Stages in the life of a contract:
1. Preparation/Generation 2. Perfection/Birth 3. Consummation/Death
Characteristics of Contracts: (ROMA)
1. 2. 3. 4. Relativity (Art. 1311) Obligatoriness & Consensuality (Art. 1315) Mutuality (Art. 1308) Autonomy (Art. 1306)
• Contracts of deposit with the Postal Savings Bank provided that the minor is over 7 years of age. Insane or demented persons unless the contract was entered into during a lucid interval; Deaf-mutes who do not know how to write.
The following may not acquire by purchase, even by public or judicial auction, in person of though the mediation of another: 1. the guardian, with respect to the property of his
2. agents, with respect to the property whose
administration or sale may have been entrusted to them, unless the consent of the principal has been given; executor or administrator, the property of the estate under administration; public officers and employees, with respect to the properties of the government, its political subdivisions, GOCCs, that are entrusted to them; judges, justices, prosecuting atty.’s, clerks of courts, etc., the property in custogia legis; and any other person specially disqualified by law.
Stipulation pour Autrui - stipulation in favor of a
3. 4. 5. 6.
1. The stipulation must be part, not whole of the contract; 2. the contracting parties must have clearly and deliberately conferred a favor upon a 3rd person; 3. the 3rd person must have communicate his acceptance; 4. neither of the contracting parties bears the legal representation of the 3rd party.
Simulation of a contract Kinds of simulation:
General Rule: Contracts (except real contracts)
are perfected from the moment there is a manifestation of concurrence between the offer and the acceptance regarding the object and the cause. Except: Acceptance by letter or telegram which does not bind the offerror except from the time it came to his knowledge.
1. Absolute - no real transaction is intended;
Effect: simulated contract is inexistent.
2. Relative - the real transaction is hidden;
Effect: the apparent contract is void, but the hidden contract is valid if it is lawful and has the necessary requisites. : as to third persons without notice - the apparent contract is valid on the principle of estoppel.
Theories applied to perfection of contracts:
1. Manifestation theory - the contract is perfected 2. 3. 4.
from the moment the acceptance is declared or made; Expedition theory - the contract is perfected from the moment the offeree transmits the notification of acceptance to the offerror; Reception theory - the contract is perfected from the moment that the notification of acceptance is in the hands of the offerror; Cognition theory - the contract is perfected from the moment the acceptance comes to the knowledge of the offerror. This is the theory adopted in the Philippines.
Absence of cause the contract confers no right and produces no legal effect does not render the contract void the contract is null and void the contract is void unless the parties can show that there is another cause which is true and lawful does not invalidate the contract unless: • there is fraud, mistake or undue influence
Failure of cause Illegality of cause Falsity of cause
Persons incapacitated to give consent:
1. Unemancipated minors;
Except: • Contracts for necessaries; • Contracts by guardians or legal representatives; • Contracts where the minor is estopped to urge minority through his own misrepresentation; Lesion
when the parties intended a donation or some other contract. • In contracts under the Statute of Frauds where the party sued makes a timely objection to the absence of a written memorandum. • enforceable. Donations of real estate or of movables if exceeding Ps 5. Sale of land through an agent (authority must be in writing) e. provided all the essential requisites for their validity are present. • for the convenience of the parties. accident. Contracts of antichresis h. inequitable conduct (MARFI).
Classes of Defective Contracts: (RUVI) 1. Contracts must be in a certain form when the law requires that a contract be in some form to be: • valid. Stipulation limiting carrier’s liability to less than extra-ordinary diligence g. Contracts shall be obligatory.000. 3. in whatever form they may have been entered into. Stipulation to pay interest in loans d.
Form of Contracts Rules:
1. b. fraud. When the agreement is void. Partnership to which immovables are contributed f. Transfer of large cattle c. if the contract is not in writing it is VOID • Real contracts that require delivery for perfection. 3. Voidable 4. The parties may compel each other to reduce the verbal agreements to writing except: • Solemn contracts such as the following: a. Void or Inexistent
Reformation of instruments:
1. Clear and convincing proof of MARFI. unconditional donations inter vivos. Simple. Rescissible 2.
Cases when there can be no reformation: 1. 2.
. 2. relative simulation. Unenforceable 3. Sale of vessels Note: in such case. 2. Meeting of the minds to the contract. The true intention is not expressed in the
instrument by reason of mistake.
not cured by prescription 3. cannot be ratified 4. binding unless the defect is raised against enforcement. defect is caused by lack of essential elements or illegality 2.
2. can be ratified
. defect is caused by vice of consent 1. or capacity of both parties 2. cured by prescription 3. can be ratified 4. need not be ratified 4. binding until annulled
1. binding unless rescinded
1. not binding 4. authority. cured by prescription 3. defect is caused by lack of form. not cured by prescription 3.COMPARATIVE TABLE OF DEFECTIVE CONTRACTS: VOID
defect is caused by injury/ damage either to one of the parties of to a 3rd person 2.
the latter cannot in any manner claim what are due them. Representation as to the credit of a 3rd person. transfer of all his property by a debtor when he is financially embarrassed or insolvent. 3. transfer was made by a debtor after a suit has been begun and while it is pending against him. Agreements for the sale of real property or interest therein. sale upon credit by an insolvent debtor. 2. 3. all other contracts especially declared by law to be subject to rescission. based on lesion/fraud of creditors. Action by the
contracting parties even by a 3rd party. those undertaken in fraud of creditors when 4.
Modes of Ratification:
1. courts cannot grant periods for compliance
RESOLUTION (Art. etc. Agreement for the sale of goods. those agreed upon in representation of absentees. at a price not less than Ps500.
1. 1191) 1. Contracts of lease for a period longer than one year. • the time the violence. Agreement in consideration of marriage other than a mutual promise to marry.
5. 4. Distinctions:
RESCISSION 1. payments made in a state of insolvency on account of obligations not yet enforceable. 3. where there are present some or any of the above circumstances. courts may grant periods
VOIDABLE CONTRACTS Causes of extinction of action to annul:
VOID OR INEXISTENT CONTRACTS
• the action must be commenced within 4 years from: • the time the incapacity ends.
Circumstances denominated as badges of fraud:
3. 7. or by the acceptance of benefits under the contract. consideration of the conveyance is inadequate or 2. 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. 3. default or miscarriage of another. failure of the vendee to take exclusive possession of the property. 3. 2. transfer is made between father and son. 2. Promise to answer for the debt. 4. based on nonfulfillment of the obligation.
suffers lesion of more than ¼ of the value of the things which are objects thereof. • the time the mistake or fraud is discovered.00 5. b.
UNENFORCEABLE CONTRACTS Kinds of unenforceable contracts:
1.RESCISSIBLE CONTRACTS Contracts which may be rescinded:
1. 6. those which do not comply with the Statute of Frauds. if the latter suffer lesion by more than ¼ of the value of the things which are subject thereof. those where both parties are incapable of giving consent. intimidation or undue influence ends. 6. If both parties are incapacitated. c. 6.
5. such reason must have ceased. there must be knowledge of the reason which renders the contract voidable. those entered into in the name of another by one without or acting in excess of authority. 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. Ratification • Requisites: a.by failure to object to the presentation of oral evidence to prove the contract. the injured party must have executed an act which expressly or impliedly conveys an intention to waive his right. Agreements not to be performed within one year from the making thereof.
Agreements within the scope of the Statute of Frauds:
1. Action only by
the injured party. 2. 2. For contracts infringing the Statute of Frauds: • expressly • impliedly . ratification by their parents or guardians shall validate the contract retroactively. those entered into by guardians where the ward 2.
2. 4. Those whose object is outside the commerce of men.
. Those where the intention of the parties relative to the principal object of the contract cannot be ascertained. 3. Those which contemplate an impossible service. object or purpose is contrary to law.The following contracts are void: 1. The following contracts are inexistent: 1. Those whose cause. Those whose cause or object did not exist at the time of the transaction. 5. Those expressly prohibited or declared void by law. 2. Those which are absolutely simulated or fictitious. public order or public policy. morals good customs.
According to obligations imposed and required by law 1. Real-perfected by delivery 3. Agency. According to cause of equivalence of the value of prestations: 1. Perfection by mere consent d. According to the time of performance or fulfillment 1. but in different capacities l. Contract of Adherence
m. Consensual 2. Formal or Solemn b. Accessory – depends upon the existence of another contract 3. According to the number of persons who participated in the drafting of the contract 1. According to perfection or formation 1. Ordinary 2.Subject Matter 3.CONTRACTS Art 1305 ELEMENTS OF A CONTRACT a. Accidental Elements – existence of such is dependent on the agreement of the parties. Warrants against against hidden defects eviction and
g. Executory – one where the prestations are to be complied with at some future time h. Remunerative c. Bilateral e. Impersonal STAGES OF A CONTRACT a. Nominate 2. Those requiring merely oral or parol evidence 2. Unilateral 2. According to the parties obligated 1. Institutional-like contract of marriage According to the evidence required for its proof 1.Cause or Consideration b. partnership d. Contracts involving services i. According to their Name or Designation 1. Relativity
k. According to the number of persons actually and physically entering into the contracts 1. Ordinary – two parties are represented by different persons 2. Personal 2. According to subject matter 1. Gratuitous or Lucrative 3. unless the contrary is stipulated Ex. but as a means thru which future transaction or contracts may be made Ex. Onerous 2. Contracts involving things 2. Those requiring written proof
j. According to the risk of fulfillment 1. Innominate f. Essential Elements 1.presumed to exist. Executed. Classification of Contracts a. Contracts involving rights credit 3.Consent 2. Consummation termination)
Basic Principles or Characteristics of a Contract a. Ordinary 2. Auto Contracts –where only one person represents two opposite parties. According to the nature of the contract 1. Freedom to stipulate b.
c. Commutative 2. Preparatory – here. Preparation b. Obligatory force and compliance in good faith c. Natural Elements. Both parties are mutually bound e. the parties do not consider the contract as an end by itself. Perfection c. Principal – can stand alone 2. According to Importance or dependence of one upon another 1.one completed at the time the contract is entered into 2.
first paragraph Requisite of Consent a. Object (Art 1347-1349) c. There must be two or more parties b. Facio ut facias (I do that you may do) Art 1308-1310 MUTUALITY OF CONTRACTS • The validity or fulfillment of a contract cannot be left to the will of one of the contracting parties. The parties must be capable or incapacitated c. Cause (Art 1350-55) Art 1319 Definition of Consent -Art 1319. • The validity or fulfillment may be left to chance. Where there is stipulation pour atrui (a stipulation in favor of a third party) c. And an acceptance must be unqualified and absolute • • • Concurrence of offer and acceptance (Art 1319-26) Legal capacity of contracting parties (Art 1327-29) Characteristics of Consent (Art 133046)
. The intent must be declared properly Requisites for the meeting of minds a. Exceptions: a. Knowledge on the part of the third person of the existence of the contract c.
Art 1314 Requisites before a third person in this article can be held for damages a. An offer that must be certain b. Interference by the third person without legal justification or excuse Art 1315-1316 Perfection of contracts Art 1317 Requisites for a Person to Contract in the Name of Another a. in some cases. their assigns and their heirs. Where. Exception to the general rule that a contract binds only the parties. Or the contract must be subsequently ratified Art 1318 Requisites of Contracts a. third persons may be adversely affected by a contract where they did not participate. by stipulation. or by provision of law. There must be no vitiation of consent d. There must be no conflict between what was expressly declared and what was really intended e. Du ut des (I give that you may give) b. b. Where the obligation arising from the contract are not transmissible by their nature. Existence of a valid contract b. e. Art 1311 This principle stresses the Principle of Relativity. Do ut facias (I give that you may do) c. Art 1312 A real right binds the property over which it is exercised. Consent (Art 1319-46) b. Art 1313 Right of defrauded creditor. Or he must have by law a right to represent him c. Facio ut des (I do that you may give) d. He must be duly authorized (expressly or impliedly) b.Art 1306 – Freedom or autonomy of contract Art 1307 Four Kinds of Innominate Contracts a. • The validity or fulfillment may be left to the will of a third person. Contracts are generally effective only between the parties. Where the law authorizes the creditor to sue on a contract entered into by his debtor. Where a third person induces another to violate his contract d.
Art 1328 Voidable incapacity contracts by reason of
a. the subject matter becomes illegal or impossible d. on the part of one of the parties. When the offer is rejected in due tome Art 1324 Option Contract Option. Mistake as the identity of the thing 2.it is a contract granting a person the privilege to buy or not to buy certain objects at anytime within the agreed period at a fixed price Perfection of Option When there is a meeting of minds on the option Art 1325-1326 If the advertisement contains all the specific particular needed in a contract. The real purpose of the parties is frustrated Art 1335-1336 Violation refer to physical coercion Intimidation refers to moral coercion Requisites for violence to vitiate consent a. Mistake must be either with regards to the identify or with regard to the qualification of one of the contracting parties 2. Mistake as to the quantity of the thing b.Art 1320 Forms of Acceptance Art 1322 Acceptance of an Offer made thru an agent Art 1323 Other instances when the offer becomes ineffective a. Art 1331 in relation to Art 1333 Mistake It is a false belief about something. Employment of serious or irresistible force
Art 1330 This article enumerates causes or vices of consent. The error must refer to the legal effect of the agreement c. If important details are left out. Identify or qualifications. it is a definite offer. but a mere invitation to make an offer. Requisites for mistake to vitiate consent
. but only if such was the principal cause of the contract. Art 1327 in relation to Art 1329 Who cannot give consent. Mistake as to the substance of the thing 3. Mistake as to person 1. When the offer is accepted with qualification or condition c. Object of the contract b. When the period of time given to the offeree within which he must signify his acceptance has already lapsed e. When the offeree expressly or impliedly rejects the offer b. Such identity or qualification must have been the principal consideration for the celebration of the contract Art 1332 Burden of proof in case of mistake Art 1333 Effect of knowledge of risk Art 1334 Mistake of Law Is that which arises from an ignorance of some provision of law. the advertisement is not a definite offer. Requisites: a. The condition which principally proved or induced one of the parties c. There must be mutual error b. The error must be excusable e. Mistake as to the conditions of the thing 4. or from an erroneous conclusion as to the legal effect of the agreement. or from an erroneous interpretation of its meaning. Mistake as to the object 1. When before acceptance is communicated. d. The error must be a mistake of fact Kinds of Mistake a.
Reasonable and well-grounded fear b. The purpose is to deceive third persons Art 1347-1349 Objects (Subject Matter) of a contract . If the contract should prejudice third persons b. because if both committed fraud. The threat must be an unjust act. Must not be contrary to law. descendents or ascendants d. Must be determinate as to its kind or determinate without the need of a new contract or agreement CAUSE OF CONTRACTS Art 1350 “Cause” defined -It is the essential and impelling reason why a party assumes an obligation Art 1351 Motive – is the purely personal or private reason which a party has in entering into a contract Motive vs. It must have been the reason why the contract was entered into e. Power over the will of another c. The false appearance must have been intended by mutual agreement c. morals.A thing or a service Requisites a. Always known c. an actionable wrong Art 1337 Requisites for undue influence to vitiate consent a. Cannot cure the absence of cause Art 1352-1355 Requisites for cause
. good customs. Effect. and must himself not be guilty of negligence in ascertaining the truth Art 1342-1344 Speaks about misrepresentation Art 1345-1346 Simulation Simulation of a Contract defined It is the process of intentionally deceiving others by producing the appearance of a contract that really does not exist (absolute simulation) Kinds
Or which is different from the true agreement relative simulation. or public policy d. morals. Fraud in the performance of the obligations stipulated in the contract Requisites of Dolo Causante a. An outward declaration of will difference from the will of the parties b. Upon his person. Of an imminent and grave evil c. Must be transmissible c. Dolo Causante or causal fraud (Art 1338) 2. The fraud must be material and serious b. Fraud in the celebration of the contract 1. Cause Motive a. Relative. Dolo Incidente of incidental fraud b. the contract would remain valid c. It must have been the reason why the contract was entered into Requisites for intimidation to vitiate consent a. The other party must have relied on the untrue statement. public order. Must not be impossible e. policy or good customs
Requisites a. Improper advantage b. May be unknown to the other c. May vary although he enters into the same kind of contract b. The thing or service must be within the commerce of man b. There must be a deliberate intent to deceive to induce d. the contract is void b. property. Absolute. Or if the purpose is contrary to law. Deprivation of the latter’s will of a reasonable freedom of choice Art 1338-1341 Kinds of Fraud a. Always the same b. The fraud must have been employed by one of the contracting parties. public order. a. the parties are bound to the real or true agreement excepta.b. or upon the person of property of his spouse. The presence of motive Cause a. Effect.
fraud. there has been a meeting of the minds of the parties. the effect is to place the existence of the contract in issue. Rescissible (Art 1380-89) b. inequitable conduct. or accident the instrument fails to express such agreement or intention. yet from the moments when any of the contracting parties invokes said provisions. it is still valid and binding as far as the parties are concerned c. the consent of one of the parties being vitiated by mistake. so after its existence has been admitted. Voidable (Art 1390-1402) c. There is clear and convincing evidence of the mistake. Requisites for reformation a. From the moment one of the contracting parties invokes the provisions of Art 1357 and 1358by means of a proper action. etc. The failure to express the true intentions is due to mistake. Unenforceable (Art 1403-1408) d. do not operate against the validity of the contract nor the validity of the acts voluntarily performed by the parties for the fulfillment thereof. The facts upon which relief by way of reformation of the instrument is sought are put in issue by the pleadings e. Even where the contract has not been reduced to the required form. or inequitable contract. fraud. There is a meeting of minds of the parties to the contract b. fraud. inequitable conduct or accident d. Art 1357 does not require that the action to compel the execution of the necessary document must precede the action upon the contract e.a. or accident Reformation vs. It must be true c. It must be lawful CHAPTER 3 FORM OF CONTRACTS Art 1356 Meaning of form of contracts -Refers to the manner in which a contract is executed or manifested Rules regarding from of contracts (Art 1356) Art 1357-1358 Principles regarding formalities for the efficacy of a contract a. Art 1357 and Art 1358 do not require the execution of a contract either in a public or private instrument in order to validate enforce it but only to ensure its efficacy. The written instrument does not express the true agreement or intention of the parties c. it is evident that under them the execution of the required document must precede the determination of the other obligations derived from the contract
Reformation – is that remedy by means of which a written instrument is amended or rectified so as to express or conform to the real agreement or intention of the parties when by reason of mistake. It must be present b. Void or Inexistent (Art 1409-1422)
. the party bound may be compelled to execute the necessary document b. Art 1360-69 Art 1360 Rule in case of conflict Art 1366 Instances allowed when reformation is not
CHAPTER 5 INTERPRETATION OF A CONTRACT Art 1370 Definition of interpretation of contract -Is the determination of the meaning of the terms or words used by the parties in their contract Art 1371-79 (provisions)
CHAPTER 4 REFORMATION OF INSTRUMENT
Kinds of defective contracts a. a contract exists while in annulment. there has been none. which must be resolved by the ordinary rules of evidence d. although the provisions of Art 1357 in connection with those of Art 1358. Annulment In reformation. hence. However.
The object of the contract must not legally g. by means of the restoration of things to their condition in which they were prior to the celebration of the said contract. The contracts must be validly agreed upon b. Rescissibility of the contract is based on equity d. Defect is extrinsic b. Art 1385 Effects of rescission Art 1324 Prescription
b. Contract is not rescissible id there is no damage or prejudice c. The object of the contract must not legally be in the possession of third persons who did not act in bad faith h. The causes of annulment The causes of rescission Rescissible a. It should be effected with knowledge of the vice or defect of the contract d. Contract is voidable even if there is no damage or prejudice c. The rescission must be based upon a case especially provided by law d. The period for filing the action of rescission must have not prescribed Meaning of Rescission -Remedy granted by law to the contracting parties and sometimes even to third persons in order to secure reparation of damages caused by them by a valid contract. Susceptible of ratification e. They are binding until they are annulled by competent court c. Defect is intrinsic b. Are different form Art 1390 Voidable contracts Art 1391 Prescription Art 1392-96 Concept of Ratification -By virtue of which efficacy is given to a contract which suffers from a vice of curable nullity Requisites for ratification a. or consent is vitiated by mistake. The cause of the nullity or defect should have already disappeared Art 1397 in relation to Art 1391 -Who and when may an action for annulment of contract be instituted Art 1398-99 Effects of annulment Art 1400-02
VOIDABLE CONTRACTS Definition -Are those which possess all the essential requisites of a valid contract but one of the parties is incapable of giving consent. Not susceptible of ratification e. violence. The contract should be tainted with a vice which is susceptible of being cured b. intimidation. Rescissible Contracts Voidable a. Their defect consist in the vitiation of consent of one of the contracting parties
. The confirmation should be effected by the person who is entitled to do so under the law c. The party asking for rescission must be able to return what he is obliged to restore by reason of the contract f. or fraud Characteristics a. undue influence. They are susceptible of convalidation by ratification or by prescription Voidable vs. There must be no other legal remedy to obtain reparation of the damages e. There must be lesion or pecuniary prejudice to one of the parties or to a third person c. Annulability of the contract is based on law d. the remedy of rescission is granted in the interest of equity Requisites of rescission a.Art 1381 in relation to Art 1382 Meaning of rescissible contracts -Those validly agreed upon because all the essential elements exists but in some cases established by law.
Applicable only to the agreements enumerated therein e.Effect pf failure to make restitution -Where loss is due to fault of plaintiff -Where loss is due to fault of defendant -Where loss is due to fortuitous event CHAPTER 8 UNENFORCEABLE CONTRACTS Meaning of unenforceable contracts -Those that san not be enforced in court or sued upon by reason of defects provided by law until and unless they are ratified according to law. Applicable only to executory contracts and not to contracts which are totally or partially performed c. The defense of the statute of frauds may be waived h. The causes for the unenforceable character of the former are different
from the causes for character of the latter STATUTE OF FRAUDS
Purpose -Not only to prevent fraud but also to guard against the mistakes of honest men by requiring that certain agreement specified must be in writing. while a rescissible contract can be enforced. Application a. while the latter is not d. while the latter may be assailed by third persons who are prejudiced Unenforceable vs. Not applicable in actions which are neither for damages because of a violation of a contract. Kinds: a. nor for the specific performance thereof b. while a voidable contract can be enforced. They are susceptible of ratification c.. d. Voidable a. It does not declare the contracts infringing it are void but merely unenforceable g. Rescissible a. Characteristics of Unenforceable Contracts a. The defense of the statute of frauds is personal to the parties and cannot be enforced by strangers to the contract Effect of Non-Compliance -The contract or unenforceable by action agreement is
Ratification of Unenforceable Contracts Either by: a. which of certain generally produce no effect at all Inexistent Contracts defects
. unless it is annulled b. They can not be assailed by third persons Unenforceable vs. unless it is rescinded b. An unenforceable contract cannot be enforced by a proper action in court. The former is susceptible of ratification. An unenforceable contract cannot be enforced by a proper action in court. They can not be enforced by a proper action in court b. Those that do not comply with the statute of fraud c. no further evidence thereof being required in such case. or impliedly by the failure to deny specifically its existence. The causes for the unenforceable character of the former are different from the causes fro the rescissible character of the latter c. the failure of object to the presentation of oral existence to prove the same c. The former cannot be assailed by third persons. Not applicable where the contract is admittedly expressly. The acceptance of benefits under them Art 1404-1408 (provisions)
CHAPTER 9 VOID OR INEXISTENT CONTRACTS Void Contracts -Those. Those where both parties are incapacitated of giving consent Unauthorized contracts -Those entered into in the name of another person by one who has been given no authority or legal representation on who has acted beyond his powers. Not applicable where a writing does not express the true agreement of the parties f. Those entered into in the name of another by one without or acting in excess of authority b.
The defense of illegality is not available to third persons whose interests are not directly affected f. The right to set up the defense of legality cannot be waived d. It cannot be ratified c. Both shall be prosecuted c.-Refer to agreements which lack one or some or all the elements or do not comply with the formalities which are essential for the existence of a contract Characteristics of a Void or Inexistent Contracts a. The parties shall have no action against each other b. it produces no effect b. The action or defense for the declaration of its inexistence does not prescribe e. The things or the price of the contract. Generally. It cannot give rise to a valid contract Art 1410 -Imprescriptibility of void or inexistent contract Art 1411-1412 Where both parties are in pari delicto a. as the effects of the crime shall be confiscated in favor of the government Where only one party is guilty -The rule in paragraph 1 of Art 1411 applies only to the guilty party or the more guilty party Exceptions to the principle of pari delicto Art 1413-1419