OBLIGATION – juridical necessity to give, to do or not to do 2.

Fraud/dolo
3. Negligence/culpa
4 ELEMENTS OF OBLIGATION 4. Contrary to terms of obligation
1. ACTIVE SUBJECT (creditor/obligee) – whose obligation is
constituted 1. DEFAULT/MORA – delay
2. PASSIVE SUBJECT (debtor/obligor) – has duty to give, to do or not 3kinds
to do a. Mora solvendi – debtor’s delay to give (real ob.), to do
3. OBJECT/PRESTATION – subject matter (personal ob.)
4. JURIDICAL/LEGAL TIE (vinculum/efficient cause) – reason b. Mora accipiende – creditor’s delay to accept
c. Compensatio Morae – delay of both in reciprocal obligation
CIVIL OBLIGATION NATURAL OBLIGATION
derived from positive law derived from equity & justice CONCEPT OF DELAY
enforceable by court action not enforceable by court action General Rule: No demand, No delay
Exceptions:
5 SOURCES OF OBLIGATION 1. Law states
1. LAW 2. Obligation states
2. CONTRACTS 3. Time is the essence
3. QUASI-CONTRACTS – arise from lawful, voluntary acts; no one 4. Demand be useless if delay
shall be unjustly enriched... 5. Debtor guilty of delay
2Kinds
a. Solutio indebiti – something received (delivered on a mistake), EFFECTS OF DELAY
no right to demand it 1. Damages
b. Negotiorum gestio – voluntary mgt of property/affairs of 2. When to deliver determinate thing, STILL LIABLE in fortuitous
another w/o his knowledge/consent event.
4. QUASI-DELICT/TORTS/CULPA AQUILIANA – arise from 2. FRAUD/DOLO – conscious, deliberate, intentional evasion of
damage; fault/negligence fulfillment
5. CRIMES/ACTS/OMISSIONS punished by law – arise from civil 2Kinds
liability that is a consequence of a criminal offense a. Dolo causante/Causal fraud – fraud in obtaining consent;
consent is defective, contract is voidable. Remedy: annulment
DILIGENCE OF A GOOD FATHER OF A FAMILY b. Dolo incidente/Incidental fraud – fraud w/c vitiates consent.
- care need to be exercised by a debtor to deliver/give determinate Remedy: damages
thing
Exception: When law/stipulation of parties requires a differnt 3. NEGLIGENCE/CULPA – voluntary act/omission; no bad faith
standard of care (slight/extraordinary diligence). intended
3Kinds
When creditor is entitled to the fruits a. Culpa aquiliana/Civil negligence – quasi-delict/torts
Rule: The creditor has personal right (right to ask for delivery) from b. Culpa contractual/Contractual negligence – breach
the time the obligation to deliver arises. c. Culpa criminal/Criminal negligence – crime/delict
But NO real right (right enforceable against the whole world) until it
is delivered. 4. Contrary to the terms of obligation

3 KINDS OF FRUITS 2 RULES OF PRINCIPAL & INSTALLMENT

1. NATURAL – w/o human intervention 1. Receipt of principal w/o mention of interest, presumed interest is
2. INDUSTRIAL – w/ human intervention paid also.
3. CIVIL – derived by virtue of juridical relation 2. Receipt of latter installment w/o mention of prior installment,
presumed prior installment is paid also.
Creditor’s rights if debtor fails to comply w/ the obligation
1. Determinate 4 SUCCESSIVE RIGHTS OF CREDITOR to satisfy claim against
a. Performance DEBTOR
b. Damages 1. Exact payment
2. Generic 2. Attach debtor’s properties
a. Performance 3. Accion subrogatoria – exercise rights & actions except inherent in
b. Damages person
c. Obligation be complied at debtor’s expense 4. Accion pauliana – cancel acts/contracts by debtor to defraud
creditor
Creditor’s rights if debtor does in contravention
1. Damages TRANSMISSIBILITY OF RIGHTS
2. Ask it be UNDONE at debtor’s expense General Rule: ALL RIGHTS are transmissible.
Exceptions:
FORTUITOUS EVENT – cannot be foreseen, if foreseen, inevitable 1. Law states
General Rule: No person liable to fortuitous event. 2. Contract states
Exceptions: 3. Obligation is purely personal
1. Law states
2. Stipulation/contract states 10 Kinds of Obligation
3. Assumption of risk 1. Pure
4. Delay 2. Conditional
5. Debtor promises deliver to 2/more persons who do not have 3. Alternative
same interest (bad faith) 4. Facultative
5. Joint
EFFECTS OF FORTUITOUS EVENT to thing to be delivered 6. Solidary
- extinguish the obligation if determinate; generic does not 7. Divisible
extinguish the obligation 8. Indivisible
9. Obligation w/ a period
3 MISCELLANEOUS RULES ON PERFORMANCE OF OBLIGA-TION 10. Obligation w/ a penal clause
1. When to deliver determinate, accessions (additions/
improvements) and accessories (joined/included with the principal) 1. PURE OBLIGATION
are INCLUDED even not mentioned. - w/o condition, demandable at once (pure has resolutory
2. If debtor fails to do, it shall be DONE AT HIS EXPENSE, same with condition/period)
doing the contravention; poorly done be undone.
3. In obligation not to do, and obligor does what is forbidden, shall 2. CONDITIONAL OBLIGATION
be UNDONE AT HIS EXPENSE. - there is condition in performance; future & uncertain
2Kinds
4 GROUNDS; debtor liable for damages a. Suspensive condition – happening of condition gives RISE to
1. Default/mora obligation
 b. Resolutory condition – happening of condition EXTINGUISHES Therefore, NEITHER of them can demand performance of obligation.
obligation Exception: If the term of obligation has to favor one of them.

6 MISCELLANEOUS RULES ON CONDITIONAL OBLIGATION 5 INSTANCES WHEN DEBTOR LOSES RIGHT TO USE “PERIOD”
1. Impossible conditions, contrary to law, shall ANNUL obligation. 1. Debtor is insolvent.
2. The condition not to do an impossible thing is considered not 2. Debtor attempts to abscond.
agreed upon. 3. Impairment of guarantees/securities.
3. The condition that happens in determinate time, EXTINGUISHES 4. Failure to furnish guarantees/securities promised.
obligation. 5. Violation of undertaking.
4. The condition that happens in INDETERMINATE time, obligation
only effective at arrival. 4. ALTERNATIVE OBLIGATION
5. The condition is fulfilled if DEBTOR prevents fulfillment. - w/ 2 or more prestations, only 1 is due.
6. The effect of conditional obligation, once fulfilled:
- to give: retroact to the day of constitution of obligation 5. FACULTATIVE OBLIGATION
- has reciprocal prestations: fruits & interests be mutually - w/ ONLY 1 prestation but can be substituted.
compensated
- has unilateral obligation: debtor shall give fruits & interests ALTERNATIVE prestations LOST w/ debtor’s fault
Creditor entitled to damages but needs ff requisites:
RULES in case of Loss, Improvement, or Deterioration of thing 1. Debtor can choose.
during the pendency of condition 2. All prestations lost/become impossible due to debtor’s fault.
1. LOST
a. w/ debtor’s fault – damages ALTERNATIVE OBLIGATION FACULTATIVE OBLIGATION
b. w/o debtor’s fault – extinguishes obligation several prestations due, giving one prestation due, but can be
one is sufficient subtituted
2. DETERIORATION right to choose (debtor) unless right to choose DEBTOR ONLY
a. w/ debtor’s fault - (1) cancel obligation & damages; or (2) fulfill granted to creditor
obligation w/ damages If 1 of the prestation is illegal, nullity of principal carries w/ it
b. w/o debtor’s fault – creditor suffer impairment others may be valid, obligation nullity of accessory/
remains substitute
3. IMPROVEMENT
loss/impossibility of ALL loss/impossibility of presta-tion
a. By nature/time – benefit to creditor
prestations due, w/o debtor’s due, w/o debtor’s fault,
b. at expense of debtor – debtor no right than that granted to
fault, extinguishes obligation extinguishes obligation
usufructuary (debtor no right to compensate amount for
improvement)
(3) SUMMARY OF RULES, OBLIGATIONS, & RIGHTS OF DEBTOR
IN ALTERNATIVE OBLIGATION
EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITION
1. If 1 of prestations lost through fortuitous event, shall still be
General Rule: The obligation becomes effective retroactively to the
perform by choosing (creditor) from the remainder.
day obligation was constituted.
2. If 1 of prestations lost through debtor’s fault, creditor may claim
Exceptions:
any of remainders w/ damages.
1. In reciprocal obligation, fruits & interests during pendency of
3. If ALL prestations lost through debtor’s fault, creditor choose price
condition shall compensate each other.
w/ damages.
2. In unilateral obligation, debtor gets fruits & interests unless there
is a contrary intent.
RULES on LOSS/DETERIORATION of the thing intended as
SUBSTITUTE in FACULTATIVE OBLIGATION
3 EFFECTS OF FULFILLMENT OF RESOLUTORY CONDITION
1. If there is a loss/deterioration of thing intended as substitute,
1. Extinguish obligation.
debtor is NOT liable if NOT HIS FAULT.
2. Both parties restore what they received plus fruits & interests.
But if substitution is already made, debtor is liable for loss of
3. The rule on L, D, or I will apply to person who has to return the
substitute when in DELAY, NEGLIGENCE, or FRAUD.
thing.
When one of debtors in reciprocal obligation does not comply w/
6. JOINT OBLIGATION
his obligation
- obligation is to be paid proportionately by debtors or to be
1. The right of injured party is (1) cancel contract & damages; or (2)
demanded proportionately by creditors
fulfill obligation & damages
7. SOLIDARY OBLIGATION
3 Kinds of Obligation (Accdng to PERSON OBLIGED)
- each one of debtors has right to render or each one of creditors
1. UNILATERAL – only 1 party obliged to comply
has right to demand the entire compliance w/ prestation
2. BILATERAL – both parties; performance not same time
3. RECIPROCAL – both parties; performance same time
MAXIMS & SYNONYMS
3. OBLIGATION W/ A PERIOD MAXIMS SYNONYMS
- demandability/extinguishment subject to the expiration of period JOINT Obligation “To each his own” proportionate
SOLIDARY Obligation “One for all, all for individually &
PERIOD – interval of time; either suspends demandability or one” collectively
produces extinguishment
(3) SOLIDARY OBLIGATION EXIST ONLY IF: *RULES
DAY CERTAIN – must come, not known when 1. Law states
2. Stipulation states
7 CASES CONSIDERED TO BE “OBLIGATION W/ A PERIOD” 3. Nature of obligation requires
1. Little by little
2. In partial payment 2 PRESUMPTIONS THAT OBLIGATION IS JOINT
3. Payable ASAP 1. The debts be divided as many shares as there are
4. When I can afford it debtors/creditors.
5. When I have the money 2. The debtors/creditors are distinct from one another.
6. When I am able to
7. When my means permit me to do so 8. DIVISIBLE OBLIGATION
- prestation is capable of partial performance
PERIOD CONDITION
certain uncertain 9. INDIVISIBLE OBLIGATION
future only future/past but unknown - prestation incapable of partial performance
(*influence upon obligation) only (*) on the very existence of
10. OBLIGATION W/ A PENAL CLAUSE
upon its demandability obligation itself
- one w/ accessory undertaking attached to obligation to assume
greater liablity in case of breach/non-fulfillment of obligation
FOR WHOSE BENEFIT IS THE PERIOD?
General Rule: Both the debtor & creditor.
3 PURPOSES OF PENAL CLAUSE
1. Ensure performance of obligation NOT act of novation act of novation
2. Substitute for damages & interest in case of noncompli-ance NOT transfer ownership transfer ownership
3. Penalize debtor in case of breach requires partial/total insol-vency may happen during solvency of
debtor
In case obligation has a PENAL CLAUSE
General Rule: Penalty takes the place of damages & interest in case d. TENDER OF PAYMENT & CONSIGNATION
of non-compliance. TENDER OF PAYMENT – act of offering the creditor what is due to
Exceptions: him w/ a demand that the creditor accept it
1. Stipulation states. CONSIGNATION – act of depositing thing due w/ the court when
2. Debtor refuse to pay penalty. creditor cannot/refuses acceptance of payment
3. Debtor guilty of fraud in performance of obligation.
5 REQUISITES OF CONSIGNATION
NULLITY OF PRINCIPAL OBLIGATION OR THE PENAL CLAUSE 1. Debt due.
Nullity of principal obligation = nullity of penal clause 2. Creditor refused the tender of payment w/o just cause
Nullity of penal clause = NOT nullity of principal obligation 3. Notice of consignation already given to persons interested in
fulfillment of obligation
10 MODES OF EXTINGUISHMENT OF OBLIGATIONS 4. Consignation of thing/amount due
1. Payment or performance 5. Subsequent notice of consignation to interested persons
2. Prescription
3. Compensation 5 VALID CONSIGNATION W/O PREVIOUS TENDER OF PAYMENT
4. Confusion/merger 1. Creditor is absent/unknown.
5. Condonation/remission 2. Creditor is incapacitate to receive at time it is due.
6. Fulfillment of resolutory condition 3. Creditor refused give a receipt, w/o just cause.
7. Annulment 4. 2 or more persons claim the right to collect.
8. Rescission 5. Title of obligation lost.
9. Novation
10. Loss of thing due 2. LOSS OF THING DUE
- perishes, disappears, or goes out of commerce; existence is
1. PAYMENT/PERFORMANCE unknown; cannot be recovered
- Payment means delivery of money & performance of obligation
3 REQUISITES TO EXTINGUISH OBLIGATION DUE TO LOSS
2 PLACE OF PAYMENT 1. Determinate thing.
1. At place agreed upon 2. W/o debtor’s fault.
2. If w/o agreement 3. No delay.
a. Object is indeterminate – paid at domicile of DEBTOR
b. Object is determinate – place of thing at the time of constitution 3. CONDONATION/REMISSION
of obligation - gratuitous abandonment of right by the creditor

4 SPECIAL MODES OF PAYMENT 3 REQUISITES OF A VALID CONDONATION/REMISSION

a. Application of payment 1. It must be gratuitous.
b. Cession 2. Accepted by obligor.
c. Tender of payment & consignation 3. Obligation is demandable.
d. Dacion in payment
4. CONFUSION/MERGER
a. APPLICATION OF PAYMENT - meeting in 1 person of qualities of debtor & creditor w/ same
- designation of debt to w/c payment must be applied when debtor obligation
has several obligations of same kind in favor of same creditor.
3 REQUISITES OF VALID CONFUSION/MERGER
3 REQUISITES OF APPLICATION OF PAYMENT 1. The merger of characters of debtor & creditor must be in same
1. Only 1 debtor & 1 creditor person.
2. 2 or more debts, same kind 2. Take place between principal debtor & creditor.
3. All debts are due 3. Clear & definite.
4. Insufficient payment to exinguish ALL debts
5. COMPENSATION
3 RIGHTS TO MAKE APPLICATION OF PAYMENT - 2 persons are debtors & creditors of each other
1. Right belongs to CREDITOR.
2. If debtor does not avail, creditor can give him receipt designating 6 ESSENTIAL REQUISITES OF COMPENSATION
the debt from which payment will be applied. 1. Parties both principal debtors & creditors of each other.
3. If debtor accepts the receipt, he cannot complain unless THERE IS 2. Compensation is not prohibited by law.
just cause to invalidate the contract. 3. No retention/controversy by 3rd person.
4. 2 debts are due & demandable.
b. CESSION 5. 2 debts are liquidated.
- debtor abandons ALL his property for creditor’s benefit to obtain 6. 2 debts both in money/consumable things.
payment from proceeds of his property
(2) CLASSES OF COMPENSATION
5 REQUISITES OF VALID CESSION 1. As to effect
1. 1 debtor & 2 or more creditors a. TOTAL – obligations completely extinguished.
2. Debtor is in partial/total insolvency. b. PARTIAL – a balance remains
3. Debtor to deliver ALL his property to creditors
4. Debt is due & demandable. 2. As to origin or cause
5. Creditors must sell the properties & apply the proceeds to their a. LEGAL – by law
respective credits proportionately. b. VOLUNTARY/CONVENTIONAL – agreement of parties
c. JUDICIAL – order from the court
c. DACION IN PAYMENT (dacion en pago) d. FACULTATIVE – 1 of parties can choose/oppose claiming
- alienation of property to the creditor in satisfaction of debt compensation

3 REQUISITES OF DACION IN PAYMENT 6. NOVATION

1. Consent of creditor - substitution/change of obligation
2. NOT prejudicial to another creditor - substitution of debtor
3. Debtor not insolvent declared by a judicial decree - subrogation of creditor

CESSION DACION IN PAYMENT (3) OBLIGATIONS MAY BE MODIFIED BY:

all properties NOT all properties 1. Changing object/principal conditions. (REAL NOVATION)
require more than 1 creditor NOT require all creditors 2. Changing the person of debtor/creditor. (PERSONAL NOVATION)
a. Substitution – change of debtor 6. NAME
b. Subrogation – change of creditor a. NOMINATE – contract given a particular/special name (eg.
3. Changing person of the parties & the objects of principal partnership)
condition. (MIXED NOVATION) b. INNOMINATE – not given special name (eg. I give that you may
give)
4 REQUISITES OF NOVATION
1. Old valid obligation. 7. SUBJECT MATTER
2. Agreement of parties to new obligation. a. Contracts involving things
3. Extinguishment of old obligation. b. Contracts involving rights/credits
4. Validity of new obligation. c. Contracts involving services

2 FORMS OF NOVATION BY SUBSTITUTION OF DEBTOR 3 STAGES OF CONTRACT

1. EXPROMISION – w/ consent of creditor, NO consent of old debtor 1. PREPARATION/CONCEPTION – preparatory steps to perfect
2REQUISITES contract
a. Initiative of 3rd person. 2. PERFECTION/BIRTH – meeting of minds between 2 contracting
b. Consent of creditor. parties
2. DELEGACION – all must agree (creditor, old debtor, new debtor) 3. CONSUMMATION/TERMINATION – terms of contract are
3REQUISITES performed, & contract is fully executed
a. Initiative from old debtor.
b. Consent of debtor. 5 BASIC PRINCIPLES/CHARACTERISTICS OF A CONTRACT
c. Acceptance by creditor. 1. PRINCIPLE OF AUTONOMY (liberty to contract)
Provided they are not contrary to:
7. SUBROGATION a. Law
- change of creditor b. Morals
c. Good customs
2 KINDS OF SUBROGATION d. Public order
1. CONVENTIONAL – consent of original parties & 3rd person e. Public policy
2. LEGAL – by law
a. creditor pays another preferred creditor even w/o debtor’s 2. MUTUALITY OF CONTRACTS
knowledge - the contract must bind both parties; its validity/compliance cannot
b. 3rd person pays the express approval of debtor be left to the will of one of them
c. 3rd person pays even w/o knowledge of debtor
3. RELATIVITY OF CONTRACTS
- Contracts take effect only between the parties, their assigns &
heirs except when there are rights & obligations not transmissible:
CONTRACT – meeting of minds between 2 persons to give a. by their nature
something or to render service. b. by stipulation (stipulation por autri)
c. by provision of law
3 ELEMENTS OF CONTRACT
1. ESSENTIAL – w/o them, contract cannot exist 4. CONSENSUALITY OF CONTRACTS
a. CONSENT of contracting parties - Contracts are perfected by mere consent
b. OBJECT CERTAIN – subject matter Exceptions:
c. CAUSE/CONSIDERATION a. REAL CONTRACTS – perfected by delivery
In some contracts, ff are also essential: b. FORMAL/SOLEMN CONTRACTS – special form required for its
d. FORM perfection
e. DELIVERY
5. OBLIGATORINESS OF CONTRACTS
2. NATURAL – found in certain contract, presumed to exist unless - The contract, once perfected, has the force of law between parties
stipulated which bound to comply in good faith

3. ACCIDENTAL – various particular stipulations that may be agreed 4 KINDS OF INNOMINATE CONTRACTS
upon by contracting parties 1. I give that you may give
2. I do that you may do
(7) CLASSIFICATION OF CONTRACTS 3. I give that you may do
According to: 4. I do that you may give
1. PERFECTION/FORMATION
a. CONSENSUAL – perfected by mere consent 4 RULES FOR INNOMINATE CONTRACTS
b. REAL – perfected by delivery 1. Agreement of parties
c. FORMAL/SOLEMN – special formalities are essential before 2. Law on Obligations & Contracts
perfection of contract 3. Rules on most analogous nominate contract
4. Customs of place
2. PARTIES OBLIGATED
a. UNILATERAL – only 1 has obligation STIPULATION POR AUTRI
b. BILATERAL – both parties require to render reciprocal - stipulation in favor of 3rd person
prestations
5 REQUISITES OF STIPULATION POR AUTRI
3. CAUSE 1. Stipulation in favor of 3rd person
a. ONEROUS – exchange of considerations 2. Stipulation is only PART, not the whole of the contract.
b. GRATUITOUS – no consideration received in exchange of what 3. Both parties must conferred upon a favor of 3rd person
is given 4. 3rd person must accept & say it to debtor before its
c. REMUNERATORY – something is given for benefit/service that revocation/cancellation
had been rendered previously 5. Neither of both parties be the legal representation/autho-rization
of 3rd person
4. RISK OF FULFILLMENT
a. COMMUTATIVE – equivalent values are given by both parties CONSENT
b. ALEATORY – fulfillment of contract depends on chance (eg. - meeting of offer (certain) & acceptance (absolute) upon a thing
insurance)
5 REQUISITES OF CONSENT
5. IMPORTANCE 1. Must be given by 2 or more parties
a. PRINCIPAL – contract may stand alone (eg. sale, partnership) 2. Parties are capacitate to enter in contract
b. ACCESSORY – existence depends on another contract (pledge, 3. No vitiation of consent
guarantee) 4. No conflict between declared & intended
c. PREPARATORY – contract not an end by itself but a means thru 5. Legal formalities must be complied
w/c other contracts may be made (eg. agency)
7 RULES ON OFFER/ACEPTANCE
1. An offer must be certain.
2. Business advertisements for sale are NOT offers but ONLY
invitations to make an offer.
3. Advertisements for bidders are ONLY invitations.
4. An acceptance made by letter/telegram does NOT
bind offeror EXCEPT from the TIME it came to his knowledge.
5. An offer made through an agent is accepted from the TIME the
acceptance is done through an agent.
6. An offer is ineffective upon death, insanity, insolvency, of EITHER
party BEFORE acceptance is made.
7. When offeror allowed offeree a certain period
to accept, offer MAY be withdrawn AT ANYTIME unless there is
something PAID/PROMISED.
3 persons who CANNOT GIVE CONSENT to a contract (if entered
into, contract is voidable)
1. UNEMANCIPATED MINORS
2. INSANE/DEMENTED PERSONS (unless they acted DURING LUCID
INTERVAL)
3. DEAF-MUTES who DO NOT know how to write
5. A mere expression of opinion is NOT FRAUD UNLESS made by
an expert & the other party relies on his special knowledge.
6. Misrepresentation made in good faith is NOT FRAUD but may
constitute an error.
7. Misrepresentation by 3rd person DOES NOT vitiate consent UNLESS
it created substantial mistake.
3. VIOLENCE
- serious/irresistible force is employed.
2 RULES ON VIOLENCE
1. Serious/irresistible force is employed w/c constitutes the reason
why one entered into a contract.
2. Violence ANNULS obligation although it is DONE by 3rd person not
part of contract.
4. INTIMIDATION
- 1 of the parties is compelled by a reasonable & well-grounded fear
of an imminent & grave evil upon his person/property to give his
consent.

DEMENTED PERSON – NOT exactly insane; difficult to distin-guish 3 RULES ON INTIMIDATION

right from wrong 1. Age, sex, & condition of person must used to determine the
degree of intimidation.
LUCID INTERVAL – period when an INSANE has acquired 2. Intimidation ANNULS obligation although it is DONE by 3rd person
SANITY temporarily, therefore, capacitated to enter into a valid not part of contract.
contract 3. A threat to enforce one’s claim (claim must be just & legal), DOES
NOT vitiate consent.
2 RULES on persons WHO CANNOT GIVE CONSENT to a contract
1. Age of majority is 18 yrs old VIOLENCE INTIMIDATION
2. A contract entered into by UNEMANCIPATED MINOR w/o External Internal
parents/guardian’s consent is voidable, except: Physical contact/coercion NO physical coercion; ONLY
a. Minor MISREPRESENTS his age (estoppel) MENTAL/MORAL coercion
b. Contract involves sale & delivery of necessities to minor
5. UNDUE INFLUENCE
5 VICES OF CONSENT - a person takes improper advantage of his power over other’s will,
- NOTE: When there is a DEFECTIVE CONSENT of EITHER of parties, depriving the other to his reasonable freedom of choice.
contract is voidable; Remedy: annulment of contract.
1. MISTAKE/ERROR 3 RULES ON UNDUE INFLUENCE
2. FRAUD/DECEIT 1. There is a person who takes improper advantage of his
3. VIOLENECE power over other’s will, depriving the other to his reasonable
4. INTIMIDATION freedom of choice.
5. UNDUE INFLUENCE 2. Undue influence ANNULS obligation although it is DONE by
3rd person not part of contract.
1. MISTAKE/ERROR 3. To constitute undue influence, ff circumstances must be
- wrong conception & lack of knowledge upon a thing considered: (1) confidential, family, spiritual, & other relations of
parties; or (2) the aggrieved party is suffering from mental
(2) MISTAKES W/C VITIATES CONSENT weakness; or (3) ignorant; or (4) in financial distress.
It should refer to:
1. substance of thing that is the OBJECT of contract SIMULATION OF CONTRACT
2. conditions w/c MOVED either/both parties to enter into contract - process of INTENTIONALLY deceiving others by producing a
contract not really exist (absolute simulation), or w/c is different
4 RULES ON MISTAKE from true agreement (relative simulation).
1. Mistake to identity/qualifications of either of parties will vitiate
consent ONLY when IT is the principal cause of contract. 2 KINDS OF SIMULATED CONTRACT
2. Simple mistake of account must be corrected. 1. ABSOLUTE SIMULATION (the parties DO NOT intend to be bound
3. No mistake if parties knew the risk/doubt affecting OBJECT of at all)
contract. - completely fictitious/make-believe; VOID
4. When one of parties is unable to read or the contract is in 2. RELATIVE SIMULATION (parties conceal their true/real
language not understood by him, & mistake/fraud is alleged, the agreement)
person enforcing the contract must FULLY explained the terms to - parties are bound to real/true agreement, EXCEPT:
him. a. contract prejudice 3rd person
b. purpose is contrary to law, morals, good customs, public order,
2. FRAUD/DOLO public policy
- when through insidious words/machinations of one of the parties,
INDUCED the other to enter into a contract, & w/o them, he will not 7 REQUISITES OF OBJECT OF CONTRACT
agree. 1. Specific & certain
2. Services not contrary to law, morals, good customs, public order,
DOLO CAUSANTE DOLO INCIDENTE public policy
Serious Not serious 3. Services/things must NOT be legally/physically impossible
cause induces party to ENTER NOT the cause to enter into 4. Services/things are w/in commerce of man including future things
into contract contract 5. Rights are NOT TRANSMISSIBLE.
make contract voidable contract is valid; liable 6. Determinate (kind) or determinable ( w/o the need of new
for damages contract/agreement)
7. NO contract be entered for future inheritance UNLESS law states
7 RULES OF FRAUD
1. Failure to disclose facts when these needs to be revealed, is a 4 REQUISITES OF CAUSE
fraud. 1. It is just & equitable.
2. Fraud should be SERIOUS (dolo causante) & SHOULD NOT be done 2. It exists.
by BOTH parties to make contract voidable. 3. It is lawful.
3. Incidental fraud (dolo incidente) ONLY obliges person to PAY 4. It is true.
DAMAGES.
4. Usual exaggerations in trade, when other party know the “real” LESION
facts, is NOT FRAUD. - inadequacy of cause (eg. insufficient price for thing sold)
 5. Those whose CAUSE/OBJECT/PURPOSE is contrary to law, morals,
RULES ON LESION good customs, public order, or public policy.
- Lesion DOES NOT invalidate contract, except there is: 6. Those where INTENTION of parties to principal object CANNOT be
a. Fraud ascertained.
b. Mistake 7. Those expressly prohibited/declared VOID by law.
c. Undue influence

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

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

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

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

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

REFORMATION OF INSTRUMENTS
- REMEDY in equity in w/c a written instrument is made/construed
to the REAL intention of parties when there is an error/mistake.

(5) CASES REFORMATION OF INSTRUMENT IS AVAILABLE

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

(3) NO REFORMATION OF INSTRUMENT WHEN:

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

4 KINDS OF DEFECTIVE CONTRACTS

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

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

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

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

7 VOID/INEXISTENT CONTRACTS
1. Those w/c are ABSOLUTELY simulated/fictitious.
2. Those w/c contemplate an impossible service.
3. Those whose OBJECT is outside the commerce of man.
4. Those whose CAUSE/OBJECT did not exist at time of tran-saction.