Definition - Art. 1305: TITLE II. Contracts Chapter I. General Provisions
Definition - Art. 1305: TITLE II. Contracts Chapter I. General Provisions
Definition - Art. 1305: TITLE II. Contracts Chapter I. General Provisions
Contracts
B. Elements
1
C. Characteristics
Case
GSIS v. CA, 228 SCRA 183 (1993)
Phil. Savings Bank v. Castillo, .R No. 193178,
May 30, 2011
3. Relativity
a) Contracts take effect only between the parties, their assigns and heirs- Art 1311
Article 1311. Contracts take effect only between the parties, their assigns and heirs,
except in case where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law. The heir is not
liable beyond the value of the property he received from the decedent.
2
Under Art. 1311 Par. 1, contracts take effect only between the parties, their assigns,
and heirs.
This means that only the parties, their assigns and heirs can have rights and obligations
under the contract.
As a rule, the act, declaration, or omission of a person cannot affect or prejudice
another without the latter’s authorization.
Exception: The cases when a contract are effective only between the parties are when
rights and obligations arising from the contract are not transmissible:
a.
CASE
Gutierrez Hmnos. v. Orense, 28 Phil. 571 (1914)
4. Consensuality
As a general rule, contracts are perfected by mere consent of the parties regarding the
subject matter and the cause of the contract. (Art. 1315, 1319)
They are obligatory in whatever from they may have been entered into, provided all the
essential requisites for their validity are present.
Art. 1356, Almost all contracts are consensual as to its perfection, they come into
existence upon their perfection by mutual consent, even if the subject matter of the
consideration has not been delivered.
In the absence of delivery, perfection does not transfer title or create real right, yet, it
gives rise to obligations binding upon both parties. (Art. 1305,1308)
D. Parties
1. Auto- Contracts
Auto-contracts – contracts where the two parties are represented by the one and
the same person, who represents and acts in different capacities (i.e., agent
representing his principal who authorized him to borrow money)
Validity of stipulations. It is understood that the contract is the law between the
contracting parties and if there is nothing in the contract which is contrary to law,
morals, good customs, public order or public policy the contract must be uphold
or continue.
Cases
Gabriel v. Monte de Piedad, 71 Phil. 497 (1941)
Pakistan International Airlines v. Ople, 190 SCRA (1990)
(2) When there has been a judicial separation of property under article
191. (1458a)
4
Article 1491. The following persons cannot acquire by purchase, even at
a public or judicial auction, either in person or through the mediation of
another:
(1) The guardian, the property of the person or persons who may be under
his guardianship;
(2) Agents, the property whose administration or sale may have been
intrusted to them, unless the consent of the principal has been given;
(4) Public officers and employees, the property of the State or of any
subdivision thereof, or of any government-owned or controlled corporation,
or institution, the administration of which has been intrusted to them; this
provision shall apply to judges and government experts who, in any
manner whatsoever, take part in the sale;
5
Acts executed against the provisions of mandatory or prohibitory laws are void,
except when the law itself authorizes their validity. (Art. 5) The contracting
parties must respect the law which is deemed to be an integral part of every
conduct.
Article 2088. The creditor cannot appropriate the things given by way of pledge
or mortgage, or dispose of them. Any stipulation to the contrary is null and void.
Article 2137. The creditor does not acquire the ownership of the real estate for
non-payment of the debt within the period agreed upon.
Every stipulation to the contrary shall be void. But the creditor may petition the
court for the payment of the debt or the sale of the real property. In this case,
the Rules of Court on the foreclosure of mortgages shall apply.
Article 1799. A stipulation which excludes one or more partners from any share
in the profits or losses is void.
b. Contrary to morals
Morals deal with norms of good and right conduct evolved in community. These
norms may differ at different times and places and with each group of people.
6
d. Contrary to public order
Public order refers principally to public safety although it has been considered to
mean also the weal.
CASES
Cui v. Arellano, 2 SCRA 205 (1961)
Arroyo v. Berwin, 36 Phil. 386 (1917)
Filipinas Compania de Seguros v. Mandanas,
17 SCRA 391 (1966)
Bustamante v. Rosel, 319 (1966)
Bustamante v. Rosel, 319 SCRA 413 (1999)
E. Classification
1. According to subject-matter
a. Things
Contract of Sale, Contract of Deposit, Contract of Pledge
b. Services
Contract of Agency, Contract of Lease of Services
2. According to name
a. Nominate
Nominate Contract- or that which has a specific name or designation in
law (ex. Commodatum, lease, agency, sale, and etc.);
b. Innominate- Art 1307
Innominate Contract- that which has no specific name or designation in law.
Case: Dizon v. Gaborro, 83 SCRA 688( 1978)
Do ut des is, however, no longer an innominate contract. It has already been given a
name of its own, i.e. barter or exchange.
7
A contract will not, therefore, be considered invalid for failure to conform
strictly to the standard contracts outlined in the Civil Code.
It is sufficient that it has all the elements of a valid contract.
These three elements must be present: consent, object, and cause.
3. According to perfection
a. By mere consent (consensual) – Art 1315
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 in keeping with good faith, usage and law.
Consensual Contract- that which is perfected by mere consent (eg. Sale, lease,
agency) (Art. 1315)
Discussion:
As a general rule, contracts are perfected by mere consent of the parties
regarding the subject matter and the cause of the contract.
They are obligatory in whatever form they may have been entered into, provided
all the essential requisites for their validity.
Almost all contracts are consensual as to its perfection. They come into
existence upon their perfection by mutual consent, even if the subject matter of
the consideration has not been delivered.
In the absence of delivery, perfection does not transfer title or create real
right, yet, it gives rise to obligation binding upon both parties. (Art. 1305,
1308)
Real Contract- that which is perfected by the delivery of the thing subject matter
of the contract (eg. Depositum, pledge, commudatum) Art. 1316., Art. 1934,
1963, 2093
Discussion:
The exceptions are the so-called real contracts which are perfected not merely
by consent but by delivery, actual or constructive, of the object of the obligation.
Art 1316
8
These contracts have for their purpose restitution because they contemplate the
return by a party of what has been received from another.
Discussion:
When the law requires that a contract be in some form to be valid, this special
form is necessary for its perfection. Thus, a donation of real property cannot be
perfected until it is embodied in a public instrument.
5. According to form
a. Common or informal – Art 1356-1358
Art. 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.
Discussion:
Contracts are binding upon the contracting parties in whatever form they may have
been entered into as long as all the essential requisites for their validity are
present.
ART. 1357. If the law requires a document or other special form, as in the acts and contracts
enumerated in the following article, the contracting parties may compel each other to observe
that form, once the contract has been perfected. This right may be exercised simultaneously
with the action the contract.
Discussion:
When form is required by law for its convenience only and the contract is in not that form,
contracting parties may compel each other to observe that form, once the contract required by
the law but if not not essential for validity .of the contract then this art. cannot be made.
Illustration:
Almarion sold leviste a house and lot but the contract appears in a private writing. under the
law, when sale refers real property like house and lot, almario cannot compel leviste to
execute a deed of sale in public documents.
The contracts covered by this article are valid and enforceable though not embodied in a public
document or instrument or in writing. The public document is required only for the convenience
and greater protection of the parties and registration is needed only to make the contract
effective as against third persons.
Formal requirements are, therefore, for the benefit of third parties for the purpose of informing
as well as binding them. Non-compliance therewith does not adversely affect the validity of the
contract nor the contractual rights and obligations of the parties there under.
In other words, the law does not require accomplishment of certain acts or contracts in a public
instrument in order to validate the act or contract but only to insure its efficacy so that after the
existence of the act or contract has been admitted or established, the party bound may be
compelled to execute the document.
A private document, however, acquires the character of a public document when it becomes
part of an official record and is certified by a public officer duly authorized by law.
Cession of actions or rights. — R mortgaged his land to E to secure the payment of a debt.
This mortgage appears in a public document. The cession by E of his right, as mortgagee, to
T, must also be in a public document.
ACTION TO COMPEL EXECUTION OF CONTRACT IN PUBLIC INSTRUMENT
Under Article 1357, the parties may compel each other to have the contract reduced in proper
form and the action may be filed simultaneously with the suit to enforce the contract. But the
latter action may be brought without the bringing of the former.
The reduction to writing in a public or private document, required by the law with respect to
certain contracts, is not an essential requisite of their existence, but is simply a coercive power
granted to the contracting parties by which they can reciprocally compel the observance of
these formal requisites. The contract can be enforced even if it may not be in writing. But
11
before the contract can be reduced in proper form or enforced, it may be necessary to prove
its existence.
LEGAL RECOGNITION OF ELECTRONIC DATA MESSAGES AND ELECTRONIC
DOCUMENTS
R.A. No. 8792, otherwise known as the “Electronic Commerce Act (June 14, 2000) gives legal
recognition to any kind of electronic data message and electronic document used in the
context of commercial and non-commercial activities to include domestic and international
dealings, transactions, arrangements, agreements, contracts and ex-changes and storage of
information.
1. Electronic data message— Information shall not be denied validity or enforceability
solely on the ground that it is in the form of an electronic data message purporting to give rise
to such legal effect, or that it is merely incorporated by reference in that electronic data
message.
2. Electronic documents — Electronic documents shall have the legal effect, validity or
enforceability as any other document or legal writing, and
A. Where the law requires a document to be in writing, that requirement is met by an electronic
document if the said electronic document maintains its integrity and reliability and can be
authenticated so as to be usable for subsequent reference, in that —
I. The electronic document has remained complete and unaltered, apart from
the addition of any endorsement and any authorized change, or any change
which arises in the normal course of communication, storage and display;
and
II. The electronic document is reliable in the light of the purpose for which it
was generated and in the light of all relevant circumstances.
B. Paragraph (a) applies whether the requirement therein is in the form of an obligation or
whether the law simply provides consequences for the document not being presented or
retained in its original form.
C. Where the law requires that a document be presented or retained in its original form, that
requirement is met by an electronic document if —
I. There exists a reliable assurance as to the integrity of the document from
the time when it was first generated in its final form, and
It has also been specified under Article 1318 that notarization is not one of the requirements
for preparing a contract.
12
(3) Cause of the obligation which is established.
However, the notarization converts a contract into a public document. While it is not
required, it is suggested that contracts involving land must be notarized as specified
under Article 1358 of the Civil Code.
Art. 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property; sales of real
property or of an interest therein a governed by Articles 1403, No. 2, and 1405;
(3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third
person;
(4) The cession of actions or rights proceeding from an act appearing in a public
document.
6. According to purpose
a. Transfer of ownership, e.g., sale
- Ownership of the thing sold may be acquired by the buyer from the
moment it is delivered to him.
- There is delivery when the object is placed in the control and possession
of the buyer.
- When the sale is made through a public instrument, the execution of the
public instrument shall be equivalent to the delivery of the thing.
In a contract of sale, when can the buyer say that he has ownership of the property?
- The ownership of the thing sold is acquired by the buyer from the moment
it is delivered to him in any of the following:
13
the placing of the titles of ownership in the possession of the buyer or the use by the
buyer of his rights, with the seller’s consent, shall be understood as a delivery; or
in any other manner signifying an agreement that the possession is transferred from the
seller to the buyer.
However, there instances when seller is still the owner despite delivery. This
includes the following instances:
a. express stipulation;
b. if under the bill of lading the goods are deliverable to seller or agent or
their order;
c. If bill of lading, although stating that the goods are to be delivered to buyer
or his agent, is KEPT by the seller or his agent;
d. When the buyer although the goods are deliverable to order of buyer, and
although the bill of lading is given to him, does not honor the bill of exchange sent
along with it. However innocent third parties (innocent holders and purchasers for
value) should not be adversely affected.
In law, conveyancing is the transfer of legal title of real property from one person to
another, or the granting of an encumbrance such as a mortgage or a lien. A typical
conveyancing transaction has two major phases: the exchange of contracts and
completion.
COMMODATUM. A contract, by which one of the parties binds himself to return to the
other certain personal chattels which the latter delivers to him, to be used by him,
without reward; loan -for use.
The easiest way to understand unilateral business contract is by analyzing the word
'unilateral.' In its simplest terms, unilateral contracts involve an action undertaken
by one person or group alone. In contract law, unilateral contracts allow only one
person to make a promise or agreement.
You might see examples of unilateral contracts every day, too; one of the most
common instances is a reward contract. Pretend you've lost your dog. You place an
advertisement in the newspaper or online offering a $100 reward to the person who
returns your missing “furbaby”. By offering the reward, you're offering a unilateral
14
contract. You promise to pay should anyone fulfill the obligation of returning your
dog. You're the only person who has taken any action in this contract, as no one is
specifically responsible or obligated to finding your dog passed on this interaction.
b. Bilateral or reciprocal
contracts where both parties have reciprocally bound themselves to fulfill their
obligations in favor of the other (i.e. sale) Also known as synalagmatic contracts.
a synallagmatic contract is a contract in which each party to the contract is bound
to provide something to the other party.
When most people think of contracts, bilateral agreements come to mind. In its
most basic form, a bilateral contract is an agreement between at least two people
or groups. Most business and personal contracts fall into this category.
Examples of bilateral contracts are present in everyday life. You're entering this
type of agreement every time you make a purchase at your favorite store, order a
meal at a restaurant, receive treatment from your doctor or even checkout a book
at your library. In each circumstance, you've promised a certain action to another
person or party in response to that person or party's action.
8. According to cause
a. Onerous
contracts that provide for exchange of valuable considerations (i.e. sale where the
seller delivers the object of the contract and the buyer pays the purchase price)
Onerous Contracts -An onerous contract is a contract in which the aggregate
cost required to fulfill the agreement is higher than the economic benefit to be
obtained from it. … Another example of an onerous contract is when a lessee is
still obligated to make payments under the terms of an operating lease, but is no
longer using the assets.
b. Gratuitous or lucarative
contracts where one of the parties gives something or renders service to the other
without receiving any equivalent or compensation (i.e. pure donation,
commodatum). It is also called the lucrative contract because it provides gain to
the other party for free.
c. Remuneratory
15
Remuneratory Contracts- is one where a party gives something t o another
because of some service or benefit given or rendered by the latter to the former.
Note that such service or benefit is not due to legal obligations.
Example:
Miss Rodora gave Miss Macasayon 1 live Carabao, in consideration of the latters
act in saving the former’s cows in times of typhoon .
9. According to risk
a. Commutative
contracts where the contracting
parties contemplate the assured
fulfillment of the terms and conditions
of their agreement, and there is no
risk to anticipate (i.e. contracts of
mortgage and pledge)
c. Aleatory
contracts where the fulfillment is dependent on chance or event which may not
happen within the period stipulated, and the loss contemplated may not happen.
(i.e. insurance contract)
Such contracts are common in insurance policies where the insurer doesn't have to
pay to the insured until a triggering event occurs, such as the vehicle being stolen
or damaged due to natural disaster. Aleatory contracts, also known as aleatory
insurance, turn out to be helpful because they support the insured person to deal
with the financial risk.
F. Stages
1. Preparation
This is the stage where the parties begin their intial negotiation, bargaining for the
formation of the contract and ending at the moment of agreement. It is also called
the preparatory stage.
2. Perfection
This is the stage where the contract is said to have been born, where the parties
had a meeting of minds as to the object, cause or consideration and other terms
and conditions of the contract. It has passed the preparatory state, thus giving birth
to the contract.
3. Consummation or death
This is the last stage which consists the performance or fulfillment by the parties of
their obligations under the terms of the perfected contract. Consummation means
16
the accomplishment, death or termination of the contract where the parties cease
to be contractually related to one another.
Art. 1311. Contracts take effect only between the parties, their assigns and heirs,
except in case where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law. The heir is not liable
beyond the value of the property he received from the decedent.
b. The contracting parties by their stipulation must have clearly and deliberately
conferred a favor upon a third person;
c. The third person must have communicated his acceptance to the obligor before
its revocation by the oblige or the original parties;
d. The stipulation in favor of the third person should be a part, not the whole, of the
contract.
e. The favorable stipulation should not be conditioned or compensated by any kind
of obligation whatever, and
f. Neither of the contracting parties bears the legal representation or authorization
of the third party for otherwise, the rules on agency will apply.
CASES:
Florentino v. Encarnacion, 79 SCRA 192 (1977)
Coquia v. Fieldmen’s Insurance Co., 26 SCRA 178 (1968)
Constantino v. Espiritu, 39 SCRA 206 (1971)
Integrated Packaging Corp. v. CA G.R No. 115117,
June 8, 2000
2. Possession of the object of contract by third persons- Art 1312
Art. 1312. In contracts creating real rights, third persons who come into possession
of the object of the contract are bound thereby, subject to the provisions of the
Mortgage Law and the Land Registration Laws. (n)
19
Chapter II. Essential Requites of Contracts
A. Concept
1. Requisites – Art 1319
a. Must be manifested by the concurrence of the offer and acceptance
Article 1319
Consent is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came
to his knowledge. The contract, in such a case, is presumed to have been entered into in the
place where the offer was made. (1262a).
Discussion:
Consent is the conformity of wills; and with reference to contracts, it is the agreement of the
will of one of contracting party with the another or others, upon the object and terms of the
contract.
Essentials of consent: It is essential for consent to be given properly that is given by two or
more competent parties, freely spontaneously and intelligently, and that the intention of the
parties had been clearly and unmistakably expressed.
Offer must be certain: The law requires that the offer must be certain in order that the liability
of the contracting parties may be fixed, such that the acceptance must be identical with the
offer, otherwise there will be no meeting of minds and consequently no contract.
Acceptance absolute: The requirement that the acceptance be absolute simply means that it
must in every respect meet and correspond with the terms and condition of the offer, plain and
unconditional.
Illustration: Raj asked Darren this question: “Do you agree to buy my bicycle for
P8,000.00?” Darren in answer to Raj said, “Yes I agree.” Here the offer of Raj to sell his
bicycle to Darren is certain and acceptance of Darren to buy the bicycle is absolute, plain and
unconditional.
20
Cases:
1.Offer
a. Must be certain – Art. 1319 (Offer definition p. 333 Domingo)
Offer must be certain: The law requires that the offer must be certain in order that the
liability of the contracting parties may be fixed, such that the acceptance must be
identical with the offer, otherwise there will be no meeting of minds and consequently no
contract
The person making the offer may fix the time, place, and manner of acceptance,
all of which must be complied with. (n)
Discussion:
The acceptance must be made known to the offeror before the lapse of the fixed
period. If the acceptance was made after the fixed period, it is not a legal acceptance
anymore. What happens then is that it becomes an offer (made by the previous
offeree) which may or may not be accepted by the original offeror (which becomes the
offeree).
In terms of the manner of acceptance, the offeror may require that the acceptance be
done by letter, personal communication, or through a representative.
Acceptance which was not made in the manner fixed by the offeror constitutes a
counter-proposal which extinguishes the offer and may not be accepted by the original
offeror.
Discussion:
This article means that when an offeror appoints a third person as his agent to
represent him, the offer by the agent, when accepted by the offeree, is deemed
accepted not from the knowledge of the acceptance by the offeror (principal) but from
the moment the agent has received the communication of acceptance. The meeting of
the minds is thus established.
The agent must be authorized by the offeror. An example of an agent is an attorney-in-
fact, authorized through a power of attorney. If the intermediary is not authorized, the
offer is not binding to the offeror.
The offeree may also act through an authorized agent.
21
Illustration:
Jay was appointed by Zola as his attorney-in-fact. Jay wanted to enter into a contract
with Joy for the lease of Joy’s warehouse. The offer was made through Zola. Joy
accepted the offer. The reckoning point for the acceptance of the offer, or the giving of
consent is the moment when Zola was informed by Joy that she accepts the offer, and
not the time when Zola informs the offeror Jay of the acceptance by Joy of the offer.
Art. 1323
An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of
either party before acceptance is conveyed.
Discussion:
Definition of Civil Interdiction, insanity and insolvency
Civil Interdiction – mandatory accessory penalty deemed imposed whenever the sentence
rendered is within the range of reclusion temporal to death. If the latter is not executed by
reason of commutation or pardon.
Insanity – legal term for mental disorder; disease or defect of the brain.
Illustrations:
Death: Maria Mercedes offer to sell her beach resort to Luis Sancuevas for the amount
of 1.5M pesos but before the day that they are going to meet up for the payment and their
contract will be made, Maria Mercedes died therefore the meeting of the mind of the two
parties became ineffective because of the death of Maria Mercedes.
Civil Interdiction: In the preceding illustration, supposing that Maria Mercedes was
sentenced for life imprisonment because she was found guilty in murder case and there is no
acceptance had been conveyed by Luis to Maria before the sale, therefore the offer made by
Maria became ineffective because her sentenced carried with civil interdiction.
Insanity: Same as the above illustration if Maria Mercedes became insane before Luis
Sancuevas accepted her offer the contract became ineffective because an insane person
cannot give consent to a contract.
Insolvency: Also, if Maria Mercedes was declared by the court as an insolvent person
due to her inability or lack of means to pay one’s debt before Luis Sancuevas accepted the
offer therefore the meeting of the minds of the parties is not valid because of the insolvency of
the offeror.
Unless it appears otherwise, business advertisements of things for sale are not definite
offers, but mere invitations to make an offer. (n)
TERMINOLOGY:
Business Advertisements of things for sale may or may not constitute definite offer. The matter
depends on the circumstances:
If advertisement contains all the necessary data needed in a contract, it is a definite offer for
the sale of the thing advertised.
22
Illustration:
For Rent/Lease for 5 years: Commercial space located at #1 Patimabao Sta. Cruz, Laguna: 50
square meters with restroom and parking space (excluded form the 50 square meters); Rental
Price: 30, 000.00 php. Please contact owner, Ralph Callueng at said address by letter,
telegram. You may also email P/SUPTralph@gmail.com or send a text message through
0917-888-8888.
When the ad appears to be a definite offer to sell, the advertiser cannot withdraw the offer
once somebody had accepted it.
If the advertisement does not contain all the important data for the future contract, it is not a
definite offer and just a mere invitation to make an offer.
Illustration:
For Rent/Lease: Commercial space located at #1 Maitim Street, Brgy. Patimbao, Sta. Cruz,
Laguna: 50 square meters with restroom and parking space (excluded form the 50 square
meters); Rental Price: 30, 000.00 php, negotiable. Please contact owner Ralph Callueng at
said address by letter, telegram. You may also email at P/SUPTralph@gmail.com or send a
text message through 0917-888-8888.
Clearly, the advertisements are just invitations for people to make offers. If the offers are
made, the same may or may not be accepted by the advertiser being mere invitations
Article 1326
Advertisements for bidders are simply invitations to make proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless the contrary
appears.
Case:
Jardine Davies v. CA, 333 SCRA 684 (2000)
2.Acceptance
a. Must be absolute – Art 1319 (Page 335 Domingo)
b. Kinds
i. Express – Art 1320
23
An express acceptance occurs when a person clearly and
explicitly agrees to an offer or agrees to pay a draft that is
presented for payment.
Manifestation theory states that an insurance coverage applies under a policy if the
property damage manifests during the policy period, regardless of when the act from
24
which it resulted occurred.[Audubon Trace Condo. Ass'n v. Brignac-Derbes, Inc., 924
So. 2d 1131 (La.App. 5 Cir. Feb. 27, 2006)].
2. Expedition Theory
Contract is complete the moment the offeree does the action necessary to
communicate his acceptance. Whether it has come to the notice of the offeror or
not, is immaterial.
3. Reception Theory
Contract is complete the moment the acceptance is received by the offeror.
Whether he has read it or not is immaterial. This theory takes into consideration the
possibility of loss in transit.
Discussion:
The article applies only to a situation where the offeror has allowed the offeree “a
certain period of time to accept”. This is giving the offeree the option to accept or not to
accept within a fixed period of time.
The option contract or contract of option is separate and distinct from the principal
contract which the parties may enter into later if they finally conclude their main
25
agreement. It is therefore a preparatory contract to the principal contract should the
parties, finally consummate their transaction which is under negotiation. The matter is
said to be still under negotiation because the offeror may or not take advantage of the
privilege granted him.
Option money – is the consideration paid in an option contract. If the principal contract
is not consummated, the option money is not refunded
Earnest money is the payment made to the seller by the buyer to show his good faith. It
will constitute as part of the purchase price, if the sale is finally consummated. It is also
a proof of the perfection of the contract. If the sale is not concluded, the earnest money
shall be returned to the would be buyer unless there is a contrary agreement.
It is a contract between the offeror and the offeree whereby the former grants the latter,
for a valuable consideration, the privilege to buy or not to buy certain objects at anytime
within the specified period and for a fixed price.
The option contract or contract of option is separate and distinct from the principal
contract which the parties may enter into later if they finally conclude their main
agreement. It is therefore a preparatory contract to the principal contract should the
parties, finally consummate their transaction which is under negotiation. The matter is
said to be still under negotiation because the offeror may or not take the advantage of
the privilege granted him.
(2) Insane or demented persons, and deaf-mutes who do not know how to write. (1263a)
Discussion:
Unemancipated Minors. – minors below 18 years of age. There are no more unemancipated
minors above 18 since the legal age was reduced from 21 to 18. Emancipation by marriage
and parental concession had already been eliminated. Children below 18 by themselves being
minors cannot enter into valid contracts. However, If misrepresented his age on the contract by
26
stating of his age, and other party was misled, the contract shall be binding upon him on the
basis of estoppel.
Insane Or Demented Persons. – When a person is insane or demented, his is detached from
reality. He does not know what he is doing. He cannot act with legal effects. Consequently, he
cannot enter into valid contracts. During lucid intervals, as may happen in rare cases, they may
enter into valid contracts because at this moment, they are sane and capable of knowing what
they are doing.
Deaf-Mutes. – Not all deaf-mutes are disqualified to give consent to contracts. Only those who
do not know how to write are disqualified.
The contracts entered into by the incapacitated persons enumerated in the law are not void.
They are only voidable if only one party cannot give his consent. But if both parties are
incapacitated to give consent, the resulting contract is unenforceable (Art. 1407).
Exceptions When Minors Are Liable Under Their Contracts Despite Their Minority.-
1.When the minor, in entering into a contract actively However, if there is merely silence in the
contract as to the age of the minor, the fraud is not actual but only constructive, the minor is
not bound by his signature. He is guilty only of passive misrepresentation.
2.When the contract involves the sale and delivery of necesarries to the minor, he is bound
thereby (Art. 1489).
3. When the minor, upon reaching the age of majority ratifies the contract he becomes bound
thereby.
4. When the contract is in the form of savings account in the Postal Savings Bank, provided
the minor is at least 7 years of age, the same is valid.
5. When the contract is an insurance for life, health and the accident on the minor’s life.
The voidable contracts referred to in this Article are those entered into by:
b. In a state of drunkenness
27
Those in the state of drunkenness (which temporarily results in complete
loss of understanding, and may therefore be equivalent to temporary insanity).
Article 1329
Discussion:
The persons enumerated under Article 1327 incapacitated to give consent to contracts due to
their lack of mental capacity to do so. They are either deaf-mutes, insane or demented.
On the other hand, the special disqualifications mentioned in Article 1329 refer to those
explicitly disqualified by law from entering certain contracts:
Incompetents who may be placed under judicial guardianship (under Rule 92,
Section 2 of the Revised Rules of Court):
28
Those who are incapacitated to give consent to contracts are not prohibited to to
exercise their right to enter into a contract. They can still do so through a guardian
with the approval of the court.
Those who are specially discqualified are prohibited whether or not they have
representation. They are absolutely disqualified from entering into a contract.
The first one renders the contract voidable, while the second renders it void.
c. The contract must be intelligent, free, spontaneous, and real- Arts. 13301346
Article 1330
A contract where consent is given through mistake, violence, intimidation,
undue influence, or fraud is voidable.
Discussion:
Vitiated consent, in the old civil code, makes the contract void. In the new civil code,
it merely renders the contract voidable.
The reason for the voidability is because consent must be intelligent, free and
spontaneous. Intelligent consent is vitiated by mistake or error, freedom by
intimidation, violence and undue influence and spontaneity by fraud.
29
2. Vices of consent (Definition p. 347 Domingo)
a. Mistake or error
Definition:
Mistake or Error is the false notion of a thing or a fact material to the contract.
It has also been defined as a “misunderstanding of the meaning or implication of
something” or “a wrong action or statement proceeding from faulty judgment”
Example:
An example of mistake as to the object of the contract is the substitution of a
specific thing contemplated by the parties with another.
Nature of Mistake:
1. Mistake should refer to the substance of the thing which is the object of the
contract.
2. Mistake should refer to those conditions which have principally moved one or
both parties to enter into the contract; and
3. The mistake maybe unilateral when only one party is mistaken about the material
fact, or bilateral when both parties are in error. Generally, a person who makes
mistake cannot avoid liability to the innocent party unless he shows that he was
free of fault or negligence.
To invalidate consent, the error must be real and not that one that could have been
avoided by the party alleging it. The error must arise from facts unknown to him. He
cannot allege an error which refers to a fact known to him or which he should have
known by ordinary diligent examination of the facts. An Error so patent and obvious that
nobody could have been avoided by ordinary prudence, cannot be invoked by the one
who made it in order to annul his contract.
i. kinds
3. Mistake of fact
30
Mistakes of fact arise when a criminal defendant misunderstood some fact that
negates an element of the crime. For instance, if an individual is charged with
larceny but believed that the property he took was rightfully his, this
misunderstanding negates any intent to deprive another of the property. One
important qualification, however, is that this mistake of fact must be honest and
reasonable. Thus, a defendant cannot later claim that he or she was mistaken when
he or she actually knew the situation. Likewise, the mistake must be one that would
appear reasonable to a judge or jury. If the same individual was repeatedly told that
the property was not his, and he could not take it, it would no longer be reasonable
for him to mistakenly have believed that he could rightfully take the property.
Mistakes of fact may apply to a variety of crimes. Some crimes may set forth that
mistake of fact is a defense. Otherwise, if the criminal defendant can prove that the
mistake reasonably negated an element of the crime, the defense will usually be
held to apply and absolve the defendant of liability.
CASES:
- As a rule, mistake of law does not invalidate consent because “ignorance of the
law excuses no one from compliance therewith” (Art. 3) This doctrine is based on public
policy, dictated by expediency and necessity.
Discussion:
(Page 353 De Leon)
31
Requisites for the Application of Article 1334
(Page 353 De Leon)
Illustration:
(Page 353 De Leon)
Discussion:
Rationale behind the article. The code commission found it necessary to
incorporate the article into the code because of its belief there is still a fairly large
number of illiterates in the country, and documents are ordinarily drawn in English or
Spanish.
In the law of evidence, it is presumed that “a person intends the ordinary
consequences of his voluntary act; or a person makes ordinary care of his concerns”.
No contract shall arise unless its acceptance is communicated to the offeror.
The presumption does not apply in the following cases:
When one of the contracting parties is unable to read;
When the contract is written in a language not understood by the said party.
If the contracting party is an illiterate or even if literate, but he could not
understand the language used in the contract which he signed, and later, he alleged
fraud and mistake in the execution thereof, there is a presumption created that there
was fraud or mistake when he signed or gave his conformity to the contract.
The burden of proof is shifted now to the party who is enforcing the agreement.
He must prove that the document was fully explained to the party alleging fraud or
mistake. Failure to rebut the presumption will sustain the charge of fraud or mistake.
When can there be a presumption that there was fraud in the execution of the
contract if the contracting party is illiterate or even if literate?
There is a presumption created that there was fraud or mistake when he signed
or gave his conformity to the contract if he could not understand the language used in
the contract which he signed, and later, he alleged fraud and mistake in the execution.
Cases:
Definition:
Violence: There is violence when in order to wrest consent, serious or irresistible force
is employed.
Intimidation: 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.
Discussion:
Nature of Violence: Violence requires the employment of physical force. Under Art.
1335, to make consent defective, the force employed must be either serious or
irresistible. In either case, consent is not free.
- Illustration: Page 355 De Leon
Nature of intimidation or threat, REQUISITES: (Page 355 Domingo)
- Illustration: Page 355 De Leon
Factors to determine degree of intimidation:
Discussion: Page 356 De Leon
Threat to enforce just or claim:
- A threat to enforce one’s claim through competent authority, if the
claim is just or legal, DOES NOT vitiate consent.
- Illustration: (Page 452 Domingo)
33
Case: Martinez v. Hongkong and Shanghai Bank,
15hil 252 (1910)
Cases:
Woodhouse v. Halili, supra
Geraldez v. CA, 230 SCRA 320 (1994)
i. Kinds
Kinds of Fraud:
Basis Fraud in performance Fraud in perfection
Consent is vitiated by
Consent Consent is free serious deception or
misrepresentation
Annulment with
Remedy Claim for damages only
damages
DOLO CAUSANTE AND DOLO INCIDENTE DISTINGUISHED TABLE: (Page 455 Domingo)
Article 1339. Failure to disclose facts, when there is a duty to reveal them, as when
the parties are bound by confidential relations, constitutes fraud.
The article refers to the usual exaggerations in trade which are not fraudulent by themselves
when the party has the opportunity to investigate and know the true facts.
35
The exaggerations are also known as “dealer’s talk” or “traders talk” or “dolus bonus” which
constitute tolerated fraud as long as the other party has the opportunity to check and know the
facts.
What tolerated fraud covers. Tolerated fraud or dealer’s talk usually refers to the
misrepresentation of traders tending to minimize the perceived defects of the thing or service
advertised for sale; exaggerations or magnifications of its qualities, and its establishment with
qualities that it does not possess.
Dealer’s talks do not give rise to actions for damages because of their insignificance or
because it is the credulousness or stupidity of the victim which is real cause of his loss.
When there is a written contract, what does not appear on the face of the contract should be
regarded as trader’s talk. Hence, the need to remember always the maxim “caveat emptor”.
Caveat emptor – the buyer has the duty to check the title of the seller over the property plus
other circumstances necessary for his own protection. Otherwise he would be buying the
property at his own risk.
It is a Latin word meaning Buyer’s beware. The buyer has the duty to check the title of the
seller over the property plus other circumstances necessary for his own protection. Otherwise,
he would be buying the property at his own risk. There is a presumption that a person takes
ordinary care of his concerns followed by another presumption “that the ordinary course of
business has been followed”.
e. Misrepresentation
i. by a third person – Art. 1342
Discussion/ Illustration- Page 364 De Leon
Cases:
Mercado and Mercado v. Espiritu, 37 phil. 215 (1917)
Braganza v.Villa Abrille, 105 Phil. 456 (1959)
f. Simulation of Contracts
Article 1345. Simulation of a contract may be absolute or relative. The former takes place
when the parties do not intend to be bound at all; the latter, when the parties conceal their
true agreement.
Concept of simulation- Simulation of a contract is the deliberate act of making a
fictitious agreement by the parties for the purposes of deception, when in fact the juridical act
that appears on the contract does not really exist or is different from what is actually agreed
upon. Simulation takes place when the parties do not really want the contract they have
executed to produce the legal effects expressed by its wordings.
Cases:
Rodriguez v. Rodriguez, 28 SCRA 229 (1914)
Suntay v. CA, 251 430 (1995)
Blanco v. Quasha G.R. No. 1331148,
November 17, 1999
1. Absolute
37
Absolute simulation- is one where the parties do not intend to be bound by the contract. It
is not really intended to produce any legal effect, nor does it alter the juridical situation of the
parties.
Ex: In the sale of a fishpond, it was made to appear that the price was paid when in fact it was
not. The sale being without consideration is fictitious.
2. relative
Relative simulation- is one where the parties conceal their real agreement by disguising it
under another contract.
Ex: A donor is donating a property to a donee. Instead of executing a deed of donation, the
donor instead executed a deed of sale to conceal the donation intended.
Reason for the invalidity of absolutely simulated contracts- lack of true consent, and its
prejudice to a third person and is generally fraudulent.
38
B. Objects of Contracts
1. What may be the objects of Contracts – Art 1347
Article 1347. All things which are not outside the commerce of men, including future
things, may be the object of a contract. All rights which are not intransmissible may
also be the object of contracts.
No contract may be entered into upon future inheritance except in cases expressly
authorized by law.
All services which are not contrary to law, morals, good customs, public order or
public policy may likewise be the object of a contract.
Discussion:
- The object of a Contract is its subject matter.
- In reality, the object of every contract is the obligation created. But since a contract
cannot exist without an obligation, it may be said that the thing, service, or right which is
the object of the obligation is also the object of the contract.
KINDS of OBJECT of CONTRACT:
- Object certain is the essential element of a valid contract. The object may
be things (as in sale), rights (as in assignment of credit), or services
(agency)
A. Requisites of things as object of Contract:
- Discussion page 372 De Leon
B. Requisites of Services as Object of Contract:
- Discussion page 372 De Leon
C. Rights as Object of Contract:
- Discussion Page 372 De Leon
Cases:
Blas v. Santos, 1 SCRA 899 (1961)
Tanedo v. CA, G.R No. 104482, January 22, 1996
b. Future support
- Please refer Reviewer
c. Impossible things or services- Art 1348
- Please refer Reviewer
D. Cause of Contracts
Please refer to page 378 of De Leon for the ff.
a. In onerous contracts
b. In remuneratory contracts
c. In contracts of beneficence
40
3. Detective causes and their effects:
Article 1352. Contracts without cause, or with unlawful cause,
produce no effect whatever. The cause is unlawful if it is contrary to law,
morals, good customs, public order or public policy.
Case:
Carantes v. CA, 76 SCRA 514 (1977)
Sps. Buenaventura, et. Al v. CA, 416 SCRA 263 (2003)
41
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.
(“Spiritual system: of the Spanish code)- Art 1356
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.
(1278a)
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
42
C. Kind of formalities required by law:
1. Those required for the validity of contracts, such as those referred to in Arts.
748, 749, 1874, 2134, 1771, 1773;
1. ARTICLE 748. The donation of a movable may be made orally or in writing.
An oral donation requires the simultaneous delivery of the thing or of the document
representing the right donated.
If the value of the personal property donated exceeds five thousand pesos, the
donation and the acceptance shall be made in writing. Otherwise, the donation shall be
void. (632a)
Donation of Personal Property of the value of which exceeds P5,000- the
donation and acceptance must bein writing (Art. 748)
2. ARTICLE 749. In order that the donation of an immovable may be valid, it must
be made in a public document, specifying therein the property donated and the value
of the charges which the donee must satisfy.
The acceptance may be made in the same deed of donation or in a separate public
document, but it shall not take effect unless it is done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall be notified thereof
in an authentic form, and this step shall be noted in both instruments. (633)
Donation of Real Property- it must be in a public instrument (Art. 749)
3. ARTICLE 1874. When a sale of a piece of land or any interest therein is through
an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.
(n)
Sale of Land through an Agent- the authority of the agent must be in writing;
otherwise the sale is void.
4. ARTICLE 2134. The amount of the principal and of the interest shall be specified
in writing; otherwise, the contract of antichresis shall be void. (n)
6. Those required not for validity, but to make the contract effective as against
third persons, such as those covered by Art. 1357 and 1358; and
ARTICLE 1357. If the law requires a document or other special form, as in the acts
and contracts enumerated in the following article, the contracting parties may compel
43
each other to observe that form, once the contract has been perfected. This right may
be exercised simultaneously with the action upon the contract. (1279a)
(1) Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property; sales of real
property or of an interest therein are governed by articles 1403, No. 2, and 1405;
(3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third
person;
(4) The cession of actions or rights proceeding from an act appearing in a public
document.
All other contracts where the amount involved exceeds five hundred pesos must
appear in writing, even a private one. But sales of goods, chattels or things in action
are governed by articles 1403, No. 2 and 1405.
7. Those required for the purpose of proving the existence of the contract, such as
those under the Statute of Frauds in Art. 1403.
In the cases of contracts covered by Statute of Fraud, the law requires that they
be in writing subscribed by the party charged or by his agent.
ARTICLE 1359. When, there having been a meeting of the minds of the parties to a
contract, their true intention is not expressed in the instrument purporting to embody the
agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties
may ask for the reformation of the instrument to the end that such true intention may be
expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds
of the parties, the proper remedy is not reformation of the instrument but annulment of the
contract.
Definition:
44
Reformation- is that remedy allowed by law by means of which a written instrument is
amended or rectified so as to express or conform to the real agreement or intention of the
parties when by reason of mistake, fraud, inequitable conduct, or accident, the instrument fails
to express such agreement or intention.
Discussion:
Par. 1 [Ill. In a contract of construction of a building, the parties agreed that
payment in dollars. The dollar sign was used in the original draft. However
what was typewritten in the contract, occassioned by mistake, was the peso
sign. Reformation was ordered by the court.
Par. 2 [Ill. Where a party is leasing his property to another, the latter through
fraud was able to make him sign an absolute deed of sale, the action is not for
reformation but for annulment of the instrument.
2.The real intention of the parties was not expressed in the instrument.
3.The reason for the instrument to express the real intention of the parties is
mistake, fraud, inequitable conduct or accident did not prevent the meeting of
the minds of the parties.
4.The said intervening mistake, fraud, inequitable conduct or accident did not
prevent the meeting of the minds of the parties.
Cases:
Garcia v. Bisaya, 97 Phil. 609 (1955)
Bentir v. Leande, 330 SCRA 591 (2000)
(2) Wills;
45
ARTICLE 1367. When one of the parties has brought an action to enforce the
instrument, he cannot subsequently ask for its reformation.
Discussion and Illustration (Page 401 De Leon)
Cases:
If the words appear to be contrary to the evident intention of the parties, the latter
shall prevail over the former. (1281)
Discussion:
It is a cardinal rule in the interpretation of contracts that if the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall control. The Court must not read into any other intention
of the contracting parties contradictory to the plain meaning.
46
The terms of an agreement or writing are presumed to have been used in their primary
and general acceptation. However, evidence may be admitted to show that they are
used in a local, technical or otherwise peculiar signification.
Legal Meaning
The MTC has no jurisdiction of the issue is interpretation, enforcement and/or rescission
of the contracts.
Only the laws existing at the time of the execution of the contract applies to the contract
unless the intention is for it to retroact.
ARTICLE 1372. However general the terms of a contract may be, they shall not be
understood to comprehend things that are distinct and cases that are different from
those upon which the parties intended to agree. (1283)
Discussion:
(Discussion and Illustration page 408 De Leon)
B. How to determine intention – Art 1371
ARTICLE 1371. In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered. (1282)
Discussion and illustration page 407 De Leon
ARTICLE 1375. Words which may have different significations shall be understood
in that which is most in keeping with the nature and object of the contract. (1286)
ARTICLE 1376. The usage or custom of the place shall be borne in mind in the
interpretation of the ambiguities of a contract, and shall fill the omission of
stipulations which are ordinarily established. (1287)
47
shall prevail. If the contract is onerous, the doubt shall be settled in favor of the
greatest reciprocity of interests.
If the doubts are cast upon the principal object of the contract in such a way that it
cannot be known what may have been the intention or will of the parties, the contract
shall be null and void. (1289)
Discussion:
Discussion:
If Articles 1370 to 1377 cannot apply, this article will be considered as the last resort.
In case of doubts on the incidental circumstances of the contract, and the contract is
gratuitous, the least transmissible of rights and interest shall prevail.
E.g.:
A pacto de retro sale should be interpreted as providing for the least transmissible of
rights. The construction favoring the right to redeem should be adopted which right is
considered a natural right.
In case of doubts on the incidental circumstances of the contract, and the contract is
onerous, the doubt shall be construed in favor of the greatest reciprocity of interests.
E.g.:
When there is doubt as to whether the contract is a loan or a sale, to hold that the
land was conveyed as security for a loan would afford greater reciprocity of interest.
If there is doubt on the principal object of the contract and it cannot be determined
what might have been the intention or will of the contracting parties, the contract
shall be void. This is in line with Article 1409, par. 6.
D. Applicability of Rule 123, Rules of Court (now Secs. 10-19, Rule 130)
ARTICLE 1379. The principles of interpretation stated in Rule 123 of the Rules of
Court shall likewise be observed in the construction of contracts. (n)
Interpretation Of Documents
Section 15. Written words control printed. — When an instrument consists partly
of written words and partly of a printed form, and the two are inconsistent, the former
controls the latter. (13)
49
DEFECTIVE CONTRACTS
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.
3. Requisites
4. Effects of rescission- Art 1385
5. Extent of rescission- Art 138 6. Presumptions of fraud- Art 1387 7.
a. Badges of fraud
Cases:
Oria v. Memciking, 21 Phil. 243 (1912)
Siguan v. Lim, et. al, 318 SCRA 725 (1999)
Suntay v. CA, supra
8. Liability for acquiring in bad faith the things alienated in fraud of creditors- Art 1388.
B. Characteristics
50
1. Their defect consists in the visitation 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 convalidation by ratification or by prescription.
C. Annulment
1. As distinguished from rescission
2. Grounds- Arts. 1390
3. Who may and may not institute for annulment- Art 1397
Cases:
Cadwallader & Co. v. Smith, Bell & Co., 7 Phil 461 (1907)
Velarde v. CA, supra
D. Ratification
1. Requisites
2. Forms
3. Effects
a. Action to annul is extinguished- Art 1392
b. The contract cleansed retroactively from all its defects- Art 1396
51
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.
Case:
Limketkai Sons Milling Inc., v. CA G.RNo. 118509,
December 1, 1995
Swedish Match v. CA, G.R. No. 128120, October 20, 2004
Case
Carbonnel v. Poncio, et. al. 103 Phil 655 (1958)
3. Contracts executed by the 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
A. Characteristics
1. Void from the beginning
2. Produces no effect whatsoever
3. Cannot be ratified- Art 1409
3.) When the purpose is illegal, and money is paid or property delivered therefor-
Art 1414
4.) When the contract is illegal and one of the parties is incapable of giving
consent – Art 1415
Cases:
Liguez v. CA, supra
Relloza v. Gaw Cheen Hum, 93 Phil. 827 (1943)
5.) When the agreement is not illegal per see but prohibited- Art 1416
Cases:
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- Aert
1419.
9.) When the contract is divisible – Art 1420
10.) When the contract is the direct result of a previous illegal contract- Art
1422
Cases:
Villaroel v. Estrada, 71 Phoil 140 (1940)
Fisher v. Robb, 69 Phil 101 (1939)
D. Conversion to civil obligation
1. By novation
2. By ratification
B. Kinds
1. Technical estoppels
a. By record
b. By deed- art 1433
2. Equitable estoppels or estoppels in pais- Art 1433
Case: Manila Lodge No. 761 Benevolent and Protective order of the Elks v.
CA, 73 SCRA 168 (1976)
Case:
Title V. TRUSTS
A. Definition
B. Governing Rules- Art 1442
C. Parties – Art. 1440
1. Trustor
2. Trustee
3. Beneficiary or cestui que trust
1. Express Trusts
2. Implied Trusts
Cases:
55