LegalRequirementsofContractualModification(SCRA73)

Twotypesofcontractualmodification:

Novationmodificationofthecontract
The obligation is modified by the change in the object or
principalconditionofthecontractthesubstitutionofpersonof
thedebtororsubrogationofathirdpersonintherightofthe
creditorandasaresult,theoriginalobligationssextinguished.
Contractisnotmodifiedbyextinguishedandanewcontract
createdtoreplaceextinguishedagreement.
Results in two stipulations: 1.) Extinguish an existing
obligation;2.)Substituteanewoneinitsplace.

Reformationcorrectionoftheinstrument
Thedocumentisconstruedsoastoexpressorconformthereal
intention of the parties without modification of the terms
thereoforsubstitutionoftheoriginalcontractbyanewone.

Basisforcontractmodification
Anobligationmaybemodifiedinthesensethatitisbeingnovatedbychanging
the object or principal condition thereof. In order for an obligation to be
extinguishedbyanother,itmustbedeclaredinunequivocaltermsthattheoldand
newobligationsareoneverypointincompatiblewitheachother.

UndertheNewCivilCode,anobligationisalsomodifiedbythesubstitutionofthe
personofthedebtorby:

Athirdpersonexpromision
o Initiativemustcomefromathirdpersonwhowillbethenewdebtor
who, together with the creditor, should give consent to excuse or
releasetheolddebtor
Thedebtorhimselfdelegacion
o Intitativecomesfromthedebtorwhoproposestothecreditorthata
new debtor should take his place and upon agreement of all the
parties,theoriginaldebtorisreleased.

Itisimportantthattheagreementisspecificthattheoriginaldebtorisreleased
fromtheobligationevenwithouthisconsentinthecaseofexpromisionorwithhis
consentincaseofdelegacionbutalwayswiththeconsentofthecreditor,otherwise
novationdoesnottakeplace.

The Civil Code also recognizes the modification of an obligation through

subrogationofathirdpersonintherightsofthecreditor.

Subrogationintherightsofthecreditormayeitherbe:
Legalmaybepresumedinthefollowingcircumstances:
o Whenacreditorpaysanothercreditorwhoispreferred,evenwithout
thedebtorsknowledge.
 o Whenathirdpersonnotinterestedintheobligationpayswiththe
expressortacitapprovalofthedebtor.
o Evenwithouttheknowledgeofthedebtorapersoninterestedinthe
fulfillmentoftheobligationpays,withoutprejudicetotheeffectsof
confusionasthelattersshare.
Conventional needs to beclearly established in order thatitmay take
effect.
o Allrightsoverthecreditistransferredtothenewcreditorandcan
enforce such rights against the debtor or third persons, be they
guarantorsorpossessorsofmortgages,subjecttostipulation.
o If transferred credit is subject to a suspensive condition, the new
creditorcannotcollectuntilaftersaidconditionisfulfilled.
o Acreditor,towhompartialpaymenthasbeenmade,mayexercisehis
rightfortheremainder,andheshallbepreferredtothepersonwho
hasbeensubrogatedinhisplaceinvirtueofthepartialpaymentofthe
samecredit.

ReformationofInstrument
Theintentionofthepartiesisthecontrollingfactorthatwoulddeterminewhether
ornotadocumentwouldhavetobemodified.Iftheintentionwasclearlystated,
anysuperveningcircumstancethatmaymakeitdifficultforonepartytoperform
or comply with its obligation therein would not justify a modification of the
contract.

Mutualmistakeofparties
Oneofthepartiesmayaskforthereformationoftheinstrumenttotheendthat
suchtrueintentionmaybeexpressed,where,therehavingbeenameetingofthe
mindsofthepartiesbuttheirtrueintentionisnotexpressedintheinstrumentby
reasonofmistake,fraud,inequitableconductoraccident.

o Itisimperativethatameetingofthemindsofthepartiestothecontractshall
havebeenattained.

FraudulentActorConcealment
TheCivilCodeallowsreformationofaninstrumentupontheinstancewhereinone
ofthepartieswasmistaken,theotherpartytothecontractactedfraudulentlyor
inequitablyinsuchawaythattheinstrumentdoesnotshowtheirtrueintention,or
the other party knew or believed that the instrument did not state their real
agreement,butconcealedthefactfromtheformer.

Thefraudulentactbytheotherpartyshouldnotbeseriousbutonlyincidental;
otherwise it may make the contract voidable. In defining fraud or deceit, the
SupremeCourtusedconcealmentasaprincipalact.

Foracontracttobevalidandreformable,theerrorshouldnotinvalidateconsent
andthefraudshouldonlybeincidental.

FailuretoExpressIntention
Whenthroughtheignorance,lackofskill,negligenceorbadfaithonthepartofthe
person drafting the instrument or the clerk or typist, said instrument does not
expressthetrueintentionoftheparties,thecourtsmayorderthattheinstrumentbe
reformed.

WhenInstrumentshowedSalebutMortgagewasIntended
Iftwopartiesagreeuponthemortgageorpledgeofrealorpersonalproperty,but
he instrument states that the property is sold absolutely or with a right of
repurchase,reformationoftheinstrumentisproper.

Inreforminginstruments,courtsdonotmakeanothercontractforthepartiesbut
merelyinquireintotheintentionoftheparties,and,havingfoundit,reformthe
writteninstrumentinorderthatitmayexpresstherealintentionoftheparties.

ProceduralRequirementsofReformationofInstrument

AnactionforreformationoftheinstrumentcanbeinstitutedasaspecialCivil
Action for Declaratory Relied. However, reformation may be entertained only
beforethebreachorviolationofthelaworcontracttowhichitrefers.

Itmustbeallegedthattherehasbeenameetingofthemindsofthepartiesbutdue
to mistake, fraud, inequitable conduct or accident, their true intention was not
expressed.

Failureto allege that the instrumentdoes not express the true intentionof the
partieswillrenderthesameinsufficientandsubjecttodismissalforfailuretostate
acauseofaction,

Anallegationthattheinstrumentdoesnotexpressthetrueintentionoftheparties
isessentialsincetheobjectsoughtforthereformationistomakethedocument
conformtotherealagreementortrueintentionoftheparties.

Itisimportanttoallegewhattherealagreementorintentionwas,otherwise,the
complaintwillberenderedinsufficientandcorrespondinglydismissedforfailure
tostateacauseofaction.