Contracts – Chapter 3, 4 & 5
What are the classification of contracts according to form?
1. Informal or common or simple contract – maybe entered into in whatever form (orally or in writing)
2. Formal or solemn contract - a specified form is required by law
What contracts must appear in a public instrument?
1. Contracts for the creation, transmission, modification or extinguishment of real rights over immovable
property; Ex. Real Estate Mortgage, Usufruct, etc.
2. Cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains.
Ex. Di modawat of kabilin sa ginikanan
3. Power to administer property
4. Cession of actions or rights from an act appearing in a public instrument. Ex. Real Estate Mortgage
which is condoned
What is reformation?
The remedy allowed by law by means of which a written instrument is amended or rectified so as to express or
conform to the real agreement or intention of the parties.
What may be the reason that the instrument can be reformed?
1. Mistake
2. Fraud
3. Inequitable conduct
4. Accident
S and B entered into a contract. B was mistaken and S acted fraudulently in such a way that the
instrument did not show their real agreement. Who can ask for reformation?
B, the party who was mistaken. S, the party who acted fraudulently cannot ask for reformation. (Art. 1362)
What is the remedy if the grounds for the reformation of instruments prevented a meeting of minds of
the parties?
Annulment (Art. 1359, 2nd paragraph)
What are the cases wherein reformation is not allowed?
Art. 1366
1. Simple donations inter vivos wherein no condition is imposed
2. Wills (but can be revoked by the testator)
3. When the real agreement is void (there is nothing to be reformed)
4. When the parties has already brought an action for the enforcement of the instrument. (estoppel)
Who can ask for reformation?
1. Either parties, if the mistake is mutual
2. In all other cases, the injured party
3. The heirs or successors in interest, in lieu of the party entitled
What is meant by interpretation of contracts?
The determination of the meaning of the terms or words used by the parties in their written contract.
How will the contract be interpreted if the terms are clear and leave no doubt upon the intention of the
parties?
Literally (Art. 1370)
What will prevail if the words in the contract appear to be contrary to the evident intention of the
parties?
The evident intention of the parties shall prevail. (Art. 1370)
What will be considered in the interpretation of contracts?
The contemporaneous and subsequent acts of the parties. (Art. 1371)
If the contract is capable of several meanings, how will the contract be interpreted?
The interpretation that will render the contract effectual or give life to the contract. (Art. 1373)
A contract was prepared by S and B merely signed the contract (contract of adhesion). There are
obscure stipulations in the contract. How will the contract be interpreted?
The contract will be interpreted in favor of B. It will not favor S, the party who caused the obscurity. (Art. 1377)
This is an example of a contract of adhesion.
When it is impossible to settle doubts of a gratuitous contract by the rules established. How will the
contract be interpreted?
The least transmission of rights. (Art. 1378)
When it is impossible to settle doubts of an onerous contract by the rules established. How will the
contract be interpreted?
Greatest reciprocity of interest. (Art. 1378)
