1. If the question asks for an enumeration, do not present your answer in paragraph form.

2. Look at the points being given per question and adjust your answer and details provided
accordingly.
3. Do not use abbreviations
4. A conclusion without any reasoning and legal basis is considered no answer.
5. Essays and objective questions, one page per number
6. Attack/address the issue and/or defense brought about by the other party in the case

1. No demand no delay – does not mean a waiver of the right to collect per se
2. Fulfillment vs. gives rise
3. Loss of right to make use of the period. violation of undertaking in consideration of
which the creditor agreed to the period.
 Cause
motive vs cause
cause presumed to exist. Need not be stated
inadequacy of cause not reason to invalidate unless there is fraud, mistake or undue
influence

Form

Generally not needed for validity and enforceability

Validity vs. Enforceability

Validity
Formal – particular form
Real -delivery

Exceptions for validity:

Real- requires delivery

e.g deposit, pledge, commodatum

Formal – requires specific form

a. Donations of real property - donation AND acceptance (in a PUBLIC INSTRUMENT). (Art. 749
NCC).
b. Donations of personal property - a donation AND acceptance if the donation exceeds P5,000
WRITTEN
-no need to be in a public instrument (Art. 748, NCC).
c. Stipulation to pay interest on loans, interest for the use of the money - said stipulation must
be WRITTEN
d. Transfer of large cattle – REGISTRATION of the transfer of the certificate of registration (Sec.
523, Rev. Adm. Code).
e. Sale of land thru an agent - authority of the agent must be WRITTEN (Art. 1874, NCC).
f. Contracts of antichresis (Art. 1881 NCC) - the principal loan, and the interest if any, must be
in writing. (Art. 2134, NCC).
g. Partnership with contribution of real property – the contract of partnership and the
inventory of the contributed property/ies should be in a PUBLIC INSTRUMENT (Art. 1773, NCC)
Exceptions for enforceability:

Statute of frauds (Art. 1403) – must be in WRITING to be enforceable

a. An agreement that by its terms is to be performed AFTER a year from the making of the
contract
b. A special promise to answer for the debt, default, or miscarriage of another – e.g Guaranty
(should be collateral/subsidiary)
c. An agreement made in consideration of marriage, other than a mutual promise to marry – e.g
marriage settlements and donations propter nuptias
d. An agreement for the sale of goods, chattels or things in action (intangibles), at a price not
less than five hundred pesos (P500 and up)
-unless the buyer accepts and receives part of such items, or pay at the time some part of the
purchase money
when a sale is made by auction and entry is made by the auctioneer in his sales book (complete
-details (amount and kind of property, terms, price, names of the purchasers and person on
whose account the sale is made)is a sufficient memorandum
e. An agreement for the leasing of real property > 1year or for the sale of real property
(regardless of price)or of an interest therein
f. A representation as to the credit of a third person (not guaranty but only an assurance; not a
contract per se)
g. Express trust over real property

Principles governing the statute of frauds

1. A violation thereof makes a contract unenforceable
2. applies only to executory contracts (no performance has yet been made at all) and not
partially or completely executed (consummated contracts).
3. does not apply if the action is neither for damages because of the violation of an
agreement nor for the specific performance of said agreement
4. The Statute of Frauds is exclusive; applies only to the agreements or contracts
enumerated herein.
5. defense may be waived (accepting benefits or failing to object)
6. contract infringing the Statute cannot be assailed by third persons; only a personal
defense
7. The Statute of Frauds is a Rule of Exclusion and does not determine the credibility or
weight of evidence. It merely concerns itself with the admissibility thereof.
i.e the oral evidence might be relevant and from credible witnesses and might therefore
be admissible were it not for the fact that the law or the statute excludes said oral
evidence
8. The Statute of Frauds does not apply if it is claimed that the contract does not express
the true agreement of the parties. (what should be determined is the applicability of the
statute on the real agreement)
Art. 1357 & 1358

If the law requires a document or other special form, as in the acts and contracts enumerated
in [article 1358], the contracting parties may compel each other to observe that form, once the
contract has been perfected. This right may be exercised simultaneously with the action upon
the contract.

For convenience ONLY (Art. 1358)

i.e the contract should already be BOTH valid AND enforceable

The following must appear in a public document:

a. Acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights (mortgage, easement) over immovable property; sales of real
property or of an interest therein are governed by Articles 1403, No. 2, and 1405
(waiver/ratification)
b. The cession, repudiation or renunciation of hereditary rights or of those of the conjugal
partnership of gains
c. The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third person;
d. The cession of actions or rights proceeding from an act appearing in a public document.

All other contracts where the amount involved exceeds five hundred pesos (P500 and up) must
appear in writing, even a private one. But sales of goods, chattels or things in action are
governed by the statute of frauds.
Reformation
- There is a meeting of the minds (valid contract)
- The document (ONLY) does not accurately show what was ACTUALLY AGREED due to
mistake, fraud, inequitable conduct or accident (mistakes of fact)
- Only purpose is to show what was REALLY agreed upon; NOT to change the contract
- Clear and convincing proof of the real agreement
- Not applicable to:
o Simple/unconditional donation inter vivos
o Wills
o Real agreement is void
- If there is no meeting of the minds, remedy is annulment (not reformation)
- Action can be brought by injured party or if mistake is mutual, by either party

Interpretation
- Rules similar to the rules on statutory construction – because contracts are considered
law between the parties
- Interpretation of obscure words or stipulations – against the party who caused the
obscurity
- When absolutely impossible to interpret the provisions based on the rules provided:
o Gratuitous contract – least transmission of rights (eg. Donation vs commodatum)
o Onerous contract – greatest reciprocity of interests (eg sale at a low price vs.
loan with security)
o Obscurity as to the principal object – void
Defective Contracts (in order of defect) least  most

Rescissible
Voidable
Unenforceable
Void

Rescissible
Rescission – reparation for damages in a contract normally binding, caused by external factors

Rescission (2 kinds)

1. Under Art. 1389 based on lesion or fraud upon creditors

2. Under Art. 1191 based on nonperformance

vs. mutual dissent

Rescissible contracts:

1. Those which are entered into:

a. By the guardians in behalf of wards whom they represent *
b. in representation of absentees (eg partition)
suffer lesion by more than one-fourth of the value of the things which are the object thereof
*
  Ownership Administration
With court approval valid valid regardless of lesion
unenforceable, regardless rescissible if lesion > 1/4 of value of
Without court approval of lesion property

2. Those undertaken in fraud of creditors when the latter cannot in any other manner collect
the claims due them (Art. 1177)
3. Those which refer to things under litigation if they have been entered into by the defendant
without the knowledge and approval of the litigants or of competent judicial authority;
4. All other contracts specially declared by law to be subject to rescission
a. partition (Art. 1098)
b. result of deterioration (Art. 1189)
c. rights given to an unpaid seller (Arts. 1526- replevin & 1534 stoppage of good in
transitu)
d. lower area or value of real estate sold (Art. 1539)
e. eviction of vendee (Art. 1556)
f. encumbrance of immovable by a non-apparent burden (Art. 1560)
5. Payments made in a state of insolvency when obligation not yet due
 - Action only allowed when no other means to recover
- Only up to extent needed to cover the damages
- Requires mutual restitution (i.e the party filing must be able to return; exception:
prejudiced creditors.)
- Object not with a 3rd party who acted in good faith. If 3rd person in bad faith, if he
cannot return for any reason, liable to pay damages

Contracts presumed fraudulent

Gratuitous alienation - debtor did not reserve sufficient property to pay all debts contracted
BEFORE the donation.
Onerous alienation - when made by persons:
a. against whom some judgment has been rendered in any instance (even if not yet
final)
b. against whom some writ of attachment has been issued (not necessarily on the
property disposed)

Badges of Fraud

1) The fact that the consideration of the conveyance is fictitious or inadequate

2) A transfer made by a debtor after suit has been begun and while it is pending against
him
3) A sale upon credit by an insolvent debtor
4) The transfer of all or nearly all of his property by a debtor, especially when he is
insolvent or greatly embarrassed financially
5) Evidence of large indebtedness or complete insolvency
6) The fact that the transfer is made between father and son (when this fact is
considered together with preceding circumstances)
7) The failure of the vendee to take exclusive possession of all the property
VOIDABLE

Basis:

Incapacity of one of the parties

Vitiated consent

Ratification

The action to annul is extinguished; the contract becomes a completely valid one.
The contract is cleansed of its defect from the beginning

Requisites
(a) The contract must be voidable
(b) The person ratifying must know the cause of its being voidable
(c) The cause must not exist or continue to exist anymore at the time of ratification
(d) The ratification must have been made expressly or by an act implying a waiver of the action
to annul (tacit; based on conduct)
(e) The person ratifying must be the injured party

- may be made by a duly appointed guardian

- capacitated party or the party who caused the vitiated consent cannot invoke the
voidability of the contract
- same effect as rescission; mutual restitution + damages by guilty party
- action cannot be brought if victim lost the object through his fault; if based on
incapacity, action can still be brought even if object lost

UNENFORCEABLE

Basis:

Unauthorized contracts (if object is land, void)

Statute of Frauds
Incapacity of both parties
-if ratified by guardian of 1 party – voidable
-if ratified by guardian of both parties – valid
VOID
Inexistent
a. Those which are absolutely simulated or fictitious
b. Those whose cause or object did not exist at the time of the transaction
c. Those which contemplate an impossible service
d. Those where the intention of the parties relative to the principal object of the
contract cannot be ascertained

Illegal

a. Those whose cause, object or purpose is contrary to law, morals, good customs,
public order, or public policy;
b. Those whose object is outside the commerce of men
c. Those expressly prohibited or declared void by law.

  RESCISSIBLE VOIDABLE UNENFORCEABLE VOID

Defect involved external internal internal internal

lack of
authortity/statute
of non-existence or
vitiated consent or frauds/incapacity illegality/against
Basis of action damage/lesion incapacity (of both parties) public policy
Collateral
attack allowed? no      
party/3rd
party/creditor in
accion party; 3rd persons
Party to bring subrogatoria (Art. must be the injured directly affected
action 1177) party or successor no action (only)

Effect of there should be no need for damage,

damage and damage and once and even if
subsequent indemnified, indemnified, can still
indemnification cannot prosper prosper N/A N/A
No;
valid until
Ratifiable? rescinded Yes Yes No
 Yes; 4 years from
Cured by disappearance of
prescription? Yes; 4 years cause No No
Status of
contract Valid Valid Valid Void

Prescription (statute of limitations)

Acquisitive or Extinctive

Ordinary vs Extraordinary

Acquisition or loss of Ownership or real rights through lapse of time through possession that is:

Open
Continuous
Exclusive
Actual
Notorious

Owner Public Peaceful Uninterrupted Adverse Possession

Good faith (ordinary) to bad faith (extraordinary) - prorate

No prescription:

Between husband and wife, even if under separation of property

Parents and children during minority/insanity; guardian and ward
Property under torrens title
Movables acquired through crime
Properties outside commerce of man