Oblicon Notes Finals 3 3

JAN.
28, 2014 it was not made in a public document), is there a valid

condonation?
CONDONATION – one of the ways of extinguishing obligations. o NO. They must always comply with the requirements.
o Can that be deemed as implied condonation, then?
Even at the time of Jesus, there is already such thing: forgive us NO. Otherwise, if every time that happens, that is
tantamount to circumventing the law.
our debts.
As a matter of fact, according to JURADO,
It is basically a gratuitous act motivated by feelings of liberality IMPLIED CONDONATIONS are found in Art.
where the creditor simple forgives and does not give anything in 1271 to 1274.
return.
The law requires that it must also be ACCEPTED.
o BASIS: Nobody can force you to accept their generosity.
o It is to protect and enhance human dignity. NOTE: when the law speaks of PRIVATE DOCUMENTS.
Why does the law limit it to private documents?

EXPRESS CONDONATION IMPLIED CONDONATION o If it is public (e.g. when it is notarized), there will definitely
be many copies (at least 4).
o The notary will have two copies, one of which will be
Must comply with the formalities ART. 1271, par. 1: if the creditor
forwarded to courts, then to the National Archives.
(Art 748 to 749; under the law on voluntarily delivers the private
donations. document to the creditor, o The possession by the debtor of a copy of the public
PRESUMPTION: IMPLIED document will not have the same effect intended by the
condonation. law, as compared to possession of a private document.
WHY? Chances are, the public document is not the only
copy.
MOVABLE / PERSONAL ART. 1272: whenever the private The duplicate of a public document: does not
document in which the debt
mean much.
1. May be done ORALLY / appears is found in the possession
VERBALLY; simultaneous of the debtor, PRESUMPTION: the In effect, the creditor is giving up his most patent weapon.
with delivery. creditor VOLUNTARILY delivered It is more difficult to prove in another way.
- Once it is condoned, you it to him. Supposing that the private document has copies (carbon copy).
need not have to deliver Which one will produce the presumption?
the thing. The debtor is - Only prima facie evidences; o The original one (the top-most page).
relieved. can be rebutted by contrary
2. Must be in a WRITTEN evidence.
PRIVATE DOCUMENT if the
TRANS-PACIFIC INDUSTRIAL SUPPLIES VS. CA
thing is higher than P5,000.
- It is the original-original which has to be surrendered and be
found on the debtor’s possession to produce the assumption.
REAL PROPERTY: always needs If A owes B P10,000 and B
to be in a PUBLIC DOCUMENT. executed a promissory note in
- The land might be small and which the debt appears in favour
in a remote brgy. Regardless of A, and the promissory note is
of its value, as long as real later found on B’s possession, the ART. 1271, par. 2: INOFFICIOUS DONATIONS
property is involved. presumption that A voluntarily
- Both for the CONDONATION delivered it to B rises. The debtor and his heirs may uphold it by proving that the
and the ACCEPTANCE: can delivery of the document was made in virtue of payment of
be in the same document or the debt.
in a separate public
document.
- The donor must be
SOME COMMENTATORS SIR (DEAN NAVARRO)
NOTIFIED in an authentic
form; must be NOTED in both
of the INSTRUMENTS.
Something is wrong with this. The It has no immoral connotation. It is
law is teaching the debtor to lie. the law itself which establishes the
function***
A obliged B to deliver his pen to A. Can A verbally condone B’s

obligation?
***Supposing that the real reason why the debtor and his heirs have that
- YES. It is less than P5,000. private document is because in fact, the debtor has PAID.
- But if the pen is worth P13,000, then it must be IN WRITING.
- The acceptance must also be IN WRITING. Is it wrong to establish the truth? That should erase any ideas of
the provision being immoral.
INOFFICIOUS: condonation – donation → the creditor gives up
his rights.
If B has to deliver a real property to A and if A just wanted to condone

the obligation, what must he do? A owed B P1M and B condoned it, it’s like B just gave A P1M, and A
accepted it.
- A must execute the condonation in a public document and B
must accept it, as well.
- What if A and B did not comply with one of the requirements (e.g.
OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 1 | Bantay

Since condonation is just like a donation, it is subject to the REASON: you cannot sue yourself.
limitations of donations.
SYSTEM OF LEGITIME CHITTICK VS. CA
Part of a person’s estate that the law reserves for his compulsory - Spouses were suing each other and were survived by their
common children.
heirs.
- Since the Chittick children as heirs of respondent-creditor are
We are all compulsory heirs (of our parents). also the heirs of petitioner-debtor, the obligation sued upon had
A LEGITIMATE CHILD: cannot receive anything less than ½ of been extinguished by the merger in their persons of the character
his parent’s estate. of creditor and debtor of the same obligation (Art. 1275, Civil
o His parent can give the other half to other people but the Code).
first half is RESERVED to their compulsory heirs.
To protect the legitime → COLLATION: a way of protecting the
legitimes.
There is a possibility that A has a legitimate child, B, and for one ART. 1276
reason or another, A does not want to give him anything when he
Merger which takes place in the person of the principal
dies. So A gave all his properties to his brothers (through
debtor or creditor = benefits the guarantors.
donation).
Confusion which takes place in the person of any of the latter =
o To prevent that from happening: COLLATION will be
does not extinguish the obligation.
done.
o When A dies, the value of all of his current properties and
those he donated will be collated and will be considered
A owes B P12,000, guaranteed by G. Later on, A acquires the rights of B
part of his estate. = the obligation is extinguished.
1975 X 2005 - If G inherits A’s estate → the principal obligation will subsist.
F owed X P100,000 DEATH
and X returned the Gross estate:
promissory note to F: P200,000
CONDONED. DEBTS: P200,000
JAN. 30, 2014
SON
COMPENSATION
Will the SON still inherit anything despite his parent’s gross One of the modes of extinguishing obligations.
estate is equivalent to the latter’s debts? You weigh the two obligations simultaneously with the aim to
o YES. There is collation of all of the parent’s gratuitous extinguish them up to the concurrent amounts.
donations by adding it to his estate. A. TOTAL: when the two debts are equal.
o DONATION (P100,000) + NET ESTATE (0) = P100,000. B. PARTIAL: when the two debts are unequal.
P50,000 is the legitime of the SON.
P50,000 is the FREE PORTION.
A owes B P700 and B owes P500 → the two obligations will be
Thus, half the amount X condoned is
extinguished up to the concurrent amount.
INOFFICIOUS, and must be returned to the
compulsory heir of X. 1. The obligation of B to A is extinguished.
If F really paid → the SON cannot come after him. 2. The obligation of A to B remains: P200.
In determining WON a donation is inofficious, you will judge WON
it has exceeded the free portion.
o The extent it exceeds, it is inofficious.
LEGAL COMPENSATION: takes effect by operation of law.
ART. 1273 VOLUNTARY COMPENSATION: by agreement of the parties.
JUDICIALCOMPESATION: by judicial decree.
If the debt is secured by a guarantee or a mortgage, the
condonation of the principal debt shall extinguish the accessory LEGAL COMPENSATION
obligation.
Waiver of the latter shall leave the former in force. Can there be legal compensation if one of the parties is insane or
incapacitated?
ART. 1274 o Legal compensation does not require CONSENT.
o If there is no consent, it does not matter. The
PLEDGE: what you enter into a pawnshop. compensation takes effect by law.
PRESUMPTION: the accessory obligation of pledge has been o What is one of the parties is actually comatose, or in the
remitted when the thing pledged, after its delivery to the creditor, ICU? YES, there will still be legal compensation.
is found in the possession of the debtor, or of a third person who Takes place at the moment all the requirements are present,
owns the thing. whether or not the parties are aware of it, or not.
CONFUSION VOLUNTARY COMPENSATION
Automatically extinguishes the obligation at the merger of the By agreement.

characteristics of the debtor and the creditor.

Can there be voluntary compensation when one of the parties are Consequently, the debt is still not due (still no delay).
incapacitated? - When one of the debts is not yet due, then there is no legal
o NO; there will be no meeting of the minds. compensation (one of the requisites not present).
JUDICIAL COMPENSATION
Takes effect by judicial decree. 4. That they be liquidated and demandable;

When one of the parties has a claim for damages and the other 5. That over neither of them there be any retention or
sets it of by proving his right to said damages and the amount controversy, commenced by third persons and
thereof. communicated in due time to the debtor.
A sued B for P1M because B owes A. In B’s answer, B said A also owes Is A deposited P12,000 in the bank and later, he became indebted to the
him P1M of damages. bank for the same amount, can there be compensation?
- Whatever the court finds out → JUDICIAL COMPENSATION. - YES. WHY? 1st requisite present. When A deposited his money
to the bank, he is in fact lending money to it; A becomes the
bank’s creditor. Upon obtaining a loan from the bank, A became
the debtor of the bank.
- Why do you say that? You cannot get the very same notes that
FACULTATIVE COMPENSATION you deposited.
o That’s how they make money. When you deposit, the
By the will of only one party and the other one cannot choose interest is less than 3% but when they lend it, they have
compensation by any impediment. atrocious interest rates.
- CONTRACT OF LOAN.
Assume that A borrowed a bicycle from B. They happen to be neighbors

and B lent it to A. when a person borrows something, there is an implicit
understanding that the borrower should return it. B would not have lent A
the bicycle if B did not trust A. later on, they entered into another If A is a stockholder of San Miguel Corp. and A bought many cases of
transaction and B became obligated to deliver a bicycle of the same kind beer from the same corporation, can there be legal compensation?
to A. Can there be legal compensation?
- NO. Being a stockholder does not mean you are the corporation’s
- NO. Commodatum. creditor.
- Can B tell A that the two obligations will be deemed - It will be different if you are an INVESTOR, as you are part-
compensated? YES. FACULTATIVE compensation. owner, and can be considered a creditor.
- The same if for depositum (for safekeeping), otherwise, there will
be breach of trust and confidence.
FRANCIA VS. IAC

Obligations that cannot be compensated (ART. 1287 to 1288):
obligations arising from criminal offenses. - The government expropriated petitioner’s properties and the
o The offender cannot invoke compensation, but the injured petitioner failed to pay taxes. Can there be legal compensation?
o Paying taxes are duties to the government: NOT
party can.
contracts.
o The State cannot be deemed as a debtor to the petitioner.
ART. 1279
REQUISITES OF LEGAL COMPENSATION:

1. That each one of the obligors be bound principally, and
that he be at the same time a principal creditor of the Assume that:
other; P12,000
2. That both debts consist in a sum of money, or if the A B
things due are consumable, they be of the same kind,
and also of the same quality if the latter has been
P12,000
stated; P12,000
o Should have been FUNGIBLES: there can still be
compensation even when things are NOT C
consumables.
3. That the two debts be due; Does this mean all of the obligations are deemed compensated?
o Can there be compensation when one of the
- NO. None of them are mutually creditor and debtor of each other,
debts is not yet due? YES, as long as the parties
bound principally.
agreed to it.
Of by the party for which the benefit of the
period was constituted.
PNB MADECOR VS. UY
- One of the debts is payable by demand, and there was none.

o EXCEPTION: when he RESERVES his right to set up
P12,000 compensation.
A B PAR. 2: If the debtor was notified of the assignment without the
consent, he can set up compensation for the debts.
o Previous to the cession, but not to the subsequent ones.
P12,000 PAR. 3 (worst case scenario): when the debtor is not notified.
o All debts which became due before he had knowledge of
G the assignment.
Can there be legal compensation between B (creditor) and the G

(guarantor)? NO.
A B Jan. 07
P10,000
B A Feb. 11
P20,000
P12,000 A B Apr. 10
A B P5,000
P4,000 Let us assume that A assigned his credit to X and the assignment was
made on Mar. 07. How much can X collect from B?
P8,000
- There is already legal compensation upon the assignment
G (between the first and second transaction).
- SCENARIO NO. 1: B gave his consent to the assignment.
Assuming that A cannot be found, Can G set up legal compensation? o B cannot set up compensation. If the debtor gives his
consent, he waives the legal compensation which has
- YES. How much can B collect from G? NONE. taken place.
- ART. 1280: G can invoke what the B owes A, aside from what B o POINT: is he gives his consent without reserving =
owes to G. WAIVING.
o X can still collect: P20,000.
o If B consented to it but reserved his right: P10,000.
- SCENARIO 2: B was notified but he did NOT give his consent.
o B can set up by way of compensation.
RETENTION CONTROVERSY o X can collect P10,000 only.
- SCENARIO 3: no notification;; all debts before B’s knowledge, B
can set up compensation.
o If B only found out of the assignment on May 08, X can
The application of the credits of Refers to a case in which a third
only collect P5,000 from B.
one of the parties to the person has a claim to the creditor
satisfaction of the claims of a third (order; writ of attachment).
person.
FEB. 04, 2014

Must be communicated in due time.
NOVATION
Different from the other modes of extinguishing payment.

Instead of extinguishing the obligation, you create or substitute
P12,000 the old to a new one.
D C Jan. 7, 2014 o REAL NOVATION.
C D Jan. 28, 2014
Three ways of effecting novation:
P10,000
1. Changing the object or the principal conditions.
On Jan. 15, there was an order from the court (X vs. D) attaching D’s 2. Substituting of the debtor.
properties. Was the controversy communicated in due time? 3. Subrogating of a third person the rights of the creditor.
The REQUISITES of a valid novation.
- YES. It was before the second debt became due, thus, there was 1. EXISTING VALID OLD OBLIGATION
still no legal compensation.
If there is none, then there is nothing to novate.
But if X got the court order on Jan. 30, was the controversy
communicated in due time?
SPOUSES BAUTISTA VS. PILLAR DEVT.
- NO. There had already been legal compensation since Jan. 28,
2014. The court order was too late. - The first promissory note was cancelled by the express terms of
the second promissory note → validly novated.
- If the first PN was not valid, then the execution of the second one
does not constitute novation.
ART. 1285
Assignment of rights.
2. AGREEMENT OF THE PARTIES TO THE NEW OBLI
PAR. 1: debtor consented → he WAIVES his right and he cannot
Is it a requirement that all parties must agree?
set up compensation.
NO. Expromision: the debtor’s consent is not
necessary.

3. INTENT AND ACTUAL EXTINGUISHMENT OF THE
OLD OBLIGATION GARCIA VS. LLAMAS
4. VALID NEW OBLIGATION
Is it necessary that for there to be valid novation that there must - The promissory note and the check can stand together.
- There was no agreement between the parties that the check will
be an agreement? Generally, not ALL of the parties’ consents are substitute the promissory note/cash.
required. - NO NOVATION.
NOVATION BY SUSBSTITUTION OF THE DEBTOR (2nd type).
o EXPROMISION: effected with the consent of the creditor
at the instance of the new debtor even without the
knowledge or against the will of the old debtor.
o DELEGACION: effected with the consent of the creditor MERCANTILE INSURANCE CO. VS. CA
at the instance of the old debtor with the concurrence of
the new debtor. - The additional security does not operate to novate the first
security: no express stipulation.
EXPRESS: declared in unequivocal terms.
- There is no agreement that the first debtor shall be released from
IMPLIED: the old and the new obligation are incompatible with responsibility and the creditor can still enforce the obligation
each other on every point. against the original debtor.
o They cannot stand together. - NO NOVATION.
o Otherwise, there will be no novation.
WHEN THERE IS NOVATION WHEN THERE IS NO NOVATION YOUNG VS. CA
- Change in signatories does NOT constitute novation.

A has to deliver his car to B. A A and B agreed that A will deliver - Where the text of the two contracts will show that the only change
then said he will deliver a certain to B a car and B will pay him introduced in the second contract was the substitution by a
horse instead. P500,000. Instead, they agreed person with his wife as signatory, there was clearly no implied
later on that B will pay him novation for lack of an essential change in the object, cause, or
- CHANGE OF OBJECT. P400,000. principal conditions of the obligation.
- REMISSION (partial).
A and B agreed that A will deliver A is to pay B P1M within a year AJAX MARKETING VS. CA
to B a car and B will pay him from the date of their contract.
P500,000. Instead, they agreed They later decided that A can pay - A certain enterprise started out a partnership and changed its
later on that B will pay him within TWO years. names. It contracted certain obligations and those loans were
P700,000. consolidated and were restructured.
- EXTENTION OF TIME - NO novation.
- UPWARD CHANGE IN FOR PAYMENT.
CONSIDERATION. - PERIOD AFFECTS
PERFORMANCE.
Compare it with…
A is to pay B P1M within a year A has to build a two-storey building

from the date of their contract. for B according to certain plans
SPS. BAUTISTA VS. PILLAR DEVELOPMENT CORP.
They later decided that A needs to and specifications. Instead of 4
pay within SIX MONTHS. windows, B now wants A to build
- YES; there was novation in this case.
8.
- There was an EXPRESS stipulation that the first promissory note
- REDUCTION;
was being cancelled in lieu of the second one.
SUBSTANTIAL - SLIGHT ALTERATION
o There is certainly no doubt that there has been novation.
CHANGE IN TERMS IN THE CONS.
- NOT EXTINCTIVE; just
MODIFICATORY.
A has to pay B a certain amount of A owes B P100k and when the debt was about to be due, C offered to
money with 12% interest. The pay it for A and B said okay. C gave P10k as partial payment. Is there a
interest was increased to 14%. substitution of the debtor?
- ADDITIONAL - NO; A is still liable to B.

INTEREST DOES NOT o It was not expressly stated that A is being released from
CONSTITUTE NOV. the obligation.
- Absent any agreement that C (new debtor) will release B (old
debtor) from the obligation, then there is no substitution; the
A executed a promissory note to B original debtor’s obligation remains.
for P1M and later on, A gave him a o There must be an agreement for the release of old
check. debtor.
- C might just be deemed as a co-debtor, or a guarantor,
- PN and CHECK:
COMPATIBLE.

No valid old obligation → NOTHING TO NOVATE.
A owes B P100k. C (third person) and A went to B and they told B that C
will assume the debt while A will be released from the obligation. B
agrees. Is there a substitution of the debtor? OLD OBLIGATION NEW OBLIGATION RULE
- YES; delegacion.
- When the debt became due, C did not pay despite him having the Object: car. Object: herion. Old: SUBSISTS.
means. Can B run after A instead?
o NO. Not anymore. New: VOID.
- Would it make any difference when C was actually insolvent
which was already existing and known to A when the substitution
was made? Gambling loss Deliver a particular Old: VOID.
o YES, it would make a difference. (P100k). horse.
o ART. 1295: B can now run after A. NO NOVATION.
- GENERAL RULE: there is no revival of liability of the old debtor
in delegacion? NO.
- EXCEPTION (only in extremely restricted terms): in case of the Car, with debtor’s Horse, with the Old: voidable.
insolvency of the new debtor which was existing at the time of consent vitiated. debtor’s consent not
delegation and was of public knowledge or known to the old vitiated. NOVATION: new
debtor. obligation operates to
ratify / validate the
obligation.
A owes B P100k and C came to B. C told B that he will take A’s place Car, if it rains on Horse, nothing ART. 1299: new
and that C will pay B P100k instead. This is done with the knowledge Christmas Day mentioned about the obligation is subject to
and consent of A, and the initiative came from C. (suspensive condition (silent). the same conditions
condition) unless the contrary is
- Can B run after A upon non-payment of C? NO; ART. 1294. stipulated.
TOLENTINO JURADO Car, when it rains on Horse, when you If both NOT complied
Christmas Day. graduate with a with, NO NOVATION.
general average of
If the substitution is done with the 95.
It should have been “if it is in the knowledge and consent of the
initiative of the third person.” old debtor, then there would be
revival of the obligation. MUST BE MUST BE If compatible.
- FAULTY FULFILLED. FULFILLED.
CODIFICATION. - LITERAL
INTERPRETATION.
“NON-FULFILMENT” covers a DEEMED MUST BE If not compatible.
multitude of things → the EXTINGUISHED. SUSTAINED; latest
codifiers could not have intended expression of the will
the old debtor to be liable for of the parties.
many reasons, while for
delegacion, it’s only for the third
person’s insolvency.
SUBROGATION
PROFESSOR: NO REVIVAL.
EVER.
a. CONVENTIONAL: by agreement of the parties.
b. LEGAL: by operation of law.
CONVENTIONAL ASSIGNMENT OF RIGHTS

ART. 1296 SUBROGATION
GENERAL RULE: When the principal obligation is extinguished

Debtor’s consent is required. Debtor’s consent is not required.
in consequence of a novation, accessory obligations will also be
extinguished.
EXCEPTION: the accessory obligation may subsist only insofar Has the effect of extinguishing the Has the effect of transmitting the
as they may benefit third persons who did not give their consent. old obligation and gives rise to a rights of the creditor to another
WHEN NOT APPLICABLE: in case of the subrogation of the third new obligation. person without modifying or
person on the rights of the creditor. extinguishing the obligation.
o SUBROGATION (ART. 1303): the persons subrogated
the credit with all the rights either against the debtor or
Defects or vices in the original Defects or vices in the original
against third person obligation are cured. obligation are not cured.
ART. 1297
Effect arises from the moment of Arises from the moment the debtor
No valid new obligation → NO NOVATION. novation or subrogation. is notified of the cession.

A. ESSENTIAL ELEMENTS: present in all contracts.
Affords better protection because 1. COMMON: present in all: consent, object, cause.
of the necessity of the debtor’s 2. SPECIAL: present only in certain types or classes
consent. of contracts.
Delivery in real contracts.
Form in solemn contract.
ART 1302 3. EXTRAORDINARY: unique to a special contract.
Price in contract of sale.
LEGAL SUBROGATION: must not be presumed. Only present in that particular kind of
EXCEPTIONS: contract.
1. When a creditor pays another creditor who is B. NATURAL ELEMENTS: derived from the nature and
preferred, even without the debtor's knowledge; ordinarily accompanies the same.
o Warranties.
C. ACCIDENTAL ELEMENTS: when parties expressly
P12,000 (secured) provide for them.
D C o How do natural elements and accidental elements
differ from one another? What is their point of
P, 12,000 distinction? For accidental elements, they are only
P1,000 present upon agreement of the parties while for
B
natural ones, they are there, but the parties can
C is a preferred (mortgage) creditor. If B pays C P12,000, B will be do away without them.
subrogated with C’s right (including the security). CHARACTERISTICS
1. OBLIGATORY FORCE: must be complied by the parties.
- But the obligations remain distinct. The mortgage security only 2. MUTUALITY: based on the principle of equality.
applied to the P12,000 debt, not to the P1,000. 3. AUTONOMY: must not be contrary to law.
- If D will not pay P12,000, B can foreclose the mortgage. 4. RELATIVITY: takes effect only between contracting
parties, their assigns and heirs (PRINCIPLE OF
RELATIVITY).
2. When a third person, not interested in the obligation, o GENERALLY: third parties cannot produce any
pays with the express or tacit approval of the debtor; effects; they cannot sue on the basis of the
3. When, even without the knowledge of the debtor, a contract.
person interested in the fulfillment of the obligation o EXCEPTIONS: quasi-delict → liabilities of third
pays, without prejudice to the effects of confusion as to persons (e.g. driver; while the contract is only
the latter's share. between the passenger and the owner of the
vehicle/operator).
ART. 1304 5. ***CONSENSUALITY: while all contracts need consent,
not all of them are perfected upon consent.
o Some needs delivery to be made first.
P12,000 STAGES
D C 1. GENERATION: period of negotiation.
2. PERFECTION: parties come to agree.
For 2 instalments. 3. CONSUMMATION: fulfilment or performance.
G
ART. 1306: AUTONOMY
When the first instalment became due, D was nowhere to be found. G
then paid the first one. Parties are free to agree as long as it is not contrary to law,
morals, good customs, public policy and public order.
- G is now subrogated to the rights of C only as regards to the first 1. LAW: always have to take precedence.
instalment. 2. MORALS: universally admitted.
- When the second instalment became due, D only has P6,000 o More or less universal in acceptance.
with him. To whom will he pay?
o Example: to kill is something that is not universally
o C is a preferred creditor than G.
accepted.
o More limited.
3. GOOD CUSTOMS: brought about by repeated conduct.
FEB. 06, 2014 o Accepted and sanctioned by the practices of
community.
CONTRACTS 4. PUBLIC POLICY: broader that public order.
o Whatever has the tendency to be injurious to the
Can there be a contract where there is only one party? NO. No public good.
exceptions. o It is not necessary that there is actual injury as
o A person cannot contract with himself. long as there are clear evidences of the tendency
o AUTO-CONTRACTS: the person is just acting in of such alone.
representation and with the authorization of another.
o WHY NOT? One must always bound himself with respect
to another. SY SUAN VS. REGALA
ELEMENTS OF A CONTRACTS

- The company needed to import and it authorized somebody for - The restriction is NOT valid.
the application for a license with the Import Control Office for the - The restriction would have entailed the person leaving the
importation of industrial starch for candy manufacture. That country for it is too broad (“in the Philippines”).
somebody will follow up the application, with 10% commission.
- Against public policy? YES. There is a clear import: injurious to
the common good.
The agent will then do everything, good or bad, to secure
that application. ORTIGAS VS. FEATI BANK
- There is an implied reservation of the state’s exercise of police

power, which is the least limitable of the inherent powers of the
state.
LEAL VS. IAC - Mere contractual stipulations must yield.
- A sold B his land on the condition that B can only sell the land to
A at the same price.
- Contrary to public policy? YES. It vests a perpetual restriction to
ownership. TRIAS VS. ARANETA
- Property should be allowed to go around.
- There was no police power of the state involved.
- There was a restriction that no factories will be built; only
residential ones.
- Court: EASEMENT is a valid restriction.
YSMAEL & CO. VS. BARRETO
- Cases of silk were asked to be delivered by company, with each

case amounting to P2,500. It was stipulated in the bill of lading 5. PUBLIC ORDER
that the carrier shall not be liable for loss or damage from any
cause beyond an amount exceeding P300 for any single package
NOMINATE
of the cargo. Four cases got lost.
- Contrary to public policy? YES. “ANY CAUSE” can mean many
things, even the captains or crew members stealing those Those that have their own distinctive individuality and are
cargos. regulated by special provisions of law.
- REASON: we are an archipelago and during that time, the
principal form of transportation from one place to another is ART. 1307: INNOMINATE
through ships.
If the company’s policy will be allowed, nobody will ship Governed by agreement of the parties (stipulations), etc.
their goods anymore. 1. Do ut des
Commerce will grind to a halt and economy will suffer.
2. Do ut facias
3. Facio ut des
4. Facio ut facias
CUI VS. ARELLANO UNIVERSITY

PEREZ VS. POMAR
- A student has been a scholar of the university for 3 ½ semesters
and on his last semester, he wanted to transfer. The university - Involves the services of an interpreter.
then asked him to reimburse. - Facio ut des: I do that you may give.
- Is it contrary to public policy? YES.
Scholarships grants are awarded on the basis of merits of
the students and not just merely to entice good students.
ART. 1308: MUTUALITY
What is equitable for the parties.

o Restrictions to the exercise of trade are ALLOWED, as 1. Cannot be left to the will of one of the parties.
long as they are limited as to time and place, and is 2. When left to the will of a third person, it must be made
necessary for the protection of the other party. known to the parties.
3. Can be left to chances.
DEL CASTILLO VS. RICHMOND

RUSTAN PULP VS. IAC
- A drugstore hired a person and that person is restricted from
opening any drugstore within four miles from the municipality of - Involves the supply of raw materials.
Legaspi. It is to prevent the threat of competition. - NOT VALID for only one party (Rustan) will determine when the
- Contrary to public policy? NO. During that time, Legaspi was a delivery of the raw materials may start or may be stopped.
small community and having two drugstores in that place will
render drugstores not a viable enterprise.
LEASE CONTRACTS: for example, when a tenant claims that as

long as he will pay, he can stay.
o That’s not the case. Such violates the mutuality of
FERRAZZINI VS. GSELL
contracts.

CONTRACTS OF LOANS: in fixing the rates of interest. POUR AUTRUI (beneficial stipulation)
o Is it possible that there will be a stipulation that one party
can unilaterally increase the interest rates? NO. It is essential that the parties have CLEARLY and
o If there is a provision providing for escalation, then there DELIBERATELY conferred to the third person such favour.
must also be one for de-escalation. It must NOT be a mere or incidental benefit → insufficient.
o It cannot be left solely to the will of the LENDER.
o The weaker party must be protected from abuse.
UY VS. LEONARD
FLORENDO VS. CA - The surety guaranteed the contractor will fulfil its obligation to the
City of Manila, which is to provide the latter with crushed rocks.
- An employee secured a housing loan to her company. When she The stipulation included that the contractor must then faithfully
resigned, the company increased the interest rates. comply with the obligation and shall promptly make payments for
- NOT ALLOWED; unwarranted. its supplier of materials. Then the suppliers were not paid. Are
- The bank could have included such stipulation in the contract but the suppliers covered by the beneficial stipulation?
it did not, so it could not increase the rates now. o NO.
- Court: such is a mere incidental benefit.
o There was no intent to clearly and deliberately confer a
favour on the suppliers’ part.
- So why did the surety include such statement (shall promptly
There are some agreements that render mutuality ILLUSORY. make payments for its supplier of materials)?
o It is only by way of extreme caution because at that time,
it is not sure that the City of Manila can be held liable to
LIEBENOW VS. PHIL. VEGETABLE OIL CO. the materials supplied.
- One of the parties obliged itself to give a certain amount of bonus

that is to be determined by the Board of Directors.
Would it be possible to have a pour autrui stipulation when one of
the parties owed the other and a third person is used to pay such
debt? YES.
FEB. 13, 2014
ART. 1311: RELATIVITY OF CONTRACTS A is obliged to build B a building, and B will pay A P10M. A remembered
that he owed C P1M. So there was a stipulation that B will pay A P9M
RULE: a contract is binding only upon its contracting parties, their and C P1M.
assigns and heirs.
o It is only fair and reasonable that when someone is not a - Is that a beneficial stipulation in favour of C? YES.
party to the country, he need not be bound. o When-one-party-owes-a-third-person kind of beneficial
EXCEPTIONS: stipulation.
- What if A did not really owe C P1M but they still chose to give C
1. Where the contract contains astipulation in favor of a P1M, is that still a stipulation pour autrui? YES.
3rd person (stipulation pour autrui). o Gratuitous kind of beneficial stipulation.
2. Where the 3rd person comes in possession of the object - Can it be revoked? YES.
of a contract creating a real right (ART. 1312). o Provided there is mutual agreement between parties.
3. Where the contract is entered into in order to defraud a o Must be done before there is acceptance.
3rd person (ART. 1313) covered by topic on rescissible
contracts.
4. Where the 3rd person induces a contracting party to
violate his contract (ART. 1314).
KAUFFMAN VS. PNB
5. Contracts creating status (e.g. contract of marriage).
When two people get married, everyone else is - Plaintiff was not paid.
bound by their marriage. Someone cannot ask - There was a stipulation pour autrui for the benefit of Kauffman.
them to be married to another again. - There was NO revocation: there was no mutual agreement
6. Group contracts (e.g. Collective Bargaining Agreements). between Phil. Fiber and PNB.
Rights acquired are NOT transmissible (they are only in between o OR at the instance of the party making the exchange:
Phil. Fiber’s decision’s to revoke it for such stipulation
parties).
was made by it.
o Is a lease contract transmissible? YES, though it is not
personal.
o Let us assume that X Co. has a credit against A. X Co.
owns all of the shares of Y Co (its subsidiary). Can Y Co. EXCEPTION
maintain an action against A for collection? NO.
o Can a subsidiary company collect a debt owed by its
parent company? NO. UY VS. CA
Despite the subsidiary company’s shares are
owned by the parent company, the does not - Petitioners cannot be indemnified.
- The two agents negotiated with NHA in behalf of the owners of
entitle the former to collect on the latter’s behalf.
the land. Initially, NHA was supposed to buy 8 parcels of land,
GENERAL RULE: Even if a certain company’s but it realized 3 out of 8 of them are not suitable for development
shares are owned by another, it still has its (prone to landslides). NHA then talked to the owners directly to
independent character. allow them to buy just 5 out of 8 of the lands.
- Petitioners’ commission, as seller agents, will then be reduced

since only 5 parcels were sold. needs to be delivered
- Court: petitioners cannot maintain an action because they are not first.
parties to the contract.
o They were mere agents representing their own interest.
*A and B entered into a contract of loan with chattel mortgage on a

ART. 1312 certain vehicle on Dec. 01. The contract was notarized on Dec. 02, and it
was registered on Dec. 03.
Where the 3rd person comes in possession of the object of a
contract creating a real right. - The compliance of the registration is what constitutes perfection
of the contract.
A mortgaged to B his land as a security of his P1M debt. Then A sold the
land to C. Is C bound by the contract?
* ART. 1317
- YES. B has a REAL RIGHT over the property mortgaged and
such follows him. A contract entered into in the name of another by one who
has no authority or legal representation, or who has acted
beyond his powers, shall be UNENFORCEABLE.
However, in some SC cases, they are declared void.
ART. 1313
Where the contract is entered into in order to defraud a 3rd A entered a contract on B’s name.
person covered by topic on rescissible contracts.
- WHAT IT ACTUALLY MEANS: B had not consented.
ART. 1314 - There was absolutely no consent from B as he may not even be
aware of the contract.
o One essential requisite is lacking: VOID OR
Where the 3rd person induces a contracting party to violate his
INEXISTENT.
contract. - Chances are, B has not even benefited from such contract.
What is your source of obligation? QUASI-DELICT.
o REQUISITES:
1. Existence of a valid contract
2. Knowledge on the part of the 3rd person of the
existence of such contract. SEVILLA VS. SEVILLA
3. Interference of the 3rd person without legal
justification or excuse. - Deed of Extra-judicial Partition was void ab initio, and not merely
unenforceable.
- Court: there was no consent given to the execution of the deed,
and therefore, there is no contract to speak of.
There is an employment contract between a multinational company and - Felisa had no legal capacity to give consent to the Deed of
A where A has to go to Baghdad or to Kabul (dangerous places). B Partition at the time of its execution inasmuch as she was neither
advised A not to go and A did not. Can B be held liable by the company? the owner nor the authorized representative of respondent to
whom she previously transmitted ownership of her undivided
- NO. Everyone knows it is dangerous to go to those places. share.
But according to the Civil Code, those contracts as

A is a singer and he has a contract with B that A will perform exclusively
unenforceable.
on B’s restaurant (exclusive contract). C then asked A to perform on his
restaurant instead and A agreed. Is C liable?
- YES;; there is no legal justification of C’s action. ESCUETA VS. LIM
- C was principally and solely motivated to profit from A’s
performance. - The sale by Virginia to respondent is not binding.
- Petitioner Rubio did not authorize Virginia to transact business in
his behalf pertaining to the property.
o His acceptance and encashment of the check was not a
ratification of the contract of sale.
ART. 1315 ART. 1316

GOZUN VS. MERCADO
Contracts are REAL CONTRACTS: SOLEMN
- Contracts entered into in the name of another person by one who
perfected by mere delivery is required. CONTRACTS*
has been given no authority or legal representation or who has
consent.
acted beyond his powers are classified as UNAUTHORIZED
CONTRACTS and are declared UNENFORCEABLE, unless they
are ratified.
Commodatum: what A - A special power of attorney is necessary for an agent to, as in
borrowed from B

this case, borrow money. QUESTION: do they have a perfected contract? When?
- YES, on Jan. 04 (COGNITION THEORY).

- In accordance with the Civil Code.
FEB. 18, 2014 - Through the MANIFESTATION THEORY: Jan. 01
- Through the EXPEDITION THEORY: Jan. 02
- Through the REDEMPTION THEORY: Jan. 03
ART. 1318: COMMON ESSENTIAL REQUISITES OF A CONTRACT
1. Consent of the contracting parties;

2. Object certain which is the subject matter of the contract;
3. Cause of the obligation which is established. Let us assume that A sent B a letter offering his property to the latter for
P5M. B received the letter on Jan. 01, he mailed his reply accepting A’s
ART. 1319 offer on Jan. 02, and his letter was delivered to A’s residence on Jan. 03.
But during that time, even though A was at home, he was already
How is consent manifested? It must be manifested by the entertaining second thoughts about the sale of his property to B. A did
concurrence of the offer and the acceptance of the thing. not open B’s letter, and instead, A called his messenger and asked the
latter to mail his revocation.
o There must be a meeting of the offer and the acceptance
upon a thing. - Is there perfection? YES.
o There was a perfection of contract even if the offerer
withdrew his offer before his knowledge of the offeree’s
A wrote B a letter, stating that A is offering to sell to the latter his house reply.
and lot for P5M, cash. B replied by sending a letter, as well, stating that - REASON: Even if we adhere to the Cognition Theory, we also
he is “accepting the offer” and the he will buy it for P5M, but he will only follow the rule on CONSTRUCTIVE KNOWLEDGE.
pay P2.5M as down payment now, and pay the rest (P2.5M) via
instalment for a period of six months.
- Is there perfection of the contract? NO. Until when can an offeror withdraw his offer? As long as he still
- For there to be perfection, the terms of each party must meet on
does not have knowledge of the offeree’s acceptance.
every point.
o The acceptance must mirror the offer.
o There must be no variance.
A sent B a letter offering his property to the latter for P5M. B received the
letter on Jan. 01, he mailed his reply accepting A’s offer on Jan. 05 and it
was delivered to A’s residence on Jan. 10. In the meantime, on Jan. 08,
A sent B a letter stating his withdrawal of the offer, and A’s letter was
delivered on Jan. 12.
A told B that he is presently contemplating of selling his house for P5M to
B. B then wrote to A that he is accepting the latter’s offer.
- Is there perfection of the contract? NO.
- NOTE: a withdrawal of an offer is immediately effective. The
- Is there perfection? NONE, as there was really no offer.
offeree need not to have knowledge of the withdrawal for it to be
o A merely stated that he’s thinking about selling it.
effective.
- The offer must be CERTAIN.
o It does not even matter that the offeree has read the
offeror’s letter.
A wrote B a letter, stating that A is offering to sell to the latter his house Can an offeree withdraw his acceptance of the letter? YES, as
and lot for P5M, cash. B replied by sending a letter, as well, stating that
long as the offeror still has no knowledge of the former’s
he is “accepting the offer” and the he will buy it for P5M, but he will only
pay P2.5M as down payment now, pay the rest (P2.5M) via instalment acceptance.
for a period of six months, and the balance will be secured in a mortgage
of property.
- Is there perfection? NO. MANRESA TOLENTINO

- A then replied that he is agreeing to sell it for P5M, with P2.5M as
down payment, the other P2.5M payable through instalment for
six months, with a mortgage to secure the balance. The offeree cannot withdraw his The offeree can withdraw his offer.
o Is there perfection? Finally, YES. offer anymore.
o There is now a meeting on each and every point of the
terms.
The offeree knows that there is There is only one moment of
already meeting of the minds, and perfection of the contract: the
of the offer and acceptance. acceptance coming to the
knowledge of the offeror.
Let us assume that A sent B a letter offering his property to the latter for
P5M. B received the letter on Jan. 01, and he immediately decided that
he will accept A’s offer, so he wrote A a letter. There are two moments of BETTER VIEW: there is only one
perfection: moment of perfection of the
1. B mailed the letter on Jan. 02. contract and anytime before that,
2. The letter was delivered at A’s residence on Jan. 03, but A was in 1. When offeree signified his both the offeror and the offeree
Cebu during that time. acceptance. can be allowed to withdraw their
3. A returned to his residence on Jan. 04 and he read B’s letter. 2. When the offeror has offer and their acceptance,
knowledge of the respectively.

acceptance. - COURT: the evidence is clear that there is an agreement
between BPI and petitioner for the sale of the land for
P1,000/square meter.
- NOTE: this is a better decision as the evidence had been clear.
A sent B a letter offering B to sell him 100 bottles of a certain red wine at LIMKETKAI VS. CA RESOLUTION
P300/bottle. B accepted his offer and he said he was willing to buy 300
bottles. - The Court completely changed its stance: There was no evidence
of the agreement of the sale because the petitioner’s acceptance
- Is there perfection of the contract? YES. was QUALIFIED.
- AMPLIFIED ACCEPTANCE: there is perfection of the contract o Such counter-offer must be accepted by LIMKETKAI first.
as regards to the 100 bottles A offered. - There was NO perfected contract.
o There is only a counter-offer for the additional bottles.
- UNLESS B makes it clear that he is not willing to buy from A NOTE: in the meantime, before this case’s resolution, there had been
anything less than 300 bottles. changes in the court and to the justices per division.
o There is no meeting of the minds. Such is a mere
counter-offer that the offeror can accept or not.
TAN VS. PPI

ART 1322
- GENERAL RULE (Art. 1319): consent is manifested by the
concurrence of the offer and of the acceptance.
An offer may be made through an agent.
- Court: this rule does NOT apply when there are certain matters or
There is perfection when the acceptance was communicated with details (causal considerations) that must be concurred with, aside
the agent (a person who has been authorized). from the object agreed upon.
o The agreement must be to all points.
NOTE: an agent is different from a MERE MESSENGER (e.g. mailman). - Without concurrence of all of those terms and conditions
The time of perfection of the contract during that time is when the offeror considered material by the parties beforehand, there is NO
himself comes to the knowledge of the acceptance of the offer. CONTRACT.
ART. 1321
The offeror may fix the time, place, and manner of acceptance.
MANILA METAL CORP. VS. PNB
o All of which must be complied with.
- There was NO perfection of the contract.
- The acceptance must mirror the offer.
A offered to B his house and lot for P5M cash, and if B decides to buy it, - If one of the parties involved is a corporation, its agreement must
he must provide a written acceptance and such must reach A before involve the concurrence of its board of directors, or through a
noon of Feb. 14, 2014. validly authorized agent.
- The letter is delivered on Feb. 15, is there perfection? NO.

- A has every right to make such determinations.
- It does not even matter if the messenger or the one carrying B’s FEB. 20, 2014
letter had an accident, which caused the delay of the delivery.
ART. 1324: CONSENT
In the cases decided by the SC, there has been some problems
COGNITION THEORY
concerning consent.
Is it the only theory we follow here? NO. o There has been a long and running debate between
MANIFESTATION THEORY: Code of Commerce. Justice Vitug and Panganiban concerning the law, with
respect to the application of the RIGHT OF FIRST
ART. 1323 REFUSAL.
Obviously, an OPTION CONTRACT is a contract, thus it must
An offer becomes ineffective upon the DEATH, CIVIL bear all the essential elements of a contract.
INTERDICTION, INSANITY, or INSOLVENCY of either party o If there is no cause and consideration then, such is NOT
before acceptance is conveyed. binding to the parties.
o It renders the offer INEFFECTIVE.
REASONS:
Let us assume that A and B entered into an agreement that A will sell his
1. DEATH: extinguishes personality and juridical capacity.
house and lot to B for P5M cash, and that B has 30 days to think about
One can no longer enter a contract. A’s offer.
2. CIVIL INTERDICTION: affects one’s authority to manage
his properties and could not execute acts inter vivos. - The following week, they met and A immediately told B, “let’s
But he can execute acts in mortis causa. forget about the offer.” Can A validly do such?
3. INSANITY: no valid consent. o YES. Although B was given an option to buy, such is NOT
BINDING because of the absence of a CAUSAL
4. INSOLVENCY: limits a person’s capacity to act.
CONSIDERATION.
- But if B gave A P10K, can A still validly withdraw his offer on that
same week?
LIMKETKAI VS. CA o NOT ANYMORE. If A does such, A will be held liable for

breach of the option contract.
o The withdrawal must not have been whimsically or A is renting B’s property and was granted the ROFR. After several years,
arbitrarily made, otherwise, such is a violation of Art. 19 of B sold the property for P1M to X, completely disregarding A’s ROFR.
the CC, under the tenets of civilization. Furthermore, X had knowledge that A had the ROFR to the property.
It is a liability for breach of common relations.
RIGHTS OF A according to ANG Rights of A according to GUZMAN

YU ASUNCION VS. CA VS. BONNEVIE and
In an OPTION CONTRACT, a person acquires a right. EQUATORIAL REALTY VS.
MAYFAIR THEATER
o Upon perfection, the right to acquire the property is
vested to the buyer, but not the actually property itself
(NOT YET). To recover damages because of Right to ask for the rescission of
o REQUIREMENT: must be supported by a causal the breach of principles of human the sale between the infractor and
consideration. relations. the third person.
- Can sue for the annulment of

Assuming that there is no causal consideration made, a week after A and the contract.
B’s agreement, B told A that B is buying the latter’s property. A then told
B that he decided not to sell the house and lot anymore.
Other than that, there is no other To recover damages.
- Can A validly withdraw such offer? juridical relation between A and B.
To compel the infractor to sell to

the injured party the property at
the same price the former sold it to
SANCHEZ VS. RIGOS: NOT ANYMORE.
the third person.
- At that point, there is already perfection and it does not matter at
all if there is a valid option contract or not.
o Such is no longer relevant.
- An offer becomes binding when it is ABSOLUTELY ACCEPTED. NOTE: in all of the cases of the SC, the third person is usually a buyer in
- Dean thinks this makes more sense, than applying PAR. 2, ART. bad faith.
1479 regarding an “accepted” unilateral promise to buy or sell
something. In EQUATORIAL REALTY VS. MAYFAIR THEATER, the
o Here, even if there has been acceptance, if the promise is petitioner was aware of the existence of the ROFR.
NOT supported by a consideration distinct from the price,
then it can still be validly withdrawn.
If the purchase was done in GOOD FAITH, then the innocent purchaser
for value is protected → NO RESCISSION.
ART. 1325
NATINO VS. IAC
Business advertisements of things for sale are not definite
- In this case, the Court invoked Art. 1479, instead of Art. 1324. offers, but mere invitations to make an offer.
In a newspaper, there was an advertisement of a house and lot for sale

→ these are not definite offers.
RIGHT OF FIRST REFUSAL OPTION AGREEMENT
- Simply an invitation.
They are not the same; they are different from each other.
ART. 1326
The price and other terms and The price is already fixed, as well
conditions are NOT YET fixed; will as the other terms and conditions. Same as for bidders.
only be known then the owner Everything is already determined.
There is usually a reservation written: “the company reserves the
indeed decides to sell the property.
right to reject.”
This is usually given to a tenant, The person granted the option has ***ART. 1327
incorporated in a lease contract the choice to exercise the option or
that “if the owner decides to sell not. There are persons who are not supposed to enter to contracts as
the property, he will first offer it to they are INCAPACITATED to give consent.
the tenant.” 1. UNEMANCIPATED MINORS: then the Family Code was
not yet effective.
The causal consideration Causal consideration REQUIRED. o Before, there were such things as unemancipated
supporting the lease contract will minors; those who are not yet free from parental
also support the ROFR contained authority.
in the agreement. o The marrying age before is 14 years old for
woman and 16 years old for men.

o There must be VOLUNTARY CONCESSION to
execute a document when the minor is at least 18 MATABUENA VS. CERVANTES
years old.
o No such thing like this anymore. - Reason and logic dictate, as long as marriage is the cornerstone
of a relationship.
o Persons who are under guardianship are not - The requirement attaches even in a common law relationship.
capacitated to enter contracts ON THEIR OWN. - This was during the time when the Family Code has not yet taken
effect.
- UNUSUAL CASE because the SC cited a decision of the CA. but
GENERAL RULE: A contract entered into by a minor is VOIDABLE. it wouldn’t come as a surprise as the ponente of that case was
JBL Reyes himself.
EXCEPTIONS:
1. When the minor misrepresents that he has already passed the

age of puberty → guilty of ACTIVE MISREPRESENTATION. 2. Insolvency.
o There are minors who can claim that they are already of
age as they look “mature” enough.
ART. 1330: VICES OF CONSENT: with any of these present, consent is
Of course, a 7-year-old boy can never pass as
someone who is of age. deemed vitiated → VOIDABLE.
SIA SUAN VS. ALCANTARA: dissenting opinion:
minors are incapacitated to enter into contracts as 1. MISTAKE: not every kind of mistake justifies annulment.
they lack the wisdom and maturity to protect o Mistake that would result to vitiated consent must refer to
themselves from abuse and bad faith. the SUBSTANCE of the thing.
Even if they have ACTIVELY
misrepresented themselves, it is logical to
make the contract VOIDABLE precisely A sold B a ring, saying that it is gold, when it turns out to be just made of
because minors would not be aware of brass.
such act, despite being done actively.
But this was NOT the majority opinion.
2. Necessaries: NOT VOIDABLE.
o As when a minor buys ice cream, or medicine.
3. Minors who are at least 7 years old are allowed to open a savings o MISTAKE OF ACCOUNT → remedy is CORRECTION,
account. NOT annulment.
o To encourage young people to save.
o Technically, they are entering a contract with the bank:
contract of LOAN with the bank as the borrower and the A sold his land to B for P10/square meter. The land is made up of 1,000
child as the creditor. square meters. They thought B only had to pay P1,000.
o Via a PD of Marcos.
- NOT VOIDABLE.
- The price can merely be corrected; from P1,000 to P10,000.
INCOMPETENT (SEC. 2 OF RULE 92 OF THE NEW RULES OF

COURT) INCLUDES:
o MISTAKE OF IDENTITY generally does NOT justify
1. Persons suffering from civil interdiction. annulment, unless the identity of the infractor is what
2. Hospitalized lepers. primarily moved the injured party to enter into a contract
3. Prodigals. with the former.
4. Deaf and dumb who are unable to read.
5. Who are of unsound mind.
6. *Spendthrifts. A entered into a contract of lease with B, and B said his name is C.
7. Those who by reason of age, weak mind or other similar cases,
- NOT voidable.
cannot, without aid from other, take care of themselves and - Mere mistake of name, which is not what principally moved A to
manage their property becoming thereby easy prey from deceit enter a contract with B.
and exploitation.
2. INSANE OR DEMENTED PERSONS AND DEAF-

MUTES WHO DO NOT KNOW HOW TO WRITE.
o When they enter a contract during a LUCID A hired B because B said he was a math teacher. A has a daughter and
INTERVAL → VALID. he wanted B to tutor her, when it turns out that he was not. He was
actually a convicted rapist.
“There are days of sunshine of the mind.”
o Different from an IMBECILE: can NEVER enter - Contract is VOIDABLE.
into contracts. - B’s misrepresentation certainly affected A in entering a contract
“It’s a perpetual eclipse of the mind.” with the former.
No lucid intervals.
REMEMBER: the difference between INCAPACITY and

PROHIBITION/DISQUALIFICATION to enter into contracts. o MISTAKE IN MOTIVES
Those PROHIBITED to enter in contractual relations:

1. HUSBAND AND WIFE, without the consent of their A bought an engagement ring to B, telling B that he will propose to his
girlfriend, C. when A popped the question, C rejected him. A is now suing
spouse (even those in a common law relationship).

for the annulment of sale between him and B. o There is ACTUAL use of force.
3. INTIMIDATION: generated through a reasonable and well-
- The contract is NOT voidable. grounded fear of an imminent and grave danger upon his person
or property, or upon the person or property of his spouse,
descendants or ascendants.
o The enumeration is NOT exclusive, as long as there is
o MISTAKE TO POSSIBLE PROFITS: differences in the
compulsion that resulted to a vitiated consent.
profits that one person hoped to derive.
o Determined by the physical condition and status of the
person threatened.
A bought 100 bags of cement from B for P100/bag, intending to sell the
cement bags in his hometown for P120/bag. It turns out that the price of
cement in A’s hometown is P90/bag. Castillejos threated Ticman that she will kill him by strangulation if he will
not sign their contract.
- A can NOT ask for the annulment of the contract.
- NOT tenuous considering the relative strengths of the parties.
- The woman cannot make good of such a threat that involves a lot
of physical strength.
o MISTAKE AS TO THE ACCIDENTAL QUALITIES OF
THE OBJECT.
PAR. 4: principle mostly used in Persons and Family Relations.
A went to the National Book Store and he saw a pocket book. On its
back, it says “very interesting.” He bought it and the book turns out to be
There are many cases in the SC of male law students, thinking their
very boring.
girlfriends were impregnable, yet they were impregnated. The girlfriends
then threatened the law students to support their children.
- It’s still a pocket book. NOT voidable.
- Not the kind of intimidation cited in the Civil Code; it is merely a
threat.
- Does NOT operate to vitiate consent.
A bought B’s residential lot in QC, thinking that Christine Reyes was
occupying the house beside it. It turns out that she does not.
NOTE: vitiated consent through intimidation is NOT THE SAME as
- A can NOT sue B.
reluctant consent.
ART. 1322 MARTINEZ VS. HONGKONG ANG SHANGHAI BANK
- Even if consent was reluctantly given, it is still consent just the

One of the social justice provisions in the Civil Code. same → NOT annullable.
When one of the parties is unable to read, or if the contract is - The husband was charged with embezzlement and fled the
in a language not understood by him, and mistake or fraud is country, leaving her poor wife behind. The creditors told the wife
alleged, the person enforcing the contract must show that the she had two options: first, for her to assign all her husband’s
terms thereof have been fully explained to the former. property to the creditors; second, the wife will never see her
husband again but she can keep all her husband’s properties.
ART. 1333 RELUCTANTLY, she agreed to do the first and they arrived at a
settlement.
- Is her consent vitiated? NO.
A sold a parcel of land to B in a distant barangay. A told B that he was
not sure exactly how big it is, but perhaps the property is for 100
hectares and that it produces around 100 sacks of rice. B bought it and it
turns out it’s only 70 hectares and produces 85 sacks of rice.
ART. 1336 ART. 1342
- NOT voidable.
- A informed B of the doubt, contingency or risk of the sale → he
said he was not exactly sure. VIOLENCE AND INTIMIDATION MISREPRESENTATION from third
from third persons. persons.
RESULT: vitiated consent; even if Does not generally vitiate consent.

ART. 1334
it came from a third person who is
not a party to the contract. EXCEPTION: when it resulted to
MUTUAL ERROR.
A and B entered into a contract of sale, when the contract was really one
of lease.
WHY ARE THEY DIFFERENT? THEY DIFFER FROM THE MATTER
OF AVAILABILITY OF CHOICE.
ART. 1335
NO CHOICE AT ALL (e.g. A and B Contracting party has a choice to
2. VIOLENCE: when serious or irresistible force is employed. are signing a contract, and out of believe the third person or not. He

nowhere, C appeared and held B has no one to blame but himself.
at gunpoint, asking him to sign the WOODHOUSE VS. HALILI
contract. Even if what C did was
something unexpected, even by A, - Halili is a business tycoon and he had a lot of business interests.
the result is vitiated consent of B). He was the biggest businessman during that time. He then
entered into an agreement with a soft drinks factory. Woodhouse
agreed and told Halili that he had the franchise of Mission Soft
Drinks. Because of that, Halili gave him 30% of the profits. It
ART. 1337 turns out that Woodhouse did not have the franchise.
- Fraud is merely INCIDENTAL.
- It is clear that Halili would still have entered a contract with
4. UNDUE INFLUENCE: power over the will of another.
Woodhouse even if the latter did not have Mission Soft Drinks’
o The will of a party was so overpowered that it echoes the franchise.
dictates of the will of the other. o He will just give him a LESSER share.
o BUT the law does not prohibit any form of influence.
“Man is by nature a social being.”
We interact in a daily basis with different people.
RESULT: constant interaction. We cannot avoid ART. 1339
being influenced by other people, and vice versa.
BUT, as long as we can still express our wills, Failure to disclose facts, when there is a duty to reveal them, as
when the parties are bound by confidential relations, constitutes
regardless of the influence of others, then our
consents are NOT vitiated. fraud.
o Difficult ground to annul → even in laws of succession,
there is only one case where one party was able to prove
A is an owner of a parcel of land in Mabalacat City. B learned from his
undue influence. sources that Henry See will be putting a big mall there, so B offered to
o Involves ACTUAL overpowering. buy A’s property. B did not tell A the news he had heard. Two weeks
later, Henry See announced that indeed, he will open up a big mall there.
ART. 1337 The price of land shot up from P100/square meter to P1,000/square
meter.
TOLENTINO: in a period of acute public want, in a land that is far
away from civilization where only ONE person has all the goods, - A can NOT sue for annulment.
- There is no duty for B to reveal the information to A.
he can then dictate the prices of the goods → UNDUE
- They are not bound by confidential relations.
INFLUENCE.
ART. 1338
5. FRAUD: NOT breach of obligation. A and B are partners and they have a land in Mabalacat City as one of
o Depending on its nature, it results to vitiated consent (AT their assets. A told B that since nothing is happening in their land in
THE TIME OF PERFECTION OF THE CONTRACT). Mabalacat City, he will just buy B out for P100/square meters. In reality,
A just learned that Henry See will be putting up a big mall there.
DOLO CAUSANTE DOLO INCIDENTE - B CAN sue for annulment.

- When two people are partners, they are bound by the highest
degree of trust and confidence.
- A has the DUTY to reveal such information to B.
RESULT: VOIDABLE contract. Indemnity of damages.
Not the principal moving force that

induced the party to enter into a ART. 1340
contract.
Intended to give a little elbow room for dealing talks.
There is a natural tendency to exaggerate products.
USUAL exaggeration of trade → NOT fraudulent.
EGUARAS VS. GREAT EASTERN LIFE ASSURANCE

Professor was in National Book Store (pen section) and he saw a pen on
- A fellow is applying for an insurance policy and he asked another display that a certain ink is manufactured by a certain American
person to undergo the medical check-up for him. company and that certain ink refill was used by astronauts → totoo nga.
- NOT a valid insurance; there is fraud on the part of the fellow.
ART. 1341
o JOKE: a company asked all of his employers to submit a
sample of their urine. A man used another person’s urine Expression of opinion NOT fraudulent.
and he passed the drug test. He was then called by the UNLESS that person is an EXPERT.
president of the company. The president said,
“congratulations! You are pregnant!”
Causal fraud. A went to B and he told B that the ring was made of gold with its stone
made up of diamond. After B bought it, B had it examined and it turns
out, it was NOT gold, but bronze and the stone was mere cut glass.

- Can A sue for annulment of the sale? YES. 2. ART. 130: there used to be a provision about future
o By MISTAKE, but not of fraud; unless A is a legitimate spouses donating to one another, but this is not replicated
jeweller. In that case, he is considered an EXPERT. in the Family Code anymore.
ART. 1349: OBJECT MUST BE DETERMINATE
ART. 1344
But what if the quantity is not specified? STILL VALID, as long it
is possible to determine the same, without the need of a new
Substantial error.
contract between the parties.
RURAL BANK OF CALOOCAN VS. CA

A and B entered into a contract obliging A to sell “all of the horses” in his
farm. Will that invalidate the contract?
- Both the bank and the old woman made a mistake.
- There was misrepresentation coming from a third person,
- NO, it is possible to determine the exact number of horses in A’s
resulting to mutual substantial error.
farm, even if such is not stated in the contract.
- HOW? Just count the horses.
- No need for a new contract.
ABSOLUTE SIMULATION RELATIVE SIMULATION
A and B entered into a contract that A cannot run for public office
VOID. BINDING. anymore and B will pay him P100K.
- The contract is NOT BINDING.

If the parties do not intend to be Happens when the real agreement - The object (prohibition to run for public office) is contrary to
bound by the contract at all. is hidden or concealed. PUBLIC POLICY.
“Pakana lang yan.” EXAMPLE: when a father gives his

property to his favourite son/
EXAMPLE: When a person is daughter through a deed of sale. CONTRACTS INVOLVING FUTURE INHERITANCE
running from his creditors and he
makes it appear that he sold his REAL CONTRACT: deed of
properties to other people. donation. BLAS VS. SANTOS: the contract here would seem like a contract of
future inheritance.
The parties do not intend to be The parties are still bound to the
bound by the contract of sale at all. REAL agreement as long as it is - A man married twice. His first wife was Marta, and they had 3
not prejudicial to a third person children. His second wife is Maxima and they did not have any
and is not contrary to law, etc. children. After the death of Marta, there was no liquidation of the
properties of the spouses. When the man was nearing his death,
he declared that all of his properties were conjugal properties of
the second marriage, giving Maxima ½ of all of his properties.
FEB. 27, 2014 The man’s children in the first marriage complained so Maxima
promised to them that she will covey half of all of the man’s
property to them. She then died without complying with her
OBJECT promise.
- Was there consideration? YES.
One of the three common essential elements of a contract. o WHAT: to prevent litigation.
All must be present for there to be a valid contract: CAUSE, o The compromise that she signed if to prevent the children
OBJECT, CONSENT. from questioning the will of the children’s father.
The WHAT of the contract; what the contract is all about. - NOT a contract involving future inheritance.
- RATIO FOR THE PROHIBITION: the properties are
Indeterminate since the heirs would have to wait for the person to
GENERAL RULE: It can be anything, as long as it can be LAWFULLY
die to know what exactly they will inherit.
APROPRIATED / transferred. - HERE, the properties are already DETERMINATE from the
moment of Marta’s death. From that point on, the children of the
EXCEPTION: contracts involving FUTURE INHERITANCE. first marriage has already inherited part of Marta’s share to the
conjugal partnership.
REASON: such is in the realm of expectancy. o The properties were already there.
The rights of the compulsory heirs of a certain person can only be o Here, the subject matter of the contract is already well-
defined properties existing at the time of the agreement.
fixed or transmitted after that person’s death.
Prior to that, the heirs so not know what they will inherit.
EXCEPTION TO THE EXCEPTION:
1. ART. 1080: a person partitioning his estate by an act inter CAUSA / CONSIDERATION
vivos, as long as such is not prejudicial to his compulsory
heirs. The WHY of the contract.
NOW: THIS IS THE ONLY EXCEPTION. The OBJECTIVE / JURIDICAL reason for entering into a
Pseudo-generis: as long as the causante lives, he contract.
can still chance his mind and the contents of his
will.

GENERAL RULE: MOTIVE ≠ CAUSA
CAUSA MOTIVE
MOTIVE: does not affect the legality of the contract.
OBJECTIVE REASON: remains PERSONAL REASON: depends

the same regardless of who the upon who the person entering a A sold three knives to B, C and D.
parties of the contract are. contract is.
a. To B, for P300, and B plans to use it in his kitchen.
b. To C, for P300, and C plans to use it in his garden.
c. To D, for P300, and D plans to use it to kill B.
ART. 1350
NOTE: all of the contracts of sale are VALID.
ONEROUS CONTRACT: a mere promise is considered a
sufficient consideration. - Motive of the parties do not affect a contract’s validity.
- Causa is the same:
1. SELLER: acquisition of the price.
2. BUYER: acquisition of the knife.
A promised to pay P500K to B and B is obliged to deliver his car to A in
return. B delivered his car to A, but A did not pay B. Can B sue for
annulment of the contract for lack of causa?
- NO, B cannot. EXCEPTION: MOTIVE = CAUSA

- There is a consideration: A’s promise, his honest to goodness
promise that he will pay B. When the motive PREDETERMINES the contract.
- REMEDY OF B: That is when the line between motive and causa disappears.
1. Rescission / resolution, with damages. The ILLICIT MOTIVE of one party becomes the causa,
2. Specific performance.
necessitating the need for the contract.
AFFECTS the validity/legality of the contract.
LIGUEZ VS. CA
LADANGA VS. CA 131 SCRA 361
- Conchita, who was a young lady (16 years old) during that time,
- It was simply made to appear that the old woman had received a
accepted a donation from a man, Lopez, with the consideration
certain amount of money, when actually, she did not.
that she will agree to be his mistress. After the death of Lopez,
- VOID: there was total absence of cause/consideration.
his heirs commenced an action against Conchita. Conchita
- There was no promise to pay at all.
averred that there is nothing wrong with the contract as it was of
- The seller was not even aware of the existence of that contract.
PURE BENEFICENCE.
- SC: Lopez would not have donated his property to her if she
hadn’t agreed to be his mistress.
o The contract was conditioned upon an illicit motive of
REMUNERATORY CONTRACT: Lopez.
- Conchita was a minor during that time, and minors occupy a
privileged position in law.
A has a doctor neighbour named B and B had been rendering free o Conchita and Lopez are not in pari delicto.
service to A and to A’s family without pay for years. A then gives B a - EQUITABLE SOLUTION: to allow her to retain the property to the
parcel of land. extent that is not prejudicial to Lopez’s compulsory heirs.
- Causa: B’s medical services to A and A’s family.
PHIL. BANKING CORP. VS. LUI SHE: CLASSIC CASE

PURE BENEFICENCE: cause → liberality/generosity.
- An old, rich woman (Doña Santos) owned a really big estate in
Manila. A Chinese was leasing a part of the estate and was
CONTRACT OF SALE OF DIAMOND RING operating a restaurant there. Doña Santos and the Chinese were
old friends. She did not have any known relatives during that time
and her only source of happiness is when the children of the
VENDOR VENDEE Chinese came to visit her and she taught them how to pray. She
then wanted to give her property to him, but foreigners are not
allowed to own properties here.
CAUSA Acquisition of the Acquisition of the o There was a constitutional obstacle.
PURCHASE PRICE. OBJECT. o She then leased her property to the Chinese and
extended it for maximum periods with an option to buy.
- A snoopy newspaperman learned about this and wrote a story
about it out of human interest about this rich woman with no
OBJECT RING: it is the starting point of all the
relatives. That was the beginning of the end.
(TOLENTINO) negotiations.
- Long lost relatives began to appear and they were successful
enough to place the old woman under guardianship. They then
- 2 different causes, but only 1 object of
proceeded to nullify those acts.
the obligation.
- PREVIOUS SC CASES: SC had invariably ruled that the Filipino
seller and the foreign buyer are in pari delicto.
o Both of them cannot recover the property.
o Who can recover? THE STATE ALONE.

- In this case, SC applied one of the exceptions of the in pari
delicto rule. FALSITY OF The cause is stated but The contract is void if it
o Merely prohibited → plaintiffs were allowed to recover the CAUSE not true. should not be proved that
property. they were founded upon
- CASTRO: if you look at the contracts individually, there is nothing another case which is
illegal about them. But if you look at them collectively, they true and lawful.
subvert the law by indirectly doing what is subverted: to
circumvent a constitutional prohibition.
o The ill motives of the parties tainted the cause of the LESION OR Shall not invalidate the
contract. INADEQUACY contract UNLESS:
o The Chinese had virtual ownership of the property. OF PRICE
1. There is fraud,
mistake or undue
influence
ACCESSORY OBLIGATIONS (annullable).
2. When the parties
intended a
Has the same causa as that of the principal.
donation or some
other contract.
A borrowed from a bank and asked B if he could use B’s property as

mortgage. B agreed. A was unable to pay the loan.
- Can B allege that there is no causal consideration of the

mortgage of his property by saying that he did not receive a CARANTES VS. CA
single centavo of the loaned amount? NO.
- There IS a consideration: The loan received by A. - After the death of Carantes, his children executed a deed of
assignment to their co-heir, Maximillo, with a consideration of
P1.00. Additionally, during the lifetime of the deceased father, he
had been saying that Maximillo is the rightful owner of the
property.
MORAL OBLIGATION - SC: it is not mere inadequacy of cause the will justify nullity.
- There is a consideration of P1.00.
- Of great legal import, as well: the admission of the late father.
FISHEL VS. ROBB o Valuable causal consideration.
o No basis for the declaration of nullity of the deed.
- The project did not push through and the organizer said that out
of sense of moral duty, he will give back the investments of the
investors.
o NOT a binding promise.
BERCERO VS. CAPITOL DEVELOPMENT CORP., GR. NO. 154765
- Respondent corporation is an owner of a property and leased it to

Nicolas Merchandising, Inc. for 10 years. RC Nicolas then
VILLAROEL VS. ESTRADA subleased it to Bercero. Respondent corporation then filed an
ejectment suit for non-payment of RC Nicolas. Pending litigation,
- VALID civil obligation: a person made a loan and subsequently respondent then leased the property to Bercero.
died. Her child said he will pay his mother’s loan instead, even - SC: the contract between Capitol and Bercero is VOID.
though prescription had already set it. o No causal consideration; inexistent.
- BINDING: the prescription of the civil obligation converted it to a o At that time, Capital did not have the right to lease it to
natural obligation. Bercero since the lease of Nicolas is still valid and
existing.
ARTS. 1352 to 1355

MAR. 04, 2014
EFFECT OF LACK OF CAUSE, UNLAWFUL CAUSE, FALSE CAUSE
AND LESION FORM OF CONTRACTS
We follow the SPIRITUAL SYSTEM as far as form of contracts is

CAUSE EFFECT concerned.
GENERAL RULE: contracts are binding no matter what form
they have.
LACK OF There is total lack or The contract confers no EXCEPTION: when the law specifies for another form for their
CAUSE absence of cause. right and produces no
VALIDITY, ENFORCEABILITY and CONVENIENCE.
legal effect.
- Justifies nullity.
A and B entered into a VERBAL contract of loan for P1,000.
ILLEGALITY The cause is contrary to The contract is null and - Is this a valid contract? YES.
OF CAUSE law, morals, good void.
customs, public order and
public policy.
MUST BE IN WRITING; OTHERWISE, NOT VALID:
1. Donations of personal property whose value exceeds five - Court: Art. 1358 does not affect the VALIDITY and the
hundred pesos. ENFORCEABILITY of contracts.
2. Sale of a piece of land or any interest therein through an agent →
SPA.
ART. 1359: REFORMATION

RECIO VS. AGUEDO
Presupposes a VALID CONTRACT.
- A certain parcel of land was inherited and owned by the heirs of Does NOT involve vitiation of the consent of either of the parties.
an old woman and one of the heirs sold it. The sale is only valid PROBLEM IT ADDRESSES: when the true intention of the
in so far as that heir’s share is concerned, without any proof of parties to a perfected and valid contract are not expressed in the
the following (the law is categorical):
instrument purporting to embody their agreement by reason of
1. The agent must be authorized in writing.
2. Special power of attorney. mistake, fraud, inequitable conduct or accident, one of the parties
- Sale is NOT valid as far as for the shares of the others are may ask for the reformation of the instrument so that such true
concerned. intention may be expressed.
o In other words, the written document does not embody
the parties’ true intent.
3. Agreement of payment of interest in contracts of loan.

4. Antichresis. A and B entered into a contract of sale, whereby A will sell Lot. No. 1 to
B for P500,000. B agreed. In the document, though, what was written
MUST BE REGISTERED: was Sale of Lot. No. 3.
- What is the proper remedy? REFORMATION, NOT annulment.

1. Chattel mortgage.
- What if the Lot. No. was correct, but the secretary erroneously
2. Sale of large cattles. typed $500,000, instead of P500,000? Is reformation still a proper
remedy?
MUST APPEAR IN A PUBLIC DOCUMENT: o YES. There was a prior meeting of the minds.
1. Donations of immovable properties.

2. Partnerships where immovable property or real rights are
contributed to the common fund.
What if A made a will and testament and when he died, there had been
ART. 1358 allegations that his will failed to reflect his true intentions.
- Can this be subject to REFORMATION? NO.

All other contracts where the amount involved exceeds five
hundred pesos must appear in writing, even a private one.
ART. 1366: WHEN THERE CAN BE NO REFORMATION

Suppose A loaned P1,000 from B, though such was NOT executed in a
public document.
1. Simple donations inter vivos wherein no condition is imposed.
- Is the contract of loan valid? YES. Enforceable? YES. 2. Wills.
- Why the law requires such: only for greater EFFICACY or 3. When the agreement is void.
CONVENIENCE.
INTERPRETATION OF CONTRACTS: things to remember:
1. WHEN THE LANGUAGE IS CLEAR: no room for interpretation.

The cession, repudiation or renunciation of hereditary rights or of o Only to implement or to enforce.
those of the conjugal partnership of gains → the contract will still 2. WHEN THERE ARE SOME APPARENT CONFLICT IN THE
be VALID despite not in a public document. WORDS AND THE INTENTION OF THE PARTIES: the intention
The non-compliance of a the requirement does NOT affect the of the parties will prevail.
validity of those contracts. 3. GUIDE OF ASCERTAINING INTENTION (for judges): through
contemporaneous and subsequent acts.
ART. 1357 4. The one who caused the ambiguity, the words will be interpreted
against him.
o CONTRACTS OF ADHESION: doubt is construed against
A and B entered into a contract which has already been perfected, but
the party who prepared it.
was not in a public document.
- The law allows one party to execute it in a public document. ART. 1378: when doubt is impossible to settle:
1. Doubt refers to circumstances of a GRATUITOUS CONTRACT:

the least transmission of rights and interest shall prevail.
2. Doubt refers to circumstances of an ONEROUS CONTRACT: the
DAUDEN-HERNAEZ VS. DE LOS ANGELES greatest reciprocity of interest.
- The actress’s professional fee of P14,700 remained unpaid,

though such agreement was not made into writing. CENTRAL PHILIPPINE UNIVERSITY VS. CA
- TCL dismissed her claims; invoked Art. 1358.

- Petitioner was not able to fulfil the condition for the donation. There must be PRIORITY OF CREDIT: for a creditor to be
defrauded due to the debtor’s alienation of his property, he must
be a creditor at that time already.
o If the creditor was not yet a creditor during that time, then
MAR. 06, 2014 he could not have been defrauded.
o EXISTENCE OF CREDIT.
RESCISSIBLE CONTRACTS
Earlier this semester, we took time to discuss Art. 1191 → A owes B P1M. A then sold his only property to C for P1M and C knew
speaks of rescission of reciprocal obligations. that A had an unpaid obligation to B, but C bought it just the same. Then
A squandered all of the proceeds.
RESOLUTION FOR BREACH OF RESCISSION BY REASON OF - Is B a defrauded creditor? Can he claim rescission? YES.
STIPULATION LESION OR DAMAGE o The intent to defraud him is clear → that was A’s only
property and he sold it.
o Will C, the third person, be protected? NO, he is in bad
PRINCIPAL ACTION; retaliatory SUBSIDIARY ACTION and faith. He knew A had an unpaid obligation and that was
action against the other party. involves partial resolution. his only property.
- Supposing that C then sold the property to D and D bought it in
good faith.
Requires mutual restitution: to return what the parties have received, o Can A ask for the rescission of the sale between C and
including the fruits and interest*** D? NO, D here is an innocent purchaser for value.
o REMEDY FOR A: to obtain damages from C.
- Does that arise when an obligation is rescinded in Art. 1191? ART. 1388, par. 2: If there are two or more
YES. alienations, the first acquirer shall be liable first,
and so on successively.
Not the first alienator, B.
o Why doesn’t the law mention the debtor (B)?
He is already presumed to be insolvent.
***The Supreme Court said in ONE CASE that there is no such
If he has money, then rescission will not even be
obligation.
a remedy available for the defrauded creditor.
That’s why it is a SUBSIDIARY REMEDY: it is
Do parties, after agreeing to RESCIND, have the obligation to only availed of when there is no other means for
return everything? Whatever the consequences of the rescission C to proceed.
depend on their AGREEMENT,
More recent cases: GRACE PARK ENGINEERING CO., INC VS.
MOHAMAD ALI DIMAPORO and LAPERAL VS. SOLID
HOMES
A is B’s creditor for P5M and A donated his only property to C, who was
in good faith.
LAPERAL VS. SOLID HOMES
- Can A recover the property? YES.
- Court applies Art. 1386 to a resolution of an obligation in Art. - If the transfer is GRATUITOUS, good faith will not protect the
1191. transferee.
- It said that as long as Art. 1191 says “rescission,” we will use the - REASON: the transferee never received anything.
same terminology and the same rules for Art. 1358.
- SAME OBLIGATION OF MUTUAL RESTITUTION.
INTENT IS ONLY IN THE MIND OF THE DEBTOR:
But there are circumstances showing fraudulent intent.

A is the guardian of B and A sold a parcel of land belonging to B worth ART. 1381: the intent to defraud is there.
P5M. A only sold it for P500K.
- What is the status of the contract? IT DEPENDS IF THE A owes B P5M. A new corporation was formed and A gave and invested
CONTRACT IS APPROVED BY THE COURT. his only property to it in exchange of the shares of stocks of the
a. If YES, then that sale is VALID. It cannot be rescinded, corporation worth P5M. After several months, the value of those shares
regardless of the actual damages. dropped to 50% of its original value.
The law has so much faith to our courts.
To ensure there is no prejudice to the ward or to - Can B sue for rescission of the investment on the ground of
the absentee. fraud? NO. There is no intent of the debtor to defraud the
b. If NOT approved by the court, it’s NOT RESCISSIBLE. creditor.
An UNENFORCEABLE CONTRACT. - Even if in consequence, there was an injury → it was an honest
There must be no acts of ownership for to goodness investment.
guardians, otherwise, they would be acting in o Not fraudulent.
excess or lack of authority.
INTENT IS IN THE MIND OF THE DEBTOR and one must rely to the
CONTRACTS ENTERED INTO IN FRAUD OF HIS CREDITORS presumptions (ART. 1387: PRESUMPTION OF FRAUD) to establish
such:

1. If the debtor did not reserve sufficient property to pay all of his
debts. - Lessor: HERMANOS → sold to SIKATUNA.
2. ONEROUS TITLE: when judgment has been rendered in any - Lessee: Guevara.
instance or some writ of attachment has been issued. - There was an option for the lessor to purchase the house of the
tenant within one year. If such is not exercised, then the tenant
o Does it need to be final? Or can it be in any instance? IN can buy the land. The lessor did not buy the house so the tenant
ANY INSTANCE, need not be final. tried buying the land. The landowner refused and the lessee filed
o What if it is not yet served? YES. All that the law requires a case. Meanwhile, the owner sold the property to Sikatuna and
is the issuance of the court. recorded the transfer in the registry. Guevara’s case was then
granted.
BADGES OF FRAUD - ISSUE: WON the rescission of the sale is proper.
- Court: NO. Sikatuna already owns the property.
o No rescission is possible if the property has already been
1. The fact of inadequate or fictitious cause or consideration of the
registered legally as that will make Sikatuna an acquirer
conveyance. in good faith.
2. Transfer by a debtor after suit has been begun and while it is o The mistake of Guevara is that it failed to annotate lis
pending against him. pendens to the title that will serve as notice to Sikatuna.
3. Sale on credit by an insolvent debtor.
4. Evidence of large indebtedness or complete insolvency.
5. Transfer of all or nearly all of debtor’s property by him, especially
when insolvent or greatly embarrassed financially.
6. Transfer between father and son, where others of the above HONRADO VS. MARCAYDA
circumstances are present.
- Third person purchased a parcel of land from Luisa Marcayda
although at the time the contract was executed, there was
already a judgment in favor of the plaintiff against the latter with
CABALIW VS. SADORRA regard to the property and a writ of attachment had already been
issued.
- Petitioner Cabaliw was the second wife of Benigno. During their - Court: there was no notice of lis pendens annotated in the title.
marriage, they bought 2 parcels of land. They had a daughter o Moreover, it was made with a consideration.
Soledad. Benigno abandoned his wife Cabaliw, thus the latter - The property was LEGALLY PASSED to the third person who did
filed an action in court for support. The Court ordered Benigno to not act in bad faith.
pay her P75 a month. However, Benigno did not pay and instead
sold their property to his son-in-law Soterro. The transaction was
done without Isidora’s consent. Prior to the sale, Soterro already
knew that there was a judgment rendered against his father-in-
***ART. 1383:
law but proceeded to buy the property anyway. When Cabaliw
found out, she instituted an action along with her daughter to
recover the properties. The action for rescission is subsidiary = no other legal means.
- The court ordered her to administer the conjugal property and WHO CAN SUE? PARTY.
she discovered that the lands were sold to her son-in-law o Their representatives.
(daughter of her husband on his first marriage). The husband o Their heirs: they can sue either as a representative of the
died and the Japanese came. The son-in-law then filled an decedent or sue in their own right due to deprivation of
affidavit claiming that the case has already been decided in his
their legitimes.
favour and caused the cancellation of the lis pendens. The wife
and her daughter then filed a case against the son-n-law and his o In the same position as defrauded creditors.
wife. o Their creditors.
- Court: the sale between the husband and his son-in-law While it is clear in this provision that the action for rescission is
simulated and fictitious. subsidiary, the rule on the subsidiary character should not be
o Did not uphold the rights of the purchaser; fraudulent. applied on the SALE OF THINGS ON LITIGATION → preserves
o Son-in-law knew about the judgment against Benigno but the REAL RIGHT.
proceeded to purchase the properties anyway.
- The sale is very questionable:
1. There was already an executed judgment of support
when the sale was made. A and B are litigating and A is in possession of the property under
2. There was a close relationship between the seller (father- litigation. Pending litigation and without any notice to the court, A sold it
in-law) to the buyer (son-in-law). to a third person who knew about the pending case. B then won the
case.
- Can A and the third person go to B and insist on just paying for
the value of the property, or can B insist on getting the property
7. Failure of the vendee to take exclusive possession of all the itself (rescission of the sale between A and C)? B can get the
property. property itself.
o He can insist of his REAL RIGHT over the property, and
PRESCRIPTIVE PERIOD: FOUR YEARS not just the value of it.
o Not merely subsidiary.
1. Action to claim rescission must be commenced within four years.
2. INCAPACITATED: from the termination of the former’s
incapacity.
3. ABSENTEE: from the time when the domicile of the absentee VOIDABLE CONTRACTS: types:
has been known.
1. Vitiated consent by mistake, violence, intimidation, undue
influence or fraud.
SIKATUNA VS. GUEVARA 2. ONE of the parties do not have the capacity to enter into a
contract (example: minors).
VALID until ANNULLED. A B (minor) A CANNOT sue for annulment of
FOUR YEARS PRESCRIPTION PERIOD the contract. Only B (minor) can.
A B (vitiated) C knew about it. C is not obliged to

ACTION DEFENSE
have the contract annulled.
Pakealam niya dun.
ONE VIEW Only applies here. Does not apply here.
You can raise the voidable character of the contract NOTE: The Supreme Court recognized AN EXCEPTION:
even AFTER FOUR YEARS.
If the heir’s rights are prejudiced and there was showing that the
action was detrimental to them → subsequently reiterated such in
PROFESSOR’S Applies here. many cases.
VIEW
An incapacitated person has FOUR YEARS to sue
for annulment after the attainment of his majority. If
TEVES VS. PEOPLE’S HOMESITE: settled rule already.
he sued for annulment, you cannot use minority as a
defense.
- Here was a person who applied for the housing award, and he
was entitled to it. A politician then intervened and the result was
the awarding of the property to another person.
- The person then sued the buyer and PHHC.
REGISTERED LAND - He is not a party to the contract between the buyer and PHHC,
but the SC ALLOWED HIM.
Registration is an operative act: it serves as notice to the whole - If a third person is prejudiced in his rights with respect to one of
world. the contracting parties, and can show detriment which would
o VOIDABLE CONTRACT → FOUR YEARS from the time positively result to him from the contract in which he has no
intervention.
of registration.
CARANTES VS. CA
ART. 1398
- Court: there is a consideration of P1.00 and the admission of the
other heirs that their late father had wanted the property to Consequence of annulment: MUTUAL RESTITUTION.
belong to Maximo. Restore to each other the things which have been the subject
- Mere inadequacy of causa does not render a contract void. matter of the contract.
- Moreover, the action has PRESCRBED: more than 4 years had SPECIAL RULE FOR INCPACITATED PERSONS (ART. 1399)
passed since the registration of the property in Maximo’s name. o GENERAL RULE: payment to incapacitated persons is
not valid.
o EXCEPTION: when the person has [1] kept and [2]
benefitted from it.
ART.1392: RATIFICATION
o The incapacitated person is not obliged to make any
restitution except insofar as he has been benefited by the
Voidable contracts can be RATIFIED and such has a
thing or price received by him.
RETROACTIVE effect (ART. 1396).
Because of this, an action for annulment will NOT prosper IF THE
Cleanses the contract from all its defects from the moment it was
PLAINTIFF IS NOT IN THE POSITION TO RETURN THE
constituted.
THINGS.
KINDS:
1. EXPRESSLY
2. IMPLIEDLY: if the party, with full knowledge of the fraud,
A and B entered into an agreement whereby A will deliver his car to B
execute an act which implies an intention to waive his and B will pay P500K, though B’s consent was vitiated. A then delivered
right. his car to B.
- B is entitled to sue for the annulment of the contract (B vs. A), but
A and B agreed that A will deliver his car and B will pay him P500K. But if he subsequently LOST THE CAR DUE TO HIS FAULT, he
A’s consent was vitiated; he was intimidated into agreeing. CANNOT (ART. 1401).
o If the defendant, A, lost the thing due to his fault, he
- If A sent a demand letter to B, then the contract is deemed should return the value of the thing and the interest from
RATIFIED. He then impliedly waived any of his intent to sue for the time it was lost (ART. 1400).
the annulment of the contract. - What if the car was lost due to caso fortuito? YES, he CAN SUE.
o The loss was not due to his fault.
o No obligation to pay the interest.
ART. 1397: WHO CAN SUE?
Only the persons obliged principally or subsidiary under the NOTE: Art. 1401 is reconciled with Art. 1399, in so far as he has
contract may sue for annulment. benefitted to the thing or price.
Only persons whose consent was vitiated can.

Par. 2: if the action is based on the incapacity, the loss of the might have possibly committed fraud.
thing shall not be an obstacle for the success of the action,
unless said loss took place at the fault of plaintiff.
o How can an incapacitated person be accused of fraud?
3. Both of the contracting parties do not possess the required legal
MAR. 11, 2014 capacity.
o When one of the parties ratifies such, then it becomes
UNENFORCEABLE CONTRACTS VOIDABLE.
Last time, we talked about RESCISSIBLE CONTRATCS. IMPORTANT: to always know what acts and contracts are covered by
Unenforceable contracts are more defective than rescissible the Statute of Frauds.
ones: in unenforceable contracts, one cannot maintain an action.
1. An agreement that by its terms is not to be performed within a
ART. 1403: THREE BASIC TYPES: year from the making thereof;
o REASON: the law assumes that the maximum limit of
1. Those entered into without or in excess of authority. human memory is one year.
o As early as Art. 1317, the Code has established such. o Chances are, after 7 months from the time you and
o In some cases, the SC held that they are void or another person agreed something, both of you will have a
inexistent because of that total absence of consent, different recollection of the agreement.
cause or object. o To prevent this, the contract must be written.
o In more recent cases, the SC’s decisions were more in o Human memory is inherently unreliable.
accord with the provision of Art. 1317 and Art. 1403 → o This is a reasonable provision based on human
UNENFORCEABLE. experience.
2. Those that do not comply with the statute of frauds: requires 2. A special promise to answer for the debt, default, or
certain contracts to be in writing and subscribed by the party miscarriage of another;
being held liable. o The promise must be COLLATERAL and not
o OTHERWISE, unenforceable. independent.
o PURPOSE: to prevent the commission of fraud, and not
to protect the commission of fraud.
o A note or memorandum will do, as long as it is signed. A borrowed P5M to B. C told B that C will guarantee A’s debt. A ended
up not paying B. Can B run after C?
Need not be in a single document.
Must contain all of the necessary details: price, - NO; the special promise to answer must be in writing.
description of the property, the names of the - If there is no written document evidencing such, B cannot run
parties. after C.
MORAL OF THE STORY: better write everything down and have the
A (seller) and B (buyer) entered into a contract of sale of land. In reality, parties sign it → provides ample protection.
there was a written contract but it was LOST.
- Is it possible to prove the existence of the contract? YES; through

ORAL EVIDENCE. o A promise to answer one’s OWN debt is NOT COVERED.
o But it must first be proven that there WAS a WRITTEN
CONTRACT, and that it is lost.
- If the court is satisfied with the evidence, then the other terms A borrowed P10M to B and since B trusted A, they did not have a written
and conditions of the contract may be proved. form of the contract. Can A invoke Statute of Frauds?
- NO; CONTRACT OF LOAN is NOT covered by the SOF.

- This is not a promise to pay another’s debt, but a promise to pay
o Only applies to EXECUTORY CONTRACTS: there must one’s own debt.
be no performance, other partial or absolute.
If there is, the contract becomes an EXECUTED
one.
3. An agreement made in consideration of marriage, other than a
mutual promise to marry;
o MUTUAL PROMISE TO MARRY: NOT covered by the
A (seller) and B (buyer) entered into a sale of land whereby C has made SOF.
a partial payment, though the contract was not made into writing. o Usually, they are not expected to be in writing.
o If one does not make good of his promise to marry
- You can prove that there has been partial payment through another, the other party can file a complaint on the basis
ORAL EVIDENCE.
of injury.
o From the testimony of a witness, and of the party himself.
o Need not be evidenced in a written document.
o Once you are able to do that, you can prove the other
terms of the contract. WASSMER VS. VELEZ
REASON WHY STATUTE OF FRAUDS IS ONLY APPLICABLE TO - It is not the breach of promise to marry that was being sanctioned
EXECUTORY CONTRACTS: the purpose of the Statute is to prevent but the manner it was committed.
fraud. If an injured party is not allowed to prove the partial payment
through oral evidence, then that protects the other party, the one who

4. An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos; LIMKETKAI VS. BPI
- A party who has cross-examined about the oral contract cannot

A and B agreed the delivery of a couple of items, one costing P300 and invoke SOF.
the other P400. - The party, before doing so, must make a clear reservation of their
right to invoke SOF.
- Is their agreement covered by the SOF? IT DEPENDS.
a. If the parties intent to have an INSEPARABLE contract,
then the TOTAL amount of the items must be calculated:
TOTAL → P700;; covered. VOID CONTRACTS
b. If not, then the aggregate amounts: P300 and P400 =
below than 500; not covered.
VOID INXISTENT
5. An agreement for the leasing for a longer period than one year, Contains all of the essential If one or all of the essential
or for the sale of real property or of an interest therein; requisites of a contract but one or elements are totally lacking or
o The agreement among CO-OWNERS for a part/precise some of those requisites are absent.
contrary to law.
location of the boundary: NOT covered by the SOF
because it does not involve a sale of property. Cause prohibited by law.
A, B and C entered into a verbal agreement regarding the partition of a The importance of the difference between the two is due to the IN PARI
parcel of land. DELICTO RULE, as such is only applicable to VOID CONTRACTS.
- Is it covered by the SOF? NO.
ART. 1409: CONTRACTS WHICH ARE INEXISTENT AND VOID AB

INITIO
o SC decisions: SOF is limited only to those contracts
enumerated. 1. Those whose cause, object or purpose is contrary to law,
o Promise to GIVE land for SERVICES PREVIOUSLY morals, good customs, public order or public policy;
rendered: NOT a sale of real property. 2. Those which are absolutely simulated or fictitious;
Not an executory contract: services had already 3. Those whose cause or object did not exist at the time of the
been rendered. transaction;
o Oral agreement to EXTEND THE LEASE of a property: o Not really accurate because you can have an object of a
COVERED. FUTURE THING.
The property must also be described, as well as o MORE ACCURATE: could not have come at the
the period of the lease. existence at the time of the perfection of the contracts.
All of the necessary details must be stated.
6. A representation as to the credit of a third person.
AGUINALDO VS. ESTEBAN
A borrowed money from B and B asked C if it’s a good idea to do so. C - There was this old illiterate man and his son and his son was
then said “yes, kahit P10M pa pautang mo sa kanya, kaya niyang being given money (50 cents) every day. Three years after, a
bayaran yan.” B then lent A P5M. T ended up not paying. contract of sale was executed.
- Court: the money being given on a daily basis came from the old
- Is C liable for the representations he made? NO; unless such man’s own property. Ginisa sa sariling mantika.
were made in writing. - There is NO valid contract: INEXISTENT due to the absolute
- When in writing, source of C’s liability: quasi-delict. lacking of CONSIDERATION.
4. Those whose object is outside the commerce of men;

INIGO VS. ESTATE OF MALOTO 5. Those which contemplate an impossible service;
6. Those where the intention of the parties relative to the principal
- There had been partial performance, thus, oral evidence may be object of the contract cannot be ascertained;
allowed to prove the existence of those partial payments, and
7. Those expressly prohibited or declared void by law.
then the terms of the contract.
REMEMBER THE RULES RE: VOID CONTRACTS:
HOW TO RATIFY AN UNENFORCEABLE CONTRACT: 1. IMPRESCRIPTIBLE, though sometimes laches may set it.
2. NOT SUSCEPTIBLE to RATIFICATION.
1. Failure to object t the representation of oral evidence to prove the 3. Generally, has NO LEGAL EFFECTS (1411-1414).
existence of such contracts. o EXECUTED CONTRACTS: the guilty party is bared from
2. Acceptance of the benefits under those contracts. recovering what he has given to the other party by reason
of the contract while the innocent party may demand for
the return of what he has given.

4. Generally covered by IN PARI DELICTO. - The court left them where they are.
o Bahala na kayo sa buhay niyo.
AZNAR VS. HEIRS OF AUGUSTO EXCEPTIONS:
- The sale was void due to the total absence of consent of the two 1. ART. 1413: payment of usurious interest.
owners. 2. ART. 1414: payment of money or delivery of property for an
- ISSUE: the case for declaration of nullity was filed some 30 years
illegal purpose.
after the purported sale.
- Court: NOT barred by laches precisely because the heirs were 3. ART. 1415: payment of money or delivery of property for made
not aware of the sale. by an incapacitated person.
o The only time they learned about it was when they were 4. ART. 1416: agreement or contract not illegal per se, but merely
already being evicted. prohibited by law.
- Art. 1410 is applicable:
PHIL. BANKING VS. LUI SHE: LANDMARK CASE.
5. The action or defense of nullity is IMPRESCRIPTIBLE. - To circumvent a constitutional prohibition: contract of lease,
extension, option to buy.
o Collectively, they reveal an evil motive.
CASTILLO VS. GALVAN - EXCEPTION: the Court did not leave them where they are.
- RATIO: instead of allowing a continuing violation of a
constitutional provision, the court nullified the contracts.
FRAUD IN SECURING ONE’S FRAUD IN SECURING ONE’S
CONSENT SIGNATURE
Voidable: with 4 years of Totally void; total absence of FRENZEL VS. CATITO
prescriptive period. consent → what happened in
the case at bar. - If a foreigner is invoking the constitutional provision: CANNOT BE
DONE.
- There, the foreigner bought a house, real estate and other
- FACTS: the property was sold for P500 only when its actual properties and named them all to Catito, but their relationship
value is P20K. eventually turned sour.
- The old man did not realize that it was a deed of sale. - Court: Sorry ka, you cannot recover. He cannot even be a
transient owner so he can sell the property immediately.
- Because of the principle of in pari delicto, the court will just leave
him be.
o Neither of the parties can maintain an action against one
LAKAS VS. ACAYLAR another.
- Public policy will not be enhanced if he will be allowed to get
- The deed of sale was thumb marked by an illiterate person, those properties back.
selling his land of 13 hectares for the price of P200. o Actually, public policy will be prejudiced.
- Even if the sale was made in the 1950s, P200 is still too
cheap.
HULST VS. PR BUILDERS, GR 156364, 09/03/07

GENERAL RULE: when the defect of a void contract consists in the
- Another case where the Court applied an exception of the in pari
illegality of the cause or object of the contract and both of the parties are
delicto rule.
at fault or in pari delicto, the law refuses them any remedy and leaves - Here, the foreigner got lucky.
them where they are: - A foreigner couple, both of them Dutch nationals, bought a
property in a certain townhouse project in Batangas for P3M. The
problem arose when the when the developer was not able to
RAMIREZ VS. RAMIREZ, GR 165088, 03/17/06: in pari delicto rule was complete the project on time. The spouses then filed for a
applied. rescission of the contract → THEY WON.
- The contract was rescinded and ordered the developer to refund
- A man had a daughter from a previous marriage. He filed a case the foreigner spouses of their partial payments.
against his daughter nullifying the sale of the deed of donation - There are many issues in this case, but according to the Court,
and the waiver of possessory rights, which were supposedly there is one issue that was never raised: the issue of ALIEN
executed by the man and his first wife. It turns out, the wife had ACQUISITION OF PF PROPERTIES AND LANDS in the
already died during the purported time they signed such. Philippines.
- SC: the obvious purpose of executing those documents is to o But the court still resolved it: ordinarily, when an alien
evade the payment of inheritance tax and notice of the estate. acquires a property in the Philippines, then such is not
- The daughter also forged the signature of her mother. valid, as that violates a constitutional provision. But the fat
- In pari delicto applies. of the matter is the contract here is a CONTRACT TO
- An old man cannot recover because there is an illegal causa or SELL, not a CONTRACT OF SALE.
motive here, that is to avoid payment of the inheritance taxes. o Before there is actual sale, the rescission had already
o The line between the motive and the causa disappears. happened.
- The act here is ILLEGAL (covered by Art. 1411). o Art. 1414 was applied. The parties were not in pari
o FORGERY is a criminal act so the old man cannot delicto: one who repudiates the agreement and demands
recover from the daughter. his money before the illegal act has taken place is entitled

to recover. Failure or neglect, for an unreasonable and unexplained length f
- The sale did not push through because of the action of the time, to do that which, by exercising due diligence, could or
foreigners: it’s like the Court put them out of harm’s way. should have been done earlier.
o They backed out in time. INORDINATE OR UNREASONABLE DELAY: it is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has
5. ART. 1417: payment of any amount in excess the maximum price abandoned it or declined to assert it.
of any article or commodity fixed by law.
ELEMENTS OF LACHES
6. ART. 1418: contract whereby a labourer undertakes to work
longer than the maximum number of hours fixed by law.
1. CONDUCT on the part of the defendant, or of one under whom
7. ART. 1419: contract whereby a labourer accepts a wage lower
he claims, giving rise to the situation of which complainant is
than the minimum wage fixed by law.
made and for which the complaint seeks a remedy.
2. DELAY in asserting the complainant’s rights, the complainant
NATURAL OBLIGATIONS
having had knowledge or notice of the defendant’s conduct and
having been afforded an opportunity to institute a suit.
What needs to be remembered here: once there is already
o Plaintiff had the opportunity to invoke his right, but he did
voluntary fulfilment of the obligor, then the obligee is authorized
not.
to retain what has been delivered or rendered by reason thereof.
3. LACK of knowledge or notice on the part of the defendant that
Different from PURELY MORAL OBLIGATIONS.
the complaint would assert the right on which he bases his suit.
There must be a CIVIL OBLIGATION or a clear import of the
4. INJURY or prejudice to the defendant in the event relief is
testator to give up his property.
accorded to the complainant, or the suit is not held to be barred.
A’s father died and left a will, which states that his father wanted B, his NOTE: LACHES is not concerned on the number of years of delay,
friend, to have P100K, but the will did not comply with the correct form unlike with PRESCRIPTION.
and was thus defective.
- A then decided to give B P100K. After a week, can A change his RODIGUEZ VS. RODRIGUEZ
mind? NO, there is already VOLUNTARY FULFILLMENT.
- A woman was madly in love with her second husband. Her first
husband was Felipe Calderon (Malolos Constitution). She wanted
to give him so many properties, but there is a prohibition of
spouses from selling or donating to each other. So she sold her
A borrowed to B P1M, but it is not in written form. They litigated and A’s properties to her daughter of first marriage and then the latter
lawyer was better, so the action was dismissed and the decision became sold to her and her second husband those properties back.
final. Then A went to B and said, “biro lang” and paid you his debt. o Circumvents the legislative prohibition.
o The illegal motive becomes the causa.
- Can A change his mind? NO. ART. 1428. - Thereafter, the relationship between the woman and the children
of her second husband turned sour and she filed a case, alleging
that she was subject to duress upon signing the contract of sales
to her daughter.
o Court: that action has already prescribed.
- SC: what is clear is that the transfers were intended to
A borrowed P1M to B and the debt prescribed. But since A was being circumvent the law, which tainted the cause.
bothered by his conscience, he paid B. - PRINCIPLE TROUBLE SHE HAD TO BEAR: it took her 28 years
to invoke your rights; laches had already set in.
- Can A change his mind and get back what he has paid? NO, o In pari delicto also applies.
there has already been voluntary fulfilment. ART. 1424.
ESTOPPEL
LACAMEN VS. LARUAN
A condition or state by virtue of which an admission or - Laruan sold a parcel of land to Lacamen with a TCT in 1928.
representation is rendered conclusive upon the person making it Lacamen then introduced improvements to the property, and paid
and cannot be denied or disproved as against the person relying the corresponding taxes. In 1957, the heirs of Lacamen learned
thereon. that the heirs of the seller that the latter had secured a new title of
Hindi pwedeng pabago bago isip mo, like when you first say that the land.
- Court: the law is 90% possession.
the house you are selling is white, then claim it as black the next
- Lower court: held the sale as VOID, since the buyer of the land
day. was an Igorot, and such sale must have been approved by the
Director of the Bureau of Non-Christian Tribes.
KINDS OF ESTOPPEL - SC: the sale might have been void BUT IT WAS ALREADY OO
LATE: 30 years had already passed.
1. Estoppel in pais. o The heirs of the buyer will be prejudiced because they
2. Technical estoppel. had been in possession of the property for a long time.
3. Estoppel by deed.
ESTOPPEL BY LACHES

BUCTON VS. GABAR
- This is a story of in-law. Josefina was married to Sosimo Gabar

and Nicanora was married to Felix Bucton. Josefina bought from
the Villarinas a property. She then talked to Nicanora and told the
latter than they can both buy it (TOTAL: P3k; each of them had to
pay P1.5k). Nicanora agreed and paid her share. It was only later
that the VIllarins executed a deed of sale in favour of Josefina.
Meanwhile, Nicanors constructed a house of strong materials and
she is asking Josefina for the partition of the property. Pinatagal
ng pinatagal. After 10 years, Nicanora filed an action against
Josefina.
- CA: the action has prescribed; more than 10 years had passed
and the action for the reconveyance had already prescribed.
- SC: NO, Art. 1434 applies → Nicanora and her husband had
already become the owner of half of the property when the
VIllarins had executed the deed of sale in favour of Josefina.
o Automatic.
o Be operation of law, that title includes Nicanor as one of
the owners.
- In reality, this was an action for QUIETING of the title → as long
as the plaintiff is in possession of the land: IMPRESCRIPTIBLE.
o Such action can be filed if there is doubt or cloud; to quiet
the title.
o WHY? As long as you are in possession of the property,
you waive your right as long as no one is questioning it.
o CA erred.
ART. 1436
A is renting B’s apartment.
- A is estopped from claiming later on that he owns the property. If

he owns it, then he need not pay.
- The payment of rentals → BARRED BY ESTOPPEL.
END

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JAN.

28, 2014 it was not made in a public document), is there a valid

Why does the law limit it to private documents?

A obliged B to deliver his pen to A. Can A verbally condone B’s

If B has to deliver a real property to A and if A just wanted to condone

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 1 | Bantay

SYSTEM OF LEGITIME CHITTICK VS. CA

CONFUSION VOLUNTARY COMPENSATION

Automatically extinguishes the obligation at the merger of the By agreement.

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 2 | Bantay

Takes effect by judicial decree. 4. That they be liquidated and demandable;

Assume that A borrowed a bicycle from B. They happen to be neighbors

FRANCIA VS. IAC

REQUISITES OF LEGAL COMPENSATION:

PNB MADECOR VS. UY

- One of the debts is payable by demand, and there was none.

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 3 | Bantay

Can there be legal compensation between B (creditor) and the G

FEB. 04, 2014

Different from the other modes of extinguishing payment.

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 4 | Bantay

WHEN THERE IS NOVATION WHEN THERE IS NO NOVATION YOUNG VS. CA

- Change in signatories does NOT constitute novation.

A is to pay B P1M within a year A has to build a two-storey building

- ADDITIONAL - NO; A is still liable to B.

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 5 | Bantay

CONVENTIONAL ASSIGNMENT OF RIGHTS

GENERAL RULE: When the principal obligation is extinguished

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 6 | Bantay

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 7 | Bantay

- There is an implied reservation of the state’s exercise of police

- Cases of silk were asked to be delivered by company, with each

CUI VS. ARELLANO UNIVERSITY

What is equitable for the parties.

DEL CASTILLO VS. RICHMOND

LEASE CONTRACTS: for example, when a tenant claims that as

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 8 | Bantay

- One of the parties obliged itself to give a certain amount of bonus

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 9 | Bantay

*A and B entered into a contract of loan with chattel mortgage on a

But according to the Civil Code, those contracts as

ART. 1315 ART. 1316

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 10 | Bantay

- YES, on Jan. 04 (COGNITION THEORY).

1. Consent of the contracting parties;

- Is there perfection? NO. MANRESA TOLENTINO

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 11 | Bantay

TAN VS. PPI

- The letter is delivered on Feb. 15, is there perfection? NO.

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RIGHTS OF A according to ANG Rights of A according to GUZMAN

- Can sue for the annulment of

To compel the infractor to sell to

In a newspaper, there was an advertisement of a house and lot for sale

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1. When the minor misrepresents that he has already passed the

INCOMPETENT (SEC. 2 OF RULE 92 OF THE NEW RULES OF

2. INSANE OR DEMENTED PERSONS AND DEAF-

REMEMBER: the difference between INCAPACITY and

Those PROHIBITED to enter in contractual relations:

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 14 | Bantay

ART. 1322 MARTINEZ VS. HONGKONG ANG SHANGHAI BANK

- Even if consent was reluctantly given, it is still consent just the

RESULT: vitiated consent; even if Does not generally vitiate consent.

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DOLO CAUSANTE DOLO INCIDENTE - B CAN sue for annulment.