Art. 1359.

When, there having been a meeting of the minds of the parties to a contract, their
true intention is not expressed in the instrument purporting to embody the agreement, by
Article 1361. When a mutual mistake of the parties causes the failure of the instrument to
reason of mistakes, fraud, inequitable conduct, or accident, one of the parties may ask for
disclose their agreement, said instrument may be reformed.
the reformation of the instrument to the end that such true intention may be expressed.
MUTUAL MISTAKE is a mistake of fact that is common to both parties of the instrument
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of minds
which causes the failure of the instrument to express their true intention.
of the parties, the proper remedy is not reformation of the instrument but annulment of the
contract. REQUISITES OF MUTUAL MISTAKE
Reformation-is the remedy allowed by law by means of which a written instrument is 1. The mistake must be of fact.
amended or rectified to express or conform to the real agreement. 2. Such mistake must be proved by clear and convincing evidence.
3. The mistake must be mutual, that is, common to both parties to the instrument.
REQUISITES OF REFORMATION
4. The mistake must cause the failure of the instrument to express their true intention.
1. There is a meeting of the minds of the parties to the contract.
2. The written instrument does not express the true agreement or intention of the
parties Grounds for REFORMATION
3. The failure to express the true intention is due to mistake, fraud, inequitable
1. Mutual Mistake-In case of mutual mistake of the parties. (Article 1361. When a
conduct or accident.
mutual mistake of the parties causes the failure of the instrument to disclose their
4. The facts upon which relief by way of reformation of the instrument is sought are
agreement, said instrument may be reformed.)
put in issue by the pleadings.
2. Fraud- When one party was mistaken, and the other party acted fraudulently.
5. There is clear and convincing evidence of the mistake, fraud, inequitable conduct, or
(Article 1362. If one party was mistaken and the other acted fraudulently or
accident.
inequitably in such a way that the instrument does not show their true intention,
Reformation distinguished from Annulment the former may ask for the reformation of the instrument.)
3. Concealment amounting to Fraud-When one party was mistaken, the other knew or
Reformation Annulment
believed that the instrument does not show their real intent but concealed that fact
There was a meeting of the minds of the There have been no meetings of the minds,
to the former. (Article 1363. When one party was mistaken and the other knew or
parties. Hence, a contract exists but the the consent of one of the parties being
believed that the instrument did not state their real agreement, but concealed that
written instrument purporting to embody vitiated by mistake.
the contract does not express the true fact from the former, the instrument may be reformed.)
intention of the parties by reason of 4. Article. 1364. When through the ignorance, lack of skill, negligence or bad faith on
mistake… the part of the person drafting the instrument or of the clerk or typist, the
AS TO EFFECT instrument does not express the true intention of the parties, the courts may order
Gives life to the contract by making the Involves a complete nullification of the that the instrument be reformed.”
instrument conform to the true intention of contract.
the parties.
5. Article 1365. If two parties agree upon the mortgage or pledge of real or personal INTERPRETATION OF A CONTRACT-is the determination of the meaning of the terms or
property, but the instrument states that the property is sold absolutely or with a words used by the parties in their written contract.
right of repurchase, reformation of the instrument is proper.
Article 1370. If the terms of a contract are clear and leave no doubt upon the intention
CASES NO REFORMATION NOT ALLOWED of the contracting parties, the literal meaning of its stipulations shall control.

Art. 1366. There shall be no reformation in the following cases: If the words appear to be contrary to the evident intention of the parties, the latter shall
prevail over the former. (1281)
(1) Simple donations inter vivos wherein no condition is imposed;

(2) Wills;

(3) When the real agreement is void.

ARTICLE. 1377
Art. 1367. When one of the parties has brought an action to enforce the instrument, he
cannot subsequently ask for its reformation. A contract of adhesion is defined as one in which one of the parties imposes a ready-
made form of contract, which the other party may accept or reject, but which the latter
1. Simple donations inter vivos where no condition is imposed.
cannot modify. One party prepares the stipulation in the contract, while the other party
2. Wills
merely affixes his signature or his “adhesion” thereto, giving no room for negotiation
3. When the real agreement is void,
and depriving the latter of the opportunity to bargain on equal footing. It must be borne
4. When one party has brought an action to enforce the instrument.
in mind, however, that contracts of adhesion are not invalid per se. Contracts of
WHO MAY ASK FOR REFORMATION adhesion, where one party imposes a ready-made form of contract on the other, are not
entirely prohibited. The one who adheres to the contract is, in reality, free to reject it
Art. 1368. Reformation may be ordered at the instance of either party or his successors entirely; if he adheres, he gives his consent.
in interest, if the mistake was mutual; otherwise, upon petition of the injured party, or
his heirs and assigns.

1. Either of the parties, if the mistake is mutual under Articles 1361, 1364 and 1365 Voidable Contracts
2. In all other cases, the injured party under Article. 1362, 1363, 1364 and 1365
VOIDABLE-
3. The heirs or successors in interest, in lieu of the party.
1. Characteristics of a Voidable Contract
a. Valid and binding until annulled;
PROCEDURE FOR REFORMATION b. Suffers a defect in the form of vitiation of consent;
c. May become valid through ratification;
Art. 1369. The procedure for the reformation of instrument shall be governed by rules of
d. May be convalidated through prescription;
court to be promulgated by the Supreme Court. e. Cannot be collaterally attacked
 2. Annulment vs. Rescission

Annulment Rescission
GR: The incapacitated
contracting parties only
Except: A
non-party who: Contracting parties
Who can a. Is prejudiced; and third persons who
Invoke
AND have been prejudiced
b. Can show
detriment which would
positively result to him
Defect Intrinsic (Consent) Extrinsic (Damage)
Basis Law Equity
Ratification P Í

3. Grounds for Annulment

a. One of the parties is incapable of giving consent to a contract;
b. Consent is vitiated by mistake, violence, intimidation, undue
influence or fraud

4. Annulment
A contract that is annulled presupposes that it subsists but later ceases to have legal effect
when it is terminated through court action.
5. Vitiation of Consent

6. Dolo Causante vs. Dolo Incidente

 Vice Concept Requisites Dolo Causante Dolo Incidente
a. Substance of the thing which is the object of Cause which induces Even without it, the
the contract; the other contracting other would still have
b. Conditions which have principally moved Concept
party to enter into the entered into the contract
Mistake
one or both parties to contract; 7. GR: contract Silence or concealment by itself does NOT constitute
c. Identity or qualifications of a party when it is fraud. Person who employed it
the principal cause Effect Voidable will be liable for
Insidious words or a. Employed by one damages Exceptions:
machinations resorted party upon the other; a. Character Serious Not serious Special duty to disclose facts;
to by one of the parties b. Induced the other b. Good faith and usages of commerce
to induce the other to party to enter into the
Fraud
enter into a contract contract; c. Serious;
which without them he d. Damage and injury to
would not have agreed the party seeking
to annulment;
In order to wrest consent, serious or irresistible force
Violence
is employed
a. Determining cause
of the contract;
One of the parties is b. Threatened act is
compelled by a unjust or unlawful;
reasonable and c. Real and serious;
wellgrounded fear of an d. Produces a
imminent and grave reasonable and well-
Intimidation
peril upon his person or
grounded fear from the
property, or that of his
fact that the person from
spouse, descendants or
whom it comes has the
ascendants to give his
necessary means or ability
consent
to inflict the threatened
injury
A person takes a. A person who can
improper advantage of be influenced;
his power over the will b. Improper
Undue influence was exerted;
of another, depriving
Influence
the latter of a c. Submission to the
reasonable freedom of overwhelming effect of
choice such unlawful conduct
8. GR: A mere expression of an opinion does not signify fraud

Exception:
a. Made by an expert; AND
b. The other party relied on his special knowledge
9. Being forced into a situation does not amount to vitiated consent where it is not shown that the party is deprived of free will and choice.

10. Influence obtained by persuasion, argument, or by appeal to the affections is not prohibited either in law or morals and is not obnoxious even in courts of equity.

11. Reverential Fear

If a contract is signed merely because of “fear of displeasing persons to whom obedience and respect are due,” the contract is still valid, for by itself, reverential fear is not wrong.
 12. Effects of Annulment

Effect To give To do
a. Things subject of
Mutual the contract; Damages based on the
Restitution b. Price with value of the service
interest
Exception: The incapacitated person is not obliged to make any
restitution except insofar as he has been benefited by the thing or
price
Plaintiff Defendant
a. Value of the thing at
Loss with The action for annulment the time of loss; b.
Fault is extinguished Fruits;
c. Interest
Loss without May still be annulled if Value of the thing at the
Fault plaintiff offers to pay à time of loss

13. Ratification
Act of or means by virtue of which efficacy is given to a contract which suffers from a vice of curable nullity.

14. Requisites of Ratification

a. The contract is voidable;
b. Effected by the person who has the right to bring the action for annulment;
c. Effected with knowledge of the vice or defect;
d. Cause of the nullity should have already disappeared

15. Manner of Ratification

It may be express or implied. A tacit ratification is the execution of an act which necessarily implies an intention to waive the right to annul, such as by accepting and retaining the benefits of a
contract.

Unenforceable Contracts
1. Characteristic of Unenforceable Contracts
a. Valid contracts but cannot be enforced by a proper action in court;
b. Susceptible of ratification;
c. The defect is of a permanent nature and will exist as long as the contract is not duly ratified;
d. Cannot be assailed by third persons

2. Kinds of Unenforceable Contracts

a. Entered into in the name of another person by one who has been given no authority or representation, or who has acted beyond his powers;
b. Do not comply with the Statute of Frauds;
c. Both parties are incapable of giving consent

3. A sale of realty of the ward or the absentee by the guardian or legal representative without authority from the court is void, not merely unenforceable.

4. Statute of Frauds
Statutes which require certain classes of contracts to be in writing to be enforceable. It provides the method by which the contracts enumerated therein may be proved but does not declare them
invalid because they are not reduced to writing.

5. Two or more writings properly connected may be considered together; matters missing or uncertain in one may be supplied or rendered certain by another, and their sufficiency will
depend on whether, taken together, they meet the requirement of the statute as to contents and the requirements of the statute as to signature.

6. The exchange of written correspondences between the parties may constitute sufficient writing to evidence the agreement for purposes of complying with the Statute of Frauds.

7. Contents of the Note to be Considered Complete

a. Name of the parties;
b. Terms and conditions of the contract;
c. Description of the property sufficient to render it capable of identification;
d. Essential elements of the contract;
e. Signature of the party charged
8. The Statute of Frauds applies only to executory contracts and not to contracts which are either partially or totally performed.

9. The SoF does not apply to actions which are neither for violation of a contract nor for the performance thereof.

Thus, the statute was held inapplicable where the verbal contract was adduced, not for the purpose of enforcing performance thereof, but as the basis of the lawful possession of the applicants in a
registration proceeding entitling them to have the land thereby sold registered in their names.
10. Waiver of the Defense of Statute of Frauds
a. Failing to object to the presentation of oral evidence to prove the contract;
b. Accepting benefits under the contract.

11. Transactions Covered by the Statute of Frauds

a. Agreements not to be performed within a year;
b. Special promise to answer for the debt of another;
c. Agreements in consideration of marriage;
d. Sale of goods not less than P500;
e. Lease of real property for more than a year;
f. Sale of real property;
g. Representation as to the credit of third persons

12. The test to determine whether an oral contract is enforceable under the one-year rule of the Statute of Frauds is whether, under its own terms, performance is possible within a year from
the making thereof. The fact that performance actually may have taken more than one year after the making of the contract is immaterial as long as performance is possible in less than a year
under the terms of the contract.

13. The Statute of Frauds applies only to agreements not to be performed on either side within a year from the making thereof.

14. The true test as to whether a promise is within the statute has been said to lie in the answer to the question whether the promise is an original or a collateral one. If the promise is an
original one; that is, if the promisor thereby becomes primarily liable for the payment of the debt, the promise is within the statute. But, on the other hand, if the promise is collateral to the
agreement of another and the promisor becomes thereby merely a surety, the promise must be in writing.

Void and Inexistent Contracts

1. Characteristics of Void and Inexistent Contracts

a. Not susceptible of ratification;
b. Right to set up the defense of inexistence or illegality cannot be waived or renounced;
c. Action or defense for declaration of nullity does not prescribe;
d. Nullity cannot be invoked by a person whose interests are not directly affected;
e. Generally produce no effect whatsoever

2. Void vs. Inexistent Contracts

 Void Inexistent
All the essential elements are Any of the essential requisites
present but the contract is for the existence of a contract is
invalid from its inception totally wanting
Principle of pari delicto is
Cannot produce any
applicable so it can produce
effect whatsoever
legal effects

3. Inexistent Contracts
a. Absolutely simulated or fictitious;
b. Cause or object did not exist at the time of the transaction;
c. Intention of the parties relative to the principal object of the contract
cannot be ascertained

4. Void Contracts
a. Cause, object or purpose is contrary to LMGPP;
b. Object it outside the commerce of man;
c. Contemplate an impossible service;
d. Expressly prohibited or declared void by law
5. When Nullity Proceeds from Illegality of Cause or Object

In pari delicto Only one is at fault

a. No cause of Innocent party:
action against each a. May claim what he
Criminal other; has given;
Offense b. Both shall b. Shall not be bound
be by his promise
prosecuted
Neither may: At fault
a. Recover what a. Cannot recover;
Not a b. Cannot ask for
he has given;
criminal fulfillment
b. Demand the
offense
performance of the Innocent
other’s undertaking a. Demand return of
 what was given;
b. No obligation to
comply with promise

6. Pari Delicto rule

In void contracts where the nullity proceeds from the illegality of the cause or purpose of the contract, whether the attendant facts constitute an offense or whether the consideration involved is
merely rendered illegal, and the two parties are equally at fault, the law leaves them as they are and denies recovery by either one of them.

7. Exceptions to the Pari Delicto Rule

a. Payment of usurious interest;
b. Repudiation before accomplishment or damage;
c. One of the parties is incapacitated;
d. When the prohibition is for the protection of the plaintiff and recovery will enhance public policy;
e. Payment of amount in excess of the price fixed by statutes for any article or commodity;
f. When work is rendered in excess of the maximum hours of labor;
g. When the laborer accepts a wage lower than the minimum