OBLIGATIONS

TO GIVE, TO DO, OR NOT

 OBLIGATION - A JURIDICAL NECESSITY
TO DO. IT COMES FROM THE WORD OBLIGARE WHICH MEANS TO
BIND.

 JURIDICAL NECESSITY - THE RIGHTS AND DUTIES ARISING FROM

OBLIGATIONS ARE LEGALLY ENFORCEABLE AND THE COURTS
MAY BE CALLED UPON TO ORDER THEIR PERFORMANCE.

 TO GIVE - A REAL OBLIGATION BECAUSE A PHYSICAL THING IS

INVOLVED AND THE DELIVERY OF THE SAME DISCHARGES THE
OBLIGATION.

 TO DO - A PERSONAL BUT POSITIVE OBLIGATION

 NOT TO DO - ANOTHER FORM OF PERSONAL OBLIGATION BUT IS

NEGATIVE
 NATURE OF OBLIGATIONS UNDER THE CIVIL CODE

 OBLIGATIONS ARE LEGALLY DEMANDABLE - EXAMPLES:

CIVIL OBLIGATIONS LIKE PAYING TAXES, DRIVING AT
REASONABLE SPEED, COMPLY WITH CONTRACTS, ETC.

 NATURAL OBLIGATIONS - LIKE PAYMENT OF DEBTS.

 ESSENTIAL REQUISITES OF AN OBLIGATION:

1) JURIDICAL TIE OR VINCULUM - THE LINK THAT BINDS THE

PARTIES TO AN OBLIGATION. ALSO KNOWN AS THE
EFFICIENT CAUSE

2) PRESTATION OR OBJECT - THE GIVING, DOING OR NOT

DOING OF SOMETHING.
3) ACTIVE SUBJECT - THE PERSON WHO HOLDS THE RIGHT
OR WHO CAN DEMAND THE PERFORMANCE OF THE
OBLIGATION OTHERWISE KNOWN AS THE CREDITOR OR
OBLIGEE.

4) PASSIVE SUBJECT - THE PERSON AGAINST WHOM THE

PRESTATION (DUTY) MAY BE DEMANDED, OTHERWISE
KNOWN AS THE DEBTOR OR OBLIGOR.
SOURCES OF OBLIGATIONS: BASED ON Art. 1157 OF THE
CIVIL CODE OF THE PHILIPPINES.

1) OBLIGATIONS ARISING FROM LAW - THIS KIND OF OBLIGATION

IS DICTATED BY LAW LIKE LEGAL OBLIGATION TO PAY TAXES
OR TO PAY BENEFITS TO EMPLOYEES. Ex. Child Support,
Paying Taxes
2) OBLIGATIONS ARISING FROM CONTRACTS - CONTRACT IS A
MEETING OF MINDS BETWEEN TWO PARTIES WHEREBY ONE
BINDS HIMSELF WITH RESPECT TO THE OTHER, TO GIVE
SOMETHING OR TO RENDER SOME SERVICE. CONTRACTS
ARE VALID AS LONG AS IT IS NOT CONTRARY TO LAW, GOOD
MORALS, GOOD CUSTOMS, PUBLIC ORDER, OR PUBLIC
POLICY.
3) OBLIGATIONS DERIVED FROM QUASI-CONTRACTS - CERTAIN
LAWFUL, VOLUNTARY AND UNILATERAL ACTS GIVE RISE TO
THE JURIDICAL RELATION OF QUASI-CONTRACT TO THE END
THAT NO ONE SHALL BE UNJUSTLY BENEFITED AT THE
EXPENSE OF THE OTHER. Ex. THE DUTY TO REFUND AN
OVERCHARGE.
 TWO KINDS OF QUASI-CONTRACTS:

 1. NEGOTIORUM GESTIO – THE VOLUNTARY ADMINISTRATION

OR MANAGEMENT OF AN ABANDON BUSINESS OR PROPERTY
BELONGING TO ANOTHER WITHOUT HIS CONSENT.

 Ex. X whose family is in Cebu is engaged in business in Manila.

During a heavy business day, he suffered a heart attack and
confined for two months. Y, a very good friend of X assumed the
management of business.

 The voluntary gesture is entitled to compensation and

reimbursement of his expenses.
 2. SOLUTIO INDEBITI – THE JURIDICAL RELATION WHICH IS
CREATED BY VIRTUE OF A PAYMENT BY MISTAKE,
CONSEQUENTLY OBLIGING THE PAYEE TO RETURN TO PAYOR
WHAT HE HAS RECEIVED. THE DUTY TO REFUND AN
OVERCHARGE.

 Ex. X owes Y P20,000.00, upon due date, X wrote a check as

payment to Y but inadvertently wrote P200,000.00. Y has the
obligation to refund the P180,000.00 to X.
 SOURCES OF OBLIGATIONS: BASED ON Art. 1157
OF THE CIVIL CODE OF THE PHILIPPINES.

4) OBLIGATIONS FROM CRIMES OR ACTS OF OMISSION

PUNISHABLE BY LAW - REFERS TO A CRIME OR A
PERSONAL OFFENSE LIKE MURDER, ROBBERY, RAPE,
HOMICIDE, ETC. EVERY PERSON CRIMINALLY LIABLE FOR A
FELONY (CRIME) IS ALSO CIVILLY LIABLE. A CIVIL
LIABILITY ARISING OUT OF THE COMMISSION OF THE
CRIME INCLUDES: RESTITUTION; REPARATION; &
INDEMNIFICATION.

a) RESTITUTION - TO RETURN THE OBJECT IN QUESTION

b) REPARATION OF DAMAGES CAUSED - TO PAY THE VALUE
OF THE OBJECT IN QUESTION
c) INDEMNIFICATION OF CONSEQUENTIAL DAMAGES - TO
PAY FOR OTHER DAMAGES SUFFERED BY THE AGRIEVE
PARTY
 SOURCES OF OBLIGATIONS: BASED ON Art. 1157
OF THE CIVIL CODE OF THE PHILIPPINES.
5) OBLIGATIONS DUE TO QUASI-DELICTS (TORT) - A LEGAL WRONG
COMMITTED THROUGH FAULT OR NEGLIGENCE ON A PERSON OR
PROPERTY THEREBY OBLIGING THE WRONG DOER TO PAY FOR THE
DAMAGE DONE, INDEPENDENT OF CONTRACT WITH NO INTENT TO
CAUSE INJURY OR DAMAGED.
 Ex. A pedestrian hit by a speeding vehicle can claim damages

 PERSONS LIABLE FOR DAMAGES ARISING FROM QUASI DELICTS:

 The Father or the Mother of minor children who live in their company
 Guardians with respect to damage caused by minors or incapacitated
persons under their authority.
 Owners and Managers of establishments for damages caused by their
employees in the service of the branches in which the latter are
employed on the occasion of their functions.
 Employers for damages caused by their employees and household
helpers
 The State when it acts through a special agent
 Teachers or Heads of establishments of arts and trades for damages
caused by their pupils or students or apprentices, so long as they remain
in their custody.
 DELIGENCE REQUIRED IN THE PERFORMANCE OF AN
OBLIGATION:

 - EVERY PERSON OBLIGED TO DO SOMETHING IS ALSO

OBLIGED TO TAKE CARE OF IT - MEANING PENDING DELIVERY
OF THE THING, THE OBLIGOR SHALL TAKE CARE OF IT UNTIL
IT IS DELIVERED.

 RULE WHEN OBLIGOR INCURS DELAY:

 - THOSE OBLIGED TO DELIVER OR TO DO SOMETHING INCUR

DELAY FROM THE TIME THE OBLIGEE JUDICIALLY DEMANDS
FROM THEM THE FULFILLMENT OF THEIR OBLIGATION.
 NATURE AND EFFECT OF OBLIGATIONS
1) DUTY TO EXERCISE DILIGENCE - EVERY PERSON OBLIGED TO
GIVE SOMETHING IS ALSO OBLIGED TO TAKE CARE OF IT
WHICH MEANS THAT PENDING DELIVERY OF THE THING, THE
OBLIGOR SHALL TAKE CARE OF IT UNTIL IT IS DELIVERED.

2) OBLIGATION TO GIVE A DETERMINATE THING - PERTAIN TO

DELIVERING THE THING AND ALL ITS ACCESSORIES THOUGH
THEY MAY NOT HAVE BEEN MENTIONED. ACCESSORIES MAY
INCLUDE FRUITS OF THE THING, ADDITIONS TO OR
IMPROVEMENTS UPON A THING SUCH AS TREES PLANTED ON
THE LAND. Ex. Car and the keys to the car

3) OBLIGATION TO DO SOMETHING - ARTICLE 1167 OF THE CIVIL

CODE STATES THAT IF A PERSON OBLIGED TO DO SOMETHING
FAILS TO DO IT, THE SAME SHALL BE EXECUTED AT HIS COST.
4) OBLIGATION NOT TO DO - WHEN THE OBLIGATION CONSISTS IN
NOT DOING, AND THE OBLIGOR DOES WHAT HAS BEEN
FORBIDDEN HIM IT SHALL BE UNDONE AT HIS EXPENSE.
5) OBLIGATION TO DELIVER - THE OBLIGOR MAY BIND HIMSELF TO
DELIVER A SPECIFIC (Determinate) OR GENERIC (Indeterminate)
THING OR TO DO SOMETHING. THE OBLIGOR INCURS DELAY
ONLY FROM THE TIME THE OBLIGEE JUDICALLY OR
EXTRAJUDICIALLY DEMANDS FROM HIM THE FULFILLMENT OF
HIS OBLIGATION. NO DEMAND, NO DELAY.

CASES WHERE DEMAND IS NOT NECESSARY:

a) WHEN THE OBLIGATION EXPRESSLY SO DECLARES
b) WHEN THE LAW EXPREESSLY SO DECLARES
c) WHEN TIME IS OF THE ESSENCE OF THE CONTRACT
d) WHEN DEMAND WILL BE USELESS
 NATURE AND EFFECT OF OBLIGATIONS
 NO PERSON SHALL BE RESPONSIBLE FOR THOSE EVENTS
WHICH COULD NOT BE FORESEEN, OR WHICH THOUGH
FORESEEN, WERE INEVITABLE, EXCEPT CASES SPECIFIED
BY LAW OR OTHERWISE DECLARED BY STIPULATION.

INSTANCES WHEN OBLIGOR IS LIABLE DESPITE FORTUITOUS

EVENT :

a) WHEN THE LAW SO PROVIDES

b) WHEN THE OBLIGATION SO PROVIDES
c) WHEN THE NATURE OF THE OBLIGATION REQUIRES
THE ASSUMPTION OF RISK.
 KINDS OF OBLIGATIONS
 OBLIGATIONS AS CLASSIFIED BY THE CIVIL CODE:

1. PURE AND CONDITIONAL OBLIGATIONS

2. OBLIGATION WITH A PERIOD

3. ALTERNATIVE AND FACULTATIVE OBLIGATIONS

4. JOINT AND SOLIDARY OBLIGATIONS

5. DIVISIBLE AND INDIVISIBLE OBLIGATIONS

6. OBLIGATIONS WITH A PENAL CAUSE

 PURE OBLIGATIONS - ONE WHICH IS NOT SUBJECT TO
ANY CONDITION OR BURDEN AND WHERE FULFILLMENT IS
NEITHER DEPENDENT UPON A FUTURE OR UNCERTAIN OR
EVEN A PAST EVENT UNKNOWN TO THE PARTIES.

 CONDITIONAL OBLIGATION - ONE WHOSE PERFORMANCE

IS SUBJECT TO A CONDITION WHICH MAY BE EITHER
SUSPENSIVE OR RESOLUTORY IN EFFECT.

1. SUSPENSIVE CONDITION - A CONDITION WHICH

SUSPENDS THE DEMANDABILITY OF THE OBLIGATION
UNTIL FULFILLMENT OF THE CONDITION. Ex. “A” binds
himself to give “B” a car as soon as his mother arrives from
Singapore.
2. RESOLUTORY CONDITION - PRODUCES THE
EXTINGUISHMENT OF AN OBLIGATION UPON THE
HAPPENING OF THE EVENT.
Ex. I will allow you to use my apartment until you pass the
C.E. Board Exam.

OTHER CONDITIONS:

a) POTESTATIVE CONDITION - DEPENDS ON THE EXCLUSIVE

WILL OF THE DEBTOR HENCE IT IS VOID. Ex. “X” promises
to give “Y” a car if he donates his lot to the city.

b) CASUAL CONDITION - Ex. I will by you a car if I win the

lotto.

c) MIXED CONDITION –Ex. “A” promised to give “B” a guitar if

he is accepted foreman in a company.
d) IMPOSSIBLE CONDITION - Ex. I will give you Php 1,000,000 if
you fly to the sun.

e) CONDITION AGAINST GOOD CUSTOM - Ex. Rudy binds

himself to give Mary P500,000 if she will live with him as wife
without marriage.

f) CONDITION AGAINST PUBLIC POLICY - Ex. Corrupt practices

g) CONDITION AGAINST THE LAW - Ex. “A” binds himself to give

P100,000 to “B” if “B” will kill “C”.
• OBLIGATION WITH A PERIOD - ONE WHICH A CERTAIN
DATE HAS BEEN FIXED FOR ITS FULFILLMENT.

• ALTERNATIVE OBLIGATION - ONE WHERE VARIOUS

PRESTATIONS ARE DUE, BUT THE PERFORMANCE OF
ONE, USUALLY CHOSEN BY THE OBLIGOR, IS
INSUFFICENT. Ex. “X” binds himself to deliver to “Y” a
colored TV or a refrigerator.

• FACULTATIVE OBLIGATION - IN THIS OBLIGATION, ONLY

ONE PRESTATION IS DUE BUT THE OBLIGOR MAY
SUBSTITUTE ANOTHER IN LIEU OF THE PRESTATION
DUE. Ex. “X” binds himself to deliver to “Y” a Toyota
Vios, but later “X” proposed and “Y” agreed, that a Ford
Focus will be delivered if a Toyota Vios is not available.
 JOINT OBLIGATION - ONE WHERE THE ENTIRE OBLIGATION IS TO BE
FULFILLED PROPORTIONATELY BY THE VARIOUS OBLIGORS OR
DEBTORS, AND EACH ONE OF THE OBLIGEES OR CREDITORS IS
ENTITLED AND CAN DEMAND A PROPORTIONATE PART OF THE
CREDIT DUE FROM EACH OF THEM. Ex. “X” and “Y” signed a
promisory note binding themselves to pay “Z” the sum of P100,000. “Z”
can demand from “X” P50,000 and from “Y” P50,000

 SOLIDARY OBLIGATION - THE EXACT OPPOSITE OF JOINT

OBLIGATION IN THE SENSE THAT EACH OF THE DEBTORS IS LIABLE
FOR THE ENTIRE OBLIGATION AS LONG AS THE SAME HAS NOT BEEN
PERFORMED, AND EACH OF THE CREDITORS CAN DEMAND
COMPLIANCE. TERMS USED TO INDICATE SOLIDARITY: JOINTLY
AND/OR SEVERALLY ; TOGETHER AND/OR SEPARATELY;
INDIVIDUALLY AND/OR COLLECTIVELY; SOLIDARIA; IN SOLIDUM
• DIVISIBLE OBLIGATION - ONE BEING CAPABLE OF
BEING PERFORMED PARTIALLY. Ex. “X” obliged himself
to deliver 200 bags of cement within a week. Delivery
may be may be done by installments.
• INDIVISIBLE OBLIGATION - THE EXACT OPPOSITE OF
DIVISIBLE OBLIGATION AS NO PARTIAL PERFORMANCE
IS PERMITED. The 200 bags of cement is delivered in one
delivery time.
• OBLIGATION WITH A PENAL CLAUSE - AN OBLIGATION
WHICH CONTAINS AN ACCESSORY UNDERTAKING TO
ASSUME A GREATER LIABILITY IN CASE OF BREACH.
THE PENALTY MAY BE EITHER SUBSIDIARY (ONLY THE
PENALTY IS DEMANDABLE) OR JOINT (BOTH PRINCIPAL
AND PENALTY CAN BE ENFORCED).
 MODES OF EXTINGUISHING OBLIGATIONS

 Art. 1231 OF THE CIVIL CODE PROVIDES THAT OBLIGATIONS

ARE EXTINGUISHED AS FOLLOWS:

1) PAYMENT OR PERFORMANCE
2) LOSS OF THE THING DUE
3) CONDONATION OR REMISSION OF THE DEBT
4) CONFUSION OR MERGER OF THE RIGHTS OF THE CREDITOR
AND DEBTOR
5) COMPENSATION
6) NOVATION
 OTHER CAUSES OF EXTINGUISHMENT OF OBLIGATIONS:

a) ANNULMENT
b) RECESSION
c) FULFILLMENT OF A RESOLUTORY CONDITION
d) PRESCRIPTION
e) DEATH OF A PARTY IN PERSONAL OBLIGATION
f) IMPOSSIBILITY OF FULFILLMENT
g) HAPPENING OF FORTUITOUS EVENT
h) COMPROMISE AGREEMENT
i) MUTUAL DISAGREEMENT OF PARTIES
1. BY PAYMENT OR PERFORMANCE - IT IS A RULE OF LAW
THAT DEBTS OR OBLIGATIONS ARE EXTINGUISHED BY
THEIR PAYMENT, AND A DEBT OR OBLIGATION SHALL
ONLY BE CONSIDERED AS PAID WHEN FULL AMOUNT
HAS BEEN DELIVERED, OR THE SERVICE OF WHICH
OBLIGATIONS CONSISTED HAS BEEN RENDERED. .

• VARIOUS SPECIAL FORMS OF PAYMENT:

a) DACION IN PAYMENT - THE CONVEYANCE OF THE

OWNERSHIP OF A THING WHICH IS ACCEPTED BY THE
OBLIGEE AS PAYMENT OF A DEBT IN LIEU OF MONEY.
Ex. “A” is indebted to “B” in the sum of P100,000.
Instead of paying the amount, “A” delivered a set of
jewelry worth P100,000 which “B” willingly accepted.
b) PAYMENT BY CESSION - CONSISTS OF THE ASSIGNMENT OF
ALL THE PROPERTIES OF THE DEBTOR TO HIS CREDITORS IN
ORDER THAT THE SAME MAY BE SOLD BY THE CREDITORS TO
SATISFY THEIR CREDITS. Ex. “A” binds himself to pay “B”,
“C”, and “D” the amount of P1,000,000. But “A” has no
substantial cash, thus “A” may assign his properties also valued
P1,000,000 to extinguish the obligation.

c) TENDER OF PAYMENT AND CONSIGNATION - THE ACT BY

WHICH A DEBTOR (OBLIGOR) OFFERS TO THE CREDITOR
(OBLIGEE) THE THING OR THE AMOUNT DUE. CONSIGNATION
AND ACT BY WHICH THE DEBTOR DEPOSITS THE THING OR
THE AMOUNT DUE WITH THE COURT OF COMPETENT
JURISDICTION WHENEVER THE CREDITOR UNREASONABLY
REFUSE TO ACCEPT OR CANNOT RECEIVE IT.
2. LOSS OF THING - AN OBLIGATION CONSISTING IN THE
DELIVERY OF A DETERMINED THING SHALL BE
EXTINGUISHED IF IT IS LOST OR DESTROYED WITHOUT
FAULT OF THE DEBTOR AND BEFORE HE HAS INCURRED
DELAY.
Ex. X obliged himself to deliver a specific dog to Y. Before the
agreed date of delivery, the dog died without X’s fault. The
obligation is extinguished.
3. CONDONATION OR REMISSION - IT IS AN ACT BY WHICH
THE OBLIGEE, WHO RECEIVES NO PRICE OR
EQUIVALENT THEREOF, RENOUNCES THE
ENFORCEMENT OF AN OBLIGATION, WHICH IS
EXTINGUISHED IN WHOLE OR IN PART.
Ex. X is indebted to Y in the amount of P5,000.00. On the due
date of the obligation, X offered to pay but Y renounces his
right to collect as he won in the lotto.
 4. CONFUSION OR MERGER - THE UNION OF THE QUALITIES
OF DEBTOR AND CREDITOR IN THE SAME PERSON, THE
EFFECT OF WHICH IS TO GENERALLY EXTINGUISH THE
OBLIGATION.

 Ex. X is indebted to Y in the amount of P5,000.00 for which he

issued a promisory note. Later, Y endorsed it to Z who then
endorsed it back to X. In this case, the obligation is extinguished
since X had become his own creditor and debtor.

 5. COMPENSATION - IT TAKES PLACE WHEN TWO OR MORE

PERSONS, IN THEIR OWN RIGHTS ARE CREDITORS AND
DEBTORS TO EACH OTHER.
Ex. X is indebted to Y in the amount of P50,000.00 whereas, Y
is indebted to X in the same amount.

KINDS OF COMPENSATION:

a) LEGAL - IT TAKES PLACE BY OPERATION OF LAW.

b) VOLUNTARY OR CONVENTIONAL - IT TAKES PLACE BY
AGREEMENT OF THE PARTIES
c) JUDICIAL - IT TAKES PLACE WITH THE CONCURRENCE OF
THE COURT OF COMPETENT JURISDICTION
d) PARTIAL - IT TAKES PLACE WHEN TWO OBLIGATIONS ARE OF
DIFFERENT AMOUNTS AND A BALANCE REMAINS
UNEXTINGUISHED.
e) TOTAL - IT TAKES PLACE WHEN TWO DEBTS ARE OF THE
SAME AMOUNT.
 6) NOVATION - THE CHANGE, SUBSTITUTION, OR
RENEWAL OF AN OBLIGATORY RELATION, WITH THE
INTENTION OF EXTINGUISHING OR MODIFYING
ESSENTIALLY THE FORMER, DEBITUM PRO DEBITO
(NEW DEBT FOR AN OLD DEBT).
Ex. 1: “A” Owes “B” P50,000. A third person, “X” went ot “B”
and told the latter that he will be the one to make the payment. If
“B” agrees that “X” will take the place of “A” there will be a
novation of obligation known as expromision.
Ex. 2: “A” binds himself to deliver to “B” 3 sacks of rice.
Subsequently, “A” brought with him his friend, “X” to “B” and
Ex. 2: requested the latter to accept “X” as the one who will undertake
the delivery of 3 sacks of rice. If “B” agrees to the proposal of
“A”, the obligation of “A” is extinguished through substitution by
delegacion.
CONTRACTS
 CONTRACTS
 CONTRACT - Art. 1305: A MEETING OF MINDS BETWEEN TWO
PARTIES WHEREBY ONE BINDS HIMSELF, WITH RESPECT TO
THE OTHER TO GIVE SOMETHING OR RENDER SOME SERVICE.

A CONTRACT IS ONE OF THE SOURCES OF OBLIGATIONS

AND THE WORD CONTRACT IS DERIVED FROM THE WORD
“CONTRACTUS” WHICH SIGNIFIES AN AGREEMENT.

 CONTRACT DISTINGUISHED FROM AGREEMENT - CONTRACT

IS BASED ON AGREEMENT BUT NOT EVERY AGREEMENT IS A
CONTRACT. IN ORDER FOR AN AGREEMENT TO QUALIFY AS A
CONTRACT, THE PARTIES MUST HAVE SHOWN THAT A LEGAL
RELATIONSHIP BE CREATED BETWEEN THEM, AS
DISTINGUISHED FROM OTHER RELATIONSHIPS LIKLE SOCIAL
AND POLITICAL.
 ESSENTIAL REQUISITES OF CONTRACTS:

1) CONSENT OF THE CONTRACTING PARTIES - AGREEMENT OF

CONTRACTING PARTIES

2) OBJECT OF CONTRACTS - THE SUBJECT MATTER OF THE CONTRACT

WHICH COULD BE A THING, RIGHTS, OR SERVICES.

3) CAUSE OF CONTRACTS - THE PURPOSE WHICH THE CONTRACTING

PARTIES HAVE IN VIEW BUT MUST NOT BE CONTRARY TO LAW, MORALS,
GOOD CUSTOMS, PUBLIC ORDER OR PUBLIC POLICY.

CONSENT - MANIFESTED BY THE MEETING OF THE OFFER AND THE

ACCEPTANCE UPON THE THING AND THE CAUSE ARE TO CONSTITUTE
THE CONTRACT.

ACCEPTANCE MADE BY LETTER OR TELEGRAM DOES NOT BIND THE

OFFERER EXCEPT FROM THE TIME IT CAME TO HIS KNOWLEDGE.
 ESSENTIAL REQUISITES OF CONTRACTS

 THE FOLLOWING CANNOT GIVE CONSENT TO CONTRACTS:

a) UNEMANCIPATED MINORS - BELOW 21 YEARS OLD

b) INSANE OR DEMENTED PERSONS

c) DEAF-MUTES WHO DO NOT KNOW HOW TO WRITE

NOTE: 1. CONTRACTS ENTERED INTO DURING A LUCID INTERVAL

ARE VALID.

2. CONTRACTS AGREED TO IN A STATE OF

DRUNKENNESS OR DURING A HYPNOTIC SPELL ARE
VOIDABLE.

3. A CONTRACT WHERE CONSENT IS GIVEN THROUGH

MISTAKE, VIOLENCE, INTIMIDATION, UNDUE
INFLUENCE, OR FRAUD IS VOIDABLE.
OFFER AND ACCEPTANCE LEADS TO A CONTRACT
 RULE ON OFFER AND ACCEPTANCE - THE PERSON MAKING
THE OFFER HAS THE INHERENT RIGHT TO FIX THE TIME,
PLACE AND MANNER OF ACCEPTANCE. LIKEWISE, THE
OFFEROR MAY GIVE THE OFFEREE A PERIOD WITH IN WHICH
TO ACCEPT THE OFFER AND HE MAY WITHDRAW IT AT ANY
TIME BY COMMUNICATING THE WITHDRAWAL BEFORE THE
OFFER HAS BEEN ASCCEPTED BY THE OFFEREE.

 WHEN THE OFFER BECOMES INEFFECTIVE – AN OFFER MAY

BECOME INEFFECTIVE IF BEFORE ITS ACCEPTANCE BY THE
OFFEREE, THE OFFEROR WILL DIE, SUFFER CIVIL
INTERDICTION OR BECOMES INSANE OR INSOLVENT.
 OFFER MADE THROUGH AGENT - ACCEPTED FROM THE TIME
ACCEPTANCE IS COMMUNICATED TO HIM BY THE OFFEREE.

 PUBLISHED ADVERTISEMENT NOT AN OFFER – THESE ARE

MERE INVITATIONS TO MAKE AN OFFER.

 VICES OF CONSENT: ASIDE FROM INCAPACITY, THE

FOLLOWING MAY INVALIDATE OR RENDER DEFECTIVE THE
GIVEN CONSENT OF A PARTY TO A CONTRACT:

1) ERROR OR MISTAKE
2) VIOLENCE OR FORCE
3) INTIMIDATION THREAT OR DURESS
 VICES OF CONSENT: ASIDE FROM INCAPACITY, THE
FOLLOWING MAY INVALIDATE OR RENDER DEFECTIVE THE
GIVEN CONSENT OF A PARTY TO A CONTRACT:

1) ERROR OR MISTAKE
2) VIOLENCE OR FORCE
3) INTIMIDATION THREAT OR DURESS
4) UNDUE INFLUENCE - A PERSON TAKES IMPROPER
ADVANTAGE OF HIS POWER OVER THE WILL OF ANOTHER.
Ex. “A” who is in financial distress, approached “B” to lend him
money. But “B” did not agree unless “A” sells his car to him.
5) FRAUD OR DECEIT
MISTAKES RENDERING CONTRACT DEFECTIVE::

1. MISTAKE IN SUBSTANCE – TAKES PLACE WHEN BOTH

PARTIES THOUGHT THAT THE SUBJECT MATTER THEY
ARE DEALING INTO DOES NOT TURN OUT TO BE WHAT
IT EXACTLY IS.

2. MISTAKE OF IDENTITY OR QUALIFICATION – TAKES

PLACE WHEN ONE PARTY ENTERS INTO THE CONTRACT
PRIMARILY BECAUSE OF SUCH IDENTITY OR
QUALIFICATION OF THE OTHER PARTY WHICH IS NOT
ACTUALLY THE CASE.
Ex. Engr. Tim Bags is the best construction engineer in Ozamiz City.
Pak Benhur wants his proposed 5-storey building constructed by
Tim Bags and meets another engineer of the same name
believing that the latter is the real Tim Bags.

3. MISTAKE OF FACT – WILL VOID THE CONTRACT AS IT MAY

CONSTITUTE FRAUD. THERE IS NO MISTAKE IF THE PARTY
ALLEGING IT KNEW OF THE REAL FACTS.

4. MISTAKE OF ACCOUNT – REMEDY FOR THIS CASE IS NOT

ANNULMENT BUT CORRECTION OF THE ACCOUNT.
 Ex. X sells to Y 155 bags of cement at P275.00 per bag but paid
only P41,215.00 instead of P42,625.00 due to mistake in addition.
X can demand the additional payment from Y.
 LEGAL PROTECTION TO THE WEAK PARTY:

 Art. 1332 OF THE CIVIL CODE STATES THAT WHEN ONE OF THE
PARTIES IS UNABLE TO READ, OR IF THE CONTRACT IS
WRITTEN IN A LANGUAGE NOT UNDERSTOOD TO HIM, AND
MISTAKE IS ALLEGED, THE PERSON ENFORCING THE
CONTRACT MUST SHOW THAT THE TERMS THEREOF HAVE
BEEN FULLY EXPLAINED TO THE FORMER BEFORE ITS
EXECUTION. Failure to do so will render the contract voidable.

 VIOLENCE - AN EXTERNAL ACT CHARACTERIZED BY THE

EMPLOYMENT OF SERIOUS AND IRRESISTIBLE FORCE BY ONE
PARTY OR THIRD PARTY TO SECURE CONSENT.
 INTIMIDATION - THERE IS INTIMIDATION WHEN ONE OF THE
CONTRACTING PARTIES IS COMPELLED TO GIVE CONSENT ON
ACCOUNT OF A REASONABLE THREAT FROM THE OTHER
PARTY.

 UNDUE INFLUENCE - EXIST WHEN A PERSON TAKES

IMPROPER ADVANTAGE OF HIS POWER OVER THE WILL OF
ANOTHER DEPRIVING THE LATTER OF A REASONABLE
FREEDOM OF CHOICE.

 FRAUD - EXIST WHEN THROUGH INSIDIOUS WORDS OR

MACHINATIONS OF ONE OF THE CONTRACTING PARTIES, THE
OTHER IS INDUCED TO ENTER INTO A CONTRACT WHICH
WITHOUT THEM, HE WOULD NOT HAVE AGREED TO.
GENERALLY, FRAUD RENDERS THE CONTRACT VOIDABLE.
 CLASSIFICATIONS OF FRAUD:
1. FRAUD AT OR BEFORE THE PERFECTION OF THE CONTRACT
(DOLO CAUSANTE) - WHEN COMMITTED, RENDERS THE
CONTRACT VOIDABLE.
Ex. A VENDOR SELLS A GOLD RING WHICH HE
REPRESENTS TO BE MOUNTED WITH DIAMONDS WHEN
SUCH WERE MERELY STONE GLASS.

2. FRAUD AFTER PERFECTION OF THE CONTRACT (DOLO

INCIDENTE) – DOES NOT CAUSE INVALIDITY OF THE
CONTRACT.
Ex. A SELLER OF FABRICS REPLACING THE IMPORTED
FABRICS AFTER EXECUTION OF THE CONTRACT
WITH LOCAL FABRICS.
 INSTANCES NOT CONSTITUTING FRAUD:

1. USUAL EXAGERATION IN TRADE

2. EXPRESSION OF A FAVORABLE OPINION - EXPRESSION OF OPINION

DOES NOT SIGNIFY FRAUD UNLESS THE SAME IS MADE BY AN
EXPERT AND THE OTHER PARTY RELIED ON THE SPECIAL
KNOWLEDGE.

3. MISREPRESENTATION MADE IN GOOD FAITH - NOT FRAUDULENT

BUT MAY CONSTITUTE ERROR.

4. MISREPRESENTATION BY A THIRD PERSON

Ex. X represented to Y that the price of land in Ozamiz is
P2,000 per sq.m. Y relying on X’s information entered
into a contract of sale of land with Z in the amount
represented. If the actual price is less or more,
annulment of contract cannot be allowed
DUTY TO DISCLOSE MATERIAL FACTS - FAILURE OF EITHER
PARTY TO DISCLOSE FACTS WHEN THERE IS A DUTY TO REVEAL
THEM CONSTITUTE FRAUD AS PER Art. 1339.

SIMULATED CONTRACT - A CONTRACT IS SIMULATED WHEN IT

IS FICTITIOUS OR PRETENDED IN ORDER TO DEFRAUD THE
CREDITOR OR MISLED THE GENERAL PUBLIC.

KINDS OF SIMULATED CONTRACT:

ABSOLUTELY SIMULATED - TAKES PLACE WHEN THE PURPOSE

OF SUCH CONTRACT IS TO DEFRAUD THE CREDITORS WHEN
THE DEBTOR ENTER INTO A FICTITIOUS CONTRACT ALIENATING
HIS PROPERTY IN ORDER TO PLACE SUCH PROPERTY BEYOND
THE REACH OF THE CREDITOR.
 RELATIVELY SIMULATED - TAKES PLACE WHEN THE PARTIES
CONCEALED THEIR TRUE AGREEMENT.
Ex. X & Y owns two Toyota Vios cars for their personal use
everyday. Due to high cost of fuel, they decided to convert their
cars into taxis, and in order to do so entered into a fictitious
contract of sale with a legitimate taxi operator.

 ESSENTIAL CHARACTERISTICS OF CONSENT:

1) IT IS INTELLIGENT - THERE IS CAPACITY TO ACT
2) IT IS FREE AND VOLUNTARY - THERE IS NO IMPAIRMENT OF
CONSENT BY REASON OF VIOLENCE OR INTIMIDATION
3) IT IS CONCIOUS OR SPONTANEOUS - THERE IS NO
IMPAIRMENT OF CONSENT BY REASON OF MISTAKE, UNDUE
INFLUENCE, OR FRAUD
 OBJECT OF CONTRACTS

 OBJECT OF CONTRACTS - MAY BE THINGS, RIGHTS, &

SERVICES.

 THINGS : a) NOT OUTSIDE THE COMMERCE OF MEN

INCLUDING FUTURE THINGS HAVING A POTENTIAL
EXISTENCE

 b) MUST NOT BE IMPOSSIBLE PHYSICALLY OR LEGALLY

 c) MUST BE DETERMINATE AS TO THEIR KIND

 OUTSIDE COMMERCE OF MAN – LIKE SALE OF STREETS,

PLAZAS RIVERS, BRIDGES, PROTECTED SPECIES, ETC.
 THINGS HAVING POTENTIAL EXISTENCE - LIKE POTENTIAL
FRUIT OF MANGO TREES, HARVEST OF RICE FIELDS, ETC.

 RIGHTS: TRANSMISSIBLE RIGHTS, HOWEVER THERE ARE
RIGHTS THAT ARE NOT TRANSMISSIBLE, HENCE COULD NOT
BECOME OBJECTS OF A CONTRACT

 INSTRANSMISSIBLE RIGHTS AND SERVICES – CANNOT BE THE

OBJECT OF CONTRACTS LIKE THE RIGHT TO VOTE.

 SERVICES:
SERVICES WHICH ARE NOT CONTRARY TO LAW,
MORALS, GOOD CUSTOMS, PUBLIC ORDER, OR PUBLIC
POLICY.

 FUTURE INHERITANCE – CONTRACTS INVOLVING FUTURE

INHERITANCE IS VOID.
 CAUSE OR CONSIDERATION OF CONTRACTS - CAUSE MUST
NOT BE CONTRARY TO LAW, MORALS, GOOD CUSTOM. PUBLIC
ORDER OR PUBLIC POLICY. IT MUST BE IN EXISTENCE AT THE
TIME OF THE CONTRACT. THE CAUSE MAY BE EITHER:
ONEROUS, REMUNERATORY, & GRATUITOUS.
a) IN ONEROUS CONTRACTS - THE CAUSE IS THE MUTUAL
UNDERTAKING OR PROMISE OF EITHER OF THE
CONTRACTING PARTIES. Ex. THING FOR THE BUYER AND
PAYMENT FOR THE SELLER
b) IN REMUNERATORY CONTRACTS - THE SERVICE OR BENEFIT
FOR WHICH THE REMUNERATION IS GIVEN. Ex.
PROFESSIONAL FEE
c) IN GRATUITOUS CONTRACTS - THE CAUSE IS THE PURE
LIBERALITY OF THE GIVER. Ex. PLEDGES, DONATIONS
 MOTIVES IN ENTERING INTO A CONTRACT:

 MOTIVE - THE SPECIAL OR PERSONAL REASON OF A PARTY

WHY HE ENTERED INTO A CONTRACT.

 CONTRACTS WITHOUT A CAUSE OR WITH ILLEGAL CAUSE -

PRODUCES NO EFFECT WHATSOEVER.

 STATEMENT OF A FALSE CAUSE IN CONTRACT - WILL RENDER

THE CONTRACT VOID.
 Ex. “X” signs a contract of sale stating that he sold and delivered
a sound system to “Y” for P50,000.00. The truth of the matter
however is that “Y” did not pay any amount to “X” as the later’s
purpose is to place the sound system beyond the reach of an
appliance firm to which he had not paid his dues. Here the
contract is void
 LESION OR INADEQUACY OF CAUSE - WILL NOT INVALIDATE A
CONTRACT, UNLESS THERE HAS BEEN FRAUD OR UNDUE
INFLUENCE, AND IN CASES SPECIFIED BY LAW.

 LESION - THE DAMAGED SUFFERED BY A PARTY BECAUSE

THE PRICE IS UNJUST OR INADEQUATE. IT DOES NOT VOID OR
INVALIDATE THE CONTRACT UNLESS THE PRICE IS GROSSLY
INADEQUATE.

 Ex. “X” IS THE OWNER OF A 500 SQ.M. LOT. WITHOUT

KNOWING THAT THE COST PER SQ.M. IS P5,000.00, HE SOLD IT
TO “Y” AT P3,000.00 PER SQ.M.
 UNDER THE CIRCUMSTANCES, THE LESION OF P200,000 PER SQ.M. SUFFERED
BY “X” WILL NOT INVALIDATE THE CONTRACT. BUT IF “Y” OR A THIRD PERSON
HAD DELIBERATELY USED FRAUD OR UNDUE INFLUENCE, LESION SUFFERED
MAY BE A BASIS OF AN ACTION TO INVALIDATE THE CONTRACT.
 STAGES OF A CONTRACT

1) PREPARATION OR CONCEPTION - INCLUDES ALL THE

INITIAL STAGES UP TO THE TIME THE PARTIES AGREE
UPON THE TERMS OF THE CONTRACT.

2) PERFECTION OR BIRTH - MARKS THE TIME WHEN THE

MINDS OF THE PARTIES MEET IN AGREEMENT UPON THE
OBJECT OR SUBJECT MATTER AS WELL AS TO THE
PRICE OR CONSIDERATION.

3) CONSUMATION OR TERMINATION - THE

IMPLEMENTATION OF THE TERMS OF THE CONTRACT.
 ELEMENTS OF CONTRACTS

1) ESSENTIAL ELEMENTS - CONSENT OF THE PARTIES;

OBJECT OR SUBJECT MATTER; CAUSE OR
CONSIDERATION. WITHOUT THESE ELEMENTS A VALID
CONTRACT CANNOT EXIST.

2) NATURAL ELEMENTS - THOSE THE EXISTENCE OF

WHICH IS PRESUMED BY LAW UNLESS THERE IS AN
AGREEMENT TO THE CONTRARY. Ex. Warranty in a
contract of sale

3) ACCIDENTAL ELEMENTS - CONSIST OF THE UNUSUAL

STIPULATION OF THE PARTIES SUCH AS CONDITIONS,
TERMS, ETC. Ex. Stipulation to pay interest on a loan
 CLASSIFICATION OF CONTRACTS
 NOTE ON CONTRACTS: THE CONTRACT MUST BIND
BOTH CONTRACTING PARTIES; ITS VALIDITY OR
COMPLIANCE CANNOT BE LEFT TO THE WILL OF ONE.
EX. “X” AND “Y” ENTERED INTO A CONTRACT WHEREBY “X”
BOUND HIMSELF TO GIVE “Y” A CAR IF “X” DECIDES TO
SELL HIS FARM.
 CLASSIFICATION OF CONTRACTS:
1) EXPRESS AND IMPLIED CONTRACTS:
a. EXPRESS CONTRACT - ONE WHEREIN THE INTENT
OF THE PARTIES IS SHOWN BY WORDS; ORAL OR
WRITTEN.
b. IMPLIED CONTRACT - ONE WHEREIN THE INTENT OF
THE PARTIES IS SHOWN BY CONDUCT.
 CLASSIFICATION OF CONTRACTS

2) EXECUTED AND EXECUTORY CONTRACTS:

a. EXECUTED CONTRACT - ONE THAT HAS ALREADY BEEN

PERFORMED.
b. EXECUTORY CONTRACT - ONE YET TO BE PERFORMED.

3) NOMINATE AND INNOMINATE CONTRACTS:

a. NOMINATE CONTRACT - THOSE WITH SPECIAL NAME OR

DESIGNATION IN THE CIVIL CODE AS IN AGENCY, SALES,
PARTNERSHIP, ETC..
b. INNOMINATE CONTRACT - DOES NOT HAVE ANY
SPECIAL DESIGNATION OR NAME.
 CLASSIFICATION OF CONTRACTS

4) CONSENSUAL AND REAL CONTRACTS:

a. CONSENSUAL CONTRACT - ONE PERFECTED BY MERE CONSENT,

SUCH AS A CONTRACT OF SALE.

a. REAL CONTRACT - ONE COMPLETED BY THE DELIVERY OF THE

THING WHICH IS THE OBJECT OF THE CONTRACT.

5) UNILATERAL AND BILATERAL CONTRACTS:

a. UNILATERAL CONTRACT - ONLY ONE OF THE PARTIES HAS AN

OBLIGATION AS IN A PLEDGE OR COMMODATUM .

a. BILATERAL CONTRACT - CREATES RECIPROCAL OBLIGATIONS

AS IN A CONTRACT OF SALE WHERE THE SELLER IS BOUND TO
DELIVER THE THING SOLD AND THE BUYER TO PAY THE
PURCHASE PRICE.


 FORM OF CONTRACTS

 FORM NOT ESSENTIAL TO BINDING: CONTRACTS SHALL BE

OBLIGATORY IN WHATEVER FORM (VERBAL OR WRITTEN) THEY
HAVE BEEN ENTERED INTO PROVIDED ALL THE ESSENTIAL
REQUISITES FOR THEIR VALIDITY ARE PRESENT.

 WHEN FORM IS A REQUIREMENT:

1. WHEN LAW REQUIRES FORM FOR VALIDITY - IF THE LAW

REQUIRES A CONTRACT TO BE IN WRITING OR TO BE IN A
PUBLIC INSTRUMENT LIKE SALE OF REAL PROPERTIES.
2. WHEN LAW REQUIRES A FORM FOR ENFORCEABILITY -
WHEN THE LAW REQUIRES A CONTRACT TO BE IN WRITING
AND NOTED IN ANY MANNER TO ENFORCEABLE.
3. WHEN THE LAW REQUIRES A FORM FOR CONVENIENCE
 IF A CONTRRACT IS VALID AND ENFORCEABLE BUT NOT IN
PUBLIC INSTRUMENT, A PARTY INTERESTED IN ITS
REGISTRATION MAY COMPEL THE OTHER PARTY TO REWRITE
IT IN THE PROPER FORM DULY NOTARIZED.

 REMEDY IF VALID CONTRACT NOT IN PUBLIC INSTRUMENT:

 - CONTRACTING PARTIES MAY COMPEL EACH OTHER TO

OBSERVE THE PROPER FORM .

 Ex. “X” SOLD TO “Y” A PARCEL OF LAND BUT THE CONTRACT

IS WRITTEN ONLY IN AN ORDINARY PAPER (NOT A PUBLIC
INSTRUMENT). UNDER THE LAW, SALES OF REAL PROPERTY
MUST BE IN PUBLIC INSTRUMENT.
 FREEDOM / LIMITATIONS TO CONTRACTS

 FREEDOM TO CONTRACT IS GUARANTEED BY THE

CONSTITUTION AND IT MEANS THAT FOR A CONTRACT TO BE
VALID, THE TERMS AND CONDITIONS THEREOF MUST NOT BE
AGAINST THE LAW, GOOD MORALS, GOOD CUSTOMS, PUBLIC
ORDER, AND PUBLIC POLICY.

 CONTRARY TO LAW - THE PARTIES CANNOT STIPULATE ON

MATTERS AGAINST THE LAW SUCH AS CONTRACTS INVOLVING
KILLING, KIDNAPPING, ETC. FOR MONETARY
CONSIDERATIONS.

 CONTRARY TO GOOD MORALS AND CUSTOMS – CONTRACTS

OFFENDING MORALS AND GOOD CUSTOMS ARE VOID AND
WITHOUT EFFECT.
 FREEDOM / LIMITATIONS TO CONTRACTS

 CONTRACTS AGAINST PUBLIC ORDER - EX. AN AGREEMENT

THAT THE CREDITOR CAN USE FORCE OR VIOLENCE TO
COMPEL THE DEBTOR TO PAY.

 CONTRACT AGAINST PUBLIC POLICY – RESTRICTIONS IN

THE CONTRACT THAT CLEARLY VIOLATES THE RIGHTS OF
ONE PARTY OR PUT TO DISADVANTAGE ONE OF THE PARTIES
INVOLVED IN THE CONTRACT.
 Ex. GRAFT AND CORRUPTION
 REFORMATION OF INSTRUMENTS

 REFORMATION OF INSTRUMENTS:

 A REMEDY APPLIED TO WRITTEN CONTRACTS WHEN THE

EXISTING CONTRACT DOES NOT TRULY EXPRESS THE
INTENTIONS OF THE CONTRACTING PARTIES BY REASON OF
SOME ERRORS OR MISTAKES IN THE INSTRUMENT.

 Ex. “A” offers to sell his car to “B” for P300,000. The latter
accepts and pays the sum of P300,000. The Deed of Sale
however reflects the sum P30,000 which is not in real
conformity with the real intention of the parties. The remedy is
Reformation of the instrument.
 REFORMATION OF INSTRUMENTS

 REQUISITES OF REFORMATION:

1. MEETING OF MINDS

2. WRITTEN CONTRACT

3. WRITTEN CONTRACT FAILS TO EXPRESS THE TRUE

INTENTIONS OF THE PARTIES

4. A CLEAR AND CONVINCING PROOF OF THE REAL INTENTION

5. FAILURE IS DUE TO MUTUAL MISTAKE, FRAUD, INEQUITABLE

CONDUCT, OR ACCIDENT
 REFORMATION OF INSTRUMENTS

 WHEN REFORMATION MAY BE SOUGHT:

1. MUTUAL MISTAKES OF THE PARTIES

2. ONE PARTY WAS MISTAKEN AND THE OTHER ACTED
FRAUDULENTLY
3. ONE PARTY WAS MISTAKEN AND THE OTHER KNOWINGLY
CONCEALED A MISTAKE
4. IGNORANCE, LACK OF SKILL, NEGLIGENCE OR BAD FAITH
OF PERSON DRAFTING THE INSTRUMENT
5. MORTGAGE OR PLEDGE WRITTEN OTHERWISE

 WHEN REFORMATION IS NOT ALLOWED:

1. SIMPLE DONATIONS WHEREIN NO CONDITION IS IMPOSED

2. WILLS
3. WHEN THE REAL AGREEMENT IS VOID
 RIGHTS AND OBLIGATIONS ARISING FROM
CONTRACTS

1) CONTRACTS BIND THE PARTIES, ASSIGNS AND

HEIRS. Ex. “A” is indebted to “B” in the amount of
P100,000. Before the due date of the obligation “B”
dies leaving his son “C” as his sole heir. In such case
“A” must pay his debt to “C”.

2) NOT TRANSMISSIBLE BY NATURE. Ex. “X”

engages the services of “Y”, a lawyer to defend him.
If “Y” dies before the case is heard the obligation of
“Y” to defend “X” cannot be transmitted to his son “Z”
because the personal qualification of “Y” as a lawyer
is involved.
 RIGHTS AND OBLIGATIONS ARISING FROM
CONTRACTS

3) NOT TRANMISSIBLE BY STIPULATION. Ex. “A” entered into a

contract with “B” whereby “A” agreed to sell his house to “B”for
P1,000,000 on October 16, 2019. They stipulated that in case
either one of them dies before said date the right of obligation
of the deceased shall not pass to their heirs.

4) NOT TRANSMISSIBLE BY LAW. Ex. “X”, “Y”, and “Z” entered

into a partnership. In case one dies, the partnership shall be
dissolved under the laws unless there is an agreement to the
contrary.

5) HEIR NOT LIABLE BEYOND VALUE OF PROPERTY. Ex. “A” is

indebted to “B” in the amount of P2,000,000. “A” died before
the debt is due leaving his heir “C” properties worth
P1,300,000. “B” cannot force “C” to pay the debt of “A” beyond
what was left to him by “A”.
 INTERPRETATION OF CONTRACTS

 THE CARDINAL RULE IN THE INTERPRETATION OF CONTRACTS

IS TO THE EFFECT THAT THE INTENTION OF THE
CONTRACTING PARTIES SHOULD ALWAYS PREVAIL.

 INTERPRETATION OF CONTRACTS WITH UNCLEAR

STIPULATIONS:
 Ex. “X” ENTERED INTO A CONTRACT DONATING TO “Y” A CAR
WHICH WAS NOT DESCRIBED IN THE DEED. “X” OWNS TWO
CARS A TOYOTA VIOS AND A MERCEDES BENZ SPORTS. IN
THIS CASE THE VIOS IS DEEMED DONATED AS IT HAS A
LESSER VALUE.

 INTERPRETATION OF CONTRACTS WITH SEVERAL MEANINGS:

 Ex. “X” A SUCCESSFUL ENGINEER, SELLS HIS CAR TO “Y”

WHICH WAS NOT PROPERLY DESCRIBED IN THE DEED OF
SALE. AT THE TIME OF THE SALE, “X” OWNS TWO CARS OF
THE SAME BRAND AND MODEL - ONE USED IN THE EXERCISE
OF HIS PROFESSION AND THE OTHER RESERVED FOR FAMILY
USE.

 IN THIS CASE, THE MEANING THAT SHOULD BE GIVEN IS

THE SALE OF THE FAMILY USE CAR SINCE THE ENGINEER’S
CAR IS NEEDED IN THE EXERCISE OF HIS PROFESSION.
 CONTRACT INTERPRETATION AGAINST PARTY CAUSING
OBSCURITY:

 Ex. “X” BORROWED P50,000.00 FROM “Y” PAYABLE IN ONE

YEAR WITH INTEREST. “Y” PREPARED THE CONTRACT AND NO
FIXED INTEREST RATE WAS STATED IN THE CONTRACT.

 IN THIS CASE, ALL THAT “Y” COULD DEMAND FROM “X” IS THE
PREVAILING LEGAL INTEREST RATE EVEN IF “Y” WANTED A
HIGHER RATE.

.
 DEFECTIVE CONTRACTS

DEFECTIVE CONTRACTS - THOSE WHICH FAILED TO MEET OR

PARTIALLY MEET THE LEGAL TEST OF VALIDITY DUE TO LACK OF
SOME ESSENTIAL ELEMENTS OR THE PARTIES LACKS CAPACITY
TO CONTRACT, THERE IS VICE IN CONSENT, OR LESION IN
CERTAIN CASES.

KINDS OF DEFECTIVE CONTRACTS:

1) RESCISSIBLE CONTRACTS

2) VOIDABLE CONTRACTS

3) UNENFORCEABLE CONTRACTS

4) VOID OR INEXISTENT CONTRACTS

 RECISSIBLE CONTRACTS

 RECISSION - A REMEDY GRANTED BY LAW TO THE

CONTRACTING PARTIES AND EVEN TO THIRD PERSONS TO
OBTAIN REPARATION FROM DAMAGES CAUSED BY A VALID
CONTRACT.

 THE FOLLOWING CONTRACTS ARE RECISSIBLE:

1. THOSE WHICH ARE ENTERED INTO BY GUARDIANS

WHENEVER THE WARDS WHOM THEY REPRESENT SUFFER
LESION BY MORE THAN ONE-FOURTH OF THE VALUE OF
THE THINGS WHICH ARE THE OBJECT THEREOF;

 Ex. “A” is the guardian of “B” a minor. “A” sells to “C” the property of
“B” worth P400,000 for only P200,000 causing “B” to suffer damage
(lesion) by more than ¼ the value of his property .
 RECISSIBLE CONTRACTS

2. THOSE AGREED UPON IN REPRESENTATION OF

ABSENTEES, IF THE LATTER SUFFER THE LESION STATED
IN THE PRECEEDING NUMBER;

3. THOSE UNDERTAKEN IN FRAUD OF CREDITORS WHEN THE

LATTER CANNOT IN ANY OTHER MANNER COLLECT THE
CLAIMS DUE THEM;

4. THOSE WHICH REFER TO THINGS UNDER LITIGATIONS IF

THEY HAVE BEEN ENTERED INTO BY THE DEFENDANT
WITHOUT THE KNOWLEDGE AND APPROVAL OF THE
LITIGANTS OR OF COMPETENT JUDICIAL AUTHORITY;

5. ALL OTHER CONTRACTS ESPECIALLY DECLARED BY LAW

TO BE SUBJECT TO RECISSION.
 RECISSIBLE CONTRACTS – ILLUSTRATED:

 CONTRACTS IN REPRESENTATION OF WARDS:

 Ex. “X”, the guardian of “Y” a minor, sold to “Z” a piece of land
belonging to “Y” in the amount of P1,000,000 when the market
price at the time sale is P1,500,000. “Y” can file for recission.

 CONTRACTS IN REPRESENTATION OF ABSENTEES:

 ABSENTEE - A PERSON WHOSE WHEREABOUTS IS UNKNOWN

AND CANNOT BE LOACATED IN HIS LAST OFFICIAL ADDRESS.
 Ex. “X”, representing “Y” an absentee, sold to “Z” a piece of land
belonging to “Y” in the amount of P1,000,000 when the market
price at the time sale is P1,500,000. “Y” can file for recission
when he reappears.
 CONTRACTS UNDERTAKEN IN FRAUD OF CREDITORS:
 Ex. “X”, in order to avoid his debt to “Y” amounting to P300,000
enters into a contract selling his car to “Z” for P300,000. “Y” can
file for recission but has to prove that the contract of sale for the
car was undertaken under fraudulent circumstances.

 CONTRACTS REFERRING TO THINGS IN LITIGATION:

 Ex. “X”, sues “Y” for the recovery of a car and pending trial e
same is sold by “Y” to “Z” without the permission of “X”. The sale
is recissible.

 CONTRACTS DECLARED BY LAW SUBJECT TO RECISSION:

 Ex. Judicial or extra-judicial partition of properties where one of
the heirs received a share less than one-fourth of his legitimate
share.
 REQUISITES FOR AN ACTION FOR RECISSION TO PROSPER:
 THE PLAINTIFF MUST BE ABLE TO RETURN WHAT HE HAS
RECEIVED BY VIRTUE OF A RECISSIBLE CONTRACT TOGETHER
WITH THE FRUITS OR THE PRICE AND INTEREST AND THE
OBJECT OF THE CONTRACT IS NOT IN THE HANDS OF A THIRD
PARTY AND THE ACTION BROUGHT WITHIN THE PRESCRIPTIVE
PERIOD.

 MUTUAL RESTITUTION OF THE THINGS RECEIVED:

 Ex. “X”, the guardian of “Y” a minor, sold to “Z” a piece of land
belonging to “Y” in the amount of P1,000,000 when the market
price at the time sale is P1,500,000. Upon reaching the age of
majority, “Y” filed an action for recission due to lesion. “Z” is
willing to return the land but “Y” cannot produce the proceeds of
the sale. Here recission cannot take place.
 ALIENATIONS OF PROPERTIES PRESUMED IN FRAUD OF
CREDITORS:
All contracts by virtue of which the debtor alienates property by
gratuitous title are presumed fraudulent.

 Ex. “X”, donated his land to “Y”. Before he made the donation he
had several debts outstanding but did not reserve enough
properties to pay his debts.

 ALIENATION BY ONEROUS TITLE PRESUMED TO BE

FRAUDULENT:

 Ex. “X”, sold all his properties to “Z” after he was ordered by the
court to pay his debts to “Y”. Here the contract of sale is
presumed fraudulent if the proceeds of the sale is not intended
for payment of the debt.
 RECISSIBLE CONTRACTS

 REQUISITES FOR CONTRACTS TO BE RESCINDED:

1. THERE MUST BE A CASE SPECIALLY PROVIDED BY LAW

2. THERE IS NO OTHER LEGAL REMEDY

3. THE PARTY ASKING FOR RECISSION MUST BE ABLE TO

RESTORE WHAT HE MAY HAVE RECEIVED BY REASON OF
THE CONTRACT.

4. THE OBJECT OF THE CONTRACT MUST NOT BE LEGALLY IN

THE POSSESSION OF A THIRD PERSON WHO ACQUIRED IT
IN GOOD FAITH.

NOTE: THE ACTION TO CLAIM RESESSION MUST BE

COMMENCED WITHIN FOUR (4) YEARS.
 VOIDABLE CONTRACT - ONE THAT POSSESSES ALL THE
ESSENTIAL REQUISITES OF A VALID CONTRACT BUT HAS A
DEFECT OR VICE IN THAT THE CONSENT IS VITIATED BY
MISTAKE, FRAUD, VIOLENCE, INTIMIDATION OR UNDUE
INFLUENCE OR THAT ONE OF THE CONTRACTING PARTIES IS
INCAPABLE OF GIVING CONSENT TO THE CONTRACT.

A VOIDABLE CONTRACT IS VALID UNTIL IT IS VOIDED OR

ANNULLED; VOIDABLE CONTRACTS BECOME ABSOLUTELY
VALID ONCE IT IS RATIFIED.

NOTE: THE ACTION FOR ANNULMENT SHALL BE BROUGHT

WITHIN FOUR (4) YEARS. THIS PERIOD SHALL BEGIN FROM
THE TIME THE DEFECT IS DISCOVERED IN CASE OF MISTAKE
OR FRAUD; FROM THE TIME THE THREAT CEASES IN CASE OF
INTIMIDATION, VIOLENCE OR UNDUE INFLUENCE; AND THE
TIME THE GUARDIANSHIP CEASES.
 DISTINCTIONS BETWEEN RECISSION AND ANNULMENT:

1) THE BASIS OF RECESSION IS LESION WHILE THAT OF

ANNULMENT IS VITIATED (TARNISH) CONSENT;
2) RECISSION IS SUBSIDIARY (FURNISHING AID OR SUPPORT)
REMEDY WHILE ANNULMENT IS A PRINCIPAL REMEDY;
3) IN RECISSION ONLY THE PRIVATE INTEREST OF PARTIES ARE
AFFECTED WHILE IN ANNULMENT PUBLIC INTEREST IS THE
ONE ESSENTIALLY AFFECTED;
4) DEFECT IN RECESSION IS EXERNAL (VISIBLE DAMAGE)
WHILE ANNULMENT IS INTERNAL; AND
5) DAMAGE TO THE PLAINTIFF (PERSON BRINGING THE
ACTION) IS ESSENTIAL IN RECESSION BUT NOT IN
ANNULMENT.
 PRESCRIPTION OF ACTION TO ANNUL CONTRACT:

THE ACTION FOR ANNULMENT OF THE CONTRACT SHALL BE

BROUGHT WITHIN FOUR YEARS COUNTED FROM:
1. THE TIME THE DEFECT OF CONSENT CEASES IN CASES OF
INTIMIDATION, VIOLENCE, OR UNDUE INFLUENCE;
2. THE TIME OF DISCOVERY OF THE MISTAKE OR FRAUD; AND

3. THE CESSATION OF GUARDIANSHIP IN CASES OF

CONTRACTS ENTERED INTO BY MINORS AND INCAPACITATED
PERSONS.

 EFFECT OF RATIFICATION OF A VOIDABLE CONTRACT:

RATIFICATION EXTINGUISHES THE ACTION TO ANNUL A
VOIDABLE CONTRACT.
 RATIFICATION - THE AFFIRMANCE BY A PERSON OF A PRIOR
ACT MADE BY HIM OR BY OTHER PERSONS FOR HIS ACCOUNT.
 ACTS OF RATIFICATION:

1) A MINOR BOUGHT A PIECE OFLAND BUT SOLD THE SAME

AFTER REACHING TWENTY ONE YEARS OF AGE TO A THIRD
PERSON;
2) A MINOR SOLD HIS LAND AND UPON REACHING THE AGE OF
MAJORITY COLLECTED THE UNPAID BALANCE OF THE
SELLING PRICE; AND
3) VOLUNTARY PERFORMANCE BY THE INJURED PARTY OF HIS
OBLIGATION AFTER THE CAUSE OF NULLITY BECAME
KNOWN TO HIM.
 REQUISITES FOR ANNULMENT ACTION TO PROSPER:

1. THAT THE PLAINTIFF HAVE AN INTEREST IN THE CONTRACT

EITHER PRINCIPALY OR SUBSIDIARILY; AND
2. THE VICTIM AND NOT THE PARTY RESPONSIBLE FOR THE
DEFECT IS THE PERSON WHO MUST ASSERT THE SAME
BECAUSE EQUITY CAN ONLY BE DEMANDED IF THE PARTY
SEEKING IT HAS CLEAN HANDS.

Ex. “X” by means of intimidation secured the signature of “Y” in

a Deed of Sale whereby the later sold a piece of land for
P1,000,000 to “X”. Later “X” learned that the market value of
the land is only P500,000. “X” could not file an annulment.
 EFFECT OF LOSS OF OBJECT THROUGH FRAUD OR FAULT OF
VICTIM:
THE ACTION FOR ANNULMENT OF THE CONTRACT SHALL BE
EXTINGUISHED WHEN THE THING WHICH IS THE OBJECT
THEREOF IS LOST THROUGH FRAUD OF THE PERSON WHO HAS
A RIGHT TO INSTITUTE THE PROCEEDINGS.

Ex. “X” sold to “Y” who is minor, a motor boat for P300,000. If the
motor boat is thereafter lost through the fault or fraud of “Y”, his
right to file an annulment is lost. But if the same is lost due to a
strong typhoon or other fortuitous event his right to file an
annulment is not extinguished even if the boat cannot be
returned.
 THE FOLLOWING CONTRACTS ARE VOIDABLE OR ANNULLABLE:

1. INCAPACITY TO GIVE CONSENT TO A CONTRACT

2. CONSENT IS VITIATED BY MISTAKE, FRAUD, INTIMIDATION,
VIOLENCE, OR UNDUE INFLUENCE.
3. CONTRACTS ENTERED INTO IN A STATE OF DRUNKENNES OR
DURING HYPNOTIC SPELL.

 GROUNDS FOR ANNULMENT:

1. INCAPACITY TO GIVE CONSENT

2. MISTAKE
3. VIOLENCE
4. INTIMIDATION
5. UNDUE INFLUENCE
6. FRAUD
 Example of Voidable Contract:

 “A”, a minor sold his land to “B” for P200,000. The contract is
voidable but it is valid until it is annulled.

 Example of Voidable Contract being Ratified:

 “A”, a minor sold his land to “B” for P200,000. Upon reaching
the age of majority, he did not institute an action to annul the
same instead he disposed all the proceeds of the sale or
collected the unpaid portion of the sale.
 UNENFORCEABLE CONTRACTS

 UNENFORCEABLE CONTRACTS - CONTRACTS WHICH

CANNOT BE SUED OR ENFORCED IN THE COURTS OF
JUSTICE BY REASON OF DEFECTS PROVIDED BY LAW
UNLESS THEY ARE RATIFIED.

 KINDS OF UNENFORCEABLE CONTRACTS:

1) UNAUTHORIZED CONTRACTS OR THOSE ENTERED INTO IN

THE NAME OF ANOTHER BY ONE WITHOUT AUTHORITY OR
LEGAL REPRESENTATION.

2) THOSE THAT DO NOT COMPLY WITH THE STATUTE OF

FRAUDS

3) THOSE WHERE BOTH PARTIES ARE INCAPABLE OF GIVING

CONSENT TO A CONTRACT.
 Example of Unenforceable Contract:

 “A” leaves his car to “B” his friend. Without the knowledge of
“A”, “B” sells “A”’s car to “C”. The contract is unenforceable and
“C” the buyer cannot compel “A” to deliver the car to him.

 “A” and “B” both minors entered into a contract of sale. The
contract is unenforceable as both cannot give consent.
 UNAUTHORIZED CONTRACTS:
 Ex. Without “X” authority, his brother “Y” sold his car in his name
to “Z”. The contract being unauthorized cannot bind “X”.

 CONTRACTS IN VIOLATION OF THE STATUTE OF FRAUDS:

 STATUE OF FRAUDS - THE PURPOSE IS TO PREVENT THE

COMMISSION OF FRAUDS BY REQUIRING THE CONTRACT TO
BE IN WRITING BECAUSE THE LAW CONSIDERS THE HUMAN
BRAIN UNRELIABLE TO RETAIN WHAT HAS BEEN ORALLY
AGREED UPON BY THE PARTIES.
 EXAMPLES OF CONTRACTS OR AGREEMENTS NOT IN WRITING
WHICH ARE UNFORCEABLE IN COURT:

 “A” made a verbal agreement to give his nephew “B” a house and
lot when “B” marries “C”. Two months later “B” married “C” but
“A” refused to abide by his promise. “B” cannot sue “A” for
breach because the agreement is not in writing.

 “A” agreed verbally to sell his car to “B” to be delivered and paid
a month later. On the designated time and date, “A” refused to
comply with the contract. “B” cannot enforce the contract as it
is not in writing.
 VOID CONTRACTS - ONE WHERE ALL REQUISITES OF A
CONTRACT ARE PRESENT, BUT THE CAUSE, OBJECT IS
CONTRARY TO LAW, MORALS, GOOD CUSTOMS, PUBLIC ORDER
OR PUBLIC POLICY.
 INEXISTENT CONTRACTS - THOSE WHERE ONE OR SOME OF
THOSE REQUISITES WHICH ARE ESSENTIAL FOR VALIDITY ARE
LACKING.
 THE FOLLOWING CONTRACTS ARE VOID FROM THE BEGINNING
AS PER Art. 1409 OF THE CIVIL CODE OF THE PHILS.:
1. THOSE WHOSE CAUSE, OBJECTS, OR PURPOSE IS CONTRARY
TO LAW, MORALS, GOOD CUSTOMS, PUBLIC ORDER, OR
PUBLIC POLICY;
2. THOSE WHICH ARE ABSOLUTELY SIMULATED OR FICTITIOUS;
3. THOSE CAUSE OR OBJECT DID NOT EXIST AT THE TIME OF THE
TRANSACTION;
5. THOSE WHOSE OBJECT IS OUTSIDE THE COMMERCE OF
MEN

6. WHICH CONTEMPLATE AN IMPOSSIBLE SERVICE;

7. THOSE WHERE THE INTENTION OF THE PARTIES RELATIVE

TO THE PRINCIPAL OBJECT OF THE CONTRACT CANNOT
BE ASCERTAINED;

8. THOSE EXPRESSLY PROHIBITED OR DECLARED VOID BY

LAW.

NOTE: VOID OR INEXISTENT CONTRACTS CANNOT BE

RATIFIED.
 Examples of Void or Inexistent Contracts:

 “A” and “B” entered into a contract for the purpose of

importing prohibited drugs.

 “A”, an insane gives “B” P50,000 in order to kill “C”.

 VOID AND VOIDABLE CONTRACTS DISTINGUISHED:

a) VOIDABLE CONTRACTS BEING VALID UNTIL ANNULED

PRODUCES LEGAL EFFECTS, WHILE NO LEGAL EFFECTS
WHATSOEVER IS PRODUCED BY A VOID CONTRACT.
b) THE DEFECT IN VOIDABLE CONTRACTS ARISES FROM
INCAPACITY OR VITIATED CONSENT, WHILE IN VOID
CONTRACTS THE BASIS IS PUBLIC POLICY.
c) VOIDABLE CONTRACTS CAN BE RATIFIED WHERAS NO
RATIFICATION CAN TAKE PLACE IN A VOID CONTRACT.
d) A VOIDABLE CONTRACT BECOMES ABSOLUTELY REGULAR
AND CURED AFTER THE LAPSE OF THE PRESCRIPTED
PERIOD TO FILE AN ACTION TO ANNUL, WHILE VOID
CONTRACTS CANNOT BE CURED.
 UNENFORCEABLE AND VOID CONTRACTS DISTINGUISHED:

a) IN UNENFORCEABLE CONTRACTS A CONTRACT EXIST

THOUGH CANNOT BE ENFORCED, WHILE NO CONTRACT AT
ALL EXIST IN A VOID CONTRACT.
b) UNENFORCEABLE CONTRACTS CAN BE RATIFIED WHILE
VOID CONTRACTS CANNOT.
c) UNENFORCEABLE CONTRACTS CANNOT BE ASSAILED BY
THIRD PERSONS WHILE VOID CONTRACTS CAN BE ASSAILED
BY ANY PERSON AFFECTED.
ILLEGAL CONTRACTS
 EXAMPLES AND EFFECTS OF ILLEGAL CONTRACTS:

a) PAYMENT OF USURIOUS INTEREST (ABOVE 14% PER ANNUM)

(Art. 1413).

b) PAYMENT IN EXCESS OF REGULATED PRICES (Art. 1417)

c) NON-PAYMENT OF LEGAL RATE FOR OVERTIME WORK (Art.

1418).

d) PAYMENT OF SUB-MINIMUM WAGES (Art. 1419)

 CONSTRUCTION CONTRACTS MUST CONTAIN THE
FOLLOWING ATTRIBUTES TO BE VALID:

1. AGREEMENT - AGREEMENT BETWEEN THE PARTIES

INVOLVED. SUCH AGREEMENT INVOLVES OFFER (EX.
SIGNED BID) AND ACCEPTANCE (WHEN THE OWNER
NOTIFIES THE WINNING PROPOSER).

2. CONSIDERATION - THE COMPENSATION OR PAYMENT TO

THE CONTRACTOR. IF A CONTRACTOR PROMISES TO
BUILD AN ADDITION TO A HOME WITHOUT COMPENSATION
AND THEN CHANGES HIS MIND, HE GENERALLY CANNOT
BE FORCED TO BUILD THE ADDITION BECAUSE THERE WAS
NO CONSIDERATION FOR HIS SERVICES.
3. CAPACITY - MEANS THAT BOTH PARTIES MUST BE
SUFFICIENT OF AGE TO ENTER INTO A CONTRACT AND
MENTALLY AWARE OF WHAT THEY ARE DOING.

4. IT MUST BE LEGAL - A CONTRACT BETWEEN TWO PARTIES

IN WHICH ONE AGREES TO COMMIT AN ILLEGAL ACT
CANNOT BE ENFORCED.
 .
 CONSTRUCTION CONTRACTS
1. LUMP-SUM CONTRACT - THE OWNER WILL PAY TO THE
CONTRACTOR AN AGREED UPON SUM OF MONEY FOR THE
COMPLETION OF A PROJECT CONFORMING TO A WELL
DEFINED SCOPE OF WORK.
2. UNIT-PRICE CONTRACT - THE OWNER WILL PAY TO THE
CONTRACTOR AN AGREED UPON AMOUNT OF MONEY FOR
EACH UNIT OF WORK COMPLETED IN A PROJECT. THIS
COULD BE PER CUBIC METER, PER SQUARE METER, PER
LINEAR METER, AND OTHER AGREED UPON UNIT OF
MEASURE.
3. COST-PLUS FEE CONTRACT – THIS TYPE OF CONTRACT
PROVIDES THAT THE OWNER WILL REIMBURSE THE
CONTRACTOR FOR ALL COSTS SPECIFIED TO CONSTRUCT
THE PROJECT, INCLUDING ALL LABOR, MATERIALS, AND
EQUIPMENT USAGE COSTS, SUB-CONTRACTOR COSTS, AND
JOB SUPERVISION COSTS.
 POINTS TO CONSIDER IN PREPARING CONSTRUCTION
CONTRACTS:

1. THE NEEDS OF THE CLIENT

2. THE TERMS AND CONDITIONS DESIRED INCLUDING THE

SUBJECT MATTER AND CONSIDERATIONS OF THE
CONTRACT.

3. LEGALITY OF THE CONTEMPLATED CONTRACT.

 PARTS OF THE CONTRACT

1. TITLE OF THE CONTRACT

2. SALUTATION
3. BODY OF THE CONTRACT
 MATTERS USUALLY EMBODIED IN ENGINEERING
CONTRACTS:

1. WORKMANSHIP ACCORDING TO AGREED PLANS AND

SPECIFICATIONS
2. MATERIALS OF AGREED QUALITY AND QUANTITY
3. RESPONSIBILITY ON COMPLIANCE OF LEGAL
REQUIREMENTS (PERMITS, LICENSES, ETC.)
4. CONTROL AND SUPERVISION OF THE WORK BY THE
ENGINEER TO FAIRLY ENSURE THE ACCOMPLISHMENT OF
THE PROJECT
5. BONDS THAT MUST BE PUT UP TO SECURE THE
PERFORMANCE OF THE CONTRACT
6. CONTRACT MODIFICATION OR RECISSION
7. RISK OR ADDITIONAL COST BY REASON OF DEFECTIVE
WORKMANSHIP
8. MODE AND CONDITIONS OF PAYMENT
THANK YOU !