UNIVERSITY OF ASIA AND THE PACIFIC

SCHOOL OF LAW AND GOVERNANCE

THE LAW ON CONTRACTS
Second Semester, Academic Year 2020-2021
ATTY. DIOSDADO MARASIGAN

Course Outline

Course description: This course consists principally of the general laws on Contracts, Book IV,
Title II (Chapters 1 to 9), Civil Code of the Philippines, including Natural Obligations (Title III),
Estoppel (Title IV) and Trusts (Title V) and general laws on Prescription, Book III, Title V
(Chapters 1 to 3), Civil Code of the Philippines.

Course requirements:

Recitation and attendance 1/3

Midterm Examination/Long Exam 1/3
Final Examination 1/3
Total

Course objective:

The students are expected to have a detailed knowledge of the topics set below and sufficient
knowledge of related jurisprudence, legislations and relevant cases.

References:

Balane, R., Jotting and Jurisprudence in Civil Law (Obligations and Contracts) (2018)
Tolentino, A., IV Commentaries and Jurisprudence on the Civil Code of the Philippines (1990)

Contracts

Chapter I. General Provisions

A. Definition – Art. 1305

B. Elements

1. Essential elements

a. Consent
b. Object
c. Cause

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 2. Natural elements
3. Accidental elements

C. Characteristics

1. Principle of Autonomy – Art. 1306

PL Uy Realty v. ALS Management, GR 166642, Oct. 24, 2012

2. Mutuality – Arts. 1308-1310 (see also Art. 1473)

GSIS v. CA, 228 SCRA 183 (1993)

Phil. Savings Bank v. Castillo, GR 193178, May 30, 2011
Juico v. China Banking Corporation, GR 187678, April 10, 2013
Sps. Silos v. PNB GR 181045 July 2, 2014
UCPB v. Beluso, 530 SCRA 567
Joaquin v. Mitsumine, 34 Phil. 858
Garcia v. Legarda, 21 SCRA 555

3. Relativity

a. Contracts take effect only between the parties, their assigns and heirs - Art. 1311

Manila Railroad Co. v. La Compañia Transatlantica, 83 Phil. 875

(1918)
DKC Holdings Corp. v. CA, 329 SCRA 666 (2000)
Ureta v. Ureta GR 165748 and 165930 Sept. 14, 2011
Doña Adela Export v. TIDCOR GR 201931 Feb. 11, 2015
Integrated Packing v. CA, 333 SCRA 170

Exceptions:

1) When binding only between the parties

2) When third persons may be affected

b. No one may contract in the name of another – Art. 1317

Gutierrez Hmnos. v. Orense, 28 Phil. 571 (1914)

4. Consensuality – Art. 1315

D. Parties

1. Auto-contracts

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2. Freedom to contract – Art. 1306

Gabriel v. Monte de Piedad, 71 Phil. 497 (1941)

Pakistan International Airlines v. Ople, 190 SCRA 90 (1990)
Azcuna, Jr. v. CA, 255 SCRA 215
Manila Bay Club v. CA, 245 SCRA 715
De Leon v. CA, 186 SCRA 345
Batarra v. Marcos, 7 Phil. 156
Cui v. Arellano University, 2 SCRA 205
Ferrazzini v. GSell, 34 Phil. 697
Omico Mining and Industrial Corp v. Vallejos, 63 SCRA 301

a. Special disqualifications

1) Art. 87, Family Code

2) Arts. 1490 and 1491, CC
3) Art. 1782, CC

3. What they may not stipulate – Art. 1306

a. Contrary to law, Article 1490, 1491

Prohibited stipulations:

1) pactum commissorium (Art. 2088; 2137)

2) pactum leonina(Art. 1799)
3) pactum de non alienando (Art. 2130)

b. Contrary to morals
c. Contrary to good customs
d. Contrary to public order
e. Contrary to public policy

Arroyo v. Berwin, 36 Phil. 386 (1917)

Filipinas Compañia de Seguros v. Mandanas, 17 SCRA 391 (1966)
Bustamante v. Rosel, 319 SCRA 413 (1999)

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E. Classification

1. According to subject-matter

a. Things
b) Services

2. According to name

a. Nominate
b. Innominate – Art. 1307

Dizon v. Gaborro, 83 SCRA 688 (1978)

Perez v. Pomar, 2 Phil. 682
Asian Construction v. Cathay Pacific Steel, June 29, 2010

1) do ut des
2) do ut facias
3) facio ut facias
4) facio ut des

3. According to perfection

a. By mere consent (consensual) – Art. 1315

b. By delivery of the object (real) – Art. 1316
c. By compliance of formality of solemnity

4. According to its relation to other contracts

a. Preparatory
b. Principal
c. Accessory

5. According to form

a. Common or informal – Art. 1356-1358

b. Special or formal

6. According to purpose

a. Transfer of ownership, e.g., sale

b. Conveyance of use, e.g., commodatum
c. Rendition of services, e.g., agency

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 7. According to the nature of the vinculum produced

a. Unilateral
b. Bilateral or reciprocal

8. According to cause

a. Onerous
b. Gratuitous or lucrative
c. Remuneratory

9. According to risk

a. Commutative
b. Aleatory

F. Stages

1. Preparation
2. Perfection
3. Consummation or death

G. As distinguished from a perfected promise and an imperfect promise (policitacion)

H. With respect to third persons

1. Stipulations in favor of third persons (stipulations pour autrui) – Art. 1311, 2nd par.

Florentino v. Encarnacion, 79 SCRA 192 (1977)

Coquia v. Fieldmen’s Insurance Co., 26 SCRA 178 (1968)
Constantino v. Espiritu, 39 SCRA 206 (1971)
Mandarin Villa vs. CA, 257 SCRA 538
Everett Steamship vs. CA, 297 SCRA 496
Kauffman vs. PNB, 42 Phil. 182
Associated Bank vs. CA, 291 SCRA 513

2. Possession of the object of contract by third persons – Art. 1312

3. Creditors of the contracting parties – Art. 1313

Luxuria Homes v. CA 302 SCRA 315

4. Interference by third persons – Art. 1314

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 Daywalt v. La Corporacion de los Padres Agustinos
Recoletos, 39 Phil. 587 (1919)
So Ping Bun v. CA, 314 SCRA 751 (1999)
Gilchrist v. Cuddy 29 Phil 542
Lagon v. CA, 453 SCRA 616

Chapter II. Essential Requisites of Contracts

A. Consent

1. Requisites – Art. 1319

a. Must be manifested by the concurrence of the offer and acceptance

Rosenstock v. Burke, 46 Phil. 217 (1924)

Malbarosa v. CA, 402 SCRA 168 (2003)
Korean Air v. Yuson, June 26, 2010

1) Offer

a) Must be certain – Art. 1319

b) What may be fixed by the offeror – Art. 1321
c) When made through an agent – Art. 1322
d) Circumstances when offer becomes ineffective – Art. 1323
e) Business advertisements of things for sale – Art. 1325
f) Advertisements for bidders – Art. 1326

Jardine Davies v. CA, 333 SCRA 684 (2000)

2) Acceptance

a) Must be absolute – Art. 1319

Batañgan v. Cojuangco, 78 Phil. 481

Zayco vs. Serra 44 Phil. 326

b) Kinds

i. Express – Art. 1320

ii. Implied – Art. 1320
iii. Qualified – Art. 1319

c) If made by letter or telegram – Art. 1319, 2nd par.

i. Four theories on when the contract is perfected:

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 1. Manifestation theory
2. Expedition thory
3. Reception theory
4. Cognition theory – Art. 1319, 2nd par.

Laudico v. Arias, 43 Phil. 270

d) Period of acceptance – Art. 1324

Sanchez v. Rigos, 45 SCRA 368 (1972)

e) Effects of death, civil interdiction, insanity or insolvency of

either party before acceptance (Art. 40-41, RPC)

f) Contract of option – Art. 1324; Art. 1482, NCC

Adelfa Properties v. CA, 240 SCRA 565 (1995)

g) Business advertisements

i. Mere invitations to make an offer

ii. Advertisements for bidders

b. Necessary legal capacity of the parties

1) Who cannot give consent – Art. 1327

2) When offer and/or acceptance is made

a) during a lucid interval

b) in a state of drunkenness
c) during a hypnotic spell

c. The consent must be intelligent, free, spontaneous, and real – Arts. 1330-1346

1) Effect – Art. 1330

2) Minors; exceptions

Bambalan v. Maramba, 51 Phil. 417

Mercado, et al. v. Espiritu, 37 Phil. 215
Braganza v. Fernando de Villa Abrille, 105 Phil. 456

3) Vices of consent

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Hernandez v. Hernandez, March 9, 2011

a) Mistake or error

i. kinds

1. Mistake of fact

a. as to substance of the object

b. as to principal conditions
c. as to identity or qualifications of one of the
parties
d. as to quantity, as distinguished from a simple
mistake of account

Theis v. CA, G.R. No. 126013, February 12, 1997

Heirs of William Sevilla, et.al v. Leopoldo Sevilla,
402 SCRA 501 (2003)
Gomez v. Linton, 45 Phil. 653
Atilano v. Atilano, 28 Phil. 231
Teran v. Villanueva, 56 Phil. 677

2. Error of law

a. General rule: Ignorantia legis

neminem excusat – Art. 3
b. Exception: Mutual error of law – Art. 1334

ii. When one of the parties is unable to read – Art. 1332

Hemedes v. CA, 316 SCRA 347 (1990)

Katipunan v. Katipunan, G.R. No. 132415, January 30, 2002
Tan v. Mandap 429 SCRA 712
Dela Cruz vs. Dela Cruz 419 SCRA 648
Calilap-Asmeron v. DBP, November 23, 2011

iii. Inexcusable mistake – Art. 1333

b) Violence and intimidation – Art. 1335

i. Effect – Art. 1336

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c) Undue influence – Art. 1337

Martinez v. HSBC, 15 Phil. 252

Bañez v. CA, 59 SCRA 15
Vales v. Villa, 35 Phil. 769

d) Fraud or dolo – Art. 1338

Geraldez v. CA, 230 SCRA 320 (1994)

Strong v. Gutierrez, 6 Phil. 680
Woodhouse v. Halili 93 Phil. 526
Cacho v. Bonifacio 476 SCRA 869
Araneta v. Tuason De Paterno 91 Phil. 786
Tuason v. Marquez, 45 Phil. 381
Azarraga v. Gay 52 Phil. 599

i. Kinds

1. dolo causante – Art 1338

2. dolo incidente – Art. 1344, 2nd par.

ii. Failure to disclose facts; duty to reveal them – Art. 1339

Rural Bank of Sta. Maria v. CA, 314 SCRA 255 (1999)

iii. Usual exaggerations in trade; opportunity to know the facts

– Art. 1340

Laureta Trinidad v. IAC, 204 SCRA 524 (1991)

iv. Mere expression of an opinion – Art. 1341

1. Effects – Art. 1344

Songco v. Sellner, 37 Phil. 254 (1917)

e) Misrepresentation

i. By a third person – Art. 1342

Hill v. Veloso, 31 Phil. 160

ii. Made in good faith – Art. 1343

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 Asiain v. Jalandoni, 45 Phil. 296

iii. Active/passive

f) Simulation of Contracts

Rodriguez v. Rodriguez, 28 SCRA 229 (1914)

Suntay v. CA, 251 SCRA 430 (1995)
Blanco v. Quasha, G.R. No. 1331148, November 17, 1999
Gonzales v. Trinidad, 67 Phil. 682
Borromero v. Borromeo, 98 Phil. 432
Bravo-Guerrero v. Bravo, 465 SCRA 244

i. Kinds – Art. 1345

1. absolute
2. relative

ii. Effects – Art. 1346

B. Object of Contracts

1. What may be the objects of contracts – Art. 1347

a. All things not outside the commerce of man

b. All rights not intransmissible
c. All services not contrary to law, morals, good customs, public, or public
policy

2. Requisite - must be determinate as to its kind – Art. 1349

3. What may not be the objects of contracts

a. Future inheritance, except when authorized by law – Art. 1347

Blas v. Santos, 1 SCRA 899 (1961)

Tanedo v. CA, G.R. No. 104482, January 22, 1996
Uson v. Del Rosario, 92 Phil. 530

b. Future support
c. Impossible things or services – Art. 1348

Castro v. Longa, 89 Phil. 581

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C. Cause of Contracts

1. Meaning of cause – Art. 1350

a. In onerous contracts
b. In remuneratory contracts
c. In contracts of pure beneficence

Velez vs. Ramas, 40 Phil. 787

Liam Law vs. Olympic Sawmill, 129 SCRA 449

2. As distinguished from motive – Art. 1351

Gonzales vs. Trinidad, 67 Phil. 682

3. Defective causes and their effects:

a. Absence of cause and unlawful cause – Art. 1352

Liguez v. CA, 102 Phil. 577 (1957)

b. Statement of a false cause in the contract – Art. 1353

c. Lesion or inadequacy of cause – Art. 1355

Carantes v. CA, 76 SCRA 514 (1977)

Sps. Buenaventura, et. al. v. CA, 416 SCRA 263 (2003)

4. Presumption of the existence and lawfulness of a cause, though it is not stated in the
contract – Art. 1354

Raet v. CA, 295 SCRA 677

PBC v. Lui She, 21 SCRA 52
Saguid v. Security Finance Inc., 477 SCRA 256

Chapter III. Form of Contracts

A. General rule: Contracts shall be obligatory, in whatever form they may have been entered
into, provided all the essential requisites for their validity are present. (“Spiritual system” of
the Spanish Code) - Art. 1356

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B. Exception: When the law requires that a contract be in some form in order that it may be
valid or enforceable. (Anglo-American principle) - Art. 1356

Hernaez v. De los Angeles, 27 SCRA 1276 (1969)

C. Kinds of formalities required by law:

1. Those required for the validity of contracts, such as those referred to in Arts. 748,
749, 1874, 2134, 1771, 1773;
2. Those required, not for validity, but to make the contract effective as against third
persons, such as those covered by Arts. 1357 and 1358; and
3. Those required for the purpose of proving the existence of the contract, such as those
under the Statute of Frauds in Art. 1403.

a. No Form:

Tan v. Lim, 296 SCRA 455

San Lorenzo Dev’t Corp. v. CA, 449 SCRA 99

b. Exception:

(Art 748, 749, 1581, 1874, 2134, 1956, 1773, 1403(2))

c. Prescriptibility:

Vda de Espiritu v. CFI of Cainta, 47 SCRA 354

d. Form for Convenience:

Shaffer vs. Palma, 131 Phil. 22

Hawaiian Phil. Co. vs. Hernaez, 45 Phil. 746
Dauden vs. delos Angeles, 137 Phil. 900

Chapter IV. Reformation of Instruments

A. Requisites (Art. 1359):

1. Meeting of the minds upon the contract;

2. The true intention of the parties is not expressed in the instrument; and
3. The failure of the instrument to express the true agreement is due to mistake, fraud,
inequitable conduct, or accident.

Garcia v. Bisaya, 97 Phil. 609 (1955)

Bentir v. Leande, 330 SCRA 591 (2000)

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 4. Basis:

San Miguel Brewery v. Law Union and Rock, 40 Phil. 674

5. Definition:

Sarming v. Dy, 383 SCRA 131

6. Requisites:

Dizon v. Gaborro, 83 SCRA 688

City of Cabanatuan v. Lazaro, 39 SCRA 653
Emilio v. Rapal, March 30, 2010

7. When Available:

Jayme v. Alampay, 62 SCRA 131

Ong Chua v. Carr, 53 Phil. 975

B. Cases where no reformation is allowed - Art. 1366

C. Implied Ratification – Art. 1367

D. Who may ask for reformation – Art. 1368

E. Procedure of reformation – Art. 1369

Atilano v. Atilano, 28 SCRA 2232 (1969)

Carantes v. CA, 76 SCRA 514 (1977)
Sarming, et. al. v. Cresencio Dy, et. al., 383 SCRA 131 (2002)

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 Chapter V. Interpretation of Contracts
(Compare with Rules on Statutory Construction)

A. General Rule

Heirs of Amparo del Rosario v. Santos, 108 SCRA 43

Labasan v. Lacuesta, 86 SCRA 16
Prisma Construction v. Pantaleon, March 9, 2010
Martin v. DBS Bank, June 16, 2010

B. Primacy of intention – Arts. 1370, 1372

Borromeo v. CA, 47 SCRA 65 (1972)

Kasilag v. Rodriguez, 69 Phil. 217 (1939)
Tanquiling v. CA & Herce, 266 SCRA 78
Ramos v. Heirs of Ramos Sr., 381 SCRA 594
Carceller v. CA, 302 SCRA 719
Almeda v. Bathala Marketing, 542 SCRA 470

C. How to determine intention – Art. 1371

D. How to interpret a contract

1. When it contains stipulations that admit several meanings – Art. 1373

2. When it contains various stipulations, some of which are doubtful – Art. 1374
3. When it contains words that have different significations – Art. 1375

Ildefonso v. Sibal, 106 Phil. 287

Ong Yong v. Tiu, 375 SCRA 614
Gov’t of the Phil v. Derham Bros, 36 Phil. 960

4. When it contains ambiguities and omission of stipulations – Art. 1376

5. With respect to the party who caused the obscurity – Art. 1377
6. When it is absolutely impossible to settle doubts by the rules above – Art. 1378

a. in gratuitous contracts
b. in onerous contracts

7. When the doubts are cast upon the principal object so that the intention cannot
be known – Art. 1378

Bundalian v. CA, 129 SCRA 645

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E. Applicability of Rule 123, Rules of Court (now Secs. 10-19, Rule 130); Art. 12 NCC, Sec. 2-3,
Rule 129 New Rules of Evidence; Sec. 10-19, Rules of Court;

Andreas vs. BPI, 47 Phil. 795

DEFECTIVE CONTRACTS
Chapter VI. Rescissible Contracts

A. Kinds – Art. 1381

B. Characteristics

1. Their defect consists in injury or damage either to one of the contracting parties or to
third persons.
2. They are valid before rescission.
3. They can be attacked directly only, and not collaterally.
4. They can be attacked only either by a contracting party or by a third person who is
injured or defrauded.
5. They can be convalidated only by prescription, and not by ratification.

C. Rescission – Art. 1380

1. Definition
2. As distinguished from rescission under Art. 1191 and Art. 1592

Universal Food Corp. v. CA, 33 SCRA 1 (1970)

3. Requisites:

a. The contract is rescissible;

b. The party asking for rescission has no other legal means to obtain reparation –
Art. 1383;
c. He is able to return whatever he may be obliged to restore if rescission is
granted – Art 1385;
d. The object of the contract has not passed legally to the possession of a third
person acting in good faith – Art. 1385;
e. The action for rescission is brought within the prescriptive period of four (4)
years – Art 1389.

Cannu v. CA, 459 SCRA 80

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4. Effect of rescission – Art. 1385

a. with respect to third persons who acquired the thing in good faith – Art. 1385,
2nd and 3rd par.

5. Extent of rescission – Art. 1384

6. Presumptions of fraud – Art. 1387

a. Badges of fraud

Oria v. Mcmicking, 21 Phil. 243 (1912)

Siguan v. Lim, et. al., 318 SCRA 725 (1999)
Suntay v. CA, 251 SCRA 430 (1995)

7. Liability for acquiring in bad faith the things alienated in fraud of creditors – Art. 1388

China Banking Corp. v. CA, 327 SCRA 378

Oria v. McMicking 21 Phil. 243
Contreras v. CBC, 76 Phil. 709; Rule 13, Section 14 RRC

8. Others: Articles 1098, 1189, 1526, 1534, 1539, 1542, 1556, 1560, 1567, 1659;

Rosencor Dev’t Corp. v. Inquing, 354 SCRA 119

9. Subsidiary Action:

Suria v. IAC, 151 SCRA 661

Regalado v. Luchsinger, 5 Phil. 625
Goquiolay v. Sycip, 9 SCRA 663

10. Restriction:

Goldenrod v. CA, 299 SCRA 141

11. Presumption of Fraud:

Cabaliw v. Sadorra, 64 SCRA 310

Alpuerto v. Perez Pastor, 38 Phil. 785
Ayles v. Reyes, 18 Phil. 243
Lee v. Bangkok Bank, Feb 9, 2011

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 Chapter VII. Voidable or Annullable Contracts

A. Kinds – Art. 1390

B. Characteristics

1. Their defect consists in the vitiation of consent of one of the contracting parties.
2. They are binding until they are annulled by a competent court.
3. They are susceptible of convalidation by ratification or by prescription.

C. Annulment

1. As distinguished from rescission

2. Grounds – Art. 1390
3. Who may and may not institute action for annulment – Art. 1397

Singsong v. Isabela Sawmill, 88 SCRA 623 (1979)

4. Prescription – Art. 1391

5. Effect

a. Mutual restitution – Arts. 1398 and 1402

Cadwallader & Co. v. Smith, Bell & Co., 7 Phil. 461 (1907)
Velarde v. CA, 31 SCRA 56
Philippine Trust Co. v. Roldan, 99 Phil. 393

b. When one of the parties is incapacitated - Art. 1399

c. When the thing is lost through the fault of the party obliged to return the
same – Art. 1400

6. Extinguishment of the action

a. By ratification – Art. 1392

b. When the thing is lost through the fault of the person who has the right to file
the action – Art. 1401

D. Ratification

1. Requisites

a. The contract is voidable;

b. The ratification is made with knowledge of the cause for nullity;
c. At the time of the ratification, the cause of nullity has already ceased to exist.

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 2. Forms

a. Express or tacit – Art. 1393

b. By the parties themselves or by the guardian in behalf of an incapacitated
party – Art. 1394

3. Effects:

a. Action to annul is extinguished – Art. 1392

b. The contract is cleansed retroactively from all its defects – Art. 1396

Uy Soo Lim v. Tan Unchuan, 38 Phil. 552

De Luna v. Linatoc, 74 Phil. 15
Rosales v. Reyes, 25 Phil. 495

Chapter VIII. Unenforceable Contracts

A. Characteristics

1. They cannot be enforced by a proper action in court.

2. They are susceptible of ratification.
3. They cannot be assailed by third persons.

United Namarco Distributors v. NAMARCO, 114 Phil. 802

B. Kinds – Art. 1403

1. Unauthorized contracts

a. Governing rules – Art. 1404

Bumanlag v. Alzate, 144 SCRA 480

Rallos v. Felix Go Chan, 81 SCRA 259

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 2. Contracts covered by the Statute of Frauds

a. Purpose of Statute

Limketkai Sons Milling Inc. v. CA, G.R. No. 118509,

December 1, 1995
Swedish Match v. CA, G.R. No. 128120, October 20, 2004
Almirol v. Monserrat, 48 Phil. 67
Hernandez v. Andal, 78 Phil. 196
Robles v. Lizarraga, 42 Phil. 584
Reiss v. Memije, 15 Phil. 350
Syquia v. CA, 151 SCRA 507

b. How ratified – Art. 1405

Carbonnel v. Poncio, et al., 103 Phil. 655 (1958)

Averia v. Averia, 436 SCRA 459
Abrenica v. Gonda, 34 Phil. 739

c. Right of the parties when a contract is enforceable but a public document is

necessary for its registration – Art. 1406

3. Contracts executed by parties who are both incapable of giving consent to a contract

a. Effect of ratification by the parents or guardian of one of the parties –

Art. 1407
b. Effect of ratification by the parents or guardian of both parties – Art. 1407

4. Attack by Third Persons

Ayson v. CA, 97 Phil. 965

Chapter IX. Void or Inexistent Contracts

A. Characteristics

1. Void from the beginning

2. Produces no effect whatsoever
3. Cannot be ratified – Art. 1409

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B. Kinds –Art. 1409

1. Contracts that are void

a. Those whose cause, object, or purpose is contrary to law, morals, good

customs, public order or public policy

1) When the act constitutes a criminal offense – Art. 1411

a) in pari delicto rule

Urada v. Mapalad A.M. MTJ 91-622 (1993)

2) When the act is unlawful but does not constitute a criminal offense
Art. 1412

a) in pari delicto rule

Modina v. CA, G.R. No. 109355, October 29, 1999

Batarra vs. Marcos, 7 Phil. 156
Santos vs. Roman Catholic Church, 94 Phil. 405

3) When the purpose is illegal, and money is paid or property delivered

therefor – Art. 1414

4) When the contract is illegal and one of the parties is incapable of

giving consent – Art. 1415

Liguez v. CA, 102 Phil. 577

Relloza v. Gaw Cheen Hum, 93 Phil. 827 (1953)

5) When the agreement is not illegal per se but is prohibited – Art. 1416

Philippine Banking Corp. v. Lui She, 21 SCRA 52 (1967)

Frenzel v. Catito, 406 SCRA 55 (2003)

6) When the amount paid exceeds the maximum fixed by law – Art. 1417

7) When by virtue of a contract a laborer undertakes to work longer than

the maximum number of hours of work fixed by law – Art. 1418

8) When a laborer agrees to accept a lower wage than that set by law
Art. 1419

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 9) When the contract is divisible – Art. 1420

10) When the contract is the direct result of a previous illegal contract –
Art. 1422

b. Those whose object or causa is outside the commerce of man

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

e. Those expressly prohibited or declared void by law

Ariaga vda. de Gurrea v. Suplico, 488 SCRA 332

Tongoy v. CA, 123 SCRA 99
Rongavilla v. CA, 294 SCRA 289
Calimlim – Canullas v. Fortun, 129 SCRA 675
Mapalo v. Mapalo, 123 Phil. 979
Manzano v. Garcia, Nov. 28, 2011

2. Contracts that are inexistent

a. Those which are absolutely simulated or fictitious (see Arts. 1345 and 1346)
b. Those whose cause or object did not exist at the time of the transaction
C. Right to set up defense of illegality cannot be waived – Art. 1409
D. The action or defense for the declaration of the inexistence of a contract

1. does not prescribe – Art. 1410

2. is not available to third persons whose interest is not directly affected
– Art. 1421

Ras v. Sua, 134 Phil. 131

Angeles v. CA, 102 Phil. 1006
Terre v. Terre, 211 SCRA 7
Atienza v. Brillantes, 243 SCRA 32
MWSS v. CA, 297 SCRA 287

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 Title III. NATURAL OBLIGATIONS

A. Definition – Art. 1423

B. As distinguished from civil obligations – Art. 1423

C. As distinguished from moral obligations

Villaroel v. Estrada, 71 Phil. 140 (1940)

Fisher v. Robb, 69 Phil. 101 (1939)

D. Conversion to civil obligation

1. By novation
2. By ratification

E. Examples – Arts. 1424-1430

Title IV. ESTOPPEL

A. Definition – Art. 1431

Pio Barretto v. CA 360 SCRA 127

Kalalo v. Luz, 34 SCRA 337 (1970)
Cristobal v. Gomez, 50 Phil. 810
Marques v. FEBTC, Jan 10, 2011
Fat Kee Computer v. Online Networks, Feb 2, 2011

B. Kinds

1. Technical estoppel

a. By record
b. By deed – art. 1433

2. Equitable estoppel or estoppel in pais – Art. 1433

C. Persons bound – Art. 1439

Manila Lodge No. 761 Benevolent and Protective Order of the

Elks v. CA, 73 SCRA 168 (1976)

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D. Cases where estoppel applies – Arts. 1434-1438

Miguel v. Catalino, 26 SCRA 234 (1969)

Read: Annotation, 32 SCRA 542

E. Promissory Estoppel:

Terminal Services v. PPA, 378 SCRA 82

F. Estoppel vs. Laches:

Francel Realty v. Sycip, 469 SCRA 431

Metromedia Times v. Pastoria, 465 SCRA 335
G. By Silence:

Magtira v. CA, 96 SCRA 680

De Ynchausti v. MERALCO, 36 Phil. 908

F. Inapplicability:

Rep v. Go Bon Lee, 111 Phil. 805

Republic v. CA, 354 SCRA 148
Republic v. “G” Holdings, 475 SCRA 608
Favis v. Municipality of Subangan, 136 Phil. 366
Eugenio v. Perdido, 97 Phil. 41
Cristobal v. Gomez, 50 Phil. 810

G. Exceptions:

Bachrach Motors v. Unson, 50 Phil. 981

Nilo v. Romero, 111 Phil. 540
Leca Realty v. Republic, 503 SCRA 563

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 Title V. TRUSTS

Chapter I. General Provisions

A. Definition
Sotto vs. Teves, 86 SCRA 154

B. Governing rules – Art. 1442

C. Parties – Art. 1440

1. Trustor
2. Trustee
3. Beneficiary or cestui que trust

D. Kinds – Art. 1441

Salao v. Salao, 70 SCRA 168 (1976)

1. Express Trusts

a. Proof required – Art. 1443

b. Form – Art. 1444
c. Want of trustee – Art. 1445
d. Acceptance by the beneficiary – Art. 1441

Ramos v. Ramos, 61 SCRA 284

Cuayacong v. Cuayacong, 129 Phil. 439
Lorenzo v. Posadas 64 Phil. 353

2. Implied Trusts

a. How established – Art. 1441

b. How proved – Art. 1457
c. Examples – Arts. 1448-1456

Fabian v. Fabian, 22 SCRA 231 (1968)

Bueno v. Reyes, 27 SCRA 1179 (1969)
Tamayo v. Callejo, 46 SCRA 27 (1972)
Juan v. Yap, Mar 30, 2011
Kiel v. Estate of Sabert, 46 Phil. 193
Thomson v. CA, 298 SCRA 280
Uy Aloc v. Cho Jan Ling, 19 Phil. 202
Muller v. Muller, 500 SCRA 65

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 Title V. PRESCRIPTION

A. General Provisions (Articles 1106 – 1116)

1. Acquisitive vs. Extinctive

Amerol v. Bagumbaran, 154 SCRA 397

Marquez v. CA, 300 SCRA 655
Morales v. CFI, 97 SCRA 872

2. Prescription vs. Laches

Tijam v. Sibonghanoy, 32 SCRA 29

Catholic Bishop v. Court of Appeals, Nov 14, 1996
Insurance of Phil Islands v. Spouses Gregorio, Feb 14, 2011

3. Limitations and Extent of Prescription

Vda. De Alberto v. Court of Appeals, 173 SCRA 436

Marcelino v. Court of Appeals, 210 SCRA 444
Republic v. PNB, 13 SCRA 42
Director of Forest Admin vs. Fernandez, 192 SCRA 121
Republic v. Court of Appeals, 131 SCRA 532

4. Waiver of Prescription

DBP v. Adil, 161 SCRA 307

5. Prescriptive Periods

DBP vs. Ozarraga, September 20, 1965

Alvero v. Reas, 35 SCRA 210

B. Prescription of Ownership (Articles 1117 – 1138)

1. Ordinary vs. Extraordinary

Godinez v. Court of Appeals, 135 SCRA 351

Heirs of Amarante v. Court of Appeals, 185 SCRA 585

2. Concept of Possession

Republic v. Court of Appeals, 146 SCRA 15

Ramos v. Court of Appeals, 112 SCRA 542

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 Coronado v. Court of Appeals, 191 SCRA 814
Corpus v. Padilla, 5 SCRA 814

3. Prescription Over Registered Properties

Reyes v. Court of Appeals, 258 SCRA 651

4. Good Faith

Negrete v. CFI of Marinduque, 48 SCRA 113

Magtira v. Court of Appeals, 96 SCRA 680

5. Just Title

Doliendo v. Biarnesa, 7 Phil. 232

Solis v. Court of Appeals, 176 SCRA 678

6. Prescription over illegally acquired movables

Tan v. Court of Appeals, 195 SCRA 355

7. Computation of Time

South City Homes v. Republic, 185 SCRA 693

C. Prescription of Actions (Articles 1139 to 1155, 649)

1. Good Faith vs. Bad Faith

Dira v. Tanega, 33 SCRA 479

2. Prescriptive Periods

Espanol v. Philippine Veterans Administration, 137 SCRA 314

Kramer Jr. v. Court of Appeals, 178 SCRA 518
Vda. De Borromeo v. Pogoy, 126 SCRA 217
Callanta v. Carnation Phils., 145 SCRA 268

3. When Period Begins to Run

Tolentino v. Court of Appeals, 162 SCRA 66

Provident v. Court of Appeals, 222 SCRA 125
Tan v. Court of Appeals, 195 SCRA 355

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4. Interruptions of Periods

Ledesma v. Court of Appeals, 224 SCRA 175

Cabrera v. Tinio, 8 SCRA 542
Olympia International v. Court of Appeals, 180 SCRA 353
Ramos v. Condez, 20 SCRA 1146

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