Jurado Notes

AUF School of Law BOOK IV OBLIGATIONS and CONTRACTS TITLE I OBLIGATIONS Art. 1156. Obligation is a !
!ridi"al n#"#ssit$ to gi%#& to do or not to do. Juridical necessity to comply with a prestationSanchez Roman Legal relation established between one person and another, whereby the latter is bound to the fulfillment of a prestation which the former may demand from him. - Manresa Ci%il obligation %s Nat!ral obligation
Obligations and Contract interest be specified in writing. ('rt. 405., ) ---6onation of immovable property be made in a public document and the acceptance be made in the same document or separate public document ('rt. -.2, ) ---contribution of immovable property or real rights to common fund (partnership) must be in a public instrument with attached inventory signed by the parties. ('rt. 0--0, 0--5, ) --- hattel 7ortgage, personal property must be recorded in the hattel 7ortgage $egister ('rt. 40.,, ) ---sale or transfer of large cattle, such transfer or sale must be registered. (8ec. 44, 'ct 9o. 00.-, 'rt. 0+/0, ) Classi'i"ations o' obligation !rimary pure and conditional with a period alternative and facultative joint and solidary divisible and indivisible with a penal clause
Gives to the obligee #''#"t annot be or creditor the right enforced by court of enforcing it action against the obligor or debtor in a court of justice. (right of action) !ositive law so!r"# "#uity and natural law.
8econdary
$e#uisites of %bligation juridical or legal tie -bilateral -unilateral active subject passive subject fact, prestation or service &&'s a general rule, the form of the obligation is not an essential element(re#uisite. E("#)t (the noncompliance of the following formalities would have the effect of rendering the contract agreement void or ine)istent)* ---donation of personal property whose value e)ceeds !+,,,,.,,, contract in writing. ('rt. -./, ) ---sale of a piece of land or any interest therein through an agent, authority of such agent be in writing. ('rt. 0/-., ) ---1nterests in a contract of simple loan or mutual, agreement with respect to such be in writing. ('rt. 02+3, ) ---anticheresis, principal amount and
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legal, conventional, penal real and personal determinate and generic unilateral and bilateral individual and collective accessory and principal
"lassi'i"ations a""ording to *anr#sa As to !ridi"al +!alit$ -9atural -civil -mi)ed As to )arti#s -:nilateral and bilateral -individual and collective -6eterminate and generic -simple and multiple -positive and negative -real and personal -possible and impossible -divisible and divisible -principal and accessory
As to ob #"t
2nd Semester/2009-2010
AUF School of Law As to )#r'#"tion and -!ure #(ting!is,-#nt -conditional -with term or period 'ait,. 51671a8
Obligations and Contract
Art. 115.. Obligations aris# 'ro-/ la0 "ontra"ts +!asi "ontra"ts a"ts or o-issions )!nis,#d b$ la01 and +!asi2d#li"ts &&;he addition of lege has been critici<ed as theoretically erroneous. &&;he enumeration is e)clusive. Art. 1153. Obligations d#ri%#d 'ro- la0 ar# not )r#s!-#d. Onl$ t,os# #()r#ssl$ d#t#r-in#d in t,is Cod# or in s)#"ial la0s ar# d#-andabl#& and s,all b# r#g!lat#d b$ t,# )r#"#)ts o' t,# la0 0,i", #stablis,#s t,#-1 and as to 0,at ,as not b##n 'or#s##n& b$ t,# )ro%isions o' t,is Boo4. 516768 &&obligations derived from law presumed. (unli=e other obligations) cannot be
Contra"t-meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Cons#ns!al "ontra"ts- contracts perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been e)pressly stipulated but also to all of the conse#uences which according to their nature may be in =eeping with good faith, usage and law. R#al Contra"ts2 perfected upon the delivery of the obligation. Obligation aris#s 'ro- t,# -o-#nt o' )#r'#"tion o' t,# "ontra"t. R#"i)ro"al obligation- parties are mutually obliged to do or to give something. 9nilat#ral obligation- only one party (obligor) is obliged to do or to give something. &&%bligations arising from contract are governed primarily by the agreement of the contracting parties. Co-)lian"# in good 'ait,- performance in accordance with the stipulations, clauses, terms and conditions of the contract. :njust enrichment &&1n default of agreement, the provisions of the ivil ode regulating such obligations are applicable. G#n#ral R!l#/ ;he contract is the law between the contracting parties. ")* 7acasaet vs %' #("#)tion to g#n#ral r!l#/ 'gcaoili vs G818 Art. 1166. Obligations d#ri%#d 'ro- +!asi2 "ontra"ts s,all b# s!b #"t to t,# )ro%isions o' C,a)t#r 1& Titl# :VII& o' t,is Boo4. 5n8
&&re#uisites to determine whether an obligation arises from law or from other sources. law that establishes or recogni<es the obligation act or condition upon which the obligation is based. && when the law merely recogni<es the e)istence of an obligation generated by an act which may constitute a contract, #uasi-contract, criminal offense, or #uasi-delict and its only purpose is to regulate such obligation, then the ' ; itself is the source of the obligation and 9%; the law. !elayo vs Llauron-obligation of support between spouses. 'rt. 4,0. obligation of the winner in a gambling to return the money to the one who lost.
Art. 1157. Obligations arising 'ro- "ontra"ts ,a%# t,# 'or"# o' la0 b#t0##n t,# "ontra"ting )arti#s and s,o!ld b# "o-)li#d 0it, in good
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;!asi2"ontra"ts2 juridical relations arising from lawful, voluntary, and unilateral acts, by virtue which the parties become bound to each other, based on the principle that no one shall be unjustly
AUF School of Law enriched or benefited at the e)pense of others. ase* ;raders :nion vs 9L$ N#gotior!- g#stio 'rises whenever a person voluntarily ta=es charge of the agency or management of the business or property of another without authority from the latter ;he gestor or officious manager shall be obliged to continue such agency or management until the termination of the affair and its incidents Sol!tio ind#biti 'rises whenever a person unduly delivers a thing through mista=e to another who has no right to demand it. E''#"t o' A"+!ittal Gro!nd 'or a"+!ittal
effect
E%id#n"# n##d#d
Guilt not ivil action to !reponderance proven beyond recover of evidence reasonable damages doubt based on the same act or omission *A? still be instituted 9on-e)istence of facts for the commission of the offense ivil action to recover damages is no longer possible.
;he person to whom the delivery has been unduly made shall return the property delivered or the money paid.
<r#s!-)ti%# "ons#nt2 consent given by law if there is no e)press consent given by the other party --gives rise to multiple juridical relations resulting in obligations for delivery of the thing or rendering of service. Art. 1161. Ci%il obligations arising 'ro"ri-inal o''#ns#s s,all b# go%#rn#d b$ t,# )#nal la0s& s!b #"t to t,# )ro%isions o' arti"l# =1..& and o' t,# )#rtin#nt )ro%isions o' C,a)t#r =& <r#li-inar$ Titl#& on >!-an R#lations& and o' Titl# :VIII o' t,is Boo4& r#g!lating da-ag#s. 5167=a8 'rt. 0,,, $! e)cept* treason, rebellion, illegal possession of firearms and gambling. "nforcement of civil liability 0. institution of criminal and civil actions- civil action impliedly instituted, e)cept* i. e)press waive of the civil action ii. reservation of right to institute it separately, or iii. institution of the civil action prior to the criminal action. 4. independent civil action 5. other civil actions arising from offense
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E''#"t o' Ind#)#nd#nt Ci%il A"tion G#n#ral r!l#/ ;he civil action to recover from the person criminally liable is not independent from the criminal action. 8eparate civil action- the right to file a civil action shall depend upon the result of the criminal action. ommencing the civil action prior the criminal action- once the criminal action is instituted, the action to recover damages shall be suspended. ")amples of entirely separate and independent civil action* the civil action is based on an obligation not arising from the act complained of as offense or felony. 8uch action may proceed independently of the criminal action and regardless of the result of the latter. Culpa contractual- 9egligence in the performance of a contract culpa aquiliana- 9egligence as a source of obligation (#uasi-delict) Law grants to the injured party the right to institute a civil action separate and distinct from the criminal action. 1nterferences by public officers or employees or by private individuals with civil rights and liberties defamation fraud
AUF School of Law physical injuries refusal or neglect of a city or municipal police to render aid or protection in case of danger to life or property. R#s#r%ation o' rig,t to 'il# s#)arat# and distin"t "i%il a"tion2 is a substantive right> -procedural re#uirement under 8ec. 4 of $ule 000 of the 9ew $ules of ourt is not mandatory. -this was amended by 8ec. 5 of $evised $ules of criminal !rocedure 4,,,. Art. 116=. Obligations d#ri%#d 'ro- +!asi2 d#li"ts s,all b# go%#rn#d b$ t,# )ro%isions o' C,a)t#r =& Titl# :VII o' t,is Boo4& and b$ s)#"ial la0s. 5167@a8 ;!asi2d#li"t2 fault or negligence of a person who, by his acts or omission, connected or unconnected with, but independent from, any contractual relation, causes damage to another person. -covers not only those that are not punished by law but also those acts which are voluntary and negligent . reasons* "it#d in Barr#do %s Gra"ia &&&' single act can give rise to various obligations !ersons liable- the person directly responsible for the damage incurred and* ;he father, and, in case of his death or incapacity, the mother, are liable for any damages caused by the minor children who live with them. Guardians are liable for damages done by minors or incapacitated persons subject to their authority and living with them. %wners or directors of an establishment or business are e#ually liable for any damages caused by their employees while engaged in the branch of the service in which employed, or on occasion of the performance of their duties. "mployers with respect to damages caused by their employees and household helpers acting within the scope of their assigned tas=s, even though the former are not engaged in any business or industry. ;he 8tate when it acts through a special agent, but not if the damage shall have
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Obligations and Contract been caused by the official upon whom properly devolved the duty of doing the act performed, in which case the provisions of the ne)t preceding article shall be applicable. ?inally, teachers or directors of arts and trades are liable for any damages caused by their pupils or apprentices while they are under their custody. ;he liability shall cease in case the persons mentioned therein prove that they e)ercised all the diligence of a good father of a family to prevent the damage. R#+!isit#s o' liabilit$ ;here e)ist a wrongful act or omission imputable to the defendant by reason of his fault or negligence. ;here e)ist a damage or injury which must be proved by the person claiming recovery. ;here must be a direct causal connection between the fault or negligence and the damage or injury. (proximate cause) ;!asi2d#li"t !rivate right %s Nat!r# o' rig,t %iolat#d Aor- o' r#dr#ss Cri-# !ublic right
ompensation or indemnification (reparation of injury suffered by the individual)
!unishment (fine, imprisonment, or both)
1t e)ist in any L#gal basis act or omission o' liabilit$ wherein fault or negligence intervenes ivil liability riminal intent not necessary !reponderance of evidence an be liabilit$
")ists when there are penal laws clearly penali<ing such crime riminal and civil liability
ondition of riminal intent the mind necessary evidence compromise @eyond reasonable doubt an never be
AUF School of Law compromised compromised.
Obligations and Contract contract is violated. Neglect or malfeasance of the carrier's employees could give ground for an action for damages. Damages here are proper because the stress of respondent's action is placed upon his wrongful expulsion, which is a violation of a public duty by petitioner- air carrier a case of !uasi-delict." #$ir %rance vs &arrascoso, G.R. No. L2 =1B@3. S#)t#-b#r =3& 1766.' C,a)t#r = NAT9RE ANC EAAECTS OA OBLIGATION Art. 116@21166 Obligation to Gi%# Ddilig#n"# o' a good 'at,#r o' a 'a-il$E - standard normal state of diligence -ordinary diligence obligations to gi%# d#t#r-inat#2 the object is particularly designated or physically segregated from all others of the same class ('rt. 0035 applies particularly to determinate object) g#n#ri"2 the object is merely designated by its class or genus without any particular designation or physical segregation from all others of the same class. (e.g. money) &&&'rt. 0035 is a guaranty that the debtor will comply with the obligation. 9ature of right of the creditor --;he obligee(creditor has the right to the thing which is the object of the obligation as well as the fruits thereof from the time the obligation to deliver it arises. ('rt. 003.)
Auasi-delict covers not only acts not punishable by laws but it also includes acts which are criminal in character, whether intentional, voluntary or negligent. 5El"ano %s >ill8 T0o distin"t 'a!lts (!adua vs $obles, Justice @arredo) "!l)a "ri-inal2 civil liability arising from crimes "!l)a2a+!iliana- liability arising from civil negligence. -recovery of damages twice for the same negligent act is omission is precluded. -the e)tinction of the civil liability referred in !ar (e) of 8ec. 5, $ule 000 refers e)clusively to liability founded on 'rt. 0,, of $! , whereas the civil liability for the same act considered as #uasi delict is not e)tinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused.("lcano vs Bill) 6iligence of employers* ;!asi2d#li"t 'rt. 40/, of !rimary liability
Cri-#s 'rt. 0,5 of $! 8ubsidiary liability
"mployer can avoid Liability is absolute and liability after proving that cannot be avoided by he e)ercised due proof of diligence. diligence 'pplies to all employers whether they are engaged in enterprise or not. 'pplies only to employers engaged in some =ind of business or industry.
ubi jus ibi remedium- unvindicated civil wrongs --;he death of the accused after arraignment and during the pendency of the criminal action shall e)tinguish the civil liability arising from the delict. &&'lthough the relation between the contracting parties is purely contractual a #uasi-delict can still be committed in view of the manner in which the
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Obligation ;hose arising from law #uasi-delicts #uasi-contracts
F,#n obligation to d#li%#r aris#s ;he specific provisions of law determine when the delivery should be made.
AUF School of Law crimes contracts 8ubject to a suspensive condition 7oment of perfection of the contract. ('rt. 0+5-) ?rom the moment the condition happens.
Obligations and Contract contravention of the tenor thereof. G#n#ri" obligations 0. to as= for 0. ;o deliver a thing performance of which is neither of the obligations superior nor inferior 4. to as= that the #uality. obligation be 4. ;o be liable for complied with at damages in case of the e)pense of breach of obligation the debtor. 5. ;o recover damages for the breach of obligation. Non# #(#-)tion 'ro- liabilit$ b#"a!s# o' caso fortuito/ d#la$ r#ason/ ;here would have been no loss if the debtor had complied with the obligation to deliver the object without delay. )ro-is# to t0o or -or# di''#r#nt )#rsons r#ason/ 1t would be impossible to comply with both obligations therefore the debtor already made himself liable for damages. A""#ssions- all of those things which are produced by the object of the obligation as well as all of those which are naturally or artificially attached thereto. Accession discreta- natural, industrial and civil fruits accession industrial D building, planting, and sowing accession natural- allusion, alvusion, abandoned river beds, and islands formed in navigable rivers. 'ccession with respect to movable property. A""#ssori#s- all of the things which have for their object the establishment, use or preservation of another thing which is more important and to which they are not incorporated or attached. embellishments &&;he liability of debtor for damages in case of breach of obligation, e)tends only to breach which
6 2nd Semester/2009-2010
Cith suspensive :pon the e)piration of the term or period term or period
<#rsonal rig,t- a right pertaining to a person to demand from another the fulfillment of a prestation to give, to do, or not to do. (jus ad rem) right enforceable only against a definite person or group of persons before delivery in obligations to give R#al rig,t2 right pertaining to a person over a specific thing, without passive subject individually determined against whom such right may be personally forced. (ownership, possession, easement) #jus in re' right enforceable against the whole world ac#uired once the thing and the fruits are delivered. Rig,ts o' Cr#ditor Obligations o' C#btor
d#t#r-inat# obligations 0. to compel specific 0. to perform the performance obligation 4. to recover damages specifically for breach of the 4. to ta=e care of the obligation. things with proper 5. "ntitlement to fruits diligence of a good and interests of the father of a family. thing at the time 5. ;o deliver all the obligation to accessions and deliver it arises. accessories of the things even though they may not have been mentioned. .. ;o be liable for damages in case of breach of obligation by reason of delay, fraud, negligence or
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AUF School of Law is voluntary in character and not to one which is involuntary (fortuitous event) &&%nly a determinate thing can be destroyed by a fortuitous event, generic things can never perish. (genus nun!uam peruit) Art. 116.. Obligation to Co (positive personal obligation) &&1f the obligor fails to do what he has obligated himself to do, the obligee can have the obligation performed or e)ecuted at the e)pense of the latter and recover damages . &&;his type of obligation recogni<es individual freedom, the obligor cannot be compelled to do what he has obligated himself to do. $emedy for obligee(creditor* performance of the obligation at the e)pense of the obligor &&1f the object of the prestation is the personal and special #ualification (i.e. artist) of the obligor, the r#-#d$ for the obligee is to recover damages under 'rt. 00-, of the ivil ode. Rig,ts a%ailabl# to t,# oblig## (in case there has been a performance of the obligation but in contravention of the tenor thereof) to have the obligation performed at the e)pense of the obligor to as= that what has been poorly done be undone to recover damages for breach of obligation ase* have< vs Gon<ales ;anguilig vs ourt of 'ppeals Arti"l# 1163. Obligation NOT to Co (negative personal obligation) -fulfilled or reali<ed so long the obligor does not do what is forbidden $emedy for obligee in case of breach* to have it undone at the e)pense of the obligor ('rt. 003/) e)ception (cannot be undone)*
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Obligations and Contract effects of the act are definite in character. physical and legal impossibility to as= for damages ('rt. 00-,) mora is not applicable
&&1n obligation not to do, the obligation is either fulfilled or not fulfilled Art. 1167. C#la$ in t,# '!l'ill-#nt o' obligation Vol!ntar$ 6efault (mora), deceit(fraud (dolo), negligence (culpa), or in manner that contravenes the tenor thereof %bligor is damages liable In%ol!ntar$ 1nability to comply because of an unforeseen event, or which though foreseen is inevitable.
for %bligor has no liability for damages
G#n#ral R!l#/ :nless there is no demand there is no delay. &&&1n reciprocal obligation, the moment the other party complied with his obligation failure to comply will cause the other party to be in delay C#'a!lt(mora)- signifies delay in the fulfillment of an obligation with respect to time. &&&;he mere stipulation of a date when the obligation is due does not by itself dispense with the necessity of a demand, unless there is an e)press stipulation (either by law or contract) that the debtor will incur delay without need of a demand. Kinds o' -ora mora solvendi- default on the part of the debtor 4inds o' -ora sol%#ndi ex re-refers to obligation to give ex persona- refers to obligation to do mora accipiendi- default on the part of the creditor to accept the delivery of the object of the obligation
AUF School of Law compensatio morae- default of both parties in reciprocal obligations
Obligations and Contract -present at the time of birth of an obligations 4inds o' 'ra!d criminal fraud civil fraud Ara!d in t,# )#r'or-an"# o' an obligation
$e#uisites to declare in default that the obligation be demandable and already li#uidated that the debtor delays performance that the creditor re#uires the performance judicially or e)tra judicially &&1n positive obligation, default arises from the moment the creditor demands the performance of the obligation. Judicially- through a complaint e)tra-judicially- oral or written demand Chen demand not necessary when there is an e)press stipulation to that effect where the law so provides when the period is the controlling motive or the principal inducement for the creation of the obligation (when time is of the essence) where demand would be useless &&9egative obligations are not subject to delay. R#"i)ro"al obligation-created or established at the same time, out of the same cause and which results in the mutual relationship of creditor and debtor between the parties. -obligations which are conditioned upon each other -conditional obligation &&1n case of delay, the liability of the obligor subsist even if the thing which constitutes the object of obligation may have been destroyed or lost through fortuitous events. ;he moment the other party has complied with his obligation, delay on the other begins. E("#)tion/ 1f there are different dates for the performance of the obligation, apply the general rule in 0032 (demand is needed). 5Art. 11.6211.@8 Ara!d 5dolo8- consist in the conscious and intentional proposition to evade the normal fulfillment of an obligation
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%s
Ara!d in t,# "onstit!tion or #stablis,-#nt o' an obligation
6uring the F,#n 't the time of the performance of an )r#s#nt birth of an e)isting obligation obligation. "vading fulfillment obligation normal )!r)os# 8ecuring the of an consent of the other party to enter into the contract r#s!lt Eitiation of consent of other party the the
9on-fulfillment or breach of the obligation
$ecover damages R#-#d$ Causal fraudfrom the 'or t,# 'nnulment of the debtor(obligor inno"#nt contract. )art$ Incidental fraudrecover damages &&&7alice or dishonesty is implied as a ground for damages. &&&?raud or dolo is synonymous with bad faith. &&&Caiver or renunciation of liability made in anticipation of the fraud is VOIC. ('rt. 00-0) &&&Caiver or renunciation of liability made after the fraud has already been committed is VALIC. &&&Chat is renounced is the effect of fraud or the right of the party to indemnity. E(t#nt o' r#"o%#rabl# da-ag#s/ all damages which may be attributable to the breach or non-fulfillment of the obligation, regardless of whether such conse#uences are natural or unnatural, probable or improbable, foreseeable or unforeseeable. 7oral and e)emplary damages
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Obligations and Contract 'rt. 00-5 (if the Governing rule 'rt. 00-5, par.0 negligence shows bad faith) Ealid (unless the Caiver of nature of the action (future) waiver is against public policy) Eoid
9egligence (culpa)- omission of that diligence which is re#uired by the nature of the obligation and corresponds with the circumstances of the person, the time, and of the place. -absence of due care re#uired by the nature of the obligation &&&6iligence of good father of a family ( pater familias) is the standard diligence re#uired if the contract does not state the diligence which is to be observed in the performance of the obligation. Finds of negligence &ulpa contractual 9egligence in the performance of a contract
)ro(i-at# "a!s#2 cause which is a natural and logical conse#uence uninterrupted by an intervening cause, without which the damage will not have happened. N#glig#n"# Bad 'ait, Good 'ait,
%s d#'inition
&ulpa a!uiliana 9egligence as a source of obligation. (#uasi-delict)
1ncident of the ",ara"t#risti 8ubstantive and performance of " independent an obligation !re-e)isting contractual relation <art$ ;here may or r#lations,i) may not be a pre-e)isting contractual relationship of So!r"# o' obligation 6efendantGs negligent act or omission
@reach contract
")istence of the F,at n##ds 9egligence of contract and its to b# )ro%#n the defendant breach !roof of A%ailabilit$ !rof of diligence diligence is not o' dilig#n"# is a %alid a defense defense N#glig#n"# %s Ara!d N#glig#n"# ulpa
%s
Ara!d 6olo
1f present, the Liability will only be on provisions of 'rt. 00-5 natural and probable and 'rt 44,0, par.4 will conse#uences of the apply. breach of obligation &&&6amages resulting from negligence is reduced or mitigated if there was contributory negligence of the obligee. %ther circumstances that can mitigate the damages* when the plaintiff himself contravenes the terms of the contract> where the plaintiff has derived some benefit as a result of the contract> in cases where e)emplary damages are to be awarded, where the defendant acted upon advice of counsel> where the loss would have resulted in any event> where upon filing of the action, the defendant has done his best to lessen the plaintiffGs loss or injury. &&&1f the negligent act of the obligee is the pro)imate cause of the event which led to the damage or injury complained of, he cannot recover. &&&;he phrase in any manner that contravenes the tenor" of the obligation includes not only any illicit act which impairs the strict fulfillment of the obligation but also every =ind of defective performance. T#st o' n#glig#n"#/ :se the reasonable care and caution which an
Eoluntary act or characteristic onscious and omission intentional proposition to evade the fulfillment of an obligation
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AUF School of Law ordinary prudent person would have used in the same situation. 5Art. 11.B8 Aort!ito!s #%#nt (caso fortuito)- event which could have not been foreseen, or though foreseen, were inevitable. A"t o' God Aor"# -a #!r# 1ndependent of human intervention events that arise from legitimate or illegitimate acts of persons other than the obligor. e)traordinary
&&&#()iration o' agr##-#nt/ ;he case of Ba"olod2*!r"ia %s CA compared and contrasted with <,ilCo-Sat %s Glob#. &&&8outheastern fortuito ollege vs '- typhoon is a caso
&&& o vs '- carnapping of a vehicle is not considered a caso fortuito &&&;anguilig vs ' D windmill case
As to 'or#s##abilit$ %rdinary
G#n#ral r!l#/ 1f the reason for the non-compliance in the obligation is a fortuitous event, the obligor is e)empted from liability whatsoever. E:CE<T/ 0. where such liability is e)pressly specified by law> 4. where it is declared by stipulation of the parties> 5. where the nature of the obligation re#uires the assumption of ris=. -(volenti non fit injuria) no wrong is done to one who consents &&&'rt. 00-. applies only to determinate obligations and not to generic ones. ***res ipsa loquitur &&&;he caso fortuito must me the 8%L" and pro)imate cause of the incident, to avail of it as a defense. &&& o-mingling negligence on the part of the obligor forfeits the defense of caso fortuito. Ess#ntial "onditions 'or Art. 11.B to a))l$/ 0. that the event must be independent of the will of the obligor> 4. that the event must be either foreseeable or inevitable> 5. that the event must be of such a character as to render it impossible for the obligor to fulfill his obligation in a normal manner> .. that the obligor must be free from any participation in the aggravation of the injury to the obligee.
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5Art. 11.58 9s!r$2 contracting for or receiving something in e)cess of the amount allowed by law for the loan or forbearance of money, goods or chattels. -ta=ing of more interest for the use of money, goods, or chattels or credits than the law allows. :sury Law ('ct 9o. 43++) and other laws amending it- special law referred to in 'rt. 00-+. entral @an= ircular 9o. 44. (6ec. 0, 02/4)- no more ceiling in interest rates on loans. &&&Loan or forebearance of money-04H interest in the default of interest stipulated by law or the parties, 3H interest for obligation not involving forbearance or loan. &&&04H interest per annum from the time the judgment has become final if t. 5Art. 11.68 &&&;here is a presumption that the interests has been paid if on the face of the receipt that the creditor issued to the obligor that the principal has been paid without reservation with respect to the interest. (in accordance with 'rt. 04+5) &&&1f the debtor is issued a receipt by the creditor ac=nowledging payment of a latter installment without reservation to prior installments, there is also a presumption that such prior installments have already been paid. GGG?or the presumption to arise, the receipt should clearly state that the payment is for the installment for a latter installment or as payment for the
AUF School of Law interest. (*anila Trading %s *#dina) 5Art. 11..8 $emedies of creditor to protect credits* 0. to e)haust the property in possession of the debtor>('rt. 4453, ) 4. to be subrogated to all of the rights and actions of the debtor to save those which are inherent in hi person. (accion su!ro"atoria) onditions* that the debtor is indebted to the creditor> the creditor must be prejudiced by the inaction of the debtor to proceed against the third person> the creditor must have first pursued all of the properties of the debtor which are not e)empt from e)ecution. 5. to impugn all of the acts which the debtor may have done to defraud him. (accion pauliana) $ccion subrogotoria- the right of the creditor to e)ercise all of the rights of the debtor to bring all of the actions against third persons. -the creditor merely acts in the name and for the account of the debtor. E:CE<TION* $ights which are purely personal in the sense that they are inherent n the person of the debtor. (i.e. family rights) $ccion pauliana- impugning or attac=ing fraud directly by means of a rescissory action at the instance of the creditors who are prejudiced. -subsidiary in character. 5Art. 11.38 G#n#ral r!l#* $ights of obligations or those rights which are ac#uired by virtue of an obligation are transmissible in character. E("#)tions* 0. where they are not transmissible in their very nature (i. e. purely personal rights)> 4. where there are stipulations by the parties that they are not transmissible> 5. where they are not transmissible by operation of law. C>A<TER T>REE
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Obligations and Contract CIAAERENT KINCS OA OBLIGATIONS Sec # - $ure and Conditional %!li"ations 5Art. 11.78 <!r# Obligation2 one whose effectivity or e)tinguishment does not depend upon the fulfillment or non-fulfillment of a condition or upon the e)piration of a term or period> characteri<ed by the #uality of immediate demandability, but there must be a reasonable period of grace. Condition2 future and uncertain fact or event upon which an obligation is subordinated or made to depend. T#r-H)#riod2 a term will surely pass and may or may not =now when e)actly> characteri<ed by futurity and certainty "ondition2 it may or may not happen Conditional obligations2 one whose effectivity is subordinated to the fulfillment or non-fulfillment of a future and uncertain act or event. (inds of conditional obligation) 1. S!s)#nsi%# %s R#sol!tor$ 5Art. 11318
S!s)#nsi%# ondition precedent
R#sol!tor$ ondition subse#uent
$esults in the $esults in the ac#uisition of rights e)tinguishment of rights arising out of the arising out of the obligations obligations ;he happening of the ;he happening of the condition gives birth to condition e)tinguishes the obligation. obligation 1f the condition is not 1f the condition is not fulfilled, no juridical tie is fulfilled, juridical relation created. is consolidated. Chat is ac#uired by the obligee in the constitution of the obligation is only mere hope and e)pectancy, protected by law. Chat is ac#uired by the obligee in the constitution of the obligation are rights that are subject to threat or danger of e)tinction.
AUF School of Law =. <ot#stati%#& "as!al& and -i(#d (cause upon which the fulfillment depends) ('rt. 00/4) <ot#stati%# "as!al -i(#d fulfillment of the obligation depends upon the will of a party to the obligations fulfillment of the condition depends upon chance(or upon the will of a third person fulfillment of the obligation depends upon the will of a party to the obligation and partly upon chance and(or will of a third person. ;he obligation and the condition shall ta=e effect. (valid and enforceable)
Obligations and Contract 5Art. 113@8 <ossibl# when the condition is capable of reali<ation according to nature, law, public policy, or good customs. I-)ossibl# when the condition is not capable of reali<ation according to nature, law, public policy, or good customs. (contrary to good customs or public policy, illicit, illegal)
E''#"ts ;he obligation and the 'nnulment of the condition is valid and obligation that are enforceable. dependent of such impossible condition &&but is there is a pree)isting obligation, therefore not dependent upon the fulfillment of the obligation for its perfection, only the %961;1%9 is void, not the obligation. &&&1f the impossible condition is attached to an obligation, the obligation itself is Void. &&&1f the impossible condition is attached to a simple donation or testamentary disposition, the condition is not i-)os#d, although the donation or testamentary disposition itself is %alid. &&&;otal 'bsence of seriousness- reason why the law invalidate the impossible condition I the dependent obligation. E:CE<TION/ gratuitous disposition(donation> because the moving force here is the generosity of the donor. &&&;he impossibility of the condition should be determined at the time the obligation is made or constituted. B. <ositi%# %s N#gati%# 5Art. 11358 <ositi%# N#gati%# condition involves the condition involves the performance of an act omission of an act. ;he event will happen ;he
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E''#"ts dependent on the "r#ditorcondition and obligation, VALIC dependent on the d#btor2 condition and obligation, VOIC &&&;he precept in the first sentence of 'rt. 0/4 is applicable only to a suspensive condition. Bence, R#sol!tor$ I <ot#stati%# J VALIC obligation and condition (e)planation at pp.00., Jurado) &&&to avoid illusory obligation- $eason for the invalidity of potestative condition dependent on the debtor. &&&!ayment for previous indebtedness(pre-e)isting obligation although the condition is purely potestative, affects the validity of the condition but =eeps the validity of the obligation because the obligation is not dependent upon the condition. Si-)l# )ot#stati%# - valid> presupposes not just the manifestation of the will but also the reali<ation of an e)ternal act. )!r# )ot#stati%# void> envisioned by 'rt. 00/4 @. <ossibl# %s I-)ossibl#
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;he obligation and the condition shall ta=e effect. (valid and enforceable)
event
will
9%;
AUF School of Law or ta=e place. ;he obligation is #(ting!is,#d as soon as the time e)pires or if it becomes indubitable that the event will not ta=e place. happen or ta=e place. E''#"ts ;he obligation is rendered #''#"ti%# from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur.
Obligations and Contract %bligation subject to %bligation subject suspensive condition period(term to
;here is no certainty if 1t is certain that the the obligation will be obligation will be fully fulfilled demandable and enforceable. 1nterests and fruits shall also be delivered when the debtor paid(delivered by mista=e. 1nterests and fruits shall also be delivered when the debtor paid(delivered by mista=e.
&&&;he intention of the parties, ta=ing into consideration the nature of the obligation, shall govern if no time has been fi)ed for the fulfillment of the condition. ;he same rule applies to <OSITIVE CONCITION. Constr!"ti%# A!l'ill-#nt o' S!s)#nsi%# Condition- ;he condition shall be deemed fulfilled when the obligor voluntarily prevents &the o!li"ee from' its fulfillment &of the condition'.('rt. 00/3) -applicable only to S!s)#nsi%# "onditions and not to $esolutory conditions. &&&;he prevention must have been done for the precise purpose of preventing the condition. E''#"ts o' S!s)#nsi%# Condition 5Art. 11338 B#'or# A!l'ill-#nt A't#r A!l'ill-#nt 6emandability as well ;he obligation arises as the ac#uisition or and becomes effective. effectivity of rights arising from the obligation is suspended. ;he right of the creditor ;he right of the creditor is mere hope I is perfected. (becomes e)pectancy. effective I demandable) "ffects are retroactive (applicable only to consensual contracts) 'rt. 00//, par. 0- !rotection for the creditor file an injunction to stop the debtor does not necessarily always involves court action in spite the wordings of the law. i.e. registration 'rt. 00//, par. 4- protection for the debtor
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R#ason 'or r#troa"ti%it$/ ;he condition is only accidental, not essential element of the obligation. &&& ;he principle of retroactivity must be tempered by principles of justice and practicability. 1n obligations to give the principal obligation as well as the fruits should be delivered in unilateral obligations, the debtor shall appropriate the fruits and interests received, unless there is a contrary intention on his part in obligations to do or not to do ourts shall determine in each case the retroactive effect of the condition that has been complied with. &&&1n reciprocal obligations the fruits and interest must be e#ually compensated between the parties. &&&1n unilateral obligation, the debtor shall appropriate the fruits and interests received unless the intention is different. &&&1n personal obligations, the courts will have to determine in each case the retroactive effect of the condition that has been complied. E''#"t o' Loss& C#t#rioration& or I-)ro%#-#nt 5Art. 11378 0. 1f the thing is lost without the fault of the debtor, the obligation shall be #(ting!is,#d> 4. 1f the thing is lost through the fault of the debtor, he shall be obliged to )a$ da-ag#s> it is understood that the thing is lost when it perishes, or goes out of
AUF School of Law commerce, or disappears in such a way that its e)istence is un=nown or it cannot be recovered> Chen the thing d#t#riorat#s without the fault of the debtor, the i-)air-#nt is to b# born# b$ t,# "r#ditor> 1f it d#t#riorat#s through the fault of the debtor, the creditor may choose between the r#s"ission o' t,# obligation and its '!l'ill-#nt, with ind#-nit$ 'or da-ag#s in either case> 1f the thing is i-)ro%#d by its nature, or by time, the improvement shall in!r# to t,# b#n#'it o' t,# "r#ditor> 1f it is i-)ro%#d at the e)pense of the debtor, he shall have no other right than that granted to the !s!'r!"t!ar$.
5. ..
E''#"t o' R#sol!tor$ Condition/ B#'or# A!l'ill-#nt A't#r A!l'ill-#nt ;he obligation is subject ;he rights vested in the to the threat of obligation is e)tinction. e)tinguished. !laced in the same position with creditor in obligation with suspensive condition. Chatever is paid or delivered to any of the parties should be returned (return to status #uo)
+. 3.
&&&;here are no e)ceptions in the retroactive effect of resolutory condition> what was delivered need to be returned. &&&;he fulfillment of a resolutory condition signifies the none)istence of the obligation, what is none)istent must no give rise to any effect whatsoever. &&&&&&;here is no provision of mutual compensation of fruits and interests but in connection with the concept of justice, restitution in 'rt. 002, carries with it the conse#uence of reimbursement for all the e)penses incurred for the production, gathering, and preservation of the fruits. &&&7utual restitution is absolute in resolutory conditions because the obligation is e)tinguished, and it ceases to have effect thus does not carry with it fruits and interests. &&&1n obligations to do or not to do, the retroactive effects shall depend upon the discretion of the courts. &&&'rt. 00/2 is also applicable with regard the effects of loss, deterioration, and improvements of things during the pendency of resolutory condition. &&&1n R#sol!tor$ "ondition the Dd#btorE is the person obliged to return while the D"r#ditorE is the person to whom the thing must be returned. R#"i)ro"al obligations 5Art. 11718 remedy for the injured party* rescission or fulfillment
&&&$ule in 'rt. 00/2 are natural conse#uences of the principle of retroactivity. &&&!redicated on the fulfillment of the condition. &&&$efer only to conditional obligations to give a determinate thing !s!'r!"t- right or enjoyment of a thing, the property of which is vested in another and to draw from the same all the profit, utilities, and advantage it may produce without altering the form(substance of the thing. Loss a thing is considered lost when it* 0. perishes> 4. goes out of commerce D impossible to legally transfer or re-ac#uire 5. disappears in such a way that its e)istence is un=nown or it cannot be recovered I-)ro%#-#nts nat!ral a""#ssions/ alluvion, abandoned river beds, island formed avulsion,
&&&;he debtor cannot as= for reimbursement for e)penses incurred for useful improvements or improvements for pleasure. &&&the debtor may have the right to remove such improvements provided it is possible to do so without damage to the thing or property.
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AUF School of Law R#"i)ro"al obligation-created or established at the same time, out of the same cause and which results in the mutual relationship of creditor and debtor between the parties. -characteri<ed by reciprocity> one obligation is correlative of the other. -bilateral in character. -tacit resolutory condition. &&&G#n#ral r!l#* 1f one of the parties fails to comply with what is incumbent upon him,there is a right on the part of the other to rescind (or resolve) the obligation. Rig,t o' r#s"ission- belongs to the injured party alone. -must be invo=ed judicially by filing the proper action of rescission. not absolute> the court is given the discretionary power to fi) a period within which the obligor in default may be permitted to comply with what is incumbent upon him. implied in reciprocal obligations('rt. 0020, par. 0) &&&1f the contract contains a resolutory provision by virtue of which the obligation may be canceled or e)tinguished by the injured party in case of breach of obligation, judicial permission to cancel or rescind the contract is no longer necessary. @ut the ourt may confirm such e)tra judicial rescission. &&&1f there is no e)press provision of rescission in the contract, rescission should be invo=ed judicially. &&&;he termination of a contract must not be contrary to law, morals, good customs, public order, or public policy. &&&9otice is always important in rescission so the alleged infractor can #uestion the propriety of the rescission. &&&'rt. 0020 is not applicable to contracts of partnership. ;here are special provisions that govern the latter, thus the general provision will not prevail. ;he same applies to sales of real property ($ecto Law) and sales of personal property by installment (7aceda Law).
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&&&$escission will only be rendered when the breach is s!bstantial so as to defeat the object of the parties in entering into the agreement. ase* *ong %o + &o. vs ,awaiian--hilippine &o. 'lternative remedies to the injured party* --fulfillment of the obligation with payment for damages (8pecific performance with damages) --rescission of the obligation with payment for damages (resolution with damages) ase* *ongcuan vs .$& &&&;he injured party can still see= the rescission or resolution of the obligation even if he has opted to choose the fulfillment of such obligation if fulfillment should become impossible. ase* $yson-*imon vs $damos &&&1n awarding damages... 1n case or only those elements of rescission damages can be admitted that are compatible with the idea of rescission. 1n case of specific %nly the elements of damages performance can be admitted which are compatible with the idea of specific performance. E''#"ts o' R#s"ission* it is the duty of the court to re#uire the parties to surrender whatever they may have received from the other (without prejudice to the obligation of the party who was not able to comply with what is incumbent upon him). $escission can no longer be demanded when he who demands is no longer in the position to return whatever he may be obliged to restore> neither can it be demanded when the thing which is the object of the contract is already in the possession of a 5rd party who obtained it in good faith. $emedy for the latter will be an action for the transfer or conveyance for damages. rd 1f 5 person obtained the property in bad faith, the injured party can still go after the
AUF School of Law property. 1f it canGt really be recovered, the remedy is for the injured party to proceed against 5rd person who acted in bad faith for damages. &&&;here can be partial rescission or fulfillment under 'rt. 0020. ase* &entral /an0 vs &$ &&&$escission calls for mutual restitution. (1aperal vs *olid ,omes) &&&1f there is arbitration in the contract, arbitration should be resorted to before as=ing for rescission ((orean 2echnology vs 1erma) which is future and certain
Obligations and Contract or event which is future and uncertain
1nterval of time '!l'ill-#nt ' future and that must uncertain fact or necessarily event that may come, although it or may not may not be happen. =nown when 7erely e)erts an In'l!#n"# ")erts an influence upon on influence upon the time of the obligation the very demandability or e)istence of the e)tinguishment of obligation itself. an obligation. 9o retroactive R#troa"ti%# Bas retroactive effects unless #''#"ts effects there is an agreement to the contrary. Chen a term or a period is left e)clusively to the will of the debtor, the e)istence of the obligation is not affected (potestative term or period) E''#"t o' 0ill o' t,# d#btor Chen a condition is left on the e)clusive will of the debtor, the e)istence of the obligation is affected (Eoid) (potestative condition)
E''#"t o' br#a", b$ bot, )arti#s 5Art. 117=8 R!l#s* 0. the liability of the first infractor shall be e#uitably tempered by the courts. -fair to both parties because the second infractor also derived, or thought he would derive, some advantage for his own act or neglect 4. 1f it cannot be determined which of the parties first violated the contract, the same shall be deemed e)tinguished, and each shall bear his own damages -it is presumed that both at about the same time tried to reap some benefit Sec ) - %!li"ations *ith a $eriod T#r- or <#riod- interval of time, which e)erting an influence on an obligation as a conse#uence of a juridical act, either suspends its demandability or produces its e)tinguishment. Obligations 0it, a )#riod- obligations whose demandability or e)tinguishment is subject to the e)piration of a term or a period. T#r-H<#riod Condition
1nterval of time r#+!isit#s $efers to a fact
Classi'i"ation o' t#r- or )#riod 0. suspensive or resolutory a) suspensive (e) die) - demandable only upon the arrival of a day certain. b) resolutory (in diem) D demandable at once, although it is terminated upon the arrival of a day certain &&&da$ "#rtain- which must necessarily come, although it may not be =nown when. 4. legal, conventional, or judicial a) legal- term or period granted by law b) conventional- stipulated by the parties c) judicial- fi)ed by the courts 5. definite or indefinite a) definite- the date or time is =nown beforehand b) indefinite- can only be determined by an even which must necessarily come to pass, although it may not be =nown
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AUF School of Law when #''#"ts o' t#r- or )#riod/ suspensive the demandability of the obligation term or period is e)tinguished, not the ac#uisition of right or the effectivity of the obligation. $esulotory ;he fulfillment or performance of term or period the obligation is demandable at once, but it is e)tinguished or terminated upon the arrival of the day certain or the e)piration of the term. ase* -N/ vs 1ope3 4ito &&&'cceleration clause is a clause where upon default of the debtor with one or more payment will ma=e the whole obligation demandable. ;his is a valid provision in contracts. "ffect of fortuitous event- relieve the contracting parties from the fulfillment of their respective obligations during the term or period. ase* 4ictoria's -lanters vs 4ictorias 5illing &o. #''#"t o' ad%an"# )a$-#nt or d#li%#r$- obligor can recover what he has paid or delivered with fruits or interests. ('rt. 002+) -applicable only to obligations to give &&&;here can be no right of recovery if the obligor delivers the thing voluntarily or with =nowledge of the period or term or the fact that the obligation has not yet become due and demandable. ('rt. 0023) G#n#ral r!l#/ a period designated for the performance or fulfillment of an obligation is presumed to have been established for the benefit of both the creditor and the debtor. ase* de 1eon vs *yjuco &&&1f the tenor of the obligation or from other circumstances that the term or period has been established in favor of the creditor or of the debtor, the general rule will not apply.
Obligations and Contract K!di"ial t#r- or )#riod ('rt. 002-) K!di"ial t#r- or )#riod- when fi)ed by a competent court, the period can no longer be judicially changed ('rt. 002-, par. 5). -becomes a law governing the contract between the party ases when court can fi) term* if the obligation does not fo) a period, but it can be inferred that a period was intended by the parties cannot be applied to contract for services in which no period was fi)ed by the parties. 1n such contracts the period of employment is understood to be implicitly fi)ed, in default of e)press stipulation, by the period of the payment of the salary of the employee, in accordance with the custom universally observed throughout the world. cannot be applied to pure obligations if the duration of the period depends upon the will of the debtor just and logical, because otherwise, there would always be the possibility that the obligation will never be fulfilled or performed. if the debtor binds himself to pay when his means permit him to do so. ase* 6on3ales vs 7ose &&&9o other action can prosper unless the court has fi)ed the duration of the term or period. &&&1n potestative term or period, in order to prevent the obligation contracted from becoming ineffective by non fulfillment, the courts must fi) the duration of the term or period. &&&8o long as such period has not been fi)ed by the court, legally there can be no possibility of any breach of contract or of failure to perform the obligation. 8uch cannot be raised for the first time on appeal. &&&'rt. 002- applies to a lease agreement, where a contract of lease clearly e)ists.
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AUF School of Law &&&1t is not necessary that the creditor will e)pressly as= in the complaint for the court to fi) the period, such may be granted although the complaint does not as= for such relief. &&&;wo ultimate facts that need to be alleged in the complaint to describe an obligation with an indefinite period. 0. ?acts showing that the contract was entered imposing on one of the parties an obligation in favor of the other 4. facts showing that the performance of the obligation was left to the will of the obligor, or clearly showing, or from which an inference can be reasonably drawn that a period was intended. &&&;he action recogni<ed by 'rt. 002- may also prescribe li=e any ordinary civil action. (6on3ales vs 7ose' E(ting!is,-#nt o' C#btorLs rig,t to <#riod ('rt. 002/) (0) Chen after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt> (a) insolvency needs no judicial declaration (b) includes any case in which it would be impossible financially for the debtor to comply with his obligations (c) such insolvency must not be pree)isting> arose after the constitution of the obligation (d) if there is a guaranty or security for the debt, the debtor, in spite of insolvency, does not lose his right to the period. (4) Chen he does not furnish to the creditor the guaranties or securities which he has promised> (a) such failure renders the original obligation pure and without any condition, and conse#uently, the loan become due and demandable. (5) Chen by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he
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Obligations and Contract immediately gives new ones e#ually satisfactory> (a) there is a difference between effects of impairment and effects of disappearance 0. if the guaranty or security is impaired through the fault of the debtor, he shall lose his right to the benefit of the period> 4. if it is impaired without his fault, he shall retain his right> 5. if the guaranty or security disappears through any cause, even without the fault of the debtor, he shall lose his right to the benefit of the period .. in either case of impairment or disappearance, the debtor will not lose his right to period if he gives a new guaranty or security which is e#ually satisfactory. (.) Chen the debtor violates any underta=ing, in consideration of which the creditor agreed to the period> (+) Chen the debtor attempts to abscond. (a) 7ere attempt of the debtor disappear or run away from his obligation. Sec + - Alternative and ,acultative %!li"ations 5. Con !n"ti%# %s Alt#rnati%# Con !n"ti%# Alt#rnati%# there are several there are several conditions, all of which conditions but only one must be reali<ed must be reali<ed.
Con !n"ti%# obligation2 all of the objects of the obligation are demandable at the same time distrib!ti%# obligation- when only one object of the obligation is demandable. Alt#rnati%#- comprehends several objects or prestation which are due, but it may be complied with by the delivery or performance of only one of them. !erformance of one of the obligation is sufficient
AUF School of Law Aa"!ltati%#- comprehends only one object or prestation which is due, but it may be complied with by the delivery of another object or the performance of another prestation in substitution. Alt#rnati%# Obligations ('rt. 04,,) G#n#ral r!l#/ ;he right of choice belongs or pertains to the debtor. &&&%nce the debtor has made the choice, and such choice is duly communicated to the creditor, the obligation becomes simple. ")ceptions* when the right of choice belongs or pertains to the creditor when it has been e)pressly granted to a third person. Limitation to the right of choice* debtor cannot choose those prestations or underta=ings that are impossible, unlawful, or which could not have been the object of the obligation. J!restations which could not have been the object of prestationK underta=ings that are not included among others those from which the obligor may select, or those which are not yet due and demandable at the time the selection is made, or those by reason of accident or some other cause, have ac#uired a new character distinct or different from that contemplated by the parties when the obligation was constituted. &&&!ar. 4 of 'rt. 04,, contemplates a case in which the right to choose or select is 9%; lost or e)tinguished altogether. ('rt. 04,0) &&&'pplicable to cases in which the choice is dependent on the debtor, creditor, or third person.
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&&& ommunication is needed to ma=e the choice effective. &&&9o special form for the communication or notification of choice, although it is always better to ma=e the notification either in a notari<ed document or in any other authentic writing. &&&6ebatable* an the creditor to whom the selection has been duly communicated impugn such selectionL &&&%nce the choice is made by the debtor (or creditor, or 5rd person) and such selection has been communicated, the obligation ceases to be alternative. ;he loss of the object of prestation chosen and communicated e)tinguishes the liability. ('rt. 04,4) &&&Chen only one prestation is practicable, the debtor loses his right of choice altogether. ;he obligation becomes simple. Art. 1=6= Art. 1=66& )ar. =
%nly one prestation ;here are still two or which can be performed more prestations that can be performed. %bligation is converted to a simple one because the debtor loses his right of election ;he obligation is still alternative because the debtor can still e)ercise his right of election.
&&&Chen the debtorGs right of choice is rendered ineffective through the creditorGs fault, the only possible remedy for the debtor is to bring an action for the rescission of the contract with damages. ('rt. 04,5) Art. 1=6B Art. 1=65 choice of
$ight of choice of $ight of debtor reditor General rule e)ception
AUF School of Law ?actors to consider in =nowing the effect of loss of the object of prestation to whom the right of choice belongL Chat is the cause of the loss of the object of prestationL (fortuitous event or fault of the debtor) (for Summar- of .ffects of /oss of %!li"ation0 see Annex 1A2 ) Aa"!ltati%# Obligations ('rt. 04,3) Aa"!ltati%# obligation- obligation wherein only one object or prestation has been agreed upon by the parties to the obligation, but which may be complied with by the delivery of another object or the performance of another prestation in substitution. Aa"!ltati%# %nly one object %s Alt#rnati%# ta=e effect.
&&& ommunication is substitution effective.
needed
to
ma=e
the
&&&Chatever may be the cause of the loss or deterioration of the thing intended as a substitute, such loss shall not render the debtor liable. - 3ean Capistrano &&&%nce the substitution has been made, the debtor shall be liable for the loss or deterioration of the substitute on account of his delay, negligence, or fraud. &&&%nce the substitution is made, the obligation is converted into a simple one. Sec 4 - 5oint and Solidar- %!li"ations Koint obligation - obligation where there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors, by virtue of which each of the creditors has a right to demand, and each of the debtors is bound to render, compliance with his proportionate part of the prestation which constitutes the obligation o!li"acion mancomunada Solidar$ obligation D obligation where there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors, by virtue of which each of the creditors has a right to demand, and each of the debtors is bound to render, entire compliance with the prestation which constitutes the obligation o!li"acion solidaria Coll#"ti%# Obligations ('rt. 04,-) General rule* 1f there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors,the presumption is that the obligation is J%19; and not solidary. ")ceptions* 0. when the obligation e)pressly states that there is solidarity> Jjointl- and severall-2 1individuall- and collectivel-2
Ob #"t d!# 8everal objects
@y the delivery "o-)lian"# @y the delivery of of another object one of the or by the objects or by the performance of performance of another one of the prestation in prestations which substitution are alternatively due. !ertains only to the debtor ",oi"# 7ay pertain to the debtor, or creditor, or third person Loss of all the objects of prestation is necessary to e)tinguish the obligation 7ay give rise to a liability on the part of the debtor
Loss or impossibility of the object e)tinguishes the obligation 6oes not give rise to liability on the part of the debtor
E''#"t o' 'ort!ito!s loss
E''#"t o' "!l)abl# loss
&&&'rt. 04,0 is applicable by analogy with respect to the time or moment when the substitution will
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AUF School of Law 4. when the law re#uires solidarity> and, Art 6)70 #8)40 #6##0 #6#90 )#4:0 )#970 and )#64 ;CC Art ##<0 R$C 5. when the nature of the obligation re#uires solidarity. %!li"ations arisin" from criminal offenses or torts Koint Ci%isibl# Obligations ('rt. 04,/) &&&"ach creditor can demand only for the payment of his proportionate share of the credit, while the debtors can be held liable only for the payment of his proportionate share of the debt. &&&Joint creditor cannot act in representation of the others> neither can debtor be compelled to answer for the liability of the others. &&&;he payment or ac=nowledgement by one of the joint debtors will not stop the running of the period of prescription as to the others. Koint Indi%isibl# Obligations ('rt. 04,2) -midway between joint and solidary obligations characteristics* no creditor can act in representation of the other no debtor can be compelled to answer for the liability of the others. joint with respect of the parties indivisible with respect the fulfillment of the obligation = or -or# "r#ditors ;he concurrence or collective act of all the creditors, although each for his own share, is necessary for the enforcement of the obligation. of the debtors
&&&1f one of the joint debtors fails to comply with his underta=ing, the obligation can no longer be fulfilled or performed. &&&;he debtors who are ready to fulfill what was incumbent upon them shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists. ('rt. 044.) &&&1f one of the joint debtors be insolvent, the others shall not be liable for his share. &&&6ebatable* 1f there are two or more creditors or debtors, will the claim of a creditor addressed to a single debtor or the ac=nowledgment made by one of the debtors in favor of one or more creditors be sufficient to interrupt the period of prescriptionL &&&1ndivisibility and solidarity are 9%; identical. Indi%isibilit$ %s Solidarit$ !restation which constitute object of obligation. !lurality subjects re#uired nat!r# the the of not r#+!isit#s Legal tie or vinculum, and conse#uently to the parties of the obligation. !lurality of subjects is indispensable. $emains even though there is a liability on the part of the debtors because of breach.
= or -or# d#btors ;he fulfillment of or compliance with the obligation re#uires the concurrence of all the debtors, although each for his own share
;erminated when the obligation is converted into one of indemnity for damages
E''#"t o' br#a",
;he obligation can be 9ot susceptible enforced only by partial fulfillment. proceeding against all
Finds of solidarity active D among creditors tie or vinculum e)isting among several creditors of one and the same obligations by virtue of which each of them, in relation to his co-creditors, possesses the character of a creditor only with respect to his share of the obligation but in relation to other debtor
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AUF School of Law or debtors, represents all other creditors. 7utual representation passive D among debtors tie or vinculum e)isting among several debtors of one and the same obligations by virtue of which each of them, in relation to his co-debtors, possesses the character of a debtor only with respect to his share of the obligation, but in relation to other creditor or creditors, represents all other debtors. each solidarity debtors, as far as the creditors are concerned, is the debtor to the entire amount mi)ed D among creditors and debtors
Obligations and Contract obligation, he has a right to demand reimbursement from his co-debtor of their share in the obligation. 'n e)tension of time granted by the creditor to one of the solidary debtors without the =nowledge of the other solidary debtors would not have the effect of releasing the latter from their obligation. entire obligation, he ac#uires a right to reimbursement from the principal debtor of the entire amount he has paid. 'n e)tension of time granted by the creditor to the principal debtor would release the surety from the obligation.
'!nda-#ntal #''#"t o' a"ti%# solidarit$- creation of a r#lations,i) o' -!t!al ag#n"$ among solidary creditors by virtue of which the creditor is empowered against the debtor or debtors not only the rights which corresponds to him, but also all the rights which correspond to the other creditors, with the conse#uent obligation to render an accounting of his acts to such creditors. (e#ual mutual representation) &&&relationship of mutual agency, basis of the difference of the rules in 'rt. 0404 and 040+. '!nda-#ntal #''#"t o' )assi%# solidarit$2 liability of each debtor for the payment of the entire obligation, with the conse#uent right to demand reimbursement from the others for their corresponding shares, once payment has been made. <assi%# solidar$ d#btor S!r#t$
&&&:niform bond or tie- when the creditors and debtors are bound in the same manner and by the same conditions or periods. &&&Earied bond or tie- when the creditors and debtors are not bound in the same manner and by the same conditions or periods. &&&1n 'rt. 0400, the right of the creditor is limited to the recovery of the share owed by the debtor whose obligation has become mature leaving in suspense his right to recover the shares corresponding to the debtors whose obligations have not yet matured. ase* .nchausti + &o. vs 8ulo ('rt. 0404) "ffects of !rejudicial acts of a creditor to... debtor(debtors D valid and binding because of the principle of mutual representation which e)ists among the creditors solidary creditors D the creditor who performed the act shall incur the obligation of indemnifying the others for damages. &&&'rt. 0404 refers to effect of prejudicial acts upon the relationship of the creditor among themselves. &&&'rt. 040+ refers to the effect of prejudicial acts upon the entirely different relationship of the creditors with the debtor or debtors. 8hall result in the e)tinguishment of the obligation
@oth are solidarily liable to the creditor for the payment of the entire obligations Liable for the payment Liable for the debt of of the debt of another another. but also for the payment of a debt which is properly his own. 1f he pays the entire 1f the surety pays the
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AUF School of Law
Obligations and Contract No%ation D change or substitution of an obligation by another, resulting in its e)tinguishment or modification, either by... changing its object or principal condition, or if prejudicial D the creditor who effected the novation shall reimburse the others for damages incurred by them if beneficial D the creditor who effected the novation is able to secure performance of the new obligation, such creditor shall be liable to the others for the share which corresponds to them, not only in the obligation, but also in the benefits. substituting another in place of the debtor, or creditor shall be liable to the acts of the new debtor in case there is a deficiency in performance or in case damage is incurred by the other solidary creditors subrogating a third person in the rights of the creditor. ;he obligation of the debtor and creditor is not in reality e)tinguished. 1f effected by subrogating a third person in the rights of all the solidary creditors, the creditor liable for such novation is liable to the creditors for the share which corresponds to them in the obligation. e)tinguishes the obligation but it creates a new one in lieu of the old. ;he co-creditor who does not participate in the novation of the obligation can have a share in the benefits of the modification but not in possible losses.
&&&!rejudicial acts* novation compensation confusion remission &&&;he act of e)tinguishment, which is prejudicial to the co-creditors, will be valid so as to e)tinguish the claim against the debtors, but not with respect to the co-creditors whose right subsists and can be enforced against the creditor who performed the act alone.
Assign-#nt o' rig,t ('rt. 0405) &&& onsent of other creditors in the assignment of rights by another solidary creditor is needed. &&&mutual agency "ffects if assigned without the consent* 0. if assigned to another co-creditor, there is no violation of the precept stated in 'rt. 0405> Ealid assignment 4. if the assignment is made to a third person, there is a violation of the precept in 'rt. 0405> 1nvalid assignment ('rt. 040.) &&&'ny creditor may demand (judicial or e)tra judicial) the payment or performance of the obligation from one, some, or all of the debtors. &&&!ayment to be made on the creditor who made the demand and to no other. 1f there is no demand, payment may be made by the debtor to anyone of the solidary creditors. &&&1n mi)ed solidarity, judicial or e)tra judicial demand prohibits the debtor upon whom the demand is made from ma=ing payment to any creditor other than to the one who made the demand> does not e)tend to other debtors upon whom no demand has been made. ('rt. 040+)
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General rule* ")tension of time for the payment of the obligation does not constitute novation. &&&needed in order that an obligation may be e)tinguished by another which substitutes it. ")press declaration of novation incompatibility of the old and new obligation. &&&1n suretyship, e)tension of time given to the principal debtor by the creditor without the consent of the surety e)tinguishes the latterGs liability, e)cept when the surety is liable for different payments or upon series of installments.
AUF School of Law
Obligations and Contract &&&8uch rules cannot be applied if the debt had already been totally paid by anyone of the solidary debtors before the remission is effected. &&&1f one of the solidary creditor was able to collect the entire amount from one or some, or all of the solidary debtors, the obligation is totally e)tinguished and that creditor must render an account to his co-creditors.
Co-)#nsation D weighing two obligations simultaneously in order to e)tinguish them to the e)tent that the amount of one is covered by the amount of the other. Con'!sion D refers to the merger of the #ualities of creditor and debtor in one and the same person with respect to one and the same obligation. !artial compensation or confusion* there may be some doubt as to the part of the obligation to which the confusion or compensation shall be applied. 'pply the rules on 'pplication of payment ;otal compensation or confusion* obligation is e)tinguished altogether and what is left is the ensuing liability for reimbursement within each group R#-ission act of pure liberality by virtue of which the creditor, without having received any compensation or e#uivalent, renounces his right to enforce the obligation, thereby e)tinguishing the same either in its entirety or in the part or aspect thereof to which the remission refers. "ffects* "o%#rs #ntir# obligation/ total e)tinguishment of the obligation. the entire juridical relation is terminated for the benefit of one of the debtors and covers his entire share of the obligation. ;otally releases the debtor from the creditors. @ut the debtor is still bound to his codebtors for the benefit of one of the debtors and covers only a part of his share of the obligation. Bis character as a solidary debtor is not affected covers the entire share of a solidary debtor in the obligation or only part thereof. !artial remission is a valid defense if the creditors proceed against any one of the solidary debtors for the payment of the entire obligation.
('rt. 0403) &&& reditor may proceed against any one, or some, or all of the solidary debtors simultaneously. &&&@ringing of an action against the principal debtor to enforce the payment of the obligation is not inconsistent with, and does not preclude the bringing of another to compel the surety to fulfill hid obligation under the surety agreement. &&&' creditorGs right to proceed against the surety e)ist independently of his right to proceed against the principal. &&&if the obligation is joint and several, the surety has the right to proceed even against the surety alone. &&&obligation of the surety is the same as that of a principal. &&&;he surety is not entitled, as a matter of right, to be given notice of the principalGs default. ommencement of the suit is a sufficient demand. ('rt. 040-) &&&Chere payment is made by one of the solidary debtors, the effect is either the total of partial e)tinguishment depending upon whether the entire amount of the debt is paid or only part thereof. &&&%nce payment is made by one of the solidary debtors of the entire obligation,, there arises immediately a conse#uent right of such debtor to
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AUF School of Law claim from his co-debtors the share which corresponds to them, with interest for the payment already made. &&&the right is not available to a debtor who ma=es the payment after the obligation has prescribed or has become illegal. &&&;he interest shall be computed not from the time payment was made, but from the time the debt became due. 1f one of the solidary debtors become insolvent, his share shall be borne by all his co-debtors, in proportion to the debt of each. (par. 5, 'rt. 040-) ('rt. 0402 D 0440) E''#"t o' Loss or I-)ossibilit$ o' <#r'or-an"# 1. NOT d!# to t,# 'a!lt o' t,# solidar$ d#btors %bligation is e)tinguished =. C!# to t,# 'a!lt o' on# o' t,# solidar$ d#btors the obligation is converted into an obligation of indemnity for damages, but the solidary character of the obligation remains @. Aort!ito!s #%#nt the obligation is converted into an obligation of indemnity for damages, but the solidary character of the obligation remains unjust enrichment D reason or philosophy behind 'rt. 044, &&&a solidary debtor who paid the entire amount of the obligation does not step into the shoes (subrogation) of the creditors because he does not ac#uire the same right to collect the entire amount of the obligation from his co-debtors. Be is only entitled to the proportionate share of each of the co-debtors. ('rt. 0444) &&&;he creditor(s may proceed against any of the solidary debtors or all of them simultaneously for the payment of the obligation, but whether only one or all of the solidary debtors are sued jointly, any soliadary debtor may interpose against the claim of
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Obligations and Contract the creditor or creditors* 6efenses available to a solidary debtor defenses derived from the very nature of the obligation payment or performance> res judicata> prescription> those which invalidate the contract such as mista=e, violence, undue influence, fraud, etc... defenses personal to him or pertaining to his own share minority> insanity, etc.. defenses personal to the others, but only as regards that part of the debt for which the latter are responsible. 7erely a partial defense Sec 9 = 3ivisi!le and Indivisi!le %!li"ations 6. Ci%isibl# %s Indi%isibl# Ci%isibl# Indi%isibl# condition is susceptible of partial reali<ation or performance without the obligation in essence being changed. condition is not susceptible to partial reali<ation or performance because, otherwise, the essence of the obligation will be changed. 1f separated into parts, its essence is changed or its value decreased disproportionately.
1f separated into parts, its essence is not changed or its value is not decreased disproportionately, because each of the parts into which it is divided are ,o-og#n#o!s and analogo!s to each other as well as the thing itself.
;he divisibility of the MperformanceN obligation IS NOT divisibility of the thing or the prestation which constitutes the object of the obligation. &&&;he divisibility or indivisibility of the object itself is a very important factor, probably the most important, in determining whether the prestation which constitutes the object of the obligation is susceptible to partial performance, or not.
AUF School of Law
Obligations and Contract comply with the obligation, it is converted into indemnity for damages the debtor who failed or refused to comply with his obligation shall bear the burden of paying all of the damages suffered by the creditors the other debtor may also recover for damages form the debtor at fault.
&&&?or a thing to be considered divisible, it is important that it must be possible for reconstruction into its condition prior the division, by uniting the different parts into which it had been divided. T,r## 4inds o' Ci%ision Auantitative D when the thing can me materially divided into parts and such parts are homogeneous to each other. 7ovable- parts are actually separated from each other immovable- the limits of the parts are fi)ed by metes and bounds Aualitative D the thing can be materially divided but the parts are not e)actly homogeneous. (i.e inheritance) 1deal(1ntellectual D the thing can only be separated into ideal or intellectual parts, not material parts. (i.e. co-ownership) ('rt. 0445) %ne debtor one creditor- the divisibility is of little significance. G#n#ral R!l#/ the creditor cannot be compelled to partially receive the prestation in which the obligation consists> neither may the debtor may the re#uired to ma=e partial fulfillment. E("#)tions/ when the obligation e)pressly stipulates the contrary when the different prestations constituting the objects of the obligation are subject to different terms and conditions. Chen the obligation is in part li#uidated and in part unli#uidated. !lurality of debtors and creditors- the effect of the divisibility or indivisibility of the obligation shall depend whether the obligation is joint or solidary. Joint D 6ivisible- 'rt. 04,/ shall apply 1ndivisible- 'rt. 04,2 and 044. 8olidary D 'rt. 0400- 0444 shall apply 5'rt. 044.) @reach of joint indivisible obligation the obligation can be enforced only by proceeding against all of the debtors if any of the debtors fails or refuse to
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('rt. 044+) ;rue test of divisibility* FON t,# obligation is s!s"#)tibl# o' )artial "o-)lian"#. &&&;he susceptibility of partial compliance should be understood in the sense of the possibility of reali<ing the end or purpose which the obligation see=s to attain. ('pplies to obligations to give, to do, or not to do) To gi%# ;he divisibility or indivisibility of the obligation is the most important factor. definite I indivisible object- not susceptible of partial fulfillment ('bsolute rule) divisible object- susceptible of partial performance. e)cept* when the law provides for its indivisibility which may be inferred or presumed either> from the fact that although the object of the obligation can be separated in parts, yet each part constitutes a necessary complement of the other parts from the very purpose of the obligation itself it is so intended by the parties e)press implied To Co indivisible prestation- not susceptible of partial fulfillment ('bsolute rule) 1n order to determine whether the prestation is divisible or not, the object or purpose of the obligation must always be considered it is divisible when it has for its

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AUF School of Law object... 0. the e)ecution of a certain number or days of wor=, 4. the accomplishment of wor= by metrical units> or 5. the accomplishment of analogous things which by their nature are susceptible of partial performance. 6ivisible prestation- susceptible of partial fulfillment, with certain #ualifications. when the law provides for its indivisibility it is so intended by the parties
Obligations and Contract agreement parties 's to purpose Co-)#nsator$ (for reparation) "stablished for the purpose of indemnifying the damages suffered by the obligee or creditor in case of breach S!bsidiar$('lternative <!niti%# "stablished for the purpose of punishing the the obligor or debtor in case of breach of the
's to "ffect KointH umulative %nly the penalty may be both the penalty and the demanded in case of principal obligation may breach be demanded ('rt. 0443) &&&!enalty may be considered as reparation or substitute for damages or as a punishment in case of breach of the obligation. R#)aration D the #uestion of damage is resolved, since the stipulated indemnity or prestation represents a legitimate estimate made by the contracting parties of the damages caused by the breach of the obligation. proof of actual damage is not needed general rule <!nis,-#nt D the #uestion of damage is not yet resolved t,# rig,t to da-ag#s& asid# 'ro)#nalt$& still s!bsists if the injured party desires to recover the damages actually suffered by him in addition to the penalty, he must prove such damages. ")ception to the general rule G#n#ral R!l#* the penalty is fi)ed by the parties as a compensation or substitute for damages in case of breach. E("#)t/ 0. when there is a stipulation to the contrary 4. when the obligor is sued for refusal to pay the agreed penalty 5. when the obligor is guilty of fraud
Not to Co ;he determination of the character of the obligation will depend upon the sound discretion of the court Sec : = %!li"ations *ith $enal Clause one in which an accessory underta=ing is attached for the purpose of insuring its performance by virtue of which the obligor bound to pay a stipulated indemnity or perform a stipulated prestation in case of breach. !enalty or penal clause is an accessory obligation attached to the principal obligation <!r)os#s o' )#nalt$/ insure the performance of the obligation (funcion coercitiva o de "arantia)> general purpose li#uidate the amount of damages to be awarded to the injured party in case of breach of the principal obligation (funcion liquidatoria)> compensatory> pre-agreed amount for the damages to punish the obligor in case of breach of the principal obligation (funcion estrictamente penal)> punitive Kinds o' )#nalt$ 's to origin L#gal onstituted by law Con%#ntional onstituted by
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AUF School of Law (see Art ##7<) (the purpose of the penalty is to punish the obligor) &&&;he obligee can recover from the obligor not only the penalty, but also the damages or interests resulting from the breach of the principal obligation where both parties were unable to comply with their obligation (fortuitous event), th penal clause cannot be invo=ed by anyone of them to the prejudice of the other. ('rt. 044-) &&&;he debtor cannot e)empt himself form the performance of the principal obligation by paying the stipulated penalty. :nless the right has been e)pressly and clearly granted to him. &&&(*hat happens to the o!li"ation if the ri"ht to choose to pa- the penalt- in su!stitute of the principal o!li"ation has !een "ranted to the de!tor0 is the o!li"ation converted to facultative o!li"ation or does it remain an o!li"ation *ith a penal clause?) &&&;he creditor cannot demand the fulfillment of the principal obligation and the satisfaction of the stipulated penalty at the same time. :nless the right must be clearly granted to him. if there is fault on the part of the debtor, the creditor can demand not only the satisfaction of the penalty but also the payment for damages. ('rt. 044/) &&&'pplicable only to the general rule in 'rt 0443 and not to the e)ceptions. ('rt. 0442) t,# )#nalt$ -a$ b# r#d!"#d/ if the principal obligation has been partly complied with some but not all the prestation are complied with by the debtor refers to the #uantity or #uality of the performance if the principal obligation has been irregularly complied with all the prestations were complied with but not in accordance with the tenor of the agreement refers to the form
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Obligations and Contract if the penalty unconscionable. is ini#uitous or
&&&;he creditor cannot recover more than the penalty stipulated even if he proves that the damage suffered by him e)ceed in amount such penalty.(the amount is already agreed upon) ('rt. 045,) &&&1f the principal obligation is void, the penal clause is also void. &&&if the penal clause is void, the principal obligation is not affected. C,a)t#r B E:TING9IS>*ENT OA OBLIGATIONS ('rt. 0450) -od#s o' #(ting!is,ing obligations payment or performance loss of the thing due condonation or remission of the debt confusion compensation novation annulment rescission fulfillment of a resolutory condition prescription --renunciation or waiver by the creditor compromise e)piration of the resolutory term or condition death of one of the contracting parties (personal obligations) will of one of the contracting parties mutual assent or dissent *ection. 9 : -ayment or -erformance ('rt. 0454) <a$-#nt D fulfillment of the obligation either voluntarily or involuntarily, including its e)tinguishment by any means or modes "onsists in t,# nor-al and %ol!ntar$ '!l'ill-#nt o' t,# obligation b$ t,# r#aliMation o' t,# )!r)os# 'or 0,i", it 0as "onstit!t#d.
AUF School of Law 1ncludes )#r'or-an"# in any other manner, of an obligation. ?ulfillment of the obligation by the delivery of a sum of money.
Obligations and Contract Rig,ts o' a @rd )#rson (with the =nowledge and consent of the debtor) right of reimbursement D recover from the debtor the #ntir# a-o!nt which he has paid. right of subrogation (without the =nowledge and consent of the debtor) right of reimbursement D recover only insofar as the payment has been beneficial to the debtor &&&1f the obligation has been previously e)tinguished by any mode, the 5rd person may proceed against the creditor based on the principle of unjust enrichment. Gratuitous payments D payments effected by a third person who does not intend to be reimbursed by the debtor. consent of the debtor is necessary. ;here is no gift if the gift was not accepted by the debtor. 1f the consent is 8" :$"6 rules on ordinary donation will apply if the consent is 9%; 8" :$"6, 'rt. 0453 and 045will apply. 8uch gratuitous payments are valid as far as the creditor is concerned.('rt. 045/) so the 5rd person who offered the gift but was declined by the debtor can compel the debtor to reimburse him (5rd person) the amount accepted by the creditor. ('rt. 0452) &&&1t is essential that the person who pays the obligation should have the necessary legal capacity to effect such payment. free disposal of the thing due capacity to alienate the thing effect of absence of one or another will effect the invalidity of payment &&&"ven if the creditor has already accepted the payment, it may still be annulled by proper action in court, subject to the e)ception provided in 'rt. 0.4-.(But such provision has alread- !een modified *hen the a"e of majorit- has !een
('rt. 0455-045+) General $ule* there should be "o-)l#t# performance. ('rt. 0455) E("#)t/ substantial performance in good faith the debtor may recover as though there has been a strict and complete fulfillment, less damages suffered by the creditor. ('rt. 045.) ase* Diesel &onstruction vs ;-*. Chen the obligee accepts the performance =nowing its incompleteness or irregularity, without e)pressing any objection or protest. ('rt. 045+) @ased on the principle of estoppel when the obligation has been converted into an indemnification (falls under 'rt. 0455) ('rt. 0453-045/) G#n#ral R!l#/ reditor is not bound to accept payment or performance by a third person. @his is !ecause the creditor ma- not have confidence in the honest- of the +rd person *ho mi"ht deliver a defective thin" or pa- *ith a checA *hich ma- not !e honored ")cept* when it is made by a 5rd person who has interest in the fulfillment of the obligation. (joint debtor, guarantor, surety) when there is a stipulation to the contrary )#rsons 0,o -a$ )a$ obligation/ the debtor himself or his legal representatives any third person who have an interest in the fulfillment of the obligation. (subject to some juridical effects) 'rt.0453-045- are not applicable to a third person who pays the redemption price in sales with right to repurchase, because a vendor a retro is not a debtor within the meaning of the law.
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AUF School of Law lo*ered to #8 - o ) ('rt. 04.,) to 0,o- )a$-#nt -!st b# -ad# person in whose favor the obligation has been constituted his successor in interest any person authori<ed to receive payment by the creditor himself (conventional authority) by law or legal authority (guardian, e)ecutor or administrator of the estate of a deceased person, assignee or li#uidator of a partnership or corporation) General rule*payment to unauthori<ed person is invalid. ")ceptions* payment made to a 5rd person, provided that it has redounded to the benefit of the creditor. ;his can be invo=ed through the following proofs* (Art #)4#) if after payment, the 5rd person ac#uires the creditorGs rights if the creditor ratifies the payment to the 5rd person if by the creditorGs conduct, the debtor has been led to believe that the 5rd person has authority to receive the payment !ayment made to the possessor of the credit, provided that it was made in good faith. (Art #)4)) Ealid payment to the )oss#ssor o' t,# "r#dit does not refer to possessor of the document evidencing it. the remedy of the creditor would be to proceed against the possessor if credit to whom payment was improperly made. &&&'lthough the payment is not valid because it is not made to a person authori<ed to receive payment, nevertheless it is clear that the vendee had acted in good faith> he can not therefore be said to have incurred in delay> conse#uently, the vendor cannot as= for rescission of the contract. ('rt. 04.0) payment to incapacitated person is valid* if he has =ept the amount or thing paid or delivered
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Obligations and Contract insofar as the payment has been beneficial to him. ;he payment is beneficial to him (incapacitated) when that which has been paid or delivered is applied or spent for some rational, necessary or useful purpose for his benefit. &&&;hese rules are applicable only to obligations to give. ('rt. 04.5) &&&!ayment by the debtor to the creditor after having been judicially ordered to retain the debt is invalid. such payment must be made to the proper officer of the court issuing the writ of attachment or garnishment in conformity with the $ules of ourt. ('rt. 04..-04.3) obligation to give specific or determinate thing D the debtor cannot fulfill his obligation by delivering a thing which is different from what is due although such may be of the same value or even more valuable than that which is due. %bligation to do or not to do D the obligor cannot fulfill his obligation by substituting another act or forbearance. &&&if the creditor or obligor accepts the delivery or substitution, such acceptance shall give the same effect as a fulfillment or performance of the obligation. Cation in )a$-#nt (dacion en pa"o) = transmission of the ownership of a thing by the debtor to the creditor as an accepted e#uivalent of the performance of the obligation. !roperty is alienated to the creditor in satisfaction of a debt in money> law on sales shall govern ('rt. 04.+)> e)ception in 'rt. 04.. ('rt. 04.-) e)tra judicial e)penses D for the account of the debtor judicial costs D $ules of ourt will govern &&&1f the debtor changed his domicile in bad faith or after he has incurred in delay, the additional
AUF School of Law e)penses shall be borne by him. ('rt. 04./) 5 conditions or characteristics of payment* identity D only the prestation agreed upon and no other must be complied with completeness D the thing or service in which the obligation consists must be completely delivered or rendered indivisibility D the payment or performance must be indivisible General $ule* 'rt. 04./ is applicable only to obligation where there is one debtor and one creditor. ")ceptions* when the obligation e)pressly states the contrary when the different prestations which constitutes the objects of the obligation are subject to different terms and conditions when the obligation is in part li#uidated and in part unli#uidated. ('rt. 04.2) &&&' judgment awarding an amount in :8 dollar may be made with its e#uivalent amount in local currency in the conversion rate prevailing at the time of payment. ;he trial court should determine the the conversion rate if the parties cannot agree on the same. (Ca"ala vs 5imenez) $' +42 D 'n 'ct to assure the uniform value of !hilippine oins and urrency. the rule that payment of debts imoney shall be made in the currency stipulated was completely abrogated. $' .0,, D amending $' +42 the law prohibiting stipulations in domestic monetary obligations purporting to give the obligee the right to re#uire payment in currency other than the !hil. currency does not apply to transactions listed on pp. 4.3, %bligations and ontracts, 5urado Legal tender D currency which may be used for the payment of all debts, whether public or private in the !hil., legal tender would be notes and coins issued by the entral @an=. !romissory notes payable to order or bills of e)change, chec=s, etc. are not legal tender
Obligations and Contract $ule* the debtor cannot compel the creditor to accept a chec= or draft. ")cept* when the document has been cashed when it had been impaired through the fault of the creditor. ('rt. 04+,) &&&1n case of e)traordinary inflation or deflation, the value of the currency at the time of the establishment of the obligation would be the basis of payment. ")traordinary inflation or deflationO unusual or beyond the common fluctuation in the value of the currency which the parties could not have been foreseen when the obligation was established. (;olentino) uncommon decrease or increase in the purchasing power of the currency which could not have been reasonably foreseen. (6ean apistrano) &&&'rt. 04+, is applicable only to contractual obligations and not to obligations arising from torts. &&&re#uisites for @allantyne schedule to apply* obligation should have been contracted during the Japanese occupation it could have been paid during the Japanese occupation it could have been paid with Japanese military notes ('rt. 04+0) !lace of payment* Obligation deliver thing a <la"# o' )a$-#nt
determinate !lace where the thing might be at the time the obligation was constituted 6omicile of the debtor (unilateral obligations)
'ny other case
Su!section # - Application of $a-ment ('rt. 04+4) a))li"ation o' )a$-#nt- designation of the debt to which the payment must be applied when the debtor has several obligations of the same =ind in favor of the same creditor.
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AUF School of Law $e#uisites* one debtor, one creditor 4 or more debts of the same =ind ")ception* if at the time the designation or application is made, such obligations had already been converted into obligations to indemnify with damages by reason of breach or nonfulfillment. all debts must be due ")ception* when there is a stipulation to the contrary the application of payment is made by the party for whose benefit the term or period has been constituted. amount paid by the debtor not sufficient to pay the total amount of the debt right to designate belongs primarily to the debtor, only at the time when payment is made. $ight of creditor to ma=e application of payment is merely a <RO<OSAL of the application of payment. (this is done !- "ivin" to the de!tor a receipt in *hich the application of pa-ments is made su!ject to the express or tacit approval of the de!tor ) -ista4#& 'ra!d& 'or"#& or inti-idation- causes that will invalidate or grounds to impugn the application of payments ti-# o' )a$-#nt -ad#- when the debtor may e)ercise the right to ma=e an application of payment. &&&'! is important so as to =now which among the obligations will be e)tinguished. ('rt. 04+5) payment of interest first before payment of principal. 7anresa* the rule is obligatory because it is more in consonance with justice. 8upreme ourt* such rule is only directory and not mandatory. 'pplies only in the absence of a verbal or written contract.
Obligations and Contract <r# !di"ial to t,# "r#ditor/ @y applying the payment to the principal, the value of the principal will be decreased and the value of the interest will also be decreased. ('rt. 04+.) applicable only when payment cannot be applied in accordance with the rules. Chen the debt due are not of the same burden, the rule that the debt which is -ost on#ro!s to the debtor shall be deemed to have been satisfied. $ules to =now the most onerous* T$)#s o' C#bts F,i", is -or# On#ro!s 1ncurred dates at different %ldest ones
6ebts bearing interest 6ebt which incurs the against those which are interest not 4 debts both incurring 6ebt with higher interest interest 8ecured and secured debts !rincipal vs surety not 8ecured ones 6ebt covering that of the principal
8olidary debtor vs sole 8olidary debtor (Jurado) debtor Sol# d#btor 5Tol#ntino8 8olidary obligation 1ndemnity obligation Li#uidated unli#uidated vs 8hare corresponding to the solidary debtor
penalty 1ndemnity vs li#uidated
$ro rata- in proportion what to apply when the obligations are due of the same nature or burden &&&1f the debtor ma=es a proper '!, but the creditor refuses to accept it because he wants to apply it to another debt, such creditor incurs in delay ( mora accipiendi)- ;olentino pro rata rule is applied &ase) -aculdo vs <egalado
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Su!section ) - $a-ment !- Cessation ('rt. 04++) C#ssion or assign-#nt- special form of payment whereby the debtor abandons all of his property for the benefit of the creditor in order that from the proceeds thereof the latter may obtain payment of their credits. $e#uisites* plurality of debts partial or relative insolvency of the debtor acceptance of the cession by the creditor insolvency Law- applicable if the creditor did not accept the cession Kinds o' C#ssion/ contractual- 'rt. 04++, 9 judicial- 1nsolvency Law C#ssion !lurality creditors essential %s Cation in <a$-#nt
Su!section + - @ender of $a-ment and Consi"nation ('rt. 04+3-04+/) t#nd#r o' )a$-#nt D manifestation made by the debtor to the creditor to immediately comply with the obligation "onsignation D deposit of the object of the obligation in a competent court in accordance with the rule prescribed by law after refusal or inability of the creditor to accept the tender of payment. T#nd#r o' <a$-#nt !reparatory act ")tra judicial character Consignation !rincipal act in Judicial in character
@ender of pa-ment does not !- itself produce le"al pa-ment0 unless it is completed !- consi"nation G#n#ral r#+!isit#s o' "onsignation D relative to payment. ('rts. 0454-04+0) those which ave already ta=en up in connection with payment in general. !erson who pays person to whom payment must be made object of the obligation to be paid time when payment or performance becomes demandable. S)#"ial r#+!isit#s D prescribed by 'rt. 04+304+/ 0. there is a thing due ('rt. 04+/, par. 0) 4. that the payment or performance was refused or the creditor was incapable of accepting payment tender of pa-ment must !e made !efore the consi"nation tender of pa-ment must have !een unconditional that the creditor must have refused to accept the pa-ment. (S- vs .ufemio) 5. previous notice has been given to the )#rsons int#r#st#d (i e suret- or
of N!-b#r o' ;here may be is )arti#s only one creditor
6ebtor is in Ainan"ial 6ebtor not partial or relative "ondition necessarily in insolvency o' t,# financial difficulty )arti#s :niversality of debtorGs property Ob #"t ;hing e#uivalent of the performance of the obligation ")tinguishes the obligation to the e)tent the value of the thing delivered (as e#uivalent of the performance of the obligation)
$elease the debtor for the net proceeds of the things ceded or assigned, unless there is a contrary intention.
E''#"t
E''#"ts o' "#ssion/ partial e)tinguishment no transfer of ownership to the creditors only transfer of possession including administration
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AUF School of Law "uarantor or a solidar- co-de!tor not just to the creditor) in the fulfillment of the obligation D a formal act - to allo* the creditor to reconsider his refusal> to sho* the de!torDs serious desire to extin"uish his o!li"ation .. that the thing or amount due has been placed at the disposal of judicial authority deposited *ith the ClerA of Court usuall- accompanied !- the filin" of the complaint for action for consi"nationEaction for specific performanceEaction for cancellation of the o!li"ation. +. after consignation has been made, the persons interested in the fulfillment of the obligation had been notified thereof. reason* to enable the creditor to withdraw the goods or money deposited. .ffectsF see Art #):<-#):# Cas#/ ($once de /eon vs S-juco0 Inc ) G#n#ral R!l#/ re#uisites must be strictly complied E("#)tion* in consideration of justice and e#uity (Cas#/ $ural @an= of aloocan vs ') &&&8ince consignation is a special form of payment, it must conform not only with the special re#uirements prescribed by law, but also with all the re#uisites of a valid payment. ")ceptions to the rule that there must be a previous tender of payment*('rt. 04+3) 0. when the creditor is absent or un=nown 4. when the creditor is incapacitated 5. when the creditor refused to give a receipt .. when 4 or more person claim the right to collect +. when the title of the obligation has been lost R#ason 'or t,# #("#)tions/ G) incapacitated persons do not have the capacitto administer their propert-> the de!tor *ill !e made to pa- a"ain !ecause the pa-ment is invalid su!ject to the exception provided in Art #)4# (protection to the de!tor) G+ *ould mean that there has !een a previous tender of pa-ment or it *as alread- said !- the
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Obligations and Contract creditor that he *ill not accept an- tender of pa-ment G4 protection to the de!tor0 to avoid tender of pa-ment to the *ron" individual &&&Chen valid tender of payment is made, the obligation is not e)tinguished unless it is completed by consignation. E''#"t/ e)emption of the debtor from payment of interest and(or damages &&& onsignation is applicable to both movable and immovable objects. E''#"t o' t#nd#r o' )a$-#nt/ stops the accrual of interest release the debtor from liability over the thing due as= the judge to order the cancellation of the obligation preserve the right of the debtor (?rancisco vs @autista) ('rt. 04+2) e)penses of consignation shall be charged against the creditor only when consignation have been properly made 0. when the creditor accepts the thing or amount deposited 4. when the court decided that consignation have been properly made or cancels the obligation at the instance of the debtor in accordance with 'rt. 043,, par. 0. ('rt. 043,-0430) E''#"ts o' "onsignation* if the creditor finally a""#)ts the thing or amount deposited, the payment is settled altogether if the creditor r#'!s#s to accept the thing deposited, litigation for the e)tinguishment or cancellation of the obligation on the ground of a valid and effective consignation will arise. If the creditor neither refuses nor accepts0 the de!tor ma- asA the court to cancel the o!li"ation after sho*in" the the requisites of consi"nation have !een complied *ith (Art #):<)- tolentino E''#"ts o' 0it,dra0al b$ t,# d#btor/
AUF School of Law made before the creditor has accepted the consignation or before judicial declaration, the obligation remains in force made with the consent of the creditor, the creditor loses every preference which he may have over the thing. 8olidary codebtors, guarantors and sureties, shall be released. ;he solidary co-debtors are released only with regard to their solidarity but not with their respective share in the obligation the guarantors and sureties are released from the obligation since the obligation could have been e)tinguished if not for the consent of the creditor to withdraw the thing from consignation>
Obligations and Contract #''#"t o' 'ort!ito!s #%#nt* e)tinguishment of the obligation, ")ceptions* when by law, the debtor is still liable even for fortuitous events when stipulated by the parties when the nature of the obligation re#uires the assumption of ris= when the loss of the thing is due partly to the fault of the debtor when the loss of the thing occurs after the debtor has incurred in delay when the debtor promised to deliver the same thing to 4 or more persons who do not have the same interest when the obligation arises from a criminal offense when the obligation is generic ('rt. 0435) loss of a generic thing does not e)tinguish the obligation because generic things do not perish ("enus nunquam peruit) #''#"t o' loss in r#"i)ro"al obligation* if one of the reciprocal obligation is e)tinguished the other must also be e)tinguished. (;olentino) ('rt. 043.) court granted discretion to determine whether a partial loss or destruction of the thing is important as to e)tinguish the obligation ('rt. 043+) presumption of fault on the part of the debtor if the thing is lost while in his possession. 1n such case, the obligation is 9%; e)tinguished. 8uch presumption does not apply in case of earth#ua=e, flood, storm, or other calamity. ('rt. 0433) impossibility of performance in obligations to do e)tinguishes the obligation. &&&8ame re#uisites provided in 'rt. 0434 &&&Legal and physical impossibility must have occurred AATER the constitution of the obligation. = "a!s#s o' i-)ossibilit$ l#gal i-)ossibilit$- (direct) when the law prohibits the performance or e)ecution of the wor= agreed upon (immoral or
!rayer of the creditor that the thing be adjudicated in his favor is already an acceptance on the part of the creditor, the debtor cannot withdraw the thing anymore. &&&?or immovable objects or other real properties, the court will assign a receiver to consider the object consigned or deposited. *ection =. : 1oss of the 2hing Due Loss o' t,# t,ing d!#- impossibility of compliance with the obligation through any cause impossibility of performance perishes goes out of commerce disappears ('rt. 0434) effect of loss in obligation to give a determinate thing* e)tinguishment of the obligation r#+!isit#s/ thing lost must be determinate the thing was lost without the fault of the debtor (if it is lost throu"h the fault of the de!tor0 the o!li"ation is converted into an o!li"ation to indemnif- the creditor for dama"es ) the thing lost before the debtor has incurred in delay (if it is lost after the de!tor has incurred in dela-0 the de!tor *ill !e held lia!le for indemnit- for dama"es)
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AUF School of Law dangerous) - (indirect) the law imposes duties of a superior character upon the obligor which are incompatible with the wor= agreed upon. <,$si"al i-)ossibilit$ D arises principally from the death of the obligor, when the act to be performed re#uires his personal #ualifications, or from the death of the obligee, when the act can be of possible benefit only to him. - it can also arise from mere accident, or from the acts of the debtor himself in which there is no fault, or from the acts of 5rd person affecting the debtorGs capacity
Obligations and Contract justification. O''#r ('rt. 043/) Consignation ('rt. 04+3-0430) of the
")tinguishment of the !ayment obligation through loss obligation. by a fortuitous event 9ecessary that creditor refused accept the offer of debtor without cause to release latter from liability
the %ffer is just a step to the to payment. the just the
&&&8eldom that impossibility of performance may arise in obligation not to do. in rare e)ceptional cases, 'rt. 0433 is also applied. &&& annot be applied to obligations to give ( ase* $;CC vs CA) ('rt. 043-) relative impossibility- service has become so difficult as to be manifestly beyond the contemplation of the parties, the court should be authori<ed to release the obligor in 0,ol# or in )art. 8ervice P performance rebus sic stantibus = the parties stipulate in the light of certain prevailing conditions and once these condition cease to e)ist, the contract also ceases to e)ist. &aseF ;a"a @elephone Co et al vs CA ('rt. 043/) A))li"abilit$* obligation of restitution of a certain determinate thing on the part of the person criminally liable cases where such obligation arises by virtue of reparation or indemnification persons who are principally and subsidiarily liable &&&the debtor shall not be e)empted from the payment of the price of the thing, whatever may be the cause of the loss. e)cept* when he offered the thing to the obligee and the latter refused to accept it without
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"ffect of creditorGs refusal without just cause* debtor may ma=e a consignation of the thing and thereby relieve himself of further liability =eep the thing in his possession, in which case, the obligation still subsists, but if the thing is lost through fortuitous event, 'rts. 0434-043+ shall govern. 'rt. 043/ is not applicable to cases where an offer is not possible, since offer by the debtor is an essential re#uisite. ('rt. 0432) &&&'ll the rights of action which the debtor may have against 5rd persons by reason of the loss of the thing are transmitted by operation of law to the creditor. ;ransmission made from the moment the obligation is e)tinguished. ")ample* insured object which is lost or destroyed, creditor may collect from the insurer. ")propriated land, the creditor may collect the compensation due by reason of the e)propriation.
AUF School of Law *ection >. - &ondonation or <emission of the Debt R#-ission- an act of liberality by virtue of which, the obligee without receiving any price or e#uivalent, renounces the enforcement of the obligation as a result, the obligation is e)tinguished totally or partially gratuitous abandonment by the creditor of his rights (8anche< $oman) R#+!isit#s/ it must be gratuitous must be accepted by the obligor the obligation must be demandable "lassi'i"ation o' r#-ission/ 's to form E()r#ss2 made with the formalities prescribed by law for donations I-)li#d- can be deduced from the acts of the obligee or creditor. 's to e)tent Total entire e)tinguished obligation is
Obligations and Contract condonation 'rt.-./, ivil ode-movable property I obligations to do or not to do personal property* verbal remission shall not be re#uired since there is no transfer of property but merely a remission or condonation of an obligation to give a personal property. 6ebtor is relieved from ma=ing conveyance of the property. ")press remission* acceptance by the debtor may be implied or tacit, provided that the value of the thing condoned does not e)ceed !+,,,, 'rt.-.2, ivil ode-immovable property rules on e)tent of the amount of donation 'rt. -+,-'rt. -+4, ivil ode 'rt. --0, ivil ode rules on revocation of the donation
)artial refers only to the principal or to accessory obligation or to an aspect thereof which affects the debtor (solidarity) 's to .nter vivos : constituted by constitution agreement of the obligee and the obligor 5ortis causa- constituted by last will and testament ('rt. 04-,) gratuitous D most essential characteristics of remission &&& ondonation must necessarily be accepted by the debtor. &&& ondonation is a bilateral act because our re#uires its acceptance by the debtor ode
1mplied remission may be deduced form the act or acts of the creditor which clearly show the intent to condone the obligation. ")press or implied acceptance is also necessary &&&Cill an ")press remission which fails to comply with the forms prescribed in 'rts. -./ and -.2 of the ode be enforced as a ;acit remissionL 'ns* 9egative, to rule otherwise would defeat the purpose of 'rt. 04-,. r#-#d$ 'or %oid donation/ reduction of the donation> or suppression of the donation ('rt. 04-0-04-4) 6elivery of the private document evidencing debt is a presumption of creditorGs renunciation of any right of action for the collection of the debt. <eason) private document is the !est evidentiarproof to sho* that the o!li"ation has not !een paid R#+!isit#s* document evidencing the credit has been delivered by the creditor to the debtor document must be a private document
A))li"abilit$ o' t,# R!l#s on Conations rules on acceptance of the debtor rules on forms of donation in e)press
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AUF School of Law delivery must be voluntary
Obligations and Contract *ection ?. : &onfusion or 5erger ('rt. 04-+) onfusion D merger of the characters of the creditor and debtor in one and the same person, by virtue of which, the obligation is e)tinguished. meeting in one and the same person the #ualities of a creditor and debtor with respect to one and the same obligation. R#+!isit#s* merger of characters of debtor and creditor must be in the same person it must ta=e place in the person of either the principal creditor or principal debtor there must be complete and definite merger of the #ualities Kinds o' *#rg#r or Con'!sion/ 's to cause or .nter vivos- constituted by constitution agreement of the parties mortis causa- constituted by succession. 's to e)tent or Total- e)tinguishes the entire effect obligation <artial-e)tinguishes only a part or aspect of the obligation or only the shares in joint obligation. ('rt. 04-3) 1f the merger will ta=e place in the person of the subsidiary creditor and subsidiary debtor (guarantor), principal obligation is not e)tinguished, there will only be 8:@8;1;:;1%9 of creditor or debtor. In "as# o'/ Guarantor-creditor D can demand the performance of the obligation from the debtor, in case of default, even from his coguarantors Guarantor-debtor D the creditor can demand the performance of the obligation directly from the guarantor. ('rt. 04--) there is only a partial e)tinguishment of obligation in case of confusion between one joint debtor and one joint creditor. Cith regard to solidary obligations, the obligation is altogether e)tinguished without prejudice to the
presumption of voluntary delivery by the creditor unless the contrary is proved heirs of the creditor may impugn condonation by establishing that it is inofficious in conformity with 'rt. --0, ivil ode. legitime is part of persons estate reserved by law for his compulsory heirs. Q of the entire estate reserved for the legitimate child(children other half is free portion, may be distributed to anybody 1nofficious donation are those which e)ceeds the free portion of the estate ollation the value of all gratuitous disposition are added to the estate of a person for the benefit of his compulsory heirs.
('rt. 04-5-04-.) effect of remission* ")tinguishment of the obligation in its entirety or aspect thereof in joint obligation, the remission only affect the share of the creditor who ma=es the remission and the corresponding share of the debtor in whose favor the remission is made. 1n solidary onligation, 'rts. 040+, 0402, and 044, of the ode shall govern. &&&$emission of the principal obligation is remission of the accessory obligation but remission of the accessory obligations is not remission of principal obligation. accessory obligation is just dependent on the principal obligation for their e)istence and efficacy. !resumption of remission of accessory obligation of pledge e)ist when the thing, after its delivery to the creditor, was found at the possession of the debtor.
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AUF School of Law rights and obligations of the solidary creditors and debtors among themselves. onfusion may be revo=ed agreement* presence of any of the causes of rescission, annulment, etc. inheritance* nullity of the will, subse#uent appearance of an heir with better right "ffect* the obligation is recreated in the same form and under the same condition in which it was found before the merger too= place. period which has elapsed from the moment the merger too= place until its revocation cannot be computed in the determination of the period of prescription *ection @. : &ompensation ('rt. 04-/) Co-)#nsation- mode of e)tinguishing in their concurrent amount those obligations of persons who in their own right are creditors and debtors to each other. weighing two obligations simultaneously in order to e)tinguish them to the e)tent in which the amount of one is covered by the amount of the other. 8implified payment (pa"o a!reviado) do!bl# ad%antag# o%#r )a$-#nt/ facility of payment- ta=es effect by operation of law guaranty for the effectivity of the creditmay avoid prejudice to one party by fraud or insolvency of the other. <a$-#nt Co-)#nsation by
Co!nt#r"lai-
Co-)#nsation
8imilarity of debts is not 4 debts must consists in necessary money or if not, they must be of the same =ind and #uality 6oes not re#uire 6ebts must li#uidation of debts li#uidated 9eed to be pleaded to 9eed not be pleaded be effectual be
Kinds o' Co-)#nsation/ 's to cause L#gal- ta=es effect by operation of law when all the re#uisites are present ('rt. 04-/-04-2, ivil ode) Vol!ntar$- agreement of the parties who are mutually creditors and debtors to compensate their respective obligations, re#uisites may not all be present ta=es effect the moment the parties agree Aa"!ltati%#- by the will of only one party and the other one cannot choose compensation because of any impediment. ('rt. 04/--04//) K!di"ial- ta=es effect by judicial decree ta=es effect the moment the judicial decree becomes final and e)ecutory 's to effect Total D compensation of 4 e#ual debts <artial - compensation of two une#ual debts. ('rt. 04-2) r#+!isit#s o' "o-)#nsation* 0. 4 parties are principal creditors and principal debtors of each other 4. both debts must consist in money, or if the things due are consumables, they must be of the same =ind and #uality limited to obligations to give consumables- movables which cannot be used in a manner appropriate to their nature without being consumed fungibles- may be e)changed or compensated by another of the same =ind and #uality
;a=es effect by acts of ;a=es effect parties operation of law
apacity to give and to apacity to give and to ac#uire are necessary ac#uire not essential omplete and !artial payment indivisible payment Con'!sion Co-)#nsation
%ne person in whom is 4 persons who are merged the #ualities of creditors and debtors of creditor and debtor each other %nly one obligation
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4 obligations
AUF School of Law 5. both debts must be due .. both debts must be li#uidated and demandable li#uidated debts- those that may be determined by simple arithmetical operation +. no retention or controversy commenced by 5rd persons over either of the debts and communicated in due time to the debtor retention D application of the credits of one of the parties to the satisfaction of the claims of a 5rd person controversy D refers to a case in which 5rd persons claim to be the creditor 3. compensation must not be prohibited by law G) compensation cannot !e applied to o!li"ations to do !ecause of the differences in the respective capacities of the o!li"ors G9 controvers-F the effect is provisional suspension of the compensation If the credit is adjudicated to the part- interested in the compensation0 compensation ma- taAe place0 !ut if the credit *as adjudicated to the +rd person *ho claims to !e the creditor0 compensation cannot taAe place ('rt. 04/,) right of guarantor to set up compensation, not only for what such creditor owes him, but also for what such creditor owes the principal debtor. e)ception to 'rt. 04-2, 9o. 0 Basis/ @ond of the guarantor cannot be resorted to so long as the debtor can pay Chen principal obligation is e)tinguished, the accessory obligation of the guarantor is also e)tinguished since it is subordinate thereto. ('rt. 04/0-'rt. 04/4) 'rt. 04/4, e)ample of voluntary obligation &&agreement to compensate debts which are not yet due ('rt. 04/5) when the defendant who has an unli#uidated claim for damages against the plaintiff sets it off by proving his right to said damages and the amount
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Obligations and Contract thereof, it is converted into a li#uidated claim by a court decree, in which case, compensation may ta=e place ('rt. 04/.) e)ception to rule 9o.5, 'rt. 04-2 rescissible(voidable obligations (considered demanda!le) may be compensated against each other before they are judicially rescinded or avoided. ('rt. 04/+) E''#"ts o' "#ssion/ F,#n t,# "o-)#nsation ,as ta4#n )la"#/ %ne or other obligation is e)tinguished, subse#uent assignment of rights by the creditor to a 5rd person "annot a''#"t the debtor with respect to the compensation which has already ta=en place. 'ssignee can just demand indemnity for damages on the ground of fraud E("#)t* when the debtor consented to the assignment, in which case, the assignee can still demand for the payment of the credit F,#n t,# "o-)#nsation ,as not ta4#n )la"# -effects depend on whether the assignment was made... with the consent of the debtor D the debtor cannot set up against the assignee the compensation e)cept* if he notified the assignor that he reserves his right to the compensation, he can still set up compensation as a defense when the assignee demands the payment of the credit. Cith =nowledge but without consent of the debtor D the debtor may set up the defense of compensation of debts prior to the assignment but not subse#uent ones. !urpose* to prevent fraud. Cithout =nowledge of debtor - the debtor may set up the defense of compensation of all credits which he may have against the assignor and which may have become demandable, before he was notified of the assignment. $emedy for the assignee* action for
AUF School of Law indemnification against the assignor ('rt. 04/3-'rt. 04//) C#bts 0,i", "annot b# "o-)#nsat#d/ 0. debts arising from contracts of depositum 4. debts arising from contracts of commodatum 5. claims for support for gratuitous title cannot be applied to support in arrears .. obligations arising from criminal offenses +. certain obligations in favor of the government, such as ta)es, fees, duties, and others of a similar nature. @ased on justice, trust and confidence, and selpreservation. ('rt. 04/2-042,) effect of compensation D e)tinguishes both debts to the e)tent that the amount of one is covered by the amount of the other compensation ta=es place by operation of law (ipso jure)- its effects arise on the very day on which ALL re#uisites are fulfilled. - applicable only to legal compensation *ection A. : Novation 9ovation D (extinctive) substitution or change of an obligation or change of an obligation by another, resulting in its e)tinguishment or modification, either by changing its object or principal conditions, or by substituting another in place of the debtor, or by subrogating any 5rd person in the rights of the creditor. - mode of e)tinguishing obligations through the "r#ation o' a n#0 on# effected by the change or substitution of an obligatory relation by another with the intention of substantially e)tinguishing or modifying the same. - two-fold purpose* e)tinguishing the old obligations giving birth to a new obligation to ta=e place of the old re#uisites* previous valid obligation
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Obligations and Contract agreement of the parties to the new obligation e)tinguishment of the old obligation validity of the new obligation E(tin"ti%# %ld obligation is terminated by the creation of a new obligation that ta=es the place of the former Kinds o' No%ation/ 's to essence *odi'i"ator$ %ld obligation subsists to the e)tent it remains compatible with the amendatory agreement
ob #"ti%#Hr#al D change either in the cause, object, or principal conditions of the obligation s!b #"ti%#H)#rsonal substitution of the person of the debtor (passive) or to the subrogation of a 5rd person in the rights of the creditor (active). *i(#d combination of objective and subjective novation. E()r#ss D declared in une#uivocal terms that the old obligation is e)tinguished by a new one which substitutes the same ta"it- old and new obligations are incompatible with each other on every point Total D e)tinguishment )artial D modification absolute mere
's to form or constitution
's to e)tent or effect
%bjective 9ovation* ",ang# in t,# "a!s# D e.g. contract of sale or a contract of lease in which the price has not yet been pad to the vendor or lessor. 1f the the parties to the contract subse#uently entered into a new
AUF School of Law agreement whereby the obligation to pay is converted into a loan made to the vendee or lessee, the result is real or objective novation ",ang# in ob #"t D e. g. certain amount is due or any change whereby the obligation to pay is converted into an obligation to render a personal service. 8imilar with dation in payment. ",ang# in )rin"i)al "onditions o' t,# obligation only those changes of an essential character can effect a novation of the previous or original obligation.
Obligations and Contract effect in obligation with a term or period* postponement of term or period D there is no novation reason* there is no incompatibility reduction of the duration of the term D there is a novation reason* clear case of incompatibility and change of the principal condition of the old obligation. ('rt. 0425) novation by substitution of the debtor D personal novation effected with the consent of the creditor expromision D effected with the consent of the creditor at the instance of the new debtor even without the =nowledge or against the will of the old debtor substitution with the =nowledge and consent of the old debtor substitution without the =nowledge and consent of the old debtor delegacion - effected with the consent of the creditor at the instance of the old debtor with the concurrence of the new debtor> refers to the substitution of debtors effected when the original debtor offers and the creditor accepts a 5rd person who consents to the substitution re#uisites* initiative of the substitution must emanate from the original debtor consent of the new debtor acceptance by the creditor difference according to 7anresa Bxpromision Delegacion 1nitiative for the change 1nitiative for the change does not emanate from emanates from the the debtor debtor may be made without the consent of the debtor since it consists in a 5rd person assuming his obligation 7ust be made with concurrence of original debtor since he who offers substitution the the it is the
('rt. 0424) &&&refers to forms of novation novation by presumption has never been favored animus novandi D intent to substitute a new obligation for the old one> must be clearly established before we can say that there is a novation resulting in the e)tinguishment of the old obligation and in the creation of a new one. (3ele"atus de!itor est odiosus in le"e) ")press novation- declared in une#uivocal terms* clearly results from the agreement, or shown by full discharge of the original debt otherwise the old contract remains in force and the new one is added to it 1mplied novation D test of incompatibility &&&C%9 the 4 obligations can stand together, each having its own independent e)istence. 9o incompatibiliy P 9o novation reiteration or ratification of the old contract with slight modifications or alterations 4nd contract provides for another method of payment 4nd contract provides for additional security 4nd contract provides for postponement of the date of payment creditor receives another guaranty or accepts payment from 5rd person, so long as there is no agreement that the principal debtor shall be released from the obligations filing of a surety bond
8ubstitution may be consent of the debtor effected even without (dele"ante), creditor
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AUF School of Law the consent original debtor of the (dele"atorio), and 5rd person (dele"ado) to be substituted is necessary
Obligations and Contract new debtor can demand the reimbursement of the entire amount which he has paid, and at the same time be subrogated in all of the rights of the creditor ('rt. 042.-042+) E''#"t o' non2)a$-#nt o' t,# n#0 d#btor/ general rule* novation by substitution of the debtor whether by expromision or dele"acion has the effect of releasing the original debtor from his obligation to the creditor, and the same time of substituting the new debtor thereto. &&&'rt. 042. is applicable only to expromision 1f the substitution is without the =nowledge or against the will of the original debtor, the new debtorGs insolvency 8B'LL 9%; $"E1E" the original debtorGs liability to the creditor if the substitution is with the =nowledge and consent of the original debtor, the new debtorGs insolvency 8B'LL $"E1E" the original debtorGs liability to the creditor &&&'rt. 042+ is applicable only to dele"acion $ight of action of the creditor against the original debtor can no longer be revived E:CE<T in the ffg. cases* when the insolvency of the delegado was already e)isting and of public =nowledge at the time the delegante delegated his debts when such insolvency was already e)isting and =nown to the original debtor when he delegated his debt. ('rt. 0423) a))li"abl# to/ objective novation novation by substituting the person of the debtor #''#"t !)on a""#ssor$ obligations/ it may subsist if there is a stipulation constituted in favor of a 5rd person which may be demanded separately from the principal obligation, although subordinated to the latter pour autrui D beneficial stipulation> stipulation in a contract, clearly and deliberately conferred by the
difference according to the case Auinto vs !eople* Bxpromision Delegacion 1nitiative does not come from the debtor and may be made without his =nowledge ;he debtor offers, the creditor accepts a 5rd person who consents to the substitution and assumes the obligation
&&&1n either mode of substitution, the "ons#nt o' t,# "r#ditor is INCIS<ENSABLE. - no time nor form prescribed when such consent must be given and ow it must be given. E''#"t o' )a$-#nt b$ n#0 d#btor/ old debtor must reimburse to the new debtor whatever benefits he may have derived therefrom. Bxpromisionrelationship shall be regulated by the rules regarding payment of a debt by a 5rd person 0it, debtorG consent D new debtor can demand the reimbursement of the entire amount which he has paid, and at the same time be subrogated in all of the rights of the creditor 0it,o!t the =nowledge and consent of the debtor (pa-ment *ithout Ano*led"e and consent)D new debtor can demand reimbursement from the old debtor only insofar as the payment has been beneficial to such debtor, no subrogation 0it,o!t the =nowledge and consent of the debtor (pa-ment *ith Ano*led"e and consent) D new debtor can demand the reimbursement of the entire amount which he has paid, and at the same time be subrogated in all of the rights of the creditor Delegacion D relationship between the parties shall be regulated by their agreement> in the absence thereof, the relationship shall be governed by the rules regarding payment of a debto by a 5rd person with the debtorGs consent.
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AUF School of Law contracting parties as a favor upon a 5rd person, who must have accepted it before it could be revo=ed ('rt. 0500) ('rt. 042--042/) - re#uisite of a valid new and old obligation before effecting novation is logical because the purpose of novation is substitution of the new obligation for the old. Old obligation void D there is nothing to novate> new obligation cannot ta=e effect voidable D when annulment depends upon the debtor or when a voidable obligation is ratified, novation is valid expromision without the consent of the debtor D debtor can still avail himself of the right to invo=e the voidable character of the obligation against any claim of the 4nd debtor if the new debtor is aware of the defect of the old obligation at the time when he assumed payment, he cannot avail himself of the right to invo=e the voidable character of the obligation against any claim of the creditor.
Obligations and Contract obligation is fulfilled D there is no novation since the re#uisite of a valid previous obligation would be lac=ing if conditions of both obligations are incompatible D 0st obligation is e)tinguished, new obligation remains (as the latest e)pression of the will or intent of the parties)
('rt. 05,,) novation by subrogation conventional subrogation D ta=es place by agreement of the original creditor, the 5rd person, and the debtor legal subrogation D ta=es place by force of law. ('rt. 05,0) conventional subrogation D must established in order to ta=e effect. "on%#ntional s!brogation be clearly
Assign-#nt o' rig,ts
Governed by 'rt. 05,,- Governed by 'rt. 034.05,. 0346ebtorGs re#uired consent is 6ebtorGs consent is not re#uired
n#0 obligation void D old obligation subsist, unless the parties intended that the former relation should be e)tinguished in any event ('rt. 0422) 1f the original obligation was subject to a suspensive or resolutory condition, the new obligation shall be under the same condition, unless it is otherwise stipulated. E''#"t i' old and n#0 ar# s!b #"t to a di''#r#nt "ondition/ both condition can stand together D both the condition in the original and new obligation must be fulfilled> the new obligation becomes demandable only the condition affecting the 0st obligation is fulfilled D previous obligation is revived, new obligation loses its force only the condition affecting the 4nd
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Bas the effect of Bas the effect of e)tinguishing the old transmitting the rights of obligation and gives rise the creditor to another to a new obligation person without modifying or e)tinguishing the obligation 6efects or vices in the 6efects or vices in the original obligation are original obligation are cured not cured "ffect arises from the 'rises form the moment moment of novation or the debtor is notified of subrogation the cession. ('rt. 05,4) General rule* Legal subrogation is not presumed, #("#)t/ 0. Chen a creditor pays another creditor who is preferred, even without the debtorGs =nowledge> the 4 obligations remain distinct and
AUF School of Law separate. 4. Chen a third person, not interested in the obligation, pays with the e)press or tacit approval of the debtor> apply 'rt. 0453-0455. Chen, even without the =nowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latterGs share. !ayment made by a co-debtor cannot produce the effect of subrogation because he cannot enforce against his co-debtors the payment of the original obligation ('rt. 05,5-05,.) E''#"t o' total s!brogation/ transfer of all the rights which the original creditor had against the debtor or against 5rd persons accessory obligations are not e)tinguished. ;his rule is absolute in legal subrogation in conventional subrogation D such accessory obligation may be increased or reduced depending upon the agreement of the parties. E''#"t o' )artial s!brogation/ - both the rights of the 5rd person and that of the creditor shall co-e)ist. 1n case of conflict, creditorGs right shall be preferred. TITLE II CONTRACTS C>A<TER 1 ('rt. 05,+) Contra"t 5cum traho8- meeting of the minds between 4 persons whereby one binds himself, with respect to the other, to give something or to render some service. agreement limited e)clusively to those agreements which produce patrimonial obligations specie juridical convention manifested in legal
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Obligations and Contract form, by virtue of which one or more persons bind themselves in favor of another or others, or reciprocally to the fulfillment of a prestation to give, to do, or not to do. "on%#ntion D includes any =ind of agreement which may create,modify, or e)tinguish patrimonial and even family relations genus ontract distinguished from other terms* 8ource of rights ontract-agreement of the and obligations parties %thers - law 9ature of the rights ontract- concrete, limited, and obligations and transitory others- elastic, permanent Contra"t absolute,
*arriag#
!arties may be 4 or 9ecessary that parties more persons of the must be one man and same or different se)es one woman Governed primarily by Governed by law the agreement of the parties Chen e)ecuted, result is contract the Chen celebrated, the result is status
an be terminated or annot be dissolved or dissolved by mere terminated agreement 1n case of breach, 1n case of breach, remedy is to institute an remedy is to institute an action for damages action for legal separation, or adultery or concubinage El#-#nts o' "ontra"ts/ Ess#ntial #l#-#nts- ommon D present in all without which there can contracts (consent of be no contracts both parties, object of the contract, cause of the obligation, parties)
AUF School of Law special D present only in certain contracts (delivery in real contracts, form in solemn contracts) e)traordinary D uni#ue to a specific contract (price in a contract of sale) Nat!ral #l#-#nts derived from the nature of the contract and ordinarily accompany the same presumed by although can e)cluded by contracting parties A""id#ntal #l#-#nts law be the
Obligations and Contract are not contrary to law, morals, good customs, public order, or public policy. .th relativity of contracts ta=e effect only between the parties, their assigns and heirs. @ ),as#s or stag#s o' t,# li'# o' "ontra"t 0st stage*G"9"$';1%9 preliminary preparation, conception of generation, period of negotiation, ending at the moment of agreement of the parties 4nd stage* !"$?" ;1%9 moment when parties come to agree on the terms of the contracts 5rd stage* %98:77';1%9 fulfillment or performance of the terms agreed upon in the contract Classi'i"ation o' "ontra"ts/ 'ccdg to their <r#)arator$ D necessary relation to as a preliminary step other towards the celebration of contracts another subse#uent contract )rin"i)al D can subsist independently a""#ssor$ D can e)ist only as a conse#uence of another prior contract. 'ccdg. to their perfection Cons#ns!al D perfected by mere agreement of the parties r#al D perfected with the consent of the parties and the delivery of the object by one party to the other. Co--on or in'or-al D no particular form s)#"ial or 'or-al D re#uire some particular form Trans'#r o' o0n#rs,i) "on%#$an"# o' !s# r#ndition o' s#r%i"# T,ings
")ist only when the parties e)pressly provide for them for the purpose of limiting or modifying the normal effects of the contract.
a!to2"ontra"t D there is only one party involved but said party merely acts in the name and for the account of two distinct contracting parties. 0. Chen a representative of another contracts with himself 4. when as representative of 4 persons brings about contract with himself and the principals ",ara"t#risti"s o' "ontra"ts 5O*AR8 0st* obligatory force or character contracting parties are bound, not only to the fulfillment of what has been e)pressly stipulated, but also to all of the conse#uences thereof. 4 -utuality of contracts contracts are binding upon both of the parties 5rd autonomy of contracts parties may establish such agreements as they may deem convenient, provided they
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nd
'ccdg. form
;o
'ccdg. ;o their purpose 'ccdg. ;o
AUF School of Law subject matter 9ature of the vinculum which they produce 'ccdg. cause ;o s#r%i"#s 9nilat#ral D gives rise to an obligation for only one of the parties bilat#ral D gives rise to reciprocal obligation On#ro!s D 0 of the parties aspire to procure for himself a benefit through the giving of an e#uivalent or compensation grat!ito!s D 0 of the parties proposes to give to the other a benefit without e#uivalent or compensation. Co--!tati%# D each of the parties ac#uires an e#uivalent of his prestation and such e#uivalent is pecuniarily appreciable and already determined. al#ator$ D which each of the parties has to his account the ac#uisition of an e#uivalent of his prestation although pecuniarily appreciable and such is not yet determined. No-inat# D have their own individuality, regulated by special provisions of law inno-inat# D lac= individuality, not regulated by special provisions of law
Obligations and Contract established must not be contrary to* la0 mandatory or prohibitive in character e)pressive of fundamental principles of justice impose essential re#uisites -orals principles which are incontrovertible and are universally admitted and which have received social and practical recognition good "!sto-s includes even those moral precept not recogni<ed universally but is sanctioned by the practice of a certain community )!bli" ord#r safety, peace and order of the country or of any particular community )!bli" )oli"$ no person can lawfully do that which has a tendency to be injurious to the public or against public good. t#st* C%9 restraint is reasonably necessary for the protection of the parties ('rt. 05,-) inno-inat# "ontra"ts- lac= individuality not regulated by special provisions of law covered by* provisions of ;itles 1 and 11 of @oo= 1E of ivil ode, (stipulation of the parties, general provisions or principles) rules governing the most analogous nominate contracts customs of the place B 4inds o' inno-inat# "ontra"ts do ut des do ut facias facio ut des facio ut facias no-inat# "ontra"ts - have their own distinctive individuality and are regulated by special provisions of law sales ('rts. 0.+/-035-) barter ('rts. 035/-03.0)
'ccdg. ;o ris= involved
'ccdg. norms
to
('rt. 05,3) &&&right of the contracting parties to establish any stipulation, clause, term or condition as they may deem convenient. (constitutional and statutory right) limitations* stipulation, clause, term or condition
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AUF School of Law lease ('rts. 03.4-0-33) partnership ('rts. 0-3--0/3-) agency ('rts. 0/3/-0254) loan ('rts. 0255-0230) deposit ('rts. 0234-4,,2) insurance, gambling, annuity ('rts. 4,0,4,4-) compromise and arbitrartion ('rts. 4,4/4,.3) guaranty ('rts. 4,.--4,/.) pledge, mortgage, antichresis ('rts. 4,/+40.0)
&&&?or an escalation clause to be valid, there must also be a de-escalation clause. ('rt. 0500) R#lati%it$ o' "ontra"ts D a contract can only bind the parties who had entered into it or their successors who have assumed their personality or their juridical position, and that as a conse#uence, such contract can neither favor nor prejudice a 5rd person. #("#)tion* if the rights and obligations arising from the contract are not trans-issibl#. @y their nature (e.g. personal or special #ualifications of the obligor) by stipulation of the parties (e.g. contract provides that the obligor shall perform an act by himself and not through another) @y provision of law (e.g. those arising from contract of partnership or of agency) <#rsons bo!nd b$ "ontra"ts/ )arti#s t,#ir assigns t,#ir ,#irs D by virtue of the right of succession, are subrogated to all the rights and obligations of the deceased and can not be regarded as 5rd parties with respect to a deceased monetary obligation which the decedent may have incurred during his lifetime cannot be transmitted to his heirs through succession. - such obligation must be li#uidated in the testate or intestate proceeding for the settlement of the estate of the decedent. 1t is the estate, rather than the heir , which must be considered as the continuation of the decedentGs personality. %bligations not monetary in character, and which will therefore constitute part of the inheritance are chargeable against the heirs, but only to the e)tent of the value of the property which they may have received from the decedent. G#n#ral r!l#/ ontracts cannot produce any effect whatsoever as far as third persons are concerned
&&&;he contract which is in restraint of trade is %alid as long as there is a stipulation as to time and place especially if for the protection of the parties. (3el Castillo vs Richmond0 .+ !hil. 3-2) Cas#s/ ;iu vs !latinum !lans, +0- 8 $' 0,0 'von osmetics vs Luna, +00 8 $' 5-3 ('rt. 05,/-050,) -!t!alit$ o' "ontra"ts D e#uality contracting parties
of
the
"ons#+!#n"#s/ 0. the fulfillment of a contract cannot be left to the will of one of the contracting parties power to determine the %alidit$ of the contract power to determine C%9 the contract s,all b# '!l'ill#d 4. validity or fulfillment may be left to the will of a 5rd person, such decision will only be binding when it has been made =nown to the contracting parties 5. validity or fulfillment can be left to chance (sensu contrario in 'rt. 05,/) contracts where mutuality is illusory because one of the contracting parties is placed in a position of superiority obligor promises to pay certain amount which is not determined (Liebenow vs !hil. Eegetable %il, 52 !hil. 3,) agreement where the fulfillment of the contract is left to the will of the contracting parties in the negative form of rescission ()
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AUF School of Law E("#)tion* 0. 0,#r# t,# "ontra"t "ontains a sti)!lation in 'a%or o' a @rd )#rson (stipulation pour autrui) if a contract should contain some stipulation in favor of a 5rd person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation ('rt. 0500, par. 4) revocation must be done by mutual agreement or at least by direction of the party purchasing the e)change or who initiated the insertion of the stipulation ((auffman vs -N/) corresponds almost always to the juridical conception of a gift or donation beneficial stipulation (pour autrui) D stipulation in a contract, "l#arl$ and d#lib#rat#l$ "on'#rr#d by the contracting parties as a favor upon a 5rd person who must have accepted it before it could be revo=ed and not just mere incidental interest Kinds o' )o!r a!tr!i those where the stipulation is intended for the 8%L" benefit of the 5rd person (gratuitous in character) those where an obligation is due from the promisee to a 5rd person which the former see=s to discharge by means of such stipulation. R#+!isit#s o' pour autrui) stipulation in favor of the 5rd person stipulation must be part, not a whole of the contract contracting parties must have clearly and deliberately conferred a favor upon a 5rd person the 5rd person must have communicated his acceptance to the obligor before its revocation neither of the contracting parties bears the legal representation of authori<ation from the 5rd party. T#st o' b#n#'i"ial sti)!lation/ the intention of the parties as disclosed by their contract.
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Obligations and Contract C%9 the contracting parties desired to tender him such an interest.
4. 0,#r# t,# @rd )#rson "o-#s in )oss#ssion o' t,# ob #"t o' a "ontra"t "r#ating a r#al rig,t (Art #+#)) 5. 0,#r# t,# "ontra"t is #nt#r#d into in ord#r to d#'ra!d a @rd )#rson (Art #+#+)
covered !- topic on rescissi!le contracts
.. 0,#r# t,# @rd )#rson ind!"#s a "ontra"ting )art$ to %iolat# ,is "ontra"t (Art #+#4) 9 contracts creatin" status (e " contract of marria"e) : "roup contracts (e " Collective Bar"ainin" A"reement) ;he voidable character of the contract cannot be asserted by one who is not a party to the transaction or his representative. ('rt. 0504) r#al rig,t D right belonging to a person over a specific thing without a passive subject individually determined against whom such right may be personally enforced enforceable against the whole world 5rd person who come to be in possession of the object of the contract creating a real right will have to be bound by the right, subject to the provisions of the 7ortgage Law and the L$ law ('rt. 0505) creditors are protected in cases of contracts intended to defraud them must be read in relation to 'rts. 05/, I 00-- of the ivil ode ('rt. 050.) any person who induces another to violate the contract shall be liable for damages to the other contracting party the right to perform a contract and to reap from such performance, and also the right to performance by the other party are property rights which entitle each party to protection and to see= compensation by an action in tort for any interference therewith. R#+!isit#s/
AUF School of Law e)istence of a valid contract =nowledge on the part of the 5rd person of the e)istence of such contract interference of the 5rd person without legal justification or e)cuse malice is generally implied
Obligations and Contract Jilliam Sevilla vs Sevilla) 1n recent cases decided by the 8 , the tribunal went bac= to the doctrine applying the principle that those contracts entered into without being clothed the proper authority are !n#n'or"#abl# (CasesF .scueta vs /im and Kozun vs Mercado) Voidabl# "ontra"ts @inding unless annulled ?arther away absolute nullity 9n#n'or"#abl# "ontra"ts annot be sued upon unless they are ratified
('rt. 050+-0503) )#r'#"tion o' "ontra"ts D moment in the life of the contract where the parties come to an agreement with respect to the object or cause of the contract. signifies the birth of the contract as obligatory tie, resulting from the concurrence of th wills of the contracting parties.- 7anresa G#n#ral r!l#/ !erfection of a contract is produced by mere consent. E("#)tion* contracts of commodatum, pledge, and deposit are perfected upon delivery of the object by one of the contracting parties. "ons#ns!alit$ D some submit that this is one of the fundamental characteristic of a contract B!t this does not hold water in those $eal contracts which re#uires delivery before its perfection. Cons#ns!al "ontra"ts D perfected by mere consent of the parties r#al "ontra"ts D perfected after delivery of the object (pledge, commodatum0 depositum0 mutuum) 1t is only when there is a complete manifestation of the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. ('rt. 050-) 9o person may enter into a contract in the name of another without the proper authority from the latter or from law. based on the principle of obligatory force and relativity of a contract. E''#"t upon the contract when a person acted without the proper authority re#uired/ $enders the contract !n#n'or"#abl# but the 8 in some case held that these contracts are Void ab initio (CasesF $alu*a"an" Ba-an vs Hin" and Ieirs of
50
from 1ntermediate ground between voidable and void contract.
:nenforceable contracts are susceptible of either e)press or implied ratification by the one in whose behalf it was e)ecuted before it is revo=ed by the other contracting party. C>A<TER = ESSENTIAL RE;9ISITES OA CONTRACTS ('rt. 050/) bas#s o' "ontra"t/ elements la0 0ill o' t,# "ontra"ting )arti#s onformed to. 'ccepted repudiated established or
"ssential are... 1mposed 9atural are... presumed
'ccidental are... 'uthori<ed
*ec. 9. : &onsent ('rt. 0502) "ons#nt 5cum sentire8 D most important element constitutes the very heart and soul of contracts agreement of wills. oncurrence of the wills of the contracting parties with respect to the object and cause which shall constitute the contract. R#+!isit#s/ 1. "ons#nt -!st b# -ani'#st#d b$ t,# "on"!rr#n"# o' t,# o''#r and t,# a""#)tan"# 5Art. 1@1721@=68
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AUF School of Law once there is such a manifestation of the concurrence of the wills of the contracting parties, the period or stage of negotiation is terminated. %ffer D proposal to ma=e contract must be certain or definite acceptance D must also be certain and definite must also be absolute counter-offer D #ualified acceptance> involves a new proposal> rejection of the original offer amplified acceptance D there is a perfected contract with regard the original offer> but with regard to the additional, the offeree is now ma=ing a counter-offer. omple) offers D rule depends whether the offers are interrelated or not. ")ample* - offer to sell lot no0, and lease on lot no4...the offeree accepted only the 0st offer, is there a valid contractLR"8 with regard the 0st offer.. - offer to mortgage the property and loan 07...the offers are interrelated, they may not be separately accepted. !ublic offer D offer made to the public gives rise to a perfected contract the moment it is accepted. contracts that are consensual in nature are perfected upon mere meeting of the minds acceptance by letter or telegram* the contract is perfected the moment.... theories* (a) *ani'#station t,#or$ D ...the acceptance is declared or made (b) E()#dition t,#or$ - S the offeree transmits(sents the notification of acceptance to the offeror. (c) R#"#)tion t,#or$ D... the notification is in the hand of the offeror or delivered to the offeror, in such a manner that he can procure the =nowledge of its content. (d) Cognition t,#or$ - S the acceptance comes to the =nowledge of the offeror par. 4, 'rt. 0502 said that acceptance made by letter or telegram does not bind the offeror e)cept from the time it came to his 4no0l#dg#.
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'ctual =nowledge D re#uired by law> offeror must have read the contents of the letter or telegram accepting his offer. mere receipt of the letter is not sufficient. !resumption that once the offeror has received the letter, he already had read the contents thereof, e)cept* when he is absent when he is incapacitated (at the time of the receipt of the letter) 8ame rule applies in case where the acceptance is made by a person who is not in the presence of the offeror (contratacion entre ausentes) cognition theory will not apply if the offeror himself refused to open the telegram for some reason or another. Cfferor withdraws offer) &&&offeror -a$ still 0it,dra0 t,# o''#r so long as he still has no =nowledge of the acceptance by the offeree. ( ase* /audico vs Arias) effect of withdrawal is immediate Cfferee withdraws acceptance) &&&t,# a""#)tan"# -a$ b# r#%o4#d before it comes to the =nowledge of the offeror, because in such case there is still no meeting of the minds, since the revocation has canceled or nullified the acceptance which thereby ceased to have any legal effect. (2olentino) - vs &&&the offeree loses the power to retract the acceptance from the moment that he accepts. $eason* since the offeree is the first person who =nows of the concurrence of wills of the parties, as a conse#uence, the obligation, as far as he is concerned, must also commence earlier. #5anresa' the view of 2olentino is more logical0 the onldecisive moment to consider (moment of perfection) is the moment *hen the offeror has Ano*led"e of the acceptance made !- the offeree =. t,# "ontra"ting )arti#s -!st )oss#ss t,# n#"#ssar$ l#gal "a)a"it$ 5Art. 1@=.21@=78
AUF School of Law @. t,# "ons#nt -!st b# int#llig#nt& 'r##& s)ontan#o!s and r#al 5Art. 1@@621@B68 ('rt. 054,) ?orm of acceptance* e)press implied !resumptive consent is the basis of #uasicontracts (-ere3 vs -omar) &&&the form prescribed by law should be followed, otherwise, there will be no valid and binding acceptance ('rt. 0540-0545) the person who ma=es the offer has the right to specify the manner, time and place of acceptance 'rt. 0544 is not applied when what is referred to is a mere messenger and not an agent who has the capacity to negotiate and represent the principal. 'n offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. Con%#$#d D moment when the offeror has =nowledge of the acceptance by the offeree. R#asons 'or Art. 1@=@/ d#at, e)tinguishes personality and juridical capacity "i%il int#rdi"tion (accessory penalty for $;) person is deprived of parental authority, guardian, and also deprived of the right to manage or dispose of his property, he cannot e)ecute acts inter vivos. Insanit$ D insane person cannot give a valid consent to a contract. Be loses the capacity to do acts with legal effects insol%#n"$ D modifies or limits capacity to act. ('rt. 054.) if the option is 0it,o!t "onsid#ration, the offeror may withdraw his offer by communicating such withdrawal to the offeree at any time before acceptance.
Obligations and Contract 1f it is 'o!nd#d !)on a "onsid#ration, the offeror cannot withdraw his offer article contemplates an option contract D a preparatory contract. ('rt. 054+-054+) 'dvertisements for bidders are simply invitations to ma=e proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. ('rt. 054-) capacity of the contracting parties D essential element of a contract indispensable re#uisite of a consent In"a)a"itat#d to gi%# "ons#nt/ 1. !n#-an"i)at#d -inors e)ception* when it is entered into by a minor who misrepresents his age based on the principle of estoppel must be active not merely constructive when it involves the sale and delivery of necessaries to the minor ('rt.0..2) when it involves a natural obligation and such obligation is fulfilled voluntarily by the minor (0/-40 y.o) when it is a marriage settlement or propter nuptias (4,-40 male> 0/-40 female) when it is a life, health, or accident insurance ta=en on the life of the minor (0/ y.o above) with minorGs estate, father, mother, husband, wife, child, brother or sister as beneficiary. &&&there are no more emancipated minors since the age of majority has been raised to 0/ y.o. =. insan# or d#-#nt#d )#rsons contracting parties are unable to understand the nature and conse#uences of the contract at the time of its e)ecution by reason of any cause affecting his intellectual or sensitive faculties. (includes drun=enness, or under hypnotic spell) contracts entered into during lucid interval is valid. ' #uestion of cat which must be decided by the court
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AUF School of Law @. d#a'2-!t#s 0,o do not 4no0 ,o0 to 0rit# there is no way that the stipulations in the contract be e)plained to them to insure that they understand what they are entering into. B. ot,#r in"a)a"itat#d )#rsons married woman in cases specified by law incompetent (8ec. 4 of $ule 24 of the 9ew $ules of ourt) includes* persons suffering from civil interdiction hospitali<ed lepers prodigals deaf and dumb who are unable to read who are of unsound mind those who by reason of age, wea= mind or other similar cases, cannot, without aid from other, ta=e care of themselves and manage their property becoming thereby easy prey fro deceit and e)ploitation. these incapacitated persons can enter into a contract only through a parent or guardian. E''#"ts/ C#'#"ti%# "ontra"t D effect of incapacitated persons entering into a contract not through a parent or agent. Voidabl# "ontra"ts D only one of the contracting parties is incapacitated to give consent. 9n#n'or"#abl# "ontra"ts D when both parties are incapacitated to give consent.. ('rt. 054/-0542) contracts entered into during a lucid interval are valid. &&&;hose referred to in 'rt. 0542 are those who are prohibited from entering into a contract with certain persons with regard to certain property under certain circumstances. In"a)a"it$ to gi%# "ons#nt to a "ontra"t Cis+!ali'i"ationH)ro,ibit ion to "ontra"t
Obligations and Contract @ased upon @ased upon public policy subjective and morality circumstances of certain persons which compel the law to suspend the personGs right to contract "ffect is a Eoidable "ffect is a void contract contract ('rt. 052,) ('rt. + I 'rt. 0.,2 9o. of the ivil ode) ('rt. 055,) %i"#s 0,i", -a$ %itiat# "ons#nt/ vices of the will (vicios de la formacion de la voluntad) mista=e violence intimidation undue influence fraud vices of declaration (vicios de la declaracion) simulation of contracts 'ccdg. to 7anresa, 'rt. 055, is a negative enumeration of the re#uisites of consent. 1ntelligent (mista=e) free (violence, intimidation I undue influence) spontaneous (fraud) real (simulation of contracts) &&&in the absence of the 0st 5 re#uisites, the contract is %oidabl#. &&&in the absence of the .th re#uisite, the contract may be either %oid ab initio or %alid as 'ar as t,# r#al agr##-#nt is "on"#rn#d, depending upon whether the simulation is absolute or relative. ('rt. 0550) -ista4# D wrong conception of a thing and the lac= of =nowledge with respect to a thing. = 4inds/ -ista4# o' 'a"t D when one or both of the contracting parties believe that a fact e)ist when in fact it does not mista=e as to object identity of the thing (error in corpore)
$estrains the right to $estrains the very thing contract itself
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AUF School of Law substance of the thing (error in su!stantia) conditions of the thing (provided such condition principally moved one or both of the parties to enter into the contract) #uantity of the thing (error in quantitate) mista=e as to person name of a person. 1dentity of a person D effect is voidable contract #ualification of a person re#uisites* the mista=e must be either with regard to the identity or with regard to the #ualification of the person such identity or #ualification must have been the principal consideration for the celebration of the contract &:sually, these mista=es occur in obligations to do. -ista4# o' la0 D when one or both f the contracting parties arrive at an erroneous conclusion regarding the interpretation of a #uestion of law or the legal effects of a certain act or transaction. G#n#ral r!l#* only mista=e of fact which will vitiate consent renders the contract voidable. ' mista=e of law does not render the contract voidable (i"norantia le"is non excusat) Cas#/ 'siain vs Jalandoni ('rt. 0554) intended for the protection of a party to a contract who is at a disadvantage due to his illiteracy, ignorance, mental wea=ness, or handicap. ?raud is present when there is an insidious words or machinations of one of the contracting parties, the other is induced to enter into the contract which without them, he would not have agreed to it. ('rt. 0555-055.) General rule* mista=e of law will not vitiate consent. ")ception* mutual error re#uisites* mista=e must be with respect to the legal effect of the agreement mista=e must be mutual
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Obligations and Contract the real purpose of the parties must have been frustrated.
('rt. 055+-0553) %iol#n"# D use of irresistible force re#uisites* force employed to wrest consent must be serious or irresistible it must be the determining cause for the party upon whom it is employed in entering into the contract. inti-idation D compelling by reasonable and well grounded fear of an imminent or grave evil upon his person, property, or upon the person or property of his spouse, descendants, or ascendants violence and intimidation are sometimes called duress. $e#uisites* one of the contracting parties is compelled to give consent by a reasonable and well grounded fear of an evil the evil must be imminent and grave the evil must be unjust the evil must be the determining cause for the party upon whom it is employed in entering into the contract. C,ara"t#r o' inti-idation/ actual serious possible of reali<ation and that the actor can and still carry out his threat d#t#r-ination o' t,# d#gr## o' inti-idation/ age se) condition of the person #''#"t o' !st or l#gal t,r#at/ -it does not vitiate consent the contract would still be perfectly valid and not voidable. Viol#n"# inti-idation ")ternal 1nternal (physical compulsion - (moral compulsion-
AUF School of Law astan) !revents the e)pression of the will substituting it with a material act dictated by another astan) 1nfluences the will, inhibiting it in such a way that the e)pression therefor is apparently that of a person who has freely given his consent.
Obligations and Contract dolo incidente D incidental fraud> deceptions or misrepresentation 9%; of a serious character employed by one party and without it, the other party 0o!ld still have entered into the agreement Dolo causante ?raud 8erious character dolo incidente in 9ot so serious
&ase* 7artine< vs Bong=ong I 8hanghai @an= distinction between vitiated consent and reluctant consent ('rt. 055-) !nd!# in'l!#n"# D ta=ing improper advantage of oneGs power over the will of another, depriving the latter of a reasonable freedom of choice. ;est* C%9 the the influence e)erted has overpowered or subjugated the mind of a contracting party as to destroy his free agency, ma=ing him e)press the will of another rather than his own. ;hing to be considered* confidential, spiritual, family, and other elations between parties ('rt. 055/) 'ra!d D insidious words or machinations employed by one of the contracting parties in order to induce the other to enter into a contract, which, without them, he would not have agreed to. Kinds o' 'ra!d/ Art. 1@@3& Ci%il Cod#
ause which induces 9ot the cause the party upon whom it is employed in entering the contract "ffect is contract a voidable "ffect is damages liability for
R#+!isit#s* insidious words insidious words must be serious insidious words must have induced the other party to enter into the contract D such fraud must be the principal or causal inducement or consideration for the consent of the other party. fraud should not have been employed by the contracting parties or by third persons t#st* there must be proof of concrete facts constituting the fraud or insidious words or machinations employed by one of the contracting parties ('rt. 0552) ?ailure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud. ('rt. 05.,) ;he usual e)aggerations in trade, when the other party had an opportunity to =now the facts, are not in themselves fraudulent. ('rt. 05.0) ' mere e)pression of an opinion does not signify fraud, unless made by an e)pert and the other party has relied on the formerGs special =nowledge. &ase) 8ongco vs 8ellner ('rt. 05.4) 7isrepresentation by a third person does not vitiate
Art. 11.6211.1& Cod#
Ci%il the the
?raud in the perfection ?raud in of the contract performance of obligation
"mployed in securing ?raud employed by the the consent of the other obligor in the party performance of a pree)isting obligation Dolo causante D causal fraud> deceptions or misrepresentation of a serious character employed by one party and without it, the other party 0o!ld not ,a%# entered into the agreement ('rt. 055/)
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AUF School of Law consent, unless such misrepresentation has created substantial mista=e and the same is mutual. &ase) $ural @an= of aloocan vs '
Obligations and Contract o' -#n - appropriability and transmissibility =. t,# ob #"t s,o!ld b# r#al or )ossibl# - objects that are ine)istent cannot be the object of contracts. - future things may be the object of contracts conditional contract D presumption in case of doubt about the nature of contract aleatory contract e)ception* future inheritance may not be the object of contract ('rt. 05.-) exception to exceptionF 'rt. 0,/, of the ivil ode> partition of estate inter vivos, provided that the legitime of compulsory heirs is not prejudiced
('rt. 05.5-05..) serious character of fraud D refers to the magnitude and importance of the fraud in securing the consent of the other party. ('rt. 05.+-05.3) si-!lation o' "ontra"ts absol!t# R#lati%# ontracting parties do !arties conceal not intend to be bound true agreement by the contract at all their
ontract is not really 8till has legal effects desired or intended to produce legal effects or in any way alter the juridical situation of the parties "ffect* void contract 8till binds the contracting parties to their real agreement, when it does not prejudice a 5rd person and is not intended for any purpose contrary to law, morals, good customs, public order, or public policy
3. the object shall be licit

B. t,# ob #"t s,o!ld b# d#t#r-inat# - the genus of the object should be e)pressed although there might be no determination of the individual specie &&&;he fact that the #uantity is not determinate shall not be an obstacle to the e)istence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. "annot b# ob #"ts o' "ontra"ts/ outside the commerce of men intransmissible rights future inheritance, e)cept in cases e)pressly authori<ed by law reason* possibility that one of the contracting parties may be tempted to instigate the death of the other in order that inheritance will become his probability that fraud and prejudice may be committed or occasioned thereby services which are contrary to law, morals, good customs, public order, public policy impossible things or services a!solute impossi!ilit- of service D arises from the nature or essence of the act or service itself> void contract relative impossi!ilit- of service D arises
&ase* Loyola vs ' *ec. =. : Cbject of contract Ob #"t D most fundamental and indispensable re#uisite of a contract. the thing, right or service which is the subject matter of the obligation which is created or established. ;he what of the contract. ('rt. 05.- D 05.2) General rule* 'll things or services may be the object of contracts $e#uisites* 1. t,# ob #"t s,all b# 0it,in t,# "o--#r"#
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AUF School of Law form the circumstances or #ualifications of the obligor rendering him incapable of e)ecuting the act or service, allows the perfection of the contract, although the fulfillment thereof is hardly probable. 1f impossibility may permanent in character, contract is void objects which are not of possible determination as to its =ind
Obligations and Contract will affect the validity of will not the contract e)istence contract affect of the the
&&&;he motives of the contracting parties are as different or comple) and as capable of infinite variety as the individual circumstances which may move men to ac#uire things or ma=e money. &&&;he motives may be regarded as when the contract is conditioned attainment of the motive of either parties. &ases* Ligue< vs ', $odrigue< vs !hil. @an=ing orp. vs Lui 8he the causa upon the contracting $odrigue<,
*ec. >. : &ause of &ontracts ('rt. 05+,-05+0) Ca!s# D the why of the contract juridical reason why the parties entered into the contract essential reason which moves the contracting parties to enter into a contract. 1mmediate, direct, or most pro)imate reason which e)plains I justifies the creation of the obligation through the will of the contracting parties. On#ro!s "ontra"ts ;he prestation or promise of a thing or service by the other R#-!n#tor$ "ontra"ts 8ervice or the benefit which is remunerated or compensated <!r# b#n#'i"#n"# Liberality or generosity of the benefactor
&&&;he cause of the accessory contract is identical with that of the principal contract. &&&Chen a moral obligation arises wholly from ethical considerations, unconnected with any civil obligation and as such, is not demandable in law but only in conscience, it can not constitute a sufficient cause or consideration supporting an onerous contract. &ases* ?isher vs $obb, Eillaroel vs "strada R#-!n#tor$ "ontra"ts D one in which one of the contracting parties compensates the service or benefit rendered by the other party, although such service or benefit does not constitute a demandable debt. ('rt. 05+4-05++) essential re#uisites of cause* (#lt) the cause should be in #)istence at the time of the celebration of the contract. ;he cause should be licit or lawful the cause should be true. &&&;he cause is presumed to be e)isting and licit(lawful. ('rt. 05+.) &&&ine)istent cause, false, or unlawful(illicit cause produces no effect (void a! initio) &ase* arantes vs ' D inade#uate causa or consideration lesion or inade#uacy of cause will not invalidate the contract, unless there be fraud, mista=e, or undue influence (%oidabl# contract if any of the 5 is present). ('rt.
1n onerous contracts, even a mere promise is a sufficient causa or consideration. $emedy* rescission or specific performance. &&&the object of an onerous contracts is the same as to both parties, although the cause is different. ;olentino Ca!s# *oti%#s
6irect, pro)imate 1ndirect and remote reason of a contract reason of a contract %bjective or juridical !sychological and reason of a contract purely personal reasons 'lways the same 6iffers for each contracting parties
1ts legality or illegality 1ts legality or illegality
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AUF School of Law 05++) !nla0'!l "a!s# D contrary to law, morals, good customs, public order, public policy effect* contract void ab initio &ases* Eeles vs $amas as compared with 7actal vs 7elegrito (incipient criminal liability) C>A<TER @ AOR*S OA CONTRACTS ('rt. 05+3) spiritual system of the 8panish ode D the law loo=s more at the spirit(intent rather than at the forms of the contract. General $ule* contracts shall be obligatory, provided all the essential elements of a contract are present. ")ceptions* 0,#n t,# la0 r#+!ir#s t,at t,# "ontra"t -!st b# in a "#rtain 'or- in ord#r to b# %alid must appear in writing donation and acceptance of personal property whose value e)ceeds !+,,,,.,, sale of a piece of land or any interest therein through an agent agreements regarding payment of interest in contract of loan antichresis must appear in public document donations of immovable properties regardless of value partnerships where immovable property or real rights are contributed to the common fund must be registered chattel mortgages sales or transfer of large cattle 0,#n t,# la0 r#+!ir#s t,at t,# "ontra"t -!st b# in a "#rtain 'or- in ord#r to b# #n'or"#abl#. overed by the 8tatutes of ?rauds &ase* @? orp vs ' D contract may not be limited in a single document or writing 'or-s o' "ontra"ts*
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Obligations and Contract necessary for the convenience of the contracting parties or for the efficacy of the contract ('rts. 05+3-05+/) necessary for the validity of the contract (scattered provisions of the ode and some special laws) necessary for the enforceability of the contract (8tatute of ?rauds)
('rts. 05+--05+/) )rin"i)l#s d#d!"ibl# 'ro- !ris)r!d#n"# 'rts. 053+--05+/ re#uire the e)ecution of the contract in a private or public document to insure its efficacy. @oth articles presupposes the e)istence of a contract which is valid and enforceable. 1nvo=ing 'rts. 05+--05+/ place the e)istence of the contract in issue, which must be resolved by the ordinary rules of evidence 'rt. 05+- does not re#uire that the action to compel the e)ecution of the necessary document must precede the action upon the contract. 'rt. 05+/ does not affect the validity or enforceability of the contract. !resent for mere convenience &ase* 6auden-Bernae< vs 6e Los 'ngeles C>A<TER B REAOR*ATION OA INSTR9*ENTS ('rt. 05+2) $"?%$7';1%9 D used when the true intention of the parties to a perfected and valid contract are not e)pressed in the instrument purporting to embody their agreement by reason of mista=e, fraud, ine#uitable conduct or accident based on justice and e#uity r#+!isit#s* meeting of the minds of the contracting parties true intention not e)pressed in the instrument such failure to e)press their true intention is due to mista=e, fraud, ine#uitable conduct, or accident. R#'or-ation o' "ontra"t Ann!l-#nt o' "ontra"t
AUF School of Law !resupposes a valid contract in which there has already been a meeting of the mind @ased on a defective contract in which there has been no meeting of the minds because the consent of one or both of the contracting parties has been vitiated. $emedy when there has been no meeting of the minds because of mista=e, fraud, ine#uitable conduct, or accident
Obligations and Contract the one who adheres to the contract is in reality free to reject it entirely, if he adheres, he gives his consent. (%n" Liu vs CA) its enforceability will have to be determined by the peculiar circumstances obtaining in each case and the situation of the parties concerned in case of conflict, the contract will be interpreted against the one who drafted the contract. 4steps needed to follow(contracts of credit cards) to absolve a card holder from liability for unauthori<ed purchase made through lost or stolen card 0. the card holder must give a written notice to the credit card company 4. credit company must give notice to all its member establishments of such lost or theft C>A<TER 5 INTER<RETATION OA CONTRACTS ('rt. 05-,-05-0) &&&1ntention of the contracting parties always prevail because their will has the force of law between them. &&&Literal sense of the stipulations shall be followed. &&&%nce the intention has been ascertained, it becomes an integral part of the contract as though it had been originally e)pressed therein in une#uivocal terms. ;he character of the transaction between the parties is not determined by the language used in the document but by their intention. (Manila BanAin" Corp vs @eodoro0 5r ) contemporaneous and subse#uent acts of the parties must be considered in order to judge the intention of the contracting parties. &ase* ;anguilig vs ' ('rt. 05-4-05-2) '$;1 L" 05-4. Bowever general the terms of a contract may be, they shall not be understood
9ot a remedy when there has been fraud, mista=e, ine#uitable conduct or accident.
('rt. 053,-0532) 0,#n "an on# )art$ as4 'or t,# r#'or-ation o' t,# "ontra"t/ mutual mista=e of the parties ('rt. 0530) one party was mista=en and the other party acted fraudulently('rt. 0534) one party mista=en, the other =new or believed that the instrument does not show their real intent but concealed that fact to the former ('rt. 0535) through the ignorance, lac= of s=ill, negligence or bad faith on the part of the person drafting the instrument or the cler= or typist. ('rt. 053.) !arties agree upon the mortgage or pledge of a real or personal property, but the instrument states that the property is sold absolutely or with a right of repurchase ('rt. 053+) 0,#n t,#r# "an b# no r#'or-ation/ simple donation inter vivos wherein no condition is imposed wills when the real agreement is void ('rt. 0533) when one of the parties brought an action to enforce the instrument ('rt. 053-) "ontra"t o' ad,#sion D one in which one of the parties imposes a ready made form of contract, which the other party may accept or reject, but which the latter cannot modify as binding as a mutually e)ecuted transaction (A-ala Corp vs Ra- Burton 3evDt Corp )
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AUF School of Law to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree. (04/5) '$;1 L" 05-5. 1f some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import which is most ade#uate to render it effectual. (04/.) '$;1 L" 05-.. ;he various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them ta=en jointly. (04/+) '$;1 L" 05-+. Cords which may have different significations shall be understood in that which is most in =eeping with the nature and object of the contract. (04/3) '$;1 L" 05-3. ;he 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. (04/-) '$;1 L" 05--. ;he interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. (04//) '$;1 L" 05-/. Chen 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. 1f the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests. 1f the doubts are cast upon the principal object of the contract in such a way that it cannot be =nown what may have been the intention or will of the parties, the contract shall be null and void. (04/2) '$;1 L" 05-2. ;he principles of interpretation stated in $ule 045 of the $ules of ourt shall li=ewise be observed in the construction of contracts. C>A<TER 6 RESCISSIBLE CONTRACTS lasses of defective contracts* rescissible contracts voidable contracts unenforceable contracts void or ine)istent contracts r#s"issibl# %oidabl# !n #n'or"#abl Void
Obligations and Contract # 's to C#'#"t ;here is da-ag# or in !r$ either to 0 of the parties or to 5rd persons ;here is %itiation o' "ons#nt or legal capacity of 0 of the parties ontract entered into 0it,o!t a!t,ority> does not comply with 8tatute of ?raud> both parties are legally incapacitat ed La"4 o' one or some of the #ss#ntial r#+!isit#s of a valid contract.
's to E''#"t Ealid and enforceabl e until they are rescinded by a competent court 'ction of rescission may prescribe Ealid and enforceabl e until they are annulled by a competent court 'ction for annulment may prescribe annot be !roduce no enforced legal effect by a proper action in court
's to )r#s"ri)tibilit$ of action or defense ?or total or partial performanc e, the action for recovery may prescribe 'ction for declaration of nullity does not prescribe.
's to susceptibility of rati'i"ation 9ot susceptible susceptible susceptible of of of ratification ratification ratification 9ot susceptible of ratification
's to 0,o -a$ assail contracts ontracting ontracting ontracting ontracting parties> 5rd party party parties> 5rd person person prejudiced whose interest is directly
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AUF School of Law affected. 's to ,o0 contracts may be assail#d 6irectly 6irectly or 6irectly or 6irectly or collaterally collaterally collaterally
R#s"ission o' "ontra"ts
R#s"ission b$ -!t!al "ons#nt
('rt. 05/,) r#s"issibl# "ontra"ts D all of the essential elements of a contract are present> contract is valid, but by reason of injury or damage to either of the contracting parties or to 5rd persons, it may be rescinded. C,ara"t#risti"s/ defects consists in injury or damage to either of one of the contracting parties or to 5rd persons. @efore rescission, they are valid and therefore legally effective can only be attac=ed directly can be attac=ed by 1 of the contracting parties or the 5rd person injured or defrauded. 8usceptible of convalidation only by prescription and not by ratification r#s"ission remedy to secure the reparation of damages caused to the contracting party or 5rd person by a contract> by means of restoration of things to their condition prior to the celebration of the contract. R#s"ission o' R#sol!tion o' "ontra"ts r#"i)ro"al obligations 5Art. 1@3621@378 5Art. 11718 7ay be instituted by a 7ay be instituted onl$ party to the contract by a )art$ to the and(or even @rd )#rson contract S#%#ral "a!s#s or grounds* lesion, fraud, and other e)pressly specified by law Gro!nd* failure of one the contracting parties to comply with what is incumbent upon him.
auses mentioned in 'greement of the 'rts. 05/0 and 05/4 parties to rescind the contract. $estoration to the condition of the parties prior to the constitution of the contract "ffects should be determined by the agreement made by the parties, or by the application of other legal provisions e)cept 'rt. 05/+
&ase* '#uino vs ;anedo ('rt. 05/0-05/4) rescissible contracts are* 1. "ontra"ts in b#,al' o' 0ard entered into by guardians whenever their wards suffer lesion or damages by more than T of the value of the thing which are the object thereof. $ules of ourt* judicial guardian entering into a contract with respect to the property of his ward must ordinarily secure the approval of a competent court. 'pply 'rts 543, > $ules 2+-23 9ew $ules of ourt =. "ontra"ts in b#,al' o' abs#nt##s rescissible if the absentee suffer the lesion or damage by more than T of the value of the thing which are the object thereof. principles applicable in 'rt. 05/0, par 0 are applicable to this provision since the powers and duties of representatives are the same as that of the guardian. $e#uisites for par. 0 I 4 of 'rts. 05/0 contract must have been entered into by the guardian in behalf of his ward or a legal representative in behalf of an absentee ward or absentee must have suffered lesion of more than T of the value of the property which is the object of the contract. ontract must have been entered into without court approval there must be no other means for obtaining reparation for the lesion the person as=ing for the rescission must be able to return whatever he may be
ourt has no )o0#r to ;he court ,as grant an e)tension of dis"r#tionar$ )o0#r to time for performance of grant an e)tension for the obligation performance provided that there is just cause. 7ay apply to :nilateral 'pplies only and reciprocal contracts reciprocal contracts to
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AUF School of Law obliged to restore. %bject of the contract must not be legally in the possession of 5rd person who acted in good faith. (otherwise, remedy is indemnification for damages) @. "ontra"ts in 'ra!d o' "r#ditors when the creditor cannot in any manner collect the claims due them. $e#uisites* e)isting credit prior to the celebration of the contract. ?raud or at least an intent to commit fraud to the prejudice of the creditor see=ing rescission. 9o other manner by which the creditor can collect the credit object of the credit is not in legal possession by 5rd person who acted in good faith.(otherwise, remedy is to proceed against the person causing the loss for damages) accion pauliana- action to rescind contracts in fraud of the creditors re#uisites* plaintiff as=ing for the rescission has a credit prior to the alienation debtor has made a subse#uent contract conveying patrimonial benefit to a 5rd person creditor has no other legal remedy act being impugned is fraudulent. 5rd person has been an accomplice in the fraud. !urpose is to guarantee an e)isting debt there is personal right that deserves the protection of law B. "ontra"ts r#'#rring to t,ings in litigation if entered into by the defendant without the =nowledge and approval of the litigants or of competent judicial authority. !urpose is to secure the possible effectivity of a claim there is a real right involved that deserves the protection of law +. "ontra"ts b$ insol%#nt ('rt. 05/4) insolvency D refers to the financial situation of the debtor in which it is impossible for him to fulfill his obligations. re#uisites*
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Obligations and Contract it must have been made in a state of insolvency the obligation must have been one which the debtor could not be compelled to pay at the time such payment was effected. @asis of the rescissible character is fraud contemplates obligations with terms or are subject to suspensive condition> void and natural obligations> and those condoned or have prescribed. 6. ot,#r "ontra"ts d#"lar#d b$ la0 to b# r#s"issibl# 'rts. 0,2/, 00/2, 0+43, 0+5., 0+52, 0+.4, 0++3, 0+3,, 0+3-, and 03+2 of the ivil ode ('rt. 05/5) &&&'ction for rescission is s!bsidiar$ it cannot be instituted e)cept when the party suffering damage has no other legal means to obtain reparation for the same. F,o -a$ instit!t# a"tion* person prejudiced party suffering the lesion in the rescissory action on the ground of fraud creditor who is defrauded in rescissory actions other persons authori<ed to e)ercise the same in their rescissory actions. representatives of those prejudiced heirs of those prejudiced creditors by virtue of the subrogatory action ('rt. 00--) &&&1f the decedent himself does not have the right to institute the action, the heir acting as representative of the decedent also does not have the right to institute the action> however, it will be possible for him to institute the action in his own right (9o.5 'rt. 05/0, ivil ode) &ase* oncepcion vs 8ta. 'na ('rt. 05/.) purpose of rescission* reparation of damage or injury suffered by one of the contracting parties or 5rd person. ")tent of rescission shall be only be to that necessary to cover the damage caused.
AUF School of Law ('rt. 05/+) par. 0 of the provision applies only to rescissory actions on the ground of lesion and not to rescissory action based on fraud. "ffect of rescission* return the things which were the object of the contract (1ncludes fruits or interests) fruits D natural, industrial, civil, and other accessions obtained by the thing interest D legal interest &&&rescission cannot apply if the one who demands cannot return what he may be obliged to restore. ;he determination of good or bad faith of the contacting parties is important in order to assess the fruits or the value thereof which must be returned as well as the e)penses which must be reimbursed. 1n transfer of properties through grat!ito!s titl#, good faith of the transferee is not a defense. $escission shall not ta=e effect upon 5rd person, 4 re#uisites* the thing must be legally in the possession of 5rd person (immova!le0propert-F the thin" must !e re"istered in the name of the +rd person for the requisite to appl-) &ase* 8i=atuna vs Guevarra such 5rd person must not have acted in bad faith. $emedy if maintaining an action for the rescission is impossible is to bring an a"tion 'or ind#-nit$ 'or da-ag#s against the person who caused the loss. ('rt. 05/3-05//) proof of fraud- needed to be established in order that a contract may be rescinded presumption of fraud* 0. alienation of property by gratuitous title if the debtor has not reserved sufficient property to pay all of his debts contracted before such alienation(donation 4. 'lienations by onerous title when made by persons against whom some judgment has been rendered in any instance (even if not yet final and e)ecutory) or some writ of attachment has been issued. ;he decision
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Obligations and Contract or attachment need not refer to the property alienated, and need not have been obtained by the party see=ing the rescission. 5. 'ny other manner recogni<ed by law of evidence &&&Chere no judgment or preliminary attachment e)ists against the debtor, the 4nd presumption is not applicable. &&&;he presumptions are disputable and may be rebutted by satisfactory and convincing evidence to the contrary. &ase* Bonrado vs 7arcayda et al. @adges of fraud* (conveyance) 0. inade#uate cause or consideration 4. transfer made by a debtor after the suit has been begun and while it is pending against him 5. sale on credit by an insolvent debtor .. evidence of large indebtedness or large insolvency +. transfer of all of the property of a debtor when he is insolvent 3. transfer made between father and son -. failure of vendee to ta=e e)clusive possession of all property &&&1f it happens that there are 4 or more alienation, the 0st ac#uirer shall be liable first, and so on successively. !ar. 4 of 'rt. 05// seems to have forgotten the debtor> this is because the debtor is already presumed to be insolvent. ('rt. 05/2) .year-prescriptive period for commencement of action for rescission. this period must be counted from the time of the termination of the incapacity of the ward ('rt. 05/0, par.0) this period must be counted from the time the domicile of the absentee is =nown ('rt. 05/0, par.4) this period must be counted from the time of the discovery of fraud ('rt. 05/0 par. 5I.> 'rt. 05/4) in certain cases of rescissible contracts of ale, the prescriptive period is 3 months or even ., days from the day of delivery.
AUF School of Law
Obligations and Contract 5rd person prejudiced. who is
C>A<TER . VOICABLE CONTRACTS Voidabl# "ontra"ts D element of consent of one of the contracting parties is vitiated either by lac= of legal capacity of one of the contracting parties, or by mista=e, violence, intimidation, undue influence, or fraud. binding until annulled by a competent court R#-#di#s* attac= the validity of the contract direct D by means of proper action (annulment) indirect D as a defense (annulability or relative nullity) convalidate it either by ratification or prescription. haracteristics* 0. defect consists in the vitiation of consent of one of the contracting parties 4. binding until annulled by a competent court 5. susceptible of convalidation by ratification or by prescription .. defect or voidable character cannot be invo=ed by 5rd persons Voidabl# "ontra"ts R#s"issibl# "ontra"ts
('rt. 052,) Eoidable contracts* 0. ;hose where one of the parties is incapable of giving consent to a contract> 4. ;hose where the consent is vitiated by mista=e, violence, intimidation, undue influence or fraud. &&&if the consent is absolutely lac=ing or simulated, the contract is ine)istent, not voidable.
1ntrinsic defect (vitiation ")ternal defect of consent) (damage or prejudice either to one of the contracting parties or to a 5rd person) ontracts are voidable ;here should be even if there is no damage or injury damage or injury caused to consider a contract rescissible. 'nnulability 1s based on $escissibility is based the law on e#uity $emedy and sanction 7ere remedy by to !redominated by public !redominated interest private interest 8usceptible ratification of 9ot susceptible ratification
('rt. 0520) B $#ars )r#s"ri)ti%# )#riod s,all "o--#n"#/ from the time the defect of the consent ceases (intimidation, violence, or undue influence) from the time of the discovery of mista=e or fraud from the time the guardianship cease (contracts entered into by the minors or other incapacitated persons) 4 conflicting views* prescription applies only to ' ;1%9 and 9%; defense prescription applies to @%;B action and defense D this one is more logical ase* &arantes vs &$ ('rt. 0524-0523) Rati'i"ation D confirmation> act or means by virtue of which efficacy is given to contract which suffers from a vice of curable nullity. $e#uisites* 0. contract should be tainted with a vice which is susceptible of being cured 4. the confirmation should be effected by the person who is entitled to do so under the law 5. it should be effected with =nowledge of the vice or defect of the contract .. the cause of the nullity or defect should have already disappeared &&&if the person entitled to effect the confirmation
7ay be invo=ed only by 7ay be invo=ed by the the contracting arty contracting party or by a
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AUF School of Law ratifies or confirms the contract with =nowledge of the mista=e, but not of the fraud, his right to as= for an annulment is not e)tinguished thereby since the ratification has only purged the contract of mista=e, but not the fraud. Aor-s o' rati'i"ation/ (with =nowledge of the reason which renders the contract voidable and such reason having ceased...) e)press D declaration of desire to convalidate the contract and e)press declaration to renounce his right to annul the contract. ;acit D e)ecuting an act which necessarily implies an intention to waive his right to annul the contract. E''#"ts o' rati'i"ation* e)tinguishes the action to annul the contract. leanses the contract of its defects from the moment it was constituted. ('rt. 052-) re#uisites to confer the necessary capacity for the e)ercise of action to annul* plaintiff must have an interest in the contract the E1 ;17 and not the party responsible for the vice or defect must be the person who must assert the same G#n#ral r!l#* a third person who is a stranger to the contract cannot institute an action for annulment. E("#)tion* when the 5rd person is prejudiced in his rights with respect to one of the contracting parties, and can show detriment which would positively result to him from the contract in which he has no intervention. CaseF 2eves vs -eople's ,omesite + ,ousing &orp. ('rt. 052/-0522) #''#"ts o' ann!l-#nt contracting parties are released from their obligations (contract not -et consummated) apply 'rt. 052/-0.,4 of the ivil ode (consummated contract)
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Obligations and Contract mutual restitution to give* things subject matter of the contract, its fruits, and the price with interest, e)cept in cases provided by law to do* apportionment of damages based on the value of the prestation with corresponding interests. &&&when the defect of the contract consists in the incapacity of one of the contracting parties, the incapacitated person is not obliged to ma=e any restitution e)cept insofar as he has been benefited by the thing or price received by him.
&&&1n the obligation of the incapacitated person to ma=e restitution, it is sufficient that there has been a prudent and beneficial use by him of the thing which he has received. (food, clothing, shelter, health, etc.) presumption that no benefit has accrued to the incapacitated person burden of proof of benefit is casted upon the person who has capacity. 'rt. 0522 is not applicable in cases where the incapacitated person can still return the thing that he received. ;here is 17!L1"6 ratification when the incapacitated person failed to as= for the annulment of the contract and also s#uandered that part of the consideration which remained. 1n consonance with the principle enunciated in 'rt. 04.0 (payment made to an incapacitated person) ('rt. 0.,,-0.,4) E''#"t o' 'ail!r# to -a4# r#stit!tion b#"a!s# o' loss/ d!# to t,# 'a!lt o' t,# d#'#ndant return the fruits received and the value of the thing at the time of the loss, with interests on the same date action for annulment not e)tinguished instead of being compelled to restore the thing, the defendant can only be compelled to pay the value thereof at the time of the loss d!# to t,# 'a!lt o' t,# )lainti''
AUF School of Law 'rt. 0.,0 shall apply> action for annulment shall be e)tinguished, regardless as to whether the loss occurred during the plaintiffGs incapacity or after he had ac#uired capacity. 'ort!ito!s #%#nt contract can be annulled> the defendant(plaintiff can be held liable only for the value of the thing at the time of the loss, but without interest thereon
Obligations and Contract purpose of )r#%#nting 'ra!ds such statute states that evidence of the agreement cannot be received without the writing or a secondary evidence of its contents statute simply provides the method by which the contracts enumerated therein may be proved. "ffect* no action can be enforced unless the re#uirement that the contract be in writing be complied with. ?orm re#uired is for evidentiary purpose 8tatute of ?rauds is applicable only to those contacts which are purely e)ecutory and not to those which have been consummated either totally or partially. ( ase* &arbonnel vs -oncio) et al.D .nigo vs Bstate of 5aloto' 3 contracts covered* 'n agreement that by its terms is not to be performed within a year from the ma=ing thereof> limit of human memor- is # -ear if one of the contractin" parties has alread- complied *ith the o!li"ations imposed upon him !- said contract *ithin the -ear0 the other part- cannot invoAe the Statute of ,raud ' special promise to answer for the debt, default, or miscarriage of another> such promise must !e collateral0 not independent or ori"inal for Statute of ,rauds to appl 'n agreement made in consideration of marriage, other than a mutual promise to marry> marria"e settlements and donations propter nuptias are covered !- the statute of fraud 'n agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos loan is not covered0 provision applies onl- to SA/. of "oods0
C>A<TER 3 9NENAORCEABLE CONTRACTS ('rt. 0.,5-0.,/) 9n#n'or"#abl# "ontra"ts D cannot be enforced by a proper action, unless ratified> Class#s/ 1. "ontra"ts #nt#r#d into 0it,o!t or in #("#ss o' a!t,orit$ ('rt. 0.,5, 9o.0) or> there is absolutely no consent applicable principles* no one may contract in the name of another without being authori<ed by the latter or unless he has right to represent him. 1f he is duly authori<ed, he must act within the scope of his powers such contracts are unenforceable as reiterated in the law on agency such contract may be ratified by the person in whose behalf it has been e)ecuted, before it is revo=ed by the other contracting party ***Confirmation and ratification *ere not used interchan"ea!l- in the old la*0 !ut in the ne* la*0 the term ratification is no* used to desi"nate the act of validatin" an- Aind of defective contract Reco"nition0 on the other hand0 is merelto cure a defect of proof =. "ontra"ts 0,i", do not "o-)l$ 0it, t,# stat!t# o' 'ra!ds ('rt. 0.,5, 9o. 4) there is no 0riting& not#& or -#-orand!- by which the contract may be proved 8tatute of ?rauds was enacted for the
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AUF School of Law chattels0 and thin"s in action if the transaction involves insepara!le "oods0 the prices of the items shall !e considered as a *hole if the transaction separa!le "oods0 the prices of the items shall not !e less than $9<< 'n agreement for the l#asing for a longer period than one year, or for the sal# of real property or of an interest therein> oral a"reement to extend the lease is covered !- the Statute ' representation as to the credit of a third person. Muasi-delict misrepresentation !- a +rd person *ill maAe him lia!le onl- if he has si"ned a document in representin" the credit of another person ;hese contracts are susceptible to ratification by the failure to object to the presentation of oral evidence to prove the same by the acceptance of the benefits under them. @. "ontra"ts 0,#r# bot, t,# "ontra"ting )arti#s do not )oss#ss t,# r#+!ir#d l#gal "a)a"it$. 'bsolutely vitiated consent if only one party is incapacitated, the contract is voidable may be ratified by the parents or guardians of the incapacitated persons, in effect, the contract becomes voidable if ratified by the parties themselves after gaining the capacity, the contract shall be validated from its inception C,ara"t#risti"s o' !n#n'or"#abl# "ontra"ts/ cannot be enforced by proper action susceptible of ratification cannot be assailed by 5rd persons C>A<TER 7
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Obligations and Contract VOIC OR INE:ISTENT CONTRACTS Void or In#(ist#nt "ontra"t D lac=s absolutely either in fact or in law one or some of the elements which are essential for its validity. Void all o' t,# r#+!isit# of a contract ar# )r#s#nt, but the cause, object, or purpose is contrary to law, morals, good customs, etc.. In#(ist#nt one or some or all of the re#uisites which are essential for the validity of a contract are absol!t#l$ la"4ing& such as those simulated , or those which cause or object did not e)ist at the time of the transaction
9either party may be %pen to attac= even by heard to invo=e its the parties thereto unlawful character (certain provisions of ivil ode) !rinciple of in pari !rinciple of in pari delicto is applicable delicto is not applicable 7ay produce effects legal annot produce effect whatsoever any
('rt. 0.,2) In#(ist#nt and %oid 'ro- t,# b#ginning cause, object, purpose are contrary to law, public morals, good customs, public order, public policy absolutely simulated or fictitious cause or object did not e)ist at the time of transaction e)cept if the object is possible to come into e)istence (this is to harmoni<e 'rt. 0.,2 with the provision that future objects may be some future thing) object is outside the commerce of man contemplates an impossible service where the intention of the parties relative to the principal object of the contract cannot be ascertained e)pressly prohibited or declared void by law &&&cannot be ratified> defense of illegality cannot be waived
AUF School of Law
Obligations and Contract law rule of in pari delicto is applicable because there is an illegal cause
C,ara"t#risti"s o' %oid and in#(ist#nt "ontra"ts/ produce no legal effect (quod nullum est nullum producit effectum) ")cept* 'rt. 0.00-0.04 D nullity is based on the illegality of the cause> any action by a guilty party to recover whatever he has already given under the contract is barred not susceptible of ratification right to set up the defense of ine)istence or absolute nullity cannot be waived action or defense for the declaration of their ine)istence or nullity is imprescriptible ('rt. 0.0,) ine)istence or absolute nullity cannot be invo=ed by a person whose interests are not directly affected. ('rt. 0.0,) action or defense of declaration of nullity is imprescriptible D because the defects are more or less permanent, thus cannot be cured by prescription ase* &astillo vs 6alvan &&&'n action to declare the nullity of a void judgment does not prescribe (-aluwagan ng /ayan /an0 vs (ing) ase* $3nar /rothers <ealty vs ,eirs of $ugusto : no unreasonable delay in asserting their rights in spite the imprescriptibility, laches may bar the action of a party in asserting the nullity of the contract ('rt. 0.00-0.44) in pari delicto D e#ually at fault the law will not aid either party to an illegal agreement, it leaves them where they are. 'pplies only to cases of e)isting contracts with an illegal cause or object and not to simulated or fictitious contracts nor to those which are ine)istent ase* <odrigue3 vs <odrigue3 circumvention of provision on prohibited donation between spouses appellant is clearly as guilty as her husband in the attempt to circumvent the
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onl$ 1 )art$ is at 'a!lt* e)ecuted contract guilty party is barred from recovering what he has given to the other party by reason of the contract innocent party may demand the return of what it has given e)ecutory contract contract cannot produce any legal effect whatsoever parties cannot demand for the fulfillment of any obligation arising from the contact nor be compelled to comply with such obligation E("#)tions in a))li"abilit$ o' in pari delicto/ payment in usurious interest ('rt. 0.05) 1interest paid in excess of the interest allo*ed !- the usur- la*2 - means the whole usurious interest> with interest thereon from the date of payment payment of money or delivery of property for an illegal purpose ('rt. 0.0.) payment of money or delivery of property by an incapacitated person ('rt. 0.0+) agreement that is not illegal per se but is prohibited by law ('rt. 0.03) in pari delicto is not applicable to a homestead> the purpose of the law is to give land to a family for home and cultivation, conse#uently, the law allows the homesteader to reac#uire the land even if it has been sold.K ($ngeles vs &$, 9E= -hil. 9EEA) rule of in pari delicto is inapplicable where the same violates a wellestablished public policy ($ngeles vs &$, 9E= -hil. 9EEA) and -hil. /an0ing vs 1ui *he payment of any amount in e)cess of the ma)imum price of any article or commodity fi)ed by law. ('rt. 0.0-) ontract where by a laborer underta=es to wor= longer than the ma)imum number of hours fi)ed by law ('rt. 0.0/) contract whereby a laborer accepts a wage
AUF School of Law lower than the minimum wage fi)ed by law ('rt. 0.02) ARTICLE 1B=1 ;he defense of illegality of contract is not available to third persons whose interests are not directly affected. ARTICLE 1B== ' contract which is the direct result of a previous illegal contract, is also void and ine)istent. TITLE III NAT9RAL OBLIGATIONS ('rt. 0.45-0.5,) Nat!ral obligations D obligations without a sanction> susceptible of voluntary performance once there is voluntary performance or fulfillment, one cannot recover what he has delivered. Nat!ral obligations Ci%il obligations
Obligations and Contract such principle will afford solution to many #uestions which are not foreseen in our legislation person is not allowed to ta=e inconsistent positions
based on e#uity and @ased on positive law natural law do not grant a right of enforceable action to enforce their action performance Nat!ral obligations by court
*oral obligations tie
;here is a juridical tie 9o juridical between the parties whatsoever which is not enforceable by court action Eoluntary performance by the obligor produces legal effect which the courts will recogni<e and protect
Eoluntary fulfillment does not produce legal effect which courts will recogni<e and protect
TITLE IV ESTO<<EL ('rt. 0.50-0.52) Esto))#l D a condition or state by virtue of which an admission or representation is rendered conclusive upon the person ma=ing it and cannot be denied or disproved as against the person relying thereon.
Kinds o' Esto))#l estoppel in pais (e#uitable estoppel) arises by acts, representations, or admissions, or by his silence induces another to believe certain acts to e)ist and such other rightfully relies and acts on such belief, as a conse#uence of which he will be prejudiced if the former is permitted to deny the e)istence of such facts estoppel by silence D inaction> estopel by acceptance of benefits estoppel by deed or by record (technical estoppel) estoppel by deed D type of technical estoppel by virtue of which a party to a deed and his privies are precluded from asserting as against the other party or his privies any right or title in derogation of the deed or from denying any material fact therein. "stoppel by record D parties are precluded from denying the truth of matters set forth in a record whether judicial or legislative. "stoppel by judgment D bars the party from raising any #uestion that might have put in issue and decided in the previous litigation estoppel by laches failure or neglect, for an unreasonable and une)plained length of time, to do that which, by e)ercising due diligence, could or should have been done earlier presumption that the party entitled to assert it either has abandoned it or declined to assert it. 8tale demands not a mere #uestion of time but is principally a #uestion of the ine#uity or unfairness of permitting a right or claim to be enforced or asserted El#-#nts o' la",#s/ conduct on the part of the defendant, or of
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AUF School of Law one under whom he claims, giving rise to the situation of which complaint is made and for which the complainant see=s a remedy delay in asserting the complainantGs right> having =nowledge and opportunity to assert his right lac= of =nowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred
&&&9o definite period for laches to ta=e in unli=e in prescription. ase* /ucton vs 6abar 2he action here although one for reconveyance is actually one for !uieting of title : when the plaintiff is in possession is actually imprescriptible." - 5ustice 5 B / Re-es
-end-
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70

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AUF School of Law BOOK IV OBLIGATIONS and CONTRACTS TITLE I OBLIGATIONS Art. 1156. Obligation is a !

Obligations and Contract

Obligations and Contract

ompensation or indemnification (reparation of injury suffered by the individual)

!unishment (fine, imprisonment, or both)

AUF School of Law compromised compromised.

Cri-#s 'rt. 0,5 of $! 8ubsidiary liability

Obligation ;hose arising from law #uasi-delicts #uasi-contracts

for %bligor has no liability for damages

Ara!d in t,# "onstit!tion or #stablis,-#nt o' an obligation

9on-fulfillment or breach of the obligation

AUF School of Law

&ulpa a!uiliana 9egligence as a source of obligation. (#uasi-delict)

Obligations and Contract

S!s)#nsi%# ondition precedent

R#sol!tor$ ondition subse#uent

Obligations and Contract

Obligations and Contract

Obligations and Contract or event which is future and uncertain

1nterval of time r#+!isit#s $efers to a fact

Obligations and Contract

$ight of choice of $ight of debtor reditor General rule e)ception

Obligations and Contract

&&& ommunication is substitution effective.

Ob #"t d!# 8everal objects

E''#"t o' 'ort!ito!s loss

E''#"t o' "!l)abl# loss

Obligations and Contract

E''#"t o' br#a",

AUF School of Law

AUF School of Law

AUF School of Law

Obligations and Contract if the penalty unconscionable. is ini#uitous or

'ny other case

penalty 1ndemnity vs li#uidated

AUF School of Law

Obligations and Contract

of N!-b#r o' ;here may be is )arti#s only one creditor

the %ffer is just a step to the to payment. the just the

AUF School of Law delivery must be voluntary

Obligations and Contract

;a=es effect by acts of ;a=es effect parties operation of law

's to form or constitution

's to e)tent or effect

Assign-#nt o' rig,ts

'ccdg. ;o their purpose 'ccdg. ;o

'ccdg. ;o ris= involved

Obligations and Contract

from 1ntermediate ground between voidable and void contract.

"ssential are... 1mposed 9atural are... presumed

'ccidental are... 'uthori<ed

Obligations and Contract

$estrains the right to $estrains the very thing contract itself

Art. 11.6211.1& Cod#

Ci%il the the

?raud in the perfection ?raud in of the contract performance of obligation

3. the object shall be licit

1ts legality or illegality 1ts legality or illegality

Obligations and Contract

R#s"ission o' "ontra"ts

R#s"ission b$ -!t!al "ons#nt

AUF School of Law

Obligations and Contract 5rd person prejudiced. who is

AUF School of Law