Oblicon

Contracts  Nagagree na sa terms ng contracts

Consummation or death or termination
 Parties performed their respective
Meaning Of contracts
obligation and after that contract will
 Contracts – meeting of mind between
end.
2 persons whereby one binds himself,
with respect to the other, to give
Classification of Contracts
something or to render some service.
(1305)
According to Perfection or Formation
 Not necessary that contracts is in
 Consensual – perfected by mere
writing
agreement of the parties.
 “All contracts are agreements BUT
 Real – requires to delivery of the
NOT ALL agreements are contracts.”
object.
 Formal or solemn – requires some
CONTRACT OBLIGATION
particular form/provided by law.
 Sources of  Legal tie after the
obligation contract has According to Cause or Equivalent value
 No contract = No been entered of Presentation
Obligation into.  Onerous – exchange valuable
 Obligation exist considerations; prestation or promise
= without of a thing or service
contracts  Gratuitous – 1 party receive no
equivalent consideration; liberality of
Elements of a contract benefactor; donation or commodatum
1. ESSENTIAL ELEMENTS – without it =  Remuneratory – for service previously
no contract rendered; service or benefit
a. Consent of the contracting parties renumerated
b. Object certain which is the subject
matter of the contract According to Degree of dependence
c. Cause of the obligation which must  Principal – stand alone/independently
be established. ung contract.
2. Natural Elements – those found in  Accessory – can exist only as a
certain contract UNLESS set aside or consequence of the obligation, or
suppressed by the parties. prior to the contract; depends upon
3. Accidental Elements – refer to the another contracts
particular stipulations of the parties  Preparatory – parties are not consider
(other agreement on terms) a contract at end itself but means
lang; serves as a means which other
Stages in the life of a contract contracts may entered into

Preparation or conception According to Name or designation

 Preparatory step – which leads to  Nominate – name and is regulated by
perfection special provisions of law.
 Negotiation or Bargaining – offer  Innominate – no specific name or
 No meeting of minds (yet) designation in law. Authorities in Civil
Perfection or Birth Law:
 Meeting of minds regarding the  Do ut des (I give that you may
subject matter give)
  Do ut facias (I give that you According to Obligatory Force
may do)  Valid contracts –
 Facio ut des (I do that you may  Rescissible contracts –
give)  Voidable contracts –
 Facio ut facias (I do that you  Unenforceable contracts –
may do)  Void or inexistent contracts –
Rules that govern innominate
contracts: ------------------------------------------------------------
1. The stipulation of the parties;
2. The provisions of Obligation and Basic principle of contract
Contracts;
3. The rules governing the most Liberty of contracts or freedom to stipulate
analogous nominate contracts; and  contracting parties are free to
4. The customs of the place (1307) stipulation, clauses, term and
conditions as they may deem
According to risk or fulfillment convenient, provided they are not
a. Commutative – parties give equivalent contrary to law, morals, good customs,
values; real fulfillment public order, or public policy.
b. Aleatory – fulfillment depends upon  Parties are free to enter any
the chance stipulation but it must be LEGAL.

According to Parties Obligated

Mutuality of contracts
 Unilateral – only 1 party is obligated to
 The contract must bind both
give or to do something; consent must
bilateral contracting parties; its validity or
 Bilateral – both parties are required to compliance cannot be left to the
give or to do something. will of one of them (1308)
 One party lead to a contract =
According to Subject Matter VOID
 Involving things
 Involving Rights or Credits Determination of the performance by a
 Involving Services third person
 Third person, whose decision shall not
According to the time of fulfillment be binding UNTIL contracting parties
a. Executed – been performed must KNOWN (1309)
b. Executory – not yet been performed  If the determination of the third party
is EVIDENTLY INEQUITABLE (act in
According to Number or person who bad faith or mistake); In such case, the
participated in the drafting of contracts court shall decide what is equitable
 Ordinary – both parties involve or under the circumstances. (1310)
participated
 Auto-contract – one person represent Relativity of contract
the two opposite parties to the  Contracts take effect only between
contract. the parties, their assigns and heirs,
Contract of Adhesion – only one party and except where the rights and
only participation of the other party is to sign
obligation are not transmissible:
his
a. By law,
According to form b. By stipulation, or
 Informal, common or simple – c. By nature. (1311)
 Formal or solemn –  Heirs is not liable to the value of the
property they received from the
 decendent; need muna bayaran before Consensuality of contracts
maghati-hati sa value.  Contracts are perfected by mere
consent except in the following
When a contract may be enforced by or contracts which need to comply with
against a third person: additional requirements: (1315)
1. Stipulation pour autrui (1311, par. a. Real Contracts – perfected by
2) delivery of the thing (1316)
- Stipulation in a contract clearly b. Formal or solemn – perfected by
and deliberately conferring a form provided by law (donation
favor upon a third person who must public) (1317)
has a right to demand its
fulfillment, provided, he Obligatory force of contract and compliance
communicates his acceptance to in good faith
the obligor before its revocation by  Obligation arising from contracts shall
the obligee or the original parties. have the force of law; complied with in
- Ex. If both parties agreed that third good faith.
party who accept payment from D.  Upon the perfection of the contract,
THIRD PARTY CAN SUED THE the parties must be bound to the
DEBTOR (D) following:
a. fulfillment of what has been
2. Creating Real Rights (1312) expressly stipulated
- Third persons who come into b. All the consequences which,
possession of the object of a according to their nature, may be
contract over which there is a real in keeping with good faith, usage
right, such as a real estate and law (1315)
mortgage, are bound thereby even -------------------------------------------------------
if they were not parties to the -----
contract.
- Ex. If third person has a real right Essential Requisites of
(whole world), the mortgage
cannot be recover. Contracts
3. Entered into defraud creditors Consent of the contracting parties
(1313)  Consent – manifestation of the
- The law provides protection from meeting of the offer and acceptance
debtor amd third person to defraud upon the thing and the cause which
Creditor. are to constitute the contract. (1319)
- Ex. If the Third person is in BAD
FAITH, creditor can sue for
Rules on offer
rescission.
1. Offer must be CERTAIN and DEFINITE,
COMPLETE & INTENTINAL.
4. Violated at the inducement of the
- Definite offer – contains all the
third person (1314)
matters required of a contract
- Where third person induces
- Nature of advertisements
another to violate his contract
a. Business advertisements of
- Third person may be held liable for
thing for sale are not definite
damages by the other contracting
offers, BUT mere invitations
parties.
to make an offer (1325)
- Ex. Creditor/Injured party sued
b. Advertiser is not bound to
third person and debtor for
accept the highest or lowest
damages
 bidder unless the contrary 4. An offer made through an agent is
appears (1326) accepted from the time it is
communicated to him.
2. Offer becomes INEFFECTIVE upon the - Agent – extension of the
DEATH, CIVIL INTERDICTION, INSANITY personality of the principal
OR INSOLVENCY of either party before
acceptance is CONVEYED (1323) Rules on consent
1. The parties must have the capacity to
3. When the offerer has allowed the enter into a contract. The following
offeree a certain period to accept, the cannot give consent to a contract:
offer may be withdrawn at any time a. Unemancipated minor – take
before acceptance by place by the attainment of the age
communicating such withdrawal of majority (18yrs old )
EXCEPT when the option is founded b. Insane or demented persons –
upon a consideration as something Lucid intervals are VALID; Lucid
paid or promised. (1324) interval – period of temporary
- Option or Consideration – offeror insanity.
gives the offeree a certain period c. Deaf-mutes who do not know
within which to buy or not to buy a how to write
certain object for the fixed price.  Above-named incapacitated
a. Option money – paid before the person = Voidable (1390)
time; cannot withdraw  Both parties are incapable of
b. Option period – giving time for giving consent =
consideration Unenforceable (1403)
- Right to withdraw the offer  Incapacity declared in
(offeror) = NOT YET ACCEPT Article 1327 is subject to the
 No consideration = anytime modification determined
within option period by law, and is understood to
 With consideration = may be without prejudice to
not withdraw, otherwise the special disqualification
offeree is liable for damages. established in the laws.
(1329)
Rules on acceptance  Pay reasonable price =
1. The ACCEPTANCE must be ABSOLUTE. VALID (1409)
a. Counter-offer – has effect of
rejecting the offer. (1319) 2. State of drunkenness or during
b. Offer fixes the time, place and hypnotic spell = VOIDABLE (not freely
manner of acceptance, ALL MUST and intelligently given) (1328)
BE COMPLIED WITH. (1321)
2. Acceptance made by letter or 3. Contract where consent is given
telegram does not bind the offerer through:
EXCEPT from the time it came to his  Mistake
KNOWLEDGE.  Violence
- The contract in such a case is  Intimidation
presumed to have been  Undue influence
entered into the place where  Fraud
the offer was made. (1319) are VOIDABLE
3. Acceptance may be EXPRESS OR a. Mistake
IMPLIED.  When mistake will invalidate
- Express – orally or writing consent
- Implied – conduct of the parties - Error must be
substance of the
 thing which is the  When intimidation vitiates
object of the contract. consent
- Those conditions - When 1 contracting
which have principally parties compelled and
moved one or both well-grounded fear
parties to enter into (evil in his person) to
the contract give his consent.
- Identity or (1335); it may be
qualification of one employed by a third
ot the parties person (who is not in a
- Legal effect of an contract) (1336)
agreement when the - Factors to be
real purpose of the considered in
parties is frustrated determining the
and same in mutual. degree of intimidation:
= Mistake of Law - a. Age;
NOT GENERALLY b. Sex; and
VITIATED CONSENT; c. Condition of the
law excuses no one person
from Compliance;  NO INTIMIDATION EXIST -
CONTRACT = treat to enforce one’s claim
VOIDABLE (1334) though competent authority
 When mistake does not (COURT), if the claims is just
vitiate consent or legal.
- Where mistake simple = not VOIDABLE
– not effect the
essential requisites; d. Undue influence
the defect can be  When undue influence
CORRECTED (1332) vitiates consent
- Party alleging it knew - When person takes
the doubt, improper advante of
contingency or risk his power over the will
affecting the object of of another; MUST
the contract – must have so overpowered
show the terms (1333) or subjugated the
and willing to claim mind (1337)
mistake - Factors to be
b. Voilence or physical coercion considered in
 When violence vitiates determining the
consent existence of undue
- There is violence influence:
when in order to wrest a. Confidential,
consent, serious, and family, spiritual,
irresistible force is and other
EMPLOYED. (1335); relations of the
Although it may have parties;
been employed by a b. Mental
third person who did weakness;
not take part in the c. Ignorance, or
contract. (1336) d. Financial
distress of the
c. Intimidation or moral coercion person alleged
 to have been  Incidental Fraud – without consent
unduly given BUT agreed on other terms =
influenced Contract is VALID, party employed it =
(1337) LIABLE FOR DAMGES
e. Fraud  Fraud in the performance – act of
 When fraud exist (dolo evading the fulfillment; party
causante) employed it = LIABLE FOR DAMAGES
- Active Fraud –
insidious words to Simulated contracts
induced to enter into  Act of deliberately deceiving other, by
a contract, not pretending by agreement, contract is
agreed. (1338) non existent or concealed; not
- Passive Fraud – intended to have legal effect; FAKE
failure to disclose CONTRACT
facts; own benefit  Absolute simulation – parties do not
- Requisites to make intend to be bound at all; Absolute
contract VOIDABLE: simulation or fictitious = INEXISTENT
= should be SERIOUS OR VOID
 Incidental fraud =  Relative simulation – contract
pay for damages entered into is different from their true
= fraud may not be agreements; Real agreement exist, but
employed by BOTH not prejudice 3rd person or not
parties intended to contrart to law etc.
 Both bad faith = ------------------------------------------------------------
GOOD FAITH BY
COURT Object of Contracts
 No Fraud Exist 1. All things which are not outside the
- Usual exaggretions in commerce of men, including FUTURE
trade – opportunity to THINGS (1347)
know the facts (etc. FUTURE INHERITANCE = VOID
advertiser tagline) = the succession has not been opened
(1340) = The object of the contract forms
- Mere expression of an part of the inheritance; and
opinion UNLESS by = purely hereditary in nature
expert or special 2. All rights which are not
knowledge. (1341) transmissible
- Misinterpretation by 3. All services which are not contrary
Third person UNLESS to law, morals, good customs,
created substantial public order or public policy
mistake and same is
mutual (1342) Requisites of object of a contract
- Misinterpretation is in  It must be within the commerce of
Good Faith = may men
annulled by buyer  It must be intransmissible.
(1343)  It must not be contrary to law, morals,
good customs, public order or public
policy.
KINDS OF DOLO OR FRAUD  It must not be impossible.
 Causal Fraud – fraud committed to  It must existence or capable of coming
secure the consent of the other; into existence
without consent given = voidable
  It must be determinate as to its kind  When there was fraud, mistake
or if its quantity is not deteminate, it and undue influence (1355)
must be possible to determine the  Incase provided by law, such as
same without the need of a new where absentee suffer lesion
contract between the parties. (1349) more the ¼ of the value of the
------------------------------------------------------------ object of the contract. (1381)
------------------------------------------------------------
Cause of Contracts Form of Contracts
 Essential reason why a party enter
into a contract. (1350) Obligatory force
 No cause = VOID  Contracts shall be obligatory in
 Failure of cause – must be proved that whatever form the may enter into.
is true and lawful; otherwise VOID  Provided all the essential requisites for
validity
Cause of contracts (kinds)  MUST BE IN WRITTEN
 Onerous Contract – The cause is the  Does not apply when a certain form is
prestation or promise of a thing or required by law for the following
service by the other. reason:
 Remunetory contract – the cause is
the service or benefit which is 1. For Validity
remunerated - Contract is not form by law = VOID
 Gratuitous contract – the cause is - Must be certain form to be valid:
liberty of benefactor; donor or a. Donation of an immovable –
commodatum; must public document with
acceptance by done
Requisites of Cause b. Donation of personal property –
1. It must exist at the time the contract exceeds 5,000 must in WRITING
is entered into with acceptance
2. It must be lawful c. Authority of the agent to sell
3. It must be true the piece of the land – WRITING
d. Contract of partnership
immovable property – public
Distinguished the Cause and Motive instrument attached signed
Cause Motive inventory
Essential reason of Private or secret 2. For enforceability
the contract reason or intention 3. For convenience
of the contracting
parties Note: If contract is valid and enforceable but
VOID when the The validity of a
not form required by law, contracting parties
cause is illegal contract does not
may compelled to observe that form. (etc.
effect by the
illegality contract is private instrument to compel
Always known to the One party may not turning public instrument)
contracting parties be known to the
other
Public document
Lesion  Required to appear the following in public
 Inadequacy of cause document:
 Any damage caused by the fact that a. Acts and contracts which have for
the price is unjust or inadequate. their object the creation, transmission,
 Lesion shall not invalidate a contract modification extinguishment of real
UNLESS: rights over immovable property.
 b. The cession, repudiation hereditary 3. Party was mistaken and othe knew =
rights of or renunciation of those of instrument did not state their real
conjugal partnership of gains. agreement
c. The power to administer property, or 4. Ignorance, lack of skill negligence or
any other power which has for its bad faith on the part of the person
object an act appearing or which drafting the instrument = instrument
should appear in a public document, does not express the true intention of
or should prejudice a third person. parties
d. The cession of actions or rights 5. Two parties agreed upon property BUT
proceeding from an act appearing in a instrument states that the property is
public document. sold.

 Any writing, public or private (under When reformation is not available

statute of frauds) 1. In the case of the following:
------------------------------------------------------------ a. Simple donations inter vivos(during
lifetime) wherein no condition is
Reformation of instruments imposed.
 Remedy in equity by means of which a - if the donation is conditional,
written instrument is made or reformation is allowed so as show
construed to express or conform to the the true intent of the donor as
real intention of the parties when regards the conditions.
some error or mistake has been
committed b. Wills.
- The, reason is that the making of a
Requisites: will is strictly a free personal act
1. There must be a meeting of minds of and the will may also be revoked at
the parties to the contract any time by the testator.
2. The true intention of the parties is not - Upon the death of testator, the
expressed in the instrument right to reformation is lost.
3. The reason therefor is due to mistake, c. When the real agreement is void.
fraud , inequitable conduct or (1366)
accident.
2. When one of the parties has brought
WHO MAY ASK REFORMATION: an action to enforce the contract, he
1. If mistake was mutual, by either part, cannot subsequently ask for its
his successor in interest such as his reformation. (Art. 1367)
heirs or assigns - This is equivalent to ratification,
2. In other cases, by the injured party or waiver or estoppel.
his heirs assigns
--------------------------------------------------------
When an instrument may be
reformed Interpretation of Contracts
1. Mutual mistake = causes the failure of  Determination of meaning of the term
the instrument to disclose their or words used in their written contract
agreement Rules on interpretation of contracts
2. One party mistaken and other acted 1. If the terms of a contract are clear and
fraudulently or inequitably; the leave no doubt upon the intention of
instrument does not show theit true the contracting parties, the literal
intention\ meaning of the stipulations shall
control. (1370)
 2. If the words appear to be contrary to 1. When the doubts refer to the
the evident intention of the parties, incidental circumstances of a
the latter shall prevail over the former. gratuitous contract, the least
transmission of rights and interests
In order to judge the intention of the shall prevail.
contracting parties, their 2. If the contract is onerous, the doubt
contemporaneous and subsequent shall be settled in favor of the greatest
acts shall be principally considered. reciprocity of interests.
(1371) 3. If the doubts are cast upon the
principal object of the contract in such
3. However, general the terms of a a way that it cannot be known what
contract may be, they shall not be may have been the intention or will of
understood to comprehend things that the parties, the contract shall be null
are distinct and cases that are and void.
different from those upon which the
parties intended to agree. (1372) ------------------------------------------------------------

4. If the stipulation of any contract Defective Contracts

should admit of several meanings, it
shall be understood as bearing that
import which is most adequate to a. Rescissible contracts
rendered it effectual. (1373)  One which has all the essential
requisites of a contract BUT may be
5. The various stipulations of a contract set aside by reason of equity on
shall be interpreted together, account of damage to one of the
attributing to the doubtful ones that parties or upon a third party.
sense which may result from all of
them taken jointly. (Art. 1374) The following contracts are rescissible
contracts:
6. Words which may have different
significations shall be understood in (1) Those which are entered into by
that which is most in keeping with the guardians whenever the wards whom they
nature and object of the contract. (Art. represent suffer lesion by more than one
1375) fourth of the value of the things which are
the object thereof;
7. The usage or custom of the place shall
be borne in mind in the interpretation (2) Those agreed upon in representation of
of the ambiguities of a contract, and absentees, if the latter suffer the lesion
Shall fill the omission of stipulations stated in the preceding number;
which are, ordinarily established. (Art.  Absentee – person who disappear from
1376) his domicile, being unknown

8. The interpretation of obscure words or (3) Those undertaken in fraud of creditors

stipulations in a Contract shall not when the latter cannot in any other manner
favor a party who caused the collect the claims due them;
obscurity. (1377)  If Third person is in good faith = not
rescissible
 f third person is in Bad faith =
Rules when it is absolutely impossible to RESCISSBLE
settle doubts under the preceding rules (Art.
1378) (4) Those which refer to things under
litigation if they have been entered into by
the defendant without the knowledge and  ONLY extent necessary to cover the
approval of the litigants or of competent damages (1384)
judicial authority;  Partial rescission, not all (damage
 must have knowledge and approval price only)
BUT if WALA = Rescissible
Alienation in fraud of creditors
(5) All other contracts specially declared by 1. Alienation by gratuitous title –
law to be subject to rescission. debtor did not reserve sufficient
property to pay all debt because
Rescissible Payments, requisites: DONATION to defraud creditors
1. Debtor is insolvent 2. Alienations by onerous title –
2. Obligation is not yet due sale/exchange is fraudulent made by
3. Debtor makes the payment (1382) person who has decision to rendered
against him
Rescission
 Remedy allowed by law to the Liability for damages (alienations to
contracting parties and even to third fraud of creditors)
persons, to secure the reparation of 1. If purchaser was made in BAD FAITH
damages caused them by a valid  Indemnify for damages suffered by
contract. them on account of alienation
whenever due to any cause;
Requisites: impossible to return
1. The contract must be validly agreed  2 or more acquirer = FIRST
upon ACQUIRER is liable first
2. There must be lesion or pecuniary 2. If the purchaser was made in GOOD
prejudice to one of the parties or to a FAITH
third person  Not liable for fraudulent intention
3. The rescission is must based upon a  Rescission will not be available
case especially provided by law ................ ....................
4. There must be no legal remedy to . . . . . . . . . . . .. . . . . .
obtain reparation for the damage b. VOIDABLE CONTRACTS
5. The party asking fo rescission  Defective by reason of the incapacity
must be able to return what he is or vitiated consent of one the
obliged to restore by a reason of the parties.
contract  Binding UNLESS annulled
6. The object of the contract must not  Susceptible of ratification
legally be in the possession of
third person who did not act in bad The following are voidable or
faith. annullable contracts:
7. The period for filing the action for 1. Those where one of the parties is
rescission must not have prescribed incapable of giving consent to
 Prescriptive period – 4 years contract:
from the date of the contract, a. Unemancipated minors
except in the following b. Insane or demented persons
a. For persons under c. Deaf-mutes who do not know how
guardianship = 4 years from to write (1327)
termination of incapacity 2. Those where consent is vitiated by
b. For absentees = 4 years mistake, violence, intimidation, undue
from the time the absentee’s influence or fraud. (1390)
domicile is known 3. Those where consent is given in a
state of drunkenness (1328)
Extent of Rescission
 4. Those where consent is given during a. Guardian of the
hypnotic spell (1328) incapacitated person during
the latter’s incapacity
Annulment b. Incapacitated person after
 Action brought to set aside a voidable he has attained capacity
contract c. Party whose consent is
vitiated by mistake,
Distinguished: Annulment and Rescission violence, intimidation, undue
Annulment Rescission influence or fraud.
Brought to declare Availed of to d. Applies only in capacitated person
the inefficacy produce the 3. Effects of annulment
inherent in the inefficacy which did Obligation created by annulment
contract not exist in the 1. Obligation to give = shall restore to
contract. each other, except in case provided
Vitiated consent; Lesion or damage by law, the following:
damage is a. The things (subject matter),
immaterial
with their fruits
Action is principal Action is a
b. The price with its interest
subsidiary; last
option for action (1398)
Sanction where the Remedy where
law predominates equity predominates 2. Obligation to render services =
Available only to the Available not only to value shall be the basis of damages
parties, whether the contracting (1398)
bound principally to parties BUT also to
subsidiarily third person whose 3. Restitution when one of the parties
interests are affeted is incapacitated
Ratification is Ratification is not  Incapacitated person not
required to prevent required to prevent obliged to make any
annulment rescission restitution EXCEPT he has
been benefited by the thing
Rules on annulment of voidable contracts or price received by him
4. When the thing is lost through the
1. When action must be brought fault of the party obliged by the
(prescriptive period); otherwise the decree of annulment to return it.
contract no longer set aside. Party shall return the following:
4 years period shall begin: a. Fruits received
a. Intimidation, violence or undue b. Value of the thing at the time of
influence = time defect in the loss
consent ceases c. Interest from the time of the
b. Mistake or fraud = time of loss (1400)
discovery of the same
c. Minor or other incapacitated party 5. Mutual Restitution
= time guardianship ceases  If one party cannot restore
what he is bound to return in
2. Who may bring an action for the decree of annulment
annulment  Other = cannot compelled to
 All who are thereby obliged comply with what is
principally or subsidiarily incumbent upon him
 Cannot be brought by third
person 4. Effect of loss of thing while in the
 It may be brought by the possession of the party who has right
following: to bring the action for annulment
 a. Lost (fault) = action for annulment
is EXTINGUISHED; Incapacitated 3. Effect of ratification
consent = VITIATES  It extinguishes the action to annul
b. Lost (without fault) = can bring a voidable contract. (Art. 1392)
action for annulment; however  Ratifies = he can no longer
required to return the value of a subsequently bring the action for
thing and its fruits; only up to annulment.
extent benefited him.  It cleanses the contract from all its
defects from the moment it was
Ratification constituted. In other words,
 Adoption or affirmation of a contract contract is validated from
which is defective because of a party’s inception.
vitiated consent or incapacity.
------------------------------------------------------------
Requisites: c. Enforceable contract
(a) There must be knowledge of the  One that cannot enforce unless
reason which renders the contract ratified.
voidable;  Right to defense: Available only to the
(b) Such reason must have ceased; contracting parties; cannot assailed by
and third person (1408)
(c) The injured party must have
executed an act which necessarily The following are enforceable contracts:
implies an intention to waive his right. 1. Those entered into the name of
another person by one who has
Rules on Ratification: been given no authority/ legal
1. How ratification is made representation/beyond power.
a. Express – orally or writing  Without authority =
b. Implied or tacit – Tacit ratification – Unenforceable
contract is having ceased, so
person who has a right is executes 2. Those that do not comply with the
an act to waive his right. Statute of fraud (1403)
(etc. Minor sell to adult a computer,  Statute of Frauds – designed to
10 monthly installment. Turn 18 the prevent the commission of
minor in 6 month. CAN DEEMED TO fraud by requiring certain to be
RATIFIED A CONTRACT.) in writing and be subscribed by
the party charge
2. Who may ratify (same person who e. No performance of both
may annul) f. Cannot sued upon damages or specific
a. Guardian of the incapacitated performance
person during the latter’s incapacity
b. Incapacitated person after he Must be in writing unless
has attained capacity they UNENFORCEABLE:
c. Party whose consent is vitiated a. Agreements is not performed
by mistake, violence, intimidation, within a year from making it
undue influence or fraud. b. Guaranty – special promise
- Applies only in capacitated to answer debt, default or
person miscarriage of another
c. Agreement in Marriage –
Note: Ratification does not require the mutual promise to marry
conformity of the contracting party who has d. Sale of good, chattels or
no right to bring the action for annulment. things in action at a price
(1395)
 not less that P500 (included: 1. Void contract cannot ratified (1409)
credit, shares of stocks etc. 2. Right to set up defense of illegality
g. Sale by auction – Enforceable BUT cannot be WAIVED
sufficient memorandum (not 3. Action or defense for the declaration
subscribed) of the inexistence of a contract does
e. Leasing a real property of an NOT PRESCRIBED (1410)
interest for more than 1 year 4. Defense of illegality of a contracts is
h. Less than 1 year- enforceable NOT AVAILABLE to third person whose
i. More than 1 = unenforceable interest are not directly affected -
f. Sale of real property or an UNLESS
interest 5. VOID AND INEXISTENT = if it is the
g. Representation as to the direct result of a previous illegal
credit of a third person contract

APPLICABILITY of statute of fraud Void from very beginning

and ratification 1. Those whose cause, object or purpose
is contrary to law, morals, good
 Statute pf Frauds – applies only to customs, public order or public policy.
executory, not completed, executed or (Art. 1347, 1352)
partially consummated contracts.
 Susceptible of ratification through any 2. Those which are absolutely simulated
of the following means which will or fictitious. (Art. 1356)
render them enforceable: (1404)
a. Failure to object to the presentation 3. Those whose object or cause did not
of oral evidence to prove them exist at the time of the transaction.
b. Acceptance of benefit under the
contract; Executed part so statute
of fraud can’t apply 4. Those whose object is outside the
commerce of men. (Art. 1347)
3. Those where both parties are
incapable of giving consent to a 5. Those which contemplate an
contract impossible service. (Art. 1347, 1348)

Effect of Ratification by parent or 6. Those where the intention of the

guardian: parties relative to the principal object
 Guardian of one party ratify = of the contract cannot be ascertained.
VOIDABLE (Art. 1378, par. 2)
 Guardian of both party ratify =
VALIDATED DOR INCEPTION 7. Those expressly prohibited or declared
void by law (Art. 1409)
------------------------------------------------------------
The following are some contracts
Void or Inexistent Contracts declared void by law:
a. contract of donation between
 Void contract – one which has no force spouses during the marriage
and effect from every beginning. b. A contract of sale between spouses
 As if they never entered into; cannot (except when there is separation of
validated (by time or ratification) property)(1490)
 NOTHING OR NO CIVIL EFFECT c. Contract which stipulates the
household services shall without
Characteristics of a void contract any compensation
 d. Contract upon future inheritance maintained or money agreed is from
(expect when provided by law) violence
 Criminal offense + both are guilty =
Kinds of illegal contracts and effect of PARI DELICTO
illegality  Cannot RECOVER both parties

1. Where the contract is a criminal offense Exception:

(Art. 1411) Cases that may recover from pari delicto
a. BOTH party are GUILTY (pari 1. Payor recover interest he paid in
delicto) excess of the interest allowed by
 They shall have no right of action USURY LAW, with interest from the
against each other. date of payment.
 Both shall be criminally a. Law governing usurious transaction
prosecuted.  12% per annum – real
 The effects and instruments of the estate; recorded or
crime (the things and price of the government securities
contract) shall be confiscated in  14% per annum –
favor of the government. unregistered real estate or
b. ONLY one party is GUILTY personal property or no
 The guilty party will be criminally security
prosecuted.  For pawnbrokers:
 Neither one may compel the other j. 2 ½ a month – loan less than P500
to comply with his undertaking. k. 2% a month – loan P500 to 2,000
 The instruments will be l. 14% per annum – more than 2,000
confiscated in favor of the
government b. Usury legally inexistent
 The innocent party shall not be  Lenders and borrowers are
bound I comply with his promise if free agree on the interest
he has not yet given anything, and  Stipulation for payment of
if he had given, he may claim for usurious interest = VOID
its return.  If borrowers paid an
excessive interest = can
2. Where the contract is not criminal offense recover
(1412)
a. BOTH party are GUILTY 2. Party may recover, if public interest
 Both party can recover what he will be subserved, money or property
must given or demand the delivered for illegal purpose then
performance cancel/change mind the contract. (etc.
b. ONLY one party is GUILTY If A cancelled before of fulfillment of B,
 Guilty party – cannot recover B can recover the damage)
BUT can ask for fulfillment
 Innocent party – may demand 3. Incapacitated person is a party of
return WITHOUT obligation to ILLEGAL CONTRACT may recover the
comply interest of justice so demands.

Pari delicto 4. Person may recover, if enchanced

 Applies only when there is equal guilt public policy, been paid, not illegal but
and not when one party is more guilty PROHIBITED by law for his protection.
than the other.
 Hold that no action, in equity or law, 5. May recover any amount he has paid
illegal contract, no suit can be in excess of the price fixed by law for
any article or commodity
  Civil obligation (Art. 1156) based on
6. Laborer may demand additional positive law; hence enforceable by
compensated for service rendered court action.
beyond the maximum number of  Natural obligation – based on natural
hours of labor in a contract where he law, hencemis not enforceable by
undertakes to works longer than court action.
maximum hours fixed  Obligation –in equity and moral
justice.
7. A laborer may recover the deficiency
in a contract where he accepts a wage Sources of obligation
lower than the minimum wage set by Law
law  A rule of conduct, just and obligatory,
laid
down by legitimate authority for
Contract is divisible or indivisible and there
commonobservance and benefit
are legal terms
(Sanchez and Roman).
 Divisible – Legal terms =enforced;
 Obligations are not presumed.
illegal terms = VOID
 Indivisible – Whole contract is VOID
Contracts
 A meeting of minds between two
persons whereby one binds himself,
with respect to the other, to give
something or to render some service
(Art. 1305).
 Obligations have force of law between
the contracting parties and should be
complied with in good faith (Art.
1159).
Obligation
 juridical necessity to give, to do or not Quasi-contracts
do. (1156)  A certain lawful, voluntary and
 Juridical necessity – the court may be unilateral act giving rise to a juridical
asked to order the performance of an relation to the end that no one shall be
obligation if the debtor does not fulfill unjustly enriched at the expense of
it. another (Art. 2142).
 Negotiorum gestio voluntary
Requisites of an obligation reimburse the gestor for necessary
 Active subject (creditor/obligee) – anduseful expenses . (Art. 2150)
party who has the right to demand  Solutio indebiti – payment by mistake
performance of the obligation. of an obligation which was not due
 Passive subject (debtor/obligor) – party when paid. It creates the obligation to
who is obliged to perform the return payment . (Art. 2154)
obligation.  Other quasi-contracts
 Prestation – the object/subject matter - When, without knowledge of the
of the obligation. person obliged to give support, it
 Efficient cause – the vinculum or the is given by a stranger, the latter
legal or the juridical tie which binds shall have the right to claim the
the parties to an obligation. same from the former, unless it
appears that he gave it out of
piety and without intention of
Civil obligation vs. natural obligation being paid (Art. 2164).
 the thing in the possession or control of the
creditor either actually or constructively.
3. To deliver the fruits of the thing (Art.
1164)
Examples: a. Kinds of fruits
Negotiorum gestio voluntary reimburse the 1) Natural fruits – spontaneous products of
gestor for necessary and the soil and the young and other
useful expenses . (Art. 2150) products of animals . (Art. 442)
 Solutio indebiti – payment by mistake Negotiorum gestio – voluntary
of an obligation which was not due administration of the property, business
when paid. It creates the obligation to or affairs of another without his ocnent
return payment . (Art. 2154) or authority. It creates the obligation to
 Other quasi-contracts
 When, without knowledge of the
person obliged to give support, it is
given by a stranger, the latter shall
have the right to claim the same
from the former, unless it appears
that he gave it out of piety and
without intention of being paid
(Art. 2164).
4. Acts or omissions punishable by law (page
6)
 Crimes or felonies
5. Quasi-delicts (a.k.a tort or culpa aquiliana)
 Acts/omissions that cause damage to
another,
there being fault or negligence but without
any
pre-existing relation between two parties.
Nature and effects of obligations (page 7)
 Determinate thing or generic thing
1. Concept
 A thing is determinate when it is a
particularly designated or physically
segregated from all others of the same
class.
 Otherwise, it is generic.
2. Importance of knowing whether a thing is
determinate or generic
 The loss of a determinate thing through
a fortuitous event extinguishes the
obligation.
 Obligations of one obliged to give a
determinate thing
1. To take good care of the thing with the
diligence of a good father of a family
unless the law or agreement of the parties
requires another standard of care (Art.
1163). Diligence of a good father – ordinary
care that an average person exercises.
2. To deliver the thing (Art. 1163) – placing