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TITLE II. CONTRACTS Chapter 1. GENERAL PROVISIONS 1305 DEFINITION of contracts 1306 Characteristic of contracts: AUTONOMY LIMITATIONS: must not be contrary to - LAW (mandatory & prohibitive laws) - MORALS (deal with right & wrong and the human conscience) - GOOD CUSTOMS (standards of justice & decency acknowledged by society) - PUBLIC ORDER (public weal, peace, safety & health of the community) - PUBLIC POLICY (idea of variable content, depending on the stage of social culture in the community) 1307 INNOMINATE contracts GOVERNED by: - stipulations - provs of Titles I & II, Book IV, CC -rules governing the most analogous nominate contracts - customs 1308 Characteristic of contracts: MUTUALITY 1309 EXCEPTION to MUTUALITY: DETERMINATION BY 3rd PERSON not binding until made known to both parties 1310 EXCEPTION to MUTUALITY: EVIDENTLY INEQUITABLE DETERMINATION not obligatory 1311 Characteristic of contracts: RELATIVITY EXCEPTIONS Stipulation pour autrui Third person comes into possession of object of contract creating a real right Contract entered into to defraud 3rd person Third person induces contracting party to violate his contract 1312 EXCEPTION to RELATIVITY: 3rd PERSON COMES INTO POSSESSION OF OBJECT OF CONTRACT CREATING A REAL RIGHT 1313 EXCEPTION to RELATIVITY: contract entered into to DEFRAUD 3RD PERSON 1314 EXCEPTION to RELATIVITY: 3RD PERSON INDUCES PARTY to VIOLATE CONTRACT 1315 Characteristics of contracts: CONSENSUALITY OBLIGATORY FORCE OF CONTRACTS & PERFORMANCE IN GOOD FAITH 1316 4TH element to perfect REAL contracts:
A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (1254a) The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a)
Innominate contracts shall be regulated by the stipulations of the parties, by the provisions of Titles I and II of this Book, by the rules governing the most analogous nominate contracts, and by the customs of the place. (n)
The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. (1256a) The determination of the performance may be left to a third person, whose decision shall not be binding until it has been made known to both contracting parties. (n) The determination shall not be obligatory if it is evidently inequitable. In such case, the courts shall decide what is equitable under the circumstances. (n) Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. (1257a) In contracts creating real rights, third persons who come into possession of the object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration Laws. (n) Creditors are protected in cases of contracts intended to defraud them. (n) Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. (n) 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. (1258) Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation. (n)
Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 2
DELIVERY 1317 REQUISITE for person to CONTRACT IN NAME OF ANOTHER DULY AUTHORIZED, or HAS RIGHT TO REPRESENT BY LAW Contract subsequently RATIFIED
No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party. (1259a)
Chapter 2. ESSENTIAL REQUISITES OF CONTRACTS General Provisions 1318 Art. 1318. There is no contract unless the following requisites concur: ESSENTIAL REQUISITES (3) (1) Consent of the contracting parties; 4TH requisite: (2) Object certain which is the subject matter of the contract; REAL contracts – DELIVERY (3) Cause of the obligation which is established. (1261) SOLEMN contracts – FORM Section 1. CONSENT 1319 CONSENT: meeting of the minds bet the parties on the subject matter & the cause of the contract, even if neither has been delivered ELEMENTS (2): - OFFER (certain) - ACCEPTANCE (absolute & unqualified; communicated to offeror & learned by him) REQUISITES (5) - PLURALITY of parties - CAPACITY or CAPABILITY of parties - NO VITIATION OF CONSENT - INTENT PROPERLY DECLARED (in due time & in proper form) - NO CONFLICT bet intent & declaration 1320 FORMS of ACCEPTANCE 1321 TERMS of the OFFER: offeror may fix TMP 1322 1323 TERMINATION of OFFER - REJECTION by OFFEREE - INCAPACITY by EITHER PARTY BEFORE ACCEPTANCE is CONVEYED - DEATH - CIVIL INTERDICTION - INSANITY - INSOLVENCY 1324 GENERAL RULE on OPTIONS: offer may be withdrawn any time before acceptance by communicating such EXCEPTION: option is founded upon a consideration as something paid or Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. (1262a)
An acceptance may be express or implied. (n) The person making the offer may fix the time, place, and manner of acceptance, all of which must be complied with. (n) An offer made through an agent is accepted from the time acceptance is communicated to him. (n) An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. (n)
When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised. (n)
inadvertent & excusable disregard of a circumstance material to the contract REQUISITES .OF FACT. (n) The incapacity declared in Article 1327 is subject to the modifications determined by law. to each other . or to those conditions which have principally moved one or both parties to enter into the contract.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 3 promised 1325 GEN RULE: ADVERTISEMENTS are MERE INVITATIONS to make an offer 1326 GEN RULE: ADVERTISER NOT BOUND TO ACCEPT highest or lowest bidder 1327 PERSONS INCAPACITATED TO CONSENT (EXERCISE OF RIGHT is RESTRICTED.HUSBAND & WIFE.DEAF-MUTES WHO DON’T know how to WRITE (AND READ) 1328 DRUNKENNESS equivalent to TEMPORARY INSANITY HYPNOTIC SPELL (DRUGS or HYPNOTISM) or SOMNAMBULISM 1329 SPECIALLY DISQUALIFIED PERSONS (RIGHT is WITHHELD. etc. violence.Contracts entered into w/ NONCHRISTIANS 1330 VICES OF CONSENT render contract VOIDABLE . (1264) A contract where consent is given through mistake. the person enforcing the contract must show that the terms thereof have been fully explained to the former. (2) Insane or demented persons. not law . 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. (1266a) When one of the parties is unable to read. (1263a) Contracts entered into during a lucid interval are valid.PRINCIPAL QUALITIES of the OBJECT (error in QUALITATE) . VOID transaction) . and deaf-mutes who do not know how to write. or if the contract is in a language not understood by him. and those HYPNOTIZED . and mistake or fraud is alleged. (1265a) In order that mistake may invalidate consent.INSOLVENTS . business advertisements of things for sale are not definite offers. VOIDABLE transaction) .Persons under CIVIL INTERDICTION .MATERIAL: must refer to factors inducing consent .Unemancipated MINORS .INSANE or DEMENTED persons (unless acting during lucid interval).EXCUSABLE . Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. or fraud is voidable. unless the contrary appears.SUBSTANCE of the OBJECT or NATURE of transaction (error in SUBSTANTIA) .Disqualified persons because of FIDUCIARY RELATIONSHIP . undue influence.INADVERTENT .proven with CLEAR AND CONVINCING EVIDENCE 1331 MISTAKE: false belief about something. but mere invitations to make an offer. considering individual skills. and is understood to be without prejudice to special disqualifications established in the laws. intimidation. and the advertiser is not bound to accept the highest or lowest bidder.IDENTITY of PARTY. (error in PERSONA) 1332 RULE in case of INABILITY TO READ or UNDERSTAND PRESUMPTION that ONE ACTS W/ DUE Unless it appears otherwise. (n) Advertisements for bidders are simply invitations to make proposals.PAST OR PRESENT . DRUNKS. A simple mistake of account shall give rise to its correction.QUANTITY (error in QUANTITATE) . (n) . confidence. it should refer to the substance of the thing which is the object of the contract. (n) The following cannot give consent to a contract: (1) Unemancipated minors.
the age. (n) There is violence when in order to wrest consent. descendants or ascendants.VIOLENCE: physical coercion 1) Employment of SERIOUS OR IRRESISTIBLE FORCE 2) SUCH FORCE the REASON why CONTRACT was ENTERED into . 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. (1267a) Violence or intimidation shall annul the obligation. The following circumstances shall be considered: the confidential.POWER OVER WILL OF ANOTHER . the other is induced to enter into a contract which. as when the parties are bound by confidential relations.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 4 CARE & SIGNS W/ FULL KNOWLEDGE of a DOC’S CONTENTS 1333 KNOWLEDGE OF DOUBT or RISK DOESN’T VITIATE CONSENT 1334 REQUISITES for MUTUAL ERROR to VITIATE CONSENT . contingency or risk affecting the object of the contract. constitutes fraud.ERROR referring to LEGAL EFFECT of AGREEMENT . DESCENDANTS. without them. (1268) There is undue influence when a person takes improper advantage of his power over the will of another. if the claim is just or legal. A threat to enforce one's claim through competent authority. although it may have been employed by a third person who did not take part in the contract. an ACTIONABLE WRONG REVERENTIAL FEAR (fear of displeasing persons to whom obedience & respect are due) doesn’t vitiate consent 1336 DURESS CAUSED BY THIRD PERSON ANNULS CONTRACT 1337 UNDUE INFLUENCE – REQUISITES . sex and condition of the person shall be borne in mind. does not vitiate consent. or upon the person or property of his spouse. may vitiate consent.INTIMIDATION: moral coercion 1) REASONABLE & WELL-GROUNDED FEAR 2) of an IMMINENT & GRAVE EVIL 3) UPON PERSON OR PROPERTY OF HIS (or his SPOUSE. (n) . depriving the latter of a reasonable freedom of choice. family.MUTUAL ERROR . serious or irresistible force is employed. spiritual and other relations between the parties. (1269) Failure to disclose facts. through insidious words or machinations of one of the contracting parties.DEPRIVING PERSON of REASONABLE FREEDOM OF CHOICE 1338 DEFINITION of FRAUD KINDS 1) Fraud in the CELEBRATION of the contract (FRAUD PROPER) . to give his consent. To determine the degree of intimidation. or the fact that the person alleged to have been unduly influenced was suffering from mental weakness.DOLO CAUSANTE (causal fraud) Requisites: 1) MATERIAL & SERIOUS FRAUD 2) USED BY only ONE PARTY 3) DELIBERATE INTENT TO DECEIVE or INDUCE 4) OTHER PARTY RELIED ON UNTRUE STMT & ISN’T GUILTY OF NEGLIGENCE IN ASCERTAINING THE TRUTH .REAL PURPOSE OF PARTIES is FRUSTRATED 1335 DURESS .DOLO INCIDENTE (incidental fraud) 2) Fraud in the PERFORMANCE of the obligations stipulated 1339 CONCEALMENT constitutes fraud when There is no mistake if the party alleging it knew the doubt. when there is a duty to reveal them. (n) There is fraud when. or ASCENDANTS) 4) SUCH was the REASON the CONTRACT was ENTERED into 5) threat must be of an UNJUST ACT. or was ignorant or in financial distress.IMPROPER ADVANTAGE . he would not have agreed to. (n) Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated.
for each contracting party. may be the object of a contract. are not in themselves fraudulent.RELATIVE (subjectively impossible) Impossibility must not be confused w/ DIFFICULTY 1349 A requisite of OBJECT The usual exaggerations in trade. (n) In order that fraud may make a contract voidable. CAUSE OF CONTRACTS 1350 CAUSE: impelling reason for which a party assumes an obligation under a contract . the prestation or promise of a thing or service by the other. and in contracts of pure beneficence. (1274) Section 3.DETERMINATE or DETERMINABLE W/O NEED OF A NEW CONTRACT 1348 IMPOSSIBILITY may be . (n) Misrepresentation by a third person does not vitiate consent. Incidental fraud only obliges the person employing it to pay damages. the service or benefit which is remunerated.ABSOLUTE (objectively impossible) . morals. (n) A mere expression of an opinion does not signify fraud.TRANSMISSIBLE . public order. good customs.LAWFUL . including future things. without the need of a new contract between the parties. or public policy binds the parties to their real agreement. (1270) Simulation of a contract may be absolute or relative.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 5 there’s a DUTY TO REVEAL THEM 1340 CAVEAT EMPTOR: let the buyer beware 1341 MERE EXPRESSION OF OPINION DOESN’T SIGNIFY FRAUD 1342 MISREPRESENTATION BY 3RD PERSON DOESN’T VITIATE CONSENT 1343 MISREPRESENTATION IN GOOD FAITH 1344 REQUISITES for FRAUD to VITIATE CONSENT 1) Fraud must be SERIOUS 2) Parties MUST NOT BE IN PARI DELICTO (mutual guilt) 1345 REQUISITES of simulated contracts 1) OUTWARD DECLARATION of WILL DIFFERENT FROM THE WILL OF THE PARTIES 2) FALSE APPEARANCE must’ve been INTENDED BY MUTUAL AGREEMENT 3) PURPOSE is TO DECEIVE 3RD PERSONS 1346 KINDS of SIMULATED CONTRACTS 1) ABSOLUTELY SIMULATED: parties don’t intend to be bound 2) RELATIVELY SIMULATED: parties conceal their true agreement Section 2. All rights which are not intransmissible may also be the object of contracts. (1273) In onerous contracts the cause is understood to be. All services which are not contrary to law. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract. (n) Misrepresentation made in good faith is not fraudulent but may constitute error. The former takes place when the parties do not intend to be bound at all. it should be serious and should not have been employed by both contracting parties. the latter. when it does not prejudice a third person and is not intended for any purpose contrary to law. (1271a) Impossible things or services cannot be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. public order or public policy may likewise be the object of a contract. provided it is possible to determine the same. (n) An absolutely simulated or fictitious contract is void. when the other party had an opportunity to know the facts. A relative simulation.W/IN the COMMERCE OF MAN . OBJECT OF CONTRACTS 1347 OBJECT OF A CONTRACT: to create or to end obligations w/c may involve things or services REQUISITES .Because of the TRANSACTION or the LAW . morals. unless such misrepresentation has created substantial mistake and the same is mutual. in remuneratory ones. unless made by an expert and the other party has relied on the former's special knowledge.ACTUAL or POSSIBLE . the mere liberality of the benefactor. good customs. when the parties conceal their true agreement. (1272) The object of every contract must be determinate as to its kind. All things which are not outside the commerce of men.
and 1405.ENFORCEABILITY . the contracting parties may compel each other to observe that form. provided all the essential requisites for their validity are present. that requirement is absolute and indispensable. 2. . produce no effect whatever. or with unlawful cause.may be unknown to the other. lesion or inadequacy of cause shall not invalidate a contract. always known . it is presumed that it exists and is lawful.VALIDITY .LAWFUL NO CAUSE = VOID CONTRACT 1353 CONTRACT W/ STATEMENT OF FALSE CAUSE not necessarily VOID. (3) The power to administer property.may vary. in whatever form they may have been entered into. (2) The cession. (n) Contracts shall be obligatory. (1279a) The following must appear in a public document: (1) Acts and contracts which have for their object the creation. always the same . morals. FORM OF CONTRACTS 1356 GEN RULE – FORM NOT REQ’D (applies to CONSENSUAL CONTRACTS) . or should prejudice a third person. This right may be exercised simultaneously with the action upon the contract. (1278a) If the law requires a document or other special form.PERFECTED (valid) . The cause is unlawful if it is contrary to law. ESSENTIAL that contract is: . as in the acts and contracts enumerated in the following article. transmission. No.ENFORCEABLE UNDER the STATUTE OF FRAUDS 1358 NECESSITY for PUBLIC DOC IN CONTRACTS ENUMERATED – for CONVENIENCE PRESUMPTION – PUBLIC INSTRUMENT is VALID The particular motives of the parties in entering into a contract are different from the cause thereof. In such cases.TRUE . unless there has been fraud. or any other power which has for its object an act appearing or which should appear in a public document.SOLEMN contracts require CERTAIN SPECIFIED FORM . (1275a) The statement of a false cause in contracts shall render them void. or that a contract be proved in a certain way.CONVENIENCE 1357 Before PARTIES may be COMPELLED to EXECUTE NEEDED FORM. once the contract has been perfected. public order or public policy. unless the debtor proves the contrary.presence of motive can’t cure absence of cause 1352 REQUISITES for CAUSE . modification or extinguishment of real rights over immovable property. (n) Contracts without cause.REAL contracts require DELIVERY FORM may be important for . the right of the parties stated in the following article cannot be exercised. sales of real property or of an interest therein a governed by Articles 1403.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 6 1351 MOTIVE V. (1277) Except in cases specified by law.PRESENT (existent at time contract was entered into) . However. (1276) Although the cause is not stated in the contract. CAUSE . if it should not be proved that they were founded upon another cause which is true and lawful. good customs. when the law requires that a contract be in some form in order that it may be valid or enforceable. may be VOIDABLE 1354 PRESUMPTION – CAUSE EXISTS 1355 LESION: inadequacy of cause GEN RULE: LESION DOESN’T INVALIDATE a CONTRACT EXCEPTIONS 1) Lesion + FRAUD/MISTAKE/UNDUE INFLUENCE 2) CASES expressly PROVIDED BY LAW Chapter 3. mistake or undue influence. repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains.
CLERK . said instrument may be reformed.WILLS . the instrument may be reformed. When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement.MISTAKE usually must be OF FACT 1362 1363 PARTY IN GOOD FAITH CAN ASK FOR REFORMATION 1364 FAILURE TO CONVEY TRUE INTENT because of IGNORANCE/ LACK OF SKILL/ BAD FAITH of . the instrument does not express the true intention of the parties. 2 and 1405. but the instrument states that the property is sold absolutely or with a right of repurchase. reformation of the instrument is proper. fraud. 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. REFORMATION OF INSTRUMENTS (n) 1359 When.TYPIST 1365 INTENT TO HAVE MORTGAGE/PLEDGE but instrument states otherwise – reformation is proper PARTIES’ INTENT judged from CONTEMPORANEOUS & SUBSEQUENT ACTS 1366 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. by reason of mistake.SIMPLE UNCONDITIONAL DONATION INTER VIVOS .MAY BE UNILATERAL PER CC 1362 & 1363 . No. When through the ignorance. but concealed that fact from the former.CONTRACT WHERE REAL AGREEMENT IS VOID 1360 CC PREVAILS OVER PRINCIPLES OF GENERAL LAW ON REFORMATION IN CASES OF CONFLICT 1361 REFORMATION bec. one of made or construed to express or conform the parties may ask for the reformation of the instrument to the end that such to the real intention of the parties when true intention may be expressed.MUTUAL MISTAKE . chattels or things in action are governed by Articles. or accident has prevented a meeting of the minds of the parties. the proper remedy is not reformation of the instrument but NO NEW CONTRACT IS MADE annulment of the contract. (1280a) Chapter 4. some error or mistake has been committed If mistake. 1403. REQUISITES for reformation 1) MEETING OF THE MINDS 2) TRUE INTENTION NOT EXPRESSED IN THE INSTRUMENT 3) CLEAR & CONVINCING PROOF 4) BROUGHT W/IN PROPER PRESCRIPTIVE PERIOD 5) DOC MUSN’T REFER TO . But sales of goods. REFORMATION: remedy in equity by their true intention is not expressed in the instrument purporting to embody the means of which a written instrument is agreement. inequitable conduct. negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist. lack of skill. fraud. All other contracts where the amount involved exceeds five hundred pesos must appear in writing.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 7 (4) The cession of actions or rights proceeding from an act appearing in a public document. even a private one. If two parties agree upon the mortgage or pledge of real or personal property. the courts may order that the instrument be reformed. the former may ask for the reformation of the instrument.DRAFTER OF the INSTRUMENT . When one party was mistaken and the other knew or believed that the instrument did not state their real agreement. There shall be no reformation in the following cases: . there having been a meeting of the minds of the parties to a contract. of MUTUAL MISTAKE . inequitable conduct or accident.
their contemporaneous IF PARTIES PLACED INTERPRETATION and subsequent acts shall be principally considered. (3) When the real agreement is void. (1284) The various stipulations of a contract shall be interpreted together. if the mistake was mutual. his HEIRS & ASSIGNS COMPLAINT MUST ALLEGE . 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.MUTUAL MISTAKE: EITHER PARTY or his successors in interest . FROM the TERMS of the contract. (1282) TO TERMS. and shall fill the omission of stipulations which are ordinarily established. attributing to the doubtful ones that sense which may result from all of them taken jointly. (1288) . When one of the parties has brought an action to enforce the instrument. LITERAL If the words appear to be contrary to the evident intention of the parties. FMR INTERPRETATION MUST PREVAIL 1374 STIPULATIONS TO BE READ TOGETHER 1375 WORDS TO BE INTERPRETED IN KEEPING W/ NATURE & OBJECT OF CONTRACT 1376 LOCAL CUSTOMS MUST BE ALLEGED & PROVED GEN. the latter MEANING CONTROLS shall prevail over the former. (1285) Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract. waiver. otherwise. IF CLEAR & LEAVE NO DOUBT.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 8 INSTANCES WHEN REFORMATION IS ALLOWED 1367 INSTANCE WHEN REFORMATION CAN’T PROSPER – ACTION TO ENFORCE THE INSTRUMENT Basis: estoppel. upon petition of the injured party. SUCH IN GEN. it shall be understood as bearing that import which is most adequate to render it effectual. The procedure for the reformation of instrument shall be governed by rules of court to be promulgated by the Supreme Court. (1281) 1371 In order to judge the intention of the contracting parties. Chapter 5. (2) Wills. INTERPRETATION OF CONTRACTS 1370 If the terms of a contract are clear and leave no doubt upon the intention of the TEST: PARTIES’ INTENTION. INTENT 1373 If ONE INTERPRETATION MAKES A CONTRACT VALID & ILLEGAL. CUSTOMS NEED NOT BE PLEADED 1377 INTERPRETATION AGAINST PARTY WHO CAUSED OBSCURITY Applies w/ greater force to CONTRACTS However general the terms of a contract may be. or ratification 1368 PLAINTIFFS IN ACTION FOR REFORMATION . (1286) The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract. DERIVED contracting parties.WHAT REAL AGREEMENT/INTENTION WAS 1369 PROCEDURAL RULES supposed to be promulgated by SC (1) Simple donations inter vivos wherein no condition is imposed. the literal meaning of its stipulations shall control. MUST BE FOLLOWED CONTEMPORANEOUS & SUBSEQUENT ACTS 1372 SPECIAL INTENT PREVAILS OVER GEN.INSTRUMENT DOESN’T EXPRESS PARTIES’ REAL AGREEMENT/INTENTION . he cannot subsequently ask for its reformation. or his heirs and assigns. Reformation may be ordered at the instance of either party or his successors in interest. (1287) The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.OTHER CASES: INJURED PARTY. (1283) If some stipulation of any contract should admit of several meanings.
(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. RESCISSIBLE CONTRACTS 1380 RESCISSION: process designated to render inefficacious a contract validly entered into & normally binding.1381(4) . (n) 1379 SUPPLETORY USE – RULE 123 of RoC to refer to RULE 130 of New Rules on Evidence . (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them.1381(2) .Partitions of inheritance when there’s lesion of ¼ or more for one heir (CC 1098) 2) BAD FAITH (fraud) .1381(1) . If the contract is onerous. (1289) The principles of interpretation stated in Rule 123 of the Rules of Court shall likewise be observed in the construction of contracts.1381(3) – ACCION PAULIANA .Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 9 OF ADHESION 1378 DOUBTS AS TO PRINCIPAL OBJECT OR INCIDENTAL CIRCUMSTANCES When it is absolutely impossible to settle doubts by the rules established in the preceding articles.1382 3) SPECIAL PROVISION OF LAW [1381(5)] Contracts validly agreed upon may be rescinded in the cases established by law.Written words control printed ones . the doubt shall be settled in favor of the greatest reciprocity of interests. If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have been the intention or will of the parties. causing an economic prejudice to a party or his creditors REQUISITES 1) INITIALLY VALID CONTRACT 2) ECONOMIC OR FINANCIAL PREJUDICE TO SOMEONE 3) Requires MUTUAL RESTITUTION EFFECTS OF RESCISSION 1) RETURN to ORIGINAL STATUS QUO (1385) 2) IF RETURN ISN’T POSSIBLE.Language interpreted according to legal meaning it bears in the place of its execution.General acceptation of terms presumed intended unless shown to have been understood in a peculiar/technical sense Chapter 6.) 1381 ENUMERATION of RESCISSIBLE CONTRACTS GROUNDS of RESCISSION 1) LESION PROPER . because of external conditions. unless parties intended otherwise . Actual possessor of thing liable fraudulently alienated will be liable for its return) (1388. the least transmission of rights and interests shall prevail. if the latter suffer the lesion stated in the preceding number. FIRST ACQUIRER IS LIABLE FIRST (for damages. last par. (1290) The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof. and the doubts refer to incidental circumstances of a gratuitous contract. (2) Those agreed upon in representation of absentees. TRANSFEREE MUST PAY INDEMNITY FOR DAMAGES (1388) 3) If there are several alienations. the contract shall be null and void. .
and need not have been obtained by the party seeking the rescission. when MADE BY PERSONS a) Against whom some JUDGMENT has been rendered b) Against whom some WRIT OF ATTACHMENT has been issued BADGES OF FRAUD: circumstances indicating certain alienation has been made in fraud of creditors 1) Fictitious or INADEQUATE CONSIDERATION 2) Transfer AFTER SUIT IS FILED & WHILE IT’S PENDING 3) SALE ON CREDIT by INSOLVENT DEBTOR 4) Proof of LARGE INDEBTEDNESS OR COMPLETE INSOLVENCY 5) Transfer OF (NEARLY) ALL PROP. (1297a) Whoever acquires in bad faith the things alienated in fraud of creditors. due to any cause. together with their fruits. (1295) Rescission referred to in Nos. In this case. The decision or attachment need not refer to the property alienated.ONEROUS alienations. (1298a) . shall indemnify the latter for damages suffered by them on account of the alienation. (1296a) All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors. and so on successively. it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. (n) Rescission creates the obligation to return the things which were the object of the contract. (1294) Rescission shall be only to the extent necessary to cover the damages caused. (1291a) Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected. If there are two or more alienations. price & real value 1388 EFFECT OF BAD FAITH – ACQUIRER MUST RETURN OR INDEMNIFY SUBSEQUENT TRANSFERS . consequently. 1 and 2 of Article 1381 shall not take place with respect to contracts approved by the courts. PLAINTIFF able to RETURN what has been received 2) THING object of contract NOT IN LEGAL POSSESSION of 3RD PERSONS IN GOOD FAITH 3) NO OTHER LEGAL REMEDY 4) Action BROUGHT W/IN PROPER PRESCRIPTIVE PERIOD 1386 1387 PRESUMPTION OF FRAUD in .GRATUITOUS alienations. In addition to these presumptions. it should be impossible for him to return them. when the donor did not reserve sufficient property to pay all debts contracted before the donation. indemnity for damages may be demanded from the person causing the loss. the design to defraud creditors may be proved in any other manner recognized by the law of evidence. (1292) The action for rescission is subsidiary. whenever. 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.First transferee IN GOOD FAITH – next (5) All other contracts specially declared by law to be subject to rescission.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 10 1382 REQUISITES . when DEBTOR DIDN’T RESERVE SUFFICIENT PROP. the first acquirer shall be liable first. and the price with its interest. TO PAY DEBT CONTRACTED BEFORE THE DONATION .Debtor-payer must’ve been insolvent (doesn’t need to be judicially declared) . 6) RELATIONSHIP + OTHER CIRCUMSTANCES 7) FAILURE OF VENDEE (in absolute sale) to take exclusive possession of prop 8) GROSS DISPARITY bet.Debt not yet due and demandable 1383 RESCISSION NOT A PRINCIPAL REMEDY 1384 PARTIAL RESCISSION 1385 NECESSITY OF MUTUAL RESTITUTION REQUISITES before action for rescission can be brought 1) Generally. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. are also rescissible. Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been issued.
– UP TO 4 YRS FROM MAJORITY OR REMOVAL OF DISABILITY 1392 REQUISITES OF RATIFICATION 1) VOIDABLE CONTRACT 2) PERSON RATIFYING MUST KNOW REASON FOR CONTRACT BEING VOIDABLE (cause must be known) 3) CAUSE MUSN’T EXIST OR CONTINUE TO EXIST ANYMORE AT TIME OF RATIFICATION 4) RATIFICATION MADE EXPRESSLY OR BY ACT IMPLYING WAIVER OF ACTION TO ANNUL 5) PERSON RATIFYING MUST BE INJURED PARTY EFFECTS OF RATIFICATION . or undue influence) – 4 YRS FROM CESSATION THEREOF 2) FRAUD OR FALSE CAUSE – 4 YRS FROM DISCOVERY 3) MINORS. 1389 Chapter 7. (n) The action for annulment shall be brought within four years. (1309a) Ratification may be effected expressly or tacitly. (1311a) Ratification may be effected by the guardian of the incapacitated person.TACIT (implied) 1394 RATIFICATION BY GUARDIAN 1395 CONFORMITY OF GUILTY PARTY NOT NEEDED 1396 RETROACTIVE EFFECT OF RATIFICATION The action to claim rescission must be commenced within four years. (1312) Ratification cleanses the contract from all its defects from the moment it was constituted. violence or undue influence.EXPRESS (oral or written) . They are susceptible of ratification. violence. (1299) The following contracts are voidable or annullable. intimidation.First transferee IN BAD FAITH – next transferee liable if he’s also in bad faith 1389 GEN RULE on prescriptive period: 4 YRS from date contract was entered into EXCEPTIONS Second par. (1313) . from the time the defect of the consent ceases. For persons under guardianship and for absentees. These contracts are binding. This period shall begin: In cases of intimidation. And when the action refers to contracts entered into by minors or other incapacitated persons. the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. (1301a) Ratification extinguishes the action to annul a voidable contract. It is understood that there is a tacit ratification if. In case of mistake or fraud. undue influence or fraud. 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. from the time the guardianship ceases. VOIDABLE CONTRACTS 1390 VOIDABLE CONTRACTS: valid until annulled GROUNDS 1) INCAPACITY OF ONE PARTY TO GIVE CONSENT 2) VITIATION OF CONSENT 1391 DURATION OF ACTION TO ANNUL 1) DURESS (violence.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 11 transferee’s good or bad faith not important . (n) Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment. with knowledge of the reason which renders the contract voidable and such reason having ceased. from the time of the discovery of the same. (2) Those where the consent is vitiated by mistake..CONTRACT CLEANSED OF DEFECT FROM BEGINNING 1393 KINDS OF RATIFICATION . intimidation. or until the domicile of the latter is known. ETC.ACTION to annul is EXTINGUISHED . the period of four years shall not begin until the termination of the former's incapacity. unless they are annulled by a proper action in court.
(1304) 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. therefore. w/ INTEREST 1399 EXCEPTION TO MUTUAL RESTITUTION PER 1398 – ONLY TO EXTENT OF ENRICHMENT NO PRESUMPTION OF ENRICHMENT 1400 VALUE of thing w/ interest MAY BE SUBSTITUTED FOR THING ITSELF 1401 ACTION to annul EXTINGUISHED W/ LOSS OF OBJECT THROUGH FRAUD OR FAULT OF VICTIM (person who has right to institute proceedings) 1402 ONE CAN’T BE COMPELLED TO RESTORE IF OTHER DOESN’T – reciprocal obligation of restitution has been created The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. RULES OF APPLICATION of such goods and chattels. at a price not less than five hundred pesos. the same until and unless they’re ratified in the manner prescribed by law (2) Those that do not comply with the Statute of Frauds as set forth in this number. the value thereof shall be the basis for damages. unless said loss took place through the fraud or fault of the plaintiff. or some of them. the contracting parties shall restore to each other the things which have been the subject matter of the contract. with their fruits. UNENFORCEABLE CONTRACTS (n) 1403 The following contracts are unenforceable. the loss of the thing shall not be an obstacle to the success of the action. he shall return the fruits received and the value of the thing at the time of the loss. and subscribed by the party charged. with interest from the same date. A CONTRACT (d) An agreement for the sale of goods. (1303a) When the defect of the contract consists in the incapacity of one of the parties. nor can those who exerted intimidation.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 12 1397 PERSONS WHO MAY ASK FOR ANNULMENT: PARTY (principal or subsidiary) WHOSE CONSENT WAS VITIATED CREDITORS OF VICTIM CAN’T ASK FOR ANNULMENT – they’re not bound by the contract ACTIVE MISREPRESENTATION BY MINOR – can’t later on sue for annulment 1398 EFFECTS OF ANNULMENT 1) Contract hasn’t been complied with: PARTIES EXCUSED FROM THEIR OBLIGATIONS 2) Contract already performed: MUTUAL RESTITUTION (in general) of .THING. or or w/o authority a secondary evidence of its contents: 2) Those that FAIL TO COMPLY W/ (a) An agreement that by its terms is not to be performed within a year from STATUTE OF FRAUDS (certain the making thereof. or caused mistake base their action upon these flaws of the contract. (1314a) As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return. If the right of action is based upon the incapacity of any one of the contracting parties. 1) UNAUTHORIZED contracts: entered thereof. unless the same. of the agreement cannot be received without the writing. the other cannot be compelled to comply with what is incumbent upon him. unless the buyer accept and receive part SoF: GEN. and the price with its interest. (1302a) An obligation having been annulled. unless they are ratified: UNENFORCEABLE CONTRACTS: contracts that by reason of statutory (1) Those entered into in the name of another person by one who has been defects don’t confer any action to enforce given no authority or legal representation. agreements req’d in writing to prevent (b) A special promise to answer for the debt. except in cases provided by law. or who has acted beyond his powers. or miscarriage of fraud another. into in another person’s name in excess of evidence. w/ FRUITS . or undue influence. other than a mutual INCAPABLE OF GIVING CONSENT TO promise to marry. 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. default. be in writing. (1307a) 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. or by his agent. or employed fraud. or the evidences. violence. However. chattels or things in action. or some note or memorandum.PRICE. persons who are capable cannot allege the incapacity of those with whom they contracted. In obligations to render service. 3) Those where BOTH PARTIES are (c) An agreement made in consideration of marriage. of such . (1308) Chapter 8. In the following cases an agreement hereafter made shall be KINDS unenforceable by action.
morals. VOID AND INEXISTENT CONTRACTS 1409 The following contracts are inexistent and void from the beginning: KINDS 1) LACKING an ESSENTIAL ELEMENT (1) Those whose cause. the contract shall be validated from the inception. 2) ILLEGAL contracts (protect general interest) (2) Those which are absolutely simulated or fictitious. or guardian.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 13 Applies to EXECUTORY CONTRACTS Applies if there’s a PRINCIPAL DEBTOR (OTHER THAN DEFENDANT) LIABLE Is EXCLUSIVE – applies only to contracts enumerated therein (1405) May be WAIVED BY: + Timely FAILURE TO OBJECT TO PRESENTATION OF ORAL EVIDENCE TO PROVE ORAL AGREEMENT + ACCEPTANCEOF BENEFITS under them PERSONAL DEFENSE – can’t be assailed by third persons Contracts infringing SoF unenforceable RULE OF EXCLUSION Concerns itself only w/ ADMISSIBILITY OF EVIDENCE DOESN’T APPLY IF IT’S CLAIMED that the CONTRACT DOESN’T EXPRESS PARTIES’ TRUE AGREEMENT 1404 1405 RATIFICATION OF CONTRACTS INFRINGING SoF 1) FAILURE TO OBJECT TO PRESENTATION OF ORAL EVIDENCE (deemed a waiver) 2) ACCEPTANCE OF BENEFITS UNDER THEM (thus SoF doesn’t apply to executed or partially executed contracts) 1406 RIGHT OF ONE PARTY TO COMPEL OTHER TO EXECUTE NEEDED INSTRUMENT – GIVEN ONLY WHEN CONTRACT IS BOTH VALID & ENFORCEABLE 1407 BOTH PARTIES INCAPACITATED (Express/implied) RATIFICATION BY A PARTY’S PARENT/GUARDIAN –gives effect as if only one party is incapacitated (VOIDABLE contract) RATIFICATION BY PARENTS/GUARDIANS OF BOTH PARTIES – VALID from beginning 1408 STRANGERS CAN’T ASSAIL UNENFORCEABLE CONTRACTS - things in action or pay at the time some part of the purchase money. are ratified by the failure to object to the presentation of oral evidence to prove the same. express or implied ratification by the parent. (3) Those where both parties are incapable of giving consent to a contract. the parties may avail themselves of the right under Article 1357. Unenforceable contracts cannot be assailed by third persons. 3) Contracts that are EXPRESSLY PROHIBITED (protect private interest) (3) Those whose cause or object did not exist at the time of the transaction. names of the purchasers and person on whose account the sale is made. but when a sale is made by auction and entry is made by the auctioneer in his sales book. price. 4) Contracts DECLARED VOID BY LAW . 1347) customs. of both contracting parties. good (1346. (f) A representation as to the credit of a third person. In a contract where both parties are incapable of giving consent. object or purpose is contrary to law. If ratification is made by the parents or guardians. it is a sufficient memorandum. 2 of Article 1403. Chapter 9. or by the acceptance of benefit under them. Contracts infringing the Statute of Frauds. or for the sale of real property or of an interest therein. referred to in No. of the amount and kind of property sold. public order or public policy. of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated. When a contract is enforceable under the Statute of Frauds. Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this Book. as the case may be. terms of sale. at the time of the sale. and a public document is necessary for its registration in the Registry of Deeds. as the case may be. (e) An agreement of the leasing for a longer period than one year.
This rule shall be applicable when only one of the parties is guilty. may demand the return of what he has given without any obligation to comply his promise.NO ACTION against each other . (1305) If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense. or demand the performance of the other's undertaking. and both shall be prosecuted.NEITHER MAY RECOVER what he has given or demand performance b) ONLY ONE IS GUILTY . neither may recover what he has given by virtue of the contract. and the act constitutes a criminal offense. or ask for the fulfillment of what has been promised him.INSTRUMENT OF CRIME CONFISCATED . Moreover. they shall have no action against each other. (2) When only one of the contracting parties is at fault. 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. the following rules shall be observed: (1) When the fault is on the part of both contracting parties.GUILTY PARTY MAY NOT RECOVER what he has given or demand performance . who is not at fault. CHARACTERISTICS OF VOID & INEXISTENT CONTRACTS 1) CAN’T BE RATIFIED (1409) 2) ACTION/DEFENSE to declare inexistence is IMPRESCRIPTIBLE (1410) 3) RIGHT TO SET UP DEFENSE OF ILLEGALITY CAN’T BE WAIVED (1409) 4) DEFENSE NOT AVAILABLE TO THIRD PERSONS WHOSE INTERESTS ARE NOT DIRECTLY AFFECTED (1421) 5) CAN’T GIVE RISE TO A CONTRACT (1422) 6) Generally produces NO EFFECT 7) Generally.BOTH PROSECUTED . NOT BOUND TO COMPLY w/ his promise 2) Those where there is NO CRIMINAL OFFENSE a) BOTH parties GUILTY (in pari delicto) . (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained. When the nullity proceeds from the illegality of the cause or object of the contract. NO ACTION TO DECLARE THEM VOID IS NEEDED 1410 ACTION for declaration of inexistence of contract IMPRESCRIPTIBLE 1411 IN PARI DELICTO: both PARTIES EQUALLY GUILTY = NO ACTION AGAINST EACH OTHER (5) Those which contemplate an impossible service. (7) Those expressly prohibited or declared void by law. The action or defense for the declaration of the inexistence of a contract does not prescribe. he cannot recover what he has given by reason of the contract. The other. Neither can the right to set up the defense of illegality be waived.PARTY NOT AT FAULT MAY DEMAND RETURN of what he has given w/o obligation to comply w/ his promise IN PARI DELICTO . OR if he hasn’t given anything yet.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 14 (4) Those whose object is outside the commerce of men.INNOCENT PARTY MAY CLAIM WHAT HE HAS GIVEN. (1306) 1412 KINDS of ILLEGAL contracts 1) Those where there is a CRIMINAL OFFENSE a) BOTH parties GUILTY (in pari delicto) .EFFECTS/INSTRUMENTS OF CRIME CONFISCATED IN FAVOR OF GOV’T b) ONLY ONE IS GUILTY . and shall not be bound to comply with his promise. These contracts cannot be ratified.GUILTY PARTY PROSECUTED . both parties being in pari delicto. but the innocent one may claim what he has given.
if the public interest will thus be subserved. When money is paid or property delivered for an illegal purpose. with interest thereon from the date of the payment. and a contract is agreed upon by which a laborer accepts a lower wage. OF PRIVATE INTERESTS.PROHIBITION DESIGNED FOR PLAINTIFF’S PROTECTION . if public policy is thereby enhanced. In case of a divisible contract.DOESN’T APPLY TO ABSOLUTELY SIMULATED contracts . 14% per yr – pawnshops 1414 One CASE WHERE RECOVERY CAN BE MADE EVEN IF parties are IN PARI DELICTO – UNACCOMPLISHED PURPOSE & NO DAMAGE CAUSED TO ANY 3RD PERSON Applies even if parties aren’t equally guilty. is also void and . DEFENSE OF ILLEGALITY NOT AVAILABLE TO 3RD PERSONS 1422 Interest paid in excess of the interest allowed by the usury laws may be recovered by the debtor. When the law fixes. any person paying any amount in excess of the maximum price allowed may recover such excess. he shall be entitled to recover the deficiency. if the interest of justice so demands allow recovery of money or property delivered by the incapacitated person.PUBLIC POLICY would be ENHANCED BY ALLOWING RECOVERY 1417 Rule in case of PAYMENT IN EXCESS OF MAX PRICE – RECOVERY OF EXCESS ALLOWED 1418 HOURS OF LABOR 1419 NO WAIVER OF RIGHT TO MIN. the contract may be repudiated by one of the parties before the purpose has been accomplished. RECOVERY PERMITTED. or by authority of law. the latter may be enforced. or authorizes the setting of a minimum wage for laborers. and a contract is entered into whereby a laborer undertakes to work longer than the maximum thus fixed. he may.INAPPLICABLE TO INEXISTENT & VOID CONTRACTS 1413 EXCESS (strictly speaking) 14% . recover what he has paid or delivered. or before any damage has been caused to a third person.CONTRACT NOT ILLEGAL PER SE . allow the party repudiating the contract to recover the money or property.DIVISIBLE contract: LEGAL TERMS may be ENFORCED IF SAME CAN BE SEPARATED FROM ILLEGAL ONES 1421 Generally. In such case. provided: . 2% per mo. When the price of any article or commodity is determined by statute. he may demand additional compensation for service rendered beyond the time limit. and where public policy would be advanced by allowing suit for relief 1415 EFFECT IF ONE PARTY IS INCAPACITATED – RECOVERY POSSIBLE 1416 Contracts ILLEGAL PER SE: those FORBIDDEN BEC. if the illegal terms can be separated from the legal ones.DOESN’T APPLY WHERE SUPERIOR PUBLIC POLICY INTERVENES . the courts may. When the agreement is not illegal per se but is merely prohibited. the courts may.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 15 . WAGE 1420 ILLEGAL TERMS OF CONTRACT .secured loans w/ registered real estate as security 2. A contract which is the direct result of a previous illegal contract.unsecured loans 12% . or authorizes the fixing of the maximum number of hours of labor.INDIVISIBLE contract: VOID contract .5% per mo. The defense of illegality of contract is not available to third persons whose interests are not directly affected. Where one of the parties to an illegal contract is incapable of giving consent.DOESN’T APPLY TO VOID CONTRACTS SIMULATED TO CIRCUMVENT A LAW . OF PUBLIC INTEREST MERELY PROHIBITED contracts: those FORBIDDEN BEC. and the prohibition by the law is designated for the protection of the plaintiff. When the law sets.
VOLUNTARILY PERFORMS obligation CAN’T DEMAND RETURN 1429 PAYMENT OF DEBTS BEYOND VALUE OF DECEDENT’S ESTATE – VALID PAYMENT & CAN’T BE RESCINDED BY PAYER 1430 WILL DENIED PROBATE because it WASN’T EXECUTED W/ FORMALITIES PRESCRIBED BY LAW – PAYMENT OF LEGACY ACCDG TO ITS TERMS IS EFFECTIVE AND IRREVOCABLE TITLE IV. When a right to sue upon a civil obligation has lapsed by extinctive prescription. he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered. voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation. the payment is effective and irrevocable. the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered. they authorize the retention of what has been delivered or rendered by reason thereof. the Rules of Court and special laws. but the debtor later voluntarily reimburses the third person. Civil obligations give a right of action to compel their performance. the obligor cannot recover what he has paid. and cannot be denied or disproved as against the person relying thereon. but after voluntary fulfillment by the obligor. there is no right to demand the thing or price thus returned. When a minor between eighteen and twenty-one years of age.W/O KNOWLEDGE OF DEBTOR . Through estoppel an admission or representation is rendered conclusive upon the person making it. NATURAL OBLIGATIONS 1423 NATURAL OBLIGATIONS: based on equity and natural law. Estoppel may be in pais or by deed. pays a legacy in compliance with a clause in the defective will. the Code of Commerce. 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. because of something w/c he hasn’t done or omitted Obligations are civil or natural. . Natural obligations. not being based on positive law but on equity and natural law.AGAINST DEBTOR’S WILL PAYMENT W/ DEBTOR’S CONSENT – CIVIL OBLIGATION ARISES 1426 AGE OF MAJORITY NOW 18 VOLUNTARY RETURN AFTER ANNULMENT: CAN’T DEMAND RETURN 1427 OBLIGEE’S GOOD FAITH MUST BE PRESENT AT TIME OF SPENDING OR CONSUMING 1428 DEFENDANT. notwithstanding the fact the he has not been benefited thereby. after the annulment of the contract voluntarily returns the whole thing or price received. ESTOPPEL (n) 1431 CONCEPT of ESTOPPEL 1432 PRINCIPLES OF ESTOPPEL ONLY SUPPLETORY 1433 KINDS of ESTOPPEL 1) Estoppel IN PAIS (EQUITABLE ESTOPPEL): situation where. do not grant a right of action to enforce their performance. a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed. 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. Some natural obligations are set forth in the following articles. and don’t grant right of action to enforce their performance EFFECT: after obligor’s VOLUNTARY FULFILLMENT. When without the knowledge or against the will of the debtor. after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation. but one of the intestate heirs. after the settlement of the debts of the deceased. When a will is declared void because it has not been executed in accordance with the formalities required by law.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 16 inexistent. who is the WINNER IN ACTION TO ENFORCE A CIVIL OBLIGATION. (1160A) When. the payment is valid and cannot be rescinded by the payer. TITLE III. who has entered into a contract without the consent of the parent or guardian. there shall be no right to recover the same from the obligee who has spent or consumed it in good faith. The principles of estoppel are hereby adopted insofar as they are not in conflict with the provisions of this Code. WHAT HAS BEEN DELIVERED OR RENDERED thereof CAN BE RETAINED 1424 EFFECT OF EXTINCTIVE PRESCRIPTION – RIGHT OR PROPERTY HAS BEEN LOST 1425 PAYMENT BY 3RD PERSON .
” – prejudice not essential 1435 ESTOPPEL CREATED IN REPRESENTATIVE CAPACITY – prejudice not essential 1436 ESTOPPEL ON PART OF LESSEE OR BAILOR 1437 REQUISITES of ESTOPPEL IN PAIS . any right or title in derogation of the deed or from denying truth of mat’l facts asserted .By OMISSION . and (4) The party defrauded must have acted in accordance with the misrepresentation. provided all these requisites are present: (1) There must be fraudulent representation or wrongful concealment of facts known to the party estopped. (3) The party misled must have been unaware of the true facts.By DEED PROPER .By SILENCE .By LACHES (unreasonable delay in suing) 2) Estoppel BY DEED (TECHNICAL ESTOPPEL): bar w/c precludes one party to a deed & his privies from asserting as against the other party & his privies.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 17 to do. made by the other to a pledgee who received the same in good faith and for value. If a person in representation of another sells or alienates a thing.By JUDGMENT AS A COURT RECORD 1434 SALE OF “AFTER-ACQUIRED PROP. a party is denied the right to plead or prove an otherwise important fact .on PARTY ESTOPPED 1) CONDUCT AMOUNTING TO FALSE REPRESENTATION OR CONCEALMENT OF MAT’L FACTS 2) INTENT OR EXPECTATION CONDUCT shall be ACTED UPON BY OTHER PARTY 3) KNOWLEDGE (actual or constructive) OF THE TRUTH . A lessee or a bailee is estopped from asserting title to the thing leased or received. . cannot. as against the lessor or bailor. and later the seller or grantor acquires title thereto.By CONDUCT or by acceptance of benefits . When in a contract between third persons concerning immovable property.on PARTY INVOKING ESTOPPEL 1) LACK OF KNOWLEDGE & MEANS TO ASCERTAIN THE TRUTH 2) RELIANCE UPON CONDUCT OF PARTY ESTOPPED 3) ACTION (OR FAILURE TO ACT) SO AS TO CHANGE HIS POSITION PREJUDICIALLY 4) PREJUDICE UNLESS ESTOPPEL IS APPLIED ESTOPPEL CONCERNING IMMOVABLE PROPERTY – ONE SHOULD’VE BEEN MISLED CONSENT ON PART OF OWNER ESTOPS HIM FROM ASSERTING ANY RIGHT OVER THE PROPERTY 1438 ESTOPPEL RESULTING FROM ACCEPTANCE OF BENEFITS ESTOPPEL ALSO APPLIES IF ‘AGENT’ WAS GIVEN APPARENT AUTHORITY. set up his own title to defeat the pledge of the property. One who has allowed another to assume apparent ownership of personal property for the purpose of making any transfer of it. the latter is precluded from asserting his legal title or interest therein. such title passes by operation of law to the buyer or grantee. one of them is misled by a person with respect to the ownership or real right over the real estate. the former cannot subsequently set up his own title as against the buyer or grantee.By REPRESENTATION OR CONCEALMENT . (2) The party precluded must intend that the other should act upon the facts as misrepresented. & OTHER PARTY WAS MISLED INTO GIVING HIM CREDIT When a person who is not the owner of a thing sells or alienates and delivers it. if he received the sum for which a pledge has been constituted.
and a refusal to enforce it would virtually sanction fraud or injustice AGENCY BY ESTOPPEL TITLE V. TRUSTS (n) Chapter 1. subjecting person holding the same to the obligation of dealing w/ the property for another person’s benefit : right to the beneficial enjoyment of property. and EQUITABLE/BENEFICIAL TITLE HELD BY ANOTHER 1441 CLASSES OF TRUST 1) EXPRESS: created by assent of the parties. Implied trusts come into being by operation of law. Express trusts are created by the intention of the trustor or of the parties. GENERAL PROVISIONS 1440 TRUST: fiduciary relationship WRT property.Estoppel APPLIES ONLY TO QUESTIONS OF FACT. . and the person for whose benefit the trust has been created is referred to as the beneficiary.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 18 1439 PERSONS BOUND BY ESTOPPEL . Trusts are either express or implied. A person who establishes a trust is called the trustor. to prevent fraud. oppression. one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee. 2) TRUST PROPERTY or trust estate or subject matter of the trust CHARACTERISTICS 1) FIDUCIARY RELATIONSHIP 2) CREATED BY LAW OR BY AGREEMENT 3) LEGAL TITLE HELD BY ONE. or by the intention of the trustor 2) IMPLIED: created by operation of law a) RESULTING TRUSTS: imposed by law to carry out actual or presumed intent of the parties. where the express trust fails b) CONSTRUCTIVE TRUSTS: est. or unjust enrichment Estoppel is effective only as between the parties thereto or their successors in interest. the legal title to w/c is vested in another ELEMENTS 1) PARTIES to the trust a) TRUSTOR or settler – establishes the trust b) TRUSTEE – holds property in trust for another’s benefit c) BENEFICIARY (CESTUI QUE TRUST) – person for whose benefit the trust has been created NOTE: The trustor may also be the beneficiary. regardless of intention. truth of w/c the other party is ignorant ESTOPPEL CAN’T VALIDATE A VOID CONTRACT PROMISSORY ESTOPPEL: promise to do or not to do something in the future intended to be relied upon & was so relied upon.Generally GOV’T NOT BOUND BY ESTOPPEL . by law.
. No particular words are required for the creation of an express trust. No express trusts concerning an immovable or any interest therein may be proved by parol evidence.FOR ENFORCEABILITY .FULFILLMENT OF RESOLUTORY CONDITION . it being sufficient that a trust is clearly intended.TRUSTEE capacitated to HOLD PROP & OBLIGATE HIMSELF .FOR TRUST OVER PERSONAL PROP. No trust shall fail because the trustee appointed declines the designation. ORAL AGREEMENT IS VALID & ENFORCEABLE BET.TRUSTOR capacitated to TRANSFER PROP . THE PARTIES .LOSS (physical loss or legal impossibility) OF SUBJECT MATTER OF TRUST . but the limitation laid down in Article 1442 shall be applicable. EXPRESS TRUSTS 1443 EXPRESS TRUSTS DON’T PRESCRIBE & MAY NOT BE PROVED BY ORAL EVIDENCE FORMALITIES RE EXPRESS TRUSTS . Acceptance by the beneficiary is necessary. if the trust imposes no onerous condition upon the beneficiary. Nevertheless.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 19 1442 PRINCIPLES OF GEN.ACCOMPLISHMENT OF PURPOSE OF THE TRUST Chapter 3. the Code of Commerce. unless the contrary should appear in the instrument constituting the trust.may be express. The principles of the general law of trusts. his acceptance shall be presumed. 1444 CREATION OF EXPRESS TRUST METHOD 1) DECLARATION OF TRUSTOR THAT HE HOLDS PROP IN TRUST 2) CONVEYANCE TO TRUSTEE INTER VIVOS OR BY TESTAMENT CLEAR INTENTION to create a trust CAPACITY .RoC) 1445 EFFECT OF DECLINATION BY TRUSTEE – Court appoints new trustee 1446 BENEFICIARY’S ACCEPTANCE IS NECESSARY . implied.RESCISSION OR ANNULMENT . IMPLIED TRUSTS 1447 TRUSTS RECOGNIZED ONLY IF NOT IN CONFLICT W/ CC.MUTUAL AGREEMENT by ALL PARTIES . the Rules of Court and special laws are hereby adopted. insofar as they are not in conflict with this Code. Code of Commerce. if it concerns real prop. LAW OF TRUSTS MERELY SUPPLETORY Chapter 2. The enumeration of the following cases of implied trust does not exclude others established by the general law of trust.RE 3RD PERSONS: trust in PUBLIC INSTRUMENT & REGISTERED in Registry of Prop. if there is no proof to the contrary.MERGER .EXPIRATION OF the TERM .BENEFICIARY capacitated to RECEIVE GRATUITOUSLY FROM TRUSTOR ADMINISTRATION (Rule 98. or presumed TERMINATION of express trusts (8) .COURT ORDER .
1449. he may demand the reconveyance of the property to him. 1456 1448 No implied trust if doc expresses different intent Resulting trust 1449 WHEN DONEE DOESN’T GET FULL OWNERSHIP OF BENEFIT Resulting trust 1450 CONVEYANCE OF PROPERTY SO IT MAY SERVE AS SECURITY Constructive trust TRUST RECEIPT: security transaction intended to aid in financing importers & retail dealers who don’t have sufficient funds to finance importation or purchase of merchandise. and who may not be able to acquire credit except thru utilization. If two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all. as collateral. However. 1454. guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third person. When land passes by succession to any person and he causes the legal title to be put in the name of another. the person obtaining it is. while the latter is the beneficiary. 1452. no trust is implied by law. If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee. 1451. Provable by oral evidence RESULTING TRUSTS (5): trusts intended but ineffective as express trusts 1448.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 20 RoC. it being disputably presumed that there is a gift in favor of the child. by gen. a trust is established by implication of law for the benefit of the true owner. legitimate or illegitimate. insofar as they’re not in conflict w/ the CC & special laws. When any trustee. of the one paying the price of the sale. by . or transfer it to another or the grantor. a trust by virtue of law is established. If property is acquired through mistake or fraud. If the fulfillment of the obligation is offered by the grantor when it becomes due. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt. law. The former is the trustee. a trust arises by operation of law in favor of the person to whom the money is loaned or for whom its is paid. There is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee. of the merchandise imported or purchased 1451 WHEN TITLE TO LAND ISN’T TO OWNER’S NAME Resulting trust 1452 WHEN PROPERTY IS IN THE NAME OF ONLY ONE OF THE CO-BUYERS Resulting trust 1453 WHEN A PERSON DECLARES HIS INTENT TO HOLD PROPERTY FOR SOMEONE ELSE Resulting trust 1454 ABSOLUTE CONVEYANCE MADE FOR SECURITY PURPOSE Constructive trust 1455 USE OF TRUST FUNDS Constructive trust 1456 There is an implied trust when property is sold. a trust is established by operation of law in favor of the person to whom the funds belong. & special laws IMPLIED TRUSTS as are specified by the Code don’t exclude others est. he nevertheless is either to have no beneficial interest or only a part thereof. if the person to whom the title is conveyed is a child. The latter may redeem the property and compel a conveyance thereof to him. and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. 1453 CONSTRUCTIVE TRUSTS (4) 1450. a trust is created by force of law in favor of the others in proportion to the interest of each. 1455. When property is conveyed to a person in reliance upon his declared intention to hold it for. there is an implied trust in favor of the person whose benefit is contemplated.
An implied trust may be proved by oral evidence. considered a trustee of an implied trust for the benefit of the person from whom the property comes.Finals Provisions Reviewer – OBLIGATIONS AND CONTRACTS YSRefran 21 PROPERTY ACQUIRED THRU MISTAKE OR FRAUD Constructive trust 1457 PROOF OF IMPLIED TRUST – applies whether property is real or personal ORAL EVIDENCE FOR TRUST MUST BE TRUSTWORTHY force of law. .
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