OBLIGATIONS AND CONTRACTS

Title I.—OBLIGATIONS CHAPTER 2

CHAPTER 1 NATURE AND EFFECT OF
OBLIGATIONS
GENERAL PROVISIONS

ART. 1163. Every person obliged to give

ART. 1156. An obligation is a juridical necessity
something is also obliged to take care of it with
to give, to do or not to do. (n) the proper diligence of a good father of a family,
unless the law or the stipulation of the parties
requires another standard of care. (1094a)
ART. 1157. Obligations arise from:
(1) Law;
ART. 1164. The creditor has a right to the fruits
(2) Contracts; of the thing from the time the obligation to deliver
(3) Quasi-contracts; it arises. However, he shall acquire no real right
over it until the same has been delivered to him.
(4) Acts or omissions punished by law; and (1095)
(5) Quasi-delicts. (1089a)
ART. 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the
ART. 1158. Obligations derived from law are not
right granted him by article 1170, may compel the
presumed. Only those expressly determined in
debtor to make the delivery.
this Code or in special laws are demandable, and
shall be regulated by the precepts of the law which If the thing is indeterminate or generic, he may
establishes them; and as to what has not been ask that the obligation be complied with at the
foreseen, by the provisions of this Book. (1090) expense of the debtor.
If the obligor delays, or has promised to deliver
the same thing to two or more persons who do not
ART. 1159. Obligations arising from contracts
have the same interest, he shall be responsible for
have the force of law between the contracting
any fortuitous event until he has effected the
parties and should be complied with in good faith.
delivery. (1096)
(1091a)

ART. 1166. The obligation to give a determinate

ART. 1160. Obligations derived from quasi-
thing includes that of delivering all its accessions
contracts shall be subject to the provisions of
and accessories, even though they may not have
Chapter 1, Title XVII, of this Book. (n)
been mentioned. (1097a)

ART. 1161. Civil obligations arising from

ART. 1167. If a person obliged to do something
criminal offenses shall be governed by the penal
fails to do it, the same shall be executed at his cost.
laws, subject to the provisions of article 2177, and
of the pertinent provisions of Chapter 2, This same rule shall be observed if he does it in
Preliminary Title, on Human Relations, and of contravention of the tenor of the obligation.
Title XVIII of this Book, regulating damages. Furthermore, it may be decreed that what has been
(1092a) poorly done be undone. (1098)

ART. 1162. Obligations derived from quasi- ART. 1168. When the obligation consists in not
delicts shall be governed by the provisions of doing, and the obligor does what has been
Chapter 2, Title XVII of this Book, and by special forbidden him, it shall also be undone at his
laws. (1093a) expense. (1099a)
ART. 1169. Those obliged to deliver or to do ART. 1174. Except in cases expressly specified
something incur in delay from the time the obligee by the law, or when it is otherwise declared by
judicially or extrajudicially demands from them stipulation, or when the nature of the obligation
the fulfillment of their obligation. requires the assumption of risk, no person shall be
responsible for those events which could not be
However, the demand by the creditor shall not be foreseen, or which, though foreseen, were
necessary in order that delay may exist: inevitable. (1105a)
(1) When the obligation or the law expressly so
declare; or
ART. 1175. Usurious transactions shall be
(2) When from the nature and the circumstances of the
governed by special laws. (n)
obligation it appears that the designation of the time
when the thing is to be delivered or the service is to be
rendered was a controlling motive for the
establishment of the contract; or ART. 1176. The receipt of the principal by the
creditor, without reservation with respect to the
(3) When demand would be useless, as when the interest, shall give rise to the presumption that
obligor has rendered it beyond his power to perform. said interest has been paid.
In reciprocal obligations, neither party incurs in
The receipt of a later installment of a debt without
delay if the other does not comply or is not ready reservation as to prior installments, shall likewise
to comply in a proper manner with what is
raise the presumption that such installments have
incumbent upon him. From the moment one of the been paid. (1110a)
parties fulfills his obligation, delay by the other
begins. (1100a)
ART. 1177. The creditors, after having pursued
the property in possession of the debtor to satisfy
ART. 1170. Those who in the performance of their claims, may exercise all the rights and bring
their obligations are guilty of fraud, negligence, all the actions of the latter for the same purpose,
or delay, and those who in any manner contravene save those which are inherent in his person; they
the tenor thereof, are liable for damages. (1101) may also impugn the acts which the debtor may
have done to defraud them. (1111)

ART. 1171. Responsibility arising from fraud is

demandable in all obligations. Any waiver of an ART. 1178. Subject to the laws, all rights
action for future fraud is void. (1102a) acquired in virtue of an obligation are
transmissible, if there has been no stipulation to
the contrary. (1112)
ART. 1172. Responsibility arising from
negligence in the performance of every kind of
obligation is also demandable, but such liability CHAPTER 3
may be regulated by the courts, according to the
circumstances. (1103) DIFFERENT KINDS OF OBLIGATIONS

ART. 1173. The fault or negligence of the obligor SECTION 1.—Pure and Conditional Obligations
consists in the omission of that diligence which is ART. 1179. Every obligation whose performance
required by the nature of the obligation and does not depend upon a future or uncertain event,
corresponds with the circumstances of the or upon a past event unknown to the parties, is
persons, of the time and of the place. When demandable at once.
negligence shows bad faith, the provisions of
articles 1171 and 2201, paragraph 2, shall apply. Every obligation which contains a resolutory
condition shall also be demandable, without
If the law or contract does not state the diligence prejudice to the effects of the happening of the
which is to be observed in the performance, that event. (1113)
which is expected of a good father of a family
shall be required. (1104a)
ART. 1180. When the debtor binds himself to pay ART. 1187. The effects of a conditional
when his means permit him to do so, the obligation to give, once the condition has been
obligation shall be deemed to be one with a fulfilled, shall retroact to the day of the
period, subject to the provisions of article 1197. constitution of the obligation. Nevertheless, when
(n) the obligation imposes reciprocal prestations
upon the parties, the fruits and interests during the
pendency of the condition shall be deemed to have
ART. 1181. In conditional obligations, the been mutually compensated. If the obligation is
acquisition of rights, as well as the unilateral, the debtor shall appropriate the fruits
extinguishment or loss of those already acquired, and interests received, unless from the nature and
shall depend upon the happening of the event circumstances of the obligation it should be
which constitutes the condition. (1114) inferred that the intention of the person
constituting the same was different.
ART. 1182. When the fulfillment of the condition In obligations to do and not to do, the courts shall
depends upon the sole will of the debtor, the determine, in each case, the retroactive effect of
conditional obligation shall be void. If it depends the condition that has been complied with. (1120)
upon chance or upon the will of a third person, the
obligation shall take effect in conformity with the
provisions of this Code. (1115) ART. 1188. The creditor may, before the
fulfillment of the condition, bring the appropriate
ART. 1183. Impossible conditions, those actions for the preservation of his right.
contrary to good customs or public policy and The debtor may recover what during the same
those prohibited by law shall annul the obligation time he has paid by mistake in case of a
which depends upon them. If the obligation is suspensive condition. (1121a)
divisible, that part thereof which is not affected by
the impossible or unlawful condition shall be
valid. ART. 1189. When the conditions have been
The condition not to do an impossible thing shall imposed with the intention of suspending the
be considered as not having been agreed upon. efficacy of an obligation to give, the following
(1116a) rules shall be observed in case of the
improvement, loss or deterioration of the thing
during the pendency of the condition:
ART. 1184. The condition that some event
happen at a determinate time shall extinguish the (1) If the thing is lost without the fault of the
obligation as soon as the time expires or if it has debtor, the obligation shall be extinguished;
become indubitable that the event will not take (2) If the thing is lost through the fault of the
place. (1117) debtor, he shall be obliged to pay damages; it is
understood that the thing is lost when it perishes,
or goes out of commerce, or disappears in such a
ART. 1185. The condition that some event will way that its existence is unknown or it cannot be
not happen at a determinate time shall render the recovered;
obligation effective from the moment the time
indicated has elapsed, or if it has become evident (3) When the thing deteriorates without the fault
that the event cannot occur. of the debtor, the impairment is to be borne by the
creditor;
If no time has been fixed, the condition shall be
deemed fulfilled at such time as may have (4) If it deteriorates through the fault of the debtor,
probably been contemplated, bearing in mind the the creditor may choose between the rescission of
nature of the obligation. (1118) the obligation and its fulfillment, with indemnity
for damages in either case;
(5) If the thing is improved by its nature, or by
ART. 1186. The condition shall be deemed time, the improvement shall inure to the benefit of
fulfilled when the obligor voluntarily prevents its the creditor;
fulfillment. (1119)
(6) If it is improved at the expense of the debtor, SECTION 2.—Obligations with a Period
he shall have no other right than that granted to
the usufructuary. (1122)
ART. 1193. Obligations for whose fulfillment a
day certain has been fixed, shall be demandable
ART. 1190. When the conditions have for their only when that day comes.
purpose the extinguishment of an obligation to
give, the parties, upon the fulfillment of said Obligations with a resolutory period take effect at
once, but terminate upon arrival of the day certain.
conditions, shall return to each other what they
have received. A day certain is understood to be that which must
In case of the loss, deterioration or improvement necessarily come, although it may not be known
when.
of the thing, the provisions which, with respect to
the debtor, are laid down in the preceding article If the uncertainty consists in whether the day will
shall be applied to the party who is bound to come or not, the obligation is conditional, and it
return. shall be regulated by the rules of the preceding
Section. (1125a)
As for obligations to do and not to do, the
provisions of the second paragraph of article 1187
shall be observed as regards the effect of the
extinguishment of the obligation. (1123) ART. 1194. In case of loss, deterioration or
improvement of the thing before the arrival of the
day certain, the rules in article 1189 shall be
ART. 1191. The power to rescind obligations is observed. (n)
implied in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him. ART. 1195. Anything paid or delivered before the
arrival of the period, the obligor being unaware of
The injured party may choose between the the period or believing that the obligation has
fulfillment and the rescission of the obligation, become due and demandable, may be recovered,
with the payment of damages in either case. He with the fruits and interests. (1126a)
may also seek rescission, even after he has chosen
fulfillment, if the latter should become
impossible. ART. 1196. Whenever in an obligation a period
The court shall decree the rescission claimed, is designated, it is presumed to have been
unless there be just cause authorizing the fixing of established for the benefit of both the creditor and
a period. the debtor, unless from the tenor of the same or
other circumstances it should appear that the
This is understood to be without prejudice to the period has been established in favor of one or of
rights of third persons who have acquired the the other. (1127)
thing, in accordance with articles 1385 and 1388
and the Mortgage Law. (1124)
ART. 1197. If the obligation does not fix a period,
but from its nature and the circumstances it can be
ART. 1192. In case both parties have committed inferred that a period was intended, the courts
a breach of the obligation, the liability of the first may fix the duration thereof.
infractor shall be equitably tempered by the
courts. If it cannot be determined which of the The courts shall also fix the duration of the period
parties first violated the contract, the same shall when it depends upon the will of the debtor.
be deemed extinguished, and each shall bear his In every case, the courts shall determine such
own damages. (n) period as may under the circumstances have been
probably contemplated by the parties. Once fixed
by the courts, the period cannot be changed by
them. (1128a)
ART. 1198. The debtor shall lose every right to ART. 1204. The creditor shall have a right to
make use of the period: indemnity for damages when, through the fault of
the debtor, all the things which are alternatively
(1) When after the obligation has been contracted, the object of the obligation have been lost, or the
he becomes insolvent, unless he gives a guaranty compliance of the obligation has become
or security for the debt; impossible.
(2) When he does not furnish to the creditor the The indemnity shall be fixed taking as a basis the
guaranties or securities which he has promised; value of the last thing which disappeared, or that
(3) When by his own acts he has impaired said of the service which last became impossible.
guaranties or securities after their establishment, Damages other than the value of the last thing or
and when through a fortuitous event they
service may also be awarded. (1135a)
disappear, unless he immediately gives new ones
equally satisfactory;
(4) When the debtor violates any undertaking, in ART. 1205. When the choice has been expressly
consideration of which the creditor agreed to the given to the creditor, the obligation shall cease to
period; be alternative from the day when the selection has
been communicated to the debtor.
(5) When the debtor attempts to abscond. (1129a)
Until then the responsibility of the debtor shall be
governed by the following rules:
SECTION 3.—Alternative Obligations (1) If one of the things is lost through a fortuitous
ART. 1199. A person alternatively bound by event, he shall perform the obligation by
different prestations shall completely perform one delivering that which the creditor should choose
of them. from among the remainder, or that which remains
if only one subsists;
The creditor cannot be compelled to receive part
of one and part of the other undertaking. (1131) (2) If the loss of one of the things occurs through
the fault of the debtor, the creditor may claim any
of those subsisting, or the price of that which,
ART. 1200. The right of choice belongs to the through the fault of the former, has disappeared,
debtor, unless it has been expressly granted to the with a right to damages;
creditor. (3) If all the things are lost through the fault of the
The debtor shall have no right to choose those debtor, the choice by the creditor shall fall upon
prestations which are impossible, unlawful or the price of any one of them, also with indemnity
which could not have been the object of the for damages.
obligation. (1132) The same rules shall be applied to obligations to
do or not to do in case one, some or all of the
prestations should become impossible. (1136a)
ART. 1201. The choice shall produce no effect
except from the time it has been communicated.
(1133) ART. 1206. When only one prestation has been
agreed upon, but the obligor may render another
in substitution, the obligation is called facultative.
ART. 1202. The debtor shall lose the right of
choice when among the prestations whereby he is The loss or deterioration of the thing intended as
alternatively bound, only one is practicable. a substitute, through the negligence of the obligor,
(1134) does not render him liable. But once the
substitution has been made, the obligor is liable
for the loss of the substitute on account of his
ART. 1203. If through the creditor’s acts the delay, negligence or fraud. (n)
debtor cannot make a choice according to the
terms of the obligation, the latter may rescind the
contract with damages. (n)
 SECTION 4.—Joint and Solidary Obligations ART. 1215. Novation, compensation, confusion
or remission of the debt, made by any of the
ART. 1207. The concurrence of two or more solidary creditors or with any of the solidary
creditors or of two or more debtors in one and the debtors, shall extinguish the obligation, without
same obligation does not imply that each one of prejudice to the provisions of article 1219.
the former has a right to demand, or that each one
of the latter is bound to render, entire compliance The creditor who may have executed any of these
with the prestation. There is a solidary liability acts, as well as he who collects the debt, shall be
only when the obligation expressly so states, or liable to the others for the share in the obligation
when the law or the nature of the obligation corresponding to them. (1143)
requires solidarity. (1137a)

ART. 1216. The creditor may proceed against any

ART. 1208. If from the law, or the nature or the one of the solidary debtors or some or all of them
wording of the obligations to which the preceding simultaneously. The demand made against one of
article refers the contrary does not appear, the them shall not be an obstacle to those which may
credit or debt shall be presumed to be divided into subsequently be directed against the others, so
as many shares as there are creditors or debtors, long as the debt has not been fully collected.
the credits or debts being considered distinct from (1144a)
one another, subject to the Rules of Court
governing the multiplicity of suits. (1138a)
ART. 1217. Payment made by one of the solidary
debtors extinguishes the obligation. If two or
ART. 1209. If the division is impossible, the right more solidary debtors offer to pay, the creditor
of the creditors may be prejudiced only by their may choose which offer to accept.
collective acts, and the debt can be enforced only
by proceeding against all the debtors. If one of the He who made the payment may claim from his co-
latter should be insolvent, the others shall not be debtors only the share which corresponds to each,
liable for his share. (1139) with the interest for the payment already made. If
the payment is made before the debt is due, no
interest for the intervening period may be
ART. 1210. The indivisibility of an obligation demanded.
does not necessarily give rise to solidarity. Nor
When one of the solidary debtors cannot, because
does solidarity of itself imply indivisibility. (n)
of his insolvency, reimburse his share to the
debtor paying the obligation, such share shall be
ART. 1211. Solidarity may exist although the borne by all his co-debtors, in proportion to the
creditors and the debtors may not be bound in the debt of each. (1145a)
same manner and by the same periods and
conditions. (1140)
ART. 1218. Payment by a solidary debtor shall
not entitle him to reimbursement from his co-
ART. 1212. Each one of the solidary creditors debtors if such payment is made after the
may do whatever may be useful to the others, but obligation has prescribed or become illegal. (n)
not anything which may be prejudicial to the
latter. (1141a)
ART. 1219. The remission made by the creditor
of the share which affects one of the solidary
ART. 1213. A solidary creditor cannot assign his debtors does not release the latter from his
rights without the consent of the others. (n) responsibility towards the co-debtors, in case the
debt had been totally paid by anyone of them
before the remission was effected. (1146a)
ART. 1214. The debtor may pay any one of the
solidary creditors; but if any demand, judicial or
extrajudicial, has been made by one of them,
payment should be made to him. (1142a)
ART. 1220. The remission of the whole ART. 1225. For the purposes of the preceding
obligation, obtained by one of the solidary articles, obligations to give definite things and
debtors, does not entitle him to reimbursement those which are not susceptible of partial
from his co-debtors. (n) performance shall be deemed to be indivisible.
When the obligation has for its object the
execution of a certain number of days of work, the
ART. 1221. If the thing has been lost or if the accomplishment of work by metrical units, or
prestation has become impossible without the analogous things which by their nature are
fault of the solidary debtors, the obligation shall susceptible of partial performance, it shall be
be extinguished. divisible.
If there was fault on the part of any one of them,
However, even though the object or service may
all shall be responsible to the creditor, for the be physically divisible, an obligation is indivisible
price and the payment of damages and interest,
if so provided by law or intended by the parties.
without prejudice to their action against the guilty
or negligent debtor. In obligations not to do, divisibility or
indivisibility shall be determined by the character
If through a fortuitous event, the thing is lost or of the prestation in each particular case. (1151a)
the performance has become impossible after one
of the solidary debtors has incurred in delay
through the judicial or extrajudicial demand upon
him by the creditor, the provisions of the SECTION 6.—Obligations with a Penal Clause
preceding paragraph shall apply. (1147a) ART. 1226. In obligations with a penal clause, the
penalty shall substitute the indemnity for damages
and the payment of interests in case of
ART. 1222. A solidary debtor may, in actions noncompliance, if there is no stipulation to the
filed by the creditor, avail himself of all defenses contrary. Nevertheless, damages shall be paid if
which are derived from the nature of the the obligor refuses to pay the penalty or is guilty
obligation and of those which are personal to him, of fraud in the fulfillment of the obligation.
or pertain to his own share. With respect to those
The penalty may be enforced only when it is
which personally belong to the others, he may
avail himself thereof only as regards that part of demandable in accordance with the provisions of
this Code. (1152a)
the debt for which the latter are responsible.
(1148a)

ART. 1227. The debtor cannot exempt himself

SECTION 5.—Divisible and Indivisible from the performance of the obligation by paying
the penalty, save in the case where this right has
Obligations
been expressly reserved for him. Neither can the
ART. 1223. The divisibility or indivisibility of creditor demand the fulfillment of the obligation
the things that are the object of obligations in and the satisfaction of the penalty at the same
which there is only one debtor and only one time, unless this right has been clearly granted
creditor does not alter or modify the provisions of him. However, if after the creditor has decided to
Chapter 2 of this Title. (1149) require the fulfillment of the obligation, the
performance thereof should become impossible
without his fault, the penalty may be enforced.
ART. 1224. A joint indivisible obligation gives (1153a)
rise to indemnity for damages from the time
anyone of the debtors does not comply with his
undertaking. The debtors who may have been ART. 1228. Proof of actual damages suffered by
ready to fulfill their promises shall not contribute the creditor is not necessary in order that the
to the indemnity beyond the corresponding penalty may be demanded. (n)
portion of the price of the thing or of the value of
the service in which the obligation consists.
(1150)
ART. 1229. The judge shall equitably reduce the ART. 1235. When the obligee accepts the
penalty when the principal obligation has been performance, knowing its incompleteness or
partly or irregularly complied with by the debtor. irregularity, and without expressing any protest or
Even if there has been no performance, the objection, the obligation is deemed fully complied
penalty may also be reduced by the courts if it is with. (n)
iniquitous or unconscionable. (1154a)

ART. 1236. The creditor is not bound to accept

ART. 1230. The nullity of the penal clause does payment or performance by a third person who
not carry with it that of the principal obligation. has no interest in 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 the knowledge or against the will of the
CHAPTER 4 debtor, he can recover only insofar as the payment
has been beneficial to the debtor. (1158a)
EXTINGUISHMENT OF OBLIGATIONS
General Provisions
ART. 1237. Whoever pays on behalf of the debtor
ART. 1231. Obligations are extinguished: without the knowledge or against the will of the
(1) By payment or performance; latter, cannot compel the creditor to subrogate him
in his rights, such as those arising from a
(2) By the loss of the thing due; mortgage, guaranty, or penalty. (1159a)
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of ART. 1238. Payment made by a third person who
creditor and debtor; does not intend to be reimbursed by the debtor is
(5) By compensation; deemed to be a donation, which requires the
debtor’s consent. But the payment is in any case
(6) By novation. valid as to the creditor who has accepted it. (n)
Other causes of extinguishment of obligations, ART. 1239. In obligations to give, payment made
such as annulment, rescission, fulfillment of a by one who does not have the free disposal of the
resolutory condition, and prescription, are thing due and capacity to alienate it shall not be
governed elsewhere in this Code. (1156a) valid, without prejudice to the provisions of
article 1427 under the Title on “Natural
Obligations.” (1160a)
SECTION 1.—Payment or Performance
ART. 1232. Payment means not only the delivery
ART. 1240. Payment shall be made to the person
of money but also the performance, in any other
manner, of an obligation. (n) in whose favor the obligation has been
constituted, or his successor in interest, or any
person authorized to receive it. (1162a)
ART. 1233. A debt shall not be understood to
have been paid unless the thing or service in
which the obligation consists has been completely ART. 1241. Payment to a person who is
delivered or rendered, as the case may be. (1157) incapacitated to administer his property shall be
valid if he has kept the thing delivered, or insofar
as the payment has been beneficial to him.
ART. 1234. If the obligation has been Payment made to a third person shall also be valid
substantially performed in good faith, the obligor insofar as it has redounded to the benefit of the
may recover as though there had been a strict and creditor. Such benefit to the creditor need not be
complete fulfillment, less damages suffered by proved in the following cases:
the obligee. (n)
(1) If after the payment, the third person acquires ART. 1248. Unless there is an express stipulation
the creditor’s rights; to that effect, the creditor cannot be compelled
partially to receive the prestations in which the
(2) If the creditor ratifies the payment to the third obligation consists. Neither may the debtor be
person; required to make partial payments.
(3) If by the creditor’s conduct, the debtor has However, when the debt is in part liquidated and
been led to believe that the third person had in part unliquidated, the creditor may demand and
authority to receive the payment. (1163a) the debtor may effect the payment of the former
without waiting for the liquidation of the latter.
(1169a)
ART. 1242. Payment made in good faith to any
person in possession of the credit shall release the
debtor. (1164) ART. 1249. The payment of debts in money shall
be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the
ART. 1243. Payment made to the creditor by the currency which is legal tender in the Philippines.
debtor after the latter has been judicially ordered
to retain the debt shall not be valid. (1165) The delivery of promissory notes payable to
order, or bills of exchange or other mercantile
documents shall produce the effect of payment
ART. 1244. The debtor of a thing cannot compel only when they have been cashed, or when
the creditor to receive a different one, although through the fault of the creditor they have been
the latter may be of the same value as, or more impaired.
valuable than that which is due. In the meantime, the action derived from the
In obligations to do or not to do, an act or original obligation shall be held in abeyance.
forbearance cannot be substituted by another act (1170)
or forbearance against the obligee’s will. (1166a)

ART. 1250. In case an extraordinary inflation or

ART. 1245. Dation in payment, whereby property deflation of the currency stipulated should
is alienated to the creditor in satisfaction of a debt supervene, the value of the currency at the time of
in money, shall be governed by the law of sales. the establishment of the obligation shall be the
(n) basis of payment, unless there is an agreement to
the contrary. (n)

ART. 1246. When the obligation consists in the

delivery of an indeterminate or generic thing, ART. 1251. Payment shall be made in the place
whose quality and circumstances have not been designated in the obligation.
stated, the creditor cannot demand a thing of There being no express stipulation and if the
superior quality. Neither can the debtor deliver a undertaking is to deliver a determinate thing, the
thing of inferior quality. The purpose of the payment shall be made wherever the thing might
obligation and other circumstances shall be taken be at the moment the obligation was constituted
into consideration. (1167a)
In any other case the place of payment shall be the
domicile of the debtor.
ART. 1247. Unless it is otherwise stipulated, the If the debtor changes his domicile in bad faith or
extrajudicial expenses required by the payment after he has incurred in delay, the additional
shall be for the account of the debtor. With regard expenses shall be borne by him.
to judicial costs, the Rules of Court shall govern.
(1168a) These provisions are without prejudice to venue
under the Rules of Court. (1171a)
 SUBSECTION 1.—Application of Payments Consignation alone shall produce the same effect
in the following cases:
(1) When the creditor is absent or unknown, or
ART. 1252. He who has various debts of the same does not appear at the place of payment;
kind in favor of one and the same creditor, may
declare at the time of making the payment, to (2) When he is incapacitated to receive the
which of them the same must be applied. Unless payment at the time it is due;
the parties so stipulate, or when the application of
(3) When, without just cause, he refuses to give a
payment is made by the party for whose benefit
the term has been constituted, application shall receipt;
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 lost.
former cannot complain of the same, unless there (1176a)
is a cause for invalidating the contract. (1172a)

ART. 1257. In order that the consignation of the

ART. 1253. If the debt produces interest, payment thing due may release the obligor, it must first be
of the principal shall not be deemed to have been announced to the persons interested in the
made until the interests have been covered. (1173) fulfillment of the obligation.
The consignation shall be ineffectual if it is not
made strictly in consonance with the provisions
ART. 1254. When the payment cannot be applied
in accordance with the preceding rules, or if which regulate payment. (1177)
application can not be inferred from other
circumstances, the debt which is most onerous to
the debtor, among those due, shall be deemed to ART. 1258. Consignation shall be made by
have been satisfied. depositing the things due at the disposal of
judicial authority, before whom the tender of
If the debts due are of the same nature and burden, payment shall be proved, in a proper case, and the
the payment shall be applied to all of them announcement of the consignation in other cases.
proportionately. (1174a)
The consignation having been made, the
interested parties shall also be notified thereof.
(1178)
SUBSECTION 2.—Payment by Cession
ART. 1255. The debtor may cede or assign his
property to his creditors in payment of his debts. ART. 1259. The expenses of consignation, when
This cession, unless there is stipulation to the properly made, shall be charged against the
contrary, shall only release the debtor from creditor. (1179)
responsibility for the net proceeds of the thing
assigned. The agreements which, on the effect of
the cession, are made between the debtor and his ART. 1260. Once the consignation has been duly
creditors shall be governed by special laws. made, the debtor may ask the judge to order the
(1175a) cancellation of the obligation.
Before the creditor has accepted the consignation,
SUBSECTION 3.—Tender of Payment and or before a judicial declaration that the
Consignation consignation has been properly made, the debtor
may withdraw the thing or the sum deposited,
ART. 1256. If the creditor to whom tender of allowing the obligation to remain in force. (1180)
payment has been made refuses without just cause
to accept it, the debtor shall be released from
responsibility by the consignation of the thing or
sum due.
ART. 1261. If, the consignation having been
made, the creditor should authorize the debtor to
ART. 1268. When the debt of a thing certain and
withdraw the same, he shall lose every preference
determinate proceeds from a criminal offense, the
which he may have over the thing. The co-
debtor shall not be exempted from the payment of
debtors, guarantors and sureties shall be released.
its price, whatever may be the cause for the loss,
(1181a)
unless the thing having been offered by him to the
person who should receive it, the latter refused
without justification to accept it. (1185)
SECTION 2.—Loss of the Thing Due

ART. 1269. The obligation having been

ART. 1262. An obligation which consists in the extinguished by the loss of the thing, the creditor
delivery of a determinate thing shall be shall have all the rights of action which the debtor
extinguished if it should be lost or destroyed may have against third persons by reason of the
without the fault of the debtor, and before he has loss. (1186)
incurred in delay.
When by law or stipulation, the obligor is liable
even for fortuitous events, the loss of the thing SECTION 3.—
does not extinguish the obligation, and he shall be Condonation or Remission of the Debt
responsible for damages. The same rule applies
when the nature of the obligation requires the
assumption of risk. (1182a) ART. 1270. Condonation or remission is
essentially gratuitous, and requires the acceptance
by the obligor. It may be made expressly or
ART. 1263. In an obligation to deliver a generic impliedly.
thing, the loss or destruction of anything of the One and the other kinds shall be subject to the
same kind does not extinguish the obligation. (n) rules which govern inofficious donations. Express
ART. 1264. The courts shall determine whether, condonation shall, furthermore, comply with the
under the circumstances, the partial loss of the forms of donation. (1187)
object of the obligation is so important as to ART. 1271. The delivery of a private document
extinguish the obligation. (n) evidencing a credit, made voluntarily by the
creditor to the debtor, implies the renunciation of
the action which the former had against the latter.
ART. 1265. Whenever the thing is lost in the
possession of the debtor, it shall be presumed that If in order to nullify this waiver it should be
the loss was due to his fault, unless there is proof claimed to be inofficious, the debtor and his heirs
to the contrary, and without prejudice to the may uphold it by proving that the delivery of the
provisions of article 1165. This presumption does document was made in virtue of payment of the
not apply in case of earthquake, flood, storm or debt. (1188)
other natural calamity. (1183a)

ART. 1272. Whenever the private document in

ART. 1266. The debtor in obligations to do shall which the debt appears is found in the possession
also be released when the prestation becomes of the debtor, it shall be presumed that the creditor
legally or physically impossible without the fault delivered it voluntarily, unless the contrary is
of the obligor. (1184a) proved. (1189)

ART. 1267. When the service has become so ART. 1273. The renunciation of the principal
difficult as to be manifestly beyond the debt shall extinguish the accessory obligations;
contemplation of the parties, the obligor may also but the waiver of the latter shall leave the former
be released therefrom, in whole or in part. (n) in force. (1190)
 ART. 1280. Notwithstanding the provisions of
the preceding article, the guarantor may set up
ART. 1274. It is presumed that the accessory compensation as regards what the creditor may
obligation of pledge has been remitted when the owe the principal debtor. (1197)
thing pledged, after its delivery to the creditor, is
found in the possession of the debtor, or of a third
person who owns the thing. (1191a)
ART. 1281. Compensation may be total or partial.
When the two debts are of the same amount, there
is a total compensation. (n)
SECTION 4.—Confusion or Merger of Rights
ART. 1275. The obligation is extinguished from
the time the characters of creditor and debtor are ART. 1282. The parties may agree upon the
merged in the same person. (1192a) compensation of debts which are not yet due. (n)

ART. 1276. Merger which takes place in the ART. 1283. If one of the parties to a suit over an
person of the principal debtor or creditor benefits obligation has a claim for damages against the
the guarantors. Confusion which takes place in the other, the former may set it off by proving his
person of any of the latter does not extinguish the right to said damages and the amount thereof. (n)
obligation. (1193)

ART. 1284. When one or both debts are

ART. 1277. Confusion does not extinguish a joint rescissible or voidable, they may be compensated
obligation except as regards the share against each other before they are judicially
corresponding to the creditor or debtor in whom rescinded or avoided. (n)
the two characters concur. (1194)

ART. 1285. The debtor who has consented to the

SECTION 5.—Compensation assignment of rights made by a creditor in favor of
a third person, cannot set up against the assignee the
ART. 1278. Compensation shall take place when compensation which would pertain to him against
two persons, in their own right, are creditors and the assignor, unless the assignor was notified by the
debtors of each other. (1195) debtor at the time he gave his consent, that he
reserved his right to the compensation.
If the creditor communicated the cession to him but
ART. 1279. In order that compensation may be
the debtor did not consent thereto, the latter may set
proper, it is necessary:
up the compensation of debts previous to the
(1) That each one of the obligors be bound cession, but not of subsequent ones.
principally, and that he be at the same time a
If the assignment is made without the knowledge of
principal creditor of the other; the debtor, he may set up the compensation of all
(2) That both debts consist in a sum of money, or credits prior to the same and also later ones until he
if the things due are consumable, they be of the had knowledge of the assignment. (1198a)
same kind, and also of the same quality if the
latter has been stated;
ART. 1286. Compensation takes place by
(3) That the two debts be due; operation of law, even though the debts may be
(4) That they be liquidated and demandable; payable at different places, but there shall be an
indemnity for expenses of exchange or
(5) That over neither of them there be any transportation to the place of payment. (1199a)
retention or controversy, commenced by third
persons and communicated in due time to the
debtor. (1196)
ART. 1287. Compensation shall not be proper ART. 1294. If the substitution is without the
when one of the debts arises from a depositum or knowledge or against the will of the debtor, the
from the obligations of a depositary or of a bailee new debtor’s insolvency or non-fulfillment of the
in commodatum. obligation shall not give rise to any liability on the
part of the original debtor. (n)
Neither can compensation be set up against a
creditor who has a claim for support due by
gratuitous title, without prejudice to the
ART. 1295. The insolvency of the new debtor,
provisions of paragraph 2 of article 301. (1200a)
who has been proposed by the original debtor and
accepted by the creditor, shall not revive the
ART. 1288. Neither shall there be compensation action of the latter against the original obligor,
if one of the debts consists in civil liability arising except when said insolvency was already existing
from a penal offense. (n) and of public knowledge, or known to the debtor,
when he delegated his debt. (1206a)

ART. 1289. If a person should have against him

several debts which are susceptible of ART. 1296. When the principal obligation is
compensation, the rules on the application of extinguished in consequence of a novation,
payments shall apply to the order of the accessory obligations may subsist only insofar as
compensation. (1201) they may benefit third persons who did not give
their consent. (1207)
ART. 1290. When all the requisites mentioned in
article 1279 are present, compensation takes
effect by operation of law, and extinguishes both ART. 1297. If the new obligation is void, the
debts to the concurrent amount, even though the original one shall subsist, unless the parties
creditors and debtors are not aware of the intended that the former relation should be
compensation. (1202a) extinguished in any event. (n)

SECTION 6.—Novation ART. 1298. The novation is void if the original

obligation was void, except when annulment may
ART. 1291. Obligations may be modified by: be claimed only by the debtor, or when
ratification validates acts which are voidable.
(1) Changing their object or principal conditions; (1208a)
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the ART. 1299. If the original obligation was subject
creditor. (1203) to a suspensive or resolutory condition, the new
obligation shall be under the same condition,
unless it is otherwise stipulated. (n)
ART. 1292. In order that an obligation may be
extinguished by another which substitute the
same, it is imperative that it be so declared in
ART. 1300. Subrogation of a third person in the
unequivocal terms, or that the old and the new
rights of the creditor is either legal or
obligations be on every point incompatible with
conventional. The former is not presumed, except
each other. (1204)
in cases expressly mentioned in this Code; the
latter must be clearly established in order that it
ART. 1293. Novation which consists in may take effect. (1209a)
substituting a new debtor in the place of the
original one, may be made even without the
knowledge or against the will of the latter, but not ART. 1301. Conventional subrogation of a third
without the consent of the creditor. Payment by person requires the consent of the original parties
the new debtor gives him the rights mentioned in and of the third person. (n)
articles 1236 and 1237. (1205a)
ART. 1302. It is presumed that there is legal ART. 1308. The contract must bind both
subrogation: contracting parties; its validity or compliance
cannot be left to the will of one of them. (1256a)
(1) When a creditor pays another creditor who is
preferred, even without the debtor’s knowledge;
(2) When a third person, not interested in the ART. 1309. The determination of the
obligation, pays with the express or tacit approval performance may be left to a third person, whose
of the debtor; decision shall not be binding until it has been
made known to both contracting parties. (n)
(3) When, even without the knowledge of the
debtor, a person interested in the fulfillment of the
obligation pays, without prejudice to the effects of
ART. 1310. The determination shall not be
confusion as to the latter’s share. (1210a)
obligatory if it is evidently inequitable. In such
case, the courts shall decide what is equitable
under the circumstances. (n)
ART. 1303. Subrogation transfers to the person
subrogated the credit with all the rights thereto
appertaining, either against the debtor or against
ART. 1311. Contracts take effect only between
third persons, be they guarantors or possessors of
mortgages, subject to stipulation in a conventional the parties, their assigns and heirs, except in case
where the rights and obligations arising from the
subrogation. (1212a)
contract are not transmissible by their nature, or
by stipulation or by provision of law. The heir is
not liable beyond the value of the property he
ART. 1304. A creditor, to whom partial payment
received from the decedent.
has been made, may exercise his right for the
remainder, and he shall be preferred to the person If a contract should contain some stipulation in
who has been subrogated in his place in virtue of favor of a third person, he may demand its
the partial payment of the same credit. (1213) fulfillment provided he communicated his
acceptance to the obligor before its revocation. A
mere incidental benefit or interest of a person is
Title II.—CONTRACTS not sufficient. The contracting parties must have
clearly and deliberately conferred a favor upon a
CHAPTER 1 third person. (1257a)
GENERAL PROVISIONS

ART. 1312. In contracts creating real rights, third

ART. 1305. A contract is a meeting of minds persons who come into possession of the object of
between two persons whereby one binds himself, the contract are bound thereby, subject to the
with respect to the other, to give something or to provisions of the Mortgage Law and the Land
render some service. (1254a) Registration Laws. (n)

ART. 1306. The contracting parties may establish ART. 1313. Creditors are protected in cases of
such stipulations, clauses, terms and conditions as contracts intended to defraud them. (n)
they may deem convenient, provided they are not
contrary to law, morals, good customs, public
order, or public policy. (1255a) ART. 1314. Any third person who induces
another to violate his contract shall be liable for
damages to the other contracting party. (n)
ART. 1307. Innominate contracts shall be
regulated by the stipulations of the parties, by the
provisions of Titles I and II of this Book, by the
rules governing the most analogous nominate
contracts, and by the customs of the place. (n)
ART. 1315. Contracts are perfected by mere Acceptance made by letter or telegram does not
consent, and from that moment the parties are bind the offerer except from the time it came to
bound not only to the fulfillment of what has been his knowledge. The contract, in such a case, is
expressly stipulated but also to all the presumed to have been entered into in the place
consequences which, according to their nature, where the offer was made. (1262a)
may be in keeping with good faith, usage and law.
(1258)
ART. 1320. An acceptance may be express or
implied. (n)
ART. 1316. Real contracts, such as deposit,
pledge and commodatum, are not perfected until
the delivery of the object of the obligation. (n) ART. 1321. The person making the offer may fix
the time, place, and manner of acceptance, all of
which must be complied with. (n)
ART. 1317. No one may contract in the name of
another without being authorized by the latter, or
unless he has by law a right to represent him. ART. 1322. An offer made through an agent is
accepted from the time acceptance is
A contract entered into in the name of another by
one who has no authority or legal representation, communicated to him. (n)
or who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has ART. 1323. An offer becomes ineffective upon
been executed, before it is revoked by the other the death, civil interdiction, insanity, or
contracting party. (1259a) insolvency of either party before acceptance is
conveyed. (n)

CHAPTER 2
ART. 1324. When the offerer has allowed the
ESSENTIAL REQUISITES OF offeree a certain period to accept, the offer may be
CONTRACTS withdrawn at any time before acceptance by
communicating such withdrawal, except when the
option is founded upon a consideration, as
General Provisions something paid or promised. (n)
ART. 1318. There is no contract unless the
following requisites concur:
ART. 1325. Unless it appears otherwise, business
(1) Consent of the contracting parties; advertisements of things for sale are not definite
offers, but mere invitations to make an offer. (n)
(2) Object certain which is the subject matter of
the contract;
(3) Cause of the obligation which is established. ART. 1326. Advertisements for bidders are
(1261) simply invitations to make proposals, and the
advertiser is not bound to accept the highest or
lowest bidder, unless the contrary appears. (n)
SECTION 1.—Consent

ART. 1327. The following cannot give consent to

ART. 1319. Consent is manifested by the meeting a contract:
of the offer and the acceptance upon the thing and
(1) Unemancipated minors;
the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute. (2) Insane or demented persons, and deaf-mutes
A qualified acceptance constitutes a counter- who do not know how to write. (1263a)
offer.
ART. 1328. Contracts entered into during a lucid There is intimidation when one of the contracting
interval are valid. Contracts agreed to in a state of parties is compelled by a reasonable and well-
drunkenness or during a hypnotic spell are grounded fear of an imminent and grave evil upon
voidable. (n) his person or property, or upon the person or
property of his spouse, descendants or ascendants,
to give his consent.
ART. 1329. The incapacity declared in article To determine the degree of intimidation, the age,
1327 is subject to the modifications determined sex and condition of the person shall be borne in
by law, and is understood to be without prejudice mind.
to special disqualifications established in the
laws. (1264) A threat to enforce one’s claim through competent
authority, if the claim is just or legal, does not
vitiate consent. (1267a)
ART. 1330. A contract where consent is given
through mistake, violence, intimidation, undue
influence, or fraud is voidable. (1265a) ART. 1336. Violence or intimidation shall annul
the obligation, although it may have been
employed by a third person who did not take part
ART. 1331. In order that mistake may invalidate in the contract. (1268)
consent, it should refer to the substance of the
thing which is the object of the contract, or to
those conditions which have principally moved ART. 1337. There is undue influence when a
one or both parties to enter into the contract. person takes improper advantage of his power
over the will of another, depriving the latter of a
Mistake as to the identity or qualifications of one reasonable freedom of choice. The following
of the parties will vitiate consent only when such circumstances shall be considered: the
identity or qualifications have been the principal confidential, family, spiritual and other relations
cause of the contract. between the parties, or the fact that the person
alleged to have been unduly influenced was
A simple mistake of account shall give rise to its
suffering from mental weakness, or was ignorant
correction. (1266a)
or in financial distress. (n)

ART. 1332. When one of the parties is unable to ART. 1338. There is fraud when, through
read, or if the contract is in a language not insidious words or machinations of one of the
understood by him, and mistake or fraud is contracting parties, the other is induced to enter
alleged, the person enforcing the contract must into a contract which, without them, he would not
show that the terms thereof have been fully have agreed to. (1269)
explained to the former. (n)

ART. 1339. Failure to disclose facts, when there

ART. 1333. There is no mistake if the party is a duty to reveal them, as when the parties are
alleging it knew the doubt, contingency or risk bound by confidential relations, constitutes fraud.
affecting the object of the contract. (n) (n)

ART. 1334. Mutual error as to the legal effect of ART. 1340. The usual exaggerations in trade,
an agreement when the real purpose of the parties when the other party had an opportunity to know
is frustrated, may vitiate consent. (n) the facts, are not in themselves fraudulent. (n)

ART. 1335. There is violence when in order to ART. 1341. A mere expression of an opinion does
wrest consent, serious or irresistible force is not signify fraud, unless made by an expert and
employed. the other party has relied on the former’s special
knowledge. (n)
ART. 1342. Misrepresentation by a third person ART. 1349. The object of every contract must be
does not vitiate consent, unless such determinate as to its kind. The fact that the
misrepresentation has created substantial mistake quantity is not determinate shall not be an obstacle
and the same is mutual. (n) to the existence of the contract, provided it is
possible to determine the same, without the need
of a new contract between the parties. (1273)
ART. 1343. Misrepresentation made in good faith
is not fraudulent but may constitute error. (n)
SECTION 3.—Cause of Contracts
ART. 1350. In onerous contracts the cause is
ART. 1344. In order that fraud may make a understood to be, for each contracting party, the
contract voidable, it should be serious and should prestation or promise of a thing or service by the
not have been employed by both contracting other; in remuneratory ones, the service or benefit
parties. which is remunerated; and in contracts of pure
Incidental fraud only obliges the person beneficence, the mere liberality of the benefactor.
employing it to pay damages. (1270) (1274)

ART. 1345. Simulation of a contract may be ART. 1351. The particular motives of the parties
absolute or relative. The former takes place when in entering into a contract are different from the
the parties do not intend to be bound at all; the cause thereof. (n)
latter, when the parties conceal their true
agreement. (n)
ART. 1352. Contracts without cause, or with
unlawful cause, produce no effect whatever. The
ART. 1346. An absolutely simulated or fictitious cause is unlawful if it is contrary to law, morals,
contract is void. A relative simulation, when it good customs, public order or public policy.
does not prejudice a third person and is not (1275a)
intended for any purpose contrary to law, morals,
good customs, public order or public policy binds
the parties to their real agreement. (n) ART. 1353. The statement of a false cause in
contracts shall render them void, if it should not
be proved that they were founded upon another
SECTION 2.—Object of Contracts cause which is true and lawful. (1276)

ART. 1347. All things which are not outside the

commerce of men, including future things, may ART. 1354. Although the cause is not stated in
be the object of a contract. All rights which are
the contract, it is presumed that it exists and is
not intransmissible may also be the object of
lawful, unless the debtor proves the contrary.
contracts. (1277)
No contract may be entered into upon future
inheritance except in cases expressly authorized
by law. ART. 1355. Except in cases specified by law,
lesion or inadequacy of cause shall not invalidate
All services which are not contrary to law, morals,
a contract, unless there has been fraud, mistake or
good customs, public order or public policy may undue influence. (n)
likewise be the object of a contract. (1271a)

ART. 1348. Impossible things or services cannot

be the object of contracts. (1272)
 CHAPTER 3 CHAPTER 4
FORM OF CONTRACTS REFORMATION OF INSTRUMENTS (n)

ART. 1356. Contracts shall be obligatory, in ART. 1359. When, there having been a meeting
whatever form they may have been entered into, of the minds of the parties to a contract, their true
provided all the essential requisites for their intention is not expressed in the instrument
validity are present. However, when the law purporting to embody the agreement, by reason of
requires that a contract be in some form in order mistake, fraud, inequitable conduct or accident,
that it may be valid or enforceable, or that a one of the parties may ask for the reformation of
contract be proved in a certain way, that the instrument to the end that such true intention
requirement is absolute and indispensable. In such may be expressed.
cases, the right of the parties stated in the
If mistake, fraud, inequitable conduct, or accident
following article cannot be exercised. (1278a)
has prevented a meeting of the minds of the
parties, the proper remedy is not reformation of
the instrument but annulment of the contract.
ART. 1357. If the law requires a document or
other special form, as in the acts and contracts
enumerated in the following article, the
ART. 1360. The principles of the general law on
contracting parties may compel each other to
observe that form, once the contract has been the reformation of instruments are hereby adopted
insofar as they are not in conflict with the
perfected. This right may be exercised
provisions of this Code.
simultaneously with the action upon the contract.
(1279a)

ART. 1361. When a mutual mistake of the parties

causes the failure of the instrument to disclose
ART. 1358. The following must appear in a
their real agreement, said instrument may be
public document:
reformed.
(1) Acts and contracts which have for their object
the creation, transmission, modification or
extinguishment of real rights over immovable ART. 1362. If one party was mistaken and the
property; sales of real property or of an interest other acted fraudulently or inequitably in such a
therein are governed by articles 1403, No. 2, and way that the instrument does not show their true
1405; intention, the former may ask for the reformation
of the instrument.
(2) The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal
partnership of gains;
ART. 1363. When one party was mistaken and
(3) The power to administer property, or any other the other knew or believed that the instrument did
power which has for its object an act appearing or not state their real agreement, but concealed that
which should appear in a public document, or fact from the former, the instrument may be
should prejudice a third person; reformed.
(4) The cession of actions or rights proceeding
from an act appearing in a public document.
ART. 1364. When through the ignorance, lack of
All other contracts where the amount involved skill, negligence or bad faith on the part of the
exceeds five hundred pesos must appear in person drafting the instrument or of the clerk or
writing, even a private one. But sales of goods, typist, the instrument does not express the true
chattels or things in action are governed by intention of the parties, the courts may order that
articles 1403, No. 2 and 1405. (1280a) the instrument be reformed.
ART. 1365. If two parties agree upon the ART. 1372. However general the terms of a
mortgage or pledge of real or personal property, contract may be, they shall not be understood to
but the instrument states that the property is sold comprehend things that are distinct and cases that
absolutely or with a right of repurchase, are different from those upon which the parties
reformation of the instrument is proper. intended to agree. (1283)

ART. 1366. There shall be no reformation in the ART. 1373. If some stipulation of any contract
following cases: should admit of several meanings, it shall be
understood as bearing that import which is most
(1) Simple donations inter vivos wherein no adequate to render it effectual. (1284)
condition is imposed;
(2) Wills;
ART. 1374. The various stipulations of a contract
(3) When the real agreement is void. shall be interpreted together, attributing to the
doubtful ones that sense which may result from all
of them taken jointly. (1285)
ART. 1367. When one of the parties has brought
an action to enforce the instrument, he cannot
subsequently ask for its reformation. ART. 1375. Words which may have different
significations shall be understood in that which is
most in keeping with the nature and object of the
contract. (1286)
ART. 1368. Reformation may be ordered at the
instance of either party or his successors in
interest, if the mistake was mutual; otherwise,
ART. 1376. The usage or custom of the place
upon petition of the injured party, or his heirs and
shall be borne in mind in the interpretation of the
assigns.
ambiguities of a contract, and shall fill the
omission of stipulations which are ordinarily
established. (1287)
ART. 1369. The procedure for the reformation of
instrument shall be governed by rules of court to
be promulgated by the Supreme Court. ART. 1377. The interpretation of obscure words
or stipulations in a contract shall not favor the
party who caused the obscurity. (1288)
CHAPTER 5
INTERPRETATION OF CONTRACTS
ART. 1378. When it is absolutely impossible to
settle doubts by the rules established in the
preceding articles, and the doubts refer to
ART. 1370. If the terms of a contract are clear and
incidental circumstances of a gratuitous contract,
leave no doubt upon the intention of the the least transmission of rights and interests shall
contracting parties, the literal meaning of its
prevail. If the contract is onerous, the doubt shall
stipulations shall control. be settled in favor of the greatest reciprocity of
If the words appear to be contrary to the evident interests.
intention of the parties, the latter shall prevail over If the doubts are cast upon the principal object of
the former. (1281) the contract in such a way that it cannot be known
what may have been the intention or will of the
parties, the contract shall be null and void. (1289)
ART. 1371. In order to judge the intention of the
contracting parties, their contemporaneous and
subsequent acts shall be principally considered. ART. 1379. The principles of interpretation
(1282) stated in Rule 123 of the Rules of Court shall
likewise be observed in the construction of
contracts. (n)
 CHAPTER 6 Neither shall rescission take place when the things
which are the object of the contract are legally in
RESCISSIBLE CONTRACTS the possession of third persons who did not act in
bad faith.
ART. 1380. Contracts validly agreed upon may In this case, indemnity for damages may be
be rescinded in the cases established by law. demanded from the person causing the loss.
(1290) (1295)

ART. 1381. The following contracts are ART. 1386. Rescission referred to in Nos. 1 and
rescissible: 2 of article 1381 shall not take place with respect
to contracts approved by the courts. (1296a)
(1) Those which are entered into by guardians
whenever the wards whom they represent suffer
lesion by more than one-fourth of the value of the
things which are the object thereof; ART. 1387. All contracts by virtue of which the
debtor alienates property by gratuitous title are
(2) Those agreed upon in representation of presumed to have been entered into in fraud of
absentees, if the latter suffer the lesion stated in creditors, when the donor did not reserve
the preceding number; sufficient property to pay all debts contracted
before the donation.
(3) Those undertaken in fraud of creditors when
the latter cannot in any other manner collect the Alienations by onerous title are also presumed
claims due them; fraudulent when made by persons against whom
some judgment has been rendered in any instance
(4) Those which refer to things under litigation if
or some writ of attachment has been issued. The
they have been entered into by the defendant
decision or attachment need not refer to the
without the knowledge and approval of the
property alienated, and need not have been
litigants or of competent judicial authority;
obtained by the party seeking the rescission.
(5) All other contracts specially declared by law
In addition to these presumptions, the design to
to be subject to rescission. (1291a)
defraud creditors may be proved in any other
manner recognized by the law of evidence.
(1297a)
ART. 1382. Payments made in a state of
insolvency for obligations to whose fulfillment
the debtor could not be compelled at the time they
were effected, are also rescissible. (1292) ART. 1388. Whoever acquires in bad faith the
things alienated in fraud of creditors, shall
indemnify the latter for damages suffered by them
on account of the alienation, whenever, due to any
ART. 1383. The action for rescission is
cause, it should be impossible for him to return
subsidiary; it cannot be instituted except when the them.
party suffering damage has no other legal means
to obtain reparation for the same. (1294) If there are two or more alienations, the first
acquirer shall be liable first, and so on
successively. (1298a)
ART. 1384. Rescission shall be only to the extent
necessary to cover the damages caused. (n)
ART. 1389. The action to claim rescission must
be commenced within four years.
ART. 1385. Rescission creates the obligation to
For persons under guardianship and for absentees,
return the things which were the object of the the period of four years shall not begin until the
contract, together with their fruits, and the price
termination of the former’s incapacity, or until the
with its interest; consequently, it can be carried domicile of the latter is known. (1299)
out only when he who demands rescission can
return whatever he may be obliged to restore.
 CHAPTER 7 ART. 1395. Ratification does not require the
conformity of the contracting party who has no
VOIDABLE CONTRACTS right to bring the action for annulment. (1312)

ART. 1390. The following contracts are voidable

ART. 1396. Ratification cleanses the contract
or annullable, even though there may have been from all its defects from the moment it was
no damage to the contracting parties: constituted. (1313)
(1) Those where one of the parties is incapable of
giving consent to a contract;
ART. 1397. The action for the annulment of
(2) Those where the consent is vitiated by
contracts may be instituted by all who are thereby
mistake, violence, intimidation, undue influence obliged principally or subsidiarily. However,
or fraud.
persons who are capable cannot allege the
These contracts are binding, unless they are incapacity of those with whom they contracted;
annulled by a proper action in court. They are nor can those who exerted intimidation, violence,
susceptible of ratification. (n) or undue influence, or employed fraud, or caused
mistake base their action upon these flaws of the
contract. (1302a)
ART. 1391. The action for annulment shall be
brought within four years.
ART. 1398. An obligation having been annulled,
This period shall begin: the contracting parties shall restore to each other
In cases of intimidation, violence or undue the things which have been the subject matter of
influence, from the time the defect of the consent the contract, with their fruits, and the price with
ceases. its interest, except in cases provided by law.

In case of mistake or fraud, from the time of the In obligations to render service, the value thereof
discovery of the same. shall be the basis for damages. (1303a)

And when the action refers to contracts entered

into by minors or other incapacitated persons, ART. 1399. When the defect of the contract
from the time the guardianship ceases. (1301a) consists in the incapacity of one of the parties, the
incapacitated person is not obliged to make any
restitution except insofar as he has been benefited
ART. 1392. Ratification extinguishes the action by the thing or price received by him. (1304)
to annul a voidable contract. (1309a)

ART. 1400. Whenever the person obliged by the

ART. 1393. Ratification may be effected decree of annulment to return the thing can not do
expressly or tacitly. It is understood that there is a so because it has been lost through his fault, he
tacit ratification if, with knowledge of the reason shall return the fruits received and the value of the
which renders the contract voidable and such thing at the time of the loss, with interest from the
reason having ceased, the person who has a right same date. (1307a)
to invoke it should execute an act which
necessarily implies an intention to waive his right.
(1311a) ART. 1401. The action for annulment of contracts
shall be extinguished when the thing which is the
object thereof is lost through the fraud or fault of
ART. 1394. Ratification may be effected by the the person who has a right to institute the
guardian of the incapacitated person. (n) proceedings.
If the right of action is based upon the incapacity account the sale is made, it is a sufficient
of any one of the contracting parties, the loss of memorandum;
the thing shall not be an obstacle to the success of
(e) An agreement for the leasing for a longer
the action, unless said loss took place through the
fraud or fault of the plaintiff. (1314a) period than one year, or for the sale of real
property or of an interest therein;
(f) A representation as to the credit of a third
ART. 1402. As long as one of the contracting person.
parties does not restore what in virtue of the
decree of annulment he is bound to return, the (3) Those where both parties are incapable of
giving consent to a contract.
other cannot be compelled to comply with what is
incumbent upon him. (1308)

ART. 1404. Unauthorized contracts are governed

by article 1317 and the principles of agency in
CHAPTER 8
Title X of this Book.
UNENFORCEABLE CONTRACTS (n)

ART. 1405. Contracts infringing the Statute of

ART. 1403. The following contracts are Frauds, referred to in No. 2 of article 1403, are
unenforceable, unless they are ratified: ratified by the failure to object to the presentation
of oral evidence to prove the same, or by the
(1) Those entered into in the name of another acceptance of benefits under them.
person by one who has been given no authority or
legal representation, or who has acted beyond his
powers;
ART. 1406. When a contract is enforceable under
(2) Those that do not comply with the Statute of the Statute of Frauds, and a public document is
Frauds as set forth in this number. In the following necessary for its registration in the Registry of
cases an agreement hereafter made shall be Deeds, the parties may avail themselves of the
unenforceable by action, unless the same, or some right under Article 1357.
note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be ART. 1407. In a contract where both parties are
received without the writing, or a secondary incapable of giving consent, express or implied
evidence of its contents: ratification by the parent, or guardian, as the case
(a) An agreement that by its terms is not to be may be, of one of the contracting parties shall give
the contract the same effect as if only one of them
performed within a year from the making thereof;
were incapacitated.
(b) A special promise to answer for the debt,
If ratification is made by the parents or guardians,
default, or miscarriage of another;
as the case may be, of both contracting parties, the
(c) An agreement made in consideration of contract shall be validated from the inception.
marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or
ART. 1408. Unenforceable contracts cannot be
things in action, at a price not less than five
assailed by third persons.
hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the
evidences, or some of them, of such things in
action, or pay at the time some part of the
purchase money; but when a sale is made by
auction and entry is made by the auctioneer in his
sales book, at the time of the sale, of the amount
and kind of property sold, terms of sale, price,
names of the purchasers and person on whose
 ART. 1412. If the act in which the unlawful or
forbidden cause consists does not constitute a
CHAPTER 9 criminal offense, the following rules shall be
VOID OR INEXISTENT CONTRACTS[1] observed:
(1) When the fault is on the part of both
contracting parties, neither may recover what he
ART. 1409. The following contracts are has given by virtue of the contract, or demand the
inexistent and void from the beginning: performance of the other’s undertaking;
(1) Those whose cause, object or purpose is (2) When only one of the contracting parties is at
contrary to law, morals, good customs, public fault, he cannot recover what he has given by
order or public policy; reason of the contract, or ask for the fulfillment of
(2) Those which are absolutely simulated or what has been promised him. The other, who is
fictitious; not at fault, may demand the return of what he has
given without any obligation to comply with his
(3) Those whose cause or object did not exist at promise. (1306)
the time of the transaction;
(4) Those whose object is outside the commerce
of men; ART. 1413. Interest paid in excess of the interest
allowed by the usury laws may be recovered by
(5) Those which contemplate an impossible the debtor, with interest thereon from the date of
service; the payment.
(6) Those where the intention of the parties
relative to the principal object of the contract
cannot be ascertained; ART. 1414. When money is paid or property
delivered for an illegal purpose, the contract may
(7) Those expressly prohibited or declared void be repudiated by one of the parties before the
by law. purpose has been accomplished, or before any
damage has been caused to a third person. In such
These contracts cannot be ratified. Neither can the
case, the courts may, if the public interest will
right to set up the defense of illegality be waived.
thus be subserved, allow the party repudiating the
contract to recover the money or property.
ART. 1410. The action or defense for the
declaration of the inexistence of a contract does
ART. 1415. Where one of the parties to an illegal
not prescribe.
contract is incapable of giving consent, the courts
may, if the interest of justice so demands allow
recovery of money or property delivered by the
ART. 1411. When the nullity proceeds from the incapacitated person.
illegality of the cause or object of the contract, and
the act constitutes a criminal offense, both parties
being in pari delicto, they shall have no action
ART. 1416. When the agreement is not illegal per
against each other, and both shall be prosecuted.
se but is merely prohibited, and the prohibition by
Moreover, the provisions of the Penal Code
the law is designed for the protection of the
relative to the disposal of effects or instruments of
plaintiff, he may, if public policy is thereby
a crime shall be applicable to the things or the
enhanced, recover what he has paid or delivered.
price of the contract.
This rule shall be applicable when only one of the
parties is guilty; but the innocent one may claim ART. 1417. When the price of any article or
what he has given, and shall not be bound to commodity is determined by statute, or by
comply with his promise. (1305) authority of law, any person paying any amount
in excess of the maximum price allowed may
recover such excess.
ART. 1418. When the law fixes, or authorizes the ART. 1425. When without the knowledge or
fixing of the maximum number of hours of labor, against the will of the debtor, a third person pays
and a contract is entered into whereby a laborer a debt which the obligor is not legally bound to
undertakes to work longer than the maximum thus pay because the action thereon has prescribed, but
fixed, he may demand additional compensation the debtor later voluntarily reimburses the third
for service rendered beyond the time limit. person, the obligor cannot recover what he has
paid.

ART. 1419. When the law sets, or authorizes the

setting of a minimum wage for laborers, and a ART. 1426. When a minor between eighteen and
contract is agreed upon by which a laborer accepts twenty-one years of age who has entered into a
a lower wage, he shall be entitled to recover the contract without the consent of the parent or
deficiency. guardian, after the annulment of the contract
voluntarily returns the whole thing or price
received, notwithstanding the fact that he has not
ART. 1420. In case of a divisible contract, if the been benefited thereby, there is no right to
illegal terms can be separated from the legal ones, demand the thing or price thus returned.
the latter may be enforced.

ART. 1427. When a minor between eighteen and

ART. 1421. The defense of illegality of contract twenty-one years of age, who has entered into a
is not available to third persons whose interests contract without the consent of the parent or
are not directly affected. guardian, voluntarily pays a sum of money or
delivers a fungible thing in fulfillment of the
obligation, there shall be no right to recover the
ART. 1422. A contract which is the direct result same from the obligee who has spent or consumed
of a previous illegal contract, is also void and it in good faith. (1160a)
inexistent.

ART. 1428. When, after an action to enforce a

Title III.—NATURAL OBLIGATIONS[1] civil obligation has failed the defendant
voluntarily performs the obligation, he cannot
demand the return of what he has delivered or the
ART. 1423. Obligations are civil or natural. Civil payment of the value of the service he has
rendered.
obligations give a right of action to compel their
performance. Natural obligations, not being based
on positive law but on equity and natural law, do
not grant a right of action to enforce their ART. 1429. When a testate or intestate heir
performance, but after voluntary fulfillment by voluntarily pays a debt of the decedent exceeding
the obligor, they authorize the retention of what the value of the property which he received by
has been delivered or rendered by reason thereof. will or by the law of intestacy from the estate of
Some natural obligations are set forth in the the deceased, the payment is valid and cannot be
following articles. rescinded by the payer.

ART. 1424. When a right to sue upon a civil ART. 1430. When a will is declared void because
obligation has lapsed by extinctive prescription, it has not been executed in accordance with the
the obligor who voluntarily performs the contract formalities required by law, but one of the
cannot recover what he has delivered or the value intestate heirs, after the settlement of the debts of
of the service he has rendered. the deceased, pays a legacy in compliance with a
clause in the defective will, the payment is
effective and irrevocable.