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TITLE I - OBLIGATIONS Quasi Contracts: Elements


1. lawful
2. voluntary
CHAPTER 1 – GENERAL PROVISIONS
3. unilateral
Obligation: Requisites Independent Civil Actions
1. Passive Subject – debtor/obligor who is bound to the 1. obligations not arising from the act/omission claimed to be
fulfilment of the obligation criminal
2. Active Subject – creditor/obligee who is entitled to demand 2. violations of constitutional rights & liberties of individuals
the fulfilment of the obligation (natural/juridical persons) 3. defamation, fraud or physical injuries
3. Prestation/Object – conduct required to be observed by the 4. refusal/failure of members of a local police force to render
debtor protection to life/property
4. Vinculuum Juris – juridical/legal tie w/c binds or connects the
parties to the obligation; enforceability of the obligation Civil Liability: Scope
1. restitution
Object/Prestation: Kinds 2. reparation for the damage caused
1. to give – delivery of a movable/immovable thing 3. indemnification
2. to do – work/service whether physical or mental
3. not to do – abstaining from some act Quasi Delict: Requisites
1. act/omission
Object/Prestation: Elements 2. fault/negligence
1. possible 3. damage caused
2. determinate/determinable 4. direct relation of cause & effect between the act or omission
3. susceptible of pecuniary value and the damage
4. legal/licit 5. no pre-existing contractual relation bet. the parties

CIVIL OBLIGATIONS NATURAL OBLIGATIONS Test of Negligence


Civil obligations are those natural obligations are those which 1. a duty on the part of the defendant to protect the plaintiff
which give a right of action cannot be enforced by court action from the injury of w/c the latter complains
to compel their performance but which are binding on the party 2. a failure to perform that duty
who makes them, in conscience and 3. an injury to the plaintiff through such failure
according to equity & natural justice
binding force from positive equity and natural justice Negligence: Kinds
law 1. culpa aquilana – negligence as a source of obligation
can be enforced by court cannot be compelled by court action 2. culpa contractual – negligence in the performance of a
action or the coercive power but depends exclusively upon the contract
of public authority good conscience of the debtor 3. culpa criminal – negligence resulting in the commission of a
crime
Legal Wrong: Elements
1. legal right in favour of the plaintiff QUASI-DELICT CONTRACT
2. correlative legal obligation on the part of the defendant The obligation arises only when There is already an obligation w/c
3. an act or omission by the defendant in violation of said right there is a breach exists prior to or even w/o a
w/ resulting damage to the plaintiff breach
It is the breach itself w/c gives The breach of the contract is
Obligations: Kinds Accdg. to Subject Matter rise to the obligation immaterial to the legal obligation
1. Real Obligation – subject matter is a thing w/c the debtor Quasi-delict & breach are Contract & breach are separable.
must deliver to the creditor inseparable
2. Personal Obligation – subject matter is an act to be done or
not to be done QUASI-DELICT DELICT/CRIME
private right (wrong against public right (wrong against the
Personal Obligations: Kinds
an individual) State)
1. Positive – obligation to do or render service
criminal intent is not present criminal intent is necessary
2. Negative – obligation not to do/not to give
punishable when fault or punishable only when there is a
negligence is present penal law that punishes it
Obligations: Sources
1. law – imposed by law itself (ultimate source) Every quasi-delict gives rise to there are crimes from which no civil
2. contracts – meeting of minds between 2 parties whereby one liability for damages to the liability arises, such as in the cases
binds himself, w/ respect to another, to give something or to injured par of contempt, gambling, and
render service violations of ordinances and traffic
3. quasi-contracts – arise from lawful, voluntary & unilateral regulations where nobody is
acts w/c are enforceable to the end that no one shall be injured.
unjustly enriched at the expense of another reparation of injury suffered fine or imprisonment, or both, the
4. delicts – acts/omissions punishable by law by the injured party (as fine accruing to the public treasury
5. quasi-delicts – arise from damage caused to another through compensation/indemnification) (as punishment)
an act/omission, there being fault/negligence, but no Preponderance of evidence Proof beyond reasonable ground
contractual relation exists between them Can be compromised Can never be compromised
6. public offer (Balane’s opinion) Civil liability only Civil & criminal liability

Quasi Contracts: Kinds (2) CHAPTER 2 – NATURE & EFFECT OF OBLIGATIONS


1. Negotiorum gestio – voluntary management of the property
or affairs of anther w/o the knowledge or consent of the latter
Obligations to Give
2. solutio indebiti – juridical relation w/c is created when
1. Determinate/Specific
something is received when there is no right to demand it & it
2. Indeterminate/Generic
was unduly delivered through mistake
3. Limited Generic

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DETERMINATE/SPECIFIC INDETERMINATE/GENERIC Liability in case of Breach


- particularly designated - refers only to a kind class/genus to 1. in good faith – liable for necessary/normal damages
- physically segregated fr. w/c it pertains 2. in bad faith – liable for all kinds of damages, including
others of the same class - cannot be pointed w particularity nominal, moral & exemplary
- individualized - the object is determinable, but the
- can be identified or moment it is delivered, it becomes Exemption from Liability: Kinds
distinguished from others of determinate 1. a party to a contract is relieved from the effects of his fault or
its kind - debtor can give anything of the negligence by a 3rd person (e.g. insurance)
- debtor cannot substitute it same class of the same kind/quality 2. one party to a contract renounces in advance the right to
w/ another although it is of *Limited Generic – when the enforce liability arising from the fault/negligence of others
the same kind & quality w/o generic objects are confined to a
the consent of the creditor particular class Damages
Moral
Duties of Debtor in Obligation to Give a Determinate Thing Exemplary
1. Preserve the thing – diligence of a good father of a family Nominal
2. deliver the thing itself Temperate
3. deliver the fruits of the things Actual
4. deliver accessions and accessories Liquidated & attorney fees
5. answer for damages in case of non-fulfilllment/breach
INCIDENTAL FRAUD CAUSAL FRAUD
Duties of Debtor in Obligation to Give a Generic Thing (ART. 1171) (ART. 1338)
1. deliver the thing w/c is of the quality intended by the parties Malice Deceit
2. to be liable for damages in case of fraud, negligence, delay, Subsequent fraud Antecedent Fraud
or contravention of the tenor the obligation Fraud committed in the Fraud employed in the execution of
3. in case of fortuitous event, debtor is still liable performance of an obligation a contract
already existing
Fruits: Kinds evades the normal fulfilment uses insidious words or
1. natural fruits – spontaneous products of the soil & the young of an obligation machinations to induce another to
& other products of animals enter a contract, w/o them, he
2. industrial fruits – produced by lands of any kind through would have agreed
cultivation of labor Does not vitiate consent Vitiates consent
3. civil fruits – derived by virtue or juridical relation Obligation/contract is valid Contract is voidable
Creditor has a right to Creditor may annul the obligation
PERSONAL RIGHT REAL RIGHT damages because of breach
Right/power of a person to demand Right/interest of a person over
from another the fulfilment of the a specific thing w/o a definite SIMPLE NEGLIGENCE GROSS NEGLIGENCE
latter’s obligation passive subject against whom Lack of due diligence So reckless as to amount to fraud
the right may be enforced Waiver of future simple Waiver of future gross negligence
Definite active subject & definite Definite active subject but no negligence is allowed is void, as it is tantamount to
passive subject definite passive subject waiving future fraud
Binding against a particular person Binding against the whole
world FRAUD NEGLIGENCE
Deliberate intention to cause No such intention
Creditor’s Remedies in Specific Real Obligations damage or injury
1. Specific performance/Compliance/Fulfillment – performance Waiver for future fraud – void May be allowed
of the prestation itself Must be clearly proved Presumed from the violation of
2. Substituted performance – when someone else performs or the contractual obligation
something else is performed at the expense of the debtor Liability cant be mitigated or May be mitigated or reduced
3. Equivalent performance – payment of damages exclusively or reduced by the courts
additonally
4. Resolution/rescission CULPA CONTRACTUAL CULPA AQUILANA
negligence in contracts negligence which by itself is the
OBLIGATION SPECIFIC EQUIVALENT SUBSTITUTE resulting in their breach; not source of obligation (quasi-delict
PERFORMANCE PERFORMANCE PERFORMANCE a source of obligation or tort)
1. To Give Liability arises involving a Liability arises not involving a
- determinate breach of contractual duty, an breach of existing obligation, en
Thing √ √ X employer may not exempt employer may exempt himself
himself from liability by from liability by proving that he
- determinable
proving that he had exercised had exercised due diligence
Thing √ √ √
due diligence
2. To Do
Court is given discretion to No such discretion is given
- personal X √ X
mitigate liability accdg. to the dealing with liability arising
- not personal X √ √
circumstances under Art. 2176
3. Not To Do X √ √
Kinds of Diligence Required
Grounds for Liability 1. that agreed upon by the parties – orally/in writing
1. Fraud/Deceit/Dolo – deliberate intent or intentional evasion of 2. that required by law in particular cases
the normal fulfilment of an obligation w/c implies a. extraordinary diligence – common carriers
malice/dishonesty/bad faith b. meticulous care - banks
2. Negligence/Fault/Culpa – failure to observe for the protection 3. if both are silent - diligence of a good father of a family
of the interests of another person, that degree of care,
precaution & vigilance w/c the circumstances justly demand Proximate Cause: adequate & efficient cause as, in the natural order
3. Delay/Mora – nonfulfillment w/ respect to time of events, & under the particular circumstances surrounding the case,
4. Contravention of the terms of the obligation – violation of the would necessarily produce the event
terms/conditions stipulated in the obligation

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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

Default: Kinds Fortuitous Event: Kinds


1. Mora Solvendi – delay on the part of the debtor 1. ordinary – events w/c are common & w/c the contracting
2. Mora Accipiendi – delay on the part of the creditor parties could reasonably foresee
3. Compensatio Morae – delay of obligors in reciprocal 2. extraordinary – uncommon & w/c the parties could not
obligations reasonably foresee

Mora Solvendi: Requisites Fortuitous Event: Requisites


1. the obligation is due, demandable & liquidated 1. event must be independent of the human will or at least of
2. failure of the debtor to perform his positive obligation on the the will of the debtor
time agreed upon through his fault/negligence 2. even could not be foreseen, if foreseen, inevitable
3. creditor makes a judicial/extra-judicial demand upon the 3. event must be of such character as to render it impossible for
debtor to comply w/his obligation the debtor to comply with his obligation in a normal manner
4. failure to comply w/ demand 4. debtor must be free from any participation in the aggravation
of the injury to the creditor
Mora Solvendi: Effects
1. debtor guilty of breach GR: a person is not liable for loss or damage caused to another
2. debtor is liable to the creditor for interest/damages resulting from a fortuitous event
3. Fortuitous event Exceptions:
a. Determinate thing – debtor still liable; but if the debtor 1. Expressly specified by law
can prove that the loss would have resulted just the a. Debtor is guilty of fraud, negligence, delay or
same even if he had not been in default, the court may contravention of the tenor of the obligation
equitably mitigate/reduce the damages b. Debtor has promised to deliver the same thing to 2 or
b. Indeterminate thing – debtor is not relieved from liability more persons who do not have the same interests
for loss & can still be compelled to deliver a thing of the c. Obligation to deliver a specific thing arises from a crime
same kind d. The thing to be delivered is generic
2. declared by stipulation
GR: Demand is necessary. No demand, no delay. 3. nature of the obligation requires the assumption of risk
Exceptions:
1. when the obligation so provides Simple Loan/Mutuum: a contract whereby one of the parties delivers
2. when the law so provides to another, money or other consumable thing, upon the condition that
3. when the nature & circumstances of the obligation provides; the same amount of the same kind & quality shall be paid
designation of time was the controlling motive
4. demand would be useless, as when the obligor has rendered Interests: income produced by money in relation to the amount &
it beyond his power to perform time it cannot be utilized by the owner
5. there is express recognition of default by the debtor
6. there is performance by a party in reciprocal obligations Interests: Kinds
(Balane: in reciprocal obligations, demand is still needed) 1. Moratory – paid in contractual obligations to pay a sum of
money as the price for the use of the money or as the
Mora Accepiendi: Requisites stipulated advanced determination of the damages due to the
1. an offer of performance by the debtor delay of the fulfilment of the obligation
2. the offer must be to comply w/ the prestation as it should be 2. Compensatory – interests in obligations w/c have an extra-
performed contractual or delictual origin
3. creditor refuses the performance w/o just cause
Recovery of Interests: Requisites
Mora Accepiendi: Effects 1. payment of interest must be expressly stated
1. creditor is guilty of breach 2. agreement must be in writing
2. creditor is liable for damages suffered by the debtor 3. interest must be lawful
3. creditor bears the risk of loss of the thing due
4. expenses incurred by the debtor for preservation of the thing
after the delay shall be chargeable to the creditor Rules for Computing Interests:
5. debtor is not liable for interest
6. debtor may release himself from the obligation by A. Loan/Forbearance of Money
consignation/deposit in court of the thing/sum due Demand/ ____________ final & _________________ full
7. responsibility of the debtor for the thing due is reduced & Breach 12 % executory 12 % payment
limited to fraud & gross negligence
8. debtor is exempted from risk of loss of the thing w/ shall pass B. Damages (NOT loan/forbearance of Money)
to the creditor Demand/ ____________ final & _________________ full
Breach 6% executory 12 % payment
Compensatio Morae: Effects
1. liability of the 1st infractor shall be equitably tempered or
balanced by the courts Usury: contracting for or receiving something in excess of the amount
2. if it cant be determined w/c of the parties 1st incurred in allowed by law for the loan or forbearance of money, goods or chattels
delay, the contract shall be deemed extinguished & each shall
bear his own damages

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Disputable Presumptions CHAPTER 3 – DIFFERENT KINDS OF OBLIGATIONS


1. Interest bearing debt – presumption that interest has been
paid if the principal has been received w/o reservation re: Different Kinds of Obligations
interest 1. According to Demandability
2. Debt payable in instalment – presumption that earlier a. Pure
instalments have been paid if the later instalment has been b. Conditional
received w/o reservation re: the previous instalment c. w/ a term
2. According to Plurality of Object
When the Presumption Does not Apply a. Simple
1. w/ reservation as to the interest b. Multiple
2. receipt w/o indication of particular instalment paid i. Alternative
3. payment of taxes ii. facultative
4. non-payment has been proven 3. According to Plurality of Subjects
a. Single
Creditor’s Remedies for Satisfaction of their Claims b. Multiple
1. Levy & execution of debtor’s non-exempt property i. Joint
2. Accion subragatoria ii. Solidary
3. Accion pauliana 4. According to Performance
4. Accion directa a. Divisible
b. Indivisible
Accion Subragatoria: the action w/c the creditor may exercise in the 5. According to Sanction for Breach
place of his negligent debtor in order to preserve/recover for the a. No penal Clause
patrimony of the debtor the product of such action & then obtain b. w/ penal clause
therefrom the satisfaction of his own credit; the debtor of my debtor is
my debtor
Section 1 – Pure & Conditional Obligations
Accion Subragatoria: Requisites
1. Debtor is indebted to the creditor Pure Obligation: has neither a condition nor a term attached to it; it
2. Debt is due & demandable is subject to no contingency
3. Failure of debtor to collect his own debt from a 3rd person
either through malice or negligence Obligations Demandable at Once
4. creditor must be prejudiced by the inaction/failure of the 1. pure
debtor to proceed against the 3rd person 2. subject to a resolutory condition
5. creditor must have pursued 1st or exhausted all the properties 3. subject to a resolutory period
of the debtor w/ aren’t exempt from execution
6. debtor’s assets are insufficient to satisfy his claims Condition: Characteristics
7. right of account is not purely personal 1. Future & Uncertain
2. Past but Unknown
Accion Pauliana: right of creditors to rescind alienations by debtor
w/c are prejudicial to them to the extent of the prejudice KINDS OF CONDITION
SUSPENSIVE RESOLUTORY
Accion Pauliana: Requisites Condition Obligation arises Obligation extinguished
1. credit in favour of the plaintiff fulfilled
2. debtor has performed an act subsequent to the contact, Does not Juridical tie doesn’t Tie of law is consolidated
giving advantage to other persons
take place appear
3. creditor is prejudiced by the debtor’s act w/c are in favour of
3rd persons & rescission will benefit the creditor Until it takes Existence of obligation is Hovers the possibility of
4. creditor has no other legal remedy place a mere hope termination of obligation
5. debtor’s acts are fraudulent AKA Precedent/antecedent Subsequent

Accion Directa: a direct (not subrogatory) action by the creditor


Positive Suspensive Condition: Obligation Extinguishes
against his debtor’s debtor; a remedy w/c gives the creditor the
1. time expires w/o the event taking place
prerogative to act in his own name 2. indubitable that the event will not take place, though the
specified time has not expired
Examples of Accion Directa
1. lessor against the sublessee
Negative Conditions: Obligation Effective
2. labourer of an independent contractor against the owner
1. time indicated has elapsed
3. principal against the subagent 2. evident that the event cannot occur, though the time
4. vendor-a-retro against the transferee of the vendee indicated has not elapsed
Personal Rights of Debtor Retroactive Effect: Fulfilment of Suspensive Condition
1. right to existence 1. obligations to give – retroact to day of constitution of
2. right of relations of a public character
obligation;
3. rights of an honorary character
a. if the obligation imposes reciprocal prestations,
4. rights consisting of powers w/c haven’t been used fruits & interests are deemed mutually compensated
5. non-patrimonial rights b. if the obligation is unilateral, debtor appropriates
6. patrimonial rights not subject to execution the fruits
7. patrimonial rights inherent in the person of the debtor
2. obligations to do/not to do – courts have discretion
GR: All rights acquired in virtue of an obligation are transmissible Rights Pending Fulfilment of Suspensive Condition
Exceptions: 1. Creditor – preservation of his right
1. prohibited by stipulation 2. Debtor – recover what was paid by mistake
2. prohibited by law – contract of partnership, agency,
commodatum

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Preservation of Creditor’s Rights RESCISSION IN RECIPROCAL OBLIGATIONS


1. To prevent the loss or deterioration of the things which are ARTICLE 1191: RESOLUTION ARTICLE 1381: RESCISSION
the object of the obligations by enjoining or restraining acts Principal remedy Subsidiary remedy
of alienation or destruction by the debtor himself or by third Need not show that there is no Must show that there is no other
persons other remedy remedy
2. To prevent concealment of the debtors properties which May be demanded only by a May be demanded by a 3rd party
constitute the guarantee in case of non performance of the party to the contract prejudiced by the contract
obligation May be denied by the court when Such reason doesn’t affect the
3. To demand security if the debtor becomes insolvent there is sufficient reason to right to ask for rescission
4. To compel the acknowledgement of the debtors signature on justify extension of time to the
a private document or the execution of the proper public defendant in w/c to perform
documents for registration so as to affect third persons Non performance is the only There are various grounds of
5. To register the deeds of sale or mortgages evidencing the ground for the right to rescission equity provided as grounds for
contract rescission (economic prejudice)
6. To set aside fraudulent alienations made by the debtor
Applies only to reciprocal Applies w/n the contract produces
7. To interrupt the period of prescription, by actions against
obligations where 1 party has unilateral/reciprocal obligations &
adverse possessors of the things which are the objects of the
not performed even when the contract has been
obligation
fully fulfilled
SIMILARITIES
Resolutory Condition: Effects
1. Both presuppose contracts validly entered into and existing
1. Obligation to give – mutual restitution (includes fruits);
2. both require mutual restitution when declared proper
return to status quo; return to each other what they received
2. Obligation to do/not to do – discretion of the courts
CONTRACT OF SALE CONTRACT TO SELL
Obligation: Kinds Accdg. to Persons Obliged Ownership transferred upon Ownership reserved in the vendor &
1. Unilateral – only 1 party is obliged to comply w/ a prestation delivery of the thing sold does not pass until full payment of the
2. Bilateral – both parties mutually bound to each other; both purchase price
are debtors/creditors of each other Reciprocal obligations: Separate obligation to do which is to
buyer – pay sum of money execute a deed of absolute sale
Bilateral Obligations: Kinds seller – deliver the thing,
1. Reciprocal – 2 prestations arise from the same cause; each transfer ownership
prestation is designed to be the counterpart of the other; Remedies: Remedies:
mutual debtor/creditor - Specific performance + - restitution
2. Non-Reciprocal – not arising from the same cause; damages Note: there can be no rescission
obligations aren’t dependent upon each other - rescission + damages because obli. to execute a deed of sale
never arose; obli. is non-existent
Reciprocal Obligations: Remedies Conditional contract of sale Execution of DOS is another and
1. Specific Performance & Damages – upon fulfilment of separate action
2. Resolution & Damages condition, may compel to Ownership is retained by vendor
transfer ownership
Summary of Rulings on Resolution Non-payment of purchase Positive suspensive condition – non
1. Right to resolve is inherent in reciprocal obligations price is resolutory condition payment of the purchase price is not a
2. Breach must be substantial & not slight & there must be proof breach, but an event which prevents
thereof the obli. of vendor to convey title
3. Right of resolution can be exercised extrajudicially & will take
effect upon receipt by the defaulting party of the notice of Conditions Accdg. to Cause/Origin
resolution 1. Potestative – depends on the sole will of 1 of the parties
4. The exercise of this right can be the subject of judicial review a. Depends on the sole will of the creditor – valid
5. Upon resolution, there must be mutual restitution of the b. Depends on the sole will of the debtor – the whole
object & its fruits obligation is void
6. If the aggrieved party has not performed the prestation & 2. Casual – depends upon chance or will of 3rd parties
resolves extrajudicially, then all the aggrieved party has to do 3. Mixed – depends partly upon the will of a party and partly
is to refuse to perform his prestation upon chance and/or the will of a 3rd person
7. If the aggrieved party has performed the prestation, the
aggrieved party can demand recovery SIMPLE POTESTATIVE PURELY POTESTATIVE
To a certain extent, it depends on the If the suspensive
Resolution: Effects voluntary act of the obligor, yet it is potestative condition
1. Extinguishes the obligatory relation as it had never been subject, in part, to contingencies over depends solely upon the
created (the extinction having a retroactive effect) w/c he has not control; Does not will of the debtor, the
2. Equivalent to invalidating and unmaking the juridical tie, prevent the formulation of a valid efficacy of the legal tie is
leaving things in their status before the celebration of the obligation destroyed
contract
3. Abrogates the contract in all parts (The party seeking Doctrine of Constructive Fulfillment: the condition is deemed
rescission cannot have performance as to a part and fulfilled when the obligor voluntarily prevents its fulfillment
rescission as to the remainder)
Doctrine of Constructive Fulfillment: Requisites
Breach of Both Parties: Effects 1. Intent of the debtor to prevent the fulfilment of the
1. if 1st infractor known, liability of 1st infractor shall be suspensive condition
equitable tempered by courts 2. Actual prevention of compliance
2. if it cant be determined who 1st breached, obligation is
extinguished & each bears his own damages Possible Condition: capable of realization according to nature, law,
public policy, good customs

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Impossible Conditions: Kinds Section 2 – Obligations with a Period


1. Physical – cannot exist/cannot be done
2. Legal – contrary to laws, morals, good customs, public order, Period/Term: length of time which, exerting an influence on an
public policy obligation as a consequence of its juridical acts, suspends its
demandability or determines its extinguishment
Effect of Impossible Condition:
GR: the whole obligation is void Period: Requisites
Exceptions: 1. Future
1. Obligation not to do an impossible thing 2. Certain
2. If the obligation is divisible, that part of the obligation not 3. Possible
affected by the impossible condition is valid
3. Pre-existing obligation Types of Periods:
4. Simple/Remuneratory donations 1. Suspensive (ex die) – obligation begins from a day certain,
5. Testamentary Dispositions upon the arrival of the period
2. Resolutory (in diem) – obligation is valid up to a day certain;
Positive condition to do Void condition terminates upon arrival of period
something impossible Void obligation 3. Legal – granted by law
Negative condition not to Disregard condition 4. Voluntary – stipulated by the parties
do something impossible Valid obligation 5. Judicial – fixed by the courts
Negative condition not to Valid condition 6. Express – specifically stated
do something illegal Valid obligation 7. Tacit – when a person undertakes to do some work w/c can
be done only during a particular season
8. Original
Other Kinds of Conditions 9. Grace – an extension fixed by the parties or by the court
1. Positive - condition involves the performance of an act 10. Definite – refers to a fixed known date or time
2. Negative - condition involves the non-performance of an act 11. Indefinite – refers to an event w/c will necessarily happen but
3. Divisible – condition is susceptible of partial realization the date of its happening is unknown
4. Indivisible – condition is not susceptible of partial realization
5. Conjunctive – there are several conditions, all of w/c must be PERIOD CONDITION
realized Ful- Certain event which must An uncertain event
6. Alternative – there are several conditions, only 1 must be filment happen sooner or later at a
realized date beforehand,
7. Express – condition is stated expressly
As to Has no effect upon the Gives rise to an
8. Implied – condition is tacit
influence existence of obligations but obligation or
on the only their demandability or extinguishes one
Application of 1189: Requisites
obligation performance already existing
1. obligation to give
Time Refers only to the future May refer also to a past
2. determinate thing
event unknown to the
3. suspensive condition
parties
4. condition fulfilled
5. there is loss, deterioration, improvement of the thing during Left to the Depends upon the will of the Depends upon the sole
pendency of condition will of the debtor – court to fix duration will of the debtor –
debtor invalidates obligation
LOSS DETERIORATION IMPROVEMENT Retro- Unless there is an agreement Happening of condition
activity of to the contrary , arrival of has retroactive effect,
By Liable for Creditor may Usufructuary
effects period does not have any
debtor damages to demand the thing (Usufruct – the
retroactive effect
the creditor or ask for right to enjoy the
upon the rescission, with use & fruits of a There’s already an obligation No obligation yet
fulfilment of damages in either thing belonging to
the condition case another) Payment Before it was Due: No recovery
Not by Obligation is Debtor not liable By nature of the 1. in reciprocal obligations & there has been premature
debtor extinguished, for damages; thing or by time – performance on both sides
unless there creditor must improvements 2. in loans w/c the debtor is bound to pay interest
is a accept the thing in shall inure to the 3. period is exclusively for the benefit of creditor because the
stipulation to its impaired benefit of the debtor by paying in advance loses nothing
the contrary condition creditor 4. debtor is aware of the period & pays anyway (waiver)
5. in personal obligations
Reqts for the Rules on Loss/Deterioration/Improvement to
Moratorium: postponement of fulfilment of an obligation (must be
Apply:
definite & reasonable)
1. Obligation has a suspensive condition, a resolutory condition
or term
2. The obligor is obligated to deliver a determinate thing PERIOD
3. There is improvement/loss/deterioration before the fulfilment BENEFIT OF BENEFIT OF BENEFIT OF DEBTOR
of the condition/period BOTH PARTIES CREDITOR ONLY ONLY
4. The condition is fulfilled or the period arrives the creditor He may demand He can’t be compelled
cannot demand fulfilment even to pay prematurely, but
Loss in Civil Law payment and the before the arrival he can, if he desires to
1. physical - perishes debtor cannot of the term but the do so. He may oppose a
2. legal – goes out of commerce make an debtor cannot premature demand for
3. civil – thing disappears effective tender require him to payment but may
and consignation accept payment validly pay at any time
of payment before the before the period
before the period expiration of the expires
stipulated. stipulated period. - “on or before/within”

SIENNA A. FLORES OBLIGATIONS & CONTRACTS


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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

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RIGHT OF CHOICE: CREDITOR JOINT DIVISIBLE JOINT INDIVISIBLE


FAULT LOSS OF ONE/SOME LOSS OF ALL Each can demand/is liable Fulfillment requires concurrence of all
Debtor Creditor may choose: Choice by the only for proportionate share debtors, but each for his own share
1. Claim any of those creditor shall fall only
subsisting upon the price of Cannot act in representation Proceed against all debtors;
2. Price of the thing any one of them or cannot be compelled to concurrence of all creditors necessary
which disappeared + damages answer for others for enforcement of obligation
Creditor Deliver remaining Obligation is
extinguished GR: The debtor may pay any of the solidary creditors
Fortuitous Creditor may choose from Obligation is E: If any of the solidary creditors make a demand upon a debtor, the
Event those subsisting extinguished latter must pay only to the one demanding payment, otherwise it will
treated as payment to a 3rd person, and the debtor can still be made to
Section 4 – Joint & Solidary Obligations pay the one who made the demand on him (the debtor can still recover
from the paid creditor)
Obligations: Kinds Accdg. to # of Parties
Active Solidarity: Effects
1. Single/Individual – 1 creditor & 1 debtor
1. Since it is a reciprocal agency the death of a solidary creditor
2. Collective – 2 or more debtors and/or 2 or more debtors
does not transmit the solidarity to each of his heirs but to all
a. Joint – There are as many obligations as there are
of them taken together
creditors multiplied by as many debtors
2. Each creditor represents the others in the act of receiving
b. Solidary – any of the debtors can be held liable for
payment and in all other acts which tend to secure the credit
the entire obligation, and any of the creditors is
or make it more advantageous.
entitled to demand the entire obligation
a. If he receives only a partial payment he must divide it
among the other creditors
GR: The obligation is joint since joint obligations are less onerous
b. He can interrupt the period of prescription
Exceptions (When Solidarity Exists):
c. He may render the debtor in default for the benefit of all
1. obligation expressly states
other creditors
2. law requires solidarity
d. bring suit so the obligation would produce interest
3. nature of the obligation
3. One creditor does not represent the others in such acts as
4. imposed in a final judgment against several defendants
novation, compensation, and remission.
5. a large condition is imposed upon heirs & the testament
4. The creditor and its benefits are divided equally among the
expressly makes the condition in solidum
creditors unless there is an agreement among to divide
6. quasi delicts
differently
7. employer-employees
5. The debtor may pay to an solidary creditor, but if a judicial
8. partners in partnerships
demand is made he must pay only to the plaintiff
9. principal-agent
6. Each creditor may renounce his right even against the will of
10. 2 bailees in a loan
the debtor and the layer need not thereafter pay the
obligation to the former
JOINT SOLIDARY
- mancommunada - solidaria
Passive Solidarity: Effects
- mancommunadamente - in solidum
1. Each debtor can be required to pay the entire obligation but
- pro rata - jointly and/or severally
after payment he can recover from the co-debtors their
- proportionately - together and/or separately
respective shares
“we promise to pay” - individually and/or collectively
2. The debtor who required to pay may set up by way of
- juntos o seperadamente
compensation his own claim against the creditor in this case
- “I promise to pay” & signed by 2 or more
the effect is the same as that of payment
3. The total remission of the debt in favour of a debtor releases
Solidarity: Kinds Accdg. to Parties Bound all the debtors but when this remission affects only the share
1. Passive – debtors – mutual guaranty of one debtor the other debtors are still liable for the balance
2. Active – creditors – mutual agency/representation 4. All the debtors are liable for the loss of the thing due even if
3. Mixed – both such loss is caused by the fault of only one of them or by
fortuitous event after one of the debtors has incurred in delay
Solidarity: Kinds Accdg. to Source 5. The interruption of prescription as to one debtor affects all
1. Conventional – agreed upon the others but the renunciation by one debtor of prescription
2. Legal – imposed by the law already had not prejudice the others because the
3. Real – nature of the obligation extinguishment of the obligation by prescription extinguishes
also the mutual representation among the solidary debtors
Solidary Obligations: Kinds Accdg. to Legal Tie 6. The interests due by reason of the delay of one of the debtors
1. uniform – parties bound by same stipulations are borne by all of them
2. non-uniform/varied – parties not subject to same stipulations
PASSIVE SOLIDARY & SURETYSHIP
Joint Liability: Effects
SIMILARITIES DISTINCTIONS
1. Demand by 1 creditor upon 1 debtor produces the effects of
1. both stand for 1. A solidary debtor unlike surety is liable not
default only w/ respect to the creditor who demanded &
some other person only for his co-debtor’s obligation but also
debtor the demand was made but not w/ respect to others
2. after payment, for his own, he is both a principal debtor &
2. Interruption of prescription by the judicial demand of 1
may require that surety
creditor upon a debtor, does not benefit the other creditors
they be 2. A solidary debtor’s responsibility for his co-
not interrupt the prescription as to other debtors
reimbursed debtor is primary not subsidiary
3. The vices of each obligation arising from the personal defect
3. An extension of time given by the creditor to
of a particular debtor or creditor does not affect the obligation
a debtor would not release a solidary c-
or right of the others
debtor but would release a solidary
4. The insolvency of a debtor does not increase the
guarantor or surety
responsibility of his co-debtors nor does it authorizes a
creditor to demand anything from his co-debtors
5. defense of res judicata is not extended from 1 to another

SIENNA A. FLORES OBLIGATIONS & CONTRACTS


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Acts Prejudicial by Solidary Creditor: Effects GR: obligations are indivisible


1. among co-creditors – obligation extinguished w/ respect to Exceptions (divisible obligations):
debtors, but doesn’t prejudice the right of other creditors to 1. The parties provide otherwise
recover their shares from the creditor who effected the act 2. The law so provides
2. among co-debtors – co-debtor to whom obligation was 3. The nature of the obligation necessarily entails the
extinguished cant recover from his co-debtors performance of the obligation in parts; when the obligation
has for its object the:
Payment by a Solidary Debtor: Effects a. execution of a certain number of days of work
1. bet. solidary debtors & creditors – full payment extinguishes b. accomplishment of work by metrical units
the obligation c. analogous things w/c are by their nature susceptible
2. among solidary debtors – paying debtor may demand of partial performance
reimbursement from others for their proportionate share; in Exception to the Exception: Even though the object/service may be
case of insolvency of 1, others assume the share physically divided, an obligation is indivisible if:
proportionately 1. intended by the parties
3. among solidary creditors – receiving creditor is jointly liable 2. so provided by law
to others for their corresponding share
Divisible Thing vs. Indivisible Thing
Non-Performance/Loss/Impossibility: Effects 1. Divisible – each 1 of the parts forms a homogenous &
1. Loss w/o fault & before delay – obligation extinguished analogous object to the other parts as well as the thing itself
2. Loss by fault of 1 of solidary debtors or through FE after 2. Indivisible – if divided into parts, its value is diminished
debtor incurred in delay – all shall be responsible to the disproportionately; if the object is physically indivisible or
creditor, for the price & payment of damages & interest w/o service is not susceptible of partial performance, obligation is
prejudice to their action against the guilty debtor always indivisible
3. No loss but there’s breach (delay, fraud, negligence) –
creditor may recover from any of the solidary debtors; the Kinds of Division
guilty debtor cannot be made to shoulder the hare of the co- 1. Qualitative
debtors in the original obligation 2. Quantitative
3. Ideal/Intellectual
Defenses Available to Solidary Debtors
1. Real defenses - derived from the nature of the obligation; Kinds of Indivisibility
benefits all the debtors (total) 1. Legal
2. Personal defences - personal to, or w/c pertain to the share 2. Conventional
of the debtor sued (total/partial) 3. Natural
3. defenses personal to other solidary debtors – the debtor can
only avail himself of the these defenses only w/ regard to the DIVISIBLE OBLIGATION INDIVISIBLE OBLIGATION
part of the debt to w/c his co-debtors are liable for (partial) Capable of partial fulfilment Not capable of partial fulfillment
1. Execution of certain # of 1. To give definite things
PRESCRIPTIVE PERIOD days of work 2. Presumption when there’s only
10 years - written contract 2. Expressed by metrical units 1 debtor & 1 creditor
- obligation created by law 3. Nature of obli. susceptible of 3. Provided by law
- upon a judgment partial fulfilment 4. Intention of parties
6 years - oral-contact
- quasi-contract INDIVISIBLE JOINT INDIVISIBLE SOLIDARY
4 years - inquiry to the rights of the plaintiff Debtors ready to perform Every debtor liable for losses &
- quasi delict their part do not become damages, but those ready to perform
liable for more than the may recover fr. guilty debtor
INDIVISIBILITY SOLIDARITY share corresponding to him
Refers to Prestation, w/c is not Juridical or legal tie Necessity of collective Creditor may demand entire
capable of partial fulfilment; action must be indemnity (including price of the
performance against ALL debtors thing/prestation & damages) fr. ANY
Demand Each creditor cannot Each obligation may debtor, even those ready/willing to
demand more than his demand the full prestation perform
share & each debtor is & each debtor has likewise Entire liability for damages Debtor who paid entire indemnity
not liable for more the duty to comply w/ the is shouldered by defaulting may recover fr. others their shares in
than his share entire prestation debtor the price, & fr. the guilty debtor the
Who will be Only the debtor guilty All debtors are liable for the entire amount of damages
liable for of breach of obligation breach of the obligation
damages committed by a debtor Partial Performance = Non-performance: Exceptions
Existence Can exist although There must be at least 2 1. Substantial performance in good faith
there is only 1 debtor debtors or 2 creditors 2. Waiver: Creditor accepts performance, knowing its
& 1 creditor incompleteness & w/o protest
In case of others aren’t liable in The other debtors are
insolvency case insolvency of 1 proportionately liable ENTIRE CONTRACT SEVERABLE CONTRACT
debtor Consideration is single Consideration is apportioned
If a part is illegal, the whole The part illegal is void & cannot be
contract is unenforceable enforced; the part w/c is legal is
Section 5 – Divisible & Indivisible Obligations
enforceable

Test of Divisibility: W/N it is susceptible of partial performance


Section 6 – Obligations with a Penal Clause
Factors Determining Divisibility/Indivisibility
1. will/intention of the parties
2. objective/purpose of the stipulated prestation Penal Clause: an accessory undertaking to pay a previously stipulated
3. nature of the thing indemnity in case of breach
4. provisions of law affecting the prestation

SIENNA A. FLORES OBLIGATIONS & CONTRACTS


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Function of Penal Clause OBLIGATIONS W/ A FACULTATIVE


1. provide for liquidated damages PENAL CLAUSE OBLIGATIONS
2. strengthen coercive force Payment of the penalty in lieu of Power of debtor to make
the principal obligation can be substitution is absolute
Purpose of Penal Clause made only in express stipulation
1. Reparation - substitutes damages suffered Creditor may be granted right to Creditor can never demand
2. Punishment - right to damages besides penalty demand both prestations both prestations

Kinds of Penal Clause OBLIGATIONS W/ A GUARANTY


1. As to its Origin PENAL CLAUSE
a. Legal Obligation to pay the penalty is Object of the obligations of the
b. Conventional diff. from the principal principal debtor & guarantor is
2. As to its Purpose obligation the same
a. Compensatory Principal obligation & penalty Principal debtor can’t be the
b. Punitive can be assumed by the same guarantor of the same
3. As to its Demandability/Effect person obligation
a. Subsidiary/Alternative
GR: Penalty extinguished by Guaranty subsists even when
b. Joint/Cumulative
nullity of principal obligation the principal obligation is
E: penal clause assumed by 3rd voidable/unenforceable or is a
Characteristics of a Penal Clause
person natural one
1. Subsidiary/Alternative
Similarities
GR: upon breach of the obligation, the creditor must choose
1. both to insure performance of principal obligation
whether to demand principal or penalty
2. both accessory & subsidiary obligations
Exceptions:
- Both the principal obligation & the penalty can be
demanded when the penal clause is joint & cumulative; this CHAPTER 4 – EXTINGUISHMENT OF OBLIGATIONS
occurs when the creditor has been clearly granted such right
expressly/impliedly Modes of Extinguishment of Obligations
- creditor has demanded fulfilment of the principal obligation 1. payment/performance
but it cannot be performed 2. loss of the thing due
2. Exclusive 3. condonation/remission
GR: penalty clause takes place of other damages 4. confusion/merger
E: Both the penalty & actual damages can be reovered if: 5. compensation
- there is an express stipulation 6. novation
- debtor refuses to pay penalty 7. annulment
- debtor guilty of fraud 8. rescission
9. fulfillment of resolutory condition/period
When Courts May Reduce Penalty 10. prescription
1. partial/irregular performance 11. death of a party in case of personal obligations
2. iniquitous/unconscionable penalty (contrary to good customs) 12. renunciation by the creditor
13. mutual desistance/withdrawal
Principal Obligation vs. Accessory Obligation 14. mutual/unilateral dissents
1. Principal – can stand by itself; does not on another obligation 15. change of civil status
for its validity/existence 16. compromise
2. Accessory – cannot stand alone; attached to a principal 17. impossibility of performance
obligation 18. happening of fortuitous event
19. want of interest
Accessory Follows the Principal: Exceptions 20. abandonment
1. Guaranty: Penalty is undertaken by a 3rd person for an 21. judicial insolvency
obligation w/c is unenforceable/voidable/natural
2. nullity of the principal obligation is due to the fault of the Section 1 – Payment or Performance
debtor who acted in bad faith
What is Payment?
OBLIGATIONS W/ A CONDITIONAL
PENAL CLAUSE OBLIGATIONS
Payment: means not only the delivery of money but also the
Already an existing obligation from No obligation before the
performance, in any other manner, of an obligation with the intention
the start suspensive condition arises
to extinguish an obligation
Accessory obligation (penalty) is Principal obligation is
dependent upon non-performance dependent upon uncertain General Effect: extinguishes the obligation
of principal obligation event
Payment: Requisites
OBLIGATIONS W/ A ALTERNATIVE 1. the person who pays
PENAL CLAUSE OBLIGATIONS 2. the person to whom payment is made
Only one prestation is due; only when 2 or more obligations 3. the thing to be paid
this is not performed can the penal are due but fulfilment 4. manner, time, placement
clause be enforced of one is sufficient
Impossibility of principal obligation Impossibility of 1 of Payment: Kinds
extinguishes penalty the obligations, w/o 1. Normal – when the debtor voluntarily performs the prestation
debtor’s fault, leaves 2. Abnormal – when the debtor is forced by means of judicial
the others subsisting proceeding, either to comply w/ the prestation/pay indemnity
GR: Debtor can’t choose to pay penalty Debtor can choose w/c
to relieve himself of principal prestation to fulfill Debt: may refer to an obligation to deliver money, to deliver a thing
obligation; (other than money), to do an act or not to do an act
E: the right is expressly granted to him

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Manner/Performance 7. if the work to be delivered partially, the price or


compensation for each part having been fixed
1. IDENTITY – the very prestation must be performed; the very 8. in case of several guarantors who demand the right of
thing or service due must be delivered division
9. in case of impossibility or extreme difficulty of a single
GR: debtor of a (specific) thing cannot compel creditor to receive a performance
different one, although the latter may be of the same value as, or
more valuable than that w/c is due Who Pays? (PAYOR)

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

Substantial Compliance in Good Faith: Requisites MINOR EFFECTS


1. there must be substantial compliance
Minor as Valid Payment to Incapacitated Person:
a. deviation is slight
creditor 1. Kept the thing delivered
b. omission/defect is technical or unimportant
2. Redounded to his benefit
c. must not be so material that intention of parties is
Minor as GR: VOID – he doesn’t have capacity to alienate
not attained
debtor Exception: Art. 1427
2. obligor must be in good faith
a. attempt in good faith to perform w/o wilfull or
intentional departure To Whom? (PAYEE)

When it will not apply: To Whom Payment Shall be Made:


1. non-performance of material part of a contract 1. creditor/obligee - the person in whose favor the obligation
2. when made in bad faith, knowingly & wilfully (Art. 1170) was constituted (creditor at the time payment is to be made,
not at the constitution of the obligation)
Substantial Compliance: Effects 2. any person in interest
1. extinguishes the obligation 3. another person authorized to receive it
2. debtor may ask for specific performance or may recover a. legal – authorized by law
damages for breach w/o proof of complete fulfillment i. guardian of incapacitated creditor
3. creditor who did not pay may counterclaim for damages ii. administrator of the estate of deceased creditor
which he was sustained by failure to completely fulfill the iii. heirs/assignee/successor in interest
obligation, but he cannot require the performance of the b. conventional – authorized by creditor (e.g. agent)
residue s a condition precedent to his liability
PAYMENT TO: EFFECTS
Waiver: Requisites Valid if:
1. obligee knows that the performance is incomplete/irregular - incapacitated person kept the thing delivered
2. he accepts the performance w/o expressing any protest or - insofar as the payment was beneficial to him
objection *in the absence of this benefit, the debtor may be
Incapacitated made to pay again by the creditor’s guardian or
3. INDIVISIBILITY – the obligor must perform the prestation in person by the incapacitated person himself when he
one act & not in instalments. recovers/acquires capacity
GR: Creditor cannot be compelled to accept partial performance *in the absence of a guardian, he may consign it
in court
Exceptions to the Requirement of Indivisibility: 1. payment to a 3rd person or wrong party is not
1. Express stipulation valid except insofar as it has redounded to the
2. prestations w/c necessarily entail partial performance benefit of the creditor
3. if the debt is liquidated in part & unliquidated in part 2. that the creditor was benefited by the payment
4. in joint divisible obligations made by the debtor to a 3rd person is not
5. in solidary obligations when the debtors are bound under To a 3rd person presumed & must be satisfactorily established
different terms & conditions 3. in absence of such proof, payment thereof in
6. in compensation where there is a balance left error & in good faith will not deprive the creditor
of his right to demand payment

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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

Special Rules on Monetary Obligations

Legal Tender: the currency which a debtor can legally compel a


creditor to accept in payment of a debt in money when tendered by the
debtor in the right amount

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 of Monetary Obligations


GR: debts shall be paid in the currency stipulated
Exception: if it is not possible to deliver such currency or in the
absence of any stipulation to make payment in a foreign currency, then
payment shall be made in the currency w/c is legal tender in the
Philippines

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

Effect on Obligation When Accepted


GR: Payment by means of mercantile documents doesn’t extinguish
the obligation
Exceptions:
1. when they have been encashed
2. they have been impaired through the fault of the creditor
- creditor didn’t encash it
- it got destroyed but debtor is already insolvent
- Balane: the check must be the check of another person, not a
party, before there will be impairment

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DACION EN PAGO APPLICATION OF PAYMENTS PAYMENT BY CESSION TENDER OF PAYMENT CONSIGNATION


Definition - Property is alienated by the debtor The designation of the debt to w/c Assignment/abandonment of all the Manifestation of the deposit of the object of the obligation in a
to the creditor in satisfaction of a payment must be applied when the properties of the debtor for the debtor to the creditor of competent court in accordance w/ the rules
debt in money debtor has several obligations of benefit of his creditor in order that his decision to comply prescribed by law after refusal or inability of
- transmission of the ownership of a the same kind in favour of the the latter may sell the same & immediately w/ his the creditor to accept the tender of
thing by the debtor to the creditor as same creditor apply the proceeds thereof to the obligation payment
an accepted equivalent of the satisfaction of their credits **extrajudicial **judicial
performance of an obligation **preparatory act **principal act
Requisites Conditions for a Valid Dacion: 1. one debtor & one creditor 1. two or more creditors 1. tender of payment 1. there is a debt due
1. if creditor consents, for a sale 2. 2 or more debts 2. 2 or more debts must comply w/ the 2. the consignation has been made because
presupposes the consent of both 3. debts must be of the same kind 3. debtor is partially insolvent rules of payment the creditor refused, w/o just cause, to
parties 4. all of the debts must be due 4. all of the properties of the debtor 2. lawful currency accept it
2. if dacion will not prejudice the 5. payment made must not be are to be aliented 3. must be unconditional 3. prior notice of the consignation to the
other creditors sufficient to cover all the debts 5. cession accepted by creditors & for the whole person interested in the performance of
3. if debtor is not judicially declared 6. Creditors agree who will be paid amount the obligation
insolvent Exceptions: 1st or the to the proportioning of 4. must actually be 4. actual deposit; amount due was placed at
Applications as to debts not yet due: payment among themselves made the disposal of the court
1. parties so stipulate 5. fusion of intent, 5. subsequent notice was made after
2. made by the party for whose ability & capability to consignation
benefit the period was constituted make good such offer **(absence of any requisites - void)
Effects Effect: Limitations: Effects: Effects:
-extinguishes obligation to the extent 1. creditor cannot be compelled to 1. Creditors don’t become the 1. debtor may ask judge to order
of the value of the thing delivered, accept partial payment owner, they are merely assignees cancellation of obligation
unless the parties agree that the 2. if there is only 1 obligation w/ authority to sell 2. running of interest is suspended
entire obligation is extinguished bearing stipulated interest, he 2. the debtor is released from his 3. deterioration, loss of the thing/amount
must 1st apply the payment to obligation only up to the net consigned w/o fault of debtor is borne by
interest before the principal proceeds of the sale of the the creditor
3. debtor cannot apply the payment property assigned 4. increase in value inures to benefit of
to the debt that is not yet 3. the debtor is still liable if there is creditor
liquidated a balance 5. creditor bears expenses of consignation
4. he cannot choose a debt w/ a 4. creditors will collect credits in the 6. before creditor accepts or before judge
period for the benefit of the order of preference agreed upon, declares consignation has been properly
creditor, when the period has not or in the order ordinarily made, obligation remains
yet arrived established by law
Other - governed by the law on sales Rules in application of payment: 2 Kinds of Insolvency: Consignation deemed properly made:
Notes - may be partial or full dation 1. apply accdg. to the agreement 1. Legal – judicial, governed by 1. creditor accepts the thing/sum deposited,
2. if there is no agreement, debtor insolvency law (total w/o objection, as payment
Traditional view: it is a sale has the right to apply extinguisment) 2. creditor questions its validity & the court,
Modern view: it is a novation 3. if the debtor does not choose, the 2. Voluntary – agreement of after hearing, declares that it has been
creditor can choose creditors (generally liable for the properly made
4. if the creditor has not also made balance left) 3. creditor neither accepts nor questions its
application, or if application is not validity & the court, after hearing, orders
valid, apply to the most onerous Property Exempt the cancellation of the obligation
debt (legal application) 1. debtor must reserve amount **anytime beforehand, debtor may
5. if the debts due are of the same needed for support in case of withdraw
nature & burden, apply donations
proportionately 2. assignment cannot include family Consignation w/o Prior Tender:
home 1. creditor absent or unknown/does not
More Onerous Obligations: appear at the place of payment
1. bound as principal than as surety 2. incapacitated to receive payment at the
2. solely bound than in solidary ones time it is due
3. oldest debt of various debts 3. refuses to issue receipt w/o just cause
4. one w/ interest than w/o interest 4. 2 or more creditors claiming the same
5. one w/ higher interest rate right to collect
6. unsecured debt w/ interest than 5. Title of obligation has been lost
secured one w/o interest
7. liquidated than unliquidated debt
**Does not comply w/ the requisite 8. one w/ a penal clause **There is no completeness of **payment is made not to the creditor but to
of identity. 9. Secured than one unsecured performance – integrity. the court

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LOSS OF THE CONDONATION/ CONFUSION/ COMPENSATION NOVATION


THING DUE REMISSION MERGER
Definition - The thing w/c constitutes the An act of liberality of the obligee, Meeting in one person Mode of extinguishing in their concurrent Substitution/change of an obligation by
of Terms obligation perishes, goes out of who w/o receiving any equivalent, of the qualities of amount those obligations of persons who another, resulting in its
commerce, or disappears in such a renounces the enforcement of the creditor & debtor w/ in their own right are creditors & debtors extinguishment/modification, either by
way that existence is unknown or it obligation, as a result of w/c it is respect to the same of each other changing its principal conditions, or by
cannot be recovered extinguished in its entirety or in obligation substituting another in place of the debtor,
- impossibility of compliance w/ the part-; gratuitous abandonment by or by subrogating a 3rd person in the rights
obligation through any cause the creditor of his right of the creditor
Requisites 1. the thing w/c is lost is determinate 1. debt must be existing 1. must take place bet. 1. 2 parties, who are principal creditors/ 1. previous valid obligation
2. the thing is lost w/o any fault of the 2. it must be gratuitous creditor & principal debtors of each other in their own right 2. agreement of all the parties to the new
debtor (If lost through fault of 3. must be accepted by the obligor debtor 2. both debts consist in money, or if the contract
debtor, its becomes an obligation to 4. parties must have capacity 2. merger must be things due are fungibles, they are of the 3. capacity & intention of the parties to
indemnify the creditor for damages) 5. must not be inofficious clear & definite same kind/quality modify/extinguish the obligation
3. the thing is lost before the debtor (infringes on the legitime of the 3. the very same 3. both debts must be due 4. modification or extinguishment of old
has incurred in delay compulsory heirs) obligation must be 4. both debts liquidated & demandable obligation
6. formalities of donation are involved 5. no retention/controversy commenced by 5. new valid obligation
required in express remission 4. confusion must be 3rd person (neither debt is garnished)
total 6. compensation not be prohibited by law
Kinds Physical: the obligor is not physically As to Form: Confusion in Joint As to Cause: As to Essence:
capacitated to perform the obligation 1. express – donation Obligations: 1. Legal – operation of law; when all 1. objective/real – change in the object or
Legal: obligation is rendered - Art. 748: movables - confusion taking requisites concur principal conditions
impossible by provision of law - Art. 749: immovables place in the person of 2. Voluntary/Conventional/Contractual – 2. subjective/personal – change of the
2. implied – waiver any debtor does not agreement of the parties is enough subjects
As to Time: affect the others 3. Judicial – set off; final judgement of a. Subrogation – change of creditor
1. Original – impossibility already As to Extent: the court (e.g. counterclaim) - Legal – operation of law
exited when the contract was made; 1. total – covers entire obligation Confusion in Solidary 4. Facultative – claimable by only 1 of - Conventional – all parties agree
the result is not extinguishment but 2. partial – does not cover entire Obligations: the parties but not of the other b. Substitution – change of debtor
inefficacy of the obligation; the obligation - merger in the - Expromision –initiative fr new debtor
contract is void person of one of the Facultative: - Delegacion –initiative fr old debtor
2. Supervening – impossibility must be As to Constitution: solidary debtors shall 1. Commodatum – by the bailor 3. mixed – combination of subjective &
subsequent to the execution of the 1. inter vivos/agreement – takes extinguish the entire 2. Depositary – by the depositor objective novation
contract to extinguish the obli. effect during lifetime of donor obligation 3. Future support (support in arrears can
2. mortis cause/will – takes effect be compensated) As to Form/Constitution:
As to Nature: upon death of donor 4. Civil liability fr. a penal offense – 1. express – declared in unequivocal terms
1. Objective – the act cannot be done offended party 2. tacit – the old & new obligation are
by anyone; extinguishes the incompatible w/ each other
obligation As to Effect:
2. Subjective – obligation is impossible 1. Total – 2 debts are of the same As to Extent/Effect:
only w/ respect to the obligor amount 1. total – obli. extinguished
2. Partial – 2 debts are not of the same 2. partial – obli. merely modified
amount
When Not When Debtor is still liable: Inofficious Donation: infringes on When Compensation shall not take place: GR: No novation where new obligation is void
Allowed 1. when by law, the obligor is liable for the legitime of the heirs of the 1. the law prohibits it E: parties stipulate to extinguish the old 1 in
fortuitous event donor. No on can give more than 2. debts arising from contracts of any event
2. when by stipulation, the obligor is that which he can give by will. depositum
liable for fortuitous events The excess shall be reduced by 3. debts arising from contracts of GR: novation can take place where new
3. when the nature of the obligation the court accordingly. commadatum obligation is voidable
requires the assumption of risk 4. claims for support due by gratuitous title E: when it is annulled, novation is considered
4. when the loss of the thing is due 5. obligations arising from criminal as not having taken place
partly to the fault of the debtor offenses
5. when the loss of thing occurs after 6. certain obligations in favour of the govt Old Obligation has a condition:
the debtor has incurred in delay 7. there is renunciation of the effects of - resolutory & it occurred: old obligation is
6. when the debtor promised to deliver compensation extinguished; no new obligation since there’s
the same thing to 2 or more persons 8. there is a period w/c has not yet arrived nothing to novate
who don’t have the same interest 9. there is a suspensive condition w/c has - suspensive & it never occurred: no
7. when the obligation is generic not yet happened obligation arises; also nothing to novate
8. when the obligation to deliver a 10. obligation cannot be sued upon
specific thing arises from a crime (natural obli.)

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LOSS OF THE CONDONATION/ CONFUSION/ COMPENSATION NOVATION


THING DUE REMISSION MERGER
Effects Effect of Impossibility in obli. to do: Effect of Partial Remission: Effect in the person of 1. both debts are extinguished to the 1. if old obligation has condition, must be
- debtor is released if impossibility was 1. renunciation of the principal principal debtor or concurrent amount compatible w/ new obligation; if new is
not due to his fault & it took place debt shall extinguish the creditor: 2. interests stop accruing w/o condition – deemed attached to new
before he was in delay (supervening & accessory obligations - extinguishes the 3. period of prescription stops 2. if new obligation has condition
not original impossibility) 2. renunciation of the accessory obligation as well as 4. all accessory obligations of the principal - if resolutory: valid
obligation shall leave the the accessory obligation are also extinguished - if suspensive & didn’t materialize, old
Effect of Partial Loss: principal in force obligation obligation is enforced
- Loss significant: enough to extinguish 3. obligation of guarantor is
the obligation extinguished at the same time Effect in the person of Effect of Total Subrogation: transfer to the
- Loss insignificant: not enough to as that of the debtor guarantor: new creditor the credit & all the rights &
extinguish obli. 4. guarantors are released from - extinguishment of actions that could have been exercised by the
their obligation whenever by accessory obligation former creditor, either against the debtor or
Effect of Loss on Creditor’s Rights: some act of the creditor they doesn’t carry w/ it 3rd persons
- creditor shall have all the rights of cannot be subrogated to the that of the principal
action w/c the debtor may have rights of the latter obligation Effect of Partial Subrogation: the creditor to
against the 3rd person by reason of the whom partial payment has been made by the
loss new creditor remains a creditor to the extent
of the balance of the debt
Rules Presumption: then the thing is lost in GR: waivers aren’t to be Rules on Assignment of Credit to 3rd GR: Novation is never presumed
the possession of debtor, it is due to presumed Person: E (legal subrogation presumed)
his fault (res perit domino) 1. the creditor pays another creditor who is
E: Presumptions: 1. assignment after compensation: preferred, even w/o the debtor’s
- natural calamity, earthquake, flood 1. if a private document is found in - no effect because obligation has already knowledge
rd
- debtor not in possession of thing lost the possession of the debtor, it extinguished 2. a 3 person, not interested in the
- there is proof to the contrary is presumed that the creditor obligation, pays w/ the express/tacit
voluntarily delivered it to him 2. assignment before compensation: approval of debtor
GR: debtor still liable for loss of 2. since the creditor voluntarily - w/ consent of debtor: debtor is estopped 3. w/o knowledge of the debtor, a person
generic thing delivered the private document, unless he reserves his right & gave notice interested in the fulfilment of the
E: then there is a presumption of to assignee obligation pays, w/o prejudice to the
- delimited generic thing remission - w/ knowledge but w/o consent: effects of confusion as the latter’s share
- the thing becomes illegal 3. it is presumed that the compensation may be set up as to debts
accessory obligation of pledge maturing prior to assignment GR: Extinguishment of the principal carries
GR: impossibility of performance has been remitted when the - w/o knowledge: compensation may be w/ it that of accessory obligations
releases the obligor thing pledged, after its delivery set-up on all debts prior to his knowledge E: those created in favour of a 3rd person
- service has become so difficult as to to the creditor, is found in the unless the latter gives consent to the
be manifestly beyond contemplation of possession of the debtor, or of novation; in active subjective novation, the
parties 3rd person who owns the thing guarantors/pledgors/mortgagors are not
released
Other Rebus Sic Stantibus/Doctrine of **Pledge: a contract where the Usual Causes:
Notes Extreme Difficulty: agreement is valid debtor delivers to the creditor or 1. succession Novation by Substitution: Novation by Substitution:
rd
only if the same conditions prevailing to a 3 rd
person a movable or 2. donation 1. Expromision: a 3rd person of his own 2. Delegacion: a creditor accepts a 3 person
at the time of contracting continue to instrument evidencing incorporeal 3. negotiation of initiative & w/o knowledge or against to take the place of the debtor at the
exist at the time of performance rights for the purpose of securing negotiable the will of the old debtor assumes the instance of the latter
the fulfilment of the principal instrument latter’s obli. w/ consent of creditor
Requisites: obligation; the thing delivered - initiative/with consent of old debtor
1. the event/change could not have shall be returned w/ all its fruits & - initiative from 3rd person/new debtor - all parties must consent
been foreseen at the time of accessions - w/ consent of creditor & new debtor - reimbursement & subrogation
execution of contract - w/o knowledge/against will of old debtor - GR: if new debtor insolvent, old debtor not
2. performance is extremely difficult, - old debtor released fr. obligation responsible because obli. extinguished - E:
but not impossible - beneficial reimbursement - insolvency already existing & of public
3. event was not due to the act of any - if new debtor is insolvent, not responsible knowledge or known to him at time of
of the parties since w/o his consent delegacion
4. contract is for a future prestation - new debtor is only secondarily liable
- 3rd person is only an agent of the debtor
- new debtor is bound solidarily w/ old debtor

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TITLE II - CONTRACTS CLASSIFICATION OF CONTRACTS


Preparatory: its object is the Agency
CHAPTER 1 – GENERAL PROVISIONS establishment of a condition in law Partnership
w/c is necessary as a preliminary
Degree step towards the celebration of
Contract: Meeting of the minds between 2 contracting parties w/c
of another subsequent contract
takes place when an offer by one party is accepted by the other. One
Depen- Principal: can subsist independently Lease,
or more persons bind himself/themselves w/ respect to another, or
dence from other contracts Sale
reciprocally, to the fulfilment of a prestation to give, to do or not to do.
Accessory: can exist only as a Pledge,
consequence or, or in relation w/, mortgage,
Contracts: Essential Elements
another prior contract Suretyship
1. Consent
2. Object Consensual: perfected by mere Purchase, sale
3. Cause Perfection consent
Real: perfected by the delivery of the Commo-
CONTRACT OBLIGATION thing datum
One of the sources of The legal tie/relation itself that exists Common/Informal: does not Loan, lease
obligations after a contract has been entered into require some particular form
Form Special/Formal: requires some Donation,
There can be no contract if An obligation may exist even w/o a
there is no obligation contract particular form chattel
mortgage
Transfer of Ownership Sale
CONTRACT AGREEMENT
Conveyance of Use Commodatum
Agreements Agreements which cannot be enforced by action
Purpose Deposit,
enforceable in the courts of justice are not contracts but
pledge
through merely moral/social agreements
proceedings Rendition of Service Agency
Elements: An agreement is broader than a contract because Things Sale, pledge,
consent, object, the former may not have all the elements of a Subject- mortgage
cause contract Matter Service Deposit,
All contracts Not all agreements are contracts agency,
are agreements Bilateral: gives rise to reciprocal Purchase, sale
obligations for both parties
Nature of Unilateral: gives rise to an Commo-
CONTRACT PROMISE
Obligation obligation for only 1 of the parties datum,
Establishes & determines the Tends only to assure and pave the
gratuitous
obligations arising therefrom way for the celebration of a contract
deposit
in the future
Onerous: each of the parties aspires Purchase, sale
Until the contract is actually made, the rights and obligations are
to procure for himself a benefit
not yet determined. An imperfect promise also constitutes a mere
through the giving of an equivalent
unaccepted offer.
Gratuitous: one of the parties Commo-
Cause proposes to give to the other a datum
Characteristics of Contracts
benefit w/o any equivalent
1. Autonomy - The contracting parties may establish such
stipulations as they may deem convenient, as long as they Remuneratory: purpose is to reward
are not contrary to law, morals, good customs, public order, the service that had been previously
or public policy rendered by the party remunerated
2. Mutuality – contract must be binding upon both contracting Commutative: each of the parties Lease
parties; its validity & performance cannot be left to the will of acquires an equivalent of his
only 1 of them (may be left to a 3rd party, except when prestation & such equivalent is
inequitable) pecuniarily appreciable & already
3. Relativity - it is binding only upon the parties, their, assigns & determined from the moment of the
heirs; strangers cannot demand enforcement celebration of the contract
4. Obligatory Force – parties are bound fr. perfection of contract Aleatory: each of the parties has to Insurance
Risk account the acquisition of an
Classes of Elements to a Contract equivalent prestation, but such
1. Essential - those w/o w/c no contract can validly exist; also equivalent, although pecuniarily
known as requisites of a contract appreciable, is not yet determined, at
2. Natural - those which exist as part of the contract even if the the moment of the celebration of the
parties do not provide for them, because the law, as contract, since it depends upon the
suppletory to the contract, creates them happening of an uncertain event,
3. Accidental - the particular stipulations, clauses, terms or thus charging the parties w/ the risk
conditions established by the parties in their contract & w/c of loss or gain
cannot exist w/o being stipulated Nominate: has a specific name or sale, lease,
designation in law & is regulated by agency
A Contract must not be contrary to… special provisions of law
1. law Name Innominate: does not have a Do ut des
2. morals specific name & is not regulated by Do ut facias
3. good customs special provisions of law Facias ut des
4. public order Facias ut
5. public policy facias

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

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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 &not 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)

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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)

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Factors to Determine Degree of Intimidation Objects: Kinds


1. age 1. things – not outside the commerce of man
2. sex 2. rights – not intransmissible
3. condition 3. services – not contrary to law, morals, good customs, public
order or public policy
Undue Influence: Circumstances to be Considered
1. confidential/family/spiritual, & other relations bet. the parties Things Which cannot be the Object of the Contract
2. mental weakness 1. things outside the commerce of man
3. ignorance 2. services w/c are contrary to law, morals, good customs,
4. financial distress of the person unduly influenced public order or public policy
3. impossible things/services (original & not supervening)
Causal Fraud: How Committed 4. objects w/c are not possible of determination as to their kind
1. insidious words or machinations 5. intransmissible rights
2. concealing/omitting facts where there is a duty to reveal 6. future inheritance
them, as when the parties are bound by confidential relations
3. opinion of an expert & the other party relied on the former’s Things Outside the Commerce of Man
special knowledge 1. Services w/c imply an absolute submission by those who
render them, sacrificing their liberty, their independence or
Requisites for an Opinion to Amount to Fraud beliefs, or disregarding in any manner the equality & dignity
1. must be made by an expert of persons (e.g. perpetual servitude/slavery)
2. the other contracting party has relied on the expert’s opinion 2. Personal rights (e.g. patria potestas or marital authority, the
3. the opinion turned out to be false/erroneous status & capacity of persons, & honorary titles & distinctions)
3. Public offices, inherent attributes of the public authority, &
FRAUD VIOLENCE/ political rights of individuals (e.g. right of suffrage)
INTIMIDATION 4. Property while they pertain to the public domain (e.g. roads,
Doesn’t annul the contract unless it Contract is annulled plazas, squares, & rivers
produces a substantial mutual mistake 5. Sacred things, common things (e.g. the air, the sea, and res
on the part of both contracting parties nullius, as long as they haven’t been appropriated)
The party has nothing to do w/ fraud by Can easily be more
a 3rd person & cannot be blamed for it resisted than fraud EMPTIO REI SPERETAE EMPTIO SPEI
It has been advocated that both fraud & violence nullify the Conditional sale; there is a Sale of hope
consent, whoever may have employed the same. Where there is the suspensive condition
same necessity, the remedy must likewise be the same. If the condition does not come Even if the future thing does not
into existence, there is not materialize, the buyer must pay
Simulation of a Contract: The act of deliberately deceiving others, by contract of sale since the buyer is taking a
feigning or pretending by agreement, the appearance of a contract w/c chance (e.g. sale of lotto ticket)
is neither non-existent or concealed.
Impossibility: Kinds
Simulation: Kinds 1. physical – the thing/service in the very nature of things
1. Absolute/Simulados – Void because he contract doesn’t really cannot exist or be performed
exist and the parties do not intend to be bound at all a. Absolute: the act cannot be done in any case so
2. Relative/Disimulado - When the contract entered into by the that no one can perform it; nullifies the contract
parties is different from their true agreement; The parties are b. Relative: it arises from the special circumstances or
bound by their real agreement provided it does not prejudice special conditions/qualifications of the obligor; if
a 3rd person and is not intended for a purpose contrary to temporary, it doesn’t nullify the contract
law, morals, good customs, public order or public policy 2. legal - the thing/service is contrary to law, morals, good
customs, public order or public policy
ABSOLUTE SIMULATION FRAUDULENT ALIENATION
Implies there is no existing There is a true & existing Partly Impossible
contract; no real act executed transfer or contract 1. Indivisible: there is no contract; the consent would be
Can be attacked by any creditor, Can be assailed only by the wanting, because it was either for the whole obligation or for
including 1 subsequent to the creditors before the alienation none at all
contract 2. Divisible: the contract is valid to the extent that is possible
Insolvency of 1 debtor making the Action to rescind, accion
simulated transfer is not a pauliana, requires that the
prerequisite to the nullity of the creditor cannot recover in any Section 3 – Cause of Contracts
contract other manner what is due him
Does not prescribe Prescribes in 4 years Cause: the immediate/proximate cause why the parties enter into the
contract (“the why”)

Section 2 – Object of Contracts Cause: Requisites


1. exists at the time the contract is entered into
Object: the prestation; it is always a conduct w/c is to be observed 2. true/real
3. licit/lawful
Object: Requisites
1. within the commerce of man (already existing or in potency) Classification of Contracts According to Cause
2. licit – not contrary to law, morals, good customs, public order 1. onerous – the cause is the prestation/promise of a thing or
or public policy service by the other
3. possible – legally/physically 2. remuneratory – the cause is the service/benefit w/c is
4. determinate/determinable (determinate as to its kind; need remunerated
not be individualized) 3. gratuitous – the cause is the liberality of the benefactor
5. transmissible

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CAUSE CONSIDERATION CHAPTER 4 – REFORMATION OF INSTRUMENTS


The why of contracts, the The reason, motive, or
essential reason w/c impels the inducement, by w/c a man is Reformation: That remedy by means of w/c a written instrument is
contracting parties to celebrate moved to bind himself by an amended/rectified so as to express or conform to the real
the contract agreement agreement/intention of the parties when by reason of mistake, fraud,
Need not be material at all, & Requires a legal detriment to inequitable conduct, or accident, the instrument fails to express such
may consist in a moral the promise w/c must be more agreement or intention
satisfaction of the promissor than a moral duty
Effect of Reformation: takes effect from it original execution
CAUSE MOTIVE
Proximate why Ultimate why Reformation: Requisites
Objective, intrinsic & juridical Psychological, individual or 1. meeting of the minds of the parties to the contract
reason for the existence of the personal purpose of a party 2. written instrument doesn’t express the true agreement/intention
contract itself to the contract of the parties
Essential or more proximate Purely personal/private 3. the failure to express the true intention is due to mistake, fraud,
purpose w/c the contracting reason which a party has in inequitable conduct (i.e. any act/omission w/c is unjust/unfair), or
parties have in view at the time of entering into a contract accident
entering into the contract 4. the facts upon w/c relief by way of reformation of the instrument
The cause of each kind of contract Motive differs w/ each is sought are put in issue by the pleadings
is always the same person 5. clear & convincing evidence of the mistake, fraud, inequitable
Immediate/direct reason Remote/indirect reason conduct, or accident
Always known to the other May be unknown
contracting party REFORMATION ANNULMENT
Essential element of a contract Not an essential element There has been a meeting of the minds of There has been no
Its illegality affects the validity of Its illegality does not render the parties meeting of the minds
a contract the contract void A contract exists but the written The consent of one of
instrument purporting to embody the the parties was
Motive Affects the Contract if: contract doesn’t express the true intention vitiated by mistake,
1. motive becomes a suspensive condition of the parties by reason of mistake, fraud, fraud, violence,
2. realization of the motive is the cause for the contract & there inequitable conduct or accident intimidation
is an intervening serious mistake of fact Gives life to it upon certain corrections Complete nullification
of the contract
When Motives of a Party may Affect the Juridical Act
1. rescissible – when the motive of a debtor in alienating Cases Where Reformation is Proper
property is to defraud creditors 1. when mutual mistake of the parties causes the failure of the
2. voidable – when the motive of a person in giving his consent instrument to disclose the real agreement
is to avoid a threatened injury, (i.e. intimidation), 2. if one party was mistaken & the other acted fraudulently or
3. voidable – when the motive of a person induced him to act on inequitably in such a way that the instrument doesn’t show
the basis of fraud or misrepresentation by the other party the true intention
3. when one party was mistaken & the other knew or believed
Absence Void – produces no legal effect that the instrument didn’t state their real agreement, but
of Cause concealed that fact from the former
Illegality Void – produces no legal effect 4. when through the ignorance, lack of skill, negligence or bad
of Cause faith on the part of the person drafting the instrument or of
Falsity Voidable – the party must prove that cause is the clerk or typist, the instrument doesn’t express the true
of Cause unlawful; presumption of validity but rebuttable intention of the parties
Causa Not Presumed to Exist – burden of proof is on the 5. if 2 parties agreed upon the mortgage or pledge of real or
Stated in person assailing it personal property, but the instrument states that the
Contract property is sold absolutely or w/ a right of repurchase
Inadequacy GR: Does not Invalidate Contract per se
Requisites for Mutual Mistake to be Basis for Reformation
of Causa Exceptions:
1. mistake of fact
- fraud
2. mutual, i.e. common to both parties
- mistake
3. caused the failure of the instrument to express their true
- undue influence
intention
- cases specified by law
4. proved by clear & convincing evidence
- contracts entered when ward suffers lesion of
more than 25 %
When Reformation is NOT Allowed
1. Simple donations inter vivos where no condition is imposed
CHAPTER 3 – FORM OF CONTRACTS 2. Wills
3. When the real agreement is void
Form: the manner in w/c a contract is executed/manifested 4. When one party has brought an action to enforce the
instrument
GR: Contracts are binding & enforceable in whatever form they may be
Exceptions: Party Entitled to Reformation
1. for validity 1. either of the parties, if the mistake is mutual
a. donations 2. in all other cases, the injured party
b. antichresis 3. the heirs/successors in interest of the party entitled
c. interest in a loan
d. sale of land by an agent
e. contribution of immovables in a partnership
2. for enforceability
a. Statute of Frauds
b. Express trusts over an immovable
3. for registrability (to make it binding upon 3rd parties)

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DEFECTIVE CONTRACTS: MORE NOTES CHAPTER 7 – VOIDABLE CONTRACTS


LOSS OF THING LOSS OF THING
CHAPTER 6: RESCISSIBLE CONTRACTS BY PLAINTIFF BY DEFENDANT
he cannot ask for annulment & he must return the
RESCISSION SIMULATION Due to the action is extinguished, even fruits received, the
There is real alienation, There is in fact no alienation but a mere his Fault if at the time of the loss the value of the thing
but its fraudulent pretense that one has been made or Fraud plaintiff was still a minor or was at the time of its
Can be alleged only by Can be alleged by all creditors, before or insane loss, w/ interest fr.
creditors prior to the act after the simulation the same date
Impossibility of satisfying Impossibility of satisfying the plaintiff’s  action for annulment isnt  Action for
the plaintiff’s claim is claim is NOT required extinguished annulment
required  but the defendant cannot be cannot be
Accion pauliana – an Does not seek to set aside the simulated obliged to make restitution to extinguished for
action to set aside a valid contract, but merely to declare its the plaintiff any event not
contract inexistence  until annulment of the contract, imputable to the
it is valid & produces legal fault/fraud of the
Right of Transferee effect plaintiff
 res perit domino(owner  Defendant
1. Gratuitous - the creditor will have a better right than the transferee bears the loss): plaintiff who required to pay
who has given nothing & would unjustly be enriched at the expense of Due to a was in possession of the object the value of the
the creditor if the transfer were upheld Fortui- at the time of its loss, must still thing at the time
A. Good faith: tous be considered the owner of the loss by
o transferee obliged to restore the thing Event thereof & must bear the loss by fortuitous event,
o but he isn’t obliged to pay the fruits received by him fortuitous event but w/o interest
o he is entitled to reimbursement for necessary & useful  Since the plaintiff cannot return because the loss
expenses incurred on the thing what he is bound to restore, wasn’t due to his
o he returns the thing in the condition that it may be found the defendant cannot be fault
o he isn’t liable for losses or deteriorations, except in cases compelled to make restitution  Defendant must
in w/c its proved that he has acted w/ fraudulent intent  But if the plaintiff offers to pay suffer the loss
or negligence after judicial summons the value of the thing as a because he is
B. Bad faith: Transferee isn’t entitled to indemnity for damages substitute for the thing itself, still the owner at
from the debtor, in the even that rescission is decreed the defendant should be the time of the
obliged to make restitution, loss
2. Onerous - the transferee in good faith is protected; as between 2 except plaintiff need not pay
persons who both stand to suffer loss, the possessor of the property interest
should be preferred in that possession, the ownership having been
transferred by delivery

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

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RESCISSIBLE VOIDABLE UNENFORCEABLE VOID


Defect consists in injury/damage either to Defect consists in the vitiation of consent or Defect consists in the fact that they All requisites prescribed by law are present, but the
1 of the contracting parties or to 3rd in the legal incapacity of 1 of the were entered into in excess or w/o any cause/object/purpose is contrary to law, morals,
Defect persons; may be set aside in whole/part, to contracting parties authority, or they do not comply w/ good customs, public order or public policy, or are
the extent of the damage caused Statute of Frauds, or both contracting prohibited by law, or are declared by law to be void
- (defect is in the effects) parties are legally incapacitated - (defect is inherent)
1. those entered into by guardians 1. those where 1 of the contracting parties is 1. Unauthorized or no sufficient 1. cause, object or purpose is contrary to law,
whenever the wards whom they incapable of giving his consent to a authority: morals, good customs, public order or public policy
represent suffer lesion by more than ¼ contract a) no authority conferred 2. absolutely simulated or fictitious
of the value of the things w/c are the a. minors b) in excess of authority conferred 3. cause/object did not exist at the time of the
object thereof b. insane/demented persons 2. Curable by Acknowledgement: transaction
2. those agreed upon in representation of c. deaf/mutes who do not know how to Those that do not comply with the 4. object is outside the commerce of men
absentees, if the latter suffer the lesion write Statute of Frauds 5. contemplate an impossible service
stated in the preceding # d. intoxicated a) agreement is not to be performed 6. intention of the parties relative to the principal
3. those undertaken in fraud of creditors e. under hypnotic spell w/in a year from the making thereof object of the contract cannot be ascertained
when the latter cannot in any other 2. those where the consent is vitiated by b) special promise to answer for the 7. expressly prohibited/declared void by law
manner collect the claims due them mistake, violence, intimidation, undue debt/default/miscarriage of another i. Contracts upon future inheritance expect in
4. those w/c refer to things under litigation influence or fraud c) agreement in consideration of cases expressly authorized by law
if they have been entered into by the marriage other than a mutual promise ii. Sale of property bet. husband & wife except
defendant w/o the knowledge & approval to marry when there is a separation of property
of the litigants or of competent judicial d) An agreement for the sale of goods, iii. Purchase of property by persons who are
Kinds authority chattels or things in action, at a price specifically disqualified by law because of their
5. contracts specifically declared by law to not less than P500 position/relation w/ the person/property under
be subject to rescission e) agreement for leasing for a period their care
6. payments made in a state of insolvency longer than one year, or for the sale of iv. Every donation bet. spouses during the marriage
for obligations whose fulfillment the real property or of an interest therein shall be void except moderate gifts w/c the
debtor could not be compelled at the f) representation as to the credit of a spouses may give each other on the occasion of
time they were effected 3rd person any family rejoicing
3. Curable by ratification: both parties v. A testamentary disposition in favour of a
Note: No rescission is allowed if the are incapable of giving consent to a disqualified person, even though made under the
contract/transaction is approved by the contract guise of an onerous contract, or made through
court ***Statute of Frauds: statute w/c an intermediary, shall be void
requires certain classes of contracts to vi. Any stipulation that household service is w/o
be in writing to prevent fraud compensation is void
- applicable only to executory vii. Congressmen are prohibited fr. being financially
contracts (where no performance has interested, directly/indirectly, in any contract w/
yet been made by both parties) the govt or any subdivision/instrumentality
4. Express trusts over immovables
Validity/ Before rescission, they are valid & effective Valid & binding until they are annulled by a Valid but cannot be enforced by a Void from the beginning; produces no effect
Effectivity competent court proper action in court, unless ratified
Prescription only, 1. prescription Ratification only, No susceptible of convalidation, either by ratification
not by ratification 2. confirmation: express/tacit-retroactive not by prescription or prescription; cannot give rise to a valid contract
Convalidation 3. loss of the thing w/c is the object of the *** validity cannot be given to it by estoppel or by
contract through fraud/fault of the person reason of equity
entitled to annul the contract

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

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RESCISSIBLE VOIDABLE UNENFORCEABLE VOID


Requisites of Confirmation: Modes of Ratification
1. contract is voidable/annulable 1. failure to object to the presentation
2. confirmation should be effected by the of oral evidence to prove the
Ratification person who is entitled to do so contract (waiver)
3. it should be effect w/ knowledge of the 2. acceptance of benefits under the
reasons w/c render the contract voidable contract
4. the reason w/c renders the contract
voidable have already disappeared
Attack of **Directly & not collaterally **Directly ** Cannot be attacked ** Collaterally or directly
Contract/ - the injured party/defrauded creditor - Cannot be attacked by 3rd persons Cannot be assailed by 3rd persons - Can be attacked/assailed by a contracting party or
Who may - his heirs/assigns/successors in interest - plaintiff must have an interest in the ***The defense of the Statute of by a 3rd person whose interest is directly affected
Institute an - the creditors of the above entitled to contract & the victim must be the 1 who Frauds is personal to the parties *** judgment of nullity would be merely declaratory
Action subrogation must assert it ***The defense may be waived
- person capacitated cant allege the
incapacity of those he contracted with
Effect of Rescission Effect of Annulment (prospective) GR: they produce no legal effects
GR: Mutual Restitution GR: Mutual Restitution Exceptions: when recovery may be made:
- things w/ its fruits - things w/ its fruits 1. if performed
- Price w/ interest - Price w/ interest 2. payment of usurious interest
Exceptions: - value of service as amount of damages 3. contract was entered into for illegal purpose but
Effects/ - creditor did not receive anything from the Exceptions: was repudiated before the purpose was
Restitution/ contract - Incapacitated person: restitution only to accomplished, so that public interest is subserved
Recovery - thing is already in possession of a party the extent that he was benefited 4. incapacitated person in the interest of justice
in good faith - loss of thing w/ fault 5. contract is not illegal per se but merely prohibited
for protection of the plaintiff
6. amount paid in excess of ceiling price
7. addt’l compensation for service rendered beyond
time limit
8. recovery of amount of wages less than min. fixed
When Rescission Shall Not Take Place: Action for Annulment will not prosper: Statute of Frauds does Not Apply: The right to set up the defense of absolute nullity or
1. if the party who demands rescission 1. the contract has been confirmed 1. Actions w/c are neither for damages inexistence cannot be renounced
cannot return what he is obliged to 2. the action to annul has prescribed because of violation of a contract,
restore under the contract 3. the thing w/c is the object of the contract nor for specific performance ***In case of a divisible contract, if the illegal terms
When Not 2. the property is legally in the possession is lost through the fault/fraud of the 2. Contracts totally/partially performed can be separated from the legal ones, the latter may
Applicable of a 3rd persons who acted in good faith; person who has right to institute the 3. When the contract is admitted be enforced
he acquired the property & registered it proceedings expressly/impliedly by the failure to
under the Torrens System of Registry of 4. estoppel deny specifically its existence
Property unaware of the flaw in his title 4. Where a writing doesn’t express the
or mode of acquisition true agreement of the parties
Requisites: - Direct influence of the public interest Constitutes a criminal offense
1. contract must be validly agreed upon 1. both parties in pari delicto
2. lesion or pecuniary prejudice to 1 of the - neither may demand specific performance
parties or to a 3rd person - neither party may ask for restitution
3. rescission must be based upon a case - the things/price of the contract shall be confiscated
especially provided by law - both shall be prosecuted
4. there must be no other legal remedy to 2. only one party is guilty
obtain reparation for the damage - only the innocent party can demand specific
5. the object of the contract must not performance
Other Notes legally be in the possession of 3rd - only the innocent party may ask for restitution
persons who did not act in bad faith Does NOT constitutes a criminal offense
6. the period for filing the action for 1. both parties are in pari delicto
rescission must not have prescribed - neither party may ask for restitution
7. the party asking for rescission must be - neither may demand specific performance
able to return what he is obliged to 2. only one party is guilty
restore by reason of the contract - only innocent party may ask for restitution
(required only if a party to the contract & - only the innocent party can demand specific
NOT if a 3rd person) performance
- based on equity & private interest

SIENNA A. FLORES OBLIGATIONS & CONTRACTS

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