Civil Law and Practical Exercises
EXC: Extinguished in the following cases:
1) If the generic thing is delimited;
2) Has already been segregated or set aside, in which case, it
has become speci c.
Effect of Loss Through a Fortuitous Event in
Reciprocal Obligations
GR: The obligation that was not extinguished remains;
EXC: Extinguished in the following cases:
1) In the case of lease — if the object is destroyed, both the
lease and obligation to pay rent are extinguished (Art
1655);
2) In contracts for piece of work — If the thing is lost prior
to delivery, the worker cannot ask for the price.
Rebus sic stantibus (Art 1267)
1. This refers to the moral impossibility or impracticability due
to change of certain conditions.
2. When the service has become so di cult as to be manifestly
beyond the contemplation of the parties, the obligor may
also be released therefrom, in whole or in part.
3. It speaks of personal obligations and is thus inapplicable to real
obligations.
4. The following requisites must concur:
a) The service must become so di cult that it was
manifestly beyond the contemplation of both parties;
b) One of the parties must ask for relief;
Reviewer
c) The object must be a future service with future
unusual change in conditions.
Naga Telephone Co., et al. v. CA supra
Article 1267 speaks of “service” which has become so di cult.
Taking into consideration the rationale behind this provision, the
term “service” should be understood as referring to the
“performance” of the obligation. In the present case, the obligation
of private respondent consists in allowing petitioners to use its posts
in Naga City, which is the service contemplated in said article.
It is not a requirement thereunder that the contract be for future
service with future unusual change. The allegations in private
respondent’s complaint and the evidence it has presented su ciently
made out a cause of action under Article 1267.
Eastern Telecom v. Eastern Telecoms Employees Union 2012
The parties to the contract must be presumed to have assumed the
risks of unfavorable developments. It is, therefore, only in absolutely
exceptional changes of circumstances that equity demands assistance
for the debtor by applying Art 1267. In the case at bench, the Court
determines that ETPI’s claimed depressed nancial state will not
release it from the binding e ect of the 2001-2004 CBA.
Tagaytay Realty Co., Inc. v. Gacutan 2015
Considering that the petitioner's unilateral suspension of the
construction of the amenities was intended to save itself from costs,
its plea for relief from its contractual obligations was properly
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rejected because it would thereby gain a position of advantage at the
expense of the lot owners like the respondent. Its invocation of
Article 1267 was factually unfounded.
Mere inconvenience, or unexpected impediments, or increased
expenses did not su ce to relieve the debtor from a bad bargain.
Condonation or Remission of Debt
Condonation or remission is the abandonment by the creditor of
his right. Essential Requisites
1) There must be an agreement;
2) The parties must be capacitated and must consent;
3) There must be a subject matter;
4) The cause or consideration must be liberality;
5) The obligation remitted must have been demandable;
6) Must not be ino cious;
7) Formalities of a donation are complied with in case of
express remission;
8) They must be clearly and convincingly shown as they are
not to be presumed generally.
Presumptions
1) of Remission — The delivery of a private document
evidencing a credit, made voluntarily by the creditor to the
debtor. (Art 1271);
2) of Voluntary Delivery — Whenever the private document in
which the debt appears is found in the possession of the
debtor. (Art 1272);
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3) of Remission of Pledge — When the thing pledged, after its
delivery to the creditor, is found in the possession of the
debtor, or of a third person who owns the thing. (Art 1274)
Confusion or Merger of Rights
Confusion or merger is the meeting in one person of the qualities of
creditor and debtor with respect to the same obligation.
Essential Requisites
1) It should take place between the principal debtor and creditor;
2) Must be clear and de nite;
3) The very obligation involved must be the same or identical.
Compensation
Compensation is the extinguishment in the concurrent amount of
the obligations of those persons who are reciprocally debtors and
creditors of each other.
ART 1279. In order that compensation may be proper, it is
necessary:
1) That each one of the obligors be bound principally,
and that he be at the same time a principal creditor of
the other;
2) That both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind,
and also of the same quality if the latter has been
stated;
3) That the two debts be due;
4) That they be liquidated and demandable;
Reviewer
5) That over neither of them there be any retention
or controversy, commenced by third persons and
communicated in due time to the debtor.
ART 1290. When all the requisites xxx are present,
compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even
though the creditors and debtors are not aware of the
compensation.
Compensation of Following are Prohibited
1) Debts arising from a depositum (Art 1287);
2) Debts arising from the obligations of a depositary (Art 1287);
3) Debts arising from the obligations of a bailee in commodatum
(Art 1287);
4) Debts arising from a claim for future support due by
gratuitous title (Art 1287);
5) Debts arising in civil liability arising from a penal o ense (Art
1288);
6) Damages su ered by a partnership through the fault of a
partner vis-a-vis pro ts and bene ts the erring partner may
have earned for the partnership by his industry (Art 1794).
Judicial Compensation or Set-off
ART 1283. If one of the parties to a suit over an obligation has
a claim for damages against the other, the former may set it o
by proving his right to said damages and the amount thereof.
Effect of Assignment on Compensation of Debts (Art 1285)
1) If made with consent of debtor — Compensation
CANNOT be set up except if the right thereto is reserved.
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2) With knowledge but without consent or against the will of
debtor — compensation can be set up regarding debts
previous to the assignment.
3) Without knowledge of debtor — Debtor can set up
compensation as a defense for all debts maturing prior to his
knowledge of the assignment.
Garcia v. Lim Chiu Sing
A share of stock or the certi cate thereof is not an indebtedness to
the owner nor evidence of indebtedness and, therefore, it is not a
credit. Stockholders, as such, are not creditors of the corporation.
Therefore, Lim Chu Sing not being a creditor of the Mercantile Bank
of China, although the latter is a creditor of the former, there is no
sufficient ground to justify a compensation.
Union Bank v. DBP 2014
Since DBP’s assumed obligations to Union Bank for remittance of
the lease payments are contingent on the prior payment thereof by
[FW] to DBP, it cannot be said that both debts are due. Also, any
de ciency that DBP had to make up for the full satisfaction of the
assumed obligations “cannot be determined until after the
satisfaction of Foodmasters’ obligation to DBP.” In this regard, it
cannot be concluded that the same debt had already been liquidated,
and thereby became demandable.
Novation
ART 1291. Obligations may be modi ed by:
1) Changing their object or principal conditions;
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2) Substituting the person of the debtor;
3) Subrogating a third person in the rights of the
creditor.
Novation is understood as the substitution or change of an obligation
by another, which extinguishes or modi es the rst, either changing its
object or principal condition, or substituting another in place of the
debtor, or subrogating a third person in the right of the creditor.
Essential Requisites
1) The old obligation must be valid;
2) The intent to extinguish or modify the old obligation by a
substantial di erence;
3) The capacity and consent of all parties except in expromision.
4) The new obligation must be valid.
How Implied Novation Made — by making substantial changes
1) In the object or subject matter;
2) In the cause or consideration;
3) In the principal terms or conditions
a) If a debt subject to a condition is made an absolute one;
b) Reduction of the term or period;
c) When, without consent of some subscribers, the capital
stock of a corporation is increased.
Instances Where there was NO Extinctive Novation
1) When there are only slight alterations or modi cations;
2) When the new contract merely contains supplementary
agreement;
Reviewer
3) When additional interest is agreed upon;
4) When additional security is given;
5) A contract was entered into providing a method of payment;
6) When a guarantor also becomes a principal debtor;
7) When the creditor in the meantime refrains from suing the
debtor, or extends the term of payment;
8) When the place of payment is changed or there is a variation in
the amount of partial payments;
9) When a public instrument is executed to con rm a valid
contract.
Substitution of Debtor (Art 1293)
a) Expromision — the initiative comes from a third person; (Art
1294)
b) Delegacion — the initiative comes from the debtor. Here the
three parties must agree. (Art 1295)
Requisites for Expromision
1) Initiative must come from a third person who will be the new
debtor;
2) The new debtor and creditor must consent;
3) The old debtor must be excused or released from his
obligation.
Requisites for Delegacion
1) The initiative comes from the old debtor;
2) All parties concerned must consent or agree;
Effect of Insolvency of New Debtor
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1) In expromision — If the substitution is without the
knowledge or against the will of the debtor, the new debtor's
insolvency or non-ful llment of the obligations shall not give
rise to any liability on the part of the original debtor. (Art
1294)
2) In delegacion — shall not revive the action of the creditor
against the original obligor,
EXC: when said insolvency was already existing and of
public knowledge, OR known to the debtor,
when he delegated his debt. (Art 1295)
Subrogation
Extinctive subjective novation by change of creditor is the transfer to a
third person of all the rights appertaining to the creditor.
ART 1301. Conventional subrogation of a third person
requires the consent of the original parties and of the third
person.
ART 1302. It is presumed that there is legal subrogation:
1) When a creditor pays another creditor who is
preferred, even without the debtor's knowledge;
2) When a third person, not interested in the obligation,
pays with the express or tacit approval of the debtor;
3) When, even without the knowledge of the debtor, a
person interested in the ful llment of the obligation
pays, without prejudice to the e ects of confusion as
to the latter's share.
Babst v. CA
Due to the failure of BPI to register its objection to the take-over by
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DBP of ELISCON's assets, it is deemed to have consented to the
substitution of DBP for ELISCON as debtor. Hence, there was a
valid novation which resulted in the release of ELISCON from its
obligation to BPI, whose cause of action should be directed against
DBP as the new debtor.
Philippine Savings Bank v. Manalac, Jr.
There was no agreement to form a new contract by novating the
mortgage contracts of the Mañalacs and the Galicias. In accepting the
check, the bank only acceded to Mañalac’s instruction on whose loan
accounts the proceeds shall be applied but rejected the other
condition that the 4 parcels of land be released from mortgage.
Clearly, there is no mutual consent to replace the old mortgage
contract with a new obligation.
Neither can Mañalac be deemed substitute debtor within the
contemplation of Article 1293. Mañalac has not shown that they
were expressly taking the place of Galicia as debtor, or that the latter
were being released from their solidary obligation. Nor was it shown
that the obligation of the Galicias was being extinguished and
replaced.
Odiamar v. Valencia 2016
The fact that the creditor accepts payments from a third person, who
has assumed the obligation, will result merely in the addition of
debtors and not novation.
Reviewer
Ever Electrical Manufacturing, Inc. v.
2016
Philippine Bank of Communications
Under the terms of the agreement, Vicente is an additional person
who would ensure that the loan of Ever to PBCom would be paid.
Under the rules of novation, the mere act of adding another person
to be personally liable, who in this case is Vicente, did not
constitute novation since there was no agreement to release Ever
from its responsibility to PBCom.
Figuera v. Ang 2016
A person interested in the fulfilment of the obligation is one
who stands to be bene ted or injured in the enforcement of the
obligation. The Court agrees with Figuera that it became absolutely
necessary for her to pay the bills since Ang did not do so when the
obligation became due.
The consent or approval of the debtor is required only if a third
person who is not interested in the ful lment of the obligation pays
such. On the other hand, no such requirement exists in cases of
payment by a creditor to another creditor who is preferred, and by a
person interested in the ful lment of the obligation.
Therefore, legal subrogation took place despite the absence of
Ang's consent to Figuera's payment of the EIDC bills. Figuera is
now deemed as Ang's creditor by operation of law.
Liam v. UCPB 2016
The transaction between UCPB and PPGI was an assignment of
credit and not subrogation.
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The crucial distinction between assignment and subrogation actually
deals with the necessity of the consent of the debtor in the original
transaction. In an assignment of credit, the consent of the debtor is
not necessary. Only notice is required.
Meanwhile, subrogation requires an agreement among the three
parties concerned — the original creditor, the debtor, and the new
creditor. The MOA and the Deed of Sale/Assignment clearly state
that UCPB became an assignee of PPGI's outstanding receivables of
its condominium buyers.
SM Systems Corporation v. Camerino, et al. 2017
The compromise agreements executed by and between SMS and
four of the farmers are valid, thus, a novation of the judgment in the
redemption case.
SMS' obligation to allow redemption of the three parcels of land was
superseded by the terms of the compromise agreements executed
with the four farmers. Novation, thus, arose as the old obligation
became incompatible with the new.
B Contracts
1 General provisions
ART 1305. A contract is a meeting of minds between two
persons whereby one binds himself, with respect to the other,
to give something or to render some service.
1) Binding force — Has the force of law and neither of the
parties may without the consent of the other, renege
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therefrom. It should not be contrary to law, morals, good
customs, public order, or public policy. (Art 1306).
2) Requirements of a valid contract — Must be valid and
enforceable (Art 1403), with all the essential elements (Art
1318) and is not contrary to law, morals, good customs, public
order, and public policy. A void contract does not exist. A
contract may be valid but unenforceable (Arts 1317,
1403).
3) Where contract requires approval by the government —
Such contract becomes the law between the parties only when
approved and its validity must be sustained.
1. Principles
4) Compliance in good faith — No party is permitted to
change his mind or disavow or go back upon his own acts, or
proceed contrary thereto, to the prejudice of the other party.
5) Liability for breach of contract — Our law on contracts
recognizes the principle that actionable injury inheres in every
contractual breach (Arts 1170, 1191).
6) Unreasonable delay in demanding performance — May
render the contract ine ective where it does not provide for
the period within which performance may be demanded but
the parties did not contemplate that the same could be made
inde nitely.
7) Preservation of interest of promisee — The e ect of every
infraction is to create a new duty, that is, to make recompense
to the one who has been injured by the failure of another to
observe his contractual obligation unless he can show
extenuating circumstances.
Sps Pascual v. Ramos
Reviewer
The interest rate of 7% per month was voluntarily agreed upon by
RAMOS and the PASCUALs. There is nothing from the records
and, in fact, there is no allegation showing that petitioners were
victims of fraud when they entered into the agreement with
RAMOS. Neither is there a showing that in their contractual
relations with RAMOS, the PASCUALs were at a disadvantage on
account of their moral dependence, ignorance, mental weakness,
tender age or other handicap, which would entitle them to the
vigilant protection of the courts as mandated by Article 24 of the
Civil Code.
a) Freedom to Stipulate or Autonomy or Liberality — The
contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public
order, or public policy. (Art 1306)
b) Mutuality — The contract must bind both contracting
parties; its validity or compliance cannot be left to the will of
one of them. (Art 1308)
c) Relativity — Contracts take e ect only between the parties,
their assigns and heirs, except in case where the rights and
obligations arising from the contract are not transmissible by
their nature, or by stipulation or by provision of law. (Art
1311)
d) Consensuality — Contracts are perfected by mere consent
xxx (Art 1315)
e) Obligatory Force — xxx Parties are bound not only to the
ful llment of what has been expressly stipulated but also to all
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the consequences which, according to their nature, may be in
keeping with good faith, usage and law. (Art 1315)
Liberty or Autonomy of Contracts
Tee v. Tacloban Electric and Ice Plant Co.
Under the principles relating to the doctrine of public policy, as
applied to the law of contracts, courts of justice will not recognize or
uphold any transaction which, in its object, operation, or tendency, is
calculated to be prejudicial to the public welfare, to sound morality,
or to civic honesty. The test is whether the parties have
stipulated for something inhibited by the law or inimical to, or
inconsistent with, the public welfare.
Industrial Personnel and Management
2016
Services, Inc. v. De Vera, et al.
The general rule is that Philippine laws apply even to overseas
employment contracts. As an exception, the parties may agree that a
foreign law shall govern the employment contract subject to the
following requisites:
1. That it is expressly stipulated in the overseas employment
contract that a speci c foreign law shall govern;
2. That the foreign law invoked must be proven before the
courts pursuant to the Philippine rules on evidence;
3. That the foreign law stipulated in the overseas employment
contract must not be contrary to law, morals, good customs,
public order, or public policy of the Philippines; and
4. That the overseas employment contract must be processed
through the POEA.
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Further, these strict terms are pursuant to the jurisprudential
doctrine that "parties may not contract away applicable provisions of
law especially peremptory provisions dealing with matters heavily
impressed with public interest," such as laws relating to labor.
Mutuality of Contracts
Allied Banking Corporation v. CA
Whether a stipulation in a contract of lease to the effect that the
contract "may be renewed for a like term at the option of the lessee" is
void for being potestative or violative of the principle of mutuality of
contracts under Art. 1308.
NO. The fact that such option is binding only on the lessor and can
be exercised only by the lessee does not render it void for lack of
mutuality. After all, the lessor is free to give or not to give the option
to the lessee. Mutuality obtains in such a contract and equality exists
between the lessor and the lessee since they remain with the same
faculties in respect to ful llment.
PNB v. CA
We cannot countenance petitioner bank's posturing that the
escalation clause at bench gives it unbridled right to unilaterally
upwardly adjust the interest on private respondents' loan. That
would completely take away from private respondents the right to
assent to an important modi cation in their agreement, and would
negate the element of mutuality in contracts.
Buenaventura v. MBTC 2016
Reviewer
A contract of adhesion is so-called because its terms are prepared by
only one party while the other party merely a xes his signature
signifying his adhesion thereto. The terms and conditions of the
promissory notes involved herein, being clear and beyond doubt,
should then be enforced accordingly. It does not exempt the parties
from compliance with what was mutually agreed upon by them.
Relativity of Contracts
Exceptions
a) Where the rights and obligations arising from the contract are
not transmissible by their nature, or by stipulation or by
provision of law;
b) Stipulation pour autrui — if a contract should contain
some stipulation in favor of a third person;
c) Tortious interference — Where a third person induces
another to violate his contract, he shall be liable for damages to
the other contracting party; (Art 1314)
So Ping Bun v. CA laid out the elements of tortious
interference:
1) existence of a valid contract;
2) knowledge on the part of the third person of the
existence of contract; and
3) interference of the third person is without legal
justi cation or excuse. (see Excellent Essentials v.
Extra Excel 2018)
d) Where third persons may be adversely a ected by a contract
where they did not participate;
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e) Accion directa — Where the law authorizes the creditor to
sue on a contract entered into by his debtor.
Florentino v. Encarnacion
A stipulation pour autrui is a stipulation in favor of a third
person. The requisites are:
1) there must be a stipulation in favor of a third person.
2) the stipulation must be a PART, not the whole of the
contract.
3) the contracting parties must have clearly and deliberately
conferred a favor upon a third person, not a mere incidental
bene t or interest.
4) the third person must have communicated his acceptance to
the obligor before its revocation.
5) neither of the contracting parties bears the legal
representation or authorization of the third party.
Sps Pontigon, et al v. Heirs of Sanchez 2016
The principle of relativity of contracts dictates that contractual
agreements can only bind the parties who entered into them, and
cannot favor or prejudice third persons, even if he is aware of such
contract and has acted with knowledge thereof.
As a general rule, the heirs of the contracting parties are precluded
from denying the binding e ect of the valid agreement entered into
by their predecessors-in-interest. This is so because they are not
deemed "third persons" to the contract within the contemplation of
law. It is then immaterial that the Extrajudicial Settlement executed
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by Flaviana was not properly notarized for the said document to be
binding on her heirs.
Consensuality of Contracts
ABS-CBN v. CA, et al.
A quali ed acceptance, or one that involves a new proposal,
constitutes a counter-o er and is a rejection of the original o er.
Consequently, when something is desired which is not exactly what
is proposed in the o er, such acceptance is not su cient to generate
consent because any modi cation or variation from the terms of the
o er annuls the o er.
DBP v. Perez
There was no evidence showing that the respondents signed the new
promissory note through mistake, violence, intimidation, undue
in uence, or fraud. The respondents merely alleged that they were
forced to restructure their loan for fear of having their mortgaged
properties foreclosed. However, it is axiomatic that this would not
amount to vitiated consent. A threat to foreclose the mortgage
would NOT, per se, vitiate consent.
Archbishop Capalla v. Comelec 2012 En Banc
In this jurisdiction, the award of public contracts, through public
bidding, is a matter of public policy. The parties are, therefore, not at
full liberty to amend or modify the provisions of the contract bidded
upon. The three principles of public bidding are:
1) the o er to the public;
Reviewer
2) an opportunity for competition; and
3) a basis for the exact comparison of bids.
A winning bidder is not precluded from modifying or amending
certain provisions of the contract bidded upon. However, such
changes must not constitute substantial or material amendments that
would alter the basic parameters of the contract and would constitute
a denial to the other bidders of the opportunity to bid on the same
terms.
Obligatory Force of Contracts
Laguna Tayabas Bus v. Manabat
Where a person by his contract charges himself with an
obligation possible to be performed, he must perform it, unless
the performance is rendered impossible by the act of God, by the law,
or by the other party, it being the rule that in case the party desires to
3. Classi cation
be excused from the performance in the event of contingencies
arising, it is his duty to provide therefor in his contract.
2. Stages
a) preparation, conception, or generation, which is the period of
negotiation and bargaining, ending at the moment of
agreement of the parties;
b) perfection or birth of the contract, which is the moment
when the parties come to agree on the terms of the contract;
and
c) consummation or death, which is the ful llment or
performance of the terms agreed upon in the contract.
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Metro Rail Transit v. Gammon Philippines 2018
To determine when the contract was perfected, the acceptance of
the o er must be unquali ed, unconditional, and made known to
the o eror. Before knowing of the acceptance, the o eror may
withdraw the o er. Moreover, if the o eror imposes the manner of
acceptance to be done by the o eree, the o eree must accept it in that
manner for the contract to be binding. If the o eree accepts the o er
in a di erent manner, it is not e ective, but constitutes a
counter-o er, which the o eror may accept or reject.
In bidding contracts, this Court has ruled that the award of the
contract to the bidder is an acceptance of the bidder's o er. Its e ect
is to perfect a contract between the bidder and the contractor upon
notice of the award to the bidder. Thus, the award of a contract to a
bidder perfects the contract. Failure to sign the physical contract does
not affect the contract's existence.
a) According to perfection or formation
i) Consensual;
ii) Real — perfected by delivery.
1) Depositum;
2) Pledge;
3) Commodatum. (Art 1316)
iii) Formal or Solemn — where special formalities are
essential before perfection.
1) Donation inter vivos of real property requires
for its validity a public instrument.
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nominate contracts, and by the customs of the place.

b) According to cause or equivalence of the value of 2) Object certain which is the subject matter of the
(Art 1307)
prestations contract;
1) Do ut des — I give that you may give;
i) Onerous — there is an interchange of equivalent 3) Cause of the obligation which is established.
valuable consideration; 2) Do ut facias — I give that you may do;
Consent
ii) Gratuitous or lucrative — one party receives no 3) Facio ut des — I do that you may give;
equivalent prestation; Requisites of Consent
4) Facio ut facias — I do that you may do.
iii) Remunerative — one prestation is given for a service 1) There must be two or more parties;
f) According to the risk of fulfillment
or bene t that had been rendered previously. 2) The parties must be capable or capacitated;
i) Commutative — real ful llment is contemplated;
c) According to importance or dependence of one upon 3) There must be no vitiation of consent;
another ii) Aleatory — the ful llment is dependent upon
chance, e.g. insurance contract. 4) There must be no con ict between what was expressly
i) Principal — the contract may stand alone, e.g. sale, declared and what was really intended;
lease; g) According to the time of performance or fulfillment
5) The intent must be declared properly.
ii) Accessory — depends for its existence upon another i) Executed — obligations are all complied with;
Requisites for the Meeting of the Minds
contract, e.g. mortgage; ii) Executory — the prestations are to be complied with
at some future time. 1) An o er that must be certain; and
iii) Preparatory — not an end by itself but as a means
for future transactions or contracts, e.g. agency, h) According to subject matter — contracts involving 2) An acceptance that must be unquali ed and absolute.
partnership. Offer Ineffective
i) Things — e.g. sale;
d) According to the parties obligated ART 1323. An o er becomes ine ective upon the death, civil
ii) Rights or credits — e.g. usufruct, assignment of
i) Unilateral — only one party has an obligation, e.g. credits; interdiction, insanity, or insolvency of either party before
commodatum; acceptance is conveyed.
iii) Services — e.g. agency, lease of services, common
ii) Bilateral — both parties are required to render carriage. Option Contracts
reciprocal prestations.
2 Essential requisites ART 1324. When the o erer has allowed the o eree a certain
e) According to their name or designation period to accept, the o er may be withdrawn at any time
ART 1318. There is no contract unless the following requisites before acceptance by communicating such withdrawal, except
i) Nominate;
concur: when the option is founded upon a consideration, as something
ii) Innominate — shall be regulated by the stipulations paid or promised.
1) Consent of the contracting parties;
of the parties, by the provisions on Obligations and
Contracts, by the rules governing the most analogous

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An option is a preparatory contract in which one party grants to a) Generally, spouses cannot sell to each other (Art 1490), ART 1330. A contract where consent is given through
the other, for a xed period and under speci ed conditions, the power nor can they donate to each other (Art 134). Transactions mistake, violence, intimidation, undue in uence, or
to decide whether or not to enter into a principal contract. are VOID, but only those prejudiced can assail the validity fraud is VOIDABLE.
of the transaction.
It is a separate agreement distinct from the contract which the parties Requisites for MISTAKE to Vitiate Consent
may enter into upon the consummation of the option. (Carceller v. b) Insolvents before they are discharged cannot make
payments. 1) The error must be substantial regarding
CA)
c) Persons disquali ed because of fiduciary relationship. a) The object of the contract;
Option Money Earnest Money (Art 1491) b) The conditions which principally moved or induced
one of the parties;
Given as a distinct Part of purchase price
Yuviengco v. Dacuycuy
consideration c) Identity or quali cations if such were the principal
Yao King Ong's telegram simply says "we agree to buy property". cause.
Applies to a sale not yet Given only where there is
It does not necessarily connote acceptance of the price but instead 2) The error must be excusable and not caused by negligence;
perfected already a sale
suggests that the details were to be subject of negotiation. Instead of
3) The error must be a mistake of fact, and not of law.
Not required to buy When given, buyer is bound to "absolutely" accepting the "certain" o er - if there was one - of the
pay the balance petitioners, respondents still insisted on further negotiation of details. Requisites for MUTUAL ERROR to Vitiate Consent
1) There must be mutual error;
Persons Incapacitated to Give Consent (Art 1327) Parties and Capacity
2) The error must refer to the legal e ect of the agreement;
a) Unemancipated minors; Frias v. Esquivel
3) The real purpose of the parties is frustrated.
b) Insane or demented persons, unless entered into during lucid
Inasmuch as Perpetua P. Zaragoza does not appear to have been Requisites for VIOLENCE to Vitiate Consent
intervals (Art 1328);
appointed a judicial guardian of her minor children with the power
c) Deaf-mutes who do not know how to write. to sell their property, the aforesaid deed of conveyance is, therefore, 1) Employment of serious or irresistible force;

Persons Specially Disqualified
1. Here, the transaction is VOID because the right itself is
restricted.
2. However, if there is mere legal incapacity, such as when only
the exercise of the right is restricted, then the transaction is
merely VOIDABLE.
Vices of Consent (Arts 1330-1344)
unenforceable. 2) It must have been the reason why the contract was entered
into.
With regard to Ricardo Esquivel, the CA found him to be insane at
the time of the execution of the deed of conveyance. This nding Requisites for INTIMIDATION to Vitiate Consent
shows that the said deed is VOID as to him for there was lack of
1) Reasonable and well-grounded fear
authority on the part of his mother Perpetua to sell his portion, she
2) Of an imminent and grave evil
not having been appointed judicial guardian of said Ricardo.
3) Upon his person, property, or upon the person or property of
his spouse, descendants or ascendants

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 Civil Law and Practical Exercises
4) It must have been the reason why the contract was entered into
5) The threat must be of an unjust act, an actionable wrong.
Requisites for UNDUE INFLUENCE to Vitiate Consent
1) Improper advantage;
2) Power over the will of another;
3) Deprivation of the latter’s will of a reasonable freedom of
choice.
Requisites of Dolo Causante under Art 1338
1) The fraud must be material and serious that it really induced
the consent. (Art 1344)
2) The fraud must have been employed by only one of the parties.
3) There must be a deliberate intent to deceive or to induce. (Art
1343)
4) The other party must have relied on the untrue statement and
must himself not be guilty of negligence in ascertaining the
truth.
Failure to Disclose Facts
ART 1339. Failure to disclose facts, when there is a duty to
reveal them, as when the parties are bound by con dential
relations, constitutes fraud.
Caveat Emptor
ART 1340. The usual exaggerations in trade, when the other
party had an opportunity to know the facts, are NOT in
themselves fraudulent.
Mere Expression of an Opinion
Reviewer for the 2022 Bar
ART 1341. A mere expression of an opinion does not signify prudent person into error; that which cannot deceive a prudent
fraud, unless made by an expert and the other party has person cannot be a ground for nullity.
relied on the former's special knowledge.
Simulation of Contracts (Arts 1345-1346)
Misrepresentation
It is the process of intentionally deceiving others by producing the
ART 1342. Misrepresentation by a third person does not appearance of a contract that really does not exist (absolute) or
vitiate consent, unless such misrepresentation has created which is di erent from the true agreement (relative).
substantial mistake and the same is mutual.
Requisites for Simulation
ART 1343. Misrepresentation made in good faith is not
1) An outward declaration of will different from the will of the
fraudulent but may constitute error.
parties;
Requisites for FRAUD to Vitiate Consent
2) The false appearance must have been intended by mutual
1) The fraud must be serious; agreement;
2) The parties must NOT be in pari delicto. 3) The purpose is to deceive third persons.
Kinds of Simulated Contracts
Tankeh v. DBP 2013
a) Absolute — parties do not intend to be bound; VOID
There are two types of fraud contemplated in the performance of
b) Relative — parties conceal their true agreement. They are
contracts: dolo incidente or incidental fraud and dolo causante or
then bound to the real or true agreement except
fraud serious enough to render a contract voidable.
i) If the contract should prejudice third persons; or
In order to constitute fraud that provides basis to annul contracts, it
must ful ll two conditions. ii) If the purpose is contrary to law, morals, good
customs, public order, or public policy.
1. First, the fraud must be dolo causante or it must be fraud
in obtaining the consent of the party.
Sps Ladanga v. CA
2. Second, this fraud must be proven by clear and
A contract of sale is void and produces no e ect whatsoever where
convincing evidence.
the price, which appears therein as paid, has in fact never been paid
The misrepresentation constituting the fraud must be established by by the purchaser to the vendor. Such a sale is inexistent and cannot
full, clear, and convincing evidence, and not merely by a be considered consummated.
preponderance thereof. The deceit must be serious. The fraud is
serious when it is su cient to impress, or to lead an ordinarily
By RGL 120 of 245