Obligations and Contracts Summary

Obligation and Contracts
Summary of Provisions
Provisions Titles Remarks

TITLE 1 OBLIGATIONS
CHAPTER 1 GENERAL PROVISIONS
Article 1156 Definition of obligation
Article 1157 Obligation may arise from
Article 1158 Obligation arising from law
Article 1159 Obligation arising from contracts
Article 1160 Obligation arising from quasi contract
Article 1161 Obligation arising from criminal offense
Article 1162 Obligation arising from quasi delict
CHAPTER 2 NATURE AND EFFECT OF OBLIGATION
Article 1163 Diligence of good father
Article 1164 Right to the fruits of the thing (creditor)
Article 1165 Par. 1 To compel the delivery of the determinate thing
Par. 2 To ask for that the obligation be complied with at the expense of the debtor
Par. 3 Exception to fortuitous; when the D has promised two or more person
Article 1166 To deliver all accessions and accessories
Article 1167 To ask for that the obligation to do be complied be with at the expense of the debtor
Article 1168 To ask the obligor at his expense to undone (Obligation no to do)
Article 1169 When to incur delay; delay in they in the fulfillment of the obligation
Par. 2 When demand is not necessary
Article 1170 To recover damages in case of breach of the obligation
Article 1171 Waiver of liability made in anticipation of fraud is VOID
Note: Waiver of liability after the fraud is valid
Article 1172 Responsibility arising from negligence
Article 1173 In the absence of law or stipulation, it is expected that a diligence of good father of a family
Article 1174 Fortuitous event; Exceptions
Article 1175 Usurious transactions shall be governed by special law
Article 1176
Article 1177 Remedy for Creditor; Accion subrogatoria and Accion Pauliana
Note: to exhaust the property in possession of the debtor (Art. 2236)
Article 1178 Transmissibility of Rights
CHAPTER 3 DIFFERENT KINDS OF OBLIGATIONS
Section 1 Pure and Conditional Obligations
Article 1179 Pure obligation
Note: Definitions Suspensive and Resolutory Condition
Article 1180 When payment shall be based on debtor's mean; It is a period
Article 1181 Conditional Obligation
Article 1182 Potestative, Casual, and Mixed Obligation
Article 1183 Impossible Obligation
Article 1184 Positive Obligation
Article 1185 Negative Obligation
Article 1186 Constructive Fulfillment
Article 1187 Principle of retroactivity
Article 1188 Par. 1 Protection for the creditor
Par. 2 Protection for the debtor
Article 1189 Effects of Loss, Deterioration, and Improvement
Article 1190 Rules if the condition is resolutory; Art. 1189 shall apply
Article 1191 Effect if one of the obligors in reciprocal obli. Should not comply
Article 1192 Effects of breach if committed by both parties
Section 2 Obligations with a period
Definition of "obligation with a period"
Article 1193 Par. 1 Suspensive Condition
Par. 2 Resolutory Condition
Par. 3 Definite or Indefinite
Par. 4 Term v. Condition
Article 1194 In case of loss, deterioration, improve seek art. 1189
Article 1195
Article 1196 Presumption if there is a term or period; Beneficial to creditor
Article 1197 Cases where the courts are empowered to fix the duration of a term or period
In connection with article 1180
Article 1198 Instances where the Debtor losses right to make use of the term or period
Section 3 Alternative Obligation
Definition of Alternative and Facultative Obligation
Article 1199 Definition of alternative obligation
Article 1200 Right of choice belongs to the debtor
Par. 1 exception; if there is a stipulation to the contrary
Par. 2 Exception; if it is impossible, unlawful or would not have been the subj of obli
Article 1201 Notice; When they are bound by the choice of D
Article 1202
Article 1203 Remedy of Debtor
Article 1204 Effects when the loss is due to the fault of the debtor
Note: see the reviewer question number 75
Article 1205 Rules that govern the responsibilty of the debtor prior selection of C
Note: see the reviewer question number 75
Article 1206 par. 1 Definition of Facltative Obligation
Par. 2 Loss of the Substitute
Section 4 Joint and Solidary Obligation
Article 1207 Joint and Solidary Obligation
Article 1208 Presumption of Joint Obligation; Divided into as Many equal Share
Joint Divisible
Article 1209 Joint Indivisible
Article 1210 Indivisibility does not give rise to solidarity
Article 1211 Solidarity may exist although the creditors may not be bound
in the same manner and by the same periods and condition
Article 1212 Effect of prejudicial and beneficial act of a creditor
Article 1213 Assignment of right of the creditor
Article 1214 Effect of res juridicata; NOTE THIS
Article 1215 Par. 1 Effect of of NCCoR of the debt
Par. 2 Effect of payment (in par. 1) to the co-creditor
Article 1216 Effect of demand upon a solidary debtor
Article 1217 Effect of payment by a debtor (answer in hypo)
Par. 1
Par. 2
Par. 3
Article 1218 Non reimbursement to S. Debtor if payment made after it becomes illegal
Article 1219 Remission
Article 1220
Article 1221 Effect of loss or impossibility in solidary obligation
Article 1222 Defenses availablle to a S. debtor
Section 5 Divisible and Indivisible Obligations
Article 1223 Effect of Divisible obligation
Article 1224 Breach of Joint Indivisible
Article 1225 Par. 1 Test of Indivisibility
Par. 2 what are Divisible
Par. 3 Exception; Intention of the parties and Provided by law
Par. 4 In obli. To do or not to do; determined by the characted of prestation
Section 6 Obligation with a Penal Clause
Article 1226 Penal Clause;Effect of penalty
Par. 1 Exception; stipulation, refusal to oay agreed penalty, and guilty of fraud
Article 1227 Limitation upon the right of debtor and creditor
Article 1228 Proof of actual damage
Article 1229 When penalty maybe reduced by the court
Article 1230 Effect of nullity of Penalty; does not affect the principal obligation
CHAPTER 4 EXTINGUISHMENT OF OBLIGATIONS
Article 1231 Extinguishment of Obligation
Section 1 Payment or Performance
Article 1232 Payment or Performance
Article 1233 Completeness/ Principle of integrity
Article 1234 Exception (substantial performance)
Article 1235 Exception (acceptance of substantial performance)
Article 1236 Par. 1 Payment from 3rd party
Par. 2 Demandability of payment
Par. 2 Extent of what can recover
Article 1237 Non subrogation of rights of the creditor (mortgage, guaranty, or penalty)
Article 1238 Gratuitous payment
Article 1239
Article 1240 To whom payment shall be made
Article 1241 Effect of payment see the exception in the book
Article 1242 Exception in article 1241; when it was redounded to the benefit of C
Article 1243
Article 1244 What must be paid
Article 1245 Dation in Payment
Article 1246 Quality; neither superior nor inferior
Article 1247 Debtor shall be liable for extrajudicial expenses
Article 1248 Indivisibility of payment cannot be compelled; character of payment
Article 1249 Currency
R.A 529
R.A 4100 Prohibiting stipulations
R.A 8183 All monetary obligations shall be in Phil. Currency
Repealed R.A 529
Article 1250 Extraordinary inflation or deflation
Article 1251 Place of payment
Subsection 1 Application of Payments
Article 1252 The right to make an application of payment (debtor)
Article 1253 With regard to its interest
Article 1254 Legal application of payment
Subsection 2 Payment by Cession
Article 1255 Payment by cessation
Subsection 3 Tender of Payment and Consignation
Article 1256 Tender of Payment; Refusal Special Requirement
Article 1257 Notice to the person interested Special Requirement
Article 1258 Par. 1 Deposit Special Requirement
Par. 2 Notice after deposit Special Requirement
Article 1259 Expense of consignation against the creditor
Article 1260 par. 1 Effects of consignation (cancellation of obligation)
Par. 2 Debtor may withdraw
Article 1261 Effects of withdrawal
Section 2 Loss of the thing Due
Article 1262 Effect of loss in determinate object
Article 1263 Effect of loss in Generic object
Article 1264 Effects of partial loss
Article 1265 Rule if the thing is lost in the debtor's possession
Article 1266 Effects of impossibility of performance
Article 1267 Effects of relative Impossibility/Rebus sic stantibus
Article 1268 Debt arising from criminal offense
Article 1269
Section 3 Condonation or remission
Article 1270 Requisites of Remission
Article 1271 Implied Renunciation
Article 1272 Presumption of voluntary delivered
Article 1273 Rules in accessory obligations
Article 1274 Return of the pledge items
Section 4 Confusion or Merger of Rights
Article 1275 Concept of Confusion;
Par. 1 First Requisite
Article 1276 Second Requisite
Effect upon Accessory Obligation
NOTE: Third requisite is "it must be complete and definite" Testate Estate of Mota v. Serra
Article 1277 Effect on Joint Obligation;
Applies only to corresponding share if Joint Obligation
Applies to entire obligation if Solidary Obligation
Section 5 Compensation
Article 1278 Concept of Compensation
First Requisite
Article 1279 No. 1 First Requisite; That there must be 2 parties, who in their own right,
are principal creditors and principal debtors of each others
No. 2 Second Requisite: Both debt must consist in money, or if the things due are
fungibles (consumables), they must be of the same kind and quality
No. 3 Third Requisite: Both debt must be due
No. 4 Forth requisite Both debts must be liquidated and demandable
No. 5 Fifth requisite: There must be no retention or controversy commenced
by third persons over either of the debts and communicated in due time
to the debtors
Sixth requisite: Art. 1287 & 1288 The compensation must not be prohibited by the
the law
Article 1280 Exception to Requisite number 1
Right of the Guarantor to set up compensation
Article 1281 Compensation mabe total or partial
Article 1282 Voluntary Compensation; Compensation of debt not yet due
Article 1283 Judicial Compensation
Article 1284 Rescissible or voidable debts may be compensated to each other
Article 1285 Outline of effects of assignment of rights
When Compensation has taken place
When Compensation has NOT taken place
With Consent of debtor
With knowledge, but without consent of debtor
Without knowledge of debtor
Article 1286 Place of compensation

Article 1287 Debts which can be compensated Par. 1 debt arising from contact of depostitum
Debts which can be compensated Par. 1 debt arising from contract of commodatum
Debts which can be compensated Par. 2 claims for support due by gratuitous title
Article 1288 Debts which can be compensated Obligation arising from criminal offense
NOTE: certain obligations in favor of the government (Tolentino)
Article 1289 Rules on "application on payment" may apply if several debts

Article 1290 Compensation takes palce even without knowledge of parties
Section 6 Novation
Article 1291 Novation in General
Changing their object or principal conditions
Substituting the person of the debtor
Subrogating thr person of the debtor
Requisites:
Previous valid obligation
Agreement of the parties to the new obligation
Extinguishment of the old obligation
Validity of the new obligation (Cruz v. Court of Appeals)
Article 1292 Extinguishment through Express or Implied (tacit)
Express- through its unequivocal term
Implied- when the new and old obligations be on every point incompatible with each other on every point
Test: (1) when or not both them can stand together, each having its own independent existence
Note: If they can stand together or no incompatiblity, hence no novation
If they cannot stand together, or there is incompatiblity, hence there is novation
Exception: Kabankalan Sugar Co. v. Pacheco (Reduction of duration of term or period)
Article 1293 Novation By Substitution of Debtor
Expromision If the substitution of debtors is effected with the consent of the creditor at the instance of the new debtor
even without the knowledge or against the will of the old debtor
Requisites: (1) iniative for the substitution must emanate from the NEW debtor
(2) consent of the creditor to the substitution
Delegacion Refers to the substitution of debtprs effected when the original debtor offer and the creditor
accepts a third person who consents to the substitution with the concurrence of the substitution
Requisites: (1) iniative for the substitution must emanate from the OLD debtor
(2) consent of the new debtor
(3) acceptance by the creditor
Rights of the person who paid debtor's obligation in "Expromision"

(1) If the the substitution, was effected with the knowledge and consent of the original debtor, and subsequently, payment
is made by new debtor with or withour the knowledge and consent of such original debtor the new debtor can demand
reimbursement from the original debtor of the entire amount which he has paid, and, at the same time, be subrogated to
all rights of the creditor (Arts. 1236, 1237, 1302 and 1303)
(2) if the substitution was effected witout the knowledge and consent of the original debtor, and subsequently, payment is
made by the new debtor again without the knowledge and consent of the original debtor, the new debtor can demand
reimbursement from the original debtor only insofar as the payment has been beneficial to such debtor, but he cannot
be subrogated to the rights of the creditor. However, if payment is made with the knowledge and consent of the original
debtor, although the substitution had been effected without his knowledge and consent, the new debtor can still demand
reimbursement from the original debtor of the entire amount which he has paid, and, at the same time be subrogated
to all rights of the creditors (Arts. 1236, 1237, 1303 and 1304)
Rights of the person who paid debtor's obligation in "Delegacion"

(1) according to art. 1293, payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237 .
Consequently, since the substitution was effected with the consent of all parties, the new debtor (delgado)
can demand reimbursement from the original debtor (delegegante) of the entire amount which he has paid (art. 1236)
as well as compel the creditor (delegatorio) to subrogate him in an of his rights (art. 1302 and 1303)
Article 1294 Insolvency in case of Expromision

General Rule: If the substitution is without the knowledge or against the will of the debtor,
the new debtor's insolvency or non fulfillment of obligation SHALL NOT GIVE RISE to
any liability on the part of original debtor
What we can infer: If the substitution was effected with the knowledge and consent of the original debtor's insolvency or
non fulfillment of the obligation shall REVIVE the orifinal debtor's liablity to the creditor
Article 1295 Insolvency in case of Delegacion
General Rule: Once requisites are fulfilled, the liability of the original debtor shall not be revived
Exceptions: (1) when the insolvency of the new debtor (delgado) was already existing and of public knowledge at
the time of the when the original debtor (delegante) delegated his debt
(2) when such insolvency was already existing and known to the original debtor (delegante)
when he delegated the his debt
Article 1296 Effect upon Accessory Obligation
Accessory obligations may subsist only insofar as they may benefit third persons who did not give their consent
Note: It cannot be applicable to subrogation (art. 1303 and 1304)
Example: Pour Autrui (art. 1311)
Article 1297 Effect of the Void new obligation
General Rule: original obligation shall subsist
Exception: unless the parties intended that the former relation should be extinguished
Article 1298 Effect of the Void OLD obligation
General Rule: Novation is VOID
Note: when it is voidable, these rules shall apply for a validate a novation
Annulment may be claimed only by the debtor (until so, it is valid see PARAS)
Ratification validates acts which are voidable
Article 1299 Effect if Original obligation was Conditional
General Rule: The Conditions attached to the old obligation are also attached to the new obligation (see PARAS)
Exception: If there is a CONTRARY STIPULATION
Article 1300 Novation by Subrogation see PARAS
Kinds of Subrogation
Legal Subrogation- It is not presumed, except in cases expressly mentioned in this CODE (see Art. 1302)
Conventional Subrogation- It must clearly established in order that it may take effect
Article 1301 Conventional Subrogation; Consent of all parties is required

Article 1302 Legal Subrogation See PARAs
It presumed when
(1) when a creditor pays another creditor who is preferred, even without the debtor's knowledge
(2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor
(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays,
without prejudice to the effects of confusion as to the latter's share
Article 1303 Total Subrogation
Article 1304 Partial Subrogation
Note: Original Creditor is preferred
TITLE 2 CONTRACTS
CHAPTER 1 GENERAL PROVISIONS
Article 1305 Concept of Contract
Characteristics of Contract
Obligatory Force or Character of Contracts ( Articles 1159, 1308, 1315, and 1356)
Autonomy of Contracts (Article 1306)
Mutuality of Contracts (Article 1308)
Relativity of Contracts (Article 1311)
Article 1306 Autonomy of Contract
Right to Contract
Limitations: "Provided they are not contrary to law, morals, good customs,
public order, or public policy"
Test for restraint of trade (Del Castillo v. Richmond)
(1) Is there a limitation as to time or place
(2) Is the prohibition reasonably necessary for the protection of the parties
Article 1307 Innominate Contract- those which lack individuality and are not regulated by special provisions of law (Sanchez Roman)
Kinds: Do ut des (I do that you give) Facio ut des (I do that you give)
Do ut facias (I give that you do) Facio ut facias (I do that you do)
Article 1308 Mutuality of Contract
Note: the validity or compliance cannot be left to the will of one of them
The determination of the performance may be left to a third person, whose decision shall not be binding
until it has been made known to both contracting parties
The determination of shall not be obligatory if it is evidently inequitable.
In such case, the courts shall decide what is equitable under the circumstances
Article 1311 Par. 1: Relativity of Contract
Par. 1:Persons bound by contracts
Between the parties
their assigns and heirs
Par. 1: The heir is not liable beyond the value of the property the received from the decedent
Exception to Relativity of Contract
Where the contracto contains stipulation in favor of a third person (Article 1311 par. 2)
Where the third person comes into possession of the object of a contract creating a real right (Art. 1312)
Where the contract is entered into in order to defraud a third person (Art. 1313)
Where the third person induces a contracting party to violate his contract ( Art. 1314)
Par. 2 Stipulation Pour Autrui
definition: a stipulation in a contract, clearly and deliberately conferred by the contraacting parties as a favor upon a third
person, who must communicate his acceptance of the favor or benefit to the obligor before it could revoked.
Requisites: Florentino v. Encarnacion
(1) that the stipulation in favor of the third person should be a part, not the whole, of the contract
(2) that the favorable stipulation should not be conditioned or compensated
by any kind of obligation whatever
(3) neither of the contracting parties bears the legal representation or authorization of the thir person
(4) acceptance of the benefit by the third person communicated to the obligor before it could be revoked
Article 1312 Contracts Creating Real Rights
Where the third person comes into possession of the object of a contract creating a real right shall be governed by mortgage law
and Land Registration Laws
Article 1313 Creditors are protected in cases of contracts intended to defraud
Article 1314 Any third person who induces another to violate his contract shall be liale for damages to other contracting party
Requisites
(1)Existence of a existence of a valid contract
(2) knowledge on the part of the third person without legal
(3) interference by the third person without legal justification or excuse
Article 1315 Consensual contract is perfected by mere consent
Article 1316 Real Contract is perfected by the delivery of the object of the contract by one contracting party to other
Article 1317 Contracts in Name of Another
General Rule: if without authority, it shall be enforceable
Exception (1) when he has authority
(2) ratified, expressly or impliedly, by the person in whose behalf it haas been executed, before it is revoked by the other
contracting party

TITLE 2 CONTRACTS
CHAPTER 2 ESSENTIAL REQUISITES OF CONTRACTS
General Provisions
Article 1318 Essential requisites
Contract of the contracting parties
Object certain which is the subject matter of the contract
Cause of the certain obligation which is established
Requisites of Consent
Consent must be manifested by the concurrence of the offer and the acceptance (Art. 1319- Art. 1326) (express)
Contracting parties must possess the necessary legal capacity (Art. 1327-1329) (implied)
Consent must be intelligent, free, spontaneous, and real (Art. 1330-1346) (implied)
Section 1 - Consent
Article 1319 Par. 1 Definition of Consent
It signifies the the meeting of the offer and acceptance upon the thing and the cause which are to
constitute the contract
Par. 1 Perfection of Contract; General Rule
In general, contracts are perfected from the moment that there is a manifestation of the concurrence
between the offer and the acceptance with respect to the oblect and the cause which shall constitute
the contract
Par. 2 Acceptance made by Letter or Telegram; Exception
General Rule (Article 1319 (par 2.)
The contract is perfected from the moment that the offeror has knowledge
of such acceptance such acceptance
Exception (Article 54 of the Code of Commerce)
The contract is perfected from the moment that an answer is made accepting the offer
Note:
for purely commercial contractssuch as joint accounts, maritime contracts, etc.;
affected by repealing clause (art. 2270)
Note:(ABS-CBN v. CA)
To convert the offer into a contract, the acceptance must be absolute and
must not qualify the terms of the offer. It must be plain and unequivocal, unconditional, and without
variance of any sort from the proposal, constitutes a counter-offer and is a rejection of original offer.
Theories applied to perfection of contracts

Manifestation Theory (Article 54 Code of Commerce)
The contract is perfected from the moment the acceptance is declared or made.
Expedition Theory (Majority of American Courts)
The contract is perfected from the moment the offeree transmits the notification of acceptance to
the offeror, as when the letter is placed in the mailbox.
Reception Theory (German Civil Code)
The contract is perfected from the moment the notification of acceptance is in the hand of the
the offeror in such manner that he can, under ordinary conditions, procure the knowledge
of its contents, even if he is not able actually to acquire such acknowledge by reason of
absence, sickness or some other cause
Cognition Theory (Second Par. Of Art. 1319) (Philippines) (Spanish Civil Code)
The contract is perfected from the moment the acceptance comes to the knowledge
of the offeror.
Article 1320 Acceptance may be express or implied

Article 1321 The person making offer may fix the time, place, manner of acceptance, all which must be complid with
Article 1322 An offer made through an agent is accepted from the acceptance is communicated to him
Article 1323 An offer made becomes INEFFECTIVE upon the death, civil interdiction, insanity, or insolvency of either party before
acceptance is conveyed
Donation Inter vivos
Note: Article 748 if the value of the personal property donated donated exceeds Php. 5,000, the donation and
and the acceptance shall be in writing
Article 749: the law declares that if the acceptance is made in a authentic form,
and this step shall be notified thereof in
Article 734: declares that a donation is perfected from the moment the
donor knows of the acceptance by the donee
Article 1324 Period of Acceptance; Options

Note: If the option is without any consideration, the offeror may withdraw his offer by communicating such
withdrawal to the to the offeree at anytime before acceptance
If it is founded upon a a consideration the offeror can not withdraw his offer
Note: Article 1479 par. 2: An accepted unilateral promise to buy or to sell a determinate thing for a price certain
is binding upon a the promissor if the promise is supported by a consideration distinct from the price
See the case of Sanchez v. Rigor
The Supreme Court ruled that in unilateral offers to buy or to sell, since there are NO VALID CONTRACT
without a cause or consideration, the promissor is NOT BOUND by his promise and may,
accordingly withdraw it
Article 1325 Unless it appears otherwise, business advertiesements of things for sale are not definite offers, but mere INVITATION
to make an offer
Article 1326 Advertisement for bidders are simply invitation to make proposals, and the advertiser IS NOT BOUND TO ACCEPT the highest
or lowest bidder, unless the contrary appears
Article 1327 The following cannot give consent to a contract
Unemancipated minors (art. 1327)
Insane or demented persons ( Art. 1327)
Deaf-mutes who do not know how to write (Art. 1327)
Married women of age in cases specified by law (Art. 34 of RPC)
Person suffering from civil interdiction (Art. 34 of RPC)
Incompetents under guardianship (Rules 93 to 94 of the Rules of Court)
Note: Yason v. Arciaga
A person is not incapacitated to ented into a contract merely because such advance age and or by physical infirmities
unless such age and infirmities impair his mental faculties to the extent that he is unable to properly
intelligently and fairly understand the provisions of said contracts
Exceptions to the rule that contracts entered into by a emancipated minor without the consent of his parents or guardian
When the contract is entered into by a minor who represents his age,
applying the doctrine of ESTOPPEL (mercado and mercado v. Espiritu)
Where the contract involves the sale and delivery of necessaries to the minor (Art. 1489 par. 2)
Where it involves a natural obligation and such obligation is voluntarily fulfilled by the minor,
provided that such minor us between 18 and 21 years of age (Article 1426 to 1427)
Where it is a marrieage settlement or a donation by reason of marriage, provided that a minor is
between 20 and 21, if male, or between 18 and 21, if female (art. 120 and 128)
When it is a life, health or accident insurance taken on the life of the minor, provided that the minor is
18 years old or more and the beneficiary is the minor's estate, or the minor's father,
mother, husband, wife, child, brother, or sister (Art. 2424)
Note: Braganza v. Villa Abrille
Article 1222 provides for the personal defense of the minor
Article 1239 provides that minor cannot be entirely absolved, they shall make restitution to the extent that they
may have been profited by the money they received.
Who are prohibited from entering into a contract
Insolvents before they are discharged by the Insolvency Court (Act. 1956)
Non Christians of Mindanao, Sulu, Mountain Province, and Nueve Vizcaya (RAC Secs. 145-146; R.A 3872)
Husband and wife are prohibited from donating or selling property
to each other during marriage (Art. 133; Art. 1490)
Persons who are prohibited from giving each other any donation or advantage. Under NCC,
they are prohibited entering into a contract of universal partnership (Art. 1782)
Person holding a fiduciary relation with respect to certain properties (Art. 1491)
Article 1328 Contracts entered into during a lucid interval are VALID
Contract agreed to in a state of drukeness or during a hypnotic spell are VOIDABLE
Article 1329
Article 1330 A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable
Kinds of Vices of Consent
Vices of the will
Mistake maybe defined not only as the wrong conception of a thing, but also lack of knowledge
with respect to a thing
Kinds of Mistake
Mistake of Fact: when one or both of the contracting parties believe
that a fact exists when in reality it does not, or such fact
does not exists when in reality it does.
Mistake of Law: when one or both of the contracting parties arrive at an
erroneous conclusion regarding the interpretation of a question
of law or the legal effect of a certain transaction
General Rule: It is only a mistake of fact which will vitiate consent thus rendering the contract
Voidable
Mistake of Law does not render the contract voidable because of the well-known
principle that ignorance of the law does not excuse from compliance therewith
Exception: Article 1334 which provides mutual error as to the legal effect
of an agreement when the real purpose of the parties
is frustrated, may vitiate consent
Requisites:
mistake must be with respect to the legal effect of an agreement
mistake must be mutual
the real purpose of the parties must be frustrated
Violence There is violence when in order to wrest consent, serious or irresistible force is
employed (Art. 1335 par. 1)
Requisites
The force employed to wrest consent must be serious or irresistible
It must be the deteermining cause for the party upon whom it is
employed in entering into the contract (Castan)
Intimidation There is intimidation when one of contracting parties is compelled
by a reasonable and well-grounded fear of an imminent and grave evil upon his
person and property, or upon the person or property of his spouse
descendants, or ascendants, to give his consent (Art. 1335 par. 2)
Requisites
One of the contracting parties is compelled to give his consent by a reasonable
and well grounded evil
The evil must be imminent and grave
The evil must be unjust
The evil must be must be the determining cause for the party upon it is employed
in entering into the contract (Castan)
Undue influence There is undue influence when a person takes improper advantage of his power
over the will of another, depriving the latter of a reasonable freedom of choice
(Art. 1337)
Fraud There is fraud when, through insidious words or machinations of one the contracting
parties, the other is induced to enter into a contract which, without them, he would
not have agreed to. (Art. 1338)
Requisites (Constantino v. CA)
See page 445. for other requisites It was employed by a contracting party upon the other
(art. 1338 to 1344) It was serious
It resulted in damages and inquiry to the party seeking annulment
Classes of Fraud
Fraud in the perfection of a contract (Art. 1338)
Fraud in the performance of obligation (Art. 1170
Fraud at the time of Obligation
Dolo Causal
The deception or misrepresentation of a serious character employed
by one of the contracting party without which the other party
would have not entered into the contract
Note: Voidable
Dolo Incidental
The incidental deception or misrepresentation employed by one of
the contracting party without which the other party would still have
entered the contract
Note: Liable for damages (Art. 1344 par. 2)
Vices of declaration
comprehends all forms of simulated contracts (Art. 1345 - 1346)
Simulation of a Contract
It is the process of intentionally deceiving others by producing the appearance of a
a contract that really DOES NOT exist (Absolute simulation) or which is
DIFFERENT from the true agreement (Relative Simulation)
Note: Absolute Simulated Contract is VOID
Relative Simulated Contract BINDS the parties to their real agreement provided that it is no
contrary to law, moral, good customs, public order, or public policy and NOT PREJUCIAL
to the third person See the case of Manila Banking Corp v. Silverio
Article 1331 Par. 1 mistake may invalidate consent, it should refer to the substance of the thing which is the
object of the contract
or to the thing which is the object of the contract
or to those conditions which have principally moved one or both of the parties to enter into the contract
Par. 2 Mistake as to the identity or qualifivations of one of the parties will vitiate consent only when such identity or
qualification have been the principal cause of the the contract (Error in Persona)
Par. 3 Simple mistake of account shall give rise to its correction
Under Mistake of Fact; Kinds (Castan)

1. Mistake as to object (Error in Re)
Mistake as to the identity of the thing (Error in corpore)
Mistake as to the conditions of the thing (Error in Substantia)
Mistake as to the conditions of the thing, provided such conditions have principally moved one or both
parties to enter into the contract
Mistake as to the quantity of the thing (Error in Quantitate), provided that the extent or dimension of the thing
was one of the principal reasons of one or both of the parties for enterinf into the contact
NOTE: mistake of account is voidable; Mistake of calculation is corrected
2. Mistake as to Person (Error in Persona)

Note: G.R:Mistake with regard to the name of one or both of the contracting parties will NOT INVALIDATE
the contract.
Exceptions: If these elements are present
Mistake must be either with regard to the identity or with regard to the qualification of
one of the contracting parties
Such Identity or qualification must have been the principal considetation for the celebration
of the contract.
Article 1332 When one of the contracting parties is unable to read, or if the contract is in a language not understood by him, and mistake or
fraud is alleged, the PERSON ENFORCING the contract must show that the terms thereof have been fully explained to the former
Article 1333 There is NO MISTAKE if the party alleging it knew the doubt, contingency or risk affecting the object of the contract
Note: It is assumed that the party is willing to take the risk
Example: Knowingly buying a questionable article (pen that can write under water)
Article 1334 Mutual error as to the legal effect of an agreement when the REAL PURPOSE OF THE PARTIES IS FRUSTRATED, may vitiate consent
Note: Exception to the General Rule that when mistake of Law does not vitiate consent (Art. 3 of CC)
Article 1335 Par. 1 VIOLENCE

Par. 2 INTIMIDATION
Par. 3 other consideration: age, sex, and condition of the person
Par. 4 A threat to enforce one's claim through competent authority, if the claim is just or legal, DOES NOT VITIATE CONSENT
Note: Legal threat does not vitate consent
Article 1336 Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part
in the contact
Article 1337 UNDUE INFLUENCE

What shall be considered: confidential, family, spititual, and other relations between the parties, or the fact that the
the person alleged to haveeb duly influenced was suffering from mental weeakness, or was ignorant or in financial distress
Test (Coso v. Fernandez)
Whether or not the influence exerted has so overpowered or subjugated the mind of a contracting party as to destroy his
free agency, making him express the will of another rather than his own
Article 1338 FRAUD
Article 1339 Effect of failure to Disclose Fact; Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by
confidential relations, constitutes FRAUD
Note: Sale can be annulled
Article 1340 Effect of Exaggaeratio0n in Trade; The usual exaggerations in trade, when the other party had an opportunity to know facts,
are NOT IN THEMSELVES OF FRAUDULENT
Article 1341 Effect of Expression of Opinion; A mere expression of an opinion DOES NOT SIGNIFY FRAUD, unless made by an
expert and the other party has relied on the former's special knowledge
Article 1342 Effect of Misrepresentation by Third Person; Misrepresentation by a third person DOES NOT VITIATE CONSENT, unless
such misrepresentation has created substantial mistake and the same is mutual
Note: Force or intimidation by a third person makes the contract voidable
Fraud by third person DOES NOT MAKE THE CONTRACT VOIDABLE
Exception: the representation has created SUSTANTIAL MISTAKE
the mistake is MUTUAL
Article 1343 Mispresentation made in good faith is NOT FRAUDULENT BUT MAY CONSTITUTE ERROR
Note: Substantial error may annul a contract
Article 1344 Par. 1 Magnitude of Fraud; In order that fraud may make a contract voidable, it should be SERIOUS and should not have been
employed by both of the contracting parties
Par. 2 Incidental fraud only obliges the person employing it to pay damages
see: Woodhouse v. Halili
Article 1345 Simulation of contract
Simulation of a Contract
It is the process of intentionally deceiving others by producing the appearance of a
a contract that really DOES NOT exist (Absolute simulation) or which is
DIFFERENT from the true agreement (Relative Simulation)
Article 1346 Note: Absolute Simulated Contract is VOID

Relative Simulated Contract BINDS the parties to their real agreement provided that it is no
contrary to law, moral, good customs, public order, or public policy and NOT PREJUCIAL
to the third person See the case of Manila Banking Corp v. Silverio; Art. 1346
Section 2 - Object of Contracts
Note: Object of Contracts maybe defined as the thing, right or service which is the subject matter of
the obligation which is created or established (Castan)
General Rule: All things, rights or services may be the object of contracts
Including Future things (Art. 1347)
Requisites The object should be within the commerce of men; in other words it should be suseptible of
appropriation and transmissble from one person to another
The object should be real or possible; in other words, it should exist from the moment of celebration
of the contract, or, atleast, exist subsequently or in the future
The object should be licit; in other words, it should not be contrary to law, morals, good customs,
public order or public policy
The object should be determinate, or at least, possible of determination, as to its kind
Things, rights, or services CANNOT be object of contracts

Article 1347 Par.1 Things which are outsidde the commerce of men
Par. 1 Intransmissible rights
Par. 2 Future inheritance except in the cases expressly authorized by law
Exceptions Article 130 of Family Code
Which allows the a future spouse to give or donate to each other in their marriage settlement
their future properties to take effect upon the death of the donor and to the extent
laid down by the provisions of the NCC relating to testamentary succession
Article 1080 of the code
Which allows a person to make partition of his estate among his heirs by an act inter vivos
provided the legitime of the compulsory heirs is not prejudiced
Par. 3 Services which are contrary to law, morals, good customs, public order or public policy
Article 1348 Impossible things
Article 1349 Object which are not determinable as to their kind
Section 3 - Cause of Contracts
Article 1350 Definition of Cause in case of Onerous contracts, Remuneratory contracts, and Contracts of Beneficence
In onerous contracts, the cause iti s understood to be for each contracting party, the prestation or promise
of a thing or service by the other
In remuneratory contracts, cause is the service or benefit which is remunerated;
Note: Remuneratory is the past service or benefit which by itself is a recoverable debt (paras)
In contract of pure beneficence, it is the liberality of the benefactor
Note: Example: Pure donation
Requisite of a cause (Castan)
The cause should be existence
The cause should be licit or lawful
The cause should be true
Article 1351 The particular motives of the parties in entering into a contract are DIFFERENT from the cause thereof
Note: Exception: If motive is regarded as causa when it undermines the purpose of contract (Liguez v. CA)
Article 1352 Contracts without cause, or with unlawful cause, PRODUCE NO EFFECT whatever. The cause is unlawful
of it is contrary to law, morals, good customs, public order or public policy
Note: See Velez v. Romas
Article 1353 The statement of a false cause in contracts shall render them VOID, if it should not be proved that
they were founded upon a cause which is true and lawful
Article 1354 Although the cause is not stated in the contracts, it is PRESUMED THAT IT EXISTS AND IS LAWFUL, unless the debtor
proves the contrary
Article 1355 Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless
there has been a fraud, mistake, or undue influence
Note: see Paras
Note: Lesion- It is inadequacy of cause, like an insuffiecient price for a thing sold
General Rule: Lack of price or lesion does not invalidate a contract
Exception: When together with lesion there has been fraud, mistake, of undue influence
In cases provided by law (Art. 1381 par. 1, par. 2 and Art. 1098)
TITLE 2 CONTRACTS
CHAPTER 3 FORM OF CONTRACTS
Article 1356 General Rule: Contracts shall be obligatory provided all of the essential requisites for its validity are present
Exception: When the law requires that the contract must be in a certain form in order to be valid
When the law requires that the contract must be in certain form in order to be enforceable
Note: Formalities required

Those which are for convenience or the purpose of binding a third person (Art. 1358 to 1358)
Those which are necessary for the the validity of the contract (scattered provison of NCC and Special laws)
Those which are necessary for the enforcement of the contract (Statute of Fraud)
Article 1357 Right of one to party to compel the other to execute the necessary form (Paras)
Note: For convenience only, not fot validity or enforceability
Article 1358 Formalities which are merely for the convenience of the parties; Which must appear in a public document
1. Acts and contracts which have for their object the creation, transmission, modification or extinguishment
of real rights over immovable property; sales of real property or of an interest therein are
governed by articles 1403,no.2 and 1405
2. The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership gains
3. The power to administer property, or any other power which has for its object an act appearing or
which should appear in a public document, or should prejudice a third person
4. The cession of actions or rights proceeding from an act appearing in a public document
Last par: all other contracts where the amount involved exceeds 500.00 pesos must appear in writing, even a private
one. But sales of goods, chattel or things in action are governed by Articles 1403, no. 2 and 1405
Note: Contracts which must be appear in writing are as follows; Necessary for the validity of contracts
Donations of personal property whose value exceeds 5,000
The donation and acceptance must be in writing, otherwise it shall be void (art. 748)
Sale of a piece land or any interest therein through an agent. Authority of the latter
of the latter shall be in writing, otherwise, the sale shall be void (Art. 1874)
Agreement regarding payment of interest in contracts of loan. No interest shall be duw unless
it has been expressly stipulated in writing. The validity of the contract of
load, however, is not affected
Antichresis. The amount of the principal and of the interest shall be specified in writing;
otherwise, the contract shall be void. (Art. 2134)
Note: Contracts which must be appear in a public document are as follows; Necessary for the validity of contracts
Donations of immovable property (Art. 749)
Partnership where immovable property or real rights are contributed to the common funds (Art. 1771 & 1773)
Note: Contracts which must be registered are as follows; Necessary for the validity of contracts
Chattel Mortgage (Art. 2140)
Sales or transfers of large cattle (Sec. 22 of Art. 1403)

TITLE 2 CONTRACTS
CHAPTER 4 REFORMATION OF INSTRUMENTS
Article 1359 Par. 1: Doctrine of Reformation of Contract;
It is the when the true intention of the parties to a perfected and valid contract are not expressed in the
instrument purporting to embody their agreement, by reason of mistake, fraud, inequitable conduct or
accident, one of the parties may ask for the reformation of the intrument so that such true intention may
be expressed.
Requisites: Huibonhoa v. COA
There must be a meeting of minds of the parties
Their true intention is not expressed in the intrument
Such failure to express their true intention is due to mistake
Note: Reformation of instrument v. annulment of contract

If the first requisite is lacking the proper remedy is annulment
Their difference
Former has already been a meeting of the minds of contracting parties
Latter has been NO meeting of the minds because consent has been vitiated
Par. 2 If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds
of the parties, the proper remedy is not reformation of the intrument but ANNULMENT of the contract
Article 1360 Rule in case of conflict
In case of conflict between cifil code and the principles of the general law on reformation, the former
prevails. The latter will have only suppletory effect
EXAMPLES OF INSTRUMENTS WHICH MAY BE INFORMED

Article 1361 When a mutual mistake of the parties causes the failure of the instrument to disclose their agreement
Article 1362 If one party was mistaken and the other acted fraudulently or inequitable in such a way that the instrument
does not show their true intention
Article 1363 When one party was mistaken and the other knew or believed that the instrument did not
state their real agreement, but concealed that fact from the former
Article 1364 When through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument
or of the clerk or typist, the instrument does not express the true intention of the parties
Article 1365 If two (2) parties agreement upon the mortgae or pledge of real or personal property, but the instrument
states that the property is sold absolutely, or with a right of repurchase
Article 1366 There shall be no reformation in the ff. cases

Simple donations inter vivos wherein no condition is imposed
Wills
Those where the real agreement is void
Article 1367 When one of the parties has brought an action to enforce the instrument, he cannot subsequently ask for its its reformation
Article 1368 Plaintiff in action for reformation; who may bring action
In article 1361 Party or his successor in interest
1362 Injured party or his heirs and assigns
Article 1369 Procedural rule
Reformation shall be governed by rules of court
Contract of adhesion
Its term are prepared by one party while the other party while the other party merely affixes his signature signifying
his adhesion thereto.
Is just as binding as ordinary contracts.
Nevertheless, contracts of adhesion are not invalid per se; they are entirely prohibited (Sps. Francisco v. BPI)
NOTE: The action for reformation of instrument shall be instituted in a special civil action for declaratory relief
For credit card; Emmanuel Aznar v. Citibank

TITLE 2 CONTRACTS
CHAPTER 5 INTERPRETATION OF CONTRACTS
Article 1370 Cardinal Rule
Par.1 "If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulations shall control
Par.2 If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former"
Article 1371 How to judge of the parties
In order to judge the intention of the contracting parties, their contemporaneous
and subsequent acts shall be principally considered.
Article 1372 Effect of the use of general terms
However general the terms of a contract may be, they shall not be understood to comprehend things that are distinct
and cases that are different from those upon which the parties intended to agree.
Article 1373 Stipulation admitting of several meaning
If some stipulation of any contract should admit of several meanings, it shall be understood as
bearing that import which is most adequate to render it effectual.
Article 1374 Stipulation to be read together
The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones
that sense which may result from all of them taken jointly.
Article 1375 Words which may have different significations shall be understood in that which is
most in keeping with the nature and object of the contract.
Article 1376 The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a
contract, and shall fill the omission of stipulations which are ordinarily established.
Article 1377 Interpretation to be against party who caused obscurity
The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.
Note: Contracts of Adhesion
Article 1378 Doubt as to Principal Object or Incidental Circumstances (PARAS)

Doubt as to the principal object
the contract is void
Doubt as to the incidental circumstances
If gratuituous, apply the rule of "atleast transmission of rights and interest"
If onerous, apply the rule of the "greatest reciprocity of interest"
Article 1379 The principles of interpretation stated in Rule 123 of the Rules of Court shall likewise be observed in the construction of contracts.
Note: It should refer to the rule 130 of reviesed rules of court (See paras)
TITLE 2 CONTRACTS
CHAPTER 6 RECISSIBLE CONTRACTS
CONCEPT
Note: Part of the classes of defective contracts
Essential Features
Their defect consist in injury or damage either to one of the contracting parties or to third person
Before rescission, they are valid and therefore legally effective
They are susceptible of convalidation only by prescription, not by ratification
They can be attacked directly only, and collaterally
They can be attacked directly either by a contracting party who suffers injury or by a third person who
is defrauded
Recissible contract is which is valid because it contains all of the essential requisites prescribed by law,
but which is defective because of injury or damage to either of the contracting parties or to the third persons,
as a consequence of which it may be rescinded by means of a proper action for recission
Recission is a remedy granted by law to the contracting parties, and even to third persons, to secure the reparation
of damage caused to them by a contract, even if the same should be valid, by means of the restoration things to their
condition prior to the celebration of the contract (Manresa)
Requisites that must concur before a contract may be rescinded on the ground of lesion; In Connection with Art. 1382
Note: as long the the contract was entered into by a guardian in behalf of his ward or by legal representative
in behald of his ward or by a legal representatives in behalf of the an absentee, before it can be rescinded on the
ground of lesion, it is indispensable that the following must concur
The contract must be entered into by the guardian in behalf of his ward or by the legal representative
in behalf of an absentee (Art. 1381, nos. 1 and 2)
The ward or absentee suffered lesion of more than one-fourth of the value of the property which is
the object of the contract (Art, 1381, nos 1 and 2)
There must be no other legal means for obtaining reparation for the lesion (Art. 1383)
The person bringing the action must be able to return whatever he may be obliged to
to restore (Art. 1385, par 1)
The object of the contract must not be legally in the possessio of a third person who did
not act in bad faith (Art. 1385, par 2)
The contract must be entered into without judicial approval (Art. 1386)
Requisites that must concur before a contract entered into in fraud of creditors can be rescinded
There must be a credit existing prior to the celebration of the contract
There must be a fraud, or atleast the intent to commit fraud, to the prejudice of the creditor
seeking the rescission
The creditor cannot in any other legal manner collect his credit (Art. 1385 par. 2)
The object of the contract must not be legally in the possessio of a third person who did
in bad faith (Art. 1385 par. 3)
Article 1380 Rescissible Contracts in General
Contracts validly agreed upon may be rescinded in the cases established by law
RECISSIBLE CONTRACTS
Article 1381 1. Contracts in behalf of wards
Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more
than one-fourth of the value of the things which are the object thereof
2. Contracts in behalf of Absentee
Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;
3. Contracts in fraud of creditors
Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them
4. Contracts referring to things under litigation
Those which refer to things under litigation if they have been entered into by the defendant without
the knowledge and approval of the litigants or of competent judicial authority
5. Other rescissible contracts
All other contracts specially declared by law to be subject to rescission
Article 1382 6. Contracts by insolvent
Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled
at the time they were effected, are also rescissible
Article 1383 SUBSIDIARY Character of Action
Who may Institute Action (Castan)
The person who is prejudiced such as
the person suffering the lesion in recissory actions based on lesion
the creditor who is defrauded in recissory actions based on fraud
and other persons authorized to exercise the same in other rescissory actions
Their representatives
Their heirs
Their creditors by virtue of the subrogatory action defined in Art. 1177 of NCC
Article 1384 Extent of Rescission; Rescission shall be only to the extent necessary to cover damages caused
Article 1385 Par. 1 Effect of rescission in case Lesion

there arises an obligation on the part of both contracting parties to return to the other
object of the contract, including fruit or interest.
Note: it can be carried out only when he who demands recission can return whatever he may be obliged to restore
Par. 2 "NEITHER shall rescission take place when the things which are the oject of the contract are legally in the possession
of third persons who DID NOT ACT IN BAD FAITH"
Par. 3 IN THIS CASE, INDEMNITY FOR DAMAGES may be demanded from the person causing the loss
Article 1386 Recission referred to in Nos. 1 and 2 of article 1381 shall not take place with respect to contracts approved by the courts
Note: (See Paras)
If an act of ownership, courts approval is required, otherwise unenforceable (Art. 1403)
If an act of administration
if with court approval, it is valid regardless of lesion in Art. 1386
if without court approval, RESCISSIBLE, if lesion is more than 1/4 (Art. 1381, no. 1)
Article 1387 Presumption of fraud;
How it is fraud
Presumption in accordance of art. 1387
Badges of fraud which is in accordance with ordinary rules of evidence
Presumption; the law presumed that there is fraud of creditors in the ff. cases
Alienationation of property by gratuitous title if the debtor has not reserved sufficient property to pay all
of his debts BEFORE alienation
Alienationation of property by onerous title if made by a debtor against whom some judgement has been
rendered in any instance or some writ of attachment has been issued. The decision or
attachment need not refer to the property alienated, and not have neen obtained by the
party seeking the rescission
Badges of fraud (Oria v. Mcmicking)

The fact that the cause or consideration of the conveyance is inadequate
A transfer made by a debtor after suit has been begun and while it is pending against him
A sale on credit by an insolvent debtor
Evidence of large indebtedness or complete insolvency
The transfer of all or nearly of his property by a debtor, especially when he is insolvent or greatly
embarrased financially
The fact that the transfer is made between father and son, when there are present others
of the above circumstances
The failure of the vendee to take exclusive possession of all the property
Article 1388 Par. 1: Effect of bad faith;

Whoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter for damages s
uffered by them on account of the alienation, whenever, due to any cause, it should be impossible for him to return them
Par. 2: Effect of subsequent transfer
If there are two or more alienations, the first acquirer shall be liable first, and so on successively.
Article 1389 Prescriptive period
(PARAS)
General Rule: 4 years from the date the contract was entered into
Exception:Persons under guardianship- 4 years from termination of incapacity of the ward
absentees- 4 years from the time the domicile is known
(JURADO)
Article 1381 nos 1 and 2 (Based on Lesion) - 4 years from termination of incapacity of the ward
or 4 years from the time the domicile is known
Article 1381 nos 3 and 4 (Based on Fraud) - the period must be counted from the time of the discovery of fraud
Certain contracts of sale which are specially declared by law to be rescible,- the period is 6 months or even 40 days,
counted from the day of delivery (art. 1543, 1571, 1577)
TITLE 2 CONTRACTS
CHAPTER 7 VOIDABLE CONTRACTS
CONCEPT
Note: Part of the classes of defective contracts
Essential Features
Their defect consists in the vitiation of consent (Mistake, violence, inmidation, undue influence, or fraud) or in
the legal capacity of one of the contracting parties
They are binding until they are annulled by a competent court
They are susceptible of convalidation either by ratification or prescription
They cannot be attacked or assailed by third person
Note: The defect is intrinsic because it consists of a vice which vitiates consent (Art. 1390)
It is voidable even there is damage (Art. 1390)
The annulability is based on law the law
Susceptible of ratificaton (Art. 1390)
Article 1390 Voidable Contracts even though there have been no damage to contracting parties
Those where one of the parties is incapable of giving his consent to a contract
Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud
Last par: These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification
Note: How may voidable contract be convalidated

By prescription of the action for annulment (art. 1391)
By ratification or confirmation (art. 1392-1396)
By the loss of the thing which is the object of the contract through fraud or fault of the person who is
entitled to institute the action for the annulment of the contract (art. 1401)
Article 1391 Prescriptive period
The action for annulment shall be brought within four years
In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases
In case of mistake or fraud, from the time of the discovery of the same.
And when the action refers to contracts entered into by minors or other incapacitated persons,
from the time the guardianship ceases
Note: Article 173 of NCC provides that the action is prescribed in 10 years from the transaction and during the marriage, i
n case the spouse asked for an action
Note: R.A 6809 lowered the age of majority from 21 to 18
Article 1392 Convalidation;Effect of Ratification; "ratification extinguishes the action to annul a voidable contract"
It is defined as the act or means by virtue which efficacy is given to a contract which suffers from vice of curable nullity
Requisites (Castan);
The contract should be tainted with a vice which is susceptible of being cured
The contract should be effected by the person who is entitled to so under the law
It should be effected with knowledge of the reason which renders the contract voidable
The reason which already renders the contract voidable should have disappeared
Article 1393 Forms of ratification; Express or Tacit;

Express ratification, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person
who has a right to invoke it should expressly declare his renunciation of his right to annul the contract
Tacit ratification, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person
who has a right to invoke it should execute an act which necessarily implies an intention to waive his right
Note: The effect of these ratification (convalidation) is it extinguishes the action to annul a voidable contract (art. 1392)
and it cleanses the contract of its defects from the moment it was constituted (Art. 1396)
Article 1394 Ratification by Guardian; Ratification may be effected by the guardian of the INCAPACITATED person.
Article 1395 Conformity of not party is not needed; Ratification does not require the conformity of the contracting party
who has no right to bring the action for annulment.
Article 1396 Retroactivity effect of ratification; Cleansing effect of Ratification;
"Ratification cleanses the contract from all its defects from the moment it was constituted"
Article 1397 Person who may ask for annulment
The victim principal or subsidiary pary)
Requisites: The plaintiff must have an interest in the contract in the sense that he is obliged thereby
either principally or subsidiary
The victim and NOT the pary responsible for the vice or defect must be the one who
must assert the same
Note: (Singsong v. Isabela Sawmill)
As a rule, a contract cannot be assailed by one who is not a party thereto
Exception: Any person may bring an action for annulment of the contract if he is prejudiced in his rights
with respect to one of the contracting parties and can show detriment
which would positively result to him from the contract in which he has no
intervention
Article 1398 Effect of annulment
A. If the contract has not yet complied with, the parties are excused form their obligation
B. If the contract has already been performed, there must be a mutual restitution (in general) of
the thing, with fruits
the price, with interest
Note: Last par. States that when it is service, the value there of shall be the basis for damage
Note: This shall apply even if the land has already been registered, provided there has been no
estoppel (PARAS cited the case Tinsay v. Yusay and Yusay)
Note: Extra Liability of the Guilty Party applying the provisions of Art. 20 and 21
Article 1399 General Rule: No Restitution for incapacitated person
Exception: insofar as he has been benefited by the thing or price received by him.
and Art. 1427
When the defect of the contract consists in the incapacity of one of the parties, the incapacitated
person is NOT obliged to make any restitution except insofar as he has been benefited by the thing or price received by him.
Note: Art. 1399 cannot be applied to those cases where the incapacitated person can still return the thing
which he has received. (Young v. Tecson)
In this case, if he reached age of majority, then it is implied ratification
Article 1400 Value may be substituted for the thing itself
Whenever the person obliged by the decree of annulment to return the thing can not do so because it has been lost
through his fault, he shall return the fruits received and the value of the thing at the time of the loss,
with interest from the same date.
All must be provided in case of lost:
Fruits
Value
Interest
Article 1401 Convalidation; Fault of the victim

General Rule
The action for annulment of contracts shall be extinguished when the thing which is the object thereof is lost
through the fraud or fault of the person who has a right to institute the proceedings.
Exception:
If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an obstacle
to the success of the action, unless said loss took place through the fraud or fault of the plaintiff.
Note: It shall apply whether the loss occurred during the plaintiff's incapacity or after he had acquired capacity,
the action for annulment would still be extinguished in accordance with the rule stated in 1st paragraph
Article 1402 Reciprocity;

As long as one of the contracting parties does not restore what in virtue of the decree of annulment
he is bound to return, the other cannot be compelled to comply with what is incumbent upon him
TITLE 2 CONTRACTS
CHAPTER 8 UNENFORCEABLE CONTRACTS
CONCEPT
Note: Unenforceable contracts are those which are cannot be enforced by a proper action in court, unless they are ratified,
because either they are entered into without or in excess of authority or they do not comply with the statute of frauds
or both of the contracting parties do not possess the required legal capacity
Essential Features
They cannot be enforced by a proper action in court
They are susceptible of ratification
They cannot be assailed by third persons
Article 1403 The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or
legal representation, or who has acted beyond his powers
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreementcontents:
hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof,
be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot
be received without the writing, or a secondary evidence of its contents
Note: It must be evidence by any note or memorandum or writing properly subscribeld by any charged
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
(c) An agreement made in consideration of marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos,
unless the buyer accept and receive part of such goods and chattels, or the evidences,
or some of them, of such things in action or pay at the time some part of the purchase money;
but when a sale is made by auction and entry is made by the auctioneer in his sales book,
at the time of the sale, of the amount and kind of property sold, terms
of sale, price, names of the purchasers and person on whose
account the sale is made, it is a sufficient memorandum;
Note: Statute of fraud is descriptive of statutes which require certain classes of contracts to be in writing.
The contracts shall be unenforceable by action unless the same or some note or memorandum thereof be in writing
and subscribed by the party charged or by his agent. Evidence of the contract, therefore, cannot be received without
the writing or a secondary evidence of its contents (Art. 1403 (2)
Article 1404 Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this Book.
Article 1405 Infringing the statute of frauds
By the failure to object to the presentation of oral evidence to prove the same
By the acceptance of benefit
Article 1406 When a contract is enforceable under the Statute of Frauds, and a public document is necessary for its registration
in the Registry of Deeds, the parties may avail themselves of the right under Article 1357.
Note: Art. 1357 is Right of one to party to compel the other to execute the necessary form (Paras)
Article 1407 In a contract where both parties are incapable of giving consent, express or implied ratification by the parent,
or guardian, as the case may be, of one of the contracting parties shall give the contract the same effect
as if only one of them were incapacitated.
If ratification is made by the parents or guardians, as the case may be, of both contracting parties, the contract
shall be validated from the inception.
Article 1408 Unenforceable contracts cannot be assailed by third persons.

TITLE 2 CONTRACTS
CHAPTER 9 VOID AND INEXISTENT CONTRACTS
CONCEPT
Void and enexistent contracts may be defined as those which lack absolutely either in fact or in law one or some or all of those
elements which are essential for its validity.
Void contracts are the contracts where all of the requisites prescribed by law for contracts are present, but the cause, object or
purpose is contrary to law, morals, good customs, public order, or public policy, or they are prohibited by law,
or they are declared by law to be void.
Inexistent contracts are those contracts which lack absolutely one or some or all of those requisites which are essential for
validity
Note: Produces as a rule no effect even if it is not set aside by a direct action (Art. 1409)
Note: Consists in absolute lack in fact or in law of one or some or all of the essential elements of a contract, whereas the
defect of the latter consists in lesion or damage to one of the contracting parties or to third person ((Art. 1409)
Note: In void and inexistent contractsis based on the law
Public policy predominates
Note: The action for the declaration of the nullity or inexistence of a contract is imprescriptible (Art. 1410)
Note: Cannot be assailed be assailed by third persons (Art. 1409)
Article 1409 Void or inexistent Contracts
Those whose cause, object or purpose is contrary is contrary to law
Those which are absolutely simulated or fictititous
Those whose cause or object did not exist at the time of the transaction
Those whose object is outside the commerce of men
Those which contemplate an impossible service
Those where the intention of the parties relative to the principal object of the contract cannot be ascertained
Those expressly prohibited or declared void by law
Note: Last Par. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived
Note: Those where there is no concurrence between offer and acceptance with regard to the object and the cause
of the contract (Art. 1422)
Those which do not comply with the required form where such form is essential for validity (Art. 1422)
Article 1410 Imprescription; The action or defense for the declaration of the inexistence of a contract does not prescribe.
Article 1411 Contracts both illegal and criminal; Principle of of in pari delicto
Note: It applies only to cases of existing contracts with an illegal cause or object and NOT to simulated or fictitious
contracts nor to thise which are inexistent for lack of an essential requisite such as cause or consideration
Note: The principle can have NO application to inexistent contracts, since such contracts are always
open to attack even by the parties thereto.
Note: The contract is void because of the illegality of the cause or the object, the principle is applicable since the code in
art. 1411 and 1412 commands that neither party thereto may be heard to invoke its unlawful character as
a ground for relief
Note: Applicable only to a contracts that has been executed; it will produce the effect of barring any action by a guilty party
to recover what has already given under the contacts.
Article 1412 Rules In Pari delicto

1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the
contract, or demand the performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the
contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the
return of what he has given without any obligation to comply his promise. (1306)
EXCEPTION TO IN PARI DELICTO PRINCIPLE

Article 1413 Interest paid in excess of the interest allowed by the usury laws may be recovered by the debtor, with interest
thereon from the date of the payment.
Article 1414 When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one of the parties
before the purpose has been accomplished, or before any damage has been caused to a third person.
Article 1415 Payment of money or delivery of property by an incapitated person.
Article 1416 Agreement or contract which is not illegal per se but is merely prohibition is deigned for the protection of the plaintiff.
Article 1417 Payment of any amount in excess of the maximum price of any article or commodity fixed by law
Article 1418 Contract whereby a laborer undertakes to work longer than the maximum number of hours fixed by law
Article 1419 Contract whereby a laborer accepts a wage lower than the minimum wage fixed by law.
Article 1420 Illegal terms in divisible contracts
In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced.
Article 1421 Defense of illegality is not available to a third person
The defense of illegality of contract is not available to third persons whose interests are not directly affected.
Article 1422 Effect of direcr result of a previous illegal contract
A contract which is the direct result of a previous illegal contract, is also void and inexistent.
TITLE 3 NATURAL OBLIGATIONS
CONCEPT
Natural Obligations are those based on equity and natural law, which are not enforceable by means of court action, but which,
after voluntary fulfillment by the obligor, authorize the retention by the obligee of what has been delivered or rendered by reason
there of. In other words, they refer to those obligations without a sanction, susceptible of voluntary performance, but not through
compulsion by legal means. (Tolentino)
Article 1423 Natural Obligation is based on equity and natural law;

After voluntary fulfillment of the obligor, it authorizes retention of what has been delivered or rendered by reason thereof.
EXAMPLE OF NATURAL OBLIGATION
Article 1424 Natural obligation on extinctive obligation
When a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor who voluntarily
performs the contract cannot recover what he has delivered or the value of the service he has rendered.
Article 1425 Natural obligation on Payment by a third person (not legally bound)
When a third person pays
A. without the knowledge of the debtor
B. Against the will of the of the debtor
Note: After the payment of a third person for the indebtedness of A. A subsequently paid the third person
In this case, third person neet not to reimburse
Note: if payment is made with the consent of the debtor. A CIVIL OBLIGATION ARISES
When without the knowledge or against the will of the debtor, a third person pays a debt which the obligor is
not legally bound to pay because the action thereon has prescribed, but the debtor later voluntarily reimburses the
third person, the obligor cannot recover what he has paid.
Article 1426 Natural obligation on contracts byminors between 18 and 21-When there has been annulment
Note: In this case, this provision is applicable, When an annulled contract was fulfilled by a minor between 18 to 21,
there will be no right to demand the return of payment even though he had no benefit.
Note: A contract must be first declared annulled
When a minor between eighteen and twenty-one years of age who has entered into a contract without the consent of t
he parent or guardian, after the annulment of the contract voluntarily returns the whole thing or price received,
notwithstanding the fact the he has not been benefited thereby, there is no right to demand the thing or price thus returned.
Article 1427 Natural obligation on contracts nu minors between 18 and 21-When there has been NO annulment yet
When a minor between eighteen and twenty-one years of age, who has entered into a contract without the consent
of the parent or guardian, voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation,
there shall be no right to recover the same from the obligee who has spent or consumed it in good faith. (1160A)
Article 1428 Natural obligation on winner in an action to enforce a civil obligation

When, after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation,
he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered.
Article 1429 Natural obligation in case of payment of debts beyond value of the the decedent's estate
Note: General rule: Heirs inherit obligations only to the extent of the value of the inheritance
Exception: If the heir paid such obligation, hence they may have no more right to demand for the returm
When a testate or intestate heir voluntarily pays a debt of the decedent exceeding the value of the property which
he received by will or by the law of intestacy from the estate of the deceased, the payment is valid and cannot be
rescinded by the payer.
Article 1430 Natural obligation on payment of legacies despite the fact that the will is void
When a will is declared void because it has not been executed in accordance with the formalities required by law,
but one of the intestate heirs, after the settlement of the debts of the deceased, pays a legacy in compliance with
a clause in the defective will, the payment is effective and irrevocable.
TITLE 4 ESTOPPEL
CONCEPT
Article 1431 Estoppel is a condition or state by virtue of which an admission or representation is rendered conclusive upon the person making
it, and cannot be denied or disproved as against the person relying thereon.
Article 1432 The general principles of estoppel are only suppletory
The principles of estoppel are hereby adopted insofar as they are not in conflict with the provisions of this Code,
the Code of Commerce, the Rules of Court and special laws.
Article 1433 Estoppel may be in pais or by deed.
Note:Kinds of Estoppel (Tijam v. Sibonghanoy)
estoppel in pais (by conduct)
It is that which arises when one by his acts, representations or admissions, or by his silence he ought to
speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist and
such other rightfully relies and acts on such belief, as a consequence of which would be prejudiced if the
former is permitted to deny the existence of such facts
Estoppel in silence
It refers to a type of estoppel in pais which arises when a party, who has a right and opportunity
to speak of act as well as a duty to do so under the circumstances, intentionally or through
culpable negligence, induces another to believe certain facts to exist and such other relies and
act on such belief, as a consequence of which he would be prejudiced if the former is
permitted to deny the existence of such facts. Ex. Is Art. 1437
Estoppel by acceptance of benefits
It refers to a type of estoppel in pais which arises when a party by accepting benefits derived
from certain act or transaction, intentionally or through culpable negligence, induces another to
believe certain facts to exist and such other relies and acts on such beliefs, as a consequence
of which he would be prejudiced if the former is permitted to deny the existence of such facts.
Ex is art. 1438
estoppel by deed or by record
Estoppel by deed type of technical estoppel by virtue of which a party to a deed and privies are precluded from
asserting as against the other party and his privies any right or title in derogation of the deed, or from
denying any material fact asserted therein.
Estoppel by record is a type of technical estoppel by virtue of which a party and his privies are included
own denying the truth of matters set forth in a record whether judical or legislative
ex. Is res judicata
estoppel by laches
in general sense, is a failure or neglect, for an reasonable and unexplained length of time, to do which, by
exercising due dilligence, could or should have been done earlier
Also known as, the stale demands, is based on public policy which requires, for the peace of society, the
discouragement of the stale claims and, unlike the statute of limitations, is not a mere question of
time but is principally a question of the inequity or unfairness of permitting a right or claim to be
enforced or asserted (Tijam v. Sibonghanoy)
Requisites (Miguel v. Catalino)

Conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation of which the complaint seeks a remedy
Delay in asserting the complainant's rights, the complaint having had afforded
an opportunity to institute a suit
Lack of knowledge or notice on the part of the defendant that the complaint would assert
the right on which he bases his suit
Injury or prejudiced to the defendant in the event of the relief is accorded to the complaint
or the suit is not held to be barred.
Note: Estoppel by judgement
it may be defined as the preclusion of a party to a case from denying the facts adjudicated by a
court of competent jurisdiction.
It bars the parties from raising any question that might have been put in issue and decided in
a previous litigation
Note: Res judicata
Makes a judgement conclusive between the same parties as to the matter directly adjudged
Article 1434 When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller
or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee.
Article 1435 If a person in representation of another sells or alienates a thing, the former cannot subsequently
set up his own title as against the buyer or grantee.
Article 1436 A lessee or a bailee is estopped from asserting title to the thing leased or received, as against the lessor or bailor.
Article 1437 When in a contract between third persons concerning immovable property, one of them is misled by a person
with respect to the ownership or real right over the real estate, the latter is precluded from asserting his legal
title or interest therein, provided all these requisites are present:
(1) There must be fraudulent representation or wrongful concealment of facts known to the party estopped;
(2) The party precluded must intend that the other should act upon the facts as misrepresented;
(3) The party misled must have been unaware of the true facts; and
(4) The party defrauded must have acted in accordance with the misrepresentation.
Article 1438 One who has allowed another to assume apparent ownership of personal property for the purpose
of making any transfer of it, cannot, if he received the sum for which a pledge has been constituted, set up his own
title to defeat the pledge of the property, made by the other to a pledgee who received the same in good faith and for value.
Article 1439 Estoppel is effective only as between the parties thereto or their successors in interest.

Obligations and Contracts Summary

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Obligation and Contracts

Provisions Titles Remarks

Article 1286 Place of compensation

Article 1289 Rules on "application on payment" may apply if several debts

Rights of the person who paid debtor's obligation in "Expromision"

Rights of the person who paid debtor's obligation in "Delegacion"

Article 1294 Insolvency in case of Expromision

Article 1301 Conventional Subrogation; Consent of all parties is required

Provisions Titles Remarks

Theories applied to perfection of contracts

Article 1320 Acceptance may be express or implied

Article 1324 Period of Acceptance; Options

Under Mistake of Fact; Kinds (Castan)

2. Mistake as to Person (Error in Persona)

Article 1335 Par. 1 VIOLENCE

Article 1337 UNDUE INFLUENCE

Article 1346 Note: Absolute Simulated Contract is VOID

Things, rights, or services CANNOT be object of contracts

Note: Formalities required

Provisions Titles Remarks

Note: Reformation of instrument v. annulment of contract

EXAMPLES OF INSTRUMENTS WHICH MAY BE INFORMED

Article 1366 There shall be no reformation in the ff. cases

For credit card; Emmanuel Aznar v. Citibank

Article 1378 Doubt as to Principal Object or Incidental Circumstances (PARAS)

Article 1385 Par. 1 Effect of rescission in case Lesion

Badges of fraud (Oria v. Mcmicking)

Article 1388 Par. 1: Effect of bad faith;

Note: How may voidable contract be convalidated

Article 1393 Forms of ratification; Express or Tacit;

Article 1401 Convalidation; Fault of the victim

Article 1402 Reciprocity;

Article 1408 Unenforceable contracts cannot be assailed by third persons.

Article 1412 Rules In Pari delicto

EXCEPTION TO IN PARI DELICTO PRINCIPLE

Article 1423 Natural Obligation is based on equity and natural law;

Article 1428 Natural obligation on winner in an action to enforce a civil obligation

Requisites (Miguel v. Catalino)

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