CONTRACTS -e.g.

Conditions, period, interests,

III. GENERAL PROVISIONS penalty
A. DEFINITION -only exists when provided by parties
● Essential Elements (p.304) B. CHARACTERISTICS
-are those without no ● Obligatory force
contract can exist regard;ess - reason why a contract is a source of
of the intentions of the obligation (Art. 1159)
parties - compliance with letter and parties
-also known as requisites of - presupposes that contract has been
a contract perfected, it is valid and enforceable
-subdivided into: ● Autonomy of Contracts (additional)
a. Common - present in all - parties are free to establish
contracts: consent, object, cause stipulations or clauses not
b. Special - not common in all contrary to law, morals,
contracts customs, public order,
- present only in specified contracts: public policy (Art. 136)
1. As regards to form, e.g. public - constitution is not a source of
instrument donation (Art. 749), freedom to contract
delivery in real contracts (Art. - property right - non-impairment
1316), registration in real estate clause
mortgage (Art. 2125) chattel - state may interfere - pursuant to
mortgage (Art. 2140) valid exercise of police
2. As regards to subject matter, e.g. power of the state
real property in antichresis 1(Art. ● Mutuality
2132), personal property in pledge - no situation where only one is
(Art. 2094) bound, if there is such, it is a violation
3. As regards to of this principle, hence, void
consideration/cause, e.g. price in - Theory of Cognition - The contract is
sale (Art. 1458) and in lease (Arts. perfected from the moment the
1643, 1644), liberality in acceptance COMES TO THE
commodatum2 (Art. 1935) KNOWLEDGE OF THE OFFEROR.
● Relativity
Note: A Valid Contract manifests all the - Obligatoriness limited to contracting
essential elements of a contract. parties as well as their heirs and
assigns; transmissible to heirs unless
● Natural Elements (p.305) intransmissible by law (Art. 1311)
-are presumed to exist in certain - Contract does not affect third person
contracts unless stipulated by the with no participation
parties, eg. warranty against eviction3 Exceptions to principle of relativity:
(Art. 1528), warranty against hidden a. Obligations not transmissible by
defects in sale4 (Art. 1561) nature, stipulation, law
● Accidental Elements b. Stipulation pour autrui - stipulation
-the particular stipulations, clauses, in a contract in favor of a third
terms, or conditions established by person; purpose of benefiting the
the parties in the contract (Art. 1306) interest of 3rd person who has no
participation in contract
1
c. Third person induces another to
In antichresis, the creditor acquires the right to receive the
fruits of the property, but with the obligation to apply them to violation his contract under Art.
the payment of the interest and thereafter to the principal of his 13145
credit, whereas in real estate mortgage, the creditor does not C. PARTIES
acquire such right.
2
commodatum n. [Latin, loan, from neuter of commodatus,
● Auto-contract/Freedom to contract
past participle of commodare to lend, bestow] : a gratuitous - Freedom of contract is the
loan of movable property to be used and returned by the ability of parties to bargain
borrower. : loan for use at loan compare deposit gratuitous and create the terms of their
bailment at bailment loan for consumption at loan.
3
The seller warrants the buyer against eviction, which is the agreement as they desire
buyer's loss of, or danger of losing, the whole or part of the without outside interference
thing sold because of a third person's right that existed at the from the government.
time of the sale.
4
The seller shall be liable for his warranty even though he
himself is unaware of the hidden defect of the thing sold [Art.
5
1566]. The seller, however, shall not be answerable for patent Art. 1314. Any third person who induces another to violate his
or visible defects, or those that may be readily perceived [Art. contract shall be liable for damages to the other contracting
1561]. party.

A Property of Limpangug, E.S. 2023

D. CLASSIFICATION:
● According to subject matter;
a. Contracts covering things (i.e.
contract of sale, deposit, pledge)
b. Contracts covering services (i.e.
contract of carriage)
c. Contracts covering transmissible
rights or credits (i.e. contract of
usufruct, assignment of credits.)
● Name;
a. Nominate – those which have been
given particular names (i.e. sale,
barter, mortgage, lease, carriage,
agency, etc.)
b. Innominate – those which have not
been given a particular name and
not regulated by special provision of
law. Roman law has classified them
as follows: Do ut des (I give that
you may give); Do ut facias (I give
that you may do); Facio ut facias (I
do that you may do); Facio ut des (I
do that you may give).
● Perfection;
a. Consensual – perfected by mere
consent (i.e. sale)
b. Real – cannot be perfected without
delivery (i.e. commodatum,
depositum, pledge, loan)
c. Formal or Solemn- cannot be
perfected without compliance with
the special formalities or solemnities
required by law, otherwise they are
void (i.e. donations, mortgages of
real property)
● to its relation to other contracts;
a. Principal – contracts which can exist
by themselves alone without
depending on another (i.e. sale,
lease, deposit, commodatum)
b. Accessory – contracts which cannot
exist alone but mut depend on
another contract (i.e. mortgage –
depends on the contract of loan)
c. Preparatory – means to an end;
contracts entered into for the
creation of another contract (i.e.
agency, the principal gives authority
to the agent through a Special
Power of Attorney)
● nature of the vinculum produced;
a. Unilateral – contracts where only one
of the parties is bound to fulfill and
obligation (i.e. commodatum,
promissory note)
b. Bilateral – contracts where both
parties have reciprocally bound
themselves to fulfill their obligations
in favor of the other (i.e. sale) Also
known as synallagmatic contracts.
A Property of Limpangug, E.S. 2023
● Cause;
a. Onerous – contracts that provide for
exchange of valuable considerations
(i.e. sale where the seller delivers the
object of the contract and the buyer
pays the purchase price)
b. Gratuitous – contracts where one of
the parties gives something or
renders service to the other without
receiving any equivalent or
compensation (i.e. pure donation,
commodatum). It is also called the
lucrative contract because it
provides gain to the other party for
free.
c. Remunerative – contracts where one
party gives something or renders
service to another in consideration
of a previous or past deeds of the
other.
● Risk
a. Commutative – contracts where the
contracting parties contemplate the
assured fulfillment of the terms and
conditions of their agreement, and
there is no risk to anticipate (i.e.
contracts of mortgage and pledge)
b. Aleatory – contracts where the
fulfillment is dependent on chance
or event which may not happen
within the period stipulated, and the
loss contemplated may not happen.
(i.e. insurance contract)
● According to Status
a. Executed – contracts which are
already completed when formally
entered into (i.e. sale of a thing)
b. Executory – contracts where the
prestation promised by the parties
have yet to be fulfilled at some
future date (i.e. a unilateral promise
to sell which has been accepted, but
the sale is not yet executed)
E. STAGES
● Preparation – This is the stage where
the parties begin their initial
negotiation, bargaining for the
formation of the contract and
ending at the moment of
agreement. It is also called the
preparatory stage.
● Perfection or Birth – This is the stage
where the contract is said to have
been born, where the parties had a
meeting of minds as to the object,
cause or consideration and other
terms and conditions of the
contract. It has passed the
preparatory state, thus giving birth
to the contract.
 ● Consummation or Termination – This
is the last stage which consists of
the performance or fulfillment by
the parties of their obligations under
the terms of the perfected contract.
Consummation means the
accomplishment, death or
termination of the contract where
the parties cease to be contractually
related to one another.
IV. ESSENTIAL REQUISITES OF CONTRACTS
A. MUST BE MANIFESTED BY THE
CONCURRENCE OF THE OFFER AND
ACCEPTANCE (1st requisite of
Consent)
1. Offer
a. Must be certain (Art. 1320)
- In order to be valid, an agreement
must satisfy the following four
conditions: first, there must a
consent of the individuals who are
bound thereby. Second, there must
be capacity to enter into an
obligation. Third, there must be a
specific subject matter.
b. What may be fixed by the offeror (1321a)
- Article 1321. The person making the
offer may fix the time, place, and
manner of acceptance, all of which
must be complied with. The offer to
set forth the terms of acceptance.
c. Offer when made through an agent
(1322a)
- Article 1322: An offer made through
an agent is accepted from the time
acceptance is communicated to
him. *Applies only if the offer is made
through an agent and acceptance is
communicated through him.
d. Circumstances when offer becomes
ineffective (1323a)
- Article 1323. An offer becomes
ineffective upon the death, civil
interdiction, insanity, or insolvency.
of either party before acceptance is
conveyed.
e. Business advertisements of things for
sale (1325a)
- Article 1325. Unless it appears
otherwise, business advertisements
of things for sale are not definite
offers, but mere. invitations to make
an offer. Business Advertisements of
things for sale may or may not
constitute definite offer.
f. Advertisement for bidders (1326a)
- Article 1326. Advertisements for
bidders are simply invitations to
make proposals, and the advertiser
is not bound to accept the highest
A Property of Limpangug, E.S. 2023
or lowest bidder, unless the contrary
appears.
2. Acceptance
a. Must be absolute
- If acceptance is qualified – it
constitutes a counter-offer, hence,
there is no contract, no meeting of
minds
b. Kinds
I. Express (oral or written) [Art. 1320.An
acceptance may be express or implied]
ii. Implied e.g. from conduct, or
acceptance of unsolicited services.
iii. Qualified (constitutes a counter-offer)
c. If [acceptance] made by letter or telegram
(1321a)
- does not bind the offerer except
from the time it came to his
knowledge.
- The contract in such a case is
presumed to be entered into the
place where the offer was made.
(This is for purposes of determining
the governing laws)
i. Cognition Theory
ii. Period of acceptance
c1. An offer made through an
agent is accepted from the time it is
communicated to him (1322a)
d. Contract of option (1324a)
● Distinguish from “RIGHT OF FIRST
REFUSAL”
● What is Article 1324 of the new Civil
Code?
● Article 1324 speaks of an 'offer' made
by an offeror which the offeree may or
may not accept within a certain
period. Under this article, the offer may
be withdrawn by the offeror before the
expiration of the period and while the
offeree has not yet accepted the offer.
● Option – is a contract whereby the
offeror gives the offeree a certain
period within which to buy or not to
buy a certain object for a fixed price. It
may or may not be for a valuable
consideration.
● Option Money – money used in
an option contract, it is not part of the
purchase price; there is no sale yet;
there is a perfected option contract
● Earnest Money – part of the
purchase price; there is already a
perfected contract of sale
B. NECESSARY LEGAL CAPACITY OF THE
PARTIES
1. Who cannot give consent
a. Unemancipated Minors
 b. Insane or demented persons
c. Deaf-mutes (cannot write)
2. When offer and/or acceptance is
made
a. During lucid interval
- a temporary period of sanity of an
insane person therefore the contract
becomes valid (1328a)
b. In a state of drunkenness
- impares the capacity of a person to
give intelligent consent
- temporary insanity (same with
hypnotic spell)
c. During a hypnotic spell
C. CONSENT MUST BE INTELLIGENT, FREE,
VOLUNTARY, CONSCIOUS, SPONTANEOUS,
AND REAL (1330a)
1. Effect: Voidable
2. Vices of Consent
a. Mistake or error [ vice of consent]
Nature (Kinds) of Mistake:
a1. Mistake of Fact
- Arise from ignorance of lack
of knowledge
a2. Substantial mistake
- a party would not have given
his consent if he knows the mistake (makes
the contract voidable)
a3. Unilateral
- one party is mistaken; bilateral
- both parties are mistaken.
WHEN MISTAKE WILL INVALIDATE CONSENT
i. If mistake refers to the substance of the
thing
ii. If mistake refers to conditions principally
moved one to enter into the contract
iii. If mistake refers to the identity or
qualification, which is the principal cause of
the contract
iv. Mistake of law; Error of law: Art. 3.
Ignorance of the law excuses no one
v. Exception: Mutual error of law
vi. When one of the parties is unable to read
vii. Inexcusable mistake
WHEN MISTAKE DOES NOT VITIATE
CONSENT
a. Simple mistake
b. If party alleging it knew the doubt,
contingency or risk affecting the object
of the contract
b. Violence and intimidation [vice of
consent]
● Effect of “violence”
“intimidation”:
● There is violence whenin order to
wrest consent, serious or
irresistible force is employed (Art.
1336)
c. Intimidation
A Property of Limpangug, E.S. 2023
- There is intimidation when
one of the contracting
parties is compelled by a
reasonable and
well-grounded fear of an
imminent and grave evil
upon his person or property
or upon the person or
property of his spouse,
descendants or ascendants
to give his consent
- Intimidation exists although
it may have been employed
by a third person who did
not take part in the contract
- Factors considered in
determining degree of
intimidation:
a. Age
b. Sex
c. Condition
- No intimidations exists if threat to
enforce one’s claim through
competent authority, if the claim is
just or legal
d. Undue influence [vice of consent]
- There is undue influence
when a person takes
improper advantage of his
power over the will of
another, depriving the latter
of reasonable freedom of
choice. (Article 1337).
a) Confidential, family,
spiritual and other
relations of the parties
b) Mental weakness
c) Ignorance
d) Financial distress of
the person alleged to
have been unduly
influenced
e. Fraud or dolo [vice of consent]
● 2 kinds of fraud:
- Dolo causante - one which vitiates a
contract
- When through insiduous words or
machinations of one the contracting
parties, the other is induced to enter
into a contract which, without them,
he would not have agreed to; ACTIVE
FRAUD
and - When there is failure to disclose
facts, when there is a duty to reveal
them, as when the parties are bound
by confidential relations. (Art. 1339);
PASSIVE FRAUD
- Dolo incidente - Failure to disclose
facts; duty to reveal (fraud)
 - Usual exaggerations in trade: a.Future inheritance, except when
opportunity to know the facts authorized by law
- Expression of an opinion (fraud) Exceptions:
- Effects: - Marriage settlements, partitions
- Art. 1344, NCC inter vivos under Art. 1080
b. Impossible things/services
REQUISITES TO MAKE A
CONTRACT VOIDABLE BY FRAUD VI. CAUSE OF CONTRACTS (P.347)
a) Fraudmust be serious a. Meaning of cause - (causa) is the
b) Fraudshould not have been employed essential reason or purpose which
by BOTH CONTRACTING PARTIES the contracting parties have in view
NO FRAUD EXISTS at the time of entering into the
• Usual exaggerations of trade contract; consideration in
• Mere expression of opinion, unless made by Anglo-american or common law
an expert and the other party relied on such Q: Whatare the requisites
knowledge of a cause? A: It must:
• Misrepresentation by a 3rd person unless • exist
such misrepresentation has created • be true
substantial mistake and the same is mutual. • be licit
• If misrepresentation is made in good faith Q: Whatare the two presumptions in
contracts as to cause?
f. Misrepresentation [vice of consent] • Every contract is presumed
i. By a third person: to have a cause; and
ii. Made in good faith: • The cause is valid.
iii. Kinds of: Article 1345
KINDS OF CONTRACTS BASE FROM CAUSE
SIMULATED CONTRACTS b. Onerous contracts - one of the cause
a) Absolute- no intention to be bound of which. For each contracting party
at all is the prestation or promise of a
b) Relative- parties conceal their true thing or service by the other; parties
agreement, parties are bound by are obligated to each other
their real agreement provided it c. In remuneratory contracts - one of
does not prejudice a 3rd person and the cause of which is the service or
is not intended for any purpose benefit which is remunerated;
contrary to law, morals, good reward the service rendered by
customs, public order, public policy previous party
- e.g. deed of sale is intention, what is d. Gratuitous Contracts/Contracts of
executed is deed of donation pure beneficence - liberality of the
- Effects; Art. 1346., NCC benefactor
- As distinguished from motive-
V. OBJECT OF CONTRACTS (p.341) Article 13516
1. What may be the objects of contracts- ➢ NOTE, HOWEVER, A MOTIVE7 MAY
a. All things not outside the commerce PREDETERMINE A CAUSE, AND
of man MOTIVE MAY HAVE AN EFFECT ON
b. All rights not intransmissible e.g. THE CONTRACT.
right to vote and be voted, parental e. Defective causes and their effects
authority (pp.350-351)
c. All services not contrary to law, i. Absence of cause/unlawful cause-
morals, good customs, public policy Article 13528
ii. Statement of a false cause in the
2. Requisite contract- Art. 13539
● must be determinate as to its kind iii. Lesion/inadequacy of cause
● Existing or the potentiality to
exist subsequent to the 6
Article 1351. The particular motives of the parties in entering
contract; into a contract are different from the cause thereof.
7
● Must be licit; A motive is a pure or private reason which a party has in
entering a contract
● Within the commerce of 8
Contracts without cause, or with unlawful cause, produce no
man; and effect whatever. The cause is unlawful if it is contrary to law,
● Transmissible morals, good customs, public order or public policy.
3. What may not be the object of contracts 9
The statement of a false cause in contracts shall render them
void, if it should not be proved that they were founded upon
another cause which is true and lawful

A Property of Limpangug, E.S. 2023

 - What is lesion? Inadequacy of cause
e.g. insufficient price of the thing
sold
iv. Presumption of the existence and
lawfulness of a cause, though not stated
in the contract- Article 135410
VII. FORM OF CONTRACTS
A. General rule: contracts shall be
obligatory, in whatever form they
may have been entered into,
provided all the requisites for their
validity are present- Article 1356
B. Exception: When the law requires
that a contract be in some form in
order that it may be valid or
enforceable (meaning form must be
observed strictly)
C. Kinds of formalities required by law:
1. Those required for validity of
contracts e.g.
a. Art. 748;Art. 749;Art. 1874;Art.
2134;Art. 1771’Art. 1773
2. Those required, not for validity, but to
make contract effective as against third
persons
a. Art. 1357
b. Art. 1358
Note: Before applying Art. 1357 (right to
compel execution of document), it is
essential that:
a. Contract is perfected (valid)
b. Enforceable under the Statute of
Frauds i.e. Unenforceable
agreements
3. Those required for the purpose of proving
the existence of the contract
e.g. those under the Statute of Frauds in
Article 1403.
RARE CASES WHEN THE LAW REQUIRES
THAT A CONTRACT BE IN A CERTAIN FORM
● Donation of real property – public
instrument
10
Although the cause is not stated in the contract, it is
presumed that it exists and is lawful, unless the debtor proves
the contrary.
A Property of Limpangug, E.S. 2023
● Donation of personal property value
of which exceeds 5,000 – donation
and acceptance must be in writing
● Sale of land through an agent –
authority of the agent must be in
writing otherwise sale is void
● Stipulation to pay interest – it must
be in writing, otherwise, no interest
is due
● Contract of partnership – if
immovables are contributed, it must
be in public instrument to which
shall be attached a signed inventory
of the immovable property
contributed
THE FOLLOWING CONTRACTS MUST BE IN A
PUBLIC INSTRUMENT (1358a)
● (1) Acts and contracts which have for
their object the creation,
transmission, modification or
extinguishment of real rights over
immovable property; sales of real
property or of an interest therein a
governed by Articles 1403, No. 2, and
1405;
● (2) The cession, repudiation or
renunciation of hereditary rights or
of those of the conjugal partnership
of gains;
● (3) The power to administer property,
or any other power which has for its
object an act appearing or which
should appear in a public document,
or should prejudice a third person;
● (4) The cession of actions or rights
proceeding from an act appearing in
a public document
VIII. REFORMATION OF INSTRUMENTS
Art. 1359 When, there having been a meeting
of the minds of the parties to a contract, their
true intention is not expressed in the
instrument purporting to embody the
agreement, by reason of mistake, fraud,
inequitable conduct or accident, one of the
parties may ask for the reformation of the
instrument to the end that such true
intention may be expressed.
If mistake, fraud, inequitable conduct, or
accident has prevented a meeting of the
minds of the parties the proper remedy is
not reformation of the instrument but
annulment of the contract. (n)
Action in personam, not in rem
A. Requisites
1. Meeting of the minds upon the
contract
2. True intention of the parties is not
expressed in the instrument
 3. Failure of the instrument to express
the true agreement is due to
mistake, fraud, inequitable conduct,
or accident
- Note: In reformation (remedy in
equity), the courts do not make
another contract for the parties.
They merely inquire into the
intention of the parties and having
found it, reform the written
instrument
What is reformed is not the contract itself,
but the instrument embodying the contract.
B. Cases where no reformation is allowed-
Art. 1366
1. Simple donations inter vivos wherein
no condition is imposed;
2. Wills;
3. When the real agreement is void.
• NOTE: when a party sought enforcement of
an instrument, he cannot anymore ask for
REFORMATION
C. Implied Ratification- Art. 1367
- When one of the parties has brought
an action to enforce the instrument,
he cannot subsequently ask for its
reformation.
D. Who may ask for reformation- Art. 1368
- Reformation may be ordered at the
instance of either party or his
successors in interest, if the mistake
was mutual; otherwise, upon
petition of the injured party, or his
heirs and assigns.
REFORMATION ALLOWED
● IGNORANCE
● LACK OF SKILL
● NEGLIGENCE
● BAD FAITH
- On the person drafting the
instrument, could be a clerk, typist
E. Procedure of reformation- Art. 1369
- The rule of court governs procedure
IX. INTERPRETATION OF CONTRACTS
A. Primacy of Intention-Arts. 1370, 1372
B. How to determine intention- Art. 1371
C. How to interpret a contract
1. When it contains stipulations that
admit several meanings- Art. 1373
2. When it contains various
stipulations, some of which are
doubtful- Art. 1374
A Property of Limpangug, E.S. 2023
3. When it contains words that have
different significations- Art. 1375
4. When it contains ambiguities and
omission of stipulations- Art. 1376
5. With respect to the party who cause
obscurity-Art. 1377
6. When it is absolutely impossible to
settle doubts by the rules above –
Art. 1378
7. When the doubts are cast upon
the principal object so that the
intention cannot be known-Art. 1378.
INTERPRETATION OF CONTRACTS
• Art. 1370. If the terms of a contract are clear
and leave no doubt upon the
intention of the contracting parties, the
literal meaning of its stipulations shall
control.
– If the words appear to be contrary to the
evident intention of the parties, the latter
shall prevail over the former. (1281)
• Art. 1371. In order to judge the intention of
the contracting parties, their
contemporaneous and subsequent acts shall
be principally considered. (1282)
• Art. 1372. However general the terms of a
contract may be, they shall not be
understood to comprehend things that are
distinct and cases that are different from
those upon which the parties intended to
agree. (1283)
– EXAMPLE: S sells “all his sacks of rice in the
warehouse to B” such term does not include
which though stored in the S’s warehouse do
not belong to S.
• Art. 1373. If some stipulation of any contract
should admit of several meanings, it shall be
understood as bearing that import which is
most adequate to render it effectual. (1284)
– EXAMPLE: S has two cars. He sold one of
the cars to B but without indicating which.
His ownership of one car is absolute, while
his ownership of the other car is disputed.
The car that is deemed to have been sold is
the first car since such is the import that
will render the contract effectual.
• Art. 1374. The various stipulations of a
contract shall be interpreted together,
attributing to the doubtful ones that sense
which may result from all of them
taken jointly. (1285)
• Art. 1375. Words which may have different
significations shall be understood in
that which is most in keeping with the
nature and object of the contract. (1286)
• Art. 1376. The usage or custom of the place ● Mutual restitution- Arts. 1398 and
shall be borne in mind in the 1402
interpretation of the ambiguities of a ● Extinguishment of the action (i.e.
contract, and shall fill the omission of when action to annul is
stipulations which are ordinarily established. extinguished)
(1287) ● By ratification- Art. 1392
● [action to annul may also be
• Art. 1377. The interpretation of obscure extinguished when…] When the
words or stipulations in a contract shall thing is lost through the fault of the
not favor the party who caused the obscurity. person who has the right to file the
(1288) action- Art. 1401

• Art. 1378. When it is absolutely impossible to D. Ratification

settle doubts by the rules established 1. Requisites
in the preceding articles, and the doubts a. Contract is voidable
refer to incidental circumstances of a b. Ratification is made with knowledge
gratuitous contract, the least transmission of of the cause for nullity
rights and interests shall prevail. If the c. At the time of ratification, the cause
contract is onerous, the doubt shall be of nullity has already ceased to exist.
settled in favor of the greatest reciprocity of
interests.
2. Forms (of ratification)
• If the doubts are cast upon the principal a. Express or tacit- Art. 1393
object of the contract in such a way that it b. By the parties themselves or by the
cannot be known what may have been the guardian in behalf of an
intention or will of the parties, the incapacitated party- Art. 1394
contract shall be null and void. (1289) 3. Effects
a. Action to annul is extinguished- Art.
1392
—--------------------------------------------------------- b. The contract is cleansed
------------------------------------------------------------ retroactively from all its defects- Art.
----------------------------------------------------------- 1396

X. DEFECTIVE CONTRACTS C. UNENFORCEABLE CONTRACTS

1. Characteristics
A. RESCISSIBLE CONTRACTS a. Cannot be enforced by a proper
a. Kinds- Art. 1381 action in court.
b. Characteristics b. Susceptible of ratification
c. Rescission- Art. 1380 c. Cannot be assailed by third persons
● Definition: 2. Kinds [of unenforceable contracts] - Art.
● Distinguished from rescission under 1403
Article 1191 a. unauthorized contracts (1ST kind of
● Requisites unenforceable contract] governing
● Effect of Rescission- Art. 1385 rules: Art. 1404
● Extent of Rescission- Art. 1384 b. Contracts covered by statute of
● Presumption of fraud- Art. 1387 frauds [2nd kind of unenforceable
● Liability for acquiring in bad faith the contract]
things alienated in fraud of 3. STATUTE OF FRAUDS
creditors- Art. 1388 ● Purpose: prevent fraud, and not to
encourage
B. VOIDABLE /ANNULLABLE CONTRACTS ● History
A. Kinds- Art. 1390 England was first country to adopt
B. Characteristics statute of frauds (in 1676). English
C. Annulment Parliament passed law [requiring
● As distinguished from rescission: certain agreements to be in writing]
● Grounds- Art. 1390 (incapacity to ● Characteristics
consent and vice of consent) 4. BASIC AND FUNDAMENTAL PRINCIPLES
● Who may and may not institute GOVERNING STATUTE OF FRAUDS:
action for annulment- Art. 1397 1. Applies only to executory contracts
● Prescription- Art. 1391 (no performance yet). Does not
● Effect (of annulment)

A Property of Limpangug, E.S. 2023

 apply to partially or completely a land under homestead, therefore,
executed contracts. eg homesteader can recover..)
- downpayment is made [not 3. Party repudiates a contract (void)
applicable before the illegal purpose is
- delivery of land. accomplished (Art. 1414)
2. Cannot apply if the action is neither
for damages [because of the
violation of an agreement] nor for
specific performance between
landlord and tenant regarding
sharing of the crops or produce in a
land]
3. Statute of frauds is exclusive
- e.g. only those contracts
enumerated are covered. Thus, the
following are not:

● Setting up of boundaries
● Oral partition of real property
● Agreement creating right of way
● Agreement on right of first refusal
4. Defense of statute of frauds may be
waived
5. Statute of frauds is a personal
defense [available only to the party
affected]
6. They are not void

c. SPECIFIC AGREEMENTS COVERED BY

STATUTE OF FRAUDS:
i. What is “sufficient memorandum”?
ii. Rule: cannot prove contract orally unless
evidence by memorandum
- (Note if there is written agreement,
but is lost, it may be proven by
“secondary evidence”.
- contracts [entered] by parties [both]
are incapable of giving consent to a
contract. [3rd kind of unenforceable
contract]

d. Contracts executed by parties who

are both incapable of giving consent to a
contract
a. Effect of ratification by the
parents/guardian of one of the
parties- Art. 1407

b. Effect of ratification by the

parents/guardian of both of the
parties.

D. VOID/INEXISTENT CONTRACTS
1. Characteristics
2. Kinds [of VOID CONTRACTS]- Art.
1409
● Pari delicto doctrine does not apply:
1. One party is much less guilty than
the other
2. Does not apply where a superior
public policy intervenes ( e.g. sale of

A Property of Limpangug, E.S. 2023