Obligations and Contracts

- CONTRACTS -

Contracts: General Provisions

Article Provision Aspects Meaning/Concept

Article 1305 A contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to
give something or to render some service.
Stages of a Contract: Contract is a juridical convention manifested in legal form, by virtue
1) Preparation - period of negotiation or of which one or more parties bind themselves in favour of another or
bargaining; others, or reciprocally, to the fulfilment of a presentation to give, to
do, or not to do.
2) Perfection - moment when the parties
come to agree on the terms of the
contract;

3) Consummation - fulfilment or
performance of the terms agreed upon in
the contract.

Characteristics of Contracts:
1) Obligatory Force - the contract
constitutes the law as between the
parties;

2) Mutuality - validity & performance

cannot be left to the exclusive will of
only one of the parties;

3) Relativity - binding only upon the

parties & their successors.

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 Contracts: General Provisions
Article Provision
Article 1306 The contracting parties may establish such stipulations,
clauses, terms, & conditions as they may deem
convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.
Article 1307 Innominate contracts shall be regulated by the
stipulations of the parties, by the provisions of Titles I & 1)
II of this Book, by the rules governing the most 2)
analogous nominate contracts, & by the customs of the 3)
place. 4)
Article 1308 The contracts must bind both contracting parties; its
validity or compliance cannot be left to the will of one of
them.
Article 1309 The determination of the performance may be left to a
third person, whose decision shall not be binding until it
has been made known to both contracting parties.
Article 1310 The determination shall not be obligatory if it is evidently
inequitable. In such case, the courts shall decide what is
equitable under the circumstances.
Aspects Meaning/Concept
Freedom to Contract is the right of parties to enter into lawful
contracts, and stipulate to the terms and conditions thereof wherein
the contract and its agreements comprises the law between the parties.
Innominate Contracts: Innominate Contracts, in the absence of stipulations & specific
Do ut des (I give, you give) provisions of law on the matter, are to be governed by rules
Do ut facias (I give, you do) applicable to the most analogous contracts.
Facio ut des (I do, you give)
Facio ut facias (I do, you do)
Mutuality of Contract - Obligations arising from contracts have the
force of law between the contracting parties; fulfilment of a contract
cannot be left to the exclusive will of one of the parties.
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 Contracts: General Provisions

Article Provision Aspects Meaning/Concept

Article 1311 Contracts take effect only between the parties, their
assigns & heirs, except in case where the rights &
obligations arising from the contract are not transmissible
by their nature, or by stipulation or by provision of law.
The heir is not liable beyond the value of the property he
received from the decedent.
If a contract should contain some stipulation in favour of
a third person, he may demand its fulfilment provided he
communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a
person is not sufficient. The contracting parties must have
clearly & deliberately conferred a favour upon a third
person.
Requisites for Stipulations for Third Persons
(par. 2, Art. 1311):
1) Contract must contain stipulation in
favour of a third person;
2) Said stipulation should be a part, not the
whole of the contract;
3) Contracting parties must clearly and
deliberately confer a favour upon a third • Rights and obligations under a contract are transmitted to the heirs
person, not a mere incidental benefit;
4) Said stipulation should not be
conditioned or compensated by any kind
of obligation;
Parties bound by Contract
• Contracts produce effect as between the parties who execute them.
• A contract cannot be binding upon and cannot be enforced against
one who is not a party to it.
• Only a party to a contract can maintain an action to enforce the
obligations arising under said contract.
of the parties.
For stipulations pour autri to be valid, it must be the purpose & intent
of the parties to benefit the third person.

5) Favoured third person must have

communicated his acceptance to the
obligor before its revocation;

6) Neither of the contracting parties bears

the legal representation or authorisation
of the third party.

Article 1312 In contracts creating real rights, third persons who come A real right directly affects property subject to it; whoever comes into
into possession of the object of the contract are bound possession of real property must respect that real right.
thereby, subject to the provisions of the Mortgage Law &
the Land Registration laws.

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Article Provision
Article 1313 Creditors are protected in cases of contracts intended to
defraud them.
Article 1314 Any third person who induces another to violate his
contract shall be liable for damages to the other
contracting party.
Article 1315 Contracts are perfected by mere consent, & from that
moment the parties are bound not only to the fulfilment
of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in
keeping with good faith, usage, & law.
Article 1316 Real contracts, such as deposit, pledge & commodatum,
are not perfected until the delivery of the object of the
obligation.
Contracts: General Provisions
Aspects Meaning/Concept
When a debtor enters into a contract in fraud of his creditors, the
latter, although not a party to said contract, may ask for its rescission.
Unlawful interference - an injured party Interference by Third Persons - A third person may be held liable
may recover damages for unlawful for damages if he induces a party to a contract to violate the terms
interference with the contract by a third thereof.
party
Requisites of action to recover damages:
1) Existence of a valid contract;
2) Knowledge by the third person of the
existence of the contract;
3) Interference by the third person in the
contractual relation without legal
justification.
Mere consent is the meeting of the minds of • The binding force of a contract includes its express stipulations, as
the parties upon the terms of a contract well as to all consequences which are the natural effect of the
thereby perfecting the contract contract, considering its true purpose, the stipulations it contains,
and the object involved
• Real contracts, by their nature & purpose, require the delivery of
the object for their perfection; it is the delivery of the object which
forms the basis of the obligations under real contracts.
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 Contracts: General Provisions

Article Provision Aspects Meaning/Concept

Article 1317 No one may contract in the name of another without • A contract entered into on behalf of another who has not authorised
being authorised by the latter, or unless he has by law a it is not valid & binding against him, unless the transaction is
right to represent him. ratified by him and is therefore estopped to question its legality.

A contract entered into in the name of another by one • Ratification of a contract by the person in whose name it has been
who has no authority or legal representation, or who has entered into without authority, validates the act from the moment of
acted beyond his powers, shall be unenforceable, unless it its celebration; ratification may be expressed or implied.
is ratified, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the
other party.

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 - ESSENTIAL REQUISITES OF CONTRACTS -

Essential Requisites of Contracts: General Provisions

Article Provision Aspects Meaning/Concept

Article 1318 There is no contract unless the following requisites concur:
1. Consent of the contracting parties;
2. Object certain which is the subject matter of the
contract;
3. Cause of the obligation which is established.
Consent - concurrence of the minds • There must be at least two parties to a contract, and their capacity and
of the parties on the object and cause consent are essential to its existence.
which shall constitute the contract;
• Legal Capacity of the contracting parties is an essential element for the
Object - is the thing, right or service existence of a contract; it is an indispensable condition for the existence
which is the subject-matter of the of consent.
obligation arising from the contract;
• Consent is ESSENTIAL for the existence of a contract, and where it is
Cause - the essential, immediate, wanting, the contract is non-existent.
direct and proximate reason which
justifies the creation of an obligation
through the will of the contracting
parties.

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 Essential Requisites of Contracts: Consent

Article Provision Aspects Meaning/Concept

Article 1319 Consent is manifested by the meeting of the offer & the
acceptance upon the thing & the cause which are to
constitute the contract. The offer must be certain & the
acceptance absolute. A qualified acceptance constitutes
a counter-offer.
1) Must be Definite - so that an agreement
Acceptance made by letter or telegram does not bind the
offeror except from the time it came to his knowledge.
The contract, in such a case, is presumed to have been
entered into in the place where the offer was made.
Offer - an offer is a unilateral proposition
which one party makes to the other for the
celebration of a contract.
Requisites of a valid offer:
can be reached on the whole contract
upon agreement;
2) Must be Complete - so as to indicate
with sufficient clearness the kind of
contract intended and definitely stating
the essential conditions of the proposed
contract, as well as the non-essential
ones desired by the offeror;
Consent is manifested by the concurrence of offer and acceptance with
respect to the object and the cause of the contract.
An unaccepted offer does not give rise to consent, and the contract
does not come into existence.
Both the offer and the acceptance can be revoked before the contract is
perfected:
1) Offeror may withdraw his offer at any time before he learns of the
acceptance;
2) Acceptance may be revoked before it comes to the knowledge of
the offeror.

3) Must be Intentional - seriousness of

offer so as to give it juridical effect to
therefore give rise to a contract.

Acceptance must be unequivocal and

unconditional

Article 1320 An acceptance may be express or implied. Implied acceptance may arise from acts or facts which reveal the intent
to accept.

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 Essential Requisites of Contracts: Consent

Article Provision Aspects Meaning/Concept

Article 1321 The person making the offer may fix the time, place, & Right of Offeror:
manner of acceptance, all of which must be complied 1) May prescribe the manner, conditions
with. and terms of sale;

2) May fix a period of acceptance;

3) May require a specific manner of

acceptance.

Article 1322 An offer made through an agent is accepted from the An intermediary who has no power to bind either the offeror or the
time acceptance is communicated to him. offer is not an agent and thus any communication of the acceptance to
him does not perfect the contract; Perfection only occurs when he
communicates such to the offeror.

Article 1323 An offer becomes ineffective upon the death, civil A contract is not yet perfected at any time before acceptance is
interdiction, insanity, or insolvency of either party conveyed, the disappearance of either party or his loss of capacity
before acceptance is conveyed. before perfection prevents the contractual tie from being formed.

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 Essential Requisites of Contracts: Consent
Article Provision
Article 1324 When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn at any time
before acceptance by communicating such withdrawal,
except when the option is founded upon a consideration,
as something paid or promised.
Article 1325 Unless it appears otherwise, business advertisements of
things for sale are not definite offers, but mere
invitations to make an offer.
Article 1326 Advertisements for bidders are simply invitations to
make proposals, & the advertiser is not bound to accept
the highest or lowest bidder, unless the contrary
appears.
Aspects
Periods of Acceptance:
1) Offeror fixes a period for acceptance -
Offeror may accept at any time;
2) Offeror has not fixed a period & offer is
made to a person present - Acceptance
must be made immediately;
3) Offer is made to a person absent -
Acceptance may be made within such
time that under normal circumstances an
answer can be received from him.
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Meaning/Concept
Withdrawal of Offer - Offeror is afforded the right to withdraw the
offer at any time before acceptance, even before the period for
acceptance has expired.
• A business advertisement of things for sale may or may not
constitute a definite offer (it is not a definite offer when the object is
not determinate).
• Valid offers to the public can be made.
• When it it can be inferred with certainty from the advertisement that
the best bid will be considered as giving rise to a contract, each bid
will imply the perfection of a contract, although subject to the
condition that no better bid is made.
 Essential Requisites of Contracts: Consent

Article Provision Aspects Meaning/Concept

Article 1327 The following cannot give consent to a contract: Incapacity to Contract - contracts entered into by persons indicated
in this article are wanting of consent and are thus inexistent and void.
1. Unemancipated minors;
Unemancipated Minors - cannot enter into valid contracts and
2. Insane or demented persons, & deaf-mutes who do contracts entered into by them are not binding upon them unless said
not know how to write. contracts are ratified by them upon reaching age of majority.

Insane Persons - Insanity must exist at the time of the making of the
contract; in cases of lunatics, it is possible that there are lucid intervals
and a contract entered into during such interval will be valid.

Deaf-Mutes - pertains to those deaf-mutes with an inability to write.

Article 1328 Contracts entered into during a lucid interval are valid. Lucid Intervals - a person under guardianship for insanity may still
Contracts agreed to in a state of drunkenness or during a enter into a valid contract, provided it is proven that at the time of
hypnotic spell are voidable. entering into said contract, he was not insane or that his mental defect
did not interfere with or affect his capacity to appreciate the meaning
and significance of the transaction entered into by him.

Liquor & Drugs - Severe intoxication to such a degree that obscures

completely the faculties may be a ground for annulment of a contract.

Article 1329 The incapacity declared in Article 1327 is subject to the

modifications determined by law, & is understood to be
without prejudice to special disqualifications established
in the laws.

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 Essential Requisites of Contracts: Consent

Article Provision Aspects Meaning/Concept

Article 1330 A contract where consent is given through mistake, Requisites of Consent: Vitiated consent by error, violence, intimidation, undue influence, or
violence, intimidation, undue influence, or fraud is 1) Intelligent - vitiated by error; fraud does not make a contract unenforceable but merely voidable.
voidable.
2) Freedom - vitiated by violence,
intimidation, or undue influence;

3) Spontaneous - vitiated by fraud.

Article 1331 In order that mistake may invalidate consent, it should
refer to the substance of the thing which is the object of
the contract, or to those conditions which have
principally moved one or both parties to enter into the
contract.
Mistake as to the identity or qualifications of one of the
parties will vitiate consent only when such identity or
qualifications have been the principal cause of the
contract.
Error or Mistake - wrong or false notion about such matter, a belief
in the existence of some circumstance, fact, or event, which in reality
does not exist.
Error of fact vitiates consent in contracts and is a ground for
annulment of contracts.
• Error as to Object - must refer to the substance of the thing, not only
of the material of which it is made up, but also in general its nature
which distinguishes it.

A simple mistake of account shall give rise to its • Error as to Nature of Contract - Nature of a contract has a
correction. determining influence upon the will of a party and a mistake as to its
nature is an essential mistake.

• Error as to Principal Conditions of a Thing -

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 Essential Requisites of Contracts: Consent
Article Provision
Article 1332 When one of the parties is unable to read, or if the
contract is in a language not understood by him, &
mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been
fully explained to the former.
Article 1333 There is no mistake if the party alleging it knew the
doubt, contingency or risk affecting the object of the
contract.
Article 1334 Mutual error as to the legal effect of an agreement when
the real purpose of the parties is frustrated, may vitiate
consent.
Aspects Meaning/Concept
• The presumption that a party to a contract knows the import of a
document to which he affixes his signature and is bound thereby is
altered by this article.
• The obligation to prove that the terms of a contract has been fully
explained to a party who is unable to read or understand the
language of the contract, when fraud or mistake is alleged, falls to
the party seeking to enforce the contract.
To invalidate consent:
1) Error must be excusable;
2) Must be a real error and not one that
could have been avoided by the alleging
party;
3) Error must arise from facts unknown to
him.
Requisites: An excusable mistake of law may be invoked as vitiating consent.
1) Error must be as to the legal effect of an
agreement; Error on the legal effects of an agreement - Legal effects include the
2) Must be mutual; rights and obligations of the parties, not as stipulated in the contract,
3) Real purpose of the parties is frustrated. but as provided by the law;
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 Essential Requisites of Contracts: Consent
Article Provision
Article 1335 There is violence when in order to wrest consent,
serious or irresistible force is employed.
There is intimidation when one of the contracting
parties is compelled by a reasonable & well-grounded
fear of an imminent & grave evil upon his person or
property, or upon the person or property of his spouse,
descendants or ascendants, to give his consent.
To determine the degree of the intimidation, the age, sex
& condition of the person shall be borne in mind.
A threat to enforce one’s claim through competent
authority, if the claim is just or legal, does not vitiate
consent.
Article 1336 Violence or intimidation shall annul the obligation,
although it may have been employed by a third person
who did not take part in the contract.
Aspects Meaning/Concept
Requisites of Violence: Duress is that degree of constraint or danger sufficient to overcome the
1) Physical force employed most be mind and will of a person of ordinary firmness; may either be actually
irresistible, or of such a degree that the inflicted (violence - physical force or compulsion; external) or
victim has no other course but to submit threatened and impending (intimidation - moral force or compulsion;
under the circumstances; internal)
2) Said physical force is the determining
cause in giving consent to the contract.
Requisites of Intimidation:
1) Intimidation must be the determining
cause of the contract, or must have
caused consent to be given;
2) Threatened act must be unjust or
unlawful;
3) Threat must be real & serious;
4) Threat produces a reasonable & well-
grounded fear from the fact that the
intimidator has the necessary means or
ability to inflict the threatened injury.
A contract whose element of consent is vitiated by the intimidation or
threat employed by a person who was not a party to said contract is
null and void.
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 Essential Requisites of Contracts: Consent
Article Provision
Article 1337 There is undue influence when a person takes improper
advantage of his power over the will of another,
depriving the latter of a reasonable freedom of choice.
The following circumstances shall be considered: the
confidential, family, spiritual, & other relations between
the parties, or the fact that the person alleged to have
been unduly influenced was suffering from mental
weakness, or was ignorant or in financial distress.
Article 1338 There is fraud when, through insidious 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 agreed to.
Article 1339 Failure to disclose facts, when there is a duty to reveal
them, as when the parties are bound by confidential
relations, constitutes fraud.
Aspects
Requisites of Fraud:
1) Fraud must have been employed by one
contracting party upon the other;
2) Fraud must have induced the other party
to enter into the contract;
3) Fraud must have been serious;
4) Fraud must have resulted in damage or
injury to the party seeking annulment.
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Meaning/Concept
Undue Influence - any means employed upon a party which, under
the circumstances, he could not well resist; In determining undue
influence
Fraud is every kind of deception whether in the form of insidious
machinations, manipulations, concealments or misrepresentations, for
the purpose of leading another party into error
Concealment as Fraud - exists where the party who obtains the
consent does so by means of concealing or omitting to state material
facts, with intent to deceive, by reason of which omission or
concealment the other party was induced to give a consent which he
would not otherwise have given.
 Essential Requisites of Contracts: Consent

Article Provision Aspects Meaning/Concept

Article 1340 The usual exaggerations in trade, when the other party • Tolerated Fraud - includes minimising the defects of a thing,
had an opportunity to know the facts, are not in exaggeration of its good qualities, and giving it qualities it does not
themselves fraudulent. have;

• Considered as lawful misrepresentation (dolus bonus) as the law

allows considerable latitude to seller’s statements or dealer’s talk
and experience teaches that it is risky to accept it at its face value;
The rule of caveat emptor should be remembered.

• Tolerated Fraud does not affect the validity of a contract, so long as

it does not go to the extent of malice or bad faith and of preventing
all verification or discovery of the truth by the other party.

Article 1341 A mere expression of an opinion does not signify fraud, An opinion of an expert is like a statement of a fact, and if false, may
unless made by an expert & the other party has relied on be considered a fraud giving rise to annulment.
the former’s special knowledge.

Article 1342 Misrepresentation by a third person does not vitiate GR: Fraud employed by a third person upon one of the parties does not
consent, unless such misrepresentation has created vitiate consent and cause the nullity of a contract; it merely gives rise
substantial mistake & the same is mutual. to an action for damages by the party injured against the third person.

XPN: If one of the contracting parties is in collusion with the third

person or knows of the fraud of the third person, and he is benefited
thereby, he may be considered as an accomplice to the fraud and the
contract becomes voidable.

Article 1343 Misrepresentation made in good faith is not fraudulent

but may constitute error.

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 Essential Requisites of Contracts: Consent
Article Provision
Article 1344 In order that fraud may make a contract voidable, it
should be serious & should not have been employed by
both contracting parties.
Incidental fraud only obliges the person employing it to
pay damages.
Article 1345 Simulation of a contract may be absolute or relative.
The former takes place when the parties do not intend to
be bound at all; the latter when the parties conceal their
true agreement.
Article 1346 An absolutely simulated or fictitious contract is void. A
relative simulation, when it does not prejudice a third
person & is not intended for any purpose contrary to
law, morals, good customs, public order or public policy
binds the parties to their real agreement.
Aspects
Absolute Simulation - there is color of a
contract, without any substance thereof, the
parties having no intention to be bound; this
contract does not legally exist;
Relative Simulation - parties have an
agreement which they conceal under the
guise of another contract; this contract is
valid, provided it does not prejudice third
persons or has an illicit purpose, its validity
is based on the Freedom to Contract.
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Meaning/Concept
• Fraud is serious when it is sufficient to impress, or to lead an
ordinarily prudent person into error;
The determination of the seriousness of fraud relies on the
probabilities of success of the machination put into play.
• Fraud must be the determining cause of the contract and must be
exercised by one party upon the other.
Mutual fraud - when both parties use fraud reciprocally, neither one
has an action against the other.
Dolo incidente - when the fraud is not the determining cause of the
contract, it only gives rise to an action for damages but not for
annulment of the contract.
Simulation is the declaration of a fictitious will, deliberately made by
agreement of the parties, in order to produce, for the purposes of
deception, the appearance of a juridical act which does not exist
(Absolute simulation) or is different from that which was really
executed (Relative simulation).
 Essential Requisites of Contracts: Object of Contracts
Article Provision
Article 1347 All things which are not outside the commerce of men,
including future things, may be the object of a contract.
All rights which are not in transmissible may also be the
object of contracts.
No contract may be entered into upon future inheritance
except in cases expressly authorised by law.
All services which are not contrary to law, morals, good
customs, public order, or public policy may likewise be
the object of a contract.
Article 1348 Impossible things or services cannot be the object of
contracts.
Aspects
Object of a contract is the thing, right or
service which is the subject-matter of the
obligation arising from the contract.
Requisites of Object:
1) Must be within the commerce of man;
2) Must be licit & not contrary to law,
morals, good customs, public policy, or
public order;
3) Must be possible;
4) Must be determinate as to its kind.
Kinds of Impossibility:
1) Absolute/Objective - when no person
can perform it;
2) Relative/Subjective - when due to the
special conditions or qualifications of
the debtor it cannot be oerfirned
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Meaning/Concept
• “Outside the commerce of men” - Includes only those things which
are not susceptible of appropriation or of private ownership.
• Object must be in existence at the time of the perfection of the
contract, or has the possibility of coming into existence at some
future time.
• “Future things” includes not only material objects but also future
rights.
Impossible Things - not susceptible of existing or are outside the
commerce of man;
Impossible Services - acts that are beyond the ordinary strength or
power of man.
• Impossibility must be actual and contemporaneous with the making
of the contract.
• Absolute/Objective Impossibility nullifies the contract
 Essential Requisites of Contracts: Object of Contracts

Article Provision Aspects Meaning/Concept

Article 1349 The object of every contract must be determinate as to
its kind. The fact that the quantity is not determinate
shall not be an obstacle to the existence of the contract,
provided it is possible to determine the same, without the
need of a new contract between the parties.
Determination of Kind - Object of contract must have definite limits,
not uncertain or arbitrary.
Determination of Quantity - may be indeterminate, so long as the
right of the creditor is not rendered illusory; Future determination of
quantity must depend upon circumstances already provided in the
contract.

Essential Requisites of Contracts: Cause of Contracts

Article Provision Aspects Meaning/Concept

Article 1350 In onerous contracts the cause is understood to be, for each
contracting party, the presentation or promise of a thing or
service by the other; in remuneratory ones, the service or benefit the creation of an obligation through the
which is remunerated; & in contracts of pure beneficence, the
mere liberality of the benefactor.
Cause - the essential, immediate, direct
and proximate reason which justifies
will of the contracting parties.
Requisites of Cause:
1) Must exist;
2) Must be true;
3) Must be licit.
Onerous Contract - Causes in onerous contracts need not be
adequate or an exact equivalent of actual value.
Gratuitous Contract - agreements to give donations; generosity or
liberality of benefactor is the cause of gratuitous contracts.
Remuneratory Contract - one where a party gives something to
another because of some service or benefit given or rendered by the
latter to the former, with said service or benefit not due as a legal
obligation.

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 Essential Requisites of Contracts: Cause of Contracts
Article Provision
Article 1351 The particular motives of the parties in entering into a contract
are different from the cause thereof.
Article 1352 Contracts without cause, or with unlawful cause, produce no
effect whatever. The cause is unlawful if it is contrary to law,
morals, good customs, public order or public policy.
Aspects
Cause - the objective, intrinsic, &
juridical reason for the existence of the
contract;
Motive - the psychological, individual,
or personal purpose of a party to the
contract.
The Cause of a contract should not be
confused with the Motives of the
parties, however Motive may be
regarded as Cause when it
predetermines the purposed of the
contract.
null and void; no independent action to rescind or annul is necessary
Illegality of Cause - Contracts with unlawful causes are considered
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Meaning/Concept
GR: Motives of a party do not affect the validity or existence of a
contract.
XPN:
1) When the motive of the debtor in alienating property is to
defraud his creditor;
2) When the motive of a party giving consent is to avoid a
threatened injury;
3) When the motive of a party induced him to act on the basis of
fraud or misrepresentation by the other party.
Want of Cause - Contracts without any cause or consideration is
as they are considered non-existent.
null and void, and therefore non-existent
 Essential Requisites of Contracts: Cause of Contracts

Article Provision Aspects Meaning/Concept

Article 1353 The statement of a false cause in contracts shall render them • Should the cause stated in a contract is false, the contract may still
void, if it should not be proved that they were founded upon be sustained by proof of another lawful cause.
another cause which is true & lawful.
• Should the true consideration in a contract be partly legal and
partly illegal, a party cannot recover upon said contract if there’s a
failure to prove which part of the contract is supported by the
legal cause.

• Should a contract be a simulated or fictitious contract of sale with

a false consideration, it is considered as an annullable contract
under this provision.

Article 1354 Although the cause is not stated in the contract, it is presumed • A contract is presumed to have a good and sufficient
that it exists & is lawful, unless the debtor proved the contrary. consideration.

• This presumption of lawful cause applies when there is no cause

stated in the contract.

Article 1355 Except in cases specified by law, lesion or inadequacy of cause GR: A contract is not subject to annulment in cases of lesion or
shall not invalidate a contract, unless there has been fraud, inadequacy of cause
mistake or undue influence.
XPN: Cases specified by law (ex. Lesion under Art. 1381 as
grounds for rescission)

20