June 18, 1949 CHAPTER 2

The Civil Code of the Philippines NATURE AND EFFECT OF OBLIGATIONS

AN ACT TO ORDAIN AND INSTITUTE THE
CIVIL CODE OF THE PHILIPPINES Art. 1163. Every person obliged to give something is
also obliged to take care of it with the proper diligence
BOOK IV of a good father of a family, unless the law or the
OBLIGATIONS AND CONTRACTS stipulation of the parties requires another standard of
care. (1094a)
Title. I. - OBLIGATIONS
Art. 1164. The creditor has a right to the fruits of the
CHAPTER 1 thing from the time the obligation to deliver it arises.
GENERAL PROVISIONS However, he shall acquire no real right over it until the
same has been delivered to him. (1095)
Art. 1156. An obligation is a juridical necessity to
give, to do or not to do. (n) Art. 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the right
Art. 1157. Obligations arise from: granted him by Article 1170, may compel the debtor to
make the delivery.
(1) Law;
If the thing is indeterminate or generic, he may ask that
(2) Contracts; the obligation be complied with at the expense of the
debtor.
(3) Quasi-contracts;
If the obligor delays, or has promised to deliver the
(4) Acts or omissions punished by law; and same thing to two or more persons who do not have the
same interest, he shall be responsible for any fortuitous
(5) Quasi-delicts. (1089a) event until he has effected the delivery. (1096)

Art. 1158. Obligations derived from law are not Art. 1166. The obligation to give a determinate thing
presumed. Only those expressly determined in this includes that of delivering all its accessions and
Code or in special laws are demandable, and shall be accessories, even though they may not have been
regulated by the precepts of the law which establishes mentioned. (1097a)
them; and as to what has not been foreseen, by the
provisions of this Book. (1090) Art. 1167. If a person obliged to do something fails to
do it, the same shall be executed at his cost.
Art. 1159. Obligations arising from contracts have the
force of law between the contracting parties and should This same rule shall be observed if he does it in
be complied with in good faith. (1091a) contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been
Art. 1160. Obligations derived from quasi-contracts poorly done be undone. (1098)
shall be subject to the provisions of Chapter 1, Title
XVII, of this Book. (n) Art. 1168. When the obligation consists in not doing,
and the obligor does what has been forbidden him, it
Art. 1161. Civil obligations arising from criminal shall also be undone at his expense. (1099a)
offenses shall be governed by the penal laws, subject
to the provisions of Article 2177, and of the pertinent Art. 1169. Those obliged to deliver or to do something
provisions of Chapter 2, Preliminary Title, on Human incur in delay from the time the obligee judicially or
Relations, and of Title XVIII of this Book, regulating extrajudicially demands from them the fulfillment of
damages. (1092a) their obligation.

Art. 1162. Obligations derived from quasi-delicts shall However, the demand by the creditor shall not be
be governed by the provisions of Chapter 2, Title XVII necessary in order that delay may exist:
of this Book, and by special laws. (1093a)
 (1) When the obligation or the law expressly so Art. 1175. Usurious transactions shall be governed by
declare; or special laws. (n)

(2) When from the nature and the Art. 1176. The receipt of the principal by the creditor
circumstances of the obligation it appears that without reservation with respect to the interest, shall
the designation of the time when the thing is to give rise to the presumption that said interest has been
be delivered or the service is to be rendered paid.
was a controlling motive for the establishment
of the contract; or The receipt of a later installment of a debt without
reservation as to prior installments, shall likewise raise
(3) When demand would be useless, as when the presumption that such installments have been paid.
the obligor has rendered it beyond his power to (1110a)
perform.
Art. 1177. The creditors, after having pursued the
In reciprocal obligations, neither party incurs in delay property in possession of the debtor to satisfy their
if the other does not comply or is not ready to comply claims, may exercise all the rights and bring all the
in a proper manner with what is incumbent upon him. actions of the latter for the same purpose, save those
From the moment one of the parties fulfills his which are inherent in his person; they may also impugn
obligation, delay by the other begins. (1100a) the acts which the debtor may have done to defraud
them. (1111)
Art. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, Art. 1178. Subject to the laws, all rights acquired in
and those who in any manner contravene the tenor virtue of an obligation are transmissible, if there has
thereof, are liable for damages. (1101) been no stipulation to the contrary. (1112)

Art. 1171. Responsibility arising from fraud is CHAPTER 3

demandable in all obligations. Any waiver of an action DIFFERENT KINDS OF OBLIGATIONS
for future fraud is void. (1102a) SECTION 1. - Pure and Conditional Obligations

Art. 1172. Responsibility arising from negligence in Art. 1179. Every obligation whose performance does
the performance of every kind of obligation is also not depend upon a future or uncertain event, or upon a
demandable, but such liability may be regulated by the past event unknown to the parties, is demandable at
courts, according to the circumstances. (1103) once.

Art. 1173. The fault or negligence of the obligor Every obligation which contains a resolutory condition
consists in the omission of that diligence which is shall also be demandable, without prejudice to the
required by the nature of the obligation and effects of the happening of the event. (1113)
corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad Art. 1180. When the debtor binds himself to pay when
faith, the provisions of Articles 1171 and 2201, his means permit him to do so, the obligation shall be
paragraph 2, shall apply. deemed to be one with a period, subject to the
provisions of Article 1197. (n)
If the law or contract does not state the diligence which
is to be observed in the performance, that which is Art. 1181. In conditional obligations, the acquisition of
expected of a good father of a family shall be required. rights, as well as the extinguishment or loss of those
(1104a) already acquired, shall depend upon the happening of
the event which constitutes the condition. (1114)
Art. 1174. Except in cases expressly specified by the
law, or when it is otherwise declared by stipulation, or Art. 1182. When the fulfillment of the condition
when the nature of the obligation requires the depends upon the sole will of the debtor, the
assumption of risk, no person shall be responsible for conditional obligation shall be void. If it depends upon
those events which could not be foreseen, or which, chance or upon the will of a third person, the
though foreseen, were inevitable. (1105a) obligation shall take effect in conformity with the
provisions of this Code. (1115)
Art. 1183. Impossible conditions, those contrary to Art. 1189. When the conditions have been imposed
good customs or public policy and those prohibited by with the intention of suspending the efficacy of an
law shall annul the obligation which depends upon obligation to give, the following rules shall be
them. If the obligation is divisible, that part thereof observed in case of the improvement, loss or
which is not affected by the impossible or unlawful deterioration of the thing during the pendency of the
condition shall be valid. condition:

The condition not to do an impossible thing shall be (1) If the thing is lost without the fault of the
considered as not having been agreed upon. (1116a) debtor, the obligation shall be extinguished;

Art. 1184. The condition that some event happen at a (2) If the thing is lost through the fault of the
determinate time shall extinguish the obligation as debtor, he shall be obliged to pay damages; it is
soon as the time expires or if it has become indubitable understood that the thing is lost when it
that the event will not take place. (1117) perishes, or goes out of commerce, or
disappears in such a way that its existence is
Art. 1185. The condition that some event will not unknown or it cannot be recovered;
happen at a determinate time shall render the
obligation effective from the moment the time (3) When the thing deteriorates without the
indicated has elapsed, or if it has become evident that fault of the debtor, the impairment is to be
the event cannot occur. borne by the creditor;

If no time has been fixed, the condition shall be (4) If it deteriorates through the fault of the
deemed fulfilled at such time as may have probably debtor, the creditor may choose between the
been contemplated, bearing in mind the nature of the rescission of the obligation and its fulfillment,
obligation. (1118) with indemnity for damages in either case;

Art. 1186. The condition shall be deemed fulfilled (5) If the thing is improved by its nature, or by
when the obligor voluntarily prevents its fulfillment. time, the improvement shall inure to the benefit
(1119) of the creditor;

Art. 1187. The effects of a conditional obligation to (6) If it is improved at the expense of the
give, once the condition has been fulfilled, shall debtor, he shall have no other right than that
retroact to the day of the constitution of the obligation. granted to the usufructuary. (1122)
Nevertheless, when the obligation imposes reciprocal
prestations upon the parties, the fruits and interests Art. 1190. When the conditions have for their purpose
during the pendency of the condition shall be deemed the extinguishment of an obligation to give, the parties,
to have been mutually compensated. If the obligation is upon the fulfillment of said conditions, shall return to
unilateral, the debtor shall appropriate the fruits and each other what they have received.
interests received, unless from the nature and
circumstances of the obligation it should be inferred In case of the loss, deterioration or improvement of the
that the intention of the person constituting the same thing, the provisions which, with respect to the debtor,
was different. are laid down in the preceding article shall be applied
to the party who is bound to return.
In obligations to do and not to do, the courts shall
determine, in each case, the retroactive effect of the As for the obligations to do and not to do, the
condition that has been complied with. (1120) provisions of the second paragraph of Article 1187
shall be observed as regards the effect of the
Art. 1188. The creditor may, before the fulfillment of extinguishment of the obligation. (1123)
the condition, bring the appropriate actions for the
preservation of his right. Art. 1191. The power to rescind obligations is implied
in reciprocal ones, in case one of the obligors should
The debtor may recover what during the same time he not comply with what is incumbent upon him.
has paid by mistake in case of a suspensive condition.
(1121a)
The injured party may choose between the fulfillment Art. 1197. If the obligation does not fix a period, but
and the rescission of the obligation, with the payment from its nature and the circumstances it can be inferred
of damages in either case. He may also seek rescission, that a period was intended, the courts may fix the
even after he has chosen fulfillment, if the latter should duration thereof.
become impossible.
The courts shall also fix the duration of the period
The court shall decree the rescission claimed, unless when it depends upon the will of the debtor.
there be just cause authorizing the fixing of a period.
In every case, the courts shall determine such period as
This is understood to be without prejudice to the rights may under the circumstances have been probably
of third persons who have acquired the thing, in contemplated by the parties. Once fixed by the courts,
accordance with Articles 1385 and 1388 and the the period cannot be changed by them. (1128a)
Mortgage Law. (1124)
Art. 1198. The debtor shall lose every right to make
Art. 1192. In case both parties have committed a use of the period:
breach of the obligation, the liability of the first
infractor shall be equitably tempered by the courts. If it (1) When after the obligation has been contracted, he
cannot be determined which of the parties first violated becomes insolvent, unless he gives a guaranty or
the contract, the same shall be deemed extinguished, security for the debt;
and each shall bear his own damages. (n)
(2) When he does not furnish to the creditor the
SECTION 2. - Obligations with a Period guaranties or securities which he has promised;

Art. 1193. Obligations for whose fulfillment a day (3) When by his own acts he has impaired said
certain has been fixed, shall be demandable only when guaranties or securities after their establishment, and
that day comes. when through a fortuitous event they disappear, unless
he immediately gives new ones equally satisfactory;
Obligations with a resolutory period take effect at
once, but terminate upon arrival of the day certain. (4) When the debtor violates any undertaking, in
consideration of which the creditor agreed to the
A day certain is understood to be that which must period;
necessarily come, although it may not be known when.
(5) When the debtor attempts to abscond. (1129a)
If the uncertainty consists in whether the day will come
or not, the obligation is conditional, and it shall be SECTION 3. - Alternative Obligations
regulated by the rules of the preceding Section.
(1125a) Art. 1199. A person alternatively bound by different
prestations shall completely perform one of them.
Art. 1194. In case of loss, deterioration or
improvement of the thing before the arrival of the day The creditor cannot be compelled to receive part of one
certain, the rules in Article 1189 shall be observed. (n) and part of the other undertaking. (1131)

Art. 1195. Anything paid or delivered before the Art. 1200. The right of choice belongs to the debtor,
arrival of the period, the obligor being unaware of the unless it has been expressly granted to the creditor.
period or believing that the obligation has become due
and demandable, may be recovered, with the fruits and The debtor shall have no right to choose those
interests. (1126a) prestations which are impossible, unlawful or which
could not have been the object of the obligation.
Art. 1196. Whenever in an obligation a period is (1132)
designated, it is presumed to have been established for
the benefit of both the creditor and the debtor, unless Art. 1201. The choice shall produce no effect except
from the tenor of the same or other circumstances it from the time it has been communicated. (1133)
should appear that the period has been established in
favor of one or of the other. (1127)
Art. 1202. The debtor shall lose the right of choice The loss or deterioration of the thing intended as a
when among the prestations whereby he is substitute, through the negligence of the obligor, does
alternatively bound, only one is practicable. (1134) not render him liable. But once the substitution has
been made, the obligor is liable for the loss of the
Art. 1203. If through the creditor's acts the debtor substitute on account of his delay, negligence or fraud.
cannot make a choice according to the terms of the (n)
obligation, the latter may rescind the contract with
damages. (n) SECTION 4. - Joint and Solidary Obligations

Art. 1204. The creditor shall have a right to indemnity Art. 1207. The concurrence of two or more creditors or
for damages when, through the fault of the debtor, all of two or more debtors in one and the same obligation
the things which are alternatively the object of the does not imply that each one of the former has a right
obligation have been lost, or the compliance of the to demand, or that each one of the latter is bound to
obligation has become impossible. render, entire compliance with the prestation. There is
a solidary liability only when the obligation expressly
The indemnity shall be fixed taking as a basis the value so states, or when the law or the nature of the
of the last thing which disappeared, or that of the obligation requires solidarity. (1137a)
service which last became impossible.
Art. 1208. If from the law, or the nature or the wording
Damages other than the value of the last thing or of the obligations to which the preceding article refers
service may also be awarded. (1135a) the contrary does not appear, the credit or debt shall be
presumed to be divided into as many shares as there
Art. 1205. When the choice has been expressly given are creditors or debtors, the credits or debts being
to the creditor, the obligation shall cease to be considered distinct from one another, subject to the
alternative from the day when the selection has been Rules of Court governing the multiplicity of suits.
communicated to the debtor. (1138a)

Until then the responsibility of the debtor shall be Art. 1209. If the division is impossible, the right of the
governed by the following rules: creditors may be prejudiced only by their collective
acts, and the debt can be enforced only by proceeding
(1) If one of the things is lost through a against all the debtors. If one of the latter should be
fortuitous event, he shall perform the obligation insolvent, the others shall not be liable for his share.
by delivering that which the creditor should (1139)
choose from among the remainder, or that
which remains if only one subsists; Art. 1210. The indivisibility of an obligation does not
necessarily give rise to solidarity. Nor does solidarity
(2) If the loss of one of the things occurs of itself imply indivisibility. (n)
through the fault of the debtor, the creditor may
claim any of those subsisting, or the price of Art. 1211. Solidarity may exist although the creditors
that which, through the fault of the former, has and the debtors may not be bound in the same manner
disappeared, with a right to damages; and by the same periods and conditions. (1140)

(3) If all the things are lost through the fault of Art. 1212. Each one of the solidary creditors may do
the debtor, the choice by the creditor shall fall whatever may be useful to the others, but not anything
upon the price of any one of them, also with which may be prejudicial to the latter. (1141a)
indemnity for damages.
Art. 1213. A solidary creditor cannot assign his rights
The same rules shall be applied to obligations to do or without the consent of the others. (n)
not to do in case one, some or all of the prestations
should become impossible. (1136a) Art. 1214. The debtor may pay any one of the solidary
creditors; but if any demand, judicial or extrajudicial,
Art. 1206. When only one prestation has been agreed has been made by one of them, payment should be
upon, but the obligor may render another in made to him. (1142a)
substitution, the obligation is called facultative.
Art. 1215. Novation, compensation, confusion or If there was fault on the part of any one of them, all
remission of the debt, made by any of the solidary shall be responsible to the creditor, for the price and
creditors or with any of the solidary debtors, shall the payment of damages and interest, without prejudice
extinguish the obligation, without prejudice to the to their action against the guilty or negligent debtor.
provisions of Article 1219.
If through a fortuitous event, the thing is lost or the
The creditor who may have executed any of these acts, performance has become impossible after one of the
as well as he who collects the debt, shall be liable to solidary debtors has incurred in delay through the
the others for the share in the obligation corresponding judicial or extrajudicial demand upon him by the
to them. (1143) creditor, the provisions of the preceding paragraph
shall apply. (1147a)
Art. 1216. The creditor may proceed against any one of
the solidary debtors or some or all of them Art. 1222. A solidary debtor may, in actions filed by
simultaneously. The demand made against one of them the creditor, avail himself of all defenses which are
shall not be an obstacle to those which may derived from the nature of the obligation and of those
subsequently be directed against the others, so long as which are personal to him, or pertain to his own share.
the debt has not been fully collected. (1144a) With respect to those which personally belong to the
others, he may avail himself thereof only as regards
Art. 1217. Payment made by one of the solidary that part of the debt for which the latter are
debtors extinguishes the obligation. If two or more responsible. (1148a)
solidary debtors offer to pay, the creditor may choose
which offer to accept. SECTION 5. - Divisible and Indivisible Obligations

He who made the payment may claim from his co- Art. 1223. The divisibility or indivisibility of the things
debtors only the share which corresponds to each, with that are the object of obligations in which there is only
the interest for the payment already made. If the one debtor and only one creditor does not alter or
payment is made before the debt is due, no interest for modify the provisions of Chapter 2 of this Title. (1149)
the intervening period may be demanded.
Art. 1224. A joint indivisible obligation gives rise to
When one of the solidary debtors cannot, because of indemnity for damages from the time anyone of the
his insolvency, reimburse his share to the debtor debtors does not comply with his undertaking. The
paying the obligation, such share shall be borne by all debtors who may have been ready to fulfill their
his co-debtors, in proportion to the debt of each. promises shall not contribute to the indemnity beyond
(1145a) the corresponding portion of the price of the thing or of
the value of the service in which the obligation
Art. 1218. Payment by a solidary debtor shall not consists. (1150)
entitle him to reimbursement from his co-debtors if
such payment is made after the obligation has Art. 1225. For the purposes of the preceding articles,
prescribed or become illegal. (n) obligations to give definite things and those which are
not susceptible of partial performance shall be deemed
Art. 1219. The remission made by the creditor of the to be indivisible.
share which affects one of the solidary debtors does
not release the latter from his responsibility towards When the obligation has for its object the execution of
the co-debtors, in case the debt had been totally paid a certain number of days of work, the accomplishment
by anyone of them before the remission was effected. of work by metrical units, or analogous things which
(1146a) by their nature are susceptible of partial performance,
it shall be divisible.
Art. 1220. The remission of the whole obligation,
obtained by one of the solidary debtors, does not However, even though the object or service may be
entitle him to reimbursement from his co-debtors. (n) physically divisible, an obligation is indivisible if so
provided by law or intended by the parties.
Art. 1221. If the thing has been lost or if the prestation
has become impossible without the fault of the solidary
debtors, the obligation shall be extinguished.
In obligations not to do, divisibility or indivisibility (2) By the loss of the thing due:
shall be determined by the character of the prestation
in each particular case. (1151a) (3) By the condonation or remission of the
debt;
SECTION 6. - Obligations with a Penal Clause
(4) By the confusion or merger of the rights of
Art. 1226. In obligations with a penal clause, the creditor and debtor;
penalty shall substitute the indemnity for damages and
the payment of interests in case of noncompliance, if (5) By compensation;
there is no stipulation to the contrary. Nevertheless,
damages shall be paid if the obligor refuses to pay the (6) By novation.
penalty or is guilty of fraud in the fulfillment of the
obligation. Other causes of extinguishment of obligations, such as
annulment, rescission, fulfillment of a resolutory
The penalty may be enforced only when it is condition, and prescription, are governed elsewhere in
demandable in accordance with the provisions of this this Code. (1156a)
Code. (1152a)

Art. 1227. The debtor cannot exempt himself from the SECTION 1. - Payment or Performance
performance of the obligation by paying the penalty,
save in the case where this right has been expressly Art. 1232. Payment means not only the delivery of
reserved for him. Neither can the creditor demand the money but also the performance, in any other manner,
fulfillment of the obligation and the satisfaction of the of an obligation. (n)
penalty at the same time, unless this right has been
clearly granted him. However, if after the creditor has Art. 1233. A debt shall not be understood to have been
decided to require the fulfillment of the obligation, the paid unless the thing or service in which the obligation
performance thereof should become impossible consists has been completely delivered or rendered, as
without his fault, the penalty may be enforced. (1153a) the case may be. (1157)

Art. 1228. Proof of actual damages suffered by the Art. 1234. If the obligation has been substantially
creditor is not necessary in order that the penalty may performed in good faith, the obligor may recover as
be demanded. (n) though there had been a strict and complete fulfillment,
less damages suffered by the obligee. (n)
Art. 1229. The judge shall equitably reduce the penalty
when the principal obligation has been partly or Art. 1235. When the obligee accepts the performance,
irregularly complied with by the debtor. Even if there knowing its incompleteness or irregularity, and without
has been no performance, the penalty may also be expressing any protest or objection, the obligation is
reduced by the courts if it is iniquitous or deemed fully complied with. (n)
unconscionable. (1154a)
Art. 1236. The creditor is not bound to accept payment
Art. 1230. The nullity of the penal clause does not or performance by a third person who has no interest in
carry with it that of the principal obligation. the fulfillment of the obligation, unless there is a
stipulation to the contrary.
The nullity of the principal obligation carries with it
that of the penal clause. (1155) Whoever pays for another may demand from the
debtor what he has paid, except that if he paid without
CHAPTER 4 the knowledge or against the will of the debtor, he can
EXTINGUISHMENT OF OBLIGATIONS recover only insofar as the payment has been
GENERAL PROVISIONS beneficial to the debtor. (1158a)

Art. 1231. Obligations are extinguished:

(1) By payment or performance:

Art. 1237. Whoever pays on behalf of the debtor may be of the same value as, or more valuable than
without the knowledge or against the will of the latter, that which is due.
cannot compel the creditor to subrogate him in his
rights, such as those arising from a mortgage, guaranty, In obligations to do or not to do, an act or forbearance
or penalty. (1159a) cannot be substituted by another act or forbearance
against the obligee's will. (1166a)
Art. 1238. Payment made by a third person who does
not intend to be reimbursed by the debtor is deemed to Art. 1245. Dation in payment, whereby property is
be a donation, which requires the debtor's consent. But alienated to the creditor in satisfaction of a debt in
the payment is in any case valid as to the creditor who money, shall be governed by the law of sales. (n)
has accepted it. (n)
Art. 1246. When the obligation consists in the delivery
Art. 1239. In obligations to give, payment made by one of an indeterminate or generic thing, whose quality and
who does not have the free disposal of the thing due circumstances have not been stated, the creditor cannot
and capacity to alienate it shall not be valid, without demand a thing of superior quality. Neither can the
prejudice to the provisions of Article 1427 under the debtor deliver a thing of inferior quality. The purpose
Title on "Natural Obligations." (1160a) of the obligation and other circumstances shall be
taken into consideration. (1167a)
Art. 1240. Payment shall be made to the person in
whose favor the obligation has been constituted, or his Art. 1247. Unless it is otherwise stipulated, the
successor in interest, or any person authorized to extrajudicial expenses required by the payment shall be
receive it. (1162a) for the account of the debtor. With regard to judicial
costs, the Rules of Court shall govern. (1168a)
Art. 1241. Payment to a person who is incapacitated to
administer his property shall be valid if he has kept the Art. 1248. Unless there is an express stipulation to that
thing delivered, or insofar as the payment has been effect, the creditor cannot be compelled partially to
beneficial to him. receive the prestations in which the obligation consists.
Neither may the debtor be required to make partial
Payment made to a third person shall also be valid payments.
insofar as it has redounded to the benefit of the
creditor. Such benefit to the creditor need not be However, when the debt is in part liquidated and in
proved in the following cases: part unliquidated, the creditor may demand and the
debtor may effect the payment of the former without
(1) If after the payment, the third person waiting for the liquidation of the latter. (1169a)
acquires the creditor's rights;
Art. 1249. The payment of debts in money shall be
(2) If the creditor ratifies the payment to the made in the currency stipulated, and if it is not possible
third person; to deliver such currency, then in the currency which is
legal tender in the Philippines.
(3) If by the creditor's conduct, the debtor has
been led to believe that the third person had The delivery of promissory notes payable to order, or
authority to receive the payment. (1163a) bills of exchange or other mercantile documents shall
produce the effect of payment only when they have
Art. 1242. Payment made in good faith to any been cashed, or when through the fault of the creditor
person in possession of the credit shall release they have been impaired.
the debtor. (1164)
In the meantime, the action derived from the original
Art. 1243. Payment made to the creditor by the debtor obligation shall be held in the abeyance. (1170)
after the latter has been judicially ordered to retain the
debt shall not be valid. (1165)

Art. 1244. The debtor of a thing cannot compel the

creditor to receive a different one, although the latter
Art. 1250. In case an extraordinary inflation or proportionately. (1174a)
deflation of the currency stipulated should supervene,
the value of the currency at the time of the
establishment of the obligation shall be the basis of SUBSECTION 2. - Payment by Cession
payment, unless there is an agreement to the contrary.
(n) Art. 1255. The debtor may cede or assign his property
to his creditors in payment of his debts. This cession,
Art. 1251. Payment shall be made in the place unless there is stipulation to the contrary, shall only
designated in the obligation. release the debtor from responsibility for the net
proceeds of the thing assigned. The agreements which,
There being no express stipulation and if the on the effect of the cession, are made between the
undertaking is to deliver a determinate thing, the debtor and his creditors shall be governed by special
payment shall be made wherever the thing might be at laws. (1175a)
the moment the obligation was constituted.

In any other case the place of payment shall be the SUBSECTION 3. - Tender of Payment and
domicile of the debtor. Consignation

If the debtor changes his domicile in bad faith or after Art. 1256. If the creditor to whom tender of payment
he has incurred in delay, the additional expenses shall has been made refuses without just cause to accept it,
be borne by him. the debtor shall be released from responsibility by the
consignation of the thing or sum due.
These provisions are without prejudice to venue under
the Rules of Court. (1171a) Consignation alone shall produce the same effect in the
following cases:

SUBSECTION 1. - Application of Payments (1) When the creditor is absent or unknown, or

does not appear at the place of payment;
Art. 1252. He who has various debts of the same kind
in favor of one and the same creditor, may declare at (2) When he is incapacitated to receive the
the time of making the payment, to which of them the payment at the time it is due;
same must be applied. Unless the parties so stipulate,
or when the application of payment is made by the (3) When, without just cause, he refuses to give
party for whose benefit the term has been constituted, a receipt;
application shall not be made as to debts which are not
yet due. (4) When two or more persons claim the same
right to collect;
If the debtor accepts from the creditor a receipt in
which an application of the payment is made, the (5) When the title of the obligation has been
former cannot complain of the same, unless there is a lost. (1176a)
cause for invalidating the contract. (1172a)
Art. 1257. In order that the consignation of the thing
Art. 1253. If the debt produces interest, payment of the due may release the obligor, it must first be announced
principal shall not be deemed to have been made until to the persons interested in the fulfillment of the
the interests have been covered. (1173) obligation.

Art. 1254. When the payment cannot be applied in The consignation shall be ineffectual if it is not made
accordance with the preceding rules, or if application strictly in consonance with the provisions which
can not be inferred from other circumstances, the debt regulate payment. (1177)
which is most onerous to the debtor, among those due,
shall be deemed to have been satisfied. Art. 1258. Consignation shall be made by depositing
the things due at the disposal of judicial authority,
If the debts due are of the same nature and burden, the before whom the tender of payment shall be proved, in
payment shall be applied to all of them
a proper case, and the announcement of the Art. 1266. The debtor in obligations to do shall also be
consignation in other cases. released when the prestation becomes legally or
physically impossible without the fault of the obligor.
The consignation having been made, the interested (1184a)
parties shall also be notified thereof. (1178)
Art. 1267. When the service has become so difficult as
Art. 1259. The expenses of consignation, when to be manifestly beyond the contemplation of the
properly made, shall be charged against the creditor. parties, the obligor may also be released therefrom, in
(1178) whole or in part. (n)

Art. 1260. Once the consignation has been duly made, Art. 1268. When the debt of a thing certain and
the debtor may ask the judge to order the cancellation determinate proceeds from a criminal offense, the
of the obligation. debtor shall not be exempted from the payment of its
price, whatever may be the cause for the loss, unless
Before the creditor has accepted the consignation, or the thing having been offered by him to the person
before a judicial declaration that the consignation has who should receive it, the latter refused without
been properly made, the debtor may withdraw the justification to accept it. (1185)
thing or the sum deposited, allowing the obligation to
remain in force. (1180) Art. 1269. The obligation having been extinguished by
the loss of the thing, the creditor shall have all the
Art. 1261. If, the consignation having been made, the rights of action which the debtor may have against
creditor should authorize the debtor to withdraw the third persons by reason of the loss. (1186)
same, he shall lose every preference which he may
have over the thing. The co-debtors, guarantors and SECTION 3. - Condonation or Remission of the
sureties shall be released. (1181a) Debt

SECTION 2. - Loss of the Thing Due Art. 1270. Condonation or remission is essentially
gratuitous, and requires the acceptance by the obligor.
Art. 1262. An obligation which consists in the delivery It may be made expressly or impliedly.
of a determinate thing shall be extinguished if it should
be lost or destroyed without the fault of the debtor, and One and the other kind shall be subject to the rules
before he has incurred in delay. which govern inofficious donations. Express
condonation shall, furthermore, comply with the forms
When by law or stipulation, the obligor is liable even of donation. (1187)
for fortuitous events, the loss of the thing does not
extinguish the obligation, and he shall be responsible Art. 1271. The delivery of a private document
for damages. The same rule applies when the nature of evidencing a credit, made voluntarily by the creditor to
the obligation requires the assumption of risk. (1182a) the debtor, implies the renunciation of the action which
the former had against the latter.
Art. 1263. In an obligation to deliver a generic thing,
the loss or destruction of anything of the same kind If in order to nullify this waiver it should be claimed to
does not extinguish the obligation. (n) be inofficious, the debtor and his heirs may uphold it
by proving that the delivery of the document was made
Art. 1264. The courts shall determine whether, under in virtue of payment of the debt. (1188)
the circumstances, the partial loss of the object of the
obligation is so important as to extinguish the Art. 1272. Whenever the private document in which
obligation. (n) the debt appears is found in the possession of the
debtor, it shall be presumed that the creditor delivered
Art. 1265. Whenever the thing is lost in the possession it voluntarily, unless the contrary is proved. (1189)
of the debtor, it shall be presumed that the loss was due
to his fault, unless there is proof to the contrary, and Art. 1273. The renunciation of the principal debt shall
without prejudice to the provisions of article 1165. extinguish the accessory obligations; but the waiver of
This presumption does not apply in case of earthquake, the latter shall leave the former in force. (1190)
flood, storm, or other natural calamity. (1183a)
Art. 1274. It is presumed that the accessory obligation Art. 1281. Compensation may be total or partial. When
of pledge has been remitted when the thing pledged, the two debts are of the same amount, there is a total
after its delivery to the creditor, is found in the compensation. (n)
possession of the debtor, or of a third person who owns
the thing. (1191a) Art. 1282. The parties may agree upon the
compensation of debts which are not yet due. (n)
SECTION 4. - Confusion or Merger of Rights
Art. 1283. If one of the parties to a suit over an
Art. 1275. The obligation is extinguished from the time obligation has a claim for damages against the other,
the characters of creditor and debtor are merged in the the former may set it off by proving his right to said
same person. (1192a) damages and the amount thereof. (n)

Art. 1276. Merger which takes place in the person of Art. 1284. When one or both debts are rescissible or
the principal debtor or creditor benefits the guarantors. voidable, they may be compensated against each other
Confusion which takes place in the person of any of before they are judicially rescinded or avoided. (n)
the latter does not extinguish the obligation. (1193)
Art. 1285. The debtor who has consented to the
Art. 1277. Confusion does not extinguish a joint assignment of rights made by a creditor in favor of a
obligation except as regards the share corresponding to third person, cannot set up against the assignee the
the creditor or debtor in whom the two characters compensation which would pertain to him against the
concur. (1194) assignor, unless the assignor was notified by the debtor
at the time he gave his consent, that he reserved his
SECTION 5. - Compensation right to the compensation.

Art. 1278. Compensation shall take place when two If the creditor communicated the cession to him but the
persons, in their own right, are creditors and debtors of debtor did not consent thereto, the latter may set up the
each other. (1195) compensation of debts previous to the cession, but not
of subsequent ones.
Art. 1279. In order that compensation may be proper, it
is necessary: If the assignment is made without the knowledge of the
debtor, he may set up the compensation of all credits
(1) That each one of the obligors be bound prior to the same and also later ones until he had
principally, and that he be at the same time a knowledge of the assignment. (1198a)
principal creditor of the other;
Art. 1286. Compensation takes place by operation of
(2) That both debts consist in a sum of money, law, even though the debts may be payable at different
or if the things due are consumable, they be of places, but there shall be an indemnity for expenses of
the same kind, and also of the same quality if exchange or transportation to the place of payment.
the latter has been stated; (1199a)

(3) That the two debts be due; Art. 1287. Compensation shall not be proper when one
of the debts arises from a depositum or from the
(4) That they be liquidated and demandable; obligations of a depositary or of a bailee in
commodatum.
(5) That over neither of them there be any
retention or controversy, commenced by third Neither can compensation be set up against a creditor
persons and communicated in due time to the who has a claim for support due by gratuitous title,
debtor. (1196) without prejudice to the provisions of paragraph 2 of
Article 301. (1200a)
Art. 1280. Notwithstanding the provisions of the
preceding article, the guarantor may set up Art. 1288. Neither shall there be compensation if one
compensation as regards what the creditor may owe of the debts consists in civil liability arising from a
the principal debtor. (1197) penal offense. (n)
Art. 1289. If a person should have against him several benefit third persons who did not give their consent.
debts which are susceptible of compensation, the rules (1207)
on the application of payments shall apply to the order
of the compensation. (1201) Art. 1297. If the new obligation is void, the original
one shall subsist, unless the parties intended that the
Art. 1290. When all the requisites mentioned in Article former relation should be extinguished in any event.
1279 are present, compensation takes effect by (n)
operation of law, and extinguishes both debts to the
concurrent amount, even though the creditors and Art. 1298. The novation is void if the original
debtors are not aware of the compensation. (1202a) obligation was void, except when annulment may be
claimed only by the debtor or when ratification
SECTION 6. - Novation validates acts which are voidable. (1208a)

Art. 1291. Obligations may be modified by: Art. 1299. If the original obligation was subject to a
suspensive or resolutory condition, the new obligation
(1) Changing their object or principal shall be under the same condition, unless it is
conditions; otherwise stipulated. (n)

(2) Substituting the person of the debtor; Art. 1300. Subrogation of a third person in the rights of
the creditor is either legal or conventional. The former
(3) Subrogating a third person in the rights of is not presumed, except in cases expressly mentioned
the creditor. (1203) in this Code; the latter must be clearly established in
order that it may take effect. (1209a)
Art. 1292. In order that an obligation may be
extinguished by another which substitute the same, it is Art. 1301. Conventional subrogation of a third person
imperative that it be so declared in unequivocal terms, requires the consent of the original parties and of the
or that the old and the new obligations be on every third person. (n)
point incompatible with each other. (1204)
Art. 1302. It is presumed that there is legal
Art. 1293. Novation which consists in substituting a subrogation:
new debtor in the place of the original one, may be
made even without the knowledge or against the will (1) When a creditor pays another creditor who
of the latter, but not without the consent of the creditor. is preferred, even without the debtor's
Payment by the new debtor gives him the rights knowledge;
mentioned in Articles 1236 and 1237. (1205a)
(2) When a third person, not interested in the
Art. 1294. If the substitution is without the knowledge obligation, pays with the express or tacit
or against the will of the debtor, the new debtor's approval of the debtor;
insolvency or non-fulfillment of the obligations shall
not give rise to any liability on the part of the original (3) When, even without the knowledge of the
debtor. (n) debtor, a person interested in the fulfillment of
the obligation pays, without prejudice to the
Art. 1295. The insolvency of the new debtor, who has effects of confusion as to the latter's share.
been proposed by the original debtor and accepted by (1210a)
the creditor, shall not revive the action of the latter
against the original obligor, except when said Art. 1303. Subrogation transfers to the persons
insolvency was already existing and of public subrogated the credit with all the rights thereto
knowledge, or known to the debtor, when the appertaining, either against the debtor or against third
delegated his debt. (1206a) person, be they guarantors or possessors of mortgages,
subject to stipulation in a conventional subrogation.
Art. 1296. When the principal obligation is (1212a)
extinguished in consequence of a novation, accessory
obligations may subsist only insofar as they may Art. 1304. A creditor, to whom partial payment has
been made, may exercise his right for the remainder,
and he shall be preferred to the person who has been Art. 1312. In contracts creating real rights, third
subrogated in his place in virtue of the partial payment persons who come into possession of the object of the
of the same credit. (1213) contract are bound thereby, subject to the provisions of
the Mortgage Law and the Land Registration Laws. (n)

Title II. - CONTRACTS Art. 1313. Creditors are protected in cases of contracts
CHAPTER 1 intended to defraud them. (n)
GENERAL PROVISIONS
Art. 1314. Any third person who induces another to
Art. 1305. A contract is a meeting of minds between violate his contract shall be liable for damages to the
two persons whereby one binds himself, with respect other contracting party. (n)
to the other, to give something or to render some
service. (1254a) Art. 1315. Contracts are perfected by mere consent,
and from that moment the parties are bound not only to
Art. 1306. The contracting parties may establish such the fulfillment of what has been expressly stipulated
stipulations, clauses, terms and conditions as they may but also to all the consequences which, according to
deem convenient, provided they are not contrary to their nature, may be in keeping with good faith, usage
law, morals, good customs, public order, or public and law. (1258)
policy. (1255a)
Art. 1316. Real contracts, such as deposit, pledge and
Art. 1307. Innominate contracts shall be regulated by Commodatum, are not perfected until the delivery of
the stipulations of the parties, by the provisions of the object of the obligation. (n)
Titles I and II of this Book, by the rules governing the
most analogous nominate contracts, and by the Art. 1317. No one may contract in the name of another
customs of the place. (n) without being authorized by the latter, or unless he has
by law a right to represent him.
Art. 1308. The contract must bind both contracting
parties; its validity or compliance cannot be left to the A contract entered into in the name of another by one
will of one of them. (1256a) who has no authority or legal representation, or who
has acted beyond his powers, shall be unenforceable,
Art. 1309. The determination of the performance may unless it is ratified, expressly or impliedly, by the
be left to a third person, whose decision shall not be person on whose behalf it has been executed, before it
binding until it has been made known to both is revoked by the other contracting party. (1259a)
contracting parties. (n)
CHAPTER 2
Art. 1310. The determination shall not be obligatory if ESSENTIAL REQUISITES OF CONTRACTS
it is evidently inequitable. In such case, the courts shall GENERAL PROVISIONS
decide what is equitable under the circumstances. (n)
Art. 1318. There is no contract unless the following
Art. 1311. Contracts take effect only between the requisites concur:
parties, their assigns and heirs, except in case where
the rights and obligations arising from the contract are (1) Consent of the contracting parties;
not transmissible by their nature, or by stipulation or
by provision of law. The heir is not liable beyond the (2) Object certain which is the subject matter of
value of the property he received from the decedent. the contract;

If a contract should contain some stipulation in favor (3) Cause of the obligation which is
of a third person, he may demand its fulfillment established. (1261)
provided he communicated his acceptance to the
obligor before its revocation. A mere incidental benefit SECTION 1. - Consent
or interest of a person is not sufficient. The contracting
parties must have clearly and deliberately conferred a Art. 1319. Consent is manifested by the meeting of the
favor upon a third person. (1257a) offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified understood to be without prejudice to special
acceptance constitutes a counter-offer. disqualifications established in the laws. (1264)

Acceptance made by letter or telegram does not bind Art. 1330. A contract where consent is given through
the offerer except from the time it came to his mistake, violence, intimidation, undue influence, or
knowledge. The contract, in such a case, is presumed fraud is voidable. (1265a)
to have been entered into in the place where the offer
was made. (1262a) Art. 1331. In order that mistake may invalidate
consent, it should refer to the substance of the thing
Art. 1320. An acceptance may be express or implied. which is the object of the contract, or to those
(n) conditions which have principally moved one or both
parties to enter into the contract.
Art. 1321. The person making the offer may fix the
time, place, and manner of acceptance, all of which Mistake as to the identity or qualifications of one of
must be complied with. (n) the parties will vitiate consent only when such identity
or qualifications have been the principal cause of the
Art. 1322. An offer made through an agent is accepted contract.
from the time acceptance is communicated to him. (n)
A simple mistake of account shall give rise to its
Art. 1323. An offer becomes ineffective upon the correction. (1266a)
death, civil interdiction, insanity, or insolvency of
either party before acceptance is conveyed. (n) Art. 1332. When one of the parties is unable to read, or
if the contract is in a language not understood by him,
Art. 1324. When the offerer has allowed the offeree a and mistake or fraud is alleged, the person enforcing
certain period to accept, the offer may be withdrawn at the contract must show that the terms thereof have
any time before acceptance by communicating such been fully explained to the former. (n)
withdrawal, except when the option is founded upon a
consideration, as something paid or promised. (n) Art. 1333. There is no mistake if the party alleging it
knew the doubt, contingency or risk affecting the
Art. 1325. Unless it appears otherwise, business object of the contract. (n)
advertisements of things for sale are not definite offers,
but mere invitations to make an offer. (n) Art. 1334. Mutual error as to the legal effect of an
agreement when the real purpose of the parties is
Art. 1326. Advertisements for bidders are simply frustrated, may vitiate consent. (n)
invitations to make proposals, and the advertiser is not
bound to accept the highest or lowest bidder, unless the Art. 1335. There is violence when in order to wrest
contrary appears. (n) consent, serious or irresistible force is employed.

Art. 1327. The following cannot give consent to a There is intimidation when one of the contracting
contract: parties is compelled by a reasonable and well-
grounded fear of an imminent and grave evil upon his
(1) Unemancipated minors; person or property, or upon the person or property of
his spouse, descendants or ascendants, to give his
(2) Insane or demented persons, and deaf-mutes consent.
who do not know how to write. (1263a)
To determine the degree of intimidation, the age, sex
Art. 1328. Contracts entered into during a lucid and condition of the person shall be borne in mind.
interval are valid. Contracts agreed to in a state of
drunkenness or during a hypnotic spell are voidable. A threat to enforce one's claim through competent
(n) authority, if the claim is just or legal, does not vitiate
consent. (1267a)
Art. 1329. The incapacity declared in Article 1327 is
subject to the modifications determined by law, and is Art. 1336. Violence or intimidation shall annul the
obligation, although it may have been employed by a
third person who did not take part in the contract. order or public policy binds the parties to their real
(1268) agreement. (n)

Art. 1337. There is undue influence when a person SECTION 2. - Object of Contracts
takes improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of Art. 1347. All things which are not outside the
choice. The following circumstances shall be commerce of men, including future things, may be the
considered: the confidential, family, spiritual and other object of a contract. All rights which are not
relations between the parties, or the fact that the person intransmissible may also be the object of contracts.
alleged to have been unduly influenced was suffering
from mental weakness, or was ignorant or in financial No contract may be entered into upon future
distress. (n) inheritance except in cases expressly authorized by
law.
Art. 1338. There is fraud when, through insidious
words or machinations of one of the contracting All services which are not contrary to law, morals,
parties, the other is induced to enter into a contract good customs, public order or public policy may
which, without them, he would not have agreed to. likewise be the object of a contract. (1271a)
(1269)
Art. 1348. Impossible things or services cannot be the
Art. 1339. Failure to disclose facts, when there is a object of contracts. (1272)
duty to reveal them, as when the parties are bound by
confidential relations, constitutes fraud. (n) Art. 1349. The object of every contract must be
determinate as to its kind. The fact that the quantity is
Art. 1340. The usual exaggerations in trade, when the not determinate shall not be an obstacle to the
other party had an opportunity to know the facts, are existence of the contract, provided it is possible to
not in themselves fraudulent. (n) determine the same, without the need of a new contract
between the parties. (1273)
Art. 1341. A mere expression of an opinion does not
signify fraud, unless made by an expert and the other SECTION 3. - Cause of Contracts
party has relied on the former's special knowledge. (n)
Art. 1350. In onerous contracts the cause is understood
Art. 1342. Misrepresentation by a third person does not to be, for each contracting party, the prestation or
vitiate consent, unless such misrepresentation has promise of a thing or service by the other; in
created substantial mistake and the same is mutual. (n) remuneratory ones, the service or benefit which is
remunerated; and in contracts of pure beneficence, the
Art. 1343. Misrepresentation made in good faith is not mere liberality of the benefactor. (1274)
fraudulent but may constitute error. (n)
Art. 1351. The particular motives of the parties in
Art. 1344. In order that fraud may make a contract entering into a contract are different from the cause
voidable, it should be serious and should not have been thereof. (n)
employed by both contracting parties.
Art. 1352. Contracts without cause, or with unlawful
Incidental fraud only obliges the person employing it cause, produce no effect whatever. The cause is
to pay damages. (1270) unlawful if it is contrary to law, morals, good customs,
public order or public policy. (1275a)
Art. 1345. Simulation of a contract may be absolute or
relative. The former takes place when the parties do Art. 1353. The statement of a false cause in contracts
not intend to be bound at all; the latter, when the shall render them void, if it should not be proved that
parties conceal their true agreement. (n) they were founded upon another cause which is true
and lawful. (1276)
Art. 1346. An absolutely simulated or fictitious
contract is void. A relative simulation, when it does not Art. 1354. Although the cause is not stated in the
prejudice a third person and is not intended for any contract, it is presumed that it exists and is lawful,
purpose contrary to law, morals, good customs, public unless the debtor proves the contrary. (1277)
Art. 1355. Except in cases specified by law, lesion or CHAPTER 4
inadequacy of cause shall not invalidate a contract, REFORMATION OF INSTRUMENTS (n)
unless there has been fraud, mistake or undue
influence. (n) Art. 1359. When, there having been a meeting of the
minds of the parties to a contract, their true intention is
CHAPTER 3 not expressed in the instrument purporting to embody
FORM OF CONTRACTS the agreement, by reason of mistake, fraud, inequitable
conduct or accident, one of the parties may ask for the
Art. 1356. Contracts shall be obligatory, in whatever reformation of the instrument to the end that such true
form they may have been entered into, provided all the intention may be expressed.
essential requisites for their validity are present.
However, when the law requires that a contract be in If mistake, fraud, inequitable conduct, or accident has
some form in order that it may be valid or enforceable, prevented a meeting of the minds of the parties, the
or that a contract be proved in a certain way, that proper remedy is not reformation of the instrument but
requirement is absolute and indispensable. In such annulment of the contract.
cases, the right of the parties stated in the following
article cannot be exercised. (1278a) Art. 1360. The principles of the general law on the
reformation of instruments are hereby adopted insofar
Art. 1357. If the law requires a document or other as they are not in conflict with the provisions of this
special form, as in the acts and contracts enumerated in Code.
the following article, the contracting parties may
compel each other to observe that form, once the Art. 1361. When a mutual mistake of the parties causes
contract has been perfected. This right may be the failure of the instrument to disclose their real
exercised simultaneously with the action upon the agreement, said instrument may be reformed.
contract. (1279a)
Art. 1362. If one party was mistaken and the other
Art. 1358. The following must appear in a public acted fraudulently or inequitably in such a way that the
document: instrument does not show their true intention, the
former may ask for the reformation of the instrument.
(1) Acts and contracts which have for their
object the creation, transmission, modification Art. 1363. When one party was mistaken and the other
or extinguishment of real rights over knew or believed that the instrument did not state their
immovable property; sales of real property or real agreement, but concealed that fact from the
of an interest therein a governed by Articles former, the instrument may be reformed.
1403, No. 2, and 1405;
Art. 1364. When through the ignorance, lack of skill,
(2) The cession, repudiation or renunciation of negligence or bad faith on the part of the person
hereditary rights or of those of the conjugal drafting the instrument or of the clerk or typist, the
partnership of gains; instrument does not express the true intention of the
parties, the courts may order that the instrument be
(3) The power to administer property, or any reformed.
other power which has for its object an act
appearing or which should appear in a public Art. 1365. If two parties agree upon the mortgage or
document, or should prejudice a third person; pledge of real or personal property, but the instrument
states that the property is sold absolutely or with a
(4) The cession of actions or rights proceeding right of repurchase, reformation of the instrument is
from an act appearing in a public document. proper.

All other contracts where the amount involved exceeds Art. 1366. There shall be no reformation in the
five hundred pesos must appear in writing, even a following cases:
private one. But sales of goods, chattels or things in
action are governed by Articles, 1403, No. 2 and 1405. (1) Simple donations inter vivos wherein no
(1280a) condition is imposed;
 (2) Wills; of a contract, and shall fill the omission of stipulations
which are ordinarily established. (1287)
(3) When the real agreement is void.
Art. 1377. The interpretation of obscure words or
Art. 1367. When one of the parties has brought an stipulations in a contract shall not favor the party who
action to enforce the instrument, he cannot caused the obscurity. (1288)
subsequently ask for its reformation.
Art. 1378. When it is absolutely impossible to settle
Art. 1368. Reformation may be ordered at the instance doubts by the rules established in the preceding
of either party or his successors in interest, if the articles, and the doubts refer to incidental
mistake was mutual; otherwise, upon petition of the circumstances of a gratuitous contract, the least
injured party, or his heirs and assigns. transmission of rights and interests shall prevail. If the
contract is onerous, the doubt shall be settled in favor
Art. 1369. The procedure for the reformation of of the greatest reciprocity of interests.
instrument shall be governed by rules of court to be
promulgated by the Supreme Court. If the doubts are cast upon the principal object of the
contract in such a way that it cannot be known what
CHAPTER 5 may have been the intention or will of the parties, the
INTERPRETATION OF CONTRACTS contract shall be null and void. (1289)

Art. 1370. If the terms of a contract are clear and leave Art. 1379. The principles of interpretation stated in
no doubt upon the intention of the contracting parties, Rule 123 of the Rules of Court shall likewise be
the literal meaning of its stipulations shall control. observed in the construction of contracts. (n)

If the words appear to be contrary to the evident CHAPTER 6

intention of the parties, the latter shall prevail over the RESCISSIBLE CONTRACTS
former. (1281)
Art. 1380. Contracts validly agreed upon may be
Art. 1371. In order to judge the intention of the rescinded in the cases established by law. (1290)
contracting parties, their contemporaneous and
subsequent acts shall be principally considered. (1282) Art. 1381. The following contracts are rescissible:

Art. 1372. However general the terms of a contract (1) Those which are entered into by guardians
may be, they shall not be understood to comprehend whenever the wards whom they represent
things that are distinct and cases that are different from suffer lesion by more than one-fourth of the
those upon which the parties intended to agree. (1283) value of the things which are the object thereof;

Art. 1373. If some stipulation of any contract should (2) Those agreed upon in representation of
admit of several meanings, it shall be understood as absentees, if the latter suffer the lesion stated in
bearing that import which is most adequate to render it the preceding number;
effectual. (1284)
(3) Those undertaken in fraud of creditors when
Art. 1374. The various stipulations of a contract shall the latter cannot in any other manner collect the
be interpreted together, attributing to the doubtful ones claims due them;
that sense which may result from all of them taken
jointly. (1285) (4) Those which refer to things under litigation
if they have been entered into by the defendant
Art. 1375. Words which may have different without the knowledge and approval of the
significations shall be understood in that which is most litigants or of competent judicial authority;
in keeping with the nature and object of the contract.
(1286) (5) All other contracts specially declared by
law to be subject to rescission. (1291a)
Art. 1376. The usage or custom of the place shall be
borne in mind in the interpretation of the ambiguities
Art. 1382. Payments made in a state of insolvency for If there are two or more alienations, the first acquirer
obligations to whose fulfillment the debtor could not shall be liable first, and so on successively. (1298a)
be compelled at the time they were effected, are also
rescissible. (1292) Art. 1389. The action to claim rescission must be
commenced within four years.
Art. 1383. The action for rescission is subsidiary; it
cannot be instituted except when the party suffering For persons under guardianship and for absentees, the
damage has no other legal means to obtain reparation period of four years shall not begin until the
for the same. (1294) termination of the former's incapacity, or until the
domicile of the latter is known. (1299)
Art. 1384. Rescission shall be only to the extent
necessary to cover the damages caused. (n) CHAPTER 7
VOIDABLE CONTRACTS
Art. 1385. Rescission creates the obligation to return
the things which were the object of the contract, Art. 1390. The following contracts are voidable or
together with their fruits, and the price with its interest; annullable, even though there may have been no
consequently, it can be carried out only when he who damage to the contracting parties:
demands rescission can return whatever he may be
obliged to restore. (1) Those where one of the parties is incapable
of giving consent to a contract;
Neither shall rescission take place when the things
which are the object of the contract are legally in the (2) Those where the consent is vitiated by
possession of third persons who did not act in bad mistake, violence, intimidation, undue
faith. influence or fraud.

In this case, indemnity for damages may be demanded These contracts are binding, unless they are annulled
from the person causing the loss. (1295) by a proper action in court. They are susceptible of
ratification. (n)
Art. 1386. Rescission referred to in Nos. 1 and 2 of
Article 1381 shall not take place with respect to Art. 1391. The action for annulment shall be brought
contracts approved by the courts. (1296a) within four years.

Art. 1387. All contracts by virtue of which the debtor This period shall begin:
alienates property by gratuitous title are presumed to
have been entered into in fraud of creditors, when the In cases of intimidation, violence or undue
donor did not reserve sufficient property to pay all influence, from the time the defect of the
debts contracted before the donation. consent ceases.

Alienations by onerous title are also presumed In case of mistake or fraud, from the time of the
fraudulent when made by persons against whom some discovery of the same.
judgment has been issued. The decision or attachment
need not refer to the property alienated, and need not And when the action refers to contracts entered into by
have been obtained by the party seeking the rescission. minors or other incapacitated persons, from the time
the guardianship ceases. (1301a)
In addition to these presumptions, the design to
defraud creditors may be proved in any other manner Art. 1392. Ratification extinguishes the action to annul
recognized by the law of evidence. (1297a) a voidable contract. (1309a)

Art. 1388. Whoever acquires in bad faith the things Art. 1393. Ratification may be effected expressly or
alienated in fraud of creditors, shall indemnify the tacitly. It is understood that there is a tacit ratification
latter for damages suffered by them on account of the if, with knowledge of the reason which renders the
alienation, whenever, due to any cause, it should be contract voidable and such reason having ceased, the
impossible for him to return them. person who has a right to invoke it should execute an
act which necessarily implies an intention to waive his Art. 1402. As long as one of the contracting parties
right. (1311a) does not restore what in virtue of the decree of
annulment he is bound to return, the other cannot be
Art. 1394. Ratification may be effected by the guardian compelled to comply with what is incumbent upon
of the incapacitated person. (n) him. (1308)

Art. 1395. Ratification does not require the conformity CHAPTER 8

of the contracting party who has no right to bring the UNENFORCEABLE CONTRACTS (n)
action for annulment. (1312)
Art. 1403. The following contracts are unenforceable,
Art. 1396. Ratification cleanses the contract from all unless they are ratified:
its defects from the moment it was constituted. (1313)
(1) Those entered into in the name of another
Art. 1397. The action for the annulment of contracts person by one who has been given no authority
may be instituted by all who are thereby obliged or legal representation, or who has acted
principally or subsidiarily. However, persons who are beyond his powers;
capable cannot allege the incapacity of those with
whom they contracted; nor can those who exerted (2) Those that do not comply with the Statute
intimidation, violence, or undue influence, or of Frauds as set forth in this number. In the
employed fraud, or caused mistake base their action following cases an agreement hereafter made
upon these flaws of the contract. (1302a) shall be unenforceable by action, unless the
same, or some note or memorandum, thereof,
Art. 1398. An obligation having been annulled, the be in writing, and subscribed by the party
contracting parties shall restore to each other the things charged, or by his agent; evidence, therefore, of
which have been the subject matter of the contract, the agreement cannot be received without the
with their fruits, and the price with its interest, except writing, or a secondary evidence of its contents:
in cases provided by law.
(a) An agreement that by its terms is not to be
In obligations to render service, the value thereof shall performed within a year from the making
be the basis for damages. (1303a) thereof;

Art. 1399. When the defect of the contract consists in (b) A special promise to answer for the debt,
the incapacity of one of the parties, the incapacitated default, or miscarriage of another;
person is not obliged to make any restitution except
insofar as he has been benefited by the thing or price (c) An agreement made in consideration of
received by him. (1304) marriage, other than a mutual promise to
marry;
Art. 1400. Whenever the person obliged by the decree
of annulment to return the thing can not do so because (d) An agreement for the sale of goods, chattels
it has been lost through his fault, he shall return the or things in action, at a price not less than five
fruits received and the value of the thing at the time of hundred pesos, unless the buyer accept and
the loss, with interest from the same date. (1307a) receive part of such goods and chattels, or the
evidences, or some of them, of such things in
Art. 1401. The action for annulment of contracts shall action or pay at the time some part of the
be extinguished when the thing which is the object purchase money; but when a sale is made by
thereof is lost through the fraud or fault of the person auction and entry is made by the auctioneer in
who has a right to institute the proceedings. his sales book, at the time of the sale, of the
amount and kind of property sold, terms of
If the right of action is based upon the incapacity of sale, price, names of the purchasers and person
any one of the contracting parties, the loss of the thing on whose account the sale is made, it is a
shall not be an obstacle to the success of the action, sufficient memorandum;
unless said loss took place through the fraud or fault of
the plaintiff. (1314a)
 (e) An agreement of the leasing for a longer (4) Those whose object is outside the
period than one year, or for the sale of real commerce of men;
property or of an interest therein;
(5) Those which contemplate an impossible
(f) A representation as to the credit of a third service;
person.
(6) Those where the intention of the parties
(3) Those where both parties are incapable of relative to the principal object of the contract
giving consent to a contract. cannot be ascertained;

Art. 1404. Unauthorized contracts are governed by (7) Those expressly prohibited or declared void
Article 1317 and the principles of agency in Title X of by law.
this Book.
These contracts cannot be ratified. Neither can the
Art. 1405. Contracts infringing the Statute of Frauds, right to set up the defense of illegality be waived.
referred to in No. 2 of Article 1403, are ratified by the
failure to object to the presentation of oral evidence to Art. 1410. The action or defense for the declaration of
prove the same, or by the acceptance of benefit under the inexistence of a contract does not prescribe.
them.
Art. 1411. When the nullity proceeds from the
Art. 1406. When a contract is enforceable under the illegality of the cause or object of the contract, and the
Statute of Frauds, and a public document is necessary act constitutes a criminal offense, both parties being in
for its registration in the Registry of Deeds, the parties pari delicto, they shall have no action against each
may avail themselves of the right under Article 1357. other, and both shall be prosecuted. Moreover, the
provisions of the Penal Code relative to the disposal of
Art. 1407. In a contract where both parties are effects or instruments of a crime shall be applicable to
incapable of giving consent, express or implied the things or the price of the contract.
ratification by the parent, or guardian, as the case may
be, of one of the contracting parties shall give the This rule shall be applicable when only one of the
contract the same effect as if only one of them were parties is guilty; but the innocent one may claim what
incapacitated. he has given, and shall not be bound to comply with
his promise. (1305)
If ratification is made by the parents or guardians, as
the case may be, of both contracting parties, the Art. 1412. If the act in which the unlawful or forbidden
contract shall be validated from the inception. cause consists does not constitute a criminal offense,
the following rules shall be observed:
Art. 1408. Unenforceable contracts cannot be assailed
by third persons. (1) When the fault is on the part of both
contracting parties, neither may recover what
CHAPTER 9 he has given by virtue of the contract, or
VOID AND INEXISTENT CONTRACTS demand the performance of the other's
undertaking;
Art. 1409. The following contracts are inexistent and
void from the beginning: (2) When only one of the contracting parties is
at fault, he cannot recover what he has given by
(1) Those whose cause, object or purpose is reason of the contract, or ask for the fulfillment
contrary to law, morals, good customs, public of what has been promised him. The other, who
order or public policy; is not at fault, may demand the return of what
he has given without any obligation to comply
(2) Those which are absolutely simulated or his promise. (1306)
fictitious;
Art. 1413. Interest paid in excess of the interest
(3) Those whose cause or object did not exist at allowed by the usury laws may be recovered by the
the time of the transaction;
debtor, with interest thereon from the date of the Art. 1423. Obligations are civil or natural. Civil
payment. obligations give a right of action to compel their
performance. Natural obligations, not being based on
Art. 1414. When money is paid or property delivered positive law but on equity and natural law, do not grant
for an illegal purpose, the contract may be repudiated a right of action to enforce their performance, but after
by one of the parties before the purpose has been voluntary fulfillment by the obligor, they authorize the
accomplished, or before any damage has been caused retention of what has been delivered or rendered by
to a third person. In such case, the courts may, if the reason thereof. Some natural obligations are set forth
public interest will thus be subserved, allow the party in the following articles.
repudiating the contract to recover the money or
property. Art. 1424. When a right to sue upon a civil obligation
has lapsed by extinctive prescription, the obligor who
Art. 1415. Where one of the parties to an illegal voluntarily performs the contract cannot recover what
contract is incapable of giving consent, the courts may, he has delivered or the value of the service he has
if the interest of justice so demands allow recovery of rendered.
money or property delivered by the incapacitated
person. Art. 1425. When without the knowledge or against the
will of the debtor, a third person pays a debt which the
Art. 1416. When the agreement is not illegal per se but obligor is not legally bound to pay because the action
is merely prohibited, and the prohibition by the law is thereon has prescribed, but the debtor later voluntarily
designated for the protection of the plaintiff, he may, if reimburses the third person, the obligor cannot recover
public policy is thereby enhanced, recover what he has what he has paid.
paid or delivered.
Art. 1426. When a minor between eighteen and
Art. 1417. When the price of any article or commodity twenty-one years of age who has entered into a
is determined by statute, or by authority of law, any contract without the consent of the parent or guardian,
person paying any amount in excess of the maximum after the annulment of the contract voluntarily returns
price allowed may recover such excess. the whole thing or price received, notwithstanding the
fact the he has not been benefited thereby, there is no
Art. 1418. When the law fixes, or authorizes the fixing right to demand the thing or price thus returned.
of the maximum number of hours of labor, and a
contract is entered into whereby a laborer undertakes Art. 1427. When a minor between eighteen and
to work longer than the maximum thus fixed, he may twenty-one years of age, who has entered into a
demand additional compensation for service rendered contract without the consent of the parent or guardian,
beyond the time limit. voluntarily pays a sum of money or delivers a fungible
thing in fulfillment of the obligation, there shall be no
Art. 1419. When the law sets, or authorizes the setting right to recover the same from the obligee who has
of a minimum wage for laborers, and a contract is spent or consumed it in good faith. (1160A)
agreed upon by which a laborer accepts a lower wage,
he shall be entitled to recover the deficiency. Art. 1428. When, after an action to enforce a civil
obligation has failed the defendant voluntarily
Art. 1420. In case of a divisible contract, if the illegal performs the obligation, he cannot demand the return
terms can be separated from the legal ones, the latter of what he has delivered or the payment of the value of
may be enforced. the service he has rendered.

Art. 1421. The defense of illegality of contract is not Art. 1429. When a testate or intestate heir voluntarily
available to third persons whose interests are not pays a debt of the decedent exceeding the value of the
directly affected. property which he received by will or by the law of
intestacy from the estate of the deceased, the payment
Art. 1422. A contract which is the direct result of a is valid and cannot be rescinded by the payer.
previous illegal contract, is also void and inexistent.
Art. 1430. When a will is declared void because it has
not been executed in accordance with the formalities
Title III. - NATURAL OBLIGATIONS required by law, but one of the intestate heirs, after the
settlement of the debts of the deceased, pays a legacy
in compliance with a clause in the defective will, the
payment is effective and irrevocable.