—F CHAPTER ONE 225 OBLIGATIONS & CONTRACTS FORMS OF CONTRACTS {90] Requirement of Form in Contracts: [90.1] [90.2] General rule: Contracts are obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present.! Thus, no form is required, as a rule, in order to make the contract binding and effective between the parties thereto. Exceptions: The rule that contracts may be entered into in any form is not absolute. There are two groups of contracts where the requirement of form is absolute and indispensable: (1) those which are required to be in some form in order that they may be valid; and (2) those which are required to be in some form in order that they may be enforceable or in order that they may be proved in a certain way (91] Contracts Which Require Form for Validity: (91.1] [91.2] Effect of non-compliance with formality: In this group of contracts, the law expressly declares the contract to be void or invalid if the formality required by law is not complied with. While the contract may have been perfected because all the essential requisites are present but if the same is not executed in the form provided by the law creating it, it is void even as between the parties. Contracts which require form for validity: The fol- lowing contracts require form for the purpose of their validity — 1) Donation of personal property where the value exceeds P5,000; 2) Donation of real property; 3) Donation propter nuptias; eH Art. 1386, NCC. 4a, canned ith CamscsnetCIVIL LAW REVIEWER 4) Contract of partnership, when real property ig contributed as capital; 5) Sale of a parcel of land or any interest therein by an agent; 6) Stipulation limiting common carrier's liability for loss, destruction or deterioration of goods; 7) Contract of antichresis; 8) Sale or transfer of large cattle; and 9) Chattel mortgage contract, [91.3] Donation of personal property: [91.3.1] Value does not exceed P5,000: The law does not require any form, the donation and its ac- ceptance may be made orally or in writing. But an oral donation requires the simultane- ous delivery of the thing or of the document representing the right donated.* [91.3.2] Value exceeds P5,000: Both the donation and the acceptance are required to be made in writing. Otherwise, the donation is void.* For example, where the subject matter of the donation is the purchase money in a contract of sale in the amount of P3,297,800, the donation must comply with the mandatory requirements of Article 748 of the Civil Code. Hence, both the donation and the acceptance should be in writing.* [91.4] Donation of real property: [91.4.1] Formality required: Regardless of the value of the property, both thie donation and the acc tance are required to be embodied ina public document in order that the donation may be =>>— sin Services COrP- lea Pande, v. CA, 166 SCRA 577 (1998): Inter-Asia Servi i onal) v. CA, 263 SCRA 408 (1996) ssumeno, Jr. Labregat, 438 SCRA 22, 35 008) «se tncussionn in Section 91.9. “fee An. 1874, NC canons Diva y “ee agit ¥ Donato, rt ‘Scanned wth Camseannet240 CIVIL LAW REVIEWER r fae EXPRERS TRUST must necessarily be evidenced by © Kat Sell, a written instrument, duly sub- crea ty GE seribed by the party charged, or by his agent, or by secondary evi- dence of their contracts.” {92.54} Representation as to credit of third persons” To bring the case within the operation of the Statute of Frauds, the representation must have been made by a stranger to the contract in which credit was extended, or, as otherwise stated, the representation must relate to a third person's credit.* Thus, representations as to the credit of the person making the representation are not within the Statute.” (92.6] Other contracts or agreements which require to be in some form to be enforceable (but not covered by the Statute of Frauds): [92.6.1] Express trust over immovable: An express trust concerning an immovable or any intel est therein may not ved by parol evi- “dence. Hence, itmust be in writingyto be en-— foreeable. An implied trust concerning real ‘Property, on the other hand, may be proved by oral evidence.» (92.6.2] Agreement on payment of interest: No inter- est shall be due unless it has been expressly stipulated in writing. Hence, a verbal agree- ment on the payment of interest may not be enforced against the borrower against his will. However, if the borrower pays the inter- est voluntarily when there has been no stipu- ‘Alba Vda. de Raz v. CA, 314 SCRA 36 (1999), "Art. 1403, par. 2(8), NCC. 7 Mass. Des Brisay v. Foss, 162 N.E, 4, Mote. 246, 39 Am.D. 726; cited in 37 6.3 3.552, 4 M&S®- 102; Modbury v. Watson, 6 Mase. Sibley v Hulbert, 15 Gray 509; ced in 7 C.r8, 2, 0" Lao v. Co Cho Chit, 220 SCRA 656, "Art. 1956, NCC. ‘Scanned wth amseannetY CHAPTER ONE m1 OBLIGATIONS & CONTRACTS lation therefore, the payment is valid and the creditor is authorized to retain the payment. ntl oe wil Code: G5" There are certain contracts which are resulted to be ta a public document under Article 1358 of the Civil Code. However, the provision of Article 1358 of the Civil Code on the necessity of a public document is only for convenience, not for validity or enforceability.“ Non- compliance with formal requisites does not adversely affect the validity of the contract or the contractual rights and obligations of the parties.* Thus, the non- appearance of the parties before the notary public who notarized the deed does not necessarily nullify nor render the parties’ transaction void ab initio. (93.2] Effect of non-recording of the instrument: Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument, is only for convenience, and registration of the instrument only adversely affects third parties. Formal requirements are, therefore, for the benefit of third parties. Non- compliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder.” 193.8] Contracts required to be in a public document for convenience: 1) Acts and contracts which have for their object the creation, transmission, modification or ex- tinguishment of real rights over immovable property; but sales of real property or of an in- terest therein are governed by the Statute of Frauds; Att 1960, in relation to Art. 1423, NCC. Ayag’Dallon v. CA. 189 SCRA 692; Caoili v. CA, 314 SCRA 345 (1999); Cenido v. Singg at 318 SCRA 688 (1999); Agasen v. CA, 325 SCRA 604 (2000); Pefialosa v. Age SCRA 545, 558-559 (2001). “Dena, CA; supra; Londres v. CA, 394 SCRA 183. spellonav. Santos, supra. © v. CA, 286 SCRA 698, 712-713 (1998). i canned ith Camscsnet— CIVIL LAW REVIEWER 2) The cession, repudiation or renunciation of he. reditary rights or of those of the conjugal part. nership of gains; 3) 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; 4) The cession of actions or rights proceeding from an act appearing in a public document." [93.4] Remedy granted under Article 1357: For contracts which are required to be in a certain form, such as those enumerated in Article 1358 which are required to be in a public document, the contracting parties . may compel each other to observe that form and this (ecw right may be exercised simultaneously with the action fete “it * anon the contract.” But in order for this remedy to be omcraey Hat te exercised, it is necessary that the following requisites emtind A aleody soust concur: (1) the contract must have already been Ae valid om 7 $6 serfacted:® (2) the contract must have been valid as to and eogectatls 04 “form's and (3) the contract must have been enforceable Hi fom Under the Statute of Frauds.” Thus, when a contract is enforceable under the Statute of Frauds, and a public document is necessary for its registration in the Registry of Deeds, the parties may avail themselves of the right under Article 1357.» [93.4.1] Illustration: When the sale of a parcel of land is evidenced by a private instrument signed by both parties, the contracting parties may compel each other to execute the formal public document of sale as required in Article 1358 of the Civil Code since the private instrument has made the sale enforceable and outside of the purview of the Statute of Frauds. Here, the sale is valid and effective as between Art, 1358, NCC. "Art. 1357, NCC. "1d, Sart. 1856, NCC. "Id. wart, 1406, NCC. Ai ‘Scanned wth amseannet