OBLIGATIONS AND CONTRACTS (NEW CIVIL CODE OF THE
1, in case this is not
PHILIPPINES) ARTS. 1156-1304 (OBLIGATIONS) ARTS. 1305-1422
OBLIGATIONS (CIVIL OBLIGATIONS)
A juridical necessity To give, to do or not to do.
OBLIGATION
Art. 1156. An obligation is a juridical necessity to give, to do or
not to do. (n)
JURIDICAL NECESSITY
CONNOTE THAT IN CASE OF NON-COMPLIANCE , THERE WILL BE
LEGAL SANCTIONS
Elements
1. Active subject (obligee/ creditor): one in whose favor
the obligation is constituted
2. Passive subject (obligor/debtor): one who has the duty
of giving, doing or not doing
3. Object: prestation; the conduct which has to be
observed by the debtor/obligor
REQUISITES
1. it must be licit (otherwise it is void)
2. it must be possible, physically and juridically (otherwise it is
void)
3. it must be determinate or determinable (otherwise it is void)
4. it must have pecuniary value
a. Vinculum Juris: juridical/legal tie; binds the parties to the
obligation
b. Causa (causa debendi/causa obligationes): why obligation
exists
SOURCES OF OBLIGATIONS (LACQ2) (Art 1157)
1.LAW
• A RULE OF CONDUCT, JUST AND OBLIGATORY,
LAID DOWN BY LEGITIMATE AUTHORITY FOR THE
COMMON OBSERVANCE AND BENEFIT.
• Must be expressly or impliedly set forth and
cannot be presumed
2.CONTRACTS
• IS A MEETING OF THE MINDS BETWEEN TWO
PERSONS WHEREBY ONE BINDS HIMSELF WITH RESPECT
TO THE OTHER TO GIVE SOMETHING OR TO RENDER
SOME SERVICE (ART. 1305, NCC)
• -It is the “law” between parties
• -Must be complied with in good faith
• Parties may freely enter into any stipulations
provided they are not contrary to law, morals, good
customs, public order or public policy
3.QUASI-CONTRACTS
• Juridical relation resulting from lawful, voluntary and
unilateral acts, which has for its purpose, the payment
of indemnity to the end that no one shall be unjustly
enriched or benefited at the expense of another.
TWO TYPES OF QUASI-CONTRACT
1. NEGOTIORUM GESTIO -REFERS TO THE VOLUNTARY
ADMINISTRATION OF THE PROPERTY, BUSINESS OR
AFFAIRS OF ANOTHER WITHOUT HIS CONSENT OR
AUTHORITY.
2. SOLUTIO INDEBITI -REFERS TO PAYMENT BY MISTAKE OF
OBLIGATION WHICH WAS NOT DUE WHEN PAID.
4.ACTS OR OMISSIONS PUNISHED BY LAW
• THESE ARE CRIMES OR FELONIES. THE COMMISSION OF
THE CRIME MAKES THE OFFENSER CIVILLY LIABLE.
SCOPE OF CIVIL LIABILITY
1. Restitution-The restitution of the thing itself must be made whenever
possible, with allowance for any deterioration, or diminution of value as
determined by the court. (Article 105 of the Revised Penal Code of the
Philippines)
2. Reparation for damage caused- The court shall determine the amount of
damage, taking into consideration the price of the thing, whenever possible,
and its special sentimental value to the injured party, and reparation shall
be made accordingly. (Article 106 of the Revised Penal Code of the
Philippines)
3. Indemnity for Consequential damages- Indemnification for consequential
damages shall include not only those caused the injured party, but also
those suffered by his family or by a third person by reason of the crime.
(Article 107 of the Revised Penal Code of the Philippines)
• First remedy granted by law is no.
possible no.
• In either case, no. 3 may be required
Example: X is found guilty for the crime Robbery.
Restitution –culprit is duty bound to return the property stolen
Reparation – in case of inability to return the property stolen, the
culprit must pay the value of the property stolen.
5. QUASI-DELICTS (ART. 1157, NCC) (ALSO KNOWN AS
”TORT/CULPA-AQUILIANA” )
• ACTS OR OMISSIONS THAT CAUSE DAMAGE TO
ANOTHER THERE BEING FAULT OR NEGLIGENCE BUT
WITHOUT ANY PRE-EXISTING CONTRACTUAL
OBLIGATION.
ELEMENTS:
1. There must be an act or omission
2. There must be fault or negligence attributable to the person
charged
3. There must be damage or injury
4. There must be a direct relation of cause and effect between
the act arising from fault or negligence and the damage or
injury (proximate Cause);
5.There is no pre-existing contractual relation between the
parties.
Example:
A is playing basketball. When the latter shot the ball, he missed
and accidentally hit B’s car. A is obligated to compensate B for
the car’s damage.
NATURE AND EFFECTS OF OBLIGATION Arts. 1163 – 1178 OF THE
New Civil code of the Philippines
Art. 1163. Every person obliged to give something is also obliged
to take care of it with the proper diligence of a good father of
a family, unless the law or the stipulation of the parties requires
another standard of care. (1094a)
➢ DETERMINATE OR SPECIFIC THING
➢ IS SOMETHING WHICH IS SUSCEPTIBLE OF
PARTICULAR DESIGNATION OR SPECIFICATION
➢ PARTICULARLY DESIGNATED OR PHYSICALLY
SEGREGATED FROM ALL OTHERS OF THE SAME CLASS
EXAMPLE; A MERCEDES BENZ CAR, MODEL 2000, CHASSIS
NO.232323 WITH PLATE NO. AAA 999
➢ INDETERMINATE THING OR GENERIC THING
➢ IS SOMETHING WHICH IS NOT PARTICULARIZED
OR SPECIFIED BUT HAS REFERENCE ONLY TO A CLASS OR
GENUS
EXAMPLE: A CAR, AN OUNCE OF GOLD
GENUS NEVER PERISHES (GENUS NUNGUAM PERIT)
1.TO DELIVER THE THING WHICH HE HAS OBLIGATED HIMSELF TO GIVE
INCLUDING THE FRUITS OF THE THING;
ARTICLE 1164 THE CREDITOR HAS THE RIGHT TO THE FRUITS OF THE THING
FROM THE TIME THE OBLIGATION TO DELIVER ARISES. HOWEVER, HE SHALL
ACQUIRE NO REAL RIGHT OVER IT UNTIL THE SAME HAS BEEN DELIVERED
TO HIM.
KINDS OF FRUITS
NATURAL FRUITS
-Spontaneous products of the soil, and the young, and other products of
animals.
Ex: Grass, all trees and plants on land produced without the intervention of
human labor.
INDUSTRIAL FRUITS
- Are those produced by lands of any kind through cultivation or labor.
Ex: Sugar cane, vegetables, rice; and all products of lands brought about by
reason of human labor.
CIVIL FRUITS
Are those derived by virtue of a juridical relation.
Ex: rents of building, prices of leases of lands and other properties.
2.TO TAKE CARE OF THE THING WITH THE PROPER DILIGENCE OF A GOOD
FATHER OF A FAMILY (ordinary care or that diligence which an average or
reasonably prudent person would exercise over his own property;
Ordinary Diligence
-Diligence required of person obliged to deliver a determinate thing
-An accepted notion that a FATHER will never put his family at risk
-The obligor/Debtor/Passive subject should take care of it as his own
determinate thing
3 KINDS OF DILIGENCE UNDER THE LAW:
1. EXTRAORDINARY – Extreme measure of care and caution
2. ORDINARY – “Diligence of a Good Father of a Family”
3.SLIGHT DILIGENCE or SLIGHT CARE -Less or no prudence
1. TO DELIVER ALL ACCESSIONS AND ACCESSORIES
Art. 1166. The obligation to give a determinate thing
includes that of delivering all its accessions and accessories,
even though they may not have been mentioned.
Accessions – additions to or improvements upon a thing. Ex: air
conditioner in a car.
Accessories – things joined to, or included with the principal
thing for its better use,
Embellishment or completion. Ex:key of a house; frame of a
picture
Exception: It is stipulated otherwise
2. TO PAY DAMAGES IN CASE OF BREACH OF
OBLIGATION by reason of delay, fraud, negligence or
contravention of the tenor of the obligation.
OBLIGATIONS IS GENERIC:
1. TO DELIVER A THING WHICH MUST BE NEITHER OF SUPERIOR
NOR INFERIOR QUALITY.
2. TO PAY DAMAGES IN CASE OF BREACH OF THE OBLIGATION in
case of breach of the obligation by reason of delay, fraud,
negligence or contravention of the tenor of the obligation (Art.
1246)
PROBLEM:
MR. A bound himself to deliver to B a (1) 21-inch 1983 model TV set, and
(2) the 13 cubic feet White Westinghouse refrigerator with Motor No.WERT-
385 , which B saw in A’s store, and (3)to repair B’s piano. A did none of
these things.
May B compel A to deliver the TV set and the refrigerator and repair the
piano?
Answers: Cannot. The obligation is a generic obligation. Object is designated
merely by its class or genus without any particular designation or physical
segregation
May compel A. obligations is determinate
CANNOT COMPEL A TO REPAIR THE PIANO. THE OBLIGATION OF A IS AN
OBLIGATION TO DO. IN THIS TYPE OF OBLIGATION,
THE LAW RECOGNIZES THE INDIVIDUALS FREEDOM TO CHOOSE BETWEEN
DOING THAT WHICH HE HAS PROMISED TO DO AND NOT DOING IT.
Kinds of Delivery
1.Actual (tradition) – the property changes hands physically.
Example: A buys cake from B. The delivery made by B is the actual delivery
of the thing due.
2.Constructive Delivery – the physical transfer of the property is implied.
Kinds of constructive delivery
a.Tradition simbolica (symbolical tradition)
Example: When the keys of a house are given to the new owner, the house
being theobject of the sale.
b.Traditio longa manu – delivery by mere consent or pointing out the object
Example: When pointing out to a van which is the object of the sale
c.Tradition brevi manu (delivery by short hand) – from possessor non –
owner to Possessor owner
Example: When a tenant already in possession of a house buys the house he
is renting.
d.Traditio constitutum possessorium. – From possessor owner to possessor
Non – owner.
Example: A house owner, who sells his house, but remains in possession as
tenant of the same house.
e.Tradition by execution of legal forms.
Example: The execution of public instrument in selling real properties.
Rights of Creditor if Debtor Failed to Deliver (Art. 1165 to 1170)
Rights of Creditor if Debtor Failed to Deliver
1. If the thing is SPECIFIC or DETERMINATE:
a. An action for Specific Performance with a right to indemnity for damages
if the debtor is guilty of fraud, negligence, delay, or contravention in the
performance of the obligation. The Creditor can compel the debtor to make
the delivery. OR
b. Demand for Rescission or Cancellation of the obligation with a right to
indemnity for damages if the debtor is guilty of fraud, negligence, delay, or
contravention in the performance of the obligation. OR
c.Demand payment for damages only, where it is the only feasible remedy.
2. If the thing is GENERIC or INDETERMINATE:
a. Ask for compliance of the obligation by the debtor himself or by third
person at the debtor’s expense. Demand a replacement which is not of
inferior or superior quality.
b. Demand damages from the debtor if the debtor is guilty of fraud,
negligence, delay, or contravention in the performance of the obligation.
(Article 1170)
CAUSES OF BREAC OF OBLIGATION
1.DEFAULT OR MORA (Art. 1169. Those obliged to deliver or to do
something incur in delay from the time the obligee judicially H
or extra judicially demands from them the fulfillment of their obligation.
1. Ordinary delay is merely the failure to perform an obligation on time.
This does not constitute breach.
2. Legal delay or default or mora is the failure to perform an obligation on
time which failure constitutes a breach of the obligation. (Article 1169)
KINDS DEFAULT OR MORA
1. MORA SOLVENDI
DELAY OF THE OBLIGOR/DEBTOR TO PERFORM HIS OBLIGATION.
The debtor is guilty of breach or violation of the obligation;
He is liable to creditor for interest;
He is liable even for a fortuitous event when the obligation is to deliver a
determinate thing
2. MORA ACCIPIENDI
- DELAY OF OF THE OBLIGEE/CREDITOR TO ACCEPT THE DELIVERY OF THE
THING W/C IS THE OBJECT OF THE OBLIGATION
The CREDITOR is guilty of breach or violation of the obligation;
He is liable for damages suffered, if any, by the debtor;
He bears the risk of loss of the thing due;
d. Where the obligation is to pay money, the debtor is not liable for
interest from the time of creditor’s delay
V.The debtor may release himself from the obligation by the consignation
or deposit in court of the thing or sum due.
3. COMPENSATIO MORAE
DELAY OF THE PARTIES/OBLIGORS IN RECIPROCAL OBLIGATIONS
The delay of the obligor cancels the delay of the obligee, and vice versa
No actionable default on the part of both parties.
QUESTION:
IN OBLIGATIONS TO GIVE OR TO DO, WHEN DOES THE OBLIGOR/DEBTOR
INCUR DELAY?
ANSWER: NON-FULFILLMENT OF OBLIGATION DESPITE OF DEMAND.
DEBTOR INCURS IN DELAY FROM THE TIME THE CREDITOR JUDICIALLY OR
EXTRAJUDICIALLY DEMANDS FROM HIM THE FULFILLMENT OF HIS
OBLIGATION
AND IN SPITE OF SUCH DEMAND
HE IS UNABLE TO COMPLY WITH THE OBLIGATION
WHEN IS DEMAND BY THE CREDITOR NOT NECESSARY IN ORDER THAT
DELAY MAY EXIST?
DEMAND BY CREDITOR IS NOT NECESSARY: TROUL
OBLIGATION OR THE LAW EXPRESSLY SO DECLARES
TIME IS OF THE ESSENCE
THE NATURE AND THE CIRCUMSTANCES OF THE OBLIGATION IT APPEARS
THAT THE DESIGNATION OF THE TIME WAS A CONTROLLING MOTIVE FOR
THE ESTABLISHMENT OF THE CONTRACT
DEMAND WOULD BE USELESS
RECIPROCAL OBLIGATIONS
DEFAULT/MORA
RECIPROCAL OBLIGATIONS
WHERE THE OBLIGATIONS ARISE OUT OF THE SAME CAUSE AND MUST BE
FULFIILED AT THE SAME TIME.
-FROM THE MOMENT ONE OF THE PARTIES FULFILLS HIS OBLIGATION,
DELAY BY THE OTHER BEGINS, DESPITE THE ABSENCE OF DEMAND
EFFECTS OF DELAY
ON THE PART OF THE DEBTOR
LIABLE FOR DAMAGES
OBLIGATION CONSISTS IN THE DELIVERY OF DETERMINATE THING
-RESPONSIBLE FOR ANY FORTUITOUS EVENT UNTIL HE EFFECTED THE
DELIVERY.
EFFECTS OF DELAY
ON THE PART OF CREDITOR
BEAR THE RISK OF LOSS
SHOULDER THE PRESERVATION OF THE THING
DEBTOR MAY RESORT TO CONSIGNATION OF THE THING DUE.
2.FRAUD/DOLO (Art. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages. )
DELIBERATE/INTENTIONAL EVASION BY THE DEBTOR OF NORMAL
COMPLIANCE OF HIS OBLIGATION
implies some kind of malice or dishonesty and it cannot cover cases of
mistake and errors of judgment made in good faith.
KINDS OF FRAUD/DOLO
FRAUD IN OBTAININNG CONSENT 1. CAUSAL FRAUD/DOLO
CAUSANTE FRAUD W/OUT W/C CONSENT WOULD NOT HAVE
BEEN GIVEN.
EFFECT: CONTRACT IS VOIDABLE.
EXAMPLE: B BOUGHT A RING FROM S WHO TOLD HIM THAT THE
RING WAS EMBELLISHED WITH BLUE DIAMOND WHICH IS NOT
TRUE.
2.INCIDENTAL FRAUD/DOLO INCIDENTE
FRAUD WITHOUT WHICH CONSENT WOULD HAVE STILL BEEN
GIVEN BUT THE PERSON GIVING IT WOULD HAVE AGREED ON
DIFFERENT TERMS.
EFFECTS: CONTRACT IS VALID, GUILTY PARTY LIABLE FOR
DAMAGES
Remedy is not Annulment but DAMAGES
Originally, injured party VALIDLY gave his consent
3.NEGLIGENCE/CULPA (Art. 1172. Responsibility arising from
negligence in the performance of every kind of obligation is
also demandable, but such liability may be regulated by the
courts, according to the circumstances)
Art. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the
persons, of the time and of the place. When negligence shows
bad faith, the provisions of Articles 1171 and 2201, paragraph 2,
shall apply.
If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a
good father of a family shall be required.
KINDS OF NEGLIGENCE
1) CULPA CONTRACTUAL/CONTRACTUALL
NEGLIGENCE -NEGLIGENCE IN THE PERFORMANCE OF A
CONTRACT
2) CULPA AQUILIANA/ CIVIL
NEGLIGENCE/TORT/QUASI-DELICT- ACTS OR OMISSION
THAT CAUSE DAMAGE TO ANOTHER, NO CONTRACTUAL
RELATION BETWEEN PARTIES.
3) CULPA CRIMINAL/ CRIMINAL NEGLIGENCE-
NEGLIGENCE THAT RESULTS IN THE COMMISSION OF A
CRIME.
TEST OF NEGLIGENCE:
WHETHER THE DEFENDANT IN DOING THE ALLEGED ACT USED THAT
REASONABLE CARE AND CAUTION WHICH AN ORDINARY
PERSON WOULD HAVE USED IN THE SAME SITUATION
WHAT KIND OF DILIGENCE ?
GEN. RULE:DILIGENCE OF A GOOD FATHER OF A FAMILY.
IF THE LAW OR CONTRACT DOES NOT STATE THE DILIGENCE TO BE
OBSERVED IN THE PERFORMANCE OF THE OBLIGATION
FORTUITOUS EVENTS (Art. 1174. Except in cases expressly
specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which, though foreseen,
were inevitable)
• ARE THOSE EVENTS THAT COULD NOT BE
FORESEEN OR WHICH, THOUGH FORESEEN, ARE
INEVITABLE.
Fortuitous event distinguished from force majeure /
CLASSIFICATION OF FORTUITOUS EVENTS:
1. Act of man – Strictly speaking, a fortuitous
event is an event independent of the will of the obligor
but not of the other human wills. Those arise from
legitimate or illegitimate acts of persons other than the
obligor (FUERZA Mayor OR force majeure)
Example: War, robbery, murder, insurrection
2. Act of God – they refer to what is called as
force majeure or those events which are totally
independent of the will of every human being. Brought
by natural forces. Situation should be PROVEN
Examples: Earthquake, flood, rain, shipwreck, lightning, eruption
of volcano
Requisites OF F.E
1. The event must be independent of the human
will;
2. The event could not be foreseen, or if foreseen,
is inevitable;
3. The occurrence must render it impossible for
the debtor to fulfill the obligation in a normal manner;
and
4. The obligor must be free of participation in, or
aggravation of the injury to the creditor
LIABILITY FOR F.E
• GENERAL RULE: NO PERSON SHALL BE LIABLE
FOR FORTUITOUS EVENT. OBLIGATION WILL BE
EXTINGUISHED.
• PROVIDED: DEBTOR COMMITTED NO
NEGLIGENCE/MISCONDUCT
LIABILITY FOR F.E: LAS
EXCEPTIONS :
1. LAW EXPRESSLY PROVIDES
(Ex. Debtor in delay (Art.1165, object is generic,)
2. STIPULATION OF THE PARTIES
3. NATURE OF THE OBLIGATION REQUIRES THE
ASSUMPTION OF RISK
REASON: NO WRONG IS DONE TO ONE WHO
CONSENTS ( VOLENTI NON FIT INJURIA)
4. OBJECT OF THE OBLIGATION IS LOST AND THE LOSS IS
DUE PARTLY TO THE FAULT OF THE DEBTOR.
5. OBJECT OF THE OBLIGATION IS LOST AND THE LOSS
OCCURS AFTER THE DEBTOR HAS INCURRES DELAY
6. DEBTOR PROMISED TO DELIVER THE SAME THING TO
TWO OR MORE PERSONS WHO DO NOT HAVE THE SAME
INTERESTS;
7. OBLIGATION TO DELIVER ARISES FROM A CRIMINAL
OFFENSE
8. OBLIGATION IS GENERIC
REASON: DESTROYED BY FORTUITOUS EVENT
OBLIGATION TO GIVE
QUESTION: IF THE OBJECT OF THE OBLIGATION TO GIVE IS LOST
OR DESTROYED THROUGH A FORTUITOUS EVENT, CAN THE DEBTOR
OR OBLIGOR STILL BE HELD LIABLE FOR DAMAGES?
ANSWER: It depends.
OBLIGATION IS DETERMINATE
General Rule: The obligor or debtor cannot be held liable for
damages provided there is no delay or fault on the part of
obligor.
OBLIGATION IS INDETERMINATE
DEBTOR/OBLIGOR CAN STILL BE LIABLE FOR DAMAGES
REASON: GENUS NUMQUAM PERUIT
(GENERIC THING CAN NEVER PERISH
QUESTION: WHAT ARE THE REMEDIES WHICH ARE AVAILABLE TO
THE CREDITOR IN ORDER TO PROTECT HIS RIGHTS AGAINST THE
DEBTOR?
ANSWER: REMEDIES AVAILABLE TO CREDITORS FOR THE
SATISFACTION OF THEIR CLAIMS
1. Exact fulfillment of the obligation by specific or
substitute performance with a right to damages in
either case (Art 1191);
2. Recission with damages (Art. 1191);
3. Accion subrogatoria – to be subrogated to all
the rights and actions of the debtor save those which
are inherent in his person.
4. Accion Pauliana – asking the court to rescind
or to impugn all the acts which the debtor may have
done to defraud the creditors (Arts. 1380-1389)
ACCION SUBRIGATORIA
REQUISITES:
a. The debtor to whom the right of action properly pertains must
be indebted to the creditor;
b. The creditor must be prejudiced by the inaction or failure of
the debtor to proceed against the third person;
c. The creditor must have pursued first or exhausted all the
properties of the debtor which are not exempt from execution;
d. The debtor’s assets are insufficient to satisfy his claims; and
e. The right of account is not purely personal
ACCION PAULIANA
REQUISITES:
a. There is a credit in favor of plaintiff;
b. The debtor has performed an act subsequent to the
contract, giving advantage to other persons;
c. The creditor is prejudiced by the debtor’s act which are in
favor of 3rd parties and
rescission will benefit the creditor;
d. The creditor has no other legal remedy; and,
e. The debtor’s acts are fraudulent.
TRANSMISSIBILITY OF RIGHTS (Art 1178)
GENERAL RULE: ALL RIGHTS ACQUIRED IN VIRTUE OF AN
OBLIGATION ARE TRANSMISSIBLE.
EXCEPTIONS:
1. LAW PROHIBITS THE TRANSMISSION OF THE RIGHT
2. STIPULATION OF PARTIES
3. RIGHT IS BY NATURE NOT TRANSMISSIBLE
EXAMPLE: SCHOLARSHIP GRANT, LOVE,
KINDS OF OBLIGATIONS See Arts. 1179 – 1230
As to Sanction
1. Civil or perfect obligation . It is an obligation
whose sanction is law.
2. Natural Obligation is one enforceable by law
but nevertheless binding on the obligor by dictate of his
conscience and the basic postulates of natural law,
justice and equity.
3. Moral Obligation is a duty imposed by ethical
or religious belief.
As to Sequence of Performance
1. Primary Obligation. The principal object of the
contract.
2. Secondary Obligation . One which is
contracted and is to be performed in case the primary
obligation cannot be performed.
As to Object
Principal Obligation. One which arises from the principal
object of the engagement of the contracting parties.
(Ex. Contract to Sell, Deed of Sale, Loan)
Accessory Obligation . One which depends upon or
peripheral or collateral to the principal.
(Ex. Interest)
Kinds of Obligations Under the Civil Code
Pure and Conditional Obligation.
Obligation with a Period
Alternative Obligation
Joint and Solidary Obligation
Divisible and Indivisible Obligation
Obligation with a Penal Clause
Pure Obligation
* Every obligation whose performance does not depend upon
a future or uncertain event, or a past event unknown to the
parties, is demandable at once and is called a pure obligation
Conditional Obligation
* Conditional obligation is one the fulfillment of which is
dependent upon the happening of an event.
THE CONDITION MAY BE;
• Suspensive or Condition Precedent – wherein
the happening of the condition gives rise to the
obligation. The obligation is not to take effect until the
event happens, it is a suspensive condition.
(Ex. I will give you P30, 000 if you graduate from college)
• Resolutory Condition or Condition Subsequent-
wherein the happening of the condition extinguishes
the obligation, obligation with resolutory condition take
effect at once, but terminate upon the happening of
the event. (Ex. I will give you P1, 000 per month until
your graduation)
• Potestative - wherein the condition depends
upon the will of the debtor. ( Ex. I will pay my debt
whenever I like. Invalid Condition, Art. 1182)
• Casual
-wherein the condition depends upon chance, or on
the will of the third person (Ex. I will give you P20, 000 if
Manny Pacquiao wins his next fight)
• Impossible Conditions - those contrary to good
customs or public policy and those prohibited by law,
-shall annul the obligation which depends upon them.
(Ex. I will give you P100, 000 if you kill my ex wife)
Obligations with a Period or Term
• Obligations for whose fulfillment a day certain
has been fixed is called an obligation with a period or
term and is demandable only when that day comes.
• In obligation with a period, the general rule is
that it is presumed that the period has been established
for the benefit of both creditor and debtor (See Arts
1193, 1196)
KINDS:
1.Resolutory ( in diem ) – demandable at once but terminates
upon arrival of the day certain.
Ex. . (Ex. I will give you P1, 000 per month until December 25,
2022)
• Day certain – that which must necessarily come, although it
may not be known when.
2.Suspensive ( ex die ) –obligation becomes demandable on
the day stipulated.
(Ex. I will give you P30, 000 on your college graduation)
In the following instances, the court
may fix the period
If the obligation does not fix a period but from its nature and
circumstances it can be inferred that a period was intended
When it depends on the will of the debtor
When the debtor binds himself to pay when his means will
permit him to do so.
(Alternative Obligation
• An alternative obligation is one where out of
two or more prestations which may be given or
performed, only one is due and the complete
performance of one of them extinguishes the
obligation.
• The Obligee or creditor cannot be compelled
to receive part of one and part of the other
undertaking or prestation (Article 1199, Civil Code)
As a general rule, the right to choose the alternative belongs to
the debtor. However, there are four limitations to this right of
choice of alternative by the debtor.
• When the right of choice of the alternative is
expressly
• Granted to the creditor by mutual agreement
of the Parties (Art. 1200, Civil Code)
• The debtor has no right to choose those
prestations
• Which are impossible, unlawful or which could
not have Been the object of the obligation (Art. 1200,
Civil Code)
• The choice cannot produce any legal effect
until it has been communicated to the other party (Art.
1200, Civil Code)
• The debtor loses the right of choice among the
prestations whereby he is alternatively bound when
only one alternative is left that is practicable of
performance.
EFFECT OF LOSS OF OBJECTS OF
ALTERNATIVE OBLIGATIONS
1. If the right of choice belongs to the debtor
• If through a fortuitous event all were lost, debtor cannot be
held liable for damages
• If 1 or more but not all of the things are lost or one or some but
not all of the prestations cannot be performed due to fortuitous
event or fault of the debtor, creditor cannot hold the debtor
liable for damages because the debtorcan still comply with his
obligation
• If all things, except one, were lost, the debtor must comply by
performing that which remain
• If all were lost by fault of the debtor the later is liable for the
value of the last thing or service which became impossible
2. If right of choice belongs to the creditor
• If 1 of the things is lost through a fortuitous event, the debtor
shall perform the obligation by delivering that which the
creditor should choose from among the remainder or that
which remains if only 1 subsists
• If the loss of 1 of the things occurs through the fault of the
debtor, the creditor may claim any of those subsisting or the
price of that which, through the fault of the former, has
disappeared with a right to damages
• If all the things are lost through the fault of the debtor, the
choice by the creditor shall fall
Facultative Obligation
• When only one prestation has been has been
agreed upon, but the obligor may render another in
substitution, the Obligation is facultative (Article 1206,
CivilCode)
1. Only one thing is due but a substitute may be
given to render payment/fulfillment easy
 2. If principal obligations is void and there is no
necessity of giving the substitute;
If it is impossible to give the principal, the
substitute does not have to be given; if it
3. is impossible to give the substitute, the principal
must still be given
4. The right of choice is given only to the debtor
Joint and Solidary Obligation
• A joint obligation may be defined as an
obligation where there is a concurrence of several
creditors or several debtors, by virtue which each of the
creditors has a right to demand, while each of the
debtors is bound to render the compliance with his
proportionate part of the prestation which constitute
the object of obligation.
*(Ex. A and B is jointy indebted to C and D in the amount of
P10, 000.
*C or D may only demand P5, 000 from either A or B. A and B
may pay their proportionate share amounting to P5, 000 each
to either C and D)
Solidary obligation
Solidary obligation as one in which each of the debtors is liable
for the entire obligation, and each of the creditors is entitled to
demand the satisfaction of the whole obligation from any or all
of the debtors.
The Right of the Creditors in Solidary Obligation
1. The right to demand entire payment of the
debt or the entire compliance with the prestation from
any one of the debtors
2. If the debt has not been fully collected from
one debtor, the creditor has the right to demand
payment from the remaining debtors (Art. 1216, Civil
Code)
3. The right to file an action for compliance with
the obligation against one , some all of the debtors
simultaneously.
4. The right to receive payment or compliance
with the entire prestation, from one, some or all of the
debtors
5. The right to do whatever may be useful to the
other creditors.
6. The right to assign his rights with the consent of
the other creditors (Art 1213, Civil Code)
7. The right to make a novation, compensation,
confusion Or remission of the debt.
Obligations of a Solidary Debtor
1. To pay the entire debt or fulfill the entire
prestation when so demanded by creditors. Payment
made by one of the solidary debtors extinguishes the
obligation. If two or more solidary debtors
offer to pay, the creditor may choose which offer to
accept. (Art. 1217, Civil Code)
2. To pay his corresponding share in the debt in
case one of the solidary debtors made full payment of
the obligation, with the interest for the payment
already made. If payment is made before the debt is
due, no interest for the intervening period may be
demanded. (Art. 1217, Civil Code)
3. To pay for the share of the insolvent co-debtor
in proportion to the debt of each when one of the
solidary debtors cannot, because of his insolvency,
reimburse his share to the debtor paying the obligation
(Art. 1217 3rd par. Civil Code)
4. If the solidary debtor makes payment after the
obligation has prescribed or become illegal, he losses
the right to reimbursement from his co debtors (Art.
1218, Civil Code)
Divisible and Indivisible Obligation
• An obligation to give definite things and those
which are not susceptible of partial performance is
deemed an indivisible obligation (Art. 1225, Civil Code)
• When the obligation gives rise for its object the
execution of certain number of days work, the
accomplishment of work by metrical units, or
analogous things which by their nature are susceptible
of partial performance, such obligation is called
divisible obligation.
• A divisible obligation is one the object of
which, in its delivery or performance, is capable of
partial fulfillment. For example, A agreed to pay B
• Php4,000 in two equal monthly installments for
his debt. Here, the obligation of A is divisible because it
is capable of partial performance.
There are three kinds of division[1]:
a)Qualitative or one that is based on quality, e.g. A and B
agreed to divide their inheritance where A gets the house and
lot, and B gets a car and Php1,000,000;
b) Quantitative or one that is based on quantity, e.g. A and B
agreed to divide 2 parcels of land which are inherited from their
parents. Each got a parcel of land; and
c) Ideal or intellectual division or one which exists only in the
minds of the parties, e.g. C and D are co-owners of a house.
They cannot divide the house physically but their one-half
shares in the house are only separated mentally
OBLIGATIONS WITH A PENAL CLAUSE (See
Arts. 1226 – 1230)
-WITH PENAL CLAUSE – One to which an accessory undertaking
is attached for the purpose of insuring its performance by virtue
of which the obligor is bound to pay a stipulated indemnity or
perform a stipulated prestation in case of breach.
CHARACTERISTICS OF PENAL CLAUSES:
1.Subsidiary – As a general rule, only penalty can be
demanded, principal cannot be demanded,
Except: Penalty is joint or cumulative
2.Exclusive – takes place of damage, damage can only be
demanded in the ff. cases:
a. Stipulation – granting right
b. Refusal to pay penalty
c. With dolo ( not of creditor )
• MODES OF EXTINGUISHING OBLIGATION
CAUSES OF EXTINGUISMENT (P2LC3N- PARF)
(Art. 1231)
1. PAYMENT OR PERFORMANCE
2. LOSS OF THE THING DUE
3. CONDONATION OR REMISSION OF DEBT
4. CONFUSION OR MERGER OF THE RIGHTS OF THE
CREDITOR AND DEBTOR
5. COMPENSATION
6. NOVATION
7. ANNULMENT
8. RESCISSION
9. FULFILLMENT OF A RESOLUTORY CONDITION
10. PRESCRIPTION
CAUSES OF EXTINGUISHMENT
1.PAYMENT OR PERFORMANCE
- DELIVERY OF MONEY
- PERFORMACE OF OBLIGATION
HOW PAYMENT MUST BE MADE?
DELIVERY OF THE THING OR RENDITION OF SERVICE
KEY POINTS TO REMEMBER:
A.DEBTOR CANNOT COMPEL THE CREDITOR TO ACCEPT AN ACT
(IN OBLIGATIONS TO DO OR NOT TO DO) OR THING DIFFERENT
FROM AGREED UPON BY PARTIES.
B. CREDITOR CANNOT DEMAND A THING OF SUPERIOR QUALITY
NOR THE DEBTOR DEMAND A THING OF INFERIOR QUALITY.
- IN OBLIGATIONS TO GIVE A GENERIC THING, QUALITY AND
CIRCUMSTANCES WERE NOT STATED,
C. IF OBLIGATION IS A MONETARY OBLIGATION
- PAYMENT MUST BE IN LEGAL TENDER
2. PAYMENT OR PERFORMACE MUST BE COMPLETE.
EXCEPTIONS: IN THE FF. CASES, OBLIGATION IS DEEMED FULLY
COMPLIED
A.SUBSTANTIAL PERFORMACE OF OBLIGATION IN GOOD FAITH
B.ACCEPTANCE OF PERFORMANCE/PAYMENT , WITHOUT
OBJECTION, KNOWING ITS INCOMPLETENESS/IRREGULARITY
PARTIAL PAYMENTS
GEN. RULE: CREDITOR CANNOT BE COMPELLED TO RECEIVE AND
DEBTOR CANNOT BE COMPELLED TO MAKE PARTIAL PAYMENT.
EXCEPTIONS:
A.AGREEMENT
B.DEBT IS IN PART LIQUIDATED AND UNLIQUIDATED
WHO MUST MAKE THE PAYMENT?
PAYMENT MUST BE MADE BY THE DEBTOR WHO MUST POSSESS
THE FOLLOWING:
1. FREE DISPOSAL OF THE THING DUE
2. CAPACITY TO ALIENATE THE THING
QUESTION; MAY A THIRD PERSON COMPEL THE CREDITOR TO
ACCEPT PAYMENT OR PERFORMACE OF AN OBLIGATION?
ANSWER: NO. 4..TENDER OF PAYMENT
EXCEPTIONS: (1) MADE BY A THIRD PERSON WHO HAS AN - CONSISTS IN MANIFESTATION MADE BY THE DEBTOR TO THE
INTEREST IN THE FULFILLMENT OF THE OBLIGATION E.G: CREDITOR OF HIS DECISION TO COMPLY IMMEDIATELY WITH HIS
GUARANTOR/ CO-DEBTOR OBLIGATION.
(2)THERE IS STIPULATION TO THE CONTRARY CONSIGNATION- ACT OF DEPOSITING THE SUM OR THING DUE
WITH THE JUDICIAL AUTHORITIES
PAYMENT OF PERFORMANCE EXAMPLE: D BORROWED P5M FROM C. ON DUE DATE, D
QUESTION: IF A THIRD PERSON PAYS AN OBLIGATION, WHAT ARE TENDERED PAYMENT IN P100 BILLS TOTALLING 5M. C
THE RIGHTS WHICH ARE AVAILABLE TO HIM? REFUSED TO ACCEPT PAYMENT
ANSWER: RIGHTS OF THIRD PERSON WHO MAKES THE PAYMENT HERE: PAYMENT TENDERED BY D WAS LEGAL TENDER,
1. WITH KNOWLEDGE/CONSENT OF DEBTOR HENCE C WAS NOT JUSTIFIED IN REFUSING TO ACCEPT IT.
- REIMBURSEMENT
- SUBROGATED IN THE RIGHTS OF CREDITOR REQUISITES OF CONSIGNATION
2. W/OUT KNOWLEDGE/AGAINST THE WILL OF DEBTOR 1. DEBT IS DUE.
- RECOVER: IF PAYMENT HAS BEEN BENEFECIAL TO THE DEBTOR 2. VALID TENDER OF PAYMENT
3. CREDITOR REFUSES W/OUT CAUSE TO ACCEPT
TO WHOM PAYMENT BE MADE: PAYMENT
1. CREDITOR (PERSON IN WHOSE FAVOR THE 4. NOTICE OF CONSIGNATION
OBLIGATION HAS BEEN CONSTITUTED) THING/AMOUNT DUE
2. SUCCESSOR’S INTEREST SUCH AS HEIRS OR 5. PLACED IS DEPOSITED W/ JUDICIAL AUTHORITIES
6. AFTER CONSIGNATION, NOTICE TO PERSONS
ASSIGNS
INTERESTED IN THE FULFILLMENT OF OBLIGATION.
3. ANY PERSON AUTHORIZED TO RECEIVE
EFFECTS OF CONSIGNATION:
PAYMENTS EXTINGUISHES THE OBLIGATION
IF CREDITOR ACCEPTED CONSIGNATION OR DECLARATION
GEN. RULE: PAYMENT TO AN UNAUTHORIZED PERSON IS NOT
FROM JUDGE THAT CONSIGNATION HAS BEEN PROPERLY MADE
VALID
EXCEPTIONS : (1) PAYMENT HAS REDOUNDED TO THE BENEFIT OF
WHAT ARE THE EXCEPTIONS TO THE RULE THAT BEFORE
CREDITOR (2) PAYMENT IS MADE IN GOOD FAITH TO A PERSON
IN POSSESSION OF THE CREDIT CONSIGNATION SHALL PRODUCE THE EFFECTS OF PAYMENT, IT IS
ESSENTIAL THAT THERE MUST BE A PREVIOUS TENDER OF
WHERE PAYMENT MUST BE MADE?
PAYMENT?
1. PLACE DESIGNATED IN THE STIPULATION
ANSWER:
2. NO STIPULATION:
1. CREDITOR IS ABSENT/UNKNOWN/DOES NOT
A.DETERMINATE THING (OBLIGATION TO GIVE) APPEAR AT THE PLACE OF PAYMENT
PLACE OF THE THING AT THE TIME OF CONSTITUTION OF 2. INCAPACITATED
OBLIGATION. 3. W/OUT JUST CAUSE, REFUSES TO GIVE RECEIPT
B.GENERIC THING/ OBLIGATION TO DO 4. TWO OR MORE PERSONS CLAIM THE RIGHT TO
- DOMICILE OF DEBTOR COLLECT
5. TITLE OF THE OBLIGATION HAS BEEN LOST
SPECIAL FORMS OF PAYMENT (DAPAT)
1. DATION IN PAYMENT CAUSES OF EXTINGUISHMENT:
2. APPLICATION OF PAYMENT LOSS OF THE THING DUE
3. PAYMENT BY CESSION - THAT THE THING WHICH CONSTITUTES THE
4. TENDER OF PAYMENT AND CONSIGNATION OBJECT OF THE OBLIGATION PERISHES,
OR GOES OUT OF COMMERCE OF MAN
1.DATION IN PAYMENT/DACION EN PAGO OR DISAPPEARS IN SUCH A WAY THAT ITS EXISTENCE IS
A special form of payment where the ownership of property is UNKNOWN OR IT CANNOT BE RECOVERED
transferred to his creditor to pay a debt in money. CAUSES OF EXTINGUISHMENT:
Example: Mr. S owes Mr. T P5M. On due date, S proposes to T to REQUISITES OF LOSS OF THE THING DUE
accept a house and lot as payment of his Debt. T agreed to D’s 1. THING WHICH IS LOST IS DETERMINATE
proposal and accepts the house/lot. 2. THING IS LOST W/OUT ANY FAULT OF THE
2.APPLICATION OF PAYMENT DEBTOR
- designation of the debt to which payment shall be applied 3. THING IS LOST BEFORE THE DEBTOR INCURRED
when the debtor owes several debts in favor of the same DELAY
creditor.
REQUISITES OF APPLICATION OF PAYMENT: CAUSES OF EXTINGUISHMENT: LOSS OF THE THING DUE
(1) TWO OR MORE DEBTS EXCEPTIONS:
(2) DEBTS MUST OF THE SAME KIND 1. LIABLE FOR FORTUITOUS EVENTS
(3) DEBTS OWED BY THE SAME CREDITOR & DEBTOR 2. ASSUMPTION OF RISK
(4) ALL DEBTS ARE DUE 3. PARTLY DUE TO THE FAULT OF THE DEBTOR
EXCEPTIONS: 4. LOSS OCCURS AFTER DEBTOR INCURRED DELAY
1.STIPULATION TO APPLY TO A DEBT NOT YET DUE 5. DEBTOR PROMISES TO DELIVER TO 2 MOR MORE
2.APPLICATION MADE BY PERSON IN WHOSE FAVOR THE TERM IS PERSONS
CONSTITUTED 6. OBLIGATION IS GENERIC
3.PAYMENT IS NOT ENOUGH TO EXTINGUISH ALL DEBTS
APPLICATION OF PAYMENT CAUSES OF EXTINGUISHMENT:
KEY POINTS: REMISSION -Gratuitous abandonment by the creditor of his right
1. DEBTOR IS GIVEN PREFERENTIAL RIGHT TO DESIGNATE DEBT TO -Forgiveness of an indebtedness
BE PAID. REQUISITES OF REMISSION
2. IF HE DOES NOT MAKE DESIGNATION, CREDITOR MAY A. GRATUITOUS
EXERCISE THE SAME. B. MUST BE ACCEPTED BY THE OBLIGOR
3. NEITHER DEBTOR NOR CREDITOR MAKES DESIGNATION, THEN C. OBLIGATION MUST BE DEMANDABLE
PAYMENT BY OPERATION OF LAW WILL APPLY.
A. PAYMENT APPLIED TO ONEROUS DEBTS. KINDS OF REMISSION/CONDONATION
B. DEBTS OF THE SAME NATURE, APPLIED PAYMENTS 1. AS TO AMOUNT/EXTENT
PROPORTIONATELY. 2. AS TO FORM
3.PAYMENT BY CESSION 3. AS TO CONSTITUTION
- ABANDONMENT OR ASSIGNMENT BY THE DEBTOR OF ALL HIS
PROPERTY IN FAVOR OF HIS CREDITORS, SO THE LATTER MAY SELL 1.AS TO AMOUNT/EXTENT
THEM AND RECOVER THEIR CLAIMS OUT OF THE PROCEEDS. a. TOTAL – PRINCIPAL & ACCESSORY OBLIGATION
a. PARTIAL
REQUISITES OF PAYMENT BY CESSION 2.AS TO FORM
1. TWO OR MORE CREDITORS a. EXPRESS – ORALLY/WRITING
2. DEBTOR IS INSOLVENT b. IMPLIED - INFERRED BY CONDUCT
3. DEBTOR ABANDONS ALL HIS PROPERTIES EXCEPT THOSE 3.AS TO CONSTITUTION a. INTER VIVOS -CONSTITUTED BY
WHICH ARE EXEMPT FROM EXECUTION AGREEMENT OF BOTH PARTIES (PARTAKES OF A DONATION) b.
1. CREDITORS ACCEPT ABANDONMENT MORTIS CAUSA- CONSTITUTES BY LAST WILL & TESTAMENT
CAUSES OF EXTINGUISHMENT: CONFUSION/MERGER
-MEETING IN THE SAME PERSON OF THE QUALITIES OF CREDITOR
AND DEBTOR WITH RESPECT TO ONE AND THE SAME
OBLIGATION.
MERGER IN A JOINT OBLIGATION
-MERGER EXTINGUISHES ONLY THE SHARE OF THE JOINT
CREDITOR/DEBTOR IN WHOM THE CHARACTERS of
DEBTOR/CREDITOR CONCUR.
EXAMPLE: A, B and C are joint debtors of X P9K. The promissory
note evidencing the debt is assigned by X to Y, Y to Z and Z and
A.
EFFECTS: A’S SHARE OF P3K IS EXTINGUISHED BY THE MERGER
-B AND C ARE STILL LIABLE ON THE NOTE WITH A NOW AS THE
CREDITOR FOR 6K
CAUSES OF EXTINGUISHMENT:
MERGER IN A SOLIDARY OBLIGATION
-MERGER IN ONE OF THE SOLIDARY DEBTORS/SOLIDARY
CREDITORS EXTINGUISHED THE WHOLE OBLIGATION
EXAMPLE:
A, B AND C are solidary debtors of X for P9K. The promissory
note evidencing the debt is assigned by X to Y, Y to Z and Z to
A.
EFFECTS:
-WHOLE OBLIGATION IS EXTINGUISHED BY CONFUSION WITH ALL
THE DEBTORS NOW BEING THE CREDITORS
-A MAY DEMAND REIMBURSEMENT FROM B AND C P3K EACH.
CAUSES OF EXTINGUISMENT: COMPENSATION
- MODE OF EXTINGUISHING IN THEIR CONCURRENT AMOUNT
THOSE OBLIGATIONS OF PERSONS WHO IN THEIR OWN RIGHT ARE
CREDITORS AND DEBTORS OF EACH OTHER.
2 FORMS OF NOVATION BY SUBSITUTION OF THE PERSON OF THE
DEBTOR :
1) EXPROMISION
- IS EFFECTED W/ CONSENT OF CREDITOR AT THE
INSTANCE OF THE NEW DEBTOR EVEN W/OUT
KNOWLEDGE/WILL OF DEBTOR
- Subject to full reimbursement and subrogation
if made w/ consent of old debtor;
- If w/o consent or against will , only beneficial
reimbursement;
- If new debtor is insolvent, not responsible since
w/o his consent.
2) DELEGACION
- EFFECTED WITH THE CONSENT OF THE CREDITOR AT THE
INSTANCE OF THE OLD DEBTOR W/ CONCURRENCE OF
THE NEW DEBTOR.
- All parties to consent, full reimbursement;
- If insolvent new debtor – not responsible old
debtor because obligation extinguished by valid
novation unless: insolvency already existing and of
public knowledge or know to him at time of
delegacion.
CHAPTER ONE:CONTRACTS
• The Civil Code defines a contract as “a
meeting of minds between two persons whereby one
binds himself, with respect to the other, to give
something or to render some service.”
• For there to be a valid contract, these three
elements must be present:
1. consent,
2. object, and
3. cause.

ESSENTIAL REQUISITES OF COMPENSATION • Consent – consent means that there has been
1. TWO PARTIES , PRINCIPAL CREDITORS AND an offer and an acceptance of the cause and object
PRINCIPAL DEBTORS; of the contract. The acceptance must be conveyed to
2. BOTH DEBT CONSISTS IN MONEY/FUNGIBLE the party making the offer.
THINGS, SAME KIND & QUALITY
3. BOTH DEBTS ARE DUE -Its existence and validity is dependent upon another contract,
such as pledge , mortgage and guaranty.
4. LIQUIDATED AND DEMANDABLE DEBTS
5. NO RETENTIOn/CONTROVERSY COMMENCED BY
C- According to name
THIRD PERSON 1- Nominate- with a special name, such as pledge, barter and
6. COMPENSATION NOT PROHIBITED BY LAW lease.
2-Innominate -without any name
KINDS OF COMPENSATION
D-According to cause
A) AS TO CAUSE
1- Onerous -there is an exchange of consideration, such sale,
1. LEGAL – WHEN IT TAKES EFFECT BY OPERATION barter and lease.
OF LAW FROM THE MOMENT ALL OF THE REQUISITES 2-Gratuitous -there is no consideration, received in exchange
PRESCRIBED BY LAW ARE PRESENT. for what has been given, such as donation, remission and
2. VOLUNTARY commodatum.
3. JUDICIAL
B) AS TO EXTENT E- According to risk
1. TOTAL – DEBTS COMPENSATED ARE EQUAL IN 1- Commutative -where equivalent values are given by both
AMOUNT parties such as sale, barter and lease.
2. PARTIAL – DEBTS ARE NOT EQUAL 2-Aleatory -where fulfillment of the contract is dependent
upon chance, such as insurance
NOVATION
-IS THE SUBROGATION OR CHANGE OF AN OBLIGATION BY F-According to nature of obligation produced or number of
ANOTHER, RESULTING IN ITS EXTINGUISMENT OR MODIFICATION, parties obligated
EITHER BY; 1-Unilateral -where only one of parties is obliged to give to do
CAUSES OF NOVATION: something such as commodatum, gratuitous deposit and
1. CHANGING ITS OBJECT OR PRINCIPAL gratuitous mutuum.
CONDITION 2-Bilateral or sinalagmatico. -where both parties are obliged
2. SUBSTITUTING ANOTHER IN PLACE OF THE give or to do something, such as sale, barter and lease.
DEBTOR
3. SUBROGATING A THIRD PERSON IN THE RIGHTS G- According to subject matter
OF THE CREDITOR 1-Contracts involving things, such as sale, barter
2-Contracts involving rights or credits such as usufruct or
REQUISITES OF NOVATION assignment of credit
1. PREVIOUS VALID OBLIGATION 3-Contract involving service, such as agency, lease of services
2. AGREEMENT BETWEEN THE PARTIES TO MODIFY and contract of carriage
OR EXTINGUISH THE OBLIGATION
3. EXTINGUISHMENT OF OLD OBLIGATION H- According to the manner that consent is given
1 Express– contracts where the consent of the parties is given
4. VALIDITY OF NEW OBLIGATION
expressly in writing or verbally
2-Implied – contracts where the consent of the parties is not
KINDS OF NOVATION given expressly but is deducible from the conduct or acts of the
1. REAL/OBJECTIVE- change object, parties (i.e. implied agency when the principal fails to repudiate
the acts of the person on his behalf)
Cause/consideration or principal condition 3-Presumed - contracts where the consent was not given by
2. PERSONAL/SUBJECTIVE the parties but is presumed or provided by the law itself, to
-Substituting person of debtor. prevent unjust enrichment on the part of one party to the
-Subrogating 3rd person to rights of prejudice of the other, such as quasi-contracts
Creditor.
CLASSES OF INNOMINATE CONTRACTS
1.Do ut des(I give and you give)– is an agreement in which A
will give one thing to B, so that B will give another thing to A.
2.Do ut facias(I give and you do)-is a contract under which A
will give something to B, in order that B may do something for A.
• Object – all things within the commerce of men
and services not contrary to law, morals, good customs,
public order and public policy may be the object of a
valid contract.
• Cause – cause is understood as ‘consideration’
in common law jurisdictions. Cause has been defined
by the Philippine Supreme Court as ‘the essential
reason which moves the contracting parties to enter
into the contract’.
A contract has three distinct stages: preparation, perfection,
and consummation.
• Preparation or negotiation begins when the
prospective contracting parties manifest their interest in
the contract and ends at the moment of their
agreement.
• Perfection or birth of the contract occurs when
they agree upon the essential elements thereof.
• Consummation, the last stage, occurs when
the parties “fulfill or perform the terms agreed upon in
the contract, culminating in the extinguishment thereof
CHARACTERISTICS OF CONTRACT
1. Autonomy (Art. 1306) – where there is a sense of freedom;
contracting parties may establish contract as long as it is not
contrary to
Law, public policy, morals.
Limitations:
• Law – contract entered into must conform to
an applicable statute
• Police power – contract shall not contravene
morals, good customs, public order or policy
2.Consensuality (Art. 1315, sent.1) –
Perfected by mere consent
3. Mutuality (Art. 1308) – that contract is binding to both parties
- a contract which its fulfillment or extinguishment is dependent
upon the will of ONLY ONE of the parties is VOID.
- no party can renounce or violate the law of the contract
without the consent of the other
4.Obligatoriness (Art. 1315) – contract is
Complied with good faith (Art. 1157)
-Parties are also bound to all the consequences
5.Relativity (Art. 1311) – Contracts take effect only between the
PARTIES, their ASSIGNS and HEIRS
CLASSIFICATION OF CONTRACTS
A-According to perfection
1-Consensual- perfected by mere consent, such as sale and
barter.
2-Real– perfected by the delivery of the object of the contract,
such as pledge, loan and deposit
B-According to degree of importance
1-Principal-can stand alone, such as sale, barter, deposit and
loan.
2-Accessory
3.Facio ut des(I do and you give)– is an agreement in which A
binds himself to do something for B, so that B will give
something to A.
4.Facio ut facias(I do and you do)– is a convention whereby A is
to do something for B, so that B will render some other service
to A.
Chapter Two: REQUISITES
Under Article 1318 of the Civil Code, “[T]here is no contract
unless the following requisites concur:
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.
CONSENT
• Article 1319. Consent is manifested by the
meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the
contract. The offer must be certain and the
acceptance absolute. A qualified acceptance
constitutes a counter-offer.
• Offer – a proposal made by one party to
another to enter into a contract.
• Acceptance – manifestation by the offeree of
his assent to the terms of the title offer.
• Without it, no meeting of the minds
OFFER
• Art. 1321. The person making the offer may fix
the time, place, and manner of acceptance, all of
which must be complied with.
• Art. 1322. An offer made through an agent is
accepted from the time acceptance is communicated
to him.
• Art. 1323. An offer becomes ineffective upon:
1) death,
2) civil interdiction,
3) insanity,
4) insolvency of either party
before acceptance is conveyed.
WHEN OFFER BECOMES INEFFECTIVE
• An offer may be withdrawn before it is
accepted. After acceptance, the contract is already
perfected.
• Under Article 1323, even if the offer is not
withdrawn, its acceptance will not produce a meeting
of the minds in case the offer has already become
ineffective because of the death, civil interdiction,
insanity, or insolvency of either party before the
conveyance of the acceptance to the offeror.
• Article 1324. When the offeror has allowed the
offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by
communicating such withdrawal, except when the
option is founded upon a consideration, as something
paid or promised.
• When acceptance of the offer is to be made?
When the offer fixes the time of acceptance
should be made within that time.
• Withdrawal of the offer
The offer may be withdrawn by the offeror at
any time before acceptance, unless the option is
founded a consideration.
How offer is withdrawn?
1- By notice given to the offeree, which notice
should be received by offeree before acceptance is
conveyed to the offeror.
2- By the expiration of the period of the offer.
OPTION CONTRACT
• An option contract is defined in the second
paragraph of Article 1479 of the Civil Code:
• Article 1479. x x x An accepted promise to buy
or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported
by a consideration distinct from the price.
• As a contract, it must necessarily have the
essential elements of subject matter, consent, and
consideration. Although an option contract is deemed
a preparatory contract to the principal contract of
sale, it is separate and distinct therefrom, thus, its
essential elements should be distinguished from those of
a sale. (PHILIPPINE NATIONAL OIL COMPANY and PNOC
DOCKYARD & ENGINEERING CORPORATION, Petitioners
vs.
KEPPEL PHILIPPINES HOLDINGS, INC. G.R. No. 202050)
ACCEPTANCE
• Article 1320. An acceptance may be express
or implied.In layman’s term
Ang pagtanggap ay maaaring ipahayag o ipahiwatig.
Discussion
1. Express – when it is implicitly made in writing or
verbally
2. Implied – when it can be deduced from the
conduct of the party
Examples: Express X agrees to Y, in writing, that the
latter will perform the delivery himself.
• Implied
X and Y was in agreement to deliver the thing due to X,
X modified the agreement that the thing due be
delivered to A, without acceptance, Y delivered the
thing due to A.
Effects of silence
Silence is not equivalent to consent, but there are specific legal
provisions which makes silence amount to consent.
Period of acceptance
1. Stated fixed period in the offer
2. No stated fixed period
a. Offer is made to a person present – acceptance must be
made immediately
b. Offer is made to a person absent –acceptance may be
made within such time
that, under normal circumstances, an answer can be received
from him
• NOTE: Acceptance may be revoked before it
Comes to the knowledge of the offeror.
PERSONS WHO CANNOT GIVE CONSENT TO A
CONTRACT:
1. Minors
2. Insane or demented persons
3. Illiterates/ deaf-mutes who do not know how to
write
4. Intoxicated and under hypnotic spell
5. Art 1331 - person under mistake; mistake may deprive
intelligence
6. Art 1338 - person induced by fraud (dolo causante)
• NOTE: Dolus bonus (usual exaggerations intrade) are not in
themselves fraudulent
RULE ON CONTRACTS ENTERED INTO BY
MINORS
GENERAL RULE: VOIDABLE
• EXCEPTIONS:
a. Upon reaching age of majority – they ratify the same.
b. They were entered unto by a guardian and the court having
jurisdiction had approved
the same.
c. They were contracts for necessities such as food, but here the
persons who are bound to
give them support should pay therefore
d. Minor is estopped for having misrepresented his age and
misled the other party.
Art. 1330. A contract where consent is given through mistake,
violence, intimidation, undue influence, or fraud is voidable
Vices of consent:
A. Mistake - should refer to mistake of fact and
not of law.
Requisites:
1. it must be of a past or present fact
2. mistake must have induced the consent
3. mistake must not be imputable to the party mistaken, i.e.
mistake is not inadvertent and excusable
4. mistake must be of fact and not of law
B) Violence
- refers to physical force or compulsion
- there is violence when in order to wrest consent, serious or
irresistible force is employed
Requisites:
1. force employed is serious or irresistible
2. it is the determining cause of consent
3. it is not justified
4. it is sufficient
C) 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.
Requisites
1. it must produce a reasonable and well-grounded fear
2. fear must produce the consent
3. fear is of imminent and grave evil upon person and property
4. threat must be unjust
D) Undue Influence
-when a person takes advantage of his power over the will of
another, depriving the latter of a reasonable freedom of
choice
- to determine whether the influence exerted is unreasonable,
the following circumstances shall be considered:
1. confidential relations
2. family relations
3. spiritual relations
4. other relations between the parties
E) Fraud
- when through insidious words or machinations of one of the
contracting parties, the other is induced to enter in to a
contract which, without them, he would not have agree to.
Requisites:
1. there must be a misrepresentation or concealment of a fact
2. it must be serious
3. it must be employed by one of the contracting parties and
not by a third person
4. it must not be employed by both contracting parties
5. it must have induced the consent of the other party
6. it must be made in bad faith, i.e. with knowledge of its falsity
Art. 1345. Simulation of a contract may be absolute or relative.
The former takes place when the parties do not intend to be
bound at all; the latter, when the parties conceal their true
agreement
SIMULATION
is the declaration of a fictitious intent manifested deliberately
and in accordance with the agreement of the parties in order
to produce for the purpose of deceiving others the
appearance of a transation which does not exist or which is
different from their true agreement.
Requisites:
1. A deliberate declaration contrary to the will of the parties
2. Agreement of the parties to the apparently valid act
3. The purpose is to deceive or to hide from third persons
although it is not necessary that the purpose be illicit or for
purposes of fraud
2 types:
a. absolute – when the parties do not intend to be bound at all
b. relative – when the parties conceal their true agreement
Effects of Simulation
• If simulation is absolute = NO CONTRACT
• If simulation is relative = VALID CONTRACT
unless it prejudices a third person or has an illicit
purpose
OBJECT
REQUISITES:
1. Within the commerce of man - either existing or in potency
2. Licit or not contrary to law, good customs
3. Possible
4. Determinate as to its kind or determinable w/oneed to enter
into a new contract
5. Transmissible
THINGS WHICH CANNOT BE THE OBJECT OF
CONTRACT
1. things which are outside the commerce of men;
2. intransmissible rights;
3. future inheritance, except in cases expressly authorized by
law;
4. services which are contrary to law, morals, good customs,
public order or public policy;
5. impossible things or services;
6. objects which are not possible of determination as to their
kind.
CAUSE
• Immediate, direct and most proximate reason
why parties enter into contract.
REQUISITES:
1. It must exist
2. It must be true
3. It must be licit
• *Art. 1354. Although the cause is not stated in the
contract, it is presumed that it exists and is lawful, unless
the debtor proves the contrary
• Art. 1355. Except in cases specified by law,
lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue
influence.
Lesion - any damage caused by the fact that the price is
unjust or inadequate. General Rule: The mere fact the
cause is unjust or inadequate does not invalidate the
contract.
Exception: Unless there is fraud, mistake or undue influence.
CHAPTER THREE: FORMS
ART. 1356. Contracts shall be obligatory, in whatever form they
may have been entered into, provided all the essential
requisites for their validity are present. However, when the law
requires that a contract be in some form in order that it may
 • be valid or enforceable or that a contract be
proved in a certain way, that requirement is absolute
and indispensible. In such cases, the right of the parties
stated in the following articles cannot be exercised.
Gen. Rule: Whatever may be the form in which the contract
may have been entered into, it shall be obligatory provided all
the essential requisites for its validity are PRESENT.
Exceptions:
1. When the law requires that the contract must be in a
certain form in order to be valid. (Donation, acceptance of
real property, interest in loans)
2. When the law requires that the contract must be in a
certain form in order to be enforceable.
3. Law requires contract to be in some form for
convenience – contract is valid and enforceable, needed
only to bind 3rd parties
Ex: public documents needed for the ff:
i. Contracts w/c object is creation, transmission
or reformation of real rights over immovables
ii. Cession, repudiation, renunciation ofhereditary
rights/CPG
iii. Power to administer property for another
iv. Cession of action of rights proceeding from an
act appearing in a public inst.
v. All other docs where amount involved is in
excess of 500 ( must be written Even private docs )
ART. 1358. The following must appear in a public document
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 are
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.
• All other contracts where the amount involved
exceeds five hundred pesos must appear in writing,
even a private one. But sales of goods, chattels or
things in action are governed by Articles 1403, No. 2
and 1405
CHAPTER 4 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.
REFORMATION OF CONTRACTS – remedy to conform to real
intention of parties due to mistake,fraud, inequitable conduct,
accident.
Requisites:
1. There must be a meeting of the minds of the contracting
parties
2. Their true intention is not expressed in the instrument
3. Such failure to express their true intention is due to mistake,
fraud, inequitable or accident
Causes/Grounds
• Art. 1361. When a mutual mistake of the parties
causes the failure of the instrument to disclose their real
agreement, said instrument may be reformed.
• Art. 1362. If one party was mistaken and the
other acted fraudulently or inequitably in such a way
that the instrument does not show their true intention,
the former may ask for the reformation of the
instrument
Art. 1363. When one party was mistaken and the other
knew or believed that the instrument did not state their real
agreement, but concealed that fact from the former, the
instrument may be reformed
• Art. 1364. When through the ignorance, lack of
skill, negligence or bad faith on the part of the person
drafting the instrument or of the clerk or typist, the
instrument does not express the true intention of the
parties, the courts may order that the instrument be
reformed.
Chapter 5 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.
Rule in interpretation of contracts:
The intention of the contracting parties should always prevail
because their will has the force of law between them.
KINDS OF DEFECTIVE CONTRACTS
1. Rescissible contracts
- there is damage or injury to one of the contracting parties or
to third persons.
2. Voidable contracts
-There is vitiation of consent or legal incapacity of one of the
contracting parties
3. Unenforceable contracts
-The contract is entered into in excess or without any authority,
or does not comply with the Statute of Frauds, or both
contracting parties are legally incapacitated .
4. Void or inexistent contracts
-One or some of the essential requisites of a valid contract are
lacking either in fact or in law
CHAPTER 6 RESCISSIBLE CONTRACTS
• Art. 1380. Contracts validly agreed upon may
be rescinded in the cases established by law.
• Rescissible contracts – a contract which is valid
because it contains all the essential requisites
prescribed by law, but which is defective because of
injury or damage to either of the contracting parties or
to third persons, as a consequence of which it may be
rescinded by a means of a proper action for rescission.
• Rescission is a remedy granted by law to the
contracting parties, and even to third persons, to
secure the reparation of damages caused to them by
a contract, even if the same should be valid, by means
of the restoration of things to their condition prior to the
celebration of the contract.
REQUISITES:
Art. 1381. The following contracts are rescissible: 1. Those which
are entered into by guardians whenever the wards whom they
represent suffer lesion by more than one-fourth of the value of
the things which are the object thereof;
2. Those agreed upon in representation of absentees, if the
latter suffer the lesion stated in the preceding number;
3. Those undertaken in fraud of creditors when the latter cannot
in any other manner collect the claims due them;
4. Those which refer to things under litigation if they have been
entered into by the defendant without the knowledge and
approval of the litigants or of competent judicial authority;
5. All other contracts specially declared by law to be subject to
rescission.
• Art. 1383. The action for rescission is subsidiary; it
cannot be instituted except when the party suffering
damage has no other legal means to obtain reparation
for the same.
• Rescission is not a principal remedy. It is only
subsidiary, meaning that it can be availed of only if the
injured party proves that he has no other legal means
aside from rescinding the contract to obtain redress for
the damage caused.
• Art. 1389. The action to claim rescission must be
commenced within four years.
• For persons under guardianship and for
absentees, the period of four years shall not begin until
the termination of the former's incapacity, or until the
domicile of the latter is known.
General Rule: The action to claim rescission must be
commenced within four years from the date the contract was
entered into.
Exceptions:
1. Under guardianship – the period shall begin from the
termination of incapacity
2. Absentees – from the time the domicile is known
Persons entitled to bring action:
1. The injured party
2. His heirs, assigns or successors in interest
3. The creditors of the above entitled to subrogation
CHAPTER 7 VOIDABLE CONTRACTS
• Art. 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.
Voidable contracts
– those which possess all the essential requisites of a valid
contract but one of the parties is incapable of giving consent,
or consent is vitiated by mistake, violence, intimidation, undue
influence or fraud.
- They are considered valid and binding unless annulled by a
proper action in court.
- Once ratified, it becomes binding and can no longer be
annulled.
Kinds of voidable contracts: Any contract is voidable if the
defect is caused by either:
1. Legal incapacity to give consent
2. Violation of consent, where the vitiation is done by mistake,
violence, intimidation, undue influence or fraud
Legal capacity to give consent
WHAT CONTRACTS ARE VOIDABLE:
a. Minors ( below 18 )
b. Insane unless acted in lucid interval
c. Deaf mute who can’t read or write
d. Persons specially disqualified: civil
interdiction
e. In state of drunkenness
f. In state of hypnotic spell
Violation of consent, where the vitiation is done by mistake,
violence, intimidation, undue influence or fraud
• MISTAKE – false belief into something.
• VIOLENCE- serious or irresistible force is employed to
wrest consent.
• INTIMIDATION- one party is compelled by a reasonable
and well grounded fear of an imminent and grave
danger upon person and property of himself,
spouse,ascendants or descendants (moral coercion).
• UNDUE INFLUENCE- person takes improper advantage
of his power over will of another depriving latter of
reasonable freedom of choice.
• FRAUD- thru insidious words or machinations of
contracting parties, other is induced to enter into
contract w/o w/c he will not enter (dolo causante).
REMEDY
• Art. 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.
Annulment – a remedy provided by law, for reason of public
interest, for the declaration of the inefficacy of a contract
based on a defect or vice
RATIFICATION
• Art. 1392. Ratification extinguishes the action to annul a
voidable contract. Ratification – the act or means by
virtue of which efficacy is given to a contract which
suffers from a vice of curable nullity.
REQUISITES
i. knowledge of reason rendering
contract voidable
ii. such reason must have ceased,
except in case of ratification
effected by the guardian to
contracts entered into by an
incapacitated,
iii. the injured party must have
executed an act which expressly
or impliedly conveys an intention
to waive his right
CHAPTER 8 UNENFORCEABLE CONTRACTS
Unenforceable contract – are those which cannot be enforced
by a proper action in court, unless they are ratified, because,
either they are entered into without or in excess of authority or
they do not comply with the statute of frauds or both
contracting parties do not possess the required legal capacity
Classes of unenforceable contract:
1. Those contracts entered into in the name of another person
by one without any authority or in excess of his authority.
2. Those which do not comply with the Statute of frauds
3. Those where both contracting parties are legally
incapacitated.
• Art. 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 of 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.
(3) Those where both parties are incapable of giving consent to
a contract.
Statute of fraud
- It was enacted for the purpose of preventing fraud
- It is required that the contract be in writing and subscribed by
the party charged or by his agent.
- In case of non-compliance, the contract is unenforceable by
action.
- Classes covered:
1. An agreement that by its terms is not to be performed within
a year from the making thereof.
2. A special promise to answer for the debt, default or
miscarriage of another.
3. An agreement made in consideration of marriage, other than
a mutual promise to marry.
4. An agreement for the sale of goods, chattels, or things in
action, at a price not less than five hundred pesos.
5. An agreement for the leasing of real property for a longer
period than one year, or for the sale of real property or an
interest therein.
TWO WAYS OF CURING UNENFORCEABLE
CONTRACTS:

a. Failure of defendant to object in

time, to the presentation of parole
evidence in court, the defect of
unenforceability is cured
b. Acceptance of benefits under the
contract. If there is performance in
either part and there is acceptance
of performance, it takes it out of
unenforceable contracts; also
estoppel sets in by accepting
performance, the defect is waived
CHAPTER 9 VOID AND INEXISTENT CONTRACTS
➢ Void or inexistent contracts – one which lacks
absolutely either in fact or in law one or some of the
elements which are essential for its validity
➢ Void contracts refer to those where all of the requisites
of a contract are present, but the cause, object or
purpose is contrary to law, morals, good customs,
public order and public policy. The concept of pari
delicto is applicable. Jurado said that there can still be
legal effect on this kind of contract.
➢ Inexistent contract, on the other hand, refers to those
where one or some or all of the essential requisites for
the validity of a contract are lacking. The concept of
pari delicto is not applicable and no legal effect may
be produced.

• Art. 1409. The following contracts are inexistent and

void from the beginning:

(1) Those whose cause, object or purpose is contrary to law,

morals, good customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the
transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the
principal object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set
up the defense of illegality be waived.

CHARACTERUSTICS:

a. It produces no effect whatsoever either against or in favor of

anyone;
b. There is no action for annulment necessary as such is ipso
jure. A judicial declaration to;
that effect is merely a declaration;
c. It cannot be confirmed, ratified or cured;
d. If performed, restoration is in order, except if pari delicto will
apply;
e. The right to set up the defense of nullity cannot be waived;
and
f. Imprescriptible