OBLIGATION – juridical necessity to give, to do or not to do

4 ELEMENTS OF OBLIGATION
1. ACTIVE SUBJECT (creditor/obligee) –he who has a duty
2. PASSIVE SUBJECT (debtor/obligor) –he who has a right
3. OBJECT/PRESTATION – subject matter
4. JURIDICAL/LEGAL TIE (vinculum juris/efficient cause) – tie, which binds or
connects the parties to the obligation

CIVIL OBLIGATION
enforceable by court action
not enforceable by court action

NATURAL OBLIGATION
derived from positive law
derived from equity & justice

5 SOURCES OF OBLIGATION
1. LAW
2. CONTRACTS
3. QUASI-CONTRACTS – arise from lawful, voluntary acts; no one shall be unjustly
enriched or benefited at the expense of another
2Kinds:
a. Negotiorum gestio - voluntary management of the property or affairs of
another without the knowledge or consent of the latter
b. Solutio indebitti - something is received when there is no right to demand
it; unduly delivered through mistake
4. CRIMES/ACTS/OMISSIONS punished by law – arise from civil liability that is a
consequence of a criminal offense
5. QUASI-DELICT/TORTS/CULPA AQUILIANA – arise from damage; fault/negligence

DILIGENCE OF A GOOD FATHER OF A FAMILY

- care need to be exercised by a debtor to deliver/give determinate thing
Exception: When law/stipulation of parties requires a different standard of care
(slight/extraordinary diligence).

When creditor is entitled to the fruits

Rule: The creditor has personal right (right to ask for delivery) from the time the
obligation to deliver arises.
But NO real right (right enforceable against the whole world) until it is delivered.

3 KINDS OF FRUITS
1. NATURAL – w/o human intervention
2. INDUSTRIAL – w/ human intervention; through cultivation or labor
3. CIVIL – derived by virtue of juridical relation
Creditor’s rights if debtor fails to comply w/ the obligation
1. Determinate
a. Demand specific performance
b. Demand recission or cancellation
c. Demand payment of damages only
2. Generic
a. Performance
b. Damages
c. Obligation be complied at debtor’s expense

Creditor’s rights if debtor does in contravention

1. Damages
2. Ask it be UNDONE at debtor’s expense

FORTUITOUS EVENT – cannot be foreseen, if foreseen, inevitable

- Acts of Man; event independent of the will of the obligor
but not of the other human wills (fire, robbery, war)
Force majeure - Acts of God; totally inedependent of the will of every human
being (earthquake, flood, rain)

General Rule: No person liable to fortuitous event.

Exceptions:
1. Law states
2. Stipulation/contract states
3. Assumption of risk
4. Delay
5. Debtor promises deliver to 2/more persons who do not have same interest (bad
faith)

EFFECTS OF FORTUITOUS EVENT to thing to be delivered

- extinguish the obligation if determinate; generic does not extinguish the
obligation

3 MISCELLANEOUS RULES ON PERFORMANCE OF OBLIGATION

1. When to deliver determinate, accessions (additions/ improvements) and
accessories (joined/included with the principal) are INCLUDED even not mentioned.
2. If debtor fails to do, it shall be DONE AT HIS EXPENSE, same with doing the
contravention; poorly done be undone.
3. In obligation not to do, and obligor does what is forbidden, shall be UNDONE AT
HIS EXPENSE.

4 GROUNDS; debtor liable for damages

1. Default/mora
2. Fraud/dolo
3. Negligence/culpa
4. Contrary to terms of obligation

1. DEFAULT/MORA – delay
3kinds
a. Mora solvendi – debtor’s delay to give (real ob.), to do (personal ob.)
b. Mora accipiende – creditor’s delay to accept
c. Compensatio Morae – delay of both in reciprocal obligation

CONCEPT OF DELAY
General Rule: No demand, No delay
Exceptions:
1. Law states
2. Obligation states
3. Time is the essence
4. Demand be useless if delay
5. Debtor guilty of delay

EFFECTS OF DELAY
1. Damages
2. When to deliver determinate thing, STILL LIABLE in fortuitous event.

When DEMAND is not necessary

1. When the obligation so provides
2. When the law so provides
3. When the time is of the essence
4. When demand would be useless
5. When there is a performance by a party in reciprocal obligations

2. FRAUD/DOLO/DECEIT – deliberate or intentional evasion of the normal

fulfillment of an obligation; malice or dishonesty; bad faith; design to mislead or
deceive another

2Kinds
a. Dolo causante/Causal fraud – employed in the execution of the contract
which vitiates consent
b. Dolo incidente/Incidental fraud – committed in the performance of an
obligation already existing because of contract

3. NEGLIGENCE/CULPA – voluntary act/omission; no bad faith intended

3Kinds
a. Culpa aquiliana/Civil negligence – quasi-delict/torts
b. Culpa contractual/Contractual negligence – breach
c. Culpa criminal/Criminal negligence – crime/delict
4. Contrary of the terms of obligation
2 RULES OF PRINCIPAL & INSTALLMENT
1. Receipt of principal w/o mention of interest, presumed interest is paid also.
2. Receipt of latter installment w/o mention of prior installment, presumed prior
installment is paid also.

4 SUCCESSIVE RIGHTS OF CREDITOR to satisfy claim against DEBTOR

1. Exact payment
2. Attach debtor’s properties
3. Accion subrogatoria – exercise rights & actions except inherent in person
4. Accion pauliana – cancel acts/contracts by debtor to defraud creditor

TRANSMISSIBILITY OF RIGHTS
General Rule: ALL RIGHTS are transmissible.
Exceptions:
1. Law states
2. Contract states
3. Obligation is purely personal

Kinds of Obligation
1. Pure
2. Conditional
3. Alternative
4. Facultative
5. Joint
6. Solidary
7. Divisible
8. Indivisible
9. Obligation w/ a period
10. Obligation w/ a penal clause
11. Unilateral and Bilateral
12. Real and Personal
13. Determinate and Generic
14. Civil and Natural
15. Legal, Conventional and Penal

1. PURE OBLIGATION
- w/o condition, no specific date is mentioned, immediately demandable

2. CONDITIONAL OBLIGATION
- there is condition in performance; future & uncertain
Condition - future and uncertain event

2Kinds
a. Suspensive condition – will give RISE to an obligation
b. Resolutory condition – will EXTINGUISH an obligation already existing
6 MISCELLANEOUS RULES ON CONDITIONAL OBLIGATION
1. Impossible conditions, contrary to law, shall ANNUL obligation.
2. The condition not to do an impossible thing is considered not agreed upon.
3. The condition that happens in determinate time, EXTINGUISHES obligation.
4. The condition that happens in INDETERMINATE time, obligation only effective at
arrival.
5. The condition is fulfilled if DEBTOR prevents fulfillment.
6. The effect of conditional obligation, once fulfilled:
- to give: retroact to the day of constitution of obligation
- has reciprocal prestations: fruits & interests be mutually compensated
- has unilateral obligation: debtor shall give fruits & interests

RULES in case of Loss, Improvement, or Deterioration of thing during the

pendency of condition
1. LOST
a. w/ debtor’s fault – damages
b. w/o debtor’s fault – extinguishes obligation

2. DETERIORATION
a. w/ debtor’s fault - (1) cancel obligation & damages; or (2) fulfill obligation w/
damages
b. w/o debtor’s fault – creditor suffer impairment

3. IMPROVEMENT
a. By nature/time – benefit to creditor
b. at expense of debtor – debtor no right than that granted to usufructuary (debtor
no right to compensate amount for improvement)

EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITION

General Rule: The obligation becomes effective retroactively to the day
obligation was constituted.
Exceptions:
1. In reciprocal obligation, fruits & interests during pendency of condition shall
compensate each other.
2. In unilateral obligation, debtor gets fruits & interests unless there is a contrary
intent.

3 EFFECTS OF FULFILLMENT OF RESOLUTORY CONDITION

1. Extinguish obligation.
2. Both parties restore what they received plus fruits & interests.
3. The rule on L, D, or I will apply to person who has to return the thing.

When one of debtors in reciprocal obligation does not comply w/ his obligation
1. The right of injured party is (1) cancel contract & damages; or (2) fulfill
obligation & damages
3 Kinds of Obligation (According to PERSON OBLIGED)
1. UNILATERAL – only 1 party obliged to comply
2. BILATERAL – both parties; performance not same time
3. RECIPROCAL – both parties; performance same time

3. OBLIGATION W/ A PERIOD
- demandability/extinguishment subject to the expiration of period

PERIOD – interval of time; either suspends demandability or produces

extinguishment

DAY CERTAIN – must come, not known when

7 CASES CONSIDERED TO BE “OBLIGATION W/ A PERIOD”

1. Little by little
2. As soon as possible
3. From time to time
4. At any time i have the money
5. In partial payments
6. When i am in a position to pay
7. When my means permit me to do so

PERIOD
certain
future only
(*influence upon obligation) only upon its demandability
CONDITION
uncertain
future/past but unknown
(*) on the very existence of obligation itself

FOR WHOSE BENEFIT IS THE PERIOD?

General Rule: Both the debtor & creditor.
Therefore, NEITHER of them can demand performance of obligation.
Exception: If the term of obligation has to favor one of them.

5 INSTANCES WHEN DEBTOR LOSES RIGHT TO USE “PERIOD”

1. When debtor becomes insolvent
2. When debtor does no furnish guaranties or securities promised
3. When guaranties or securities given have been impaired or have disappeared
4. When debtor violates an undertaking
5. When debtor attempts to abscond

4. ALTERNATIVE OBLIGATION
- w/ 2 or more prestations, only 1 is due.

5. FACULTATIVE OBLIGATION
- w/ ONLY 1 prestation but can be substituted.
ALTERNATIVE prestations LOST w/ debtor’s fault
Creditor entitled to damages but needs ff. requisites:
1. Debtor can choose.
2. All prestations lost/become impossible due to debtor’s fault.

ALTERNATIVE OBLIGATION
several prestations due, giving one is sufficient
right to choose (debtor) unless granted to creditor
If 1 of the prestation is illegal, others may be valid, obligation remains
loss/impossibility of ALL prestations due, w/o debtor’s fault, extinguishes
obligation
FACULTATIVE OBLIGATION
one prestation due, but can be substituted
right to choose DEBTOR ONLY
nullity of principal carries w/ it nullity of accessory/
substitute
loss/impossibility of prestation due, w/o debtor’s fault, extinguishes obligation

(3) SUMMARY OF RULES, OBLIGATIONS, & RIGHTS OF DEBTOR IN ALTERNATIVE

OBLIGATION
1. If 1 of prestations lost through fortuitous event, shall still be perform by choosing
(creditor) from the remainder.
2. If 1 of prestations lost through debtor’s fault, creditor may claim any of
remainders w/ damages.
3. If ALL prestations lost through debtor’s fault, creditor choose price w/ damages.

RULES on LOSS/DETERIORATION of the thing intended as SUBSTITUTE in

FACULTATIVE OBLIGATION
1. If there is a loss/deterioration of thing intended as substitute, debtor is NOT
liable if NOT HIS FAULT.
But if substitution is already made, debtor is liable for loss of substitute when in
DELAY, NEGLIGENCE, or FRAUD.

6. JOINT OBLIGATION
- obligation is to be paid proportionately by debtors or to be demanded
proportionately by creditors

7. SOLIDARY OBLIGATION
- each one of debtors has right to render or each one of creditors has right to
demand the entire compliance w/ prestation

MAXIMS & SYNONYMS

 JOINT Obligation
“To each his own”
proportionate

SOLIDARY Obligation
“One for all, all for one”
individually & collectively

(3) SOLIDARY OBLIGATION EXIST ONLY IF: *RULES

1. Law states
2. Stipulation states
3. Nature of obligation requires

2 PRESUMPTIONS THAT OBLIGATION IS JOINT

1. The debts be divided as many shares as there are debtors/creditors.
2. The debtors/creditors are distinct from one another.

8. DIVISIBLE OBLIGATION
- prestation is capable of partial performance

9. INDIVISIBLE OBLIGATION
- prestation incapable of partial performance

10. OBLIGATION W/ A PENAL CLAUSE

- one w/ accessory undertaking attached to obligation to assume greater liablity in
case of breach/non-fulfillment of obligation

3 PURPOSES OF PENAL CLAUSE

1. Ensure performance of obligation
2. Substitute for damages & interest in case of noncompli-ance
3. Penalize debtor in case of breach

In case obligation has a PENAL CLAUSE

General Rule: Penalty takes the place of damages & interest in case of non-
compliance.
Exceptions:
1. Stipulation states.
2. Debtor refuse to pay penalty.
3. Debtor guilty of fraud in performance of obligation.

NULLITY OF PRINCIPAL OBLIGATION OR THE PENAL CLAUSE

Nullity of principal obligation = nullity of penal clause
Nullity of penal clause = NOT nullity of principal obligation

10 MODES OF EXTINGUISHMENT OF OBLIGATIONS

1. Payment or performance
2. Prescription
3. Compensation
4. Confusion/merger
5. Condonation/remission
6. Fulfillment of Resolutory condition
7. Annulment
8. Rescission
9. Novation
10. Loss of thing due

1. PAYMENT/PERFORMANCE
- Payment means delivery of money & performance of obligation

2 PLACE OF PAYMENT
1. At place agreed upon
2. If w/o agreement
a. Object is indeterminate – paid at domicile of DEBTOR
b. Object is determinate – place of thing at the time of constitution of obligation

4 SPECIAL MODES OF PAYMENT

a. Application of payment
b. Cession
c. Tender of payment & consignation
d. Dation in payment

a. APPLICATION OF PAYMENT
- designation of debt to w/c payment must be applied when debtor has several
obligations of same kind in favor of same creditor.

3 REQUISITES OF APPLICATION OF PAYMENT

1. Only 1 debtor & 1 creditor
2. 2 or more debts, same kind
3. All debts are due
4. Insufficient payment to extinguish ALL debts

3 RIGHTS TO MAKE APPLICATION OF PAYMENT

1. Right belongs to DEBTOR.
2. If debtor does not avail, creditor can give him receipt designating the debt from
which payment will be applied.
3. If debtor accepts the receipt, he cannot complain unless THERE IS just cause to
invalidate the contract.

b. CESSION
- debtor abandons ALL his property for creditor’s benefit to obtain payment from
proceeds of his property

5 REQUISITES OF VALID CESSION

1. 1 debtor & 2 or more creditors
2. Debtor is in partial/total insolvency.
3. Debtor to deliver ALL his property to creditors
4. Debt is due & demandable.
5. Creditors must sell the properties & apply the proceeds to their respective
credits proportionately.

c. DATION IN PAYMENT (dacion en pago)

- alienation of property to the creditor in satisfaction of debt

3 REQUISITES OF DACION IN PAYMENT

1. Consent of creditor
2. NOT prejudicial to another creditor
3. Debtor not insolvent declared by a judicial decree

CESSION
all properties
requires more than 1 creditor
NOT act of novation
NOT transfer ownership
requires partial/total insolvency

DACION IN PAYMENT
NOT all properties
NOT require all creditors
act of novation
transfer ownership
may happen during solvency of debtor

d. TENDER OF PAYMENT & CONSIGNATION

TENDER OF PAYMENT – act of offering the creditor what is due to him w/ a
demand that the creditor accept it
CONSIGNATION – act of depositing thing due w/ the court when creditor
cannot/refuses acceptance of payment

5 REQUISITES OF CONSIGNATION
1. Debt due.
2. Creditor refused the tender of payment w/o just cause
3. Previous notice of consignation already given to persons interested in fulfillment
of obligation
4. Consignation of thing/amount due
5. Subsequent notice of consignation to interested persons

5 VALID CONSIGNATION W/O PREVIOUS TENDER OF PAYMENT

1. Creditor is absent/unknown.
2. Creditor is incapacitated to receive at time it is due.
3. Creditor refused to give a receipt, w/o just cause.
4. 2 or more persons claim the right to collect.
5. Title of obligation has been lost.

2. LOSS OF THING DUE

- perishes, disappears, or goes out of commerce; existence is unknown; cannot be
recovered

3 REQUISITES TO EXTINGUISH OBLIGATION DUE TO LOSS

1. Determinate thing.
2. W/o debtor’s fault.
3. No delay.

3. CONDONATION/REMISSION
- gratuitous abandonment of right by the creditor

3 REQUISITES OF A VALID CONDONATION/REMISSION

1. It must be gratuitous.
2. Accepted by obligor.
3. Obligation is demandable.

4. CONFUSION/MERGER
- meeting in 1 person of qualities of debtor & creditor w/ same obligation

3 REQUISITES OF VALID CONFUSION/MERGER

1. The merger of characters of debtor & creditor must be in same person.
2. Take place between principal debtor & creditor.
3. Clear & definite.

5. COMPENSATION
- 2 persons are debtors & creditors of each other

6 ESSENTIAL REQUISITES OF COMPENSATION

1. Parties are principal creditors and principal debtors or each other
2. Both debts consist in a sum of money, or of consumable things of the same kind
and quality
3. Two debts are due and demandable
4. Two debts are liquidated
5. No retention or controversy commenced by a third person

(2) CLASSES OF COMPENSATION

1. As to effect
a. TOTAL – obligations completely extinguished.
b. PARTIAL – a balance remains

2. As to origin or cause
a. LEGAL – by law
b. VOLUNTARY/CONVENTIONAL – agreement of parties
c. JUDICIAL – order from the court
d. FACULTATIVE – 1 of parties can choose/oppose claiming compensation

6. NOVATION
- substitution/change of obligation
- substitution of debtor
- subrogation of creditor
- total or partial extinction of an obligation through the creation of a new one
which substitutes it

(3) OBLIGATIONS MAY BE MODIFIED BY:

1. Changing object/principal conditions. (REAL NOVATION)
2. Changing the person of debtor/creditor. (PERSONAL NOVATION)
a. Substitution – change of debtor
b. Subrogation – third person is subrogated in the rights of the creditor
3. Changing person of the parties & the objects of principal condition. (MIXED
NOVATION)

4 REQUISITES OF NOVATION
1. Previous valid obligation
2. Capacity and intention of the parties to modify or extinguish the obligation
3. Modification or extinguishment of the obligation
4. Creation of a new valid obligation

2 FORMS OF NOVATION BY SUBSTITUTION OF DEBTOR

1. EXPROMISION – w/ consent of creditor, NO consent of old debtor
2REQUISITES
a. Initiative of 3rd person.
b. Consent of creditor.

2. DELEGACION – all must agree (creditor, old debtor, new debtor)

3 REQUISITES
a. Initiative from old debtor.
b. Consent of debtor.
c. Acceptance by creditor.
General rule:
The old debtor is not liable to the creditor in case of insolvency of the new debtor

Exceptions:
1. The said insolvency was already existing and of public knowledge (even not
known to the old debtor)
2. The insolvency was already existing and known to the debtor (even not of public
knowledge)

7. SUBROGATION
- substitution of one person in the place of a creditor with reference to a lawful
claim or right

2 KINDS OF SUBROGATION
1. CONVENTIONAL – consent of original parties & 3rd person
2. LEGAL – by operation of law
a. creditor pays another preferred creditor even w/o debtor’s knowledge
b. 3rd person pays the express approval of debtor
c. 3rd person pays even w/o knowledge of debtor

CONTRACT –meeting of minds between two persons when an offer by one party is
accepted by the other
 - one of the sources of obligation
Obligation - legal tie or relation itself that exists after a contract has been
entered into

LMGPP
- Law
- Morals - norms of good and right conduct in a community
- Good Customs - habits and practices; long usage
- Public Order - public safety; public weal
- Public Policy - refer also to considerations which are moved by the common good

3 ELEMENTS OF CONTRACT
1. ESSENTIAL – w/o them, contract cannot exist
a. CONSENT of contracting parties
b. OBJECT CERTAIN – subject matter
c. CAUSE/CONSIDERATION
In some contracts, ff are also essential:
d. FORM
e. DELIVERY

2. NATURAL – found in certain contract, presumed to exist unless stipulated. Eg.

warranty

3. ACCIDENTAL – various particular stipulations that may be agreed upon by

contracting parties. Eg. conditions, period, interest, penalty

(7) CLASSIFICATION OF CONTRACTS

According to:
1. PERFECTION/FORMATION
a. CONSENSUAL – perfected by mere consent
b. REAL – perfected by delivery of the thing
c. FORMAL/SOLEMN – requires compliance with certain formalities prescribed
by law

2. PARTIES OBLIGATED
a. UNILATERAL – only 1 has obligation
b. BILATERAL – both parties require to render reciprocal prestations

3. CAUSE
a. ONEROUS – exchange of considerations or prestation/promise of a thing or
service
b. GRATUITOUS – no consideration received in exchange of what is given;
liberality of the benefactor or the giver. Eg. Donation
c. REMUNERATORY – something is given for benefit/service that had been
rendered previously; purpose is to reward the service
4. RISK OF FULFILLMENT
a. COMMUTATIVE – equivalent values are given by both parties
b. ALEATORY – fulfillment of contract depends on chance (eg. insurance)

5. IMPORTANCE
a. PRINCIPAL – contract may stand alone (eg. sale, partnership)
b. ACCESSORY – existence depends on another contract (pledge, guarantee)
c. PREPARATORY – contract not an end by itself but a means thru w/c other
contracts may be made (eg. agency)

6. NAME
a. NOMINATE – contract given a particular/special name (eg. partnership)
b. INNOMINATE – not given special name (eg. I give that you may give)
1) do ut des - i give that you may give (barter)
2) do ut facias - i give that you may do
3) facio ut des - i do that you may give
4) facio ut facias - i do that you may do

7. SUBJECT MATTER
a. Contracts involving things
b. Contracts involving rights/credits
c. Contracts involving services

3 STAGES OF CONTRACT
1. PREPARATION/CONCEPTION – preparatory steps to perfect contract
2. PERFECTION/BIRTH – meeting of minds between 2 contracting parties
3. CONSUMMATION/TERMINATION – terms of contract are performed, & contract is
fully executed

5 BASIC PRINCIPLES/CHARACTERISTICS OF A CONTRACT

1. PRINCIPLE OF AUTONOMY (liberty to contract)
Provided they are not contrary to: LMGPP
a. Law
b. Morals
c. Good customs
d. Public order
e. Public policy

2. MUTUALITY OF CONTRACTS
- the contract must bind both parties; its validity/compliance cannot be left to
the will of one of them

3. RELATIVITY OF CONTRACTS
- Contracts take effect only between the parties, their assigns & heirs except when
there are rights & obligations not transmissible:
a. by their nature
b. by stipulation (stipulation por autri)
c. by provision of law

4. CONSENSUALITY OF CONTRACTS
- Contracts are perfected by mere consent
Exceptions:
a. REAL CONTRACTS – perfected by delivery
b. FORMAL/SOLEMN CONTRACTS – special form required for its perfection

5. OBLIGATORINESS OF CONTRACTS
- The contract, once perfected, has the force of law between parties which bound
to comply in good faith

4 KINDS OF INNOMINATE CONTRACTS

1. I give that you may give
2. I do that you may do
3. I give that you may do
4. I do that you may give

4 RULES FOR INNOMINATE CONTRACTS

1. Agreement of parties
2. Law on Obligations & Contracts
3. Rules on most analogous nominate contract
4. Customs of place

STIPULATION POR AUTRI

- stipulation in favor of 3rd person

5 REQUISITES OF STIPULATION POR AUTRI

1. Stipulation in favor of 3rd person
2. Stipulation is only PART, not the whole of the contract.
3. Th favorable stipulation should not be conditioned or compensated by any kind
of obligation whatever
4. 3rd person must accept & say it to debtor before its revocation/cancellation
5. Neither of both parties be the legal representation/authorization of 3rd person

CONSENT
- meeting of offer (certain) & acceptance (absolute) upon a thing

5 REQUISITES OF CONSENT
1. Must be given by 2 or more parties
2. Parties are capacitated to enter into a contract
3. No vitiation of consent
4. No conflict between declared & intended
5. Legal formalities must be complied

7 RULES ON OFFER/ACCEPTANCE
1. An offer must be certain.
2. Business advertisements for sale are NOT offers but ONLY invitations to make an
offer.
3. Advertisements for bidders are ONLY invitations.
4. An acceptance made by letter/telegram does NOT bind offeror EXCEPT from the
TIME it came to his knowledge.
5. An offer made through an agent is accepted from the TIME the acceptance is
done through an agent.
6. An offer is ineffective upon death, insanity, insolvency, of EITHER party BEFORE
acceptance is made.
7. When offeror allowed offeree a certain period to accept, offer MAY be
withdrawn AT ANYTIME unless there is something PAID/PROMISED. (option contract
& option money)

3 persons who CANNOT GIVE CONSENT to a contract (if entered into, contract is
voidable)
1. UNEMANCIPATED MINORS
2. INSANE/DEMENTED PERSONS (unless they acted DURING LUCID INTERVAL)
3. DEAF-MUTES who DO NOT know how to write

DEMENTED PERSON – NOT exactly insane; difficult to distinguish right from wrong

LUCID INTERVAL – period when an INSANE has acquired SANITY temporarily,

therefore, capacitated to enter into a valid contract

2 RULES on persons WHO CANNOT GIVE CONSENT to a contract

1. Age of majority is 18 yrs old
2. A contract entered into by UNEMANCIPATED MINOR w/o parents/guardian’s
consent is voidable, except:
a. Minor MISREPRESENTS his age (estoppel)
b. Contract involves sale & delivery of necessities to minor

5 VICES OF CONSENT (VIMFU)

- NOTE: When there is a DEFECTIVE CONSENT of EITHER of parties, contract is
voidable; Remedy: annulment of contract.
1. MISTAKE/ERROR
2. FRAUD/DECEIT
3. VIOLENCE
4. INTIMIDATION
5. UNDUE INFLUENCE

1. MISTAKE/ERROR
- wrong conception & lack of knowledge upon a thing

(2) MISTAKES W/C VITIATES CONSENT

It should refer to:
1. substance of thing that is the OBJECT of contract
2. conditions w/c MOVED either/both parties to enter into contract

4 RULES ON MISTAKE
1. Mistake to identity/qualifications of either of parties will vitiate consent ONLY
when IT is the principal cause of contract.
2. Simple mistake of account must be corrected.
3. No mistake if parties knew the risk/doubt affecting OBJECT of contract.
4. When one of parties is unable to read or the contract is in language not
understood by him, & mistake/fraud is alleged, the person enforcing the contract
must FULLY explained the terms to him.

2. FRAUD/DOLO
- when through insidious words/machinations of one of the parties, INDUCED the
other to enter into a contract, & w/o them, he will not agree.

DOLO CAUSANTE
Serious
cause induces party to ENTER into contract
make contract voidable

DOLO INCIDENTE
Not serious
NOT the cause to enter into contract
contract is valid; liable for damages

7 RULES OF FRAUD
1. Failure to disclose facts when these needs to be revealed, is a fraud.
2. Fraud should be SERIOUS (dolo causante) & SHOULD NOT be done by BOTH parties
to make contract voidable.
3. Incidental fraud (dolo incidente) ONLY obliges person to PAY DAMAGES.
4. Usual exaggerations in trade, when other party know the “real” facts, is NOT
FRAUD.
5. A mere expression of opinion is NOT FRAUD UNLESS made by an expert & the
other party relies on his special knowledge.
6. Misrepresentation made in good faith is NOT FRAUD but may constitute an error.
7. Misrepresentation by 3rd person DOES NOT vitiate consent UNLESS it created
substantial mistake.

3. VIOLENCE
- serious/irresistible force is employed.

2 RULES ON VIOLENCE
1. Serious/irresistible force is employed w/c constitutes the reason why one
entered into a contract.
2. Violence ANNULS obligation although it is DONE by 3rd person not part of
contract.

4. INTIMIDATION
- 1 of the parties is compelled by a reasonable & well-grounded fear of an imminent
& grave evil upon his person/property to give his consent.

3 RULES ON INTIMIDATION
1. Age, sex, & condition of person must used to determine the degree of
intimidation.
2. Intimidation ANNULS obligation although it is DONE by 3rd person not part of
contract.
3. A threat to enforce one’s claim (claim must be just & legal), DOES NOT vitiate
consent.

VIOLENCE
External
Physical contact/coercion

INTIMIDATION
Internal
NO physical coercion; ONLY MENTAL/MORAL coercion

5. UNDUE INFLUENCE
- a person takes improper advantage of his power over other’s will, depriving the
other to his reasonable freedom of choice.

3 RULES ON UNDUE INFLUENCE

1. There is a person who takes improper advantage of his power over other’s will,
depriving the other to his reasonable freedom of choice.
2. Undue influence ANNULS obligation although it is DONE by 3rd person not part of
contract.
3. To constitute undue influence, ff circumstances must be considered: (1)
confidential, family, spiritual, & other relations of parties; or (2) the aggrieved
party is suffering from mental weakness; or (3) ignorant; or (4) in financial distress.

SIMULATION OF CONTRACT
- process of INTENTIONALLY deceiving others by producing a contract not really
exist (absolute simulation), or w/c is different from true agreement (relative
simulation).

2 KINDS OF SIMULATED CONTRACT

1. ABSOLUTE SIMULATION (the parties DO NOT intend to be bound at all)
- completely fictitious/make-believe; VOID
2. RELATIVE SIMULATION (parties conceal their true/real agreement)
- parties are bound to real/true agreement (can continue), EXCEPT:
a. contract prejudice(cause harm or injure) 3rd person
b. purpose is contrary to law, morals, good customs, public order, public policy

7 REQUISITES OF OBJECT OF CONTRACT

1. Specific & certain
2. Services not contrary to LMGPP
3. Services/things must NOT be legally/physically impossible
4. Services/things are w/in commerce of man including future things
5. Rights are NOT TRANSMISSIBLE.
6. Determinate (kind) or determinable ( w/o the need of new contract/agreement)
7. NO contract be entered for future inheritance UNLESS law states

Cause - essential reason or purpose; something bargained for or given by a party in

exchange for a legally enforceable promise of another; consideration
- it is the subject matter or object for the other
- what you will receive for entering in the contract

4 REQUISITES OF CAUSE
1. It is just & equitable.
2. It exists.
3. It is lawful.
4. It is true.

LESION
- inadequacy of cause (eg. insufficient price for thing sold)

RULES ON LESION
- Lesion DOES NOT invalidate contract, except there is:
a. Fraud
b. Mistake
c. Undue influence

2 FORM OF CONTRACTS
1. Contracts in writing
2. Contracts in a public instrument

1. Contracts w/c must be IN WRITING to be valid:

 a. Donation of personal property exceeds P5000.
b. Agent’s authority in sale of land/any interest.
c. Contract of antichresis.
d Stipulation to pay interest on loans.
e. Stipulation to reduce common carrier’s extraordinary diligence & to limit
its liability.

2. Contracts w/c must be IN A PUBLIC INSTRUMENT to be valid:

a. Donation of real property (both the donation & acceptance).
b. Sale of real property.
c. Partnership where real property/rights is contributed; or when capital
contribution exceeds P3000.

REFORMATION OF INSTRUMENTS
- REMEDY allowed by law by means of which a written instrument is amended or
rectified so as to express or conform to the real agreement or intention of the
parties due to mistake, fraud or accident

(5) CASES REFORMATION OF INSTRUMENT IS AVAILABLE

1. Mutual mistake of parties.
2. One party was mistaken & the other acted fraud.
3. One party was mistaken & the other knew/believed that the instrument did not
state their REAL agreement.
4. Ignorance, lack of skill, negligence, or bad faith of person drafting the
instrument DOES NOT state the TRUE INTENTION of parties
5. Two parties agree on mortgage/pledge of personal/real property BUT the
instrument states the property is sold ABSOLUTELY, or w/ the right to repurchase.

(3) NO REFORMATION OF INSTRUMENT WHEN:

1. Simple donation inter vivos where NO CONDITION is imposed.
2. Will.
3. Real agreement is VOID.

4 KINDS OF DEFECTIVE CONTRACTS

1. RESCISSIBLE – valid until rescinded; has ALL essential requisites but because of
injury/damage to one of the parties, the contract may be rescinded.
2. VOIDABLE – valid until annulled; has ALL essential requisites but because of
defect in consent, contract may be annulled.
 3. UNENFORCEABLE – cannot be sued/enforced unless ratified; no effect NOW but
may take effect upon ratification.
4. VOID – NO effect at all; cannot be ratified/validated.

5 RESCISSIBLE CONTRACTS
1. Those entered by guardians & suffered LESION by more than ¼ of value of the
value that is the OBJECT.
2. Those agreed upon in representation of absentees, if the absentees suffered
LESION.
3. Those undertaken in FRAUD of creditors when the creditors cannot further claim.
4. If entered into contract w/o knowledge/approval of litigants under litigation.
5. Contracts subjected to rescission declared by law.

3 VOIDABLE CONTRACTS
1. One of the parties INCAPABLE of giving consent to a contract.
2. Those where consent vitiates by vices of consent. (VIMFU)
3. Those agreed in the state of drunkenness/hypnotic spell.

3 UNENFORCEABLE CONTRACTS
1. Those entered in name of other person, or who acted BEYOND his powers.
2. Those who do not comply w/ the Statute of Frauds.
3. Both parties are incapable of giving consent to a contract.

7 VOID/INEXISTENT CONTRACTS
1. Those w/c are ABSOLUTELY simulated/fictitious.
2. Those w/c contemplate an impossible service.
3. Those whose OBJECT is outside the commerce of man.
4. Those whose CAUSE/OBJECT did not exist at time of transaction.
5. Those whose CAUSE/OBJECT/PURPOSE is contrary to LMGPP
6. Those where INTENTION of parties to principal object CANNOT be ascertained.
7. Those expressly prohibited/declared VOID by law.