cases. reduced by the courts.

2.Waiver
RESOLUTION OR CANCELLATION (ART. 1191) III. KINDS OF OBLIGATIONS
of an action to enforce liability due to future culpa Waiver of an action to enforce liability due to future fraud
B. OBLIGATIONS WITH A PERIOD
3. ACTION mayFOR D a certain(Asense
inAMAGES RT. 1170)
be allowed. is void.
preservation, therefore, these expenses incurred by the person obliged to return should be deducted from
OBLIGATIONS
the gross value of the fruits to be returned.

2. IN CASE OF LOSS, DETERIORATION

OBLIGATIONS TONGIVE OR IMPROVEMENT OF DETERMINATE TO DO THINGS IN OBLIGATIONS TO GIVE
STIPULATIONS REGARDING EGLIGENCE (FUTURE NOBLIGATIONS
EGLIGENCE) OBLIGATIONS NOT TO DO
‣ Apply
1. 1. Gross the rules
negligence in Art. 1189

(equivalent to fraud)1.canAction
never be
Action for Specific Performance for excused
Substitute in Performance
advance for this1.would be contrary
Action to Compel to the
public
thepolicy.

‣
2. Simple TOLENTINO
(Art. 1165) — Before the resolutory
negligence may in certain cases be(Art.condition happens, the
1167)or mitigated.

excused party who has a right is practically in the same

Debtor to Undo what has been position
as one who has an obligation subject to a suspensive condition. There is the possibility that he
Done (Art. 1168) may have to return or
2. Action
deliverfortheSubstitute
thing to the other party, 2. Action
and that to Compel
possibility the theaDebtor
becomes positive duty when the resolutory condition is
Performance
fulfilled. (Art. 1165,
Therefore, 2ndof loss of theto
in case UndoorImproper
thing, Performance
deteriorations suffered 2.or improvements
by it, Resolution or Cancellation
made thereon, (Art.
the
KINDS par.)
OF NEGLIGENCE CLASSIFIED ACCORDING (Art.
TO THE SOURCE
1167, 2nd OF THE O
par.) BLIGATION
provisions of Art. 1189 are applicable, the party who has to make restitution being1191)
considered as the debtor.

1. Contractual negligence (culpa contractual) — that which results in a breach of a contract

3. 3. IN Resolution or Cancellation (Art.

CASE OF OBLIGATIONS TO DO OR NOT TO DO
3. Action for Resolution or 3. Action for Damages (Art. 1170)
2. Civil 1191) Cancellation
negligence or negligent tort (culpa aquiliana)
(Art. 1191)

‣ Apply the rule in Art. 1187 — The courts shall determine, in each case, the incidental effects of the happening of the
3. 4. Criminal
Action for Damages
negligence
resolutory (Art.criminal)
(culpa
condition.
1165, —4.thatAction
whichfor in the(Art.
Damages
results 1170) of a crime or a delict

commission
1st par.; 1170)
III. KINDS OF OBLIGATIONS
CONTRACTUAL NEGLIGENCE NEGLIGENCE BASED ON TORT C. A LTERNATIVE OBLIGATIONS
CRIMINAL NEGLIGENCE
B. OBLIGATIONS WITH A PERIOD
The same(culpa contractual)
rules shall be applied to obligations to do (culpa
or notaquiliana)
to do in case one, some or all of(culpa criminal) should
the prestations
become impossible. (1136a)
Negligence is merely incidental, Negligence here is direct, substantive, Negligence here is direct,
DEFINITION
incident to the OF A PERIOD
performance of OR
an TERM and independent. (Rakes v. Atlantic substantive, and independent of a
obligation already existing because of Gulf & Pacific Co) contract.
IMPAIRMENT
a contract.OR LOSSvs
(Rakes OF SOME CHOICES
Atlantic Gulf &
1.CLARENCE
ArticleWhen
1193. TIU
the right of choice
Pac. Co)
Obligations is with
for whose the debtor
fulfillment a day certain has been fixed, shall be demandable OBLIGATIONS
only whenAND thatCONTRACTS
day
A
comes.
TENEO L AW 4B,
Obligations B ATCH 2017
with a resolutory period take effect at 18
once,
OF 185
but terminate upon arrival of the day C IVIL
certain. AL AW
dayREVIEWER
a. Loss
There due to the obligation
fault of the(acreditor — the debtorobligation
may rescind the contract (Art. 1203)(except
with damages obligation
certain isisunderstood
a pre-existingto be that which Nonecessarily
must pre-existing (except
come, although of notNo
it may bepre-existing
known when.
contract, either express
‣ Rescission only or implied)
applies when thecourse the lost
thing was dutydue
to be
to careful
the faultinofallthe creditor
the duty
if thenever towas
debtor harmreally
others).
prejudiced
If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by
(such as when he owns the thing involvedhuman in oneactuations)

of such choices). If the debtor is not prejudiced, then he should

the rules of the preceding Section. (1125a)
still choose from the remaining‣choices less—
EXCEPT damages.
If the act which
b. Loss due to fault of debtor — no effect, breaches
sinceathecontract
right ofischoice
a tort itself.
is with him, he can choose what is left.

(Air France vs Carrascoso)

NATURE OF A P
c. Loss due
ERIODto a fortuitous event — no effect, debtor must choose from the remaining choices, if one choice is left,
then the obligation
Proof
‣ A period is a certain length ceases
needed to
of—time be alternative
preponderance
which and
of
determines now
evidence becomes or
the effectivity pure,
thethe debtor
Proofloses
extinguishmentneededtheobligations.

of right of choice
in a crime (Art. of
— proof 1202)

guilt beyond reasonable doubt.

‣2. AWhenperiodthehasright of choice
reference is with
to a “day the creditor
certain” which is understood to be that which must necessarily come, although it may
not be
a.
DefenseLossknown
due when.

of “good tofather
fault of debtor
a family”— the Defense
creditor may claimfather,
of “good any ofetc,”
thoseis subsisting,
a ornot
This is theaprice
properof that which,
defense through the
in culpa
in fault of
selection the former,
and has
supervisiondisappeared,
of with
proper a
andright to damages

‣ NOTE — When we know that something will happen but we are uncertain as to the time it will happen, this is aisterm.
the complete defense (insofar criminal. Here the employee’s guilt
employees
When we is nota proper
are not evencomplete
sure if something as will
employers
happen or asguardians are this is a automatically
a fact or not, condition.
the employer’s civil
defense in culpa contractual, though concerned) (Cangco v. Manila guilt, if the former is insolvent.
‣IMPAIRMENT
A term
this orOR
a period
may mitigate LOSS consists
ALL C
damages.
OF in a space of time which Railroad)
(Cangco
HOICES has an influence on obligations as a result of a judicial act, and either
suspendsManila
their demandableness, or produces their extinguishment. Obligations with a period are, therefore, those whose
1. When v. the rightRailroad)
of choice is with the debtor
consequences are subjected in one way or another to the expiration of said term.

Asa.longLoss
as it due to thethat
is proved fault of the
there wascreditor — the the
Ordinarily, debtor
victimmay hasrescind thethe
to prove contract with damages
Accused (Art. 1203)
is presumed innocent until
‣ REQUISITES — A period must be —

a b.
contract
Lossand duethat it wasofnot
to fault carried
debtor — thenegligence of the
debtor is liable fordefendant.
damages. ThisThe is the contrary
indemnity shall be fixed istaking
proved,
as asobasis the
1. it Future
out, is presumed— It must referdebtor
thatthing
the to theisfuture.

because or histhat
action is based onwhich
alleged prosecution has the burdenother
of than
value of the last which disappeared, of the service last became impossible. Damages
at fault,
2. Certain and it is
the value—ofItthe his duty
must to prove
lastbething
certain negligence
(sure tomay
or service come)alsobut
becanon the part
be extended.
awarded. of the proving the negligence of
(If eliminated subsequently by mutual agreement,
(Art. 1204)
the
that the
there was no neg-
obligation becomesligence immediately(Cangco
in and defendant.
pure v. Manila Railroad)
demandable).
accused.
Loss due
c. carrying out totheaterms
fortuitous
of theevent — obligation is extinguished

3. Possible — It must beRailroad)

physical and legally possible, otherwise the obligation is void.

When (Cangco
2.contract. the rightv.ofManila
choice is with the creditor
a. Loss due to fault of debtor — the choice by the creditor shall fall upon the price of any one of them, also with
indemnity for damages.
PERIOD CONDITION
DELAY OR DEFAULT
As to their A period is an event which must happen sooner or later, at a A condition is an uncertain event
FACULTATIVE
fulfillment OBLIGATIONS
date known beforehand, or a time which cannot be determined.

Article 1169.
As to time Those obliged to Adeliver or to do
period always something
refers incur in delay from
to the future the time
A condition may the obligee
under the law judicially orthe past.
refer even to
extrajudicially demands from them the fulfillment of their obligation.
Article
However, 1206.
the When
demandonly
byone
the prestation
creditor shallhasnotbeenbeagreed
necessary upon, but the
in order obligor
that delaymaymayrender
exist: another in substitution, the
obligation is called
As to influence on facultative.
A period merely fixes the time or the efficaciousness of an A condition causes an obligation to arise or to cease
CLARENCE
The loss
the or TIU
deterioration of the thing intended
obligation as a substitute, through the negligence of the
obligation OBLIGATIONS
obligor, doesAND not CONTRACTS
render him
liable.
ATENEOBut LAWonce
4B, Bthe substitution
ATCH 2017 has been made, the obligor 21 OFis185
liable for the loss of the substitute on account CIVIL of
LAWhis delay,
REVIEWER
As to the will of A period left to the debtor’s will merely empowers the court to A condition which depends exclusively on the will of
negligence or
the debtor fraud. fix the period the debtor annuls the obligation

ALTERNATIVE FACULTATIVE
CLARENCE TIU
As to the contents
OBLIGATIONS AND CONTRACTS
Various things are due, but the Only one thing is principally due, and it is that one which generally is given, but
ATENEO
of theLobligation
AW 4B, BATCH 2017
giving of one is sufficient. the 39
other 185
OF(the CIVIL LAW
substitute) may be given to render payment or fulfillment REVIEWER
easy.

As to nullity If one of the prestations is illegal, If the principal obligation is void, and there is no necessity of giving the
the others may be valid and the substitute. (“The nullity of the principal carries with it the nullity of the
obligation remains. accessory or substitute.’’ — this principle may by analogy be applied.)

As to the effect of If it is impossible to give all except If it is impossible to give the principal, the substitute does not have to be
loss or impossibility one, that last one must still be given; if it is impossible to give the substitute, the principal must still be given.
given.

As to influence on A period merely fixes the time or A condition causes an obligation to arise or to cease
the obligation the efficaciousness of an obligation

As to the right of The right to choose may be given The right of choice is given only to the debtor.
choice either to debtor or creditor.
 ‣ To pay my debt of P1,000,000 in favor of Bella, I gave her with her consent a diamond ring instead worth P1,000,000.
‣ To pay off his debt, an heir assigned his inheritance in an estate to his creditor.

SALE VS DATION IN PAYMENT

SALE DATION IN PAYMENT

There is no pre-existing credit There is a pre-existing credit

This gives rise to obligations This extinguishes obligations

The cause or consideration here is the price (from the The cause or consideration here, from the viewpoint of
viewpoint of the seller); or the obtaining of the object the debtor in dation in payment is the extinguishment of
(from the viewpoint of the buyer) his debt; from the viewpoint of the creditor, it its he
acquisition of the object offered in credit

There is greater freedom in the determination of the price There is less freedom in determining the price

The giving of the price may generally end the obligation of The giving of the object in lieu of the credit generally
the buyer extinguishes completely the credit, unless the agreement
IV. MODES
provides OF EXTINGUISHMENT OF OBLIGATIONS
otherwise.
A. PAYMENT OR PERFORMANCE
DATION IN PAYMENT VS PAYMENT BY CESSION
PACTUM COMMISSORIUM
DATION IN PAYMENT CESSION
‣ RULE — THE CREDITOR CANNOT APPROPRIATE THE THINGS GIVEN BY WAY OF PLEDGE OR MORTGAGE, OR DISPOSE OF THEM.
ANYDoes not affectTO
STIPULATION allTHE
the CONTRARY
properties IS
of NULL AND VOID. (ART. 2088)
the debtor In in general, affects all the properties of the debtor
‣ In Pactum Commissorium, the parties agree generally in one single contract, that, in the event that the debtor fails to
Does
pay the not the
debt, require pluralityorofpledged
mortgaged creditorsproperty of the debtor shallRequires more than
automatically one creditoror owned by the
be appropriated
creditor

Only the specific or concerned creditor’s consent is Requires the consent of all the creditors
‣ RATIONALE — Thisrequired
is because of the rule that any property made as a security for a load must always be foreclosed
or subjected to a sale by public bidding in case it shall be used to satisfy a debt wholly or partially of the debtor

May take place during the solvency of the debtor Requires full or partial insolvency
‣ ELEMENTS —
Transfers ownership upon delivery Does not transfer ownership
IV. MODES OF EXTINGUISHMENT OF OBLIGATIONS
F. NOVATION
CLARENCE TIU This is really an act of novation Not an act of OBLIGATIONS
novation AND CONTRACTS
one, assignment refers to the same right which passes from one person to another. The nullity of an old obligation
ATENEO LAW 4B, BATCH 2017 73 OF 185 CIVIL LAW REVIEWER
may be cured byAkin
subrogation,
to a sale such that the new obligation
Akinwill be perfectly
to agency wherevalid, but the nullity
the creditors of an obligation
are authorized to sell not
remedied by the assignment of the creditor’s right to another.
the properties ceded.

TENDER OF PAYMENTCONVENTIONAL SUBROGATION

AND CONSIGNATION ASSIGNMENT OF CREDIT

Effect on the This extinguishes the original obligation, and creates There is mere transfer of the same right or credit (the transfer
Original Obligation a new one
Article 1256. If the creditor to whom tender of payment has been made refusesdid not extinguish the credit)
without just cause to accept it, the debtor
shall be released
Requirement of the from responsibility by the consignation
This requires the debtor’s consent of the thing or sum due. Consignation alone
This does NOT require the debtor’s shall(mere
consent produce the
same effect
Debtor’s in the following cases:
Consent notification to him is sufficient)
(1) When the creditor is absent or unknown, or does not appear at the place of payment;
Effect on Defects The defect of the old obligation may be cured in such The defect in the credit or right is NOT cured simply by
(2) in
When he is incapacitated
the Original to receive
a way that the the payment
new obligation at the valid.
becomes entirely time
it is due; assigning the same (

Obligation
(3) When, without just(Here,
cause, heisrefuses
there no right totopresent
give aagainst
receipt;
the new Here, the debtor generally still has the right to present
creditor any defense which he, the debtor, could have against the new creditor any defense available as against old
(4) When two or more persons claim the same right to collect;
set up against the old creditor.) creditor.)
(5) When the title of the obligation has been lost. (1176a)

EArticle OF SUBROGATION
FFECTS1257. In order that the consignation of the thing due may release the obligor, it must first be announced to the
persons interested
1. FULL SUBROGATION in the fulfillment of the
— It transfers toobligation.
the new creditors (persons subrogated the credit) with all the rights of the
Theold
consignation shall against
creditor, either be ineffectual if it isor
the debtor not made third
against strictly in consonance
person, with the provisions
be they guarantors which regulate
or possessors payment.
of mortgages.
(1177)
(Art. 1303)

‣ BUT — this is subject to stipulation in a conventional subrogation. (Art. 1303)

Article 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom
‣ The credit and all the appurtenant rights, either against the debtor, or against third persons, are transferred (thus, in a
the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases.
sense the obligation subsists, that is, it has not yet been extinguished or paid).

The consignation having been made, the interested parties shall also be notified thereof. (1178)
‣ Example — D owes C P1,000,000. G is the guarantor. A stranger S paid C the P1,000,000 with the consent of D and
C. S is now subrogated in the place of C. If D cannot pay the P1,000,000, S can proceed against the guarantor, G.
Article 1259. The expenses of consignation, when properly made, shall be charged against the creditor. (1179)
‣ Effect of Presence of a Suspensive Condition — It is understood that if the transferred credit is subject to a
suspensive condition, the new creditor cannot collect until after said condition is fulfilled.
Article 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the
2. PARTIAL SUBROGATION — The old creditor to whom partial payment has been made, may exercise his right for
obligation.
the remainder, and he shall be preferred to the new creditor in virtue of the partial payment of the same credit. (Art.
Before
1304)the creditor has accepted the consignation, or before a judicial declaration that the consignation has been
properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force. (1180)
‣ Here, there are two creditors —

a. The old creditor, who still remains a creditor as to balance (because only a partial payment has been made to him);

Article 1261. If, the consignation having been made, the creditor should authorize the debtor to withdraw the same, he
shall lose
b. every preference
The new which
creditor who is he may have
a creditor over
to the the thing.
extent of whatThe
heco-debtors,
had paid theguarantors
creditor.
and sureties shall be released.
(1181a)
‣ Example — A owes B P500,000. With the consent of both, C pays B P250,000. Now B and C are the creditors of A to
the amount of P250,000. Suppose A has only P250,000 who should be preferred? B, the original creditor, should be
preferred inasmuch as he is granted by the law (Art. 1304, Civil Code) preferential right to recover the remainder, over
TENDERthe PAYMENT
OFperson subrogated in his place by virtue of the partial payment of the same credit.
‣ ‣ It isNOTE
the act
—ofTheoffering the creditor
preference is onlywhat
in theisassets
due him togetherwith
remaining withthe
a demand thatthose
debtor (not the creditor
alreadyaccept the same.

transferred to others).
Therefore, the old creditor must assert his claim or preference over the assets only while they are still in the hands of
 b. Object

c. Cause or consideration

CONTRACTS
d. Compliance with the formalities prescribed by law

CONSENT OBJECT CAUSE

REQUISITES 1. There must be a meeting of the 1. It must be within the commerce 1. It must exist

minds
of man

2. It must be
2. There must be at least two parties 2. It must be licit, or not contrary to true

to the contract who are legally law, morals, good customs

3. It must be licit
capacitated to give consent
public order or public policy

3. It must be voluntarily, freely, 3. It must be possible

wilfully, and intelligently given

4. It must be an object certain such
(there must be no mistake, fraud,
that it is determinate at least as
violence, intimidation or undue
to its kind
influence)

4. It must have been intended and

truly given (intent to be bound)

EFFECT OF 1. Contract is void — if the first

ABSENCE IN requisite is absent, such that there
THE is no meeting of the minds

REQUISITES Contract is void

2. Contract is merely voidable — if
the second or third requisite is
absent VI. ESSENTIAL REQUISITES OF CONTRACTS
B. OBJECT OR SUBJECT-MATTER
ABSOLUTE SIMULATION FRAUDULENT ALIENATION

Implies that there is no existing contract, no real act There is a true and existing transfer or contract
executed
CLARENCE
Can TIU
be attacked by any creditor, including one Can only be assailed by theOBLIGATIONS AND
creditors before CONTRACTS
the
ATENEO LAW 4B, Bsubsequent
ATCH 2017 to the contract 123 OF 185 alienation C IVIL L AW REVIEWER

The insolvency of the debtor making the simulated The action to rescind, or accion pauliana, requires that the
transfer is not a prerequisite to the nullity of the contract creditor cannot recover in any other manner what is due
to him

Imprescriptible Prescribes in 4 years

B. OBJECT OR SUBJECT-MATTER

Article 1347. All things which are not outside the commerce of men, including future things, may be the object of a
contract. All rights which are not intransmissible may also be the object of contracts.
No contract may be entered into upon future inheritance except in cases expressly authorized by law.
All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object
of a contract. (1271a)

Article 1348. Impossible things or services cannot be the object of contracts. (1272)

Article 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate
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)

NATURE OF THE OBJECT AS AN ESSENTIAL ELEMENT OF CONTRACTS

‣ The object of the contract is its subject-matter. It is the thing, right, or service which is the subject-matter of the obligation
arising from the contract.Hence, it is said that under the Code, the object of the contract and the object of the obligation
cerated thereby are identical.

‣ REQUISITES— In order that a thing, right or service may be a valid object of contracts, it is necessary that the following
requisites concur —

1. The object must be within the commerce of man (Art. 1347)

2. It must be licit, or not contrary to law, morals, good customs, public policy, or public order (Art. 1347)
3. It must be possible (Art. 1348)
4. It must be determinate as to its kind (generic at least) (Art. 1349)

REQUISITES OF THE OBJECT (EXPOUNDED)

1. THE OBJECT MUST BE WITHIN THE COMMERCE OF MAN (ART. 1347)
‣ REQUISITES —
a. The object must be in existence at the time of the perfection of the contract OR it has the possible or
potentiality of coming into existence at some future time.

 ‣ the transfer of the debt by the debtor to another, without the consent of the creditor, is ineffective as to the latter
‣ the payment by a debtor to his creditor after the credit has been garnished or attached by a third person, is
ineffective as to the latter
RESCISSIBLE CONTRACTS
or is a party to the contract, contract can assert its
Requisites 1. There must be a valid
(Art. 1408)
ground for rescission (Art.
contract falls under the under the grounds for nullity
1380)
2. The party asking for
rescission must have no
and is NOT ratified, it
other legal means to obtain
reparation for the damages
suffered by him. (Art. 1383)
3. Generally, the person
demanding rescission must
be able to return whatever
he may be obliged to restore
if rescission is granted. (Art.
1385)
4. The things which are the
object of the contract must
not have passed legally to
the possession of a third
person acting in good faith.
RESCISSIBLE
(Art. 1385) CONTRACTS
5. Action has not prescribed
Grounds 1. Contracts which cause lesion
or economic damage (of 1/4
of the value of the thing)
parties is incapable of
a. Contracts which are
another person by policy;
entered into by
guardians
2. Vitiated consent — Those
b. Contracts agreed upon
a. Been given no
in representation of
absentees
a. Mistake
object did not exist at the
2. Contracts which defraud
CLARENCE TIU
representation
OBLIGATIONS AND CONTRACTS
creditors
ATENEO LAW 4B, BATCH 2017
3. Things in litigation
men;
4. All other contracts specially
declared by law to be subject
to rescission
5. Payments made in a state of
insolvency for obligations to
whose fulfillment the debtor
could not be compelled at
2. Creates the obligation to
the time they were effected.
(Art. 1381, 1382)
How 1. Can be made directly by an action for such purpose, or
It is not an action but a 1. May be made in proper
availed of
2. Indirectly by way of defense to an action (but it should be set
the price paid
up as a counterclaim)
EXCEPT — In the following
1414, 1415, & 1416
Prescriptiv 4 years
e Period
When 1. Generally — From the date
prescripti the contract was entered
on into and all legal remedies
commenc have been exhausted
of the consent ceases.
es
2. For minors — Within four
years after attaining the age
been benefited by the
of majority and all other
legal remedies have been
exhausted
3. For absentees — when he
learns of the contract (when
(Tolentino)
his domicile is known) and
all legal remedies have been
exhausted
4. For contracts in fraud of
creditors — From the time
the fraud is discovered and
all other legal remedies have
been exhausted
5. Things in litigation — after
knowledge of the
transaction and all other
legal remedies have been
exhausted
VOIDABLE CONTRACTS
1. There is a valid ground for
affected (Art. 1421)
annulment
grounds for
2. Action has not prescribed
unenforceability under
3. Must be brought by the Art. 1403 and provided
proper parties
4. The party capacitated to
bring the action for
annulment must NOT
have lost the thing he
received as the object of
the contract through his
fault (Art. 1401)
VOIDABLE CONTRACTS
1. Incapacity to consent —
Those where one of the
those entered into law, morals, good customs,
giving consent to a
contract
2. Those which are absolutely
where the consent is
vitiated by either —
b. Violence
c. Intimidation
143 OF 185
his powers
d. Undue influence
e. Fraud
Statute of Frauds
the subject matter of the
when the nullity proceeds
are guilty (pari delicto)
1. Intimidation, violence,
or undue influence —
form the time the defect
2. Mistake or fraud —
from the time of the
discovery of the same
3. Contracts entered into
by minors or other
incapacitated persons
— from the time the
guardianship ceases
VIII. DEFECTIVE CONTRACTS
RESCISSIBLE CONTRACTS VOIDABLE CONTRACTS UNENFORCEABLE VOID CONTRACTS
CONTRACTS
Who can 1. The person who is injured by The person who has interest in Only the parties to the 1. Contracting parties
UNENFORCEABLE VOID CONTRACTS file the rescissible contract
CONTRACTS 2. Third persons who
provided he must be the unenforceability and
a. Ward or absentee in the interests are directly
victim, and NOT the party NEVER third persons
As long as the As long as the contract falls case of lesion
responsible for the defect
under Art. 1409, it is void. b. Plaintiff in a case where
a thing in litigation is
alienated by the
defendant
is unenforceable c. Defrauded creditors in
case of an accion
pauliana
2. The heirs of these persons
3. The debtor’s creditors by
virtue of their right granted by
Art. 1177 (accion
subrogatoria)
Ratificatio May be ratified by lapse of time 1. May be ratified either 1. In the case of Cannot be ratified
n due to prescription expressly or impliedly by the Statute of
the party who is Frauds it may be
VIII. DEFECTIVE CONTRACTS incapacitated or whose ratified by —
UNENFORCEABLE VOID CONTRACTS consent is vitiated
a. Partial
CONTRACTS 2. May be ratified by lapse performance
of time due to of the
1. Unauthorized 1. Those whose cause, object prescription obligation
contracts — or purpose is contrary to arising from
the contract
in the name of public order or public
b. Non-
objection
one who has
during the
either —
simulated or fictitious;
trial when oral
evidence is
3. Those whose cause or
authority or presented
legal
time of the transaction;
2. In the case of
4. Those whose object is other grounds —
b. Acted beyond CIVIL LAW REVIEWER Ratification either VIII. DEFECTIVE CONTRACTS
outside the commerce of
expressly or
RESCISSIBLE CONTRACTS VOIDABLE CONTRACTS UNENFORCEABLE VOID CONTRACTS
2. Contracts that fail impliedly by the
5. Those which contemplate CONTRACTS
to comply with the proper parties
an impossible service;
Effects 1. Rescission shall be only to The contracting parties shall The contract cannot The contract cannot be given
6. Those where the intention the extent necessary to restore to each other the be given effect effect and both parties may
3. Contracts where
of the parties relative to the cover the damages caused following — generally recover what each
both parties are
principal object of the (Art. 1384) has given
incapable of giving
contract cannot be 1. Things which have been
consent
ascertained;
EXCEPT —
return and/or pay (mutual contract
7. Those expressly prohibited 1. No recovery is allowed —
restitution) the following (Art.
or declared void by law 2. Fruits
1385) —
from the illegality of the
3. The price with its interest
a. Things which were the cause or object of the
defense that should be and direct action filed for (Art. 1398)
object of the contract or contract AND both parties
claimed at the earliest such purpose, or
instance
2. It may be claimed as an b. Fruits
‣ EXCEPT — See
affirmative defense (but it cases, a party is NOT obliged exceptions in Art.
need not be a c. Interest
to return fully or partially
counterclaim) ‣ BUT — Mutual (recovery by one party)
1. In cases provided by law here is allowed)
restitution ONLY applies
N/A Imprescriptible (Art. 1410) (Art. 1398)
to—
2. Partial recovery (recovery
2. When the defect of the by one party) is allowed —
i. Defective contracts
contract consists in the When the nullity proceeds
N/A causing lesion in
incapacity of one of the from the illegality of the
numbers 1 and 2 of
parties, the incapacitated cause or object of the
Art. 1381 (by
person is not obliged to contract BUT only one
guardians and
make any restitution party is guilty
administrators)
except insofar as he has
ii. Mutual dissent
thing or price received by
iii. Resolution or
him (Art. 1399)
cancellation or
reciprocal 3. When the principle of
obligations under unjust enrichment applies
Art. 1191
3. In case the objects of the
CLARENCE TIU OBLIGATIONS AND CONTRACTS
contract are legally in the
ATENEO LAW 4B, Bpossession
ATCH 2017of third persons 145 OF 185 CIVIL LAW REVIEWER
in good faith, then damages
instead should be paid by
the party causing the loss
 ‣ Both presuppose contracts validly entered into and existing (or at least voidable)

‣ Both require mutual restitution when declared proper

‣ Differences —

RESCISSION UNDER ART. 1380 RESCISSION UNDER ART. 1191

May be demanded by a third party prejudiced by the May be demanded only by a party to the contract
contract
VIII. DEFECTIVE CONTRACTS
May not be denied by the court if the conditions for May be denied by the court when there A. R sufficientCONTRACTS
isESCISSIBLE
3. rescission are present.
The person demandingTherescission
courts cannot
mustgrant a period
be able reason to
to return whatever hejustify
may be extension
obliged of
to time to the
restore defendant
if rescission is in
granted.
(Art. 1385)or term within which to comply which to perform
4. There
Thearethings which
various are theofobject
reasons equityofprovided
the contract must not have
as grounds passed legallyortosubstantial
Non-performance the possession of a performance
improper third person acting
is in
good faith. (Art.under
for rescission 1385)Art. 1381 and 1382. The non- the basis for rescission
5. Theperformance by the other
action for rescission mustparty is immaterial.
be brought within the prescriptive period of 4 years. (Art. 1389)

VIII. DEFECTIVE CONTRACTS

Applies whether the contract produces unilateral or Applies only to reciprocal obligations where one party has
D. VOID AND INEXISTENT CONTRACTS
reciprocalOF
RESCISSION obligations andCeven
RESCISSIBLE when(A
ONTRACTS the
RTcontract
. 1380) has not performed
VS RESCISSION and theOother
OF RECIPROCAL is ready(A
BLIGATIONS toRTcomply
. 1191)with his
been fully fulfilled obligation
‣D. VOID AND—INEXISTENT CONTRACTS
Similarities
‣ BothMust be rescinded
presuppose by judicial
contracts validly action May
entered into and existing (orbe
at done
least extra-judicially
voidable)
if there is a stipulation

‣ Both require mutual restitution when declared proper

NATURE OF VOID CONTRACTS

‣ Differences —
RESCISSION OF RESCISSIBLE CONTRACTS VS MUTUAL DISSENT
‣‣ Rescission
A void orRESCISSION
inexistent
should alsocontract
be
UNDER is one
clearly which1380has no
distinguished
ART. force
from and effect
mutual fromRESCISSION
dissent.
the very beginning,
UNDER asART.
if it had
1191never been
rendered into, and which cannot be validated either by time or ratification.

‣ Mutual dissent — is an agreement of the parties to cancel their contract and mutually return the object and cause thereof.

‣ MayThesebekinds
demanded by a third
of contract include partynotprejudiced
only thoseby the
contracts May one
in which be demanded only by
of the essential a party to
requisites the contract
is totally wanting, but
‣ also
Inthose
mutual withdrawal,
which it is the
contract
are declared willby
void ofpositive
the parties that constitutes
provision the basis, whereas in rescission (properly called), it is
of law or statute.

the law that constitutes the basis.

‣ MayA void contract

not be deniedis equivalent to nothing, it is absolutely wanting
Mayinfrom
civil effects.

‣ Example — whenbythe thepurchaser

court if the conditions
returned for purchased
the thing be denied by thesaying
the vendor, court when
that hethere
wasisnosufficient
longer able to
‣ rescission
pay for it, and the vendor took possession thereof, the contract is rescinded (or resolved), and the defendant
are present.
Characteristics of The
Void courts
Contracts cannot
—
grant a period reason to justify extension of time to the in
vendor cannot
recover or term
the withinofwhich
balance the to comply
purchase price from the vendee. which to perform
1. It produces no effect whatsoever either against or in favour of anyone, hence, it does not create, modify or extinguish
the various
There are juridicalreasons
relation of
to equity
which provided
it refers
as grounds Non-performance or substantial improper performance is
for rescission
2. No action under Art. 1381 and 1382. The non-
annulment is necessary, because the nullity exists ipso jure, the abasis for rescission
GROUNDS FORforRESCISSION
performance by the other party is immaterial.
judgment of nullity would merely be
declaratory

3. It cannot
Applies whether be the
confirmed
contract orproduces
ratified
unilateral or Applies only to reciprocal obligations where one party has
reciprocal
Article 1381. obligations
The followingandcontracts
even when are the contract has
rescissible: not performed and the other is ready toVIII. comply with his
DEFECTIVE CONTRACTS
4. If it has been performed, the restoration of what has been given is in order

been fully fulfilled obligation

(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesionB.by more than
VOIDABLE one-
CONTRACTS
5. Any person may invoke the inexistent of the contract whenever its juridical effects are asserted against him

fourth ofMust the value of the things

be rescindedCONTRACTS which are
by judicial action the object thereof; May be doneVOIDABLEextra-judicially if there is a stipulation
RESCISSIBLE CONTRACTS
6. The
(2) Those right to
agreed set in
upon uprepresentation
the defense of of illegality cannotif be
absentees, thewaived

latter suffer the lesion stated in the preceding number;

7. A undertaken
(3) Compatible
Those contractwithwhich is theof
theinperfect
fraud direct
validityresult
of the
creditors ofcontract
whena previous in illegal
the latter contract
Here,
cannot anyisother
a defect
in also void andcollect
is presupposed
manner inexistent

on the
the essential
claims due elements
them;
(4) Those
‣ ESCISSION which
Ratification relation
referto the essential
newtocontract
things under elements
— If alitigation ifvalid
they have been entered into by theof contract
thedefendant without thecontract
knowledge
R OF Rby ESCISSIBLE CONTRACTS new
VS Mand UTUAL contract
DISSENT is entered into about same thing, the new is of
and approval
course binding, of the
but litigants
this is notortechnically
of competent judicial authority;
the “ratification” referred to in the law. Thus, a donation of land in a private
To prevent
‣ Rescission rescission,
should also be ratification is not required
clearly distinguished from mutual dissent.
To prevent annulment, ratification is required
instrument
(5) All is void, specially
other contracts but if a month later by
declared thelawsame to bedonation
subjectis to
made in a public
rescission. instrument, the donation becomes valid, but
(1291a)
this time,
‣ Mutual the new
dissent — iscontract becomes
an agreement validparties
of the and effective,
to cancelnot from
their the date
contract andofmutually
the original agreement,
return the objectbut from
and the date
cause of
thereof.

the new agreement, for technically there has been no ratification

‣ In
Article mutual
1382. withdrawal,
Payments madeit in
is the will of
a state of the parties that
insolvency constitutes to
for obligations thewhose
basis, fulfillment
whereas inthe rescission (properly
debtor could notcalled),
be it is
GROUNDS the law FOR
that ANNULMENT
constitutes the OF
basis.
CONTRACTS
compelled at the time they were effected, are VOIDalso VSrescissible. (1292)
VOIDABLE CONTRACTS
‣ Example — when the purchaser returned the thing purchased from the vendor, saying that he was no longer able to
pay for it, andVOID CONTRACTS
the vendor took possession thereof, the contract is rescinded VOIDABLE CONTRACTS
(or resolved), and the vendor cannot
Article
CLARENCE 1390. TIUThe following contracts are voidable or annullable, even though there may have been no damage
OBLIGATIONS to the
AND CONTRACTS
recover the balance of the purchase price from the vendee.
contracting
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2017 be ratified 148 OF 185 may be ratified CIVIL LAW REVIEWER
(1) Those where one of the parties is incapable of giving consent to a contract;
GROUNDS
(2) Those where FOR the RESCISSION
generally, consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
effects are not produced at all produces effects until anulled
These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. (n)
the defect here is that ordinarily, public policy is militated defect is due to incapacity or vitiated consent
Article 1381. The followingagainst contracts are rescissible:
GROUNDS FOR ANNULMENT
(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-
void from the very
1. Incapacity beginning so generally, noofaction is valid until annulled
fourth of thetovalue
consent — things
of the Those where are
which one thethe parties
object is incapable of giving
thereof; consent to a contract

required to set it aside, unless the contract has already

(2) Vitiated
2. consent
Those agreed upon— in
Those where the consent
beenrepresentation
performed
is vitiated
of absentees, bylatter
if the eithersuffer
—
the lesion stated in the preceding number;
(3) a.
Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;
Mistake

cannot be cured by prescription may be cured by prescription

(4) b.
Those which refer to things under litigation if they have been entered into by the defendant without the knowledge
Violence

and approval of the litigants or of competent judicial authority;

c. Intimidation

(5) All other contracts specially declared by law to be subject to rescission. (1291a)
defense
d. Undue may be availed of by anybody, whether he is a
influence
defense may be invoked only by the parties (those
party to the contract or not, as long as his interest is principally or subsidiarily liable), or their successors in
e. Fraud

Article 1382. Payments madeaffected.

directly in a state of insolvency for obligations to whose fulfillment
interest and the debtor could not be
privies
compelled
‣ NOTE — atRepentance
the time they at were
havingeffected,
enteredare
intoalso rescissible. is
the transaction (1292)
NOT a ground for annulment. It is not the function of the
law to protectreferred to as
or relieve absolute
a man fromnullity
the consequences of a bad bargain.
referred to as relative or conditional nullity

CLARENCE TIU OBLIGATIONS AND CONTRACTS

VOID VS UNENFORCEABLE CONTRACTS
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PRESCRIPTIVE 2017
PERIOD FOR ANNULMENT 148 OF 185 CIVIL LAW REVIEWER
VOID CONTRACTS UNENFORCEABLE CONTRACTS

cannot
Article 1391. The action be ratified shall be brought within four years.
for annulment may be ratified
This period shall begin:
In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases.
CLARENCE
In TIU
case of mistake or fraud, from the time of the discovery of the same. OBLIGATIONS AND CONTRACTS
 directly affected. interest and privies

referred to as absolute nullity referred to as relative or conditional nullity

VOID VS UNENFORCEABLE CONTRACTS

VOID CONTRACTS UNENFORCEABLE CONTRACTS

VIII. DEFECTIVE CONTRACTS
D. VOID AND
VIII. ID
NEXISTENT CONTRACTS
EFECTIVE C ONTRACTS
cannot be ratified may be ratified
VOID CONTRACTS UNENFORCEABLED. VOID AND INEXISTENT CONTRACTS
CONTRACTS
VOID CONTRACTS UNENFORCEABLE CONTRACTS
no contract at all there is a contract but it cannot be enforced by a court
CLARENCE TIU no contract at all there is a contract but it action
cannotOBLIGATIONS AND
be enforced by CONTRACTS
a court
ATENEO LAW 4B, BATCH 2017 169 OF 185 action CIVIL LAW REVIEWER
cannot be assailed by third parties can be assailed by anybody directly affected
cannot be assailed by third parties can be assailed by anybody directly affected
VOID VS RESCISSBLE CONTRACTS
VOID VS RESCISSBLE CONTRACTS
VOID CONTRACTS RESCISSIBLE CONTRACTS
VOID CONTRACTS RESCISSIBLE CONTRACTS
Defect is inherent in the contract itself Defect is in the effect of the contract
Defect is inherent in the contract itself Defect is in the effect of the contract
The nullity is a matter of law and public interest It is a matter of equity and private interest
The nullity is a matter of law and public interest It is a matter of equity and private interest
There are no legal effects even if no action is taken to set If no action is taken to set it aside, it remains valid and
There are no legal effectsiteven
asideif no action is taken to set produces
If no action is taken to set all its effects
it aside, it remains valid and
it aside produces all its effects
imprescriptible may prescribe
imprescriptible may prescribe

GROUNDS FOR NULLITY OF CONTRACTS

GROUNDS FOR NULLITY OF CONTRACTS

Article 1409. The following contracts are inexistent and void from the beginning:
Article 1409.
(1) Those The cause,
whose following contracts
object are inexistent
or purpose andtovoid
is contrary law,from the good
morals, beginning:
customs, public order or public policy;
(1)
(2) Those whose cause,
which are object simulated
absolutely or purposeorisfictitious;
contrary to law, morals, good customs, public order or public policy;
(2)
(3) Those which
whoseare absolutely
cause simulated
or object or fictitious;
did not exist at the time of the transaction;
(3)
(4) Those whose cause
object or object did
is outside thenot exist at the
commerce time of the transaction;
of men;
(4)
(5) Those whose object is outside
which contemplate the commerce
an impossible of men;
service;
(5)
(6) Those which
where contemplate
the intention an impossible
of the service;to the principal object of the contract cannot be ascertained;
parties relative
(6)
(7) Those where the prohibited
expressly intention oforthe partiesvoid
declared relative to the principal object of the contract cannot be ascertained;
by law.
(7) Those
These expressly
contracts prohibited
cannot or declared
be ratified. Neither void by law.
can the right to set up the defense of illegality be waived.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

1. LACK OF ESSENTIAL REQUISITES

1. a.LACK OF ESSENTIAL
Those which areREQUISITES
absolutely simulated or fictitious

a. i. Those which are absolutely simulated

Absolute simulation — the contractorisfictitious

void for utter lack of consent.

i.ii. Absolute simulation—

Relative simulation — hidden
the contract is void contract
or intended for utter is
lack of consent.

generally binding but the apparent contract is void

c. Those whose cause or object did not exist at the time of the transaction
but the apparent contract is void

ii. Relative simulation — hidden or intended contract is generally binding

c. ‣ Those whose
PARAS cause
— This or object
is not did
exactly not exist
correct at the there
because time of
can the
betransaction

valid contracts involving future property, such as sale of

‣ future or—after-acquired
PARAS property.
This is not exactly Thisbecause
correct should be read
there as be
can “objects which could
valid contracts not come
involving into
future existence”

property, such as sale of

d. future or after-acquired property. This should
Those which contemplate an impossible service
be read as “objects which could not come into existence”

d.
e. Those
Those which
where contemplate
the intention an impossible
of the service
to the principal object of the contract cannot be ascertained

parties relative
2. e.CONTRACTS
Those where the intention of the parties relative to the principal object of the contract cannot be ascertained

DECLARED ILLEGAL OR VOID BY LAW

2. a.CONTRACTS DECLARED
Those whose cause,ILLEGAL
object OR VOID BY LAW
or purpose is contrary to law, morals, good customs, public order or public policy

a.
b. Those
Those whose
whose cause, object
object is or purpose
outside is contrary
the commerce to law, morals, good customs, public order or public policy

of men

b.
c. Those
Those whose object
expressly is outside
prohibited the commerce
or declared void byoflaw

men

c. Those expressly prohibited or declared void by law

IMPRESCRIPTIBILITY OF VOID CONTRACTS

IMPRESCRIPTIBILITY OF VOID CONTRACTS

CLARENCE TIU OBLIGATIONS AND CONTRACTS

CLARENCE
ATENEO LAWTIU
4B, BATCH 2017 170 OF 185 OBLIGATIONS C
AND
IVIL LCONTRACTS
AW REVIEWER
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