Batchelder vs.

Central Bank Monetary Board resolutions do not create contracts between Central Bank and dollar earner.—Considering the fundamental meaning of ―contracts under the Civil Law and the nature of the administrative authority of the Monetary Board to promulgate rules and regulations governing the monetary and banking system of the Philippines, the Monetary Board Resolutions Nos. 857 dated June 17, 1960 and 695 dated April 28, 1961 are not contracts that give rise to obligations which must be fulfilled by the Central Bank in favor of affected parties. These resolutions merely lay down a general policy on the utilization of the dollar earnings of Filipino and resident. American contractors undertaking projects in U.S. military bases. Republic vs. Phil. Long Distance Telephone Co. Freedom of parties to stipulate; Grounds for annulment. —Parties can not be coerced to enter into a contract where no agreement is had between them as to the principal terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation or undue influence (Articles 1306, 1336, 1337, Civil Code of the Philippines). Corpus vs. Court of Appeals Contracts; An attorney-client relationship can be created by implied agreement, as when the attorney actually rendered legal services for a person who is a close friend. The obligation of such a person to pay attorney’s fees is based on the law of contracts’ concept of facio ut des (I do and you give). —WE find respondent David‘s position meritorious. While there was no express agreement between petitioner Corpus and respondent David as regards attorney‘s fees, the facts of the case support the position of respondent David that there was at least an implied agreement for the payment of attorney‘s fees. Petitioner s act of giving the check for P2,000.00 through his aforestated April 18, 1962 letter to respondent David indicates petitioner‘s commitment to pay the former attorney‘s fees, which is stressed by expressing that ―I wish I could give more but as you know we were banking on a SC decision reinstating me and reimbursing my back salaries.‘ This last sentiment constitutes a promise to pay more upon his reinstatement and payment of his back salaries. Petitioner ended his letter that he was ―looking forward to a continuation of the case in the lower court, x x x‖, to which the certiorari-mandamus-quo warranto case was remanded by the Supreme Court for further proceedings. Moreover, the payment of attorney‘s fees to respondent David may also be justified by virtue of the innominate contract of facio ut des (I do and you give) which is based on the principle that ―no one shall unjustly enrich himself at the exp ense of another.‖ Innominate contracts have been elevated to a codal provision in the New Civil Code by providing under Article 1307 that such contracts shall be regulated by the stipulations of the parties, by the general provisions or principles of obligations

and contracts, by the rules governing the most analogous nominate contracts, and by the customs of the people. Cui v. Arellano University Students and educational institutions; Scholarships; Stipulation whereby student cannot transfer to another school without refunding scholarship cash null and void.—The stipulation in a contract, between a student and the school, that the student‘s scholarship is good only if he continues in the same school, and that he waives his right to transfer to another school without refunding the equivalent of his scholarship in cash is contrary to public policy and, hence, null and void because scholarships are awarded in recognition of merit and to help gifted students in whom society has an established interest or a first lien, and not to keep outstanding students in school to bolster its prestige and increase its business potential. Saura v. Sindico THE RIGHT TO PRESENT ONE'S CANDIDACY; PUBLIC OFFICE; NOT WITHIN COMMERCE OF MAN.—Among those that may not be the subject matter (object) of contracts are certain rights of individuals, which the law and public policy have deemed wise to exclude from the commerce of man. Among these are the political rights conferred upon citizens, including, but not limited to one's right to vote, the right to present one's candidacy to the people and to be voted to public office, provided, however, that all the qualifications prescribed by law obtain. Such rights may not, therefore, be bargained away or surrendered for consideration by the citizen or unduly curtailed with impunity, for they are conferred not for individual or private benefit or advantage but for the public good and interest. Leal vs. Intermediate Appellate Court Contracts are generally binding between the parties, their assigns and heirs; Under Art 1255 of the Civil Code of Spain, parts, clauses and conditions which are contrary to public order are null and void. —Contracts are generally binding between the parties, their assigns and heirs; however, under Art. 1255 of the Civil Code of Spain, which is applicable in this instance, pacts, clauses, and conditions which are contrary to public order are null and void, thus, without any binding effect. The equivalent provision in the Civil Code of the Philippines of Art. 1255 of the Civil Code of Spain is Art. 1306; Public order and public policy, interpreted. — Parenthetically, the equivalent provision in the Civil Code of the Philippines is that of Art. 1306, which states: ‗That 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.‖ Public order signifies the public weal-public policy. Essentially, therefore, public order and public policy mean one and the same thing. Public policy is simply the English equivalent of ―orden publico‖ in Art. 1255 of the Civil Code of Spain.

1976 (supra)." The guidelines thus presuppose that a Central Bank regulation is not within the term "any law. Thus. Provided. Banco Filipino Savings & Mortgage Bank vs. "Although a circular duly issued is not strictly a statute or a law." The Escalation Clause was dependent on an increase of rate made by "law" alone. lot buyer. the reliance of GSIS on the Deed of Quitclaim of May 7. That such stipulation shall be valid only if there is also a stipulation in the agreement that the rate of interest agreed upon shall be reduced in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board. 7-a. altho'. material furnisher.—There can be an increase in interest if increased by law or by the Monetary Board." The distinction between a law and an administrative regulation is recognized in the Monetary Board guidelines quoted in the letter to the BORROWER of Ms. 494. Thus. indefinite and unlimited as to time. which shall continue to be applicable even beyond the lifetime of the original parties to the contract. Usury. petitioners' contention that the escalation clause is violative of the said law is bereft of any merit." "That administrative rules and regulations have the force of law can no longer be questioned. According to the guidelines. is. however. —The Escalation Clause reads as follows: "I/We hereby authorize Banco Filipino to correspondingly increase the interest rate stipulated in this contract without advance notice to me/us in the event a law increasing the lawful rates of interest that may be charged on this particular kind of loan. further. goods or credits may stipulate that the rate of interest agreed upon may be increased in the event that the applicable maximum rate of interest is increased by law or by the Monetary Board: Provided. Court of Appeals Escalation clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money in long term contracts. having connection with said development." 2. Same. Court of Appeals Contracts. it must include a provision for reduction of the stipulated interest "in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board. —What is more. 1970 is to Our mind misplaced. —In Banco Filipino Savings v." Florendo vs. Parties to an agreement pertaining to a loan or forbearance of money.D. the Court reiterated the rule that escalation clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money in long term contracts. Spouses Salazar. 1980. waived in favor of GSIS its rights in favor of the subdivision in question arising out of its development and assumed to pay the claims of any contractor. so much so that it shall continue to be applicable even beyond the lifetime of the original parties to the contract." (Italics supplied). 494. That the adjustment in the rate of interest agreed upon shall take effect on or after the effectivity of the increase or decrease in the maximum rate of interest. is a nullity. Velasco vs. does not include a Central Bank Circular." (Paragraphing and italics supplied) It is clear from the stipulation between the parties that the interest rate may be increased "in the event a law should be enacted increasing the lawful rate of interest that may be charged on this particular kind of loan. No. this Court in essence ruled that in general there is nothing inherently wrong with escalation clauses. The unilateral determination and imposition of increased interest rates by the herein respondent bank is obviously violative of the principle of mutuality of contracts. Escalation Clause to be valid must include de-escalation clause. the GSIS was not relieved of any liability to petitioner for the cost of materials and labor the latter incurred in building the subdivision houses if Laigo Realty Corp. a nullity." To quote: "Sec. 1684. Navarro. is not strictly a statute or a law. In IBAA vs. we grant the petitioners‘ prayer for the cancellation of the annotations of this prohibition at the back of their Transfer Certificates of Title.—One such condition which is contrary to public policy is the present prohibition to sell to third parties. it will not be amiss to point out that the unilateral determination and imposition of increased interest rates by the herein respondent bank is obviously violative of the principle of mutuality of contracts ordained in Article 1308 of the Civil Code. We have analyzed this document carefully." The distinction is again recognized by P. for a loan's interest to be subject to the increases provided in CIRCULAR No. and in order for such stipulation to be valid. it has. CIRCULAR No. Paderes of September 24. and We are of the . is not a law.Prohibition to sell property to third parties which is indefinite and unlimited as to time. the Usury Law has been rendered ineffective. etc. specifically the owner‘s right to freely dispose of his properties. the Usury Law has been rendered ineffective. In the Deed of Quitclaim in question wherein Laigo Realty Corp. because the same virtually amounts to a perpetual restriction on the right of ownership. adding section 7-a to the Usury Law. which. Navarro A contract which embodies an Escalation Clause authorizing automatic increase in interest rates in the event a law increasing the lawful rates of interest that may be charged. we hold that any such prohibition. "An administrative regulation adopted pursuant to law has the force and effect of law. providing that parties to an agreement pertaining to a loan could stipulate that the rate of interest agreed upon may be increased in the event that the applicable maximum rate of interest is increased "by law or by the Monetary Board. By virtue of CB Circular 905. is unable to pay them. promulgated on March 17. without doubt.—On the other hand.—We have already mentioned (and now reiterate our holding in several cases) that by virtue of CB Circular 905. the force and effect of law. there must be an Escalation Clause allowing the increase "in the event that any law or Central Bank regulation is promulgated increasing the maximum interest rate for loans. having the face and effect of law. In the light of this pronouncement. although it has the effect of law. Mortgage Bank vs.

A stipulation pour autrui is a stipulation in favor of a third person conferring a clear and deliberate favor upon him. and which stipulation is merely a part of a contract entered into by the parties. (2) that the favorable stipulation should not be conditioned or compensated by any kind of obligation whatever. — Contracts take effect only between the parties thereto. 1308. National Bank Stipulation in Favor of Third Person. that the dispositive portion of the quitclaim deed does not really relieve GSIS from liability to petitioners. We believe that it being a matter of judicial notice that the prices of labor and material have substantially risen since 1970. Contracts. Obligations. Upon the foregoing factual premises. albeit it must be collecting the installments on the lots. this stipulation takes effect between the parties. Mora Contracts. Under Art. under the peculiar circumstances of this case. While. regarding the lower value of money at the time the demand upon GSIS was made compared to that when petitioners furnished the labor and materials in question. v. Same. The requisites are: (1) that the application in favor of a third person should be a part.C. GSIS virtually assumed under said deed. Encarnacion Contracts. All it has to do then is to pass on to them what it has to pay petitioners. Kauffman vs. it is not fair to award petitioners four times the value of the cost of their construction.—The second paragraph of Article 1311 above-quoted states the law on stipulations pour autrui. to be sure. 1975. it is of judicial notice that the costs of labor and material have risen substantially since 1970. Same. A stipulation that the fruits of a parcel of land shall be used to defray certain expenses connected with religious festivities or occasions is a stipulation pour autrui. at the rate of 12% per annum from the time petitioners filed their complaint below on April 14. GSIS agreed to receive and did actually receive the benefits of what petitioners had accomplished or would accomplish under their contracts with Laigo.—The stipulation (Exhibit 0-1) is part of an extra-judicial partition (Exh. a third person. and such third person may demands its fulfillment provided that he communicates his acceptance to the obligor before it is revoked. The validity of or compliance with a stipulation appearing in an extra-judicial partition cannot be left to the will of one of the parties. of the contract. Same. After all.—The question of whether a third person has an enforceable interest in a contract must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring a favor upon such third person.—albeit it is possible there was no express consent given thereto —by and thru the aforementioned deed of quitclaim. that GSIS was unaware all along during the period of their construction of the work then being done by petitioners. not the whole. We reiterate that. Contracts take effect only between the parties thereto. not a party to the contract. We hold that said stipulation is a stipulation pour autrui. Our considered view is and We so hold that even in equity alone. The fairest test to determine whether the interest of a third person in a contract is a stipulation pour autrui or merely an incidental interest. provided that the contracting parties have clearly and deliberately conferred a favor upon such person. a third person is allowed to avail himself of a benef it granted to him by the terms of the contract. Land Registration. is to rely upon the intention of the parties as disclosed by their contract. N. inclined to go along with the trial court that the amount demanded should be multiplied four times. Florentino v. it would be fair enough to make respondent liable for interest on the amount of the demand. We are not. their assigns and heirs. that is. there is evidence in the record. Stipulation pour autrui. Evidence. Under this doctrine. and cannot generally demand the enforcement of the same. it admits it has not collected from the ones who appear to be the buyers thereof. . uncontradicted at that.C. Exception. however. and (3) neither of the contracting parties bears the legal representation or authorization of third party. Even if what is unnatural in ordinary business or industrial experience were assumed. except in some specific instances provided by law where the contract contains some stipulation in favor of a third person which is known as a stipulation pour autrui or a provision in favor of a third person not a party to the contract. 1311 of the New Civil Code. GSIS should pay the petitioners. which is supported by evidence and not effectively disputed by GSIS in its answer. but only interest at 12% per annum since they filed their complaint. Extra-judicial partition. without the conformity of the other contracting party. So much so. Consequently. Bonifacio Bros. When a third person has an enforceable interest in the contract. Revocation of Such Stipulation. the legal issue that arises is whether or not GSIS is liable to the petitioners for the cost of the materials and labor furnished by them in construction of the 63 houses now owned by the GSIS and for the construction of which no payment has been made on the balance due petitioners.). Considering the nature and purpose of the stipulation (Exh. hence the same must bind the contracting parties thereto and its validity or compliance cannot be left to the will of one of them (Art. liability in regard to claims like those of petitioners who might not be paid by Laigo albeit said liability has been made subject to the reservation that it could seek indemnity from Laigo. the owner of said houses. In all.—Coming now to the amount for which GSIS is liable. has no action against the parties thereto. Properly viewed. Same.considered view that it is actually evidence against GSIS. GSIS is. neither of whom acted as agent of the third person. —A stipulation in favor of a third person cannot be revoked by the obligated party alone. 0) duly agreed and signed by the parties. 0-1).

A stipulation pour autrui may be accepted anytime before it is revoked. In other words. The enjoyment of benefits flowing therefrom for almost seventeen years without question from any quarters can only be construed as an implied acceptance by the Church of the stipulation pour autrui before its revocation. Test to be used in determining whether stipulation constitutes a valid stipulation pour autrui. 88 Phil. Contract between foreign bank and a local bank asking the latter topay an amount to a beneficiary. the personality of the lessee does not disappear and the sub-lease generally does not have any direct action against the owner of the premises as lessor. he does not transmit absolutely his rights and obligations to the sub-lessee. as well as the name of Minami. Inc. is to rely upon the intention of the parties as disclosed by their contract. On the other hand. 438). Therefore. is a stipulation pour autrui. Art.. Same. must be parties to said contract. Daywalt v. and his personality disappears. Same. and the sub-lessee generally does not have any direct action against the owner of the premises as lessor. Similarly. unlike in a case of assignment of lease. Same. Same. Bank of America v. 24506 –01–7. A party who has not taken part in the contract. In a contract of sub-lease. it matters not whether the stipulation is in the nature of a gift or whether there is an obligation owing from the promisee to the third person. in an action upon that contract. Lease.—In Vargas Plow Factory. in the tested telex.. Same.. Upon the other hand. BANKAMERICA could not have very well disregarded that account number. 155 [1922] and Salonga v. Fieldmen's Insurance Co. there is no time limit. unless he has a real interest affected thereby. the personality of the lessee does not disappear. to require the compliance of the obligations contracted with the plaintiff as lessee. Same. in the tested telex. vs. That no such obligation exists may in some degree assist in determining whether the parties intended to benefit a third person. Warner Barnes & Co. to prevent payment to a possible another ―Toshiyuko Minami‖ who may not be connected with ACTC. 594). that the contract involved contained a stipulation pour autrui amplifies this settled rule only in the sense that the third person for whose benefit the contract was entered into may also demand its fulfillment provided he had communicated his acceptance thereof to the obligor before the stipulation in his favor is revoked. up to a year before the filing of their application in May 1964. 43 Phil. there only remains in the juridical relation two persons. Stipulation pour autrui. Same. A party to a contract pour autrui may also bring an action for its enforcement in the same manner as the beneficiary thereof. As a rule. as had always been the case since time immemorial. and also their assigns and heirs. IAC No restitution of amount sent by a foreign bank thru telex with apatent ora latent ambiguity payable to another person where the person credited by the local bank is the proper beneficiary and the account number is correct.—In a sub-lease. it was held that ―the opening of a letter of credit in favor of the exporter becomes ultimately but the result of a stipulation pour autrui‖ (27 SCRA 84 [1969]). 1311 of Civil Code. p. It could also be that the mention of ACTC‘s name was a further identification of Minami. Spanish Civil Code. Contracts. Account No. Inc. a party who has not taken part in it cannot sue or be sued for performance or for cancellation thereof. v. Acceptance of a stipulation pour autrui need not be in any particular form and may be inferred from the beneficiary‘s enjoyment of the fruits flowin g therefrom for a good number of years. 24506–01–7 was erroneously written and should be substituted by Account No. We find that the Church accepted the stipulation in its favor before it is sought to be revoked by some of the co-owners. Action. in a contract of sublease. namely the petitioners-appellees herein. —The fairest test to determine whether the interest of third person in a contract is a stipulation pour autrui or merely an incidental interest. Corp de PP Agustinos . Ltd. there are two leases and two distinct judicial relations although intimately connected and related to each other. thereto as against each other. the real parties in interest. Same. Warner Barnes & Co. CA Civil Law. the beneficiary is Minami. 2nd ed. the lessor and the assignee who is converted into a lessee (Moreno. unless he shows that he has a real interest affected thereby (Macias & Co. the eontract was between KYOWA and BANKAMERICA and it had a stipulation pour autrui. 26 SCRA 178 [1968]). Marimperio v.. or by stipulation or by provision of law. 125 [1951]. 19842–01–2 in the name of ACTC. —That one of the parties to a contract pour autrui is entitled to bring an action for its enforcement or to prevent its breach is too clear to need any extensive discussion. either as plaintiff or as defendant.—According to Article 1311 of the Civil Code. has to be given more weight than the mention of the name of ACTC. when KYOWA asked BANKAMERICA to pay an amount to a beneficiary (either ACTC or Minami). It is not disputed that from the time of the death of Dona Encarnacion Florentino in 1941. a contract takes effect between the parties who made it. Central Bank. where the lessee transmits absolutely his right.Same. the law does not provide when the third person must make his acceptance. except in cases where the rights and obligations arising from the contract are not transmissible by their nature. In applying this test. considered either as a patent ambiguity or as a latent ambiguity.. cannot sue or be sued for the performance or cancellation thereof. —It is our considered opinion that. Coquia v. or vice versa (10 Manresa. such third person has all the time until the stipulation is revoked. Since a contract may be violated only by the parties. the Church had been enjoying the benefits of the stipulation. Here. The mention of Account No. it should be difficult to concede that.—While a stipulation in favor of a third person has no binding effect in itself before its acceptance by the party favored.. Philippine Law Dictionary.

Luzon Surety So Ping Bun v. and. if any. knowledge of the special conditions which render such damages possible will not make them recoverable. Sales. Estate of K. the promisor is not bound by his promise and may. The business desire is there to make some gain to the detriment of the contracting parties. Special damages of this character cannot be recovered unless made the subject of special stipulation. accordingly. While lack of malice precludes damages. Accepted promise to sell is an offer to sell and when accepted becomes a contract of sale. INTERFERENCE WITH CONTRACTS BY STRANGERS. Where the alleged interferer is financially interested. since there may be no valid contract without a cause or consideration.. it does not relieve the interferer of the legal liability for entering into contracts and causing breach of existing ones. that the promise be ―supported by a consideration distinct from the price. precludes damages.—The interference with lawful contracts by strangers thereto gives rise to an action for damages in favor of the injured person. primarily. Same. we held that where there was no malice in the interference of a contract. This is upon the principle that an offer implies an obligation on the part of offeror to maintain it for such length of time as to permit the offeree to decide whether to accept or not.‖ Accordingly. and the impulse behind one‘s conduct lies in a proper business interest rather than in wrongful motives. a party cannot be a malicious interferer. and the impulse behind one‘s conduct lies in a proper business interest rather than in wrongful motives. v. A contrary view would remove the stability and security of business transactions. Consideration not presumed in an accepted unilateral promise to buy or lo sell. Same. Same.—While the law permits the offeror to withdraw the offer at any time before acceptance even before the period has expired. natural and in a sense the necessary damage resulting from the breach. In other words. he cannot become more extensively liable in damages for the nonperformance of the contract than the party in whose behalf he intermeddles. the promisee has the burden of proving such consideration. to ―an accepted unilateral promise to buy or to sell. and therefore cannot arbitrarily revoke the offer without being liable for damage which the offeree may suffer. which a stranger to a contract may incur by advising or assisting one of the parties to evade performance.—Article 1354 of the Civil Code which presumes the existence of a consideration in every contract applies to contracts in general.— Whatever may be the character of the liability.—In accepted unilateral promise to sell. Same.. Promisee in an accepted unilateral promise to sell must prove existence of consideration. that the offeror can not exercise this right in an arbitrary or capricious manner. DAMAGES FOR BREACH.—As early as Gilchrist vs. are recoverable where it appears that the particular conditions which made such damages a probable consequence of the breach were known to the delinquent party at the time the contract was made. Same. IAC Contracts. CA Where there was no malice in the interference of a contract. Gilchrist v. however. The general rule. results in a perfected contract of sale.ID. Cuddy.CONTRACTS. a party cannot be a malicious interferer. Rigos Offeror cannot withdraw offer arbitrarily.H. —The damages recoverable upon breach of contract are. known as special damages. Form. ID. Article 1479 requires the concurrence of a condition. The respondent appellate court correctly confirmed the permanent injunction and nullification of the lease contracts between DCCSI and Trendsetter Marketing. MEASURE OF DAMAGES FOR BREACH OF CONTRACT. The law does not require that the responsible person shall have known the identity of the injured person. Same. Same. Hemady v. Same. some writers hold the view. however. therefore. 2. LIABILITY OF THIRD PARTY. Same. of the nature of an offer to sell which. This proposition must be understood with the qualification that. we find that the conduct herein complained of did not transcend the limits forbidding an obligatory award for damages in the absence of any malice. the ordinary. if the damages are in the legal sense remote or speculative. without awarding damages. is that a contract may be oral or written. The injunction saved the respondents from further damage or injury caused by petitioner‘s interference. withdraw it. Same. Fact that previous contracts were all oral does not necessarily mean that all subsequent contracts of similar or allied nature should also be oral and . and such interest motivates his conduct. Pending notice of its withdrawal.—While we do not encourage tort interferers seeking their economic interest to intrude into existing contracts at the expense of others. But it does not relieve petitioner of the legal liability for entering into contracts and causing breach of existing ones. if accepted. the promisee can not compel the promisor to comply with the promise. his accepted promise partakes. Other damages. Tong Brothers Co. it cannot be said that he is an officious or malicious intermeddler. whereas the second paragraph of Article 1479 thereof refers to ―sales‖ in particular.‖ It is Article 1479 that controls defendant‘s unilateral promise to sell her property to the plaintif f.—In order that said unilateral promise may be ―binding‖ upon the promisor. Cuddy DAMAGES. more specifically. however. Same. Same. The general rule is that a contract may be oral or written. Sanchez v. Same. unless the former establishes the existence of said distinct consideration. —A contract may be entered into in whatever form except where the law requires a document or other special form as in the contracts enumerated in Article 1388 of the Civil Code. namely. Lack of malice.

in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other. It is likewise to be noted that there is nothing in the evidence to show the actual value of the goods allegedly lost by petitioner Weldon v. Contracts. its existence and binding effect can no longer be disputed. the Nawasa officials would be subject to administrative disciplinary action if they awarded the contract to C & C Commercial Corporation in spite of its unsettled tax liabilities. Inc.000. Statutes. does not necessarily result in a conclusive presumption that all subsequent contracts between the parties of similar or allied nature should also be oral and the procedure be the same. Such being the situation. the parties had already agreed upon a contract of supervision under Exhibit "A. and valid and binding upon the passenger regardless of the latter‘s lack of knowledge or assent to the regulation‖. Same. 349 S. such fact can no longer negate the binding effect of that agreement if its existence and especially.00 Pesos was not an unqualified acceptance of the offer contained in the first proposal (Exhibit "A") as in fact an entirely new proposal (Exhibit "4") was submitted by Weldon Construction subsequently.—The Nawasa was justified in not awarding the contract to C & C Commercial Corporation because it had no tax clearance certificate. its consummation can be established by other evidence.00 Pesos fully paid. he is nevertheless bound by the provisions thereof. ―12‖). It never attained perfection as the contract between the parties. therefore. The fact. that the petitioners delivered to the respondent the sum of P10. e. Same. The advance payment of P10. be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. An administrative order requiring that bidders for government contract must have a tax clearance certificate is applicable even though it was issued .E. Rosenchein vs. this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. are contracts not entirely prohibited. Contracts. its existence and binding effect can no longer be disputed—Petitioner's position is untenable.00. Philippine Air Lines‘ limited carriage liability of P100." why then was a second proposal made? Res ipsa loquitur.00 as part of the down-payment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties under article 1482 of the new Civil Code.—The fact that the parties' previous contracts for the repair of the private respondent's vessels were all oral and that the procedure consisted merely in the vessels being drydocked at the petitioner's shipyard and after repair the petitioner would just send the bill to the private respondent.. Same. Same. 66. CA Contracts of adhesion.e.g by the contemporaneous acts of the parties and their having performed their respective obligations pursuant to the agreement. if he adheres. Order No. It is what is known as a contract of ―adhesion‖. The award to C & C Commercial Corporation would be in gross contravention of Administrative Order No. Ong Yiu v. — It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the respondent still had to meet and agree on how and when the down-payment and the installment payments were to be paid. Same. C & C Commercial Corp. CA A definite agreement on manner of payment essential to a binding contract of sale. Once a contract is shown to have been consummated or fully performed by the parties thereto. It is irrelevant and immaterial to dispute the due execution of a contract. it cannot. ―1‖). 6391. Only an absolute or unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract (Article 1319. passengers are advised not to place valuable items inside their baggage but ―to avail of our V-cargo service‖ (Exh. CA Civil Law. Indeed. 66 dated June 26. If.G.000. Government agency justified in refusing to avoid a contract to a bidder who had no tax clearance certificate as required by Adm. Trans World Airlines. therefore. 63 O. 172. Velasco v. the date of signing by one of the parties. American Airlines. 2d 483. therefore. 2d 878. if both of them have in fact performed their obligations thereunder and their respective signatures and those of their witnesses appear upon the face of the document. as claimed by the petitioner. 103 Ohio App.W. The one who adheres to the contract is in reality free to reject it entirely.—While it may be true that petitioner had not signed the plane ticket (Exh. v. ―Such provisions have been held to be a part of the contract of carriage. Same. even assuming that the Building Contract in Exhibit "5" was signed by the private respondent only after the Gay Theater building had been completed and the stipulated price of P600. a proposal. 66. It had a pending tax case in the Bureau of Internal Revenue. ―a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence.000. New Civil Code). i.‖ Considering. 1967. The existence of the second proposal belies the perfection of any contract arising from the first proposal. Besides.procedure be the same. Menor Taxation. that petitioner had failed to declare a higher value for his baggage.00 for loss or delay of its passengers‘ baggage held valid and binding absent higher value declared for luggage and actual value of goods lost.—Under Administrative Order No. he gives his consent. he cannot be permitted a recovery in excess of P100. 144 N. Thus. Once a contract is shown to have been consummated or fully performed by the parties thereto. Same. as the plane ticket in the case at bar. Only an absolute or unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract—The first proposal submitted by Weldon Construction for rendering service under a contract of supervision (Exhibit "A") is simply that. And as held in Randolph v.

L-27072. Therefore. That duty devolves on the ones—the beneficiaries—who would like to enforce the insurance agreement. the absence of any concealment or deception however slight. CA Contracts. 1 to the invitation to bid dated July 6. we view the P6. Civil Code). devolves on the party seeking to enforce it. Insurance contracts are contracts ―uberimae fidei. A reservation “to reject the bid of any bidder” does not make it obligatory for a government agency to award its contract to the lowest bidder. nature of.J. which transfer of said lot to his name was later on disapproved by the LTA. respondent company was under no obligation to prove that the terms of the insurance contracts were fully explained to the other party. Tang v. No evidentiary hearing having been held. morals. The Nawasa in its addendum No. The Licensing Agreement has the force of law between the contracting parties and since its provisions are not contrary to law. Here the insurance company is not seeking to enforce the contracts. Olympic Sawmill Civil Law. To this effect Quesada testified. as amended. It is petitioner who is seeking to enforce them even as fraud or mistake is not alleged. despite the warning given to him by the court that his statement might incriminate him. no award had as yet been made and when the award was to be made.00 obligation. Damages. all facts within his knowledge which are material to the contract. A contract is valid even though one of the parties entered into it against his own wish and desires. Surigao Mineral Reservation Board vs. it has to be noted as above stated that there has been no imputation of mistake or fraud by the illiterate insured whose personality is represented by her beneficiary the petitioner herein. Considering the findings of both the CFI and Court of Appeals that the insured was guilty of concealment as to her state of health.00 obligation as liquidated . As can be gleaned from the testimony of Josue Quesada. 114 Phil. In this case. good customs. CA Contracts. or even against his better judgment. Evidence. 153). Art. —Under Article 1354 of the Civil Code. 35. Such candor in the testimony of Quesada gives credibility to the Encabos' claim. Evidence. 1332 abovequoted. Contracts. Obligations.‖ Insured must reveal all material facts within his knowledge. at the time the said order was issued. P6. petitioner should comply with it in good faith. As a general rule. 1189. Confirming the Trial Court‘s finding. —It erred because Administrative Order No.—There is merit to the Encabos' claim that the simulated deed of sale in favor of the Cariños was executed in order to protect the money Quesada invested in the purchase of the rights to the lot in question. we have to affirm. 24 SCRA 491). Aytona. Law v. 1332 of the Civil Code that the English terms of the contract were read and explained to the insured. he did this by putting Cirila Vicencio as the vendee in the simulated Deed of Sale.000 principal obligation after extension of payment of original obligation. when fraud or mistake is alleged. 1966 reserved the right “to reject the bid of any bidder” (p. of which he is aware makes the contract voidable at the option of the insurer (45 C. public order or public policy (Art. Contracts which are absolutely simulated or fictitious are inexistent and null and void ab initio. added to the P10. 1968. absolute and perfect candor or openness and honesty. there is no difference between a contract wherein one of the contracting parties exchanges one condition for another because he looks for greater profit or gain by reason of such change. 1332 is inapplicable to the case at bar. a bidder whose bid is rejected has no cause for complaint nor a right to dispute the award to another bidder (Esguerra & Sons vs. when in fact.000.—In a contract of insurance each party ―must communicate to the other. Cloribel. unless the debtor proves the contrary‖. he makes a choice free and untramelled and must accordingly abide by it. said insurer is not obliged to show under Art. good customs. public orders or public policy. 66 (promulgated after Judge Cloribel had rendered his decision of March 1. it was not the ministerial duty of the Nawasa officials to award the contract to C & C Commercial Corporation even if it was the lowest bidder. Encabo and Quesada meant her only as a dummy for the latter. Lagunzad v. and an agreement wherein one of the contracting parties agrees to accept the lesser of two disadvantages. Insurance Law.000. it has to be concluded that defendant‘s had not proven that the P6. Where the insurer sought to avoid payment of life insurance policy on the ground that insured concealed or misrepresented her state of health. Even if we were to say that the insurer is the one seeking the performance of the contracts by avoiding paying the claim.—It should be noted that under Art. Liquidated damages. the obligation to show that the terms of the contract had been fully explained to the party who is unable to read or understand the language of the contract. Record on Appeal).000.000 obligation considered as liquidated damages.S. Cariño v. Accordingly. In either case. July 31. it is seeking to avoid their performance. a failure by the insured to disclose conditions affecting the risk. Gonzales Contracts. exists and is lawful unless the debtor proves the contrary.00 obligation was illegal. In sum. ―it is presumed that it exists and is lawful. —Moreover. 1967) covers not only the bidding but also the ―execution of any contract with‖ the lowest bidder. morals. in regards to the agreement of the parties relative to the P6. on the contrary. The reason for this rule is that insurance policies are traditionally contracts ―uberimae fidei‖ which means most abundant good faith. a Chinese. —It is necessary to distinguish between real duress and the motive which is present when one gives his consent reluctantly.after the bidding. In legal effect. and which the other has not the means of ascertaining ***‖ (Section 27. Act 2427. the said order was already in force. 1306. Duties must comply with contracts entered into where provisions thereof are not contrary to law. in good faith. Insurance Law. Presumption that the amount of P6. Italics supplied).000 obligation. but before execution of the contract with the lowest bidder.

which is that the interpretation shall not favor the party who caused the ambiguity (Art. Contemporaneous acts of the parties as indication of their contractual relation. (See Lopez v. We rule that in the instant case.damages suffered by plaintiff.00 upon the signing of the contract. applying Art. November 13. 875): x x x Contracts in whatever form they may have been entered into are binding on the parties unless form is essential for the validity and enforceability of that particular contract. Same. who shall certify such acknowledgment substantially in form next hereinafter stated. 1970. The trial court was correct in judging and deciding the intention of the parties from their actuations contemporaneous with and subsequent to the agreement for the sale of the sugar in question. as argued by appellants. are conclusive in the absence of averment and proof of mistake or fraud —the question being not what the intention was. As held in the case of Herrera v. that the conveyance be executed ‗before the judge of a court of record or clerk of a court record of a notary public or a justice of the peace. attorney‘s fees and incidentals. CA Contracts. 1377. Assistant to the Manager of the company. but what is expressed in the language used. ―A‖) from which the intention of the contracting parties may be judged correctly. Said law is Section 127 of Act 496 which requires. Perfected Contract. Registration of a private deed of sale by the Register of Deeds is unauthorized and does not lend validity to the defective private document of sale. supra. a meeting of the minds between two parties whereby one bound himself with respect to the other. representing loss of interest income. Same. requiring a contract to be in some form when the law so requires for validity or enforceability. upon instruction of General Manager Emiliano L. Auditor General. the one who prepared the contract which states: ―Terms: Cash upon signing of this contract. IAC Same. in order to judge the intention of the contracting parties. 20 SCRA 655). Same. Same. their contemporaneous and subsequent acts shall be principally considered. Republic v. and we sustain the trial court. a contract was therefore perfected. Gallardo v. Same. the respondent company contending that the stipulation ―Terms: Cash upon signing of this contract‖ does not mean that the agreement was a cash transaction because no money was paid by the petitioner at the time of the signing thereof whereas the petitioner insists that it was a cash transaction inasmuch as he paid cash amounting to P142. Interpretation shall not favor the party who caused the ambiguity.—Considering the admitted fact that the contract of sale (Exhibit ―A‖) was prepared in the office of respondent company by Generoso Bongato. a private conveyance of registered property is valid as between the parties. Same. Moreover. Thus. By the unconditional acceptance of the offer that they would be paid separation pay. The next sentence provides the exception.—However general the terms of a contract may be. the interpretation to be taken shall not favor the respondent company since it is the party who caused the ambiguity in its preparation. Teodoro Garcia. Auditor General. Contracts. 1356 is that contracts are obligatory. — Lao Sok made an offer which was duly accepted by the private respondents. New Civil Code. Eastern Shipping v. Sabaysabay Same. when unambiguous. Plaintiffs-appellants‘ reliance on Article 1356 of the Civil Code is unfortunate. Where the employer offered the employees payment of separation pay which offer was unconditionally accepted a contract was perfected. and Manager Abalos although the sale was agreed to in the morning of the same day. though orally made are binding on the parties. Then.‖ Lim v.—The above facts show contemporaneous and subsequent acts of the parties in relation to the transaction between them as embodied in the Contract of Sale of Sugar (Exh. The action of the Register of Deeds of Laguna in allowing the registration of the private deed of sale was unauthorized and did not lend a bit of validity to the defective private document of sale. provided all the essential requisites for their validity are present. in whatever form they may have been entered. Same. Lao Sok v.975. Intent is to be deduced from the language employed by the parties. General terms of contract cannot include things different from those intended by the parties. The general rule enunciated in said Art. 1960. 1371. the payment having been made at around 1:30 in the afternoon of November 13.‘ Such law was violated in this case.‖ cannot deny that the agreement was not a cash transaction. Intention cannot prevail over the clear and express terms of the contract. Construction of. as of March 17. Separation Pay. New Civil Code). the only right the vendee of registered property in a private document is to compel through court processes the vendor to execute a deed of conveyance sufficient in law for purposes of registration. among other things. therefore. the cardinal rule should and must apply. Civil Code). to give something or to render some service (Article 1305. Right of a vendee of registered property in a private document. —―True. and the terms of the contract. However. (102 Phil. Castellvi Contracts. 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 was. and We are now confronted with the varying or conflicting interpretations of the parties thereto. Same. Margarina-Verkaufs-Union Cabaliw v.—Intention cannot prevail over the clear and express terms of the lease contract. Abalos who is a lawyer. Sadorra . 1970 to the cashier. the conflicting interpretations have shrouded the stipulation with ambiguity or vagueness.

Same. Wife‘s contract of sale can be annulled by the husband during the marriage. Same. 1413 of the old Civil Code which authorizes the husband as administrator to alienate and bind by onerous title the property of the conjugal partnership without the consent of the wife. —For the heart of the matter is that about seven months after a judgment was rendered against him in Civil Case No. Except for the prohibition against the taking of private . the fraudulent nature of the conveyance in question prevails. House Int’l. the four-year period fixed in Article 1391 within which to bring an action for annulment of the deed. Same. Same.—The view that the contract made by Gimena is a voidable contract is supported by the legal provision that contracts entered by the husband without the consent of the wife when such consent is required. His is the burden of rebutting the presumption of fraud established by law. and having failed to do so. v. That theory would diminish public faith in the integrity of torrens titles and impair commercial transactions involving registered lands for it would render uncertain the computation of the period for the prescription of such actions.—The decision of the Court of Appeals makes mention of Art. Actions. Not one of those provisions render unlawful the contract in question. 1413 therefore is inapplicable. the constitutional provisions are inapposite. Such a sale even if made for a valuable consideration is presumed to be in fraud of the judgment creditor who in this case happens to be the offended wife. Same. shall be computed from the registration of the conveyance (March 5. Same. Hongkong & Shanghai Bank v. Property. IAC As bases for a declaration that the conditional sale between GSIS and CENTERTOWN is null and void for being contrary to law or public policy. Heirs of Aldon A contract of sale of land made by the wife without the husband‘s consent is voidable. Where sale of land is presumed fraudulent. Contracts. 666). the vendee. Pauli Civil Law.—Plaintiff‘s submission that the four-year period commenced to run from the date when the Bank obtained actual knowledge of the fraudulent sale of Pauli‘s land to the Garganeras (sometime in 1969) and that hence the four-year period for bringing an action to annul the sale had not yet expired when it filed the action for annulment on February 17. Avecilla vs. who was the party responsible for the defect. the result would be the same because the very article reserves to the wife the right to seek redress in court for alienations which prejudice her or her heirs. Same. 1963) on the familiar theory that the registration of the document is constructive notice of the conveyance to the whole world (Armentia vs. 43192 of the Court of First Instance of Manila and without paying any part of that judgment. Fraud. Land Titles. 18 SCRA 1253. — When a transaction involves registered land. 103 Phil. Gimena. Effect if the four-year period commenced to run from the date when the bank obtained actual knowledge of the fraudulent sale of the land or that the 4-year period had not yet expired. The four-year period to bring an action for annulment of deed of sale of lot is computed from the registration of the conveyance. Same. transferee has burden of proving otherwise. Art. Yatco. the presumption established by the law in favor of petitioners is bolstered by other indicia of bad faith on the part of the vendor and vendee. Thus (1) the vendee is the son-in-law of the vendor. he did not present satisfactory and convincing evidence sufficient to overthrow the presumption and evidence of a fradulent transaction. Sotero. Reason. The fact that a vendor transfers all of his property to a third person when there is a judgment against him is a strong indication of a scheme to defraud one who may have a valid interest over his properties. and he knew that there was a judgment directing the latter to give a monthly support to his wife Isidora and that his father-in-law was avoiding payment and execution of the judgment. x x x close relationship between the vendor and the vendee is one of the known badges of fraud.—Furthermore. Circumstances indicating sale of a parcel of land belonging to conjugal partnership is void. In other words. Contracts. (2) At the time of the conveyance. x x x On this point.Sale. but even if it were. A sale of a parcel of land by the husband is deemed fraudulent if made about seven months after a judgment was rendered against the vendor for support of his wife and the vendor has not paid any part of the judgment.—On the part of the transferee. Felipe v. Benigno Sadorra sold the only two parcels of land belonging to the conjugal partnership to his son-in-law. petitioner seeks relief not so much as an aggrieved wife but more as a judgment creditor. is unacceptable. could not ask for its annulment.—The voidable contract of Gimena was subject to annulment by her husband only during the marriage because he was the victim who had an interest in the contract. (3) It was known to the vendee that his father-in-law had no properties other than those two parcels of land which were being sold to him. Conjugal assets. was living with his father-in-law. counsel for petitioners rightly claims that the lack of consent of the wife to the conveyances made by her husband was never invoked nor placed in issue before the trial court. but not by the wife nor their children. 1971. Wife may seek redress in courts for alienations prejudicial to her. What was claimed all along by plaintiffpetitioner was that the conveyances or deeds of sale were executed by her husband to avoid payment of the monthly support adjudged in her favor and to deprive her of the means to execute said judgment. Patriarca. the vendor. are annullable at her instance during the marriage and within ten years from the transaction questioned. Sale. Their children could not likewise seek the annulment of the contract while the marriage subsisted because they merely had an inchoate right to the lands sold.

continued possession.—The main thrust of the petitioner‘s challenge on the validity of the conditional sale is that the contract is ultra vires because the respondent CENTERTOWN is not qualified to acquire properties under its Articles of Incorporation. Same. clear and unambiguous. payment of taxes.—While. Mere claim that petitioners have unjustifiably refused to proceed with the sale of the property is unenforceable under the Statute of Frauds in the absence of any note or memorandum and signed agreement of sale. Same.—The Statute of Frauds is applicable only to executory contracts. Void contract. Statute of Frauds. Babao v. Same. ENFORCEMENT OF CONTRACT ON THE GROUND OF PART PERFORMANCE.—Where the contract is vague and ambiguous. all the essential terms of the contract must be established by competent proof. if a contract has been totally or partially performed. except as to the form. 101. Same. PAROL CONTRACT FOR THE SALE OF LAND. Same. However. "The recognition of the exceptional effect of part performance in taking an oral contract out of the statute of frauds involves the principle that oral evidence is admissible in such cases to prove both the contract and the part performance of the contract" (49 Am. much less a duly signed agreement to the effect that the price of P6. In any sale of real property on installments. surveying of the land at the vendee's expense. CONTRACTS WHICH ARE NOT TO BE PERFORMED WITHIN ONE YEAR. — We hold that either way We view the situation. the doctrine of part performance cannot be invoked to take the case out of the operation of the statute of frauds. Auxilio Evidence. .) Cabague v. PARTIAL PERFORMANCE BY ONE PARTY. for it would enable the defendant to keep the benefits already derived by him from the transaction in litigation. the principle excluding evidence of parol contracts for the sale of realty will not apply. The reason is simple. which is merely voidable. that a partial performance of the contract may take the case out of the operation of the statute. evade the obligations. 927). building of improvements. Same. EFFECT OF. the exclusion of parol evidence would promote fraud or bad faith. the contents of the note or memorandum. 2. as well as the contract itself. Same. however. So that when the party concerned has pleaded partial performance..establish by parol evidence the truth of this allegation. the Statute of Frauds read together with the perfection requirements of Article 1475 of the Civil Code must be understood and applied in the sense that the idea of payment on installments must be in the requisite of a note or memorandum therein contemplated. the other provisions require implementing legislation to confer a legal right and impose a legal duty which can be judicially invoked. as otherwise the statute would apply. Same. Statute of Frauds. and. 34 Phil. PAROL CONTRACT OF SALE OF REALTY UNENFORCEABLE . and evidence of such mutual promise is admissible. at the same time. responsibilities or liabilities assumed or contracted by him thereby. Poncio STATUTE OF FRAUDS. 100. Obviously. it must appear clear that the full performance has been made by one party within one year. Under the Statute of Frauds.ID. WHEN APPLICABLE. Yuvienco v. such party is entitled to a reasonable chance to . Same. The petitioner has confused a void contract with an ultra vires contract which is merely voidable.ID. where there is partial performance of the sale contract. Ortega v. different from ultra vires contract. unless they be in writing there is no palpable evidence of the intention of the contracting parties. DOCTRINE OF PART PERFORMANCE. the contents of a note or memorandum is considered as the contract itself.500. Carbonel v.000 fixed by petitioners for the real property herein involved was agreed to be paid not in cash but in installments as alleged by respondents. certain. not to contracts that are totally or partially performed. the groom may sue the bride for damages. Santos.property for public use without just compensation. on the ground of part performance. 2. Dacuycuy Same. an oral agreement to sell a piece of land is not provable. however. under the Statute of Frauds. there can be no part performance until there is a definite and complete agreement between the parties. the Statute of Frauds read together with the perfection requirements of Article 1475 of the Civil Code must be applied such that payment on installments of the sale must be in the requisite note or memorandum.. tender of payment rendition of services. PART PERFORMANCE. Mutual Promise to Marry. ORAL EVIDENCE ADMISSIBLE TO PROVE BOTH CONTRACT AND PART PERFORMANCE. and shown to be definite. the conclusion is inescapable that the claim of respondents that petitioners have unjustifiably refused to proceed with the sale to them of the property in question is unenforceable under the Statute of Frauds.—We hold that in any sale of real property on installments. etc.—To put it the other way. —Some circumstances indicating partial performance of an oral contract of sale of realty are: relinquishment of rights. In order to warrant the specific enforcement of a parol contract for the sale of land. Leonardo SALE. as a general rule. Jur. (Cuyugan vs. PERFORMANCE. —For breach of a mutual promise to marry.—Contracts which by their terms are not to be performed within one year may be taken out of the Statute of Frauds through perf ormance by one party thereto. In order. Perez STATUTE OF FRAUDS. CIRCUMSTANCES INDICATING PARTIAL. It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there is any writing or memorandum. In executory contracts there is a wide field for fraud because..

especially Antonio V. object or purpose which renders them void. The purpose of the Contracts was to create an agency for BISTRANCO with Marciano Sanchez as its agent in Butuan City. it is undisputed that Atty. and (3) informing Sanchez that "we (petitioners) are abiding strictly with the terms of the contracts executed between Marciano C. the Contracts were executed in 1976. as early as 14 December 1979. The determination. enforced. Same. Roa. thereby affecting the disposition of the assets and business of the company under receivership. 8 of the Contract executed by Sanchez the plaintiff with BISTRANCO on 27 July 1976. good customs. In the case at bar. Adolfo Amor as Receiver. Same. With the contract being partially executed. as Executive Vice-President of BISTRANCO. whereas. were never presented as witnesses. The people who were more in a position to know about the Contracts. unless they are ratified. still sent Sanchez three (3) separate letters with the following contents: (1) reducing his passage commission from 10%. Payment. — What then is the status of the Contracts which Receiver Amor entered into with Sanchez. etc. therefore.—Hence. Besides. Bisaya Land Transportation v. On the other hand.00. paragraph 1. (See Khan v. in their Petition.000. Even as to the other provisions of the Contracts. The latter‘s acceptance of the payment clearly showed his consent to the contract thereby precluding him from rejecting its binding effect. Acceptance of payment. or who has acted beyond his powers" are unenforceable. may be said to be the contract itself. Same. with the administration of BISTRANCO and its business. without the approval of the court which appointed him receiver? Even the petitioners noticeably waver as to the exact status of these Contracts.—Private respondent Sanchez filed his complaint in the lower court on 28 December 1979. there is nothing in their cause or object which can be said as contrary to law. The petitioners alleged in their Memorandum submitted to this Court that they are void contracts under Article 1409(1) of the Civil Code. the petitioner cannot avoid his obligation by interposing that Exhibit A is not a public document. Statute of Frauds. Adolfo V.whether in one writing or in separate ones merely indicative for an adequate understanding of all the essential elements of the entire agreement. In the case at bar. due to Receiver Amor's failure to secure the court's approval of said Contracts. the pretended lack of knowledge of Benjamin G. Cuenco. v. Facts showing that the unenforceable contracts were nevertheless deemed ratified in the case at bar. Same. Amor in behalf of BISTRANCO. Adolfo Amor was entrusted. Inc. Rulona Same. as he used to receive in the previous years. Same. Roa in effect recognized and gave efficacy to the Contracts in question." The three (3) letters of Benjamin G.00 pursuant to par. Therefore. an unenforceable contract may still be ratified and. solicitation of cargo and passengers shall be undertaken by you strictly in accordance with the scheduled rates of the Company". we are recalling all unused passage tickets issued your agency" and reminding him (Sanchez) also that "pursuant to par. But the act of entering into a contract is one which requires the authorization of the court which appointed him receiver. they labelled the contracts as unenforceable under Article 1403(1) of the Civil Code. Aside from this. Fulveo Pelaez succeeded Atty." (2) advising Sanchez that in view of "his failure to post a bond or such other securities acceptable to the company in the sum of P5. But a perusal of the Contracts in question would show that there is nothing in their cause. morals. Same. thereafter. whereas. the company cannot deny its ratification of the Contracts even before the time of Benjamin G. object or purpose is contrary to law. with the contract being valid and enforceable. National Marketing Corporation. Sanchez Same. Article 1403 of the Civil Code provides that contracts "entered into in the name of another person by one who has been given no authority or legal representation. the same is no longer covered by the requirements of the Statute of Frauds in order to be enforceable. an indication of party‘s consent to the contract. citing Article 1409(1) of the Civil Code which provides that contracts whose cause. 4 SCRA 884). the questioned Contracts can rightfully be classified as unenforceable for having been entered into by one who had acted beyond his powers. Roa that BISTRANCO did not have any knowledge about the Contracts before the complaint was filed on 28 December 1979 is contradicted by his own testimony that. as receiver. public order or public policy. It should be noted that Roa started to work for BISTRANCO only on 27 April 1979. But on 10 January 1980. he was represented by BISTRANCO's shipping manager as having . 19 SCRA 996). of whether the questioned contracts are void or merely unenforceable is important. Clarin v. copetitioner Benjamin G. the contracts of agency were entered into for the management and operation of BISTRANCO's business in Butuan City. under Article 1357 of the Civil Code. are inexistent and void from the beginning. to 7½% "as stated in the agency contract dated 27 July 1976. because when Atty. the petitioner can even be compelled by the respondent to execute a public document to embody their valid and enforceable contract. The declaration of Benjamin G. because of the settled distinction that a void and inexistent contract can not be ratified and become enforceable. Sanchez and Atty. The petitioners allege that the Contracts are void. morals. Contract partially executed. good customs. etc. after he saw Exhibit "NN". Status of contracts entered into without Court's approval. Roa. except as to the form. public order or public policy so as to render them void. Asuncion. Same. Consequently. On the contrary. wherein Sanchez requested the company "to abide with the terms of the contract which will expire on July 1981". not covered by Statute of Frauds. Roa can not be equated with BISTRANCO's. whereas. Said Contracts necessarily imposed obligations and liabilities on the contracting parties. he was already looking for the contract. like the company officers and members of the board of directors at the time the Contracts were entered into. 2 of aforementioned Contract. (See Federation of United Namarco Distributors. it cannot be denied that there was a perfected contract of sale between the parties and that such contract was already partially executed when the petitioner received the initial payment of P800.

The consideration of P700.00 is not only grossly inadequate but is shocking to the conscience. Civil Code). judges. De Cruz Contracts. agents and administrators. Nullity of such prohibited contracts cannot be cured by ratification. Not every agreement ―affecting land‖ must be put in writing to attain enforceability. the object which was illegal at the time of the first contract. vda. however. Section 118]. agents and administrators (Article 1491. Same.310. based upon the monthly statements of income of BISTRANCO upon which the commissions of Sanchez were based A perusal of the Contracts will also show that there is no single provision therein that can be said as prejudicial or not beneficial to BISTRANCO. it is clear that BISTRANCO received material benefits from the contracts of agency of Sanchez. which is valid. Delfin Cruz did not have any means of livelihood. as to whose transactions. paragraphs (4) and (5) of the Civil Code of the Philippines) has been adopted in a new article of the Civil Code of the Philippines. The Statute of Frauds finds no application to this case. —Article 1491 of the Civil Code of the Philippines (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons. Menil v. such formality is only required of contracts involving leases for longer than one year. Thus. Same. Contracts of sale. CA Civil Procedure: Statute of Frauds: Not every agreement affecting land must be put in writing to attain enforceability. viz. or the intention which could not be ascertained may have been clarified by the parties. was very ill and was about to die when his thumbmark was affixed on the deed of sale.00. the shipping manager of BISTRANCO at that time. Although the deed of sale purports to convey a parcel of land with an area of only 26. Fulveo Pelaez) maintains that the previous agency contract remains and (sic) basically the same except that the rates of the agency commission were modified". as heirs of Delfin Cruz. under Article 1491. Homesteads. Article 1403(2) (e) of the Civil Code. (5) judicial officers and employees." as follows: (1) guardians.959 square meters assessed at P4. and lawyers. dated 15. 1960 is void for it is expressly prohibited or declared void by law [CA 141. Hernandez‘s testimony is thus admissible to establish his agreement with Fr. This is shown by a letter. written by Capt. it therefore cannot be confirmed nor ratified. Nullity of. Furthermore.577 square meters. Rubias v.—The permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three cases of guardians. by public officers and employees of government property intrusted to them and by justices. Where circumstances indicate that alleged vendor did not voluntarily affix his thumbmark on the deed of sale and did not receive any consideration for said sale. or the service which was impossible may have become possible." Same. in which case its validity shall be determined only by the circumstances at the time of execution of such new contract. CA Civil Law.00 per hectare. claim a much bigger land containing an area of 182. Garcia as to the boundary of their estates. 1941 Delfin Cruz could not have raised the amount of P700. Article 1409 declaring such prohibited contracts as "inexistent and void from the beginning. It is obvious that on January 17. The public interest and public policy remain paramount and do not permit of compromise or ratification. (4) public officers and employees.taken cognizance of these Contracts and sanctioned the acts of Sanchez as shipping agent of BISTRANCO in Butuan City. Under the Statute of Frauds. defendants. and (6) others specially disqualified by law. having been executed after the lapse of the 5-year prohibitory period. Batiller Sales. Hernandez v. The ratification or second contract would then be valid from its execution. . Contract of sale of homestead within the 5-year prohibitory period is void and sale cannot be confirmed nor ratified. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. it does not retroact to the date of the first contract. —It cannot be claimed that there are two contracts: One which is undisputably null and void. (3) administrators. February 1977.—The respondents‘ reliance on the Statute of Frauds to secure a contrary judgment is misplaced. may be "ratified" by means of and "in the form of a new contract. Article 1491. Javier v. The letter states that "the Receiver (Atty. In view of the foregoing. Lack of consent and consideration. Federico Reyes. Even the petitioners concede this point. He was only the houseboy of Eusebio Cruz. Nullity of such prohibited contracts differentiated from the nullity of contracts of purchase by the guardians.g. by reason of the relation of trust or their peculiar control either directly or indirectly and "even at a public or judicial auction. Inasmuch as the contract of sale executed on May 7. may have already become lawful at the time of ratification or second contract. or for the sale of real property or of an interest therein. Prohibition against purchase by lawyer of property in litigation from his client. Case at bar. prosecuting attorneys. Prohibited purchase void and produces no legal effect.00 as consideration of the land supposedly sold to him by Eusebio Cruz. —Eusebio Cruz could not talk. this Court finds that Eusebio Cruz did not voluntarily affix his thumbmark on the deed of sale and did not receive any consideration for said sale. —The nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification. and another.—Castan's rationale for his conclusion that fundamental considerations of public policy render void and inexistent such expressly prohibited purchases (e. paragraph (5) of the Philippine Civil Code construed. The second contract of sale executed on March 3. its has been opined. (2) agents. 1964 is admittedly a Confirmatory deed of sale. fiscals and lawyers of property and rights in litigation submitted to or handled by them. No sane person would sell the land claimed by the defendants for only about P40.

Same. ―this is a pernicious system that cannot be too severely condemned. Therefore. Abuse of this privilege by the grantees thereof cannot be countenanced. Same. As WE have already stated: ―The prohibition in said article applies only to a sale or assignment to the lawyer by his client of the property which is the subject of litigation.‖ Although not outrightly penalized as a criminal offense. In the words of Chief Justice Makalintal. Same. Same. likewise. the transfer or assignment of one-half (1/2) of the property in litigation will take place only if the appeal prospers. Same. the amount of P415. concept of. 1973 Ed.). of simulation was defined by this Court in the case of Rodriguez vs. void and inexistent under Article 1409 of the Civil Code. Director of Lands v. the attorney‘s fees of Atty. 4) The action or defense for the declaration of their inexistence or absolute nullity is imprescriptible.—A void contract produces no effect whatsoever either against or in favor of anyone. Article 1412 of the Civil Code denies them such aid. Civil Code of the Philippines. It is a fundamental principle that the court will not aid either party to enforce an illegal contract. is contingent upon the success of the appeal. therefore. 3) The right to set up the defense of inexistence or absolute nullity cannot be waived or renounced. and which cannot be validated either by time or by ratification (p. that is. it does not create. ―Kabit system‖.00 had long been paid to Agueda Garan on that same occasion. L-23002. the deed of transfer is but a sham. Characteristics of a void ab initio contract. —Further. Same. An agreement for payment of 1/2 of real property in litigation to a lawyer as attorney‘s fees in case the appeal prospers does not violate Art. 1491 of the New Civil Code. This characteristic . IAC Civil Law.—In the instant case. the transfer actually takes effect after the finality of a favorable judgment rendered on appeal and not during the pendency of the litigation involving the property in question. it was flagrant error on the part of both the trial and appellate courts to have accorded the parties relief from their predicament. CA Contracts. The ―kabit system‖ has been identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices.—The following are the most fundamental characteristics of void or inexistent contracts: 1) As a general rule. In other words. 594. modify or extinguish the juridical relation to which it refers (p. Transportation. July 31. petitioner Potenciano Menil. Tongoy v. Contracts. Illegal Contracts.00. the unvarying term of the said contract is ample manifestation that the same is simulated and that no object or consideration passed between the parties to the contract. Jurado. 5) The inexistence or absolute nullity of a contract cannot be invoked by a person whose interests are not directly affected (p. Vol. 1960.—Unquestionably. Thus. 592. Court cannot allow either of the parties to enforce an illegal contract but leaves them both where it finds them. Rodriguez. 1967. is for the same price of P415.‖ 2) They are not susceptible of ratification. Clearly. Nature of a simulated contract. simulates a transfer of it to another.—A void or inexistent contract is one which has no force and effect from the very beginning. for the prohibition to operate. Nature of a contract void ab initio. Fernandez.—This contention is without merit. hence. It is evident from the whole record of the case that the homestead had long been in the possession of the vendees upon the execution of the first contract of sale on May 7. Alba Attorneys.. he does not really intend to divest himself of his title and control of the property. 444. We find no evidence to the contrary. Article 1491 of the New Civil Code prohibiting sale to lawyer of client‘s estate involved in a litigation applies only while litigation is pending. supra). noteworthy is the fact that the second contract of sale over the said homestead in favor of the same vendee. the ―kabit system‖ is invariably recognized as being contrary to public policy and. It constitutes an imposition upon the good faith of the government. Tolentino. whereby a person who has been granted a certificate of convenience allows another person who owns motor vehicles to operate under such franchise for a fee. hence. ―Kabit system‖. consisting of one half (1/2) of whatever Maximo Abarquez might recover from his share in the lots in question. 20 SCRA 908. Hence. where a person. Consequently. Lita Enterprises v. Comments and Jurisprudence on Obligations and Contracts. they produce no legal effects whatsoever in accordance with the principle ―quod null um est nullum producit effectum. Same. as if it had never been entered into. contrary to public policy and void and inexistent.—The characteristic of simulation is the fact that the apparent contract is not really desired nor intended to produce legal effects nor in any way alter the juridical situation of the parties. 1969 Ed. italics supplied). commonly known as the ―kabit system‖. Tolentino. of property which is the subject of litigation. Simulated contracts. Article 1491 prohibits only the sale or assignment between the lawyer and his client. A certificate of public convenience is a special privilege conferred by the government. The second contract of sale for the same homestead in favor of the same vendee for the same price is ample manifestations that the second sale is simulated and that no object or consideration in the second contract of sale has passed between the parties. the parties herein operated under an arrangement.‖ Same. No. the payment of the attorney‘s fees. Upon this premise. the sale or assignment of the property must take place during the pendency of the litigation involving the property. the contract for a contingent fee is not covered by Article 1491. IV. but will leave them both where it finds them. in order to place his property beyond the reach of his creditors.

and 1409 of the new Civil Code in relation to the indispensable requisite of a valid cause or consideration in any contract. Same. we reiterate the rule that an alienation or sale of a homestead executed within the five-year prohibitory period is void and cannot be confirmed or ratified. Applying the provisions of Articles 1350. and (8) the fact that the Acaylars were able to occupy only four hectares out of the 13 hectares and were eventually forcibly ousted therefrom by the children and agents of the vendor. Barsobia v. disclaimed any knowledge or participation therein. Manotok Realty v. neither can seek relief from the courts. Cuenco Civil Law. the alleged contract of sale is vitiated by the total absence of a valid cause or consideration. particularly Cornelia. Case at bar. Contracts. Same. Contracts. Sale. it was erroneous for the trial court to declare that the benefit of the prohibition in the Public Land Act ―does not inure to any third party.‖ Arsenal v.Same. This Court has on several occasions ruled on the nature of a confirmatory sale and the public policy which proscribes it. assert that they. Yanas‖ when the truth is that her correct name is Maria Aglimot Yanas. and each must bear the consequences of his acts. Sale. —―Ex pacto illicito non oritur actio‖ [No action arises out of an illicit bargain] is the time honored maxim that must be applied to the parties in the case at bar. that "(T)he action or defense for the declaration of the existence of a contract does not prescribe. As this Court said in Eugenio v. Acaylar Civil Law. Property. Defect of inexistence of contract permanent and incurable. (2) the fact that his wife did not join in the sale and that her name is indicated in the deed as ―Maria S. and cannot be cured by ratification or by prescription. Same. Sales. A third person who is directly affected by a void contract may set up its nullity. Such being the case. it is precisely the petitioners‘ interest in the disputed land which is in question. The petitioners in their complaint.—There should be no question that the sale of the . And their claim was immeasurably bolstered when the private respondent‘s co defendant below. Same. Thus. showed to them the controversial deed. Deed of sale is void ab initio or inexistent not merely voidable. applicable in case at bar where parties entered into an illegal contract like the ―Kabit system.‖ In pari delicto rule. Same. Sales. Parties who entered into an illegal contract cannot seek relief from the courts and each must bear the consequences of his acts. (5) the failure to state the boundaries of the lot sold. who was allegedly his co-vendee in the transaction. It was not a fair and regular transaction done in the ordinary course of business. the alleged vendor being illiterate. Portugal v. we rule that the disputed deed of sale is void ab initio or inexistent.—We are. If this is so.‖ Such a sweeping declaration does not find support in the law or in precedents. Same. IAC Public Lands.—And it is provided in Article 1410 of the Civil Code. Prescription. Badges of fraud and fictitiousness. Sale of the paraphernal property of the deceased wife by the husband who was neither an owner nor administrator of the property at the time of sale is void ab initio. not merely voidable. Same. 1352. IAC Civil Law. A sale of homestead land within the prohibited period cannot be confirmed or ratified later It remains void. A sale of homestead land within the prohibited period is void. (6) the fact that the governor approved it more than two years after the alleged sale. Sale which is void cannot be subject of ratification by the company or the probate court. led to the inevitable conclusion that the sale between Don Vicente Legarda and the private respondent is void ab initio. IAC Civil Law. Same. and what constitutes a void or inexistent contract. ―the mere lapse of time cannot give efficacy to contracts that are null and void. They claim that they came to know of the supposed sale only after the private respondent. —More than these. no consideration was ever paid at all by the private respondent.‖ Yanas v. Same. An action or defense for the declaration of the inexistence of a contract does not prescribe.—As to whether or not the execution by the respondents Palaos and Suralta of another instrument in 1973 cured the defects in their previous contract. A 3rd person affected by a void contract may set up its nullity. (4) the notarization of the sale on the day following the alleged thumbmarking of the document. Sale of land to a Chinese citizen in 1936 renders sale inexistent and void from the beginning. Reason. therefore. Same. Among the badges of fraud and fictitiousness taken collectively are the following: (1) the fact that the sale is in English. the former being neither an owner nor administrator of the subject property. Same. Perdido. —Being void. the inevitable implication of the allegations is that contrary to the recitals found in the assailed deed. never knew of the existence of the questioned deed of sale. (7) its registration more than three years later. (3) the obvious inadequacy of P200 as price for a 13-hectare land (P15. upon their repeated entreaties to produce and return the owner‘s duplicate copy of the transfer certificate of title covering the two parcels of land. the sale cannot be the subject of the ratification by the Philippine Trust Company or the probate court. Same.40 a hectare). Same. Same. Having entered into an illegal contract. Where the contract of sale is vitiated by the total absence of a valid cause or consideration. the foregoing principles and rulings are applicable.—The defect of inexistence of a contract is permanent and incurable. Same. his brother Emiliano Portugal. Sales. the contract is void or inexistent. In this case. —We hold that the sale was fictitious and fraudulent. and this is not contradicted by the decisions of the courts below.

Respondent. de la Rama Same. The lower court erred in treating the case as one involving simply the application of the statute of limitations. Fong Land Registration. 213). Li Seng Giap et al. illegal per se. contracts designed solely and exclusively to procure the welfare of the beneficiary. we see no necessity from the facts of this case to pass upon the nature of the contract of sale executed by Jose Godinez and Fong Pak Luen—whether void ab initio. was constitutionally qualified to own the subject property. Contracts. the same Article 1274 provides that in remuneratory contracts. Civil Code of 1889. which is an expression of public policy to conserve lands for the Filipinos. liberality of the donor is deemed causa only in those contracts that are of "pure" beneficence.‘ ‖ Pineda v. Same. 1409 [7]. The Krivenko ruling that ―under the Constitution aliens may not acquire private or agricultural lands. A parcel of land sold to a Chinese citizen which the latter subsequently sold to a Filipino Citizen can no longer be recovered by the vendor. 141. 461) which also detailed the evolution of the provision in the public land laws. Validity of lease or option to buy real estate to an alien. Obligations. LIBERALITY OF DONOR WHEN DEEMED "CAUSA".land in question in 1936 by Epifania to Ong King Po was inexistent and void from the beginning (Art. Philbanking v. 2874 and Commonwealth Act No. Case at bar. Civil Law. CA 1. was constitutionally qualified to own the subject property. Applying by analogy the ruling of this Court in Vasquez vs. — The right of the husband to donate community property is strictly limited by law (Articles 1409. causa is not liberality in these cases because the contract or conveyance is not made out of pure beneficence. de Bersabia: ―There should be no question that the sale of the land in question in 1936 by Epifania to Ong King Po was inexistent and void from the beginning (Art. as construed by this Court in the Krivenko case. prescription is unavailing. that aim or purpose would not be thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino Citizens by naturalization. not applicable. Sale of a residential lot to a Chinese national who had been a naturalized Filipino citizen for 15 years at time of sale. For this very reason.** It is enough to stress that insofar as the vendee is concerned. was later sold by the Chinese to a qualified person. Ban on aliens from acquiring agricultural and urban lands under the 1935 Constitution. Cuenco (113 SCRA 547) sustain the petitioner‘s contentions. There would be no more public policy to be served in allowing petitioner Epifania to recover the land as it is already in the hands of a qualified person. However. —A lease to an alien for a reasonable period is valid. The consideration for the promissory note —to influence public officers in the performance of their duties—is contrary to law and public policy. of the Civil Code of 1889. The promissory note is void ab initio and no cause of action for the collection cases can arise from it. Godinez v. Giap and Li Seng Giap & Sons: ― ‗x x x if the ban on aliens from acquiring not only agricultural but also urban lands. as a naturalized citizen. a naturalized Filipino citizen. CAUSE OR CONSIDERATION.—The rulings in Vasquez v. Grageda Civil Law. valid. The litigated property is now in the hands of a naturalized Filipino. contracts. Same. However. 447) and Sarosa Vda. 1409 [7]. where land previously sold by the Filipino citizen to the Chinese. Yap v. So is an option giving an alien the right to buy real property on condition that he is granted Philippine citizenship. Civil Code) because it was a contract executed against the mandatory provision of the 1935 Constitution. Same. Same. that is to say.—Whether or not the supposed cash advances reached their destination is of no moment. DONATION OF CONJUGAL PROPERTY BY THE HUSBAND. The rule applies whether the donation is gratuitous or for a consideration. Act No. Property. is to preserve the nation‘s lands for future generations of Filipinos. Constitutional Law. Consequently. x x x ―But the factual set-up has changed.—But the factual set-up has changed. 1413. including residential lands‖ is a declaration of an imperative constitutional policy. the consideration is the service or benefit for which the remuneration is given. (96 Phil. It is no longer owned by a disqualified vendee. Villanueva. Sales. but only in so far as it prejudices the interest of the wife. Civil Code) because it was a contract executed against the mandatory provision of the 1935 Constitution. a disqualified vendee. It is no longer-owned by a disqualified vendee. but "solvendi animo". Same. the donation made in contravention of the law is not void in its entirety. which is an expression of public policy to conserve lands for the Filipinos. Respondent. We stated in Sarosa Vda. Exception is.—The meaning of the 0above provision was fully discussed in Krivenko v. 54 Phil. in which the idea of self-interest is totally absent on the part of the transferor.DONATION. de Bersabia v. as a naturalized citizen.—Under Article 1274. or merely prohibited. There would be no more public policy to be served in allowing petitioner Epifania to recover the land as it is already in the hands of a qualified person. The litigated property is now in the hands of a naturalized Filipino. EFFECT OF. Lui She Same. Aliens are not . without any intent of producing any satisfaction for the donor. Sales. in other words. Promissory note void ab initio where consideration for the note is to influence public officers in the performance of their duties. Liguez v. Reason. prescription may never be invoked to defend that which the Constitution prohibits. But neither can the vendor or his heirs rely on an argument based on imprescriptibility because the land sold in 1941 is now in the hands of a Filipino citizen against whom the constitutional prescription was never intended to apply. 1415. Reason. Register of Deeds of Manila (79 Phil. Baello vs.

129 SCRA 81. Furthermore. Contracts. and each must bear the consequences of his acts. Property. and each must bear the consequences of his acts. undisputed that such purchase was prohibited under Section 579 of the Revised Administrative Code. the principal one is to pay the debt. Same.—While it is true that Marciana Avila. concept of. The illegality lies only as to the prestation to pay the stipulated interest. Since their residence in the Philippines is temporary. necessarily regards the prestation to pay such usurious interest as an integral part of the cause. Article 1957 of the Civil Code which declares the contract itself—not merely the stipulation to pay usurious interest—void. the latter only should be deemed void. is contrary to public policy. Same. Loan and usurious interest void. Same. And said two stipulations are divisible in the sense that the former can still stand without the latter. Kabit system. as amended. Sale at public auction. which is the cause of the contract. neither of the parties can seek relief from the courts. etal. Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been identified as one of the root causes of the prevalence of graf t and corruption in the government transportation offices. A certificate of public convenience is a special privilege conferred by the government. then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the Avila v.) Same. Should they desire to remain here forever and share our fortune and misfortune. purchased the questioned property at a public auction conducted by the government. Same. The Intermediate Appellate Court. but also an option to buy. The principal debt remaining without stipulation for payment of interest can thus be recovered by judicial action. Same. —In a contract which is tainted with usury. Filipino citizenship is not impossible to acquire. CA Civil Law. the parties herein operated under an arrangement. Right of creditor to recover his capital. Same. It is also the controlling cause. Divisibility of the contract. under Article 1409 of the Civil Code. When invalid. Loan with usurious interest. it is however. —To discourage stipulations on usurious interest. the prestation of the debtor to pay the principal debt. Briones v.—A contract of loan with usurious interest consists of principal and accessory stipulations. a void contract is inexistent from the beginning. and was issued a final bill of sale after the expiration of the redemption period. and is void and inexistent. Same. Same. Same.R.—Unquestionably. A party having entered into an illegal contract. vs. the accessory stipulation is to pay interest thereon. the prestation to pay such interest is an integral part of the cause of the contract. however.1986). is not illegal. Principle that the court will not aid either party to enforce an illegal contract.completely excluded by the Constitution from the use of lands for residential purposes. since it is the only one that is illegal. Loan valid but usurious interest void. Same. Same. Same. although not outrightly penalized as a criminal offense. said stipulations are treated as wholly void. Cammayo Usury. Same. It cannot be ratified neither can the right to set up the defense of its illegality be waived. A party to an illegal transaction cannot recover what she has given by reason ofthe contract orask forfulfillment of what has been promised her. making it illegal.—If an alien is given not only a lease of. Common Carriers. neither can seek relief from the courts. Having entered into an illegal contract. —" 'Ex pacto illicito' non oritur actio' (No action arises out of illicit bargain) is the time-honored maxim that must be applied to the parties in the case at bar. Where the property was purchased atpublic auction. Teja Marketing v. IAC Civil Law. as a further deterrence to usury. IAC. with a stipulation (whether written or unwritten) to pay usurious interest. this to last for 50 years. penal sanctions are available against a usurious lender. Void contract is inexistent from the beginning and cannot be ratified and the right to set up the defense ofits illegality is not waived — On the other hand. Same. one of the root causes of the prevalence of graft and corruption in government transportation offices. . No." (Lita Enterprises vs. x x x Thus. paid the purchase price. hence. their mother and predecessor-in-interest. Same. for this would unjustly enrich the borrower at the expense of the lender. In simple loan with stipulation of usurious interest. commonly known as the "kabit system" whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. Kabit system. It should not. July14. et al. for a usurer lends his money not just to have it returned but indeed to acquire inordinate gain. Maxim that no action arises out of illicit bargain. being separable. by virtue of which the Filipino owner cannot sell or otherwise dispose of his property. 66696. so that the loan becomes without stipulation as to payment of interest. Same. the sale is void as thepurchase was prohibited under the Revised Administrative Code. Contracts. a piece of land. (Arsenal. the sale to her of Lot 594 is void. they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. that is. Kabit system. Same. Same. be interpreted to mean forfeiture even of the principal. G.

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