You are on page 1of 35

OBLIGATIONS AND CONTRACTS

TITLE V
PRESCRIPTION
CHAPTER 1
GENERAL PROVISIONS
Art. 1106. By prescription, one acquires
• ownership and
• other real rights
o through the lapse of time
o in the manner and under the conditions laid down by law.
In the same way, rights and actions
• are lost by prescription.
Art. 1107. Persons who are capable of acquiring property or rights by the other
legal modes
• may acquire the same by means of prescription.
Minors and other incapacitated persons
• may acquire property or rights by prescription, either
o personally or
o through their parents, guardians or legal representatives.
Art. 1108. Prescription, both acquisitive and extinctive, runs against:
(1) Minors and other incapacitated persons who have
• parents,
• guardians or
• other legal representatives;
(2) Absentees who have administrators, either
• appointed by them before their disappearance, or
• appointed by the courts;
(3) Persons living abroad, who have
• managers or
• administrators;
(4) Juridical persons, except
• the State and
• its subdivisions.
Persons who are disqualified from administering their property
• have a right to claim damages from their legal representatives
o whose negligence has been the cause of prescription.
REGINALD M. ARCEO

ATENEO LAW – C 2015

Art. 1109. Prescription does not run between husband and wife,
• even though there be a separation of property
o agreed upon in the marriage settlements or
o by judicial decree.
Neither does prescription run
• between parents and children,
o during the minority or insanity of the latter, and
• between guardian and ward
o during the continuance of the guardianship.
Art. 1110. Prescription, acquisitive and extinctive, runs in favor of, or against a
married woman.
Art. 1111. Prescription obtained by a co-proprietor or a co-owner
• shall benefit the others.
Art. 1112. Persons with capacity to alienate property
• may renounce prescription already obtained,
• but not the right to prescribe in the future.
Prescription is deemed to have been tacitly renounced
• when the renunciation results from acts which imply the abandonment
of the right acquired.
Art. 1113. All things which are within the commerce of men
• are susceptible of prescription,
unless
• otherwise provided.
Property of
• the State or
• any of its subdivisions not patrimonial in character
o shall not be the object of prescription.
Art. 1114. Creditors and all other persons interested in making the prescription
effective
• may avail themselves thereof
o notwithstanding the express or tacit renunciation by the debtor or
proprietor.
Art. 1115. The provisions of the present Title
• are understood to be without prejudice to what
o in this Code or
o in special laws
§ is established with respect to specific cases of prescription.
Art. 1116. Prescription already running before the effectivity of this Code
ART. 1106 - 1

OBLIGATIONS AND CONTRACTS
• shall be governed by laws previously in force;
but if since the time this Code took effect the entire period herein required for
prescription should elapse,
• the present Code shall be applicable,
o even though by the former laws a longer period might be required.

Art. 1124. Judicial summons
• shall be deemed not to have been issued and
• shall not give rise to interruption:

CHAPTER 2
PRESCRIPTION OF OWNERSHIP AND OTHER REAL RIGHTS

(2) If the plaintiff
• should desist from the complaint or
• should allow the proceedings to lapse;

Art. 1117. Acquisitive prescription of
• dominion and
• other real rights may be
o ordinary or
o extraordinary.
Ordinary acquisitive prescription requires possession of things
• in good faith and
• with just title
o for the time fixed by law.
Art. 1118. Possession has to be
• in the concept of an owner,
• public,
• peaceful and
• uninterrupted.
Art. 1119. Acts of possessory character executed
• in virtue of license or
• by mere tolerance of the owner
o shall not be available for the purposes of possession.
Art. 1120. Possession is interrupted for the purposes of prescription,
• naturally or
• civilly.
Art. 1121. Possession is naturally interrupted
• when through any cause it should cease for more than one year.
The old possession is not revived if
• a new possession should be exercised by the same adverse claimant.
Art. 1122. If the natural interruption is for only one year or less,
• the time elapsed shall be counted in favor of the prescription.
Art. 1123. Civil interruption
• is produced by judicial summons to the possessor.
REGINALD M. ARCEO

ATENEO LAW – C 2015

(1) If it should be void for lack of legal solemnities;

(3) If the possessor should be absolved from the complaint.
In all these cases, the period of the interruption
• shall be counted for the prescription.
Art. 1125. Any express or tacit recognition which the possessor may make of
the owner’s right
• also interrupts possession.
Art. 1126. Against a title recorded in the Registry of Property,
• ordinary prescription of ownership or real rights shall not take place to
the prejudice of a third person,
except
• in virtue of another title also recorded; and
• the time shall begin to run from the recording of the latter.
As to lands registered under the Land Registration Act,
• the provisions of that special law shall govern.
Art. 1127. The good faith of the possessor
• consists in the reasonable belief
• that the person from whom he received the thing
o was the owner thereof, and
o could transmit his ownership.
Art. 1128. The conditions of good faith required for possession in Articles
• 526,
• 527,
• 528, and
• 529 of this Code
o are likewise necessary for the determination of good faith in the
prescription of
§ ownership and
§ other real rights.
Art. 1129. For the purposes of prescription, there is just title when
ART. 1117 - 2

OBLIGATIONS AND CONTRACTS

the adverse claimant came into possession of the property through
one of the modes recognized by law for the acquisition of ownership or
other real rights,
but the grantor was not the owner or could not transmit any right.

Art. 1130. The title for prescription must be
• true and
• valid.
Art. 1131. For the purposes of prescription, just title
• must be proved;
• it is never presumed.
Art. 1132. The ownership of movables prescribes through
• uninterrupted possession
• for four years
• in good faith.
The ownership of personal property also prescribes through
• uninterrupted possession
• for eight years,
• without need of any other condition.
With regard to the right of the owner to recover
• personal property lost or of which he has been illegally deprived,
• as well as with respect to movables acquired
o in a public sale, fair, or market, or
o from a merchant’s store
§ the provisions of Articles
559 and
1505 of this Code
• shall be observed.
Art. 1133. Movables possessed through a crime
• can never be acquired through prescription by the offender.
Art. 1134. Ownership and other real rights over immovable property
• are acquired by
o ordinary prescription
o through possession of ten years.
Art. 1135. In case the adverse claimant possesses
• by mistake
• an area greater, or less, than that expressed in his title,
o prescription shall be based on the possession.
Art. 1136. Possession
REGINALD M. ARCEO

ATENEO LAW – C 2015


in wartime,
when the civil courts are not open,
o shall not be counted in favor of the adverse claimant.

Art. 1137. Ownership and other real rights over immovables
• also prescribe through
o uninterrupted adverse possession thereof
o for thirty years,
o without need
§ of title or
§ of good faith.
Art. 1138. In the computation of time necessary for prescription,
• the following rules shall be observed:
(1) The present possessor may complete the period necessary for
prescription
• by tacking his possession to that of his grantor or predecessor in
interest;
(2) It is presumed that the present possessor who was also the possessor
at a previous time,
• has continued to be in possession during the intervening time,
unless
• there is proof to the contrary;
(3) The first day shall be excluded and the last day included.
CHAPTER 3
PRESCRIPTION OF ACTIONS
Art. 1139. Actions prescribe
• by the mere lapse of time fixed by law.
Art. 1140. Actions to recover movables shall prescribe
• eight years from the time the possession thereof is lost,
unless
• the possessor has acquired the ownership by prescription for a less
period,
o according of Article 1132, and
o without prejudice to the provisions of Articles
§ 559,
§ 1505, and
§ 1133.
Art. 1141. Real action over immovables prescribe
• after thirty years.
ART. 1130 - 3

1145. The period for prescription of action to demand accounting • runs from the day the persons who should render the same cease in their functions. The following actions must be commenced • within six years: (1) Upon an oral contract. Art. 1146. The following actions must be filed • within one year: • • 1140 to 1142. • when there is a written extrajudicial demand by the creditors. Art. o shall be counted from the day they may be brought. Art. The prescription of actions is interrupted • when they are filed before the court. 1147. (2) For defamation. A mortgage action prescribes • after ten years. 1152. (1) For forcible entry and detainer. 1150. and 1144 to 1147 o are without prejudice to those specified § in other parts of this Code. 1144. Art. The following actions must be brought • within ten years from the time the right of action accrues: (1) Upon a written contract. The following actions must be instituted • within four years: (1) Upon an injury to the rights of the plaintiff. (3) Upon a judgment. 1142. Art. The period during which the obligee was prevented by a fortuitous event from enforcing his right • is not reckoned against him. 1142 . The time for the prescription of actions which have for their object the enforcement of obligations to pay principal with interest or annuity • runs from the last payment of the annuity or of the interest.4 . The period for prescription of actions to demand the fulfillment of obligations declared by a judgment • commences from the time the judgment became final. (2) Upon a quasi-delict. Art. Art. • when there is no special provision which ordains otherwise. (2) Upon an obligation created by law. 1151. 1155. and • when there is any written acknowledgment of the debt by the debtor. 1149. § in the Code of Commerce. The limitations of action mentioned in Articles REGINALD M. Art. 1154. (2) Upon a quasi-contract. among others specified elsewhere in this Code. (2) To bring an action to abate a • public or • private nuisance. The following rights. 1143. The time for prescription for all kinds of actions. 1153. 1148. Art. Art. Art. Art. ARCEO ATENEO LAW – C 2015 ART. regulated in Article 649. All other actions whose periods are not fixed • in this Code or • in other laws o must be brought § within five years from the time the right of action accrues. Art.OBLIGATIONS AND CONTRACTS This provision is without prejudice • to what is established for the acquisition of ownership and other real rights by prescription. • are not extinguished by prescription: (1) To demand a right of way. Art. and § in special laws. The period for the action arising from the result of the accounting • runs from the date when said result was recognized by agreement of the interested parties.

Title XVII of this Book. by the provisions of this Book. 1162. If the thing is indeterminate or generic. 1164. Preliminary Title. Obligations arise from: (1) Law.OBLIGATIONS AND CONTRACTS BOOK IV OBLIGATIONS AND CONTRACTS TITLE I OBLIGATIONS CHAPTER 1 GENERAL PROVISIONS Art. Obligations derived from quasi-delicts shall be governed • by the provisions of Chapter 2. Art. Only those expressly determined • in this Code or • in special laws o are demandable. 1156 . and o of the pertinent provisions of Chapter 2. ART. on Human Relations. § even though they may not have been mentioned. 1166. (2) Contracts. he shall acquire no real right over it • until the same has been delivered to him. (3) Quasi-contracts. If the obligor • delays. When what is to be delivered is a determinate thing. unless • the law or • the stipulation of the parties o requires another standard of care. ARCEO ATENEO LAW – C 2015 • subject to the provisions of o Article 2177. regulating damages. and (5) Quasi-delicts. 1161. or • has promised to deliver the same thing to two or more persons who do not have the same interest. • he may ask that the obligation be complied with at the expense of the debtor. the creditor. Art. Every person obliged to give something • is also obliged to take care of it with the proper diligence of a good father of a family. The obligation to give a determinate thing • includes that of delivering all its o accessions and o accessories. The creditor has a right to the fruits of the thing • from the time the obligation to deliver it arises. Art. o he shall be responsible for fortuitous event § until he has effected the delivery. • to do or • not to do. 1158. Obligations derived from quasi-contracts • shall be subject to the provisions of Chapter 1. Art. Art. 1159. Civil obligations arising from criminal offenses • shall be governed by the penal laws. Art. However. CHAPTER 2 NATURE AND EFFECT OF OBLIGATIONS Art.5 . Art. Title XVII. and o of Title XVIII of this Book. 1165. of this Book. Obligations derived from law • are not presumed. REGINALD M. 1157. An obligation is a juridical necessity • to give. • may compel the debtor to make the delivery. and § as to what has not been foreseen. and o shall be regulated § by the precepts of the law which establishes them. Art. 1163. • in addition to the right granted him by Article 1170. 1156. (4) Acts or omissions punished by law. and • by special laws. Obligations arising from contracts • have the force of law between the contracting parties and • should be complied with in good faith. 1160. Art.

the demand by the creditor • shall not be necessary in order that delay may exist: (1) When • the obligation or • the law o expressly so declares. From the moment one of the parties fulfills his obligation. 1172. However. or (3) When demand would be useless. Art.6 . Art. o shall give rise to the presumption that said interest has been paid. • delay by the other begins. or (2) When from • the nature and • the circumstances of the obligation o it appears that the designation of the time when the thing is to be delivered or the service is to be rendered § was a controlling motive for the establishment of the contract. In reciprocal obligations. 1168. 1167. When negligence shows bad faith. • without reservation with respect to the interest. 1173. Usurious transactions • shall be governed by special laws. 1170. the provisions of Articles • 1171 and • 2201. 1167 . o shall apply. Furthermore. Those obliged to deliver or to do something • incur in delay o from the time the obligee § judicially or § extra-judicially demands from them the fulfillment of their obligation. 1176. Art. and • the obligor does what has been forbidden him. • the same shall be executed at his cost. o according to the circumstances. Art. negligence. Except • in cases expressly specified by the law. 1175. Art. When • the obligation consists in not doing. • • • • fraud. it may be decreed • that what has been poorly done be undone. § of the time and § of the place. o no person shall be responsible for those events § which could not be foreseen. Art. were inevitable. o it shall also be undone at his expense. or delay and those who in any manner contravene the tenor thereof. Responsibility arising from negligence in the performance of every kind of obligation • is also demandable.OBLIGATIONS AND CONTRACTS Art. 1174. Art. 1169. 1171. Responsibility arising from fraud • is demandable in all obligations. Art. paragraph 2. The fault or negligence of the obligor • consists in the omission of that diligence which o is required by the nature of the obligation and o corresponds with the circumstances § of the person. or • when it is otherwise declared by stipulation or • when the nature of the obligation requires the assumption of risk. • as when the obligor has rendered it beyond his power to perform. Any waiver of an action for future fraud • is void. but such liability • may be regulated by the courts. ARCEO ATENEO LAW – C 2015 ART. neither party incurs in delay if the other • does not comply or • is not ready to comply o in a proper manner with what is incumbent upon him. or § which though foreseen. Those who in the performance of their obligation are guilty of REGINALD M. The receipt of the principal • by the creditor. Art. o are liable for damages. If a person obliged to do something fails to do it. This same rule shall be observed • if he does it in contravention of the tenor of the obligation.

or o if it has become evident that the event cannot occur. 1185. 1182. 1187. unless • from the nature and circumstances of the obligation o it should be inferred that the intention of the person constituting the same was different. The condition that some event will not happen at a determinate time • shall render the obligation effective o from the moment the time indicated has elapsed. The condition not to do an impossible thing • shall be considered as not having been agreed upon. • may exercise all the rights and bring all the actions of the latter for the same purpose. when the obligation imposes reciprocal prestations upon the parties. after having pursued the property in possession of the debtor to satisfy their claims. Art. Art. If no time has been fixed. o bearing in mind the nature of the obligation. 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. Art. • as well as the extinguishment or loss of those already acquired. Art. If it depends REGINALD M. 1183. ARCEO ATENEO LAW – C 2015 • • upon chance or upon the will of a third person. Art. Subject to the laws. In conditional obligations. all rights acquired in virtue of an obligation • are transmissible. ART. o save those which are inherent in his person. When the fulfillment of the condition depends upon the sole will of the debtor. If the obligation is divisible. • the debtor shall appropriate the fruits and interests received. • the conditional obligation shall be void. The effects of a conditional obligation to give. • the obligation shall be deemed to be one with a period. 1184. once the condition has been fulfilled. 1181. 1179. Art. • the acquisition of rights. • those contrary to good customs or public policy and • those prohibited by law o shall annul the obligation which depends upon them. the condition shall be deemed fulfilled • at such time as may have probably been contemplated. 1177. Art. Nevertheless. o without prejudice to the effects of the happening of the event. Every obligation whose performance does not depend • upon a future or uncertain event. The creditors. • Impossible conditions. o the obligation shall take effect in conformity with the provisions of this Code. 1186. o subject to the provisions of Article 1197. Art. • that part thereof which is not affected by the impossible or unlawful condition shall be valid. 1177 . o if there has been no stipulation to the contrary. or • upon a past event unknown to the parties.OBLIGATIONS AND CONTRACTS The receipt of a later installment of a debt without reservation as to prior installment. o is demandable at once. If the obligation is unilateral. • shall retroact to the day of the constitution of the obligation.7 . Art. • shall likewise raise the presumption that such installments have been paid. o shall depend upon the happening of the event which constitutes the condition. The condition that some event happen at a determinate time • shall extinguish the obligation o as soon as the time expires or o if it has become indubitable that the event will not take place. 1180. The condition shall be deemed fulfilled • when the obligor voluntarily prevents its fulfillment. 1178. CHAPTER 3 DIFFERENT KINDS OF OBLIGATIONS SECTION 1 Pure and Conditional Obligations Art. Art. Every obligation which contains a resolutory condition • shall also be demandable. • they may also impugn the acts which the debtor may have done to defraud them.

ARCEO ATENEO LAW – C 2015 o the improvement shall inure to the benefit of the creditor. • before the fulfillment of the condition. 1190. 1188. Art. even after he has chosen fulfillment. unless • there be just cause authorizing the fixing of a period. Art. The injured party may choose between • the fulfillment and • the rescission of the obligation. The court • shall decree the rescission claimed. (5) If the thing is improved • by its nature. • he shall have no other right than that granted to the usufructuary. o with the payment of damages in either case. (6) If it is improved at the expense of the debtor. • the creditor may choose between o the rescission of the obligation and o its fulfillment. • the following rules shall be observed in case of the o improvement.OBLIGATIONS AND CONTRACTS In obligations • to do and • not to do. When the conditions have for their purpose the extinguishment of an obligation to give. shall return to each other what they have received. with respect to the debtor. The power to rescind obligations • is implied in reciprocal ones. Art. or • goes out of commerce. 1189. • deterioration or • improvement of the thing. • the obligation shall be extinguished. § with indemnity for damages in either case. the retroactive effect of the condition that has been complied with. • if the latter should become impossible. o the courts shall determine. o the provisions of the second paragraph of Article 1187 shall be observed as regards the effect of the extinguishment of the obligation. As for obligations • to do and • not to do. He may also seek rescission. or • disappears in such a way that o its existence is unknown or o it cannot be recovered. • the parties. (2) If the thing is lost through the fault of the debtor. in each case. In case of the • loss. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give. o bring the appropriate actions for the preservation of his right. • he shall be obliged to pay damages. Art.8 . it is understood that the thing is lost when it • perishes. upon the fulfillment of said conditions. 1191. o in case one of the obligors should not comply with what is incumbent upon him. The debtor may recover • what during the same time he has paid o by mistake o in case of a suspensive condition. REGINALD M. (3) When the thing deteriorates without the fault of the debtor. • the impairment is to be borne by the creditor. The creditor may. or • by time. This is understood to be without prejudice • to the rights of third persons who have acquired the thing. o loss or o deterioration of the thing § during the pendency of the condition: (1) If the thing is lost without the fault of the debtor. 1188 . o the provisions which. are laid down in the preceding article shall be applied to the party who is bound to return. (4) If it deteriorates through the fault of the debtor. in accordance with Articles o 1385 and o 1388 and ART.

If it cannot be determined which of the parties first violated the contract. Once fixed by the courts. 1192. Art. SECTION 2 Obligations with a Period unless from the • tenor of the same or • other circumstances o it should appear that the period has been established in favor of one or of the other. Art. In every case the courts shall determine such period • as may under the circumstances have been probably contemplated by the parties. (2) When he does not furnish to the creditor the guaranties or securities which he has promised. A person alternatively bound by different prestations • shall completely perform one of them. 1198. REGINALD M. 1195. o the courts may fix the duration thereof. In case both parties have committed a breach of the obligation. A day certain • is understood to be that which must necessarily come. • it is presumed to have been established for the benefit of both o the creditor and o the debtor.9 . Anything paid or delivered • before the arrival of the period.OBLIGATIONS AND CONTRACTS o the Mortgage Law. • the period cannot be changed by them. SECTION 3 Alternative Obligations Art. o although it may not be known when. Art. o unless he immediately gives new ones equally satisfactory. Whenever in an obligation a period is designated. • but from its nature and the circumstances it can be inferred that a period was intended. 1197. • shall be demandable only when that day comes. • the obligor o being unaware of the period or o believing that the obligation has become due and demandable. The debtor shall lose every right to make use of the period: (1) When after the obligation has been contracted. Art. If the obligation • does not fix a period. Obligations for whose fulfillment a day certain has been fixed. • the same shall be deemed extinguished. and when • through a fortuitous event they disappear. (5) When the debtor attempts to abscond. • the liability of the first infractor shall be equitably tempered by the courts. 1196. (3) When • by his own acts he has impaired said guaranties or securities after their establishment. with the fruits and interests. 1193. Art. 1194. The creditor cannot be compelled ART. In case of • loss. • deterioration or • improvement o of the thing before the arrival of the day certain. § the rules in Article 1189 shall be observed. and • each shall bear his own damages. Obligations with a resolutory period • take effect at once. Art. If the uncertainty consists in whether the day will come or not. • in consideration of which the creditor agreed to the period. (4) When the debtor violates any undertaking. The courts shall also fix the duration of the period • when it depends upon the will of the debtor. • unless he gives a guaranty or security for the debt. ARCEO ATENEO LAW – C 2015 Art. 1192 . § may be recovered. he becomes insolvent. 1199. • the obligation is conditional and • it shall be regulated by the rules of the preceding Section. • but terminate upon arrival of the day certain.

ARCEO ATENEO LAW – C 2015 o o that which the creditor should choose from among the remainder. The choice shall produce no effect • except from the time it has been communicated. The debtor shall lose the right of choice • when among the prestations whereby he is alternatively bound. Art. Art. Art. or • that of the service which last become impossible. When • only one prestation has been agreed upon. Until then the responsibility of the debtor • shall be governed by the following rules: (1) If one of the things is lost through a fortuitous event. o only one is practicable. • but the obligor may render another in substitution. When the choice has been expressly given to the creditor. The creditor shall have a right to indemnity for damages when.OBLIGATIONS AND CONTRACTS • to receive part of one and part of the other undertaking. SECTION 4 Joint and Solidary Obligations Art. o all the things which are alternatively the object of the obligation have been lost. or o the compliance of the obligation has become impossible. some or all of the prestations should become impossible. • he shall perform the obligation by delivering REGINALD M. Damages other than the value of the last thing or service • may also be awarded. The right of choice • belongs to the debtor. o negligence or o fraud. o the obligation is called facultative. • the obligor is liable for the loss of the substitute on account of his o delay. The debtor shall have no right to choose those prestations which are • impossible. Art. Art. unless • it has been expressly granted to the creditor.10 . (2) If the loss of one of the things occurs through the fault of the debtor. 1203. 1204. through the fault of the former has disappeared. or o the price of that which. If through the creditor’s acts the debtor cannot make a choice according to the terms of the obligation. 1207. ART. • entire compliance with the prestation. 1201. 1200 . or that each one of the latter is bound to render. • the choice by the creditor shall fall upon the price of any one of them. The same rules shall be applied to obligations • to do or • not to do o in case one. 1202. or that which remains if only one subsists. The loss or deterioration of the thing intended as a substitute. • the obligation shall cease to be alternative o from the day when the selection has been communicated to the debtor. 1200. Art. • through the fault of the debtor. • the creditor may claim o any of those subsisting. But once the substitution has been made. Art. • through the negligence of the obligor. The indemnity shall be fixed taking as a basis the value of • the last thing which disappeared. (3) If all the things are lost through the fault of the debtor. • unlawful or • which could not have been the object of the obligation. • the latter may rescind the contract o with damages. o does not render him liable. 1206. o also with indemnity for damages. § with a right to damages. The concurrence • of two or more creditors or • of two or more debtors o in one and the same obligation § does not imply that each one of the former has a right to demand. 1205.

or when • the law or • the nature of the obligation requires solidarity. Art. Art. • with the interests for the payment already made. • such share shall be borne by all his co-debtors. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors • if such payment is made after the obligation has ART. Art. made o by any of the solidary creditors or o with any of the solidary debtors. the credit or debt • shall be presumed to be divided into as many equal shares as there are creditors or debtors. Nor does solidarity • of itself imply indivisibility. Art. o has been made by one of them. Art. or • the nature or the wording of the obligations to which the preceding article refers o the contrary does not appear. because of his insolvency. 1208. 1210. • as well as he who collects the debt. • the others shall not be liable for his share. • judicial or • extrajudicial. 1211. 1209. § shall extinguish the obligation. The creditor • who may have executed any of these acts. 1213. o in proportion to the debt of each. 1217. o shall be liable to the others for the share in the obligation corresponding to them. Solidarity may exist although the creditors and the debtors may not be bound • in the same manner and • by the same periods and conditions. • but not anything which may be prejudicial to the latter. Art. without prejudice to the provision of Article 1219. If two or more solidary debtors offer to pay. If the payment is made before the debt is due. o so long as the debt has not been fully collected.11 . REGINALD M. Art. • confusion or • remission of the debt. Each one of the solidary creditors • may do whatever may be useful to the others. ARCEO ATENEO LAW – C 2015 When one of the solidary debtors cannot. Art. § payment should be made to him.OBLIGATIONS AND CONTRACTS There is a solidary liability only when • the obligation expressly so states. If from • the law. If one of the latter should be insolvent. reimburse his share to the debtor paying the obligation. Art. Art. and • the debt can be enforced only by proceeding against all the debtors. 1208 . 1215. The demand made against one of them • shall not be an obstacle to those which may subsequently be directed against the others. The creditor may proceed against • any one of the solidary debtors or • some or • all of them o simultaneously. 1214. • the credits or debts being considered distinct from one another. 1212. • no interest for the intervening period may be demanded. • Novation. If the division is impossible. The indivisibility of an obligation • does not necessarily give rise to solidarity. • the right of the creditors may be prejudiced only by their collective acts. o subject to the Rules of Court governing the multiplicity of suits. but if any demand. He who made the payment may claim from his co-debtors • only the share which corresponds to each. Payment made by one of the solidary debtors • extinguishes the obligation. • the creditor may choose which offer to accept. The debtor may pay • any one of the solidary creditors. A solidary creditor cannot assign his rights • without the consent of the others. 1218. 1216. • compensation. Art.

Art. or • analogous things which by their nature are susceptible of partial performance. 1223. If • • through a fortuitous event.12 . If there was fault on the part of any one of them. A solidary debtor may. 1219 . 1225. • the accomplishment of work by metrical units. 1224. 1226. 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 codebtors. The debtors who may have been ready to fulfill their promises • shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists. 1219. • all shall be responsible to the creditor for o the price and o the payment of damages and o interest. For the purposes of the preceding articles. damages shall be paid if the obligor • refuses to pay the penalty or • is guilty of fraud in the fulfillment of the obligation. obtained by one of the solidary debtors. § if there is no stipulation to the contrary. However. § the obligation shall be extinguished. • does not entitle him to reimbursement from his co-debtors. • avail himself of all defenses o which are derived from the nature of the obligation and o of those which are personal to him. § without prejudice to their action against the guilty or negligent debtor. 1221. The penalty may be enforced ART. in actions filed by the creditor.OBLIGATIONS AND CONTRACTS o o prescribed or become illegal. 1222. Art. divisibility or indivisibility shall be determined • by the character of the prestation in each particular case. In obligations with a penal clause. The remission of the whole obligation. o the thing is lost or o the performance has become impossible after one of the solidary debtors has incurred in delay through the judicial or extra-judicial demand upon him by the creditor. The divisibility or indivisibility of the things that are the object of obligations in which there is • only one debtor and • only one creditor o does not alter or modify the provisions of Chapter 2 of this Title. Art. Art. 1220. Nevertheless. o in case the debt had been totally paid by anyone of them before the remission was effected. obligations • to give definite things and • those which are not susceptible of partial performance o shall be deemed to be indivisible. SECTION 6 Obligations with a Penal Clause Art. • an obligation is indivisible if so o provided by law or o intended by the parties. • he may avail himself thereof only as regards that part of the debt for which the latter are responsible. even though the object or service may be physically divisible. o the provisions of the preceding paragraph shall apply. Art. When the obligation has for its object • the execution of a certain number of days of work. the penalty shall substitute • the indemnity for damages and • the payment of interests o in case of non-compliance. If • the thing has been lost or if • the prestation has become impossible o without the fault of the solidary debtors. In obligations not to do. Art. o it shall be divisible. or o pertain to his own share. SECTION 5 Divisible and Indivisible Obligations REGINALD M. With respect to those which personally belong to the others. A joint indivisible obligation gives rise to indemnity for damages • from the time anyone of the debtors does not comply with his undertaking. ARCEO ATENEO LAW – C 2015 Art.

o he can recover only insofar as the payment has been beneficial to the debtor. However. SECTION 1 Payment or Performance Art. o save in the case where this right has been expressly reserved for him. 1227 . 1232. The creditor is not bound to accept payment or performance • by a third person who has no interest in the fulfillment of the obligation. and • without expressing any protest or objection. and • prescription. REGINALD M. of an obligation. (6) By novation. o the penalty may be enforced. in any other manner. if • after the creditor has decided to require the fulfillment of the obligation. Whoever pays for another • may demand from the debtor what he has paid. The nullity of the penal clause • does not carry with it that of the principal obligation. • fulfillment of a resolutory condition. Art. § less damages suffered by the obligee. The judge shall equitably reduce the penalty • when the principal obligation has been partly or irregularly complied with by the debtor. 1235. 1227. (2) By the loss of the thing due. except that if he paid • without the knowledge or • against the will of the debtor. 1234. 1228. ARCEO ATENEO LAW – C 2015 (5) By compensation. o unless this right has been clearly granted him. 1236. 1229. 1233. If the obligation has been • substantially performed • in good faith. CHAPTER 4 EXTINGUISHMENT OF OBLIGATIONS General Provisions Art.13 . such as • annulment. o are governed elsewhere in this Code. When the obligee accepts the performance. Art. ART. Neither can the creditor demand • the fulfillment of the obligation and the satisfaction of the penalty at the same time. The nullity of the principal obligation • carries with it that of the penal clause. Art. unless • there is a stipulation to the contrary. as the case may be. Art. Art. Art. Obligations are extinguished: (1) By payment or performance.OBLIGATIONS AND CONTRACTS • only when it is demandable in accordance with the provisions of this Code. • knowing its incompleteness or irregularity. 1230. Other causes of extinguishment of obligations. (3) By the condonation or remission of the debt. Art. (4) By the confusion or merger of the rights of creditor and debtor. o the obligation is deemed fully complied with. The debtor cannot exempt himself from the performance of the obligation • by paying the penalty. o the obligor may recover § as though there has been strict and complete fulfillment. Payment means • not only the delivery of money • but also the performance. 1231. Even if there has been no performance. Art. Proof of actual damages suffered by the creditor • is not necessary in order that the penalty may be demanded. A debt shall not be understood to have been paid • unless the thing or service in which the obligation consists has been completely delivered or rendered. • the performance thereof should become impossible without his fault. • rescission. the penalty may also be reduced by the courts • if it is iniquitous or unconscionable.

ART. Whoever pays on behalf of the debtor • without the knowledge or • against the will of the latter. Dation in payment. 1244. ARCEO ATENEO LAW – C 2015 Art. Such benefit to the creditor • need not be proved in the following cases: Art. But the payment is in any case valid • as to the creditor who has accepted it. • whose quality and circumstances have not been stated. o the creditor cannot demand a thing of superior quality. Unless it is otherwise stipulated. Payment shall be made to • the person in whose favor the obligation has been constituted. 1237. the third person acquires the creditor’s rights. 1243. Payment made by a third person who does not intend to be reimbursed by the debtor • is deemed to be a donation. 1242. • • in good faith to any person in possession of the credit o shall release the debtor. Art. • which requires the debtor’s consent. 1237 . 1248. Payment made REGINALD M.” Art. (3) If by the creditor’s conduct. In obligations to do or not to do. Payment made • to the creditor • by the debtor • after the latter has been judicially ordered to retain the debt o shall not be valid. 1239. Art. 1240. • an act or forbearance cannot be substituted by another act or forbearance against the obligee’s will. or o insofar as the payment has been beneficial to him. o cannot compel the creditor to subrogate him in his rights. (1) If after the payment. such as those arising from a § mortgage. • whereby property is alienated to the creditor in satisfaction of a debt in money. o shall be governed by the law of sales. However. In obligations to give. With regard to judicial costs. Art.14 . Art. 1246. • Neither may the debtor be required to make partial payments. • the extrajudicial expenses required by the payment shall be for the account of the debtor. when the debt is • in part liquidated and • in part unliquidated. Unless there is an express stipulation to that effect. 1241. § without prejudice to the provisions of Article 1427 under the Title on “Natural Obligations. Payment made to a third person • shall also be valid insofar as it has redounded to the benefit of the creditor. 1247. or • any person authorized to receive it. or § penalty. the debtor has been led to believe that the third person had authority to receive the payment. (2) If the creditor ratifies the payment to the third person. payment made by one who does not have • the free disposal of the thing due and • capacity to alienate it o shall not be valid. Art. § guaranty. or o more valuable than that which is due. Art. • the creditor cannot be compelled partially to receive the prestations in which the obligation consists. or • his successor in interest. although the latter may be o of the same value as. The debtor of a thing cannot compel the creditor • to receive a different one. When the obligation consists in the delivery • of an indeterminate or generic thing. Neither can the debtor • deliver a thing of inferior quality. • the Rules of Court shall govern. Payment to a person who is incapacitated to administer his property • shall be valid o if he has kept the thing delivered. Art. Art. 1238. The purpose of the obligation and other circumstances • shall be taken into consideration. 1245.OBLIGATIONS AND CONTRACTS Art.

15 . or • bills of exchange or • other mercantile documents o shall produce the effect of payment only § when they have been cashed. o the payment shall be made wherever the thing might be § at the moment the obligation was constituted. If the debtor accepts from the creditor a receipt in which an application of the payment is made.OBLIGATIONS AND CONTRACTS o o the creditor may demand and the debtor may effect § the payment of the former without waiting for the liquidation of the latter. o the additional expenses shall be borne by him. There being • no express stipulation and • if the undertaking is to deliver a determinate thing. § to which of them the same must be applied. ART. In any other case the place of payment • shall be the domicile of the debtor. He who has various debts • of the same kind • in favor of one and the same creditor. If the debtor changes his domicile • in bad faith or • after he has incurred in delay. o shall only release the debtor from responsibility for the net proceeds of the thing assigned. Art. 1254. or § when through the fault of the creditor they have been impaired. 1255. • the value of the currency at the time of the establishment of the obligation shall be the basis of payment. unless • there is an agreement to the contrary. 1250. Art. 1253. Unless • the parties so stipulate. the action derived from the original obligation • shall be held in abeyance. or • when the application of payment is made by the party for whose benefit the term has been constituted. o may declare at the time of making the payment. In case an extraordinary inflation or deflation of the currency stipulated should supervene. o the debt which is most onerous to the debtor. shall be deemed to have been satisfied. • unless there is stipulation to the contrary. In the meantime. • the former cannot complain of the same. If the debt produces interest. or • if application cannot be inferred from other circumstances. Art. and • if it is not possible to deliver such currency. payment of the principal • shall not be deemed to have been made until the interests have been covered. The payment of debts in money shall be made • in the currency stipulated. ARCEO ATENEO LAW – C 2015 • under the Rules of Court. 1249 . o the payment shall be applied to all of them proportionately. The delivery of • promissory notes payable to order. o application shall not be made as to debts which are not yet due. The agreements which. When payment • cannot be applied in accordance with the preceding rules. These provisions are without prejudice to venue REGINALD M. If the debts due are of the same • nature and • burden. Art. then in the currency which is legal tender in the Philippines. 1251. Payment shall be made • in the place designated in the obligation. unless • there is a cause for invalidating the contract. Subsection 1 Application of Payments Art. Art. 1252. Subsection 2 Payment by Cession Art. among those due. The debtor may cede or assign his property to his creditors • in payment of his debts. 1249. This cession.

1256 . before whom o the tender of payment shall be proved. The consignation shall be ineffectual • if it is not made strictly in consonance with the provisions which regulate payment. or before • a judicial declaration that the consignation has been properly made. • the consignation having been made. An obligation which consists in the delivery of a determinate thing • shall be extinguished if it should be o lost or o destroyed § without the fault of the debtor. The same rule applies • when the nature of the obligation requires the assumption of risk. o the debtor may withdraw the thing or the sum deposited. 1263. Art. and § before he has incurred in delay. § The co-debtors. 1259. • the debtor shall be released from responsibility by the consignation of the thing or sum due. o the obligor is liable even for fortuitous events. Consignation alone • shall produce the same effect in the following cases: (1) When the creditor is • absent or • unknown. When by • law or • stipulation. • it must first be announced to the persons interested in the fulfillment of the obligation. The consignation having been made. when properly made.OBLIGATIONS AND CONTRACTS • • on the effect of the cession. • the interested parties shall also be notified thereof. Art. The expenses of consignation. are made between the debtor and his creditors o shall be governed by special laws. If the creditor to whom tender of payment has been made refuses without just cause to accept it. 1258. or • does not appear at the place of payment. 1257. REGINALD M. (2) When he is incapacitated to receive the payment • at the time it is due. Consignation shall be made • by depositing the things due at the disposal of judicial authority. Art. 1262. SECTION 2 Loss of the Thing Due Art. Art. • the debtor may ask the judge to order the cancellation of the obligation. Art. If. § the loss of the thing does not extinguish the obligation. In order that the consignation of the thing due may release the obligor. 1256. Before • the creditor has accepted the consignation. § guarantors and § sureties shall be released.16 . • the loss or destruction of anything of the same kind does not extinguish the obligation. Once the consignation has been duly made. • the creditor should authorize the debtor to withdraw the same. (3) When. 1260. • he refuses to give a receipt. ARCEO ATENEO LAW – C 2015 ART. in a proper case. (4) When two or more persons claim the same right to collect. § allowing the obligation to remain in force. Subsection 3 Tender of Payment and Consignation Art. 1261. In an obligation to deliver a generic thing. • without just cause. o he shall lose every preference which he may have over the thing. (5) When the title of the obligation has been lost. and o the announcement of the consignation in other cases. Art. • shall be charged against the creditor. and § he shall be responsible for damages.

The obligation having been extinguished by the loss of the thing. and o without prejudice to the provisions of Article 1165. or § of a third person who owns the thing. 1270. • it shall be presumed that the creditor delivered it voluntarily. The debtor in obligations to do shall also be released • when the prestation becomes o legally or o physically impossible § without the fault of the obligor. If in order to nullify this waiver it should be claimed to be inofficious. Art. Art. 1269. 1271. The delivery of a private document • evidencing a credit. 1265. 1266. and • requires the acceptance by the obligor. When the debt of a thing certain and determinate proceeds from a criminal offense. • 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.17 . When the service has become • so difficult • as to be manifestly beyond the contemplation of the parties. Art. ART. Art. • flood. but the waiver of the latter • shall leave the former in force. • the latter refused without justification to accept it. 1268. It may be made REGINALD M. Art. Art. Whenever the private document in which the debt appears is found in the possession of the debtor. unless • the thing having been offered by him to the person who should receive it. Whenever the thing is lost in the possession of the debtor. o is found in the possession § of the debtor. Art. o the obligor may also be released therefrom. Condonation or remission • is essentially gratuitous. Express condonation • shall. 1272. • the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. • made voluntarily by the creditor to the debtor.OBLIGATIONS AND CONTRACTS Art. comply with the forms of donation. It is presumed that the accessory obligation of pledge has been remitted • when the thing pledged. Art. The renunciation of the principal debt • shall extinguish the accessory obligation. whatever may be the cause for the loss. SECTION 4 Confusion or Merger of Rights Art. • the debtor shall not be exempted from the payment of its price. o implies the renunciation of the action which the former had against the latter. 1276. Art. 1273. The obligation is extinguished • from the time the characters of creditor and debtor are merged in the same person. unless • the contrary is proved. under the circumstances. 1264. Merger which takes place in the person of the principal debtor or creditor • benefits the guarantors. This presumption does not apply in case of • earthquake. • it shall be presumed that the loss was due to his fault. The courts shall determine whether. ARCEO ATENEO LAW – C 2015 • • expressly or impliedly. 1275. • storm. SECTION 3 Condonation or Remission of the Debt Art. 1267. o after its delivery to the creditor. or • other natural calamity. One and the other kinds • shall be subject to the rules which govern inofficious donations. Art. furthermore. o unless there is proof to the contrary. • the partial loss of the object of the obligation is so important as to extinguish the obligation. 1274. § in whole or § in part. 1264 .

1284. Art. If • • the creditor communicated the cession to him but the debtor did not consent thereto. 1277. (5) That over neither of them there be any retention or controversy. o they may be compensated against each other § before they are judicially rescinded or avoided. Compensation shall not be proper when one of the debts arises • from a depositum or • from the obligations REGINALD M. • in their own right. and o also of the same quality if the latter has been stated. Compensation takes place • by operation of law. Art. • commenced by third persons and • communicated in due time to the debtor. The parties may agree upon the compensation of debts • which are not yet due. When the two debts are of the same amount. Art. 1283. the guarantor may set up compensation • as regards what the creditor may owe the principal debtor. 1277 . Art. Art. • the former may set it off by proving o his right to said damages and o the amount thereof. 1279. o even though the debts may be payable at different places. (4) That they be • liquidated and • demandable. Art. o they be of the same kind. In order that compensation may be proper. Notwithstanding the provisions of the preceding article.OBLIGATIONS AND CONTRACTS Confusion which takes place in the person of any of the latter • does not extinguish the obligation. and • that he be at the same time a principal creditor of the other. ARCEO ATENEO LAW – C 2015 ART. o the latter may set up § the compensation of debts previous to the cession. 1285. or • if the things due are consumable. 1286. Art. Art. (3) That the two debts be due. § but there shall be an indemnity for expenses of exchange or transportation to the place of payment. 1280. • cannot set up against the assignee the compensation which would pertain to him against the assignor. Art. o that he reserved his right to the compensation. Compensation may be • total or • partial. § but not of subsequent ones. Compensation shall take place • when two persons. (2) That both debts consist • in a sum of money. Art. If one of the parties to a suit over an obligation has a claim for damages against the other. 1282. 1287. Confusion • does not extinguish a joint obligation except • as regards the share corresponding to the creditor or debtor in whom the two characters concur. • there is a total compensation. SECTION 5 Compensation Art. When one or both debts are • rescissible or • voidable. • are creditors and debtors of each other. If the assignment is made without the knowledge of the debtor. The debtor who has consented to the assignment of rights made by a creditor in favor of a third person. it is necessary: (1) That each one of the obligors • be bound principally. unless • the assignor was notified by the debtor o at the time he gave his consent.18 . 1281. • he may set up the compensation of all credits o prior to the same and o also later ones until he had knowledge of the assignment. 1278.

Art. 1291. except when said insolvency • was already existing and o of public knowledge. Art. If a person should have against him several debts which are susceptible of compensation. 1294. (3) Subrogating a third person in the right of the creditor. When the principal obligation is extinguished in consequence of a novation. 1297. 1288. Art. Art. 1289. Subrogation of a third person in the rights of the creditor is either • legal or ART. 1299. 1296. Art.OBLIGATIONS AND CONTRACTS o o of a depository or of a bailee in commodatum. Payment by the new debtor gives him the rights mentioned in Articles • 1236 and Art. it is imperative • that it be so declared in unequivocal terms. • the new obligation shall be under the same condition. Neither shall there be compensation • if one of the debts consists in civil liability arising from a penal offense. 1293. If the new obligation is void. (2) Substituting the person of the debtor. 1290. 1295. or • that the old and the new obligation be on every point incompatible with each other. • 1237. Art. unless • the parties intended that the former relation should be extinguished in any event. 1300. In order that an obligation may be extinguished by another which substitutes the same. o the new debtor’s § insolvency or § non-fulfillment of the obligation shall not give rise to any liability on the part of the original debtor. Obligations may be modified by: (1) Changing their object or principal conditions. SECTION 6 Novation Art. REGINALD M. § when he delegated his debt. • the original one shall subsist. 1288 . When all the requisites mentioned in Article 1279 are present. or o known to the debtor. 1298. If the substitution is • without the knowledge or • against the will of the debtor. o shall not revive the action of the latter against the original obligor. who has been • proposed by the original debtor and • accepted by the creditor. except • when annulment may be claimed only by the debtor. Neither can compensation be set up • against a creditor who has claim for support due by gratuitous title. 1292. • accessory obligations may subsist o only insofar as they may benefit third persons who did not give their consent. unless • it is otherwise stipulated. o even though the creditors and debtors are not aware of the compensation. • the rules on the application of payments shall apply to the order of the compensation. • but not without the consent of the creditor. If the original obligation was subject to a suspensive or resolutory condition. The insolvency of the new debtor. Art. Art. The novation is void • if the original obligation was void. Art. or • when ratification validates acts which are voidable. and • extinguishes both debts to the concurrent amount. Novation which consists in substituting a new debtor in the place of the original one. ARCEO ATENEO LAW – C 2015 Art. o without prejudice to the provisions of paragraph 2 of Article 301. • may be made even o without the knowledge or o against the will of the latter.19 . Art. compensation • takes effect by operation of law.

1309. o the latter must be clearly established in order that it may take effect. 1305. except in cases expressly mentioned in this Code. A creditor. and • by the customs of the place.OBLIGATIONS AND CONTRACTS • conventional. Art. 1308. • may exercise his right for the remainder. either o against the debtor or o against third persons. even without the knowledge of the debtor. • without prejudice to the effects of confusion as to the latter’s share. Art.20 . • terms and • conditions o as they may deem convenient. o its validity or o compliance § cannot be left to the will of one of them. • even without the debtor’s knowledge. Subrogation transfers to the person subrogated • the credit • with all the rights thereto appertaining. o to give something or o to render some service. Art. It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred. The determination shall not be obligatory • if it is evidently inequitable. § public order. o The former is not presumed. not interested in the obligation. o provided they are not contrary to § law. • by the rules governing the most analogous nominate contracts. or § public policy. Art. 1303. (2) When a third person. 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. Contracts take effect only between • the parties. • pays with the express or tacit approval of the debtor. The determination of the performance • may be left to a third person. In such case. The contract • must bind both contracting parties. • by the provisions of Titles I and II of this Book. except • in case where the rights and obligations arising from the contract are not transmissible o by their nature. TITLE II CONTRACTS CHAPTER 1 GENERAL PROVISIONS Art. or o by stipulation or o by provision of law. 1310. Art. • clauses. ARCEO ATENEO LAW – C 2015 Art. § good customs. with respect to the other. 1307. Art. A contract • is a meeting of minds • between two persons • whereby one binds himself. Innominate contracts shall be regulated • by the stipulations of the parties. § subject to stipulation in a conventional subrogation. o whose decision shall not be binding until it has been made known to both contracting parties. 1301 . 1302. 1304. The heir is not liable • beyond the value of the property he received from the decedent. • the courts shall decide what is equitable under the circumstances. 1311. to whom partial payment has been made. The contracting parties may establish such • stipulations. ART. Art. Art. 1301. be they guarantors or possessors of mortgages. 1306. a person interested in the fulfillment of the obligation pays. • their assigns and • heirs. Conventional subrogation of a third person requires the consent • of the original parties and • of the third person. (3) When. REGINALD M. Art. § morals.

or who has acted beyond his powers. The contract. o according to their nature. • pledge and • commodatum. and § law. and from that moment the parties are bound • not only to the fulfillment of what has been expressly stipulated • but also to all the consequences which. o expressly or o impliedly. Art.21 . Any third person who induces another to violate his contract • shall be liable for damages to the other contracting party. § shall be unenforceable. 1319. A mere incidental benefit or interest of a person • is not sufficient. Creditors are protected • in cases of contracts intended to defraud them. (2) Object certain which is the subject matter of the contract. unless • it is ratified. 1316. SECTION 1 Consent Art. 1318. The contracting parties must have • clearly and • deliberately o conferred a favor upon a third person. (3) Cause of the obligation which is established. Consent is manifested • by the meeting of o the offer and o the acceptance • upon o the thing and o the cause § which are to constitute the contract. o are not perfected until the delivery of the object of the obligation. • third persons who come into possession of the object of the contract are bound thereby. A qualified acceptance • constitutes a counter-offer. There is no contract unless the following requisites concur: (1) Consent of the contracting parties. Art. 1317. A contract entered into • in the name of another • by one REGINALD M. No one may contract in the name of another • without being authorized by the latter.OBLIGATIONS AND CONTRACTS If a contract should contain some stipulation in favor of a third person. § before it is revoked by the other contracting party. Acceptance made by letter or telegram does not bind the offerer • except from the time it came to his knowledge. Art. The offer • must be certain and the acceptance • absolute. 1315. 1320. Real contracts. • he may demand its fulfillment o provided he communicated his acceptance to the obligor before its revocation. Art. may be in keeping with § good faith. 1312 . Art. § usage. Contracts are perfected • by mere consent. 1313. An acceptance may be ART. Art. or • unless he has by law a right to represent him. In contracts creating real rights. ARCEO ATENEO LAW – C 2015 o o who has no authority or legal representation. CHAPTER 2 ESSENTIAL REQUISITES OF CONTRACTS General Provisions Art. Art. 1314. o subject to the provisions of § the Mortgage Law and § the Land Registration Laws. such as • deposit. is presumed to have been entered into • in the place where the offer was made. § by the person on whose behalf it has been executed. in such a case. 1312.

Art. 1324. as something o paid or o promised. unless • the contrary appears. 1325. 1323.22 . Contracts agreed to • in a state of drunkenness or • during a hypnotic spell o are voidable. Art. or • fraud o is voidable. (2) • Insane or REGINALD M. Art. Unless it appears otherwise. Contracts entered into during a lucid interval • are valid. • undue influence. and • manner of acceptance. An offer made through an agent is accepted • from the time acceptance is communicated to him. 1329. When the offerer has allowed the offeree certain period to accept. A simple mistake of account • shall give rise to its correction. Art. When • one of the parties o is unable to read. Mistake as to the • identity or • qualifications of one of the parties o will vitiate consent only when such identity or qualifications have been the principal cause of the contract. Art. or o to those conditions which have principally moved one or both parties to enter into the contract. An offer becomes ineffective upon the • death. A contract where consent is given through • mistake. and the advertiser • is not bound to accept the highest or lowest bidder. 1331. business advertisements of things for sale • are not definite offers. The following cannot give consent to a contract: (1) Unemancipated minors. and • mistake or fraud is alleged. Art. ART. Art. 1321. or o if the contract is in a language not understood by him. • place. and • is understood to be without prejudice to special disqualification established in the laws. The incapacity declared in Article 1327 • is subject to the modifications determined by law. 1321 . • civil interdiction.OBLIGATIONS AND CONTRACTS • • express or implied. o all of which must be complied with. Art. ARCEO ATENEO LAW – C 2015 demented persons. 1326. • • Art. and deaf-mutes who do not know how to write. • insanity. or • insolvency o of either party o before acceptance is conveyed. In order that mistake may invalidate consent. Advertisements for bidders • are simply invitations to make proposals. The person making the offer may fix the • time. • violence. Art. 1328. • the offer may be withdrawn o at any time before acceptance o by communicating such withdrawal. 1327. except • when the option is founded upon a consideration. • intimidation. 1322. 1330. Art. • but mere invitations to make an offer. the person enforcing the contract • must show that the terms thereof have been fully explained to the former. 1332. • it should refer o to the substance of the thing which is the object of the contract. Art.

o may vitiate consent. The usual exaggerations in trade. Art. Misrepresentation made in good faith • is not fraudulent • but may constitute error. 1343. 1335. Art. • sex and • condition of the person o shall be borne in mind. • when the other party had an opportunity to know the facts. • depriving the latter of a reasonable freedom of choice. unless • made by an expert and • the other party has relied on the former’s special knowledge. without them. ART. Art. 1338. o does not vitiate consent. In order that fraud may make a contract voidable. 1339. • although it may have been employed by a third person who did not take part in the contract. 1337. or o upon the person or property of his spouse. o constitutes fraud. There is intimidation • when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil o upon his person or property. A threat to enforce one’s claim • through competent authority. There is undue influence when a person • takes improper advantage of his power over the will of another. • the other is induced to enter into a contract • which. 1344. Mutual error • as to the legal effect of an agreement • when the real purpose of the parties is frustrated. it • should be serious and • should not have been employed by both contracting parties. he would not have agreed to. Art. § to give his consent. o serious or o irresistible force is employed. Art. 1341. • spiritual and • other relations between the parties. 1340. Art. There is fraud when. 1342. • through insidious words or machinations of one of the contracting parties. 1345. 1334. 1333. A mere expression of an opinion • does not signify fraud. There is violence • when in order to wrest consent. • if the claim is just or legal. or o was ignorant or o in financial distress. Art. To determine the degree of the intimidation. o are not in themselves fraudulent. or REGINALD M. Art. • as when the parties are bound by confidential relations. Art. The following circumstances shall be considered: • the confidential. • the age.OBLIGATIONS AND CONTRACTS Art. • the fact that the person alleged to have been unduly influenced o was suffering from mental weakness. unless • such misrepresentation has created substantial mistake and • the same is mutual. 1336. There is no mistake if the party alleging it knew the • doubt. Failure to disclose facts. 1333 . Art. Incidental fraud • only obliges the person employing it to pay damages. Violence or intimidation shall annul the obligation. • when there is a duty to reveal them. • family. descendants or ascendants. Simulation of a contract may be • absolute or • relative. Misrepresentation by a third person • does not vitiate consent. Art. • contingency or • risk o affecting the object of the contract.23 . ARCEO ATENEO LAW – C 2015 Art.

All services which are not contrary to • law. Art. 1356. The object of every contract • must be determinate as to its kind. when the law requires ART. o without the need of a new contract between the parties. Art. Art. • the service or benefit which is remunerated. o produce no effect whatsoever. and in contracts of pure beneficence. • the mere liberality of the benefactor. • if it should not be proved that they were founded upon another cause which is true and lawful. Impossible things or services • cannot be the object of contracts. All things • which are not outside the commerce of men. 1346 . However. • when it does not prejudice a third person and • is not intended for any purpose contrary to law. • good customs. the latter. Art. No contract may be entered into • upon future inheritance except • in cases expressly authorized by law.24 . • mistake or • undue influence. • including future things. good customs. Art. • public order or • public policy. 1353.OBLIGATIONS AND CONTRACTS o o The former takes place when the parties do not intend to be bound at all. • it is presumed that it o exists and o is lawful. for each contracting party. or public policy o binds the parties to their real agreement. Art. the prestation or promise of a thing or service by the other. CHAPTER 3 FORM OF CONTRACTS Art. or • with unlawful cause. The particular motives of the parties in entering into a contract • are different from the cause thereof. All rights which are not intransmissible • may also be the object of contracts. • public order or • public policy o may likewise be the object of a contract. in remuneratory ones. • morals. The fact that the quantity is not determinate • shall not be obstacle to the existence of the contract. Art. 1351. 1352. o may be the object of a contract. The cause is unlawful if it is contrary to • law. 1349. A relative simulation. 1348. Art. ARCEO ATENEO LAW – C 2015 Art. o provided it is possible to determine the same. Contracts shall be obligatory. unless • the debtor proves the contrary. 1350. An absolutely simulated or fictitious contract • is void. 1354. 1346. • lesion or inadequacy of cause shall not invalidate a contract. Contracts • without cause. o provided all the essential requisites for their validity are present. Although the cause is not stated in the contract. • in whatever form they may have been entered into. • morals. SECTION 2 Object of Contracts Art. 1347. The statement of a false cause in contracts shall render them void. In onerous contracts • the cause is understood to be. 1355. • good customs. Except in cases specified by law. morals. public order. unless there has been • fraud. SECTION 3 Cause of Contracts REGINALD M. when the parties conceal their true agreement.

ART. o that requirement is absolute and indispensable. fraud. • transmission. § the proper remedy is not reformation of the instrument but annulment of the contract. inequitable conduct. But sales of • goods. Art. sales of • real property or • of an interest therein o are governed by Articles § 1403. In such cases. o fraud. or accident o has prevented a meeting of the minds of the parties. When. or • any other power which has for its object o an act appearing or o which should appear in a public document. This right may be exercised • simultaneously with the action upon the contract. or • that a contract be proved in a certain way. o inequitable conduct or o accident. (2) The • cession. No. Art. 2 and § 1405. 1360. and § 1405. The principles of the general law on the reformation of instruments • are hereby adopted insofar as they are not in conflict with the provisions of this Code. REGINALD M. 2. once the contract has been perfected. • there having been a meeting of the minds of the parties to a contract.OBLIGATIONS AND CONTRACTS that a contract be in some form in order that it may be o valid or o enforceable. If • • • • mistake. 1359. 1357 . 1358.25 . If the law requires • a document or • other special form. • modification or • extinguishment o of real rights over immovable property. • Art. The following must appear in a public document: (1) Acts and contracts which have for their object the • creation. • the rights of the parties stated in the following article cannot be exercised. (3) The • power to administer property. § the contracting parties may compel each other to observe that form. 1361. • said instrument may be reformed. § one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed. 1357. o as in the acts and contracts enumerated in the following article. • by reason of o mistake. • their true intention is not expressed in the instrument purporting to embody the agreement. o even a private one. Art. or o should prejudice a third person. ARCEO ATENEO LAW – C 2015 All other contracts where the amount involved exceeds five hundred pesos • must appear in writing. No. (4) The cession of actions or rights • proceeding from an act appearing in a public document. • chattels or • things in action o are governed by Articles § 1403. CHAPTER 4 REFORMATION OF INSTRUMENTS Art. When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement. • repudiation or • renunciation o of hereditary rights or o of those of the conjugal partnership of gains.

There shall be no reformation in the following cases: (1) Simple donations inter vivos wherein no condition is imposed. • the latter shall prevail over the former. 1376. o but concealed that fact from the former. If • one party was mistaken and • the other o acted fraudulently or inequitably o in such a way that the instrument does not show their true intention. • but the instrument states that the property is sold o absolutely or o with a right of repurchase. Words which may have different significations • shall be understood in that which is most in keeping with the o nature and o object of the contract. • they shall be understood to comprehend o things that are distinct and o cases that are different § from those upon which the parties intended to agree. if the mistake was mutual. If the terms of a contract • are clear and • leave no doubt upon the intention of the contracting parties. 1373. Art. 1362 . o attributing to the doubtful ones that sense which may result from all of them taken jointly.26 . 1370. or his heirs and assigns. 1375. Art. Art. 1371. Art. o lack of skill. If • two parties agree upon the mortgage or pledge of real or personal property. The various stipulations of a contract • shall be interpreted together. Reformation may be ordered at the instance of • either party or his successors in interest. (2) Will. o the courts may order that the instrument be reformed. § the former may ask for the reformation of the instrument. and ART. Art. 1369. When one of the parties has brought an action to enforce the instrument • he cannot subsequently ask for its reformation. 1368. When • through the o ignorance. Art. REGINALD M. 1374. 1367. § reformation of the instrument is proper. 1362. 1372. The usage or custom of the place • shall be borne in mind in the interpretation of the ambiguities of a contract. CHAPTER 5 INTERPRETATION OF CONTRACTS Art. When • one party was mistaken and • the other o knew or believed that the instrument did not state their real agreement. If some stipulation of any contract should admit of several meanings. The procedure for the reformation of instruments • shall be governed by Rules of Court to be promulgated by the Supreme Court. In order to judge the intention of the contracting parties. Art. However general the terms of a contract may be. Art. (3) When the real agreement is void. 1363. Art. upon petition of the injured party. • the instrument does not express the true intention of the parties. o negligence or o bad faith on the part § of the person drafting the instrument or § of the clerk or typist. their • contemporaneous and • subsequent acts o shall be principally considered. 1365. If the words appear to be contrary to the evident intention of the parties. Art. Art. Art. 1366. o the literal meaning of its stipulations shall control.OBLIGATIONS AND CONTRACTS Art. ARCEO ATENEO LAW – C 2015 Art. § the instrument may be reformed. 1364. • otherwise. • it shall be understood as bearing that import which is most adequate to render it effectual.

Art. 1384. o when the donor did not reserve sufficient property to pay all debts contracted before the donation. Art. 1381. When • it is absolutely impossible to settle doubts by the rules established in the preceding articles. 1379. 1386. The following contracts are rescissible: (1) Those which are entered into by the guardians • whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof. and • the price with its interest. Art. it can be carried out • only when he who demands rescission can return whatever he may be obliged to restore. If the doubts • are cast upon the principal object of the contract • in such a way that it cannot be known what may have been the intention or will of the parties. Rescission creates the obligation to return • the things which were the object of the contract. 1380. Payments made • in a state of insolvency • for obligations to whose fulfillment the debtor could not be compelled at the time they were effected. Art. (5) All other contracts specially declared by law to be subject to rescission. Contracts validly agreed upon • may be rescinded in the cases established by law. Art. 1385. CHAPTER 6 RESCISSIBLE CONTRACTS Art. Rescission referred to in Nos. • 1 and • 2 of Article 1381 o shall not take place with respect to contracts approved by the courts. Neither shall rescission take place • when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. 1383. All contracts by virtue of which the debtor alienates property by gratuitous title • are presumed to have been entered into in fraud of creditors. Art. 1377 . o are also rescissible. The interpretation of obscure words or stipulations in a contract • shall not favor the party who caused the obscurity. The principles of interpretation stated in Rule 123 of the Rules of Court • shall likewise be observed in the construction of contracts. 1382. Rescission shall be only to the extent • necessary to cover the damages caused. • together with their fruits. consequently. (2) Those agreed upon in representation of absentees. (3) Those undertaken in fraud of creditors • when the latter cannot in any other manner collect the claims due them. o it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. Art. 1377. o o of the litigants or of competent judicial authority. indemnity for damages • may be demanded from the person causing the loss.OBLIGATIONS AND CONTRACTS • shall fill the omission of stipulations which are ordinarily established. and • the doubts refer to incidental circumstances of a gratuitous contract.27 . If the contract is onerous. (4) Those which refer to things under litigation • if they have been entered into by the defendant without the knowledge and approval REGINALD M. Art. o the least transmission of rights and interests shall prevail. The action for rescission • is subsidiary. ARCEO ATENEO LAW – C 2015 In this case. Art. Art. 1387. • if the latter suffer the lesion stated in the preceding number. Alienations by onerous title ART. • the doubt shall be settled in favor of the greatest reciprocity of interests. 1378. o the contract shall be null and void.

• They are susceptible of ratification. • fraud. • In addition to these presumptions. Whoever acquires in bad faith the things alienated in fraud of creditors.28 . Art. (2) Those where the consent is vitiated by • mistake. Ratification • extinguishes the action to annul a voidable contract. • the first acquirer shall be liable first. Ratification may be effected • expressly or • tacitly. Art. o from the time the defect of the consent ceases. This period shall begin: Art. 1391. These contracts • are binding. In case of • mistake or • fraud. and so on successively. • intimidation. • 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. Art. • violence. or § until the domicile of the latter is known. o the period of four years shall not begin § until the termination of the former’s incapacity. It is understood that there is a tacit ratification if. 1395. and • need not have been obtained by the party seeking the rescission. Art. Ratification does not require the conformity • of the contracting party who has no right to bring the action for annulment. The action to claim rescission must be commenced • within four years. • with knowledge of the reason which renders the contract voidable and • such reason having ceased. The following contracts are voidable or annullable. 1392. ARCEO ATENEO LAW – C 2015 And when the action refers to contracts entered into by • minors or • other incapacitated persons. The decision or attachment • need not refer to the property alienated. • shall indemnify the latter for damages suffered by them on account of the alienation. 1388 . 1393. For • • persons under guardianship and for absentees. 1390. In cases of • intimidation. o from the time the guardianship ceases. ART. CHAPTER 7 VOIDABLE CONTRACTS Art. o unless they are annulled by a proper action in court. • undue influence or REGINALD M. o from the time of the discovery of the same. • the design to defraud creditors may be proved in any other manner recognized by the law of evidence. The action for annulment shall be brought • within four years. Art. o whenever. • the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. Art. due to any cause. • violence or • undue influence. 1394. Ratification may be effected • by the guardian of the incapacitated person. If there are two or more alienations. 1389. it should be impossible for him to return them.OBLIGATIONS AND CONTRACTS are also presumed fraudulent o when made by persons against whom § some judgment has been rendered in any instance or § some writ of attachment has been issued. 1388.

(d) An agreement for ART. violence. In the following cases an agreement hereafter made • shall be unenforceable by action. The action for the annulment of contracts may be instituted • by all who are thereby obliged o principally or o subsidiarily. Ratification cleanses the contract • from all its defects • from the moment it was constituted. (2) Those that do not comply with the Statute of Frauds as set forth in this number. Art. (b) A special promise to answer for the • debt. Whenever the person obliged by the decree of annulment to return the thing cannot do so because it has been lost through his fault. or • miscarriage of another. 1401. • nor can those who exerted intimidation. Art. Art. 1396. When the defect of the contract consists in the incapacity of one of the parties. ARCEO ATENEO LAW – C 2015 • said loss took place through the fraud or fault of the plaintiff. or • some note or • memorandum thereof. or o 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. • default. • the contracting parties shall restore to each other o the things which have been the subject matter of the contract. 1402. o be in writing. unless • the same. Art. or o who has acted beyond his powers. and o the price with its interest. Art. • the incapacitated person is not obliged to make any restitution except • insofar as he has been benefited by the thing or price received by him. or § by his agent. § except in cases provided by law. unless REGINALD M. In obligations to render service. • the value thereof shall be the basis for damages. 1398. o with their fruits. evidence. 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. (c) An agreement made in consideration of marriage. The following contracts are enforceable. and o subscribed § by the party charged. CHAPTER 8 UNENFORCEABLE CONTRACTS Art. or employed fraud. 1400. • other than a mutual promise to marry. of the agreement • cannot be received without o the writing. 1396 . • persons who are capable o cannot allege the incapacity of those with whom they contracted. • unless they are ratified: (1) Those entered into • in the name of another person • by one o who has been given no authority or legal representation. 1403. therefore. 1399. o with interest from the same date. or undue influence. • the other cannot be compelled to comply with what is incumbent upon him. • the loss of the thing shall not be an obstacle to the success of the action.OBLIGATIONS AND CONTRACTS Art.29 . or caused mistake o base their action upon these flaws of the contract. An obligation having been annulled. However. Art. 1397. If the right of action is based upon the incapacity of any one of the contracting parties. • he shall return o the fruits received and o the value of the thing at the time of the loss. As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return.

or o by the acceptance of benefits under them. but when • a sale is made by auction and • entry is made by the auctioneer o in his sales book. 1404 . or guardian. (f) A representation as to the credit of a third person. Art. o at the time of the sale. Unenforceable contracts • cannot be assailed by third persons. Art. as the case may be. o good customs. of both contracting parties. § of the amount and § kind of property sold. (3) Those where both parties are incapable of giving consent to a contract. of such things in action. § at a price not less than five hundred pesos. • express or implied ratification by the parent. CHAPTER 9 VOID OR INEXISTENT CONTRACTS Art. • the contract shall be validated from the inception. ARCEO ATENEO LAW – C 2015 • a public document is necessary for its registration in the Registry of Deeds. or some of them. (3) Those whose • cause or • object o did not exist at the time of the transaction. and REGINALD M. When • a contract is enforceable under the Statute of Frauds.30 . or • pay at the time some part of the purchase money. 1407. (6) Those where the intention of the parties • relative to the principal object of the contract • cannot be ascertained. Art. 1409. Unauthorized contracts are governed by • Article 1317 and • the principles of agency in Title X of this Book. In a contract where both parties are incapable of giving consent. • object or • purpose is contrary to o law. 1408. or o the evidences. • are ratified o by the failure to object to the presentation of oral evidence to prove the same. If ratification is made by the parents or guardians. § terms of sale. as the case may be. or o public policy. Art. Art. o chattels or o things in action. o the parties may avail themselves of the right under Article 1357. or • for the sale o of real property or o of an interest therein. (5) Those which contemplate an impossible service. ART. Contracts infringing the Statute of Frauds. The following contracts are inexistent and void from the beginning: (1) Those whose • cause.OBLIGATIONS AND CONTRACTS the sale of o goods. o public order. 1406. 1405. § price. unless the buyer • accept and receive part of o such goods and chattels. (4) Those whose object is outside the commerce of men. 1404. o morals. (2) Those which are absolutely simulated or fictitious. of one of the contracting parties o shall give the contract the same effect as if only one of them were incapacitated. 2 of Article 1403. referred to in No. § names of the purchasers and § person on whose account the sale is made. it is a sufficient memorandum. • (e) An agreement • for the leasing for a longer period than one year.

The action or defense for the declaration of the inexistence of a contract • does not prescribe. • he may. Moreover. the courts may. When • the law sets. Art. 1417. o allow the party repudiating the contract to recover the money or property. and • shall not be bound to comply with his promise. or o demand the performance of the other’s undertaking. The other. and o both shall be prosecuted. 1411. When the price of any article or commodity is determined • by statute. When the agreement • is not illegal per se • but is merely prohibited. ARCEO ATENEO LAW – C 2015 o with interest thereon from the date of the payment. 1414. Art. Art. Art. o recover what he has paid or delivered. o they shall have no action against each other. o he may demand additional compensation for service rendered beyond the time limit. 1410. and • the act constitutes a criminal offense. 1419. In case of a divisible contract. or o before any damage has been caused to a third person. or authorizes the fixing of the maximum number of hours of labor. • the contract may be repudiated by one of the parties o before the purpose has been accomplished.OBLIGATIONS AND CONTRACTS (7) Those expressly prohibited or declared void by law. o he shall be entitled to recover the deficiency. Where one of the parties to an illegal contract is incapable of giving consent. o any person paying any amount in excess of the maximum price allowed may recover such excess. 1413. Interest paid in excess of the interest allowed by the usury laws • may be recovered by the debtor. REGINALD M. 1418. and • a contract is agreed upon by which a laborer accepts a lower wage. In such case. • may demand the return of what he has given • without any obligation to comply with his promise. who is not at fault. • the following rules shall be observed: (1) When the fault is on the part of both contracting parties. or authorizes the setting of a minimum wage for laborers. 1420. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense. • if the interest of justice so demands. • if the public interest will thus be subserved. or • by authority of law. These contracts • cannot be ratified. (2) When only one of the contracting parties is at fault. Art. • both parties being in pari delicto. • if the illegal terms can be separated from the legal ones. 1416. but the innocent one • may claim what he has given. or o ask for the fulfillment of what has been promised him. Art. 1410 . • neither may o recover what he has given by virtue of the contract. • he cannot o recover what he has given by reason of the contract. Art. the courts may. and • the prohibition by the law is designed for the protection of the plaintiff. Art. Art. Neither can the right to set up the defense of illegality • be waived. Art. o allow recovery of money or property delivered by the incapacitated person. When • the nullity proceeds from the illegality of the cause or object of the contract. the provisions of the Penal Code relative to the disposal of effects or instruments of a crime • shall be applicable to the things or the price of the contract. if public policy is thereby enhanced. When • the law fixes. Art. 1415. This rule shall be applicable • when only one of the parties is guilty. ART. 1412. and • a contract is entered into whereby a laborer undertakes to work longer than the maximum thus fixed. When money is paid or property delivered for an illegal purpose.31 . o the latter may be enforced.

§ they authorize the retention of what has been delivered or rendered by reason thereof. When a right to sue upon a civil obligation has lapsed by extinctive prescription. there is no right to demand the thing or price thus returned. o the Code of Commerce. The principles of estoppel are hereby adopted. § the obligor cannot recover what he has paid. o after the settlement of the debts of the deceased. after the annulment of the contract voluntarily returns the whole thing or price received. 1430. o he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered. ARCEO ATENEO LAW – C 2015 ART. 1427. • but one of the intestate heirs. • the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered. 1431. When a testate or intestate heir voluntarily pays • a debt of the decedent • exceeding the value of the property which he received by will or by the law of intestacy from the estate of the deceased. Civil obligations • give a right of action to compel their performance. 1425. When a minor between eighteen and twenty-one years of age who has entered into a contract without the consent of the parent or guardian. o a third person pays a debt § which the obligor is not legally bound to pay § because the action thereon has prescribed. o but after voluntary fulfillment by the obligor. notwithstanding the fact that he has not been benefited thereby. o the payment is § valid and § cannot be rescinded by the payer. • insofar as they are not in conflict with the provisions of o this Code. Art. 1421. Art. obligation. voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the Art. Art. • after an action to enforce a civil obligation has failed. Art. 1422. • not being based on positive law but on equity and natural law. Natural obligations. • is also void and inexistent. Art. and o cannot be denied or disproved § as against the person relying thereon. Estoppel may be REGINALD M. the payment is • effective and • irrevocable. Art. The defense of illegality of contracts is not available to third persons • whose interests are not directly affected. Art.OBLIGATIONS AND CONTRACTS Art. • the defendant voluntarily performs the obligation. A contract which is the direct result of a previous illegal contract. Art. 1424.32 . who has entered into a contract without the consent of the parent or guardian. o but the debtor later voluntarily reimburses the third person. TITLE III NATURAL OBLIGATIONS Art. When a minor between eighteen and twenty-one years of age. o pays a legacy in compliance with a clause in the defective will. Some natural obligations • are set forth in the following articles. there shall be no right to recover the same from the obligee who has spent or consumed it in good faith. • do not grant a right of action to enforce their performance. 1432. 1433. When. 1421 . TITLE IV ESTOPPEL Art. Obligations are • civil or • natural. 1423. 1426. 1429. 1428. When • a will o is declared void o because it has not been executed in accordance with the formalities required by law. Art. When • without the knowledge or • against the will of the debtor. o the Rules of Court and o special laws. Through estoppel • an admission or • representation o is rendered conclusive upon the person making it.

1437. Art. One who has allowed another to assume apparent ownership of personal property for the purpose of making any transfer of it. Art. if he received the sum for which a pledge has been constituted. • cannot. • one of them is misled by a person with respect to the ownership or real right over the real estate. 1439. When in a contract • between third persons • concerning immovable property. Art. in good faith and for value. o the latter is precluded from asserting his legal title or interest therein. 1434 . 1435. (3) The party misled must have been unaware of the true facts. If a person • in representation of another • sells or alienates a thing. (2) The party precluded must intend that the other should act upon the facts as misrepresented. and (4) The party defrauded must have acted in accordance with the misrepresentation.33 . When a person • who is not the owner of a thing • sells or alienates and delivers it. 1436. § provided all these requisites are present: (1) There must be fraudulent representation or wrongful concealment of facts known to the party estopped. 1434. o the former cannot subsequently set up his own title as against the buyer or grantee. and • later the seller or grantor acquires title thereto. made by the other to a pledgee who received the same REGINALD M. Art.OBLIGATIONS AND CONTRACTS • • § § in pais or by deed. Art. § as against the lessor or bailor. Estoppel is effective only as between • the parties thereto or • their successors in interest. o such title passes by operation of law to the buyer or grantee. 1438. Art. ARCEO ATENEO LAW – C 2015 ART. o set up his own title to defeat the pledge of the property. • A lessee or • a bailee o is estopped from asserting title to the thing leased or received.

The former is the trustee. No particular words • are required for the creation of an express trust. and the person for whose benefit the trust has been created • is referred to as the beneficiary. Acceptance by the beneficiary • is necessary. of the one paying the price of the sale. o the Rules of Court and o special laws § are hereby adopted. Art. No trust shall fail • because the trustee appointed declines the designation. Art. If • the price of a sale of property is loaned or paid by one person for the benefit of another and • the conveyance is made to the lender or payor to secure the payment of the debt. it being sufficient • that a trust is clearly intended. A person who establishes a trust • is called the trustor. Art. and o the legal estate is granted to one party o but the price is paid by another § for the purpose of having the beneficial interest of the property. 1441.OBLIGATIONS AND CONTRACTS TITLE V TRUSTS CHAPTER 1 GENERAL PROVISIONS Art. while the latter is the beneficiary. 1440. o the Code of Commerce. 1444. 1445. 1449. Art. The latter may • redeem the property and ART. However. 1448. • it being disputably presumed that there is a gift in favor of the child. legitimate or illegitimate. • his acceptance shall be presumed. Nevertheless.34 . The principles of the general law of trusts. 1447. No express trusts concerning • an immovable or • any interest therein o may be proved by parol evidence. CHAPTER 3 IMPLIED TRUSTS Art. Trusts are either • express or • implied. Art. o he nevertheless is either to have § no beneficial interest or § only a part thereof. 1443. ARCEO ATENEO LAW – C 2015 unless • the contrary should appear in the instrument constituting the trust. one in whom confidence is reposed as regards property for the benefit of another person • is known as the trustee. • no trust is implied by law. but the limitation laid down in article 1442 • shall be applicable. 1440 . 1446. CHAPTER 2 EXPRESS TRUSTS Art. Art. Art. 1442. 1450. o a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. • insofar as they are not in conflict with o this Code. Express trusts • are created by the intention o of the trustor or o of the parties. if the trust imposes no onerous condition upon the beneficiary. The enumeration of the following cases of implied trust • does not exclude others established by the general law of trust. There is also an implied trust • when a donation is made to a person o but it appears that although the legal estate is transmitted to the donee. There is an implied trust • when property is sold. if the person to whom the title is conveyed is a child. o if there is no proof to the contrary. REGINALD M. Art. Implied trusts • come into being by operation of law.

1451 .35 . Art. If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee. • guardian or • other person holding a fiduciary relationship o uses trust funds for the purchase of property and o causes the conveyance to be made § to him or § to a third person. When • land passes by succession to any person and • he causes the legal title to be put in the name of another. Art. If the fulfillment of the obligation is offered by the grantor when it becomes due. Art. If property is acquired through • mistake or • fraud. Art. a trust is established by operation of law in favor of the person to whom the funds belong. • he may demand the reconveyance of the property to him. Art. 1453. An implied trust may be proved • by oral evidence. REGINALD M. 1451. • a trust by virtue of law is established. When property is conveyed to a person • in reliance upon his declared intention to o hold it for. ARCEO ATENEO LAW – C 2015 ART. 1452. 1455. o the person obtaining it is. o a trust is created by force of law in favor of the others § in proportion to the interest of each. o a trust is established by implication of law for the benefit of the true owner. or o transfer it to § another or § the grantor. 1457. 1456. 1454. there is an implied trust in favor of the person whose benefit is contemplated. When any • trustee. Art.OBLIGATIONS AND CONTRACTS • compel a conveyance thereof to him. considered a trustee § of an implied trust § for the benefit of the person from whom the property comes. by force of law. Art. If • two or more persons agree to purchase property and • by common consent the legal title is taken in the name of one of them for the benefit of all.