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GR: contributory negligence of a creditor reduces/mitigates the Cessation of the Effects of Mora
damages w/c he can recover 1. renunciation by the creditor – express/implied
E: if the negligent act/omission of the creditor is the proximate cause 2. prescription
of the event w/c led to the damage/injury complained of, the creditor
cannot recover damages FORTUITOUS EVENT FORCE MAJEURE
Acts of man Acts of God
Delay: Kinds Independent of the will of the Independent of the will of every
1. Ordinary delay – failure to perform an obligation on time obligor but not of other human man
2. Legal Delay/Default – failure to perform an obligation on time wills
constitutes a breach of the obligation e.g. war, fire, robbery, murder e.g. earthquake, flood, lightning
Debtor Loses Right to Make Use of Period GR: in alternative obligations, the right of choice belongs to debtor
1. debtor becomes insolvent, unless he gives a Exceptions:
guaranty/security for the debt 1. When expressly granted to the creditor
2. debtor doesn’t furnish the guaranty/security promised 2. When agreed upon by the parties that a 3rd person shall
3. debtor by his own acts has impaired the guaranty/security make the choice
after their establishment or through a fortuitous event they
disappear, unless he immediately gives a new one equally Debtor’s Right of Choice: Limitations
satisfactory 1. Debtor can’t choose prestations that are impossible, unlawful,
4. debtor violates any undertaking in consideration of w/c the or couldn’t have been the object of the obligation
creditor agreed to the period 2. debtor can’t choose part of 1 & part of another prestation
5. debtor attempts to abscond 3. only 1 is practicable; loss of right of choice
6. creditor is deceived on the substance/quality of the thing
pledged, the creditor may either claim another thing in its Concentration: the act of making the choice
stead, or demand immediate payment of the principle
obligation (Art. 2109) Notice of Choice: Form
1. Orally
Steps involved in an Action for Fixing a Period 2. Writing
1. court should determine that the obligation does NOT fix a 3. Tacitly/Impliedly
period but it can be inferred that a period is intended due to 4. Other Unequivocal Means
the circumstances OR the period is dependent on the debtor’s
will Effect of Notice
2. court shall decide what period was probably contemplated by 1. Ceases to be alternative & becomes simple
the parties 2. choice is irrevocable & cannot be changed by either party w/o
consent of the other
Instances When Courts Can Fix a Period
1. no period fixed but a period was intended ALTERNATIVE FACULTATIVE
2. duration of period depends upon will of the debtor As to the There are various Only the principal
3. debtor binds himself to pay when his means permits him to content prestation all of w/c constitute the obligation,
do so constitute parts of the the accessory being only a
4. in reciprocal obligations when there’s a just cause for fixing a obligation means to facilitate payment
period Number of Several are due but Only one prestation is due
5. no period for lease, monthly rent paid, and lessee occupies prestations compliance of one is although the debtor is
premises for over a year; if the rent is weekly, the courts sufficient allowed to substitute it
may determine a longer period after lessee’s possession for
Right of May be given to the Right to make substitution
over 6 months; if rent is daily, the courts may fix a longer
choice creditor or third person – debtor only
period after lessee’s possession for over 1 month
Loss thru a Loss of one or more of Loss of the thing due
fortuitous the alternatives doesn’t extinguishes the obligation
GR: if the obligation does not fix a period, but from its nature & the
event extinguish the obligation
circumstances it can be inferred that a period is intended, the courts
may fix the duration thereof As to The nullity of one Nullity of the principal
Exceptions: nullity prestation does not obligation invalidates the
1. Lease of rural land (Art. 1682 & 1687, 1st sentence) – when invalidate the obligation obligation & the creditor
its duration has not been fixed, it shall be for the time cant demand the substitute
necessary for the gathering of the fruits w/c the whole estate even when this is valid
may yield in 1 year OR w/c it may yield once, although 2 or As to Only the impossibility of the impossibility of the
more years have to elapse for the purpose effect of all the prestation due principal prestation is
2. Pacto de retro sales (Art 1606) – in the absence of an loss without fault of the sufficient to extinguish the
express agreement, the right shall last 4 years from the date debtor extinguishes the obligation even if the
of the contract obligation substitute is possible
3. Contract of services for an indefinite period – fixing a period
would amount to involuntary servitude Effect of Loss in Facultative Obligations
1. Before Substitution
Term fixed by Court: Effects a. Principal lost w/o fault – obligation extinguished
a. becomes part of the contract b. Principal lost w/ fault – liable for damages
b. cannot be changed or extended by the courts w/o consent of c. Substitute lost – debtor not liable; extinguishes
both parties facultative character of obligation
2. After Substitution
a. Principal lost – debtor not liable
Section 3 – Alternative Obligations b. Substitute lost – liability depends on W/N loss is due
to his fault
Obligations: Kinds Accdg. to Object
1. Simple – only 1 prestation RIGHT OF CHOICE: DEBTOR
2. Compound – 2 or more prestations FAULT LOSS OF ONE/SOME LOSS OF ALL
Debtor 1. Obligation subsists Creditor may ask
Compound Obligations: Kinds 2. Debtor obliged to deliver one of for indemnity +
1. Conjunctive – several prestation & all are due those that are subsisting value of last
2. Disjunctive – one, two or more of prestations are due (exception to Art. 1170) thing lost
3. Alternative – several prestations are due, but the Creditor 1. Debtor may rescind the obligation Debtor may
payment/performance of 1 is sufficient + damages rescind
4. Facultative – only 1 prestation has been agreed upon, but the 2. Debtor may ask for specific obligation +
debtor may deliver or render another in substitution performance waiving his right as damages
stated in Art.1203
Fortuitous 3. Obligation still subsists Obligation is
event 4. Debtor obliged to deliver extinguished
whatever remains
Exceptions the Requirement of Identity: Creditor May be Compelled to Accept Payment From:
1. when the obligee consents 1. the debtor, his heirs, assigns or agents
2. in case of waiver 2. any person who has an interest in the obligation (e.g.
3. in facultative obligations – debtor is given the right to render guaranty/surety)
another prestation in substitution 3. a 3rd person who has no interest in the obligation when there
4. substitution is allowed by stipulation w/ consent of creditor is a stipulation that he can make payment
5. Dacion en Pago
6. Novation Donation: no intention of reimbursement & requires acceptance
if by 3rd person w/o interest – can’t compel acceptance
Rule of Medium Quality: if the obligation is the delivery of a generic if debtor did not accept, but creditor accepted, rules of
thing, whose quality & circumstances have not been stated: reimbursement apply
the creditor cannot demand a thing of superior quality
the debtor cannot deliver a thing of inferior quality WHO PAYS COMPELLABILITY REIMBURSEMENT
the court shall take into consideration the purpose & other Debtor Can compel receipt No reimbursement
circumstances of the obligation 3rd Person in Can compel receipt Reimbursement & subrogation
Interest (E: if intended to be a donation)
2. INTEGRITY – the entire prestation must be performed; 3rd Person Can compel receipt Reimbursement & subrogation
completeness w/o Interest
w/ stipulation
Exceptions to the Requirement of Integrity: 3rd Person Cannot compel w/ knowledge & consent:
1. Substantial Compliance in Good Faith (POV of Debtor) w/o Interest receipt; if accepted, - reimbursement & subrogation
2. Waiver (POV of Creditor) w/o obli. extinguished no knowledge & no consent:
3. In application of payments, if the debts are equally onerous stipulation - beneficial reimbursement only
When Benefit to Creditor need not be Proved: Loss of Value: So long as the notes were legal tender at the time they
1. subrogation of the payer in the creditor’s rights were paid/delivered, the person accepting them must suffer the loss if
2. ratification by the creditor they become valueless
3. estoppel on the part of the creditor
Valid if: Inflation: a sharp sudden increase of money/credit w/o a
rd
To a 3 person - payment to debtor was made in good faith corresponding increase in business transactions. It causes a drop in the
in possession of - creditor was in possession of the credit & not value of money, resulting in the rise of the general price level. This is
credit merely the evidence of indebtedness not based on the exchange rate, but on the Consumer Price Index.
*mere possession of the instrument does not
entitle the holder to a payment nor does payment Deflation: reduction in volume & circulation of the available money or
release the debtor credit, resulting in a decline of the general price level.
When & Where Payment Shall be Made Extraordinary Inflation/Deflation: that w/c is unusual or beyond
the common fluctuation in the value of the currency, w/c the parties
could not have reasonably foreseen, or w/c was manifestly beyond
When?
their contemplation at the time the obligation was made.
1. payment should be made when it is due
2. even if payment is due, the general rule is that demand is
GR: Inflation or deflation will not affect the obligation.
still necessary
Exception: in cases of extraordinary inflation or deflation, to be
Where?
determined by the courts.
1. with stipulation – at the place designated
2. no stipulation & delivery of specific thing – place where the
thing was at the perfection of the contract
a. exception: when its existence at the place when the
obligation was constituted was temporary, the
performance must be made at the debtor’s domicile
3. no stipulation & delivery of generic thing – domicile of the
debtor & creditor bears expenses in going to the debtor’s
place to accept payment
4. obligations of sum of money – creditor is obliged to collect
from the debtor in the debtor’s domicile
5. if debtor changes his domicile in bad faith or after he has
incurred in delay, additional expenses shall be borne by him
Legal Tender in the Philippines: all coins & notes issued by the
Bangko Sentral ng Pilipinas
coins are legal tender for amounts not exceeding P50 for
denominations of P0.25 and above
those in amounts not exceeding P20 for denominations of
P0.10 or less
all coins & bills above P1.00 are valid legal tenders for any
amount
Payment by Checks
GR: a check, whether a manager’s check or an ordinary check, is not
legal tender, & an offer of the check in payment of a debt is not valid
legal tender
Exceptions:
1. when there’s a stipulation
2. when it was accepted by the creditor (waiver
Rules Governing Innominate Contracts Contracts of Adhesion: One party has already a prepared form of a
1. Agreement of the parties contact containing the stipulation he desires, & he simply asks the
2. Provisions of the Civil Code on obligations and contracts other party to agree to them if he wants to enter into the contract
3. Rules governing the most analogous contracts
4. Customs of the place
Persons Affected by a Contract Offer: unilateral proposition w/c 1 party makes to the other for the
GR: Principle of Relativity - contracts take effect only bet. the parties, celebration of the contract
their assigns & heirs
Exception: the contract is effective only between the parties when the Offer: Requisites
rights & obligations arising from a contract are not transmissible 1. definite
1. By their nature (contract involving personal qualifications) 2. complete
2. By stipulation (principle of freedom to contract) 3. intentional
3. By provision of law (agency, partnership, commodatum,
when death extinguishes the legal relationships) Requisites for Silence to Produce Effect of Tacit Acceptance
1. There is a duty or possibility to express oneself
rd
Cases when a Stranger/3 Persons are Affected by a Contract 2. The manifestation of the will cannot be interpreted in any
1. Stipulation pour autrui: contracts containing a stipulation in other way
favour of a 3rd person 3. There is a clear identity in the effect of the silence & the
2. contracts containing real rights undisclosed will
3. contracts entered into to defraud creditors (accion pauliana)
4. contracts w/c have been violated at the inducement of a 3rd Acceptance of Offer: Forms
person 1. express – oral or written
5. accion directa 2. implied – inferred from act or conduct
Stipulation Pour Autrui: a stipulation in a contract clearly & Matters That May be Fixed by the Offeror
deliberately conferring a favour upon a 3rd person who has a right to 1. time
demand its fulfilment provided he communicates his acceptance to the 2. place
obligor before its revocation 3. manner of acceptance
4. terms
Stipulation Pour Autrui: Requisites 5. conditions
1. a stipulation in favour of a 3rd person
2. which should be a part, not the whole, of the contract When Offer becomes Ineffective
3. the contracting parties must have clearly & deliberately 1. death
conferred a favour upon a 3rd person, not a mere incidental 2. civil interdiction
benefit 3. insanity
4. the favourable stipulation should not be conditioned or 4. insolvency
compensated by any kind of obligation 5. express/implied revocation of the offer by the offeree
5. the 3rd person must have communicated his acceptance to 6. qualified/conditional acceptance of the offer (counter offer)
the obligor before its revocation 7. subject matter becomes illegal/impossible
6. neither of the contracting parties bears the legal 8. expiration of the period fixed in the offer for acceptance
representation or authorization of the 3rd party, otherwise the
rules on agency will apply Rule on Advertisements as Offers
1. business advertisements – not a definite offer, but a mere
Liability of a 3rd Person for Breach of Contract: Requisites invitation to make an offer unless it appears otherwise
1. existence of a valid contract 2. advertisements for bidders – only invitation to make
2. knowledge of by the 3rd person of the existence of the proposals & advertiser is not bound to accept the highest or
contract lowest bidder, unless it appears otherwise
3. interference by the 3rd person in the contractual relation w/o
legal justification Option Contract: giving a person for a consideration a certain period
w/in w/c to accept the offer of the offeror; & binds the person who has
Stages in the Life of a Contract given the option not to enter into the principal contract w/ any other
1. Preparation – politicacion, negotiation, conception, generation person during the designated period; it is a “continuing offer”
2. Perfection – birth, meeting of the minds
3. Consummation – performance, fulfillment RIGHT OF FIRST REFUSAL OPTION CONTRACT
Right to have the 1st opportunity Limits the promissor’s power to
When a Persons is Bound by the Contract of Another: Requisites to purchase revoke an offer
1. the person entering into the contract must be duly authorized Separate consideration NOT Separate consideration required
by the person in whose name he contracts required
2. the person must act within his power No definite offer since vendor There is a definite offer
has option to sell or not
CHAPTER 2 – ESSENTIAL REQUISITES GR: Specific performance may GR: buyer can file for specific
be filed & actual vendee may be performance if seller does not
Section 1 – Consent required to sell the property to want to sell
the holder of the right of 1st E: if sold to an innocent
Consent: manifested by the meeting of the certain/definite offer & the refusal at the price he bought it purchaser for value
absolute acceptance upon the thing & cause w/c constitute the contract Remedy: buyer may sue seller
for damages
Consent: Elements
1. plurality of subjects GR: the offer may be withdrawn as a matter of right any time before
2. capacity acceptance
3. intelligence and free will Exception: if the option is founded upon a consideration, as
4. manifestation of intent of the parties something paid or promised
5. cognition by the other party
6. conformity of the manifestation & cognition Theory of Cognition: the offer & acceptance concur only when the
offeror comes to know ¬ when the offeree merely manifests his
Consent: Characteristics acceptance (as opposed to the Theory of Manifestation)
1. intelligent
2. free/voluntary Acceptance: Requisites
3. conscious/spontaneous 1. unequivocal
2. unconditional (if qualified, it is a counter-offer)
Amplified Acceptance: an acceptance of the original offer, plus a Undue When a person takes
new offer w/c is contained in the amplification Influence improper advantage
(even if of his power over the
Persons Who Cannot Give Consent employed by will of another,
1. minors 3rd person) depriving the latter of
2. insane/demented persons a reasonable freedom
3. deaf/mutes who do now know how to write of choice
4. intoxicated Fraud False representation 1. misrepresentation or
5. under hypnotic spell (if employed of a material fact concealement
by 3rd made by word or 2. must be serious
Special Disqualifications: Incompetents person, conduct w/ 3. employed by only 1 of the
1. persons suffering the accessory penalty civil interdiction remedy is knowledge of its parties
2. hospitalized lepers damages) falsehood or reckless 4. made in bad faith or w/
3. prodigals (spendthrifts) disregard of its truth, intent to deceive
4. deaf & dumb who are unable to read and write in order to induce 5. induced the consent of the
5. those of unsound mind even though they have lucid intervals another to execute an other
6. those who, by reason of age, disease, weak mind and other act 6. resulted in damage/injury
similar causes, cannot w/o outside aid, take care of 7. proved by clear &
themselves & manage their property, becoming thereby an convincing evidence
easy prey for deceit & exploitation
CAUSES VITIATING CONSENT CAUSES OF INCAPACITY
Temporary More or less permanent
INCAPACITY TO GIVE SPECIAL Refers to the contract itself Refers to the person entering into
CONSENT DISQUALIFICATIONS the contract
Restriction upon the exercise of Restriction upon the very right Both make a contract “voidable” only, and not void
a right itself
Renders the contract voidable Makes the contract void IGNORANCE MISTAKE
Based upon subject Based upon public policy & Complete absence of any notion wrong/false notion about such a
circumstances of certain persons morals about a particular thing matter, a belief in the existence
Contracts entered into are Contracts entered into are void of some circumstance, fact or
voidable even w/c in reality doesn’t exist
There is a lack of full & correct knowledge about the thing
Juridically, they produce the same effect
GR: contracts entered into by incapacitated persons are voidable
Exceptions: Mistake of Fact Which Vitiates Consent
1. 1. when necessaries such as food, are sold & delivered to a 1. Substance of the thing w/c is the object of the contract
minor or other person w/o capacity to act, he must pay a 2. mistakes re: the nature of the contract, in w/ case is an
reasonable price therefore essential mistake, because it is one w/c has determining
2. a minor 18 years old or above may contract for life, health influence upon the will of the party
and accident insurance, provided the insurance is taken on 3. principal condition of the thing as its essential/substantial
his life & the beneficiary appointed is the minor’s estate or character, w/o w/c the thing ceases to be what it is
the minor’s father, mother, husband, wife, child, brother or 4. Identity/qualifications of 1 of the parties provided the same
sister was the principal cause of the contract
3. valid if entered into through a guardian/legal rep.
4. valid where minor misrepresented his age & convincingly led Mistake of Fact Which Does NOT Vitiate Consent
the other party to believe in his legal capacity 1. incidents of a thing or accidental qualities not taken as the
5. valid where a minor voluntarily pays a sum of money or principal consideration of the contract
delivers a fungible thing in fulfillment of his obligation 2. Error in the value of the thing
thereunder & the oblige has spent/consumed it in good faith 3. Quantity or amount
4. Motives of the contract
VICES OF CONSENT REQUISITES 5. Identity/Qualification of a party because contracts are
Mistake Substantial mistake 1. mistake of fact entered into more in consideration of the things/services w/c
of fact, such that the 2. must be mutual form their subject matter rather than of persons
party wouldn’t have 3. such mutual mistake 6. Error in the name
given his consent had frustrates the real purpose of 7. Error as to solvency of the other party is not a cause of nullity
he known of the the parties 8. Mistake as to the motive of a party doesn’t affect the contract
mistake 9. Error as to account is purely a mistake in computation
Violence When, in order to 1. irresistible physical force (mathematical error)
(even if wrest consent, of such a degree that the 10. Error as to estimates
employed by serious or irresistible victim has no other course 11. Error in unilateral decision
rd
3 person) force is employed but to submit
2. it is the determining cause VIOLENCE INTIMIDATION
for giving consent External internal
Intimi- When 1 of the parties 1. produces a reasonable & Degree of constraint or Danger threatened or impending; evil
dation is compelled by a well-grounded fear of an evil danger actually inflicted or harm arising from an unlawful act
(even if reasonable & well- 2. imminent & grave evil Physical force/compulsion Moral force/compulsion
employed by grounded fear of an 3. threatened evil is
To prevent an act fr. being Induces the performance of an act
3rd person) imminent & grave evil unlawful/unjust
done
upon his 4. evil must be upon his
person/property, or person or property, or that
INTIMIDATION UNDUE INFLUENCE
that of his spouse, of his spouse, descendants
descendants, or ascendants Threatened unlawful/unjust act that There need not be an
ascendants, to give 5. it is the determining cause causes consent to be given unjust/unlawful act
consent for the contract There is moral coercion (threats, or harassing tactics)
Badges of Fraud:
1. consideration of the conveyance is inadequate/fictitious
2. transfer was made by a debtor after a suite has begun &
while its pending against him
3. sale upon credit by an insolvent debtor
4. evidence of indebtedness or complete insolvency
5. transfer of all his property by a debtor when he is financially
embarrassed or insolvent
6. transfer made bet. father & son where there is present any of
the above circumstances
7. failure of the vendee to take exclusive possession of the
property
GR: the action to claim rescission must be GR: the action for annulment must be Imprescriptible
commenced w/in 4 years fr. the date the commenced w/in 4 years fr. the date the
contract was entered into contract was entered into
Exceptions: Exceptions:
- for persons under guardianship, the - for incapacitated persons, from the the
period shall begin from the termination of guardianship ceases
Prescriptive incapacity - in case of intimidation, violence or undue
Period - for absentees, from the time the domicile influence, from the time the defect of
is known consent ceases
- for creditors, from the time of discovery - in case of mistake or fraud, from the time
of fraud & after all means are exhausted of its the discovery
- for litigants, from the time of knowledge ***prescriptive period not interrupted by
of transaction extra-judicial demand