WENRY A. RESURRECCION JR.

, MBA
Instructor
Chapter 1: General Provisions
Art. 1156. An obligation is a juridical
necessity to give, to do or not to
do.
 The definition of obligations
establishes the unilateral act of the
debtor either to give, to do or not to do
as a patrimonial obligation. It means
that the debtor has the obligation while
the creditor has its rights.
The obligations referred to is a patrimonial obligations
that is, those obligations with pecuniary value or
assessable in terms of money.

1.Characteristics of patrimonial obligations:

• They represent an exclusively private interest.
• They create ties that are by nature transitory.
• They exist a power to make effective in case of non-
fulfillment, the economic equivalent obtained at the
patrimony of a debtor.

2.Juridical Necessity – it means the rights and duties

arising from obligation are legally demandable and the
courts of justice may be called upon through proper
action to order the performance.
Action means an ordinary suit in court of justice by which
one party prosecutes another for the enforceable or
protection for a right or a prevention or redress of a
wrong ( Sec. 1. Rules of court ).

Example –
Gaya bought a refrigerator from Tito but Gaya did
not pay the refrigerator. If after demand, Gaya still
did not pay, Tito can sue Gaya in Court either to
demand payment or for recovery of the
refrigerator.
3. Essential requisites of an obligation
–
a) An active subject, who has the power to demand the
prestation, known as the creditor or oblige;
b) A passive subject, who is bound to perform the prestation,
known as debtor or obligor.
c) An object or the prestation which may consist in the act of
giving, doing or not doing something.
d) The vinculum juris or the juridical tie between the two subjects
by reason of which the debtor is bound in favor of the creditor
to perform the prestation. It is the legal tie which constitutes
the source of obligation—the coercive force which makes the
obligation demandable. It is the legal tie which constitutes the
devise of obligation… the coercive force which makes the
obligation demandable.
 Juridical
Debtor
Or Obligor
Tie Creditor
or Obligee
To give, to
do or not to
 Example:
do
Gaya enters into a contract of sale with Tito who paid the
purchase of a GE refrigerator. Gaya did not deliver the
refrigerator. Gaya is the passive subject or debtor and
Tito is the active subject or creditor. The object or
prestation is the GE refrigerator and the obligation to
deliver is the legal tie or the vinculum juris which binds
Gaya and Tito.
This is also known as a unilateral obligation, that is, the
obligation of the debtor to fulfill or comply his commitment,
in this case, the delivery of the refrigerator.

On the other hand, if Gaya, delivered the refrigerator and

Tito did not pay, then Tito becomes the debtor who is bound
to pay while Gaya is the creditor who has the right to
demand the prestation.

4. Distinctions between Obligations and Contracts:

 Contract is the only one of the sources of obligation, while obligations
have other sources like law, quasi-contracts, delicts or quasi-delicts;
 Contract is a bilateral obligation while obligation is a
unilateral obligation;
 All contracts are obligations while not all obligations are
contracts.
5. Civil obligations as distinguished from
Natural obligations –
 Civil obligations derive their binding force from positive
law; Natural Obligation derives their binding effect
from equity and natural justice.
 Civil can enforced by court action of the coercive power
of public authority;
Natural – the fulfillment cannot be compelled by
court action but depends on the good conscience
of debtor.
ART. 1157. Obligations arise from:
 Law;
 Contracts;
 Quasi-contracts;
 Acts or omissions punished by law; and
 Quasi-delicts. (1089a)

On the sources of obligation, the main sources are really

Law and Contracts. The other sources are also established
by law.
 Source of
Obligations
1. LAW as a source of obligations –
The provisions of Art. 1158 refers to the legal
obligations or obligations imposed by specific
provisions of law, which means that obligations
arising form law are not presumed and that to be
demandable must be clearly provided for, expressly or
impliedly in the law.
Examples:
 It is the duty of the Spouses to support each other. (Art.
291, New Civil Code)
 And under the National Internal Revenue Code, it is the
duty of every person having an income to pay taxes.
2. CONTRACT as a source of obligations –

Contract as defined in Art. 1305, NCC is the meeting of minds between two person
whereby one binds himself with respect to the other,

Obligations arising from contracts have the force of law between the contracting
parties because that which is agreed upon in the contract by the parties is the law
between them, thus, the agreement should be complied with in good faith. (Art.
1159).

For examples:
A contract of lease was executed between Gaya as the lessee and Tito as the
lessor for the rent of an apartment.

 Although contracts have the force of law, it does not mean that contract are over
and above the law. Contracts are with the limitations imposed by law in Art. 1306,
NCC, it states that the contracting parties may establish such stipulations, clauses
terms and conditions as, they may deem convenient, provided that are not
contrary to law, morals, good custom, public order or public policy.
3. QUASI-CONTRACTS as a source of
obligations
The ‘quasi’ literally means ‘as if’.
 Quasi-contract is the juridical relation resulting from a
lawful, voluntary and unilateral act which has for its
purpose the payment of indemnity to the end that no
one shall unjustly enrich or benefited at the expense of
another. (Art. 2142, NCC)

Contracts and quasi-contracts distinguished:

 in a contract, consent is essential requirement for its validity
while in quasi-contract, there is no consent as the same is
implied by law;
 contract is a civil obligation while quasi-contract is a natural
obligation.
 2 Kinds of Quasi-contracts
1.Solutio Indebiti (Payment by mistake)
It is the juridical relation which arises when a person is obliged to return something
received by him through error or mistake.
Example-
Arvin owed Ian the sum of P1, 000.00. By mistake, Arvin paid P2, 000.00. Ian has
the obligation to return the P1, 000.00 excess because there was payment by
mistake.

2. Negotiorum gestio (management of another’s property)

It is the voluntary management or administration by a person of the abandoned
business or property of another without any authority or power from the latter. (Art.
2144, NCC)
Example-
Victor, a wealthy landowner suddenly left for abroad leaving his livestock farm
unattended. Ramon, a neighbor of Victor managed the farm thereby incurring
expenses. When Victor returns, he has the obligation to reimburse Ramon for the
expenses incurred by him and to pay him for his services. It is bases on the
principle that no one shall enrich himself at the expense of another.
4. DELICTS or acts or omissions punished by law as a source of obligations
Acts or omission punished by law is known as Delict or Felony or Crime.
 While an act or omission is felonious because it is punished by law, the criminal
act gives rise to civil liability as it caused damage to another.

Civil liability arising from delicts:

 Restitution – which is the restoration of or returning the object of the crime to

the injured party.

 Reparation – which is the payment by the offender of the value of the object

of the crime, when such object cannot be returned to the injured party.
 Indemnification – the consequential damages which includes the payment of

other damages that may have been caused to the injures party.
Illustration:
 Mario was convicted and sentenced to imprisonment by the Court for the crime of
theft, the gold wrist watch, of Rito. In addition to whatever penalty that the Court
may impose, Mario may also be ordered to return (restitution) the gold wrist watch
to Rito. If restitution is no longer possible, for Mario to pay the value (reparation) of
the gold wrist watch. In addition to either restitution or reparation, Mario shall also
pay for damages (indemnification) suffered by Rito.
5. QUASI-DELICTS as a source of obligations

Concepts of Quasi-Delict –
Quasi-delict is one where whoever by act or omission causes
damage to another, there being fault of negligence, is
obliged to pay for the damage done. Such fault of
negligence, if there is no pre-existing contractual relation
between the parties. (Art. 2176)

Example-
If Pedro drives his car negligently and because of his
negligence hits Jose, who is walking on the sidewalk of the
street, inflicting upon him physical injuries. Then Pedro
becomes liable for damages based on quasi-delict.
 Requisites of a quasi-
 delicts
There must be fault of negligence attributable to the
offended;
 There must be damage or injury caused to another;
 There is no pre-existing contract.
ART. 1158. Obligations derived from law are not presumed.
Only those expressly determined in this Code or in
special laws are demandable, and shall be regulated by
the precepts of the law which establishes them; and as
to what has not been foreseen, by the provisions.
(1090)

ART. 1159. Obligations arising from contracts have the

force of law between the contracting parties and should be
complied with in good faith. (1091a)
 ART. 1160. Obligations derived from quasi-
contracts shall be subject to provisions.

 ART. 1161. Civil obligations arising from criminal

offenses shall be governed by the penal laws,
subject to the provisions of article 2177, and of
the pertinent provisions of Chapter 2,
Preliminary Title, on Human Relations, and of
regulating damages. (1092a)

 ART. 1162. Obligations derived from quasi-delicts

shall be governed by the provisions of Chapter 2,
Title XVIII of this Book, and by special law.
(1093a)
Chapter 2: NATURE AND
EFFECT
 ART. 1163. OF
Every OBLIGATIONS
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. (1904a)

 ART. 1664. The creditor has a right to the fruits of

the thing from the time the obligation to deliver it
arises. However, he shall acquire no real right over it
until the same has been delivered to him. (1905)

 ART. 1165. When what is to be delivered is a determinate

thing, the creditor, in addition to the right granted him
by article 1170, may compel the debtor to make the
delivery.
 If the thing is indeterminate or generic, he may ask
that the obligation be complied with at the expense
of the debtor.

 If the obligor delays, or has promised to deliver the

same thing to two or more persons who do not have the
same interest, he shall be responsible for any
fortuitous event until he has effected the deliver. (1906)

 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. (1097a)
 Obligations of the Debtor To Give
a determinate thing-
1. To preserve or take care of the thing with the proper
diligence of a good father of a family. It means the
ordinary diligence that a prudent man would exercise in
taking care of his own property taking into
consideration the nature of the obligation, of the time
and of the place, like a person who is obliged to deliver
a determinate horse to another should, pending its
delivery, preserve it by taking care of the same as if the
horse is his own.
2. Accessions and
accessories.
 Accession – is the right pertaining to the owner of a
thing over its products and whatever is attached thereto
either naturally or artificially.
Example-
 Accretion which refers to the gradual and addition of
sediment to the shore by action of water.
 Accessories – are those things which are joined attached
to the principal object as ornament or to render it perfect.
Example-
 Radio attached to a car; or key to a car.
3. To be liable for damages in case of breach of obligation
(Art. 1170, NCC)

 When creditor acquire a right to the thing to be delivered

and
its fruits-
The creditor has a right to the fruits of the thing from the
time the obligation to deliver it arises. However, he shall
acquire no real right over it until the same have been delivered
to him. (Art. 1164, NCC)

Example – a binds himself to sell his horse to B for fro

P10, 000. No date nor condition is stipulated for delivery of
the horse.
Later, the horse gave birth to a colt. A has right to the
colt, if B has not paid the horse. Before delivery, B does not
 Definition of
1.terms:
Determinate thing – a thing is determinate when it is
particularly designated or physically segregated from
all others from the same class. (Art. 1460, NCC)
2. Indeterminate or generic thing – A thing is generic
when it refers to a class or thing or genus and cannot
be designated with particularity. (Art. 1460, NCC)
3. Fortuitous Events – those events which could not be
foreseen or which though foreseen were inevitable.
(Art. 1174, NCC)
 Art. 1167. If a person obliged to do something fails to do
it, the same shall be executed at his cost.

 This same rule shall be observed if he does it in

contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been
poorly done be undone. ( 1098 )
 Obligation of the debtor To
Do
Being a personal positive obligation, The creditor
has the right to secure the services of third person to
perform the obligation at the expense of the debtor
under the following instances:

 When the debtor fails to do the obligation;

 When the debtor performs the obligation but contrary to the
tenor; or
 When the obligor poorly performs the obligation.
 ART. 1168. When the obligation consists in not doing, and the
obligor does has been forbidden him, it shall also be undone
at his expense, (1099a)

 Obligation of the Debtor NOT To Do –

This is negative personal obligation which is consisting of an
obligation, of not doing something. If the debtor does what has been
forbidden him to do, the obligee can ask the debtor to have it
undone. If it is impossible to undo what was done, the remedy of
the injured party is for an action of damages.

Example-
A bought a land from B. It was stipulated that A would not
construct a fence in a certain portion of his land adjoining that land
sold by B. Should A construct a fence in violation of the agreement,
B. can bring an action to have the fence remove at the expense of A.
 ART. 1169. Those oblige to deliver or to do something incur in
delay from the time the obligee judicially or extra - judicially
demands from theme the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in

order that delay may exist:

(1) When the obligation or the law expressly declares; or

(2) When fro m the nature and the circumstances of the

obligation it appears that the destination of the time when
the thing is to be delivered or the service is to rendered was
controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor

has rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other

does not comply in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfills his obligation,
delay by the other begins. ( 1100a )
 Delay
(
means a legal delay Mora
or )
default and it consists of
failure discharge a duty resulting to one’s own
disadvantaged.

 The debtor incurred delay if:

 The debtor fails to perform his obligation when it falls
due; and
 A demand has been made by the creditor judicially or
extra judicially.
Example –
Gaya obliged herself to deliver a determinate horse to Tito on
June 20. this year. Gaya failed to delivered on the agreed date,
Is Gaya already on delay on June 20, only when Tito makes a
 However, there are instances when the demand by the
Creditor is not necessary to place the debtor on delay:

1. When the obligation expressly so provides

The mere fixing of the period is not sufficient to
constitute a delay. An agreement to the effect
that fulfillment or performance is not made
when the obligation becomes due, default or
delay by the
debtor will automatically arise.
2. When the law so provides
The express provision of law that a debtor is in default.
For instance, taxes must be paid on the date prescribed by
law, and demand is not necessary in order that the
taxpayer is liable for penalties.

3. When time is of the essence

Because time is the essential factor in the fulfillment of
the obligation. Example, Gaya binds herself to sew
the wedding gown of Maya to be used by the latter on
her wedding date. Gaya did not deliver the wedding
gown on the date agreed upon. Even without demand,
Gaya will be in delay because time of the essence.
4. When demand would be useless
 When the debtor cannot comply his obligation as when it is
beyond his power to perform. Like when the object of the
obligation is lost or destroyed through the fault of the
debtor, demand is not necessary.

5. In a reciprocal obligation, from the moment one of

the parties fulfills his obligation, delay to the
other begins
 For instance, in a contract of sale, if the seller delivers the object
to the buyer and the buyer does not pay, then delay by the
buyer begins and vice versa, if the buyer pays and the seller did
not deliver the object, then the seller is on delay.
 Kinds of delay
–
 Mora solvendi – delay on the part of the debtor.

 Mora accipiendi – delay on the part of the creditor, like

when the creditor unjustifiably refused to accept
payment at the time it was due, is in delay.

 Compensatio morae – delay both parties in a

reciprocal obligation.
ART. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or
delay, and those whoin any manner contravene
the tenor thereof, are liable for damages. (1101)

ART. 1171. Responsibility arising from fraud is

demandable in all obligations. Any waiver of an
action for future fraud is void. (1120a)

ART. 1172. Responsibility arising from

negligence in the performance of every king of
obligation is also demandable, but such liability
may be regulated by the courts, according to the
circumstances. (1130)
 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 of which is to be observed in the
performance, that which is expected of a good
father of a family shall be required. (1104a)
 Sources of liability for
1. damages:
Fraud (dolo) – is the intentional deception made by
one person resulting in the injury of another.
 The fraud referred to is incidental fraud, that is, fraud
incident to the performance of a pre-existing obligation.

2. Negligence (culpa) – consists in the omission by the

obligor of that diligence which is required by the
nature of the obligation and corresponds with the
circumstances of the person, of the time and of the
place. (Art. 1173, NCC)
3. Delay (Mora) – like when there has been judicial or
extra-judicial demand and the debtor does not
comply his obligation, delay will occur.

4. In contravention of the tenor of the obligation – refers to

the violation of the terms and conditions or defects in
the performance of the obligation, like when a
landlord fails to maintain a legal and peaceful
possession of a tenant being leased by the latter
because the landlord was not the owner and the real
owner wants to occupy the land, there is
contravention of the tenor of the obligation.
 Other sources of liability for
damages
 Loss of the thing with the fault of debtor.

 Deterioration with the fault of debtor. (Art. 1189)

 Kinds of
1.
Damages
Moral damages – include physical sufferings, mental
anguish, fright, serious anxiety, besmirched reputation,
wounded feeling, moral shock, social humiliation and
similar injury.

2. Exemplary damages – imposed by way of example

or correction for the public good.

Like in quasi-delicts, if the defendant acted with

gross negligence. (Art. 2231, NCC)
3. Nominal damages – are adjudicated in order that a
right of the plaintiff, which has been violated by the
defendant, may be vindicated or recognized and not
for the purpose of indemnifying the plaintiff for any
loss suffered by him. (Art. 2221, NCC)

4. Temperate or moderate damages – are more than

nominal but less than compensatory damages may be
recovered when the courts finds that its amount
cannot, from the nature of the case, be proved with
certainty. Pecuniary loss means loss of money, or of
something by which money or something of money
value may be acquired. (Black Law Dict. P. 1131)
5. Actual or compensatory damages – except as
provided by law, or a stipulation, one is entitled to
an adequate compensation only for such pecuniary
loss suffered by him as he has duly proved. (Art.
2199, NCC)
 Damages may be recovered:
 For loss or impairment of earning capacity in cases of
temporary
or permanent personal injury;
 For injury, to the plaintiff’s business standing or
commercial credit.
 Liquidated damages – are those agreed upon by parties to
a contract to be paid in case of breach thereof. (Art. 2226,
NCC)
 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
(1105a)
Fortuitous even – is an event which cannot be foreseen
which though foreseen is inevitable.

Fortuitous event proper are acts of God such as volcanic

eruption, earthquake, lightning, etc. is now similar with force
majuere or acts of man such as conflagration, war, robbery,
etc.

1. Requisite necessary to constitute fortuitous event

 The failure of the debtor to comply with the obligation must
be independent from the human will;
 The occurrence makes it impossible for the debtor to fulfill the
obligation on a normal manner, and the obligor did not take
part as to aggravate the injury of the creditor. (Vasquez v.C.A.
G.R.
2. As a general rule, no person shall be held responsible
for fortuitous events

 Example – Gaya obliged herself to deliver a determine car to

Tito on Dec. 30, 1998. Before the arrival of the period, the car
was struck by lightning and was totally destroyed. Gaya
cannot be held responsible for the destruction of the car,
hence her obligation to deliver is extinguished.
 Exceptions (when the person is responsible despite the
fortuitous even).

a. When the law expressly so provides, such as:

 The debtor is guilty of fraud, negligence or in contravention of the
tenor of the obligation. (Art, 1170, NCC)
 The debtor has proved to deliver the same thing to two or more
persons who do not have the same interest. ( Art. 1165,NCC )
 The thing to delivered is generic.
 The debtor is guilty of default or delay. ( Art. 1169,NCC )
 The debtor is guilty of concurrent negligence.

b. When declared by stipulation;

c. When the nature of obligation requires the assumption

of risk. An example of this is a contract of insurance.
 ART. 1175. Usurious transaction shall be governed by
special laws.

 Note: C.B. Circular No. 905 suspends the ceilings in the usury
law.
Hence, parties can agree as to the rate of interest.
 Kinds of interest
1. Conventional *The rate which is agreed upon by
the parties.
2. Legal Interest *The rate which is prescribed by law.
3. Lawful Interest *The rate which is agreed upon by
the parties but which rate is within
the
4. Usurious Interest rate authorized by law.
*The rate which is in excess of the
maximum rate of interest allowed
by law.
 ART. 1176.The receipt of the principal by the creditor
without reservation with respect to the interest,
shall give rise to the presumption that said interest
has been paid.

The receipt of a later installment of a debt

without reservation as to prior installments, shall
likewise raise the presumption that such
installments have been paid. (1110a)

Presumption means “the inference as to the

existence of a certain fact which if not contradicted is
considered as true.”
 The presumption in the above article is a disputable
presumption, whereby one which can be contradicted by
presenting proof to the contrary while a conclusive
presumption does not admit any evidence or proof,
hence, it is considered as a fact.

 Presumption under this article:

1. Receipt of the principal, without reservation as to the
interest, shall give rise to the presumption that the
said interest has been paid.
2. When the creditor issues a receipt of a later installment
of a debt without reservation as to prior installment is
presumed to have been paid.
 ART. 1177. The creditors, after having pursued the property
in possession of the debtor to satisfy their claims, may
exercise all the rights and bring all the actions of the latter
for the same purpose, save those which are inherent in his
person; they may also impugn the acts which the debtor may
have done to defraud them. (1111)

 Rights of Creditors –
In order to satisfy their claims against the debtor, creditors have
the following successive rights:

1. to levy by attachment and execution upon all the property of

the debtor, except such as are exempt by law from execution;

2. to exercise all the rights and actions of the debtor, except, such
as
are inherently personal to him; and

3. to ask for the rescission of the contracts made by the debtor in

ART. 1178. Subject to the laws, all rights acquired in
virtue of an obligation are transmissible, if there
has been no stipulation to the contrary. (1112)

As a rule, all rights acquired in virtue of an obligation

are transmissible, except in the following cases:
1. When the law so provides.
2. When the parties stipulate otherwise – by agreement
of parties that the rights acquired by them will not
be transmitted to any other person.
3. When the obligation is purely personal in nature.
 General Provisions on
Contracts
ART. 1305. A contract is a meeting of minds
between two persons whereby one binds
himself, with respect to the other, to give
something or to render service. (1254a)

 The above article defines the term Contract. In a

contract, one or more persons bind themselves with
respect to another or reciprocally, to the fulfillment of a
presentation to give, to do or not to do.
 Elements of
Contract
 1. Essential elements – those elements without which
there can be no valid contract. This element are consent,
object or subject matter and cause or consideration

 2. Natural elements – those elements which are found in

a contract by its nature and presumed by law to exist,
such as Warranty of hidden defects or eviction in
contract of sale.

 3. Accidental elements - those which exist by virtue of an

agreement for the purpose of expanding, limiting, or
modifying a contract. Such accidental elements are
condition, terms, modes of
clauses, payment, or
penalties.
 Stages of A
Contract
 1. Preparatory or conception – process of formation
such as bargaining, negotiation to arrive at a define
contract.

 2. Perfection or birth – there is now a meeting of

minds to arrive at a definite agreement as to the
subject matter, cause or consideration, terms and
conditions of contract.

 3. Consumption or death – which is the fulfillment

or performance of the terms and conditions agreed
upon in the contract may be said to have been fully
accomplished or executed.
 Characteristics of
Contracts
 1. Freedom to contract – they may establish terms
and conditions as they may deem convenient.

 2. Relativity – it is binding only upon the

parties and their successors.

 3. Obligatory force – it constitutes the law

as between the parties.

 4.Mutuality – its validity and performance cannot

be left to the will of only one of the parties.
 Classification of A
Contract: (FORM)
 1. As to perfection
a.Consensual – one which is perfected by mere consent (Art. 1315
b.Real Contract – perfected by mere consent and by the delivery of
the object or
subject matter. Ex. Deposit, pledge, or commodatum.
 2. As to dependence to other contract.
a. Principal – one which can stand alone. Ex. A contract of sale,
lease.
b.Accessory – those which are dependent upon another
contract. Ex. Contract of
mortgage, pledge of guaranty.
c.Preparatory – those which is created in order that a future
transaction or contract may be entered into by te parties. Ex.
Contract of partnership or agency.
 3. According to name or designation
a. Nominate – one which has particular
or designationname
such as sale, agency, etc.
b. Innominate – those without particular
name.
 4. According to the nature of obligation
a. Unilateral – where only one ha an obligation
perform.to Ex. Contract of donation, commodation.
b. Bilateral – where both parties have
obligation to perform. Ex.
reciprocal Sale.
 5. According to risk involved
a.Commutative - where there is an exchange
of values, such as lease.
b. Aleatory - one which the
fulfillment of the
obligation depends upon chance. Ex. Contract
of insurance.
 6. According to cause
a.Onerous – one which imposes valuable consideration
such as sale, mortgage.
b.Gratuitous – one which one of the parties does not
receive any valuable consideration, such as
commodatum.

7. According to form
a.Oral – by word of mouth of the parties
b.Written – the agreement which is reduced in
writing which may be public or private or private
document
ART. 1306. The contracting parties may establish such
stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public
policy. (1255a)

Art. 1307 Innominate contracts shall be regulated

by the stipulations of the parties, by the
provisions of Contracts, by the rules governing
the most analogous nominate contracts, and by
the customs of the place.
Contract Binds by Both
Parties
ART. 1308. The contract must bind both
contracting parties; its validity or compliance
cannot be left to the will of one of them. (1256a)

 ART. 1309. The determination of the
performance may be left to a third person, whose
decision shall not be binding until it has been made
known to both contracting parties.

 ART. 1310. The determination shall not be

obligatory if it is evidently inequitable. In such case, the
courts shall decide what is equitable under the
circumstances.
Determination of Performance
by Third Person
 As a rule, compliance with a contract cannot be left to the
will of one of the contracting parties. However, the
determination of its performance may be left to a third person
after it has been made known to both contracting parties.
Provided, further, the parties are not bound by the
determination if it is evidently inequitable or unjust when the
third person acted in bad faith or by mistake, the courts shall
decide what is equitable under the circumstances.

 Example, Gaya sold her parcel of land to Laura. It was

agreed that Maya, a real estate appraiser would be the one to
determine the reasonable price of the land. Maya, then, fixed
the price after considering the factors affecting the value of
the land, and informing both contracting party that the
decision is just and suitable. If the decision made by Maya is
manifestly inequitable, the court may be called upon to decide
what is equitable
ART. 1311. Contracts take effect only between the
parties, their assigns and heirs, except in case where
the rights and obligations arising from the contract
are not transmissible by their nature, or by
stipulation, or by provision of law. The heir is not
liable beyond the value of the property he perceived
from the decedent.

If a contact should contain some stipulation in

favor of third person, he may demand its fulfillment
provided he communicated his acceptance to the
obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The
contracting parties must have clearly and
deliberately conferred a favor upon a third person.
(1257a)
 Art. 1312 In contracts creating real rights, third persons
who come into possession of the object of the contract
are bound thereby, subject to the provisions of the
Mortgage Law and the Land Registration Laws.

 Art. 1313 Creditors are protected in cases of

contracts intended to defraud them.

 Art. 1314 Any third person who induces another to

violate his contract shall be liable for damages to the
other contracting party.
Cases Where Third person May
Be Affected By a Contract
 1. In determining the performance of both parties (Art.
1309).
 2. In contracts containing a stipulation in favor of a third person
1311)
(Art.
.
 3. In contracts creating real rights (Art. 1312).

 4. In contracts entered into to defraud creditor (Art.

1313).
 5. In contracts which have been violated at the inducement of the
person
third (Art.
314).
 Example, Gaya mortgaged her parcel of land in favor of Laura as
collateral for her debt. The mortgage is duly registered. Later on, Gaya
sold the same land to Tito. In this case, Tito bought the land subject to
the mortgage constituted thereon. Tito, although a stranger in the
mortgage, being a real right follows the property on the right of Laura to
the mortgage
Art. 1317 No one may contract in the name of
another without being authorized by the latter, or
unless he has by law a right to represent him.
 A contract entered into in the name of another by one who
has no authority or legal representation, or who has acted
beyond his powers , shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the
other contracting party. (1259a)
Chapter 2: Essential Requisites of
Contracts
General Provisions
Art. 1318 There is no contract unless the
following requisites occur:
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.
(1261)
Section 1.
Consent
Art. 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.
Acceptance made by letter or telegram does not bind
the offerer except from the time it came to his
knowledge.
The contract in such a case, is presumed to have been
entered into the place where the offer was made.
(1262a)
Art. 1320 An acceptance may be express or implied.

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 the death,
civil interdiction, insanity, or insolvency of either
party before acceptance is conveyed.

Art. 1324 When the offerer 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 rounded
upon a consideration, as something paid or
promised.
Art.1325. Unless it appears otherwise, business
advertisements of things for sale are not definite
offers, but mere invitations to make an offer.

Art. 1326. Advertisement for bidders are simply

invitations to make proposals, and the advertiser is not
bound to accept the highest or lowest bidder, unless
the contrary appears.
Art. 1327 The following cannot give consent to a
contract: 1.) Unemancipated minors;
2.) Insane or demented persons, and deaf-mutes who
do not know how to write. (1263a)

Art. 1328 Contracts entered into during a lucid interval

are valid, contracts agreed to in a state of drunkenness
or during a hypnotic spell are voidable.
Art. 1329 The incapacity declared in article 1327 is
subject to the modifications determined by law, and is
understood to be without prejudice to special
disqualifications established in the laws.

Art. 1330 A contract where consent is given

through mistake, violence, intimidation, undue
influence or fraud is voidable.
Art. 1331 In order that mistake may invalidate consent,
it should refer to the substance of the thing which is
the object of the contract, or to those conditions
which have principally moved one or both parties to
enter into the contract.
Mistake as to the identity or qualifications of one of
the parties will vitiate consent only when such
identity or qualifications have been the principal
cause of contract.
A simple mistake of account shall give rise to
its correction. (1226a)
Art. 1332 When one of the parties is unable to read, or if the
contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been fully
explained to the former.

Art. 1333 There is no mistake if the party alleging it know

the doubt, contingency, or risk affecting the object of the
contract.

Art. 1334. Mutual error as to the legal effect of an

agreement when the real purpose of the parties is
frustrated may vitiate consent.
Art. 1335. There is violence when in order to wrest
consent, serious or irresistible force is employed.
 There is intimidation when one of the contracting parties is
compelled by a reasonable and well-grounded fear of an
imminent and grave peril upon his person or property, or
upon the person or property of his spouse, descendants or
ascendants, to give his consent.
 To determine the degree of the intimidation, the age, sex
and condition of the person shall be borne in mind.
 A threat to enforce one’s claim through competent
authority, if the claim is just or legal, does not
vitiate consent. (1267a)
Art. 1336. Violence or intimidation shall annul the
obligation, although it may have been employed by
third Person who did not take part in the contract.
(1268)

Art. 1337. There is undue influence when a person takes

improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of
choice. The following circumstances shall be
considered: the confidential, family, spiritual, and
other relations between the parties, or the fact that
the person alleged to have been unduly influenced was
suffering from mental weakness, or was ignorant or in
financial distress.
Art. 1338. There is fraud when, through insidious
words or machinations of one of the contracting
parties, the other is induced to enter into contract
which, without them, he would not have agreed to.
(1269)

Art. 1339. Failure to disclose facts, when there is a duty

to reveal them, as when the parties are bound by
confidential relations, constitutes fraud.

Art. 1340. The usual exaggerations in trade, when the

other party had an opportunity to know the facts, are
not in themselves fraudulent.
Art. 1341. A mere expression of an opinion does not
signify fraud, unless made by an expert and the
other party has relied on the former’s special
knowledge.

Art. 1342. Misrepresentation by a third person does

not vitiate consent, unless such misrepresentation
has created substantial mistake and the same is
mutual

Art. 1343. Misrepresentation made in good faith is

not fraudulent but may constitute error.
Art. 1344. In order that fraud may make a contract
voidable, it should be serious and should not have
been employed by both contracting parties.
 Incidental fraud only obliges the person employing it
to pay damages.

Art. 1335. 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.
Art. 1346. An absolutely simulated or fictitious contract
is void. A relative simulation, when it does not
prejudice a third person and is not intended for any
purpose contrary to law, morals, good customs, public
order or public policy binds the parties to their real
agreement.
Section 2. Object of
Contracts
1347. All things which are not outside the commerce
of men, including future things, may be the object
of a contract. All rights which are not intransmissible
may also be the object of contracts.
 No contract may be entered into upon future
inheritance except in cases expressly authorized
by law.
 All services which are not contrary to law, morals,
good customs, public order or public policy may
likewise be the object of a contract. (1271a)
Art. 1348. Impossible things or services cannot be
the object of contracts. (1272)

Art. 1349. The object of every contract must be

determinate so as to its kind. The fact that the quantity
is not determinate shall not be an obstacle to the
existence of a contract, provided it is possible to
determine the same, without the need of a new
contract between the parties. (1273)
Section 3. Cause of
Contracts
Art. 1350. In onerous contracts the cause is
understood to be, for each contracting party, the
prestation or promise of a thing or service by the
other; in
remuneratory ones, the service or benefit which is
remunerated; and in contrast of pure beneficence, the
mere liberality of the benefactor. (1274)

Art. 1351. The particular motives of the parties in

entering into a contract are different from the
cause thereof.
Art. 1352. Contracts without cause, or with unlawful
cause, produce no effect whatever. The cause is
unlawful if is contrary to law, morals, good customs,
public order or public policy. (1275a)

Art. 1353. The statement of a false cause in contracts

shall render them void, if it should not be proved that
they were rounded upon another cause which is true
and lawful.
Art. 1354. Although the cause is not stated in the
contract, it is presumed that it exist and is lawful,
unless the debtor proves the contrary. (1277)

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.
 “IGNORANCE OF
THE LAW EXCUSES
NO ONE”