Obli Finals Notes

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OBLIGATIONS & CONTRACTS NOTES (ATTY. CAPILI LECTURES)
Section 2 Example:
LOSS OF THE THING DUE
A rice field in Rizal produces 100 sacks of palay
Loss includes impossibility of performance. annually. A was promised 10 sacks and B was promised 90
sacks. Due to a flood, the rice field produced only 50 sacks.
Causes which render impossible the performance of the
prestation *Remedy: Mag-unahan yung dalawang creditors sa pag-file
ng case against the debtor para sa 50 sacks of palay
1. when the object perishes (depending on the stipulated share).
2. when it goes out of commerce
3. when it disappears in such a way that –
a. its existence is unknown
b. or it cannot be recovered ARTICLE 1264 *case-to-case basis
[NOTE: This applies only to obligations to deliver a The thing is always equivalent to the whole obligation.
determinate thing. Generic things cannot be lost.]
Q: If there is partial loss, does it mean that extinguishment
[NOTE: If the debtor is at fault, what is the remedy of is only partial too?
the creditor? Damages.]
A: It depends on the intention of the parties. It does not
necessarily result to total or partial extinguishment.
The court will decide (what if the thing is not so
ARTICLE 1262 important that it may not affect the obligation).
Effect of loss on an obligation to deliver a specific thing
General rule: The obligation is extinguished. ARTICLE 1265
[NOTE: The loss must be after the obligation has been Presumption that loss was due to debtor’s fault
incurred. If the loss had been prior, there would be no
subject matter, therefore there would be no obligation The thing lost (in the possession of the debtor) must be
at all.] determinate. If it is generic, there is no presumption of
fault.
Exceptions:
[NOTE: This article may also apply to delimited generic
1. if the debtor is at fault things. (Atty. Capili)]
2. when the debtor is made liable for a fortuitous
event (because of a provision of law; of a [NOTE: The presumption does not apply in case of
contractual stipulation; the nature of the obligation earthquake, flood, storm, or other natural calamity.]
requires assumption of risk on the part of the
debtor) Q: What if the debtor is not in possession and the thing is
lost?
A: The creditor should just wait until the obligation is

ARTICLE 1263 demandable and he should demand to put the debtor at
fault. The debtor is not presumed to be at fault. At the
Effect of loss on an obligation to deliver a generic thing time of delivery, the debtor to present defense, he need
not prove anything.
General rule: The obligation continues to exist because a
generic thing does not really perish.
Exceptions: ARTICLE 1266
1. if the generic thing is delimited Compliance of personal obligations, without the debtor’s
2. if the generic thing has already been segregated fault, become:
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1. a legal impossibility A: If he did not commit the crime in the first place, the
2. a physical impossibility object would not be lost. He cannot use his own
infraction to justify the loss.
[NOTE: Impossible performance is equivalent to loss of
a determinate thing.] Mora Accipiendi – A’s phone was snatched by B. When B
wanted to return it to A, the latter won’t accept because he
[NOTE: The impossibility must AFTER the constitution wants it to be replaced by a different model.
of the obligation, but BEFORE its performance.]
*If the object is damaged, the creditor is not obliged to
accept what has not been contemplated – i.e. something
of lesser value (dapat ibalik kung ano yung ninakaw) =
ARTICLE 1267 ask for damages
Effect of difficulty beyond the parties’ contemplation:

the obligor may be released therefrom, in whole or in part
ARTICLE 1269
Principle of Unforeseen Difficulty of Service
Remedy: The creditor shall have all the rights of action
- a treaty or agreement remains valid only if the which the debtor may have against third persons by reason
same conditions prevailing at the time of of loss.
contracting continue to exist at the time of
performance (rebus sic stantibus) Q: From whom can the creditor ask damages?
Q: Is this equivalent to impossible service that would A: Third-party complaint.

extinguish the obligation?
Rule: Creditor is not obliged, he is only given the right, to go
A: The test is whether or not it was contemplated by the after the third person. Creditor must demand or go after his
parties at the very start. If yes, it may almost be debtor because it is what is on their contract. The debtor
equivalent to impossible service. will be the one to after the third person.
[NOTE: It must have become (1) manifestly difficult

and (2) beyond what was contemplated by the parties.
Otherwise, the debtor may not be released.]
Example:
Two years ago, it was stipulated that A would

repair or renovate B’s house in Marawi. At present,
however, Marawi was totally destructed. Thus, the
obligation has become extremely difficult because total
reconstruction is needed, not mere repairs nor renovations.
ARTICLE 1268
*This is an exception to fortuitous event.
Rule: A criminal is obliged to return the object that is a

product of the crime.
Q: Why do you always make him liable?
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Section 3
CONDONATION OR REMISSION OF THE DEBT
ARTICLE 1272
ARTICLE 1270
Presumptions (when the private document is found in
Condonation or remission: gratuitous abandonment by debtor’s possession) *rebuttable
the creditor of his right
1. Done voluntarily by the creditor
1. essentially gratuitous – it is not condonation if 2. Payment by the debtor
payment or service be required
2. requires the acceptance by the obligor – no Example:
acceptance, no remission (equivalent to donation –
why he should accept) The pre-signed receipt was sent to the debtor to
collect the debt but he did not pay and kept the receipt.
[NOTE: Condonation can be revoked because it is Here, there is no remission.
governed by the law on donation.]
Rule: If the instrument of credit is still in creditor’s hands,
[NOTE: The old obligation is extinguished and a new this is evidence that the debt has not yet been paid, unless
one is created – a ‘contract’ of donation.] the contrary is proved. To rebut the presumption, a receipt
of payment must be presented.
Requisites:
1. the obligation remitted must be demandable at

the time of remission ARTICLE 1273 *self-explanatory
2. the cause or consideration must be liberality
(purely gratuitous) Rule: The accessory follows the principal.
3. acceptance of the offer is required
4. it must not be inofficious – must not impair the
legitime of the creditor
5. the formalities of a donation are required ARTICLE 1274
[NOTE: Waivers are not to be presumed. They must be Remission of pledge (real contracts that requires actual
clearly and convincingly shown. The debtor has the delivery)
burden of proving that there has been condonation.]
- the principal obligation (i.e. loan) remains in force
- presumption is rebuttable (because the debtor or
third person may be in possession of the property
ARTICLE 1271 by theft, or because it has been sent for repairs, etc.)
Effect of delivery of private document evidencing credit [NOTE: The third person in possession of the thing must
actually own it.]
- a remission or renunciation is presumed
- example of implied condonation Doctrine of complementary contracts: the accessory
- “private document” – not notarized; the only copy contract must be read (in its entirety) together and
(as opposed to a public document wherein several interpreted together with the principal contract.
copies are available, therefore the delivery of one
does not necessarily imply condonation)
[NOTE: Voluntary destruction by the creditor of the

instrument is another example of implied
condonation.]
Paragraph 2: HEIRS – burden of proof that the evidence

was of condonation and not of payment because there is no
presumption of condonation, only of payment
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Section 4 Section 5
CONFUSION OR MERGER OF RIGHTS COMPENSATION
ARTICLE 1275 ARTICLE 1278
Confusion: the merging or the convergence of the rights of Compensation: the extinguishment in the concurrent
a creditor and debtor in one and in the same person with amount of the obligations of those persons who, in their
regard to the same obligation own right, are reciprocally debtors and creditors of each
other
[NOTE: The original debtor becomes the creditor of his
own debt. Here, only one obligation is extinguished. (If [NOTE: There must be two persons who are mutually
compensation, at least two.)] creditor and debtor to each other.]
[NOTE: If any event that created the merger is revoked, Q: Why is partial compensation allowed when there is a
the merger shall also be revoked; hence, the obligation rule that payment or performance must be full or complete?
is revived but it still depends on the circumstances of
the case.] A: Compensation is not payment. Therefore, “partial
extinguishment” should be used instead of “partial
Requisites: payment.”
1. in the same person of the characters of a creditor

and a debtor
2. must be in the characters of a principal creditor and ARTICLE 1279
a principal debtor (confusion of the creditor with
the person of the guarantor does not extinguish Legal compensation: compensation by operation of law
the principal obligation)
3. must be definite and complete Requisites:
1. That each one of the obligors be bound principally, and

that he be at the same time a principal creditor of the
ARTICLE 1276 other.
- they must generally be bound as principals and
Merger on guarantors not in their representative capacity
i.e. a situation wherein the creditor owes the
- if there is merger with respect to the principal debt, guarantor, legal compensation is not allowed
the guaranty is extinguished because the guarantor is not the principal
- however, merger takes place in the person of any debtor
of the guarantors does not extinguish the obligation
2. That both debts consist in a sum of money, or if the
[NOTE: From the moment C (third person) transferred things due are consumable (fungible), they be of the
the document to A (original debtor), it is merger same kind, and of the same quality if the latter has been
because the obligation is already extinguished. If A stated.
encashes his own check, there is still merger since they - two different things cannot be set-off by
is already no obligation. It is not payment.] compensation
[NOTE: Sale – exchange of a thing for money.
Barter – exchange of one thing for a different
thing.]
ARTICLE 1277 - it should be money for money, a car for a car, sacks
of rice for sacks of rice
Merger in joint obligations – whole obligation is not
extinguished; there are as many debts as there are debtors 3. That the two debts be due.
Reason: merger must be complete and definite (separate 4. That they be liquidated and demandable.
and distinct) - demandable: neither of the debts has prescribed
or that the obligation is not invalid or illegal
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[NOTE: If one of the debts has already ARTICLE 1283

prescribed, there can be no compensation
because the said debt is no longer demandable.] Judicial compensation (‘set-off’)
- liquidated: the exact amount has already been
determined or fixed - counterclaim damages (CivPro)
e.g. (not liquidated) - pleading and proof of the counterclaim must be
- 1000 kg of white corn and 1000 kg of made; otherwise, the court cannot declare the
yellow corn – the quantity cannot be compensation
determined kasi mas malalaki’t mabibigat
yung mga yellow corn kaya baka mas konti siya [NOTE: The claim for damages need not be a separate
kaysa sa white corn case, under the principle of human relations; i.e. banks
should not result to humiliating acts to collect debt.]
5. That over neither of the debts must there be any
retention or controversy commenced by third persons
and communicated in due time to the debtor.
- negative requisite ARTICLE 1284
- this can be disregarded by voluntary compensation
but subject to liability later (if there is a court Compensation in the case of rescissible or voidable
order, either may be liable) debts: allowed because the debts are valid until rescinded
or annulled
ARTICLE 1280
ARTICLE 1285
*This is an exception to Article 1279, paragraph 1.
Assignment of the credit to a third person
- the guarantor may set up compensation with
respect to the principal debt - generally, all requisites are there, nothing to assign
anymore
Reason: Extinguishment of principal obligation - compensation takes place automatically or ipso
extinguishes the guaranty. jure
- if after compensation has taken place, one of the
extinguished debts is assigned to a stranger, it
would be a useless act since there is nothing more
ARTICLE 1281 *self-explanatory to assign
Total compensation – two debts are of the same amount Illustration:
Partial compensation – two debts are not of the same

amount; operative only up to the concurrent amount
ARTICLE 1282
Voluntary compensation: the parties agree to compensate First case: Assignment with the knowledge and consent
their mutual obligations even in the absence of some of the debtor
requisites (under Article 1279)
- compensation cannot be set up because his consent
[NOTE: It is sufficient that the agreement itself be valid. constitutes a waiver
Thus, the parties must have legal capacity and must - exception: if the right to the compensation that has
freely give their consent.] already taken place is reserved
- refer to illustration – B must pay third person but go
after A unless he reserves the right to
compensation
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Second case: Assignment with the knowledge but 2. when one debt arises from obligations of a depositary;
without the consent or against the will of the debtor it is the depositor who is given the right to claim
- legal compensation has already taken place 3. when one debt arises from obligations of a bailee in
- example: commodatum (the borrower of the property pays
A assigned the credit due today to a nothing for the loan)
guarantor. B’s credit from A matures later. If e.g. A owes B 10,000. A then suggested that his
the guarantor goes after B, there is no phone that B borrowed would be used to set-off the
compensation but ordinary payment only. debt through commodatum instead.
Upon maturity of B’s credit, there is still no
compensation because the guarantor is not 4. when one debt arises because of a claim for support
the principal debtor. due to gratuitous title
- refer to illustration – all defenses available may
already be used come December 1 (debts that are 5. when one debt is due or owed to the government
there, take note of the dates of assignment); the (taxes and other fees)
defenses available before assignment can be used
when compensation was not really intended
ARTICLE 1288
Third case: Assignment made without the knowledge of
the debtor Debts arising from a crime – no compensation (add to
Article 1287)
- debtor can set up compensation as a defense for all
debts maturing prior to his knowledge of the Reason: Compensation would be improper and inadvisable
assignment because the satisfaction of such obligation is imperative.
- refer to illustration – October 1 (assignment date),
November 5 (date when debtor was informed) – all [NOTE: The victim, who is indebted to the accused,
debts before and after October 1 but before should still be allowed to claim compensation. Non-
November 5 may be set up or used as defense compensation should be limited to the accused to
(actual damage) prevent his escaping liability by pleading prior
credits against the offended party.]
Test: assignment of credit must take place before there is
legal compensation or at the time the assignment was
made, legal compensation have not yet taken place
ARTICLE 1289
Application of payments shall apply to the order of

! ARTICLE 1286 compensation when there are several debts susceptible of
compensation.
Compensation by operation of law
- indemnity for expenses of transportation (of the

goods or the object) and indemnity for expenses of ! ARTICLE 1290
exchange (monetary, the debts are money debts)
Automatic compensation: takes place when all the
requisites are present unless there has been a valid waiver
ARTICLE 1287 [NOTE: If legal compensation takes place, the parties

cannot reverse it.]
Instances when legal compensation cannot take place
[NOTE: The parties need not to consent in order for
1. when one debt arises from a depositum (safety deposit legal compensation to take place.]
banks); the depositary cannot claim compensation, it is
the depositor who is allowed
Purpose: to prevent breach of trust and confidence
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Section 6 Modificatory or imperfect novation

NOVATION
- merely modifies the old obligation; thus, it still
ARTICLE 1291 remains in force
- only operates as a relative extinction
Novation: the substitution or change of an obligation by - what is being changed is merely incidental
another, which extinguishes or modifies the first, either by: e.g. change of interest rate, change of place of
payment, extension to pay
1. changing the object (real/objective novation)
2. changing the principal conditions (real/objective [NOTE: If there be any doubt as to whether the
novation) novation is total or partial, it shall be presumed to be
3. substituting the person of the debtor (passive merely modificatory.]
subjective novation)
4. subrogating a third person in the right of the Q: If there is a change of place of payment (i.e. instead of the
creditor (active novation) creditor’s house, MOA nalang), is there novation?
[NOTE: It is a mode of extinguishment with respect to A: Strictly speaking, there is no novation. There is a
the old one but also a mode of creating a new one. Its change but it does not refer to any of the four instances
essence is to enter a new obligation with the intent to enumerated. This is only modificatory novation,
extinguish or end the old one.] which is not the novation contemplated under this
article.
[NOTE: A new contract does not necessarily mean that
novation took place.] Test (most important consideration): the intention
of the parties (animus novandi) – the parties will not
[NOTE: There is no novation if the old and new enter into a contract without meaning
obligations are not related nor connected.]
Implied novation
[NOTE: Novation is never presumed. The intention to
novate should be expressly, clearly, and unequivocably - the two obligations are essentially incompatible as
declared.] a whole in every point – if they can be harmonized,
no implied novation
Requisites:
Test: Can they stand together?
1. The existence of a valid old obligation
2. The intent to extinguish or to modify the *Novation is not one of the means recognized by the RPC
obligation by a substantial difference – whereby criminal liability can be extinguished – only the
agreement to extinguish the old obligation and to state can say if there can be novation
create a new one
3. The validity of the new obligation
Q: What if the second contract is void but the parties intend ARTICLE 1292
to novate?
Real or objective novation
A: A void contract produces no legal effect. It cannot
novate. The old contract subsists. - not only the main obligation; if the principal
condition is changed, there is novation
Q: What if the second contract is later on or is already
annulled? Classifications according to manner or form
A: If the parties intended to extinguish the first 1. Express novation

obligation and never be resurrected, the second is still - declared in unequivocal terms
valid even if annulled.
2. Implied novation
- the old and new obligations must be totally
incompatible
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- done by making substantial changes in the ARTICLE 1295

object or subject matter, cause or consideration,
or principal terms or conditions Delegacion – substitution of the debtor; he knows that he
will be substituted
[NOTE: Extension to pay is not novation. BUT decrease General rule: The old debtor cannot be held liable in case
in the period of an obligation to pay a lump sum may be of the new debtor’s insolvency because the creditor
considered as novation due to its effect; i.e. a debt accepted.
payable in two years will be paid tomorrow instead.]
Exceptions:
1. When the insolvency was already existing and of
ARTICLE 1293 public knowledge when the debt was delegated
2. When the insolvency was already existing and
Passive subjective or personal novation known to the debtor when the debt was delegated
[NOTE: If the insolvency occurred only after the
1. Passive – change of the debtor delegation, the old debtor is not liable.]
2. Active – change of the creditor
[NOTE: This article deals only with insolvency and not
Key: Creditor must consent. with other causes of non-fulfillment. In other causes,
[NOTE: Novation should not be mixed up with payment the old debtor is not liable.]
or specific performance.]
Forms of passive subjective novation ARTICLE 1296
1. Expromision – may or may not be known to the Extinctive novation
debtor
Requisites: [NOTE: This article applies only to novation by
a. initiative must come from a third person substitution of debtor and not to novation by
b. only two consents necessary; i.e. new subrogation of the creditor.]
debtor and creditor
c. the old debtor must be excused or released General rule: Extinguishment of the principal carries with
from his obligation it the extinguishment of the accessory obligations.
Exception: Accessory obligations or stipulations made in
2. Delegacion favor of third persons (stipulations pour autrui) remain
Requisites: unless said third persons have their consent to the
a. initiative comes from the old debtor novation.
b. all the parties must consent (creditor must
accept; new debtor must agree) Reason: Their rights to the accessory obligations
c. old debtor is released (which, for them, is really a distinct one) should not be
prejudiced without their consent.
Rights of the new debtor
Illustration:
1. Beneficial reimbursement – if payment was
made without the knowledge or against the will of
the old debtor
2. Reimbursement and subrogation – if it was made
with the old debtor’s consent
ARTICLE 1294
Expromision – the old debtor will not be responsible for When the REM over the 10M is extinguished, the
the new debtor’s insolvency or non-fulfillment of the third party mortgage should also be extinguished BUT since
obligation it covers 1M loan, it should not yet be extinguished (in favor
Reason: The expromision was brought about without of third person).
his initiative.
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ARTICLE 1297 - must be clearly established

General rule: If the new obligation is void, the original one 2. Legal subrogation
shall subsist. - takes place by operation of law
Reason: A void contract produces no legal effect. - not presumed
Exception: When, by agreement of the parties, that there is

waiver or remission of the obligation (the former obligation ARTICLE 1301 *just read
should be extinguished in any event).
[NOTE: The second contract is considered as a new
contract because there is nothing to novate. Hindi ! ARTICLE 1302
porke’t may dalawang magkasunod na contracts, may
novation na.] Instances of legal subrogation (for example situations,
refer to pp. 522-524, Paras)
Rule if the new obligation is merely voidable
1. When a creditor pays another creditor who is
1. The old obligation is novated because a voidable preferred, even without the debtor’s knowledge
obligation is valid until annulled – the novation
must come before annulment “Creditor” – one who has an interest in the obligation,
2. If the new obligation is annulled, the old obligation e.g. to get the rights over foreclosure of REM
subsists and whatever novation has taken place “Preferred” – one who enjoys priority payment
will be set aside
Q: How do you know who is preferred?
[NOTE: Voidable contracts are valid. Do not revive the
old obligation unless there is stipulation.] A: Refer to Preference of Credits.
*Claim by a third person over the REM without the
debtor’s knowledge – file a case to defend the right (a
ARTICLE 1298 *just read person cannot mortgage what he does not own)
ARTICLE 1299 2. When a third person, not interested in the obligation,

General rule: The conditions attached to the obligation are pays with the express or tacit approval of the debtor
also attached to the new obligation. *Right to reimbursement not by virtue of law BUT by
Reason: If, for example, the suspensive condition virtue of legal subrogation.
attached to the obligation is not fulfilled, the old *Before the third person paid, debtor agreed – previous
obligation never rose. There would be nothing to approval of the debtor is extinguished, not the payment
novate. by the person
Exception: If there is contrary stipulation.
3. When, even without the knowledge of the debtor, a

ARTICLE 1300 person interested in the fulfillment of the obligation
pays, without prejudice to the effects of confusion as to
Subrogation (active subjective novation) the latter’s share
- transfer to a third person of all the rights “Person interested” – one who can be affected,
appertaining to the creditor subject to any directly or indirectly
provision or any modification that may be agreed
upon a. a guarantor
b. a third party mortgagor (owner of the property
Kinds: mortgaged as security for the debtor’s debt)
c. a surety
1. Conventional or voluntary subrogation
- requires an agreement and the consent of the *There is no more accessory obligation (wala na
original parties and the creditor siyang hahabulin in case hindi makabayad si debtor kasi
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siya yung may hawak ng security). His liability is merged

to him. He cannot be liable to himself.
Illustration:
ARTICLE 1303
Effects of subrogation
The credit and all the appurtenant rights, either against
the debtor or against third persons, are transferred.
[NOTE: The credit or obligation, in a sense, subsists. It
is not really extinguished.]
ARTICLE 1304
Partial subrogation (rule of preference)
When there is conflict of interest or when payment is not
enough to cover the two credits, the old creditor shall be
preferred over the new creditor.
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TITLE II – CONTRACTS Basic principles or characteristics of a contract
Chapter 1 1. Freedom to Stipulate (Article 1306)

GENERAL PROVISIONS 2. Obligatory Force of Contracts [and Compliance
In Good Faith] (Articles 1159 and 1315)
ARTICLE 1305 3. Mutuality of Contracts (Article 1308)
4. Relativity of Contracts (Article 1311)
Contract: a meeting of minds between two persons 5. Perfection by Mere Consent (Consensuality)
whereby one binds himself, with respect to the other, to (Article 1315)
give something or to render some service
Suggested definition: A contract is a meeting of minds
between two or more parties, whereby one party binds ARTICLE 1306
himself with respect to the other, or where both parties
bind themselves reciprocally, in favor of one another, to Freedom to stipulate
fulfill a prestation to give, to do, or not to do. - The contracting parties may establish such
Stages of a contract stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not
*courtship engagement marriage contrary to law, morals, good customs, public
order, or public policy
1. Conception or Generation (Preparation) – the - Free entrance into contracts without restraint
parties are progressing with the negotiations; no
definite agreement yet but there may have been Limitations imposed by law
preliminary offer and bargaining
2. Perfection or Birth – there is a definite agreement - must not be contrary to mandatory and prohibitive
(as to the object, cause or consideration, terms and laws
conditions) - must respect the law for the provisions of all laws
3. Consummation or Fulfillment (Death or are understood to be incorporated in the contract
Termination) – the terms of the contract are Limitations imposed by morals
performed; contract is fully executed
- deals with right and wrong and with human
Some classifications of contracts conscience
a. According to perfection or formation - moral principles that are incontrovertible and
1. Consensual – perfected by mere consent accepted universally
2. Real – perfected by delivery - e.g. Medel v. CA
3. Formal or Solemn – where special formalities are Limitations imposed by good customs
essential before perfection
- those that received for a period of time practical
b. According to cause or equivalence of the value of and social confirmation
prestations
1. Onerous – interchange of equivalent valuable Limitations imposed by public order
consideration - maintenance of public safety, peace, and order
2. Gratuitous or Lucrative – all to be done is to
accept; one party receives no equivalent prestation Limitations imposed by public policy
or compensation
3. Remunerative – a prestation is given in - “public, social, and legal interest in private law”
consideration of a past deed (benefit or service) - constitution and laws; manifest will of a state
- e.g. socialized housing from government cannot be
c. According to their name or designation sold to others because it is made for the less
1. Nominate – the contract is given a particular or fortunate
special name; e.g. contract of marriage
2. Innominate – those not given any special name;
e.g. “do ut des” (I give that you may give), “do ut ARTICLE 1307
facias” (I give that you may do), “facio ut facias” (I
do that you may do), “facio ut des” (I do that you Innominate contracts: contracts that cannot be classified
may give). under the Civil Code and/or commercial laws
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Governing rules ARTICLE 1310 *related to 1308

1. stipulations If the determination is unequitable, it shall not be
2. Titles I and II CC (Obligations and Contracts) obligatory. The court is called upon to decide what is
3. rules on the most analogous nominate contracts equitable.
4. customs of the place
ARTICLE 1311
ARTICLE 1308
Relativity of Contracts
Mutuality of Contracts
- Contracts are generally effective only between the
- The contract must bind both contracting parties; its parties, their assigns (after transfer), and their
validity or compliance cannot be left to the will of heirs (upon death)
one of them - If the parties are still there, assigns or heirs will not
Basis: essential equality of the parties come in
- To be properly called a contract, it must be the - Personal rights or those prohibited by law are not
force of law between the parties; cannot be left to transmissible
the hands of one party
- e.g. continue leasing a property as long as you pay [NOTE: A creditor can go after his debtor’s heir but not
rent – not valid (both parties should decide on the to the extent of the property received.]
compliance) Illustration:
Power to unbind
- when it is expressly provided that one of the
contracting parties is authorized to cancel it and
the party given the right subsequently cancelled,
the agreement is just being fulfilled
- no violation of the principle of mutuality of
contracts
General rule: A party cannot revoke or renounce a contract
without the consent of the other.
General rule: Third persons have nothing to do with
Exception: When, under such terms and conditions they contracts they are not parties to.
may deem wise, they mutually cancel such contract.
Exception: When there is a stipulation in favor of a third
person who accepted the benefit before the contract had
been revoked – stipulation pour autrui.
ARTICLE 1309 *related to 1308
Stipulation Pour Autrui (paragraph 2) *1st XPN to relativity principle
Determination of the performance may be left to a third
person. The decision binds the parties only after it is made - a stipulation in favor of a third person conferring a
known to both. clear and deliberate favor upon him, and which
stipulation is merely part of a contract entered
Q: Can validity or compliance be given to a third person? into by the parties, neither of whom acted as agent
A: NO. Determination of performance only but it is not of the third person
binding. If unequitable, not obligatory (Article 1310). [NOTE: Just because he has benefit doesn’t
mean that he is already bound. It must be
Example: express and deliberate.
e.g. insurance contract of husband is
There is a contract between Philippines and Japan. assigned or give to the wife – the wife is a
A third party contractor determines what materials should third person because the contract is
be used, who the sub-contractors should be, etc. between the husband and the insurance
company]
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Other exceptions to the principle: [NOTE: Even if not a party: right – accion pauliana;
liability – tortious interference.]
1. If there is a court order
2. Tortious interference Elements:
3. Accion pauliana
1. Existing valid contract between two or more
persons
2. Third person is aware of the existence of the
ARTICLE 1312 *2nd XPN to relativity principle contract
Contracts creating real rights 3. Third person interferes by inducing a party to
violate the contract and was thus violated
- third person who come into possession of the 4. No legal justification or valid excuse for the
object of the contract are bound even if: (1) they interference
are not originally bound; (2) they did not
participate in the contract
e.g. real estate mortgage ARTICLE 1315
Reason: A real right binds the property over which it is Consensuality of Contracts: perfection by mere consent
exercised.
What binds them:
1. Stipulation
ARTICLE 1313 *3rd XPN to relativity principle 2. Nature of the agreement
Right of defrauded creditors
- creditors are protected in cases of contracts ARTICLE 1316
intended to defraud them – basis of accion
pauliana Requisites for perfection of real contracts
[NOTE: Ordinarily, a creditor has nothing to say on the 1. Consent
contract between his debtor and a third person and yet, 2. Subject matter
the law gives him the right to interfere.] 3. Cause or consideration
4. Delivery – for validity, or else no contract at all
[NOTE: The creditor does not need to wait for
consummation of the contracts. Mere intention shall be Most common kinds of real contracts
sufficient.]
1. Deposit
[NOTE, IMPORTANT: The debtor must not have any 2. Pledge
other property. Thus, the contract he is trying to enter 3. Commondatum
into will prejudice his contract with the creditor.] 4. Contract of carriage
5. Mutuum (loan)
ARTICLE 1314 *4th XPN to relativity principle

ARTICLE 1317
Principle of Tortious Interference with Contractual
Relations Requisites for a person to contract in the name of
another
- the contract is violated through inducement by
the third person 1. He must be duly authorized, expressly or
- a stranger to a contract can be sued because of his impliedly
unwarranted interference; whoever is injured may 2. He must have by law a right to represent him
properly sue for damages (guardian, administrator)
3. The contract must be subsequently ratified
Basis for damages: ill motives How ratified? The principal ratifies, expressly
[NOTE: There is no tortious interference if purely or impliedly.
economic motives with no ill motives; i.e. purely Absent the requisites, the contract shall be unenforceable
business – legal justification (only negotiate upon unless ratified before revoked by the other party.
expiration.)]
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“I am not the owner but I am authorized to sell Chapter 2

(although he really is not).” ESSENTIAL REQUISITES OF CONTRACTS
Example of unauthorized contract (a form of ARTICLE 1318
unenforceable contract)
Requisites (consensual contracts):
In Jose’s name, but without Jose’s authorization,
Maria sold Jose’s car to Marilyn. The sale of the car is 1. Consent of the contracting parties
unauthorized. 2. Object certain which is the subject matter of the
contract
Effect of ratification 3. Cause of the obligation which is established
- cleanses the contract from all its defects from the Fourth requisite for real contracts: delivery
moment the contract was entered into (Article
1396) Fourth requisite for solemn or formal contracts:
- there is a retroactive effect compliance with the formalities required by law (e.g. simple
donation inter vivos requires a public instrument for its
[NOTE: There can be no more ratification if the contract perfection)
has previously been revoked by the contracting party.]
[NOTE: Ratification can be implied from acts, e.g.
when the owner of a hacienda, which was sold to Section 1
strangers without his authority, collected the amount in CONSENT
a promissory note given as purchase price.]
ARTICLE 1319
Consent
- the meeting of the minds between the parties on the
subject matter and the cause of the contract
- the manifestation of the meeting of the offer and
the acceptance upon the thing and the cause which
are to constitute the contract
Requisites of consent
1. the parties must be capable or capacitated; if
incapacitated, the party may be represented by a
legal representative
2. there must be overt acts showing the concurrence
of the offer and the acceptance of the object and
the cause of the contract – no conflict between
what was expressly declared and what was really
intended
3. there must be no vitiation of consent, the
conformity must be intelligent and spontaneous
4. the conformity must be real and not simulated or
fictitious
[NOTE: Silence is not acceptance except when it shall be
considered implied acceptance or coupled with acts
that will be considered implied acceptance.]
ARTICLE 1320
Forms of acceptance: express and implied
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ARTICLE 1321 - preparatory contract to the one contemplated;

separate and distinct from the contract that may be
Things that may be fixed by the offeror entered into upon consummation
1. time of acceptance - i.e. you cannot force the owner of a property to sell
2. place of acceptance it to you since there is no contract of sale yet
3. manner of acceptance ‘Valuable consideration’
[NOTE: The offeror may also fix the form of payment - amount that the offeror can weigh to depend upon
and such other terms.] by the contract
[NOTE: If the manner is not complied with, it cannot be - one peso is not enough to be considered as valuable
treated as a valid acceptance.] Three kinds of contracts (CASE: Ang Yu v. CA)
1. Offer without any consideration – withdrawn
ARTICLE 1322 anytime
2. Option contract = offer + valuable consideration
General rule: The act or knowledge of the agent is the act - if perfected, may become a basis for action
or knowledge of the principal. - independent contract, different from the main
contract
Exceptions: 3. Right of first refusal
1. Article 1321 (any acceptance must be directly - dependent upon grantor’s intention (grantor-
communicated to the principal) owner not yet decided, price not yet set)
2. When the authority of the agent has been limited - remedy is damages because it was never
by the principal perfected
- you were given a right but you were not
offered anything; there is no obligation to
proceed with the offer
ARTICLE 1323
[NOTE: Under Sales, earnest money is not equivalent to
Instances when offer becomes ineffective valuable consideration. Earnest money forms part of
the purchase price; therefore, it is evidence of the
1. Death (either party)
perfection of a contract/evidence of agreement to the
2. Civil interdiction (either party)
main contract.]
3. Insanity (either party)
4. Insolvency (either party)
[NOTE: It must be before acceptance is conveyed.] ARTICLE 1325
General rule: Business advertisements are not definite
offers. They are mere invitations to make an offer.
! ARTICLE 1324
Exception: When it is specifically provided – the wordings
General rule: If the offeror has allowed the offeree a certain
would say that it is a concrete offer.
period to accept, the offer may be withdrawn at any time
before acceptance (or the thing being offered) by [NOTE: “I’m accepting.” – you are the one making an
communicating such withdrawal. offer.]
Exception: When the option is founded upon a
consideration as something paid or promised.
ARTICLE 1326
[NOTE: If the offeror withdraws, he will be liable since
there is already a contract.] Advertisements for bidders are mere announcements or
invitations to make proposals.
Option contract
General rule: Advertiser not bound to accept the highest or
- a contract granting a person the privilege to buy or lowest bidder.
not to buy certain objects at any time within the
agreed period at a fixed price Exception: When it is specific or very clear that it is a
definite offer.
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ARTICLE 1327 Hypnotic spell

Persons who cannot give consent to a contract - induced by drugs or by deliberate or unintentional
hypnotism
1. Unemancipated minors – those under 18 years - loss of level of informed consciousness
old; under custody or guardianship
[NOTE: For civil contracts, consent is not needed
by 18-year-olds and above.]
[NOTE: Marriage contracts (special contracts – ARTICLE 1329 *just read
union) are not included here because they are not Effect on the contract: violate prohibition
governed by Obligations and Contracts.
Exceptions:
a. When the minor misrepresented his age
and pretended to be one of major age. It is ARTICLE 1330
essential that the other party must have Causes of vitiated consent (vic es of consent)
been misled.
b. Contracts for necessities such as food. The 1. mistake or error
people who are legally bound to give them 2. fraud or deceit
support should pay (Article 1489). 3. violence
c. Upon reaching the age of majority, they 4. intimidation
ratify the same. 5. undue influence
d. Contracts in the form of savings account
(Postal Savings Bank), provided that the
minor was at least 7 years old.
ARTICLE 1331
e. Insurance for life, health, and the accident
on the minor’s life. Mistake or error
f. Those entered into through a guardian,
approved by the court. - erroneous belief of something
- not equivalent to ignorance
2. Insane or demented persons
Requisites:
Reason: People who contract must know what
they are entering into. 1. The error must be substantial regarding the:
Exception: When they acted during a lucid a. object of the contract
interval. b. conditions which principally moved or
induced one or both parties to enter into
3. Deaf-mutes who do not know how to write (and the contract
read) – if he knows how to write, he can give a full c. identity or qualifications but only if such
consent was the principal cause
2. The error must be excusable, i.e. not caused by
Effect: voidable if other party is capacitated; unenforceable
negligence
if both are incapacitated (but can be ratified)
3. The error must be a mistake of fact and not of law
[NOTE: Article 3, CC – Ignorance of the law does not
ARTICLE 1328 excuse anyone from compliance therewith.]
Rule: Contracts entered into during lucid interval are valid. Error re the object of the contract – mistake as to the
substance
[NOTE: A person is already presumed insane.
Therefore, the sanity must be proved.] Error in quality – the principal condition must be the
moving factor why a person entered into the contract
State of drunkenness
Error in quantity – can vitiate but not to simple mistake
- temporarily results in complete loss of
understanding which may be equivalent to Error in identity or in qualifications – does not affect
temporary insanity except if it is the principal reason
- a person almost doesn’t know what he is doing
- a talk over a bottle of beer is not the drunkenness
anticipated under this article
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Examples: Requisites:
*In a sale of a car, you thought that the seller is a woman but 1. The error must refer to the legal effect of the
is actually a transgender – does not affect the transaction or agreement (hindi dapat basta-bastang error or
the contract effect lang)
2. The real purpose of the parties is frustrated
*In a sale of a car, you thought that the seller is the owner
but is actually not – void as to the owner, voidable as to
both the ‘contracting parties’
ARTICLE 1335
[NOTE: Not every mistake vitiates consent (see Roman
Catholic Church v. Pante). Mistake in motive will not Violence – present and physical coercion
vitiate consent.] Requisites for violence to vitiate consent:
1. Employment of serious or irresistible force
ARTICLE 1332 2. It must have been the reason why the contract was
entered into
Inability to read – a contract may be written or oral
[NOTE: The violence must be against you only. The
Inability to understand the language of the contract – a killing of your wife for you to sign a contract is not
contract may be written in Tagalog (or any other language) violence against your wife not intimidation to her BUT
intimidation against you in order to sign the contract. It
*If one of the parties did not really understand, vitiated was intended to scare you, to be forced to sign]
consent can be alleged.
Intimidation – moral coercion; directed towards
[NOTE: Consent is there but not fully intelligent everything else
enough.]
Requisites for intimidation to vitiate consent:
[NOTE: The inabilities must be coupled by allegation of
mistake of fraud to constitute vitiated consent because 1. Reasonable and well-grounded fear of an imminent
a person who is unable to read or is unable understand and grave evil upon his person, property, or upon
the language by itself does not constitute vitiated the person or property of his spouse, descendants,
consent (reasons noted in the provision).] or ascendants
[NOTE: “grave” – papatayin, hindi yung
pipitikin sa ilong; not imminent or grave –
tinutukan ng baril through Skype; “upon
ARTICLE 1333
property” – susunugin yung bahay]
Knowledge of doubt, contingency, or risk does not
vitiate consent – it is assumed that the party was willing to 2. It must have been the reason why the contract was
take the risk entered into
3. The threat must be of an unjust act, an actionable
Examples: wrong
*A mechanic cannot say that he did not know that an engine Reasonable and well-grounded fear – depends upon
was not functioning properly. He is a person knowledgeable many circumstances, including the age, condition, and sex
or is an expert of that kind of contract (or of the of the person concerned
contingency).
Example: a midget threatening a giant – no reasonable
*One cannot allege vitiated consent just because a 300- or well-grounded fear except when the midget has a
square-meter property became 150 square meters due to gun
the high tide.
ARTICLE 1336
ARTICLE 1334
Violence or intimidation caused by third person
Mutual error – mistake on the part of both parties
- contract may still be annulled because the consent
is still vitiated; otherwise, the other party could just
fake ignorance
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ARTICLE 1337 2. Fraud in the performance of the obligation

stipulated in the contract – presupposes the
Requisites for undue influence to vitiate consent existence of an already perfected contract;
1. improper advantage of one’s power over the will of damages
another e.g. Because of shortage, a seller mixed NFA
2. deprivation of the latter’s will of a reasonable rice to the jasmine rice so he would not lose his
freedom of choice customers.
[NOTE: If the latter was not deprived and it did not Requisites of dolo causante
result to the destruction of free will, there is no undue
influence that vitiates consent. Here, the consent is full 1. It must have been employed by only one of the
and the contract may be valid.] contacting parties, because if both committed
fraud, the contract would remain valid.
Circumstances to be considered 2. It must be material and serious, i.e. it really
1. confidential, family, spiritual, and other relations induced the consent.
between the parties 3. There must be a deliberate intent to deceive or
2. mental weakness to induce.
3. ignorance 4. It must have resulted in damage or injury to the
4. financial distress victim.
Due influence: consists in persuasive arguments or in Example:

appeals to the affections which are not prohibited by law, A and B are best friends. A said he’d be the best chef
morals, good customs, public order, or public policy; so he and B should open a restaurant someday. It turns out,
consent is not vitiated however, A does not know how to cook.
E.g. solicitation, importunity, argument, persuasion *If the motivating factor is their childhood friendship and B
did not care whether or not A knows how to cook, there can
be no fraud.
ARTICLE 1338 *distinguish rom Article 1171
*If, however, if A was a different person, there can be fraud
Fraud because his being a chef is the motivating factor.
- when one of the contracting parties is induced to

enter into a contract through insidious words and
machinations of the other party which, without ARTICLE 1339
them, he would not have agreed to Concealment
- vitiates consent because the other party’s will is
misled - failure to disclose facts constitutes fraud when
- must be proved by clear and convincing there is duty to reveal them
evidence; good faith is always assumed
e.g. A real state agent should disclose to potential
[NOTE: Fraud and mistake can overlap. Fraud can buyers the fact that a person committed suicide inside
cause one to make a mistake. It is important, therefore, the house being sold.
to be able to know what ground to use.]
Obligation of agents to their principals: Good faith not
Kinds of fraud only requires that a partner should not make any false
concealment, but he also should abstain from all
1. Fraud in the celebration of the contract (fraud concealment.
proper)
a. Dolo causante (causal fraud; Article 1338)
– were it not for the fraud, the other party
would not have consented; voidable ARTICLE 1340
b. Dolo incidente (incidental fraud) – even Principle of tolerated fraud (trader’s/dealer’s talk)
without the fraud, the parties would not
have agreed just the same, hence fraud is - usual exaggerations in trade are not in themselves
only incidental in causing consent; valid, fraudulent
ask for damages
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- minimizing the defects of the quality of an object or ARTICLE 1344

a service
- caveat emptor: let the buyer beware; a buyer must Requisites for fraud to vitiate consent:
be on his guard 1. It must be serious
Example: 2. The parties must not be in pari delicto (mutual
guilt)
A was persuaded to buy a condominium unit from
B after seeing a fully furnished model in B’s showroom. Reason: One fraud cancels the other fraud.
However, when it was turned over, the unit was bare. Therefore, the contract would be considered
valid.
It is a usual practice in real estate not to present a
bare model to potential buyer, hence the use of interior e.g. iPhone X – natapon na yung box kaya
design. nagpagawa sa Quiapo kaso nabubura pala
yung print – no vitiated consent kasi hindi
naman yung box ang binili kundi yung phone
(tamad na ko mag-translate, balakajan self)
ARTICLE 1341
General rule: A mere expression of an opinion does not
signify fraud. ARTICLE 1345
Exception: When it is made by an expert and the other Simulation of contract: deliberate act of making a
party has relied on the former’s special knowledge. fictitious agreement by the parties for purposes of
deception, when in fact the juridical act that appears on the
Reason: An expert’s opinion is almost in the same contract does not really exist or is different from what is
category as a fact. actually agreed upon
Q: X, desiring to buy certain property, hired an expert to
ascertain its true value. But the expert’s opinion turned out
to be wrong and X was, therefore misled. May X ask for ARTICLE 1346
annulment of the contract?
Kinds of simulated contracts
A: No because his own expert (technically his employee)
committed the error. X may, however, ask for damages. 1. Absolutely simulated or fictitious contracts
- takes place when the parties do not intend to
be bound at all
- the contract is void
ARTICLE 1342 2. Relatively simulated or disguised contracts
General rule: Misrepresentation by a third person does not - when the parties conceal their true agreement
vitiate consent. Therefore, it does not make the contract - the parties intend to be bound but by a
voidable. different agreement
- all the elements of a contract are present, may
Exception: When such has created substantial mistake and be valid but it is the hidden or true agreement
the same is mutual. that is valid
- the parties are bound to the true agreement
[NOTE: Article 1342 – capable to give consent but except:
vitiated; Article 1407 – incapable to give consent.]  if the contract should prejudice a third
[NOTE: Vitiated consent is not equivalent to incapacity person – declare the contract as void
to give consent. In the latter, how can there be vitiation  if the purpose is contrary to law, morals,
when there is no consent to give.] good customs, public order, or public
policy
ARTICLE 1343
Misrepresentation made in good faith – not fraudulent
but may constitute error
e.g. A bought a laptop from B. A thought that it was black
but it was actually dark blue. There is only substantial
error.
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Section 2 4. it must be determinate or determinable as to

OBJECT OF CONTRACTS quantity
ARTICLE 1347 [NOTE: It need not be specific because generic objects

can be the subject of a contract.]
Object or subject matter of a contract
1. things
- not outside the commerce of men
- includes future things such as an offspring of
an animal
2. rights
- considered as property
- may be present, future, existing (e.g.
commission to write a book – copyright
belongs to you but sell to me now, in the case
of a biography)
3. services
- must not be contrary to law, morals, good
customs, public order, or public policy
- household services, driver, masseuse
General rule: No contract may be entered into upon future
inheritance.
Reason: A supposed heir has nothing to give.
Exception: When expressly authorized by law.
*Article 84, Family Code – marriage settlements
*Succession inter vivos
ARTICLE 1348
Impossible things or services – cannot be the object of
contracts
1. because of the nature of the transaction
2. because of the law
3. absolute or objectively impossible – no one can do
it
4. relative or subjectively impossible – the particular
debtor cannot comply
[NOTE: Mere difficulty is not impossibility. While it is
difficult, it is still doable. The debtor cannot escape
responsibility. He must still perform even if it became
so difficult because it is not impossible.]
ARTICLE 1349
Rules (or requisites of object of contracts):
1. it must be determinate as to its kind
2. it must be existing or is capable of existing
3. it must be licit
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Section 3 3. it must be lawful

CAUSE OF CONTRACTS

Cause: the essential and impelling reason why a party Statement of a false cause
assumes and obligation
- renders the contract void if it is not proved that the
[NOTE: A moral obligation can be a cause if based on a cause is true and lawful
past civil obligation.] - burden of proof is one the one enforcing the
Q: Is it needed that the cause and the subject matter be contract
equal to have a valid contract?
A: No need because the cost of a property may be increased ARTICLE 1354
or decreased.
Presumption: The cause exists and it is a lawful cause
Classifications of contracts as to cause unless the debtor proves the contrary. It is not necessary to
1. Onerous – the cause is the prestation or promise state the cause in the contract.
of a thing or service Reason: Contracts are valid in all forms. For instance,
2. Remuneratory – the cause is the past service or verbal contracts need not be in writing, the cause is
benefit (you want to compensate) which is a nowhere to be found but it is presumed that it was agreed
recoverable debt upon.
3. Gratuitous (contracts of pure beneficence) – the
cause is the pure liberality of the benefactor; e.g.
donation
ARTICLE 1355 *complementary to Article 1470 (Sales)
Lesion: inadequacy of cause
ARTICLE 1351
General rule: Mere inadequacy does not invalidate a
Motives of the parties contract (it may be voidable or rescissible).
- different from the cause Exceptions:
- cannot substitute for cause or consideration
- do not enter at all in the validity or invalidity of the 1. when there has been fraud, mistake, or undue
cause or consideration influence
2. in cases expressly provided by law (rescission)
Example:
A and B are classmates. A sells shirts. Because A is
very pretty, B calls her every single night to buy a shirt just
so he could talk to her. Here, B’s motive does not invalidate
the contract.
ARTICLE 1352
Contracts without cause or with unlawful cause
- void, produce no legal effect
- complements the rule that contracts should have
all the elements
Requisites for cause
1. it must be present at the time the contract was
entered into
2. it must be true
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Chapter 3 A: There are certain acts that need to be done, e.g.

FORM OF CONTRACTS registration in the registry, notary, etc.
! ARTICLE 1356
General rule: Contracts shall be obligatory, binding in ! ARTICLE 1358
whatever form as long as all the essential elements are The following must appear in a public document:
there.
1. creation, transmission, modification, or
Exception: When the law requires a certain form for its extinguishment of real rights over immovable
validity, enforceability, or evidentiary value (defense or property; sales of real property or of an interest
cause of action), it is absolute and indispensable (solemn
contracts). [NOTE: The lease must be in a note or
memorandum. Lease for 3 months need not be
E.g. donation of real property – must be in a public in writing.]
instrument, i.e. in writing and notarized; requires
acceptance also in a public instrument 2. cession, repudiation, or renunciation of hereditary
rights or those of conjugal partnership o gains
[NOTE: The registry and transfer of title is
ARTICLE 1357 binding upon the heirs.]
Right to compel 3. power to administer property or any other power
- remedy when there is contract but is not in writing whose object is an act appearing or which should
or not notarized appear in a public document, or should prejudice a
- available to both the debtor and the creditor third person
- provides a cause of action to compel the [NOTE: This refers to GPA. SPA is not required
observance of form to be notarized except when it is a sale of real
[NOTE: This Article contemplates consensual property or when it is needed to be given to the
contracts.] bank.]
[NOTE: If the contract is perfected, require the other 4. cession of action or rights proceeding from an act
party to follow the form required by law. If there is no appearing in a public document
contract yet, there can be no right to compel [NOTE: Contracts need not be in a public document. It
(premature).] not a mandatory requirement for validity or
Applicability: When form is needed only for convenience, enforceability, only for convenience. Nothing says
not for validity or enforceability. that if not in a public document, it will be void.]
Requisites in order to avail of this right: Q: If not mandatory, why can you require to compel under
Article 1357?
1. the contract must be perfected (Article 1357)
2. the contract must be enforceable under the Statute A: To use the agreement to the full extent, not only between
of Frauds (Article 1356) the two parties but also to others for the transfer for
prestation to government agencies.
What can be compelled
Form for convenience: a public document is necessary if
1. to be in writing you want to bind third persons
2. notarization (if already in writing)
[NOTE: Shake-hand deal is sufficient except when the
Inapplicability of the remedy: law requires it to be in writing and/or notarized.]
1. solemn contracts which require form to be valid (Safe answer: As a rule, contracts are valid in any form
2. unenforceable contracts – did not follow the form unless the law requires a certain form for its validity, if not
for its enforceability.)
Prescriptive period: 5 years
Q: Why do you still need to compel the other party?
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Chapter 4 ARTICLE 1361

REFORMATION OF INSTRUMENTS
Mutual mistake
ARTICLE 1359 - when it causes the failure of the instrument to
Reformation: a remedy in equity by means of which a disclose the parties’ real agreement, the
written instrument is made or construed so as to express or instrument may be reformed
conform to the real intention of the parties when some - must be of fact; an error of law is not enough
error or mistake has been committed [NOTE: When the mutual mistake is on the legal effect,
[NOTE: This is not available to verbal contracts because the remedy is annulment under Article 1334. This is
it is essential that the parties have a contract reduced vitiation of consent.]
into writing. The ‘instruments’ referred to is not the
agreement/meeting of the minds itself, only an
evidence of the agreement.] ARTICLE 1362
[NOTE: File for a declaratory relief no a petition for Unilateral mistake
reformation.]
- mistake of one coupled with fraudulent or
Rationale inequitable act of the other
- mistake on the preparation of the document
- it would be unjust and inequitable to allow the (content, font, terms, writing) not on the giving of
enforcement of a written instrument which does the consent
not reflect or disclose the real meeting of the minds
of the parties
- to forestall the effects of mistake, fraud, inequitable
conduct, or accident ARTICLE 1363
REFORMATION ANNULMENT Unilateral mistake

No question on the No agreement because of - mistake of one who is guilty of concealment
agreement vitiated consent - mistake on the preparation also
There is mistake, fraud, Mistake, fraud, inequitable
inequitable conduct, or conduct, or accident
accident in the contract as prevented the meeting of
written the minds ARTICLE 1364
Does not invalidate a Invalidates a contract Failure to convey the true intent of the parties through
contract the ignorance. lack of skill. or bad faith of the drafter of the
To establish the true To render inefficacious the instrument or the clerk or the typist
agreement of the parties, contract
not to create a new
contract
ARTICLE 1365
Intent to have a mortgage or pledge
Requisites for the action for reformation
- ask for reformation when the instrument states
1. There must be a meeting of the minds
that the property is sold absolutely or with a right
2. The true intention is not expressed in the
to repurchase
instrument
Reason: Sale is more burdensome because
3. There is mistake, fraud, inequitable conduct, or
rights are transferred.
accident
4. The aforementioned affected the drafting of the
instrument but not the meeting of the minds
ARTICLE 1366
No reformation (one who questions has nothing to do and
ARTICLE 1360 has no right to the contracts):
Civil Code prevails over the principles of the general law on 1. Simple donations inter vivos wherein no
the reformation of instruments, in case of conflict. condition is imposed
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- the cause or consideration is pure liberality Chapter 5

- one has no right to demand INTERPRETATION OF CONTRACTS
2. Wills ! ARTICLE 1374

- the making of a will is strictly a personal act
which is free Doctrine of Complementary Contracts Construed
- a notary public is not allowed to keep copies Together
because the heirs can easily go to them and - an accessory contract must be read in its entirety
complain about their shares and interpreted together with the principal
- what the parties can do is to participate in the agreement
probate of the will
3. Void agreements
- such procedure would be useless since there is
nothing to reform
ARTICLE 1367
No reformation
- when one of the parties brought an action to
enforce the instrument; basis is estoppel, waiver,
or ratification
ARTICLE 1368
Who can petition
1. if mistake was mutual, either party or his
successors in interest
2. in all other cases, the injured party or his heirs
and assigns
Prescriptive period: 10 years (if filed after, you are already
bound by it)
ARTICLE 1369
Procedural rules: ROC; Rule 63 – Declaratory Relief
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Chapter 6 - Q: Does the debtor’s fraudulent act give rise to the

RESCISSIBLE CONTRACTS creditor’s right to ask for rescission?
A: No. Not all fraudulent acts of the debtor will give
ARTICLE 1380 the creditor the right to ask for accion pauliana. The
fraudulent act may have nothing to do with the
Rescission contract between them.
- a contract is valid and enforceable until there is a - ‘Creditor’ need not be the actual creditor; can be:
court order declaring or rendering it to be  Heirs (contracts that intend to alienate
rescinded properties that will impair inheritance) –
- certain persons are injured or damaged; for purposes of asking rescission of the
extrinsic defect donation
- only the injured party can ask for rescission  Lessee (right of first refusal) – attended by
bad faith (substantial interest; prejudiced
[NOTE: The Court will not necessarily grant whole by the sale to third person also in bad
rescission. The Court can choose partial rescission if faith)
there is sufficient ground.] - badges of fraud only indicators, not conclusive
proof of intent to defraud
Important principles under rescission 4. those which refer to things under litigation, entered
1. Valid contracts into by defendant without knowledge and approval of
2. Remedy of last resort – do not ask for rescission if the litigants or of competent judicial authority
there are other remedies - the object is in custodia legis (control of the court)
3. The court will not necessarily rescind the whole - anybody who conspired will be liable
contract – only to the extent necessary (Article 5. all other contracts specially declared by law
1384)
4. If you file, be ready to return the object of the
contract (restitution) ARTICLE 1382
5. File within 4 years
Premature payments made in a state of insolvency
Effects of rescission
Q: Why did he volunteer to pay when the debt is subject to
1. terminates the contract time or period?
2. releases the parties from further obligations
3. abrogates the contract from its inception A: Because iniiwasan or tinatakasan yung demands ng other
4. restores the parties to their original position as if creditor.
no contract has been made
ARTICLE 1383
ARTICLE 1381 Rescission is not a principal remedy
Enumeration of rescissible contracts General rule: Exhaust all remedies first before filing an
1. those entered into by guardians in behalf of wards who action for rescission.
suffer lesion by more than ¼ of the value of the things Exception: When the party suffering damage has no other
which are the object of the contracts legal means to obtain reparation for the same.
- economic damage or lesion, e.g. the guardian sold
a property worth 1M for 500k (50% damage) [NOTE: If the debtor has other properties, the creditor
- unless approved by the court cannot choose. The debtor is merely negotiating the
2. those agreed upon in representation of absentees who other properties.]
suffer lesion stated in the first enumeration
- also economic damage or lesion
3. those undertaken in fraud of creditors who cannot in ARTICLE 1384
any other manner collect the claims due them
- the action to be filed is a petition to rescind Partial rescission – only if there is sufficient ground; the
through accion pauliana contract must be divisible
- intent to defraud creditors; no minimum damage
or actual damage required
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ARTICLE 1385 [NOTE: There is a presumption but the creditor is still

given burden of proof that the debtor has intent to
Principle of mutual restitution defraud him.]
- rescission creates the obligation to return the Badges of fraud – rules by which the fraudulent
things which were the object of the contract, character of the transaction may be determined
together with their fruits, and the price with its
interest 1. The consideration or conveyance is fictitious or
- the one who demands must be ready to return inadequate
what he has received 2. A transfer made by a debtor after suit has begun
and while it is pending against him
[NOTE: If the object cannot be returned, the petition for 3. A sale upon credit by an insolvent debtor
rescission should be dismissed. Damages is the - Bakit pinautang pa eh may utang na nga siya?
remedy.] There really is intent to defraud his creditor.
[NOTE: A third person who acquired the object in good 4. The transfer of all or nearly all of his property by a
faith may ask for rescission because there is nothing to debtor, especially when he is insolvent or greatly
lose in that contract, i.e. donation.] embarrassed financially
5. Evidence of large indebtedness or complete
insolvency
6. The fact that the transfer is made between father
ARTICLE 1386 and son (considered with the preceding
Effect if contracts were judicially approved circumstances)
7. The failure of the vendee to take exclusive
- rescission shall not take place (nos. 1 and 2, Article possession of all the property
1381) - third person is not getting the property, it is
- Who will rescind when the court already the debtor that still uses the property
approved?
- one court cannot mutualize the decision of another
court ARTICLE 1388
- the remedy would be appeal or certiorari
Transfer to third person in bad faith – liable for damages
to the creditor when it becomes impossible for him to
ARTICLE 1387 return due to any cause (including fortuitous event)
Statutory presumption of fraud (bad faith): rebuttable; Q: When the creditor was able to prevent the third person
good faith is always presumed to further transfer and the property was recovered, can he
still ask for damages?
Gratuitous alienations
A: Yes.
- presumed fraudulent when the debtor did not
reserve sufficient property to pay all debts Two or more alienations – first acquirer shall be liable
contracted before the donation first and so on, successively
Onerous alienations
- presumed fraudulent when made by persons: ARTICLE 1389
 against whom some judgment has been Prescriptive period for rescission
rendered in any instance (even if not yet a
final judgment or still on appeal) or General rule: 4 years from the date the contract was
 against whom some writ of attachment has entered into
been issued
Exceptions:
[NOTE: There is not presumption if the creditor has
other means to collect or when the debtor has other 1. persons under guardianship – from termination of
means to pay.] incapacity (age of majority; lucid interval)
2. absentees – from the time the domicile is known
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VOIDABLE CONTRACTS
Who can ratify
! ARTICLE 1390 1. Innocent party, in case of vitiated consent
Grounds for annulment 2. Guardian, in case of contracts entered into by
incapacitated persons
1. incapacity to give consent
2. vitiated consent
[NOTE: Damage or lesion is not necessary.] ARTICLE 1395
Q: Can annulment still be asked if the voidable contract is Conformity of guilty party is not needed
beneficial to the minor? - otherwise, ratification would no longer would
A: Yes because the essence of voidable contracts is the make sense
defect on the consent but if he is benefited, he can ratify. - otherwise, he may find a way of getting out of the
contract by the simple expedient of refusing to
[NOTE: Only the injured party can ratify. The other ratify
party has no business to ratify it.]
ARTICLE 1396
ARTICLE 1391
Retroactive effect of ratification
Relatively ineffective contracts – valid between the
parties; not binding upon third persons - once ratification has taken place, annulment based
on the original defects cannot prosper
Prescriptive period – within four years - the rights of innocent third persons must be
protected and not prejudiced
The period shall begin:
1. from the time the defect of the consent ceases
(intimidation, violence, or undue influence) ARTICLE 1397
2. from the time of discovery (mistake or fraud)
3. from the time the guardianship ceases (minors or Who may ask for annulment
other incapacitated persons) - victim (whether principally or subsidiarily liable)
not the guilty person or his successor
Reason: He who comes to equity must come
ARTICLE 1392 with clean hands.
Effects of ratification [NOTE: A third party mortgagor, who is a person
subsidiarily liable, can use the minority of the debtor as
1. the action to annul is extinguished defense and initiate an action for annulment. This is
2. the right to ask for annulment is also extinguished because if the debtor cannot pay, he will become liable.]
3. the contract becomes a completely valid one
4. the contract is cleansed of its defect from the General rule: A minor can ask for annulment.
beginning
Exception: When he is guilty of active misrepresentation,
i.e. when he asserts that he is of legal age. He cannot ask for
annulment because of estoppel.
ARTICLE 1393
Kinds of ratification
ARTICLE 1398
1. Express – oral or written
2. Tacit – implied, as from conduct implying a waiver Effect of an annulment of an obligation – mutual
restitution of the thing with fruits and the price with
E.g. a minor bought land but sold the same interest
after reaching 21 years of age to a third person
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[NOTE: ‘Obligation’ is used instead of ‘contract’ because obstacle to the success of the action unless through fraud
one contract can cover several obligations.] or fault of the plaintiff
Limitations to mutual restitution: [NOTE: Here, the incapacitated party nevertheless gave
consent without active representation but the petition
1. Unjust enrichment – only proportional restitution will still not be granted. Di ko alam.]
E.g. 4 months was used up in a 1-year rent,
return only 8 months
2. If there is a law that prohibits full restitution
3. Article 1399 ARTICLE 1402
General rule: The whole contract is annulled. Duty of mutual restitution – one party cannot be
compelled to comply with what is incumbent upon him if
Exception: Joint obligations – annul only, for example, the other party does not restore what he is bound to return
minority. There is full annulment with respect to his share,
not partial; i.e. everything that pertains to the minors can be [NOTE: Annulment may be granted immediately.]
annulled.
Partial obligation to do – cannot force to undo because it
will result to involuntary servitude; if there is no
performance yet, there is nothing to return
ARTICLE 1399
General rule: There is no restitution if the defect of the
contract consists in the incapacity of one of the parties.
Exception: When he has been benefited by the thing or
price received by him.
ARTICLE 1400
Duty to return the thing cannot be done because of loss
through fault of the person obliged
- return the fruits received and the value of the
thing at the time of loss, with interest from the
same date
[NOTE: If the thing is generic, it cannot be considered
lost. If the thing is determinate, the person is not liable
if through fortuitous event but if through his fault, he
must return the value at the time it was lost plus fruits
and interest.]
ARTICLE 1401
Effect of loss of object through fraud or fault of victim –
action for annulment shall be extinguished
[NOTE: The victim can still file for annulment if the
object is lost through fortuitous event.]
Right of action based upon incapacity of any of the
contracting parties – loss of the thing shall not be an
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Chapter 8 - those enumerated are enforceable even if not

UNENFORCEBLE CONTRACTS in writing
ARTICLE 1403 3. The SOF is a personal defense. A contract

infringing it cannot be assailed by third
Unenforceable contracts persons.
- invoked only by that party to a contract
- cannot be sued upon or enforced [in court] unless
ratified; thus, as if no effect yet 4. The defense of SOF may be waived.
- they are valid (because if void, why not just call - by failure to object to the testimony or through
them void?) cross-examination
- must be in writing, if not in a note or
[NOTE: Not all unenforceable contracts fall under the memorandum
Statute of Frauds but all covered by the Statute of
Frauds are unenforceable contracts.] Specific agreements under the Statute of Frauds
Kinds of unenforceable contracts - limitative, i.e. if unlisted, not included

- when the party has already performed, it would be
1. Unauthorized contracts (see Article 1317) unjustified to not allow him to collect
- entered into in the name of another person by
one: a. An agreement not to be performed within one year from
 who has given no authority or legal the making thereof.
representation (one declared who is the  Mag-aaral ka sa UST tapos may gusto kang upahang
real owner and claimed that he is the legal condo sa Dapitan. Nag-usap kayo nugn landlord na
representative) sa’yo niya ipapa-rent next year since meron pang
 who has acted beyond his powers (there is umuupa for the rest of the school year. However,
authority but exceeded) after 1 year, may iba na palang umuupa sa unit nay
2. Contracts covered by the Statute of Frauds un.
- an agreement shall be unenforceable by action - If no contract in writing, you cannot demand
unless the same or some note or because it is unenforceable.
memorandum be in writing and subscribed by  Obligation with a period
the party charged or by his agent - If silent on period, there is no presumption
- to prevent fraud and perjury in the because the court can fix the period
performance of certain required agreements
- there must be some writing even in a form of [NOTE: It is not unenforceable if there is already
note or memorandum so that it may be downpayment for next year’s rent. The act constitutes
enforced partial performance.]
3. Agreement contracts where both parties are
b. A special promise to answer for the debt, default, or
incapable of giving consent
miscarriage of another.
[NOTE: If only one party is incapacitated and  ‘miscarriage’ of obligation – failure to perform
the other has full capacity, the contract is only  ‘special promise’ – subsidiary or collateral promise
merely voidable.] to pay (contract of guaranty)
 involves burden on the part of the promisor; hence,
Some guidelines concerning the Statute of Frauds it is needed to be in writing for enforceability, not
for validity
1. The SOF applies only to executory contracts and
not partially or completely executed. c. An agreement made in consideration of marriage other
- wholly executory, i.e. neither party has than a mutual promise to marry.
performed their obligation yet  breach of promise to marry is not actionable
- partial execution does not warrant invocation  examples are marriage settlements and
of the Statute of Frauds because it would result donations propter nuptias (must be in writing)
to injustice and inequity
- Nag-perform na yung isa, bakit hindi mo d. An agreement for the sale of goods, chattels, or things in
pwedeng ipagawa sa kabila? action, at a price not less than five hundred pesos.
 movable property – must be in writing because
2. The SOF is exclusive. It applies only to the these are easy to move around… hahaha ewan
agreements enumerated.  example: contract of sale of a cellphone
- inclusio unios est exclusion alterius
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- if in writing, you are already bound by it 2. acceptance of benefits under them – does not apply
because there is already a contract meaning, to executed or partially executed or performed
you cannot change your mind the next day and contracts
say you don’t want to buy it anymore
 exception: auction sale
- even though not yet declared and not yet in ARTICLE 1406
writing but it is noted in their sales book
- also, if you are considered a bidder, it is already Right of one party to compel the other to execute the
binding needed instrument
e. An agreement for the leasing for a longer period than - only when the contract is valid and enforceable
one year, or for the sale of real property or of an interest (note, memorandum, in writing)
therein. - a public document is necessary for its registration;
 ‘interest’ – easement, usufruct, right of a mortgage i.e. you cannot present your prelims booklet as a
 if there is already downpayment, deposit, or deed of sale to the Registry of Deeds or to a notary
advanced rental, the contract is considered as public (proper form must be observed to be
partially executed (dapat wholly executory!) enforced on the other party)
 partition of property is not covered
f. A representation as to the credit of a third person.
 merely an assurance ARTICLE 1407
 representation of good credit standing but not
binding Ratification of contracts where both parties are
incapacitated (express or implied)
Telegram – not considered as sufficient memorandum
because important details are set out 1. By the parent or guardian of one of the contracting
parties – voidable
Requirements for sufficient memorandum 2. By the parent or guardian of both contracting
parties – validated from the inception
1. must be clear on the following: names of the
parties, terms of the contract, subject matter, place, Q: Can the parent or guardian who did not ratify ask for
signature annulment?
2. the essential requisites of a contract must appear
A: A and B, both 15 years old, entered into a contract. The
[NOTE: No particular form of language or instrument is contract is unenforceable because both cannot give consent.
necessary to constitute a memorandum or note in
*If the parent or guardian of A ratifies (e/i) the contract,
writing under the SOF. Thus, a formal deed of sale is not
necessary.] it becomes voidable, valid unless annulled by the
parent or guardian of B.
Rule on authority of the agent to sell land or any
interest therein – if land is included, it is not automatically *However, if the parent or guardian of B also ratifies,
covered by the SOF therefore, it can be proved by the contract is validated right from the time it was first
entered into.
testimonial evidence
[NOTE: How can unenforceable contract be annulled?
For unauthorized contracts, apply 1317. For those
ARTICLE 1404 under SOF, apply 1405. For incapacitated, apply 1407.]
Unauthorized contracts – governed by Article 1317 and

principles of agency; cured by ratification
ARTICLE 1408
Unenforceable contracts cannot be assailed by third
ARTICLE 1405 persons in order to avoid liability.
Two ways of ratification (contracts under SOF)

1. failure to object to the presentation of oral
evidence or by cross-examination – deemed as a
waiver
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VOID AND INEXISTENT CONTRACTS
Nullity proceeds from the illegality of the cause or
! ARTICLE 1409 object, act constitutes a criminal offense
Void: agreements which are tainted with illegality - e.g. transaction of marijuana
- both parties in pari delicto, no action against each
Inexistent: agreements which lack any of the essential other and both are prosecuted
requisites of a contract
Only one of the parties is guilty
[NOTE: Void and inexistent contracts take precedence
over other defective contracts.] - innocent party received the illegal thing, he must
return the same to the state or to the government
Important principles: - innocent party may claim what he has given and
not bound to comply with his promise
1. Void contracts produce no legal effect [NOTE: ‘Promise’ is used instead of ‘obligation’
2. Cannot be ratified because it is void, covering a legal object;
3. Using the defense that the contract is void can be therefore, there is no obligation.]
made anytime and cannot be waived - e.g. Pinarada mo yung kotse mo sa Dapitan tapos
4. Action to declare a contract void is nawala yung side mirror mo. May nagbenta sa’yo
imprescriptible ng side mirror kasi napansin niyang wala yung
5. A third person whose rights are not affected isang side mirror mo. It turns out, sa’yo pala yun.
cannot question illegality Kapag binayaran mo, dapat ma-prosecute yung
6. No need to declare it void except when there has guilty party and you are allowed to recover the
been performance, or affects title of any money you paid.
property/when rights or interest will be affected
Void and inexistent contracts:
ARTICLE 1412
1. Agreements tainted with illegality – cause, object,
or purpose is contrary to law, morals, good Contract is void because of illegal object but no crime
customs, public order, or public policy committed
2. Absolutely simulated or fictitious contracts
(relatively simulated contracts may also be - e.g. violation of a socialized housing loan
included) Rules:
3. Lack of essential requisites of a contract – cause or
object did not exist at the time of transaction 1. both parties are guilty
4. Object outside the commerce of men (e.g. parks, - no action against each other (cannot recover
military reservations, mountains) what he has given nor demand performance of
5. Contemplates an impossible service the other)
6. Intention of the parties relative to the principal - both shall be prosecuted
object cannot be ascertained – equivalent to lack of - instruments of the crime shall be confiscated in
object (see Article 1378) favor of the government
7. Expressly prohibited or declared void by law (e.g. 2. only one of the parties is guilty
donation by husband to wife) - guilty party cannot recover what he has given
- guilty party cannot demand fulfillment of what
[NOTE: Agreements to regularize a void contract is not has been promised him
ratification. There is a new contract, it’s just that same - innocent party may demand the return of what
terms were reiterated.] he has given without any obligation to comply
with his promise
ARTICLE 1410
Action or defense for the declaration of the inexistence ARTICLE 1413
of a contract is mprescriptible – you can have it declared Usury law is suspended
void anytime
- whatever excessive may be given back or be
recovered by virtue of jurisprudence (Medel)
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Instances when recovery is allowed even if in pari No waiver of right to minimum wage – recover the
delicto deficiency even if he agreed to a lower wage
1. if the purpose has not yet been accomplished
2. if damage has not yet been caused any third person
ARTICLE 1420
[NOTE: The Court will decide if any or both of the
parties are allowed to recover.] Illegal terms of a contract
Recovery is not allowed if: 1. Indivisible

- whole contract is void even if only some terms
1. Public interest is subserved are illegal
2. Purpose has been accomplished 2. Divisible
3. Damage has been caused - legal terms may be enforced if they can be
separated from the illegal terms
- ‘separability clause’
ARTICLE 1415 - Protection of client’s intention to enter into a
valid and legal contract, not an illegal one
One of the parties to an illegal contract is incapable to
give consent
- recovery of money or property may be allowed by ARTICLE 1421
the court if the interest of justice so demands Defense of illegality not available to third persons
- ‘void na nga, incapable to give consent pa’ – hadn’t
it been for the illegal object, the contract is voidable - if he is directly affected by the void contract, he
can question it
Example:
ARTICLE 1416
You cannot question the sale or transaction of marijuana
Contracts illegal per se between two persons because you are not a party thereto.
- forbidden because of public interest What you can do is report it to the authorities.
Merely prohibited contracts

- forbidden because of private interest ARTICLE 1422
- recovery is permitted if the prohibition is designed Contract that is the direct result of a previous illegal
for the protection of the plaintiff and if public policy contract, also void
would be enhanced
Example:
E.g. the portion which violates right to inheritance shall
not be affected by the void portions 1st contract – yung anak ni Don Manolo ang naging object
nung contract trough trafficking
2nd contract – to apply for a visa, they made it appear that
ARTICLE 1417 the anak is under a contract of employment
Price control *The 2nd contract is also void since it is an offshoot of a
- recover the amount paid in excess of the maximum previous void contract.
price allowed of any article or commodity
- to curb the evils of profiteering
ARTICLE 1418
Laborer works longer than maximum hours – demand
additional compensation (OT pay)
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TITLE III – NATURAL OBLIGATIONS ARTICLE 1427
ARTICLE 1423 Contracts by minors when there has been no

annulment yet
Civil obligations: can be enforced in court and ask for
damages (take note of the sources of obligations) - no right to recover what has been voluntarily paid
or delivered in fulfillment of an obligation when the
Natural obligations oblige has spent or consumed it in good faith
- cannot be enforced in court and cannot ask for [NOTE: If the other party acted in bad faith,
damages but the obligation is there reimbursement can be asked.]
E.g. prescribed debt – retain although no
longer enforceable
ARTICLE 1428
- obligation without sanction because it is based on
equity Winner in an action to enforce a civil obligation
- already lost enforceability due to certain
circumstances - if you win the case, you do not owe the plaintiff
anything, you are not obliged because there is a
Voluntary fulfillment (alam mo yet ginawa mo) court decision
- but if you voluntary do so, you cannot recover
- the debtor complied with the same even if he knew
that he could not have been legally forced to do so
ARTICLE 1429
ARTICLE 1424 Payment of debts beyond value of the decedent’s estate
Extinctive prescription - if you receive inheritance, you cannot be held by

the creditor of your estate beyond you received,
- a right or property has been lost your personal money should not answer for the
- the obligor cannot recover what he has delivered deficiency
or the value of the service he has rendered - but if you want to, you cannot recover
Essence: voluntary fulfillment
ARTICLE 1430
ARTICLE 1425 Payment of legacies despite the will being void
Debt already prescribed, payment by third person - if the will is void, the legacy would also be void and
without the knowledge or against the will of the debtor the deceased is considered to have died without a
will
- if the debtor voluntarily reimbursed, he cannot
- but if you voluntarily pay it to the legatee, no more
recover
recovery
[NOTE: Legacy means personal or movable property.
ARTICLE 1426 Device pertains to real property.]
Contracts by minors when there has been annulment [NOTE: Payment is not valid, under the law on natural
obligations. If you want, result to settlement of estate
- without parental consent with donation.]
- no right to demand the thing or price he voluntarily
returned even though he has not been benefited
thereby
[NOTE: In voidable contracts, where mutual restitution
is required, a minor is not obliged to restitute except
when delegated or when he has been benefited.]
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TITLE IV – ESTOPPEL [NOTE: Equity cannot be used or applied when there is

a governing law.]
ARTICLE 1431
[NOTE: Negligence or omission to assert a right within
Estoppel a reasonable time warrants a presumption that he
already abandoned his right or he refused to assert that
- a bar which precluded a person from denying or
right (doctrine of state demand).]
asserting anything contrary to that which has been
established as the truth either by acts of judicial or [NOTE: If the assertion of a right is still within the
legislative officers or by his own deed or prescriptive period, one cannot assert laches.
representation (express/implied) Prescription does not apply when there is no
- legal principle based on equity and public policy agreement, laches shall be used instead. Moreover, in
- there is conflict between the supposed facts or all other instances when prescription cannot be
assertion properly asserted, laches is used.]
- there is a contest of what is the real fact
Promissory estoppel – you made a promise, the other
General rule: It is bound only by the words or acts in party relied but you did not comply, the other party
respect to that person who relied on such. It is not bound to subsequently suffered damages
the whole world (mga hindi mo sinabihan, wala kayong
transaction, the assertion was not made to him). E.g. promised to extend – cannot assert specific
performance but may ask for damages under the
But those who heard can be made witnesses of the promissory note
person to whom assertion was made.
[NOTE: It is essential that the other party must act or
Purpose: must rely. Otherwise, no promissory estoppel.]
1. aid in the administration of justice Instances when estoppel does not apply
2. shield against injustice
1. Omission or neglect of government officials does
Elements: not create estoppel against the government
2. No estoppel against the government because of the
1. act, assertion (utterances), omission (estoppel by
error or mistake of its agent
silence) which conveys a particular fact as the truth
3. Validation of unlawful acts (e.g. euthanasia)
- must be plain and clear, not ambiguous
4. Probate proceedings (mahaba ang proseso sa mga
2. intent or expectation that other party will rely on
inheritance churva)
his act or assertion
3. you have knowledge of the real facts – whatever
asserted may not be in line with the real facts
4. other party will suffer injustice or damages (if ARTICLE 1432
allowed to retract)
General principles of estoppel – only suppletory
[NOTE: Estoppel applies only to questions of fact (e.g.
who is the real owner), not to questions of law because
the Supreme Court is the final arbiter of what the law ARTICLE 1433
provides.]
Kinds of estoppel
Estoppel in contracts – whatever you put there cannot be
retracted 1. Estoppel in pais (equitable estoppel)
- when one intentionally or through culpable
E.g. You said na notices should be sent to *this address* negligence, induces another to believe certain
pero you moved without informing them. You are thus facts to exist and the other rightfully relies and
held in default. You cannot use moving as defense. acts on such belief who is later prejudiced by
Estoppel by silence or inaction – must be more than the denial of the existence of such facts
innocent silence; there must be unjustifiable reason - by conduct or by misrepresentation or
concealment
Estoppel by laches – unreasonable delay in making a claim - all kinds of estoppel arising from writing on
in court based on equity, not on any law record
2. Estoppel by deed proper (technical estoppel)
- there must be a written instrument
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CJLTENEDERO
UST LAW | 1G 2017-2018
- estoppel by record 3. party misled must have been unaware of the true
- estoppel by judgment as a court record facts
4. party defrauded must have acted in accordance
with the misrepresentation
ARTICLE 1434
Sale or alienation by non-owner ARTICLE 1438
- if he later acquires the title, it passes by operation Estoppel that results from acceptance of benefits
of law to the buyer or grantee; the defect is cured
- allowing someone to assumer apparent ownership
Example: of personal property
Atty. Capili sold in his own name Dean Divina’s Lexus to - the possessor is presumed to be the owner of the
Judge Gina. He also delivered it to Judge Gina. If later one, personal or movable property
Dean Divina donates the car to Atty. Capili, ownership over - no ready proof, i.e. you cannot have the receipts
the same passes to Judge Gina, not by tradition or delivery, with you all the time (difficult to ascertain
but by operation of law. ownership)
Estoppel created in representative capacity Persons bound by estoppel
- sale or alienation in representation of another, he 1. Both contracting parties

cannot set up his own title against the buyer or 2. Successors-in-interest
grantee [NOTE: Third persons cannot claim estoppel because
Example: the assertion was not made upon them.]
Atty. Capili, in representation of Dean Divina, sells to Judge [NOTE: Under the Torrens System, any registration is
Gina a car. Atty. Capili cannot afterwards allege that he was equivalent to an announcement to the whole world.
really the owner of the car and that the sale is not valid. You are estopped.]
ARTICLE 1436 fin.
Estoppel on the part of a lessee or a bailee

- you rent something, you cannot say that the lessor
or bailor is not the owner because you previously
recognized his rights
ARTICLE 1437
Estoppel concerning immovable property between
third persons where one of them is misled
- you asserted that you are not the owner, you
cannot later say that you are the owner if all the
requisites are present
Requisites:
1. fraudulent representation or wrongful
concealment of facts known to the party estopped
2. party precluded must intend that the other should
act upon the facts as misrepresented
35 | P a g e

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CJLTENEDERO

UST LAW | 1G 2017-2018

Effect of loss on an obligation to deliver a specific thing

General rule: The obligation is extinguished. ARTICLE 1265

A: The creditor should just wait until the obligation is

Exceptions: ARTICLE 1266

Effect of difficulty beyond the parties’ contemplation:

Q: Is this equivalent to impossible service that would A: Third-party complaint.

[NOTE: It must have become (1) manifestly difficult

Two years ago, it was stipulated that A would

*This is an exception to fortuitous event.

Rule: A criminal is obliged to return the object that is a

Q: Why do you always make him liable?

1. the obligation remitted must be demandable at

[NOTE: Voluntary destruction by the creditor of the

Paragraph 2: HEIRS – burden of proof that the evidence

ARTICLE 1275 ARTICLE 1278

1. in the same person of the characters of a creditor

1. That each one of the obligors be bound principally, and

[NOTE: If one of the debts has already ARTICLE 1283

Total compensation – two debts are of the same amount Illustration:

Partial compensation – two debts are not of the same

Application of payments shall apply to the order of

- indemnity for expenses of transportation (of the

ARTICLE 1287 [NOTE: If legal compensation takes place, the parties

Section 6 Modificatory or imperfect novation

A: If the parties intended to extinguish the first 1. Express novation

- done by making substantial changes in the ARTICLE 1295

ARTICLE 1297 - must be clearly established

Exception: When, by agreement of the parties, that there is

ARTICLE 1299 2. When a third person, not interested in the obligation,

3. When, even without the knowledge of the debtor, a

siya yung may hawak ng security). His liability is merged

TITLE II – CONTRACTS Basic principles or characteristics of a contract

Chapter 1 1. Freedom to Stipulate (Article 1306)

Governing rules ARTICLE 1310 *related to 1308

ARTICLE 1314 *4th XPN to relativity principle

“I am not the owner but I am authorized to sell Chapter 2

ARTICLE 1321 - preparatory contract to the one contemplated;

ARTICLE 1327 Hypnotic spell

ARTICLE 1337 2. Fraud in the performance of the obligation

Due influence: consists in persuasive arguments or in Example:

- when one of the contracting parties is induced to

- minimizing the defects of the quality of an object or ARTICLE 1344

Section 2 4. it must be determinate or determinable as to

ARTICLE 1347 [NOTE: It need not be specific because generic objects

Section 3 3. it must be lawful

ARTICLE 1350 ARTICLE 1353

Chapter 3 A: There are certain acts that need to be done, e.g.

Chapter 4 ARTICLE 1361

REFORMATION ANNULMENT Unilateral mistake

- the cause or consideration is pure liberality Chapter 5

2. Wills ! ARTICLE 1374

Chapter 6 - Q: Does the debtor’s fraudulent act give rise to the

ARTICLE 1385 [NOTE: There is a presumption but the creditor is still

Chapter 7 ARTICLE 1394

Chapter 8 - those enumerated are enforceable even if not

ARTICLE 1403 3. The SOF is a personal defense. A contract