Kinds of simulation

2. Relative simulation.- when the contract

entered into by the parties is different from
their true agreement. The parties are bound
by their real agreement provided it does not
prejudice a third person and is not intended
for a purpose contrary to law, morals, good
customs, public order, or public policy.
Example:
D and C entered into a contract of mortgage. But
wanting to hide the mortgage, it was made to
appear in the form of a deed of sale.
As far as D and C are concerned, the
contract entered into between them is a contract of
mortgage. As to third persons, the apparent
contract, the contract of sale, is the one entered
into. Consequently, if C is the mortgagee but is
made to appear as the buyer and C sells the land
to B, the latter will acquire ownership. D and C are
in estoppel.
 Article 1390. The following contracts are
voidable or annullable, even though there may
have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of
giving consent to a contract;
(2) Those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are
annulled by a proper action in court. They are
susceptible of ratification. (n)
 Article 1391. The action for annulment shall be
brought within four years.
This period shall begin:
In cases of intimidation, violence or undue influence,
from the time the defect of the consent ceases.
In case of mistake or fraud, from the time of the
discovery of the same.
And when the action refers to contracts entered into by
minors or other incapacitated persons, from the time
the guardianship ceases. (1301a)
 Article 1403. The following contracts are unenforceable,
unless they are ratified:
 (1) Those entered into in the name of another person by
one who has been given no authority or legal
representation, or who has acted beyond his powers;
 (2) Those that do not comply with the Statute of Frauds as
set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by
action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a
secondary evidence of its contents:
 (a) An agreement that by its terms is not to
be performed within a year from the making
thereof;
 (b) A special promise to answer for the debt,
default, or miscarriage of another;
 (c) An agreement made in consideration of
marriage, other than a mutual promise to
marry;
 d) An agreement for the sale of goods, chattels or things in action,
at a price not less than five hundred pesos, unless the buyer accept
and receive part of such goods and chattels, or the evidences, or
some of them, of such things in action or pay at the time some
part of the purchase money; but when a sale is made by auction
and entry is made by the auctioneer in his sales book, at the time
of the sale, of the amount and kind of property sold, terms of sale,
price, names of the purchasers and person on whose account the
sale is made, it is a sufficient memorandum;
 (e) An agreement for the leasing for a longer period than one year,
or for the sale of real property or of an interest therein;
 ( f ) A representation as to the credit of a third person.
 Agreement not to be performed within one year
from the making thereof –
On June 10, 2003, S entered into an oral contract
with B for the construction of B’s house to begin
on June 20, 2004. The contract must be in
writing to be enforceable.
In order that this provisions be applicable, it must
appear that the parties intended when they
made the contract that it should not be
performed within one year.
 Promise to answer for the debt, default, or
miscarriage of another –

D owes C P1000.00 with G as guarantor. Here, G

has a special promise to answer for the debt
of D in case D fails to pay the same. This
promise is unenforceable unless it is in
writing signed by G.
 Agreement in consideration of marriage
other than mutual promise to marry

 M agrees to build a house worth 1M for W if W

will marry M. This must appear in writing to
be enforceable unless M ratifies the
agreement. The statute applies even when
the promise to build the house is made by a
third person to W.