OBLIGATIONS

I. Definition
A juridical necessity to give, to do or not to do, 1 one impressed with the character
of enforceability.
II. Elements of an Obligation

1. Active subject2

The possessor of a right;
he in whose favor the
obligation is constituted;

2. Passive subject3

He who has the duty of
giving, doing or not doing;

3. Object or prestation4

May consist of giving a
thing, or doing or not
doing a certain act5and

4. Efficient cause6

The
reason
why
obligation exists

the

III. Different Kinds of Prestations

1. To give

Consists in the delivery of a
movable or an immovable thing,
in order to create a real right or
for the use of the recipient or for
its simple possession or in order
to return to its owner

2. To do

All kinds of work or services,

1 Art. 1156
2 obligee or creditor
3 obligor or debtor
4 the subject matter of the obligation
5 Requisites:
1. it must be licit
2. it must be possible, physically & juridically
3. it must be determinate or determinable
4. it must have a possible equivalent in money

6 vinculum or juridical tie

whether mental or physical

3. Not to do

Consists in abstaining from some
act, includes “not to give,” both
being negative obligations

IV. Classification of Obligations

1.
Criteria
demandability:

of a. Pure - one w/c is not
subject to a condition or a
term.
b.
Conditional - the
acquisition of rights, as well
as the extinguishment or
loss
of
those
already
acquired,
shall
depend
upon the happening of the
event which constitutes the
condition.7
c. W/ a term8 -

2. Plurality of objects

a. Single

3. Plurality of subjects

b. Alternative - where the
debtor must perform any of
the prestations9
c. Facultative - where only
one thing is due but the
debtor has reserved the
right to substitute it w/
another10
d. Joint - one in w/c each of

7 Art. 1181
A past thing can never be a condition. A condition is always future and uncertain.
Past event unknown to the parties.-- It is really the knowledge of the event w/c constitutes the future.
It is the knowledge w/c is future and uncertain.
Effect of Impossible Condition.-- It annuls the obligation w/c depends upon them. The entire juridical
tie is tainted by the impossible condition.

8 see Reference
9 The characteristic of alternative obligations is that, several objects being due, the fulfillment of
one is sufficient (Tolentino)
10 Art. 1206

the debtors is liable only for
a proportionate part of the
debt or each creditor is
entitled
only
to
a
proportionate part of the
credit.11
e. Solidary - one in w/c the
debtor is liable for the
entire obligation or each
creditor
is
entitled
to
demand
the
whole
obligation.
There is only
one obligation is a solidary
obligation.

4. Performance

a.
Divisible
susceptible
of
performance.

-

one
partial

b.
Indivisible - one that
must be performed in one
act.12

5. Sanctions for Breach

a. Simple
b. W/ a penal clause - an
accessory undertaking to
assume greater liability in
case of breach.13

11 there are as many obligations as there are debtors multiplied by the number of creditors. Effects of
Joint Liability:
1. The demand by one creditor upon one debtor, produces the effects of default only w/ respect to the
creditor who demanded and the debtor on whom the demand was made, but not w/ respect to the others;
2. The interruption of prescription by the judicial demand of one creditor upon a debtor, does not benefit
the other creditors nor interrupt the prescription as to other debtors. On the same principle, a partial
payment or acknowledgement made by one of several joint debtors does not stop the running of the
statute of limitations as to the others;
3. The vices of each obligation arising from the personal defect of a particular debtor or creditor does not
affect the obligation or rights of the others;
4. The insolvency of a debtor does not increase the responsibility of his co-debtors, nor does it authorize a
creditor to demand anything from his co-creditors;
5. In the joint divisible obligation, the defense of res judicata is not extended from one debtor to another.
(Manresa.)

12 General rule: Obligation is indivisible w/c means that it has to be performed in one act singly. Why?
Bec. the law provides so: Unless there is an express stipulation to that effect, the creditor cannot be
compelled partially to receive the prestations in which the obligation consists. Neither may the debtor be
required to make partial payments. xxx (Art. 1248, par. 1.) Three Exceptions to the Rule on Indivisibility:
1. When the parties so provide. (Art. 1248, par. 1.)
2. When the nature of the obligation necessarily entails performance in parts.
3. Where the law provides otherwise.

Reimbursement of a third person for a debt that has prescribed. Quasi-contract19 . Restitution by minor after annulment of contract. Sources of Obligations14 A. 2.. 1980 Ed. damages do not have to be proved. and which has for its purpose. Quasi-contracts 4. voluntary and unilateral act. Natural Obligations16 They are real obligations to which the law denies an action. Extra-contractual Obligations18 1. Performance after action to enforce civil obligation has failed. 2142 to 2194 19 obligation ex quasi-contractu 20 This takes place when a person voluntarily takes charge of another’s abandoned business or property without the owner’s authority 21 This takes place when something is received when there is no right to demand it. Performance after the civil obligation has prescribed.17 A. Acts or omissions punished by law and 5. 3. 6. Law 2.undue payment 21 13 The purpose is to strengthen the coercive force of the obligation. and 7. The Philippine Law on Obligations and Contracts Explained. 2 16 a. 4..That juridical relation resulting from a lawful. 15 Nolledo. but which the debtor may perform voluntarily. Quasi-delicts. 18 Arts. Payment by heir of debt exceeding value of property inherited. Contracts 3. 5. Do not grant such right of action to 17 Examples of natural obligations enumerated under the Civil Code: 1. A single act or omission can give rise to different causes of action It is a source of obligation because of the provision in Article 100 of the Revised code that “every person criminally liable is also civilly liable. Delivery by minor of money or fungible thing in fulfillment of obligation. Jose N. the payment of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of another 2 kinds: a Negotiorum gestio . p.V.”15 B. Based not on positive law but on equity and natural law enforce their performance b. When a penal clause is present. Payment of legacy after will have been declared void. 14 Obligations arise from: 1. and it was unduly delivered thru mistake .unauthorized management20 b Solutio indebiti .

It is a fault or act of negligence ( or omission of care ) which causes damage to another. 1st par. 1163) 2. 1165 . Obligation to give24 1. To take care of the thing w/ the diligence of a good father of a family until actual delivery. 2nd par. there being no pre-existing contractual relations between the parties.28 B. and it cannot be substituted by another act or forbearance against the obligee’s will29. 1166 28 Art.27 2. the same shall be executed at his cost30 albeit he may not be In Obligations not to do When the obligation consists in not doing.2.25 may compel the debtor to make the delivery. 1164) 3. Obligation to do or not to do Obligations to do If a person is obliged to do something. 1244 . An indeterminate or generic thing If the thing is indeterminate or generic. in addition to the right granted him by Article 1170.32 22 obligation ex quasi-delicto or ex quasi maleficio 23 Elements: a. Nature and Effect of obligations A. A determinate or specific thing When what is to be delivered is a determinate thing.23 VI. If the obligor fails to do it. even though they may not have been mentioned. the creditor. To deliver accessions and accessories(Art. There must be fault or negligence attributable to the person charged b. 27 Art. 1165. 29 see Art. he may ask that the obligation be complied with at the expense of the debtor.26 The obligation to give a determinate thing includes that of delivering all its accessions and accessories.(Art. To deliver the fruits to the creditor (fruits produced after obligation to deliver arises). it shall also be undone at his expense.(Art. There must be damage or injury c. 1166) 25 See reference 26 Art. There must be a direct relation of cause and effect between the fault or negligence on the one hand and the damage or injury on the other hand ( proximate cause ) 24 Three Accessory Obligations: 1. it must be done as promised. Quasi-delict/torts22 . and the obligor does what has been forbidden him.

Default. In reciprocal obligations.31 C. There is acknowledgment of default. delay or mora34 – no default unless creditors makes a demand. Demand is still necessary if their respective obligations are to be performed on separate dates. 37 There can be delay only in positive obligations (to give/to do).33 2. Gonzales. it may be decreed that what has been poorly done be undone.compelled to do so personally or by himself. Breaches of obligations 1. This same rule shall be observed if he does it in contravention of the tenor of the obligation. 36 see Art.36 a Mora solvendi Delay of the debtor to perform his obligation. 1167 32 see Art. Ex re – obligation is to give 2. one party incurs in delay from the moment the other party fulfills his obligation. 1169 The general rule is that fulfillment by both parties should be simultaneous except when different dates for the performance of obligation is fixed by the parties. Ex persona – obligation is to do37 30 see Chavez vs. 523 33 debtor is not liable for damages 34 Non-fulfillment of the obligation with respect to time 35 There must be a demand (judicial or extra-judicial) before delay may be incurred. It may be: 1. Cui vs. Furthermore. Chan. 41 Phil. Obligation or law expressly so declares 2.35 exceptions 1. Complete failure to perform Debtor is unable to comply with his obligation because of fortuitous event. 32 SCRA 547 31 Art. . 1168. Demand is useless as when obligor has rendered beyond his power to perform 4. There can be no delay in negative obligations (not to give/not to do). Time is of the essence of the contract 3. while he himself does not comply or is not ready to comply in a proper manner with what is incumbent upon him.

41 see Art. 1.41 6. Any waiver of an action for future fraud is void. Exceptions: 1. requisites Fortuitous event42. 2147. Waiver of future fraud is void Responsibility arising from fraud is demandable in all obligations. 1268. Exceptions: common carriers which are required to exercise extraordinary diligence 5. Contravention of the tenor of obligation The faithful observance of an obligation according to its tenor is mandated by law. 1942. . Compesatio morae Delay of the parties or obligors in reciprocal obligation. of the time and of the place Negligence can be waived unless the nature of the obligation or public policy requires extraordinary diligence as in common carrier. was inevitable. Article 552(2). an unexcused failure thereof renders the obligor liable for losses and damages caused thereby. 1170 42 General Rule: No liability in case of fortuitous event. 40 Omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons.39 4. 1165(3). Mora accipiendi Delay of the creditor to accept the delivery of the thing w/c is the object of the obligation c. 2148 and 2159 of the Civil Code. When expressly declared by stipulation or contract 3.an event which could not be foreseen or which though foreseen.) 2. When expressly declared by law (e.b. When the nature of the obligation requires the assumption of risk 4 When the obligor is in default or has promised to deliver the same thing to 2 or more persons who do not have the same interest [Article 1165(3)]. Legal excuse for breach of obligation – fortuitous event. Requisites: 38 Deliberate and intentional evasion of the fulfillment of an obligation 39 Art.g. Negligence (culpa)40 in the performance of obligation a. 1171Future fraud cannot be waived because it would result to illusory obligation. Fraud in the performance of obligation38 a. Diligence normally required is ordinary diligence or diligence of a good father of a family b.

1 cause is independent of the will of the debtor43 2 the event must be unforeseeable or unavoidable 3 occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner 4 debtor must be free from any participation in the aggravation of the injury resulting to the creditor44 B. Substituted performance by a third person on obligation to deliver generic thing and in obligation to do. Specific Performance45 When what is to be delivered is a determinate thing. in addition to the right granted him by Art 1170.e. Rescission50 43 It must not only be the proximate cause but it must be the only and sole cause. Remedies available to creditor in cases of breach 1. Debtor cannot avoid obligation by paying damages if the creditor insists on the performance. 45 Phil. the creditor. Smith. Sec 10 48 Art 1165. the same shall be executed at his cost. 49 Art. Furthermore.46 may compel the debtor to make the delivery. where there is “reciprocity” between the parties i. unless a purely personal act Obligation to give Obligation to do If the thing is indeterminate or generic. Exception: Imposition of personal force or coercion upon the debtor to comply with his obligation tantamount to involuntary servitude and imprisonment for debt 50 resolution in reciprocal obligations Only applies to reciprocal obligations.47 a. Par 2 Delivery of anything belonging to the species stipulated will be sufficient. This same rule shall be observed if he does it in contravention of the tenor of the obligation. 1165. 1167 The court has no discretion to merely award damages to the creditor when the act can be done in spite of the refusal or failure of debtor to do so.49 generic thing 2. it may be decreed that what has been done poorly be undone. 44 Lasam vs. he may ask that the obligation be complied with at the expense of the debtor. par 1. . 657 45 in obligation to give specific thing 46 indemnification for damages 47 Art.48 If a person obliged to do something fails to do it. see also ROC Rule 39. creditor debtor relations arise from the same cause or “identity of cause”.

2. in any event In case of breach of the obligation. Give a period to the debtor in which to perform 52 The remedy is alternative. the liability of the first infractor shall be equitably tempered by the courts. Damages. and each shall bear his own damages. can refuse to perform if the other party is not yet ready to comply If the injured party has already performed: cannot extrajudicially rescind IF the other party opposes the rescission (otherwise. Responsibility for damages is indivisible . if the latter should become impossible. The court shall decree the rescission claimed. party who did not perform not entitled to insist upon the performance of the contract by the defendant or recover damages by reason of his own breach Rights of injured party subordinated to the rights of a 3rd person to whom bad faith is not imputable Not absolute. the same shall be deemed extinguished.52 with the payment of damages in either case. 1191 56 Art. unless there be just cause authorizing the fixing of a period.The power to rescind obligations is implied in reciprocal ones. not permitted in casual/slight breach. may only be claimed in substantial breach (Song Fo v.56 3. in accordance with articles 1385 53 and 138854 and the Mortgage Law. See Reference Recoverable damages include any and all damages that a human being may suffer. If it cannot be determined which of the parties first violated the contract. 53 See Reference 54 ibid 55 Art. Subsidiary remedies of creditors Reciprocal obligations have a “tacit resolutory condition” 51 Power to rescind: Pertains to the injured party. Party seeking rescission can only elect one between fulfillment and rescission. There can be no partial performance and partial rescission. 1192 57 Art.51 The injured party may choose between the fulfillment and the rescission of the obligation. even after he has chosen fulfillment.55 In case both parties have committed a breach of the obligation. 1170.57 exclusive or in addition to specific performance. Declare the rescission as properly made b. rescission produces legal effect). in case one of the obligors should not comply with what is incumbent upon him. In the case the other party impugns rescission. This is understood to be without prejudice to the rights of third persons who have acquired the thing. the court comes in either to: a. He may also seek rescission. Hawaiian Philippines) Rescission requires judicial approval to produce legal effect Exception: object is not yet delivered and obligation has not yet been performed If the obligation has not yet been performed: extrajudicial declaration of party willing to perform would suffice.

Accion subrogatoria58 Action which the creditor may exercise in place of the negligent debtor in order to preserve or recover for the patrimony of the debtor the product of such action. 1652. 1729 64 Art. or upon a past event unknown to the parties. See Reference Payments of pre-existing obligations already due. see reference 62 See Art.62 Right of the laborers or persons who furnish materials for a piece of work undertaken by a contractor to go directly to the owner for any unpaid claims due to the contractor. 3. Hence. 1608. Accion directa61 Right of the lessor to go directly to sublessee for unpaid rents of the lessee.a. last sentence and 1381. any balance shall pertain to the debtor Patrimony of the debtor (includes both present and future property) is liable for the obligations he may contract by being a legal guaranty in favor of his creditors. Pure The performance does not depend upon a future or uncertain event. he cannot maliciously reduce such guaranty 60 rescissory action An action to rescind contracts entered into by the debtor in fraud of creditors ( Arts. cannot be impugned by an accion pauliana 61 Arts. and then obtain therefrom the satisfaction of his own credit. whether natural or civil. par. can be revoked by this action.64 B.63 VII. 1652 63 See Art. shall depend upon the happening of the event which constitutes the condition. which is demandable at once. c. 1179 . as well as the extinguishment or loss of those already acquired. Accion pauliana60 Creditors have the right to set aside or revoke acts which the debtor may have done to defraud them.59 b. 1729 & 1893. See Art. Suspensive condition66 The happening of the event gives birth to an obligation 58 An action against the debtor’s debtor 59 subrogatory action. Kinds of Civil Obligations A. Conditional The acquisition of rights.65 1. 1177. 1177 Previous approval of court is not necessary Plaintiff entitled only to so much as is needed to satisfy his credit. whether by gratuitous or onerous title. All acts of the debtor which reduce his patrimony in fraud of his creditors.

If the obligation is unilateral. once the condition has been fulfilled. When the debtor binds himself to pay when his means permit him to do so. the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. Obligations subject to potestative suspensive conditions are void When the fulfillment of the condition depends upon the sole will of the debtor. 65 Every obligation which contains a resolutory condition shall also be demandable. the conditional obligation shall be void. without prejudice to the effects of the happening of the event. the obligation shall be deemed to be one with a period..." 69 e. Effect of the happening of suspensive condition or resolutory condition a) Extent of retroactivity The effects of a conditional obligation to give. Potestative. a.70 4.g. shall retroact to the day of the constitution of the obligation. Resolutory condition67 The happening of the event will extinguish the obligation. "I will give you my plantation in Davao provided you reside in Davao permanently." 70 Art. unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. the debtor shall appropriate the fruits and interests received.68 depend upon a third person or upon 69 chance. casual or mixed Potestative Casual One w/c depends One where the solely on the will of condition is made to either one party. the obligation shall take effect.2. When the obligation imposes reciprocal prestations upon the parties. 1181 66 condition precedent 67 condition subsequent 68 e. 1182 . If it depends upon chance or upon the will of a third person.g. "I will give you my land in Pampanga if you will pass the bar exams this year. Mixed One w/c depends partly upon the will of one of the parties and partly on either chance or the will of a third person. 1180) Art. subject to the provisions of Article 1197 (Art. 3.

1187 72 Art. with indemnity for damages in either case. 1190. . the improvement shall inure to the benefit of the creditor. the presumption is that it is for the benefit of both parties.In obligations to do and not to do. the debtor cannot compel acceptance before the arrival of the term. (6) If it is improved at the expense of the debtor. or by time. (3) When the thing deteriorates without the fault of the debtor. loss or deterioration of the specific thing The provisions of the second paragraph of Article 1187 73 shall be observed as regards the effect of the extinguishment of the obligation. 1189 73 supra 74 Art. (5) If the thing is improved by its nature. The consequence is that the creditor cannot compel the performance before the arrival of the term. Effect when a resolutory condition in obligation to do or not to do happens and there is improvement. Obligations with a resolutory period take effect at once. but terminate upon arrival of the day certain. or goes out of commerce. loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor. Effect of improvement. the impairment is to be borne by the creditor. the obligation shall be extinguished. or disappears in such a way that its existence is unknown or it cannot be recovered. he shall be obliged to pay damages. the retroactive effect of the condition that has been complied with. (4) If it deteriorates through the fault of the debtor. the courts shall determine. which is demandable only when that day comes. he shall have no other right than that granted to the usufructuary. 71 Art. Obligation with a period or a term75 Obligations for whose fulfillment a day certain has been fixed.72 6.74 C. the creditor may choose between the rescission of the obligation and its fulfillment. in each case. par.71 3. it is understood that the thing is lost when it perishes. 3 75 General rule: If a period is attached in an obligation. A day certain is understood to be that which must necessarily come. loss or deterioration of specific thing before the happening of a suspensive condition in obligation to do or not to do Rules in case of the improvement. (2) If the thing is lost through the fault of the debtor. although it may not be known when.

it is presumed to have been established for the benefit of both the creditor and the debtor. 31.000 on or before Oct. unless he immediately gives new ones equally satisfactory. in consideration of which the creditor agreed to the period. the obligation is conditional.80 4. anytime. "I promise to pay Clara the sum of P100.76 1. Effect if suspensive period78 is for the benefit of both debtor and creditor Term is for the benefit of Term is for the benefit of the creditor the debtor The creditor can demand The creditor cannot demand performance anytime. Effect if given to debtor alone a) Instances when debtor losses benefit of period (1) When after the obligation has been contracted. (4) When the debtor violates any undertaking.79 3. Presumption that period is for the benefit of both debtor and creditor Whenever in an obligation a period is designated. (2) When he does not furnish to the creditor the guaranties or securities which he has promised.If the uncertainty consists in whether the day will come or not. but the performance anytime. 1198 . (3) When by his own acts he has impaired said guaranties or securities after their establishment. unless he gives a guaranty or security for the debt." This is a term for the benefit of the debtor." This is a term for the benefit of the debtor. (5) When the debtor attempts to abscond.1196 78 The obligation has already arisen except that it is not yet demandable 79 Illustrations: "I promise to pay within 60 days.77 2. he becomes insolvent. Resolutory period 76 Art. and when through a fortuitous event they disappear. 1996. 1193 77 Art. unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other. but the debtor cannot insist on payment debtor can insist on performance before the period. 80 Art.

Alternative or Facultative83 1. the accessory being only a means to facilitate payment. You just have to find out what the parties really intended (Balane) . Definite or indefinite period a. it is difficult to distinguish the two. but from its nature and the circumstances it can be inferred that a period was intended. the period cannot be changed by them. In every case. Once fixed by the courts. 1199 A person alternatively bound by different prestations shall completely perform one of them. Difference between alternative and facultative obligations84 Alternative Facultative As to contents of the obligation There are various prestations all of w/c constitute parts of the obligation Only the principal prestation constitutes the obligation.Obligations with a resolutory period take effect at once. Instances when courts may fix the period If the obligation does not fix a period. but terminate upon arrival of the day certain. In theory. As to nullity The nullity of one prestation does not invalidate the obligation. it is easy to distinguish a facultative obligation from an alternative one. 84 Facultative obligations always involve choice by the debtor.82 b. Creditor must ask court to set the period before he can demand payment D. The courts shall also fix the duration of the period when it depends upon the will of the debtor. As to choice The right to choose may be given Only the debtor can choose the 81 in diem. or resolutory 82 Art. The creditor cannot be compelled to receive part of one and part of the other undertaking. the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. w/c is still in force w/ respect to those w/c have no vice The nullity of the principal prestation invalidates the obligation and the creditor cannot demand the substitute even when this is valid. 1197 83 Art.81 5. But in practice.

Effect of loss of specific things or impossibility of performance of alternative.85 2. even if obligation the substitute is possible.to the creditor substitute prestation. As to effect of loss Only the impossibility of all the The impossibility of the principal prestations due w/o fault of the prestation is sufficient to debtor extinguishes the extinguish the obligation. through fault of debtor/creditor or through fortuitous events Choice is debtor's Choice is the creditor's 85 IV Tolentino .

d. the creditor may one that is left. If all prestations but one are fortuitous event. (2) 92 Id. If all are lost through the liable to indemnify the creditor debtor's fault. If all are lost through creditor's fault.86 the debtor may perform the fortuitous event. If some things are lost fall upon the price of any of through the debtor's fault. e. the them. the debtor can ask for resolution plus damages. If all but one the fault of the last one was lost fortuitous event. for damages. 1205 (1) 91 Id.87 choose from those remaining. If one or some are lost through the debtor's fault.90 b. those remaining. the creditor may fortuitous event.a. 1204 90 Art. If all are lost through the latter is liable to indemnify the creditor's fault. the latter is c. If one or some are lost through left. the obligation is creditor for damages. When only one prestation is a. 1203 89 Art.89 the choice of the creditor shall d. the creditor has choice from the remainder or the value of the things lost plus damages. If some are lost through the e. extinguished.91 c. w/ indemnity for 92 debtor can still choose from damages. If the choice is limited through the creditor's own acts. g. If all are lost through f. and extinguished. If everything is lost through the debtor's fault. extinguished. 1202 88 Art. (3) .88 b. the obligation is lost through fortuitous event. extinguished. the remaining prestation was lost through the debtor's fault. the obligation is choose from the remainder. are lost through debtor and the through through the obligation is 86 whether or not the rest of the prestations have been lost through fortuitous event or through the fault of the debtor 87 Art. the f.

1208 95 Art. unless otherwise indicated by the law or nature of obligation The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand. If one of the latter should be insolvent. there is default but only guilty debtor shall be liable for damages A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking.95 d. although he may pay if he wants to If the division is impossible.93 b. obligations are indivisible since the integrity of the obligations requires their payment or performance completely. the right of the creditors may be prejudiced only by their collective acts. Insolvency of a joint debtor. Joint obligation is presumed. others not liable for his share96 B. Each credit is distinct from one another.97 2. 1233 and 1248 . 1209 96 ibid 97 Arts. There is a solidary liability only when the obligation expressly so states. entire compliance with the prestation. Joint Indivisible Obligation 1. Obligation presumed to be divided into as many equal shares as there are creditors or debtors The credit or debt or deemed divided into as many shares as there are creditors or debtors to each other. 1207 94 see Art.VIII. Joint (divisible) obligation 1. Obligation cannot be performed in parts but debtors are bound jointly Generally. therefore a joint debtor cannot be required to pay for the share of another with debtor. In case of failure of one joint debtor to perform his part (share). or when the law or the nature of the obligation requires solidarity. each resulting credit or debt being considered distinct from one another. Joint and Solidary obligation A. or that each one of the latter is bound to render.94 c. the others shall not be liable for his share. and the debt can be enforced only by proceeding against all the debtors. Concurrence of two or more creditors and or two or more debtors a. The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the 93 Art.

in proportion to the debt of each. has been made by one of them. so long as the debt has not been fully collected. 1214 100 The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors. with the interest for the payment already made. 1222 .104 98 Art. confusion or remission of the debt. as well as he who collects the debt. With respect to those which personally belong to the others. He who made the payment may claim from his co-debtors only the share which corresponds to each. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others.98 C.103 A solidary debtor may. made by any of the solidary creditors or with any of the solidary debtors. the creditor may choose which offer to accept. but if any demand. 1216 103 Art. Mutual guaranty among solidary debtors The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. judicial or extrajudicial. in actions filed by the creditor. without prejudice to the provisions of Article 1219.corresponding portion of the price of the thing or of the value of the service in which the obligation consists. If two or more solidary debtors offer to pay. 101 Art. Solidary obligation 1. reimburse his share to the debtor paying the obligation. Mutual agency among solidary debtors The debtor may pay any one of the solidary creditors.99 Novation. 1215 102 Art. no interest for the intervening period may be demanded. shall be liable to the others for the share in the obligation corresponding to them. such share shall be borne by all his codebtors. he may avail himself thereof only as regards that part of the debt for which the latter are responsible. because of his insolvency. When one of the solidary debtors cannot. shall extinguish the obligation.100 The creditor who may have executed any of these acts.101 2. avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him. payment should be made to him. compensation. If the payment is made before the debt is due. 1217 104 Art. in case the debt had been totally paid by anyone of them before the remission was effected.102 Payment made by one of the solidary debtors extinguishes the obligation. or pertain to his own share. 1224 99 Art.

confusion or remission of debt executed by a solidary creditor The obligation is extinguished. 1212 106 supra 107 Art.107 D. 105 Art. without prejudice to the provisions of Article 1219.111 The nullity of the penal clause does not carry with it that of the principal obligation. In obligations not to do. Even if there has been no performance. the accomplishment of work by metrical units. 1215 108 Art. 110 The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. 1225 109 Art. Divisible and Indivisible Obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. When the obligation has for its object the execution of a certain number of days of work. is liable to the others for the share in the obligation corresponding to them. compensation. it shall be divisible.106 The creditor who may have executed any of these acts. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. divisibility or indivisibility shall be determined by the character of the prestation in each particular case.3.108 E. However.109 Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. even though the object or service may be physically divisible. or analogous things which by their nature are susceptible of partial performance. The penalty may be enforced only when it is demandable. Damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. Obligations with a Penal Clause The penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance. but not anything prejudicial to them105 a) Effect of any novation. 1226 110 Art. as well as he who collects the debt. if there is no stipulation to the contrary. Each one of solidary creditors may do whatever may be useful to the others. 1229 . 1228 111 Art. an obligation is indivisible if so provided by law or intended by the parties.

unless there is a stipulation to the contrary. Whoever pays for another may demand from the debtor what he has paid. he can recover only insofar as the payment has been beneficial to the debtor.116 2.113 Whoever pays on behalf of the debtor without the knowledge or against the will of the latter. 1236 114 Art. the action derived from the original obligation shall be held in abeyance. Payment The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation. cannot compel the creditor to subrogate him in his rights. 1237 115 Art. But the payment is in any case valid as to the creditor who has accepted it115 1. If it is not possible to deliver such currency. In the meantime. Extraordinary inflation or deflation The value of the currency at the time of the establishment of the obligation shall be the basis of payment. except that if he paid without the knowledge or against the will of the debtor. such as those arising from a mortgage.117 3. Extinguishment of Obligations A. which requires the debtor's consent. or when through the fault of the creditor they have been impaired. Dation in payment Property is alienated to the creditor in satisfaction of a debt in money.The nullity of the principal obligation carries with it that of the penal clause. unless there is an agreement to the contrary.112 IX. Form of payment The payment of debts in money shall be made in the currency stipulated. or penalty. 1238 116 Art.and the debtor becomes now the vendor. then in the currency which is legal tender in the Philippines.114 Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation. 1249 . The delivery of promissory notes payable to order. 1230 113 Art.118 112 Art. 117 Art. guaranty. 1245 Dation in payment is governed by the law on sales because it is as if the creditor is now the vendee. or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed.

120 If the debt produces interest. (2) He is incapacitated to receive the payment at the time it is due.124 118 Art. Tender of Payment and Consignation If the creditor to whom tender of payment has been made refuses without just cause to accept it. to which of them the same must be applied. when: (1) Creditor is absent or unknown. or if application cannot be inferred from other circumstances. (4) Two or more persons claim the same right to collect. may declare at the time of making the payment. he refuses to give a receipt. 1257 . Consignation alone shall produce the same effect in the following cases. the former cannot complain of the same. 1254 123 Art. 1250 119 the designation of a debt which is being paid by the debtor who has several obligations of the same kind in favor of the creditor to whom the payment is made (quoting Tolentino.123 In order that the consignation of the thing due may release the obligor. 1253 122 Art.121 When the payment cannot be applied. or does not appear at the place of payment. shall be deemed to have been satisfied. application shall not be made as to debts which are not yet due. payment of the principal shall not be deemed to have been made until the interests have been covered.) 120 Art. unless there is a cause for invalidating the contract. 1252 121 Art.122 5. the payment shall be applied to all of them proportionately.1256 124 Art. the debtor shall be released from responsibility by the consignation of the thing or sum due. If the debts due are of the same nature and burden. it must first be announced to the persons interested in the fulfillment of the obligation. Application of payment119 He who has various debts of the same kind in favor of one and the same creditor.4. among those due. (3) Without just cause. If the debtor accepts from the creditor a receipt in which an application of the payment is made. or when the application of payment is made by the party for whose benefit the term has been constituted. the debt which is most onerous to the debtor. (5) The title of the obligation has been lost. Unless the parties so stipulate.

Condonation or Remission of Debt An act of liberality by virtue of which. and before he has incurred in delay. the consignation having been made. the debtor may ask the judge to order the cancellation of the obligation. 1266 131 Art. without receiving any equivalent. he shall lose every preference which he may have over the thing. The same rule applies when the nature of the obligation requires the assumption of risk. allowing the obligation to remain in force.128 B. before whom the tender of payment shall be proved. the creditor should authorize the debtor to withdraw the same. the interested parties shall also be notified thereof.127 If. 1260 128 Art. the debtor may withdraw the thing or the sum deposited.Consignation shall be made by depositing the things due at the disposal of judicial authority.126 Once the consignation has been duly made. shall be charged against the creditor. The consignation having been made. Before the creditor has accepted the consignation.125 The expenses of consignation.129 The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.130 When the service has become so difficult as to be manifestly beyond the contemplation of the parties. 1267 . in whole or in part. 1261 129 Art. guarantors and sureties shall be released. and the announcement of the consignation in other cases. 1259 127 Art. when properly made. and he shall be responsible for damages. 1262 130 Art. or before a judicial declaration that the consignation has been properly made. in a proper case. the creditor renounces enforcement of an obligation which is extinguished. the obligor may also be released therefrom. the obligor is liable even for fortuitous events. in whole or in part. When by law or stipulation. Loss of Determinate Thing Due or Impossibility or difficulty of performance The obligation is extinguished if it should be lost or destroyed without the fault of the debtor. 1258 126 Art. The co-debtors.132 125 Art.131 C. the loss of the thing does not extinguish the obligation.

Compensation When two persons. You can remit a debt even before it is due. Renunciation must be gratuitous. Capacity of the parties. It may be novation. or of a third person who owns the thing. If renunciation is for a consideration. apply Art. 134 Art. But note that the creditor may just refuse to collect (w/o observing any form. 1278 . after its delivery to the creditor. Express condonations and required formality thereof Express condonation shall comply with the forms of donation. the debtor and his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt. Implied The delivery of a private document evidencing a credit. it shall be presumed that the creditor delivered it voluntarily.134 Whenever the private document in which the debt appears is found in the possession of the debtor. If in order to nullify this waiver it should be claimed to be inofficious. and requires the acceptance by the obligor. Acceptance by the debtor 4. 2. 1275 138 Art. 6. 132 Four (4) requisites:1. compromise of dacion en pago. apply Art. 3. is found in the possession of the debtor. 133 Condonation or remission is essentially gratuitous. the mode of extinguishment may be something else. One and the other kind shall be subject to the rules which govern inofficious donations (Art. in their own right.) In this case. 748. 1271 135 Art. are creditors and debtors of each other.137 E. If the condonation involves movables. 1270) The form of donation must be observed.1. unless the contrary is proved. 749. 1274 137 Art. If it involves immovables. the obligation will be extinguished not by virtue of condonation but by waiver under Art. Debt that is existing. It may be made expressly or impliedly. and that he be at the same time a principal creditor of the other.133 2.138 It is necessary that: (1) Each one of the obligors be bound principally. 1272 136 Art. implies the renunciation of the action which the former had against the latter.135 It is presumed that the accessory obligation of pledge has been remitted when the thing pledged. Confusion or Merger of Rights When the characters of creditor and debtor are merged in the same person.136 D. made voluntarily by the creditor to the debtor.

without prejudice to the provisions of par. Kinds a. and also of the same quality if the latter has been stated.141 b. even though the debts may be payable at different places. or if the things due are consumable. Legal compensation Compensation takes place by operation of law. 1289) Art. the rules on the application of payments shall apply to the order of the compensation (Art. they be of the same kind.139 1. 1282 143 See Agreement. 1288) If a person should have against him several debts which are susceptible of compensation. Agreement The parties may agree upon the compensation of debts which are not yet due. 1279 140 Art. supra 144 Art. 1286 141 Art. compensation takes effect by operation of law. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title. Facultative When compensation is claimable by only one of the parties but not of the other. Judicial If one of the parties to a suit over an obligation has a claim for damages against the other. (3) The two (2) debts be due. 1290 142 Art. (5) Over neither of them there be any retention or controversy. even though the creditors and debtors are not aware of the compensation. commenced by third persons and communicated in due time to the debtor.145 139 Compensation shall not be proper when one of the debts arises from a depositum or from the obligations of a depositary or of a bailee in commodatum. 2 of Article 301 (Art. and extinguishes both debts to the concurrent amount.142 c.140 When all the requisites mentioned above are present. 1287) Neither shall there be compensation if one of the debts consists in civil liability arising from a penal offense (Art. Voluntary143 d. 1283 .144 e. but there shall be an indemnity for expenses of exchange or transportation to the place of payment.(2) Both debts consist in a sum of money. the former may set it off by proving his right to said damages and the amount thereof. (4) They be liquidated and demandable.

without prejudice to the provisions of paragraph 2 of Article 301.146 c. b. par.147 F. the new debtor's insolvency or non-fulfillment of the obligations shall not give rise to any liability on the part of the original debtor. shall not revive the action of the latter against the original obligor. may be made even without the knowledge or against the will of the latter.149 Novation which consists in substituting a new debtor in the place of the original one. 1287. and the right to demand the same may be transmitted by onerous or gratuitous title (Art. 1294 152 Art.148 In order that an obligation may be extinguished by another which substitute the same. Payment by the new debtor gives him the rights mentioned in articles 1236 and 1237. If one of the debts consists in civil liability arising from a penal offense. 1291 149 Art. when the delegated his debt. or known to the debtor. but not without the consent of the creditor. Novation Obligations may be modified by: (1) Changing their object or principal conditions. except when said insolvency was already existing and of public knowledge. it is imperative that it be so declared in unequivocal terms.. (2) Substituting the person of the debtor. 1288 148 Art. 2) 147 Art. 1287 Support in arrears may be compensated and renounced. When one of the debts arises from a depositum or from the obligations of a depositary or of a bailee in commodatum. who has been proposed by the original debtor and accepted by the creditor.151 The insolvency of the new debtor. Arts. or that the old and the new obligations be on every point incompatible with each other. (3) Subrogating a third person in the rights of the creditor. 1292 150 Art. Against a creditor who has a claim for support due by gratuitous title. 1288 146 Art.g. 1293 151 Art.152 145 e.2.150 If the substitution is without the knowledge or against the will of the debtor. 301. 1295 . Obligations not compensable a.

1303 .157 Conventional subrogation of a third person requires the consent of the original parties and of the third person. 1302 160 Art. not interested in the obligation. the new obligation shall be under the same condition. 1300 158 Art. The former is not presumed.160 A creditor. subject to stipulation in a conventional subrogation. 1298 156 Art. unless the parties intended that the former relation should be extinguished in any event. except when annulment may be claimed only by the debtor or when ratification validates acts which are voidable. even without the knowledge of the debtor. the latter must be clearly established in order that it may take effect.156 Subrogation of a third person in the rights of the creditor is either legal or conventional. 1296 154 Art.161 153 Art.153 If the new obligation is void. accessory obligations may subsist only insofar as they may benefit third persons who did not give their consent.158 It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred. may exercise his right for the remainder. either against the debtor or against third person. be they guarantors or possessors of mortgages. without prejudice to the effects of confusion as to the latter's share. 1301 159 Art.When the principal obligation is extinguished in consequence of a novation. unless it is otherwise stipulated.155 If the original obligation was subject to a suspensive or resolutory condition. 1297 155 Art. even without the debtor's knowledge. (2) When a third person. pays with the express or tacit approval of the debtor. (3) When. to whom partial payment has been made.154 The novation is void if the original obligation was void. 1299 157 Art.159 Subrogation transfers to the persons subrogated the credit with all the rights thereto appertaining. and he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit. a person interested in the fulfillment of the obligation pays. except in cases expressly mentioned in this Code. the original one shall subsist.

00). (2) Object certain which is the subject matter of the contract. representing the right donated. usage and law.164 161 Art. specifying therein the An oral donation requires the property donated and the value simultaneous delivery of the of the charges which the donee thing or of the document must satisfy. Essential Requisites (1) Consent of the contracting parties. pledge and commodatum . the donation and the acceptance shall be made in writing. 1.162 II.CONTRACTS I. the perfection. according to their nature may be in keeping with good faith. only to the fulfillment such prescribed form of what has been being an essential expressly stipulated element but also to all consequences which. Otherwise. Donations Movable May be made orally or in writing Immovable It must be made in a public document. Kinds of Contracts Consensual Real Formal or Solemn Perfected by mere Requires delivery of Requires compliance consent and from object for with certain 163 that moment. 1304 162 Art. If the value of the personal property donated exceeds five thousand pesos (P5. (3) Cause of the obligation which is established.000. 1381 163 like deposit. formalities parties are bound not prescribed by law. the donation shall be void.

167 There must be: 1. and 3.171 6. the contract of antichresis is void.The acceptance may be made in the same deed of donation or in a separate public document. but it shall not take effect unless it is done during the lifetime of the donor. 2134 170 Art.168 3. Antichresis The amount of the principal and of the interest shall be specified in writing. 1874 171 Art. an inventory of said property 2. signed by the parties. otherwise.165 2. Stipulation limiting common carrier’s duty of extraordinary diligence to ordinary diligence 164 Art. and this step shall be noted in both instruments. Agency to sell real property or an interest therein The authority of the agent must be in writing.170 5. otherwise. Partnership166 where real property contributed A public instrument is necessary. 1956 . the sale is void. the donor shall be notified thereof in an authentic form. 1773. 1771 168 Art. 749 166 may be constituted in any form 167 Art. If the acceptance is made in a separate instrument. the contract of partnership is void 169 Art.169 4. Stipulation to charge interest No interest shall be due unless it has been expressly stipulated in writing. attached to the public instrument. 748 165 Art. otherwise.

If the movable. Formality Contracts shall be obligatory. destruction. The permit shall only be valid in such province. or deterioration of the goods to a degree less than extraordinary diligence shall be valid. This right may be exercised simultaneously with the action upon the contract. 1356 177 Art. partnership. just and not contrary to public policy.175 III.177 The following must appear in a public document: 172 Art. 1147 175 Sec. corporation or entity shall engage in the business of buy and sell of large cattle without first securing a permit for the said purpose from the Provincial Commander of the province where it shall conduct such business and the city/municipal treasurer of the place of residence of such person. signed by the shipper or owner. the contract is a pledge and not a chattel mortgage. P. 1744 173 Art. that requirement is absolute and indispensable. partnership. However. in whatever form they may have been entered into. 533 176 Art. In such cases.173 8. when the law requires that a contract be in some form in order that it may be valid or enforceable. once the contract has been perfected. 1357 . provided it be: (1) In writing. the contracting parties may compel each other to observe that form. 2140 174 Act No.A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss. Chattel mortgage Personal property is recorded in the Chattel Mortgage Register as security for the performance of an obligation. provided all the essential requisites for their validity are present. 5. the right of the parties stated in the following article cannot be exercised. is delivered to the creditor or a third person.176 If the law requires a document or other special form. No person. (2) Supported by a valuable consideration other than the service rendered by the common carrier.172 7. association. Sale of large cattle Governed by special law174 which requires that the same be in a public instrument. corporation or entity. association.D. and (3) Reasonable. instead of being recorded. or that a contract be proved in a certain way.

(3) The power to administer property. (2) Those agreed upon in representation of absentees. (5) All other contracts specially declared by law to be subject to rescission. 1403.00) must appear in writing. 1191 Rescission in Article 1191 Rescission Proper in Article 1381 It is a principal action retaliatory It is a subsidiary remedy. 178 infra 179 Art. No. sales of real property or of an interest therein are governed by Articles 1403. Rescissible Contracts180 (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof. 2 and 1405. or should prejudice a third person.(1) Acts and contracts which have for their object the creation. But sales of goods. transmission. 2. (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. All other contracts where the amount involved exceeds five hundred pesos (P500. or any other power which has for its object an act appearing or which should appear in a public document. 1358 180 Contracts validly agreed upon but. (4) The cession of actions or rights proceeding from an act appearing in a public document.179 IV. Difference with Rescission (resolution) under Art. chattels or things in action are governed by articles. No. Defective Contracts A. and 1405.178 (2) The cession. even a private one. modification or extinguishment of real rights over immovable property. in character. by reason of lesion or economic prejudice may be rescinded in cases established by law. 1381 .181 (6) Payments made in a state of insolvency on account of obligations not yet enforceable 1. if the latter suffer the lesion stated in the preceding number. 181 Art. repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains.

B. intimidation. and is understood to be without prejudice to special disqualifications established in the laws. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. 1330 . demand the rescission of the contract.185 A contract where consent is given through mistake. such reason must have ceased and c. intimidation. there must be knowledge of the reason which renders the contract voidable b. 1328 184 See Reference 185 Art.There are 5 grounds to rescind.187 182 Art. party is not important. undue influence. although the element of consent is vitiated either by lack of capacity of one of the contracting parties or by VIMFU. A simple mistake of account shall give rise to its correction. By loss of the thing which is the object of the contract through fraud or fault of the person who is entitled to annul the contract. the injured party must have executed an act which expressly or impliedly conveys an intention to waive his right. Voidable Contracts182 Contracts entered into during a lucid interval are valid. performance of one’s obligation/s Non-performance by the other or what is incumbent upon him. violence. or to those conditions which have principally moved one or both parties to enter into the contract. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract. it should refer to the substance of the thing which is the object of the contract.The only ground is non. violence. What contracts are voidable: 1. 1329 186 Art. Only a party to the contract may Even a 3rd person who is demand fulfillment or seek the prejudiced by the contract may rescission of the contract. Requisites: a.186 In order that mistake may invalidate consent. or fraud is voidable. Those where the consent is vitiated by mistake. undue influence or fraud 3. 1409 Those in which all of the essential elements for validity are present.183 The incapacity declared in Article 1327184 is subject to the modifications determined by law. 183 Art. It applies obligation only to reciprocal It applies to both unilateral and reciprocal obligations. Those where one of the parties is incapable of giving consent to a contract 2.

1335 192 Art.189 Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated. the person enforcing the contract must show that the terms thereof have been fully explained to the former.194 Failure to disclose facts. the other is induced to enter into a contract which. There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property. The following circumstances shall be considered: the confidential.195 187 Art.192 There is undue influence when a person takes improper advantage of his power over the will of another. the age. contingency or risk affecting the object of the contract. without them. through insidious words or machinations of one of the contracting parties. he would not have agreed to. or if the contract is in a language not understood by him. depriving the latter of a reasonable freedom of choice. 1338 . 1334 191 Art. 1336 193 Art. 1337 194 Art.193 There is fraud when. constitutes fraud. 1332 189 Art. to give his consent. descendants or ascendants. or the fact that the person alleged to have been unduly influenced was suffering from mental weakness. does not vitiate consent. and mistake or fraud is alleged. To determine the degree of intimidation. if the claim is just or legal. or was ignorant or in financial distress. although it may have been employed by a third person who did not take part in the contract. when there is a duty to reveal them.When one of the parties is unable to read. A threat to enforce one's claim through competent authority. or upon the person or property of his spouse.190 There is violence when in order to wrest consent. 1331 188 Art. family. sex and condition of the person shall be borne in mind. may vitiate consent. spiritual and other relations between the parties. as when the parties are bound by confidential relations.188 There is no mistake if the party alleging it knew the doubt. 1333 190 Art.191 Violence or intimidation shall annul the obligation. serious or irresistible force is employed.

196 A mere expression of an opinion does not signify fraud. from the time of the discovery of the same. 198 Misrepresentation made in good faith is not fraudulent but may constitute error. undue influence or fraud. 1390 202 Art. unless made by an expert and the other party has relied on the former's special knowledge. violence or undue influence. And when the action refers to contracts entered into by minors or other incapacitated persons. 1341 198 Art. violence. (2) Those where the consent is vitiated by mistake.202 Ratification extinguishes the action to annul a voidable contract. 1340 197 Art. from the time the defect of the consent ceases. intimidation.200 The following contracts are voidable or annullable. Incidental fraud only obliges the person employing it to pay damages. These contracts are binding. This period shall begin: In cases of intimidation. unless they are annulled by a proper action in court. In case of mistake or fraud. it should be serious and should not have been employed by both contracting parties. 1343 200 Art. unless such misrepresentation has created substantial mistake and the same is mutual.The usual exaggerations in trade. 1344 201 Art. 1342 199 Art. are not in themselves fraudulent. when the other party had an opportunity to know the facts.199 In order that fraud may make a contract voidable.201 The action for annulment shall be brought within four (4) years. 1339 196 Art.203 195 Art. They are susceptible of ratification. 1391 .197 Misrepresentation by a third person does not vitiate consent. from the time the guardianship ceases. even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract.

207 The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily.206 Ratification cleanses the contract from all its defects from the moment it was constituted. except in cases provided by law.205 Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment. with interest from the same date. with knowledge of the reason which renders the contract voidable and such reason having ceased. 1397 209 Art.210 Whenever the person obliged by the decree of annulment to return the thing cannot do so because it has been lost through his fault. the value thereof shall be the basis for damages. or employed fraud. It is understood that there is a tacit ratification if. the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him. or undue influence.Ratification may be effected expressly or tacitly.208 An obligation having been annulled. However. with their fruits. In obligations to render service. 1392 204 Art. 1393 205 Art.204 Ratification may be effected by the guardian of the incapacitated person. 1395 207 Art. 1399 211 Art. 203 Art.209 When the defect of the contract consists in the incapacity of one of the parties.211 The action for annulment of contracts shall be extinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings. the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. and the price with its interest. or caused mistake base their action upon these flaws of the contract. 1394 206 Art. 1400 . persons who are capable cannot allege the incapacity of those with whom they contracted. the contracting parties shall restore to each other the things which have been the subject matter of the contract. he shall return the fruits received and the value of the thing at the time of the loss. 1396 208 Art. nor can those who exerted intimidation. 1398 210 Art. violence.

Agreements not to be performed within one year from the making thereof. and 7. therefore. memorandum or writing. Contracts of lease for a period longer than one year. unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation. or some note or memorandum thereof. unless said loss took place through the fraud or fault of the plaintiff. evidence. default or miscarriage of another. Failure to object to the presentation of oral evidence to prove such contracts 2. etc. The contracts/agreements under the Statute of Frauds require that the same be evidenced by some note. Acceptance of benefits under these contracts . not to those that are partially or completely fulfilled. or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof. It refers rather to a collateral promise.00. the other cannot be compelled to comply with what is incumbent upon him. 2. chattels or things in action. at a price not less than P500. or miscarriage of another. In the following cases an agreement hereafter made shall be unenforceable by action. Agreement for the sale of goods. subscribed by the party charged or by his agent. those which do not comply with the Statute of Frauds Agreements within the scope of the Statute of Frauds (exclusive list): 1. other than a mutual promise to marry. or some of them. The statute of frauds applies only to executory contracts. 6. Agreements for the sale of real property or interest therein. Unenforceable Contracts214 The following contracts are unenforceable. be in writing. of the agreement cannot be received without the writing. (d) An agreement for the sale of goods. otherwise.00). of such things in action or pay at the time some part of the purchase money. 2. but when a sale is made by auction and entry is made by the auctioneer in his sales 212 Art. 5. 1401 213 Art. unless the buyer accept and receive part of such goods and chattels. 4. unless the same. and 3. (c) An agreement made in consideration of marriage. 3.212 As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return. (b) A special promise to answer for the debt.213 C. those where both parties are incapable of giving consent. . or who has acted beyond his powers. Representation as to the credit of a third person. Ratification of contracts in violation of the Statute of Frauds 1. or by his agent. those entered into in the name of another by one without or acting in excess of authority. or the evidences. (2) Those that do not comply with the Statute of Frauds. 1402 214 Those which cannot be enforced by proper action in court unless they are ratified What contracts are unenforceable 1. default.If the right of action is based upon the incapacity of any one of the contracting parties. the said contracts shall be unenforceable. Special promise to answer for the debt. the loss of the thing shall not be an obstacle to the success of the action. Agreement in consideration of marriage other than a mutual promise to marry.this does not refer to the original or independent promise of the debtor to his own creditor. at a price not less than five hundred pesos (P500. and subscribed by the party charged.

215 Unauthorized contracts are governed by Article 1317 216 and the principles of agency. morals. or unless he has by law a right to represent him. good customs. referred to in No. before it is revoked by the other contracting party. the parties may avail themselves of the right under Article 1357. 1357) 220 Art. public order or public policy. it is a sufficient memorandum. 2 of Article 1403. as the case may be.217 Contracts infringing the Statute of Frauds.218 When a contract is enforceable under the Statute of Frauds. as the case may be. or unless he has by law a right to represent him.219 In a contract where both parties are incapable of giving consent. or by the acceptance of benefit under them. A contract entered into in the name of another by one who has no authority or legal representation. shall be unenforceable. are ratified by the failure to object to the presentation of oral evidence to prove the same. 1405 219 Art. Void Contracts221 (1) Those whose cause. 1404 218 Art. of the amount and kind of property sold. of both contracting parties. 1406 If the law requires a document or other special form. terms of sale. or guardian.220 D. at the time of the sale. This right may be exercised simultaneously with the action upon the contract (Art. (3) Those where both parties are incapable of giving consent to a contract. A contract entered into in the name of another by one who has no authority or legal representation. or for the sale of real property or of an interest therein. before it is revoked by the other contracting party 217 Art. shall be unenforceable. unless it is ratified. 215 Art. or who has acted beyond his powers. object or purpose is contrary to law. 1403 216 No one may contract in the name of another without being authorized by the latter. expressly or impliedly. the contracting parties may compel each other to observe that form. unless it is ratified. by the person on whose behalf it has been executed. once the contract has been perfected. or who has acted beyond his powers. by the person on whose behalf it has been executed. No one may contract in the name of another without being authorized by the latter. and a public document is necessary for its registration in the Registry of Deeds. of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated. express or implied. price. expressly or impliedly. names of the purchasers and person on whose account the sale is made. (e) An agreement for the leasing for a longer period than one (1) year.book. ratification by the parent. If ratification is made by the parents or guardians. (f) A representation as to the credit of a third person. 1407 . the contract shall be validated from the inception.

(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained.(2) Those which are absolutely simulated or fictitious. (4) Those whose object is outside the commerce of men. or contract itself is prohibited or declared void by law. public order or public policy binds the parties to their real agreement. good customs. when it does not prejudice a third person and is not intended for any purpose contrary to law. 1409 223 Art. good customs.222 An absolutely simulated or fictitious contract is void. object or purpose is contrary to law. 1346 . (7) Those expressly prohibited or declared void by law. A relative simulation. 222 Art. morals. (3) Those whose cause or object did not exist at the time of the transaction. (5) Those which contemplate an impossible service. morals. Neither can the right to set up the defense of illegality be waived.223 Comparative table of defective contracts 221 Those where all of the requisites of a contract are present but the cause. public order or public policy. These contracts cannot be ratified.

Cannot be Can be ratified ratified Need not ratified 6. authority. if there was total or partial performance of the unenforceable contract under No.Void Voidable Rescissible Unenforceabl e 1. Assailed Assailed only by not only by a a contracting contracting party party but even by a third person whose interest is directly affected Assailed not only by a contracting party but even by a third person who is prejudiced or damaged by the contract 7. 1 or 3 of Article 1403 may prescribe 4. Defect is Defect is Defect is caused by caused by vice caused by lack of of consent injury/ damage essential either to one of elements or the parties of to illegality a 3rd person Defect is caused by lack of form. as a general rule produce any legal effect Valid and enforceable until they are annulled by a competent court Cannot be enforced by a proper action in court 3. Not cured Cured by Cured by Not cured by by prescription prescription prescription prescription 5. Action for the declaration or nullity or inexistence or defense of nullity or inexistence does not prescribe Action for Action annulment or rescission defense of prescribe annulability may prescribe Valid and enforceable until they are rescinded by a competent court for Correspondin may g action for recovery. or capacity of both parties not cured by prescription 2. Do not. Assailed Assailed directly or directly collaterally collaterally Assailed or directly only be Can ratified be Assailed only by a contracting party Assailed directly or collaterally .

or by stipulation or by provision of law. The contracting parties must have clearly and deliberately conferred a favor upon a third person. 1311 . Effect of Contracts Contracts take effect only between the parties. or dispose of them. A mere incidental benefit or interest of a person is not sufficient.224 3. 2130 225 Art. If a contract should contain some stipulation in favor of a third person. their assigns and heirs.225 V. Pactum commissorium It can be found in Article 2088 of the civil code which provides: The creditor cannot appropriate the things given by way of pledge or mortgage. he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. 1799 226 Art.226 224 Art. This stipulation is void. Simply put. 2. Pactum leonina A stipulation which excludes one or more partners from any share in the profits or losses. Any stipulation to the contrary is null and void.1. Pactum de non alienando A stipulation forbidding the owner from alienating the immovable mortgaged. The heir is not liable beyond the value of the property he received from the decedent. it is a stipulation in a contract of mortgage of pledge which provides that the mortgagee will automatically own the property mortgaged in case the mortgagor fails to pay the loan. except in case where the rights and obligations arising from the contract are not transmissible by their nature.

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