DE LA SALLE LIPA

COLLEGE OF LAW

Course Title: Obligations and Contracts

2nd Semester SY 2018-2019

Faculty: Atty. Charlton Jules P. Romero

e-mail: romerolaw88@yahoo.com

Course Description: An in-depth study of the nature, kinds and effects of obligations,
and their extinguishment; contracts in general, their requisites, form and interpretation;
and defective contracts, including quasi-contracts, natural obligations and estoppel.

Cases, recitations, lectures and online activity (Canvas LMS): 5 hours a week- 5 units.

Learning Objectives:
At the end of the semester the students are expected to have:
a) A critical understanding of the fundamental principles of the law on obligations and the
sources thereof, nature and effects, the different kinds of obligations and how these are
extinguished.
b) A critical understanding of the law on contracts relating to its essential requisites, forms,
interpretation and types of contracts and their effects.
c) The analytical capacity to evaluate different factual circumstances and cases and be
able to achieve a critical application of the law on obligations and contracts.
d) An understanding of the law as an instrument to achieve justice and peace.

Initial meeting: Introductions, course overview, requirements, expectations and delivery.

I. Obligations.
Art. 1156, New Civil Code (NCC). Definition; elements; distinction between natural and
civil obligations (see Art. 1423)
• Makati Stock Exchange, Inc. et al v. Campos; G.R. No. 138814 April 16,
2009
• Ang Yu Asuncion v. Court of Appeals; G.R. No. 109125; December 2, 1994
• de la Cruz v. Northern Theatrical Enterprises; G.R. No. L-7089; August 31, 1954
• Ansay v Board of Directors NDC; G.R. No. L-13667; April 29, 1960.

II. Sources of Obligations.

Art. 1157
• Pelayo v. Lauron; G.R. No. L-4089; January 12, 1909
• Leung Ben v. O’Brien; G.R. No. L-13602; April 6, 1918
• Virata v. Ochoa; G.R. No. L-46179; January 31, 1978

III. Law as a source of obligations.

Art. 1158.
• Estate of the late Juliana Diez vda. de Gabriel v. Commissioner of Internal
Revenue; G.R. No. 155541; January 27, 2004.
• Arroyo v Vazquez de Arroyo; G.R. No. L-17014; August 11, 1921.

IV. Contracts.
Art. 1159; Arts. 1305 and 1306; see Sec. 10 & 20, Art. III, Constitution; see also Art. 1311.
• Perez v. Pomar; G.R. No. L-1299; November 16, 1903
• Cathay Pacific v. Vazquez; G.R. No. 150843; March 14, 2003
• Ollendorf v. Abrahamson; G.R. No. 13228; September 13, 1918
• De Los Reyes v. Alojado; G.R. No. L-5671; August 24, 1910

V. Quasi-Contracts.
Art. 1160; Art. 2142. Kinds: Negotriorum Gestio (Art. 2144); Solutio Indebiti (Art. 2154);
Other quasi-contracts (Art. 2164 to 2175)
• Rotea v. Delupio; G.R. No. L-45310; April 14, 1939
 • UST Cooperative Store v. City of Manila; G.R. No. L-17133; December 31, 1965
• Ramirez v. Redfern; G.R. No. L-26062; December 31, 1926

VI. Delicts.
Art. 1161 Acts or omissions punished by law. See Arts. 100 to 113, Revised Penal Code;
Chapter 2 Preliminary Title on Human Relations, NCC; Arts. 2177, 2202 to 2206, 2211,
2219, 2230 NCC; Rule 111 Revised Rules of Court
• Elcano v. Hill; G.R. No. L-24803; May 26, 1977
• People v. Teehankee, Jr.; G.R. Nos. 111206-08; October 6, 1995
• RCPI v Court of Appeals; G.R. No. L-44748 August 29, 1986

VII. Quasi-Delicts.
Art. 1162. (tort/culpa aquiliana) Art. 2176 et seq. Distinguish from crime.
• Picart v. Smith; G.R. No. L-12219; March 15, 1918
• Gutierrez v. Gutierrez; G.R. No. 34840; September 23, 1931
• Far East Bank v. Court of Appeals; G.R. No. 108164; February 23, 1995
• St. Francis High School v. Court of Appeals; G.R. No. 82465; February 25, 1991
• Coca Cola v. Court of Appeals; G.R. No. 110295; October 18, 1993
• Gashem Shookat Baksh v. Court of Appeals; G.R. No. 97336; February 19, 1993

Civil Code; Book IV; Title I, Obligations, Chapter 2.Nature and effects.

Obligation to give (see 1246; 1163; 1166 1164. Generic thing- 1246)
Obligation to do; not to do (see 1244)

Art. 1163
standard- diligence of a good father of a family

• Canlas v Court of Appeals, G.R. No. 112160, February 28, 2000

• Bishop of Jaro v De la Pena; G.R. No. L-6913, November 21, 1913
• Obejera v Iga Sy; Adm. Case No. 34 . April 29, 1946|||, 76 PHIL 580-588).
• Africa v Caltex; G.R. No. L-12986, March 31, 1966

also distinguish from extraordinary diligence

• Philippine Airlines v Court of Appeals; G.R. No. 92501 March 6, 1992

• Sulpicio Lines v Court of Appeals; G.R. No. 113578 July 14, 1995
(see also 1173; 1244; 1246; 1349; 1733)
(incidental/accessory) duties of debtor to deliver a determinate thing

Art. 1164
What are fruits? (see 442; examples)
When is it time to deliver (tradition)?
Kinds of Delivery. Actual and constructive delivery.
Distinguish personal and real rights (in personam & in rem).

• Cruzado v Bustos & Escaler; G.R. No. L-10244, February 29, 1916

Art. 1165
Remedies of a creditor (obligations to give). Specific performance (see also 1170; 2215
[4]; gen rule [1174]); substituted performance.

• Jimmy Co v Court of Appeals; G.R. No. 124922 June 22, 1998

• Yu Tek v Gonzales; G.R. No. L-9935, February 1, 1915

Art. 1166
Definition of accessories; accessions (see 440)

Arts. 1167; 1168

Remedies of creditor (obligations to do; not to do). Undoing of poor work.
 • Chavez v Gonzales; L-27454. April 30, 1970

Other remedies. Rescission. 1191, 1192

Art. 1169
kinds of mora: a) solvendi; b) accipiendi (see 1268); c) compensatio morae
requisites for delay.
need for demand. When not necessary.
Effects of delay.

• Cetus Dev’t Inc. v CA; G.R. No. 77648, August 7, 1989

• Aerospace Chemical Industries, Inc., v CA; G.R. No. 108129, September 23,
1999
• Santos Ventura Hocorma Foundation, Inc. v. Santos; G.R. No. 153004,
November 5, 2004
• Vazquez v Ayala Corp., G.R. No. 149734, November 19, 2004
• De la Cruz v Legaspi & Samperoy; G.R. No. L-8024, November 29, 1955
• Manuel v CA; G.R. No. 95469 July 25, 1991 (mora accipiendi)
• Central Bank v CA; G.R. No. L-45710; October 3, 1985 (compensatio morae)

Art. 1170
Modes of Breach. Definitions. Fraud (dolo incidente ;distinguish from dolo causante in
1338; 1390), negligence (culpa contractual; distinguish from culpa aquiliana in 2176 and
culpa criminal), delay (mora; see 1169), contravene tenor
Damages (2197).

Breach of obligations
Distinction between substantial breach and casual/slight breach.

• Barredo v Leano; G.R. No. 156627, June 4, 2004

• Velarde v CA; G.R. No. 108346, July 11, 2001
• Angeles v Calasanz; G.R. No. L-42283, March 18, 1985
• Delta Motor Corp. v Genuino; G.R. No. L-55665, February 8, 1989
• Vermen Realty v CA; G.R. No. 101762, July 6, 1993

Fraud (see Art. 1171 non-waiver)

• Woodhouse v Halili; G.R. No. L-4811, July 31, 1953

• Geraldez v CA & Kenstar; G.R. No. 108253, February 23, 1994
• Yutivo Sons v CTA; G.R. No. L-13203, January 28, 1961

Neglience (see Arts. 1172, 1173, 2201). Distinguish dolo from culpa.

• Gutierrez v Gutierrez; G.R. No. 34840. September 23, 1931.|||

• Vasquez v de Borja; G.R. No. L-48930, February 23, 1944
(standard of care)

• De Guia v Manila Electric; G.R. No. L-14335, January 28, 1920

• U.S. v Barias; G.R. No. L-7567, November 12, 1912
• Sarmiento v Cabrido; G.R. No. 141258, April 9, 2003
• Crisostomo v CA; G.R. No. 138334. August 25, 2003.

Contravention of tenor.

• Chaves v Gonzales; G.R. No. L-27454. April 30, 1970.

• Telefast v Castro; G.R. No. 73867 February 29, 1988
• Arrieta v NARIC; G.R. No. L-15645, January 31, 1964
• Magat v Medialdea; G.R. No. L-37120 April 20, 1983

Art. 1174
Fortuitous event (concept- acts of god; acts of man. Effects of concurrent fault.
Extinguishment of liability- 1174, 1165, 552, 1942, 1979, 2001, 2147)

• Tanguilig v Court of Appeals; G.R. No. 117190 January 2, 1997

• Juan Nakpil & Sons v CA; G.R. No. L-47851 October 3, 1986
• Republic v Luzon Stevedoring; G.R. No. L-21749, September 29, 1967
• Dioquino v Laureano; G.R. No. L-25906, May 28, 1970
• Austria v CA; G.R. No. L-29640 June 10, 1971
• Nat’l Power Corp v CA; G.R. No. L-47379 May 16, 1988
• Yobido v CA; G.R. No. 113003, October 17, 1997
• Bacolod Murcia v CA & Gatuslao; G.R. Nos. 81100-01 February 7, 1990
• Philcomsat v Globe Telecom; G.R. No. 147324, May 25, 2004

Art. 1175
(usurious transactions; 1413; 1961; PD 858; PD 1685; CB Circ. 416; Monetary Board
Circ 905)

• Security Bank v RTC Manila; G.R. No. 113926 October 23, 1996
• Almeda v CA; G.R. No. 113412 April 17, 1996
• Angel Jose Warehousing v Chelda Ent.; G.R. No. L-25704; April 24, 1968
• First Metro Investment v Este del Sol; G.R. No. 141811; November 15, 2001

Art. 1176
Presumptions in payment of interest and installments

• Hill v Veloso; G.R. No. 9421. July 24, 1915; 31 Phil 160.
• Magdalena Estates v Rodriguez; L-18411, Dec 17, 1966 (18 SCRA 967)
• Manila Trading & Supply v Medina; L-16477 May 31, 1961

Art. 1177
Subsidiary remedies of creditor. Accion subrogatoria distinguish from accion pauliana
1381(3). Other specific remedies 1652; 1729; 1608; 1895.

• Khe Hong Cheng v CA; G.R. No. 144169 March 28, 2001
• Siguan v Lim; G.R. No. 134685 November 19, 1999

Art. 1178 Transmissibility of rights (see also 1311)

• Estate of Hernandez v Luzon Surety; L-8437, Nov 28, 1956

###

Different Kinds of Obligations (Arts. 1179 to 1230, NCC)

1. Pure & conditional

Condition. Concept. Condition v. period/term

• Gaite v Fonacier 2 SCRA 830

• Gonzales v Heirs of Thomas 314 SCRA 585

Kinds of Conditions

As to effect on obligation

Suspensive (condition precedent)

-retroactive effect when condition is fulfilled
• Coronel v CA & Alcaraz G.R. No. 103577 Oct. 7, 1996
-rights of creditor and debtor before fulfillment of condition
Resolutory
• Parks v Province of Tarlac 49 Phil 142
• Central Phil Univ. v CA 246 SCRA 511
• Quijada v CA G.R. No. 126444 Dec. 4, 1998
As to cause or origin
-Potestative
• Lim v CA G.R. No. 87047 Oct. 31, 1990
-Casual
• Naga Telephone v CA G.R. No. 107112 Feb. 24, 1994.
-Mixed
• Osmena v Rama 14 Phil 99
• Hermosa v Longora 93 Phil 971
• Taylor v Uy Tieng Piao 43 Phil 873
• Smith Bell v Sotelo Matti 44 Phil 875
• Rustan Pulp v IAC 214 SCRA 665
• Romero v CA G.R. No. 107207 Nov. 23, 1995

As to Possibility
-possible
-impossible
• Roman Catholic v CA 198 SCRA 300
As to mode
-positive
-negative
Rules in case of loss, deterioration or improvement pending the happening of the
condition
• Heirs of Moreno v Mactan G.R. No. 156273 Oct. 15, 2003

Effect of prevention of the fulfillment of the condition by the obligor

Jose Herrera v Leviste G.R. No. 55744 Feb. 28, 1985

2. Reciprocal obligations. Concept.

-alternative remedies of injured party in case of breach
action for fulfillment. When fulfillment no longer possible.
action for rescission

3. Obligation with a period (1193 et seq.)

-kinds of period/term
as to:
effect- suspensive; resolutory
expression- express; implied
definiteness- definite; indefinite
source- voluntary; legal; judicial

Effect of payment in advance.

Benefit of period. For whose benefit. Effect. Presumption. When debtor loses right to
make use of period.

When court may fix period.

• Ponce de Leon v Syjuco 90 Phil 311
• Buce v CA 332 SCRA 151
• Araneta v Phil Sugar Estate 20 SCRA 330
• Central Phil. University v CA 246 SCRA 511

4. Alternative obligations. Facultative obligation. (1199; 1200 et seq)

5. Joint & solidary obligations. (1207; 1208) Joint indivisible obligations. (1209; 1210)
• Ynchausti v Yulo 34 Phil 978
• Lafarge Cement v Continental Cement G.R. No. 155173 Nov. 23, 2004
• Jaucian v Querol 38 Phil 718
• Quiombing v CA 189 SCRA 325
 • Inciong v CA 257 SCRA 578
• Alipio v CA 341 SCRA 441

6. Divisible & indivisible obligations. (1225). Effects.

7. Obligations with a penal clause. (1226 et seq)

-as to effect; source; purpose
• Makati Dev’t Corp. v Empire Ins. Co. 20 SCRA 557
• Tan v CA 367 SCRA 571
• Country Bankers v CA; G.R. No. 85161, Sept. 9, 1991. 201 SCRA.
###

Chapter 4 Extinguishment of Obligations

I. Modes of Extinguishment (Art. 1231)

A. Payment or Performance
B. Loss or Impossibility
C. Condonation or Remission
D. Confusion or Merger
E. Compensation
F. Novation
G. Other Causes

II. Payment or Performance

A. Concept-Art. 1232
B. Requisites
1. Who can pay
a. in general
b. third person who is an interested party
i. meaning of "interested party
ii. effects-Art. 1302 [3]
c. third person who is not an interested party but with consent of debtor
i. effects - Art. 1236 par. 2, 1237, 1236 par. 1
d. third person who is not an interested party and without knowledge or
against the will of the debtor
i. effects - Art. 1236 par. 2, 1237, 1236 par. 1
e. third person who does not intend to be reimbursed -Art. 1238
f. in obligation to give - Art. 1239, 1427
i. effect of incapacity
g. in case of active solidarity - Art. 1214

2. To whom payment may be made

a. in general - Art. 1240
b. incapacitated person - Art. 1241 par. 1
i. requisites
c. third person-Art. 1241 par. 2
i. requisites
ii. when proof of benefit not required - Art. 1241 par. 3
d. in case of active solidarity
3. What is to be paid ("Identity")
a. in general
b. in obligations to:
i. give a specific thing - Art 1244
ii. give a generic thing - Art. 1246
iii. pay monthly - Art. 1249, 1250, R.R. 529, R.A. 4100
Cases:
Arrieta vs. NARIC, (GR No. L-15645, Jan 31, 1964)
Kalalo vs. Luz, 34 SCRA 377 (1970)
St. Paul Fire and Marine Insurance vs. Macondray, 70 SCRA 122 (1976)
Papa vs. A.V. Valencia, et al., 284 SCRA 643 (1998)
PAL vs. CA, 181 SCRA 557 (1990)
 c. payment of interest-Art. 1956
4. How is payment to be made ("Integrity")
a. in general-Art. 1233.
General Rule: Partial payment is not allowed - Art. 1248
Exceptions: - Art. 1248
b. substantial performance in good faith -Art. 1234
c. estoppel - Art. 1235
d. presumptions in payment of interests and installments-Art 1176

5. When payment is to be made

a. in general - Art. 1169
b. see Chapter 2: Delay
6. Where payment is to be made - Art. 1251 par. 1
a. if no place is expressly designated - Art. 1251 par. 2 to par. 4
7. Expenses of making payment - Art. 1247

C. Application of Payments
1. Concept-Art 1252
Cases:
Reparations Commission vs. Universal Deep Sea Fishing, 83 SCRA 764 (1978)
Paculdo vs. Regalado, 345 SCRA 134 (2000)

2. Requisites
3. Rules in application of payments - Art. 1252, 1253
a. if rules inapplicable and application cannot be inferred - Art. 1254
i. meaning of "most onerous to debtor

D. Payment by Cession
1. Concept-Art. 1255
2. Requisites
3. Effects

E. Dation in Payment
1. Concept-Art. 1245
a. distinguished from Payment by Cession
Case:
DBF vs. CA, G.R. No. 118342, January 5, 1998.
2. Requisites
3. Effects
Case: Filinvest Credit /Corporation vs. Philippine Acetylene, G.R. L-50449,
January 30, 1982

F. Tender of Payment and Consignation

1. Tender of Payment
a. Concept
b. Requisites
2. Consignation
a. Concept
i. purpose
b. Requisites
i. when tender and refusal not required - Art. 1256 par. 2
ii. two notice requirement - Art. 1257 par. 1, 1258 par. 2 effects of
noncompliance
c. Effects-Art. 1260 par. 1
d. Withdrawal by debtor before acceptance by creditor or approval by court;
effects - Art. 1260 par. 2
e. Withdrawal by debtor after proper consignation - Art. 1261
i. with creditor's approval; effects
ii. without creditor's approval; effects
f. Expenses of consignation - Art. 1259
Cases:
De Guzman vs. CA, 137 SCRA 730 (1985)
 TLG International Continental Enterprising, Inc. vs.Flores,17SCRA437(1972)
McLaughtia vs. CA, 144 SCRA 693 (1986)
Soco vs. Militante, 123 SCRA 160 (1983)
Sotto vs. Mijares, 28 SCRA 17 (1969)
Meat Packing Corp. vs. Sandiganbayan, G.R. NO. 103068, June 22, 2001
Pabugais vs. Sahijwani, G.R. No. 156846, February 23, 2004

III. Loss or Impossibility

A. Loss of Thing Due
1. Concept-Art. 1189 [2]
2. Kinds
a. As to extent
i. Total
ii. Partial
3. Requisites-Art. 1262
4. Presumption-Art. 1265, 1165
a. when not applicable
5. Effects
a. in obligation to give a specific thing - Art. 1262, 1268
b. in obligation to give a generic ting - Art. 1263
c. in case of partial loss - Art. 1264
d. action against third persons - Art. 1269

B. Impossibility of Performance
1. Concept-Art. 1266, 1267
2. Kinds
a. As to extent
i. Total
ii. Partial
b. As to source
i. legal
ii. physical
3. Requisites-Art. 1266
4. Effects
a. in obligations fo do -Art. 1266, 1267, 1262 par. 2 (by analogy)
i.”impossibility" distinguished from difficulty”
cases:
Occena vs. CA, 73 SCRA 637 (1976)
Naga Telephone Co. vs. CA, 230 SCRA 351 (1994)
PNCC vs. CA, G.R. No. 116896, May 5, 1997
b. in case of partial impossibility - Art. 1264

IV. Condonation or Remission

A. concept
B. Kinds
1. As to extent
a. Total
b. Partial
2. As to form -Art. 1270 par. 1
a. Express
b. Implied
C. Requisites
a. when formalities required - Art. 1270 par. 2
case:
Yam vs. CA, G.R. No. 194726, Feb. 11.1999
D. Presumptions -Art. 1271, 1272, 1274
E. Effects
1. in general
2. in case of joint or solidary obligations
F. Governing Rules-Art. 1270
G. Renunciation of Principal or Accessory Obligation
1. effects-Art. 1273
 2. rationale
V. Confusion or Merger of Rights
A. Concept

B. Requisites
C. Effects
1. in general-Art. 1275
2. in case of joint (Art. 1277) or solidary obligations
D. Confusion in Principal or Accessory Obligation - Art. 1276
VI. Compensation
A. Concept-Art. 1278
1. Distinguished from Confusion
B. Kinds
1. As to extent
a. Total
b. Partial
2. As to origin
a. Legal
b. Conventional
c. Judicial-Art. 1283
d. Facultative
C. Legal Compensation
1. Requisites-Art. 1279, 1280
a. "due" distinguished from "demandable"
Cases:
Gan Tion vs. CA, 28 SCRA 235 (1969)
Silahis Marketing Corp. vs. IAC, G.R. No. 74027, December 7, 1989
BPE vs. Reyes, 255 SCRA 571 (1996)
PNB vs. Sapphire Shipping, 259 SCRA 174 (1996)
BPI vs. CA, G.R. No. 116792, March 29, 1996
Mirasol vs. CA, G.R. No. 128448, February 1,2001
2. Effects-Art. 1290, 1289
D. When Compensation is Not Allowed - Art. 1287, 1288
E. compensation of Debts Payable in Different Places - Art. 1286
F. Effect of Nullity of Debts to be compensated - Art. 1284
G. Effects of Assignment of Credit
1. with consent of debtor - Art. 1285 par. 1
2. with knowledge but without consent of debtor - Art. 1285 par.2
3. without knowledge of debtor - Art. 1285 par. 3
a. rationale
VII. Novation
A. Concept-Art. 1291
B. Kinds
1. As to form
a. Express
b. Implied
2. As to origin
a. Conventional
b. Legal
3. As to object
a. Objective or Real
b. Subjective or Personal
C. Requisites-Art. 1292
Cases:
Millar vs. CA, 38 SCRA 642 (1971)
Dormitorio vs. Fernandez, 72 SCRA 388 (1976)
Magdalena Estate vs. Rodriguez, 18 SCRA 967 (1966)
Reyes vs. Secretary of Justice, 264 SCRA 35 (1996)
Couchingyan vs. RB Surety and Insurance, G.R. No. L-47369, June 30, 1987
Broadway Centrum Condominium Corp. vs. Tropical Hut, G.R. No. 79642, July 5,
1993)
California Bus Line vs. State Investment, G.R. No.147950, Dec.11,2003
 D. Effects
1. in general-Art. 1296
2. when accessory obligation may subsist - Art. 1296
E. Effect of the Status of the Original or New Obligation
1. nullity or voidability of original obligation - Art. 1298
2. nullity or voidability of new obligation - Art. 1297
3. suspensive or resolutory condition of original obligation
- Art. 1299
F. Objective Novation

1. meaning of "principal conditions"

G. Subjective Novation
1. By change of debtor
a. Expromision
i. requisites-Art. 1293
ii. effects - Art. 1295
Cases:
Garcia vs. Llamas, 417 SCRA 292 (2003)
Quinto vs. People, G.R. No. 126715, April 14,
1999.
2. By change of creditor: Subrogation of a third person in the rights of the
creditor - Art. 1300
a. Conventional subrogation
i. requisites-Art 1301
ii. distinguished from Assignment of Credit
iii. effects-Art 1303, 1304
Case:
Licaros vs. Gatmaitan, G.R. No. 142838, August 9, 2001
b. Legal subrogation
i. requisites
ii. when presumed - Art. 1302
iii. effects-Art. 1303, 1304
Case:
Astro Electronics Corp. vs. Philippine Export and Foreign Loan
Guarantee Corporation, G.R. No. 136729, September 23, 2003.
###

CONTRACTS

Chapter I. General Provisions

A. Definition- Art. 1305

B. Elements
1. Essential elements (see Chapter II, infra)
a. Consent
b. Object
c. Cause
2. Natural elements
3. Accidental elements (see D.,3., infra)
C. Characteristics
1. Obligatory force-Art. 1308
2. Mutuality-Arts. 1308-1310 (see also Art. 1473)
Case:
GSIS vs. CA, 228 SCRA 183 (1993)
3. Relativity
a. Contracts take effect only between the parties, their assigns and heirs -
Art. 1311
Cases:
 Manila Railroad Co. vs. La Compania Transatlantica, 83 Phil. 875 (1918)
DKC Holdings Corp. vs. CA, 329 SCRA 666 (2000)
b. No one may contract in the name of another - Art. 1317
Case:
Gutierrez Hmnos. Vs. Orense, 28 Phil. 571 (1914)
D. Parties
1. Auto-contracts
2. Freedom to contract - Art. 1306
Cases:
Gabriel vs. Monte de Piedad, 71 Phil. 497 (1941)
Pakistan International Airlines vs. Opie, 190 SCRA 90 (1990)
a. Special disqualifications
1) Art. 87, Family Code
2) Arts. 1490 and 1491, CC
3) Art. 1782, CC
3. What they may not stipulate - Art. 1306
a. Contrary to law, e.g.:
1) pactum commissorium (Art. 2088)
2) Pactum leonine (Art. 1799)
3) pactum de non alienado (Art. 2130)
b. Contrary to morals
c. Contrary to good customs
d. Contrary to public order
Cases:
Cui vs. Arellano, 2 SCRA 205 (1961)
Arroyo vs. Bel-win, 36 Phil. 386 (1917)
Filipinas Compama de Seguros vs. Mandanas, 17 SCRA 391 (1966)
Bustamante vs. Rosel, 319 SCRA 413 (1999)
E. Classification
1. According to subject-matter
a. Things
b. Services
2. According to name
a. nominate
b. Innominate-Art. 1307
Case:
Dizon vs. Gaborro, 83 SCRA 688 (1978)
1) do ut des
2) do ut facia
3) focio ut facias
4) facio ut des
3. According to perfection
a. By mere consent (consensual) - Art. 1315
b. By delivery of the object (real) - Art. 1316
4. According to its relation to other contracts
a. Preparatory
b. Principal
c. Accessory
5. According to form
a. common or informal
b. Special or formal
6. According to purpose
a. Transfer of ownership, e.g., sale
b. Conveyance of use, e.g., commodatum
c. rendition of services, e.g., agency
7. According to the nature of the vinculum produced
a. Unilateral
b. Bilateral
c. Reciprocal
8. According to cause
a. Onerous
b. Gratuitous or lucrative
 9. According to risk
a. Commutative
b. Aleatory
F. Stages
1. Preparation
2. Perfection
3. Consummation or death
G. As distinguished from a perfected promise and an imperfect promise (policitacion)
H. With respect to third persons
1. Stipulations in favor of third persons (stipulations pour autrui) - Art. 1311, 2nd
par.
Cases:
Florentine vs. Encarnacion, 79 SCRA 192 (1977)
Coquia vs. Fieldman's Insurance Co., 26 SCRA 178 (1968)
Constantino vs. Espiritu, 39 SCRA 206 (1971)
Integrated Packaging Corp. vs. CA, G.R. No. 115117, June 8, 2000.
2. Possession of the object of contract by third persons - Art. 1312
3. Creditors of the contracting parties - Art. 1313
4. Interference by third persons-Art. 1314
Cases:
Daywalt vs. La Corporacion de los Padres Agustinos Recoletos, 39 Phil.
587 (1919)
So Ping bun vs. CA, 314 SCRA 751 (1999)

Chapter II. Essential Requisites of Contracts

A. Consent
1. Requisites-Art. 1319
a. Must be manifested by the concurrence of the offer and acceptance
Cases:
Rosenstock vs. urke, 46 Phil. 217 (1924)
Malbarosa vs. CA, 402 SCRA 168 (2003)
1) Offer
a) Must be certain - Art. 1319
b) What may be fixed by the offerer - Art. 1321
c) When made through an agent - Art. 1322
d) Circumstances when offer becomes ineffective-Art. 1323
e) Business advertisements of things for sale - Art. 1325
f) Advertisements for bidders - Art. 1326
Case:
Jardine Davies vs. CA, G.R. Nos. 128066 and 128069,June 19, 2000.
2) Acceptance
a) Must be absolute-Art. 1319
b) Kinds
i. Express-Art. 1320
ii. Implied-Art. 1320
iii. Qualified-Art. 1319
c) If made by letter or telegram - Art. 1319, 2nd par.
i. Four theories on when the contract is perfected:
1. Manifestation theory
2. Expedition theory
3. Recrption theory
4. Cognition theory
d) Period of acceptance - Art 1324
Case:
Sanchez vs. Rigos, 45 SCRA 368 (1972)
e) Contract of option - Art. 1324
Case:
Adelfa Properties vs. CA, G.R. No. 111238, January 25, 1995
b. Necessary legal capacity of the parties
1) Who cannot give consent-Art. 1327
2) When offer and/or acceptance is made
a) during a lucid interval
 b. in a state of drunkenness
c) during a hypnotic spell
c. The consent must be intelligent, free, spontaneous, and real - Arts. 1330-1346
1) Effect-Art. 1330
2) Vices of consent
a) Mistake or error
i. kinds
1. Mistake of fact
a. as to substance of the object
b. as to principal conditions
c. as to identity or qualifications of one of the parties
d. as to quantity, as distinguished from a simple mistake of account
Cases:
Damasug vs. Modelo, 34 Phil. 252 (1916)
Hemedes vs. CA, 316 SCRA (1990)
Katipunan vs. Katipnan, G.R. No. 132415, January 30,2002
iii. Inexcusable mistake-Art. 1333
b) Violence and intimidation - Art. 1335
i. Effect-Art. 1336
Case
Martinez vs. Hongkong and Shanghai Bank, 15 Phil. 252 (1910)
c) Undue influence-Art. 1337
d) Fraud or dolo - Art. 1338
Cases:
Hill vs. Veloso, 31 Phil. 161 (1915)
Woodhouse vs. Halili, supra
Geraldez vs. CA, supra
i. Kinds
1. dolo causante - Art 1338
2. dolo incidente - Art 1344, 2nd par.
ii. Failure to disclose facts; duty to reveal them - Art. 1339
Cases:
Tuason vs. Marquez. 45 Phil. 38 (1923)
Rural Bank of Sta. Maria vs.CA, 314 SCRA 255 (1999)
iii. Usual exaggerations in trade; opportunity to know the facts - Art. 1340
Cases:
Azarraga vs. Gay, 52 Phil. 599 (1928)
Laureta Trinidad vs. IAC, 204 SCRA 524 (1991)
iv. Mere expression of an opinion - Art. 1341
1. Effects - Art. 1344
e) Misrepresentation
i. By a third person - Art. 1342
ii. Made in good faith-Art. 1343
iii. Active/passive
Cases:
Mercado and Mercado vs. spiritu, 37 Phil. 215 (1917)
Braganza vs. Villa Abrille, 105 Phil. 456 (1959)
f) Simulation of Contracts
Cases:
Rodriguez vs. Rodriguez, 28 SCRA 229 (1914)
Suntay vs. CA, 251 SCRA 430 (1995)
Blanco vs. Quasha, G.R. No. 133148, November 17, 1999
i. Kinds-Art. 1345
1. absolute
2. relative
ii. Effects - Art 1346
B. Object of Contracts
1. What may be the objects of contracts - Art. 1347
a. All things not outside the commence of man
b. All rights not intransmissible
c. All services not contrary to law, morals, good customs, public or public
policy
 2. Requisite - must be determinate as to its kind - Art. 1349
3. What may not be the objects of contents
a. Future inheritance, except when authorized by law-Art. 1347
Cases:
Blas vs. Santos, 1 SCRA 899 (1961)
Tanedo vs. CA, G.R. No. 104482, January 22, 1996
b. Impossible things or services - Art. 1348
C. Cause of Contracts
1. Meaning of cause-Art. 1350
a. In onerous contracts
b. In remuneratory contracts
c. In contracts of pure beneficence
2. As distinguished from motive - Art. 1351
3. Defective causes and their effects:
a. Absence of cause and unlawful cause - Art.1352
Case:
Liguez vs. CA, 102 Phil. 577 (1957)
b. Statement of a false cause in the contract - Art. 1353
c. Lesion or inadequacy of cause - Art. 1355
Cases:
Carantes vs. CA, 76 SCRA 514 (1977)
Sps. Buenaventura, et al. vs. CA, 416 SCRA 263 (2003)
4. Presumption of the existence and lawfulness of a cause, though it is not stated in the
contract - Art. 1354

Chapter III. Form of Contracts

A. General rule: Contracts shall be obligatory, in whatever form they may have been
entered into, provided all the essential requisites for their validity are present.
B. Exception: When the law requires that a contract be in some form in order that it
may be valid or enforceable. (Anglo-American principle) -Art. 1356
Case:
Hernaez vs. De los Angeles, 27 SCRA 1276 (1969)
C. Kinds of formalities required by law:
1. Those required for the validity of contracts, such as those referred to in Arts. 748,
749, 1874, 2134,177 L 1773;
2. Those required, not for validity, but to make the contract effective as against third
persons, such as those covered by Arts. 1357 and 1358; and
3. Those required for the purpose of proving the existence of the contract, such as
those under the Statute of Frauds in Art. 1403.

Chapter IV. Reformation of Instruments

A. Requisites (Art. 1359):
1. Meeting of the minds upon the contract;
2. The true intention of the parties is not expressed in the instrument; and
3. The failure of the instrument to express the true agreement is due to mistake, fraud,
inequitable conduct, or accident.
Cases:
Garcia vs. Bisaya, 97 Phil. 609 (1955)
Bentir vs. Leande, 330 SCRA 591 (2000)
B. Cases where no reformation is allowed - Art. 1366
C. Implied Ratification-Art. 1367
D. Who may ask for reformation - Art. 1368
E. Procedure of reformation - Art. 1369
Cases:
Atilano vs. Atilano, 28 SCRA 2232 (1969)
Carantes vs. CA, supra
Sarming, et al. vs. Cresencio Dy, et al., 383 SCRA 131 (2002)

Chapter V. Interpretation of Contracts (Compare with Rules on Statutory

Construction)
 A. Primacy of intention-Arts. 1370, 1372
Cases:
Borromeo vs. CA, 47 SCRA 65 (1972)
Kasilag vs. Rodriguez, 69 Phil. 217 (1939)
B. How to determine intention - Art. 1371
C. How to interpret a contract
1. When it contains stipulations that admit several meanings -Art. 1373
2. When it contains various stipulations, some of which are doubtful-Art. 1374
3. When it contains words that have different significations - Art. 1375
4. When it contains ambiguities and omission of stipulations -Art. 1376
5. With respect to the party who caused the obscurity - Art. 1377
6. When it is absolutely impossible to settle doubts by the rules above - Art. 1378
a. in gratuitous contracts
b. in onerous contracts
7. When the doubts are cast upon the principal object so that the intention cannot
be known - Art. 1378
D. Applicability of Rule 123, Rules of Court (now Sees. 10-19, Rule 130)

DEFECTIVE CONTRACTS
Chapter VI. Rescissible Contracts
A. Kinds-Art. 1381
B. Characteristics
1. Their defect consists in injury or damage either to one of the contracting parties
or to third persons.
2. They are valid before rescission.
3. They can be attacked directly only, and not collaterally.
4. they can be attacked only either by a contracting party or by a third person who
is injured or defrauded.
5. They can be convalidated only by prescription, and not by ratification.
C. Rescission-Art. 1380
1. Definition
2. As distinguished from rescission under Art. 1191
Case:
Universal Food Corp. vs. Ca, 33 SCRA 1 (1970)
3. Requisites:
a. The contract is rescissible;
b. The party asking for rescission has no other legal means to obtain reparation
- Art. 1383;
c. He is able to return whatever he may be obliged to restore if rescission is
granted - Art. 1385;
d. The object of the contract has not passed legally to the possession of a third
person acting in good faith-Art. 1385;
e. The action for rescission is brought within the prescriptive period of four (4)
years - Art. 1389;
4. Effect of rescission - Art. 1385
a. with respect to third persons who acquired the thing in good faith - Art. 1385,
2nd and 3rd par.
5. Extent of rescission - Art. 1384
6. Presumptions of fraud - Art. 1387
a. Badges of fraud
Cases:
Oria vs. Mcmicking, 21 Phil. 243 (1912)
Siguan vs. Urn, et al., 318 SCRA 725 (1999)
Suntay vs. CA, supra
7. Liability for acquiring in bad faith the thins alienated in fraud of creditors - Art. 1388
Chapter VII. Voidable or Annullable Contracts
A. Kinds-Art. 1390
B. Characteristics
1. Their defect consists in the vitiation of consent of one of the contracting parties.
2. They are binding until they are annulled by a competent court.
3. They are susceptible of co-validation by ratification or by prescription.
 C. Annulment
1. As distinguished from rescission
2. Grounds-Art. 1390
3. Who may and may not institute action for annulment - Art. 1397
Case:
Singsong vs. Isabela Sawmill, 88 SCRA 732 (1979)
4 Prescription-Art. 1391
5. Effect
a. Mutual restitution-Arts. 1398 and 1402
Cases:
Cadwallader & Co. vs. Smith, Bell & Co., 7 Phil. 461 (1907)
Velarde vs. CA, supra
1) When one of the parties is incapacitated - Art. 1399
2) When the thing is lost through the fault of the party obliged to return the same
- Art. 1400
6. Extinguishment of the action
a. By ratification-Art. 1392
b. When the thing is lost through the fault of the person who has the right to file
the action - Art. 1401
D. Ratification
1. Requisites:
a. The contract is voidable;
b. The ratification is made with knowledge of the cause for nullity;
c. At the time of the ratification, the cause of nullity has already ceased to exist.
2. Forms:
a. Express or tacit-Art. 1393
b. By the parties themselves or by the guardian in behalf of an incapacitated party
- Art. 1394
3. Effects:
a. Action to annul is extinguished - Art. 1392
Case:
Uy Soo Urn vs. Tan Unchuan, 38 Phil. 552 (1918)
b. The contract is cleansed retroactively from all its defects-Art. 1396

Chapter VIII. Unenforceable Contracts

A. Characteristics
1. They cannot be enforced by a proper action in court.

2. They are susceptible of ratification.

3. They cannot be assailed by third persons.
B. Kinds-Art. 1403
1. Unauthorized contracts
a. Governing rules-Art. 1404
2. Contracts covered by the Statute of Frauds
a. Purpose of Statute
Cases:
Philippine National Bank vs. Philippine Vegetable Oil Co., 49 Phil. 857
(1927)
Limketkai Sons Milling Inc. vs. CA, G.R. No. 118509, December 1. 1995
Swedish Match vs. CA, G.R. NO. 128120, October 20, 2004
b. How ratified - Art. 1405
Case:
Carbonnel vs. Poncio, et al., 103 Phil. 655 (1958)
c. Right of the parties when a contract is enforceable but a public document is
necessary for its registration - Art. 1406
3. Contracts executed by parties who are both incapable of giving consent to a
contract
a. Effect of ratification by the parents or guardian of one of the parties - Art. 1407
b. Effect of ratification by the parents or guardian of both parties-Art. 1407

Chapter IX. Void or Inexistent Contracts

A. Characteristics
 1. Void from the beginning
2. Produces no effect whatsoever
3. Cannot be ratified - Art. 1409
B. Kinds-Art. 1409
1. Contracts that are void
a. Those whose cause, object, or purpose is contrary to law, morals, good
customs, public order or public policy
1) When the act constitutes a criminal offense -Art. 1411 a)
in pan delicto rule
Case:
Urada vs. Mapalad, A.M. MTJ-91-622 (1993)
2) When the act is unlawful but does not constitute a criminal offense-
Art.1412.
a) in pari delicto rule
Case:
Medina vs. CA, G.R. No. 109355, October 29,
1999.
3) When the purpose is illegal, and money is paid or property delivered
therefore - Art. 1414
4) When the contract is illegal and one of the parties is incapable of giving
consent - Art. 1415
Case:
Liguez vs. Ca, supra
Relloza vs. Gaw Cheen Hum, 93 Phil. 827 (1953)
5) When the agreement is not illegal per se but is prohibited - Art. 1416
Cases:
Philippine Banking Corp. vs. Lui She, 21 SCRA 52(1967)
Frenzel vs. Catito, 406 SCRA 55 (2003)
6) When the amount paid exceeds the maximum fixed by law - Art. 1417
7) When by virtue of a contract a laborer undertakes to work longer than the
maximum number of hours of work fixed by law - Art. 1418
8) When a laborer agrees to accept a lower wage than that set by law - Art.
1419
9) When the contract is divisible - Art. 1420
10) When the contract is the direct result of a previous illegal contract - Art. 1422
b. Those whose object is outside the commerce of man
c. Those which contemplate an impossible service
d. Those where the intention of the parties relative to the principal object of the
contract cannot be ascertained
e. Those expressly prohibited or declared void by law
2. Contracts that are inexistent
a. Those which are absolutely simulated or fictitious (see Arts. 1345 and 1346)
b. Those whose cause or object did not exist at the time of the transaction

C. Right to set up defense of illegality cannot be waived - Art. 1409

D. The action or defense for the declaration of the inexistence of a contract
1. does not prescribe - Art. 1410
2. is not available to third persons whose interest is not directly affected
- Art 1421

Title III. Natural Obligations

A. Definition-Art. 1423
B. As distinguished from civil obligations - Art. 1423
C. As distinguished from moral obligations
Cases:
Villaroel vs. Estrada, 71 Phil. 140 (1940)
Fisher vs. Robb, 69 Phil. 101 (1939)
D. Conversion to civil obligation
1. by novation
2. By ratification
E. Examples-Arts. 1424-1430
Title IV. Estoppel
A. Definition-Art. 1431
Case:
Kalalo vs. Luz, 34 SCRA 337 (1970)
B. Kinds
1. Technical estoppel
a. By record
b. By deed-Art. 1433
C. Persons bound - Art. 1439
Case:
Manila Lodge No. 761 Benevolent and Protective Order of the Elks vs. CA,
73 SCRA 168 (1976)
D. Cases where estoppel applies - Arts. 1434-1438

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