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Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009
OBLIGATIONS & CONTRACTS
Chapter 1Art. 1156. •
An obligation is a juridical necessity to give, to do or not to do.
An incomplete definition because it only refers to the debt side; it only refers to the conduct to be observed by the obligor; there is no debt without credit.
Complete definition: A juridical relation between two persons, known as the creditor and debtor, whereby the former can demand from the latter the observance of a determinate conduct and in case of breach, may obtain satisfaction from the assets of the latter.
Why is it a juridical necessity? Because the term, “juridical necessity” connotes that in case of noncompliance, there will be legal sanction. Note: It covers only civil obligations, not natural obligations. Characteristics of an Obligation: 1. 2. 3. It represents an exclusively private interest It creates ties that are by nature transitory It involves the power to make the juridical tie effective in case of non-fulfillment through an economic equivalent obtained from the debtor's patrimony.
Types of obligations:
Civil obligations - those which derive their binding force from positive law, and can be enforced by court action or the coercive power of public authority. b. Natural obligations - refer to those which derive their binding force from equity and natural justice, and its fulfillment cannot be compelled by court action but depends exclusively on the conscience of the debtor. c. Moral obligations - are those which arise from moral law developed by the church and not enforceable in court. It deals with the spiritual obligation of a person in relation to his God and church ELEMENTS of an OBLIGATION CODE: A P O E
Active subject (creditor, obligee)• Has the power to demand the prestation; it is he who in his favor the obligation is constituted, established or created; it is he who has the right to demand. Passive subject (debtor, obligor) • One who is bound to perform the prestation; passive because without the demand, there will be no action, he has to wait for the demand from the creditor. • Has the juridical necessity of adjusting his conduct to the demand of the creditor pursuant to the obligatory tie.
NB: It is not necessary that the active/passive subject (also known as the personal elements of the obligation) be determinate at the time of the constitution, but they must at least be determinable. When the subject cannot be determined, the obligatory tie can have no effect.
The object or the prestation • The object is not a thing but a particular conduct of the debtor. It is the subject matter of the obligation which has an economic value or susceptible to pecuniary substitution in case of noncompliance. D. Efficient cause or juridical tie between the two subjects • The vinculum by which the debtor is bound to in favor of the creditor to perform the prestation. It is determined by knowing the sources of the obligation (Art. 1157) Note: Additional elements from RAM Notes: 5. Causa debendi/ obligationes (Castan).-- This is what makes the obligation demandable. This is the proximate why of an obligation.
Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009
Form.-- This is controversial. This is acceptable only if form means some manifestation of the intent of the parties.
KINDS OF PRESTATION:
“to give” consists of the delivery of a movable or immovable thing which is either determinate (specific) or indeterminate (generic). This is in order to create a real right, or for the use of the creditor, or for its simple possession, or in order to return to its owner. “to do” involves all kinds of work or services whether physical or mental, but in most cases the essence of the act man not be such, but merely the necessity of concluding a juridical operation, such as, when a person promises to give a bond. “not to do” is a negative obligation which consists of abstaining from some act, it includes “not to give”.
REQUISITES OF PRESTATION 1. 2. 3. it must be physically and juridically possible; it must be determinate or at least determinable according to pre-established elements or criteria; it must have a possible equivalent in money or a pecuniary value. (why: so in case of breach, one can demand damages)
a. b. c. d. e.
Article 1157 – Sources of obligation Law; Contracts; Quasi-Contracts; Crimes; Quasi-delicts; • The enumeration of the sources of obligation is exclusive; no obligation exists if its source is not one of those enumerated above.
Note: 1. Unilateral promise is admitted by modern doctrine, which recognizes that unilateral engagements may give rise to obligations without the need of acceptance. 2. Contrary to Pineda, Tolentino supports that it cannot be said with certainty that the enumeration in this article is exclusive because there is nothing which expressly precludes other sources of obligation, such as the unilateral promise to the public of an award for a certain act or accomplishment. 3. The clear implication of Sagrada Orden vs. Nacoco is that, these five (5) are the only sources of obligations.
Articles 1158 - 1162 specify the general principles regarding the sources of obligation enumerated in Art. 1157. Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. Note: When we say that law is an independent source of obligation, it does not mean that law and human acts exclude each other completely. The law cannot exist as a source of obligation, unless the acts to which its principles may be applied exists. But once those acts exist, the obligations arising from them by virtue of law are entirely independent of the agreement of the parties. NB: When the law merely acknowledges the existence of an obligation generated by an act which constitutes a contract, quasi-contract, delict or quasi-delict, and its only purpose is to regulate such obligation which did not arise from it, the act itself is the source of obligation and not the law. But, when the law creates the obligation, and the act upon which it is bases is nothing more that a mere factor in determining the moment when it becomes demandable, then the source of obligation is the law itself. (i.e. a husbands’ obligation to his spouse is not anchored upon the contract of marriage but on the law which dictates it.) Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.
Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009
Known as the Principle of autonomy of will. The parties can stipulate anything (they have the freedom), provided that the terms of the contract are not contrary to law, public policy or public order. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment 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 and law. Since a contract has the force of law between parties, each is bound to fulfill what has been expressly stipulated therein. does not apply to attorney’s contracts: courts can decide whether or not attorney’s fees are reasonable. Art. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII,of this book.
A quasi-contract is a juridical relation which arises from certain lawful, voluntary and unilateral act/s executed by somebody for the benefit of another and for which the former must be indemnified to the end that no one shall be enriched or benefited at the expense of another; It is a kind of contract created without the consent of one party but whose missing consent is given by law (presumptive consent). Characteristics of a Quasi-Contract The acts executed must be lawful The acts executed must be voluntary The acts executed must be unilateral TWO PRINCIPLE TYPES:
• a. b. c.
NEGOTIORUM GESTIO- (officious manager) juridical relation which takes place when somebody takes charge of the agency or management of the business or property of another without any power form the latter. The owner shall reimburse the gestor for the necessary and useful expenses incurred by the latter, and for the damages suffered by him in the performance of his functions.
SOLUTIO INDEBITI – a juridical relation which takes place when somebody received something from another without any right to demand for it, and the thing was unduly delivered through mistake (compared to Art. 22 or unjust enrichment wherein there was no mistake). Obligation to return the thing arises on the part of the recipient. Art. 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title on Human Relations, and of Title XVIII of this Book, regulating damages. • Basis is Article 100 of RPC, that every person criminally liable is also civilly liable Art. 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by special laws. Chapter 2- NATURE AND EFFECT OF OBLIGATIONS Art. 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. • • • Refers to the obligation to give. The obligation to give may refer to a determinate object / thing or to an indeterminate or generic thing. A generic thing/ indeterminate thing is one that is indicated by its kinds, without being designated and distinguished from the others of the same kind. In an obligation to deliver a generic or indeterminate thing, the thing is determinable and becomes determinate from the time the obligation has been fulfilled or performed. A generic thing is something which is not particularized or specified but has reference to a class or genus. A limited generic obligation is one when a the generic objects are classified to a particular class, i.e. one of my cars A Determinate thing is something which is susceptible of particular designation or specification. It is one which is individualized and can be identified or distinguished form the others of its kind.
Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla), 2007 Case Digests (from Erwin Vicente), Book of Tolentino, RAM Notes Compiled by: Hanniyah Sevilla, Christ May Andolana, Ferlyn Ong for 4th year Batch 2009
Read in relation to Art. 1173 - The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply. Effect of breach: Liability for damages, unless the loss or damage of the thing is due to a fortuitous event. Art. 1164.The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him.
Delivery is essential to acquire real right1. WHEN DOES OBLIGATION TO DELIVER ARISE? a. b. Perfection of contract if no term/condition; From the moment the term/condition arrives if there is a term
• The creditor has a right to the fruits of the thing from the time to deliver it arises. The fruits referred involve only determinate things.
1) Natural 2) Civil 3) Industrial • The moment when the obligation to deliver arises varies in different types of obligations:
Kinds of fruits: (cf: Property)
In obligations arising form law, quasi-delicts, quasi-contracts and crimes, the specific provisions of law applicable to the obligation determine when the delivery should be made. b. Suspensive conditions attached to an obligation to deliver arises only form the moment the condition happens. c. Suspensive periods agreed upon for the performance of the obligation gives rise to its delivery only upon the expiration of the term. d. Pure obligations are immediately demandable
• The right to the fruits of the thing shall only be personal, and only upon the delivery of the thing, its fruits, accessory and accession shall the creditor acquire a real right over it. • Classes of Delivery or Tradition:
REAL or ACTUAL tradition- This contemplates the actual delivery of the thing from the hand of the grantor to the hand of the grantee , if it is a personal property. If it is a real property, it is manifested by certain possessory acts executed by the grantee with the consent of the grantor such as by taking over the property; occupying the property.
CONSTRUCTIVE tradition- when the delivery of the thing is not actual but representative or symbolical in essence. But there must be intention to deliver the ownership. • Kinds of CONSTRUCTIVE TRADITION:
REAL right- is the power belonging to a person over a specific thing, without a passive subject individually determined, against whom such right may be personally exercised. It gives to a person a direct and immediate juridical power over a thing, which is susceptible of being exercised against the whole world. There is a need for tradition or delivery since from the time the obligation to deliver a determinate thing arises, the creditor has only a personal right. He can only demand that the debtor deliver such thing and its fruit. The delivery or tradition of a thing constitutes a necessary and indispensable requisite for the purpose of acquiring ownership. The ownership of things is transferred not by mere agreements but by delivery.
If the thing is indeterminate or generic. RAM Notes Compiled by: Hanniyah Sevilla. titles. Book of Tolentino. vii.Obligations and Contracts: Sources 2006 Lectures of Atty. 2. (Jovellanos) Tradicion Constitutum Possessorium – consists in the owner’s continuous possession of the property he had sold to another person and his present possession thereof is no longer that of the owner but of a lessee. Damages exclusively or in addition to either of the first actions. the shall be executed at his cost. Art. Obligor is guilty of bad faith. 1156. Specific performance is available even if the thing to be delivered is indeterminate. vi. If obligor delays or in default. may compel the debtor to make the delivery. d. 2007 Case Digests (from Erwin Vicente). If a person obliged to do something fails to do it. Art. in addition to the right granted to him by article 1170. RULES: OBLIGATION TO DELIVER 1. iii.consists in the delivery of incorporeal property. Demand for specific performance . Lydia Galas (Hann Sevilla). Rescission of the obligation which is under Art. Resolution of the contract under Art. iv. Indeterminate or generic thing REMEDIES OF CREDITOR REMEDY Creditor may compel debtor to deliver Creditor may ask for compliance at the expense of the debtor a. or has promised to deliver the same thing to 2 or more persons who do not have the same interest. Obligation to give a determinate thing includes that of delivering all its accessions and accessories. even though they may not have been mentioned. c. the thing could not be placed yet in the possession of the grantee.delivery of certain symbols or things representing the thing to be delivered such as keys. Art. When what is to be delivered is a determinate thing. 5 . Tradicion Brevi Manu – consists in the grantee’s continuation of his possession over the thing delivered but now under a title of ownership as in case of a lessee who had purchased the property leased to him. the creditor. Ferlyn Ong for 4th year Batch 2009 i. Obligation to deliver a specific thing is extinguished by fortuitous event.This action presupposes that it is based on a contractual relationship between the contending parties. 1166. ii. Indeterminate thing is however not General Rule: extinguished. he shall be responsible for any fortuitous event until he has effected the delivery. Exceptions: 1. 1191 if it is a reciprocal obligation. Christ May Andolana. v. Determinate thing 2. b. Tradicion Instrumental – consists in the delivery of the instrument of conveyance to the grantee by the grantor. If the obligor delays. 1380. 1167. he may ask that the obligation be complied with at the expense of the debtor. Tradicion by operation of law – consists in the delivery of the thing by operation of law such as intestate succession Quasi-Tradicion. Tradicion Longa Manu – consists in the pointing to a movable property within sight by the grantor to the grantee but which at the time of the transaction. Tradicion Symbolica.
REASON: because the dispensing of demand is only an exception. c. when time or period is the controlling motive or the principal inducement for the creation of the obligation. even if a period has been fixed in the obligation. Remedies: 1. when the obligor admits he is in delay In reciprocal obligations. Note: if any of the above happens. 2. b. Thing may be ordered undone if done poorly or obligation is a negative one This article presupposes that the thing can be done by the creditor himself or a third person. Christ May Andolana. the obligation is determinate or liquidated. Art. 2. in the light of good faith he should have offered the prestation in the form and manner that it is due. • Coverage: the obligor failed to fulfill a positive personal obligation. 1169. MORA SOLVENDIREQUISITES FOR MORA SOLVENDI TO EXIST: 1. no further demand is necessary. d. neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Lydia Galas (Hann Sevilla). the obligation pertains to the debtor or obligor. a. Ferlyn Ong for 4th year Batch 2009 This same rule shall be observed if he does it in contravention of the tenor of the obligation. if the prestation can be done only by the debtor. the creditor is entitled to have the thing done in a proper manner. 6 . The law does not require expressly that the debtor should know that the fixing of the date for the performance was a controlling motive on the part of the creditor. obligations to give) or ex persona (personal obligations. there is still a need for demand. In case of doubt on whether the debtor has incurred delay. it is not a general rule. Art. However. When the obligation consists in not doing and the obligor does what has been forbidden him. obtain damages. From the moment one of the parties fulfills his obligation. obligations to do) B. the only recourse available to the creditor is a claim for damages since it is against the constitution to force the debtor to perform the obligation. however. at the expense of the debtor.Obligations and Contracts: Sources 2006 Lectures of Atty. or 2. There was fulfillment but the same was poor or inadequate. it shall also be undone at his expense. The court has no discretion to merely award damages to the creditor when the act can be done in spite of the refusal or failure of the debtor to do so. 1168. but this knowledge is essential in order that it can be said that the debtor has tacitly consented to incur delay without the necessity of delay. • • Note: The demand must refer to the prestation due and not to another. COMPESATIO MORAE – default on the part of both parties in reciprocal obligations • • • I. c. due and demandable. by himself or by a third person. Furthermore. where the law so provides. Book of Tolentino. it may be decreed that what has been poorly done be undone. When the time for the fulfillment of the obligation is fixed. he fulfilled the obligation but in contravention of the agreement. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation • Demand is generally necessary. MORA ACCIPIENDI – default on the part of the creditor C. RAM Notes Compiled by: Hanniyah Sevilla. even if the demand had been absolutely correct. KINDS OF DELAY: A. Even in obligations where there is an acceleration clause. the doubt is resolved in favor of the debtor. MORA SOLVENDI – default on the part of the debtor which may either be ex re (real obligations. e. • INSTANCES when demand by Creditor not necessary in order that delay may exist: a. when there is an express stipulation between the parties to that effect. delay by the other begins. b. that is TO DO something. when demand would useless. there will still be delay even if the demand was wrong if: 1. • have obligation executed at debtor’s expense. 2007 Case Digests (from Erwin Vicente). the debtor would not have performed the obligation.
he releases the other from his obligations.Obligations and Contracts: Sources 2006 Lectures of Atty. all expenses incurred by the debtor for the preservation of the thing after the mora shall be chargeable to the creditor. the debtor may relieve himself from the obligation by consignation of the thing. or delay and those who in any manner contravene the tenor thereof. MORA ACCIPIENDI. the creditor refuses the performance without just cause CONSEQUENCES OF MORA ACCIPIENDI 4. the offer must be to comply with the obligation as it should be performed. Art.delay in the performance of the obligation based on the omission by the creditor of the necessary cooperation. and that he can perform. default. 1. 2. o When one party does not fulfill his obligation. 7 . Fraud. There is implied renunciation when the creditor. Leyva case. 4. which automatically pass to the creditor. an offer of performance by the debtor who has the required capacity. RAM Notes Compiled by: Hanniyah Sevilla. it is necessary that it be lawful for the debtor to perform. GROUNDS FOR LIABILITY: 1. Prescription Art. DOES NOT APPLY IN THE FF. 2007 Case Digests (from Erwin Vicente). Damages: MENTAL Indemnity for damages consists of: a. III. 6. grants an extension of time to the debtor or agrees to a novation of the obligation. Renunciation by the creditor. subject to equitable mitigation if the loss would have still occurred even if there was no default on the part of the debtor. COMPENSATIO MORAE – applies only in reciprocal obligations. 2. OBLIGATIONS: natural obligations. 1171. Those who in the performance of their obligations are guilty of fraud. Ferlyn Ong for 4th year Batch 2009 3. b. negligence. even after the delay. which may be implied or expressed. violation of terms of obligations. that agreed upon. II. How: ) 1. o Neither party incurs delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. especially in acceptance on his part. and 4. The effects of delay was not applied since there was a waiver on the part of Tayag when she accepted the payments even after the due date) 2. the default of one compensates the default of the other. debtor may be liable for damages or interests. the debtor is exempted from the risks of loss of the thing. 2. Lydia Galas (Hann Sevilla). REQUISITES FOR MORA ACCIPIENDI TO EXIST 1. the responsibility of the debtor for the thing is reduced and limited to fraud and gross negligence. are liable for damages. o Delay begins when one party fulfills his obligation. legal rate of interest. in absence of agreement. 3. 2. CESSATION OF THE EFFECTS OF DELAY: (may the right to place the debtor in delay be renounced or waived? Yes. (remember Tayag vs. negligence. 3. the obligation has not been performed on its maturity date. 7. 5. Any waiver of an action for future fraud is void. Where the parties are both guilty of mora or mutual default. debtor may bear the risk or loss of the things even if the default is due to fortuitous event. negative obligations CONSEQUENCES/EFFECTS OF MORA SOLVENDI: 1. Responsibility arising from fraud is demandable in all obligations. who therefore does not become delinquent in the fulfillment. 1170. Christ May Andolana. there is a demand made by the creditor on the debtor for the fulfillment of the obligation that is due. Book of Tolentino.
or the failure of the debtor to comply with his obligations must be independent of the human will. according to the circumstances. or of the debtor’s will. Culpa Aquiliana N is direct. Culpa Criminal – criminal negligence that which results in commission of crime or a delict. Book of Tolentino. KINDS: 1. RAM Notes Compiled by: Hanniyah Sevilla. When negligence shows bad faith. Art. 2. DILIGENCE REQUIRED: 1. 1172. shall apply. there is a contract and Case: Prudential Bank vs. (cases) SABEDA airlines.Except in cases expressly specified by the law. Hence. Responsibility arising from negligence in the performance of every kind of obligation is also demandable. It must be impossible to foresee the event which constitute the caso fortuito.Obligations and Contracts: Sources 2006 Lectures of Atty. that which is expected of a good father of a family shall be required. 2007 Case Digests (from Erwin Vicente). 8 . or which. Lydia Galas (Hann Sevilla). In the case of PAL. negligence is incidental. Ferlyn Ong for 4th year Batch 2009 Art. paragraph 2. 1173. or when it is otherwise declared by stipulation. though foreseen. substantive independent. it was inevitable to avoid Although under normal circumstances. the hijacking was independent of the will of PAL. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons. that agreed upon by parties. in the absence of #1. that required by law. Christ May Andolana. the military take over that took place that afternoon rendered the foreseeability of the event as impossible since it was the army already conducting the checking and frisking. there is pre-existing obligation. 3. preponderance of evidence 4. 3. or when the nature of the obligation requires the assumption of risk. If the law or contract does not state the diligence which is to be observed in the performance. Prudential Bank cases Art. it was not impossible for PAL to foresee the hijacking of the airplane. No pre-existing obligation. Culpa Contractual 1. Culpa Contractual – breach of contract Culpa Aquiliana – civil negligence. the provisions of articles 1171 and 2201. ELEMENTS OF FORTUITOUS EVENT: 1. but such liability may be regulated by the Courts. The cause of the unforeseen and unexpected occurrence. respondent still suffered anxiety. 3. oblig. While in the case at bar there was no bad faith.civilly liable in case of insolveny Presumption of innocence until contrary is proved.same Defense of a good father of a family Prove that defendant is negligent Culpa Criminal N is direct. master-servant rule 5. substantive No pre-existing obligation except not to harm others Guilt beyond reasonable doubt ER’s guilt. of the time and of the place. no person shall be responsible for those events which could not be foreseen. . CA: responsibility from negligence in the performance of every kind of obligation is demandable. or if it can be foreseen. tort or quasi-delict. 2. in absence of #2. entitle to recover (moral) damages. 2. that expected of a good father of a family. Existscontract 2. o o General Rule: Fortuitous events absolve Obligor from liability. embarrassment and humiliation. 1174. were inevitable.
RAM Notes Compiled by: Hanniyah Sevilla. 4. Rule: All rights acquired in virtue of an obligation are transmissible. The creditors. negligence or delay or if he contravened the tenor of the obligation. When the obligor is guilty of fraud. or aggravation of. 4. The obligor must be free from any participation in. 8. for his convenience or profit. CA: Even if the tires are new. 1177. shall give rise to the presumption that said interest has been paid. 1176. Moreover. 2. after having pursued the property in possession of the debtor to satisfy their claims. When the nature of the obligation requires the assumption of risk. (n) Art. may exercise all the rights and bring all the actions of the latter for the same purpose. Christ May Andolana. they may also impugn the acts which the debtor may have done to defraud them.Obligations and Contracts: Sources 2006 Lectures of Atty. or that it had a good brand name. 1165). if there has been no stipulation to the contrary. creates risks for the public which formerly did not exist. subrogatory action – exercise all rights and actions except inherent rights. The receipt of a later installment of a debt without reservation as to prior installments shall likewise raise the presumption that such installments have been paid. 2007 Case Digests (from Erwin Vicente). 1175. 3. EXCEPTIONS: (when obligor is still liable even if there is a fortuitous event) 1. it is settled that all accident caused either by defects in the automobile Or through the negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages. save those which are inherent in his person. When the possessor is in bad faith and the thing is lost or deteriorated due to a fortuitous event. Subject to the laws. 3. Ferlyn Ong for 4th year Batch 2009 Note: In the case of PHILCOMSAT v Globe: the SC held that although the parties could have foreseen the closure of the military bases. Art. Usurious transactions shall be governed by special laws. Art. impugn/rescind acts or contracts done by debtor to defraud them. such as defective packing. The common carrier must still prove that it was not negligent in causing the death or injury resulting from an accident. o ASSUMPTION OF RISKS: (doctrine of created risk) The exception is based on social justice: If a person. such as conducting daily routinary check-ups of the vehicle's parts. If he benefits from the means that have produced the loss. 1178. 7. he should nevertheless be held liable for such. exact payment. 9 . 4. Art. a common carrier may not be absolved from liability in case of force fortuitous event alone. When the obligor is in delay already. Lydia Galas (Hann Sevilla). When the obligor contributed to the loss of the thing during the fortuitous event. The occurrence must be of such as to render it impossible for the debtor to fulfill his obligation in a normal manner. Case: Yobido vs. (1111) Rights of Creditors: 1. 5. 3. all rights acquired in virtue of an obligation are transmissible. When the law so provides. Petitioners should have shown that it undertook extraordinary diligence in the care of its carrier. although morally his fault or negligence may not be the cause of the damages resulting therefrom. it was impossible to avoid. Note: o o o An obligation consisting of the delivery of a specified thing shall be extinguished when the said thing shall be lost or destroyed without the fault of the obligor and before he is in default. but also when it is due to the act of the creditor himself. The obligor is released from liability no only when the non-performance of the obligation is due to fortuitous events. The receipt of the principal by the creditor without reservation with respect to the interest. When the obligor has promised the same thing to two or more persons who do not have the same interest (Art. it is only equitable that he should bear the consequences of such loss. the injury resulting to the creditor. Book of Tolentino. exhaust debtor’s properties generally by attachment. (1112) Gen. 6. 2. When it is expressly stipulated by the parties.
Christ May Andolana. when it is pure. RAM Notes Compiled by: Hanniyah Sevilla. b. 2007 Case Digests (from Erwin Vicente). Every obligation whose performance does not depend upon a future or uncertain event. Every obligation which contains a resolutory condition shall also be demandable. CONDITIONAL – with a condition CONDITION. If the debtor does not fulfill his prestation. The condition must be imposed by the will of a party and must not be a necessary legal requisite of the act. those not transmissible by their nature. o PAST EVENTS can be conditions too. without prejudice to the effects of the happening of the event. if contract provides otherwise. PURE . b. (1113) o Kinds of Obligations: a. 2. Book of Tolentino. and b. The futurity required in past events is the future knowledge or proof of a past event unknown to the parties. Ferlyn Ong for 4th year Batch 2009 Exceptions: 1. 3. CLASSIFICATION OF CONDITIONS A. C.Obligations and Contracts: Sources 2006 Lectures of Atty. if obligation is purely personal Note: The exceptions refer to: a.000 if the number of people who died in the 9/11 attack exceeds 2. if law provides otherwise. INSTANCES WHEN AN OBLIGATION IS DEMANDABLE AT ONCE: a. RESOLUTORY – happening of event/condition extinguishes the obligation. Art. is demandable at once.Pure and Conditional Obligations PURE AND CONDITIONAL OBLIGATIONS: o Condition: An event which is both future and uncertain upon which the existence or extinguishment of an obligation is made to depend. or upon a past event unknown to the parties. those not transmissible by law or by stipulation of the parties. MIXED – depends partly on will of 3rd person and partly on chance. Example: I will pay you 1. B. 10 . i. 1179.e. .000.happening of event/condition gives rise to obligation. CASUAL – depends on chance/will of a 3rd person. CHAPTER 3 DIFFERENT KINDS OF OBLIGATIONS SECTION 1. purely personal rights.When the obligation contains no term or condition whatever upon which depends the fulfillment of the obligation contracted by the debtor. TERM – is that w/c necessarily must come whether the parties know when it will happen or not. when it has resolutory condition. especially after a valid demand. Lydia Galas (Hann Sevilla). but when the proof of such fact or event is presented. which would be in the future. INDIVISIBLE – not capable of partial fulfillment. DIVISIBLE – capable of partial fulfillment. not the event itself. the contract or obligation arises not when the event happened or the fact came into existence. POTESTATIVE – depends upon the will of the debtor. The element of futurity and uncertainty must concur. he is placed in default.is an uncertain event w/c wields an influence on a legal relation. it is immediately demandable and there is nothing to exempt the debtor from compliance therewith. SUSPENSIVE . In past events.
Potestative and resolutory valid since there is immediate performance on the part of the obligor. POSITIVE – an act is to be performed NEGATIVE – something will be omitted. IF RESOLUTORY – valid. The happening of w/c will give rise to the acquisition of a right – future & uncertain event. this cannot happen when the fulfillment depends on the will of the creditor. b. in cases falling under this article. 1181. Lydia Galas (Hann Sevilla). Resolutory -. as well as the extinguishment or loss of those already acquired. COURTS will fix the duration of the period.Obligations and Contracts: Sources 2006 Lectures of Atty. covers cases wherein the debtor binds himself to pay when his means permit him to do so. Case: Padilla vs. o This article applies only to potestative SUSPENSIVE CONDITIONS. Art. This is because the creditor is naturally interested in the fulfillment of the condition which will benefit him. E. Pure potestative conditions renders the whole obligation void. If it depends upon chance or upon the will of a third person. It does not imply immediate instantaneous compliance. Ferlyn Ong for 4th year Batch 2009 D. 2. An action to enforce the obligation is premature if the court has not yet fixed a period. the creditor should file an action to fix a period for the payment of the obligation. Christ May Andolana. c. (or not the performance of the condition) Art. (n) payment does not depend on debtor’s will for he has promised to pay. the acquisition of rights. Potestative (facultative) Casual Mixed POTESTATIVE ON THE PART OF THE DEBTOR 1. the moment of payment is dependent upon the will of he debtor but not the payment. RAM Notes Compiled by: Hanniyah Sevilla. 2007 Case Digests (from Erwin Vicente).conditions subsequent – rights are lost once the condition is fulfilled. ALTERNATIVE – if only a few of the conditions have to be performed. Q: What does automatically/immediately demandable mean? A: Immediate demandability is not impaired when the performance of the obligation is allotted a reasonable time by the court. Paredes: there was no obligation to perform since the suspensive condition did not happen. Art. TIME when payment is to be made depends upon the DEBTOR. When the fulfillment of the condition depends upon the sole will of the debtor. b. as soon as I have the money. Suspensive – conditions precedent/antecedent. CONJUNCTIVE – if all the conditions must be performed. In conditional obligations. 1197. such as “I’ll pay you little by little. IF SUSPENSIVE – both condition and obligation are void. Reason: to allow conditions whose fulfillment depends exclusively on the debtor’s will. HOW LONG? Article 1180. 1180. 1182. the conditional obligation shall be void. When the debtor binds himself to pay when his means permit him to do so. (1114) a.read in relation with Art. subject to the provisions of article 1197. the obligation shall be deemed to be one with a period. it is valid. in partial payments ” Here. 11 . is to sanction illusory obligations. (1115) 3 KINDS OF CONDITIONS a. o If it depends solely on the will of the creditor. shall depend upon the happening of the event which constitutes the condition. as soon as possible. Book of Tolentino. the obligation shall take effect in conformity with the provisions of this Code.
Christ May Andolana. o NEGATIVE SUSPENSIVE CONDITIONS have the effect of converting the obligation into a pure and simple one. or if it has become evident that the event cannot occur. There is constructive fulfillment only if the act of the debtor had in fact prevented compliance with the condition. Actual prevention of compliance. If condition is negative (not to do) DISREGARD CONDITION BUT OBLIGATION REMAINS. It is simply considered not written. Book of Tolentino. and manifests that he does not have any intention to be bound. it must consist of an act or fact for one of the parties. and also to POSITIVE SUSPENSIVE CONDITIONS. 2. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed. RAM Notes Compiled by: Hanniyah Sevilla. 1184. Note: o o o If condition is to do an impossible or illegal thing – CONDITION & OBLIGATION ARE VOID. 3. In order for the condition to be considered as illicit or juridically impossible. 1183. The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place. Art. Example: B ordered A to stop building because it was against the city ordinance. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. 2. may in some way be prevented by the debtor from happening. although not exclusively within the will of the debtor. Lydia Galas (Hann Sevilla). Impossible conditions. If condition is negative (not to do an illegal thing) BOTH CONDITION & OBLIGATION ARE VALID. the condition will not be deemed fulfilled. that part thereof which is not affected by the impossible or unlawful condition shall be valid. (1116a) EFFECTS: 1. the condition shall be deemed fulfilled at such time as may have probably been contemplated. bearing in mind the nature of the obligation. This article applies only to cases where the conditions was already impossible from the time of the constitution of the obligation.Obligations and Contracts: Sources 2006 Lectures of Atty.positive condition Effect if Period of Fulfillment is not fixed: the Court considering the parties intentions should determine what period was really intended. Voluntarily made – the intent to prevent is present. EXCEPTION: if in preventing the fulfillment of the condition the debtor acts pursuant to a right. Art. The condition must already be existing at the time of the creation of the obligation. thus as if no condition exists. The mere mention of a juridically impossible condition does not annul the obligation. The criterion is the effects upon one of the parties. Note: This refers to Constructive Fulfillment/ Implied fulfillment o o o Applies to a condition which. (1117) . 12 . If the obligation is divisible. o Reason: one who promises something under a condition that is impossible or illicit knows that it cannot be fulfilled. If no time has been fixed. 1186. 1185. The condition not to do an impossible thing shall be considered as not having been agreed upon. Ferlyn Ong for 4th year Batch 2009 Art. those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. 2007 Case Digests (from Erwin Vicente). (1119) Requisites: 1. Supervening events which would render the obligation no longer impossible does not affect the effect of annulling the obligation. – Negative Condition Art.
Nevertheless. shall retroact to the day of the constitution of the obligation. Remember: between the constitution and the happening of the suspensive condition. the debtor cannot alienate the subject property if it is a determinate thing. (Jovellanos case: The right of Daniel to the property was merely inchoate and expectant right which would ripen into a vested right only upon his acquisition of the ownership) The moment the suspensive condition happens. Book of Tolentino. RAM Notes Compiled by: Hanniyah Sevilla. If the obligation is unilateral. Creditors can however. once the condition has been fulfilled. The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition. The suspensive condition only prevents the efficacy of the obligation. However. 1188. bring the appropriate actions for the preservation of his right. (1120) In conditional oblig. however. His only recourse is damages against the debtor. CAN THERE BE RECOVERY? a. to give. before the fulfillment of the condition. Lydia Galas (Hann Sevilla). the debtor shall appropriate the fruits and interests received. action to demand security in case the debtor becomes insolvent. the courts shall determine. Note: If condition is fulfilled – NO RECOVERY If condition is not fulfilled. Ferlyn Ong for 4th year Batch 2009 Art. he may be compelled to deliver the thing to the creditor. Case: DBP vs. Reason: suspensive conditions are merely accidental to the obligation. RETROACTS to the moment of constitution of such obligation. shall retroact to the day of the constitution of obligation. the creditor cannot reclaim the property as the delivery of the thing vests ownership. The creditor may. CA Limitations to retroactivity: the right to the fruits or interests of the thing accruing before the happening of the condition. The EFFECTS. (1121a) APPROPRIATE ACTIONS FOR CREDITOR TO PRESERVE HIS RIGHTS: a. if real property is involved. Christ May Andolana. c. The effects of a conditional obligation to give. action to set aside alienations made by the debtor in fraud of the creditors. - 13 . in each case. Before the happening of the suspensive condition. they are not essential elements of the obligation. and prescription is computed from this time. Cause of action accrues. - 2nd Par: a case of solutio indebiti (undue payment) if creditor is in bad faith. – the debtor shall appropriate the fruits and interests received UNLESS from the nature of the obligation it should be inferred that the intention of person was different. An obligation is deemed constituted when all the necessary elements are present. shall be deemed to have been mutually compensated. debtor is entitled to fruits and interests. there should be recovery EXCEPT when a pure donation was intended. 2007 Case Digests (from Erwin Vicente). – the fruits and interests during the pendency of condition. once fulfilled. unless otherwise stipulated by the parties. if there was bad faith on the part of the 3rd person. when the obligation imposes reciprocal prestations upon the parties. b. the creditor cannot enforce the obligation. 1187. IF PAYMENT WAS NOT BY MISTAKE. action for prohibition restraining the alienation of the thing pending the happening of the condition petition for the annotation of the creditor’s right. unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. Art. the retroactive effect of the condition that has been complied with. The right of the creditor during the period is mere expectancy. alienate their inchoate right. If the obligor alienated the determinate property to a 3rd person (good faith on part of the 3rd person). In obligations to do and not to do. In unilateral oblig. the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. d.Obligations and Contracts: Sources 2006 Lectures of Atty. In reciprocal oblig. b. In Obligation to do or not to do – the Court shall determine the retroactive effect of condition that has been complied with. the right becomes enforceable and the debtor may be compelled to perform the obligation.
In case of the loss. or by time. and if object is specified (not generic) Art. (4) If it deteriorates through the fault of the debtor. including fruits & interests. he shall have no other right than that granted to the usufructuary. when it perishes. (6) If it is improved at the expense of the debtor. the following rules shall be observed in case of the improvement. 14 . with the payment of damages in either case. the provisions which. he shall be obliged to pay damages. shall return to each other what they have received. (physical loss) or b. Christ May Andolana. with respect to the debtor. even after he has chosen fulfillment. (5) If the thing is improved by its nature. Courts shall determine the retroactivity of resolutory conditions In case of loss. deterioration or improvement of the thing. Obligation is extinguished. Art. 2. 3. 4. (2) If the thing is lost through the fault of the debtor. The injured party may choose between the fulfillment and the rescission of the obligation. Ferlyn Ong for 4th year Batch 2009 - If payment was a determinate thing. (legal loss) or c. As for the obligations to do and not to do. He may also seek rescission. b. 1190. The power to rescind obligations is implied in reciprocal ones. the cause of action is accion revindicatoria. there is an implied waiver of the condition and what has been paid cannot be recovered. otherwise the provisions of solution indebiti applies. the creditor may choose between the rescission of the obligation and its fulfillment. the parties. in case one of the obligors should not comply with what is incumbent upon him. suspensive condition is fulfilled. RAM Notes Compiled by: Hanniyah Sevilla. are laid down in the preceding article shall be applied to the party who is bound to return. 2007 Case Digests (from Erwin Vicente). the obligation shall be extinguished. however. Parties shall return what they have received. upon the fulfillment of said conditions. deterioration.Obligations and Contracts: Sources 2006 Lectures of Atty. No express provision regarding fruits and interests. with indemnity for damages in either case. 1189. 1191. (1123) EFFECTS WHEN RESOLUTORY CONDITION IS FULFILLED: 1. 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give. If however. When the conditions have for their purpose the extinguishment of an obligation to give. the improvement shall inure to the benefit of the creditor. the impairment is to be borne by the creditor. (1122) Article applies if: a. or improvement. It is understood that the thing is lost: a. there can be recovery by the provisions of solution indebiti. disappears in such a way that its existence is unknown or it cannot be recovered. if the latter should become impossible. (civil loss) (3) When the thing deteriorates without the fault of the debtor. apply Art. goes out of commerce. Art. loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor. the provisions of the second paragraph of article 1187 shall be observed as regards the effect of the extinguishment of the obligation. Book of Tolentino. payment was made with the knowledge of the condition. Lydia Galas (Hann Sevilla).
in the absence of any just cause for the court to determine the period of compliance. Ferlyn Ong for 4th year Batch 2009 The court shall decree the rescission claimed. The breach contemplated in the said provision is the obligor’s failure to comply with an existing obligation. considering that the suspensive condition has not yet happened. A party who has not performed his pat of the obligation cannot rescind. such that the obligation of one is dependent upon the obligation of the other. CA) Case: Padilla vs. (1124) CHARACTERISTICS OF RIGHT TO RESCIND 1. This article does not apply when the parties made a stipulation providing for the automatic rescission of the contract in case of violation of the terms thereof without need of judicial intervention or permission. the other party has the right to either demand performance. not absolute slight breach is not sufficient as held in Tayag vs. When the obligor cannot comply with what is incumbent upon it. Christ May Andolana. It is not enough that both parties are creditor and debtor or each other. Hence. Lydia Galas (Hann Sevilla). willing and able to comply with his own obligations while the other is not capable to perform his own. RAM Notes Compiled by: Hanniyah Sevilla. Who can demand rescission: The party who can demand rescission should be the party who is ready. willing and able to comply with his own obligation and the other is not. the contract stipulates for rescission in case the other has not performed. 4. the right to rescind may be waived expressly or impliedly DAMAGES FOR BREACH OF LEASE CONTRACT: If he selects specific performance as an action. no actions can be done before the expiration of period. Even if there is no corresponding agreement between the parties. These remedies/choices are mutually exclusive. his failure to do so brought about a situation which prevented the obligation of respondent spouses to convey title from acquiring an obligatory force. it needs judicial approval in some cases – when there has already been delivery of thing. can be demanded only if the plaintiff is ready. 3. is not even a breach but merely an event which prevents the vendor's obligation to convey title from acquiring binding force. 5. if there has been delivery. so that the performance of one is conditioned upon the simultaneous fulfillment of the other. Book of Tolentino. unless there be just cause authorizing the fixing of a period. he gets only the back rents and ouster the lessee plus damages but not future rents. the court shall decree the rescission. the agreement of the parties in the case at bench may be set aside.The right to rescind is not absolute and will not be granted if there has been substantial performance by partial payments. the right to rescind is implied to exist. They are to be performed simultaneously. Note: This article is applicable only to reciprocal obligations. This is understood to be without prejudice to the rights of third persons who have acquired the thing. Reciprocal obligations are those which arise from the same cause. the obligee may seek rescission and. or ask for the resolution of the contract. and in which each party is a debtor and a creditor of each other. in accordance with articles 1385 and 1388 and the Mortgage Law. 2. If there’s no delivery. CA. “Rescission” here is to be understood as “resolution” or cancellation of the contract. - - - - 15 . not a failure of a condition to render binding that obligation. but not because of a breach on the part of petitioner for failure to complete payment of the purchase price. Case: “Failure to pay. Paredes : There can be no rescission of an obligation that is non-existent. 6. There can be no breach of a non-existent obligation.Obligations and Contracts: Sources 2006 Lectures of Atty. 2007 Case Digests (from Erwin Vicente). The breach contemplated is the obligor’s failure to comply with an obligation already existing. If there is a fixed period. the law provides for such power to rescind. Rather. the reciprocity in the obligation must arise from the same cause. judicial approval may not be needed. If lessor demands rescission. in this instance. Case: Velarde vs. o a) b) It exists only in reciprocal obligations. One cannot choose specific performance then rescission. (Ong vs. he can demand the accrued rent plus the future rent for the unexpired term. When one party fails to comply with his obligation under a contract. CA: when Padilla chose to rescind the contract. The right of rescission of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them.
Case: Cannu vs. 3. 1191 always carries with it the obligation of mutual restitution. 2. DUE PROCESS MUST BE OBSERVED. EFFECTS OF RESCISSION Note that the exercise of the power to rescind extinguishes the obligatory relation as if it had never been created. In estimating the damages to be awarded in case of rescission or resolution. and he may therefore by his own declaration elect to rescind by not performing his own undertaking. exception: when the injured party chose specific performance. is one of lease. the contract shall be deemed extinguished and each shall bear his own damages. the other party must be given his day in court. the choice had already been made and to allow Velarde to pay the existing amount would tantamount to a novation of the contract .) - - o Note: When the contract. Hence. the court must declare the rescission. However. The rescission has the effect of abrogating the contract in all parts and The parties will be brought back. 2007 Case Digests (from Erwin Vicente). GalangLimitations/Restrictions on the right to rescind: 1. Having chosen rescission. RAM Notes Compiled by: Hanniyah Sevilla. extra-judicial declaration of rescission by the party who is ready and willing to perform would suffice. However. so long as there has been no judgment declaring rescission. Lydia Galas (Hann Sevilla). in case of resolution for non-delivery of the thing sold cannot consist in the fruits. EXTRAJUDICIAL rescission produces legal effects. Book of Tolentino. to which he is entitled only when delivery is made. there is always a need for judicial action if the other party refuses to make the delivery of the thing promised. The injured party must respect the power of the court to fix period in lieu of decreeing rescission. o Inapplicability of Art. (case: Central Univ. he is only entitled to the interest on the amount he has paid. or vice-versa. In cases of specific performance. Slight breach of the contract will not justify rescission. and the prestation had become impossible to perform. however. Once one of the parties fails to comply with his obligation. the purchaser is entitled to indemnity for damages. It is the judgment of the court and not the mere act of the vendor which produces the rescission of the sale (Cannu) The right to rescind is SUBORDINATED TO THE RIGHTS OF 3RD PERSONS who acquired the thing in good faith. unless he has previously renounced one of these remedies. he may then cancel or rescind the contract. Laperal was not made to pay restitution since the parties had expressly stipulated the payment for damages in case of breach. 4. in this case. if the injured party has already performed such as when property has already been delivered by him to the other party. the other is relieved from complying with his. there is always a need for restitution. Tayag case: WAIVER. The resolution or cancellation shall take effect only after the creditor has notified the debtor of his choice of rescission. However. Rescission under Art. those elements of damages only can be admitted that are compatible with the idea of rescission In case of resolution of a contract of sale.the rescission authorized is judicial rescission.the court may fix the period for the fulfillment of the obligation. however. Solid Homes. When can there be extrajudicial rescission? When there has been no performance of the obligation or whatsoever. and it cannot be determined who was the first infractor. 1191: 16 . the creditor who has asked for it may change his mind and demand specific performance instead. the court will have no discretion to grant the lessee a period within which to pay the rents. the breach should be substantial and fundamental as to defeat the object of the parties in making the contract. CA. the court held that there was no need to fix the period since sufficient time had already lapse for the plaintiff to fulfill the condition.) In Ong vs. the SC held that Ong was not entitled to reimbursement as regards the improvements he made on the property because he contracted these improvements in bad faith. as much as possible to the status quo before they entered into the contract. Christ May Andolana. he cannot by his own declaration rescind the contract. (case: Laperal vs. o Evidence is needed to justify the rescission. and the lessee fails to pay the rents stipulated within the time agreed upon. in this case. Hence. Ferlyn Ong for 4th year Batch 2009 although Velarde opted to pay. If the obligation has not yet been performed. however. the extinction having a retroactive effect.Obligations and Contracts: Sources 2006 Lectures of Atty. This indemnity. Where both parties have committed a breach of obligation. 5.
A day certain is understood to be that which must necessarily come. 17 . b. 3. . B. Book of Tolentino.Obligations and Contracts: Sources 2006 Lectures of Atty. Condition may under the law refer to past. Obligations for whose fulfillment a day certain has been fixed. b. but terminate upon arrival of the day certain.Obligations with a Period Art. PERIOD vs. DIFFERENT KINDS OF TERMS/PERIODS a. 2. in obligations of sales of real property by installments since Maceda Law RA 6552 governs. 1192. shall be demandable only when that day comes. As to Influence on the obligation 1. LEGAL – a period granted by law CONVENTIONAL/VOLUNTARY – period agreed upon or stipulated by parties. c. Ferlyn Ong for 4th year Batch 2009 1. If the uncertainty consists in whether the day will come or not. DEFINITE – exact date/time is known and given INDEFINITE – something that will surely happen. if there is no express stipulation of automatic rescission in case of breach. the same shall be deemed extinguished. CONDITION A. the liability of the first infractor shall be equitably tempered by the courts. 4. Condition causes an obligation to arise or to cease. C. a period is an event which must happen sooner or later at a date known beforehand or a time which cannot be determined. if there is an express stipulation of automatic rescission. a condition is an uncertain event. (1125a) Period: A certain length of time which determines the effectivity or the extinguishments of obligations. although it may not be known when. but date of happening is unknown. or for its termination. and it shall be regulated by the rules of the preceding Section. the obligation is conditional. upon arrival of period. In case both parties have committed a breach of the obligation. 2007 Case Digests (from Erwin Vicente). Christ May Andolana. Obligations with a resolutory period take effect at once. 2. JUDICIAL – period or term fixed by Courts for the performance of an obligation. If it cannot be determined which of the parties first violated the contract. Obligation begin only from a day certain. RAM Notes Compiled by: Hanniyah Sevilla. 2. 2. (n) SECTION 2. judicial approval is needed when there has been already delivery of the object—unless the debtor voluntarily returned the thing. Lydia Galas (Hann Sevilla). Art. Period refers to future. sales of personal property by installments governed by RA 1484 (Recto Law) Contracts of partnerships Contracts of lease o Cases when judicial approval is not needed in rescission: a. and each shall bear his own damages. As to their fulfillment – 1. EX DIE or SUSPENSIVE PERIOD– a period with suspensive effect. Period merely fixes the time or the efficaciousness of an obligation. With reference to time 1. 1193.
2007 Case Digests (from Erwin Vicente). 3. deterioration.Article 1189 is applicable in cases of loss. 18 . 3. the obligor being unaware of the period or believing that the obligation has become due and demandable. Anything paid or delivered before the arrival of the period. the creditor gets the benefit. but from its nature and the circumstances it can be inferred that a period was intended. NOTE: An action may be brought to immediately enforce an obligation originally with a term if: a. 4. deterioration or improvement of the thing before the arrival of the day certain. 2. It perishes. Before the debt matures ( Art. (1126a) PERIOD W/IN W/C RECOVERY MAY BE MADE Without Debtor’s knowledge – 1. he shall have the rights granted to a usufructuary for improvements on a thing held in usufruct. may be recovered. 1197. with the fruits and interests. REQUISITES FOR A VALID PERIOD/TERM 1. Christ May Andolana. • If the thing is improved by nature. Termination of obligation upon the arrival of said period. Note: “Genus nunquam perit” – in an obligation to deliver generic thing the loss or destruction of anything of the same kind does not extinguish the obligation. Lydia Galas (Hann Sevilla). it is presumed to have been established for the benefit of both the creditor and the debtor. Whenever in an obligation a period is designated. Art. 1195. • If the thing deteriorates through the fault of the debtor. RAM Notes Compiled by: Hanniyah Sevilla. It disappears in such a way that its existence is unknown. or b. must be physical and legally possible otherwise it is void. the rules in article 1189 shall be observed. • If the thing has improved through the expense of the debtor. It goes out of commerce. (the obligation is converted into a pure obligation) Art. If the obligation does not fix a period. or (2) fulfillment of the obligation plus damages.Obligations and Contracts: Sources 2006 Lectures of Atty. unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other. Book of Tolentino. In case of loss. the creditor may choose between (1) rescission of the agreement or obligation plus damages. Must refer to the future. Thing Is Lost When – 1. 2. or by time. the contract in which the terms is imposed has been cancelled by mutual agreement of the parties. (n) Article 1194. he shall be obliged to pay damages. Ferlyn Ong for 4th year Batch 2009 IN DIEM or RESOLUTORY PERIOD– a period/term with a resolutory effect. 1196. Even after maturity – if creditor is in bad faith – the right prescribes in 5 years after premature payment With Debtor’s knowledge – NO RECOVERY (implied waiver) Note: the law presumes that the debtor knew of the prematureness. 1194) 2. It disappears in such a way that it cannot be recovered. When the non-fulfillment of the terms of the contract resolves the period and authorizes the creditor to immediately demand performance. 1194. (1127) Art. Art. • If the thing is lost through the fault of the debtor. the courts may fix the duration thereof. and improvement during the pendency of condition. must be certain but can be extended.
(2) When he does not furnish to the creditor the guaranties or securities which he has promised. unless he immediately gives new ones equally satisfactory. it can be inferred that a period was intended. When what appears to be a term is really a condition. RAM Notes Compiled by: Hanniyah Sevilla. When the period w/in which to ask the court to have the period fixed has itself already prescribed. In every case. 4. When the obligation or not is “payable on demand”. the courts shall determine such period as may under the circumstances have been probably contemplated by the parties.Alternative Obligations Art. 2. (4)When the debtor violates any undertaking. The debtor shall have no right to choose those prestations which are impossible. (1128a) WHEN THE COURT MAY FIX A PERIOD 1. The Debtor Shall Have No Right To Choose Those Prestations Which Are: 19 . The creditor cannot be compelled to receive part of one and part of the other undertaking. Book of Tolentino. the period cannot be changed by them. 1198. (avoid legal process) (1129a) – actual absconding.Obligations and Contracts: Sources 2006 Lectures of Atty. 5. unless he gives a guaranty or security for the debt. PRESCRIPTIVE PERIOD: ACTION MUST FIX THE PERIOD – 10 YEARS Art. When specific periods are provided for in the law. in consideration of which the creditor agreed to the period. (1132) In obligation with a term – general rule: term is for both parties’ benefit In obligation/alternative oblig – general rule: Debtor has the right of choice. When although the obligation does not fix a period. 1200. The right of choice belongs to the debtor. unlawful or which could not have been the object of the obligation. (3) When by his own acts he has impaired said guaranties or securities after their establishment. When no term was specified because no term was ever intended. Christ May Andolana. it is sufficient for him to find a hard time paying off his obligations because of financial reverses that have made his assets less than his liabilities. SECTION 3. 2007 Case Digests (from Erwin Vicente). 1199. (1131) Alternative Obligation is one where out of the 2 or more prestations which may be given. Lydia Galas (Hann Sevilla). and when through a fortuitous event they disappear. The debtor shall lose every right to make use of the period: (1) When after the obligation has been contracted. unless it has been expressly granted to the creditor. A person alternatively bound by different prestations shall completely perform one of them. . Art. he becomes insolvent. only one is due. Once fixed by the courts. Note: the insolvency referred to does not have to be judicially declared. 3. INSTANCES WHEN THE COURT MAY NOT FIX THE TERM: 1. intent to do so is sufficient. Ferlyn Ong for 4th year Batch 2009 The courts shall also fix the duration of the period when it depends upon the will of the debtor. When the duration depends upon the will of the debtor. 2. (5)When the debtor attempts to abscond.
Unlawful. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared. THE DEBTOR MAY CHOOSE. or the compliance of the obligation has become impossible. 7.B & C. the choice by the creditor shall fall upon the price of any one of them.if C is destroyed (fortuitous event) obligation is extinguished. (1135a) Art. expressly/impliedly. or the price of that which. (3) If all the things are lost through the fault of the debtor. for the creditor to receive the object being delivered. If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation. 6. through the fault of the debtor. 1202. Book of Tolentino. C can only be delivered. Lydia Galas (Hann Sevilla). written. When the choice has been expressly given to the creditor. Damages other than the value of the last thing or service may also be awarded. the latter may rescind the contract with damages. (n) Art. 1201. 2. Art. (1136a) if contract does not state to whom the right to choose is given. coercion etc. if tender of the same has been made. Or which could not have been the object of the obligation. (1134) Example: Objects A. the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. (1133) Means of Communication to other party – oral. REQUISITES FOR MAKING A CHOICE 1. A&B are destroyed. 2. he shall perform the obligation by delivering that which the creditor should choose from among the remainder. made in due time and that is before or upon maturity. 2007 Case Digests (from Erwin Vicente). made voluntarily and freely (no force. has disappeared. made with full knowledge that a selection is indeed being made (if there is error – choice can be annulled) 3. 1205. 1204. with a right to damages. Christ May Andolana. Made properly so that creditor or agent will know. implied. RAM Notes Compiled by: Hanniyah Sevilla. The creditor shall have a right to indemnity for damages when. Art. PURPOSE: To inform the creditor that the obligation is now a simple one. 5. also with indemnity for damages. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound. through the fault of the former. express EFFECT OF NOTICE THAT CHOICE HAS BEEN MADE Obligation becomes a simple obligation to do or deliver the object selected. Impossible. 3. made to all the proper persons. or that of the service which last became impossible. 1203. 20 . made w/o conditions unless agreed to by the creditor. may be waived. The choice shall produce no effect except from the time it has been communicated. no longer alternative and if already due. (2) If the loss of one of the things occurs through the fault of the debtor. Art. Until then the responsibility of the debtor shall be governed by the following rules: (1) If one of the things is lost through a fortuitous event. Effect if Creditor delays in making the choice: he cannot hold the debtor in default for the debtor does not know what to deliver.Obligations and Contracts: Sources 2006 Lectures of Atty. or that which remains if only one subsists. ) 4. all the things which are alternatively the object of the obligation have been lost. some or all of the prestations should become impossible. The same rules shall be applied to obligations to do or not to do in case one. only one is practicable. the creditor may claim any of those subsisting. Ferlyn Ong for 4th year Batch 2009 1.
(NULLITY OF PRINCIPAL CARRIES WITH IT THE NULLITY OF SUBSTITUTE.Obligations and Contracts: Sources 2006 Lectures of Atty. Ferlyn Ong for 4th year Batch 2009 if debtor wants to relieve himself from the obligation. only one thing is principally due but may be substituted. if principal obligation is void. or when the law or the nature of the obligation requires solidarity. Book of Tolentino. 4. EXCEPTIONS: when there is a stipulation in the contract that the obligation is solidary. negligence or fraud. when the nature of the obligation requires liability to be solidary. If it is impossible to give the principal. There is a solidary liability only when the obligation expressly so states. (n) FACULTATIVE OBLIGATION – it is one where only one prestation has been agreed upon but the obligor may render another in substitution. a) b) c) There may be plurality of creditors Plurality of both debtors and creditors. c. Lydia Galas (Hann Sevilla). The loss or deterioration of the thing intended as a substitute. the obligor is liable for the loss of the substitute on account of his delay. he may petition the court to compel Creditor to accept in the alternative. (1137a) JOINT Each of the debtors is liable only for a proportionate part of the debt and each creditor is entitled to a proportionate part of the credit. When only one prestation has been agreed upon. but giving of one is enough. The right to choose is given only to the debtor. if vice versa. the right to choose may be given either to debtor/creditor FACULTATIVE 1. bailees in commodatum. Art. 3. But once the substitution has been made. When there are 2 or more debtors or creditors. • 1. the substitute does not have to be given. the obligation is called facultative.) 3. quasi-contracts. various things are due. 4. INSTANCES WHERE LAW IMPOSES SOLIDARY LIABILITY obligation arising from torts. 2. • GENERAL RULE: SOLIDARY Each debtor – entire obligation. the principal must be given. each creditor is entitled to demand the whole obligation. liability of principals. when the law declares so • a. the one left must still be given. 2. at the petitioner’s option with damages. 2. through the negligence of the obligor. SECTION 4. if one prestation is illegal. others may be valid and the obligation remains. 3. Christ May Andolana.Joint and Solidary Obligations Art. giving of the substitute is no longer necessary. RAM Notes Compiled by: Hanniyah Sevilla. e. DISTINCTIONS ALTERNATIVE 1. legal provisions re: the obligation of legatees and devisees. 2007 Case Digests (from Erwin Vicente). the obligation is JOINT. 1206. if it is impossible to give all except one. 1207. Plurality of debtors. b. . entire compliance with the prestation. but the obligor may render another in substitution. or that each one of the latter is bound to render. does not render him liable. EFFECTS OF JOINT LIABILITY 21 . The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand. accomplices and accessories of a felony. d.
Each one of the solidary creditors may do whatever may be useful to the others. If one of the latter should be insolvent. others are not liable for his share. the others shall not be liable for his share. 1215. Christ May Andolana. EFFECT Modification of an obligation by changing its object or principal conditions. subrogation 22 . (1139) Indivisible joint obligation – requires the consent of all debtors CHARACTERISTICS Obligation is joint but since it is indivisible. Lydia Galas (Hann Sevilla). e. If the division is impossible. The debtor may pay any one of the solidary creditors. 3. but if any demand. shall extinguish the obligation. delivery must be made to all unless authorized by others. b. 5. Art. by substituting the person of debtor. subject to the Rules of Court governing the multiplicity of suits. The creditor who may have executed any of these acts. d. 1213. Novation. (n) Solidarity ---the tie between parties Indivisibility --. 2007 Case Digests (from Erwin Vicente). creditor must proceed against all the joint debtors. the right of the creditors may be prejudiced only by their collective acts. 1210. the defense of res judicata is not extended from one debtor to another. as well as he who collects the debt. 1211. In case of insolvency of one debtor. In joint divisible obligation. without prejudice to the provisions of article 1219. Demand by one creditor upon one debtor produces effects of default only with respect to both parties but not with respect to the others. c. 1212. (n) Art. (1143) NOVATION. The indivisibility of an obligation does not necessarily give rise to solidarity. Vices of each obligation arising from personal defect of a particular debtor or creditor does not affect the obligation or rights of the others. but not anything which may be prejudicial to the latter. Book of Tolentino. Interruption of prescription by judicial demand of one creditor upon one debtor does not benefit the other creditors. has been made by one of them. confusion or remission of the debt. Each joint creditor may renounce his share Art. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. the credits or debts being considered distinct from one another. and the debt can be enforced only by proceeding against all the debtors. 1209.Obligations and Contracts: Sources 2006 Lectures of Atty. the credit or debt shall be presumed to be divided into as many shares as there are creditors or debtors. judicial or extrajudicial. payment should be made to him. Insolvency of a debtor does not increase the responsibility of his co-debtors nor does it authorize a creditor to demand anything from his co-creditors. made by any of the solidary creditors or with any of the solidary debtors. (1140) Art. 1214. If from the law. 2.subject matter KINDS OF SOLIDARITY 1. (1138a) Art. shall be liable to the others for the share in the obligation corresponding to them. RAM Notes Compiled by: Hanniyah Sevilla. ACTIVE – on the part of creditors/obliges PASSIVE – debtors/obligors part MIXED – both CONVENTIONAL – agreed by parties LEGAL – imposed by law Art. If there are joint creditors. Ferlyn Ong for 4th year Batch 2009 a. or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear. 4. Demand must be to all joint debtors. (1142a) Art. Nor does solidarity of itself imply indivisibility. 1208. compensation. A solidary creditor cannot assign his rights without the consent of the others. (1141a) Art.
The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others. Christ May Andolana. Payment by a solidary debtor shall not entitle him to reimbursement from his codebtors if such payment is made after the obligation has prescribed or become illegal. (n) Art. SURETY can be reimbursed for everything he has paid. the obligation shall be extinguished. Lydia Galas (Hann Sevilla). If there was fault on the part of any one of them. (1145a) Art. are creditors and debtors of each other. Solidary debtor can be reimbursed with what he has paid less his own share. both can demand reimbursement Differences: 1. but the other is still indebted to the other for his share. in case the debt had been totally paid by anyone of them before the remission was effected.) Effect of not proceeding against ALL – there is no waiver against those not yet sued. obtained by one of the solidary debtors. 1217. 2007 Case Digests (from Erwin Vicente).” Art. in the course of negotiation. (1147a) 23 . If the payment is made before the debt is due. does not entitle him to reimbursement from his co-debtors. with the interest for the payment already made. as when a check issued by A. If two or more solidary debtors offer to pay. CONFUSION/ MERGER W/c takes place when the characters of creditor and debtor are merged in the same person. The remission of the whole obligation. The solidary obligation is extinguished. PASSIVE SOLIDARITY & SURETYSHIP (similarities) 1. (1146a) Art. that where the creditor tells the debtor to “forget about the whole thing. 1218. so long as the debt has not been fully collected. If through a fortuitous event. both the solidary debtor and the surety guarantee for another person. (n) Art. Book of Tolentino. When one of the solidary debtors cannot. all shall be responsible to the creditor. the provisions of the preceding paragraph shall apply. If the principal debtor receives extension w/out surety’s consent. Art. (1144a. others are still liable for the whole obligation minus the share of the debtor who has extension. RAM Notes Compiled by: Hanniyah Sevilla. 1219. because of his insolvency. for the price and the payment of damages and interest. 1216. Applies only to solidary obligation. 1221. Payment made by one of the solidary debtors extinguishes the obligation. the surety is released. in proportion to the debt of each. is eventually endorsed to him. no interest for the intervening period may be demanded. REMISSION (WAIVER) That act of liberality whereby a creditor condones the obligation of the debtor. 3. SURETY is indebted only for the share of the principal debtor.Obligations and Contracts: Sources 2006 Lectures of Atty. Ferlyn Ong for 4th year Batch 2009 COMPENSATION Is that w/c takes place when 2 persons in their own right. they may be proceeded against later. Solidary debtor indebted for own share only. not joint. reimburse his share to the debtor paying the obligation. SD receives an extension of period of payment. the creditor may choose which offer to accept. the thing is lost or the performance has become impossible after one of the solidary debtors has incurred in delay through the judicial or extrajudicial demand upon him by the creditor. 2. without prejudice to their action against the guilty or negligent debtor. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors. such share shall be borne by all his co-debtors. 1220. He who made the payment may claim from his co-debtors only the share which corresponds to each. 2. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors.
1225. When the obligation has for its object the execution of a certain number of days of work. Art. needs at least 2 debtors or creditors. it shall be divisible. (1150) EFFECT OF NON-COMPLIANCE – the obligation is converted into a monetary one for indemnity. in actions filed by the creditor. avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him. 3.Divisible and Indivisible Obligations Art. A solidary debtor may. (1148a) KINDS OF DEFENSES a. or pertain to his own share. 2. (1149) Divisible obligation – capable of partial performance. Ferlyn Ong for 4th year Batch 2009 PAYMENT Payment is one of the ways by which an obligation is extinguished and consists in the delivery of the thing or the rendition of the service which is the object of the obligation EFFECTS OF LOSS/ IMPOSSIBILITY 1. if w/out fault – no liability 2. Natural/absolute – nature of obligation Legal – by law INDIVISIBILITY Refers to nature of obligation. Those derived from the nature of the obligation Those personal to the debtor sued. . or analogous things which by their nature are susceptible of partial performance. SECTION 5. Qualitative – depends of quality 3. 2. INDIVISIBILITY vs. 2007 Case Digests (from Erwin Vicente). refers to the tie between parties. obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. Christ May Andolana. fault of one is fault of others CLASSES/KINDS OF INDIVISIBILITY 1. Conventional – agreed to by parties. Lydia Galas (Hann Sevilla). Art. SOLIDARITY SOLIDARITY 1. 3. The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists. Intellectual/ moral – one that exists merely in the mind and not in physical reality Art. 1222. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. 24 . With respect to those which personally belong to the others. Indivisible – not capable of partial fulfillment. May exist even if there is one debtor and one creditor. if w/ fault – liable + damages and interest 3. The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title. b. RAM Notes Compiled by: Hanniyah Sevilla. fortuitous event after default – there is liability because of default. 1223. Quantitative – depends of quantity 2. Book of Tolentino.Obligations and Contracts: Sources 2006 Lectures of Atty. the accomplishment of work by metrical units. For the purposes of the preceding articles. 1224. Fault of one – not fault of others KINDS OF DIVISION 1. he may avail himself thereof only as regards that part of the debt for which the latter are responsible.
. divisibility or indivisibility shall be determined by the character of the prestation in each particular case. In obligations not to do. When the purpose of the obligation is to pay a certain amount in installments. Expressly stipulated – to the effect that damages and interests may still be recovered despite the presence of Penal clause 2. Joint – when both the principal contract and penal clause can be enforced *** be noted on this points (read the book) Penal Clause constitutes an obligation although an accessory May become demandable in default of the unperformed principal obligation PURPOSE: to insure performance and also to substitute for damages and the payment of interest in case of non-compliance EXCEPTIONS: 1. 4. 3. (reason: no waiver of future action for fraud) Art. SECTION 6. However. Nevertheless. if there is no stipulation to the contrary. RAM Notes Compiled by: Hanniyah Sevilla.Obligations and Contracts: Sources 2006 Lectures of Atty. When debtor is guilty of fraud or dolo in the fulfillment of the obligaton. PENAL CLAUSE – a coercive means to obtain from debtor compliance. the penalty may be enforced. OBLIGATIONS THAT ARE DEEMED DIVISIBLE 1. d. When the object of the obligation is the accomplishment of work by metrical units. In obligations with a penal clause. KINDS OF PENAL CLAUSE legal. save in the case where this right has been expressly reserved for him. (n) 25 . (1152a) • • a. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. 3. 1228. it may be indivisible if such was the intention of the parties concerned. 2. the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance. It is an accessory undertaking to assume greater liability in case of breach. even though the object or service may be physically divisible. c. Book of Tolentino. 1226. Even if the thing is physically divisible. Ferlyn Ong for 4th year Batch 2009 However. Christ May Andolana. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. b. unless this right has been clearly granted him. if after the creditor has decided to require the fulfillment of the obligation. Even if the thing is physically divisible. Lydia Galas (Hann Sevilla). conventional/ voluntary Subsidiary – when only penalty may be asked. 2. The debtor cannot exempt himself from the performance of the obligation by paying the penalty. Obligations to give definite things. 1227. Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time. 4. 2007 Case Digests (from Erwin Vicente). When the object of the obligation is the execution of a certain number of days of work. (1151a) OBLIGATIONS THAT ARE DEEMED INDIVISIBLE 1. Those which are not susceptible of partial performance. 3. When debtor refuses to pay the penalty imposed in the obligation. it may be indivisible if so provided by law. an obligation is indivisible if so provided by law or intended by the parties.Obligations with a Penal Clause Art. (1153a) Art. When the object of the obligation is accomplishment of work susceptible of partial performance. the performance thereof should become impossible without his fault.
(5) By compensation. b. 26 . Fortuitous event intervened unless the debtor expressly agreed on his liability in case of fortuitous event. of an obligation. are governed elsewhere in this Code. (1155) CHAPTER 4 EXTINGUISHMENT OF OBLIGATIONS Art.death. VOLUNTARY 1. rescission. Obligations are extinguished: (1) By payment or performance: (2) By the loss of the thing due: (3) By the condonation or remission of the debt. in any other manner.Obligations and Contracts: Sources 2006 Lectures of Atty. Art. performance in any other manner of an obligation. change of civil status) c) by reason of object – impossibility of performance. 1231. Book of Tolentino. RAM Notes Compiled by: Hanniyah Sevilla. (1154a) WHEN PENAL CLAUSE CANNOT BE ENFORCED: a) b) c) The breach is the fault of creditor. (1156a) CLASSIFICATION OF CAUSES OF EXTINGUISMENT A.Payment or Performance Art. (n) PAYMENT – mode of extinguishing obligation consists of: c. d. loss of thing due SECTION 1. 1232 Payment means not only the delivery of money but also the performance. and prescription. 2007 Case Digests (from Erwin Vicente). When debtor is not yet in default.. 1230. 1229. (4) By the confusion or merger of the rights of creditor and debtor. Even if there has been no performance. Agreement to Obligation a. fulfillment of a resolutory condition. Substitution of Performance compensation novation dacion en pago 3. Other causes of extinguishment of obligations. such as annulment. Ferlyn Ong for 4th year Batch 2009 Art. delivery of money. Subsequent to Obligation unilateral waiver natural waiver remission mutual dissent compromise Simultaneous with Creation of Obligation resolutory term or extinctive period resolutory condition or condition subsequent INVOLUNTARY a) by failure to bring an action (prescription) b) resolutory/ condition subsequent (merger/confusion. Performance payment consignation 2. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. (6) By novation. Lydia Galas (Hann Sevilla). Christ May Andolana. The nullity of the penal clause does not carry with it that of the principal obligation. B. . in personal obligation. The nullity of the principal obligation carries with it that of the penal clause. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor.
4. RAM Notes Compiled by: Hanniyah Sevilla. by performance of said undertaking. 3. the very thing/ service contemplated must be paid. 5. the obligation is deemed fully complied with. Acceptance of the payment by the creditor. 2. 1234 and 1235. If he voluntarily accepts such payments then he is deemed to have waived the requirements in Art. Ferlyn Ong for 4th year Batch 2009 Payment is defined as not only the delivery of money but also the performance. as the case may be. that is. There must be no willful or intentional deviation from the contract or prestation by the debtor. Note: A debtor cannot compel the creditor to accept partial payment. 1233 that the performance of the obligation is not considered complete unless there is complete delivery or complete performance. by refraining from doing such. If monetary obligation. • 1. it must not be so material as to frustrate the accomplishment of the intended work. (Pineda). In 1234 there has been substantial performance by the obligor in good faith. he can accept partial payment. by delivery of such thing/s if debt is doing of a personal undertaking. 2. 3. Delivery of the full amount or the full performance of the prestation. Art. Requisites of a valid payment: Capacity of the person paying. less of course the damages suffered by the creditor. 3. Two kinds of payment: 1. It becomes abnormal (involuntary) when the creditor institutes an action to collect payment in order that the obligor shall comply with his obligation. and the omission or defect must not be material. knowing its incompleteness or irregularity. HOW PAYMENT/ PERFORMANCE IS MADE 1. Payment and performance is identical. (n) In this case. Note: 1. then the obligor can recover as though there had been strict and complete fulfillment. Payment is the satisfaction or fulfillment of a prestation that is due. 2.if debt is not doing of something. But. Lydia Galas (Hann Sevilla). and without expressing any protest or objection. While it may be true that there is no payment if there is no complete delivery or performance of the service. otherwise. 2. 1235. 2. If the obligation has been substantially performed in good faith. The omission or defect must be slight and unimportant. if there has been substantial performance IN GOOD FAITH by the obligor.Obligations and Contracts: Sources 2006 Lectures of Atty. 2007 Case Digests (from Erwin Vicente). there are two exceptions to the general rule. Propriety of time. And those are Art. Art. the obligor may recover as though there had been a strict and complete fulfillment. 27 . Christ May Andolana. fulfillment must be complete. place and manner of payment. by delivery of money – in full payment unless otherwise stipulated in contract. resulting in the extinguishment of the obligation of the debtor. (1157) Requisites of Valid Payment: 1. It is normal (or voluntary) when the obligor voluntarily pays the obligation. if debt is delivery of thing/s. When the obligee accepts the performance. less damages suffered by the obligee. in any other manner. Capacity of the person receiving the payment. 1234. Art. So. OBLIGEE is in ESTOPPEL – barred from further action for claims. Book of Tolentino. the performance will not amount to substantial compliance. of an obligation. 1233: A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered.
RAM Notes Compiled by: Hanniyah Sevilla. b. Paid/performed debt. There can be knowledge without the consent. But with the knowledge but without the consent. the payor is entitled to be reimbursed for the full amount. unless there is a stipulation to the contrary. 1236. if the debt had already prescribed or had already been compensated. (1158a) Art. 2007 Case Digests (from Erwin Vicente). The same applies if the debtor knows that the third person is making the payment but he did not object thereto. Remission. Under this situation. cannot compel the creditor to subrogate him in his rights. If said 3rd person has an interest in the fulfillment of the obligation. arising from mortgage. or he did not repudiate the same at anytime. Such right is not granted to him by law as stated in Art. So. then he has no right to demand that he be subrogated into the right of the creditors. the reimbursement shall be only up to the amount or extent by which the debtor was benefited. because the law does not require that knowledge and consent must come together. or penalty. Consent of course always means with the knowledge. When legal compensation had already taken place • If the 3rd person pays the obligation of the debtor with the knowledge and consent of the debtor. then the third person can demand full reimbursement. • If payment was made without the knowledge or without the consent of the debtor. 1237. 3. penalty SUBROGATION REIMBURSEMENT 28 . NB: Prescription. Lydia Galas (Hann Sevilla). guaranty. • Consequently. such as those arising from a mortgage. how much can the 3rd person demand reimbursement? Only to the extent that the debtor is benefited. and we call that beneficial reimbursement. SUBROGATION – act of putting somebody into the shoes of the Creditor. 2.Obligations and Contracts: Sources 2006 Lectures of Atty. enabling the former to exercise all the rights and actions that could be exercised by the creditor. Knowledge does not always mean there is consent because consent can be implied. 2. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter. 4. Ferlyn Ong for 4th year Batch 2009 How shall it happen? The creditor accepts the performance despite knowledge of the incompleteness or irregularity and without protest or objection accepts the performance. or with the consent. Rights w/c may be exercised by Person subrogated in the Place of Creditor: 1. Whoever pays for another may demand from the debtor what he has paid. except that if he paid without the knowledge or against the will of the debtor. EXCEPT: a. What if he has the knowledge but he does not say anything? Full reimbursement. Because if he does not want that the 3rd person will pay his obligation. Instance when RECOVERY can be had from Creditor and not from Debtor: 1. only so much as the payment redounded to the benefit of the debtor. he is deemed to have waived the irregularity because the law requires that he must know the incompleteness or irregularity of the performance and accept it without protest or objection. he can recover only insofar as the payment has been beneficial to the debtor. diba? This is just like the MU sa inyo. • Another effect if payment was with the knowledge and consent is that the 3 rd is subrogated into the rights of the former creditor. hence. then definitely he would express his refusal. (With knowledge but without consent of debtor falls under this situation) o From transcription: So. in effect he has the knowledge but the consent is tacit or implied. He becomes the new creditor. 1237. guaranty. Book of Tolentino. the payor is definitely not entitled to reimbursement from the debtor. if he does not consent even if he knew about it. Art. In effect. But if it is without the consent or against the will of the debtor or without the knowledge. 3. the payment would no longer be beneficial. (1159a) The creditor can refuse payment by a 3rd person. When stipulated. if he pays with the knowledge. Christ May Andolana.
with respect to reimbursement. who is married to Petra. 2007 Case Digests (from Erwin Vicente). Art. It terminates upon the death. 1238. In obligations to give. paid Jane. the payment is not valid. debt is extinguished in one sense but a new creditor appears with same rights. Juan remarried to Jane. without prejudice to the provisions of article 1427 under the Title on "Natural Obligations. creditor cannot be compelled to accept. or any person authorized to receive it. which requires the debtor's consent. there is something more than a personal action of recovery. (1163a) 29 . 2. But the payment is in any case valid as to the creditor who has accepted it. Such benefit to the creditor need not be proved in the following cases: (1) If after the payment. 3. Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor.The minors who entered into a contract. To person in whose favor the obligation has been constituted (creditor). 1247 -. to any person authorized to receive it (eg. Pedro. If the creditor accepts payment even if it is against the will of the debtor. recourse can be had to the mortgage or guaranty or pledge. 1241.(to be considered as a valid donation) But the payment is still valid since the consent of the debtor is immaterial as the extinguishment of the obligation is concerned. Christ May Andolana. payment is not valid – if accepted. It belongs to the first marriage. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation. Now. Lydia Galas (Hann Sevilla). if JR is of age. Payment to a person who is incapacitated to administer his property shall be valid if he has kept the thing delivered. kanino pala nya ibayad? To the administrator of the property. They had a child. But definitely not to the 2nd wife.Obligations and Contracts: Sources 2006 Lectures of Atty. Ferlyn Ong for 4th year Batch 2009 1." (1160a) PAYMENT BY AN INCAPACITATED PERSON GENERAL RULE: If payment is made by a person incapacitated to give: 1. or his successor in interest. Juan died. agent) Q: Pedro borrowed money (900. 3.000) from Juan. no recourse new creditor has different rights Personal action Art. without the consent of the parents or the guardian. remedy of consignation is not proper. successor in interest. Payment shall be made to the person in whose favor the obligation has been constituted. only that we will apply 1236. but voluntarily pays a sum of money or delivers a fungible thing for the fulfillment of the obligation. EXCEPT: Art. because the 2nd wife is not part of the agreement. Guardian of insane. the debtor has been led to believe that the third person had authority to receive the payment. the minor cannot recover the same from the creditor who accepted it or consumed it in good faith. diba? So. (3) If by the creditor's conduct. payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid. 1239. 2. (Discussion of Culaba case) Art. But take note that if the payment made by the third person who does not intend to be reimbursed exceeds P5. Petra died. JR (17 years old). 1240. (2) If the creditor ratifies the payment to the third person. or insofar as the payment has been beneficial to him. then the payment to JR is valid. 3. the third person acquires the creditor's rights. Art. Book of Tolentino. Is the payment valid? Answer: The payment is not valid despite the authority of Juan.000 the requirement of the law is that the payment must be in writing. the payment is still valid. So. (1162a) TO WHOM PAYMENT MUSTBE MADE 1. This belongs to the estate of the former marriage. when the obligation became due and demandable. What about the authority? Authority terminates upon the death of the person executing that authority. 2. RAM Notes Compiled by: Hanniyah Sevilla.
and later on you saw the third person wearing the same ring. the creditor had no authority to accept payment. Why? Because he did not inform the debtor. or garnishment GARNISHMENT. the third person becomes the new creditor. Torquator vs. and the debtor paid the original creditor. 2. So. he ratified it. under 1242 payment is made to a third person in possession of the credit. the creditor ratifies the payment to the third person. that is the difference between possession of the credit and the evidence of the credit. injunction. The presumption is that the payment was without his authority. RAM Notes Compiled by: Hanniyah Sevilla. but in as much as he did not inform the debtor. the person must present evidence that he is Pedro. Sahijwani. or by the latter’s representative during the time of the incapacity of the creditor. (1164) Requisites: 1. the debtor may be compelled by the creditor to pay anew when he regains capacity. the payment is still valid. FEB vs. Payment made in good faith to any person in possession of the credit shall release the debtor. Cases: Culaba vs. ano yan? Authorization. Sering vs. 1242. Book of Tolentino. although the latter may be of the same value as. moral or intellectual advantages which must be proved. or more valuable than that which is due. you have the burden of proving that payment made to the third person redounded to the benefit of the creditor. the third person acquires the creditor's rights – Ex: you have an obligation to deliver a diamond ring. but when you made the payment. INTERPLEADER – action in w/c a certain person in possession of certain property wants claimants to litigate among themselves for the same. and it was received by a third person. INJUNCTION – a judicial process by virtue of w/c a person is generally ordered to refrain from doing something. Diaz Realty. But benefit need not be proved in the following instances: 1. When a creditor assigns credit to a third person. Meat Packing vs. 1243. When the creditor assigns his credit to a third person. Art. the presumption is that he had acquired ownership over the property you had delivered. 1244.takes place when the debtor of a debtor is ordered not to pay the latter so that preference would be given to the latter’s creditor. (Pineda) Benefit may be in the form of financial. Ratification comes after. PnB vs. 2. 3. Lydia Galas (Hann Sevilla). Another instance is. • Other instances where payment to a third person releases the debtor: 1. The debtor of a thing cannot compel the creditor to receive a different one. What is the difference between a person in possession of the credit? An example of a document which is the credit itself is a check payable to the order of the bearer. without the consent of the debtor. Ferlyn Ong for 4th year Batch 2009 • • If payment was made to the incapacitated creditor who cannot administer his property. Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid. From Transcription: Payment to a third person shall also be valid if it has redounded to the benefit of the creditor. CA. Christ May Andolana. But if what is presented is the evidence of the credit. payee must be in possession of the credit itself. or if he has not kept the thing delivered. an example a promissory note payable to the order of Pedro. So. So it follows that at the time of payment. because if it is prior. payment must be in good faith. and the debtor paid the old creditor. Sandiganbayan. Pabugais vs. Bernabe. You lead the debtor to believe that the third person is authorized to receive payment. or in cash. CA. Art. only that he ratified it. CA. not the evidence of the credit. 2.Obligations and Contracts: Sources 2006 Lectures of Atty. (1165) judicial order prompted by an order of attachment. Art. Seguvia Dev't case. 30 . In possession of the credit. 2007 Case Digests (from Erwin Vicente). if after the payment.
(n) Concept: Property is alienated to the creditor in satisfaction of a debt in money. I. 31 . and it is not sufficient to cover the monetary obligation. if it will only be based on the value of the thing that is delivered. the contract is VOID. Art. If it extinguishes the entire obligation then there is full extinguishment. it is no longer governed by the law on obligations and contracts but the law on sales. shall be governed by the law of sales. C. 1245. giving of price may generally end the obligation of buyer. and money is exchanged for the delivery. gives rise to obligations. DATION IN PAYMENT /DATION EN PAGO/ ADJUDICACION EN PAGO Art. When the Kind and quantity cannot be determined w/out need of a new agreement. If the creditor accepts. what he did instead is to offer that instead of the money. the presumption is there is merely a pledge. 5. 4. Extinguishes the obligation. When the obligation consists in the delivery of an indeterminate or generic thing. 4. At the time of the constitution of the obligation what is due is money. (1166a) EXCEPTIONS: a) b) c) In case of FACULTATIVE OBLIGATION In case there is another agreement resulting in: Dation in payment Novation In case of waiver by creditor SPECIAL FORMS OF PAYMENT A. Neither can the debtor deliver a thing of inferior quality. Less freedom May extinguish completely or partially the credit. Ferlyn Ong for 4th year Batch 2009 In obligations to do or not to do. B. Extinguishment of his debt & acquisition of object offered in credit (part of creditor). 2. cause/consideration is the price or obtaining the object. he will deliver another thing in lieu of the money. If dation in payment will not prejudice the other creditors. CONDITIONS under w/c a Dation in Payment is valid a) b) c) If creditor consents. the debtor could no longer deliver the money. whose quality and circumstances have not been stated. 2007 Case Digests (from Erwin Vicente). 1. SALE 1. RAM Notes Compiled by: Hanniyah Sevilla. Dation in payment. then the obligation is extinguished. whereby property is alienated to the creditor in satisfaction of a debt in money. no pre-existing credit. then there is partial fulfillment. but at the time of fulfillment. DATION IN PAYMENT There is pre-existing credit. Lydia Galas (Hann Sevilla). Book of Tolentino. depending on the agreement of the parties. an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. (1167a) Except: if there is WAIVER. what presumption arises? Is dation in payment presumed? A: When there is delivery and you cannot presume what the agreement of the parties is. Take note that as soon as the agreement has been perfected. 1246. Christ May Andolana. So. Dation in payment Application of payments Assignment in favor of Creditors (cession) Tender of payment and consignation. 2. 3. 5. the creditor cannot demand a thing of superior quality. If debtor is not judicially declared insolvent. Q: Suppose there was an agreement between the parties but the debtor delivered a car and the creditor accepts. But. The purpose of the obligation and other circumstances shall be taken into consideration. greater freedom in determining price.Obligations and Contracts: Sources 2006 Lectures of Atty. D. 3.
2. and if it is not possible to deliver such currency. unless there is an agreement to the contrary. quasi-contract. (n) • Applies only to cases where a contract or agreement is involved. or when through the fault of the creditor they have been impaired. then in the currency which is legal tender in the Philippines. MWSA. when one debt is bigger than the other. 3. However. This will not apply to quasi-delict. 1249. the extrajudicial expenses required by the payment shall be for the account of the debtor.Obligations and Contracts: Sources 2006 Lectures of Atty. (1170) LEGAL TENDER – is that w/c a debtor may compel a creditor to accept in payment of the debt. the Rules of Court shall govern. (1169a) • • GEN. to obligations arising from law. in case of compensation. when it is stipulated otherwise. when a joint debtor pays his share or the creditor demands the same. the additional expenses shall be borne by him. (1171a) 32 . These provisions are without prejudice to venue under the Rules of Court. when different prestations are subject to different conditions or terms. (1168a) Art. payment of monetary obligations. If the debtor changes his domicile in bad faith or after he has incurred in delay. Neither may the debtor be required to make partial payments. 2007 Case Digests (from Erwin Vicente). to indebtedness. The payment of debts in money shall be made in the currency stipulated. the payment shall be made wherever the thing might be at the moment the obligation was constituted. when debt is part liquidated and part unliquidated. Lydia Galas (Hann Sevilla). In case an extraordinary inflation or deflation of the currency stipulated should supervene. Payment shall be made in the place designated in the obligation. Gueco Art. the value of the currency at the time of the establishment of the obligation shall be the basis of payment. Purely contractual obligations. Christ May Andolana. Unless it is otherwise stipulated. In the meantime. 1248. 1247. With regard to judicial costs. Art. Case of Filipino Bank vs. Unless there is an express stipulation to that effect. the creditor may demand and the debtor may effect the payment of the former without waiting for the liquidation of the latter. In any other case the place of payment shall be the domicile of the debtor. 1250. Book of Tolentino. This does not apply where obligation to pay arises from law. 5. when the debt is in part liquidated and in part unliquidated. 7. There being no express stipulation and if the undertaking is to deliver a determinate thing. The delivery of promissory notes payable to order. when a solidary debtor pays only the part demandable. when work is to be done by parts. 6. RULE: Payment shall be complete EXCEPT: 1. the action derived from the original obligation shall be held in the abeyance. case of International Corporate Bank vs. the creditor cannot be compelled partially to receive the prestations in which the obligation consists. Ferlyn Ong for 4th year Batch 2009 Art. 1251. 4. (This applies only to contractual obligations. independent of contracts. or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed. RAM Notes Compiled by: Hanniyah Sevilla. Art.
Debtor designates 33 . then he should bear the loss? Merisi. Christ May Andolana. unless the debtor changes his domicile in bad faith. 1252. b. but subject to certain conditions: First. 5. If it was the creditor was the one who said that it should be sent to him through the courier. All debts must be due unless contrary is provided – eg. If there is a stipulation – in designated place. at the place where the thing might be at the time the obligation was constituted. may declare at the time of making the payment. that he cannot apply it to a debt which will not cover the entire obligation because under the law. then he bears the loss. if its determinate. (1172a) • being paid. if there is no stipulation i. What will the creditor do? Wala na syang pagasa? The creditor would run after the courier. RAM Notes Compiled by: Hanniyah Sevilla. RULE WHEN DEBTS ARE NOT YET DUE – there may be application of payments when: the parties so stipulate. who shall bear the loss? It depends. Unless the parties so stipulate. Payment is not enough to extinguish all the debts. Lydia Galas (Hann Sevilla). • 1. when application of payment is made by the party for whose benefit the term has been constituted. Debts must be of the same kind. ii. He who has various debts of the same kind in favor of one and the same creditor. Fourth. Ferlyn Ong for 4th year Batch 2009 WHERE PAYMENT MUST BE MADE 1. 2. Third. Transcription: Now what about if payment is made through couriers. at the domicile of the Debtor. the former cannot complain of the same. Debts are owed by the same debtor in favor of the same creditor. he cannot choose to apply it first to the principal. he cannot choose a debt or an obligation which is not of the same kind of the other debt. application shall not be made as to debts which are not yet due. REQUISITES FOR APPLICATION OF PAYMENT There must be 2 or more debts (severalty of debts). • a. Why is he merisi? What will be your defense? In the absence of any stipulation. and the courier ran away with the money. out of 2 or more debts owing the same creditor. So those are the limitations.Obligations and Contracts: Sources 2006 Lectures of Atty. Stipulated by parties. 2. 2007 Case Digests (from Erwin Vicente). 3. the creditor cannot be compelled to accept partial payment. to which of them the same must be applied. If its generic/personal. Note: When shall the debtor make the choice? At the time payment shall be made. or when the application of payment is made by the party for whose benefit the term has been constituted. he cannot choose a debt that is not yet due and demandable. But if it was through the initiative of the debtor. Second. Book of Tolentino. HOW APPLICATION IS MADE A. If the debtor accepts from the creditor a receipt in which an application of the payment is made. is Note: The right to choose w/c debt to serve first is vested to the DEBTOR except: If there was a valid prior but contrary agreement. The law says interest should be paid first before the principal. payment shall be made in the domicile of the debtor. • Note: the creditor shall bear the expenses. Debtor cannot choose to pay part of the principal ahead of the interest unless the creditor consents. II. like the LBC? Suppose the debtor sent the money through the LBC. unless there is a cause for invalidating the contract. APPLICATION OF PAYMENT Art. 4. APPLICATION OF PAYMENT – shows w/c debt.
unless there is cause for voiding the contract ( ex. by operation of law. If the debts due are of the same nature and burden. 10.000 with interest and penalty due on Dec. 20.000 due on June 25. 7. Creditor does it w/o debtor’s consent) C. 5. debts w/ penal clause. (1173) Interest must be paid first except if creditor consents to payment of the principal first WHAT INTEREST IS SUPPOSED TO BE PAID? a. Book of Tolentino. 50. the obligation is extinguished. the payment shall be applied to all of them proportionately. that w/c charges the higher interest. (without interest) is the least onerous because it can run up to how many years and the amount would be the same. To where shall the 50. Creditor cannot be forced to accept partial payment. RAM Notes Compiled by: Hanniyah Sevilla.000 due on Dec.000 because of the penalty. Likewise. What are the rules to remember? 1. a debt where debtor is in mora (default) 8. and the debtor has to make the choice under the given situation: 3. b. it is not yet due and demandable. RULE: Once application of payment is made. Ferlyn Ong for 4th year Batch 2009 B. however. Number 4 cannot be the subject of application of payment because it is not of the same kind. EXCEPT: If both parties agree • Even if both parties agree. 34 . Christ May Andolana. If the debt produces interest. advances for subsistence than cash advances. 1. 5.000. debts secured by mortgage/pledge. 1253 and 1254) REVOCATION GEN.000 without interest. So. 4. 2. 2. 4. Older accounts in case of running accounts 2. (1174a) Burdensome Debts 1. If 2 interest-bearing debts. When the payment cannot be applied in accordance with the preceding rules. 2004. a 4 carat pink diamond ring 50.Obligations and Contracts: Sources 2006 Lectures of Atty. it cannot be revoked. Except: if creditor agrees. 2007 Case Digests (from Erwin Vicente). suppose. In case of partner-creditor Surety or a solidary guarantor – one debt only not several. 1253.000 be applied? To the most onerous of the debts already due and demandable. and once the mortgage is foreclosed. Art. 6. among those due. if it will prejudice 3rd persons—cannot revoke WHEN APPLICATION CANNOT BE AVAILED OF? 1. From transcription: Now. 3. From transcription. The debt with a mortgage is less onerous because there is only that tendency to lose the mortgage. If not. the debt which is most onerous to the debtor. 25. Interest-bearing debts. exclusive debt than solidary Note: The “more burdensome rule” does not apply if debtor has used “application of payment”. The most onerous of the 3 debts due is the 20. shall be deemed to have been satisfied. secured by a mortgage. payment of the principal shall not be deemed to have been made until the interests have been covered. 2006. interest by way of damages by way of default.000 is the most onerous of the debts. (Applying Arts. interest by way of compensation. 20. or if application cannot be inferred from other circumstances. creditor makes it – known or made at the time of the issuance of the receipt. Payment cannot be applied to the principal first if there is interest due. the debtor has 50. Art. 24. 1254. A simple debt. • If both do not avail of it. Lydia Galas (Hann Sevilla). 2004 with an interest of 6% plus a penalty of 2% on the interest in case of delay. the application of payment will only be centered on the 3. 6.
only possession and administration are transferred to the creditors with the authorization to convert the property into cash with which the debts shall be paid. generally.Obligations and Contracts: Sources 2006 Lectures of Atty. (there are various creditors) Requires full/partial insolvency. Art. (1175a) • 2 Kinds of Assignment a. Ferlyn Ong for 4th year Batch 2009 3. then the debtor cannot vary the agreement. etc) without the need of the debtor’s consent. does not require plurality of creditors. 5. REQUISITES FOR VOLUNTARY ASSIGNMENT More than 1 debt More than 1 creditor Complete or partial insolvency of debtor Abandonment of all debtor’s property not exempt from execution to the creditors Acceptance or consent on creditor’s part • EFFECTS OF VOL. 2. 1. When the parties have an agreement as to which debt shall be paid first. (there is presumption of insolvency) Does not transfer ownership. only the specific creditor’s consent is needed. Legal – majority of creditors must agree b. merely assignees with authority to sell. 3. It becomes monetary in character. in the order established by law. DACION EN PAGO CESSION In general. 6. Requires more than 1 creditor. Exception: if the period is for the benefit of the debtor. Lydia Galas (Hann Sevilla). transfers the credit and its accessory rights to another who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor. is for the creditors to sell these properties. dation. All obligations must be due and of the same kind. The debtor cannot also pay the debt not yet due. Creditors will collect credits in the order of preference agreed upon or in default. The purpose of the transfer or the assignment or the cession. ASSIGNMENT a) b) c) Creditors do not become owners. shall only release the debtor from responsibility for the net proceeds of the thing assigned. PAYMENT BY CESSION OR ASSIGNMENT • It is the process of transfer of debtor’s property to creditors not subject to execution so that the latter may sell them and thus apply the proceeds to their credits. are made between the debtor and his creditors shall be governed by special laws. he can choose a debt not yet due. 2007 Case Digests (from Erwin Vicente). affects all properties. 3. The debtor may cede or assign his property to his creditors in payment of his debts. The agreements which. May totally extinguish the obligation and release the debtor 35 . 5. there is an act of novation 7. unless otherwise agreed upon. does not affect all properties. transfers ownership upon delivery. Christ May Andolana. This cession. and to apply the proceeds in proportion to their respective credit. 2. All creditors’ consent. by legal causes (such has sale. 1255. 4. may take place during solvency. III. An assignment of credit is an agreement by virtue of which the owner of a credit. Exception: unless the obligation is converted into the payment of damages. unless there is stipulation to the contrary. (transfer is only in favor of one creditor to satisfy a debt) 4. (no presumption of insolvency) 5. Book of Tolentino. Not an act of novation Only extinguishes the credits to the extent of the amount realized from the properties assigned. on the effect of the cession. 4. Debtor is released up to the amount of the net proceeds unless stipulated. RAM Notes Compiled by: Hanniyah Sevilla. Voluntary – all creditors must agree • 1.
The obligation must be due. (1177) REQUISITES OF CONSIGNATION a) b) c) d) e) f) g) Existence of a valid debt. Subsequent notice of consignation Hearing. (1176a) • a) b) c) d) REQUISITES OF A VALID TENDER OF PAYMENT Must be in legal tender (lawful currency) – not a check but if there is consent – valid. • Requisites wherein the creditor is deemed to have unjustly refused the tender of payment 1. (4) When two or more persons claim the same right to collect. that the legal tender currency was offered. That the tender of payment was unconditional. Lydia Galas (Hann Sevilla). Christ May Andolana. . or in case of money obligations.Tender of Payment and Consignation IV. Ferlyn Ong for 4th year Batch 2009 SUBSECTION 3. as in the case of exercising the right to repurchase (Meat Packing case). CONSIGNATION – the act of depositing the thing due with court or judicial authorities whenever the creditor cannot accept or refuse to accept payment. Note: Tender and consignation is only true if there is a debt due. 4. The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment. (5) When the title of the obligation has been lost. Like the case of DBP. he refuses to give a receipt. that act of the respondent in buying the property was an exercise of the right to repurchase. (3) When. Book of Tolentino. (2) When he is incapacitated to receive the payment at the time it is due. without just cause. Judgment 36 . without just cause. 3. Art. or does not appear at the place of payment. that the creditor refused to accept payment without just cause. he cannot later on prescribe the terms for the validity of the acceptance w/c he had already made – complete payment. unless tender is excused. Actual consignation (deposit). That there was previous tender of payment 2. Valid prior tender of payment. But mere tender alone does not extinguish the obligation. 1257. In order that the consignation of the thing due may release the obligor. Because if it were in an exercise of a right. Consignation alone shall produce the same effect in the following cases: (1) When the creditor is absent or unknown. Prior notice of consignation (before deposit). 1256. and. RAM Notes Compiled by: Hanniyah Sevilla. 2007 Case Digests (from Erwin Vicente). It must include whatever interest is due. That the tender of payment was of the very thing due. it must first be announced to the persons interested in the fulfillment of the obligation. It must be unconditional. Art. but if made with conditions and no protest on creditor’s part. then mere tender is sufficient. From transcription: tender of payment is the manifestation made by the debtor to the creditor of his desire to comply with his obligation with the offer of immediate performance. It must be followed by consignation. if the creditor refuses what you have tendered. If the creditor to whom tender of payment has been made refuses without just cause to accept it. TENDER OF PAYMENT AND CONSIGNATION TENDER OF PAYMENT – the act of offering the creditor what is due him together with a demand that the creditor accept the same. the debtor shall be released from responsibility by the consignation of the thing or sum due.Obligations and Contracts: Sources 2006 Lectures of Atty.
DEPOSIT; EFFECTS OF a) b) c) d) The property is in “custodia legis”; Not exempt from attachment and execution; But if property be perishable by nature, the court may order the sale of the property; The debtor by consigning the thing practically makes himself the agent or receiver of the court, particularly if for some reason, the property cannot actually be placed in the hands of the court.
From transcription: • REQUISITES FOR VALID CONSIGNATION 1. There must be a debt due; there must be a debt owing. 2. That the consignation was made because of some legal cause provided in the present article. (the unjust refusal of the creditor) 3. Previous notice of the consignation has been given to the persons interested in the performance of the obligation. 4. That the amount or thing due was placed at the disposal of the court (actual consigning or depositing the thing due with the clerk of court); and 5. That after the consignation had been made, the persons interested were notified thereof.
Q: what if the debtor decides to withdraw what has been consigned, would that be allowed? A: Yes. The original obligation is revived. Q: Can he withdraw after the court finds that consignation is proper? A: Generally, no, unless or the exception is the creditor consents. Q: what are the consequences if the creditor consents to the withdrawal after the finding of the court that consignation is proper? One of the consequences is that the creditor loses the preference of credit; He loses the security attached to that obligation. EFFECT OF PROPER CONSIGNTATION: It retroacts to the time of consignation. Likewise, all interest shall be deemed to stop running from the time of consignation. Art. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases. The consignation having been made, the interested parties shall also be notified thereof. (1178) HOW IS CONSIGNATION MADE? 1. 2. The things due must be deposited with the proper judicial authorities; There must be proof that: Tender was previously made; Or that the creditor had previously notified the debtor that consignation will be made (in case tender is not required) Art. 1259. The expenses of consignation, when properly made, shall be charged against the creditor. (1178) Art. 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation. Before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force. (1180) VALID CONSIGNATION, EFFECTS OF: 1. 2. 3. Debtor may ask the judge to cancel the obligation; The running of interest is suspended; It should be observed that before the creditor accepts or before the judge declares that consignation has been properly made, the obligation remains.
IMPROPER CONSIGNATION; EFFECTS: 1. 2. If improperly made, obligation remains; At the time of consignation, the debt already due; requisites are absent – DEBTOR is in default.
Art. 1261. If, the consignation having been made, the creditor should authorize the debtor to withdraw the same, he shall lose every preference which he may have over the thing. The co-debtors, guarantors and sureties shall be released. (1181a) Effects of Withdrawal a) Obligation remains; b) Creditor loses any preference over the thing; c) Co-debtors, guarantors and sureties are released (unless they consented) LOSS OF THE THING DUE WHEN IS A THING CONSIDERED LOST a) b) c) When it perishes; When it goes out of commerce; When it disappears in such a way that: Its existence is unknown; or It cannot be recovered.
Note: The term loss does not refer strictly to actual or physical loss but contemplates also impossibility of performance. WHAT IMPOSSIBILITY OF PERFORMANCE INCLUDES a) b) Physical impossibility; Legal impossibility; Directly – prohibited by law; Indirectly – e.g when debtor is required to enter a military draft. Moral impossibility
Art. 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay. When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk. (1182a) 2 Kinds of Obligation “to give” 1. to give a generic thing; 2. to give a specific thing Effect of Loss GEN. RULE: Obligation is extinguished EXCEPTIONS 1. If debtor is at fault; 2. When debtor is made liable for fortuitous event because of: Provision of law; Contractual stipulation; Nature of obligation requires the assumption of risk (debtor) INSTANCES when Law requires Liability even in case of Fortuitous Event: 1. 2. 3. 4. 5. Debtor is in default; When debtor has promised to deliver the same thing to 2 or more persons who do not have the same interest; Obligation arises from a crime; When borrower has lent the thing to another who is not a member of his own HH; When thing loaned has been delivered with appraisal of value unless stipulated exempting borrower from responsibility;
When payee in solutio indebiti is in bad faith.
Q: What about partial loss? Will that extinguish the obligation? It depends. Why? Generally, if the partial loss is due to a fortuitous event, the obligor has to deliver the object at its deteriorated state. But if the loss is such that led the parties to enter into the contract, then there is extinguishment of the obligation. For instance, you bought a lot at Royal Pines because of the view that it affords. And then a high rise hotel was constructed which obstructed the view. Is there total loss? No, but there is extinguishment of the obligation. Art. 1263. In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation. (n) GEN. RULE: Genus never perishes EXCEPTIONS 1. If the generic thing is delimited; 2. If generic thing has been segregated or set aside – it becomes specific now. e.g. MONEY Art. 1264. The courts shall determine whether, under the circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation. (n) Art. 1265. Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was due to his fault, unless there is proof to the contrary, and without prejudice to the provisions of article 1165. This presumption does not apply in case of earthquake, flood, storm, or other natural calamity. (1183a) Art. 1266. The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor. (1184a) Article 1266 refers to impossibility in obligations to do when the prestation has become legally or physically impossible without the fault of the obligor. The impossibility must arise after the constitution of the obligation. Because if it were prior or at the time of the inception, the nullity of the contract. Legal/physical impossibility must be after the constitution of obligation.
Effect of Loss Thru Fortuitous Event in Reciprocal Obligation GEN. RULE: The obligation that was not extinguished by the fortuitous event remains.
EXCEPTIONS: 1. In case of lease – if object is destroyed, both lease and rent are extinguished; 2. In contracts for a piece of work. Note from transcription: what are the forms of impossibility? 1. It might be physical, when by reason of its nature the act cannot be performed.
2. 3. 4.
Second, legal: a law is subsequently passed making the act illegal. Objective when the act or service itself, without considering the person of the obligor, becomes impossible. It is the act itself. The last is subjective which is the opposite of objective. The act or service cannot be done by the obligor, and the reason why you entered into the obligation is the person who would perform the act or the service.
Q: What happens if there is temporary impossibility? A: You merely wait for the impossibility but you still have to comply with the obligation. Exception is if the obligation is to be performed at a definite time, and that time is within the period of that impossibility, so the obligation is extinguished. Q: What happens if the debtor has complied with the obligation then here comes this temporary impossibility by reason of a circumstance or a situation. Is he entitled to the payment of his performance of what he has partially performed? A: Yes, of course, unless it is an indivisible obligation. If it turns out the impossibility has become permanent, and you have not yet paid, then you have to pay, unless there is extinguishment of the obligation (falling under 1234 and 1235), Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. (n)
Refers to moral impossibility or impracticability due to change of certain conditions; Refers to personal obligation (or obligations to do) and not real ( to give) Does not cover highly speculative contracts or agreements such as stocks and aleatory contracts such as insurance contracts Based on the doctrine of unforeseen events or rebus sic stantibus
1. Even or change of circumstances could not have been forseen at the time of the execution of the contract; 2. Performance is extremely difficult but not impossible; 3. The impossibility was not due to acts of any of the parties; 4. The prestation refers to a future one, not an immediate fulfillment; Art. 1268. When the debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not be exempted from the payment of its price, whatever may be the cause for the loss, unless the thing having been offered by him to the person who should receive it, the latter refused without justification to accept it. (1185) Effect of Loss in Criminal Offenses – DOES NOT EXTINGUISH OBLIGATION, EVEN IF FORTUITOUS EVENT INTERVENES e.g theft. So this is one of the exceptions to the rule that if a determinate thing is lost through fortuitous events, the obligation is extinguished. Exception is when Creditor is in Mora Accipiendi (default); otherwise stated, if the thing was offered to the person who should receive it and the latter refused without just cause. Art. 1269. The obligation having been extinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. (1186) CONDONATION/REMISSION OF A DEBT
It is the gratuitous abandonment by the creditor of his right against the debtor. Condonation/remission is essentially a donation of the credit to the debtor. It is a bilateral act (not reciprocal), which requires the acceptance by the donor. It is therefore, subject to the rules on donations with respect to acceptance, amount and revocation2. It may be made expressly or impliedly. Express condonation shall, furthermore, comply with the forms of donation. Art. 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly. One and the other kind shall be subject to the rules which govern inofficious donations. Express condonation shall, furthermore, comply with the forms of donation. (1187) • 1. 2. 3. 4. 5. 6. 7. 8. 9.
ESSENTIAL REQUISITES FOR REMISSION
There must be an agreement; Parties must be capacitated and must consent; There must be subject matter (object/prestation); The cause or consideration must be liberality – essentially gratuitous; Obligation remitted must be demandable at the time of remission; The remission must not be inofficious – not excessive; Formalities of a donation are required in case of an express remission; Waivers/remissions are not to be presumed generally – it must be expressed or implied; The debtor must accept the remission. • CLASSES OF REMISSION AS TO EFFECT/EXTENT 1. Total
Note: On acceptance: see Art. 745, on amount Arts 750-752, and on revocation, Arts. 760-765 of the New Civil Code (more thoroughly discussed in property) 40
if unconscionable or inequitous. the debt may be said to have been extinguished by Prescription. the obligation is revived. Can it erase penalty? No. Ferlyn Ong for 4th year Batch 2009 2. 4. 1275. Partial (upto the portion/ or may refer to accessory obligation) AS TO DATE OF EFFECTIVITY 1. 1277) If the reason for confusion ceases. this may be set aside for causes of nullity or rescission of contract. Whenever the private document in which the debt appears is found in the possession of the debtor. after its delivery to the creditor. the principal obligation remains in force. Can the court lower interest? Yes. (1192a) MERGER/CONFUSION – the meeting in one person of the qualities of creditor and debtor with respect to the same obligation. The obligation is extinguished from the time the characters of creditor and debtor are merged in the same person. Inter vivos (during lifetime) 2. whole obligation is remitted.Obligations and Contracts: Sources 2006 Lectures of Atty. Christ May Andolana. If in order to nullify this waiver it should be claimed to be inofficious. The renunciation of the principal debt shall extinguish the accessory obligations. PRESUMPTION IN JOINT/SOLIDARY OBLIGATION In Solidary. 1271. 2007 Case Digests (from Erwin Vicente). 3. 41 . Art. It should take place between principal debtor and creditor.mortgage is extinguished but principal obligation may remain. May the court waive interest? No. (1189) Presumption of remission prevails over presumption of payment. 1272. 1273. Mortis Causa (after death) AS TO FORM 1. Effect if mortgagee becomes owner --. The delivery of a private document evidencing a credit. RCBC case) Art. C. No confusion if Debtor and Creditor represent different juridical entities even if both are the same. made voluntarily by the creditor to the debtor. In joint. (Ligutan case. but the waiver of the latter shall leave the former in force. B. 2. Note from transcription: Now. It is presumed that the accessory obligation of pledge has been remitted when the thing pledged. The private document must refer to the original of the original (because it may be issued in duplicate copies) Not true in case of public documents because there is always a copy in the archives to prove the credit. Express/formal If debtor does not accept and creditor does not collect within the statute of limitations. it shall be presumed that the creditor delivered it voluntarily. The very obligation involved must be the same or identical The confusion must be total or as regards the entire obligation (exception Art. Merger must be clear and definite. May the court lower penalty? Yes. or of a third person who owns the thing. 1274. only the share of the Debtor to whom creditor has granted remission. RAM Notes Compiled by: Hanniyah Sevilla. (Example: when the merger takes place by a particular title. Lydia Galas (Hann Sevilla). implies the renunciation of the action which the former had against the latter. (1190) Art. CONFUSION OR MERGER OF RIGHTS Art. may the creditor waive interest but demand fulfillment of the principal? Yes. is found in the possession of the debtor. (1188) Art. the debtor and his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt. unless the contrary is proved. (1191a) Only the accessory is remitted. Implied (no formality) – conduct is enough 2. REQUISITES 1. Book of Tolentino.
RAM Notes Compiled by: Hanniyah Sevilla. Confusion which takes place in the person of any of the latter does not extinguish the obligation. Requisites: (1) each of the parties can dispose of the credit he seeks to compensate. c) d) DISTINCTIONS PAYMENT Payment must be complete and indivisible. effective upon order of the Court. or extinguished to the concurrent amount if of different values. Ferlyn Ong for 4th year Batch 2009 Art. However. It is a simplified or abbreviated payment because the 2 debts are extinguished without requiring the transfer of money or property from one party to the other. JUDICIAL (SET-OFF). COMPENSATION OR OFF SETTING It is a mode of extinguishing to the concurrent amount. Involves action/delivery Capacity to dispose of the thing paid and capacity to receive payment are required COMPENSATION 2 persons who are mutually creditor and debtor to each other. PARTIAL . (1193) The extinguishment of the principal obligation through confusion releases the guarantors because the obligation of the latter is merely accessory.when a balance remains. the obligations of those persons who in their own right are reciprocally debtors and creditors of each other. Christ May Andolana. Book of Tolentino.Obligations and Contracts: Sources 2006 Lectures of Atty. 1277. Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. (2) the parties agree to mutual extinguishment of their credits.must be pleaded. one obligation - COMPENSATION Takes place by operation of law and extinguishes reciprocally the 2 debts as soon as they exist simultaneously to the amount of respective sums - COUNTERCLAIM OR SET-OFF Must be pleaded to be effectual 42 . 2 obligation COMPENSATION Partial extinguishment is always allowed. Lydia Galas (Hann Sevilla). (Two debts arising from final and executory judgment) FACULTATIVE – one party has the choice of claiming the compensation. the obligation is not extinguished. True or legal compensation takes place by operation of law.agreed to by parties. Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. No such capacity is necessary As to # of Persons As to # of Obligation - - MERGER one person in whom is merged the qualities of C and D. It is the offsetting of 2 obligations which are reciprocally extinguished if they are of equal value. Art. AS TO ITS ORIGIN/CAUSE a) b) LEGAL – takes place by operation of law. This is compensation which can be set up only at the option of a creditor when legal compensation cannot take place because of want of some legal requisites for the benefit of the creditor. 1276. when the merger takes place in the person of a guarantor. 2007 Case Digests (from Erwin Vicente). VOLUNTARY/CONVENTIONAL. Kinds/Classes of Compensation IAS TO ITS EXTENT a) b) II- TOTAL – obligation are completely extinguished because they are of the same amount.
(2) That both debts consist in a sum of money. 1281. and that he be at the same time a principal creditor of the other. or if the things due are consumable. PROHIBITED COMPENSATION a) b) c) 1. in their own right. 3. If one of the parties to a suit over an obligation has a claim for damages against the other. are creditors and debtors of each other. it is necessary: (although the parties may not be aware of it – CF Art. 4. The parties may agree upon the compensation of debts which are not yet due. 1283. (n) True for all different kinds of compensation whether voluntary. 5. But if one is reciprocal and the other is suspensive. Art. pwede. 2. the former may set it off by proving his right to said damages and the amount thereof. (3) (4) That the two debts be due. legal. (1197) Why is a guarantor allowed to set up compensation? Because it will be beneficial to him. Art. there can be no compensation. That they be liquidated and demandable. provided that requirements of ROC are observed. If the conditions are resolutory. RAM Notes Compiled by: Hanniyah Sevilla. Debts consisting in civil liability arising from a penal offense. 1278. 1282. Debts arising from a claim for future support due by gratuitous title. Book of Tolentino. the guarantor may set up compensation as regards what the creditor may owe the principal debtor. (1195) Art. Notwithstanding the provisions of the preceding article. 6. Q: May there be compensation of obligations subject to conditions? A: It depends. Ferlyn Ong for 4th year Batch 2009 - Works as a sort of judicial compensation. Art. Debts arising from the obligations of a bailee in commodatum. Debts arising from a depositum except bank deposits. (1196) NEGATIVE REQUISITES OF LEGAL COMPENSATION That over neither of the debts must there be any retention or controversy commenced by 3 rd persons and communicated in due time to the debtor. Art. Note: There can be no compensation when the object of the obligation is specific or determinate because there is only one determinate or specific thing. Christ May Andolana. they be of the same kind. Compensation shall take place when two persons. In order that compensation may be proper. When the two debts are of the same amount. (n) Applies to conventional or voluntary compensation. Compensation may be total or partial. Damages suffered by a partnership through the fault of a partner cannot be compensated with profits and benefits w/c he may have earned for the partnership by his industry. commenced by third persons and communicated in due time to the debtor. (n) 43 . there is a total compensation. etc. Debts arising from the obligations of a depositary. you cannot duplicate that. Lydia Galas (Hann Sevilla). 1290) (1) That each one of the obligors be bound principally. (5) That over neither of them there be any retention or controversy. The compensation of debts must not have been prohibited by law.Obligations and Contracts: Sources 2006 Lectures of Atty. 1279. 1280. There must have been no waiver of the compensation. and also of the same quality if the latter has been stated. 2007 Case Digests (from Erwin Vicente). Art. he will be released from the debt.
000 eonverted into damages by reason of non performance. A cow worth 15. 4. wala. 25. Lydia Galas (Hann Sevilla). The debtor who has consented to the assignment of rights made by a creditor in favor of a third person. 4. Assignment made w/out knowledge of debtor -.000 due on Aug. If the creditor communicated the cession to him but the debtor did not consent thereto. 05. 15. 2.Obligations and Contracts: Sources 2006 Lectures of Atty. If with consent. but not after the assignment. 1284.04. 2007 Case Digests (from Erwin Vicente). From transcription: Situation: A owes B : 1. 50. 25. If with knowledge.000 due on Aug. different parties in w/c cases each separate claim furnishes the jurisdictional test. If the assignment is made without the knowledge of the debtor. Where the claim joined under the same complainant are separately owed by. 1. Q: What are the rights of A? What debts can he claim compensation? What debts can be the subject of compensation? A: It depends: 1. (#2.000 due on April 1. Ferlyn Ong for 4th year Batch 2009 JURISDICTION OF COURT RE: VALUE OF DEMAND GEN. cannot set up against the assignee the compensation which would pertain to him against the assignor. RAM Notes Compiled by: Hanniyah Sevilla. #3. it serves as a waiver except if the right to compensation is reserved Assignment with knowledge but without consent of debtor --. without consent: all debts previous to the assignment. 25. 2004. A dining set worth 200. but not of subsequent ones.compensation can be set-up re: debts before the cession.000 due on Dec. or due to. irrespective of whether the plural cases arose out of the same or different transactions.Compensation cannot be set-up. he may set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment. 3. 80. a bracelet worth 100. (1198a) RULES: 1. 100.) 2. 2.2006. unless the assignor was notified by the debtor at the time he gave his consent. RULE: Jurisdictionn depends upon the totality of the demand in all the causes of action. the latter may set up the compensation of debts previous to the cession. Book of Tolentino. 10. EXCEPTIONS 1. 04 B owes A 1. 1285. that he reserved his right to the compensation. 03 5.00 due on June 1. B assigned his credit to C on Dec. 2. 3. they may be compensated against each other before they are judicially rescinded or avoided. Christ May Andolana.debtor can set up compensation as a defense for all debts maturing prior to his knowledge of assignment. 2005. (n) Note: The rescissible obligations here refer to Art. Where not all the causes of action joined are demands or claims for money. #5) 44 . 3. 1. Assignment with consent of debtor -. 06.000 due on Jan 1. 75. 75. (unless there is reservation of right to claim. Art. Art. When one or both debts are rescissible or voidable.05.000 due on Feb. 1381. 2. 000 due on Oct.
the depositary cannot deposit the thing to 3rd persons. (1202a) Legal compensation takes place automatically unless there has been valid waiver thereof. Compensation shall not be proper when one of the debts arises from a depositum or from the obligations of a depositary or of a bailee in commodatum. all the requisites mentioned in 1279 are present before the debt actually prescribed. the balance subsists as debt. If deposit to 3rd person is allowed. 1286. Christ May Andolana. When one debt arises because of a claim for support due to gratuitous title. and extinguishes both debts to the concurrent amount. As long as at one point. “to the Concurrent amount” means if one debt is bigger than the other. even though the creditors and debtors are not aware of the compensation. or to his heirs and successors or to person who may have been designated in the contract. 1288. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title. but there shall be an indemnity for expenses of exchange or transportation to the place of payment. When all the requisites mentioned in article 1279 are present. WHEN LEGAL COMPENSATION CANNOT TAKE PLACE When one debt arises from a depositum. 25. 4. Example of which would be 1285 paragraph 1. the depositary is liable for the loss if the person is careless or unfit. 2007 Case Digests (from Erwin Vicente). (1199a) Applies to compensation by operation of law. 1289. Neither shall there be compensation if one of the debts consists in civil liability arising from a penal offense. Art. 2. When one debt arises from the obligation of a depositary. Ferlyn Ong for 4th year Batch 2009 3. Lydia Galas (Hann Sevilla). If a person should have against him several debts which are susceptible of compensation. RAM Notes Compiled by: Hanniyah Sevilla. Unless stipulated to contrary. for as long as the requisites have met at a certain point. Compensation takes place by operation of law. Depositary cannot make use of the thing deposited w/out express permission of depositor otherwise he shall be liable for damages – except preservation of thing requires its use. 1287. 5. then there can be compensation. (1200a) Art. Q: May it be possible for one claiming compensation despite the fact that the one claiming has a debt that already prescribed? A: Yes. But the offended party may claim compensation (this is an example of a facultative obligation) • OBLIGATIONS OF A DEPOSITARY a) b) c) d) e) The Depositary is obliged to keep the thing safely and to return it when required to the depositor. Art. without prejudice to the provisions of paragraph 2 of article 301. Depositary is responsible for the negligence of his employees. (n) • 1. When the debt arises from a criminal liability. compensation takes effect by operation of law.Obligations and Contracts: Sources 2006 Lectures of Atty. Compensation w/c extinguishes principal obligation carries with it the extinguishments of the accessory obligation. Book of Tolentino. Q: May the benefit of compensation be renounced or waived? A: Yes. even though the debts may be payable at different places. Art. Art. 3. because Dec. NOVATION 45 . Indemnity for expenses of transportation (of goods/objects) Indemnity for expenses of exchange. 05 is not the reckoning point. 1290. the rules on the application of payments shall apply to the order of the compensation. even if one of the debts had already prescribed at the time of the claim for compensation. When one debt arises from the obligation of a bailee in commodatum. Assign without knowledge: it would now depend when A acquired knowledge.
In order that an obligation may be extinguished by another which substitute the same. There is a novation if there is a change in the nature of the prestation. If the period is increased. Take note that novation is never presumed. It also says from negotiorum gestio to contract of agency. b) Personal/subjective – change of persons i. Even if that is merely an implied novation. But if the new obligation is increased but if separate from the old obligation? (There is an increase in the old but it is found in a separate document) There is because the prior promissory notes are extinguished and superceded by the new promissory notes. Yes. (1204) 46 . (remission) There is no novation there because the obligation is extinguished. example would be from commodatum to lease of thing. 1292. there is no novation) Art. Book of Tolentino. you have to pay. Novation however is proper in case of change of juridical relation. RAM Notes Compiled by: Hanniyah Sevilla. it merely becomes a simple debt. Renunciation of security? None ha. In order that there shall be novation. because it is from a noncontractual relation to a contractual relation. Yes. ii. is there novation or lengthened or shortened? No.According to its Extent/Effect a) Total or extinctive (old obligation is totally extinguished) b) Partial or modificatory (imperfect or improper REQUISITES OF NOVATION a) The existence of a valid old obligation If valid – nothing to novate If voidable – possible novation before annulment Intent to extinguish or to modify the old obligation by substantial difference The capacity and consent of all the parties except in case of expromision – old debtor does not participate Validity of new obligation b) c) d) Is there novation if the amount in the new obligation is increased? No. Why? It merely affects the performance of the obligation. or subrogating a 3rd person in the rights of creditor. 2. it is imperative that it be so declared in unequivocal terms. Lydia Galas (Hann Sevilla).According to its Object/Purpose a) Real/objective – changing the object/principal conditions of obligation. From alternative to simple or simple to alternative? Yes. or that the old and the new obligations be on every point incompatible with each other. are there incompatible in all material points. it is a free use of thing while in lease. If the evidence of credit from promissory note payable to order to payable to bearer? There is no novation. (Absent any. (3) Subrogating a third person in the rights of the creditor. Subrogating a 3rd person in the rights of creditor (by agreement or by law) c) Mixed (change of object and parties) II. there is no novation. But there is no novation in a subsequent execution of a real estate mortgage as security. Substituting the person of debtor. From contract of donation to contract of sale? Yes. Art. 1291. There must be a previous valid obligation. Surrender of the evidence of credit? No. Otherwise. 4. four requisites must be complied with: 1. Ferlyn Ong for 4th year Batch 2009 NOVATION – substitution or change of an obligation by another w/c extinguishes/modifies the 1st either by changing its object or principal condition or substituting another in place of debtor. In commodatum. 3. Christ May Andolana. Obligations to pay a sum of money is not novated by a new instrument which merely changes the terms of payment. A valid new obligation. there is a novation. In order that there is implied novation. From mortgage to antichrisis. if the change is merely accessory or accidental. 2007 Case Digests (from Erwin Vicente). anong change dun? The juridical tie. Obligations may be modified by: (1) Changing their object or principal conditions.Obligations and Contracts: Sources 2006 Lectures of Atty. the agreements must be incompatible with each other. (2) Substituting the person of the debtor. person of the creditor or debtor. (1203) KINDS OF NOVATION I. The consent of the parties to extinguish the prior obligation. it does not affect either the principal object.According to Form of its Constitution a) Express b) Implied (incompatibility of 2 obligation) III. condition. why? The mortgage being merely an accessory obligation to secure the loan or promissory note. The extinguishment of the old obligation.
not the creation of the obligation. Change of Creditor (active) FORMS (Passive Novation) IExpromision – initiative comes from 3rd person. Initiative from 3rd person New debtor and creditor must consent Old debtor must be released from his obligations IIDelegacion – initiative from debtor for it is he who delegates another to pay. Ferlyn Ong for 4th year Batch 2009 a) b) Express Novation – declared in unequivocal terms Implied – complete/substantial incompatibility . Change of debtor (passive) 2. What happens if the new debtor is insolvent? Is the old debtor liable for the new debtor? No. 3 parties (old. but not without the consent of the creditor. what would be the effect: 1236 and 1237. Initiative from old debtor 2. Requisites 1. 1293. Book of Tolentino. Now. 47 . Requisites 1. new debtor and creditor) must agree. Novation which consists in substituting a new debtor in the place of the original one. Lydia Galas (Hann Sevilla). When a public instrument is executed to confirm a valid contract. All parties concerned must consent Implied/express Before/after new debtor has given consent Maybe conditional – has to be fulfilled. 2. Christ May Andolana. When creditor in the meantime refrains from suing debtor or even when creditor merely extends the term of payment for here the period merely affects performance. precisely because he did not consent or it was made without his knowledge. may be made even without the knowledge or against the will of the latter. 3. Art. When a guarantor enters into an agreement with creditor that he (guarantor) will also be a principal debtor. Payment by the new debtor gives him the rights mentioned in articles 1236 and 1237. In expromission. the original debtor's consent is not necessary. RAM Notes Compiled by: Hanniyah Sevilla. 3 Parties Delegante – original debtor Delegatario – creditor Delegado – new debtor 1293: is expromission. When payment of purchase price for certain trucks is made by execution of promissory note for said price. it is essential that old debtor be released from his obligation. (1205a) 2 Kinds of Personal/Subjective Novation 1. New contract merely contains supplementary agreement When additional interest is agreed upon When additional security is given When after a final judgment.Obligations and Contracts: Sources 2006 Lectures of Atty.substantial changes: In object/subject matter of contract In cause or consideration of contract In principal terms or conditions of contract If debt subject to condition is made an absolute one w/out a condition Reduction of term/period stipulated W/out consent of subscribers INSTANCES WHEN COURT HELD: NO EXTINCTIVE NOVATION a) b) c) d) e) f) g) h) i) j) Slight alterations or modifications in construction plans of buildings. 2007 Case Digests (from Erwin Vicente). He cannot be held liable by reason of insolvency of the new debtor. a contract was entered into precisely to provide a method of payment other than that stated in judgment. Place of payment is changed or there is variation in amount of partial payments.
But can a prescribed debt be the subject of novation? Can a prescribed debt be an object of a contract? Yes. except when said insolvency was already existing and of public knowledge. except in cases expressly mentioned in this Code. shall not revive the action of the latter against the original obligor. (1208a) If old obligation is void – no valid novation. 1298. Subrogation of a third person in the rights of the creditor is either legal or conventional. Book of Tolentino. possessors of mortgages etc. the original one shall subsist. (n) GEN. what happens if the new oblilgation is void? Would that extinguish the old obligation? It does not. If the original obligation was subject to a suspensive or resolutory condition. Will that revive the old obligation? It does not. unless it is otherwise stipulated. But can it also be subject to ratification? Yes. accessory obligations may subsist only insofar as they may benefit third persons who did not give their consent. The former is not presumed. Now what if the old obligation is void. Exception: If the insolvency of the new debtor is of public knowledge and existing and known to the (old) debtor. then there is revival of the original obligation. 1294. unless the parties intended that the former relation should be extinguished in any event. This is 1297. the new debtor's insolvency or non-fulfillment of the obligations shall not give rise to any liability on the part of the original debtor. If the substitution is without the knowledge or against the will of the debtor. Can minority be a defense? Yes. Art. 1300. 2. Ferlyn Ong for 4th year Batch 2009 Now. 3rd person is only an agent. Lydia Galas (Hann Sevilla). New debtor merely agreed to make himself jointly or partly liable for the obligation Art. unless it is otherwise stipulated. CA compensation case) Art. would that extinguish the new obligation? Yes. The novation is void if the original obligation was void. what about delegacion. (1206a) Refers to delegacion Requisites to Hold Old debtor Liable 1. c. 1298: When can a debtor claim annulment? What would be an instance wherein a debtor can claim annulment? A very common defense would be prescription of debt. RULE: The conditions attached to the old obligation are also attached to the new obligation. What happens if the obligation is one with an accessory obligation or contract and the principal obligation is extinguished? Would that carry the extinguishment of the accessory obligation? Yes. If the new obligation is void. when the delegated his debt. When Art. exception if there is a stipulation pour autrui. Art. 3rd person action only as guarantor/ surety New debtor merely agreed to make himself solidarily liable for the obligation. 1295 does not apply: a. even if it is not of public knowledge. Now what happens if the new debtor is insolvent. Now. 1299 says the new obligation shall be under the same condition. SUBROGATION SUBROGATION – transfer to a 3rd person all the rights appertaining to creditor – right to proceed against guarantors. 1295. the new obligation shall be under the same condition. messenger or employee of debtor b. review PNB vs. 2007 Case Digests (from Erwin Vicente). 1299. novation is also void. Art. EXCEPTION: If there is a contrary stipulation. But can it be a defense of the obligor? The prescription of the debt? Yes. 1296. So a prescribed debt can be the subject of novation in as much as the prescribed debt can be the subject of a contract. who has been proposed by the original debtor and accepted by the creditor. Insolvency was already existing and of public knowledge at time of Delegation. d. Christ May Andolana. (n) Refers to expromision Art. (1207) Art. except when annulment may be claimed only by the debtor or when ratification validates acts which are voidable. (an example is being named as a beneficiary of an insurance policy. or known to the debtor. Now what if the original obligation has a suspensive or resolutory condition? Would the new obligation that novates the old obligation carry with it the condition? Yes. Who proposes the new debtor? The old debtor.Obligations and Contracts: Sources 2006 Lectures of Atty. Or the insolvency was already existing and known to the debtor at the time of delegation. If old obligation is voidable and annulled – no more obligation. The insolvency of the new debtor. 1297. 48 . RAM Notes Compiled by: Hanniyah Sevilla. So in both cases the consent of the creditor is always necessary. the latter must be clearly established in order that it may take effect. When the principal obligation is extinguished in consequence of a novation.
Requires consent. (2) When a third person. Lydia Galas (Hann Sevilla). 1301.000. whose credit of 100. even without the knowledge of the debtor. *Who is the creditor who is preferred? A. and he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit. When. to whom partial payment has been made. A creditor. Art. while subrogation involves change in the person of the creditor. So. (3) When. Book of Tolentino. may exercise his right for the remainder. those are the situations when legal subrogation takes place.000 is secured by a chattel mortgage? B is preferred. 2007 Case Digests (from Erwin Vicente). It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred. Christ May Andolana. when the creditor pays another creditor who is preferred. even without the debtor's knowledge. Defect in credit/right is not cured by assigning the same. who is preferred? The old creditor. if A pays B. 1304: Speaks of two creditor. new creditor cannot collect until after such condition is fulfilled. (Licaros vs. 1304. without prejudice to the effects of confusion as to the latter's share. Subrogation transfers to the persons subrogated the credit with all the rights thereto appertaining. (1212a) If transferred credit is subject to suspensive condition. When a third person. CONTRACTS 49 . be they guarantors or possessors of mortgages. Defect obligation cured in way that obligation becomes valid. not interested in the obligation. Conventional subrogation of a third person requires the consent of the original parties and of the third person. subject to stipulation in a conventional subrogation. But may a legal subrogation be changed into conventional subrogation? Yes. For as long as the original credit has not been fully satisfied. or B. Art. So. RAM Notes Compiled by: Hanniyah Sevilla. a person interested in the fulfillment of the obligation pays. either against the debtor or against third person. All he has to do is to foreclose the mortgage and his credit is extinguished by reason of the foreclosure. But subrogation is classified into conventional (by agreement of the parties) or legal (1302). Subrogation is different from ex promission or delegacion because the latter involves a change in the person of the debtor. in this case. 1302. 3. CONVENTIONAL SUBROGATION Extinguishes obligation and creates a new one. whose credit of 100. then he has a right of preference over the new creditor. without prejudice to the effects of confusion as to the latter's share. pays with the tacit or express approval of the debtor. the parties may still enter into a conventional subrogation. a person interested in the fulfillment of the obligation pays. even without the knowledge of the debtor. Does not require consent of debtor. not interested in the obligation. So. even without the debtor's knowledge. when is there conventional subrogation? It would require the consent of the original parties and of the third person. 2. As between the two. diba? Autonomy of will. Gatmaitan case) Art. So. and the new creditor whose debt has also been partially performed. debtor’s in old may be such a the new entirely Art. 1303: So despite the fact that there is legal subrogation. Ferlyn Ong for 4th year Batch 2009 ASSIGNMENT OF CREDIT Mere transfer of same right or credit (transfer does not extinguish credit).Obligations and Contracts: Sources 2006 Lectures of Atty.000 has an interest of 12% per annum. A now steps into the shoes of creditor B and is entitled to the security of B. because in the event of default by the debtor. 1303. when is there legal subrogation? (1302) 1. need not go to court to file an action for the collection of the 100. The old creditor whose debt has been partially performed. even without the knowledge of the debtor. pays with the express or tacit approval of the debtor.
ACCIDENTAL Elements – various particular stipulations that may be agreed upon by the contracting parties in a contract. c. a. b. to the fulfillment of a prestation to give. to do or not to do. a. Christ May Andolana. that is. Parties Delegated Unilateral – one party has obligation Bilateral – both parties are obliged to give or render reciprocal prestations Name/Designation Nominate – contract has a name Innominate – contract has no name Risk of Fulfillment Commutative – parties contemplated a real fulfillment. c. a. equivalent value are given (lease) Aleatory – fulfillment is dependent upon chance. to give something or to render some service. a. b. b. b. values vary. G. obligations are complied with at this time (eg. 2007 Case Digests (from Erwin Vicente). of Persons actually and physically entering into Contracts Ordinary (2) Auto-contracts – one represents 2 opposite parties but in different capacities 50 . Property not yet delivered and price not yet given) Subject Matter Contract involving things (eg. or reciprocally. Book of Tolentino. K. b. assignment of credits) Contract involving services (carriage) Obligation Imposed and regarded by Law Ordinary Institutional Evidence Required for its Proof Parol/oral Required written proof No. I. F. unless the contrary has been stipulated. Time of Performance Executed – one contemplated at time the contract is entered into. a.Obligations and Contracts: Sources 2006 Lectures of Atty. by virtue of w/c. b. b. a. 1305. principal is Loan) Preparatory – contract is not the end itself but as means through w/c future transactions or contracts may be made. J. A contract is a meeting of minds between two persons whereby one binds himself. ELEMENTS (Essential) Consent Subject matter Cause/consideration NATURAL Elements – those found in certain contracts and presumed to exist. a. (eg. a. a. Sale) Contract involving Rights/credits (usufruct. D. b. E. c. c. b.perfected by delivery Formal/solemn – those where special formalities are essential before contract may be perfected. B. with respect to the other. b. a. b. Ferlyn Ong for 4th year Batch 2009 Art. Contract of sale) Executory – prestations are to be complied with at some future time (eg. According to Importance/ Dependence of One upon Another Principal – contract stands alone by itself Accessory – depends for its existence upon another contract. Lydia Galas (Hann Sevilla). Mortgage. According to Formation Consensual – perfected by consent Real . C. (1254a) CONTRACT – is a juridical convention manifested in legal form. H. According to Cause/Equivalence of Value of Prestations Onerous – interchange of equivalent valuable considerations Gratuitous/ lucrative – free. a. one party receives no equivalent prestation Remunerative – one where one prestation is given for a benefit or service that had been rendered previously. one or more persons bind themselves in favor of another or others. RAM Notes Compiled by: Hanniyah Sevilla. CLASSIFICATION OF CONTRACTS A.
The validity and performance cannot be left to the performance of one of the contracting parties and leaving the other free from complying with what is stipulated in the contract. The debtor. The second is mutuality of contract. cannot stipulate his term. The appropriate term is to parties because there can be as many persons in a contract as they are interested in the contract. except if there is complete separation of property.Obligations and Contracts: Sources 2006 Lectures of Atty. The only option is to either to sign or not to sign. solidary liability is not presumed. Book of Tolentino. what has been stipulated in the contract is the law between the parties to the contract. but by the number of declarations of will. Because. (contracts of adhesion) He can be a vendor and a vendee at the same time only that in one contract he might merely be an agent and the other the buyer. Because in that case. Now. 2007 Case Digests (from Erwin Vicente). Ferlyn Ong for 4th year Batch 2009 L. 5. M. Now. That it only binds the parties to the contract and their successors in interest. The presumption is that at the time of the negotiation. (Contracts of adhesion) What are contracts of adhesion? Example of which would be an insurance contract. b. One of the exceptions there is: if there is a stipulation in favor of a third person. which are those elements that even if not agreed upon by the parties form part of the contract. contracts have 3 elements. a. Now. because there are certain limitations. a. what are the characteristics of a contract? Contracts have three characteristics: we have the obligatory force of contracts. the interpretation would always be in favor of the person who merely affixed his signature thereto and who did not participate in the preparation of the contract. The accidental elements are the ones that must be agreed upon by the parties. subject matter. 3. So in those cases in case of doubt. The third is the principle of relativity of contracts. especially if he borrows money from the bank. #of Persons participating in Drafting a Contract Ordinary – e. or reciprocally. Preparation (conception) – negotiations between parties Perfection (birth) – agreement. Basic Principles/Characteristics of Contract 1. He cannot say that this is onerous on my part. we learned before that in cases of contracts of adhesion. under the law. the reason why parties entered into the contract. can the agent also be the lender? Or if he is authorized to lend. what is meant by obligatory force of contracts? Just like autonomy of will. It does not mean that the parties are only limited to only two persons. if the agent is authorized to borrow money. May a person enter into a contract with himself? Yes. in case of doubt. by virtue of which one or more persons bind themselves in favor of another or others. Lydia Galas (Hann Sevilla). may any person just enter into a contract? Is that right absolute? No. Nature Personal Impersonal STAGES OF CONTRACT 1. Such as: husbands and wives cannot enter into contracts involving properties. but in different capacities. Then we have the natural elements. Consummation (termination) – terms of contract are perfected. RAM Notes Compiled by: Hanniyah Sevilla. 4. An example of which would be the warranty against hidden defects. can he use his own money? o The existence of a contract is not determined by the number of persons who intervene in it. 2. We have the essential elements. Consent. 2. to do. That if it is not stipulated there. And one cannot be heard later on to say that the agreement is disadvantageous on his part. An example would be that if the parties agree that in case of breach. Freedom to stipulate Obligatory force and compliance in good faith Perfection by mere consent Both parties are mutually bound Relativity Contract: juridical convention manifested in legal form. Now. their liability would be solidary. and the cause. the presumption is that it is not part of the agreement. prior to the perfection of the contract.g sale Contract of Adhesion – buyer or person interested is insured. elements of subject matter and valid cause – accepted by mutual consent. to the fulfillment of a prestation to give. The third element would be the accidental elements. 51 . Christ May Andolana. He cannot do that. The cause is the why of the contract. or not to do. signifies his consent by signing the contract. 3. Now. the parties freely stipulates the conditions. the parties do not stand on equal footing. So different capacities in one person. and liberally in favor of the person who does nothing but merely affixes his signature to the already prepared contract. 1305 says that a contract is the meeting of minds between two persons whereby one binds himself with respect to the other to give some thing or to render some service. may he borrow money? But if he is authorized to lend. terms and stipulations that may have agreed which arrived at and belong to the perfection of the contract. the construction is construed strictly against that person who prepared that contract. b. Other limitations: in agency.
m. Second. it must not be contrary to law. the contract of loan is the principal contract. But there are certain contracts that will require delivery aside from consent. Now. who received the PN in good faith and paid value for it. Lydia Galas (Hann Sevilla). then this is the accessory contract. In fact. because this is not a contractual debt.? Would the parties now be bound by that agreement in case there is a doubt? No. conveys. The deed of Sale with right to repurchase contains that A. 20K). sabi ni A. that is an example of the principle that while it may be true that parties are bound by their stipulations and it shall constitute the law between them. you call that preparation or generation. it is one of equitable mortgage. (like. The cause of the issuance is an illegal cause. likewise even if the parties would say "this is valid between us ha. 52 . (because 3rd persons are always protected. Yes. Christ May Andolana. sige discounted ko yan. And when you pay the price and he delivers what you have bought. good customs. then that is consummation or death of the contract. the consideration is very very low. A in fact can recover what he had lost from X kung nagbigay sya ng pera. the promissory note of a gambling debt". m. for and in consideration of the sum of 20K hereby transfers.C. the birth and the perfection of the contract. RAM Notes Compiled by: Hanniyah Sevilla. it is the obligatory force between the parties. by looking at it.Obligations and Contracts: Sources 2006 Lectures of Atty. Now. disposes. So. would you believe that that is a valid deed of sale taking into account that the land is located in Ecoland. So. however. Then you have perfection. So those are the considerations that must be taken together when the parties entered into the agreement. he is not affected by the agreement between X and A. Y would demand from A the value of the PN. If Y is authorized to lend money. looking at it. but i will furnish you a promissory note. X will not have a cause of action against A.000. So if the loan is guaranteed by a mortgage. clauses. Now what are those future transactions that will arise from a contract of agency? It would depend to the powers granted. i don't have the money now. there is a period to repurchase within one year. that would really be a deed of sale with right to repurchase because the consideration given is really equivalent to the value of the property based on its location. Is marriage a consensual contract? Yes. an example of which would be antichresis. This is what you call as future transactions. 1306. but the juridical relations as well as the rights and obligations that would arise by reason of that contract that you have entered into is not governed by the stipulation of the parties. 2007 Case Digests (from Erwin Vicente). public order. Art. Book of Tolentino. And if A will be unable to repurchase the property within the period of 1 year. not of sale with right to repurchase. Y can still collect the amount stated in the PN. 1306 Autonomy of Contracts: But there are certain limitations. the juridical relations as well as the rights and obligations that will arise by reason of the contract is not governed by the stipulation but rather by law. So. such as sale. As I said. natalo si A at umabot ang utang nya ng 300. because while it might be true that the stipulation is the law between the parties. parties are free to stipulate. Such as what? Suppose A executed a deed of Sale with right to repurchase in favor of C. provided they are not contrary to law. what would be the future transaction that would arise? A contract of loan. there are three stages: when the parties bargain or negotiate. how are contracts perfected? It might be perfected by mere consent and they are called as consensual. then B's right over the property shall be absolute and unconditional. but rather by law. There would be no question if the consideration was 20million. You don't have to have the contract or certificate of marriage. Now. Ano ang kasama sa negotiation? The price. only couched differently by the parties. Ferlyn Ong for 4th year Batch 2009 To arrive at a consummated or perfected contract. or public policy. however. Remember antichresis? You have to deliver the property in order that antichresis shall be perfected. how are contracts classified? First is according to the degree of dependence. A cannot invoke as a defense that the PN is a void PN as against a 3rd person who acted in good faith and paid the PN with consideration. it is from gambling. 1306: Autonomy of contract = to autonomy of will. in case of doubt. So in this case. So. and only for 20K for 500sq. terms and conditions as they may deem convenient. consisting of 500 sq. So in that case. the SC said. this PN if suppose A would not pay what is stated on it. a contract may be preparatory in nature such as a contract of agency because this would lead to future transactions. it would seem that the contract entered into is one of mortgage. the rights and obligations which arise by reason of this contract is not governed by the stipulations. (illegal gambling) But suppose X would negotiate the PN to Y. A contract might also be considered accessory because its existence will depend on the principal contract. For one. The contracting parties may establish such stipulations. if X and A played Tong-its and then their bet is 50K. of course he cannot recover under the circumstances of the promissory note. if a contract of sale does not have any document is that a valid contract? Yes.) Now. Between Y and A. the contract of agency the prepratory contract and the contract of mortgage the accessory contract. alienates his parcel of land covered by TCT 123 located in Ecoland D. morals. sells. because it is perfected by mere consent. Hindi man yan kailangan. Now. because as I've said. So the contract of loan is the principal contract. So. Because there can be no antichresis if the debtor does not deliver the property. Why is it called preparatory? It is called such in as much as it looks forward to future transactions. the PN cannot be the basis for X to file a case against A because the source is from a polluted source from one not allowed by law. X cannot sue A by reason of the PN. Because there is now fulfillment or performance of the terms agreed upon in the contract. (except those allowed).
them. Here. Consequences of Mutuality 1. like when a lawyer and a client enters into an agreement whereby the client hires the services of the lawyer. 1308. 1308: Speaks of mutuality of contracts that both parties must be bound by the agreements that they have entered into. he is therefore entitled for compensation. Innominate contracts shall be regulated by the stipulations of the parties. 2007 Case Digests (from Erwin Vicente). Rules governing most analogous nominate contract iv. 2. it is a loan with pledge. by the rules governing the most analogous nominate contracts. There was this Spaniard who came to the Philippines and wanted to tour the Philippines. at the time of the bargaining stage. its validity or compliance cannot be left to the will of one of Mutuality of contracts – both parties are bound. Was there a contract entered into by the parties. Do ut facias ( I give and you do) 3. Facio ut des ( I do and you give) 4. There is a contract. Provisions of Title I and II iii. Its validity and compliance cannot be left to the will of only one of them. an agent authorized to lend cannot borrow. Stipulations of parties ii. assumed that the person consented the request. mutuality is that both parties must be bound to the contract. the presumption is that both parties at the time of the negotiation. o Innominate contracts are. the conditional obligation is void if the condition is suspensive. Ferlyn Ong for 4th year Batch 2009 - not absolute because there are limitations. and it is secured by a pledge. A party cannot revoke or renounce a contract w/o the consent of the other. Unfortunately. So. "can you go to the store to buy for me the following items?". Unlike when you enter into a contract of sale. if it is resolutory it is valid. (n) 4 Kinds of Innominate Contracts i. there is this contract of lease. Do ut Des ( I give that you may give) ii. Art. Lydia Galas (Hann Sevilla). Facio ut Des (I do that you may give) iv. After the tour. When the fulfillment of condition depends upon the sole will of debtor. Customs of place 1307: Innominate Contracts These are contracts that have no specific name. it cannot be left to one of the parties alone leaving the other party free from complying with what is incumbent upon him. Facio ut Facias (I do that you may do) Rules Governing Innominate i. Facio ut facias ( I do and you do) There was this very old case. and by the customs of the place. So he went around the island. But the SC said that as soon as you have hired the services of the person and you made use of the talent of that person. So. When one of the Filipinos learned the dilemma of the Spaniard. Now. Do ut Facias ( I give that you may do) iii. voluntarily entered into the request of the Spaniard. in one bar examination. the question goes like this: X called B. The Spaniard countered that there was no contract between them because the Filipino presented himself. to be governed by rules applicable to the most analogous contract. there is this deed of sale. (1256a) The contract must bind both contracting parties. precisely which lead to the perfection of the contract. Christ May Andolana. the agreement has no specific name. in this case. RAM Notes Compiled by: Hanniyah Sevilla. such as husband and wives cannot enter into a contract subject to certain exceptions. because he rendered his services and he is entitled to compensation. nor can have it set aside on the ground that he had made a bad bargain. Art. 53 . he did not know how to speak the local dialect. Book of Tolentino. Meaning each one of them participated during the negotiation stage. and if there was what kind of a contract was it? Can the person demand payment for the services he rendered. or when you borrow money. Do ut des ( I give and you give) 2. when you rent. There are four kinds of innominate contracts 1. the Filipino now demanded payment for his services. in the absence of stipulations and specific provisions of law on the matter. by the provisions of Titles I and II of this Book. they stood on equal footing. Regardless if there is a contract or not. the presented himself to do the interpretation.Obligations and Contracts: Sources 2006 Lectures of Atty. there is no specific name. 1307.
The lessee cannot thereafter escape liability even if he should subsequently decide to abandon the premises. except in case where the rights and obligations arising from the contract are not transmissible by their nature.g. The heir is not liable beyond the value of the property he received from the decedent. the fixing of price and delivery date can be left to a 3 rd person. and the lessor may hold him liable for the rent therefor. The questioned provision states that the lease "may be renewed for a like term at the option of the lessee. 1311. The unilateral act of one party in terminating the contract without legal cause makes it liable for damages. The contracting parties must have clearly and deliberately conferred a favor upon a third person. The lessee likewise becomes bound only when he exercises his option and the lessor cannot thereafter be excused from performing his part of the agreement Art. It is a purely executory contract and at most confers a right to obtain a renewal if there is compliance with the conditions on which the right is made to depend. he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. Contracts take effect only between the parties. (1257a) Principle of Relativity Contracts are generally effective only between the parties. (n) Art. and the lessee is entitled to retain possession of the property for the duration of the new lease. Mutuality obtains in such a contract and equality exists between the lessor and the lessee since they remain with the same faculties in respect to fulfillment. 2007 Case Digests (from Erwin Vicente). A mere incidental benefit or interest of a person is not sufficient. in a contract of sale. the courts shall decide what is equitable under the circumstances. The fact that a party may not have fully understood the legal effect of the contract is no ground for setting it aside. 54 ." The lessor is bound by the option he has conceded to the lessee. in the same manner once a contract is entered into. Lydia Galas (Hann Sevilla). In such case. Their rights and obligations become mutually fixed. Where obligations arising from the contract are not transmissible by their nature. Where law authorizes the creditor to sue on a contract entered into by his debtor. A mere incidental benefit or interest of a person is not sufficient The stipulation must be part of contract and not the whole of the contract. the lessor is free to give or not to give the option to the lessee. After all. The binding effect of the contract on both the parties is based on the principles that (1) obligations arising from contracts have the force of law between the contracting parties. 4. If a contract should contain some stipulation in favor of a third person. once he exercises his option to continue and the lessor accepts. 5.Obligations and Contracts: Sources 2006 Lectures of Atty. their assigns and heirs. Allied Bank case: . (n) - E. Ferlyn Ong for 4th year Batch 2009 - 1308: The contract must bind both contracting parties. Mutuality of contract. 1309. The determination shall not be obligatory if it is evidently inequitable. RAM Notes Compiled by: Hanniyah Sevilla. The determination of the performance may be left to a third person. by stipulation in favor of a 3rd party. The right of renewal constitutes a part of the lessee’s interest in the land and forms a substantial and integral part of the agreement. Contracting parties must have clearly and deliberately conferred a favor upon a 3rd person. 3rd persons may be adversely affected by a contract where they did not participate. Book of Tolentino. or by stipulation or by provision of law. And while the lessee has a right to elect whether to continue with the lease or not. 1310. 3. the decision binds the party only after it is made known to both. Christ May Andolana. Just as nobody can be forced to enter into a contract. no party can renounce it unilaterally or without the consent of the other. and (2) there must be mutuality between the parties based on their essential equality. Where there is stipulation Pour Autri ( a stipulation in favor of 3rd person) Where a third person induces another to violate his contract Where in some cases. Exceptions: 1. Requisites of Stipulation Pour Autri a) b) c) d) There must be a stipulation in favor of a 3rd person. its validity cannot be left to the will of one of them. whose decision shall not be binding until it has been made known to both contracting parties. The fact that such option is binding only on the lessor and can be exercised only by the lessee does not render it void for lack of mutuality. Art. both parties are thereafter bound by the new lease agreement. 2. their assigns and their heirs.
Art. Ferlyn Ong for 4th year Batch 2009 e) f) g) 3rd person communicated his acceptance to obligor before its revocation. and the juridical qualification of the contract resulting therefrom is another. 1315. 2. No one may contract in the name of another without being authorized by the latter. Book of Tolentino. such as deposit. In contracts creating real rights. Cause/consideration and Delivery. expressly or impliedly. Object certain means at the very least determinable I. otherwise. and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which. by the person on whose behalf it has been executed. third persons who come into possession of the object of the contract are bound thereby. The validity of stipulations is one thing.) That the favorable condition should not be conditioned or compensated by any kind of obligation or whatsoever. subject to the provisions of the Mortgage Law and the Land Registration Laws. Art. Note: Contracts are not what the parties choose to call them. before it is revoked by the other contracting party. Real contracts. 1317. (3) Cause of the obligation which is established. (1259a) Requisites for a Person to Contract in the Name of Another a) b) c) He must be duly authorized (express/impliedly) He must have by law a right to represent him (guardian/administrator) Contract must be subsequently ratified (express/implied. Contracts are perfected by mere consent. (2) Object certain which is the subject matter of the contract. Requisites: 1. shall be unenforceable. 1318. are not perfected until the delivery of the object of the obligation. A contract entered into in the name of another by one who has no authority or legal representation. Subject matter. by word or deed) Unenforceable contracts are valid contracts but they cannot be enforced through court actions. but what they really are as determined by the principles of laws. or unless he has by law a right to represent him. There is no contract unless the following requisites concur: (1) Consent of the contracting parties. Art. (1258) Consensual contracts are perfected from the moment there is agreement (consent) on the subject matter. Art. Consent presupposes legal capacity. Interference of the 3rd person in the contractual relation without legal justification. Art. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. There must be no relation of agency between either of the parties and 3rd person. or who has acted beyond his powers. Christ May Andolana. contract is voidable. 1314. 2. Note: 1. CONSENT 55 . 3. and the Cause or consideration. 1312. RAM Notes Compiled by: Hanniyah Sevilla. unless it is ratified. pledge and Commodatum. Knowledge by the 3rd person of the existence of the contract. usage and law. may be in keeping with good faith. (Neither the contracting parties bears the representation or authorization of the 3rd party.Obligations and Contracts: Sources 2006 Lectures of Atty. according to their nature. Existence of a valid contract. CF: Law on agency ESSENTIAL REQUISITES OF CONTRACTS Art. (n) Requires Consent. 1316. Lydia Galas (Hann Sevilla). 2007 Case Digests (from Erwin Vicente).
Manifestation Theory – Contracts are perfected upon the moment acceptance is declared. The offer must be certain and the acceptance absolute. So. If there are 2 contracts and they are independent of each other. there are requisites in order that silence produces tacit acceptance.Obligations and Contracts: Sources 2006 Lectures of Atty. Reception Theory – Contracts are perfected upon the time the acceptance is in the hand of the offeror (regardless of knowledge or if he read the same) Note: Offer by telephone similar to face to face conversation. If a persons offers the same thing to two persons. regardless of whether the declaration has come to the knowledge of the offeror or not. 2007 Case Digests (from Erwin Vicente). complete and intentional. Here. Cognition Theory – Contracts are perfected only upon the knowledge of the offer of the acceptance of the offeree. 3. b. acceptance of one does not imply acceptance of the other. • Theories: 1. is presumed to have been entered into in the place where the offer was made. c. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.. to Tolentino: (f) express or tacit manifestation of the will and (g) conformity of the internal will and its manifestation. A qualified acceptance constitutes a counter-offer. Christ May Andolana. Note: Offer and acceptance may be withdrawn before perfection of the contract. The intent must be declared properly (legal formalities must be complied with) Note: Accdg. and the second offeree accepts the offer before the first. (1262a) Requisites of Consent a) b) c) d) e) Plurality of subjects/parties. at different times. Art. according to ma’am G. There is a duty or the possibility to express oneself. according to Tolentino. Note: Another type of acceptance is amplified acceptance. there is no perfected contract. There must be no vitiation of consent or consent must be made intelligently and freely. even if neither one has been delivered. 4. adhered in the Phil. (Used if consent is manifested through letter or telegram. Expedition Theory – Contracts are perfected the moment the offeree transmits the acceptance to the offeror. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. A qualified acceptance constitutes a counter-offer. 1319. There is a perfected contract with respect to the first (sell at 5/kilo) but not to the second offer (buy 100 kilos). Consent may be express or implied.) 2. namely: a. the offeror becomes liable for damages to the 1st offeree if he does not withdraw his offer prior to the acceptance of the 2nd offeree. What happens is a counter-offer. Requisites for Meeting of Minds a) An offer that must be certain An offer must be definite. The manifestation of the will cannot be interpreted in any other way. there is no contract if there is a qualified acceptance. Parties must be capable or capacitated. with respect to the first but not to the 2nd. Q: Is there a perfected contract in a qualified acceptance? No. There is a clear identity in the effect of the silence and the undisclosed will. "I'm selling you mangosteen at 5/kl but you have to get 100 kilos. RAM Notes Compiled by: Hanniyah Sevilla. Note: In our law. b) And an acceptance that must be Unqualified and absolute. There must be no conflict between what was expressly declared and what was really intended. The contract. such as the letter or telegram of acceptance is placed in the mail box. Book of Tolentino. in such a case. Ferlyn Ong for 4th year Batch 2009 It is the meeting of the minds between parties on the subject matter and the cause of the contract. When we say amplified. 56 ." Is there a perfected contract there? Yes. However. Lydia Galas (Hann Sevilla). silence does not authorize any definite conclusion. there is acceptance but there is a qualification. I will buy another 100 for the same price.
An acceptance may be express or implied. all of which must be complied with. within that period. presumed (by law) 1321: The person making the offer may fix the time. RAM Notes Compiled by: Hanniyah Sevilla. i will accept it. the offer may be withdrawn at any time before acceptance (of thing being offered) by communicating such withdrawal. express 2. Advertisements for bidders are simply invitations to make proposals. e) When the offer is revoked in due time (before the offeror has learned of its acceptance by the offeree) Art. So the performance of the act for which a reward or prize is promised can be considered as an acceptance. Christ May Andolana. OPTION CONTRACT– contract granting a person the privilege to buy or not to buy certain objects at anytime w/in the agreed period at a fixed price." Then that is removed from 1324 because it says part of the purchase price. Art. From Transcription: Suppose Y will say "give me 3 days to decide. 1320. 1324. Art. compensation. In order that such promise can be enforced. 1322: An offer made through an agent is accepted from the time acceptance is communicated to him. (n) GEN. c) When before acceptance is communicated. but mere invitations to make an offer. as something paid or promised. but here is 10. except when the option is founded upon a consideration. 1323. An offer becomes ineffective upon the death. business advertisements of things for sale are not definite offers. b) When the offer is accepted with a qualification or condition. Exception: when the option is founded upon a consideration as something paid or promised. Lydia Galas (Hann Sevilla). the subject matter has become illegal or impossible. Ferlyn Ong for 4th year Batch 2009 Note: Rule on public offers: A promise may be made publicly by way of advertising a reward. and the grant must be exclusive The cause is not only price but something/anything of value. Unless it appears otherwise. unless the contrary appears. civil interdiction. Note: When the offeror has not fixed a period and the offer is made to a person present. insanity. there is no contract of option here but a perfected contract of sale. When the offerer has allowed the offeree a certain period to accept. Earnest money is actually part of the purchase price. RULE: If the offeror has allowed the offeree a certain period to accept. implied 3. the business advertisement is not an offer. Art. It binds the party who has given the option not to enter into the principal contract with any other person during the period designated and. or insolvency of either party before acceptance is conveyed. to enter into such contract with the one to whom the option was granted if the latter should decide to use the option. 1325. may also come in the form of a forfeiture. (n) Unless the object is determinate. (n) Other instances when Offer becomes Ineffective a) When the offeree expressly or impliedly rejects the offer. 2007 Case Digests (from Erwin Vicente). We will just execute the deed of sale as soon as you deliver the balance. or prize for any person who performs of executes a particular act or obtains a particular result. A unilateral promise is not recognized by our Code as having obligatory effect. 1326. the acceptance must be made immediately. This is a unilateral promise.000 as earnest money" and A says "okay. there must be an acceptance that shall convert it into a contract. Book of Tolentino. It must have its own cause/consideration because it is a distinct contract. Art. (n) Exceptions: Judicial sales and if specifically stated in the advertisement 57 . (n) Forms of Acceptance 1. d) When the period of time given to the offeree w/in which he must signify his acceptance has already lapsed. the offer may be withdrawn at any time before acceptance by communicating such withdrawal. and the advertiser is not bound to accept the highest or lowest bidder. place and manner of acceptance.Obligations and Contracts: Sources 2006 Lectures of Atty.
or to those conditions which have principally moved one or both parties to enter into the contract. They were entered into through a guardian and the court having jurisdiction had approved it. provided that minor was at least 7 years old. the contract is unenforceable. weak mind. and is understood to be without prejudice to special disqualifications established in the laws. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. (1264) Incompetents under Rules of Court a) Under Civil interdiction b) Hospitalized lepers c) Prodigals d) Deaf and dumb. but here the people who are legally bound to give them support should pay therefore. 1330. Unless: a) b) c) d) e) f) Upon reaching the age of majority. 1329. Contracts of life insurance in favor of their parents. (n) Voidable Contracts: a) b) c) Entered into by insane/demented persons (unless they acted during a lucid interval) Those in state of drunkenness Under hypnotic spell Art. cannot w/o aid. 1328. undue influence.Obligations and Contracts: Sources 2006 Lectures of Atty. The following cannot give consent to a contract: (1) Unemancipated minors. unable to read and write e) Unsound mind even though they have lucid intervals f) Those who by reason of age. INSANE/DEMENTED PERSONS– no proper declaration of insanity by the court is required. Contracts entered into during a lucid interval are valid. Book of Tolentino. it should refer to the substance of the thing which is the object of the contract. spouse. and deaf-mutes who do not know how to write. Note: But if both are incapable of giving consent. Art. Art. as long as it is shown that at the time of contracting. Ferlyn Ong for 4th year Batch 2009 Art. 1327. RAM Notes Compiled by: Hanniyah Sevilla. 1331. children. Art. In the form of savings account. They were contracts for necessities such as food. (1266a) 58 . the person was really insane. Lydia Galas (Hann Sevilla). Mere preponderance of evidence is not sufficient. (2) Insane or demented persons. intimidation. violence. they ratify the same. (1265a) Vices/Causes of Vitiated Consent Mistake (error) Fraud (deceit) Violence Intimidation Undue influence Note: Vitiated consent does not avoid the contract but merely renders it voidable. and other similar causes. 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. A simple mistake of account shall give rise to its correction. disease. A contract where consent is given through mistake. brothers and sisters and provided furthermore that the minor is 18 years and above. They were contracts where the minor misrepresented his age and pretended to be one of major age and is thus in Estoppel. or fraud is voidable. Contracts w/c they enter into are Voidable. Christ May Andolana. In order that mistake may invalidate consent. (1263a) In General. The incapacity declared in article 1327 is subject to the modifications determined by law. 2007 Case Digests (from Erwin Vicente). take care of themselves and manage their property.
Lydia Galas (Hann Sevilla). There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property. (1267a) Requisites for Violence to Vitiate Consent a) Employment of serious or irresistible force. error as to the solvency of the party. RAM Notes Compiled by: Hanniyah Sevilla. may vitiate consent. error as to the motive of a party Art. descendants or ascendants. or the different interpretations or construction of the law. if the claim is just or legal. 1334. Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated. Art. or upon the person or property of his spouse. b) The error must be excusable (not caused by negligence) c) The error must be a mistake of fact and not of law. serious or irresistible force is employed. There is violence when in order to wrest consent. 6. When Presumption Cannot Apply a) When one of the parties is unable to read b) Or if contract is in a language not understood by one of the parties In both cases. 1333. error in the value of the thing. So in that case. b) It must have been the efficient cause why the contract was entered into. Note: If the error refers to the rights of the parties in the contract. the contract is not invalidated. 1335. Christ May Andolana. Errors which do not affect the validity of the contract: 1. (n) Presumption: One always acts with due care and signs with full knowledge of all the contents of a document even if the mind of the party signing was confused at the time of signing as long as he knew what he was doing. When one of the parties is unable to read. that might lead to frustration of the real intention of the parties that would warrant annulment. contract. sex and condition of the person shall be borne in mind. c) The real purpose of the parties is frustrated. 1332. error which refers to accessory matters in the contract foreign to the determination of the object. 4. the person enforcing the contract must show that the terms thereof have been fully explained to the former. Art. error in the name of the person. contingency or risk affecting the object of the Art. 5. the person enforcing the contract must show that the terms thereof have been fully explained to the former. 2007 Case Digests (from Erwin Vicente). but without error as to the person. error with respect to accidental qualifies of the object of the contract. (n) Requisites for Mutual Error To Vitiate Consent a) There must be mutual error b) The error must refer to the legal effect of the agreement. Ferlyn Ong for 4th year Batch 2009 Requisites For Mistake to Vitiate Consent a) The error must be substantial regarding: Object of contract The conditions w/c principally moved/induced one of the parties. Doubtful questions of law. Book of Tolentino. To determine the degree of intimidation. you cannot agree to a certain provision. 2. otherwise it is REFORMATION. and mistake or fraud is alleged.Obligations and Contracts: Sources 2006 Lectures of Atty. Legal effects. 1334: The provision here refers to mistakes of doubtful questions of law. (Mistake of law is not a ground for annulment of contracts) • Error of law refers to a mistake as to the existence of a legal provision or as to its interpretation or application. the age. 3. Error as to the person will invalidate consent when the consideration of the person has been the principal cause of the contract. Identity or qualifications but only if such was the principal cause of the contract. If there is no meeting of the mind and both parties erroneously that their acts is intended towards a particular contract but the same was not met/frustrated – then the remedy is annulment. or if the contract is in a language not understood by him. to give his consent. (n) There is no mistake if the party alleging it knew the doubt. does not vitiate consent. A threat to enforce one's claim through competent authority. 59 .
Book of Tolentino. through insidious words or machinations of one of the contracting parties. or the fact that the person alleged to have been unduly influenced was suffering from mental weakness. d) The other party must have relied on the untrue statement and must himself not be guilty of negligence in ascertaining the truth. But if it were fraud under 1338. Intimidation: compelled by a resonable and well-grounded fear of an imminent and grave evil upon the person or property of one of the contracting parties. RAM Notes Compiled by: Hanniyah Sevilla. Christ May Andolana. induced the other to consent. depriving the latter of a reasonable freedom of choice. 1337. Ferlyn Ong for 4th year Batch 2009 Requisites for Intimidation to Vitiate Consent a) Reasonable and well-grounded fear b) Of an imminent and grave evil c) Upon his person. requisites of fraud: 1. fraud is incidental--Contract is valid but damages may be recovered. And if both parties employed fraud. the contract would remain valid. c) There must be a deliberate intent to deceive or to induce therefore misrepresentation in good faith is not fraud. Fraud in the Celebration of Contract a) Dolo Causante – were it not for the fraud. The following shall be considered: the confidential (the priest). (1269) Kinds of Fraud A. merely damages. family. It must be employed against the other contracting parties. Fraud in Performance of Obligations stipulated in the Contract Requisites of Dolo Causante a) Fraud must be material and serious. There is fraud when. the courts will leave them where they are. the fraud here is fraud at the time of the inception of the contract. or employed upon the spouse. You are a chain 60 . or was ignorant or in financial distress. property or upon the person or property of his spouse. The last paragraph is enforcement of one's claim through competent authority. B. the other is induced to enter into a contract which. Undue influence: when a person takes improper advantage of his powe over the will of another. without them. and it cannot result to the nullity or annulment of the contract but will only be a ground for damages. But the fraud here must be one that is causal. serious or irrisistible force is employed. the other party was induced. spiritual and other relations between the parties. spiritual and other relations between the parties. or was ignorant or in financial distress. e) The threat must be an unjust act. Now. And the fraud alleged by the other party seeking annulment must be clearly and convincingly established by sufficient and clear evidence. 1338: There is fraud when. d) Efficient cause of the execution of the contract. It must have been employed by one contracting party upon the other contracting party. Take note of third paragraph. It must have induced the other party to enter into the contract. Violence or intimidation shall annul the obligation. b) Fraud must have been employed by only one of the contracting parties. The following circumstances shall be considered: the confidential. (dolo causante). in order to wrest consent. it is also found in your criminal law. descendants or ascendants. the parties would have still agreed. (or their properties). no annulment. Now. not by mere preponderance. Because if it were merely dolo incidente. And it must not be employed on a co-party. although it may have been employed by a third person who did not take part in the contract. example: when you apply for insurance policy and the amount is one that will not require you to undergo medical examination but only to fill up a certain form. it can be a ground for nullity or annulment of the contract plus damages.Obligations and Contracts: Sources 2006 Lectures of Atty. depriving the latter of a reasonable freedom of choice. Art. not the fraud at the time of the fulfillment of the contract. an actionable wrong. descendants or ascendants. the other party would not have consented--the contract is voidable b) Dolo Incidente – even w/o the fraud. So. It is as if they were in good faith because of the fact that they are in pari delicto. when is there intimidation? The same definition that you have in your criminal law. 2. when is there violence. that belongs to 1171. because if both committed fraud. 1336. he would not have agreed to. not against a co-party. 1338. family. (n) Art. Because if it were the latter. Lydia Galas (Hann Sevilla). through insidouse words or machinations. or that the person alleged to have been unduly influenced was suffering from mental weakness. (1268) Art. to give his consent. 2007 Case Digests (from Erwin Vicente). (1335) Violence. There is undue influence when a person takes improper advantage of his power over the will of another.
1343.000. Effect: If Absolute simulation. Basta what is required here is that you must have the opportunity to know the facts. 1341. Exception to the exception. 1341: So. Requisites of Simulation a) Outward declaration of will different from the will of the parties. Christ May Andolana. Exception. you cannot sue. 1339: Confidential relations: between the principal and the agent. CA whereby the mistake was committed by a surveyor with respect to the particular location of a particular lot. Lydia Galas (Hann Sevilla). committed by the surveyor and there was mutual mistake by both parties and the SC said that annulment is proper because of the mistake. The rule is: let the buyer beware. 2007 Case Digests (from Erwin Vicente). In order that fraud may make a contract voidable. between two partners. it should be serious and should not have been employed by both contracting parties. c) The purpose is to deceive 3rd persons. And if it turns out that the facts are not true. because of the confidential relation between them. It must have been serious and must have resulted in damage or injury to the other party now seeking annulment of the contract. you answer no. 1342. And you were approved.000. Incidental Fraud – not a cause for annulment. The usual exaggerations in trade. when the other party had an opportunity to know the facts. Ferlyn Ong for 4th year Batch 2009 smoker. Failure to disclose facts. Art. the reason for the loss is the stupidity of the person. then there can be no annulment of the contract based on fraud. Art. 1340: Dolos Bonus. Requisites for Fraud to Vitiate Consent a) Fraud must be serious b) The parties must not be in pari delicto. common victims are the women. because that is merely an opinion. Like if the principal authorizes the agent to sell the property at 100. constitutes fraud. This will not annul the contract. Why will you immediately believe that this particular product is a miracle. then it shall bind the parties provided that no third person shall be prejudiced by such relative simulation. According to authors. Misrepresentation by a third person does not vitiate consent. only damages can be recovered. RAM Notes Compiled by: Hanniyah Sevilla. Art. And the rule is let the buyer beware. otherwise there can be no annulment. For as long as the other party has the opportunity to know the facts. i. Failure to do so constitutes fraud. are not in themselves fraudulent.Obligations and Contracts: Sources 2006 Lectures of Atty. unless made by an expert and the other party has relied on the former's special knowledge. So in that case. b) False appearance must have been intended by mutual agreement. the latter. when the parties conceal their true agreement. unless such misrepresentation has created substantial mistake and the same is mutual. the mistake was not committed by both parties but by a third person. Is the agent bound to disclose to the principal this fact? Yes. This is an example of material misrepresentation. But if it were relative simulation. if the expert is the employee of the person seeking the opinion of the expert. an expert would be one that is knowledgeable in that specific area. 1339. when there is a duty to reveal them. Art. Tolerated fraud. 1345. Art. 1340. but the expert is your employee. Even if it is given by an expert. The agent now was able to sell it at 200. Art. i don't smoke. as when the parties are bound by confidential relations. A mere expression of an opinion does not signify fraud. if you seek the opinion of an expert. 1344.e. 1342: There was this case Diaz vs. Art. Incidental fraud only obliges the person employing it to pay damages. and there is a question there do you smoke and how many packs. Book of Tolentino. The former takes place when the parties do not intend to be bound at all. (n) Simulation of Contract – process of intentionally deceiving others by producing the appearance of a contract that really does not exist (absolute) or w/c is different from the true agreement (relative). 61 . and the person says yes. If it turns out the the opinion of the expert is false. the contract is void. 3. then you cannot sue your own employee. you ask the opinion of a person if this is a true diamond. Is there fraud? No. The parties did not intend to be bound by the agreement. Misrepresentation made in good faith is not fraudulent but may constitute error. (1270) Fraud should not be employed by a party against a co-party. caveat emptor. Simulation of a contract may be absolute or relative. Because that what we call as tolerated fraud.
62 . Your rights to the credit are subordinated to the death of the debtor. good customs. Means there is a true and existing transfer or contract. All rights which are not intransmissible may also be the object of contracts. But if the simulated contract has an illegal object. A relative simulation. exceptions: (1) marriage settlements. Spouses are allowed to donate to each other future properties provided that they comply with the forms of will. public order or policy. (2)partition of the property during the lifetime of the testator. public order or public policy. Also there can be sale of hope. Accdg. Ex: X borrows money from Y. No contract may be entered into upon future inheritance except in cases expressly authorized by law. the parties to the contract ma prove the simulation in order to recover whatever may have been given under such simulated act. including one subsequent to the contract 3. Relatively Simulated (disimulados) disguised contracts: Parties conceal their true agreement EFFECT: Parties are bound to the real or true contract/agreement except: o If contract should prejudice a 3rd person. 1347. Art. ABSOLUTE SIMULATION 1. OBJECTS OF CONTRACTS Art. There can be sale of future things or objects having potential existence. (1272) The thing or service must be w/in the commerce of man. So in that case. morals. 2. in that case that is not within the meaning of future inheritance. 2007 Case Digests (from Erwin Vicente).Obligations and Contracts: Sources 2006 Lectures of Atty. (3) When one’s right over the property is not as an heir but as a creditor. Ferlyn Ong for 4th year Batch 2009 Art. when it does not prejudice a third person and is not intended for any purpose contrary to law. 4. Absolutely Simulated (simulados) fictitious contracts: Parties do not intend to be bound. Book of Tolentino. good customs. the provisions of Art. Implies that there is no existing contract. An absolutely simulated or fictitious contract is void. No contract may be entered upon future inheritance. 2. All services which are not contrary to law. morals. including future things. EFFECT: Contract is Void. The action to rescind (accion pauliana) requires that the creditor cannot recover in any other manner what is due to him. Impossible things or services cannot be the object of contracts. may be the object of a contract. (1271a) Requisites of Object of a Contract a) b) c) d) e) Notes: 1. no real act executed. Lydia Galas (Hann Sevilla). public order or public policy binds the parties to their real agreement. to Tolentino: If the absolute simulation does not have an illicit purpose. morals. 4. and Y says I will pay you when I die. good customs. The action to declare a contract absolutely simulated does not prescribe FRAUDULENT ALIENATION 1. All things which are not outside the commerce of men. Can be assailed only by the creditors before the alienation. public order or public policy may likewise be the object of a contract. Must be determinate as to its kind or determinable w/o need of a new contract or agreement. good customs. 1348. morals. or o If the purpose is contrary to law. (n) Kinds of Simulated Contracts A. Must be transmissible. Must not be contrary to law. Christ May Andolana. 1346. 3. Can be attacked by any creditor. 1411 and 1412 will apply. So. X can enter into a contract involving that credit but subordinated to the death of Y. Accion pauliana to rescind a fraudulent alienaction prescribes in 4 years. B. RAM Notes Compiled by: Hanniyah Sevilla. but no of vain hope (CF: Sales) 2. The insolvency of the debtor making the simulated transfer is not a pre-requisite to the nullity of the contract. Must not be impossible.
unexpected impediments. Art. Contract of guaranty is gratuitous unless there is stipulation to the contrary. (1273) Object must be determinate determinable (w/out need of a new agreement). otherwise the contract is void for want of an essential requisite – the object of contract. 2007 Case Digests (from Erwin Vicente). 1350. The heirs of Lopez now said that the motive predetermined the purpose of the contract. It cannot be said that the donation is a contract of pure benifecence or a contract designed solely and exclusively for the benefit of the donee. the prestation or promise of a thing or service by the other. a 15 year old girl. 1349. For here. provided it is possible to determine the same. in remuneratory ones. without the need of a new contract between the parties. Difficulty of performance – A showing of mere inconvenience. 1351. or increased expenses is not enough to relieve a debtor from the obligation Equity cannot relieve from bad bargains simply because they are such. Cause in Accessory Contracts Like Mortgage & Pledge – the same as the cause for principal contract of loan. Ferlyn Ong for 4th year Batch 2009 Nature of Impossibility a) Nature of transaction or because of law b) Absolute (objectively impossible) – “nobody can do it” c) Relative (subjectively impossible) – “particular debtor cannot comply” Note: The impossibility must exist at the time of the constitution of the contract. it does not affect the validity of the contract. and in contracts of pure beneficence. Case: Lopez fell in love with Conchita. the mere liberality of the benefactor. The particular motives of the parties in entering into a contract are different from the cause thereof. The object of every contract must be determinate as to its kind. Gratuitous or contracts of pure beneficence– the cause is the mere liberality of the benefactor.Obligations and Contracts: Sources 2006 Lectures of Atty. still a contract conditioned upon the attainment of an immoral motive should be considered void. no valid cause. Art. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract. Lydia Galas (Hann Sevilla). Because of Lopez' desire and lust for the body of Conchita. Conchita now demanded for the delivery of the parcel of land. RAM Notes Compiled by: Hanniyah Sevilla. Exception: if the motive predetermines the purpose of the contract then the motive becomes the cause of the contract. CAUSE OF CONTRACTS It is the essential and impelling reason why a party assumes. Conchita said the cause is the liberality. the service or benefit which is remunerated. Art. for each contracting party. No matter how illegal the motive is for as long as the cause is legal and lawful. Book of Tolentino. (1274) Classification of Contracts As to Cause a) b) c) Onerous – the cause is for each contracting party. It is the prestation to be performed by the other contracting party. he told the parents and Conchita that he will be donating a parcel of coconut land if you agree to cohabit with me. In onerous contracts the cause is understood to be. And while it may be true that the cause is the liberality. The SC said the contract is void. however the real cause is the motive and the motive is to have sexual intercourse. The donation was designed both for the benefit of the donee and satisfy the sexual 63 . Remuneratory – the past service/benefit w/c by itself is a recoverable debt. Christ May Andolana. the prestation/promise of thing/service. Moral obligation may be the cause of civil obligation – if it does not exist . (n) Q: Is the cause the same as the motive of the contract? No. it may be regarded as cause when it predetermines the purpose of the contract. an obligation. The debtor who does not perform in such cases must be held liable for damages. While it is true that motive differs from the cause. Then Lopez died. The parents and Conchita consented and they lived and had sexual intercourse.
So the employer filed an action to collect the amount stated in the PN. the guilt of the minor cannot be judged with equal severity with the guilt of an adult. 1355. Although the cause is not stated in the contract. before the hearing. (1277) Cause must exist but is not necessary to state the cause. stating that the cause for the action was illegal because it was to stifle a criminal prosecution. produce no effect whatever. Art. 1354. Insufficient price of a thing sold) Rules on Lesion 64 . Therefore Conchita is entitled to the land. Lydia Galas (Hann Sevilla). Art. and the parties bound to it unless third persons are prejudiced by such simulation. The cause is unlawful if it is contrary to law. the pari delicto rule cannot apply in the case. This is different from the first case. When she was about to be prosecuted for what she did. No palay was bought. if it should not be proved that they were founded upon another cause which is true and lawful. A executed a PN. the father and the husband of X executed a PN covering the value of what has been lost by reason of X's stealing. RAM Notes Compiled by: Hanniyah Sevilla. to return the money to B. But the SC said that motion should be denied because there was an admission on the part of A that he really owed B money. 1354: So. mistake or undue influence. public order or public policy. Now. with B seeking consideration that the case would be dismissed because he will try to convince A to issue a promissory note to cover the amount that was not returned. there was A who was given money by B to buy palay within a certain period or if unable to secure the palay by that time. So what B did was file a case against A for estafa. Under Statute of Frauds – certain agreement must be in writing. Book of Tolentino. contract is void b) It must be true – if cause is false. the cause was the stifling of the criminal prosecution of X. But because the donor cannot invoke his own immorality. The statement of a false cause in contracts shall render them void. Lopez. then that is not an absolutely simulated contract but only a relatively simulated one. 2007 Case Digests (from Erwin Vicente). ILLEGAL MOTIVE not necessarily renders the contract void. Art. Christ May Andolana. (n) LESION – inadequacy of cause – (eg. (1275a) Requisites for Cause a) It must be present – no cause. But X was not made a signatory to the PN. So what B did was to file an action to recover the amount. the parties are given a chance to show that a cause really exists and is lawful and true. Except in cases specified by law. it is presumed that it exists and is lawful. a friend entered before and in behalf of A. to the court. no money was returned. 1352. (1276) False cause does not necessarily mean that contract is void. so the employer was not able to collect. But in another case. morals. Art. or there is mistake or there is undue influence. unless the debtor proves the contrary. Ferlyn Ong for 4th year Batch 2009 desire of Mr. Maybe unknown to the other. the presumption is that the contract is valid. lesion or inadequacy of cause shall not invalidate a contract. Remember that Conchita is a minor. Now. then the more reasons that the heirs are barred in questioning the validity of the donation. but the amount was not paid. Cause is void. and it was found out that she was stealing money from the business establishment. good customs. The exception there is when fraud is employed. Contracts without cause.Obligations and Contracts: Sources 2006 Lectures of Atty. MOTIVE May vary although he enters into same contract. 1353. Its presence cannot cure the absence of cause CAUSE The same Always known ILLEGAL CAUSE makes a contract void. according to JBL Reyes. The case was dismissed because accdg. the PN remained as a PN. and the buyer is the son or daughter. Minors occupy a privilege position before the law. or with unlawful cause. A moved for the dismissal of the case. no matter how inadequate the consideration is. unless there has been fraud. contract is void unless some other cause w/c is lawfully really exists. c) It must be lawful From transcription: There was this case: X is an employee of a business establishment. In the MFR filed by the heirs. Like the actual value is 1M and he's only selling it for 100K.
Christ May Andolana. The law require that it must be in writing. it may refer to the manner in which the contract is executed. or that a contract be proved in a certain way. But the spiritual system of contract 65 . but rather to transfer ownership over the property in favor of the vendee. the acceptance of the donee must also be in a public document to be valid. Absent one makes the donation void. there are certain exceptions. no. it must be in writing or in some memorandum or note. And to inform third person that the property has already been bought. Book of Tolentino. Lydia Galas (Hann Sevilla). but it is unenforceable. An example of which would be a donation of a real property which must be in a public document in order to be valid. provided that all the essential requisites for the validity are present. for as long as the three are found. One is for validity. Ferlyn Ong for 4th year Batch 2009 Gen. or iii. But in contracts. So that is the purpose of the form. So those are only the exceptions for purposes of validity or enforceability. So a sale involving real property is valid in whatever form it is entered into. may be waived by acceptance of benefits (partial) or by failure to object to presentation of oral or parol evidence. When we say enforceable. And another is when you are into lending money. 1356. Underlying principle that in the interpretation and/or construction of the law. cause or consideration and object/subject matter.Obligations and Contracts: Sources 2006 Lectures of Atty. So. But with respect to form. For what purpose then is the form? It is not for validity. When together with lesion there has been i. but it need not be in a public document to be valid. for as long as there has been payment (vendee) and there has been delivery on the part of the vendor. the right of the parties stated in the following article cannot be exercised. agreements for the payment of interests must be in writing otherwise one cannot collect. that requirement is absolute and indispensable. provided all the essential requisites for their validity are present. if it is absolute and indispensable. in whatever form they may have been entered into. 2007 Case Digests (from Erwin Vicente). Undue Influence b. Contracts shall be obligatory. Art. So. in whatever form they may have been entered into. And not only that. The authority of the agent to sell property must be in writing. we must interpret not by the letter that killeth. which may be written or oral. Rule: Lesion/inadequacy of price does not invalidate a contract. subscribed by the parties. Another example of a contract which would require a certain form is donation involving movable property and the value exceeds 5K. Because if you were the one who prepared the contract. under 1403. However. then the contract should be construed strictly against the person who prepared it. it cannot be enforced through court action. then the sale is void. Now. noncompliance with it means the contract is void. contracts are obligatory. Now what would be required. In such cases. That must be in writing otherwise void. When we say form. paragraph 2. (1278a) GEN. then the contract is presumed valid. So that a contract may prove in a certain way. regardless of the form. provided that all the essential requisites for its validity are present. RULE: NO FORM IS REQUIRED IN CONSENSUAL CONTRACTS Formal Contracts – requires form ( eg. FORMS OF CONTRACTS The general principle is that the law looks more into the spirit. That is how one should construct or interpret the law. Fraud. a sale of a parcel of land orally made is valid. what else? Contracts involving antichresis. and the other for enforceability. A contract may be valid. In cases expressly provided by law. if not. c) For convenience 1356 is the spiritual system of a contract. In such cases. and liberally in favor of the person who merely affixed his signature and did not participate in the making of the contract. the right of the parties stated in the following article cannot be exercised. Donation) Real Contracts – requires delivery WHEN FORM IS IMPORTANT a) For validity b) Enforceability (Statute of Frauds). but by the spirit that giveth life. And what are the essential requisites? Consent. that requirement is absolute and indispensable. Exceptions: a. Mistake. (Statute of Fraud). It is valid. Even if there is no (written) contract. The register of deeds will not transfer the title of the property from the vendor to the vendee unless it is in a public document. But there are certain contracts which would require that they be in a certain form. which means that. ii. rather than in form. You cannot maintain an action in court because there is a lack in that particular document. But there are certain documents which will require a certain form in order that it be valid. But for validity. So. Now. contracts are obligatory in whatever form they may have been entered into. RAM Notes Compiled by: Hanniyah Sevilla. when the law requires that a contract be in some form in order that it may be valid or enforceable. Even if it is orally made between the parties. another exception is for purposes of enforceability.
1358. oral agreements would often lead to fraud in the fulfillment of the obligation. barter. there is this case of Hernaez vs. 66 . As in a case of a donation of real property which needs to be in a public document. transmission. whether a certain form is required or not. or for efficacy against third persons. transmission. all contracts are valid regardless of form. The following must appear in a public document: (1) Acts and contracts which have for their object the creation. or should prejudice a third person. or of those if the conjugal partnership of gains. The contract covered by Art. She was paid but there was a balance. Art. it is already valid. better put it into writing. Only for purposes of affecting third persons. Under 1356. chattels or things in action are governed by articles. he sided with the movie company. then that is highly debatable. or renuncitation of hereditary rights. Now. Christ May Andolana. Hernaez was a star of Philippine Cinema. 1357: If the law requires that a document or other special form. as in the acts and contracts enumerated in 1358. RAM Notes Compiled by: Hanniyah Sevilla. An example of this is waiver of a right. under the Statute of Fraud. This right may be exercised simultaneously with the action upon the contract. Because by itself. All other contracts where the amount involved exceeds five hundred pesos must appear in writing. Lydia Galas (Hann Sevilla). So after rendering service. 2007 Case Digests (from Erwin Vicente). 1403. That's the essence of the Hernaez case. 2. or things in action are governed by Art. The reason is to inform 3rd persons that the administration has been transferred. Delos Angeles. or any other power which has for its object an act appearing or which should appear in a public document.Obligations and Contracts: Sources 2006 Lectures of Atty. The SC said that the dismissal was not proper. and 1405. (3) The power to administer property. But sales of goods. or should prejudice a third person In your family code. No. and the balance exceeds 500 pesos. chattels. The movie company refused to honor the agreement stating that the agreement is deemed void because it was not in writing. Art. once the contract has been perfected. there are only two exceptions. Hernaez now demanded for the payment of the balance. 2 and 1405. One is when the contractual form is needed for validity. (4) The cession of actions or rights proceeding from an act appearing in a public document. modification or extinguishment of real rights over immovable property. You renounce your right over the inheritance that has already become vested in favor of your siblings. the transfer must be in a public document. mortgage (modification of one's proprietarial rights). Who were there when you entered into the agreement? There were only two of us. REFORMATION REFORMATION OF INSTRUMENTS (n) Remedy in equity by means of w/c a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or mistake has been committed. even a private one. No. or any other power which has for its object an act appearing or which should appear in a public document. 1358: Is the requirement that it must be in a public document for the purpose of validity? No. Otherwise. 1358 are binding and enforceable by action despite the absence of writing because the Article nowhere provides that the absence of written form will make the agreement invalid or unenforceable. The powers to administer property. even if not in a public docu are valid. This right may be exercised simultaneously with the action upon the contract. Because if worse comes to worst. [Take note that sale involving real properties is already removed from par. 1357. even a private one. So. when one spouse desires to transfer administration over his communal or paraphernal property to the other spouse. once the contract has been perfected. repudiation. So. 3. The cession of actions or rights proceeding from an act appearing in a public document [example Claim of ownership] All other contracts where the amount involved exceeds 500 must appear in writing. Acts and contracts which have for their object the creation. Ms. If the law requires a document or other special form. And her services were engaged by one of the producers. 1 of 1358] 2. Because the faintest ink is better than the sharpest memory. those enumerated under 1358. as in the acts and contracts enumerated in the following article. Book of Tolentino. Now what are those contracts? 1. Nowhere does it say that if it is not in writing. repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains. Delos Angeles is the judge. Second when form is needed for enforceability. they went to court. is that it is to enforce against third person. modification or extinguishment of real rights over immovable property. assignment. Ferlyn Ong for 4th year Batch 2009 cannot be adopted in unqualified manner. when you enter into a contract of usufruct because there is a transfer of ownership. you file a case in court and what is your proof? It was orally admitted. So. 1403. The cession. the contracting parties may compel each other to observe that form. the contract is void. The reason why there is this requirement that it must be in a public document. the contracting parties may compel each other to observe that form. But sales of goods. sales of real property or of an interest therein a governed by articles 1403. (2) The cession. 4.
through the fraudulent acts of the other. Document must not refer to a simple unconditional donation inter vivos or to wills or to a contract where real agreement is void. True intention is not expressed in the instrument 3. Requisites: 1. but concealed that fact from the former. But if it prevented the meeting of the minds. there was this case of Ong vs. fraud. inequitable conduct or accident. there having been a meeting of the minds of the parties to a contract. When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement. When. Mistake may be unilateral under the conditions set forth in Art. It must be brought w/in the proper prescriptive period. 1363. the proper remedy is not reformation of the instrument but annulment of the contract. Car (?). by reason of mistake. Lydia Galas (Hann Sevilla). 1361. When through the ignorance. 5. So here is there was failure on the part of the parties to express their true intention. 3. Only that when the parties reduced the agreement into writing. the courts may order that the instrument be reformed. ok. fraud. the instrument does not express the true intention of the parties. There must be clear and convincing proof thereof 4. one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement. Ferlyn Ong for 4th year Batch 2009 Art. What was only omitted was the right of the buyer to repurchase. the instrument may be reformed. But if any of the vices of consent have prevented the meeting of the minds of the parties. 1360. By reason of Fraud. negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist. When the document was already prepared. 67 . There was already a meeting of the mind with respect to object and the cause. Requisites for Action for Reformation 1. Mistake must be mutual 2. The Spaniard said. then there is no reformation but rather annulment. the failure of the instrument to express the agreement must be due to mistake. 1365. Now in that case. Now the Chinese does not know how to read or speak English. fraud. If two parties agree upon the mortgage or pledge of real or personal property. reformation of the instrument is proper. 1362: Now. Art. 2007 Case Digests (from Erwin Vicente). Art. there has been an agreement. lack of skill. the Chinese aske if he included the condition that the sale should be one with a right to repurchase. inequitable conduct. mistake. inequitable conduct or accident. inequitable conduct or accident. The Spanish said yes when in truth the Spaniard omitted that it was a sale of pacto de retro because he intended to mortgage the property. The instrument or document evidencing the contract does not express the true agreement between the parties. their true intention is not expressed in the instrument purporting to embody the agreement. 1364: This is very common in law firms. inequitable conduct or accident. If mistake. and the parties have consented. one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed. So the Spaniard was interested to buy the property of the Chinese. Mistake must be of fact. the writing failed to keep the true intention. then no reformation but annulment. the former may ask for the reformation of the instrument. 3. 1362 and 1363. There must be meeting of the minds 2. Book of Tolentino. By reason of what? Fraud. 2. RAM Notes Compiled by: Hanniyah Sevilla. 1359. Now the Chinese said the agreement should be a pacto de retro. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention. (typographical error) Art. Art. because lawyers trust their secretaries. What are the requisites in order that reformation is proper? 1. or accident has prevented a meeting of the minds of the parties. 1364. The principles of the general law on the reformation of instruments are hereby adopted insofar as they are not in conflict with the provisions of this Code. Why is there a need to reform instruments? Instruments are reformed in order that the true intention of the parties is expressed. but the instrument states that the property is sold absolutely or with a right of repurchase. Art. involving a Spaniard and a Chinese. There must have been a meeting of the minds upon the contract. said instrument may be reformed. Christ May Andolana. 1362. 1361: The error is thru mistake but all the essential requisites are present Art. But all the essential requisites are present. mistake.Obligations and Contracts: Sources 2006 Lectures of Atty.
waiver or ratification) 1367: You cannot ask for reformation and at the same time ask for enforcement. so what is the presumption? The presumption is that what was entered into by the parties is not one of sale but mortgage. he cannot subsequently ask for its reformation. in a void contract. Reformation may be ordered at the instance of either party or his successors in interest. Lydia Galas (Hann Sevilla). if the words appear contrary to the intention of the parties. #3. Art. Ita Scripta Lex. upon petition of the injured party. [Because if it were sale. (2) Wills. 1371: So going back to the example of equitable mortgage. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties. those are contrary to each other. literal interpretation. 1368. how do you interpret contracts? If the stipulations of the contract are clear and leave no room for doubt. Christ May Andolana. 1372: Example is your best friend executed an SPA for you to encumber her property. So. So. yet at the same time you are asking for performance. the buyer retains a portion of the purchase price. However general the terms of a contract may be. why should the buyer retain a portion of the purchase price. if the mistake was mutual. If you say that it does not express the true intention of the parties. 1369. what are included? Everything that is incorporated with the land. The seller. parties do not intend to be bound by their agreement. 1371. There is no force or effect that arise from a void contract. continues to pay the taxes on the property. you would also be liable for the debt of your friend. 3. being void. That is under a different guise. Book of Tolentino. 2. 1366. If the words appear to be contrary to the evident intention of the parties. So you used it as a collateral in your loan. Then we must interpret the law as it is written. So. and being gratuitous you cannot question the intention of the person giving or donating the thing/property. the important task of contract interpretation is to always ascertain the intention of the contracting parties. (1370) If the written instrument is different from what has been verbally agreed upon? Reformation because it does not express the true agreement. would say that let's just execute a deed of sale with a right to repurchase. ] Now read 1502 Art. When one of the parties has brought an action to enforce the instrument. And the determination is based on their subsequent acts. 1367. That portion represent actually the interest. Art. how can you reform it. aside from he remains in possession of the property. the latter shall prevail over the former. Very common is equitable mortgage although the document is denominated as deed of sale with a right to repurchase. And guided by the principle again that we should interpret not by the letter that killeth. INTERPRETATION OF CONTRACTS: Art. It does not follow that even if your property was used as a surety. (estoppel. if the buyer is not yet in possession after several years. RAM Notes Compiled by: Hanniyah Sevilla. Prescriptive period for reformation of contracts is 10 years Art. but by the spirit that giveth life. The procedure for the reformation of instrument shall be governed by rules of court to be promulgated by the Supreme Court. Art. instead of having executed a deed of real estate mortgage. The seller remains in possession of the property. the literal meaning of its stipulations shall control. 1370. In fact. Because those are different and distinct from the agreement. So. However. they shall not be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree. Ferlyn Ong for 4th year Batch 2009 1365: Now there are money lenders who would. There shall be no reformation in the following cases: (1) Simple donations inter vivos wherein no condition is imposed. their contemporaneous and subsequent acts shall be principally considered. It has the following indicators: 1. or his heirs and assigns. (3) When the real agreement is void. Moreover. if you say the sale of land with all the improvements thereon. One is inconsistent with the other. In order to judge the intention of the contracting parties. then the intention shall prevail. 68 . 2007 Case Digests (from Erwin Vicente). No legal effect shall come from a void contract. 1366: #1 and 2 are contracts based purely on the liberality of the testator. Now. then definitely the seller has to vacate the property and why should he continue to pay the taxes. 1372. otherwise.Obligations and Contracts: Sources 2006 Lectures of Atty. that will not find any application if the stipulation of the parties are clear and unambiguous which leaves no room for interpretation. Art.
Void (inexistent or illegal) – no effect at all. attributing to the doubtful ones that sense which may result from all of them taken jointly. Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract. the contract shall be null and void. which has the least transmission of rights? Commodatum. Requires mutual restitution. 1377. Rescissible Contracts are valid contracts. rescissible contracts occupy the highest lesion. 69 . Anong presumption dyan? The difference in the payment actually refers to the payment of interest. the price varies.Obligations and Contracts: Sources 2006 Lectures of Atty. 1373. the least transmission of rights and interests shall prevail. extrinsic defect consists of economic lesion or damage. when we speak of rescission. Ferlyn Ong for 4th year Batch 2009 Art. because the usufructuary is under obligation to return the property. If some stipulation of any contract should admit of several meanings. So for instance it is a pacto de retro sale. Unenforceable – cannot be sue upon or enforced unless ratified. When it is absolutely impossible to settle doubts by the rules established in the preceding articles. Art. Between antichresis and mortgage? Mortgage parin. but the creditor still enjoys the interest on the money that was loaned. If the contract is onerous. Art. The various stipulations of a contract shall be interpreted together. Voidable – valid until annulled except if ratified – intrinsic defect as in vitiated consent. If it cannot be harmonized. or to a third person. The various stipulations of a contract shall be interpreted together. 1379. Between pledge or mortgage? If there is doubt. (1287) Art. The principles of interpretation stated in Rule 123 of the Rules of Court shall likewise be observed in the construction of contracts. Rescissible – contract w/c is valid until rescinded. There must be at the beginning either a valid or a voidable contract. nor can be ratified or validated. (2nd sentence) Now. Art. Of the four of defective kinds of contracts. There is an economic or financial prejudice to someone ( a party or a third person) 3. 1378: So between a commodatum and donation. 1375: If you are appointed as an administrator. Lydia Galas (Hann Sevilla). But upon demand. 4. and the other person gives money. 1374. Contracts validly agreed upon may be rescinded in the cases established by law. RAM Notes Compiled by: Hanniyah Sevilla. 2. Art. RESCISSIBLE CONTRACTS 4 Kinds of Defective Contracts 1. why? Because there is no transfer of ownership in commodatum. (Last paragraph) Lack of object which makes the contract void because the intention of the parties cannot be ascertained. obscurity. Christ May Andolana. So a person giving a ring to the other person. there is no breach of faith in the performance but rather the ground of rescission is more on the economic injury suffered by the parties or a third person. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract. Art. attributing to the doubtful ones that sense which may result from all of them taken jointly. and shall fill the omission of stipulations which are ordinarily established. Why? Because there is no transfer of possession. The contracts are valid but by reason of economic injury caused either to one of the parties. and the doubts refer to incidental circumstances of a gratuitous contract. 1378. the doubt shall be settled in favor of the greatest reciprocity of interests. 1376. 2. What is the presumption? Pledge. Book of Tolentino. 3. 2007 Case Digests (from Erwin Vicente). what if the contract is onerous? The doubt shall be resolved in favor of the greatest reciprocity of interest. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the 1377: Very common in contracts of adhesion. it shall be understood as bearing that import which is most adequate to render it effectual. Whereas if it were a donation. And unlike 1191. remove those which are incompatible. 1374: (Allied Bank) Harmoninize the provisions. (1284) Art. the contract has to be rescinded. If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have been the intention or will of the parties. Usufruct or the donation? Usufruct. no effect now but it may be upon ratification. mortgage. Then you ascertain the intention of the parties. 1380. it does not involve acts of dominion or acts of ownership. the property has left the patrimony of the donor forever. 1375. because that would fall under the greatest reciprocity of interest. (1290) Requisites for Rescission 1.
1381. (2) Those agreed upon in representation of absentees. With Court approval – valid regardless of lesion ii. (4) 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. EFFECT OF CONTRACTS ENTERED IN BEHALF OF WARD (1) (2) If an act ownership. The party alienating must be in bad faith (he knew that damages would be caused) d. if the latter suffer the lesion stated in the preceding number. THINGS IN LITIGATION (eg. The powers mentioned in 1381 are powers of administration and the representative or the guardian entered into a contract and the object of the contract resulted to the economic injury of either the ward or the absentee. Rescission under 1381 is a subsidiary remedy. (5) All other contracts specially declared by law to be subject to rescission. The action is instituted by either of the parties or by third parties. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. Lydia Galas (Hann Sevilla). You have to prove before the court that you have exhausted all the remedies available to you as a creditor before you are given a right to institute an action for rescission 1380: What are those cases? 1381 provides those cases. Fictitious contract cannot be rescinded since it is null and void. if there is no showing that. The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than onefourth of the value of the things which are the object thereof. 70 . LESION – disparity between price and the value. Courts cannot grant a period or term w/in w/c to comply Non-performance by other party is immaterial. By more than 1/4 of value of the object thereof. especially if it is found in number 3 of 1381. RAM Notes Compiled by: Hanniyah Sevilla. W/out Court approval – rescissible. unless shocking to the conscience is not a sufficient ground for setting aside a sale. What rescission presupposes is a valid contract. in the event of a resale. Action may be instituted only by the injured party to the contract. Court approval is required otherwise it is unenforceable whether there is lesion or not. 2007 Case Digests (from Erwin Vicente). if lesion is more than ¼ contract may be rescinded on the ground of lesion is a partition of inheritance. the courts may grant a term. Requisites a. There must be no other remedy for the prejudiced creditor – “inability to collect to the claims due them. In some cases.Obligations and Contracts: Sources 2006 Lectures of Atty.” (4) Action to rescind may be brought even if debtor has not been judicially declared insolvent and even if the creditor has not yet brought an action to collect. Ferlyn Ong for 4th year Batch 2009 RESCISSION (1380) Based on lesion or fraud upon creditors. mere inadequacy of price. B sells ring to C – sale to C is rescissible) Property is in litigation after defendant received service of summons. There must be a creditor who became such Prior to the contract sought to be rescinded – (a person asking for a rescission is a judgment creditor – immaterial) b. If act of administration i. and the representative with respect to the absentee are only given the powers of administration. A sues B for recovery of ring – pendente ite. c. Book of Tolentino. Non-performance of the party is important. Art. 1381: #1 and 2: The guardian with respect to the ward. There must be an alienation made subsequent to such credit. a better price can be obtained. RESCISSION (1191) Based on nonperformance or nonfulfillment of the obligation. (3) Accion Pauliana – action to rescind made in fraud of creditors. Christ May Andolana.
no rescission if with court approval. The court cannot just grant rescission since there are certain requisites that must be complied with. summary: -This only refers to acts of administration. Now. ano? Unenforceable. a tractor. If suppose it is an onerous transfer.But even if it exceeds more than one fourth of the value. But. the good faith of the first transferee will cleanse the transfer. unenforceable. when can you consider a person an absentee for purposes of administration? 2 years if without administrator. Ferlyn Ong for 4th year Batch 2009 So example. Regardless of the good faith or bad faith of the receiver. Only in cases where there has been no judicial authorization obtained by the representative or the guardian. It will be found in the cases that i've assigned. even if it exceeds more than 1/4. That is acted without or in excess of the authority granted to him. OR suppose there are several transfer. But you also have other motives in mind. Now what if the transfer is gratuitous? Do we also follow the same principle? No. the contract has to be rescinded. Because if you co-relate that with the provisions of the Family Code and there is a need to encumber or dispose a portion of the property of the absentee. Then it ends now to the fourth transferee regardless of the bad faith of the subsequent transferee because it ended with the person who acted in good faith. and there is collusion between the transferor and the second transfeee. and not acts of ownership . Pag third person ang magbenta. not rescission because there has been good faith of the last transferee. 2007 Case Digests (from Erwin Vicente). But if it were the spouse. void yan. otherwise that act of the other spouse is void but it is a continuing offer between the spouse who did not give consent and the offeree unless earlier revoked. -But if it were acts of administration. So this would only refer to in excess of the authority granted to the present spouse and the encumbrance/alienation refers to the paraphernal property and the capital(?) property of the absentee. Book of Tolentino. the act is void. so what you did was to buy an equipment. so in that case the contract entered into by the administrator can be rescinded because it will result to the economic injury of the ward by more than 1/4 of the value of the object which is the tractor. So all the of the transferee will be liable. Then there can be damages. then there can be no rescission. Christ May Andolana. hence there can no longer be rescission. beyond his authority. Exception: even if the first transferee acted in GF. to fall whether in number one or number two 1381. . to the second transferee who acted in bad faith. And you tell now the dealer. RAM Notes Compiled by: Hanniyah Sevilla. 3. Why? There is no consideration given by the transferee. He can only ask for rescission.) Those undertaken in fraud of creditors when teh latter cannot in any other manner collect the claim due them. But what if the guardian or the representative speaks of getting money in order to develop the property. His only recourse is to ask damages from the transferor. we have to take into account the good faith or bad faith of the transferee. you wanted to enhance the development of the farm. it must exceed 1/4 of the value of the object of the contract. Lydia Galas (Hann Sevilla). If the representative is a third person. but the administrator obtained judicial authorization. -The exception in #1 and 2 is judicial authorization. then the creditor who is prejudiced by the transfer could no longer ask for the rescission of the transfer because of the good faith. "can you increase the price by 30%? You get 5%. So if it is onerous and ther is good faith from the first transferor to the first transferee (meaning the transferee acted in good faith). what will you do? For purposes of supporting the family? You gain judicial authority in a summary proceeding. Now. The good faith or bad faith of the transferee is immaterial. But if the representative is the spouse. 71 . then there can be no rescission. and 5 years if there is an administrator. when he received the thing transferred. it does not include acts of ownership. from the first transferee to the third transferee.if the guardian or representative would exercise acts of ownership beyond what is authorize. but there is court approval or judicial authorization. meaning there is an equivalent consideration given. Now if the transfer is onerous. if there is bad faith from the first to the 2nd then definitely there can be rescission. to the third transferee who still acted in bad faith and the fourth transferee who acted in good faith. But if there was no collusion between the transferor and the 2nd transferee. And normally the spouse is given priority. What kind of a contract is that? Unenforceable contract. From the 1st transferee who acted in bad faith. subsequent transferee acted in bad faith. So the spouse' authority only includes powers of administration. He now mortgaged the property. In those cases there is a need for judicial declaration as an absentee. Now the creditor cannot ask for annulment precisely because he is not a party to the contract. But such act prior to the effectivity of the family code is not void. So the exception in number three would now depend on the kind of transfer. even if the wife or the absentee suffers lesion by more than one fourth.Obligations and Contracts: Sources 2006 Lectures of Atty. so he cannot be prejudiced by the rescission. I get 25%". if you remember in your Family Code. even if the subsequent transfer is in bad faith. but voidable. In order that rescission will lie. The good faith of the first transfer cures the bad faith of the second transfer. the act will not be rescissible but rather unenforceable. to cleanse the transfer of any defect. they would now use the first transferee as an intermediary or a bridge. then there can be rescission.
if what is involved is real property and you are the complainant. (1292) Requisites (1) The Debtor-payer must have been insolvent (no judicial declaration needed) (2) Debt was not yet due and demandable. so there can also be rescission. But if it is a transfer between a father and a son and it is accompanied by a sale upon credit by an insolvent debtor (Chua vs.So if you are insolvent. RAM Notes Compiled by: Hanniyah Sevilla. Manikil (?). meaning you're asking for the return of real or movable property. -meaning there is already a case filed against him involving collection or money claim.Obligations and Contracts: Sources 2006 Lectures of Atty. 1526. then you pray before the court that a writ of attachment be issued or a receiver be appointed over the property which is the subject matter of the litigation. So it refers to obligations not yet due. and the price with its interest. -Your assets cannot meet your obligations. Christ May Andolana. And if any of those will be found. then definitely the presumption will arise that the transfer is to defraud creditors. Others would be those falling under the Law on Sales. the transfer of all or nearly all of his property by a debtor. to prevent the defendant in possession of the property from alienating it without your knowledge or without the approval of court. 2007 Case Digests (from Erwin Vicente). there are also what we call as the badges of fraud with respect to alienation in order to defraud creditors. Obligations exceeds assets. and 1529 Art. Ferlyn Ong for 4th year Batch 2009 Now. 6.) Those which refer to things under litigation if they have been enterd into by the defendant without the knowledge and approval of the litigants or of competent judicial authority Example of this would be a claim for reconveyance. to protect your right. 7. Art. 4. and he found out that the debtor has already transferred nearly all his property to answer for the credit that is due him. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected. And that is why we said that the action for rescission is subsidiary. The action for rescission is subsidiary. in order to place the property in custodia legis and to take it away from the possession of the debtor. why will you sell your property on credit when you are actually in need of money. 4. then the debtor now would start to dispose or encumber the properties that might answer for the judgment award that may be rendered by the court against him. That is what is meant by to whom fulfillment the debtor could not be compelled at the time they were effected. (1294) Art. are also rescissible. when there are present any of the above circumstances. So it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. Rescission shall be only to the extent necessary to cover the damages caused. especially if the transfer is gratuitous in nature. the fact that the consideration of the conveyance is inadequate 2. CA). 72 . then the presumption will arise especially if the transfer is made after incurring the obligation and it can be shown that the debtor has no other property which can answer for that obligation except that property which he has transferred. the person who will be prejudiced by such must show proof before court that he had already exhausted all efforts to recover what is due him. 5. 3. a transfer made by the debtor after suit has been begun and while it is pending against him. 78 with respect to partiton of the estate of the deceased when one of the heirs suffer lesion by more than 1/4 of the value which he is supposed to receive. 1384. Lydia Galas (Hann Sevilla). then the presumption will arise that he intended to defraud the creditors when he made that transfer. Evidence of large indebtedness or complete insolvency. then you may go to the office of the Register of Deeds and have it annotated at the back of the title of the property that this property is under litigation. 1383. Now what are the badges of fraud: 1. 1382. Book of Tolentino. together with their fruits. the fact that the transger is made between father and son. benefits only the creditor who has asked for rescission. He can only ask to the extent necessary to cover the damages caused. the failure of the vendee to take exclusive possession of all the property So those are the badges of fraud. and he failed.) All other contracts specially declared by law to be subject to rescission Those referred to in Art. 5. yet despite the fact that the debtor is insolvent pays the obligation. consequently. it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. especially when he is insolvent or greatly embarrassed financially. In Oria vs. Rescission creates the obligation to return the things which were the object of the contract. And we call that notice of lis pendens. Or if what is involved is personal property. (n) Partial rescission is possible. are also rescissible. (1383) And he cannot ask for more than what is due him. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. a sale upon credity by an insolvent debtor . Now another act which can be the subject of rescission can be found in 1382: obligations not yet due. -The mere fact that there is a transfer between a parent and a child does not arise that there is a fraudulent transfer. 1385. (1384) Art. 1524.
Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been issued. So just like 1191. And if you cannot return this then you cannot ask for rescission. Rescission referred to in Nos. Neither shall rescission take place when the things which are the object of hte contract are legally in the possession of third persons who did not act in bad faith. there is mutual restitution. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors. 1386: Rescission referred to in Nos. In this case. Third. Second. Except when it is prejudicial to creditors. RAM Notes Compiled by: Hanniyah Sevilla. if the transfer is gratuitous and you acted in good faith. (1297a) PRESUMPTIONS OF FRAUD Gratuitous Alienations contracted “before” the donation. when the donor did not reserve sufficient property to pay all debts contracted before the donation. Now. then you return the thing in that state. the design to defraud creditors may be proved in any other manner recognized by the law of evidence. or 2. Now. Meaning if there has already been deterioration. Against whom some writ of attachment has been issued. Ferlyn Ong for 4th year Batch 2009 Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. In this case. you return the thing in the condition that it is found. and need not have been obtained by the party seeking the rescission. (1295) Mutual restitution Requisites before Rescission can be Brought a) Generally. Book of Tolentino. then you can ask for reimbursement. the price and the interest? If you are a transferee in good faith. And you cannot ask for rescission unless you can return what you have received from the other party. especially when he is insolvent or greatly embarrassed financially. indemnity for damages may be demanded from the person causing the loss. The thing-object of the contract is not in the legal possession of 3rd persons in good faith. indemnity for damages may be demanded from the person causing the loss. restoration or restoration applies only to what under Art. The action must be brought w/in proper prescriptive period. then you will not be liable for the deterioration of the thing which is the subject matter for rescission. The transfer of all or nearly all of his property by a debtor. exception you are the complainant and you have not annotated it. presumed fraudulent: when debtor did not reserve sufficient property to pay all debts Onerous Alienations Presumed fraudulent – when made by persons: 1. 2007 Case Digests (from Erwin Vicente). 73 . There must be no other legal remedy. 1381? #1 and 2 and 3. Unless. BADGES OF FRAUD (circumstances that a certain alienation has been made in fraud of creditors) 1. exception is onerous and good faith. the price and the interest. In addition to these presumptions. are you also obliged to return the thing. It can be carried out only when he who demands rescission can return whatever he will be obliged to return. plaintiff must be able to return what has been received by virtue of rescissible contract. The decision or attachment need not refer to the property alienated. Christ May Andolana. Against whom some judgment has been rendered in any instances (even if not final). 2. the fruits. The fact that consideration of the conveyance is fictitious or inadequate. A sale upon credit by an insolvent debtor. and the 3rd person who acquired it had no constructive knowledge of the litigation. 1387. you received the property believing in good faith that the transfer gratuitously is legal and valid. Art. and in number 4. b) c) d) 1385: So what must be returned? The object of the contract. 1386.Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla). 3. 4. A transfer made by a debtor after suit has been began and while it is pending against him. if the deterioration is caused by your negligence or through fraud after receiving the summons for rescission. 1 and 3 of 1381 shall not take place with respect to contracts approved by the courts Art. 1 and 2 of article 1381 shall not take place with respect to contracts approved by the courts. if you have incurred necessary expenses. But if it was due to a fortuitous event and before you have received the summons. your obligations are to return the thing but not to pay for the fruits already received. the fruits.
Now suppose it does not fall under numbers 1 and 2. (1299) WHO CAN BRING ACTION? 1. 1388. the writ of execution issued by the court by reason of that favorable judgment will be returned unsatisfied by the sheriff) Par. but he will be liable for damages. 1177 of C. For persons under guardianship and for absentees. When shall you start counting the four year period? That was answered in the case of Cheng vs. validly executed is presumed valid unless it can be shown that at the time of execution of conveyance. the liability will be only upto T3. If there are two or more alienations. Book of Tolentino. He will not be liable to return. Rescission is merely a secondary remedy --. The injured party (or defrauded creditor) 2. The failure of vendee to take exclusive possession of all the property. 1387: Presumptions Par. RAM Notes Compiled by: Hanniyah Sevilla. These contracts are binding. or 2.Obligations and Contracts: Sources 2006 Lectures of Atty. shall indemnify the latter for damages suffered by them on account of the alienation. The action to claim rescission must be commenced within four years. unless they are annulled by a proper action in court. then as we said. or until the domicile of the latter is known. Christ May Andolana. even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract. 1388: So in this case. 3: Badges of fraud Art. 7. Lydia Galas (Hann Sevilla). and so on successively. His heir or successor-in-interest 3. for after all transferee may have been in good faith and is now in legal possession of the property. The fact that the transfer is made between father and son. CA. due to any cause. even if it is by onerous title. intimidation. They are susceptible of ratification. there is already an on going case filed against you for collection of money. Otherwise. the next transferee is only liable if he is in bad faith. a creditor/s is/are adversely affected by said transaction. good/ bad faith of next transferee is immaterial. Whoever acquires in bad faith the things alienated in fraud of creditors. Creditors of (a) and (b) by virtue of Art. If transferee is in bad faith. undue influence or fraud. 2: So the first is that. he transfers it to T2 and then to T3. there is a writ of attachment ( a writ of attachment is issued during the pendency of the case asked by the complainant upon the court that the defendant is about to dispose nearly all his property and which if judgment shall be rendered by the court in favor of the complainant. or until the domicile of the latter is known. Transfers If transferee is in good faith. 1: It is absolutely necessary when you prepare a deed of donation for the donor to state that he has reserved sufficient property for himself to answer for his support as well as the obligations that he has incurred prior to this donation. whenever. (n) RESCISSION Basis is lesion (damage) ANNULMENT Basis is vitiated consent or 74 .C 1389 Now when do you institute the action for rescission? Must be commenced within four years. Evidence of large indebtedness or complete insolvency. For persons under guardianship and for absentees. the first acquirer shall be liable. A gratuitous conveyance or donation. Par. 1389. 2007 Case Digests (from Erwin Vicente). the four years shall not begin until the termination of the former's incapacity. if that is not found then the presumption is that you intend to defraud your creditors. Art. Because of the impossibility to return what he is supposed to return to the debtor for purposes of answering the liabilities of the debtor. 1390. 1. it should be impossible for him to return them. Ferlyn Ong for 4th year Batch 2009 5. 6. the period of four years shall not begin until the termination of the former's incapacity. The following contracts are voidable or annullable. precisely because he has transferred it. Fraud is not sufficient to rescind. the first acquirer shall be liable first. (2) Those where the consent is vitiated by mistake. VOIDABLE CONTRACTS Art. (1298a) “due to any cause” includes fortuitous event. violence.only if debtor cannot pay.
And when will you bring the action for annulment? Four years. Christ May Andolana. If it were intimidation. rescission will not prosper Compatible w/ perfect validity To prevent rescission. "By the way. When you say direct. the minor sells the property during minority. 75 . you insitute an action asking the court asking the court to annul the contract on the ground of 1 or 2. 2. and it cleanses the contract of whatever defects it creates. from the time the guardianship ceases.Who? The minor. the incapacitated. where any of hte vices of consent is employed in order to obtain the consent by one of the contracting parties. ratification is required. and the period shall begin 1. ratification is not required. Upon reaching the age of majority. They are susceptible of ratification. It can only be brought by the aggrieved party. - There are only two kinds of voidable contracts. the contract is voidable because one of the parties is a minor". the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. - - incapacity to consent Defect is internal/intrinsic (in the meeting of mind) Action is principal A sanction Public interest governs Law predominates Plaintiff must be a party to the contract Damage is immaterial Indemnity is not a bar to the action Defect is presupposed To prevent annulment. Lydia Galas (Hann Sevilla). and upon reaching the age of majority. he will now rent the very property. Now who has the right to invoke it? May the capacitated person invoke the incapacity of the other party? Or the person who employed any of the vices of the consent on the ground that the contract is voidable because he used fraud or there was mistake. and when the action refers to contracts entered into by minors or other incapacitated persons. and these can be annulled by the court even if there may have been no damage to the contracting parties. RAM Notes Compiled by: Hanniyah Sevilla. the person upon whom any of the vices of consent were employed. It has retroactive effect. unless there are annulled by a proper action in court. and instead of having that contract of sale annulled upon reaching the age of majority. So one would be when one of the parties is incapable of giving consent to a contract. 2. These contracts are binding. Or he buys the property during minority. So when is there tacit ratification? For instance. from the time of the discovery of the same. then from the time of the cessation of guardianship. Ferlyn Ong for 4th year Batch 2009 Defect is external/extrinsic Action is subsidiary A remedy Private interest governs Equity predominates Plaintiff may be party or 3rd person There is damage If plaintiff is indemnified. he now donates the property. if the incapacitated. In cases of mistake or fraud. What happens if there is ratification? Ratification cleanses the contract of its defects. then upon reaching the age of majority. So the guardian may effect the ratification. violence or undue influence. instead of asking for the annulment of the contract. and it shall retroact to the day of the inception of the contract. and he was the one who caused the mistake? No. Book of Tolentino.Obligations and Contracts: Sources 2006 Lectures of Atty. Or during the minority the purchase price has not been fully paid. But if it were the minor. form the time the defect of the consent ceases. he asks for the balance of the purchase price. May the guardian bring also an action for annulment? of course. What do you mean by collateral attack? You say. You must institute a direct proceeding asking that the contract be annulled. Or you can state it in the counterclaim if you are a defendant. 3. And voidable or annullable contracts cannot be attacked collaterally. It is understood as tacit if with knowledge of the reason which renders the contract voidable and such reason having ceased. Now ratification may be express or tacit. So it becomes a valid contract. 2007 Case Digests (from Erwin Vicente).
2. . Ratification does not require the consent of the party who has no right to institute the action for annulment. (1302a) WHO MAY ASK FOR ANNULMENT: o The victim (principal or subsidiary party) o EXCEPT: If person not obliged principally/ subsidiarily in a contract may exercise an action for nullity if he is prejudiced in his rights w/ respect to one of the contracting parties. the contracting parties shall restore to each other the things which have been the subject matter of the contract. RAM Notes Compiled by: Hanniyah Sevilla. from the time the defect of the consent ceases. i am 18 and I have a cedula to show you" but the cedula is doctored. 1398. Then the incapacitated person cannot be heard later on when asking for annulment that at the time he entered into the contract. It is understood that there is a tacit ratification if. or employed fraud. An obligation having been annulled. Christ May Andolana. except in cases provided by law. 1395. 1393. violence or undue influence. violence. Ratification may be effected by the guardian of the incapacitated person. for example: "You are a minor" and you say "No. 1397. the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. mortgagors). parties are excused from the obligation. or undue influence. Art. annulment based on original defect cannot prosper. and the price with its interest. or caused mistake base their action upon these flaws of the contract. So who can ask for annulment? Those who may be obliged either principally or subsidiarily (guarantors.Rights of innocent 3rd persons must not be prejudiced. And when the action refers to contracts entered into by minors or other incapacitated persons. 1396. the value thereof shall be the basis for damages. Art. (1301a) Art. with knowledge of the reason which renders the contract voidable and such reason having ceased. Mutual Restitution of: 76 . Cause must not exist/continue to exist anymore at time of ratification 4. Ratification extinguishes the action to annul a voidable contract. sureties. annulment. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. (1303a) Effects of Annulment 1. persons who are capable cannot allege the incapacity of those with whom they contracted. persons who are capable cannot allege the incapacity of those with whom they contracted. he was incapacitated because there was active misrepresentation. Art. nor can those who exerted intimidation.Obligations and Contracts: Sources 2006 Lectures of Atty. Ratification is made expressly or by an act implying a waiver of action to annul 5. Ratification may be effected expressly or tacitly. If contract has already been performed . 1391. However. (1309a) Requisites of Ratification 1. they cannot ask for annulment on the ground that the other party is incapacitated. with their fruits. (1311a) Art. from the time the guardianship ceases. Ratification cleanses the contract from all its defects from the moment it was constituted. Art. 1392. This period shall begin: In cases of intimidation. or undue influence. violence. In obligations to render service. Art. In case of mistake or fraud. So we apply the principle of estoppel with respect to those who are capable. (1313) Retroactive Effect of Ratification Once ratified. from the time of the discovery of the same. (n) Ratification does not require the conformity of the contracting party who has no right to bring the action for 1395: Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment. The action for annulment shall be brought within four years. Ferlyn Ong for 4th year Batch 2009 Art. nor can those who exerted intimidation. or employed fraud. Contract is voidable 2. Lydia Galas (Hann Sevilla). Book of Tolentino. Creditors of victim cannot ask for annulment except when it prejudice them and the debtor has no other property. 1394. or caused mistake base their action upon these flaws of the contract. . Active misrepresentation. If contract is not complied w/. However. Person ratifying must be the injured party. . Now the exception there is if there is active misrepresentation on the part of the incapacitated person. Person ratifying must know the reason for the contract being voidable (cause is known) 3. 2007 Case Digests (from Erwin Vicente).
1399. plus interest. So here. Whenever the person obliged by the decree of annulment to return the thing can not do so because it has been lost through his fault. And what shall it consist? The subject matter.Obligations and Contracts: Sources 2006 Lectures of Atty. Cannot be availed of by strangers to contract and innocent third parties cannot be obliged to restore. In relation to that 1241. If the thing is lost through the fault or negligence of the defendant or the capacitated or the person who excercised the fraud. So it were lost through fortuitous event. interest and fruits? No. There is that mutual obligation to restore. The thing with fruits. 1398: If there is annulment. and the loss is not due to his fault. plus damages because there was negligence. what will be the basis of the valuation? The value at the time of the loss of the object. what will be the obligation of the parties. So those are the object that he would have to return in case annulment is possible but he could no longer do it because it has been lost by fault (or fraud). then he is only obliged to pay the value no longer the interest. So the loss shall not be an obstacle to the success of the action. Husband cannot barter away his wife’s paraphernal properties except when she consents. RAM Notes Compiled by: Hanniyah Sevilla. Now the defendant will be obliged to return. Now what happens if the thing is lost and the person obliged to return it is the incapacitated. the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him. Now what if the defendant loss the object of the contract through a fortuitous event and a petition for annulment is filed by the party who has the right to institute the action? Is he still obliged to pay the value. under the 2nd par of 1401. Christ May Andolana. if he were the one who lost the thing which is the object of the contract which is annullable. The price with interest. And if the thing is lost. 1400. Because he is in good faith. the other cannot be compelled to comply with what is incumbent upon him. then the action will prosper because the law says through the fault or fraud. (1307a) Art. if the lost is fortuitous. the other cannot be compelled to comply with what is incumbent upon him. with interest from the same date. the price or the value of the thing plus the interest. then he has to return the value. 2007 Case Digests (from Erwin Vicente). Art. The law only obliges him to return it if it has redounded to his benefit or he has kept the thing. (employment of any of the vices of consent) Art. the price with its interest. or if he has disposed the thing and the disposal was to his benefit. but the plaintiff will only be obliged to pay the value. If the right of action is based upon the incapacity of any one of the contracting parties. mutual restitution. 77 . unless the loss is through the fault or fraud of the incapacitated. then the petition for annulment is extinguished. again. the fruits. and the party who lost it has the right to institute the action. then he is obliged to pay the value. Now. he shall return the fruits received and the value of the thing at the time of the loss. or if he has disposed of it and was benefited by the disposal. 1402. 1399: Contract entered into by the incapacitated (number 1). however the defendant cannot be compelled to restore what he is obliged to restore because the essence of mutual restitution becomes untenable in as much as there can be no mutual restitution. 1401. Now. if he has kept the thing delivered. He is only obliged to restore in so far as he has been benefited by the thing or price received by him. he can still compel if he offers to pay the value of the object of what he is bound to return. (1308) Principle of mutual restitution 1402: As long as one of the contracting parties doesn not restore what in virtue of the decree of annulment he is bound to return. b. Ferlyn Ong for 4th year Batch 2009 a. Book of Tolentino. As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return. it shall not be an obstacle to the action. Art. But this will only apply to contracts falling under Number 2. So those are the only instances wherein restoration will be possible with respect to the incapacitated. The action for annulment of contracts shall be extinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings. those are the exception. No restoration except if he has kept the thing delivered. then he shall have the obligation to return the fruits received. unless said loss took place through the fraud or fault of the plaintiff. If you remember also. the price and the interest. if it were the incapacitated who lost or squandered the object he is not under obligation to return it. Lydia Galas (Hann Sevilla). or the person upon whom any of the vices of consent were employed? 1401 says that if the thing is lost through the fault of the person who has the right to institute the action. and it is lost through fortuitous event. the loss of the thing shall not be an obstacle to the success of the action. The defendant in an annullable contract would either be the capacitated or the person who employed the vices of the consent. He is exempt from paying the value because the lost is through fortuitous event. 1401 2nd paragraph speaks of the action instituted by the incapacitated. Now. But it will prosper if the plaintiff if the person who has the right to institute the action for annulment offers to pay the value of the thing that he has lost. When the defect of the contract consists in the incapacity of one of the parties.
or some note or memorandum. default. (c) An agreement made in consideration of marriage. That is why you cannot prove the existence of the contract through parol or oral evidence. 2(c) – agreements in consideration of marriage – marriage settlement. The following contracts are unenforceable. because contracts are valid in whatever form they are entered into unless forms are necessary for its validity or enforceable. (3) Those where both parties are incapable of giving consent to a contract. unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation. unless the buyer accept and receive part of such goods and chattels. unless the same. cannot be assailed by 3rd persons Does not apply to contracts fully or partially performed. There is an 78 . no matter how long.no effect yet. A says to B that I am selling my house for 500K. (e) An agreement of the leasing for a longer period than one year. but when a sale is made by auction and entry is made by the auctioneer in his sales book. say A and B would enter into an agreement. 1403. KINDS OF UNENFORCEABLE CONTRACTS a) Unauthorized contracts b) Those that fail to comply with the Statute of Frauds c) Those where both parties are incapable of giving consent to a contract. donations propter nuptias STATUTE OF FRAUDS – laws. or miscarriage of another. is not the ratification required by law. (2) Those that do not comply with the Statute of Frauds as set forth in this number. That is why. the “agent” assumes personal liability. of the amount and kind of property sold. It may be invoked in actions for damages for breach of said agreement or for specific performance. be in writing. or who has acted beyond his powers. price. or for the sale of real property or of an interest therein. thus some agreement are required to be in writing. and subscribed by the party charged. it is a sufficient memorandum. Christ May Andolana. Does not apply to contract of loan. Mere lapse of time. unenforceable contracts are valid contracts only that because they are still in the stage where there is no performance yet by either of the parties. or by his agent. or the evidences. at a price not less than five hundred pesos. or some of them. unless the unenforceable contract is ratified. Waivable (defense) Personal defense. (2) Acceptance of benefits under them (as where contract is totally or partially performed) Art. of the agreement cannot be received without the writing. UNENFORCEABLE CONTRACT There are three kinds of unenforceable contracts. unless first ratified. In the following cases an agreement hereafter made shall be unenforceable by action. therefore. at the time of the sale. evidence. So this one is a purely executory but valid contract. (f) A representation as to the credit of a third person. thereof. Lydia Galas (Hann Sevilla). Ferlyn Ong for 4th year Batch 2009 CHAPTER 8 UNENFORCEABLE CONTRACTS (n) Contracts that cannot be sued upon or enforced unless RATIFIED --. Book of Tolentino. RAM Notes Compiled by: Hanniyah Sevilla.2 (b) . Here specific performance will not lie. Valid? Yes. (b) A special promise to answer for the debt. There can be compulsion through specific performance. That is an oral agreement. The first two are enforceable thru court action. chattels or things in action. of such things in action or pay at the time some part of the purchase money. not to partially or totally executed or performed contracts. and B says I will buy your house. Now. STATUTE OF FRAUDS Purpose: to prevent fraud.special promise refers to a subsidiary/collateral promise to pay like contract of guaranty. W/out ratification. 1403. statutes or provisions w/c require certain agreements to be in writing before they can be enforced in a judicial action. Art.Obligations and Contracts: Sources 2006 Lectures of Atty. 2007 Case Digests (from Erwin Vicente). there can be no action that can be maintained before the court precisely because the agreement is in its executory stage. other than a mutual promise to marry. statutes are applicable only to executory contracts. names of the purchasers and person on whose account the sale is made. Unenforceable contracts cannot be enforced through court action. terms of sale. or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof. 2 Ways to Waive This Defense (1) Timely failure to object to presentation of oral evidence to prove the oral agreement. (d) An agreement for the sale of goods.
I have 50K. Now suppose A now would change his mind and later on sell it to C. And if you do not comply with the formalities of ordinary donations. then it falls within this paragraph. chattels or things in action (those movables not susceptible of possession. Book of Tolentino. It applies only to purely executory contracts. It does not have to be a public document. letter C is no longer applicable because now it states that donations propter nuptias must observe the forms on ordinary donations. You read this case and Locquiao case. A special promise to answer for the debt. No part of it shall be performed within the entire 1 year period. in rescissible contract. So in that case if A changes his mind and sells to C. signed by the parties. So in this case. RAM Notes Compiled by: Hanniyah Sevilla. what is not found there is not considered to be included. default or miscarriage of another. There is now what we call as partial fulfillment or partial execution. B now can go to court and prove before the court the agreement. But before the ratification comes. what are those contracts which are unenforceable unless ratified? (1403) 1. You cannot enforce it thru court action precisely because it is a purely executory contract. Then in that case if he sells. So in that case. a. What would fall under letter c would be marriage settlements. Christ May Andolana. If you remember your requirements in order that prenuptial agreements will be valid. or some of them. if you do not institute the action. if B changes his mind. Now there is this case of Domalagan vs. or pay at the time some art of the purchase money. So this will only apply to purely executory contracts. that agreement is removed from the ambit of purely executory contracts. and A now got hold of his diary and tore a piece of paper and writes that B agreed to buy my property. An agreement for the sale of goods. The agent is given the authority to rent. the buyer cannot compel the principal to execute the deed of sale precisely because the agent was in excess of his authority. there are only three: writing. then even if A does not issue a receipt. Unenforceable contracts are not curable by any lapse of time. but not the authority to sell. or partially consummated. it is void. we discussed this already under 1317. That is no longer covered. Remember in your Family Code that a breach of action to marry is not an actionable wrong. That is not within the purview of this paragraph. An agreement made n consideration of marriage other than the mutual promise to marry. because hindi sila nagkatuluyan. but if you take all together. the prescriptive period is also 4 years. The enumeration in paragraph 2 is exclusive. the exclusive promise of the promissor. c. An example of this would be a contract of guaranty. this is already a sufficient note or memorandum. you sell me your credit. but if he guarantees. So there is a perfected contract only that there is no execution yet by the parties. of such things in action. Ferlyn Ong for 4th year Batch 2009 offer and there is an unqualified acceptance. but not an action to set aside. But here there is no prescription. So let's say its the other way around. It gives rise to a defense against its enforcement. located at so and so and covered by TCT# 1111. the price is more than 500. How shall the principal ratify it? If he demands for the payment of the purchase price. or the evidences. Now. And there can be oral proof as to the agreement because of this partial payment. But suppose B says. and executed by the parties before the celebration of the marriage. If you remember. then A can say that it cannot be enforced precisely because there was no note or memorandum. So the agreement must not be performed within a year from the time of its constitution. ako ang bahala. Before the effectivity of the family code. Must it be in writing to be enforceable? How will you now interpret the agreement as such? The determining factor is the 79 . B says sige bilihin ko. there is now a perfection of the contract and the proof is the note. It becomes actionable if the breach is coupled with seduction. even partially. what if you buy a certain good and the price is less than 500. Unlike voidable which prescribe in 4 years. But not an action to set aside a contract. and the lapse of four years will be deemed a waiver of your right to question the voidability of the contract. It is a defense against its enforcement. Those entered into in the name of another person by one who has been given no authority or legal representaion or who has acted beyond his powers. donations propter nuptias are also covered by letter c but with the effectivity of the FC. d. It will not apply if part of it will be performed within the year although the completion of it will take five years.Obligations and Contracts: Sources 2006 Lectures of Atty. an agreement that by its terms is not be be performed within a year from the making thereof. So if the promissor says. at a price not less than five hundred pesos. sabi ni Domalagan. So it a sheild but not a sword. A now can compel B to pay the purchase price. So you cannot enforce it through court action. as earnest money. But A cannot ask for the setting aside of the agreement. Another would be. b. can B sue A for breach of contract? Can B go to court and compel A to perform? In that case oral evidence is not allowed to prove the existence of the agreement because this is a purely executory agreement involving the sale of real property. Bolifer. if B sues A. because that will be what. So. Or he delivers the DOS and asks for the purchase price. then the authority is in excess of his authority and in that case the contract entered into by the agent is unenforceable. unless the buyer accept and receive part of such goods and chattels. Or even if on your part it is to be performed within one year but the other party has already performed his part. 2. kunin ko yung 500 ko. But not a credit extended to a debtor upon the exclusive promise of the promissor. No where does it provide it be in a public document. 2007 Case Digests (from Erwin Vicente). negotiable instruments) . and not to contract which have been consummated. Lydia Galas (Hann Sevilla). Those that do not comply with the Statute of Frauds. such as credit. the ante-nuptial agreements or prenuptial agreements.
no action is required to set aside. 2007 Case Digests (from Erwin Vicente). If the intention is that it should be taken as a whole. Unauthorized contracts are governed by article 1317 and the principles of agency in Title X of this Book. An example of this is suppose Lorelie would like to borrow money from Mr. Ah yes. You are not vouching for the obligation. the contract shall be validated from the inception. 1405. Art. kilala mo ba si Lorelie? Ah Oo kilala ko yan. of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated. 1407: I have discussed this already. express or implied ratification by the parent. and a public document is necessary for its registration in the Registry of Deeds. you are merely vouching for the credit standing of the third person. contract of lease for more than one year must be in writing to be enforceable. CA. Take note of the sale of real property that is why in 1358. then it must be in writing. Only the parties because the defense of Statute of Fraud is personal to the contracting parties. Is she a good payor. CHAPTER 9 VOID AND INEXISTENT CONTRACTS VOIDABLE May be ratified Produces effect until annulled Defect: incapacity/ vitiated consent Valid until annulled VOID Cannot be ratified No effect Defect is ordinarily against public policy Void from the very beginning. of for the sale of real property or of an interest therein. That is a representation to the credit of a third person. partition? (Rosencor case) f. 1406: Remember the case of Martinez vs. As well as of the interest therein. sale of real property is definitely excluded. the parties may avail themselves of the right under Article 1357. what would now be the nature of the agreement? Voidable. of both contracting parties. It becomes valid and enforceable. e. 3. Christ May Andolana. subscribed and sworn by the person charged to be enforceable. 1408: Unenforceable contracts cannot be assailed by third persons. 1404. 1407. In a contract where both parties are incapable of giving consent. A representation to the credit of a third person. Ferlyn Ong for 4th year Batch 2009 intention of the parties. Now what if one of the representatives of the incapacitated person would ratify the contract. 1406. valid. If ratification is made by the parents or guardians. and not for purposes of validity or enforceability. RAM Notes Compiled by: Hanniyah Sevilla. This right is given only when contract is both valid and enforceable. an agreement for the leasing for a longer period than one yaer. So 1405 is the exception. or by the acceptance of benefit under them. Art. Book of Tolentino. Tan. or guardian. When we say interest. When a contract is enforceable under the Statute of Frauds. and asks Mr.Obligations and Contracts: Sources 2006 Lectures of Atty. The failure to object to the presentation of oral evidence to prove the unenforceable agreement because it is not in writing. as the case may be. That is one exception. Art. Lydia Galas (Hann Sevilla). does that include boundaries. Art. Vicente. 2 of article 1403. Art. Those where both parties are incapable of giving consent to a contract. UNLESS contract has been performed Cannot be cured by prescription Available to May be cured by prescription Defense may be - - 80 . If both the guardians would ratify. But for purposes of registration. The public document is only necessary for the registration with the Registry of Deeds and you can compel the other contracting party to observe the required form. are ratified by the failure to object to the presentation of oral evidence to prove the same. Contracts infringing the Statute of Frauds. referred to in No. meaning the real property. as the case may be.
The following contracts are inexistent and void from the beginning: (1) Those whose cause. Art. Absolute – void for lack of consent 2. morals. But it shall be a continuing offer between the spouse who did not obtain consent and the third person. 1409. object or purpose is contrary to law. Lydia Galas (Hann Sevilla). There are certain contracts which are void. there is still a necessity for the declaring of the contract void. However. Right to set up the defense of illegality cannot be waived. When is there laches? When you sleep on your rights. Christ May Andolana. Action/defense for declaration as inexistent does not prescribe. Produces no effect f. Because while it may be true that void contracts have no legal effect from the very beginning. No action to declare them void is needed g. What kind? When the authority of the solemnizing officer is absent. Cannot give rise to a contract e. (7) Those expressly prohibited or declared void by law. (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained. (5) Those which contemplate an impossible service.(the object could not come into existence because the object may legally be a future thing) (4) Those whose object is outside the commerce of men. d. Another is marriage. Relative – hidden/intended contract is binding CHARATERISTICS OF VOID CONTRACTS a. Believed in good faith lang ang kailangan. It cannot prescribe but can be defeated by laches. cannot be assailed by third parties - VOID Cannot be ratified No contract at all Can be assailed by anybody directly affected. public order or public policy. -. Take note that it is void or inexistent from the beginning. 2. UNENFORCEABLE 1. 3. there is contract but it is unenforceable. and shall be considered as a perfected contract as soon as the written consent of the incapacitated spouse or absent spouse is obtaine or judicial authorization. There is no need to declare nullity by the competent 81 .Obligations and Contracts: Sources 2006 Lectures of Atty. Special Classification 1. if there has been performance by one of the contracting parties. Neither can the right to set up the defense if illegality be waived. may be ratified 2. These contracts cannot be ratified. Ano yon? Any encumbrance or disposition of the property by the present/capacitated spouse without the written consent of the incapacitated or absentee spouse or without judicial authority is void. (3) Those whose cause or object did not exist at the time of the transaction. but one or both the contracting parties believed in good faith that the solemnizing officer has the authority to do. remember that void contracts do not produce any legal effect and no obligation shall arise from a void contract. Inexistent – essential formalities are not complied with. Illegal/ illicit ones Simulate Contracts 1. (2) Those which are absolutely simulated or fictitious. it is void but you did not institute the appropriate action. good customs. 2007 Case Digests (from Erwin Vicente). Not available to third persons whose interests are not directly affected. RAM Notes Compiled by: Hanniyah Sevilla. Ferlyn Ong for 4th year Batch 2009 invoked only by parties or their successors-ininterest Referred to as relative/ conditional nullity - anybody – 3rd persons provided that their interests are affected Absolute nullity. These contracts cannot be ratified. c. VOID/INEXISTENT CONTRACTS And there are 7 (1409). Cannot be ratified. appealable even if not raised in trial court. Exception to the void contracts that cannot be ratified: The contract is void and yet the law says that it can be ratified. Book of Tolentino. Neither can the right to set up the defense of illegality be waived. You know that the contract is defective. b.
1410. or ask for the fulfillment of what has been promised by him. When only one of the contracting parties is at fault. but if there is performance already. CA and Guan vs. So what would be the rules if both parties are in bad faith or in pari delicto? They shall have no action against each other and both shall be prosecuted. So the right might be lost by the unreasonable passage of time and not by prescription. 1411and 1412: 1411 referst to a contract that is void because it proceeds from the illegality of the cause or object and the act constitutes a criminal offense. Art. would that apply to inexistent contracts? Inexistent contracts does not necessarily mean a void contract. No action can be maintained in an illicit transaction. Now. Moreover. the following rules shall be observed: (1) When the fault is on the part of both contracting parties. That will not fall under here because what has been entered into by the parties are what we call as absolutely simulated contracts. The rule is that when both parties are in bad faith. Is that a criminal offense? No. encumber the property you acquired by reason of the implementation of CARP within 10 years. because when we say inexistent. Art. but the innocent one may claim what he has given. or demand the performance of the other's undertaking. or only one of the parties is guilty. This rule shall be applicable when only one of the parties is guilty. And if you remember your provisions in the RPC. and shall not be bound to comply with his promise. he cannot recover what he has given by reason of the contract. 1411 refers to a contract which has an illegal cause which act proceeds from a criminal offense. 1411. neither may recover what he has given by virtue of the contract. The very common example of this is you deal in drugs. but the innocent one may claim what he has given and shall not be bound to comply with his promise. the government will take back what has been given to you. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense. he cannot recover what he has given by reason of the contract. 1412.Obligations and Contracts: Sources 2006 Lectures of Atty. illegal drugs. Ong. no. Moreover. When the nullity proceeds from the illegality of the cause or object of the contract. (1305) Art. Book of Tolentino. 2007 Case Digests (from Erwin Vicente). who is not at fault. One is that. RAM Notes Compiled by: Hanniyah Sevilla. The other. provided that the rate of interest agreed upon is not unconscionable and inequitous which is for the court to be determine. you are prohibited to sell. may demand the return of what he has given without any obligation to comply with his promise. An example of which would be. (1410) 1410: The action of defense for the declaration of teh inexistence of a contract does not prescribe. and both shall be prosecuted. then you have to go to court and let the court declare that the contract is void. and parties can agree with respect to the rate of interest. Lydia Galas (Hann Sevilla). what happens? Just like when you are a benificiary of CARP. what would be the general rule with respect to the effects of a crime or its instruments? It shall be seized by the State. your utang shall subsist. When the fault is on the part of both contracting parties. regardless of whether the rate of interest is unconscionable or inequitous. or ask for the fulfillment of what has been promised him. Now what would be an unlawful or forbidden cause but does not constitute a criminal offense? Is a contract involving a sale of land to a foreigner valid? No. The laws on usury have been repealed. they shall have no action against each other. and if you violate that undertaking. may demand the return of what he has given without any obligation to comply his promise. again neither may recover what he has given by virtue of the contract. 1412 is also a void contract but the unlawful or forbidden cause does not constitute a criminal offense but nevertheless it is unlawful or forbidden. Christ May Andolana. and the act constitutes a criminal offense. Would that fall under 1411 and 1412. The other. or demand the performance of the other's undertaking. transfer. That is the distinction between 1411 and 1412. If you have read the case of Modina vs. it does not actually exist. both parties being in pari delicto. Now we no longer have the Usury Law. whereas 1412. So if the State will find that out. This rule shall be applicable when only one of the parties is guilty. The action or defense for the declaration of the inexistence of a contract does not prescribe. It does not mean that the obligation is deemed extinguished by reason of the rate of interest imposed by the creditor. it is purely or absolutely simulated contract. Ferlyn Ong for 4th year Batch 2009 court if the contract is still purely executory. 82 . (2) When only one of the contracting parties is at fault. it is unlawful or forbidden but it does not constitute a criminal offense. So take note of 1411 and 1412. the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract. who is not at fault. then the law leaves them where they are and they have no cause of action against each other. you could no longer get the money back as a form of punishment because there is really that prohibition. But as I said. So take note that 1411 speaks of an act which has an illegal cause and the act constitutes a criminal offense. And if you were the one who bought it. Either both parties are in pari delicto. it can be defeated by laches.
then definitely the law will treat them differently. Applies also if parties are not equally guilty and where public policy would be advanced by allowing the suit for relief. the contract may be repudiated by one of the parties before the purpose has been accomplished. 1416: Example of this is donation of all the properties of the donor. and a contract is entered into whereby a laborer undertakes to work longer than the maximum thus fixed. Remember the penalty for illegal possession of drugs has been repealed and is now made to depend on the amount of the drugs.Obligations and Contracts: Sources 2006 Lectures of Atty. So if your sari-sari store sells you more than what is permitted by DTI. then the other can recover what he has given either money or property. Lydia Galas (Hann Sevilla). Contracts: (1) Illegal per se – forbidden for it is against public interest. or authorizes the setting of a minimum wage for laborers. 1417. Conchita was allowed to get what was promised to her because according to the court. When the law fixes. if public policy is thereby enhanced. 1419: Is minimum wage. 1415: Suppose a minor buys a gram of shabu. 1414. then he can now get back what he has earlier given to Querubin before the purpose has been accomplished. When money is paid or property delivered for an illegal purpose. recover what he has paid or delivered. 1418: So when the maximum hours of work is fixed. if the interest of justice so demands allow recovery of money or property delivered by the incapacitated person. Where one of the parties to an illegal contract is incapable of giving consent. but it is prohibited because one is. Recovery even if it is in pari delicto provided The purpose has not yet been accomplished. public policy is enhanced. or If damage has not been caused to any third person. Cannot be waived. May overtime pay be waived? It depends. When the law sets. 83 . In such case. Art. or before any damage has been caused to a third person. Art. If you remember the Liguez case (?). This provision is actually designed for the protection of the donor. and a contract is agreed upon by which a laborer accepts a lower wage. 1413. When the price of any article or commodity is determined by statute. No. If for service rendered. he may. you can demand for overtime pay. and the prohibition by the law is designated for the protection of the plaintiff. RAM Notes Compiled by: Hanniyah Sevilla. Ferlyn Ong for 4th year Batch 2009 Art. Any contract in violation of this article shall be invalid. Second is you may no longer have anything to support your needs when you will be giving all your properties. 1419. it might prejudice the creditor. (2) And merely prohibited contracts forbidden because of private interest recovery is permitted provided that: contract is not illegal per se prohibition is for protection of plaintiff. or authorizes the fixing of the maximum number of hours of labor. and when public interest will be subserved. And if you also notice most of the provisions in the RPC regarding minors would always lean to the protection of the minor Art. Especially if donations inter vivos. 1417: This is true in basic necessities. you can go to DTI and complain. the courts may. 1414: So suppose Miranda would give Querubin 100K to kill Gloria. or by authority of law. 1418. so it is not illegal per se. he may demand additional compensation for service rendered beyond the time limit. Interest paid in excess of the interest allowed by the usury laws may be recovered by the debtor. Book of Tolentino. Another example would be homestead lands. So here is you can recover the excess of what you have paid. she occupies a privileged position under our law. yes. But if you are still going to render service. 1415. And you have your friendly neigborhood variety store. with interest thereon from the date of the payment. Now suppose he later on has a change of heart and tells Quirubin please do not proceed with our plan. 2007 Case Digests (from Erwin Vicente). 1416. being a minor. And in that case he can recover what he has delivered. Art. that is against the law. But if it were the incapacitated or the minor. When the agreement is not illegal per se but is merely prohibited. the courts may. Art. Art. if the public interest will thus be subserved. allow the party repudiating the contract to recover the money or property. In that case if Miranda would decide to repudiate the plan and has a change of heart. any person paying any amount in excess of the maximum price allowed may recover such excess. Christ May Andolana. he shall be entitled to recover the deficiency.
NATURAL OBLIGATIONS Art. In case of Prescription If prescription is unknown. Mixed is either civil with moral. Art. they authorize the retention of what has been delivered or rendered by reason thereof. But such is not true in natural obligations because natural obligations 84 . RAM Notes Compiled by: Hanniyah Sevilla. Precisely because the previous contract might either be one that has an illegal object or an illegal cause or forbidden cause. the creditor can institute an action to compel the obligor to perform his obligation. The defense of illegality of contract is not available to third persons whose interests are not directly affected. 1422. Natural obligations are obligations not sanctioned by any action (court action). the contract that will arise from such forbidden contract would also be void and inexistent . no legal obligation has yet been created. Lydia Galas (Hann Sevilla). Some natural obligations are set forth in the following articles. the obligation as demanded by the constructor is about 2. though it may be converted into civil obligation. Example of Natural Obligation (1) Obligation to pay interest for use of money. and it demanded for the payment of what it had constructed. Civil obligations which are obligations enforceable in court. Title III. 1422: A contract which is the direct result of a previouis illegal contract. Civil obligations give a right of action to compel their performance.So in that case. Natural obligations. Christ May Andolana. the loan obligation shall remain but the pledge shall be stricken out. Voluntary Fulfillment – debtor complies with the same even if he knows that he could not have been legally forced to do so. and there is that stipulation that you cannot redeem what has been pledged and it becomes the property of the creditor. The construction company that won the bidding had already started building the slaughter house. 1420. So an example of that would be a pledge. is also void and inexistent. 1423. not being based on positive law but on equity and natural law. Now there is this case Osmena vs. If it is known. (2) Duty to support natural or spurious children. these are obligations which are purely based on conscience or what we call as duty. but after voluntary fulfillment by the obligor. enforced. Book of Tolentino. that is a void agreement. 1421. Obligations are civil or natural. the balance cannot be recovered since on said balance. 2007 Case Digests (from Erwin Vicente). or moral with natural. the whole contract is void. there can be recovery.5 million so they arrived at about 1. A contract which is the direct result of a previous illegal contract. (3) Giving of material and financial assistance to children upon their marriage. except unenforceable contracts. 1421: So third persons can invoke as a defense the illegality of the contract for as long as they will be affected by such an illegal contract. even if not agreed upon in writing. do not grant a right of action to enforce their performance. In short.5 M as a compromise but it was questioned with respect to the compromise and it went to SC. The parties and the City of Cebu arrived at a compromise agreement. But natural obligations may be converted into civil obligations by novation or by acknowledgement or confirmation such as that of a prescribed debt. If divisible.g. In case of a divisible contract. Precisely when demand is made and the other person does not perform what is incumbent upon him. if the illegal terms can be separated from the legal ones. no recovery. the latter may be If indivisible. In case of partial voluntary fulfillment. 1420: In case of a divisible contract. Art. Commission on Audit. the latter may be enforced. . Civil obligations give a right of action to compel their performance. the legal terms may be enforced if they can be separated from illegal terms. Ferlyn Ong for 4th year Batch 2009 Art. if the illegal terms can be separated from the legal ones. (e. is also void and inexistent. Now the City of Cebu appropriated 5 million for the construction of a modern abatoir but the allocation exceeded the budget. acknowledgment of a prescribed debt) NATURAL OBLIGATIONS Four kinds of obligations according to juridical science: moral obligations. Moral obligation has no juridical tie. for this is a case of natural obligation. SC said the compromise agreement is void because it is a derivative of a void contract.Obligations and Contracts: Sources 2006 Lectures of Atty. 1423: Obligations are either civil or natural.
He is only obliged to restore if he has kept the thing or if it has redounded to his benefit. Because the action the has already prescribed. so he is not liable for the debts of the decedent which exceeds the amount he received from the decedent. dated by the testator and signed by the testator. So if what is stated here is a legacy (personal movable property) of a car and the will is void. and C could now ignore the provisions in the holographic will. 1429. When a minor between eighteen and twenty-one years of age. a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed. 1428. When a will is declared void because it has not been executed in accordance with the formalities required by law. Art. When a right to sue upon a civil obligation has lapsed by extinctive prescription. RAM Notes Compiled by: Hanniyah Sevilla. there must be a signature otherwise the will be void. there shall be no right to recover the same from the obligee who has spent or consumed it in good faith. Art. but the debtor later voluntarily reimburses the third person. after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation. However. the payment is valid and cannot be rescinded by the payer. 1426. He is not under obligation under the law to reimburse the third person because the payment did not redound to his benefit. after the settlement of the debts of the deceased. Art. It has 3 requirements. Another example would be 1425. but by analogy it applies to those below 18. he voluntarily delivers. but after voluntary fulfillment by the obligor. pays a legacy in compliance with a clause in the defective will. if B decides to honor what has been written in the complaint and delivers voluntarily he could no longer asks for the return of what he has delivered or payment for the service he has rendered. voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation. there is no right to demand the thing or price thus returned. 1426. If there are alterations. 1424. So if there has been voluntary performance then the person who has performed can no longer recover or demand for the return or the payment of what he has delivered or rendered. they authorize the retention of what has been delivered and rendered by reason thereof. then the person who perform can demand the restoration or the payment of whatever has been delivered or rendered. the payment is effective and irrevocable. When a testate or intestate heir voluntarily pays a debt of the decedent exceeding the value of the property which he received by will or by the law of intestacy from the estate of the deceased. the stipulations in the will will no longer govern the distribution of the estate of the deceased. he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered. 1425. B. Correlate to 1239: delivers a sum of money a sum of money or a fungible thing in fulfillment of an obligation there shall be no right to recover the same from the obligee who has spent or consumed it in good faith.Obligations and Contracts: Sources 2006 Lectures of Atty. 85 . Now if one of the pages was undated. Here is the civil obligation has already prescribed. 1429: Remember 1311that the heirs is not liable beyond the value of what he has received. 1430. When without the knowledge or against the will of the debtor. (15 years old to 17) Remember 1241: the minor is not obliged to restore. 1428: This time suppose A files a case against B. Ferlyn Ong for 4th year Batch 2009 are not based on positive law but on equity and natural law and being such they do not grant a right of action to enforce their performance. When a minor between eighteen and twenty-one years of age who has entered into a contract without the consent of the parent or guardian. So in that case he can no longer demand for the return of what has been delivered. they will now file before the court a special proceeding for the probate of the will. 1430: Wills are classified either notarial or holographic. Let us go to holographic or simple will. But the obligor is conscience stricken. So there is always that voluntariness on the part of the person who performs the obligation. Art. Remember 1236 and 1237. 1427. Art. But the court decided in favor of B. If the will is void. Art. When. So what are the different kinds of natural obligations? One of which is found in 1424. Now suppose one of the pages was not dated. Christ May Andolana. This was mentioned in 1239. after the annulment of the contract voluntarily returns the whole thing or price received. but one of the intestate heirs. but the debtor later voluntarily reimburses the third person. who has entered into a contract without the consent of the parent or guardian. 1427 no longer applies to 18-21. then suppose the heirs are A. notwithstanding the fact the he has not been benefited thereby. therefore the complaint of A against B did not prosper so whatever he has prayed for in that complaint could no longer be recovered from B since there was an unfavorable judgment against A. Art. the legacy is also void and the deceased is considered to have died without a will. 2007 Case Digests (from Erwin Vicente). So if the testator dies what will the heirs do. Lydia Galas (Hann Sevilla). so a debt has already prescribed because no demand was made within the period of 10 years and therefore the creditos could no longer sue the debtor for the non payment. Book of Tolentino. So in that case. the obligor cannot recover what he has paid. The requirement dated and signed applies to all pages of the will. you remember that. the obligor cannot recover what he has paid. the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered. then the court declares the will void. So in all instances the performance must be accompanied by voluntary because if there is no voluntariness in the performance. one is it must be entirely handwritten by the testator.
the complainant having had knowledge or notice of defendant’s conduct and having been afforded an opportunity to institute a suit. therefore consent was vitiated. in the absence of voluntariness. Delay in asserting the complainant’s rights. Art. If deed/instrument is null and void. Estoppel by Deed A bar w/c precludes a party to a deed and his privies from asserting as against the other and his privies any right or title in derogation of deed. so that he will be prejudiced if the former is permitted to deny the existence of such facts. Being the heirs of A will the action for annulment prosper? No. By representation or concealment. Proper (written instrument may also be in the form of a bond/mortgage) b. C as heirs of X. or the suit is not held to be barred. d. Book of Tolentino. Title IV. mine. Now A died a year later. A week later the same 86 . Lydia Galas (Hann Sevilla). b. the heirs chose to honor the legacy stated in the will. A did not want to. giving rise to the situation of w/c the complaint is made and for w/c the complaint seeks a remedy. And he said. Estoppel in Pais Arises when one. Now a neighbor asked the person whose dog he was walking. and cannot be denied or disproved as against the person relying thereon. then the person who performed it can demand for the return of whatever he has delivered or payment for the service he has rendered. RAM Notes Compiled by: Hanniyah Sevilla. estoppel will not apply. c. Art. or of one under whom he claims. induces another to believe certain facts to exist. 2007 Case Digests (from Erwin Vicente). (1) a. Through estoppel an admission or representation is rendered conclusive upon the person making it. 1432. it ceases to be a natural obligation. Otherwise. the will of X contains a stipulation in favor of D which was a legacy. Ferlyn Ong for 4th year Batch 2009 Despite the fact. B. A very common example of estoppel would be one that came out of a bar exam. 1433. or from denying the truth of any material fact asserted in it. By omission. Estoppel may in pais or by deed. If a person notarizes (and is not a party to). Estoppel in Pais (Equitable estoppel) By conduct or by acceptance of benefits.Obligations and Contracts: Sources 2006 Lectures of Atty. By silence. This guy was walking a dog around the neighborhood. the vice that was employed upon A is personal upon A and moreover. . The principles of estoppel are hereby adopted insofar as they are not in conflict with the provisions of this Code. By laches (unreasonable delay in suing) (2) Estoppel by Deed ( Technical estoppel) a. There must be a written contract. d. estoppel does not apply. they merely have an inchoate right over the thing that was delivered to D as a legacy at the time of the delivery. Y and R filed now a petition for rescission because the consent of A was vitiated by force. and such the other rightfully relies and acts on such belief.ESTOPPEL (n) A bar w/c precludes a person from asserting or denying anything contrary to that w/c has been. So the action is true with A but not with Y and R. 1431. 4 Elements of Laches a. established as the truth. in contemplation of law. so there was force employed upon him. A. Estoppel by judgment as a Court record – when court is in res judicata. intentionally or thru culpable negligence. ESTOPPEL Estoppel is a bar that precludes a person from denying or asserting anything contrary to what he has ascertained earlier. Conduct on the part of defendant. Natural obligations will only produce a binding effect if the performance is coupled with voluntariness. Christ May Andolana. by his own deed… Art. Lack of knowledge or notice on the part of the defendant that complainant would assert the right on w/c he bases his suit. If there is no voluntarines on the performance. the Rules of Court and special laws. Because while it may be true that they are successors in interest. the instrument. representations or admissions or by his silence when he ought to speak out. But he was forced by B and C. b. c. Injury/ prejudice to defendant in the event relief is accorded to complainant. the Code of Commerce. X already died. by his acts. Prevents the parties from raising questions that could have been put in issue and decided in previous case. e. the heirs of A. The court declared the will void because one of the pages was not signed by the testator. But B and C now chose to honor the legacy. either by acts of judicial/legislative officers.
and later the seller or grantor acquires title thereto. (3) The party misled must have been unaware of the true facts. 2. The latter is precluded from asserting his legal title or interest provided all the requisites are present. If a person in representation of another sells or alienates a thing. Estoppel in pais is what we call as equitable estoppel. (2) The party precluded must intend that the other should act upon the facts as misrepresented. It is not based on positive law unlike prescription. 1. This applies to an immovable. technical estoppel. SC said he was estopped. 1435. The neighbor went to the person and asked for reimbursement and the person said it is not my dog but a friend of mine's. The principle behind that is one who is silent when he ought to speak cannot be heard later on to speak when he ought to be silent. corporation by estoppel. Yan. A lessee or a bailee is estopped from asserting title to the thing leased or received. Like two or more persons would represent themselves to a person(stranger) that they are officers of a corporation and by reason of that misrepresentation. Now a house made of strong material is an immovable. But the parties in an agreement may treat the house as a chattel. Ferlyn Ong for 4th year Batch 2009 dog bit the neighbor. Meaning the person who has acted on a particular illegal act. Later on however he acquired ownership of the thing. The creditor cannot say that you are estopped from questionning the interest. Despite that. the party misled must have been unaware of the true facts. 2007 Case Digests (from Erwin Vicente). you apply 1435 and 1436. 1431: So estoppel works against the person representing that he is this type of person and later on he would say that it was just a joke if the other person has relied on your statement or representation. the parties cannot be heard later on to say that the contract is void because the object is not actually a movable but an immovable property. such title passes by operation of law to the buyer or grantee. the part precluded must intend that the other should act upon the facts as misrepresented. he cannot be heard later on that at the time of the alienation. RAM Notes Compiled by: Hanniyah Sevilla. Estoppel by deed or technical estoppel. I just walked the dog. 1436. We also have estopple in pais and estoppel by deed. he was not actually the owner but merely a representative. But a tenant will not be heard to dispute the title of the landlord. meaning movable. And the presumption is conclusive. he cannot be heard later on to say that the check is not a legal tender because of his acceptance of the check. If the question arises later on about the contract. When in a contract between third persons concerning immovable property. So later he invoked the fact that the lower court had no jurisdiction. 3. prejudice is not essential. In this kind of estoppel. Book of Tolentino. then rebutt or affirm it otherwise you will be estopped later on from denying or affirming it.) 1434: Here. Prejudice is not essential Art. we know that a check is not a legal tender. the person is nt the owner of the thing alienated but he sold it. attach or plead in his complaint the contract of lease. In cases of contracts. If it were a movable. And later on when payment is to be made. Christ May Andolana. he borrows. Estoppel cannot be also predicated on an illegal act. because that is predicated in an illegal act. 4. Art. bailor. For example a person who is in need of money because a loved one is hospitalized and he goes to a money lender. Lydia Galas (Hann Sevilla). When a person who is not the owner of a thing sells or alienates and delivers it. Art. cannot be estopped. Now other kinds of estoppel we have. Now there is also what we call as estoppel by acquiesence. as against the lessor or Presumption does not apply if alleged tenant does not admit expressly or impliedly the existence of lease contract (such as when landlord did not. and the money lender says my rate of interest is 20% per month. Unfortunately the ruling of the court was not favorable to the person who knew. Neither can a bailee dispute the title of the bailor. the latter is precluded from asserting his legal title or interest therein. If there is a need to rebutt or affirm. There must be fraudulent representation or wrongful concealment of facts known to the party estopped. The party defrauded must have acted in accordance with the misrepresentation. But estoppel is different from laches which is the failure to institute the action within the reasonable period of time. the third person would enter into a transaction with these people who are in fact not a corporation. 1437 applies to an immovable property and a third person is misled by a person with respect to the ownership or real right over the immovable. Art. Well. Estoppel by silence or inaction. one of them is misled by a person with respect to the ownership or real right over the real estate. Then we have judgment by estoppel. It is not a disputable presumption. (Tijam vs. He cannot assert something different from what he has represented earlier. But if the creditor accepts the check without any objection. the former cannot subsequently set up his own title as against the buyer or grantee. 1435 is the exact opposite of 1434. Sibunghanoy): One of the parties knew that the court trying the case has no jurisdiction but despite knowledge he entered into trial. and (4) The party defrauded must have acted in accordance with the misrepresentation. he would now question the interest. then those who misrepresented themselves are already estopped from denying that actually no corporation existed. 1437. 87 . provided all these requisites are present: (1) There must be fraudulent representation or wrongful concealment of facts known to the party estopped. So estoppel will not lie against the debtor. This is sometimes referred to as estopple by standing by or laches.Obligations and Contracts: Sources 2006 Lectures of Atty. 1434. that is estoppel.
2007 Case Digests (from Erwin Vicente). Christ May Andolana. 1439: Estoppel is effective only as between the parties thereto or their successors in interest. One who has allowed another to assume apparent ownership of personal property for the purpose of making any transfer of it. Art. Third persons can invoke the principle of estoppel. Book of Tolentino. RAM Notes Compiled by: Hanniyah Sevilla. Estoppel resulting from acceptance of benefits (knowledge of true facts) 1438 applies to a situation wherein you allow your friend to borrow your jewelry and pawn. 1438. Ferlyn Ong for 4th year Batch 2009 Art. That is the general rule. 88 . Neither does prescription lie against the state. 1439. Estoppel is effective only as between the parties thereto or their successors in interest. set up his own title to defeat the pledge of the property. if he received the sum for which a pledge has been constituted. And later on also made use of the portion of the proceeds of the loan. made by the other to a pledgee who received the same in good faith and for value. Now estoppel does not lie against the state. cannot. that is estoppel. And later on you had a change of heart and tells the owner of the pawnshop that you are the owner. But not to third persons.Obligations and Contracts: Sources 2006 Lectures of Atty. Lydia Galas (Hann Sevilla). Because there is estoppel in the acceptance of benefits.
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