Obligations and Contracts Reviewer Atene

ATENEO CENTRAL BAR OPERATIONS 2007
Civil Law
SUMMER REVIEWER
OB L I G A T I ON S A N D C O N T R A
 neither party may unilaterally evade his obligation
C T S T I T L E 1 - OB L I G A T I O N in the contract, unless:
a. Contract authorizes it
b. Other party assents
 Parties may freely enter into any stipulations
Art. 1156. An obligation is a juridical necessity to give, to do or not to do. (n) provided they are not contrary to law, morals,
good customs, public order or public policy
QUASI-CONTRACT (OBLIGATION EX QUASI-

CHAPTER 1. – GENERAL PROVISIONS
CONTRACTU)
See Arts. 1156 - 1162
 Juridical relation resulting from lawful, voluntary
and unilateral acts, which has for its purpose, the
ELEMENTS OF AN OBLIGATION:
payment of indemnity to the end that no one shall
1. Active subject (obligee/creditor): one in whose
be unjustly enriched or benefited at the expense
favor the obligation is constituted
of another.
2. Passive subject (obligor/debtor): one who has
 Distinguished from other Sources
the duty of giving, doing or not doing
3. Object: prestation; the conduct which has to be 1. act giving rise to a quasi contract must be
LAWFUL distinguishing it from delict;
observed by the debtor/obligor
2. act must be VOLUNTARY distinguishing it from
REQUISITES quasi-delict which is based on fault or
1. it must be licit (otherwise it is void) negligence;
2. it must be possible, physically and juridically 3. act must be UNILATERAL distinguishing it from
(otherwise it is void) contract which is based on agreement.
3. it must be determinate or determinable (Tolentino, Volume IV, p. 68)
(otherwise it is void)
KINDS OF QUASI-CONTRACT
4. it must have pecuniary value
a. Vinculum Juris: juridical/legal tie; binds the  Negotiorum gestio: unauthorized management;
parties to the obligation arises whenever a person voluntarily takes
b. Causa (causa debendi/causa obligationes): charge of the agency or management of
why obligation exists another’s abandoned business or property
without the latter’s authority
SOURCES OF OBLIGATION  Solutio indebiti: undue payment. Arises when a
person unduly delivers a thing through mistake to
another who has no right to demand it (must not
be through liberality or some other cause)
Art. 1157. Obligations arise from:
Law; DELICTS (OBLIGATION EX MALEFICIO OR EX
Contracts; DELICTO )
Quasi-contracts;
Acts or omissions punished by law; and RPC: Art. 100 Every person criminally liable for a felony is also civilly liable.
Quasi-delicts. (1089a)
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LAW (OBLIGAT are
GthisEor
 Must be expressly pi)cture.
impliedly set forth and 1. Articles 100-113 of the RPC and other penal laws
cannot be presumed subject to Art 2177 Civil Code (quasi-delict);
2. Chapter 2, Preliminary title, on Human Relations
CONTRACT (OBLIGATION EX CONTRACTU) ( Civil Code )
3. Title 18 of Book IV of the Civil Code on damages
 Must be complied with in good faith
 it is the “law” between parties;
SCOPE OF CIVIL LIABILITY
1. Restitution
—Adviser: Dean Cynthia del Castillo Head: Joy Ponsaran, Ele anor Mateo ; Understudy: Joy Tajan, John Paul Lim;
Subject Head: Jennifer Sanchez; Pledgees: Maria Angela Alarilla, Gregorio Rafael Bueta, Kristi Fe Mari Lu
Civil Law Summer Reviewer
2. Reparation for damage caused 2. Real Obligations: obligations to give; where the
3. Indemnity for Consequential damages subject matter is a thing which the obligor must
deliver to the obligee
EFFECT OF ACQUITTAL IN CRIMINAL CASE a. Determinate or specific – object is particularly
1. When due to reasonable doubt – no civil liability designated or physically segregated from all
2. When due to exempting circumstances – there is other things of the same class
civil liability b. Generic –object is designated by its class or
3. When there is preponderance of evidence – there genus
is civil liability c. Limited Generic – generic objects confined to
a particular class
CRIMES WITHOUT CIVIL LIABILITY Ex: An obligation to deliver one of my horses
1. Contempt (Tolentino, Volume IV, p. 91; De Leon, 2003 ed.,
2. Insults to persons in authority p. 7)
3. gambling
4. violations of traffic regulations (De Leon, 2003 EFFECT OF OBLIGATIONS
ed.,p. 23)
DUTIES OF DEBTOR IN AN OBLIGATION TO GIVE
QUASI-DELICT/TORTS (OBLIGATION EX QUASI- A DETERMINATE THING (See Arts. 1163, 1164,
DELICTO Or EX QUASI MALEFICIO ) 1166.)
 It is an act or omission arising from fault or 1. To preserve or take care of the thing due with the
negligence which causes damage to another, diligence of a good father of a family
there being no pre-existing contractual relations
between the parties DILIGENCE OF A GOOD FATHER OF A FAMILY –
 ELEMENTS: ordinary care or that diligence which an average or
1. There must be an act or omission reasonably prudent person would exercise over his
2. There must be fault or negligence attributable to own property
the person charged
3. There must be damage or injury NOTE: Rule on Standard of Care
4. There must be a direct relation of cause and  That which the law requires; or
effect between the act arising from fault or  That stipulated by the parties; or
negligence and the damage or injury (proximate  In the absence of the two, diligence of a good
cause ); father of a family
5. There is no pre-existing contractual relation
between the parties. 2. To deliver the fruits of the thing: Right to the
fruits of the thing from the time the obligation to
NEGLIGENCE deliver it arises
 Failure to observe for the protection of the

interests of another person, that degree of care, WHEN OBLIGATION TO DELIVER ARISES
precaution and vigilance which the circumstances  GENERAL RULE: From the time of the
justly demand, whereby such other person perfection of the contract (i.e. meeting of the
suffers injury. (US v. Barrias, 23 Phil. 434 [1912]) minds between the parties)
 EXCEPTIONS
CHAPTER 2. – NATURE & EFFECTS OF a. when the parties made a stipulation as
OBLIGATIONS regards the right of the creditor to the fruits of
See Arts. 1163 - 1178 the thing
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b. when the obligation is subject to a
NATURE OF are needed to see this picture. suspensive condition or period; arises upon
OBLIGATIONS
1. Personal Obligations: obligations to do or not fulfillment of the condition or arrival of the
to do; where the subject matter is an act to be period
done or not to be done
a. Positive – obligation to do PERSONAL V. REAL RIGHT
b. Negative – obligation not to do Personal Real
Jus ad rem, a right Jus in re, a right
enforceable only enforceable against
Page 105 of 297
against a definite the whole world equivalent Can
person or group of performance X X only X
persons be
Right pertaining to a Right pertaining to a dema
person to demand person over a specific nded
from another, as a thing, without a definite if
definite passive passive subject oblig
subject, the against whom the right ation
fulfillment of the may be personally is not
prestation to give, to enforced very
do or not to do. perso
nal
3. To deliver its accessions and accessories substitute Undo the
 Accessions – additions to or improvements upon a performance X X things
thing. Ex: air conditioner in a car. already
 Accessories – things joined to, or included done at
with the principal thing for its better use, debtor's
embellishment or completion. Ex:key of a expense
rescission/
house; frame of a picture (De Leon, 2003
cancellation X X X
ed., pp. 37-38)
4. To deliver the thing itself
5. To pay damages in case of breach of the
obligation by reason of delay, fraud, negligence
or contravention of the tenor of the obligation.
DUTIES OF DEBTOR IN AN OBLIGATION TO GIVE

A GENERIC THING BREACH OF OBLIGATIONS (See Arts. 1170 –
1. To deliver the thing which is neither of superior 1174)
nor of inferior quality 1. Voluntary – debtor in the performance of the
2. To pay damages in case of breach of the obligation is guilty of:
obligation by reason of delay, fraud, negligence  fraud (Dolo)
or contravention of the tenor of the obligation.  negligence (culpa)
 delay (mora)
REMEDIES OF THE CREDITOR IN CASE OF NON-  contravention of the tenor of the obligation
PERFORMANCE (See Arts 1165 – 1168)  NOTE: debtor is liable for damages
1. Specific Performance: Performance by the 2. Involuntary – debtor is unable to comply with his
debtor of the prestation itself obligation due to fortuitous event/s
2. Substitute Performance: someone else  NOTE: debtor is not liable for damages
performs or something else is performed at the
expense of debtor FRAUD (Dolo)
3. Equivalent Performance: damages  It is the deliberate or intentional evasion of the
normal fulfillment of an obligation. (8 Manresa 72)
Real
O’leary Macondray & Co., Personal
45 Phil. 812 [1924[– It implies some kind of malice or dishonesty and it cannot cover cases of mistake and errors of judgment made in good faith. It is sy
Remedies Obligations Obligations
Specific Gener To do Not to
Quiic
ckTime™ and a do
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specific are needed to see this picture. undoorthe
– The law presumes requires a man to possess ordinary capacity to avoid harming his neighbors unless a clear and manifest incapacity is shown and the law does not hold him
performance X X ¶ X things TYPES OF FRAUD
already 1. Causal Fraud (Dolo Causante): fraud employed
done
2. in the execution of the contract
3. Incidental Fraud (Dolo Incidente): fraud in
performance of obligation already existing
because of a contract
Page 106 of 297
making the
Fraud in the Causal Fraud Incidental contract
Performance (Art. 1338) Fraud (Art. Results in the Results in Does not
(Art. 1170) 1344) breach of an vitiation of result in the
Present Present Present obligation consent; vitiation of
during the during the during the voidable consent
performance perfection of a perfection of a contract
of a pre- contract contract Gives rise to a Gives rise to a Gives rise to a
existing right in favor right of an right of an
obligation of the creditor innocent party innocent party
Purpose is to Purpose is to Purpose is to to recover to annul the to claim for
evade the secure the secure the damages contract damages
normal consent of consent of the
fulfillment of another to other party but NOTE: Future fraud cannot be waived. However, the law does not prohibit renunciation of the
the obligation enter into the the fraud was action for damages on the ground of fraud already committed.
contract not the
principal REMEDIES OF DEFRAUDED PARTY
inducement in  Insist on specific performance (Art 1233)
 Resolve contract (Art 1191)  NOTE: Negligence can be waived except in
 Claim damages, in either case cases where the nature of the obligation or public
policy requires another standard of care.
 EXCEPTIONS: Nature of Obligation of a
NEGLIGENCE Common carrier
 Consists in the omission of that diligence which is
required by the nature of the obligation and
corresponds with the circumstances of the FRAUD V. NEGLIGENCE
persons, of the time and of the place. Fraud Negligence
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There is deliberate There is no deliberate
KINDS OF NEGLaIrGe nEeeNdedCtoEsee this picture. intention to cause intention to cause
1. Quasi-Delict (Culpa aquiliana/culpa extra damage. damage.
contractual)- source of obligation Liability cannot be Liability may be
2. Contractual Negligence (Culpa Contractual)- mitigated. mitigated.
negligence in the performance of a contract Waiver for future fraud Waiver for future
is void. negligence may be
allowed in certain
cases
KINDS OF NEGLIGENCE, DISTINGUISHED

Culpa Aquiliana Culpa Contractual
Negligence is Negligence merely an
substantive and incident of performance
independent of an obligation
There may or may There is a pre-existing
not be a pre-existing contractual relation
contractual obligation
Source of the Source of the obligation
obligation is the is the breach of the
negligence itself contractual obligation
Negligence must be Proof of existing of the
proved contract and its breach
is prima facie sufficient
to warrant recovery
Diligence in the Diligence in the
selection and selection and
supervision of the supervision of the
employees is a employees is not
defense available as a defense
EFFECTS OF CONTRIBUTORY NEGLIGENCE OF

THE CREDITOR
 GENERAL RULE: Reduces or mitigates the
damages which he can recover
 EXCEPTION: If the negligent act or omission of
the creditor is the proximate cause of the event
which led to the damage or injury complained of,
he cannot recover.
DELAY (MORA)
1. Ordinary Delay – failure to perform an obligation

on time
2. Legal Delay/ Default – failure to perform an
obligation on time which failure constitutes a
Page 107 of 297
breach of the obligation. (De Leon, 2003 ed., p.  Mora Solvendi Ex persona – default in personal obligations
42)  REQUISITES:
a. The obligation must be due, enforceable and already liquidated or determinate in
REQUISITES OF DELAY amount;
1. Obligation must be due, demandable and b. There must be non-performance; and
liquidated; c. There must be a demand, unless demand is not required.
2. Debtor fails to perform his positive obligation on  GENERAL RULE: Those obliged to deliver or to do something incur in delay from the
the date agreed upon; time the obligee judicially or extrajudicially demands from them the fulfillment of their
3. A demand (not merely a reminder or notice), obligation.
judicial or extra-judicial, made by the creditor  EXCEPTIONS (no demand necessary)
upon the debtor to fulfill, perform or comply with a. When the obligation or the law expressly so declare; or
his obligation otherwise, he will be in default; and b. When from the nature and the circumstances of the obligation it appears that the
4. Failure of the debtor to comply with such designation of the time when the thing is to be delivered or the service is to be
demand. rendered was a controlling motive for the establishment of the contract; or
c. When demand would be useless, as when the obligor has rendered it beyond his
KINDS OF DELAY power to perform
1. Mora Solvendi– default on the part of the debtor:  EFFECTS: QuickTime™ and a
TIFF (Uncompressed) decompressor are needed to see this picture.
 Mora Solvendi
a. Debtor Exofrebreach
is guilty – default in real
of the
obligations obligation
b. Liability: If obligation to pay money- must c. Obligations to deliver a determinate
pay interest. If no extra-judicial demand, thing, liable for fortuitous events. If debtor
interest runs from the filing of the can prove that loss would have resulted
complaint. In other obligations, pay even if he had not been in default, the
damages. court may equitably mitigate the
damages (Art. 2215[4])
d. Resolution (Art 1170, in proper cases)
2. Mora Accipiendi – default on part of creditor

when he unjustifiably refuses to accept the
performance of the obligation.
 REQUISITES:
a. Offer of performance by the debtor
b. Offer must be to comply with the
prestation as it should be performed
c. Creditor refuses the performance without
just cause
 EFFECTS:
a. Responsibility of debtor is limited to
fraud and gross negligence
b. Debtor is exempted from risk of loss
of thing; creditor bears risk of loss
c. Expenses by debtor for preservation
of thing after delay is chargeable to
creditor
d. If obligation bears interest, debtor does
not have to pay from time of delay
e. Creditor liable for damages
f. Debtor may relieve himself of
obligation by consigning the
thing
3. Compensatio morae – both parties are in

default (in reciprocal obligations); there is no
actionable default on the part of both parties
 Rule in Reciprocal Obligations: In reciprocal

obligations, neither party incurs in delay if the
other does not comply or is not ready to comply
in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfills
his obligation, delay by the other begins.
 Performance must be simultaneous unless
different dates for the performance of the
obligation were fixed by the parties
CESSATION OF THE EFFECTS OF MORA:

 renunciation (express or implied)
 prescription
 NOTE: There is no delay in negative obligations
and natural obligations.
FORTUITOUS EVENT – An event which could not be

Page 108 of 297
foreseen, or which though foreseen, was inevitable
REQUIREMENTS: (Nakpil and Sons vs. CA): Art. 1178 Subject to the laws, all rights acquired in
1. The cause of the breach of the obligation must be virtue of an obligation are transmissible, if there has
independent of the will of the debtor been no stipulation to the contrary. (1112)
2. The event must be either unforeseeable or Art. 1191. The power to rescind obligations is implied
unavoidable in reciprocal ones, in case one of the obligors should
3. The event must be such as to render it not comply with what is incumbent upon him.
impossible for the debtor to fulfill his obligation in The injured party may choose between the fulfillment
a normal manner and the rescission of the obligation, with the payment
4. The debtor must be free from any participation in, of damages in either case. He may also seek
or aggravation of injury to the creditor rescission, even after he has chosen fulfillment, if the
latter should become impossible.
RULE ON FORTUITOUS EVENT: The court shall decree the rescission claimed, unless
 GENERAL RULE: No liability for fortuitous event there be just cause authorizing the fixing of a period.
 EXCEPTIONS: This is understood to be without prejudice to the
1. When expressly declared by law ( bad faith, rights of third persons who have acquired the thing, in
subject matter is generic, debtor is in delay ) accordance with Articles 1385 and 1388 and the
2. When expressly declared by stipulation or Mortgage Law. (1124)
contract Art. 1192. In case both parties have committed a
3. When nature of obligation requires assumption of breach of the obligation, the liability of the first
risk infractor shall be equitably tempered by the courts. If
4. When the obligor is in default or has promised to it cannot be determined which of the parties first
deliver the same thing to two or more persons violated the contract, the same shall be deemed
who do not have the same interest (Art. 1165[3]) extinguished, and each shall bear his own damages.
(n)
EFFECT OF FORTUITOUS EVENT
Determinate Generic Obligation REMEDIES AVAILABLE TO CREDITORS FOR THE
Obligation SATISFACTION OF THEIR CLAIMS
Obligation is Obligation is not 1. Exact fulfillment of the obligation by specific or
extinguished extinguished based on the substitute performance with a right to damages in
rule that the genus never either case;
perishes (genus nunquam 2. In case of reciprocal obligations, petition the court
peruit) to resolve the contract;
3. Pursue the leviable (not exempt from attachment
Art. 1176 The receipt of the principal by the creditor, without reservation with under thetolaw)
respect property
the interest, of give
shall the rise
debtor;
to the presumption that said interest has been paid.
The receipt of a later installment of a debt without reservation as to prior4.installments,
Accion directa (Arts.
shall likewise raise1729 and 1652):Right
the presumption of
that such installments have been paid.
the lessor to go directly to sublessee for unpaid
rents of the lessee. Right of the laborers or
persons who furnish materials for a piece of work
undertaken by a contractor to go directly to the
owner for any unpaid claims due to the contractor
5. Accion subrogatoria – to be subrogated to all
the rights and actions of the debtor save those
PRINCIPLE IN ARTICLE 1176 which are inherent in his person
 Before the presumption that a prior installment  REQUISITES:
had been paid may arise, the receipt must a. The debtor to whom the right of action
specify the installment for which payment is properly pertains must be indebted to the
made. QuickTime™ and a creditor;
are needed to see this picture. b. The creditor must be prejudiced by the
se all rights and bring all the actions of the latter for the same purpose, save those which are inherent
inaction orinfailure
his person; theydebtor
of the may alsotoimpugn
proceed the acts which the debtor may have done to defra
against the third person;
c. The creditor must have pursued first or
exhausted all the properties of the debtor
which are not exempt from execution;
d. The debtor's assets are insufficient to satisfy
his claims; and
Page 109 of 297

e. The right of account is not purely personal fulfillment of a condition or upon the expiration of a
6. Accion Pauliana – asking the court to rescind or period and is demandable at once
to impugn all the acts which the debtor may have CONDITIONAL – one whose effectivity is
done to defraud the creditors (Arts. 1380-1389) subordinated to the fulfillment or non-fulfillment of a
 REQUISITES: future AND uncertain event or upon a past event
a. There is a credit in favor of plaintiff unknown to the parties
b. The debtor has performed an act subsequent CONDITION - Future and uncertain event or a past
to the contract, giving advantage to other event unknown to the parties
persons
c. The creditor is prejudiced by the debtor's act 1. Suspensive – happening of condition gives rise
which are in favor of 3rd parties and to obligation
rescission will benefit the creditor  Effects:
d. The creditor has no other legal remedy a. Effectivity retroacts to the day of the
e. The debtor's acts are fraudulent constitution of the obligation
b. No retroactivity with reference to fruits or
Without the With the fault of the interest and prescription
fault of the debtor
debtor c. Creditor may preserve rights
Loss Obligation is Debtor obliged to pay d. Debtor – recovery of payment by mistake or
extinguished damages even w/o mistake
Deterioration Impairment Creditor may choose
borne by the between rescission or RULES ON LOSS, DETERIORATION, AND
creditor its fulfillment with IMPROVEMENTS DURING PENDENCY OF A
damages in either SUSPENSIVE CONDITION (Art. 1189)
case
CHAPTER 3. - DIFFERENT KINDS OF Improvement If by nature or If at the expense of

OBLIGATIONS by time€ the debtor€
See Arts. 1179 - 1230 inures to the debtor’s right is only
benefit of the that of a
PRIMARY CLASSIFICATION OF OBLIGATIONS debtor usufructuary
UNDER THE CIVIL CODE
1. Demandability REQUISITES FOR THE APPLICATION OF
a. pure, ARTICLE 1189
b. conditional a. 1.The obligation must be a real obligation
c. with a period b. 2.The object is a specific or determinate thing
2. Plurality of object c. The obligation is subject to a suspensive
a. simple condition
b. alternative d. The condition is fulfilled
c. facultative e. There is loss, deterioration or improvement of
3. Plurality of subject the thing during the pendency of the
a. Simple happening of the condition
b. Joint
c. solidary 2. Resolutory – happening of condition
4. Performance extinguishes obligation
a. Divisible EFFECTS:
b. indivisible a. No retroactive effect
5. Sanctions for breach b. Obligation extinguished
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a. with a penal clause
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decompressor are needed to see c. Restore to each other what was received
this picture.
b. without a penal clause plus interest/fruits
PURE AND CONDITIONAL OBLIGATIONS 3. Potestative – dependent on sole will of 1 party; if

(See Arts. 1179 – 1190) on part of debtor and suspensive – void
4. Casual – dependent on chance or hazard
5. Mixed
PURE – one whose effectivity or extinguishment does not depend upon – chance,
the fulfillment or any of parties
or non-
6. With term
Page 110 of 297

a. Positive – extinguished if time expires or

indubitable of condition to happen
b. Negative – effective from moment of time
elapsed or evident it can't happen
WHEN COURTS MAY FIX PERIOD:
IMPOSSIBLE AND ILLEGAL CONDITIONS 1. If the obligation does not fix a period, but from its
 GENERAL RULE: They shall annul the nature and circumstances it can be inferred that a
obligation which depends upon them period was intended by the parties
 EXCEPTIONS: 2. If the duration of the period depends upon the will
a. pre-existing obligation of the debtor
b. if obligation is divisible 3. In case of reciprocal obligations, when there is a
c. in simple or remuneratory donations just cause for fixing a period
d. testamentary dispositions 4. If the debtor binds himself when his means
e. conditions not to do an impossible thing permit him to do so
PERIOD FOR WHOSE BENEFIT

 GENERAL RULE: When a period is designated
OBLIGATIONS WITH A PERIOD for the performance or fulfillment of an obligation,
it is presumed to have been established for the
WITH A PERIOD – An obligation which depends on a benefit of both creditor and debtor.
future and certain event (See Arts 1193, 1196)  EXCEPTION: When it appears from the tenor of
the obligation or other circumstances that the
WHEN STIPULATION SAYS “PAYABLE WHEN period has been established in favor of one or the
ABLE” – IT IS WITH A PERIOD, REMEDY: other.
1. Agreement among parties
2. Court shall fix period of payment when PERIOD FOR THE BENEFIT OF THE CREDITOR
parties unable to agree  Creditor may demand the fulfillment of the
obligation at any time but the debtor cannot
KINDS: compel him to accept before the expiration of the
1. Resolutory ( in diem ) – demandable at once but period
terminates upon arrival of the day certain
 Day certain – that which must necessarily PERIOD FOR THE BENEFIT OF THE DEBTOR
come, although it may not be known when  Debtor may oppose any premature demand of
2. Suspensive ( ex die ) –obligation becomes the creditor but he may renounce the benefit of
demandable on the day stipulated the period by performing his obligation in
advance (Manresa)
TERM CONDITION WHEN DEBTOR LOSES RIGHT TO PERIOD:

Interval of time which Fact or event which is  Insolvency of debtor, unless security provided
is future and certain future or uncertain or a  Did not deliver security promised
past event unknown to  Impaired security through his own acts or through
the parties fortuitous event unless he gives new securities
Time w/c must Future and uncertain fact equally satisfactory
necessarily come or event which may or  Violates undertaking in consideration of
although it may not be may not happen extension of period
known when  Attempts to abscond
Exerts an E x e r t s an influence
ckT im e ™ a n d a
inTfIlFuFenceQui upon
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nee de d of the
demandability or obligation itself Page 111 of 297
extinguishment of an
obligation
Does not have any Has retroactive effect
retroactive effect
unless there is an
agreement to the
contrary
When it is left When it is left exclusively
exclusively to the will to the will of the debtor,
of the debtor, the the obligation is void
existence of the
obligation is affected
upon the price of any 1 of them, also with
indemnity for damages.
ALTERNATIVE OBLIGATIONS (See Arts. 1199 – REQUISITES FOR MAKING THE CHOICE:
1206) 1. Made properly so that creditor or his agent will
actually know
FACULTATIVE - only one prestation has been 2. Made with full knowledge that a selection is
agreed upon but another may be given in substitution indeed being made
3. Made voluntarily and freely
EFFECT OF LOSS OR DETERIORA0TION THRU 4. Made in due time – before or upon maturity
NEGLIGENCE, DELAY OR FRAUD OF OBLIGOR: 5. Made to all proper persons
 Of thing intended as substitute - no liability 6. Made w/o conditions unless agreed by the
 Of the substitute after substitution is made – with creditor
liability 7. May be waived, expressly or impliedly
ALTERNATIVE – bound by different prestations but ALTERNATIVE vs. FACULTATIVE

only one is due A L TERNA TIVE FA CU LT A T IV E
a) Various a) Only one thing is due
RIGHT OF CHOICE IN ALTERNATIVE things are due but but a substitute may be
OBLIGATIONS the giving principally given to render
 As a general rule the right of choice belongs to of one is sufficient payment/fulfillment easy
debtor b) If one of b) If principal obligations
prestations is illegal, is void and there is no
EFFECT OF LOSS OF OBJECTS OF others may be valid necessity of giving the
ALTERNATIVE OBLIGATIONS but obligation substitute; nullity of P
1. If the right of choice belongs to the debtor remains carries with it nullity of S
 If through a fortuitous event all were lost,
debtor cannot be held liable for damages c) If it is impossible c) If it is impossible
 If 1 or more but not all of the things are lost to give all except to give the principal, the
or one or some but not all of the prestations one, the last one substitute does not have
cannot be performed due to fortuitous event must still be given to be given; if it is
or fault of the debtor, creditor cannot hold the impossible to give the
debtor liable for damages because the debtor substitute, the principal
can still comply with his obligation must still be given
 If all things, except one, were lost, the debtor d) Right to choose d) The right of choice is
must comply by performing that which remain may be given either given only to the debtor
 If all were lost by fault of the debtor the later to debtor or creditor
is liable for the value of the last thing or
service which became impossible JOINT AND SOLIDARY OBLIGATIONS (See Arts.
1207 – 1222)
2. If right of choice belongs to the creditor
 If 1 of the things is lost through a fortuitous JOINT – presumption when two or more creditors or
event, the debtor shall perform the obligation two or more debtors concur in one and the same
by delivering that which the creditor should obligation
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the fault of the debtor, the creditor may claim 1. when expressly stated that there is solidarity
any of those subsisting or the price of that 2. when the law requires solidarity
which, through the fault of the former, has 3. when the nature of the obligation requires
disappeared with a right to damages solidarity
 If all the things are lost through the fault of 4. when a charge or condition is imposed upon
the debtor, the choice by the creditor shall fall heirs or legatees and the testament expressly
makes the charge or condition in solidum
(Manresa)
Page 112 of 297
5. when a solidary responsibility is imputed by a

final judgment upon several defendants breach, indivisibility of debtors remains
(Gutierrez v. Gutierrez) the obligation is
terminated
EFFECTS OF JOINT LIABILITY
1. Demand on one produces delay only with respect SOLIDARY – must be expressed in stipulation or
to the debt provided by law or by nature of obligation
2. Interruption in payment by one does not benefit
or prejudice the other 1. Active – on the part of creditor or oblige
3. Vices of one debtor to creditor has no effect on  EFFECTS:
the others  Death of 1 solidary creditor transmits share
4. Insolvency of one debtor does not affect other to heirs (but collectively)
debtors  Each creditor represents the other in the act
of recovery of payment
JOINT DIVISIBLE OBLIGATIONS  Credit is divided equally between creditors as
1. Each creditor can demand for the payment of his among themselves
proportionate share of the credit, while each  Debtor may pay any of the solidary creditors
debtor can be held liable only for the payment of 2. Passive – on the part of debtors or obligors
his proportionate share of the debt  EFFECTS:
2. A joint creditor cannot act in representation of the  Each debtor may be requested to pay whole
other creditors while a joint debtor cannot be obligation with right to recover from co-
compelled to answer for the acts or liability of the debtors
other debtors  Interruption of prescription to one creditor
affects all
JOINT INDIVISIBLE OBLIGATIONS  Interest from delay on 1 debtor is borne by all
1. If there are 2 or more debtors, the fulfillment of or 3. Mixed – on the part of the obligors and obligees,
compliance with the obligation requires the or the part of the debtors and the creditors
concurrence of all the debtors, although each for 4. Conventional – agreed upon by the parties
his own share. The obligation can be enforced 5. Legal – imposed by law
only by proceeding against all of the debtors.  Instances where law imposes solidary
2. If there are 2 or more creditors, the concurrence obligation:
or collective act of all the creditors, although each a. Obligations arising from tort
for his own share, is also necessary for the b. Obligations arising from quasi-contracts
enforcement of the obligation c. Legal provisions regarding obligation of
devisees and legatees
EFFECT OF BREACH
d. Liability of principals, accomplices, and
 If one of the joint debtors fails to comply with accessories of a felony
his undertaking, the obligation can no longer e. Bailees in commodatum
be fulfilled or performed. Consequently, it is
 EFFECTS:
converted into one of indemnity for damages.
a. Payment made before debt is due, no
Innocent joint debtor shall not contribute to the
interest can be charged, otherwise – interest
indemnity beyond their corresponding share of
can be charged
the obligation.
b. Insolvency of one – others are liable for
share pro-rata
INDIVISIBILITY SOLIDARITY
c. If different terms and conditions – collect only
Refers to the Refers to the legal tie and
what is due, later on collect from any
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obligation e. Remission made after payment is made – co-
the TIFoFb(Ujnecocmtpreare needed debtor still entitled to reimbursement
of the obligation f. Effect of insolvency or death of co-debtor –
Plurality of subjects is Plurality of subjects is still liable for whole amount
not required indispensable g. Fault of any debtor – every one is
In case of breach, When there is liability on responsible – price, damage and interest
obligation is converted the part of the debtors
into 1 of indemnity for because of the breach,
damages because of the solidarilty among the
Page 113 of 297
h. Complete/ personal defense – total or partial

( up to amount of share only ) if not personal
CHAPTER 4. - EXTINGUISHMENT OF
to him
OBLIGATIONS
EFFECT OF LOSS OR IMPOSSIBILITY OF THE See Arts. 1232 - 1304
PRESTATION:
1. If without fault – no liability MODES OF EXTINGUISHMENT OF OBLIGATION
2. If with fault – there is liability (also for damage (Art. 1231):
and interest) 1. Payment or performance
3. Loss due to fortuitous event after default – there 2. Loss of the thing due
is liability (because of default) 3. Condonation or remission of debt
4. Confusion or merger of rights
DIVISIBLE AND INDIVISIBLE OBLIGATIONS (See 5. Compensation
Arts. 1223 – 1225) 6. Novation
7. Annulment
DIVISIBLE - obligation that is capable of partial 8. Rescission
performance 9. Fulfillment of resolutory condition
PAYMENT OR PERFORMANCE
 Execution of certain no of days work - delivery of money and performance, in any other
 Expressed by metrical units manner of the obligation
 Nature of obligation – susceptible of partial
fulfillment
REQUISITES FOR VALID
PAYMENT/PERFORMANCE
INDIVISIBLE – one not capable of partial
performance
1. With respect to prestation itself
a. Identity
 To give definite things
b. Integrity or completeness
 Not susceptible of partial performance
c. Indivisibility
 Provided by law
2. With respect to parties - must be made by
 Intention of parties proper party to proper party
a. Payor
OBLIGATIONS WITH A PENAL CLAUSE (See i. Payor - the one performing, he can be
Arts. 1226 – 1230) the debtor himself or his heirs or assigns
or his agent, or anyone interested in the
WITH PENAL CLAUSE – One to which an accessory fulfillment of the obligation; can be
undertaking is attached for the purpose of insuring its anyone as long as it is with the creditor's
performance by virtue of which the obligor is bound to consent
pay a stipulated indemnity or perform a stipulated ii. 3RD person pays/performs - only the
prestation in case of breach creditor's consent; If performance is done
also with debtor's consent - he takes the
CHARACTERISTICS OF PENAL CLAUSES: place of the debtor. There is subrogation
1. Subsidiary - As a general rule, only penalty can except if the 3rd person intended it to be
be demanded, principal cannot be demanded, a donation
except: Penalty is joint or cumulative iii. 3rd person pays/performs with consent of
2. Exclusive - takes place of damage, damage can creditor but not with debtor's consent, the
only be demandedQiunickTthimee™fafn.dcaases: repayment is only to the extent that the
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c. With dolo ( not of creditor ) i. Payee - creditor or obligee or successor
in interest of transferee, or agent
CAUSES FOR REDUCTION OF PENALTY: ii. 3rd person - if any of the ff. concur:
1. Partial/irregular performance  It must have redounded to the
2. Penalty provided is iniquitous/ unconscionable obligee's
 benefit and only to the extent of such
benefit
Page 114 of 297
 It falls under art 1241, par 1,2,3 - the Art. 1235. When the obligee accepts the
benefit is total so, performance is performance, knowing its incompleteness or
total irregularity, and without expressing any protest or
iii. Anyone in possession of the credit - but objection, the obligation is deemed fully complied
will apply only if debt has not been with. (n)
previously garnished
 Attempt in Good Faith to perform without willful or
PAYMENT MADE TO AN INCAPACITATED
intentional departure
PERSON, VALID IF
 Deviation is slight
1. Incapacitated person kept the thing delivered, or
 Omission/Defect is technical or unimportant
2. Insofar as the payment has been beneficial to
him  Must not be so material that intention of parties is
not attained
PAYMENT TO 3RD PARTY NOT AUTHORIZED,
VALID IF PROVED AND ONLY TO THE EXTENT EFFECT OF SUBSTANTIAL PERFORMANCE IN
OF BENEFIT; PRESUMED IF GOOD FAITH
1. After payment, 3rd person acquires the creditor’s  Obligor may recover as though there has been
rights strict and complete fulfillment, less damages
2. Creditor ratifies payment to 3rd person suffered by the oblige
3. By creditor’s conduct, debtor has been led to  Right to rescind cannot be used for slight breach
make the payment (estoppel)
SPECIAL RULES/FORMS OF PAYMENT
PAYMENT MADE IN GOOD FAITH TO A PERSON
IN POSSESSION OF CREDIT SHALL RELEASE 1. APPLICATION OF PAYMENTS – the designation
DEBTOR; REQUISITES: of the debt which payment shall be made, out of
1. Payment by debtor must be made in good faith 2 or more debts owing the same creditor:
2. Creditor must be in possession of the credit and stipulation or application of party given benefit of
not merely the evidence of indebtedness period – OK; to be valid: must be debtor’s choice
or w/ consent of debtor
 NOTE: With respect to time and place of
payment - must be according to the obligation REQUISITES FOR THE APPLICATION OF
PAYMENT:
WHERE PAYMENT SHOULD BE MADE a. Various debts of the same kind
1. In the place designated in the obligation b. Same debtor
2. If there is no express stipulation and the c. Same creditor
undertaking is to deliver a specific thing – at the d. All debts must be due
place where the thing might be at the moment the  EXCEPTION: there may be application of
obligation was constituted payment even if all debts are not yet due if:
3. In other case – in the place of the domicile of the a. Parties so stipulate
debtor b. When application of payment is made by the
 Time of payment - time stipulated party for whose benefit the term has been
 Effect of payment – extinguish obligation constituted
Except: order to retain debt c. Payment is not enough to extinguish all debts
SUBSTANTIAL PERFORMANCE HOW APPLICATION IS MADE:

a. Debtor makes the designation
b. If not, creditor makes it by so stating in the
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valid, then application, is made by operation
Art. 1234. If the obligation has been substantially performed in good faith, the ofobligor
law may recover as though there had been a strict and complete fulfillment, less damages suff
WHO MAKES APPLICATION OF DEBTS

Page 115 of 297
 GENERAL RULE: Debtor d. Abandonment of all debtor’s property not

 EXCEPTION: Creditor exempt from execution
a. Debtor without protest accepts receipt in e. Acceptance or consent on the part of the
which creditor specified expressly and creditors
unmistakably the obligation to which such
payment was to be applied – debtor in this EFFECTS OF ASSIGNMENT:
case renounced the right of choice a. Creditors do not become the owner; they are
b. When monthly statements were made by the merely assignees with authority to sell
bank specifying the application and the b. Debtor is released up to the amount of the
debtor signed said statements approving the net proceeds of the sale, unless there is a
status of her account as thus sent to her stipulation to the contrary
monthly by the bank c. Creditors will collect credits in the order of
d. In case no application is made: preference agreed upon, or in default of
 Apply payment to the most onerous agreement, in the order ordinarily established
 If debts are of the same nature and by law
burden, application shall be made to all
proportionately DATION IN CESSION IN
PAYMENT PAYMENT
2. DACION EN PAGO One creditor Plurality of creditors
Not necessarily in Debtor must b partially
DACION EN PAGO – mode of extinguishing an state of financial or relatively insolvent
obligation whereby the debtor alienates in favor of the difficulty
creditor property for the satisfaction of monetary debt; Thing delivered is Universality of property
extinguish up to amount of property unless w/ considered as of debtor is what is
contrary stipulation; A special form of payment equivalent of ceded
because 1 element of payment is missing: IDENTITY performance
Payment extinguishes Merely releases debtor
CONDITIONS FOR A VALID DACION: obligation to the extent for net proceeds of
a. If creditor consents, for a sale presupposes of the value of the things ceded of,
the consent of both partie thing delivered as assigned, unless there
b. If dacion will not prejudice the other creditors agreed upon, proved is a contrary intention
c. If debtor is not judicially declared insolvent or implied from the
 NOTE: DACION is governed by the law on sales conduct of the creditor
4. CESSION or ASSIGNMENT
4. CONSIGNATION
CESSION/ASSIGNMENT IN FAVOR OF
CREDITORS – the process by which debtor transfer
all the properties not subject to execution in favor of
creditors is that the latter may sell them and thus,
apply the proceeds to their credits; extinguish up to
amount of net proceeds ( unless w/ contrary
stipulation )
TENDER -the act of offering the creditor what is
due him together with a demand that the creditor
accept the same (When creditor refuses w/o just
cause to accept payment, he becomes in mora
accepiendi and debtor is released from
responsibility if he consigns the thing or sum due)
CONSIGNATION – the act of depositing the thing
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Page 116 of 297

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CONFUSION OR MERGER OF RIGHTS– character

of debtor and creditor is merged in same person with
REQUISITES: respect to same obligation
a. There must be an agreement
b. There must be a subject matter (object of the
remission, otherwise there would be nothing
to condone)
REQUISITES:
c. Cause of consideration must be liberality
a. It must take place between principal debtor
(Essentially gratuitous, an act of liberality )
and principal creditor only
d. Parties must be capacitated and must
b. Merger must be clear and definite
consent; requires acceptance by obligor;
c. The obligation involved must be same and
implied in mortis causa and expressed inter
identical – one obligation only
vivos
d. Revocable, if reason for confusion ceases,
e. Formalities of a donation are required in the
the obligation is revived
case of an express remission
f. Revocable – subject to rule on inofficious
7. COMPENSATION
donation ( excessive, legitime is impaired )
and ingratitude and condition not followed
g. Obligation remitted must have been COMPENSATION –
demandable at the time of remission Set off; it is a mode of extinguishment to the
h. Waivers or remission are not to be presumed concurrent amount the obligation of persons who are
generally in their own right reciprocally debtors or creditors
REQUISITES:
Forms: Extent: Kinds: a. Both parties must be mutually creditors and
a. Express – a. total a. Principal – accessory debtors - in their own right and as principals
formalities of also condoned b. Both debts must consist in sum of money or
donation if consumable , of the same kind or quality
c. Both debts are due
b. Implied – b. partial b. accessory – principal d. Both debts are liquidated and demandable
conduct is still outstanding (determined)
sufficient e. Neither debt must be retained in a
c. accessory obligation controversy commenced by 3rd person and
of pledge – condoned; communicated w/ debtor (neither debt is
presumption only, garnished)
rebuttable
KINDS OF COMPENSATION
a. Legal – by operation of law; as long as 5
REQUISITES OF IMPLIED CONDONATION requisites concur- even if unknown to parties
1. Voluntary delivery – presumption; when and if payable in diff places; indemnity for
evidence of indebtedness is w/ debtor – expense of exchanges; even if not equal
presumed voluntarily delivery by creditor; debts – only up to concurring amount
rebuttable b. Conventional – agreement of parties is
2. Effect of delivery QuickTime™
of evidence and
of indebtedness enough, forget other requirement as long as
is a conclusion
that debt is both consented
condoned – already conclusion; voluntary c. Facultative – one party has choice of
delivery of private document claiming/opposing one who has benefit of
a. If in hands of joint debtor – only his share is period may choose to compensate:
condoned i. Not all requisites are present
b. If in hands of solidary debtor - whole debt is ii. Depositum; commodatum; criminal
condoned offense; claim for future support; taxes
c. Tacit – voluntary destruction of instrument by
creditor; made to prescribe w/o demanding
Page 118 of 297

d. Judicial – set off; upon order of the court; b. Old obligation subsists if new obligation is
needs pleading and proof; all requirements void or voidable but annulled already
must concur except liquidation (except: intention of parties)
e. Total – when 2 debts are of the same c. If old obligation has condition
amount i. If Resolutory and it occurred – old
f. Partial – when 2 debts are not of the same obligation already extinguished; no new
amount obligation since nothing to novate
ii. If Suspensive and it never occurred –as
EFFECT OF ASSIGNMENT OF CREDIT TO 3RD if no obligation; also nothing to novate
PERSON; CAN THERE STILL BE d. If old obligation has condition, must be
COMPENSATION compatible with the new obligation; if new is
a. If made after compensation took place – no w/o condition – deemed attached to new
effect; compensation already perfected e. If new obligation has condition
b. If made before compensation took place – i. If resolutory: valid
depends ii. If suspensive and did not materialize:
i. With consent of debtor – debtor is old obligation is enforced
estopped unless he reserves his right
and gave notice to assignee KINDS OF NOVATION:
ii. With knowledge but w/o consent of a. REAL/OBJECTIVE – change object,
debtor – compensation may be set up as cause/consideration or principal condition
to debts maturing prior to assignment b. PERSONAL/SUBJECTIVE
iii. W/o knowledge – compensation may be i. Substituting person of debtor
set-up on all debts prior to his knowledge (passive)
 EXPROMISION; initiative is from 3rd
8. NOVATION person or new debtor; new debtor and
creditor to consent; old debtor released
NOVATION – from obligation; subject to full
extinguishment of obligation by creating/ substituting reimbursement and subrogation if made
a new one in its place w/ consent of old debtor; if w/o consent
or against will , only beneficial
 Changing object or principal conditions reimbursement; if new debtor is
 Substituting person of debtor insolvent, not responsible since w/o his
 Subrogating 3rd person in right of creditor consent
 DELEGACION; initiative of old debtor; all
REQUISITES: parties to consent; full reimbursement; if
a. Valid obligation insolvent new debtor – not responsible
b. Intent to extinguish old obligation – old debtor because obligation
expressed or implied: extinguished by valid novation unless:
completely/substantially incompatible old and insolvency already existing and of public
new obligation on every point knowledge or know to him at time of
c. Capacity and consent of parties to the new delegacion
obligation 1. Delegante – old debtor
d. Valid new obligation 2. Delegatario - creditor
3. Delegado – new debtor
EFFECTS OF NOVATION: ii. Subrogating 3rd person to rights of
a. Extinguishment of principal carries creditor ( active )
accessory, except:
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s t the
Difference from i contractin
payment by 3rd p
i e g parties
person c
t s bears the
1. debtor is not
u
r , legal
e
necessarily . represent
released from debt PRINCIPAL ation or
t authorizat
2. can be done w/o CHARACTERISTICS:
h ion of 3rd
consent of creditor 1. Autonomy of wills –
e party
parties may stipulate
i 5. The third
3. one obligation anything as long as not
r person
illegal, immoral, etc.
2. Mutuality – performance communi
4. 3rd person has no or validity binds both a cates his
obligation to pay if parties; not left to will of s acceptan
insolvent one of parties s ce before
3. Obligatory Force – i revocatio
parties are bound from g n by the
CONVENTIONAL n original
perfection of contract:
SUBROGATION s parties
governed by Arts. , 6. Art 1312; Art 1314
1300-1304
debtor’s consent is REQUISITES OF ART 1312:
required h
e 1. Existence of a valid contract
extinguishes the
i 2. Knowledge of the contract by a 3rd person
obligation and
r 3. Interference by the 3rd person
gives rise to a new
one s
KINDS OF n n is
CONTRACTS d f given
e o for
1. As to l r servic
perfection i m e
or v i previo
formation e t usly
a. C r y render
o y ed not
n t as
s o obligat
( ion
e
n 3. As to
c e importanc
s
o s e or
u
m s dependen
a
m e ce of one
l
o n upon
d t another
– i a. Principal – contract may stand alone
a
t a b. Acces
p u l sory –
e m depen
r , f ds on
f o anothe
e r r
p
c m contra
l
t a ct for
e
e l its
d
d i existe
g
t nce;
e
b i may
,
y e not
s exist
d on its
a e own
g p (
c. Prepa
r o d
ratory
e s o
– not
e i n
an end
m t a
by
e t
itself;
n i
) a
t o
c. F means
n
o throug
o r h
f m ) which
a 2. As to cause future
l a. Onerous – with contra
p valuable consideration
/ cts
a b. Gratuitous – founded
s may
r on liberality
o be
t c. R
l made
i e
e 4. As to parties obliged
e m
m a. Unilat
s u
n eral –
b. R n only
e e one of
a – r the
l a parties
p t has an
– e i obligat
r v ions
p f e
e e P
r c – a
f t g
e e e
d p
c r
t 1
e 2
e b s
d 0
y t
a o
b c t f
y o i 2
o
9 7 o nce
b. Bilater birth f
al – 3. Consummation – f ELEMENTS
both performance e OF VALID
parties r OFFER /
are CHAPTER 2. – o ELEMENTS
require ESSENTIAL r OF VALID
d to REQUISITES OF A ACCEPTANC
render CONTRACT c E
recipro See Arts. 1318 - 1355 o 1. Definite--unequivocal
cal m 2. Complete--unconditional
prestati ES SENT IA L ELEMENTS: e 3. Intentional
ons 1. Consent s
5. As to 2. Subject Matter WHEN OFFER BECOMES INEFFECTIVE:
name or 3. Consideration t 1. Death, civil
designatio o interdiction
n CONSENT , insanity
a. Nomin k or
ate CONSENT – meeting of n insolvency
b. Innomi minds between parties on o of either
nate subject matter and cause of w party
I. Do contract; concurrence of offer , before
ut and acceptance acceptanc
des REQUIREMENTS: a e is
–I 1. Plurality of subject n conveyed
giv 2. Capacity d 2. Express or
e 3. Intelligence and free will implied
that 4. Manifestation of intent of n revocation
you parties o of the offer
ma 5. Cognition by the other t by the
y party offeree
giv 6. Conformity of w 3. Qualified
e manifestation and h or
II. Do cognition e conditional
ut n acceptanc
faci AUTO CONTRACTS e of the
as  made by a person acting t offer,
–I in another’s name in one h which
giv capacity e becomes a
e counter-
that COLLECTIVE CONTRACTS o offer
you f 4. Subject
 will of majority binds a
ma f matter
minority to an agreement
y e becomes
notwithstanding the
do r illegal or
opposition of the latter
III. Fac e impossible
io e before
CONTRACTS OF ADHESION
ut acceptanc
 one party has
des m e is
are needed to seeal
thisQrueicakTdimye™ aand
–I e communic
aprepared form of a
picture.
do r ated
that contract,
e
you coTnIFFta(Uinncionmgprestshede)
dec o m pre ss or l PERIOD FOR ACCEPTANCE
ma s t ip u la tions he
y 1. Stated fixed period in the offer
y desires, and he simply
asks the other party to 2. No stated fixed period
giv m a. Offer
e agree to them if he wants
to enter into the contract a is
IV. Fac n made
io i to a
ut  NOTE: We follow the
f perso
faci theory of cognition and
e n
as not the theory of
s prese
–I manifestation. Under our
t nt –
do Civil Law, the offer and
s accept
that acceptance concur only
when the ance
you h must
ma i be
y s made
do immed
a iately
STAGES IN A c b. Offer
CONTRACT: c is
1. Preparatio e made
n- p to a
negotiation t perso
2. Perfection/ a n
a u o
b m k AMPLIFIED ACCEPTANCE
s s e  under
e t d certain
n a circumstan
t n b ces, a
c e mere
– e f amplificati
s o on on the
, r offer must
a be
e
c understoo
c a
n d as an
e i acceptanc
p t e of the
t a original
a n c offer, plus
n s o a new
c w m offer which
e e e is
r s contained
m in the
a c t amplificati
y a o on.
n
RULE ON COMPLEX OFFERS
b t 1. Offers are
e b h interrelate
e e d–
m contract is
a r k perfected
d e n if all the
e c o offers are
e w accepted
w i l 2. Offers are
i v e not
t e d interrelate
h d g d – single
i e acceptanc
n f e of each
If the parties intended that there should be ran express acceptance, the contract will offer of the express acceptance by the offeree of the offer. A
o be perfected only upon knowledge by the offeror
o f results in a
s
m perfected
u contract
c t unless the
h h h offeror has
i e made it
t m clear that
i  N o one is
m O f dependent
e T f upon the
E e other and
: r acceptanc
t
h r e of both
a A o is
t c r necessary.
, c .
e
p
u t P
n a a
d n g
e c e
r e
1
n m 2
o a 1
r y
m o
a f
b
l
e 2
9
c 7
r
i
e
r
v
c
the offeror may accept or reject. c. They were contracts for necessities such as
food, but here the persons who are bound to
RULE ON ADVERTISEMENTS AS OFFERS give them support should pay therefor
 Business advertisements – Not a definite offer, d. Minor is estopped for having misrepresented
but mere invitation to make an offer, unless it his age and misled the other party (when age
appears otherwise is close to age of majority as in the Mercado
 Advertisement for Bidders – only invitation to v Espiritu and Sia Suan v Alcantara cases.
make proposals and advertiser is not bound to
accept the highest or lowest bidder, unless
appears otherwise
dissent by J.Padilla to the effect that the minor cannot be estopped if he is too young to give consent; one that is too young to give consent is too young to be estopped. Subsequently, in Bra
OPTION - option may be withdrawn anytime before
acceptance is communicated but not when supported
by a consideration other than purchase price: option
money
DISQUALIFIED TO ENTER INTO CONTRACTS:

*Ang Yu v. CA (1994) states that a unilateral (contracts entered into are void)
promise to buy or sell, if not supported by a distinct
1. Those under civil interdiction
consideration, may be withdrawn but may not be
2. Hospitalized lepers
done whimsically or arbitrarily; the right of the
3. Prodigals
grantee here is damages and not specific
4. Deaf and dumb who are unable to read and write
performance; Equatorial v. Mayfair(264 SCRA 483)
5. Those who by reason of age, disease, weak mind and other similar causes, cannot without outside aid, take care of
held that an option clause in order to be valid and
themselves and manage their property, becoming an easy prey for deceit and exploitation
enforceable must indicate the definite price at which
the person granting the option is willing to sell,
contract can be enforced and not only damages;
PERSONS
ParanaqueWHO KingsCANNOT
V CA (1997GIVE )CONSENT
states thatTO A of
right
CONTRACT:
1. Minors Incapacity Disqualification
2. Insane or demented persons Restrains the exercise Restrains the very right
3. Illiterates/ deaf-mutes who do not know how to of the right to contract itself
write May still enter into Absolutely disqualified
4. Intoxicated and under hypnotic spell contract through
5. Art 1331 - person under mistake; mistake may parent, guardian or
deprive intelligence legal represemtative
6. Art 1338 - person induced by fraud (dolo Based upon subjective Based upon public policy
causante) circumstance of and morality
 NOTE: Dolus bonus (usual exaggerations in certain person
trade) are not in themselves fraudulent Contracts entered into Contracts entered into
are merely voidable are void
RULE ON CONTRACTS ENTERED INTO BY CAUSES WHICH VITIATE FREEDOM
1. Violence
MINORS QuickTime™ and a
TIFF (Uncompressed) decompressor  REQUISITES
 GENERAL RUareLnEeed:eVd toOseIeDthAis BpicLturEe. a. Irresistible physical force
 EXCEPTIONS: b. Such force is the determining cause for
a. Upon reaching age of majority – they ratify giving consent
the same 2. Intimidation
b. They were entered unto by a guardian and  REQUISITES:
the court having jurisdiction had approved a. Determining cause for the contract
the same b. Threatened act is unjust and unlawful
c. Real and serious
Page 122 of 297
d.Produces a well grounded fear that the  immediate, direct and most proximate reason
person making it will carry it over why parties enter into contract
3. Undue influence  REQUISITES:
1. It must exist
SIMULATED CONTRACTS 2. It must be true
1. Absolute – no intention to be bound at all, 3. It must be licit
fictitious only – void from beginning
2. Relative – there is intention to be bound but MOTIVE
concealed; concealed contract binds:  purely private reason; illegality does not invalidate
a. No prejudice to 3rd persons contract except when it predetermines purpose of
b. Not contrary to law, morals, etc. contract; when merged into one
OBJECT REQUISITES:Cause Motive

1. Within the
Direct andcommercemost of Indirect or remote
man - reason
proximate either existing
of a or reasons
in
contract
potency
2. Licit orand
Objective notjuridical
contrary to law,Psychological or purely
good
reason of customs
contract personal reason
3. Possible
Cause us always same The motive differs for
4. Determinate
for each as to its kind
contracting each contracting party
partyor determinable w/o need
to enter into a new
contract  NOTE:
5. Transmissible Legality or
Absence Of Void - produce no legal effectillegality of
Causa cause
Illegality Of Void - produce no legal effectaffects the
Causa existence
Falsity Of Voidable – party must prove of validity
that
Causa of
cause is untruthful; presumption the
of
validity but rebuttable contract;
Causa Not Presumed to Exist - burden of Legality
proof isor
Stated illegality of
In on the person assailing its existence
Contract motive
Inadequacy Does not Invalidate Contractdoesper se not
Of Causa Exceptions: affect the
 fraud existence
 mistake or validity
 undue influence of contract
 cases specified by
- contracts entered whenCAUSA IN SOME CONTRACTS:
ward suffers
lesion of more than 25%1. Onerous
contracts
THINGS WHICH CANNOT BE – the
THE OBJECT OF prestation
CONTRACT: of
1. things which are outside promise of
the commerce of men a thing or
2. intransmissible rights service by
3. future inheritance, except the other
in cases expressly 2. Remunera
authorized by law tory
4. services which contracts
TIFF (Uncompressed)
decompressor
areQucickoTnimter™aarnyd ato – the
law, morals, good service or
customs, publairce benefit
n ee d ed to s ee th is pic tu r e . remunerat
o r d e r o r p u b li c
ed
policy
3. Pure
5. impossible things or
Beneficen
services
ce – mere
6. objects which are not
liberality of
possible of determination
the donor
as to their kind
or
benefactor
CAUSA
4. Accessor
y –
CAUSA
identical
with cause
of principal
contract,
the loan
which it
derived its
life and
existence
( e u n certain
e s specified
x e e form such
: n 2. F as:
t o donation
m e r of real
o r m property,
r e a stipulation
t d l to pay
g interest,
a – transfer of
i large
g n
e cattle, sale
t r of land
o e thru agent,
o q contract of
r w u antichresis
h i , contract
p a r of
l t e partnershi
e e d p,
d v registratio
g e b n of
e r y chattel
) P
f l a
o a g
r w e
m
CHAPTE 1
R 3. – t
2
FORM a o
3
OF s
CONTRA b o
CTS l e f
S o 2
e n 9
i
e g 7
mortgage, donation of exercised; need ratification to be enforceable
A a personal prop in excess of c. Law requires contract to be in some form for
r s 5,000 convenience - contract is valid and
t 3. Real – creation of real enforceable, needed only to bind 3rd parties
s rights over immovable Ex: public documents needed for the ff:
. t prop must be written i. Contracts w/c object is creation,
h transmission or reformation of real rights
e WHEN FORM IS over immovables
1 r IMPORTANT: ii. Cession, repudiation, renunciation of
3 e 1. For validity (formal/solemn hereditary rights/CPG
5
contracts) iii. Power to administer property for another
6
i 2. For enforceability (statute iv. Cession of action of rights proceeding
s of frauds) from an act appearing in a public inst.
- 3. For convenience v. All other docs where amount involved is
in excess of 500 ( must be written even
c
1  GENERAL RULE: private docs )
o
3 n contract is valid and
5 binding in whatever form  NOTE: RA 8792 (E-COMMERCE ACT) – formal
s
8 provided that 3 essential requirements to make contracts effective as against
e
requisites concur third persons and to establish the existence of
n
t FORM – in some kind of contracts only as contracts
1. I
, are generally consensual; form is a manner in which
n
a contract is executed or manifested
f
o o  EXCEPTIONS acontract are deemed complied with provided that
r b a. Law requires the electronic document is unaltered and can be
m j contract to be in authenticated as to be useable for future
a e some form for rQeuicfkeTrimeen™caend.a
l c validity - donation are needed to see this picture.
t and acceptance of CHAPTER 4. – REFORMATION OF INSTRUMENTS

real property See Arts. 1359 - 1369
– b. Law requires
REFORMATION OF CONTRACTS a – remedy to contract to be in
conform to real intentionnof parties due to mistake,
m some form to be
a d accident enforceable - Statute
fraud, inequitable conduct,
y of Frauds; contract is
c valid but right to
a enforce cannot be
b
CAUSES/GRO w e aled
UNDS: h n c. party in good faith may ask for reformation
1. M a t 3. Mistake
u t i by 3rd
t o persons –
u s n due to
a h 2. Unilateral ignorance,
l o a. one party was lack of
: u mistaken skill,
l b. o negligence
i d t , bad faith
n h of drafter,
s e clerk,
b r typist
t e
r 4. Others
u e specified
m t i by law –
e h t to avoid
n e h frustration
t r e of true
e r intent
a. Mutual  Requisites:
i b. Mistake of fact a. There is a written instrument
n c. clear and convincing a b. There is meeting of minds
c proof c c. True intention not expressed in instrument
l d. c t d. Clear and convincing proof
u a e e. Facts put in issue in pleadings
d d
u  NOTE:
e s prescribes
s e f in 10 years
s r from date
s a of
o f u execution
m a d of
e i u instrument
t l l
h u e WHEN REFORMATION NOT AVAILABLE:
i r n 1. Simple donation inter vivos
n e t 2. Wills
g l 3. When real agreement is void
y 4. Estoppel when party has brought suit to enforce it
o
w f
/ o
c r C
i H
n A
s s i P
h t n T
o r e E
u u q R
l m u
d e i 5
n t .
n t a –
o b
t l I
t y N
o
T
b
o E
e e r R
x P
t p R
h r k
E
e e n
T
r s e
A
e s w
T
I
o t b O
r r u N
u t
e O
o F
m c
i i o
n C
t n O
t c
e N
T O o a 3rd
R N person
A T o and which
C R n may be set
T A e aside even
S C if valid. It
S T may be
e S o set aside
e f in whole or
– in part, to
A t the extent
r h of the
T e damage
t
h caused'
s
o
. p
s REQUISITES:
e a
a. Contract must be rescissible
1 r
i. Und
3 t
w er art
7 i
h 1381:
0 e
i Contra
s
c cts
- h entere
o d into
r by
1 h
3 person
a
7 t s
v
9 o exerci
e
sing fiduciary capacity:
c
CHAPTE
a P
R 6. -
u a
DEFECTI
s g
VE
e e
CONTRA
d
CTS
S 1
e a 2
e 4
p o
A a f
r r
t t 2
s i 9
. c 7
u 1. Entered into by defendant w/o knowledge or
1 l by guardian approval of litigants or judicial authority
3 a whenever 5. Payment by an insolvent – on debts w/c
7 r ward suffers are not yet due; prejudices claim of
0 damage by others
e more than 1/4 6. Provided for by law - art 1526, 1534,
c of value of 1538, 1539, 1542, 1556, 1560, 1567
-
o object and 1659
n 2. Agreed upon ii. Under art 1382 - Payments made in a state
1 o in of insolvency
4 m representation 1. Plaintiff has no other means to obtain
2 i of absentees, reparation.
2 c if absentee 2. Plaintiff must be able to return whatever
suffers lesion he may be obliged to return due to
KINDS OF by more than rescission
DEFECTIVE d
¼ of value of 3. The things must not have been passed
CONTRACTS: a
property to 3rd parties who did not act in bad faith
1. R m
3. Contracts 4. It must be made within the prescribed
E a
where period (of 4 years)
S g
rescission is
C e
based on
I fraud OBLIGATION CREATED BY THE RESCISSION OF
S e committed on THE CONTRACT: Mutual Restitution
S i creditor a. Things w/c are the objects of the contract and
I t (accion their fruits
B h pauliana) b. Price with interest
L e 4. Objects of
E r litigation; MUTUAL RESTITUTION NOT APPLICABLE WHEN
contract a. creditor did not receive anything from contract
C t entered into b. thing already in possession of party in good
faith; c. sale upon credit by an e. t sed or

subject insolvent debtor r insolv
to d. evidence of a ent
indemn indebtedness or n f. transfe
ity complete insolvency s r
only; if f made
there e betwe
are 2 r en
or father
more o and
alienati f son
ons – where
liability there
of 1st a is
infracto l presen
r l t any
of the
BADGES OF h above
FRAUD i circum
QuickTim
a.e™ and
consideration
a
T
of the conveyance is s stance
I
F s
F
g. failure
p
of the
(
r
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vende
n
o
c
o e to
m p
p take
r e
e exclusi
s r
s ve
e t
d posse
) y
ssion
d of the
e
c b proper
o
m y ty
p
r
e
s
a Rescission in Art Rescission Proper in
s
o
r
1191 Art 1381
It is a principal action it is a subsidiary remedy
a
d retaliatory in character
r e
e Only ground is non- There are 5 grounds to
b
performance of one’s rescind. Non-
n t
e obligation or what is performance by the other
e o incumbent upon him
d is not important
e r
d Applies only to Applies to both unilateral
reciprocal obligation and reciprocal obligations
t
o w Only a party to the Even a third person who is
h contract may demand prejudiced by the contract
s
e
e fulfillment or seek the may demand the
e n rescission of the rescission of the contract.
t
contract
h
i h Court may fix a period Court cannot grant
s
e or grant extension of extension of time for
p
time for the fulfillment fulfillment of the
i of the obligation obligation
c i
t
Its purpose is to cancel Its purpose is to seek
u
s
r
e the contract reparation for the damage
inadeq
.
or injury caused, thus
uate or f allowing partial rescission
fictitiou i of the contract
s n
b. transfe a 2. VOIDABL
r was n E
made c CONTRA
by a i CTS –
debtor a intrinsic
after a l defect;
suit l valid until
has y annulled;
been defect is
begun
e due to vice
and of consent
while it m
b or legal
is incapacity
pendin a
r  CHARACTERISTICS:
g
r a. Effective until set aside
against
a b. May
him
s be
a ( a ive or
s b his
s N l heirs
a O e or
i T assign
l E c s
e : o
d n WHAT CONTRACTS ARE VOIDABLE:
t a. Minors ( below 18 )
c b. Insane unless acted in lucid interval
o r
o c. Deaf mute who can’t read or write
r a
n d. Perso
f c
t ns specially
a i disqua
t r )
d. C lified: civil interdiction
t m e. In state of drunkenness
a a a
n f. In state of hypnotic spell
c t
k i
e o b
d n e
o i a
n s s
l s
y a
t
h i
i e l
n e
d
p
a r
n o o
p n
e l
a
r y
c
t
i t b
o e y
n r
m t
f h
o f e
r o
r p
t a
h c r
a u t
t r y
i
p n w
u g h
r o
p t s
o h e
s e
e c
c. C o
a d
e n
n s
f
e e
b c n
e t t
c o w
o f a
n s
f
i a
d
r e
m v f
e o e
d i c
d t
q tation
Page 125 of u  NOTE:
a  Expressio
MISTAKE to wrest consent l n of an
 false belief i opinion –
into INTIMIDATION t not fraud
something  one party is compelled by i unless
 REQUISIT a reasonable and well- e made by
ES: grounded fear of an s expert and
a. Refers imminent and grave other party
to the danger upon person and a relied on
subject property of himself, n the
of the spouse, ascendants or d former’s
thing descendants (moral special
which coercion) g knowledge
is the i  Fraud by
object UNDUE INFLUENCE v third
of the  person takes improper i person –
contrac advantage of his power n does not
g
d even if one of the parties entered it against his wishes or even against his better judgment. Contracts are also valid even though they are entered into by one of the parties without hope of
t over will of another i vitiate

b. Refers depriving latter of t consent;
to the reasonable freedom of only action
nature choice q for
of the u damages
contrac FRAUD a except if
t l there is
 thru insidious words or
c. Refers i collusion
machinations of
to the t between
contracting parties, other
princip i one party
is induced to enter into
al e and the
contract w/o w/c he will
conditi s third
not enter (dolo causante)
ons in person, or
an i resulted to
KINDS OF FRAUD IN THE
agree t substantial
PERFORMANCE OF
ment mistake,
OBLIGATION OR
d. Error d mutual
CONTRACTS
as to o between
a. Causal Fraud (dolo
person e parties.
causante) – deception
- when s
of
it is the CAUSES OF EXTINCTION OF ACTION TO ANNUL
serious charcter
princip n a. PRES
without which the other
al o CRIPT
party would not
consid t ION -
haQvuieckTimee™ntaendrea d
eration Period
into; contract is
of the TIFF (Uncompressed) h to
VOIDABLE (Art. 1338)are needed to seedecompressor
contrac this picture.
a bring
t b. Incidental Fraud v an
e. Error (dolo incidente) – e action
as to deception which are ; for
legal not serious and Annul
effect - without which the L ment
when other party would still A i. Intimidation, violence, undue influence -
mistak have entered into the W 4
e is contract; holds the F ye
mutual guilty party liable for U ar
and DAMAGES (Art. L s
frustrat 1344) fro
es the c. Tolerated Fraud – m m
real includes minimizing i ti
purpos the defects of the s m
e of thing, exaggeration of r e
parties its god e de
p fe
VIOLENCE r ct
 serious or e of
irresistible s co
force is e ns
employed n en
t l ecte
t e d by
c i ii. s the
e m u guar
a e c dian
s h to
e cont
s g racts
u r
ii. M e ente
i a red
r a
s s into
t d by
i o
a n an
k a inca
e n pacit
, s m ated
h u ,
i s iii. the
f p t
r injur
a ed
u c h part
d e a y
a v must
s e have
– e exec
s uted Deleted: (9a)
c
4 an Formatted: Font: 10 pt
b. RATIFICATION Formatted: Font: 10 pt
Carantes vs. CA, 76 SCRA 514, discovery of
y  REQUISITES fraud must be reckoned to have taken place from
e i. k the time the document was registered in the
a n office of the register of deeds. Registration
r o constitutes constructive notice to the whole world
s w e act
l a whic
e s h
f d
r e expr
g d essl
o e
m , y or
impli
o e edly
t f conv
i x
eys
m c
r an
e e
e inten
p
a tion
t
o s to
f waiv
o i e his
n n right
d
i r c c. LOSS
s e a OF
c n s THE
o d e THING
v e which
e r is the
r i o object
y n f of the
iii. I g contra
n
r ct
c
c a throug
a
o t h
p
n i fraud
a
t f or fault
c
r i of the
i
a c person
t
c a who is
y
t t entitle
i d to
- o annul
v n the
o
F contra
i ct
r d e
o f  NOTE
a
m f :
b
Object
i b h ss, but
s u e withou
t t
l v interes
o t a t
s h l thereo
t e u n.
e  Ratific
ation
t p cleans
h e o es the
r r f contra
o s ct of
u o t its
g n h defect
h e s from
o the
a b mome
t
l nt it
h
i was
f i
g constit
o n
e uted.
r g
t d
3. UNENFO
u a RCEABLE
i t t CONTRA
t o
CT – valid
o
t but cannot
u r h compel its
s e e execution
t unless
e u ratified;
v r t
e n i P
n m a
t e g
t
, e
h
e o
f 1
t
2
h s 6
e a t
m h o
c e e f
o 2
n c l 9
t a o 7
r n extrinsic defect; produce contract
a legal effects only after ii. Special promise to answer for debt, default
c ratified or miscarriage of another
t b iii. Agreement made in consideration of
e KINDS: promise to marry
c a. Unauthorized or No iv. Agreement for sale of goods, chattels or
a h sufficient authority – things in action at price not less than 500;
n e entered into in the exception: auction when recorded sale in
l name of another sales book
d when: v. Agreement for lease of property for more
s i. No authority than one year and sale of real property
t conferred regardless of price
i l
i ii. In excess of vi. Representation as to credit of another
l authority
l a
b conferred ( ultra TWO WAYS OF CURING UNENFORCEABLE
l vires) CONTRACTS:
b e b. Curable by a. Failure of defendant to object in time, to the
e Ratification - Both presentation of parole evidence in court, the
parties incapable of defect of unenforceability is cured
o giving consent -2 b. Acceptance of benefits under the contract.
a n
n minor or 2 insane If there is performance in either part and there
l persons is acceptance of performance, it takes it out of
n y
u c. Curable by unenforceable contracts; also estoppel sets in
l Acknowledgment - by accepting performance, the defect is waived
l f Failure to comply with
e o Statute of Frauds 4. VOID OR INEXISTENT – of no legal effect
d r i. Agreement to be CHARACTERISTICS:
, performed within a a. It produces no effect whatsoever either against
year after making or in favor of anyone
t
b. There waived g. A ects

is no f. Imprescriptible n are
action y assert
for o ed
annulm n agains
ent e t him
necess
ary KINDS OF VOID CONTRACT:
as such m
a a. Those
is ipso lackin
jure. A y
judicial g in
declara essen
tion to i tial
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ii. T o in
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o o nti
s b on
e n of
o j
e pa
w c rti
h c t es
i a iv. T rel
c u h ati
h s o ve
e s to
/ e pri
c o nc
a b ip
u j w al
s e / ob
e c c je
t ct
o iii. T c of
r h o th
o n e
s t co
o
e e ntr
b
m ac
j
p t
e w
l ca
c h
a nn
t o
t ot
s
e be
d e as
i ce
d o a
rta
b n
in
n j ed
o e i b. Prohibited by law
t c m c. Those
t p expre
o ssly
e s prohib
x i
s ited or
i s
i declar
s b ed
t o l void
u e by law
a t -
t s Contra
s
i cts w/c
e
d violate
t r
e any
h v
e i legal
t c provisi
h e on,
t wheth
e
i er it
m –
amoun
e c
ts to a
o
n crime
m
o o or not
m
f d. Illegal
e
o /Illicit
r
t b ones
c
h j –
e
e e Those
c whose
o t cause,
t f object
r v. T
h or
a purpos
m o
n e is
a s
s contra
n e
a ry to
c law,
t – w morals
i / , good
o n c custo
n
m for an illegal purpose, the

s ; where the party who purpos
, paid or delivered e has
repudiates the been
E contract before accom
p x
u plishe
: d, or
b
l before
i C any
c o damag
n e has
t been
o r cause
r a d to a
d c 3rd
e t person
r c. payme
nt of
t
o money
o
r or
deliver
s y of
p e proper
u l ty
b l made
l
by an
i
m incapa
c
a citated
r person
p i d. agree
o j ment
l u or
i a contra
c n ct
y a which
is not
illegal
per se
Page 127 of
and
the
prohibi
tion is
CONTRACT CONSTITUTE CRIMINAL
DOES OFFENSE
NOT CONSTITUTE CRIMINAL OFFENSE
KINDS OF but is ILLEGAL esigne
/UNLAWFUL PER SE d for
ILLEGAL No action for specific performance the
No action for protect
Parties are ina.pari
No delicto
action for specific performance ion of
CONTRACTS
h. No action for restitutionon the
PARI plaintif
f
DELICTO restitution on e. payme
either
either side. The side.leaveyou
law will The law will leave you where you are nt of
c. No confiscation
DOCTRINE any
 Both parties are guilty, no amoun
where you are t in
action against each other;
Both shall bethose
prosecuted exces
who come in equity
Thing/priceto be confiscated
must come with clean s of
hands; applies only to
superior public policy intervenes the
illegal contracts and not to maxim
infavorof um
inexistent contracts; does
government a.No action for price
not apply when a
Only
specific
one party
performance
is guilty No action for specific performance
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and a
Innocent party is entitled to restitution
Innocent party is
TIFF (Uncompressed)
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Guilty party is not entitled to restitution
 EXCEPTION or
Guilty party will be prosecuted TO P A R I
are n eeded to se e th is comm
Instrument of crime will be p ictu entitled
Dconfiscated
EreL. ICTOrestitution
RULE
in favor -
of gov’t. to odity
If c. Guilty party not entitled restitution fixed
purpose has not yet been is to by law
accomplished and If or
damage has not been regulat
caused to any 3rd person ion by
OTHER EXCEPTIONS: compe
a. Payment of Usurious tent
interest authori
b. payment of money or ty
delivery of property f. contra
c f e n if
t s gambli
h ng is
w o p prohibi
h u r ted.
e r a
r s c REQUISITES OF ILLEGAL CONTRACTS:
e t a. Contract is for an illegal purpose
b i b. Cont
f ract
y i c
e must
x be
a e d
repu
d diate
l o d by
a b n any
b y of
o h the
r l i parti
e a m es
r w befor
g. o e
i
u n purp
s
n e ose
d is
a acco
e w l mplis
r h l hed
t o o or
a
w dam
k
l e age
e
o d is
s
s caus
t t ed to
t 3rd
o o
parti
i
es
n r
w c. Cour
o e t
r g c belie
k a o ves
m v that
b e publi
l r
l c
o
i inter
n
n h est
g
g i will
e
r s be
b serv
e l ed
t by
c o
h allow
a s
a ing
u s
n reco
s e
e s very
t (disc
h retio
e o ( nary
f A upon
r the
m t
f court
a .
r ) –
x
i a base
m u 3 d on
u d 1 remo
m u 3 rse;
l illega
e lity is
n R
n acco
u P
t mplis
m C
hed
b )
whe
e s
c n
r e parti
h
v es
e
o e enter
m
e R t an
d O i amo
T o unt
i E n in
n C exce
t T – ss of
o the
C maxi
E i mum
c R f price
o T allow
n A p ed
t I r may
r N i reco
a c ver
c S e such
t E exce
; C ss
o
T b. Lab
f
b O or –
e R if law
f S c sets
o : o the
r m mini
e C m mum
O o wag
N d e for
i i
S labor
t t
U ers,
M y any
t E labor
a R i er
k s who
e P agre
s R ed to
O d recei
T e ve
e t
f E less
C e may
f r
e T still
I m be
c i
t O entitl
N n ed to
– e
party , reco
d ver
w/c is
remor L the
seful A b defici
preve B y ency
nts it O ; if
R s law
W , t set
H a max
E U t worki
R S u ng
E U t hour
R e s
L Y , and
A labor
W L er
S A a who
W n unde
A a. C y rtake
R o s to
E n p work
s e long
I u r er
S m s may
S e o dem
U r n and
E addit
D p ional
p
r com
a
T o pens
y
O t ation
i
e c. Inter
n
P c est
g
p d i y of
a t money
i b a ,
d y t proper
e ty
i d deliver
d , ed by
n e incapa
b citated
e t c
o person
x o in the
c r u
r interes
e t of
s t
w s justice
s i ; pari
t delicto
o h m cannot
f a apply
y becau
i
se an
t n
h t a P
e e l a
r l g
e o e
i w
n s
t 1
t 2
e r
e 8
r f
e r c
o o
s o f
t m v
2
e
9
r
a d 7
l a incapacitated person b. other party is less guilty or not guilty
l t does not know what
o e he is entering into; TITLE 3. – NATURAL OBLIGATIONS
w unable to understand See Arts. 1423 - 1430
e the consequences of
o his own action
d NATURAL OBLIGATIONS
f b. If agreement is not  they are real obligations to which the law denies
illegal per se but an action, but which the debtor may perform
b p merely prohibited and voluntarily.
y a prohibition is  It is patrimonial, and presupposes a prestation.
y designated for the  The binding tie of these obligations is in the
t m protection of the conscience of man, for under the law, they do not
h e plaintiff – may recover have the necessary efficacy to give rise to an
e n what he has paid or action.
t delivered by virtue of
u public policy EXAMPLES OF NATURAL OBLIGATIONS
s EFFECTS OF ILLEGAL ENUMERATED UNDER THE CIVIL CODE:
u CONTRACTS MUTUAL RESTITUTION IN 1. Performance after the civil obligation has prescribed
r a. I VOID CONTRACTS 2. reimbursement of a third person for a debt that has
y f  GENERAL RULE: parties prescribed
should return to each other 3. restitution by minor after annulment of contract
o what they have given by 4. Delivery by minor of money or fungible thing in
l virtue of the void contract
n fulfillment of obligation
a in case
w e
 Where nullity arose from
defect in essential
m p elements
a a a. return object of
y r contract and fruits
t b. return price plus
y interest
b
e  EXCEPTION: No recovery
i can be had in cases where
s nullity of contract arose
r from illegality of contract
e where parties are in pari
c i
n delicto; except:
o a. incapacitated – not
v c
a obliged to return what
e he gave but may
r p
a recover what he has
e given
c
1. estoppel in sion to
pais (by L d assert a
conduct) i right within
c. estopp A l reasonabl
el by i e time
silence C g warranting
d. estopp e a
el by H n presumpti
accepta c on that the
nce of E e party
benefits , entitled to
2. Technical S assert it
estoppel  Failure or neglect, for an c either has
a. Estopp unreasonable and o abandone
el by u u d it or
deed n l declined to
b. Estopp e d assert it
el by x  ELEMENTS
record p o 1. conduct on
c. Estopp l r part of the
el by a defendant,
judgme i s or of one
nt n h under
d. Estopp e o whom he
el by d u claims,
laches l giving rise
l d to the
L e situation
n h of which
A g a complaint
t v is made
C h e and for
which the
H o b complaint
f e seeks a
E e remedy
t n 2. delay in
S i asserting
m d the
e o complaina
n nt’s rights,
O t e the
o complaina
R e nt having
d a knowledge
o r or notice,
l of the
S t i defendant’
h e s conduct
T a r and having
t ; been
A afforded
w i the
L h t opportunit
i y to
E c i institute a
h s suit
, 3. lack of
n knowledge
D b e or notice
y g on the part
E l of the
e i defendant
x g that the
M
e e complaina
r n nt would
A
c c assert the
i e right on
N
s which he
i o bases his
D
n r suit
g 4. injury to
S
o the
d m defendant
u i in the
e s event relief
i t y
s h m
e e
a n
c s t
c u
o i b
r t y
d
e i h
d n e
i
t n r
o o
t o
t f
h h
e e d
l e
c d b
o t
m t
p o e
l
x
a
b c
i
e e LACHES PRESCRIPTION
n
e
Concerned with Concerned with fact of delay
a
d
effect of delay
n b i
Question of Question or matter of time
t a n
inequity of
, r g
permitting the
r
e claim to be
o
d enforced
v
r
. Not
a statutory Statutory
Applies
l in equity Applies at law
5. Performance afteQurickTimaec™tiaondna to enforce Not
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KINDS
Page 129 of
TITLE 4. – ESTOPPEL
See Arts. 1431 - 1439
ESTOPPEL - a condition or state by virtue of

which an admission or representation is
redered conclusive upon the person making it
and cannot be denied or disproved as against
the person relying thereon.
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ATENEO CENTRAL BAR OPERATIONS 2007

QUASI-CONTRACT (OBLIGATION EX QUASI-

 Failure to observe for the protection of the

DUTIES OF DEBTOR IN AN OBLIGATION TO GIVE

KINDS OF NEGLIGENCE, DISTINGUISHED

EFFECTS OF CONTRIBUTORY NEGLIGENCE OF

1. Ordinary Delay – failure to perform an obligation

2. Mora Accipiendi – default on part of creditor

3. Compensatio morae – both parties are in

 Rule in Reciprocal Obligations: In reciprocal

CESSATION OF THE EFFECTS OF MORA:

FORTUITOUS EVENT – An event which could not be

Page 109 of 297

CHAPTER 3. - DIFFERENT KINDS OF Improvement If by nature or If at the expense of

PURE AND CONDITIONAL OBLIGATIONS 3. Potestative – dependent on sole will of 1 party; if

Page 110 of 297

a. Positive – extinguished if time expires or

PERIOD FOR WHOSE BENEFIT

TERM CONDITION WHEN DEBTOR LOSES RIGHT TO PERIOD:

ALTERNATIVE – bound by different prestations but ALTERNATIVE vs. FACULTATIVE

5. when a solidary responsibility is imputed by a

h. Complete/ personal defense – total or partial

SUBSTANTIAL PERFORMANCE HOW APPLICATION IS MADE:

WHO MAKES APPLICATION OF DEBTS

 GENERAL RULE: Debtor d. Abandonment of all debtor’s property not

Page 116 of 297

unjustly nation has been a. Debtor is at fault w,

f REBUS SIC STANTIBUS - agreement is valid only if

ATION/REMISSION OF THE DEBT –

CONFUSION OR MERGER OF RIGHTS– character

Page 118 of 297

o defects and vices in defects and vices4.

DISQUALIFIED TO ENTER INTO CONTRACTS:

OBJECT REQUISITES:Cause Motive

t and acceptance of CHAPTER 4. – REFORMATION OF INSTRUMENTS

faith; c. sale upon credit by an e. t sed or

t over will of another i vitiate

b. There waived g. A ects

m for an illegal purpose, the

ESTOPPEL - a condition or state by virtue of

Page 130 of 297

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