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CHAPTER 4: REFORMATION OF INSTRUMENTS PRINCIPLES OF THE GENERAL LAW ON REFORMATION

(ART 1360)
REFORMATION (ART 1359)
- In case of conflict between the provisions of the
- That remedy in equity by means of which a
New Civil Code and the principles of general law
written instrument is made or construed as to
on reformation, the former prevails. The latter
express or conform to the real intention of the
will have only suppletory effect.
parties when by reason of mistake, fraud,
inequitable conduct or accident, the instrument
fails to express such agreement or intention.

REQUISITES FOR THE ACTION FOR REFORMATION

MUTUAL MISTAKE (ART 1361)
A. There must be meeting of the minds of the
- A mistake of fact that is common to both parties
parties to the contract.
of the instrument which causes the failure of the
B. The true intention or agreement of the parties is instrument to express their true intention.
not expressed in the written instrument.
REQUISITES
C. The failure to express the true intention is due
A. The mistake must be of fact (ART 1331)
to mistake, fraud, inequitable conduct, or
accident. B. Such mistake must be proved by clear and
convincing evidence.
D. The facts upon which relief by way of
reformation of the instrument is sought are put C. The mistake must be mutual, that is, common to
in issue by the pleadings. both parties to the instrument.
E. There must be clear and convincing proof of the D. The mistake must cause the failure of the
mistake, fraud, inequitable conduct, or accident. instrument to express the true intention of the
parties.
F. It must be brought within the proper prescriptive
period of 10 years.

G. The document must not refer to a simple MISTAKE ON ONE SIDE, FRAUD OR INEQUITABLE
unconditional donation inter vivos, wills or to a CONDUCT ON THE OTHER (ART 1362)
contract where the real agreement is void.
- The mistake is unilateral but the other party
acted fraudulently or inequitably. The right to
ask for reformation is granted only to the party
WHEN REFORMATION IS PROPER
who has mistaken since the mistake is not
a. Article 1361 – Mutual Mistake mutual.

b. Article 1362 – Mistake on one side and fraud or CONCEALMENT OF MISTAKE BY THE OTHER PARTY (ART
inequitable conduct on the other side. 1363)

c. Article 1363 – concealment of mistake by the - The mistake is unilateral but the other party is
other party. guilty of concealment. The remedy of
reformation may be availed of the party who
d. Article 1364 – ignorance, lack of skill, negligence,
acted in good faith. The concealment of the
or bad faith on the part of a third person.
mistake by other party constitutes fraud.
e. Article 1365 – mortgage or pledge stated as sale.
IGNORANCE, LACK OF SKILL, NEGLIGENCE, OR BAD
f. Article 1346 – relative simulation that does not FAITH ON THE PART OF THIRD PERSON (ART 1364)
prejudice a third person and is not lawful.
- Neither party is responsible for the mistake.
Either party may ask for reformation.

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- The court may order the reformation of the - Based on estoppel or ratification. When a
instrument if the instrument does not convey party brings an action to enforce the
the true intention of the parties because of the contract, he admits its validity and that it
ignorance, lack of skill, or bad faith of the drafter expresses the true intention of the parties.
of the instrument, or the clerk, or the typist. The bringing of the action is thus
inconsistent with reformation.
MORTGAGE OR PLEDGE STATED AS A SALE (ART 1365)

- The reformation of the instrument is proper;

otherwise the true intention of the parties would PARTY ENTITLED TO REFORMATION (ART 1368)
be frustrated. Such true intention must prevail
A. Either of the parties, if the mistake is mutual
for the contract must be complied with in good
under Articles 1361, 1364, and 1365.
faith.
B. In all other cases, the injured party, under
- The intent of the parties can be adjudged from
Articles 1362 – 1365.
their contemporaneous and subsequent acts.
C. The heirs or successors-in-interest, in lieu of the
party entitled.
CASES WHEN REFORMATION IS NOT ALLOWED
PROCEDURE FOR REFORMATION (ART 1369)
A. SIMPLE DONATIONS INTER VIVOS WHERE NO
➢ The Rules of Court governs procedure. However,
CONDITION IS IMPOSED (ART 1366)
no rules have yet been promulgated.
- The act is essentially gratuitous and the
donee has no just cause for complaint. The
donor is not bound to correct mistakes or
defects in the deed of donation which in the
first place he was not bound to make. Of
course, the donor may ask for the
reformation of a deed of donation.

B. WILLS (ART 1366)

- The making of a will is a strictly personal

and free act, hence upon the death of
the testator, the right to reformation is
lost. Furthermore, a will may be
revoked by the testator any time before
his death. However, after the death of
the testator, errors of imperfections in
descriptions may be corrected under
Article 789, but not the manner of
property disposal.

C. WHEN THE REAL AGREEMENT IS VOID (ART

1366)

- If the real agreement is void, there is

nothing to reform.

D. WHEN ONE PARTY HAS BROUGHT AN ACTION

TO ENFORCE THE INSTRUMENT (ART 1367)

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CHAPTER 5: INTERPREATION OF CONTRACT special matter means that attention was

given to that particular matter and it
INTERPRETATION OF CONTRACT
must be assumed that it expresses their
- The determination of the meaning of the intent. A reference to a general matter
terms or words used by the parties in written may be included, does not mean that the
contract. parties had that particular matter in
mind.
RULES IN INTERPRETATION OF CONTRACTS
E. PRINCIPLE OF EFFECTIVENESS (ART 1373)
A. LITERAL MEANING CONTROLS WHEN
LAGUANGE IS CLEAR (ART 1370) - When an agreement if susceptible of
several meanings, one of which would
- If the terms of a contract are clear and render it effectual, it should be given
unequivocal, the parties are bounds by such that interpretation. If one
terms. The concern here is not what existed interpretation makes a contract valid
in the minds of the parties but what and the other makes it illegal the
intention is expressed in the language used. former interpretation will prevail.
B. EVIDENT INTENTION OF PARTIES PREVAILS F. INTERPRETATION OF VARIOUS STIPULATIONS
OVER TERMS OF CONTRACT (ART 1370) OF A CONTRACT (ART 1374)
- Where the words and clauses of a written - A contract must be interpreted as a
contracts are in conflict with the manifest whole and the intention of the parties
intention of the parties, the latter shall is to be gathered from the entire
prevail over the former. It is a cardinal rule instrument and not from particular
in the interpretation of contracts that the words, phrases, or clauses. All
intention of the parties should always provisions should, if possible, be so
prevail because their will has the force of interpreted as to harmonize with each
law between them. other.
C. CONTEMPORANEOUS AND SUBSEQUENT ACTS G. INTERPRETATION OF WORDS WITH DIFFERENT
RELEVANT IN THE DETERMINATION OF SIGNIFICATIONS (ART 1375)
INTENTION (ART 1371)
- If a word is susceptible of two or more
- Where the parties to a contract have placed meanings, it is to be understood in that
an interpretation to the terms of the sense which is most in keeping with the
contract by their contemporaneous and/or nature and object of the contract in line
subsequent acts, as by acts in partial with the cardinal rule that the intention
performance, such interpretation may be of the parties must prevail.
considered by the court in determining its
meaning and ascertaining the intention of H. RESORT TO USAGE OR CUSTOM AS AID IN
the parties when such intention cannot INTERPRETATION (ART 1376)
clearly be ascertained from the words used
- The usage or custom of the place where
in their contract.
the contract was entered into may be
- Antecedent circumstances may also be received to explain what is doubtful or
considered. ambiguous in a contract on the theory
that the parties entered into their
D. SPECIAL INTENT PREVAILS OVER A GENERAL contract with reference to such usage or
INTENT (ART 1372) custom.
- The special provisions control over the - It is necessary to prove the existence of
general provisions when the two usage or custom, the burden of proof
cannot stand together. A reference to a

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being upon the partly alleging it. Usage INTRODUCTION TO DEFECTIVE CONTRACTS
or custom is not admissible to supersede
KINDS OF DEFECTIVE CONTRACTS
or vary the plain terms of a contract.
A. RESCISSIBLE CONTRACTS
I. INTERPRETATION OF OBSCURE WORDS (ART
1377) - Valid because all the essential
requisites of a contract exist but by
- In case of doubt, a written agreement
reason of extrinsic defect consisting of
should be interpreted against the part
an economic injury or damage or lesion
who has drawn it or be given an
to one of the parties or to third persons,
interpretation which will be favorable
such as creditors, the contract may be
to the other who, upon the faith or
rescinded.
which, has incurred and obligation.
Since he caused the obscurity, the party - It does not require ratification.
who drew up the contract with
ambiguous terms should be responsible; B. VOIDABLE or ANNULLABLE CONTRACTS
therefore, so the obscurity must be - Valid because all the essential
construed against him. requisites of a contract exist but may be
CONTRACTS OF ADHESION annulled due to an intrinsic defect i.e.
one of the parties is incapable of giving
• Contracts most of the term of consent, or consent is vitiated by
which do not result from mutual mistake, violence, intimidation, undue
negotiation between the parties influence, or fraud unless there has been
as they are usually prescribed in ratification to make them absolutely
printed forms prepared by one valid.
party to which the other party
merely “adheres” if he chooses C. UNENFORCEABLE CONTRACTS
but which he cannot change. - Although a valid contract, it cannot be
sued upon or enforced because it is
entered into the name of another
RULES IN CASE OF DOUBTS AS TO INCIDENTAL without authorization, does not
CIRCUMSTANCES (ART 1378) conform a prescribed form, or where
both parties are incapacitated, unless
A. LEAST TRANSMISSION OF RIGHTS AND
they are ratified.
INTERESTS
- In a way, it may be considered as a
- Applies when the doubts refer to
validable transaction, that is, it has no
incidental circumstances of gratuitous
effect now, but it may be effective upon
contracts.
ratification.
B. GREATEST RECIPROCITY OF INTERESTS
D. VOID or INEXISTENT CONTRACTS
- applies when the doubts refer to
- They are absolutely null and void. They have no
incidental circumstances of onerous
effect at all and cannot be ratified.
contracts.

C. PRINCIPAL OBJECT IS DOUBTFUL

- If the doubt refers to the principal

object of the contract and such doubt
cannot be resolved thereby leaving the
intention of the parties unknown, the
contract is null and void.

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CHAPTER 6: RESCISSIBLE CONTRACTS legally demanded such as natural obligations

and those that have prescribed.
RESCISSIBLE CONTRACTS (ART 1380)

- Those that are validly agreed upon and

enforceable because all the essential elements ACTION FOR RESCISSION
exist and, therefore, legally effective, but in the
NATURE OF ACTION FOR RESCISSION (ART 1382 AND
cases established by law, the remedy of
1384)
rescission is granted by the court in the
interest of equity when there is economic - Rescission is not a principal remedy. It is merely
damage or prejudice or lesion to one of the a subsidiary remedy. It can be availed of only if
parties or to a third person. There is actually no the injured party proved that he has no other
defect at all but by reason of some extrinsic legal means aside from rescinding the contract
defect, its enforcement would cause injustice. to obtain redress for the damage caused. If the
damage is repaired, rescission cannot take
KINDS OF RESCISSIBLE CONTRACTS
place.
A. CONTRACTS ENTERED INTO IN BEHALF OF
- Rescission shall be only to the extent necessary
WARDS (ART 1381)
to cover the damages caused.
B. CONTRACTS AGRED UPON IN REPRESENTATION
RESCISSION CREATES OBLIGATION OF MUTUAL
OF ABSENTEES (ART 1381)
RESTITUTION (ART 1385)
C. CONTACTS UNDERTAKEN IN FRAUD OF
- The purpose of rescission is to restore the
CREDITORS (ART 1381)
parties to their original situation. The law
D. CONTRACTS WHICH REFER TO THINGS UNDER presumes that the party who received the
LITIGATION (ART 1381) object of the contract has enjoyed the fruits
thereof while the other has used the money
E. OTHER INSTANCES (ARTS 1098, 1189, 1191,
which is the price of the object.
1382, 1526, 1534, 1539, 1542, 1560, 1567, 1599
AND 1659) PERIOD FOR FILING ACTION FOR RESCISSION (ART 1389)

A. GENERAL RULE – the action to claim rescission

must be commenced within four years from the
CONTRACTS APPROVED BY THE COURTS (ART 1386)
date the contract was entered into.
- If a contract entered into in behalf of a ward or
B. EXCEPTIONS
absentee has been approved by the court,
rescission cannot take place because it is valid 1. For persons under guardianship, the period
whether or not there is lesion. The law shall begin from the termination of
presumes that the court is acting in the incapacity.
interests of the ward or absentee when it
2. For absentees, from the time the domicile is
approves the contract despite of the lesion.
known.

PERSONS ENTITITLED TO BRING ACTION

RESCISSIBLE PAYMENT
A. The injured party or the defrauded creditor.
PAYMENTS MADE IN A STATE OF SOLVENCY (1382)
B. The heirs, assigns, successors-in-interest.
- Payments made for obligations to whose
C. The creditors of the above entitled to
fulfillment the debtor could not be compelled
subrogation.
at the time they were effected. Includes
obligations which are not yet due and
demandable but also those which cannot be

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BADGES OF FRAUD PURCHASER IN BAD FAITH

WHEN ALIENATION PRESUMED IN FRAUD OF LIABILITY OF PURCHASER IN BAD FAITH (ART 1388)
CREDITORS (ART 1387)
- The purchaser in bad faith, who acquired the
- Prima facie presumption of fraud in case of object of the contract alienated in fraud of
alienation by the debtor of his property. The creditors, must return the same if the sale is
enumeration is not exclusive. rescinded and should it be impossible for him to
return it, due to any cause, he must indemnify
a. GRATUITOUS ALIENATION
the creditor.
- Presumed fraudulent when the debtor
EFFECT OF BAD FAITH
did not reserve sufficient property to
pay all debts contracted before the A. The acquirer must return or indemnify.
donation.
B. “Due to any cause” includes fortuitous event.
b. ONEROUS ALIENATION

1. Presumed to be fraudulent when made by

SUBSEQUENT TRANSFERS
persons against whom some judgement has
been rendered in any instance even if not A. If the first transferee is in good faith, the good or
yet a final judgement. bad faith of the next transferee is not important.
2. When made by persons against whom some B. If the first transferee is in bad faith, the next
writ of attachment has been issued. transferee is liable only if he is also in bad faith.

BADGES OF FRAUD

- Circumstances indicating that certain alienation

have been made in fraud of creditors.

CIRCUMSTANCES DENOMINATED AS BADGES OF

FRAUD

A. The fact that the consideration of the

conveyance is fictitious or inadequate.

B. A transfer made by a debtor after suit has been

begun and while it is pending against him.

C. A sale upon credit by an insolvent debtor.

D. The transfer of all or nearly all of his property by

a debtor, especially when he is insolvent or
greatly embarrassed financially.

E. The fact that the transfer is made between the

father and son, when the fact is considered
together with preceding circumstances.

F. The failure of the vendee to take exclusive

possession of all property.

G. It was known to the vendee that the vendor had

no properties other than that sold to him.

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CHAPTER 7: VOIDABLE CONTRACTS B. IN CASE OF VITIATED CONSENT

VOIDABLE or ANNULLABLE CONTRACTS 1. Party whose consent is vitiated.

- Those which possess all the essential requisites

of a valid contract but one of the parties is
ANNULMENT
incapable of giving consent, or consent is vitiated
by mistake, violence, intimidation, undue - A remedy provided by law, for reason of public
influence, or fraud. interest, for the declaration of the inefficacy of
a contract based on a defect or vice in the
- These contacts are valid and binding between
consent of one of the contracting parties in
the parties unless annulled by a proper court
order to restore them to their original position
action. Once ratified, they become absolutely
in which they were before the contract was
valid and can no longer be annulled.
executed.

PARTY ENTITITLED TO BRING ACTION TO ANNUL (ART

KINDS OF VOIDABLE CONTRACTS (ART 1390) 1397)

A. Legal incapacity to give consent, where one of 1. The plaintiff who must have an interest in the
the parties is incapable of giving consent to the contract.
contract.
2. The victim and not the party responsible for the
B. Violation of consent, where the vitiation is done defect of the person who must assert the same.
by mistake, violence, intimidation, undue
PERIOD FOR FILING ACTION FOR ANNULMENT (ART
influence, or fraud.
1391)

A. In cases of intimidation, violence, or undue

RATIFICATION influence, four years from the time the
intimidation, etc. ceases.
- One voluntarily adopts some defective or
unauthorized contract which, without his B. In case of mistake or fraud, four years from the
subsequent approval or consent, would not be time it is discovered.
binding on him.
C. In case of contracts entered into by minors or
- It cleanses the contract from all of its defects other incapacitated persons, four years from the
from the moment it was constituted (Art 1396) time the guardianship ceases.

- Extinguishes an action to annul a voidable DUTY OF MUTUAL RESTITUTION (ART 1398)

contract (Art 1392)
A. If the contract is annulled, the parties, as a
- Ratification may be effected expressly or tacitly general rule, must restore to each other the
(Art 1393) subject matter of the contract and the price
thereof with legal interest.
- Has no right to bring the action for annulment
(Art 1395) B. In personal obligations where the service has
already been rendered, the value thereof with
PERSONS WHO MAY RATIFY (ART 1394)
the corresponding interest, is the basis for
A. IN CASE OF INCAPACITY damages discoverable from the party benefited
the service.
1. Guardian
RESTITUTION BY AN INCAPACITATED PERSON (ART
2. Injured party himself provided he is already 1399)
capacitated.

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- This is an exception to the general rule of mutual CHAPTER 8: UNENFROCEABLE CONTRACTS

restitution laid down in Article 1398. The
UNENFORCEABLE CONTRACTS
incapacitated person is obliged to make
restitution only to the extent that he was - Although valid, they are unenforceable in court
benefited by the thing or price received by him. unless they are cured or ratified. Thus, it is as if
they have no effect yet. Once ratified, these
EFFECT OF LOSS OF THING TO BE RETURNED BY THE
contracts may then be enforceable and they can
GUILTY PART (DEFENDANT) (ART 1400)
have in such a case the effect of valid contracts.
A. If the thing to be returned is lost without the In one sense, therefore, they may be called
fault of the person obliged to make restitution validable.
(defendant), there is no more obligation to
RIGHT OF THIRD PERSON TO ASSAIL AN
return such thing but the other cannot be
UNENFORCEABLE CONTRACT (ART 1408)
compelled to restore what in virtue of the
decree of annulment he is bound to return. - Strangers to an unenforceable contract cannot
bring an action to assail or question an
B. If it is lost through the fault of the person
unenforceable contract.
obliged to make restitution, his obligation is not
extinguished but is converted into an indemnity
for damages consisting of the value of the thing
at the time of the loss with interest from the KINDS OF UNENFORCEABLE CONTRACTS (ART 1403)
same date and the fruits received from the time A. Those unauthorized contracts i.e. those entered
the thing was given to him to the time of its loss. into in the name of another by one without or
acting in excess pf authority.

EFFECT OF LOSS OF THE THING TO BE RETURNED BY THE B. Those that do not comply with the Statute of
INNOCENT PARTY (PLAINTIFF) Frauds and Perjuries.

A. If the person who has a right to institute an C. Those where both parties are incapable of giving
action for annulment, will not be able to restore consent to the contract.
the thing which he may be obliged to return in
case the contract is annulled because such thing
is lost through his fraud or fault, his right to have UNAUTHORIZED CONTRACTS (ART 1317, 1403 AND
the contract annulled is extinguished (ART 1404)
1401). - Those entered into in the name of another
B. If the loss is not due to his fault or fraud, there person by one who has been given no authority
is no annulment if the party cannot restore or legal representation or who has acted beyond
what he is bound to return. This is true even if his powers.
the loss is due to fortuitous event. (Art 1402) If - Such contract must be ratified to become
an innocent party asks for annulment but the effective against the person allegedly
thing is he is supposed to return is lost by a represented. Without ratification, the “agent”
fortuitous event, there may still be restitution assumes personal liability. The ratification must
provided he offers to give the value of the thing be clear and express so as not to admit of any
lost but he does not have to give interest in view doubt of vagueness.
of the fortuitous event.

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STATUTE OF FRAUDS AND PERJURIES AGREEMENTS WITHIN THE SCOPE OF THE STATUTE OF
FRAUDS (ART 1403)
- It has been enacted not only to prevent fraud
but also to guard against the mistakes of honest A. An agreement that by its terms is not to be
men by requiring that certain agreements performed within a year from the making
specified that are susceptible to fraud must be thereof.
in writing; otherwise they are unenforceable by
B. A special promise to answer for the debt,
action in court.
default, or miscarriage of another.
- They are ratified by the failure to object to the
C. An agreement made in consideration of
presentation of oral evidence to prove the
marriage, other than a mutual promise to marry.
same, or by acceptance of benefits under them.
(Art 1405) D. An agreement for the sale of goods, chattels or
things in action, at a price not less than five
- It is a Rule of Execution, that is, oral evidence
hundred pesos, unless the buyer accept and
might be relevant to the agreements
received part of such goods and chattels, or the
enumerated therein and might therefore be
evidences, or some of them, of such things in
admissible were it not for the fact that the law
action or pay at the time some part of the
or the statute excludes said oral evidence.
purchase money; but when a sale is made by
RULES OF APPLICATION OF THE STATUTE OF FRAUDS auction and entry is made by the auctioneer in
his sales book, at the time of the sale, of the
A. The Statute of Frauds is not applicable in actions
amount and kind of property sold, terms of sale,
which are neither for damages because of a
price, names of the purchasers and person on
violation of a contract, nor for the specific
whose account the sale is made, it is a sufficient
performance thereof.
memorandum.
B. It is applicable only to executory contracts and
E. An agreement of the leasing for a longer period
not to contracts which are totally or partially
than one year or for the sale of real property or
performed.
of an interest therein.
C. It is not applicable where the contract is
F. A representation as to the credit of a third
admitted expressly, or impliedly by the failure
person.
to deny specifically its existence, no further
evidence thereof being required in such case. MODES OF RATIFICATION OF A CONTRACT COVERED BY
THE STATUTE OF FRAUDS AND PERJURIES (ART 1405)
D. It is applicable only to agreements enumerated
therein. A. By failure to object to the presentation of oral
evidence to prove the contract. The failure to so
E. It is not applicable where a writing does not
object amounts to a waiver and makes the
express the true agreement of the parties.
contract as binding as if it has been reduced to
F. It does not declare that contracts infringing it writing.
are void but merely unenforceable.
B. By acceptance of benefits under the contract. In
G. The defense of the Statute of Frauds and this case, the contract is no longer executory
Perjuries is personal to the parties and cannot and therefore, the Statute does not apply.
be interposed by strangers to the contract.

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INCAPACITY OF CONTRACTING PARTIES CHAPTER 9: VOID CONTRACTS

RATIFICATION OF AN UNENFORCEABLE CONTRACT DUE VOID CONTRACTS

TO THE INCAPACITY OF THE BOTH CONTRACTING
- those which, because of certain defects,
PARTIES (ART 1407)
generally produce no effect at all. They are
A. WHEN AN UNENFORCEABLE CONTRACT considered as inexistent from its inception or
BECOMES A VOIDABLE CONTRACT from the very beginning.

- If the parent or guardian, as the case SPECIAL CLASIFFICATIONS OF VOID CONTRACTS

may be, of either party, or if one of the
- in the case of Liguez V. Lopez, 102 Phil. 577, the
parties after attaining or regaining
Supreme Court stated that there are two kinds
capacity, ratifies the contract, it
of void contracts:
becomes voidable.
A. INEXISTENT CONTRACT
B. WHEN AN UNENFORCEABLE CONTRACT
BECOMES A VALID CONTRACT - Agreements which lack one or some or
all of the elements or do not comply
- if the ratification is made by the parents
with formalities which are essential for
or guardians, as the case may be, of
the existence of a contract.
both contracting parties, or by both
contracting parties after attaining or B. ILLEGAL OR ILLICIT CONTRACT
regaining capacity the contract is
validated and its validity retroacts to - May produce effects under certain
the time it was entered into. circumstances where the parties are not
equal guilt.

CHARACTERISTICS OF A VOID OR INEXISTENT

CONTRACT

A. Generally, it produces no force and effect

whatsoever.

B. It cannot be ratified (Art 1409)

C. The right to set up the defense of illegality

cannot be waived.

D. The action or defense for the declaration of its

inexistence does not prescribe (Art 1410)

E. The defense of illegality is not available to third

persons whose interests are not directly affected
(Art 1421)

F. It cannot give rise to a valid contract (Art 1422)

INSTANCES OF VOID CONTRACTS

A. Contracts whose cause, object, or purpose is

contrary to LMGPP (Art 1306 and 1416)

B. Contracts which are absolutely simulated or

fictitious (Art 1345 and 1346)

C. Contracts without cause or object (Art 1347,

1352 and 1353)

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D. Contracts whose object is outside the commerce ILLEGAL AND CRIMINAL CONTRACTS
of men (Art 1347 and 1348)
RULES WHERE CONTRACT IS ILLEGAL AND THE ACT
E. contracts which contemplate an impossible CONSTITUTES A CRIMINAL OFFENSE (ART 1411)
service (Art 1347 and 1348)
A. WHERE BOTH PARTIES ARE IN PARI DELICTO
F. contracts where the intention of the parties
1. The parties shall have no action against each
relative to the object cannot be ascertained (Art
other.
1378)
2. Both shall be prosecuted.
G. Contracts expressly prohibited or declared void
by law. 3. The things or the price of the contract, as the
effects or instruments of the crime, shall be
confiscated in favor of the government.
CONTRACTS EXPRESSLY PROHIBITED OR DECLARED
B. WHERE ONLY ONE PARTY IS GUILTY (IN DELICTO
VOID BY LAW
BUT NOT IN PARI DELICTO)
A. Contracts upon future inheritance except in
1. The guilty party will be prosecuted.
cases expressly authorized by law (Art 1347)
2. The instrument of the crime or object of the
B. Sale of property between husband and wife
contract will be confiscated.
except when there is a separation of property
(Art 1490) 3. The innocent one may claim what he has
given; or if he has not yet given anything, he
C. Purchase of property by persons who are
shall not be bound to comply with his
specially disqualified by law because of their
promise.
position or relation with the person or property
under their care (Art 1491)

D. Donation between the spouses during their RULES WHERE CONTRACT IS ILLEGAL AND THE ACT
marriage except moderate gifts on the occasion DOES NOT CONSTITUTES A CRIMINAL OFFENSE (ART
of any family rejoicing. (Art 87, Family Code of 1412)
the Philippines, Executive Order No. 209 as
amended, December 13, 1989) A. WHERE BOTH PARTIES ARE IN PARI DELICTO

E. A testamentary provision in favor of a 1. Neither party may recover what he has given
disqualified person even though made under by virtue of the contract.
the guise of an onerous contracts, or made 2. Neither party may demand the performance
through an intermediary shall be void (Art 1031) of the other’s undertaking.
F. Any stipulation that household service shall be B. WHERE ONLY ONE PARTY IS ILLEGAL
without compensation is void (Art 1689)
1. The guilty party loses what he has given by
G. Members of congress are prohibited from being reason of the contract.
financially interested, directly or indirectly, in
any contract with the government or any 2. The guilty party cannot ask for the fulfillment
subdivision or instrumentality thereof. (Art of the other’s undertaking.
1782, 1874, 2045, 2088, and 2130 and Section 3. The innocent party may demand the return
14, Article VI, The Constitution of the Republic of of what he has given.
the Philippines, February 2, 1987)
4. The innocent party cannot be compelled to
comply with his promise.

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RECOVERY G. RECOVERY OF AMOUNT OF WAGE LESS THAN

MINIMUM FIXED (ART 1419)
RULES FOR RECOVERY
- If an employee receives less than
A. RECOVERY OF EXCESSIVE INTEREST (ART 1413)
minimum wage rate, he can still recover
- The entire interest agreed upon may be the deficiency with legal interest and
recovered, not merely that in excess of the employer shall be criminally liable.
those allowed by law.

B. RECOVERY WHERE CONTRACT ENTERED INTO

EFFECTS OF ILLEGALITY WHERE CONTRACT INDIVISIBLE
FOR ILLEGAL PURPOSE (ART 1414)
OR DIVISIBLE (ART 1420)
- Provided the contract is repudiated
A. When the consideration is entire and single, the
before the purpose has been
contract is indivisible so that if part of such
accomplished or before any damage
consideration is illegal, the whole contract is
has been caused to a third person. The
void.
court considers that public interest will
be subserved by allowing recovery. B. Where the contract is divisible as when the
consideration is made up of several parts, and
C. RECOVERY BY INCAPACITATED PERSON (ART
the illegal ones can be separated from the legal
1415)
portions, the latter may be enforced. The rule is
- Recovery can be allowed if one of the subject to the contrary intention of the parties.
parties is incapacitated and the interest
of justice so demands.

D. RECOVERY WHERE CONTRACT IS NOT ILLEGAL

PER SE (ART 1416)

- Prohibition is designed for the

protection of the plaintiff. Public policy
would be enhanced by allowing the
plaintiff to recover what he has paid or
delivered.

E. RECOVERY OF AMOUNT PAID IN EXCESS OF

CEILING PRICE (ART 1417)

- Recovery of any amount paid in excess

of the ceiling price is allowed to curb the
evils of profiteering or black-marketing.

F. RECOVERY OF ADDITIONAL COMPENSATION

FOR SERVICES RENDERED BEYOND TIME LIMIT
(ART 1418)

- The normal hours of work of any

employee shall not exceed eight hours
a day. The law allows recovery of
overtime pay in case work exceeds eight
hours.

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