OBLIGATION – juridical necessity to give, to do or not to do

EFFECTS OF FORTUITOUS EVENT to thing to be delivered

4 ELEMENTS OF OBLIGATION - extinguish the obligation if determinate; generic does not
1. ACTIVE SUBJECT (creditor/obligee) – whose obligation is extinguish the obligation
constituted
2. PASSIVE SUBJECT (debtor/obligor) – has duty to give, to do 3 MISCELLANEOUS RULES ON PERFORMANCE OF OBLIGA-
or not to do TION
3. OBJECT/PRESTATION – subject matter 1. When to deliver determinate, accessions (additions/
4. JURIDICAL/LEGAL TIE (vinculum/efficient cause) – reason improvements) and accessories (joined/included with the
principal) are INCLUDED even not mentioned.
CIVIL OBLIGATION NATURAL OBLIGATION 2. If debtor fails to do, it shall be DONE AT HIS EXPENSE, same
derived from positive law derived from equity & justice with doing the contravention; poorly done be undone.
enforceable by court action not enforceable by court 3. In obligation not to do, and obligor does what is forbidden,
action shall be UNDONE AT HIS EXPENSE.

5 SOURCES OF OBLIGATION 4 GROUNDS; debtor liable for damages

1. LAW 1. Default/mora
2. CONTRACTS 2. Fraud/dolo
3. QUASI-CONTRACTS – arise from lawful, voluntary acts; no 3. Negligence/culpa
one shall be unjustly enriched... 4. Contrary to terms of obligation
2Kinds
a. Solutio indebiti – something received (delivered on a 1. DEFAULT/MORA – delay
mistake), no right to demand it 3kinds
b. Negotiorum gestio – voluntary mgt of property/affairs a. Mora solvendi – debtor’s delay to give (real ob.), to do
of another w/o his knowledge/consent (personal ob.)
4. QUASI-DELICT/TORTS/CULPA AQUILIANA – arise from b. Mora accipiende – creditor’s delay to accept
damage; fault/negligence c. Compensatio Morae – delay of both in reciprocal
5. CRIMES/ACTS/OMISSIONS punished by law – arise obligation
from civil liability that is a consequence of a criminal offense
CONCEPT OF DELAY
DILIGENCE OF A GOOD FATHER OF A FAMILY General Rule: No demand, No delay
- care need to be exercised by a debtor to Exceptions:
deliver/give determinate thing 1. Law states
Exception: When law/stipulation of parties requires a differnt 2. Obligation states
standard of care (slight/extraordinary diligence). 3. Time is the essence
4. Demand be useless if delay
When creditor is entitled to the fruits 5. Debtor guilty of delay
Rule: The creditor has personal right (right to ask for delivery)
from the time the obligation to deliver arises. EFFECTS OF DELAY
But NO real right (right enforceable against the whole world) 1. Damages
until it is delivered. 2. When to deliver determinate thing, STILL LIABLE in
fortuitous event.
3 KINDS OF FRUITS 2. FRAUD/DOLO – conscious, deliberate, intentional evasion
1. NATURAL – w/o human intervention of fulfillment
2. INDUSTRIAL – w/ human intervention 2Kinds
3. CIVIL – derived by virtue of juridical relation a. Dolo causante/Causal fraud – fraud in obtaining
consent; consent is defective, contract is voidable. Remedy:
Creditor’s rights if debtor fails to comply w/ the obligation annulment
1. Determinate b. Dolo incidente/Incidental fraud – fraud w/c vitiates
a. Performance consent. Remedy: damages
b. Damages
2. Generic 3. NEGLIGENCE/CULPA – voluntary act/omission; no bad faith
a. Performance intended
b. Damages 3Kinds
c. Obligation be complied at debtor’s expense a. Culpa aquiliana/Civil negligence – quasi-delict/torts
b. Culpa contractual/Contractual negligence – breach
Creditor’s rights if debtor does in contravention c. Culpa criminal/Criminal negligence – crime/delict
1. Damages
2. Ask it be UNDONE at debtor’s expense 4. Contrary to the terms of obligation

FORTUITOUS EVENT – cannot be foreseen, if foreseen, 2 RULES OF PRINCIPAL & INSTALLMENT

inevitable 1. Receipt of principal w/o mention of interest, presumed
General Rule: No person liable to fortuitous event. interest is paid also.
Exceptions: 2. Receipt of latter installment w/o mention of prior
1. Law states installment, presumed prior installment is paid also.
2. Stipulation/contract states
3. Assumption of risk 4 SUCCESSIVE RIGHTS OF CREDITOR to satisfy claim against
4. Delay DEBTOR
5. Debtor promises deliver to 2/more persons who do not 1. Exact payment
have same interest (bad faith) 2. Attach debtor’s properties
3. Accion subrogatoria – exercise rights & actions except General Rule: The obligation becomes effective retroactively
inherent in person to the day obligation was constituted.
4. Accion pauliana – cancel acts/contracts by debtor to Exceptions:
defraud creditor 1. In reciprocal obligation, fruits & interests during pendency
of condition shall compensate each other.
TRANSMISSIBILITY OF RIGHTS 2. In unilateral obligation, debtor gets fruits & interests unless
General Rule: ALL RIGHTS are transmissible. there is a contrary intent.
Exceptions:
1. Law states 3 EFFECTS OF FULFILLMENT OF RESOLUTORY CONDITION
2. Contract states 1. Extinguish obligation.
3. Obligation is purely personal 2. Both parties restore what they received plus fruits &
interests.
10 Kinds of Obligation 3. The rule on L, D, or I will apply to person who has to return
1. Pure the thing.
2. Conditional When one of debtors in reciprocal obligation does not
3. Alternative comply w/ his obligation
4. Facultative 1. The right of injured party is (1) cancel contract & damages;
5. Joint or (2) fulfill obligation & damages
6. Solidary
7. Divisible 3 Kinds of Obligation (Accdng to PERSON OBLIGED)
8. Indivisible 1. UNILATERAL – only 1 party obliged to comply
9. Obligation w/ a period 2. BILATERAL – both parties; performance not same time
10. Obligation w/ a penal clause 3. RECIPROCAL – both parties; performance same time

1. PURE OBLIGATION 3. OBLIGATION W/ A PERIOD

- w/o condition, demandable at once (pure has resolutory - demandability/extinguishment subject to the expiration of
condition/period) period

2. CONDITIONAL OBLIGATION PERIOD – interval of time; either suspends demandability or

- there is condition in performance; future & uncertain produces extinguishment
2Kinds
a. Suspensive condition – happening of condition gives DAY CERTAIN – must come, not known when
RISE to obligation
b. Resolutory condition – happening of condition 7 CASES CONSIDERED TO BE “OBLIGATION W/ A PERIOD”
EXTINGUISHES obligation 1. Little by little
2. In partial payment
6 MISCELLANEOUS RULES ON CONDITIONAL OBLIGATION 3. Payable ASAP
1. Impossible conditions, contrary to law, shall ANNUL 4. When I can afford it
obligation. 5. When I have the money
2. The condition not to do an impossible thing is considered 6. When I am able to
not agreed upon. 7. When my means permit me to do so
3. The condition that happens in determinate time,
EXTINGUISHES obligation. PERIOD CONDITION
4. The condition that happens in INDETERMINATE time, certain uncertain
obligation only effective at arrival. future only future/past but unknown
5. The condition is fulfilled if DEBTOR prevents fulfillment. (*influence upon obligation) (*) on the very existence of
6. The effect of conditional obligation, once fulfilled: only upon its demandability obligation itself
- to give: retroact to the day of constitution of obligation
- has reciprocal prestations: fruits & interests be mutually FOR WHOSE BENEFIT IS THE PERIOD?
compensated General Rule: Both the debtor & creditor.
- has unilateral obligation: debtor shall give fruits & interests
Therefore, NEITHER of them can demand performance of
obligation.
RULES in case of Loss, Improvement, or Deterioration of Exception: If the term of obligation has to favor one of them.
thing during the pendency of condition
1. LOST
5 INSTANCES WHEN DEBTOR LOSES RIGHT TO USE “PERIOD”
a. w/ debtor’s fault – damages
1. Debtor is insolvent.
b. w/o debtor’s fault – extinguishes obligation 2. Debtor attempts to abscond.
3. Impairment of guarantees/securities.
2. DETERIORATION
4. Failure to furnish guarantees/securities promised.
a. w/ debtor’s fault - (1) cancel obligation & damages; or (2) 5. Violation of undertaking.
fulfill obligation w/ damages
b. w/o debtor’s fault – creditor suffer impairment
4. ALTERNATIVE OBLIGATION
- w/ 2 or more prestations, only 1 is due.
3. IMPROVEMENT
a. By nature/time – benefit to creditor
5. FACULTATIVE OBLIGATION
b. at expense of debtor – debtor no right than that granted to
- w/ ONLY 1 prestation but can be substituted.
usufructuary (debtor no right to compensate amount for
improvement) ALTERNATIVE prestations LOST w/ debtor’s fault
Creditor entitled to damages but needs ff requisites:
EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITION
1. Debtor can choose.
2. All prestations lost/become impossible due to debtor’s 1. Ensure performance of obligation
fault. 2. Substitute for damages & interest in case of noncompli-
ance
ALTERNATIVE OBLIGATION FACULTATIVE OBLIGATION 3. Penalize debtor in case of breach
several prestations due, one prestation due, but can
giving one is sufficient be subtituted In case obligation has a PENAL CLAUSE
right to choose (debtor) right to choose DEBTOR General Rule: Penalty takes the place of damages & interest
unless granted to creditor ONLY in case of non-compliance.
If 1 of the prestation is illegal, nullity of principal carries w/ Exceptions:
others may be valid, it nullity of accessory/ 1. Stipulation states.
obligation remains substitute 2. Debtor refuse to pay penalty.
3. Debtor guilty of fraud in performance of obligation.
loss/impossibility of ALL loss/impossibility of presta-
prestations due, w/o tion due, w/o debtor’s fault,
NULLITY OF PRINCIPAL OBLIGATION OR THE PENAL CLAUSE
debtor’s fault, extinguishes extinguishes obligation
Nullity of principal obligation = nullity of penal clause
obligation
Nullity of penal clause = NOT nullity of principal obligation
(3) SUMMARY OF RULES, OBLIGATIONS, & RIGHTS OF
10 MODES OF EXTINGUISHMENT OF OBLIGATIONS
DEBTOR IN ALTERNATIVE OBLIGATION
1. Payment or performance
1. If 1 of prestations lost through fortuitous event, shall still
2. Prescription
be perform by choosing (creditor) from the remainder.
3. Compensation
2. If 1 of prestations lost through debtor’s fault, creditor may
4. Confusion/merger
claim any of remainders w/ damages.
5. Condonation/remission
3. If ALL prestations lost through debtor’s fault, creditor
6. Fulfillment of resolutory condition
choose price w/ damages.
7. Annulment
8. Rescission
RULES on LOSS/DETERIORATION of the thing intended as
9. Novation
SUBSTITUTE in FACULTATIVE OBLIGATION
10. Loss of thing due
1. If there is a loss/deterioration of thing intended as
substitute, debtor is NOT liable if NOT HIS FAULT.
1. PAYMENT/PERFORMANCE
But if substitution is already made, debtor is liable for loss of
- Payment means delivery of money & performance of
substitute when in DELAY, NEGLIGENCE, or FRAUD.
obligation
6. JOINT OBLIGATION
2 PLACE OF PAYMENT
- obligation is to be paid proportionately by debtors or to be
1. At place agreed upon
demanded proportionately by creditors
2. If w/o agreement
a. Object is indeterminate – paid at domicile of DEBTOR
7. SOLIDARY OBLIGATION
b. Object is determinate – place of thing at the time of
- each one of debtors has right to render or each one of
constitution of obligation
creditors has right to demand the entire compliance w/
prestation
4 SPECIAL MODES OF PAYMENT
a. Application of payment
MAXIMS & SYNONYMS
b. Cession
MAXIMS SYNONYMS
c. Tender of payment & consignation
JOINT Obligation “To each his own” proportionate d. Dacion in payment
SOLIDARY “One for all, all for individually &
Obligation one” collectively a. APPLICATION OF PAYMENT
- designation of debt to w/c payment must be applied when
(3) SOLIDARY OBLIGATION EXIST ONLY IF: *RULES debtor has several obligations of same kind in favor of same
1. Law states creditor.
2. Stipulation states
3. Nature of obligation requires 3 REQUISITES OF APPLICATION OF PAYMENT
1. Only 1 debtor & 1 creditor
2 PRESUMPTIONS THAT OBLIGATION IS JOINT 2. 2 or more debts, same kind
1. The debts be divided as many shares as there are 3. All debts are due
debtors/creditors. 4. Insufficient payment to exinguish ALL debts
2. The debtors/creditors are distinct from one another.
3 RIGHTS TO MAKE APPLICATION OF PAYMENT
8. DIVISIBLE OBLIGATION 1. Right belongs to CREDITOR.
- prestation is capable of partial performance 2. If debtor does not avail, creditor can give him receipt
designating the debt from which payment will be applied.
9. INDIVISIBLE OBLIGATION 3. If debtor accepts the receipt, he cannot complain unless
- prestation incapable of partial performance THERE IS just cause to invalidate the contract.

10. OBLIGATION W/ A PENAL CLAUSE b. CESSION

- one w/ accessory undertaking attached to obligation to - debtor abandons ALL his property for creditor’s benefit to
assume greater liablity in case of breach/non-fulfillment of obtain payment from proceeds of his property
obligation
5 REQUISITES OF VALID CESSION
3 PURPOSES OF PENAL CLAUSE 1. 1 debtor & 2 or more creditors
2. Debtor is in partial/total insolvency.
3. Debtor to deliver ALL his property to creditors 5. COMPENSATION
4. Debt is due & demandable. - 2 persons are debtors & creditors of each other
5. Creditors must sell the properties & apply the proceeds to
their respective credits proportionately. 6 ESSENTIAL REQUISITES OF COMPENSATION
1. Parties both principal debtors & creditors of each other.
c. DACION IN PAYMENT (dacion en pago) 2. Compensation is not prohibited by law.
- alienation of property to the creditor in satisfaction of debt 3. No retention/controversy by 3rd person.
4. 2 debts are due & demandable.
3 REQUISITES OF DACION IN PAYMENT 5. 2 debts are liquidated.
1. Consent of creditor 6. 2 debts both in money/consumable things.
2. NOT prejudicial to another creditor
3. Debtor not insolvent declared by a judicial decree (2) CLASSES OF COMPENSATION
1. As to effect
CESSION DACION IN PAYMENT a. TOTAL – obligations completely extinguished.
all properties NOT all properties b. PARTIAL – a balance remains
require more than 1 creditor NOT require all creditors
NOT act of novation act of novation 2. As to origin or cause
a. LEGAL – by law
NOT transfer ownership transfer ownership
b. VOLUNTARY/CONVENTIONAL – agreement of parties
requires partial/total insol- may happen
c. JUDICIAL – order from the court
vency during solvency of debtor
d. FACULTATIVE – 1 of parties can choose/oppose claiming
compensation
d. TENDER OF PAYMENT & CONSIGNATION
TENDER OF PAYMENT – act of offering the creditor what is
6. NOVATION
due to him w/ a demand that the creditor accept it
- substitution/change of obligation
CONSIGNATION – act of depositing thing due w/ the court
- substitution of debtor
when creditor cannot/refuses acceptance of payment
- subrogation of creditor
5 REQUISITES OF CONSIGNATION
(3) OBLIGATIONS MAY BE MODIFIED BY:
1. Debt due.
1. Changing object/principal conditions. (REAL NOVATION)
2. Creditor refused the tender of payment w/o just cause
2. Changing the person of debtor/creditor. (PERSONAL
3. Notice of consignation already given to persons interested
NOVATION)
in fulfillment of obligation
a. Substitution – change of debtor
4. Consignation of thing/amount due
b. Subrogation – change of creditor
5. Subsequent notice of consignation to interested persons
3. Changing person of the parties & the objects of principal
condition. (MIXED NOVATION)
5 VALID CONSIGNATION W/O PREVIOUS TENDER OF
PAYMENT
4 REQUISITES OF NOVATION
1. Creditor is absent/unknown.
1. Old valid obligation.
2. Creditor is incapacitate to receive at time it is due.
2. Agreement of parties to new obligation.
3. Creditor refused give a receipt, w/o just cause.
3. Extinguishment of old obligation.
4. 2 or more persons claim the right to collect.
4. Validity of new obligation.
5. Title of obligation lost.
2 FORMS OF NOVATION BY SUBSTITUTION OF DEBTOR
2. LOSS OF THING DUE
1. EXPROMISION – w/ consent of creditor, NO consent of old
- perishes, disappears, or goes out of commerce; existence is
debtor
unknown; cannot be recovered
2REQUISITES
a. Initiative of 3rd person.
3 REQUISITES TO EXTINGUISH OBLIGATION DUE TO LOSS
1. Determinate thing. b. Consent of creditor.
2. W/o debtor’s fault. 2. DELEGACION – all must agree (creditor, old debtor, new
3. No delay. debtor)
3REQUISITES
3. CONDONATION/REMISSION a. Initiative from old debtor.
- gratuitous abandonment of right by the creditor b. Consent of debtor.
c. Acceptance by creditor.
3 REQUISITES OF A VALID CONDONATION/REMISSION
1. It must be gratuitous. 7. SUBROGATION
2. Accepted by obligor. - change of creditor
3. Obligation is demandable.
2 KINDS OF SUBROGATION
4. CONFUSION/MERGER 1. CONVENTIONAL – consent of original parties & 3rd person
- meeting in 1 person of qualities of debtor & creditor w/ 2. LEGAL – by law
same obligation a. creditor pays another preferred creditor even w/o
debtor’s knowledge
3 REQUISITES OF VALID CONFUSION/MERGER b. 3rd person pays the express approval of debtor
1. The merger of characters of debtor & creditor must be in c. 3rd person pays even w/o knowledge of debtor
same person.
2. Take place between principal debtor & creditor.
3. Clear & definite.
CONTRACT – meeting of minds between 2 persons to give 2. MUTUALITY OF CONTRACTS
something or to render service. - the contract must bind both parties; its validity/compliance cannot
be left to the will of one of them
3 ELEMENTS OF CONTRACT
1. ESSENTIAL – w/o them, contract cannot exist 3. RELATIVITY OF CONTRACTS
a. CONSENT of contracting parties - Contracts take effect only between the parties, their assigns &
b. OBJECT CERTAIN – subject matter heirs except when there are rights & obligations not transmissible:
c. CAUSE/CONSIDERATION a. by their nature
In some contracts, ff are also essential: b. by stipulation (stipulation por autri)
d. FORM c. by provision of law
e. DELIVERY
4. CONSENSUALITY OF CONTRACTS
2. NATURAL – found in certain contract, presumed to exist unless - Contracts are perfected by mere consent
stipulated Exceptions:
a. REAL CONTRACTS – perfected by delivery
3. ACCIDENTAL – various particular stipulations that may be agreed b. FORMAL/SOLEMN CONTRACTS – special form required for its
upon by contracting parties perfection

(7) CLASSIFICATION OF CONTRACTS 5. OBLIGATORINESS OF CONTRACTS

According to: - The contract, once perfected, has the force of law between parties
1. PERFECTION/FORMATION which bound to comply in good faith
a. CONSENSUAL – perfected by mere consent
b. REAL – perfected by delivery 4 KINDS OF INNOMINATE CONTRACTS
c. FORMAL/SOLEMN – special formalities are essential before 1. I give that you may give
perfection of contract 2. I do that you may do
3. I give that you may do
2. PARTIES OBLIGATED 4. I do that you may give
a. UNILATERAL – only 1 has obligation
b. BILATERAL – both parties require to render reciprocal 4 RULES FOR INNOMINATE CONTRACTS
prestations 1. Agreement of parties
2. Law on Obligations & Contracts
3. CAUSE 3. Rules on most analogous nominate contract
a. ONEROUS – exchange of considerations 4. Customs of place
b. GRATUITOUS – no consideration received in exchange of what
is given STIPULATION POR AUTRI
c. REMUNERATORY – something is given for benefit/service that - stipulation in favor of 3rd person
had been rendered previously
5 REQUISITES OF STIPULATION POR AUTRI
4. RISK OF FULFILLMENT 1. Stipulation in favor of 3rd person
a. COMMUTATIVE – equivalent values are given by both parties 2. Stipulation is only PART, not the whole of the contract.
b. ALEATORY – fulfillment of contract depends on chance (eg. 3. Both parties must conferred upon a favor of 3rd person
insurance) 4. 3rd person must accept & say it to debtor before its
revocation/cancellation
5. IMPORTANCE 5. Neither of both parties be the legal representation/autho-rization
a. PRINCIPAL – contract may stand alone (eg. sale, partnership) of 3rd person
b. ACCESSORY – existence depends on another contract (pledge,
guarantee) CONSENT
c. PREPARATORY – contract not an end by itself but a means thru - meeting of offer (certain) & acceptance (absolute) upon a thing
w/c other contracts may be made (eg. agency)
5 REQUISITES OF CONSENT
6. NAME 1. Must be given by 2 or more parties
a. NOMINATE – contract given a particular/special name (eg. 2. Parties are capacitate to enter in contract
partnership) 3. No vitiation of consent
b. INNOMINATE – not given special name (eg. I give that you may 4. No conflict between declared & intended
give) 5. Legal formalities must be complied

7. SUBJECT MATTER 7 RULES ON OFFER/ACEPTANCE

a. Contracts involving things 1. An offer must be certain.
b. Contracts involving rights/credits 2. Business advertisements for sale are NOT offers but ONLY
c. Contracts involving services invitations to make an offer.
3. Advertisements for bidders are ONLY invitations.
3 STAGES OF CONTRACT 4. An acceptance made by letter/telegram does NOT
1. PREPARATION/CONCEPTION – preparatory steps to perfect bind offeror EXCEPT from the TIME it came to his knowledge.
contract 5. An offer made through an agent is accepted from the TIME the
2. PERFECTION/BIRTH – meeting of minds between 2 contracting acceptance is done through an agent.
parties 6. An offer is ineffective upon death, insanity, insolvency, of EITHER
3. CONSUMMATION/TERMINATION – terms of contract are party BEFORE acceptance is made.
performed, & contract is fully executed 7. When offeror allowed offeree a certain period
to accept, offer MAY be withdrawn AT ANYTIME unless there is
5 BASIC PRINCIPLES/CHARACTERISTICS OF A CONTRACT something PAID/PROMISED.
1. PRINCIPLE OF AUTONOMY (liberty to contract)
Provided they are not contrary to: 3 persons who CANNOT GIVE CONSENT to a contract (if entered
a. Law into, contract is voidable)
b. Morals 1. UNEMANCIPATED MINORS
c. Good customs 2. INSANE/DEMENTED PERSONS (unless they acted DURING LUCID
d. Public order INTERVAL)
e. Public policy 3. DEAF-MUTES who DO NOT know how to write
 2. Violence ANNULS obligation although it is DONE by 3rd person not
DEMENTED PERSON – NOT exactly insane; difficult to distin-guish part of contract.
right from wrong
4. INTIMIDATION
LUCID INTERVAL – period when an INSANE has acquired - 1 of the parties is compelled by a reasonable & well-grounded fear
SANITY temporarily, therefore, capacitated to enter into a valid of an imminent & grave evil upon his person/property to give his
contract consent.

2 RULES on persons WHO CANNOT GIVE CONSENT to a contract 3 RULES ON INTIMIDATION

1. Age of majority is 18 yrs old 1. Age, sex, & condition of person must used to determine the
2. A contract entered into by UNEMANCIPATED MINOR w/o degree of intimidation.
parents/guardian’s consent is voidable, except: 2. Intimidation ANNULS obligation although it is DONE by 3rd person
a. Minor MISREPRESENTS his age (estoppel) not part of contract.
b. Contract involves sale & delivery of necessities to minor 3. A threat to enforce one’s claim (claim must be just & legal), DOES
NOT vitiate consent.
5 VICES OF CONSENT
- NOTE: When there is a DEFECTIVE CONSENT of EITHER of parties, VIOLENCE INTIMIDATION
contract is voidable; Remedy: annulment of contract. External Internal
1. MISTAKE/ERROR Physical contact/coercion NO physical coercion; ONLY
2. FRAUD/DECEIT MENTAL/MORAL coercion
3. VIOLENECE
4. INTIMIDATION 5. UNDUE INFLUENCE
5. UNDUE INFLUENCE - a person takes improper advantage of his power over other’s will,
depriving the other to his reasonable freedom of choice.
1. MISTAKE/ERROR
- wrong conception & lack of knowledge upon a thing 3 RULES ON UNDUE INFLUENCE
1. There is a person who takes improper advantage of his
(2) MISTAKES W/C VITIATES CONSENT power over other’s will, depriving the other to his reasonable
It should refer to: freedom of choice.
1. substance of thing that is the OBJECT of contract 2. Undue influence ANNULS obligation although it is DONE by
2. conditions w/c MOVED either/both parties to enter into contract 3rd person not part of contract.
3. To constitute undue influence, ff circumstances must be
4 RULES ON MISTAKE considered: (1) confidential, family, spiritual, & other relations of
1. Mistake to identity/qualifications of either of parties will vitiate parties; or (2) the aggrieved party is suffering from mental
consent ONLY when IT is the principal cause of contract. weakness; or (3) ignorant; or (4) in financial distress.
2. Simple mistake of account must be corrected.
3. No mistake if parties knew the risk/doubt affecting OBJECT of SIMULATION OF CONTRACT
contract. - process of INTENTIONALLY deceiving others by producing a
4. When one of parties is unable to read or the contract is in contract not really exist (absolute simulation), or w/c is different
language not understood by him, & mistake/fraud is alleged, the from true agreement (relative simulation).
person enforcing the contract must FULLY explained the terms to
him. 2 KINDS OF SIMULATED CONTRACT
1. ABSOLUTE SIMULATION (the parties DO NOT intend to be bound
2. FRAUD/DOLO at all)
- when through insidious words/machinations of one of the parties, - completely fictitious/make-believe; VOID
INDUCED the other to enter into a contract, & w/o them, he will not 2. RELATIVE SIMULATION (parties conceal their true/real
agree. agreement)
- parties are bound to real/true agreement, EXCEPT:
DOLO CAUSANTE DOLO INCIDENTE a. contract prejudice 3rd person
Serious Not serious b. purpose is contrary to law, morals, good customs, public order,
cause induces party to ENTER NOT the cause to enter into public policy
into contract contract
make contract voidable contract is valid; liable 7 REQUISITES OF OBJECT OF CONTRACT
for damages 1. Specific & certain
2. Services not contrary to law, morals, good customs, public order,
7 RULES OF FRAUD public policy
1. Failure to disclose facts when these needs to be revealed, is a 3. Services/things must NOT be legally/physically impossible
fraud. 4. Services/things are w/in commerce of man including future things
2. Fraud should be SERIOUS (dolo causante) & SHOULD NOT be done 5. Rights are NOT TRANSMISSIBLE.
by BOTH parties to make contract voidable. 6. Determinate (kind) or determinable ( w/o the need of new
3. Incidental fraud (dolo incidente) ONLY obliges person to PAY contract/agreement)
DAMAGES. 7. NO contract be entered for future inheritance UNLESS law states
4. Usual exaggerations in trade, when other party know the “real”
facts, is NOT FRAUD. 4 REQUISITES OF CAUSE
5. A mere expression of opinion is NOT FRAUD UNLESS made by 1. It is just & equitable.
an expert & the other party relies on his special knowledge. 2. It exists.
6. Misrepresentation made in good faith is NOT FRAUD but may 3. It is lawful.
constitute an error. 4. It is true.
7. Misrepresentation by 3rd person DOES NOT vitiate consent UNLESS
it created substantial mistake. LESION
- inadequacy of cause (eg. insufficient price for thing sold)
3. VIOLENCE
- serious/irresistible force is employed. RULES ON LESION
- Lesion DOES NOT invalidate contract, except there is:
2 RULES ON VIOLENCE a. Fraud
1. Serious/irresistible force is employed w/c constitutes the reason b. Mistake
why one entered into a contract. c. Undue influence
2 FORM OF CONTRACTS 5. Those whose CAUSE/OBJECT/PURPOSE is contrary to law, morals,
1. Contracts in writing good customs, public order, or public policy.
2. Contracts in a public instrument 6. Those where INTENTION of parties to principal object CANNOT be
ascertained.
1. Contracts w/c must be IN WRITING to be valid: 7. Those expressly prohibited/declared VOID by law.
a. Donation of personal property exceeds P5000.
b. Agent’s authority in sale of land/any interest.
c. Contract of antichresis.
d Stipulation to pay interest on loans.
e. Stipulation to reduce common carrier’s extraordinary diligence
& to limit its liability.

2. Contracts w/c must be IN A PUBLIC INSTRUMENT to be valid:

a. Donation of real property (both the donation & accep-tance).
b. Sale of real property.
c. Partnership where real property/rights is contributed; or when
capital contribution exceeds P3000.

REFORMATION OF INSTRUMENTS
- REMEDY in equity in w/c a written instrument is made/construed
to the REAL intention of parties when there is an error/mistake.

(5) CASES REFORMATION OF INSTRUMENT IS AVAILABLE

1. Mutual mistake of parties.
2. One party was mistaken & the other acted fraud.
3. One party was mistaken & the other knew/believed that the
instrument did not state their REAL agreement.
4. Ignorance, lack of skill, negligence, or bad faith of person drafting
the instrument DOES NOT state the TRUE INTENTION of parties
5. Two parties agree on mortgage/pledge of personal/real property
BUT the instrument states the property is sold ABSOLUTELY, or w/
the right to repurchase.

(3) NO REFORMATION OF INSTRUMENT WHEN:

1. Simple donation inter vivos where NO CONDITION is imposed.
2. Will.
3. Real agreement is VOID.

4 KINDS OF DEFECTIVE CONTRACTS

1. RESCISSIBLE – valid until rescinded; has ALL essential requisites
but because of injury/damage to one of the parties, the contract
may be rescinded.
2. VOIDABLE – valid until annulled; has ALL essential requisites but
because of defect in consent, contract may be annulled.
3. UNENFORCEABLE – cannot be sued/enforced unless ratified; no
effect NOW but may take effect upon ratification.
4. VOID – NO effect at all; cannot be ratified/validated.

5 RESCISSIBLE CONTRACTS
1. Those entered by guardians & suffered LESION by more than ¼ of
value of the value that is the OBJECT.
2. Those agreed upon in representation of absentees, if the
absentees suffered LESION.
3. Those undertaken in FRAUD of creditors when the creditors
cannot further claim.
4. If entered into contract w/o knowledge/approval of litigants
under litigation.
5. Contracts subjected to rescission declared by law.

3 VOIDABLE CONTRACTS
1. One of the parties INCAPABLE of giving consent to a contract.
2. Those where consent vitiates by vices of consent. (MFVIU)
3. Those agreed in the state of drunkenness/hypnotic spell.

3 UNENFORCEABLE CONTRACTS
1. Those entered in name of other person, or who acted BEYOND his
powers.
2. Those who do not comply w/ the Statute of Frauds.
3. Both parties are incapable of giving consent to a contract.

7 VOID/INEXISTENT CONTRACTS
1. Those w/c are ABSOLUTELY simulated/fictitious.
2. Those w/c contemplate an impossible service.
3. Those whose OBJECT is outside the commerce of man.
4. Those whose CAUSE/OBJECT did not exist at time of tran-saction.