“FORM OF CONTRACTS” 25 pushups

It refers to the manner in which a contract is manifested or executed. A contract may be

in writing, oral, or partly both. If in writing it may be in a public or private instrument.

Generally, to be a written contract, all its terms must be in writing. A contract partly in
writing and partly oral is, in legal effect, an oral contract.

Classifications according to form

 Informal/simple/common – contracts that can be entered into whatever form

provided all the essential requisites for a contract are present. This may only
refer to consensual contracts.
 Formal/solemn – contracts required by law to be in a certain form.

Rules regarding form

 Generally, contracts are binding whatever may be the form in which the contract
has been entered into.
 Exceptions: the law requires that a contract be in some form
a) to be valid;
b) to be enforceable or proved in a certain way (statute of frauds); or
c) for the convenience of the parties or for the purpose of affecting third
persons.

Form for the convenience of parties

This refers to the contracts referred to in letter ‘c’ above. In some cases, a certain form is
required for the convenience of parties in order that the contract may be registered in
the proper registry to make effective, as against third persons, the right acquired under
such contract. Non-compliance with the form would not adversely affect the
validity/enforceability of the contract.

A party is allowed by law to compel the other to comply with such forms.

As regards to Sales
A sale of real property must be in writing to be enforceable. It can be entered into
orally validly, but the same will not be enforceable (if still executory).

Article 1357 will apply when a sale of real property is made in a private instrument. In
such case it will be binding, valid, and enforceable between the parties but not against
third persons. A party, in such a case, may compel the other to put the contract in a
public instrument.

Contracts which must appear in a public document

Article 1358 lists the contracts which are valid and enforceable though not contained in
a public document. The document is required only for convenience and greater
protection of the parties.

a) Creation, transmission, modification, or extinguishment of real rights over

immovable property.
b) Cession or renunciation of hereditary rights or those of conjugal partnership
gains
c) Power to administer property.
d) Cession of actions or rights proceeding from an act appearing in a public
document.

“REFORMATION OF CONTRACTS”

Reformation is the remedy by means of which a written instrument is amended or

rectified so as to express the real agreement/intention of the parties when by reason of
MFIA the instrument fails to express such intention.

Requisites of reformation

a) There is a meeting of the minds of the parties to the contract;

b) The written instrument does not express the true agreement of the parties;
c) The failure to express the true intention is due to MFIA;
d) The facts upon relief by way of reformation of the instrument is sought are put in
issue by the pleadings; and
e) There is clear and convincing evidence of MFIA.
Basis for reformation

Article 1361 – Mutual mistake

The requisites to justify reformation under Article 1361 are:

a) The mistake must be of fact;

b) Such mistake can be proved by clear and convincing evidence;
c) The mistake is mutual;
d) The mistake must cause the failure of the instrument to express their true
intention.

If the mutual mistake is of law, the remedy is annulment (see Art. 1334.)

Article 1362 – Mistake on one side, fraud/inequitable conduct on the other

Article 1363 – Mistake on on side, concealment by the other

Article 1364 – Ignorance on the part of third person

Neither party is responsible for the mistake. Either party may ask for reformation.

Article 1365 – Mortgage/pledge stated as sale

Reformation prohibited by law

(1) Simple unconditional donations inter vivos.

 The donee may not ask for reformation for he has no just cause for
complaint. Donation is gratuitous.
 The donor may ask for the reformation of a deed of donation.
(2) Wills.
 A will is an act whereby a person is permitted by law to control to a
certain degree the disposition of his estate, to take effect after his death.
 A will may be revoked by a testator any time prior to his death.
(3) When the real agreement is void.
(4) When one party has brought an action to enforce the instrument.

Party entitled to reformation

(1) Either of the parties, if the mistake is mutual under Articles 1361, 1364, and 1365;
(2) In all other cases, the injured party, under Articles 1362, 1363, 1364, and 1365;
and
 (3) The heirs or sucessors in interest. (Art. 1368.)

The burden of proof is upon the party insisting reformation. The effect of reformation is
retroactive. The rules of court governs procedure for the reformation of instruments.

“DEFECTIVE CONTRACTS”

Rescissible Voidable Unenforceable Void

Cause of Lesion or Defect in Unauthorized Lacks one or
action. inequity consent contracts, does all of the
not comply essential
with the elements or do
statute of not comply
fruads, or both with the forms
parties required by
incapable of law.
giving consent.
Remedy Rescission Annulment - Defense of
Illegality
(cannot be
waived)
Party entitled 1. The injured (a) In case of 1. Contracting 1. Injured party
party incapacity: parties when parties
(including 1. The injured 2. Guardians are not in pari
defrauded party upon delicto.
creditors) gaining 2. Exceptions
2. His heirs capacity are provided in
and assigns 2. Guardians Articles 1413 –
3. Creditors of (b) In case of 1419.
the above vitiation of
entitled to consent:
subrogation 1. The injured
party
May third Yes, defrauded Yes, if shown No Yes, if the third
persons avail creditors may to detriment person is
of the remedy? bring an action them. directly
for rescission. effected.
 Ratifiable? Yes Yes Yes No
Cases wherein 1. Party 1. Waived
remedy is not demanding impliedly or
available. rescission expressly
cannot return 2. Plaintiff
what he is loses the thing
obliged to he is bound to
restore return through
2. Property is his fault or
in legal fraud.
possession of a
third person
who did not
act in bad faith.