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INTRODUCTION INTRODUCTION TO LAW Law means any rule of action or any system of uniformity 2 G eneral Groups Law (in

n the strict legal sense) promulgated and enforced by state Law (in the non-legal sense) not promulgated and enforced by state General Divis ions of Law Divine Law o Law of religion and faith; concerns itself with the con cept of sin and salvation o Divulged to mankind by direct revelation o Sanction lies in assurance of certain rewards and punishments in the present life or life to come Natural Law o Divine inspiration in man of the sense of justice, fairne ss & righteousness o Internal dictates of reason alone o Impressed in man as the core of his higher self o Regarded as reasonable basis of state law Moral Law o Mores or ways of life o Totality of norms of good and right conduct o No defini te legal sanction for violation of purely moral law o Not absolute; shapes/influ ences state law Physical Law o Uniformities of actions and orders of sequence St ate Law o Only law promulgated and enforced by state o Also called: positive law , municipal law, civil law, imperial law NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Characteristics of (state) Law 1. It is a rule of conduct tells us what to do and what not to do. It dictates behavior 2. It is obligatory- a positive command im posing a duty to obey and involving a sanction which forces obedience 3. It is p romulgated by legitimate authority 4. It is of common observance and benefit- in tended by man to serve man Necessity and functions of law What would life be wit hout law? Society has a need for internal order which is as constant as the need for external defense. What does law do? Law secures justice, resolves social co nflict, orders society, protects interests, and controls social relations. No so ciety can last and continue without means of social control, without rules of so cial order binding on its members. Ultimate end of the law is justice Sources of L aw 1. Constitution a written instrument; highest law of the land 2. Legislation- de claration of legal rules by a competent authority. Acts passed are called: enact ed or statute law. 3. Administrative or Executive orders, regulations and ruling s- issued by administrative officials under legislative authority. Valid only wh en they are not contrary to the laws and Constitution 4. Judicial decisions or j urisprudence- decisions of the courts. 5. Custom- consists of habits and practic es which through long and uninterrupted usage have become acknowledged and appro ved by society as binding rules of conduct. 6. Other sources Law compared with o ther means of social control Laws are made and administered by the only institut ions in society authorized to act in behalf of the entire citizenry. Churches, f or example, only act for their members Only legal institutions within the societ y can make rules, regulations and orders with which the entire citizenry must co mply. Rules of social & economic organizations govern only limited members Citiz ens of state cannot free themselves from the impact of its rules and regulations unless they choose to leave the area which the state is sovereign. People can t erminate their membership in organizations to do this. Sanctions or techniques o f control through law are more varied and complex than that available to organiz ations. Before law operates on an individual, various procedural steps are require d. Organization of Courts 1. Regular courts- Supreme courts, Court of Appeals, R egional Trial Courts, etc. 2. Special courts- special anti-graft court: Sandigan bayan, and Court of Tax Appeals doesnt entertain other cases 3. Quasi-judicial ag encies- they involve also the settlement or adjudication of controversies or dis putes Classification of Law As to its purpose: 1. Substantive law- portion of th e body of law creating and defining rights and duties 2. Adjective law also call ed remedial or procedural law; portion of the body of law prescribing the manner or procedure by which rights may be enforced or their violations redressed As t o its subject matter: 1. Public law- body of legal rules which regulates the rig hts and duties arising from the relationship of the state to the people 2. Priva te law- body of rules which regulates the relations of individuals with one anot her for purely private ends. Law on obligations and Contracts The law on obligat ions and contracts is the body of rules which deals with the nature and sources of obligations and the rights and duties arising from agreements and the particu lar contracts Civil Code of the Philippines When we speak of civil law, we refer to the law found primarily on our civil code. The Civil Code of the Philippines is based mainly on the Civil Code of Spain which took effect on December 7, 188 9. Conclusive presumption of knowledge of law Ignorance of law excuses no one fro m compliance therewith Everyone, therefore, is conclusively presumed to know the l aw. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

OBLIGATIONS CHAPTER 1 Article 1156. An obligation is a juridical necessity to give, to do or not to do. (n) Obligation from Latin word obligation. It is a tie or bond recog nized by law by virtue of which one is bound to in favor of another to render so mething: giving a thing, doing a certain act or not doing a certain act. Juridic al necessity- in case of non-compliance, courts of justice can be called upon to enforce the obligations fulfillment. (* if an obligation cannot be enforced, it is a natural obligation) Essential Requisites of an obligation 1. A passive obje ct (debtor or obligor)- he who has a duty 2. An active object (creditor or oblig ee)- he who has a right 3. Object or prestation (subject matter) conduct require d to be observed by debtor: to do, not to do or to give 4. A juridical or legal tie (efficient cause)- binds or connects the parties to the obligation Forms of Obligations manner in which obligation is manifested. May be oral, or in writing , or partly oral and partly in writing. Obligation vs. Right vs. Wrong Obligatio n act or performance which law will enforce Right the power to demand from anoth er any prestation Wrong- act or omission of one party in violation of the legal rights of another. Kinds of Obligation according to subject matter 1. Real oblig ation obligation to give; subject matter is a thing 2. Personal obligation oblig ation to do or not to do; subject matter is an act a. Positive personal obligati on- obligation to do b. Negative personal obligation obligation not to do Articl e 1157. Obligations arise from: 1. Law; 2. Contracts; 3. Quasi-Contracts; 4. Act s or omissions punished by law; and 5. Quasi-delicts. (1089a) Sources of obligat ions 1. Law imposed by law itself 2. Contracts arise from stipulation of the par ties 3. Quasi-Contracts- arise from lawful voluntary and unilateral acts which a re enforceable to the end that no one shall be unjustly enriched or benefited at the expense of another. 4. Crimes or acts or omissions punished by law- arise f rom civil liability which is a consequence of a criminal offense 5. Quasi-delict s or torts- arise from damages caused by another through an act or omission with fault or negligence but no contractual relation exists between the parties Arti cle 1158. Obligations derived from law are not presumed. Only those expressly de termined in this Code or in special laws are demandable and shall be regulated b y the precepts of the law which establishes them; and as to what has not been fo reseen, by the provision of this Book. (1090) Legal laws are not presumed becaus e they are considered a burden to the obligor. *special laws all other laws not in contained in the Civil Code. Article 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied wi th in good faith. (1091a) *contracts or voluntary agreements are valid and enfor Binding force- have the force of law Requirement of a valid contract- not ceable contrary to law, morals, good customs, public order, and public policy. Complia nce in good faith compliance or performance in accordance with the stipulations or terms of the contract or agreement. Article 1160. Obligations derived from qu asi-contracts shall be subject to the provisions of Chapter 1, Title XVII of thi s Book. (n) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Quasi-Contractual obligations- A juridical relation resulting from lawful, volun tary, unilateral acts by virtue of which the parties become bound to each other to the end that no one will be unjustly enriched at the expense of another. Kind s of Quasi-contracts 1. Negotiorum gestio voluntary management of the property o r affairs of another without the knowledge or consent of the latter. 2. Solutio indebiti- juridical relation which is created when something is received when th ere is no right to demand it and it was unduly delivered through mistake. Articl e 1161. Civil obligations arising from criminal offenses shall be governed by th e penal laws, subject to the provisions of article 2177, nd of the pertinent pro visions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages. (1092a) *every person criminally liable for an act or omission is also civilly liable Restitution (return) Reparation for the damages caused and Indemnification for consequential damages Article 1162. Oblig ations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this book, and by special laws. (1093a) Quasi-delicts- an act or omission by a person (tort feasor) which causes damage to another giving rise to an obligation to pay for the damage done. Requisites of quasi-delict 1. Ther e must be an act or omission 2. There must be fault or negligence 3. There must be damage caused 4. There must be a direct relation of cause and effect between the act or omission and the damage; and 5. There is no pre-existing contractual relation between the parties Crime VS. Quasi-delict Criminal/ malicious intent or criminal negligence Punishment Affects public inte rest Criminal & civil liability Cannot be compromised Guilt must be proved beyon d reasonable doubt Negligence Indemnification of offended party Private interest Civil liability Ma y be settled by the parties Fault or negligence proved by preponderance of evide nce CHAPTER 2: Nature and Effect of Obligations Article 1163. Every person obliged t o give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties req uires another standard of care. (1094a) Specific or determinate thing- Particula rly designated or physically segregated others of the same class. It is identifi ed by its individuality. The debtor cannot substitute it with another without th e consent of the creditor Generic or indeterminate thing- Refers only to a class or genus which cannot be pointed out with particularity and is identified only by its specie. The debtor can give anything of the same class. Duties of debtor in obligation to give a determinate thing 1. Preserve the thing a. Diligence of a good father of a family. b. Another standard of care c. Factors to be consider ed - The diligence depends upon the nature of the obligation and corresponds wit h the circumstances of the person, of the time, and of the place. The debtor is not liable if his failure to preserve the thing is not due to his fault or negli gence but to fortuitous events or force majeure. d. Reason for debtor s obligati on. The debtor must exercise diligence to insure that the thing to be delivered would subsist in the same condition as it was when the obligation was contracted . 2. Deliver the fruits of the thing. 3. Deliver the accessions and accessories. 4. Deliver the thing itself 5. Answer for damages in case of non-fulfillment or breach. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Duties of debtor in obligation to deliver a generic thing 1. Deliver a thing whi ch is the quality intended 2. Be liable for damages Article 1164. The creditor h as a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him. (1095) Different Kinds of fruits 1. Natural fruits- spontaneo us products of the soil, the young & products of animals. 2. Industrial fruits are produced by lands of any kind through cultivation or labor. 3. Civil fruits - are those derived by virtue of a relation. Right of creditor to the fruits The creditor is entitled to the fruits of the thing to be delivered from the time t he obligation to make delivery arises. When obligation to deliver fruits arises 1. From the time of the perfection of the contract. 2. Upon the fulfillment of t he condition or arrival of the term 3. Arises from the perfection of the contrac t even if the obligation is subject to a suspensive condition or a suspensive pe riod where the price has been paid. 4. Determined by the specific provisional of the law applicable. Personal Right VS. Real Right Power to demand another to give, do or not to do nst a particular person Active and Passive subject Agai

Right over a specific thing without a definite passive object efinite passive subject Against the world

Active without a d

Ownership acquired by delivery Creditor does not become the owner until the spec ific thing has been delivered to him. Hence, when there has been no delivery yet , the proper court action of the creditor is not one for recovery of possession and ownership but one for specific performance or rescission of the obligation A rticle 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to m ake the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not hav e the same interest, he shall be responsible for any fortuitous event until he h as effected the delivery. (1096) Remedies of creditor in real obligation 1. In a specific real obligation (obligation to deliver a determinate thing), the credi tor may exercise the following remedies or rights in case the debtor fails to co mply with his obligation. a. demand specific fulfillment of obligation w/ a righ t to indemnity for damages; b. demand cancellation of the obligation w/ a right to recover damages;or c. demand payment of damages only where it is the only fea sible remedy. *the very thing itself must be delivered and only debtor can compl y 2. A generic real obligation (obligation to deliver a generic thing), can be p erformed by a third person since the object is expressed only according to its f amily or genus. Responsibility of debtor who delays/has promised delivery to sep arate creditors. Paragraph 3 gives two instances when a fortuitous event does no t exempt the debtor from responsibility. It likewise refers to a determinate thi ng. An indeterminate thing cannot be the object of destruction by a fortuitous e vent because genus nunquam perit (genus never perishes). Article 1166. The oblig ation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. (1097a) Accessio ns - the fruits of a thing or additions to a thing Accessories- things joined to or included with the principal thing for the latter s embellishment, better use , or completion Right of creditor to accessions and accessories NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

The general rule is that all accessions and accessories are considered included in the obligation to deliver a determinate thing although they may not have been mentioned, unless otherwise stipulated Article 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation . Furthermore, it may be decreed that what has been poorly done be undone. (1098 ) Situations in Article 1167 1. The debtor fails to perform an obligation to do; 2. The debtor performs an obligation to do but con-trary to the terms thereof; or 3. The debtor performs an obligation to do but poor manner. Remedies of credi tor in positive personal obligation 1. If the debtor fails to comply with his ob ligation to do, the creditor has the right: a. to have the obligation performed by himself, or by another, unless personal considerations are involved, at the d ebtor s expense; b. to recover damages. 2. In case the obligation is done in con travention of the terms of the same or is poorly done, it may be ordered (by the court) that it be undone if it is still possible to undo what was done. Perform ance by a third person A personal obligation can be performed by a third person unless it is specific. Thus, remedy is indemnity for damages. Article 1168. When the obligation consists in not doing, and the obligor does what has been forbid den him, it shall also be undone at his expense. (1099a) Remedy of creditor in n egative personal obligation undoing the forbidden act plus damages Article 1169. Those obliged to deliver or to do something incur in delay from the time the ob ligee judicially or extra-judicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: 1. When the obligation or the law expressly so declares; o r 2. When from the nature and the circumstances of the obligation it appears tha t the designation of the time when the thing is to be delivered or the service i s to be rendered was a controlling motive for the establishment of the contract; or 3. When demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay i f the other does not comply or is not ready to comply in a proper manner with wh at is incumbent upon him. From the moment one of the parties fulfills his obliga tion, delay by the other begins. (1100a) Delay Ordinary delay - merely the failu re to perform an obligation on time. Legal delay or default - the failure to per form an obligation on time which failure constitutes a breach of the obligation. Kinds of delay or default Mora solvendi - the delay on me part of the debtor to fulfill his obligation (to give or to do); Mora accipiendi - the delay on the p art of the credi-tor to accept the performance of the obligation; and Compensati o morae - the delay of the obligors in reciprocal obligations (like in sale) No delay in negative personal obligations Delay is impossible for the debtor fulfil ls by not doing Requisites of delay or default by the debtor 1. failure of the d ebtor to perform his (positive) obligation on the date agreed upon; 2. demand (n ot mere reminder or notice) made by the creditor upon the debtor to comply with his obligation which demand may be either judicial or extra-judicial; and 3. fai lure of the debtor to comply with such demand Effects of Delay 1. The following are the effects of mora solvendi: a. The debtor is guilty of breach or violation of the obligation; b. He is liable to the creditor for interest (in case of obl igations to pay money) or damages. In the absence of extra-judicial demand, the interest shall commence from the filing of the complaint; and c. He is liable ev en for a fortuitous event when the obligation is to deliver a determinate thing. However, if the debtor can prove that the loss would have resulted just the sam e even if he had not been in default, the court may equitably mitigate or reduce the damages. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

*In an obligation to deliver a generic thing, the debtor is not relieved from li ability for loss due to a fortuitous event. He can still be compelled to deliver a thing of the same kind or held liable for damages. 2. The effects of mora acc ipiendi are as follows: a. The creditor is guilty of breach of obligation; b. He is liable for damages suffered, if any, by the debtor; c. He bears the risk of loss of the thing due; d. Where the obligation is to pay money, the debtor is no t liable for interest from the time of creditor s delay; and e. The debtor may r elease himself from the obligation by the consignation or deposit in court of th e thing or sum due. 3. In compensatio morae, the delay of the obligor cancels th e delay of the obligee and vice, versa. The net result is that there is no defau lt or delay on the part of both parties. *If the delay of one party is followed by that of the other, the liability of the first infractor shall be equitably te mpered or balanced by the courts. If it cannot be determined which of the partie s is guilty of delay, the contract shall be deemed extinguished and each shall b ear his own damages. When demand is not necessary to put debtor in delay When th e obligation so provides. When the law so provides. When demand would be useless . When there is performance by a party in reciprocal obligations. Article 1170. Those who in the performance of their obligations are guilty of fraud, negligenc e, or delay, and those who in any manner contravene the tenor thereof, are liabl e for damages. (1101) Grounds for liability 1. Fraud (deceit or dolo). - it is t he deliberate or intentional evasion of the normal fulfillment of an obligation. As a ground for damages, it implies some kind of malice or dishonesty and it ca nnot cover cases of mistake and errors of judgment made in good faith. It is syn onymous to bad faith. 2. Negligence (fault or culpa). - It is any voluntary act or omission, there being no malice, which prevents the normal fulfillment of an obligation. 3. Delay (mora) 4. Contravention of the terms of the obligation. - T his is the violation of the terms and conditions stipulated in the obligation. T he contravention must not be due to a fortuitous event or force majeure. Fraud V S. Negligence With deliberate intention to cause damage or injury Waiver for future fraud is v oid Must be clearly proved Liability cant be reduced or mitigated by courts No malice Waiver are allowed Presumed from the violation of a contractual obliga tion Liability may be reduced according to circumstances Article 1171. Responsibility arising from fraud is demandable in all obligations . Any waiver of an action for future fraud is void. (1102a) *fraud is so serious and evil that its employment to avoid the fulfillment of ones obligation is disc ouraged *waiver of action for future fraud is void as being against the law and public policy *waiver of action for past fraud is valid and considered as an act of generosity and magnanimity of the aggrieved party. The effect of fraud is re nounced Article 1172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regula ted by the courts, according to the circumstances. (1103) *the debtor is also li able for damages resulting from his negligence. Validity of waiver of action ari sing from negligence An action for future negligence may be renounced except whe re the nature of the obligation requires the exercise of extraordinary diligence as in the case of common carriers. Where negligence shows bad faith, it is cons idered equivalent to fraud. Any waiver of an action for future negligence of thi s kind is, therefore, void. Kinds of negligence according to source of obligation 1. Contractual negligence (culpa contractual) - negligence in contracts resulting in their breach. Article 1172 refers to culpa contractual. This kind of negligence is not a source of ob ligation. It merely makes the debtor liable for damages in view of his negligenc e in the fulfillment of a preexisting obligation. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

2. Civil negligence (culpa aquiliana) - negligence which by itself is the source of an obligation between the parties not so related before by any preexisting c ontract. It is also called tort or quasi-delict; and 3. Criminal negligence (cul pa criminal) - negligence resulting in the commission of a crime. The same negli gent act causing damages may produce civil liability arising from a crime, or cr eate an action for a quasi-delict. *In negligence cases, the aggrieved party may choose between a criminal action under Article 100 of the Revised Penal Code or a civil action for damages under Article 2176 of the Civil Code. What is prohib ited under Article 2177 of the Civil Code is to recover twice for the same negli gent act. Effect of negligence on the part of the injured party When the plainti ff s own negligence was the immediate and proximate cause of his injury, he cann ot recover damages. But if his negligence was only contributory, the immediate a nd proximate cause of the injury being the defendant s lack of due care, the pla intiff may recover damages, but the courts shall mitigate the damages to be awar ded. Article 1173. The fault or negligence of the obligor consists in the omissi on of that diligence which is required by the nature of the obligation and corre sponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2, shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a fa mily shall be required. (1104a) Fault or Negligence- negligence is the failure t o observe for the protection of the interests of another person Factors to be co nsidered 1. Nature of the obligation 2. Circumstances of the person 3. Circumsta nces of time 4. Circumstances of the place Measure of liability for damages In c ontract and quasi-contracts, obligor who acted in good faith is liable for damag es of natural and probable consequences of the breach of obligations, and which parties have foreseen or reasonably could have foreseen at obligations constituti on. For fraud, bad faith, malice or wanton attitude, obligor is responsible for all damages which may be reasonably attributed to the non-performance of the obl igation Kinds of diligence required that agreed upon by the parties, orally or i n writing; in the absence of stipulation, that required by law in the particular case if both the contract and law are silent; then the dili-gence expected of a good father of a family Article 1174. Except in cases expressly specified by th e law, or when it is otherwise declared by stipulation, or when the nature of th e obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevi table. (1105a) Fortuitous event- any event which cannot be foreseen, or which, t hough foreseen, is inevitable Fortuitous event distinguished from force majeure 1. Acts of man. - Strictly speaking, fortuitous event is an event independent of the will of the obligor but riot of other human wills. 2. Acts of God -They ref er to what is called manure or those events which are totally independent will o f every human being. Kinds of fortuitous events 1. Ordinary fortuitous events those events which are common and which the contracting parties could reasonably foresee 2. Extra-ordinary fortuitous events - those events which are uncommon a nd which the contracting parries could not have reasonably foreseen Requisites o f a fortuitous event 1. The event must be independent of the human will or at le ast of the debtor s will 2. The event could not be foreseen, or if foreseen, is inevitable; 3. The event must be of such a character as to render it impossible for the debtor to comply with his obligation in a normal manner; 4. The debtor m ust be free from any participation in, or the aggravation of, the injury to the creditor, that is, there is no concurrent negligence on his part Rules as to lia bility in case of fortuitous event 1. When expressly specified by law a. The deb tor is guilty of fraud, negligence, or delay, or contravention of the tenor of t he obligation. b. The debtor has promised to deliver the same (specific) thing t o two or more persons who do not have the same interest. c. The obligation to de liver a specific thing arises from a crime. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

d. The thing to be delivered is generic 2. When declared by stipulation 3. When the nature of the obligation requires the assumption of risk Article 1175. Usuri ous transactions shall be governed by special laws. (n) Simple loan or mutuum a contract whereby one of the parties delivers to another: money or other consum able thing, upon the condition that the same amount of the same kind and quality shall be paid. It may be gratuitous or with a stipulation to pay interest. Usur y - contracting for or receiving interest in excess of the amount allowed by law for the loan or use of money, goods, chattels or credits Requisites for recover y of interest 1. The payment of interest must be expressly stipulated; 2. The ag reement must be in writing; and 3. The interest must be lawful *a stipulation fo r the payment of usurious interest is void, that is, as if there is no stipulati on as to interest Article 1176. The receipt of the principal by the creditor, wi thout reservation with respect to the interest, shall give rise to the presumpti on that said interest has been paid. The receipt of a later installment of a deb t without reservation as to prior installments, shall likewise raise the presump tion that such installments have been paid. (1110a) Presumption - meant the infe rence of a fact not actually known arising from its usual connection with anothe r which is known. Two kinds of presumption 1. Conclusive presumption. - one whic h cannot be contradicted, like the presumption that everyone is conclusively pre sumed to know the law; 2. Disputable (or rebuttable) presumption. - one which ca n be contradicted or rebutted by presenting proof to the contrary, like the pres umption established in Article 1176. When presumptions in Article 1176 do not ap ply 1. With reservation as the interest. - The presumptions established in Artic le 1176 do not arise where there is a reservation that no payment has been made as to interest or prior installments, as the case may be. 2. Receipt without ind ication of particular installment paid. - The presumption in paragraph 2 of Arti cle 1176 is not applicable if the receipt does not recite that it was issued for a particular installment due as when the receipt is only dated. 3. Payment of t axes. - Article 1176 does not apply to payment of taxes. There is no presumption that previous taxes have been paid by the payment of later ones. 4. Non-payment proven. - Of course, Article 1176 is not applicable where the non-payment of pr ior obligations has been proven. A presumption cannot prevail over a proven fact . Article 1177. The creditors, after having pursued the property in possession o f the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to def raud them. (1111) Remedies available to creditors for the satisfaction of their exact fulfillment with the right to damages; pursue the leviable property claims of the debtor; "after having pursued the property in possession of the debtor," exercise all the rights (like the right to redeem) and bring all the actions of the debtor (like the right to collect from the debtor of his debtor) except tho se inherent in or personal to the person of the latter (such as the right to vot e, to hold office, to receive legal support, to revoke a donation on the ground of ingratitude, etc.); ask the court to rescind or impugn acts or contracts whic h the debtor may have done to defraud him when he cannot in any other manner rec over his claim. Article 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the con trary. (1112) Transmissibility of rights All rights acquired in virtue of an obl igation are generally transmissible Exceptions Prohibited by law. - When prohibi ted by law like the rights in partnership, agency, and commodatum which are pure ly personal in character. o By the contract of partnership - two or more persons bind themselves to contribute money, property or industry to a common fund, wit h the intention of dividing the profits among themselves o By the contract of ag ency - a person binds himself to render some service or to do something in repre -sentation or on behalf of another, with the consent or authority of the latter. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

o By the contract of commodatum - one of the par-ties delivers to another someth ing not consumable (e.g., car) so that the latter may use the same for a certain time and return it. Commodatum is essentially gratuitous. Prohibited by stipula tion of the parties. - When prohibited by stipulation of the parties, like the s tipulation that upon the death of the creditor, the obligation shall be extin-gu ished, or that the creditor cannot assign his credit to. an-other. Such stipulat ion, being contrary to the general rule, must be clearly proved, or, at the very least, clearly implied from the provisions of the contract itself. CHAPTER 3; Sec.1: Pure and Conditional Obligations Article 1179. Every obligatio n whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contain in a resolutory condition shall also be demandable, without prejudice t o the effects of the happening of the event. (1113) Pure Obligation- one which i s not subject to any condition and no specific date is mentioned for its fulfill ment and is, therefore, immediately demandable Conditional Obligation- one whose consequences are subject in one way or another for the fulfillment of a conditi on Condition- a future and uncertain event, upon happening of which, the effecti vely or extinguishment of an obligation (or right) subject to it depends Charact eristics of a Condition Future and uncertain Past but unknown *a condition must not be impossible 2 principal kinds of condition: Suspensive VS. Resolutory Condition precedent or condition antecedent One the fulfillment of which will gi ve rise to an obligation (or right). If it does not take place, tie of the law d oes not appear Until it takes place, obligation is a mere hope Condition subsequent One the fulfillment of which will extinguish an obligation (or right) already existing. If it does not take place, tie of the law is consol idated Until it takes place, obligations effects flow, but it hovers the possibil ity of termination When obligation is demandable at once when it is pure; when it is subject to any resolutory condition; or when it is subject to a resolutory period. Past event unknown to the parties- a past event cannot be a condition. Only the knowledge t o be acquired in the future of a past event which is at the moment uncertain to the parties can determine if an obligation will arise or not. Article 1180. When the debtor binds himself to pay when his means permit him to do so, the obligat ion shall be deemed to be one with a period, subject to the provisions of articl e 1197. (n) Where duration of period depends upon the will of debtor *period is a future and certain event upon the arrival of which the obligation subject to i t either arises or is extinguished 1. The debtor promises to pay when his means permit him to do so- The obligation shall be deemed to be one with a period. In this case, what depends upon the debtors will is not whether he should pay or not for indeed he binds himself to pay. What is left only to his will is the durati on of the period. 2. Other Cases As when the debtor binds himself to pay: a. Littl e by Little b. as soon as possible c. from time to time d. at any time I have the mone y: e. in partial payments f. when I am in a position to pay Article 1181. In conditio nal obligations, the acquisition of rights as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which c onstitutes the condition. (1114) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Effect of Happening of Condition 1. Acquisition of Rights- In obligations subjec t to a suspensive condition, the acquisition of rights by the creditor depends u pon the happening of the event which constitutes the condition 2. Loss of Rights already Acquired- In obligations subject to a resolutory condition, the happeni ng of the event which constitutes the condition produces the extinguishment or l oss of rights already acquired Article 1182. When the fulfillment of the conditi on depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligat ion shall take effect in conformity with the provision of this Code. (1115) Clas sifications of Conditions As to effect o Suspensive the happening of which gives rise to the obligatory; o Resolutory the happening of which extinguishes the ob ligation. As to form o Express the condition is clearly stated; and o Implied th e condition is merely inferred. As to possibility o Possible the condition is ca pable of fulfillment, legally and physically; and o Impossible the condition is not capable of fulfillment, legally or physically. As to cause or origin o Potes tative the condition depends upon the will of one of the contracting parties; o Casual the condition depends upon chance or upon the will of a third person; and o Mixed the condition depends partly upon chance and partly upon the will of a third person As to mode o Positive the condition consists in the performance of an act; and o Negative the condition consists in the omission of an act. As to n umbers o Conjunctive there are several conditions and all must be fulfilled; o D isjunctive there are several conditions and only one or some of them must be ful filled. As to divisibility o Divisible the condition is susceptible of partial p erformance; and o Indivisible the condition is not susceptible of partial perfor mance When suspensive condition depends upon sole will of debtor Conditional obl igation void- Where the potestative condition depends solely upon the will of th e debtor, the conditional obligation shall be void because its validity and comp liance is left to the will of the debtor and it cannot, therefore, be easily dem anded. Only the condition void- If the obligation is a pre-existing one and, the refore, does not depend for its existence upon the fulfillment by the debtor of the potestative condition, only the condition is void leaving unaffected the obl igation itself Where resolutory condition depends upon will of debtor The fulfil lment of the condition merely causes the extinguishment or loss of rights alread y acquired. The debtor is naturally interested in its fulfillment. *The position of the debtor when the condition is resolutory is exactly the same as that of t he creditor when the condition is suspensive When suspensive condition depends p artly upon will of debtor Conditional obligations whose fulfillment depends part ly upon the will of the debtor and partly upon the will of a third person, or up on chance are perfectly valid Article 1183. Impossible conditions, those contrar y to good customs or public policy and those prohibited by law shall annul the o bligation which depends upon them. If the obligation is divisible, that part the reof which is not affected by the impossible or unlawful condition shall be vali d. The condition not to do an impossible thing shall be considered as not having been agreed upon. (1116a) *applies only to cases where the impossibility alread y existed at the time the obligation was constituted Two Kinds of Impossible Conditions 1. Physically impossible conditions- when the y, in nature of things, cannot exist or cannot be done 2. Legally impossible con ditions- when they are contrary to law, morals, good customs, public order, or p ublic policy. Effects of Impossible Conditions Conditional Obligation Void- Impo ssible conditions annul the obligation which depends upon them. Conditional obli gation valid- If the condition is negative, that is, not to do an impossible thi ng, it is disregarded and the obligation is rendered pure and valid Only the aff ected obligation void- If the obligations is divisible, the part thereof not aff ected by the impossible condition shall be valid. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Only the condition void- If the obligation is a pre-existing obligation, therefo re, does not depend upon the fulfillment of the condition which is impossible, f or its existence, only the condition is void. Article 1184. The condition that s ome event happen at a determinate time shall extinguish the obligation as soon a s the time expires or if it has become indubitable that the event will not take place. (1117) Positive condition *The above article refers to positive (suspensi ve) condition happening of an event at a determinate time. The obligation is ext inguished: As soon as the time expires without the event taking place; or As soo n as it has become indubitable that the event will not take place although the t ime specified has not expired. Article 1185. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed, or if it has become evident that the even t cannot occur. If no time has been fixed, the condition shall be deemed fulfill ed at such time as may have probably been contemplated, bearing in mind the natu re of the obligation. (1118) Negative condition *The above provision speaks of a negative condition that an event will not happen at a determinate time. The obl igation shall become effective and binding: From the moment the time indicated h as elapsed without the event taking place; or From the moment it has become evid ent that the event cannot occur, although the time indicated has not yet elapsed . **If no time is fixed, the circumstances shall be considered to arrive at the intention of the parties. This rule may also be applied to a positive condition. ARTICLE 1186. The condition shall be deemed fulfilled when the obligor voluntar ily prevents its fulfillment. (1119) Constructive Fulfillment of Suspensive Cond ition: 3 Requisites 1. The condition is suspensive 2. The obligor actually preve nts the fulfillment of the condition 3. He acts Voluntarily *The law does not re quire that the obligor acts with malice or fraud as long as his purpose is to pr event fulfillment of the condition. He should not be allowed to profit from his own fault or bad faith Constructive Fulfillment of Resolutory Condition Art 1186 applies also to an obligation subject to a resolutory condition with respect to the debtor who is bound to return what he has received upon the fulfillment of the condition Article 1187. The effects of a conditional obligation to give, onc e the condition has been fulfilled shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestat ions upon the parties the fruits and interests during the pendency of the condit ion shall be deemed to have been mutually compensated. If the obligation is unil ateral, the debtor shall appropriate the fruits and interests received, unless f rom the nature and circumstances of the obligation it should be inferred that th e intention of the person constituting the same was different. In obligations to do and not to do, the courts shall determine, in each case, the retroactive eff ect of the condition that has been complied with. (1120) Retroactive effects of In obligation to give- An obligation to give fulfillment of suspensive condition subject to a suspensive condition becomes demandable only upon the fulfillment of the condition In obligations to do or not to do- With respect to the retroact ive effect of the fulfillment of a suspensive condition, in obligations to do or not to do, no fixed rule is provided Retroactive effects as to fruits and interests in obligations to give In recipro cal obligations- There is no retroactivity because the fruits and interests rece ived during the pendency of the condition are deemed to have been mutually compe nsated In unilateral obligations- There is usually no retroactive effect because they are gratuitous. The debtor receives nothing from the creditor Article 1188 . The creditor may, before the fulfillment of the condition, bring the appropria te actions for the preservation of his right. The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition. (1121a) Rights pending fulfillment of suspensive condition NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

1. Rights of creditor He may take or bring appropriate actions for the preservat ion of his right, as the debtor may render nugatory the obligation upon the happ ening of the condition 2. Rights of debtor He is entitled to recover what he has paid by mistake prior to the happening of the suspensive condition Article 1189 . When the conditions have been imposed with the intention of suspending the eff icacy of an obligation to give, the following rules shall be observed in case of improvement, loss or deterioration of the thing during the pendency of the cond ition: 1. If the thing is lost without the fault of the debtor, the obligation s hall be extinguished; 2. If the thing is lost through the fault of the debtor, h e shall be obliged to pay the damages; it is understood that a thing is lost whe n it perishes, or goes out of commerce, or disappears in a way that its existenc e is unknown or it cannot be recovered 3. When the thing deteriorates without th e fault of the debtor; 4. If it deteriorates through the fault of the debtor, th e creditor may choose between the rescission of the obligation and its fulfillme nt, with indemnity for other damages in either case; 5. if the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the cr editor; 6. if it is Improved at the expense of the debtor, he shall have no othe r right than that granted to the usufructuary. (1122) *Usufruct is the right to enjoy the use and fruits of a thing belonging to another Requisites of Applicati on of Article 1189 1. The obligation is a real obligation; 2. The object is a sp ecific or determinate thing; 3. The obligation is subject to a suspensive condit ion; 4. The condition is fulfilled; and 5. There is loss, deterioration, or impr ovement of the thing during the pendency of the condition 3 kinds of losses 1. P hysical loss- when a thing perishes 2. Legal loss- thing goes out of commerce 3. Civil loss- a things existence becomes unknown Rules in case of loss deteriorati on,or improvement of a thing during pendency of a suspensive condition 1. Loss o f a thing without the debtors fault- as a general rule, a person is not liable fo r a fortuitous event 2. Loss of thing through debtors fault- the creditor will be entitled to demand damages 3. Deterioration of a thing without debtors fault- cr editor will have to suffer the deterioration or impairment 4. Deterioration of a thing through debtors fault- rescission of the obligation with damages or fulfil lment of the obligation with damages 5. Improvement of thing by nature or timeimprovement shall inure to the benefit of the creditor 6. Improvement of thing a t the expense of the debtor- the debtor will have the right granted to a usufruc tuary with respect to improvements made on the thing held in usufruct Article 11 90. When the conditions have for their purpose the extinguishment of an obligati on to give, the parties, upon the fulfillment of said conditions, shall return t o each other what they have received. In case of loss, deterioration or improvem ent of the thing, the provisions which, with respect to the debtor, are laid dow n in the preceding article shall be applied to the party who is bound to return. As for obligations to do and not to do, the provisions of the second paragraph of Article 1187 shall be observed as regards the effect of the extinguishment of the obligation. (1123) Effects of fulfillment of resolutory condition 1. In obl igations to give when the resolutory condition in an obligation to give is fulfi lled, the obligation is extinguished and the parties are obliged to return to ea ch other what they have received under the obligation. 2. In obligations to do o r not to do the courts shall determine the retroactive effect of the fulfillment of the resolutory condition. *The fulfillment of the resolutory condition conve rts the creditor into debtor and the debtor into creditor. Article 1191. The pow er to rescind obligations is implied in reciprocal ones, in case one of the obli gors should not comply with what is incumbent upon him. The injured party may ch oose between the fulfillment and the rescission of the obligation, with the paym ent of the damages in either case. He may also seek rescission even after he has chosen fulfillment, if the latter should become impossible. The court shall dec ree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third per sons who have acquired the thing, in accordance with articles 1385 and1388 and t he Mortgage Law. (1124) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST

RICTLY FOR BMS MEMBERS ONLY!!!

Kinds of obligation according to the person obliged 1. Unilateral when only one party is obliged to comply with a prestation 2. Bilateral when both parties are mutually bound to each other a. Reciprocal obligation those which arise from the same cause and in which each party is a debtor and creditor of the other, such that the performance of one is designed to be the equivalent and the condition o f the performance of the other b. Non-reciprocal obligation those which do not i mpose simultaneous and correlative performance on both parties Remedies in recip rocal obligations Action for specific performance (fulfillment) of the obligatio n with damages; or Action for rescission of the obligation also with damages Cou rt may grant guilty party term for performance Applies only where the guilty par ty is willing to comply with his obligation but needs time to do so and not wher e he refuses to perform Remedies are alternative Aggrieved party is privileged t o choose only one of the remedies, and not both Limitation on right to demand re scission *The right to rescind by the injured party is not absolute thus: Resort to the courts Power of court to fix period Rights of third person Substantial v iolation Waiver of right Rescission without previous judicial decree 1. Where au tomatic rescission expressly stipulated- Where the contract itself contains such stipulation, the right to rescind is not implied but expressly recognized 2. Wher e contract still executory- when there is no performance yet by both parties, bu t one is ready and willing to comply with what is incumbent upon him and the oth er is not, the willing party may, by his own declaration, rescind the contract w ithout a previous judicial decree of rescission Article 1192. In case both parti es have committed a breach of the obligation, the liability of the first infract or shall be equitably tempered by the courts. If it cannot be determined which o f the parties first violated the contract, the same shall be deemed extinguished , and each shall bear his own damages. (n) Where both parties are guilty of brea ch 1. First infractor known- In this case, the liability of the first infractor should be equitably reduced 2. First infractor cannot be determined- The rule is that the contract shall be deemed extinguished and each shall bear his own dama ges. In effect, the court shall not provide remedy to either of the parties, who must suffer the damages allegedly sustained by them CHAPTER 3; Sec.2: Obligations with a Period Article 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. A day certain is understood to be that which mu st necessarily come, although it may not be known when. If the uncertainty consi sts in whether the day will come or not, the obligation is conditional, and it s hall be regulated by the rules of the preceding section. (1125a) Obligations wit h a period- one whose consequences are subjected in one way or another to the ex piration of said period or term. Period or Term- a future and certain event upon the arrival of which the obligation (or right) subject to it either arises or i s terminated. Period VS. Condition Certain event Uncertain event Future May be unknown past event If it depends on debtors will, it If it depends on the debtors will, empowers the court to fix the obligation is invalidated duration thereof Unless there is an agreement to the H appening of a condition has a retroactive effect contrary, arrival of a period d oes not PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. NOTE: have a retroactive e ffect THIS SPECIAL PRIVILEGE IS STRICTLY FOR BMS MEMBERS ONLY!!!

Kinds of Period or Term According to effect a. Suspensive Period (ex die)- oblig ation begins only from a day certain upon the arrival of the period b. Resolutor y Period (in diem)- obligation is valid up to a day certain and terminates upon arrival of the period According to source a. Legal Period- provided for by laws b. Conventional or voluntary Period- agreed to by parties c. Judicial Period- fi xed by the court According to definiteness a. Definite Period- it is fixed or it is known when it will come b. Indefinite Period- not fixed or not known when it will come Article 1194. In case of loss, deterioration or improvement of the th ing before the arrival of the day certain, the rules in Article 1189 shall be ob served. (n) Effect of loss, deterioration, or improvement before arrival of peri od *see comments under Article 1189 Article 1195. Anything paid or delivered bef ore the arrival of the period, the obligor being unaware of the period, or belie ving that the obligation has become due and demandable, may be recovered, with t he fruits, and interests. (1126a) *applies only to obligations to give. It allow s recovery of what has been paid by mistake. Debtor presume aware of period Debt or has the burden of proving that he was unaware of the period. Obligor may no l onger recover once the period arrives but he may still recover the fruits and in terests. No Recovery in Personal Obligations It is physically impossible to reco ver the service rendered Article 1196. Whenever in an obligation a period is des ignated, it is presumed to have been established for the benefit of both the cre ditor and the debtor, unless from the tenor of the same or other circumstances, it should appear that the period has been established in favor of one or of the other. (1127) Presumption as to benefit of Period Period is to be presumed to ha ve been established for the benefit of both the creditor and the debtor; this pr esumption however, is rebuttable. Exceptions to the general rule 1. Term is for the benefit of the debtor alone- he cannot be compelled to pay prematurely, but he can, if he desires to do so. 2. Term is for the benefit of the creditor- he m ay demand fulfillment even before the arrival of the term but the debtor cannot require him to accept payment before the expiration of the stipulated period. Co Year = 365 days Month = 30 days Day = 24 hours Night mputation of Period or Term s = from sunset to sunrise If months are designated by name, days are computed r espective to the month In computing a period, 1st day is excluded and last day i s included If the last day is a Sunday or Legal holiday, time shall not run unti l the end of the next day Article 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. The courts shall also fix the duration of the period when it depends upon the will of the debtor. In every ca se, the courts shall determine such period as may under the circumstances have b een probably contemplated by the parties. Once fixed by the courts, the period c annot be changed by them. (1128a) Court generally without Power to fix a Period If obligation does not state a period and no period is intended, the court is no t authorized to fix a period. The courts have no right to make contracts for the parties. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Exceptions to the General Rule 1. No period is fixed but a period was intended 2 . Duration of the period depends upon the will of the debtor Period fixed cannot be changed by courts 1. If there is a period agreed upon and it has already lap sed, the court cannot fix another period 2. From the very moment the parties giv e their acceptance and consent to the period fixed by the court, said period acq uires the nature of a contract. Article 1198. The debtor shall lose every right to make use of the period: 1. 2. 3. 4. 5. When after the obligation has been con tracted, he becomes insolvent, unless he gives a guaranty or security for the de bt; When he does not furnish to the creditor the guaranties or securities which he hs promised; When by his own acts he has impaired said guaranties or securiti es after their establishment, and when through a fortuitous event they disappear , unless he immediately gives new ones equally satisfactory; When the debtor vio lates any undertaking, in consideration of which the creditor agreed to the peri od; When the debtor attempts to abscond. (1129a) When obligations can be demanded before the lapse of period *obligation becomes pure and immediately demandable 1. When debtor becomes insolvent 2. When debtor does no furnish guaranties or securities promised 3. When guaranties or securiti es given have been impaired or disappeared 4. When debtor violates an undertakin g 5. When debtor attempts to abscond CHAPTER 3; Sec.3: Alternative Obligations A rticle 1199. A person alternatively bound by different prestations shall complet ely perform one of them. The creditor cannot be compelled to receive part of one and part of the other undertaking. (1131) Kinds of Obligation according to obje ct 1. Simple Obligation- one where there is only one prestation 2. Compund Oblig ation one where there are two or more prestations a. Conjunctive Obligation- one where there are several prestations and all of them are due b. Distributive Obl igation- one where one, two or more of the prestations is due i. Alternative Obl igations- one where several prestations are due but the performance of one is su fficient ii. Facultative Obligations- one where only one prestation is due but t he debtor may substitute another Article 1200. The right of choice belongs to th e debtor, unless it has been expressly granted to the creditor. The debtor shall have no right to choose those prestations which are impossible, unlawful, or wh ich could not have been the object of the obligation. (1132) * Right to choose t he prestation belongs to the debtor except when it is expressly granted to the c reditor Right of choice of debtor not Absolute 1. Debtor cannot choose prestatio ns which are: impossible, unlawful, or which could not have been the object of t he obligation. These prestations are VOID 2. Debtor has no more right when- amon g the prestations whereby he is alternatively bound, only one is practicable. Ar ticle 1201. The choice shall produce no effect except from the time it has been communicated. (1133) Communication of notice that choice has been made 1. Effect of notice- until the choice is made and communicated, the obligation remains al ternative. Once it is properly communicated, it is irrevocable and cannot be cha nged by one party without the consent of the other. 2. Proof and form of noticethe burden of proving that such communication has been made is upon him who mad e the choice. It may be orally, in writing, expressly or impliedly. Article 1202 . The debtor shall lose the right of choice when among the prestations whereby h e is lternatively bound, only one is practicable. (1134) *If only one is practic able, obligation is converted into a simple one. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Article 1203. If through the creditors acts, the debtor cannot make a choice acco rding to the terms of the obligation, the latter may rescind the contract with d amages. (n) When debtor may rescind the contract Rescission creates the obligati on to return the thigs which were the object of the contract together with their fruits, and the price with its interest. If through the creditors fault, debtor cannot make a choice according to the terms of the obligation, he may rescind th e contract. *the debtor, however, is not bound to rescind Article 1204. The cred itor shall have a right to indemnity for damages when, through the fault of the debtor, all the things which are alternatively the object of the obligation have been lost, or the compliance of the obligation has become impossible. The indem nity shall be fixed taking as a basis the value of the last thing which disappea red, or that of the service which last became impossible. Damages other than the value of the last thing or service may alos be awarded. (1135a) Effect of Loss of objects of the obligation 1. Some of the objects- debtor is not liable since he has the right of choice and the obligation can still be performed 2. All of t he objects- If it is through his fault, the creditor shall have the right to ind emnity for damages since the obligation can no longer be complied with. If the l oss is through a fortuitous event, the obligation is extinguished Basis of Indem nity The indemnity shall be fixed taking as a basis the value of the last thing which disappeared or that service which last became impossible. Article 1205. Wh en the choice has been expressly given to the creditor, the obligation shall cea se to be alternative from the day when the selection has been communicated to th e debtor. Until then the responsibility of the debtor shall be governed by the f ollowing rules: 1. If one of the things is lost through a fortuitous event, he s hall perform the obligation by delivering that which the creditor should choose from among the remainder, or that which remains if oly one subsists; 2. If the l oss of one of the things occurs through the fault of the debtor, the creditor ma y claim any of those subsisting, or the price of that which, through the fault o f the former, has disappeared, with a right to dmages; 3. If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any one of them, also with indemnity for damages. The same rules s hall also be applied to obligations to do or not to do in case one, some or all of the prestations should become impossible. (1136a) *before the creditor makes the selection, the debtor cannot incur in delay Rules in case of loss before cre ditor has made choice 1. When a thing is lost through a fortuitous event- credit or can choose from among the remainder 2. When a thing is lost through debtors fa ult- creditor may claim from among the remainder with a right to damages or the price of the item lost also with a right to damages 3. When all the things are l ost through debtors fault- creditor can demand the payment of any of the items wi th a right to indemnity for damages 4. When all the things are lost through a fo rtuitous event- the obligation shall be extinguished Article 1206. When only one prestation has been agreed upon, but the obligor may render another in substitu tion, the obligation is called facultative. The loss or deterioration of the thi ng intended as substitute, through the negligence of the obligor, does not rende r him liable. But once the substitution has been made, the obligor is liable for the los of the substitute on account of his delay, negligence or fraud. (n) Fac ultative obligation- one where only one prestation has been agreed upon but the obligor may render another in substitution. Effect of Loss 1. Before substitutio n- if the principal thin is lost through a fortuitous event, the obligation is e xtinguished; otherwise, the debtor is liable for damages. The loss of the intend ed substitute, with or without the debtors fault, does not make him liable. 2. Af ter substitution- if the principal thing is lost, with or without the debtors fau lt, he is not liable. If the substitute is lost, his liability depends upon whet her or not the loss was due to his fault. Alternative VS. Facultative Several prestations are due nut Only one prestation is due but compliance with o ne is sufficient debtor is allowed to substitute it Right of choice may be debto r, Right of choice belongs only to NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REV IEWER. creditor or third person debtor THIS not Loss of thing due (because of Lo ss of some of alternatives does SPECIAL PRIVILEGE IS STRICTLY FOR BMS MEMBERS ON

LY!!! render obligation extinguished fortuitous event) renders obligation (throu gh fortuitous event) extinguished If it depends on debtors choice, loss Loss of t hing due through debtors

CHAPTER 3; Sec.4: Joint and Solidary Obligations Article 1207. The concurrence o f two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. The re is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. (1137a) Article 12 08. If from the law, or the nature or the wording of the obligations to which th e preceding article refers, the contrary does not appear, the credit or debt sha ll be presumed to be divided into as many equal share as there are creditors or debtors, the credits or debts being considered distinct from one another, subjec t to the Rules of Court governing the multiplicity of suits. (1138a) Kinds of ob ligations according to the number of parties 1. Individual obligation one where there is only one obligor or one obligee; and 2. Collective Obligation one where there are two or more debtors OR two or more creditors. It may be joint or soli dary. Joint obligation - one where the whole obligation is to be paid or fulfill ed proportionately by the different creditors Solidary Obligation - one where ea ch one of the debtors is bound to render, and/or each one of the creditors has a right to demand from any of the debtors, entire compliance with the prestation. Collective obligation presumed to be joint 1. If A is liable to B for P9,000.00 there can be no problem regarding the determination of the following: a. the pe rson liable to pay b. the person entitled to demand payment c. the extent of the liability of the debtor; and d. the extent of the right of the creditor 2. Wher e there is a plurality of parties (two or more debtors and/or two or more credit ors) and the share of each in the obligation specified, the correlative rights a nd obligations of the parties are known. 3. On the other hand, let us suppose th at in the same obligation, the share of each debtor (or the share of each credit or, if there are two or more creditors) is not specified. In such case, the pres umption is that the obligation is joint, and as consequence: a. There are as man y debts as there are debtors b. There are as many credits as there are creditors c. The debts and/or credits are considered distinct and separate from one anoth er d. Each debtor is liable only for a proportionate part of the debt e. Each cr editor is entitled only to a proportionate part of the credit The presumption es tablished in Article 1208 is, however, rebuttable. * Presumption subject to rule Ma s on multiplicity of suits Words used to indicate joint liability Mancomunada ncomunadamente Pro rata Proportionately We promise to pay. signed by two or more p ersons When obligation solidary *There is solidary liability only when: 1. the o bligation expressly so states 2. the law requires solidarity 3. the nature of th e obligation requires solidarity *Solidary liability also exists when it is impo sed in a final judgment NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

against several defendants. Words used to indicate solidary liability jointly an d/or severally solidaria in solidum together and/or separately individually and/ or collectively juntos o separadamente I promise to pay signed by two or more pers ons Kinds of solidarity According to parties bound: o Passive solidarity solidar ity on the part of the debtors, where any one of them can be made liable for the fulfillment of the entire obligation. It is in the nature of a mutual guaranty. o Active solidarity solidarity on the part of the creditors, where any one of t hem can demand the fulfillment of the obligation. Its essential feature is that of mutual representation among the solidary creditors with powers to exercise th e rights of others in the same manner as their rights. o Mixed solidarity solida rity on the part of the debtors and creditors, where each one of the debtors is liable to render, and each one of the creditors has a aright to demand, entire c ompliance with the obligation. According to source: o Conventional solidarity wh ere solidarity is agreed upon by the parties. If nothing is mentioned in the con tract relating to solidarity, the obligation is only joint. o Legal solidarity w here solidarity is imposed by the law. o Real solidarity where solidarity is imp osed by the nature of the obligation *Solidarity not presumed because solidary o bligations are very burdensome for they create unusual rights and liabilities. A rticle 1209. If the division is impossible, the right of the creditors may be pr ejudiced only by their collective acts, and the debt can be enforced only by pro ceeding against all debtors. If one of the latter should be insolvent, the other s shall not be liable for his share. (1139) Joint indivisible obligation the obl igation is joint because the parties are merely proportionately liable. the obli gation is indivisible because the object or subject matter is not physically div isible into different parts. it is joint as to liabilities of debtors and rights of creditors it is indivisible as to compliance the obligation constitutes the middle ground between a joint and solidary obligation Joint debtors VS. Joint Cr editors if one of the debtors refuses to comply, he can be liable for damages if the oth er debtors suffered damages due to the non-compliance of another debtor, they ma y recover from him if one of the debtors become insolvent, the other debtors are not liable for his share if one of the creditors refuse to accept the obligation jointly with the other c reditors, the debtor may deposit the obligation in court by way of consignation creditors can only recover their respective shares in an indemnity creditors can not do anything which may be prejudicial to the other creditors Article 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. (n) *a liabi lity in an indivisible obligation may either be joint or solidary *in a solidary obligation, the subject matter may be divisible or indivisible o o o o joint in divisible obligation: prestation is indivisible but liability is joint solidary indivisible obligation: prestation is indivisible but liability is solidary soli dary divisible obligation: prestation is divisible but liability is solidary joi nt divisible obligation: prestation is divisible but liability is solidary Indivisibility VS. Solidarity refers to prestation (subject matter of obligation) each of obligation is liable for damages only the debtor guilty of br

refers to the judicial or legal tie which binds the obligation all debtors are l iable for the breach of the obligation comamitted by a NOTE: PROPERTY OF BMS. UN OFFICIAL OBLICON REVIEWER. debtor THIS SPECIAL there must be at least two debtor s PRIVILEGE IS STRICTLY FOR BMS MEMBERS ONLY!!! can exist although there is only one debtor and one creditor and two creditors other debtors are not liable for other debtors are proportionately insolvency of one debtor liable for insolvency of one debtor

Article 1211. Solidarity may exist although the creditors and the debtors may no t be bound in the same manner and by the same periods and conditions. (1140) Kin ds of solidary obligation according to legal tie 1. Uniform: parties are bound b y same stipulations 2. Non-uniform or varied: parties are not subject to same pr estations Solidarity not affected by diverse stipulations solidarity consists in : o the right of each creditor to enforce the rights of all o the liability of e ach debtor to answer for the liabilities of all a solidary obligation may exist although parties may not be bound in the same manner and by the same periods and conditions the creditor may bring his action in toto (as a whole) against any o f the solidary debtors less the shares of the other debtors with unexpired terms or unfulfilled conditions who are entitled to defenses under Article 1222 upon expiration of the term or fulfillment of the condition, the creditor will have t he right to demand the payment of the remainder the parties may stipulate that a ny solidary debtor already bound may be made liable for the entire obligation Ar ticle 1212. Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter. (1141a) Act of solidary creditor prejudicial to others A solidary creditor may do any act b eneficial or useful to the others but he cannot perform any act prejudicial to t hem. If he performs such act and as a result the obligation is extinguished, he shall be responsible to the others for damages. As far as the debtor or debtors are concerned, the act shall be valid and binding. The rule is based on the theo ry of mutual agency among the solidary creditors. Article 1213. A solidary credi tor cannot assign his rights without the consent of the others. (n) Assignment b y solidary creditor of his rights a solidary creditor cannot assign his rights t o a third person If the assignee is made to a co-creditor, the consent of the ot her creditors is not necessary Article 1214. The debtor may pay any one of the s olidary creditors; but if any demand, judicial or extrajudicial, has been made b y one of them, payment should be made to him. (1142a) Payment to any of the solidary creditors the debtor may pay any one of the solid ary creditors. But when a demand, judicial or extrajudicial, has been made by on e of them, to avoid confusion, as well as prejudice to the more diligent credito r, payment should be made to him Article 1215. Novation,compensation, confusion or remission of the debt, made by any of the solidary creditors or with any of t he solidary debtors, shall extinguish the obligation, without prejudice to the p rovisions of Article 1219. The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the shar e in the obligation corresponding to them. (1143) Liability of solidary creditor in case of novation, compensation, confusion, or remission This extinguishes th e obligation It is but logical that the creditor who executed any of these acts should be liable to the others for their corresponding shares considering that s uch acts are prejudicial to them Effect of novation, etc. where obligation is jo int NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

These does not extinguish or modify the obligation except with respect to the cr editor or debtor affected Article 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. ( 1144a) Right of the creditor to proceed against any solidary debtor Not applicab le to a joint obligation. It reiterates the rule hat in a solidary obligation (p assive solidarity), any one or some or all of the solidary debtors may simultane ously, may be made to pay the debt so long as it has not been fully collected. A rticle 1217. Payment made by one of the solidary debtors extinguishes the obliga tion. If two or more solidary debtors offer to pay, the creditor may choose whic h offer to accept. He who made the payment may claim from his co-debtors only th e share which corresponds to each, with the interest for the payment already mad e. If the payment is made before the debt is due, no interest for the intervenin g period may be demanded. When one of the solidary debtors cannot, because of hi s insolvency, reimburse his share to the debtor paying the obligation, such shar e shall be borne by all his co-debtors, in proportion to the debt of each. (1145 a) Effects of payment by a solidary debtor 1. Between the solidary debtors and c reditor(s) payment made by one of the solidary debtor extinguishes the obligatio n. However, the creditor for his protection is given the right to choose which o ffer to accept if two or more solidary debtors offers to pay 2. Among the solida ry debtors after payment of the debt, the paying solidary debtor can demand reim bursement from his co-debtors for their proportionate shares with (legal) intere st only from the time of payment. Their liability is based upon the payment made by the co-debtor which creates a joint obligation of reimbursement on the part of the others. However, in case of insolvency of any solidary debtors, the other s assume the share of the insolvent one pro rata. 3. Among the solidary creditor s the receiving creditor is jointly liable to the others for their corresponding shares. Article 1218. Payment by a solidary debtor shall not entitle him to rei mbursement from his co-debtors if such payment is made after the obligation has prescribed or become illegal. (n) Effect of payment after obligation has prescri bed or become illegal When the obligation has already prescribed or become illeg al, the obligation is extinguished. Hence, there is no more obligation to be com plied with. Prescriptive periods of actions *By prescription, one acquires owners hip and other rights through the lapse of time in the manner and under the condi tions laid down by law. In the same way, rights and actions are lost by prescrip The following actions must be brought within ten years from the time the rig tion. ht of action accrues: o Upon an obligation created by law o Upon a judgment. The f ollowing actions must be commenced within six years: o Upon an oral contract o U pon a quasi-contract. The following actions must be instituted within four years: o Upon an injury to the rights of the plaintiff o Upon a quasi-delict. **The stat ute of limitations, *however, may be superseded or modified by a contract betwee n parties. Article 1219. The remission made by the creditor of the share which a ffects one of the solidary debtors does not release the latter from his responsi bility towards the co-debtors, in case the debt had been totally paid by anyone of them before the remission was effected. (1146a) Effect of remission of share after payment If payment is made first, the remission or waiver is of no effect. If remission is made previous to the payment and payment is made, solution inde biti arises. Article 1220. The remission of the whole obligation obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debt ors. (n) No right to reimbursement in case of remission The debtor who obtains r emission pays nothing to the creditor. Remission is essential gratuitous. It is really a donation In case of novation, compensation, or confusion (see art. 1215 .), the debtor with whom it is effected is entitled to recover from his co-debto rs their corresponding shares of the obligation. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Article 1221. If the thing has been lost or if the prestation has become impossi ble without the fault of the solidary debtors, the obligation shall be extinguis hed. If there was fault on the part of any one of them, all shall be responsible to the creditor, for the price and the payment of damages and interest, without prejudice to their action against the guilty or negligent debtor. If through a fortuitous event, the thing is lost or the performance has become impossible aft er one of the solidary debtors has incurred in delay through the judicial or ext ra-judicial demand upon him by the creditor, the provisions of the preceding par agraph shall apply. (1147a) Rules in case thing has been lost or prestation has become impossible *If the thing is lost due or the prestation becomes impossible , the liability of the solidary debtors depends upon whether or not there is fau lt or delay. 1. Loss is without fault and before delay- obligation shall be exti nguished 2. Loss is due to fault on the part of a solidary debtor- as far as cre ditor is concerned, fault or delay of one solidary debtor shall be the fault or delay of all the solidary debtors 3. Loss is without fault but after delay- defa ult by one debtor makes all solidary debtors responsible even for fortuitous eve nt Article 1222. . A solidary debtor may, in actions filed by the creditor, avai l himself of all defenses which are derived from the nature of the obligation an d of those which are personal to him, or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof onl y as regards that part of the debt for which the latter are responsible. (1148a) Defenses available to a solidary debtor *In actions filed by the creditor, a so lidary debtor may avail himself of the following defenses: 1. Defenses derived f rom the nature of the obligation 2. Defenses personal to, or which pertain to sh are of, debtor sued 3. Defenses personal to other solidary debtors CHAPTER 3: Se c.5: Divisible and Indivisible Obligations Article 1223. The divisibility or ind ivisibility of the things that are the object of obligations in which there is o nly one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title. (1149) Divisible obligations - The object of these obli gations, in its delivery or performance, is capable of partial fulfillment Indiv isible Obligations- The object of these obligations in its delivery or performan ce, is not capable of partial fulfillment Test for the Distinction *factors to b e considered in determining whether an obligation is divisible or indivisible: 1 . The nature of the obligation; 2. The provision of law affecting the prestation ; 3. The will or intention of the parties, either express or tacit; 4. The end o r purpose of the obligation. Applicability of Article 1223 While article 1223 ap pears to be limited to real obligations because it speaks of things , the word is u sed in its broad sense as referring to the object or prestation of the obligatio n, which may be to deliver a thing or to render some service. Kinds of Division 1. Qualitative Division- Based on quality, not on number or quantity of the thin gs which are the object of the obligation 2. Quantitative Division- Based on qua ntity rather than on quality 3. Ideal or Intellectual Division- Exists only in t he minds of the parties Kinds of Indivisibility 1. Legal Indivisibility- Where a specific provision of law declares as indivisible, obligations which, by their nature are divisible 2. Conventional Indivisibility- Where the will of the parti es makes as indivisible, obligations which, by their nature, are divisible. 3. N atural Indivisibility- Where the nature of the object or prestation does not adm it of division Where There is Only One Creditor and One Debtor Since divisibilit y or indivisibility refers to the object or prestation, it does not alter or mod ify said provisions. When there is only one creditor and debtor, the latter has to perform the obligation in its totality, whether or not the prestation is divi sible. Unless there is an express stipulation to that effect, the creditor canno t be compelled partially to receive the prestations in which the obligation cons ists; and in accordance with Article 1232, an obligation is not deemed paid unle ss the thing or service in which the obligation consists has been completely del ivered or rendered, as the case may be. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Article 1224. A joint divisible obligation gives rise to indemnity for damages f rom the time anyone of the debtors does not comply with his undertaking. The deb tors who may have been ready to fulfill their promises shall contribute to the i ndemnity beyond the corresponding portion of the price of the thing or of the va lue of the service in which the obligation consists. (1150) Effect of non-compli ance by a debtor in a joint indivisible obligation If any of the debtors does no t comply, the obligation is converted into one for damages. The creditor cannot ask for specific performance or rescission because there is no action against th e other debtors Article 1225. For the purpose of the preceding articles, obligat ions to give definite things and those which are not susceptible of partial perf ormance shall be demed to be indivisible. When the obligation has for its object the execution of a certain number of days of work, the accomplishment of work b y metric units, or analogous thing which by their nature are susceptible of part ial performance, it shall be divisible. However, even though the object or servi ce may be physically divisible, an obligation is indivisible if so provided by l aw or intended by the parties. In obligations not to do, divisibility or indivis ibility shall be determined by the character of the prestation in each particula r case. (1151a) Obligations Deemed Indivisible 1. Obligations to give definite t hings 2. Obligations which are not susceptible of partial performance 3. Obligat ions provided by law to be indivisible even if thing or service is physically di visible. 4. Obligations intended by the parties to be indivisible even if the th ing or service in physically divisible. Obligations Deemed Divisible 1. Obligati ons which have for their object the execution of a certain number of days of wor k. 2. Obligations which have for their object the accomplishment of work by metr ical units. 3. Obligations which by their nature are susceptible of partial perf Indivisible Obl ormance. Divisibility or Indivisibility in Obligations Not to Do igation o A obliged himself to B not to sell cigarettes in his store for one yea r. Here, the obligation should be fulfilled continuously during a certain period . Divisible Obligation o If the obligation of A is not to sell cigarettes only d uring Sundays and holidays, the obligation is divisible because the forbearance is not continuous. CHAPTER 3; Sec.6: Obligations with a Penal Clause Article 122 6. In obligations with a penal clause, the penalty shall substitute the indemnit y for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obli gor refuses to pay the penalty or is guilty of fraud in the fulfillment of the o bligation. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. (1152a) Principal obligation- One which can st and by itself and does not depend for its validity and existence upon another ob ligation. Accessory obligation- One which is attached to a principal obligation and, therefore cannot stand alone Obligation with a penal clause- One which cont ains an accessory undertaking to pay a previously stipulated indemnity in case o f breach. Penal Clause- An accessory undertaking attached to an obligation to as sume greater liability in case of breach, i.e., the obligation is not fulfilled, or is partly or irregularly complied with. Penal Clause VS. Condition Constitutes an obligation although accessory May become demandable in default of unperformed obligation and sometimes, jointly with it Purposes of penal clause Does not constitute an obligation Is never demandable

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1. To insure their performance by creating an effective deterrent against breach , making the consequences of such breach as onerous as it may be possible. This is the general purpose of a penal clause; and 2. To substitute a penalty for the indemnity for damages and the payment of interests in case of non-compliance; o r to punish the debtor for the nonfulfillment or violation of his obligation. In the first case, the purpose is reparation; in the second, punishment. Kinds of penal clause As to its origin: a. Legal penal clause. when it is provided by law ; and b. Conventional penal clause. when it is provided for by stipulation of th e parties. As to its purpose: a. Compensatory penal clause. when the penalty tak es the place of damages; and b. Punitive penal clause. when the penalty is impos ed merely as punishment for breach. As to its demandability or effect: a. Subsid iary or alternative penal clause. when only the penalty can be enforced; and b. Joint or cumulative penal clause. when both the principal obligation and the pen al clause can be enforced. Penalty substitutes for damages and interests Penalty takes the place of the indemnity for damages and the payment of interests in ca se of non-compliance. Proof of actual damages suffered by the creditor is not ne cessary in order that the penalty may be enforced. When creditor may recover dam ages 1. When so stipulated by the parties; 2. When the obligor refuses to pay th e penalty, in which case the creditor may recover legal interest thereon; or 3. When the obligor is guilty of fraud in the fulfillment of the obligation, in whi ch case the creditor may recover damages caused by such fraud. When creditor may be enforced When it is demandable in accordance with the provisions of the Civi l Code. If the obligation cannot be fulfilled due to a fortuitous event, the pen alty is not demandable. Article 1227. The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same ti me, unless the right has been clearly granted him. However, if after the credito r has decided to require the fulfillment of the obligation, the performance ther eof should become impossible without his fault, the penalty may be enforced. (11 53a) Penalty not substitute for performance The penalty is to secure compliance with the obligation; if debtor is allowed to pay penalty, the obligation would b ecome an alternative one. This is unless the right has been expressly reserved f or him Penal Clause presumed Subsidiary 1. When there is performance- Once the o bligation is fulfilled, there is no need to demand penalty. Unless this right ha s been clearly granted to the creditor. 2. When there is no performance- Credito r may ask for the penalty or require specific performance. If there was fraud, c reditor may recover penalty with damages for non-fulfillment. When penal clause joint The debtor has the right to pay penalty in lieu of perfo rmance only when this right has been expressly reserved for him (supra) The cred itor has the right to demand performance and payment of penalty jointly when thi s right has been clearly granted him. (supra) Article 1228. Proof of actual dama ges suffered by the creditor is not necessary in order that the penalty may be d emanded. (n) Penalty demandable without proof of actual damages All the creditor has to prove to enforce penalty is the violation of the obligation by the debto r. He can recover penalty whether or not he suffered damages. But, he cannot rec over more than the stipulate penalty even if he proves that his damages exceeds the penalty. *Damages recoverable in addition to penalty must be proved Article 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has b een no performance, the penalty may also be reduced by the courts if it is iniqu itous or unconscionable. (1154a) When penalty may be reduce by the Courts 1. Whe n there is partial or irregular performance- since the creditor is benefitted by the partial performance, the penalty of the debtor must be reduced. 2. When the penalty agreed upon is iniquitous or unconscionable NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Article 1230. The nullity of the penal clause does not carry with it that of the principal obligation Thu nullity of the principal obligation carries with it th at of the penal clause (1155) Effect of nullity of the Penal Clause The principa l obligation remains valid and demandable. The penal clause is disregarded and i njured party may recover indemnity for damages as if no penalty has been stipula ted Effect of nullity of the Principal Obligation The penal clause is likewise v oid because it cannot stand alone without the principal obligation to which it i s subrogated. But if nullity of principal obligation is due to the fault of the debtor who acted in bad faith, and the creditor suffered damages, penalty may be enforced. CHAPTER 4: Extinguishment of Obligations Article 1231. Obligations are extinguis hed: 1. By payment or performance; 2. By the loss of the thing due; 3. By the co ndonation or remission of the debt; 4. By the confusion or merger of the rights of creditor and debtor; 5. By compensation; 6. By novation. Other such cases of extinguishment of obligations, such as annulment, rescission, fulfillment of a r esolutory condition, and prescription, are goverened elsewhere in this Code. (11 56a) Causes of Extinguishment of Obligations 1. Death of a party in case the obl igation is a personal one; 2. Mutual desistance or withdrawal 3. Arrival of reso lutory period 4. Compromise 5. Impossibility of fulfillment 6. Happening of a fo rtuitous event CHAPTER 4; Sec1: Payment or Performance Article 1232. Payment mea ns not only the delivery of money but also the performance, In any other manner of obligation. (n) Payment- in law, may consist not only in the delivery of mone y but also the giving of a thing, the doing of an act, or not doing of an act. * In law, payment and performance are synonymous Article 1233. A debt shall not be under stood to have been paid unless the thing or service in which the obligati on consist has been completely delivered or rendered, as the case may be. (1157) * partial or irregular performance will not produce the extinguishment of an ob ligation as a general rule. Article 1234. If the obligation has been substantial ly performed in good faith, the obligor may recover as though there had been a s trict and complete fulfillment, less damages suffered by the obligee. (n) *Recov ery allowed in case of substantial performance in performance in good faith: the oblige is benefited so the obligor should be allowed to recover Requisites for the application of Article 1234 1. There must be substantial performance; and 2. The obligor must be in good faith Article 1235. When the obligee accepts the pe rformance, knowing its incompleteness or irregularity, and without expressing an y protest or objection, the obligation is deemed fully complied with. (n) * Reco very allowed when incomplete or irregular performance is waived. If the payment is incomplete or irregular, the creditor may reject it; but if he accepts, the l aw considers tha he has waived his rights. Requisites for the application of Art icle 1235 1. The obligee knows that the performance is incomplete or irregular; and NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

2. He accepts the performance without expressing any protest or objection Articl e 1236. The creditor is not bound to accept payment or performance by a third pe rson who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary. Whoever pays for another may demand from the debto r what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been benefici al to the debtor. (1158a) Persons from whom the creditor must accept payment 1. The debtor 2. Any person who has an interest in the obligation (like a guarantor ); 3. A third person who has no interest in the obligation when there is stipula tion that he can make payment *creditor may refuse payment by a third person bec ause he may not have confidence in the honesty of the third person Effect of pay ment by third person 1. If made without the knowledge or against the will of the debtor- the payer can recover from the debtor only insofar as the payment has b een beneficial to the latter. 2. If made with the knowledge of the debtor- the p ayer shall have the right to recover what he has paid and to acquire all the rig hts of the creditor Article 1237. Whoever pays on behalf of the debtor without t he knowledge or against the will of the latter, cannot compel the creditor to su brogate him in his rights, such as those arising from the mortgage, guaranty or penalty. (1159a) Right of a third person to subrogation Whoever pays on behalf o f the debtor with the consent of the latter is entitled to subrogation. But the third person cannot compel the creditor to subrogate him in the latters rights of mortgage, guaranty or penalty Subrogation VS. Reimbursement There is no real extinction of the obligation, but only a change of the creditor The right to be refunded to the extent that the payment benefited the creditor Article 1238. Payment made by a third person who does not intend to be reimburse d by the debtor is deemed to be donation, which requires the debtors consent. But the payment is any case valid as to the creditor who has accepted it. (n) *no o ne should be compelled to accept the generosity of another Article 1239. In obli gations to give, payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid, without prejudice to t he provisions of article 1427 under the title on Natural Obligation. (1160a) Free disposal of the thing due- the thing to be delivered must not be subject to any claim lien or encumbrance Capacity to alienate- the person is not incapacitated to enter into contracts and for that matter, to make a thing due *in obligations to give, payment by one who does not have the free disposition of the thing due and capacity to alienate it is not valid. Thus the thing paid can be recovered. Article 1240. Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. (1162a) Person to whom payment shall be made 1. The creditor or obl ige 2. His successor in interest 3. Any person authorized to receive it Article 1241. Payment to a person who is in capacitated to administer his property shall be valid if he has kept the thing delivered, or insofar as the payment has been beneficial to him. Payment made to a third person shall also be valid insofar a s it has redounded to the benefit of the creditor. Such benefit to the creditor. Need not be proved in the following cases: 1. 2. 3. If after the payment, the t hird person acquires the creditor rights; If the creditor ratifies the payment t o the third person; If by the creditors conduct, the debtor has been led to belie ve that the third person had authority to receive payment. (1163a) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Effect of payment to an incapacitated person It is not valid unless the incapaci tated person kept the thing paid or delivered or was benefited by the payment. I n the absence of these, the debtor may be made to pay again the creditors guardia n. Proof of such benefit is incumbent upon the debtor who paid. Effect of paymen t to a third person It is not valid except insofar as it has redounded to the be nefit of the creditor When benefit to the creditor need not be proved by debtor 1. Subrogation of the payer in the creditors rights; 2. Ratification by the credi tor; or 3. Estoppels on the part of the creditor Article 1242. Payment made in g ood faith to any person in possession of the credit shall release the debtor. (1 164) * Possession of the credit itself and not merely of the document or instrum ent evidencing the credit Article 1243. Payment made to the creditor by the debt or after the latter has been judicially ordered to retain the debt shall not be valid. (1165) Article 1244. The debtor of a thing cannot compel the creditor to receive a different one although the latter may be of the same value as, or more valuable than that which is due. In obligation to do or not to do, an act or fo rbearance substituted by another act or forbearance against the oblegees will. (1 166a) * Prestation may be substituted if the oblige consents Article 1245. Datio n in payment, whereby property is alienated to the creditor in satisfaction of a debt in money shall be governed by the law of sales. (n) Special Forms of Payme nt 1. Dation in payment 2. Application of payments 3. Payment by cession 4. Tend er of payment and consignation Daton in payment (adjudication or dacion en pago) - the conveyance of ownership of a thing as an accepted equivalent of performanc e Article 1246. When the obligation consists in delivery of an indeterminate and generic thing, whos quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can then debtor deliver a th ing of inferior quality. The purpose of the obligation and other circumstances s hall be taken. (1167a) Article 1247. Unless it is otherwise stipulated the extra judicial expenses required by the payment shall be for the account of the debtor . With regard to judicial costs, rules of court shall govern. (1168a) *debtor pa ys extrajudicial expenses because when obligation is extinguished and payment is made, debtor is primarily benefited Judicial costs- statutory amounts allowed t o a party to an action for his expenses incurred in the action. The cost of an a ction, as a rule, shall be paid by the losing party. Article 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelled parti ally to receive the prestrations in which the obligation consists. Neither may t he debtor be required to make partial payments. However, when the debt is in par t liquidated and in part unliquidated, the creditor may demand and the debtor ma y affect the payment of the former without waiting for the liquidation of the la tter. (1169a) When partial performance allowed 1. When there is an express stipu lation to that effect; 2. When the debt is in part liquidated (definitely determ ined and computed), and in part liquidated; 3. When the different prestations in which the obligations consists are subject to different terms or conditions whi ch affect some of them. Article 1249. The payment of debts in money shall be mad e in the currency stipulated, and if it is not possible to deliver such currency , then the currency which is legal tender in the Philippines. The delivery of pr omissory notes payable to order, or bills of exchange or other mercantile docume nts shall produce the effect of payment only when they have been cashed or when through the fault of the creditor thay have been impaired. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

In the meantime, the action derived from the original obligation shall be held i n abeyance. (1170) Legal tender- that currency which a debtor can legally compel a creditor to accept in payment of a debt in money when tendered by the debtor in the right amount Legal tender in the Philippines Coins are legal tender for a mounts not exceeding P50.00 for denominations of P0.25 and above For amounts not exceeding P20.00, for denominations of P0.10 or less All coins and bills above P1.00 are, therefore, valid legal tenders for any amount Payment by means of ins truments of credits 1. Right of creditor to refuse or accept creditor cannot be compelled to accept them since they are not legal tenders 2. Effect on obligatio n- payment by means of mercantile document does not extinguish the obligation, a . Until they have been cashed; b. Unless they have been impaired through the fau lt of the creditor Article 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the t ime of establishment of the obligation shall be the basis of payment, unless the re is an agreement of the contrary. (n) Inflation- a sharp sudden increase of mo ney or credit or both without a corresponding increase in business transactions Deflation- reduction in volume and circulation of the available money or credit *the purchasing value of the currency at the time of the establishment of the ob ligation shall be the basis of payment Article 1251. Payment shall be made in th e place designated in the obligation. There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment shall be made whe never the thing might be at the moment the obligation was constituted. In any ot her case the place of payment shall be the domicile of the debtor If the debtor changes his domicile in bad faith or after he has incurred in delay, the additio nal expenses shall be borne by him. These provisions are without prejudice to ve nue under the Rules of Court. (1171a) Place where obligation shall be paid 1. If there is a stipulation, the payment shall be made in the place designated 2. If there is no stipulation and object is specific, payment shall be made at the pl ace where thing was at the perfection of the contract 3. If there is o stipulati on and object is generic, payment shall be the domicile of the debtor. creditor bears the expenses in going to debtors place o accept payment Subsection 1: Appli cation of Payments Article 1252. He who has various debts of the same kind in fa vor of one and the same creditor may declare at the time of making the payment t o which of them the same must be applied. The parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall be made to them as to debts which are not yet due . If the debtor accepts from the creditor a receipt in which an application of t he payment is made, the former cannot complain of the same, unless there is a ca use for invalidating the contract. (1172a) Application of payments- the designat ion of the debt to which should be applied the payment made by a debtor who has various debts of the same kind in favor of one and the same creditor Requisites of Application of Payments 1. There must be one debtor and one creditor; 2. Ther e must be two or more debts; 3. The debts must be of the same kind; 4. The debts to which payment made by the debtor has been applied must be due; and 5. The pa yment made must not be sufficient to cover all the debts. Application as to debt s not yet due *(cannot be made unless) 1. There is a stipulation that the debtor may so apply; or 2. It is made by the debtor or the creditor, as the case may b e, for whose benefit the period has been constituted NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Rules on application of payments 1. The debtor has the first choice; he must ind icate at the time of making payment, and not afterwards, which particular debt i s being paid. If, in making use of his right, the debtor applied the payment to a debt. The right to make the application once exercised is irrevocable unless t he creditor consents to the change; 2. If the debtor does not apply payment, the creditor may make the designation by specifying in the receipt which debt is be ing paid 3. If the creditor has not also made the application, or if the applica tion is not valid, the debt, which is most onerous to the debtor among those due , shall be deemed to have been satisfied and; 4. If the debts due are of the sam e nature and burden, the payment shall be applied to all of them proportionately Article 1253. If the debt produces interest, payment of the principal shall not be deemed to have been made until the interest have been covered. (1173) *payme nt maid must be applied to the interest first and whatever balance left is credi ted to the principal Article 1254. When the payment cannot be applied in accorda nce with the preceding rules, or if application cannot inferred from the circums tances, the debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfied. If the debts due are of the same nature and burde n, the payment shall been applied to all of them proportionately. (1174a) *In ca se no application of payment has been made by the debtor and the creditor, then the payment shall be applied to the most onerous debt, and if the debts are of t he same nature or burden, to all of them proportionately When a debt more onerou s than another 1. An interest bearing debt is more onerous than a non interest b earing debt even if the latter is an older one 2. A debt as a sole debtor is mor e onerous than as a solidary debtor 3. Debts secured by a mortgage or by pledge is more onerous than unsecured debts 4. Of two interest bearing debts, the one w ith a higher rate is more onerous 5. An obligation with a penalty clause penalty clause is more burdensome than one without a penalty clause Subsection 2: Payme nt by Cession Article 1255. The debtor may cede or assign his property to his cr editors in payment of his debts. This cession, unless there is a stipulation to the contrary, shall only release the debtor from responsibility for the net proc eeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws. (1175a) Payment by cession- another special form of payment; it is the assignme nt or abandonment of all the properties of the debtor for the benefit of his cre ditors in order that the latter may sell the same and apply the proceeds thereof to the satisfaction of their credits. Requisites of payment by cession 1. There must be two or more creditors; 2. The debtor must be (partially) insolvent; and 3. The cession must be accepted by the creditors * Assignment does not make cre ditors the owners of the property and debtor is only released up to the net proc eeds of the sale of the property assigned. Dation is payment VS Cession There are several creditors Debtor is insolvent at the time of the assignment Ex tends to all the property of the debtor subject to execution Creditors only acqu ire the right to sell the thing and apply the proceeds to their credits proporti onately Subsection 3: Tender of Payment and Consignation Not an act of novation U sually only one creditor Does not presuppose the insolvency of the debtor Does n ot involve all the property of the debtor Creditor becomes the owner of the thin g given by debtor An act of novation Article 1256. If the creditor to whom tender of payment has been refused without just cause to accept it, the debtor shall be released from responsibility by th e consignation of the thing or sum due. Consignation alone shall produce the sam e effect in the following cases: 1. When the creditor is absent or unknown, or d oes not appear at the place of payment; 2. When he is incapacitated to receive t he payment at the time it is due; 3. When, without just cause, he refuses to giv e a receipt; NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

4. 5. When two or more persons claim the same right to collect; When the title of the obligation has been lost. (1176a) Tender of payment- the act, on the part of the debtor, of offering to the credit or the thing or amount due Consignation- the act of depositing the thing or amou nt due with the proper court Requisites of a valid consignation 1. Existence of a valid debt which is due 2. Tender of payment by the debtor and refusal withour justifiable reason by the creditor to accept it 3. Previous notice of consignat ion to persons interested in the fulfillment of the obligation 4. Consignation o f the thing or sum due 5. Subsequent notice of consignation made to the interest ed parties Requirement for valid tender of payment 1. Tender of payment must com ply with the rules on payment 2. It must be unconditional and for the whole amou nt 3. It must actually be made Article 1257. In order that the consignation of t he thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation. The consignation shall be ineff ectual if it is not made in consonance with the provisions which regulate paymen t. (1177) *in the absence of prior notice to persons interested in the fulfillme nt of the obligation, the consignation as payment is void Article 1258. Consigna tion shall be made by depositing the things due at the disposal of judicial auth ority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases. The consignation having bee n made, the interested parties shall also be notified thereof. (1178) * Consigna tion must be made with proper judicial authority. * Interested parties must also be notified after the consignation has been made Article 1259. The expenses of consignation, when properly made, shall be charged against the creditor. (1179) *creditor bears the expenses because it is through his fault and unjust refusal that consignation is made necessary When consignation deemed properly made When the creditor accepts the thing or su m deposited, without objection, as payment of the obligation; or When the credit or questions the validity of the consignation, and the court, after hearing, dec lares that it has been properly made; or When the creditor neither accepts nor q uestions the validity of the consignation, and the court after hearing, orders t he cancellation of the obligation Article 1260. Once the consignation has been m ade, the debtor may ask the judge to order the cancellation of the obligation. B efore the creditor has accepted the consignation, or before a judicial declarati on that the consignation has been properly made, the debtor may withdraw the thi ng or sum deposited, allowing the obligation to remain in force. (1180) Article 1261. If, the consignation having been made, thecreditor should authorize the de btor to withraw the same, he shall lose every preference which he may have over the thing. The co-debtors, guarantors and sureties shall be released. (1181a) * as far as the creditor and debtor are concerned, their relations will remain as they were before acceptance or cancellation CHAPTER 4; Sec2: Loss of the Thing Due Article 1262. An obligation which consist s in the delivery of a determinate thing shall be extinguished if it should be l ost or destroyed without the fault of the debtor, and before he has incurred in delay. When by law or stipulation, the obligor is liable even for fortuitous eve nts, the loss of the thing does not extinguish the obligation, and he shall be r esponsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk. (1182a) Thing is lost- when it perishes, or goe s out of commerce or disappears in such a way that its existence is unknown or i t cannot be recovered. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

When a loss of a thing will extinguish an obligation to give 1. The obligation i s to deliver a specific or determinate thing; 2. The loss of the thing occurs wi thout the fault of the debtor; and 3. The debtor is not guilty of delay. When lo ss of thing will not extinguish liability 1. When the law so provides 2. When th e stipulation so provides 3. When the nature of the obligation requires the assu mption of risk 4. When the obligation to deliver a specific thing arises from a crime Article 1263. In an obligation to deliver a generic thing, the loss or des truction of anything of the same kind does not extinguish the obligation. (n) * Based on the principle that a generic thing never perishes (genus nunquam perit) the debtor can still be compelled to deliver a thing of the same kind Article 1 264. The courts shall determine whether, under the circumstances, the partial lo ss of the object of the obligation is so important as to extinguish the obligati on. (n) * There is partial loss when only a portion of the thing is lost or dest royed. In such case, the courts is given discretion to determine whether it is s o important as to extinguish the obligation. Article 1265. Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was du e to his fault, unless there is proof to the contrary, and without prejudice to the provisions of article 1165. This presumption does not apply in case of earth quake, flood, storm or other natural calamity. (1183a) *The disputable presumpti on is that the debtor is liable because he has the custody and care of the thing and can easily explain the circumstances of the loss. *In case of natural calam ities the presumption of fault does not apply. Article 1266. The debtor in oblig ations to do shall also be released when the prestation becomes legally or physi cally impossible without the fault of the obligor. (1184a) *The impossibility of performance will result in the extinguishment of the obligation. It must take p lace after the constitution of the obligation, else the obligation is void and t here is no need to extinguish it. Physical Impossibility- when the personal qualifications Kinds of impossibility of the obligor are involved Legal impossibility- occurs when the obligation cann ot be performed because it is rendered impossible by provision of law. Article 1 267. When the service has become so difficult as to be manifestly beyond the con templation of the parties, the obligor may also be released therefrom, in whole or in part. (n) *When the obligation has become so difficult as to be manifestly beyond the contemplation of both parties, the court is authorized to release th e debtor in whole or in part Article 1268. When the debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not be exempted f rom the payment of its price, whatever may be the cause of the loss, unless the thing having been offered by him to the person who should receive it, the latter refused without justification to accept it. (1185) *This is another instance wh ere a fortuitous event does not exempt the debtor from liability. The obligation subsists except when the creditor refused to accept it without justification af ter it was offered to him Article 1269. The obligation having been extinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor may have against the third persons by reason of the loss. (1186) *Th e creditor has the right to proceed against the third person responsible for the loss. The debtors obligation is extinguished and is no longer liable. CHAPTER 4; Sec.3: Condonation or Remission of Debt Article 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

One and the other kind shall be subject to the rules which govern inofficious do nations. Express condonation shall, furthermore, comply with the forms of donati on. (1187) Condonation or Remission- the gratuitous abandonment by the creditor of his right against the debtor Requisites of Condonation or Remission 1. It mus t be gratuitous; 2. It must be accepted by the obligor; 3. The parties must have capacity; 4. It must not be inofficious; and 5. If made expressly, it must comp ly with the forms of donations Kinds of Remission As to its extent a. Completewhen it covers the entire obligation b. Partial- when it does not cover the enti re obligation As to its form a. Express- when it is made either verbally or in w riting b. Implied- when it can only be inferred from conduct As to its date of e ffectivity a. Inter vivos- when it will take effect during the lifetime of the d onor b. Mortis causa- when it will become effective upon the death of the donor. (must comply with the formalities of will) *Testamentary dispositions which imp air the legitime shall be reduced on petition of the heirs. Article 1271. The de livery of a private document evidencing a credit, mae voluntarily by the credito r to the debtor, implies the renunciation of the action which the former had aga inst the latter. If in order to nullify this waiver it should be claimed to be i nofficious, the debtor and his heirs may uphold it by proving that the delivery of the document was made in the virtue of payment of the debt. (1188) *if the cr editor delivers the document evidencing the credit, it is presumed (implied) tha t he has waived his rights against the debtor. This does not apply in case of a public document which is easy to obtain a copy of. *it is presumed that the debt or has paid (not remitted) Article 1272. Whenever the private document in which the debt appears is found in the possession of the debtor, it shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved. (1189 ) * If it is known that the debtor has not yet paid the creditor, then it is pre sumed that the obligation was delivered. Article 1273. The renunciation of the p rincipal debt shall extinguish the accessory obligations; but the waiver of the latter shall leave the former in force. (1190) * The accessory follows the princ ipal. The accessory obligations cannot exist without the principal obligation, b ut the latter may exist without the former. Article 1274. It is presumed that th e accessory obligation of the pledge has been remitted when the thing pledged, a fter its delivery to the creditor, is found in the possession of the debtor, or of a third person who owns the thing. (1191a) *Only the accessory obligation of pledge if remitted and not the obligation itself. CHAPTER 4; Sec.4: Confusion or Merger of Rights Article 1275. The obligation is extinguished from the time the characters of creditor and debtor are merged in t he same person. (1192a) Confusion or Merger- the meeting in one person o the qua lities of creditor and debtor with respect to the same obligation Reason or basi If a debtor is his own creditor, the enforcement of the obligati s for confusion on becomes absurd since a person cannot claim payment from himself When there is confusion of rights, the purposes for which the obligation may have been create d are deemed realized Requisites for Confusion 1. It must take place between the principal debt and creditor; and 2. It must be complete NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Article 1276. Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. Confusion which takes place in the person of a ny of the latter does not extinguish the obligation. (1193) *Merger in the perso n of the principal debtor or creditor extinguishes the obligation as well as acc essory obligations. * Merger which takes place in the person of the guarantor ex tinguishes the guaranty but not the principal obligation Article 1277. Confusion does not extinguish a joint obligation except as regards the share correspondin g to the creditor or debtor in whom the two characters concur. (1194) *in joint obligations, debts and credits are considered distinct and separate. Thus, the c onfusion will extinguish only the share corresponding to the creditor or debtor in whom the two characters concur *in solidary obligations, merger in the person of any of the solidary debtors will extinguish the entire obligation. However, he may claim reimbursement from his co-debtors for the share which corresponds t o them. CHAPTER 4; Sec.5: Compensation Article 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. (1195) Compensation- the extinguishment to the concurrent amount of the debts of two p ersons who, in their own right, are debtors and creditors of each other. Compens ation VS. Confusion Two persons are involved, each of whom is a creditor and debtor of each other. wo obligations Indirect payment Only one person who is both a creditor and debtor of himself. ossibility of payment One obligation T Imp

Kinds of Compensation According to its effect or extent: a. Total- When both obl igations are of equal amount and are entirely extinguished. b. Partial- When the two obligations are of different amounts and a balance remains. The extinctive effect of compensation will be partial only as regards the larger debt. Accordin g to its cause or origin: a. Legal- When it takes place by operation of law even without the knowledge of the parties. b. Voluntary- When it takes place by agre ement of the parties. c. Judicial- When it takes place by order from a court in a litigation. Facultative- When it can be set up only by one of the parties. Art icle 1279. In order that compensation be proper, it is necessary that: 1. That e ach one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; 2. That both debts consist in a sum of money, o r if the things due are consumable, they be of the same kind, and also of the sa me quality if the latter has been stated; 3. That the two debts be due; 4. That they be liquidated and demandable; 5. That over neither of them be any retention or controversy, commenced by third persons and communicated in due time to the debtor. (1196) Requisites of Legal Compensation 1. The parties are principally c reditors and principal debtors of each other. 2. Both debts consists in a sum of money, or of consumable things of the same kind. 3. The two debts are due or de mandable. 4. The two debts are liquidated. 5. No retention or controversy commen ced by a third person. Article 1280. Notwithstanding the provisions of the prece ding article, the guarantor may set up compensation as regards to what the credi tor may owe the principal debtor. (1197) *Guarantor is given the right to set up compensation because the extinguishment of principal obligation through compens ation carries with it the accessory obligations. Article 1281. Compensation may be total or partial. When two debts are of the same amount, there is a total com pensation. (n) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Total Compensation results when the two debts are equal or the same amount. Part ial Compensation when the two obligations are of the different amounts and a bal ance remains. The extinctive effect of the compensation will be partial only as regards the larger debt. Article 1282. The parties may agree upon the compensati on of debts which are not yet due. (n) Voluntary or Conventional Compensation- i ncludes any compensation which takes place by agreement of the parties even if a ll the requisites for egal compensation are not present. Article 1283. If one of the parties to a suit over an obligation has a claim for damages against the ot her, the former may set it off by proving his right to said damages and the amou nt thereof. (n) * Compensation may also take place when so declared by final jud gment of a court in a suit Article 1284. When one or both the debts are rescissi ble or voidable, they may be compensated against each other before they are judi cially rescinded or avoided. (n) * Prior to rescission or annulment, the debts m ay be compensated aginst each other. Article 1285. The debtor who has consented to the assignment of rights made by a creditor in favor of a third person, canno t set up against the assignee the compensation which would pertain to him agains t the assignor, unless the assignor was notified by the debtor at the time he ga ve his consent, that he reserved his right to the compensation. If the creditor communicated the cession to him but the debtor did not consent thereto, the latt er may set up the compensation of debts previous to the cession, but not of subs equent ones. If the assignment is made without the knowledge of the debtor, he m ay set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment. (1198a) Where compensation has taken p lace before assignment When compensation takes effect by operation of law or aut omatically, the debts are extinguished to the concurrent amount. If the extingui shed debt is assigned to a third person, the debtor can raise the defense of com pensation and the remedy of the assignee is against the assignor. Where compensa tion has taken place after assignment 1. Assignment with the consent of debtorThe debtor cannot set up consignment but has the right to collect from the origi nal creditor, unless he has reserved hi right to compensation. 2. Assignment wit h the knowledge but without the consent of the debtor- There is partial compensa tion depending upon the maturity of the debts. 3. Assignment without the knowled ge of the debtor- the crucial time is when the debtor acquired the knowledge of assignment. If he learned after the debts have matured, he can raise the defense of compensation, otherwise, he cannot. Article 1286. Compensation takes place b y operation of law, even though the debts may be payable at different places, bu t there shall be an indemnity for expenses of exchange or transportation to the place of payment. (1199a) *the indemnity shall be paid by the person who raises the defense of compensation Foreign Exchange- the conversion of an amount of mon ey or currency of one country into an equivalent amount of money or currency of another. Exchange Rate- the price of one currency expressed or quoted in relatio n to another currency. Article 1287. Compensation shall not be proper when one o f the debts arises from a depositum or from the obligations of a depositary or o f a bailee in commodatum. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title, without prejudice to the pr ovisions of paragraph 2 of Article 301. (1200a) Article 1288. Neither shall ther e be compensation if one of the debts consists in civil liability arising from a penal offense. (n) Instances when legal compensation is not allowed by law 1. W here one of the debts arises from a depositum- a depositum is constituted from t he moment a person receive a thing belonging to another with the obligation of s afely keeping it and of returning the same. However, a bank has the right to set -offs deposits in its hands for the payment of any indebtedness to it on the par t of the depositor. 2. Where one of the debts arises from a commadatum- a commod atum is a gratuitous contract whereby on of the parties delivers to another some thing not consumable so that the latter may use the same for a certain time and return it. 3. Where one of the debts arises from a claim of support due by gratu itous title NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

4. Where one of the debts consists in civil liability arising from a penal offen se- compensation would be improper because the satisfaction of such obligation i s imperative. Article 1289. If a person should have against him several debts wh ich are susceptible of compensation, the rules on the application of payments sh all apply to the order of the compensation. (1201) Rules on application of payme nts apply to order of compensation The rules on application of payments apply wh ere there are several debts capable of being compensated. Debtor must inform the creditor on which object shall be the object of compensation. If the debtor fai ls to inform the creditor, the compensation would be applied to the most onerous obligation. Article 1290. When all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law, and extinguishes both d ebts to the concurrent amount, even though the creditors and debtors are not awa re of the compensation. (1202a) * Legal compensation is automatic. It is not req uired that the parties have full legal capacity to give or to receive, as the ca se may be. CHAPTER 4; Sec.6: Novation Article 1291. Obligations may be modified by: 1. Chan ging their object or principal conditions; 2. Substituting the person of the deb tor; 3. Subrogating a third person in the rights of the creditor. (1203) Novatio n- extinction of an obligation through the creation of a new one which substitut es it. Kinds of Novation According to origin: a. Legal-that which takes place by operation of law; or b. Conventional-that which takes place by agreement of the parties. According to how it is constituted: a. Express-when I is so declared i n unequivocal terms; or b. Implied- when the old and the new obligations are ess entially incompatible with ach other. According to extent or effect: a. Total or extinctive-when the old obligation is completely extinguished; or b. Partial or modificatory- when the old obligation is merely modified. According to the subj ect: a. Real or objective- when the object (or cause) or principal conditions of the obligation are changed; b. Personal or subjective-when the person of the de btor is substituted and/or when a third person is subrogated in the rights of th e creditor; or c. Mixed- when the object and/or principal conditions of the obli gations and the debtor or the creditor, or both the parties, are changed. It is a combination of real and personal novations. Article 1292. In order that an obl igation may be extinguished by another which substitutes the same, it is imperat ive that it be so declared in unequivocal terms, or that the old and the new obl igations be on every point incompatible with each other. (1204) Requisites of No vation 1. A previous valid obligation; 2. Capacity and Intention of the parties to modify or extinguish the obligation; and 3. The modification or extinguishmen t of the obligation; and 4. The creation of a new valid obligation. *Novation is no presumed, it must be clearly and unmistakably established either by the expr ess agreement of the parties or acts equivalent import or by incompatibility of the two obligations with each other in every material respect Article 1293. Nova tion which consists in substituting a new debtor in the place of the original on e, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him th e rights mentioned in articles 1236 and 1237. (1205a) Kinds of Personal Novation 1. Substitution- When the person of the debtor is substituted.; 2. SubrogationWhen a third person is subrogated in the rights of the creditor. Kinds of Subst itution NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

1. Expromision- That which takes place when a third person of his own initiative and without the knowledge or against the will of the original debtor assumes th e latters obligation with the consent of the creditor. It is essential that the o ld debtor be released from his obligation. 2. Delegacion- That which takes place when the creditor accepts a third person to take place of the debtor at the ins tance of the latter. The creditor may withhold approval. *In Delegacion, all the parties must agree. Right of new debtor who pays In expromision, the new debtor has a right to beneficial reimbursement In delegacion, the new debtor is entitl ed to reimbursement and subrogation Article 1294. If the substitution is without the knowledge or against the will of the debtor, the new debtors insolvency or n on-fulfillment of the obligation shall not give rise to any liability on the par t of the original debtor. (n) * in expromision, the new debtors insolvency or non -fulfillment will not revive the action of the creditor against the old debtor w hose obligation is already extinguished. Article 1295. The insolvency of the new debtor, who has been proposed by the original debtor and accepted by the credit or, shall not revive the action of the latter against the original obligor, exce pt when said insolvency was already existing and of public knowledge, or known t o the debtor, when he delegated his debt. (1206a) Effect of new debtors insolvenc y or non-fulfillment of the obligation in delagacion *old debtor is not liable i n non-fulfillment of the new debtor. As a general rule, old debtor is not liable for insolvency of new debtor EXCEPT: 1. The said insolvency was already existin g and of public knowledge at the time of delegacion 2. The insolvency was alread uye existing and known to the debtor at the time of delegacion. Article 1296. Wh en the principal obligation is extinguished in consequence of a novation, access ory obligations may subsist only insofar as they may benefit third persons who d id not give their consent. (1207) * the extinguishment of the principal obligati on carries with it the extinguishment of the accessory unless it was created in favor of a third person. The accessory will be extinguished if the third person gives his consent Article 1297. If the new obligation is void, the original one shall subsist, unless the parties intended that the former relation should be ex tinguished in any event. (n) *the general rule is that there is no novation if t he new obligation is void and original obligation shall subsist. Unless the part ies intended the original obligation to be extinguished in any event *if the new obligation is voidable, novation an take place. But once it is annulled, novati on is considered to not have taken place and original obligation is enforced, un less the parties intended otherwise. Article 1298. The novation is void if the o riginal obligation was void, except when annulment may be claimed only by the de btor, or when ratification validates acts which are voidable. (1208a) *if the ol d obligation is void, it cannot be novated. If it is voidable, it can be novated until it is annulled by courts. Article 1299. If the original obligation was su bject to a suspensive or resolutory condition, the new obligation shall be under the same condition, unless it is otherwise stipulated. (n) *if the first obliga tion is subject to condition, the new obligation is deemed subject to the same c onditions. Article 1300. Subrogation of a third person in the rights of the cred itor is either legal or conventional. The former is not presumed, except in case s expressly mentioned in this Code; the latter must be clearly established in or der that it may take effect. (1209a) Kinds of Subrogation 1. Conventional- When it takes place by express agreement of the original parties (the debtor and the original creditor) and the third person (the new creditor); or 2. Legal- When it takes place without agreement but by operation of law. Article 1301. Convention al subrogation of a third person requires the consent of the original parties an d of the third person. (n) Consent of all parties required in conventional subro gation *In conventional subrogation, the consent of all the parties is an essent ial requirement. The debtor- because he becomes liable under the new obligation to a new creditor. The old creditor- because his right against the debtor is ext inguished. The new creditor- because he may dislike or distrust the debtor. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Article 1302. It is presumed that there is legal subrogation: 1. When a creditor pays another creditor who is preferred, even without the debtors knowledge; 2. W hen a third person, not interested in the obligation, pays with the express or t acit approval of the debtor; 3. When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latters share. (1210a) Cases of Legal Subr ogation 1. When the creditor pays another creditor who is preferred. 2. When a t hird person without interest in the obligation pays with the approval of the deb tor. 3. When a third person with interest in the obligation pays even without th e knowledge of the debtor. Article 1303. Subrogation transfers to the person sub rogated the credit with all the rights thereto appertaining, either against the debtor or against third persons, be they guarantors or possessors of mortgages, subject to stipulation in a conventional subrogation. (1212a) *the effect of leg al subrogation is to transfer to the new creditor the crdit and all the rights a nd actions that could have been exercised by the former creditor either against the debtor or against third persons. Article 1304. A creditor, to whom partial p ayment has been made, may exercise his right for the remainder, and he shall be preferred to the person who has been subrogated in his place in virtue of the pa rtial payment of the same credit. (1213) *the creditor to whom partial payment h as been made by the new creditor remains a creditor to the extent of the balance of the debt. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

CONTRACTS CHAPTER 1: General Provisions Article 1305. A contract is a meeting of minds bet ween two persons whereby one binds himself with respect to the other, to give so mething or to render some service. (1254a) Meaning of Contract meeting of 2 mind s, which takes place when an offer by one party is accepted by the other. must b e at least 2 persons or parties Contract VS. Obligation one of the sources of an obligation nforceable through legal proceedings Contract VS. Agreement the legal tie that exists after the contract has been entered into there can be an obligation without a contract moral or social agreements cannot be enforced i n the courts of justice not all agreements are contracts Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. (1255a) *an indivi dual does not have an absolute right to enter into any kind of contract. *but si nce to enter a contract is a right, courts move with the necessary caution in vo iding contracts. Limitations on Contractual Stipulations law must be in accordan ce with the law police power (power of state to enact laws to promote public wel fare) when law is silent, the will of contracting parties will prevail unless th ey are contrary to morals, good customs, public order or policy. When this happe ns, contractual obligations are subject to the possible exercise of police power of the state. Contracts must not be contrary to law o rule of conduct, just, obligatory, promu lgated by legitimate authority and of common observance and benefit o law is sup erior to a contract o anything against law is void except when law itself author izes it morals o deal with norms of goot and right conduct customs o habits and practices which through long usage have been followed and enforced by society or some part of it as binding rules of conduct public order o public safety and pu blic weal public policy o considerations which are moved by the common good Arti cle 1307. Innominate contracts shall be regulated by the stipulations of the par ties, by the provisions of Titles I and II of this Book, by the rules governing the most analogous nominate contracts and by the customs of the place. (n) Class ification of contracts according to its name or designation 1. nominate contract has a specific name or designation in law 2. innominate has no specific name or designation in law do ut des (I give that you may give) no longer an innominate contract because it is known as barter or exchange do ut facias (I give that yo u may do) facio ut des (I do that you may give) facio ut facias (I do that you m ay do) *since not all contracts can be anticipated, innominate are valid as long as they have the elements of a valid contract Rules Governing Innominate Contracts NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!! there is no contract without an obligation all contracts are agreements e

1. agreement of parties 2. provisions of Civil Code on obligations and contracts 3. rules governing similar contracts 4. customs of the place Article 1308. The contract must bind both contracting parties, its validity or compliance cannot b e left to the will of one of them. (1256a) *must be enforceable to both parties or else there is no force of law between them *one party cannot violate the law of the contract without consent of the other Article 1309. The determination of the performance may be left to a third person, whose decision shall not be bindi ng until it has been made known to both contracting parties. (n) *since determin ation of performance cannot be left to one of the contracting parties alone, it can be left to a third person. Article 1310. The determination shall not be obli gatory if it is evidently inequitable. In such case, the courts shall decide wha t is equitable under the circumstances. (n) *when 3rd persons decision is unjust due to bad faith or mistake, it will not be binding. Courts will decide what is equitable under the circumstances. Article 1311. Contracts take effect only betw een the parties, their assigns and heirs, except in case where the rights and ob ligations 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. If a contract should contain some st ipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere inciden tal benefit or interest of a person is not sufficient. The contracting parties m ust have clearly and deliberately conferred a favor upon a third person. (1257a) Persons Affected by a Contract 1. General rule only the parties, assigns and he irs have the rights and obligation under the contract. Heir is not liable beyond the value of the property he received. 2. exceptions cases where contract are e ffective only between the parties and rights and obligation are not transferable by stipulation (freedom to : by their nature (involving personal qualifications) contract) provision of law (as in agency, partnership, commodatum where death e xtinguished legal relationships) *Third person who has not taken part in a contr act is a stranger to the contract and has no rights to demand enforcement or que stion validity. However, they can be affect by a contract in the following: 1. s tipulation in favor of a third person (stipulation pour autrui) stipulations in a contract which clearly confers a favor upon a 3rd person to demand fulfillment as long as he communicates his acceptance to the obligor before its revocation a. Stipulation intended for the sole benefit of such person rules of donations m ust govern as it confers a gift. 3rd party called donee benficiary b. Obligation is due from the promisee to the 3rd person, which the promisee seeks to dischar ge by means of stipulation. 3rd person is creditor beneficiary. 2. contracts cre ating real rights 3. contracts entered to defraud creditors 4. contracts which h ave been violated at the inducement of a third person Requisites of Stipulation Pour Autrui 1. contracting parties by their stipulation must have clearly and de liberately conferred a favor upon a 3 rd person 2. 3rd person must have communic ated his acceptance to the obligor before its revocation by the obligee or the o riginal parties 3. stipulation is favor of 3rd person should be a part, not the whole of the contract 4. the favorable stipulation should not be conditioned or compensated by any kind of obligation 5. neither of the contracting parties bear s the legal representation or authorization of the 3rd party for otherwise, rule s of agency will apply Article 1312. In contracts creating real rights, third pe rsons 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 ) *exception to the rule that a contract binds only the parties * 3rd persons wh o come into possession of the object of a contract which there is a real right, are bound thereby even if they are not parties to the contract Article 1313. Creditors are protected in cases of contracts intended to defraud them. (n) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

*the creditor is given the right to impugn the contracts of his debtor to defrau d him Article 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. (n) *a stranger can be sued for damages when he interferes with a valid contract Article 1315. Cont racts 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 al l the consequences which, according to their nature, may be keeping with good fa ith, usage and law. (1258) Article 1316. Real contracts such as deposit, pledge and commodatum are not perfected until the delivery of the object of the obligat ion. (n) *contracts are created by mere consent and from that time on, they are bound to fulfill what was stipulated and the consequences of it that may be keep ing with good faith, usage and law. Classification of Contracts according to per fection 1. consensual contract perfected by mere consent 2. real contract perfec ted by the delivery of thing subject matter of the contract 3. solemn contractrequires compliance with certain formalities prescribed by law (donation of real property which must be in a public instrument) Stages in a Life of a Contract 1 . preparation or negotiation includes all the steps taken by the parties leading to the perfection of the contract 2. perfection or birth parties have come to a definite agreement or meeting of the minds regarding the subject matter and cau se of the contract 3. consummation or termination parties have performed their r espective obligations resulting in termination How Contracts are Perfected 1. co nsensual contract contracts are perfected by mere consent of the parties regardi ng subject matter and cause of the contract. When there is no delivery, no trans fer of title or create real rights but there is already an obligation between th e parties. 2. real contracts perfected not merely by consent but by actual or co nstructive delivery of the object of the obligation 3. Solemn contracts- contrac ts required to be in some form for their validity when law requires that contrac t be in some form for it to be valid, this special form is necessary for its per to the fulfillment of what was fection Perfection of the contract binds parties stipulated to all the consequences which may be keeping with good faith, usage a nd law Article 1317. No one may contract in the name of another without being au thorized by the latter or unless he has by law a right to represent him. A contr act entered into in the name of another by one who has no authority or legal rep resentation, 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 bee n executed, before it is revoked by the other contracting party. (1259a) *a cont ract entered into in the name of another without his consent or knowledge is une nforceable unless expressly ratified by him Requisites for a person to be bound by a contract by another person entering into the contract must be duly authoriz ed by the person in whose name he contracts person must act within his power CHA PTER 2: Essential Requisites of Contracts Article 1318. There is no contract unl ess the following requisites concur: 1) 2) 3) Consent of the contracting parties Object certain which is the subject matter of the contract Cause of the obligat ion which is established. (1261) Classes of Elements of a Contract 1. essential elements - those without which co ntract cannot validly exist a. common those present in all contracts (object, co nsent, cause) b. special not common to all contracts form public instrument in d onation of immovable property, delivery in real contracts subject matter real pr operty in antichresis, personal property in pledge consideration or cause price in sale, liberality in commodatum 2. natural elements those presumed to exist in certain contracts unless contrary is stipulated (ex. warranty in a sale) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

3. accidental elements particular stipulations, clauses, terms and conditions es tablished by the parties in their contract, exist only when stipulated by the pa rties (ex. conditions, period, interest) CHAPTER 2; Sec.1: Consent Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the t hing and the cause which are to constitute the contract. The offer must be certa in and the acceptance absolute. A qualified acceptance constitutes a counter off er. 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) Definition s Consent conformity or concurrence of wills (offer and acceptance) agreement of the will of one contracting party with that of another Offer proposal made by o ne party to another to enter into a contract promise to act or to refrain from a cting on condition that the terms are accepted by other person offer must be cer tain or definite (will you buy ths watch for 500? certain; I am willing to buy y our car. uncertain, no price) Acceptance manifestation by the offeree of his app roval to the terms of the offer. No acceptance, no meeting of minds acceptance m ust be absolute and unqualified. Meaning it must be accepted on all its terms, i f not, it is a counter offer and is considered a rejection of the original offer Article 1320. An acceptance may be express or implied. (n) Express oral or writ ten Implied based from act or conduct; when he accepts services of another wheth er solicited or not Article 1321. The person making the offer may fix the time, place and the manner of acceptance, all of which must be complied with. (n) *All terms must be complied with. If not, it is a counter offer which has the effect of extinguishing the original offer. It means making a new offer which the orig inal offerer may accept or reject. Article 1322. An offer made through an agent is accepted from the time acceptance is communicated to him. (n) Agent- consider ed an extension of the personality of his principal. If he is duly authorized, h is acts are the acts of the principal *if offer made through the agent, acceptan ce will be valid if communicated through him (agent). If principal made offer an d acceptance communicated to agent, not valid unless agent has authority to rece ive the acceptance. Article 1323. An offer becomes ineffective upon the death, c ivil interdiction, insanity or insolvency of either party before acceptance is c onveyed. (n) *offer can be withdrawn when not yet accepted. After acceptance, co ntract is perfected. When Offer becomes Ineffective death civil interdiction (pr ohibition) insanity insolvency of either party before conveyance of acceptance. failure to comply with terms time, place, manner of payment expiration of period fixed in the offer destruction of the thing due before acceptance rejection of the offer Article 1324. When the offerer has allowed the offeree a certain period to accep t, the offer may be withdrawn at any time before acceptance by communicating suc h withdrawal, except when the option is founded upon consideration, as something paid or promised. (n) Definitions NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

option contract one giving a person for a consideration a certain period within which to accept the offer of the offerer. Option - refers to the privilege given to the offeree to accept an offer within a certain period option period period given within which the offeree must accept the period option money money paid or promised to be paid in consideration for the option; not to be confused with ea rnest money which is like downpayment *when offerer gives offeree a period to accept offer, offerer can withdraw anyti me unless offeree paid or promised to pay offerer for giving offeree the period. *when promise to buy or sell a determinate thing, even if offeree accepted offe r of offerer, offerer can withdraw offer if offeree did not give option money Ar ticle 1325. Unless it appears otherwise, business advertisements of things for s ale are not definite offers, but mere invitations to make an offer. (n) *unless it contains all specifics, not an offer. Article 1326. Advertisements for bidder s are simply invitations to make proposals, and the advertiser is not bound to a ccept the highest or lowest bidder, unless the contrary appears. *bidder is the one making offer which the advertiser may accept or reject *in judicial sales, s heriff or auctioneer is bound to accept the highest bid Article 1327. The follow ing cannot give consent to a contract: 1) Unemancipated minors 2) Insane or deme nted persons and deaf mutes who do not know how to write. (1263a) *burden of pro of is on the party who claims incapacity *contract entered where one is incapaci tated is voidable and susceptible to ratification *reason for this is they can e asily be the victims of fraud Persons who cannot give consent 1. unemancipated m inors not yet reached the age of majority (18 years) and subject to parental aut hority; can be emancipated by coming of age, marriage, or allowed by parents 2. insane or demented insanity must exist at time of contracting 3. deaf-mutes anyo ne who does not know how to write, does not know how to read; one who knows how to read necessarily knows how to write therefore deaf mute who knows how to read is valid Article 1328. Contracts entered during a lucid interval are valid. Con tracts agreed to in a state of drunkenness or during a hypnotic spell are voidab le. (n) *contracts entered by a insane person in a temporary period of sanity is valid *drunkenness and hypnotic spell impair the capacity of a person to give i ntelligent consent so these are voidable. Article 1329. The incapacity declared in article 1327 is subject to the modifications determined by law and is underst ood to be without prejudice to special disqualifications established in the laws . (1264) Incapacitated people may give their consent when necessities such as fo od are sold to a minor, he must pay a reasonable price a minor can contract for insurance provided insurance is taken on his life and beneficiaries are of his e state (family) entered through a guardian or legal representative minor misrepre sented himself minor between 18-21 years old voluntarily pays or delivers someth ing in fulfillment of obligation and the obligee consumed it in good faith. Othe r Special disqualifications may be provided by law *Under Rules of Court, follow ing are incompetent and must be placed under guardianship: persons suffering the accessory penalty of civil interdiction hospitalized lepers prodigals (spendthr ifts) deaf and dumb who are unable to read and write those who are of unsound mi nd even though they have lucid intervals by reason of age, disease, weak minds c annot take care of themselves Article 1330. A contract where consent is given th rough mistake, violence, intimidation, undue influence or fraud is voidable. (12 65a) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Characteristics of Consent 1. it is intelligent there is capacity to act 2. free and voluntary no violence or intimidation 3. conscious or spontaneous no mistak es, undue influence or fraud Vices of Consent 1. error or mistake 2. violence or force 3. intimidation or threat or pressure 4. undue influence 5. fraud or dece it Causes Vitiating Consent VS. Causes of Incapacity Temporary Refers to the contract itself Refers to a person entering into the contract

More or less permanent

Article 1331. In order that mistake may invalidate consent, it should refer to t he substance of the thing which is the object of the contract or to those condit ions which have principally moved one or both parties to enter into the contract . Mistake as to the identity or qualifications of one of the parties will vitiat e consent only when such identity or qualifications have been the principal caus e of the contract. A simple mistake of account shall give rise to its correction . (1266a) Mistake false notion of a thing or a fact material to the contract may be of fact or of law. In this article, refers to mistake of fact. It arises fro m ignorance or lack of knowledge mistake of law is substantial mistake of fact. Party would not have given consent if he had known of the mistake. Not all mista ke will make a contract voidable. Mistake of fact to which law refers *In order for mistake to vitiate consent, must refer to: substance of the thing which is o bject of contract those conditions which have principally moved one or both to e nter into contract identity or qualifications of one of the parties which was th e principal cause of the contract Mistake of Fact which does not vitiate consent 1. error as to incidents of a thing or accidental qualities (accessibility, max imum speed of car) that were not the principal reasons for the contract unless c aused by fraud 2. mistake as to quantity or amount, only gives rise to correctio n, not voiding, unless it is the essence of the contract 3. error as to motives of the contract unless it was the essence of the contract 4. mistake as to ident ity or qualifications because mostly contracts are entered based on things or se rvices, not people unless identity is principal cause of contract like in person al qualifications *mistake in account or calculation does not make contract void because it can be corrected Article 1332. When one of the parties is unable to read or if the contract is in a language bit understood by him and mistake or fr aud is alleged, the person enforcing the contract must show that the terms there of have been fully explained to the former. (n) *burden of proof is on the perso n who signs a contract because it is presumed that he signed with full knowledge of the contents of the contract *exception is when the parties are unable to re ad or in a foreign language. Burden of proof is on the person enforcing the cont ract that he explained the contents to the signee and that there is no fraud or mistake intended. Article 1333. There is no mistake if the party alleging it kne w the doubt, contingency or risk affecting the object of the contract. (n) *if a party knew beforehand of the risk affecting the object of the contract, he cann ot claim mistake since it is understood he was willing to take the chances. Arti cle 1334. Mutual error as to the legal effect of an agreement when the real purp ose of the parties is frustrated, may vitiate consent. (n) Mistake of law arises from an ignorance of some provision of law, from a wrong interpretation of its meaning, or from a wrong conclusion as to the legal effect of an agreement *mist ake of law does not normally vitiate consent unless the mistake is due to a mist ake on a doubtful question of law or the construction and application of law NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Requisites for the Application of Article 1334 1. error must be mutual 2. must b e as to legal effect of an agreement 3. must frustrate the real purpose of the p arties Article 1335. There is violence when in order to wrest consent, serious o r irresistible force is employed. There is intimidation when one of the contract ing parties is compelled by a reasonable and well-grounded fear of an imminent a nd grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants to give his consent. To determine the degree of the intimidation, the age, sex and condition of the person shall be borne in mind. A threat to enforce ones claim through competent authority, if the claim is just or legal does not vitiate consent. (1267a) Violence or force employment of physical (serious or irresistible) force to vitiate consent Nature of Intimidati on or threat 1. produces a reasonable and well-grounded fear of an evil 2. evil must be imminent and grave 3. evil must be upon person or property or family (sp ouse, descendants, ascendants) 4. evil is the reason why he entered into the con tract *whether or not evil or threat is reasonable depends on the age, sex, and condition of the person *if contract signed out of reverential fear, contract va lid unless undue influence has been exercised *if threat of a court action, cont ract is valid Article 1336. Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in t he contract. (1268) *violence of a third person who did not take part in the con tract vitiates consent Article 1337. There is undue influence when a person take s improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be conside red: the confidential, family, spiritual and other relations between the parties or the fault that the person alleged to have been unduly influenced was sufferi ng from mental weakness or was ignorant or in financial distress. (n) undue infl uence- must be of a kind that it overpowers the mind of a party as to destroy hi s free will and make him express the will of another, rather than his own. Circu mstances to be considered 1. confidential, family, spiritual and other relations between the party 2. mental weakness 3. ignorance 4. financial distress of the person alleged to have been unduly influenced Article 1338. There is fraud when, through insidious (sinister) words, or machinations of one of the contracting p arties, the other is induced to enter into a contract which, without them, he wo uld not have agreed to. (1269) Causal Fraud -fraud used by a party to induce the other to enter into a contract without which the latter would not have agreed t o; committed through insidious (sinister) words or set-ups or by concealment Req uisites of Casual Fraud 1. there must be misrepresentation or concealment 2. mus t be serious 3. must have been employed by only one of the contracting parties ( fraud by 3rd person does not vitiate consent unless other party is involved) 4. must be made in bad faith or with intent to deceive other party 5. must have ind uced the consent of the other contracting party 6. must be alleged and proved by clear and convincing evidence Article 1339. Failure to disclose facts, when the re is a duty to reveal them, as when the parties are bound by confidential relat ions, constitutes fraud. (n) Concealment neglect or failure of one party to comm unicate what the other ought to know *if intentional, fraud and injured party ca n annul or rescind *if unintentional, basis for annulment is mistake or error NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

*if intentional but fact is not important to the contract, the contract is valid Article 1340. The usual exaggerations in trade, when the other party had an opp ortunity to know the facts, are not in themselves fraudulent. (n) *law allows co nsiderable exaggerations, customers are expected to rely on their own judgment d ealers talk or traders talk - representations which do not appear on the face of t he contract and do not bind either parties Article 1341. A mere expression of an opinion does not signify fraud, unless made by an expert and the other party ha s relied on the formers special knowledge. (n) Requisites so that an opinion may amount to fraud: 1. must be made by an expert 2. other party relied on the exper ts opinion 3. opinion turned out to be false Article 1342. Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has create d substantial mistake and the same is mutual. (n) *if misrepresentation has crea ted a big mistake to both parties, contract may be annulled but on the grounds o f mistake *if 3rd party is in connivance with other party, fraud *if force or in timidation was used, contract is voidable because vitiated consent Article 1343. Misrepresentation made in good faith is not fraudulent but may constitute error . (n) *misrepresentation is unintentional but made in good faith, it is consider ed mere mistake or error. Article 1344. In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contrac ting parties. Incidental fraud only obliges the person employing it to pay for d amages. (1270) Kinds of Fraud in the making of contract causal fraud ground for annulment of contract although may also give rise to damages incidental fraud on ly renders the party who employed it liable for damages because fraud was not th e principal inducement to enter contract Casual fraud must be serious and unilat eral *the ff. are requisites for casual fraud to vitiate consent: 1. it should b e serious 2. should not have been employed by both parties 3. should not have be en known by other party Article 1345. Simulations of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound a t all; the latter, when the parties conceal their true agreement. (n) Article 13 46. An absolutely simulated or fictitious contract is void. A relative simulatio n, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. (n) Simulation of a contract the act of deliber ately deceiving others by pretending the existence of a contract o absolute simu lation when the contract does not really exist and the parties do not intend to be bound by it; contract is inexistent and void o relative simulation when contr act entered is different from true agreement CHAPTER 2; Sec.2: Object of Contracts Article 1347. All things which are not out side the commerce of men, including future things, may be the object of a contra ct. 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 expres sly 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. (1271a) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Article 1348. Impossible things or services cannot be the object of contracts. ( 1272) Definitions Object of contract subject matter o may be things in sale o ri ghts assignment of credit o services in agency *Since every contract cannot exis t without an obligation, object of the obligation is object of the contract futu re inheritance any property or right not yet in existence and cannot be determin ed at the time contract was made that a person may inherit in the future. *excep t when authorized by law, contract concerning future inheritance is void Requisi tes of Things as object of contract 1. thing must be within the commerce of men (it can legally be the subject of commercial transaction) 2. must not be impossi ble, legally or physically 3. must be in existence or capable of coming into exi stence 4. must be determinate or determinable without need of new contract from parties Requisites of Services as object of contract 1. service must be within c ommerce of men 2. must not be impossible, legally or physically 3. must be deter minable and capable of determination Rights as object of contract *as a general rule, all rights can be object of contract except intransmissible ones 1. outsid e the commerce of men those of public ownership or common to everybody 2. imposs ible, physically or legally prohibited drugs, get soil from Jupiter 3. determina ble things all eggs in this basket, watch I am wearing 4. future things or right s things to be manufactured after perfection of contract, young animals not yet in existence, royalty to be received by author 5. intransmissible rights right t o vote, public office Validity of contracts upon future inheritance in case of d onations by reason of marriage between spouses of their future property that wil l only take effect upon death of one, to the extent that is allowed by testament ary succession in case of division of property by a person to take effect upon h is death Kinds of Impossibility 1. physical in the very nature cannot exist or b e performed. As to performance, can be a. absolute when act cannot be done by an ybody in any case (fly like a bird) b. relative when arises from special circums tances of the case (drive a car in flooded highway or paint by a blind person) 2 . legal when thing or service contrary to law, morals, good customs, public orde r or public policy Article 1349. The object of every contract must be determinat e as to its kind. The fact that the quantity is not determinable shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. (1273) *objec t matter must be determinate or capable of being determined without need to make a new contract. Quantity must also be the same. *when obligation consists in de livery of generic thing, purpose of obligation must be taken into consideration. CHAPTER 2; Sec.3: Cause of Contracts Article 1350. In onerous contracts, the cau se is understood to be, for each contracting party, the prestation or promise of a thing or service by the other, in remuneratory ones, the service or benefit w hich is remunerated; and in contracts of pure beneficence, the mere liberality o f the benefactor. (1274) Cause (causa) or consideration the essential or more im mediate purpose which the parties have in view at the time of entering the contr act Cause VS. Object NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Ex. I sold a watch to Maria for 2000. For me, cause is the price, subject matter is the watch. For Maria, cause is the watch and subject matter is the price. OR Cause for me is delivery of price, for Maria, delivery of watch but watch is su bject matter of both. Classification of contracts according to cause 1. onerous where the cause for each contracting party is the prestation or promise of thing /service. Parties are reciprocally obligated to each other. 2. remuneratory or r emunerative cause is the service or benefit which is compensated. Purpose is to reward the service that had been rendered by the party compensated. 3. gratuitou s cause is the mere kindness of the benefactor or giver Article 1351. The partic ular motives of the parties in entering into a contract are different from the c ause thereof. (n) Motive purely personal or private reason of a party in enterin g a contract Cause VS. Motive

Immediate or direct reason Always known to other party Essential element of a co ntract Illegality of cause makes contract void

Remote or indirect reason May be unknown Not essential element Illegality of ones motives does not make contract void 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. (1275a) Article 1353. The statement of a false c ause in contracts shall render them void, if it should not be proved that they w ere founded upon another cause which is true and lawful. (1276) Requisites of Ca use 1. must exist at time contract is entered into 2. must be lawful 3. must be true or real Absence of cause there is a total lack of any valid consideration f or the contract and produces no legal effect and therefore is inexistent and voi d **Absence of cause vs inadequacy of cause (not ground for relief) vs failure o f cause (does not render contract void) Ex. not paying price after execution of contract does not convert contract into one without cause. But contract of sale saying amount has been paid when in fact, not yet paid is void. Illegality of ca use there is a cause but is unlawful or illegal. These contracts are null and vo id. Falsity of cause - contract states a valid consideration but such statement is not true, may be erroneous or simulated erroneous makes contract void simulat ed, may still be valid when hidden but true or when parties can show that cause is true and lawful Article 1354. Although the cause is not stated in the contrac t, it is presumed that it exists and is lawful, unless the debtor proves the con trary. (1277) *cause need not be expressly stated, law presumes there is a cause unless debtor proves otherwise. Burden of proof is on the debtor. Article 1355. Except in cases specified by law, lesion or inadequacy of cause shall not inval idate a contract, unless there has been fraud, mistake or undue influence. (n) L esion any damage caused by the fact that the price is inadequate or unjust injury suffered because of inequality of situation by one party who does not receive f ull equivalent for what he gave Effects of Lesion or inadequacy of cause 1. gene ral rule lesion does not invalidate a contract because the courts cannot look af ter the welfare of every single person. Each person must be liable for his own d ecisions and mistakes. 2. exceptions lesion will invalidate when: a. there has b een fraud, mistake, undue influence b. in cases specified by law CHAPTER 3: Form of Contracts NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Arctile 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are pres ent. However, when the law requires that a contract be in some form in order tha t 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) Form of con tract manner in which a contract is executed or manifested, oral, written or par tly oral and written Considered to be: Written when all its term is in writing ral all orally or part oral, part writing Classification of contracts according to form 1. informal or common entered into in whatever form provided all essenti al requisites for validity are present; may be oral or written 2. formal or sole mn required by law to be in a specified format Rules regarding form of contracts 1. general rule binding and enforceable to parties whatever form as long as 3 e ssential requisites (consent, object, cause) are present 2. exceptions a. when r equired by law that it be in a certain form to be valid b. when law requires con tract be in some form to be enforceable or proved in certain way c. when law req uires it to be in some form for the convenience of party or purpose of affecting 3rd persons. Form for validity of contract 1. donation of real property must be in public instrument 2. donation of personal property which exceeds 5000 donati on and acceptance must be in writing 3. sale of land through agent authority of agent must be in writing or else sale is void 4. stipulation to pay interest mus t be in writing or else no interest is due 5. contract of partnership if immovab les are contributed, must be in a public instrument and attached a signed invent ory *by the statute of frauds, law requires contracts be in writing. If contract is not in writing, contract is valid as long as requisites are there but cannot be proved and enforced unless ratified. Article 1357. If the law requires a doc ument or other special form, as in the acts and contracts enumerated in the foll owing article, the contracting parties may compel each other to observe that for m, one the contract has been perfected. This right may be exercised simultaneous ly with the action upon the contract. (1279a) *some cases require a certain form of contracts for convenience of parties so contract can be registered in the pr oper registry to make effective the rights under the contract *parties can compe l each other to observe the proper form as long as the contract is valid and enf orceable. Article 1358. The following must appear in a public document: 1) 2) 3) 4) 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 The cession, repudiation, or renunciation of hereditary rights or those of the conjugal partnership of gains The power to administer property, or any othe r power which has for its object an act appearing or which should appear in a pu blic document or should prejudice a third person The cession of actions or right s proceeding from an act appearing in a public document All other contracts where the amount involved exceeds five hundred pesos must ap pear in writing, even a private one. But sales of goods, chattels or things in a ction are governed by articles 1403, No.2 and 1405. (1280a) *contracts are valid even if not contained in public document or instrument or in writing. Public do cument is only for convenience and protection of parties against 3rd parties. CH APTER 4: Reformation of Instruments (n) Arctile 1359. When, there having been a meeting of the minds of the parties to a contract, their intention is not expres sed in the instrument purporting to embody the agreemtn, by reason of mistake, f raud, inequitable conduct or accident, one of the parties may ask for the reform ation 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 th parties, the proper remedy is not reformation of the instrument but annulment of the contract. Reformation- remedy by means of which a written instr ument is amended or rectified 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

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*it would be unjust and inequitable to allow the enforcement of a written instru ment which does not reflect or disclose the real meeting of minds of the parties Requisites for Reformation 1. There is a meeting of the minds of the parties to the contract; 2. The written instrument does not express the true agreement or intention of the parties; 3. The failure to express the true intention is due to mistake, fraud, inequitable conduct, or accident; 4. The facts upon which relie f by way of reformation of the instrument is sought are put in issue by the plea dings; and 5. There is a clear and convincing evidence of the mistake, fraud, in equitable conduct, or accident. Reformation VS. Annulment There has been a meeti ng of the minds of the parties A contract exists but written document does not e xpress the true intention of the parties There is no meeting of minds The consen t of one is vitiated by mistake, etc. Article 1360. The principles of the genera l law on the reformation of instruments are hereby adopted insofar as they are n ot in conflict with the provisions of this Code. *The provisions of the New Civi l Code prevails over the principles of the general law on reformation. The latte r will only have suppletory effect. Article 1361. When a mutual mistake of the p arties causes the failure of the instrument to disclose their real agreement, sa id instrument may be reformed. Requisites to justify reformation by Mutual Mista ke 1. The mistake must be of fact; 2. Such mistake must be proved by clear and c onvincing evidence; 3. The mistake must be mutual, that is, common to both parti es to the instrument; and 4. The mistake must cause the failure of the instrumen t to express their true intention *if the mutual mistake is of law, the remedy i s annulment Article 1362. If one party was mistaken and the other acted fraudule ntly or inequitably in such a way that the instrument does not show their true i ntention, the former may ask for the reformation of the instrument. * the right to ask reformation is granted only to the party who was mistaken in good faith A rticle 1363. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but concealed that fact from the former, the instrument may be reformed * the remedy of reformation may be avail ed of the party who acted in good faith. The concealment of mistake by the other party constitutes fraud Article 1364. When through ignorance, lack of skill, ne gligence or bad faith on the part of the person drafting the instrument or of th e clerk or typist, the instrument does not express the true intention of the par ties, the courts may order that the instrument be reformed. *Neither party is re sponsible for the mistake; thus, either may ask for reformation Article 1365. If two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with a right of r epurchase, reformation of the instrument is proper. *such true intention must pr evail for the contract must be complied with good faith Article 1366. There shal l be no reformation in the following cases: 1) 2) 3) Simple donations inter vivo s wherein no condition is imposed; Wills; When the real agreement is void. Article 1367. When one of the parties has brought an action to enforce the instr ument, he cannot subsequently ask for the reformation. Cases when reformation is not allowed 1. Simple donations inter vivos where no condition is imposed- when donor intends that the donation shall take effect during his lifetime, it is a donation intervivos. a. A donation is essentially gratuitous and the done has no just cause for complaint. The donor is not bound (but may ask for reformation) to correct a mistake or defects in the deed of donation which in the first place , he was not bound to make NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

b. If the donation is conditional or onerous, the deed may be reformed so the tr ue conditions imposed by the donor or the real intention of the parties might be expressed. 2. Wills- a will is a personal and free act, thus the right to refor mation is lost upon the testators death. 3. When the real agreement is void- ther e is nothing to reform 4. When one party has brought an action to enforce the in strument- the bringing of an action is inconsistent with ratification Article 13 68. Reformation may be ordered at the instance of either party or his successors in interest, if the mistake was mutual; otherwise, upon petition of the injured party, or his heirs and assigns. Party entitled to reformation 1. Either of the parties if the mistake is mutual 2. In all other case, the injured party 3. The heirs and successors in interest, in lieu of the entitled party *the effect of reformation I retroactive from the time of the execution of the original contract. Article 1369. The procedure for the reformation of the instruments shall be governed by rules of court to be pr omulgate by the Supreme Court. *The Rules of court governs procedure. The Suprem e Court has not as yet promulgated the procedure for the reformation of instrume nts CHAPTER 5: Interpretation of Contracts Arctile 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. If the words appear to be con trary to the evident intention of the parties, the latter shall prevail over the former. (1281) Interpretation of a contract- the determination of the meaning o f the terms or words used by the parties in their contract *contracts should be fulfilled according to the literal sense of their stipulations, if the terms of the contract are clear and unequivocal. * a cardinal rule is that interpretation of the contacting parties should always prevail because their will has the forc e of law between them. Article 1371. In order to judge the intention of the cont racting parties, their contemporaneous and subsequent acts shall be principally considered. (1282) * such interpretation may be considered by the court in deter mining the meaning and ascertaining the intention of the parties Article 1372. H owever general the terms of a contract may be, they shall not be understood to c omprehend things that are distinct and cases that are different from those upon which the parties intended to agree. (1283) *special intent prevails over genera l intent because it is assumed that the particular matter expresses their intent Article 1373. If some stipulation of any contract should admit of several meani ngs, it shall be understood as bearing that import which is most adequate to ren der it effectual. (1284) *when an agreement is susceptible of several meanings, one of which would render it effectual, it should be given that interpretation. (if one interpretation makes it illegal, and the other makes it valid, the latte r is warranted) Article 1374. The various stipulations of a contract shall be in terpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. (1285) *a contract is interpreted as a whole an d the intention of the parties is gathered from entire instrument. 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) *if a wor d is susceptible of 2 or more meanings, it is to be understood in that sense whi ch is most in keeping with the nature and object of the contract in line with th e cardinal rule that the intention of the parties must prevail. Article 1376. Th e usage or custom of the place shall be borne in mind in the interpretation of t he ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily established. (1287) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

*the usage or custom of the place may explain what is doubtful or ambiguous. It is however, necessary to prove the existence and this burden is upon the party a lleging it. Article 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who cause the obscurity (1288) *a written agreement should, in case of doubt, be interpreted against the party who has dra wn it. Generally, the party who causes the obscurity acts with ulterior motives Article 1378. When it is absolutely impossible to settle doubts by the rules est ablished in the preceding articles, and the doubts refer to incidental circumsta nces of a gratuitous contract, the least transmission of rights and interest sha ll prevail. If the contract is onerous, the doubt shall be settled in favor of t he 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 ) Rules in case doubts impossible to settle 1. Gratuitous contract- interpretati on should be made which would result in the least transmission of rights and int erests 2. Onerous contracts- the doubts shall be settled in fevor of the greates t reciprocity of interests 3. Principal object of the contract- the contract sha ll be null and void. Article 1379. The principles of Interpretation stated in Ru le 123 of the Rules of Court shall likewise be observed in the constitution of c ontracts. (n) INTRODUCTION: To Chapters 6, 7, 8, and 9 Kinds of Defective Contracts 1. resciss ible valid because all essential requisites of a contract exist but because of i njury or damage to one of the parties or to 3rd persons, contract may be annulle d. 2. voidable- valid until annulled unless there has been a ratification. Defec t is caused by vice of consent 3. unenforceable cannot be sued or enforced unles s they are ratified. This occupies middle ground between voidable and void contr acts. 4. void or inexistent absolutely null and void. They have no effect at all and cannot be ratified. CHAPTER 6: Rescissible Contracts Arctile 1380. Contract s validly agreed upon may be rescinded in the cases established by law. (1290) D Rescissible contracts validly agreed upon because all requisites exis efinitions t therefore legally effective but by reason of external facts (damage or prejudi ce to one party or to 3rd persons) its enforcement would cause injustice. Rescis sion remedy granted by law to parties or third persons to secure reparation of d amages caused by a valid contract by restoring things to previous condition Requ isites of Rescission a. Contract must be validly agreed upon b. There must be le sion or financial prejudice to one of the parties or 3rd person c. Rescission mu st be based on a case especially provided by law d. There must be no other legal remedy to obtain compensation for damages e. Party asking for rescission must b e able to return what he is obliged to restore by reason of contract f. Object o f contract must not legally be in possession of 3rd person who did not act in ba d faith g. Period for filing for rescission must not have lapsed Article 1381. T he following contracts are rescissible: 1) Those which are entered into by guard ians whenever the wards whom they represent suffer lesion by more than one-forth of the value of the things which are the object thereof; 2) Those agreed upon i n representation of absentees, if the latter suffer the lesion stated in the pre ceding number; 3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; 4) Those which refer to things under litigation if they have been entered into by the defendant without the kno wledge and approval of the litigants or of competent judicial authority; 5) All other contracts specially declared by law to be subject to rescission. (1291a) C ases of Rescissible Contracts 1. contracts entered in behalf of wards ward is pe rson under guardianship because of some incapacity NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

2. contracts agreed upon in representation of absentees absentee is person who d isappears from his home, his whereabouts unknown and without leaving an agent to administer his property. Lesion must also be greater than of value of thing/pro perty *general rule lesion does not invalidate contract unless specified by law 3. contracts undertaken in fraud of creditors the following requisites must also be present: a. there must be a credit prior to the contract to be rescinded alt hough not yet due b. there must be fraud on part of debtor which may be presumed or proved c. creditor cannot recover his credit in any other manner, not requir ed that debtor be insolvent *when fraud charged is not the one used to obtain co nsent, it can only be fraud of creditors that gives rise to a rescission of the offending contract 4. contracts which refer to things under litigation 5. other instances a. judicial or extrajudicial partition may be rescinded on account of lesion when any one of co-heirs received less than of the share which he is enti tled b. lessor or lessee should not comply with obligations in article 1654 (obl igations of lessor) and 1657 (lessee), aggrieved party can ask for rescission an d indemnification or only indemnification and contract will still remain in forc e c. vendee may rescind when lack in the area of real estate sold be not less th an 1/10 of that stated or when inferior value of thing sold exceeds 1/10 of pric e agreed upon Article 1382. Payments made in a state of insolvency for obligatio ns to whose fulfillment the debtor could not be compelled at the time they were effected are also rescissible. (1292) *when insolvent debtor pays for obligation s that are not yet demandable, payment is rescissible. *debtor is insolvent when he does not have sufficient properties to meet his obligations, need not be jud icially declared Article 1383. The action for rescission is subsidiary; it canno t be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. (1294) *rescission can only be availed when t here is no other legal means to obtain compensation for damage received *if dama ge is repaired, as in lesion suffered by ward or absentee, rescission cannot tak e place Article 1384. Rescission shall be only to the extent necessary to cover the damage caused. (n) *policy of law is only to preserve or respect contract, n ot extinguish it. Thus, if partial rescission can cover damage, then only partia l rescission will take place. Article 1385. Rescission creates the obligation to return the things which were the object of the contract. Together with their fr uits and the price with its interest; consequently, it can be carried out only w hen he who demands rescission can return whatever he may be obliged to restore. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad f aith. In this case, indemnity for damages may be demanded from the person causin g the loss. (1295) *rescission takes place to restore the parties to original si tuation, thus, parties must return to each other object of contract with fruits, and the price with legal interest. * he who demands rescission also applies to 3rd persons but if he has nothing to return, then article does not apply. Rescissio n is not allowed 1. if party who demands rescission cannot return what he is obl iged to restore under the contract 2. if property is legally in the possession o f 3rd person who acted in good faith. Remedy would be indemnity for damages from person who caused the loss. Article 1386. Rescission referred to in Nos 1 and 2 of article 1381 shall not take place with respect to contracts approved by the courts. (1296) *when approved by courts, rescission cannot take place because it is assumed that court is acting in the interest of the ward or absentee. Articl e 1387. All contracts by virtue of which the debtor alienates property by gratui tous title are presumed to have been entered into in fraud of creditors, when th e donor did not reserve sufficient property to pay all debts contracted before t he donation. Alienation by onerous title are also presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued. The decision or attachment need not refer to the property alienated, and need not have been obtained by the party seeking th e rescission. In addition to these presumptions, the design to defraud creditors may be proved in any other manner recognized by the law of evidence. (1297a) Wh en alienation presumed in fraud of creditors

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*established prima facie presumptions of fraud in case of alienation by debtor o f his property 1. Alienation by gratuitous title when debtor donates property to another after which his remaining property is no longer enough to pay for his d ebts 2. alienation by onerous title instead of donation, there is contract of sa le. Sale by debtor is not fraudulent unless proven by creditors that sale will p rejudice their rights. However, if there is some judgment issued against debtor, sale is considered fraudulent. Circumstances denominated as badges of fraud 1. consideration of the conveyance is fictitious or inadequate 2. transfer made by debtor after suit has been begun and while pending against him 3. sale upon cred it by an insolvent debtor 4. transfer of all property by debtor, especially if i nsolvent 5. transfer is made between father and son, when there are present some or any of the above 6. failure of vendee to take exclusive possession of all th e property 7. vendee knows that the vendor had no properties other than that sol d to him Article 1388. Whoever acquires in bad faith the things alienated in fra ud of creditors shall indemnify the latter for damages suffered by them on accou nt of the alienation, whenever, due to any cause, it should be impossible for hi m to return them. If there are two or more alienations, the first acquirer shall be liable first, and so on successively. (1298a) *purchaser in bad faith must r eturn the object if sale is rescinded and if he is unable to return thing due to any cause, he must indemnify the former. *the first acquirer is liable and so o n. Article 1389. The action to claim rescission must be commenced within four ye ars. For persons under guardianship and for absentees, the period of four years shall not begin until the termination of the formers incapacity, or until the dom icile of the latter is known. (1299) Exceptions for period of filing action 1. w hen person is under guardianship, period shall start from end of incapacity 2. f or absentees, from time when domicile is known Persons entitled to bring action 1. injured party or defrauded creditor 2. heirs, assigns, successors in interest 3. creditors of the above entitled to subrogation CHAPTER 7:Voidable Contracts Arctile 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting part ies; 1) those where one of the parties is incapable of giving consent to a contr act; 2) those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding unless they are annulled b y a proper action in court. They are susceptible of ratification. (n) Voidable o r annullable those which possess all requisites of a valid contract but one of t he parties is incapable of giving consent, or consent is vitiated by mistake, vi olence, intimidation, undue influence or fraud *valid and binding unless annulle d by courts. Once ratified, it is absolutely valid and cannot be annulled anymor e. Annulment remedy provided by law for reason of public interest, declaration o f the inefficacy of a contract based on a defect in the consent of one of the pa rties Article 1391. The action for annulment shall be brought within four years. This period shall begin: In case of intimidation, violence or undue influence, from the time the defect of the consent ceases. In case of mistake or fraud, fro m the time of the discovery of the same. And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardi anship ceases. (1301a) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Period for filing action for annulment 1. from the time intimidation, violation, or undue influence ceases; because before time, consent is still being vitiated , thus victim cannot be expected to bring an action in court 2. in cases of mist ake or fraud, from the time it is discovered because innocent party is unaware o f the reason which makes the contract voidable. 3. in contracts entered into by minors, from the time guardianship stops because incapacitated person has no cap acity to sue. Article 1392. Ratification extinguished the action to annul a void able contract. (1309a) *subsequent approval cleanses contracts of all defects. C ontract thus become valid. Article 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowled ge of the reason which renders the contract voidable and such reason having ceas ed, the person who has a right to invoke it should execute an act which necessar ily implies an intention to waive his right. (1311a) Kinds of Ratification 1. ex press manifested in words or writing 2. implied or tacit by silence, compliance, by showing approval of contract or acceptance of benefits Requisites of ratific ation 1. implied ratification a. must be knowledge of reason which makes contrac t voidable b. such reason must have stopped c. injured party must have executed an act which implies an intention to waive his right 2. express same as above ex cept expressly made Article 1394. Ratification may be effected by the guardian o f the incapacitated person. (n) Who may Ratify 1. contract entered into by an in capacitated person my be ratified by: a. guardian b. injured party as long as he is already capacitated c. guardians of wars may also ratify contracts since the y have power to contract on their behalf 2. in case of a contract voidable by gr ound of mistake, ratification can be made by party whose consent is vitiated Art icle 1395. Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment. (1312) *ratification is uni lateral act. Consent of guilty party is not required Article 1396. Ratification cleanses the contract from all its defects from the moment it was constituted. ( 1313) *it extinguished right to annul, contract is valid from its initiation sub ject to the prior rights of 3rd persons. Article 1397. The action for the annulm ent of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those who exerted intimidation, violence or undue influence or employed fraud or caused mistake base their action upon these flaws of the contract. (1302a) Requ isites to bring an action to annul 1. claimant must have an interest in the cont ract 2. victim and not the party responsible for the defect is the person who as serts annulment *one who is not a party to the contract or does not represent th ose who took part has no legal capacity to challenge validity of contract *stran gers are without right to bring action unless they can show loss which would res ult from the contract in which they had no participation *quilty party cannot as k for annulment, he who comes to court must come with clean hands Article 1398. An obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits and the price with its interest, except in cases provided by law. In obli gations to render service, the value thereof shall be the basis for damages. (13 03a) Duty of Mutual Restitution upon annulment parties must restore to each othe r the subject matter of the contract with fruits and price with legal interest i n personal obligations, value of service plus interest is basis for damages Arti cle 1399. When the defect of the contract consists in the incapacity of one of t he parties, the incapacitated person is not obliged to make any restitution exce pt insofar as he has been benefited by the thing or price received by him. (1304 ) NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

*exception to the general rule of mutual restitution *only when object is benefi cial to the incapacitated person will he return what he has received. If he was not benefited, he is not obliged to restore/return what he received but other pa rty is still bound to return. Article 1400. Whenever the person obliged by the d ecree of annulment to return the thing can not do so because it has been lost th rough his fault, he shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date. 1307a Effect of Loss of thing to be returned 1. if thing to be returned is lost without fault of pers on obliged to return, there is no longer any obligation to return such thing. 2. if lost through his fault, obligation to return is converted to indemnity for d amages consisting of value of thing, interest and fruits Article 1401. The actio n for annulment of contracts shall be extinguished when the thing which is the o bject thereof is lost through the fraud or fault of the person who has a right t o institute the proceedings. If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an ob stacle to the success of the action, unless said loss took place through fraud o r fault of the plaintiff. (1314a) Extinguishment of action for annulment 1. if a person who has right to annul will not be able to return what he is obliged to return because of fraud or his fault, his right to have contract annulled is ext inguished 2. the right of action is based on the incapacity of any one of the pa rties. Same rule as above. Article 1402. As long as one of the contracting parti es does not restore what in virtue of the decree of annulment, he is bound to re turn, the other cannot be compelled to comply with what is incumbent upon him. ( 1308) *when contract is annulled, reciprocal obligation of restitution is create d. *unless one complies with his part, the other cannot be compelled to comply w ith his part. CHAPTER 8: Unenforceable Contracts (n) Arctile 1403. The following contracts are unenforceable, unless they are ratified: 1) Those entered into th e name of another person by one who has been given no authority or legal represe ntation, or who has acted beyond his powers; Those that do not comply with the S tatute of Frauds as set forth in this number. In the following cases, an agreeme nt hereafter made shall be unenforceable by action, unless the same, or some not e or memorandum thereof, be in writing and subscribed by the party charged, or b y his agent; evidence thereof, of the agreement cannot be received without the w riting or a secondary evidence of its contents: a. b. c. d. An agreement that by its terms is not to be performed within a year from the making thereof; A speci al promise to answer for the debt, default or miscarriage of another; An agreeme nt made in consideration of marriage, other than a mutual promise to marry; An a greement for the sale of goods, chattels or things in action, at a price not les s than five hundred pesos, unless the buyer accept and receive part of such good s and chattels or the evidences or some of them, of such things in action, or pa y at the time some part of the purchase money; but when a sale is made by auctio n and entry is made by the auctioneer in his sales book, at the time of the sale , of the amount and kind of property sold, terms of sale, price, names of the pu rchasers and person on whose account the sale is made, it is sufficient memorand um; An agreement for the leasing for a longer period than one year or for the sa le of real property or of an interest therein; A representation as to the credit of a third person 2) e. f. 3) Those where both parties are incapable of giving consent to a contract. Unenforceable contracts those that cannot be enforced in court or sued upon by r eason of defects provided by law unless they are ratified according to law *whil e rescissible and voidable contracts are valid until they are annulled, unenforc eable contracts, while valid, cannot be enforced until they are ratified. Kinds of Unenforceable Contracts 1. those entered into the name of another by one acti ng without or in excess of authority 2. those that do not comply with Statute of

Frauds 3. those where both parties are incapable of giving consent NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Unauthorized contracts those entered into the name of another by one who has bee n given no authority or legal representation or acted beyond his powers. (govern ed by article 1317 and the principles of agency) Statute of Frauds 1. history 16 77, English Parliament enacted laws to counter the evil practice of giving false testimony. 2. purpose Statute of Frauds has been enacted to not only prevent fr aud but also guard against the mistakes of honest men by requiring certain agree ments be in writing, otherwise, unenforceable in court because there is no hard evidence other than witnesses who may be unreliable. 3. application fundamental p rinciples are: a. SOF applicable only in actions for damages because of a violat ion of contract or for the specific performance b. Applicable only to executory contracts (where no performance of both parties) and not to contracts which are totally or partially performed because partial performance implies the existence of the contract. Injustice to the one who already performed his part because th e other would keep the benefits and evade his part of the obligation. c. Not app licable where the contract is admitted expressly/impliedly by failure to deny it s existence d. Applicable only to agreements enumerated above. An agreement crea ting an easement of right of way is not covered by SOF since it is not a sale of property or of interest. e. Not applicable where writing does not express true agreement of parties since SOF cannot be used as a shield for fraud f. Does not declare that contracts breaking it are void but merely unenforceable g. Defense of SOF may be waived h. Defense of SOF is personal to parties and cannot be intr oduced by strangers to contract Agreements within the scope of the Statute of Fr auds *agreements that must be in writing to be enforceable 1. agreement not to b e performed within one year from the making thereof if I entered an oral contrac t with you that you will build my house one year from now, it should be in writi ng to be enforceable. 2. promise to answer for the debt, default or miscarriage of another if you owe Maria and I am your guarantor, our agreement should be in writing to be enforceable. If my promise is to pay Maria without your failure to pay, then I am no longer just guarantor but a principal party in the obligation to Maria. No need for written contract to be enforceable. 3. agreement in consi deration of marriage other than a mutual promise to marry if I promise to build your house if you marry me, then there must be written agreement unless you rati fy it. if we both agreed to marry, no need for written agreement even if marriag e is to be celebreated beyond one year. a. Marriage settlement pre-nuptial enter ed by people who are about to get married for the purpose of fixing conditions o f their relations b. Donations propter nuptias or donations by reason of marriag e agreements made before marriage in consideration of the same and in favor of o ne or both spouses 4. agreement for sale of goods at a price not less than 500 i f what I am selling is more than 500, contract must be in writing. If less than 500, oral evidence of sale is enough 5. agreement for leasing for a longer perio d than one year if period is more than a year, must be in writing. 6. agreement for sale of real property or of an interest therein sale of property or anything related to the property (usufructuary) must be in writing to be enforceable or if there is partial performance. 7. representation as to the credit of a third p erson if Maria is trying to borrow from me and you represent Maria as having a g ood credit standing and I loan to Maria money who is actually insolvent, your re presentation of Maria must be in writing to be enforceable. Article 1404. Unauth orized contracts are governed by article 1317 and the principles of agency in Ti tle X of this Book. Article 1405. Contracts infringing the Statue of Frauds, ref erred to in No. 2, article 1403 are ratified by the failure to object to the pre sentation of oral evidence to prove the same, or by the acceptance of benefits u nder them. Modes of Ratification under the Statute 1. failure to object to the p resentation of oral evidence to prove the contract. Failure to object means waiv er and makes contract binding. 2. by acceptance of benefits under the contract, one who enjoyed benefits must not be allowed to repudiate (reject) its burdens A rticle 1406. When a contract is enforceable under the Statute of Frauds, and a p ublic document is necessary for its registration in the registry of Deeds, the p arties may avail themselves of the right under article 1357. (n) RIGHT OF PARTY WHEN CONTRACT IS ENFORCEABLE *there must be valid agreement and agreement must n ot infringe the SOF 1. a party to an oral sale of real property cannot compel th

e other to put the contract in a public document for purposes of registration be cause if is unenforceable unless it was ratified. 2. right one party to have the other execute a public document is not available in a donation of realty when i t is in a private instrument because the donation is void. Article 1407. In a co ntract when both parties are incapable of giving consent, express or implied rat ification by the parent or guardian, as the case may be, of one of the contracti ng parties shall give the contract the same effect as if only one of them were i ncapacitated. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

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. *where both parties are incapable of giving consent, contract is unenforceable. Howeve r, if one guardian or one party who has gained capacity ratifies the contract, c ontract becomes voidable. *if both parties (guardian or both gains capacity) rat ifies the contract, contract is valid and retroacts from the day it was entered into. Article 1408. Unenforceable contracts cannot be assailed by third persons. *strangers to a voidable contract cannot bring action to annul the contract. Ne ither can they question a contract because of its unenforceability. The SOF can only be claimed by one who is a party to the oral contract. It is a personal def ense. CHAPTER 9: Void or Inexistent Contracts Article 1409. The following contra cts are inexistent and void from the beginning: 1) 2) 3) 4) 5) 6) 7) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy Those which are absolutely simulated or fictitious Those whose cause or object did not exist at the time of the transaction Those whose object is outside the commerce of men Those which contemplate an impossible service Th ose where the intention of the parties relative to the principal object of the c ontract cannot be ascertained Those expressly prohibited or declared void by law These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. Definitions Void contracts because of certain defects, produce no effect at all, inexistent from the very beginning Inexistent contract s refer to agreements which lack one or more of the elements (object, cause, con sent) or do not comply with requirements for the existence of contract Illegal c ontract may produce effects under certain circumstances where the parties are no t of equal guilt Characteristics of Void or Inexistent Contracts 1. generally pr oduces no effect whatsoever 2. cannot be ratified 3. set up the defense of illeg ality cannot be waived 4. action or defense for the declaration of its inexisten ce does not prescribe 5. defense of illegality is not available to third persons whose interests are not directly affected 6. it cannot give rise to a valid con tract Instances of Void or Inexistent Contracts 1. contracts whose cause, object or purpose is contrary to law 2. contracts which are absolutely simulated or fi ctitious 3. contracts without cause or object 4. contracts whose object is outsi de the commerce of men 5. contracts which contemplate an impossible service 6. c ontracts where the intention of the parties relative to the object cannot be det ermined 7. contracts expressly prohibited by the law a. upon future inheritance unless allowed by law b. sale of property between spouses unless there is separa tion of property c. purchase of property by persons disqualified by law because of their relation with the person under their care (guardian-ward, lawyer-judge, mayor-city) d. donation between spouses during marriage shall be void except gi fts which spouses may give to each other on some occasion. e. A testamentary pro vision in favor of disqualified person even if under the guise of onerous contra ct or made through an intermediary f. Household service without compensation is void g. Members of congress are prohibited from being financially interested in any contract with the government Article 1410. The action or defense for the dec laration of the inexistence of a contract does not prescribe. *a person can alwa ys raise the defense of nullity even with passage of time *generally do not need court to say it is void but it is better to do that than to take the law into t heir own hands Article 1411. When the nullity proceeds from the illegality of th e cause of object of the contract, and the act constitutes a criminal offense, b oth parties being in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relati ve to the disposal of effects or instruments of a crime shall be applicable to t he things or the price of the contract. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

This rule shall be applicable when only one of the parties is guilty, but the in nocent one may claim what he has given, and shall not be bound to comply with hi s promise. (1305) Rules where contract is illegal and the act constitutes a crim inal offense 1. where both parties are in pari delicto both are guilty because c ause or object constitutes a criminal offense a. parties shall have no action ag ainst each other b. both shall be prosecuted c. thing or price of the contract s hall be confiscated in favor of the government 2. where only one party is guilty both parties are not equally guilty (in delicto) rule applies only to more guil ty party and innocent party may claim what he has given and not be bound to comp ly with his promise Article 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: 1) 2) when the fault is on the part of both contracting parties, n either may recover what he has given by virtue of the contract or demand the per formance of the others undertaking when only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask fo r the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply wit h his promise. (1306) Rules where Contract is Illegal but the act does not constitute a criminal offen se 1. where both parties are in pari delicto is cuase is unlawful but does not m ean criminal offense a. neither party may recover what he has given b. neither p arty may demand the performance of the other *ex. common law wife immoral but no t illegal 2. when only one party is guilty a. guilty party loses what he has giv en by reason of contract b. guilty party cannot ask for fulfillment of the other c. innocent party may demand the return of what he has given d. innocent party cannot be compelled to comply with his promise Article 1413. Interest paid in ex cess of the interest allowed by the usury laws may be recovered by the debtor, w ith interest thereon from the date of payment. *payment of usurious interest can be recovered. Not only those that exceeded the legal interest but the whole int erest plus interest from date of payment. Article 1414. When money is paid or pr operty delivered for an illegal purpose, the contract may be repudiated by one o f the parties before the purpose has been accomplished, or before the damage has been caused to a third person. In such case, the courts may, if the public inte rest will thus be subserved, allow the party repudiating the contract to recover the money or property. Requisites for recovery where contract entered into for illegal purpose 1. contract is for an illegal purpose 2. contract is rejected be fore the purpose has been accomplished or before any damage has been caused to a third person 3. court considers that public interest will be subserved by allow ing recovery Article 1415. Where one of the parties to an illegal contract is in capable of giving consent, the courts may, if the interest of justice so demands , allow recovery of money or property delivered by the incapacitated person. *ex ception to the in pari delicto *recovery can be allowed if one of the parties is incapacitated and the interest of justice demands it. *not necessary that illeg al purpose has not been accomplished or that no damage has been caused to a 3rd person Article 1416. When the agreement is not illegal per se, but is merely pro hibited, and the prohibition by the law is designed for the protection of the pl aintiff, he may, public policy is thereby enhanced, recover what he has paid or delivered. *exception to the in pari delicto Recovery where contract is not ille gal per se 1. the agreement is not illegal per se but merely prohibited 2. prohi bition is designed for the protection of plaintiff 3. public policy would be enh anced by allowing plaintiff to recover what he has paid NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Article 1417. When the price of any article or commodity is determined by statut e, or by authority of law, any person paying any amount in excess of the maximum price allowed may recover such excess. ceiling law statute fixing max price of any article or commodity to curb blackmarketing Article 1418. When the law fixes , or authorizes the fixing of the maximum number of hours of labor, and a contra ct is entered into whereby a laborer undertakes to work longer than the maximum thus fixed, he may demand additional compensation for the service rendered beyon d the time limit. *Labor Code says normal working hours of any employee shall no t exceed 8 hours a day. Exceptions to this Law 1. govt employees 2. managerial em ployees 3. field personnel 4. members of family of employers who are dependent o n him for support 5. domestic helpers 6. persons in the personal service of anot her 7. workers who are paid by results Article 1419. When the law sets, or autho rizes the setting of a minimum wage for laborers and a contract is agreed upon b y which a laborer accepts a lower wage, he shall be entitled to recover the defi ciency. *when an employee receives less than the minimum wage, he can recover de ficiency with legal interest and the employer is criminally liable. Article 1420 . In case of a divisible contract, if the illegal terms can be separated from th e legal ones, the latter may be enforced. Effect of Illegality where Contract is Indivisible/ Divisible 1. when consideration is entire and single, the contract is indivisible so that if part of consideration is illegal, the whole contract is void 2. when contract is divisible, consideration is made up of several parts , illegal ones can be separated from the legal portions, the legal ones may be e nforced. Divisible Contract VS. Divisible Obligation Divisibility of cause (refe rs to cause) Susceptible to partial fulfillment (refers to object) Article 1421. The defense of illegality of contracts is not available to third persons whose interests are not directly affected. *in voidable and unenforceable contracts, 3 rd person has no right to annul or assail contracts. However, if void and illega l contract, 3rd person can set up nullity as defense as long as his interest is directly affected by the contract. Article 1422. A contract which is the direct result of a previous illegal contract is also void and inexistent. *an illegal c ontract is void and inexistent and cannot give rise to a valid contract NATURAL OBLIGATIONS Article 1423. Obligations are civil or natural. Civil obliga tions give a right of action to compel their performance. Natural Obligations, n ot being based on positive law but on equity and natural law, do not grant a rig ht of action to enforce their performance, but after voluntary fulfillment by th e obligor, they authorize the retention of what has been delivered or rendered b y reason thereof. Some natural obligations are set forth in the following articl es Concept of Natural Obligations Originated in the Roman law where they grew in importance in ordert to temper with equity and justice the severity of jus civi le Could no be enforced by civil action but has certain juridical consequences C ivil Obligations VS. Natural Obligations Arise from law, contracts, quasi-contra cts, delicts and quasi delicts Give a right of action to compel their performanc e Based not on positive law but on equity and natural law Do not grant such right of action to enforce their performance NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Article 1424. When a right to sue upon a civil obligation has lapsed by extincti ve prescription, the obligor who voluntarily performs the contract cannot recove r what he has delivered or the value of the service he has rendered. * by prescr iption, one acquires ownership and other real rights through the lapse of time i n the manner and under the conditions laid down by law. Also, rights and actions are lost by prescription Article 1425. When without the knowledge or against th e will of the debtor, a third person pays a debt which the obligor is not legall y bound to pay because the action thereon has prescribed, but the debtor later v oluntarily reimburses the third person, the obligor cannot recover what he has p aid. * the debtor cannot recover when he voluntarily reimburses the third person Article 1426. When a minor between eighteen and twenty-one years of age who has entered into a contract without the consent of the parent or guardian, after th e annulment of the contract voluntarily returns the whole thing or price receive d, notwithstanding the fact that he has not been benefited thereby, there is no right to demand the thing or price thus returned. * As long as the minor is 18-2 1 yrs of age (law considers he already has a conscious idea of what is morally j ust or unjust) , he cannot recover what he has returned Article 1427. When a min or between eighteen and twenty-one years of age, who has entered into a contract without the consent of the parent or guardian, voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation, there shall be no right to recover the same from the oblige who has spent or consumed in good fai th. (1160a) *by the decree of annulment, both parties as a general rule are obli ged to make mutual restitution. But the oblige who consumes in good faith is not liable to do so. Article 1428. When, after am action to enforce a civil obligat ion has failed, the defendant voluntarily performs the obligation, he cannot dem and the return of what he has delivered or the payment of the value of the servi ce he has rendered. *debtor cannot recover nor ask for payment since it is deeme d that he must have considered it his moral duty to fulfill his obligation Artic le 1429. When a testate or intestate heir voluntarily pays a debt of the descend ent exceeding the value of the property which he has received by will or by the law of intestacy from the estate of the decreased, the payment is valid and cann ot be rescinded by the payer. *an heir has a moral duty to perform or pay obliga tion legally contracted by his dead relatives Article 1430. When a will is decla red void because it has not been executed in accordance by the formalities requi red by law, but one of the intestate heirs, after the settlement of the debts of the deceased, pays a legacy in compliance with a clause in the defective will , the payment is effective and irrevocable. Legacy- act of disposition by the tes tator in separating from the inheritance for definite purposes, things, rights o r a definite portion of his property. *the purpose of the legacy is to reward fr iends, servants and others for services they have rendered, to give alms, etc. * if a will is disallowed for non-compliance with the formalities prescribed by la w, the legacy made in the will is also void. But if the heir pays the legacy, it is effective and irrevocable. * It was the intention of the testator to give th e legacy; it is the moral duty of the heir to carry it out. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

STUDY GUIDE OBLIGATIONS Chapter 2, Sec.1: Consent Study Guide I. Definitions 1. Consent the conformity or concurrence of wills (offer & acceptance) 2. Acceptance- the manifestation by t he offeree of his assent to the terms of the offer. 3. Natural Elements- those t hat are presumed to exist in certain contracts unless the contrary is expressly stipulated by the parties, like warranty against eviction, or warranty against h idden defects in sale 4. Option Contract- one giving a person for a consideratio n a certain period within which to accept the offer of the offerer 5. Mistake of Law- that which arises from an ignorance of some provision of law, or from an e rroneous conclusion as to the legal effect of an agreement, on the part of one o f the parties. II. Discussions 1. When is a contract voidable or annulable? According to Art.13 30, a contract is voidable when consent is given through mistake, violence, inti midation, undue influence or fraud. 2. Is it always required that he who alleges fraud or mistake in entering into a contract, must prove his allegation? Explai n. No. According to Art.1332, when one of the parties is unable to read or if th e contract is in a language not understood by him, it is the party enforcing the contract who is duty-bound to show that there has been no fraud or mistake and the terms of the contract have been fully explained to the former. 3. Give the r equisites in order that intimidation may vitiate or annul consent of a party to a contract. According to Art.1335, the requisites are that (1) it must produce a reasonable and well-grounded fear of an evil, (2) the evil must be imminent and grave, (3) the evil must be upon his person or property, or that of his spouse, descendants, or ascendants, and (4) it is the reason why he enters into the con tract. 4. May fraud be committed by a party to a contract though there is no mis representation on his part? Explain. Yes. According to Art.1339, concealment is equivalent to misrepresentation when there is a neglect or failure to communicat e that which a party to a contract knows and ought to communicate. 5. Will the a cceptance of a business advertisement of a thing for sale produce the perfection of a contract? Explain. No. According to Art.1325, business advertisements of t hings for sale are not definite offers, acceptance of which will perfect a contr act, but are merely invitations to the reader to make an offer. III. Problems 1. In a contract containing an option period, when is the offeree not allowed to w ithdraw his offer even before acceptance by offeree? When is the offeree allowed to withdraw his offer even after acceptance? According to Art.1324, the offeree may not withdraw his offer even before acceptance if the option is founded upon a consideration, as something paid or promised. According to Art.1479, the offe ree is allowed to withdraw the offer even after the acceptance if it is a unilat eral promise to buy or sell a determinate thing not supported by any considerati on distinct from the price for which the thing was intended to be sold by or to the promisee. 2. Can S legally withdraw from the contract on the ground of mista ke? Yes. According to Art.331, mistake as to the identity of or qualifications o f one of the parties will vitiate consent only when such identity or qualificati ons have been the principal cause of the contract. 3. Can B ask the court to ann ul the contract on the ground of fraud? No. According to Art.1344, the fraud sho uld be serious for it to make a contract voidable. In this situation, there is o nly incidental fraud which only obliges S to pay B damages. 4. Is S liable to B for misrepresentation? No. According to Art.1340, usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent 5. Has B the right to have the sale annulled? No. According to Art.1 339, there is fraud only when there is a failure to disclose facts when there is a duty to reveal them. S was not bound to make disclosure of his reasons for hi s belief so B may not annul the sale which is valid. Chapter 2, Sec.2: Object of Contracts Study Guide I. 6. 7. Definitions Future Inheritance any property or r ight, not in existence or capable of determination at the time of the contract, that a person may inherit in the future Physical Impossibility- when the thing o r service in the very nature of things cannot exist or be performed. IV. Discussions 1. Give the requisites of things as object of a contract.

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2. 3. According to Art.1347, the requisites of things as object of a contract are: (1) the thing must be within the commerce of men, that is, it can legally be the su bject of commercial transaction, (2) it must not be impossible, legally or physi cally, (3) it must be in existence or capable of coming into existence, and (4) it must be determinate or determinable without the need of a new contract betwee n the parties. Give the requisites of service as object of a contract. According to Art.1347, the requisites of service as object of a contract are: (1) the ser vice must be within the commerce of men, (2) it must not be impossible, physical ly or legally, and (3) it must be determinate or capable of being made determina te May a contract be entered upon future inheritance? According to Art.1347, no contract may be entered into upon future inheritance except in cases expressly a uthorized by law. V. Problems 1. Is the sale valid? No. According to Art.1349, the object of every contract must be determinate. Since S did not specify the exact location and ar ea of the land, the sale is void since the particular land sold cannot be determ ined without a new or further agreement between the parties. 2. State the bindin g effect of the sale. According to Art.1349, the contract is valid but not perfe cted until the quantity (weight) agreed upon has been selected and is capable of being physically designated and distinguished from all the other pigs. The cont ract is merely an executor contract to sell. Chapter 2, Sec.3: Cause of Contract s Study Guide I. 1. 2. 3. Definitions Cause (causa) the essential or more proxim ate purpose which the contracting parties have in view at the time of entering i nto the contract Motive- purely personal or private reason which a party has in entering into a contract Inadequacy of Cause- not a ground for relief; II. Discussions 1. Give the requisites of cause in a contract. According to Arts .1352 & 1353, the requisites of cause in a contract are: (1) it must exist at th e time the contract is entered into, (2) it must be lawful and (3) it must be tr ue or real 2. State the effect if the cause of a contract is found to be false. According to Art.1353, 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 3. What is the object and what is the cause in a contra ct of sale? In a contract of sale, the cause for one is the subject matter or ob ject for the other, and vice versa. III. Problems 1. Is the contract of sale ill egal? No. According to Art.1351, the particular motives are different from the c ause and the illegality of ones motive does not render the contract void. 2. 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? No. According to Arts.1352 & 1409 (3), t he cause must exist at the time the contract is entered into which is true for t his case. There is no absence of cause just because B is unable to pay. 3. Is Y bound to return the P10 000? No. According to Art.1354, the cause is presumed to exist and is lawful. Unless the debtor proves the contrary, since it is not pro ven otherwise, it is lawful. 4. Has S the right to have the sale annulled? No. A ccording to Art.1355, except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract. Chapter 3: Form of Contracts Study Guide I. 1. 2. Definitions Form of Contract refers to the manner in which a contract i s executed or manifested Informal Contract- that which may be entered into in wh atever form provided all the essential requisites for their validity are present . II. Discussions 1. What may be the form of a contract? According to Art.1356, th e contract may be oral, or in writing, or partly oral and partly in writing 2. I f the law requires a contract to be in writing, will the contract be invalid if it is not in writing? According to Art.1356, when the law requires that a contra ct be in some form in order that it may be valid and enforceable, that requireme

nt is absolute and indispensable. Thus it will be invalid if it isnt in writing I II. Problems 1. Is the sale valid? NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

2. Yes. According to Art.1358, the contracts covered by that article are valid and enforceable though not contained in a public document. The public document is re quired only for convenience and greater protection of the parties and to make th e contract binding as against third persons. What rights if any, are acquired by the contracting parties? According to Art.1356, the contract of sale is valid a nd binding although it is still executory. Chapter 4: Reformation of Instruments Study Guide I. 1. Definitions Reformation t hat remedy 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. Mutual Mistake- a mistake that is commo n to both parties of the instrument. 2. II. Discussions 1. What is the reason why the law in certain cases permits a wri tten instrument to be reformed or corrected? According to Art.1359, it would be unjust and inequitable to allow the enforcement of a written instrument which do es not reflect or disclose the real meeting of minds of the parties 2. In what w ay is reformation of written instrument distinguished from the annulment of a co ntract? In reformation, there is a meeting of minds, thus a contract exists but the true intention of the parties is not expressed in the written instrument; in annulment, there is no meeting of minds and consent of one parties is vitiated by mistake etc. III. Problems 1. Can S ask for the reformation of the contract a gainst the objection of B who is agreeable to the sale of horse X? No. According t o Art.1361, the mistake must be mutual for the contract to be reformed. Here, on ly B thought the horse was Y . 2. Give the 3 cases when he can ask for the reformat ion of the contract Yes. According to Arts.1362, 1363, & 1364, he can ask for re formation when: (1) one party was mistaken and the other acted fraudulently or i nequitably, in such a way that the instrument does not show their true intention , (2) when one party was mistaken and the other knew or believed that the instru ment did not state their real agreement, but concealed that fact from the former , and (3) when through ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or the clerk or typist, the instrumen t did not express the true intention of the parties. Chapter 5: Interpretation o f Contracts Study Guide I. 1. 2. Definitions Interpretation of Contract the deter mination of the meaning of the terms or words used by the parties in their contr act. Contract of Adhesion- most of the terms of which do not result from mutual negotiation between the parties as they are usually prescribed in printed forms prepared by one party to which the other may adhere if he chooses but which he can not change. II. Discussions 1. What should be followed in the interpretation of a contract, its terms or the intention of the parties? Explain. According to Art.1370, the e vident intention of the parties prevails over the terms of the contract because their will has the force of law between them. 2. Suppose a stipulation or word i n a written contract is susceptible of various interpretations, what interpretat ion or meaning should be given to it? According to Arts.1373 & 1375, the meaning to be taken is that which most adequately renders it effectual and those that i s most in keeping with the nature and object of the contract. 3. State the rule of interpretation where there are various stipulations of a contract. According to Art.1374, the various stipulations of a contract shall be interpreted togethe r, attributing to the doubtful ones that sense which may result from all of them taken jointly. III. Problems 1. Is the chair to be included in the sale of the unit? No. According to Art.1372, however general the terms of a contract may be, they shall not be understood to comprehend things that are distinct and cases t hat are different from those upon which the parties intended to agree. Since it

was not intended that the chair be included, then it isnt. 2. How much is Y bound to pay X? According to Arts.1371 & 1376, the payment Y is bound to make to X is determined, with consideration to their contemporaneous and subsequent acts, an d the usage or customs of the place. 3. How much is Y liable to pay? According t o Art.1377, Y is liable to pay the lesser amount since it was Xs fault that an ob scurity occurred and the interpretation should not favor the person who caused t he obscurity. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Chapter 6: Rescissible Contracts Study Guide I. 1. 2. Definitions Rescissible Co ntract those validly agreed upon because all the essential elements exist and, th erefore, legally effective, but in the cases established by law, the remedy of r escission is granted in the interest of equity. Rescission- a remedy granted by law to the contracting parties and sometimes even to third persons in order to s ecure reparation of damages caused them by a valid contract, by means of the res toration of things to their condition in which they were prior to the celebratio n of said contract. II. Discussions 1. State the rule on the liability of the acquires in bad faith of property alienated in fraud of creditors. According to Art.1388, the acquires should indemnify the creditor for damages suffered by them on account of the al ienation, whenever, due to any cause, it should be impossible for him to return them. 2. In what cases is rescission not allowed although the contract is found to be rescissible under the law? According to Art.1385 remedy of rescission cann ot be availed if the party who demands rescission cannot return what he is oblig ed to restore under the contract or if the property is legally in the possession o a third person who acted in good faith. III. Problems 1. Has C the right to a sk for rescission of the sale? Yes. According to Arts.1381 (3) & 1383, C can dem and for rescission since the sale was made in order to defraud him. 2. If rescis sion of the sale is demanded, what possible defense under the law can B present to avoid rescission? According to Art.1386, B could use the defense that the con tract is approved by the courts, thus the contract is valid whether there is les ion or not Chapter 7: Voidable Contracts Study Guide I. 1. 2. Definitions Voidab le Contract those which possess all the essential requisites of a valid contract but one of the parties is incapable of giving consent, or consent is vitiated by mistake, violence, intimidation, undue influence or fraud Annulment- a remedy p rovided by law, for reason of public interest, for the declaration of the ineffi cacy of a contract based on a defect or vice in the consent of one of the contra cting parties in order to restore them to their original position in which they were before the contract was executed Ratification- one voluntarily adopts some defective or unauthorized act or contract which, without his subsequent approval or consent, would not be binding on him 3. II. Discussions 1. Give the requisites for the ratification of a voidable contra ct. According to Art.1393, the requisites for ratification are: (1) there must b e knowledge of the reason which renders the contract voidable, (2) such reason m ust have ceased, (3) the injured party must have executed an act which necessari ly implies an intention to waive his right 2. State the rule on the right of str angers to a contract to bring an action for its fulfillment According to Art.139 7, strangers do not have a right to bring the action for they are not obliged by the contract, unless they show detriment which would positively result to them from the contract in which they have no intervention or participation 3. Under t he law, what contracts are voidable or annullable? According to Art.1390, contra cts where one of the parties is incapable of giving consent and those where the consent is vitiated by mistake, violence, intimidation, undue influence, or frau d are voidable/ annullable. III. Problems 1. Is S bound to return the price rece ived by him? No. According to Art.1399, S is only obliged to return to the exten t of his benefit. If S was not benefited, he is not bound to return anything. 2. Has B the right to refuse the ratification and demand mutual restitution of the property and the price? No. According to Art.1395, ratification is a unilateral act and does not require the conformity of the contracting party who has no rig ht to bring the action for annulment. 3. What are the rights of the parties if t he property was lost or destroyed: (According to Art. 1400) a. Without the fault of B? There is no more obligation to return such thing. Also, the other cannot be compelled to return what he is bound to do so. b. Through the fault of B? The obligation is not extinguished but converted into an indemnity for damages cons isting of the value of the thing at the time of the loss with interest from the

same date and the fruits received from the time the thing was given to him to th e time of its loss Chapter 8: Unenforceable Contracts Study Guide I. Definitions NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

1. 2. 3. Unenforceable Contract those that cannot be enforced in court or sued upon by rea son of defects provided by law until and unless they are ratified according to l aw Statute of Frauds- enacted to not only prevent fraud but also guard against t he mistakes of honest men by requiring certain agreements be in writing, otherwi se, unenforceable in court because there is no hard evidence other than witnesse s who may be unreliable. Unauthorized Contracts- those entered into the name of another by one who has been given no authority or legal representation or acted beyond his powers II. Discussions 1. What are the kinds of unenforceable contracts? According to A rt.1403, the kinds of unenforceable contracts are: (1) those entered into the na me of another by one acting without or in excess of authority, (2) those that do not comply with Statute of Frauds, (3) those where both parties are incapable o f giving consent 2. How many contracts violating the Statute of Frauds be ratifi ed? According to Art.1405, the ratification of contracts infringing the Statute of Frauds may be effected in 2 ways: (1) failure to object to the presentation o f oral evidence to prove the contract. Failure to object means waiver and makes contract binding or; (2) by acceptance of benefits under the contract, one who e njoyed benefits must not be allowed to repudiate its burdens 3. State the purpos e of the Statute of Frauds. Statute of Frauds has been enacted to not only preve nt fraud but also guard against the mistakes of honest men by requiring certain agreements be in writing, otherwise, unenforceable in court because there is no hard evidence other than witnesses who may be unreliable. III. Problems 1. What is the effect of ratification (according to Art.1407) a. By either; and if both parties are incapable of giving consent, contract is unenforceable. However, if one guardian or one party who has gained capacity ratifies the contract, contrac t becomes voidable b. By both, after becoming incapacitated? if both parties rat ifies the contract, contract is valid and retroacts from the day it was entered into 2. Can the promise of T be proved by the testimony of a witness who was pre sent when T made the same? No. According to Art.1403 (2, b), a special promise t o answer for the debt, default or miscarriage of another has to be evidenced in writing to be enforceable. 3. Can B enforce the sale considering that the contra ct was oral and the price was more the P500.00? No. According to Art.1403 (2, d) , if what I am selling is more than 500, contract must be in writing. If less th an 500, oral evidence of sale is enough. Chapter 9: Void or Inexistent Contracts Study Guide I. 1. 2. 3. Definitions Void Contract because of certain defects, p roduce no effect at all, inexistent from the very beginning Inexistent Contractrefer to agreements which lack one or more of the elements or do not comply wit h requirements for the existence of contract Indivisible Contract - when conside ration is entire and single II. Discussions 1. What are the characteristics of a void or inexistent contract ? According to Art.1409, the characteristics of a void contract are: (1) general ly produces no effect whatsoever, (2) cannot be ratified, (3) set up the defense of illegality cannot be waived, (4) action or defense for the declaration of it s inexistence does not prescribe, (5) defense of illegality is not available to third persons whose interests are not directly affected, (6) it cannot give rise to a valid contract. 2. Give the rules where the contract is unlawful and the a ct constitutes a crime, and both parties are equally guilty. According to Art.14 11, the rules are: (1)where both parties are in pari delicto: a. parties shall h ave no action against each other, b. both shall be prosecuted, c. thing or price of the contract shall be confiscated in favor of the government, (2)where only one party is guilty both parties are not equally guilty (in delicto) rule applie s only to more guilty party and innocent party may claim what he has given and n ot be bound to comply with his promise 3. Give the rules where the contract is u nlawful but the act does not constitute a criminal offense and only one party is guilty or both parties are not equally guilty. According to Art.1412, the rules are: (1) where both parties are in pari delicto is cause is unlawful but does n

ot mean criminal offense: a. neither party may recover what he has given, b. nei ther party may demand the performance of the other, (2) when only one party is g uilty: a. guilty party loses what he has given by reason of contract, b. guilty party cannot ask for fulfillment of the other, c. innocent party may demand the return of what he has given, d. innocent party cannot be compelled to comply wit h his promise III. Problems 1. Is it correct for the court to dismiss the action because of the long lapse of time? No. According to Art.1410, the action or def ense for the declaration of the inexistence of a contract does not prescribe. Th us, even if it took S 20 years, his action should not be dismissed because of th e duration of the time. 2. Is X entitled to recover from Y? NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

3. Yes. According to Art.1414, the courts may allow the party repudiating the contr act to recover the money or property. Thus X can recover his money from Y. Is Y entitled to recover from M? No. According to Art.1412 (1), neither may recover w hat he has given by virtue of the contract or demand the performance of the othe rs undertaking. Thus since it is an illegal contract, W cannot recover from M. TITLE III: Natural Obligations Study Guide I. 1. 2. Definitions Natural Obligati on Originated in the Roman law where they grew in importance in order to temper with equity and justice the severity of jus civile; Could no be enforced by civi l action but has certain juridical consequences Civil Obligation- arise from law , contracts, quasi-contracts, delicts, quasi-delicts; give a right of action to compel their performance II. Discussions 1. What is the effect of the voluntary performance of a natural obligation? According to Art.1423, after voluntary fulfillment by the obligor, t he natural obligation authorizes the retention of what has been delivered or ren dered by reason thereof. 2. Give 2 examples of natural obligations under the law . According to Art.1424, the two examples of natural obligations are acquisitive and extinctive. III. Problems 1. Decide. D can no longer recover what he has vo luntarily paid. According to Art.1428, when, after am action to enforce a civil obligation has failed, the defendant voluntarily performs the obligation, he can not demand the return of what he has delivered or the payment of the value of th e service he has rendered. 2. Give the situation by reason of which M cannot rec over the P2000 from N. According to Art.1427, M cannot recover from N if he volu ntarily pays; and if N has consumed it in good faith. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

STUDY GUIDE - CONTRACTS Chapter 1: General Provision Study Guide I. 1. 2. Definitions Obligation is a ti e or bond recognized by law where one person is bound in favor of another to giv e something, do a certain or act, or not do a certain act. Quasi-contract is a j uridical relation caused by lawful, voluntary and unilateral acts because of whi ch, the parties become bound to each other so that no one will be unjustly enric hed or benefited at the expense of the other. The law considers the parties to h ave entered a contract, even if they havent really and regardless of their intent ion, to prevent injustice. Compliance in good faith means conformity to the cond itions or terms of the contract or agreement. Wrong- an act or omission of one p arty which violates the legal right(s) of another. Solution indebiti- is a juridic al relation created when something is received without a right to demand it and it was unduly delivered through mistake. 3. 4. 5. II. Discussions 1. What are the essential requisites of an obligation? Give an e xample to illustrate. The 4 essential requisites of an obligation are a passive subject, an active subject, an object or prestation, and a juridical or legal ti e. The passive subject is the debtor or the one who has a duty, the active subje ct is the creditor or the one who is demanding, the object is the condition for the fulfillment of the obligation and the legal tie binds the parties to the obl igation. For example, if John and Michael signed a contract stating that John wo uld pay Michael 5000 pesos for the repair of his car, Michael is the passive sub ject, John is the active subject, repairing Johns car is the object, and their wr itten contract is the legal tie. 2. Why are obligations under the Civil Code a j uridical necessity? Explain. Obligations under the Civil Code are a juridical ne cessity because they are based on positive laws. This means that noncompliance o f the obligation entitles the creditor to call upon the courts of justice to enf orce the fulfillment of the debtors obligations. The debtor can also be held liab le for damages to compensate for the harm caused by his noncompliance. 3. What a re the elements or requisites in order that a person may acquire a right of acti on in court against another to enforce the performance of the latters obligation? Right is the power a person has under the law to demand from another any presta tion. A person may acquire a right of action in court to enforce the performance of anothers obligation if the obligation is a civil obligation, that is, it is b ased on positive law. 4. May a person incur obligations even without entering in to any contract or voluntary agreement? Explain. Yes because obligations do not only arise from contracts. They can be imposed by law, arise from quasi-contract s, from crimes or acts or omissions punished by law and from quasi-delicts or to rts. You can have an obligation so that no one will be unjustly benefited or enr iched at the expense of someone else, or if you commit a crime, or if you cause damage due to fault or negligence. III. Problems 1. Is X entitled to be reimburs ed by Y for the amount of P150? Yes, because on the principle of quasi-contract, Y is liable to X even if she did not give her consent. X fed Ys child and incurr ed expenses and this should be reimbursed by X to prevent anyone being unjustly enriched or benefited at the others expense. 2. Under the circumstances, does it follow that Y is liable to X for the damage? Yes because even if there is no pre -existing contractual relation between them, Xs car was damaged due to the neglig ence of Y. If Y did not bump Xs car, Xs car would not have been damaged. Thus, Y i s liable to X for the damages 3. Has X the right to ask indemnity from R, employ er of X, on the ground that the accident occurred when X was on his way to trans act business with a client of R? X doesnt have a right to ask for indemnity from R because there is no law that requires this. 4. Is D legally justified to refus e to pay C? No, because when D loaned from C, he entered a voluntary agreement a nd he was willing and the contract is valid. Thus, D should comply with their ag reement in good faith and does not have a legal justification to refuse payment to C. Chapter 2: Nature & Effect of Obligations Study Guide VI. Definitions 1. G eneric/ Indeterminate thing a thing that refers only to a class or genus to whic h it pertains and cannot be pointed out with particularity. 2. Personal Right po

wer of a person to demand from another the fulfillment of the latters obligation. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

3. 4. 5. Legal delay or Default failure to perform an obligation on time which failure con stitutes a breach of the obligation. Fortuitous event- any event which cannot be foreseen, or which, though foreseen, is inevitable. Diligence of a good father of a family - ordinary care or diligence which an average person exercises over his own property. VII. Discussions 1. Give the rules as to the liability of a person for loss or d amage resulting from a fortuitous event. A person is not responsible for loss or damage resulting from a fortuitous event. Thus, his obligation will be extingui shed. (Except when expressly specified by law, declared by stipulation, or when nature of obligation requires assumption of risk.) 2. What rights are given by l aw to the creditor in case the debtor fails to comply with his obligation to del iver a specific thing? The creditor can demand specific performance or fulfillme nt of the obligation with indemnity for damages, OR demand rescission or cancell ation of the obligation with a right to indemnity for damages, OR demand payment for damages only when it is the only feasible remedy. 3. What are included to b e delivered in an obligation to give a definite thing? Explain them. The obligat ion includes the delivery of all its accessions and accessories. Accessions are the fruits of a thing or additions to or improvements upon a thing. Accessories are things joined to or included with the principal thing for the latters embelli shment, better use, or completion. 4. Suppose the obligation of the debtor is to do something and he fails to do it or performs it in contravention of the agree ment, what are the remedies available to the creditor? If the debtor fails to co mply, the creditor has the right to have the obligation performed by himself, or by another, (unless personal considerations are involved) at the debtors expense and to recover damages. If the debtor performs contrary to terms, it may be ord ered by court that it be undone (if still possible to undo what was done) 5. Can a debtor be put in delay and consequently, incur liability even without demand from creditor? Explain. No. If the creditor does not demand, then it is presumed that he is giving the debtor an extension of time and the latter in not liable for damages. 6. May an action arising from fraud be waived? Explain. Yes. If the creditor, with full knowledge of the fraud committed by the debtor, decides to waive his right to indemnity, then it is considered as an act of forgiveness by the former to the latter. Waiver is void only when it is a waiver of an action f or future fraud. 7. May an action arising from negligence be waived? Explain. Ye s. An action for future negligence may be renounced except where the nature of t he obligation requires the exercise of extraordinary diligence as in the case of common carriers and when the negligence shows bad faith. VIII. 1. Problems Who has a better right to Silver? B has a better right to Silver because he had a ri ght to Silver the moment his contract with S was perfected, which was on July 5. This is before Ts contract with S was perfected. Thus, B has a better right. Is S guilty of legal delay? No. S is only guilty of ordinary delay since B has not yet demanded. Suzie gave birth to a colt on July 5 a. What are the obligations o f S? S is obliged to preserve Suzie, Deliver its fruits, Deliver its accessions and accessories, deliver Suzie, and answer for damages in case of non-fulfillmen t or breach. b. Who has a right to the colt? B has a right to the colt since it is a fruit of Suzie, which is part of what S has to deliver to B. c. Who is the lawful owner of Suzie in case it was sold and delivered by S to T on July 8? T w ill be the lawful owner of Suzie if he acted in good faith. S will now be oblige d to answer to B for damages. Is D liable to pay interest? D is not liable to pa y interest since the payment of the interest was not stipulated in his contract with C. Can R still collect from E the rents for January & February 2003? R can collect from E the rents for January and February if he can show proof that the latter has not yet paid for the said months. If R cannot do so, then it is presu med that E has paid for the rent for January and February. 2. 3.

4. 5. Chapter 3, Sec.1: Pure and Conditional Obligations Study Guide IX. Definitions 1 . Condition a future and uncertain event, upon the happening of which, the effec tivity or extinguishment of an obligation subject to it arises. 2. Civil loss a thing disappears in such a way that its existence is unknown, or even if known, it cannot be recovered, whether as a matter or fact or of law. 3. Reciprocal obl igations those which arise from the same cause where each party is a debtor and c reditor to the other. 4. Pure obligation- obligation not subject to any conditio n and NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

5. no specific date is mentioned for its fulfillment (immediately demandable). Pote stative condition - a condition suspensive in nature and which depends upon the sole will of one of the contracting parties. X. Discussions 1. Illustrate an obligation subject to: (a suspensive condition, (b)resolutory condition. (A) A will give B P100 if DLSU will beat ADMU in the ga me. (B) A will give B P100 until DLSU beats ADMU in the game. What is the effect of the fulfillment of the condition in a conditional obligation? (A) As obligati on to B will arise (B) As obligation to B will be extinguished 2. Give 2 cases wh en the conditional obligation is valid although the condition depends entirely u pon the will of the debtor. Explain (1) If the obligation is a pre-existing one and does not depend for its existence upon the fulfillment of the obligation. If the debtor already has an obligation, only the condition will be void because t he obligations existence does not depend upon the conditions fulfillment. (2) If t he condition is resolutory, and depends upon the debtor, it is valid. It is the same as a suspensive condition that depends upon the creditors will. 3. May an ob ligor be liable under an obligation subject to a suspensive condition although t he condition has not yet been fulfilled? Explain . Yes. If the condition is susp ensive, and the obligor actually prevents the fulfillment of the condition, and he does this voluntarily, he can be held liable. The obligor is liable because h e prevented the condition from happening to avoid his obligations. 4. In an obli gation to give a parcel of land subject to a suspensive condition, who is entitl ed to the fruits that accrued during the pendency of the condition once said con dition is fulfilled? The debtor is entitled to the fruits of the land unless the ir stipulations clearly states otherwise. 5. State the rules in case the thing t o be delivered: a. Is lost with the debtors fault; without his fault If w/ debtors fault, creditor is entitled to demand damages plus incidental damages, if any. If w/o debtors fault, obligation is extinguished and debtor has no liability to t he creditor. b. Deteriorates with the debtors fault; without his fault If w/ debt ors fault, creditor may choose between rescission of obligation with damages OR f ulfillment of obligation with damages. If w/o debtors fault, creditor will suffer the deterioration. XI. Problems 1. Can C insist that B pay not later than Augus t 30? No. C cannot insist that B pay earlier because the condition is if B wants . The obligation is void. 2. Is the obligation valid? The obligation is valid beca use the suspensive condition does depend upon the sole will of D. 3. What are th e remedies of S? S can EITHER demand action for specific performance (fulfillmen t) of the obligation with damages, OR demand action for rescission of the obliga tion with damages. 4. If you were the judge, would you grant the rescission? No. I will not grant rescission because B is willing to pay the balance and only ne eds more time. I will grant B a term for performance instead. 5. Give the 3 case s when the obligation of D is demandable at once by C. (1) If Ds obligation does not depend upon a future or uncertain event. (2) If Ds obligation does not depend upon a past event unknown to the parties (3) If the obligation depends upon a r esolutory condition. Chapter 3, Sec.2: Obligations with a period Study Guide I. 1. 2. 3. Definitions Obligations with a period one whose consequences are subjec ted in one way or another to the expiration of said period or term. Period a fut ure and certain event upon the arrival of which the obligation subject to it eit her arises or is terminated A day certain which must necessarily come although i t may not be known when. Indefinite period when it is not fixed or it is not kno wn when it will come. II. Discussions 1. Has the debtor the right to recover what he has paid to the c reditor before the arrival of the period agreed upon? Explain. Yes, if the debto r paid, unaware of the period, believing that it is already due and demandable, he can recover. The debtor paid by mistake (solutio indebiti) 2. If an obligation does not state a period for its performance, has a party the right to ask a cour t to fix a period or the duration thereof? Explain . No. If the obligation does not state a period and no period is intended, the court is not authorized to fix

a period. The courts have no right to make contracts for the parties. 3. Give t he cases when the obligee can demand the performance of an obligation even befor e the arrival of the period agreed upon. (1) when debtor becomes insolvent. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

(2) when debtor does no furnish the guaranties or securities promised. (3) when guaranties or securities given have been impaired or have disappeared (4) when t he debtor violates an undertaking (5) when debtor attempts to abscond III. Probl ems 1. Can D require C to accept payment before December 31? No. It is presumed that the period designated is established for the benefit of both. An earlier pa yment by D may be inconvenient for C to accept. 2. Is the obligation of D condit ional or one with a period? It is one with a period because it is a future and c ertain event. Even if it is not known exactly when Ds father will D, it is known that that day will indeed come. 3. What rights, if any, does C have under the la w? May C demand payment from D even before August 10? C can demand payment from D and ignore the period. This is due to the impairment of Ds guaranty or security . Chapter 3, Sec.3: Alternative Obligations Study Guide I. 1. 2. 3. Definitions Alternative obligation one wherein various prestations are due but the performan ce of one of them is sufficient as determined by the choice which, as a general rule, belongs to the debtor. Facultative obligation one where only one prestatio n is due but the debtor may substitute another. Conjunctive obligation one where there are several prestations and all of them are due. II. Discussions 1. What are the limitations on the right of choice of the debtor in alternative obligations? Illustrate one such limitation. Debtor cannot choos e prestations which are impossible, unlawful, or which could not have been the o bject of the obligation. Also, debtor cannot choose if only one prestation is pr acticable or choose part of one prestation and part of another. (EX: If the pres tations are to pay P250000, give a diamond ring or kill Pedro, debtor cannot cho ose to kill Pedro because it is unlawful) 2. Give the situation when the debtor is given the option either to exercise his right of choice or to rescind the con tract with damages . If through the creditors acts, the debtor cannot make a choi ce, the latter may rescind the contract with damages. 3. State the legal effects in case: a. Some of the objects of the obligation are lost through the fault of the debtor who has the right of choice; The creditor may claim a different item with a right to damages or may pick the price of the one lost with a right to d amages. b. All are lost through his fault. The creditor may demand payment of th e price of any of the prestations with a right to indemnity for damages. III. Pr oblems 1. Can D still change his period considering that he was given the right of choice? No. D can only change his period with Cs consent because he has alread y communicated his choice thus it is irrevocable. 2. What is the liability of X in case, through hi fault: a. Item two is lost or destroyed; If Y chooses item t wo, he will the price of which and be liable for damages OR if Y chooses the oth er items, he will still be liable for damages. b. All the items are lost or dest royed? X will be liable for damages and will pay the price of the item which Y c hooses. 3. Is S liable to B in case the TV is lost through Ss fault? No, S is not liable because he can still perform his obligation by delivering his refrigerat or instead. Chapter 3, Sec.4: Joint and Solidary Obligations Study Guide I. 1. 2 . 3. 4. 5. Definitions Joint obligation one where the whole obligation is to be p aid or fulfilled proportionately by different debtors and/or is to be demanded p roportionately be different creditors Solidary obligation one where each one of the debtors is bound to render, and/or each one of the creditors has a right to demand from any of the debtors, entire compliance with the prestation. Active So lidarity- solidarity on the part of the creditors where any one of them can dema nd the fulfillment of the entire obligation. Joint indivisible obligation- the o bligation is joint because the parties are merely proportionately liable but ind ivisible because the object or subject matter is not physically divisible into d ifferent parts. Solidary divisible obligation- the obligation is solidary becaus e the parties can be compelled to fulfill the entire obligation and divisible be cause the subject matter can be divided NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

II. Discussions 1. If there are two or more debtors in one and the same obligati on, is their liability joint or solidary? It would depend. According to Art.1207 , the concurrence of two or more debtors in one and the same obligation does not make them liable to comply with the whole obligation. Unless the obligation exp ressly so states, or the law or nature of obligation requires solidarity, the ob ligation is a joint obligation. 2. In case of active solidarity, to whom shall t he debtor or debtors make the payment? According to Art.1214, the debtors may ch oose which creditor to pay; however, if a creditor makes a demand, then the paym ent shall be made to him. 3. Give the effect of the condonation or remission of a debt by one of the several creditors where: a. The obligation is joint; Accord ing to Art.1215, the condonation will only affect the share of the certain debto r. The obligation will not be extinguished and the other co-debtors will still h ave to comply with their proportionate shares. b. The obligation is solidary Acc ording to Art.1215, the part of the obligation which is condoned or remitted sha ll be extinguished. It is now the responsibility of the creditor who made the co ndonation/remission to be liable to his co-creditors for their corresponding sha res. 4. In case a remission is made by a creditor of the share of one of the sol idary debtors, is the said debtor released from responsibility to his codebtors? Explain. According to Art.1219, the debtor is not released from his responsibil ity to his co-debtors. If one of the co-debtors would become insolvent, he still has the responsibility to share in the payment of the insolvent debtor. 5. Supp ose a solidary debtor obtained remission of the whole obligation, is he entitled to reimbursement from his co-debtors? Explain. According to Art.1220, the debto r is not entitled to reimbursement from his co-debtors. The remission of the ent ire obligation is essentially gratuitous and he paid nothing, thus, he shall not be reimbursed. III. Problems 1. Has W the right to demand the full payment of P 30000 from Z alone? No. According to Art.1207, if the obligation does not state solidarity, then it is a joint obligation. And if it is a joint obligation, Z is only liable up to his proportionate share of P10000; thus, W cannot demand from Z the whole P30000. 2. According to Article 1217: a. How much can X collect fro m Y and Z? X can collect from Y and Z only the share which corresponds to them, which is P10000 each. b. May X collect interest from Y and Z? X cannot collect i nterest because payment was made before the debt was due. c. Suppose Z turns out to be insolvent, how much can X collect from Y? If Z becomes insolvent, X can c ollect from Y his share plus half of Zs share, which is P15000 3. A owes B and C, solidary creditors, the sum of P20000: a. Can C condone the debt without the co nsent of B? According to Art.1212, C can condone the debt without Bs consent, how ever, he shall be liable to B and has to reimburse Bs share. b. Can C assign his rights without the consent of B? According to Art 1213, C cannot assign his righ ts to another person without Bs consent. However, if there are 3 creditors, (B, C , and D) C can assign his rights to D even without Bs consent. 4. Has C the right to demand that A and B be also included as party defendants? According to Art.1 216, C has no right to demand from D to include A and B as party defendants beca use C, as a solidary debtor can be compelled to pay for the entire obligation. 5 . Give the rights and obligations of the parties. According to Art.1221, as far as D is concerned, A, B and C are all liable for the price of the printing equip ment as well as damages. A and B can recover from C since it was through his fau lt that the object was destroyed. If C paid for the price and damages, he cannot ask for reimbursement from A or B. Chapter 3, Sec.5: Divisible and Indivisible Obligations Study Guide I. 1. 2. 3. Definitions Divisible obligation one, the ob ject of which, in its delivery or performance, is capable of partial fulfillment . Indivisible obligation one, the object of which, in its delivery or performanc e, is not capable of partial fulfillment. Legal Indivisibility- where a specific provision of law declares as indivisible, obligations which, by their nature, a re divisible. II. Discussions 1. Explain: The divisibility of an obligation is different from the divisibility of the thing which is the object thereof. According to Art.1223 , the obligations divisibility or indivisibility is not determined by the divisib ility or indivisibility of its object. Even if the object is divisible but the l

aw or the parties intend the obligation to be indivisible, then it is indivisibl e. But if the object is indivisible, the obligation is always indivisible as wel l. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

2. 3. What obligations are deemed indivisible? According to Art.1225, obligations to g ive definite things and those which are not susceptible of partial performance s hall be deemed indivisible. What obligations are deemed divisible? According to Art.1225, when the obligation has for its object the execution of a certain numb er of days work, the accomplishment of work by metrical units, or analogous thin gs which by their nature are susceptible of partial performance shall be deemed divisible. III. Problems 1. Is the obligation divisible or indivisible? Indivisible. Accord ing to Art.1225, even though money is divisible the obligation may still be indi visible if the parties intend it to be. Since A and B intend to pay the loan on a certain date, the intention is that it will be paid at one time and as a whole . 2. State the rights and obligations of the parties. According to Art 1224, the failure of B to comply with his share shall give rise to indemnity for damages. A and C has the obligation to pay only up to their share of the price of the ho rse. B has the obligation to pay for his share plus the indemnity. D has a right to collect the price of the horse plus indemnity for damages. 3. Is the obligat ion of D divisible or indivisible? Divisible. According to Art.1225, loans to be paid by installments are deemed divisible obligations. However, each installmen t of P2500 is indivisible. Chapter 3, Sec.6: Obligations with a Penal Clause Stu dy Guide I. 1. 2. 3. Definitions Obligations with a penal clause one which conta ins an accessory undertaking to pay a previously stipulated indemnity in case of breach. Penal clause an accessory undertaking attached to an obligation to assu me greater liability in case of breach. Joint penal clause- both the principal o bligation and the penal clause can be enforced. II. Discussions 1. What are the purposes of incorporating a penal clause to an o bligation? According to Art.1226, penal clauses are incorporated to obligations to insure their performance (to make the consequence of breach as onerous as pos sible) and to substitute penalty for indemnity for damages and payment of intere sts in non-compliance. The main purposes are reparation and punishment. 2. In an obligation with a penal clause, may the creditor still recover damages and inte rests in addition to the stipulated penalty? According to Art.1226, the creditor may still do so if it is stipulated by the parties, the obligor refuses to pay the penalty (in which case the creditor may recover legal interest thereon), or the obligor is guilty of fraud in the fulfillment of the obligation (in which ca se the creditor may recover damages caused by such fraud). 3. In what cases may the debtor validly object to the enforcement of the stipulated penalty? Accordin g to Art.1227, debtor may object the enforcement of penalty if there is performa nce on his part or if the creditor already required fulfillment of obligation. I II. Problems 1. Has Y the right to refuse to accept the penalty in lieu of the h orse? Yes. According to Art.1227, X cannot exempt himself from delivering the ho rse by paying the penalty, unless this right was reserved for him. 2. Can Y stil l enforce the penalty? Yes. According to Art 1228, Y does not have to prove that he suffered damages in order to demand the penalty. Since X violated the obliga tion, Y can enforce the penalty. 3. Is X liable for damages in addition to the p enalty? No. According to Art.1226, X will only be liable for damages if the stip ulations so states, if X refuses to pay the penalty, or when there is fraud on Xs part. Since there is only negligence and not fraud, Y cannot demand for damages in addition to the penalty and X is only liable for the penalty. Chapter 4, Sec .2: Loss of the Thing Due Study Guide I. 1. 2. 3. Definitions Legal impossibilit y occurs when the obligation cannot be performed because it is rendered impossib le by provision of law, although physically it may still be possible of performa nce. Loss of thing occurs when the object perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered . Difficulty of performance- performance has become so difficult as to be manife

stly beyond the contemplation of both parties. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

II. Discussions 1. Give two cases when a person may be released from an obligati on validly entered into. According to Art.1266, a person may be released from an obligation if the prestation becomes legally or illegally impossible without th e fault of the obligor. Another case is when (according to Art.1267) the service has become so difficult, as to be manifestly beyond the contemplation of both p arties, the obligor may be released in whole or part 2. Give the cases when loss of the specific thing to be delivered will not exempt the obligor from liabilit y even in the absence of fault or delay. According to Art.1262, the obligor will not be exempt from liability if it is stated by law or stipulation. This also a pplies when the nature of the obligation requires the assumption of risk. 3. Wil l partial loss of the specific thing to be delivered extinguish the obligation? Explain According to Art.1264, the courts will determine if the partial loss of the object of the obligation is so important as to extinguish the obligation. II I. Problems 1. Is X liable to Y? Yes. According to Art.1265, if the object is lo st in the possession of the debtor, it shall be presumed that the loss was due t o his fault, unless there is proof to the contrary. Thus, X is still liable to Y unless he proves the contrary. 2. Does it mean that X is already exempt from li ability? Yes. According to Art 1262, the obligation which consists in the delive ry of a specific thing shall be extinguished if it should be lost without the fa ult of the debtor, and before he has incurred in delay. Since the thing was lost without Xs fault and he is not yet in delay, then he is already exempt from his liability. 3. State the effects of loss as far as X, Y, and Z are concerned. Acc ording to Art.1269, the creditor shall have the rights of action which the debto r may have against the third persons by reason of the loss. Thus the obligation of X is extinguished and he is no longer liable to Y. However, Y has the right t o bring an action against Z to recover the price of the thing with damages. Chap ter 4, Sec.3: Condonation or Remission of Debt Study Guide I. 1. 2. Definitions Condonation or remission of debt the gratuitous abandonment by the creditor of h is right aginst the debtor. It is thus a form of donation Inofficious remission when the remission given is more than that which the creditor can give by will. II. Discussions 1. Give the requisites in order that a condonation or remission of debt may be valid. According to Art.1270, the requisites of remission or cond onation are: (1) it must be gratuitous, (2) it must be accepted by the obligor, (3) the parties must have capacity, (4) it must not be inofficious, and (5) if m ade expressly, it must comply with the forms of donations. 2. When is the condon ation or remission of debt considered inofficious? What is the remedy of the par ty adversely affected thereby? According to Art.1270, the condonation or remissi on of the debt is considered inofficious if it is more than that which the credi tor can give by will. The remedy is that the testamentary dispositions which imp air the legitime shall be reduced on petition of the heirs. III. Problems 1. D b orrowed money rom C evidenced by a promissory note signed by D. a. What presumpt ion arises if: 1. The promissory note is voluntarily given by C to D? According to Art.1271, the delivery of a private credit evidencing a credit, made voluntar ily br the creditor to the debtor, implies the renunciation of the action which the former had against the latter. Thus the presumption is that C has renounced his rights against D and a remission of debt occurred. 2. It is found in the pos session of D? According to Art.1272, whenever the private document in which the debt appears is found in the possession of the debtor, it shall be presumed that the creditor delivered it voluntarily. Thus it is presumed that C delivered the promissory note to D and the debt has been remitted. b. When will the presumpti on of remission arise? The presumption of remission will arise when the private document in which the debt appears is found in the possession of the debtor. 2. What presumption arises if: a. The debt is condoned by C? According to Art.1273, the renunciation of the principal debt shall extinguish the accessory obligatio ns. Thus, if C condoned the debt, then the guaranty and security is likewise ext inguished. b. The certificate is later found in the possession of D? According t o Art.1274, it is presumed that the accessory obligation of pledge has been remi tted when the thing pledged, after its delivery to the creditor, is found in the possession of the debtor. Thus, it is presumed that Ds pledge of shares of stock

has been remitted. Chapter 4, Sec.4: Confusion or Merger of Rights NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Study Guide I. 1. 2. Definitions Confusion meeting in one person of the qualitie s of creditor and debtor with respect to the same obligation Merger when the cre ditor is in itself his own debtor. II. Discussions 1. What is the rationale behind confusion or merger as a mode of extinguishing an obligation? According to Art.1275, the obligation is extinguis hed if the roles of creditor and debtor are merged into the same person. This is so because it becomes absurd since a person cannot claim payment from himself. 2. Give the effect of merger when it takes place: a. In the person of the princi pal debtor or creditor According to Art.1276, merger in the person of the princi pal debtor or creditor extinguishes the obligation. b. .in the person of the gur antor of the principal obligation. According to Art.1276, confusion which takes place in the person of the guarantor does not extinguish the obligation. It only extinguishes the guaranty. III. Problems 1. Give the effect of the assignment. According to Art.1277, confusion does not extinguish a joint obligation. Since C , who is originally a joint debtor, becomes the creditor, then A and B are now l iable to him for their share of P5000 each. 2. Assuming the obligation of A, B a nd C is solidary, distinguish the effect of the assignment from the first proble m. According to Art.1277, merger in the person of one of the solidary debtors sh all extinguish the entire obligation. Thus, the solidary obligation of A, B, and C to D is extinguished. However, C can still ask for reimbursement from A and B of their share in the obligation of P5000 each. Chapter 4, Sec.5: Compensation Study Guide I. 1. 2. 3. Definitions Compensation the extinguishment to the concu rrent amount of the debts of two persons, who, in their own right, are debtors a nd creditors of each other. Legal compensation when it takes place by operation o f law even without the knowledge of the parties Facultative compensation- when i t can be set up only by one of the parties. II. Discussions 1. What are the distinctions between confusion and compensation as modes for extinguishing an obligation? According to Art.1278, there is compen sation when TWO persons are creditors and debtors of each other. Confusion occur s when ONE person is his own creditor and debtor. 2. In what way is compensation similar to payment? According to Art.1289, compensation and payment is similar in way due to the fact that application of payments can be applied to compensati on. 3. May there be compensation although the things due are not consumable? Exp lain. According to Art.1279, there will be no compensation if both debts are NOT in the form of sums of money or consumable things of the same kind and quality. 4. When may compensation take place when only one of the debts is due? Accordin g to Art.1279, compensation may take place when A has not yet paid B on the date that Bs obligation is due. III. Problems 1. Has the bank the right to apply the deposit to the payment of Ds debt? Yes. According to Art.1287, since the other pa rty is a bank deposit, it may apply the deposit to the payment of Ds debt. 2. Can compensation also take place although the debts are not payable on the same deb t? According to Art.1282, the parties may agree upon the compensation of debts w hich are not yet due. Thus, if C and D would agree, compensation can take place. It can also happen if by Oct20, D hasnt paid C yet. 3. Illustrate compensation w hich can be set up by one of the parties. According to Arts.1287,1288, If A depo sited an object to B, B the depository cannot claim compensation. However, A can set up his deposit as a compensation to B. Also If B borrowed the thing, only A can set up the compensation. 4. Assuming that both obligations are now due, may the two debts be compensated against each other? What is the effect if the debt of C is later annulled in court at the instance of D? According to Art.1284, th ey may be compensated. However, when Cs debt is later annulled, D is still liable to C because the annulment will make it seem like as if there had been no compe nsation. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!

Chapter 4, Sec.6: Novation Study Guide I. 1. 2. 3. Definitions Novation the exti nction of an obligation through the creation of a new one which substitutes it. Mixed novation when the object and/or principal conditions of the obligation and the debtor or creditor, or both parties, are changed. Expromission- that which t akes place when a third person of his own initiative and without the knowledge o r against the will of the original debtor assumes the obligation of the latter w ith the consent of the creditor. Delegacion- that which takes place when the cre ditor accepts a third person to take place of the debtor at the instance of the latter. 4. II. Discussions 1. Give the requisites of novation. According to Art.1292, the r equisites of novation are (1) a previously valid obligation, (2) capacity and in tention of the parties to modify or extinguish the obligation, (3) the modificat ion or extinguishment of the obligation and (4) the creation of a new valid obli gation. 2. When there is subrogation, what rights are acquired by the new credit or? According to Art.1303, subrogation transfers all the rights, either against the debtor of against third persons, subject to stipulation in a conventional su brogation. 3. In novation, give the effect where: a. The new obligation is voida ble According to Art.1297, if the new obligation is void, the original one shall subsist, unless the parties intended that the former relation should be extingu ished in any event b. The old obligation is voidable. Explain According to Art.1 298, the novation is void if the original obligation is void, except hen annulme nt may be claimed only by the debtor or when ratification validates acts which a re voidable 4. In novation, are accessory obligations necessarily extinguished? Explain. According to Art.1296, when the principal obligation is extinguished in consequence of a novation, accessory obligations may subsist only insofar as th ey may benefit third persons who did not give their consent. Thus if a third per son is affected by the accessory in the original obligation, it will not be exti nguished without his consent. III. Problems 1. Is D released from his obligation to C? Yes. According to Art.1293, there is expromission only if D is released f rom his obligation to C. If T and C didnt agree as to such, D is not liable becau se T paid without his knowledge or consent. 2. Is D still liable to C in case of insolvency of T? No. According to Art.1295, the insolvency of the new debtor wi ll not revive the creditors actions against the original one. 3. What are the rig hts of T? According to Art.1302, T has the all the previous rights that C had. 4 . Illustrate a mixed novation. Jo will deliver to Jacq a sundae cone. In the agr eement of the parties, Jo will instead deliver a tetra pack of jungle juice to N ix. NOTE: PROPERTY OF BMS. UNOFFICIAL OBLICON REVIEWER. THIS SPECIAL PRIVILEGE IS ST RICTLY FOR BMS MEMBERS ONLY!!!