3.
The stipulation in favor of the 3rd
CHAPTER 1
GENERAL PROVISIONS
Q: What is a contract?
A: Art. 1305 a meeting of minds between two
persons whereby one binds himself, with respect to
the other, to give something or to render some
service. (1254a)
Q: What are the Characteristics of Contracts?
A: AMOR
1. AUTONOMY: Art. 1306. The contracting parties
may establish such stipulations, clauses, terms
and conditions as they may deem convenient,
provided they are not contrary to law, morals,
good customs, public order, or public policy.
2. MUTUALITY: Art. 1308. The contract must bind
both contracting parties; its validity or
compliance cannot be left to the will of one of
them.
Except:
Art. 1309. The determination of the
performance may be left to a third person,
whose decision shall not be binding until it
has been made known to both contracting
parties.
Art. 1310. The determination shall not be
obligatory if it is evidently inequitable. In
such case, the courts shall decide what is
equitable under the circumstances. (n)
3. OBLIGATORY: Art. 1315. Contracts are
perfected by mere consent, and from that
moment the parties are bound not only to the
fulfillment of what has been expressly stipulated
but also to all the consequences which, according
to their nature, may be in keeping with good
faith, usage and law.
4. RELATIVITY: Art. 1311. Contracts take effect
only between the parties, their assigns and heirs,
except in case where the
rights and obligations arising from the
contract are not transmissible by their
nature, or
by stipulation or
by provision of law.
The heir is not liable beyond the value of
the property he received from the
decedent.
Except: SA CAI
(Stipulation pour autrui)
If a contract should contain some
stipulation in favor of a third person, he
may demand its fulfillment provided he
communicated his acceptance to the
obligor before its revocation. A mere
incidental benefit or interest of a person
is not sufficient. The contracting parties
must have clearly and deliberately
conferred a favor upon a third person.
(Art. 1311, par. 2.)
Requisites: CCPNN
1. Contracting parties by their
stipulation must have clearly and
deliberately conferred a favor
upon a third person
2. 3rd person must have
communicated his acceptance to
the obligor before its revocation
by the oblige or the original
parties
person should be a part and not
the whole of the contract or the
contract itself;
4. The favorable stipulation should
not be conditioned or
compensated by any kind of
obligation whatever; and
5. Neither of the contracting parties
bear the legal representation or
authorization of the 3rd party for
otherwise the rules on agency
will apply
Accion Directa
Right of the lessor to go directly to
sublessee for unpaid rents of the lessee.
Right of the laborers or persons who
furnish material for a piece of work
undertaken by a contractor to go directly
to the owner for any unpaid claims due
to the contractor
Contracts creating real rights
Art. 1312. In contracts creating real
rights, third persons who come into
ossession of the object of the contract
are bound thereby, subject to the
provisions of the Mortgage Law and the
Land Registration Laws. (n)
Accion Pauliana
Asking the court to rescind or impugn all
the acts which the debtor may have done
to defraud his creditors
Art. 1313. Creditors are protected in
cases of contracts intended to defraud
them.
Inducement by a third person
Art. 1314.Any third person who induces
another to violate his contract shall be
liable for damages to the other
contracting party.
***contracts creating status and negotiorum
gestio
Q: How are contacts classified?
A:
1. Ac to Name:
a. Nominate (has a specific name of
designation in law)
b. Innominate (do ut des/facias; facio ut
des/facias)
Q: What governs innominate Contracts?
A: SLAC
Art. 1307. Innominate contracts shall be regulated by
1. stipulations of the parties, (stipulation)
2. provisions of Titles I and II of this Book, (law)
3. rules governing the most analogous
nominate contracts, (analogous)
4. customs of the place. (n) (customs)
2. Ac to Perfection: Consensual and Real
3. Ac to Cause: Onerous, Remuneratory,
Gratuitous
4. Ac to Form: Informal or common and Formal
or Solemn
5. Ac to Obligatory Force: Valid, Rescissible,
Voidable, Unenforceable, Void or Inexistent
6. Ac to Person Obliged: Unilateral or
Bilateral
7. Ac to Dependence: Preparatory, Accessory,
Principal
8. Ac to Risks: Commutative, Aleatory
9. Ac to Liability: Unilateral, Bilateral
Q: When are real contracts perfected?
A: Art. 1316. Real contracts, such as deposit, pledge
and Commodatum, are not perfected until the
delivery of the object of the obligation. (n)
Q: Unenforceable contracts
A: Art. 1317. General Rule: Unenforceable when:
no authority or legal representation,
acted beyond his powers,
unless
ratified, expressly or impliedly,
by the person on whose behalf it has been
executed,
before it is revoked by the other contracting
party.
CHAPTER 2
ESSENTIAL REQUISITES OF CONTRACTS
Q: What are Essential Requisites of a contract?
A: Art. 1318. There is no contract unless the
following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the
contract;
(3) Cause of the obligation which is established.
(1261)
ACCEPTANCE THEORIES
(1) COGNITION THEORY So, under our civil law,
we adhere to this theory if the acceptance is
through letter or telegram]. That the contract
becomes perfected only upon knowledge by
the offeror of the acceptance of the offerree.
Even if there was acceptance already by the
offerree, but the letter or telegram was left
unopened by the offeror, then there is no
perfected contract. It must come into the
knowledge. So how does knowledge come
about? By reading. Whether its a letter or a
telegram. Now, what about silence? Under
our law, it does not authorize any definite
conclusion. What about if the parties talk
through the telephone? How shall it be
considered? It is as if it is face to face,
deemed to have been made by two persons
present.
(2) MANIFESTATION THEORY: how is a
contract perfected under this theory? From
the moment the acceptance is declared.
Whether it has come to the knowledge of the
offeror or not. So, what you wrote, I accept,
then it is perfected.
(3) EXPEDITION THEORY: perfected from the
moment the offeree transmits the
acceptance to the offeror, such as the letter
or telegram of acceptance is placed in the
mail box.
(4) RECEPTION THEORY: perfected from the
time the acceptance is in the hand of the
offeror. It need not be opened.
RE: AMPLIFIED ACCEPTANCE. As against
qualified, where there is no perfected contract. A
very common qualification would be the lowering of
the price. (tawad ng presyo). There is acceptance but
there is a qualification. So, there is no perfected
contract. When we say amplified, "I'm selling you
mangosteen at 5/kl but you have to get 100 kilos. I
will buy another 100 for the same price." Is there a
perfected contract there? Yes, with respect to the
first but not to the 2nd. There is a perfected contract
with respect to the first but not to the second offer.
Section 1. Consent
Art. 1319.
Consent is manifested by
the meeting of the offer and the acceptance
(upon the thing and the cause which are to
constitute the contract).
The offer must be certain and the acceptance
absolute.
A qualified acceptance constitutes a counter-
offer.
Acceptance made by letter or telegram does not
bind the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed
to have been entered into in the place where the
offer was made. (1262a)
Art. 1320. An acceptance may be express or implied.
(n)
Q: Scope of offerors right?
A: Art. 1321. The person making the offer may fix
the
1. time,
2. place, and
3. manner of acceptance, all of which must be
complied with. (n)
Q: Reckoning point if offer is made through an
agent
A: Art. 1322. An offer made through an agent is
accepted from the time acceptance is communicated
to him. (n)
Q: When an Offer becomes ineffective:
A: Art. 1323. If, either party before acceptance is
conveyed
suffers
1. death
2. civil interdiction
3. insanity, or
4. insolvency
5. ***lapse of the period
6. ***Revocation of the offer before learning of
its acceptance
Contract of Option: a preparatory contract in which
one party grants to the other, for a fixed period and
under specified conditions, the power to decide
whether or not to enter into a principal contract.
Q: When can an offer be withdrawn in a
contract of option?
A: Art. 1324. the offer may be withdrawn at any
time before acceptance by communicating such
withdrawal,
except when the option is founded upon
- a consideration,
- as something paid or
- promised. (n)
Q: Crossing of Revocation and Acceptance
A: That which arrives first at its destination is
effective.
GR: the expression of the will of a person, addressed
to another does not become effective except from
the time it is received by the latter.
No express acceptance intended,
tacit acceptance perfects contract, and the
subsequent receipt of a letter of revocation is
effective.
Express acceptance required
Contract will be perfected if the acceptance is
first to reach the offeror; and will not be
perfected if the revocation first reaches offeree
Q: What are not definite offers?
A:
 1. Art. 1325. business advertisements of b. Incapacity to sell between HW
things for sale are not definite offers, but c. Contract to sell real property made
mere invitations to make an offer. (n) by a person w/ any non-christian
Q: Why? Because the object is not inhabitant
determinate since there is no specification of
essential elements of a future contract. Incapacity to SD
Therefore, it cannot constitute an offer. give consent
(dapat Restriction upon Restriction upon
2. Art. 1326. Advertisements for bidders are exercising a right the very right
simply invitations to make proposals, and the itself
advertiser is not bound to accept the highest Voidable Void
or lowest bidder, unless the contrary Other SD by law:
appears. (n) (1) Under the Rules of Court, the
Except: Judicial Sales following are considered incompetents
and may be placed under
guardianship:
Q: When is a contract Valid? Voidable? Or 1. persons suffering the accessory
VOID? penalty of civil interdiction
A: Art. 1328 & 1329 2. hospitalized lepers;
VALID VOIDABLE VOID 3. prodigals (spendthrifts);
1.Contracts 1. a state of 1. Unemancipa 4. deaf and dumb who are unable
entered drunkenness ted minors; to read and write;
into or 2. demented 5. those who are of unsound mind
during a 2. during a persons, and even though they have lucid
lucid hypnotic 3. deaf-mutes intervals; and
interval spell who do not 6. those who, by reason of age,
3. consent is know how to disease, weak mind and other
given write. similar causes, cannot without
through 4. Absolute outside aid, take care of
mistake, simulation themselves and manage their
violence, property, becoming thereby an
intimidation, easy prey for deceit and
undue exploitation. (Sec. 2, Rule 92,
influence, or Rules of Court.)
fraud
4. mutual
mistake of
law
5. substantial
DEFECTS OF THE WILL
and mutual
mistake
upon fraud Art. 1330. A contract where consent is given through
committed the following is voidable:
by a third
person 1. MISTAKE (of fact)
against both a. Art. 1331. In order that mistake may
parties invalidate consent, it should refer to
6. misrepresenta a) substance of the thing which is the
tion by object of the contract, or to
experts b) conditions which have principally
opinion moved one or both parties to enter into
7. violence or the contract.
intimidation c) identity or qualifications of one of the
by a 3rd parties when such have been the
person principal cause of the contract.
b. Art. 1332. When one of the parties is unable
to read, or if the contract is in a language not
understood by him, and mistake or fraud is
Q: General rule: 1327 is void. Exception? alleged, the person enforcing the contract
A:Exception: must show that the terms thereof have been
1. necessaries sold and delivered to a minor or fully explained to the former.
other person without capacity to act, he must c. Art. 1334. Mutual error as to the legal effect
pay a reasonable price therefore of an agreement when the real purpose of
2. unemancipated minors may ratify the the parties is frustrated, may vitiate consent.
contract upon reaching the age of majority or (mutual mistake of law)
entered by their guardian and approved by a) Mutual error
the guardianship court b) Error as to legal effect
3. J. Padilla: minors cannot be held in estoppel c) frustrate the real purpose of the parties.
4. Lucid intervals d. Art. 1333. There is no mistake if the party
5. Emancipation of a minor for any cause such alleging it knew the doubt, contingency or
as by marriage or by recorded agreement, risk affecting the object of the contract.
shall terminate parental authority over his (inexcusable error)
person and property and he shall then be e. A simple mistake of account shall give rise to
qualifi ed and responsible for all acts of civil its correction
life.
6. .Art. 1329. The incapacity declared in Article 2. VIOLENCE Art. 1335. There is violence when in
1327 is subject to the modifications order to wrest consent, serious or irresistible
determined by law, and is understood to be force is employed.xxx
without prejudice to special A threat to enforce one's claim through
disqualifications established in the laws. competent authority, if the claim is just or legal,
(1264) does not vitiate consent. *physical *external
a. Insolvent not yet discharged
3. INTIMIDATION,- There is intimidation when one
of the contracting parties is compelled by a
reasonable and well-grounded fear of an
imminent and grave evil upon his person or
property, or upon the person or property of his
spouse, descendants or ascendants, to give his
consent.
a. To determine the degree of intimidation, the
age, sex and condition of the person shall be
borne in mind. *moral*internal
b. Art. 1336. Violence or intimidation shall annul
the obligation, although it may have been
employed by a third person who did not take
part in the contract.
4. UNDUE INFLUENCE, Art. 1337. There is undue
influence when a person takes improper
advantage of his power over the will of another,
depriving the latter of a reasonable freedom of
choice. The following circumstances shall be
considered:
a. the confidential, family, spiritual and other
relations between the parties, or the
b. fact that the person alleged to have been
unduly influenced was suffering from mental
weakness, or was ignorant or in financial
distress
5. FRAUD Art. 1338. There is fraud when, through
insidious words or machinations of one of the
contracting parties, the other is induced to enter
into a contract which, without them, he would
not have agreed to
a. Concealment
Art. 1339. Failure to disclose facts, when
there is a duty to reveal them, as when the
parties are bound by confidential relations,
constitutes fraud.
Exception:
Caveat Emptor (innocent non-disclosures)
b. Tolerated Fraud
Art. 1340. The usual exaggerations in trade,
when the other party had an opportunity to
know the facts, are not in themselves
fraudulent
Dolos Bonus (lawful misrepresentation)
c. Expression of an Opinion
Art. 1341. A mere expression of an opinion
does not signify fraud, unless made by an
expert and the other party has relied on the
former's special knowledge.
d. Misrepresentation
Art. 1342. Misrepresentation by a third
person does not vitiate consent, unless such
misrepresentation has created substantial
mistake and the same is mutual.
Art. 1343. Misrepresentation made in good
faith is not fraudulent but may constitute
error
Art. 1344. In order that fraud may make a contract
voidable, it should be serious and should not have
been employed by both contracting parties.
Incidental fraud only obliges the person employing it
to pay damages.
INCIDENTAL DOLO
FRAUD(1171) CAUSANTE(1338)
Fraud in the fulfillment fraud simultaneous to
of the obligation or prior to the consent
or the creation of the
obligation
Only gives rise to Ground for annulment
action for damages of contract
under 1344
Result of fraud is error
on part of the victim
Q: Requisites of Fraud
A: OISI
1. Must have been employed by one
contracting party upon the other (1342-44)
2. Must have induced the other party to enter
into a contract (1338)
3. Must have been serious (1344)
4. must have resulted in damage or injury to
the party seeking annulment
***must be alleged and proved by full, clear, and
convincing E.
Q: When is there Simulation of contracts?
A: declaration of fictitious will, deliberately made by
agreement of the parties, in order to produce, for the
purpose of deception, the appearance of a juridical
act which does not exist or is different from that
which was really executed.
Art. 955 There is simulation when the juridical nature
of a contract is concealed under the guise of another,
or when the contract has untrue clauses or incorrect
dates, or when the contract transmits rights to
interposed persons who are not the parties to whom
they are in reality to be transmitted.
1. Absolute - parties do not intend to be bound at
all; entirely fictitious - VOID
2. Relative- parties conceal their true agreement.
is employed to give a juridical act an appearance
which hides its true character - VALID if not
prejudicial to anyone
Q: Why is an absolutely simulated contract
void?
A: due to want of true consent; there is no intent to
be bound; the contract is merely illusory, a mere
phantom.
Q: How is Absolute Simulation different from
Fraudulent Alienation?
A: AS implies that there is no existing contract, no
real act executed; while fraudulent alienation means
that there is a true and existing transfer or contract.
The former can be attacked by any creditor, including
one subsequent to the contract while the latter can
be assailed only by the creditors before the
alienation.
In AS, the insolvency of debtor making the simulated
transfer is not a prerequisite to the nullity of the
contract; while in FA, the action to rescind or accion
pauliana requires that the creditor cannot recover in
any other manner what is due him.
In AS, action to declare a contract as AS does not
prescribe; while Accion Pauliana to rescind a
fraudulent alienation is 4 years
Art. 1346. An absolutely simulated or fictitious
contract is void. A relative simulation, when it does
not prejudice a third person and is not intended for
any purpose contrary to law, morals, good customs,
public order or public policy binds the parties to their
real agreement. (n)
 E: A as seller and B as buyer entered into a contract
of sale involving a land. The cause of A is the
SECTION 2 payment of B of the purchase price while Bs cause in
the contract is the obligation on part of A to deliver
OBJECT OF CONTRACTS the object of the contract, which is the title of the
land.
R: T-E-L (true, exist, licit)
Q: What is the concept of object of contracts?
A: It is the subject matter of the obligation arising CAUSE CONSIDERATI MOTIVE
from a contract which might a thing, right, or service. ON
Why of the Reason, Particular
Requisites; Objects :CTLPD contracts; motive, reason for
1. Within the commerce of men (1347) essence inducement a
2. Transmissible which moved contracting
3. Licit, or not contrary to LMGPP (1347) the man to bind party,
4. Must be possible (1348) himself by which does
5. Must be determinate as to its kind or atleast agreement; not affect
determinable without need of a new contract or the other
agreement(1349) and which
does not
impede the
Q: What may constitute as an object of a true and
contract? distinct
A: cause
1. All determinate things w/c are w/I commerce Always known Narrower May be
of men concept than unknown
2. future things (determinate/determinable; that of cause
maybe conditional or aleatory) Cause need More than a
3. rights which are not intransmissible not be moral duty
4. All not contrary to LMGPP material at all
Except: and may
1. future inheritance (unless ok by law) consist in
a. succession has not yet been opened moral
b. object of contract forms part of the satisfaction
inheritance
c. promissor has, w/ respect to the
object, an expectancy of a right Q: Different kinds of contracts according to
which is purely hereditary in nature cause:
Except: A: 1350
a) marriage settlements 1. Onerous contracts: The cause is understood to
b) partitions of property be, for each contracting party, the prestation or
intervivos by the deceased. promise of a thing or service by the other. Such
as in sale, for the seller, what is the cause? The
2. Absolutely/Objectively Impossible things purchase price. For the buyer? the thing to be
or services delivered. Because it is the prestation to be
a. If partly impossible, then the valid performed by the other party.
divisible part subsists
2. Remuneratory contracts: for past service or
Q: what are those not within the commerce of benefit which for by itself is a recoverable debt.
men? Supposed you saved your neighbor's son and you
A: yourself suffered bruises. That is a recoverable
1. Services which require absolute submission debt, you can demand payment for the back
2. Personal rights (patria potestas, marital service.
authority)
3. Public offices 3. Gratuitous/Contracts of pure beneficence:
4. Properties of public dominion the cause is the liberality of the giver or the
5. Sacred things and common things benefactor.

Art. 1349. The object of every contract must be
determinate as to its kind. The fact that the quantity
is not determinate shall not be an obstacle to the
existence of the contract, provided it is possible to
determine the same, without the need of a new
contract between the parties. (1273)
SECTION 3
CAUSE OF CONTRACTS
Q: But is the cause the same as the motive of
the contract?
A: Art. 1351. The particular motives of the parties in
entering into a contract are different from the cause
thereof. (n)
No. No matter how illegal the motive is for as long as
the cause is legal and lawful, it does not affect the
validity of the contract.
Exception: if the motive predetermines the purpose
of the contract then the motive becomes the cause
of the contract. In such case, the motive may be
regarded as a cause for it predetermines the purpose
of the contract.

E: Lopez fell in love with Conchita, a 15 year old girl.

Q: What is the cause of contracts?
A: It is the why of the contract, the reason why
parties entered into the contract. It is the prestation
to be performed by the other contracting party. It is
the immediate direct and proximate reason that
moved the parties to enter into a contract; the cause
of each party is the undertaking or prestation
to be performed by the other
Because of Lopez' desire and lust for the body of
Conchita, he told the parents and Conchita that he
will be donating a parcel of coconut land if you agree
to cohabit with me. The parents and Conchita
consented and they lived and had sexual intercourse.
Then Lopez died. Conchita now demanded for the
delivery of the parcel of land. The heirs of Lopez now
said that the motive predetermined the purpose of
the contract. And while it may be true that the cause
is the liberality, however the real cause is the motive
and the motive is to have sexual intercourse.
Conchita said the cause is the liberality.
The SC said the contract is void. While it is true that
motive differs from the cause, still a contract
conditioned upon the attainment of an immoral
motive should be considered void. For here, it may
be regarded as cause when it predetermines the
purpose of the contract. It cannot be said that the
donation is a contract of pure beneficence or a
contract designed solely and exclusively for the
benefit of the donee. The donation was designed
both for the benefit of the donee and satisfy the
sexual desire of Mr. Lopez. But because the donor
cannot invoke his own immorality, then the more
reasons that the heirs are barred in questioning the
validity of the donation. Therefore Conchita is
entitled to the land
In the MFR filed by the heirs, according to JBL Reyes,
the pari delicto rule cannot apply in the case.
Remember that Conchita is a minor, the guilt of the
minor cannot be judged with equal severity with the
guilt of an adult. Minors occupy a privilege position
before the law.
Q: What is the effect of absence of cause?
A: Art. 1352. Contracts without cause, or with
unlawful cause, produce no effect whatever. The
cause is unlawful if it is contrary to law, morals, good
customs, public order or public policy. (1275a)
Q: What are the effects of a statement of false
cause?
A: Art. 1353. The statement of a false cause in
contracts shall render them VOID, if it should not
be proved that they were founded upon another
cause which is true and lawful. (1276)
Q: Presumption of Legal cause
A: Art. 1354. Although the cause is not stated in the
contract, it is presumed that it exists and is lawful,
unless the debtor proves the contrary. (1277)
Q: Effect of Inadequate Cause or Lesion
A: Art. 1355. Except in cases specified by law, lesion
or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or
undue influence. (n)
D: Lesion: inadequacy of cause, like insufficient
space for a thing sold. As a general rule, lesion or
inadequacy of price does not invalidate a contract
CHAPTER 3
FORM OF CONTRACTS
INTENT OVER FORM
Art. 1356. Contracts shall be obligatory, in whatever
form they may have been entered into, provided all
the essential requisites (consent, object certain,
cause) for their validity are present. Except,
requirement is absolute and indispensable: In these
cases, the right of the parties stated in the following
article cannot be exercised. :
1. when the law requires that a contract be in
some form in order that it may be valid or
enforceable, or
2. that a contract be proved in a certain way,
a. Formal or solemn contracts (validity)
i. Donations of real property
requires public instrument
ii. Donations of personal property
exceeding 500pesos require
written document
iii. Stipulation to pay interest on
loans
iv. Transfer of large cattle
v. Sale of land thru an agent
(here, the authority of the
agent must be in writing;
vi. Contracts of antichresis (here
the principal loan, and the
interest if any, must be
specified in writing; otherwise,
the contract of antichresis is
void)
b. Agreements under Statute of Frauds
(enforceability)
c. 1385 contracts (convenience)
E; VALID CONTRACTS
a) Oral contract of partnership, civil, or
commercial, irrespective of the amount of the
contribution of the partners
b) Oral contract of sale of real property
c) Exchange of land although not in writing, nor
is registration necessary if the rights of
innocent third parties or subsequent
transferees are not involved.
d) Lease of services
e) Verbal extrajudicial partition
f) Agency not in writing
E; FORMALITIES REQUIRED BY LAW
(1) AD ESENTIA, AD SOLEMNITATEM (required for
validity)
(2) (REQUIRED TO AFFECT THIRD PERSONS)
Art. 1357. If the law requires a document or other
special form, as in the acts and contracts
enumerated in the following article, the
contracting parties may compel each other to
observe that form, once the contract has been
perfected. This right may be exercised
simultaneously with the action up on the
contract.
(3) FOR CONVENIENCE
Art. 1358. The following must appear in a public
document: RHAC
a. Acts and contracts which have for their
object the creation, transmission,
modification or extinguishment of real rights
over immovable property; sales of real
property or of an interest therein a governed
by Articles 1403, No. 2, and 1405;
b. The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal
partnership of gains;
c. The power to administer property, or any
other power which has for its object an act
appearing or which should appear in a public
document, or should prejudice a third person;
d. The cession of actions or rights proceeding
from an act appearing in a public document.
All other contracts where the amount involved
exceeds five hundred pesos must appear in writing,
even a private one. But sales of goods, chattels or
things in action are governed by Articles, 1403, No. 2
and 1405.
(4) AD PROBATIONEM (such as those provided in
statute of frauds)
(5) Negotiable instruments Law
(6) Donations of Personal property in excess of
5k (must be accepted in writing)
(7) Donations of Real property in excess of 5k
(must be made in a public instrument)
(8) Principal and Interest in Antichresis (must
be made in writing)
CHAPTER 4
REFORMATION OF INSTRUMENTS

Q: Why?
A: Equity dictates the reformation of an instrument
in order that the true intention of the contracting
parties may be expressed. The courts do not attempt
to make another contract
for the parties. The rationale of the doctrine is that it
would be
unjust and inequitable to allow the enforcement of a
written
instrument which does not refl ect or disclose the
real meeting
of the minds of the parties
Art. 1359. When, there having been a meeting of
the minds of the parties to a contract, their true
intention is not expressed in the instrument
purporting to embody the agreement, by reason of
1. mistake, fraud,
2. inequitable conduct or accident,
one of the parties may ask for the reformation of the
instrument to the end that such true intention may
be expressed.
If mistake, fraud, inequitable conduct, or accident
has prevented a meeting of the minds of the
parties, the proper remedy is not reformation of the
instrument but annulment of the contract.
INSTRUMENT ANNULMENT OF
REFORMATION CONTRACT
There is a meeting of No meeting of the
the minds; does not minds; invalidates the
invalidate a contract contract
If both agreed on If the seller was
500k and the contract selling for 1m, but the
written states 1m buyer thought he was
buying the same thing
for 500k
R: MICPV
1. There must be a meeting of the minds
2. True intention is not expressed in the
instrument
a. no dispute as to the intention of the
parties to sell the land but there was
a mistake as to the designation of
the lot intended to be sold as stated
in the Settlement of Estate and Sale.
3. Clear and Convincing Proof
4. Brought w/I the proper prescriptive period
5. The document must not refer to a simple
unconditional donation inter vivos or to wills
or to a contract where the real agreement is
void.
Q: What is the rule in case of conflict of laws?
A: In case of conflict between the Civil Code and the
principles
of the general law on reformation, the CIVIL CODE
prevails. The latterwill have only suppletory effect.
Art. 1360. The principles of the general law on the
reformation of instruments are hereby adopted
insofar as they are not in conflict with the provisions
of this Code.
Q: When can reformation be asked ?
1. MUTUAL MISTAKE
Art. 1361. When a mutual mistake of the parties
causes the failure of the instrument to disclose
their real agreement, said instrument may be
reformed.
R:
1. Mutual mistake proved by a clear and
convincing evidence
2. Mistake may be unilateral under conditions
set forth in 1362 and 1363
3. Mistake must be of FACT (error of law is not
enough)
E: A sold to B orally a house at 16 San Isidro, Malate.
In the written public document, both forgot the true
number of the house and instead wrote on the
contract No. 18 San Isidro, Malate. Here,
reformation of the instrument is proper
2. UNILATERAL MISTAKE V. FRAUD
Art. 1362. If one party was mistaken and the
other acted fraudulently or inequitably in such a
way that the instrument does not show their true
intention, the former may ask for the reformation
of the instrument.
E: A agreed with B that A would be loaned
P10,000,000 by B. In the contract signed by A and B,
it was stated that A was selling his house to B for
said amount. A signed the contract in the belief that
it was really a contract of loan. Who, if any, may ask
for the reformation of the instrument if B had acted
fraudulently?
ANS.: A may ask for the reformation of the
instrument because after the meeting of the minds,
one party (B) acted fraudulently or inequitably in
such a way that the contract does not show their real
intention. In such a case, the law provides that the
person who acted by mistake may ask for the
reformation of the instrument.
E2: FACTS: Teck sold his land to Ong with the right to
repurchase within 4 years. Ong sold the land to Carr
with the understanding that Carr was buying it,
subject to the right to repurchase on the part of Teck.
At that time, Carr did not have enough money. So
Carr asked for a loan from an Association. The
Association offered to give a loan provided Carr could
offer, as security, land of which he was the absolute
owner, that is, land which would not be subject for
example to repurchase. So Carr began to think. With
the help of a lawyer who drafted the deed, Carr and
Ong (who did not know English) signed a contract in
which Carr was made out to be the absolute owner of
the land, and the words regarding the right to
repurchase omitted. Later Teck was repurchasing
the property from Ong, and Ong demanded the
reconveyance of the property from Carr. Carr refused
on the ground that he (Carr) was the absolute owner
of the land. Hence, Ong brought this action against
Carr. Issue: May the contract be reformed? If so, may
Ong now demand the land from Carr so that it would
be resold to Teck?
HELD: Yes, the contract may be reformed because if
one party was mistaken and the other acted
fraudulently or inequitably in such a way that the
instrument does not show their true intention, the
former may ask for the reformation of the
instrument. (Art. 1362, Civil Code). It follows,
therefore, that Ong may now demand the
reconveyance of the property to him so that the land
may be repurchased by Teck.Art.
3. UNILATERAL MISTAKE V. CONCEALMENT
1363. When one party was mistaken and the
other knew or believed that the instrument did
not state their real agreement, but concealed
that fact from the former, the instrument may be
reformed. (at the instance of the party in good
faith)
4. FAILURE TO CONVEY TRUE INTENT
Art. 1364. The court may order the reformation
of the instrument if it does not convey the true
intention of the parties because of
1. ignorance,
2. lack of skill,
3. negligence or
4. bad faith OF
drafter of instrument
clerk or
typist,
5. Intent to have a Mortgage or Pledge
Art. 1365. If two parties agree upon the
mortgage or pledge of real or personal property,
but the instrument states that the property is
 sold absolutely or with a right of repurchase,
reformation of the instrument is proper.
The intention of the parties can be
judged from their contemporaneous and
subsequent acts
Q: When is there no reformation?
A: Art. 1366. There shall be no reformation in the ff:
cases:
(1) Simple donations inter vivos wherein no
condition is imposed;
Donations are acts of pure liberality. But
if donation is conditional, reformation
may be resorted to so that the real or
true conditions intended by the donor
might be brought out. If it is onerous,
reformation is very much in order
inasmuch as in this case, said donation
would partake very much of the nature of
contracts.
(2) Wills;
Personal act which is free and may be
revoked anytime.
(3) Void Real Agreements
Useless
(4) Estoppel-
Art. 1367. When one of the parties has brought
an action to enforce the instrument, he cannot
subsequently ask for its reformation.
E: A sold B a house. A fraudulently made the
contract one of mortgage instead of sale. Both
signed the contract of mortgage, with B believing
all the time that it was a contract of sale. B,
therefore, has the right to bring an action for the
reformation of the instrument; but if B brings an
action to foreclose the mortgage, he is by said
action enforcing the instrument. He cannot,
therefore, subsequently ask for the reformation
of the instrument to make it one of sale.
Q: Who may bring an action for reformation?
A: Art. 1368. Reformation may be ordered at the
instance of
(1) if the mistake was mutual
a. either party or
b. his successors in interest,;
(2) otherwise, upon petition of the
a. injured party, or
b. his heirs and
c. assigns.
NOTE: Prescriptive period is 10 years (review codal)
Art. 1369. The procedure for the reformation of
instrument shall be governed by rules of court to be
promulgated by the Supreme Court.
CHAPTER 5
INTERPRETATION OF CONTRACTS
So, how do you interpret contracts? If the stipulations
of the contract are clear and leave no room for
doubt, literal interpretation. Now, the important task
of contract interpretation is to always ascertain
the intention of the contracting parties. And
guided by the principle again that we should
interpret not by the letter that killeth, but by
the spirit that giveth life. However, that will not
find any application if the stipulation of the parties
are clear and unambiguous which leaves no room for
interpretation. Then we must interpret the law as it is
written. Ita Scripta Lex.
So, if the words appear contrary to the intention of
the parties, then the intention shall prevail. (1370).
Q: If the written instrument is different from what
has been verbally agreed upon?
A: Reformation because it does not express the
true agreement. So, if you say the sale of land with
all the improvements thereon, what are included?
Everything that is incorporated with the land.
Art. 1370. If the terms of a contract are clear and
leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall
control.
If the words appear to be contrary to the
evident intention of the parties, the latter
(intention) shall prevail over the former (words).
(1281)
Art. 1371. In order to judge the intention of the
contracting parties, their contemporaneous and
subsequent acts shall be principally considered.
(1282)
E: So going back to the example of equitable
mortgage, if the buyer is not yet in possession after
several years, so what is the presumption? The
presumption is that what was entered into by the
parties is not one of sale but mortgage. And the
determination is based on their subsequent acts.
Art. 1372. However general the terms of a contract
may be, they shall not be understood to comprehend
things that are distinct and cases that are different
from those upon which the parties intended to agree.
(1283)
E: Example is your best friend executed an SPA for
you to encumber her property. So you used it as a
collateral in your loan. It does not follow that even if
your property was used as a surety, you would also
be liable for the debt of your friend. Because those
are different and distinct from the agreement.
Art. 1373. If some stipulation of any contract should
admit of several meanings, it shall be understood
as bearing that import which is most adequate to
render it effectual. (1284)
Art. 1374. The various stipulations of a contract
shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of
them taken jointly. (1285)
E: (Allied Bank) Harmonize the provisions. If it cannot
be harmonized, remove those which are
incompatible. Then you ascertain the intention of the
parties. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones
that sense which may result from all of them taken
jointly. So for instance it is a pacto de retro sale. But
upon demand, the price varies. Anong presumption
dyan? The difference in the payment actually refers
to the payment of interest.
Art. 1375. Words which may have different
significations shall be understood in that which is
most in keeping with the nature and object of the
contract. (1286)
E: If you are appointed as an administrator, it does
not involve acts of dominion or acts of ownership.
Art. 1376. The usage or custom of the place shall be
borne in mind in the interpretation of the
ambiguities of a contract, and shall fill the
omission of stipulations which are ordinarily
established. (1287)
Art. 1377. The interpretation of obscure words or
stipulations in a contract shall not favor the party
who caused the obscurity.
E: Contracts of Adhesion
Art. 1378. When it is absolutely impossible to
settle doubts by the rules established in the
preceding articles, and the doubts refer to
incidental circumstances
1. of a gratuitous contract, the least
transmission of rights and interests shall
prevail.
2. If the contract is onerous, the doubt shall be
settled in favor of the greatest reciprocity of
interests.
If the doubts are cast upon the principal object of
the contract in such a way that it cannot be known
what may have been the intention or will of the
parties, the contract shall be null and void. (1289)
E: So between a commodatum and donation, which
has the least transmission of rights? Commodatum,
why? Because there is no transfer of ownership in
commodatum. Whereas if it were a donation, the
property has left the patrimony of the donor forever.
Usufruct or the donation? Usufruct, because the
usufructuary is under obligation to return the
property.
(2nd sentence)
E: Now, what if the contract is onerous? The doubt
shall be resolved in favor of the greatest reciprocity
of interest. So a person giving a ring to the other
person, and the other person gives money. What is
the presumption? Pledge, because that would fall
under the greatest reciprocity of interest.
Between pledge or mortgage? If there is doubt,
mortgage. Why? Because there is no transfer of
possession, but the creditor still enjoys the interest
on the money that was loaned.
Between antichresis and mortgage? Mortgage pa rin.
(Last paragraph) Lack of object which makes the
contract void because the intention of the parties
cannot be ascertained.
Art. 1379. The principles of interpretation stated in
Rule 123 of the Rules of Court shall likewise be
observed in the construction of contracts. (n)