Professional Documents
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OBLICON 1262 1422 Reviewer
OBLICON 1262 1422 Reviewer
ARTICLE 1283
If one of the parties in a case over an obligation can claim for damages against the other, then the
amount charged to the other can be used for compensation.
Basically if you don't pay and the other guy goes psycho, then you can sue him for damages
and then use whatever that was as compensation for whatever you had to pay.
ARTICLE 1284
If debts are rescissible or voidable, they can be used for compensation before the courts rescind
them.
Rescissible and voidable obligations are valid until judicially rescinded.
BUT, wala ring point, okay, because should the annulment be retroactive, it's as if there was
no compensation in the first place.
ARTICLE 1285
In compensation, rights can be reassigned, even to include a third party.
If you give consent to assignment, then you lose the right to the defense of compensation
versus a third party.
COMPENSATION BEFORE ASSIGNMENT: Assuming you did compensation already, if
you gave consent to assignment already, you have to do it all over again. The good thing is,
everyone else has to as well. So although you are now liable to a third party, you can still
collect from whoever was originally in the obligation.
COMPENSATION AFTER ASSIGNMENT
1. Assignment with the consent of debtor: if you reserve your right to the compensation
while consenting to assignment, you are only liable to the remaining.
2. Assignment with knowledge but without the consent of debtor: compensation is possible
to debts before assignment was made, but not after. Affects pending debts.
3. Assignment without knowledge of the debtor: compensation can be set up before or after
assignment; important is when debtor learns of the assignment.
ARTICLE 1286
When an exchange is made, compensation must also happen for the expenses incurred in order for
the exchange to be made.
Whoever claims compensation must pay for the expense of exchange.
ARTICLE 1287
Compensation can't be done when one of the debts arises from a gratuitous act, like paying for bail
money.
ARTICLE 1288
Compensation can't be done if one of the debts is a civil liability arising from a crime.
WHEN IS LEGAL COMPENSATION NOT ALLOWED BY LAW?
1. One of the debts arises from a depositum: a DEPOSIT [same thing as depositum] is
basically giving something to someone for safe-keeping. Breach of trust daw.
2. One of the debts arises from a commodatum: a COMMODATUM is when you lend
someone something not consumable to use for some time that will be eventually returned.
3. One of the debts arises from a claim for support due by gratuitous title: basically has to do
with your parents not saying that since they take care of you, it can't be used for
compensation if you owe them a certain amount of money.
4. One of the debts arises from civil liability arising from a penal offense: you can't use
whatever you acquired illegally for compensation. However, if the victim wants it, then
okay. Pertains only to the accused.
ARTICLE 1289
If a person has several debts, the rules of application of payments will apply to the order of
compensation.
That is, you have to specify which debt you are paying, etc.
ARTICLE 1290
When all prerequisites for compensation are present, compensation is automatic, even without the
knowledge of the creditors and debtors.
Consent of parties not required. Compensation by mere operation of law.
ARTICLE 1291
Obligations may be modified by changing the object or principal conditions; substituting the person
of debtor; subrogating a third person in the rights of the creditor.
NOVATION: relative extinguishment of an obligation by creating a new one in substitution
of it.
KINDS:
1. ORIGIN
a. LEGAL: takes place by operation of law.
b. CONVENTIONAL: takes place by agreement of parties.
2. HOW IT IS CONSTITUTED
a. EXPRESS: when it is declared in unequivocal terms.
b. IMPLIED: when the old and the new obligations are essentially incompatible.
3. EXTENT
a. TOTAL: old obligation completely gone.
b. PARTIAL/MODIFICATORY: modifications to original obligation.
4. SUBJECT
a. REAL/OBJECTIVE: change in object or principal conditions.
b. PERSONAL/SUBJECTIVE: when the person of the debtor is substituted or the
subrogation of a third person in the right of the creditor.
c. MIXED: combination of real and personal.
ARTICLE 1292
For novation to happen, it must be declared so in unequivocal terms.
REQUISITES OF NOVATION: a previous valid obligation; capacity and intention of parties
to modify or extinguish the obligation; modification or extinguishment of old obligation;
creation of a new valid obligation.
Novation is never presumed.
TEST OF INCOMPATABILITY: Whether they have an independent existence of each other.
They must both be impossible to make them incompatible, one has to give.
ARTICLE 1293
In novation, you can substitute a new debtor even without the knowledge of the old debtor, but not
without consent of the creditor.
Payment by the new debtor allows him rights in 1236 and 1237.
KINDS OF PERSONAL NOVATION
1. SUBSTITUTION: debtor is substituted. Old debtor being released from his obligation is
KEY.
a. EXPROMISION: new debtor takes initiative, old one doesn't know, with creditor
consent. Right of new debtor who pays: beneficial reimbursement.
b. DELEGACION: creditor accepts the new debtor to take old one's place, all parties
[old debtor, new debtor, creditor] must agree. Right of new debtor who pays:
reimbursement and subrogation.
customs.
NOMINATE CONTRACTS: specific name or designation in law.
ARTICLE 1308
The contact must bind both parties, its validity or compliance cannot be left to the will of one of
them.
ARTICLE 1309
The determination of the performance is left to a third person whose decision is not binding until it
is made known to both contacting parties.
A third person can appraise the value of obligation to either party.
ARTICLE 1310
The determination of performance made by a third person [in 1309] is not obligatory if it sucks.
If it sucks forreal, the courts handle it.
ARTICLE 1311
Contacts affect only the parties, the assigns, the heirs.
EXCEPTIONS: contracts that are not transmissible by their nature [involving personal
qualifications], by stipulation, by provision of law.
Third person who did not take part in the contract but is affected by it? You have no right to
demand anything.
STIPULATION POUR AUTRUI: favour to a third person who has a right to demand
fulfillment, assuming he says yez to the obligor.
a. CLASSES
1. Stipulation is intended for the benefit of such person.
2. Obligation is due from the promisee to the third person.
b. PREREQUISITES
1. Clearly agreed upon favour to the third person.
2. Third person must have communicated acceptance to obligor before revocation.
3. Stipulation in favour of third person must only be a part of the contract.
4. Should not be compensated by any kind of obligation.
5. Neither contracting party represents third party.
ARTICLE 1312
In contracts creating real rights, third persons who come into possession of the object of the contract
are included.
This is the exception to the rule that a contract only binds involved parties.
ARTICLE 1313
Creditors are protected in cases of contracts intended to defraud them.
In case third parties or attachments are made to the obligation. Keeps the creditor safe
from getting played like a nigger.
ARTICLE 1314
Contracting party that induces a third party to violate the contract is liable for damages.
Stranger and his unwarranted interference with a contract.
Presupposes the contract is valid and the third person has knowledge of the contract.
ARTICLE 1315
Contracts are perfected by mere consent.
ARTICLE 1316
Real contracts such as deposit, pledge, commodatum are not perfected until delivery of the object of
the obligation.
CLASSIFICATION OF CONTRACTS ACCORDING TO PERFECTION
1. CONSENSUAL CONTRACT: perfected by mere consent.
2. REAL CONTRACT: perfected by the delivery of the thing.
3. SOLEMN CONTRACT: that which requires compliance with certain formalities
prescribed by law. Perfected by acquiring special form.
STAGES IN THE LIFE OF A CONTRACT
1. PREPARATION/NEGOTIATION: no definite agreement yet; steps leading to perfection.
2. PERFECTION/BIRTH: definite agreement over subject matter and cause of the contract
and essential elements.
3. CONSUMMATION/TERMINATION: parties have performed respective obligations;
contract is fully accomplished, resulting to extinguishment.
PERFECTION means they are bound to the fulfillment of contract and its consequences.
ARTICLE 1317
No one may contract in the name of another without authorization or right by law to representation.
Any made like dut is unenforceable unless ratified by person in whose name it was made.
Ratification has to be before the other contracting party revokes it. Must be clear and
express.
PERSON BOUND BY THE CONTRACT OF ANOTHER? Guy who did the contract has to
be authorized or he as to have right by law to represent the guy whose named he used. AND
person whose name it was made in must act within his power.
If person in whose name the contract was made is not given notice, the guy who made the
contract in his name is liable.
ARTICLE 1318
There is no contract unless these prerequisites are met: consent of the contracting parties; object
certain which is the subject matter; cause of the obligation is established.
CLASSES OF ELEMENTS OF A CONTRACT
1. ESSENTIAL ELEMENTS: requisites of a contract. Without this, the contract does not
validly exist.
a. COMMON: those present in all contracts, like consent, object, cause.
b. SPECIAL: present in specific cases.
- as regards to FORM.
- as regards to SUBJECT MATTER.
- as regards to CONSIDERATION or cause.
2. NATURAL ELEMENTS: those presumed to exist in certain contracts in relation to the
nature of the contracts themselves.
3. ACCIDENTAL ELEMENTS: stipulations established by parties, like conditions, periods,
interest, penalty, etc.
ARTICLE 1319
Consent is the meeting of an offer and the acceptance upon the thing and the cause which are to
constitute the contract. Acceptance made by letter or telegram binds the offerer only at the time
when he came into the knowledge. The contract is presumed to have been entered into in the place
where the offer was made.
OFFER: proposal made by one party to another to enter into a contract. Must be certain.
ACCEPTANCE: manifestation of approval of the offeree to the offerer. Must be absolute.
QUALIFIED ACCEPTANCE: constitutes a counter offer. Basically rejection of the
original offer, becomes an attempt by parties to enter into a contract, but on a different basis.
ARTICLE 1354
Although the cause is not stated in the contract, presume it exists and is lawful, unless debtor says
otherwise.
Assume a person will not part with property unless there is reason to.
ARTICLE 1355
Lesion or inadequacy of cause does not invalidate a contract, unless there is fraud, mistake, undue
influence.
LESION: damage caused by the fact that the price is unjust or inadequate.
EXCEPTIONS: fraud, mistake, undue influence.
ARTICLE 1356
Contracts shall be obligatory, should all essential requisites for validity be present. But if the law
requires that a contract be in some form in order to be valid/enforceable, it has to happen. In such
cases, the right of the parties cannot be exercised.
FORM OF A CONTRACT: refers to the manner which a contract is executed.
CLASSIFICATIONS OF CONTRACTS:
1. INFORMAL: any form, as long as all essentials are there.
2. FORMAL: required by law to be in a specific form.
THE FORM IS REQUIRED IN THE FOLLOWING CASES
1. Law requires contract to be valid.
2. Law requires to be enforceable/proved.
3. Law requires contract to be in some form for convenience of parties or third parties.
ARTICLE 1357
If the law requires a document or special form, the contracting parties may compel each other to
observe that form upon contract perfection.
ARTICLE 1358
The following must appear in a public document:
(1) acts and contract which have for their object, the creation, transmission, modification or
extinguishment of real rights over immovable property;
(2) the cession, repudiation, renunciation of hereditary rights or conjugal gain;
(3) power to administer property or any other power for its object;
(4) the cession of actions or right proceeding from an act appearing in a public document.
CESSION: formal giving up of rights.
ARTICLE 1359
A party can ask for reformation of an instrument if true intention was not expressed or by reason of
mistake, fraud, inequitable conduct, accident.
REFORMATION: remedy where a written instrument is amended or rectified so as to
express to the real agreement or intention of the parties.
REQUISITES OF REFORMATION:
1. meeting of the minds of parties.
2. written instrument does not express the true agreement or intention of the parties.
3. failure to express the true intention is due to mistake, fraud, inequitable conduct, accident.
ARTICLE 1372
Even though a contract's terms are general, they shall not be seen as different than what the parties
intended.
ARTICLE 1373
If some stipulation of any contract should admit of several meanings, go with the meaning where
the contract can be carried out.
ARTICLE 1374
Various stipulations of a contract must be interpreted altogether.
ARTICLE 1375
Keep all words within the context of the contract.
ARTICLE 1376
The usage or custom of the place shall be borne in mind in the interpretation of contract
ambiguities.
ARTICLE 1377
The interpretation of obscure words/stipulations shall not favour the party who caused the obscurity.
ARTICLE 1378
Impossible to settle doubts? Least transmission of rights and interest shall prevail. Onerous
contract? Settle in favour of the greatest reciprocity of interests. Doubts still and parties' intention is
unclear? Contract is null and void.
ARTICLE 1379
Principles of interpretation should also be observed in the construction of contract.
ARTICLE 1380
Contracts validly agreed upon may be rescinded in the cases established by law.
RESCISSIBLE CONTRACTS: validly agreed upon because all essential elements exist but
its enforcement would cause injustice.
RESCISSION: remedy granted by law to the contracting parties in order to make amends
for damages caused by a valid contract.
REQUISITES OF RESCISSION:
1. Contract must be valid.
2. There must be lesion or pecuniary prejudice to one of the parties or a third party.
3. Rescission must be based on a case provided by law.
4. There must be no other legal remedy to obtain reparation for damages.
5. Party asking to rescission must be able to return what he is obliged to restore.
6. Object of the contract must not be in the possession of a third party.
7. the period for filing rescission action must not have prescribed.
ARTICLE 1381
The following contracts are recissible:
(1) those entered by guardians whose wards suffer lesion by more than of the value of the
object.
(2) Same as above, but by representatives.
(3) Those undertaken in fraud of creditors when the latter cannot collect claims due to them.
(4) Those with objects under litigation.
RATIFICATION: you voluntarily say yes to defective crap in the contract which would not
have been binding until you decided to do diz. It cleans the contract, and you can't annul it
anymore.
ARTICLE 1393
Ratification may be expressed expressly or tacitly. It is understood that there is a tacit ratification if
the person who has the right to invoke it acts in implication to waive his right.
KINDS OF RATIFICATION
1. EXPRESS oral or written.
2. IMPLIED/TACIT may take diverse forms, like silence, or acts showing approval of the
contract, etc.
REQUISITES OF RATIFICATION
1. Must be knowledge of the reason which renders the contract voidable.
2. Such reason must have ceased.
3. Injured party must have executed an act which necessarily implies an intention to waive
his right.
ARTICLE 1394
Ratification may be effected by a guardian.
ARTICLE 1395
Ratification does not require the conformity of the contracting party who has no right to bring the
action for annulment.
ARTICLE 1396
Ratification cleanses the contract from all its defects.
ARTICLE 1397
The action for the annulment can be brought in by strangers, but not the bad people who did
intimidation, etc.
ARTICLE 1398
An obligation having been annulled, the contracting parties shall restore to each other the objects of
the obligation. In obligations to render service, the value is the basis for damages.
ARTICLE 1399
When the defect in the contract is due to incapacity of a party, he only has to give back to the extent
that he has benefitted.
Exception to 1398.
ARTICLE 1400
If you have to return the object and you can't cause you lost it, you have to return the value of the
thing + fruits of it, with interest from the same date.
ARTICLE 1401
The action for annulment is extinguished when the object to be returned is lost through fraud or
fault of the person who has a right to institute the proceedings.
Right of action is based on the incapacity of any of the contracting parties.
ARTICLE 1402
If you can't restore what you have to return, there is no annulment.
Even due to fortuitous events.
ARTICLE 1403
The following contracts are unenforceable unless ratified:
(1) those entered in the name of another without authorization to.
(2) Noncompliance with the State of frauds. The following can be done upon authorization in
writing: an agreement that can't be performed within a year of making it; special promise to
answer for the debt, default, miscarriage of another; agreement made in consideration of
marriage other than a mutual promise to marry; agreement for the sale of goods for less than
PhP500; a leasing agreement longer than a year; representation to the credit of a third
person.
(3) Those where both parties can't give consent.
UNENFORCEABLE CONTRACTS: cannot be enforced by law due to contract defects
until cured or ratified.
KINDS OF UNENFORCEABLE CONTRACTS: see above.
UNAUTHORIZED CONTRACTS: those entered in the name of another without
authorization to.
ARTICLE 1404
Unauthorized contracts are governed by 1317.
ARTICLE 1405
Contracts infringing the State of Frauds are ratified by the failure to object and by the acceptance of
benefits in the contract.
ARTICLE 1406
When a contract is enforceable under the Statute of Frauds and a public document is necessary for
its registration in the Registry of Deeds, the parties may avail themselves of the right under article
1357.
ARTICLE 1407
If both parties cannot give consent, authorize someone to. If ratification is made by the authorized
for both parties, contract is valid from inception.
One party lang? Voidable.
ARTICLE 1408
Unenforceable contracts cannot be assailed by a third person.
ARTICLE 1409
The following contracts are inexistent and void from the beginning:
(1) those against the goody goody crap.
(2) Those which absolutely simulated.
(3) Those with a cause or object that did not exist at the time of transaction.
(4) Those whose object is outside the commerce of men.
(5) Those which contemplate an impossible service.
(6) Those where the intention of the parties relative to the object is not clear.
(7) Those expressly prohibited or declared void by law.
VOID CONTRACTS: generally produce no effects whatsoever.
INEXISTENT CONTRACTS: agreements that lack elements or do not comply with
formalities essential in a contract.
CHARACTERISTICS OF VOID/INEXISTENT CONTRACTS:
1. No effects.
2. Can't be ratified.
3. Right to set up defense of illegality can't be waived.
4. Action or defense for the declaration of its inexistence does not prescribe.
5. The defense of illegality is not available to third persons whose interests are not directly
affected.
6. Can't give rise to a valid contract.
ARTICLE 1410
Action or defense for the declaration of its inexistence does not prescribe.
Secure its voidness judicially.
ARTICLE 1411
When the contract is null because the cause or object is illegal, and the act constitutes a criminal
offense, there will no be no action against teach other. They will instead be prosecuted.
Rule is applicable when one party is guilty. The innocent one can just return his crap.
ARTICLE 1412
If the act above doesn't constitute a criminal offense:
(1) If both parties are at fault, neither can recover what he was given by virtue of the contract or
demand the performance of the other's undertaking.
(2) If one party is at fault, he cannot recover what he was given or ask for fulfillment of what
has been promised to him. The other may demand the return of what he gave without any
obligation to comply on his end.
ARTICLE 1413
Interest paid in excess of interest allowed by the usury laws may be recovered by the debtor, with
interest thereon from the date of payment.
ARTICLE 1414
When money is paid or property delivered for an illegal purpose, the contract may be rejected by
one of the parties before it has been completed.
ARTICLE 1415
If one party in an illegal contract can't give consent, he can recover his crap.
ARTICLE 1416
If the agreement is prohibited but not illegal, parties may recover what was paid or delivered.
ARTICLE 1417
If an object has a set price, any amount paid over that price is recoverable.
ARTICLE 1418
A laborer can demand compensation for service rendered beyond time limit.
ARTICLE 1419
If a laborer accepts a wage lower than minimum, he can recover the difference.
ARTICLE 1420
In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter
may be enforced.
If indivisible and illegal, the whole contract is void and unenforceable.
The legal parts are still enforceable.
ARTICLE 1421
The defense of illegality if contracts is not available to third persons whose interests are not directly
affected.
Voidable and unenforceable? Third person can't make epal.
Void and illegal? Third person can make epal if his interest is directly affected.
ARTICLE 1422
A contract which is the direct result of a previous illegal contract is also void and inexistent.