does not allo'
#ontra#ts on "5t5re n)ertan#e.
2. the ob%ect must be 7ICIT+ or not be contrary to la',
morals, &ood customs, public policy or public order (Art.
134B)
3. the ob%ect must be (oss&le (Art. 1343)
1f the ob%ect is impossible, then the contract
is vod "or la#; o" #a5seD
Art. 1357 does not talk of super"enin&
impossibility 'hich is a mode of e+tin&uishment
1mpossibility under Art. 1357 must be actual
and contemporaneous 'ith the makin& of the
contract.
4. the ob%ect must be deter$nate as to ts ;nd and
deter$na&le as to ts =5antt* (Art. 1344)
The ob%ect need not be indi"iduali8ed. 1t
must be determinate as to its kind or species
The ;uantity of the ob%ect may be
indeterminate, so lon& as the ri&ht of the creditor is
not rendered illusory.
5. the ob%ect must be trans$ss&le
This is actually a redundancy since this is
already in the re;uisite of bein& 'ithin the commerce
of man.
3. CA2S. o" t)e H1
The cause of a contract is the ')* o" t)e #ontra#t
the immediate and most pro+imate purpose of the
contract
the essential reason 'hich impels the contractin&
parties to enter into it and 'hich e+plains and %ustifies
the creation of the obli&ation throu&h such contract
The cause is different from consideration.
Consderaton in the An&lo<American sense must
al'ays be "aluable or capable of pecuniary estimation.
Ca5se, on the other hand, need not be material at all,
and may consist in a moral satisfaction for the
promissor.
Re=5stes o" Ca5se1
1. t $5st e8st
2. t $5st &e tr5e
3. t $5st &e l#t
(ause is different from moti"e.
Ca5se is the pro+imate 'hy 'hile $otve is the
ultimate 'hy
./: A 'ants to sell his house for >=0 F because A is
mo"in& to (anada. ? is 'illin& to buy the house for
>=0 F. 1n this case, the cause for A is the >=0 F
'hile the cause for ? is the house. A2s moti"e is to
dispose of the house 'hich he does not need since A is
&oin& to (anada.
Aike failure of or lack of ob%ect, the failure of cause has
an effect on the contract. I" t)ere s no #a5se or
t)e #a5se s lle%al+ t)en t)e #ontra#t s vod.
This is unlike the lack of consent. Ghen consent is
lackin&, the contract is not "oid. The contract is
merely voda&le.
Art#le 1350. 1n onerous contracts the cause is understood to
be, for each contractin& party, the prestation or promise of a
thin& or ser"ice by the other in remuneratory ones, the ser"ice
or benefit 'hich is remunerated and in contracts of pure
beneficence, the mere liberality of the benefactor.
PGRQ >al5re o" $otve as a %eneral r5le does not
a""e#t t)e #ontra#t.
P.KCQ 0otve a""e#ts t)e #ontra#t ')en1
1. the moti"e becomes a suspensi"e condition or
!. the reali8ation of the moti"e is the cause for the
contract and there is an inter"enin& serious mistake of
fact
1n onerous contracts, the cause is the
prestation or promise of a thin& or ser"ice by the other
party.
1t has been held that, as a mort&a&e is an
accessory contract, its cause or consideration is the
"ery cause or consideration of the principal contract,
from 'hich it recei"es its life, and 'ithout 'hich it
cannot e+ist as an independent contract #(hina ?ank
". Aichauco$.
1n remuneratory contracts, the cause is the
ser"ice or benefit 'hich is remunerated .
A re$5nerator* #ontra#t is one 'here a
party &i"es somethin& to another because of some
ser"ice or benefit &i"en or rendered by the latter to the
former, 'here such ser"ice or benefit 'as not due as a
le&al obli&ation.
1n %rat5to5s #ontra#ts, the cause is the
mere liberality of the benefactor.
bern.carrasco
12
Art#le 1351. The particular moti"es of the parties in enterin&
into a contract are different from the cause thereof.
Art#le 1352. (ontracts 'ithout cause, or 'ith unla'ful cause,
produce no effect 'hate"er. The cause is unla'ful if it is
contrary to la', morals, &ood customs, public order or public
policy.
Art#le 1353. The statement of a false cause in contracts shall
render them "oid, if it should not be pro"ed that they 'ere
founded upon another cause 'hich is true and la'ful.
Art#le 1354. Althou&h the cause is not stated in the contract,
it is presumed that it e+ists and is la'ful, unless the debtor
pro"es the contrary.
Art#le 1355. .+cept in cases specified by la', lesion or
inade;uacy of cause shall not in"alidate a contract, unless there
has been fraud, mistake or undue influence.
4. !elver* C "or real #ontra#ts
5. >or$ C "or "or$al #ontra#ts
Art. 135=. (ontracts shall be obli&atory, in 'hate"er form they
may ha"e been entered into, pro"ided all the essential re;uisites
for their "alidity are present. Po'e"er, 'hen the la' re;uires
that a contract be in some form in order that it may be "alid or
enforceable, or that a contract be pro"ed in a certain 'ay, that
re;uirement is absolute 9 indispensable.
Tolentno
Art. 135= pro"ides for TG@ (A:.: 'here form is absolute 9
indispensable, namely:
(1) Ghen the form is essential to the "alidity of
the -
(2) Ghen the - is unenforceable unless it is in a
certain form, such as those under the Stat5te o"
>ra5ds #SO>$
34: A - ha"in& the essential re;uisites of Art. 1317 'ill be "alid
as bet'een the parties 'hate"er the form it may ha"e been
entered into
Re=5stes 5nder Art. 1313
1. (onsent of the contractin& parties
!. @b%ect certain ')c is the sub%ect matter of
liti&ation
3. (ause of the obli&ation ')c is established
T)e "or$altes re=5red &* la' are #lass"ed nto
t)ree %ro5(s1
#1$ ad esent"a- ad solemnitatem those ')c are re;uired for the
"alidity of the -
#!$ those re;uired to make the effecti"e as a&ainst 3rd parties,
such as those mentioned in Arts. 135E 9 1357
#3$ formalities ad probat"onem those re;uired for the
purpose of pro"in& the e+istence of a , such as those pro"ided
in the :@B
01F Y32 / ,A
@n& may not ha"e si&ned the ticket ne"ertheless, he is
bound by such stipulation the same bein& part of the contract
of carria&e, "alid 9 bindin& upon the passen&er re&ardless of
lack of kno'led&e or assent.
3t "s a contract of ad$es"on w$ere"n one party
"mposes a ready made contract for t$e ot$er party(
t$e p!ace t"c)et "n ,AB. S%c$ contracts are not
ent"re!y pro$"b"ted. +$e one w$o ad$eres to t$e
contract "s free to re&ect "t ent"re!y( "f $e ad$eres $e
g"/e consent.
WE'01 / ,A
RATIO1
0n!y an abso!%te or %nM%a!"f"ed acceptance
of a def"n"te offer man"fests t$e consent necessary
to perfect a contract 5Art"c!e #8#C( 1ew ,"/"! ,ode6.
0nce a contract "s s$own to $a/e been
cons%mmated or f%!!y performed by t$e part"es
t$ereto( "ts eG"stence and b"nd"ng effect can no
!onger be d"sp%ted.
+A1F / ,A
RATIO1
Art. #88?. W$en one of t$e part"es "s %nab!e to read(
or "f t$e contract "s "n a !ang%age not %nderstood
by $"m( and m"sta)e or fra%d "s a!!eged( t$e person
enforc"ng t$e contract m%st s$ow t$at t$e terms
t$ereof $a/e been f%!!y eGp!a"ned to t$e former.
+$e ob!"gat"on to s$ow t$at t$e terms of t$e
contract $ad been f%!!y eGp!a"ned to t$e party w$o
"s %nab!e to read or %nderstand t$e !ang%age of t$e
contract( w$en fra%d or m"sta)e "s a!!eged(
de/o!/es on t$e party see)"ng to enforce "t.
,A.3S0 / ,A
RATIO1
,ontracts w$c are abso!%te!y s"m%!ated or
f"ct"t"o%s are "neG"stent and n%!! & /o"d ab "n"t"o.
'AF21PA / F01PA'ES
RATIO1
%t"es m%st comp!y w7s entered "nto
w$ere pro/"s"ons t$ereof are not contrary to
'7M7F,7:07::.
G. >OR0 O> CONTRACTS1 135<-1353
C-APT.R 3 - >or$ o" Contra#ts
Art#le 135<. (ontracts shall be obli&atory, in 'hate"er form
they may ha"e been entered into, pro"ided all the essential
re;uisites for their "alidity are present. Po'e"er, 'hen the la'
re;uires that a contract be in some form in order that it may be
"alid or enforceable, or that a contract be pro"ed in a certain
'ay, that re;uirement is absolute and indispensable. 1n such
cases, the ri&ht of the parties stated in the follo'in& article
cannot be e+ercised. #1!E7a$
Art#le 135B. 1f the la' re;uires a document or other special
form, as in the acts and contracts enumerated in the follo'in&
article, the contractin& parties may compel each other to
obser"e that form, once the contract has been perfected. This
ri&ht may be e+ercised simultaneously 'ith the action upon the
contract. #1!E6a$
Art#le 1353. The follo'in& must appear in a public
document:
#1$ Acts and contracts 'hich ha"e for their ob%ect the
creation, transmission, modification or e+tin&uishment of
real ri&hts o"er immo"able property sales of real property
or of an interest therein are &o"erned by articles 1503, ,o.
!, and 1505
#!$ The cession, repudiation or renunciation of hereditary
ri&hts or of those of the con%u&al partnership of &ains
#3$ The po'er to administer property, or any other po'er
'hich has for its ob%ect an act appearin& or 'hich should
appear in a public document, or should pre%udice a third
person
bern.carrasco
13
#5$ The cession of actions or ri&hts proceedin& from an act
appearin& in a public document.
All other contracts 'here the amount in"ol"ed e+ceeds fi"e
hundred pesos must appear in 'ritin&, e"en a pri"ate one. ?ut
sales of &oods, chattels or thin&s in action are &o"erned by
articles, 1503, ,o. ! and 1505.
,@T.: >urpose of form in Art. 1357 is to pre%udice or to affect
third persons.
1. 3., 4CA.: #any$ T)ere s no need "or a s(e#"#
"or$+ &5t t)ere $5st stll &e so$e $an"estaton o"
#onsent
./(.>T1@,: Ghen the 'ritten form is re;uired
2. SP.CIA7 >OR0
a) "or valdt*
1f it not 'ritten, the same is "oid.
.+amples are donations #Arts. E57, E56$,
antichresis #Art. !135$,
interest in a loan #Art. 165=$,
sale of land by an a&ent #Art. 17E5$,
contribution of immo"ables in a partnership #Art.
1EE3$
Art. E56. 1n order that the donation of an immo"able may be
"alid, it must be made in a public document, specifyin& therein
the property donated 9 the "alue of the char&es ')c the donee
must satisfy.
The acceptance may be made in the same deed of donation or in
a separate public document, but it shall not take effect unless it is
done durin& the lifetime of the donor.
1f the acceptance is made in a separate instrument, the donor
shall be notified thereof in an authentic form, 9 this step shall be
noted in both instruments.
Tolentno1
1f the donation of an immo" 'as not made in a public
instrument, the donee cannot brin& an action to compel
the donor to e+ecute a public instrument of donation
under Art. 135E.
Art. 135E applies only to -s ')c "alidly e+ist, 9 cannot
be held applicable to a case 'here the form is re;uired
in order to make it "alid
A public instrument is not necessary in cases of
onerous donations bec. they are &o"erned by the rules
on contracts.
Title to immo" prop. does not pass fr. the donor to the
donee until 9 unless:
1. t )as &een a##e(ted n a (5&l#
nstr5$ent<<<'hether in the deed of donation itself
or on a separate public instrument. :olemn 'ords of
acceptance are not necessary.
2. T)e donor 'as d5l* not"ed t)ereo"---
,ecessary that formal notice is &i"en to the donor 9 the
fact that due notice has been &i"en must be noted in the
instruments containin& the offer to donate 9 that
sho'in& the acceptance. Then 9 only then is the
donation perfected
3. T)e a##e(tan#e $5st &e $ade d5rn%
t)e l"e o" t)e donorD if not made before the donor2s
death, it is ')o effect.
4. 1n so far as the donor is concerned, the
donation is not accepted unless he)she is notified of
such acceptance.
Art. E57. + + + 1f the "alue of the personal property donated
e+ceeds fi"e thousand pesos, the donation 9 the acceptance shall
be made in 'ritin&. @ther'ise, the donation shall be "oid.
PTolentno+ R. B43Q
A donation of personal prop. e+ceedin& >5 thou in
"alue must AAGA0: be made in 'ritin&, 9 accepted
also in 'ritin&.
The document of donation 9 the acceptance need not
be public instruments but may simply be pri"ate
documents.
Ghen the "alue does not e+ceed >5 thou, a donation
may be mare orally or in 'ritin&.
1f donation is made orally, there must be simultaneous
deli"ery.
1f there is no simultaneous deli"ery, the donation is
"oid unless made in 'ritin&. ?CT in this case, the la'
does not re;uire that that 'hen the donation is made in
'ritin&, the acceptance should also be in 'ritin&.
Tolentno
Art. 135< pro"ides for TG@ (A:.: 'here form is absolute 9
indispensable, namely:
1) Ghen the form is essential to the "alidity of
the -
2) Ghen the - is unenforceable unless it is in a
certain form, such as those under the :tatute of Brauds
#:@B$
3.,.4AA 4CA.: A - ha"in& the essential re;uisites of Art.
1317 'ill be "alid as bet'een the parties 'hate"er the form it
may ha"e been entered into
Re=5stes 5nder Art. 1313
1. (onsent of the contractin& parties
2. @b%ect certain ')c is the sub%ect matter of
liti&ation
3. (ause of the obli&ation ')c is established
Tolentno1
A donation of personal prop. e+ceedin& >5 thou in
"alue must AAGA0: be made in 'ritin&, 9 accepted
also in 'ritin&.
The document of donation 9 the acceptance need not
be public instruments but may simply be pri"ate
documents.
Ghen the "alue does not e+ceed >5 thou, a donation
may be made orally or in 'ritin&.
1f donation is made orally, there must be
simultaneous deli"ery.
1f there is no simultaneous deli"ery, the donation is
"oid unless made in 'ritin&. ?CT in this case, the la'
does not re;uire that that 'hen the donation is made
in 'ritin&, the acceptance should also be in 'ritin&.
bern.carrasco
14
Instan#es ')en t)e la' re=5res F to &e n a #ertan
"or$ to &e vald1
Art. 1EE3. A contract of partnership is "oid, 'hene"er immo"able
property is contributed thereto, if an in"entory of said property
is not made, si&ned by the parties, 9 attached to the public
instrument.
Art. 1675. The depositary cannot demand that the depositor
pro"es his o'nership of the thin& deposited.
,e"ertheless, should he disco"er that the thin& has
been stolen 9 'ho its true o'ner is, he must ad"ise the latter of
the deposit.
1f the o'ner, in spite of such information, does not
claim it ')in the period of one month, the depositary shall be
relie"ed of all responsibility by returnin& the thin&
deposited to the depositor.
1f the depositary has reasonable &rounds to belie"e that
the thin& has not been la'fully ac;uired by the depositor, the
former may return the same.
Art. !135. The amount of the principal 9 of the interest shall be
specified in 'ritin& other'ise, the contract of antichresis shall
be "oid.
Art. 73<<<Bamily (ode
These donations are &o"erned by the rules on ordinary
donations established in Title 111 of ?ook 111 of the (i"il (ode,
insofar as they are not modified by the follo'in& articles.
(&) "or en"or#ea&lt*
NOT.: VVV This list is .KC72SI?. #Art. 1503, belo'$
P,A?I.RAQ
Ghen the la' states in 'ritin&, this need
not be a public document.
1t is sufficient that it 'as :13,.D by the party
sou&ht to be char&ed
Instan#es ')en t)e la' $a;es a #ontra#t
5nen"or#ea&le " t s not 'rtten1 (SO>)
5a6 an agreement that by its terms is not to be
performed w"t$"n a year from t$e ma)"ng t$ereof
5Art. #RN8 5a66
P,A?I.RAQ rationale of this: bec. of memory lapse
Tolentino: The time be&ins fr. the day the - is entered into, 9
not fr. the time that performance of it is entered upon
1t must appear that the parties intended 'hen they
made the - that it should not be performed ')in a
year.
Ghere no time is fi+ed by the parties for performance,
9 there is nothin& in the a&reement itself to sho' that it
cannot be performed ')in a year accordin& to its terms
9 the understandin& of the parties, the a&reement is
,@T ')in the :@B.
5b6 a spec"a! prom"se to answer for t$e debt(
defa%!t or m"scarr"age of anot$er 5Art. #RN8 5b66
,A?I.RA1 .+amples of this are &uaranty 9 surety
contracts
Tolentno1 This has been defined as an undertakin& by a
person, not before liable, for the purpose of securin& or
performin& the same duty for ')c the ori&inal debtor continues
to be liable.
The test as to ')et)er a (ro$se s 'An t)e
stat5te has been said to lie in the ans'er to the
;uestion 'hether the promise is an ori&inal or a
collateral one:
PRO0IS. IS ORIGINA7
OR IN!.P.N!.NT
PRO0IS. IS CO77AT.RA7
1f the promisor becomes
primarily liable for the
payment of a debt, the
promise is not ')in the
statute
1f the promise is collateral to the
a&reement of another 9 the
promisor becomes thereby merely a
surety, the promise falls ')in the
:@B 9 hence, it should be in 'ritin&
5c6 an agreement made "n cons"derat"on of
marr"age( ot$er t$an a m%t%a! prom"se to marry
5Art. #RN8 5c66
,A?I.RA1 .+amples of this 'ould be a marria&e settlement,
donation propter nuptias
A mutual promise to marry, 'hether or not in 'ritin&,
is unenforceable bec. it is a personal act.
Tolentino: Ghen the marria&e is a mere incident, 9 not the
end to be attained by the a&reement, the contract is not in
consideration of marria&e, 9 oral e"idence can pro"e the
a&reement
."en 'hen marria&e is a consideration, but in
addition thereto, there is some other consideration
sufficient to support the oral a&reement, this may be
pro"ed by ')o a 'ritin&.
.d0 an agreement for the sale of goods- chattels or things in
action- at a price not less than &<==- unless the buyer accepts
and recei"es part of such goods and chattels- or the e"idence-
or some of them- of such things in action- or pay at the time
some part of the purchase money1 but when a sale is made by
auction and entry is made by the auctioneer in his sales boo)-
at the time of sale- of the amount and )ind 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 (Art. 1403 (d))
?AL1.4A1 C)oses n a#ton refer to incorporeal property
Tolentino: The re;uirement of a 'ritten instrument or a memo
for sales of personal prop. for a price not less than >500, co"ers
both TA,31?A. 9 1,TA,31?A. personal prop.
To &rn% a sales transa#ton 'An t)e
o(eraton o" t)e SO>+ t)e (r#e o" t)e (ro(. sold
$5st &e at least P500.
A F "or t)e sale o" %oods+ #)attels or
t)n%s n a#ton s re$oved "r. t)e o(eraton o"
t)e SO> ')ere t)e &5*er ACC.PTS E
R.C.I?.S (art o" s5#) %oods E #)attels.
Net)er 'll t)e SO> a((l* ')ere t)ere
)as &een (art (a*$ent o" t)e (5r#)ase (r#e.
.vden#e to (rove an oral F o" sale o"
real estate $5st &e dsre%arded " t$el*
o&:e#tons are $ade to ts ntrod5#ton.
A #ons5$$ated sale o" real (ro(. s not
#overed &* t)e SO>.
5e6 an agreement of !ease for a per"od of more t$an
# year( or t$e sa!e of rea! property or of an "nterest
t$ere"n 5Art. #RN8 5e66
5f6 a representat"on as to t$e cred"t of a 8
rd
person
5Art. #RN8 5f66
Tolentno1
bern.carrasco
15
The representations are limited to those ')c
operate to induce the person to 'hom they are made to
enter into contractual relations ') the third person, but
not to those representations tendin& to induce action
for the benefit of the person makin& them.
BAVIERA:Q: What is the ratio for the SOF?
A: To pre"ent fraud. The problem ') oral contracts is
that they are easy to fabricate 9 per%ure the 'itnesses.
Q: An ora! contract for t$e !ease of property for ?
years. W$at "s t$e stat%s of t$e O?
A: .nforceable for the 1st year, unenforceable for the
!nd year
Q: An ora! O for t$e sa!e of !and. +$e b%yer s%ffered
damages w$en t$e se!!er ref%sed to comp!y w7 $"s
prom"se e/en "f t$e b%yer offered to pay. B cons"gned
t$e payment. So w$at>s %p?
A: Acceptance of benefits #e"en if it 'as %ust an earnest
money$ takes it a'ay ')in the ambit of the :tatute of
Brauds. To allo' a O ')c has been partially performed
to become unenforceable 'ould be to allo' a party to
perpetrate fraud.
Q: W$en "s t$ere a wa"/er of t$e S04?
A: 1n the ff. instances:
Ghen there has been acceptance of benefits
Ghen there is failure to ob%ect to the
introduction of oral e"idence
Q: Se!!er $as ad/ert"sed a spec"f"c ob&ect for sa!e. A
b%yer comes to b%y 5s%s...e$ ano pa nga bang
g"nagawa ng b%yer?6. Se!!er says KB%)as )a na !ang
b%ma!")( a!as 9:NN na e$TL +o s$ow good fa"t$( b%yer
depos"ts :BNN.NN as earnest money. 3s t$e sa!e
enforceab!e e/en "f t$ere>s no comp!"ance w7 t$e S04?
A: @@ naman.
PTolentnoQ
4ationale of the :@B: Oral #ontra#ts lead to "ra5d n t)e
"5l"ll$ent o" o&l%atons+ or to "alse test$on*.
:@B applies only to ./.(CT@40 9 not to completed
or e+ecuted -s.
A - fallin& under the :@B cannot be pro"ed ')o the
'ritin& or a memorandum thereof.
:@B simply pro"ides for the manner in ')c -s under it
shall be pro"ed. 1t does not make such Os in"alid if not
e+ecuted in 'ritin&, but only makes ineffecti"e the
action for specific performance.
Ghere one party has entirely performed his * under an
oral -, e;uity 'ould a&ree that all e"idence be
admitted to pro"e the alle&ed a&reement. >erformance
takes it out of the operation of the statute.
Durin& trial, if the parties to the action make no
ob%ection to the admissibility of oral e"id to support the
- co"ered by the statute, 9 thereby permits such - to
be pro"ed orally, it 'ill be %ust as bindin& upon the
parties as if it had been reduced to 'ritin&.
1n order that a ,@T.)F.F@4A,DCF shall meet the
re;uirements of the :@B, it must contain:
the names of the parties
the terms 9 conditions of the a&reement
a description of the sub%ect matter sufficient to render it
capable of identification
the date 9 place of the makin& of the a&reement
si&nature of the party assumin& the obli&ation
5g6 no eGpress tr%sts concern"ng an "mmo/ab!e or
any "nterest t$ere"n may be pro/ed by paro!
e/"dence 5Art. #RR86
,A?I.RA1
This pro"ision is not "ery clear as to the
meanin& of parol. :trictly, parol e"idence rule
presupposes a 'ritten a&reement. 1t is much better to
make it unenforceable.
>ertinent Bamily (ode >ro"isions
Art. EE. The marria&e settlements 9 any modification thereof
shall be in 'ritin&, si&ned by the parties 9 e+ecuted before the
celebration of the marria&e. They shall not pre%udice third
persons unless they are re&istered in the local ci"il re&istry 'here
the marria&e contract is recorded as 'ell as in the proper
re&istries of property.
Art. 73. These donations are &o"erned by the rules on ordinary
donations established in Title 111 of ?ook 111 of the (i"il (ode,
insofar as they are not modified by the follo'in& articles.
'A0 S0O /. SABAYSABAY + 133 SC 135
RATIO1
:erfected < w$ere t$e E. offered t$e EEs
payment of separat"on pay w$c offer was
%ncond"t"ona!!y accepted( a was perfectedH s
t$o ora!!y made are b"nd"ng on t$e part"es.
GA77AR!O v. IAC+ 155 SC 134
RATIO1
.eg"strat"on of a pr"/ate deed of sa!e by t$e
. "s %na%t$or"Jed and does not !end /a!"d"ty to
t$e defect"/e pr"/ate doc of sa!eH .t of a /endee of
reg>d prop "n a pr"/ate doc.
C. >or Greater .""#a#* or Convenen#e or "or
Re%stra&lt* t)e "ollo'n% $5st a((ear n a (5&l#
nstr5$ent1
1. acts and contracts 'hich ha"e for their ob%ect the
creation, transmission, modification or e+tin&uishment of
real ri&hts o"er immo"able property sales of real property or
of an interest therein &o"erned by Arts. 1503 #!$ and 1505
2. the cession, repudiation or renunciation of
hereditary ri&hts or of those of the con%u&al partnership of
&ains
3. the po'er to administer property, or any other po'er
'hich has for its ob%ect an act appearin& or 'hich should
appear in a public document, or should pre%udice a 3
rd
person
4. the cession of actions or ri&hts proceedin& from an
act appearin& in a public document
(ontracts enumerated in Art. 1357 are vald as &et'een t)e
#ontra#tn% (artes even ')en t)e* )ave not &een
red5#ed to (5&l# or (rvate 'rtn%s.
.+cept in certain cases 'here public
instruments and re&istration are re;uired for the
"alidity of the contract itself, the le&ali8ation of a
contract by means of a public 'ritin& and its entry in
the re&ister are not essential solemnities or re;uisites
for the "alidity of the contract as bet'een the
bern.carrasco
16
contractin& parties, but are re;uired for the purposes
of makin& it effecti"e as a&ainst 3
rd
person.
Art. 135E &i"es the contractin& parties the
coerci"e po'er to reciprocally compel the e+ecution of
the formalities re;uired by la', as soon as the
re;uisites for the "alidity of the contracts are present.
-. Re"or$aton o" Instr5$ents
@nce the minds of the contractin& parties meet, a
"alid contract e+ists, 'hether the a&reement is reduced to
'ritin& or not. There are instances ho'e"er, 'here in
reducin& their a&reements to 'ritin&, the true intention of
the contractin& parties are not correctly e+pressed in the
document, either by reason of mistake, fraud, ine;uitable
conduct or accident. 1t is in such cases that reformation of
instruments is proper. The action for such relief rests on
the theory that the parties came to an understandin&, but
in reducin& it to 'ritin&, throu&h mutual mistake, fraud or
some other reason, some pro"ision 'as omitted or
mistakenly inserted, and the action to chan&e the
instrument so as to make it conform to the contract a&reed
upon.
Re"or$aton !stn%5s)ed "ro$ Ann5l$ent
Re"or$aton Ann5l$ent
presupposes that there is a "alid
e+istin& contract bet'een the
parties, and only the document
or instrument 'hich 'as dra'n
up and si&ned by them does not
correctly e+press the terms of
their a&reement
if the minds of the parties did
not meet, or if the consent of
either one 'as "itiated by
"iolence or intimidation or
mistake or fraud, so that no real
and "alid contract 'as made
&i"es life to it upon certain
corrections
in"ol"es a complete nullification
of the contract 'hile
reformation &i"es life to it upon
certain corrections.
O(eraton and .""e#t o" Re"or$aton
34: 4eformation relates back to, and takes effect from the
time of its ori&inal e+ecution, especially as bet'een the
parties.
Re=5stes o" Re"or$aton1
1. t)ere $5st )ave &een a $eetn% o" t)e $nds 5(on
t)e #ontra#t
2. t)e nstr5$ent or do#5$ent evden#n% t)e
#ontra#t does not e8(ress t)e tr5e a%ree$ent &et'een
t)e (artes
3. t)e "al5re o" t)e nstr5$ent to e8(ress t)e
a%ree$ent $5st &e d5e to $sta;e+ "ra5d+ ne=5ta&le
#ond5#t or a##dent
Re=5stes o" 0sta;e1
a) t)at t)e $sta;e s one o" "a#t
o Ghene"er an instrument is dra'n 'ith the
intention of carryin& an a&reement pre"iously made,
but 'hich, due to mistake or inad"ertence of the
draftsman or clerk, does not carry out the intention of
the parties, but "iolates it, there is a &round to correct
the mistake by reformin& the instrument.
&) t)at t 'as #o$$on to &ot) (artes
A 'ritten instrument may be reformed 'here
there is a mistake on 1 side and fraud or ine;uitable
conduct on the other, as 'here 1 party to an
instrument has made a mistake and the other kno's it
and conceals the truth from him.
The mistake of 1 party must refer to the
contents of the instrument and not the sub%ect mater
or the principal conditions of the a&reement. 1n the
latter case, an action for annulment is the proper
remedy.
1f ! parties a&ree upon the mort&a&e or
pled&e of real property or personal property, but the
instrument states that the property is sold absolutely
or 'ith a ri&ht of repurchase, reformation is proper.
#) t)e (roo" o" $5t5al $sta;e $5st &e #lear and
#onvn#n%
7$tatons o" Re"or$aton1
1. Re"or$aton s not (ro(er n t)e "ollo'n% #ases1
a$ simple donations inter "i"os 'herein no condition
is imposed
b$ 'ills
c$ 'hen the real a&reement is "oid
2. @)o $a* as; "or re"or$aton
a) I" t)e $sta;e s $5t5al+ reformation may be
ordered at the instance of either party or his
successors in interest
&) I" t)e $sta;e s not $5t5al+ reformation may
be ordered upon petition of the in%ured party or his
heirs and assi&ns
3. .""e#t o" en"or#n% an a#ton
Ghen one of the parties has brou&ht an
action to enforce the instrument, he cannot
subse;uently ask for its reformation.
I. Inter(retaton o" Contra#ts1 (13B0-13B4)
Ghere the parties ha"e reduced their contract into
'ritin&, the contents of the 'ritin& constitutes the sole
repository of the terms of the a&reement bet'een the parties.
Ghate"er is not found in the 'ritin& must be understood as
'ai"ed and abandoned. 3enerally, therefore, there can be no
e"idence of the terms of the contract other than the contents of
the 'ritin&, unless it is alle&ed and pro"ed that the intention of
the parties is other'ise.
Ghen the terms of the a&reement are so clear and
e+plicit that they do not %ustify an attempt to read into it any
alle&ed intention of the parties, the terms are to be understood
literally %ust as they appear on the face of the contract.
Ghen the true intent and a&reement of the parties is
established, it must be &i"en effect and pre"ail o"er the bare
'ords of the 'ritten a&reement.
1n order to %ud&e the intention of the contractin&
parties, their contemporaneous and subse;uent acts shall be
principally considered.
Ghen a &eneral and a particular pro"ision are
inconsistent, the particular pro"ision 'ill control.
Ghere the instrument is susceptible of !
interpretations, 1 'hich 'ill make it in"alid and ille&al, and
another 'hich 'ill make it "alid and le&al, the latter
interpretation should be adopted.
bern.carrasco
17
1n the construction of an instrument 'here there are
se"eral pro"isions or particulars, such a construction is, if
possible, to be adopted as 'ill &i"e effect to all.
Ghen there is doubt as to the meanin& of any
particular lan&ua&e, it should be determined by a consideration
of the &eneral scope and purpose of the instrument in 'hich it
occurs.
An instrument may be construed accordin& to usa&e
in order to determine its true character.
The party 'ho dra's up a contract in 'hich obscure
terms or clauses appear, is the one responsible for the
obscurity or ambi&uity they must therefore be construed
a&ainst him.
Ghen it is absolutely impossible to settle doubts by
the rules established in the precedin& articles, and the doubts
refer to incidental circumstances of a &ratuitous contract, the
least transmission of ri&hts and interest shall pre"ail. 1f the
contract is onerous, the doubt shall be settled in fa"or of the
&reatest reciprocity of interests.
1f the doubts are cast upon the principal ob%ect of the
contract in such a 'ay that it cannot be kno'n 'hat may ha"e
been the intention or 'ill of the parties, the contract shall be
null and "oid.
9. Lnds o" Contra#ts as to ?aldt*1
1. ?ald and ,ndn%
2. ?ald &5t de"e#tve
a. rescissible - #1370<76 1161$
b. "oidable - #1360<150! 13!E<!7 1330$
c. unenforceable - #1503<1507 131E 17E7$
3. ?od or ne8stent #1506<15!! 1317 1353 13E7 1561
1767$
!.>.CTI?. CONTRACTS1
1. Res#ss&le Contra#ts
A res#ss&le #ontra#t is a contract 'hich is "alid
because it contains all the essential re;uisites prescribed by
la', but 'hich is defecti"e because of in%ury or dama&e to
either of the contractin& parties or to 3
rd
persons, as a
conse;uence of 'hich it may be rescinded by means of a proper
action for rescission.
Res#sson is a remedy &ranted by la' to the
contractin& parties, and e"en to 3
rd
persons, to secure the
reparation of dama&es caused to them by a contract, e"en if the
same should be "alid, by means of the restoration of thin&s to
their condition prior to the celebration of the contract.
Re=5stes o" Res#sson1
a6 t$e contact m%st be a resc"ss"b!e contract %nder
Art. #8U# or Art. #8U?:
T)e "ollo'n% #ontra#ts are res#ss&le -
". t$ose entered "nto by g%ard"ans w$ene/er t$e
w$om t$ey represent s%ffer !es"on by more t$an V of
t$e /a!%e of t$"ngs w$"c$ are t$e ob&ect t$ereof 5Art.
#8U# 5#66
4escission shall not take place 'ith respect to
contracts appro"ed by the court #Art. 137=$.
As a rule, 'hen a &uardian enters into a contract
in"ol"in& the disposition of the 'ard2s property, the
&uardian must secure the appro"al of the &uardianship
court. A &uardian is only authori8ed to mana&e the estate
of the 'ard. A &uardian has no po'er to dispose of any
portion of the estate 'ithout appro"al of the court. 1f
more than acts of mere administration are in"ol"ed,
%udicial appro"al is necessary.
1n case of sale, mort&a&e, or other encumbrance
of any portion of the estate 'hich does not ha"e %udicial
appro"al is an unenforceable contract #Art. 1503 #1$$.
Therefore, Art. 1371 #1$ is limited to contracts
'hich constitute mere acts of administration #i.e. the
purchase of e;uipment for the culti"ation of lands,
purchase of materials for repair of buildin&s, etc.$.
7eson s ver* d""#5lt to a((l* n (ra#t#e C
Bor e+ample, A is the a&ent of ?. ? o'ns land 'orth >10 F. A
sells the land for >E F. Brom the facts, the lesion suffered by ?
is 30W. 1n practice, are you sure that >10 F is the fair market
"alue of the land. Ghat if the situation is ur&ent and that
property must be disposed of ri&ht a'ayI
Another e+ample, A is the a&ent of ?. ? o'ns land 'orth >10
F. ( 'ants to buy the land. ( is 'illin& to pay > E F N lump
sum payment. D is 'illin& to pay > 10 F but on installments.
"". t$ose agreed %pon "n representat"on of absentees(
"f t$e absentee s%ffers !es"on by more t$an V of t$e
/a!%e of t$"ngs w$"c$ are t$e ob&ect t$ereof 5Art. #8U#
5?66
4escission shall not take place 'ith respect to
contracts appro"ed by the court #Art. 137=$.
As a rule, 'hen the le&al representati"e of an absentee
enters into a contract in"ol"in& the disposition of the
absentee2s property, he must secure the appro"al of the
court.
A le&al representati"e is only authori8ed to mana&e
the estate of the absentee. Pe has no po'er to dispose of
any portion of the estate 'ithout appro"al of the court. 1f
more than acts of mere administration are in"ol"ed,
%udicial appro"al is necessary.
1n case of sale, mort&a&e, or other encumbrance of
any portion of the estate 'hich does not ha"e %udicial
appro"al is an unenforceable contract #Art. 1503 #1$$.
The
refore, Art. 1371 #!$ is limited to contracts 'hich constitute
mere acts of administration #i.e. the purchase of
e;uipment for the culti"ation of lands, purchase of
materials for repair of buildin&s, etc.$.
""". t$ose %nderta)en "n fra%d of cred"tors w$en t$e
cred"tors cannot "n any ot$er manner co!!ect t$e
c!a"ms d%e t$em 5Art. #8U# 5866
This is an e+ception to the principle of relati"ity of
contracts.
(reditors, after ha"in& pursued the property in
possession of the debtor to satisfy their claims may
e+ercise all the ri&hts and brin& all the actions of the latter
bern.carrasco
18
for the same purpose, sa"e those 'hich are inherent in his
person they may also impu&n the acts 'hich the debtor
may ha"e done to defraud them #Art. 11EE$.
(reditors are protected in cases of contracts intended
to defraud them #Art. 1313$.
1n determinin& 'hether or not a certain con"eyance is
fraudulent, the ;uestion in e"ery case is 'hether the
con"eyance 'as a bona fide transaction or trick and
contri"ance to defeat creditors, or 'hether it conser"es to
the debtor a special ri&ht.
All contracts by "irtue of 'hich the debtor alienates
property by &ratuitous tile are presumed to ha"e been
entered into in order to defraud creditors, 'hen the donor
did not reser"e sufficient property to pay all debts
contracted before the donation #Art. 137E, 1
st
par$.
Alienations by onerous title are also presumed
fraudulent 'hen made by persons a&ainst 'hom some
%ud&ment has been rendered in any instance or some 'rit
of attachment has been issued. The decision or
attachment need not refer to the property alienated, and
need not ha"e been obtained by the party seekin& the
rescission #Art. 137E, !
nd
par$.
,ad%es o" >ra5d1
1. the fact that the consideration of the
con"eyance is inade;uate
2. a transfer made by a debtor after suit has
be&un and 'hile it is pendin& a&ainst him
3. a sale upon credit by an insol"ent debtor
4. e"idence of lar&e indebtedness or complete
insol"ency
5. the transfer of all or nearly all of his property
by a debtor, especially 'hen he is insol"ent or &reatly
embarrassed financially
6. the fact that the transfer is made bet'een
father and son 'hen there are present any of the
abo"e circumstances
7. the failure of the "endee to take e+clusi"e
possession of all the property
"/. t$ose w$"c$ refer to t$"ngs %nder !"t"gat"on "f t$ey
$a/e been entered "nto by t$e defendant w"t$o%t t$e
)now!edge and appro/a! of t$e !"t"gants or of
competent &%d"c"a! a%t$or"ty 5Art. #8U# 5R66
Art. 1371 #5$ refers to a contract e+ecuted by
the defendant in a suit in"ol"in& the o'nership or
possession of a thin&, 'hen such contract is made
'ithout the kno'led&e and appro"al of the plaintiff or
court.
As in the case of a contract in fraud of
creditors, the remedy of rescission in this case is &i"en
to a 3
rd
person 'ho is not a party to the contract. The
purpose is to protect the plaintiff.
/. a!! ot$er contracts spec"a!!y dec!ared by !aw to be
t$e s%b&ect of resc"ss"on 5Art. #8U# 5B66
The follo'in& pro"ision in sales are e+amples of
rescissible contracts declared by la' N Arts 15!=, 1535,
1537, 1536, 1550, 155=, 15=0, 15=E, 1=56.
payments made in a state of insol"ency for obli&ations
to 'hose fulfillment the debtor could not be compelled at
the time they 'ere effected #Art. 137!$
(1) t)e (erson as;n% "or res#sson $5st
)ave no ot)er le%al $eans to o&tan
re(araton "or t)e da$a%es s5""ered &* )$
(Art. 1333)D
(2) t)e (erson de$andn% res#sson $5st
&e a&le to ret5rn ')atever )e $a* &e o&l%ed
to restore " res#sson s %ranted (Art. 1335+ 1
st
(ar)
This re;uisite is only applicable if the one
'ho suffers the lesion is a party to the contract.
This re;uisite does not apply 'hen a
defrauded creditor resorts to accion pauliana.
(3) t)e t)n%s ')#) are t)e o&:e#t o" t)e
#ontra#t $5st not )ave (assed le%all* to t)e
(ossesson o" a 3
rd
(erson a#tn% n %ood "at)
(Art. 1335+ 2
nd
(ar)
Ghoe"er ac;uires in bad faith the thin&s
alienated in fraud of creditors, shall indemnify the
latter for dama&es suffered by them on account of the
alienation, 'hene"er, due to any cause, it should be
impossible for him to return them #Art. 1377,1
st
par$.
1f there are ! or more alienations,the 1
st
ac;uirer shall be liable 1
st
, and so on successi"ely #Art.
1377, !
nd
par$.
(4) t)e a#ton "or res#sson $5st &e &ro5%)t
't)n t)e (res#r(tve (erod o" 4 *ears (Art.
1334)
Art. 1161. The po'er to rescind obs. 1s implied in reciprocal
ones, in case on of the obli&ors should not comply ') 'hat is
incumbent upon him.
The in%ured party may choose bet'een the fulfillment 9 the
rescission of the ds., ') the payment of dama&es in either case.
Pe may also seek rescission, e"en after he has chosen fulfillment,
if the latter should become impossible.
The ct. shall decree the rescission claimed, unless there be %ust
cause authori8in& the fi+in& of a period.
This is understood to be ')o pre%udice to the rts of third persons
'ho ha"e ac;uired the thin&, in accordance ') Arts. 1375 9 1377
9 the Fort&a&e Aa'.
Art. 116!. 1n case both parties ha"e committed a breach of the
obli&ation, the liability of the 1
st
infractor shall be e;ually
tempered bye the cts. 1f it cannot be det. Ghich of the parties 1
st
"iolated the O, the same shall be deemed e+tin&uished, 9 each
shall bear his o'n dama&es.
PTolentnoQ
S$lartes &et'een Rsn 5nder Art. 1141 E Art. 1330R1
#1$ both presuppose -s "alidly entered into 9 e+istin&, 9
#!$ both re;uire mutual restitution 'hen declared proper.
!""eren#es :
#1$ 4sn under 1161 may be demanded only by party to the -,
under 1370X by 3> pre%udiced by the -
#!$ 4sn under 1161 may be denied 'hen there is sufficient reason
to %ustify e+tension of time to perform, under 1370X such reason
does ,@T affect rt. To ask for 4sn
bern.carrasco
19
#3$ ,on<perf. is the only &rd. Bor 4sn under 1161, 'hile there
are "arious reasons of e;uity as &rds. under 1161 applies only to
recip. ds. 'here one party has not performed, 'hile under
1370#X$ ob. Fay be unilateral or reciprocal 9 e"en 'hen O has
been fulfilled.
2. ?OI!A,7. Contra#ts
A "oidable contract s a #ontra#t n ')#) all o" t)e
essental ele$ents "or valdt* are (resent+ &5t t)e
ele$ent o" #onsent s vtated et)er &* la#; " le%al
#a(a#t* o" 1 o" t)e #ontra#tn% (artes or &* $sta;e+
volen#e+ nt$daton+ 5nd5e n"l5en#e+ or "ra5d.
Loidable contracts are &ndn% 5nless t)e* are ann5lled
&* a (ro(er a#ton #o5rt. T)e* are s5s#e(t&le to
#on"r$aton.
There is a difference bet'een confirmation and ratification:
Con"r$aton is the process of curin& the defect of a
"oidable contract.
Rat"#aton is the process of curin& contracts 'hich
are defecti"e because they 'ere entered into 'ithout
authority.
The follo'in& #ontra#ts are voda&le or ann5lla&le,
e"en thou&h there may ha"e been no dama&e to the
contractin& parties:
a. t$ose w$ere one of t$e part"es "s "ncapab!e of
g"/"ng consent to a contract.
The follo'in& cannot &i"e consent to a contract #Art. 13!E$:
. 5ne$an#(ated $nors
Ghere necessaries are sold and deli"ered to a
minor or other person 'ithout capacity to act, he
must pay a reasonable price therefore.
,ecessaries include e"erythin& that is
indispensable for sustenance, d'ellin&, clothin&, and
medical attendance.
(ontracts effected by minors 'ho ha"e
already passed the a&e of puberty and adolescence
and are near the adult a&e, 'hen they pretend to ha"e
already reached the a&e of ma%ority, 'hile in fact they
ha"e not, are "alid, and cannot be permitted
after'ards to e+cuse themsel"es from compliance
'ith obli&ations assumed by them or seek their
annulment. This is in consonance 'ith the rules of
estoppel. #Mercado /. Esp"r"t%$.
Po'e"er in BraganJa /( e @"!!a, the :(
said that the misrepresentation of an incapacitate
person does not estop him from denyin& that he 'as
of a&e, or from assertin& that he 'as under a&e, at the
time he entered into the contract. Accordin& to >rof.
?alane, this "ie' is "ery lo&ical. 1f the minor is too
youn& to enter into contracts, he is too youn& to be
estopped.
"". "nsane or demented persons( and deaf m%tes w$o
do not )now $ow to wr"te
(ontracts entered into durin& a lucid inter"al are
"alid. (ontracts a&reed to in a state of drunkenness or durin& a
hypnotic spell are "oidable #Art. 13!7$.
. t)ose ')ere t)e #onsent s vtated &* $sta;e+
volen#e+ nt$daton+ 5nd5e n"l5en#e or "ra5d
A contract 'here consent is &i"en throu&h mistake,
"iolence, intimidation, undue influence or fraud is "oidable
(Art. 1330).
a) $sta;e
1n order that mistake may in"alidate consent, it should refer to
the substance of the thin& 'hich is the ob%ect of the contract, or
to those conditions 'hich ha"e principally mo"ed one or both
parties to enter into the contract (Art. 1331+ 1
st
(ar).
Fistake as to the identity or ;ualification of one of the parties
'ill "itiate consent only 'hen such identity or ;ualifications
ha"e been the principal cause of the contract (Art. 1331+ 2
nd
(ar).
A simple mistake of account shall &i"e rise to its correction
#Art. 1331, 3
rd
par$.
Ghen one of the parties is unable to read, or if the contract is
in a lan&ua&e not understood by him, and mistake or fraud is
alle&ed, the person enforcin& the contract must sho' that the
terms thereof ha"e been fully e+plained to the former #Art.
133!$.
There is no mistake if the party alle&in& it kne' the doubt,
contin&ency or risk affectin& the ob%ect of the contract #Art.
1333$
Futual error as to the le&al effect of an a&reement 'hen the
real purpose of the parties is frustrated, may "itiate consent
#Art. 1335$.
Fisrepresentation by a 3
rd
person does not "itiate consent,
unless such misrepresentation has created substantial mistake
and the same is mutual #Art. 135!$.
Fisrepresentation made in &ood faith is not fraudulent but
may constitute error #Art. 1353$.
&) volen#e
There is "iolence 'hen in order to 'rest consent, serious or
irresistible force is employed (Art. 1335+ 1
st
(ar).
Liolence shall annul the obli&ation, althou&h it may been
employed by a 3
rd
person 'ho did not take part in the contract
(Art. 133<).
Re=5stes o" ?olen#e1
i. irresistible physical force is employed
ii. the force is the determinin& cause for &i"in& consent
#) nt$daton
There is intimidation 'hen one of the contractin& parties is
compelled by a reasonable and 'ell<&rounded fear of an
imminent and &ra"e e"il upon his person or property, or upon
the person or property of his spouse, descendants or
ascendants, to &i"e his consent (Art. 1335+ 2
nd
(ar).
Re=5stes o" Int$daton1
. t)e t)reat $5st &e t)e deter$nn% #a5se "or %vn%
#onsent
. t)e t)reatened a#t s 5n:5st and 5nla'"5l
A threat to enforce one2s claim throu&h
competent authority, if the claim is %ust or le&al, does
not "itiate consent (Art. 1335+ 4
t)
(ar).
The threat to enforce a ri&ht, should not be
aimed at a result 'hich is contrary to la' or morals,
or 'hich is un%ust and contrary to &ood faith.
Althou&h it is la'ful to e+ercise ri&hts, it is not al'ays
bern.carrasco
20
la'ful to use them for purposes different from those
for 'hich they 'ere created. Thus, althou&h it is
la'ful to report crimes, the threat to report it may be
illicit if the purpose is not to cooperate in the
disco"ery and prosecution of the crime, but to obtain
some prestation from the culprit 'hich other'ise
could not be obtained and 'hich does not constitute
indemnity for dama&es for the crime committed.
Thus, the threat to report a murderer if he does not
a&ree to pay a certain sum to one 'ho sa' the offense
committed, 'ould constitute intimidation, because he
is made to a&ree to somethin& 'hich has no relation
to his crime.
The rule re&ardin& marria&e is different.
Ghere a man marries under the threat to obstruct his
admission to the bar by filin& char&es a&ainst him for
immorality committed by him, he cannot a"oid the
marria&e on the &round of duress.
""". t$e t$reat "s rea! and ser"o%s
Bor e+ample the threat must be to kill you or burn
your house and not merely to pinch you.
"/. +$e t$reat prod%ces a we!!<gro%nded fear t$at t$e
person ma)"ng "t can and w"!! "nf!"ct $arm
To determine the de&ree of intimidation, the a&e, se+, and
condition of the person shall be borne in mind (Art. 1335+ 3
rd
(ar).
Bor e+ample, a E5year old man 'ho is bed ridden and
says that he 'ill kill you does not produce a 'ell<
&rounded fear.
1ntimidation shall annul the obli&ation, althou&h it may ha"e
been employed by a 3
rd
person 'ho did not take part in the
contract (Art. 133<).
2.ESS is that de&ree of constraint or dan&er sufficient to
o"ercome the mind and 'ill of the person or ordinary firmness.
?olen#e Int$daton
Duress actually inflicted threatened or impendin&
.+ternal 1nternal
:er"es to pre"ent an act from
bein& done
operates upon the 'ill, induces
performance of an act
>hysical force employed is
irresistible
1nfluences the mind to choose
bet. t'o e"ils
@r of such de&ree as that "ictim
has no other choice but to
submit
1nfluences the e+pression of the
'ill, inhibits the true intent and
makin& of manifest somethin&
apparently as that of the person
'ho consents
:uch force is the determinin&
cause in &i"in& consent
intimidation caused the consent
to be &i"en
Threatened act un%ust or
unla'ful
Threat must be real or serious
producin& reasonable and 'ell<
&rounded fear
d6 %nd%e "nf!%ence
There is undue influence 'hen a person takes improper
ad"anta&e of his po'er o"er the 'ill of another, depri"in& the
latter of a reasonable freedom of choice. The follo'in&
circumstances shall be considered: the confidentiality, family,
spiritual and other relations bet'een the parties, or the fact
that the person alle&ed to ha"e been unduly influenced 'as
sufferin& from mental 'eakness, or 'as i&norant or in financial
distress (Art. 133B).
e6 4ra%d
Ghen one of the parties is unable to read, or if the contract is
in a lan&ua&e not understood by him, and mistake or fraud is
alle&ed, the person enforcin& the contract must sho' that the
terms thereof ha"e been fully e+plained to the former (Art.
1332).
T)ere s "ra5d ')en+ throu&h insidious 'ords or
machinations of one of the contractin& parties, the other is
induced to enter into a contract 'hich, 'ithout them, he 'ould
not ha"e a&reed to (Art. 1333)
deceit or dolo causante.
Re=5stes o" >ra5d1
1. fraud is employed by 1 party on the other #Arts. 135!,
1355$
2. the other party 'as induced to enter into the contract
#Art.1337$
3. the fraud must be serious #Art. 1355$
4. there is dama&e or in%ury caused
Bailure to disclose facts, 'hen there is a duty to re"eal them, as
'hen the parties are bound by confidential relations,
constitutes fraud (Art. 1334)
The usual e+a&&erations in trade, 'hen the other party had an
opportunity to kno' the facts, are not in themsel"es fraudulent
(Art. 1340).
A mere e+pression of an opinion does not si&nify fraud, unless
made by an e+pert and the other party has relied on the
former2s special kno'led&e (Art. 1341).
Fisrepresentation by a 3
rd
person does not "itiate consent,
unless such misrepresentation has created substantial mistake
and the same is mutual (Art. 1342).
Fisrepresentation made in &ood faith is not fraudulent but
may constitute error (Art. 1343).
1n order that fraud may make a contract "oidable, it should be
serious and should not ha"e been employed by both
contractin& parties (Art.1344+ 1
st
(ar).
In#dental "ra5d only obli&es the person employin& it to pay
dama&es (Art. 1344+ 2
nd
(ar).
1f a 3
rd
person should commit "iolence or intimidation on 1 of
the contractin& parties and this "itiates the contractin& party2s
consent, then the contract may be annulled (Art. 133<).
?y analo&y, if a 3
rd
person should e+ert undue influence on 1 of
the contractin& parties and this "itiates the consent of the
contractin& party, then the contract may be annulled.
Po'e"er, if the 3
rd
party commits fraud, dama&es is the only
remedy unless the fraud committed by the 3
rd
person has
created a mutual substantial mistake (Art. 1342).
R5les Re%ardn% ?oda&le Contra#ts1
a) @o"dab!e contracts are effect"/e %n!ess set
as"de.
b) +$e /a!"d"ty of a /o"dab!e contract can on!y
be assa"!ed "n a s%"t for t$at p%rpose 5".e. comp!a"nt
or co%nterc!a"m6.
The action for annulment of contracts may be
instituted by all 'ho are thereby obli&ed principally or
subsidiarily. Po'e"er, persons 'ho are capable
cannot alle&e the incapacity of those 'ith 'hom they
bern.carrasco
21
contracted nor can those 'ho e+erted intimidation,
"iolence, or undue influence, or employed fraud, or
caused ,mistake base their action upon these fla's of
the contract (Art. 134B).
The action for annulment shall be brou&ht 'ithin 5 years. This
period shall be&in:
nt$daton from the time the defect of the consent ceases
volen#e from the time the defect of the consent ceases
5nd5e n"l5en#e from the time the defect of the consent
ceases
$sta;e from the time of the disco"ery of the mistake
"ra5d from the time of the disco"ery of the fraud
Re=5stes o" Consent vtated &*
1. it shd be ntell%ent, 'ith e+act notion
of the matter to 'hc it refers
by error or mistake
!. it shd be "ree "iolence,
intimidation, or
undue influence
3. it shd be s(ontaneo5s by fraud
The 4 *ear (res#r(ton (erod to ann5l #ontra#ts
entered into by minors or other incapacitated persons shall
be&in from the time the &uardianship ceases (Art. 1341+ 4
t)
(ar).
An obli&ation ha"in& been annulled, the contractin& parties
shall restore to each other the thin&s 'hich ha"e been the
sub%ect matter of the contract, 'ith their fruits, and the price
'ith its interest, e+cept in cases pro"ided by la' (Art. 1343+
1
st
(ar).
1n obli&ations to render ser"ice, the "alue thereof shall be the
basis for dama&es (Art. 1343+ 2
nd
(ar).
Ghen the defect of the contract consists in the incapacity of 1 of
the parties, the incapacitated person is not obli&ed to make any
restitution e+cept insofar as he has been benefited by the thin&
or price recei"ed by him (Art. 1344)D
M1 @)at " t)e T)n% to ,e Ret5rned s 7ostN
a. 'oss d%e to 4a%!t of efendant to pay t$e p!a"nt"ff
/a!%e of t$e t$"ng !oss( fr%"ts "f any( "nterest
b. 'oss d%e to a 4ort%"to%s E/ent or d%e to a 8
rd
party
Defendant has to pay the plaintiff "alue of the
thin& loss fruits if any
c. 'oss d%e to 4a%!t or 4ra%d of :!a"nt"ff
The plaintiff loses the ri&ht to annul #Art. 1501$.
There is fault on the part of the plaintiff once the
plaintiff re&ains capacity.
d. 'oss w"t$o%t 4a%!t on t$e :!a"nt"ff>s :art
(ommentators ha"e a difference of opinion <
the ri&ht to annul is e+tin&uished unless the plaintiff
offers to pay the "alue of the ob%ect at the time of loss
the plaintiff is entitled to annul 'ithout ha"in& to pay
anythin&.
As lon& as 1 of the contractin& parties does not restore 'hat in
"irtue of the decree of annulment he is bound to return, the
other cannot be compelled to comply 'ith 'hat is incumbent
upon him (Art. 1402).
T)e a#ton "or ann5l$ent 'll not (ros(er n t)e
"ollo'n%1
a) " t)e #ontra#t )as &een #on"r$ed (Art. 1342)
&) " t)e a#ton to ann5l )as (res#r&ed (Art. 1341)
#) ')en t)e t)n% ')#) s t)e o&:e#t o" t)e #ontra#t s
lost t)ro5%) t)e "a5lt or "ra5d o" t)e (erson ')o )as a
r%)t to nstt5te t)e (ro#eedn%s (Art. 1401+ 1
st
(ar)
d) esto((el
?oda&le #ontra#ts #an &e #on"r$ed.
Con"r$aton e+tin&uishes the action to annul a
"oidable contract #Art. 136!$.
(onfirmation #leanses t)e #ontra#t "ro$ all ts
de"e#ts "ro$ t)e $o$ent t 'as #onstt5ted
#Art. 136=$.
Re=5stes o" Con"r$aton1
i. t)at t)e #ontra#t s a voda&le or ann5lla&le
#ontra#t
ii. t)at t)e rat"#aton s $ade 't) ;no'led%e
o" t)e #a5se "or n5llt*
iii. t)at at t)e t$e t)e rat"#aton s $ade+ t)e
#a5se o" n5llt* )as alread* #eased to e8st
(onfirmation may be effected e+pressly or tacitly. 1t is
understood that there is tacit confirmation if, 'ith kno'led&e
of the reason 'hich renders the contract "oidable and such
reason ha"in& ceased, the person 'ho has a ri&ht to in"oke it
should e+ecute an act 'hich necessarily implies an intention to
'ai"e his ri&ht #Art. 1363$.
?oda&le #ontra#ts #an &e #on"r$ed onl* &* t)e (art*
')ose #onsent 'as vtated.
(onfirmation does not re;uire the conformity of the
contractin& party 'ho has no ri&ht to brin& the action
for annulment #Art. 1365$.
(onfirmation may be effected by the &uardian of the
incapacitated person #Art. 1365$.
(3) 2nen"or#ea&le Contra#ts
An unenforceable contract s a #ontra#t ')#) #annot &e
en"or#ed &* a (ro(er a#ton n #o5rt+ 5nless t)e* are
rat"ed+ &e#a5se et)er t)e* are entered nto 't)o5t
or n e8#ess o" a5t)ort* or t)e* do not #o$(l* 't)
t)e Stat5te o" >ra5ds or &ot) t)e #ontra#tn% (artes
do not (ossess t)e re=5red le%al #a(a#t*.
P,A?I.RAQ
M1 A5t)ort* to sell oral &5t sale s n 'rtn%
A: Loid.
M1 A5t)ort* to sell n 'rtn% &5t sale o" land s not
A: Cnenforceable under :tatute of Brauds.
M1 @)* s)o5ld loan &e n 'rtn% "or ant#)ress to &e
n 'rtn%N
A: Antichresis takes a lon& time. Aoan is "alid if not in
'ritin& but antichresis not
Donation propter nuptias: rules on ordinary donations 'ould
apply.
M1 ,5*er E seller orall* a%reed "or Seller to sell land.
,5*er sold (ala* E 'A t)e $one* "r. t)s sale ,5*er
%ave to Seller. Seller re"5sed.
bern.carrasco
22
A: :eller can refuse. Pe did not recei"e any benefit
yet.
M1 K sa' an advertse$ent "or t)e sale o" a #ar "or
P200T. K ()oned 6 E t)e latter noted t)e order. 6
"aled to delver t)e #ar. Can K en"or#e t)e o&l%atonN
A: :ale of mo"able Y >500 should be in 'ritin& under
the :tatute of Brauds or else unenforceable.
1f person promises to lend money to another, then refuses to
lend, no cause of action. 1f a bank does it, enforceable.
"!ag /s. 3A, Badges of fra%d:
'hether sale to children 'as paid
not re&istered until after decision in the ;uasi<
delict case
parents continued to e+ercise acts of
o'nership o"er land
relationship bet'een "endor 9 "endee.
This does not fall s;uarely under the presumption of fraud bec.
there 'as a sale before %ud&ment in 16E5. 1f sale 'as after,
presumed to be fraudulent.
M1 K (ro(osed to &5* 6Gs )o5se E lot. K (ad t)e P100T
t)en #onstt5ted a #)attel $ort%a%e on 6Gs )o5se E lot
"or t)e 5n(ad &alan#e. Art. 1434 CC1 la' %ves seller
t)e #)o#e o" re$edes.
A: 0 cannot choose to rescind bec. alternati"e remedy
of foreclosure is a"ailable.
T)e "ollo'n% #ontra#ts are 5nen"or#ea&le 5nless
t)e* are rat"ed (Art. 1403)1
5a6 t$ose entered "nto "n t$e name of anot$er person
by # w$o $as been g"/en no a%t$or"ty or !ega!
representat"on( or w$o $as acted beyond $"s powers
,o one may contract in the name of another 'ithout
bein& authori8ed by the latter, or unless he has by la'
or ri&ht to represent him #Art. 131E, 1
st
par$.
A contract entered into in the name of another by one
'ho has no authority or le&al representation, or 'ho
has acted beyond his po'ers, shall be unenforceable,
unless it is ratified, e+pressly or impliedly, by the
person on 'hose behalf it has been e+ecuted, before it
is re"oked by the other contractin& party. #Art. 131E,
!
nd
par$.
Ghen a person enters into a contract for and in the
name of another, 'ithout authority to do so, the
contract does not bind the latter, unless he ratifies the
same.
The a&ent, 'ho has entered into the contract in the
name of the purported principal, but 'ithout
authority from him, is liable to 3
rd
persons upon the
contract.
5b6 t$ose t$at do not comp!y w"t$ t$e Stat%te of
4ra%ds
. an a%ree$ent t)at &* ts ter$s s not to &e
(er"or$ed 't)n a *ear "ro$ t)e $a;n%
t)ereo"
1n Babao /. :ereJ, the :( interpreted the
phrase not be to performed 'ithin a year to
mean that the obli&ation cannot be finished
'ithin 1 year. >rof. ?alane does not a&ree 'ith
this interpretation. Accordin& to >rof. ?alane the
phrase not to be performed 'ithin a year
should mean that the obli&ation cannot be&in
'ithin a year. Bor practical reasons, the contract
must be in 'ritin& since the parties mi&ht for&et.
Accordin& to >rof. ?alane, the :(2s interpretation
is incorrect. 1f the obli&ation cannot be finished
'ithin 1 year, the contract is not 'ithin the
:tatute of Brauds because of partial performance.
. a s(e#al (ro$se to ans'er "or t)e de&t+
de"a5lt or $s#arra%e o" anot)er
The test as to 'hether a promise is 'ithin the
statute has been said to lie in the ans'er to the
;uestion 'hether the promise is an ori&inal or
collateral one. 1f the promise is an ori&inal one or
an independent one, that is, if the promisor
becomes thereby primarily liable for the payment
of the debt, the promise is not 'ithin the statute.
1f the promise is collateral to the a&reement of
another and the promisor becomes merely a
surety or &uarantor, the promise must be in
'ritin&.
. an a%ree$ent $ade n #onsderaton o"
$arra%e+ ot)er t)an a $5t5al (ro$se to
$arr*
A mutual promise to marry does not fall
'ithin the :tatute of Brauds since they are not
made in 'ritin&.
A&reements made in consideration of marria&e
other than the mutual promise to marry are
'ithin the :tatute of Brauds.
1n ,abag%e /. A%G"!"o, the father of the &room promised
to impro"e his dau&hter<in<la'2s father2s house in
consideration of the marria&e. The father of the &room made
impro"ements on the house. The 'eddin& did not take
place. The :( said that the father of the &room could not sue
on the oral contract 'hich as to him is not mutual promise
to marry. >rof. ?alane disa&rees 'ith the :(. Accordin& to
>rof. ?alane, the father of the &room should be able to sue
since there 'as partial performance.
v. an a%ree$ent "or t)e sale o" %oods+ #)attels or
t)n%s n a#ton+ at a (r#e not less t)an P500+ 5nless
t)e &5*er a##e(ts and re#eves (art o" s5#) %oods and
#)attels+ or t)e evden#e+ or so$e o" t)e$+ o" s5#)
t)n%s n a#ton+ or (a* at t)e t$e so$e (art o" t)e
(5r#)ase $one*D &5t ')en a sale s $ade &* a5#ton
and entr* s $ade &* t)e a5#toneer n )s sales &oo;+
at t)e t$e o" sale+ o" t)e a$o5nt and ;nd o" (ro(ert*
sold+ ter$s o" sale+ (r#e+ na$es o" t)e (5r#)asers and
(erson on ')ose a##o5nt t)e sale s $ade+ t s a
s5""#ent $e$orand5$
The re;uirement of a 'ritten instrument or a
memorandum for sales of personal property for a price not
less than >500, co"ers both tan&ible and intan&ible
personal property. 1t also co"ers the assi&nment of choses
in action.
Ghere a contract for the sale of &oods at a price not less
than >500 is oral, and there is neither partial payment or
deli"ery, receipt, and acceptance of the &oods, the contract
is unenforceable, and cannot be the basis of an action for
the reco"ery of the purchase price, or as the basis of an
action for dama&es for breach of the a&reement.
Ghere there is a purchase of a number of articles 'hich
taken separately does not ha"e a price of >500 each, but
taken to&ether, the price e+ceeds >500, the operation of
the statute of frauds depends upon 'hether there is a
sin&le inseparable contract or a se"eral one. 1f the contract
is entire or inseparable, and the total price e+ceeds >500,
bern.carrasco
23
the statute applies. ?ut if the contract is separable, then
each article is taken separately.
v. an a%ree$ent o" lease "or a (erod o" $ore t)an 1
*ear+ or t)e sale o" real (ro(ert* or o" an nterest
t)eren
As lon& there is a sale of real property, the sale must
be in 'ritin&. There is no minimum.
An oral contract for a supplemental lease of real
property for lon&er period than 1 year is 'ithin the
:tatute of Brauds.
An a&reement to enter into an a&reement is also
'ithin the :tatute of Brauds.
v. a re(resentaton as to t)e #redt o" a 3
rd
(erson
A 'ants to borro' money from (. ( does not kno' A.
( &oes to ? to ask about A2s credit standin&. ? says
that A2s credit standin& is satisfactory e"en thou&h ?
kno's that A is insol"ent. Cnder Art. 1503, ( can &o
after ? if ?2s representation 'as in 'ritin&.
>rof. ?alane thinks that this does not belon& in the
:tatute of Brauds. There is no contract bet'een ( and
?. ? did not bind himself to pay (. Ghat 'e ha"e
here is an unenforceable tort.
Accordin& to >rof. ?alane, a representation as to the
credit of a 3
rd
person should be replaced by Art. 1553.
Art. 1553 pro"ides that no e+press trusts concernin&
an immo"able or any interest therein may be pro"ed
by parol e"idence.
Ghen the e+press trust concerns an immo"able or an
interest therein, a 'ritin& is necessary to pro"e it.
This 'ritin& is not re;uired for the "alidity of the
trust. 1t is re;uired only for purposes of proof. Ghen
the property sub%ect to the e+press trust, ho'e"er is
not real estate or an interest therein, then it may be
pro"ed by any competent e"idence, includin& parol
e"idence.
(#) t)ose ')ere &ot) (artes are n#a(a&le o" %vn%
#onsent to a #ontra#t
,either party or his representati"e can enforce the
contract unless it has been pre"iously ratified.
The ratification by 1 party, ho'e"er, con"erts the
contract into a "oidable contract N "oidable at the
option of the party 'ho has not ratified the latter,
therefore, can enforce the contract a&ainst the party
'ho has ratified.
@r, instead, of enforcin& the contract, the party 'ho
has not ratified it may ask for annulment on the
&round of his incapacity.
2 Prn#(les n t)e Stat5te o" >ra5ds
(a) Parol evden#e s not ad$ss&le. -o'ever+ t)ere
are 2 'a*s o" &rn%n% t o5t.
i. failure to ob%ect by the opposin& la'yer 'hen parol
e"idence is used #Art. 1505$
1f there is no ob%ection, then parol e"idence
is admitted.
. a##e(tan#e o" &ene"ts (Art. 1405)
if there has been performance on 1 side and
the other side accepts, then the :tatute of
Brauds is not applicable.
(&) T)e Stat5te o" >ra5ds a((les onl* to e8e#5tor*
#ontra#ts and not to t)ose ')#) )ave &een e8e#5ted
n ')ole or n (art.
TO7.NTINO1
P5r(ose o" t)e Stat5te o" >ra5ds1 To pre"ent fraud 9
per%ury in the enforcement of obli&ations dependin& for their
e"idence upon the unassisted memory of 'itnesses by re;uirin&
certain enumerated contracts 9 transactions to be e"idenced by
a 'ritin& si&ned by the party to be char&ed.
Stat5te O" >ra5ds
simply pro"ides for the manner in ')c contracts
under it shall be pro"ed
such contracts are "alid but effect of noncompliance
') the :@B is simply that no action can be pro"ed
unless the re;uirement is complied ')
not applicable to contracts either totally or partially
performed but only to e+ecutory contracts
neither applicable to actions ')c are neither for
specific performance of the contract nor for the
"iolation thereof
partial performance must be duly pro"ed
contract under :@B cannot be pro"ed ')o the
'ritin& or a memorandum thereof
Inote or $e$orand5$J
e"idence of the a&reement used to sho' the intention of
the parties
may consist of any kind of 'ritin&, fr. a solemn deed to
a mere hasty note or memorandum in books 9 papers,
may be in ink or in pencil, typed or printed
meets re;uirements of :tatute of Brauds if it contains:
names of the parties
terms 9 conditions of the a&reement
a description of the sub%ect matter sufficient to render it
capable of identification
date 9 place of the makin& of the a&reement
si&nature of the party assumin& the obli&ation
Ghere there is a sale of a number of articles ')c separately do
not ha"e a price of >500 each but ')c in their a&&re&ate ha"e a
total price e+ceedin& >500, the operation of the :@B depends
upon 'hether there is a sin&le inseparable contract or a se"eral
one. 1f the contract is entire or inseparable, :@B applies. 1f
separable, then each article is taken separately, 9 the application
of the :@B depends upon its price.
oral e"idence to pro"e a consummated sale of real property <
allo'ed by the :tatute of Brauds
representation as to credit of a third person < limited to those
')c operate to induce the person to 'hom they are made to
enter into contractual relations ') the 3
rd
person, but ,@T to
those representations tendin& to induce action for the benefit of
the person makin& them.
bern.carrasco
24
An oral contract for a supplemental lease of property for a
period lon&er than 1 year < also ')in :@B. An a&reement to enter
into an a&reement is also ')in the :@B 9 the promise is not
enforceable unless the statute is satisfied.
!e"ense o" t)e Stat5te o" >ra5ds personal to the party to
the a&reement like minority, fraud, mistake, 9 similar defenses
')c may be asserted or 'ai"ed by the party affected cannot be
set up by stran&ers to the a&reement
4. ?od Contra#ts
A "oid contract s an a&sol5te n5llt* and (rod5#es no
e""e#t+ as " t )ad never &een e8e#5ted or entered nto.
T)e "ollo'n% #ontra#ts are ne8stent and vod "ro$
t)e &e%nnn% (Art. 1404)1
(a) t$ose w$ose ca%se( ob&ect or p%rpose "s
contrary to !aw( mora!s. Food c%stoms( p%b!"c order
or p%b!"c po!"cy
(b) t$ose w$"c$ are abso!%te!y s"m%!ated or
f"ct"t"o%s
(c) t$ose w$ose ca%se or ob&ect d"d not eG"st at
t$e t"me of t$e transact"on
,alane: Art. 1506 #3$ should not be did not e+ist.
4ather, the correct phrase should be could not come
into e+istence because there can be a contract o"er a
future thin&.
5d6 t$ose w$ose ob&ect "s o%ts"de t$e commerce of
men
5e6 t$ose w$"c$ contemp!ate an "mposs"b!e ser/"ce
5f6 t$ose w$ere t$e "ntent"on of t$e part"es re!at"/e to
t$e pr"nc"pa! ob&ect of t$e contract cannot be
ascerta"ned
5g6 t$ose eGpress!y pro$"b"ted or dec!ared /o"d by
!aw
C)ara#terst#s o" ?od Contra#ts1
#6 t$e contract prod%ces no effect w$atsoe/er e"t$er
aga"nst or "n fa/or of anyone
?6 a &%dgment of n%!!"ty wo%!d be mere!y
dec!aratory
."en 'hen the contract is "oid or ine+istent, an action
is necessary to declare its ine+istence, 'hen it has
already been fulfilled. ,obody can take the la' into
his o'n hands.
The inter"ention of a competent court is necessary to
declare the absolute nullity of the contract and to
decree the restitution of 'hat has been &i"en under it.
The %ud&ment of nullity 'ill retroact to the "ery day
'hen the contract 'as entered into.
86 "t cannot be conf"rmed or rat"f"ed
R6 "f "t $as been performed( t$e restorat"on of w$at
$as been g"/en "s "n order
B6 t$e r"g$t to set t$e contract>s n%!!"ty cannot be
wa"/ed
D6 t$e act"on for n%!!"ty "s "mprescr"pt"b!e 5Art. #R#N6
As bet'een the parties to a contract, "alidity cannot
be &i"en to it by estoppel if it is prohibited by la' or is
a&ainst public policy.
96 any person can "n/o)e t$e contract>s n%!!"ty "f "ts
&%r"d"ca! effects are fe!t as to $"m
The defense of ille&ality of contracts is not a"ailable to
3
rd
persons 'hose interests are not directly affected
#Art. 15!1$.
:ar" e!"cto #n e=5al %5lt$
A. 1f it constitutes a criminal offense
1. 1f both parties are in pari delicto
,o action for specific performance can prosper on
either side #Art. 1511, 1
st
par$.
,o action for restitution can prosper on either side
#Art. 1511, 1
st
par$.
A shabu supplier supplies shabu to the shabu
dealer. 1f the shabu supplier does not deli"er the
shabu, the dealer cannot file an action for specific
performance.
1f the shabu dealer pays the shabu supplier but
fails to deli"er the shabu, the shabu deli"er
cannot reco"er 'hat he has paid.
!. 1f only 1 party is &uilty
,o action for specific performance can
prosper on either side.
An action for restitution 'ill be allo'ed only
if the innocent party demands.
?. 1f it does not constitute a criminal offense
1. 1f both parties are in pari delicto
,o action for specific performance can
prosper on either side #Art. 1511, 1
st
par$.
,o action for restitution can prosper on
either side #Art. 1511, 1
st
par$.
!. 1f only 1 party is &uilty
,o action for specific performance
can prosper on either side.
An action for restitution 'ill be
allo'ed only if the innocent party demands.
.8#e(tons to :ar" e!"cto:
1nterest paid in e+cess of the interest allo'ed by the usury la's
may be reco"ered by the debtor, 'ith interest therefrom from
the date of payment (Art. 1413)
Ghen money is paid or property deli"ered for an ille&al
purpose, the contract may be repudiated by 1 of the parties
before the purpose has been accomplished, or before any
dama&e has been caused to a 3
rd
person. 1n such case, the
courts may, if the public interest 'ill thus be subser"ed, allo'
the party repudiatin& the contract to reco"er the money or
property (Art. 1414).
Ghere 1 of the parties to an ille&al contract is incapable of
&i"in& consent, the courts, may, if the interest of %ustice so
demands, allo' reco"ery of money or property deli"ered by the
incapacitated person (Art. 1415).
bern.carrasco
25
Ghen the a&reement is not ille&al per se but is merely
prohibited, and the prohibition by la' is desi&ned for the
protection of the plaintiff, he may, if public policy is enhanced,
reco"er 'hat he has paid or deli"ered (Art. 141<).
Ghen the price of any article or commodity is determined by
statute, or by authority of la', any person payin& any amount
in e+cess of the ma+imum price allo'ed may reco"er such
e+cess (Art. 141B).
Ghen the la' fi+es, or authori8es the fi+in& of the ma+imum
number of hours of labor, and a contract is entered into
'hereby a laborer undertakes to 'ork lon&er than the
ma+imum thus fi+ed, he may demand additional compensation
for ser"ice rendered beyond the time limit (Art. 1413).
Ghen the la' sets or authori8es the settin& of a minimum 'a&e
for laborers, and a contract is a&reed upon by 'hich a laborer
accepts a lo'er 'a&e, he shall be entitled to reco"er the
deficiency (Art. 1414).
bern.carrasco
26