ANS. ccoeent must be given oxpresely for the reason that, since novation extinguishes the perconality of the frst debtor ‘whois tobe substituted by a new ono, it implies on the part (of the crodtor a waiver of the right that he had before the ‘ovation, which waiver must be express under the principle of renuntiatio non praceumitur, recognized by the law in declaring that a waiver of right may oot be presumed unlese ‘he will to waiveisindispatably shown by him who holds the right. (Chestor Babst va. CA, G-R. No 9998/104635, January 26, 2001 citing Testate Hstate of Mota, etal. vs, Serra, 47 Phil. 464). ‘CONDONATION OR REMISSION OF THE DEBT ‘What is remission? : ‘tis an actofliberality by virtue of which thebliges, without ‘receiving any price or equivalent, renounces the enereement ofthe obligation; asa rorult of which, i is extinguished in its entirety or in that pat or aspect ofthe same to which the remission refers. Manrese, Sth Ka, Bk. 1, p. 673) ‘What are the requisites of renaiasion? ‘Thoy are: @)_Teimust be gratuitous; ©) Ttqnust be accepted by the obligor; (©) Theobligation must be demandsble. (Art, 1270, NCO). ‘borrowed money from Yin theamountofP150,000.00. ‘One morning, ¥ went to X and delivered to the latter the promlasory note he issued to Y. What is the effect of such delivery? Explain. ‘There is extinguishment ofthe obligation of X. Under the Jaw, the delivery fa private document evidencing a credit, rade voluntarily by the creditor t the debtor, implies the ‘renunciation ofthe action which the former had against the latter. (Art. 1271, NCC). ANS, ANS, ‘An action to nullify the walver in the next preceding ‘question was filed hy the heirs of ¥ contending that it if inoffieious. What is the defense of X ifany? If in order to mull this walver it should be claimed to be inoffiiows, the debtor and his heirs may uphold it by providing that the delivery ofthe document was made in ‘virtue of payment ofthe debt. (Art. 1271, NCC). ‘Xisindebted to Yin the amount ofP100,000.00 secured by a real estate mortgage. Y renounced his right over the mortgage. Can he still demand the payment of the obligation? Why? ‘Yes, because the renunciation of the prinelpal debt shall extinguish the accesery obligations; but the waiver of the ‘coeatory ball Teave the principal. (Art. 1278, NCC), Here, ‘what waa renounced was the accessory. Henos, the principal CONTRACTS What is a contract? A contract is meeting of minds between two persons ‘whereby ono binds himself, with respect to the other, to give Something or to render some service (Art. 1905, NCO). Ibis juridical enovention io legal form, by virtue of which one or ‘more persons bind themselves in favor of another, or other, or reciprocally tothe flfllment ofa prestation to do, togive or not to do. (Sanchez v. Mapalad Realty Corp., GR. No 148516; December 27,2007 What is the so-called Uberty of contracts? Is it absolute? Why? ‘The Uberty of contracts simply means the right of the parties tp enter into such stipelations or terms and conditions in their contracts ‘The liberty of contracts i not absolute. It is subject to certain limitations imposed by law fad that the contracting Dertios may establish such stipulations, clauses, terms, and ‘conditions ms they may deem convenient, provided they arenot contrary to law, morals, good customs, public order, oF public policy. (Art. 1808, NCO) Petitioner was employed as Division Marketing Feapontiens, x premeed company, In 1865 cho stopped working and became the Vice President for Sales of Profesional Pension Flan, Inc, another premeed company. She wae sued for damages for violating her contrat with respondant ‘which probibited her from working n'a business of thesame nature within two @) year after separation, ‘whether voluntary ot invotuniary: The RIG and the CA"held hor Hable. Before the’ SG, the peliioner ‘offensive to public policy since the restraint imposed is much greater than what is necessary to afford respondent a fair and reasonable protection. She ‘added that since the products sold in the pre-need {industry are more or less the same, the transfer to rival company is acceptable. She likewise argued that 4 trict application of the non-invelvement clause ‘would deprive her of the right to engage in the only ‘work she knows. Respondent countered that the validity of a non-involyement clause has heen sustained by the Supreme Court in a long line of eases. It contended that the inclusion of the two-year noninvolvement clause in the contract of employment was reasonable and needed since her job gave her access 40 the company’s confidential marketing strategies. It added that the noninvolvement elause merely enjoined her from engaging in premneed business akin to respondent's within two years from her separation from respondent. She had not been prohibited from marketing other service plans. Whose contention correct? Explain. ‘The contention of the respondents correct. In this case, the ‘on-involvement clause has atime init: two years from the tim petitioner's enspayment with eapondent ends. Ttis also limited as to trade, since it aly probibite petitioner fom ‘engaging in any pre-need business akin to respondent’ oO 5 COBLIGaTIONS AND CONTRACTS ss ‘What makes the non involvement clause valid is that, she had been privy tp confidential and highly sensitive marketing strategies of respondent's bustess. To allow her to engage in a rival business soon after she leaves would make respondents trade seerte vulnerable especially in fa highly competitive marketing environment. In sum, the ‘hon-involvement clause isnot contrary to public welfare and nt greater than is necessary to afford a fir and reasonable protedton to respondent. (Ollendorf ve. Abrahemeom, 38 Pra 685 (1918), In any event, Article 1806 ofthe Civil Code provides ‘at partiog toa contract may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary ta law, morals, good eastoms, Dubie arder, o publi policy ‘Article 1159 of the seme Code also provides that cbligations arising from contracts have the fares of law ‘betwoen the contracting partes and shouldbe complied with {in good faith. Courts eannot stipulate for the parties nor ‘amend their agreement where th same does not contravene Tew, moral, ood customs, pubic erder or public policy, for ‘to dos0 would be to alter the real intent ofthe partes, and ‘would run contrary to the funetion of the erurts to give force ‘an effect thereto, (Phil. Communications Satellite Corp. vs. ‘Telecom, Ine, GR. Noe, 147324 and 147534, May 25, 2004, 499 SCRA 153; Daisy Tu vs Platinum Plans, Ine, GR, No, 4369512, February 8, 2007), A telegraphic transfer'was obtained from PCIB for ‘the money to he transmitted to quitable Bank in ‘Cogayan de Ord, But the money waa not transmit hhonee, the checks that were issued were dishonore ‘There is, however, a stipulation exempting the PCIB from liability. A suit for damages was filed, but the CIB interposed such defense, Rule on the contention ‘of PCIE. "The defense is untenable. Having established that: PCIB acted fraudulently and in bad faith, it is implausible to tbeolve it fom its wrongful acts on account of tie assailed ‘provision exampting it from any liability. In Geraides ws Court of Appeels, GR, No, 108958, February 23, 1994,a 448 SCAD 508, it was declared that notwithstanding the enforceability of contractual limitation, responsiblity arising fom a fenudulont act exnnot be exeutpated bocause ‘he same is contrary to public policy. Indeed, Art. 21 of the Givil Code is quite explicit in providing that: “Any person ‘who willfully causes loss or injury to another in & manner that is contrary to morals, good customs, or public policy shall compensate the latter for Uhe damage.” Fresiom of Contract is eubjct tothe limitation tht the agreement must ‘ot be against publi policy, and any agreement or contract ‘nade fa violation of this rue fe nat binding and will not be enforeed, ‘The prohibition against this type of contractual stipulation is moreover treated by lw a void which may not ’be ratified or waived by a contracting party. Undoubtedly, the services being offered by a banking institution like petitioner are imbued with pubic intorest. The use of {elographic transfers have now become commonplace among ‘businessmen because it fciitatescommereal transactions Any attempt to completely exempt one of the contracting parties from any ibility in ease of loss, notwithstanding its bad faith, fault, or negligence, cannot be sanctioned for being Inmical to public interest and therefore contrary to public policy. Resultingly, there being no dispute that petitioner. acted fraudulently and in bad faith, the award of moral and exemplary damages were proper. (PCIB vs. CA, ef ol, GR. [No. 97785, March 29, 1996, 69 SCAD 707), A.and B are contending parties over a parcel of land ‘owned by the State. To settle thelr dispute, they entered into a-compromise agreement whereoy recognized the ownership of A with a consideration. Is the compromise agreement valid? Why? No, because it ia contrary to law. In Maneslang vs. IAC, September 30,1886, a compromise on property belonging to the State was held as vod ‘Titles were issued to several persons over a real property. Ten years later, Congress passed a law evoking the titles and declaring the property public property once again. The purpose is to develop the Property as a housing project to be distributed to ‘qualified cltizons. The title holders objected on the {ground that they have entered into a contract with ‘the State and that the law is violative of the freedom. ‘of contract. Is their contention valld? Why? No, because the freedom of contract must yield to the police power ofthe Stato to promote the health and general ‘welfare, A contract affecting general welfare is ono that has ‘congenital defect in that the State reserves the right to ‘late. (abiing vs. NHLA, G.R, No, 57424, December 38, 1987). A, B, and C were dismissed by XYZ Corporation. ‘They filed a complaint at the NLRC where they were ‘asked to dismies thelr complaint for a consideration ‘of P500.00 each, Their individual claims amounted to 'P50,000.00 each. Discuss the validity or invalidity of ‘the contract. Cite your reasons. ‘The contrac ia vold beeause itis contrary to public policy. ‘The Constitution and the law seok to promote and protect the interest of the workers to the extent of aerring them ‘subetantnl income for Unie welfare, To dismiss a complaint {ora mealy sum of P500.00 is shocking to Uh conscience af sma, henee, iti contrary to publi policy. (Carmeleraft Carp. va. NLRC, GR. Nos, $9624.85, June 6, 1890; Gatchalian vs, Dalim, etal, GR. No, 6487, October 21, 1991), Temeans thatthe contracts ar binding botwoen the parties; ste validity or compliance cannot be lef to the will one of them. (Are 1808, NCO). For e contrac is a contract. Once ‘agreed upon and the essential elements are present, itis valid and binding botwoon the parties Mate vs, CA, ef al, GR, Nos. 129724.25, May 21, 1998, 94 SCAD 615; Bla vs. Linda AngoloeHotalla, G.R. No. 156594, September 21, 2004; Sps. Dumlaov. Marlon Realty Corp, @.R. No. 181491, ‘August 17, 2007). ‘Whats the basic purpose of the principle of mutuality of contracts? Explain. "Tho ultimate purpose ofthe mutuality prineple is thus to nullify a contract containing a condition which makes itsfolfllment or pre-ermination dependent exclusively upon the uncontroled wil of one of the contracting partie. [Not all contracts though which vest to one party their datormination of validity or compliance or the right to terminate the same are void for being vnltive of the ‘mutuality principle. Jurisprudence is eplete with instances of cases where the Court upheld the legality of contracts which let their fulfillment or implementation to the will ‘of either ofthe partie, fora Tong as there is the presence of essential equality of the partes to the contracts, thus preventing the perpatratin ofinjustice on the weaker party. (GF. Equity, In. ve, Arturo Valenzona, G.R. No, 15684), June 80,2008) ‘The partios in a contract agreed that the interest ale fs 20% and it can be increased if there is a law that would authorize the Increase of Interest rates. Suppose A would inerease the rate of interest without flaw authorizing it, is A's action valid? Why? 1No, because that is violative ofthe principle of mutuality of contracts. (PNB ve, Padilla et al, No. 88880, Apel 30, 1999). ‘The contract of the parties provided that in the event Odyssey fails to pay any portion ofthe purchase price of the property or the interest or service charges thereon as they fall due or otherwise fails to comply with the provisions of the contract, the seller shall hhave the absolute diseretion to rescind and cancel the contract and_declare it mull and void, and all, ‘payments shall be forfeited in favor of the seller as ‘rentals for the use and occupancy of the property. It farther provided that all improvements shall belong to the seller without reimbursements provided that the seller may waive the discretion to require the buyer to remove the same. There was failure to pay and comply with the terms of the contract. Which shall apply, the terms of the contract or BLA. No. 6552, otherwise known as “An Act to Protect Buyers of Real Estate on Installments" or Art. 1592, NCC? Why? ‘Tho contract shall apply. It is «familiar doctrine inthe law on contracts thet the parties are bound hy the stipulations, VU ‘OBLIGATIONS AND CONTRACTS eo buyer-company. Since no new contract was signed, ‘the owner sued for the recovery of the lots but the buyer contended that a contract has been perfected even if no document was signed, especially s0, that ithad already sent five (@) checks as downpayment which were duly received. Was the buyer correst? Why? No, because tho parties have not arrived ab « definite agreement as they only agreed onthe price, not the number ofthe lots which is « material component ofthe Contract to Bell. Without, the partas may notin say way becansidered as having arrived ata contract under the law. Te was forther said that since the five (6) checks ‘were not encashed, the buyer should have deposited the sorresponding amounts ofthe sid checks in court. A contract to tell nyalves the performance of an obligation, not merely ‘the exercise of a privilage or a right. Payment cannot be flected by mere tender of payment but also by consgnation It is consignation which is essential tothe ex ofthe buyer's obligation to pay the price, but it didnot lif a finger to do it. ‘A jaar CONTRACTS eT Note that the rule tht contracts may be valid even tthe parties didnot affix Weir signatures to its writen form was not applied in this eace. (People’s Industrial and Commercial Corp. vs, CA, ef al, GR. No, 112738, October 24, 1997, 88 SCAD 565). State the effect if the period given to a party within Which to accept the offer was not itself founded upon br supported by any consideration. Explain. ANS. Ifit is not founded on a consideration, the offeror has the ‘reedom andthe right(o withdraw Uheofferby communicating fuch withdrawal to the oferee before the latter's acceptance Of the offer; or, if the offer has been accepted, before the sccaptance came tobe known by such party. Jardine Davies, Je ve. CA, 380 SCRA 204 {2000}; Insular Life Assurance (Co Lisi vs, Asset Builders Corp.,GR-No. 147410, February 5, 2004, Panganiban, J) © Mamta mutans sos vtec omer tm der an dfn eon en end aaa er Soe ental ran eee etiam emesis ee Sie ee scam nee oe 5 i ie eter Copal week ea, @ —_Inacontract of sale of hereditary rights it was agreed ‘hat it shall be effective only upon the approval by the RIC of Negros Occidental where the testate case ‘as pending. Both lower courts held it to be void for Jot having boen approved hy the probate court. Isthe ruling correet? Why? 'ANS. No, In this case, there was a confusion in the concepts of ‘ality and eflicecy of a contract. As long asthe essential slates of contract are protent, von iit does not bear the stamp of approval of the cour, the contract's validity ~ ig not affected, fr in the words ofthe stipulation, only the @etivity and not the volidty of the eontract is affected. Heirs of Pedro Bacanlar, etal. vs. CA, etal.,G.R.No. 119777,92 SCAD 87S; Holgado, et al. va. CA, etal, GR No. 120600, October 23, 1997, 88 SCAD 527 Is there a need for judicial approval in case an heir sells ls individual share in the estate of his father? Why? ‘No. Ibis role thet it is within the jurisdiction ofthe probate court to approve the sale of properties ofa deceased person by his prospective heirs before final adjadieation It is settled that court approval ie necessary forthe validity of ny disposition ofthe decedents estate. However, reference to judicial epproval cannot adversely affect the substantive rights of the heirs to dispose oftheir ideal share inthe co- Ihsrship and/or co-ownership among the hers. (Aocbed vs Abesamis, 217 SCRA 186; Go Ong vs. CA, 154 SCRA 270), It must be recalled that during the period of indivision of 1 decedents estate, each heir, being a co-owner, fas fall ownership of his part and may therefore alienate ft, But the effect of the alionation with respect o the co-owners shall Delimited to the portion which may be alloted to him in the division upon th termination of the eo-ownership. Art. 499, NCC; PNB vs, CA, 88 SCRA 207; Go Ong ve. CA, 154 SCRA 270; Dillena ve. CA, 163 SCRA 620 (1988), Aand Bare the partiesin acontract ofleare whichisto ‘expire on December 31, 1988. Sometime in November 1903, they started negotiating for a new contract. A sent a draft of his proposed contract to B. B also sent alletter asking A to include three (8) proposed terms -and placed therein a cover loter that if A would be agreeable to the three (8) terms the contract would be considered signed and perfected. A agreed and later sent the contract already signed by him to B for his signature. Suppose B would ‘can you ‘consider the contract signed and. ‘Why? ‘Yes, bocause the consent can be derived from the commu: nications betweon A and B. Consent ean be manifested in ny form, like a series of communications (Ramon Magsey — say Award Foundation vs. CA, G.R- No. 85908, Janoary 17, 41965), or throtigh a marginal note (NGA va. IAC, G.R. No 14470, March 8, 1989), or Uurough the acreptance ofa down: ) SautgasIONs AND cowTRACTS we ‘tia Regus Coats payment: (Topacio vs. CA, ef al, G.R. No, 102606, July 8, 1992) ‘Xowns ahouse and lot, Hesenta letter toYand offered it for sale, Two days after receipt, Y sent X a letter ocepting the offer; but when the etter of aoceptance enched 3's residence, he was already dead. Was there 2 meeting of the minds? Why? None. Acceptance made by lettar does not bind the offerer capt from the Lie it came to his knowledge. (Art. 1518, NO) Since X was already dead when the letter of acceptance eached his residence, he could not have known the said acceptance, — deere sts marptnce ra comms capes th mene re oe aig cae eee ee a ae a ota ie ol contract of conditional sale wat entered into Sossten the Babasas and Tabangeo eal, Tne. "Ruo'condlaans were the following’) the amount 29300 000.0 shall be pad pon the sigalog ofthe Ghnament of sal; @) fae bntance of Psat 20 00 Sii'he etd yon the prosentation and delivery of Slenn tiles over the aod within 30 months from the Seting of the contract Btore the lapaeaf the period. {He Habaces soked for postponement but Tabangno ‘Shane nene the Babaenoxcented unilateral set “Srresearon Tabangao fled a complain for specie $etormanccbut the Babasas fled atnaton to dismiss Berfhe ground that the contract became vold with dhe explratlosof the Abmonth period given them to Shisab clean tides leon the contention ofBabasas. Siteremone ‘The Babasos cannot rescind the contract, otherwise, to allow ther would be the height of inequity as they would beCIVIL LAW REVIEWER ‘invoking theit own failure to deliver the titles over the lots within the stipulated period of time, ‘The contract provided for conditions. Like in Zim ws CCA, 75 SCAD 574, 268 SCRA 569, » distinction between, ‘8 condition impaeed on the perfection of a coutract and 4 condition imposed merely on the performance of an obligation. While failure to comply withthe first condition results in failure ofa contrac, failure to comply with the second merely gives the other party the option to either ufo to proced with the sale orto waive the condition, The conzltions imposed were conditions for performance, forthe parties had a perfected contract. Babasa va, CA, eta, GR. No, 124045, May 21, 1998, 04 SCAD 679), Furthermore, restesion ean only bo availed of by the aggrieved party. A person cannot benefit out of his owa wrongdling or failure Give the mature and concept ofa contract of adhesion, Explain. ‘A contract of adhesion is one wher it terms are prepared iy nly one party while the other party merely fies his signature signifying his adhesion thereto, Such contracts fe not void in themselves. Thay ae binding as ordinary contract. Parties who ener ino such canta! ae free reject the stipulations entirely. TheSupreme Court however, seid thet it wil not hesitate to rales void adherence Such contracts if they prove to be too ene-ided under the attendant fects and creumstanes, Beene ofthe peculiar ‘ature of entrat of sdhesion, the val cheret must be detormined in light ofthe eiteamatences under which the stipulation ie intended to apply, (ps. Ermitao vs, CA, et 1, GR No. 12726, Api 21, 1699, 105 SCAD 82, ‘Mr. Del Rosario of VIVA met with Mr. Loper of ABS. CBN at the Tamarind Grill on 2 April 1992 to discuss package of films. Said package of 104 VIVA Films ‘was VIVA's offer to ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent, through, ‘Ms. Concio, counter-proposal in the form of a draft contract proposing exhibition of 53 films for a ‘consideration of PSSM This counter-proposal could be nothing less than the counter-offer of Mr. Lopes ea cowmacts =m ‘ena aque fcanacs during his conference with Del Rosario at Tamarind Grilt Renteurant, Was there perfected contract? Boylan. None, bocave ther was no acceptance of VIVA‘ fe, for [was et by countraffer which substantially varied the ferme cf the fer Contract ht re oes nae ae pred upon more meeting ofthe inde, Once theres concurrence eeween te ofr and th acceptance upon the abject ater, conioratin, and tars of payment a contra Joduced, Thecffer must be certain To convert the offer into Teint, the ascoplance cst be abolute and mutt not ually te term oftheir, mst be plac, negra, Sesion and won aan any et rom pot! A uaiied scent, or ne that involves anew pean, cotta conifer and in arejection of Tr rina! efor, Consoqunty, when someting ie desired sik bao exay what is roped in the or, such Teoeplance isnot euiciet to gnerato consent bce any STodieation ovation from sb ter tho offer anal the afr In view of the foepsng, there was 0 infected tonerac(ABSCBN Brondcsting Corps. Che ly GX fo. 125600, January 21,1960, 102 SCAD €9), In determining the effect of an error in a contract, ‘what should the court cousider? Explain. tn determining the effect of an alleged error, the courts ‘must consider both the objective and subjective aspects of the ease which in the intelectual capacity ofthe persun who ccbmmited the mistake ‘Mistake, in order to invalidate consent should refer to ‘te substance ofthe thing which ls the object of the contract, tr to those conditions which have principally moved one oF both parties to enter into the contract. (Article 1381, NCC) ‘Under Article 1982 ofthe Civil Code, when one of the pasties is unable fo read, o ithe eontract i in a language Dot understood by him, and mistako or fraud i lloged, the ‘ervon enforcing the contract must show that the terms {hereof have been flly explained tothe former,ANS. ANS. Article 1882 was a provision taken from Americen lasy, necessitated hy the fact that there continues to bo a fair number of people in this country without the benefit ‘of a goed education or documents have been written in niglish or Spanish. The provision was intended to protect ‘party toa contract disadvantaged by literacy, ignorance, ‘ental weakness or some other handicap. It contemplates sitation wherein a contract Ss entered nto but the eoneeat of one of the contracting parties is vitiated by mistake or fraud committed by the other. When is there fraud? ‘Thereisfraudwhen, throug insidious words ormachinations of one of the contraciing parties, the other is induced to enter Into a contract which, without hem, he would not have greed to, (Art 1838, NCC). ———= ‘They are: (1) It was employed by a contracting party upon the others, (2) Teinduced the other party to enter inte the contract @)_ Teas serious; (4) eresuled in damages and injury tothe party sosking annulment. Constantino vs. CA, eta, G8. No. 116018, November 13, 1996, 75 SCAD 47, elting Alcasid vs. CA, GR.No. 104763, Octabor 7, 1994, 58 SCAD 40). ~ Give an example of such fraudulent act. feaused itt be prepared left several spaces blank, more practically as rogards the dimensions ofthe property to be fd. The heirs were perruaded to eign the document only ‘upon the assurance of the petitioner that respandent Roque, pursuant to their understanding, would be present when the property would be surveyed after obtaining permission from the Bureau of Lands. As it aurfaced, the suppoced ‘pLioxmIONs ano CONTRACTS on Otte ‘understanding was merely a ruse by petitioner to induce respondents to sign the deed without which the later ‘ould not have given thei conformity thereto. Apparently, petitioner deceived respondents by filing the blank spaces Jn the deed, having the lots surveyed and subdivided, and then causing the issuance of transfor of certificates of title ‘without thelr knowledge, much lss consent. (Constantino Ye CAvet al, GR No, 16018, November 13,1996, 76SCAD 1, cling Periquet ve. IAC, GR. No. 69968, December 6, 1994, 67 SCAD 286). Whatis theeffectitboth partiestoa contract employed fraud? Why? "The contract ia valid and they cannot invoke the fraud to ‘void iability as theirmatual raud would negate each other. ‘Under the law, ia order that fraud may make a contract Yoidable, it should be serious and should not have been ‘Employed by both contracting parties, (Art. 1844, NCO). What are thé kinds of simulation of contracts and what are their effects? Simulation of a contract may be sbeolute or relative. The former takes place when the partice do not intend to be ‘bound at al; the later, when the parties conceal ther true agroement. (Art 1845, NCO). ‘An absolutely simulated o fictitious contact is void. ‘A relative simulation, when it does not prejudice a third peroon and isnot intended for any purpese contrary tulaw, morals, good customs, public order or public policy binds the partis to thelr real agreement. (Art, 1948, NCC). OBJECT OF CONTRACTS. What may be the objet of contrat? ‘AIL things which are not outaide the commerce of men, ‘iehuding future things, may be the object of a contract. AIL ‘ghts which are not intransmissible may also be the object fcontrcts ‘Nocontract may be entered into upon futureinheritance except in canes expresly authorized bylaw.Ase whch are ot otrary ole, ora ew marae, ed estonn, plc oder or pli poly may Hows ba object of a contract. (Art. 1347, NCC). fe X-entered ino a contract of sale with right to repurchase with ¥ over a house and lot belonging ‘him. Can he sell that right? Why? a Yi, benute tat right, ven iintangbl is determina Te jc of every eomtace most ba Sterns ops in The te ha he gees not dteranat da ost bela abt tothe ssn on contrac pd ia poutle wo determiaa the sane, witout te wel af noe Contract between the parties. Ae 1388, NCO. ee na te eget a peer oc et cece Menten eet een tobeteld.The acceptance ofthe offer wee not abeohte, hones it did not generate consent that would perfect a contract. CAUSE OF CONTRACTS What are the eauses of contracts? 1m onerous contracts, the cause ie understood to be, for ‘each contracting party, the preitation or promise ofa thing or service by the other; In remuneratory exes, the service or benefit whichis remunerated; and in contracts of pure ‘enfsnc, the mere iberliy of te beefcor, Art. 180, Xand Y entered into a contract of sal sale over & parcel of land without any cause or consideration. Is the ‘contract valid? Why? No, becuse the lw requires one of the requlreme tthe ly o's cnet that thre bess cass or consideration, Ar. 1238, NOC; Hoblse 80364, June 28, 1989). CM OR No. ANS. ~~ ontiaazions ano contaacts os Suppose the cause or price was not paid, is the contract valid? Why? ‘Yes, Non-payment ofthe price i nt the controlling criterion Uaake aconurect void. Non-paymentie merely a ground for Specific performance ar resclesion. (Rebeza vs. CA, supra.) ‘A contract of sale was entered into by and between ‘A and B whereby A sold and delivered a parcel of land to B. The contract, however, did not state the consideration, hence, after the death of A, lls heirs filed an action for reconveyance contending that the ‘contract is vold due to Inck of consideration. Will the ‘action prosper? Why? ‘No, beceuse under the law, although the cause isnot stated in the contrac, itis presumed tha it exists and is lawful, tunloss the debtar proves the contrary (Art. 1854, NOC) Petitioner sought to provent the sales promotion toheme designated as “Grand Slam” for respondent's products. He contended that this is a lottery. The Scheme was to the effect that participants would Submit plotures, one-half of which is found in the Tabels of the products and the other half from its fccotntants, Entries were sent to the accountant of the company with self-stamped envelopes. ‘Was the contention correct? Why? No. A plan whereby prizes ean be obtained without any ‘nddtionel consideration when the product is purchased is rota lottery, (Citing Uy vs-Palomar, 123248, February 28, 1968, US. ve, Baguio, 89 Phil. 962; Caltex (Phil, In. vs Postmaster Genoral, 18 SCRA 247) Ti Philippine Refining Co. vs, Palomar, 148 SCRA S18, ‘where the company rasorted to sehemes to promote the sale fits products, both of which envisioned the giving for free Gf certain prizes without additional conaideration for the Durehase of its products, Participants would get the exact ‘ali ofthe price forthe goods plus the chance of winning in the scheme. No one would be required to pay more tharrthe tau prize ofthe products, (See Palomar vs, CFT of Manila, 1-29881, August 31, 1988)& ans. In a contract of sale of a car between A and B, they ‘agreed that the consideration is P100 and ‘other ‘considerations. Is the contract valid? Why? ‘Yes, because POO and other consideration is a valid and suficient consideration. The rule that the gross inadequacy ‘ofthe price does nat invalidate a contrat of eale (Art. 1470, NCO), expecially so with the presumption of consideration Jn the law. (See Ong va. Ong, GR. No, 67888, October 8 8), {a.m oral contrat of al vera parca of and valid ‘Yes, an oral contract of sale ovor a parce! of land is valid and binding between the parties, but with respect to innecent ‘third peroons, iis net binding upon them. FORM OF CONTRACTS. May a contract be entered into in any form? Why? ‘Yes. Contracts shall be obligatory in whatever form they. ‘may have been entered into, provided all the essential requisites for their validity are present, However, hen ‘the law requires that a contract be in some farm in order that it may be valid or enforceable, or that a contract be proven i a certain way, that requirement is absolute and Indispensable, (Art. 1356, NCC). One exception thereto is the Statute of Fraude which requires waitin inatrumeat for the enforceability ofa contract, (Ars. 1256 and-1402, NOG; Arrogante, etal. vs, Deliarta, etal, G.R, No, 162122, aly 24, 2007). ‘X,and ¥ entered into an oral contract of ale ofa parcel ‘of land. X paid the consideration. When he demanded the delivery of the ttle, Y refused, contending thet there was no written contract evidencing the same. What right, ifany, doos Xhave as against ¥to enforce hhisrighte? Explain, = He can ask for a specfe performance, Under the law, if the law requires a document or other special form, the racking partion may comps each ther to observe that {Srionce te contract tas teen perfected. This right may be ‘Sorcnalsmaltneosly wis the ation wn he contac. eee Ser NCC: Limltia ve. Ca, ol, GR No 118500, ‘ocunber, 196, 668CAD 198 ‘What contracts or acts mst appeerin.a public insta: ment ‘he fllowing mast apperin a publ ineiament and contac which have for thelr objet the © Soca, anno modinion or etingahment Sn vet imaoable property ses of rel cr een interne tere ar governed by Relea, No 2 and 1406 unto of hexetary ‘The ces, repudiation or ° ‘rights or of those of the conjugal partnership of gains; Th por to nminter property or ny ote power © Thich as for ite object an ec appeating o= which ses eeer ine pac osament shoul preudce ‘hire perons (4) ‘Toe ceson of acton or ight proseding fm an ast Tppering ina publ document : iA other contrac where the amount nvlved xn Freel ers 79000 must ape Ww crek Pane But aales foods chats or hg pial oms py ans ane, No? and 405 (Art 1958, Nod. “Marlene Dauden, & movie actress, oa 5 complaint 2gsimat A’Co. seeking to recover the amount of Tufondo representing the balance of her fee 3s Tending actress in two movies produced by A Co, The ‘etapa ied a motion to dismiss onthe ground that {heclalm wasnnot evidenced by any written document, (iblltor private Teviolated Ar. 1858, NCC. The lower Bebrt gronted the motion. Was the order dismissing ‘the complaint proper? Why? No, beeauso contracts are binding between the partis in ‘Mhatover form they may be, whether oral or writen. (ArtsANS, ANS, ANS, 1816 and 1356, NCC; Dauden-Homnaer vs. Delos Angeles, 27 SCRA 1216; Renato Cenido, ets. vs. Spe. Sta. Ana, G.R. [No, 192474, November 19, 1990) ‘As a rule, the requirement that contracts be in a ‘crtain form does not necessarily mean that they be #0 {in order to be valid, but the requirement is designed merely for purposes of enforceability. Cite some laws that require contracts tobe in a certain form tobe (In ase of donation of personal properties the val of ‘which exceeds P5,000.0, the law requires it to be ia writing Art. 748, NCC, (@ Donation ofrea property must bein publicintrument and accepted tbe valid (rt. 749, NCK (In the sale of real property through an agen, the law requires the agency to be in writing. (Art 1874, NCO), REFORMATION OF INSTRUMENTS ‘When, therehavingbeen ameetigoftheminds ofthe parties to a contract, their true intention is not expressed in the instrument purporting t embody the agreement, by reason ‘of mistake, fraud, inequitable conductor acident, one ofthe partice may ask forthe reformation of the instrument to the So tha ech tr intention maybe expresso Ate 189, Statethobasisandnature oftheremedy ofreformation of instrument, Explain. ‘The remody of refermetion of an instrument ie grounded on the principle of equity where, in order to express the true {intention ofthe contracting partic, an Instrument already executed is allowed by law to be reformed, The right of reformation is necessarily an invasion or limitation of the parol evidence rile since, when a writing ie reformed, the result is that on oral agreement is by court decree made legally effective. Consequently, the courts, as the agence ANS. siaoxnon’ nm commacrs tn authorized by law to exercise the power to reform an Instrument, must necesaerly exercise that power sparingly fand with greet caution and zealous care. Moreover, the remedy, being an extraordinary one, must be subject to Timiations ae may be provided by law. Ault for reformation of an instrument must be brought within the period prescribed by law, others, it wil be barred by the mere [epee of time (enti and Formida vs. Judge Leanda and Lyte Gulf Traders, Ine, GR. No. 128992, April 12, 2000) When should an action for reformation of instrument befled? ‘Sincethe purpose ofan actin fr declaratory reliefs tosecure ‘sn authoritative statement of the vights and obligations of. the parties for their guidsnce in the enforcement thereof, ‘or compliance therewith, and not to settle iszues arising from an alleged breech thereof, t may be entertained only before the beach or vielation ofthe lw or contract to which ‘teers, Such action is instituted ina special evil action for declaratory rele, A contract of sale was entered into between the Darties whereby Lot No, 4163 was intended to be sold Dut mistakenly designated as Lot No. 6784, The seller did not object when the buyer took possession of Lot [No 4163. May this contract be the subject of an aeti for reformation of instrument? Why? Yes, Reformation i that remedy in equity by means of which a written instrament ie made or construod so as to express tr vonform torthe weal intention of the parties, (NIA, ea. ‘o- Cara etal, 215 SCRA496, Condo vs. Cuenca, eal, 99, Phil, 1056). Is elements are: (2) there must be meeting of ‘the minds of the parties to the contrac; (2) the instrument oes not express the true intention of the parties, and (8) ‘the failure ofthe instrument to expreaa the true intention of ‘the parties ia die to mistake, Baud, inequitable conduct or accident, (Huibonhoa ve, CA, eta, $20 SCRA 626). In this ‘aoe, there was meeting of the minds of the parties but the feed did not express their truo intention due to mistake in the designation of the lot inthe deed, hence, reformation of ‘instrament ie proper in order thatthe document may reflectANS, the true intention of the partes. (Rita Sarming, etal. vs, Cresenclo Dy, et al, GE. No, 183643, June 6, 2002) ‘The late Virginia Tangga-an leased a house to the Spouses Alcaraz, but did not include the lot as it was owned by the NHA. The contract provided for a 6 year period but the lessees failed to pay the rentals espite demands to pay and vacate made by the lessor. Hence, a complaint for unlawful detainer was filed. The defendants fled an answer stating that the NHA transferred the house and lot to Virgilio and ‘Angelita Tangga-an, the children of Virginia, hence, ‘they contended that the change in ownership of the hhouse and lot resulted in the cancellation of the lease contract. Therefore, they paid the rents to the new ‘owners as the lestors have no more right to collect the rents. Is the contention of the defendants proper? Why? No, bocause they are estopped from raising the issue of ‘ownership, They know that their contract pertained only to the house and not tho lot, atthe lot belonged to the NHA. ‘Their cain thatthe transfer of ownership ofthe lot stripped the lessor of the ownership ofthe house is without merit Aller recognizing the validity of che lease contract, the lessees are barred from alleging automatic cancellation of ‘he contract on the ground that there las been a transfer ofthe lotto anather. Under Rale 131, See, 2, of the Rules of Court, there is eeonslusve presumption whenever a party ‘has, by bis own declaration, act, or omission, intentionally sad deliberately led another to believe a particular thing ‘true, and to actupen suck belie, he eannet; in any litigation arising out of such declaration, actor omission, be permitted to falafy it. (Spe. Alcaraz vs. Pedro Tanggavan, eo, GR, No, 128568, Apri 9, 2008) : Xand ¥ entered into a contractofloan.X,the creditor, however, asked ¥ tosign a document which purported ~ tobeasale ofa parcel of land with the assurance that the same would uly be a security for the payment of the obligation. What is the remedy of ¥ in ease X demands the delivery of the supposed security ANS. ANS. \ ligation ann coslrmacs ten “edrnauon frame contending that X is ow the owner ofthe property? Ean. YY cam ask for specifi prformane. Under the lw, wh, {hase ave been meting of the minds ofthe paris {0 ere ac ete tue ination in nt epreeed Jn the {natn purporting embed te agreement bytes {Gente rei ineqiable conductor acident, one of {helpartos may ak fr the reformation of tho Insrement {Die cad tha uch tre ntonion maybe expressed. Art. Yaseen 0, NCO. What are the requirements before an action for reformation of instruments may prosper? Thy ae 1 thre mst have bees a meting ofthe minds Tie paris tthe contac; G) the fastranent doe not creme tke re intention of he parte, nd( the tare Eicnorument io express the roe nention othe pat rocoto mistake, out negate conductor aiden. ihn’ Game al, Gi Ne ASE, Novber 6, 1980 ‘he eu enue Under ea mista, ad egsneal Saco aint bar tented a menting of rae inteperealynat fran met bol manent oe ceed Ct 1956(par-23,NCO), . at is the remedy of the partes ifthe following Wiijessant inthe eontract rach Gat they fll to Sipe ete true intention: (0) mataal mistake; reed ot one and mistake of one; (0 ignorance o= lack otk in the preparstion? cate the remedy is rfomation of natrement a eee rth ene Ct 106,198, 1204 noo,. cL LaW RevEWER a ‘As a rule, reformation isthe remedy ifthe instrument oes not reflect the trucintention ofthe parties. Under ‘what circumstances is reformation not proper? ‘Reformation is nat proper inthe fellowing eases (@) Simple donations inter vivoe wherein no condition ie imposed; © wits; (©) When thereat agreement is void (Art. 1866, NCC). X and ¥ entered into a contract. X sought to enforce it by way of a sult in court. Can he still ask for the reformation of the instrument? Why? No, because when one ofthe partes has brought an action to enforce the instrument, he cannot subsequently ask for sts reformation. (Art. 1867, NCC), ‘What do you understand by the principle that you do not reform the contract but youreform the instrument evidencing it? 1k simply means thatthe contract is binding as it sthe law botwoen the parties, but the introment that evidences the terms und conditions of the contract may not be reflective of ‘the same, heneo it must bo reformed inorder to relat the ‘rueintention ofthe parties, A contract was entered Into between the petitioner. telephone company and Camarines Sur If Electric Cooperative, ine.fortheformertousethe lectrieposts of the later in consideration ofthe installation of ten (o) telephone lines free of charge with the condition that the period of the contract shall be for as long as the tolophone company has need for the posts, but it shall be terminated ifthe electric company is forced to stop or abandon its operations, as a public service and it becomes necessary to remove the electrie light posts. After the contract had been enforced for over ‘en (10) years, the clectzic company filed an action for the reformation of the instrament on the ground that the contract is too one-sided in favor of petitioner Ratraton! Ineramente and that the telephone eables strung by them have ‘become much heavier with the ierease in the volume of subscribers. To abolish the inequities, reformation fr necessary. It is alao alleged that the petitioner used its posts outside Naga City, hence, it must pay ‘damages. Finally, the respondent prayed that it be paid damages because of the losses it incurred for the poor service rendered by the petitioner. The trial court ruled for the respondent as it hhas become disadvantageous and unfair to private respondent; hence, it ordered the parties to reform thelr contract; to tho extent that petitioner should pay that Article 1267, NCC applies and that the contract Is subject to a potestative condition which rendered said condition void. A motion for reconsideration was filed but it was denied, hence this petition. Petitioner contended that Art. 1267, NCC does not apply because the contract does not involve the rendition of service or personal prestation and itis ‘ot for fature service with future unuaual change. ‘The contention isnot correc, Article 1267 speak of*eervice” which has become so dificult, Servio shouldbe understood to refer to “performance” of the obligation. The ebligation ofthe respondent consist in allowing petitioners to use its posta in Naga City which is the gervcecontamplated in the nid artile. The In does not require that the contract be ‘or future service with future unusual change. Article 1267 states that the law or deerine of unforeseen events based on ‘the discredited rebus sic stantibus in publicinternetional law ‘where the parties atipulat in the light of eertain prevailing ‘conditions, and once these conditions cease to exist, the ‘contract also ceases to exist ‘The SC released the parties trom their correlative obligations under the contrac; but taking into consideration ‘the consequences like disription of essential public service, the petitioners were required t pay the respondent for the use of the posts in Naga City and other towns at theANS, ato of P10.00 por post per month from January 1989, and the respondent was required to pay telephone bills at the same rate paid by Uhe public trom January 1989, ‘Those circomstances necesitated the exercise of eauity juvodiction. (Citing Agno vs. Director of Lands, etal, 181 ‘SORA 799 (1990), Naga Telephone Co. va. CA, ef al, GR. No, 107112, February 24, 1984, 48 SCAD 589) Give the concept of the “doctrine of complementary ‘contracts construed together,” and what is ite basis? Explain. ‘The doctrine closely adheres tothe sist of Art. 1974, NCC which states thatthe various stipulations of contract ehall beinterpreted together attributing tothe doubtful ones that sense which may result fom allo hem taken jointly. If there is a principal contract and a surety agreement, applying the doctrine, the principle leaves no doubt that ‘the intention ofthe parties thatthe turety be personally Tiable inthe deed of suretyshipbecause of thloen agreement. In the earller case of NPC ex. CA, 145 SCRA 593 (1988), it ‘was ruled thatthe surety bond must be readin its entiraty and together with the contract between the NPC snd the contractors. The provisions must be construed together to arrive at their true meaning. Cersin stipulations cannot be Segregated and then made to control. (Rodolfo ve, Velaayuex Typo at GX. No- 12404, Jane 90,199,108 SCAD 465). RESCISSIBLE CONTRACTS Enumerate the rescissible contracts, ‘The fellowing contracts are ressiaible: (1). Those whieh are entered into by guardians whenever the wards whom they represent eufer lesion by ire than one-fourth of the valu ofthe Uhings which are the object thereof, ("Bose agreed upon in representation of abeentees, ‘if the latter suffer the lesion stated in the preceding umber; ‘ese Duara (9) ‘Thove undertaken in fraud of creditors when the latter cannot ia any other manner collect the claims due ‘them; (4) Those which refer to things under litigation if they ‘have been entared into by the defendant without the nowledge and approval of the Hitigants or of eompotent judicial authority, (@) All other contracts specially declared by law to be subject to teaciasion, (Art. 1881, NCC). Rescssion is a remedy granted by law to the contracting parties and to third persons in order to secure reparation of omages caused them by a contrac, even if the contract be ‘alld, by means ofthe restoration of things to their condition prior to the celebration af the said contract, ‘What is the nature of an action for rescission? ‘The ation for rescission is subsidiary; it cannot be instituted ecopt when the party suffering damage has no other legal tnoans to cbiain reparation forthe eame, (Article 1388, New Civil Code). Hence, it mast be availed of asthe lst resort, tvailed only after all legal remedies have boon exhausted find proven futile, (he Hong Cheng vs.CA, Gt No, 144169, Mareh 28, 200%). ‘When shgald an action for rescission be filed? ‘The action o clams eadesion must be commenced within four, years. For persons under guardianship and for abseatees, The priod of four yeas shall not bogin ul the termination ofthe former's incapacity, or until the domicile ofthe latter {is known. (Article 1389, New Civil Cade) X and ¥ entered into a lease contract over a house ‘and lot of X, the lessor, giving ¥, the lessee, the right of first refusal to purchase the premises in case X ‘decides to ell the property. When X decided to sell, ae offered it to Y for PSM payable within one () year. ‘Since ¥eould not afford, ¥ communicated the inability ‘0 pay, hence, X offered it to 2 for PSM payable inz | eal wns. four (4) years. Title was later acquired by Z, thus, he filed an ejectment sult against Y who discovered the manner of payment. Discuss the remedy/remedies of Y, ifany, as against X and Z. State whether the action wil prosper and why. ‘The remody isto fil an action for rescission because the ‘ale was made in fraud of ereditors, In Gurman, Bocaling & Co. us. Honnevie, which is similarly situated with the ‘ase at ber, it was said that tho lesse can be considered a ‘creditor betauce of the substantial right he sequired fom ‘the contract giving him the right to buy under equal terms ‘and conditions as are offered to others in cage he cannot vail of such right (206 SCRA 668 (1992), ‘Rescisible contracts are valid until rescinded. They have extrinsic defects in that there is economic damage ot lesion suffered by one party. Ita requisites are (a) there must be ‘valid or voidable contrac; (b) there must be eounomie oF financial prejudog (c) there must be mutual reattution of ‘the object and cause. In Legarda Hermanos vs. Saldaiia, 126878, January 28, 1974, a sale on installment of two (2) lots was centered into hy the parties. Adding all the payments ‘made, the buyer was able to pay an amount equivalent to one lot but he failed to pay for the two lots, hence, ‘an action for resciasion was filed by the seller, Will the netion prosper? Why? No, there can be no rescission under the cieumstances, ‘otherwise, i would result in unfairaeas tothe buyer. fat all, the buyer can be ordered to recover ane ofthe to lot, A contract of sale of and was entered into where the seller warranted peaceful possession of the property sold. However, the seller failed to eject the tenants. Can this fallure to eject the tenants bo a ground to rescind the contract? Why? > ANS. ANS. ‘No,becauseit was not stipulated. The buyer was the one who prepared the document, yet, such condition was not statod. ‘Any obscurity in a contract must be construed against the party who caused it. (Art. 1877, NCC; Ang va. CA, 170 SCRA 286; Lim Yhi Luya vs. CA, 99 SCRA 668). In Romero ov C4, such a condition was imposed that in case of failure to ramove the tanant, the other has the right to either ruse to proceed with the agreement or waive that condition to ject in arcardance with Art. 1548, NCC. Inthe ease at bar, the sume condition was uot present. The provision was more of the usual warranty against eviction, and not a condition ‘hat was nat mat. (Power Commercial and Induatril Corp. vy. CA, ef al, GR, No, 139745, Jane 20, 1897, 84 SCAD en, ‘What is an accion pauliana and state its requisites? ‘An aceion pouliana is an action to rescind contracts in fraud of erditrs. is requisites are: 1. The plaintiff asking for rescission has a credit prior to the alienation (Pano vs. Victoria, 36 Phil. 706; Solis vs, Chua Pua Hermanos, 60 Phil. 636) although emandable later; 2 The debtor has made a subsequent contract conveying ‘8 patrimonial benefit to a third person; 3. Tho creditor bas no other legal remedy to satity his claim; 4 Thoadt being impugned is fraudulent; 5. The third peroon who recuve the property conveyed, i tis by onerous tte, has been aa accomplice in the fraud, (Maria Antonia Siguan ve. Roea Lim, etal, GR. ‘No, 1846865, November 19, 1999), ‘The Barredo spouses sold a house and lot to the Leaiio spouses for P400,000.00 twas stipulated that upon the signing of the instrument of sale, the Leafio spouses shall pay P200,000.00 with the balance payable within a certain period. It was further stipulated that the buyers shall assume the mortgage indebtedness to the $88 and Aper Mortgage & Loans Corporation upon theANS, signing of the document of sale. The Barredo spouses filed a complaint for rescission of the contract for failure ofthe buyer to pay the mortgage indebtedness. ‘The buyers contended that rescission cannot prosper becuse the payment of the mortgage indebtedness ‘was only a collateral matter or agreement which does not detract from the condition of paying the principal consideration. The complaint was dismissed on the round that there was no material breach, hence, rescission was not proper. Is the dismissal correct? Explain. ‘Yes, the dismissal was correct as there was no material breach, The asrumption of the mortgage over the property sandtheirpayment ofamorticationsarejustcllateral matters ‘which are natural consequonces ofthe sale of the mortgaged property. Nowhere in the agreement was it stipulated that the sale was conditioned upon ther fll payment ofthe loans with SSS and Apen, "To include tho fall payment of the obligations with the S88 and Apex as a condition would be to unnocoesarily stretch and put a new meaning to the provisions af the ‘agrooment ‘But even ifthe payment af the mortgage amortizations to the SSS and Apex as a condition on which the sale is based on, still rescission would nat be available since aon- compliance with such condition would just be a minor oF ‘casual breach thereof aa it does not defeat the very okie of the partios in entering into the contract. The main ‘consideration of tho sal isthe payment of P200,000.00 to the vendors within tho period agreed upon. The assumption of mortgage by the buyers isa natural eonsoquence of thelr Duying a mortgaged property. In fact, the sellers do not stand to benefit from the payment ofthe amortizations by ‘the buyers directly tothe 85S and Apex simply becatse the sollrs have already parted with their property with the payment ofthe price. (Sps. Barredo vs. Ss. Leaf, G.R. No. 156627, June 4, 2008), ‘Xhasa property He donated it toY on March 27, 1998. ‘On March 27, 2000, X incurred an obligation from Z. OU Rascals Gates Can fle an action for rescission of the donation after: 1 judgment is rendered holding X liable? Why? No, because at the time ofthe donation, there was no credit yoteristingItis a requirement that for rescission to prosper, ‘a parson asking for it haa a eredit prior tothe alienation. ‘Without any prior existing debt, there can be neither injury nor fraud, Whileitis necessary that th eredit of the plaintat {in the accion pouliana must exist prior to the fraudulent slienation, the date ofthe judgment is immaterial. Bven if ‘the judgment be subsoquent to the alienation, it i morely, declaratory, without retroactive effect tothe date when the credit was conatituted Siquan vs. Rosa Lim, eal, GR. No 194685, November 19, 999, 135 SCAD 839) ‘obtains aloan from Y. As security for the payment of ‘the obligation, X exccutes a real estate mortgage with ‘the condition that if X fails to pay Y could foreclose ‘the mortgage. In ease Xdoes not pay the loan, can Y rescind the contract? Why? No, The action for rescission ie subsidiary; it cannot be instituted except when the party suffering damage has no ‘other legal means to obtain reparation for the same. (Art 1885, NCC. t must be recalled that in rescission baeed on lesion, the cause of action is subordinated to the existence ofthat prejudice hocause itis the raison detre aa well 8 tho meaoure ofthe right to rescind, (Suria vs. IAC, GR. No, "78808, June 80, 1987; Siquan, eal. v. Lim, etal, GR. No 184686, November 18, 1950) X sold his ear to ¥ for P400,000.00. After Y pai 'P300,000.00, X agreed to have the car transferred in thenameof ¥ provided that ¥ would pay the balance of 'P100,000.00 within ten (10) days from the registration of the same. After the certificate of registration was Issued, ¥ sold it toZ who registered itunder hisname. Y falled to pay. Can X rescind the contract? If not, what is his remedy? Kxplain. X can no longer’Foscind the contract bocause Y cannot retum the thing to him anymore. Rescssion ereates the ‘obligation of mutual rattulion ofthe objet and the eausea wns, ANS. O or consideration, (Art, 1985, NCC). Since Y has already ‘ansferred the car to, rescission is na longer possible, ‘can, however, fle an action fur specie performance with damages against ¥. (Art 191, NCO). State the Hability of one who acquires the thing in bad faith where rescission can no longer be availed of. Whoever acquire in bad faith the things alienated in fraud ofereditors, shall indemnify the latter for damages suffered by thom on account of tho alionation, whenever, duo t any ‘aus, it should be impossible for him to return them, Tf ther are two or more slenations, the frst acquirer hall be liable fist, and 20 on successively. (Art. 1388, NCO X and ¥ entered into a contract of sale over a parcel of land. X, the owner-seller, reserved the right to rescind {in ease ¥ would not comply. ¥ failed to comply but X gave him a series of extensions. Thereafter, he wanted to rescind the contract, Can he validly do 60? Why? ‘Nomore. In Pilipinas Banks, JAC, June 80, 1987, twas said ‘that a contractual provision silowing automat rescission 8 valid. However itean alsobe waived there was a series of ‘extensions given to the vendos the same ean be considered ‘25a waiver ofthe contractual provision allowing automatic reseesion. X bought car from ¥ valued at P200,000.00 payable in threo (8) monthly installments. Upon the signing -of-the contract, X paid P100,000.00. The balance was payable in May and June 1993 with an extension of fone (1) month. X failed to pay. Demands were made for the payment, hones, X paid Y the amount of 'P10,000.00 in August 1903; P20,000.00 in September 1083; and P10,000.00 in October 1983. On November 8, 1083, Y notified X that he has reseinded the contract for Xs failure to pay the balance on time. Is the action of ¥ proper? Why? No, because when ¥ accepted and received delayed payments of installments, though X had been in arrears beyond the ‘aLig,stons avo CONTRACTS ss Rasch Catrce race period, ¥ waived the right of rescission. (Teyag, eal te CA. etal, GR-No, 96058, March 3, 198). What isthe period within which rescission should be resorted to? "The action to clamaressasion must be commenced within four (years. For pereons under guardianship and for absentoes, the period of four (4) years shall not begin until th termination fof the former’ incapeity, or until the domicile of the latter In known, (Art. 1988, NCO). Tes the lagal possibilty of bringing tho action which determines the starting point for the computation of the fouryear prescriptive period a8 provided in the nw. (Khe Hong Cheng ve. CA, GR. No. 144169, March 28, 200), In a contract of lease thore is « provision giving the lessee the right of first option or priority to buy the properties subject of the lease wherein a violation of the same gives rise to a valid cause of action. In this case, the lessor sald the property leased to a third person; and realizing her error, she repurchased the Same, She then offered it for ale to the lessee for IGM which the latter rejected because the price was ridiculous. Finally, she sold it to another for PSM. In the first sale, there was no prior offer to the lessee for the latter to exercise the right of first option or priority to buy. ‘@) Can the Iessee file an action for rescission so that hhe-can exercise the frst option to buy? Why? (2) What is, meant by the phrase “all things snd conditions being equal” in a contract of frst option to buy? Explain. (8) State the basis ofthe right of frst refusal. 1) Yes. Theright ofthe Gest option to buy by the lessee has already been uphold. Only ifthe lessee failed to exercise ‘he right of first priority could the lessor lawfully sell the subject property to others, and only under the same terms and conditions previously offered tothe lessee.O. 2) "ThoSCinterpreted the phraso“all things and conditions being equal” to mean that there should be identity of terms and conditions tobe offared to the lesoe enjoying the right of first priority. Thi rule applies even without the same provislan ifthe right of iret refusal a not to bevendered lusory. 8) Tho basis of the right of frst refusal must be the current offer to ell ofthe seller or offer to purchase of any prospective buyer. Only after the grantee fails to exercise its right of fst preety under the same terms land conditions and within the period contemplated ould the owner validly offer to sell the property to 8 third person, agsin, under the same terms and ‘conditions offered tothe grantee. In Bquatorial Realty ve. Mayfair Theater, Ine, GR. No, 106068, November 21, 1996, 76 SCAD 407, the right of frst rafusal to buy was also upheld considering that Mayfair, ‘which had substantive interest over the subject property, ‘was preudiced by ite sale to Equatorial without Carmelo conferring to Mayfair every opportunity to negotiate within the 80-day stipulated period, See alsa Parshaque Kings Ent, Ine. ve. CA, al, GR, No, 111588, February 26, 1997, ‘9SCAD 986, citing Guzman, Bocaling and Ca. vs. Bonnevie, supra) Is the Statute of Frauds applicable to contracts with ight of frat refusal? Why? No, he Statute of Frauds does not contemplate cases involving a right of fist refuse because the eppliation of such statute presupposes the existence of « perfected contract. A right of first refusal is not by any means a perfected contract of sale of real property. It ies contractusl rant, not ofthe sae ofthe real property involved, bat ofthe "ight of first refusal ver the property sought tobe sal. Thus, ‘right of firt-refusal need not be written to be enforceable ‘and may be proven by oral evidence (Raaencor Development, Corporation vs, Inguing, GR. No. 140879, March 8, 2001), What is the nature of a right of first refusal? Is it ‘enforceable even if orally given? Explain. ‘A right of frst refusal isnot among those sted as unen foreeable under the Statute of Frauds, Furthermore, the ANS. O ‘OBLIGATIONS AND CONTRACTS 00 ‘Yous Cate pplication of Article 1403, par. 26) of the New Civil Code presuppooes the existence of a perfeted, albeit unwritten, Contract of sale A right offre rfatal ia not by any means perfected contract of eal of real property. At best, i is a fontroctual grant, not of the sale af real property involved, but ofthe right of frst refusal over the property sought tobe eld 1 is thus evident that the Statute of Frauds does not contemplate eases involving a right of frst refusal. AS such, {right of fist refusal need not be writen to be enfoeeable fand may be proven by oral evidence (Rosencor Development Corporation e avs nguing, etc, GR. No. 140478, March 8, 2000). VOIDABLE CONTRACTS. ‘What are the voldable contracts? ‘The flowing contracts are voidablo or annullable, even ‘hough there may have been no damage to the contracting parties: (1) Those where ons ofthe partis is incapable of giving ‘eangent to acontract (@) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. (Art. 1390, NCC). What are some basic characteristics of voidable contracts? a : = Voidable contracts “are valid until annulled: They are suseoptible of ratification. Once ratification is made, the id contracts chal be cleansed of their defeets and such ‘atifcation retroaets 2o the constitution of the contracts, (rt 1396, NCO), ‘What are the requisites required for the ratification ‘of voldable contracts? ‘They are: (8) Tho contract must be vidable;ws. (The person ratifying must know the reason for the contract being vaidable; (0 The eause of its being voldable must not continue to exist atthe time of atifiestion; (@) Thre must be no implied or express waiver of the actions, (©) The person ratifying must be the injured party. What is the effect of ratification of voldable con- tracts? Ratification of voidable contract cleanses the contracts from all its defects from the moment they were constituted. (Art 1996, NCO). ‘Xmortgaged his and and building to GSIS as security {for the payment of his obligation. Since he failed to ay his obligation, GSIS foreclosed the mortgage. Centertown, Inc. was the highest bidder. Since the GSIS was not authorized to engage in the real stats Uasincen’ it euemtses restore naa meal ‘Towers, Inc.. The Tenants Association sued the GSIS, Contertown, and Towers for annulment ofthe title on ‘he ground that itis void because itis ultra vires. ‘WIN the action prosper? Why? [No, because the Associaton wat neither a party nor privy to ‘the contract of eae or astignment, Tt has therefore no right ‘tw question the contact. House Int Blég. Tenants Assn v6. TAC, June 80, 1987). The action forthe annulment of contracts may be instituted by all who are thereby obliged Drlncipally or subsidiavly. (Art. 1997, NCC). The reason for ‘tho rule that the person prejudiced can question the validity cof contract is that, he who omes to court must cme with closn hands. (Bastia ve. Dy Bunclo and Co, 95 Phil. 198). ‘What is the obligation of each party in case of annulment of a contract? ‘The contracting partes shal restore to each ther the things ‘which have been the subject mattor of the enntrat, with “osLAGAMONS AND CONTRACTS co "oale Cones their fruits, and the price with ite intrest, except in cates ‘a provided by lw. In obligations to render service, the value thereof shall be the basis for damages. (Art. 1398, NCC), Suppose the thing was lost through the fault of the person who must return it, what is his obligation? ‘He shall restore the value and the fruits only. (Art 1400, NCO. X, a minor, represented himself to be of age. He tered into a contract. Thereafter, can he asl for its ‘unulment on the ground of his minority? Why? ‘No. In Mereadd ve, Bspritu, 7 Phil 216, it was aaid that Since the minor was under estoppel, he exnot question the ‘aldiy of Che contrect, (Sia Suan and Chiao vs. Aleantara, March 4, 1950) ‘Ais the owner ofa building with about 1,000 tenants, Hiborrowed money from se GS1S using the building Ss vccurlty by way ofa realestate mortgage. He failed {2 pany ence, O89 forecloned the mortgage with it tthe highes! bidder. A falled to redeem it thus, the Sherif ined «final sale, GSIS told the Duilding to V7 Corporation which was not authorized to engage Trang realty busineds The tenants association of the Dulldlng questioned the sale an wlira vires. Will the aetlon prosper? Why? ‘No, because the tenants auction cannot question the dt afte ene Under the a the ation or analent Fanaa may Be Ite by all who are thereby Shulged princely or ebsdiary hr. 1907, NCO; House remade! Bldg. Tenants Arn. ve IAC, Jane 80,1987; ‘Mes Conlidted Mining va CA, Q1-No. 64306, Pebrary 11000; Note ha the ttn asocation was ota paey fothecontact. X and ¥ entered into a contract of sale. X failed to deliver the object ofthe contract, and yet, he was the fone who filed a sult to annul the contract. Will the ‘action prosper? Why?NS. No, because the guilty party eannot file an action for ‘annulment. He who comes to court mutt ome with clean hhands. Bastida va. Dy Bundi and Co, 98 Phil 196), UNENFORCEABLE CONTRACTS The following contracts are unenforceable, unless they are ratified: (1) ‘Those entared intoin the name of anather person by one ‘who lis been given no authority or legal representation, ‘or who has acted beyond his powers, @) Those that do not comply with the Statute of Frauds ‘as eet forth i this number. Inthe flowing eases en ‘agreement hereafter made thall be unenforceable by faction, unless the came, or some note ar memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the fgreement canmol be received without the writing, ot _econdary evidence of ts content (2) An agreement that by its terms isnot to be per- formed within a year from the making there, ©) Acpocial promise to answer for the deb, default, or miscarriage of another; (© An agreement made in consideration of mariage, other Dhan a autual promiae to mary; (@ An agreement for-the sale of goods, chattels or things in action, at a price not les than Five Jmundred pesos, unlesa the bayer accept and receive part of such goods and chattels or the evidences, (or somo of them, of such things in action, or pay fat tho time some part of the purchase money; but ‘when asale is made by auction and entry is made by the auctioner in his sales book, atthe time of the sale ofthe amount and kindof property 201d, ‘arma of ele, pres, amas ofthe parehasers and perwon on whoee acsount the ale ia made, iia 8 ‘ffclnt memorandum; O ‘OBLAGAMONS AND CONTRACTS: wo ‘Ueaetbe Canoct () An agreement forthe leasing for a longer period than one year oF forthe sale of real property o of sn interest therein; (OA representation as to the credit of third person () ‘Those where both partics are incapable of giving enngent.(Art. 1408, NCO). ‘Why are they called unenforceable contracts? ‘They are caled unenforceable contracts because they cannot be sued upon or enforced unless they are ratified. How are contracts infringing the Statute of Frauds referred ta in Art, 1403(2), ratified? ‘They are ratified by the failure to object tothe presentation ‘of oral evidence to prove the sama, or by the accoptance of Dbenefita under them. (Art. 1405, NCC. ‘A and B entered into an oral contract of sale of a pareel of land agreeing on the price, date of payment and delivery of the title on August $0, 1999. Suppose ‘on August 50, 1999, A will go to B's house and deliver the money, but B would refuse to convey the land. (2) Can Asue B to enforce the oral contract? Why? (2) What is the defense of B, ff any? Will it prosper? why? (8). Will your answer in nos. {and 2 be the same if B accepted a downpayment? Explain, (4) Suppose A has already delivered the consider ation, but B refuses now to execute the deed of ‘conveyance, what would be the remedy of the ag: ‘rioved party? Explain. (2) No, beceuse the oral contract of sale over ral property is unenforoeable if notin writing. (Hernandez vs. CA, 160 SCRA B21; Renata Cenido, et. vs. Spe. Sta. Ana, GR. No, 192474, November 18,1988). (2) The defonse of Bs thatthe oral contract isnot enforee- abl, and it would prosper because the requirement isws, ws, ANS, Ov LAW nevis that, to be enforceable, such contract must be in wet ing. (8) No more the defense in nos. 1 and 2 would no longer prosper because if a dowapayment was accepted it fwould mean that the contract ie no Tonger executory but partly executed. A parly executed contract doos not fall under the Statute of Frauds (©) The aggrioved party can Ble an action for specific performance or rescission, and in both eases, with damages. (Art, 1191{par. 23, NCC) X and ¥ entered into an oral contract of sale of @ ‘parcel ofland. X, the buyer, paid the value of the land, ‘but ¥ has not yet delivered the land. To enforce his right and to be able to register the same, what is his remedy? Explain. ‘is remedy ie specific performance whore X can ask ¥ to ‘execute the necessary document inorder that bis right may be restored. (Art. 1408, NCC), A,B, and C entered into a contract of oral partition of, ‘a real property they inherited from their parents. Is ‘the contract enforceable? Why? ‘Yes, boeause it ie not a eonveyance of land. Article 1409, [NGC which requires that conveyances involving and must be put t writing, dace not apply as it applies only ta Leeses ‘and conveyances, Partition is bot alesse or conveyance, but ‘a mere division ofthe property. (Vda. de Rayes va. CA, 199 SCRA S46 (1991); Gavina Gagiucot-aw, ef al. vs. Leopoldo ‘Maglucot, et a., GR. No, 132518, March 28, 2000), ‘Aand B entered into an oral agreement defining the boundary of their two (2) parcels of land which are ‘adjacent to one another. A applied for registration ‘Of his land but did not follow the oral agreement. ‘objected on the ground that the oral agreement must be followed. A contended that such agreement is ‘unenforceable. Is A's contention valid? Why? — No, lscause there is no need to pat the agrooment defining the boundary af their two (2) parcals of land to writing ANS. Catiaartons axp covmeacrs ro ‘untrsateCmoet because the requirement that contracts pertaining to land ‘must bo in writing daee not apply in an agreement on the ‘boundary ofthe same. The Statute of Frauds applies only to leases and conveyances of land, (Hernandez vs, CA, 160 SCRA 821). ‘A is the owner of house which is being verbally leased to B for five years. Aorally promised B that the Tease would be renewed, only to refuse it later. Can B {fo to court and enforce hia right that the contract be Fenewed after the expiration of the contract? Why? No. In Syquia vt. CA, June 20, 1987, twas ruled that an oral asqurance that the lease would be renewed is not enforceable ‘Thisis ue tothe fact that under Art. 1408,No. Zofthe NCC, ‘an agreement forthe leasing fora period longer than one {eer is unenforceable hy an action unles the same or some note or memorandum thereof, be in writing and subseribed by the party charged or by his agont. Byidence, therefore, of the agreement cannot be received without the writing oF a secondary evidence of ts contents Ais the administrator of the estate of B. In need of ‘money to support the children of B, he asked for leave to sell a particular portion of B's estate which was ‘approved by the court. Tho sale was effected but the ‘administrator did not have the deed of sale approved ‘by the court. Is the contract enforceable? Why? No. In Leabres we, CA, December 12, 1986, the SC sald that ‘a supposed tale of apiece of land belonging to the estate of the deceased under cuted legis, made by tho administrator ‘without coure approval cannot bind tho estate. The sale ‘Should have been sbmittd tothe court for its approvat in ‘order that the right ofthe buyer could be recognied.” ‘Whatis the effect ifa lawyer entersinto a compromise agreement for his client without authority to do eo? Explain. ‘The compromise agrooment ia unenforceable; hence, it can be ratified by the clint exprasly or impliedly. (Art. 1403(1); Blumanlag ve Alzte, -29119, September 26, 1986).ANS, uv, LAW RevTEWER ‘The widow, inher own bebalf,and that ofher children, ‘as natural guardian, sold properties belonging to hher husband. After a sister of the husband obtained ‘guardianship over the persons and properties of the ‘minors, an action to annul the sale together with a rayer that they be allowed to redoom the properties of the minor was filed, The tral court rendered Jndgment in favor of the plaintiffs. (On appeal if you were the ponente, how would you decide? Explain. ‘would sustain the lower court, In Badill vs. Ferrer, GR. No. 51969, July 29, 1987, the SC seid that the gencral powers of a cour-sppointad receiver are provided in Section 7, Rule £9 ofthe Rales af (Court. Under euch ral, the receiv is ‘subject tothe contra) of the court in which the action is pending” and he can “generally do such acte respecting the property as the court may authorize” ‘A court-appointed roosiver naot validly enter into @ ‘contract without the approval ofthe cour, ‘The questioned contracts can rightfully be classified as ‘unenforceable for having been entered into by one who had acted beyond his powers due to receiver Amor failure to secure the court’ approval of said contracts. (See also Nario ve Phil. Ameriean Life Ins, Co, 1-22798, June 25, 1987). ‘A bought a building together with the Ind upon ‘which ft is built from B. One of the conditions is that ttpon the payment of 12 ofits vale, B would assign his rights over the leases to which B did not comply. ‘Adomanded the refand of his money, and since B ‘refused, he filed a suit for collection of am of money. B filed a motion to dismiss on the ground that the contract is unenforceable since itis only am oral one. Is the contention correct? Why? No, because the contract no longer falls under the State of ‘Frauds, the same having been partly executed as result of ‘he pavment of 12 of the value ofthe land andthe building. ANS. ~Zouigamtons axo conmmAcrs on outro Contacte ‘To allow B to interpooe the rule in the Statute of Frauds ‘would be to allow him to perpatrate fraud. The Statute of Frauds was designed to prevent fraud, not to perpetrate tnd promote fraud and perjry. Furthermore A here isnot ‘enforcing the contract but backing out from it because of B's olation. (Asia Production Co, vs. Pato, GR. No. 51058, anvary 27, 1992; Arrogante etal. vs, Delante, et a., GR No, 189182, daly 24,2007) Can Bin the case above object to the proof of payment fof 12 of the value of the land and building on the ground that there was no reeeipt at all hence, falling ‘under the Statute of Frauds? Why? To, because that would result in unfaimess. B would thon be enriching himalf at A's expense. (PNB ve Phil. Veg. Oil Coy 49 Phil. 857). Oral evidence is allowed. Further, the contract has already been pardly executed, The Statute of Frauds eovers only those contracts that are exeeutory, not ‘hove that have already been executed or partly exseuted. (Almiol and Cerio ve, Monserrat, 48 Phil. 67. ‘The probate court authorized the special administra tor to sell a pareel of land st P0.50 per square meter, It likewise ordered the execution of a necessary doc: lument and the submission of the same to it for ap- proval, There was a sale but there was no public in- ‘Strament made in writing evidencing the sale, In the ‘meantime, the probate court also authorized the sale {and it was sold to another person. The second sale ‘was evidenced by way of public dacument that was approved by the court. As between the two (2) sales, ‘which vested a better title? Explain, In Manotok Reolty, Inc. ve. CA, 1-95967, April 9, 1987, the Supreme Court seid that the sale ‘by the special ‘administrator didnot bind the estate and the buyer in the firoteale because the ire sle was notin public instrament fand there was 20 approval othe court. The second sale was {na public instrament and approved bythe court. Itisarule, the Supreme Court said, chat when a law requiros tha ‘contract bein a publi instrument in order tobe enforceable, ‘where such e contract has for its object the creation of or(vi LAW REVIEWER transmission of rights over immovable properties, that requirement is absolute and indispensable, ‘And B entered into a contract of sale whereby the parties verbally agreed that A would be allowed to repurchase the property. Can A enforce the verbal ‘agreement? Bxplain. Yes, under Art, 1408 of the Civil Code, a sal of real property shall be unenforceable unless the for some note or memorandum thereef be in writing and tubeeribed by the party charged or his agent, Bridenoe of tho agreement cannot be received without tho waiting or fa secondary evidence ofits contents. In th ease at bench, the deed of aale and the verbal agroement allowing the ight to repurchase should be considered a an Integral ‘whole, The deed of eale relied upon by the petitioners is in tcl the note or memorandum evidencing th contract. ‘Thus, the requirement of the Statuto of Frauds has been ‘sufficiently complied with. Moreover, the principle of the ‘Statute of Frauds only applies to exeeutory contract, and not to contracts either partially or totally performed (citing ‘Vietoriano vs. CA, 194 SCRA 19), as in this ease where the sale has been consummated, hence, the seme is taken out of the scope ofthe Statute of Fraud. (PNB ve, Pil. Vegetable Oil, Ga, 40 Phil. 857; Mactan Cebu Int. Airport Anterity ‘8. CA, et a, GR, No. 121806, October 80,1986, 75 SCAD 72) contract forthe If_an unenforceable contract entered into between per¥ons who are incapable of givinig consent is ‘ratified, what Is the reckoning period of its validity? If there is ratieation of the contract by the parents or ‘Fuardians of the persons who entered into the unenforceable fontrac, the same shall be validated fom its inception. (Art, 47, NCC). May a third person assail an unenforceable contract? No, because under the law, unenforceable contracts cannot be nsalled by third persons. (Art. 1408, NCO). Q ‘SauioaTions ano conTRACTS eo Volo CONTRACTS What are the void contracts? ‘The fllowing contracts are inexistent and void from the beginning: (1) Thove whose cause object or purpose is contrary tla orale, god customs, public order a public policy, (2) Those which are sbooltaly simulated or Setitions; (9) Those whose cause or object didnot exist atthe time of the transaction; (©) ‘hose whooe objet is outside the commerce of men; (5) Those which contemplate an impossible service; (©) Those where the intention of the partis relative tothe principal object ofthe contract cannot be ascertained; (1) "Those expresely prohibited or delared void by lar, ‘These contracts cannot he ratified. Neither can the right to setup the defense of ilogality be waived. (Art. 1409, NCO), Avoid contratis equivalent to nothing itieaboolutely svanting in civil effets; it cannat be the ass of actions 0 enforce compliance. (Rep. vs. Lafo, -R. No. 141941, May 4, £2004, 89 SCRA 424; Bareerov. Capitol Dev. Corp, GR. No. 154765, March 29, 2007). a] 1No, void and absolitely simulated contracts cannot be ‘alified, (Art, 1409, NCO). The characteristic of simulation ‘is the fact thatthe apparent contract isnot really desired or intended to produce logal effects nor in any way alter the Juridical eituation. (Carino va. CA, 1-47661, July 21, 1987). In.a suit filed by the employees of ABC Corporation, to enforce their rights over benefits under the law, the employer interposed the defense that they have ‘slgued x quitolaim of certain benefits, hence, this ‘bars them from enforcing their rights over the saidbenefits. The waiver was for less than what they are entitled to. Is the defense proper? Why? No, Under At, 6 of the Civ Code, rights may be waived unless the waiver is contrary to la, publie order, public policy, morale or good customs, or prejudicial to a third Dereon witha righ recognized bylaw. Likewive, under the provision of Art. 1806, NCC, the enntracting parties may ‘ctablsh such stipulations, elaures, terms and conditions at ‘hey may deer convenient, provided they are not contrary to lw, public order, able poliey, morals, and good customs. ‘The employees signing of quitelaim did notresltin a ‘waiver. The la doesnot consider as valid any agreament to ‘receive compensation less than. what the worker is entitled to recover, The quitclaim is inequitable and incongruous to ‘the declared policy of the State to afford protection to labor ‘and to aavure the rights of workers to security of tenure (Carmeleraf. Corp. vs. NLRC, GR. Nos. 9083435, June 6, 1990, 186 SCRA 393) - ‘The plaintiff took up law in the defendant university and finished up to and including the first semester ‘of his fourth year. Ho entered into a contract not to transfer to another school. He then transferred to ‘Abad Santos University on the last semester of his fourth year, failing to pay his tuition fee om his last semester in the defendant university. The plaintiff then applied to take the bar examination, but before doing fo, he needed to secure al his eredentials from the defendant imniversity which was denied by the latter until he paid fully Ble last tuition foe which he did but under protest. Plaintiff passed the bar- examination and instituted an action against the defendant, but the lower court denied it, hence, this appeal Issuer Is the contract executed by and between the defendant and plaintiff valid? No, In Cui vs, Arellano University, 2 SCRA 208; the Supreme Court ld that the contract signed bythe plaintif fe contrary to public policy, good morals, and custams and therefore aul and void. Scholarship grants as pointed out in a | ‘OBLIGATIONS anD conTRACTS os ‘Memorandum 38 ae awarded in recognition of merit, and not ‘tw attract brilliant student in school for their propeganda value, Hence, granting echolarshipe to increase the business potential of an educational institution is inconsistent with ‘ound public policy as well as good morals, ‘May an action or defense based on the nullity of ‘contract prescribe? No. Under Article 1410, NCO, the action or defense for ‘the declaration of the inexiatence of a contract does not preserbe. It a contract is void, an action to declare it void is impreseriptible, but laches may prevent the declaration ofits nullity. How do you distinguish one from the other? Explain. ‘The defense of laches applies independently of preserption. Lashes is different ffom the Statute of Limitations Prescription is concerned with the fact of delay, whereas laches is concerned with the effect of delay. Prescription is ‘a mattar of ime; laches is principally 2 question of inequity of permitting a claim to bo enforced, the inequity being founded in same change i the condition ofthe property oF the relation ofthe parties, Prescription is statutory; laches Js not, Laches applies in inequity, whereas prescription applies at law. Prescription is based on fxed-time; aches is. ot. ‘Thus the prevailing dectrine is thatthe right to have 1 contract declared void ob initio may be barred by laches slthough not barred by prescription. (Rafole va. Barba, 119 SCRA 146), ‘tha, forall its elements are present, vs 42) conduct on the part of the defendant, or one under ‘whom he claims, giving ise to Uhe situation that led ‘to tho camplaint and for which tho complaint socks remedy; D) delay in asserting the complainant’s-rights, having hhad knowledge or notice of tho defondant’s conduct ‘and having heen afforded en opportunity to institute 2 suitANS. AN. (OV LAW REVIEWER ©) lackofknowledge or notie onthe partofthe defendant that the complainant would assere the right on which be bases hie suit and 2) injury or prejudice to the defendant in the event relief ff eceorded tothe complainant, ortho suit isnot held barred, (Yusingeo ve. Ong Hing Lian, 42 SCRA S80; [Nilecn and Co. vs, Lepanta Consolidated Mining Co, IS SCRA 1040), In the review of a decree of registration of a pareel of land, what fraud is required? Explain. ‘The fraud that is contemplated by law is actual and ‘extrinsic fraud which includes an intentional omission of a Tact required by law, For fraud to justify the annulment of a decree, it must be extrinsic or collateral, and the facts upon, ‘whieh itis based have not boen controverted oF resolved In the case where tho judgment sought tobe annulled was ‘rendered. (Serna, etal. vs Fontanila,et a, No, 24806, ‘Tune 18, 1999, 107 SCAD 648) ‘There was an action for reconveyance of a real property allegedly sold but without consideration. It ‘was contended that the action has proseribed since 16 ‘years have already lapsed. Is the contention correct? ‘Why? No, the void. [Neither is their ation barred by laches, The elements ‘laches ar: (1) conduct onthe part ofthe defendant, or of oe under whom he claims, giving rise tthe situation of Which the complaint seeks a remedy; (2) delay in aseerting ‘the complainant's rights, he complainant having had knowledge or notice of the defendant's conduct as having been afforded an opportunity to institute @ sui; (8) lack of ‘knowledge or notice on the part of the defendant that the complainant would assert the right in which he bases his ‘uj and (i) injry oF prejudice to the defendant in the event Felit is accorded to the complainant, othe suite not held barzed. (Maneclang vs. Busn, 208 SCRA 179; Santos vs. Santos et al, G-R. No, 198605, October 2, 2000, tion has not yet preserbod, because the contracts “OBLIGATIONS AND CONTRACTS on A contract of sale was entered into by and between ‘A and B purporting to be a sale of a 12-hectare lot ‘for P800.00 in 1950. A died in 1955, and the heirs of ‘A discovered the sale in 1975. They filed an action {or nullification of the deed of sale contonding that their father never received the amount of P300.00 or for total lack of consideration. B filed an answer contending that the action has already prescribed, the same having been filed after ten years. Is the defense proper? Why? No, because an action or defense based on the mullity of a Aocament does not prescribe. (Art. 1410, NCC) What do you understand by the principle of in pari delicto? tis expressed in the maxims: “Ex dolo malo non oritur ‘acto and “Tn part delet potior est conditio defendentix” ‘The law will not aid either party to an illegal agreement; it leaves them where they are. No sult can be maintained for its specific perfomance, o recover the property agreed to be sald or delivered, or Use money agreed to be paid oF damages for its isolation, and no efimative relief of any ‘kind willbe given to one against tho other. Each must bear ‘the consequences of his own acts. They will be let where ‘they have place themselves since they didnot came to court ‘with clean hands. arcero va, Capital Dev. Corp, GR No. 154765, March 29, 2007) . ‘Aro there legal foundations of the principle of in pari — : ‘Yu. They are the following: (1) When the nullity proceeds from the legality of the cause or abject of the contract, and the set constituts a ‘rimminal offense, bath partes being in part delicto they Shall have no action ageinst each other, and bath shall be prosecuted. Moreover, the provisions of the Penal (Code relative tothe disposal of effects or instruments of acrime shall be applicable to the things or the price ofthe contract.‘This rule shal be applicable when only one ofthe parties is guilty; but the ianocent one may laim what ‘hehas given, and shall not be bound to comply with his promise. (Art. 1411, NCO). (@) I the act in which the unlawful or forbidden cause cemsists does ot constitute a criminal offnss, the following vues shall be observed: (@) When the faut ison the part ofboth contracting parties either may recover what he has given by ‘irtu of the contract, or demand the performance \ ofthe other's undertaking, (©) When only one of the contracting parties is at fault, he cannot recover what he bas given by reason of the contract, or ask for the fafllment of what has been promised him. The othe, who {snot at falt, may demand the return of what he thas given without any obligation to comply with his promise. (Art. 1412, NCO). X isa franchise holder dlong the route from Manila to Bian, Laguna. Z, 2 friend, wants to engage in the transportation business but he has no franchise; hence, he sought the assistance of X who told him that hhe can accommodate his buses for a fee. They then centered into a contract whereby Z made it appear ‘that he conveyed the bures to X just 20 to have the same registered and covered by the franchise. One year later, Y sold his franchise to Z. Thereafter, Z Sought the recanveyance of the buses to him from X. X, however, refused, hence, this action for specific. performance. Will the action prosper? Why? No, boeause they are in pari delito. In Teja Marketing vs. ‘CA, Mareh 9, 1987, it was sad that the Rabi system has been the soure of corruption in the government agency (LTO or TRB), thus, the evurt would leave the parties where they Give certain exceptions to the principle of in pari delieto. ‘These are the exceptions tothe principle of in pari delica: @ ® @ ® © o o ie Interest paid in excess ofthe interest allowed by the ‘unary laws may be recovered by the debtor, with Interest thereon from the date ofthe payment. (Art. 1413, NCO). ‘When money is paid or property delivered for an llega) purpose, the contract may be repudiated by one of the parties before the purpose has been accomplished, oF before any damage has been eaused toa third person. In such cage, the courts may, if the public interest wil thus be subsorved, alow the party repudlating the contract to recover the money oF property. (Art. 1414, NCO, Where one of the parties to an illegal contract Incapable of giving consent, the courts may, if the {interest of justice so demands allow recovery of money cx property delivered bythe inenpacitated person. (Art 1415, NCC), When the agreement isnot illegal per se bu is merely prohibited, and the prohibition by the law is designed for the protection ofthe plaintf, he may, if public policy is thereby enhanced, recover what he has paid or delivered. (Art. 1416, NCO), ‘When the ptice of any article or commodity ie deter ‘mined by statute, or by authority of law, any person ‘paying any amount in exceas ofthe maxizmum prie al- Towed may reoover auch excess. (Art. 1417, NCC When the law fixes, or suthorizes the fixing of the ‘maximum number of hour of labor, and a contract {entered into whereby a laborer undertalzes to work Jonger than the maximum thus fixed, he may demand ‘ditional compensation for service rendered beyond the time limit (Art. 1418, NCO), When the law sets, or authorizes the aetting of minimum wage for laborers, and a contract ie agroed ‘pen by which a laborer accept a lower wage, he shell be entitled to recover the deScieney. (Art 1419, NCO),ANS, NATURAL OBLIGATIONS. What are natural obligations? civil obligations? Civil obligations give a right of action to compel their performance. Natural obligations, not being basedon positive Taw but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulillment by the obligor, they authorize the retention of ‘what has bean delivered or rendered by reason thoreof (Art 1423, NCO), ‘What are the distinctions between naturel and efvil obligations? (2) Natural obligations are based on equity and natural Jaw while civil obligations are based on positive law; Natural obligations are not enforceable by court action ‘while ivi ebligntions are enforceable by court action. X contracted a loan with the DBP in 1966 but failed to pay, hence, in 1966, the obligation became due and demandable. in1987, tho DBP unearthed hi obligation and demanded payment. Upon receipt of the demand letter, X paid the obligation together with its interest. ‘Advised that the action hae already prescribed, he ‘sued DBP for reimbursement of whatever he had ‘Paid. Will che action prosper? Why? [No, borause when aright to sue upon a civil obligation hes lapced by extinctivopreseription, the obligor who voluntarily performs the contract eannot recover what he has delivered ortho value of the service ha has rendered. (Art. 1424, NCC; DBP va. Adil, GR. No, 14889, May 11, 1988), Suppose in the problem above, there was payment of X's obligation in 1986 by a friend, A, without his -knowledge and consent. Can A, the friend who made ‘the payment, ask for reimbursement from X? Can A recover from X? Why? 'No. Under the law, when without the knowledge or against ‘the will ofthe debtor, a third person pays a debt which the ANS. ANS. bligoris not Legally bound to pay because the action thereon has prescribed, but the debtor voluntarily reimburses the third person, the obligor cannot resover what he hae psi (xt 1425, NCC). 1%, the father of ¥, was indebted to Z in the amount of, PAM during his lifetime. He died without paying it. Y Inherited from X properties worth only P400,000.00. Y ald Z the amount of PIM one month after W's death. (Gan ¥ ask for the refund of what he paid to Z? Why? No. Under the lav, when a testate or intestate heir voluntarily pays a debt ofthe decedent exceeding the value afthe property which he reocived ky will or by the law of Intstaey from the estate of the deceased, the payment is valid and cannot be rescinded by the payer. (Art. 1429, NCO) : Suppose in the problem above X exectod a will but twas declared void and the heirs paid a legacy to a friend of his father, can Yrevokeit or ask for arefund? Why? No, because when a willis declared void beesuse it has not bbeen-executed in accordance with the formalities required bylaw, but one ofthe intestate heir, after the settlement of the debts ofthe deceased, pays a legacy in compliance with ‘clause in the defective wil, the payment is effective and Inrevocable. (Art. 1480, NCO), ESTOPPEL ‘What is estoppel? 1 is a condition or state by virtue of which an admission ‘or representation is rendared eonelusive upon the person raking it, and cannot be denied or disproved as against the person relying thereon. (Art 1481, NCO). ‘What are the kinds of estoppel? — ‘They are: () estoppel in pais; (2) estoppel by deed. (Art. 1483, NCC).