Obligations and Contracts: Sources 2006 Lectures of Atty.

Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009

OBLIGATIONS & CONTRACTS
Chapter 1Art. 1156. •

GENERAL PROVISIONS

An obligation is a juridical necessity to give, to do or not to do.

An incomplete definition because it only refers to the debt side; it only refers to the conduct to be observed by the obligor; there is no debt without credit.

o

Complete definition: A juridical relation between two persons, known as the creditor and debtor, whereby the former can demand from the latter the observance of a determinate conduct and in case of breach, may obtain satisfaction from the assets of the latter.

• •

Why is it a juridical necessity? Because the term, “juridical necessity” connotes that in case of noncompliance, there will be legal sanction. Note: It covers only civil obligations, not natural obligations. Characteristics of an Obligation: 1. 2. 3. It represents an exclusively private interest It creates ties that are by nature transitory It involves the power to make the juridical tie effective in case of non-fulfillment through an economic equivalent obtained from the debtor's patrimony.

Types of obligations:

a.

Civil obligations - those which derive their binding force from positive law, and can be enforced by court action or the coercive power of public authority. b. Natural obligations - refer to those which derive their binding force from equity and natural justice, and its fulfillment cannot be compelled by court action but depends exclusively on the conscience of the debtor. c. Moral obligations - are those which arise from moral law developed by the church and not enforceable in court. It deals with the spiritual obligation of a person in relation to his God and church ELEMENTS of an OBLIGATION CODE: A P O E

A.

Active subject (creditor, obligee)• Has the power to demand the prestation; it is he who in his favor the obligation is constituted, established or created; it is he who has the right to demand. Passive subject (debtor, obligor) • One who is bound to perform the prestation; passive because without the demand, there will be no action, he has to wait for the demand from the creditor. • Has the juridical necessity of adjusting his conduct to the demand of the creditor pursuant to the obligatory tie.

B.

NB: It is not necessary that the active/passive subject (also known as the personal elements of the obligation) be determinate at the time of the constitution, but they must at least be determinable. When the subject cannot be determined, the obligatory tie can have no effect.

The object or the prestation • The object is not a thing but a particular conduct of the debtor. It is the subject matter of the obligation which has an economic value or susceptible to pecuniary substitution in case of noncompliance. D. Efficient cause or juridical tie between the two subjects • The vinculum by which the debtor is bound to in favor of the creditor to perform the prestation. It is determined by knowing the sources of the obligation (Art. 1157) Note: Additional elements from RAM Notes: 5. Causa debendi/ obligationes (Castan).-- This is what makes the obligation demandable. This is the proximate why of an obligation.

C.

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Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009

6.

Form.-- This is controversial. This is acceptable only if form means some manifestation of the intent of the parties.

KINDS OF PRESTATION:

a. b.

“to give” consists of the delivery of a movable or immovable thing which is either determinate (specific) or indeterminate (generic). This is in order to create a real right, or for the use of the creditor, or for its simple possession, or in order to return to its owner. “to do” involves all kinds of work or services whether physical or mental, but in most cases the essence of the act man not be such, but merely the necessity of concluding a juridical operation, such as, when a person promises to give a bond. “not to do” is a negative obligation which consists of abstaining from some act, it includes “not to give”.

c.

REQUISITES OF PRESTATION 1. 2. 3. it must be physically and juridically possible; it must be determinate or at least determinable according to pre-established elements or criteria; it must have a possible equivalent in money or a pecuniary value. (why: so in case of breach, one can demand damages)

a. b. c. d. e.

Article 1157 – Sources of obligation Law; Contracts; Quasi-Contracts; Crimes; Quasi-delicts; • The enumeration of the sources of obligation is exclusive; no obligation exists if its source is not one of those enumerated above.

Note: 1. Unilateral promise is admitted by modern doctrine, which recognizes that unilateral engagements may give rise to obligations without the need of acceptance. 2. Contrary to Pineda, Tolentino supports that it cannot be said with certainty that the enumeration in this article is exclusive because there is nothing which expressly precludes other sources of obligation, such as the unilateral promise to the public of an award for a certain act or accomplishment. 3. The clear implication of Sagrada Orden vs. Nacoco is that, these five (5) are the only sources of obligations.

Articles 1158 - 1162 specify the general principles regarding the sources of obligation enumerated in Art. 1157. 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. Note: When we say that law is an independent source of obligation, it does not mean that law and human acts exclude each other completely. The law cannot exist as a source of obligation, unless the acts to which its principles may be applied exists. But once those acts exist, the obligations arising from them by virtue of law are entirely independent of the agreement of the parties. NB: When the law merely acknowledges the existence of an obligation generated by an act which constitutes a contract, quasi-contract, delict or quasi-delict, and its only purpose is to regulate such obligation which did not arise from it, the act itself is the source of obligation and not the law. But, when the law creates the obligation, and the act upon which it is bases is nothing more that a mere factor in determining the moment when it becomes demandable, then the source of obligation is the law itself. (i.e. a husbands’ obligation to his spouse is not anchored upon the contract of marriage but on the law which dictates it.) Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

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Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009


Known as the Principle of autonomy of will. The parties can stipulate anything (they have the freedom), provided that the terms of the contract are not contrary to law, public policy or public order. Contracts are perfected by mere consent, 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 according to their nature, may be in keeping with good faith, usage and law. Since a contract has the force of law between parties, each is bound to fulfill what has been expressly stipulated therein. does not apply to attorney’s contracts: courts can decide whether or not attorney’s fees are reasonable. Art. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII,of this book.

A quasi-contract is a juridical relation which arises from certain lawful, voluntary and unilateral act/s executed by somebody for the benefit of another and for which the former must be indemnified to the end that no one shall be enriched or benefited at the expense of another; It is a kind of contract created without the consent of one party but whose missing consent is given by law (presumptive consent). Characteristics of a Quasi-Contract The acts executed must be lawful The acts executed must be voluntary The acts executed must be unilateral TWO PRINCIPLE TYPES:

• a. b. c.

1.

NEGOTIORUM GESTIO- (officious manager) juridical relation which takes place when somebody takes charge of the agency or management of the business or property of another without any power form the latter. The owner shall reimburse the gestor for the necessary and useful expenses incurred by the latter, and for the damages suffered by him in the performance of his functions.

2.

SOLUTIO INDEBITI – a juridical relation which takes place when somebody received something from another without any right to demand for it, and the thing was unduly delivered through mistake (compared to Art. 22 or unjust enrichment wherein there was no mistake). Obligation to return the thing arises on the part of the recipient. 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. • Basis is Article 100 of RPC, that every person criminally liable is also civilly liable 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. Chapter 2- NATURE AND EFFECT OF OBLIGATIONS Art. 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. • • • Refers to the obligation to give. The obligation to give may refer to a determinate object / thing or to an indeterminate or generic thing. A generic thing/ indeterminate thing is one that is indicated by its kinds, without being designated and distinguished from the others of the same kind. In an obligation to deliver a generic or indeterminate thing, the thing is determinable and becomes determinate from the time the obligation has been fulfilled or performed. A generic thing is something which is not particularized or specified but has reference to a class or genus. A limited generic obligation is one when a the generic objects are classified to a particular class, i.e. one of my cars A Determinate thing is something which is susceptible of particular designation or specification. It is one which is individualized and can be identified or distinguished form the others of its kind.

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Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009

Read in relation to Art. 1173 - 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, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply. Effect of breach: Liability for damages, unless the loss or damage of the thing is due to a fortuitous event. Art. 1164.The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him.


Delivery is essential to acquire real right1. WHEN DOES OBLIGATION TO DELIVER ARISE? a. b. Perfection of contract if no term/condition; From the moment the term/condition arrives if there is a term

• The creditor has a right to the fruits of the thing from the time to deliver it arises. The fruits referred involve only determinate things.

1) Natural 2) Civil 3) Industrial • The moment when the obligation to deliver arises varies in different types of obligations:

Kinds of fruits: (cf: Property)

a.

In obligations arising form law, quasi-delicts, quasi-contracts and crimes, the specific provisions of law applicable to the obligation determine when the delivery should be made. b. Suspensive conditions attached to an obligation to deliver arises only form the moment the condition happens. c. Suspensive periods agreed upon for the performance of the obligation gives rise to its delivery only upon the expiration of the term. d. Pure obligations are immediately demandable

• The right to the fruits of the thing shall only be personal, and only upon the delivery of the thing, its fruits, accessory and accession shall the creditor acquire a real right over it. • Classes of Delivery or Tradition:

a.

REAL or ACTUAL tradition- This contemplates the actual delivery of the thing from the hand of the grantor to the hand of the grantee , if it is a personal property. If it is a real property, it is manifested by certain possessory acts executed by the grantee with the consent of the grantor such as by taking over the property; occupying the property.

b.

CONSTRUCTIVE tradition- when the delivery of the thing is not actual but representative or symbolical in essence. But there must be intention to deliver the ownership. • Kinds of CONSTRUCTIVE TRADITION:

1

REAL right- is the power belonging to a person over a specific thing, without a passive subject individually determined, against whom such right may be personally exercised. It gives to a person a direct and immediate juridical power over a thing, which is susceptible of being exercised against the whole world. There is a need for tradition or delivery since from the time the obligation to deliver a determinate thing arises, the creditor has only a personal right. He can only demand that the debtor deliver such thing and its fruit. The delivery or tradition of a thing constitutes a necessary and indispensable requisite for the purpose of acquiring ownership. The ownership of things is transferred not by mere agreements but by delivery.

4

Indeterminate thing is however not General Rule: extinguished. When what is to be delivered is a determinate thing. 1156. Lydia Galas (Hann Sevilla). iv. Specific performance is available even if the thing to be delivered is indeterminate.consists in the delivery of incorporeal property. Tradicion Longa Manu – consists in the pointing to a movable property within sight by the grantor to the grantee but which at the time of the transaction. Obligation to deliver a specific thing is extinguished by fortuitous event. 2. Resolution of the contract under Art. Art.Obligations and Contracts: Sources 2006 Lectures of Atty. Tradicion Symbolica. Indeterminate or generic thing REMEDIES OF CREDITOR REMEDY Creditor may compel debtor to deliver Creditor may ask for compliance at the expense of the debtor a. in addition to the right granted to him by article 1170. Book of Tolentino. b. Damages exclusively or in addition to either of the first actions. v. Ferlyn Ong for 4th year Batch 2009 i. d. Determinate thing 2. iii. Rescission of the obligation which is under Art. Christ May Andolana. 1191 if it is a reciprocal obligation. c. or has promised to deliver the same thing to 2 or more persons who do not have the same interest. the thing could not be placed yet in the possession of the grantee. Tradicion by operation of law – consists in the delivery of the thing by operation of law such as intestate succession Quasi-Tradicion. ii. 1166. (Jovellanos) Tradicion Constitutum Possessorium – consists in the owner’s continuous possession of the property he had sold to another person and his present possession thereof is no longer that of the owner but of a lessee. may compel the debtor to make the delivery. he may ask that the obligation be complied with at the expense of the debtor. Obligor is guilty of bad faith. vi. the creditor. Art. RULES: OBLIGATION TO DELIVER 1. If a person obliged to do something fails to do it. RAM Notes Compiled by: Hanniyah Sevilla. If the obligor delays. Tradicion Instrumental – consists in the delivery of the instrument of conveyance to the grantee by the grantor. vii. If obligor delays or in default. Demand for specific performance . titles.delivery of certain symbols or things representing the thing to be delivered such as keys. 1380. the shall be executed at his cost. 2007 Case Digests (from Erwin Vicente).This action presupposes that it is based on a contractual relationship between the contending parties. 5 . Obligation to give a determinate thing includes that of delivering all its accessions and accessories. Art. even though they may not have been mentioned. 1167. he shall be responsible for any fortuitous event until he has effected the delivery. Tradicion Brevi Manu – consists in the grantee’s continuation of his possession over the thing delivered but now under a title of ownership as in case of a lessee who had purchased the property leased to him. If the thing is indeterminate or generic. Exceptions: 1.

When the time for the fulfillment of the obligation is fixed. COMPESATIO MORAE – default on the part of both parties in reciprocal obligations • • • I. c. d. it shall also be undone at his expense. RAM Notes Compiled by: Hanniyah Sevilla. However. he fulfilled the obligation but in contravention of the agreement. the doubt is resolved in favor of the debtor. Note: if any of the above happens. • • Note: The demand must refer to the prestation due and not to another. obligations to do) B. c. b. however. even if a period has been fixed in the obligation. where the law so provides. When the obligation consists in not doing and the obligor does what has been forbidden him. neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. when demand would useless. Christ May Andolana. Ferlyn Ong for 4th year Batch 2009 This same rule shall be observed if he does it in contravention of the tenor of the obligation. 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 • Demand is generally necessary. b. when there is an express stipulation between the parties to that effect. e.Obligations and Contracts: Sources 2006 Lectures of Atty. the obligation is determinate or liquidated. even if the demand had been absolutely correct. Remedies: 1. 2007 Case Digests (from Erwin Vicente). the obligation pertains to the debtor or obligor. there will still be delay even if the demand was wrong if: 1. there is still a need for demand. REASON: because the dispensing of demand is only an exception. when the obligor admits he is in delay In reciprocal obligations. MORA SOLVENDI – default on the part of the debtor which may either be ex re (real obligations. Art. obtain damages. it may be decreed that what has been poorly done be undone. Even in obligations where there is an acceleration clause. • have obligation executed at debtor’s expense. by himself or by a third person. KINDS OF DELAY: A. delay by the other begins. 2. The court has no discretion to merely award damages to the creditor when the act can be done in spite of the refusal or failure of the debtor to do so. but this knowledge is essential in order that it can be said that the debtor has tacitly consented to incur delay without the necessity of delay. 1169. due and demandable. In case of doubt on whether the debtor has incurred delay. the creditor is entitled to have the thing done in a proper manner. or 2. at the expense of the debtor. if the prestation can be done only by the debtor. MORA ACCIPIENDI – default on the part of the creditor C. The law does not require expressly that the debtor should know that the fixing of the date for the performance was a controlling motive on the part of the creditor. obligations to give) or ex persona (personal obligations. 1168. Thing may be ordered undone if done poorly or obligation is a negative one This article presupposes that the thing can be done by the creditor himself or a third person. in the light of good faith he should have offered the prestation in the form and manner that it is due. no further demand is necessary. when time or period is the controlling motive or the principal inducement for the creation of the obligation. it is not a general rule. 6 . There was fulfillment but the same was poor or inadequate. Book of Tolentino. a. From the moment one of the parties fulfills his obligation. Art. MORA SOLVENDIREQUISITES FOR MORA SOLVENDI TO EXIST: 1. 2. • Coverage: the obligor failed to fulfill a positive personal obligation. Furthermore. that is TO DO something. Lydia Galas (Hann Sevilla). the only recourse available to the creditor is a claim for damages since it is against the constitution to force the debtor to perform the obligation. • INSTANCES when demand by Creditor not necessary in order that delay may exist: a. the debtor would not have performed the obligation.

CESSATION OF THE EFFECTS OF DELAY: (may the right to place the debtor in delay be renounced or waived? Yes. negligence. 2. default. There is implied renunciation when the creditor. the default of one compensates the default of the other. The effects of delay was not applied since there was a waiver on the part of Tayag when she accepted the payments even after the due date) 2. 3. 7. o Delay begins when one party fulfills his obligation. the obligation has not been performed on its maturity date. Damages: MENTAL Indemnity for damages consists of: a. that agreed upon. 4. b. 2. III. negative obligations CONSEQUENCES/EFFECTS OF MORA SOLVENDI: 1. Prescription Art. Leyva case. o When one party does not fulfill his obligation. the creditor refuses the performance without just cause CONSEQUENCES OF MORA ACCIPIENDI 4. 6. and 4. grants an extension of time to the debtor or agrees to a novation of the obligation. RAM Notes Compiled by: Hanniyah Sevilla.Obligations and Contracts: Sources 2006 Lectures of Atty. 1. COMPENSATIO MORAE – applies only in reciprocal obligations. 5. Ferlyn Ong for 4th year Batch 2009 3. 2. violation of terms of obligations. the debtor is exempted from the risks of loss of the thing.delay in the performance of the obligation based on the omission by the creditor of the necessary cooperation. and that he can perform. 1171. or delay and those who in any manner contravene the tenor thereof. Where the parties are both guilty of mora or mutual default. all expenses incurred by the debtor for the preservation of the thing after the mora shall be chargeable to the creditor. the debtor may relieve himself from the obligation by consignation of the thing. (remember Tayag vs. 7 . How: ) 1. which may be implied or expressed. are liable for damages. an offer of performance by the debtor who has the required capacity. legal rate of interest. in absence of agreement. debtor may be liable for damages or interests. DOES NOT APPLY IN THE FF. GROUNDS FOR LIABILITY: 1. which automatically pass to the creditor. 3. MORA ACCIPIENDI. the responsibility of the debtor for the thing is reduced and limited to fraud and gross negligence. who therefore does not become delinquent in the fulfillment. 1170. o Neither party incurs delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. especially in acceptance on his part. negligence. Any waiver of an action for future fraud is void. Book of Tolentino. Fraud. Responsibility arising from fraud is demandable in all obligations. Lydia Galas (Hann Sevilla). he releases the other from his obligations. debtor may bear the risk or loss of the things even if the default is due to fortuitous event. OBLIGATIONS: natural obligations. the offer must be to comply with the obligation as it should be performed. Christ May Andolana. Art. REQUISITES FOR MORA ACCIPIENDI TO EXIST 1. even after the delay. 2. it is necessary that it be lawful for the debtor to perform. 2007 Case Digests (from Erwin Vicente). Renunciation by the creditor. II. subject to equitable mitigation if the loss would have still occurred even if there was no default on the part of the debtor. there is a demand made by the creditor on the debtor for the fulfillment of the obligation that is due. Those who in the performance of their obligations are guilty of fraud.

shall apply. 3. Prudential Bank cases Art. 2007 Case Digests (from Erwin Vicente). it was not impossible for PAL to foresee the hijacking of the airplane. were inevitable. in the absence of #1. or when the nature of the obligation requires the assumption of risk. that required by law. Art. 1173. it was inevitable to avoid Although under normal circumstances. Culpa Contractual 1.same Defense of a good father of a family Prove that defendant is negligent Culpa Criminal N is direct. No pre-existing obligation. paragraph 2. negligence is incidental. substantive No pre-existing obligation except not to harm others Guilt beyond reasonable doubt ER’s guilt. 3. The cause of the unforeseen and unexpected occurrence. (cases) SABEDA airlines. or which. in absence of #2. ELEMENTS OF FORTUITOUS EVENT: 1. When negligence shows bad faith. Responsibility arising from negligence in the performance of every kind of obligation is also demandable. In the case of PAL. DILIGENCE REQUIRED: 1. that which is expected of a good father of a family shall be required. 2.civilly liable in case of insolveny Presumption of innocence until contrary is proved. Culpa Criminal – criminal negligence that which results in commission of crime or a delict. . or if it can be foreseen. embarrassment and humiliation. that expected of a good father of a family. Hence. preponderance of evidence 4.Except in cases expressly specified by the law. While in the case at bar there was no bad faith. Culpa Aquiliana N is direct. 8 . no person shall be responsible for those events which could not be foreseen. respondent still suffered anxiety. or of the debtor’s will. CA: responsibility from negligence in the performance of every kind of obligation is demandable. 2. entitle to recover (moral) damages.Obligations and Contracts: Sources 2006 Lectures of Atty. but such liability may be regulated by the Courts. though foreseen. oblig. o o General Rule: Fortuitous events absolve Obligor from liability. KINDS: 1. RAM Notes Compiled by: Hanniyah Sevilla. according to the circumstances. Ferlyn Ong for 4th year Batch 2009 Art. If the law or contract does not state the diligence which is to be observed in the performance. substantive independent. or when it is otherwise declared by stipulation. of the time and of the place. the provisions of articles 1171 and 2201. 3. Christ May Andolana. there is a contract and Case: Prudential Bank vs. tort or quasi-delict. Book of Tolentino. Culpa Contractual – breach of contract Culpa Aquiliana – civil negligence. 1172. 1174. that agreed upon by parties. 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. there is pre-existing obligation. the hijacking was independent of the will of PAL. It must be impossible to foresee the event which constitute the caso fortuito. Lydia Galas (Hann Sevilla). 2. the military take over that took place that afternoon rendered the foreseeability of the event as impossible since it was the army already conducting the checking and frisking. or the failure of the debtor to comply with his obligations must be independent of the human will. Existscontract 2. master-servant rule 5.

When the obligor has promised the same thing to two or more persons who do not have the same interest (Art.Obligations and Contracts: Sources 2006 Lectures of Atty. Art. Subject to the laws. 2. shall give rise to the presumption that said interest has been paid. 9 . The receipt of a later installment of a debt without reservation as to prior installments shall likewise raise the presumption that such installments have been paid. o ASSUMPTION OF RISKS: (doctrine of created risk) The exception is based on social justice: If a person. The creditors. 5. The obligor must be free from any participation in. if there has been no stipulation to the contrary. 1178. or that it had a good brand name. impugn/rescind acts or contracts done by debtor to defraud them. for his convenience or profit. but also when it is due to the act of the creditor himself. Rule: All rights acquired in virtue of an obligation are transmissible. When the obligor contributed to the loss of the thing during the fortuitous event. When the nature of the obligation requires the assumption of risk. Ferlyn Ong for 4th year Batch 2009 Note: In the case of PHILCOMSAT v Globe: the SC held that although the parties could have foreseen the closure of the military bases. creates risks for the public which formerly did not exist. CA: Even if the tires are new. When the obligor is guilty of fraud. or aggravation of. Art. Lydia Galas (Hann Sevilla). 6. 3. they may also impugn the acts which the debtor may have done to defraud them. The occurrence must be of such as to render it impossible for the debtor to fulfill his obligation in a normal manner. save those which are inherent in his person. (1112) Gen. (1111) Rights of Creditors: 1. RAM Notes Compiled by: Hanniyah Sevilla. Moreover. 7. EXCEPTIONS: (when obligor is still liable even if there is a fortuitous event) 1. 3. 1177. a common carrier may not be absolved from liability in case of force fortuitous event alone. The common carrier must still prove that it was not negligent in causing the death or injury resulting from an accident. The obligor is released from liability no only when the non-performance of the obligation is due to fortuitous events. When the possessor is in bad faith and the thing is lost or deteriorated due to a fortuitous event. 4. Usurious transactions shall be governed by special laws. negligence or delay or if he contravened the tenor of the obligation. exact payment. Case: Yobido vs. Petitioners should have shown that it undertook extraordinary diligence in the care of its carrier. 2007 Case Digests (from Erwin Vicente). although morally his fault or negligence may not be the cause of the damages resulting therefrom. 3. When the law so provides. 1175. When it is expressly stipulated by the parties. all rights acquired in virtue of an obligation are transmissible. Art. When the obligor is in delay already. it is settled that all accident caused either by defects in the automobile Or through the negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages. it is only equitable that he should bear the consequences of such loss. after having pursued the property in possession of the debtor to satisfy their claims. The receipt of the principal by the creditor without reservation with respect to the interest. may exercise all the rights and bring all the actions of the latter for the same purpose. it was impossible to avoid. If he benefits from the means that have produced the loss. 4. he should nevertheless be held liable for such. Note: o o o An obligation consisting of the delivery of a specified thing shall be extinguished when the said thing shall be lost or destroyed without the fault of the obligor and before he is in default. the injury resulting to the creditor. 1165). 4. 1176. (n) Art. 8. 2. exhaust debtor’s properties generally by attachment. Christ May Andolana. subrogatory action – exercise all rights and actions except inherent rights. such as defective packing. Book of Tolentino. such as conducting daily routinary check-ups of the vehicle's parts.

those not transmissible by law or by stipulation of the parties. The condition must be imposed by the will of a party and must not be a necessary legal requisite of the act. INSTANCES WHEN AN OBLIGATION IS DEMANDABLE AT ONCE: a. The element of futurity and uncertainty must concur. and b. when it is pure. Ferlyn Ong for 4th year Batch 2009 Exceptions: 1. Art. Example: I will pay you 1.happening of event/condition gives rise to obligation. if law provides otherwise. POTESTATIVE – depends upon the will of the debtor. In past events.is an uncertain event w/c wields an influence on a legal relation. it is immediately demandable and there is nothing to exempt the debtor from compliance therewith. C. if contract provides otherwise. CASUAL – depends on chance/will of a 3rd person. SUSPENSIVE . Christ May Andolana. Lydia Galas (Hann Sevilla). 3. CONDITIONAL – with a condition CONDITION. 2007 Case Digests (from Erwin Vicente). i. especially after a valid demand. those not transmissible by their nature. b. is demandable at once. CLASSIFICATION OF CONDITIONS A. the contract or obligation arises not when the event happened or the fact came into existence. if obligation is purely personal Note: The exceptions refer to: a. 10 . when it has resolutory condition. or upon a past event unknown to the parties. TERM – is that w/c necessarily must come whether the parties know when it will happen or not. which would be in the future.000 if the number of people who died in the 9/11 attack exceeds 2. 1179. without prejudice to the effects of the happening of the event. o PAST EVENTS can be conditions too.Obligations and Contracts: Sources 2006 Lectures of Atty.Pure and Conditional Obligations PURE AND CONDITIONAL OBLIGATIONS: o Condition: An event which is both future and uncertain upon which the existence or extinguishment of an obligation is made to depend. Book of Tolentino. B. not the event itself. MIXED – depends partly on will of 3rd person and partly on chance. RESOLUTORY – happening of event/condition extinguishes the obligation. Every obligation whose performance does not depend upon a future or uncertain event.e. DIVISIBLE – capable of partial fulfillment. but when the proof of such fact or event is presented.000. (1113) o Kinds of Obligations: a. he is placed in default. Every obligation which contains a resolutory condition shall also be demandable. PURE . b. purely personal rights. RAM Notes Compiled by: Hanniyah Sevilla. 2. If the debtor does not fulfill his prestation. INDIVISIBLE – not capable of partial fulfillment.When the obligation contains no term or condition whatever upon which depends the fulfillment of the obligation contracted by the debtor. The futurity required in past events is the future knowledge or proof of a past event unknown to the parties. . CHAPTER 3 DIFFERENT KINDS OF OBLIGATIONS SECTION 1.

1181. is to sanction illusory obligations. Case: Padilla vs. Pure potestative conditions renders the whole obligation void. covers cases wherein the debtor binds himself to pay when his means permit him to do so. This is because the creditor is naturally interested in the fulfillment of the condition which will benefit him. Paredes: there was no obligation to perform since the suspensive condition did not happen. the acquisition of rights. b. as well as the extinguishment or loss of those already acquired. it is valid. (1114) a. subject to the provisions of article 1197. In conditional obligations. The happening of w/c will give rise to the acquisition of a right – future & uncertain event. RAM Notes Compiled by: Hanniyah Sevilla. c. Potestative (facultative) Casual Mixed POTESTATIVE ON THE PART OF THE DEBTOR 1. 1180. 2. b. (1115) 3 KINDS OF CONDITIONS a. the creditor should file an action to fix a period for the payment of the obligation. An action to enforce the obligation is premature if the court has not yet fixed a period. HOW LONG? Article 1180. When the debtor binds himself to pay when his means permit him to do so.conditions subsequent – rights are lost once the condition is fulfilled. as soon as I have the money. Lydia Galas (Hann Sevilla). POSITIVE – an act is to be performed NEGATIVE – something will be omitted. the moment of payment is dependent upon the will of he debtor but not the payment. ALTERNATIVE – if only a few of the conditions have to be performed. such as “I’ll pay you little by little. in partial payments ” Here. IF RESOLUTORY – valid. IF SUSPENSIVE – both condition and obligation are void. COURTS will fix the duration of the period. 1197.read in relation with Art. E. When the fulfillment of the condition depends upon the sole will of the debtor. the conditional obligation shall be void. this cannot happen when the fulfillment depends on the will of the creditor. o If it depends solely on the will of the creditor. (n)   payment does not depend on debtor’s will for he has promised to pay. in cases falling under this article. (or not the performance of the condition) Art.Obligations and Contracts: Sources 2006 Lectures of Atty. Ferlyn Ong for 4th year Batch 2009 D. Q: What does automatically/immediately demandable mean? A: Immediate demandability is not impaired when the performance of the obligation is allotted a reasonable time by the court. TIME when payment is to be made depends upon the DEBTOR. 2007 Case Digests (from Erwin Vicente). shall depend upon the happening of the event which constitutes the condition. 11 . Suspensive – conditions precedent/antecedent. as soon as possible. the obligation shall be deemed to be one with a period. Potestative and resolutory valid since there is immediate performance on the part of the obligor. It does not imply immediate instantaneous compliance. If it depends upon chance or upon the will of a third person. Reason: to allow conditions whose fulfillment depends exclusively on the debtor’s will. Book of Tolentino. CONJUNCTIVE – if all the conditions must be performed. Art. Art. Resolutory -. o This article applies only to potestative SUSPENSIVE CONDITIONS. the obligation shall take effect in conformity with the provisions of this Code. Christ May Andolana. 1182.

bearing in mind the nature of the obligation. 2. Art. (1117) . and also to POSITIVE SUSPENSIVE CONDITIONS. If the obligation is divisible. 3. those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. may in some way be prevented by the debtor from happening. 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. The criterion is the effects upon one of the parties.positive condition Effect if Period of Fulfillment is not fixed: the Court considering the parties intentions should determine what period was really intended. thus as if no condition exists. the condition shall be deemed fulfilled at such time as may have probably been contemplated. Note: o o o If condition is to do an impossible or illegal thing – CONDITION & OBLIGATION ARE VOID. o NEGATIVE SUSPENSIVE CONDITIONS have the effect of converting the obligation into a pure and simple one. The mere mention of a juridically impossible condition does not annul the obligation.Obligations and Contracts: Sources 2006 Lectures of Atty. 2007 Case Digests (from Erwin Vicente). The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place. Art. Lydia Galas (Hann Sevilla). The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. 1184. 12 . In order for the condition to be considered as illicit or juridically impossible. 1183. (1119) Requisites: 1. EXCEPTION: if in preventing the fulfillment of the condition the debtor acts pursuant to a right. There is constructive fulfillment only if the act of the debtor had in fact prevented compliance with the condition. If condition is negative (not to do) DISREGARD CONDITION BUT OBLIGATION REMAINS. Impossible conditions. It is simply considered not written. 1186. Christ May Andolana. Ferlyn Ong for 4th year Batch 2009 Art. Book of Tolentino. The condition must already be existing at the time of the creation of the obligation. RAM Notes Compiled by: Hanniyah Sevilla. Actual prevention of compliance. If condition is negative (not to do an illegal thing) BOTH CONDITION & OBLIGATION ARE VALID. although not exclusively within the will of the debtor. and manifests that he does not have any intention to be bound. The condition not to do an impossible thing shall be considered as not having been agreed upon. that part thereof which is not affected by the impossible or unlawful condition shall be valid. Example: B ordered A to stop building because it was against the city ordinance. 2. Supervening events which would render the obligation no longer impossible does not affect the effect of annulling the obligation. If no time has been fixed. or if it has become evident that the event cannot occur. 1185. it must consist of an act or fact for one of the parties. o Reason: one who promises something under a condition that is impossible or illicit knows that it cannot be fulfilled. Voluntarily made – the intent to prevent is present. the condition will not be deemed fulfilled. This article applies only to cases where the conditions was already impossible from the time of the constitution of the obligation. (1116a) EFFECTS: 1. – Negative Condition Art. Note: This refers to Constructive Fulfillment/ Implied fulfillment o o o Applies to a condition which.

b. – the debtor shall appropriate the fruits and interests received UNLESS from the nature of the obligation it should be inferred that the intention of person was different. - 13 . once fulfilled. the courts shall determine. Note: If condition is fulfilled – NO RECOVERY If condition is not fulfilled. when the obligation imposes reciprocal prestations upon the parties. Cause of action accrues. The effects of a conditional obligation to give. His only recourse is damages against the debtor. (1121a) APPROPRIATE ACTIONS FOR CREDITOR TO PRESERVE HIS RIGHTS: a. Before the happening of the suspensive condition. - 2nd Par: a case of solutio indebiti (undue payment) if creditor is in bad faith. 2007 Case Digests (from Erwin Vicente). to give. shall be deemed to have been mutually compensated. If the obligation is unilateral. and prescription is computed from this time. c. action to demand security in case the debtor becomes insolvent. the debtor cannot alienate the subject property if it is a determinate thing. the creditor cannot enforce the obligation. he may be compelled to deliver the thing to the creditor. Nevertheless. if real property is involved. the debtor shall appropriate the fruits and interests received. In reciprocal oblig. the retroactive effect of the condition that has been complied with. Christ May Andolana. Reason: suspensive conditions are merely accidental to the obligation. Case: DBP vs. The suspensive condition only prevents the efficacy of the obligation. action for prohibition restraining the alienation of the thing pending the happening of the condition petition for the annotation of the creditor’s right. before the fulfillment of the condition. Creditors can however. shall retroact to the day of the constitution of the obligation. Ferlyn Ong for 4th year Batch 2009 Art. CA Limitations to retroactivity: the right to the fruits or interests of the thing accruing before the happening of the condition. In Obligation to do or not to do – the Court shall determine the retroactive effect of condition that has been complied with. In obligations to do and not to do. bring the appropriate actions for the preservation of his right. CAN THERE BE RECOVERY? a. (1120)     In conditional oblig. The right of the creditor during the period is mere expectancy. in each case. Book of Tolentino. An obligation is deemed constituted when all the necessary elements are present. 1188. d. (Jovellanos case: The right of Daniel to the property was merely inchoate and expectant right which would ripen into a vested right only upon his acquisition of the ownership) The moment the suspensive condition happens. action to set aside alienations made by the debtor in fraud of the creditors. alienate their inchoate right. unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. once the condition has been fulfilled. RETROACTS to the moment of constitution of such obligation. the right becomes enforceable and the debtor may be compelled to perform the obligation. unless otherwise stipulated by the parties. – the fruits and interests during the pendency of condition. RAM Notes Compiled by: Hanniyah Sevilla. the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. they are not essential elements of the obligation. however. However. 1187. The EFFECTS. debtor is entitled to fruits and interests. if there was bad faith on the part of the 3rd person. Art. IF PAYMENT WAS NOT BY MISTAKE. Remember: between the constitution and the happening of the suspensive condition. shall retroact to the day of the constitution of obligation. The creditor may. the creditor cannot reclaim the property as the delivery of the thing vests ownership. there should be recovery EXCEPT when a pure donation was intended. In unilateral oblig. Lydia Galas (Hann Sevilla). The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition. If the obligor alienated the determinate property to a 3rd person (good faith on part of the 3rd person). b.Obligations and Contracts: Sources 2006 Lectures of Atty.

even after he has chosen fulfillment. (1122) Article applies if: a. upon the fulfillment of said conditions. payment was made with the knowledge of the condition. apply Art. 1189. (2) If the thing is lost through the fault of the debtor. (6) If it is improved at the expense of the debtor. are laid down in the preceding article shall be applied to the party who is bound to return. with respect to the debtor. with the payment of damages in either case. Art. 1191. The injured party may choose between the fulfillment and the rescission of the obligation. (1123) EFFECTS WHEN RESOLUTORY CONDITION IS FULFILLED: 1. RAM Notes Compiled by: Hanniyah Sevilla. the impairment is to be borne by the creditor. deterioration. b. As for the obligations to do and not to do. (physical loss) or b. deterioration or improvement of the thing. he shall have no other right than that granted to the usufructuary. If however. there is an implied waiver of the condition and what has been paid cannot be recovered. suspensive condition is fulfilled. (legal loss) or c. 2. Parties shall return what they have received. if the latter should become impossible. Art. No express provision regarding fruits and interests. the parties. the provisions of the second paragraph of article 1187 shall be observed as regards the effect of the extinguishment of the obligation. the provisions which. loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor. and if object is specified (not generic) Art. 3. 2007 Case Digests (from Erwin Vicente). disappears in such a way that its existence is unknown or it cannot be recovered. Ferlyn Ong for 4th year Batch 2009 - If payment was a determinate thing. Lydia Galas (Hann Sevilla). (4) If it deteriorates through the fault of the debtor. in case one of the obligors should not comply with what is incumbent upon him. or improvement. It is understood that the thing is lost: a. In case of the loss. shall return to each other what they have received. Courts shall determine the retroactivity of resolutory conditions In case of loss. 1190. the cause of action is accion revindicatoria. goes out of commerce.Obligations and Contracts: Sources 2006 Lectures of Atty. Obligation is extinguished. 1189. or by time. He may also seek rescission. including fruits & interests. The power to rescind obligations is implied in reciprocal ones. there can be recovery by the provisions of solution indebiti. with indemnity for damages in either case. the following rules shall be observed in case of the improvement. however. otherwise the provisions of solution indebiti applies. (5) If the thing is improved by its nature. when it perishes. the creditor may choose between the rescission of the obligation and its fulfillment. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give. 14 . (civil loss) (3) When the thing deteriorates without the fault of the debtor. Christ May Andolana. 4. Book of Tolentino. the obligation shall be extinguished. When the conditions have for their purpose the extinguishment of an obligation to give. the improvement shall inure to the benefit of the creditor. he shall be obliged to pay damages.

If there’s no delivery. no actions can be done before the expiration of period. This article does not apply when the parties made a stipulation providing for the automatic rescission of the contract in case of violation of the terms thereof without need of judicial intervention or permission. Case: “Failure to pay. Lydia Galas (Hann Sevilla). When the obligor cannot comply with what is incumbent upon it. It is not enough that both parties are creditor and debtor or each other. The breach contemplated in the said provision is the obligor’s failure to comply with an existing obligation. Case: Velarde vs. his failure to do so brought about a situation which prevented the obligation of respondent spouses to convey title from acquiring an obligatory force. the obligee may seek rescission and. he can demand the accrued rent plus the future rent for the unexpired term. he gets only the back rents and ouster the lessee plus damages but not future rents. If there is a fixed period. 3. but not because of a breach on the part of petitioner for failure to complete payment of the purchase price. the right to rescind may be waived expressly or impliedly DAMAGES FOR BREACH OF LEASE CONTRACT: If he selects specific performance as an action. not absolute  slight breach is not sufficient as held in Tayag vs. willing and able to comply with his own obligations while the other is not capable to perform his own. 2007 Case Digests (from Erwin Vicente). The right of rescission of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them. Hence. or ask for the resolution of the contract. Note: This article is applicable only to reciprocal obligations. 4. and in which each party is a debtor and a creditor of each other. CA) Case: Padilla vs. Rather. is not even a breach but merely an event which prevents the vendor's obligation to convey title from acquiring binding force. in this instance. Even if there is no corresponding agreement between the parties. Book of Tolentino. o a) b) It exists only in reciprocal obligations. the law provides for such power to rescind. (1124) CHARACTERISTICS OF RIGHT TO RESCIND 1. “Rescission” here is to be understood as “resolution” or cancellation of the contract. willing and able to comply with his own obligation and the other is not. not a failure of a condition to render binding that obligation. They are to be performed simultaneously. RAM Notes Compiled by: Hanniyah Sevilla. in accordance with articles 1385 and 1388 and the Mortgage Law. 2. If lessor demands rescission. it needs judicial approval in some cases – when there has already been delivery of thing. - - - - 15 . Reciprocal obligations are those which arise from the same cause. CA: when Padilla chose to rescind the contract. Who can demand rescission: The party who can demand rescission should be the party who is ready. the reciprocity in the obligation must arise from the same cause. These remedies/choices are mutually exclusive. in the absence of any just cause for the court to determine the period of compliance. the court shall decree the rescission. unless there be just cause authorizing the fixing of a period. CA. so that the performance of one is conditioned upon the simultaneous fulfillment of the other. When one party fails to comply with his obligation under a contract. the contract stipulates for rescission in case the other has not performed. One cannot choose specific performance then rescission. the other party has the right to either demand performance. (Ong vs. such that the obligation of one is dependent upon the obligation of the other. This is understood to be without prejudice to the rights of third persons who have acquired the thing. There can be no breach of a non-existent obligation. 5. Ferlyn Ong for 4th year Batch 2009 The court shall decree the rescission claimed. The breach contemplated is the obligor’s failure to comply with an obligation already existing.Obligations and Contracts: Sources 2006 Lectures of Atty. can be demanded only if the plaintiff is ready. considering that the suspensive condition has not yet happened. Christ May Andolana. the agreement of the parties in the case at bench may be set aside. A party who has not performed his pat of the obligation cannot rescind. 6.The right to rescind is not absolute and will not be granted if there has been substantial performance by partial payments. Paredes : There can be no rescission of an obligation that is non-existent. if there has been delivery. the right to rescind is implied to exist. judicial approval may not be needed.

Book of Tolentino. he cannot by his own declaration rescind the contract. It is the judgment of the court and not the mere act of the vendor which produces the rescission of the sale (Cannu) The right to rescind is SUBORDINATED TO THE RIGHTS OF 3RD PERSONS who acquired the thing in good faith. in case of resolution for non-delivery of the thing sold cannot consist in the fruits. RAM Notes Compiled by: Hanniyah Sevilla. Where both parties have committed a breach of obligation. Laperal was not made to pay restitution since the parties had expressly stipulated the payment for damages in case of breach. and the prestation had become impossible to perform. however. exception: when the injured party chose specific performance. The resolution or cancellation shall take effect only after the creditor has notified the debtor of his choice of rescission. is one of lease. However. there is always a need for judicial action if the other party refuses to make the delivery of the thing promised. to which he is entitled only when delivery is made.the court may fix the period for the fulfillment of the obligation. the court will have no discretion to grant the lessee a period within which to pay the rents. GalangLimitations/Restrictions on the right to rescind: 1. the other is relieved from complying with his. if the injured party has already performed such as when property has already been delivered by him to the other party. the purchaser is entitled to indemnity for damages. unless he has previously renounced one of these remedies. CA. Tayag case: WAIVER. The rescission has the effect of abrogating the contract in all parts and The parties will be brought back. and it cannot be determined who was the first infractor. Once one of the parties fails to comply with his obligation. however. Christ May Andolana. 1191: 16 . 4.Obligations and Contracts: Sources 2006 Lectures of Atty. and the lessee fails to pay the rents stipulated within the time agreed upon. or vice-versa. the choice had already been made and to allow Velarde to pay the existing amount would tantamount to a novation of the contract . however. 3. The injured party must respect the power of the court to fix period in lieu of decreeing rescission. In estimating the damages to be awarded in case of rescission or resolution. so long as there has been no judgment declaring rescission. there is always a need for restitution. In cases of specific performance. (case: Central Univ. 2007 Case Digests (from Erwin Vicente). Slight breach of the contract will not justify rescission. the breach should be substantial and fundamental as to defeat the object of the parties in making the contract.the rescission authorized is judicial rescission. Having chosen rescission. in this case. the SC held that Ong was not entitled to reimbursement as regards the improvements he made on the property because he contracted these improvements in bad faith. the extinction having a retroactive effect. in this case. Lydia Galas (Hann Sevilla). the other party must be given his day in court. This indemnity. (case: Laperal vs. he may then cancel or rescind the contract. Case: Cannu vs. Ferlyn Ong for 4th year Batch 2009 although Velarde opted to pay. Rescission under Art. the creditor who has asked for it may change his mind and demand specific performance instead. However. When can there be extrajudicial rescission? When there has been no performance of the obligation or whatsoever. the court held that there was no need to fix the period since sufficient time had already lapse for the plaintiff to fulfill the condition. However.) - - o Note: When the contract. Hence. o Inapplicability of Art. 1191 always carries with it the obligation of mutual restitution. EXTRAJUDICIAL rescission produces legal effects. DUE PROCESS MUST BE OBSERVED. EFFECTS OF RESCISSION Note that the exercise of the power to rescind extinguishes the obligatory relation as if it had never been created. those elements of damages only can be admitted that are compatible with the idea of rescission In case of resolution of a contract of sale. the court must declare the rescission. extra-judicial declaration of rescission by the party who is ready and willing to perform would suffice. Solid Homes. If the obligation has not yet been performed. he is only entitled to the interest on the amount he has paid. and he may therefore by his own declaration elect to rescind by not performing his own undertaking.) In Ong vs. 2. o Evidence is needed to justify the rescission. the contract shall be deemed extinguished and each shall bear his own damages. 5. Hence. as much as possible to the status quo before they entered into the contract.

Period merely fixes the time or the efficaciousness of an obligation. 2. With reference to time 1. C. 2. Ferlyn Ong for 4th year Batch 2009 1. DIFFERENT KINDS OF TERMS/PERIODS a. JUDICIAL – period or term fixed by Courts for the performance of an obligation. b. Period refers to future. but terminate upon arrival of the day certain. If it cannot be determined which of the parties first violated the contract. sales of personal property by installments governed by RA 1484 (Recto Law) Contracts of partnerships Contracts of lease o Cases when judicial approval is not needed in rescission: a. In case both parties have committed a breach of the obligation. Obligations for whose fulfillment a day certain has been fixed. (1125a) Period: A certain length of time which determines the effectivity or the extinguishments of obligations. 2. 3. 17 . the obligation is conditional. Lydia Galas (Hann Sevilla). 4. Obligations with a resolutory period take effect at once. DEFINITE – exact date/time is known and given INDEFINITE – something that will surely happen. upon arrival of period. 2. 2007 Case Digests (from Erwin Vicente). Obligation begin only from a day certain. EX DIE or SUSPENSIVE PERIOD– a period with suspensive effect. Book of Tolentino. but date of happening is unknown. LEGAL – a period granted by law CONVENTIONAL/VOLUNTARY – period agreed upon or stipulated by parties. the same shall be deemed extinguished. Art. judicial approval is needed when there has been already delivery of the object—unless the debtor voluntarily returned the thing. a condition is an uncertain event. b. c. 1193. If the uncertainty consists in whether the day will come or not. As to their fulfillment – 1. if there is an express stipulation of automatic rescission. if there is no express stipulation of automatic rescission in case of breach. and each shall bear his own damages. CONDITION A. As to Influence on the obligation 1. PERIOD vs. although it may not be known when. (n) SECTION 2. and it shall be regulated by the rules of the preceding Section. Condition may under the law refer to past. shall be demandable only when that day comes. . RAM Notes Compiled by: Hanniyah Sevilla. Christ May Andolana. in obligations of sales of real property by installments since Maceda Law RA 6552 governs. Condition causes an obligation to arise or to cease. the liability of the first infractor shall be equitably tempered by the courts. B. a period is an event which must happen sooner or later at a date known beforehand or a time which cannot be determined. or for its termination.Obligations with a Period Art.Obligations and Contracts: Sources 2006 Lectures of Atty. 1192. A day certain is understood to be that which must necessarily come.

2. Before the debt matures ( Art. (n) Article 1194. Art. Book of Tolentino. RAM Notes Compiled by: Hanniyah Sevilla. REQUISITES FOR A VALID PERIOD/TERM 1. It perishes. NOTE: An action may be brought to immediately enforce an obligation originally with a term if: a. or (2) fulfillment of the obligation plus damages. 1194. he shall have the rights granted to a usufructuary for improvements on a thing held in usufruct. and improvement during the pendency of condition. 1196. It disappears in such a way that it cannot be recovered. 18 . Lydia Galas (Hann Sevilla). (the obligation is converted into a pure obligation) Art. Anything paid or delivered before the arrival of the period. It goes out of commerce. it is presumed to have been established for the benefit of both the creditor and the debtor. 2007 Case Digests (from Erwin Vicente). deterioration or improvement of the thing before the arrival of the day certain. deterioration. If the obligation does not fix a period. he shall be obliged to pay damages. 3. must be physical and legally possible otherwise it is void. Christ May Andolana. It disappears in such a way that its existence is unknown.Obligations and Contracts: Sources 2006 Lectures of Atty. or by time. but from its nature and the circumstances it can be inferred that a period was intended. 4. (1126a) PERIOD W/IN W/C RECOVERY MAY BE MADE Without Debtor’s knowledge – 1. with the fruits and interests. Thing Is Lost When – 1. 2. 3. Whenever in an obligation a period is designated. • If the thing deteriorates through the fault of the debtor. In case of loss. • If the thing has improved through the expense of the debtor. (1127) Art. When the non-fulfillment of the terms of the contract resolves the period and authorizes the creditor to immediately demand performance. 1194) 2. Termination of obligation upon the arrival of said period. must be certain but can be extended. • If the thing is lost through the fault of the debtor. unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other. Must refer to the future. the courts may fix the duration thereof.Article 1189 is applicable in cases of loss. Even after maturity – if creditor is in bad faith – the right prescribes in 5 years after premature payment With Debtor’s knowledge – NO RECOVERY (implied waiver) Note: the law presumes that the debtor knew of the prematureness. Art. or b. 1195. Note: “Genus nunquam perit” – in an obligation to deliver generic thing the loss or destruction of anything of the same kind does not extinguish the obligation. the obligor being unaware of the period or believing that the obligation has become due and demandable. the creditor may choose between (1) rescission of the agreement or obligation plus damages. • If the thing is improved by nature. the contract in which the terms is imposed has been cancelled by mutual agreement of the parties. the creditor gets the benefit. Ferlyn Ong for 4th year Batch 2009 IN DIEM or RESOLUTORY PERIOD– a period/term with a resolutory effect. may be recovered. the rules in article 1189 shall be observed. 1197.

(avoid legal process) (1129a) – actual absconding. Christ May Andolana. INSTANCES WHEN THE COURT MAY NOT FIX THE TERM: 1. In every case. Note: the insolvency referred to does not have to be judicially declared. (1132) In obligation with a term – general rule: term is for both parties’ benefit In obligation/alternative oblig – general rule: Debtor has the right of choice. (1131) Alternative Obligation is one where out of the 2 or more prestations which may be given. unless it has been expressly granted to the creditor. The right of choice belongs to the debtor. Lydia Galas (Hann Sevilla). (1128a) WHEN THE COURT MAY FIX A PERIOD 1. (3) When by his own acts he has impaired said guaranties or securities after their establishment. 4. When no term was specified because no term was ever intended. Book of Tolentino. The Debtor Shall Have No Right To Choose Those Prestations Which Are: 19 . When what appears to be a term is really a condition. 2007 Case Digests (from Erwin Vicente). When the duration depends upon the will of the debtor. he becomes insolvent. When the obligation or not is “payable on demand”. PRESCRIPTIVE PERIOD: ACTION MUST FIX THE PERIOD – 10 YEARS Art. RAM Notes Compiled by: Hanniyah Sevilla. When specific periods are provided for in the law. intent to do so is sufficient. and when through a fortuitous event they disappear. it is sufficient for him to find a hard time paying off his obligations because of financial reverses that have made his assets less than his liabilities. When the period w/in which to ask the court to have the period fixed has itself already prescribed. A person alternatively bound by different prestations shall completely perform one of them. Once fixed by the courts. 2. (5)When the debtor attempts to abscond. Art. the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. unless he immediately gives new ones equally satisfactory. unlawful or which could not have been the object of the obligation. The debtor shall lose every right to make use of the period: (1) When after the obligation has been contracted. 2.Obligations and Contracts: Sources 2006 Lectures of Atty. The creditor cannot be compelled to receive part of one and part of the other undertaking. (4)When the debtor violates any undertaking. (2) When he does not furnish to the creditor the guaranties or securities which he has promised.Alternative Obligations Art. Ferlyn Ong for 4th year Batch 2009 The courts shall also fix the duration of the period when it depends upon the will of the debtor. 1198. unless he gives a guaranty or security for the debt. The debtor shall have no right to choose those prestations which are impossible. 1199. only one is due. it can be inferred that a period was intended. When although the obligation does not fix a period. 5. SECTION 3. . 3. 1200. in consideration of which the creditor agreed to the period. the period cannot be changed by them.

through the fault of the former. Art. (n) Art. The same rules shall be applied to obligations to do or not to do in case one. Made properly so that creditor or agent will know. the latter may rescind the contract with damages. The creditor shall have a right to indemnity for damages when. Effect if Creditor delays in making the choice:  he cannot hold the debtor in default for the debtor does not know what to deliver. or that of the service which last became impossible. made in due time and that is before or upon maturity.if C is destroyed (fortuitous event) obligation is extinguished. some or all of the prestations should become impossible. 1202. has disappeared. he shall perform the obligation by delivering that which the creditor should choose from among the remainder. expressly/impliedly.  PURPOSE: To inform the creditor that the obligation is now a simple one. coercion etc. (1136a)  if contract does not state to whom the right to choose is given. made w/o conditions unless agreed to by the creditor. made voluntarily and freely (no force. if tender of the same has been made. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound. 2.Obligations and Contracts: Sources 2006 Lectures of Atty. may be waived. RAM Notes Compiled by: Hanniyah Sevilla. or the price of that which. written. (1135a) Art. or the compliance of the obligation has become impossible. 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. all the things which are alternatively the object of the obligation have been lost. REQUISITES FOR MAKING A CHOICE 1. 2007 Case Digests (from Erwin Vicente). C can only be delivered. the choice by the creditor shall fall upon the price of any one of them. (1134) Example: Objects A. 1201. also with indemnity for damages. made to all the proper persons. or that which remains if only one subsists. Art. Christ May Andolana. (2) If the loss of one of the things occurs through the fault of the debtor. 6. only one is practicable. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared.B & C. 1205. 5. ) 4. 7. 1203. through the fault of the debtor. the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. with a right to damages. for the creditor to receive the object being delivered. Unlawful. 20 . The choice shall produce no effect except from the time it has been communicated. Lydia Galas (Hann Sevilla). Book of Tolentino. express EFFECT OF NOTICE THAT CHOICE HAS BEEN MADE  Obligation becomes a simple obligation to do or deliver the object selected. the creditor may claim any of those subsisting. 1204. When the choice has been expressly given to the creditor. (3) If all the things are lost through the fault of the debtor. made with full knowledge that a selection is indeed being made (if there is error – choice can be annulled) 3. no longer alternative and if already due. implied. (1133) Means of Communication to other party – oral. Art. 3. If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation. THE DEBTOR MAY CHOOSE. Damages other than the value of the last thing or service may also be awarded. Impossible. Or which could not have been the object of the obligation. A&B are destroyed. Ferlyn Ong for 4th year Batch 2009 1. 2.

The right to choose is given only to the debtor. legal provisions re: the obligation of legatees and devisees.Obligations and Contracts: Sources 2006 Lectures of Atty.) 3. 1206. various things are due. each creditor is entitled to demand the whole obligation. 2007 Case Digests (from Erwin Vicente). (n) FACULTATIVE OBLIGATION – it is one where only one prestation has been agreed upon but the obligor may render another in substitution. INSTANCES WHERE LAW IMPOSES SOLIDARY LIABILITY obligation arising from torts. . There is a solidary liability only when the obligation expressly so states. 2. c. Christ May Andolana. accomplices and accessories of a felony. EFFECTS OF JOINT LIABILITY 21 . d. RAM Notes Compiled by: Hanniyah Sevilla. DISTINCTIONS ALTERNATIVE 1. or that each one of the latter is bound to render. through the negligence of the obligor. 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. 4. 1207. 3. Art. • 1. when the nature of the obligation requires liability to be solidary. the principal must be given.   When there are 2 or more debtors or creditors. the substitute does not have to be given. if principal obligation is void. the obligation is JOINT. only one thing is principally due but may be substituted. giving of the substitute is no longer necessary. • GENERAL RULE: SOLIDARY Each debtor – entire obligation. When only one prestation has been agreed upon. others may be valid and the obligation remains. 3. quasi-contracts. (1137a) JOINT Each of the debtors is liable only for a proportionate part of the debt and each creditor is entitled to a proportionate part of the credit. but giving of one is enough.Joint and Solidary Obligations Art. 4. liability of principals. e. he may petition the court to compel Creditor to accept in the alternative. Lydia Galas (Hann Sevilla). (NULLITY OF PRINCIPAL CARRIES WITH IT THE NULLITY OF SUBSTITUTE. if one prestation is illegal. The loss or deterioration of the thing intended as a substitute. Book of Tolentino. a) b) c) There may be plurality of creditors Plurality of both debtors and creditors. but the obligor may render another in substitution. SECTION 4. the right to choose may be given either to debtor/creditor FACULTATIVE 1. 2. the obligor is liable for the loss of the substitute on account of his delay. EXCEPTIONS: when there is a stipulation in the contract that the obligation is solidary. when the law declares so • a. or when the law or the nature of the obligation requires solidarity. if vice versa. entire compliance with the prestation. But once the substitution has been made. the one left must still be given. the obligation is called facultative. Plurality of debtors. 2. if it is impossible to give all except one. at the petitioner’s option with damages. negligence or fraud. does not render him liable. b. If it is impossible to give the principal. Ferlyn Ong for 4th year Batch 2009  if debtor wants to relieve himself from the obligation. bailees in commodatum.

c. but not anything which may be prejudicial to the latter. 1214. and the debt can be enforced only by proceeding against all the debtors. the defense of res judicata is not extended from one debtor to another. Art. Insolvency of a debtor does not increase the responsibility of his co-debtors nor does it authorize a creditor to demand anything from his co-creditors. (n) Art. shall extinguish the obligation. as well as he who collects the debt. shall be liable to the others for the share in the obligation corresponding to them. (1138a) Art. the credit or debt shall be presumed to be divided into as many shares as there are creditors or debtors. RAM Notes Compiled by: Hanniyah Sevilla. If the division is impossible. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. Lydia Galas (Hann Sevilla). without prejudice to the provisions of article 1219. Christ May Andolana. (1141a) Art. but if any demand. In joint divisible obligation. If there are joint creditors. A solidary creditor cannot assign his rights without the consent of the others. Each one of the solidary creditors may do whatever may be useful to the others. Ferlyn Ong for 4th year Batch 2009 a.subject matter KINDS OF SOLIDARITY 1. 2007 Case Digests (from Erwin Vicente). Demand by one creditor upon one debtor produces effects of default only with respect to both parties but not with respect to the others. judicial or extrajudicial. made by any of the solidary creditors or with any of the solidary debtors. Book of Tolentino. (1139)  Indivisible joint obligation – requires the consent of all debtors CHARACTERISTICS      Obligation is joint but since it is indivisible. delivery must be made to all unless authorized by others. If from the law. e. others are not liable for his share. subject to the Rules of Court governing the multiplicity of suits. The indivisibility of an obligation does not necessarily give rise to solidarity. subrogation 22 . confusion or remission of the debt. Novation. 4. the credits or debts being considered distinct from one another. has been made by one of them. the others shall not be liable for his share. The debtor may pay any one of the solidary creditors.Obligations and Contracts: Sources 2006 Lectures of Atty. (1143) NOVATION. creditor must proceed against all the joint debtors. (1140) Art. d. 1211. Nor does solidarity of itself imply indivisibility. If one of the latter should be insolvent. (1142a) Art. Each joint creditor may renounce his share Art. Vices of each obligation arising from personal defect of a particular debtor or creditor does not affect the obligation or rights of the others. 1210. payment should be made to him. EFFECT  Modification of an obligation by changing its object or principal conditions. (n)   Solidarity ---the tie between parties Indivisibility --. Interruption of prescription by judicial demand of one creditor upon one debtor does not benefit the other creditors. ACTIVE – on the part of creditors/obliges PASSIVE – debtors/obligors part MIXED – both CONVENTIONAL – agreed by parties LEGAL – imposed by law Art. the right of the creditors may be prejudiced only by their collective acts. 2. Demand must be to all joint debtors. The creditor who may have executed any of these acts. 1209. 1215. b. 3. or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear. 1208. 1213. 5. In case of insolvency of one debtor. 1212. by substituting the person of debtor. compensation.

Lydia Galas (Hann Sevilla). reimburse his share to the debtor paying the obligation. 2. SD receives an extension of period of payment. Solidary debtor indebted for own share only. 1216. CONFUSION/ MERGER  W/c takes place when the characters of creditor and debtor are merged in the same person. Solidary debtor can be reimbursed with what he has paid less his own share. Art. (1145a) Art. If the principal debtor receives extension w/out surety’s consent. are creditors and debtors of each other. Book of Tolentino. because of his insolvency. the creditor may choose which offer to accept. If the payment is made before the debt is due.  Applies only to solidary obligation. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors. with the interest for the payment already made. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others. in proportion to the debt of each. SURETY can be reimbursed for everything he has paid. He who made the payment may claim from his co-debtors only the share which corresponds to each. both the solidary debtor and the surety guarantee for another person. the provisions of the preceding paragraph shall apply. as when a check issued by A. The remission of the whole obligation. (1147a) 23 . (1144a. SURETY is indebted only for the share of the principal debtor.  The solidary obligation is extinguished. If there was fault on the part of any one of them. 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. (n) Art. RAM Notes Compiled by: Hanniyah Sevilla. the surety is released.” Art.) Effect of not proceeding against ALL – there is no waiver against those not yet sued. PASSIVE SOLIDARITY & SURETYSHIP (similarities) 1. (1146a) Art. both can demand reimbursement Differences: 1. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. in case the debt had been totally paid by anyone of them before the remission was effected. 2007 Case Digests (from Erwin Vicente). 1217. 3. If through a fortuitous event. Ferlyn Ong for 4th year Batch 2009 COMPENSATION  Is that w/c takes place when 2 persons in their own right. Payment made by one of the solidary debtors extinguishes the obligation. 1220. Christ May Andolana. so long as the debt has not been fully collected. in the course of negotiation. 1218. obtained by one of the solidary debtors. 1219. they may be proceeded against later. but the other is still indebted to the other for his share. 2.Obligations and Contracts: Sources 2006 Lectures of Atty. the obligation shall be extinguished. without prejudice to their action against the guilty or negligent debtor. all shall be responsible to the creditor. Payment by a solidary debtor shall not entitle him to reimbursement from his codebtors if such payment is made after the obligation has prescribed or become illegal. If two or more solidary debtors offer to pay. is eventually endorsed to him. that where the creditor tells the debtor to “forget about the whole thing. such share shall be borne by all his co-debtors. (n) Art. no interest for the intervening period may be demanded. When one of the solidary debtors cannot. does not entitle him to reimbursement from his co-debtors. for the price and the payment of damages and interest. REMISSION (WAIVER)  That act of liberality whereby a creditor condones the obligation of the debtor. 1221. 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. not joint. others are still liable for the whole obligation minus the share of the debtor who has extension.

refers to the tie between parties. (1150) EFFECT OF NON-COMPLIANCE – the obligation is converted into a monetary one for indemnity.  May exist even if there is one debtor and one creditor. 1225. the accomplishment of work by metrical units. 1222. in actions filed by the creditor. 2. Those derived from the nature of the obligation Those personal to the debtor sued. Intellectual/ moral – one that exists merely in the mind and not in physical reality Art. 3. 3.  Fault of one – not fault of others KINDS OF DIVISION 1. Art. fault of one is fault of others CLASSES/KINDS OF INDIVISIBILITY 1. fortuitous event after default – there is liability because of default. With respect to those which personally belong to the others. SOLIDARITY SOLIDARITY 1. if w/ fault – liable + damages and interest 3. 2007 Case Digests (from Erwin Vicente). A solidary debtor may. avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him. it shall be divisible. or analogous things which by their nature are susceptible of partial performance. he may avail himself thereof only as regards that part of the debt for which the latter are responsible. Christ May Andolana. . Ferlyn Ong for 4th year Batch 2009 PAYMENT Payment is one of the ways by which an obligation is extinguished and consists in the delivery of the thing or the rendition of the service which is the object of the obligation EFFECTS OF LOSS/ IMPOSSIBILITY 1.Obligations and Contracts: Sources 2006 Lectures of Atty. Art. (1149)   Divisible obligation – capable of partial performance. INDIVISIBILITY vs. When the obligation has for its object the execution of a certain number of days of work. 1223. if w/out fault – no liability 2. 24 . Lydia Galas (Hann Sevilla). or pertain to his own share. 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. Quantitative – depends of quantity 2.Divisible and Indivisible Obligations Art. b. For the purposes of the preceding articles. Natural/absolute – nature of obligation Legal – by law INDIVISIBILITY  Refers to nature of obligation. Indivisible – not capable of partial fulfillment. Conventional – agreed to by parties. RAM Notes Compiled by: Hanniyah Sevilla. 1224. SECTION 5. (1148a) KINDS OF DEFENSES a. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. 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. obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. needs at least 2 debtors or creditors. Book of Tolentino. Qualitative – depends of quality 3.

1228.Obligations with a Penal Clause Art. c. 2. the penalty may be enforced. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. Even if the thing is physically divisible. 3. PENAL CLAUSE – a coercive means to obtain from debtor compliance. (1153a) Art. 1227. (1152a) • • a. RAM Notes Compiled by: Hanniyah Sevilla.Obligations and Contracts: Sources 2006 Lectures of Atty. (reason: no waiver of future action for fraud) Art. divisibility or indivisibility shall be determined by the character of the prestation in each particular case. it may be indivisible if so provided by law. it may be indivisible if such was the intention of the parties concerned. b. unless this right has been clearly granted him. The debtor cannot exempt himself from the performance of the obligation by paying the penalty. 4. Expressly stipulated – to the effect that damages and interests may still be recovered despite the presence of Penal clause 2. save in the case where this right has been expressly reserved for him. (n) 25 . Ferlyn Ong for 4th year Batch 2009 However. the performance thereof should become impossible without his fault. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. When debtor is guilty of fraud or dolo in the fulfillment of the obligaton. When the purpose of the obligation is to pay a certain amount in installments. When the object of the obligation is accomplishment of work susceptible of partial performance. Even if the thing is physically divisible. 3. It is an accessory undertaking to assume greater liability in case of breach. d. . if after the creditor has decided to require the fulfillment of the obligation. an obligation is indivisible if so provided by law or intended by the parties. 2. When the object of the obligation is the execution of a certain number of days of work. the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance. damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. 1226. When the object of the obligation is the accomplishment of work by metrical units. Obligations to give definite things. if there is no stipulation to the contrary. Lydia Galas (Hann Sevilla). SECTION 6. In obligations not to do. Nevertheless. Book of Tolentino. 4. OBLIGATIONS THAT ARE DEEMED DIVISIBLE 1. When debtor refuses to pay the penalty imposed in the obligation. (1151a) OBLIGATIONS THAT ARE DEEMED INDIVISIBLE 1. 2007 Case Digests (from Erwin Vicente). Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time. even though the object or service may be physically divisible. Christ May Andolana. Joint – when both the principal contract and penal clause can be enforced *** be noted on this points (read the book)  Penal Clause constitutes an obligation although an accessory  May become demandable in default of the unperformed principal obligation PURPOSE: to insure performance and also to substitute for damages and the payment of interest in case of non-compliance EXCEPTIONS: 1. However. conventional/ voluntary Subsidiary – when only penalty may be asked. KINDS OF PENAL CLAUSE legal. In obligations with a penal clause. Those which are not susceptible of partial performance. 3.

. (4) By the confusion or merger of the rights of creditor and debtor. RAM Notes Compiled by: Hanniyah Sevilla. (n) PAYMENT – mode of extinguishing obligation consists of: c. loss of thing due SECTION 1. (1154a) WHEN PENAL CLAUSE CANNOT BE ENFORCED: a) b) c) The breach is the fault of creditor.Obligations and Contracts: Sources 2006 Lectures of Atty. Book of Tolentino. (1156a) CLASSIFICATION OF CAUSES OF EXTINGUISMENT A. Ferlyn Ong for 4th year Batch 2009 Art. and prescription. d. VOLUNTARY 1. performance in any other manner of an obligation. of an obligation. the penalty may also be reduced by the courts if it is iniquitous or unconscionable.Payment or Performance Art. Substitution of Performance compensation novation dacion en pago 3.death. 1231. Lydia Galas (Hann Sevilla). (1155) CHAPTER 4 EXTINGUISHMENT OF OBLIGATIONS Art. are governed elsewhere in this Code. (6) By novation. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. in personal obligation. 26 . 1229. Agreement to Obligation a.. such as annulment. 1232 Payment means not only the delivery of money but also the performance. in any other manner. 1230. (5) By compensation. rescission. 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. Christ May Andolana. change of civil status) c) by reason of object – impossibility of performance. delivery of money. The nullity of the principal obligation carries with it that of the penal clause. Art. The nullity of the penal clause does not carry with it that of the principal obligation. Other causes of extinguishment of obligations. Subsequent to Obligation unilateral waiver natural waiver remission mutual dissent compromise Simultaneous with Creation of Obligation resolutory term or extinctive period resolutory condition or condition subsequent INVOLUNTARY a) by failure to bring an action (prescription) b) resolutory/ condition subsequent (merger/confusion. fulfillment of a resolutory condition. B. Fortuitous event intervened unless the debtor expressly agreed on his liability in case of fortuitous event. Even if there has been no performance. b. Performance payment consignation 2. 2007 Case Digests (from Erwin Vicente). When debtor is not yet in default.

2. (n)  In this case. It becomes abnormal (involuntary) when the creditor institutes an action to collect payment in order that the obligor shall comply with his obligation. 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. he can accept partial payment. (1157) Requisites of Valid Payment: 1. if there has been substantial performance IN GOOD FAITH by the obligor. that is. the obligor may recover as though there had been a strict and complete fulfillment. When the obligee accepts the performance. While it may be true that there is no payment if there is no complete delivery or performance of the service. In 1234 there has been substantial performance by the obligor in good faith. 5. 3. Art. in any other manner. Lydia Galas (Hann Sevilla). less damages suffered by the obligee. by delivery of such thing/s if debt is doing of a personal undertaking. Payment and performance is identical. knowing its incompleteness or irregularity. Acceptance of the payment by the creditor. 2. 3. There must be no willful or intentional deviation from the contract or prestation by the debtor. Payment is the satisfaction or fulfillment of a prestation that is due. resulting in the extinguishment of the obligation of the debtor. as the case may be. HOW PAYMENT/ PERFORMANCE IS MADE 1. Capacity of the person receiving the payment. Ferlyn Ong for 4th year Batch 2009 Payment is defined as not only the delivery of money but also the performance. Book of Tolentino. 1235. then the obligor can recover as though there had been strict and complete fulfillment. Art. And those are Art. otherwise. RAM Notes Compiled by: Hanniyah Sevilla. less of course the damages suffered by the creditor. 27 . Note: 1. 3. The omission or defect must be slight and unimportant. there are two exceptions to the general rule. OBLIGEE is in ESTOPPEL – barred from further action for claims. by delivery of money – in full payment unless otherwise stipulated in contract. It is normal (or voluntary) when the obligor voluntarily pays the obligation. 2. Two kinds of payment: 1. it must not be so material as to frustrate the accomplishment of the intended work. 2. the very thing/ service contemplated must be paid. If the obligation has been substantially performed in good faith. But. 1233 that the performance of the obligation is not considered complete unless there is complete delivery or complete performance. and the omission or defect must not be material. if debt is delivery of thing/s. the obligation is deemed fully complied with. 2007 Case Digests (from Erwin Vicente). of an obligation. If he voluntarily accepts such payments then he is deemed to have waived the requirements in Art.Obligations and Contracts: Sources 2006 Lectures of Atty. fulfillment must be complete.if debt is not doing of something. by performance of said undertaking. the performance will not amount to substantial compliance. 2. Delivery of the full amount or the full performance of the prestation. If monetary obligation. 1234. Requisites of a valid payment: Capacity of the person paying. and without expressing any protest or objection. 4. (Pineda). Note: A debtor cannot compel the creditor to accept partial payment. Christ May Andolana. place and manner of payment. Art. by refraining from doing such. Propriety of time. 1234 and 1235. So. • 1.

Art. enabling the former to exercise all the rights and actions that could be exercised by the creditor. or he did not repudiate the same at anytime. 1237. If said 3rd person has an interest in the fulfillment of the obligation. 4. So. penalty SUBROGATION REIMBURSEMENT 28 . Rights w/c may be exercised by Person subrogated in the Place of Creditor: 1. arising from mortgage. unless there is a stipulation to the contrary. only so much as the payment redounded to the benefit of the debtor. guaranty. Knowledge does not always mean there is consent because consent can be implied. cannot compel the creditor to subrogate him in his rights. Whoever pays for another may demand from the debtor what he has paid. hence. then definitely he would express his refusal. in effect he has the knowledge but the consent is tacit or implied. • If payment was made without the knowledge or without the consent of the debtor. • Consequently. But with the knowledge but without the consent. diba? This is just like the MU sa inyo. When legal compensation had already taken place • If the 3rd person pays the obligation of the debtor with the knowledge and consent of the debtor. 1237. such as those arising from a mortgage. 2007 Case Digests (from Erwin Vicente). Christ May Andolana. In effect. Instance when RECOVERY can be had from Creditor and not from Debtor: 1. he is deemed to have waived the irregularity because the law requires that he must know the incompleteness or irregularity of the performance and accept it without protest or objection. 2. then the third person can demand full reimbursement. because the law does not require that knowledge and consent must come together. SUBROGATION – act of putting somebody into the shoes of the Creditor. if he does not consent even if he knew about it. guaranty. Consent of course always means with the knowledge.Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla). There can be knowledge without the consent. The same applies if the debtor knows that the third person is making the payment but he did not object thereto. the reimbursement shall be only up to the amount or extent by which the debtor was benefited. then he has no right to demand that he be subrogated into the right of the creditors. (1158a) Art. (With knowledge but without consent of debtor falls under this situation) o From transcription: So. Book of Tolentino. how much can the 3rd person demand reimbursement? Only to the extent that the debtor is benefited. Paid/performed debt. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation. Under this situation. except that if he paid without the knowledge or against the will of the debtor. EXCEPT: a. • Another effect if payment was with the knowledge and consent is that the 3 rd is subrogated into the rights of the former creditor. Such right is not granted to him by law as stated in Art. 3. b. What if he has the knowledge but he does not say anything? Full reimbursement. NB: Prescription. Remission. or penalty. the payor is definitely not entitled to reimbursement from the debtor. 1236. (1159a) The creditor can refuse payment by a 3rd person. Because if he does not want that the 3rd person will pay his obligation. RAM Notes Compiled by: Hanniyah Sevilla. 2. But if it is without the consent or against the will of the debtor or without the knowledge. the payor is entitled to be reimbursed for the full amount. 3. He becomes the new creditor. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter. When stipulated. the payment would no longer be beneficial. if the debt had already prescribed or had already been compensated. if he pays with the knowledge. Ferlyn Ong for 4th year Batch 2009 How shall it happen? The creditor accepts the performance despite knowledge of the incompleteness or irregularity and without protest or objection accepts the performance. he can recover only insofar as the payment has been beneficial to the debtor. or with the consent. and we call that beneficial reimbursement.

Ferlyn Ong for 4th year Batch 2009 1. recourse can be had to the mortgage or guaranty or pledge. 2. 2. EXCEPT: Art. Art. (Discussion of Culaba case) Art. (1162a) TO WHOM PAYMENT MUSTBE MADE 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. Pedro. then the payment to JR is valid. remedy of consignation is not proper. Payment shall be made to the person in whose favor the obligation has been constituted. Guardian of insane. 2. It terminates upon the death. JR (17 years old). because the 2nd wife is not part of the agreement. creditor cannot be compelled to accept. 1247 -. Juan died. Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor. 1238. or his successor in interest. Petra died. Art. without prejudice to the provisions of article 1427 under the Title on "Natural Obligations. the minor cannot recover the same from the creditor who accepted it or consumed it in good faith. 1240. What about the authority? Authority terminates upon the death of the person executing that authority. But the payment is in any case valid as to the creditor who has accepted it. but voluntarily pays a sum of money or delivers a fungible thing for the fulfillment of the obligation. 1239. Lydia Galas (Hann Sevilla). agent) Q: Pedro borrowed money (900. It belongs to the first marriage. This belongs to the estate of the former marriage. They had a child. the payment is still valid. kanino pala nya ibayad? To the administrator of the property. who is married to Petra. RAM Notes Compiled by: Hanniyah Sevilla. there is something more than a personal action of recovery. 3. Juan remarried to Jane. successor in interest. To person in whose favor the obligation has been constituted (creditor). (3) If by the creditor's conduct. with respect to reimbursement. only that we will apply 1236.(to be considered as a valid donation) But the payment is still valid since the consent of the debtor is immaterial as the extinguishment of the obligation is concerned. which requires the debtor's consent. when the obligation became due and demandable. the payment is not valid. 1241.Obligations and Contracts: Sources 2006 Lectures of Atty. 3. (2) If the creditor ratifies the payment to the third person. 2007 Case Digests (from Erwin Vicente). 3. to any person authorized to receive it (eg. But definitely not to the 2nd wife. Such benefit to the creditor need not be proved in the following cases: (1) If after the payment. Book of Tolentino. without the consent of the parents or the guardian. Christ May Andolana.000) from Juan. the third person acquires the creditor's rights.000 the requirement of the law is that the payment must be in writing." (1160a) PAYMENT BY AN INCAPACITATED PERSON GENERAL RULE: If payment is made by a person incapacitated to give: 1. Now.The minors who entered into a contract. payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid. the debtor has been led to believe that the third person had authority to receive the payment. In obligations to give. paid Jane. If the creditor accepts payment even if it is against the will of the debtor. if JR is of age. payment is not valid – if accepted. debt is extinguished in one sense but a new creditor appears with same rights. or any person authorized to receive it. (1163a) 29 . Is the payment valid? Answer: The payment is not valid despite the authority of Juan. So. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation.    no recourse new creditor has different rights Personal action Art. But take note that if the payment made by the third person who does not intend to be reimbursed exceeds P5. diba? So.

Cases: Culaba vs. under 1242 payment is made to a third person in possession of the credit. So. Meat Packing vs.Obligations and Contracts: Sources 2006 Lectures of Atty. and the debtor paid the original creditor. 30 . Book of Tolentino. So it follows that at the time of payment. From Transcription: Payment to a third person shall also be valid if it has redounded to the benefit of the creditor. So. Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid. an example a promissory note payable to the order of Pedro. Sahijwani.takes place when the debtor of a debtor is ordered not to pay the latter so that preference would be given to the latter’s creditor. the creditor ratifies the payment to the third person. only that he ratified it. the payment is still valid. but in as much as he did not inform the debtor. or in cash. and it was received by a third person. and the debtor paid the old creditor. 1242. Lydia Galas (Hann Sevilla). FEB vs. CA. 1243. the third person becomes the new creditor. Sering vs. Payment made in good faith to any person in possession of the credit shall release the debtor. When a creditor assigns credit to a third person. without the consent of the debtor. INJUNCTION – a judicial process by virtue of w/c a person is generally ordered to refrain from doing something. although the latter may be of the same value as. 2007 Case Digests (from Erwin Vicente). Sandiganbayan. ano yan? Authorization. 2. Another instance is. because if it is prior. or by the latter’s representative during the time of the incapacity of the creditor. and later on you saw the third person wearing the same ring. What is the difference between a person in possession of the credit? An example of a document which is the credit itself is a check payable to the order of the bearer. that is the difference between possession of the credit and the evidence of the credit. Bernabe. or garnishment GARNISHMENT. (Pineda) Benefit may be in the form of financial. (1164) Requisites: 1. the presumption is that he had acquired ownership over the property you had delivered. Art. CA. RAM Notes Compiled by: Hanniyah Sevilla. payment must be in good faith. You lead the debtor to believe that the third person is authorized to receive payment. the debtor may be compelled by the creditor to pay anew when he regains capacity. but when you made the payment. Christ May Andolana. Torquator vs. or if he has not kept the thing delivered. 2. PnB vs. • Other instances where payment to a third person releases the debtor: 1. The presumption is that the payment was without his authority. Pabugais vs. Why? Because he did not inform the debtor. INTERPLEADER – action in w/c a certain person in possession of certain property wants claimants to litigate among themselves for the same. 3. not the evidence of the credit. The debtor of a thing cannot compel the creditor to receive a different one. Art. injunction. Diaz Realty. payee must be in possession of the credit itself. the creditor had no authority to accept payment. Ferlyn Ong for 4th year Batch 2009 • • If payment was made to the incapacitated creditor who cannot administer his property. if after the payment. or more valuable than that which is due. (1165)  judicial order prompted by an order of attachment. he ratified it. Seguvia Dev't case. In possession of the credit. the third person acquires the creditor's rights – Ex: you have an obligation to deliver a diamond ring. But benefit need not be proved in the following instances: 1. you have the burden of proving that payment made to the third person redounded to the benefit of the creditor. CA. Ratification comes after. 1244. 2. moral or intellectual advantages which must be proved. the person must present evidence that he is Pedro. Art. When the creditor assigns his credit to a third person. But if what is presented is the evidence of the credit.

Take note that as soon as the agreement has been perfected. The purpose of the obligation and other circumstances shall be taken into consideration. If the creditor accepts.  When the Kind and quantity cannot be determined w/out need of a new agreement. DATION IN PAYMENT /DATION EN PAGO/ ADJUDICACION EN PAGO Art. Dation in payment Application of payments Assignment in favor of Creditors (cession) Tender of payment and consignation. 3. 2. CONDITIONS under w/c a Dation in Payment is valid a) b) c) If creditor consents. Neither can the debtor deliver a thing of inferior quality. he will deliver another thing in lieu of the money. cause/consideration is the price or obtaining the object. depending on the agreement of the parties. DATION IN PAYMENT There is pre-existing credit. SALE 1. Extinguishes the obligation. But. but at the time of fulfillment. If debtor is not judicially declared insolvent. Christ May Andolana. C. the contract is VOID. whose quality and circumstances have not been stated. 1245. it is no longer governed by the law on obligations and contracts but the law on sales. 5. then the obligation is extinguished. Extinguishment of his debt & acquisition of object offered in credit (part of creditor). shall be governed by the law of sales. 1246. 4. When the obligation consists in the delivery of an indeterminate or generic thing. whereby property is alienated to the creditor in satisfaction of a debt in money. I. no pre-existing credit. greater freedom in determining price. D. Lydia Galas (Hann Sevilla). and it is not sufficient to cover the monetary obligation. If it extinguishes the entire obligation then there is full extinguishment. Dation in payment.Obligations and Contracts: Sources 2006 Lectures of Atty. the creditor cannot demand a thing of superior quality. (n) Concept: Property is alienated to the creditor in satisfaction of a debt in money. what he did instead is to offer that instead of the money. then there is partial fulfillment. So. an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. 2. Art. 4. 3. and money is exchanged for the delivery. gives rise to obligations. Less freedom May extinguish completely or partially the credit. 1. If dation in payment will not prejudice the other creditors. 31 . RAM Notes Compiled by: Hanniyah Sevilla. (1167a) Except: if there is WAIVER. Ferlyn Ong for 4th year Batch 2009 In obligations to do or not to do. Book of Tolentino. if it will only be based on the value of the thing that is delivered. Q: Suppose there was an agreement between the parties but the debtor delivered a car and the creditor accepts. 2007 Case Digests (from Erwin Vicente). 5. the presumption is there is merely a pledge. B. what presumption arises? Is dation in payment presumed? A: When there is delivery and you cannot presume what the agreement of the parties is. the debtor could no longer deliver the money. (1166a) EXCEPTIONS: a) b) c) In case of FACULTATIVE OBLIGATION In case there is another agreement resulting in: Dation in payment Novation In case of waiver by creditor SPECIAL FORMS OF PAYMENT A. At the time of the constitution of the obligation what is due is money. giving of price may generally end the obligation of buyer.

RAM Notes Compiled by: Hanniyah Sevilla. the creditor cannot be compelled partially to receive the prestations in which the obligation consists. MWSA. the extrajudicial expenses required by the payment shall be for the account of the debtor. or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed. (1168a) Art. Gueco Art. There being no express stipulation and if the undertaking is to deliver a determinate thing. This will not apply to quasi-delict. 5. In any other case the place of payment shall be the domicile of the debtor. This does not apply where obligation to pay arises from law. 6. If the debtor changes his domicile in bad faith or after he has incurred in delay. the action derived from the original obligation shall be held in the abeyance. 1249. payment of monetary obligations. Unless it is otherwise stipulated. (1171a) 32 . (1170) LEGAL TENDER – is that w/c a debtor may compel a creditor to accept in payment of the debt. 1247. (1169a) • • GEN. then in the currency which is legal tender in the Philippines. when the debt is in part liquidated and in part unliquidated. and if it is not possible to deliver such currency. In case an extraordinary inflation or deflation of the currency stipulated should supervene. (This applies only to contractual obligations. the value of the currency at the time of the establishment of the obligation shall be the basis of payment. With regard to judicial costs. case of International Corporate Bank vs. Lydia Galas (Hann Sevilla). (n) • Applies only to cases where a contract or agreement is involved. Art. in case of compensation. when work is to be done by parts. 3. when different prestations are subject to different conditions or terms. to indebtedness. the Rules of Court shall govern. the creditor may demand and the debtor may effect the payment of the former without waiting for the liquidation of the latter. when a joint debtor pays his share or the creditor demands the same. when it is stipulated otherwise. However. The payment of debts in money shall be made in the currency stipulated. 2. Neither may the debtor be required to make partial payments.Obligations and Contracts: Sources 2006 Lectures of Atty. Art. In the meantime. Case of Filipino Bank vs. These provisions are without prejudice to venue under the Rules of Court. unless there is an agreement to the contrary. or when through the fault of the creditor they have been impaired. Christ May Andolana. 1251. when debt is part liquidated and part unliquidated. the additional expenses shall be borne by him. when one debt is bigger than the other. Purely contractual obligations. independent of contracts. Payment shall be made in the place designated in the obligation. Book of Tolentino. 2007 Case Digests (from Erwin Vicente). when a solidary debtor pays only the part demandable. the payment shall be made wherever the thing might be at the moment the obligation was constituted. Unless there is an express stipulation to that effect. 7. 1248. 4. quasi-contract. 1250. The delivery of promissory notes payable to order. RULE: Payment shall be complete EXCEPT: 1. to obligations arising from law. Ferlyn Ong for 4th year Batch 2009 Art.

If its generic/personal. 5. then he bears the loss. All debts must be due unless contrary is provided – eg. is Note: The right to choose w/c debt to serve first is vested to the DEBTOR except:  If there was a valid prior but contrary agreement. • 1. the former cannot complain of the same. Christ May Andolana. out of 2 or more debts owing the same creditor. RULE WHEN DEBTS ARE NOT YET DUE – there may be application of payments when: the parties so stipulate. Third. he cannot choose to apply it first to the principal. Lydia Galas (Hann Sevilla). Debts must be of the same kind.  Debtor cannot choose to pay part of the principal ahead of the interest unless the creditor consents. at the domicile of the Debtor. APPLICATION OF PAYMENT – shows w/c debt. • a. II. if its determinate. but subject to certain conditions: First. RAM Notes Compiled by: Hanniyah Sevilla. payment shall be made in the domicile of the debtor. REQUISITES FOR APPLICATION OF PAYMENT There must be 2 or more debts (severalty of debts). Why is he merisi? What will be your defense? In the absence of any stipulation. 1252. He who has various debts of the same kind in favor of one and the same creditor. Unless the parties so stipulate. If the debtor accepts from the creditor a receipt in which an application of the payment is made. Book of Tolentino. Payment is not enough to extinguish all the debts. Debts are owed by the same debtor in favor of the same creditor. • Note: the creditor shall bear the expenses. that he cannot apply it to a debt which will not cover the entire obligation because under the law. Fourth. he cannot choose a debt that is not yet due and demandable. and the courier ran away with the money. at the place where the thing might be at the time the obligation was constituted. or when the application of payment is made by the party for whose benefit the term has been constituted. to which of them the same must be applied. when application of payment is made by the party for whose benefit the term has been constituted. 4. unless there is a cause for invalidating the contract. ii. Second. Debtor designates 33 . The law says interest should be paid first before the principal. Stipulated by parties. 2007 Case Digests (from Erwin Vicente). he cannot choose a debt or an obligation which is not of the same kind of the other debt. APPLICATION OF PAYMENT Art. unless the debtor changes his domicile in bad faith. may declare at the time of making the payment. So those are the limitations. But if it was through the initiative of the debtor. Transcription: Now what about if payment is made through couriers. like the LBC? Suppose the debtor sent the money through the LBC. Note: When shall the debtor make the choice? At the time payment shall be made. the creditor cannot be compelled to accept partial payment. 2. 2. (1172a) • being paid.Obligations and Contracts: Sources 2006 Lectures of Atty. application shall not be made as to debts which are not yet due. Ferlyn Ong for 4th year Batch 2009 WHERE PAYMENT MUST BE MADE 1. What will the creditor do? Wala na syang pagasa? The creditor would run after the courier. If there is a stipulation – in designated place. who shall bear the loss? It depends. if there is no stipulation i. 3. b. then he should bear the loss? Merisi. HOW APPLICATION IS MADE A. If it was the creditor was the one who said that it should be sent to him through the courier.

suppose.000 is the most onerous of the debts. 20. 1. 20. Number 4 cannot be the subject of application of payment because it is not of the same kind. 24. if it will prejudice 3rd persons—cannot revoke WHEN APPLICATION CANNOT BE AVAILED OF? 1. advances for subsistence than cash advances. (Applying Arts. 2. 4. EXCEPT:  If both parties agree  • Even if both parties agree. the debt which is most onerous to the debtor. 1253. 10. What are the rules to remember? 1. Ferlyn Ong for 4th year Batch 2009 B. From transcription. payment of the principal shall not be deemed to have been made until the interests have been covered. The most onerous of the 3 debts due is the 20. it is not yet due and demandable. exclusive debt than solidary Note: The “more burdensome rule” does not apply if debtor has used “application of payment”. a 4 carat pink diamond ring 50. 5. debts w/ penal clause. 1253 and 1254) REVOCATION GEN. Except: if creditor agrees. and the debtor has to make the choice under the given situation: 3.Obligations and Contracts: Sources 2006 Lectures of Atty. A simple debt.000 due on Dec.000 because of the penalty. 6. that w/c charges the higher interest. If 2 interest-bearing debts. 2006. 2004 with an interest of 6% plus a penalty of 2% on the interest in case of delay. RAM Notes Compiled by: Hanniyah Sevilla. If the debts due are of the same nature and burden. 25. 1254. shall be deemed to have been satisfied. Christ May Andolana. Lydia Galas (Hann Sevilla). When the payment cannot be applied in accordance with the preceding rules. 2007 Case Digests (from Erwin Vicente). a debt where debtor is in mora (default) 8.000 without interest. debts secured by mortgage/pledge. or if application cannot be inferred from other circumstances.000 with interest and penalty due on Dec. 5. 3. secured by a mortgage. 2004. 34 . Interest-bearing debts. interest by way of compensation. If not. Art. the debtor has 50. In case of partner-creditor Surety or a solidary guarantor – one debt only not several.000. Creditor cannot be forced to accept partial payment. If the debt produces interest. creditor makes it – known or made at the time of the issuance of the receipt. 6. however. Likewise. unless there is cause for voiding the contract ( ex. Book of Tolentino. (without interest) is the least onerous because it can run up to how many years and the amount would be the same. So. 4. 2. Creditor does it w/o debtor’s consent) C. 7. Older accounts in case of running accounts 2. Payment cannot be applied to the principal first if there is interest due. (1174a) Burdensome Debts 1. 50. interest by way of damages by way of default. among those due. Art. • If both do not avail of it. b. RULE: Once application of payment is made.000 be applied? To the most onerous of the debts already due and demandable. the obligation is extinguished. To where shall the 50. and once the mortgage is foreclosed. (1173)  Interest must be paid first except if creditor consents to payment of the principal first WHAT INTEREST IS SUPPOSED TO BE PAID? a. the payment shall be applied to all of them proportionately. by operation of law.000 due on June 25. The debt with a mortgage is less onerous because there is only that tendency to lose the mortgage. From transcription: Now. the application of payment will only be centered on the 3. it cannot be revoked.

2. 4. The agreements which. he can choose a debt not yet due. Art. All obligations must be due and of the same kind. merely assignees with authority to sell. shall only release the debtor from responsibility for the net proceeds of the thing assigned. (there is presumption of insolvency) Does not transfer ownership. are made between the debtor and his creditors shall be governed by special laws. does not affect all properties. (1175a) • 2 Kinds of Assignment a. Voluntary – all creditors must agree • 1. dation. When the parties have an agreement as to which debt shall be paid first. then the debtor cannot vary the agreement. The debtor cannot also pay the debt not yet due. May totally extinguish the obligation and release the debtor 35 . ASSIGNMENT a) b) c) Creditors do not become owners. PAYMENT BY CESSION OR ASSIGNMENT • It is the process of transfer of debtor’s property to creditors not subject to execution so that the latter may sell them and thus apply the proceeds to their credits. 5. transfers ownership upon delivery. Christ May Andolana. there is an act of novation 7. 3. by legal causes (such has sale. (there are various creditors) Requires full/partial insolvency. 2. may take place during solvency. Not an act of novation Only extinguishes the credits to the extent of the amount realized from the properties assigned. III. (no presumption of insolvency) 5. only the specific creditor’s consent is needed. 3. in the order established by law. unless otherwise agreed upon. The purpose of the transfer or the assignment or the cession. (transfer is only in favor of one creditor to satisfy a debt) 4. Exception: unless the obligation is converted into the payment of damages. 4.Obligations and Contracts: Sources 2006 Lectures of Atty. 1255. does not require plurality of creditors. Exception: if the period is for the benefit of the debtor. on the effect of the cession. 1. Debtor is released up to the amount of the net proceeds unless stipulated. DACION EN PAGO CESSION In general. only possession and administration are transferred to the creditors with the authorization to convert the property into cash with which the debts shall be paid. unless there is stipulation to the contrary. RAM Notes Compiled by: Hanniyah Sevilla. It becomes monetary in character. An assignment of credit is an agreement by virtue of which the owner of a credit. generally. Book of Tolentino. Requires more than 1 creditor. etc) without the need of the debtor’s consent. Ferlyn Ong for 4th year Batch 2009 3. Creditors will collect credits in the order of preference agreed upon or in default. is for the creditors to sell these properties. This cession. transfers the credit and its accessory rights to another who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor. 6. affects all properties. Legal – majority of creditors must agree b. All creditors’ consent. REQUISITES FOR VOLUNTARY ASSIGNMENT More than 1 debt More than 1 creditor Complete or partial insolvency of debtor Abandonment of all debtor’s property not exempt from execution to the creditors Acceptance or consent on creditor’s part • EFFECTS OF VOL. and to apply the proceeds in proportion to their respective credit. 5. Lydia Galas (Hann Sevilla). The debtor may cede or assign his property to his creditors in payment of his debts. 2007 Case Digests (from Erwin Vicente).

he cannot later on prescribe the terms for the validity of the acceptance w/c he had already made – complete payment. Christ May Andolana. Note: Tender and consignation is only true if there is a debt due. (1176a) • a) b) c) d) REQUISITES OF A VALID TENDER OF PAYMENT Must be in legal tender (lawful currency) – not a check but if there is consent – valid. It must include whatever interest is due. That there was previous tender of payment 2. that the creditor refused to accept payment without just cause.Obligations and Contracts: Sources 2006 Lectures of Atty. without just cause. (4) When two or more persons claim the same right to collect. 1257. 1256. Prior notice of consignation (before deposit). That the tender of payment was of the very thing due. 4. that act of the respondent in buying the property was an exercise of the right to repurchase. (5) When the title of the obligation has been lost. Lydia Galas (Hann Sevilla). Art. TENDER OF PAYMENT AND CONSIGNATION TENDER OF PAYMENT – the act of offering the creditor what is due him together with a demand that the creditor accept the same. Consignation alone shall produce the same effect in the following cases: (1) When the creditor is absent or unknown. but if made with conditions and no protest on creditor’s part. if the creditor refuses what you have tendered. and. Like the case of DBP. The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment. From transcription: tender of payment is the manifestation made by the debtor to the creditor of his desire to comply with his obligation with the offer of immediate performance. Art. as in the case of exercising the right to repurchase (Meat Packing case). or in case of money obligations. he refuses to give a receipt. or does not appear at the place of payment. Actual consignation (deposit). it must first be announced to the persons interested in the fulfillment of the obligation. It must be unconditional. . that the legal tender currency was offered. But mere tender alone does not extinguish the obligation. 3. Ferlyn Ong for 4th year Batch 2009 SUBSECTION 3. In order that the consignation of the thing due may release the obligor. CONSIGNATION – the act of depositing the thing due with court or judicial authorities whenever the creditor cannot accept or refuse to accept payment. That the tender of payment was unconditional. • Requisites wherein the creditor is deemed to have unjustly refused the tender of payment 1. then mere tender is sufficient. 2007 Case Digests (from Erwin Vicente). Subsequent notice of consignation Hearing. without just cause. the debtor shall be released from responsibility by the consignation of the thing or sum due. Judgment 36 . Valid prior tender of payment. unless tender is excused. The obligation must be due. It must be followed by consignation. RAM Notes Compiled by: Hanniyah Sevilla. If the creditor to whom tender of payment has been made refuses without just cause to accept it. Because if it were in an exercise of a right. Book of Tolentino. (2) When he is incapacitated to receive the payment at the time it is due.Tender of Payment and Consignation IV. (1177) REQUISITES OF CONSIGNATION a) b) c) d) e) f) g) Existence of a valid debt. (3) When.

Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009

DEPOSIT; EFFECTS OF a) b) c) d) The property is in “custodia legis”; Not exempt from attachment and execution; But if property be perishable by nature, the court may order the sale of the property; The debtor by consigning the thing practically makes himself the agent or receiver of the court, particularly if for some reason, the property cannot actually be placed in the hands of the court.

From transcription: • REQUISITES FOR VALID CONSIGNATION 1. There must be a debt due; there must be a debt owing. 2. That the consignation was made because of some legal cause provided in the present article. (the unjust refusal of the creditor) 3. Previous notice of the consignation has been given to the persons interested in the performance of the obligation. 4. That the amount or thing due was placed at the disposal of the court (actual consigning or depositing the thing due with the clerk of court); and 5. That after the consignation had been made, the persons interested were notified thereof.

Q: what if the debtor decides to withdraw what has been consigned, would that be allowed? A: Yes. The original obligation is revived. Q: Can he withdraw after the court finds that consignation is proper? A: Generally, no, unless or the exception is the creditor consents. Q: what are the consequences if the creditor consents to the withdrawal after the finding of the court that consignation is proper? One of the consequences is that the creditor loses the preference of credit; He loses the security attached to that obligation. EFFECT OF PROPER CONSIGNTATION: It retroacts to the time of consignation. Likewise, all interest shall be deemed to stop running from the time of consignation. Art. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases. The consignation having been made, the interested parties shall also be notified thereof. (1178) HOW IS CONSIGNATION MADE? 1. 2. The things due must be deposited with the proper judicial authorities; There must be proof that:  Tender was previously made;  Or that the creditor had previously notified the debtor that consignation will be made (in case tender is not required) Art. 1259. The expenses of consignation, when properly made, shall be charged against the creditor. (1178) Art. 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation. 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 deposited, allowing the obligation to remain in force. (1180) VALID CONSIGNATION, EFFECTS OF: 1. 2. 3. Debtor may ask the judge to cancel the obligation; The running of interest is suspended; It should be observed that before the creditor accepts or before the judge declares that consignation has been properly made, the obligation remains.

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Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009

IMPROPER CONSIGNATION; EFFECTS: 1. 2. If improperly made, obligation remains; At the time of consignation, the debt already due; requisites are absent – DEBTOR is in default.

Art. 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 and sureties shall be released. (1181a) Effects of Withdrawal a) Obligation remains; b) Creditor loses any preference over the thing; c) Co-debtors, guarantors and sureties are released (unless they consented) LOSS OF THE THING DUE WHEN IS A THING CONSIDERED LOST a) b) c) When it perishes; When it goes out of commerce; When it disappears in such a way that:  Its existence is unknown; or  It cannot be recovered.

Note: The term loss does not refer strictly to actual or physical loss but contemplates also impossibility of performance. WHAT IMPOSSIBILITY OF PERFORMANCE INCLUDES a) b) Physical impossibility; Legal impossibility;  Directly – prohibited by law;  Indirectly – e.g when debtor is required to enter a military draft. Moral impossibility

c)

Art. 1262. An obligation which consists in the delivery 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. (1182a) 2 Kinds of Obligation “to give” 1. to give a generic thing; 2. to give a specific thing Effect of Loss GEN. RULE: Obligation is extinguished EXCEPTIONS 1. If debtor is at fault; 2. When debtor is made liable for fortuitous event because of:  Provision of law;  Contractual stipulation;  Nature of obligation requires the assumption of risk (debtor) INSTANCES when Law requires Liability even in case of Fortuitous Event: 1. 2. 3. 4. 5. Debtor is in default; When debtor has promised to deliver the same thing to 2 or more persons who do not have the same interest; Obligation arises from a crime; When borrower has lent the thing to another who is not a member of his own HH; When thing loaned has been delivered with appraisal of value unless stipulated exempting borrower from responsibility;

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Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009

6.

When payee in solutio indebiti is in bad faith.

Q: What about partial loss? Will that extinguish the obligation? It depends. Why? Generally, if the partial loss is due to a fortuitous event, the obligor has to deliver the object at its deteriorated state. But if the loss is such that led the parties to enter into the contract, then there is extinguishment of the obligation. For instance, you bought a lot at Royal Pines because of the view that it affords. And then a high rise hotel was constructed which obstructed the view. Is there total loss? No, but there is extinguishment of the obligation. Art. 1263. In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation. (n) GEN. RULE: Genus never perishes EXCEPTIONS 1. If the generic thing is delimited; 2. If generic thing has been segregated or set aside – it becomes specific now. e.g. MONEY Art. 1264. The courts shall determine whether, under the circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation. (n) Art. 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. (1183a) Art. 1266. The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor. (1184a)  Article 1266 refers to impossibility in obligations to do when the prestation has become legally or physically impossible without the fault of the obligor. The impossibility must arise after the constitution of the obligation. Because if it were prior or at the time of the inception, the nullity of the contract. Legal/physical impossibility must be after the constitution of obligation.

Effect of Loss Thru Fortuitous Event in Reciprocal Obligation GEN. RULE: The obligation that was not extinguished by the fortuitous event remains.

EXCEPTIONS: 1. In case of lease – if object is destroyed, both lease and rent are extinguished; 2. In contracts for a piece of work. Note from transcription: what are the forms of impossibility? 1. It might be physical, when by reason of its nature the act cannot be performed.

2. 3. 4.

Second, legal: a law is subsequently passed making the act illegal. Objective when the act or service itself, without considering the person of the obligor, becomes impossible. It is the act itself. The last is subjective which is the opposite of objective. The act or service cannot be done by the obligor, and the reason why you entered into the obligation is the person who would perform the act or the service.

Q: What happens if there is temporary impossibility? A: You merely wait for the impossibility but you still have to comply with the obligation. Exception is if the obligation is to be performed at a definite time, and that time is within the period of that impossibility, so the obligation is extinguished. Q: What happens if the debtor has complied with the obligation then here comes this temporary impossibility by reason of a circumstance or a situation. Is he entitled to the payment of his performance of what he has partially performed? A: Yes, of course, unless it is an indivisible obligation. If it turns out the impossibility has become permanent, and you have not yet paid, then you have to pay, unless there is extinguishment of the obligation (falling under 1234 and 1235), Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. (n)

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Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009

    Requisites:

Refers to moral impossibility or impracticability due to change of certain conditions; Refers to personal obligation (or obligations to do) and not real ( to give) Does not cover highly speculative contracts or agreements such as stocks and aleatory contracts such as insurance contracts Based on the doctrine of unforeseen events or rebus sic stantibus

1. Even or change of circumstances could not have been forseen at the time of the execution of the contract; 2. Performance is extremely difficult but not impossible; 3. The impossibility was not due to acts of any of the parties; 4. The prestation refers to a future one, not an immediate fulfillment; Art. 1268. When the debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not be exempted from the payment of its price, whatever may be the cause for the loss, unless the thing having been offered by him to the person who should receive it, the latter refused without justification to accept it. (1185)  Effect of Loss in Criminal Offenses – DOES NOT EXTINGUISH OBLIGATION, EVEN IF FORTUITOUS EVENT INTERVENES e.g theft. So this is one of the exceptions to the rule that if a determinate thing is lost through fortuitous events, the obligation is extinguished.  Exception is when Creditor is in Mora Accipiendi (default); otherwise stated, if the thing was offered to the person who should receive it and the latter refused without just cause. Art. 1269. The obligation having been extinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. (1186) CONDONATION/REMISSION OF A DEBT

It is the gratuitous abandonment by the creditor of his right against the debtor. Condonation/remission is essentially a donation of the credit to the debtor. It is a bilateral act (not reciprocal), which requires the acceptance by the donor. It is therefore, subject to the rules on donations with respect to acceptance, amount and revocation2. It may be made expressly or impliedly. Express condonation shall, furthermore, comply with the forms of donation. Art. 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly. One and the other kind shall be subject to the rules which govern inofficious donations. Express condonation shall, furthermore, comply with the forms of donation. (1187) • 1. 2. 3. 4. 5. 6. 7. 8. 9.

ESSENTIAL REQUISITES FOR REMISSION

There must be an agreement; Parties must be capacitated and must consent; There must be subject matter (object/prestation); The cause or consideration must be liberality – essentially gratuitous; Obligation remitted must be demandable at the time of remission; The remission must not be inofficious – not excessive; Formalities of a donation are required in case of an express remission; Waivers/remissions are not to be presumed generally – it must be expressed or implied; The debtor must accept the remission. • CLASSES OF REMISSION AS TO EFFECT/EXTENT 1. Total

A.

2

Note: On acceptance: see Art. 745, on amount Arts 750-752, and on revocation, Arts. 760-765 of the New Civil Code (more thoroughly discussed in property) 40

this may be set aside for causes of nullity or rescission of contract. Ferlyn Ong for 4th year Batch 2009 2. The renunciation of the principal debt shall extinguish the accessory obligations.mortgage is extinguished but principal obligation may remain. made voluntarily by the creditor to the debtor. 1272. the debt may be said to have been extinguished by Prescription. Inter vivos (during lifetime) 2. May the court lower penalty? Yes. The private document must refer to the original of the original (because it may be issued in duplicate copies) Not true in case of public documents because there is always a copy in the archives to prove the credit. implies the renunciation of the action which the former had against the latter. Effect if mortgagee becomes owner --. is found in the possession of the debtor. It should take place between principal debtor and creditor. 2007 Case Digests (from Erwin Vicente). (Ligutan case. 1277)   If the reason for confusion ceases. Mortis Causa (after death) AS TO FORM 1. Whenever the private document in which the debt appears is found in the possession of the debtor. 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. Art. Can it erase penalty? No.  Note from transcription: Now. the obligation is revived. may the creditor waive interest but demand fulfillment of the principal? Yes. but the waiver of the latter shall leave the former in force. Express/formal If debtor does not accept and creditor does not collect within the statute of limitations. (Example: when the merger takes place by a particular title. after its delivery to the creditor. or of a third person who owns the thing. Partial (upto the portion/ or may refer to accessory obligation) AS TO DATE OF EFFECTIVITY 1. May the court waive interest? No. 1273. B. The delivery of a private document evidencing a credit. REQUISITES 1. Implied (no formality) – conduct is enough 2. 4. 1274. CONFUSION OR MERGER OF RIGHTS Art. The obligation is extinguished from the time the characters of creditor and debtor are merged in the same person. (1192a) MERGER/CONFUSION – the meeting in one person of the qualities of creditor and debtor with respect to the same obligation. Can the court lower interest? Yes. whole obligation is remitted. 1271. RCBC case) Art. unless the contrary is proved. (1191a)  Only the accessory is remitted. If in order to nullify this waiver it should be claimed to be inofficious. 41 . only the share of the Debtor to whom creditor has granted remission. Book of Tolentino. The very obligation involved must be the same or identical The confusion must be total or as regards the entire obligation (exception Art. the principal obligation remains in force. (1188) Art. 3. It is presumed that the accessory obligation of pledge has been remitted when the thing pledged. (1189)    Presumption of remission prevails over presumption of payment.  In joint. RAM Notes Compiled by: Hanniyah Sevilla. C. 1275. it shall be presumed that the creditor delivered it voluntarily. Christ May Andolana. if unconscionable or inequitous.  No confusion if Debtor and Creditor represent different juridical entities even if both are the same.Obligations and Contracts: Sources 2006 Lectures of Atty. 2. Merger must be clear and definite. Lydia Galas (Hann Sevilla). PRESUMPTION IN JOINT/SOLIDARY OBLIGATION  In Solidary. (1190) Art.

when the merger takes place in the person of a guarantor. Confusion which takes place in the person of any of the latter does not extinguish the obligation. This is compensation which can be set up only at the option of a creditor when legal compensation cannot take place because of want of some legal requisites for the benefit of the creditor. Book of Tolentino.Obligations and Contracts: Sources 2006 Lectures of Atty.when a balance remains. (2) the parties agree to mutual extinguishment of their credits. Christ May Andolana.  Kinds/Classes of Compensation IAS TO ITS EXTENT a) b) II- TOTAL – obligation are completely extinguished because they are of the same amount.must be pleaded. JUDICIAL (SET-OFF). 1276. 2007 Case Digests (from Erwin Vicente). PARTIAL . the obligations of those persons who in their own right are reciprocally debtors and creditors of each other. Requisites: (1) each of the parties can dispose of the credit he seeks to compensate. the obligation is not extinguished.agreed to by parties. No such capacity is necessary As to # of Persons As to # of Obligation - - MERGER one person in whom is merged the qualities of C and D. Art. VOLUNTARY/CONVENTIONAL. It is the offsetting of 2 obligations which are reciprocally extinguished if they are of equal value. AS TO ITS ORIGIN/CAUSE a) b) LEGAL – takes place by operation of law. COMPENSATION OR OFF SETTING  It is a mode of extinguishing to the concurrent amount. c) d) DISTINCTIONS PAYMENT Payment must be complete and indivisible. Lydia Galas (Hann Sevilla). RAM Notes Compiled by: Hanniyah Sevilla. effective upon order of the Court. However. 2 obligation COMPENSATION Partial extinguishment is always allowed. Ferlyn Ong for 4th year Batch 2009 Art. (1193)  The extinguishment of the principal obligation through confusion releases the guarantors because the obligation of the latter is merely accessory. Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. 1277. True or legal compensation takes place by operation of law. or extinguished to the concurrent amount if of different values. one obligation - COMPENSATION Takes place by operation of law and extinguishes reciprocally the 2 debts as soon as they exist simultaneously to the amount of respective sums - COUNTERCLAIM OR SET-OFF Must be pleaded to be effectual 42 . Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. Involves action/delivery Capacity to dispose of the thing paid and capacity to receive payment are required COMPENSATION 2 persons who are mutually creditor and debtor to each other. (Two debts arising from final and executory judgment) FACULTATIVE – one party has the choice of claiming the compensation. It is a simplified or abbreviated payment because the 2 debts are extinguished without requiring the transfer of money or property from one party to the other.

If one of the parties to a suit over an obligation has a claim for damages against the other. they be of the same kind.  PROHIBITED COMPENSATION a) b) c) 1. Debts consisting in civil liability arising from a penal offense. The compensation of debts must not have been prohibited by law. commenced by third persons and communicated in due time to the debtor. (2) That both debts consist in a sum of money. in their own right. Notwithstanding the provisions of the preceding article. When the two debts are of the same amount. it is necessary: (although the parties may not be aware of it – CF Art. In order that compensation may be proper. and that he be at the same time a principal creditor of the other. Note: There can be no compensation when the object of the obligation is specific or determinate because there is only one determinate or specific thing. Lydia Galas (Hann Sevilla). he will be released from the debt. Christ May Andolana. If the conditions are resolutory. 1281. Art. Debts arising from a depositum except bank deposits. provided that requirements of ROC are observed. (1197) Why is a guarantor allowed to set up compensation? Because it will be beneficial to him.Obligations and Contracts: Sources 2006 Lectures of Atty. (1195) Art. there is a total compensation. there can be no compensation. But if one is reciprocal and the other is suspensive. Q: May there be compensation of obligations subject to conditions? A: It depends. are creditors and debtors of each other. 5. etc. Compensation may be total or partial. 4. 1279. the former may set it off by proving his right to said damages and the amount thereof. 3. Art. (n)  True for all different kinds of compensation whether voluntary. or if the things due are consumable. 2. Debts arising from a claim for future support due by gratuitous title. pwede. Damages suffered by a partnership through the fault of a partner cannot be compensated with profits and benefits w/c he may have earned for the partnership by his industry. Art. (3) (4) That the two debts be due. 6. 1278. 2007 Case Digests (from Erwin Vicente). RAM Notes Compiled by: Hanniyah Sevilla. Ferlyn Ong for 4th year Batch 2009 - Works as a sort of judicial compensation. There must have been no waiver of the compensation. (n)  Applies to conventional or voluntary compensation. (1196)  NEGATIVE REQUISITES OF LEGAL COMPENSATION That over neither of the debts must there be any retention or controversy commenced by 3 rd persons and communicated in due time to the debtor. 1282. (5) That over neither of them there be any retention or controversy. and also of the same quality if the latter has been stated. 1283. Art. Book of Tolentino. That they be liquidated and demandable. legal. Compensation shall take place when two persons. 1290) (1) That each one of the obligors be bound principally. you cannot duplicate that. Debts arising from the obligations of a depositary. The parties may agree upon the compensation of debts which are not yet due. Art. the guarantor may set up compensation as regards what the creditor may owe the principal debtor. (n) 43 . 1280. Debts arising from the obligations of a bailee in commodatum.

00 due on June 1. Lydia Galas (Hann Sevilla). 80. 1285. 2004. #3. a bracelet worth 100. (#2.compensation can be set-up re: debts before the cession. EXCEPTIONS 1. 25.Obligations and Contracts: Sources 2006 Lectures of Atty.000 due on Aug. 75. A dining set worth 200. 2. (unless there is reservation of right to claim. Christ May Andolana.) 2.000 due on Feb. 04 B owes A 1.04. RULE: Jurisdictionn depends upon the totality of the demand in all the causes of action. it serves as a waiver except if the right to compensation is reserved Assignment with knowledge but without consent of debtor --. A cow worth 15. 25. Ferlyn Ong for 4th year Batch 2009 JURISDICTION OF COURT RE: VALUE OF DEMAND GEN. 75. (n) Note: The rescissible obligations here refer to Art. 1284.Compensation cannot be set-up.000 due on Aug. 25. or due to. If the assignment is made without the knowledge of the debtor. cannot set up against the assignee the compensation which would pertain to him against the assignor.000 eonverted into damages by reason of non performance. 100. 1. RAM Notes Compiled by: Hanniyah Sevilla. 1381. Assignment made w/out knowledge of debtor -. 2. If with consent.debtor can set up compensation as a defense for all debts maturing prior to his knowledge of assignment. 4.2006. unless the assignor was notified by the debtor at the time he gave his consent. that he reserved his right to the compensation. irrespective of whether the plural cases arose out of the same or different transactions. Book of Tolentino. he may set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment. 10. 000 due on Oct. From transcription: Situation: A owes B : 1. 1. Q: What are the rights of A? What debts can he claim compensation? What debts can be the subject of compensation? A: It depends: 1. 3. 05. 03 5. 3. B assigned his credit to C on Dec. 50.000 due on April 1. If with knowledge.05. the latter may set up the compensation of debts previous to the cession. without consent: all debts previous to the assignment. 2. (1198a) RULES: 1. 2005. wala. but not after the assignment. Art. Art. #5) 44 . When one or both debts are rescissible or voidable. If the creditor communicated the cession to him but the debtor did not consent thereto.000 due on Dec. Where not all the causes of action joined are demands or claims for money. 4. 06.000 due on Jan 1. Where the claim joined under the same complainant are separately owed by. 3. 2007 Case Digests (from Erwin Vicente). Assignment with consent of debtor -. 2. but not of subsequent ones. 15. The debtor who has consented to the assignment of rights made by a creditor in favor of a third person. different parties in w/c cases each separate claim furnishes the jurisdictional test. they may be compensated against each other before they are judicially rescinded or avoided.

When the debt arises from a criminal liability. Art. even though the debts may be payable at different places. compensation takes effect by operation of law. When one debt arises because of a claim for support due to gratuitous title. all the requisites mentioned in 1279 are present before the debt actually prescribed. 05 is not the reckoning point. 1288. Art. or to his heirs and successors or to person who may have been designated in the contract. Art. If a person should have against him several debts which are susceptible of compensation. RAM Notes Compiled by: Hanniyah Sevilla. Neither shall there be compensation if one of the debts consists in civil liability arising from a penal offense. If deposit to 3rd person is allowed. 2007 Case Digests (from Erwin Vicente). (n) • 1. When all the requisites mentioned in article 1279 are present.Obligations and Contracts: Sources 2006 Lectures of Atty. because Dec. 5. Indemnity for expenses of transportation (of goods/objects) Indemnity for expenses of exchange. the depositary cannot deposit the thing to 3rd persons. Book of Tolentino. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title. “to the Concurrent amount” means if one debt is bigger than the other. 25. Lydia Galas (Hann Sevilla). When one debt arises from the obligation of a bailee in commodatum. Depositary is responsible for the negligence of his employees. 1289. Q: May the benefit of compensation be renounced or waived? A: Yes. 1290. Example of which would be 1285 paragraph 1. without prejudice to the provisions of paragraph 2 of article 301. (1200a) Art. the balance subsists as debt. Art. the depositary is liable for the loss if the person is careless or unfit. then there can be compensation. even though the creditors and debtors are not aware of the compensation. the rules on the application of payments shall apply to the order of the compensation. But the offended party may claim compensation (this is an example of a facultative obligation) • OBLIGATIONS OF A DEPOSITARY a) b) c) d) e) The Depositary is obliged to keep the thing safely and to return it when required to the depositor. As long as at one point. 4. When one debt arises from the obligation of a depositary. WHEN LEGAL COMPENSATION CANNOT TAKE PLACE When one debt arises from a depositum. 2. but there shall be an indemnity for expenses of exchange or transportation to the place of payment. Q: May it be possible for one claiming compensation despite the fact that the one claiming has a debt that already prescribed? A: Yes. (1202a)    Legal compensation takes place automatically unless there has been valid waiver thereof. (1199a)    Applies to compensation by operation of law. and extinguishes both debts to the concurrent amount. NOVATION 45 . Unless stipulated to contrary. even if one of the debts had already prescribed at the time of the claim for compensation. for as long as the requisites have met at a certain point. Compensation takes place by operation of law. 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. Assign without knowledge: it would now depend when A acquired knowledge. Christ May Andolana. Depositary cannot make use of the thing deposited w/out express permission of depositor otherwise he shall be liable for damages – except preservation of thing requires its use. Ferlyn Ong for 4th year Batch 2009 3. Compensation w/c extinguishes principal obligation carries with it the extinguishments of the accessory obligation. 1287. 1286. 3.

it is imperative that it be so declared in unequivocal terms. or subrogating a 3rd person in the rights of creditor. Renunciation of security? None ha. (3) Subrogating a third person in the rights of the creditor. It also says from negotiorum gestio to contract of agency. there is a novation. There must be a previous valid obligation. Obligations to pay a sum of money is not novated by a new instrument which merely changes the terms of payment. (Absent any. ii. (2) Substituting the person of the debtor. The consent of the parties to extinguish the prior obligation. 1292. four requisites must be complied with: 1. From mortgage to antichrisis. or that the old and the new obligations be on every point incompatible with each other. Otherwise. there is no novation) Art. In commodatum. (1203) KINDS OF NOVATION I.According to Form of its Constitution a) Express b) Implied (incompatibility of 2 obligation) III. Novation however is proper in case of change of juridical relation. anong change dun? The juridical tie. Christ May Andolana. 3. There is a novation if there is a change in the nature of the prestation. Book of Tolentino. If the period is increased. But there is no novation in a subsequent execution of a real estate mortgage as security.According to its Extent/Effect a) Total or extinctive (old obligation is totally extinguished) b) Partial or modificatory (imperfect or improper REQUISITES OF NOVATION a) The existence of a valid old obligation  If valid – nothing to novate  If voidable – possible novation before annulment Intent to extinguish or to modify the old obligation by substantial difference The capacity and consent of all the parties except in case of expromision – old debtor does not participate Validity of new obligation b) c) d) Is there novation if the amount in the new obligation is increased? No. why? The mortgage being merely an accessory obligation to secure the loan or promissory note. Ferlyn Ong for 4th year Batch 2009 NOVATION – substitution or change of an obligation by another w/c extinguishes/modifies the 1st either by changing its object or principal condition or substituting another in place of debtor. you have to pay. Lydia Galas (Hann Sevilla). Why? It merely affects the performance of the obligation. it does not affect either the principal object. example would be from commodatum to lease of thing. A valid new obligation. Even if that is merely an implied novation.Obligations and Contracts: Sources 2006 Lectures of Atty. condition. Yes. Surrender of the evidence of credit? No. b) Personal/subjective – change of persons i. The extinguishment of the old obligation. But if the new obligation is increased but if separate from the old obligation? (There is an increase in the old but it is found in a separate document) There is because the prior promissory notes are extinguished and superceded by the new promissory notes. 2. (1204) 46 . From contract of donation to contract of sale? Yes. the agreements must be incompatible with each other. 1291. Yes. because it is from a noncontractual relation to a contractual relation. it is a free use of thing while in lease. person of the creditor or debtor.According to its Object/Purpose a) Real/objective – changing the object/principal conditions of obligation. Subrogating a 3rd person in the rights of creditor (by agreement or by law) c) Mixed (change of object and parties) II. Obligations may be modified by: (1) Changing their object or principal conditions. In order that there shall be novation. If the evidence of credit from promissory note payable to order to payable to bearer? There is no novation. From alternative to simple or simple to alternative? Yes. Art. there is no novation. Take note that novation is never presumed. are there incompatible in all material points. 4. In order that an obligation may be extinguished by another which substitute the same. In order that there is implied novation. Substituting the person of debtor. (remission) There is no novation there because the obligation is extinguished. is there novation or lengthened or shortened? No. RAM Notes Compiled by: Hanniyah Sevilla. 2007 Case Digests (from Erwin Vicente). if the change is merely accessory or accidental. it merely becomes a simple debt.

3 Parties Delegante – original debtor Delegatario – creditor Delegado – new debtor 1293: is expromission. Place of payment is changed or there is variation in amount of partial payments. Art.Obligations and Contracts: Sources 2006 Lectures of Atty. Book of Tolentino. Initiative from old debtor 2. Now. Requisites 1. what would be the effect: 1236 and 1237. 3. 3 parties (old. Payment by the new debtor gives him the rights mentioned in articles 1236 and 1237. Christ May Andolana.substantial changes:  In object/subject matter of contract  In cause or consideration of contract  In principal terms or conditions of contract  If debt subject to condition is made an absolute one w/out a condition  Reduction of term/period stipulated  W/out consent of subscribers INSTANCES WHEN COURT HELD: NO EXTINCTIVE NOVATION a) b) c) d) e) f) g) h) i) j) Slight alterations or modifications in construction plans of buildings. Change of debtor (passive) 2. 2007 Case Digests (from Erwin Vicente). All parties concerned must consent  Implied/express  Before/after new debtor has given consent  Maybe conditional – has to be fulfilled. precisely because he did not consent or it was made without his knowledge. 2. a contract was entered into precisely to provide a method of payment other than that stated in judgment. (1205a) 2 Kinds of Personal/Subjective Novation 1. may be made even without the knowledge or against the will of the latter. Ferlyn Ong for 4th year Batch 2009 a) b) Express Novation – declared in unequivocal terms Implied – complete/substantial incompatibility . Change of Creditor (active) FORMS (Passive Novation) IExpromision – initiative comes from 3rd person. Lydia Galas (Hann Sevilla). the original debtor's consent is not necessary. new debtor and creditor) must agree. not the creation of the obligation. 47 . He cannot be held liable by reason of insolvency of the new debtor. When payment of purchase price for certain trucks is made by execution of promissory note for said price. Requisites 1. New contract merely contains supplementary agreement When additional interest is agreed upon When additional security is given When after a final judgment. 1293. but not without the consent of the creditor. When a guarantor enters into an agreement with creditor that he (guarantor) will also be a principal debtor. What happens if the new debtor is insolvent? Is the old debtor liable for the new debtor? No. In expromission. Initiative from 3rd person New debtor and creditor must consent Old debtor must be released from his obligations IIDelegacion – initiative from debtor for it is he who delegates another to pay. RAM Notes Compiled by: Hanniyah Sevilla. When a public instrument is executed to confirm a valid contract. When creditor in the meantime refrains from suing debtor or even when creditor merely extends the term of payment for here the period merely affects performance. it is essential that old debtor be released from his obligation. Novation which consists in substituting a new debtor in the place of the original one.

Lydia Galas (Hann Sevilla). Will that revive the old obligation? It does not. Christ May Andolana. When Art. When the principal obligation is extinguished in consequence of a novation. what about delegacion. would that extinguish the new obligation? Yes. 1298: When can a debtor claim annulment? What would be an instance wherein a debtor can claim annulment? A very common defense would be prescription of debt. If the substitution is without the knowledge or against the will of the debtor. Exception: If the insolvency of the new debtor is of public knowledge and existing and known to the (old) debtor. except when annulment may be claimed only by the debtor or when ratification validates acts which are voidable. But can a prescribed debt be the subject of novation? Can a prescribed debt be an object of a contract? Yes. If the new obligation is void. Book of Tolentino. unless it is otherwise stipulated. (n)  Refers to expromision Art. Subrogation of a third person in the rights of the creditor is either legal or conventional. So in both cases the consent of the creditor is always necessary. (an example is being named as a beneficiary of an insurance policy. novation is also void. 1296. the original one shall subsist. The novation is void if the original obligation was void. exception if there is a stipulation pour autrui. Can minority be a defense? Yes. what happens if the new oblilgation is void? Would that extinguish the old obligation? It does not.Obligations and Contracts: Sources 2006 Lectures of Atty. SUBROGATION SUBROGATION – transfer to a 3rd person all the rights appertaining to creditor – right to proceed against guarantors. CA compensation case) Art. Art. 48 . So a prescribed debt can be the subject of novation in as much as the prescribed debt can be the subject of a contract. unless the parties intended that the former relation should be extinguished in any event. or known to the debtor. 3rd person action only as guarantor/ surety New debtor merely agreed to make himself solidarily liable for the obligation. unless it is otherwise stipulated. who has been proposed by the original debtor and accepted by the creditor. But can it be a defense of the obligor? The prescription of the debt? Yes. 1295. What happens if the obligation is one with an accessory obligation or contract and the principal obligation is extinguished? Would that carry the extinguishment of the accessory obligation? Yes. possessors of mortgages etc. 1299. 1298. 1294. Who proposes the new debtor? The old debtor. the latter must be clearly established in order that it may take effect. when the delegated his debt. This is 1297. even if it is not of public knowledge. EXCEPTION: If there is a contrary stipulation. 2. 1295 does not apply: a. then there is revival of the original obligation. But can it also be subject to ratification? Yes. (1208a)  If old obligation is void – no valid novation. except when said insolvency was already existing and of public knowledge. 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. Now. If the original obligation was subject to a suspensive or resolutory condition. (1207) Art. (1206a)  Refers to delegacion Requisites to Hold Old debtor Liable 1. Now what if the original obligation has a suspensive or resolutory condition? Would the new obligation that novates the old obligation carry with it the condition? Yes.  If old obligation is voidable and annulled – no more obligation. 1297. Insolvency was already existing and of public knowledge at time of Delegation. 1299 says the new obligation shall be under the same condition. RAM Notes Compiled by: Hanniyah Sevilla. Now what happens if the new debtor is insolvent. review PNB vs. Or the insolvency was already existing and known to the debtor at the time of delegation. The insolvency of the new debtor. c. Art. 3rd person is only an agent. d. messenger or employee of debtor b. (n) GEN. Art. 2007 Case Digests (from Erwin Vicente). the new obligation shall be under the same condition. RULE: The conditions attached to the old obligation are also attached to the new obligation. The former is not presumed. except in cases expressly mentioned in this Code. 1300. Ferlyn Ong for 4th year Batch 2009 Now. Now what if the old obligation is void. shall not revive the action of the latter against the original obligor. New debtor merely agreed to make himself jointly or partly liable for the obligation Art. accessory obligations may subsist only insofar as they may benefit third persons who did not give their consent.

because in the event of default by the debtor. CONTRACTS 49 . Art. without prejudice to the effects of confusion as to the latter's share. even without the knowledge of the debtor. not interested in the obligation. debtor’s in old may be such a the new entirely Art. diba? Autonomy of will. Conventional subrogation of a third person requires the consent of the original parties and of the third person. Subrogation transfers to the persons subrogated the credit with all the rights thereto appertaining. or B. even without the debtor's knowledge. (3) When. But subrogation is classified into conventional (by agreement of the parties) or legal (1302). So. even without the knowledge of the debtor. *Who is the creditor who is preferred? A. 1304. whose credit of 100. All he has to do is to foreclose the mortgage and his credit is extinguished by reason of the foreclosure. The old creditor whose debt has been partially performed. 2007 Case Digests (from Erwin Vicente). CONVENTIONAL SUBROGATION Extinguishes obligation and creates a new one. to whom partial payment has been made.000 is secured by a chattel mortgage? B is preferred. while subrogation involves change in the person of the creditor. RAM Notes Compiled by: Hanniyah Sevilla.000. may exercise his right for the remainder. So. without prejudice to the effects of confusion as to the latter's share. those are the situations when legal subrogation takes place. whose credit of 100. 1302. 2. A now steps into the shoes of creditor B and is entitled to the security of B. 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. It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred. 1304: Speaks of two creditor. a person interested in the fulfillment of the obligation pays. pays with the tacit or express approval of the debtor. 1301. who is preferred? The old creditor. Gatmaitan case) Art. But may a legal subrogation be changed into conventional subrogation? Yes. For as long as the original credit has not been fully satisfied. (1212a)  If transferred credit is subject to suspensive condition. So. a person interested in the fulfillment of the obligation pays. Book of Tolentino. When a third person. be they guarantors or possessors of mortgages. When. Subrogation is different from ex promission or delegacion because the latter involves a change in the person of the debtor. Lydia Galas (Hann Sevilla). A creditor. even without the knowledge of the debtor. 1303.000 has an interest of 12% per annum. (Licaros vs.Obligations and Contracts: Sources 2006 Lectures of Atty. in this case. even without the debtor's knowledge. So. the parties may still enter into a conventional subrogation.  Does not require consent of debtor. subject to stipulation in a conventional subrogation. not interested in the obligation. new creditor cannot collect until after such condition is fulfilled. when the creditor pays another creditor who is preferred. Defect obligation cured in way that obligation becomes valid. 1303: So despite the fact that there is legal subrogation. if A pays B. either against the debtor or against third person. then he has a right of preference over the new creditor. 3. Requires consent. and the new creditor whose debt has also been partially performed. As between the two. when is there conventional subrogation? It would require the consent of the original parties and of the third person. pays with the express or tacit approval of the debtor. Christ May Andolana. need not go to court to file an action for the collection of the 100. Ferlyn Ong for 4th year Batch 2009 ASSIGNMENT OF CREDIT  Mere transfer of same right or credit (transfer does not extinguish credit). Art. when is there legal subrogation? (1302) 1. (2) When a third person.  Defect in credit/right is not cured by assigning the same.

D. E. b. a. Mortgage. J. G. c. 2007 Case Digests (from Erwin Vicente). a. a. RAM Notes Compiled by: Hanniyah Sevilla. principal is Loan) Preparatory – contract is not the end itself but as means through w/c future transactions or contracts may be made. ELEMENTS (Essential) Consent Subject matter Cause/consideration NATURAL Elements – those found in certain contracts and presumed to exist. According to Cause/Equivalence of Value of Prestations Onerous – interchange of equivalent valuable considerations Gratuitous/ lucrative – free. b. Parties Delegated Unilateral – one party has obligation Bilateral – both parties are obliged to give or render reciprocal prestations Name/Designation Nominate – contract has a name Innominate – contract has no name Risk of Fulfillment Commutative – parties contemplated a real fulfillment. b. b. F. C. a. A contract is a meeting of minds between two persons whereby one binds himself. equivalent value are given (lease) Aleatory – fulfillment is dependent upon chance. K. Ferlyn Ong for 4th year Batch 2009 Art. a.Obligations and Contracts: Sources 2006 Lectures of Atty. a. b. b. with respect to the other. that is. or reciprocally. ACCIDENTAL Elements – various particular stipulations that may be agreed upon by the contracting parties in a contract. c. B. According to Importance/ Dependence of One upon Another Principal – contract stands alone by itself Accessory – depends for its existence upon another contract. unless the contrary has been stipulated. Sale) Contract involving Rights/credits (usufruct. (1254a) CONTRACT – is a juridical convention manifested in legal form. H. Lydia Galas (Hann Sevilla). 1305. a. values vary. one party receives no equivalent prestation Remunerative – one where one prestation is given for a benefit or service that had been rendered previously. to give something or to render some service. c. a. Contract of sale) Executory – prestations are to be complied with at some future time (eg. obligations are complied with at this time (eg. of Persons actually and physically entering into Contracts Ordinary (2) Auto-contracts – one represents 2 opposite parties but in different capacities 50 . a. c. b. a. a. Property not yet delivered and price not yet given) Subject Matter Contract involving things (eg. Christ May Andolana. by virtue of w/c. one or more persons bind themselves in favor of another or others. (eg. Time of Performance Executed – one contemplated at time the contract is entered into. to the fulfillment of a prestation to give.perfected by delivery Formal/solemn – those where special formalities are essential before contract may be perfected. CLASSIFICATION OF CONTRACTS A. b. b. to do or not to do. b. According to Formation Consensual – perfected by consent Real . b. Book of Tolentino. I. assignment of credits) Contract involving services (carriage) Obligation Imposed and regarded by Law Ordinary Institutional Evidence Required for its Proof Parol/oral Required written proof No.

3. Now. Nature Personal Impersonal STAGES OF CONTRACT 1. Basic Principles/Characteristics of Contract 1. Ferlyn Ong for 4th year Batch 2009 L. The presumption is that at the time of the negotiation.Obligations and Contracts: Sources 2006 Lectures of Atty. The third is the principle of relativity of contracts. 2. An example of which would be the warranty against hidden defects. prior to the perfection of the contract. We have the essential elements. their liability would be solidary. can he use his own money? o The existence of a contract is not determined by the number of persons who intervene in it. cannot stipulate his term. solidary liability is not presumed. what is meant by obligatory force of contracts? Just like autonomy of will. That it only binds the parties to the contract and their successors in interest. in case of doubt. #of Persons participating in Drafting a Contract Ordinary – e. by virtue of which one or more persons bind themselves in favor of another or others. the parties do not stand on equal footing. can the agent also be the lender? Or if he is authorized to lend. Freedom to stipulate Obligatory force and compliance in good faith Perfection by mere consent Both parties are mutually bound Relativity Contract: juridical convention manifested in legal form. The debtor. 1305 says that a contract is the meeting of minds between two persons whereby one binds himself with respect to the other to give some thing or to render some service. 2007 Case Digests (from Erwin Vicente). if the agent is authorized to borrow money. The third element would be the accidental elements. RAM Notes Compiled by: Hanniyah Sevilla. what has been stipulated in the contract is the law between the parties to the contract. what are the characteristics of a contract? Contracts have three characteristics: we have the obligatory force of contracts. and the cause. and liberally in favor of the person who does nothing but merely affixes his signature to the already prepared contract. signifies his consent by signing the contract. which are those elements that even if not agreed upon by the parties form part of the contract. elements of subject matter and valid cause – accepted by mutual consent. He cannot do that. Now. That if it is not stipulated there. Consummation (termination) – terms of contract are perfected. 2. (contracts of adhesion) He can be a vendor and a vendee at the same time only that in one contract he might merely be an agent and the other the buyer. He cannot say that this is onerous on my part. to the fulfillment of a prestation to give. especially if he borrows money from the bank. 4. Other limitations: in agency. The appropriate term is to parties because there can be as many persons in a contract as they are interested in the contract. The validity and performance cannot be left to the performance of one of the contracting parties and leaving the other free from complying with what is stipulated in the contract. 51 . It does not mean that the parties are only limited to only two persons. And one cannot be heard later on to say that the agreement is disadvantageous on his part. Because. the construction is construed strictly against that person who prepared that contract. Such as: husbands and wives cannot enter into contracts involving properties. the parties freely stipulates the conditions. except if there is complete separation of property. Then we have the natural elements. b. Christ May Andolana. Now. a. under the law. Consent. One of the exceptions there is: if there is a stipulation in favor of a third person. So different capacities in one person. 3. may any person just enter into a contract? Is that right absolute? No. subject matter. we learned before that in cases of contracts of adhesion. a. terms and stipulations that may have agreed which arrived at and belong to the perfection of the contract. to do. Now. Preparation (conception) – negotiations between parties Perfection (birth) – agreement.g sale Contract of Adhesion – buyer or person interested is insured. Now. may he borrow money? But if he is authorized to lend. Lydia Galas (Hann Sevilla). The only option is to either to sign or not to sign. or reciprocally. or not to do. 5. but in different capacities. but by the number of declarations of will. M. b. the presumption is that it is not part of the agreement. May a person enter into a contract with himself? Yes. Because in that case. An example would be that if the parties agree that in case of breach. (Contracts of adhesion) What are contracts of adhesion? Example of which would be an insurance contract. The accidental elements are the ones that must be agreed upon by the parties. the interpretation would always be in favor of the person who merely affixed his signature thereto and who did not participate in the preparation of the contract. So in those cases in case of doubt. The cause is the why of the contract. the reason why parties entered into the contract. Book of Tolentino. because there are certain limitations. contracts have 3 elements. The second is mutuality of contract.

the PN cannot be the basis for X to file a case against A because the source is from a polluted source from one not allowed by law. conveys.000. Is marriage a consensual contract? Yes. alienates his parcel of land covered by TCT 123 located in Ecoland D. Now. it is one of equitable mortgage. how are contracts perfected? It might be perfected by mere consent and they are called as consensual. Ferlyn Ong for 4th year Batch 2009 To arrive at a consummated or perfected contract. (illegal gambling) But suppose X would negotiate the PN to Y.? Would the parties now be bound by that agreement in case there is a doubt? No. sige discounted ko yan. (because 3rd persons are always protected. X cannot sue A by reason of the PN.) Now. So. the birth and the perfection of the contract. So in this case. If Y is authorized to lend money. in case of doubt. Y would demand from A the value of the PN. likewise even if the parties would say "this is valid between us ha. The contracting parties may establish such stipulations. then that is consummation or death of the contract. who received the PN in good faith and paid value for it. because while it might be true that the stipulation is the law between the parties. consisting of 500 sq. So. 1306 Autonomy of Contracts: But there are certain limitations. Why is it called preparatory? It is called such in as much as it looks forward to future transactions. of course he cannot recover under the circumstances of the promissory note. As I said. Yes. So those are the considerations that must be taken together when the parties entered into the agreement.Obligations and Contracts: Sources 2006 Lectures of Atty. Between Y and A. for and in consideration of the sum of 20K hereby transfers. In fact. the promissory note of a gambling debt". however. A cannot invoke as a defense that the PN is a void PN as against a 3rd person who acted in good faith and paid the PN with consideration. 20K). But there are certain contracts that will require delivery aside from consent. if a contract of sale does not have any document is that a valid contract? Yes. but i will furnish you a promissory note. disposes. there is a period to repurchase within one year. i don't have the money now. Book of Tolentino. (except those allowed). Now what are those future transactions that will arise from a contract of agency? It would depend to the powers granted. Lydia Galas (Hann Sevilla). clauses. a contract may be preparatory in nature such as a contract of agency because this would lead to future transactions. 2007 Case Digests (from Erwin Vicente). natalo si A at umabot ang utang nya ng 300. good customs. because this is not a contractual debt. you call that preparation or generation. public order. Art. Then you have perfection. RAM Notes Compiled by: Hanniyah Sevilla. there are three stages: when the parties bargain or negotiate. then this is the accessory contract. Hindi man yan kailangan. So. if X and A played Tong-its and then their bet is 50K. So in that case. This is what you call as future transactions. And if A will be unable to repurchase the property within the period of 1 year. 52 . X will not have a cause of action against A. only couched differently by the parties. the contract of loan is the principal contract. sells. looking at it. by looking at it. The cause of the issuance is an illegal cause. m.C. (like. Now. And when you pay the price and he delivers what you have bought. So if the loan is guaranteed by a mortgage. parties are free to stipulate. the juridical relations as well as the rights and obligations that will arise by reason of the contract is not governed by the stipulation but rather by law. The deed of Sale with right to repurchase contains that A. Second. 1306: Autonomy of contract = to autonomy of will. but the juridical relations as well as the rights and obligations that would arise by reason of that contract that you have entered into is not governed by the stipulation of the parties. A contract might also be considered accessory because its existence will depend on the principal contract. There would be no question if the consideration was 20million. that would really be a deed of sale with right to repurchase because the consideration given is really equivalent to the value of the property based on its location. Because there can be no antichresis if the debtor does not deliver the property. 1306. it must not be contrary to law. Ano ang kasama sa negotiation? The price. it would seem that the contract entered into is one of mortgage. terms and conditions as they may deem convenient. Because there is now fulfillment or performance of the terms agreed upon in the contract. the consideration is very very low. this PN if suppose A would not pay what is stated on it. an example of which would be antichresis. such as sale. the rights and obligations which arise by reason of this contract is not governed by the stipulations. morals. So. or public policy. the contract of agency the prepratory contract and the contract of mortgage the accessory contract. Y can still collect the amount stated in the PN. not of sale with right to repurchase. and only for 20K for 500sq. Now. he is not affected by the agreement between X and A. m. because it is perfected by mere consent. but rather by law. then B's right over the property shall be absolute and unconditional. Christ May Andolana. Now. how are contracts classified? First is according to the degree of dependence. the SC said. because as I've said. A in fact can recover what he had lost from X kung nagbigay sya ng pera. that is an example of the principle that while it may be true that parties are bound by their stipulations and it shall constitute the law between them. So the contract of loan is the principal contract. For one. Such as what? Suppose A executed a deed of Sale with right to repurchase in favor of C. So. however. sabi ni A. what would be the future transaction that would arise? A contract of loan. Remember antichresis? You have to deliver the property in order that antichresis shall be perfected. it is the obligatory force between the parties. provided they are not contrary to law. would you believe that that is a valid deed of sale taking into account that the land is located in Ecoland. it is from gambling. You don't have to have the contract or certificate of marriage.

There was this Spaniard who came to the Philippines and wanted to tour the Philippines. Unfortunately. when you rent. Christ May Andolana. such as husband and wives cannot enter into a contract subject to certain exceptions. (n) 4 Kinds of Innominate Contracts i. Book of Tolentino. he did not know how to speak the local dialect. Facio ut Des (I do that you may give) iv. So he went around the island. voluntarily entered into the request of the Spaniard. mutuality is that both parties must be bound to the contract. or when you borrow money. an agent authorized to lend cannot borrow. he is therefore entitled for compensation. Was there a contract entered into by the parties. its validity or compliance cannot be left to the will of one of Mutuality of contracts – both parties are bound. and by the customs of the place. RAM Notes Compiled by: Hanniyah Sevilla. There is a contract. o Innominate contracts are. When the fulfillment of condition depends upon the sole will of debtor. 1308. in this case. precisely which lead to the perfection of the contract. When one of the Filipinos learned the dilemma of the Spaniard. in one bar examination. Customs of place 1307: Innominate Contracts These are contracts that have no specific name. 1308: Speaks of mutuality of contracts that both parties must be bound by the agreements that they have entered into. there is no specific name. The Spaniard countered that there was no contract between them because the Filipino presented himself. After the tour. Now. to be governed by rules applicable to the most analogous contract. it cannot be left to one of the parties alone leaving the other party free from complying with what is incumbent upon him. (1256a)  The contract must bind both contracting parties. the question goes like this: X called B. Ferlyn Ong for 4th year Batch 2009 - not absolute because there are limitations. nor can have it set aside on the ground that he had made a bad bargain. at the time of the bargaining stage. So. there is this contract of lease. the conditional obligation is void if the condition is suspensive. by the provisions of Titles I and II of this Book. A party cannot revoke or renounce a contract w/o the consent of the other. Do ut Des ( I give that you may give) ii. the agreement has no specific name. Do ut des ( I give and you give) 2. 2007 Case Digests (from Erwin Vicente). them. Provisions of Title I and II iii. Do ut facias ( I give and you do) 3. it is a loan with pledge. the Filipino now demanded payment for his services. because he rendered his services and he is entitled to compensation. by the rules governing the most analogous nominate contracts. Facio ut Facias (I do that you may do) Rules Governing Innominate i.Obligations and Contracts: Sources 2006 Lectures of Atty. Facio ut des ( I do and you give) 4. there is this deed of sale. Stipulations of parties ii. Innominate contracts shall be regulated by the stipulations of the parties. the presented himself to do the interpretation. and it is secured by a pledge. assumed that the person consented the request. the presumption is that both parties at the time of the negotiation. like when a lawyer and a client enters into an agreement whereby the client hires the services of the lawyer. Here. Art. Rules governing most analogous nominate contract iv. Lydia Galas (Hann Sevilla). 2. But the SC said that as soon as you have hired the services of the person and you made use of the talent of that person. Unlike when you enter into a contract of sale. There are four kinds of innominate contracts 1. Its validity and compliance cannot be left to the will of only one of them. if it is resolutory it is valid. Facio ut facias ( I do and you do) There was this very old case. "can you go to the store to buy for me the following items?". Consequences of Mutuality 1. Meaning each one of them participated during the negotiation stage. Do ut Facias ( I give that you may do) iii. 53 . 1307. in the absence of stipulations and specific provisions of law on the matter. Art. So. Regardless if there is a contract or not. they stood on equal footing. and if there was what kind of a contract was it? Can the person demand payment for the services he rendered.

" The lessor is bound by the option he has conceded to the lessee. the decision binds the party only after it is made known to both. The heir is not liable beyond the value of the property he received from the decedent. its validity cannot be left to the will of one of them. After all. (1257a) Principle of Relativity  Contracts are generally effective only between the parties. It is a purely executory contract and at most confers a right to obtain a renewal if there is compliance with the conditions on which the right is made to depend. A mere incidental benefit or interest of a person is not sufficient The stipulation must be part of contract and not the whole of the contract. If a contract should contain some stipulation in favor of a third person. 4. their assigns and heirs. except in case where the rights and obligations arising from the contract are not transmissible by their nature. Where there is stipulation Pour Autri ( a stipulation in favor of 3rd person) Where a third person induces another to violate his contract Where in some cases. the fixing of price and delivery date can be left to a 3 rd person. The determination of the performance may be left to a third person. their assigns and their heirs. The lessee cannot thereafter escape liability even if he should subsequently decide to abandon the premises. The contracting parties must have clearly and deliberately conferred a favor upon a third person. the courts shall decide what is equitable under the circumstances. Requisites of Stipulation Pour Autri a) b) c) d) There must be a stipulation in favor of a 3rd person. Contracts take effect only between the parties. no party can renounce it unilaterally or without the consent of the other. 1310. 3. Contracting parties must have clearly and deliberately conferred a favor upon a 3rd person. the lessor is free to give or not to give the option to the lessee. The unilateral act of one party in terminating the contract without legal cause makes it liable for damages. 3rd persons may be adversely affected by a contract where they did not participate.Obligations and Contracts: Sources 2006 Lectures of Atty. by stipulation in favor of a 3rd party. Lydia Galas (Hann Sevilla). A mere incidental benefit or interest of a person is not sufficient. The questioned provision states that the lease "may be renewed for a like term at the option of the lessee. The fact that such option is binding only on the lessor and can be exercised only by the lessee does not render it void for lack of mutuality. The right of renewal constitutes a part of the lessee’s interest in the land and forms a substantial and integral part of the agreement. both parties are thereafter bound by the new lease agreement. The lessee likewise becomes bound only when he exercises his option and the lessor cannot thereafter be excused from performing his part of the agreement Art. Their rights and obligations become mutually fixed. and (2) there must be mutuality between the parties based on their essential equality. (n) -  E. Where law authorizes the creditor to sue on a contract entered into by his debtor.g. Mutuality of contract. Art. or by stipulation or by provision of law. 2007 Case Digests (from Erwin Vicente). and the lessee is entitled to retain possession of the property for the duration of the new lease. The determination shall not be obligatory if it is evidently inequitable. 5. Book of Tolentino. The fact that a party may not have fully understood the legal effect of the contract is no ground for setting it aside. 1309. 54 . Ferlyn Ong for 4th year Batch 2009 - 1308: The contract must bind both contracting parties. in a contract of sale. 1311. And while the lessee has a right to elect whether to continue with the lease or not. 2. once he exercises his option to continue and the lessor accepts. The binding effect of the contract on both the parties is based on the principles that (1) obligations arising from contracts have the force of law between the contracting parties. in the same manner once a contract is entered into. Allied Bank case: . he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. Just as nobody can be forced to enter into a contract. Mutuality obtains in such a contract and equality exists between the lessor and the lessee since they remain with the same faculties in respect to fulfillment. Christ May Andolana. whose decision shall not be binding until it has been made known to both contracting parties. Exceptions: 1. RAM Notes Compiled by: Hanniyah Sevilla. Where obligations arising from the contract are not transmissible by their nature. and the lessor may hold him liable for the rent therefor. In such case. (n) Art.

Note: 1. (1259a) Requisites for a Person to Contract in the Name of Another a) b) c) He must be duly authorized (express/impliedly) He must have by law a right to represent him (guardian/administrator) Contract must be subsequently ratified (express/implied. Christ May Andolana. 2007 Case Digests (from Erwin Vicente). Art. Art. expressly or impliedly. 2. Knowledge by the 3rd person of the existence of the contract. are not perfected until the delivery of the object of the obligation. No one may contract in the name of another without being authorized by the latter. by the person on whose behalf it has been executed. 1317. before it is revoked by the other contracting party. Note: Contracts are not what the parties choose to call them. Cause/consideration and Delivery. (Neither the contracting parties bears the representation or authorization of the 3rd party. according to their nature. usage and law.Obligations and Contracts: Sources 2006 Lectures of Atty.) That the favorable condition should not be conditioned or compensated by any kind of obligation or whatsoever. Ferlyn Ong for 4th year Batch 2009 e) f) g) 3rd person communicated his acceptance to obligor before its revocation. 3. (n)  Requires Consent. or who has acted beyond his powers. Art. shall be unenforceable. Consent presupposes legal capacity. unless it is ratified. subject to the provisions of the Mortgage Law and the Land Registration Laws. Interference of the 3rd person in the contractual relation without legal justification. 1314. 1316. 2. may be in keeping with good faith. Art. 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. 1315. Subject matter. 1312. Lydia Galas (Hann Sevilla). (1258)   Consensual contracts are perfected from the moment there is agreement (consent) on the subject matter. In contracts creating real rights. CF: Law on agency ESSENTIAL REQUISITES OF CONTRACTS Art. (3) Cause of the obligation which is established. There must be no relation of agency between either of the parties and 3rd person. A contract entered into in the name of another by one who has no authority or legal representation. pledge and Commodatum. Contracts are perfected by mere consent. otherwise. RAM Notes Compiled by: Hanniyah Sevilla. (2) Object certain which is the subject matter of the contract. third persons who come into possession of the object of the contract are bound thereby. There is no contract unless the following requisites concur: (1) Consent of the contracting parties. Book of Tolentino. Real contracts. contract is voidable. and the Cause or consideration. such as deposit. Existence of a valid contract. Requisites: 1. 1318. The validity of stipulations is one thing. Art. CONSENT 55 . Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. and the juridical qualification of the contract resulting therefrom is another. Object certain means at the very least determinable I. or unless he has by law a right to represent him. by word or deed) Unenforceable contracts are valid contracts but they cannot be enforced through court actions. but what they really are as determined by the principles of laws.

) 2. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Q: Is there a perfected contract in a qualified acceptance? No. (Used if consent is manifested through letter or telegram. there is no perfected contract. What happens is a counter-offer. there is acceptance but there is a qualification. c. at different times. silence does not authorize any definite conclusion. The offer must be certain and the acceptance absolute. Note: Offer and acceptance may be withdrawn before perfection of the contract. to Tolentino: (f) express or tacit manifestation of the will and (g) conformity of the internal will and its manifestation. There is a clear identity in the effect of the silence and the undisclosed will. and the second offeree accepts the offer before the first. with respect to the first but not to the 2nd. Manifestation Theory – Contracts are perfected upon the moment acceptance is declared. b. Expedition Theory – Contracts are perfected the moment the offeree transmits the acceptance to the offeror. Cognition Theory – Contracts are perfected only upon the knowledge of the offer of the acceptance of the offeree. Note: In our law. is presumed to have been entered into in the place where the offer was made. according to Tolentino. adhered in the Phil. The intent must be declared properly (legal formalities must be complied with) Note: Accdg. There must be no vitiation of consent or consent must be made intelligently and freely. Book of Tolentino. Here. RAM Notes Compiled by: Hanniyah Sevilla. such as the letter or telegram of acceptance is placed in the mail box. A qualified acceptance constitutes a counter-offer. 3. The manifestation of the will cannot be interpreted in any other way. When we say amplified. in such a case. b) And an acceptance that must be Unqualified and absolute. "I'm selling you mangosteen at 5/kl but you have to get 100 kilos. complete and intentional. Reception Theory – Contracts are perfected upon the time the acceptance is in the hand of the offeror (regardless of knowledge or if he read the same) Note: Offer by telephone similar to face to face conversation. 2007 Case Digests (from Erwin Vicente). Parties must be capable or capacitated. So. There must be no conflict between what was expressly declared and what was really intended. • Theories: 1. Ferlyn Ong for 4th year Batch 2009 It is the meeting of the minds between parties on the subject matter and the cause of the contract. there are requisites in order that silence produces tacit acceptance. A qualified acceptance constitutes a counter-offer. There is a perfected contract with respect to the first (sell at 5/kilo) but not to the second offer (buy 100 kilos). 56 ." Is there a perfected contract there? Yes.Obligations and Contracts: Sources 2006 Lectures of Atty. acceptance of one does not imply acceptance of the other. Christ May Andolana. the offeror becomes liable for damages to the 1st offeree if he does not withdraw his offer prior to the acceptance of the 2nd offeree. regardless of whether the declaration has come to the knowledge of the offeror or not. If a persons offers the same thing to two persons. Consent may be express or implied. namely: a. according to ma’am G. (1262a) Requisites of Consent a) b) c) d) e) Plurality of subjects/parties. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. Requisites for Meeting of Minds a) An offer that must be certain An offer must be definite. There is a duty or the possibility to express oneself.. Art. even if neither one has been delivered. I will buy another 100 for the same price. 1319. Note: Another type of acceptance is amplified acceptance. 4. there is no contract if there is a qualified acceptance. The contract. However.  If there are 2 contracts and they are independent of each other. Lydia Galas (Hann Sevilla).

the offer may be withdrawn at any time before acceptance by communicating such withdrawal. insanity. business advertisements of things for sale are not definite offers. This is a unilateral promise. Unless it appears otherwise. It binds the party who has given the option not to enter into the principal contract with any other person during the period designated and. Book of Tolentino. unless the contrary appears. but mere invitations to make an offer." Then that is removed from 1324 because it says part of the purchase price. 1323. b) When the offer is accepted with a qualification or condition. 2007 Case Digests (from Erwin Vicente). e) When the offer is revoked in due time (before the offeror has learned of its acceptance by the offeree) Art. OPTION CONTRACT– contract granting a person the privilege to buy or not to buy certain objects at anytime w/in the agreed period at a fixed price. there must be an acceptance that shall convert it into a contract. 1322: An offer made through an agent is accepted from the time acceptance is communicated to him. Ferlyn Ong for 4th year Batch 2009 Note: Rule on public offers: A promise may be made publicly by way of advertising a reward. the business advertisement is not an offer. the offer may be withdrawn at any time before acceptance (of thing being offered) by communicating such withdrawal.000 as earnest money" and A says "okay. 1325. Earnest money is actually part of the purchase price. Note: When the offeror has not fixed a period and the offer is made to a person present. as something paid or promised. and the advertiser is not bound to accept the highest or lowest bidder. A unilateral promise is not recognized by our Code as having obligatory effect. We will just execute the deed of sale as soon as you deliver the balance. Exception: when the option is founded upon a consideration as something paid or promised. RAM Notes Compiled by: Hanniyah Sevilla. except when the option is founded upon a consideration. 1326. (n) Forms of Acceptance 1. the acceptance must be made immediately. Art. d) When the period of time given to the offeree w/in which he must signify his acceptance has already lapsed. RULE: If the offeror has allowed the offeree a certain period to accept. but here is 10. civil interdiction. Lydia Galas (Hann Sevilla). It must have its own cause/consideration because it is a distinct contract. Art. or insolvency of either party before acceptance is conveyed. When the offerer has allowed the offeree a certain period to accept. compensation. (n) Other instances when Offer becomes Ineffective a) When the offeree expressly or impliedly rejects the offer. there is no contract of option here but a perfected contract of sale. (n) GEN. to enter into such contract with the one to whom the option was granted if the latter should decide to use the option. Art. place and manner of acceptance. In order that such promise can be enforced. (n) Exceptions: Judicial sales and if specifically stated in the advertisement 57 . may also come in the form of a forfeiture. 1324. Christ May Andolana. So the performance of the act for which a reward or prize is promised can be considered as an acceptance. c) When before acceptance is communicated. An acceptance may be express or implied. express 2. implied 3. within that period. Advertisements for bidders are simply invitations to make proposals. From Transcription: Suppose Y will say "give me 3 days to decide. the subject matter has become illegal or impossible. or prize for any person who performs of executes a particular act or obtains a particular result. and the grant must be exclusive The cause is not only price but something/anything of value. (n) Unless the object is determinate. Art. presumed (by law) 1321: The person making the offer may fix the time. i will accept it. An offer becomes ineffective upon the death. all of which must be complied with. 1320.Obligations and Contracts: Sources 2006 Lectures of Atty.

provided that minor was at least 7 years old. Christ May Andolana. In the form of savings account. In order that mistake may invalidate consent. A simple mistake of account shall give rise to its correction. 1331. A contract where consent is given through mistake. INSANE/DEMENTED PERSONS– no proper declaration of insanity by the court is required. Note: But if both are incapable of giving consent. take care of themselves and manage their property. The incapacity declared in article 1327 is subject to the modifications determined by law. the person was really insane. Art. spouse. 1329. brothers and sisters and provided furthermore that the minor is 18 years and above. Contracts w/c they enter into are Voidable. (2) Insane or demented persons. children. as long as it is shown that at the time of contracting. Unless: a) b) c) d) e) f) Upon reaching the age of majority. (1266a) 58 . unable to read and write e) Unsound mind even though they have lucid intervals f) Those who by reason of age.Obligations and Contracts: Sources 2006 Lectures of Atty. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. They were contracts for necessities such as food. or to those conditions which have principally moved one or both parties to enter into the contract. violence. or fraud is voidable. 2007 Case Digests (from Erwin Vicente). 1327. Art. (1263a) In General. 1328. Ferlyn Ong for 4th year Batch 2009 Art. (1265a) Vices/Causes of Vitiated Consent  Mistake (error)  Fraud (deceit)  Violence  Intimidation  Undue influence Note: Vitiated consent does not avoid the contract but merely renders it voidable. (n) Voidable Contracts: a) b) c) Entered into by insane/demented persons (unless they acted during a lucid interval) Those in state of drunkenness Under hypnotic spell Art. Lydia Galas (Hann Sevilla). but here the people who are legally bound to give them support should pay therefore. Book of Tolentino. (1264) Incompetents under Rules of Court a) Under Civil interdiction b) Hospitalized lepers c) Prodigals d) Deaf and dumb.  Mere preponderance of evidence is not sufficient. They were contracts where the minor misrepresented his age and pretended to be one of major age and is thus in Estoppel. disease. 1330. The following cannot give consent to a contract: (1) Unemancipated minors. Contracts of life insurance in favor of their parents. Contracts entered into during a lucid interval are valid. undue influence. and is understood to be without prejudice to special disqualifications established in the laws. cannot w/o aid. intimidation. They were entered into through a guardian and the court having jurisdiction had approved it. the contract is unenforceable. and deaf-mutes who do not know how to write. and other similar causes. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract. it should refer to the substance of the thing which is the object of the contract. Art. RAM Notes Compiled by: Hanniyah Sevilla. they ratify the same. weak mind.

2007 Case Digests (from Erwin Vicente). 1335. RAM Notes Compiled by: Hanniyah Sevilla. (n) Requisites for Mutual Error To Vitiate Consent a) There must be mutual error b) The error must refer to the legal effect of the agreement. Christ May Andolana. Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated. 1334. error as to the solvency of the party. (Mistake of law is not a ground for annulment of contracts) • Error of law refers to a mistake as to the existence of a legal provision or as to its interpretation or application. Book of Tolentino. 4. or upon the person or property of his spouse. error with respect to accidental qualifies of the object of the contract. Errors which do not affect the validity of the contract: 1. Doubtful questions of law. (n) Presumption: One always acts with due care and signs with full knowledge of all the contents of a document even if the mind of the party signing was confused at the time of signing as long as he knew what he was doing. otherwise it is REFORMATION. but without error as to the person. Legal effects. error which refers to accessory matters in the contract foreign to the determination of the object. To determine the degree of intimidation. c) The real purpose of the parties is frustrated. 3. 59 . the person enforcing the contract must show that the terms thereof have been fully explained to the former. contract. to give his consent. A threat to enforce one's claim through competent authority. Art. that might lead to frustration of the real intention of the parties that would warrant annulment.Obligations and Contracts: Sources 2006 Lectures of Atty. contingency or risk affecting the object of the Art. 1333. 5. the person enforcing the contract must show that the terms thereof have been fully explained to the former. the age. sex and condition of the person shall be borne in mind. or if the contract is in a language not understood by him. Lydia Galas (Hann Sevilla). 2. Ferlyn Ong for 4th year Batch 2009 Requisites For Mistake to Vitiate Consent a) The error must be substantial regarding:  Object of contract  The conditions w/c principally moved/induced one of the parties. or the different interpretations or construction of the law. 1334: The provision here refers to mistakes of doubtful questions of law. 1332. There is violence when in order to wrest consent. When Presumption Cannot Apply a) When one of the parties is unable to read b) Or if contract is in a language not understood by one of the parties  In both cases. b) It must have been the efficient cause why the contract was entered into. does not vitiate consent. error in the value of the thing. 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. Art.  Identity or qualifications but only if such was the principal cause of the contract. if the claim is just or legal.  If there is no meeting of the mind and both parties erroneously that their acts is intended towards a particular contract but the same was not met/frustrated – then the remedy is annulment. serious or irresistible force is employed. So in that case. descendants or ascendants. you cannot agree to a certain provision. Error as to the person will invalidate consent when the consideration of the person has been the principal cause of the contract. Note: If the error refers to the rights of the parties in the contract. error in the name of the person. the contract is not invalidated. (1267a) Requisites for Violence to Vitiate Consent a) Employment of serious or irresistible force. 6. b) The error must be excusable (not caused by negligence) c) The error must be a mistake of fact and not of law. may vitiate consent. When one of the parties is unable to read. (n) There is no mistake if the party alleging it knew the doubt. and mistake or fraud is alleged. error as to the motive of a party Art.

B. the other party was induced. when is there violence. not by mere preponderance. descendants or ascendants. he would not have agreed to. requisites of fraud: 1. property or upon the person or property of his spouse. (1268) Art. induced the other to consent. depriving the latter of a reasonable freedom of choice. because if both committed fraud. through insidious words or machinations of one of the contracting parties. It must have been employed by one contracting party upon the other contracting party. And it must not be employed on a co-party. Fraud in the Celebration of Contract a) Dolo Causante – were it not for the fraud. d) Efficient cause of the execution of the contract. It must have induced the other party to enter into the contract. The last paragraph is enforcement of one's claim through competent authority. It must be employed against the other contracting parties. family. through insidouse words or machinations. the fraud here is fraud at the time of the inception of the contract. without them. Fraud in Performance of Obligations stipulated in the Contract Requisites of Dolo Causante a) Fraud must be material and serious. 1338: There is fraud when. You are a chain 60 . example: when you apply for insurance policy and the amount is one that will not require you to undergo medical examination but only to fill up a certain form. Book of Tolentino. family. d) The other party must have relied on the untrue statement and must himself not be guilty of negligence in ascertaining the truth. The following shall be considered: the confidential (the priest). 2007 Case Digests (from Erwin Vicente). But the fraud here must be one that is causal. the parties would have still agreed. serious or irrisistible force is employed. that belongs to 1171. to give his consent. There is fraud when. or employed upon the spouse. the other party would not have consented--the contract is voidable b) Dolo Incidente – even w/o the fraud. depriving the latter of a reasonable freedom of choice. 1337. 2. or was ignorant or in financial distress. Lydia Galas (Hann Sevilla). or  the fact that the person alleged to have been unduly influenced was suffering from mental weakness. b) Fraud must have been employed by only one of the contracting parties. Christ May Andolana. not the fraud at the time of the fulfillment of the contract. not against a co-party. Take note of third paragraph. no annulment. Because if it were the latter.Obligations and Contracts: Sources 2006 Lectures of Atty. But if it were fraud under 1338. Intimidation: compelled by a resonable and well-grounded fear of an imminent and grave evil upon the person or property of one of the contracting parties. and it cannot result to the nullity or annulment of the contract but will only be a ground for damages. Because if it were merely dolo incidente. descendants or ascendants. (or their properties). And if both parties employed fraud. e) The threat must be an unjust act. when is there intimidation? The same definition that you have in your criminal law. Ferlyn Ong for 4th year Batch 2009 Requisites for Intimidation to Vitiate Consent a) Reasonable and well-grounded fear b) Of an imminent and grave evil c) Upon his person. or that the person alleged to have been unduly influenced was suffering from mental weakness. or  was ignorant or  in financial distress. spiritual and other relations between the parties. 1336. (1335) Violence. It is as if they were in good faith because of the fact that they are in pari delicto. it can be a ground for nullity or annulment of the contract plus damages. although it may have been employed by a third person who did not take part in the contract. RAM Notes Compiled by: Hanniyah Sevilla. in order to wrest consent. Undue influence: when a person takes improper advantage of his powe over the will of another. Now. an actionable wrong. Violence or intimidation shall annul the obligation. (n) Art. (1269) Kinds of Fraud A. Now. Art. c) There must be a deliberate intent to deceive or to induce therefore misrepresentation in good faith is not fraud. And the fraud alleged by the other party seeking annulment must be clearly and convincingly established by sufficient and clear evidence. There is undue influence when a person takes improper advantage of his power over the will of another. the contract would remain valid. 1338. merely damages. spiritual and other relations between the parties. the courts will leave them where they are. it is also found in your criminal law. So. The following circumstances shall be considered:  the confidential. the other is induced to enter into a contract which. (dolo causante). fraud is incidental--Contract is valid but damages may be recovered.

c) The purpose is to deceive 3rd persons. Basta what is required here is that you must have the opportunity to know the facts. an expert would be one that is knowledgeable in that specific area. Ferlyn Ong for 4th year Batch 2009 smoker. Why will you immediately believe that this particular product is a miracle. constitutes fraud. then you cannot sue your own employee. But if it were relative simulation. 1342: There was this case Diaz vs. The parties did not intend to be bound by the agreement. Incidental fraud only obliges the person employing it to pay damages. if you seek the opinion of an expert. Is the agent bound to disclose to the principal this fact? Yes. 1339: Confidential relations: between the principal and the agent. committed by the surveyor and there was mutual mistake by both parties and the SC said that annulment is proper because of the mistake. caveat emptor. if the expert is the employee of the person seeking the opinion of the expert. unless such misrepresentation has created substantial mistake and the same is mutual. Art. Requisites for Fraud to Vitiate Consent a) Fraud must be serious b) The parties must not be in pari delicto. 1339.000. Lydia Galas (Hann Sevilla). 1342. Tolerated fraud. the mistake was not committed by both parties but by a third person. According to authors. it should be serious and should not have been employed by both contracting parties. the reason for the loss is the stupidity of the person. Simulation of a contract may be absolute or relative. and there is a question there do you smoke and how many packs. Effect: If Absolute simulation. b) False appearance must have been intended by mutual agreement. unless made by an expert and the other party has relied on the former's special knowledge. Like if the principal authorizes the agent to sell the property at 100. the contract is void. Art. because that is merely an opinion. you cannot sue. and the person says yes. For as long as the other party has the opportunity to know the facts. Requisites of Simulation a) Outward declaration of will different from the will of the parties. 2007 Case Digests (from Erwin Vicente). In order that fraud may make a contract voidable. Art. So in that case. It must have been serious and must have resulted in damage or injury to the other party now seeking annulment of the contract. you answer no. 1343. And you were approved. are not in themselves fraudulent. Because that what we call as tolerated fraud. If it turns out the the opinion of the expert is false. Art. then there can be no annulment of the contract based on fraud. Exception to the exception. when there is a duty to reveal them. Misrepresentation by a third person does not vitiate consent.  Incidental Fraud – not a cause for annulment. RAM Notes Compiled by: Hanniyah Sevilla. And the rule is let the buyer beware. 1341. Art. 1341: So. when the other party had an opportunity to know the facts. otherwise there can be no annulment. as when the parties are bound by confidential relations. i don't smoke. 61 . when the parties conceal their true agreement. Failure to disclose facts. 3. 1345. the latter. This will not annul the contract. (n) Simulation of Contract – process of intentionally deceiving others by producing the appearance of a contract that really does not exist (absolute) or w/c is different from the true agreement (relative). then it shall bind the parties provided that no third person shall be prejudiced by such relative simulation. 1340. i. only damages can be recovered. 1344. The agent now was able to sell it at 200. because of the confidential relation between them. but the expert is your employee. A mere expression of an opinion does not signify fraud.e. Is there fraud? No.Obligations and Contracts: Sources 2006 Lectures of Atty. Failure to do so constitutes fraud. The former takes place when the parties do not intend to be bound at all. This is an example of material misrepresentation.000. Misrepresentation made in good faith is not fraudulent but may constitute error. The rule is: let the buyer beware. 1340: Dolos Bonus. Exception. Book of Tolentino. common victims are the women. between two partners. Art. Christ May Andolana. CA whereby the mistake was committed by a surveyor with respect to the particular location of a particular lot. Even if it is given by an expert. (1270) Fraud should not be employed by a party against a co-party. The usual exaggerations in trade. Art. And if it turns out that the facts are not true. you ask the opinion of a person if this is a true diamond.

good customs. morals. including one subsequent to the contract 3. Must be determinate as to its kind or determinable w/o need of a new contract or agreement. morals. 2. public order or public policy. An absolutely simulated or fictitious contract is void. Your rights to the credit are subordinated to the death of the debtor. the provisions of Art. So in that case. 3. 1347. RAM Notes Compiled by: Hanniyah Sevilla. Relatively Simulated (disimulados) disguised contracts:  Parties conceal their true agreement  EFFECT: Parties are bound to the real or true contract/agreement except: o If contract should prejudice a 3rd person. 2. public order or public policy may likewise be the object of a contract. Accdg. no real act executed. Ferlyn Ong for 4th year Batch 2009 Art. Ex: X borrows money from Y. Impossible things or services cannot be the object of contracts. (2)partition of the property during the lifetime of the testator. in that case that is not within the meaning of future inheritance. Spouses are allowed to donate to each other future properties provided that they comply with the forms of will. Lydia Galas (Hann Sevilla). There can be sale of future things or objects having potential existence. but no of vain hope (CF: Sales) 2. Implies that there is no existing contract. The insolvency of the debtor making the simulated transfer is not a pre-requisite to the nullity of the contract. may be the object of a contract. good customs. public order or policy. Must be transmissible. (3) When one’s right over the property is not as an heir but as a creditor. All services which are not contrary to law. No contract may be entered upon future inheritance. Can be attacked by any creditor. morals. (n) Kinds of Simulated Contracts A. 62 . OBJECTS OF CONTRACTS Art. Accion pauliana to rescind a fraudulent alienaction prescribes in 4 years. (1271a) Requisites of Object of a Contract a) b) c) d) e) Notes: 1. the parties to the contract ma prove the simulation in order to recover whatever may have been given under such simulated act. 1346. (1272) The thing or service must be w/in the commerce of man. and Y says I will pay you when I die. exceptions: (1) marriage settlements. X can enter into a contract involving that credit but subordinated to the death of Y. ABSOLUTE SIMULATION 1. Also there can be sale of hope. The action to declare a contract absolutely simulated does not prescribe FRAUDULENT ALIENATION 1. So. But if the simulated contract has an illegal object. 4. All things which are not outside the commerce of men. 4.Obligations and Contracts: Sources 2006 Lectures of Atty. All rights which are not intransmissible may also be the object of contracts. B. The action to rescind (accion pauliana) requires that the creditor cannot recover in any other manner what is due to him. 1348. No contract may be entered into upon future inheritance except in cases expressly authorized by law. Must not be contrary to law. Must not be impossible. good customs. 2007 Case Digests (from Erwin Vicente).  EFFECT: Contract is Void. 1411 and 1412 will apply. Means there is a true and existing transfer or contract. Christ May Andolana. A relative simulation. good customs. including future things. morals. Book of Tolentino. public order or public policy binds the parties to their real agreement. or o If the purpose is contrary to law. to Tolentino: If the absolute simulation does not have an illicit purpose. when it does not prejudice a third person and is not intended for any purpose contrary to law. Can be assailed only by the creditors before the alienation. Art. Absolutely Simulated (simulados) fictitious contracts:  Parties do not intend to be bound.

Difficulty of performance – A showing of mere inconvenience. Art. The SC said the contract is void. the prestation/promise of thing/service. The debtor who does not perform in such cases must be held liable for damages. The donation was designed both for the benefit of the donee and satisfy the sexual 63 . he told the parents and Conchita that he will be donating a parcel of coconut land if you agree to cohabit with me. No matter how illegal the motive is for as long as the cause is legal and lawful. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract. In onerous contracts the cause is understood to be. the mere liberality of the benefactor. (1273)   Object must be determinate determinable (w/out need of a new agreement). It is the prestation to be performed by the other contracting party. Cause in Accessory Contracts Like Mortgage & Pledge – the same as the cause for principal contract of loan. Lydia Galas (Hann Sevilla). it may be regarded as cause when it predetermines the purpose of the contract. the service or benefit which is remunerated. Because of Lopez' desire and lust for the body of Conchita. It cannot be said that the donation is a contract of pure benifecence or a contract designed solely and exclusively for the benefit of the donee. still a contract conditioned upon the attainment of an immoral motive should be considered void. 1351. Remuneratory – the past service/benefit w/c by itself is a recoverable debt. in remuneratory ones. (1274) Classification of Contracts As to Cause a) b) c) Onerous – the cause is for each contracting party. 1349. Moral obligation may be the cause of civil obligation – if it does not exist . RAM Notes Compiled by: Hanniyah Sevilla. a 15 year old girl. provided it is possible to determine the same. Conchita said the cause is the liberality. Gratuitous or contracts of pure beneficence– the cause is the mere liberality of the benefactor. Christ May Andolana. without the need of a new contract between the parties. The heirs of Lopez now said that the motive predetermined the purpose of the contract. The object of every contract must be determinate as to its kind. (n) Q: Is the cause the same as the motive of the contract? No. Art. 2007 Case Digests (from Erwin Vicente). Art. Ferlyn Ong for 4th year Batch 2009 Nature of Impossibility a) Nature of transaction or because of law b) Absolute (objectively impossible) – “nobody can do it” c) Relative (subjectively impossible) – “particular debtor cannot comply” Note: The impossibility must exist at the time of the constitution of the contract. Conchita now demanded for the delivery of the parcel of land.Obligations and Contracts: Sources 2006 Lectures of Atty. While it is true that motive differs from the cause.    Contract of guaranty is gratuitous unless there is stipulation to the contrary. however the real cause is the motive and the motive is to have sexual intercourse. For here. Book of Tolentino. Then Lopez died. CAUSE OF CONTRACTS It is the essential and impelling reason why a party assumes. The particular motives of the parties in entering into a contract are different from the cause thereof. otherwise the contract is void for want of an essential requisite – the object of contract. Case: Lopez fell in love with Conchita. The parents and Conchita consented and they lived and had sexual intercourse. Exception: if the motive predetermines the purpose of the contract then the motive becomes the cause of the contract. no valid cause. unexpected impediments. And while it may be true that the cause is the liberality. an obligation. the prestation or promise of a thing or service by the other. and in contracts of pure beneficence. it does not affect the validity of the contract. 1350. or increased expenses is not enough to relieve a debtor from the obligation Equity cannot relieve from bad bargains simply because they are such. for each contracting party.

Book of Tolentino. So what B did was to file an action to recover the amount. the father and the husband of X executed a PN covering the value of what has been lost by reason of X's stealing. Contracts without cause. Art. This is different from the first case. Art. the guilt of the minor cannot be judged with equal severity with the guilt of an adult. ILLEGAL MOTIVE not necessarily renders the contract void. to the court. the presumption is that the contract is valid. no money was returned. But in another case. contract is void b) It must be true – if cause is false. 1355. When she was about to be prosecuted for what she did. with B seeking consideration that the case would be dismissed because he will try to convince A to issue a promissory note to cover the amount that was not returned. 2007 Case Digests (from Erwin Vicente). Now. So the employer filed an action to collect the amount stated in the PN. RAM Notes Compiled by: Hanniyah Sevilla. or with unlawful cause. (n) LESION – inadequacy of cause – (eg. Therefore Conchita is entitled to the land. the pari delicto rule cannot apply in the case. Except in cases specified by law. if it should not be proved that they were founded upon another cause which is true and lawful. good customs. c) It must be lawful From transcription: There was this case: X is an employee of a business establishment. the parties are given a chance to show that a cause really exists and is lawful and true. Like the actual value is 1M and he's only selling it for 100K. public order or public policy. The exception there is when fraud is employed. stating that the cause for the action was illegal because it was to stifle a criminal prosecution. lesion or inadequacy of cause shall not invalidate a contract. the PN remained as a PN. But the SC said that motion should be denied because there was an admission on the part of A that he really owed B money. or there is mistake or there is undue influence. so the employer was not able to collect. A executed a PN. In the MFR filed by the heirs. then the more reasons that the heirs are barred in questioning the validity of the donation. it is presumed that it exists and is lawful. and it was found out that she was stealing money from the business establishment. and the buyer is the son or daughter. So what B did was file a case against A for estafa. but the amount was not paid. (1276)  False cause does not necessarily mean that contract is void. unless the debtor proves the contrary. according to JBL Reyes. a friend entered before and in behalf of A. (1277)  Cause must exist but is not necessary to state the cause. Art. unless there has been fraud. 1352.  Under Statute of Frauds – certain agreement must be in writing. But because the donor cannot invoke his own immorality. Maybe unknown to the other. (1275a) Requisites for Cause a) It must be present – no cause. MOTIVE May vary although he enters into same contract. morals. Insufficient price of a thing sold) Rules on Lesion 64 . Ferlyn Ong for 4th year Batch 2009 desire of Mr. Cause is void.Obligations and Contracts: Sources 2006 Lectures of Atty. contract is void unless some other cause w/c is lawfully really exists. mistake or undue influence. Now. No palay was bought. to return the money to B. Art. no matter how inadequate the consideration is. Remember that Conchita is a minor. Lydia Galas (Hann Sevilla). 1354: So. there was A who was given money by B to buy palay within a certain period or if unable to secure the palay by that time. Its presence cannot cure the absence of cause CAUSE   The same Always known     ILLEGAL CAUSE makes a contract void. before the hearing. then that is not an absolutely simulated contract but only a relatively simulated one. Christ May Andolana. The statement of a false cause in contracts shall render them void. 1354. But X was not made a signatory to the PN. Lopez. A moved for the dismissal of the case. the cause was the stifling of the criminal prosecution of X. 1353. produce no effect whatever. The cause is unlawful if it is contrary to law. and the parties bound to it unless third persons are prejudiced by such simulation. Minors occupy a privilege position before the law. Although the cause is not stated in the contract. The case was dismissed because accdg.

for as long as there has been payment (vendee) and there has been delivery on the part of the vendor. Book of Tolentino. But the spiritual system of contract 65 . In such cases. So a sale involving real property is valid in whatever form it is entered into. (1278a) GEN. Art. In such cases. When we say enforceable. But for validity. Fraud. An example of which would be a donation of a real property which must be in a public document in order to be valid. if it is absolute and indispensable. or iii. So. cause or consideration and object/subject matter. then the sale is void. 2007 Case Digests (from Erwin Vicente). there are certain exceptions. 1356. in whatever form they may have been entered into. So that is the purpose of the form. and liberally in favor of the person who merely affixed his signature and did not participate in the making of the contract. A contract may be valid. and the other for enforceability. that requirement is absolute and indispensable. But with respect to form. And not only that. When together with lesion there has been i. That is how one should construct or interpret the law. agreements for the payment of interests must be in writing otherwise one cannot collect. that requirement is absolute and indispensable. which means that. The register of deeds will not transfer the title of the property from the vendor to the vendee unless it is in a public document. regardless of the form. but it need not be in a public document to be valid. or that a contract be proved in a certain way. Underlying principle that in the interpretation and/or construction of the law. when the law requires that a contract be in some form in order that it may be valid or enforceable. Rule: Lesion/inadequacy of price does not invalidate a contract. Ferlyn Ong for 4th year Batch 2009 Gen. But in contracts. c) For convenience 1356 is the spiritual system of a contract. ii. So.Obligations and Contracts: Sources 2006 Lectures of Atty. Now what would be required. And another is when you are into lending money. we must interpret not by the letter that killeth. provided all the essential requisites for their validity are present. Now. if not. But there are certain contracts which would require that they be in a certain form. but it is unenforceable. provided that all the essential requisites for the validity are present. FORMS OF CONTRACTS The general principle is that the law looks more into the spirit. Mistake. it cannot be enforced through court action. may be waived by acceptance of benefits (partial) or by failure to object to presentation of oral or parol evidence. noncompliance with it means the contract is void. And what are the essential requisites? Consent. RAM Notes Compiled by: Hanniyah Sevilla. In cases expressly provided by law. Because if you were the one who prepared the contract. One is for validity. The law require that it must be in writing. Contracts shall be obligatory. but rather to transfer ownership over the property in favor of the vendee. subscribed by the parties. it must be in writing or in some memorandum or note. For what purpose then is the form? It is not for validity. Absent one makes the donation void. paragraph 2. a sale of a parcel of land orally made is valid. So. contracts are obligatory. Even if there is no (written) contract. Another example of a contract which would require a certain form is donation involving movable property and the value exceeds 5K. it may refer to the manner in which the contract is executed. But there are certain documents which will require a certain form in order that it be valid. contracts are obligatory in whatever form they may have been entered into. Undue Influence b. in whatever form they may have been entered into. for as long as the three are found. under 1403. (Statute of Fraud). Donation) Real Contracts – requires delivery WHEN FORM IS IMPORTANT a) For validity b) Enforceability (Statute of Frauds). The authority of the agent to sell property must be in writing. but by the spirit that giveth life. what else? Contracts involving antichresis. no. the right of the parties stated in the following article cannot be exercised. And to inform third person that the property has already been bought. Christ May Andolana. rather than in form. provided that all the essential requisites for its validity are present. Now. It is valid. When we say form. You cannot maintain an action in court because there is a lack in that particular document. Exceptions: a. the acceptance of the donee must also be in a public document to be valid. which may be written or oral. RULE:   NO FORM IS REQUIRED IN CONSENSUAL CONTRACTS Formal Contracts – requires form ( eg. another exception is for purposes of enforceability. So that a contract may prove in a certain way. However. That must be in writing otherwise void. So those are only the exceptions for purposes of validity or enforceability. the right of the parties stated in the following article cannot be exercised. then the contract should be construed strictly against the person who prepared it. then the contract is presumed valid. Even if it is orally made between the parties. Lydia Galas (Hann Sevilla).

when you enter into a contract of usufruct because there is a transfer of ownership. REFORMATION REFORMATION OF INSTRUMENTS (n)  Remedy in equity by means of w/c a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or mistake has been committed. 1357. All other contracts where the amount involved exceeds five hundred pesos must appear in writing. Book of Tolentino. Art. Because the faintest ink is better than the sharpest memory. the contracting parties may compel each other to observe that form. whether a certain form is required or not. when one spouse desires to transfer administration over his communal or paraphernal property to the other spouse. One is when the contractual form is needed for validity. or things in action are governed by Art. even a private one. repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains. 2 and 1405. This right may be exercised simultaneously with the action upon the contract. once the contract has been perfected. they went to court. Christ May Andolana. (2) The cession. or of those if the conjugal partnership of gains. Under 1356. or any other power which has for its object an act appearing or which should appear in a public document. 1403. But sales of goods. or should prejudice a third person. 2. RAM Notes Compiled by: Hanniyah Sevilla. No. So. The reason why there is this requirement that it must be in a public document. [Take note that sale involving real properties is already removed from par. or should prejudice a third person In your family code. The following must appear in a public document: (1) Acts and contracts which have for their object the creation. Delos Angeles. This right may be exercised simultaneously with the action upon the contract. mortgage (modification of one's proprietarial rights). and the balance exceeds 500 pesos. She was paid but there was a balance. those enumerated under 1358. sales of real property or of an interest therein a governed by articles 1403. (3) The power to administer property. The reason is to inform 3rd persons that the administration has been transferred. If the law requires a document or other special form. it is already valid. As in a case of a donation of real property which needs to be in a public document. Acts and contracts which have for their object the creation. or for efficacy against third persons. So. he sided with the movie company. oral agreements would often lead to fraud in the fulfillment of the obligation. barter. even if not in a public docu are valid. all contracts are valid regardless of form. The contract covered by Art. repudiation. You renounce your right over the inheritance that has already become vested in favor of your siblings. assignment. the contract is void. you file a case in court and what is your proof? It was orally admitted. So. 1358 are binding and enforceable by action despite the absence of writing because the Article nowhere provides that the absence of written form will make the agreement invalid or unenforceable. An example of this is waiver of a right. No. Nowhere does it say that if it is not in writing. 4. chattels. 3. better put it into writing. The cession. Now what are those contracts? 1. The powers to administer property. And her services were engaged by one of the producers. as in the acts and contracts enumerated in the following article. chattels or things in action are governed by articles. the transfer must be in a public document. Now. 1357: If the law requires that a document or other special form. Because if worse comes to worst. there is this case of Hernaez vs. But sales of goods. 1358. So after rendering service. Art. The movie company refused to honor the agreement stating that the agreement is deemed void because it was not in writing. or renuncitation of hereditary rights. the contracting parties may compel each other to observe that form. modification or extinguishment of real rights over immovable property. Who were there when you entered into the agreement? There were only two of us. there are only two exceptions. Ms. Because by itself. The SC said that the dismissal was not proper. 1358: Is the requirement that it must be in a public document for the purpose of validity? No. 2007 Case Digests (from Erwin Vicente). then that is highly debatable. Ferlyn Ong for 4th year Batch 2009 cannot be adopted in unqualified manner. Second when form is needed for enforceability. The cession of actions or rights proceeding from an act appearing in a public document [example Claim of ownership] All other contracts where the amount involved exceeds 500 must appear in writing. Otherwise. or any other power which has for its object an act appearing or which should appear in a public document. 1 of 1358] 2. as in the acts and contracts enumerated in 1358. That's the essence of the Hernaez case. and 1405. Lydia Galas (Hann Sevilla). (4) The cession of actions or rights proceeding from an act appearing in a public document. is that it is to enforce against third person. Hernaez was a star of Philippine Cinema. even a private one. Delos Angeles is the judge. Hernaez now demanded for the payment of the balance.Obligations and Contracts: Sources 2006 Lectures of Atty. Only for purposes of affecting third persons. modification or extinguishment of real rights over immovable property. 66 . once the contract has been perfected. 1403. transmission. under the Statute of Fraud. transmission.

the instrument does not express the true intention of the parties. 67 . 1364. inequitable conduct or accident. one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed. then no reformation but annulment. The instrument or document evidencing the contract does not express the true agreement between the parties. said instrument may be reformed. the failure of the instrument to express the agreement must be due to mistake. Lydia Galas (Hann Sevilla). Christ May Andolana. the proper remedy is not reformation of the instrument but annulment of the contract. There must have been a meeting of the minds upon the contract. When through the ignorance. fraud. ok. 5. What was only omitted was the right of the buyer to repurchase. Now the Chinese does not know how to read or speak English. 1362. Document must not refer to a simple unconditional donation inter vivos or to wills or to a contract where real agreement is void. 1361. (typographical error) Art. there having been a meeting of the minds of the parties to a contract. their true intention is not expressed in the instrument purporting to embody the agreement. the Chinese aske if he included the condition that the sale should be one with a right to repurchase. Art. When. 1362 and 1363. So the Spaniard was interested to buy the property of the Chinese. When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement. inequitable conduct or accident. the courts may order that the instrument be reformed. By reason of Fraud. inequitable conduct or accident. mistake. Now in that case. by reason of mistake. inequitable conduct or accident. but concealed that fact from the former. the instrument may be reformed. there was this case of Ong vs. True intention is not expressed in the instrument 3. 1359. The principles of the general law on the reformation of instruments are hereby adopted insofar as they are not in conflict with the provisions of this Code. Requisites: 1. and the parties have consented. When the document was already prepared. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement. 1362: Now.Obligations and Contracts: Sources 2006 Lectures of Atty. 3. the former may ask for the reformation of the instrument. through the fraudulent acts of the other. 1363. Art. involving a Spaniard and a Chinese. If mistake. Mistake must be mutual 2. but the instrument states that the property is sold absolutely or with a right of repurchase. fraud. Art. But if any of the vices of consent have prevented the meeting of the minds of the parties. because lawyers trust their secretaries. Art. Ferlyn Ong for 4th year Batch 2009 Art. 1360. or accident has prevented a meeting of the minds of the parties. Requisites for Action for Reformation 1. 1365. But if it prevented the meeting of the minds. But all the essential requisites are present. 1364: This is very common in law firms. one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed. It must be brought w/in the proper prescriptive period. Mistake must be of fact. Book of Tolentino. The Spanish said yes when in truth the Spaniard omitted that it was a sale of pacto de retro because he intended to mortgage the property. Mistake may be unilateral under the conditions set forth in Art. The Spaniard said. fraud. What are the requisites in order that reformation is proper? 1. mistake. There was already a meeting of the mind with respect to object and the cause. lack of skill. There must be meeting of the minds 2. 2007 Case Digests (from Erwin Vicente). RAM Notes Compiled by: Hanniyah Sevilla. reformation of the instrument is proper. There must be clear and convincing proof thereof 4. Now the Chinese said the agreement should be a pacto de retro. 3. By reason of what? Fraud. Car (?). 1361: The error is thru mistake but all the essential requisites are present Art. Why is there a need to reform instruments? Instruments are reformed in order that the true intention of the parties is expressed. So here is there was failure on the part of the parties to express their true intention. If two parties agree upon the mortgage or pledge of real or personal property. there has been an agreement. then there is no reformation but rather annulment. 2. inequitable conduct. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention. Only that when the parties reduced the agreement into writing. the writing failed to keep the true intention. negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist.

1371: So going back to the example of equitable mortgage. instead of having executed a deed of real estate mortgage. how can you reform it. 1371. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties. 1366. Art. So you used it as a collateral in your loan. There is no force or effect that arise from a void contract. 1366: #1 and 2 are contracts based purely on the liberality of the testator. And the determination is based on their subsequent acts. if the mistake was mutual. If the words appear to be contrary to the evident intention of the parties. you would also be liable for the debt of your friend. or his heirs and assigns. 1372. Art. those are contrary to each other. 1367. So. (2) Wills. So. Very common is equitable mortgage although the document is denominated as deed of sale with a right to repurchase. Moreover. 2007 Case Digests (from Erwin Vicente). their contemporaneous and subsequent acts shall be principally considered. yet at the same time you are asking for performance. In fact. if the words appear contrary to the intention of the parties. and being gratuitous you cannot question the intention of the person giving or donating the thing/property. Then we must interpret the law as it is written. 1369. Ferlyn Ong for 4th year Batch 2009 1365: Now there are money lenders who would. otherwise. but by the spirit that giveth life. then definitely the seller has to vacate the property and why should he continue to pay the taxes. That is under a different guise. he cannot subsequently ask for its reformation. 68 .Obligations and Contracts: Sources 2006 Lectures of Atty. So. RAM Notes Compiled by: Hanniyah Sevilla. the latter shall prevail over the former. Now. upon petition of the injured party. Book of Tolentino. When one of the parties has brought an action to enforce the instrument. So. why should the buyer retain a portion of the purchase price. that will not find any application if the stipulation of the parties are clear and unambiguous which leaves no room for interpretation. It has the following indicators: 1. then the intention shall prevail. 1370. being void. Because those are different and distinct from the agreement. in a void contract. In order to judge the intention of the contracting parties. the buyer retains a portion of the purchase price. The procedure for the reformation of instrument shall be governed by rules of court to be promulgated by the Supreme Court. (estoppel. It does not follow that even if your property was used as a surety. One is inconsistent with the other. 2. Lydia Galas (Hann Sevilla). Reformation may be ordered at the instance of either party or his successors in interest. 3. (3) When the real agreement is void. Art. That portion represent actually the interest. Christ May Andolana. continues to pay the taxes on the property. [Because if it were sale. would say that let's just execute a deed of sale with a right to repurchase. Prescriptive period for reformation of contracts is 10 years Art. However. The seller remains in possession of the property. INTERPRETATION OF CONTRACTS: Art. if the buyer is not yet in possession after several years. how do you interpret contracts? If the stipulations of the contract are clear and leave no room for doubt. 1368. Art. so what is the presumption? The presumption is that what was entered into by the parties is not one of sale but mortgage. #3. what are included? Everything that is incorporated with the land. However general the terms of a contract may be. waiver or ratification) 1367: You cannot ask for reformation and at the same time ask for enforcement. the important task of contract interpretation is to always ascertain the intention of the contracting parties. ] Now read 1502 Art. parties do not intend to be bound by their agreement. If you say that it does not express the true intention of the parties. aside from he remains in possession of the property. if you say the sale of land with all the improvements thereon. 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. There shall be no reformation in the following cases: (1) Simple donations inter vivos wherein no condition is imposed. the literal meaning of its stipulations shall control. The seller. literal interpretation. (1370) If the written instrument is different from what has been verbally agreed upon? Reformation because it does not express the true agreement. 1372: Example is your best friend executed an SPA for you to encumber her property. No legal effect shall come from a void contract. Ita Scripta Lex. And guided by the principle again that we should interpret not by the letter that killeth.

1375: If you are appointed as an administrator. RAM Notes Compiled by: Hanniyah Sevilla. no effect now but it may be upon ratification. RESCISSIBLE CONTRACTS 4 Kinds of Defective Contracts 1. because that would fall under the greatest reciprocity of interest. there is no breach of faith in the performance but rather the ground of rescission is more on the economic injury suffered by the parties or a third person. Between antichresis and mortgage? Mortgage parin. and the other person gives money. The various stipulations of a contract shall be interpreted together. Voidable – valid until annulled except if ratified – intrinsic defect as in vitiated consent. (1287) Art. Art. Rescissible – contract w/c is valid until rescinded. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract. Christ May Andolana. Art. 1378: So between a commodatum and donation. Why? Because there is no transfer of possession. Usufruct or the donation? Usufruct. Then you ascertain the intention of the parties. the least transmission of rights and interests shall prevail. and shall fill the omission of stipulations which are ordinarily established. the contract has to be rescinded. Art. 4. (2nd sentence) Now. or to a third person. and the doubts refer to incidental circumstances of a gratuitous contract. 1379. Void (inexistent or illegal) – no effect at all. because the usufructuary is under obligation to return the property. obscurity. when we speak of rescission. the contract shall be null and void. 2007 Case Digests (from Erwin Vicente). 1373. 2. Book of Tolentino. (1290) Requisites for Rescission 1. Requires mutual restitution. which has the least transmission of rights? Commodatum. 1380.Obligations and Contracts: Sources 2006 Lectures of Atty. There is an economic or financial prejudice to someone ( a party or a third person) 3. Rescissible Contracts are valid contracts. So for instance it is a pacto de retro sale. it does not involve acts of dominion or acts of ownership. 1374. the doubt shall be settled in favor of the greatest reciprocity of interests. There must be at the beginning either a valid or a voidable contract. So a person giving a ring to the other person. 1378. 3. the property has left the patrimony of the donor forever. If it cannot be harmonized. but the creditor still enjoys the interest on the money that was loaned. 1375. 1376. Art. extrinsic defect consists of economic lesion or damage. If some stipulation of any contract should admit of several meanings. If the contract is onerous. 1377. 2. (Last paragraph) Lack of object which makes the contract void because the intention of the parties cannot be ascertained. Between pledge or mortgage? If there is doubt. it shall be understood as bearing that import which is most adequate to render it effectual. Of the four of defective kinds of contracts. what if the contract is onerous? The doubt shall be resolved in favor of the greatest reciprocity of interest. Art. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the 1377: Very common in contracts of adhesion. why? Because there is no transfer of ownership in commodatum. Ferlyn Ong for 4th year Batch 2009 Art. nor can be ratified or validated. 1374: (Allied Bank) Harmoninize the provisions. What is the presumption? Pledge. (1284) Art. attributing to the doubtful ones that sense which may result from all of them taken jointly. When it is absolutely impossible to settle doubts by the rules established in the preceding articles. And unlike 1191. remove those which are incompatible. Unenforceable – cannot be sue upon or enforced unless ratified. The various stipulations of a contract shall be interpreted together. 69 . rescissible contracts occupy the highest lesion. Contracts validly agreed upon may be rescinded in the cases established by law. The principles of interpretation stated in Rule 123 of the Rules of Court shall likewise be observed in the construction of contracts. But upon demand. the price varies. attributing to the doubtful ones that sense which may result from all of them taken jointly. The contracts are valid but by reason of economic injury caused either to one of the parties. Whereas if it were a donation. Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract. mortgage. Lydia Galas (Hann Sevilla). 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. Anong presumption dyan? The difference in the payment actually refers to the payment of interest.

 In some cases. W/out Court approval – rescissible. B sells ring to C – sale to C is rescissible) Property is in litigation after defendant received service of summons. (5) All other contracts specially declared by law to be subject to rescission. Court approval is required otherwise it is unenforceable whether there is lesion or not.  (3) Accion Pauliana – action to rescind made in fraud of creditors. Christ May Andolana. Non-performance of the party is important. The party alienating must be in bad faith (he knew that damages would be caused) d. 2007 Case Digests (from Erwin Vicente). a better price can be obtained. There must be an alienation made subsequent to such credit. The action is instituted by either of the parties or by third parties. if there is no showing that. Rescission under 1381 is a subsidiary remedy. The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than onefourth of the value of the things which are the object thereof. There must be no other remedy for the prejudiced creditor – “inability to collect to the claims due them. If act of administration i. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. mere inadequacy of price. What rescission presupposes is a valid contract. the courts may grant a term. You have to prove before the court that you have exhausted all the remedies available to you as a creditor before you are given a right to institute an action for rescission 1380: What are those cases? 1381 provides those cases. Courts cannot grant a period or term w/in w/c to comply Non-performance by other party is immaterial. With Court approval – valid regardless of lesion ii. if lesion is more than ¼ contract may be rescinded on the ground of lesion is a partition of inheritance.”  (4) Action to rescind may be brought even if debtor has not been judicially declared insolvent and even if the creditor has not yet brought an action to collect. LESION – disparity between price and the value. (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. if the latter suffer the lesion stated in the preceding number. There must be a creditor who became such Prior to the contract sought to be rescinded – (a person asking for a rescission is a judgment creditor – immaterial) b. Ferlyn Ong for 4th year Batch 2009 RESCISSION (1380)  Based on lesion or fraud upon creditors. By more than 1/4 of value of the object thereof. 1381. and the representative with respect to the absentee are only given the powers of administration. The powers mentioned in 1381 are powers of administration and the representative or the guardian entered into a contract and the object of the contract resulted to the economic injury of either the ward or the absentee. Lydia Galas (Hann Sevilla). (2) Those agreed upon in representation of absentees. Art. unless shocking to the conscience is not a sufficient ground for setting aside a sale. THINGS IN LITIGATION (eg. especially if it is found in number 3 of 1381.Obligations and Contracts: Sources 2006 Lectures of Atty.  Action may be instituted only by the injured party to the contract. c. A sues B for recovery of ring – pendente ite.  RESCISSION (1191)  Based on nonperformance or nonfulfillment of the obligation.     Fictitious contract cannot be rescinded since it is null and void. RAM Notes Compiled by: Hanniyah Sevilla. in the event of a resale. EFFECT OF CONTRACTS ENTERED IN BEHALF OF WARD (1) (2) If an act ownership. 1381: #1 and 2: The guardian with respect to the ward. Requisites a. 70 . Book of Tolentino.

the contract has to be rescinded. beyond his authority. when can you consider a person an absentee for purposes of administration? 2 years if without administrator. then there can be no rescission. His only recourse is to ask damages from the transferor. not rescission because there has been good faith of the last transferee. And you tell now the dealer.) Those undertaken in fraud of creditors when teh latter cannot in any other manner collect the claim due them. summary: -This only refers to acts of administration. . Why? There is no consideration given by the transferee. Exception: even if the first transferee acted in GF. Christ May Andolana. -The exception in #1 and 2 is judicial authorization. Only in cases where there has been no judicial authorization obtained by the representative or the guardian. But if it were the spouse. OR suppose there are several transfer. Regardless of the good faith or bad faith of the receiver. Now what if the transfer is gratuitous? Do we also follow the same principle? No. a tractor. it must exceed 1/4 of the value of the object of the contract. no rescission if with court approval. Pag third person ang magbenta. unenforceable. even if the wife or the absentee suffers lesion by more than one fourth. ano? Unenforceable. The good faith or bad faith of the transferee is immaterial. if you remember in your Family Code. but there is court approval or judicial authorization. So the spouse' authority only includes powers of administration. meaning there is an equivalent consideration given. hence there can no longer be rescission. then there can be no rescission. He can only ask for rescission. but the administrator obtained judicial authorization. From the 1st transferee who acted in bad faith. and not acts of ownership . So this would only refer to in excess of the authority granted to the present spouse and the encumbrance/alienation refers to the paraphernal property and the capital(?) property of the absentee. Then there can be damages. the act is void. what will you do? For purposes of supporting the family? You gain judicial authority in a summary proceeding. but voidable. even if it exceeds more than 1/4. the act will not be rescissible but rather unenforceable. 2007 Case Digests (from Erwin Vicente). 71 .But even if it exceeds more than one fourth of the value. Because if you co-relate that with the provisions of the Family Code and there is a need to encumber or dispose a portion of the property of the absentee. then there can be rescission. I get 25%". But if there was no collusion between the transferor and the 2nd transferee. we have to take into account the good faith or bad faith of the transferee. Then it ends now to the fourth transferee regardless of the bad faith of the subsequent transferee because it ended with the person who acted in good faith.Obligations and Contracts: Sources 2006 Lectures of Atty. So if it is onerous and ther is good faith from the first transferor to the first transferee (meaning the transferee acted in good faith). and 5 years if there is an administrator. to fall whether in number one or number two 1381. If suppose it is an onerous transfer. you wanted to enhance the development of the farm. so he cannot be prejudiced by the rescission. subsequent transferee acted in bad faith. In those cases there is a need for judicial declaration as an absentee. Now. -But if it were acts of administration. even if the subsequent transfer is in bad faith. they would now use the first transferee as an intermediary or a bridge. to the second transferee who acted in bad faith. Now the creditor cannot ask for annulment precisely because he is not a party to the contract. Lydia Galas (Hann Sevilla). otherwise that act of the other spouse is void but it is a continuing offer between the spouse who did not give consent and the offeree unless earlier revoked. But. 3. "can you increase the price by 30%? You get 5%. Book of Tolentino. But if the representative is the spouse. So all the of the transferee will be liable. But you also have other motives in mind. Now. What kind of a contract is that? Unenforceable contract. so what you did was to buy an equipment. it does not include acts of ownership. In order that rescission will lie. void yan. The good faith of the first transfer cures the bad faith of the second transfer. the good faith of the first transferee will cleanse the transfer. But what if the guardian or the representative speaks of getting money in order to develop the property. then the creditor who is prejudiced by the transfer could no longer ask for the rescission of the transfer because of the good faith. so in that case the contract entered into by the administrator can be rescinded because it will result to the economic injury of the ward by more than 1/4 of the value of the object which is the tractor. to cleanse the transfer of any defect. to the third transferee who still acted in bad faith and the fourth transferee who acted in good faith. But such act prior to the effectivity of the family code is not void. And normally the spouse is given priority. RAM Notes Compiled by: Hanniyah Sevilla. when he received the thing transferred. If the representative is a third person. from the first transferee to the third transferee. He now mortgaged the property. It will be found in the cases that i've assigned. So the exception in number three would now depend on the kind of transfer. and there is collusion between the transferor and the second transfeee. Now if the transfer is onerous. if there is bad faith from the first to the 2nd then definitely there can be rescission. The court cannot just grant rescission since there are certain requisites that must be complied with.if the guardian or representative would exercise acts of ownership beyond what is authorize. Ferlyn Ong for 4th year Batch 2009 So example. That is acted without or in excess of the authority granted to him.

then the presumption will arise that he intended to defraud the creditors when he made that transfer. 4. Others would be those falling under the Law on Sales. That is what is meant by to whom fulfillment the debtor could not be compelled at the time they were effected. 3. when there are present any of the above circumstances. yet despite the fact that the debtor is insolvent pays the obligation. And we call that notice of lis pendens. Lydia Galas (Hann Sevilla). (n)  Partial rescission is possible. Now what are the badges of fraud: 1. CA). especially when he is insolvent or greatly embarrassed financially. 72 . Or if what is involved is personal property. and the price with its interest.So if you are insolvent. Christ May Andolana. 5. Rescission shall be only to the extent necessary to cover the damages caused. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected. (1294) Art. the person who will be prejudiced by such must show proof before court that he had already exhausted all efforts to recover what is due him. 5. then definitely the presumption will arise that the transfer is to defraud creditors. then the presumption will arise especially if the transfer is made after incurring the obligation and it can be shown that the debtor has no other property which can answer for that obligation except that property which he has transferred. 1384. benefits only the creditor who has asked for rescission. 1524. so there can also be rescission. especially if the transfer is gratuitous in nature. the transfer of all or nearly all of his property by a debtor. then you may go to the office of the Register of Deeds and have it annotated at the back of the title of the property that this property is under litigation. a transfer made by the debtor after suit has been begun and while it is pending against him. to prevent the defendant in possession of the property from alienating it without your knowledge or without the approval of court. then you pray before the court that a writ of attachment be issued or a receiver be appointed over the property which is the subject matter of the litigation.) All other contracts specially declared by law to be subject to rescission Those referred to in Art. 2007 Case Digests (from Erwin Vicente). 4. and 1529 Art. together with their fruits. 7. Obligations exceeds assets.) Those which refer to things under litigation if they have been enterd into by the defendant without the knowledge and approval of the litigants or of competent judicial authority Example of this would be a claim for reconveyance. and he found out that the debtor has already transferred nearly all his property to answer for the credit that is due him. He can only ask to the extent necessary to cover the damages caused. And that is why we said that the action for rescission is subsidiary. And if any of those will be found. -Your assets cannot meet your obligations. and he failed. Evidence of large indebtedness or complete insolvency. Manikil (?). in order to place the property in custodia legis and to take it away from the possession of the debtor. to protect your right. Book of Tolentino. 1383. if what is involved is real property and you are the complainant. consequently. Ferlyn Ong for 4th year Batch 2009 Now. are also rescissible. (1383) And he cannot ask for more than what is due him. In Oria vs. there are also what we call as the badges of fraud with respect to alienation in order to defraud creditors.Obligations and Contracts: Sources 2006 Lectures of Atty. The action for rescission is subsidiary. (1292) Requisites (1) The Debtor-payer must have been insolvent (no judicial declaration needed) (2) Debt was not yet due and demandable. 78 with respect to partiton of the estate of the deceased when one of the heirs suffer lesion by more than 1/4 of the value which he is supposed to receive. Art. RAM Notes Compiled by: Hanniyah Sevilla. So it refers to obligations not yet due. 1382. But if it is a transfer between a father and a son and it is accompanied by a sale upon credit by an insolvent debtor (Chua vs. (1384) Art. why will you sell your property on credit when you are actually in need of money. the fact that the transger is made between father and son. the fact that the consideration of the conveyance is inadequate 2. -The mere fact that there is a transfer between a parent and a child does not arise that there is a fraudulent transfer. 1526. the failure of the vendee to take exclusive possession of all the property So those are the badges of fraud. So it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. -meaning there is already a case filed against him involving collection or money claim. 1385. then the debtor now would start to dispose or encumber the properties that might answer for the judgment award that may be rendered by the court against him. Now another act which can be the subject of rescission can be found in 1382: obligations not yet due. 6. are also rescissible. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. a sale upon credity by an insolvent debtor . Rescission creates the obligation to return the things which were the object of the contract. meaning you're asking for the return of real or movable property.

when the donor did not reserve sufficient property to pay all debts contracted before the donation. you return the thing in the condition that it is found. Second. Christ May Andolana. if the deterioration is caused by your negligence or through fraud after receiving the summons for rescission. 1 and 2 of article 1381 shall not take place with respect to contracts approved by the courts. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors. Art. The thing-object of the contract is not in the legal possession of 3rd persons in good faith. Unless. 73 . 2. are you also obliged to return the thing. then you will not be liable for the deterioration of the thing which is the subject matter for rescission. b) c) d) 1385: So what must be returned? The object of the contract. In this case. So just like 1191. In this case. (1295)  Mutual restitution Requisites before Rescission can be Brought a) Generally. 1386. and the 3rd person who acquired it had no constructive knowledge of the litigation. and in number 4. Except when it is prejudicial to creditors. Rescission referred to in Nos. The fact that consideration of the conveyance is fictitious or inadequate. It can be carried out only when he who demands rescission can return whatever he will be obliged to return. then you can ask for reimbursement. then you return the thing in that state. Now. (1297a) PRESUMPTIONS OF FRAUD Gratuitous Alienations contracted “before” the donation. Against whom some writ of attachment has been issued. Now. and need not have been obtained by the party seeking the rescission. or 2. A sale upon credit by an insolvent debtor. 1381? #1 and 2 and 3. 2007 Case Digests (from Erwin Vicente). the fruits. The transfer of all or nearly all of his property by a debtor. exception is onerous and good faith. plaintiff must be able to return what has been received by virtue of rescissible contract. Ferlyn Ong for 4th year Batch 2009 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. the fruits. exception you are the complainant and you have not annotated it. your obligations are to return the thing but not to pay for the fruits already received. you received the property believing in good faith that the transfer gratuitously is legal and valid. Against whom some judgment has been rendered in any instances (even if not final). BADGES OF FRAUD (circumstances that a certain alienation has been made in fraud of creditors) 1. Book of Tolentino. And if you cannot return this then you cannot ask for rescission. 1386: Rescission referred to in Nos. if you have incurred necessary expenses. the price and the interest? If you are a transferee in good faith. Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been issued. presumed fraudulent: when debtor did not reserve sufficient property to pay all debts Onerous Alienations Presumed fraudulent – when made by persons: 1. the price and the interest. Third. In addition to these presumptions. There must be no other legal remedy. 3. indemnity for damages may be demanded from the person causing the loss. 1 and 3 of 1381 shall not take place with respect to contracts approved by the courts Art. Meaning if there has already been deterioration. the design to defraud creditors may be proved in any other manner recognized by the law of evidence. restoration or restoration applies only to what under Art. indemnity for damages may be demanded from the person causing the loss. if the transfer is gratuitous and you acted in good faith. RAM Notes Compiled by: Hanniyah Sevilla. Neither shall rescission take place when the things which are the object of hte contract are legally in the possession of third persons who did not act in bad faith. especially when he is insolvent or greatly embarrassed financially. 4. Lydia Galas (Hann Sevilla). The decision or attachment need not refer to the property alienated. A transfer made by a debtor after suit has been began and while it is pending against him. there is mutual restitution.Obligations and Contracts: Sources 2006 Lectures of Atty. But if it was due to a fortuitous event and before you have received the summons. The action must be brought w/in proper prescriptive period. 1387. And you cannot ask for rescission unless you can return what you have received from the other party.

1387: Presumptions Par. 2007 Case Digests (from Erwin Vicente). 1388: So in this case. Art. (2) Those where the consent is vitiated by mistake. a creditor/s is/are adversely affected by said transaction. good/ bad faith of next transferee is immaterial. the first acquirer shall be liable first. Christ May Andolana. but he will be liable for damages. Creditors of (a) and (b) by virtue of Art. violence. there is already an on going case filed against you for collection of money. The failure of vendee to take exclusive possession of all the property. 7.  A gratuitous conveyance or donation. intimidation. The action to claim rescission must be commenced within four years. If there are two or more alienations. the period of four years shall not begin until the termination of the former's incapacity. if that is not found then the presumption is that you intend to defraud your creditors. for after all transferee may have been in good faith and is now in legal possession of the property. For persons under guardianship and for absentees. Book of Tolentino. 1. Fraud is not sufficient to rescind. When shall you start counting the four year period? That was answered in the case of Cheng vs. CA. Transfers  If transferee is in good faith. the liability will be only upto T3. These contracts are binding. or until the domicile of the latter is known. The fact that the transfer is made between father and son. the first acquirer shall be liable.Obligations and Contracts: Sources 2006 Lectures of Atty. For persons under guardianship and for absentees. 1388. and so on successively. Evidence of large indebtedness or complete insolvency. 2: So the first is that. (n) RESCISSION Basis is lesion (damage) ANNULMENT Basis is vitiated consent or  74 . (1299) WHO CAN BRING ACTION? 1. even if it is by onerous title. The following contracts are voidable or annullable. whenever. 1: It is absolutely necessary when you prepare a deed of donation for the donor to state that he has reserved sufficient property for himself to answer for his support as well as the obligations that he has incurred prior to this donation. then as we said. Rescission is merely a secondary remedy --. Whoever acquires in bad faith the things alienated in fraud of creditors. 6. Because of the impossibility to return what he is supposed to return to the debtor for purposes of answering the liabilities of the debtor. there is a writ of attachment ( a writ of attachment is issued during the pendency of the case asked by the complainant upon the court that the defendant is about to dispose nearly all his property and which if judgment shall be rendered by the court in favor of the complainant. 1390. the writ of execution issued by the court by reason of that favorable judgment will be returned unsatisfied by the sheriff) Par. Otherwise. unless they are annulled by a proper action in court. 3: Badges of fraud Art. Lydia Galas (Hann Sevilla). They are susceptible of ratification. or until the domicile of the latter is known. Now suppose it does not fall under numbers 1 and 2. VOIDABLE CONTRACTS Art. 1389. he transfers it to T2 and then to T3. due to any cause. He will not be liable to return. the four years shall not begin until the termination of the former's incapacity. RAM Notes Compiled by: Hanniyah Sevilla.  If transferee is in bad faith.C 1389 Now when do you institute the action for rescission? Must be commenced within four years. Ferlyn Ong for 4th year Batch 2009 5. The injured party (or defrauded creditor) 2. (1298a)   “due to any cause” includes fortuitous event. or 2.only if debtor cannot pay. precisely because he has transferred it. it should be impossible for him to return them. Par. His heir or successor-in-interest 3. the next transferee is only liable if he is in bad faith. shall indemnify the latter for damages suffered by them on account of the alienation. 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. 1177 of C. validly executed is presumed valid unless it can be shown that at the time of execution of conveyance. undue influence or fraud.

the person upon whom any of the vices of consent were employed. rescission will not prosper Compatible w/ perfect validity To prevent rescission. from the time the guardianship ceases. the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. May the guardian bring also an action for annulment? of course. Book of Tolentino. and the period shall begin 1. So when is there tacit ratification? For instance. the minor sells the property during minority. Ferlyn Ong for 4th year Batch 2009  Defect is external/extrinsic Action is subsidiary A remedy Private interest governs Equity predominates Plaintiff may be party or 3rd person There is damage If plaintiff is indemnified. Or you can state it in the counterclaim if you are a defendant. and it shall retroact to the day of the inception of the contract. Or he buys the property during minority.Obligations and Contracts: Sources 2006 Lectures of Atty. "By the way. It has retroactive effect. But if it were the minor. In cases of mistake or fraud. ratification is required. Now ratification may be express or tacit. you insitute an action asking the court asking the court to annul the contract on the ground of 1 or 2. So the guardian may effect the ratification. where any of hte vices of consent is employed in order to obtain the consent by one of the contracting parties. If it were intimidation. It can only be brought by the aggrieved party. They are susceptible of ratification. violence or undue influence. then upon reaching the age of majority. So it becomes a valid contract. he will now rent the very property. form the time the defect of the consent ceases.      - There are only two kinds of voidable contracts. What do you mean by collateral attack? You say. When you say direct. the contract is voidable because one of the parties is a minor". unless there are annulled by a proper action in court. if the incapacitated. and these can be annulled by the court even if there may have been no damage to the contracting parties. 75 . and upon reaching the age of majority. he asks for the balance of the purchase price.Who? The minor. 2. 2. And voidable or annullable contracts cannot be attacked collaterally. then from the time of the cessation of guardianship. from the time of the discovery of the same. instead of asking for the annulment of the contract. Or during the minority the purchase price has not been fully paid. And when will you bring the action for annulment? Four years. Lydia Galas (Hann Sevilla). Upon reaching the age of majority. Now who has the right to invoke it? May the capacitated person invoke the incapacity of the other party? Or the person who employed any of the vices of the consent on the ground that the contract is voidable because he used fraud or there was mistake. 2007 Case Digests (from Erwin Vicente). It is understood as tacit if with knowledge of the reason which renders the contract voidable and such reason having ceased. and it cleanses the contract of whatever defects it creates. and instead of having that contract of sale annulled upon reaching the age of majority. Christ May Andolana. and when the action refers to contracts entered into by minors or other incapacitated persons. -     - incapacity to consent Defect is internal/intrinsic (in the meeting of mind) Action is principal A sanction Public interest governs Law predominates Plaintiff must be a party to the contract Damage is immaterial Indemnity is not a bar to the action Defect is presupposed To prevent annulment. What happens if there is ratification? Ratification cleanses the contract of its defects. ratification is not required. RAM Notes Compiled by: Hanniyah Sevilla. These contracts are binding. So one would be when one of the parties is incapable of giving consent to a contract. the incapacitated. and he was the one who caused the mistake? No. 3. You must institute a direct proceeding asking that the contract be annulled. he now donates the property.

1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily.Rights of innocent 3rd persons must not be prejudiced. nor can those who exerted intimidation. or undue influence. In case of mistake or fraud. i am 18 and I have a cedula to show you" but the cedula is doctored. Ratification does not require the consent of the party who has no right to institute the action for annulment. or caused mistake base their action upon these flaws of the contract. and the price with its interest. 1394. violence. An obligation having been annulled. (1302a) WHO MAY ASK FOR ANNULMENT: o The victim (principal or subsidiary party) o EXCEPT: If person not obliged principally/ subsidiarily in a contract may exercise an action for nullity if he is prejudiced in his rights w/ respect to one of the contracting parties. Contract is voidable 2. (1303a) Effects of Annulment 1. from the time the defect of the consent ceases. or employed fraud. Person ratifying must be the injured party. the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. 1396. violence. persons who are capable cannot allege the incapacity of those with whom they contracted. Cause must not exist/continue to exist anymore at time of ratification 4. RAM Notes Compiled by: Hanniyah Sevilla. Book of Tolentino. Ratification may be effected expressly or tacitly. with their fruits. Ferlyn Ong for 4th year Batch 2009 Art. If contract has already been performed . with knowledge of the reason which renders the contract voidable and such reason having ceased. nor can those who exerted intimidation. he was incapacitated because there was active misrepresentation. If contract is not complied w/. . (1311a) Art. 2007 Case Digests (from Erwin Vicente). Art. Lydia Galas (Hann Sevilla). This period shall begin: In cases of intimidation. violence or undue influence. 1392. the contracting parties shall restore to each other the things which have been the subject matter of the contract. Active misrepresentation. annulment. . So who can ask for annulment? Those who may be obliged either principally or subsidiarily (guarantors. In obligations to render service. It is understood that there is a tacit ratification if. persons who are capable cannot allege the incapacity of those with whom they contracted. (1309a) Requisites of Ratification 1. The action for annulment shall be brought within four years. parties are excused from the obligation. they cannot ask for annulment on the ground that the other party is incapacitated. from the time of the discovery of the same. except in cases provided by law. Mutual Restitution of: 76 . the value thereof shall be the basis for damages. or employed fraud. Ratification extinguishes the action to annul a voidable contract. So we apply the principle of estoppel with respect to those who are capable. (1313) Retroactive Effect of Ratification Once ratified.Obligations and Contracts: Sources 2006 Lectures of Atty. Creditors of victim cannot ask for annulment except when it prejudice them and the debtor has no other property. Art. or caused mistake base their action upon these flaws of the contract. However. from the time the guardianship ceases. (n) Ratification does not require the conformity of the contracting party who has no right to bring the action for 1395: Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment. Art. 1398. Christ May Andolana. for example: "You are a minor" and you say "No. or undue influence. And when the action refers to contracts entered into by minors or other incapacitated persons. . Ratification is made expressly or by an act implying a waiver of action to annul 5. annulment based on original defect cannot prosper. 1395. 1393. (1301a) Art. Art. sureties. Person ratifying must know the reason for the contract being voidable (cause is known) 3. mortgagors). 1391. 2. Then the incapacitated person cannot be heard later on when asking for annulment that at the time he entered into the contract. Art. However. Now the exception there is if there is active misrepresentation on the part of the incapacitated person. Ratification may be effected by the guardian of the incapacitated person. Ratification cleanses the contract from all its defects from the moment it was constituted.

1401. and it is lost through fortuitous event. Now. And what shall it consist? The subject matter. 1399: Contract entered into by the incapacitated (number 1). So the loss shall not be an obstacle to the success of the action. If you remember also. Cannot be availed of by strangers to contract and innocent third parties cannot be obliged to restore. Now what if the defendant loss the object of the contract through a fortuitous event and a petition for annulment is filed by the party who has the right to institute the action? Is he still obliged to pay the value. with interest from the same date. Because he is in good faith. The price with interest. if he has kept the thing delivered. then the action will prosper because the law says through the fault or fraud. Christ May Andolana. The defendant in an annullable contract would either be the capacitated or the person who employed the vices of the consent. again. the other cannot be compelled to comply with what is incumbent upon him. So those are the only instances wherein restoration will be possible with respect to the incapacitated. then he has to return the value. So here. then he is obliged to pay the value. There is that mutual obligation to restore. the price with its interest. 1401 2nd paragraph speaks of the action instituted by the incapacitated. But it will prosper if the plaintiff if the person who has the right to institute the action for annulment offers to pay the value of the thing that he has lost. unless said loss took place through the fraud or fault of the plaintiff. 1400. Art. those are the exception. And if the thing is lost. but the plaintiff will only be obliged to pay the value. So it were lost through fortuitous event. the price and the interest. it shall not be an obstacle to the action. plus interest.Obligations and Contracts: Sources 2006 Lectures of Atty. No restoration except if he has kept the thing delivered. RAM Notes Compiled by: Hanniyah Sevilla. what will be the basis of the valuation? The value at the time of the loss of the object. if he were the one who lost the thing which is the object of the contract which is annullable. if the lost is fortuitous. In relation to that 1241. The law only obliges him to return it if it has redounded to his benefit or he has kept the thing. Book of Tolentino. (1308)  Principle of mutual restitution 1402: As long as one of the contracting parties doesn not restore what in virtue of the decree of annulment he is bound to return. however the defendant cannot be compelled to restore what he is obliged to restore because the essence of mutual restitution becomes untenable in as much as there can be no mutual restitution. and the party who lost it has the right to institute the action. 1399. 1402. he shall return the fruits received and the value of the thing at the time of the loss. But this will only apply to contracts falling under Number 2. So those are the object that he would have to return in case annulment is possible but he could no longer do it because it has been lost by fault (or fraud). 1398: If there is annulment. When the defect of the contract consists in the incapacity of one of the parties.   The thing with fruits. the fruits. mutual restitution. Now what happens if the thing is lost and the person obliged to return it is the incapacitated. and the loss is not due to his fault. then he shall have the obligation to return the fruits received. If the thing is lost through the fault or negligence of the defendant or the capacitated or the person who excercised the fraud. Now. unless the loss is through the fault or fraud of the incapacitated. As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return. the other cannot be compelled to comply with what is incumbent upon him. (1307a) Art. what will be the obligation of the parties. b. Ferlyn Ong for 4th year Batch 2009 a. or if he has disposed of it and was benefited by the disposal. (employment of any of the vices of consent) Art. or the person upon whom any of the vices of consent were employed? 1401 says that if the thing is lost through the fault of the person who has the right to institute the action. 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. Now the defendant will be obliged to return. then the petition for annulment is extinguished. 2007 Case Digests (from Erwin Vicente). 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. Husband cannot barter away his wife’s paraphernal properties except when she consents. Lydia Galas (Hann Sevilla). the price or the value of the thing plus the interest. plus damages because there was negligence. He is only obliged to restore in so far as he has been benefited by the thing or price received by him. Now. the loss of the thing shall not be an obstacle to the success of the action. Art. 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. He is exempt from paying the value because the lost is through fortuitous event. If the right of action is based upon the incapacity of any one of the contracting parties. if it were the incapacitated who lost or squandered the object he is not under obligation to return it. under the 2nd par of 1401. he can still compel if he offers to pay the value of the object of what he is bound to return. 77 . or if he has disposed the thing and the disposal was to his benefit. then he is only obliged to pay the value no longer the interest. interest and fruits? No.

or who has acted beyond his powers. 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. there can be no action that can be maintained before the court precisely because the agreement is in its executory stage.no effect yet. In the following cases an agreement hereafter made shall be unenforceable by action. names of the purchasers and person on whose account the sale is made. 1403. Art. So this one is a purely executory but valid contract.  It may be invoked in actions for damages for breach of said agreement or for specific performance. not to partially or totally executed or performed contracts. or the evidences. Waivable (defense) Personal defense. Does not apply to contract of loan. or some of them.special promise refers to a subsidiary/collateral promise to pay like contract of guaranty.2 (b) . at a price not less than five hundred pesos. because contracts are valid in whatever form they are entered into unless forms are necessary for its validity or enforceable. but when a sale is made by auction and entry is made by the auctioneer in his sales book. it is a sufficient memorandum. of the agreement cannot be received without the writing. UNENFORCEABLE CONTRACT There are three kinds of unenforceable contracts. or by his agent. evidence.  Mere lapse of time.  W/out ratification. A says to B that I am selling my house for 500K. (b) A special promise to answer for the debt. or miscarriage of another. donations propter nuptias STATUTE OF FRAUDS – laws. is not the ratification required by law. other than a mutual promise to marry. Here specific performance will not lie. 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. of the amount and kind of property sold. Christ May Andolana. unless the buyer accept and receive part of such goods and chattels. default. be in writing. The first two are enforceable thru court action. statutes or provisions w/c require certain agreements to be in writing before they can be enforced in a judicial action. unless the unenforceable contract is ratified.  statutes are applicable only to executory contracts. no matter how long. Ferlyn Ong for 4th year Batch 2009 CHAPTER 8 UNENFORCEABLE CONTRACTS (n)  Contracts that cannot be sued upon or enforced unless RATIFIED --. unless first ratified. 2007 Case Digests (from Erwin Vicente). (c) An agreement made in consideration of marriage. (2) Acceptance of benefits under them (as where contract is totally or partially performed) Art. the “agent” assumes personal liability. RAM Notes Compiled by: Hanniyah Sevilla. Unenforceable contracts cannot be enforced through court action. and subscribed by the party charged. (f) A representation as to the credit of a third person. of such things in action or pay at the time some part of the purchase money. (d) An agreement for the sale of goods. therefore. unenforceable contracts are valid contracts only that because they are still in the stage where there is no performance yet by either of the parties. STATUTE OF FRAUDS Purpose:  to prevent fraud. Now. thereof. or for the sale of real property or of an interest therein. That is an oral agreement. Lydia Galas (Hann Sevilla).    2 Ways to Waive This Defense (1) Timely failure to object to presentation of oral evidence to prove the oral agreement. That is why. (2) Those that do not comply with the Statute of Frauds as set forth in this number. terms of sale. Book of Tolentino. price. and B says I will buy your house. That is why you cannot prove the existence of the contract through parol or oral evidence. (e) An agreement of the leasing for a longer period than one year.Obligations and Contracts: Sources 2006 Lectures of Atty. say A and B would enter into an agreement. The following contracts are unenforceable. (3) Those where both parties are incapable of giving consent to a contract. or some note or memorandum. cannot be assailed by 3rd persons Does not apply to contracts fully or partially performed. at the time of the sale. There is an 78 . KINDS OF UNENFORCEABLE CONTRACTS a) Unauthorized contracts b) Those that fail to comply with the Statute of Frauds c) Those where both parties are incapable of giving consent to a contract. unless the same. 2(c) – agreements in consideration of marriage – marriage settlement. chattels or things in action. There can be compulsion through specific performance. thus some agreement are required to be in writing. Valid? Yes. 1403.

You cannot enforce it thru court action precisely because it is a purely executory contract. Now there is this case of Domalagan vs. of such things in action. then the authority is in excess of his authority and in that case the contract entered into by the agent is unenforceable. as earnest money. It will not apply if part of it will be performed within the year although the completion of it will take five years. negotiable instruments) . but if you take all together. Remember in your Family Code that a breach of action to marry is not an actionable wrong. this is already a sufficient note or memorandum. Bolifer. A now can compel B to pay the purchase price. can B sue A for breach of contract? Can B go to court and compel A to perform? In that case oral evidence is not allowed to prove the existence of the agreement because this is a purely executory agreement involving the sale of real property. Now suppose A now would change his mind and later on sell it to C. a. what is not found there is not considered to be included. Or he delivers the DOS and asks for the purchase price. So you cannot enforce it through court action. or some of them. kunin ko yung 500 ko. So in that case. It does not have to be a public document. An example of this would be a contract of guaranty. So this will only apply to purely executory contracts. So. Must it be in writing to be enforceable? How will you now interpret the agreement as such? The determining factor is the 79 . But A cannot ask for the setting aside of the agreement. or pay at the time some art of the purchase money. Another would be. If you remember. the buyer cannot compel the principal to execute the deed of sale precisely because the agent was in excess of his authority. It becomes actionable if the breach is coupled with seduction. So let's say its the other way around. And there can be oral proof as to the agreement because of this partial payment. That is not within the purview of this paragraph. located at so and so and covered by TCT# 1111. the price is more than 500. such as credit. But before the ratification comes. what are those contracts which are unenforceable unless ratified? (1403) 1. So the agreement must not be performed within a year from the time of its constitution. we discussed this already under 1317. Then in that case if he sells. Lydia Galas (Hann Sevilla). Christ May Andolana. So it a sheild but not a sword. And if you do not comply with the formalities of ordinary donations. B says sige bilihin ko. the prescriptive period is also 4 years. there are only three: writing. So in this case. letter C is no longer applicable because now it states that donations propter nuptias must observe the forms on ordinary donations. Ferlyn Ong for 4th year Batch 2009 offer and there is an unqualified acceptance. It is a defense against its enforcement. and the lapse of four years will be deemed a waiver of your right to question the voidability of the contract. if B sues A. No where does it provide it be in a public document. or the evidences. ako ang bahala. Unenforceable contracts are not curable by any lapse of time. it is void. but if he guarantees. No part of it shall be performed within the entire 1 year period. at a price not less than five hundred pesos. because that will be what. That is no longer covered. you sell me your credit. But suppose B says. signed by the parties. unless the buyer accept and receive part of such goods and chattels. that agreement is removed from the ambit of purely executory contracts. but not the authority to sell. then it falls within this paragraph. Before the effectivity of the family code. then A can say that it cannot be enforced precisely because there was no note or memorandum. The agent is given the authority to rent. So if the promissor says. and A now got hold of his diary and tore a piece of paper and writes that B agreed to buy my property. default or miscarriage of another. RAM Notes Compiled by: Hanniyah Sevilla. 2007 Case Digests (from Erwin Vicente).Obligations and Contracts: Sources 2006 Lectures of Atty. an agreement that by its terms is not be be performed within a year from the making thereof. what if you buy a certain good and the price is less than 500. the exclusive promise of the promissor. The enumeration in paragraph 2 is exclusive. You read this case and Locquiao case. Those that do not comply with the Statute of Frauds. If you remember your requirements in order that prenuptial agreements will be valid. even partially. in rescissible contract. I have 50K. b. Now. then even if A does not issue a receipt. if you do not institute the action. or partially consummated. Or even if on your part it is to be performed within one year but the other party has already performed his part. 2. So there is a perfected contract only that there is no execution yet by the parties. A special promise to answer for the debt. the ante-nuptial agreements or prenuptial agreements. What would fall under letter c would be marriage settlements. but not an action to set aside. How shall the principal ratify it? If he demands for the payment of the purchase price. But not an action to set aside a contract. and executed by the parties before the celebration of the marriage. chattels or things in action (those movables not susceptible of possession. donations propter nuptias are also covered by letter c but with the effectivity of the FC. because hindi sila nagkatuluyan. Book of Tolentino. and not to contract which have been consummated. There is now what we call as partial fulfillment or partial execution. But here there is no prescription. It applies only to purely executory contracts. Those entered into in the name of another person by one who has been given no authority or legal representaion or who has acted beyond his powers. sabi ni Domalagan. An agreement made n consideration of marriage other than the mutual promise to marry. there is now a perfection of the contract and the proof is the note. It gives rise to a defense against its enforcement. An agreement for the sale of goods. So in that case if A changes his mind and sells to C. c. Unlike voidable which prescribe in 4 years. B now can go to court and prove before the court the agreement. But not a credit extended to a debtor upon the exclusive promise of the promissor. d. if B changes his mind.

Art. Art. of for the sale of real property or of an interest therein. Art. does that include boundaries. The failure to object to the presentation of oral evidence to prove the unenforceable agreement because it is not in writing. kilala mo ba si Lorelie? Ah Oo kilala ko yan. of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated. Tan. 1407. Contracts infringing the Statute of Frauds. and asks Mr. are ratified by the failure to object to the presentation of oral evidence to prove the same. 2 of article 1403. Vicente. The public document is only necessary for the registration with the Registry of Deeds and you can compel the other contracting party to observe the required form. But for purposes of registration. partition? (Rosencor case) f. subscribed and sworn by the person charged to be enforceable. 1406. 1407: I have discussed this already. Art. 1406: Remember the case of Martinez vs. Those where both parties are incapable of giving consent to a contract. An example of this is suppose Lorelie would like to borrow money from Mr. When a contract is enforceable under the Statute of Frauds. 3. It becomes valid and enforceable. Christ May Andolana. Lydia Galas (Hann Sevilla). and a public document is necessary for its registration in the Registry of Deeds. Take note of the sale of real property that is why in 1358. Is she a good payor. If both the guardians would ratify. If ratification is made by the parents or guardians. meaning the real property. e. Unauthorized contracts are governed by article 1317 and the principles of agency in Title X of this Book. In a contract where both parties are incapable of giving consent. referred to in No. or by the acceptance of benefit under them. or guardian. CHAPTER 9 VOID AND INEXISTENT CONTRACTS VOIDABLE May be ratified Produces effect until annulled Defect: incapacity/ vitiated consent Valid until annulled VOID Cannot be ratified No effect Defect is ordinarily against public policy Void from the very beginning. 2007 Case Digests (from Erwin Vicente). You are not vouching for the obligation. Book of Tolentino. As well as of the interest therein. valid. Only the parties because the defense of Statute of Fraud is personal to the contracting parties. A representation to the credit of a third person. then it must be in writing. sale of real property is definitely excluded. RAM Notes Compiled by: Hanniyah Sevilla. Art. an agreement for the leasing for a longer period than one yaer. and not for purposes of validity or enforceability. no action is required to set aside. contract of lease for more than one year must be in writing to be enforceable. 1408: Unenforceable contracts cannot be assailed by third persons. Ferlyn Ong for 4th year Batch 2009 intention of the parties. If the intention is that it should be taken as a whole. as the case may be. express or implied ratification by the parent. UNLESS contract has been performed Cannot be cured by prescription Available to       May be cured by prescription Defense may be - - 80 . the contract shall be validated from the inception. CA. 1405. the parties may avail themselves of the right under Article 1357. you are merely vouching for the credit standing of the third person.  This right is given only when contract is both valid and enforceable. Now what if one of the representatives of the incapacitated person would ratify the contract. When we say interest. 1404. So 1405 is the exception.Obligations and Contracts: Sources 2006 Lectures of Atty. That is a representation to the credit of a third person. Ah yes. as the case may be. of both contracting parties. That is one exception. what would now be the nature of the agreement? Voidable.

Right to set up the defense of illegality cannot be waived. VOID/INEXISTENT CONTRACTS And there are 7 (1409). (2) Those which are absolutely simulated or fictitious. d. 3. Another is marriage. and shall be considered as a perfected contract as soon as the written consent of the incapacitated spouse or absent spouse is obtaine or judicial authorization. b. Ferlyn Ong for 4th year Batch 2009  invoked only by parties or their successors-ininterest Referred to as relative/ conditional nullity - anybody – 3rd persons provided that their interests are affected Absolute nullity. (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. Special Classification 1. Book of Tolentino. When is there laches? When you sleep on your rights. public order or public policy. UNENFORCEABLE 1. Exception to the void contracts that cannot be ratified: The contract is void and yet the law says that it can be ratified. RAM Notes Compiled by: Hanniyah Sevilla. Ano yon? Any encumbrance or disposition of the property by the present/capacitated spouse without the written consent of the incapacitated or absentee spouse or without judicial authority is void. it is void but you did not institute the appropriate action. Absolute – void for lack of consent 2. The following contracts are inexistent and void from the beginning: (1) Those whose cause. You know that the contract is defective. 2. Not available to third persons whose interests are not directly affected. Cannot give rise to a contract e. cannot be assailed by third parties - VOID Cannot be ratified No contract at all Can be assailed by anybody directly affected. Produces no effect f. good customs. Relative – hidden/intended contract is binding CHARATERISTICS OF VOID CONTRACTS a.Obligations and Contracts: Sources 2006 Lectures of Atty. It cannot prescribe but can be defeated by laches. if there has been performance by one of the contracting parties. Christ May Andolana. Art. Take note that it is void or inexistent from the beginning. These contracts cannot be ratified. What kind? When the authority of the solemnizing officer is absent. (7) Those expressly prohibited or declared void by law. Neither can the right to set up the defense if illegality be waived. Believed in good faith lang ang kailangan. remember that void contracts do not produce any legal effect and no obligation shall arise from a void contract. 2007 Case Digests (from Erwin Vicente). But it shall be a continuing offer between the spouse who did not obtain consent and the third person. (3) Those whose cause or object did not exist at the time of the transaction. c. Illegal/ illicit ones Simulate Contracts 1. may be ratified 2. Action/defense for declaration as inexistent does not prescribe. there is still a necessity for the declaring of the contract void. 1409. No action to declare them void is needed g. There are certain contracts which are void. However. object or purpose is contrary to law. -. morals. appealable even if not raised in trial court. Because while it may be true that void contracts have no legal effect from the very beginning. There is no need to declare nullity by the competent 81 . there is contract but it is unenforceable. but one or both the contracting parties believed in good faith that the solemnizing officer has the authority to do.(the object could not come into existence because the object may legally be a future thing) (4) Those whose object is outside the commerce of men. Cannot be ratified. (5) Those which contemplate an impossible service. Inexistent – essential formalities are not complied with. Lydia Galas (Hann Sevilla).

again neither may recover what he has given by virtue of the contract. or only one of the parties is guilty. but the innocent one may claim what he has given. 1411and 1412: 1411 referst to a contract that is void because it proceeds from the illegality of the cause or object and the act constitutes a criminal offense. and shall not be bound to comply with his promise. So take note that 1411 speaks of an act which has an illegal cause and the act constitutes a criminal offense. transfer. both parties being in pari delicto.Obligations and Contracts: Sources 2006 Lectures of Atty. who is not at fault. Is that a criminal offense? No. provided that the rate of interest agreed upon is not unconscionable and inequitous which is for the court to be determine. neither may recover what he has given by virtue of the contract. Moreover. he cannot recover what he has given by reason of the contract. It does not mean that the obligation is deemed extinguished by reason of the rate of interest imposed by the creditor. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense. because when we say inexistent. 1411 refers to a contract which has an illegal cause which act proceeds from a criminal offense. Would that fall under 1411 and 1412. Either both parties are in pari delicto. it does not actually exist. and the act constitutes a criminal offense. what would be the general rule with respect to the effects of a crime or its instruments? It shall be seized by the State. 2007 Case Digests (from Erwin Vicente). it is purely or absolutely simulated contract. Book of Tolentino. CA and Guan vs. your utang shall subsist. 1410. then the law leaves them where they are and they have no cause of action against each other. encumber the property you acquired by reason of the implementation of CARP within 10 years. illegal drugs. what happens? Just like when you are a benificiary of CARP. Christ May Andolana. no. So take note of 1411 and 1412. So the right might be lost by the unreasonable passage of time and not by prescription. but the innocent one may claim what he has given and shall not be bound to comply with his promise. If you have read the case of Modina vs. That will not fall under here because what has been entered into by the parties are what we call as absolutely simulated contracts. Now we no longer have the Usury Law. Now what would be an unlawful or forbidden cause but does not constitute a criminal offense? Is a contract involving a sale of land to a foreigner valid? No. you are prohibited to sell. Ferlyn Ong for 4th year Batch 2009 court if the contract is still purely executory. Ong. 1412 is also a void contract but the unlawful or forbidden cause does not constitute a criminal offense but nevertheless it is unlawful or forbidden. When the fault is on the part of both contracting parties. they shall have no action against each other. the government will take back what has been given to you. the following rules shall be observed: (1) When the fault is on the part of both contracting parties. This rule shall be applicable when only one of the parties is guilty. 82 . or ask for the fulfillment of what has been promised him. Now. may demand the return of what he has given without any obligation to comply his promise. (2) When only one of the contracting parties is at fault. But as I said. So if the State will find that out. or ask for the fulfillment of what has been promised by him. or demand the performance of the other's undertaking. it is unlawful or forbidden but it does not constitute a criminal offense. and parties can agree with respect to the rate of interest. And if you remember your provisions in the RPC. No action can be maintained in an illicit transaction. One is that. The laws on usury have been repealed. When only one of the contracting parties is at fault. you could no longer get the money back as a form of punishment because there is really that prohibition. would that apply to inexistent contracts? Inexistent contracts does not necessarily mean a void contract. The action or defense for the declaration of the inexistence of a contract does not prescribe. regardless of whether the rate of interest is unconscionable or inequitous. This rule shall be applicable when only one of the parties is guilty. The other. then you have to go to court and let the court declare that the contract is void. Lydia Galas (Hann Sevilla). The other. An example of which would be. (1305) Art. whereas 1412. So what would be the rules if both parties are in bad faith or in pari delicto? They shall have no action against each other and both shall be prosecuted. may demand the return of what he has given without any obligation to comply with his promise. Art. and both shall be prosecuted. RAM Notes Compiled by: Hanniyah Sevilla. Art. And if you were the one who bought it. (1410) 1410: The action of defense for the declaration of teh inexistence of a contract does not prescribe. 1411. it can be defeated by laches. 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. Moreover. That is the distinction between 1411 and 1412. who is not at fault. The rule is that when both parties are in bad faith. he cannot recover what he has given by reason of the contract. but if there is performance already. and if you violate that undertaking. When the nullity proceeds from the illegality of the cause or object of the contract. The very common example of this is you deal in drugs. 1412. or demand the performance of the other's undertaking.

1414. or before any damage has been caused to a third person. he may. then he can now get back what he has earlier given to Querubin before the purpose has been accomplished. Art. recover what he has paid or delivered. and when public interest will be subserved. and a contract is agreed upon by which a laborer accepts a lower wage. In such case.  Recovery even if it is in pari delicto provided  The purpose has not yet been accomplished. any person paying any amount in excess of the maximum price allowed may recover such excess. If you remember the Liguez case (?). So here is you can recover the excess of what you have paid. she occupies a privileged position under our law. or authorizes the setting of a minimum wage for laborers. but it is prohibited because one is. it might prejudice the creditor. so it is not illegal per se. 1416: Example of this is donation of all the properties of the donor. 1419. 1417. When the law fixes. So if your sari-sari store sells you more than what is permitted by DTI. the contract may be repudiated by one of the parties before the purpose has been accomplished. Another example would be homestead lands. Contracts: (1) Illegal per se – forbidden for it is against public interest. Art. This provision is actually designed for the protection of the donor. No. In that case if Miranda would decide to repudiate the plan and has a change of heart. Christ May Andolana. 1415: Suppose a minor buys a gram of shabu. if the public interest will thus be subserved. public policy is enhanced. allow the party repudiating the contract to recover the money or property. 1417: This is true in basic necessities. When the price of any article or commodity is determined by statute. 1415. Art. Art. you can demand for overtime pay. Now suppose he later on has a change of heart and tells Quirubin please do not proceed with our plan. you can go to DTI and complain. When the law sets. When the agreement is not illegal per se but is merely prohibited. Book of Tolentino. And in that case he can recover what he has delivered. Lydia Galas (Hann Sevilla).  Applies also if parties are not equally guilty and where public policy would be advanced by allowing the suit for relief. then definitely the law will treat them differently. 1418: So when the maximum hours of work is fixed. (2) And merely prohibited contracts forbidden because of private interest recovery is permitted provided that:    contract is not illegal per se prohibition is for protection of plaintiff. if the interest of justice so demands allow recovery of money or property delivered by the incapacitated person. Remember the penalty for illegal possession of drugs has been repealed and is now made to depend on the amount of the drugs. 2007 Case Digests (from Erwin Vicente).  Any contract in violation of this article shall be invalid. Conchita was allowed to get what was promised to her because according to the court. Art. the courts may.  Cannot be waived. if public policy is thereby enhanced. he shall be entitled to recover the deficiency. the courts may. Ferlyn Ong for 4th year Batch 2009 Art. 1419: Is minimum wage. Interest paid in excess of the interest allowed by the usury laws may be recovered by the debtor. or authorizes the fixing of the maximum number of hours of labor.Obligations and Contracts: Sources 2006 Lectures of Atty. 83 . or by authority of law. 1414: So suppose Miranda would give Querubin 100K to kill Gloria. 1418. When money is paid or property delivered for an illegal purpose. But if it were the incapacitated or the minor. and a contract is entered into whereby a laborer undertakes to work longer than the maximum thus fixed. with interest thereon from the date of the payment. yes. 1413. Where one of the parties to an illegal contract is incapable of giving consent. And if you also notice most of the provisions in the RPC regarding minors would always lean to the protection of the minor Art. being a minor. RAM Notes Compiled by: Hanniyah Sevilla. then the other can recover what he has given either money or property. that is against the law. May overtime pay be waived? It depends. 1416. and the prohibition by the law is designated for the protection of the plaintiff. If for service rendered. Especially if donations inter vivos. or  If damage has not been caused to any third person. Second is you may no longer have anything to support your needs when you will be giving all your properties. And you have your friendly neigborhood variety store. he may demand additional compensation for service rendered beyond the time limit. But if you are still going to render service.

though it may be converted into civil obligation. and it demanded for the payment of what it had constructed. and there is that stipulation that you cannot redeem what has been pledged and it becomes the property of the creditor.  If it is known. RAM Notes Compiled by: Hanniyah Sevilla. the latter may be enforced. Voluntary Fulfillment – debtor complies with the same even if he knows that he could not have been legally forced to do so. the contract that will arise from such forbidden contract would also be void and inexistent . Some natural obligations are set forth in the following articles. 1421. Lydia Galas (Hann Sevilla). but after voluntary fulfillment by the obligor. 2007 Case Digests (from Erwin Vicente). . or moral with natural. 1423. (3) Giving of material and financial assistance to children upon their marriage. In short. A contract which is the direct result of a previous illegal contract. (2) Duty to support natural or spurious children. do not grant a right of action to enforce their performance. even if not agreed upon in writing. Ferlyn Ong for 4th year Batch 2009 Art. Commission on Audit. the obligation as demanded by the constructor is about 2. Art. the balance cannot be recovered since on said balance. not being based on positive law but on equity and natural law. Civil obligations give a right of action to compel their performance. there can be recovery.NATURAL OBLIGATIONS Art. 1420: In case of a divisible contract. the latter may be If indivisible. that is a void agreement. So an example of that would be a pledge. Civil obligations which are obligations enforceable in court.   In case of a divisible contract. Obligations are civil or natural. Precisely because the previous contract might either be one that has an illegal object or an illegal cause or forbidden cause. Now there is this case Osmena vs. Natural obligations. In case of Prescription  If prescription is unknown. The parties and the City of Cebu arrived at a compromise agreement. the legal terms may be enforced if they can be separated from illegal terms. 1422: A contract which is the direct result of a previouis illegal contract. 1420. the whole contract is void.Obligations and Contracts: Sources 2006 Lectures of Atty. the creditor can institute an action to compel the obligor to perform his obligation. Christ May Andolana. Example of Natural Obligation (1) Obligation to pay interest for use of money.5 million so they arrived at about 1. Title III. they authorize the retention of what has been delivered or rendered by reason thereof.  Moral obligation has no juridical tie. if the illegal terms can be separated from the legal ones. The defense of illegality of contract is not available to third persons whose interests are not directly affected. Art. except unenforceable contracts. these are obligations which are purely based on conscience or what we call as duty. The construction company that won the bidding had already started building the slaughter house. 1421: So third persons can invoke as a defense the illegality of the contract for as long as they will be affected by such an illegal contract.g. is also void and inexistent. Civil obligations give a right of action to compel their performance.  In case of partial voluntary fulfillment. 1423: Obligations are either civil or natural. If divisible. Book of Tolentino.So in that case.5 M as a compromise but it was questioned with respect to the compromise and it went to SC. 1422. (e. But such is not true in natural obligations because natural obligations 84 . SC said the compromise agreement is void because it is a derivative of a void contract. Precisely when demand is made and the other person does not perform what is incumbent upon him. the loan obligation shall remain but the pledge shall be stricken out. is also void and inexistent. enforced. no legal obligation has yet been created. But natural obligations may be converted into civil obligations by novation or by acknowledgement or confirmation such as that of a prescribed debt. Natural obligations are obligations not sanctioned by any action (court action). for this is a case of natural obligation. no recovery. acknowledgment of a prescribed debt) NATURAL OBLIGATIONS Four kinds of obligations according to juridical science: moral obligations. if the illegal terms can be separated from the legal ones. Mixed is either civil with moral. Now the City of Cebu appropriated 5 million for the construction of a modern abatoir but the allocation exceeded the budget.

but one of the intestate heirs. they will now file before the court a special proceeding for the probate of the will. dated by the testator and signed by the testator. When. Book of Tolentino.  If the will is void. Art. Let us go to holographic or simple will. This was mentioned in 1239. so he is not liable for the debts of the decedent which exceeds the amount he received from the decedent. after the settlement of the debts of the deceased. So if the testator dies what will the heirs do. RAM Notes Compiled by: Hanniyah Sevilla. 1429. the payment is effective and irrevocable. you remember that. there shall be no right to recover the same from the obligee who has spent or consumed it in good faith. the obligor cannot recover what he has paid. one is it must be entirely handwritten by the testator. Lydia Galas (Hann Sevilla). So there is always that voluntariness on the part of the person who performs the obligation. When a will is declared void because it has not been executed in accordance with the formalities required by law. Another example would be 1425. So in all instances the performance must be accompanied by voluntary because if there is no voluntariness in the performance. Now if one of the pages was undated. But the obligor is conscience stricken. 1427. Art. 1427 no longer applies to 18-21. Because the action the has already prescribed. he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered. but after voluntary fulfillment by the obligor. When a right to sue upon a civil obligation has lapsed by extinctive prescription. 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. (15 years old to 17) Remember 1241: the minor is not obliged to restore. So in that case he can no longer demand for the return of what has been delivered. notwithstanding the fact the he has not been benefited thereby. if B decides to honor what has been written in the complaint and delivers voluntarily he could no longer asks for the return of what he has delivered or payment for the service he has rendered. Art. So if there has been voluntary performance then the person who has performed can no longer recover or demand for the return or the payment of what he has delivered or rendered. When a minor between eighteen and twenty-one years of age. 1430: Wills are classified either notarial or holographic. It has 3 requirements. 85 . B. 1426. they authorize the retention of what has been delivered and rendered by reason thereof. However. 1429: Remember 1311that the heirs is not liable beyond the value of what he has received. So in that case.Obligations and Contracts: Sources 2006 Lectures of Atty. So what are the different kinds of natural obligations? One of which is found in 1424. Correlate to 1239: delivers a sum of money a sum of money or a fungible thing in fulfillment of an obligation there shall be no right to recover the same from the obligee who has spent or consumed it in good faith. 1428: This time suppose A files a case against B. therefore the complaint of A against B did not prosper so whatever he has prayed for in that complaint could no longer be recovered from B since there was an unfavorable judgment against A. there is no right to demand the thing or price thus returned. He is not under obligation under the law to reimburse the third person because the payment did not redound to his benefit. Art. 1426. Here is the civil obligation has already prescribed. but by analogy it applies to those below 18. a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed. pays a legacy in compliance with a clause in the defective will. When a minor between eighteen and twenty-one years of age who has entered into a contract without the consent of the parent or guardian. there must be a signature otherwise the will be void. Now suppose one of the pages was not dated. then the person who perform can demand the restoration or the payment of whatever has been delivered or rendered. but the debtor later voluntarily reimburses the third person. the stipulations in the will will no longer govern the distribution of the estate of the deceased. 2007 Case Digests (from Erwin Vicente). after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation. but the debtor later voluntarily reimburses the third person. voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation. 1424. 1425. Art. 1430. who has entered into a contract without the consent of the parent or guardian. so a debt has already prescribed because no demand was made within the period of 10 years and therefore the creditos could no longer sue the debtor for the non payment. he voluntarily delivers. When without the knowledge or against the will of the debtor. after the annulment of the contract voluntarily returns the whole thing or price received. He is only obliged to restore if he has kept the thing or if it has redounded to his benefit. Christ May Andolana. 1428. Ferlyn Ong for 4th year Batch 2009 are not based on positive law but on equity and natural law and being such they do not grant a right of action to enforce their performance. the legacy is also void and the deceased is considered to have died without a will. If there are alterations. the obligor cannot recover what he has paid. So if what is stated here is a legacy (personal movable property) of a car and the will is void. The requirement dated and signed applies to all pages of the will. Art. the payment is valid and cannot be rescinded by the payer. the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered. and C could now ignore the provisions in the holographic will. Remember 1236 and 1237. Art. then suppose the heirs are A. then the court declares the will void. But the court decided in favor of B.

. Ferlyn Ong for 4th year Batch 2009 Despite the fact. then the person who performed it can demand for the return of whatever he has delivered or payment for the service he has rendered. RAM Notes Compiled by: Hanniyah Sevilla. 1431. Book of Tolentino. Lydia Galas (Hann Sevilla). the vice that was employed upon A is personal upon A and moreover. they merely have an inchoate right over the thing that was delivered to D as a legacy at the time of the delivery. Y and R filed now a petition for rescission because the consent of A was vitiated by force. Estoppel in Pais (Equitable estoppel) By conduct or by acceptance of benefits. Through estoppel an admission or representation is rendered conclusive upon the person making it. so that he will be prejudiced if the former is permitted to deny the existence of such facts. Estoppel may in pais or by deed. intentionally or thru culpable negligence. b. d. 1433. 2007 Case Digests (from Erwin Vicente). the Rules of Court and special laws. Otherwise. Lack of knowledge or notice on the part of the defendant that complainant would assert the right on w/c he bases his suit. the Code of Commerce. Natural obligations will only produce a binding effect if the performance is coupled with voluntariness. If there is no voluntarines on the performance. But B and C now chose to honor the legacy. representations or admissions or by his silence when he ought to speak out. Conduct on the part of defendant. C as heirs of X. And he said. the instrument. estoppel does not apply. or of one under whom he claims. A very common example of estoppel would be one that came out of a bar exam. 4 Elements of Laches a. in contemplation of law. or the suit is not held to be barred. But he was forced by B and C. Estoppel by judgment as a Court record – when court is in res judicata. in the absence of voluntariness. by his own deed… Art. Delay in asserting the complainant’s rights. Injury/ prejudice to defendant in the event relief is accorded to complainant. Art. Proper (written instrument may also be in the form of a bond/mortgage) b.ESTOPPEL (n)  A bar w/c precludes a person from asserting or denying anything contrary to that w/c has been. by his acts. induces another to believe certain facts to exist. therefore consent was vitiated. The principles of estoppel are hereby adopted insofar as they are not in conflict with the provisions of this Code. A did not want to. A week later the same 86 .  If a person notarizes (and is not a party to). 1432.  There must be a written contract. established as the truth. Now a neighbor asked the person whose dog he was walking. By omission. (1) a. and such the other rightfully relies and acts on such belief. giving rise to the situation of w/c the complaint is made and for w/c the complaint seeks a remedy. The court declared the will void because one of the pages was not signed by the testator. d.  Prevents the parties from raising questions that could have been put in issue and decided in previous case. Being the heirs of A will the action for annulment prosper? No. and cannot be denied or disproved as against the person relying thereon. ESTOPPEL Estoppel is a bar that precludes a person from denying or asserting anything contrary to what he has ascertained earlier. the will of X contains a stipulation in favor of D which was a legacy. c. e. the heirs of A. Estoppel by Deed  A bar w/c precludes a party to a deed and his privies from asserting as against the other and his privies any right or title in derogation of deed.  If deed/instrument is null and void. So the action is true with A but not with Y and R.Obligations and Contracts: Sources 2006 Lectures of Atty. the heirs chose to honor the legacy stated in the will. Estoppel in Pais  Arises when one. By silence. Because while it may be true that they are successors in interest. mine. either by acts of judicial/legislative officers. Title IV. Art. By representation or concealment. By laches (unreasonable delay in suing) (2) Estoppel by Deed ( Technical estoppel) a. it ceases to be a natural obligation. estoppel will not apply. the complainant having had knowledge or notice of defendant’s conduct and having been afforded an opportunity to institute a suit. Now A died a year later. b. X already died. This guy was walking a dog around the neighborhood. B. c. Christ May Andolana. A. or from denying the truth of any material fact asserted in it. so there was force employed upon him.

Estoppel in pais is what we call as equitable estoppel. 1436. (3) The party misled must have been unaware of the true facts. as against the lessor or Presumption does not apply if alleged tenant does not admit expressly or impliedly the existence of lease contract (such as when landlord did not. Ferlyn Ong for 4th year Batch 2009 dog bit the neighbor. the party misled must have been unaware of the true facts. Now there is also what we call as estoppel by acquiesence. 1. (2) The party precluded must intend that the other should act upon the facts as misrepresented. 3. Estoppel by deed or technical estoppel. Unfortunately the ruling of the court was not favorable to the person who knew. If there is a need to rebutt or affirm. we know that a check is not a legal tender. Estoppel by silence or inaction. 87 . If it were a movable. 1437 applies to an immovable property and a third person is misled by a person with respect to the ownership or real right over the immovable. 1437. If a person in representation of another sells or alienates a thing. This applies to an immovable. The neighbor went to the person and asked for reimbursement and the person said it is not my dog but a friend of mine's. technical estoppel. The party defrauded must have acted in accordance with the misrepresentation. Now other kinds of estoppel we have. attach or plead in his complaint the contract of lease. he cannot be heard later on that at the time of the alienation. Art. It is not based on positive law unlike prescription.  A lessee or a bailee is estopped from asserting title to the thing leased or received. 2. But the parties in an agreement may treat the house as a chattel. the part precluded must intend that the other should act upon the facts as misrepresented. he was not actually the owner but merely a representative. then those who misrepresented themselves are already estopped from denying that actually no corporation existed. Like two or more persons would represent themselves to a person(stranger) that they are officers of a corporation and by reason of that misrepresentation. Then we have judgment by estoppel. Well. For example a person who is in need of money because a loved one is hospitalized and he goes to a money lender.  Prejudice is not essential Art. the latter is precluded from asserting his legal title or interest therein. 2007 Case Digests (from Erwin Vicente). prejudice is not essential. Later on however he acquired ownership of the thing. 1431: So estoppel works against the person representing that he is this type of person and later on he would say that it was just a joke if the other person has relied on your statement or representation. I just walked the dog. and (4) The party defrauded must have acted in accordance with the misrepresentation. and the money lender says my rate of interest is 20% per month. Neither can a bailee dispute the title of the bailor. Yan. If the question arises later on about the contract. you apply 1435 and 1436. the parties cannot be heard later on to say that the contract is void because the object is not actually a movable but an immovable property. he would now question the interest. Despite that. Meaning the person who has acted on a particular illegal act. So later he invoked the fact that the lower court had no jurisdiction. In cases of contracts. Sibunghanoy): One of the parties knew that the court trying the case has no jurisdiction but despite knowledge he entered into trial. he borrows. corporation by estoppel. 1435. This is sometimes referred to as estopple by standing by or laches. And later on when payment is to be made. then rebutt or affirm it otherwise you will be estopped later on from denying or affirming it. When a person who is not the owner of a thing sells or alienates and delivers it.  In this kind of estoppel. cannot be estopped. the person is nt the owner of the thing alienated but he sold it. But if the creditor accepts the check without any objection. It is not a disputable presumption. meaning movable. SC said he was estopped. RAM Notes Compiled by: Hanniyah Sevilla. and later the seller or grantor acquires title thereto. 4. But a tenant will not be heard to dispute the title of the landlord. We also have estopple in pais and estoppel by deed. When in a contract between third persons concerning immovable property. (Tijam vs. Estoppel cannot be also predicated on an illegal act. the former cannot subsequently set up his own title as against the buyer or grantee. There must be fraudulent representation or wrongful concealment of facts known to the party estopped. bailor. because that is predicated in an illegal act. Lydia Galas (Hann Sevilla). Now a house made of strong material is an immovable. So estoppel will not lie against the debtor. provided all these requisites are present: (1) There must be fraudulent representation or wrongful concealment of facts known to the party estopped. The latter is precluded from asserting his legal title or interest provided all the requisites are present. Christ May Andolana. Art. The creditor cannot say that you are estopped from questionning the interest. And the presumption is conclusive. that is estoppel. Book of Tolentino. Art. he cannot be heard later on to say that the check is not a legal tender because of his acceptance of the check. The principle behind that is one who is silent when he ought to speak cannot be heard later on to speak when he ought to be silent. 1435 is the exact opposite of 1434. 1434. the third person would enter into a transaction with these people who are in fact not a corporation.Obligations and Contracts: Sources 2006 Lectures of Atty.) 1434: Here. But estoppel is different from laches which is the failure to institute the action within the reasonable period of time. one of them is misled by a person with respect to the ownership or real right over the real estate. He cannot assert something different from what he has represented earlier. such title passes by operation of law to the buyer or grantee.

made by the other to a pledgee who received the same in good faith and for value. That is the general rule. 1439. Estoppel is effective only as between the parties thereto or their successors in interest. Now estoppel does not lie against the state. Art. Christ May Andolana. 2007 Case Digests (from Erwin Vicente). Neither does prescription lie against the state. Book of Tolentino.Obligations and Contracts: Sources 2006 Lectures of Atty. if he received the sum for which a pledge has been constituted. RAM Notes Compiled by: Hanniyah Sevilla. And later on also made use of the portion of the proceeds of the loan. Lydia Galas (Hann Sevilla). Because there is estoppel in the acceptance of benefits. set up his own title to defeat the pledge of the property. But not to third persons. Ferlyn Ong for 4th year Batch 2009 Art. 1438. One who has allowed another to assume apparent ownership of personal property for the purpose of making any transfer of it. cannot. 88 . 1439: Estoppel is effective only as between the parties thereto or their successors in interest. that is estoppel. And later on you had a change of heart and tells the owner of the pawnshop that you are the owner. Third persons can invoke the principle of estoppel.  Estoppel resulting from acceptance of benefits (knowledge of true facts) 1438 applies to a situation wherein you allow your friend to borrow your jewelry and pawn.