Obli Con Jurado Outline

8/20/2019 Obli Con Jurado Outline

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AUF School of Law Obligations and Contract

BOOK IVOBLIGATIONS and CONTRACTS

TITLE I – OBLIGATIONS

Art. 1156. Obligation is a !ridi"al n#"#ssit$ to

gi%#& to do or not to do.

Juridical necessity to comply with a prestation-Sanchez Roman

Legal relation established between one person andanother, whereby the latter is bound to thefulfillment of a prestation which the former maydemand from him. - Manresa

Ci%il obligation %s Nat!ralobligation

Gives to the obligeeor creditor the rightof enforcing itagainst the obligoror debtor in a courtof justice.(right of action)

#''#"t annot beenforced by courtaction

!ositive law so!r"# "#uity and naturallaw.

$e#uisites of %bligation

• juridical or legal tie

-bilateral-unilateral

•active subject

•passive subject

•fact, prestation or service

&&'s a general rule, the form of the obligation is notan essential elementre#uisite. E("#)t (the non-compliance of the following formalities would havethe effect of rendering the contract agreement voidor ineistent)*

---donation of personal property whose

value eceeds !+,., contract inwriting. ('rt. /, )---sale of a piece of land or any interesttherein through an agent, authority of suchagent be in writing. ('rt. 0/, )---1nterests in a contract of simple loan ormutual , agreement with respect to such bein writing. ('rt. 02+3, )---anticheresis, principal amount and

interest be specified in writing. ('rt. 405,)---6onation of immovable property be madein a public document and the acceptancebe made in the same document or separate

public document ('rt. 2, )---contribution of immovable property orreal rights to common fund (partnership)must be in a public instrument withattached inventory signed by the parties.('rt. 00, 05, )---hattel 7ortgage, personal propertymust be recorded in the hattel 7ortgage$egister ('rt. 40, )---sale or transfer of large cattle, suchtransfer or sale must be registered. (8ec.44, 'ct 9o. 00, 'rt. 0+/0, )

Classi'i"ations o' obligation

!rimary 8econdary

•pure and conditional

•with a period

•alternative andfacultative

• joint and solidary

•divisible and indivisible

•with a penal clause

•legal, conventional,penal

•real and personal

•determinate andgeneric

•unilateral and bilateral

•individual andcollective

•accessory and

principal

"lassi'i"ations a""ording to *anr#sa

As to !ridi"al +!alit$ -9atural-civil-mied

As to )arti#s -:nilateral and bilateral-individual andcollective

As to ob#"t -6eterminate andgeneric-simple and multiple-positive and negative-real and personal-possible andimpossible-divisible and divisible-principal and accessory

jmvdg 1 2nd Semester/2009-2010

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enriched or benefited at the epense of others.

ase* ;raders :nion vs 9L$

N#gotior!- g#stio Sol!tio ind#biti

'rises whenever aperson voluntarily ta=escharge of the agency ormanagement of thebusiness or property ofanother withoutauthority from the latter

'rises whenever aperson unduly deliversa thing through mista=eto another who has noright to demand it.

;he gestor or officiousmanager shall beobliged to continue suchagency or managementuntil the termination of

the affair and itsincidents

;he person to whom thedelivery has beenunduly made shallreturn the propertydelivered or the money

paid.

<r#s!-)ti%# "ons#nt2 consent given by law ifthere is no epress consent given by the otherparty--gives rise to multiple juridical relations resulting inobligations for delivery of the thing or rendering ofservice.

Art. 1161. Ci%il obligations arising 'ro-"ri-inal o''#ns#s s,all b# go%#rn#d b$ t,#)#nal la0s& s!b#"t to t,# )ro%isions o' arti"l#=1& and o' t,# )#rtin#nt )ro%isions o'C,a)t#r =& <r#li-inar$ Titl#& on >!-anR#lations& and o' Titl# :VIII o' t,is Boo4&r#g!lating da-ag#s. 17=a8

'rt. 0, $!ecept* treason, rebellion, illegal possession offirearms and gambling.

"nforcement of civil liability0. institution of criminal and civil actions- civil

action impliedly instituted, ecept*i. epress waive of the civil actionii. reservation of right to institute it

separately, or iii. institution of the civil action prior to the

criminal action.4. independent civil action5. other civil actions arising from offense

E''#"t o' A"+!ittal

Gro!nd 'ora"+!ittal

effect E%id#n"#n##d#d

Guilt notproven beyondreasonabledoubt

ivil action torecoverdamagesbased on thesame act oromission *A?still beinstituted

!reponderanceof evidence

9on-eistenceof facts for thecommission ofthe offense

ivil action torecoverdamages is nolonger possible.

E''#"t o' Ind#)#nd#nt Ci%il A"tionG#n#ral r!l#/ ;he civil action to recover from theperson criminally liable is not independent from thecriminal action.8eparate civil action- the right to file a civil actionshall depend upon the result of the criminal action.

ommencing the civil action prior the criminalaction- once the criminal action is instituted, theaction to recover damages shall be suspended.

"amples of entirely separate and independent

civil action*• the civil action is based on an obligation

not arising from the act complained of asoffense or felony.

◦ 8uch action may proceedindependently of the criminal actionand regardless of the result of thelatter.

◦ Culpa contractual - 9egligence in theperformance of a contract

◦ culpa aquiliana- 9egligence as asource of obligation (#uasi-delict)

•Law grants to the injured party the right toinstitute a civil action separate and distinctfrom the criminal action.

◦ 1nterferences by public officers oremployees or by private individualswith civil rights and liberties

◦ defamation

◦ fraud





◦ physical injuries

◦ refusal or neglect of a city or municipalpolice to render aid or protection incase of danger to life or property.

R#s#r%ation o' rig,t to 'il# s#)arat# and distin"t"i%il a"tion2 is a substantive right>

-procedural re#uirement under 8ec. 4 of$ule 000 of the 9ew $ules of ourt is notmandatory.-this was amended by 8ec. 5 of $evised $ules ofcriminal !rocedure 4.

Art. 116=. Obligations d#ri%#d 'ro- +!asi2d#li"ts s,all b# go%#rn#d b$ t,# )ro%isions o'C,a)t#r =& Titl# :VII o' t,is Boo4& and b$s)#"ial la0s. 17@a8

;!asi2d#li"t2 fault or negligence of a person who,by his acts or omission, connected or unconnectedwith, but independent from, any contractualrelation, causes damage to another person.-covers not only those that are not punished by lawbut also those acts which are voluntary andnegligent reasons* "it#d in Barr#do %s Gra"ia

&&&' single act can give rise to various obligations!ersons liable- the person directly responsible for

the damage incurred and*• ;he father, and, in case of his death or

incapacity, the mother, are liable for anydamages caused by the minor childrenwho live with them.

• Guardians are liable for damages done byminors or incapacitated persons subject totheir authority and living with them.

• %wners or directors of an establishment orbusiness are e#ually liable for anydamages caused by their employees whileengaged in the branch of the service inwhich employed, or on occasion of theperformance of their duties.

• "mployers with respect to damagescaused by their employees and householdhelpers acting within the scope of theirassigned tas=s, even though the former arenot engaged in any business or industry.

• ;he 8tate when it acts through a specialagent, but not if the damage shall have

been caused by the official upon whomproperly devolved the duty of doing the actperformed, in which case the provisions ofthe net preceding article shall beapplicable.

• ?inally, teachers or directors of arts andtrades are liable for any damages causedby their pupils or apprentices while they areunder their custody.

;he liability shall cease in case the personsmentioned therein prove that they eercised all thediligence of a good father of a family to prevent thedamage.

R#+!isit#s o' liabilit$

• ;here eist a wrongful act or omissionimputable to the defendant by reason of hisfault or negligence.

• ;here eist a damage or injury which mustbe proved by the person claiming recovery.

• ;here must be a direct causal connectionbetween the fault or negligence and thedamage or injury. ( proximate cause)

;!asi2d#li"t %s Cri-#

!rivate right Nat!r# o'rig,t

%iolat#d

!ublic right

ompensation

orindemnification(reparation ofinjury suffered

by theindividual)

or- o'

r#dr#ss

!unishment

(fine,imprisonment, or

both)

1t eist in anyact or omissionwherein fault ornegligenceintervenes

L#gal basiso' liabilit$

"ists when thereare penal lawsclearly penali<ingsuch crime

ivil liability liabilit$ riminal and civil

liability

riminal intentnot necessary

ondition ofthe mind

riminal intentnecessary

!reponderanceof evidence

evidence @eyondreasonable doubt

an be compromise an never be





compromised compromised.

Auasi-delict covers not only acts not punishable bylaws but it also includes acts which are criminal incharacter, whether intentional, voluntary or

negligent. El"ano %s >ill8

T0o distin"t 'a!lts(!adua vs $obles, Justice @arredo)

• "!l)a "ri-inal2 civil liability arising fromcrimes

• "!l)a2a+!iliana- liability arising from civilnegligence.

-recovery of damages twice for the same negligentact is omission is precluded.

-the etinction of the civil liability referred in !ar (e)

of 8ec. 5, $ule 000 refers eclusively to liabilityfounded on 'rt. 0 of $!, whereas the civilliability for the same act considered as #uasi delictis not etinguished even by a declaration in thecriminal case that the criminal act charged has nothappened or has not been committed by theaccused.("lcano vs Bill)

6iligence of employers*

;!asi2d#li"t Cri-#s

'rt. 40/ of 'rt. 05 of $!

!rimary liability 8ubsidiary liability

"mployer can avoidliability after proving thathe eercised duediligence

Liability is absolute andcannot be avoided byproof of diligence.

'pplies to all employerswhether they areengaged in enterpriseor not.

'pplies only toemployers engaged insome =ind of businessor industry.

ubi jus ibi remedium- unvindicated civil wrongs

--;he death of the accused after arraignment andduring the pendency of the criminal action shalletinguish the civil liability arising from the delict.

&&'lthough the relation between the contractingparties is purely contractual a #uasi-delict can stillbe committed in view of the manner in which the

contract is violated.“Neglect or malfeasance of thecarrier's employees could giveground for an action for damages.Damages here are proper because

the stress of respondent's action is placed upon his wrongfulexpulsion, which is a violation of a

public duty by petitioner- air carrier a case of !uasi-delict." #$ir%rance vs &arrascoso, G.R. No. L2=1@3. S#)t#-b#r =3& 1766.

C,a)t#r =NAT9RE AN EECTS O OBLIGATION

Art. 116@21166 Obligation to Gi%#

Ddilig#n"# o' a good 'at,#r o' a 'a-il$- standard normal state of diligence-ordinary diligence-

obligations to gi%#

• d#t#r-inat#2 the object is particularlydesignated or physically segregated fromall others of the same class ('rt. 0035applies particularly to determinate object)

• g#n#ri"2 the object is merely designatedby its class or genus without any particular

designation or physical segregation from allothers of the same class. (e.g. money)

&&&'rt. 0035 is a guaranty that the debtor willcomply with the obligation.

9ature of right of the creditor --;he obligeecreditor has the right to thething which is the object of the obligation aswell as the fruits thereof from the time theobligation to deliver it arises. ('rt. 003)

Obligation F,#n obligation tod#li%#r aris#s

;hose arising from

• law

• #uasi-delicts

• #uasi-contracts

;he specific provisionsof law determine whenthe delivery should bemade.





• crimes

• contracts 7oment of perfection ofthe contract. ('rt. 0+5)

• 8ubject to a

suspensivecondition

?rom the moment the

condition happens.

• Cith suspensiveterm or period

:pon the epiration ofthe term or period

<#rsonal rig,t- a right pertaining to a person todemand from another the fulfillment of a prestationto give, to do, or not to do.

– ( jus ad rem) right enforceable onlyagainst a definite person or groupof persons

– before delivery in obligations togive

R#al rig,t2 right pertaining to a person over aspecific thing, without passive subject individuallydetermined against whom such right may bepersonally forced. (ownership, possession,easement)

– #jus in re right enforceable against thewhole world

– ac#uired once the thing and the fruitsare delivered.

Rig,ts o' Cr#ditor Obligations o' #btor

d#t#r-inat# obligations

0. to compel specificperformance

4. to recover damagesfor breach of theobligation.

5. "ntitlement to fruitsand interests of thething at the timethe obligation todeliver it arises.

0. to perform theobligationspecifically

4. to ta=e care of thethings with properdiligence of a goodfather of a family.

5. ;o deliver allaccessions andaccessories of thethings even thoughthey may not havebeen mentioned.

. ;o be liable fordamages in case ofbreach of obligationby reason of delay,fraud, negligence or

contravention of thetenor thereof.

G#n#ri" obligations

0. to as= for

performance ofthe obligations

4. to as= that theobligation becomplied with atthe epense ofthe debtor.

5. ;o recoverdamages for thebreach ofobligation.

0. ;o deliver a thing

which is neither ofsuperior nor inferior#uality.

4. ;o be liable fordamages in case ofbreach of obligation

Non# #(#-)tion 'ro- liabilit$ b#"a!s# o' casofortuito/d#la$r#ason/ ;here would have been no loss if thedebtor had complied with the obligation to deliverthe object without delay.

)ro-is# to t0o or -or# di''#r#nt )#rsonsr#ason/ 1t would be impossible to comply with bothobligations therefore the debtor already madehimself liable for damages.

A""#ssions- all of those things which are

produced by the object of the obligation as well asall of those which are naturally or artificiallyattached thereto.

• Accession discreta- natural, industrial andcivil fruits

• accession industrial D building, planting,and sowing

• accession natural - allusion, alvusion,abandoned river beds, and islands formedin navigable rivers.

• 'ccession with respect to movableproperty.

A""#ssori#s- all of the things which have for theirobject the establishment, use or preservation ofanother thing which is more important and to whichthey are not incorporated or attached.

– embellishments

&&;he liability of debtor for damages in case ofbreach of obligation, etends only to breach which





is voluntary in character and not to one which isinvoluntary (fortuitous event)

&&%nly a determinate thing can be destroyed by afortuitous event, generic things can never perish.

(genus nun!uam peruit )

Art. 116.Obligation to o

(positive personal obligation)

&&1f the obligor fails to do what he has obligatedhimself to do, the obligee can have the obligationperformed or eecuted at the epense of the latterand recover damages .

&&;his type of obligation recogni<es individualfreedom, the obligor cannot be compelled to do

what he has obligated himself to do.$emedy for obligeecreditor* performance of theobligation at the epense of the obligor

&&1f the object of the prestation is the personal andspecial #ualification (i.e. artist) of the obligor, ther#-#d$ for the obligee is to recover damagesunder 'rt. 00 of the ivil ode.

Rig,ts a%ailabl# to t,# oblig##(in case there has been a performance of theobligation but in contravention of the tenor thereof)

•to have the obligation performed at theepense of the obligor

• to as= that what has been poorly done beundone

• to recover damages for breach ofobligation

ase*have< vs Gon<ales;anguilig vs ourt of 'ppeals

Arti"l# 1163.Obligation NOT to o

(negative personal obligation)-fulfilled or reali<ed so long the obligor does not dowhat is forbidden

$emedy for obligee in case of breach*

• to have it undone at the epense of theobligor ('rt. 003/)eception (cannot be undone)*

◦ effects of the act are definite incharacter.

◦ physical and legal impossibility

• to as= for damages ('rt. 00)

◦ mora is not applicable

&&1n obligation not to do, the obligation is eitherfulfilled or not fulfilled

Art. 1167.#la$ in t,# '!l'ill-#nt o' obligation

Vol!ntar$ In%ol!ntar$

6efault (mora),deceitfraud (dolo),negligence (culpa), or in

manner thatcontravenes the tenorthereof

1nability to complybecause of anunforeseen event, or

which though foreseenis inevitable.

%bligor is liable fordamages

%bligor has no liabilityfor damages

G#n#ral R!l#/ :nless there is no demand there isno delay.

&&&1n reciprocal obligation, the moment the otherparty complied with his obligation failure to complywill cause the other party to be in delay

#'a!lt(mora)- signifies delay in the fulfillment ofan obligation with respect to time.

&&&;he mere stipulation of a date when theobligation is due does not by itself dispense withthe necessity of a demand, unless there is anepress stipulation (either by law or contract) thatthe debtor will incur delay without need of ademand.

Kinds o' -ora

•mora solvendi - default on the part of thedebtor 4inds o' -ora sol%#ndi

◦ ex re-refers to obligation to give

◦ ex persona- refers to obligation to do

• mora accipiendi - default on the part of thecreditor to accept the delivery of the objectof the obligation





9egligence (culpa)- omission of that diligencewhich is re#uired by the nature of the obligationand corresponds with the circumstances of theperson, the time, and of the place.

-absence of due care re#uired by thenature of the obligation

&&&6iligence of good father of a family ( paterfamilias) is the standard diligence re#uired if thecontract does not state the diligence which is to beobserved in the performance of the obligation.

Finds of negligence

&ulpacontractual

%s &ulpaa!uiliana

9egligence in

the performanceof a contract

d#'inition 9egligence as a

source ofobligation.(#uasi-delict)

1ncident of theperformance ofan obligation

",ara"t#risti"

8ubstantive andindependent

!re-eistingcontractualrelation

<art$r#lations,i)

;here may ormay not be apre-eistingcontractualrelationship

@reach ofcontract So!r"# o'obligation 6efendantsnegligent act oromission

"istence of thecontract and itsbreach

F,at n##dsto b# )ro%#n

9egligence ofthe defendant

!roof ofdiligence is nota defense

A%ailabilit$o' dilig#n"#

!rof of diligenceis a %aliddefense

N#glig#n"# %s ra!d

N#glig#n"# %s ra!d

ulpa 6olo

Eoluntary act oromission

characteristic onscious andintentionalproposition toevade thefulfillment of anobligation

'rt. 005 (if thenegligenceshows bad faith)

Governing rule 'rt. 005, par.0

Ealid (unless thenature of thewaiver is againstpublic policy)

Caiver ofaction (future)

Eoid

)ro(i-at# "a!s#2 cause which is a natural andlogical conse#uence uninterrupted by anintervening cause, without which the damage willnot have happened.

N#glig#n"#

Bad 'ait, Good 'ait,

1f present, the

provisions of 'rt. 005and 'rt 440, par.4 willapply.

Liability will only be on

natural and probableconse#uences of thebreach of obligation

&&&6amages resulting from negligence is reducedor mitigated if there was contributory negligence ofthe obligee.%ther circumstances that can mitigate thedamages*

• when the plaintiff himself contravenes theterms of the contract>

• where the plaintiff has derived some benefitas a result of the contract>

• in cases where eemplary damages are tobe awarded, where the defendant actedupon advice of counsel>

• where the loss would have resulted in anyevent>

• where upon filing of the action, thedefendant has done his best to lessen theplaintiffs loss or injury.

&&&1f the negligent act of the obligee is theproimate cause of the event which led to thedamage or injury complained of, he cannotrecover.

&&&;he phrase “in any manner that contravenesthe tenor" of the obligation includes not only anyillicit act which impairs the strict fulfillment of theobligation but also every =ind of defectiveperformance.

T#st o' n#glig#n"#/:se the reasonable care and caution which an





ordinary prudent person would have used in thesame situation.

Art. 118ort!ito!s #%#nt (caso fortuito)- event whichcould have not been foreseen, or though foreseen,

were inevitable.A"t o' God or"# -a#!r#

1ndependent of humanintervention

events that arise fromlegitimate or illegitimateacts of persons otherthan the obligor.

As to 'or#s##abilit$

%rdinary etraordinary

G#n#ral r!l#/ 1f the reason for the non-compliancein the obligation is a fortuitous event, the obligor is

eempted from liability whatsoever.E:CE<T/

0. where such liability is epressly specifiedby law>

4. where it is declared by stipulation of theparties>

5. where the nature of the obligation re#uiresthe assumption of ris=.

-(volenti non fit injuria) no wrong isdone to one who consents

&&&'rt. 00 applies only to determinate obligationsand not to generic ones.

***res ipsa loquitur

&&&;he caso fortuito must me the 8%L" andproimate cause of the incident, to avail of it as adefense.

&&&o-mingling negligence on the part of theobligor forfeits the defense of caso fortuito.

Ess#ntial "onditions 'or Art. 11 to a))l$/0. that the event must be independent of the

will of the obligor>4. that the event must be either foreseeableor inevitable>

5. that the event must be of such a characteras to render it impossible for the obligor tofulfill his obligation in a normal manner>

. that the obligor must be free from anyparticipation in the aggravation of the injuryto the obligee.

&&&#()iration o' agr##-#nt/;he case of Ba"olod2*!r"ia %s CA comparedand contrasted with <,ilCo-Sat %s Glob#.

&&&8outheastern ollege vs '- typhoon is a casofortuito

&&&o vs '- carnapping of a vehicle is notconsidered a caso fortuito

&&&;anguilig vs ' D windmill case

Art. 11589s!r$2 contracting for or receiving something inecess of the amount allowed by law for the loanor forbearance of money, goods or chattels.-ta=ing of more interest for the use of money,

goods, or chattels or credits than the law allows.

:sury Law ('ct 9o. 43++) and other lawsamending it- special law referred to in 'rt. 00+.

entral @an= ircular 9o. 44 (6ec. 0, 02/4)- nomore ceiling in interest rates on loans.

&&&Loan or forebearance of money-04H interest inthe default of interest stipulated by law or theparties, 3H interest for obligation not involvingforbearance or loan.

&&&04H interest per annum from the time the judgment has become final if t.

Art. 1168&&&;here is a presumption that the interests hasbeen paid if on the face of the receipt that thecreditor issued to the obligor that the principal hasbeen paid without reservation with respect to theinterest. (in accordance with 'rt. 04+5)

&&&1f the debtor is issued a receipt by the creditor

ac=nowledging payment of a latter installmentwithout reservation to prior installments, there isalso a presumption that such prior installmentshave already been paid.

?or the presumption to arise, the receipt shouldclearly state that the payment is for the installmentfor a latter installment or as payment for the





interest. (*anila Trading %s *#dina)

Art. 118$emedies of creditor to protect credits*

0. to ehaust the property in possession of

the debtor>('rt. 4453, )4. to be subrogated to all of the rights and

actions of the debtor to save those whichare inherent in hi person. (accionsu!ro"atoria)onditions*

– that the debtor is indebted to thecreditor>

– the creditor must be prejudiced bythe inaction of the debtor toproceed against the third person>

– the creditor must have first pursuedall of the properties of the debtorwhich are not eempt fromeecution.

5. to impugn all of the acts which the debtormay have done to defraud him. (accion

pauliana)

$ccion subrogotoria- the right of the creditor toeercise all of the rights of the debtor to bring all ofthe actions against third persons.-the creditor merely acts in the name and for theaccount of the debtor.E:CE<TION* $ights which are purely personal in

the sense that they are inherent n the person of thedebtor. (i.e. family rights)

$ccion pauliana- impugning or attac=ing frauddirectly by means of a rescissory action at theinstance of the creditors who are prejudiced.

-subsidiary in character.

Art. 1138G#n#ral r!l#* $ights of obligations or those rightswhich are ac#uired by virtue of an obligation aretransmissible in character.E("#)tions*

0. where they are not transmissible in theirvery nature (i. e. purely personal rights)>

4. where there are stipulations by the partiesthat they are not transmissible>

5. where they are not transmissible byoperation of law.

C>A<TER T>REE

IERENT KINS O OBLIGATIONS

Sec # - $ure and Conditional %!li"ations

Art. 1178

<!r# Obligation2 one whose effectivity oretinguishment does not depend upon thefulfillment or non-fulfillment of a condition or uponthe epiration of a term or period>

– characteri<ed by the #uality ofimmediate demandability, but theremust be a reasonable period of grace.

Condition2 future and uncertain fact or event uponwhich an obligation is subordinated or made todepend.T#r-H)#riod2 a term will surely pass and may ormay not =now when eactly> characteri<ed by

futurity and certainty"ondition2 it may or may not happen

Conditional obligations2 one whose effectivity issubordinated to the fulfillment or non-fulfillment of afuture and uncertain act or event.

(inds of conditional obligation)1. S!s)#nsi%# %s R#sol!tor$

Art. 11318

S!s)#nsi%# R#sol!tor$ondition precedent ondition subse#uent

$esults in theac#uisition of rightsarising out of theobligations

$esults in theetinguishment of rightsarising out of theobligations

;he happening of thecondition gives birth tothe obligation.

;he happening of thecondition etinguishesobligation

1f the condition is notfulfilled, no juridical tie is

created.

1f the condition is notfulfilled, juridical relation

is consolidated.

Chat is ac#uired by theobligee in theconstitution of theobligation is only merehope and epectancy,protected by law.

Chat is ac#uired by theobligee in theconstitution of theobligation are rights thatare subject to threat ordanger of etinction.





=. <ot#stati%#& "as!al& and -i(#d(cause upon which the fulfillment depends)

('rt. 00/4)

<ot#stati%# "as!al -i(#d

fulfillment ofthe obligationdepends uponthe will of aparty to theobligations

fulfillment of theconditiondepends uponchanceor uponthe will of athird person

fulfillment of theobligationdepends uponthe will of aparty to theobligation andpartly uponchance andorwill of a thirdperson.

E ' ' # " t s

dependent on

the "r#ditor -condition andobligation,VALI

dependent onthe d#btor2condition andobligation,VOI

;he obligation

and thecondition shallta=e effect.(valid andenforceable)

;he obligation

and thecondition shallta=e effect.(valid andenforceable)

&&&;he precept in the first sentence of 'rt. 0/4 isapplicable only to a suspensive condition. Bence,R#sol!tor$ <ot#stati%# J VALI obligation andcondition (eplanation at pp.00, Jurado)

&&&to avoid illusory obligation- $eason for theinvalidity of potestative condition dependent on thedebtor.

&&&!ayment for previous indebtednesspre-eistingobligation although the condition is purelypotestative, affects the validity of the condition but=eeps the validity of the obligation because theobligation is not dependent upon the condition.

Si-)l# )ot#stati%# - valid> presupposes not justthe manifestation of the will but also the reali<ationof an eternal act.

)!r# )ot#stati%# – void> envisioned by 'rt. 00/4

@. <ossibl# %s I-)ossibl#

Art. 113@8

<ossibl# I-)ossibl#

when the condition iscapable of reali<ationaccording to nature,law, public policy, orgood customs.

when the condition isnot capable ofreali<ation according tonature, law, publicpolicy, or good customs.(contrary to goodcustoms or public policy,illicit, illegal)

E ' ' # " t s

;he obligation and thecondition is valid andenforceable.

'nnulment of theobligation that aredependent of suchimpossible condition&&but is there is a pre-

eisting obligation,therefore not dependentupon the fulfillment ofthe obligation for itsperfection, only the%961;1%9 is void, notthe obligation.

&&&1f the impossible condition is attached to anobligation, the obligation itself is Void.

&&&1f the impossible condition is attached to asimple donation or testamentary disposition, thecondition is not i-)os#d, although the donationor testamentary disposition itself is %alid.

&&&;otal 'bsence of seriousness- reason why thelaw invalidate the impossible condition I thedependent obligation.E:CE<TION/ gratuitous dispositiondonation>because the moving force here is the generosity ofthe donor.

&&&;he impossibility of the condition should bedetermined at the time the obligation is made or

constituted. . <ositi%# %s N#gati%#Art. 11358

<ositi%# N#gati%#

condition involves theperformance of an act

condition involves theomission of an act.

;he event will happen ;he event will 9%;





or ta=e place. happen or ta=e place.

E ' ' # " t s

;he obligation is#(ting!is,#d as soon

as the time epires or ifit becomes indubitablethat the event will notta=e place.

;he obligation isrendered #''#"ti%# from

the moment the timeindicated has elapsed,or if it has becomeevident that the eventcannot occur.

&&&;he intention of the parties, ta=ing intoconsideration the nature of the obligation, shallgovern if no time has been fied for the fulfillmentof the condition. ;he same rule applies to<OSITIVE CONITION.

Constr!"ti%# !l'ill-#nt o' S!s)#nsi%#Condition- ;he condition shall be deemed fulfilledwhen the obligor voluntarily prevents &the o!li"eefrom' its fulfillment &of the condition' .('rt. 00/3)

-applicable only to S!s)#nsi%# "onditionsand not to $esolutory conditions.

&&&;he prevention must have been done for theprecise purpose of preventing the condition.

E''#"ts o' S!s)#nsi%# Condition Art. 11338

B#'or# !l'ill-#nt A't#r !l'ill-#nt

6emandability as wellas the ac#uisition oreffectivity of rightsarising from theobligation is suspended.

;he obligation arisesand becomes effective.

;he right of the creditoris mere hope Iepectancy.

;he right of the creditoris perfected. (becomeseffective I demandable)

"ffects are retroactive(applicable only toconsensual contracts)

'rt. 00//, par. 0- !rotection for the creditor – file an injunction to stop the debtor

– does not necessarily alwaysinvolves court action in spite thewordings of the law.

i.e. registration

'rt. 00//, par. 4- protection for the debtor

%bligation subject tosuspensive condition

%bligation subject toperiodterm

;here is no certainty ifthe obligation will befulfilled

1t is certain that theobligation will be fullydemandable andenforceable.

1nterests and fruits shallalso be delivered whenthe debtorpaiddelivered bymista=e.

1nterests and fruits shallalso be delivered whenthe debtorpaiddelivered bymista=e.

R#ason 'or r#troa"ti%it$/ ;he condition is onlyaccidental, not essential element of the obligation.

&&& ;he principle of retroactivity must be temperedby principles of justice and practicability.

• 1n obligations to give

◦ the principal obligation as well as thefruits should be delivered

◦ in unilateral obligations, the debtorshall appropriate the fruits and interestsreceived, unless there is a contraryintention on his part

• in obligations to do or not to do

◦ ourts shall determine in each case theretroactive effect of the condition thathas been complied with.

&&&1n reciprocal obligations the fruits and interestmust be e#ually compensated between the parties.

&&&1n unilateral obligation, the debtor shallappropriate the fruits and interests received unlessthe intention is different.

&&&1n personal obligations, the courts will have todetermine in each case the retroactive effect of thecondition that has been complied.

E''#"t o' Loss& #t#rioration& or I-)ro%#-#ntArt. 113780. 1f the thing is lost without the fault of the

debtor, the obligation shall be#(ting!is,#d>

4. 1f the thing is lost through the fault of thedebtor, he shall be obliged to )a$da-ag#s> it is understood that the thing islost when it perishes, or goes out of





commerce, or disappears in such a waythat its eistence is un=nown or it cannotbe recovered>

5. Chen the thing d#t#riorat#s without thefault of the debtor, the i-)air-#nt is to b#

born# b$ t,# "r#ditor >. 1f it d#t#riorat#s through the fault of the

debtor, the creditor may choose betweenthe r#s"ission o' t,# obligation and its'!l'ill-#nt, with ind#-nit$ 'or da-ag#sin either case>

+. 1f the thing is i-)ro%#d by its nature, or bytime, the improvement shall in!r# to t,#b#n#'it o' t,# "r#ditor >

3. 1f it is i-)ro%#d at the epense of thedebtor, he shall have no other right thanthat granted to the !s!'r!"t!ar$.

&&&$ule in 'rt. 00/2 are natural conse#uences ofthe principle of retroactivity.

&&&!redicated on the fulfillment of the condition.

&&&$efer only to conditional obligations to give adeterminate thing

!s!'r!"t- right or enjoyment of a thing, theproperty of which is vested in another and to drawfrom the same all the profit, utilities, and advantageit may produce without altering the formsubstanceof the thing.

Lossa thing is considered lost when it*

0. perishes>4. goes out of commerce D impossible to

legally transfer or re-ac#uire5. disappears in such a way that its eistence

is un=nown or it cannot be recovered

I-)ro%#-#ntsnat!ral a""#ssions/ alluvion, avulsion,abandoned river beds, island formed

&&&;he debtor cannot as= for reimbursement forepenses incurred for useful improvements orimprovements for pleasure.

&&&the debtor may have the right to remove suchimprovements provided it is possible to do sowithout damage to the thing or property.

E''#"t o' R#sol!tor$ Condition/

B#'or# !l'ill-#nt A't#r !l'ill-#nt

;he obligation is subjectto the threat ofetinction.

;he rights vested in theobligation isetinguished.

!laced in the sameposition with creditor inobligation withsuspensive condition.

Chatever is paid ordelivered to any of theparties should bereturned (return tostatus #uo)

&&&;here are no eceptions in the retroactive effectof resolutory condition> what was delivered need tobe returned.

&&&;he fulfillment of a resolutory condition signifiesthe noneistence of the obligation, what isnoneistent must no give rise to any effectwhatsoever.

&&&&&&;here is no provision of mutual compensationof fruits and interests but in connection with theconcept of justice, restitution in 'rt. 002 carrieswith it the conse#uence of reimbursement for allthe epenses incurred for the production,gathering, and preservation of the fruits.

&&&7utual restitution is absolute in resolutory

conditions because the obligation is etinguished,and it ceases to have effect thus does not carrywith it fruits and interests. &&&1n obligations to do or not to do, the retroactiveeffects shall depend upon the discretion of thecourts.

&&&'rt. 00/2 is also applicable with regard theeffects of loss, deterioration, and improvements ofthings during the pendency of resolutory condition.

&&&1n R#sol!tor$ "ondition the Dd#btor is the

person obliged to return while the D"r#ditor is theperson to whom the thing must be returned.

R#"i)ro"al obligationsArt. 11718

remedy for the injured party* rescission orfulfillment





R#"i)ro"al obligation-created or established atthe same time, out of the same cause and whichresults in the mutual relationship of creditor anddebtor between the parties.

-characteri<ed by reciprocity> one obligation

is correlative of the other.-bilateral in character.-tacit resolutory condition.

&&&G#n#ral r!l#* 1f one of the parties fails tocomply with what is incumbent upon him,there is aright on the part of the other to rescind (or resolve)the obligation.

Rig,t o' r#s"ission- belongs to the injured partyalone.

-must be invo=ed judicially by filing theproper action of rescission.

– not absolute> the court is given thediscretionary power to fi a periodwithin which the obligor in default maybe permitted to comply with what isincumbent upon him.

– implied in reciprocal obligations('rt.0020, par. 0)

&&&1f the contract contains a resolutory provision byvirtue of which the obligation may be canceled oretinguished by the injured party in case of breachof obligation, judicial permission to cancel or

rescind the contract is no longer necessary. @ut theourt may confirm such etra judicial rescission.

&&&1f there is no epress provision of rescission inthe contract, rescission should be invo=ed

judicially.

&&&;he termination of a contract must not becontrary to law, morals, good customs, publicorder, or public policy.

&&&9otice is always important in rescission so thealleged infractor can #uestion the propriety of the

rescission.

&&&'rt. 0020 is not applicable to contracts ofpartnership. ;here are special provisions thatgovern the latter, thus the general provision will notprevail. ;he same applies to sales of real property($ecto Law) and sales of personal property byinstallment (7aceda Law).

&&&$escission will only be rendered when thebreach is s!bstantial so as to defeat the object ofthe parties in entering into the agreement.ase* *ong %o + &o. vs awaiian-hilippine

&o.

'lternative remedies to the injured party*--fulfillment of the obligation with payment fordamages (8pecific performance with damages)--rescission of the obligation with payment fordamages (resolution with damages)ase* *ongcuan vs $&

&&&;he injured party can still see= the rescission orresolution of the obligation even if he has opted tochoose the fulfillment of such obligation iffulfillment should become impossible.

ase* $yson-*imon vs $damos

&&&1n awarding damages...

1n case orrescission

only those elements ofdamages can be admitted thatare compatible with the idea ofrescission.

1n case of specificperformance

%nly the elements of damagescan be admitted which arecompatible with the idea ofspecific performance.

E''#"ts o' R#s"ission*

• it is the duty of the court to re#uire theparties to surrender whatever they mayhave received from the other (withoutprejudice to the obligation of the party whowas not able to comply with what isincumbent upon him).

• $escission can no longer be demandedwhen he who demands is no longer in theposition to return whatever he may beobliged to restore> neither can it bedemanded when the thing which is the

object of the contract is already in thepossession of a 5rd party who obtained it ingood faith.

◦ $emedy for the latter will be an actionfor the transfer or conveyance fordamages.

• 1f 5rd person obtained the property in badfaith, the injured party can still go after the





when

#''#"ts o' t#r- or )#riod/

suspensiveterm or period

the demandability of the obligationis etinguished, not the ac#uisition

of right or the effectivity of theobligation.

$esulotoryterm or period

;he fulfillment or performance ofthe obligation is demandable atonce, but it is etinguished orterminated upon the arrival of theday certain or the epiration of theterm.

ase* N/ vs 1ope3 4ito

&&&'cceleration clause is a clause where upondefault of the debtor with one or more payment will

ma=e the whole obligation demandable. ;his is avalid provision in contracts.

"ffect of fortuitous event- relieve the contractingparties from the fulfillment of their respectiveobligations during the term or period.ase* 4ictoria's lanters vs 4ictorias 5illing&o.

#''#"t o' ad%an"# )a$-#nt or d#li%#r$- obligorcan recover what he has paid or delivered withfruits or interests. ('rt. 002+)-applicable only to obligations to give

&&&;here can be no right of recovery if the obligordelivers the thing voluntarily or with =nowledge ofthe period or term or the fact that the obligation hasnot yet become due and demandable.

('rt. 0023)

G#n#ral r!l#/ a period designated for theperformance or fulfillment of an obligation ispresumed to have been established for the benefit

of both the creditor and the debtor.ase* de 1eon vs *yjuco

&&&1f the tenor of the obligation or from othercircumstances that the term or period has beenestablished in favor of the creditor or of the debtor,the general rule will not apply.

!di"ial t#r- or )#riod('rt. 002)

!di"ial t#r- or )#riod- when fied by acompetent court, the period can no longer be

judicially changed ('rt. 002, par. 5).-becomes a law governing the contract

between the party

ases when court can fi term*

• if the obligation does not fo a period, but itcan be inferred that a period was intendedby the parties

◦ cannot be applied to contract forservices in which no period was fiedby the parties. 1n such contracts theperiod of employment is understood tobe implicitly fied, in default of epress

stipulation, by the period of thepayment of the salary of the employee,in accordance with the customuniversally observed throughout theworld.

◦ cannot be applied to pure obligations

• if the duration of the period depends uponthe will of the debtor

◦ just and logical, because otherwise,there would always be the possibilitythat the obligation will never be fulfilledor performed.

• if the debtor binds himself to pay when hismeans permit him to do so.

ase* 6on3ales vs 7ose

&&&9o other action can prosper unless the courthas fied the duration of the term or period.

&&&1n potestative term or period, in order to preventthe obligation contracted from becoming ineffectiveby non fulfillment, the courts must fi the durationof the term or period.

&&&8o long as such period has not been fied bythe court, legally there can be no possibility of anybreach of contract or of failure to perform theobligation. 8uch cannot be raised for the first timeon appeal.

&&&'rt. 002 applies to a lease agreement, where acontract of lease clearly eists.





&&&1t is not necessary that the creditor will epresslyas= in the complaint for the court to fi the period,such may be granted although the complaint doesnot as= for such relief.

&&&;wo ultimate facts that need to be alleged in thecomplaint to describe an obligation with anindefinite period.

0. ?acts showing that the contract wasentered imposing on one of the parties anobligation in favor of the other

4. facts showing that the performance of theobligation was left to the will of the obligor,or clearly showing, or from which aninference can be reasonably drawn that aperiod was intended.

&&&;he action recogni<ed by 'rt. 002 may also

prescribe li=e any ordinary civil action. (6on3alesvs 7ose

E(ting!is,-#nt o' #btors rig,t to <#riod('rt. 002/)

(0) Chen after the obligation has beencontracted, he becomes insolvent, unlesshe gives a guaranty or security for the debt>(a) insolvency needs no judicial declaration(b) includes any case in which it would be

impossible financially for the debtor tocomply with his obligations

(c) such insolvency must not be pre-eisting> arose after the constitution ofthe obligation

(d) if there is a guaranty or security for thedebt, the debtor, in spite of insolvency,does not lose his right to the period.

(4) Chen he does not furnish to the creditorthe guaranties or securities which he haspromised>(a) such failure renders the original

obligation pure and without anycondition, and conse#uently, the loanbecome due and demandable.

(5) Chen by his own acts he has impaired saidguaranties or securities after theirestablishment, and when through afortuitous event they disappear, unless he

immediately gives new ones e#uallysatisfactory>(a) there is a difference between effects of

impairment and effects ofdisappearance

0. if the guaranty or security isimpaired through the fault of thedebtor, he shall lose his right to thebenefit of the period>

4. if it is impaired without his fault, heshall retain his right>

5. if the guaranty or securitydisappears through any cause,even without the fault of the debtor,he shall lose his right to the benefitof the period

. in either case of impairment ordisappearance, the debtor will not

lose his right to period if he gives anew guaranty or security which ise#ually satisfactory.

() Chen the debtor violates any underta=ing,in consideration of which the creditoragreed to the period>

(+) Chen the debtor attempts to abscond.(a) 7ere attempt of the debtor disappear

or run away from his obligation.

Sec + - Alternative and ,acultative %!li"ations

5. Con!n"ti%# %s Alt#rnati%#

Con!n"ti%# Alt#rnati%#

there are severalconditions, all of whichmust be reali<ed

there are severalconditions but only onemust be reali<ed.

Con!n"ti%# obligation2 all of the objects of theobligation are demandable at the same time

distrib!ti%# obligation- when only one object ofthe obligation is demandable.

• Alt#rnati%#- comprehends several objectsor prestation which are due, but it may becomplied with by the delivery orperformance of only one of them.

◦ !erformance of one of the obligation issufficient





• a"!ltati%#- comprehends only one objector prestation which is due, but it may becomplied with by the delivery of anotherobject or the performance of anotherprestation in substitution.

Alt#rnati%# Obligations('rt. 04)

G#n#ral r!l#/ ;he right of choice belongs orpertains to the debtor.

&&&%nce the debtor has made the choice, and suchchoice is duly communicated to the creditor, theobligation becomes simple.

"ceptions*

• when the right of choice belongs orpertains to the creditor

• when it has been epressly granted to athird person.

Limitation to the right of choice*

• debtor cannot choose those prestations orunderta=ings that are impossible, unlawful,or which could not have been the object ofthe obligation.

!restations which could not have been the object

of prestationK• underta=ings that are not included among

others those from which the obligor mayselect, or

• those which are not yet due anddemandable at the time the selection ismade, or

• those by reason of accident or some othercause, have ac#uired a new characterdistinct or different from that contemplatedby the parties when the obligation wasconstituted.

&&&!ar. 4 of 'rt. 04 contemplates a case in whichthe right to choose or select is 9%; lost oretinguished altogether.

('rt. 040)&&&'pplicable to cases in which the choice isdependent on the debtor, creditor, or third person.

&&&ommunication is needed to ma=e the choiceeffective.

&&&9o special form for the communication or

notification of choice, although it is always better toma=e the notification either in a notari<eddocument or in any other authentic writing.

&&&6ebatable* an the creditor to whom theselection has been duly communicated impugnsuch selection

&&&%nce the choice is made by the debtor (orcreditor, or 5rd person) and such selection has beencommunicated, the obligation ceases to bealternative. ;he loss of the object of prestation

chosen and communicated etinguishes theliability.

('rt. 044)

&&&Chen only one prestation is practicable, thedebtor loses his right of choice altogether. ;heobligation becomes simple.

Art. 1== Art. 1=& )ar. =

%nly one prestationwhich can be performed

;here are still two ormore prestations that

can be performed.

%bligation is convertedto a simple onebecause the debtorloses his right ofelection

;he obligation is stillalternative because thedebtor can still eercisehis right of election.

&&&Chen the debtors right of choice is renderedineffective through the creditors fault, the onlypossible remedy for the debtor is to bring an actionfor the rescission of the contract with damages.

('rt. 045)

Art. 1= Art. 1=5

$ight of choice ofdebtor

$ight of choice ofreditor

General rule eception





?actors to consider in =nowing the effect of loss ofthe object of prestation

• to whom the right of choice belong

• Chat is the cause of the loss of the objectof prestation (fortuitous event or fault of

the debtor)

(for Summar of .ffects of /oss of %!li"ation0 see Annex 1A2 )

a"!ltati%# Obligations('rt. 043)

a"!ltati%# obligation- obligation wherein onlyone object or prestation has been agreed upon bythe parties to the obligation, but which may becomplied with by the delivery of another object orthe performance of another prestation in

substitution.

a"!ltati%# %s Alt#rnati%#

%nly one object Ob#"t d!# 8everal objects

@y the deliveryof another objector by theperformance ofanotherprestation insubstitution

"o-)lian"# @y the delivery ofone of theobjects or by theperformance ofone of theprestations whichare alternatively

due.!ertains only tothe debtor

",oi"# 7ay pertain tothe debtor, orcreditor, or thirdperson

Loss orimpossibility ofthe objectetinguishes theobligation

E''#"t o''ort!ito!s

loss

Loss of all theobjects ofprestation isnecessary toetinguish theobligation

6oes not giverise to liability onthe part of thedebtor

E''#"t o'"!l)abl#loss

7ay give rise toa liability on thepart of the debtor

&&&'rt. 040 is applicable by analogy with respectto the time or moment when the substitution will

ta=e effect.

&&&ommunication is needed to ma=e thesubstitution effective.

&&&Chatever may be the cause of the loss ordeterioration of the thing intended as a substitute,such loss shall not render the debtor liable. - 3eanCapistrano

&&&%nce the substitution has been made, thedebtor shall be liable for the loss or deterioration ofthe substitute on account of his delay, negligence,or fraud.

&&&%nce the substitution is made, the obligation isconverted into a simple one.

Sec 4 - 5oint and Solidar %!li"ations

oint obligation - obligation where there is aconcurrence of several creditors, or of severaldebtors, or of several creditors and debtors, byvirtue of which each of the creditors has a right todemand, and each of the debtors is bound torender, compliance with his proportionate part ofthe prestation which constitutes the obligation

– o!li"acion mancomunada

Solidar$ obligation D obligation where there is aconcurrence of several creditors, or of severaldebtors, or of several creditors and debtors, byvirtue of which each of the creditors has a right todemand, and each of the debtors is bound torender, entire compliance with the prestation whichconstitutes the obligation

– o!li"acion solidaria

Coll#"ti%# Obligations('rt. 04)

General rule* 1f there is a concurrence of several

creditors, or of several debtors, or of severalcreditors and debtors,the presumption is that theobligation is J%19; and not solidary."ceptions*

0. when the obligation epressly states thatthere is solidarity>

➢ jointl and severall2

➢ 1individuall and collectivel2





4. when the law re#uires solidarity> and,

➢ Art 670 #840 #6##0 #6#90 #4:0#970 and #64 ;CC

➢ Art ##<0 R$C 5. when the nature of the obligation re#uires

solidarity.➢ %!li"ations arisin" from criminal

offenses or torts

oint i%isibl# Obligations('rt. 04/)

&&&"ach creditor can demand only for the paymentof his proportionate share of the credit, while thedebtors can be held liable only for the payment ofhis proportionate share of the debt.

&&&Joint creditor cannot act in representation of theothers> neither can debtor be compelled to answerfor the liability of the others.

&&&;he payment or ac=nowledgement by one of the joint debtors will not stop the running of the periodof prescription as to the others.

oint Indi%isibl# Obligations('rt. 042)

-midway between joint and solidary obligationscharacteristics*

• no creditor can act in representation of the

other • no debtor can be compelled to answer for

the liability of the others.

– joint with respect of the parties

– indivisible with respect the fulfillment of theobligation

= or -or# d#btors = or -or# "r#ditors

;he fulfil lment of orcompliance with theobligation re#uires the

concurrence of all thedebtors, although eachfor his own share

;he concurrence orcollective act of all thecreditors, although

each for his own share,is necessary for theenforcement of theobligation.

;he obligation can beenforced only byproceeding against all

9ot susceptible ofpartial fulfillment.

the debtors

&&&1f one of the joint debtors fails to comply with hisunderta=ing, the obligation can no longer befulfilled or performed.

&&&;he debtors who are ready to fulfill what wasincumbent upon them shall not contribute to theindemnity beyond the corresponding portion of theprice of the thing or of the value of the service inwhich the obligation consists. ('rt. 044)

&&&1f one of the joint debtors be insolvent, theothers shall not be liable for his share.

&&&6ebatable* 1f there are two or more creditors ordebtors, will the claim of a creditor addressed to a

single debtor or the ac=nowledgment made by oneof the debtors in favor of one or more creditors besufficient to interrupt the period of prescription

&&&1ndivisibility and solidarity are 9%; identical.

Indi%isibilit$ %s Solidarit$

!restationwhichconstitute theobject of theobligation.

nat!r# Legal tie orvinculum, andconse#uently tothe parties ofthe obligation.

!lurality ofsubjects notre#uired

r#+!isit#s !lurality ofsubjects isindispensable.

;erminatedwhen theobligation isconverted intoone ofindemnity fordamages

E''#"t o'br#a",

$emains eventhough there isa liability on thepart of thedebtorsbecause ofbreach.

Finds of solidarity

• active D among creditors◦ tie or vinculum eisting among several

creditors of one and the sameobligations by virtue of which each ofthem, in relation to his co-creditors,possesses the character of a creditoronly with respect to his share of theobligation but in relation to other debtor





or debtors, represents all othercreditors.

◦ 7utual representation

• passive D among debtors

◦ tie or vinculum eisting among several

debtors of one and the sameobligations by virtue of which each ofthem, in relation to his co-debtors,possesses the character of a debtoronly with respect to his share of theobligation, but in relation to othercreditor or creditors, represents allother debtors.

◦ each solidarity debtors, as far as thecreditors are concerned, is the debtorto the entire amount

• mied D among creditors and debtors

'!nda-#ntal #''#"t o' a"ti%# solidarit$- creationof a r#lations,i) o' -!t!al ag#n"$ amongsolidary creditors by virtue of which the creditor isempowered against the debtor or debtors not onlythe rights which corresponds to him, but also allthe rights which correspond to the other creditors,with the conse#uent obligation to render anaccounting of his acts to such creditors.(e#ual mutual representation)

&&&relationship of mutual agency, basis of the

difference of the rules in 'rt. 0404 and 040+.

'!nda-#ntal #''#"t o' )assi%# solidarit$2 liabilityof each debtor for the payment of the entireobligation, with the conse#uent right to demandreimbursement from the others for theircorresponding shares, once payment has beenmade.

<assi%# solidar$d#btor

S!r#t$

@oth are solidarily liable to the creditor for the

payment of the entire obligations

Liable for the paymentof the debt of anotherbut also for the paymentof a debt which isproperly his own.

Liable for the debt ofanother.

1f he pays the entire 1f the surety pays the

obligation, he has aright to demandreimbursement from hisco-debtor of their sharein the obligation.

entire obligation, heac#uires a right toreimbursement from theprincipal debtor of theentire amount he has

paid.

'n etension of timegranted by the creditorto one of the solidarydebtors without the=nowledge of the othersolidary debtors wouldnot have the effect ofreleasing the latter fromtheir obligation.

'n etension of timegranted by the creditorto the principal debtorwould release thesurety from theobligation.

&&&:niform bond or tie- when the creditors anddebtors are bound in the same manner and by thesame conditions or periods.

&&&Earied bond or tie- when the creditors anddebtors are not bound in the same manner and bythe same conditions or periods.

&&&1n 'rt. 0400, the right of the creditor is limited tothe recovery of the share owed by the debtorwhose obligation has become mature leaving insuspense his right to recover the sharescorresponding to the debtors whose obligationshave not yet matured.ase* nchausti + &o. vs 8ulo

('rt. 0404)

"ffects of !rejudicial acts of a creditor to...

• debtordebtors D valid and binding becauseof the principle of mutual representationwhich eists among the creditors

• solidary creditors D the creditor whoperformed the act shall incur the obligationof indemnifying the others for damages.

&&&'rt. 0404 refers to effect of prejudicial acts uponthe relationship of the creditor among themselves.

&&&'rt. 040+ refers to the effect of prejudicial actsupon the entirely different relationship of thecreditors with the debtor or debtors. 8hall result inthe etinguishment of the obligation





&&&!rejudicial acts*

• novation

• compensation

• confusion

• remission

&&&;he act of etinguishment, which is prejudicial tothe co-creditors, will be valid so as to etinguishthe claim against the debtors, but not with respectto the co-creditors whose right subsists and can beenforced against the creditor who performed theact alone.

Assign-#nt o' rig,t('rt. 0405)

&&&onsent of other creditors in the assignment ofrights by another solidary creditor is needed.

&&&mutual agency"ffects if assigned without the consent*

0. if assigned to another co-creditor, there isno violation of the precept stated in 'rt.0405> Ealid assignment

4. if the assignment is made to a third person,there is a violation of the precept in 'rt.0405> 1nvalid assignment

('rt. 040)&&&'ny creditor may demand (judicial or etra

judicial) the payment or performance of theobligation from one, some, or all of the debtors.

&&&!ayment to be made on the creditor who madethe demand and to no other. 1f there is no demand,payment may be made by the debtor to anyone ofthe solidary creditors.

&&&1n mied solidarity, judicial or etra judicial

demand prohibits the debtor upon whom thedemand is made from ma=ing payment to anycreditor other than to the one who made thedemand> does not etend to other debtors uponwhom no demand has been made.

('rt. 040+)

No%ation D change or substitution of an obligationby another, resulting in its etinguishment ormodification, either by...

• changing its object or principal condition, or

◦ if prejudicial D the creditor who effected

the novation shall reimburse the othersfor damages incurred by them

◦ if beneficial D the creditor who effectedthe novation is able to secureperformance of the new obligation,such creditor shall be liable to theothers for the share which correspondsto them, not only in the obligation, butalso in the benefits.

• substituting another in place of the debtor,or creditor shall be liable to the acts of thenew debtor in case there is a deficiency inperformance or in case damage is incurredby the other solidary creditors

• subrogating a third person in the rights ofthe creditor.

◦ ;he obligation of the debtor andcreditor is not in reality etinguished.

◦ 1f effected by subrogating a thirdperson in the rights of all the solidarycreditors, the creditor liable for suchnovation is liable to the creditors for theshare which corresponds to them in theobligation.

– etinguishes the obligation but it creates anew one in lieu of the old.

– ;he co-creditor who does not participate inthe novation of the obligation can have ashare in the benefits of the modification butnot in possible losses.

General rule* "tension of time for the payment ofthe obligation does not constitute novation.

&&&needed in order that an obligation may beetinguished by another which substitutes it.

•"press declaration of novation

• incompatibility of the old and newobligation.

&&&1n suretyship, etension of time given to theprincipal debtor by the creditor without the consentof the surety etinguishes the latters liability,ecept when the surety is liable for differentpayments or upon series of installments.





Co-)#nsation D weighing two obligationssimultaneously in order to etinguish them to theetent that the amount of one is covered by theamount of the other.

Con'!sion D refers to the merger of the #ualities ofcreditor and debtor in one and the same personwith respect to one and the same obligation.

!artial compensation or confusion*

• there may be some doubt as to the part ofthe obligation to which the confusion orcompensation shall be applied.

• 'pply the rules on 'pplication of payment

;otal compensation or confusion*

• obligation is etinguished altogether andwhat is left is the ensuing liability forreimbursement within each group

R#-ission – act of pure liberality by virtue ofwhich the creditor, without having received anycompensation or e#uivalent, renounces his right toenforce the obligation, thereby etinguishing thesame either in its entirety or in the part or aspectthereof to which the remission refers.

"ffects*

• "o%#rs #ntir# obligation/

◦ total etinguishment of the obligation.◦ the entire juridical relation is terminated

• for the benefit of one of the debtors andcovers his entire share of the obligation.

◦ ;otally releases the debtor from thecreditors.

◦ @ut the debtor is still bound to his co-debtors

• for the benefit of one of the debtors andcovers only a part of his share of theobligation.

◦ Bis character as a solidary debtor is not

affected• covers the entire share of a solidary debtor

in the obligation or only part thereof.

◦ !artial remission is a valid defense ifthe creditors proceed against any oneof the solidary debtors for the paymentof the entire obligation.

&&&8uch rules cannot be applied if the debt hadalready been totally paid by anyone of the solidarydebtors before the remission is effected.

&&&1f one of the solidary creditor was able to collect

the entire amount from one or some, or all of thesolidary debtors, the obligation is totallyetinguished and that creditor must render anaccount to his co-creditors.

('rt. 0403)

&&&reditor may proceed against any one, or some,

or all of the solidary debtors simultaneously.

&&&@ringing of an action against the principal debtorto enforce the payment of the obligation is notinconsistent with, and does not preclude thebringing of another to compel the surety to fulfill hidobligation under the surety agreement.

&&&' creditors right to proceed against the suretyeist independently of his right to proceed againstthe principal.

&&&if the obligation is joint and several, the suretyhas the right to proceed even against the suretyalone.

&&&obligation of the surety is the same as that of aprincipal.

&&&;he surety is not entitled, as a matter of right, tobe given notice of the principals default.ommencement of the suit is a sufficient demand.

('rt. 040)

&&&Chere payment is made by one of the solidarydebtors, the effect is either the total of partialetinguishment depending upon whether the entireamount of the debt is paid or only part thereof.

&&&%nce payment is made by one of the solidarydebtors of the entire obligation,, there arisesimmediately a conse#uent right of such debtor to





claim from his co-debtors the share whichcorresponds to them, with interest for the paymentalready made.

&&&the right is not available to a debtor who ma=es

the payment after the obligation has prescribed orhas become illegal.

&&&;he interest shall be computed not from the timepayment was made, but from the time the debtbecame due.

1f one of the solidary debtors become insolvent, hisshare shall be borne by all his co-debtors, inproportion to the debt of each. (par. 5, 'rt. 040)

('rt. 0402 D 0440)

E''#"t o' Loss or I-)ossibilit$ o' <#r'or-an"#1. NOT d!# to t,# 'a!lt o' t,# solidar$

d#btors

• %bligation is etinguished=. !# to t,# 'a!lt o' on# o' t,# solidar$

d#btors

• the obligation is converted into anobligation of indemnity for damages,but the solidary character of theobligation remains

@. ort!ito!s #%#nt

• the obligation is converted into an

obligation of indemnity for damages,but the solidary character of theobligation remains

unjust enrichment D reason or philosophy behind 'rt. 044

&&&a solidary debtor who paid the entire amount ofthe obligation does not step into the shoes(subrogation) of the creditors because he does notac#uire the same right to collect the entire amountof the obligation from his co-debtors. Be is onlyentitled to the proportionate share of each of the

co-debtors.

('rt. 0444)&&&;he creditors may proceed against any of thesolidary debtors or all of them simultaneously forthe payment of the obligation, but whether only oneor all of the solidary debtors are sued jointly, anysoliadary debtor may interpose against the claim of

the creditor or creditors*

6efenses available to a solidary debtor

• defenses derived from the very nature ofthe obligation

◦ payment or performance> res judicata>prescription> those which invalidate thecontract such as mista=e, violence,undue influence, fraud, etc...

• defenses personal to him or pertaining tohis own share

◦ minority> insanity, etc..

• defenses personal to the others, but onlyas regards that part of the debt for whichthe latter are responsible.

◦ 7erely a partial defense

Sec 9 = 3ivisi!le and Indivisi!le %!li"ations

6. i%isibl# %s Indi%isibl#

i%isibl# Indi%isibl#

condition is susceptibleof partial reali<ation orperformance without theobligation in essencebeing changed.

condition is notsusceptible to partialreali<ation orperformance because,otherwise, the essenceof the obligation will bechanged.

1f separated into parts,

its essence is notchanged or its value isnot decreaseddisproportionately,because each of theparts into which it isdivided are,o-og#n#o!s andanalogo!s to eachother as well as thething itself.

1f separated into parts,

its essence is changedor its value decreaseddisproportionately.

;he divisibility of the MperformanceN obligation ISNOT divisibility of the thing or the prestation whichconstitutes the object of the obligation.

&&&;he divisibility or indivisibility of the object itselfis a very important factor, probably the mostimportant, in determining whether the prestationwhich constitutes the object of the obligation issusceptible to partial performance, or not.





&&&?or a thing to be considered divisible, it isimportant that it must be possible for reconstructioninto its condition prior the division, by uniting thedifferent parts into which it had been divided.

T,r## 4inds o' i%ision

• Auantitative D when the thing can mematerially divided into parts and such partsare homogeneous to each other.

◦ 7ovable- parts are actually separatedfrom each other

◦ immovable- the limits of the parts arefied by metes and bounds

• Aualitative D the thing can be materiallydivided but the parts are not eactlyhomogeneous. (i.e inheritance)

• 1deal1ntellectual D the thing can only beseparated into ideal or intellectual parts,not material parts. (i.e. co-ownership)

('rt. 0445)%ne debtor one creditor- the divisibility is of littlesignificance.G#n#ral R!l#/ the creditor cannot be compelled topartially receive the prestation in which theobligation consists> neither may the debtor may there#uired to ma=e partial fulfillment.E("#)tions/

• when the obligation epressly stipulates

the contrary• when the different prestations constituting

the objects of the obligation are subject todifferent terms and conditions.

• Chen the obligation is in part li#uidatedand in part unli#uidated.

!lurality of debtors and creditors- the effect of thedivisibility or indivisibility of the obligation shalldepend whether the obligation is joint or solidary.

• Joint D

◦ 6ivisible- 'rt. 04/ shall apply

◦ 1ndivisible- 'rt. 042 and 044• 8olidary D 'rt. 0400- 0444 shall apply

'rt. 044)@reach of joint indivisible obligation

– the obligation can be enforced only byproceeding against all of the debtors

– if any of the debtors fails or refuse to

comply with the obligation, it is convertedinto indemnity for damages

– the debtor who failed or refused to complywith his obligation shall bear the burden ofpaying all of the damages suffered by the

creditors – the other debtor may also recover for

damages form the debtor at fault.

('rt. 044+);rue test of divisibility* FON t,# obligation iss!s"#)tibl# o' )artial "o-)lian"#.

&&&;he susceptibility of partial compliance shouldbe understood in the sense of the possibility ofreali<ing the end or purpose which the obligation

see=s to attain. ('pplies to obligations to give, todo, or not to do)

To gi%#;he divisibility or indivisibility of the obligation is themost important factor.

• definite I indivisible obje ct- not susceptibleof partial fulfillment ('bsolute rule)

• divisible object - susceptible of partialperformance. ecept*

◦ when the law provides for itsindivisibility which may be inferred or

presumed either>▪ from the fact that although the

object of the obligation can beseparated in parts, yet each partconstitutes a necessarycomplement of the other parts

▪ from the very purpose of theobligation itself

◦ it is so intended by the parties

▪ epress

▪ implied

To o• indivisible prestation - not susceptible of

partial fulfillment ('bsolute rule)

◦ 1n order to determine whether theprestation is divisible or not, the objector purpose of the obligation mustalways be considered

▪ it is divisible when it has for its





◦ (see Art ##7<)(the purpose of the penalty is to punish the obligor)&&&;he obligee can recover from the obligor notonly the penalty, but also the damages or interestsresulting from the breach of the principal obligation

where both parties were unable to comply withtheir obligation (fortuitous event), th penal clausecannot be invo=ed by anyone of them to theprejudice of the other.

('rt. 044)&&&;he debtor cannot eempt himself form theperformance of the principal obligation by payingthe stipulated penalty. :nless the right has beenepressly and clearly granted to him.

&&&(hat happens to the o!li"ation if the ri"ht to

choose to pa the penalt in su!stitute of the principal o!li"ation has !een "ranted to the de!tor0is the o!li"ation converted to facultative o!li"ationor does it remain an o!li"ation ith a penalclause?)

&&&;he creditor cannot demand the fulfillment of theprincipal obligation and the satisfaction of thestipulated penalty at the same time. :nless theright must be clearly granted to him.

– if there is fault on the part of the debtor, thecreditor can demand not only the

satisfaction of the penalty but also thepayment for damages.

('rt. 044/)&&&'pplicable only to the general rule in 'rt 0443and not to the eceptions.

('rt. 0442)t,# )#nalt$ -a$ b# r#d!"#d/

• if the principal obligation has been partlycomplied with

◦ some but not all the prestation arecomplied with by the debtor

◦ refers to the #uantity or #uality of theperformance

• if the principal obligation has beenirregularly complied with

◦ all the prestations were complied withbut not in accordance with the tenor ofthe agreement

◦ refers to the form

• if the penalty is ini#uitous orunconscionable.

&&&;he creditor cannot recover more than thepenalty stipulated even if he proves that the

damage suffered by him eceed in amount suchpenalty.(the amount is already agreed upon)

('rt. 045)&&&1f the principal obligation is void, the penalclause is also void.

&&&if the penal clause is void, the principalobligation is not affected.

C,a)t#r E:TING9IS>*ENT O OBLIGATIONS

('rt. 0450)-od#s o' #(ting!is,ing obligations

• payment or performance

• loss of the thing due

• condonation or remission of the debt

• confusion

• compensation

• novation

• annulment

• rescission

• fulfillment of a resolutory condition

• prescription

• --renunciation or waiver by the creditor

• compromise

• epiration of the resolutory term orcondition

• death of one of the contracting parties(personal obligations)

• will of one of the contracting parties

• mutual assent or dissent

*ection. 9 : ayment or erformance

('rt. 0454)

<a$-#nt D• fulfillment of the obligation either voluntarily

or involuntarily, including its etinguishmentby any means or modes

• "onsists in t,# nor-al and %ol!ntar$'!l'ill-#nt o' t,# obligation b$ t,#r#aliMation o' t,# )!r)os# 'or 0,i", it0as "onstit!t#d.





◦ 1ncludes )#r'or-an"# in any othermanner, of an obligation.

• ?ulfillment of the obligation by the deliveryof a sum of money.

('rt. 0455-045+)General $ule* there should be "o-)l#t#performance. ('rt. 0455)E("#)t/

• substantial performance in good faith

◦ the debtor may recover as though therehas been a strict and completefulfillment, less damages suffered bythe creditor. ('rt. 045)

◦ ase* Diesel &onstruction vs ;*

• Chen the obligee accepts the performance=nowing its incompleteness or irregularity,

without epressing any objection or protest.('rt. 045+)

◦ @ased on the principle of estoppel

• when the obligation has been convertedinto an indemnification (falls under 'rt.0455)

('rt. 0453-045/)G#n#ral R!l#/ reditor is not bound to acceptpayment or performance by a third person. @his is!ecause the creditor ma not have confidence inthe honest of the +rd person ho mi"ht deliver adefective thin" or pa ith a chec hich ma not

!e honored"cept*

• when it is made by a 5rd person who hasinterest in the fulfillment of the obligation.(joint debtor, guarantor, surety)

• when there is a stipulation to the contrary

)#rsons 0,o -a$ )a$ obligation/

• the debtor himself or his legalrepresentatives

• any third person who have an interest inthe fulfillment of the obligation. (subject to

some juridical effects)

– 'rt.0453-045 are not applicable to a thirdperson who pays the redemption price insales with right to repurchase, because avendor a retro is not a debtor within themeaning of the law.

Rig,ts o' a @rd )#rson(with the =nowledge and consent of the debtor)

• right of reimbursement D recover from thedebtor the #ntir# a-o!nt which he haspaid.

• right of subrogation(without the =nowledge and consent of the debtor)

• right of reimbursement D recover onlyinsofar as the payment has been beneficialto the debtor

&&&1f the obligation has been previouslyetinguished by any mode, the 5rd person mayproceed against the creditor based on the principleof unjust enrichment.

Gratuitous payments D payments effected by athird person who does not intend to be reimbursedby the debtor.

– consent of the debtor isnecessary. ;here is no gift if thegift was not accepted by thedebtor.

– 1f the consent is 8":$"6rules on ordinary donation willapply

– if the consent is 9%;8":$"6, 'rt. 0453 and 045will apply.

– 8uch gratuitous payments arevalid as far as the creditor is

concerned.('rt. 045/) so the 5rd

person who offered the gift butwas declined by the debtor cancompel the debtor to reimbursehim (5rd person) the amountaccepted by the creditor.

('rt. 0452)&&&1t is essential that the person who pays theobligation should have the necessary legalcapacity to effect such payment.

– free disposal of the thing due

–capacity to alienate the thingeffect of absence of one or another will effect the

invalidity of payment

&&&"ven if the creditor has already accepted thepayment, it may still be annulled by proper actionin court, subject to the eception provided in 'rt.04.(But such provision has alread !eenmodified hen the a"e of majorit has !een





loered to #8 o )('rt. 04)

to 0,o- )a$-#nt -!st b# -ad#

• person in whose favor the obligation hasbeen constituted

• his successor in interest• any person authori<ed to receive payment

◦ by the creditor himself (conventionalauthority)

◦ by law or legal authority (guardian,eecutor or administrator of the estateof a deceased person, assignee orli#uidator of a partnership orcorporation)

General rule*payment to unauthori<ed person isinvalid. "ceptions*

• payment made to a 5rd person, provided

that it has redounded to the benefit of thecreditor. ;his can be invo=ed through thefollowing proofs* (Art #4#)

◦ if after payment, the 5rd personac#uires the creditors rights

◦ if the creditor ratifies the payment to the5rd person

◦ if by the creditors conduct, the debtorhas been led to believe that the 5rd

person has authority to receive thepayment

• !ayment made to the possessor of thecredit, provided that it was made in good

faith. (Art #4)◦ Ealid payment to the )oss#ssor o' t,#

"r#dit does not refer to possessor ofthe document evidencing it.

◦ the remedy of the creditor would be toproceed against the possessor if creditto whom payment was improperlymade.

&&&'lthough the payment is not valid because it isnot made to a person authori<ed to receivepayment, nevertheless it is clear that the vendee

had acted in good faith> he can not therefore besaid to have incurred in delay> conse#uently, thevendor cannot as= for rescission of the contract.

('rt. 040)payment to incapacitated person is valid*

• if he has =ept the amount or thing paid ordelivered

• insofar as the payment has been beneficialto him.

◦ ;he payment is beneficial to him(incapacitated) when that which hasbeen paid or delivered is applied or

spent for some rational, necessary oruseful purpose for his benefit.

&&&;hese rules are applicable only to obligations togive.

('rt. 045)&&&!ayment by the debtor to the creditor afterhaving been judicially ordered to retain the debt isinvalid.

– such payment must be made to the properofficer of the court issuing the writ ofattachment or garnishment in conformitywith the $ules of ourt.

('rt. 04-043)obligation to give specific or determinate thing Dthe debtor cannot fulfill his obligation by deliveringa thing which is different from what is due althoughsuch may be of the same value or even morevaluable than that which is due.

%bligation to do or not to do D the obligor cannotfulfill his obligation by substituting another act orforbearance.

&&&if the creditor or obligor accepts the delivery orsubstitution, such acceptance shall give the sameeffect as a fulfillment or performance of theobligation.

ation in )a$-#nt (dacion en pa"o) =transmission of the ownership of a thing by thedebtor to the creditor as an accepted e#uivalent ofthe performance of the obligation.

– !roperty is alienated to the creditor insatisfaction of a debt in money>

– law on sales shall govern ('rt. 04+)>

– eception in 'rt. 04

('rt. 04)etra judicial epenses D for the account of thedebtor

judicial costs D $ules of ourt will govern

&&&1f the debtor changed his domicile in bad faith orafter he has incurred in delay, the additional





epenses shall be borne by him.

('rt. 04/)5 conditions or characteristics of payment*

• identity D only the prestation agreed upon

and no other must be complied with• completeness D the thing or service in

which the obligation consists must becompletely delivered or rendered

• indivisibility D the payment or performancemust be indivisible

General $ule* 'rt. 04/ is applicable only toobligation where there is one debtor and onecreditor. "ceptions*

• when the obligation epressly states thecontrary

• when the different prestations whichconstitutes the objects of the obligation aresubject to different terms and conditions

• when the obligation is in part li#uidated andin part unli#uidated.

('rt. 042)&&&' judgment awarding an amount in :8 dollarmay be made with its e#uivalent amount in localcurrency in the conversion rate prevailing at thetime of payment. ;he trial court should determinethe the conversion rate if the parties cannot agreeon the same. (a"ala vs 5imenez )

$' +42 D 'n 'ct to assure the uniform value of!hilippine oins and urrency.

– the rule that payment of debts imoney shallbe made in the currency stipulated wascompletely abrogated.

$' 0 D amending $' +42

– the law prohibiting stipulations in domesticmonetary obligations purporting to give theobligee the right to re#uire payment incurrency other than the !hil. currency doesnot apply to transactions listed on pp. 43,%bligations and ontracts, 5urado

Legal tender D currency which may be used for thepayment of all debts, whether public or private

– in the !hil., legal tender would be notesand coins issued by the entral @an=.

– !romissory notes payable to order or billsof echange, chec=s, etc. are not legaltender

$ule* the debtor cannot compel the creditor toaccept a chec= or draft. "cept*

• when the document has been cashed

• when it had been impaired through the faultof the creditor.

('rt. 04+)&&&1n case of etraordinary inflation or deflation, thevalue of the currency at the time of theestablishment of the obligation would be the basisof payment.

"traordinary inflation or deflationO

– unusual or beyond the common fluctuationin the value of the currency which theparties could not have been foreseen whenthe obligation was established. (;olentino)

– uncommon decrease or increase in thepurchasing power of the currency whichcould not have been reasonably foreseen.(6ean apistrano)

&&&'rt. 04+ is applicable only to contractualobligations and not to obligations arising from torts.

&&&re#uisites for @allantyne schedule to apply*

• obligation should have been contractedduring the Japanese occupation

• it could have been paid during theJapanese occupation

• it could have been paid with Japanese

military notes

('rt. 04+0)!lace of payment*

Obligation <la"# o' )a$-#nt

deliver a determinatething

!lace where the thingmight be at the time theobligation wasconstituted

'ny other case 6omicile of the debtor(unilateral obligations)

Su!section # - Application of $ament

('rt. 04+4)a))li"ation o' )a$-#nt- designation of the debtto which the payment must be applied when thedebtor has several obligations of the same =ind infavor of the same creditor.





Su!section - $ament ! Cessation

('rt. 04++)

C#ssion or assign-#nt- special form of paymentwhereby the debtor abandons all of his property forthe benefit of the creditor in order that from theproceeds thereof the latter may obtain payment oftheir credits.$e#uisites*

• plurality of debts

• partial or relative insolvency of the debtor

• acceptance of the cession by the creditor

◦ insolvency Law- applicable if thecreditor did not accept the cession

Kinds o' C#ssion/

• contractual- 'rt. 04++, 9

• judicial- 1nsolvency Law

C#ssion %s ation in<a$-#nt

!lurality ofcreditors isessential

N!-b#r o')arti#s

;here may beonly one creditor

6ebtor is inpartial or relativeinsolvency

inan"ial"ondition

o' t,#

)arti#s

6ebtor notnecessarily infinancial difficulty

:niversality ofdebtors property

Ob#"t ;hing e#uivalentof theperformance ofthe obligation

$elease thedebtor for the netproceeds of thethings ceded orassigned, unlessthere is acontraryintention.

E''#"t "tinguishes theobligation to theetent the valueof the thingdelivered (ase#uivalent of theperformance ofthe obligation)

E''#"ts o' "#ssion/

• partial etinguishment

• no transfer of ownership to the creditorsonly transfer of possession includingadministration

Su!section + - @ender of $ament andConsi"nation

('rt. 04+3-04+/)t#nd#r o' )a$-#nt D manifestation made by thedebtor to the creditor to immediately comply withthe obligation

"onsignation D deposit of the object of theobligation in a competent court in accordance withthe rule prescribed by law after refusal or inabilityof the creditor to accept the tender of payment.

T#nd#r o' <a$-#nt Consignation

!reparatory act !rincipal act

"tra judicial incharacter

Judicial in character

@ender of pament does not ! itself produce le"al pament0 unless it is completed ! consi"nation

G#n#ral r#+!isit#s o' "onsignation D relative topayment. ('rts. 0454-04+0)

– those which ave already ta=en up inconnection with payment in general.

– !erson who pays

– person to whom payment must be

made – object of the obligation to be paid

– time when payment or performancebecomes demandable.

S)#"ial r#+!isit#s D prescribed by 'rt. 04+3-04+/

0. there is a thing due ('rt. 04+/, par. 0)4. that the payment or performance was

refused or the creditor was incapable ofaccepting payment

• tender of pament must !e made

!efore the consi"nation• tender of pament must have !een

unconditional

• that the creditor must have refused toaccept the pament .

(S vs .ufemio)5. previous notice has been given to the

)#rsons int#r#st#d (ie suret or





"uarantor or a solidar co-de!tornot justto the creditor ) in the fulfillment of theobligation D a formal ac t

- to allo the creditor to reconsider hisrefusal> to sho the de!torDs serious

desire to extin"uish his o!li"ation. that the thing or amount due has been

placed at the disposal of judicial authority

– deposited ith the Cler of Courtusuall accompanied ! the filin" of thecomplaint for action forconsi"nationEaction for specific

performanceEaction for cancellation ofthe o!li"ation.

+. after consignation has been made, thepersons interested in the fulfillment of theobligation had been notified thereof.

– reason* to enable the creditor to

withdraw the goods or moneydeposited.

– .ffectsF see Art #:<-#:#Cas#/ ($once de /eon vs Sjuco0 Inc)

G#n#ral R!l#/ re#uisites must be strictly compliedE("#)tion* in consideration of justice and e#uity(Cas#/ $ural @an= of aloocan vs ')

&&&8ince consignation is a special form of payment,it must conform not only with the specialre#uirements prescribed by law, but also with all

the re#uisites of a valid payment.

"ceptions to the rule that there must be aprevious tender of payment*('rt. 04+3)

0. when the creditor is absent or un=nown4. when the creditor is incapacitated5. when the creditor refused to give a receipt. when 4 or more person claim the right to

collect+. when the title of the obligation has been

lost

R#ason 'or t,# #("#)tions/

G incapacitated persons do not have the capacitto administer their propert> the de!tor ill !emade to pa a"ain !ecause the pament is invalidsu!ject to the exception provided in Art #4#(protection to the de!tor)

G+ ould mean that there has !een a previoustender of pament or it as alread said ! the

creditor that he ill not accept an tender of pament

G4 protection to the de!tor0 to avoid tender of pament to the ron" individual

&&&Chen valid tender of payment is made, theobligation is not etinguished unless it is completedby consignation.E''#"t/ eemption of the debtor from payment ofinterest andor damages&&&onsignation is applicable to both movable andimmovable objects.

E''#"t o' t#nd#r o' )a$-#nt/

• stops the accrual of interest

• release the debtor from liability over thething due

• as= the judge to order the cancellation ofthe obligation

• preserve the right of the debtor (?ranciscovs @autista)

('rt. 04+2)epenses of consignation shall be charged againstthe creditor only when consignation have beenproperly made

0. when the creditor accepts the thing oramount deposited

4. when the court decided that consignation

have been properly made or cancels theobligation at the instance of the debtor inaccordance with 'rt. 043, par. 0.

('rt. 043-0430)E''#"ts o' "onsignation*

• if the creditor finally a""#)ts the thing oramount deposited, the payment is settledaltogether

• if the creditor r#'!s#s to accept the thingdeposited, litigation for the etinguishmentor cancellation of the obligation on theground of a valid and effective consignationwill arise.

• If the creditor neither refuses nor accepts0the de!tor ma as the court to cancel theo!li"ation after shoin" the the requisitesof consi"nation have !een complied ith(Art #:<)- tolentino

E''#"ts o' 0it,dra0al b$ t,# d#btor/





• made before the creditor has accepted theconsignation or before judicial declaration,the obligation remains in force

• made with the consent of the creditor, thecreditor loses every preference which he

may have over the thing. 8olidary co-debtors, guarantors and sureties, shall bereleased.

◦ ;he solidary co-debtors are releasedonly with regard to their solidarity butnot with their respective share in theobligation

◦ the guarantors and sureties arereleased from the obligation since theobligation could have beenetinguished if not for the consent ofthe creditor to withdraw the thing fromconsignation>

!rayer of the creditor that the thing be adjudicatedin his favor is already an acceptance on the part ofthe creditor, the debtor cannot withdraw the thinganymore.

&&&?or immovable objects or other real properties,the court will assign a receiver to consider theobject consigned or deposited.

*ection =. : 1oss of the 2hing DueLoss o' t,# t,ing d!#- impossibility of compliance

with the obligation through any cause – impossibility of performance

• perishes

• goes out of commerce

• disappears

('rt. 0434)effect of loss in obligation to give a determinatething* etinguishment of the obligationr#+!isit#s/

• thing lost must be determinate

• the thing was lost without the fault of the

debtor (if it is lost throu"h the fault of thede!tor0 the o!li"ation is converted into ano!li"ation to indemnif the creditor fordama"es)

• the thing lost before the debtor hasincurred in delay (if it is lost after the de!torhas incurred in dela0 the de!tor ill !eheld lia!le for indemnit for dama"es)

#''#"t o' 'ort!ito!s #%#nt* etinguishment of theobligation, "ceptions*

• when by law, the debtor is still liable evenfor fortuitous events

• when stipulated by the parties

• when the nature of the obligation re#uiresthe assumption of ris=

• when the loss of the thing is due partly tothe fault of the debtor

• when the loss of the thing occurs after thedebtor has incurred in delay

• when the debtor promised to deliver thesame thing to 4 or more persons who donot have the same interest

• when the obligation arises from a criminaloffense

• when the obligation is generic

('rt. 0435)loss of a generic thing does not etinguish theobligation because generic things do not perish("enus nunquam peruit )

#''#"t o' loss in r#"i)ro"al obligation* if one ofthe reciprocal obligation is etinguished the othermust also be etinguished. (;olentino)

('rt. 043)court granted discretion to determine whether apartial loss or destruction of the thing is important

as to etinguish the obligation

('rt. 043+)presumption of fault on the part of the debtor if thething is lost while in his possession. 1n such case,the obligation is 9%; etinguished.8uch presumption does not apply in case ofearth#ua=e, flood, storm, or other calamity.

('rt. 0433)impossibility of performance in obligations to doetinguishes the obligation.

&&&8ame re#uisites provided in 'rt. 0434

&&&Legal and physical impossibility must haveoccurred ATER the constitution of the obligation.= "a!s#s o' i-)ossibilit$

• l#gal i-)ossibilit$- (direct) when the lawprohibits the performance or eecution ofthe wor= agreed upon (immoral or





• delivery must be voluntary

presumption of voluntary delivery by the creditorunless the contrary is proved

– heirs of the creditor may impugn

condonation by establishing that it isinofficious in conformity with 'rt. 0, ivilode.

– legitime is part of persons estate reservedby law for his compulsory heirs.

– Q of the entire estate reserved for thelegitimate childchildren

– other half is free portion, may bedistributed to anybody

– 1nofficious donation are those whicheceeds the free portion of the estate

–ollation the value of all gratuitousdisposition are added to the estate of aperson for the benefit of his compulsoryheirs.

('rt. 045-04)effect of remission* "tinguishment of theobligation in its entirety or aspect thereof

– in joint obligation, the remission only affectthe share of the creditor who ma=es theremission and the corresponding share ofthe debtor in whose favor the remission ismade.

– 1n solidary onligation, 'rts. 040+, 0402, and044 of the ode shall govern.

&&&$emission of the principal obligation isremission of the accessory obligation but remissionof the accessory obligations is not remission ofprincipal obligation.

– accessory obligation is just dependent onthe principal obligation for their eistenceand efficacy.

!resumption of remission of accessory obligation

of pledge eist when the thing, after its delivery tothe creditor, was found at the possession of thedebtor.

*ection ?. : &onfusion or 5erger

('rt. 04+)onfusion D merger of the characters of thecreditor and debtor in one and the same person, by

virtue of which, the obligation is etinguished. – meeting in one and the same person the

#ualities of a creditor and debtor withrespect to one and the same obligation.

R#+!isit#s*

• merger of characters of debtor and creditormust be in the same person

• it must ta=e place in the person of eitherthe principal creditor or principal debtor

• there must be complete and definitemerger of the #ualities

Kinds o' *#rg#r or Con'!sion/

's to cause orconstitution

nter vivos- constituted byagreement of the partiesmortis causa- constituted bysuccession.

's to etent oreffect

Total- etinguishes the entireobligation<artial-etinguishes only a partor aspect of the obligation or onlythe shares in joint obligation.

('rt. 043)

1f the merger will ta=e place in the person of thesubsidiary creditor and subsidiary debtor(guarantor), principal obligation is not etinguished,there will only be 8:@8;1;:;1%9 of creditor ordebtor.In "as# o'/

• Guarantor-creditor D can demand theperformance of the obligation from thedebtor, in case of default, even from his co-guarantors

• Guarantor-debtor D the creditor candemand the performance of the obligationdirectly from the guarantor.

('rt. 04)there is only a partial etinguishment of obligationin case of confusion between one joint debtor andone joint creditor.

Cith regard to solidary obligations, the obligation isaltogether etinguished without prejudice to the





rights and obligations of the solidary creditors anddebtors among themselves.

onfusion may be revo=ed

• agreement* presence of any of the causes

of rescission, annulment, etc.• inheritance* nullity of the will, subse#uent

appearance of an heir with better right"ffect* the obligation is recreated in the same formand under the same condition in which it was foundbefore the merger too= place.

– period which has elapsed from the momentthe merger too= place until its revocationcannot be computed in the determination ofthe period of prescription

*ection @. : &ompensation

('rt. 04/)Co-)#nsation- mode of etinguishing in theirconcurrent amount those obligations of personswho in their own right are creditors and debtors toeach other.

– weighing two obligations simultaneously inorder to etinguish them to the etent inwhich the amount of one is covered by theamount of the other.

– 8implified payment ( pa"o a!reviado)

– do!bl# ad%antag# o%#r )a$-#nt/

– facility of payment- ta=es effect by

operation of law – guaranty for the effectivity of the credit-

may avoid prejudice to one party byfraud or insolvency of the other.

<a$-#nt Co-)#nsation

;a=es effect by acts ofparties

;a=es effect byoperation of law

apacity to give and toac#uire are necessary

apacity to give and toac#uire not essential

omplete and

indivisible payment

!artial payment

Con'!sion Co-)#nsation

%ne person in whom ismerged the #ualities ofcreditor and debtor

4 persons who arecreditors and debtors ofeach other

%nly one obligation 4 obligations

Co!nt#r"lai- Co-)#nsation

8imilarity of debts is notnecessary

4 debts must consists inmoney or if not, theymust be of the same=ind and #uality

6oes not re#uireli#uidation of debts

6ebts must beli#uidated

9eed to be pleaded tobe effectual

9eed not be pleaded

Kinds o' Co-)#nsation/ 's to cause

• L#gal- ta=es effect by operation of lawwhen all the re#uisites are present ('rt.

04/-042, ivil ode)• Vol!ntar$- agreement of the parties who

are mutually creditors and debtors tocompensate their respective obligations,re#uisites may not all be present

◦ ta=es effect the moment the partiesagree

• a"!ltati%#- by the will of only one partyand the other one cannot choosecompensation because of any impediment.('rt. 04/-04//)

• !di"ial- ta=es effect by judicial decree

◦ ta=es effect the moment the judicialdecree becomes final and eecutory

's to effect

• Total D compensation of 4 e#ual debts

• <artial - compensation of two une#ualdebts.

('rt. 042)r#+!isit#s o' "o-)#nsation*

0. 4 parties are principal creditors andprincipal debtors of each other

4. both debts must consist in money, or if thethings due are consumables, they must beof the same =ind and #uality

◦ limited to obligations to give

◦ consumables- movables which cannotbe used in a manner appropriate totheir nature without being consumed

◦ fungibles- may be echanged orcompensated by another of the same=ind and #uality





5. both debts must be due. both debts must be li#uidated and

demandable

◦ li#uidated debts- those that may bedetermined by simple arithmetical

operation+. no retention or controversy commenced by

5rd persons over either of the debts andcommunicated in due time to the debtor

◦ retention D application of the credits ofone of the parties to the satisfaction ofthe claims of a 5rd person

◦ controversy D refers to a case in which5rd persons claim to be the creditor

3. compensation must not be prohibited bylaw

G compensation cannot !e applied to o!li"ationsto do !ecause of the differences in the respectivecapacities of the o!li"ors

G9 controversF the effect is provisionalsuspension of the compensation If the credit isadjudicated to the part interested in thecompensation0 compensation ma tae place0 !utif the credit as adjudicated to the + rd person hoclaims to !e the creditor0 compensation cannottae place

('rt. 04/)

right of guarantor to set up compensation, not onlyfor what such creditor owes him, but also for whatsuch creditor owes the principal debtor.

– eception to 'rt. 042, 9o. 0Basis/

• @ond of the guarantor cannot be resortedto so long as the debtor can pay

• Chen principal obligation is etinguished,the accessory obligation of the guarantor isalso etinguished since it is subordinatethereto.

('rt. 04/0-'rt. 04/4) 'rt. 04/4, eample of voluntary obligation&&agreement to compensate debts which are notyet due

('rt. 04/5)when the defendant who has an unli#uidated claimfor damages against the plaintiff sets it off byproving his right to said damages and the amount

thereof, it is converted into a li#uidated claim by acourt decree, in which case, compensation mayta=e place

('rt. 04/)

eception to rule 9o.5, 'rt. 042

rescissiblevoidable obligations (considereddemanda!le) may be compensated against eachother before they are judicially rescinded oravoided.

('rt. 04/+)E''#"ts o' "#ssion/F,#n t,# "o-)#nsation ,as ta4#n )la"#/

• %ne or other obligation is etinguished,subse#uent assignment of rights by thecreditor to a 5rd person "annot a''#"t the

debtor with respect to the compensationwhich has already ta=en place.

◦ 'ssignee can just demand indemnityfor damages on the ground of fraud

◦ E("#)t* when the debtor consented tothe assignment, in which case, theassignee can still demand for thepayment of the credit

F,#n t,# "o-)#nsation ,as not ta4#n )la"#-effects depend on whether the assignment wasmade...

• with the consent of the debtor D the debtorcannot set up against the assignee thecompensation

◦ ecept* if he notified the assignor thathe reserves his right to thecompensation, he can still set upcompensation as a defense when theassignee demands the payment of thecredit.

• Cith =nowledge but without consent of thedebtor D the debtor may set up the defenseof compensation of debts prior to theassignment but not subse#uent ones.

◦ !urpose* to prevent fraud.

• Cithout =nowledge of debtor - the debtormay set up the defense of compensation ofall credits which he may have against theassignor and which may have becomedemandable, before he was notified of theassignment.

◦ $emedy for the assignee* action for





indemnification against the assignor

('rt. 04/3-'rt. 04//)#bts 0,i", "annot b# "o-)#nsat#d/

0. debts arising from contracts of depositum

4. debts arising from contracts ofcommodatum

5. claims for support for gratuitous title

◦ cannot be applied to support in arrears. obligations arising from criminal offenses+. certain obligations in favor of the

government, such as taes, fees, duties,and others of a similar nature.

@ased on justice, trust and confidence, and sel-preservation.

('rt. 04/2-042)

effect of compensation D etinguishes both debtsto the etent that the amount of one is covered bythe amount of the other

compensation ta=es place by operation of law(ipso jure)- its effects arise on the very day onwhich ALL re#uisites are fulfilled.- applicable only to legal compensation

*ection A. : Novation

9ovation D (extinctive) substitution or change of an

obligation or change of an obligation by another,resulting in its etinguishment or modification,either by

• changing its object or principal conditions,or

• by substituting another in place of thedebtor, or

• by subrogating any 5rd person in the rightsof the creditor.

- mode of etinguishing obligations through the"r#ation o' a n#0 on# effected by the change orsubstitution of an obligatory relation by anotherwith the intention of substantially etinguishing or

modifying the same.- two-fold purpose*

• etinguishing the old obligations

• giving birth to a new obligation to ta=eplace of the old

re#uisites*

• previous valid obligation

• agreement of the parties to the newobligation

• etinguishment of the old obligation

• validity of the new obligation

E(tin"ti%# *odi'i"ator$

%ld obligation isterminated by thecreation of a newobligation that ta=es theplace of the former

%ld obligation subsiststo the etent it remainscompatible with theamendatory agreement

Kinds o' No%ation/

's to essence • ob#"ti%#Hr#al D changeeither in the cause,object, or principal

conditions of theobligation

• s!b#"ti%#H)#rsonal –substitution of the personof the debtor ( passive) orto the subrogation of a 5rd

person in the rights of thecreditor (active).

• *i(#d – combination ofobjective and subjectivenovation.

's to form or

constitution

• E()r#ss D declared in

une#uivocal terms thatthe old obligation isetinguished by a newone which substitutes thesame

• ta"it- old and newobligations areincompatible with eachother on every point

's to etent oreffect

• Total D absoluteetinguishment

• )artial D mere

modification

%bjective 9ovation*

• ",ang# in t,# "a!s# D e.g. contract ofsale or a contract of lease in which theprice has not yet been pad to the vendor orlessor. 1f the the parties to the contractsubse#uently entered into a new





agreement whereby the obligation to pay isconverted into a loan made to the vendeeor lessee, the result is real or objectivenovation

• ",ang# in ob#"t D e. g. certain amount is

due or any change whereby the obligationto pay is converted into an obligation torender a personal service. 8imilar withdation in payment.

• ",ang# in )rin"i)al "onditions o' t,#obligation – only those changes of anessential character can effect a novation ofthe previous or original obligation.

('rt. 0424)&&&refers to forms of novation

novation by presumption has never been favored

animus novandi D intent to substitute a newobligation for the old one> must be clearlyestablished before we can say that there is anovation resulting in the etinguishment of the oldobligation and in the creation of a new one.(3ele"atus de!itor est odiosus in le"e)

"press novation- declared in une#uivocal terms*

• clearly results from the agreement, or

• shown by full discharge of the original debtotherwise the old contract remains in force and the

new one is added to it

1mplied novation D test of incompatibility&&&C%9 the 4 obligations can stand together, eachhaving its own independent eistence.

9o incompatibiliy P 9o novation

• reiteration or ratification of the old contractwith slight modifications or alterations

• 4nd contract provides for another method ofpayment

• 4nd contract provides for additional security

• 4nd contract provides for postponement ofthe date of payment

• creditor receives another guaranty oraccepts payment from 5rd person, so longas there is no agreement that the principaldebtor shall be released from theobligations

• filing of a surety bond

effect in obligation with a term or period*

• postponement of term or period D there isno novation

◦ reason* there is no incompatibility

• reduction of the duration of the term D there

is a novation◦ reason* clear case of incompatibility

and change of the principal condition ofthe old obligation.

('rt. 0425)novation by substitution of the debtor D personalnovation

• effected with the consent of the creditor

◦ expromision D effected with theconsent of the creditor at the instanceof the new debtor even without the

=nowledge or against the will of the olddebtor

▪ substitution with the =nowledge andconsent of the old debtor

▪ substitution without the =nowledgeand consent of the old debtor

◦ delegacion - effected with the consentof the creditor at the instance of the olddebtor with the concurrence of the newdebtor> refers to the substitution ofdebtors effected when the originaldebtor offers and the creditor accepts a5rd person who consents to the

substitution▪ re#uisites* initiative of the

substitution must emanate from theoriginal debtor

▪ consent of the new debtor

▪ acceptance by the creditor

difference according to 7anresa

Bxpromision Delegacion

1nitiative for the changedoes not emanate fromthe debtor

1nitiative for the changeemanates from thedebtor

may be made withoutthe consent of thedebtor since it consistsin a 5rd personassuming his obligation

7ust be made with theconcurrence of theoriginal debtor since it ishe who offers thesubstitution

8ubstitution may beeffected even without

consent of the debtor(dele"ante), creditor





contracting parties as a favor upon a 5rd

person, who must have accepted itbefore it could be revo=ed ('rt. 0500)

('rt. 042-042/)

- re#uisite of a valid new and old obligation beforeeffecting novation is logical because the purpose ofnovation is substitution of the new obligation for theold.

Old obligation

• void D there is nothing to novate> newobligation cannot ta=e effect

• voidable D when annulment depends uponthe debtor or when a voidable obligation isratified, novation is valid

◦ expromision without the consent of thedebtor D debtor can still avail himself ofthe right to invo=e the voidablecharacter of the obligation against anyclaim of the 4nd debtor

◦ if the new debtor is aware of the defectof the old obligation at the time whenhe assumed payment, he cannot availhimself of the right to invo=e thevoidable character of the obligationagainst any claim of the creditor.

n#0 obligation• void D old obligation subsist, unless the

parties intended that the former relationshould be etinguished in any event

('rt. 0422)1f the original obligation was subject to asuspensive or resolutory condition, the newobligation shall be under the same condition,unless it is otherwise stipulated.

E''#"t i' old and n#0 ar# s!b#"t to a di''#r#nt"ondition/

• both condition can stand together D boththe condition in the original and newobligation must be fulfilled> the newobligation becomes demandable

• only the condition affecting the 0st

obligation is fulfilled D previous obligation isrevived, new obligation loses its force

• only the condition affecting the 4nd

obligation is fulfilled D there is no novationsince the re#uisite of a valid previousobligation would be lac=ing

• if conditions of both obligations areincompatible D 0st obligation is

etinguished, new obligation remains (asthe latest epression of the will or intent ofthe parties)

('rt. 05)novation by subrogation

• conventional subrogation D ta=es place byagreement of the original creditor, the 5rd

person, and the debtor

• legal subrogation D ta=es place by force oflaw.

('rt. 050)conventional subrogation D must be clearlyestablished in order to ta=e effect.

"on%#ntionals!brogation

Assign-#nt o' rig,ts

Governed by 'rt. 05-05

Governed by 'rt. 034-034

6ebtors consent isre#uired

6ebtors consent is notre#uired

Bas the effect ofetinguishing the oldobligation and gives riseto a new obligation

Bas the effect oftransmitting the rights ofthe creditor to anotherperson withoutmodifying oretinguishing theobligation

6efects or vices in theoriginal obligation arecured

6efects or vices in theoriginal obligation arenot cured

"ffect arises from themoment of novation orsubrogation

'rises form the momentthe debtor is notified ofthe cession.

('rt. 054)General rule* Legal subrogation is not presumed,#("#)t/

0. Chen a creditor pays another creditor whois preferred, even without the debtors=nowledge>

• the 4 obligations remain distinct and





separate.4. Chen a third person, not interested in the

obligation, pays with the epress or tacitapproval of the debtor>

• apply 'rt. 0453-045

5. Chen, even without the =nowledge of thedebtor, a person interested in the fulfillmentof the obligation pays, without prejudice tothe effects of confusion as to the lattersshare.

• !ayment made by a co-debtor cannotproduce the effect of subrogationbecause he cannot enforce against hisco-debtors the payment of the originalobligation

('rt. 055-05)E''#"t o' total s!brogation/

transfer of all the rights which the original creditorhad against the debtor or against 5rd persons

– accessory obligations are not etinguished.

– ;his rule is absolute in legalsubrogation

– in conventional subrogation D suchaccessory obligation may be increasedor reduced depending upon theagreement of the parties.

E''#"t o' )artial s!brogation/

- both the rights of the 5rd

person and that of thecreditor shall co-eist.

– 1n case of conflict, creditors right shall bepreferred.

TITLE IICONTRACTS

C>A<TER 1

('rt. 05+)Contra"t cum traho8- meeting of the mindsbetween 4 persons whereby one binds himself,with respect to the other, to give something or torender some service.

– agreement

– limited eclusively to those agreementswhich produce patrimonial obligations

– specie

– juridical convention manifested in legal

form, by virtue of which one or morepersons bind themselves in favor ofanother or others, or reciprocally to thefulfillment of a prestation to give, to do, ornot to do.

"on%#ntion D includes any =ind of agreementwhich may create,modify, or etinguish patrimonialand even family relations

– genus

ontract distinguished from other terms*

8ource of rightsand obligations

ontract-agreement of theparties

%thers - law

9ature of the rights

and obligations

ontract- concrete, limited,

and transitory

others- elastic, absolute,permanent

Contra"t *arriag#

!arties may be 4 ormore persons of thesame or different sees

9ecessary that partiesmust be one man andone woman

Governed primarily bythe agreement of the

parties

Governed by law

Chen eecuted, theresult is contract

Chen celebrated, theresult is status

an be terminated ordissolved by mereagreement

annot be dissolved orterminated

1n case of breach,remedy is to institute anaction for damages

1n case of breach,remedy is to institute anaction for legalseparation, or adulteryor concubinage

El#-#nts o' "ontra"ts/

Ess#ntial #l#-#nts-without which there canbe no contracts

ommon D present in allcontracts (consent ofboth parties, object ofthe contract, cause ofthe obligation, parties)





special D present only incertain contracts(delivery in realcontracts, form insolemn contracts)

etraordinary D uni#ueto a specific contract(price in a contract ofsale)

Nat!ral #l#-#nts derived from the natureof the contract andordinarily accompanythe same

presumed by lawalthough can be

ecluded by thecontracting parties

A""id#ntal #l#-#nts "ist only when theparties epresslyprovide for them for thepurpose of limiting ormodifying the normaleffects of the contract.

a!to2"ontra"t D there is only one party involvedbut said party merely acts in the name and for the

account of two distinct contracting parties.0. Chen a representative of another contracts

with himself 4. when as representative of 4 persons brings

about contract with himself and theprincipals

",ara"t#risti"s o' "ontra"ts O*AR80st* obligatory force or character

– contracting parties are bound, not only tothe fulfillment of what has been epresslystipulated, but also to all of theconse#uences thereof.

4nd -utuality of contracts

– contracts are binding upon both of theparties

5rd autonomy of contracts

– parties may establish such agreements asthey may deem convenient, provided they

are not contrary to law, morals, goodcustoms, public order, or public policy.

th r elativity of contracts

– ta=e effect only between the parties, their

assigns and heirs.

@ ),as#s or stag#s o' t,# li'# o' "ontra"t0st stage*G"9"$';1%9

– preliminary preparation, conception ofgeneration, period of negotiation, ending atthe moment of agreement of the parties

4nd stage* !"$?";1%9

– moment when parties come to agree onthe terms of the contracts

5rd stage* %98:77';1%9

– fulfillment or performance of the termsagreed upon in the contract

Classi'i"ation o' "ontra"ts/

'ccdg to theirrelation toothercontracts

• <r#)arator$ D necessaryas a preliminary steptowards the celebration ofanother subse#uentcontract

• )rin"i)al D can subsistindependently

• a""#ssor$ D can eist

only as a conse#uence ofanother prior contract.

'ccdg. to theirperfection

• Cons#ns!al D perfectedby mere agreement of theparties

• r#al D perfected with theconsent of the parties andthe delivery of the objectby one party to the other.

'ccdg. ;oform

• Co--on or in'or-al Dno particular form

• s)#"ial or 'or-al Dre#uire some particularform

'ccdg. ;o theirpurpose

• Trans'#r o' o0n#rs,i)

• "on%#$an"# o' !s#

• r#ndition o' s#r%i"#

'ccdg. ;o • T,ings





subject matter • s#r%i"#s

9ature of thevinculumwhich they

produce

• 9nilat#ral D gives rise toan obligation for only oneof the parties

•bilat#ral D gives rise toreciprocal obligation

'ccdg. ;ocause

• On#ro!s D 0 of theparties aspire to procurefor himself a benefitthrough the giving of ane#uivalent orcompensation

• grat!ito!s D 0 of theparties proposes to giveto the other a benefitwithout e#uivalent or

compensation. 'ccdg. ;o ris=involved

• Co--!tati%# D each ofthe parties ac#uires ane#uivalent of hisprestation and suche#uivalent is pecuniarilyappreciable and alreadydetermined.

• al#ator$ D which each ofthe parties has to hisaccount the ac#uisition ofan e#uivalent of his

prestation althoughpecuniarily appreciableand such is not yetdetermined.

'ccdg. tonorms

• No-inat# D have theirown individuality,regulated by specialprovisions of law

• inno-inat# D lac=individuality, not regulatedby special provisions oflaw

('rt. 053)&&&right of the contracting parties to establish anystipulation, clause, term or condition as they maydeem convenient. (constitutional and statutoryright)

limitations* stipulation, clause, term or condition

established must not be contrary to*

• la0

– mandatory or prohibitive in character

– epressive of fundamental principles of justice

– impose essential re#uisites• -orals

– principles which are incontrovertibleand are universally admitted and whichhave received social and practicalrecognition

• good "!sto-s

– includes even those moral precept notrecogni<ed universally but issanctioned by the practice of a certaincommunity

• )!bli" ord#r

– safety, peace and order of the countryor of any particular community

• )!bli" )oli"$

– no person can lawfully do that whichhas a tendency to be injurious to thepublic or against public good.

t#st* C%9 restraint is reasonably necessary forthe protection of the parties

('rt. 05)inno-inat# "ontra"ts- lac= individuality

– not regulated by special provisions of law

– covered by*

• provisions of ;itles 1 and 11 of @oo= 1E ofivil ode, (stipulation of the parties,general provisions or principles)

• rules governing the most analogousnominate contracts

• customs of the place

4inds o' inno-inat# "ontra"ts

• do ut des

• do ut facias

• facio ut des

• facio ut facias

no-inat# "ontra"ts - have their own distinctiveindividuality and are regulated by specialprovisions of law

• sales ('rts. 0+/-035)

• barter ('rts. 035/-030)





• lease ('rts. 034-033)

• partnership ('rts. 03-0/3)

• agency ('rts. 0/3/-0254)

• loan ('rts. 0255-0230)

• deposit ('rts. 0234-42)

• insurance, gambling, annuity ('rts. 40-44)

• compromise and arbitrartion ('rts. 44/-43)

• guaranty ('rts. 4-4/)

• pledge, mortgage, antichresis ('rts. 4/+-400)

&&&;he contract which is in restraint of trade is%alid as long as there is a stipulation as to timeand place especially if for the protection of theparties. (3el Castillo vs Richmond0 + !hil. 32)

Cas#s/

• ;iu vs !latinum !lans, +0 8$' 00

• 'von osmetics vs Luna, +00 8$' 53

('rt. 05/-050)-!t!alit$ o' "ontra"ts D e#uality of thecontracting parties

"ons#+!#n"#s/0. the fulfillment of a contract cannot be left to

the will of one of the contracting parties

– power to determine the %alidit$ of thecontract

– power to determine C%9 the contracts,all b# '!l'ill#d

4. validity or fulfillment may be left to the willof a 5rd person, such decision will only bebinding when it has been made =nown tothe contracting parties

5. validity or fulfillment can be left to chance(sensu contrario in 'rt. 05/)

contracts where mutuality is illusory because one

of the contracting parties is placed in a position ofsuperiority

• obligor promises to pay certain amountwhich is not determined (Liebenow vs !hil.Eegetable %il, 52 !hil. 3)

• agreement where the fulfillment of thecontract is left to the will of the contractingparties in the negative form of rescission ()

&&&?or an escalation clause to be valid, there mustalso be a de-escalation clause.

('rt. 0500)

R#lati%it$ o' "ontra"ts D a contract can only bindthe parties who had entered into it or theirsuccessors who have assumed their personality ortheir juridical position, and that as a conse#uence,such contract can neither favor nor prejudice a 5 rd

person.#("#)tion* if the rights and obligations arising fromthe contract are not trans-issibl#.

• @y their nature

◦ (e.g. personal or special #ualificationsof the obligor)

• by stipulation of the parties

◦ (e.g. contract provides that the obligorshall perform an act by himself and notthrough another)

• @y provision of law

◦ (e.g. those arising from contract ofpartnership or of agency)

<#rsons bo!nd b$ "ontra"ts/

• )arti#s

◦ t,#ir assigns

◦ t,#ir ,#irs D by virtue of the right ofsuccession, are subrogated to all therights and obligations of the deceasedand can not be regarded as 5rd parties

with respect to a deceased

monetary obligation which the decedent may haveincurred during his lifetime cannot be transmitted tohis heirs through succession. - such obligationmust be li#uidated in the testate or intestateproceeding for the settlement of the estate of thedecedent.

1t is the estate, rather than the heir , which must beconsidered as the continuation of the decedentspersonality.

%bligations not monetary in character, and whichwill therefore constitute part of the inheritance arechargeable against the heirs, but only to the etentof the value of the property which they may havereceived from the decedent.

G#n#ral r!l#/ ontracts cannot produce any effectwhatsoever as far as third persons are concerned





E("#)tion*0. 0,#r# t,# "ontra"t "ontains a

sti)!lation in 'a%or o' a @rd )#rson(stipulation pour autrui )

◦ if a contract should contain some

stipulation in favor of a 5rd

person, hemay demand its fulfillment provided hecommunicated his acceptance to theobligor before its revocation ('rt. 0500,par. 4)

◦ revocation must be done by mutualagreement or at least by direction ofthe party purchasing the echange orwho initiated the insertion of thestipulation ((auffman vs N/)

◦ corresponds almost always to the juridical conception of a gift or donation

◦ beneficial stipulation (pour autrui) Dstipulation in a contract, "l#arl$ andd#lib#rat#l$ "on'#rr#d by thecontracting parties as a favor upon a 5rd

person who must have accepted itbefore it could be revo=ed and not justmere incidental interest

▪ Kinds o' )o!r a!tr!i

• those where the stipulation isintended for the 8%L" benefitof the 5rd person (gratuitous incharacter)

• those where an obligation is

due from the promisee to a 5rd

person which the former see=sto discharge by means of suchstipulation.

R#+!isit#s o' pour autrui)

• stipulation in favor of the 5rd person

• stipulation must be part, not a whole of thecontract

• contracting parties must have clearly anddeliberately conferred a favor upon a 5 rd

person

• the 5rd person must have communicated

his acceptance to the obligor before itsrevocation

• neither of the contracting parties bears thelegal representation of authori<ation fromthe 5rd party.

T#st o' b#n#'i"ial sti)!lation/ the intention of theparties as disclosed by their contract.

• C%9 the contracting parties desired totender him such an interest.

4. 0,#r# t,# @rd )#rson "o-#s in)oss#ssion o' t,# ob#"t o' a "ontra"t

"r#ating a r#al rig,t ( Art #+# )5. 0,#r# t,# "ontra"t is #nt#r#d into in

ord#r to d#'ra!d a @rd )#rson (Art #+#+)covered ! topic on rescissi!le contracts

. 0,#r# t,# @rd )#rson ind!"#s a"ontra"ting )art$ to %iolat# ,is "ontra"t(Art #+#4)

9 contracts creatin" status (e" contract ofmarria"e)

: "roup contracts (e" Collective Bar"ainin" A"reement)

;he voidable character of the contract cannot be

asserted by one who is not a party to thetransaction or his representative.

('rt. 0504)r#al rig,t D right belonging to a person over aspecific thing without a passive subject individuallydetermined against whom such right may bepersonally enforced

– enforceable against the whole world

– 5rd person who come to be in possession ofthe object of the contract creating a realright will have to be bound by the right,

subject to the provisions of the 7ortgageLaw and the L$ law

('rt. 0505)creditors are protected in cases of contractsintended to defraud them

– must be read in relation to 'rts. 05/ I00 of the ivil ode

('rt. 050)

– any person who induces another to violatethe contract shall be liable for damages to

the other contracting party – the right to perform a contract and to reap

from such performance, and also the rightto performance by the other party areproperty rights which entitle each party toprotection and to see= compensation by anaction in tort for any interference therewith.

R#+!isit#s/





• eistence of a valid contract

• =nowledge on the part of the 5 rd person ofthe eistence of such contract

• interference of the 5rd person without legal justification or ecuse

◦ malice is generally implied

('rt. 050+-0503))#r'#"tion o' "ontra"ts D moment in the life of thecontract where the parties come to an agreementwith respect to the object or cause of the contract.

– signifies the birth of the contract asobligatory tie, resulting from theconcurrence of th wills of the contractingparties.- 7anresa

G#n#ral r!l#/ !erfection of a contract is producedby mere consent.E("#)tion*

• contracts of commodatum, pledge, anddeposit are perfected upon delivery of theobject by one of the contracting parties.

"ons#ns!alit$ D some submit that this is one ofthe fundamental characteristic of a contract B!tthis does not hold water in those $eal contractswhich re#uires delivery before its perfection.

Cons#ns!al "ontra"ts D perfected by mere

consent of the partiesr#al "ontra"ts D perfected after delivery of theobject (pledge, commodatum0 depositum0 mutuum)

1t is only when there is a complete manifestation ofthe meeting of the offer and the acceptance uponthe thing and the cause which are to constitute thecontract.

('rt. 050)

– 9o person may enter into a contract in thename of another without the properauthority from the latter or from law.

– based on the principle of obligatory forceand relativity of a contract.

– E''#"t upon the contract when a personacted without the proper authority re#uired/$enders the contract !n#n'or"#abl# butthe 8 in some case held that thesecontracts are Void ab initio (CasesF$alua"an" Baan vs Hin" and eirs of

Jilliam Sevilla vs Sevilla)1n recent cases decided by the 8, thetribunal went bac= to the doctrine applyingthe principle that those contracts enteredinto without being clothed the proper

authority are !n#n'or"#abl# (CasesF.scueta vs /im and Kozun vs Mercado)

Voidabl# "ontra"ts 9n#n'or"#abl#"ontra"ts

@inding unless annulled annot be sued uponunless they are ratified

?arther away fromabsolute nullity

1ntermediate groundbetween voidable andvoid contract.

:nenforceable contracts are susceptible of eitherepress or implied ratification by the one in whosebehalf it was eecuted before it is revo=ed by theother contracting party.

C>A<TER =ESSENTIAL RE;9ISITES O CONTRACTS

('rt. 050/)bas#s o' "ontra"t/

elements la0 0ill o' t,#"ontra"ting

)arti#s

"ssential are... 1mposed onformed to.

9atural are... presumed 'ccepted orrepudiated

'ccidental are... 'uthori<ed established

*ec. 9. : &onsent

('rt. 0502)"ons#nt cum sentire8 D most important element

– constitutes the very heart and soul ofcontracts

– agreement of wills. – oncurrence of the wills of the contracting

parties with respect to the object and causewhich shall constitute the contract.

R#+!isit#s/1. "ons#nt -!st b# -ani'#st#d b$ t,#"on"!rr#n"# o' t,# o''#r and t,# a""#)tan"#Art. 1@1721@=68





once there is such a manifestation of theconcurrence of the wills of the contractingparties, the period or stage of negotiation isterminated.

%ffer D proposal to ma=e contract

– must be certain or definite

acceptance D must also be certain and definite

– must also be absolute

counter-offer D #ualified acceptance> involves anew proposal> rejection of the original offer

amplified acceptance D there is a perfectedcontract with regard the original offer> but withregard to the additional, the offeree is now ma=inga counter-offer.

omple offers D rule depends whether the offersare interrelated or not.

"ample* - offer to sell lot no0, and lease on lot no4...theofferee accepted only the 0st offer, is there a validcontractR"8 with regard the 0st offer.. - offer to mortgage the property and loan 07...theoffers are interrelated, they may not be separatelyaccepted.

!ublic offer D offer made to the public gives rise to

a perfected contract the moment it is accepted.

contracts that are consensual in nature areperfected upon mere meeting of the mindsacceptance by letter or telegram*the contract is perfected the moment....theories*

(a) *ani'#station t,#or$ D ...the acceptanceis declared or made

(b) E()#dition t,#or$ - S the offereetransmitssents the notification ofacceptance to the offeror.

(c) R#"#)tion t,#or$ D... the notification is in

the hand of the offeror or delivered to theofferor, in such a manner that he canprocure the =nowledge of its content.

(d) Cognition t,#or$ - S the acceptancecomes to the =nowledge of the offeror

par. 4, 'rt. 0502 said that acceptance made byletter or telegram does not bind the offeror eceptfrom the time it came to his 4no0l#dg#.

'ctual =nowledge D re#uired by law> offeror musthave read the contents of the letter or telegramaccepting his offer.

– mere receipt of the letter is not sufficient.

– !resumption that once the offeror hasreceived the letter, he already had read thecontents thereof, ecept*

– when he is absent

– when he is incapacitated (at the time ofthe receipt of the letter)

8ame rule applies in case where the acceptance ismade by a person who is not in the presence of theofferor (contratacion entre ausentes)

cognition theory will not apply if the offeror himselfrefused to open the telegram for some reason oranother.

Cfferor withdraws offer)&&&offeror -a$ still 0it,dra0 t,# o''#r so long ashe still has no =nowledge of the acceptance by theofferee. (ase* /audico vs Arias)

– effect of withdrawal is immediate

Cfferee withdraws acceptance)&&&t,# a""#)tan"# -a$ b# r#%o4#d before itcomes to the =nowledge of the offeror, because insuch case there is still no meeting of the minds,

since the revocation has canceled or nullified theacceptance which thereby ceased to have anylegal effect. (2olentino)

- vs -

&&&the offeree loses the power to retract theacceptance from the moment that he accepts.$eason* since the offeree is the first person who=nows of the concurrence of wills of the parties, asa conse#uence, the obligation, as far as he isconcerned, must also commence earlier.#5anresa

the view of 2olentino is more logical 0 the onldecisive moment to consider (moment of

perfection) is the moment hen the offeror hasnoled"e of the acceptance made ! the offeree

=. t,# "ontra"ting )arti#s -!st )oss#ss t,#n#"#ssar$ l#gal "a)a"it$ Art. 1@=21@=78





@. t,# "ons#nt -!st b# int#llig#nt& 'r##&s)ontan#o!s and r#al Art. 1@@21@68

('rt. 054)?orm of acceptance*

• epress• implied

!resumptive consent is the basis of #uasi-contracts (ere3 vs omar )

&&&the form prescribed by law should be followed,otherwise, there will be no valid and bindingacceptance

('rt. 0540-0545)the person who ma=es the offer has the right tospecify the manner, time and place of acceptance

'rt. 0544 is not applied when what is referred to isa mere messenger and not an agent who has thecapacity to negotiate and represent the principal.

'n offer becomes ineffective upon the death, civilinterdiction, insanity, or insolvency of either partybefore acceptance is conveyed.

Con%#$#d D moment when the offeror has=nowledge of the acceptance by the offeree.

R#asons 'or Art. 1@=@/ – d#at, etinguishes personality and juridical

capacity

– "i%il int#rdi"tion (accessory penalty for$;) person is deprived of parentalauthority, guardian, and also deprived ofthe right to manage or dispose of hisproperty, he cannot eecute acts intervivos.

– Insanit$ D insane person cannot give avalid consent to a contract. Be loses thecapacity to do acts with legal effects

– insol%#n"$ D modifies or limits capacity toact.

('rt. 054)if the option is 0it,o!t "onsid#ration, the offerormay withdraw his offer by communicating suchwithdrawal to the offeree at any time beforeacceptance.

1f it is 'o!nd#d !)on a "onsid#ration, the offerorcannot withdraw his offer

article contemplates an option contract D apreparatory contract.

('rt. 054+-054+) 'dvertisements for bidders are simply invitations toma=e proposals, and the advertiser is not bound toaccept the highest or lowest bidder, unless thecontrary appears.

('rt. 054)capacity of the contracting parties D essentialelement of a contract

– indispensable re#uisite of a consent

In"a)a"itat#d to gi%# "ons#nt/1. !n#-an"i)at#d -inors

eception*◦ when it is entered into by a minor who

misrepresents his age

▪ based on the principle of estoppel

▪ must be active not merelyconstructive

◦ when it involves the sale and deliveryof necessaries to the minor ('rt.02)

◦ when it involves a natural obligationand such obligation is fulfi lledvoluntarily by the minor (0/-40 y.o)

◦ when it is a marriage settlement or

propter nuptias (4-40 male> 0/-40female)

◦ when it is a life, health, or accidentinsurance ta=en on the life of the minor(0/ y.o above) with minors estate,father, mother, husband, wife, child,brother or sister as beneficiary.

&&&there are no more emancipated minors since theage of majority has been raised to 0/ y.o.

=. insan# or d#-#nt#d )#rsons

◦ contracting parties are unable tounderstand the nature and

conse#uences of the contract at thetime of its eecution by reason of anycause affecting his intellectual orsensitive faculties. (includesdrun=enness, or under hypnotic spell)

◦ contracts entered into during lucidinterval is valid.

◦ ' #uestion of cat which must bedecided by the court





▪ substance of the thing (error insu!stantia)

▪ conditions of the thing (providedsuch condition principally movedone or both of the parties to enter

into the contract)▪ #uantity of the thing (error in

quantitate)

◦ mista=e as to person

▪ name of a person.

▪ 1dentity of a person D effect isvoidable contract

▪ #ualification of a personre#uisites*

• the mista=e must be either with regardto the identity or with regard to the#ualification of the person

• such identity or #ualification must havebeen the principal consideration for thecelebration of the contract

&:sually, these mista=es occur inobligations to do.

• -ista4# o' la0 D when one or both f thecontracting parties arrive at an erroneousconclusion regarding the interpretation of a#uestion of law or the legal effects of acertain act or transaction.

G#n#ral r!l#* only mista=e of fact which will vitiateconsent renders the contract voidable. ' mista=e oflaw does not render the contract voidable

(i"norantia le"is non excusat)

Cas#/ 'siain vs Jalandoni('rt. 0554)

intended for the protection of a party to a contractwho is at a disadvantage due to his illiteracy,ignorance, mental wea=ness, or handicap.

?raud is present when there is an insidious wordsor machinations of one of the contracting parties,the other is induced to enter into the contract whichwithout them, he would not have agreed to it.

('rt. 0555-055)General rule* mista=e of law will not vitiate consent."ception* mutual error

re#uisites*

• mista=e must be with respect to thelegal effect of the agreement

• mista=e must be mutual

• the real purpose of the parties musthave been frustrated.

('rt. 055+-0553)%iol#n"# D use of irresistible force

re#uisites*• force employed to wrest consent must be

serious or irresistible

• it must be the determining cause for theparty upon whom it is employed in enteringinto the contract.

inti-idation D compelling by reasonable and wellgrounded fear of an imminent or grave evil uponhis person, property, or upon the person orproperty of his spouse, descendants, orascendants

violence and intimidation are sometimes calledduress.

$e#uisites*

• one of the contracting parties is compelledto give consent by a reasonable and wellgrounded fear of an evil

• the evil must be imminent and grave

• the evil must be unjust

• the evil must be the determining cause forthe party upon whom it is employed inentering into the contract.

C,ara"t#r o' inti-idation/• actual

• serious

• possible of reali<ation

• and that the actor can and still carry out histhreat

d#t#r-ination o' t,# d#gr## o' inti-idation/

• age

• se

• condition of the person

#''#"t o' !st or l#gal t,r#at/-it does not vitiate consentthe contract would still be perfectly valid and notvoidable.

Viol#n"# inti-idation

"ternal(physical compulsion -

1nternal(moral compulsion-





astan) astan)

!revents the epressionof the will substituting itwith a material actdictated by another

1nfluences the will,inhibiting it in such away that the epressiontherefor is apparentlythat of a person whohas freely given hisconsent.

&ase* 7artine< vs Bong=ong I 8hanghai @an=distinction between vitiated consent and reluctantconsent

('rt. 055)!nd!# in'l!#n"# D ta=ing improper advantage ofones power over the will of another, depriving thelatter of a reasonable freedom of choice.

;est* C%9 the the influence eerted hasoverpowered or subjugated the mind of acontracting party as to destroy his free agency,ma=ing him epress the will of another rather thanhis own.;hing to be considered*

• confidential, spiritual, family, and otherelations between parties

('rt. 055/)'ra!d D insidious words or machinations employedby one of the contracting parties in order to inducethe other to enter into a contract, which, withoutthem, he would not have agreed to.

Kinds o' 'ra!d/

Art. 1@@3& Ci%il Cod# Art. 112111& Ci%ilCod#

?raud in the perfectionof the contract

?raud in theperformance of theobligation

"mployed in securingthe consent of the other

party

?raud employed by theobligor in the

performance of a pre-eisting obligation

Dolo causante D causal fraud> deceptions ormisrepresentation of a serious character employedby one party and without it, the other party 0o!ldnot ,a%# entered into the agreement ('rt. 055/)

dolo incidente D incidental fraud> deceptions ormisrepresentation 9%; of a serious characteremployed by one party and without it, the otherparty 0o!ld still have entered into the agreement

Dolo causante dolo incidente

?raud 8erious incharacter

9ot so serious

ause which inducesthe party upon whom itis employed in enteringthe contract

9ot the cause

"ffect is a voidablecontract

"ffect is liability fordamages

R#+!isit#s*

• insidious words• insidious words must be serious

• insidious words must have induced theother party to enter into the contract D suchfraud must be the principal or causalinducement or consideration for theconsent of the other party.

• fraud should not have been employed bythe contracting parties or by third persons

t#st* there must be proof of concrete factsconstituting the fraud or insidious words ormachinations employed by one of the contracting

parties

('rt. 0552)?ailure to disclose facts, when there is a duty toreveal them, as when the parties are bound byconfidential relations, constitutes fraud.

('rt. 05);he usual eaggerations in trade, when the otherparty had an opportunity to =now the facts, are notin themselves fraudulent.

('rt. 050)

' mere epression of an opinion does not signifyfraud, unless made by an epert and the otherparty has relied on the formers special =nowledge.

&ase) 8ongco vs 8ellner

('rt. 054)7isrepresentation by a third person does not vitiate





consent, unless such misrepresentation hascreated substantial mista=e and the same ismutual.

&ase) $ural @an= of aloocan vs '

('rt. 055-05)serious character of fraud D refers to themagnitude and importance of the fraud in securingthe consent of the other party.

('rt. 05+-053)si-!lation o' "ontra"ts

absol!t# R#lati%#

ontracting parties donot intend to be boundby the contract at all

!arties conceal theirtrue agreement

ontract is not reallydesired or intended toproduce legal effects orin any way alter the

juridical situation of theparties

8till has legal effects

"ffect* void contract 8till binds thecontracting parties totheir real agreement,when it does notprejudice a 5rd personand is not intended for

any purpose contrary tolaw, morals, goodcustoms, public order,or public policy

&ase* Loyola vs '

*ec. =. : Cbject of contractOb#"t D most fundamental and indispensablere#uisite of a contract.

– the thing, right or service which is thesubject matter of the obligation which is

created or established. – ;he what of the contract.

('rt. 05 D 052)General rule* 'll things or services may be theobject of contracts$e#uisites*

1. t,# ob#"t s,all b# 0it,in t,# "o--#r"#

o' -#n- appropriability and transmissibility

=. t,# ob#"t s,o!ld b# r#al or )ossibl#- objects that are ineistent cannot be theobject of contracts.

- future things may be the object ofcontracts

◦ conditional contract D presumption incase of doubt about the nature ofcontract

◦ aleatory contract

– eception* future inheritance may notbe the object of contract ('rt. 05)

– exception to exceptionF 'rt. 0/ of theivil ode> partition of estate intervivos, provided that the legitime ofcompulsory heirs is not prejudiced

3. the object shall be licit. t,# ob#"t s,o!ld b# d#t#r-inat#- the genus of the object should beepressed although there might be nodetermination of the individual specie

&&&;he fact that the #uantity is not determinateshall not be an obstacle to the eistence of thecontract, provided it is possible to determine thesame, without the need of a new contract betweenthe parties.

"annot b# ob#"ts o' "ontra"ts/

• outside the commerce of men• intransmissible rights

• future inheritance, ecept in casesepressly authori<ed by law

◦ reason*

▪ possibility that one of thecontracting parties may be temptedto instigate the death of the other inorder that inheritance will becomehis

▪ probability that fraud and prejudicemay be committed or occasioned

thereby• services which are contrary to law, morals,

good customs, public order, public policy

• impossible things or services

◦ a!solute impossi!ilit of service Darises from the nature or essence ofthe act or service itself> void contract

◦ relative impossi!ilit of service D arises





form the circumstances or #ualificationsof the obligor rendering him incapableof eecuting the act or service, allowsthe perfection of the contract, althoughthe fulfil lment thereof is hardly

probable.▪ 1f impossibility may permanent in

character, contract is void

• objects which are not of possibledetermination as to its =ind

*ec. >. : &ause of &ontracts('rt. 05+-05+0)

Ca!s# D the why of the contract

– juridical reason why the parties enteredinto the contract

– essential reason which moves thecontracting parties to enter into a contract.

– 1mmediate, direct, or most proimatereason which eplains I justifies thecreation of the obligation through the will ofthe contracting parties.

On#ro!s "ontra"ts ;he prestation orpromise of a thing orservice by the other

R#-!n#tor$ "ontra"ts 8ervice or the benefitwhich is remunerated orcompensated

<!r# b#n#'i"#n"# Liberality or generosity

of the benefactor

1n onerous contracts, even a mere promise is asufficient causa or consideration.$emedy* rescission or specific performance.

&&&the object of an onerous contracts is the sameas to both parties, although the cause is different. -;olentino

Ca!s# *oti%#s

6irect, proimatereason of a contract

1ndirect and remotereason of a contract

%bjective or juridicalreason of a contract

!sychological andpurely personal reasons

'lways the same 6iffers for eachcontracting parties

1ts legality or illegality 1ts legality or illegality

will affect the validity ofthe contract

will not affect theeistence of thecontract

&&&;he motives of the contracting parties are as

different or comple and as capable of infinitevariety as the individual circumstances which maymove men to ac#uire things or ma=e money.

&&&;he motives may be regarded as the causawhen the contract is conditioned upon theattainment of the motive of either contractingparties.&ases* Ligue< vs ', $odrigue< vs $odrigue<,!hil. @an=ing orp. vs Lui 8he

&&&;he cause of the accessory contract is identical

with that of the principal contract.

&&&Chen a moral obligation arises wholly fromethical considerations, unconnected with any civilobligation and as such, is not demandable in lawbut only in conscience, it can not constitute asufficient cause or consideration supporting anonerous contract.&ases* ?isher vs $obb, Eillaroel vs "strada

R#-!n#tor$ "ontra"ts D one in which one of thecontracting parties compensates the service orbenefit rendered by the other party, although such

service or benefit does not constitute ademandable debt.

('rt. 05+4-05++)essential re#uisites of cause* (#lt)

• the cause should be in #istence at thetime of the celebration of the contract.

• ;he cause should be licit or lawful

• the cause should be true.

&&&;he cause is presumed to be eisting andlicitlawful. ('rt. 05+)

&&&ineistent cause, false, or unlawfulillicit causeproduces no effect (void a! initio)&ase* arantes vs ' D inade#uate causa orconsideration

lesion or inade#uacy of cause will not invalidatethe contract, unless there be fraud, mista=e, orundue influence (%oidabl# contract if any of the 5 is present). ('rt.





05++)

!nla0'!l "a!s# D contrary to law, morals, goodcustoms, public order, public policyeffect* contract void ab initio

&ases* Eeles vs $amas as compared with 7actalvs 7elegrito (incipient criminal liability)

C>A<TER @OR*S O CONTRACTS

('rt. 05+3)spiritual system of the 8panish ode D the lawloo=s more at the spiritintent rather than at theforms of the contract.

General $ule* contracts shall be obligatory,provided all the essential elements of a contract

are present."ceptions*

• 0,#n t,# la0 r#+!ir#s t,at t,# "ontra"t-!st b# in a "#rtain 'orin ord#r to b#%alid

◦ must appear in writing

▪ donation and acceptance ofpersonal property whose valueeceeds !+,.

▪ sale of a piece of land or anyinterest therein through an agent

▪ agreements regarding payment of

interest in contract of loan▪ antichresis

◦ must appear in public document

▪ donations of immovable propertiesregardless of value

▪ partnerships where immovableproperty or real rights arecontributed to the common fund

◦ must be registered

▪ chattel mortgages

▪ sales or transfer of large cattle

• 0,#n t,# la0 r#+!ir#s t,at t,# "ontra"t

-!st b# in a "#rtain 'orin ord#r to b##n'or"#abl#.

◦ overed by the 8tatutes of ?rauds

&ase* @? orp vs ' D contract may not be limitedin a single document or writing

'or-s o' "ontra"ts*

• necessary for the convenience of thecontracting parties or for the efficacy of thecontract ('rts. 05+3-05+/)

• necessary for the validity of the contract(scattered provisions of the ode and

some special laws)• necessary for the enforceability of the

contract (8tatute of ?rauds)

('rts. 05+-05+/))rin"i)l#s d#d!"ibl# 'ro- !ris)r!d#n"#

• 'rts. 053+-05+/ re#uire the eecution ofthe contract in a private or public documentto insure its efficacy.

• @oth articles presupposes the eistence ofa contract which is valid and enforceable.

• 1nvo=ing 'rts. 05+-05+/ place the

eistence of the contract in issue, whichmust be resolved by the ordinary rules ofevidence

• 'rt. 05+ does not re#uire that the action tocompel the eecution of the necessarydocument must precede the action uponthe contract.

• 'rt. 05+/ does not affect the validity orenforceability of the contract. !resent formere convenience&ase* 6auden-Bernae< vs 6e Los 'ngeles

C>A<TER

REOR*ATION O INSTR9*ENTS

('rt. 05+2)$"?%$7';1%9 D used when the true intention ofthe parties to a perfected and valid contract are notepressed in the instrument purporting to embodytheir agreement by reason of mista=e, fraud,ine#uitable conduct or accident

– based on justice and e#uityr#+!isit#s*

• meeting of the minds of the contractingparties

• true intention not epressed in theinstrument

• such failure to epress their true intentionis due to mista=e, fraud, ine#uitableconduct, or accident.

R#'or-ation o'"ontra"t

Ann!l-#nt o' "ontra"t





!resupposes a validcontract in which therehas already been ameeting of the mind

@ased on a defectivecontract in which therehas been no meeting ofthe minds because theconsent of one or both

of the contractingparties has beenvitiated.

9ot a remedy whenthere has been fraud,mista=e, ine#uitableconduct or accident.

$emedy when there hasbeen no meeting of theminds because ofmista=e, fraud,ine#uitable conduct, oraccident

('rt. 053-0532)0,#n "an on# )art$ as4 'or t,# r#'or-ation o'

t,# "ontra"t/• mutual mista=e of the parties ('rt. 0530)

• one party was mista=en and the other partyacted fraudulently('rt. 0534)

• one party mista=en, the other =new orbelieved that the instrument does not showtheir real intent but concealed that fact tothe former ('rt. 0535)

• through the ignorance, lac= of s=ill,negligence or bad faith on the part of theperson drafting the instrument or the cler=or typist. ('rt. 053)

• !arties agree upon the mortgage or pledgeof a real or personal property, but theinstrument states that the property is soldabsolutely or with a right of repurchase('rt. 053+)

0,#n t,#r# "an b# no r#'or-ation/

• simple donation inter vivos wherein nocondition is imposed

• wills

• when the real agreement is void ('rt. 0533)

• when one of the parties brought an actionto enforce the instrument ('rt. 053)

"ontra"t o' ad,#sion D one in which one of theparties imposes a ready made form of contract,which the other party may accept or reject, butwhich the latter cannot modify

– as binding as a mutually eecutedtransaction ( Aala Corp vs Ra Burton3evDt Corp)

– the one who adheres to the contract is inreality free to reject it entirely, if headheres, he gives his consent. (%n" Liu vsCA)

– its enforceability will have to be determined

by the peculiar circumstances obtaining ineach case and the situation of the partiesconcerned

– in case of conflict, the contract will beinterpreted against the one who drafted thecontract.

4steps needed to follow(contracts of credit cards)to absolve a card holder from liability forunauthori<ed purchase made through lost or stolencard

0. the card holder must give a written noticeto the credit card company

4. credit company must give notice to all itsmember establishments of such lost ortheft

C>A<TER 5INTER<RETATION O CONTRACTS

('rt. 05-050)&&&1ntention of the contracting parties alwaysprevail because their will has the force of lawbetween them.

&&&Literal sense of the stipulations shall befollowed.

&&&%nce the intention has been ascertained, itbecomes an integral part of the contract as thoughit had been originally epressed therein inune#uivocal terms.

;he character of the transaction between theparties is not determined by the language used inthe document but by their intention. (ManilaBanin" Corp vs @eodoro0 5r)

contemporaneous and subse#uent acts of theparties must be considered in order to judge theintention of the contracting parties.&ase* ;anguilig vs '

('rt. 054-052) '$;1L" 054. Bowever general the termsof a contract may be, they shall not be understood





to comprehend things that are distinct and casesthat are different from those upon which the partiesintended to agree. (04/5)

'$;1L" 055. 1f some stipulation of anycontract should admit of several meanings, it shall

be understood as bearing that import which is mostade#uate to render it effectual. (04/)

'$;1L" 05. ;he various stipulations of acontract shall be interpreted together, attributing tothe doubtful ones that sense which may result fromall of them ta=en jointly. (04/+)

'$;1L" 05+. Cords which may havedifferent significations shall be understood in thatwhich is most in =eeping with the nature and objectof the contract. (04/3)

'$;1L" 053. ;he usage or custom of theplace shall be borne in mind in the interpretation ofthe ambiguities of a contract, and shall fill the

omission of stipulations which are ordinarilyestablished. (04/)

'$;1L" 05. ;he interpretation ofobscure words or stipulations in a contract shall notfavor the party who caused the obscurity. (04//)

'$;1L" 05/. Chen it is absolutelyimpossible to settle doubts by the rules establishedin the preceding articles, and the doubts refer toincidental circumstances of a gratuitous contract,the least transmission of rights and interests shallprevail. 1f the contract is onerous, the doubt shallbe settled in favor of the greatest reciprocity ofinterests.1f the doubts are cast upon the principal object ofthe contract in such a way that it cannot be =nownwhat may have been the intention or will of theparties, the contract shall be null and void. (04/2)

'$;1L" 052. ;he principles ofinterpretation stated in $ule 045 of the $ules ofourt shall li=ewise be observed in theconstruction of contracts.

C>A<TER 6RESCISSIBLE CONTRACTS

lasses of defective contracts*• rescissible contracts

• voidable contracts

• unenforceable contracts

• void or ineistent contracts

r#s"issibl# %oidabl# !n#n'or"#abl

Void

#

's to #'#"t

;here isda-ag# or

in!r$either to 0of theparties orto 5rd

persons

;here is%itiation o'

"ons#nt orlegalcapacity of0 of theparties

ontractentered

into0it,o!ta!t,ority>does notcomplywith8tatute of?raud> bothparties arelegallyincapacitated

La"4 o'one or

some ofthe#ss#ntialr#+!isit#sof a validcontract.

's to E''#"tEalid andenforceable until theyarerescindedby acompetentcourt

Ealid andenforceable until theyareannulled byacompetentcourt

annot beenforcedby a properaction incourt

!roduce nolegal effect

's to )r#s"ri)tibilit$ of action or defense

'ction ofrescissionmayprescribe

'ction forannulmentmayprescribe

?or total orpartialperformance, theaction forrecoverymayprescribe

'ction fordeclarationof nullitydoes notprescribe.

's to susceptibility of rati'i"ation

9otsusceptibleofratification

susceptibleofratification

susceptibleofratification

9otsusceptibleofratification

's to 0,o -a$ assail contracts

ontractingparties> 5rd

personprejudiced

ontractingparty

ontractingparty

ontractingparties> 5rd

personwhoseinterest isdirectly





affected.

's to ,o0 contracts may be assail#d

6irectly 6irectly orcollaterally

6irectly orcollaterally

6irectly orcollaterally

('rt. 05/)r#s"issibl# "ontra"ts D all of the essentialelements of a contract are present> contract isvalid, but by reason of injury or damage to either ofthe contracting parties or to 5 rd persons, it may berescinded.C,ara"t#risti"s/

• defects consists in injury or damage toeither of one of the contracting parties or to5rd persons.

• @efore rescission, they are valid and

therefore legally effective• can only be attac=ed directly

• can be attac=ed by 1 of the contractingparties or the 5rd person injured ordefrauded.

• 8usceptible of convalidation only byprescription and not by ratification

r#s"ission – remedy to secure the reparation ofdamages caused to the contracting party or 5rd

person by a contract> by means of restoration ofthings to their condition prior to the celebration ofthe contract.

R#s"ission o'"ontra"ts

Art. 1@321@378

R#sol!tion o'r#"i)ro"al obligations

Art. 11718

7ay be instituted by aparty to the contractandor even @rd )#rson

7ay be instituted onl$by a )art$ to thecontract

S#%#ral "a!s#s orgrounds* lesion, fraud,and other epresslyspecified by law

Gro!nd* failure of onethe contracting partiesto comply with what isincumbent upon him.

ourt has no )o0#r to

grant an etension oftime for performance ofthe obligation

;he court ,as

dis"r#tionar$ )o0#r togrant an etension forperformance providedthat there is just cause.

7ay apply to :nilateraland reciprocal contracts

'pplies only toreciprocal contracts

R#s"ission o'"ontra"ts

R#s"ission b$ -!t!al"ons#nt

auses mentioned in 'rts. 05/0 and 05/4

'greement of theparties to rescind thecontract.

$estoration to thecondition of the partiesprior to the constitutionof the contract

"ffects should bedetermined by theagreement made by theparties, or by theapplication of otherlegal provisions ecept

'rt. 05/+

&ase* '#uino vs ;anedo

('rt. 05/0-05/4)rescissible contracts are*

1. "ontra"ts in b#,al' o' 0ard

• entered into by guardians whenever theirwards suffer lesion or damages by morethan T of the value of the thing which arethe object thereof.

• $ules of ourt* judicial guardian enteringinto a contract with respect to the propertyof his ward must ordinarily secure theapproval of a competent court.

• 'pply 'rts 543, > $ules 2+-23 9ew$ules of ourt

=. "ontra"ts in b#,al' o' abs#nt##s

• rescissible if the absentee suffer the lesionor damage by more than T of the value ofthe thing which are the object thereof.

• principles applicable in 'rt. 05/0, par 0 areapplicable to this provision since thepowers and duties of representatives arethe same as that of the guardian.

$e#uisites for par. 0 I 4 of 'rts. 05/0

• contract must have been entered into bythe guardian in behalf of his ward or a legalrepresentative in behalf of an absentee

• ward or absentee must have suffered

lesion of more than T of the value of theproperty which is the object of the contract.

• ontract must have been entered intowithout court approval

• there must be no other means for obtainingreparation for the lesion

• the person as=ing for the rescission mustbe able to return whatever he may be





obliged to restore.

• %bject of the contract must not be legally inthe possession of 5rd person who acted ingood faith. (otherwise, remedy isindemnification for damages)

@. "ontra"ts in 'ra!d o' "r#ditors• when the creditor cannot in any manner

collect the claims due them.

• $e#uisites*

◦ eisting credit prior to the celebration ofthe contract.

◦ ?raud or at least an intent to commitfraud to the prejudice of the creditorsee=ing rescission.

◦ 9o other manner by which the creditorcan collect the credit

◦ object of the credit is not in legal

possession by 5rd

person who acted ingood faith.(otherwise, remedy is toproceed against the person causing theloss for damages)

• accion pauliana- action to rescind contractsin fraud of the creditors

◦ re#uisites*

▪ plaintiff as=ing for the rescissionhas a credit prior to the alienation

▪ debtor has made a subse#uentcontract conveying patrimonialbenefit to a 5rd person

▪ creditor has no other legal remedy

▪ act being impugned is fraudulent.

▪ 5rd person has been an accomplicein the fraud.

• !urpose is to guarantee an eisting debt

• there is personal right that deserves theprotection of law

. "ontra"ts r#'#rring to t,ings in litigation

• if entered into by the defendant without the=nowledge and approval of the litigants orof competent judicial authority.

• !urpose is to secure the possible effectivity

of a claim• there is a real right involved that deserves

the protection of law+. "ontra"ts b$ insol%#nt ('rt. 05/4)

• insolvency D refers to the financial situationof the debtor in which it is impossible forhim to fulfill his obligations.

• re#uisites*

◦ it must have been made in a state ofinsolvency

◦ the obligation must have been onewhich the debtor could not becompelled to pay at the time such

payment was effected.• @asis of the rescissible character is fraud

• contemplates obligations with terms or aresubject to suspensive condition> void andnatural obligations> and those condoned orhave prescribed.

6. ot,#r "ontra"ts d#"lar#d b$ la0 to b#r#s"issibl#

• 'rts. 02/, 00/2, 0+43, 0+5, 0+52, 0+4,0++3, 0+3, 0+3, and 03+2 of the ivilode

('rt. 05/5)&&&'ction for rescission is s!bsidiar$ it cannot beinstituted ecept when the party suffering damagehas no other legal means to obtain reparation forthe same.F,o -a$ instit!t# a"tion*

• person prejudiced

◦ party suffering the lesion in therescissory action on the ground of fraud

◦ creditor who is defrauded in rescissoryactions

◦ other persons authori<ed to eercisethe same in their rescissory actions.

• representatives of those prejudiced

• heirs of those prejudiced

• creditors by virtue of the subrogatory action('rt. 00)

&&&1f the decedent himself does not have the rightto institute the action, the heir acting asrepresentative of the decedent also does not havethe right to institute the action> however, it will bepossible for him to institute the action in his ownright (9o.5 'rt. 05/0, ivil ode)&ase* oncepcion vs 8ta. 'na

('rt. 05/)purpose of rescission* reparation of damage orinjury suffered by one of the contracting parties or5rd person.

"tent of rescission shall be only be to thatnecessary to cover the damage caused.





('rt. 05/+)par. 0 of the provision applies only to rescissoryactions on the ground of lesion and not torescissory action based on fraud.

"ffect of rescission*• return the things which were the object of

the contract (1ncludes fruits or interests)

◦ fruits D natural, industrial, civil, andother accessions obtained by the thing

◦ interest D legal interest&&&rescission cannot apply if the one who demandscannot return what he may be obliged to restore.

;he determination of good or bad faith of thecontacting parties is important in order to assessthe fruits or the value thereof which must bereturned as well as the epenses which must bereimbursed.

1n transfer of properties through grat!ito!s titl#,good faith of the transferee is not a defense.

$escission shall not ta=e effect upon 5rd person, 4re#uisites*

• the thing must be legally in the possessionof 5rd person (immova!le0propertF thethin" must !e re"istered in the name of the+rd person for the requisite to appl )&ase* 8i=atuna vs Guevarra

• such 5rd

person must not have acted in badfaith.

$emedy if maintaining an action for the rescissionis impossible is to bring an a"tion 'or ind#-nit$'or da-ag#s against the person who caused theloss.

('rt. 05/3-05//)proof of fraud- needed to be established in orderthat a contract may be rescinded

presumption of fraud*0. alienation of property by gratuitous title if

the debtor has not reserved sufficientproperty to pay all of his debts contractedbefore such alienationdonation

4. 'lienations by onerous title when made bypersons against whom some judgment hasbeen rendered in any instance (even if notyet final and eecutory) or some writ ofattachment has been issued. ;he decision

or attachment need not refer to theproperty alienated, and need not havebeen obtained by the party see=ing therescission.

5. 'ny other manner recogni<ed by law of

evidence&&&Chere no judgment or preliminary attachmenteists against the debtor, the 4nd presumption is notapplicable.

&&&;he presumptions are disputable and may berebutted by satisfactory and convincing evidence tothe contrary. &ase* Bonrado vs 7arcayda et al.

@adges of fraud* (conveyance)0. inade#uate cause or consideration4. transfer made by a debtor after the suit has

been begun and while it is pending against

him5. sale on credit by an insolvent debtor . evidence of large indebtedness or large

insolvency+. transfer of all of the property of a debtor

when he is insolvent3. transfer made between father and son. failure of vendee to ta=e eclusive

possession of all property

&&&1f it happens that there are 4 or more alienation,the 0st ac#uirer shall be liable first, and so onsuccessively.

!ar. 4 of 'rt. 05// seems to have forgotten thedebtor> this is because the debtor is alreadypresumed to be insolvent.

('rt. 05/2)year-prescriptive period for commencement ofaction for rescission.

– this period must be counted from the timeof the termination of the incapacity of theward ('rt. 05/0, par.0)

– this period must be counted from the time

the domicile of the absentee is =nown ('rt.05/0, par.4)

– this period must be counted from the timeof the discovery of fraud ('rt. 05/0 par.5I> 'rt. 05/4)

– in certain cases of rescissible contracts ofale, the prescriptive period is 3 months oreven days from the day of delivery.





C>A<TER VOIABLE CONTRACTS

Voidabl# "ontra"ts D element of consent of one ofthe contracting parties is vitiated either by lac= of

legal capacity of one of the contracting parties, orby mista=e, violence, intimidation, undue influence,or fraud.

– binding until annulled by a competent court

R#-#di#s*

• attac= the validity of the contract

◦ direct D by means of proper action(annulment)

◦ indirect D as a defense (annulability orrelative nullity)

• convalidate it either by ratification orprescription.

haracteristics*0. defect consists in the vitiation of consent of

one of the contracting parties4. binding until annulled by a competent court5. susceptible of convalidation by ratification

or by prescription. defect or voidable character cannot be

invo=ed by 5rd persons

Voidabl# "ontra"ts R#s"issibl# "ontra"ts

1ntrinsic defect (vitiationof consent) "ternal defect(damage or prejudiceeither to one of thecontracting parties or toa 5rd person)

ontracts are voidableeven if there is nodamage or injury

;here should bedamage or injurycaused to consider acontract rescissible.

'nnulability 1s based onthe law

$escissibility is basedon e#uity

$emedy and sanction 7ere remedy

!redominated by publicinterest

!redominated byprivate interest

8usceptible ofratification

9ot susceptible toratification

7ay be invo=ed only bythe contracting arty

7ay be invo=ed by thecontracting party or by a

5rd person who isprejudiced.

('rt. 052)Eoidable contracts*

0. ;hose where one of the parties isincapable of giving consent to a contract>

4. ;hose where the consent is vitiated bymista=e, violence, intimidation, undueinfluence or fraud.

&&&if the consent is absolutely lac=ing or simulated,the contract is ineistent, not voidable.

('rt. 0520)

$#ars )r#s"ri)ti%# )#riod – s,all "o--#n"#/• from the time the defect of the consent

ceases (intimidation, violence, or undueinfluence)

• from the time of the discovery of mista=e orfraud

• from the time the guardianship cease(contracts entered into by the minors orother incapacitated persons)

◦ 4 conflicting views*

▪ prescription applies only to ';1%9and 9%; defense

▪ prescription applies to @%;B actionand defense D this one is morelogical

ase* &arantes vs &$

('rt. 0524-0523)Rati'i"ation D confirmation> act or means by virtueof which efficacy is given to contract which suffersfrom a vice of curable nullity.$e#uisites*

0. contract should be tainted with a vice whichis susceptible of being cured

4. the confirmation should be effected by the

person who is entitled to do so under thelaw

5. it should be effected with =nowledge of thevice or defect of the contract

. the cause of the nullity or defect shouldhave already disappeared

&&&if the person entitled to effect the confirmation





ratifies or confirms the contract with =nowledge ofthe mista=e, but not of the fraud, his right to as= foran annulment is not etinguished thereby since theratification has only purged the contract of mista=e,but not the fraud.

or-s o' rati'i"ation/(with =nowledge of the reason which renders thecontract voidable and such reason havingceased...)

• epress D declaration of desire toconvalidate the contract and epressdeclaration to renounce his right to annulthe contract.

• ;acit D eecuting an act which necessarilyimplies an intention to waive his right toannul the contract.

E''#"ts o' rati'i"ation*• etinguishes the action to annul the

contract.

• leanses the contract of its defects fromthe moment it was constituted.

('rt. 052)re#uisites to confer the necessary capacity for theeercise of action to annul*

• plaintiff must have an interest in thecontract

• the E1;17 and not the party responsiblefor the vice or defect must be the personwho must assert the same

G#n#ral r!l#* a third person who is a stranger tothe contract cannot institute an action forannulment.E("#)tion* when the 5rd person is prejudiced in hisrights with respect to one of the contracting parties,and can show detriment which would positivelyresult to him from the contract in which he has nointervention.CaseF 2eves vs eople's omesite + ousing&orp.

('rt. 052/-0522)#''#"ts o' ann!l-#nt

• contracting parties are released from theirobligations (contract not et consummated)

• apply 'rt. 052/-04 of the ivil ode(consummated contract)

• mutual restitution

◦ to give* things subject matter of thecontract, its fruits, and the price withinterest, ecept in cases provided bylaw

◦ to do* apportionment of damagesbased on the value of the prestationwith corresponding interests.&&&when the defect of the contractconsists in the incapacity of one of thecontracting parties, the incapacitatedperson is not obliged to ma=e anyrestitution ecept insofar as he hasbeen benefited by the thing or pricereceived by him.

&&&1n the obligation of the incapacitated person toma=e restitution, it is sufficient that there has beena prudent and beneficial use by him of the thingwhich he has received. (food, clothing, shelter,health, etc.)

– presumption that no benefit has accrued tothe incapacitated person

– burden of proof of benefit is casted uponthe person who has capacity.

– 'rt. 0522 is not applicable in cases wherethe incapacitated person can still return thething that he received.

– ;here is 17!L1"6 ratification when theincapacitated person failed to as= for the

annulment of the contract and alsos#uandered that part of the considerationwhich remained.

– 1n consonance with the principleenunciated in 'rt. 040 (payment made toan incapacitated person)

('rt. 0-04)E''#"t o' 'ail!r# to -a4# r#stit!tion b#"a!s# o'loss/

• d!# to t,# 'a!lt o' t,# d#'#ndant

◦ return the fruits received and the value

of the thing at the time of the loss, withinterests on the same date

◦ action for annulment not etinguished

◦ instead of being compelled to restorethe thing, the defendant can only becompelled to pay the value thereof atthe time of the loss

• d!# to t,# 'a!lt o' t,# )lainti''





◦ 'rt. 00 shall apply> action forannulment shall be etinguished,regardless as to whether the lossoccurred during the plaintiffs incapacityor after he had ac#uired capacity.

• 'ort!ito!s #%#nt◦ contract can be annulled> the

defendantplaintiff can be held liableonly for the value of the thing at thetime of the loss, but without interestthereon

C>A<TER 39NENORCEABLE CONTRACTS

('rt. 05-0/)9n#n'or"#abl# "ontra"ts D cannot be enforcedby a proper action, unless ratified>Class#s/

1. "ontra"ts #nt#r#d into 0it,o!t or in#("#ss o' a!t,orit$ ('rt. 05, 9o.0) or>

◦ there is absolutely no consent

◦ applicable principles*

▪ no one may contract in the name ofanother without being authori<ed bythe latter or unless he has right torepresent him. 1f he is duly

authori<ed, he must act within thescope of his powers

▪ such contracts are unenforceableas reiterated in the law on agency

▪ such contract may be ratified by theperson in whose behalf it has beeneecuted, before it is revo=ed bythe other contracting party

***Confirmation and ratification ere not usedinterchan"ea!l in the old la0 !ut in the ne la0the term ratification is no used to desi"nate theact of validatin" an ind of defective contract

Reco"nition0 on the other hand0 is merelto cure a defect of proof

=. "ontra"ts 0,i", do not "o-)l$ 0it,t,# stat!t# o' 'ra!ds ('rt. 05, 9o. 4)

◦ there is no 0riting& not#& or-#-orand!- by which the contractmay be proved

◦ 8tatute of ?rauds was enacted for the

purpose of )r#%#nting 'ra!ds

◦ such statute states that evidence of theagreement cannot be received withoutthe writing or a secondary evidence ofits contents

◦ statute simply provides the method bywhich the contracts enumerated thereinmay be proved.

◦ "ffect* no action can be enforcedunless the re#uirement that thecontract be in writing be complied with.

◦ ?orm re#uired is for evidentiarypurpose

◦ 8tatute of ?rauds is applicable only tothose contacts which are purelyeecutory and not to those which havebeen consummated either totally orpartially. (ase* &arbonnel vs oncio)et al. nigo vs Bstate of 5aloto

◦ 3 contracts covered*

▪ 'n agreement that by its terms isnot to be performed within a yearfrom the ma=ing thereof>

• limit of human memor is #ear

• if one of the contractin" partieshas alread complied ith theo!li"ations imposed upon him! said contract ithin theear0 the other part cannot

invoe the Statute of ,raud ▪ ' special promise to answer for the

debt, default, or miscarriage ofanother>

• such promise must !ecollateral0 not independent orori"inal for Statute of ,rauds toappl

▪ 'n agreement made inconsideration of marriage, otherthan a mutual promise to marry>

• marria"e settlements and

donations propter nuptias arecovered ! the statute of fraud

▪ 'n agreement for the sale ofgoods, chattels or things in action,at a price not less than five hundredpesos

• loan is not covered0 provisionapplies onl to SA/. of "oods0





chattels0 and thin"s in action

• if the transaction involvesinsepara!le "oods0 the pricesof the items shall !econsidered as a hole

• if the transaction separa!le"oods0 the prices of the itemsshall not !e less than $9<<

▪ 'n agreement for the l#asing for alonger period than one year, or forthe sal# of real property or of aninterest therein>

• oral a"reement to extend thelease is covered ! the Statute

▪ ' representation as to the credit ofa third person.

• uasi-delict

•misrepresentation ! a +

rd

person ill mae him lia!leonl if he has si"ned adocument in representin" thecredit of another person

◦ ;hese contracts are susceptible toratification

▪ by the failure to object to thepresentation of oral evidence toprove the same

▪ by the acceptance of the benefitsunder them.

@. "ontra"ts 0,#r# bot, t,# "ontra"ting

)arti#s do not )oss#ss t,# r#+!ir#dl#gal "a)a"it$.

◦ 'bsolutely vitiated consent

◦ if only one party is incapacitated, thecontract is voidable

◦ may be ratified by the parents orguardians of the incapacitated persons,in effect, the contract becomesvoidable

◦ if ratified by the parties themselvesafter gaining the capacity, the contractshall be validated from its inception

C,ara"t#risti"s o' !n#n'or"#abl# "ontra"ts/

• cannot be enforced by proper action

• susceptible of ratification

• cannot be assailed by 5rd persons

C>A<TER 7

VOI OR INE:ISTENT CONTRACTS

Void or In#(ist#nt "ontra"t D lac=s absolutelyeither in fact or in law one or some of the elementswhich are essential for its validity.

Void In#(ist#nt

all o' t,# r#+!isit# of acontract ar# )r#s#nt,but the cause, object, orpurpose is contrary tolaw, morals, goodcustoms, etc..

one or some or all of there#uisites which areessential for the validityof a contract areabsol!t#l$ la"4ing&such as those simulated, or those which causeor object did not eist atthe time of thetransaction

9either party may beheard to invo=e itsunlawful character(certain provisions ofivil ode)

%pen to attac= even bythe parties thereto

!rinciple of in paridelicto is applicable

!rinciple of in paridelicto is not applicable

7ay produce legaleffects

annot produce anyeffect whatsoever

('rt. 02)

In#(ist#nt and %oid 'ro- t,# b#ginning• cause, object, purpose are contrary to law,

public morals, good customs, public order,public policy

• absolutely simulated or fictitious

• cause or object did not eist at the time oftransaction

◦ ecept if the object is possible to comeinto eistence (this is to harmoni<e 'rt.02 with the provision that futureobjects may be some future thing)

• object is outside the commerce of man

•contemplates an impossible service

• where the intention of the parties relative tothe principal object of the contract cannotbe ascertained

• epressly prohibited or declared void bylaw

&&&cannot be ratified> defense of illegality cannot bewaived





C,ara"t#risti"s o' %oid and in#(ist#nt"ontra"ts/

• produce no legal effect (quod nullum estnullum producit effectum)

◦ "cept* 'rt. 000-004 D nullity isbased on the illegality of the cause> anyaction by a guilty party to recoverwhatever he has already given underthe contract is barred

• not susceptible of ratification

• right to set up the defense of ineistence orabsolute nullity cannot be waived

• action or defense for the declaration oftheir ineistence or nullity is imprescriptible('rt. 00)

• ineistence or absolute nullity cannot be

invo=ed by a person whose interests arenot directly affected.

('rt. 00)action or defense of declaration of nullity isimprescriptible D because the defects are more orless permanent, thus cannot be cured byprescriptionase* &astillo vs 6alvan

&&&'n action to declare the nullity of a void judgment does not prescribe (aluwagan ng/ayan /an0 vs (ing )

ase* $3nar /rothers <ealty vs eirs of $ugusto : no unreasonable delay in assertingtheir rights

– in spite the imprescriptibility, laches maybar the action of a party in asserting thenullity of the contract

('rt. 000-044)in pari delicto D e#ually at fault

– the law will not aid either party to an illegalagreement, it leaves them where they are.

– 'pplies only to cases of eisting contractswith an illegal cause or object and not tosimulated or fictitious contracts nor to thosewhich are ineistent

ase* <odrigue3 vs <odrigue3

– circumvention of provision on prohibiteddonation between spouses

– appellant is clearly as guilty as herhusband in the attempt to circumvent the

law

– rule of in pari delicto is applicable becausethere is an illegal cause

onl$ 1 )art$ is at 'a!lt*

• eecuted contract◦ guilty party is barred from recovering

what he has given to the other party byreason of the contract

◦ innocent party may demand the returnof what it has given

• eecutory contract

◦ contract cannot produce any legaleffect whatsoever

◦ parties cannot demand for thefulfillment of any obligation arising fromthe contact nor be compelled to comply

with such obligation

E("#)tions in a))li"abilit$ o' in pari delicto/

• payment in usurious interest ('rt. 005)

◦ 1interest paid in excess of the interestalloed ! the usur la2 - means thewhole usurious interest> with interestthereon from the date of payment

• payment of money or delivery of propertyfor an illegal purpose ('rt. 00)

• payment of money or delivery of propertyby an incapacitated person ('rt. 00+)

• agreement that is not illegal per se but isprohibited by law ('rt. 003)

◦ “ in pari delicto is not applicable to ahomestead> the purpose of the law is togive land to a family for home andcultivation, conse#uently, the lawallows the homesteader to reac#uirethe land even if it has been sold.K( $ngeles vs &$, 9E= hil. 9EEA )

◦ rule of in pari delicto is inapplicablewhere the same violates a well-established public policy ( $ngeles vs&$, 9E= hil. 9EEA ) and hil. /an0ing

vs 1ui *he• payment of any amount in ecess of the

maimum price of any article or commodityfied by law. ('rt. 00)

• ontract where by a laborer underta=es towor= longer than the maimum number ofhours fied by law ('rt. 00/)

• contract whereby a laborer accepts a wage





lower than the minimum wage fied by law('rt. 002)

ARTICLE 1=1;he defense of illegality of contract is not available

to third persons whose interests are not directlyaffected.

ARTICLE 1== ' contract which is the direct result of a previousillegal contract, is also void and ineistent.

TITLE IIINAT9RAL OBLIGATIONS

('rt. 045-05)Nat!ral obligations D obligations without asanction> susceptible of voluntary performance

– once there is voluntary performance or

fulfillment, one cannot recover what he hasdelivered.

Nat!ral obligations Ci%il obligations

based on e#uity andnatural law

@ased on positive law

do not grant a right ofaction to enforce theirperformance

enforceable by courtaction

Nat!ral obligations *oral obligations

;here is a juridical tiebetween the partieswhich is not enforceableby court action

9o juridical tiewhatsoever

Eoluntary performanceby the obligor produceslegal effect which thecourts will recogni<eand protect

Eoluntary fulfillmentdoes not produce legaleffect which courts willrecogni<e and protect

TITLE IV

ESTO<<EL

('rt. 050-052)Esto))#l D a condition or state by virtue of whichan admission or representation is renderedconclusive upon the person ma=ing it and cannotbe denied or disproved as against the personrelying thereon.

– such principle will afford solution to many#uestions which are not foreseen in ourlegislation

– person is not allowed to ta=e inconsistentpositions

Kinds o' Esto))#l

• estoppel in pais (e#uitable estoppel)

◦ arises by acts, representations, oradmissions, or by his silence inducesanother to believe certain acts to eistand such other rightfully relies and actson such belief, as a conse#uence ofwhich he will be prejudiced if the formeris permitted to deny the eistence ofsuch facts

▪ estoppel by silence D inaction>

▪estopel by acceptance of benefits

• estoppel by deed or by record (technicalestoppel)

◦ estoppel by deed D type of technicalestoppel by virtue of which a party to adeed and his privies are precluded fromasserting as against the other party orhis privies any right or title inderogation of the deed or from denyingany material fact therein.

◦ "stoppel by record D parties areprecluded from denying the truth ofmatters set forth in a record whether

judicial or legislative.

▪ "stoppel by judgment D bars theparty from raising any #uestion thatmight have put in issue anddecided in the previous litigation

• estoppel by laches

◦ failure or neglect, for an unreasonableand uneplained length of time, to dothat which, by eercising due diligence,could or should have been done earlier

◦ presumption that the party entitled toassert it either has abandoned it or

declined to assert it.◦ 8tale demands

◦ not a mere #uestion of time but isprincipally a #uestion of the ine#uity orunfairness of permitting a right or claimto be enforced or asserted

El#-#nts o' la",#s/

• conduct on the part of the defendant, or of





one under whom he claims, giving rise tothe situation of which complaint is madeand for which the complainant see=s aremedy

• delay in asserting the complainants right>

having =nowledge and opportunity toassert his right

• lac= of =nowledge or notice on the part ofthe defendant that the complainant wouldassert the right on which he bases his suit

• injury or prejudice to the defendant in theevent relief is accorded to the complainant,or the suit is not held to be barred

&&&9o definite period for laches to ta=e in unli=e inprescription.

ase* /ucton vs 6abar “2he action here although one for

reconveyance is actually one for!uieting of title : when the plaintiff is in

possession is actually imprescriptible."- 5ustice 5B/ Rees

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