OBLIGATION AND CONTRACT

OBLIGATION juridical necessity to give, to do or

not to do

- care need to be exercised by a debtor to

deliver/give determinate thing

ELEMENTS OF OBLIGATION

Exception: When law/stipulation of parties requires

a different standard of care (slight/extraordinary
diligence).

1. ACTIVE SUBJECT (creditor/obligee) whose

obligation is constituted
2. PASSIVE SUBJECT (debtor/obligor) has duty to
give, to do or not to do
3. OBJECT/PRESTATION subject matter
4. JURIDICAL/LEGAL TIE (vinculum/efficient cause)
reason

When creditor is entitled to the fruits

Rule: The creditor has personal right (right to ask for
delivery) from the time the obligation to deliver
arises.
But NO real right (right enforceable against the whole
world) until it is delivered.
3 KINDS OF FRUITS
1. NATURAL w/o human intervention

CIVIL OBLIGATION

NATURAL OBLIGATION 2. INDUSTRIAL w/ human intervention

derived from positive law

3. CIVIL derived by virtue of juridical relation

derived from equity & justice

enforceable by court action

Creditors rights if debtor fails to comply w/

not enforceable by court action
the obligation

5 SOURCES OF OBLIGATION

1. Determinate
a. Performance

1. LAW

b. Damages

2. CONTRACTS

2. Generic
complied at

3. QUASI-CONTRACTS arise from lawful, voluntary

acts; no one shall be unjustly enriched...

expense

2Kinds
a. Solutio indebiti something received (delivered
on a mistake), no right to demand it
b. Negotiorum gestio voluntary mgt of
property/affairs of another w/o his
knowledge/consent
4. QUASI-DELICT/TORTS/CULPA AQUILIANA arise
from damage; fault/negligence
5. CRIMES/ACTS/OMISSIONS punished by law arise
from civil liability that is a consequence of a criminal
offense
DILIGENCE OF A GOOD FATHER OF A FAMILY

2. Generic
a. Performance
b. Damages
c. Obligation be
the debtors

Creditors rights if debtor does in

contravention
1. Damages
2. Ask it be UNDONE at debtors expense
FORTUITOUS EVENT cannot be foreseen, if
foreseen, inevitable
General Rule: No person liable to fortuitous event.
Exceptions:
1. Law states
2. Stipulation/contract states
3. Assumption of risk
4. Delay
5. Debtor promises deliver to 2/more persons who do
not have same interest (bad faith)

EFFECTS OF FORTUITOUS EVENT to thing to be

delivered

a. Dolo causante/Causal fraud fraud in obtaining

consent; consent is defective, contract is voidable.
Remedy: annulment

- extinguish the obligation if determinate; generic

does not extinguish the obligation

b. Dolo incidente/Incidental fraud fraud w/c

vitiates consent. Remedy: damages

3 MISCELLANEOUS RULES ON PERFORMANCE

OF OBLIGATION
1. When to
deliver determinate, accessions (additions/
improvements) and accessories (joined/included with
the principal) are INCLUDED even not mentioned.
2. If debtor fails to do, it shall be DONE AT HIS
EXPENSE, same with doing the contravention; poorly
done be undone.
3. In obligation not to do, and obligor does what is
forbidden, shall be UNDONE AT HIS EXPENSE.
4 GROUNDS; debtor liable for damages
1. Default/mora
2. Fraud/dolo
3. Negligence/culpa
4. Contrary to terms of obligation

3. NEGLIGENCE/CULPA
voluntary act/omission; no bad faith intended
3Kinds
a. Culpa aquiliana/Civil negligence quasidelict/torts
b. Culpa contractual/Contractual negligence
breach
c. Culpa criminal/Criminal negligence
crime/delict
4. Contrary to the terms of obligation
2 RULES OF PRINCIPAL & INSTALLMENT
1. Receipt of principal w/o mention of interest,
presumed interest is paid also.
2. Receipt of latter installment w/o mention of prior
installment, presumed prior installment is paid also.

1. DEFAULT/MORA delay
3kinds
a. Mora solvendi debtors delay to give (real
ob.), to do (personal ob.)
b. Mora accipiende creditors delay to accept
c. Compensatio Morae delay of both in reciprocal
obligation

4 SUCCESSIVE RIGHTS OF CREDITOR to satisfy

claim against DEBTOR
1. Exact payment
2. Attach debtors properties
3. Accion subrogatoria exercise rights & actions
except inherent in person

CONCEPT OF DELAY

4. Accion pauliana cancel acts/contracts by debtor

to defraud creditor

General Rule: No demand, No delay

TRANSMISSIBILITY OF RIGHTS

Exceptions:

General Rule: ALL RIGHTS are transmissible.

1. Law states

Exceptions:

2. Obligation states

1. Law states

3. Time is the essence

2. Contract states

4. Demand be useless if delay

3. Obligation is purely personal

5. Debtor guilty of delay

10 Kinds of Obligation
EFFECTS OF DELAY

1. Pure

6. Solidary

1. Damages

2. Conditional

7. Divisible

2. When to deliver determinate thing, STILL LIABLE in

fortuitous event.

3. Alternative

8. Indivisible

4. Facultative

9. Obligation w/ a period

5. Joint

10. Obligation w/ a penal clause

2. FRAUD/DOLO conscious, deliberate, intentional

evasion of fulfillment
2Kinds

1. PURE OBLIGATION

- w/o condition, demandable at once (pure has

resolutory condition/period)

EFFECTS OF FULFILLMENT OF SUSPENSIVE

CONDITION

2. CONDITIONAL OBLIGATION

General Rule: The obligation becomes effective

retroactively to the day obligation was constituted.

- there is condition in performance; future &

uncertain

Exceptions:

2Kinds
a. Suspensive condition happening of condition
gives RISE to obligation
b. Resolutory condition happening of condition
EXTINGUISHES obligation
6 MISCELLANEOUS RULES ON CONDITIONAL
OBLIGATION
1. Impossible conditions, contrary to law, shall
ANNUL obligation.
2. The condition not to do an impossible thing is
considered not agreed upon.

1. In reciprocal obligation, fruits & interests during

pendency of condition shall compensate each other.
2. In unilateral obligation, debtor gets fruits &
interests unless there is a contrary intent.
3 EFFECTS OF FULFILLMENT OF RESOLUTORY
CONDITION
1. Extinguish obligation.
2. Both parties restore what they received plus fruits
& interests.
3. The rule on L, D, or I will apply to person who has
to return the thing.

3. The condition that happens in determinate time,

EXTINGUISHES obligation.

When one of debtors in reciprocal obligation

does not comply w/ his obligation

4. The condition that happens in INDETERMINATE

time, obligation only effective at arrival.

1. The right of injured party is (1) cancel contract &

damages; or (2) fulfill obligation & damages

5. The condition is fulfilled if DEBTOR prevents

fulfillment.
6. The effect of conditional obligation, once fulfilled:
- to give: retroact to the day of constitution of
obligation
- has reciprocal prestations: fruits & interests be
mutually compensated
- has unilateral obligation: debtor shall give fruits &
interests

3 Kinds of Obligation (According to PERSON

OBLIGED)
1. UNILATERAL only 1 party obliged to comply
2. BILATERAL both parties; performance not same
time
3. RECIPROCAL both parties; performance same
time
3. OBLIGATION W/ A PERIOD
- demandability/extinguishment subject to the
expiration of period

RULES in case of Loss, Improvement, or

Deterioration of thing during the pendency of
condition
1. LOST
a. w/ debtors fault damages
b. w/o debtors fault extinguishes obligation
2. DETERIORATION
a. w/ debtors fault - (1) cancel obligation &
damages; or (2) fulfill obligation w/ damages
b. w/o debtors fault creditor suffer impairment

PERIOD interval of time; either suspends

demandability or produces extinguishment
DAY CERTAIN must come, not known when
7 CASES CONSIDERED TO BE OBLIGATION W/
A PERIOD
1. Little by little
2. In partial payment
3. Payable ASAP
4. When I can afford it
5. When I have the money

3. IMPROVEMENT
a. By nature/time benefit to creditor
b. at expense of debtor debtor no right than that
granted to usufructuary (debtor no right to
compensate amount for improvement)

6. When I am able to
7. When my means permit me to do so

PERIOD

CONDITION

certain

uncertain

future only

future/past but unknown

loss/impossibility of ALL
prestations due, w/o debtors
fault, extinguishes obligation

loss/impossibility of presta-tion
due, w/o debtors fault,
extinguishes obligation

(3) SUMMARY OF RULES, OBLIGATIONS, &

RIGHTS OF DEBTOR IN ALTERNATIVE
OBLIGATION

(*influence upon obligation) only

upon its demandability

(*) on the very existence of

1. If 1 of prestations lost through fortuitous event,
obligation itself
shall still be perform by choosing (creditor) from the
remainder.
FOR WHOSE BENEFIT IS THE PERIOD?
2. If 1 of prestations lost through debtors fault,
creditor may claim any of remainders w/ damages.
General Rule: Both the debtor & creditor.
Therefore, NEITHER of them can demand
performance of obligation.
Exception: If the term of obligation has to favor one
of them.
5 INSTANCES WHEN DEBTOR LOSES RIGHT TO
USE PERIOD
1. Debtor is insolvent.
2. Debtor attempts to abscond.
3. Impairment of guarantees/securities.
4. Failure to furnish guarantees/securities promised.
5. Violation of undertaking.

3. If ALL prestations lost through debtors fault,

creditor choose price w/ damages.
RULES on LOSS/DETERIORATION of the thing
intended as SUBSTITUTE in FACULTATIVE
OBLIGATION
1. If there is a loss/deterioration of thing intended as
substitute, debtor is NOT liable if NOT HIS FAULT.
But if substitution is already made, debtor is liable for
loss of substitute when in DELAY, NEGLIGENCE, or
FRAUD.
6. JOINT OBLIGATION

4. ALTERNATIVE OBLIGATION
- w/ 2 or more prestations, only 1 is due.

- obligation is to be paid proportionately by debtors

or to be demanded proportionately by creditors

5. FACULTATIVE OBLIGATION

7. SOLIDARY OBLIGATION

- w/ ONLY 1 prestation but can be substituted.

ALTERNATIVE prestations LOST w/ debtors
fault
Creditor entitled to damages but needs ff requisites:

- each one of debtors has right to render or each one

of creditors has right to demand the entire
compliance w/ prestation
MAXIMS & SYNONYMS

1. Debtor can choose.

2. All prestations lost/become impossible due to
debtors fault.

JOINT Obligation

MAXIMS

SYNONYMS

To each his own

proportionate

One for all, all for

one

individually &
collectively

ALTERNATIVE OBLIGATION

SOLIDARY
FACULTATIVE OBLIGATION
Obligation

several prestations due, giving

one is sufficient

one prestation due, but can(3)

beSOLIDARY OBLIGATION EXIST ONLY IF:
subtituted
*RULES

right to choose (debtor) unless

granted to creditor

1. Law states
right to choose DEBTOR ONLY
2. Stipulation states

If 1 of the prestation is illegal,

others may be valid, obligation
remains

3. Nature of obligation requires

nullity of principal carries w/ it
nullity of accessory/
2 PRESUMPTIONS THAT OBLIGATION IS JOINT
substitute

1. The debts be divided as many shares as there are

debtors/creditors.

2. The debtors/creditors are distinct from one

another.

- Payment means delivery of money & performance

of obligation

8. DIVISIBLE OBLIGATION

2 PLACE OF PAYMENT

- prestation is capable of partial performance

1. At place agreed upon

9. INDIVISIBLE OBLIGATION
- prestation incapable of partial performance
10. OBLIGATION W/ A PENAL CLAUSE

2. If w/o agreement
a. Object is indeterminate paid at domicile of
DEBTOR
b. Object is determinate place of thing at the time
of constitution of obligation

- one w/ accessory undertaking attached to

obligation to assume greater liability in case of
breach/non-fulfillment of obligation

4 SPECIAL MODES OF PAYMENT

3 PURPOSES OF PENAL CLAUSE

b. Cession

1. Ensure performance of obligation

c. Tender of payment & consignation

2. Substitute for damages & interest in case of

noncompliance

d. Dacion in payment

3. Penalize debtor in case of breach

a. APPLICATION OF PAYMENT

In case obligation has a PENAL CLAUSE

- designation of debt to w/c payment must be

applied when debtor has several obligations of same
kind in favor of same creditor.

General Rule: Penalty takes the place of damages &

interest in case of non-compliance.

a. Application of payment

3 REQUISITES OF APPLICATION OF PAYMENT

Exceptions:

1. Only 1 debtor & 1 creditor

1. Stipulation states.

2. 2 or more debts, same kind

2. Debtor refuse to pay penalty.

3. All debts are due

3. Debtor guilty of fraud in performance of obligation.

4. Insufficient payment to exinguish ALL debts

NULLITY OF PRINCIPAL OBLIGATION OR THE

PENAL CLAUSE

3 RIGHTS TO MAKE APPLICATION OF PAYMENT

Nullity of principal obligation = nullity of penal clause

Nullity of penal clause = NOT nullity of principal
obligation
10 MODES OF EXTINGUISHMENT OF
OBLIGATIONS

1. Right belongs to CREDITOR.

2. If debtor does not avail, creditor can give him
receipt designating the debt from which payment will
be applied.
3. If debtor accepts the receipt, he cannot complain
unless THERE IS just cause to invalidate the contract.

1. Payment or performance

b. CESSION

2. Prescription

- debtor abandons ALL his property for creditors

benefit to obtain payment from proceeds of his
property

3. Compensation
4. Confusion/merger
5. Condonation/remission
6. Fulfillment of resolutory condition
7. Annulment
8. Rescission
9. Novation
10. Loss of thing due
1. PAYMENT/PERFORMANCE

5 REQUISITES OF VALID CESSION

1. 1 debtor & 2 or more creditors
2. Debtor is in partial/total insolvency.
3. Debtor to deliver ALL his property to creditors
4. Debt is due & demandable.
5. Creditors must sell the properties & apply the
proceeds to their respective credits proportionately.

c. DACION IN PAYMENT (dacion en pago)

2. LOSS OF THING DUE

- alienation of property to the creditor in satisfaction

of debt

- perishes, disappears, or goes out of commerce;

existence is unknown; cannot be recovered

3 REQUISITES OF DACION IN PAYMENT

3 REQUISITES TO EXTINGUISH OBLIGATION DUE

TO LOSS

1. Consent of creditor
2. NOT prejudicial to another creditor
3. Debtor not insolvent declared by a judicial decree

1. Determinate thing.
2. W/o debtors fault.
3. No delay.
3. CONDONATION/REMISSION

CESSION

DACION IN PAYMENT

all properties

NOT all properties

require more than 1 creditor

NOT require all creditors

NOT act of novation

act of novation

NOT transfer ownership

transfer ownership

requires partial/total insol-vency

4. CONFUSION/MERGER
may happen during solvency
- meeting in 1 person of qualities of debtor & creditor
debtor
w/ same obligation

- gratuitous abandonment of right by the creditor

3 REQUISITES OF A VALID
CONDONATION/REMISSION
1. It must be gratuitous.
2. Accepted by obligor.
3. Obligation is demandable.

d. TENDER OF PAYMENT & CONSIGNATION

TENDER OF PAYMENT act of offering the creditor
what is due to him w/ a demand that the creditor
accept it
CONSIGNATION act of depositing thing due w/ the
court when creditor cannot/refuses acceptance of
payment

3 REQUISITES OF VALID CONFUSION/MERGER

1. The merger of characters of debtor & creditor
must be in same person.
2. Take place between principal debtor & creditor.
3. Clear & definite.
5. COMPENSATION
- 2 persons are debtors & creditors of each other

5 REQUISITES OF CONSIGNATION
6 ESSENTIAL REQUISITES OF COMPENSATION
1. Debt due.
2. Creditor refused the tender of payment w/o just
cause
3. Notice of consignation already given to persons
interested in fulfillment of obligation
4. Consignation of thing/amount due
5. Subsequent notice of consignation to interested
persons
5 VALID CONSIGNATION W/O PREVIOUS TENDER
OF PAYMENT
1. Creditor is absent/unknown.
2. Creditor is incapacitate to receive at time it is due.
3. Creditor refused give a receipt, w/o just cause.

1. Parties both principal debtors & creditors of each

other.
2. Compensation is not prohibited by law.
3. No retention/controversy by 3rd person.
4. 2 debts are due & demandable.
5. 2 debts are liquidated.
6. 2 debts both in money/consumable things.
(2) CLASSES OF COMPENSATION
1. As to effect
a. TOTAL obligations completely extinguished.
b. PARTIAL a balance remains

4. 2 or more persons claim the right to collect.

2. As to origin or cause

5. Title of obligation lost.

a. LEGAL by law

b. VOLUNTARY/CONVENTIONAL agreement of
parties

a. creditor pays another preferred creditor even

w/o debtors knowledge

c. JUDICIAL order from the court

b. 3rd person pays the express approval of debtor

d. FACULTATIVE 1 of parties can choose/oppose

claiming compensation

c. 3rd person pays even w/o knowledge of debtor

6. NOVATION
- substitution/change of obligation
- substitution of debtor
- subrogation of creditor
(3) OBLIGATIONS MAY BE MODIFIED BY:
1. Changing object/principal conditions. (REAL
NOVATION)
2. Changing the person of
debtor/creditor. (PERSONAL NOVATION)
a. Substitution change of debtor
b. Subrogation change of creditor
3. Changing person of the parties & the objects of
principal condition. (MIXED NOVATION)

CONTRACT meeting of minds between 2 persons

to give something or to render service.
3 ELEMENTS OF CONTRACT
1. ESSENTIAL w/o them, contract cannot exist
a. CONSENT of contracting parties
b. OBJECT CERTAIN subject matter
c. CAUSE/CONSIDERATION
In some contracts, ff are also essential:
d. FORM
e. DELIVERY
2. NATURAL found in certain contract, presumed to
exist unless stipulated

4 REQUISITES OF NOVATION
1. Old valid obligation.
2. Agreement of parties to new obligation.
3. Extinguishment of old obligation.
4. Validity of new obligation.
2 FORMS OF NOVATION BY SUBSTITUTION OF
DEBTOR
1. EXPROMISION w/ consent of creditor, NO consent
of old debtor
2REQUISITES
a. Initiative of 3rd person.
b. Consent of creditor.
2. DELEGACION all must agree (creditor, old debtor,
new debtor)
3 REQUISITES
a. Initiative from old debtor.
b. Consent of debtor.
c. Acceptance by creditor.
7. SUBROGATION

3. ACCIDENTAL various particular stipulations that

may be agreed upon by contracting parties
(7) CLASSIFICATION OF CONTRACTS
According to:
1. PERFECTION/FORMATION
a. CONSENSUAL perfected by mere consent
b. REAL perfected by delivery
c. FORMAL/SOLEMN special formalities are
essential before perfection of contract
2. PARTIES OBLIGATED
a. UNILATERAL only 1 has obligation
b. BILATERAL both parties require to render
reciprocal prestations
3. CAUSE
a. ONEROUS exchange of considerations
b. GRATUITOUS no consideration received in
exchange of what is given

- change of creditor

c. REMUNERATORY something is given for

benefit/service that had been rendered previously

2 KINDS OF SUBROGATION

4. RISK OF FULFILLMENT

1. CONVENTIONAL consent of original parties &

3rd person

a. COMMUTATIVE equivalent values are given by

both parties

2. LEGAL by law

b. ALEATORY fulfillment of contract depends on

chance (eg. insurance)

a. by their nature

5. IMPORTANCE

c. by provision of law

a. PRINCIPAL contract may stand alone (eg. sale,

partnership)
b. ACCESSORY existence depends on another
contract (pledge, guarantee)
c. PREPARATORY contract not an end by itself
but a means thru w/c other contracts may be made
(eg. agency)
6. NAME
a. NOMINATE contract given a particular/special
name (eg. partnership)
b. INNOMINATE not given special name (eg. I
give that you may give)

b. by stipulation (stipulation por autri)

4. CONSENSUALITY OF CONTRACTS
- Contracts are perfected by mere consent
Exceptions:
a. REAL CONTRACTS perfected by delivery
b. FORMAL/SOLEMN CONTRACTS special form
required for its perfection
5. OBLIGATORINESS OF CONTRACTS
- The contract, once perfected, has the force of law
between parties which bound to comply in good faith

7. SUBJECT MATTER
a. Contracts involving things

4 KINDS OF INNOMINATE CONTRACTS

b. Contracts involving rights/credits

1. I give that you may give

c. Contracts involving services

2. I do that you may do

3 STAGES OF CONTRACT
1. PREPARATION/CONCEPTION preparatory steps to
perfect contract
2. PERFECTION/BIRTH meeting of minds between 2
contracting parties
3. CONSUMMATION/TERMINATION terms of contract
are performed, & contract is fully executed
5 BASIC PRINCIPLES/CHARACTERISTICS OF A
CONTRACT

3. I give that you may do

4. I do that you may give
4 RULES FOR INNOMINATE CONTRACTS
1. Agreement of parties
2. Law on Obligations & Contracts
3. Rules on most analogous nominate contract
4. Customs of place
STIPULATION POR AUTRI

1. PRINCIPLE OF AUTONOMY (liberty to

contract)

- stipulation in favor of 3rd person

Provided they are not contrary to:

5 REQUISITES OF STIPULATION POR AUTRI

a. Law

1. Stipulation in favor of 3rd person

b. Morals

2. Stipulation is only PART, not the whole of the

contract.

c. Good customs
d. Public order
e. Public policy
2. MUTUALITY OF CONTRACTS
- the contract must bind both parties; its
validity/compliance cannot be left to the will of one of
them

3. Both parties must conferred upon a favor of

3rd person
4. 3rd person must accept & say it to debtor before its
revocation/cancellation
5. Neither of both parties be the legal
representation/authorization of 3rd person
CONSENT - meeting of offer (certain) & acceptance
(absolute) upon a thing

3. RELATIVITY OF CONTRACTS
- Contracts take effect only between the parties, their
assigns & heirs except when there are rights &
obligations not transmissible:

5 REQUISITES OF CONSENT
1. Must be given by 2 or more parties

2. Parties are capacitate to enter in contract

3. No vitiation of consent
4. No conflict between declared & intended
5. Legal formalities must be complied

3. VIOLENECE
1. MISTAKE/ERROR
- wrong conception & lack of knowledge upon a thing
(2) MISTAKES W/C VITIATES CONSENT

7 RULES ON OFFER/ACEPTANCE

It should refer to:

1. An offer must be certain.

2. Business advertisements for sale are NOT offers
but ONLY invitations to make an offer.
3. Advertisements for bidders are ONLY invitations.
4. An acceptance made by letter/telegram does NOT
bind offeror EXCEPT from the TIME it came to his
knowledge.
5. An offer made through an agent is accepted from
the TIME the acceptance is done through an agent.
6. An offer is ineffective upon death, insanity,
insolvency, of EITHER party BEFORE acceptance is
made.
7. When offeror allowed offeree a certain period
to accept, offer MAY be withdrawn AT ANYTIME
unless there is something PAID/PROMISED.
3 persons who CANNOT GIVE CONSENT to a
contract (if entered into, contract is voidable)

1. substance of thing that is the OBJECT of contract

2. conditions w/c MOVED either/both parties to enter
into contract
4 RULES ON MISTAKE
1. Mistake to identity/qualifications of either of
parties will vitiate consent ONLY when IT is the
principal cause of contract.
2. Simple mistake of account must be corrected.
3. No mistake if parties knew the risk/doubt affecting
OBJECT of contract.
4. When one of parties is unable to read or the
contract is in language not understood by him, &
mistake/fraud is alleged, the person enforcing the
contract must FULLY explained the terms to him.

1. UNEMANCIPATED MINORS
2. INSANE/DEMENTED PERSONS (unless they acted
DURING LUCID INTERVAL)
3. DEAF-MUTES who DO NOT know how to write

2. FRAUD/DOLO
- when through insidious words/machinations of one
of the parties, INDUCED the other to enter into a
contract, & w/o them, he will not agree.

DEMENTED PERSON NOT exactly insane; difficult

to distinguish right from wrong
LUCID INTERVAL period when an INSANE has
acquired SANITY temporarily, therefore, capacitated
to enter into a valid contract
2 RULES on persons WHO CANNOT GIVE
CONSENT to a contract

DOLO CAUSANTE

DOLO INCIDENTE

Serious

Not serious

cause induces party to ENTER

into contract

NOT the cause to enter into

contract

make contract voidable

contract is valid; liable

fordamages

1. Age of majority is 18 yrs old

2. A contract entered into by UNEMANCIPATED MINOR
w/o parents/guardians consent is voidable, except:
a. Minor MISREPRESENTS his age (estoppel)
b. Contract involves sale & delivery of necessities
to minor
5 VICES OF CONSENT
- NOTE: When there is a DEFECTIVE CONSENT of
EITHER of parties, contract is voidable;
Remedy:annulment of contract.
1. MISTAKE/ERROR
2. FRAUD/DECEIT

4. INTIMIDATION
5. UNDUE INFLUENCE

7 RULES OF FRAUD
1. Failure to disclose facts when these needs to be
revealed, is a fraud.
2. Fraud should be SERIOUS (dolo causante) &
SHOULD NOT be done by BOTH parties to make
contract voidable.
3. Incidental fraud (dolo incidente) ONLY obliges
person to PAY DAMAGES.
4. Usual exaggerations in trade, when other party
know the real facts, is NOT FRAUD.

5. A mere expression of opinion is NOT FRAUD

UNLESS made by an expert & the other party relies
on his special knowledge.

SIMULATION OF CONTRACT

6. Misrepresentation made in good faith is NOT

FRAUD but may constitute an error.

- process of INTENTIONALLY deceiving others by

producing a contract not really exist (absolute
simulation), or w/c is different from true
agreement (relative simulation).

7. Misrepresentation by 3rd person DOES NOT vitiate

consent UNLESS it created substantial mistake.

2 KINDS OF SIMULATED CONTRACT

3. VIOLENCE

1. ABSOLUTE SIMULATION (the parties DO NOT

intend to be bound at all)

- serious/irresistible force is employed.

- completely fictitious/make-believe; VOID

2 RULES ON VIOLENCE

2. RELATIVE SIMULATION (parties conceal their

true/real agreement)

1. Serious/irresistible force is employed w/c

constitutes the reason why one entered into a
contract.

- parties are bound to real/true agreement, EXCEPT:

2. Violence ANNULS obligation although it is DONE by

3rd person not part of contract.

b. purpose is contrary to law, morals, good

customs, public order, public policy

4. INTIMIDATION

7 REQUISITES OF OBJECT OF CONTRACT

- 1 of the parties is compelled by a reasonable &

well-grounded fear of an imminent & grave evil upon
his person/property to give his consent.

1. Specific & certain

3 RULES ON INTIMIDATION

3. Services/things must NOT be legally/physically

impossible

1. Age, sex, & condition of person must used to

determine the degree of intimidation.

a. contract prejudice 3rd person

2. Services not contrary to law, morals, good

customs, public order, public policy

4. Services/things are w/in commerce of man

including future things

2. Intimidation ANNULS obligation although it is

DONE by 3rd person not part of contract.

5. Rights are NOT TRANSMISSIBLE.

3. A threat to enforce ones claim (claim must be just

& legal), DOES NOT vitiate consent.

6. Determinate (kind) or determinable ( w/o the need

of new contract/agreement)
7. NO contract be entered for future
inheritance UNLESS law states

VIOLENCE

INTIMIDATION

External

Internal

Physical contact/coercion

1. It is just & equitable.

NO physical coercion; ONLY
MENTAL/MORAL coercion 2. It exists.

4 REQUISITES OF CAUSE
3. It is lawful.
4. It is true.

LESION
5. UNDUE INFLUENCE

- inadequacy of cause (eg. insufficient price for thing

sold)

- a person takes improper advantage of his

power over others will, depriving the other to his
reasonable freedom of choice.

RULES ON LESION

3 RULES ON UNDUE INFLUENCE

1. There is a person who takes improper advantage
of his power over others will, depriving the other to
his reasonable freedom of choice.
2. Undue influence ANNULS obligation although it is
DONE by 3rd person not part of contract.
3. To constitute undue influence, ff circumstances
must be considered: (1) confidential, family, spiritual,
& other relations of parties; or (2) the aggrieved
party is suffering from mental weakness; or (3)
ignorant; or (4) in financial distress.

- Lesion DOES NOT invalidate contract, except there

is:
a. Fraud
b. Mistake
c. Undue influence
2 FORM OF CONTRACTS
1. Contracts in writing
2. Contracts in a public instrument

1. Contracts w/c must be IN WRITING to be

valid:
a. Donation of personal property exceeds P5000.
b. Agents authority in sale of land/any interest.
c. Contract of antichresis.

3. UNENFORCEABLE cannot be
sued/enforced unless ratified; no effect NOW but may
take effect upon ratification.
4. VOID NO effect at all; cannot be
ratified/validated.

d Stipulation to pay interest on loans.

e. Stipulation to reduce common carriers
extraordinary diligence & to limit its liability.
2. Contracts w/c must be IN A PUBLIC
INSTRUMENT to be valid:
a. Donation of real property (both the donation &
acceptance).
b. Sale of real property.
c. Partnership where real property/rights is
contributed; or when capital contribution exceeds
P3000.

5 RESCISSIBLE CONTRACTS
1. Those entered by guardians & suffered LESION by
more than of value of the value that is the OBJECT.
2. Those agreed upon in representation of absentees,
if the absentees suffered LESION.
3. Those undertaken in FRAUD of creditors when the
creditors cannot further claim.
4. If entered into contract w/o knowledge/approval of
litigants under litigation.

REFORMATION OF INSTRUMENTS
- REMEDY in equity in w/c a written instrument is
made/construed to the REAL intention of parties
when there is an error/mistake.
(5) CASES REFORMATION OF INSTRUMENT IS
AVAILABLE
1. Mutual mistake of parties.
2. One party was mistaken & the other acted fraud.

5. Contracts subjected to rescission declared by law.

3 VOIDABLE CONTRACTS
1. One of the parties INCAPABLE of giving consent to
a contract.
2. Those where consent vitiates by vices of consent.
(MFVIU)

3. One party was mistaken & the other

knew/believed that the instrument did not state their
REAL agreement.

3. Those agreed in the state of drunkenness/hypnotic

spell.

4. Ignorance, lack of skill, negligence, or bad faith of

person drafting the instrument DOES NOT state the
TRUE INTENTION of parties

3 UNENFORCEABLE CONTRACTS

5. Two parties agree on mortgage/pledge of

personal/real property BUT the instrument states the
property is sold ABSOLUTELY, or w/ the right to
repurchase.
(3) NO REFORMATION OF INSTRUMENT WHEN:
1. Simple donation inter vivos where NO CONDITION
is imposed.
2. Will.

1. Those entered in name of other person, or who

acted BEYOND his powers.
2. Those who do not comply w/ the Statute of
Frauds.
3. Both parties are incapable of giving consent to a
contract.
7 VOID/INEXISTENT CONTRACTS
1. Those w/c are ABSOLUTELY simulated/fictitious.

3. Real agreement is VOID.

2. Those w/c contemplate an impossible service.

4 KINDS OF DEFECTIVE CONTRACTS

3. Those whose OBJECT is outside the commerce of

man.

1. RESCISSIBLE valid until rescinded; has ALL

essential requisites but because
of injury/damage to one of the parties, the contract
may be rescinded.
2. VOIDABLE valid until annulled; has ALL essential
requisites but because of defect in consent, contract
may be annulled.

4. Those whose CAUSE/OBJECT did not exist at time

of transaction.
5. Those whose CAUSE/OBJECT/PURPOSE is contrary
to law, morals, good customs, public order, or public
policy.

6. Those where INTENTION of parties to principal

object CANNOT be ascertained.

7. Those expressly prohibited/declared VOID by law.