Finals Oblicon Doctrines

OBLIGATIONS AND CONTRACTS: FINALS CASE DOCTRINES
ALEEZAH GERTRUDE
LOSS OF A THING DUE however an absolute application of the principle of rebus sic stantibus,
which would endanger the security of contractual relations.
PEOPLE VS. FRANKLIN ☠ The parties to the contract must be presumed to have assumed the risks
of unfavorable developments. It is therefore only in absolutely
➢ "The rights and liabilities of sureties on a recognizance or bail bond are,
exceptional chances of circumstances that equity demands assistance for
in many respects, different from those of sureties on ordinary bonds or
the debtor.
commercial contracts. The former can discharge themselves from
☠ The principle of rebus sic stantibus neither fits in with the facts of the
liability by surrendering their principal; the latter, as a general rule, can
case. Under this theory, the parties stipulate in the light of certain
only be released by payment of the debt or performance of the act
prevailing conditions, and once these conditions cease to exist, the
stipulated.
contract also ceases to exist.
➢ Surety bond becomes the legal custodian and jailer of the accused,
thereby assuming the obligation to keep the latter at all times under his LAGUNA TAYABAS BUS COMPANY VS MANABAT
surveillance, and to produce and surrender him to the court upon the
latter's demand. ☠ Art. 1680. The lessee shall have no right to a reduction of the rent on account of the
➢ due to the surety company's fault because it was its duty to do everything sterility of the land leased, or by reason of the loss of fruits due to ordinary fortuitous
events; but he shall have such right in case of the loss of more than one-half of the
and take all steps necessary to prevent that departure. This could have
fruits through extraordinary and unforeseen fortuitous events, save always when there
been accomplished by seasonably informing the Department of Foreign
is a specific stipulation to the contrary.
Affairs and other agencies of the government of the fact that the accused
☠ Extraordinary fortuitous events are understood to be: fire, war,
for whose provisional liberty it had posted a bail bond was facing a
pestilence, unusual flood, locusts, earthquake, or others which are
criminal charge in a particular court of the country.
uncommon, and which the contracting parties could not have reasonably
PNCC VS. NLRC foreseen.
☠ Article 1680, it will be observed is a special provision for leases of rural
➢ Obligor shall be released from his obligation when the prestation has lands. No other legal provision makes it applicable to ordinary leases.
become legally or physically impossible without fault on his part. The Had theintention of the lawmakers been so, they would have placed the
supervening impossibility of performance, based upon some factor article among the general provisions on lease. Nor can the article be
independent of the will of the obligor, releases the obligor from his applied analogously to ordinary leases, for precisely because of its special
obligation after restitution of what he may have received, if any, in character, it was meant to apply only to a special specie of lease.
advance from the other contracting party; 8 t he obligor incurs no liability ☠ It is a provision of social justice designed to relieve poor farmers from
for damages for his inability to perform. the harsh consequences of their contracts with rich landowners. And
taken in that light, the article provides no refuge to lessees whose
PNCC VS CA financial standing or social position is equal to, or even better than, the
lessor as in the case at bar.
☠ Article 1267 of the New Civil Code provides that when the service has ☠ Even if the cited article were a general rule on lease, its provisions
become so difficult as to manifestly beyond the contemplation of the nevertheless do not extend to petitioners. One of its requisites is that the
parties, the obligor may also be released therefrom, in whole or in part.
cause of loss of the fruits of the leased property must be an
This article, which enunciates the doctrine of unforeseen events, is not,
ALEEZAH GERTRUDE
"extraordinary and unforeseen fortuitous event." The petitioners use private respondent's post; and 2)private respondent to
circumstances of the instant case fail to satisfy such requisite pay petitioner the monthly dues of all its telephones at the same rate
being paid by the public. The peculiar circumstances of the present case,
OCCENA VS JABSON as distinguished further from the Occeña case, necessitates exercise of a
equity jurisdiction.
☠ If the prayer of the private respondent is to be released from its
☠ ". . . In affirming said ruling, we are not making a new contract for the
contractual obligations on account of the fact that the prestation has
parties herein, but we find it necessary to do so in order not to disrupt the
become beyond the contemplation of the parties, then private respondent
basic and essential services being rendered by both parties herein to the
can rely on said provision of the civil code.
public and to avoid unjust enrichment by appellant at the expense of
☠ But the prayer of the private respondent was for the modification of their
plaintiff . . . "
valid contract.
☠ The above-cited civil code provision does not grant the court the power MAGAT VS CA
to remake, modify, or revise the contract or to fix the division of the
shares between the parties as contractually stipulated with the force of ☠ The law provides that when the service has become so difficult as to be
law between the parties. manifestly beyond the contemplation of the parties, the obligor may also
☠ Therefore, private respondent’s complaint for modification of its be released therefrom, in whole or in part.
contract with petitioner must be dismissed. ☠ Here in the case, the denial of permit to import resulted the non
compliance of the obligation and the inability to secure the letter of
NAGA TELEPHONE CO. VS CA credit.
☠ Article 1267 speaks of "service" which has become so difficult. Taking CONDONATION /REMISSION OF DEBT
into consideration the rationale behind this provision, the term "service"
should be understood as referring to the "performance" of the obligation. YAM VS CA
☠ According to Tolentino, Article 1267 states in our law the doctrine of
unforseen events. ☠ The appointment of a receiver operates to suspend the authority of a
☠ This is said to be based on the discredited theory of rebus sic stantibus in corporation and of its directors and officers over its property and effects,
public international law; under this theory, the parties stipulate in the such authority being reposed in the receiver.
light of certain prevailing conditions, and once these conditions cease to ☠ Sobrepeñas has no authority to condone the debt. The notation on the
exist the contract also ceases to exist. voucher covering the check payment that a “full payment of IGLF loan”
☠ Considering practical needs and the demands of equity and good faith, was made does not bind respondent.
the disappearance of the basis of a contract gives rise to a right to relief in ☠ It would have been different if the notated appeared in the receipt issued
favor of the party prejudiced. by the corporation through its receiver, which would be an admission
☠ The Court, therefore, release the parties from their correlative obligations against interest.
under the contract. However, the disposition of the present controversy ☠ Express condonation must comply the forms of donation. Where the
does not end here. To allow withdrawal would prejudice the public. value exceeds Php 5,000, the donation and acceptance must be made in
☠ Rather, the Court requires, as ordered by the trial court: 1) petitioners to writing; otherwise, void.
pay private respondent for the use of its posts and in other places where
ALEEZAH GERTRUDE
TRANS-PACIFIC VS CA ☠ There can be no offsetting of taxes against the claims that the taxpayer
may have against the government. A person cannot refuse to pay a tax on
☠ Art 1271 : the delivery of a private document evidencing a credit, made the ground that the government owes him an amount equal to or greater
voluntarily by the creditor to the debtor implies the renunciation of the than the tax being collected.
action which the former had against the latter. ☠ The collection of a tax cannot await the results of a lawsuit against the
☠ The presumption created by Art 1271 is not conclusive but merely prima government. Internal revenue taxes cannot be the subject of
facie. If there be no evidence on the contrary the presumption stands. compensation.
Conversely, the presumption loses its legal efficacy in the face of proof or ☠ The Government and the taxpayer are not mutually creditors and debtors
evidence to the contrary of each other under Article 1278 of the Civil Code and a claim of taxes is
☠ The rationale for allowing presumption of renunciation in delivery of a not such a debt, demand, contract or judgment as is allowed to be set-off.
private instrument is that , unlike a public document, there could be just
one copy of the evidence of credit. MONDRAGON VS IAC
☠ Where several originals are made out of a private document, the
intendment of the law would thus be to refer to the delivery of the ☠ Petitioners act of withholding respondents service/fees/commissions and
original original rather than to the original duplicate of which the debtor applying them to latter’s outstanding obligation with the former is
would normally retain a copy. merely an acknowledgment of the legal compensation that occurred by
operation of law between the parties.
EXTINGUISHMENT OF OBLIGATION ☠ Compensation is a mode of extinguishing to the concurrence of amount
the obligations of persons who in their own right and as principals are
GAN TION VS CA reciprocally debtors and creditors of each other.
☠ Legal compensation takes place by operation of law when all the
☠ Compensation: possible only when two parties are each other’s creditor
requisites are present as opposed to conventional compensation which
and debtor
takes place when the parties agree to compensate their mutual
PNB VS VDA. DE ONG ACERO obligations even in the absence of some requisites.
☠ Legal compensation requires the concurrence of the following conditions
☠ There being no indebtedness to PNB on Isabela’s part there is in 1. Each one of the obligors be bound principally, and that he be at the
consequence no occasion to speak of any mutual set-off or compensation same time a principal creditor of the other;
whether it be legal which automatically occurs by operation of law or 2. That both debts consist in a sum of money or if the thing due are
voluntary which can only take place by agreement of the parties which consumable, they be of same kind and also of the same quality if the
ISABELA did not agree upon which was attested by lack of evidence latter has been stated
☠ Since the record reveals that the application was attempted to be made by 3. Two debts due
PNB on Feb 1980, that essayed application was ineffectual and futile 4. They be liquidated and demandable
because at that time, the deposit was already in custodial egis, notice of
garnishment thereof having been served on PNB. REPUBLIC VS DE LOS ANGELES
FRANCIA VS IAC ☠ Compensation of debt arises even without proof of liquidation of claim
where claim is undisputed
ALEEZAH GERTRUDE
☠ Proof of liquidation of claim in order that there be ☠ Although compensation by operation of law cannot take place as between
compensation of debts, is proper if such claim is disputed. But if claim is Republic and Pan oriental by specific pronouncement of this court,
undisputed as in the case at bar, the statement is sufficient and no other rentals payable bby Pan oriental should be deducted from sum of useful
proof may be required. expenses plus legal interest.
SOLINAP VS DEL ROSARIO INTERNATIONAL CORPORATE BANK VS IAC
☠ For compensation to take place, both obligations must be certain and ☠ There can be no doubt that petitioner is indebted to private respondent in
liquidated the amount of P1,062,063.83 representing the proceeds of her money
☠ Petitioner’s claim against respondent is still pending determination by market investment.
the court. Claim is disputed in both factual and legal grouns. ☠ This is admitted. But whether private respondent is indebted to
☠ Mialhe vs Halili—compensation cannot take place where one’s claim petitioner in the amount of P6.81 million representing the deficiency
against the other is still subject to court litigation. It is a requirement, for balance after the foreclosure of the mortgage executed to secure the loan
compensation to take place that the amount involved be certain and extended to her, is vigorously disputed.
liquidated ☠ This circumstance prevents legal compensation from taking place
☠ Therefore, the validity of the extrajudicial foreclosure sale and
SYSIP VS CA petitioner's claim for deficiency are still in question, so much so that it is
evident, that the requirement of Article 1279 that the debts must be
☠ Compensation cannot take place where with respect to the money
liquidated and demandable has not yet been met.
involved in the estafa case, the complainant was merely acting as agent
☠ For this reason, legal compensation cannot take place under Article 1290
of another.
of the Civil Code.
☠ In set-off two persons must in their own right be creditor and debtor of
each other. ONG VS CA
☠ Compensation cant take place since evidence shows that Jose Lapuz is
only an agent of Albert Smith/Dr.Dill. ☠ Fermin claims the balance of his debt is deemed set off by the price of the
☠ Compensation takes place only when two persons in their own right are zippers in the possession of Mariano, who had the obligation to return
debtors and creditors of each other and each one of the obligor is bound. them to him.
☠ Lapuz did not consent to the obligation with petitioner’s obligation to ☠ The flaw in this argument is the assumption that Mariano had such an
pay 500 shares obligation, which has not been proved by Fermin It has already been
found that Mariano had not retained them nor dId he have any need for
COMPANIA MARITIMA VS CA them as he was in a different business.
☠ He had not bought them or otherwise owed their value to Fermin, who
☠ For compensation to take place, one of the elements necessary is that
was in fact the obligor.
debts be liquidated.
☠ Fermin does not deny that he deposited the zippers in Mariano's
☠ In this case, all elements for compensation to take place were not present
warehouse without paying storage fees or any other consIderation.
on the date of dispossession. . The amount expended for repairs and
☠ The instant case does not certainly satisfy the above because (1)
improvements had yet to be determined by TC
appellant is not a debtor of appellee, it is only the latter who is indebted
ALEEZAH GERTRUDE
to appellant; (2) the debts, even admitting that the delivery of the ☠ Art. 1285. The debtor who has consented to the assignment of rights
zippers to plaintiff is a debt, do not both consist in a sum of money nor made by a creditor in favor of a third person, cannot set up against the
are they of the same quality and kind assignee the compensation which would pertain to him against the
assignor, unless the assignor was notified by the debtor at the time he
PIONEER VS CA gave his consent, that he reserved his right to the compensation.
the creditor communicated the cession to him but the debtor did not consent
☠ Pioneer has no right to institute and maintain in its own name an action
thereto, the latter may set up the compensation of debts previous to the
for the benefit of the reinsurers, it is well settled that an action brought
cession, but not of subsequent ones.
by an attorney-in-fact in his own name instead of that of the principal
☠ If the assignment is made without the knowledge of the debtor, he may
will not prosper, and this is so even where the name of the principal is
set up the compensation of all credits prior to the same and also later
disclosed in the complaint.
ones until he had knowledge of the assignment.
☠ An Atty-in-fact is not a real party in interest, there is no law permitting
☠ Article 1626 of the same code states that: "the debtor who, before having
an action to be brought by an atty-in-fact
knowledge of the assignment, pays his creditor shall be released from the
SILAHIS VS IAC obligation."
☠ Art 1279 among others requires that in order that legal compensation In Sison v. Yap-Tico,21 the Court explained that:
shall take place, two debts be due and they be liquidated and demandable
☠ [n]o man is bound to remain a debtor; he may pay to him with whom he
☠ Compensation is not proper where claim of person asserting the set-off
contacted to pay; and if he pay before notice that his debt has been
against the other is not clear nor liquidated
assigned, the law holds him exonerated, for the reason that it is the duty
☠ Compensation cannot extend to unliquidated, disputed claim existing
of the person who has acquired a title by transfer to demand payment of
from breach of contract
the debt, to give his debt or notice.
☠ Commission is vigorously disputed. The circumstances prevents legal
☠ At the time that Delta was first put to notice of the assignment in
compensation from taking place
petitioner's favor on 14 July 1981, DMC PN No. 2731 had already been
SESBRENO VS CA discharged by compensation. Since the assignor Philfinance could not
have then compelled payment anew by Delta of DMC PN No. 2731,
☠ On 9 February 1981, neither DMC PN No. 2731 nor Philfinance PN No. petitioner, as assignee of Philfinance, is similarly disabled from collecting
143-A was due. This was explicitly recognized by Delta in its 10 April from Delta the portion of the Note assigned to him.
1980 "Letter of Agreement" with Philfinance, where Delta acknowledged
that the relevant promissory notes were "to be offsetted (sic) against MINDANAO PORTLAND CEMENT VS CA
[Philfinance] PN No. 143-A upon co-terminal maturity."
☠ petitioner and respondent were creditors and debtors of each other, their
☠ . It is a firmly settled doctrine that the rights of an assignee are not any
debts to each other consisting in final and executory judgments of the
greater that the rights of the assignor, since the assignee is merely
Court of First Instance in two (2) separate cases, ordering the payment to
substituted in the place of the assignor 20 and that the assignee acquires
each other of the sum of P10,000.00 by way of attorney's fees. The
his rights subject to the equities — i.e., the defenses — which the debtor
obligations, therefore, respectively offset each other, compensation
could have set up against the original assignor before notice of the
having taken effect by operation of law and extinguished both debts to
assignment was given to the debtor.
ALEEZAH GERTRUDE
the concurrent amount of P10,000.00, pursuant to the provisions of ☠ Unless admitted by a debtor himself, the conclusion that he is in truth
Arts. 1278, 1279 and 1290 of the Civil Code. since all the requisites indebted to another cannot be definitely and finally pronounced, no
provided in Art. 1279 of the said Code for automatic compensation "even matter how convinced he may be from the examination of the pertinent
though the creditors and debtors are not... aware of the compensation" records of the validity of that conclusion the indebtedness must be one
were duly present that is admitted by the alleged debtor or pronounced by final judgment of
☠ "ART. 1278. Compensation shall take place when two persons, in their a competent court or in this case by the Commission.
own right, are creditors and debtors of each other.
☠ "ART. 1279. In order that compensation may be proper, it is necessary: PNB MADECOR VS UY
☠ (1) That each one of the obligors be bound principally, and that he be at
☠ There could not be any compensation between PNEI’s receivables and
the same time a principal creditor of the other;
PNB Madecor and the latter’s obligation to the former because PNB
☠ (2) That both debts consist in a sum of money, or if the things due are
Madecor’s supposed debt to PNEI is the subject of attachment
consumable, they be of the same kind, and also of the same quality if the
proceedings initiated by third party Uy. This is a controversy that would
latter has been stated;
prevent legal compensation from taking place per the requirements set
☠ (3) That the two debts be due;
forth in Art 1279 of CC.
☠ (4) That they be liquidated and demandable;
☠ (5) That over neither of them there be any retention or controversy, HERMENEGILDO TRINIDAD VS ACAPULCO
commenced by third persons and communicated in due time to the
debtor. ☠ The claim of respondent that there could be no legal compensation in
☠ "ART. 1290. When all the requisites mentioned in Art. 1279 are present, this case as one of the obligations consists of delivery of a car and not a
compensation takes effect by operation of law, and extinguishes both sum of money must also fail.
debts to the concurrent amount, even though the creditors and debtors ☠ Respondent sold the car to petitioner on March 4, 1991 for P500,000.00
are not aware of the compensation." while she filed her complaint for nullification of the sale only on May 6,
1991.
EGV REALTY VS CA ☠ As legal compensation takes place ipso jure, and retroacts to the date
when its requisites are fulfilled, legal compensation has already taken
☠ Compensation or offset under the New Civil Code takes place only when
place at the time of the sale. At such time, petitioner owed respondent
two persons or entities in their own rights, are creditors and debtors of
the sum of P500,000.00 which is the price of the vehicle.
each other. (Art. 1278).
☠ A distinction must be made between a debt and a mere claim. BPI VS CA
☠ A debt is an amount actually ascertained. It is a claim which has been
formally passed upon by the courts or quasi-judicial bodies to which it ☠ In Serrano vs. Central Bank of the Philippines, --bank deposits are in the
can in law be submitted and has been declared to be a debt. nature of irregular deposits; they are really loans because they earn
☠ A claim, on the other hand, is a debt in embryo. It is mere evidence of a interest. The relationship then between a depositor and a bank is one of
debt and must pass thru the process prescribed by law before it develops creditor and debtor.
into what is properly called a debt. ☠ The account was proved and established to belong to Eastern even if it
☠ Absent, however, any such categorical admission by an obligor or final was deposited in the names of Lim and Velasco.
adjudication, no compensation or off-set can take place.
ALEEZAH GERTRUDE
☠ As the real creditor of the bank, Eastern has the right to ☠ The assent of private respondent BF Lifeman Insurance Corporation
withdraw it or to demand payment thereof. BPI cannot be relieved of its therefore was not given when it merely received the application form and
duty to pay Eastern simply because it already allowed the heirs of Velasco all the requisite supporting papers of the applicant.
to withdraw the whole balance of the account. The petitioner should not ☠ Its assent was given when it issues a corresponding policy to the
have allowed such withdrawal because it had admitted in the Holdout applicant. Under the abovementioned provision, it is only when the
Agreement the questioned ownership of the money deposited in the applicant pays the premium and receives and accepts the policy while he
account. is in good health that the contract of insurance is deemed to have been
☠ We have ruled that when the ownership of a particular property is perfected.
disputed, the determination by a probate court of whether that property
is included in the estate of a deceased is merely provisional in character
and cannot be the subject of execution. 24
NOVATION
☠ Because the ownership of the deposit remained undetermined, BPI, as the
debtor with respect thereto, had no right to pay to persons other than LAND BANK VS CA
those in whose favor the obligation was constituted or whose right or
authority to receive payment is indisputable. ☠ None of the requirements of novation either of subject matter of bond
☠ The payment of the money deposited with BPI that will extinguish its agreement/partial subrogation of oblige or creditor is visible
obligation to the creditor-depositor is payment to the person of the ☠ Unilateral novation of respondents was not inserted in new bearer bond
creditor or to one authorized by him or by the law to receive it. certificates
☠ Payment made by the debtor to the wrong party does not extinguish the ☠ Negligence cannot be set up against the government
obligation as to the creditor who is without fault or negligence, even if
the debtor acted in utmost good faith and by mistake as to the person of REYES VS CA
the creditor, or through error induced by fraud of a third person.
☠ Novation requisites
PEREZ VS CA 1. Previous valid obligation
2. Agreement of parties: new contract
☠ Insurance is a contract whereby, for a stipulated consideration, one party 3. Extinguishment of old contract
undertakes to compensate the other for loss on a specified subject by 4. Validity of new contract
specified perils. ☠ Absence of new contract extinguishing the old: destroys the possibility of
☠ A contract, on the other hand, is a meeting of the minds between two novation by conventional subrogaton
persons whereby one binds himself, with respect to the other to give ☠ Novation by substituting of creditor requires the agreement among 3
something or to render some service. parties concerned
☠ there shall be no contract of insurance unless and until a policy is issued 1. Original creditor
on this application and that the said policy shall not take effect until the 2. Debtor
premium has been paid and the policy delivered to and accepted by me/us 3. New Creditor
in person while I/We, am/are in good health. ☠ Novation is never presumed there must be an express retention to novate
☠ Laches/Failure neglect for an unreasonable & unexplained length of time
: lack of due diligence
ALEEZAH GERTRUDE
☠ Novation by substitution of debtor must always be with ☠ Novation : one of the modes of extinguishing obligation : done by
consent of the credito substituting/change of obligation by a subsequent one
☠ Mere circumstance of creditor receiving payments from 3P : Acquisced to ☠ Obligation to pay sum of money is not novated by an instrument that
assume obligation of debtor; Where no agreement = Judicial relation of expressly recognizes the old, changes only the terms of payment, adds
co-debtorship or suretyship other obligations not incompatible with the old one
☠ Waiver must be couched in clear and unequivocal terms which leave no
QUINTO VS PEOPLE doubt : intention of party to give up right or benefit
☠ Mere failure to pay debt (x) enough to justify an attachment on debtor’s
☠ Novation may be extinctive/modificatory
properties
☠ Extinctive : objective/real : substituting debtor/subrogating 3P to rights
of creditor FUA VS YAP
☠ Dual Function of novation
1. Extinguish the old ☠ Novation by subsequent agreement: appellants liability under judgment
2. Substitute : new one in civil case: extinguished by statement evidenced by mortgage executed
☠ Novation is never presumed by them in favor of appellee
☠ Extinguishment of old obligation by the new is a necessary element of ☠ Although mortgage did not expressly cancel old obligation; this was
novation (express/implied) impliedly novated by reason of incompatibility resulting from the facts
☠ Test of incompatibility : WON two obligations can stand together each that judgment money was payable at time did not provide atts fees and
having its independent existence was not secured
☠ Incompatibility must take place in any of the essential elements of the ☠ New oblgation is payable on installments
obligation (consent/object/cause/principal conditions) otherwise change ☠ Later agreement did not merely extend time to pay judgment it also
is merely modificatory provided for the change in terms of payment and the security
☠ Two forms of novation by substituting Debtor requirement
1. Expromission ☠ MORRAN DISSENT : (x) incompatible simply gave them more time & a
- Initiative (x) come from debtor different method of payment
- May be done w/o his knowledge
- 3P & creditor MILLAR VS CA
2. Delegacion
☠ defense of implied novation requires clear and convincing proof of
- Initiative of debtor
incompatibility between two obligations
- Acceptance by 3P
☠ Test is whether two obligations can stand together
☠ Consent of creditor : inidispensible
☠ Only those essential and principal changes introduced by new obligation
☠ Criminal liability of Estafa is already committed: it is not affected by
producing alteration or modification = implied novation
subsequent novation
☠ Mere reduction of amount due (x) sufficient incompatibility : reduction
FOUNDATION PECIALIST VS BENTOVAL due to partial payment
SANDICO VS PAGUING
ALEEZAH GERTRUDE
☠ Payment by respondent of lesser amount, accepted by ☠ Surety bond was not novated by trust agreement. Both agreements can
petitioner without protest or objection and acknowledged them as in full co-exist
satisfaction of money judgment. Completely extinguished judgment debt
& released the respondent from pecuniary liability PEOPLE’S BANK AND TRUST COMPANY VS SYVEL’S INCORPORATION,
☠ Novation : 2 stipulations (1) Extinguish old obligation (2) Substitute a ANTONIO SYYAP AND ANGEL SYYAP
new one in its place
☠ Absence of existence of explicit novation/incompatibility between old
☠ To sustain novation : necessitates that some be so declared in
and new agreements
unequivocal terms clearly and unmistakably show by express agreement
☠ Contract on its face (x) show existence of explicit novation nor
by equivalent import ; that there is substantial incompatibility
incompatibility
☠ Terms of receipt : clear and definite : neither expressly nor impliedly
☠ Novation : not intended = real estate mortagbe was evidently taken as
declares that reduction of money judgment was conditioned upon
additional security for performance of contracts
respondent’s reason and reopening of irrigation cannal: it merely says :
☠ Fraudulent concealment of property : to delay and defraud creditors :
comply immediately
attachment
NPC VS JUDGE DAYRIT
BROADWWAY CENTRUM CONDOMINIUM CORP VS TROPICAL HUT
☠ Novation is never presumed but must be explicitly stated FOOD MARKET & CA
☠ No novation in absence of explicit novation/incompatibility on every
☠ Novation through:
point between old and new argument
☠ change of object/principal condition = real/objective novation
☠ Nothing in 1982 agreement which supports petitioner’s contention
☠ Change of person : Subjective or personal
☠ Art 1292 : in order that an obligation may be extinguished by another
☠ Mixed : Change of both
which substitutes the same it is imperative that it be so declared in
☠ If objective novation is to take place it is essential that new obligation
unequivocal terms that old and new obligations be on every point
expressly declare old obligation to be extinguished/new obligation is
incompatible with each other.
compatible with the old
COCHINGYAN VS R&B SURETY AND INSURANCE CO ☠ Will to novate : Total/partial : must appear: express agreement of parties
☠ Reduction of rent: “on a trial basis”
☠ Novation is the extinguishment of an obligation by substitution/change ☠ Any reduction in rental extended is merely temporary suspension of
of obligation by subsequent one which terminates it either by changing original rate of rental stipulated and is not an amendment thereto
its objects/principal conditions /substituting 3p to rights of creditor
☠ Novation is never presumed AJAX MARKETING VS CA
☠ If old debtor (x) released = no novation occurs and 3P who assumed
☠ Novation will not be allowed unless it is clearly shown by express
obligation : co-debtor or surety
agreement/by equal import
☠ Novation is not implied when parties to new obligation expressly negated
☠ To effect subjective novation by change of person : debtor : it is necessary
lapsing of old
that old debtor be released expressly from obligation & 3 P/new debtor
assumes his place in the relation
ALEEZAH GERTRUDE
☠ No novation without release as to 3P who assumed debtor’s ☠ Caveat emptor applies only to execution sales
obligation: becomes merely a codebtor or surety ☠ Obligation o discharge mortgage indebtedness remained in shoulders of
☠ Petitioner AJAX only became a co-debtor surety original debtor
☠ Without express release of debtor from the obligation, any 3p who may ☠ Bid must be understood & taken to conform to normal practice
thereafter assume obligation = considered merely as co-debtor or surety
ONG VS BOGNABAL
CRUZ VS CA
☠ Novation is never presumed unless it is clearly show either by express
☠ Requisite of novation : PIEN agreement of parties or by acts of equivalent import, defense will never
☠ MOA falls short of producing novation : it does not express clear intent to be allowed
dissolve old obligation as a consideration for the emergence of a new one ☠ Assuming that there was indeed a novation, such condition is deemed
☠ MOA created an obligation on part of such co-owner to share with others fulfilled because of Art 1186 : the condition is deemed fulfilled when
: Proceeds of sale = (x) incompatibility obligor voluntarily prevents its fulfillment
☠ Legal effects of contracts : determined by extracting intention of parties
from the language they used & from contemporaneous and subsequent SERVICEWIDE SPECIALISTS VS IAC
acts
☠ Since it was neither established nor shown that Siton was released from
☠ MOA (x) make petitioners co-owners of disputed parcels of land
responsibility under the promissory note, the same does not constitute
DEGANOS VS PEOPLE novation by substitution of debtors under Article 1293 of the Civil Code.
☠ Likewise, the fact that petitioner company accepts payments from a third
☠ One of the parties in a contract of sale obligates himself to transfer person like respondent de Dumo, who has assumed the obligation, will
ownership of & deliver determinate thing while the other party obligates result merely to the addition of debtors and not novation. Hence, the
himself to express terms of kasunduan creditor may therefore enforce the obligation against both debtors.
☠ Partial payment of deganos (x) novation of original contractual
relationship of agency to sell. It is only slight modification and old
obligation still prevails LICAROZ VS GATMAITAN
☠ Novation (x) ground for extinguishment of criminal liability : only state
may validly waive criminal action
☠ Novation may only be either to prevent rise of criminal liability / cast
doubt on true nature of original base transaction
RODRIGUEZ VS REYES
☠ Mortgage is merely an accessory undertaking for convience & security of ☠

mortgage creditor and exist independently of obligation to pay debt ☠ This provision which contemplates the signed conformity of Anglo-Asean
secured Bank, taken together with the preambulatory clause leads to the
☠ Buyer cannot obligate himself to replace debtor in principal oligation nor conclusion that both parties intended that Anglo-Asean Bank should
do so in law without creditor’s consent. signify its agreement to the MOA.
ALEEZAH GERTRUDE
☠ The extinguishment of the old obligation is the effect of the ☠ A central bank circular may have the force and effect of law especially
establishment of a contract for conventional subrogation. It is not a when issued in pursuance of a quasi-legislative power. That of itself,
requisite without which a contract for conventional subrogation may not however is no justification to conclude that it has thereby assumed an
be created. obligation.
☠ provisions may not simply be disregarded or dismissed as superfluous ☠ A circular is not equivalent to a contract
☠ the intention of the parties to treat the MOA as embodying a
conventional subrogation is shown not only by the "whereas clause" but CMC VS CA
also by "WITH OUR CONFORME" reserved for Anglo-Asean Bank.
☠ When a student registers in a school, it is understood that he is enrolling
☠ These provisions may not simply be dismissed as superfluous.
for the entire school year (elementary and secondary courses, and for the
☠ The various stipulations of a contract shall be interpreted together,
entire semester (collegiate course)
attributing to the doubtful ones that sense which may result from all of
☠ The contract between college and student who is enrolled and pays the
them taken jointly." It is mandated that "(I)n the construction of an
fees for a semester is for the entire semester only, not for the entire
instrument where there are several provisions or particulars, such a
course.
construction is, if possible, to be adopted as will give effect to all."
☠ The law does not require a school to see a student through to the
Contracts should be so construed as to harmonize and give effect to the
completion of his course. If school closes or is closd by proper authority
different provisions thereof.
at the end of the semester, the student has no cause of action for breach
BPI VS DOMINGO of contract against school.
☠ In this case as compared to Alcuaz et al vs. PSBA, the school closed
☠ Under Art 1293, there are two forms of novation by substitutiong person completely.
who is a debtor (1) expromision and delecacion. ☠ Even if it can be supposed that enrollment of student creates an implied
☠ In order to give novation legal effect, law requires that creditor should binding contract with the school to educate him for the entire course,
consent to the substitution of a new debtor since a contract creates reciprocal rights and obligations, the obligation
☠ Consent must be given expressly for the reason that since novation of school to educate the student imply a corresponding obligation on the
extinguishes the personality of the first debtor, who is substituted by new part of the student to obey the rules and regulations of the school.
one, it implies on part of the credtor a waiver of the right that he had ☠ When students breach that supposed contract by refusing to attend
before the novation which waiver must be express under the principle classes, preferring to take to the streets to mount a noisy demonstration,
that remuntitio non praesumitor as recognized by law in declaring that a the latter may cancel the contract and close its doors
waiver of right may not be performed unless the will to waive is
indisputably shown by him who holds rights REPUBLIC V. PLDT
☠ While the Republic may not compel the PLDT to celebrate a contract with
CONTRACTS
it, the Republic may, in the exercise of the sovereign power of eminent
BATCHELDER V. CB
domain, require the telephone company to permit interconnection of the
☠ Obligations arise from (1) Law (2) Contracts (3) Quasi-contracts (4) Acts government telephone system and that of the PLDT, as the needs of the
or omissions punished by law (5) Quasi-delicts.
☠ Obligation arising from law are not presumed.
ALEEZAH GERTRUDE
government service may require, subject to the payment of just ☠ One such condition which is contrary to public policy is the present
compensation to be determined by the court.” prohibition to self to third parties (perpetual restrictin to the rights of
ownership specifically the owner’s right to freely dispose of his
CUI V. ARELLANO UNIVERSITY properties)
☠ The memorandum of the Director of Private Schools is not a law where PAKISTAN INTERNATIONAL AIRLINES V. OPLE
the provision set therein was advisory and not mandatory in nature.
☠ Moreover, the stipulation in question, asking previous students to pay ☠ Labor = Heavily impressed ; public interest
back the scholarship grant if they transfer before graduation, is contrary ☠ Counter-balancing the principle of autonomy of contract is the equally
to public policy, sound policy and good morals or tends clearly to general rule that the provisions of applicable law, especially provisions
undermine the security of individual rights and hence, null and void. relating to matters affected with public interest are presumed written
into contract.
SAURA VS SINDICO ☠ Par 10 of the employment agreement cannot be given effect so as to oust
Philippine agencies and courts of jurisdiction vested upon them by PH
☠ Among those that may not be the object of contracts are certain rights of
law.
individuals, which the law and pubic policy have deemed wie to exclude
from the commerce of man. NON V. JUDGE DAMES II
☠ Among them are political rights conferred upon citizens including one’s
right to vote, the right to present one’s candidacy to the people and to be ☠ Contract between schools and students (x) ordinary
voted to public office, provided however that all the qualificatons ☠ It is impressed with public interest: high priority given by constitution to
prescribed by law obtain. education
☠ Art 1347 : all things which are not outside the commerce of men, ☠ School cannot refuse to enroll student on simple ground that his contract
including future things may be object of a contract. All rights which are expires every sem
not intransmissible may also be object of contracts. ☠ Exclusion of student for academic deficiency where real cause of action
No contract may be entered into upon future inheritance except in cases expressly for doing so is related to possible breach of discipline, staging mass
authorized by law. action and rally violates rules of fair play
All services which are not contrary to law, morals, good customs, public order or ☠ Enrollment in another school (x) bar for re-admission
public policy may likewise be object of contracts ☠ Par 137 : merely clarifies that a student enrolls for an entire semester, it
serves to protect school in tuition fee collection.
LEAL VS. IAC
DE LUNA V. ABRIGO
☠ Right to redeem must be expressly stipulated in the contract of sale in
order that it may have legal existence. Right to redeem or repurchase, in ☠ Onerous donation : subject to burdens, charges/future services -> equal/
absence of an express agreement as to time, shall last 4 years from date of greater in value of thing alienated
contract. ☠ Donation : conditional : donee contruct (chapel, nursery, and
☠ Art 1306 includes that contracting parties may establish such kindergarten)
stipulations, clauses, terms and conditions as they may deem convenient,
provided that they are not contrary to LaMoGPpoPpu
ALEEZAH GERTRUDE
☠ Art 733: donations w/an onerous cause shall be governed by ERMITANO V. CA
rules on contract & remuneratory donations by the provisions of the
present title as regards that portion which exceeds the value of burden ☠ Contract of adhesion (x) void in themselves
imposed ☠ But court will no hesistate to rule out blind adherence if they prove to be
☠ Par 11: revival of donation intervivos ::not contrary to LaMoGPpoPpu one sided
☠ Judicial intervention necessary : not for the purpose of obtaining judicial ☠ Stipulation : card holder
declaration rescinding contract already deemed rescinded but in order to a) Give written notice to BECC
determine WON rescission was proper b) BECC must notify its member-establishments of such laws/theft
☠ Prompt notice of card holder : enough to relieve former of any liability
LLORIN V. CA
REGINO V. PANGASINAN COLLEGE
☠ Escalation clause : valid : contract fixes a base price but contains a
provision in event of specified cost increase ☠ Terms of S-S contract : defined at the moment of inception: upon
☠ Escalation Clause (x) substantively unconscionable enrollment
☠ For a stipulation clause to be valid it must provide ☠ Assailed revenue : mid-sem : exacted dance party : condition for taking
a) Increase of interest: if increase by law or MB finals---not part of contract hence cannot be unilaterally imposed
b) Include a provision for reduction of stipulated interest in event
DUNCAN ASSOCIATION V. GLAXO
that applicable max is reduced by law or MB
☠ Art 1408 : mutuality of contracts ☠ Glaxo’s policy of prohibiting an employee from relationship with an
☠ De-escalation clause : indispensable requisite to validity and employee of a competitor company : valid exercise of management
enforceability of escalation clause prerogative
☠ Notwithstanding : It is admitted by petitioner that APEX unilaterally and ☠ Glaxo has right to guard its trade secrets, manufacturing formulas, and
actually decreased interest charges imposed. information from competitors
☠ Prohibition to employees : deemed reasonable
PALANCA V. CA
STAR PAPER CORP V. SIMBOL
☠ Stipulation violates RA 529: an act to assure uniform value to PH & coin
currency : Cuenco law ☠ Exercise of management prerogative must be reasonable
☠ Such law prohibits ☠ Policy violated Art 136 of labor code ; failure of petitioners to prove
a) Giving of right to require payment in specified currency other legitimate business concern in imposing policy cannot prejudice
than PH currency employee’s right to be free from arbitrary discrimination based upon
b) Giving oblige : right to require payment “in any amount of stereotypes of married persons working together in one company
money of ph measured thereby “
☠ RA mandates money obligations to be entered into in PH : In PH AZNAR V. CITIBANK
currency
☠ Policy of law: preserve the value of pesos ☠ Rules on Electronic Evidence, sections of Rule 5 read:
ALEEZAH GERTRUDE
☠ Section 1. Burden of proving authenticity. – The person naturalized Philippine citizen, who is constitutionally qualified to own a
seeking to introduce an electronic document in any legal proceeding has land.
the burden of proving its authenticity in the manner provided in this
Rule. TIU V. PLATINUM PLANS
☠ Section 2. Manner of authentication. – Before any private electronic
☠ the non-involvement clause has a time limit: two years from the time
document offered as authentic is received in evidence, its authenticity
petitioner’s employment with respondent ends. It is also limited as to
must be proved by any of the following means:
trade, since it only prohibits petitioner from engaging in any pre-need
☠ (a) by evidence that it had been digitally signed by the person purported
business akin to respondent’s.
to have signed the same;
☠ involvement clause not contrary to public welfare and not greater than is
☠ (b) by evidence that other appropriate security procedures or devices as
necessary to afford a fair and reasonable protection to respondent. Hence
may be authorized by the Supreme Court or by law for authentication of
the restraint is valid and such stipulation prevails.
electronic documents were applied to the document; or
☠ (c) by other evidence showing its integrity and reliability to the HEIRS OF UY EK LIONG V. CASTILLO
satisfaction of the judge.
☠ Indeed, Aznar failed to demonstrate how the information reflected on the ☠ Although executed on the same day, it cannot likewise be gainsaid that
print-out was generated and how the said information could be relied the Agreement and the Kasunduan are independent contracts, with
upon as true. parties, objects and causes different from that of the other.
☠ Defined as a meeting of the minds between two persons whereby one
MACALINAO V. BPI binds himself, with respect to the other to give something or to render
some service.
☠ We need not unsettle the principle that stipulated interest rates of 3% per
☠ a contract requires the concurrence of the following requisites: (a)
month and higher are excessive, iniquitous and unconscionable and
consent of the contracting parties; (b) object certain which is the subject
exhorbitant. Such stipulations are void for being contrary to morals if not
matter of the contract; and, (c) cause of the obligation which is
against law
established.
☠ CB 905-82: nothing therein grants lenders carte blanche authority to
☠ Already partially executed with respondents’ receipt of P1,000.00 from
raise interest to levels which would enslave the borrrowers or lead to the
Manuel upon the execution thereof, the Kasunduan simply concerned the
hemorrhaging of their assets
sale of the former’s 60% share in the subject parcel, less the 1,750-square
☠ Since stipulation on the interest is void, it is as if there was no express
meter portion to be retained, for the agreed consideration of P180,000.00.
contract thereon. Court lowered interest rate :24% per annum
As a notarized document that carries the evidentiary weight conferred
CASTRO V. TAN upon it with respect to its due execution,51 the Kasunduan was shown to
have been signed by respondents with full knowledge of its contents, as
☠ No, independently of the doctrine of pari delicto, the petitioner cannot may be gleaned from the testimonies elicited from Philip52 and Leovina
have the sale annulled. While the vendee was an alien at the time of sale,
the land has since become the property, of respondent Joaquin Teng, a ADVOCATES OF TRUTH IN LENDING V. BSP
☠ CB Circular No. 905 "did not repeal nor in anyway amend the Usury Law
but simply suspended the latter’s effectivity;" that "a CB Circular cannot
ALEEZAH GERTRUDE
repeal a law, [for] only a law can repeal another law;" that "by virtue you give which is based on the principle that "no one shall unjustly enrich
of CB Circular No. 905, the Usury Law has been rendered ineffective;" and himself at the expense of another." innominate contracts have been
"Usury has been legally non-existent in our jurisdiction. Interest can now elevated to a codal provision in the New Civil Code by providing under
be charged as lender and borrower may agree upon." Article 1307 that such contracts shall be regulated by the stipulations of
☠ By lifting the interest ceiling, CB Circular No. 905 merely upheld the the parties, by the general provisions or principles of obligations and
parties’ freedom of contract to agree freely on the rate of interest. contracts, by the rules governing the most analogous nominate contracts,
☠ the lifting of the ceilings for interest rates does not authorize stipulations and by the customs of the people.
charging excessive, unconscionable, and iniquitous interest. It is settled ☠ While there was no express contract between the parties for the payment
that nothing in CB Circular No. 905 grants lenders a carte blanche of attorney's fees, the fact remains that respondent David rendered legal
authority to raise interest rates to levels which will either enslave their services to petitioner Corpus and therefore as aforestated, is entitled to
borrowers or lead to a hemorrhaging of their assets. Stipulations compensation under the innominate contract of facio lit des And such
authorizing iniquitous or unconscionable interests have been invariably being the case, respondent David is entitled to a reasonable
struck down for being contrary to morals, if not against the law. compensation.
SPS. MALLARI V. PRUDENTIAL BANK LAO LIM V. CA
☠ Unconscionable interest rates – The SC has ruled in the following cases ☠ Compromise agreement invalid
that the interest is unconscionable: 3% and 3.81% per month on a P10 ☠ Art 1182: fulfillment of the conditions depends upon the sole will of
Million loan (Toring vs. Sps. Ganzon-Olan, 2008); 66% per annum or 5.5% debtor (lessee), conditional obligation is void.
per month on a P500 thousand loan (Medel vs. Court of Appeals, 1998) ☠ Thus stipulation should be construed that contract of lessee is for the
and; 7% and 5% or 84% and 60% per annum (Chua vs. Timan, 2008). definite period of 3 years and the renewal of the contract will only take
☠ The Court has also ruled affirmed in a plethora of cases that stipulated effect if both parties decided to renew lease
interest rates of 3% per month and higher are excessive, unconscionable
and exorbitant. PNB V. CA
☠ Conscionable interest rates – In this case 23% per annum or 2% per
☠ The unilateral action of the PNB in increasing the interest rate on the
month as agreed upon by petitioner and respondent bank is NOT
private respondent's loan violated the mutuality of contracts ordained in
unconscionable. It is much lower than the above mentioned
Article 1308 of the Civil Code: The contract must bind both contracting
unconscionable interest rates and there is no similarity of factual milieu.
parties; its validity or compliance cannot be left to the will of one of
CORPUS V. CA them.
☠ In order that obligations arising from contracts may have the force or law
☠ absence of an express contract for attorney's fees between respondent between the parties, there must be mutuality between the parties based
David and petitioner Corpus is no argument against the payment of on their essential equality.
attorney's fees, considering their close relationship which signifies ☠ A contract containing a condition which makes its fulfillment dependent
mutual trust and confidence between them. exclusively upon the uncontrolled will of one of the contracting parties, is
☠ Moreover, the payment of attorney's fees to respondent David may also void
be justified by virtue of the innominate contract of facio ut des (I do and
ALEEZAH GERTRUDE
FLORENDO V. CA owners" is inappropriate, if only because in Paragraph 16 of its Comment
on the petition herein, GSIS unequivocally state that "GSIS foreclosed the
☠ To allay fears that respondent bank will inordinately be prejudiced by properties including all improvements (the houses in 1970" and, thereby,
being stuck with this "sweetheart loan" at patently concessionary interest became the owner of said houses.
rates, which according to respondent bank is the "sweetest deal" anyone
could obtain and is an act of generosity considering that in 1985 lending ☠ We so hold that even in equity alone, GSIS should pay the petitioners.
rates in the banking industry were peaking well over 30% p.a., 17 we need After all, it admits it has not collected from the ones who appear to be the
only point out that the bank had the option to impose in its loan buyers thereof, albeit it must be collecting the installments on the lots
contracts the condition that resignation of an employee-borrower would
be a ground for escalation. Kauffman v PNB
☠ The fact is it did not. Hence, it must live with such omission. And it would
☠ Article 1257 of the Civil Code provides that contracts are productive of
be totally unfair to now impose said condition, not to mention that it
effects only between the parties who execute them. The said article
would violate the principle of mutuality of consent in contracts.
likewise provides an exception:"Should the contract contain any
☠ It goes without saying that such escalation ground can be included in
stipulation in favor of a third person, he may demand its fulfillment,
future contracts — not to agreements already validly entered into.
provided he has given notice of his acceptance to the person bound
SAMPAGUITA BUILDERS V. PNB before the stipulation has been revoked." (Art. 1257, par. 2, Civ. Code.)
☠ Sampaguita’s accessory duty to pay interest did not give PNB ☠ The fairest test, in this jurisdiction at least, whereby to determine
unrestrained freedom to charge any rate other than that which was whether the interest of a third person in a contract is a stipulation pour
agreed upon. No interest shall be due unless expressly stipulated in autrui, or merely an incidental interest, is to rely upon the intention of
writing. the parties as disclosed by their contract.
☠ Unilateral determination and imposition of increase is violative of
☠ undeniable that the bank's promise to cause a definite sum of money to
principle of mutuality of contracts under 1308
be paid to the plaintiff in New York City is a stipulation in his favor and
☠ Circular that lifted ceiling of interest rates of usury law did not
the circumstances under which that promise was given disclose an
authorize either party to unilaterally raise interest without the
evident intention on the part of the contracting parties that the plaintiff
other’s consent
should have that money upon demand in New York City. The recognition
VELASCO V. CA of this unqualified right in the plaintiff to receive the money implies in
our opinion the right in him to maintain an action to recover it.
☠ Again, it is thus obvious that GSIS assumed ownership of the houses built
by petitioners and was benefited by the same, and the fact that it has not ☠ It will be noted that under the paragraph cited a third person seeking to
collected any payment from the "house owners" or the construction of the enforce compliance with a stipulation in his favor must signify his
houses respectively occupied by them is of no moment insofar as its acceptance before it has been revoked
liability to petitioners is concerned.
Bonifacio Bros vs Mora
☠ Surely, it is not pretended that those "house owners" would be allowed to
enrich themselves at the expense of petitioners. Indeed, the term "house
ALEEZAH GERTRUDE
☠ It is fundamental that contracts take effect only between the ☠ Since the church already made an acceptance even before the death of
parties thereto, except in some specific instances provided by law where Dona Encarnacion since it (the church) was already in use of the land
the contract contains some stipulation in favor of a third person. since time immemorial (implied acceptance)
○ Specifically 17 years
☠ The time for acceptance in cases of stipulation pour autrui is also not
☠ “ In the instant case the insurance contract does not contain any words limited by time as long as it is made before the stipulation is revoked
or clauses to disclose an intent to give any benefit to any repairmen or ☠ Therefore, it cannot now be revoked since it has acquired a force of law
materialmen in case of repair of the car in question. The parties to the between the parties
insurance contract omitted such stipulation, which is a circumstance that ○ Especially that respondents had kept their peace in 1962 (had
supports the said conclusion. knowledge of the encumbrance fromthis year) and 1963
BANK OF AMERICA V. IAC
☠ On the other hand, the "loss payable" clause of the insurance policy
☠ The identity of the beneficiary should be in accordance with the
stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating that
identification made by KYOWA, and ACTC cannot question that
it was only the H.S. Reyes, Inc. which they intended to benefit.
identification as it is not a party to the arrangement between KYOWA
☠ The policy in question has been so framed that "Loss, if any, is payable to and BANKAMERICA. Hence, the CA decision was reversed insofar as Bank
H.S. Reyes, Inc.," which unmistakably shows the intention of the parties. of America was concerned.
FLORENTINO V. ENCARNACION MARIMPERIO V. CA
☠ A stipulation pour autrui is a stipulation in favor of a third person ☠ In the two Articles it is not the sub-lessee, but the lessor, who can bring
conferring a clear and deliberate favor upon him, and which stipulation is the action. In the instant case, it is clear that the sub-lessee as such
merely a part of a contract entered into by the parties, neither of whom cannot maintain the suit they filed with the trial court.
acted as agent of the third person, and such third person and demand its ☠ In the law of agency "with an undisclosed principa”l, the Civil Code in
fulfillment provoked that he communicates his to the obligor before it is Article 1883 reads:If an agent acts in his own name, the principal has no
revoked. 3 right of action against the persons with whom the agent has contracted;
☠ The requisites are: neither have such persons against the principal.
(1) that the stipulation in favor of a third person should be a part, not the whole, of
CAPITAL INSURANCE & SURETY CO., INC. V. CENTRAL AZUCARERA
the contract;
DEL DANAO TALISAY-SILAY MILLING CO
(2) that the favorable stipulation should not be conditioned or compensated by
any kind of obligation whatever; and ☠ The agreement of PNB and respondent does not extend to those not
☠ (3) neither of the contracting bears the legal represented or authorization parties in the contract (such as Talisay)
of third person. ☠ Therefore, respondent cannot escape liability by passing the obligation to
☠ To be valid, it must be the purpose and intent of the stipulating parties to Talisay
benefit the third person and not merely accidental ☠ Petitioner cannot be prejudiced by the terms of the agreement
☠ The fairest test to determine whether the interest of third person in a ☠ However, this does not mean that respondent cannot be indemnified by
contract is a stipulation pour autrui or merely an incidental interest, is to Talisay
rely upon the intention of the parties as disclosed by their contract.
ALEEZAH GERTRUDE
☠ mere entry in its books is not enough to bind Central reasonable care and caution which an ordinary prudent person would
Azucarera del Danao, for had it been so intended, PNB would not have have used in the same situation, hence liable for negligence.
insisted on including in paragraph 10, the phrase "such as in paragraph ☠ Petitioner cannot disclaim its obligation to accept private respondent’s
9", which qualifies the kind of acknowledgment or acceptance required BANKARD credit card without violating the equitable principle of
before any unpaid account could be borne by Central Azucarera del estoppel. Miranda Villa Seafood Village is affiliated with BANKARD. In
Danao. fact, they had an “Agreement” wherein merchant shall honor validly
PCCCI Credit cards presented provided card is not expired, etc.
Barfel Development Corp v CA ☠ While private respondent may not be a party to the said agreement, the
stipulation conferred in favor of private respondent, a holder of credit
PISO bank is not a party to the three (3) contracts which are the subject of the
card validly issued by BANKARD. This stipulation is a stipulation pour
action for specific performance and damages between the private respondents
autri.
and petitioners. The bank which is not a party to the transaction is not an
indispensable party. SUMMA INSURANCE CORPORATION V. CA & METRO PORT SERVICE,
INC.
According to Article 1311 of the Civil Code a contract takes effect between the
parties who made it, and also their assigns and heirs, with certain exceptions ☠ Since the petitioner was subrogated to the rights of Semirara (as
provided therein. consignee), it must be first determined the relation between the
consignee and the arrastre operator
Since a contract may be violated only by the parties, thereto as against each
☠ The arrastre operator should observe the same degree of diligence as that
other, in an action upon that contract, the real parties in interest, either as
required of a common carrier and a warehouseman. Being the custodian
plaintiff or as defendant, must be parties to said contract.
of goods, it is its duty to take good care of the goods and turn them over
Therefore, a party who has not taken part in it cannot sue or be sued for to the party entitled to their possession
performance or for cancellation thereof, unless he shows that he has a real ☠ Therefore, PR is liable for the loss
interest affected thereby. ☠ An arrastre operator is bound by the management contract which is a sort
of a stipulation pour autrui
o Therefore, it is also binding on a consignee because it is
incorporated in the gate pass and delivery receipt which must be
A real interest has been defined as a present substantial interest, as presented by consignee before delivery can be effected to it
distinguished from a mere expectancy or a future, contigent, subordinate or ☠ The insurer is also bound by the management contract as a successor in
consequential interest. interest
☠ Upon taking a delivery, the consignee tacitly accepts the provisions of the
Mandarin Villa vs. CA
management contract including those which are intended to limit the
☠ In this case, private respondent’s BANKARD credit card has an embossed liability of one of the contracting parties, the arrastre operator
expiry date of Sept 1990. Clearly it has not yet expired and it was ☠ BUT a consignee who does not avail the services of an arrastre operator is
wrongfully dishonored by the petitioner. Petitioner did not use not bound by the management contract. This is however not applicable
ALEEZAH GERTRUDE
here since the consignee in fact accepted the delivery of the cargo ☠ Petitioners are not parties, heirs, assignees, or beneficiaries of a
from the arrastre operator stipulation pour autrui under the contracts of sale, they do not, under
substantive law, possess the right they seek to enforce.
Baluyot vs. CA
☠ Sec. 2, Rule 3 of the Rules of Court requires that every action must be
☠ While prescription does not run against registered lands, nonetheless a prosecuted and defended in the name of the real party-in-interest. An
registered owner’s action to recover possession of his land may be barred action shall be prosecuted in the name of the party who, by the
by laches. substantive law, has the right sought to be enforced.
☠ But UP is not suing in this case. It is petitioners who are, and their suit is ☠ According Article 1311 of the Civil Code Contracts take effect only between
mainly to seek enforcement of the deed of donation made by UP in favor the parties, their assigns, and heirs, except in case where the rights and
of the Quezon City government. If at all, they are claiming ownership by obligations arising from the contract are not transmissible by their nature, or
prescription which, as already stated, is untenable considering that the by stipulation, or by provision of law. .
land in question is a registered land. Nor can petitioners question the
validity of UP’s title to the land this constitutes a collateral attack on ☠ If a contract should contain some stipulation in favor of a third person,
registered title which is not permitted. he may demand its fulfillment provided he communicated his acceptance
to the obligor before its revocation. A mere incidental benefit or interest
☠ A cause of action exists if the following elements are present, namely: (1) of a person is not sufficient.
a right in favor of the plaintiff by whatever means and under whatever
law it arises or is created;(2) an obligation on the part of the defendant to ☠ Petitioners are mere agents of the owners of the land subject of the sale.
respect or not to violate such right; and(3) an act or omission on the part As agents, they only render some service or do something in
of such defendant in violation of the right of the plaintiff or constituting representation or on behalf of their principals.
a breach of the obligations of the defendant to the plaintiff for which the
latter may maintain an action for recovery of damages. ☠ The rendering of such service did not make them parties to the contracts
of sale executed in behalf of the latter.
☠ Art. 1311, second paragraph, of the Civil Code provides:
☠ An agent, in his own behalf, may bring as an assignee of such contract.
If a contract should contain some stipulation in favor of a third person, he Section 372 (1) of the Restatement of the Law on Agency. Petitioners,
may demand its fulfillment provided he communicated his acceptance to the however, were not able to show that they were assignees of their
obliger before its revocation. A mere incidental benefit or interest of a person principal.
is not sufficient. The contracting parties must have clearly and deliberately
conferred a favor upon a third person ☠ There was no “rescission” per se. What is involved is a cancellation based
on the negation of the cause of the contract.
WILLIAM UY and RODEL ROXAS, petitioners, vs. COURT OF APPEALS,
HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, ☠ The right of rescission or, more accurately, resolution, is predicated on a
breach of faith by the other party.
ALEEZAH GERTRUDE
☠ NHA did not have the right to rescind for the other parties to o (6) The contracting parties do not represent, or are not authorized, by the
the contract, the vendors, did not commit any breach of their obligation. third party.22
☠ The cancellation was based on the negation of the cause arising from the ☠ However, none of the foregoing elements obtains in this case.
realization that the lands, which were the object of the sale, were not
suitable for housing. ☠ What the contract between Respondent and AIB is only limited to its
premises and employees and nothing reflecting a stipulation with regard
☠ Cause, which is the essential reason for the contract, should be to third persons
distinguished from motive, which is the particular reason of a party which
does not affect the other party. Bel Air Village Association, Inc. vs Virgilio Dionisio
☠ the quality of the land was an implied condition for the NHA to enter into ☠ According to the Land Registration Act, purchasers of a registered land
the contract. On NHA’s part, therefore, the motive was the cause for its are bound by the annotations found at the back of the certificate of title
being a party to the sale. The findings of the Land Geosciences Bureau covering the subject parcel of land.
were sufficient for the cancellation of the sale
☠ When the petitioner voluntarily bought the subject parcel of land it was
MAMARIL V. THE BOY SCOUT OF THE PHILIPPINES understood that he took the same free of all encumbrances except
annotations at the back of the certificate of title, among them, that he
☠ vicarious liability of an employer cannot be applied in this case since BSP automatically becomes a member of the respondent association. One of
is not the employer of the security guards the obligations of a member is to pay certain amounts for the operation
and activities of the association.
☠ It is a contract between respondent and AIB
☠ The limitations upon the ownership of the petitioner do not contravene
☠ The said contract did not contain any stipulation pour autrui provisions of laws, morals, good customs, public order or public policy.
☠ For a stipulation pour autrui to be valid, the following must concur: ☠ Since these limitations have been imposed upon the contract of sale as
admitted in the stipulation of facts, it I obvious that the annotation of
o (1) There is a stipulation in favor of a third person;
said lien and encumbrance that the defendant automatically becomes a
o (2) The stipulation is a part, not the whole, of the contract; member of the association is binding and enforceable.
o (3) The contracting parties clearly and deliberately conferred a favor to DAYWALT VS CORPORACION DE PP. AGUSTINOS RECOLETOS
the third person - the favor is not merely incidental;
☠ defendant corporation, having notice of the sale of the land in question
o (4) The favor is unconditional and uncompensated; to Daywalt, might have been enjoined by the latter from using the
property for grazing its cattle thereon. That the defendant corporation is
o (5) The third person communicated his or her acceptance of the favor also liable in this action for the damage resulting to the plaintiff from the
before its revocation; and wrongful use and occupation of the property has also been already
determined.
ALEEZAH GERTRUDE
☠ But it will be observed that in order to sustain this liability it is ☠ Since lease contracts are not personal, it survives the death of the parties
not necessary to resort to any subtle exegesis relative to the liability of a and continue to bind the heirs except when the contract provides
stranger to a contract for unlawful interference in the performance otherwise
thereof. It is enough that defendant use the property with notice that the
plaintiff had a prior and better right. ☠ Sec. 6 of the contract provided that it is non transferable unless prior
consent of the lessor is obtained in writing
☠ Article 1902 of the Civil Code declares that any person who by an act or
omission, characterized by fault or negligence, causes damage to another ☠ In this case, HDSJ acknowledged that Ramon is its month-to month
shall be liable for the damage so done. Ignoring so much of this article as lessee and thus, the death of German did not terminate the lease
relates to liability for negligence, we take the rule to be that a person is contract. Since the month has already expired, Ramon must now leave
liable for damage done to another by any culpable act; and by "culpable the premises
act" we mean any act which is blameworthy when judged by accepted
☠ Inocencios, tortious interference has the following elements:
legal standards.
o (1) existence of a valid contract;
☠ Article 1257 of the Civil Code declares that contracts are binding only
between the parties and their privies. In conformity with this it has been o (2) knowledge on the part of the third person of the existence of
held that a stranger to a contract has no right of action for the non the contract; and
fulfillment of the contract except in the case especially contemplated in
the second paragraph of the same article. o (3) interference of the third person without legal justification or
excuse
☠ Whatever may be the character of the liability which a stranger to a
contract may incur by advising or assisting one of the parties to evade Ouano v CA
performance, there is one proposition upon which all must agree.
☠ In the first place, Rafols did not violate the terms of the contract by
☠ This is, that the stranger cannot become more extensively liable in entering into a contract of transportation of cement cargo with MADE
damages for the nonperformance of the contract than the party in whose since it did not sublet nor sub-charter the same to the latter. The
behalf he intermeddles. possession, operation and management of the vessel remained with
Rafols as the charterer.
☠ To hold the stranger liable for damages in excess of those that could be
recovered against the immediate party to the contract would lead to ☠ Further, it is a basic principle in civil law that with certain exceptions, a
results at once grotesque and unjust. In the case at bar, as Teodorica contract can only bind the parties who had entered into it or by their
Endencia was the party directly bound by the contract, it is obvious that successors who had assumed their personalities or juridical position and
the liability of the defendant corporation, even admitting that it has as a consequence, such a contract can neither favor nor prejudice a third
made itself coparticipant in the breach of the contract, can in no even person.
exceed hers.
INOCENCIO V. HOSPICIO DE SAN JOSE

ALEEZAH GERTRUDE
☠ It is undisputed that the charter contract was entered into only pledge and commodatum. It may be entered into whatever form save
by Ouano and Rafols and MADE and SMCSI were not parties thereto nor where the law requires a document or other special form as in the
were they aware of the provisions thereof. contracts enumerated in Art. 1388 NCC.
☠ Even if the petitioner’s allegation that Rafols subleased the vessel to ☠ As a general rule, the contract may be oral or written.
MADE, it does not give Ouano any cause of action against the supposed
sublessee as his right of recourse is against the original charterer. ☠ the original contract of services was in writing. However, it does not
follow that all supplements of the written contract should be written as
☠ The obligation to obtain the written consent of petitioner before well.
subleasing or sub-chartering the vessel was on Rafols and not on MADE,
hence the latter cannot be held liable for the supposed non-compliance ☠ Art. IV of the contract stipulates: “During the performance of the work
therewith. required on the vessel at the Bataan National Shipyard, the owner, at his
option may send an authorized representative o be present while the
☠ Also, herein petitioner is deemed to have ratified the supposed work is being performed. In the event that the owner requests for any
sub-charter contract entered into by MADE and Rafols when he modification, change and/or extra work to be performed on the vessel,
demanded the payment of the second freight installment as provided in which are not otherwise specified herein and which have not been
the agreement and, later, received the same by virtue of the CFI decision. included in the Specifications submitted by the Builder to the owner, the
same shall be subject of another contract between the parties thereto.”

☠ the contracting parties did not necessarily or explicitly agree that the
BA VS IAC 145 SCRA 419 (1986) second contract should be in writing. The second contract could be
verbal and will be binding upon both parties as long as it represented a
☠ It is highly unlikely that the intended recipient of the amount should be
meeting minds between them.
ACTC given that the account number and the name clearly indicate
Minami as the beneficiary. VILLANUEVA VS CA 244 SCRA 395 (1995)
☠ “the opening of a letter in favor of the exporter becomes ultimately but ☠ Under Art. 1323 NCC, an offer becomes ineffective upon the death, civil
the result of a stipulation pour atrui.” interdiction, insanity or insolvency of either party before acceptance is
conveyed. The reason for this is that the contract is not perfected except
☠ If Tokyo Tourist had actually intended to credit the amount to ACTC, it
by the concurrence of two wills which exist and continue until the
should have, upon finding out that it was deposited to Minami’s account,
moment they occur.
filed a complaint against Kyowa Bank. Since that was not done, it can be
sufficiently concluded that Tokyo Tourist really intended the remittance ☠ The contract is not yet perfected at any time before acceptance is
to be credited to Minami. conveyed; hence, the disappearance of either party or his capacity before
perfection prevents the contractual tie from being formed.
ROYAL LINES VS CA 143 SCRA 608 (1986)
☠ The insolvency of a bank and the consequent appointment of a receiver
☠ A contract is a meeting of minds between the parties and is perfected by
restrict the banks capacity to act, especially in the case of property, which
mere consent except in the case of certain agreements like deposit,
ALEEZAH GERTRUDE
is the case here. Applying Art. 1323 Ong’s offer to purchase the ☠ Art. 1479 NCC provides that an accepted unilateral promise to buy and
lots became ineffective because the PVB became insolvent before the sell a determinate thing for a specific price is binding upon the promisor
bank’s acceptance of the offer came to his knowledge. Hence, the if the promise is supported by a consideration distinct from the price.
purported contract of sale between Ong and PVB did to reach perfection.
☠ In a unilateral promise to sell, where the debtor fails to withdraw the
OBANA VS CA 135 SCRA 557 (1985) promise before the acceptance of the creditor, the transaction becomes a
bilateral contract to sell and to buy because upon acceptance by the
☠ It is clear that Chan had intentions of swindling both Sandoval and creditor of the offer to sell by the debtor, there is already a meeting of
Obana by purchasing from Sandoval the cavans of rice at P37.25 and minds of the parties as to the thing which is determinate and the price
offering the same to Obana at a much lower price. His purpose in which is certain. In such case, the parties may demand reciprocal
entering into said contract with Sandoval was to gain physical possession performance. Jurisprudence has taught us that an optional contract is a
of the goods and pass them to Obana on the pretext that he is the owner privilege existing only in one party—the buyer.
thereof. Premises considered, Chan Lin cannot be considered as the
owner of the goods at the time the same was said to have been sold to ☠ For a separate consideration paid, he is given the right to decide to
Obana. Considering that Obana acquired the 170 cavans from someone purchase or not, a certain merchandise or property, at any time within
who is not the owner, therefore he acquired no greater right than his the agreed period, at a fixed price. This being his prerogative, he may not
predecessor-in-interest. Based on the principle of equity, it is but proper be compelled to exercise the option to buy before the time expires.
that Sandoval be allowed to recover 170 cavans of rice or its value
☠ Chan Lin had a rescissible title to the goods for the non-payment of the ☠ In the present case, the consideration is even more onerous on the part of
purchase price but it was not rescinded at the time of sale to the the lessee since it entails a transfer of the building and/or improvements
petitioner.But the petitioner’s testimony proves that there was voluntary on the property to the petitioner should the Bank fail to exercise its
rescission considering that Chan Lin returned the money Obana paid. option within the period stipulated.
☠ Obana cannot be allowed to unjustly enrich himself at the expense of
CF SHARP & CO INC VS PIONEER INSURANCE AND SURETY
another by holding on to property no longer belonging to him. In law and
CORPORATION
in equity, Sandoval is entitled to recover the rice or its value since Obana
has not paid the price for it. ☠ Contracts undergo 3 distinct stages:
SERRA VS CA, 229 SCRA 60 (1994) 1. Negotiation--begins from the time prospective contracting parties
manifest their interest i the contract and ends the moment of agreement
☠ The contract, when valid, is the law between the parties and if there is a
of parties
need for some changes, both parties could by themselves negotiate for
the amendment of the contract. 2. Perfection or birth of the contract-- takes place when the parties agree
upon the essential elements of the contract
☠ Art. 1324 NCC provides that when a offeror has allowed the offeree a
certain period to accept, the offer may be withdrawn anytime before 3. Consummation--occurs when the parties fulfill or perform the terms
acceptance by communicating such withdrawal, except when the option agreed upon in the contract, culminating in the extinguishment thereof.
is founded upon consideration, as something paid or promised.
ALEEZAH GERTRUDE
☠ Under Article 1315 of the Civil Code, a contract is perfected by sale is far different from the customary signature of Garcia that appeared
mere consent and from that moment the parties are bound not only to in his passport and driver's license, the testimony of Garcia that the
the fulfillment of what has been expressly stipulated but also to all the signature was not his is sufficient evidence of the forgery pursuant to
consequences which, according to their nature, may be in keeping with Section 50, Rule 130[15] of the Rules of Court. On the basis of Atty.
good faith, usage and law Mediante's testimony, the presumption of regularity in the execution of
the public document has been sufficiently destroyed and overcome.
☠ the perfection and effectivity of the Contract of Employment depend ☠ Pacto de retro sale is void ab initio pursuant to Article 1409 in
upon the actual deployment of respondents. It based its conclusion that
relation to Article 1505 of the Civil Code.
there was no perfected contract based on the following rationale:
☠ Irregularities in the notarization of the document may be established
☠ The commencement of an employer-employee relationship must be by oral evidence of persons present in said proceeding. Here, the
treated separately from the perfection of an employment contract. presumption of regularity of the notarized deed of pacto de retro sale
was sufficiently overcome by the testimony of Atty. Mediante.
☠ Despite the fact that the employer-employee relationship has not
commenced due to the failure to deploy respondents in this case, ☠ At this point, however, we should clarify that the proper basis for the
respondents are entitled to rights arising from the perfected Contract of nullity of the forged pacto de retro sale is not Article 1409
Employment, such as the right to demand performance by C.F. Sharp of (enumerates examples of void contracts) in relation to Article 1505
its obligation under the contract (refers to an unenforceable contract and is applicable only to goods)
of the Civil Code as stated by the Court of Appeals, but Article 1318
STARBRIGHT SALES ENTERPRISES, INC. V. PHILIPPINE REALTY of the Civil Code, which enumerates the essential requisites of a
CORPORATION (PRC) valid contract:
☠ While Cirilos had a perfected contract with Licup, when the latter ☠ There are two types of void contracts: (1) those where one of the
proposed the transfer the same to SSE. a subjective novation took place essential requisites of a valid contract as provided for by Article 1318
of the Civil Code is totally wanting; and (2) those declared to be so
☠ Therefore, a new debtor was placed under Article 1409 of the Civil Code"Conveyances by virtue of a
forged signature x x x are void ab initio. The absence of the essential
☠ SE cannot revert to the original terms stated in Licups letter to Msgr.
requisites of consent and cause or consideration in these cases
Cirilos dated April 17, 1988 since it was not privy to such contract.
rendered the contract inexistent. x x x.
☠ The parties to it were Licup and Msgr. Cirilos. Under the principle of
ONG YIU VS CA
relativity of contracts, contracts can only bind the parties who entered
into it. It cannot favor or prejudice a third person. ☠ PAL had not acted in bad faith. It exercised due diligence in looking for
petitioner’s luggage which had been miscarried. Had petitioner waited or
VICENTE MANZANO, JR., Petitioner, v. MARCELINO GARCIA,
caused someone to wait at the airport for the arrival of the morning flight
☠ No rule requiring expert testimony to determine the genuineness of a which carried his luggage, he would have been able to retrieve his luggage
signature appearing on a document. Since it was plainly obvious from sooner. In the absence of a wrongful act or omission or fraud, the
the evidence on record that the signature appearing on the pacto de retro petitioner is not entitled to moral damages. Neither is he entitled to
ALEEZAH GERTRUDE
exemplary damages absent any proof that the defendant acted in a conflict with the name given the contract by the parties, the former must
wanton, fraudulent, reckless manner. prevail over the latter
☠ The limited liability applies in this case. On the presumed negligence of
PAL, its liability for the loss however, is limited on the stipulation written Thus, the manner in which the parties conducted their transactions relating
on the back of the plane to the construction of the Gay Theater building indicates whether the parties
☠ Ticket which is P100 per baggage. The petitioner not having declared a had intended to be bound by a construction contract for a stipulated price or
greater value and not having called the attention of PAL on its true value by any other agreement. The demandability of the amounts sought to be
and paid the tariff therefore. The stipulation is printed in reasonably and recovered by the petitioner will depend on the nature of that agreement.
fairly big letters and is easily readable.
The inescapable conclusion is that Weldon Construction assumed the
VELASCO V. CA AND MAGDALENA ESTATE obligation to construct the building at the price fixed by the parties and to
furnish both the labor and materials required for the project.
● Petitioners admit that they still had to meet and agree on how and when
the down-payment and the installment payments were to be paid. ● Both parties having fully performed their reciprocal obligations in
accordance with said contract, petitioner is estopped from invoking an
● Such being the situation, it cannot be said that a definite and firm sales entirely different agreement so as to demand additional consideration.
agreement between the parties had been perfected over the lot in Once a contract has been consummated, there is nothing left to be done
question. or to be demanded by the parties thereto. All obligations arising from the
contract are extinguished.
● Indeed, this Court has already ruled before that a definite agreement on
the manner of payment of the purchase price is an essential element in MARIA CRISTINA FERTILIZER CORPORATION v. CA,
the formation of a binding and enforceable contract of sale.
● Whether deemed to be an offer or an acceptance, the letter obviously is
Weldon v CA far from the requisite offer or acceptance contemplated under Article
1319 of the Civil Code.
The first proposal submitted by Weldon Construction for rendering service
under a contract of supervision (Exhibit "A") is simply that, a proposal. It ● An offer must be clear and definite, while an acceptance must be
never attained perfection as the contract between the parties. unconditional and unbounded, in order that their concurrence can
give rise to a perfected contract
● Only an absolute or unqualified acceptance of a definite offer manifests
the consent necessary to perfect a contract (Article 1319, New Civil ● "Art. 1319. Consent is manifested by the meeting of the offer and the
Code). acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. A
To determine the nature of a contract courts do not have or are not bound to qualified acceptance constitutes an counter-offer.
rely upon the name or title given it by the contracting parties, should there be
a controversy as to what they really had intended to enter into, but the way Sanchez v Rigos
the contracting parties do or perform their respective obligations, stipulated
or agreed upon may be shown and inquired into, and should such performance
ALEEZAH GERTRUDE
● ART. 1324. When the offerer has allowed the offeree a certain NATINO V. IAC AND RURAL BANK OF AGUILAR
period to accept, the offer may be withdrawn any time before acceptance
by communicating such withdrawal, except when the option is founded ● No. The right to redeem becomes functus officio on the date of its expiry,
upon consideration as something paid or promised. and its exercise after the period is not really one of redemption but a
repurchase.
● However, it is not Article 1354 but the Article 1479 which is controlling
because the latter‘s 2nd paragraph refers to "sales" in particular, and, ● Distinction must be made because redemption is by force of law; the
more specifically, to "an accepted unilateral promise to buy or to sell." purchaser at public auction is bound to accept redemption.
○ ART. 1479. A promise to buy and sell a determinate thing for a ● Repurchase however of foreclosed property, after redemption period,
price certain is reciprocally demandable. An accepted unilateral imposes no such obligation.
promise to buy or sell a determinate thing for a price certain is
● After expiry, the purchaser may or may not re-sell the property but no
binding upon the promisor if the promise is supported by a
law will compel him to do so, And, he is not bound by the bid price; it is
consideration distinct from the price.
entirely within his discretion to set a higher price, for after all, the
● Article 1479 must be read in relation to Article 1324 property already belongs to him as owner.
● there may be no valid contract without a cause or consideration, the ● Appellants failed to accept the offer; they deposited only P4,000.00.
promisor is not bound by his promise and may, accordingly, withdraw it. There was therefore no meeting of the minds, and accordingly,
Pending notice of its withdrawal, his accepted promise partakes, appellants may no longer be heard.
however, of the nature of an offer to sell which, if accepted, results in a

perfected contract of sale.
Serra v CA
● Since there may be no valid contract without a cause or consideration,
the promisor is not bound by his promise and may, accordingly, withdraw ● Article 1324 of the Civil Code provides that when an offeror has allowed
it. the offeree a certain period to accept, the offer maybe withdrawn at
anytime before acceptance by communicating such withdrawal, except
● Pending notice of its withdrawal, his accepted promise partakes,
when the option is founded upon consideration, as something paid or
however, of the nature of an offer to sell which, if accepted, results in a
promised.
perfected contract of sale.
● On the other hand, Article 1479 of the Code provides that an accepted
● Even if the "offer of option" is not supported by any consideration, the
unilateral promise to buy and sell a determinate thing for a price certain is
option became binding on the promisor when the promisee gave notice to
binding upon the promisor if the promise is supported by a consideration
it of its acceptance, and that having accepted it within the period of
distinct from the price.
option, the offer can no longer be withdrawn and in any event such
withdrawal is ineffective. ● In a unilateral promise to sell, where the debtor fails to withdraw the
promise before the acceptance by the creditor, the transaction becomes a
bilateral contract to sell and to buy, because upon acceptance by the
ALEEZAH GERTRUDE
creditor of the offer to sell by the debtor, there is already a meeting option is exercised timely, i.e., the offer is accepted before a breach of the
of the minds of the parties as to the thing which is determinate and the option, a bilateral promise to sell and to buy ensues and both parties are
price which is certain. In which case, the parties may then reciprocally then reciprocally bound to comply with their respective undertakings.
demand performance.
Buen Realty cannot be ousted from the ownership and possession of the
● In the present case, the consideration is even more onerous on the part property
of the lessee since it entails transferring of the building and/or
improvements on the property to petitioner, should respondent bank fail ● Buen Realty, not having been impleaded in Civil Case No. 87-41058,
to exercise its option within the period stipulated. cannot be held subject to the writ of execution issued by respondent
Judge, let alone ousted from the ownership and possession of the
ANG YU ASUNCION v. CA, property, without first being duly afforded its day in court.
● Art. 1458. By the contract of sale one of the contracting parties obligates Equatorial Realty v Mayfair Theater
himself to transfer the ownership and to deliver a determinate thing, and
the other to pay therefor a price certain in money or its equivalent. ● Article 1324 speaks of an "offer" made by an offeror which the offeree
A contract of sale may be absolute or conditional. may or may not accept within a certain period.
● In a right of first refusal, while the object might be made determinate, the ○ Under this article, the offer may be withdrawn by the offeror before the
exercise of the right, however, would be dependent not only on the expiration of the period and while the offeree has not yet accepted the
grantor’s eventual intention to enter into a binding juridical relation with offer.
another but also on terms, including the price, that obviously are yet to
○ However, the offer cannot be withdrawn by the offeror within the period
be later firmed up.
if a consideration has been promised or given by the offeree in exchange
● remedy is not a writ of execution on the judgment, since there is none to for the privilege of being given that period within which to accept the
execute, but an action for damages in a proper forum for the purpose. offer.
● An unconditional mutual promise to buy and sell, as long as the object is ○ The consideration is distinct from the price which is part of the offer. The
made determinate and the price is fixed, can be obligatory on the parties, contract that arises is known as option.
and compliance therewith may accordingly be exacted.
● Article 1479, second paragraph, on the other hand, contemplates of an
● An accepted unilateral promise which specifies the thing to be sold and "accepted unilateral promise to buy or to sell a determinate thing for a
the price to be paid, when coupled with a valuable consideration distinct price within (which) is binding upon the promisee if the promise is
and separate from the price, is what may properly be termed a perfected supported by a consideration distinct from the price."
contract of option. This contract is legally binding, and in sales, it
○ That "unilateral promise to buy or to sell a determinate thing for a price
conforms with the second paragraph of Article 1479 of the Civil Code, viz:
certain" is called an offer. An "offer", in laws, is a proposal to enter into a
● Observe, however, that the option is not the contract of sale itself. contract.
The optionee has the right, but not the obligation, to buy. Once the
ALEEZAH GERTRUDE
○ In other words, paragraph 8 of the two Contracts of lease, ● An option contract needs to be supported by a separate consideration
particularly the stipulation giving Mayfair "30-days exclusive option to
purchase the (leased premises)," was meant to provide Mayfair the ● The consideration need not be monetary but could consist of other things
opportunity to purchase and acquire the leased property in the event that or undertakings. However, if the consideration is not monetary, these
Carmelo should decide to dispose of the property. must be things or undertakings of value, in view of the onerous nature of
the contract of option. Furthermore, when a consideration for an option
○ In order to realize this intention, the implicit obligation of Carmelo once contract is not monetary, said consideration must be clearly specified as
it had decided to sell the leased property, was not only to notify Mayfair such in the option contract or clause.
of such decision to sell the property, but, more importantly, to make an
offer to sell the leased premises to Mayfair, giving the latter a fair and ● In this case, the option was not founded upon a separate and distinct
reasonable opportunity to accept or reject the offer, before offering to sell consideration and that, hence, spouses Villanuevas cannot be compelled
or selling the leased property to third parties. to sell their property to petitioner Baptist Church.
● The right vested in Mayfair is analogous to the right of first refusal, which ● The option to buy the leased premises was not binding upon the
means that Carmelo should have offered the sale of the leased premises Villanuevas for non-compliance with Article 1479.
to Mayfair before offering it to other parties, or, if Carmelo should receive
Villegas v CA
any offer from third parties to purchase the leased premises, then
Carmelo must first give Mayfair the opportunity to match that offer. ● A right of first refusal is a contractual grant, not of the sale of a property,
but of the first priority to buy the property in the event the owner sells

the same. The exercise of the right of first refusal is dependent not only
BIBLE BAPTIST CHURCH V. CA and SPS. VILLANUEVA on the owners eventual intention to sell the property but also on the final
decision of the owner as regards the terms of the sale including the price.
● A valid option contract has a separate and distinct consideration that
supports it ● When a lease contains a right of first refusal, the lessor has the legal duty
to the lessee not to sell the leased property to anyone at any price until
● Art. 1479. A promise to buy and sell a determinate thing for a price after the lessor has made an offer to sell the property to the lessee and
certain is reciprocally demandable. the lessee has failed to accept it.
● An accepted unilateral promise to buy or to sell a determinate thing for a ● Only after the lessee has failed to exercise his right of first priority could
price certain is binding upon the promissor if the promise is supported by the lessor sell the property to other buyers under the same terms and
a consideration distinct from the price. conditions offered to the lessee,[28] or under terms and conditions more
favorable to the lessor.
● The second paragraph of Article 1479 provides for the definition and
consequent rights and obligations under an option contract. For an ● When petitioner-lessees opted not to respond to this offer,
option contract to be valid and enforceable against the promissor, there respondent-heirs had the right to sell the property to other buyers.
must be a separate and distinct consideration that supports it. Petitioner-lessees already exercised their right of first refusal when they
refused to respond to the latest offer of respondent-heirs, which
ALEEZAH GERTRUDE
amounted to a rejection of the offer. Upon petitioner-lessees failure ● Its distinguishing characteristic is that it imposes no binding
to respond to this latest offer of respondent-heirs, the latter could validly obligation on the person holding the option, aside from the
sell the property to other buyers under the same terms and conditions consideration for the offer
offered to petitioner-lessees. Thus, when respondent-heirs sold the
property to Lita Sy, respondent-heirs did not violate the right of first ● It is also sometimes called an "unaccepted offer" and is sanctioned by
refusal of petitioner-lessees. Article 1479 of the Civil Code:
Art. 1479. A promise to buy and sell a determinate thing for a price
ENRICO S. EULOGIO v. SPS. CLEMENTE APELES AND LUZ APELES certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing
● spouses Apeles were able to overcome the burden of proof and prove for a price certain is binding upon the promissor if the promise is
by preponderant evidence in disputing the authenticity and due supported by a consideration distinct from the price.
execution of the Contract of Lease with Option to Purchase.
● The second paragraph of Article 1479 provides for the definition and
● Even assuming for the sake of argument that we agree with Enrico consequent rights and obligations under an option contract. For an
that Luz voluntarily entered into the Contract of Lease with Option option contract to be valid and enforceable against the promissor,
to Purchase and personally affixed her signature to the said there must be a separate and distinct consideration that supports it.
document, the provision on the option to purchase the subject
property incorporated... in said Contract still remains unenforceable. ● In the present case, it is indubitable that no consideration was given by
Enrico to the spouses Apeles for the option contract. The absence of
● An option is a contract by which the owner of the property agrees monetary or any material consideration keeps this Court from enforcing
with another person that the latter shall have the right to buy the the rights of the parties under said option contract.
former's property at a fixed price within a certain time. It is a
condition offered or contract by which the owner stipulates with Vasquez v Ayala Corp
another that the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in compliance with ● An option is a preparatory contract in which one party grants to another,
certain terms and conditions; or which gives to the owner of the for a fixed period and at a determined price, the privilege to buy or sell, or
property the right to sell or demand a sale. to decided WON to enter into a principal contract.It binds the party who
has given the option NOT to enter into the principal contract with any
● An option is not of itself a purchase, but merely secures the privilege other person during the period.
to buy. It is not a sale of property but a sale of the right to purchase.
● In a right of first refusal, while the object may b
e determinate, the
● It is simply a contract by which the owner of the property agrees with exercise of the right would be dependent not only on the grantor’s
another person that he shall have the right to buy his property at a eventual intention to enter into a binding juridical relation with another,
fixed price within a certain time. but also on terms, including the price, that are yet to be firmed up.
ALEEZAH GERTRUDE
● Par. 5.15 was inserted into the MOA to give the Sps the first ignorance, indigence, mental weakness, tender age or other
crack to buy the subject lots at the price which Ayala would be willing to handicap, the court must be vigilant for his protection.
accept when it offers the lots for sale.
● It should be noted that under Art. 1332 above quoted, the obligation
a. It is not supported by an independent consideration. to show that the terms of the contract had been fully explained to
the party who is unable to read or understand the language of the
b. Hence not governed by Arts. 1324 and 1749! contract, when fraud or mistake is alleged, devolves on the party
seeking to enforce it.
C&C COMMERCIAL CORPORATION V. MENOR
Here the insurance company is not seeking to enforce the contracts; on the
● A bidder whose bid is rejected has no cause for complaint nor a right
contrary, it is seeking to avoid their performance.
to dispute the award to another bidder
● It is petitioner who is seeking to enforce them even as fraud or
● Advertisements for bidders are simply invitation to make proposals,
mistake is not alleged.
and the advertiser is not bound to accept the highest or lowest bidder
unless the contrary appears ● Accordingly, respondent company was under no obligation to prove
that the terms of the insurance contracts were fully explained to the
○ No such contrary intention appears in this case
other party.
● Nawasa was justified in rejecting the bid of petitioner for
● Even if we were to say that the insurer is the one seeking the
non-compliance with the requirements prescribed by law
performance of the contracts by avoiding paying the claim, it has to
TANG v CA AND PHILIPPINE AMERICAN LIFE INSURANCE COMPANY be noted as above stated that there has been no imputation of
mistake or fraud by the illiterate insured whose personality is
● Art. 1332. When one of the parties is unable to read, or if the contract is represented by her beneficiary the petitioner herein. In sum, Art.
in a language not understood by him, and mistake or fraud is alleged, the 1332 is inapplicable to the case at bar.
person enforcing the contract must show that the terms thereof have
been fully explained to the former. DE LEON VS CA
● According to the Code Commission: "This rule is especially necessary ● Art. 1306. The contracting parties may establish such stipulations,
in the Philippines where unfortunately there is still a fairly large clauses, terms, and conditions as they may deem convenient, provided
number of illiterates, and where documents are usually drawn up in they are not contrary to law, morals, good customs, public order or public
English or Spanish." policy.
If the stipulation is contrary to law, morals or public policy, the contract
● Art. 1332 supplements Art. 24 of the Civil Code which provides that " is void and inexistent from the beginning.
In all contractual, property or other relations, when one of the
parties is at a disadvantage on account of his moral dependence, ● Art. 1409. The following contracts are inexistent and void from the
beginning:
Those whose cause, object or purpose is contrary to law, morals, good
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customs, public order or public policy must be the determining cause of the contract, or must have caused the
xxx xxx xxx consent to be given; (2) that the threatened act be unjust or unlawful; (3)
(7) Those expressly prohibited or declared void by law. that the threat be real and serious, there being an evident disproportion
between the evil and the resistance which all men can offer, leading to
● These contracts cannot be ratified. Neither can the right to set up the the choice of the contract as the lesser evil; and (4) that it produces a
defense of illegality be waived. But marriage is not a mere contract but a reasonable and well-grounded fear from the fact that the person from
sacred social institution. Intervenor’s undertaking under Exhibit 'E' whom it comes has the necessary means or ability to inflict the
premised on the termination of marital relationship is not only contrary threatened injury.
to law but contrary to Filipino morals and public Policy. As such, any
agreement or obligations based on such unlawful consideration and ● In the ultimate analysis, therefore, both parties acted in violation of the
which is contrary to public policy should be deemed null and void. laws. However, the pari delicto rule, which refuses remedy to either party
to an illegal agreement and leaves them where they are, does not apply in
● However, Macaria was able to prove that the questioned properties are this case.
owned by her. Neither Sylvia nor Jose Vicente adduced any contrary • Article 1414 of the Civil Code, which is an exception to the pari
evidence. delicto rule, is the proper law to be applied. It provides:
When money is paid or property delivered for an illegal purpose, the
● Art. 221. The following shall be void and of no effect:
contract may be repudiated by one of the parties before the purpose has
(1) Any contract for personal separation between husband and wife;
been accomplished, or before any damage has been caused to a third
(2) Every extra-judicial agreement, during marriage, for the dissolution
person. In such case, the courts may, if the public interest wig thus be
of the conjugal partnership of gains or of the absolute community of
subserved, allow the party repudiating the contract to recover the money
property between husband and wife
or property.
● Art. 1330. A contract where consent is given through mistake, violence, • Since the Letter-Agreement was repudiated before the purpose has
intimidation, undue influence or fraud is voidable. been accomplished and to adhere to the pari delicto rule in this case is to
put a premium to the circumvention of the laws, positive relief should be
● Art. 1331. In order that mistake may invalidate consent, it should refer to granted to Macaria. Justice would be served by allowing her to be placed
the substance of the thing which is the object of the contract, or to those in the position in which she was before the transaction was entered into.
conditions which have principally moved one or both parties to enter into
a contract. ... Abando v Lozada
● To determine the degree of the intimidation, the age, sex and condition ● The misrepresentations by Pucan are facts constitutive of fraud defined
of the person shall be borne in mind. in Art. 1338:
● A threat to enforce one's claim through competent authority, if the claim ● As that insidious words or machinations of one of the contracting parties,
is just or legal, does not vitiate consent. by which the other is induced to contract which, without them, he would
not have agreed to.
● In order that intimidation may vitiate consent and render the contract
invalid, the following requisites must concur: (1) that the intimidation
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● When fraud is employed to vitiate consent, the resulting ○ This is dolo causante or casual fraud
contract is merely voidable.Hence, contrary to the assertion of the Sps.
Abando, the JVA and the DA are not void. ○ Or deception employed by one party prior to or
simultaneous to the contract in order to secure the consent
● In re: Sps. Lozano’s good faith: of the other
● Good faith refers to a state of mind which is manifested by the acts of the ● The letter of Bartolome (increase in lease) led PR to believe and conclude
individual. that his lease contract was impliedly renewed and that formal renewal
thereof would be made upon arrival of Madrigal
● It is the opposite of fraud, and its absence should be established by
convincing evidence. ● From the start it was known to both parties that as to the agreement
regarding the transfer of PR’s leasehold right to petitioner was
● In this case, when the real estate mortgage was executed, the titles were concerned, the object thereof related to a future right
not yet registered in the name of Pucan
○ It is a conditional contract between PR and Susana Realty
● However, no evidence was presented to say that the Sps. Lozano were
aware of the fraud and deceit employed by Pucan upon the Sps. Abando! Umali v CA
● Mr. Lozano even went out of his way to verify from the Register of Deeds ● There is absolute simulation, which renders the contract null and void,
if the properties were indeed in the name of Pucan. when the parties do not intend to be bound at all by the same. The basic
characteristic of this type of simulation of contract is the fact that the
SAMSON V. CA & ANGEL SANTOS apparent contract is not really desired or intended to either produce legal
effects or in any way alter the juridical situation of the parties.
● PR was never guilty of fraud nor bad faith in claiming that there was
implied renewal of his contract of lease with Susana Realty ● The subsequent act of Rivera in receiving and making use of the tractor
subject matter of the Sales Agreement and Chattel Mortgage, and the
● Bad faith is essentially a state of mind affirmatively operating with
simultaneous issuance of a surety bond in favor of Bormaheco,
furtive design or with some motive of ill-will
concomitant with the execution of the Agreement of Counter-Guaranty
○ Not merely bad judgement or negligence with Chattel/Real Estate Mortgage, conduce to the conclusion that
petitioners had every intention to be bound by these contracts. The
● It imports a dishonest purpose or some moral obliquity and conscious occurrence of these series of transactions between petitioners and private
wrong doings respondents is a strong indication that the parties actually intended, or at
least expected, to exact fulfillment of their respective obligations from
● The kind of fraud that will vitiate consent is one where through insidious one another.
words or machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he would not have ● proof of fraud must be clear and convincing. We are not persuaded that
agreed to such quantum of proof exists in the case at bar.
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PAYONGAYONG VS CA requisites are: a) an outward declaration of will different from the will of
the parties; b) the false appearance must have been by mutual
● .It is a well established principle that a person dealing with registered agreement; and c) the purpose is to deceive third persons.
land may safely rely on the correctness of the certificate of title issued
therefor and the law will in no way oblige him to go behind the certificate ● The claim of simulation does not lie.
to determine the condition of property.
Heirs of Policronio Ureta v Heirs of Liberato Ureta
● He is considered in law as an innocent purchaser of value or one who
buys property of another without notice that some other person has a ● A simulated contract of sale is without any cause or consideration, and is,
right to or interest in such property and pays a full and fair price for the therefore, null and void.
same.
● In such case, no independent action to rescind or annul the contract is
● When innocent 3rd persons rely on correctness of certificate of title and necessary, and it may be treated as non-existent for all purposes.
acquire rights over the property, the court can not just disregard such
● A void or inexistent contract is one which has no force and effect from
rights. Otherwise, public confidence in cert of title/Torrens system would
the beginning, as if it has never been entered into, and which cannot be
be impaired
validated either by time or ratification.
● Art. 1544. If the same thing should have been sold to different vendees,
● A void contract produces no effect whatsoever either against or in favor
the ownership shall be transferred to the person who may have first taken
of anyone; it does not create, modify or extinguish the juridical relation
possession thereof in good faith, if it should be movable property.
to which it refers.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of ● Therefore, it was not necessary for the Heirs of Alfonso to first file an
Property. action to declare the nullity of the Deed of Sale prior to executing the
Should there be no inscription, the ownership shall pertain to the person Deed of Extra-Judicial Partition
who in good faith was first in the possession; and, in the absence thereof,
to the person who presents the oldest title, provided there is good faith. ● The Deed of Sale was void because it is simulated as the parties did not
intend to be legally bound by it. As such, it produced no legal effects and
● There being double sale of an immovable property, as the above-quoted did not alter the juridical situation of the parties. It is only made to avoid
provision instructs, ownership shall be transferred (1) to the person tax purposes.
acquiring it who in good faith first recorded it in the Registry of Property;
(2) in default thereof, to the person who in good faith was first in ● In absolute simulation, there is a colorable contract but it has no
possession; and (3) in default thereof, to the person who presents the substance as the parties have no intention to be bound by it.
oldest title, provided there is good faith.
● The main characteristic of an absolute simulation is that the apparent
● Simulation occurs when an apparent contract is a declaration of a contract is not really desired or intended to produce legal effect or in any
fictitious will, deliberately made by the agreement of the parties, in order way alter the juridical situation of the parties.
to produce, for the purpose of deception, the appearance of a juridical act
which does not exist or is different from that which is executed. Its
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● . As a result, an absolutely simulated or fictitious contract is meaning and ascertaining the mutual intention of the parties at the time
void, and the parties may recover from each other what they may have of contracting.
given under the contract.
● The efficacy of said deed of assignment is subject to the condition that
● However, if the parties state a false cause in the contract to conceal their the application of private respondent for an additional area for forest
real agreement, the contract is relatively simulated and the parties are concession be approved by the Bureau of Forestry.
still bound by their real agreement.
● Since private respondent did not obtain that approval, said deed
CARINO V. CA produces no effect.
● Characteristic of simulation is the fact that the apparent contract is ● When a contract is subject to a suspensive condition, its birth or
not really desired or intended to produce legal effects nor in any way effectivity can take place only if and when the event which constitutes
alter the judicial situation of the parties the condition happens or is fulfilled. If the suspensive condition does not
take place, the parties would stand as if the conditional obligation had
● In this case, the parties knew that the document Exhibit D-1 was at never existed.
once fictitious and simulated where none of the parties intended to
be bound thereby ● Moreover, under the second paragraph of Article 1461 of the Civil Code,
the efficacy of the sale of a mere hope or expectancy is deemed subject to
● A sale of land without consideration, but intended merely to protect the condition that the thing will come into existence. In this case, since
a party to a joint venture for the cash advances he was to make for private respondent never acquired any right over the additional area for
the realty subdivision that the parties wanted to put up, is null and failure to secure the approval of the Bureau of Forestry, the agreement
void executed therefor, which had for its object the transfer of said right to
petitioners, never became effective or enforceable.
Javier v CA and Tiro
FORMAN VS ONG
● the true cause or consideration of said deed was the transfer of the forest
concession of private respondent to petitioners for P120,000.00. This ● subject Deed of Sale is indeed simulated, as it is:
finding is supported by the following considerations, viz:
(1) totally devoid of consideration;
● The aforesaid contemporaneous and subsequent acts of petitioners and
private respondent reveal that the cause stated in the questioned deed of (2) it was executed on August 12, 1967, less than two months from the time
assignment is false. It is settled that the previous and simultaneous and the subject land was donated to petitioner on June 25, 1967 by no less than
subsequent acts of the parties are properly cognizable indica of their true the parents of respondent Glenda Ong;
intention.
(3) on May 18, 1978, petitioner mortgaged the land to the Aklan Development
● Where the parties to a contract have given it a practical construction by Bank for a ₱23,000.00 loan;
their conduct as by acts in partial performance, such construction may be
considered by the court in construing the contract, determining its
ALEEZAH GERTRUDE
(4) from the time of the alleged sale, petitioner has been in actual 4) Where upon insolvency of a bank a receiver is appointed, the assets
possession of the subject land; of the bank pass beyond its control and into the control of the receiver.
(5) the alleged sale was registered on May 25, 1991 or about twenty four (24) a. Hence appointment of receiver = suspension of authority of bank
years after execution; over its properties and effects.
(6) respondent Glenda Ong never introduced any improvement on the subject b. Under the Central Bank Act, the assets of a bank under receivership
land; and shall be deemed in custodia legis in the hands of the receiver.
(7) petitioner’s house stood on a part of the subject land. 5) Applying Article 1323, Ong’s offer to purchase became
INEFFECTIVE because the PVB became insolvent before the Bank’s
● These are facts and circumstances which may be considered badges of acceptance of the offer came to his knowledge.
bad faith that tip the balance in favor of petitioner.
a. Hence, the contract never reached perfection.
● If the sale was legitimate, defendant Glenda should have immediately
taken possession of the land, declared in her name for taxation purposes, BOSTON BANK OF THE PHILIPPINES V. MANALO
registered the sale, paid realty taxes, introduced improvements therein
and should not have allowed plaintiff to mortgage the land. These ● NO. Contract is unenforceable because manner of payment of 80%
omissions properly militated against defendant Glenda’s submission that balance has yet to be agreed upon.
the sale was legitimate and the consideration was paid.
● For a perfected contract of sale or contract to sell to exist in law, there
Villanueva v CA must be an agreement of the parties, not only on the price of the property
sold, but also on the manner the price is to be paid by the vendee.
1) Ong did not receive any notice of approval of his offer.
● Price is an essential element in the formation of a binding and
2) Before Ong knew his offer was accepted, PVB was placed under enforceable contract of sale. In a contract to sell property by
receivership. installments, it is not enough that the parties agree on the price as well as
the amount of downpayment. The parties must, likewise, agree on the
a. Pursuant to an MB Resolution after a finding that PVB was insolvent. manner of payment of the balance of the purchase price and on the other
terms and conditions relative to the sale. Even if the buyer makes a
b. The PVB was effectively prohibited from doing business.
downpayment or portion thereof, such payment cannot be considered as
c. The receiver appointed was directed to take charge of its assets and sufficient proof of the perfection of any purchase and sale between the
liabilities, etc. parties.
3) Under Article 1323, an offer becomes ineffective upon the death, civil ● Jurisprudence has ruled that if a material element of a contemplated
interdiction, insanity, or insolvency of either party before acceptance is contract is left for future negotiations, the same is too indefinite to be
conveyed. enforceable. And when an essential element of a contract is reserved for
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future agreement of the parties, no legal obligation arises until ● As a result, if the party contracting to sell, because of non-compliance
such future agreement is concluded. with the suspensive condition stipulated, seeks to eject the would-be
buyer from the land object of the agreement, the former is enforcing the
PLATINUM PLANS PHIL. INC. v. ROMEO R. CUCUECO contract and not resolving it. The failure to make payment is not a breach
of the contract but an event that prevented the obligation to convey the
To begin with, a contract of sale is defined under Article 1458 of the Civil
title from materializing.
Code as follows:
● Based on the foregoing distinctions, a contract to sell may not be
By the contract of sale one of the contracting parties obligates himself to
considered as a contract of sale because the first essential element of
transfer the ownership of and to deliver a determinate thing, and the other to
consent to a transfer of ownership is lacking in the former. Since the
pay therefor a price certain in money or its equivalent.
prospective seller in a contract to sell explicitly reserves the transfer of
● In a contract of sale, the vendor cannot recover ownership of the thing title to the prospective buyer, the prospective seller does not as yet
sold until and unless the contract itself is resolved and set aside. unequivocally agree or consent to a transfer ownership of the property
subject of the contract to sell. On the happening of an event, that is, the
● On this score, it is significant to note that the resolution or rescission of a full payment of the purchase price, the obligation then arises to execute a
contract of sale is further circumscribed by Article 1592 of the Civil Code contract of sale that alone will transfer such ownership.
which provides: “In the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price at the time agreed ● Secondly, the reservation of the title in the name of petitioners indicates
upon, the rescission of the contract shall of right take place, the vendee the intention of the parties to enter, at most, into a contract to sell. Be
may pay, even after the expiration of the period, as long as no demand for that as it may, the intention of the parties to enter into a contract to sell
rescission of the contract has been made upon him either judicially or by did not effectively translate into an enforceable obligation in view of
a notarial act. After the demand, the court may not grant him a new their failure to agree on the contract's actual terms. As in a contract of
term.” sale, it is important that there be a stipulation on the period within which
the payment would become due and demandable, the absence of which
● On the other hand, a contract to sell is defined as a bilateral contract would justify the conclusion that there was no consent to the contract
whereby the prospective seller, while expressly reserving the ownership proposed.
of the subject property despite its delivery to the prospective buyer,
commits to sell the property exclusively to the prospective buyer upon ● Considering that the agreement of the parties did not ripen into a binding
fulfillment of the condition agreed upon, that is, full payment of the and enforceable contract meaning it did not acquire any obligatory force
purchase price. either for the transfer of the ownership of the property or the rendition of
payments as part of the purchase price due to the absence of the essential
● Full payment in this context is deemed a positive suspensive condition. element of consent, the Court is precluded from finding any cause of
action that would warrant the granting of the reliefs prayed for in
● It bears stressing that ownership of the property offered for sale is respondent's complaint.
reserved in the seller and is not to pass to the buyer until such condition
has been fulfilled. ADELFA PROPERTIES INC., VS CA
ALEEZAH GERTRUDE
Contract to sell Contract of sale minds of contracting parties meet in
the terms of the agreement
by agreement the ownership is the title passes to the vendee upon
reserved in the vendor and is the delivery of the thing sold No obligation rests on the party to
not to pass until the full make any payment except such as
payment of the price may be agreed on between parties
as consideration to support the
option until he has made up his
, title is retained by the vendor the vendor has lost and cannot mind within the time specified
until the full payment of the recover ownership until and unless
price, such payment being a the contract is resolved or rescinded;

positive suspensive condition
and failure of which is not a
breach but an event that a deed of sale is considered absolute EARNEST MONEY OPTION MONEY
prevents the obligation of the in nature where there is neither a
vendor to convey title from stipulation in the deed that title to
Part of the purchase price Money given as a distinct consideration
becoming effective the property sold is reserved in the
for an option contract
seller until the full payment of the
price, nor one giving the vendor the
right to unilaterally resolve the Given only when there is already a sale Applies to a sale not yet perfected
contract the moment the buyer fails
to pay within a fixed period.
Given by the buyer in bound to pay the Not required to buy
balance

OPTION Contract of Sale
JG SUMMIT HOLDINGS, INC. V. CA
Unaccepted offer Fixes definitely the relative rights
● The SC clearly and definitively ruled on the propriety of the bidding
and obligations of both parties at the
process by exhaustively discussing the rules and principles of public
time of execution. Offer and
bidding and determining whether Kawasaki’s right to top granted to
acceptance are concurrent, since
it in exchange for its right of first refusal violates these principles.
The shipbuilding industry was merely mentioned in relation to the
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impact that it may receive as a result of the Court’s ruling that a first refusal was validly converted into a right to top, which was
shipyard is not a public utility which should maintain a 60%-40% exercised not by Kawasaki but by PHI, a Filipino corporation. As
Filipino-foreign equity ratio. such, there is no violation of the Constitution.
● In fact, the case was resolved based on basic principles of the right of ● The SC upheld PHI’s argument and declared that the mutual right
first refusal in commercial law and estoppel in civil law. Contractual of first refusal of NIDC and Kawasaki in the JVA was valid. First,
obligations arising from rights of first refusal are not new in this it held that said right consisted of NIDC and Kawasaki’s property
jurisdiction and have been recognized in numerous cases. Estoppel is right given to them by their contract. This agreement, by itself, does
too known a civil law concept to require an elongated discussion. not constitute a violation of the provisions of the Constitution
Fundamental principles on public bidding were likewise used to limiting land ownership to Filipinos and Filipino corporations. The
resolve the issues. There is also nothing new about the right to top, SC sustained the abovementioned alternative options given by PHI
which was merely a condition or a reservation made in the bidding to avoid a violation of the constitution. It further held that if
rules fully disclosed to all bidding parties. Kawasaki, while PHILSECO still owns land, assigns its right to a
qualified Filipino entity in order to maintain the 60%-40% ratio, this
● SC: Nothing in the JVA or in the bidding rules bars the conversion of transfer would not necessarily amount to a violation of the
the right of first refusal to the right to top. Anti-Dummy Laws, absent proof of any fraudulent intent.
● There is nothing in the bidding rules that bars the losing ● Further, the SC said that even if Kawasaki’s shareholdings in
bidders from joining either the winning bidder or Kawasaki/PHI PHILSECO exceed 40%, it would not necessarily affect its
to raise the purchase price. There was also no allegation or standing as a shareholder; it would most likely affect PHILSECO
proof that the participation of the losing bidders in the public itself and disqualify it from owning land. This finds support under
bidding was done with fraudulent intent. Absent any proof of the basic corporate law principle that the corporation and its
fraud, the formation by PHI of a consortium is legitimate in a free stockholders are separate juridical entities. In this vein, the right
enterprise system, unlike in a contract for the operation of or of first refusal over shares pertains to the shareholders whereas
construction of a government infrastructure where the identity of the capacity to own land pertains to the corporation. Hence, the
the buyer/bidder or financier constitutes an important consideration. fact that PHILSECO owns land cannot deprive stockholders of
In the latter case, the government would have to take utmost their right of first refusal. No law disqualifies a person from
precaution to protect public interest by ensuring that the parties purchasing shares in a landholding corporation even if the
with which it is contracting have the ability to satisfactorily latter will exceed the allowed foreign equity, what the law
construct or operate the infrastructure. disqualifies is the corporation from owning land. This is the clear
import of the relevant provisions under the constitution.[1]
● SC: PHI admitted that PHILSECO owned land until the time of the
bidding. However, PHI asserts that this would not affect the right of ● SC: The discretion to accept or reject a bid and award contracts is vested
first refusal but only the exercise thereof, meaning: (1) if the land is in the government agencies entrusted with that function. The discretion
retained, the right of first refusal, being a property right, could be given to the authorities on this matter is of such wide latitude that the
assigned to a qualified party; or (2) the land could be divested before courts will not interfere therewith, unless it is apparent that it is used as
the exercise of the right of first refusal. However here, the right of a shield to a fraudulent award. It is only upon a clear showing of grave
ALEEZAH GERTRUDE
abuse of discretion that the courts will set aside the award of a contract properties for the price which they were finally sold to third persons should
made by a government entity. have been likewise been offered to the party with the right of first refusal.
b. Further, there should be identity of terms and conditions to be offered to

the buyer with a right of first refusal.
Riviera Filipina, Inc. v CA
c. Lastly, the basis of the right of first refusal must be the current offer to sell
i. Guzman v Bonnevie case! or the offer to purchase.
a. A lease with a proviso granting the lessee a right of first refusal ”all things 2) Hence, the prevailing doctrine is that a right of first refusal means
and conditions being equal” meant that there should be identity of the terms
and conditions to be offered to the lessee and all other prospective buyers. i. Identity of terms and conditions to be offered to the lessee
and all other prospective buyers; and
b. A deed of sale executed in favor of a 3rd party who is not a purchaser in good
faith is rescissible (not voidable, under the Statute of Frauds). ii. A contract of sale entered into in violation of a right of first
refusal is, while valid, is rescissible.
ii. Ang Yu v Asuncion case!
3) In this case, due to the actions of Reyes and Riviera, Inc to the
a. Court departed from the Guzman v Bonnevie doctrine and refused to rescind Contract of Lease, they have shaped their interpretation of right of first refusal
a contract of sale which violated the right of first refusal. provided for in the Contract to mean simply:
b. Court held that a right of first refusal cannot be deemed a perfected contract i. That should Reyes decide to sell the lot during the term of the lease,
of sale. such sale should first be offered to Riviera.
c. Hence, a breach of such would only entitle the aggrieved party to an action 4) It is clear that Riviera, Inc. was insistent in its 5k offer and was not
for damages. willing to budge.
iii. Equatorial Realty v Mayfair case! 5) So it’s hard to conclude that after Reyes informed Riviera, Inc. that it
had lost its right of first refusal due to its insistence on purchasing it at a mere
a. Court reverted back to the Guzman v Bonnevie d
octrine!
5k, Riviera, Inc. would’ve matched the higher 5.3k price offered to Traballo.
b. Rescission is a relief allowed for the protection of one of the contracting
6) Pursuant to Article 1339, silence or concealment, by itself, does not
parties and even 3rd persons, from injury and damage the contract (right of first
constitute fraud, unless there is a special duty to disclose certain facts, or unless
refusal) may cause.
according to good faith and the usages of commerce communication should be
iv. Paranaque Kings v CA c ase! made.
a. In order to have full compliance with the contractual right granting In light of the parties’ interpretation of the right of first refusal i n their lease
petitioner the first option to purchase (right of first refusal), the sale of the contract, the Court would be rewriting the Contract of Lease if the Court
ALEEZAH GERTRUDE
would interpret the right of first refusal as Riviera, Inc. propounds it, ***JURISPRUDENCE ON EFFECT OF SALE IN VIOLATION OF RIGHT OF
despite contrary construction as exhibited by its actions. FIRST REFUSAL:
Tanay Recreation v Faustino 1.1992: Guzman, Bocaling & Co. v. Bonnevie: where the Court held that a
lease with a proviso granting the lessee the right of first priority all things and
● When a lease contract contains a right of first refusal, the lessor is under conditions being equal meant that there should be identity of the terms and
a legal duty to the lessee not to sell to anybody at any price until after he conditions to be offered to the lessee and all other prospective buyers, with
has made an offer to sell to the latter at a certain price and the lessee has the lessee to enjoy the right of first priority.
failed to accept it.
● A deed of sale executed in favor of a third party who cannot be deemed a
● The lessee has a right that the lessor's first offer shall be in his favor. purchaser in good faith, and which is in violation of a right of first refusal
granted to the lessee is not voidable under the Statute of Frauds but
● Petitioners right of first refusal is an integral and indivisible part of the
rescissible under Articles 1380 to 1381 (3) of the New Civil Code.
contract of lease and is inseparable from the whole contract. The
consideration for the lease includes the consideration for the right of first 2. 1994: Ang Yu Asuncion v. Court of Appeals, the Court en banc departed
refusal and is built into the reciprocal obligations of the parties from the doctrine laid down in Guzman, Bocaling & Co. v. Bonnevie.. The
Court held that the so-called right of first refusal cannot be deemed a
● With the death of Fausto, whatever rights and obligations she had over
perfected contract of sale under Article 1458 of the New Civil Code and, as
the property, including her obligation under the lease contract, were
such, a breach thereof decreed under a final judgment does not entitle the
transmitted to her heirs by way of succession.
aggrieved party to a writ of execution of the judgment but to an action for
● A lease contract is not essentially personal in character. damages in a proper forum for the purpose.
● Thus, the rights and obligations therein are transmissible to the 3. 1996: Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., the
heirs. The general rule is that heirs are bound by contracts entered Court en banc reverted back to the doctrine in Guzman Bocaling & Co. v.
into by their predecessors-in-interest except when the rights and Bonnevie stating that rescission is a relief allowed for the protection of one of
obligations arising therefrom are not transmissible by (1) their the contracting parties and even third persons from all injury and damage the
nature, (2) stipulation or (3) provision of law contract may cause or to protect some incompatible and preferred right by the
contract.
● In this case, the nature of the rights and obligations are, by their
nature, transmissible. There is also neither contractual stipulation 4. 1997, in Paranaque Kings Enterprises, Inc. v. Court of Appeals, the Court
nor provision of law that makes the rights and obligations under the affirmed the nature of and the concomitant rights and obligations of parties
lease contract intransmissible. Thus, the contract of lease, with all its under a right of first refusal. The Court, summarizing the rulings in Guzman,
concomitant provisions, continues even after Faustos death and her Bocaling & Co. v. Bonnevie and Equatorial Realty Development, Inc. v.
heirs merely stepped into her shoes. Respondent, as an heir of Mayfair Theater, Inc., held that in order to have full compliance with the
Fausto, is therefore bound to fulfill all its terms and conditions. contractual right granting petitioner the first option to purchase, the sale of the
properties for the price for which they were finally sold to a third person should
have likewise been first offered to the former. Further, there should be identity of
ALEEZAH GERTRUDE
terms and conditions to be offered to the buyer holding a right of first 1) Non-payment does not make a contract void; it results in a breach of
refusal if such right is not to be rendered illusory. Lastly, the basis of the right of contract for non-performance and warrants an action for rescission or
first refusal must be the current offer to sell of the seller or offer to purchase of any specific performance under Article 1191.
prospective buyer. (Prevailing doctrine above)
2) Where the parties intended to be bound by the contract except that it did
BENITO DILAG v. IAC, GR No. 72727, 1987-07-30 not reflect the actual purchase price, there is only a relative simulation of
contract which remains valid and enforceable, but the parties shall be
● The Deed of Absolute Sale in favor of petitioners executed in 1974 after bound by their real agreement.
filing of case was a simulated and fictitious transaction to defraud
Arellano who obtained a money judgment against the parents of 3) Spouses Robleza admitted that the actual consideration was 50k for both
petitioners. lots, but since the Spouses Robleza owed Mr. Tan’s mom 6k, they agreed to
subtract it from the purchase price (kaya 44k lang yung isang check).
● Supposed sellers, spouses Pablo and Socorro Dilag who sold the lot in
question to their chldren for an insufficient consideration continued a. Since there was partial payment, an action for declaration of nullity will
exercising acts of ownership by leasing to David Diancin and turning not prosper.
over material possession thereof to the latter as lessee.
4) However, the power to rescind obligations is implied in reciprocal
● In fact, when the deed of sale in favor of Arellano was executed on ones.
August 30, 1982, by virtue of the failure of the former owners to
redeem the property within the period prescribed by law, the actual a. Hence, the remedy of resolution is available to the Spouses Robleza.
possessor was David Diancin.
a. The pari delicto r ule would not apply as both the object and cause are
● He however recognized Arellano's right of ownership when he was licit.
notified of the delivery of possession to Arellano .
b. If the concealed contract is lawful, it is absolutely enforceable where the
● Furthermore, even assuming that petitioners became the valid and essential requisites are present and the simulation was only on the content or
legal owners of the lot in question by virtue of the deed of sale term
executed in their favor in 1981, they nonetheless failed to avail
VILLAMOR V. CA and SPS. REYES
themselves of their right as registered owners to redeem the property
from the private respondent herein (buyer in the sale by public ☠ No. As expressed in Gonzales v. Trinidad, 67 Phil. 682, consideration is
auction) within the period provided for by law. "the why of the contracts, the essential reason which moves the
contracting parties to enter into the contract."
Robleza v CA ☠ The cause or the impelling reason on the part of private respondent
executing the deed of option as appearing in the deed itself is the
petitioner's having agreed to buy the 300 square meter portion of private
ALEEZAH GERTRUDE
respondents' land at P70.00 per square meter "which was greatly ☠ As contradistinguished, motive is the condition of mind which incites to
higher than the actual reasonable prevailing price." action, but includes also the inference as to the existence of such
condition, from an external fact of a nature to produce such a condition.
☠ The option offered by private respondents had been accepted by the
petitioner, the promise, in the same document. ☠ Under certain circumstances, however, the motive of the parties may be
regarded as the consideration when it predetermines the purpose of the
☠ The acceptance of an offer to sell for a price certain created a bilateral contract. When they blend to that degree, and the motive is unlawful,
contract to sell and buy and upon acceptance, the offer, ipso facto then the contract entered into is null and void.
assumes obligations of a vendee
☠ In the case at bench, the primary motive of Marciliano is selling the lot to
☠ Demandabilitiy may be exercised at any time after the execution of the private respondents was to illegally frustrate petitioners' right of
deed. inheritance and to avoid payment of estate tax.
☠ However, the Deed of Option did not provide for the period within which ☠ Applying Articles 1352 and 1409 of the Civil Code in relation to the
the parties may demand the performance of their respective undertakings indispensable requisite of a valid cause, we hold that the alleged deed of
in the instrument. sale is void. It is also obvious to the eye that the contract of sale in 1986 is
unregistered. Thus, even if the contract of sale is valid, it cannot
☠ The parties could not have contemplated that the delivery of the property
adversely affect third persons because of its non-registration.
and the payment thereof could be made indefinitely and render uncertain
the status of the land. Lagunzad vs. Soto Vda. De Gonzalez
☠ The failure of either parties to demand performance of the obligation of ☠ Licensing agreement is not null and void for lack of or for having an
the other for an unreasonable length of time renders the contract illegal cause or consideration
ineffective.
☠ While it is true that petitioner had purchased the rights to the book
Olegario v CA entitled "The Moises Padilla Story," that did not dispense with the need
for prior consent and authority from the deceased heirs to portray
☠ In a contract of sale, consideration is, as a rule, different from the motive
publicly episodes in said deceased's life and in that of his mother and the
of the parties.
members of his family.
☠ Consideration is defined as some right, interest, benefit, or advantage
☠ A contract is valid even though one of the parties entered into it
conferred upon the promissor, to which he is otherwise not lawfully
against his own wish and desires, or even against his better
entitled, or any detriment, prejudice, loss, or disadvantage suffered or
judgment.
undertaken by the promisee other than to such as he is at the time of
consent bound to suffer. ☠ In legal effect, there is no difference between a contract wherein one of
the contracting parties exchanges one condition for another because he
looks for greater profit or gain by reason of such change, and an
ALEEZAH GERTRUDE
agreement wherein one of the contracting parties agrees to accept Management Contract itself is null and void as provided in Article 1422 of
the lesser of two disadvantages the Civil Code.
LIAM LAW v OLYMPIC SAWMILL Pangadil v CFI of Cotabato
☠ Under Article 1354 of the Civil Code, with regard to the agreement of the ☠ The imprescriptibility of an action to declare the inexistence of a contract
parties relative to the P6,000.00 obligation, "it is presumed that it exists refers only to the contracts expressly enumerated in Article 1409 of the
and is lawful, unless the debtor proves the contrary". Civil Code.
☠ Moreover, for sometime now, usury has been legally non-existent. ☠ Admitted facts show that the conveyance of the land in question in favor
Interest can now be charged as lender and borrower may agree upon. of the private respondents had been effected by the father of the
petitioners during his lifetime. It may not be said, therefore, that in
E. RAZON V. PHIL. PORTS AUTHORITY executing a deed to ratify said transaction executed by her father,
petitioners Salandang Pangadil and Tinting Pangadil deprived their
☠ No. the transfer of the shares of stock of petitioner ERI to Bejo
minor brothers and sisters of their supposed shares in the inheritance
Romualdez was null and void
from their deceased father.
☠ Not due to vitiated consent but because of want of monetary
☠ Assuming, once again, that the execution of the deed of ratification was
consideration
attended by fraud, such circumstance would only make the contract
☠ General rule is that the causa of the contract must not be confused with voidable or annulable (Art. 1309, Civil Code), and not an inexistent and
the motives of the parties, this case squarely fits into the exception that void contract in accordance with Article 1409 of the same Code. The
the motive maz be regarded as causa when it predetermines the purpose action to annul a voidable contract is not imprescriptible, unlike in the
of the contract case of an inexistent contract. If the action to annul a voidable contract is
based on fraud, as in the case herein, it prescribes in four years from the
☠ On the part of Romualdez, the motive was to be able to contract with the time of the discovery of the fraud. (Art. 1391, Civil Code.)
government which he was then prohibited by law from doing, and on
petitioner Razon's part, to be able to renew his management contract. ☠ The simulation of a contract may either be absolute or relative. It is only
when the contract is absolutely simulated or fictitious that it is deemed
☠ For it is scarcely disputable that Enrique Razon would not have void.There is absolute simulation "when the parties do not intend to be
transferred said shares of stock to Romualdez without an assurance from bound at all."
the latter that he would be unduly favored with a renewal of the
Management Contract. ☠ In case the parties merely conceal their true agreement, the simulation is
relative, and the contract with that defect is binding upon the parties
☠ We have resolved to be null and void, served as the direct link to unless it prejudices a third person and is intended for a purpose contrary
petitioner company's obtaining the Management Contract. Being the to law, morals, good customs, public order or public policy. (Arts. 1345
direct consequence and result of a previous illegal contract, the and 1346, Civil Code.)
ALEEZAH GERTRUDE
☠ The document in question may not be deemed absolutely denominated as cause, can take different forms, such as the prestation or
simulated or fictitious. By petitioners' own admission, they intended to promise of a thing or service by another.
be bound thereby; they merely contend that they thought it was to ratify
a contract of oral mortgage, instead of an oral sale of land ● In this case, the cause of the contract of sale consisted not in the
stated peso value of the land, but in the expectation of profits from
TORRES VS CA the subdivision project, for which the land was intended to be used.
As explained by the trial court, the land was in effect given to the
☠ ART. 1315. Contracts are perfected by mere consent, and from that partnership as petitioners participation therein.
moment the parties are bound not only to the fulfillment of what has
been expressly stipulated but also to all the consequences which, Agan, Jr. v. Philippine International Air Terminals Co., Inc
according to their nature, may be in keeping with good faith, usage and
law. ● Public bidding aims to protect the public interest by giving the public the
best possible advantages through open competition.
☠ It is undisputed that petitioners are educated and are thus presumed to
have understood the terms of the contract they voluntarily signed. If it ● An essential element of a publicly bidded contract is that all bidders must
was not in consonance with their expectations, they should have objected be on equal footing. Each bidder must be able to bid on the same thing!
to it and insisted on the provisions they wanted.
● A winning bidder may amend certain provisions, but it must not
☠ Courts are not authorized to extricate parties from the necessary constitute material or substantial changes which would alter the contract
consequences of their acts, and the fact that the contractual stipulations itself. This would constitute a denial to the other bidders the opportunity
may turn out to be financially disadvantageous will not relieve parties to bid on the same terms!
thereto of their obligations. They cannot now disavow the relationship
● In this case, clearly the ARCA substantially amended the 1997
formed from such agreement due to their supposed misunderstanding of
Concession Agreement which gave PIATCO added financial benefits
its terms.
which were not available to it in the 1997 Concession Agreement.
☠ Clearly, the contract manifested the intention of the parties to form a
● The PIATCO cannot, by mere contractual stipulation, contravene the
partnership.
Constitution!

● Lastly, the Agreements grant PIATCO the EXCLUSIVE RIGHT t o
● Petitioners were wrong in contending that the JVA is void under Article
operate a commercial international terminal within the Island of
1422 of the Civil Code, because it is the direct result of an earlier illegal
Luzon at the NAIA T3 (with several exceptions i.e. Clark, Subic, and
contract, which was for the sale of the land without valid consideration.
Laoag).
● The Joint Venture Agreement clearly states that the consideration for the
● Under the Constitution, monopolies are not prohibited, but it must be
sale was the expectation of profits from the subdivision project. Its first
regulated.
stipulation states that petitioners did not actually receive payment for
the parcel of land sold to respondent. Consideration, more properly
ALEEZAH GERTRUDE
● So MIAA has the right and duty to ensure that PIATCO’s exclusivity must
be done in accord with public interest. (Sinabi lang ata to cuz it doesn’t
necessarily violate anything)
● However, since several service providers in NAIA T1 and T2 extends

beyond when PIATCO starts its exclusive right to operate, PIATCO
cannot by law and certainly not by contract, render a valid and binding
contract nugatory

Finals Oblicon Doctrines

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OBLIGATIONS AND CONTRACTS: FINALS CASE DOCTRINES

SOLINAP VS DEL ROSARIO INTERNATIONAL CORPORATE BANK VS IAC

☠ Mortgage is merely an accessory undertaking for convience & security of ☠

SPS. MALLARI V. PRUDENTIAL BANK LAO LIM V. CA

FLORENTINO V. ENCARNACION MARIMPERIO V. CA

INOCENCIO V. HOSPICIO DE SAN JOSE

b. Further, there should be identity of terms and conditions to be offered to

LIAM LAW v OLYMPIC SAWMILL Pangadil v CFI of Cotabato

● However, since several service providers in NAIA T1 and T2 extends

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