NAG HINTAY KA

BA? WALA
ISSAPRANK

HAHAHAHAHA
STUDY GUIDE (p. 329-330)
 1. Contract- As defined under Article 1305, a contract is a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something or to
render some service.
2. Stipulation pour autrui – A stipulation in favor of a third person
3. Real contract- This kind of contract is perfected by the delivery of the thing subject
matter of the contract. In other words, mere consent is not enough.
4. Perfection of contract- This is when the parties have come to a definite agreement or
meeting of the mind regarding the subject matter and cost of the contract.

II. Discussions
1. May a third person acquire rights under a contract to which he is a stranger or be
bound thereby? Explain. The general rule is that strangers cannot be bound by a
contract to which they are not parties. In other words, there are cases when even third
persons (not parties to the contract) may assume benefits or may be held liable for
damages under the contract.
2. How are contracts perfected? Article 1315. Contracts are perfected by mere consent,
and from that moment the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according to their nature,
may be keeping with good faith, usage and law.
3. When will a person be bound by a contract entered into by another?
A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.
4. Give the effect of the perfection of a contract.
Article 1316. Real contracts, such as deposit, pledge and commodatum, are not perfected
until the delivery of the object of the obligation.

III. Problems
Explain or state briefly the rule or reason for your answer.
1. A and B entered into a contract not specifically provided in the Civil Code. Is the
contract valid and binding.
The contract is invalid. In the general provisions of the Civil Code of the Philippines, a contract
is only deemed valid if it possesses the three elements which are the following: Consent, Object
and Cause.
2. S (seller) and B (buyer) entered into a contract of sale. It was agreed that the price shell
be determined by T, a third person. Can S or B refuse to be bound by T’s determination of
the price if the price if he does not agree with the amount thereof?
It depends on a number of factor, including what type of contract it is in terms of goods or
services represented who the sellers are for example, are they both merchants and so forth.
3. D owes C P20,000. Both are house painters. It was agreed that D instead of paying C, will
paint the house of E to which E expressed his conformity to C whose service as painter was
previously contracted by E. Has B the right to enforce the stipulation between C and D?
Under Article 1311, if a contract should contain some stipulation in favor of a third person, he
may demand its fulfillment provided he communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting
parties must have clearly deliberately conferred a favor upon a third person.
4. X made an office desk for Y. X told Y that the latter may pay whatever amount he would
like to pay for it. When the desk was finished Y offered to pay P2,000 but X instead
demanded P3,000, its fair value. Is X entitled to P3,000
In the given above, both X and Y are merchants, the course of trade, and their specific course of
dealing, while taking note of the fact that specialized goods are involved. General contract
principles also apply, and there would appear to be no contract due to the vague terms and a
failure of consideration. However, courts might find a contract implied in law, and make sure Y
is not unjustly enriched, according to doctrines of unjust enrichment or quantum merit.

STUDY GUIDE (p. 369-370)

1. Consent- The conformity or concurrence of wills and with respect to the contracts, it is
the agreement of the will of one (1) contracting party with that of another or others,
upon the object and the terms of the contract.
 2. Acceptance- This the manifestation by the offense of his assent to all the terms of the
offer, there is a true meeting of the minds resulting in the existence of a binding contract
of sale.
3. Natural elements- Those are presumed to exist in certain contracts unless the contrary is
expressly stipulated by the parties, like warranty against eviction, or warranty against
hidden defects in sale.
4. Option contact- One giving a person for a consideration a certain period within which
accept the offer of the offerer.
5. Mistake of law- It is arise from ignorance of some provision of law, or from an erroneous
interpretation of its meaning, or from an erroneous conclusion as to the legal effect of an
agreement, on the part of one of the parties.

II. Discussions
1. When is a contract voidable or annullable?
Article 1330. A contract where consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable.
2. Is it always required that he who alleges fraud or mistakes in entering into a
contract, must prove his allegation? Explain.
Yes, whoever alleges must always prove both criminal and civil cases. However,
the standard or proof in civil cases is usually lower. When entering a contract, one
must always be ready to prove what they are alleging.
3.Give the requisites in order that intimidation may vitiate or annul consent of a
party to a contract.
There is intimidation when one of the contracting parties is compelled by a
reasonable and well-grounded fear of an imminent and grave evil upon his person
or property, or upon the person or property of his spouse, descendants or
ascendants, to give his consent.

4. May fraud be commuted by a party to a contract though there is no

misrepresentation on his part? Explain.
Article 1339. Failure to disclose facts, when there is a duty to reveal them, as when
the parties are bound by confidential relation, constitutes fraud.
5. Will the acceptance of a business advertisement of a thing for sale produce the
perfection of a contract? Explain.
Article 135. Unless it appears otherwise, business advertisements of things for sale
are not definite offers, but mere invitations to make an offer.

III. Problems
Explain or state briefly the rule or reason for your answer.
1. In a contract containing an option period, when is the offerer not allowed to
withdraw his offer even before acceptance by the offeree? When is the offerer
allowed to withdraw his offer even after acceptance?
Article 1324. When the offerer has allowed the offeree a certain period to accept
the offer may be withdrawn any time before acceptance by communicating such
withdrawal, except when the option is founded upon consideration as something
paid or promised.
2. S sold his house to B believing that B was C. Can S legally withdraw from the
contract on the ground of mistake?
Yes, because under Article 1331, mistake as to the identify or qualifications of one
the parties will vitiate consent only when such identity or qualifications have been
the principal cause of the contract.
3. S agreed to deliver to B 500 cavans of rice at P600 per cavan. S delivered only
490 cavans deliberately misrepresenting that the delivery consisted of 500 cavans.
Can B ask the court to annul the contract on the ground of fraud?
Yes, because this situation is a representation of Casual Fraud (fraud used by party
to induce the other to enter into a contract without which the latter would not have
agreed to, taking into account the circumstances of the case) or fraud employed to
secure the consent of the other party, which is a ground for the annulment of a
contract although it may give rise to an action for damages.

4. S sold to B a commercial land for P1,000,000. S assured B that it is certain that in two
years time, the land would increase in market value by 50% or P1,500,000. It turned out
that the market value of the land even decreased to about P800,000. Is S liable to B for
misrepresentation?
Under Article 1340, the usual exaggeration in trade, when the other party had an opportunity to
know the facts, are not in themselves fraudulent. The law allows considerable latitude to seller’s
statements or dealer’s talk and experience teaches that it is exceedingly risky to accept it at its
face value. Customers are expected to know how to take care their concerns and to rely on their
ow independent judgement. Any person who relies on said exaggerations does so at own peril.
5. Suppose in the same problem, what S sold to B, hardware owner are 500 bags of cement.
S had every reason to believe that the price of cement would go down. After two weeks, it
did go down. Has B the right to have the sale annulled?
Under Article 1339, failure to disclose facts, when there is duty to reveal them, as when the
parties are bound by confidential relations, constitutes fraud. The sale is valid and B does not
have the right to have the contract annulled because S was not bound to make disclosure of his
reasons for his belief.

STUDY GUIDE (p. 376-377)

1. Future inheritance - Future inheritance is any property or right, not in existence or ca- pable
of determination at the time of the contract, that a person may inherit in the future.
2. Physical impossibility - physical impossibility takes place when, for example, the obligor
dies or becomes physically incapacitated to perform the obligation. The law does not make
any distinction as to whether or not the obligation can still be performed by others. However,
if the impossibility is due to the fault or negligence of the obligor, he shall be liable for damages.
1. Give the requisites of things as object of a contract.
(1) The thing must be within the commerce of men, that is, it can legally be the subject of
commercial transaction (Article 134)
(2) It must not be impossible, legally or physically (Article 1348)
(3) It must be in existence or capable of coming into existence (see Article1461,1493,1495)
(4) It must be determinate or determinable without the need of a new contract between the
parties. (Article 1349,1460 part 2).

2. Give the requisites of service as object of a contract.

(1) The service must be within the commerce of men.
(2) It must not be impossible, physically or legally (Article 1348)
(3) It must be determinate or capable of being made determinate. (Article 118,1349)
3. May a contract be entered upon future inheritance?
No contract may be entered into upon future inheritance except in cases expressly authorized by
law.

III. Problems
Explain or state briefly the rule or reason for your answer.
1.S sold to B for P100,000 a parcel of land belonging to S located in his hometown without
specifying its exact location and area. Is the sale valid?
According to the Article 1349 of the civil code. The object of every contract must be determinate
as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the
existence of the contract, provided it is possible to determinate the same, without the need of a
new contract between the parties.
2.S has several pigs. Under a contract of sale, S binds himself to deliver a pig to a B for
P3,000 if the pig has a weight of at least 30 kilos. State the binding effect of the sale.
According to the Article 1349 of the civil code. The object of every contract must be determinate
as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the
existence of the contract, provided it is possible to determinate the same, without the need of a
new contract between the parties.
STUDY GUIDE (p. 387)
1. Cause - Cause (causa) is the essential or more proximate purpose or reason which the
contracting parties have in view at the time of entering into the contract
2. Motive - Motive is the purely personal or private reason which a party has in entering into a
contract. It is different from the cause of the contract.
3. Inadequacy of Cause - The general rule is that a party to a contract will not be relieved from
his obligation under it by the mere fact that the contract may turn out to be financially
disadvantageous to him. The reason for this rule is explained by the Supreme Court this wise
1. Give the requisites of cause in a contract.
(1) It must exist at the same time the contract is entered into
(2) It must be lawful
(3) It must be true or real
2. State the effect if the cause of a contract is found to be false.
The statement of a false cause in contracts shall render them void, if it should not be proved that
they were founded upon another cause, which is true and lawful. Article 1353.
3. What is the object and what is the cause in a contract of sale?
The thing or the object of the contract of sale is a bilateral or reciprocal contract which is the
cause for one is the subject matter or object for the other, and vice versa. Hence, the distinction is
only a matter of viewpoint. The object of the contract of sale also must be determinate or capable
of being determinate.

III. Problems
1. S sold his fishing boat to B who intends to use the boat for smuggling. Is the contract of
sale illegal?
In this case, the motive of the buyer tends to use it in illegal form, but the question is for the
contract of sale is illegal. Based on what I understand under Article 1351, the particular motives
of the parties in entering into a contract is Not essential element of a contract which the illegality
of the buyer’s motive does not render the contract to be void. But there are 2 cases that we may
be considered. First is if seller has the knowledge about the will the buyer do about the boat and
that makes the contract of sale void while the second case is when the seller doesn’t have the
knowledge what will buyer’s do about the boat and that makes the contract of sale still validated.
2. S sold to B a specific parcel of land for P500,000. B failed to pay. Has C the right to have
the sale declared void by the court on the ground of absence of cause for non-payment of
the price?
 In this scenario, C is just the third person which doesn’t concern any fulfillment of obligation on
the contract. C doesn’t have any right to have the sale declared void by the court on the ground
of absence of cause for non-payment of the price. C didn’t exist at the same time of the
transaction of the contracting parties and it’s not his responsibility to declared that the contract of
sale is void. Only the agreement of the contracting parties has the rights to do anything about the
contract.

3. X gave P10,000 to Y who signed a receipt stating: “This is to acknowledge payment by X

in the amount of P12,000.” X later complains that he received nothing form Y for the
P10,000. Is Y bound to return the P10,000?
Although the cause is not expressly stated in the contract the law presumes that X must have
received a service from Y and that the same is lawful. If X claims otherwise, then he must prove
his allegation and that is when Y bound to return the P10,000 of X.

4. S sold to B his car worth P250,000 for only P200,000. There is no question that the
purchase price is grossly inadequate. Has S the right to have the sale annulled?
In this situation, the contract of sale is valid although the price of S car is inadequate. The fact
that the contracting parties has the consent about what is the price of the car, the transaction is
not sufficient ground for the cancellation of a contract. However, it is show that B induced S to
sell his car through the fraud, mistake or undue influence, S has the right to have the sale
annulled.

STUDY GUIDE (p. 394-395)

1. Form contract - To form a contract it must include an offer, acceptance of the offer, and a
form of consideration that offers a financial benefit for completion of the contract. Contracts
document the obligations negotiated between two or more parties that are legally enforceable.
2. Informal contract - An informal contract can be in written or oral form and is not recorded
with the court, like the purchase of food at your favorite restaurant. Both contracts are
enforceable; however, a formal contract is a stronger form of a contract and is legally
enforceable under all conditions.
1.What may be the form of a contract?
The contract may be oral, or in writing, or partly oral and partly writing. It may be express when
the parties expressly set forth their intentions, or implied when their intentions may be inferred
from their actions or conduct. If in writing, it may be in public or a private instrument.
2. If the law requisites a contract to be in writing, will the contract be invalid if it is not in
writing?
Article 1356. Contracts shall be obligatory, in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. However, when the law requires
that a contract be in some form in order that it may be valid or enforceable, or that a contract be
proved in a certain way, that requirement is absolute and indispensable. In such cases, the right
of the parties stated in the following article cannot be exercised.

III. Problems. Explain or state briefly the rule or reason for your answer.
1. S (seller) and B (buyer) entered into a contract of sale of a parcel of land. The sale is
embodied only in a private document and not in a public instrument because it was not
acknowledged before a notary public as required by law. Is the sale valid?
The sale is valid because it was writing even though it was not made to appear in a public
instruments.
2. In the same example, what rights, if any, are acquired by the contacting parties? The
contract is valid and binding, although it is still executory, but only as between the parties
and not against third persons without notice until the sale is registered in the Registry of
Property.
B has the right to compel S to put the contract in a public instrument so that it can be registered
to affect third persons, even in the absence of express agreement between them to the effect.

STUDY GUIDE (p. 404)

1. Reformation - The reformation is that remedy to amend or correct the form of a contract as a
written instrument so that it would conform to the real intention of the parties.
2. Mutual mistake - A mutual mistake occurs when the parties to a contract are both mistaken
about the same material fact within their contract. They are at cross purposes. There is a meeting
of the minds, but the parties are mistaken. Hence the contract is voidable.
1. What is the reason why law in certain cases permits a written instrument to be reformed
or corrected?
Equity orders the reformation of an instrument in order that the intention of the contracting
parties may be expressed.
2. In what way is reformation of written instrument distinguished from the annulment of a
contract?
In reformation, there has been a meeting of the minds of the parties (Article 1359 part 1); hence,
a contract exists but the written instruments purporting to embody the contract does not express
the true intention of the parties by reason of mistake, fraud, inequitable conduct, or accident.
III.
1. S sold his horse “X” to B under a written contract of sale. What B thought S was selling
him is horse “Y.” Can S ask for the reformation of the contract against the objection of B
who is agreeable to the sale of horse “X?”
Article 1361. When a mutual mistake of the parties causes the failure of the instrument to
disclose their real agreement, said instrument may be reformed.
2. Suppose in the same example, S was intending to sell his horse “Y.” Give the three (3)
cases when he can ask for the reformation of the contract.
If one party was mistaken and the other acted fraudulently or inequitably in such a way that the
instrument does not show their true intention, the former may ask for the reformation of the
instrument. Article 1362.
When one party was mistaken and the other knew or believed that the instrument did not state
their real agreement, but concealed the fact from the former, the instrument may be reformed.
Article 1363.
When though the ignorance, lack of skill, negligence or bad faith on the part of the person
drafting the instrument or of the clerk or typist, the instrument does not express the true intention
of the parties, the courts may order that the instrument be reformed. Article 1364

STUDY GUIDE (p. 414-415)

1. Interpretation of contract - Interpretation of a contract is the determination of the meaning
of the terms or words used by the parties in their contract. Determining the intent of the parties is
usually what courts say it is when they interpret a contract’s language in particular cases.
2. Contract of adhesion - Generally, the terms of a contract result from the material formulation
thereof by the parties thereto. It is, how- ever, of common knowledge that there are certain
contracts almost all the provisions of which have been drafted by only one party, usually a
corporation
1. What should be followed in the interpretation of a contract, its terms or the intention of
the parties? Explain.
In the interpretation of a contract, the intention of the parties is one of the important to consider
the contract. The intention of the parties should always prevail because their will has the force of
law between them. Terms are just created after the intention of the parties has been created.
Article 1370.
2. Suppose a stipulation or word in a written contract is susceptible of various
interpretations, what interpretation or meaning should be given to it?
There are some instances that the word or stipulation of contract has susceptible meanings. In
this case, one of which would render it effectual, it should be given that interpretation. Thus, if
one interpretation makes a contract valid and the other makes it illegal, the former interpretation
is one, which is warranted. Also, it is to be understood in that sense which is most in keeping
with the nature and object of the contract in line with the cardinal rule that the intention of the
parties must prevail.
3. Sate the rule of interpretation where there are various stipulations of a contract.
Article 1374, which stated, “The various stipulations of a contract shall be interpreted together,
attributing to the doubtful one that sense which may result from all of them taken jointly” said
that the contract must be interpreted as a whole and the intention of the parties is to be gathered
from the entire instrument and not from particular words, phrases or clauses. All provisions
should, if possible, be so interpreted as to harmonize with each other.

III. Problems. Explain or state briefly the rule or reason for your answer.
1. S sold to B his condominium unit “including all its contents.” In the unit, there is an
antique chair belonging to X which X agreed to sell to S. Is the chair to be included in the
sale of the unit?
The decision be made is based upon the Article 1372 which explained about the particular
matter that may be included and excluded on the terms of the contract. In this illustration, if S
already paid the antiques chair to X, this chair can be considered to be part of the agreement.
And if S is not yet paid, this char is still belong of X, so it is not included on the contract that
says, “including all its contents”.

2. X, architect, designed and supervised the construction of the house of Y. The parties
failed to agree beforehand the professional fee of X. How much is Y bound to pay X?
In this case it will be based on Article 1376, which tackled about the doubtful or ambiguous in a
contract which the contracting parties are entered into. A fine example of this was mentioned
above the amount must be determined by the rate customarily paid in the place where the
services were rendered. They must also consider the quality of the work and the other factors that
may affect the price of the work of X.

3. Suppose in the same problem, the professional fee was agreed upon, but it is not clear
from the written contract prepared by X upon the request of Y whether it should be the
fixed amount of P200,000 or 6% of the cost of construction. How much is Y liable to pay?
 In this problem, X is the party who draft the contract that could have prevented mistakes or
ambiguity in the meaning by careful choice of words and also the party who causes the obscurity
acts with ulterior motives.

STUDY GUIDE (p. 430)

1. Rescissible contract - They are the least infirm or defective. They are valid because all the
essential requisites of a contract exist but by reason of injury or damage to one of the parties or
to third persons, such as creditors, the contract may be rescinded. Thus, the defect is external.
Until such contracts are rescinded in an appropriate proceeding, they remain valid and binding
upon the parties thereto
2. Rescission - Rescission is an equitable remedy granted by law to the contracting parties and
sometimes even to third persons in order to secure reparation of damages caused them by a valid
contract,2 by means of the restoration of things to their condition prior to the celebration of said
contract.

II. Discussions
State the rule on the liability of the acquires in bad faith of property alienated in fraud of
creditors.
Article 1388 Whoever Acquires in Bad faith the things alienated in fraud of creditors, shall
indemnify the latter for damages suffered by them on account of the alienation, whenever, due to
any cause, it should be impossible for him to return them. If there are two or more alienations,
the first acquirer shall be liable first and so on successively.
In what cases is rescission not allowed although the contract is found to be rescissible under
the law?
 Under Article 1382, if one party is unable to pay debts owed, the injured party can rescind the
contract. Rescission is only necessary to the extent that it is required to cover damages. The
offending party must return the items that were the subject of the contract, along with interest.
Therefore, rescission can only occur if the person can return what he or she is required to return.
III. Problems
Explain or state briefly the rule or reason for your answer.
1. D owes C P100,000. Since D fails to pay, C expressed its willingness to accept the car of
D, with the same value, more or less, in payment of his debt. D, in bad faith, sold the car to
X. Has C the right to ask for the rescission of the sale?
The answer is D must return the same of the sale is rescinded and should it be possible for him
to return it, due to any cause, he must indemnify the former.

2. F, guardian of M (minor), sold to B a property of M with a market value of P50,000 for

only P37,000, or difference of more than ¼ (P12,500) of the value. If rescission of the sale is
demanded, what possible defense under the law can B present to avoid rescission?
We can say if B sells land to M, an innocent purchaser in good faith takes legal possession,
rescission cannot also take place. The remedy of M is to file an action for damages against F his
former guardian. The contract of sale can be rescinded because the lesion is ¼ .

STUDY GUIDE (p. 442-443)

1. Voidable contract - Voidable or annullable contracts are those which possess all the es-
sential requisites of a valid contract but one of the parties is legally incapable of giving consent,
or consent is vitiated by mistake, violence, intimidation, undue influence, or fraud.
2. Annulment - Annulment is a remedy as well as a sanction provided by law, for reason of
public interest, for the declaration of the inefficacy of a contract based on a defect or vice in
the consent of one of the contracting parties in order to restore them to their original position in
which they were before the contract was executed.
3. Ratification - Ratification means that one under no disability voluntarily adopts and gives
sanction to some defective or unauthorized contract, act, or proceeding which, without his
subsequent sanction or consent, would not be binding or him.
1. Give the requisites for the ratification of voidable contract.
Ratification may be affected expressly or tacitly. It is understood that there is a tacit ratification
if, with knowledge of the reason which renders the contract voidable and such reason having
ceased, the person who has a right to invoke it should execute an act which necessarily implies
an intention to waive his right.

2. State the rule on the right of strangers to a contract to bring an action for its annulment.
According to Art. 1397, outsiders are not entitled to bring the action as they are not bound by
the contract, unless they demonstrate some downside to the contract in which they are not
interested or participating.

Under the law, what contracts are voidable or annulment?

ART. 1390. The following contracts are voidable or annullable, even though there may have
been no damage to the contracting parties:

III. Problems
Explain or state briefly the rule or reason for your answer.
1. S, a minor, sold a property to B. Later, the sale is annulled on the ground of the minority
of S. Is S bound to return the price received by him?
Yes, S is bound to return the price he received from B. From Article 1399, S is obliged to make
restitution only to the extent that he was benefited by the price he received.
2. In the same problem, suppose S, upon reaching the age of majority, decided to ratify or
respect the contract. Has B the right to refuse the retification and demand mutual
restitution of the property and the price?
Yes, B has the right to refuse ratification and demand mutual restitution of the property and the
price. From Article 1395, since S agreed to the contract while being a minor, he waives his rights
in case any defects may happen to the contract. Because of this, B can just conveniently
disregard the demands of S to honor the contract even though he reaches the age of maturity.
3. Again, in the same problem, suppose the sale was annulled by the court, what are the
rights of the parties of the property was lost or destroyed?
(a) without the fault of B?
Under Article 1400, if the property was lost or destroyed without the fault of B, there is no more
obligation to return the thing which is the subject matter of the contract.
(b) through the fault of B?
If the property was lost or destroyed through the fault of B, his obligation is not extinguished but
he is liable for damages. Under Article 1400, B must pay damages consisting of the value of the
thing at the time of the loss with interest from the same date.

STUDY GUIDE (p. 455-456)

1. Unenforceable contract - Unenforceable contracts are those that cannot be enforced in court
or sued upon by reason of defects provided by law until and unless they are ratified according to
law.
2. Statue of frauds - The statute of frauds (SOF) is a legal concept that requires certain types of
contracts to be executed in writing. The statute covers contracts for the sale of land, agreements
involving goods worth over $500, and contracts lasting one year or more.
3. Unauthorized contract - Unauthorized contracts are those entered into in the name of another
person by one who has been given no authority or legal representation or who has acted beyond
his powers.

1. What are the kinds of unenforceable contract?

Under article 1403, the following contracts are unenforceable, unless they are ratified:
(1)Those entered into in the name of another by one without, or acting in excess of,
authority.
(2) Those that do not comply with the statue of frauds; and
(3) Those where both parties are incapable of giving.
The above contracts indicate the three (3) types of defects that render them unenforceable.
2. How may contracts violating the Statue of Frauds be ratified?
Contracts infringing the statute of frauds, referred to in no. 2, article 1403 are ratified by the
failure to object to the presentation of oral evidence to prove the same or by the acceptance of
benefits under them. ART. 1405.
3. State the purpose of the Statue of Frauds.
 The purpose of a “statute of frauds” is, as the name suggests, to prevent injury from fraudulent
conduct. There is some criticism of the continued existence of these statutes, as they are often
used by parties who freely entered into fair contracts yet wish to avoid having to fulfill their
agreements.
III. Problems. Explain or state briefly the rule or reason for your answer.
1. I, an insane person, entered into a contract with M, a minor. What is the effect of
ratification
(a) by either; and
In a contract where both parties are incapable of giving consent, express or implied ratification
by the parent, or guardian, as the case may be, of one of the contracting parties shall give the
contract the same effect as if only one of them were incapacitated. Article 1407
(b) by both, after becoming incapacitated?
If ratification is made by the parents or guardians, as the case may be, of both contracting
parties, the contract shall be validated from the inception. If both of the parties regain capacity
through their guardian wherein it ratifies the contract, therefore the contract becomes validated
since according to article 1407 if ratification is made by the parents or guardians, as the case may
be, of both contracting parties, the contract shall be validated from the inception. Since both of
the parties have ratification then the contract is invalid. Article 1407.
2. D (debtor) owes C (creditor) P10,000. T (third person) orally promised to assume the
obligation of D. Can the promise of T be proved by the testimony of a witness who was
present when T made the same?
No, because T cannot assail the contract between D and C for being unenforceable under the
Statute of Frauds. T is a stranger to the contract. T can neither assail contract because of its
unenforceability. It was stated in Article 1408, unenforceable contracts cannot be assailed by
third person.
3. S orally agreed to sell his photo for P7,000 to B who made a partial payment of P1,000.
Later, S denied there was such a sale. Can B enforce the sale considering that the contract
was oral and the price was more than P500?
Yes, B can enforce the sale. Given that the price is more than P500 and B already made a partial
payment to S, this makes the contract fraud and as stated, it was orally conducted. Proven by
Article 1403, which states that, those who are not within the scope of Statute of Fraud may not
have a written document. This means that the oral contract between S and B is valid since the
price is above P500 and B already made a partial payment.
STUDY GUIDE (p. 472-473)
Define or give the meaning of the following:
1. Void contract - Void contracts are those which, because of certain defects, generally produce
no effect at all. They are considered as inexistent from its inception or from the very beginning.
The expression ‘‘void contract” is, therefore, a contradiction in terms. However, the expression
is often loosely used to refer to an agreement tainted with illegality.
2. Inexistence contract - On the other hand, inexistent contracts refer to agreements which lack
one or some or all of the elements (i.e., consent, object, and cause) or do not comply with the
formalities which are essential for the exis- tence of a contract.
3. Indivisible contract - A contract that cannot be divided into parts. It is either completely
satisfied or incomplete.

II. Discussions
1. What are the characteristics of a void or inexistent contract?
Characteristics of Void or Inexistent Contracts:
1. Cannot be ratified.
2. Set up defense of illegality cannot be waived.
3. Action or defense for the declaration of the inexistence of a contract does not prescribe.
4. The defense of illegality of contracts is not available to third persons whose interest are
not directly affected.
5. Void and inexistent as a direct result of previous illegal contract.
Set up defense of illegality cannot be waived. Action or defense for the declaration of the
inexistence of a contract does not prescribe. The defense of illegality of contracts is not available
to third persons whose interest are not directly affected.
2. Give the rules where the contract is unlawful and the act constitute a criminal offense,
and both parties are equally guilty.
- If both parties in pari delicto (equal fault), the rules are as follows:
- Both parties shall have no action against each other; neither of them can seek relief from the
court.
-
- The things or the price of the contract, used and produced in the crime, shall be
confiscated by the government.

3. Give the rules where the contract is unlawful but the act does not constitute a criminal
offense and only one party is guilty or both parties are not equally guilty.
- If both parties in pari delicto (equal fault), the rules are as follows:
-neither party may recover what has been given by reason of the contract.
-neither party may demand the performance of the other's undertaking.
-neither party can ask the court to settle disputes and grant reliefs as regards to the void
-contract.

III. Problems

1. S (seller) and B (buyer) entered absolutely simulated contract of sale of a parcel of land.
S brought action in court to recover the land only after 20 years. Is it correct for the court
to dismiss the action because of the long lapse of time?
When it comes to void or non-existent contracts, there is no time restriction. As a result, the
court's decision to dismiss the lawsuit due to the considerable lapse of time is incorrect.
2. In consideration of P 10,000 given by X to Y, the latter agreed to burn the house of Z.
Later, X told Y to forget the agreement and to return the money. Y refused, Is X entitled to
recover from Y?
Because it was an unlawful agreement, X has no right to reclaim the money from Y. Y refused
to refund the money because the agreement was for an illegal purpose, and Article 1414 states
that "When money is paid or property is delivered for an illegal purpose, the contract may be
repudiated by one of the parties before the purpose is accomplished, or before any damage has
been caused to a third person.

3. W (woman) agreed to stay in the house of M (man) as the latter’s live-in partner for one
year in consideration of the latter’s promise to pay her P100,000 after said period. W
complied with her part of the agreement but M reneged on his promise. Is W entitled to
recover from M?
(Article 1412) when the fault is on the part of both contracting parties, neither may recover what
he has given by virtue of the contract, or demand the performance of other's undertaking, the
promise of it does not constitute a crime, hence, there can be no recovery by one against the
other, and neither the party may as for the fulfilment of the other's promise.

(p. 480-481)
1. Natural obligation - Natural obligations originated in the Roman law where they grew in
importance in order to temper with equity and justice the severity of the jus civile. In that ancient
system of law, there were two kinds of obligations: the civil and the natural. The latter could not
be enforced by a civil action but it had certain juridical consequences.
2. Civil obligation - Civil law is one of a which binds in law, vinculum juris, and which may be
enforced in a court of justice. See Obligation, A Law Dictionary, Adapted to the Constitution and
Laws of the United States.
II.
1. What is the effect of voluntary performance of a natural obligation?
According to Art. 1423, after voluntary fulfillment by the obligor, the natural obligation
authorizes the retention of what has been delivered or rendered by reason thereof.
2. Give two (2) examples of natural obligations under the law.
A debtor who willfully and voluntarily performs his contractual obligations cannot recover what
he has delivered or the value of the services he rendered on the ground that the creditor’s right to
file suit has lapsed by extinctive prescription (Article 1424, Civil Code)
A debtor also cannot recover what he has paid to the third party, who paid the debtor’s debt
without the knowledge or against the will of the latter and who was not legally bound to pay as
the right to sue thereon has prescribed (Article 1425).
III. Problems
1. C (creditor) and D (debtor) for nonpayment of the latter’s obligation. D won the case on
the technicality (i.e., not on the merits). Nevertheless, when C asked payment again, D paid
him. Now, D demands the return of what he has paid claiming, he should not have paid C
since he had no more obligation to C under the law. Decide.
(Article 1428) When a defendant voluntarily performs a civil obligation after an action to enforce
it has failed, he cannot claim the return of what he has supplied or payment of the value of the
service he has rendered.
2. M, a minor, bought a bicycle for P2,000 from N, who is not minor. Under the law, the
contract is voidable because M is incapacitated to give consent because of his minority.
Give the situation by reason of which M cannot recover the P2,000 from N.
When a minor between the ages of eighteen and twenty-one enters into a contract without the
consent of a parent or guardian and voluntarily pays a sum of money or delivers a fungible thing
in fulfillment of the obligation, the obligee who has spent or consumed it in good faith has no
right to recover the same. Art 1427