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OBLIGATIONS AND CONTRACTS

CIVIL OBLIGATION juridical necessity to give,


to do or not to do.
Essential Requisites of Obligation (PAVO)
1. Active Subject aka Creditor (to give) or
Obligee (is oblige to do) has the right to go to
court in case of non-performance by the debtor.
Has the right to demand that the obligation be
performed.
2. Passive Subject aka Debtor or Obligor. Has
to perform the obligation.
3. Oject the prestation or conduct to be
performed by the passive subject.
Conduct or prestation:
a. to give b. to do
c. not to do
4.
Vinculum
juris

sanction/specific
performance. The obligatory element in an
obligation.
Sources of Obligation
1. Law
2. Contracts culpa contractual
3. Quasi-contracts no contract. Based on
unjust
enrichment
(Solutio
Indebiti
and
Negotiorum Gestio)
4. Crimes/delicts culpa criminal
1

5. Quasi-delicts culp aquiliana there is


negligence/ no contractual relationship between
the parties.
General Rule for obligations arising from
delicts
If one committed a crime, he is criminally and
civilly liable.
Exception: When there is no private offended
party.
Civil liability may be awarded if accused was
convicted beyond reasonable doubt.
Kinds of Prestation
1. To give a determinate thing or a generic
thing
2. To do - + personal obligation/ not enforceable
by specific performance violative of the
Constitution of Involuntary Servitude. Remedy:
To be done by another at obligors expense.
3. To not do there is prohibition.
Accessory obligations
1. After constitution of obligation and before
delivery:
Take care of the thing with diligence of GFF
Except: when law or stipulation requires another
standard.
- If the thing is damaged, the debtor is liable for
damages.
2

2. Account and deliver to creditor the fruits of


the thing from the time of obligation to deliver.
Nature of the Right of the Creditor
Before delivery personal right
After delivery real right
Creditors remedies when obligation is to
do
1. If something only the obligor can do
equivalent performance plus damages.
2. When anyone else can do the obligation
substitute
performance
or
equivalent
performance.
Creditors remedies when obligation is not
to do
1. Substitute performance
2. Equivalent performance exclusive or in
addition to number 1.
Concept of delay/default (Mora)
GR: Delay begins after demand
XPN: In reciprocal obligations where one who is
not ready to perform is the one in delay.
Three kinds of Mora
3

1. Mora Solvendi debtor in delay. (delay in


performance)
Non performance with respect to time
Negligence and malice with respect to quality
Requisites of Mora Solvendi
1. Obligation is liquidated and demandable.
2. Debtor delays in the performance due to dolo
or culpa (thus without justifiable reason)
3. The creditor requires performance, judicially
or extra-judicially (demand)
GR: Demand is required prior to mora solvendi
mora solvendi ex persona.
XPN: When demand is not required mora
sovendi ex re
1. The obligation/law expressly so declares.
2. Time is of the essence. Look at the intent of
the parties and attendant circumstances.
3. Demand is useless. Ex: Under the law on
partnership, a promise to make contributions on
a particular date and then failing to do so, would
make the person a debtor of the partnership and
is liable for interest and damages.
2. Mora Accipiendi creditor in delay (delay in
accepting performance)
3. Compensatio morae both are in delay. No
one is liable (In pari delicto)
Force Majeure
4

Requisite of caso fortuito


1. The cause was unforeseen and unexpected
and was independent of human will.
2. Impossible to foresee, or if foreseen,
impossible to avoid.
3. Impossible for the debtor to fulfill his
obligation in the normal manner.
4. Obligor must be free from participation in the
aggravation of the injury to the creditor.
Effect if there is a fortuitous event
GR: The debtor is free from liability
XPN: (SLN)
1. If the parties have agreed or Stipulated.
2. If the Law so declares.
3. Nature of the obligation requires assumption
of risk.
Types of Obligation
Classes of obligations
1. Pure
2. Conditional happening gives birth/death to
the obligation
a. Suspensive Condition
condition. Gives rise to
Demandability is suspended.
5

wait for the


the obligation.

b. Resolutory Condition when the condition


happens, the obligation is extinguished.
Demandable at once.
c. Potestative condition something that
depends solely on the will one of the parties.
VOID.
d.
Impossible
or
illegal
suspensive
condition VOID
d1. original impossibility
d2. supervening impossibility does not
annul the obligation, it just extinguishes it.
3. Obligation with a term /period unlike
condition which is uncertain, term is certain.
Only demandable when the day arrives.
Anything that is paid before the day arrives is
1. unrecoverable if made consciously. There is
waiver of the term.
2. recoverable including fruits and interest if
made out of mistake.
When court can fix the duration of the
period
1. If it does not fix a period but a term is
assumed to have been intended.
2. If the period entirely depends upon the will of
the debtor.
3. Debtor binds himself to pay when his means
permit him to do so.

Instances when the debtor loses the right


to avail of the period (IGIVAD) the
obligation becomes pure
1. After the obligation have been contracted, he
becomes
Insolvent,
unless
he
gives
security/guarantee for the debt.
2. He does not furnish to the creditor the
Guarantees/securities promised.
3. By his own acts, he Impairs said
guarantees/securites, and by fortuitous event,
they are lost. Unless he replaces them with
securities just as good.
4. He Violates the undertaking in consideration
of which the creditor agreed to a period.
5. He attempts to Abscond.
6. Article 2109 Creditor is Deceived as to the
substance or quality of the thing.
Classification of obligation according to
number of prestation
1. Conjunctions two or more prestations, all
of which must be performed.
2. Alternative 1199-1205 two or more
prestations, one or some must be performed.

3. Facultative 1206 one prestation but may


render another in substitution.
Implications when creditor has right of
choice:
A. Some lost
1. due to fortuitous event perform what
remains.
2. due to debtors fault creditor can ask for
performance of any of them or value of one of
them + damages.
B. All lost
1. due to debtors fault creditor can choose
value of any one of them + damages (value of
the last thing lost or last service performed.)
2. due to fortuitous event obligation is
extinguished.
3. due to creditors fault obligation is
extinguished.
Facultative obligation
There is only one obligation agreed upon, but
the debtor has the right to substitution. (Only
the debtor can choose the substitute.)
- becomes simple obligation when choice has
already been made.
Joint obligation (Mancomunada or pro rata)

The debtors are liable only for a proportionate


part of the debt. Or the creditors are entitled
only for a proportionate part of the debt.
GR: Obligation is presumed JOINT.
XPN:
1. If Stipulated otherwise.
2. Law so declares as solitary.
3. Nature of the obligation requires solidarity.
Essential nature of joint obligation:
1. Active joint (many creditors, one debtor)
You have as many obligations a creditors
multiplied by debtors.
2. Passive joint (many debtors, one creditor)
3. Mixed joint (many debtors, many
creditors)
Solidary obligation
solidum, solidaria)

(joint,

several,

in

Against one, some or all debtors.


Debtors can be held liable for the entire part of
the debt. Or creditors can demand the entire
part of the debt from one or some or all of the
debtors.
Essential nature of solidarity
1. Active There is mutual agency, up to a
certain point (because if there are multiple
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creditors, and one collects, he must deliver what


is not his. So its not complete agency because
he keeps some for himself.)
2. Passive There is mutual guarantee among
the multiple debtors, as to the single creditor.
3. Mixed Solidary
When is there solidarity (SLN)
1. When the parties Stipulate.
2. When the Law so states. (EX: joint torfeasors)
3. When the Nature of the obligation demands
solidarity.
- If one becomes insolvent, his share shall be
shouldered by the others proportionately.
Defenses available to a solidary co-debtor
1.
From
nature
of
the
obligation

Prescription/Payment/Remission (total defense)


2. Personal to him Minority/insanity. (partial
defense)
3. Personal to the co-debtor as to share of codebtor, remission/extension of time. (partial
defense)
GR: Obligations are INDIVISIBLE. (because the
law says so.)
XPN: When obligations are divisible (SLN)
10

1. Parties so Stipulate.
2. Law provides divisibility.
3. Nature of the obligation necessarily entails
performance in parts. (Ex: Art. 1225, par 2)
Obligations with a penal clause (penalty
for non-performance)
This is especially
projects.

common

in

construction

Purpose:
1. To ensure performance of obligation.
2. Substitutes for the indemnity and
damages or interests awarded.
3. Penalizes the debtor.

for

Extinguishment of obligations (this is not


an exclusive enumeration)
1.
2.
3.
4.
5.
6.

Payment
Loss
Condonation
Confusion/merger
Compensation/set-off
Novation

Other forms of extinguishment:


1.Death, for certain obligations (purely personal)
2. Renunciation by the creditor
3. Compromise
4. Arrival of a resolutory term.
5. Mutual desistance/dissent
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6. Unilateral withdrawal (Ex: Partnership)


7. Change of civil status
8. Rebuc sic stantibus when the services
become so difficult as to be manifestly beyond
the contemplation of the parties, the obligor is
excused. (applicable in obligations to do)
CAVEAT: But if the service becomes SO
DIFFICULT as if it becomes impossible to do,
invoke impossibility and not rebus sic stantibus.
9. Judicial insolvency
1. Payment obligations to give
Performance obligations to do
- not only delivery in money but also
performance o of an obligation.
- must be complete. Creditor cannot be
compelled to receive an incomplete payment.
However, if creditor accepts the same without
protest, obligation considered fully paid.
Special forms of payment
1. Dacion in pago (art. 1245) (dation in
payment) - A special form of payment by virtue
of which the debtor offers another thing to the
creditor who accepts it as the equivalent of
payment for an outstanding debt.
- obligation is monetary. Once accepted by
creditor, the obligation is extinguished.
- the obligation is extinguished to the extent of
the value of thing given.
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- mode of payment in lieu of cash.


Requisites of dacion en pago:
1. Performance of a prestation in lieu of
payment.
2. Some difference between the presttion due
and that which is given.
3. Agreement between the debtor and the
creditor that the debt is extinguished by the
performance of the substitute prestation.
Legal effect of dacion en pago:
The debtor becomes the seller and the creditor
becomes the buyer, and the debt becomes the
purchase price.
2. Imputacion (application of payment)
A special form of payment which involves the
designation or application of payment covering
several debts of the same kind from the debtor
to the creditor.
How to apply the payment
1. Primary rule apply according to the
agreement of the parties.
2. If there is no agreement, the debtor may
apply (Debtors choice).
3. If the debtor does not apply, the creditor
does.
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4. If neither the debtor nor the creditor applies,


apply the most onerous first.
5. If equally onerous, apply proportionally to all
debts.
3. Payment by Cession This is applied when
the debtor becomes insolvent. The debtor turns
over all of his assets to the creditor giving the
latter the authority to sell the property.
Ownership is not transferred only the authority
to sell. Obligation is not extinguished upon
delivery of the properties since the creditor still
has to sell the property.
4. Consignation Act of depositing the thing
due with the court or judicial authorities
whenever the creditor cannot accept or refuses
to accept payment.
It generally presupposes PRIOR TENDER OF
PAYMENT.
Requisites of consignation:
1. There must be a debt due.
2. Consignation was made due to some legal
cause. (A prior tender of payment was unjustly
refused or there exists circumstances that make
a prior tender unnecessary or impossible.
3. First notice of consignation given to the
interested parties.
4. Actual deposit with court.
5. Second notice given after consignation that
payment has been deposit in court.
14

What is tender?
It is the manifestation made by debtor of his
willingness/desire and ability to make immediate
payment.
When prior
(TRIAL)

tender

is

dispensed

with

1. Creditor is Absent or unknown or does not


appear in place of payment.
2. Creditor Incapacitated during time of
payment.
3. When without just cause, he Refuses to give
receipt.
4. When Two or more persons claim the same
right to collect.
5. Title of the obligation has been Lost.
Remedy if there is payment but creditor
refuses
to
accept
it

Petition for
consignation.
Payment
alone
does
not
extinguish obligation.
Special Rule on Money Debts Made in the
currency stipulated. If not possible, whatever is
legal tender in the Philippines.
Rule on inflation or deflation it must be
extraordinary inflation or deflation. (not the
regular/usual rise and fall of the value of the
15

currency.) There must be a declaration from the


Bangko Sentral.
Who can the payor be which the payee
cannot refuse?
1. The debtor/obligor himself.
2. Debtors heir or assignee.
3. Debtors agent (provided there is proof of
agency.)
4. Anyone interested in the fulfillment of the
obligation (Ex: guarantor)
To whom do one pay:
1.Creditor/oblige
2. His successor or transferee
3. Agent
4. Third person, as long as (it redounded to the
benefit of the creditor, and the payment is good
only to the extent of the benefit)
5. Anyone in possession of the credit. (Ex: NIL)
What is the effect of payment by a third
person, if accepted?
GR: If it is done with the debtors consent, then
there is subrogation. The one who pays
becomes the creditor and he can go after the
debtor.
XPN: If the third person intended it as a
donation.
16

Time and place of payment


Time when it is due.
GR: When there is judicial or extra-judical
demand.
XPN: the three exceptions on mora solvendi ex
re.
Place Primary Rule stipulated price
Secondary Rule place where the thing was
located at the time of constitution of the
obligation (only if the obligation is to deliver a
determinate thing.)
Tertiary Rule (for instance, if it is a generic
thing, or an obligation to do) debtors domicile.
2. Loss (to give) /Impossibility (to do)
When loss occurs in obligation to give a
determinate
thing,
the
obligation
is
extinguished.
This does not apply to obligations to give a
generic thing.
Reason: Genus nunquam perit genus never
perishes.
Fortuitous event must be the proximate and
only cause without human intervention in order
to avoid liability.
3. Condonation/Remission

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Act of liberality wherein without receiving any


equivalent, the creditor renounces the debt.
(renounces his right to collect.)
Requisites
(CAGE)

of

Condonation/Remission

1. Debt Existing at the time the remission is


made.
2. The remission or the waiver must be
Gratuitous.
3. Acceptance by the debtor.
4. Capacity between the parties to enter into a
contract of donation.
- express condonation must comply with the law
on Donation.
4. Merger/Confusion
Debtor and creditor in the obligation is the same
person. (Ex: Intestate succession)
5. Compensation/Set-off
Concurrent amount of two persons who in their
own right are reciprocal debtors and creditors of
each other.
Kinds of Compensation
1. Legal compensation automatically when
all requisites are present.
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Requisites:
1. Parties are mutually debtors and creditors of
each other.
2. Both debts consist of sum of money, or
fungible goods of the same kind/quality.
3. The two debts are due.
4. They be liquidated or demandable.
5. Neither of the debts must be garnished.
6. Must not be prohibited by law.
Provision on Assignment of Credits (Art.
1285)
- The consent of the debtor is not required. Only
that of the old creditor and the new creditor.
Illustration:
Y owes debt to X (Credit 1). X owes debt to Y
(Credit 2). In any other case, when both debts
fall due, there is automatic compensation. This
is not the concern of Art. 1285.
But now before legal compensation takes place,
X assigns to A Credit 1. So for Credit 1, A
becomes the new creditor. There appears to be
3 possibilities:
a. The assignment was with Ys consent. (A goes
against Y when the assigned credit becomes
due. Y cannot set up against A Credit 2 because
Y consented to the assignment.
b. The assignment was with Ys knowledge, but
without his consent. A goes against Y. Y can set
19

up against A Credit 2 as long as Credit 2 existed


by the time Credit 1 was assigned. (Does not
cover subsequent debts.)
2. Facultative compensation can only be
claimed by one party, but not the other.
1. (Art. 1287 When legal compensation does
not automatically take place.)
This concerns obligations arising from:
a. Deposit
Illustration: X deposited 1 cavan of rice with Y
(depositary). In another unrelated transaction, Y
owes X also a 1 cavan of rice. (There is no legal
compensation here because one of the contracts
is a contract of deposit. But the depositor can
claim in his favor compensation. (Facultative in
his favor.)
b. Commodatum
c. Support
2. (Art. 1288 One of the debts arises from civil
liability from acrime. The victim of the crime
from which the liability arises can invoke this.
3. Conventional/contractual compensation
parties agree to compensate, even if the
requisites are not complete.
4. Judicial compensation by means of court
order/decree.
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6. Novation
Requisites of Novation (PANE)
1. Previous valid obligation.
2. Agreement by the parties to the new
obligation.
3. Extinguishment of the old obligation. (This is
actually a consequence.)
4. Validity of New valid obligation.
Novation arises when:
1. There is a change in the object or principal
conditions. (Real Novation)
2. There is a change in the debtor. (Personal
Novation)
3. Subrogating a third person to the rights of the
creditor.
Types of Novation
1 Subjective/Personal Novation change in
one or more parties. (must have consent of the
parties)
a. Active subjective change in the person of
the creditor.
b. Passive subjective change in the person of
the debtor. (EXPROMISSION AND DELEGACION)
Expromission initiated by the new debtor.
The consent of the creditor and the new debtor
21

are required, but the consent of the old debtor is


not.
Delegacion (conventional subrogation)
initiated by the old debtor. The consent of all
three
(creditor
(delegatario),
old
debtor
(delegante), new debtor (delegado)) are all
required.
Consequence - GR: The old debtor is absolved.
XPN:
1. If the new debtor was already insolvent at the
time of the novation AND
2. If such insolvency was known to the old
debtor or one of public knowledge.
When principal obligation is extinguished
what happens to the accessory obligation?
GR: (Art. 1296)Extinguished too. (Ex: Pledge,
mortgage, guaranty, etc. are extinguished.)
XPN: Stipulations pour autrui When there is
benefit for a third person.
CONTRACTS
Meeting of the minds between two or more
parties
A contract cannot exist without obligation but
there can be an obligation without a contract.

22

Auto-contract one contracts with oneself.


One person acting as two parties. (Ex: An
agency to borrow money: he can also act as the
lender.) This is why party is the proper term.
Elements of a contract
Essential Requirements
1.
2.
3.
4.
5.

Consent
Subject Matter
Cause
Delivery in real contracts
Formality in some contracts

Natural Requirements
Those incorporated by law into the
contract. (Ex: Warranties in Sales against
eviction, of fitness, etc., Right to resolve in
reciprocal contracts.
Accidental Requirements
Need to be stipulated by the parties. (Ex:
Purchase price in sales, Conditions for
performance of the contract.)
Classification of Contracts
According to perfection
1. Consensual perfected by mere consent.
(Ex: Sales)
23

2. Real Perfected by consent + delivery of


the property. (Ex: Deposit, pledge,
commodatum, loan)
3. Formal need form for validity. (Ex:
Donation of property)
According to Name
1. Nominate with particular designation
under the law. (Ex: sales, lease, etc.)
2. Innominate stipulation of the parties.
Provisions of OBLICON, rules on the most
analogous contracts, customs of the place
shall regulate innominate contracts. (Art.
1307)
a. Do ut des I give that you may give.
b. Do ut facias I give that you may do.
c. Facio ut des I do that you may give.
d. Facio ut facias I do that you may do.
Autonomy of will depends on what you
want. Generally, you can enter into contracts
depending on what you want. But it yields to
various restrictions on law, public policy,
public order, morals and good customs.
Mutuality of contracts The contract must
bind both parties. The legal tie must be
mutual.
Contracts
with
escalation
clause
(adjustment of interest) it is valid as
long as it is tied to a factor not entirely
24

dependent on the will of the creditor. (purely


potestative.)
Relativity of contracts acts between two
persons cannot affect positively or negatively a
third person.
XPN: Stipulation pour atrui
Requisites:
1. Contracting parties clearly and deliberately
conferred a favor/benefit to a third person.
2. The stipulation in favor of a third person is a
part, not the whole of the entire contract.
3.
It must not be compensated by any
obligation whatsoever.
4. Neither of the contracting parties must bear
the legal representation of the third party.
5. The third party communicated his acceptance
to the obligor before the revocation by the
original parties.
Consent
- can be given in different ways.
Elements:
1. Plurality of subjects
2. Capacity
3. Intelligence and free will
4. Express/tacit manifestation of the will
5. Conformity of the internal will and its
manifestation
25

Cognition Theory of acceptance Offer and


acceptance take effect only from the time
knowledge is acquired by the other person. If
during the intervening time, the party dies or
becomes insane, the acceptance or offer has no
effect.
Option contract vs. Right of First Refusal
Option contract limits the offerors power to
revoke the offer.
Right of First Refusal the right to have first
opportunity to purchase or the right to meet any
other offer.
Who cannot give consent to a contract
1. Minors only the minor can sue to annul the
contract.
2. Insane or demented persons and
illiterate deaf-mutes
XPN to the insanity rule: When he entered
into the contract during lucid interval.
Situation
consent

where

there

is

vitiation

of

1. Mistake of fact
2. Fraud it must be the dolo causante or one
that has a decisive effect on the giving of
consent.
26

Requisites:
1. Employed by one party against the other.
2. Induced the other to enter into the contract.
3. It must have been serious.
Dolo Incidente Does not annul the contract
because it did not induce the giving of consent.
The consequence of incidental fraud is merely
damages.
Dolus Bonus tolerable fraud and does not
lead to damages. (Usual exaggeration in trade,
when the other party had an opportunity to
know the facts. Art. 1340)
3. Violence Requisites:
1. Physical force is irresistible.
2. It is the determining factor to give consent.
4. Intimidation Requisites:
1. Threat is determining factor to give consent.
2. Threat is unjust and unlawful.
5. Undue Influence It must be influence that
deprives one of freedom.
Object
Object must be within the commerce of man,
licit and possible at the time of perfection.
Causa (Cause)
27

Cause must be real, licit and must exist.


-

the proximate why of the contract. Motive


being the ultimate why.

Form
GR: No form required.
XPN: Required in the following:
1. Donation of property
2. Sale of large cattle
3. Antichresis (requires statement of the
principal and interest in writing.)
4.
Partnership
where
real
property
is
contributed.
5. Interests in mutuum. (Must be expressly
stipulated.
6. Sale of land by an agent. (With SPA)
7. Chattel Mortgage
8. Stipulation limiting common carriers duty of
extraordinary diligence to ordinary diligence.
When form is not required for validity but
for purposes of registration
Those in Art. 1358
1. Acts and contracts for real rights over
immovable property. EXCEPT: Sale of real
property or interest therein, which is governed
by the Statute of Frauds.
2.
Cession,
repudiation,
renunciation
or
hereditary rights or those in CPG.
28

3. Power to administer property or any other


power which:
a. Should appear in a public document.
b. Should prejudice third persons.
- Failure to follow form makes it valid and
enforceable but cannot be registered.
Defective contracts
1. Rescissible valid but there is damage to
the contracting party.
REMEDY: Rescission cancellation and return to
original position as if contract is not agreed
upon.
Rescission a process or remedy designated to
render inefficacious a contract validly entered
into and normally binding by reason of external
conditions creating an economic prejudice,
either to a party or to his creditors.
Requisites:
1. The contract must be rescissible under Art.
1381-1382.
2. It is the last resort for the plaintiff
3. Plaintiff must be able to return what he would
be obliged to return if rescission takes effect.
4. The object of the contract must not have
passed to an innocent third person.
Rescissible contracts
29

1. Entered into by guardians when wards suffer


lesion by more than of the value of the thing.
2. Same as number one but in the case of
representatives and absentees.
3. Disposition in favor of third person in fraud of
creditors. (Only to the extent of creditor
prejudiced.)
4. Refer to things under litigation if entered into
without knowledge of litigants or consent of
judicial authority. (Rescissible at plaintiffs
instance.)
5. By special provision of law. (Art. 1382)
6. Payments made under state of insolvency for
obligations to whose fulfillment the debtor would
not be compelled at the time they were
effected. (Just actual insolvency, not judicial
insolvency.)
2. Voidable
- only the injured party can file for annulment.
- once ratified, the action to annul is
extinguished.
Characteristics of voidable contracts
1. Effective unless set aside.
2. It may be assailed only for an action
specifically for that purpose.
3. It may be confirmed. (not ratify, confirm is the
proper term.)
4. May be assailed only by the party with
vitiated consent, his heirs, or subsidiaries.
When action for annulment cannot prosper
30

1. If it has been confirmed.


2. Prescription.
Period to file action:
a. 4 years from disappearance of the cause, for
intimidation, violence or undue influence.
b. 4 years from discovery, for mistake or fraud.
c. 4 years from cessation of guardianship, in
case of minor or incapacitated persons.
3. Loss of the thing due to fraud or fault of
person with right to institute proceedings.
4. Estoppel.
3. Unenforceable
- no authority or beyond authority
- no compliance with the SF. (No document)
- no capacity to give consent. (both parties)
Kinds of unenforceable contracts
1. Entered into in the name of another by one
with no authority or legal representation, or
acting beyond powers.
2. Both parties are incapable of giving consent.
(Ratification by guardian cleanses the defect.)
3. Falling under the Statute of Frauds applies
only to purely executory contracts.
a. Agreement whereby its terms, cannot be
begun within one year from the agreement.
(Refers to commencement, not completion.)
b. Special promise to answer for debt, default, or
miscarriage of others. (Contract of guaranty or
suretyship.)
c. Agreement made in consideration of marriage
except mutual promise to marry.
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d. Sale of chattel/goods/things in action for price


P500 or more. (Unless there is payment of price
or delivery of goods.)
e. Agreement for leasing for period longer than
1 year or sale of real property/interest therein.
(Amount is immaterial for real property.)
f. Representation as to the credit of a third
person.
g. Art. 1443 no express trust concerning an
immovable or any interest therein may be
proved by parol evidence.
SOF is not designed to perpetrate fraud (partly
executed contracts) but to prevent perpetration
of fraud (executory contracts)
4. Void/inexistent No force and effect, as if it
is never entered into. It cannot be validated
neither by time or ratification.
Characteristics
of
a
void/inconsistent
contract:
1.No effect whatsoever.
2. No action for annulment necessary because
the nullity exists ipso jure. (Judgment of nullity is
merely declaratory.)
3. It cannot be confirmed, ratified, or
acknowledged.
4. If performed, the restoration of what has been
given is in order.
5. Right to set-up defense of nullity cannot be
waived.
Enumeration in 1409:
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1. Cause, object or purpose is against law,


morals, good customs, public policy.
2. Absolutely simulated.
3. cause or object could not exist at the time of
the transaction. (could not exist no did not exist
because there can be a contract over a future
thing.)
4. Object is outside the commerce of men.
5. Contemplates an impossible service.
6. Intent of the parties relative to the principal
object of the contract cannot be ascertained.
7. Expressly prohibited or declared void by law.
Articles 1412 to 1419: Exceptions to pari
delicto rule
The parties are in pari delicto, but despite that,
due to social considerations, allows one of the
parties recovery:
1. Interest paid in excess of allowable under the
usury law.
2. Money paid for illegal purpose, but before it
was accomplished or damage has been caused
to third persons.
3. One of the parties to the illegal contract was
incapacitated.
4. Agreement is not illegal per se but merely
prohibited, and prohibition is to protect the party
seeking recovery of the money paid.
5. Payment of price beyond maximum price
allowed by law for a commodity.
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6. Employer and employee voluntarily agreeing


on wages below the minimum wage or more
hours than allowable working hours. (Can ask for
OT pay)
Pactum Commissorium
The creditor cannot appropriate the things given
by way of pledge or mortgage, or dispose of
them. (Contrary stipulation is null and void.)
Pactum de non alienado
There can be no stipulation prohibiting the
mortgagor from alienating his own property.
Pactum Leonina
A stipulation which excludes one or more
partners from any share in the profits or losses
of the partnership is void.

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