PART X

ALEATORY CONTRACTS, COMPROMISES

AND ARBITRATION

1. ALEATORY CONTRACTS DEFINED. By an aleatory contract,

one of the parties or both reciprocally bind themselves to give
or to do something in consideration of w hat the other shall
give or do upon the happening of an event which is uncertain,
or which is to occur at an indeterminate time.1
a) There is no suspensive condition for the
effectivity of the agreement. For instance, an
insurance contract is both an aleatory contract
and a consensual contract. It is perfected by
mere consent; from the time of perfection
the insured already got what he bargained
for — the insurer already made a promise to
give (there is already a protection given to the
insured). However, the contract is aleatory
because the insurer's obligation to pay the
proceeds will arise only upon the happening of
the risk insured against.

2. KINDS. The kinds of aleatory contracts under the New Civil

Code includes: (1) Insurance, (2) Gambling, and (3) Life
Annuity.
a) Survivorship Agreement — it is an aleatory
contract supported by consideration where the
joint depositors of a bank deposit/account agree
to permit either of them to withdraw the whole
deposit during their lifetime and transferring

1Art. 2010, NCG.

802
 ALEATORY CONTRACTS, COMPROMISES 803
AND ARBITRATION

the balance to the survivor upon the death of

one of them.2

3. INSURANCE. This is now governed by the Insurance Code.3

However, there are two important provisions under the New
Civil Code on Insurance:
a) Disqualification of Beneficiary under Article
2012. — Any person who is forbidden from
receiving any donation under Article 739 cannot
be named beneficiary of a life insurance policy
by the person who cannot make any donation to
him, according to said article; and
b) Right of Subrogation under A rticle 2207. — If
the plaintiff's property has been insured, and
he has received indemnity from the insurance
company for the injury or loss arising out of the
wrong or breach of contract complained of, the
insurance company shall be subrogated to die
rights of the insured against the wrongdoer or
the person who has violated the contract. If the
amount paid by the insurance company does
not fully cover the injury or loss, the aggrieved
party shall be entitled to recover the deficiency
from the person causing die loss or injury.

4. GAMBLING. A game of chance is that which depends more on

chance or hazard than skill or ability.4
4.01. PRESUMPTION: in case of doubt, a game is deemed
to be one of chance.
4.02. COURT ACTION.
4.02.01. Winner Not Allowed to Recover Winnings. —
No action can be maintained by the winner for the

2Vitug v. Court of Appeals, G.R. No. 82027, March 29,1990; Macam v. Gatmaitan,
G.R. No. 42519, March 11,1937; Ana Rivera v. People's Bank and Trust Co., 73 Phil. 546
(1942).
3The present law is R.A. No. 10607 which amended the Insurance Code of 1978.
4Art. 2013, NCC.
804 ' REVIEWERON CIVIL LAW

collection of what he has won in a game of chance

(2004 Bar).5
4.02.02. Loser Allowed to Recover Losses. Any loser in a
game of chance may recover his loss from:
(1) the winner, with legal interest from the
time he paid the amount lost, and
(2) subsidiarily from the operator or manager
of the gambling house.6
a) If the loser refuses or neglects to bring an
action to recover what has been lost, his or her
creditors, spouse, descendants or other persons
entitled to be supported by the loser may
institute the action. The sum thereby obtained
shall be applied to the creditors' claims, or to the
support of the spouse or relatives, as the case
may be.7
b) Exemplary Damages for Cheating. If cheating
or deceit is committed by the winner, he, and
subsidiarily the operator or manager of the
gambling house, shall pay by way of exemplary
damages, not less than the equivalent of the sum
lost, in addition to the latter amount.8
c) In Pari Delicto. If both the winner and the loser
have perpetrated fraud, no action for recovery
can be brought by either.9
4.03. BETTING IN A GAME WHICH IS NOT OF
CHANCE. The loser in any game which is not one
of chance, when there is no local ordinance which
prohibits betting therein, is under obligation to pay
his loss, unless the amount thereof is excessive under
the circumstances. In the latter case, the court shall
reduce the loss to the proper sum.10

5Art. 2014, ibid.

6Ibid.
7A it. 2016, NCC.
8Art. 2015, ibid.
9Ibid.
“ Art. 2020, ibid.
 ALEATORY CONTRACTS, COMPROMISES 805
AND ARBITRATION

5. LIFE ANNUITY. — The aleatory contract of life annuity binds

the debtor to pay an annual pension or income during the life of
one or more determinate persons in consideration of a capital
consisting of money or other property, whose ownership is
transferred to him at once with the burden of the income.11
a) The beneficiary must be alive when the annuity
is constituted.12
b) The annuity may be constituted upon the life
of the person who gives the capital, upon that
of a third person, or upon the lives of various
persons, all of whom must be living at the
time the annuity is established. It may also be
constituted in favor of the person or persons
upon whose life or lives the contract is entered
into, or in favor of another or other persons.13

6. COMPROMISES. A compromise is a contract whereby the

parties, by making reciprocal concessions, avoid a litigation or
put an end to one already commenced.14
6.01. BINDING EFFECT. A compromise has upon the
parties the effect and authority of RES JUDICATA
and it cannot be disturbed except for vices of consent
or forgery.15 But there shall be no execution except in
compliance with a judicial compromise.16
6.01.01. Court Approval. The court's approval is necessary
in compromises entered into by guardians, parents,
absentee's representatives, and administrators or
executors of decedent's estates.17
a) Compromise agreements may be entered
into even without his lawyers intervention,
knowledge and consent and even if he agreed

“ Art. 2021, NCC.

12Art. 2023, ibid.
13Art. 2022, ibid.
14Art. 2028, ibid.
15Cachopero v. Celestial, 668 SCRA 619 (2012).
16Art. 2037, NCC.
17Art. 2032, ibid.
806 REVIEWER ON CIVIL LAW

with his lawyer not to enter into a compromise

agreement. However, the terms of the
compromise agreement should not be such that
will amount to the entire deprivation of the
law yer's fees.18
6.01.02. Juridical Persons may compromise only in the form
and with the requisites which may be necessary to
alienate their property.19
6.02. COVERAGE. A compromise comprises only those
objects which are definitely stated therein, or which
by necessary implication from its terms should be
deemed to have been included in the same.20
a) A general renunciation of rights is understood
to refer only to those that are connected with
the dispute which was the subject of the
compromise.21
b) It may cover civil liability arising from criminal
liability. However, the criminal liability will not
be affected.22
c) Effect of Earnest a Party's Effort to Compro­
mise. The courts may mitigate the damages to
be paid by the losing party who has shown a
sincere desire for a compromise.23
6.03. WHAT CANNOT BE COMPROMISED. No
compromise upon the following questions shall be
valid24 (1958 and 1968 Bar):
(1) The civil status of persons;
(2) The validity of a marriage or a legal separation;
(3) Any ground for legal separation;

18Gubat v. National Power Corporation, 613 SCRA 742 (2010).

19Art. 2033, NCC.
20Art. 2036, ibid.
21Art. 2036, ibid.
22Art. 2034, ibid.
23Art. 2031, ibid.
24Art. 2035, ibid.
 ALEATORY CONTRACTS, COMPROMISES 807
AND ARBITRATION

(4) Future support;

(5) The jurisdiction of courts; or
(6) Future legitime.
6.04. WHEN A COMPROMISE AGREEMENT MAY BE
ANNULLED OR RESCINDED:
(1) A compromise in which there is mistake, fraud,
violence, intimidation, undue influence, or
falsity of documents.25
(i) However, one of parties cannot set up
a mistake of fact as against the other if
the latter, by virtue of the compromise,
has withdrawn from a litigation already
commenced.
(2) Discovery of documents concealed by one of the
parties referring to one or more but not to all of
the questions settled;26
(3) The compromise it refers only to one thing to
which one of the parties has no right, as shown
by the newly-discovered documents;27
(4) If after a litigation has been decided by a final
judgment, a compromise should be agreed
upon, either or both parties being unaware of
the existence of the final judgment.28
(i) Ignorance of a judgment which may be
revoked or set aside is not a valid ground
for attacking a compromise.
6.05. REMEDY FOR BREACH. If one of the parties fails or
refuses to abide by the compromise, the other party
may either:29
(1) enforce the compromise; or

25Art. 2038, NCC.

26Art. 2039, ibid.
27Ibid.
28Art. 2040, ibid.
29Art. 2041, ibid.
808 REVIEWER ON CIVIL LAW

(2) regard it as rescinded and insist upon his

original demand.

7. ARBITRATION. The same persons who may enter into a

compromise may submit their controversies to one or more
arbitrators for decision.30
a) Finality. Any stipulation that the arbitrators'
award or decision shall be final, is valid, without
prejudice to Articles 2038,2039, and 2040.31
b) Choice of Arbitrator W hen Void. Any clause
giving one of the parties power to choose more
arbitrators than the other is void and of no
.. effect.32
7.01. GOVERNING LAWS. Alternative dispute
resolution, including arbitration, is governed by R.A.
No. 9285 otherwise known as the Alternative Dispute
Resolution Act of 2004 and R.A. No. 876, otherwise
known as the Arbitration Law. For violation of
construction contracts, Executive Order No. 1008
confers jurisdiction to the Construction Industry
Arbitration Commission where there is an agreement
for the parties to a construction contract to agree to
. submit their dispute to arbitration.33

30Art. 2042, NCC.

31Art. 2044, ibid.
“ Art. 2045, ibid
“ LICOMCEN, Inc. v. Foundation Specialists, Inc., 647 SCRA 83 (2011).