OBLIGATIONS AND CONTRACTS

ENUMERATION and EXPLANATION

Questions Answers
In case of non-compliance, the courts of justice may be called upon to enforce fulfillment or in
Why is Obligation a Juridical Necessity?
defult, the economic value it represents.
Passive Subject (debtor/obligor)
Active Subject (creditor/obligee)
What are the requisites of an Obligation?
Object or Prestation (subject matter)
Juridical or Legal Tie (vinculum or efficient cause)
Legal Right
Correlative Legal Obligation
What are the Elements of Cause of Action?
Act or omission in breach or obligation
**If elements are absent, it will be vunerable to motion to dismiss.
Differentiate the kinds of obligations accdg to subject Real Obligation - to give
matter Personal Obligation - to do
Positive Personal Obligation - to do
Differentiate the kinds of personal obligations
Negative Personal Obligation - not to do
Laws
Contracts
Sources of Obligations Quasi-contracts
Acts or omissions punished by Law
Quasi-delicts
Civil Obligation
What are the kinds of obligations based on Sanction? Natural Obligation
Moral Obligation
Unilateral Obligation
Kinds of obligation from viewpoint of persons obliged
Bilateral Obligation
Reciprocal Obligations
2 kinds of Bilateral Obligations
Non-reciprocal Obligations
What if there's a conflict between the Civil Code and
The Special Law prevails unless the contrary has been expressly stipulated in the new civil code.
Special Law?
Do ut Des
Do ut facias
What are the innominate contracts?
Facio ut des
Facio ut facias
What are the requirements of a valid contract? Should not be contrary to law, morals, good customs, public order and policy.
Negotiorum Gestio
Kinds of Quasi-contracts
Solutio Indebiti
Restitution - indemnification or compensation
Scope of Civil Liability arising from crimes Reparation for damages caused
Indemnification for consequential damages
Nature and Effect of Obligations

What does Diligence of a Good Father of a Family mean? that which is required by the nature of the obligation or ordinary catre of a prudent person

1. Preserve the thing

2. Deliver the fruits of the thing
What are the duties of debtor in obligation to deliver a
3. Deliver its accessions and accessories
determinate thing?
4. Deliver the thing itself
5. Answer for damages in case of breach
1. Deliver a thing which is of the quality intended by the parties taking into consideration the
What are the duties of debtor in obligation to deliver a
purpose of the obligation and other circumstances
generic thing?
2. To be liable for damages in case of fraud, negligence or delay.
Personal Right / Jus in Personam
2 kinds of rights
Real Right / Jus in Re
1. Actual Delivery / Tradition
What are the kinds of delivery?
2. Constructive Delivery
1. Traditio Symbolica
2. Traditio Longa Manu
5 kinds of constructive delivery 3. Traditio Brevi Manu
4. Traditio Constitutum Possessorium
4. Quasi Traditio
IT DEPENDS. 1. If there is no term or condition, the thing should be delivered from the perfection
When does the obligation to deliver arise? of the contract.
2. If there is a term or condition, when the term arrives or the condition happens.
1. Natural Fruits
What are the kinds of Fruits? 2. Industrial Fruits
3. Civil Fruits
From the perfection of the contract even if the obligation is subject to a suspensive condition
In a contract of sale, when does the obligation arise?
where the price has been paid.
1. demand specific performance or compliance of the obligation
What are the Remedies of a Creditor when Debtor fails to
2. demand rescission or cancellation
comply with his obligation? (TO GIVE)
3. demand damages either with or without either 1. or 2.
What is the effect of fortuitous event in an obli to deliver a
Extinguises the obligation
specific thing?
What is the effect of fortuitous event in an obli to deliver a
Generic obligations are never extinguised. (Genus Nunquam Perit)
generic thing?
1. If the obligor delays
2 Exemptions where fortuitous event does not excuse
2. If the debtor is guilty of bad faith (promised to deliver same thing to two or more persons who
debtor of compliance?
do not have the same interest)
Ordinary Delay
What are the 2 kinds of delay?
Legal Delay
What are the remedies of a Creditor when Debtor FAILS TO 1. To have the obligation performed at debtor's expense
DO 2. To obtain damages

Specific performance CANNOT be ordered in a personal obligation to do because this may amount
Can specific performance be ordered?
to Involuntary Servitude which is prohibited under our constitution

1. When the obligation or the law expressly so declares;

2. When from the nature and the circumstances of the obligation, it appears that the designation
of the time when the thing is to be delivered or the service is to be rendered was a controlling
3 instances where demand by the creditor shall not be
motive for the establishment of the contract;
necessary in order that delay may exists
3. When demand would be useless, as when the obligor has rendered it beyod his power to
perform.
*Also, when the obligor expressly acknowledged he's in default.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready
When does delay begin in a Reciprocal Obligation? to comply in a proper manner with what is incumbent upon him. From the moment one of the
parties fulfills his obligation, delay by the other begins.
1. Mora Solvendi
What are the kinds of Mora? 2. Mora Accipiendi
3. Compensatio Morae
1. Mora Solvendi ex Re
2 kinds of Mora Solvendi
2. Mora Solvendi ex persona
1. Obligation must be due, enforceable & already liquidated or determinate in amount
2. There must be non-performance
What are the requisites for Mora Solvendi?
3. There must be a demand, unless not required
4. Demand must be for the obligation that is due

1. Debtor may be liable to interest or damages

What are the effects of Mora Solvendi? 2. Debtor may bear the risk of loss
3. Debtor is liable even for a fortuitous event; although damages may be mitigated.

1. If principal obligation is allowed to lapse by prescription

3 instances when damages or interest may be lost 2. If interest or damages are allowed to prescribe
3. If interest or damages are condoned / waived / remitted.
1. Creditor is guilty of breach of obligation
2. Creditor is liable for damages suffered, if any, by the debtor
3. Creditor bears the loss of the thing due
What are the effects of Mora Accipiendi?
4. Debtor is not liable for interest from the time of the creditor's delay
5. Debtor may release himself from the obligation by consignation or deposit in court of thing or
sum due.
1. Fraud / Dolo
2. Negligence / Culpa
What are the sources or grounds of liability?
3. Delay / Mora
4. Contravention / Violatio
Moral
Exemplary
Nominal
What are the kinds of damages?
Temperate
Actual
Liquidated
Moral
Exemplary
Damages where amount is determined by court?
Nominal
Temperate
Actual
Damages where amount is not determined by court?
Liquidated
Dolo Incidente
2 kinds of Fraud / Dolo
Dolo Causante
What is the similarity of Dolo and Culpa? Both are voluntary.

Intention to cause damage; waiver of liability; fraud must be proved while culpa is presumed;
What are the differences of Dolo and Culpa?
liability of fraud cant be mitigated while liability of culpa may be reduced.

Past
Types of Fraud accdg to time of commission
Future
Exemption on renouncement of future negligence When obli requires exercise of extraordinary diligence as in case of common carriers
Culpa Contractual
Kinds of Negligence accdg to source of obligation Culpa Aquiliana
Culpa Criminal
 When a plaintiff's own negligence was the immediate cause of the injury, he can't recover
What is the affect of a victim/plaintiff's own negligence?
damages. If contributory, the plaintiff may recover damages but the court shall mitigate damages.
Culpa Lata (grave negligence)
What are the degrees of Culpa under Roman Law? Culpa Levis (ordinary negligence)
Culpa Levissima (slight negligence)
1. that agreed upon by the parties
Kinds of Diligence 2. that required by the law
3. that expected of a good father of a family
1. Nature of the obligation
Factors to be considered in determining the issue of 2. Circumstances of the person
negligence 3. Circumstances of time
4. Circumstances of the place
1. When expressly declared by law (ie default or bad faith)
Cases when the debtor is responsible for Fortuitous Events
2. When expressly declared by stipulation or contract
/ Case Fortuito
3. When the nature of the obligation requires the assumption of risk

1. The cause of the breach of the obligation must be independent of the will of the debtor
2. The event must be either unforeseen or unavoidable
What are the essential characteristics of a Fortuitous event
3. The event must be such as to render it impossible for the debtor to fulfill his obligation in a
to exempt the debtor from liability?
normal manner
4. The debtor must be free from any participation in, or aggravation of, the injury to the creditor

(a) If the fortuitous event was the proximate cause, the obligation is extinguished.
What happens when there is a combination of fortuitous
(b) If the negligence was the proximate cause, the obligation is not extinguished. (It is converted
event and negligence
into a monetary obligation for damages.)
1. Moratory Interest
What are the 2 kinds of interest?
2. Compensatory interest
* 12% per annum
* 12% per annum on mortgage of real estate
Max. Lawful Rates under Former Usury Law
* 14% if not recorded
* For pawnshops, 2.5% if less than P100, 2% if P100-500, 14% per annum if more than P500

1. Exact payment
2. Exhaust debtor's properties, generally by attachment, except properties exempted by law
What are the rights of Creditors?
3. Exercise all rights and actions except those inherent in the person
4. Impugn or rescind acts or contracts done by the debtor to defraud the creditors
(a) The right to existence, thereby exempting from the reach of creditors, whatever he may be
receiving as support.
(b) Rights or relations of a public character
(c) Rights of an honorary character
What are the rights inherent to the person of the debtor?
(d) Rights pertaining to the affairs of the home and the family
(e) Rights granted by law only to the debtor such as the action to revoke a donation on the ground
of ingratitude.
(f) The right to appear in court proceedings, like the settlement of an estate.

(a) The judgment obligor’s family home as provided by law, or the homestead in which he resides,
and land necessarily used in connection therewith;
(b) Ordinary tools and implements personally used by him in his trade, employment, or livelihood;
(c) Three horses, or three cows, or three carabaos, or other beasts of burden, such as the judgment
obligor may select necessarily used by him in his ordinary occupation;
(d) His necessary clothing and articles for ordinary personal use, excluding jewelry;
(e) Household furniture and utensils necessary for housekeeping, and used for that purpose by the
judgment obligor and his family, such as the judgment obligor may select, of a value not exceeding
one hundred thousand pesos;
(f) Provisions for individual or family use suffi cient for four months;
(g) The professional libraries and equipment of judges, lawyers, physicians, pharmacists, dentists,
engineers, surveyors, clergymen, teachers, and other professionals, not exceeding three hundred
thousand pesos in value;

What are Debtor's Properties Exempt from Execution?

What are Debtor's Properties Exempt from Execution?
(h) One fishing boat and accessories not exceeding the total value of one hundred thousand pesos
owned by a fisherman and by the lawful use of which he earns his livelihood;
(i) So much of the salaries, wages, or earnings of the judgment obligor for his personal services
within the four months preceding the levy as are necessary for the support of his
family;
(j) Lettered gravestones;
(k) Monies, benefi ts, privileges, or annuities accruing or in any manner growing out of any life
insurance;
(l) The right to receive legal support, or money or property obtained as such support, or any
pension or gratuity from the Government;
(m) Properties specially exempted by law.
But no article or species of property mentioned in this section shall be exempt from execution
issued upon a judgment recovered for its price or upon a judgment of foreclosure of a mortgage
thereon. (Sec. 13, Rule 39 of 1997 Rules of
Civil Procedure).

The debtor is liable with all his property, present and future, for the fulfi llment of his obligations
What is the Extent of Debtor’s Liability?
subject to the exemptions provided by law.
1) if the law provides otherwise;
Rights are transmissible except on what 3 cases? 2) if the contract provides otherwise;
3) if the obligation is purely personal.
Kinds of Obligations
1) pure as distinguished from conditional
2) pure as distinguished from that with a period or term
3) alternative or facultative obligations (as distinguished
6 Classification of Obligations according to the PRIMARY
from conjunctive)
classification of the Civil Code
4) joint as distinguished from solidary
5) divisible as distinguished from indivisible
6) with a penal clause (as distinguished from those without)
1) unilateral as distinguished from bilateral (Arts. 1168, 1191).
2) real and personal (Arts. 1164-1165).
3) determinate and generic (Arts. 1167, 1168).
Secondary classification of Obligations by the Civil Code
4) positive and negative (See Arts. 1167, 1168).
5) legal, conventional, penal (Arts. 1156, 1158, 1159, 1161).
6) civil and natural.
1) according to juridical quality and efficaciousness:
a) natural — according to natural law
b) civil — according to civil law
c) mixed — according to both natural and civil laws
2) by the parties or subjects:
a) unilateral, bilateral
b) individual, collective
c) joint, solidary
3) by the object of the obligation
a) specifi c, generic
Classification of Obligations According to Sanchez Roman
b) positive, negative
c) real, personal
d) possible, impossible
e) divisible, indivisible
f) principal, accessory
g) simple, compound
If compound — may be
(1) conjunctive — demandable at the same time
(2) distributive — either alternative or facultative

1) No defect — valid
2) Defective
Classification of Obligations by the Code according to a) rescissible
Defects: b) voidable
c) unenforceable
d) void
1 Future and uncertain
Characteristics of a Condition
2 Past but unknown
1 when it is a Pure obligation
When is an obligation demandable at once? 2 when it is subject to a resolutory condition
3 when it is subject to a resolutory period
1 Suspensive and Resolutory conditions
2 Potestative, Casual and Mixed conditions
3 Divisible and Indivisible
7 ways of classifying conditions and the classifications 4 Positive and Negative
5 Express and Implied Conditions
6 Possible and Impossible Conditions
7 Conjunctive and Alternative Conditions
1 Physically Impossible Conditions
2 classifications of impossible conditions
2 Illegal Conditions
 1 When the time expires
What extinguishes an obligation with a positive condition?
2 When it becomes indubitable that the event will not take place
What makes an obligation effective when it has a Negative 1 When the time indicated has elapsed
condition? 2 When it has become evident that the event will not occur
Requisties of Fulfillment of Condition due to Debtor's 1 Voluntarily made
Prevention 2 Debtor actually prevents fulfillment of condition

1 Fruits or interest
There is no retroactivity with regards to…
2 Period of prescriptpion

1 Sue in court. Otherwise, there is danger that creditor will receive nothing when object is
Appropriate actions of creditor to preserve his rights during destroyed, hidden or alienated.
pendency of condition 2 Ask for security id the debtor is about to be insolvent
3 Ask the court to prevent alienation or concealment (pendente conditionae)
If payment by debtor before fulfillment of suspensive 1. If condition is fulfilled, there is no recovery due to retroactivity.
condition was not by mistake, can there be recovery? 2. If not fulfilled, there should be recovery unless donation is intended

(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages;
(3) When the thing deteriorates without the fault of the
debtor, the impairment is to be borne by the creditor;
Rules to be observed in case of the improvement, loss or
(4) If it deteriorates through the fault of the debtor,
deterioration of the thing during the pendency of the
the creditor may choose between the rescission of the obligation
condition in suspensive condition to give:
and its fulfillment, with indemnity for damages in either
(Applies if suspensive condition is fulfilled and object is
case;
specific)
(5) If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall
have no other right than that granted to the usufructuary.

1. it perishes, or
2. goes out of commerce, or
it is understood that the thing is lost when
3. disappears in such a way that its existence is unknown or
4. disappears in such a way that it cannot be recovered;
1 The obligation is extinguished
2 The parties should restore to each other what they've received
3 Aside from actual things received, the fruits and interests thereon should be returned after
deducting the expenses made for their production, gathering & preservation.
Effects when a resolutory condition is fulfilled
4 Art 1189 rules shall apply to whoever has the duty to return in case of loss, deterioration or
improvement of the thing
5 Courts are given power to determine retroactivity of fulfillment of resolutory conditions to do
and not to do.

1 Trivial causes or slight breaches will not cause rescission

2 If there will be just cause for fixing the period within which the debtor can comply
Cases when court can dismiss claim to Rescind
3 If the property is now in the hands of an innocent 3rd party who has lawful possession of the
same

1 It must refer to the future

Requisites of a valid term or period 2 It must be certain
3 It must be physically and legally possible
1. Definite or Indefinite
Kinds of Periods 2. Legal, Conventional/Voluntary, or Judicial
3. Ex Die or In Diem
1 from its nature and the circumstances it can be inferred that a period was intended, the courts
Cases when court may fix the period may fix the duration thereof.
2 when it depends upon the will of the debtor.
1 When no term was specified by the parties because no term was even intended, in which case
the obligation is really a pure one, and demandable at once, unless of course absurd consequences
would arise.
2 When the obligation or note is “payable on demand.”
Cases when court may NOT fix the term 3 When specific periods are provided for in the law, as in an employment contract where if no
period was agreed upon, the time of employment depends upon the time for payment of salary.
4 When what appears to be a term is really a condition
5 When the period within which to ask the Court to have the period fi xed has itself already
prescribed.
 (1) When after the obligation has been contracted, he becomes insolvent, unless he gives a
guaranty or security for the debt;
(2) When he does not furnish to the creditor the guaranties or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their establishment,
The debtor shall lose every right to make use of the period: and when through a fortuitous event they disappear, unless he immediately gives new ones
equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the
period;
(5) When the debtor attempts to abscond.

1 made properly so that the creditor or his agent will actually know;
2 made with full knowledge that a selection is indeed being made.
3 made voluntarily and freely
Requisites for making a choice in an Alternative Obligation 4 made in due time, that is, before or upon maturity
5 made to all the proper persons
6 made without conditions unless agreed to by the creditor
7 may be waived, expressly or impliedly

(1) If one of the things is lost through a fortuitous event, he shall perform the obligation by
delivering that which the creditor should choose from among the remainder, or that which
remains if only one subsists;
(2) If the loss of one of the things occurs through the fault of the debtor, the creditor may claim
Governing rules on the responsibilities of the debtor on
any of those subsisting, or the price of that which, through the fault of the former has disappeared,
pendency of choice when the right to choose has been
with a right to damages;
given to Creditor in Alternative Obligation
(3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon
the price of any one of them, also with indemnity for damages.
The same rules shall be applied to obligations to do or not to do in case one, some or all of the
prestations should become impossible.

1 No. of Prestations
2 Right of choice
Differentiate Alternative vs Facultative Obligations
3 Loss through Fortuitous event
4 Loss through fault of debtor

1 Individual Obligation
Kinds of Obligations accdg to Number of parties
2 Collective Obligation
1 Joint Obligations
Types of Collective Obligations
2 Solidary Obligations
1 The obligation expressly so states
There is solidary liability only when: 2 The law requires solidarity
3 The nature of the obligation requires solidarity
1 Passive Solidarity
2 Active Solidarity
3 Mixed Solidarity
Kinds of solidarity
1 Conventional Solidarity
2 Legal Solidarity
3 Real Solidarity
1 Obligations arising from torts
2 Obligations arising from quasi-contracts
Instances when the law imposes solidarity 3 Legal provisions regarding the devisees and legatees
4 Liability of principals, accomplices and accessories of a felony
5 Bailees in commodatum
1 Vitiated consent on part of 1 debtor does not affect the others
2 Insolvency of 1 debtor does not make the others liable for his share
3 Demand by the creditor on 1 joint debtor puts him in default, but not the others since the debts
Consequences of Joint Liability are distinct
4 When the creditor interrupts the running of the prescriptive period by demanding judicially from
1, the others are not affected
5 Defenses of 1 debtor are not necessarily availble to others
1 The creditor must proceed against all debtors
2 Demand must be made on all joint debtors
3 There is monetary obligation for damages if any one of the debtors does not comply
Characteristics of a Joint Indivisible Obligation
4 If any joint debtor becomes insolvent, the others are not liable
5 Delivery must be made to all joint creditors, unless 1 is specifically authorized by the others
6 Each joint creditor is allowed to renounce his proportionate credit
1 Uniform
Kinds of solidary obligations accdg to legal tie
2 Non-uniform or varied
the right of each creditor to enforce the rights of all, and the liability of each debtor to answer for
The essense of solidarity
the liabilites of all
 1 Both guarantee for another person
Similarities of Passive Solidarity and Suretyship
2 Both can demand reimbursement

1 Solidary debtor is indebted for his own share, surety is indebted for the share of the principal
debtor
2 solidary debtor can be reimbursed what he has paid minus his own share; surety can be
Differentiate Passive Solidarity and Suretyship reimbursed for everything he paid
3 If a solidary debtor receives extension of period, the others are still liable for whole amount
minus the share of debtor who received extension. If a principal debtor receives extension,
without the surety's consent, the surety is released
2 cases when paying debtor cannot get reimbursement 1 Payment was made after the obligation prescribed
from co-debtors 2 Payment was made after the obligation became illegal
10 years for written contracts, obligations created by law and by judgement
Number of years laid by law for Prescription to occur 6 years for oral contracts and quasi-contracts
4 years for quasi-delicts and rights of plaintiff

1 Those derived from the nature of the obligation (complete defense) like extinguishment of
obligation, illegal or absence of consideration, absolute simulation, non-fulfillment of suspensive
condition, statute of frauds, all debtors incapacitated to give consent and vitiated consent
Kinds of Defenses of a solidary debtor
2 Those personal to the debtor sued (generally complete defense except non-fulfillment yet of
condition)
3 Defense personal to other solidary debtors (partial defense)

1 Qualitative Division
Kinds of Division 2 Quantitative Division
3 Intellectual / Moral / Ideal Division
1 Legal Indivisibility
Kinds of Indivisibility 2 Conventional Indivisibility
3 Natural or Absolute Indivisibility

1 Definite things
2 Those not susceptible of partial performance
Obligations that are deemed indivisible
3 Provided by law to be indivisible even if the thing is physically dividible (i.e taxes)
4 Intended by the parties

1 Execution of certain number of days of work

Obligations that are deemed divisible 2 Accomplishment of work by metrical units
3 Analogous things which by their nature are susceptible of partial performance
1 Legal Penal Clause
2 Conventional Penal Clause

1 Subsidiary
Kinds of Penal Clauses
2 Joint

1 Compensatory
2 Punitive
1 To insure performance
Purposes of Penal Clause 2 To substitute a penalty for the indemnity for damages and payment of interest, in case of non-
compliance
1 stipulated by the parties
Instances when in addition to penalty, the creditor can
2 obligor refuses to pay penalty
recover damages and interests
3 obligor is guilty of fraud

1 If the principal obligation has been partly complied with

When can penalty be reduced? 2 If the principal obligation has been irregularly complied with
3 If the penalty in inquitous or unconscionable even if there has been no performance

1 The breach is the fault of the creditor

2 Fortuitous event intervened, unless debtor expressly agreed on his liability in case of fortuitous
The penal clause cannot be enforced if
event
3 The debtor is not yet in default
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
Causes of extinguishment of obligations
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation.
1 annulment
Other causes of extinguishment of obligations governed in 2 rescission
the code 3 fulfillment of a resolutory condition,
4 prescription
 1 Death of a party in personal obligation
2 Arrival of resolutory term
3 Change in civil status
Other causes of extinguishment of obligations 4 Compromises
5 Mutual dissent or withdrawal
6 Impossibility of Fulfillment
7 Fortuitous events

1) Voluntary
a. Performance (payment or performance; consignation)
b. Substitution of Performance (compensation; novation; dation)
c. Agreement to Release (subsequent to obligation: unilateral waiver, natural waiver, remission,
mutual dissent, compromise; Simultaneous with obligation: resolutory term, resolutory condition)
Classifications of Extinguishment by Castan
2) Involuntary
a. By failure to bring an action (prescription)
b. Resolutory condition (merger or confusion, death of party in personal obli, change in civil stat)
c. By reason of the object (impossibility; loss of the thing)

1 Delivery of money
Payment consists of
2 the performance in any other manner of an obligation
1 The very thing or service contemplated must be paid
Requisites of a valid payment
2 Fulfillment must be complete
1 When the obligation has been substantially performed in good faith
2 When the obligee accepts the performance, knowing its irregularity or incompleteness and
Exceptions to the requisites of valid payment without expressing any protest or objection
3 When there is an express stipulation
4 When the debt is in part liquidated and part unliquidated
1 The creditor may properly reject it
Remedies of Creditor on incomplete or irregular
2 In case of acceptance, the law considers that he waives his right. The whole obligation is
performance
extinguished.
1 the debtor
2 any person who has an interest in the obligation (I.e. guarantor)
Persons from whom Creditor must accept payment
3 A 3rd person who has no interest in the obligation when there is stipulation that he can make
payment
1 If there is a stipulation allowing this
The creditor can refuse payment by a stranger except:
2 If said third person has an interest in the fulfillment of the obligation
1 If with the knowledge and consent of the debtor, the payor is entitled to REIMBURSEMENT and
SUBROGATION to such rights as guaranty, penal clause or mortgage
Effects of payment of a 3rd person 2 If without the knowledge or against the will of the debtor, the payor is entitled to BENEFICIAL
REIMBURSEMENT. The payor is not entitled to subrogation. He can only recover insofar as the
payment has benefitted the debtor.
1 Solutio Indebiti
2 Debt has prescribed
Instances when recovery by a 3rd person should come from
3 Debt has been completely remitted
the creditor:
4 Debt has already been paid
5 Legal compensation has taken place
1 Mortgage
Rights which may be exercised by the person subrogated 2 Guaranty
3 Penalty or Penal Clause
1 Payment is not valid
If person paying has no capacity to give 2 Creditor cannot be compelled to accept it
3 The remedy of consignation would not be proper
When a minor below 18y/o who has entered into a contract without the consent of the parents or
Exemption on validity of payment of a 3rd person who
guardians voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the
have no capacity to alienate and no free disposal of the
obligation, there shall be no right to recover the same from the obligee who has spent or
thing due
consumed it in good faith.
1 The person whose favor the obligation has been constituted (creditor)
To whom payment must be made 2 His successor in interest
3 Any person authorized to receive it (by creditor or by law)
Payment to a person who is incapacitated to administer his 1 if he has kept the thing delivered
property shall be valid on these 2 cases 2 insofar as the payment has been beneficial to him

(1) If after the payment, the third person acquires the creditor’s rights; (subrogation)
Payment to 3rd person has redounded to the benefit of the (2) If the creditor ratifies the payment to the third person; (ratification)
creditor and need not be proved on these cases. (3) If by the creditor’s conduct, the debtor has been led to believe that the third person had
authority to receive the payment. (estoppel)

1 Payment by payor must be made in good faith

Requisites on paying a person in possession of the credit 2 The payee must be in possession of the credit itself, not merely the document evidencing the
credit.
Exceptions to Art 1244: The debtor of a thing cannot
compel the creditor to receive a different one, although the
1 In case of facultative obligations
latter may be of the same value as, or more valuable than
2 In case there is another agreement resulting in either DATION IN PAYMENT or NOVATION
that which is due. In obligations to do or not to do, an act
3 In case of waiver by the creditor
or forbearance cannot be substituted by another act or
forbearance against the obligee’s will.
Datio in Solutum
Synonyms of Dation in Payment Dacion en Pago
Adjudicacion en pago
1 Existence of a monetary obligation
Requisites of Dation in Payment 2 Alienation to the creditor of a property by the debtor with the consent of the creditor
3 Satisfaction of the money obligation of the debtor
1 Application of Payment
2 Dation in Payment
Special Forms of Payment
3 Payment by Cession
4 Tender of Payment and Consignation

1 there must be only 1 debtor and 1 creditor

2 There must be 2 or more debts of the same kind
Requisites of Application of Payment 3 All of the debts must be due, except if there's stipulation to the contrary, or application of
payment is made by the party for whose benefit the term has been constituted
4 Amount paid by the debtotr must not be sufficient to cover the total amount of all the debts

1 If neither the debtor or the creditor makes any application of payment, the debt which is most
onerous to the debtor, among those which are due, shall be deemed to have been satisfied
Legal Application of payment
2 If the debts due are of the same nature and burden, payment shall be applied to all of them
proportionately

1 Plurality of debts
Requisites of Payment by Cession 2 Partial or relative insolvency of the debtor
3 Acceptance of the cession by the creditors
1 no. of creditors
2 financial state
3 value of property
Differentiate Dation in Payment from Payment by Cession 4 effect
5 properties affected
6 ownership transfer
7 novation
1 When there is an express stipulation
2 When different prestations are subject to different conditions or different terms,
3 When the debt is in part liquidated and part unliquidated
4 When a joint debtor pays his share or the creditor demands the same,
Partial performance is allowed :
5 When a solidary pays only the part demandable because the rest are not yet demandable on
account of their being subject to different terms and conditions
6 In case of compensation, when one debt is larger than the other, it follows that a balance is left
7 When work is to be done by parts
Payment by means of Mercntile Documents does NOT 1 they have been cashed
extinguish the obligation until: 2 they have been impaired through the fault of the creditor
Requisites of Art 1250: In case an extraordinary infl ation or
1 The decrease in the value of the currency could not have reasonably foreseen by the parties
defl ation of the currency stipulated should supervene, the
2 There must be a declaration of such extraordinary inflation or deflation by the Bangko Sentral.
value of the currency at the time of the establishment of
Without such declaration, the creditors cannot demand an increase, and the debtors a decrease, of
the obligation shall be the basis of payment, unless there is
what is due to or from them.
an agreement to the contrary.

If there is a stipulation — in the place DESIGNATED

2. Without stipulation, payment for a DETERMINATE THING shall be made wherever the thing
Place of payment
might be at the moment the obligation was constituted.
3 In any other case the place of payment shall be the domicile of the debtor.
Cases when debtor shall borne additional expenses to 1 If the debtor changes his domicile in bad faith
deliver payment 2 after he has incurred in delay
1 the parties so stipulate
If a debt is not yet due, payment can only be applied if: 2 when the application of payment is made by the party for whose benefit the term has been
constituted
1 Legal - governed by the insolvency law
Kinds of Assignment
2 Voluntary - creditors must agree
1 The creditors do not become the owners, they are merely assignees with authority to sell
2 The debtor is released only up to the amount of the net proceeds of the sale, unless there is
Effects of voluntary assignment stipulation to the contrary
3 Creditors will collect credits in the order of preference agreed upon, or in default of agreement,
in the order ordinarily established by law
 (1) When the creditor is absent or unknown, or does not appear at the place of payment;
(2) When he is incapacitated to receive the payment at the time it is due;
Consignation alone shall produce the same effect in the
(3) When, without just cause, he refuses to give a receipt;
following cases:
(4) When two or more persons claim the same right to collect;
(5) When the title of the obligation has been lost
1 be made in legal tender
Creditor is justified in refusing tender of payment when the 2 include interest due
payment is INVALID. To be valid, it must: 3 be unconditional, unless accepted by creditor
4 be due

1 The debt sought to be paid must be due

2 There must be a valid and unconditional tender of payment or any of the causes stated by law
for effective consignation without previous tender of payment exists
Requisites of Consignation 3 The consignation of the thing due must first be announced to the persons interested in the
performance of the obligation
4 Consignation shall be made by depositing the things due at the disposal of judicial authority
5 The consignation having been made, the interested parties shall also be notified thereof.

When can the debtor withdraw the thing consigned, 1 Before the creditor has accepted the consignation, or
allowing the obligation to remain in force 2 before a judicial declaration that the consignation has been properly made

1 If the creditor accepts the thing or amount deposited without contesting the validity or efficacy
of the consignation, the obligation is extinguished
Effects of consignation 2 If the creditor contests the validity or efficacy of the consignation or if the creditor is not
interested or unknown or is absent, the result is litigation. If the debtor complied with all the
requisites, the obligation is extinguished. (Here, running of interest is suspended.)
1 The obligation remains
Effects of improper consignation 2 If at the time of the consignation, the debt is already due, and the requisites are absent, the
debtor is in default
1 The obligation remains
Effects of withdrawal of consigned thing 2 The creditor loses any preference over the thing
3 The co-debtors, guarantors and sureties are released
1 The thing lost must be DETERMINATE
Requisites to extinguish obligation due to a fortuitous
2 The thing is lost without the fault of the debtor
event
3 The thing is lost before the debtor has incurred in delay
1 When by law, the obligor is liable for fortuitous events
2 When by stipulation, obligor is liable for fortuitous events
3 When the nature of the obligation requires assumption of risk
When fortuitous event does not exempt debtor from 4 When the loss of the thing due is partly to the fault of the debtor
liability 5 When the loss of the thing occurs after the debtor incurred in delay
6 When the debtor promised to deliver the same thing to 2 or more persons who do not have the
same interest
7 When the debt proceeds from a criminal offense
When the thing is indeterminate, it is never lost. (Genus Nunquam Perit)
When the thing is determinate,
1 When it perishes
When is there loss?
2 When it goes out of commerce
3 When it disappears in a way that it cannot be recovered
4 When it disappears in a way that its existence is unknown
1 Physical Impossibility
Kinds of impossibility
2 Legal Impossibility
Effect of relative impossibility or doctrine of unforeseen When the service has become so difficult as to be manifested beyond the contemplation of the
events parties, the obligor may also be released therefrom, in whole or in part.
1 The event or change in cicumstances could not have been foreseen at the time of the execution
Requisites of Art 1267: When the service has become so
of the contract
difficult as to be manifested beyond the contemplation of
2 It makes the performance of the contract extermely difficult but not impossible
the parties, the obligor may also be released therefrom, in
3 The event must not be due to the act of any of the parties
whole or in part.
4 The contract is for a future prestation
When there is no physical or legal loss, but the thing object of the obligation belongs to another,
the performance of the debtor undoubtedly becomes impossible. Failure of performance is
Principle of Subjective Impossibility
imputable to the debtor. Thus, the debtor must indemnify the creditor for the damages suffered
by the latter.
If an obligation is extinguished by the loss of the thing or impossibility of performance through
fortuitous events, the counter-prestation is also extinguished. The debtor is releasedfrom liability
Effect of Loss on Reciprocal Obligations
but he cannot demand the prestation which has been stipulated for his benefit. He who gives
nothing has no reason to demand anything.
1 It must be gratuitous
2 It must be accepted by the debtor
3 The obligation must be demandable
Requisites of condonation
4 The parties must have the capacity
5 It must not be inofficious
6 If made expressly, it must comply with the forms of donation
 1 Complete or Total
2 Partial

1 Express or Formal
Kinds of remission
2 Implied or Tacit

1 Inter Vivos
2 Mortis Causa

1 The characters of creditor and debtor must be in the same person

Requisites of Confusion 2 it must take place in the person of either the principal debtor or the principal creditor
3 It must be complete and definite

1 There must be 2 parties, who, in their own right, are principal creditors and principal debtors of
each other (except in case of guarantor)
2 Both debts must consist in money, or if the things due are fungibles, they must be of the same
kind and quality
Requisites of Compensation 3 Both debts must be due
4 Both debts must be liquidated and demandable
5 There must be no retention or controversy commenced by 3rd persons over either of the debts
and communicated in due time to the debtor,
6 Compensation must not be prohibited by law

1. In compensation, there are 2 persons who are mutually debtors and creditors; while in
Confusion, there is only 1 person where qualities of debtor and creditor are mergedd
Differentiate Compensation and Confusion 2. In compensation, there must be at least 2 obligations, while in Confusion, there is only 1
obligation
3. In compensation, there is indirect payment, while in Confusion, there is impossibility of payment

1 Legal
2 Voluntary
3 Judicial
Kinds of Compensation 4 Facultative

1 Total
2 Partial
1 Compensation takes effect by operation of law; while Payment takes effect by the act of the
parties (involves action and delivery)
Differential Compensation and Payment 2 In Compensation, capacity to give and acquire is not necessary; while in Payment, capacity to
give and to acqquire is essential
3 Compensation, as a rule, is partial; while Payment is complete and indivisible
1 In Compensation, 2 debts must consist in money or if fungibles, must be the same kind and
quality; while in Counterclaim, this is not necessary
Differential Compensation and Counterclaim 2 In Compensation, both debts must be liquidated; while Counterclaim does not require the debts
be liquidated
3 Compensation need not be pleaded; while Counterclaim must be pleaded to be effectual

1 debts arising from contracts of deposit

2 debts arising from contracts of commodatum
3 claims for support by gratuitous title
What are the debts not subject to compensation
4 Obligations arising from criminal offenses
5 Certain obligations in favor of government (i.e. taxes are not subject to compensation because
the government and taxpayers are not mutually creditors and debtors of each other)

(1) That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the
same kind, and also of the same quality if the latter has been stated;
In order that compensation may be proper, it is necessary:
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons
and communicated in due time to the debtor.

(1) That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the
Affirmative requisites of Legal Compensation
same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
 (5) That over neither of them there be any retention or controversy, commenced by third persons
Negative Requisites of Legal Compensation
and communicated in due time to the debtor.

1 If assignment is made with the consent of the debtor, the debtor cannot set-up compensation as
there was a waiver, unless right to compensation is reserved
2 If assignment is made with the knowledge but without the consent of the debtor or against his
Rules on Assignment when there is right to compensation will, compensation can be set-up on debts previous to assignment (debts maturing before
announcement)
3 If assignment is made without the knowledge of the debtor, he can set-up compensation as a
defense for all debts maturing prior to his knowledge of the assignment

1 A previous valid obligation

2 Agreement of the parties to the new obligation
Requisites of Novation
3 Extinguishment of the old obligation
4 Validity of the new obligation
1 Objective or Real Novation
2 Subjective or Personal Novation
3 Mixed Novation

1 Express
2 Implied
Kinds of Novation
1 Legal
2 Conventional

1 Total or Extinctive
2 Partial or Modificatory
(1) Changing their object or principal conditions;
How can an obligation be modified? (2) Substituting the person of the debtor;
(3) Subrogating a third person in the right of the creditor.
1 Expromision
Forms of substitution of Debtor
2 Delegacion
1 Initiative of substitution must emanate from the new debtor
Requisites of Expromision
2 Consent of the creditor to the substitution
1 Initiative of substitution must emanate from the old debtor
Requisites of Delegacion 2 Consent of the new debtor
3 Acceptance by the creditor
1 Substitution
Kinds of Personal Novation
2 Subrogation
1 In expromision, payment gives the new debtor the right to BENEFICIAL REIMBURSEMENT
Rights of the new debtor who pays
2 In Delegacion, the new debtor is entitled to REIMBURSEMENT and SUBROGATION
1 Delegante - original debtor
Parties in Delegacion 2 Delegatorio - creditor
3 Delegado - new debtor
1 In expromision, the new debtor's insolvency or non-fulfillment shall NOT revive the original
debtor's liability to the creditor whether the substitution is effected with or without the knowledge
or against the will of the original debtor
Effects of insolvency of the new debtor
2 In delegacion, the creditor can sue the old debtor only when the insolvency was prior to the
delegacion and publicly known or when the old debtor knew of such insolvency at the time he
delegated the obligation
1 If the old obligation is void, there is no valid novation
Effects if the old obligation was void 2 If the old obligation was voidable and already been annulled, there is no more obligation.
Therefore, the novation is void.
If the old obligation is voidable and not yet annulled, there 1 Annullment may be claimed only by the debtor
is valid novation if: 2 When ratification validates acts which are voidable
1 Coventional
2 Legal
Kinds of subrogation
1 Total Subrogation
2 Partial Subrogation
1 In Conventional Subrogation, debtor's consent is required; while in Assignment of Rights,
debtor's consent is not required
2 Conventional Subrogation extingsuishes the obli and gives rise to a new one; while in Assignment
Differentiate Conventional Subrogation from Assignement of Rights, there is transmission of rights to the 3rd person without modifying the obligation
of Rights 3 In Conventional Subrogation, defects and vices in the old obli are cured; while in Assignment of
Rights, defect and vices in the old obli are not cured
4 Conventional Subrogation takes effect upon moment of novation or subrogation; while
Assignment of Rights takes effect upon notification

(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
When is it presumed that there is legal subrogation? 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.
CONTRACTS

Questions Answers
1 Essential Elements
What are the elements of a contract? 2 Natural Elements
3 Accidental Elements
Consensual
Classifications of contracts accdg to perfection or formation Real
Formal or Solemn
Onerous
Classifications of contracts accdg to cause or equivalence of
Gratuitous
prestations
Remunerative
Principal
Classifications of contracts accdg to importance or
Accessory
dependence of one upon another
Preparatory
Nominate
Classifications of contracts accdg to name or designation
Innominate
Unilateral
Classifications of contracts accdg to parties obliged
Bilateral
Commutative
Classifications of contracts accdg to risk of fulfillment
Aleatory
Classifications of contracts accdg to time of performance or Executed
fulfillment Executory
contract involving things
Classifications of contracts accdg to subject matter contract involving rights
contract involving service
Classifications of contracts accdg to obligations imposed or Ordinary
regarded by law Institutional
Classifications of contracts accdg to evidence required for requiring merely oral or parol evidence
its proof requiring written proof
Classifications of contracts accdg to number of persons Ordinary
actually and physically entering into contract Auto-contracts
Classifications of contracts accdg to number of persons who Ordinary
participated in drafting of contract Contract of Adhesion
Personal
Classifications of contracts accdg to nature of contract
Impersonal
1 Preparation or Generacion or Conception
Stages of a Contract 2 Perfection or Birth
3 Consummation or Death or Termination
1 Relativity
2 Obligatory Force and compliance in good faith
Basic Principles or Characteristics of a Contract 3 Mutuality
4 Autonomy
5 Consensuality
Law
Morals
Limitations of Nature of Stipulations Good customs
Public Order
Public policy
1 Stipulation of the parties
2 General provisions of the Civil Code on Obligations and Contracts
How are innominate contracts regulated?
3 Rules governing the most analogous nominate contracts
4 Customs of the place
Do ut des
Do ut facias
Kinds of Innominate contracts
Facio ut des
Facio ut facias
Mutuality states that contract cannot have any stipulation 1 determine whether or not the contract shall be valid
authorizing one of the parties to: 2 determine whether or not the suspensive condition shall be fulfilled
1 A party cannot revoke or renounce a contract without the consent of the other, nor can it be set
Consequences of mutality aside on the ground of bad bargain
2 The conditional obligation is void if the condition is suspensive potestative
1 Parties
Contracts take effect only between the… 2 their assigns
3 Heirs
Rights and obligations arising from the contracts are not transmissible by
1 Nature
Cases when the contract is binding only to parties
2 Stipulation
3 Law
 1 Stipulations Pour Autrui
2 When a 3rd person induces a party to violate contract
Exception to Principle of Relativity (3rd person may be
3 Third persons who come into possession of the object of the contract creating real right
affected)
4 Contracts entered into to defraud creditors
5 Third persons are adversely affected by a contract where they did not participate

1 The stipulation must be a part and not the whole of a contract

2 The contracting parties must have clearly and deliberately conferred the favor upon a 3rd
person, not a mere incidental benefit or interest
3 The 3rd person must have communicated his acceptance to the obligor before its revocation
Requisites of Stipulations pour Autrui
4 The favorable stipulation should not be conditioned or compensated by any kind of obligation
whatever
5 Neither of the contracting parties bears the legal representative or authorization of the third
person
1 Existence of a valid contract
Requisites when a 3rd person is affected by inducing a
2 Knowledge of contract by 3rd person
party to violate the contract
3 Interference by a 3rd person without legal justification or excuse
1 Parties are bound to the fulfillment of what has been expressly stipulated and compliance
thereof must be in good faith
Consequences or effects of perfection
2 Parties are bound also to all the consequences which according to their nature, may be in
keeping with good faith, usage and law.
Deposit
Samples of Real Contracts Pledge
Commodatum
1 Consent
2 Object or subject matter
Requisites of a Real Contract
3 Cause or consideration
4 Delivery
1 He must be duly authorized
Requisites for a Person to contract in the name of another 2 He must have, by law, a right to represent him
3 The contract must be subsequently ratified
Essential Requisites of Contracts
Consensual:
1 Consent
2 Object or subject matter
3 Cause or consideration
Essential Requisites of Contracts
Real Contract:
4 Delivery
Solemn Contract
4 Compliance w/ the formalities required by law
1 If there is no consent, there's no contract. Agreement is non-existent or void.
Effect of non-consent
2 If there is vice of consent, contract is not void. It's merely voidable.
1 Legal capacity of the contracting parties
2 Manifestation of the conformity of the contracting parties
Requisites of Consent 3 The parties' conformity to the object, cause, terms and conditions of the contract must be
intelligent, spontaneous and free from all vices of consent
4 The said conformity must be real and not simulated or fictitious
1 An offer that must be certain
Requisites for the Meeting of the Minds
2 An acceptance that must be absolute and unqualified
1 Express
2 Implied
Forms of acceptance
3 Presumed (by law) as when there is failure to repudiate hereditary rights within the period fixed
by law
1 time
Things that may be fixed by the offerer 2 place
3 manner of acceptance
1 Death
2 Civil Interdiction
3 Insanity
4 Insolvency
Others
1 When the offeree expressly or impliedly rejects the offer
9 Instances when the offer becomes ineffective
2 When the offer is accepted with a qualification or condition
3 When before the acceptance is communicated, the subject matter has become illegal or
impossible
4 When the period of time given to the offeree within which he must signify his acceptance has
already lapsed
5 When the offer was revoked in due time (before offeror learned acceptance)
1 Unemancipated minors
Persons incapacitated to give consent 2 Insane or demented persons
3 Deaf-mutes who do not know how to read and write
1 Those where 1 party is uncapacitated to give consent
2 classes of voidable contract
2 Those where the consent of one party has been vitiated
 1 attainment of the age majority (18)
A minor can be emancipated by 2 marriage
3 concession recorded in civil register by the father or mother
1 Contracts where the minor is estopped to raise minority as a defense through his own
misrepresentation
2 Contracts of necessaries
3 Contracts by guardians or legal representatives
Exceptions when minors can give consent 4 Voluntary fulfillment of a natural obligation provided that a minor is between 18-21 y/o
5 Contracts of life, health or accident insurance taken on life of minor
6 Married minors can validly alienate or encumber personal property without parental consent ,
but in case of real property or borrowing money, they need parental consent; otherwise, it's
voidable.

Misrepresentation shall bind them in the sense that they are estopped subsequently from
What is the effect of misrepresentatrion of age of minor? impugning the validity of the contract on the ground of minority. It is necessary that the
misrepresentation must be ACTIVE, not merely constructive.

1 Insane or demented persons, unless acted during lucid interval

Contracts entered into by reason of incapacity are entered
2 Those in state of drunkeness
into by:
3 Those entered into dujring a hypnotic spell
Those under Civil interdiction
Hospitalized lepers
Prodigals
Incompetents under the Rules of Court
Deaf-mutes
Those of unsound mind even though they have lucid intervals
Those who cannot take care of themselves & manage their property without outside aid.
Violence
Intimidation
Vices of consent Mistake
Fraud
Undue influence
1 It is intelligent
Characteristics of consent 2 It is free and voluntary
3 It is conscious and spontaneous
1 Mistake
Defects of Intelligence
2 Fraud
1 Violence
Defects of Will 2 Intimidation
3 Undue influence
1 The error must be substantial regarding the (1) object of the contract, (2) the conditions which
principally moved or induced one of the parties and (3) identity or qualifications but only if such
Requisites for mistake to vitiate consent was the principal cause of the contract
2 The error must be excusable, not caused by negligence
3 The error must be a mistake of fact and not of law
1 Error as regards the incidents of a thing or accidental qualities not taken as principal
consideration of contract
2 Mistake as to quantity or amount only gives rise to correction, unless it’s the essence of the
contract
Mistakes of fact that does not vitiate consent
3 Error as regards the motives unless it's the cause of the contract
4 Error as regards the identity or qualifications of a party, except if it's the cause of the contract
5 Error which could have been avoided by the party alleging it, or which refers to a fact known to
him or which should have known

1 There must be a mutual error

Requisites for mutual error on legal effect to vitiate
2 The error must refer to the legal effect of the agreement
consent
3 The real purpose of the parties is frustrated.
1 Employment of a serios and irresistible force
Requisites for Violence to vitiate consent
2 It must have been the reason why the contract was entered into
1 Reasonable and well-grounded fear
2 The evil must be imminent and grave
3 The evil must be upon his person or propery, or upon the person or property of his spouse,
Requisites for Intimidation to vitiate consent
decendants or ascendants.
4 It is the reason why he enters into the contract
5 The threat must be of an unjust act, an actionable wrong.
1. the confidential, family, spiritual and other relations between the parties, or
2. the fact that the person alleged to have been unduly influenced was suffering from mental
Circumstances to be considered for undue influence to
weakness, or
vitiate consent
3 the person alleged to have been unduly influenced was ignorant or;
4 the person alleged to have been unduly influenced was in financial distress.
1 Improper advantage
Requisites for undue influence to vitiate consent 2 Power over the will of another
3 Deprivation of the latter's will of reasonable freedom of choice.
1 Dolo Causante / causal fraud
kinds of Fraud
2 Dolo Incidente / incidental fraud
 1 Fraud must be material and serious, that is, it induced consent.
2 Fraud must have been employed by only one of the parties bec if both committed fraud, the
contract would remain valid.
Requisites of Dolo Causante 3 There must be a deliberate intent to deceive or to induce. A misrepresentation in good faith is
not fraud.
4 the other party must have relied on the untrue statement and must himself not be guilty of
negligence in asserting the truth.
1 Opinion was made by an expert
Requisites of Opinion to amount to fraud 2 Other party has relied on the expert's formal knowledge
3 Opinion turned out false or erroneous
Fraud or Misrepresentation of 3rd person does not make a 1 it created a substantial mistake
contract voidable unless in these cases 2 the mistake is mutual. Here, contract may be annulled on ground of mistake.
1 An outward declaration of will different from the will of the parties
Requisites for Simulation 2 The false appearance must have been intended by mutual agreement
3 The purpose is to deceive 3rd persons
1 Absolutely simulated (simulados) fictitious contracts - void
2 Relatively simulated (disimulados) disguised contracts - binds the parties to their real or true
Kinds of Simulated Contracts and effects agreement except --
1 if the contract prejudices a third person
2 if the purpose is contrary to law, morals, good customs, public policy and public order

1 If offers are interrelated, contract is perfected if ALL the offers are accepted
2 If offers are not interrelated, single acceptance of each offer results in perfected contract unless
Rules on Complex Offers
the offeror has made it clear that one is dependent upon the other and acceptance of both is
necessary.

1 It must be within the commerce of man

2 It must be licit or not contrary to law, morals, good customs, public policy and public order
Requisites of a valid object of a contract 3 It must be possible
4 It must be determinate as to its kind
5 It must be transmissible

1 Things which are outside the commerce of man

2 Intransmissible rights
3 Future inheritance, except in cases expressly authorized by law
Things which cannot be the object of the contract
4 Services which are contrary to law, morals, good customs, public policy and public order
5 Impossible things or service
6 Objects which are not possible of determination as to their kind

Exceptions when future inheritance can be the object of 1 In cases of marriage settlements
contract 2 In case of partitions of property inter vivos by the deceased
1 Physical
2 Legal
Kinds of impossibility For services,
1 Absolute or Objectively Impossible (act cannot be done)
2 Relative or Subjectively Impossible (arises from special circumstances)

1 The motive of a person may vary although he enters into the same kind of contract, the cause is
always the same
2 The motive may be unknown to the other; the cause is always known
Motive distinguished from Cause 3 Presence of motive cannot cure absence of cause. Cause is essential.
4 Cause is the immediate or direct reason; motive is the remote or indirect reason
5 illegal cause makes a contract void, an illegal motive does not necessarily render the transaction
void (though if the motive in selling is to defraud a creditor,the creditor may rescind)

1 It must be present at the time the contract was entered into

Requisites of Cause 2 It must be true
3 It must be lawful or licit
1 If one party is innocent, he cannot be compelled to perform his obligation and he may recover
what he has already given
Effects if the cause is illegal
2 If both parties are guilty, in general, neither can sue the other, the law leaving them as they are.
Certain exemptions exists.
1 Together with lesion, there's fraud, mistake or undue influence
2 Cases expressly provided by law:
1 Entered into by guardians whenever the wards they represent suffer lesion by more than 1/4 of
the value of the thing which is the object
Exceptions to general rule in lesion
2 Agreed in representation of absentees if the latter suffer lesion by more than 1/4 of the value
of the thing which is the object
3 Partition among co-heirs, when anyone of them received things with a value less by at least 1/4
than the share to which he is entitled
Effect of absence of cause the contract confers no right and produces no legal effect
Effect of failure of cause does not render the contract void
Effect of Illegality of cause The contract is null and void
Effect of falsity of cause the contract is void, unless the parties show that there is another cause which is true and lawful
does not invalidate the contract, unless (a) there is fraud, mistake or undue influence; or (b) when
Effect of lesion
the parties intended a donation or some other contract
Form of Contracts
 1 For validity
When Form is important 2 For enforceability (under Statute of Frauds)
3 For convenience
1 Donations of Real Property req. public instrument
2 Donations of Personal Property req. written contract or document if donation exceeds Php5,000
3 Stipulations to pay interests on loans must be in writing
Samples of Formal Contracts 4 Transfer of large cattle req. transfer of cert. of registration
5 Sale of Land thru an agent. The authority of the agent must be in writing.
6 Contracts of Antichresis (principal loan and interest must be in writing, otherwise, contract of
antichresis is void)

1 When the law requires that a contract be in some form in order that it may be valid (solemn)
Exception to general rule of Form of Contract
2 When the law requires that a contract be in some form in order that it may be enforceable (SoF)

(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 (SoF), No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal
Contracts that must appear in a public document partnership of gains;
(for convenience. Oral agreement is still valid and binding (3) The power to administer property, or any other power which has for its object an act appearing
between parties, not not against 3rd persons until or which should appear in a public document, or should prejudice a third person;
registered. Formal req. benefit third parties) (4) The cession of actions or rights proceeding from an act appearing in a public document.

All other contracts where the amount involved exceeds five hundred pesos must appear in writing,
even a private one. But sales of goods, chattels or things in action are governed by Articles 1403,
No. 2 and 1405.

Reformation of Instruments
a. meeting of the minds to the contract
b. true intention is not expressed in the instrument by reason of mistake, accident, relative
simulation, fraud, or inequitable conduct
Requisites of Reformation of Instruments
c. clear and convincing proof of mistake, accident, relative simulation, fraud, or inequitable
conduct
d. It must be brought within the proper prescriptive period

1. Simple unconditional donations inter vivos;

2. Wills;
Instances when there can be no reformation: 3. When the agreement is void
4. When one of the parties has brought an action to enforce the instrument, no subsequent
reformation can be asked. (on basis of estoppel, waiver or ratification)

1 Mistake should be of fact

Necessary to justify reformation of written instruments on 2 Proved by clear and convincing evidence
ground of mistake 3 Common to both parties
4 Must cause failure to express true intentions
Interpretation of Contracts

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. If the words appear to be contrary to
the evident intention of the parties, the latter shall prevail over the former.
2. In order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered.
3. However general the terms of a contract may be, they shall NOT be understood to comprehend
Rules on Interpretation of Contracts
things that are distinct and cases that are different from those upon which the parties intended to
agree.
4. 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.
5. 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.
 6. Words which may have different significations shall be understood in that which is most in
keeping with the nature and object of the contract. (if can't be determined, use primary and
general acceptation)
7. 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.
8. The interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity.
Rules on Interpretation of Contracts 9. When it is absolutely impossible to settle doubts by the rules established in the preceding
articles, and the doubts refer to incidental circumstances of a gratuitous contract, the least
transmission of rights and interests shall prevail. If the contract is onerous, the doubt shall be
settled in favor of the greatest reciprocity of interests. If the doubts are cast upon the principal
object of the contract in such a way that it cannot be known what may have been the intention or
will of the parties, the contract shall be null and void.
10. The principles of interpretation stated in Rule 130 of the Rules of Court shall likewise be
observed in the construction of contracts.

REFER TO NOTES p129-152

Void
Voidable
Defective Contracts
Rescissible
Unenforceable
1 Cause of defect
2 Legal effect
3 Presciption
Compare Void, Voidable, Rescissible and Unenforceable
4 Cure by prescription
Contract
5 Ratification
6 Who can assail
7 Method of assailment
1. those entered into by guardians where the ward suffers lesion of more than ¼ of the value of
the things which are objects thereof;
2. those agreed upon in representation of absentees, if the latter suffer lesion by more than ¼ of
the value of the things which are subject thereof;
3. those undertaken in fraud of creditors when the latter cannot in any manner claim what are due
What contracts are rescissible
them;
4. those which refer to things under litigation if they have been entered into by the defendant
without the knowledge and approval of the litigants and the court;
5. all other contracts especially declared by law to be subject to rescission; and
6. payments made in a state of insolvency on account of obligations not yet enforceable
a. the contract must be rescissible
b. the party asking for rescission must have no other legal meansb to obtain reparation for the
damages suffered by him
c. the person demanding rescission must be able to return whatever he may be obliged to restore
Requisites of Rescission
if rescission is granted
d. the things w/c are the object ofthe contract must not have passed legally to the possession of a
3rd person acting in good faith
e. the action for rescission must be brought w/in the prescriptive period of 4 years

1. Consideration of the conveyance is inadequate or fictitious;

2. Transfer was made by a debtor after a suit has been begun and while it is pending against him;
3. Sale upon credit by an insolvent debtor;
Badges of Fraud 4. Evidence of indebtedness or complete insolvency
5. Transfer of all his property by a debtor when he is financially embarrassed or insolvent;
6. Transfer made between father & son, where there is present any of the above circumstances
7. Failure of the vendee to take exclusive possession of all the property

1 It is a principal action retaliatory in character.

2 The only ground is non-performance of one’s obligation/s or what is incumbent upon him.
3 It applies only to reciprocal obligation
Rescission in Article 1191
4 Only a party to the contract may demand fulfillment or seek the rescission of the contract.
5 Court may fix a period or grant extension of time for the fulfillment of the obligation.
6 Its purpose is to cancel the contract.

1 It is a subsidiary remedy.
2 There are 5 grounds to rescind. Non-performance by the other party is not important.
3 It applies to both unilateral and reciprocal obligations.
Rescission Proper in Article 1381 4 Even a 3rd person who is prejudiced by the contract may demand the rescission of the contract.
5 Court cannot grant extension of time for fulfillment of the obligation.
6 Its purpose is to seek reparation for the damage or injury caused, thus allowing partial rescission
of the contract.
 1. Those where one of the parties is incapable of giving consent to a contract
What are voidable contracts
2. Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud
1 Prescription
2 Ratification
Causes of extinction of action to annul
3 By loss of the thing which is the object of the contract through fraud or fault of the person who is
entitled to annul the contract.
the action must be commenced within 4 years from:
a. the time the incapacity ends;
Requisites to avoid Presciption
b. the time the violence, intimidation or undue influence ends; or
c. the time the mistake or fraud is discovered.
a. there must be knowledge of the reason which renders the contract voidable
b. such reason must have ceased and
Requisites of Ratification to extinct action for annulment
c. the injured party must have executed an act which expressly or impliedly conveys an intention to
waive his right
1. those entered into in the name of another by one without or acting in excess of authority;
What contracts are unenforceable 2. those where both parties are incapable of giving consent; and
3. those which do not comply with the Statute of Frauds
1. Agreements not to be performed within one year from the making thereof;
2. Special promise to answer for the debt, default or miscarriage of another; NOTE: This does not
refer to the original or independent promise of the debtor to his own creditor. It refers rather to a
collateral promise.
Agreements within the scope of the
3. Agreement in consideration of marriage other than a mutual promise to marry;
Statute of Frauds
4. Agreement for the sale of goods, etc. at a price not less than P500.00;
5. Contracts of lease for a period longer than one year;
6. Agreements for the sale of real property or interest therein; and
7. Representation as to the credit of a third person.
Ratification of contracts in violation of 1. Failure to object to the presentation of oral evidence to prove such contracts
the Statute of Frauds 2. Acceptance of benefits under these contracts
1. Those whose cause, object or purpose is contrary to law, morals good customs, public order or
public policy;
2. Those whose object is outside the commerce of men;
What contracts are void 3. Those which contemplate an impossible service;
4. Those where the intention of the parties relative to the principal object of the contract cannot
be ascertained; and
5. Those expressly prohibited or declared void by law.
1. Those which are absolutely simulated or fictitious; and
What contracts are inexistent
2. Those whose cause or object did not exist at the time of the transaction.

1. Payment of usurious interest

2. Payment of money or delivery of property for an illegal purpose, where the party who paid or
delivered repudiates the contract before the purpose has been accomplished, or before any
damage has been caused to a 3rd person.
3. Payment of money or delivery of property made by an incapacitated person
4. Agreement or contract which is not illegal per se & the prohibition is designed for the protection
of the plaintiff
Exceptions to Principle of Pari Delicto
5. Payment of any amount in excess of the maximum price of any article or commodity fixed by law
or regulation by competent authority.
6. Contract whereby a laborer undertakes to work longer than the maximum # of hours fixed by
law.
7. Contract whereby a laborer accepts a wage lower than the minimum wage fixed by law.
8. One who lost in gambling because of fraudulent schemes practiced on him is allowed to recover
his losses [(Art. 315, 3 (b), RPC] even if gambling is a prohibited one.

1. Executed Contracts:
a. Guilty party is barred from recovering what he has given to the other party by reason of the
Rules when only one of the parties is at contract.
fault: b. Innocent party may demand for the return for the return of what he has given.
2. Executory Contracts - Neither of the contracting parties can demand for the fulfillment of any
obligation from the contract nor may be compelled to comply with such obligation
Natural Obligations
1. Performance after the civil obligation has prescribed;
2. Reimbursement of a third person for a debt that has prescribed;
3. Restitution by minor after annulment of contract;
Examples of natural obligations enumerated under the Civil
4. Delivery by minor of money or fungible thing in fulfillment of obligation;
Code:
5. Performance after action to enforce civil obligation has failed;
6. Payment by heir of debt exceeding value of property inherited; and
7. Payment of legacy after will have been declared void.
Estoppel
 Estoppel in Pais (by conduct)
a. Estoppel by silence
b. Estoppel by acceptance of benefits
2. Technical Estoppel (impedimento técnico)
Kinds of Estoppel
a. Estoppel by deed
b. Estoppel by record
c. Estoppel by judgment
d. Estoppel by laches

a. Conduct on part of the defendant, or of one under whom he claims, giving rise to the situation
of which complaint is made and for which the complaint seeks a remedy
b. Delay in asserting the complainant’s rights, the complainant having knowledge or notice, of the
defendant’s conduct and having been afforded the opportunity to institute a suit
Elements of Laches
c. Lack of knowledge or notice on the part of the defendant that the complainant would assert the
right on which he bases his suit
d. Injury to the defendant in the event relief is accorded to the complainant, or the suit in not held
to be barred

LACHES
1. concerned with effect of delay
2. question of inequity of permitting the claim to be enforced
3. not statutory
4. applies in equity
5. not based on a fixed time
Differentiate Laches and Prescription
PRESCRIPTION
1. concerned with fact of delay
2. question or matter of time
3. statutory
4. applies at law
5. based on a fixed