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[ UP COLLEGE OF LAW ] A More Complete Definition:
OBLIGATIONS & CONTRACTS (Disini)
TITLE I. OBLIGATIONS
CHAPTER I. GENERAL PROVISIONS I. Concept
A. Definition- Article 1156 (CC) Art. 1156. An obligation is a
juridical necessity to give, to do or not to do. Sanchez-Roman Definiton: An obligation is the creation of a juridical relation, created by virtue of certain facts, between two or more persons, whereby one of them, known as the creditor or obligee, may demand of the other, known as the debtor or obligor, a definite prestation.
A juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinate conduct (or behaviour) and in case of nonobservance, may obtain satisfaction from the assets of the latter.
B. Elements of an Obligation
1. Active Subject a. Also known as the obligee, or creditor. He possesses a right or credit. b. He has the right to demand an object. c. Reyes-Puno: A person endowed with the optional power to demand the observance of a certain behaviour (activity) by another, and if necessary, coerce such behaviour, directly or indirectly 2. Passive Subject a. Also known as the obligor, or debtor b. He has the duty of giving, doing or not doing. c. The debt is the duty to give, to do or not do d. Reyes-Puno: A person who must behave (act or not act) in a determined way for the satisfaction of the creditor’s private interest. 3. Prestation or Object The object of an obligation is the prestation (the conduct, to give, to do or not to do) that the debtor should observe. The obligation represents a restraint on the liberty of another, but a restraint limited in its extent. The object of an obligation is always a prestation. It must be possible, determinate and have a pecuniary value.
Criticism of Definition
According to J.B.L. Reyes, this definition is incomplete. It is onesided because it views obligations only from the side of the debts. It is imperfect because it only applies to all kinds of legal duty. There is no debt without a credit, and the credit is an asset in the patrimony of the creditor just as the debt is a liability of the obligor. “Also, the new code separates responsibility from other elements of the obligation and only establishes its existence way near the end, in article 2236.” (Tolentino) Finally, this definition only applies to civil obligations, not natural obligations. (See C. Distinction Between Natural and Civil Obligations)
Simoun Antonio Montelibano Salinas - 2002-24124
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(2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts.
4. Efficient Cause/Vinculum/ Juridical Tie a. The efficient cause or vinculum is the reason why the obligation exists. b. The juridical/legal tie or sanction allows the party who is prejudiced by the debtor’s refusal to observe the requisite conduct, to resort to the State authorities for a remedy. c. It is a relation established by law, by bilateral acts (contracts giving rise to obligations, stipulations) or unilateral acts (crimes and quasi-delicts) (See II. Sources of Obligations)
A. Law (Art. 1158)
Art. 1158. Obligations derived
from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. -Reyes-Puno: It does not require concurrence of any act of the creditor or debtor, nor is the obligation necessarily in accord with their intention. It is an involuntary source of obligations. (obligation to support or pay taxes)
C. Distinction Between Natural and Civil Obligations
1) As to enforceability: Civil Obligations: Those which give a rise to a right of action. They can be enforced by court action. Natural Obligations: Those which cannot be enforced by legal action, but which are binding on the party who makes them in conscience and according to equity and natural justice. They are enumerated in Articles 1423-1430 of the Civil Code. They depend exclusively on the good conscience of the debtor. 2) As to basis: Civil Obligations: Civil obligations derive their binding force from positive law. Natural Obligations: Natural obligations derive their binding effect from equity and natural justice.
B. Contracts (Art. 1159, 1305)
Art. 1159. Obligations arising from
contracts have the force of law between the contracting parties and should be complied with in good faith.
Art. 1305. A contract is a meeting
of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. -Reyes-Puno: Contracts are characterized by a previous accord of wills or intention. This determines the nature and extent of the resulting obligation, within legal limits.
C. Quasi-Contracts (Art. 1160, 2142)
quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book. (n)
II. Sources of Obligations
Article 1157 (CC)
Obligations arise from: (1) Law;
Art. 1160. Obligations derived from
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Art. 2142. Certain lawful,
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voluntary and unilateral acts give rise to the juridical relation of quasicontract to the end that no one shall be unjustly enriched or benefited at the expense of another. -In quasi-contracts, no previous agreement exists between the parties. It is created by the voluntary and lawful act of one party, who usually becomes the creditor. -Obligations arising from quasi-contracts are designed to avoid unjust enrichment, and have the character of reimbursements. Kinds a. Negostiorum gestio Art. 2144 . Whoever voluntarily takes charge of the agency or management of the business or property of another, without any power from the latter, is obliged to continue the same until the termination of the affair and its incidents, or to require the person concerned to substitute him, if the owner is in a position to do so. This juridical relation does not arise in either of these instances: (1) When the property or business is not neglected or abandoned; (2) If in fact the manager has been tacitly authorized by the owner. In the first case, the provisions of Articles 1317, 1403, No. 1, and 1404 regarding unauthorized contracts shall govern. In the second case, the rules on agency in Title X of this Book shall be applicable. b. Solutio Indebiti
Art. 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.
c. Other kinds of QuasiContracts Enumerated in Articles 2164-2175 of the CC
D. Acts or Omissions Punishable by Law (Delicts)
Art. 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages.
-These consist in voluntary but punishable acts, including criminal negligence, under criminal law. The creditor is the offended party.
E. Acts or Omissions Punishable by Law (Delicts) Art. 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by special laws. (1093a)
-These are voluntary but negligent acts that are not punishable under criminal law. The same negligent act may give rise to an action based on delict or on quasi-delict, but the party is free to choose his remedy. (Art. 2177, 32, 33, 34.) BARREDO vs. GARCIA & ALMARIO FACTS: Petitioner is the sole proprietor of the Malate Taxi Cab driven by Pedro Fonatilla, who figured in a head on collision with a carratela driven by Pedro Dimapiling. This resulted in the death of one of the carratela’s passengers, 16 year old Faustino Garcia. Garcia’s parents filed a case before the CFI of Manila against Barredo, who employed
Simoun Antonio Montelibano Salinas - 2002-24124
which states that damage caused or inflicted by pupils or students of an education institution were liabilities of said institution while in its custody. held that Barredo was liable under Art. Carlito’s assailants were not from PSBA. and was therefore subsidiary to Fontanilla’s. However. dismissing his complaints against jeepney driver Salazar. YES. which was a negligent act causing damages creating a civil liability arising from a crime. Also. ISSUES: 1) WON petitioner had a cause of action against Timbol. 1985. NO. since he was not a complainant against Montoya. 1902-1910 of the old Civil Code. Petitioner Mendoza based his cause of action against Salazar on culpa criminal (under Article 100 of the RPC) and not under culpa aquiliana (Article 2177 of the CC). which was dismissed by the CFI of Bulacan.[ C 2011 ] [ UP COLLEGE OF LAW ] 4 Fontanila. as maintained by the CA. 2) WON petitioner had a cause of action against Salazar. Then-respondent (now petitioner) PSBA and its officials asked that the case be dismissed on the grounds that since they were presumably sued under Article 2180 of the Civil Code. His parents filed a case for damages in the RTC of Manila. CA. YES 2) WON CA’s ruling was founded on appropriate legal premises. Truck driver Montoya was found guilty of damages to Salazar. seeking indemnification for damages sustained by his Mercedes Benz. actively participated in the criminal prosecution against Salazar. RATIO: 1) Article 2180 establishes the rule of in loco parentiis. MENDOZA vs ARRIETA (Judge of CFI Mla). It is believed that Salazar cannot be held liable for damages sustained by Mendoza’s car. 1903 of the old Civil Code. 2) The trial court ruled that the collision between Salazar and Mendoza’s vehicles was a result of the truck hitting Salazar’s jeep in the rear. YES. since it was Fontanilla’s negligence that led to the the death of Garcia. No civil case was filed against Fontanilla. BAUTISTA & BAUTISTA FACTS: PSBA student Carlitos Bautista was stabbed by assailants who were not students of the said school) on August 30. under Article 1903 of the old Civil Code. are beyond the ambit of the rule. A civil action under quasi-delict may proceed independently of criminal proceedings for criminal negligence. No damages were granted to Mendoza. RATIO: 1) Article 31 of the Civil Code states that when the civil action is based on an obligation not arising from the act or omission complained of as a felony. ISSUE: WON Barredo may be charged as the person liable for the negligence of his employee. The RTC denied them twice. ISSUE: 1) WON petition of PSBA was rightfully dismissed by the CA. as did respondent CA. The CA ruled that Article 2180 should apply to all institutions of learning. owners or directors are equally liable for damages caused by their employees. TIMBOL & SALAZAR FACTS: Petitioner assails the decision of the CFI of Manila. Petitioner’s cause of action was based on quasi-delict. PSBA vs. and may prosper regardless of the result. no cause of action exists since jurisprudence showed that academic institutions such as PSBA. and truck owner Timbol. Garcia’s parents. petitioner’s liability was governed by the RPC. RATIO: Culpa aquiliana or quasi-delicts anchor the responsibility of employers. Remember. the school must prove they observed diligence in order to prevent damages. Petitioner maintains that. which states that employees. Petitioner. prior to filing the case.2002-24124 . The employers are primarily and directly responsible under Article 1903. Simoun Antonio Montelibano Salinas . such a civil action may proceed independently of the criminal proceedings and regardless of the result of the latter. but against Salazar. There is a distinction between civil liability arising from criminal negligence (governed by Article 100 and 103 of the RPC) and responsibility under Art. Quasi-delicts are a more expedient way of seeking redress than seeking damages only by virtue of the civil responsibility arising from a criminal action. NO. Fontanilla had already been caught several times in violation of the Automobile Law.
suffering inconvenience. COLEGIO DE SAN JOSE RECOLETOS FACTS: Student Alfredo Amadora was shot by his classmate Pablito Daffon.[ C 2011 ] [ UP COLLEGE OF LAW ] 5 2) Upon enrolment of Carlitos to PSBA. They also claimed that they exercised necessary diligence in preventing the injury. confirming the payment and receipt of said ticket. Petitioner asserts that the first class ticket given to respondent did not represent their complete and full intent/agreement. This was held by petitioner. humiliation. ISSUE: WON CA was correct in dismissing the petition of Amadora. Petitioner claims respondent Court of Appeals’ ruling did not show a finding of bad faith. were able to win in its case with the CFI of Cebu. ISSUE: WON CA failed to show bad faith in breach of contract between respondent and petitioner. authorizing such an award would need to show averment of fraud or bad faith. The dean of boys would have been liable. To them. AMADORA vs CA. but an academic institution of learning. RATIO: Petitioner entered into a contract with respondent. only the “teacher-in-charge” or head of the school would be liable. This includes an implicit obligation by the school to provide their student with an atmosphere of learning and safety. and embarrassment. and physics teacher were ordered to indemnify the parents. granting them damages. But the inference of bad faith is to be drawn from the facts and circumstances presented. Also. Said ticket was supposedly subject to confirmation in Hong Kong. The school’s rector. but the evidence regarding the gun does not link him to the shooting. resulting in his death. principal. Amadora’s parents. the school claimed the said students were not in the custody of the school since the semester had already ended. Respondent court affirmed the CFI’s award of damages to private respondent. The CA reversed the decision. mental anguish and other conditions which resulted in moral damages. respondent reluctantly gave up his seat. resulting in bilateral obligations. on the basis that Article 2180 of the CC was not applicable since the school was not a school of arts and trade. despite the ‘written evidence’ and the exhibits presented by private respondent. AIR FRANCE vs CARRACOSO FACTS: Petitioner issued a ticket for a “first class” seat to private respondent. for that act breaks the contract and may also be a tort. there is no mention of bad faith in the ruling of the CA. Petitioner claims that since respondent claimed action on the basis of breach of contract. The school itself cannot be held liable. Petitioners contend that Amadora was in school to submit a physics experiment. YES. it was no guarantee that he would be accommodated in the first class compartment. since the respondent knew that he did not have continued reservation s for first class on any specific flight. a contract existed between them. who was the one considered liable under Article 2180. which petitioner did not object to. Both were students of respondent school Amadora came to school to submit a requirement for his physics class. plaintiff airline forced private respondent to abandon his seat because a “white man” had a “better right” to the seat. NO. The trial court proceedings must continue in order to determine that there was a breach of contract between the school and Bautista. plaintiff travelled in first class. In the course of a fracas or commotion. Liability from tort may exist even if there is a contract. RATIO: The rector. dean of boys. but in Bangkok. the petitioners in this case. The rule on quasi-delicts does not apply. principal and dean of boys were not liable because none of them was the teacher-in-charge. and thus was under their care. From Manila to Bangkok. Said bad faith was to be drawn based on evidence. wherein respondent was entitled to a first class seat on their air carriage. on the basis of private respondent. Granted. the manager of Simoun Antonio Montelibano Salinas .2002-24124 .
(1125a) 1193. without prejudice to the effects of the happening of the event. Primary Classification Under the Civil Code Peculiarities of Prestation Pure and Conditional (Arts. but terminate upon arrival of the day certain. and it shall be regulated by the rules of the preceding Section. III. 11791192) Pure Obligations Art. demandable at creditor’s will -When said obligation contains no term or condition upon which depends the fulfilment of the obligation contracted by the debtor -It is immediately demandable -No exemptions as to its compliance -Cancellation by both parties.2002-24124 .[ C 2011 ] [ UP COLLEGE OF LAW ] Conditional Obligations 6 Art. Every obligation whose performance does not depend upon a future or uncertain event. A day certain is understood to be that which must necessarily come. shall depend upon the happening of the event which constitutes the condition. for whose fulfillment a day certain has been fixed. -Its demandability or extinction depends upon a future and uncertain event -The time of the event may be uncertain. In conditional obligations. 1181. in absence of other restrictions. for instance. Classification of Obligations A. or upon a past event unknown to the parties. Obligations -When some space of time suspends the demandability or produces the extinction of the obligation Simoun Antonio Montelibano Salinas . is demandable at once. the obligation is now considered pure -A demand note. but it must happen -The condition imposed by the will of the parties must not be a necessary legal requisite of the act Types of Conditions -Suspensive – gives rise to an obligation -Resolutory – extinguishes already existing rights With a period or term (Arts. Obligations with a resolutory period take effect at once. 11931198) Art. If the uncertainty consists in whether the day will come or not. shall be demandable only when that day comes. the obligation is conditional. by mutual agreement of period originally given or nonfulfillment of a condition resolves the period stipulated. – Not subject to a condition or period. as well as the extinguishment or loss of those already acquired. Every obligation which contains a resolutory condition shall also be demandable. is a pure obligation the acquisition of rights. 1179. although it may not be known when.
12071222) Joint (“mancommunada”) – One in which each of the debtors is liable only for a proportionate part of the credit Solidary (“joint and several”) – When each party is liable for the 4. If improperly executed. it is a sum of money. and each creditor is entitled to demand the whole obligation. 12261230) 5. If obligor does what is forbidden him. Ex: money.Where the obligation involves one creditor and one debtor Bilateral . may be substituted for an object that has similar qualities or quantity. a horse Positive (to give. may be decreed that what was poorly done be undone Negative (not to give. Both obligations arise from the same source. With a penal clause (Arts. Secondary Classification 1. 12231225) Divisible – when it may be partially performed. not to do) a. to do) a. 3. Divisibility of the obligation is not the same as divisibility of the thing. Each creditor enforces the whole obligation Qualities of the Object Divisible and Indivisible (Arts.Where each party is the creditor of a prestation and promises another in return. characteristics or quality. it shall be undone at his expense 2. also known as reciprocal obligations. According to Number of Sureties/Parties Joint and Solidary (Arts. Ex: a white pony to be delivered to my house at 8 AM Generic .indeterminate in terms of specific quantity.certain. 1199-1206) Alternative Obligations – Where only one of several prestations due has to be fulfilled -Generally.to give Personal .2002-24124 . entire obligation. Unilateral . It is indicated only by its kind. Damages (Equivalent Performance) c. Facultative Obligations – Where one prestation is due but may be substituted with another by the debtor at the latter’s discretion Legal (Art. Simoun Antonio Montelibano Salinas . No specific or substituted Performance b. 1159) Penal (Art. or is not susceptible of partial performance. 1161) Real . debtor can legally perform the obligation by parts and the creditor cannot demand a single performance of the entire obligation Indivisible – when it cannot be validly performed in parts. distinguishable and specific in terms of character and quantity. including an action or abstention B. Action for Substituted Performance b. It is individualized or distinguished from others of its kind. Single – Unipersonal or individual Collective – Joint or solidary 6.to do or not to do Determinate . 1158 ) Conventional (Art. but can be any other thing stipulated by parties.[ C 2011 ] [ UP COLLEGE OF LAW ] Penal Clause – an accessory undertaking (dependent upon some other obligation to exist) to assume greater liability in case of breach 7 Prestations to be Rendered Alternative and Facultative (Arts. or susceptible of partial performance.
one prestation Multiple – several prestations Conjunctive – all prestations are due and demandable Alternative – when only one of several prestations due has to be performed Facultative – one prestation is due. or keys with respect to a house) -Accessions – include everything produced by a thing or which is incorporated or attached theret. he shall acquire no real right over it until the same has been delivered to him.2002-24124 . In obligations to do or not to do. (Examples include machinery in a factory. As to object or prestation: Simple . either naturally or artificially. Obligation to give 1. 1166. they must still be delivered. They have for their object the completion of the latter for which they are indispensable or convenient. To deliver the fruits Art. CHAPTER 2: NATURE & EFFECTS OF OBLIGATIONS I. 1163. To deliver thing itself Art. an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. To deliver the accessions and accessories Art. 1244. A specific or determinate object or thing A. Duties of the obligor i.things which are made or ‘destined’ for the use. Simoun Antonio Montelibano Salinas . The obligation to give a determinate thing includes that of delivering all its accessions and accessories. The diligence must be determined based on considering all concurrent circumstances. Principal – The obligation can stand alone Accessory – Depends on some obligation in order to exist. -The diligence required is that of a good father of a family. unless the law or the stipulation of the parties requires another standard of care. although the latter may be of the same value as. preservation of embellishment of another thing of greater importance. To preserve the thing Art. This is the legal standard or model of diligence. give something is also obliged to take care of it with the proper diligence of a good father of a family. -Accessories . -Even when accessories and accessions have been separated temporarily. Kinds of Prestations A.1164. However. or more valuable than that which is due. 9. but may be substituted by the debtor at the latter’s discretion Possible – by law or nature Impossible – cannot be performed. iii. Every person obliged to 8 other 8.[ C 2011 ] 7. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. The debtor of a thing cannot compel the creditor to receive a different one. [ UP COLLEGE OF LAW ] ii. iv. the debtor may deliver a different thing or perform a different prestation in lieu of that stipulated. -Upon agreement or consent of the creditor. even though they may not have been mentioned.
8 M.000 to respondent and vendee was also tasked an contractually obliged to pay the mortgage obligations on the property amounting to P1. In obligations to do or not to do. which obliged them to pay P35.[ C 2011 ] [ UP COLLEGE OF LAW ] A. A generic thing Art. par. The appellant defendant Hawaiian Phil. When the obligation consists in the delivery of an indeterminate or generic thing. an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. Their application was denied by BPI. A delay in payment for a small quantity of molasses for some 20 days is not a violation of an essential condition of the contract as to warrant rescission for non-performance. Breach of Obligation Simoun Antonio Montelibano Salinas . Petitioner delivered P800. B. -A non-justifiable non-performance of a pre-existing obligation. Not only this. Both plaintiff and defendant agreed upon the time of payment and the date. The plaintiff-petitioners then applied for the assumption of the mortgage obligations on the property. the creditor cannot demand a thing of superior quality. Respondents informed plaintiffs that their failure to pay the interest of the loan constituted non-performance of their 2. and the defendant said that Song Fo’s failure to pay the said amount upon presentation of bills for each delivery constituted sufficient grounds to rescind the contract agreed upon. -In times of disagreement. based on the breach of contract committed by Song Fo. Concept 9 -The creditor is entitled to the fruits from the time the obligation to deliver it comes. which causes injury to the other party SONG FO vs HAWAIIAN PHILIPPINE CO. 1244. Obligation to do C. Obligation not to do Art. or -Delivery of an indeterminate generic thing. RATIO: The general rule is that rescission or termination of a contract will not be permitted for a slight or causal breach of contract. plaintiff company defaulted in the payment of molasses that was delivered to them. Only breaches which are so substantial and fundamental as to defeat the object of the parties in making the agreement.93 to plaintiff Song Fo. RAYMUNDO & RAYMUNDO FACTS: Private petitioner Avelina Velarde and private respondent David A. Raymundo entered into a deed of sale with assumption of mortgage for a parcel of land and a house in Makati. the creditor cannot demand a thing of superior quality. II. FACTS: Appellant and defendant Hawaiian Philippine Co appealed a decision by the CFI of Iloilo. waived the condition when it arose by accepting the payment of the overdue account and continuing with the contract. whose quality and circumstances have not been stated. ISSUE: WON Hawaiian Philippine Co had a right to rescind the contract. Neither can the debtor deliver a thing of inferior quality. the court decides whether the quality of the thing complies with the obligation itself. CA. whose quality and circumstances have not been stated. nor can the debtor deliver a thing of inferior quality. 317. Co was compelled to cancel and rescind their contracts. VELARDE vs. or the failure to perform it in the manner that is required by the obligation. 2. The purpose of the obligation and other circumstances shall be taken into consideration. and they then stopped paying the loan. -The purpose of the obligation and attendant circumstances must have been taken into consideration in delivering and deciding on the generic thing. NO. -Delivery constitutes a necessary and indispensable requisite for purposes of acquiring the ownership of the same by virtue of a contract. 1246. but the defendant Hawaiian Phil Co. According to the defendant.2002-24124 .
to rescind the contract. including all surcharges and expenses.[ C 2011 ] [ UP COLLEGE OF LAW ] 10 obligation. The act of a party in treating a contract as cancelled or resolved must be made known to the other. The CA then brought the case for decision before the SC. and the unjust enrichment of the company. being subject to scrutiny and review.2002-24124 . Article 1234 of the Civil Code also says that if an obligation has been substantially performed in good faith. 1967. NO. DELTA MOTOR CORP vs. where the case was initially dismissed. and the release of the title and mortgage from BPI to make the title free from all liens and encumbrances.38. Delta should have indicated a deadline. upholding the rescission of the contract. ISSUE: WON the contract was validly cancelled by the defendant-appellants Calasanz. ANGELES vs. for initial fulfilment of the two contracts. For Delta. The condition was that delivery for the stipulation of payment were ‘ex-stock subject to prior sales’. RATIO: The power to rescind is not absolute. Delta did not deliver the iron pipes. 533. hence the company cannot change the price. The lower court ruled in favour of plaintiffs. VELMEN REALTY DEV’T CO. There was a justifiable rescission the said contract by Raymundo. The CA then overturned the decision.8 M obligation constituted a substantial breach of contract that would justify rescission on the part of the defendant. vs CA & SENECA FACTS: Petitioner entered into a contract denominated as an offsetting agreement with Simoun Antonio Montelibano Salinas . as well as the execution of a deed of absolute sale in favour of Avelina. Delta claims that the Genuinos’ failure to make the payments constituted a substantial breach of contract. the obligor may recover as though there had been a strict and complete compliance and fulfilment. NO. On January 28. They have then waived and are now estopped from exercising their alleged right to rescind the contract. Petitioners filed a complaint with the RTC of Makati. The conditions imposed by petitioner were not mutually approved and cannot be enforced. Genuino agreed to enter into the contract. They stoopped paying both the mortgage obligations and the remaining balance of the purchase price. which ruled in favour of Delta. on the basis of the non-payment of the mortgage obligation of the petitioners. under article 1191 of the CC. ISSUE: WON CA erred in dismissing the complaint of the petitioners. which ruled in favour of the petitioners. Genuino asked for the delivery of the iron pipes. RATIO: Defendant appellant received the delayed payment of plaintiffs-appellees on several occasions. Plaintiff-appellant Angeles filed a case with the CFI of Rizal on the basis that they had discovered they already paid P4. 920 plus 7% interest per annum. They were subject to ‘prior sales’. which allowed them. resulting in its dismissal and this case before the court. the price offer indicated was within 30 days from the date thereof. and made the first two payments. defendantsappellants Calasanz cancelled the contract on the basis of failure of Angeles to secure payment. GENUINO & CA FACTS: Petitioner entered into a contract of sale with private respondents. NO. The defendants then sent plaintiffs a notarial notice cancelling or rescinding the intended sale of the property. 1987. but Delta said they would not be able to sell the pipes at the same prices from 3 years ago. The Genuinos then filed a case against the company with the CFI of Rizal. In the contract. ISSUE: WON Genuino’s actions constituted a substantial breach of contract. 3 years after approving the contract. CALASANZ FACTS: Plaintiffs-appellees and defendantsappellants entered into a contract to sell a piece of land located in Rizal for the amount of P3. Genuino did not make subsequent payments. and is always provisional. A motion for reconsideration was filed. and did not execute the promissory notes. Genuinos approved the price within the 30 day period. RATIO: The failure of the petitioners to fulfil the P1. due to trouble in forming the ice plant which was the reason they entered into the contract with Delta. The CA reversed the decision. The plaintiff-petitioners then told respondents that that they would resume payment of the interest of the loan provided that the property was delivered to Avelina Velarde not later than January 15. knowing the condition of the ice plant of the Genuinos. since they violated the need for reciprocity in the contract of sales. The plaintiffs-appellees paid in monthly instalments and defendants-appellants told plaintiffs-appellants to remit past due accounts. citing Delta’s failure to include a deadline in the contract.
dolo incidente -fraud committed in the course of the performance of an obligation. Nonwaiver Simoun Antonio Montelibano Salinas . the court was unable to determine what type of fraud was committed by Kenstar. pursuant to Article 1344 of the Civil Code ii. In 1982. Defendant actually committed fraud by reducing the amount to be given to plaintiff. Whether the fraud was dolo incidente or dol causante. petitioner repossessed one of the condominium units. However.2002-24124 . RATIO: Kenstar fraudulently made claims that led Geraldez to avail of their tour package. and failing to bring their group to the Italian leather factory. Part of the agreement was Seneca’s option to move to Phase II. B. Plaintiff claims his principal obligation was to secure the franchise for their partnership. and he is thus entitled to 30% of the net profits. It is causal fraud that is a ground for annulment of the contract.[ C 2011 ] [ UP COLLEGE OF LAW ] 11 respondent Seneca Corp. WOODHOUSE vs HALILI FACTS: Plaintiff Woodhouse led defendant Halili to believe he was the exclusive distributor for Mission Soft Drinks. It is fraud that affects the consent of the parties. The impossibility of the obligation on the part of the petitioner constitutes a substantial breach of the offsetting agreement. Dolo vs. which the CA denied her. They just ruled that Geraldez was entitled to damages. The said condominium units were supposed to be part of the deal that petitioner would give to respondent on the basis of their offsetting agreement. GERALDEZ vs CA & KENSTAR TRAVEL FACTS: Petitioner sued respondent travel agency on the basis of fraud they committed in the course of her experience under their tour package to Europe. MODES OF BREACH 1. which led plaintiff to invest in the partnership. which defendant claims plaintiff Woodhouse cannot recover. resulting in the stoppage of its construction. and petitioner paid as well. YES. ISSUE: WON a breach of the agreement was committed by petitioner. the loan application fro constructing Phase II of the condominium units was denied. Plaintiff now seeks damages. The respondent corporation desired to buy two condominium units from petitioner. which he was able to do. since its construction has ceased. She sought to recover damages. knowing and intending the effects which naturally and necessarily arise from such act or omission i. ISSUE: WON petitioner is entitled to damages. ruling in favour of Kenstar. YES. YES. RATIO: Petitioner would never be able to fulfil their obligation in allowing private respondent to exercise the option to transfer to Phase II. the party who suffered injury had been aware of. he would not have entered into the obligation in the first place. Fraud a. misrepresenting the people who would assist them. Defendant realized that plaintiff Woodhouse was not the exclusive distributor. petitioner is entitled to damages. The respondent made a payment and delivered construction materials. Dolo vs. but only for one month. if b. RATIO: Since defendant did not actually have the exclusive rights to the franchise. claiming respondent had failed to complete the balance. This led to defendant investing 30% into the net profits of their partnership. A reciprocal obligation took place in this case. which the party who was injured by the fraud would still have wilfully entered into even with the existence or awareness of such fraud EFFECT: renders the party guilty of fraud for damages. ISSUE: WON defendant may recover damages. dolo causante -fraud that is rooted in the realization or formation of the obligation. an obligation which. This included giving them an inexperienced tour guide. while petitioner bought construction materials from the said corporation. the plaintiff was able to secure the franchise. Consequently. Concept: the voluntary execution of a wrongful act or a wilful omission. SIR JJ: In this case.
that which is expected of a good father of a family shall be required. ISSUE: WON Vasquez is guilty of negligence. where Narciso Gutierrez was injured. he is only entitled to answer for damages that were foreseeable in the course of his actions that led to the injury. hence he is not liable for damages. Culpa Contractual 12 Art. They are not personally liable for contracts duly entered into. Concept. If the law or contract does not state the diligence which is to be observed in the performance. The corporation is an artificial being imbued with its own personality. since 2. by failing to exercise the due care needed to drive the truck. Velasco. In each case. The said company is not a party in the suit. which he was acting manager at the time. Negligence a.Absence of due care required by the obligation. since Velasco and Narciso entered into a contract of carriage as driver and passenger. but only 2. ISSUE: WON both Velasco and Gutierrez are liable for damages to Narciso Gutierrez. and it was independent of any contract. was liable based on culpa contractual. When Borja sought to recover in court. shall apply. respectively. VASQUEZ vs BORJA FACTS: Defendants Vasquez and Busuego obligated themselves to sell 4000 cavans of palay to Borja. separate and distinct from its stockholders and managers. (1102a) c. where an automobile driven by Bonifacio Gutierrez collided with a truck driven by Velasco. Damages recovered may be Culpa aquiliana: negligence to fulfil an obligation that is independent of any contract Culpa contractual: failure. YES. When negligence shows bad faith. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons. 1173. of the time and of the place. 1171. the provisions of Articles 1171 and 2201. it is NVSDC which is liable. Culpa vs Dolo -Negligence replaces intent When one commits dolo. When one commit culpa. Effects 1. Responsibility arising from fraud is demandable in all obligations. Velasco is guilty of negligence. RATIO: The action is a contract. and not Vasquez. Simoun Antonio Montelibano Salinas . Vasquez claimed that the agreement made was with Natividad Vasquez Sabani Dev’t Co. because he is liable for the damage done to Narciso. Vasquez’s counterclaim is also invalid. 2. as the driver of the truck where Narciso was a passenger. i. However. Any waiver of an action for future fraud is void. paragraph 2. The contract or obligation may be annulled.[ C 2011 ] [ UP COLLEGE OF LAW ] ii. NO. it is a question of facts taking into consideration what a reasonable man would have done under the circumstances Art. Culpa Aquiliana vs. GUTIERREZ FACTS: An automobile accident took place. or negligence to perform an obligation that arises from a contract GUTIERREZ vs. RATIO: Gutierrez is guilty of culpa aquiliana to Narciso. he is liable for all damages.2002-24124 .488 cavans of rice were delivered by Vasquez. and based on the facts. Borja delivered the money to pay for the rice to them. (NVSDC).
If the law or contract does not state the diligence which is to be observed in the performance. in order to see that nobody was in front of it. Meralco tried to prove that they had exercised due care in selecting and instructing the motorman. CRISOSTOMO vs CA & CARAVAN TRAVEL FACTS: Petitioner availed of services of respondent Caravan Travel Agency. Meralco cannot avail of the defense that culpa aquiliana took place. when actually. YES. The job offer was accepted for P400. NO. RATIO: There is definitely care or diligence required of the company both in preventing injury to its passengers and the general public. does not mean that Barias did not exercise due diligence. ISSUE: WON respondents performed due care or diligence. that which is expected of a good father of a family shall be required. She was then offered a new package. because she claimed that the agency refused to perform the extraordinary diligence which led her to miss her flight. As a motorman. without looking to see if the track was clear. She came to rest a pair of diamond rings into a pair of gold rings. respondents were not obliged to the same standard of extraordinary diligence expected in a contract of transport or carriage. and the conduct of Santos constituted negligence. and the duty of the carrier is to be determined with reference to the principles of contract law.[ C 2011 ] he failed in his moral duty to fulfil the contract. 1173. and plaintiff suffered bruises and possible internal injuries. YES. What if the car was designed in such a way that it would have been difficult for him to see beyond a certain field of vision from inside the vehicle? SARMIENTO vs SPS CABRIDO FACTS: Petitioner Sarmiento brought a pair of diamond earrings to the jewelry shop owned by respondent spouses. -A good father of a family means a person of ordinary or average diligence. ISSUE: WON respondent failed to observe due diligence and care required by law. RATIO: First. US v BARIAS FACTS: Defendant is a motorman of a street car which ran over and killed Fermina Jose. ISSUE: WON Meralco is guilty of negligence. Standard of Care Required Art. since a contractual relation existed. The object of the contract did not require the extraordinary diligence purported by petitioner.2002-24124 . SIR JJ: Just because there was injury or in this case. We must use as basis the abstract average standard corresponding to a normal orderly person. The fault or negligence of the obligor consisted in the omission of the due diligence needed in the circumstances present in the case. The company was bound to convery and deliver plaintiff safely and securely. since their contractual relation consisted in arranging and facilitating petitioner’s travel arrangements. ISSUE: WON evidence shows carelessness of defendant. The diamond was broken by Zenon Santos in the process of the job. Barias should have checked the front of the car. NO. [ UP COLLEGE OF LAW ] 13 b. RATIO: Respondents’ defense that Zenon Santos was not their employee does not hold water. Simoun Antonio Montelibano Salinas . because petitioner was charged P400 for a job order they readily accepted. a two year old girl. her flight was scheduled for a Friday. but she still sued to recover damages from respondent. par 2. death. the contract was one for services and not for transport. the test as to whether the defendant used reasonable care and caution is reasonably applicable in this case. An accident took place. Petitioner asked respondents to replace the diamond. Also. He started his car from a standstill. Hence. She received the travel documents and was told to be at NAIA on Saturday. thus showing that he did not execute the ordinary care or diligence required by law. Anyone who uses diligence below the standard is guilty of negligence. RATIO: The relationship between De Guia and Meralco was one of a contractual nature. since DE GUIA vs MERALCO FACTS: Plaintiff boarded a street car as a passenger for the city of Manila.
Coupled with the fact that no collector was sent. c. Kinds 1. The petitioner should have also checked her travel documents. [ UP COLLEGE OF LAW ] 14 -The obligation must be: due. Petitioner failed to show that id not have to demand from private respondents. the private respondents cannot be guilty of mora solvendi o delay in the payment of rentals. and not in negative obligations Article 1169 (par. either in culpa aquiliana or culpa contractual For Culpa Contractual: rescission/nullity of contract and indemnification For Culpa Aquiliana: damages 3. CETUS DEVT CORP VS . otherwise petitioner would be charged for consequential damages. or (3) When demand would be useless. Mora solvendi (delay of the obligor) Requisites: 1) A prestation that is due and enforceable 2) A civil obligation 3) Arises only when the delay is due to causes imputable to the debtor Reyes-Puno: Delay of the obligor may only come about as a result of a positive act or prestation.2002-24124 .CA Petitioner Cetus Dev’t demanded payment of the rentals when the obligation matured. 1169 (par 1). Respondent made a categorical demand. 2) However. Art.[ C 2011 ] they fulfilled their responsibility to secure the petitioner’s travel arrangements. Concept It is the non-fulfillment of an obligation with respect to time of fulfilment of said obligation -It involves the beginning of a special condition. Petition denied. the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declare. Effects -damages. demandable and liquidated -The performance may be delayed by fraud (malice) or negligence (culpa). Simoun Antonio Montelibano Salinas . as when the obligor has rendered it beyond his power to perform. with the exception of those circumstances present in Article 1169. or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract. Delay (Mora) a. which exists only in positive obligations. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. AEROSPACE CHEMICAL INDUSTRIES vs CA & PHIL PHOSPHATE Respondent required petitioner to ship out the sulphuric acid as agreed. b. -The creditor should demand performance of the debtor. under any of the conditions presented in Article 1169 of the Civil Code.
because one is depriving the lessor of his right to collect the rent that he has a right to collect. unless the thing having been offered by him to the person who should receive it. (1185) VDA DE VILLARUEL vs MANILA MOTOR CORP By their improper refusal to accept the current rents tendered by their lessess. The Vasquez spouses also waived their right claim Ayala’s delay. When demand was made on October 28. there was no indication that payment on time was essential. The payment as stated in the Compromise Agreement. When the debt of a thing certain and determinate proceeds from a criminal offense. Exceptions: ABELLA vs FRANCISCO. It was an extrajudicial demand done in compliance with the law. 1992. 1984 were not categorical demands. Decision of CFI Rizal affirmed. The period was an essential element of the obligation. on August 6. One party cannot demand performance by the other without offering to comply with his own prestation. SIR JJ: This is not exactly a good case to illustrate this law. 3. Plaintiff may pay before demand is made upon him. 1) That the obligation should require an act of cooperation of the creditor for its fulfilment 2) That the debtor has done all that is incumbent upon him and has made tender of performance or payment 3) That the creditor refuses to accept payment or fails to carry out an act incumbent upon him Art. Since petitioners made an advance payment for the unlifted acid. VASQUEZ v AYALA CORP Ayala Corp was not guilty of delay. The exemption of the less to pay is derived from the deprivation of enjoyment and possession of said land. informed petitioner of charges of 2. Petitioner is guilty of delay after private respondent made the necessary extrajudicial demand by requiring petitioner to lift the cargo at its designated ports. The compromise was made by the parties to avoid litigation. the trial court could allow plaintiff to enforce. the latter refused without justification to accept it. the debtor shall not be exempted from the payment of its price. 1268. 2. Also. the lessors incurred in fault (mora) and they must shoulder the subsequent accidental loss of the premises leased. it is lawful to offset the amount against the rental expenses incurred by respondent. neither party incurs in delay if the other is not ready or does not comply in a proper with what is incumbent upon him.000/day.[ C 2011 ] [ UP COLLEGE OF LAW ] Requisites: 15 Respondent. delay by the other begins. Petition denied. The local court rightly considered that period was essential in an option to purchase the lots. Its failure to comply led to its liabilities. From the moment one of the parties fulfills his obligation.2002-24124 . since the letter to their agent was a concession that the lots would be finished 3 years after the termination of the case by Lancer. Petition denied. Compensation Morae Requisites: 1) It must be a bilateral obligation 2) With reciprocal prestations ARTICLE 1169 (3): In reciprocal obligations. because the letters sent prior to April 23. whatever may be the cause for the loss. the obligation was already due and demandable. DE LA CRUZ vs LEGASPI & SAMPEROY At most. defendants have a right to demand interest. CA decision affirmed. In reciprocal obligations. Mora accipendi Simoun Antonio Montelibano Salinas . Petition denied. Even if the contract of sale explicitly provided for the automatic rescission. must be made within 2 years. SANTOS VENTURA HOCORMA vs SANTOS Respondent’s right to damage is based on delay.
but it was returned in shambles. or delay. negligence. He then sued Telfast Communication.2002-24124 . MAGAT vs MEDIALDEA & GUERRERO Magat is entitled to damages. Action for specific performance in obligation to give a specific thingArt. Where both are in default. the non-performing party incurs in delay. CHAVEZ v GONZALES It is clear that defendant-appellant Gonzales contravened the tenor of his obligation because he not only failed to repair the typewriter. and those who in any manner contravene the tenor thereof. Rule 39: Sec. Action for performance 1. He is liable for the cost of executing the cost Revised Rules of Court. There was a default in both of their reciprocal obligations. are liable for damages. since Guerrero committed a breach of contract. TELFAST COMMUNICATION vs CASTRO When defendant’s daughter sent a telegram to their relatives in the States informing them of his wife’s death. and therefore. III. Tolentino is entitled to specific performance or rescission with damages. Effects of Delay 1) Cessation/Renunciation of creditor 2) Prescription 4. he is not entitled to rescission. c. 1170. 1165 (par 1). their respective liability for damages shall be offset equitably. When one party has performed. His failure to pay makes him a party in default. in addition to the right granted him by Article 1170. Petitioner and defendant entered into a contract to deliver the said telegram. specific Execution of judgments act. which resulted in Magat suffering the loss of his expected profits. hence they are both liable for damages. The obligation or promise of each party o each other is in consideration for that of the other.000. 10. recoverable under the law. rescission is the only option. Art.000 in unrealized profit. the creditor. and Castro is entitled to recover damages by virtue of Article 2217 of the Civil Code. The loss comes into being at the very moment of breach. Pecuniary inability to pay does not rescind or discharge the obligation of the contract. Due to the prohibition of the land. Petitioner did not fulfil his part. Such a loss is real. Those who in the performance of their obligations are guilty of fraud. Remedies of Creditor in Case of Breach A. may compel the debtor to make the delivery. ARRIETA vs NARIC It was NARIC’s actions or inaction which singularly delayed the opening of the letter of credit. CENTRAL BANK vs CA A reciprocal obligation took place. 16 the general rule is that the fulfillment of the parties should be simultaneous. When what is to be delivered is a determinate thing. Contravention of the Tenor -Non-performance -Any illicit act or omission which impairs the strict and faithful fulfilment of the obligation and every kind of defective performance.[ C 2011 ] [ UP COLLEGE OF LAW ] in a proper manner and for the cost of the missing part. fixed and vested. despite performance by private respondent in fulfilling his part in the contract. Therefore. which resulted in the delay and plaintiff Arrieta’s losses of $286. Hence. Contravention of the tenor took place. they are bound to indemnify her for losses and damages caused by the delay. But the promissory note signed by Tolentino obligates him to pay P17. for Simoun Antonio Montelibano Salinas . they did not receive it and they were shocked to discover his wife’s death when his daughter went to the US and told them.
or to perform any other specific act in connection therewith. if necessary of appropriate peace officers. -To obtain compliance of the prestation -Creditor has the right to ask that the same be performed -Its implied basis is a contractual relation between plaintiff and defendant 2. to sell such property. damages. in addition to the right granted him in article 1178. rents or profits awarded by the judgment shall be satisfied in the same manner as a judgment for money. (b) Sale of real or personal property. vesting title. If real or personla property is situated within the Philippines. 2 If the thing is indeterminate or generic.Art. (e) Delivery of personal property.If a judgment directs a party who execute a conveyance of land or personal property. and apply the proceeds in conformity with the judgment. the officer shall oust and such persons therefrom with the assistance. the court in lieu of directing a conveyance thereof may be an order divest the title of any party and vest it in others. and place the judgment obligee in possession of such property. demolish or remove said improvements except upon special order of the court issued upon motion of the judgment obligee after due hearing and after the former has failed to remove the same within a reasonable time fixed by the court. the officer shall not destroy.[ C 2011 ] [ UP COLLEGE OF LAW ] 17 (a) Conveyance. -The creditor may ask that the obligation be complied with by others at the expense of the debtor -The substituted performance satisfies the needs of the creditor -Delivery of anything belonging to the same species is sufficient 3.2002-24124 . the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done shall have like effect as if done by the party. he may ask that the obligation be complied with at the expense of the debtor. (d) Removal of improvements on property subject of execution. delivery of deeds. and the party fails to comply within the time specified.— If the judgment be for the sale of real or personal property. may compel the debtor to make the delivery. and employing such means as may be reasonably necessary to retake possession.In judgments for the delivery of personal property. which shall have the force and effect of a conveyance executed in due form of law.When the property subject of the execution contains improvements constructed or planted by the judgment obligor or his agent. or to deliver deeds or other documents.The officer shall demand of the person against whom the judgment for the delivery or restitution of real property is rendered and all person claiming rights under him to peaceably vacate the property within three (3) working days. and restore possession thereof to the judgment obligee. -When what is to be delivered is a determinate thing. 1167 Simoun Antonio Montelibano Salinas . Any costs. (c) Delivery or restitution of real property.1165 par. describing it. the creditor. the officer shall take possession of the same and forthwith deliver it to the party entitled thereto and satisfy any judgment for money as therein provided. Action for substituted performance in obligation to give a generic thingArt. or other specific acts. Action for substituted performance or undoing of poor work in obligation to do . .. otherwise.
Action for rescission Simoun Antonio Montelibano Salinas . it may be decreed that what has been poorly done be undone. negligence. in accordance with Articles 1385 and 1388 and the Mortgage Law.[ C 2011 ] [ UP COLLEGE OF LAW ] 18 Art. with the payment of damages in either case. if the latter should become impossible. or delay. -In damages.2002-24124 . are liable for damages. by himself or a third person -The court cannot award damages when the act can be done in spite of the refusal or failure of the debtor to do so. he is liable for damages. the same shall be executed at his cost. if it is physically or legally impossible to do the thing. Art. Furthermore. he is not entitled to insist upon performance of the contract by the defendant or to recover damages -The other party has the right to demand performance or ask the resolution or termination of the contract Rescission – the power that does not require previous declaration by the courts -If the obligation is not yet performed. 1167. But if one has B. This same rule shall be observed if he does it in contravention of the tenor of the obligation. -The action for rescission is given to the injured party -Where the other party is the one who did not perform. He may also seek rescission. the plaintiff is entitled to the value of the use of his property from the time it was taken to the time of restoration. 1191. This is understood to be without prejudice to the rights of third persons who have acquired the thing. The sole remedy is indemnification for damages caused when the effects of the act prohibited are definite in character and will not cease even if the thing prohibited is undone. -The creditor is entitled to have the thing done in a proper manner. even after he has chosen fulfillment. in case one of the obligors should not comply with what is incumbent upon him. unless there be just cause authorizing the fixing of a period. and those who in any manner contravene the tenor thereof. Exception: -breach may be excused by fortuitous event -This does not exclude the right to indemnify for damages causes by the debtor who has done what has been forbidden him. Aside from doing what is in violation of the prohibition. If a person obliged to do something fails to do it. Action for damages Art. C. The court shall decree the rescission claimed. extrajudicial rescission would suffice. The power to rescind obligations is implied in reciprocal ones. 1170 Those who in the performance of their obligations are guilty of fraud. The injured party may choose between the fulfillment and the rescission of the obligation.
No period of prescription is needed. Accio Subrogatoria IV. 2. wilful or not KHE HONG CHENG vs CA Respondent Philam only learned about unlawful conveyances in January 1997. he cannot by extrajudicial declaration rescind the contract. 772: inherent rights are only those with a right to legitime and heirs and successors of interest. Subsidiary Remedies of Creditors These are actions that take place as a result of the right of creditors to reach all present and future property of the creditor. -the extrajudicial declaration of the creditor.[ C 2011 ] [ UP COLLEGE OF LAW ] 19 already committed his part in the reciprocal obligation. Accion subrogatoria (Action in subrogation) - a) After exhausting all the property of the debtor. It was Simoun Antonio Montelibano Salinas . the injured party cannot resolve the obligation himself -The mere failure of one party to perform does not ipso jure produce the resolution of the contract 3) existence of credit (not anterior to debtor’s credit) 4) credit must be due and demandable 5) exhaustion of assets Exceptions: Art. 1. and all other means must have been exhausted. Accio Pauliana (Rescissory Action) Creditors may impugn acts which the debtor may have done to defraud them Requisites: 1) prior existence of credit (must be anterior to fraudulent act) 2) credit must be due and demandable 3) fraudulent intent of debtor if transaction rescinded is onerous 4) complicity/bad faith 5) exhaustion or insufficiency of assets 6) prejudice to the creditor Accio Pauliana The credit must exist before the fraudulent act -The rescinded contract is onerous -The intent must be fraudulent It must take place within 4 years of the discovery of the fraud It must be the last means. b) “The debtor of my debtor is also my debtor” – Creditors have the right to bring into the patrimony of his debtor everything that should properly enter and form part of it.2002-24124 . c) subject of the action -all rights and actions of debtor -No fraudulent intent is required Requisites: 1) interest of creditor who brings the action 2) inaction of the debtor. electing rescission produces legal effect -However. Court action must be taken. the creditor may exercise all the rights and bring all the actions of the debtor for the same purpose.
However. employees and furnishers of materials: (1) Payments made by the owner to the contractor before they are due. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made. without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. A. Victoria Suarez is not a party to the accion pauliana. Payments of rent in advance by the sublessee shall be deemed not to have been made. the petitioner cannot invoke the credit of Suarez to justify rescission of the subject deed of donation. The date of the decision of the trial court is immaterial.[ C 2011 ] only then that respondents’ action for rescission accrued because respondent had exhausted all legal means. the sublessee shall not be responsible beyond the amount of rent due from him.an unforeseen or unexpected occurrence -it must be impossible to foresee the event -occurrence renders it impossible for debtor to fulfill his obligation in a normal manner -obligor must be free from any participation in aggravation of injury resulting to the creditor liable to the lessor for any rent due from the lessee. governmental provisions. 1. the following shall not prejudice the laborers. attack by bandits. 1729. no person shall be responsible for those events which could not be foreseen. therefore. Concept of Fortuitous Event Art. The vendor may bring his action against every possessor whose right is derived from the vendee. floods. though foreseen. were inevitable. This article is subject to the provisions of special laws. the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. epidemics. so far as the lessor's claim is concerned. or when the nature of the obligation requires the assumption of risk. or which. Act of Man -armed invasion. robbery Art. Act of God (natural) Caso Fortuito – “an event which takes place by accident and could not have been foreseen -circumstances independent of the will of the obligor -earthquakes. 1608. Other Specific Remedies Art. even if in the second contract no mention should have been made of the right to repurchase. Accion pauliana is a last resort. (1597a) SIGUAN vs LIM Petitioner still had other legal remedies to make claims. D. However.2002-24124 . 1893. storms. V. Extinguishment of Liability in Case of Breach Due to Fortuitous Event – Art. The requisite for filing accion pauliana was not met. Art. The respondent still had the property in her name in 1989. or when it is otherwise declared by stipulation. at the time of the extrajudicial demand by the lessor. Therefore. Except in cases expressly specified by the law. in accordance with the terms of the sublease. 1652. unless said payments were effected in virtue of the custom of the place. In the cases mentioned in Nos. 1174. and no fraud was committed. 1 and 2 of the preceding article. Simoun Antonio Montelibano Salinas . The sublessee is subsidiarily Fortuitous Event . the credit was not fraudulent. fires 2. [ UP COLLEGE OF LAW ] 20 (2) Renunciation by the contractor of any amount due him from the owner.
BACOLOD MURCIA MILLING vs CA & GATUSLAO The closure of any portion of the railroad track was foreseeable and inevitable. TUMBOY. Napocor cannot escape liability because its negligence was the proximate cause of the loss and damage. The mere fact that Tumboy claimed that the tire was new did not imply that it was free from manufacturing defects. would be to demand proof beyond reasonable doubt. Petitioner took a calculated risk thinking all landowners would renew their contract. The robbery constitutes a fortuitous event. and this can be done by preponderant evidence. Section 8 of the agreement entered into by Philcomsat and Globe Telecom provided for events that were either unforeseeable. Hence. 1174. Extinguishment of Liability – Exceptions Art. AUSTRIA vs CA It is not necessary that persons responsible for the occurrence or the robbery of Austria should be found of punished. and not by caso fortuito. or when it is otherwise declared by stipulation. RP vs LUZON STEVEDORING Defendant stresses precautions it took on the day of the accident in question. despite the lack of conviction of guilty parties. Requisites 1. it must still prove that it was not negligent in causing the death or injury resulting from the accident. However. foreseeable but beyond the control of the parties. or Simoun Antonio Montelibano Salinas . NAPOCOR vs CA C. Effect of Concurrent Fault NAKPIL & SONS vs UNITED CONSTRUCTION. The wanton negligence of the defendant and the third party defendants in effecting the plans. 1992. nor could it constitute force majeure. On December 31 1992. which led to the breaking of the windshield.[ C 2011 ] -unavoidable accidents B. CA &PHIL BAR [ UP COLLEGE OF LAW ] 21 Despite the typhoon constituting an act of God. in this case Tumboy et al who operated the bus whose tire blew which led to Yubido’s death. Article 1174 of the Civil Code guards against the possibility of being reproached for such a fortuitous event. They were indeed negligent and liable for damages. YUBIDO vs CA. cannot be absolved from liability in case of force majeure. designs. Unfortunately. To require the conviction of the culprits. It would only be sufficient that the unforeseeable event did take place without concurrent fault on the debtor’s part. What happened was clearly unforeseen. Globe is liable for payment of rentals until December 1. Except in cases expressly specified by the law. The date they ceased using the Earth station was not established. specifications and construction was equivalent to bad faith in the performance of their respective tasks. not to open them quickly at the height of the typhoon. but actually foreseen.2002-24124 . It was not just an Act of God that was responsible for the destruction of the building. TUMBOY & TUMBOY A common carrier. for those which are foreseeable but inevitable. Petitioner was negligent because it knew of the need to open the gates gradually and earlier. DIOQUINO vs LAUREANO The boy threw stones at the window. PHILCOMSAT vs GLOBE TELECOM Article 1174 exempts an obligor from liability in case of fortuitous events. the termination of the contractual relationships of sugar plantation of Angela Estate could not be foreseen as an act of God. No contrary definition exists between Article 1174 and Section 8 of the contract exists. Other buildings in the vicinity were not affected by the earthquake. the US left and rendered ineffective said communication facility. in order to establish a fact. It was a fortuitous event resulting in a loss which must be borne by the owner of the car. said precautions adopted by appellant prove that the possibility of danger was not only foreseeable.
552. Art. even if it should be through a fortuitous event: (1) If he devotes the thing to any purpose different from that for which it has been loaned. The depositary is liable for the loss of the thing through a fortuitous event: (1) If it is so stipulated. even if caused by a fortuitous event. or after the accomplishment of the use for which the commodatum has been constituted. [ UP COLLEGE OF LAW ] 22 Art. 2001. Art. (5) If. 2 A possessor in bad faith shall be liable for deterioration or loss in every case. (2) If he uses the thing without the depositor's permission. (2) If he has preferred his own interest to that of the owner. The act of a thief or robber. Art. being able to save either the thing borrowed or his own thing. VI. (3) If the thing loaned has been delivered with appraisal of its value. Art. (3) If he delays its return.2002-24124 . 1175. Interest paid in excess of the interest allowed by the usury laws may be recovered by the debtor. 1413. who is not a member of his household. unless there is a stipulation exemption the bailee from responsibility in case of a fortuitous event.[ C 2011 ] when the nature of the obligation requires the assumption of risk…. par. unless it is done with the use of arms or through an irresistible force. even though he himself may have been authorized to use the same. (4) If he lends or leases the thing to a third person. he chose to save the latter. Usurious Transactions Art. 3 If the obligor delays. Usurious transactions shall be governed by special laws. (4) If he allows others to use it. with Simoun Antonio Montelibano Salinas . Art. 1979. he shall be responsible for any fortuitous event until he has effected the delivery. (4) If he assumed the management in bad faith. The bailee is liable for the loss of the thing. who has entered the hotel is not deemed force majeure. The officious manager shall be liable for any fortuitous event: (1) If he undertakes risky operations which the owner was not accustomed to embark upon. 1942. Art. (3) If he fails to return the property or business after demand by the owner. or has promised to deliver the same thing to two or more persons who do not have the same interest. (2) If he keeps it longer than the period stipulated. 1165. par. 2147.
on a loan or forbearance of money shall not be subject to any ceiling prescribed under or pursuant to the Usury Law. Usurious contracts shall be governed by the Usury Law and other special laws. this interim period being deemed to be by then an equivalent to a forbearance of credits. It also states that the rate of interest. 12% per annum from time of judicial or extrajudicial demand. chattels or credits than the law allows. shall be the payment of the interest agreed upon. interest shall begin to run from the time the claim is made. Interest itself. Vs and the debtor incurs in delay. interest is either that which is stipulated in writing or. shall be 12% per annum from such finality until its satisfaction. which is six per cent per annum. Art. the rate of legal interest. It did not repeal or amend the Usury Law. When demand is established reasonably. an interest on the amount of damages may be imposed at the discretion of the court at the rate of 6% per annum. but simply suspended its effectivity. when stipulated.2002-24124 . No interest shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Usury – defined as contracting for or receiving something in excess of the amount allotted by law for the loan or forbearance of money. goods or chattels. the indemnity for damages. goods. PD 858 The Monetary Board is authorized to prescribe the maximum rate or rates of interest for the loan or renewal thereof of the forbearance… PD 1685 Foreign loans obtained by the Central Bank may be guaranteed. whether it is either one of the aforementioned conditions. Art. 1961. the legal interest. there being no stipulation to the contrary. Simoun Antonio Montelibano Salinas . if not interest shall begin to run from the date the court makes its judgment. and in the absence of stipulation. shall itself earn legal interest from the time it is demanded. If the obligation consists in the payment of a sum of money. 3) When judgment awarding sum of money becomes final and executory. They may exercise/prescribe higher maximum rates for loans of low priority. Rule: 1) When the obligation is breached and it consists in the payment of money (loan or forbearance). Actual base for computation of legal interest shall be the amount finally adjudged. so far as they are not inconsistent with this Code. right. 2209. Circular Bank Circular 416: There is a reduction in the risk weight of multilateral development banks to 0% -it removes loans to exporters to extent guaranteed by the guarantee fund for small and medium enterprises Monetary Board Circular 905 It empowers the Central Bank to prescribe maximum rates. 2) When the obligation not involving money is breached. or obligation that is due. judicially or extrajudicially. Forbearance is the refraining from enforcement of debt. Cases are rendered moot and academic by virtue of the repeal of CB 416. Interest is the income produced by money in relation to its amount and the time it cannot be utilized by its owner. in absence of stipulation.[ C 2011 ] [ UP COLLEGE OF LAW ] 23 interest thereon from the date of the payment. It is the taking of more interest for the use of money.
-The failure of the creditor to make reservation in these cases extinguished the obligation to pay the interest or the prior instalments. Pure & Conditional Obligations A. but also performance of any obligation. Promissory note with no condition stated) Art. Presumption in payment of interest and instalments. -When there is no stipulation in the assignment of an obligation. as well as the Simoun Antonio Montelibano Salinas . 1253. Art. all rights acquired in virtue of an obligation are transmissible. 1176. if there has been no stipulation to the contrary. par. 1181. or upon a past event unknown to the parties.immediately demandable at creditor’s will -no exemptions as to its compliance (ex. 1179. Conditional Obligations Art. Fulfillment of Obligations (See Chapter 4 Art. the acquisition of rights. … Art 1232… not only the delivery of money. Pure – no term or condition whatever depends upon which depends the fulfilment of the obligation contracted by the debtor. Art. is demandable at once. Subject to the laws. The receipt of a later installment of a debt without reservation as to prior installments.2002-24124 . shall likewise raise the presumption that such installments have been paid. there arises only a rebuttable presumption of such extinguishment. -An instrument evidencing credit may be transferred or assigned and the transferee will be considered in lawful possession unless the contrary is proven CHAPTER III. VIII. 1178. but under the present article. 1231: Obligations are extinguished: 1) by payment or performance. Transmissibility of Rights Art. . The receipt of the principal by the creditor without reservation with respect to the interest. B. 1 Every obligation whose performance does not depend upon a future or uncertain event. B. payment of the principal shall not be deemed to have been made until the interests have been covered. DIFFERENT KINDS OF OBLIGATIONS I. In conditional obligations. all rights acquired by virtue of an obligation are transmissible.[ C 2011 ] [ UP COLLEGE OF LAW ] 24 VII. shall give rise to the presumption that said interest has been paid. If the debt produces interest.
Death of A ahead of B. and uncertain event. the obligation arises. the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated.2002-24124 . since the “the balance will be paid out from the opening of the first letter of credit…” To subordinate the obligation to pay the remaining 65.000 pesos to the sale or shipment of the ore is tantamount to leaving payment at the discretion of the debtor. (see Gonzales vs Heirs of Tomas) i. shall depend upon the happening of the event which constitutes the condition. once the condition has been fulfilled. the debtor shall appropriate the fruits and Note: A past event unknown to the parties cannot be a condition for the knowledge of the parties cannot prevent the obligation from being demandable. if the condition does not happen. “when I pass the bar” Term/Period Not uncertain but must necessarily happen It must necessarily come. Until A dies. 1. -retroactive effect when obligation is fulfilled – Art. as well as the extinguishment or loss of those already acquired. Only when securing the right to dispose of the land for the petitioner to give down payment in fulfilment of the contract. It is a period or term. As to effect on obligation Art. Vs. There is no “uncertainty” that the payment will have to be made. Ex. by virtue of those who execute the juridical act B. In conditional obligations. shall retroact to the day of the constitution of the obligation. Term Period/Term – an event which is not uncertain. GAITE vs FONACIER The shipment or local sale of iron ore is not a condition to the payment of the balance of 65. A conditional obligation’s obligatory force is subordinated to the happening of a future Simoun Antonio Montelibano Salinas . death of a person) Condition A future and uncertain event There is uncertainty as to when the day will come. the acquisition of rights. 1181. the obligation does not come into existence. Kinds of Conditions a.000 pesos. The effects of a conditional obligation to give. If the obligation is unilateral. “when my means permit” 2. shall depend upon the happening of the event which constitutes the condition. but must necessarily happen (ex.[ C 2011 ] [ UP COLLEGE OF LAW ] 25 extinguishment or loss of those already acquired. when the obligation imposes reciprocal prestations upon the parties. Condition A. Nevertheless. 1187. Concept – a future and uncertain event upon which an obligation depends -dependent on future or uncertain event upon which an obligation or provision is dependent on (the use of “or” is actually a mistake) -the acquisition or resolution of rights depend on a future and uncertain event. uncertain when it will happen Ex. GONZALES vs HEIRS of THOMAS The transfer of the TCT was precisely needed by petitioner to ensure that he would own the land free of legal encumbrance. Suspensive (condition precedent) -If the suspensive condition happens. In other words.
-If non-fulfillment is due to the fault of creditor. unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. Since the time within which the condition should be fulfilled depended upon the exclusive will of CPU. wherein petitioner should have complied with the condition to make the donation in its favour forever valid.Where the obligation is immediately effective. debtor may not ask that the fruits received by creditor be returned to debtor. On February 6. -rights of creditor and debtor before fulfilment of condition BEFORE THE FULFILLMENT OF THE CONDITION: -preservation of right (prevent loss or deterioration of things. Also. CORONEL vs CA & ALCARAZ The suspensive condition of the “Receipt of Down Payment” was the transfer of the title from petitioners’ deceased father to them. Beginning work on the school could not be complied with. which is not present in a contract to sell. bring the appropriate actions for the preservation of his right. Art. Creditor is allowed to take appropriate steps which preserve his right and prevent events which might render his right void or inexistent. Resolutory (condition subsequent) . except after giving effect to the donation. and the petitioners were obliged to present a deed of absolute sale to respondent. In this case. 1985. Its compliance cannot be effected until the right is deemed acquired. but its subsistence and extinguishment depend upon the fulfilment of the condition PARKS vs TARLAC CIRER & HILL Appellant claims that the condition that one of the parcels be used exclusively and absolutely for erection of a school was not complied with. Also. ii. The element of consent is present. the condition took place. as well as full payment by correspondent. more than a reasonable period of 50 years has passed. the oblige may seek rescission and the court shall decree the same. fixing the number of years cannot be applied since more than a reasonable period of time has lapsed. before the fulfillment of the condition. The period to bring revocation for action is ten years. 1188. the action for revocation of donation has prescribed. of CC. However. appellant claims that the contract is invalidated. and fix the period. The creditor may. constitutes a precedent condition.2002-24124 . CENTRAL PHILIPPINE UNIVERSITY v CA When petitioner accepted the donation. Under Article 1191. it bound itself to comply with the condition thereof. provided that subsequent condition’s nonresolution renders the contract ineffective. Simoun Antonio Montelibano Salinas . prevent concealment of debtor’s property). Since it was not followed. it has been held that its absolute acceptance and acknowledgment of obligation were sufficient to prevent the statute of limitations from barring the action of private respondents regarding prescription. The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition. The sellers made no express reservation of ownership or title to subject parcel of land. this is not a precedent condition but an imposed one.[ C 2011 ] [ UP COLLEGE OF LAW ] 26 interests received.
given by virtue of liberality. For purely potestative conditions. When the nonfulfillment of the resolutory condition was brought to the donor’s knowledge. The conditional obligation is void. the right to the thing is now extinguished pursuant to Article 1181 of the Civil Code. lessees would terminate the contract simply through non-payment. QUEJADA vs CA & MONDEJARETAL A resolutory condition exists only until the time it is capable of fulfilment. [ UP COLLEGE OF LAW ] 27 conformity with the provisions of this code. is perfected at the moment there is a meeting of the minds upon the thing which is the object of the sale and upon the price. At that time. Conversely. 3) The period was actually contemplated by Lopez. When the fulfilment of the condition depends upon the sole will of the debtor. the donation is still valid and effective. To allow conditions whose fulfilment depends exclusively on debtor’s will is to sanction illusory obligations. It leaves effectivity and enjoyment of rights to the sole and exclusive will of the lessee. consequently. 1180. If this defense were allowed. not just the condition. Ownership was then reverted to petitioners. When the debtor binds himself to pay when his means permit him to do so. based on the writing of the ponente. the obligation shall take effect in i. he did not expect the land to remain idle for ever. 2) It is improper to say that it is a resolutory condition since upon fulfilment of the obligation or condition. ownership is transferred to respondents pursuant to Article 1434 of the CC: “Title passes by operation of law to the buyer. 733 of the Civil Code. 1182. It is suspensive because renewal depends upon said condition. ii. -Creditor should file an action to fix the a period for the payment of the obligation -Only if it is suspensive LAO LIM vs CA & DY The condition is not resolutory but potestative. 4) Onerous donations are covered under the rule on contracts. The sale is still valid. Any option can be revoked as long as it is potestative. Causal Condition -One which depends exclusively upon chance or other factors as Simoun Antonio Montelibano Salinas . as a contract. As to cause or origin Art. Potestative Condition -one which depends upon the will of the debtor. owners would never be able to discontinue their occupancy. Such period became irrelevant when doneemunicipality manifested its inability to comply with the condition. A lease that gives the lessee the right to perpetual renewal is not favored by the courts. The Court must determine which donee must comply with conditions or obligations. the conditional obligation shall be void.2002-24124 .[ C 2011 ] DAVIDE (dissent): 1) There is confusion as to the nature of the contract. b. pursuant to Art. it was onerous.” Sale. or it placed a burden on the donee. the obligation shall be deemed to be one with a period. If it depends upon chance or upon the will of a third person. Then it became gratuitous. so long as defendants could pay the lease. then ownership reverted to the donor. the whole obligation is void. First. Debtor’s promise to pay is not a conditional obligation (period) Art.
The cancellation of Taylor’s contract was valid. and the provision is therefore not invalidated. as well. c. It depends on chance. Since the machinery did not arrive. those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. SMITH BELL vs MATTI When the fulfilment of the condition does not depend upon the will of the obligor. but that of a third person or any other cause. ordering the other party to comply with his part is also not contrary to law. iii.” OSMENA vs RAMA The acknowledgement by defendantappellant of indebtedness led her to impose the condition that she would pay the obligation if she sold her house. The failure of respondents gives petitioner the right to refuse to proceed with the argument or waive that condition.Depends upon the will of one of the contracting parties and other circumstances. Impossible conditions. The acknowledgement was an absolute acknowledgement of obligation. ROMERO vs CA The condition of the private respondents’ undertaking is a mixed condition dependent on the will of the third persons. Such a clause is inoperative. abandon its operation…” is causal. The stipulation that “it being understood that this contract shall terminate…are when for any reason whatsoever. If the obligation is divisible. became due and demandable. of his obligation to pay the balance. 1183. RUSTAN PULP vs IAC A purely potestative condition such as that wherein resumption of delivery of respondents to the petitioner being purely dependent on the latter’s will must be obliterated. and upon happening of the condition. depending partly upon the will of Hermosa and partly upon chance. that part thereof which is not affected by the impossible or unlawful condition shall be valid. the old Civil Code rendered the defense null and void as it was dependent solely upon her will. such as the presence of a buyer and under conditions desired by intestate. and the obligor has done all he can to ensure compliance with the obligation. At this point. As to possibility Art. It is a mixed condition. government agencies and the vendor. and was sufficient to prevent the statute of limitations from barring the action upon the original contract. such as chance or will of a stranger. vs CA The term or period of this contract shall be as long as the party of the first part has need for electric light posts is potestative. Mixed .2002-24124 . Uy Tieng Piao et al had no positive obligation to cause the machinery needed to arrive in Manila. this led to the valid cancellation of the said contract. The ejectment is a condition. the operative act of which sets the motion of compliance by petitioner. -“I will buy you a house if you marry my daughter. like the squatters. The condition not to do an impossible thing shall be Simoun Antonio Montelibano Salinas . hazard or the will of a third person.[ C 2011 ] well as the will of a third person/stranger [ UP COLLEGE OF LAW ] TAYLOR vs UY TIENG PIAO 28 NAGA TELEPHONE CO. HERMOSA v LONGARA The condition given by Hermosa was a mixed one. The obligation is a suspensive one. because Article 1256 of the old CC includes no impediment to the insertion in a contract for personal service of a resolutory condition permitting the cancellation of the contract by one of the parties. the party of the second part is forced to stop.
1185. -ex. unless she changes her religion. the condition becomes effective from the moment the time (period) indicated has elapsed. Hence. Rules in case of loss. Physical – contrary to law of nature Juridical . or if it has become evident that the event cannot occur. the nullity of the promise follows. It is an undue restriction. Art. Negative – . bearing in mind the nature of the obligation. ROMAN CATHOLIC ARCHBISHOP OF MANILA vs CA The condition that 100 years from the date of execution. 1189. and it is still a definite period of time. -If the condition is negative. said land must not be sold disposed of. the condition shall be deemed fulfilled at such time as may have probably been contemplated. Art. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give.2002-24124 . Possible Impossible soon as the time expires or if it has become indubitable that the event will not take place. constitutes an essential condition necessary for the fulfilment of the deed of donation. If no time has been fixed. but the obligation is extinguished as soon as the time expires or it becomes indubitable (certain) that the event will take place/ ii.contrary to law. The condition that some event happen at a determinate time shall extinguish the obligation as Simoun Antonio Montelibano Salinas . (Violation of Bill of Rights in freedom of religion) -One who promises an impossible condition and knows that it cannot be fulfilled has manifested his lack of intention to be bound. Positive – Art. SIR JJ: It is actually still possible. loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor. d. Condition that a person shall not contract marriage.either judicially impossible or physically impossible. i. deterioration or improvement pending in the happening of the condition. The court finds that such a condition is impossible. or it becomes evident that the event cannot occur. A hundred years is finite.[ C 2011 ] [ UP COLLEGE OF LAW ] 29 considered as not having been agreed upon. As to mode i. 1184. the following rules shall be observed in case of the improvement. the obligation shall be extinguished. good customs and public policy -Impossible obligations annul the obligation dependent upon them. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed. 3. ii. -The condition must be fulfilled within the period stipulated.
The thing still exists but it is no longer intact. it is understood that the thing is lost when it perishes. the parties. incorporated in. shall return to each other what they have received. When the conditions have for their purpose the extinguishment of an obligation to give. the creditor may choose between the rescission of the obligation and its fulfillment. it is understood that the thing is lost when it perishes. In case of the loss. he shall be obliged to pay damages. Effect of loss or deterioration Art. With debtor’s fault Deterioration: 1189. deterioration or improvement of the thing. (4) If it deteriorates through the fault of the debtor. the improvement shall inure to the benefit of the creditor. or by time. the obligation shall be extinguished. the provisions of the second paragraph of Article 1187 shall be observed as regards the effect of the extinguishment of the obligation. to become of advantage. (6) If it is improved at the expense of the debtor. Improvement – anything added to. (5) If the thing is improved by its nature. Inure – use.2002-24124 1190. in case petitioners wish to purchase them and respondent decides to sell. put into practice.[ C 2011 ] [ UP COLLEGE OF LAW ] 30 (2) If the thing is lost through the fault of the debtor. he shall have no other right than that granted to the usufructuary. HEIRS OF TIMOTEO MORENO vs MACTAN INTL AIRPORT AUTHORITY There is no need for petitioners to pay for improvements. or disappears . pars 1 and 3: (1) If the thing is lost without the fault of the debtor. the impairment is to be borne by the creditor ii. said improvements may be removed without petitioners needing to pay. par 2 and 4: (2) If the thing is lost through the fault of the debtor. Without debtor’s fault Loss: 1189. b. If petitioners do not wish to purchase. upon the fulfillment of said conditions. are laid down in the preceding article shall be applied to the party who is bound to return. he shall be obliged to pay damages. (3) When the thing deteriorates without the fault of the debtor. goes out of commerce. with respect to the debtor. (3) When the thing deteriorates without the fault of the debtor. or disappears in such a way that its existence is unknown or it cannot be recovered. the provisions which. (1122) Loss: . with indemnity for damages in either case. As for the obligations to do and not to do. or attached to the thing that is due. or goes out of commerce. Simoun Antonio Montelibano Salinas . or goes out of commerce. Improvements done on the lot may be paid for by petitioner. the impairment is to be borne by the creditor. nor shall the value of the lot over time be subject to restitution. i. or disappears and cannot be recovered Deterioration – any reduction or impairment in the substance value of a thing which does not amount to a loss.when the thing perishes.
Petitioner did not validly and fully comply with the conditions in their contract. by nature or time: 1189. (4) If it deteriorates through the fault of the debtor. 6 submit collateral to GSIS. He may also seek rescission. Petitioner’s loss was due to his failure to II. the creditor may choose between the rescission of the obligation and its fulfillment. But GSIS still received payments. Effect of prevention of the fulfilment of the condition by the obligor Art. ii. non-payment of the mortgage debt and not making an earnest effort to redeem the property. While it is true that under paragraph 11 of the contract. (6) If it is improved at the expense of the debtor.[ C 2011 ] [ UP COLLEGE OF LAW ] 31 in such a way that its existence is unknown or it cannot be recovered. Leviste still refused to execute the final deed of sale in favour of Herrera as required by GSIS. in accordance with Articles 1385 and 1388 and the Mortgage Law. (1124) Art. Herrera was prevented from fulfilling the condition of assuming the GSIS mortgage because of Leviste’s own noncompliance with its obligation of securing the consent of GSIS. 4. Constructive fulfilment -a condition which. the improvement shall inure to the benefit of the creditor. Herrera was informed that he could not assume payment of the mortgage until a final deed of sale was submitted. at the debtor’s expense: 1189. if the latter should become impossible. with indemnity for damages in either case. 1192. par. or by time. RECIPROCAL OBLIGATIONS Art. 1186. unless there be just cause authorizing the fixing of a period. 2 requisites: 1) Intent of obligor to prevent fulfilment of the condition 2) actual prevention of fulfilment HERRERA vs LEVISTE Herrera may not redeem the property. Effect of Improvement i. The court shall decree the rescission claimed. with the payment of damages in either case. Despite payment by Herrera of remaining price to Leviste. he shall have no other right than that granted to the usufructuary. par 5 (5) If the thing is improved by its nature. This is understood to be without prejudice to the rights of third persons who have acquired the thing. in case one of the obligors should not comply with what is incumbent upon him. and all payments being kept by vendor. failure to fulfil would result in a cancellation of the contract. TEEHANKEE (DISSENT): Leviste failed to complete all the necessary steps to inform GSIS and arrange conformity of Herrera’s assumption of the mortgage obligation. In case both parties have committed a breach of the obligation. Leviste made no effort. 1191. Simoun Antonio Montelibano Salinas . despite clear stipulations in the contract. although not exclusively within the will of the debtor. may in some way be prevented for the debtor from happening. The power to rescind obligations is implied in reciprocal ones. The injured party may choose between the fulfillment and the rescission of the obligation. c. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.2002-24124 . even after he has chosen fulfillment.
1. Action for Rescission -a power. but only for breaches so substantial as to defeat the object of the parties in making the agreement ii. rescission with damages to injured party may be fulfilled. Action for Fulfillment -ask for specific performance of the obligation -payment for damages -if fulfilment is no longer possible. iii. creating liability for damages and entitling other party to ask for rescission a. or sale in instalments the liability of the first infractor shall be equitably tempered by the courts. They are to be performed simultaneously.[ C 2011 ] [ UP COLLEGE OF LAW ] 32 fault or fraud of defendant. the same shall be deemed extinguished. If it cannot be determined which of the parties first violated the contract. an action must be filed or a notarial demand made -damages must be adjudicated in the same action for rescission -rescission may not be for slight or casual breach. Requisites 1) breach must be by Simoun Antonio Montelibano Salinas . Alternative Remedies Of Injured Party in case of Breach a. Concept Reciprocal Obligations – those which arise from the same cause and in which each party is a debtor and a creditor of the other.2002-24124 b. so that the performance of one is conditioned upon the simultaneous fulfilment. judicial action must be undertaken. and each shall bear his own damages. -it does not affect third parties -no partial rescission and partial fulfilment/ no simultaneous specific performance and rescission b. 2. by declaration of the injured party i. one single breach except in contrary stipulation. such that the obligation of one is dependent upon the obligation of the other. Effects -extinguished obligatory relation as if it never existed -equivalent to unmaking and invalidating the juridical tie -it is the duty of the court to require both parties to surrender what they have respectively received . How made -rescission takes place upon declaration of the injured party -party should apply to courts for a decree of rescission or resolution -when injured party has already performed.
creditor had “the right and power to consider logging agreement dated December 2. 1983.2002-24124 . IRINGAN vs CA Rescission took place upon filing of JCR in RTC. the change of management. which allows for rescission by providing notice. the restitution must still take place. where implied delivery took place. This was a suspensive condition. and a contract to sell took place. there should be simultaneous restitution of the principal object of the contract to sell and the consideration paid. but a situation took place that prevented the obligation of the vendor to convey title from acquiring an obligatory force. Boysaw violated the contract when he engaged in a boxing match in Las Vegas.1960 may be considered rescinded without necessity of a juridical suit. Therefore. with legal interest (no attorney’s fees).[ C 2011 ] [ UP COLLEGE OF LAW ] 33 -rescission abrogates the contract in all parts -defendant’s sole duty is to return what he has received. The court erred in punishing UP for simply protecting its own interest. Also. Simoun Antonio Montelibano Salinas . return to plaintiff as well violated may act as if contract were rescinded. Also the letter of credit did not involve respondent RJH but another company and it was set to expire on July 24. -no partial rescission and resolution -no judgment rendered declaring rescission. no obligation arose on the part of petitioner. Despite the unfinished accounting for the fruits. Such violations allowed defendant the right to rescind and repudiate the contract altogether. Judicial notice is needed before one party can unilaterally affect a rescission.” upon default by debtor ALUMCO. DE LOS ANGELES In the “Acknowledgement of Debt & Proposed Manner of Payment. SIR JJ: This case changes the rule regarding rescission. It was not a contract of sale. Rescission did not take place with the letter. Also. Although only the final judgment may determine the correctness of the action. but proceeds at its own risk. No breach took place. but the failure to comply with a positive suspensive condition. judicial action is needed to ascertain the final award and resolution. creditor may change his mind and ask for fulfilment -no availment of pledge -in rescission. purchaser is only entitled to interest on amount he paid -damages are only those compatible with the idea of rescission -parties may choose to waive rescission in reciprocal obligations BOYSAW vs INTERPHIL PROMOTIONS This occasion led to a reciprocal obligation. VISAYAN SAW MILL vs CA What took place in this case was a contract to sell wherein the failure of respondent to ensure the opening of the letter of credit prior to May 15 1983 led to the inability of petitioner to fulfil its obligation. Article 1597 should apply. UP vs HON. The party who deems the contract DE ERQUIAGA vs CA & REYNOSO In rescission of contracts of reciprocal obligations. ONG vs CA Petitioner entered into contract with respondents on the basis that issuance of deed of absolute sale would be granted upon full payment of 2M pesos. But defendant is ordered to finish the accounting. but with Palao’s filing of the judicial notice of rescission. without consent or knowledge of defendant constituted another violation. No breach took place.
ROQUE vs LAPUZ & CA The respondent’s failure to pay the succeeding monthly instalments was a failure to comply with the suspensive condition which is the full payment of the price.[ C 2011 ] the implied delivery is a mere accommodation. Article 1191 is ALWAYS applied. making inapplicable and unwarranted the benefits of Article 1191. He shall also be liable for the fruits thereof from the time they should have been delivered. it is the duty of the court to require the parties to surrender that which they have severally received. in the same cases and in the same manner as the vendor is bound with respect to the vendee. paragraph 3. Simoun Antonio Montelibano Salinas . There was clear bad faith and malice on the part of respondent. 1788. 2) Delivery did take place. Article 1191 imposes upon petitioner to build the structure and private respondents to pay for it. The same rule applies to any amount he may have taken from the partnership coffers.2002-24124 . It became a contract between mortgagor and mortgagee. The vendor obligates himself to transfer ownership and to deliver a determinate thing to the buyer. It would contradict the very notion of rescission the very notion of rescission under Article 1385 of the CC. Mortgage has the option of seeking fulfilment or suing for breach. ROMERO (dissent): [ UP COLLEGE OF LAW ] sanctioning infringement of a contractual obligation. SURIA vs IAC 34 1) Time was not explicitly provided as essential to the contract. It was an absolute contract of sale. Art. is obliged to pay a price in money or its equivalent. To do so would be tantamount to excusing his bad faith and Petitioner and respondents entered into a contract of sale. 1786. A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the time he should have complied with his obligation. and is a perfected contract of sale. The contract is deemed extinguished. Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto. Article 1191 In all contracts involving reciprocal obligations. Art. GRACE PARK ENGG CO vs DIMAPORO When a contract is resolved or rescinded. If the contract is rescinded. the contract was valid under Art 1191. DEIPARINE vs CA & CARUNGAY & TRINIDAD Article 1191 is predicated on breach of faith by one of them that violates reciprocity between them. since he did not follow their stipulated plans and specifications. Foreclosure here is a specific provision found in the contract between the parties. Rescission is not a principal action retaliatory in character. who in turn. It has the effect of abrogating the contract in all parts. Deiparine’s failure has given the Carungay spouses the right to rescind or cancel. and no interest may be claimed by both of the contracting parties. but becomes subsidiary when it is available only in absence of any legal remedy. Therefore. without the need of any demand. property reverts to mortgagee. Both parties fulfilled their obligation. He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may have contributed to the partnership.
exerting an influence on obligations as a consequence of a juridical act. should the vendee's failure to pay cover two or more installments. the obligation shall be deemed to be one with a period. In the case referred to in two preceding articles. if one has been constituted. 1193. although it may not be known when. Any agreement to the contrary shall be void. 1486. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy. should the vendee's failure to pay cover two or more installments. -Obligations for whose fulfilment a day certain has been fixed. suspends demandability or determines extinguishment vs Period/Term Fulfillment Condition Art.2002-24124 . Period or term 1. it is a conditional obligation A. Concept -space of time which. Art. 1180. (n) II. OBLIGATION WITH A PERIOD Art. In a contract of sale of personal property the price of which is payable in installments. he shall have no further action against the purchaser to recover any unpaid balance of the price. a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. but terminate upon arrival of the day certain. shall be demandable only when that day comes. Simoun Antonio Montelibano Salinas . the obligation is conditional. When the debtor binds himself to pay when his means permit him to do so. If the uncertainty consists in whether the day will come or not. 1484. (2) Cancel the sale. the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation. should the vendee fail to pay. In this case. and it shall be regulated by the rules of the preceding Section. (3) Foreclose the chattel mortgage on the thing sold. when the lessor has deprived the lessee of the possession or enjoyment of the thing. shall be demandable only when that day comes (ex die) Obligations with a resolutory period take effect at once. but terminate upon arrival of day certain (in diem) -A day certain is to be understood to be that which must necessarily come. 1485. Obligations for whose fulfillment a day certain has been fixed. subject to the provisions of Article 1197. Art. Art. [ UP COLLEGE OF LAW ] 35 Obligations with a resolutory period take effect at once.[ C 2011 ] and his liability shall begin from the time he converted the amount to his own use. although it may not be known when -If uncertainty consists in whether the day will come or not. A day certain is understood to be that which must necessarily come.
possible B. As to definiteness a. 1180. As to effect -Suspensive -Resolutory Suspensive (ex die) – Art. Usually. Definite – when period is fixed b. court renders a definite period. Indefinite – when period is not fixed. 1195. the courts shall determine such period as may under the circumstances . In case of loss. 1197. Implied: When from the nature and circumstances of obligation. future 2. deterioration or improvement before arrival of period. As to expression a. Requisites 1. 1197) Simoun Antonio Montelibano Salinas . or when period is specified in the obligation or by law b. may be recovered. certain 3. 2 – period after which performance must terminate 2. Rules in case of loss. In every case. deterioration or improvement of the thing before the arrival of the day certain. D. Kinds of Periods/Terms 1. must lapse before performance of obligation can be demanded (from a day certain) Resolutory ( in diem) Art 1193 par. Legal: Fixed by law c. Art. par 3. As to source a. (See Article 1189.2002-24124 4. Anything paid or delivered before the arrival of the period. 1193. with the fruits and interests. Judicial: Fixed or allowed by the court C. the rules in Article 1189 shall be observed. Express: specifically stated. 1194. 1194) Art. the obligor being unaware of the period or believing that the obligation has become due and demandable. it can be inferred that a period was intended (Art. as in Art. par 1.[ C 2011 ] Must necessarily come Influence No effect on obligation but only on its demandability or performance Time Future Will of debtor Empowers court to fix record uncertain [ UP COLLEGE OF LAW ] 36 Gives rise to an obligation or extinguishes one already existing May refer to a past event unknown to both parties Annuls obligation (exclusively dependent on debtor’s will) 3. Effect of payment in advance Art. Voluntary: Fixed or stipulated by will of the parties b.
Benefit of Period 1.2002-24124 . he becomes insolvent. petitioner became subject to ejectment from the premises. Creditor may want to keep his money safely invested. Syjuco has nothing to lose. or wants to avoid the Simoun Antonio Montelibano Salinas . The period is set for the benefit of both the creditor and the debtor. Effects 1. such as that of barring debtor from paying principal of loan prior to agreed time. creditor – antichresis b. and when through a fortuitous event they disappear. After termination of the lease. The debtor shall lose every right to make use of the period: (1) When after the obligation has been contracted. it appears that the period has been established in favour of one or the other 2. it is presumed to be for the benefit of both creditor and debtor -unless from tenor or other circumstances. 4. especially at a time of uncertainty. (3) When by his own acts he has impaired said guaranties or securities after their establishment. payment must be received. neither was it stated that the option was given for petitioner’s benefit. (2) When he does not furnish to the creditor the guaranties or securities which he has promised. but interest is not the only reason why period is fixed. unless he gives a guaranty or security for the debt.[ C 2011 ] have been probably contemplated by the parties. For whose benefit a. unless he immediately gives new 3. Creditor cannot compel debtor to pay in advance of fixed date. When debtor loses right to make use of period Art. the period must be deemed to have been agreed upon by and for the benefit of both parties. Effect of antichresis: Compulsion of debtor to retake possession and pay balance of debt (beneficial for creditor) BUCE vs CA & SPOUSES TIONGCO In a reciprocal contract like a lease. when a period is designated. nor can debtor compel creditor to receive payment in advance 2. PARAS (dissent): If by early payment of obligation. It was not specifically indicated who may exercise the option to renew. 1198. [ UP COLLEGE OF LAW ] 37 sudden decline in purchasing power of currency. debtor – “within: c. the creditor would not lose any part of stipulated interest. both – generally. Presumption PONCE DE LEON vs SYJUCO INC Syjuco is allowed to refuse payment tendered by De Leon. E. Once fixed by the courts. the period cannot be changed by them. But no prayer was included for possession or restoration of leased properties. PADILLA: Creditor should not be allowed to exact and impose unfair terms and conditions.
Article 1197 has a 2 step process. A person alternatively bound by different prestations shall completely perform one of them. the intervention of the court to fix the period of performance was warranted. (5) When the debtor attempts to abscond. If the obligation does not fix a period. the courts may fix the duration thereof.2002-24124 . the fulfilment of one is sufficient. The period contemplated was the performance of the eviction of the squatters. DEUDOR vs JM TUASON CO When the court exercises the power to fix the period. it has to determine the period probably contemplated by the parties. In no case can the court hold that under the plea mentioned. unless it has been expressly granted to the creditor. Once fixed by the courts. [ UP COLLEGE OF LAW ] equally 38 ARANETA vs PHIL SUGAR ESTATES DEVT The issue was not the court fixing the time of performance but determining whether or not the parties agreed that Araneta should have reasonable time to perform its part in the bargain. When Court May Fix Period Art. F. III. -The obligation is extinguished by performance of only one of the prestations.[ C 2011 ] ones satisfactory. In every case. Concept – Art. -several objects being due. Right of Choice Art. determined by the choice of the debtor who generally has the right of election. It can be inferred that a period was intended by the parties thereto. -Proper election does not require assent. B. Simoun Antonio Montelibano Salinas . The contract did not prohibit payment before the fixed date. 1199. 1200. Period depends solely on will of debtor LACHICA vs ARANETA A term is fixed and presumed to have been established for the benefit of both creditor and debtor. (4) When the debtor violates any undertaking. it does not modify or alter but merely enforces period. The creditor cannot be compelled to receive part of one and part of the other undertaking. but from its nature and the circumstances it can be inferred that a period was intended. The right of choice belongs to the debtor. The courts shall also fix the duration of the period when it depends upon the will of the debtor. Period is implied 2. The period within which delivery was made sprang from the agreement between Deudor and JM Tuason. No basis is stated to support the court’s intervention. 1. Although defendant holds that the reason for the dates is for stipulated interest. then. unless from its tenor. It has to be determined that the obligation does not fix a period. the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. it should appear that the term was established for the sale. in consideration of which the creditor agreed to the period. or the period of two years it granted. the period cannot be changed by them. ALTERNATIVE OBLIGATIONS A. 1197.
Until then the responsibility of the debtor shall be governed by the following rules: (1) If one of the things is lost through a fortuitous event. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared. the obligation is called facultative. 1202 to 1205 Art. the choice by the creditor shall fall upon the price of any one of them. 1203. Effect of loss or impossibility of one or all prestations. 1201. or the price of that which. but the obligor may render another in substitution. If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation. 1206 When only one prestation has been agreed upon. or that which remains if only one subsists. 1202. through the fault of the former.[ C 2011 ] C. (1135a) Art. Simoun Antonio Montelibano Salinas . (3) If all the things are lost through the fault of the debtor.2002-24124 . he shall perform the obligation by delivering that which the creditor should choose from among the remainder. Effect of Notice of Choice [ UP COLLEGE OF LAW ] 39 -Expressed by election or choice. some or all of the prestations should become impossible. D. all the things which are alternatively the object of the obligation have been lost. When Notice Produces Effect – Art. the creditor may claim any of those subsisting. When the choice has been expressly given to the creditor. (n) Art. with a right to damages. or that of the service which last became impossible. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound. Facultative ObligationArt. The creditor shall have a right to indemnity for damages when. only one is practicable. E. the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. election is irrevocable -Election ceases to be alternative from the time creditor’s choice is made. The choice shall produce no effect except from the time it has been communicated. once made. (2) If the loss of one of the things occurs through the fault of the debtor.Art. the latter may rescind the contract with damages. through the fault of the debtor. 1205. The same rules shall be applied to obligations to do or not to do in case one. Damages other than the value of the last thing or service may also be awarded. or the compliance of the obligation has become impossible. F. has disappeared. also with indemnity for damages. 1204. (1134) Art. when he is expressly allowed to do so.
2. 3. does not render him liable. Plurality of Subjects: More than one creditor or debtor or both 3. The loss or deterioration of the thing intended as a substitute. JOINT AND SOLIDARY OBLIGATIONS A. many constitute prestations that are part of the obligation. Each creditor can only recover his share of the obligation and each debtor can be made to pay only his part. 2. FACULTATIVE 1. 2. only one thing is due. Concept: A joint obligation is one in which each of the debtors is liable only for a proportionate part of the debt and each of the creditors is entitled only to a proportionate part of the debt. negligence or fraud. through the negligence of the obligor.[ C 2011 ] [ UP COLLEGE OF LAW ] creditor or a third person. 40 discretion and choice of the debtor. Joint Obligations 1. among whom the benefit or the burden of the obligation is divided. the choice never falls on the creditor. Nullity of one prestation does not invalidate the obligation which is still in force. But once the substitution has been made. if from the law. But the debtor has reserved the right to substitute it with another. In a facultative obligation. loss of that which may be given as substitute does not affect the delay. Concept – in facultative obligations. Requisites 1. 4. Effect of Substitution Substitute: the thing or service owed to the creditor instead of the original or main obligation -before substitution: substitution is at debtor’s option and cannot be compelled by the creditor. nor may the creditor refuse the substitution 1. Loss of one alternative prestation due to debtor’s fault renders him liable if the choice is by the creditor. -In facultative obligations.2002-24124 A. Loss of the substitute due to debtor’s fault does not render him liable for damages 4. the obligor is liable for the loss of the substitute on account of his delay. but the presumption is that shares are equal. Distinguished from Alternative Obligation ALTERNATIVE 1. The creditor can never refuse or reject the substitution IV. Substitution is always at the Simoun Antonio Montelibano Salinas . the nature or the wording of the obligation. Several prestations due. the . Choice may be granted to the 2. Only one principal prestation due. Determination of shares in the demandability or the fulfilment of the obligation: Shares may be unequal. 3. -Obligations existing between several persons. but accessory only as means to facilitate payment. The nullity of the principal prestation invalidates the obligation and the creditor cannot demand the substitute even when this is valid.
Simoun Antonio Montelibano Salinas .2002-24124 . Effects. or that each one of the latter is bound to render. the presumption is that their obligation is joint and each debtor is liable only for a proportionate part of the obligation. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand.[ C 2011 ] contrary does not appear. Words used to indicate Joint Obligations -“We promise to pay” used by two or more signers 2. If from the law. the credit or debt shall be presumed to be divided into as many shares as there are creditors or debtors. The vices of each obligation arising from the personal defect of a particular debtor or creditor does not affect the obligation or rights of the others. The insolvency of a debtor does not increase responsibility of his codebtors nor does it authorize a creditor to demand anything from his cocreditors.Art. or when the law or the nature of the obligation requires solidarity. 1207. 1207. Presumption. 4. There is a solidary liability only when the obligation expressly so states. [ UP COLLEGE OF LAW ] 41 -When two persons are liable under a contract or under a judgment. Extent of right of creditor 1. 1208 a. and no words appear in the contract or judgment to make each liable for the entire obligation. Extent of liability of debtor b. The interruption of prescription by the judicial demand of one creditor upon a debtor. Partial payment or acknowledgment made by one of the debtors does not stop the running of the statute of limitations against the others. entire compliance with the prestation. 3. 2. When a final judgment does not specify that it is solidary liability. The demand by one creditor upon one debtor. does not benefit other creditors nor interrupt the prescription as to other debtors. but not with respect to the others. 1207. the credits or debts being considered distinct from one another. subject to the Rules of Court governing the multiplicity of suits.Art. produces the effects of default only with respect to the creditor who demanded and the debtor on whom the demand was made. 1208 Art. 1208. it is presumed joint. or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear. Shares shall be considered distinct from one another subject to rules of court governing multiplicity of suits B. 3. Art. -It is not necessary that the agreement should use precisely the word “solidary” for an obligation to do so.
Remission – without receiving any Simoun Antonio Montelibano Salinas . compensation. the creditor renounces the enforcement of the obligation. Divisible. There exists a presumption against solidarity and a presumption of joint obligations Art. Novation. It results in a partial extinguishment of an obligation. made by any of the solidary creditors or with any of the solidary debtors. Confusion – the meeting in one person of the qualities of creditor and debtor of the same obligation. confusion or remission of the debt.2002-24124 b.extinguishment of an obligation by substitution or change of the obligation by a subsequent one which extinguishes or modifies the first. confusion (Art.each creditor may independently demand and compel performance of his share of the credit c. Compensation – capacity to dispose of the thing paid and capacity to receive payment is not necessary. remission [ UP COLLEGE OF LAW ] 42 equivalent. Philippine doctrine requires express provision. B. 1277). Novation . In case of novation. Words used to indicate solidary obligations “joint and several” or “in solidum” -“I promise to pay” with two or more persons -“use of the words individually and collectively” . use of the term “solidary” is not required -plurality of subjects shares unity of prestation ii. Requisites . Concept: One in which each debtor is liable for the entire obligation a. Art. Solidary Obligations 1. Res judicata is not extended from one debtor to another in a joint divisible obligation. 1277. Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. It is gratuitous. shall extinguish the obligation. 1215. without prejudice to the provisions of Article 1219.solidary liability exists only when the obligation expressly so states or when the law or the nature of the obligation requires solidarity i. compensation. intention to establish solidary liability must clearly appear iii.[ C 2011 ] 5. which is extinguished in its entirety or in that part or aspect of the same to which the remission refers.
such as mortgage of one object by its co-owners Art. the credit or debt shall be presumed to be divided into as many shares as there are creditors or debtors. -the credit and its benefits are equally divided among the creditors ii. Legal ii. -of bailees Art. When there are two or more bailees to whom a thing is loaned in the same contract. [ UP COLLEGE OF LAW ] for the purpose of enforcing neutrality. Active: solidarity of creditors. As to source Art. As to uniformity i. 1945. violates any regulation issued by competent authority Simoun Antonio Montelibano Salinas . Conventional iv. 1915. RPC: The penalty of prision correctional shall be inflicted upon any one who.[ C 2011 ] 2. 43 or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear. If two or more persons have appointed an agent for a common transaction or undertaking. in which the government is not involved. subject to the Rules of Court governing the multiplicity of suits. i. with the resulting obligation of paying anyone what belongs to him. Mixed: simultaneously active and passive c. Uniform: with the Art. Passive: solidarity of debtors. If from the law. the credits or debts being considered distinct from one another. 1208. -of tortfeasors Art. The responsibility of two or more persons who are liable for quasi-delict is solidary. -co-principals to a common agent b. on the occasion of a war. Real – from the nature of the obligation. As to parties bound i. they shall be solidarily liable to the agent for all the consequences of the agency.2002-24124 . they are liable solidarily. where each is liable to pay the whole to the common creditor -its essence is that each debtor can be made to answer for the others with the right on the part of the debtor – payor to recover from the others their respective shares iii. each having the right to collect from the common debtor -its essence consists of the authority to claim and enforce the rights of all. Kinds a. 119. 2194.
Art. 1211. RCBC vs CA The ‘Comprehensive Surety Agreement’ the parties entered into expressly consider Ching as a surety. The choice is left to the solidary creditor to determine against whom he will enforce collection. Solidary creditor in relation to: 1. Varied/Nonuniform. as well as he who collects the debt. shall extinguish the obligation. without prejudice to the provisions of Article 1219. Only the 225.[ C 2011 ] same terms and conditions for all -debtors are bound by same conditions or clauses ii. compensation. 1216. shall be liable to the others for the share in the obligation corresponding to them. LAFARGE CEMENT PHIL vs CONTINENTAL CEMENT The fact that the liability sought against respondent Continental Cement is solely for tort does not negate the solidary nature of their liability. Any one. some or all of them may be proceeded against for the entire obligation. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. since the said order only affects PBM and not Ching. When an obligation states solidary liability. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. INCIONG vs CA The promissory note expressly states three signatories as jointly and severally liable. 1211 [ UP COLLEGE OF LAW ] 44 can be sued. Art. confusion or remission of the debt. concurrence of 2 or more creditors or 2 or more debtors in one obligation implies that one of the former can demand or that each of the latter is bound to render entire compliance of the prestation. despite the SEC order. made by any of the solidary creditors or with any of the solidary debtors. -with different periods and conditions for each effects -only the portion due at the time is collectible from any one of the debtors or by any one of the creditors. so long as the Simoun Antonio Montelibano Salinas . common debtor – right to demand Art. He 3. Liability may not be restricted or extended by implication.2002-24124 . Effects a. the remission of any part of the debt made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others and therefore. Novation. The creditor who may have executed any of these acts. YNCHAUSTI vs YULO The obligation being solidary. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others. on the basis of the remission of the 3 debtors. (1143) Art. 1215.000 in the second contract can be recovered. there can be no doubt that all debtors have a right to enjoy the benefits of the partial remission granted by the creditor.
If two or more solidary debtors offer to pay. shall be liable to the others for the share in the obligation corresponding to them. 2. confusion or remission. Each one of the solidary creditors may do whatever may be useful to the others.[ C 2011 ] [ UP COLLEGE OF LAW ] . 1217 (par 1). 1212. Payment made by one of the solidary debtors extinguishes the obligation. confusion of the debt -These are considered from two aspects: 1) the relation between the creditors on one hand and the debtors on the other and 2) the relations among codebtors themselves Between Creditors & Debtors -any of these acts will extinguish the obligation Between Creditors: -extinguishment of obligation does not prejudice the right of the other creditors to recover their share in obligation from creditor who effected any of the above Between Debtors: Codebtor to whom obligation was extinguished cannot recover from his co-debtors more than their respective shares in whatever he may have given up or lost as consideration for extinguishment of other obligation 2.in case of novation. compensation.prejudicial acts prohibited- Art. -the solidary creditor is an agent of the others. -Other creditors may recover their respective shares in the obligation from creditors who effected novation. compensation. assignment of rights not allowed- Art. The act of extinguishment will be valid so as to extinguish claim against debtors. as well as he who collects the debt. Effects of acts of novation. hence he cannot assign that agency to a third person without the . the creditor may choose which offer to accept. The creditor who may have executed any of these acts. remission- 45 debt has not been fully collected. confusion. Art. but not with respect to co-creditors whose rights subsist and can be enforced against creditor who performed the act alone. 1213. (1144a) Art. compensation. -A solidary creditor cannot do anything prejudicial to the cocreditors. A solidary creditor cannot assign his rights without the consent of the others. solidary co-creditor/s Simoun Antonio Montelibano Salinas . but not anything which may be prejudicial to the latter.2002-24124 . 1215 par.
If two or more solidary debtors offer to pay. implies mutual confidence. hence. it is just to require consent of others. entire compliance with the prestation. confusion or remission of the debt. Solidary debtor in relation to: i. reimburse his share to the debtor paying the obligation. Take note: the power of the creditor to extinguish the obligation justifies this rule. - in case of novation. b. compensation. confusion. consent of other creditors. shall extinguish the obligation. 1217-1220 Art. no interest for the intervening period may be demanded. solidary co-debtor .[ C 2011 ] [ UP COLLEGE OF LAW ] 46 Novation. If the payment is made before the debt is due. He who made the payment may claim from his co-debtors only the share which corresponds to each.in case of payment by a co-debtor. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand. the essence of active solidarity. ii. compensation. Mutual agency. made by any of the solidary creditors or with any of the solidary debtors. without prejudice to the provisions of Article 1219. There is a solidary liability only when the obligation expressly so states. or that each one of the latter is bound to render.Art. 1215 par. such share shall be 1217. 1 Simoun Antonio Montelibano Salinas . because of his insolvency. 1207. common creditor . with the interest for the payment already made.obligation to performArt. or when the law or the nature of the obligation requires solidarity. Payment made by one of the solidary debtors extinguishes the obligation. remission by a creditor.2002-24124 . the creditor may choose which offer to accept.Art. When one of the solidary debtors cannot.
2002-24124 in case of fortuitous event. 1221.Art. -He cannot claim entire amount. for the price and the payment of damages and interest. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors. Simoun Antonio Montelibano Salinas . -Payment by one solidary debtor extinguishes the obligation. the provisions of the preceding paragraph shall apply. 1221 Art. If one does pay.[ C 2011 ] borne by all his codebtors. with interest of payment already made. obtained by one of the solidary debtors. 1218. If there was fault on the part of any one of them. [ UP COLLEGE OF LAW ] 47 After one solidary debtor has paid the entire obligation. If through a fortuitous event. it is extinguished and there is nothing to remit. The remission of the whole obligation. he does not revive the obligation. -Exemption of codebtor in such a case will give way to fraud. Art 1220. in case the debt had been totally paid by anyone of them before the remission was effected. the thing is lost or the performance has become impossible after one of the solidary debtors has incurred in delay through the judicial or extrajudicial demand upon him by the creditor. 1219. -It is no longer due. even partially. all shall be responsible to the creditor. the obligation shall be extinguished. Art. in proportion to the debt of each. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors. . Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if such payment is made after the obligation has prescribed or become illegal. He who made payment may claim from his codebtors only the share which corresponds to each. and none of the solidary debtors may be compelled to pay. without prejudice to their action against the guilty or negligent debtor. but only that share pertaining to each with interest on the amount advanced Art. does not entitle him to reimbursement from his co-debtors.
[ C 2011 ] -If anyone was at fault. those derived from the nature of the obligation -defenses which may contribute to or weaken or destroy vinculum juris -nullity due to capacity or consent of all debtors.Art. RFC vs CA The obligation to pay the balance had already been assumed by RFC. With respect to those which Simoun Antonio Montelibano Salinas . Hence. avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him. Types i. 4. fraud. mistake. In case of fortuitous event. Effects ALIIPIO vs CA The debt to be demanded is accountable to the couple’s conjugal partnership of gains. JAUCIAN vs QUEROL [ UP COLLEGE OF LAW ] 48 personally belong to the others. in actions filed by the creditor. A solidary debtor may. 1222. defenses pertaining to his share -special terms or conditions affecting his part of the obligation iv. Defenses available to a solidary debtor against the creditor. a. 1222 Art. With no other conditions other than the title first be conveyed to Dominguez and the lien registered. not nature of obligation itself ii. an ordinary proceeding for a money claim in the settlement of the estate of the Article 1144 of the old Civil Code states that a creditor may sue any of the joint and several debtors or all of them simultaneously. QUIOMBING vs CA It did not matter who between the petitioners would file the complaints since the respondents were liable to either of them as a solidary creditor for the full amount of the debt. he may avail himself thereof only as regards that part of the debt for which the latter are responsible. Rogero was liable absolutely for the full amount of the obligation. the things lost or impossible due to delay. Her position so far as the creditor was concerned was exactly the same as if she had been the principal debtor.2002-24124 . personal defenses -partial or total defense -those which annul consent iii. all shall be responsible to the creditor. those personally belonging to the other codebtors -those which exempt him from payment or obligation pertaining to other debtors who have personal defense b. violence -invalidate original contract -death of principal debtor only bars execution against debtor’s estate. provision of preceeding paragraph shall apply. or pertain to his own share.
and the debt can be enforced only by proceeding against all the debtors. 1209. -When there are several debtors or creditors. Joint Indivisible Obligations 1. Solidarity Art. each creditor may demand the full prestation and each debtor has the duty to comply. -in solidary obligations. Effects (Art. The debtors who may have been ready to fulfill their promises 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. the obligation is joint. -midway between joint and solidary obligations [ UP COLLEGE OF LAW ] 49 latter should be insolvent. Concept -Necessity of collective fulfilment and the action must be against all debtors. 1224. -in indivisible joint obligations. each creditor cannot demand more than his share and each debtor is not liable for more than his share solidarity – legal tie or vinculum juris defining extent of liability indivisibility . 1209) a. If one of the Simoun Antonio Montelibano Salinas . Nor does solidarity of itself imply indivisibility. The indivisibility of an obligation does not necessarily give rise to solidarity. The obligation assumed in this case is joint. Indivisibility vs. and debts chargeable to it are paid in accordance with the settlement of estate proceedings. Upon death of Alipidio. Liability for damages in case of breach Art. If the division is impossible.[ C 2011 ] decedent. no stipulation was present to render the obligation solidary. the spouses did not jointly and severally claim the debt to respondent. 2. the others shall not be liable for his share. -its fulfilment requires concurrence of all debtors -ex: delivery of a house Distinguished from joint obligations: 1) No creditor can do an act prejudicial to others 2) No debtor can be made to answer for others 3) Collective action is expressly required 4) Various creditors Distinguished from solidary obligations: 1) requires plurality of subjects 2) not required in indivisibility Art. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. In this case. the right of the creditors may be prejudiced only by their collective acts. Also. C.-prestation which is not capable of partial performance 3. 1210. the CPG was dissolved. but the prestation is indivisible.2002-24124 .
as the case may be. obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. Distinguished from solidary obligations solidarity: vinculum juris and refers to subject of obligation indivisibility: prestations or object of the obligation V. Divisible Obligations 1. 2. Conventional. 50 -identity: very thing or service due -integrity: fulfilled completely B. 1223. Indivisible Obligations 1. Presumptions Simoun Antonio Montelibano Salinas . For the purposes of the preceding articles. Natural. by nature. DIVISIBLE AND INDIVISBLE OBLIGATIONS A. Concept: When each of the parts into which it is divided is divided forms a homogenous and analogous object to the other parts as well as the thing itself. Legal. 1 Art. 1223. 1. Concept: when it cannot be validly performed in parts a. 1225 par. 1233 Art.Art. 1225 par.[ C 2011 ] [ UP COLLEGE OF LAW ] rendered. c. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or 2. The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title. an obligation is indivisible if so provided by law or intended by the parties. 1225 par. -when the object is.Art. even though the object or service may be physically divisible.2002-24124 . Effects. indivisible.Art. 1233. 3 However.Art. Kinds a. 1225 par. 3 (intended by the parties) 3. Art. so that it could never be due without being indivisible b.
Accessory obligations: Those attached to a principal obligation in order to complete the same or take their place in case of breach. Of divisibilityArt. Of indivisibilityArt. OBLIGATIONS WITH A PENAL CLAUSE A. Effects. 1 For the purposes of the preceding articles. it is the fulfilment that gives rise to the obligation Penal Clause: an existing obligation (the principal) exists from the very beginning Conditional: principal obligation dependent on Uncertain event Penal Clause: accessory dependent on principal VS Alternative Obligations: Alternative: 2 or more obligations are due. but fulfilment of one is sufficient Penal: Only one prestation and only in its non-performance is penal clause enforceable Alternative: impossibility of one makes other obligations subsist Penal: impossibility of principal obligation extinguishes penalty Alternative: debtor chooses obligation Penal: debtor cannot choose payment of penalty to address principal obligation absent express right VI. or analogous things which by their nature are susceptible of partial performance.[ C 2011 ] [ UP COLLEGE OF LAW ] 51 a. It is attached to an obligation in order to insure performance. Natural Indivisibility: by conversion of the obligation into an obligation to pay damages B. including acts and abstentions. Divisibility and indivisibility in obligations not to doArt. no obligation exists before suspensive condition happens. 4. obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible.see Joint Indivisible Obligations 6.Art. b. VS Conditional Obligations: -in conditional obligations. the accomplishment of work by metrical units. 1224 . Conventional or Legal Indivisibility -by novation of the obligation -by death of creditor or debtor (heirs may pursue) 1. Principal Obligations: those that can stand alone. 1233. independently of the existence of other obligations and have individual and independent purpose. it shall be divisible. Simoun Antonio Montelibano Salinas . 1225 par. 1225 par. 2 When the obligation has for its object the execution of a certain number of days of work. Concept: an accessory undertaking to assume greater liability in case of breach. 1223.2002-24124 . 3 -determined by the character of the prestation in each case 5. 1225 par. It may be a sum of money. or anything stipulated by parties. Cessation of indivisibility A.
Demandability of PenaltyArt. 2 The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. -Unless the contrary is stipulated. In obligations with a penal clause. As to effect a. Reparatory: where the penalty substitutes indemnification for damages C.2002-24124 . The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. . Substitute for indemnity for damages and payment of interestArt. Subsidiary: when only the penalty may be enforced Simoun Antonio Montelibano Salinas . the penalty shall substitute the indemnity and the payment of interests in case of non-compliance 1. Nevertheless. D. damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. Complementary: when 2. Effects of Penal Clause 1. 1226. B. Kinds of Penal Clause b. As to purpose a. 3) Penal: penalty is extinguished by nullity of principal obligation Guaranty: guaranty subsists even when principal obligation is void or unenforceable or is a natural one.[ C 2011 ] [ UP COLLEGE OF LAW ] both the principal obligation and the penalty may be enforced 52 VS Facultative Obligations: Facultative: power of debtor to make substitution is absolute Penal: power granted only by express stipulation Facultative: creditor can never demand both prestations Penal: such right may be granted to him Penal Clause vs Guaranty -guaranty: contract by virtue of which a 3rd person called the guarantor binds himself to fulfil the obligations to principal in case debtor fails to do so SAME: Both insure performance of principal obligation -Both accessory and subsidiary obligations DIFF: 1) Penal: obligation to pay penalty is different from principal obligation Guaranty: object of obligation of principal debtor and guarantor is the same 2) Penal: principal obligation of penalty can be assumed by same person Guaranty: Guarantor can never be the principal debtor. if there is no stipulation to the contrary. 1226 par. Legal: provided by law 3. Punitive: where damages may be collected b. the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance. As to source a. Conventional: produced by agreement b.
2. When penalty shall be equitably reducedArt. 1227… unless this right has been clearly granted him. damages are generally resolved. nothing in the deed of sale restricted Anda’s right to sell the lot within the two year period. The undertaking assumed by Country Bankers Insurance refers to all such damages vas such party may sustain by reason of the injunction if the court should finally decide that the plaintiffs were not entitled thereto. Creditor cannot collect other damages in addition to penaltyArt. Creditor cannot demand both performance and penalty at the same timeArt. Exceptions. COUNTRY BANKERS INSURANCE vs CA A provision for forfeiture of the remaining deposit still in possession of the lessor in the event of the cancellation of the agreement 3. It was through the fault of the defendant that said default had taken place. Penalty clauses can be in the form of penalty or compensatory interest. ExceptionsArt. MKTI DEV’T CORP vs EMPIRE INSURANCE The ‘special condition’ was. Also. ExceptionArt. 1227 …Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time… a. Since there was a partial performance of the obligation. the judge shall reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor.Art. 4. courts are called to apply strictly against enforcement of penalty in its entirety. Not exempt debtor from performanceArt. According to Article 1229 of the Civil Code.2002-24124 . 1227The debtor cannot exempt himself from the performance of the obligation by paying the penalty… a. 1226 a. 1227…save in the case where this right has been expressly reserved for him. question of indemnity for damages is not resolved. petitioner had made several payments and the continued monthly accrual of the 2% penalty was deemed unconscionable by the court. 1226: 1) express provision to that effect 2) debtor refuses to pay the penalty 3) debtor is guilty of fraud E. 1229 The judge shall equitably reduce the penalty when the principal obligation has Simoun Antonio Montelibano Salinas . but is subsisting. in fact. led to a reduction to 12% total. -When purpose is reparation.Art. -When purpose is punishment. However. 1226 [ UP COLLEGE OF LAW ] 53 -Damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation.[ C 2011 ] a. There is a stipulation in the contrary in this case. a penal clause. by lessee’s violation is a valid penal clause. TAN vs CA The promissory note clearly makesv the stipulation of payment of interest. Exception.
Rationale -if it is contrary to law. Other causes of extinguishment of obligations.[ C 2011 ] [ UP COLLEGE OF LAW ] public order or public policy 54 been partly or irregularly complied with by the debtor. it assumes the form of a guaranty -when nullity of a principal obligation itself gives rise to a liability of debtor for damages CHAPTER 4: EXTINGUISHMENT OBLIGATIONS OF I. fulfillment of a resolutory condition. (6) By novation. such as annulment. Simoun Antonio Montelibano Salinas . -exception: when penalty undertaken by 3rd person precisely for obligation that is unenforceable. Obligations are extinguished: (1) By payment or performance: (2) By the loss of the thing due: (3) By the condonation or remission of the debt.2002-24124 . rescission. 2. courts apply strictly against enforcement of penalty in its entirety F. void or natural. Even if there has been no performance. (4) By the confusion or merger of the rights of creditor and debtor. (5) By compensation. it exists -In any case where there has been partial or irregular compliance with provisions of a contract with a penal clause. are governed elsewhere in this Code. 1230 The nullity of the penal clause does not carry with it that of the principal obligation. 1231. good customs. The nullity of the principal obligation carries with it that of the penal clause. -if principal obligation is valid. EffectsArt. Modes of ExtinguishmentArt. morals. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. and prescription. Nullity of Principal Obligation or Penal Clause 1.
-This is because whenever a third person who has no interest in the obligation pays. in any other manner. effectsArt. . etc.it is the fulfillment of the prestation due. Who can pay a. third person who is not an interested party and .Art. 1. guarantors) Simoun Antonio Montelibano Salinas . meaning of “interested party” . third person who is not an interested party but with consent of debtor i. with all the corresponding rights c. Requisites 1. Payment means not only the delivery of money but also the performance. time and place of payment. of an obligation. the manner. and fulfillment are identical. unless there is a stipulation to the contrary.the persons who have an interest in the fulfillment of the obligation are those who would be benefited by the extinguishment of the obligation (co-debtors. 1 The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation. not interested in the obligation. third person who is an interested party i. there is a modification of a prestation that is due.[ C 2011 ] II. 1302 It is presumed that there is legal subrogation: (3) When. even without the knowledge of the debtor. effects. 1232. the person who pays 2. sureties.2002-24124 1236 par. Payment or Performance A. A creditor should not be compelled to accept payment from a third person whom he may dislike or distrust. a person interested in the fulfillment of the obligation pays. B. a fulfillment that extinguishes the obligation by realization of the purpose for which it was constituted/ -Payment. pays with the express or tacit approval of the debtor. without prejudice to the effects of confusion as to the latter's share. 1302. the person to whom payment is made 3. the thing to be paid 4. -subrogation transfers to the third person or new creditor the entire credit. When a third person. d. [ UP COLLEGE OF LAW ] 55 ii. ConceptArt. in general: the debtor or his duly authorized agent -the debtor’s heir or successor in interest -any person interested in the fulfillment of obligation b.
effects. without prejudice to the provisions of Article g. -when the person paying has no capacity to make the payment. in case of active solidarityArt. guaranty. or his successor in interest. To whom payment may be made a. except that if he paid without the knowledge or against the will of the debtor. 1237 Whoever pays on behalf of the debtor without the knowledge or against the will of the latter. cannot compel the creditor to subrogate him in his rights. such as those arising from a mortgage. has been made by one of them. 1238. in case he accepts it. par. or Simoun Antonio Montelibano Salinas . in obligation to giveArt. payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid. -no one should be compelled to accept the generosity of another f. . judicial or extrajudicial. he can recover only insofar as the payment has been beneficial to the debtor. who has entered into a contract without the consent of the parent or guardian. 1. payment should be made to him.Art. -equality of rights of solidary creditors by virtue of mutual representation lasts only until one of therm goes ahead of the others and sues the debtors." 56 without knowledge or against the will of the debtor i. Art. or penalty. in generalArt. Art. 1239. 2.2002-24124 . i. Payment shall be made to the person in whose favor the obligation has been constituted. Whoever pays for another may demand from the debtor what he has paid.Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation. 1214. effect of incapacity e. the payment will not be valid. The debtor may pay any one of the solidary creditors. When a minor between eighteen and twentyone years of age. voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation. In obligations to give. third person who does not intend to be reimbursedArt. there shall be no right to recover the same from the obligee who has spent or consumed it in good faith. 1240. 2. But the payment is in any case valid as to the creditor who has accepted it. but if any demand. except in the case of Article 1427. the creditor cannot be compelled to accept it.[ C 2011 ] [ UP COLLEGE OF LAW ] 1427 under the Title on "Natural Obligations. which requires the debtor's consent. 1427. par. 1236.
[ C 2011 ]
[ UP COLLEGE OF LAW ]
any person authorized to receive it. -The repayment of debt must be made to the person in whose favor the obligation is constituted or to another authorized to receive the payment in his name. -at the time of payment. -also to a person not authorized to receive payment , by law or stipulation
i. requisites 1. if the payee has kept the thing delivered, or 2. insofar as the payment has been beneficial to him 3. payment made to a creditor after debtor has been judicially ordered to retain the debt. c. third personArt. 1241 par. 2 Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor. Such benefit to the creditor need not be proved in the following cases: (1) If after the payment, the third person acquires the creditor's rights; (2) If the creditor ratifies the payment to the third person; (3) If by the creditor's conduct, the debtor has been led to believe that the third person had authority to receive the payment. i. requisites (same as prior) ii. when proof of benefit not requiredArt. 1241 par. 3. Art. 1242 Payment made in good faith to any person in possession of the credit shall release the debtor. -the person in possession of the credit is neither the creditor nor one authorized by him, to receive payment, but appears, under the circumstances
b. incapacitated personArt. 1241 par. 1 Payment to a person who is incapacitated to administer his property shall be valid if he has kept the thing delivered, or insofar as the payment has been beneficial to him. -when the creditor is incapacitated to receive payment, this must be made to his legal representative if there is one. -the debtor may pay again to the incapacitated person when he attains capacity.
Simoun Antonio Montelibano Salinas - 2002-24124
[ C 2011 ]
be of the case, to the creditor.
[ UP COLLEGE OF LAW ]
circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration. -Quality in cases of disagreement as to quality, the court should decide whether said quality complies with the obligation, with the attendant circumstances.
d. in case of active solidarityArt. 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him. 3. What is to be paid (“Identity”) a. in general: the very thing or service due b. in obligations to: i. give a specific thingArt. 1244 The debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due.
iii. pay moneyArt. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. In the meantime, the action derived from the original obligation shall be held in the abeyance. Legal tender- currency which in a given jurisdiction can be used for payment of debts -other currency, if there is a stipulation to that effect Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of
In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. -there is a novation when, upon agreement or consent of the creditor, the debtor delivers a different thing or performs a different prestation in lieu of that stipulated ii. give a generic thingArt. 1246 When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and
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[ C 2011 ]
the obligation shall be the basis of payment, unless there is an agreement to the contrary. PAL vs CA A negotiable instrument is only a substitute for money. The payment was not in cash, but in checks.
[ UP COLLEGE OF LAW ]
4. several guarantors invoke benefit of division 5. death of debtor, wherein each heir answers only for his share. 6. when work is done by parts, and there is no contrary stipulation. b. substantial performance in good faithArt. 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee. -an attempt in good faith to perform without any wilful or intentional departure; deviation must be slight, and omission or defect must be technical and unimportant. c. estoppelArt. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with. -Estoppel of creditor: a creditor cannot object because of defects in performance resulting from his own acts or directions. Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. d. presumptions in payment of interests and installmentsArt.1176. . The receipt of the principal by the creditor without reservation with respect to the interest, shall give rise to the presumption that said interest has been paid. The receipt of a later installment of a debt without
c. payment of interestArt. 1956. No interest shall be due unless it has been expressly stipulated in writing. 4. How is payment to be made (“Integrity”) a. in generalArt. 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. -prestation must be fulfilled completely
General Rule: Partial payment is not allowedArt. 1248 par. 1. Unless there is an express stipulation to that effect, the creditor cannot be compelled partially to receive the prestations in which the obligation consists. Neither may the debtor be required to make partial payments. Exceptions:Art. 1248 par. 2. However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and the debtor may effect the payment of the former without waiting for the liquidation of the latter. 1. express stipulation 2. partial liquidation and non-liquidation 3. compensation
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1251 par. in general: Art. the extrajudicial expenses required by the payment shall be for the account of the debtor. the former cannot complain of the same. The 10. Consent of the debtor must be clear and definite. [ UP COLLEGE OF LAW ] 60 -payment is his duty. 2 to par. When payment is to be made a. C. 1247. shall likewise raise the presumption that such installments have been paid. or when the application of payment is made by the party for whose benefit the term has been constituted. REPARATIONS COMMITTEE vs. see Chapter 2: Delay 6. Payment shall be made in the place designated in the obligation. Unless it is otherwise stipulated. the payment shall be made wherever the thing might be at the moment the obligation was constituted. b. unless there is a cause for invalidating the contract. and it inures to his benefit that he is discharged from the burden of the obligation. 4. 1. 1252. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. the Rules of Court shall govern. to which of them the same must be applied. may declare at the time of making the payment. UNIVERSAL DEEPSEA Under Articles 1252-1254.000 could not be construed in favour of the debt. If the debtor accepts from the creditor a receipt in which an application of the payment is made. These provisions are without prejudice to venue under the Rules of Court. Application of Payments 1. 5. 7. ConceptArt. In any other case the place of payment shall be the domicile of the debtor. no payment is to be made to a debt that is not yet due. . 1251 par. If the debtor changes his domicile in bad faith or after he has incurred in delay. That which is most onerous to the debtor must be applied to first. Where payment is to madeArt. application shall not be made as to debts which are not yet due. . Requisites of Application a.2002-24124 .[ C 2011 ] reservation as to prior installments. There being no express stipulation and if the undertaking is to deliver a determinate thing. With regard to judicial costs. and it is his duty. -designation of the debt which is being paid by a debtor who has several obligations of the same kind in favour of the creditor to whom payment is made. All payments are to be made and applied to the Fairview Wet Market. 2. Expenses of making paymentArt. application may be done by a persn owing several debts of the same kind to a single creditor. . if no place is expressly designatedArt. Unless the parties so stipulate. 1169. the additional expenses shall be borne by him. Simoun Antonio Montelibano Salinas . Obligation included payment. PACULDO vs REGALADO If the debtor does not declare to which debts the payment is to be applied. He who has various debts of the same kind in favor of one and the same creditor.
who are only authorized to sell it. shall only release the debtor from responsibility for the net proceeds of the thing assigned. When the payment cannot be applied in accordance with the preceding rules. shall be governed by the law of sales. 1252. Assignment does not vest title to the property of the creditors. shall be deemed to have been satisfied. Partial/relative insolvency iv. he could have relieved himself first of the more burdensome debt. The agreements which. E. default 61 kind term There are several debts owed. Art. 1245. They are owed by the same debtor the same creditor That the debts be of the same 4. Acceptance by the creditor 3. 1254. debts with interest > debts w/o interest 4. Payment by Cession 1. That the payment made is not sufficient to cover all the debts. This cession. are made between the debtor and his creditors shall be governed by special laws. payment of the principal shall not be deemed to have been made until the interests have been covered. Assignment liberates the debtor up to the amount of the net proceeds of the sale of his assets. on the effect of the cession. 1255.Art. principal > accessory 2. 3. 2. if rules inapplicable and application cannot be inferredArt. oldest > newest 3. ConceptArt. Plurality of Creditors iii. with interest 5. The debtor may cede or assign his property to his creditors in payment of his debts. ConceptArt. the payment shall be applied to all of them proportionately. unsecured debt with interest > no security. i. Effects 1. 1253. guaranty>without security D. whereby property is alienated to the creditor in satisfaction of a debt in money. a. Rules in application of payments. Dation in payment. Dation in Payment 1. Plurality of Debts ii. meaning of “most onerous to debtor” -it is assumed that if the debtor had chosen the debt to be paid. That the debts are due (or the was for the benefit of the party making the application 5. Requisites i. or if application can not be inferred from other circumstances. the debt which is most onerous to the debtor. unless there is stipulation to the contrary. If the debt produces interest.2002-24124 . If the debts due are of the same nature and burden. Simoun Antonio Montelibano Salinas . More/Most Onerous: 1. 2. [ UP COLLEGE OF LAW ] 6. Abandonment of the totality of the debtor’s properties for the benefit of the creditors v. to 3. . among those due. 2. -it is relative and is fundamentally a question of fact. liquidated debt > unliquidated 7.[ C 2011 ] 1.
Requisites -not a money debt -consent. Consignation Completes the extinguishment of the obligation if done after tender of payment. object certain. Requisites i. Consignation a. may totally 2. Concept: the manifestation made by the debtor to the creditor of his desire to comply with his obligation with the offer of immediate performance b. -does not involve plurality of creditors -merely involves a change of object of obligation -in effect. Effects -extinguishes the obligation to the extent of the value of thing delivered either as agreed upon or as may be proved. novatory 5. transfer 1. only extinguishes extinguish obligation credits to the extent of amount realized from properties assigned 3. the consignation of the obligation was made because of some legal cause iii. Concept: the deposit of the object of the obligation in a competent court in accordance with rules prescribed by law after the tender of payment has been refused or because of circumstances which render direct payment to the creditor impossible or inadvisable.[ C 2011 ] [ UP COLLEGE OF LAW ] 62 -the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation a. that previous notice of the consignation has been given to the persons interested in the performance of the obligation Simoun Antonio Montelibano Salinas . and not a satisfaction of indebtedness. cause 3. It was not pactum commissoriu. involves all some specific thing property of the debtor 4.2002-24124 . cession of only 3. Tender of Payment a. only possession ownership of thing and administration alienated to the are transferred with creditor an authorization to convert property into cash 2. unconditional 4. F. unaccepted offer in writing to pay is equivalent to actual production and tender of money and property 2. because the obligation to pay a sum of money remained because the assignment merely served as security for the loans covered by the promissory notes. purpose: to avoid delay b. include interest due 3. Requisites 1. Tender of payment is a preparatory act which precedes consignation. 2. FILINVEST vs PHIL ACETYLENE The consent of appellee is not stipulated or presented. distinguished from Payment by Cession DATION CESSION 1. i. there was a debt due ii. it is a sale. various creditors satisfy a debt 5. Nor was it dation because a mortgage is a security. Tender of Payment and Consignation 1. no presumption of 6. there exists a insolvency presumption of insolvency DBP vs CA What took place was not cession because Article 1255 presupposes a plurality of debts and creditors. not novatory 6. No transfer of ownership is possible without clear consent of appellee ot the preferred special mode of payment. made in lawful currency 2. one creditor to 4.
[ C 2011 ]
iv. that the amount or thing due was placed at the disposal of the court. v. that after the consignation had been made the persons interested were notified thereof vi. valid tender of payment (or no need)
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the lack of notice does not invalidate the consignation but simply makes the debtor liable for the expenses That said, notice of consignation is ALWAYS required. c. EffectsArt. 1260 par. 1. . Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation. -Debtor is released in the same manner as if he had performed the obligation at the time of the consignation because this produces the same effect as a valid payment. -the accrual of interest on the obligation is suspended from the moment of consignation -the deteriorations or loss of the thing or amount consigned occurring without fault of the debtor must be borne by the creditor because the risks of the thing are transferred to the creditor from the moment of the deposit -any increment or increase in value of the thing after the consignation inutes to the benefit of the creditor
i. when tender and refusal not requiredArt. 1256 par. 2. Consignation alone shall produce the same effect in the following cases: (1) When the creditor is absent or unknown, or does not appear at the place of payment; (2) When he is incapacitated to receive the payment at the time it is due; (3) When, without just cause, he refuses to give a receipt; (4) When two or more persons claim the same right to collect; (5) When the title of the obligation has been lost. ii. two notice requirementArt. 1257 par. 1, In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation. -must be given to all interested, passive or active subjects Art. 1258 par. 2. The consignation having been made, the interested parties shall also be notified thereof. -the requirement is fulfilled by the service of the summons upon the defendant together with a copy of the complaint - effects of noncompliance:
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d. Withdrawal by debtor before acceptance by creditor or approval by court; effectsArt.1260 par. 2. Before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum
[ C 2011 ]
deposited, allowing the obligation to remain in force.
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may withdraw the thing or sum deposited. The case was dismissed before the amount was accepted by creditor or the court’s approval. Respondent judge should have allowed the withdrawal by peititioner. MCLAUGHLIN vs CA
-debtor is still owner of the thing or amount deposited, and other parties have no right to oppose withdrawal of such thing or
e. Withdrawal by debtor after proper consignationArt. 1261. . If, the consignation having been made, the creditor should authorize the debtor to withdraw the same, he shall lose every preference which he may have over the thing. The co-debtors, guarantors an sureties shall be released. i. with creditor’s approval; effects: a revival of the obligation takes place, as well as a restoration of the debtorcreditor relationship -guarantors and co-debtors are freed ii. without creditor’s approval; effects obligation subsists, without change in the obligation of the gurantors, co-debtors or the creditor’s right or preference f. Expenses of consignationArt.1259. The expenses of consignation, when properly made, shall be charged against the creditor. -when consignation is properly made. DE GUZMAN vs CA The court ruled that respondent had substantially complied with the compromise agreement by validly consigning the amount of 3,000 pesos with the cashier. TLG INTL vs CONTINENTAL ENGG Before creditor accepts consignation, or before a judicial declaration that consignment has been made, the debtor
There was substantial compliance with the compromise agreement because respondent made a valid tender of payment. But respondent failed to consign the the sum due with the court. He remains liable for payment of obligation after December 31, 1980. SOCO vs MILITANTE In order that consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation. The letter does not constitute a valid tender of payment because it does not indicate what month and intention there is to deposit the rental with the court. It is no proof of tender of payment of other or subsequent monthly rentals. Respondent failed to prove the second notice as well, based on the testimony of COMTRUST comptroller. SOTO vs MIJARES To deposit the amount in the court is a right given to the debtor exclusively. Consignation is a facultative remedy; he may or may not avail of it. If debtor has the right of withdrawal, he has the right to refuse to make the deposit as well. RURAL BANK vs CASTRO At the time of consignation, the Bank had already foreclosed the mortgage and the sale of the lot was already extrajudicially determined. It was useless of her to make a tender of payment. LICUANAN vs DIAZ Consignation must be made with the court and/or the bank, not the Office of Civil Relations of the AFP. CHAN vs CA The validity of the consignation was not raised before the Court of Appeals. MEAT PACKING CORP vs SANDIGANBAYAN
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[ C 2011 ]
There was prior tender of payment by PCGG. The acceptance of payment negates rescission of lease-purchased agreement.
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of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay. When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk. -it must occur without the fault of the debtor, before the debtor incurs delay, and after the obligation is constituted
III. LOSS OR IMPOSSIBILITY
A. Loss of thing due 1. Concept: (1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished; (2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered -non-existence in the hands of the obligor
2. Kinds a. As to extent i. Total ii. Partial – not imputable to the fault or negligence of the debtor but to fortuitous events or circumstances beyond his control -does not extinguish obligation, but the portion lost, if the obligation would not have been constituted without it, thus extinguishing the obligation -intention of parties is a controlling factor -courts determine these 3. RequisitesArt. 1262. An obligation which consists in the delivery
4. PresumptionArt. 1265. Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was due to his fault, unless there is proof to the contrary, and without prejudice to the provisions of article 1165. This presumption does not apply in case of earthquake, flood, storm, or other natural calamity. Art. 1165 a. when not applicable This presumption does not apply in case of earthquake, flood, storm or other natural calamity, EXCEPT FIRE. 5. Effects a. in obligation to give a specific
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When the service has become so difficult as to be manifestly beyond the contemplation of the parties. -includes not only legal or physical impossibility. Effects: releases the debtor from his obligation. Partial: The rule in Art. the partial loss of the object of the obligation is so important as to extinguish the obligation d. physical: when the act by reason of its nature cannot be accomplished 3.Art. 1264 may be applied if at the time performance becomes impossible. thing. in case of partial lossArt. The obligation having been extinguished by the loss of the thing.[ C 2011 ] [ UP COLLEGE OF LAW ] 1. Art. As to extent i. 1269. the debtor has already fulfilled part of the obligation. b. 1268. but also impracticability because of extreme difficulty. Total ii. B. the creditor must pay the part done so long as he benefits from such partial compliance b. whatever may be the cause for the loss. the debtor shall not be exempted from the payment of its price. the obligor may also be released therefrom. must be subsequent to execution of contract to extinguish obligation. manifestly beyond the contemplation of the parties. unless the thing having been offered by him to the person who should receive it. the supervening impossibility of the prestation. The loss or destruction of anything of the same kind does not extinguish the obligation c. Requisites. When the debt of a thing certain and determinate proceeds from a criminal offense. the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. Art. 1266 (same_ 4. The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.2002-24124 . 1266.1267. 1263. Simoun Antonio Montelibano Salinas . 1262 the obligation shall be extinguished if it should be destroyed without fault of the debtor and before he has incurred in delay . in whole or in part. under the circumstances. 1264. the latter refused without justification to accept it. As to source i. Impossibility of Performance 2. Because the obligation is legitimate in origin. Kinds a. Concept- 66 Art. independent of will of the obligor. legal: when the act by reason of a subsequent law is prohibited ii. in obligation to give a generic thingArt. The courts shall determine whether. action against third personsArt.Art.
2 (by analogy). “impossibility” distinguished from “difficulty” OCCENA vs CA Respondent may not cite Article 1267 to modify the existing contract. The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor. Art. 1270. These unforeseen events did not render the performance of lease contract impractical and inimical to corporate survival. When by law or stipulation. because article 1267 allows one to be released from the difficulty of the “service” or “performance” of the obligation. NAGATEL CO vs CA Respondents may be released from said contract. without receiving any equivalent. 1266. The same rule applies when the nature of the obligation requires the assumption of risk. in obligations to doArt. When the service has become so difficult as to be manifestly beyond the contemplation of the parties. in whole or in part. Also.2002-24124 .[ C 2011 ] cannot render the latter liable beyond restitution of what he may have received in advance from creditor. Concept: Art. under the circumstances. the creditor renounces the Simoun Antonio Montelibano Salinas . It may be made expressly or impliedly. when contract was entered into. the loss of the thing does not extinguish the obligation. 1985. IV. Also.Art. Art. 1264 Art. -an act of liberality. comply with the forms of donation. and he shall be responsible for damages. i. PNCC vs CA 1266 is only applicable in obligations “to do” not “to give”. however. Condonation or remission is essentially gratuitous. Ninoy Aquino had been assassinated and the political climate was such. The courts shall determine whether. 1267. Condonation or Remission A. furthermore. the courts are authorized to release the oblgor in whole or in part. Express condonation shall. because Article 1267 is not the difficulty contemplated that would allow them to modify their said contract. One and the other kind shall be subject to the rules which govern inofficious donations. it cannot make him liable for damages [ UP COLLEGE OF LAW ] 67 -where. Despite these. prior to November 18. it is not the prestation that has become impossible but the act to be performed after the fulfillment of the prestation. the partial loss of the object of the obligation is so important as to extinguish the obligation. The intention of the parties is the controlling factor in the solution of each case of partial loss. 1262 par. 1264. in case of partial impossibility. and requires the acceptance by the obligor. petitioner still entered into the contract. b. a. the obligation is not extinguished. -partial loss determines whether or not the obligation is sustained or is extinguished based on the extent of the loss. the obligor is liable even for fortuitous events. the obligor may also be released therefrom. by virtue of which.
unless the contrary is proved. Governing Rules. the presumption of remission can refer only to the portion of the debt in possession of the instrument evidencing possession of debt. in case of joint or solidary obligations: when obligation is joint. 1270. Reduction or condonation of P266. 1 a. 1272. It is presumed that the accessory obligation of pledge has been remitted when the thing pledged. Remission did not take place because Article 1270 paragraph 2 requires that express condonation must comply with forms of donation. If in order to nullify this waiver it should be claimed to be inofficious. or to some other aspect of the obligation only (such as pledge or interest or to some other aspect of the obligation (such as solidarity) enforcement of the obligation. One and 2. Also. Simoun Antonio Montelibano Salinas . made voluntarily by the creditor to the debtor. furthermore. Kinds 1. 2. pursuant to Article 748. Express: made formally b. D. E. when formalities requiredArt. comply with the forms of donation. -express condonation must comply with forms of donation. 1274. PresumptionsArt. 146. in general: extinguishes obligation in its entirety a. it shall be presumed that the creditor delivered it voluntarily. debtor must accept the remission Art. which is extinguished in its entirety or in that part or aspect of the same to which the remission refers.Art. after its delivery to the creditor. YAM vs CA F. debt must be existing and demandable at the time of the remission ii. Effects 1. 88 was not reduced in writing. 1270 par. Requisites i. Express condonation shall. 1270 par. It must be made in writing. Partial: refers to amount of indebtedness. Total b. is found in the possession of the debtor. 1271 The delivery of a private document evidencing a credit. implies the renunciation of the action which the former had against the latter. the debtor and his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt. or of a third person who owns the thing. As to formArt. the voucher was not a receipt. As to extent a.2002-24124 . Implied: it can be inferred through the acts of the parties Art. or to an accessory obligation only. Whenever the private document in which the debt appears is found in the possession of the debtor. the other kind shall be subject to the rules which govern inofficious donations.[ C 2011 ] [ UP COLLEGE OF LAW ] 68 B. 2. the renunciation must be gratuitous without any equivalent or consideration iii. C.
Requisites i. the confusion must be total or as regards the entire obligation. Effects 1. C. In compensation. 1277. but not obligation in question. only one obligation is involved. Distinguished from Confusion: In Confusion/Merger. The Art. 1278. in their own right. Compensation shall take place when two persons.2002-24124 A. Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. 1273. . Compensation: two persons mutually debtors and creditors of each other. 1277) or solidary obligations Simoun Antonio Montelibano Salinas . no merger takes place) iii. Confusion: one person in whom the character of creditor and debtor meet. Renunciation of Principal or Accessory Obligation 1. -extinguishment of the principal obligation through confusion releases the guarantor because the obligation of the latter is merely accessory renunciation of the principal debt shall extinguish the accessory obligations. Confusion in Principal or Accessory ObligationArt. Compensation B. rationale: This applies the rule that accessory obligation simply follows the principal V. in case of joint (Art. 2. 1276. the very same obligation must be involved (if debtor acquires rights from creditor. but the waiver of the latter shall leave the former in force. Concept -Merger or confusion is the meeting in one person of the qualities of the creditor and debtor with respect to the same obligation. in generalArt. there must always be two obligations. each arising from a different cause. 2. 1275. Solidary obligations: total extinction in a merger of the creditor with one solidary debtor or of one solidary creditor and debtor D. The obligation is extinguished from the time the characters of creditor and debtor are merged in the same person. Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. Concept- Art. Confusion or Merger of Rights A.[ C 2011 ] which requires express acceptance. effectsArt. must take place between creditor and principal debtor ii. [ UP COLLEGE OF LAW ] 69 G. VI. Confusion which takes place in the person of any of the latter does not extinguish the obligation. are creditors and debtors of each other.
as NCB’s correspondent bank. PNB vs. Notwithstanding the provisions of the preceding article. CKH and Century were not principal contracting parties. It was due. Facultative: it can be claimed by one of the parties who. however. and that he be at the same time a principal creditor of the other. 1279. it is necessary: (1) That each one of the obligors be bound principally. (5) That over neither of them there be any retention or controversy. CA Legal compensation did not prevent Gan Tion from having to pay attorney’s fees. PNB. If one of the parties to a suit over an obligation has a claim for damages against the other. Legal: takes place by operation of law. In this case. Therefore. d. (4) That they be liquidated and demandable. 1280. and also of the same quality if the latter has been stated. Kinds 1. liquidated and demandable. CKH vs CA Article 1279 requires that the parties be principal contracting parties. it is the litigant who is owed the attorney’s fees.2002-24124 .[ C 2011 ] B. and not parties in the sale. has the right to object to it. CA In this case. the former may set it off by proving his right to said damages and the amount thereof. Art. the parties are not mutual creditors and debtors. They are not principally bound either. who renounces that period so as to make the obligation due. Art. (2) That both debts consist in a sum of money. Simoun Antonio Montelibano Salinas . Corporations have personalities separate from stockholders. such as when one of the obligations has a period for the benefit of one party alone. Legal compensation had not taken place. As to extent a. or if the things due are consumable. In order that compensation may be proper. Total: if debts are of the same amount b. they be of the same kind. Choi and Kev are only stockholders. The claim is still subject to litigation and cannot be liquidated. the guarantor may set up compensation as regards what the creditor may owe the principal debtor. 1283. 1282 c. was tasked with this obligation. JudicialArt. C. SAPPHIRE SHIPPING PNB had no right to intercept the sum of money from private respondent. and was not claimed by a third person. not Ong Wan Sieng. As to origin a. “due” distinguished from “demandable” GAN TION vs. such as those in Article 1282. compensation did not take place. There is a sum of money involved. Both are creditors and debtors of each other. b. RequisitesArt. BPI vs. Partial: if one debt is larger the other [ UP COLLEGE OF LAW ] 70 than 2. because all requisites are present. because PNB had to transmit the money transfer to Citibank. 1279 inapplicable. commenced by third persons and communicated in due time to the debtor. even if some requisites are lacking. Conventional: when parties agree to compensate their mutual obligations. (3) That the two debts be due. Legal Compensation 1. REYES Respondent Reyes is not entitled to restitution because legal compensation already took place. MIRASOL vs. a.
[ C 2011 ] [ UP COLLEGE OF LAW ] 71 iii. the rules on the application of payments shall apply to the order of the compensation. The bank’s premature withdrawal of amount led Tan’s account debit. SILAHIS vs IAC Compensation is not proper because the 22. even though the debts may be payable at different places. Hence. --it takes effect the moment that articles 1278 and 1279 coexist i. 2. all accessory obligations of extinguished principal obligation are also extinguished ASSOCIATED BANK vs TAN The relationship between banks and depositor is creditor-debtor. not September 9. 1974 or October 3. and the amount was still subject to a claim by a third party. PEREZ vs CA For amounts rolled over on September 9. Also. 1974.000 did not offset the indebtedness. compensation takes effect by operation of law. When Compensation is Not AllowedArt. EffectsArt. 1974 or October 3. 1289. When all the requisites mentioned in Article 1279 are present. 1286. VILLANUEVA vs TANTUICO Without an express admission of indebtedness. interests stop accruing on extinguished obligation or part extinguished Simoun Antonio Montelibano Salinas . petitioner had no right to debit Tan’s account for a dishonored check. Depositum: contract by virtue of which a person receives personal property belonging to another with the obligation of safely keeping it and returning the same Commodatum: gratuitous contract by virtue of which one of the parties delivers to other a non-consumable personal property -civil liability due to a penal offense must be served and honoured imperatively.2002-24124 Art. Compensation of Debts Payable in Different PlacesArt. 1974. no compensation takes place. 1290. But bills and principals were rolled over to other dates. E. Compensation shall not be proper when one of the debts arises from a depositum or from the obligations of a depositary or of a bailee in commodatum. Art 1288. there was a grave error in the lack of notice. even though the creditors and debtors are not aware of the compensation. but . D. Compensation takes place by operation of law. Neither shall there be compensation if one of the debts consists in civil liability arising from a penal offense. legal compensation took place. 1287. and extinguishes both debts to the concurrent amount. If a person should have against him several debts which are susceptible of compensation. because this was due and demandable. namely those on October 4 and October 11 were not subject to legal compensation since they were not yet due and demandable. period of prescription stops with respect to obligation or part extinguished iv. both debts are extinguished to concurrent amount ii.
1285 par. ConceptArt. A subsequent assignment of an extinguished obligation cannot produce any effect against debtor. the credit assigned to a 3rd person matures after 3. G. If the creditor communicated the cession to him but the debtor did not consent thereto.2002-24124 . 1 The debtor who has consented to the assignment of rights made by a creditor in favor of a third person. cannot set up against the assignee the compensation which would pertain to him against the assignor.a juridical act of dual function in that at the time it Simoun Antonio Montelibano Salinas . When one or both debts are rescissible or voidable. that he reserved his right to the compensation. . . 1285 par. there had already been an extinguishment of one of the obligations. -compensation takes place before assignment. (3) Subrogating a third person in the rights of the creditor.[ C 2011 ] there shall be an indemnity for expenses of exchange or transportation to the place of payment. 2. the latter may set up the compensation of debts previous to the cession. rationale: to prevent one party from being fraudulently deprived of the benefits of compensation VII. 1284. [ UP COLLEGE OF LAW ] that which pertains to the debtor 72 F. he may set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment. they may be compensated against each other before they are judicially rescinded or avoided. 1285 par. 2. unless the assignor was notified by the debtor at the time he gave his consent.extinguishment of an obligation by substitution or change of the obligation by a subsequent one which extinguishes or modifies the first. with consent of debtorArt. but not of subsequent ones. without knowledge of debtorArt. a. (2) Substituting the person of the debtor. Effects of Assignment of Credit 1. Effect of Nullity of Debts to be CompensatedArt. Novation A. Obligations may be modified by: (1) Changing their object or principal conditions. . -if debtor was notified he did not give his consent. 1291. with knowledge but without consent of debtorArt. 3 If the assignment is made without the knowledge of the debtor.
DORMITORIO vs. As to form a. Express: when parties declare that the old obligation is extinguished by the new obligation b. agreement of all parties to the new contract iii. or that the old and the new obligations be on every point incompatible with each other.2002-24124 . BROADWAY CENTRUM vs TROPICAL HUT The agreement did not extinguish or alter the obligations of Tropical. it is imperative that it be so declared in unequivocal terms. In novation by substitution of debtor. In fact. The mere fact that a person receives a guaranty does not constitute a novation. validity of the new contract Requisites imply that parties had the capacity for new contract and intend to bring about the novation (animus novandi) MILLAR vs CA The mere reduction of the amount due in no sense constitute a sufficient indicion of incompatibility. Objective or Real -change of obligation by substitution or changing the object with another or changing the principal conditions b. Conventional b. no evidence was presented to show that AFP intended to release Reyes from her obligation to pay. B. When after judgment has become final. But. Kinds 1. passive when a debtor is substituted. REYES vs CA No new agreement for substitution of creditor was forged among the parties concerned which would take the place of the preceding contract. 1292. There was no express nor implied novation. As to object a. Legal 3. i. the note evidences the loan obligation. In the second case. the interested party may ask the court to modify or alter the judgment to harmonize the same with justice and facts. no novation took place. In order that an obligation may be extinguished by another which substitute the same. GARCIA vs LLAMAS There is no incompatibility between the note and the check. which the check answers for. MAGDALENA ESTATES vs. Subjective or Personal -modification of obligation by change of subject. FERNANDEZ The presence of animus novandi is undeniable. active when a third person is subrogated in the rights of the creditor. extinguishment of the old contract iv.[ C 2011 ] [ UP COLLEGE OF LAW ] 73 extinguishes one obligation. the novation did not release Molino because she expressly waived discharge in case of change or novation in the Surety Undertaking. a previous valid obligation ii. as it was expressly stated that it should not be interpreted as an amendment to the lease contract. the creditor must always consent. RequisitesArt. As to origin a. Hence. facts and circumstances transpire which render its execution impossible or unjust. The deed of chattel mortgage simply specified how much Gabriel still owed Millar. C. it creates a new one in lieu of the old one. MOLINO vs SECURITY DINERS The upgrading was a novation of the original agreement of the first credit card. Implied: when there is such an incompatibility between the old and new obligation that they cannot stand together 2. CALIFORNIA BUS LINE INC vs STATE INVESTMENT HOUSE Simoun Antonio Montelibano Salinas . RODRIGUEZ The fact that Magdalena accepted the subsequent surety agreement without providing for accruing interest does not imply novation.
G. releasing Eliscon from its obligation to BPI. If the original obligation was subject to a suspensive or resolutory condition. F. The novation is void if the original obligation was void. -novation is also conditional. -if new obligation is voidable. The agreement shows hat the parties did not expressly stipulate that the restructuring agreement novated the promissory notes. but not without the consent of the creditor. except when annulment may be claimed only by the debtor or when ratification validates acts which are voidable. accessory obligations may subsist only insofar as they may benefit third persons who did not give their consent. the novation becomes effective 3. It is in reality a distinct obligation in favor of a third person and cannot be extinguished by novation without consent of the latter. E. guarantors and sureties -no obligation. the original one shall subsist. no incompatibility was present. i. Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237. Also. 1296. knowledge or consent of old debtor is not required ii. only to the payment formula of DBP. unless it is otherwise stipulated. By change of debtor a. . BPI’s conduct evinced a clear and unmistakable consent of DBP for Eliscon as debtor. Objective Novation 1. If the new obligation is void. because the two can stand together. may be made even without the knowledge or against the will of the latter. no novation 2. 1293. Effects 1. 1299. the new obligation shall be under the same condition. BABST vs.2002-24124 . Expromision i. mortgages. requisitesArt. Subjective Novation 1. When the principal obligation is extinguished in consequence of a novation. and its efficacy depends upon whether the condition which affects the former is complied with or not. in generalArt. effects- Simoun Antonio Montelibano Salinas .Art. unless the parties intended that the former relation should be extinguished in any event. . -extinguishment of principal obligation releases pledges. consent of two parties – creditor and new debtor. 1297. Novation which consists in substituting a new debtor in the place of the original one. which is subordinated to the principal obligation.[ C 2011 ] [ UP COLLEGE OF LAW ] 74 The restructuring agreement did not novate the promissory notes. 1298. meaning of “principal conditions”: making the debt absolute instead of conditional or vice versa) 2. D. Effect of the Status of the Original or New Obligation 1. There was a valid extinctive novation. 1296 -except in reference to a stipulation in favor of a third person. nullity or voidability of original obligationArt. ii. suspensive or resolutory condition of original obligationArt. nullity or voidability of new obligationArt. CA BPI did not object to the substitution of debtors. when accessory obligation may subsist.
which may be given at any time.[ C 2011 ] [ UP COLLEGE OF LAW ] 2. the new creditor and the debtor i. insolvency of the new debtor does not revive the old obligation b.2002-24124 . when the delegated his debt. -subrogation is transfer of all the rights of the creditor to a 3rd person who substitutes him in all his rights a. 1295. Conventional subrogation of a third person requires the consent of the original parties and of the third person. 1301. and it refers to the same right which passes from one person to another Simoun Antonio Montelibano Salinas . except when said insolvency was already existing and of public knowledge. distinguished from Assignment of Credit -consent is necessary -extinguishes an obligation and gives rise to anew one Assignment of credit requires consent. i. There really was no substitution of debtors since Aurelia merely acquiesced to the payment but did not give her consent to the contract. 1294. The insolvency of the new debtor. who has been proposed by the original debtor and accepted by the creditor. 1293) i. 1300. or implied in any form ii. the old debtor is r released from the obligation ii. requisites. of the old creditor. or known to the debtor. Subrogation of a third person in the rights of the creditor is either legal or conventional. Art. consent of: -the old debtor -the new debtor -necessarily. consent and intervention of the original creditor. requisitesArt. . The former is not presumed. the latter must be clearly established in order that it may take effect. shall not revive the action of the latter against the original obligor. Subrogation of a third person in the rights of the creditorArt. By change of creditor: 75 Art.(vs. -original creditor’s right is extinguished. effectsArt. the new debtor's insolvency or non-fulfillment of the obligations shall not give rise to any liability on the part of the original debtor. If the substitution is without the knowledge or against the will of the debtor. -insolvency of new debtor revives the old obligation if it was anterior and public or anterior and known to the two debtors QUINTO vs PEOPLE The changes consist only in the manner of payment. except in cases expressly mentioned in this Code. Delegacion i. new creditor becomes a part of the new relation and consent of the debtor is necessary because the old obligation is extinguished and he becomes liable under the new obligation ii. Conventional subrogation -requires agreement by the parties.
without prejudice to the TITLE II: CONTRACTS CHAPTER I: GENERAL PROVISIONS A. or reciprocally. requisites: not presumed except: ii. 1303. to whom partial payment has been made. even without the debtor's knowledge. conventional subrogation. be they guarantors or possessors of mortgages. not interested in the obligation. Therefore. much less a source of cause of action for both parties. Philguarantee has the right to proceed against the petitioner. Legal subrogation i. to vthe fulfillment of a prestation to give. 1304 ASTRO PHIL vs PHIL EXPORT 76 iii. and he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit.” Simoun Antonio Montelibano Salinas . which required the consent of the third party. LICAROS vs GATMAITAN The Memorandum of Agreement provided for the need to get the bank’s consent. pays with the express or tacit approval of the debtor. . or not to do. a person interested in the fulfillment of the obligation pays. even without the knowledge of the debtor. subject to stipulation in a conventional subrogation. took place. (2) When a third person. A creditor. either against the debtor or against third person. 1303. Art 1304. to give something or to render some service. subject to the condition that upon payment. 1302. Subrogation transfers to the persons subrogated the credit with all the rights thereto appertaining. effects. It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred. Definition – Art. Legal subrogation took place. iii. with respect to the other. Philguarantee received Philtrust’s right to proceed against Roxas and Astro. Philguarantee shall be proportionally subrogated. 1305. The failure to get the agreement of the bank prevented the agreement from becoming effective. Sanchez-Roman: “A juridical convention manifested in legal form. by virtue of which one or more persons bind themselves in favor of another or others. and consent or knowledge of debtor Astro was not needed. (3) When.Art. b. to do. when presumedArt. Now.2002-24124 . since it already paid 70% of the loan.[ C 2011 ] [ UP COLLEGE OF LAW ] effects of confusion as to the latter's share. A contract is a meeting of minds between two persons whereby one binds himself. effectsArt. may exercise his right for the remainder.
1308. infra) a. Accidental elements (see D. 3. The determination of the performance may be left to a third person. modify. No unilateral cancellation or rescission of the first MOA Simoun Antonio Montelibano Salinas .. Consent b. it was established that the said notation was not in the original deed agreed upon by the parties. Art. The contract must bind both contracting parties. The fixing of the price can never be left to the discretion of one of the contracting parties. 1473) 77 -a bilateral legal transaction to create. PAPI vs CRISOSTOMO Punzalan’s letter did not cancel the first MOA. 3. whose decision shall not be binding until it has been made known to both contracting parties. 1473. its validity or compliance cannot be left to the will of one of them. or agreed upon by parties and cannot exist without being stipulated or predetermined stipulation C. the sale is perfected. Elements 1. The determination shall not be obligatory if it is evidently inequitable. if the price fixed by one of the parties is accepted by the other.[ C 2011 ] -an agreement on the declaration of a common will [ UP COLLEGE OF LAW ] 2. -validity and performance cannot be left to the will of one of the parties GSIS vs CA The purchase price mutually agreed upon by the parties was P19. or terminate a legal tie between the parties -A contract is the accord of two or more persons (with previously diverging interests) for the purpose of creating a juridical relation between them B. The respondent spouses did not give their consent for petitioner to make a unilateral upward adjustment of this purchase price. petitioner is bound for the admission the omission of said notation was an honest mistake. 1309. Characteristics/Basis of Binding Effect 1. infra): exist only when stipulated. -mutuality between parties based on essential equality -no unilateral cancellation Art. Obligatory force – Art. 1308-1310 (see also Art. Mutuality – Arts. Essential elements (see Chapter II. Natural elements: those which exist as part of the contract even if the parties do not provide for them because the law creates them (warranty in sales) Art.2002-24124 .. 1310. Also. thus solidifying the contention that the said notation was not present in the signed Deed of Conditional Sale. Also. Object/Subject Matter c. 740. In such case. the courts shall decide what is equitable under the circumstances. However. Cause 2. It only signified the suspension of the acceptance of new applications.
or unless he has by law a right to represent him. Contracts take effect only between the parties. plaintiff could not have enforced the action. D. before it is revoked by the other contracting party. Normally. expressly or impliedly. The character of the contract is such that its obligation may be performed by promissor’s personal representatives. their assigns and heirs. No one may contract in the name of another – Art.[ C 2011 ] took place. which constituted the violation of said contract. unless it is ratified. If a contract should contain some stipulation in favor of a third person. Once a contract is entered into. or by stipulation or by provision of law. That said. 3. -contracts produce effect only as between the parties who execute them MLA RAILROAD vs LA COMPANIA There was an express contractual relation between Atlantic Co and Steamship Co. but by the number of parties thereto. HERMANOS vs. their assigns and heirs. and Steamship Co must recover the same amount from Atlantic. A mere incidental benefit or interest of a person is not sufficient. the Steamship Art. except in stipulations. ORENSE Duran sold Orense’s land to Hermanos despite the lack of legal authority to do so. by the person on whose behalf it has been executed. it is valid because the existence of a contract is not determined by the number of persons who intervene in it. the contract entered into by Duran with plaintiff Hermanos is void. A contract entered into in the name of another by one who has no authority or legal representation. The contracting parties must have clearly and deliberately conferred a favor upon a third person. Freedom to contract – Simoun Antonio Montelibano Salinas . But the sale became valid by the verbal confirmation given by Orense in the trial where plaintiff filed a case against Duran for estafa.2002-24124 . DKC HOLDINGS vs CA. BARTOLOME Heirs are bound by contracts entered into by their predecessors in interest. Relativity: Contracts take effect only between the parties. shall be unenforceable. Auto-contracts: Where one contracts with himself. No one may contract in the name of another without being authorized by the latter. Hence. Parties 1. The heir is not liable beyond the value of the property he received from the decedent. His consent to Duran’s selling the property must hold. 2. Mla Railroad has no right to recover damages from Atlantic Co for the wrongful act. Hence. [ UP COLLEGE OF LAW ] 78 Co must pay Mla Railroad. 1317. or who has acted beyond his powers. The defendant conferred agency or implied said power to Duran. except in case where the rights and obligations arising from the contract are not transmissible by their nature. b. Atlantic Co cannot assume the double responsibility to both Steamship Co and Mla Railroad since it is a general rule that an implied contract never arises where an express contract has been made. he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. If Atlantic refused to carry out its agreement to discharge. The Mla Railroad can only be made effective through the Steamship Co with whom the contract was made. Atlantic Co was bound by its undertaking to use due care. 1311. nature or provisions that make said rights or obligations intransmissible. based on the principle of mutuality it contains embodied in Article 1308. no party can renounce it unilaterally or without the consent of the other.
SIR JJ: The reasoning of the Supreme Court is wrong. terms and conditions as they may deem convenient. the property whose administration or sale may have been entrusted to them. 2) Arts. clerks of superior and inferior courts. The following persons cannot acquire by purchase. take part in the sale. direct or indirect. the administration of which has been intrusted to them. (2) Agents. Pakistan Intl may not contract away applicable provisions of law. Despite petitioner’s claim of deceit. except: (1) When a separation of property was agreed upon in the marriage settlements. this prohibition Simoun Antonio Montelibano Salinas . Also. in any manner whatsoever. what is wrong with the stipulation that the contracts be tried in Pakistani territory? a. They should have based their reasoning on the fact that there are substantial contacts between contracts and the Philippines. 679. unless the consent of the principal has been given. the property of the estate under administration. and other officers and employees connected with the administration of justice. this provision shall apply to judges and government experts who. the property of the person or persons who may be under his guardianship. The prohibition shall also apply to persons living together as husband and wife without a valid marriage. The contracting parties may establish such stipulations.2002-24124 . (5) Justices. the property of the State or of any subdivision thereof. not on the violation of freedom to contract. or institution. or (2) When there has been a judicial separation or property under Article 191. public order. The law relating to labor and employment is such a concern. 1490. the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions. The husband and the wife cannot sell property to each other. 87. either in person or through the mediation of another: (1) The guardian. Family Code Every donation or grant of gratuitous advantage. even at a public or judicial auction. good customs. PAKISTAN INTL AIRLINES vs OPLE The contracts of employment violated the freedom of contracts. especially provisions impressed with public interest. judges. (3) Executors and administrators. provided they are not contrary to law. 1491. (1458a) Art. between the spouses during the marriage shall be void. CC Art. 1306. Special disqualifications 1) Art. 1490 and 1491.07 does not in any way militate against the public good. morals. said contract does not contravene the policy of the law nor the established interests of society. or public policy GABRIEL vs MONTE DE PIEDAD The contract which calls for petitioner to pay P14. except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. prosecuting attorneys. (4) Public officers and employees.[ C 2011 ] [ UP COLLEGE OF LAW ] 79 Art. or of any governmentowned or controlled corporation. clauses. Parties are not at liberty to insulate themselves and their relationship from the impact of labor laws and regulations.
It is in the interest of the public that criminals be prosecuted. social and legal interest in private law. A stipulation forbidding the owner from alienating the immovable mortgaged shall be void. CC Art. 3) Art. Contrary to public order -public order: public. 1799. (6) Any others specially disqualified by law. 2130. Its purpose is not to eliminate competition but to promote ethical practices in duly registering with the Bureau. 3) pactum de non alienado Art. or dispose of them. which. Contrary to law. a promise to vote. 2) pactum leonina Art. ARROYO vs BEARWIN An agreement by the owner of stolen goods to stifle prosecution of the accused for a pecuniary or some other valuable consideration is contrary to public policy and due administration of justice. Contrary to public policy -public policy: the idea of variable content. that which is permanent and essential in institutions. 1782. even if favoring some individual to whom the right pertains. Any stipulation to the contrary is null and void. 1306 a. or contravenes some established interest of society or is inconsistent with sound policy and good morals. -the public weal. 2088. peace. to do something at risk of life) d. Going against these lawful motivations is violative of public policy. A stipulation which excludes one or more partners from any share in the profits or losses is void. 3. e. SIR JJ: There must be some lawful motivation for granting scholarships. It eliminates unfair competition. with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. Contrary to morals: morals may be considered as those generally accepted principles of morality which have received some kind of social and practical confirmation -morals have particular reference to standards of justice (right and wrong) and decency acknowledged by society c.[ C 2011 ] [ UP COLLEGE OF LAW ] 80 includes the act of acquiring by assignment and shall apply to lawyers. safety and health of the community e. The creditor cannot appropriate the things given by way of pledge or mortgage. depending on the stage of social culture in the community -has a tendency to injure the publicis against the public good. What they may not stipulate – Art. not to keep outstanding students in order to bolster the school’s prestige. Simoun Antonio Montelibano Salinas . It is not violative of public policy. cannot be left to his own will.g.: 1) pactum commissorium Art. Persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership.2002-24124 . b. 1782. or tends to clearly to undermine the security of individual rights CUI vs ARELLANO UNIVERSITY The stipulation that Cui can only recover his transcript after he reimburses the funds he received during his scholarship is one that is contrary to public policy. FILIPINAS COMPANIA vs MANDANAS Article 22 of the Constitution of the Philippine Rating Bureau is lawful. Contrary to good customs -contracts which limit in an excessive manner the personal or economic freedom of a person (promise not to engage in work. Scholarships are awarded in recognition of merit.
Services 2. -perfection is the moment from which it exists. presented in the Deed of Sale with Assumption of Mortgage and Option to Purchase Real Estate was that Gaborro would assume and name. 3. pledge and Commodatum. Innominate contracts shall be regulated by the stipulations of the parties. the juridical tie between the parties arise from that time. so that B will give another thing to A. The innominate contract of facio ut des applies.000 check indicates petitioner’s commitment to pay the fees. 3) facio ut facias (I do and you give) -A binds himself to do something for B so that B will give something to A. By mere consent (consensual) – Art. 1307. usage and law. The stipulation is pactum commissorium. Things b. CORPUS vs CA There was an implied agreement for payment of Attorney’s fees. 2) do ut facias – I give and you do -A will give something to B. Therefore. Nominate: where the law gives the contract a special designation or particular -those with particular names (purchase and sale. according to their nature. may be in keeping with good faith. Simoun Antonio Montelibano Salinas . Innominate – Where the contract has no special name Art. in order that B may do something for A. the agreement was an innominate contract under Article 1307 of the Civil Code. are not perfected until the delivery of the object of the obligation. The event did not occur. According to subject-matter a. BUSTAMANTE vs ROSAL The stipulation in the loan contract was not valid and enforceable. E. Petitioner’s act of giving the 2. lease. 4) facio ut des (I do and you do) -A is to do something for B. so that B will render some service for A. Because the sale of the collateral is an obligation with a suspensive condition. and Gaborro was given the possession until petitioner can fully reimburse the respondent. and by the customs of the place. such as deposit. According to name a. DIZON vs GABORRO The true intention of the parties. [ UP COLLEGE OF LAW ] 81 pay indebtedness of Dizon to DBP and PNB. by the rules governing the most analogous nominate contracts. Classification 1. By delivery of the object (real) – Art. Petitioner did not fail in tendering payment. Real contracts. it was a forced sale. respondents have no right to demand the purchase of the collateral. agency) b. by the provisions of Titles I and II of this Book. SIR JJ: This was not pactum commissorium. According to perfection a. No automatic appropriation took place. 1) do ut des – I give and you give -A will give one thing to B. which involves the automatic appropriation of property that was mortgaged by way of security of payment of principal obligation. Thus. -from the moment the parties are bound b.[ C 2011 ] SIR JJ: Territorial jurisdiction determines public policy. 1316.2002-24124 . and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which. Technically. 1315. Contracts are perfected by mere consent.
he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. Stipulations in favor of third persons (stipulations pour autrui) – Art. Reciprocal 8. Conveyance of use.2002-24124 . e. agency 7. ends at the moment of agreement of the parties 2. sale b. Perfection: the moment when parties come to agreement 3. Onerous – where there is an exchange of equivalent values b. delivery of the thing is also required -not arbitrary nor formulistic.[ C 2011 ] [ UP COLLEGE OF LAW ] 9. Preparatory – where the contract looks forward to other future transactions b. Bilateral – where both parties are bound to reciprocal prestations c. Special or formal -where the law requires certain formality (usually some writing) to perfect the contract and make it binding in addition to consent 6. until said contract is actually made. A mere incidental benefit or interest of a person is not sufficient.g. -imperfect promise: a mere unaccepted offer H. Stages 1. but is demanded by the very nature of real contracts and their purpose Solemn – formal.a loan b. If a contract should contain some stipulation in favor of a third person. According to form a. According to purpose a. With respect to third persons 1.g.. According to the nature of the vinculum produced a. Unilateral – where only one of the parties is bound by a prestation b. Gratuitous or lucrative – where no equivalent prestation is received by one party F. 1311.g.. Aleatory – fulfillment is dependent upon chance -insurance 82 . 2nd par. Consummation or death: the fulfillment or performance of the terms agreed upon in the contract. Common or informal . The contracting parties must have clearly and deliberately conferred a Simoun Antonio Montelibano Salinas . e. Commutative – fulfillment is predetermined in advance -lease b. According to its relation to other contracts (dependence) a..where the contract may exist alone c. According to risk a. Principal . According to cause a. rights and obligations are not yet determined. As distinguished from a perfected promise and an imperfect promise (policitacion) -perfect promise: tends only to assure and pave the way for the celebration of a contract in the future.a real contract is not perfected by mere consent. e. bargaining. Transfer of ownership. Accessory – where the contract depends upon some other contract for its existence 5. when said contract is fully executed G. commodatum c. Rendition of services. Preparation: when negotiations are in process. special formalities 4.
may ask for its rescission 4. YOUNG vs CA Young was not a party in the case. hence. 1313. Creditors of the contracting parties – Art. in this case Coquia’s relatives. Private respondent may not be a party to the contract between Mandarin and Bankard. Interference by third persons Art. Albeit Marmont was not a party. the Church. The purpose and intent of stipulating parties Maris Trading and the Guiang spouses was to benefit petitioner Marmont. De Jesus may then demand its fulfillment under Article 1311. MANDARIN VILLA vs CA An existing agreement between petitioner and Bankard existed where petitioner shall honor credit cards by Bankard. the creditor. Creditors are protected in cases of contracts intended to defraud them. The Church did accept the stipulation pour autrui. the sale of said property effectively revoked Young’s right of first refusal. not a stipulation pour autrui. It is in favor of a third person. 1314. subject to the provisions of the Mortgage Law and the Land Registration Laws.2002-24124 . the sole purpose of Maris entering into the 3. but the stipulation confers upon him a favor. not just a stipulation. provided the expiration date had not elapsed. However. the entire contract is for the benefit of Constantino’s son. third persons who come into possession of the object of the contract are bound thereby. The 3rd party in this case are the heirs of the insured. 1312.[ C 2011 ] favor upon a third person. -a real right directly affects the property subject to it. She cannot enforce a compromise agreement which she clearly was not a part of. Also. an a stipulation pour autrui was present. Any third person who induces another to violate his contract shall be liable for Simoun Antonio Montelibano Salinas . her contention that said stipulation has not yet been revoked. This is a trust. although not parties to such contract of alienation. The enjoyment of the benefits flowing from the land for 17 years without question can be construed as an implied acceptance by the Church of the stipulation pour autrui. CONSTANTINO vs ESPIRITU [ UP COLLEGE OF LAW ] 83 land was to supply the water requirements of Marmont. constituting a stipulation pour autrio. This is a stipulation pour autrui and the third person whose benefit the contract was entered into may demand its fulfillment. SIR JJ: In this case. 2. In contracts creating real rights. -when a debtor enters into a contract in fraud of his creditors. FLORENTINO vs ENCARNACION The stipulation for the fruits of the land paying for the expenses of the Church festivities is a stipulation pour autrui. whoever comes into possession of such property must respect that real right The inclusion of the beneficiary under the contract and as co-plaintiff would allow the court to adjudicate. . MARMONT RESORT vs GUIANG It was clear that Marmont was to benefit from the second MOA. she did not communicate her acceptance whether expressly or impliedly. Possession of the object of contract by third persons – Art. COQUIA vs FIELDMEN’S INSURANCE The stipulation pour autrui is explicit in its mention that Fieldmen’s Insurance will insure and indemnify the personal relatives of the deceased.
plurality of subjects ii. is presumed to have been entered into in the place where the offer was made. BURKE The letter is not a definite offer to purchase because the use of the word “entertain”.[ C 2011 ] damages to the other contracting party -inducement by a 3rd person of a party to the contract to violate the terms thereof may hold him liable for damages DAYWALT vs. Respondent required petitioner to accept by making his signature on the space indicated. in such a case. Thus. CORP The cause of action here is based on a liability derived from a the wrongful interference of defendant in the performance of a contract between plaintiff and Endencia. express or tacit manifestation of the will v. Said letter was written in defendant’s presence. However. SAN LORENZO DEVT CORP vs CA The acts of the spouses Lu indicated that they never intended to transfer ownership to Babasanta.2002-24124 . This is not tantamount to a resolution to perform said act. A qualified acceptance constitutes a counter-offer.counter offer is a rejection of the first offer -conformity of the parties on the terms of the contract requisites: i. petitioner is guilty for damages. The Simoun Antonio Montelibano Salinas . Requisites – Art. Consent 1. . MALBAROSA vs CA An offer that is not accepted does not give rise to consent. The record also shows that he did not induce his heirs to sell. Must be manifested by the concurrence of the offer and acceptance ROSENSTOCK vs. DISSENT: There was a completed contract by Elser. [ UP COLLEGE OF LAW ] 84 contract. the extent of the liability for breach must be determined in light of the situation in existence. knowledge of the third person and the interference of the third person without legal justification. intelligence and free will iv. The offer must be certain and the acceptance absolute. SLDC is a purchaser in good faith because at the time of the sale of SO PING BUN vs CA Tort interference consists of the existence of a valid contract. conformity of the will and its manifestation a. For that. since the sailboat was already in his possession and nothing remained to be done except the payment of the purchase price. Plaintiff was not in a position to make a definite offer. capacity iii. 1319. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. That said. he is not liable for tortuous interference. CHAPTER II: ESSENTIAL REQUISITES CONTRACTS FOR A. which foreclosed any implied acceptance or any other mode of acceptance for that matter. LAGON vs CA The petitioner conducted his own investigation and exercised all due diligence. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.
Manifestation theory 2. the vendors were still the registered owners. Implied – Art. 1323. all of which must be complied with. the disappearance of either party or the loss of his capacity before the Simoun Antonio Montelibano Salinas . 1319 -a counter offer c) If made by letter or telegram – Art. and manner of acceptance. Cognition theory – Art. civil interdiction. Express – Art. 1319. . MMDA vs JANCOM The contract between MMDA and JANCOM is binding because there was a clear signing and execution of the contract by an authorized representative. 1319 b) Kinds i. business advertisements of things for sale are not definite offers. -the law permits the offerror to withdraw the offer at any time before acceptance.[ C 2011 ] [ UP COLLEGE OF LAW ] 85 perfection prevents the contractual tie from being performed. Reception theory 4. 1319. Four theories on when the contract is perfected: 1. 1324. 2) Acceptance a) Must be absolute – Art.2002-24124 . . f) Advertisements for bidders – Art. Expedition thory 3. the offer may be withdrawn at any time before acceptance by communicating such withdrawal. unless the contrary appears. in this case. except when the option is founded upon a consideration. and the advertiser is not bound to accept the highest or lowest bidder. The person making the offer may fix the time. i. 2nd par. 1326. 1321. Advertisements for bidders are simply invitations to make proposals. An offer made through an agent is accepted from the time acceptance is communicated to him. Unless it appears otherwise. Qualified – Art. . 1320 iii. 1320 ii. place. e) Business advertisements of things for sale – Art. An offer becomes ineffective upon the death. insanity. 1322. d) Period of acceptance – Art. 1) Offer a) Must be certain – Art. or insolvency of either party before acceptance is conveyed.an offer is a unilateral proposition which one party makes to another for the celebration of a contract b) What may be fixed by the offeror – Art. This does not mean that he can exercise agent c) When made through an Art. property to SLDC. d) Circumstances when offer becomes ineffective Art. the DENR Secretary who is authorized by law to enter into publicly bidded contracts. 2nd par. When the offerer has allowed the offeree a certain period to accept. hence. 1325. as something paid or promised. -the contract is not perfected except by concurrence of two the wills which exist and continue until the moment that they occur. 1319. but mere invitations to make an offer.
Since Rigos’ offer to sell was accepted by Sanchez before she could withdraw her offer. free. a bilateral reciprocal contract to sell and buy was generated. of the thing. conditions that are of essential or substantial character c. Contracts entered into during a lucid interval are valid.2002-24124 . There was a gross mistake of fact that may make the contract rescindable. Necessary legal capacity of the parties 1) Who cannot give consent – Art.[ C 2011 ] this right absolutely without the regard of others. since she donated said land to respondent Leopold Sevilla who accepted the donation in the same deed. In the second. b. 1324 e) Contract of option – Art. and deaf-mutes who do not know how to write. hence. violence. cannot give contract: [ UP COLLEGE OF LAW ] qualifications parties will 86 of one of the vitiate consent a. there is no consent. 1328. 1330-1346 1) Effect – Art. spontaneous. as to principal conditions -those key conditions or considerations which produced consent. c. Mistake of fact . as to quantity. There was a mutual mistake as to the quantity. Simoun Antonio Montelibano Salinas . A contract where consent is given through mistake. as to substance of the object -nature of the transaction b. individual skill or qualities are considered (error in persona) d. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. 1330. The consent must be intelligent. 1327. that is not the case The following consent to a (1) Unemancipated minors. as to identity or qualifications of one of the parties -where confidence. thus the contract is vitiated. She did not possess the capacity to give consent or execute the said deed. 2) Vices of consent a) Mistake or error i. and real – Arts. undue influence. there is a real mistake with respect to one of the principal conditions. SANCHEZ vs RIGOS Both parties entered into a perfected contract of sale. Felisa was no longer the owner of the contested land. 2) When offer and/or acceptance is made a) during a lucid interval b) in a state of drunkenness c) during a hypnotic spell Art. HEIRS of WILLIAM SEVILLA vs SEVILLA At the time of the execution of the deed of extrajudicial partition. (2) Insane or demented persons. or fraud is voidable. intimidation.a ground for annulling the contract -mistake as to the identity or ASIAIN vs JALANDONI Asiain is not allowed to recover the amount from Jalandoni because the phrase “more or less” can only be considered as covering small or excusable differences. kinds 1. as distinguished from a simple mistake of account: in the first case.
who has no right to apply it to the account of FACETS. private respondent may recover the $10. hence. LEONARDO vs CA The presumption of mistake was not addressed by private respondent. 3 Ignorance of the law excuses no one from compliance therewith. when it was actually a Deed of Absolute Sale. Petitioner did not understand English. 1333. When one of the parties is unable to read. There was a mistake in the name written on the check.2002-24124 Petitioners made use of undue influence in making Katipunan sign a contract he thought was a labor contract. HEMEDES vs CA Strong. Exception: Mutual error of law – Art. There was an honest mistake by the surveyor. Petitioner was not privy to the contract. The consent given by Dumasug was given by mistake and is null andd void. Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated. but the document was not interpreted to her. KATIPUNAN vs KATIPUNAN 2. 1334. CALSONS The mistake or error on the subject of the sale in question is substantial. THEIS vs CA. The deed was written in English. Dumasug signed without understanding the contents. Inexcusable mistake – Art. Error of law a. Hence. General rule: Ignorantia legisneminem excusat – Art. the person enforcing the contract must show that the terms thereof have been fully explained to the former.[ C 2011 ] [ UP COLLEGE OF LAW ] 87 When one of the parties is unable to read – Art. and mistake or fraud is alleged. The contract for transmittal of dollars from the US to petitioner was with FNSB. 1332. which petitioner did not understand. This is a case of solutio indebiti. Hence. The contents were not read nor explained to her. ANDRES vs MANUFACTURERS HANOVER Although FACETS has outstanding debt to petitioner. . clear and unconvincing evidence to overcome the value of the Deed is present. where if something is received when there is no right and it was unduly delivered by mistake. the contract of sale is voidable on the ground of mistake. LUSTAN vs CA Petitioner had no knowledge that the contract she signed was indeed a deed of sale. her consent was given by mistake. b. which respondent tried to remedy. as to the object land of the same transaction is different from that intended by the parties. contingency or risk affecting the object of the contract. may vitiate consent. . iii. the contract of petitioner was with FACETS and FACETS alone.000 from petitioner. the obligation to return it arises. Simoun Antonio Montelibano Salinas . DUMASUG vs MODELO It is evident that said document was not the instrument of debt which Dumasug signed. TAGAYTAY. or if the contract is in a language not understood by him. There is no mistake if the party alleging it knew the doubt.
1335. and she was not barred from leaving. he would not have agreed to. -violence: external. the age. or was ignorant or in financial distress. The contract she entered into is valid. no violence was done unto her? That is weak reasoning. Effect – Art. Undue influence: no unlawful act done. MARTINEZ vs HSBC Attendant circumstances show that no violence was done upon Martinez and her person. serious or irresistible force is employed. in order to change the will and induce action i. through insidious words or machinations of one of the contracting parties. descendants or ascendants. i. the other is induced to enter into a contract which. dolo causante – Simoun Antonio Montelibano Salinas . to give his consent. he could not well resist which controlled his volition and induced him to give his consent d) Fraud or dolo – Art. does not vitiate consent. any means employed upon a party which. although it may have been employed by a third person who did not take part in the contract. She sought the compromise and she had attendant counsel. 1338. c) Undue influence – Art. 1336. LEE vs CA There is a need to make a distinction where a person gives his consent reluctantly and one where he acts against his will under pressure. intimidation is done internally on the person. SIR JJ: Just because she had access to legal counsel and family and friends’ advice. A threat to enforce one's claim through competent authority. without them. if the claim is just or legal. no violence or duress may be claimed. There is fraud when. even though it may have been entered into against her will and desire.2002-24124 . error [ UP COLLEGE OF LAW ] 88 b) Violence and intimidation – Art. She refused to sign the note. She was able to move freely about in the office. To determine the degree of intimidation. Violence or intimidation shall annul the obligation. under the circumstances. or upon the person or property of his spouse. or the fact that the person alleged to have been unduly influenced was suffering from mental weakness. generally done to prevent an act from being done. The following circumstances shall be considered: the confidential. There is undue influence when a person takes improper advantage of his power over the will of another. sex and condition of the person shall be borne in mind. family. Hence. 1337. she benefited from the contract. depriving the latter of a reasonable freedom of choice. Also. spiritual and other relations between the parties.[ C 2011 ] -to invalidate consent. Kinds 1. She also had time to solicit advice from her friends and family. which showed a lack of immediate and continuous threat. There is violence when in order to wrest consent. There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property.
duty to reveal them – Art. one of the contracting parties induces another to execute a contract. The usual exaggerations in trade. opportunity to know the facts – Art. constitutes fraud. is not one of the contracting parties. and plaintiff did nothing to prevent her from making the investigation. Defendant had ample opportunity to appraise the condition of the land. Failure to disclose facts. SIERRA vs. Also. TRINIDAD vs IAC Petitioner. and it remained unimpaired regardless of the consideration of the sale. and was given considerable warning of the flooding prior to her purchase. 2nd par. even if defrauded party were still aware of. -fraud in the conception or realization of the obligation/contract. through insidious words or machinations of one of the contracting parties. which does not vitiate consent: which. RURAL BANK vs CA Respondents had no duty to disclose the real consideration of the sale between them and Behir. he would not have agreed to.[ C 2011 ] [ UP COLLEGE OF LAW ] 89 there is a duty to reveal them. ii. iv. -fraud in the performance of the obligation. Usual exaggerations in trade. he would have still entered into the contract or given his consent HILL vs VELOSO Deceit takes place when by words or machinations. 1344. A mere expression of an opinion does not signify fraud. which vitiates consent: if defrauded party had been aware of. There is fraud when. Incidental fraud only obliges the person employing it to pay damages. said land was security for the debt. It would have been deceit by a third party. herself a real estate broker. Failure to disclose facts. which is risky by nature. are not in themselves fraudulent. unless made by an expert and the other Simoun Antonio Montelibano Salinas . The bank had other means to determine the financial capacity of the respondents. CA The mere assertion that said note was not notarized in their presence does not constitute fraud. dolo incidente – Art. 1339. Franco. when TUASON vs MARQUEZ The innocent non-disclosure of a fact does not affect the formation of the contract or operate to discharge the parties from their agreement. when the other party had an opportunity to know the facts. for a promissory note does not need to be notarized to be binding. he would not have entered into the contract or given his consent 2. 1340.2002-24124 . without them. 1341. -tolerated fraud or dolus bonus: considerable latitude is given to seller’s statement or dealer’s talk AZARRAGA vs GAY The law allows dealer’s talk. as when the parties are bound by confidential relations. was given ample opportunity to examine the land. iii. Art 1338. the other is induced to enter into a contract which. Mere expression of an opinion – Art. which does not annul the consent of the parties.
[ C 2011 ] [ UP COLLEGE OF LAW ] SUNTAY vs CA 90 party has relied on the former's special knowledge. SONGCO vs SELLNER A misrepresentation upon a mere matter of opinion is not an actionable deceit. Kinds – Art. An absolutely simulated or fictitious contract is void. which was the ownership of the fishponds. Misrepresentation made in good faith is not fraudulent but may constitute error. it is only a relative simulation subject to reformation. ii. when it does Simoun Antonio Montelibano Salinas . it should be serious and should not have been employed by both contracting parties. 2. Absolute: when parties do not intend to be bound at all. 1346. 1345. when in fact it was an oral contract of sale. Effects – Art. He did not even intend to take exclusive possession. Simulation of a contract may be absolute or relative. 1344. their sole contention was that it was based on an oral contract of mortgage. want of true consent. This is passive misrepresentation. 1343. By a third person – Art. when the parties conceal their true agreement. Active/passive MERCADO & MERCADO vs ESPIRITU The sale of real estate made by minors pretending to be of legal age is valid. it is illusory. Made in good faith – Art. 1. 1342 Misrepresentation by a third person does not vitiate consent. but the contract does not reflect the actual purchase price. it shows that petitioners intended to fulfill their obligations. Relative: when parties conceal their true agreement MACAPAGAL vs REMORIN The fact that the deed of sale between respondents did not accurately reflect the true consideration is not cause for declaration of nullity. This is an active misrepresentation. the latter. Petitioners admit that they were bound. since they were the means to achieve the result desired. Effects – Art. The contract does not legally exist. ii. The claim that it was a valid sale was incongruous to since he never considered the land one of his assets. unless such misrepresentation has created substantial mistake and the same is mutual. f) Simulation of Contracts RODRIGUEZ vs RODRIGUEZ The two contracts of sale were not simulated. In order that fraud may make a contract voidable. and the potential quantity of sugar to produce. A relative simulation. Suntay refused to assert his rights of ownership over the land and rice mill. e) Misrepresentation i. when they were minors at the time of the celebration of the contract.2002-24124 . but were real and intended to be fully operative. Said representation was merely an opinion regarding the cane in the field. BRAGANZA vs VILLA ABRILLE Plaintiffs did not specifically state that they were of legal age. 1. When parties intend to be bound. a mere phantom. i. iii. UMALI vs CA Since Santiago received the tractor subject matter of the sales agreement. The former takes place when the parties do not intend to be bound at all. PANGADIL vs CFI The simulation here is only relative.
2002-24124 . All rights which are not intransmissible may also be the object of contracts. public. including future things. Object of Contracts 1. morals. public order or public policy may likewise be the object of a contract. except when authorized by law – Art.must be determinate as to its kind – Art. All services which are not contrary to law. public order or public policy may likewise be the object of a contract. B. good customs. The object of every contract must be determinate as to its kind. All things which are not outside the commerce of men. BLAS vs SANTOS a. not prejudice a third person and is not intended for any purpose contrary to law. 3. or public policy 2. including strictly personal rights such parental or marital authority -in order to be a future inheritance: 1) succession must not have been opened 2) the object of the contract forms part of the inheritance 3) that the promissory has an expectancy of a right which is purely hereditary of nature. Future inheritance. public order or public policy binds the parties to their real agreement. 1349. No contract may be entered into upon future inheritance except in cases expressly authorized by law. good customs. morals. 1347. including future things. All rights which are not intransmissible may also be the object of contracts. What may not be the objects of contracts a. All things which are not outside the commerce of men. morals. may be the object of a contract. provided it is Simoun Antonio Montelibano Salinas . without the need of a new contract between the parties. What may be the objects of contracts – Art. Requisite . 1347. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract. All services which are not contrary to law. No contract may be entered into upon future inheritance except in cases expressly authorized by law. which parties cannot modify at will -all intransmissible rights. All services not contrary to law. may be the object of a contract. good customs.[ C 2011 ] [ UP COLLEGE OF LAW ] 91 possible to determine the same. -outside the commerce of men: all kinds of things and interests whose alienation or free exchange is restricted by law or stipulation. All rights not intransmissible c. morals. All things not outside the commerce of man b. good customs.
there must be more than one “causa” Art. their effects: a. BALANSAG [ UP COLLEGE OF LAW ] 92 the understanding or the promise of a thing or service by the other party b. The particular motives of the parties in entering into a contract are different from the cause thereof. but one causa. It refers to existing property that she will receive by operation upon her husband’s death. Said condition was unlawful. Courts will not aid either party to enforce an illegal contract. However. public order or public policy. whence it follows that if obligations are created for both parties. good customs. In onerous contracts Simoun Antonio Montelibano Salinas . Meaning of cause – -cause: the ‘why’ of its contract. and in contracts of pure beneficence. As distinguished from motive – Art. or with unlawful cause. In contracts of pure beneficence gratuitous contracts are essentially agreements to give donations 2. intrinsic and juridical reason for the existence of the contract itself.2002-24124 . Impossible things or services cannot be the object of contracts. JLT AGRO vs. Lot 63 is not a future inheritance. 1350. Cause: objective. 1351. Cause of Contracts 1. LIGUEZ vs CA Lopez conveyed said parcel of land for the purpose of cohabitation with Liguez. outside of the commerce of man C. had he been living. Absence of cause and unlawful cause – Art. objective of the party Motive: the psychological. the essential reason which impels the contracting parties to enter into it and which explains or justifies the creation of the obligation -the obligation established by the contract. 1348. 1352. where such service or benefit was no due as a legal obligation c. for each contracting party. In onerous contracts the cause is understood to be. It existed at the time of its celebration on December 26. . in remuneratory ones. the prestation or promise of a thing or service by the other. 1936. the service or benefit which is remunerated. produce no effect whatever. since it was conveyed. a. The cause is unlawful if it is contrary to law. Because of this.[ C 2011 ] Exhibit A is not a contract on future inheritance. Contracts without cause. Impossible things or services – Art. since he cannot donate the entirety of the property Article 1080 of the Civil Code authorizes a testator to execute an instrument of special character which is revocable at any time during his lifetime. the mere liberality of the benefactor. b. would be barred from setting up his own defense. -impossible: not susceptible or existing. what drives one to enter into said contract You can have two differing motives for entering into a contract. individual or personal purpose of a party to a contract. the immediate and proximate purpose of the contract. Lopez. morals. In remuneratory contracts where a party gives something to another because of some service or benefit.
However. the sum of 1. B. though it is not stated in the contract – Art. b. provided all the essential requisites for their validity are present. it must be licit. in whatever form they may have been entered into. CARANTES vs CA The contract cannot be considered as one to declare the inexistence of a contract for lack of consideration. Presumption of the existence and lawfulness of a cause.00 appears in the document as one of the considerations. provided all the essential requisites for their validity are present. mistake or undue influence. if it should not be proved that they were founded upon another cause which is true and lawful. Statement of a false cause in the contract – Art. 4. Requisite of Cause: 1. or that a contract be proved in a certain way. In such cases. Lesion or inadequacy of cause – Art. Contracts shall be obligatory. 1353. Form of Contracts A.2002-24124 . In this case. Although the cause is not stated in the contract. Also. provided all the essential requisites for their validity are present. or that a contract be proved in a certain way.[ C 2011 ] [ UP COLLEGE OF LAW ] 93 -unless the contrary is proved. when the law requires that a contract be in some form in order that it may be valid or enforceable. the right of the parties stated in the following article cannot be exercised. General rule: Contracts shall be obligatory. -validity of the contract in whatever form it may have SPS BUENAVENTURA vs CA Failure to pay the consideration is different from lack of consideration. In such cases. 1356. 1354. Except in cases specified by law. when the law requires that a contract be in some form in order that it may be valid or enforceable. Contracts shall be obligatory. 1355. it must be true 3. HERNAEZ vs DE LOS ANGELES The oral contract in this case is still valid and enforceable. Exception: When the law requires that a contract be in some form in order that it may be valid or enforceable. in whatever form they may have been entered into. in litigation. Hernaez is entitled to the money she was promised as star of the films she is claiming. he can only donate insofar as it does not prejudice his wife. It is only total absence of cause or consideration that renders a contract void and inexistent. a contract is presumed to have a good and sufficient consideration. the right of the parties stated in the following article cannot be exercised. it is presumed that it exists and is lawful. Simoun Antonio Montelibano Salinas . 1356. (AngloAmerican principle) – Art. in whatever form they may have been entered into. unless the debtor proves the contrary. The statement of a false cause in contracts shall render them void. that requirement is absolute and indispensable. The children may set aside the donation in so far as it is in excess of the portion of free disposal. Chapter III. that requirement is absolute and indispensable. unless there has been fraud. it must exist 2. However. (“Spiritual system” of the Spanish Code) – Art. lesion or inadequacy of cause shall not invalidate a contract. c. apparent gross inadequacy shall not invalidate a contract.
GARCIA vs BISAYA Chapter IV. The failure of the instrument to express the true agreement is due to mistake. inequitable conduct or accident. The prescriptive period of a written contract is within 10 years. not for validity. but to make the contract effective as against third persons. Appellant’s complaint does not ask for annulment. you should determine whether or not reformation is possible.2002-24124 . -it is unjust to allow the enforcement of a written instrument. such as those covered by Arts. or accident. 1771. 2134. 1403. fraud. 2. Meeting of the minds upon the contract. inequitable conduct. 2. whether written or not. If mistake. which does not reflect the real meeting of the minds -valid contract exists. and 3. SIR JJ: Before you can claim prescription. QUIROS vs ARJONA The inability of the municipal court to identify the exact location did not negate the principal object of the contract. there having been a meeting of the minds of the parties to a contract. 1773. Those required for the validity of contracts. 1874. Requisites (Art. [ UP COLLEGE OF LAW ] 94 reformation of the instrument but annulment of the contract. BENIR vs LEANDA The complaint for reformation has not prescribed. fraud. their true intention is not expressed in the instrument purporting to embody the agreement. 1. 749. The requisites for reformation must concur: a Simoun Antonio Montelibano Salinas . 1357 and 1358. in reducing the agreement in writing. and 3. by reason of mistake. inequitable conduct. such as those under the Statute of Frauds in Art. This error is correctible by reformation. not to make a new agreement. Those required for the purpose of proving the existence of the contract. RESUENA vs CA Assuming the verbal agreement. said Article grants a coercive power to the parties by which they can reciprocally compel the documentation of the agreement. 748. the true intention of the contracting parties are not correctly expressed. or accident has prevented a meeting of the minds of the parties. the proper remedy is not An allegation is essential because the object sought is to make an instrument conform to a real agreement or intention of the parties. such as those referred to in Arts.[ C 2011 ] C. fraud. Those required. The true intention of the parties is not expressed in the instrument. Reformation of Instruments . A. The function of reformation is to establish and perpetuate an existing agreement. Sometimes. and does not indicate the absence of the principal object. one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed. Kinds of formalities required by law: 1. 1359): When.
unless parties have reference to a different place -when the terms of the agreement are so clear and explicit Simoun Antonio Montelibano Salinas .2002-24124 . she sold the coconut trees. which is an element lacking as between donor and donee and between testator and beneficiary. (3) When the real agreement is void. An action for reformation is tantamount to an action for specific performance . Implied Ratification – Art. Cases where no reformation is allowed – Art. There shall be no reformation in the following cases: (1) Simple donations inter vivos wherein no condition is imposed. otherwise. and was also one of the heirs entitled to the estate. he cannot subsequently ask for its reformation. The mistake in the preparation of the contract may be privy to reformation. ATILANO vs ATILANO Chapter V. the literal meaning of its stipulations shall control. Interpretation of Contracts (Compare with Rules on Statutory Construction) A. -wills and donations are gratuitous dispositions of property. and another in disaffirmance. one in affirmance of the contract. 1368. The parties retain possession of their property and all they should do is execute mutual deeds of sale. C. E. Remember. The procedure for the reformation of instrument shall be governed by rules of court to be promulgated by the Supreme Court. -there has been an election as between inconsistent remedies. if the mistake was mutual. In this case. Reformation may be ordered at the instance of either party or his successors in interest. -the language of a writing is to be interpreted according to the legal meaning it bears in the place of its execution. 1367.[ C 2011 ] meeting of the minds. or his heirs and assigns. Primacy of intention – Art. [ UP COLLEGE OF LAW ] 95 B. 1370. When one of the parties has brought an action to enforce the instrument. 1369. and an instrument that does not express the true intention. upon petition of the injured party. Who may ask for reformation – Art. (2) Wills. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties. The mistake did not vitiate the consent. 1366. Procedure of reformation – Art. the deed of sale executed need not be reformed. SARMING vs DY Silveria was a party to the contract. D.
1373. -The circumstances under which the contract was made.[ C 2011 ] that they do not justify an attempt to read into it only alleged intention of the parties. being independent of the mortgage. It does not state who has the capacity to extend the contract. However general the terms of a contract may be. The clauses regarding said contract of antichresis. Respondent is also in estoppel. When it contains stipulations that admit several meanings – Art. KASILAG vs RODRIGUEZ The verbal contract they entered into sought to alter the mortgage contract into a contract of antichresis. The correct view is that the 500 peso monthly installments with a 10% interest per annum. 1371. The payment is due. -when the true intent and agreement of the parties is established. go through Simoun Antonio Montelibano Salinas . How to interpret a contract 1. thus indicating that jurisdiction of the arbitrator is not all encompassing.a particular intent will prevail over a general one. How to determine intention – Art. since she accepted petitioner’s payments. If you’re going to construct an argument. OIL & NATURAL GAS CO vs CA Petitioner’s displacement of the comma in its complaint cannot circumvent that clause 16 deals with the fact that ‘except when otherwise provided in the supply/order contract’. their contemporaneous and subsequent acts shall be principally considered. 1372. . which is illegal and void. [ UP COLLEGE OF LAW ] 96 and Reyes. Always write in the active voice.2002-24124 . If some stipulation of any contract should admit of several meanings. SIR JJ: The problem with the clause is that it is written in the passive voice. and the circumstances including the situation of the subjects RAPANUT vs CA Petitioner has complied with his obligation. they shall not be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree . the terms are to be understood literally. such is not the case where they appear to be contrary to the evident intention of the contracting parties. B. not placing an additional 10% interest on the 500 pesos monthly. SANTI vs CA The phrase “automatically extended” did not appear in the contract of lease between Jose C. The difference in the two contracts is present. can be eliminated because said contract of mortgage is legal and valid. The contract cannot be construed to include matters distinct from those with respect to what parties intended to contract BORROMEO vs CA It is a fundamental principle in the interpretation of contracts that while ordinarily the literal sense of the words employed is followed. it shall be understood as bearing that import which is most adequate to render it effectual. it must be given effect and prevail as the bare words of the contract Art. SIR JJ: Do not take structuring of arguments for granted. In order to judge the intention of the contracting parties.
1376. with one complementing the other. attributing to the doubtful ones that sense which may result from all of them taken jointly. 1374. .[ C 2011 ] each step. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract. -a contract cannot be construed in parts. 1377. pursuant to Article 1374. this is the proper venue. 5. -An instrument may be construed according to usage. 1375. The deed of chattel mortgage modified this condition where the promissory note confined the proper court to Makati. absent any other possible means of interpretation. -the party who draws up a contract in which obscure terms or clauses appear. but its clauses must be interpreted in relation to one another 4. and shall fill the omission of stipulations which are ordinarily established. Since respondent moved to Dagupan. [ UP COLLEGE OF LAW ] 97 keeping with the nature and object of the contract -determined by a consideration of the general scope and purpose of the instrument in which it occurs 2. Words which may have different significations shall be understood in that which is most in Simoun Antonio Montelibano Salinas . When it contains ambiguities and omission of stipulations – Art. When it contains words that have different significations – Art. Explain why the ruling applies. Analyze how the SC reaches its conclusion. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. With respect to the party who caused the obscurity – Art. is the one responsible . Do it step by step. When it contains various stipulations. In this case. 3. “putting one’s papers in order” does not involve payment of the capital gains tax is not a pre-requisite of transferring ownership to the buyer. some of which are doubtful – Art. SIR JJ: Let the acts determine the intention. The various stipulations of a contract shall be interpreted together. in order to determine the true character CHUA vs CA RIGOR vs CONSOLIDATED ORIX Both promissory note and the chattel mortgage must be treated as a singular contract.2002-24124 Article 1376 states that the custom of the place shall be used in interpreting ambiguities of the contract.
not waiver. When it is absolutely impossible to settle doubts by the rules established in the preceding articles. the doubt shall be settled in favor of the greatest reciprocity of interests. RCBC vs CA & ILUSTRE There is no evidence that Ilustre acted with malice or negligence. a. in onerous contracts -doubts are resolved in favor of greater reciprocity/ equivalence 7.[ C 2011 ] [ UP COLLEGE OF LAW ] 98 for the obscurity or ambiguity. CA Art. Hence. D. -construction which would amount to impairment or loss of right is not favored. in gratuitous contracts -doubts are resolved in favor of least resolved in favor of the least transmission of right GACOS vs. -if the will or intent of the parties cannot be ascertained. When the doubts are cast upon the principal object so that the intention cannot be known – Art. 1378. and the doubts refer to incidental circumstances of a gratuitous contract. If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have been the intention or will of the parties.2002-24124 . the doubt shall be settled in favor of the greatest reciprocity of interests. conservation and preservation. When it is absolutely impossible to settle doubts by the rules above – Art. they must therefore be construed against him. When it is absolutely impossible to settle doubts by the rules established in the preceding articles. b. 10-19. 6. the least transmission of rights and interests shall prevail. the contract shall be null and void. Applicability of Rule 123. that RCBC claimed he did when he failed to sing a check which they claim violated Paragraph 11 of the Chattel Mortgage. 1378. the interpretation will be that Gacos did not sell her entire share. 1378 states that there will be an inclination against the least possible transmission of rights and interests. and the doubts refer to incidental circumstances of a gratuitous contract. the contract shall be null and void. Rules of Court (now Secs. If the contract is onerous. If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have been the intention or will of the parties. If the contract is onerous. the contract is null and void. abandonment or forfeiture of a right is the rule. the least transmission of rights and interests shall prevail. Rule 130) Simoun Antonio Montelibano Salinas .
Characteristics DEFECTIVE CONTRACTS Chapter VI. -the idea is to establish parity between the value of the thing and its price.[ C 2011 ] [ UP COLLEGE OF LAW ] 99 (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. he must secure the approval of the guardianship court Contracts for absentees – principles for wards and guardians also apply. (5) All other contracts specially declared by law to be subject to rescission. since the powers and duties of a legal representative of an absentee and the same as those of guardians B. Contracts & guardians: a guardian is only to manage the estate of his word. The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof.2002-24124 . 1381. there is lesion. Rescissible Contracts A. he has no power to dispose of any portion thereof without approval of the court when a guardian enters into a contract. (2) Those agreed upon in representation of absentees. -to give rise to rescission. -a valid contract can only be rescinded for legal cause. Simoun Antonio Montelibano Salinas . (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. so that if the price is less than the true value of the thing at the time of the perfection of a contract. Kinds – Art. lesion must have been known or could have been known at the time of making the contract Lesion: the injury which one of the parties suffers by virtue of a contract which is disadvantageous to him. hence. if the latter suffer the lesion stated in the preceding number.
[ C 2011 ] [ UP COLLEGE OF LAW ] 100 1. Definition 2. The remedy is not rescission but termination. The vessels are no longer owned by private respondent. EQUATORIAL REALTY vs MAYFAIR Rescission creates the obligation to return the things object of the contract. albeit rescissible is valid until legally rescinded. The contract is rescissible. Rescission – Art. UNIVERSAL FOOD CORP vs. Their defect consists in injury or damage either to one of the contracting parties or to third persons. Hence. They are valid. CANNU vs.subsidiary The Deed of Sale is rescissible. They can be attacked only either by a contracting party or by a third person who is injured or defrauded. Hence.. no more. FRANCISCO In this case. 1380 1. As distinguished from rescission under Art. no less. IRINGAN vs CA The applicable period of rescission here is not under Article 1389 (4 years) but under Article 1144 (10 years) since it is a principal action. b. it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. GALANG 3. respondentsappellees had no alternative but to file the present action for rescission and damages. UNION INSURANCE vs CA Philippine Tugger’s acquisition. Hence. VITUG (DISSENT): Rescissible contracts are not void ab initio. The action for rescission is subsidiary. 2. Petitioner is only entitled to the return of the purchase price. which means that they must return the partial payment made by petitioner. PRYCE CORP vs PAGCOR When parties pray for payment of rental. 1383. petitioner may ask for value of ships. Simoun Antonio Montelibano Salinas . and not by ratification. 5. until set aside in an appropriate action.2002-24124 . They can be attacked directly only. The ‘Kasunduan’ does not fall under any one of them. and all fruits and price with interest. Requisites: a. Petitioner should have impleaded Peninsula Tourist Shipping who owned the vessels. and not collaterally. 3. They are valid before rescission. 4. the dismissal of respondent from his work as head scientist was a fundamental and substantial breach of the Bill of Assignment. the aggrieved party sought the partial enforcement of a lease contract. Termination entails enforcement of its terms prior to the declaration of its cancellation. They can be convalidated only by prescription. what is applicable is rescission or resolution under Article 1191. RIVERA vs DEL ROSARIO Article 1383 only applies to those found under Article 1381. this is the rescission of Article 1191. The party asking for rescission has no other legal means to obtain reparation – Art. 1191 1191: rescission – RESOLUTION – principal 1381: rescission – LESION . However. C. not a subsidiary one limited to case of rescission under Article 1381.
not all of the creditors. 1385. consequently. consequently. The action to claim rescission must be commenced within four years. with respect to third persons who acquired the thing in good faith – Art. . Presumptions of fraud – Art. 6. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. indemnity for damages may be demanded from the person causing the loss. Rescission creates the obligation to return the things which were the object of the contract. The object of the contract has not passed legally to the possession of a third person acting in good faith – Art. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.[ C 2011 ] [ UP COLLEGE OF LAW ] 101 together with their fruits. and the price with its interest. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. The action for rescission is brought within the prescriptive period of four (4) years – Art 1389. 5. 2nd and 3rd par. a. when the donor did not reserve sufficient property Simoun Antonio Montelibano Salinas . In this case. 1385. Rescission creates the obligation to return the things which were the object of the contract. e. -it is only in favor of plaintiff creditor. d. He is able to return whatever he may be obliged to restore if rescission is granted – Art 1385. Extent of rescission – Art. 1387. together with their fruits. 1384.2002-24124 . or until the domicile of the latter is known. 1385. the period of four years shall not begin until the termination of the former's incapacity. 4. Effect of rescission – Art. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. c. The extent of the revocation is only to the amount of the prejudice suffered by creditor. For persons under guardianship and for absentees. and the price with its interest. Rescission shall be only to the extent necessary to cover the damages caused.
by in a. the first acquirer shall be liable first. In addition to these presumptions. intimidation. and so on successively. It is inconceivable that ADB will connive with Marcopper to defraud Solidbank. (2) Those where the consent is vitiated by mistake. -this article presumes the existence of fraud a debtor. undue influence or fraud. The decision or attachment need not refer to the property alienated. it should be impossible for him to return them. 7. it is enough that it be issued. shall indemnify the latter for damages suffered by them on account of the alienation. These are the badges of fraud. which are all present in this present case. and need not have been obtained by the party seeking the rescission. Badges of fraud ORIA vs MCMICKING Courts have laid down certain rules by which the fraudulent character of the transaction is determined. 1390. due to any cause. CHINA BANKING CORP vs CA There are two badges of fraud present in this case: Chua sold the only property which was his right to redeem to his son. Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been issued.2002-24124 . even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract. MR HOLDINGS vs BAJAR Chapter VII. If there are two or more alienations. These contracts are binding. unless they are annulled by a Simoun Antonio Montelibano Salinas . To raise the presumption of fraud case of attachment. Solidbank was not prejudiced. Whoever acquires in bad faith the things alienated in fraud of creditors. the design to defraud creditors may be proved in any other manner recognized by the law of evidence. 1388. The following contracts are voidable or annullable. whenever. -proof of fraud must be met. Voidable or Annullable Contracts A.[ C 2011 ] [ UP COLLEGE OF LAW ] 102 to pay all debts contracted before the donation. violence. said land was sought by China Banking Corp. Kinds – Art. Also. Liability for acquiring in bad faith the things alienated in fraud of creditors – Art.
2. The law predominates the former. rescission may be demanded even by third party affected by it. They are susceptible of ratification. Gimena’s late husband. 2. 5. -plaintiff must have an interest in the contract -the victim and not the party responsible for the defect is the one who must assert the same SINGSONG vs ISABELLA SAWMILL Plaintiffs may institute an action for annulment. SIR JJ: This is more of an unenforceable contract than it is a voidable contract. they Simoun Antonio Montelibano Salinas . After Maximo. Rescission needs no ratification. since it deprives them of their hereditary rights. nullity declares the inefficacy which the contract already carries in itself. or caused mistake base their action upon these flaws of the contract. nullity is based on a vice of the contract which invalidates it. 3. violence. equity dominates the latter. while rescission merely produces that inefficacy which did not exist essentially in the contract.[ C 2011 ] [ UP COLLEGE OF LAW ] 103 proper action in court. However. DIFFERENCES: 1. and can show detriment which would positively result to him from the contract in which he has no intervention. Who may and may not institute action for annulment – Art. died.2002-24124 . it was only the heirs of Aldon who could acquire the right to question the defective contract. while rescission is compatible with the perfect validity of the contract. 4. As distinguished from rescission: Both rescission and nullity when declared. Gimena cannot assail the deed of sale. which she sold without her husband’s consent. B. Saldajeno has a right to be reimubursed. 1397. 1390 3. because Gimena had no capacity to give consent to the contract. to be cured. Characteristics 1. while in rescission. since he is prejudiced in his rights with respect to one of the contracting parties. Annulment 1. 6. persons who are capable cannot allege the incapacity of those with whom they contracted. They are binding until they are annulled by a competent court. nullity. render the contract inofficious. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. nullity is a sanction while rescission is a remedy. are valid until it is set aside. However. In nullity. even if they are not parties to the contract. They are susceptible of convalidation by ratification or by prescription. while nullity can be demanded only by parties to the contracts. FELIPE vs HEIRS of ALDON The deed of sale is a voidable contract. Their defect consists in the vitiation of consent of one of the contracting parties. nor can those who exerted intimidation. private interest governs. the direct influence of the public interest is noted. or undue influence. Grounds – Art. 2. or employed fraud. 3. C. -they are existent and binding and valid although they can be annulled because of want of capacity or vitiated consent of one of the parties but before annulment. requires an act of ratification.
which they never initiated. As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return. where the land was sold. 1398.2002-24124 . 1391. And Arts. INES vs CA Interest may be allowed in discretion of damages. the heir cannot bring an action to annul the contract. The action to annul the minors’ redemption was one that could only have been initiated by the minors themselves. -principle of unjust enrichment is the basis of the second paragraph CADWALLER vs SMITH. 5.[ C 2011 ] [ UP COLLEGE OF LAW ] 104 -This does not apply to third persons but only to the parties to the contract since the parties explicitly agreed to release her from the partnership. their assigns and heirs. Effect a. Erlinda Armentia and Patriarca clearly did not intend to be legally bound by their actions. 1402. Armentia adjudicated to herself a parcel of land. -the effect of annulment is to wipe the contract out of existence and to restore the parties to their original situation before the contract was entered into. the other cannot be compelled to comply with what is incumbent upon him. Gaw Ching had no legal right of preemption in respect of the house. Prescription – Art. from the time the guardianship ceases. An obligation having been annulled. VELARDES vs CA Simoun Antonio Montelibano Salinas . SIR JJ: This is an absolutely simulated contract. MALABANAN vs GAW CHING Contracts take effect only between the parties. because it was valid until the lower court declared it. BELL The defendants were not entitled to retain their commission under the annulled contract. Mutual restitution – Arts. the contracting parties shall restore to each other the things which have been the subject matter of the contract. from the time the defect of the consent ceases. who was renting the land. violence or undue influence. because the land at the time belonged to the lessee and not Gaw Ching. He could not pursue the nullity of the contract. from the time of the discovery of the same. The award of legal interest is a necessary consequence the finding that the Contract of Sale is void that Ines existed. This period shall begin: In cases of intimidation. It is outside the Urban Land Refor Zone. except in cases provided by law. SIR JJ: It is voidable. It is not void ab initio. this is dangerous because the other party would only want to delay the case as to incur greater interest. And when the action refers to contracts entered into by minors or other incapacitated persons. 4. she was 13 years old at the time of the sale. The action for annulment shall be brought within four years. and the price with its interest. ARMENTIA vs PATRIARCA If no rights. In case of mistake or fraud. which was ½ of whatever sum was obtained. SAMAHAN NG MAGSASAKA vs SAN JOSEP The redemption made by the minors is only voidable. with their fruits. action or obligation is transmitted to the heir. However. It is not voidable.
Ratification extinguishes the action to annul a voidable contract. At the time of the ratification. and sale of GDCIA. the loss of the thing shall not be an obstacle to the success of the action. If the right of action is based upon the incapacity of any one of the contracting parties. he shall return the fruits received and the value of the thing at the time of the loss. 1399. unless said loss took place through the fraud or fault of the plaintiff. When the thing is lost through the fault of the person who has the right to file the action – Art. If nullity is on account of incapacity of one of the contracting parties. b. 1401. the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him.2002-24124 . Requisites: a. hence. it is valid and produces legal effect. SIR JJ: This is a valid contract! Breach took place. By ratification – Art. the cause of nullity has already ceased to exist. -a person must see to it that other party has sufficient capacity to bind himself . [ UP COLLEGE OF LAW ] 105 Annulment: -by the fault or negligence of one party: he must restore the fruits and value of the thing lost plus interest at the time of the loss -by fortuitous event: only the fruits received and restored 6. the 2) When the thing is lost through the fault of the party obliged to return the same – Art. b. 1392.[ C 2011 ] Rescission in this case is for mutual restitution as well. with interest from the same date. Loss after the decree of Simoun Antonio Montelibano Salinas . Ratification 1. -efficacy is given to a 1) When one of the parties is incapacitated – Art. The contract is voidable. the plaintiff who was in possession of the object at the time of the loss if he were to be given back the consideration that he had paid to the defendant D. -Until the annulment of the contract. The action for annulment of contracts shall be extinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings. Extinguishment of the action a. When the defect of the contract consists in the incapacity of one of the parties. ARRA REALTY vs GUARANTEED DEVT ARC failed to transfer property to respondent’s name because of mortgage to CBC. respondent Penaloza is entitled to refund the amount she paid to petitioner ARC. The ratification is made with knowledge of the cause for nullity. the party suffering from such incapacity is only bound to return what he has profited. Whenever the person obliged by the decree of annulment to return the thing can not do so because it has been lost through his fault. 1400. c.
By the parties themselves or by the guardian in behalf of an incapacitated party – Art. Uy Soo cannot seek to have the contract annulled when he himself benefited from it. 1394. the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. Uy Soo had not sustained the burden of proof of fraud. 1396.000 pesos he now seeks to be paid to him. Unenforceable Contracts A. there is confirmation or ratification. It is distinguished from the rescissible contracts and annullable contracts in that the latter two contracts produce legal effects unless they are set aside by a competent court 1.[ C 2011 ] contract which suffers from a vice of curable nullity [ UP COLLEGE OF LAW ] 106 -the right to ratify pertains to the incapacitated persons. b. acknowledgement – remedy of proof confirmation – remedy of a defect of nullity 2. Through his actions. Characteristics -an unenforceable contract is one which cannot be enforced unless it is first ratified in the manner provided by law.2002-24124 . 1393. Effects: a. UY SOO LIM vs TAN UNCHUAN By virtue of ratification. during the existence of incapacity. Ratification cleanses the contract from all its defects from the moment it was constituted. hence. Chapter VIII. it may be exercise by the guardian for him -ratification does not require consent of the party who could not ask for annulment of the contract -when a contract entered into through error is approved by a party after discovering his error. Ratification may be effected by the guardian of the incapacitated person. He disposed of the whole 85. The contract is cleansed retroactively from all its defects – Art. with knowledge of the reason which renders the contract voidable and such reason having ceased. Express or tacit – Art. -the action to annul the same can be maintained based upon defects relating to its original validity -ratification is merely declaratory of the waiver of the right to ask for annulment Implied ratification: Based on the conduct of acts or the party who is entitled to ask for annulment. Ratification may be effected expressly or tacitly. Express ratification: Any oral or written manifestation of the person entitled to ask for annulment that he agrees to be bound by the contract or that he will not seek the annulment 3. Action to annul is extinguished – Art. This may include silence. Ratification extinguishes the action to annul a voidable contract. acquiescence or acceptance b. Forms a. 1392. They cannot be enforced by a Simoun Antonio Montelibano Salinas . It is understood that there is a tacit ratification if.
it should not be made the instrument B. be in writing.contracts that by reason of statutory defects do not confer any action to enforce the are same until and unless they ratified in the manner prescribed by law are called unenforceable contracts. thereof. without authority to do so. unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation. They are susceptible of ratification. The following contracts are unenforceable.when a person enters into a contact for and in the name of another. at the time of the sale. -since the Statute of Frauds was enacted for the purpose of preventing frauds. Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this Book. [ UP COLLEGE OF LAW ] 107 auction and entry is made by the auctioneer in his sales book. 2. (e) An agreement of the leasing for a longer period than one year. It regulates the formalities of the contract necessary to Render it enforceable a. or who has acted beyond his powers. or for the sale of real property or of an interest therein. or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof. (d) An agreement for the sale of goods. or miscarriage of another. 1403. of the amount and kind of property sold. Purpose of Statute -prevent fraud and perjury in the enforcement of contracts depending for their evidence upon the unassisted memory of witnesses by requiring certain enumerated contracts & transactions to be evidenced by a writing signed by the party to be charged. of the agreement cannot be received without the writing. unless the same. or by his agent. (3) Those where both parties are incapable of giving consent to a contract 1. at a price not less than five hundred pesos. other than a mutual promise to marry. They cannot be assailed by third persons. (f) A representation as to the credit of a third person. names of the purchasers and person on whose account the sale is made. evidence. therefore. (c) An agreement made in consideration of marriage. price.[ C 2011 ] proper action in court. Governing rules – Art. Unauthorized contracts . chattels or things in action. Kinds – Art. or some of them. terms of sale. but when a sale is made by Simoun Antonio Montelibano Salinas . 3. 2. or the evidences.2002-24124 . (2) Those that do not comply with the Statute of Frauds as set forth in this number. (b) A special promise to answer for the debt. . the contract does not bind the latter a. or some note or memorandum. it is a sufficient memorandum. In the following cases an agreement hereafter made shall be unenforceable by action. unless the buyer accept and receive part of such goods and chattels. Contracts covered by the Statute of Frauds -the term ‘Statute of Frauds’ is descriptive of statutes which require certain classes of contracts to be in writing. of such things in action or pay at the time some part of the purchase money. and subscribed by the party charged. default. 1404.
-If the parties make no objection to the admissibility of oral evidence to support a contract covered by the Statute of Frauds and therein permit such contract to be proved orally. Void from the beginning 2. -Defense is personal to the party of the agreement. 1409. as the case may be. 1407. Thus. The Statute of Frauds cannot be invoked when the contract had been partly executed. where one pary has entirely performed his obligation under an oral contract. Cannot be ratified – Art. express or implied ratification by the parent.2002-24124 . of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated. of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated. Chapter IX. Contracts infringing the Statute of Frauds. It is like minority. mistake or of the similar defects which may be asserted or waived by the parties to the contract or their representatives. b. and cannot be set up by strangers to the agreement. Void or Inexistent Contracts A. It will be just and binding upon the parties as if it had been reduced to writing. Characteristics 1. In a contract where both parties are incapable of giving consent. or by the acceptance of benefit under them. the parties may avail themselves of the right under Article 1357. When a contract is enforceable under the Statute of Frauds. fraud. referred to in No. The following contracts are inexistent and void from the beginning: (1) Those whose cause. 1407. Effect of ratification by the parents or guardian of both parties – Art. Simoun Antonio Montelibano Salinas . 2 of Article 1403. Right of the parties when a contract is enforceable but a public document is necessary for its registration – Art. and a public document is necessary for its registration in the Registry of Deeds. How ratified – Art. Contracts executed by parties who are both incapable of giving consent to a contract a. it only applies to executory contracts c. 1405. or guardian. Effect of ratification by the parents or guardian of one of the parties Art.[ C 2011 ] [ UP COLLEGE OF LAW ] – 108 to further them. In a contract where both parties are incapable of giving consent. object or purpose is contrary to law. as the case may be. are ratified by the failure to object to the presentation of oral evidence to prove the same. equity would agree that all evidence be admitted to prove the alleged agreement. express or implied ratification by the parent. b. . Produces no effect whatsoever 3. 3. 1406. or guardian.
good customs. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense. a) in pari delicto rule -parties who voluntarily enter into a compromise agreement which is “expressly prohibited or declared void by law” cannot withdraw. (2) Those which absolutely simulated fictitious.[ C 2011 ] [ UP COLLEGE OF LAW ] 109 morals. good customs. Kinds –Art. The other. he cannot recover what he has given by reason of the contract. Neither can the right to set up the defense of illegality be waived. (5) Those which contemplate an impossible service. -No force and effect from the very beginning -Consent was not produced by the concurrence of the offer and acceptance and did not pass the stage of generation to the point of perfection -those which violate some mandatory provisions of law 1) When the act constitutes a criminal offense – Art. (2) When only one of the contracting parties is at fault. they shall have no action against each other. Contracts that are void a. When the nullity proceeds from the illegality of the cause or object of the contract. These contracts cannot be ratified. both parties being in pari delicto. neither may recover what he has given by virtue of the contract. 1412. are or (3) Those whose cause or object did not exist at the time of the transaction. public order or public policy Simoun Antonio Montelibano Salinas . (4) Those whose object is outside the commerce of men. who is not at fault. and both shall be prosecuted. but the innocent one may claim what he has given. 1409 1. recall or render ineffective acts already done in the performance of their part in the illegal bargain 2) When the act is unlawful but does not constitute a criminal offense – Art. or purpose is contrary to law. may demand the return of what he has given without any B. and shall not be bound to comply with his promise.2002-24124 . object. This rule shall be applicable when only one of the parties is guilty. 1411. Those whose cause. or demand the performance of the other's undertaking. the following rules shall be observed: (1) When the fault is on the part of both contracting parties. the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract. (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained. public order or public policy. (7) Those expressly prohibited or declared void by law. Moreover. morals. and the act constitutes a criminal offense. or ask for the fulfillment of what has been promised him.
designated for the protection of the plaintiff. the courts may. if public policy is thereby enhanced. -when parties to an illegal contract are not equally guilty. he shall be entitled to recover the deficiency. or authorizes the setting of a minimum wage for laborers. and the prohibition by the law is 8) When a laborer agrees to accept a lower wage than that set by law – Art. allow the party repudiating the contract to recover the money or property. improper. When the law fixes. When the agreement is not illegal per se but is merely prohibited. 9) When the contract is divisible – Simoun Antonio Montelibano Salinas . When the law sets. immoral.[ C 2011 ] obligation to comply his promise. he may. -illegal per se: an act or contract that is illegal per se is one that is universally recognized standard or inherently or by its very nature bad. When money is paid or property delivered for an illegal purpose. In such case.2002-24124 . When the price of any article or commodity is determined by statute. . a) in pari delicto rule [ UP COLLEGE OF LAW ] 110 3) When the purpose is illegal. or before any damage has been caused to a third person. 1415. any person paying any amount in excess of the maximum price allowed may recover such excess. 1414. the contract may be repudiated by one of the parties before the purpose has been accomplished. 7) When by virtue of a contract a laborer undertakes to work longer than the maximum number of hours of work fixed by law – Art. or contrary to good conscience 6) When the amount paid exceeds the maximum fixed by law – Art. or authorizes the fixing of the maximum number of hours of labor. and when public policy is considered as advanced by allowing the more excusable of the two to sue for relief. the transactory relief is given to him 4) When the contract is illegal and one of the parties is incapable of giving consent – Art. recover what he has paid or delivered. if the public interest will thus be subserved. Where one of the parties to an illegal contract is incapable of giving consent. 1416. and money is paid or property delivered therefor – Art. and a contract is agreed upon by which a laborer accepts a lower wage. 5) When the agreement is not illegal per se but is prohibited – Art. 1417. 1418. the courts may. or by authority of law. and a contract is entered into whereby a laborer undertakes to work longer than the maximum thus fixed. 1419. if the interest of justice so demands allow recovery of money or property delivered by the incapacitated person. he may demand additional compensation for service rendered beyond the time limit.
1410. Civil obligations give a right of action to compel their Simoun Antonio Montelibano Salinas . 1345 and 1346) b. Those which contemplate an impossible service d. 1423. Obligations are civil or natural. The action or defense for the declaration of the inexistence of a contract 1. does not prescribe – Art. In case of a divisible contract. -void stipulations have no effect -exceptions: when the nature of the contract requires divisibility 2) when the intention of the parties is that the contract be entire 10)When the contract is the direct result of a previous illegal contract – Art. is not available to third persons whose interest is not directly affected – Art. b. . 2. 1420. the latter may be enforced. TITLE III. Those where the intention of the parties relative to the principal object of the contract cannot be ascertained e.1421. Those whose cause or object did not exist at the time of the transaction C. if the illegal terms can be separated from the legal ones. is also void and inexistent. Definition – Art. Those which are absolutely simulated or fictitious (see Arts. A contract which is the direct result of a previous illegal contract. Contracts that are inexistent a. The defense of illegality of contract is not available to third persons whose interests are not directly affected. 1409 D. The action or defense for the declaration of the inexistence of a contract does not prescribe.2002-24124 . Those whose object is outside the commerce of man c.[ C 2011 ] [ UP COLLEGE OF LAW ] 111 Art. NATURAL OBLIGATIONS A. 1422. Those expressly prohibited or declared void by law 2. Right to set up defense of illegality cannot be waived – Art.
When a minor between eighteen and twentyone years of age who has entered into a contract without the consent of the parent or guardian. Conversion to civil obligation 1. Some natural obligations are set forth in the following articles. It is a real obligation to which the law denies an action. there is no right to demand the thing or price thus returned. -midway between civil and moral obligation -an obligation without a sanction. As distinguished from civil obligations – Art. Art. When. the obligor cannot recover what he has paid. (1160A) Art. Art. 1429.2002-24124 . but the debtor later voluntarily reimburses the third person. not being based on positive law but on equity and natural law. 1426.[ C 2011 ] [ UP COLLEGE OF LAW ] 112 performance. Art. 1428. Examples – Arts. the obligor who voluntarily performs the contract cannot recover what Simoun Antonio Montelibano Salinas . When a right to sue upon a civil obligation has lapsed by extinctive prescription. do not grant a right of action to enforce their performance. but are contrary to juridical principles and susceptible of being annulled. E. Art. 1424. When a testate or intestate heir voluntarily pays a debt of the decedent exceeding the value of the property which he received by will or by the law of intestacy from the estate of the deceased. a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed. he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered. they authorize the retention of what has been delivered or rendered by reason thereof. but not through compulsion by legal means. As distinguished from moral obligations: duties of conscience completely outside of the field of law D. the payment is valid and cannot be rescinded by the payer. after the annulment of the contract voluntarily returns the whole thing or price received. who has entered into a contract without the consent of the parent or guardian. Natural obligations. 1425. 1423 Civil obligations: juridical obligation which are apparently in conformity with positive law. voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation. notwithstanding the fact the he has not been benefited thereby. after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation. susceptible of voluntary performance. 1424-1430 Art. When without the knowledge or against the will of the debtor. there shall be no right to recover the same from the obligee who has spent or consumed it in good faith. By novation 2. When a minor between eighteen and twentyone years of age. By ratification he has delivered or the value of the service he has rendered. B. but after voluntary fulfillment by the obligor. but which the debtor may perform voluntarily. given effect by law Natural obligations: there is a juridical tie C. 1427.
When a will is declared void because it has not been executed in accordance with the formalities required by law. Estoppel may be in pais or by deed. either by the acts of judicial or legislative officer. the payment is effective and irrevocable. and to act upon such belief. in any litigation arising out of such declaration. by his own declaration. Definition – Art. after the settlement of the debts of the deceased. 3. 1433. Technical estoppel a. or by his own deed or representation either expressed or implied -whenever a party has. ESTOPPEL Art. intentionally and deliberately led another to believe a particular thing to be true. and cannot be denied or disproved as against the person relying thereon. By record -the preclusion to deny the truth of matters set for him a record. he cannot. 1433 -applied to a situation where because of something he has done or omitted to do. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it. 1430.2002-24124 . Kinds 1. a party is denied the right to plead or prove an otherwise important fact A. or asserting anything to the contrary of that which has in contemplation of law been established as the truth. By deed – -a bar which precludes one party to a deed and his privies from asserting as against the other party and the other party or from denying the truth of any material facts asserted in it. whether judicial or legislative and also to deny the facts adjudicated by a court of competent jurisdiction example: the conclusiveness of a judgment on the parties to a case b. be permitted to falsify it. but one of the intestate heirs. Equitable estoppel or estoppel in pais – Art. B. Simoun Antonio Montelibano Salinas . act or omission. -origin in equity -a bar which precludes a person from denying.[ C 2011 ] [ UP COLLEGE OF LAW ] 113 Art. TITLE IV. act or omission. pays a legacy in compliance with a clause in the defective will.
the former cannot subsequently set up his own title as against the buyer or grantee. and (4) The party defrauded must have acted in accordance with the misrepresentation. -a person who sells property when he did not have title to it. the latter is precluded from asserting his legal title or interest therein. Persons bound – Art. provided all these requisites are present: (3) The party misled must have been unaware of the true facts. 1437. Estoppel is effective only as between the parties thereto or their successors in interest. 1439. TITLE V.2002-24124 . (2) The party precluded must intend that the other should act upon the facts as misrepresented. D. Art. 1435. one of them is misled by a person with respect to the ownership or real right over the real estate. 1436. A lessee or a bailee is estopped from asserting title to the thing leased or received. such title passes by operation of law to the buyer or grantee. cannot deny validity to the sale after he has acquired title Art. If a person in representation of another sells or alienates a thing. the equitable ownership of the Simoun Antonio Montelibano Salinas . cannot. 1438. General Provisions A. When a person who is not the owner of a thing sells or alienates and delivers it. if he received the sum for which a pledge has been constituted. Art. made by the other to a pledgee who received the same in good faith and for value. 1434. as against the lessor or bailor. When in a contract between third persons concerning immovable property. Cases where estoppel applies – Arts.[ C 2011 ] [ UP COLLEGE OF LAW ] 114 C. One who has allowed another to assume apparent ownership of personal property for the purpose of making any transfer of it. and later the seller or grantor acquires title thereto. Chapter I. set up his own title to defeat the pledge of the property. 1434-1438 Art. Art. TRUSTS (1) There must be fraudulent representation or wrongful concealment of facts known to the party estopped. Definition Trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property.
A person who establishes a trust is called the trustor. Implied Trusts a. 1441. C.[ C 2011 ] [ UP COLLEGE OF LAW ] 115 former entitling him to the performance of certain duties and the exercise of certain powers by the latter -a fiduciary relationship with respect to property subjecting the person holding the same to the obligation of dealing with the property benefit of another person B. 1448. 1457. D. Implied trusts come into being by operation of law. if the person to whom the title is Simoun Antonio Montelibano Salinas . Implied trusts come into being by operation of law. Form – Art. No particular words are required for the creation of an express trust. Express Trusts a. Express trusts are created by the intention of the trustor or of the parties. Acceptance by the beneficiary – Art. Trusts are either express or implied. -equity will not allow a trust to fail for want of a trustee is clearly established d. Governing rules – Art. The mere fact that these words are used does not necessarily indicate an intention to create a trust c. Kinds – Art. and the person for whose benefit the trust has been created is referred to as the beneficiary. Parties – Art. 1445. 1443. Trusts are either are created by the intention of the trustor or of the parties. and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. Trustee. . b. The former is the trustee. 1440. Trustor. while the latter is the beneficiary.2002-24124 . 1442. Beneficiary or cestui que . The principles of the general law of trusts. 1441. Proof required – Art. the Rules of Court and special laws are hereby adopted. Examples – Arts. which is held by the trustee for the beneficiary any interest therein may be proved by parol evidence. who establishes or creates trust 2. How established – Art. How proved – Art. An implied trust may be proved by oral evidence. No express trusts concerning an immovable or c. the person for whose benefit the property is held by the trustee 4. Want of trustee – Art. the Code of Commerce. However. it being sufficient that a trust is clearly intended. one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee.it is possible to create a trust without using the word ‘trust’ or ‘trustee’. 1. 1441 b. who holds the property in trust 3. 1444. Trust property. insofar as they are not in conflict with this Code. unless the contrary should appear in the instrument constituting the trust. 2. There is an implied trust when property is sold. No trust shall fail because the trustee appointed declines the designation. 1448-1456 Art. 1.
1451.2002-24124 Art. a trust arises by operation of law in favor of the person to whom the money is loaned or for whom its is paid. 1452. There is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee. the person obtaining it is. If the fulfillment of the obligation is offered by the grantor when it becomes due. it being disputably presumed that there is a gift in favor of the child. it being disputably presumed that there is a gift in favor of the child. If property is acquired through mistake or fraud. he nevertheless is either to have no beneficial interest or only a part thereof. he may demand the reconveyance of the property to him. When property is conveyed to a person in reliance upon his declared intention to hold it for. guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third person. 1454. Art. a trust is established by operation of law in favor of the person to whom the funds belong. When land passes by succession to any person and he causes the legal title to be put in the name of another. a trust is created by force of law in favor of the others in proportion to the interest of each. The latter may redeem the property and compel a conveyance thereof to him. If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee. there is an implied trust in favor of the person whose benefit is contemplated. 1453. 1450. Art. by force of law. Art. Art.[ C 2011 ] [ UP COLLEGE OF LAW ] 116 conveyed is a child. . 1455. -mutual mistake Why you must know the difference among trusts? -If the person to whom the title is conveyed is a child. Art. a trust by virtue of law is established. considered a trustee of an implied trust for the benefit of the person from whom the property comes. a trust is established by implication of law for the benefit of the true owner. or transfer it to another or the grantor. Art. of the one paying the price of the sale. 1456. Simoun Antonio Montelibano Salinas . legitimate or illegitimate. no trust is implied by law. When any trustee. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt. Art. no trust is implied by law. If two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all. 1449.