COBLAW1: Obligations and

Contracts
 TABLE OF CONTENTS
CHAPTER 1: OBLIGATIONS..................................................................................................................... 4
REQUISITES OF AN OBLIGATION.................................................................................................................... 4
SOURCES OF AN OBLIGATION.................................................................................................................... 5
Law.................................................................................................................................................................... 5
Contracts.........................................................................................................................................................5
Quasi-contracts...........................................................................................................................................5
Delicts.............................................................................................................................................................. 6
Quasi-delicts.................................................................................................................................................6
CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS.................................................................6
GENERIC VS SPECIFIC OBJECTS................................................................................................................ 7
RIGHTS OVER FRUITS.................................................................................................................................... 8
Kinds of Fruits............................................................................................................................................. 8
DELIVERY............................................................................................................................................................... 9
Kinds of Delivery........................................................................................................................................ 9
OBLIGATIONS TO DO.......................................................................................................................................9
DELAY............................................................................................................................................................ 10
Requisites of Delay by the Debtor................................................................................................. 10
Ordinary Delay vs Legal Delay........................................................................................................ 11
Kinds of Delay..........................................................................................................................................11
VIOLATIONS OF OBLIGATIONS.................................................................................................................12
Grounds for Liability...............................................................................................................................12
FORTUITOUS EVENTS.................................................................................................................................. 14
PRESUMPTION OF PAYMENT...................................................................................................................15
Kinds of Presumptions.......................................................................................................................... 15
When Presumptions Do Not Apply..................................................................................................15
RIGHTS OF CREDITORS............................................................................................................................... 16
CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS..................................................................... 17
PURE & CONDITIONAL..................................................................................................................................17
OBLIGATION WITH A PERIOD....................................................................................................................19
DISTRIBUTIVE (ALTERNATIVE AND FACULTATIVE).................................................................. 20
JOINT AND SOLIDARY OBLIGATIONS................................................................................................... 21
DIVISIBLE AND INDIVISIBLE OBLIGATIONS.................................................................................... 25
OBLIGATIONS WITH A PENAL CLAUSE...............................................................................................26
CHAPTER 4: EXTINGUISHMENT OF OBLIGATIONS...................................................................28
 PAYMENT OR PERFORMANCE................................................................................................................ 28
LOSS OF THE THING DUE.......................................................................................................................... 32
CONDONATION/REMISSION OF DEBT................................................................................................. 33
CONFUSION/MERGER OF RIGHTS......................................................................................................... 34
COMPENSATION..............................................................................................................................................34
NOVATION...........................................................................................................................................................36
CHAPTER 5: CONTRACTS......................................................................................................................37
FORMS OF CONTRACTS................................................................................................................................ 37
STAGES IN LIFE OF A CONTRACT:................................................................................................. 38
CLASSIFICATIONS OF CONTRACTS...............................................................................................39
ESSENTIAL REQUISITES OF CONTRACTS........................................................................................ 40
FORM.....................................................................................................................................................................42
REFORMATION................................................................................................................................................ 43
INTERPRETATION..........................................................................................................................................43
DEFECTIVE CONTRACTS............................................................................................................................43
RESCISSIBLE CONTRACTS................................................................................................................. 43
VOIDABLE CONTRACTS.......................................................................................................................44
UNENFORCEABLE CONTRACTS......................................................................................................44
VOID OR INEXISTENT CONTRACTS..............................................................................................45
 CHAPTER 1: OBLIGATIONS
Obligation

●​ The word "obligation" comes from the Latin term “obligatio”, meaning a binding or tying.
●​ The goal of a debtor is often to be free from obligation (extinguishment of obligations).
●​ Article 1156. "An obligation is a juridical necessity to give, to do, or not to do."
-​ Juridical necessity means the courts can enforce the obligation in case of
noncompliance.

Examples of uses of Obligations To Give, To do, Or Not To Do

●​ Obligation to Give – A agrees to give B a car.
●​ Obligation to Do – A agrees to build a house for B.
●​ Obligation Not to Do – A agrees not to build a structure taller than
two floors in exchange for payment.

REQUISITES OF AN OBLIGATION

Passive Subject Debtor/Obligor Duty to fulfill an obligation

Active Subject Creditor/Obligee Right to demand fulfillment

Object/Prestation Subject Matter Conduct— to give, to do, or to not do

Juridical/Legal Tie Efficient Cause Binding relation or source of obligation

ARTICLE 1157. SOURCES OF AN OBLIGATION

1.​ Law
●​ Rule of conduct, just and obligatory, laid down by the legitimate authority for
common observance and benefit
●​ Explicitly imposed by statutes or law itself

Examples of uses of Obligations by Law

●​ Paying taxes
●​ Standing when the national anthem plays

2.​ Contracts
○​ Obligations that arise from stipulations from parties, need not be written
○​ Meeting of minds between two persons whereby one binds himself with respect to
the other, to give something or to render some service

●​ Quasi-contracts
○​ Juridical relations resulting from lawful, voluntary, and unilateral acts by virtue of
which, the parties become bound to each other to the end that no one will be
unjustly and rich at the expense of another.
○​ Quasi means semi— not properly a contract due to lack of mutual consent between
parties
■​ Solutio Indebiti -Juridical relation which is created when a thing is received
with no right to demand it and is delivered through mistake.
■​ Negotiorum Gestio - Voluntary management of property without
knowledge or consent of the latter.
 ●​ Delicts
○​ Criminal offenses and obligations arise from criminal offenses
○​ Criminal acts create civil liability.

●​ Quasi-delicts
○​ Arising from damages caused by fault or negligence, although there is no
contractual relation between parties
○​ Obliges a person to pay the injured party damages.

CHAPTER 2: NATURE AND EFFECT OF

OBLIGATIONS

Article 1163:

●​ A person obliged to give something must take care of it with the diligence of a good father
of a family unless the law or a contract stipulates a different standard.
●​ The default standard of care is ordinary care/due diligence of a good father of a family.
●​ Exceptions:
-​ If the law requires a higher standard, such as extraordinary diligence (e.g., public
transportation obligations to passengers).
-​ If the parties agree to a different standard in the contract (e.g., requiring security
guards for a car delivery).
-​ A lesser standard than ordinary care can also be agreed upon.

GENERIC VS SPECIFIC OBJECTS

Generic/Indeterminate Thing

●​ One which refers only to a class or genus to which it pertains and cannot be pointed out
with particularity
●​ Identified by its class or genus (e.g., "a car").
○​ The obligor must still perform the obligation by delivering another item of the same
kind.

Duties of a Debtor to Deliver a Generic Thing

●​ To deliver a thing which is of the quality intended by the parties

●​ To be liable for damages in case of fraud, negligence, or delay in the performance of his
obligation, or contravention of the tenor thereof.

Specific/Determinate Thing

●​ One which can be particularly designated or physically segregated from all others of the
same class
●​ Identified by its unique characteristics (e.g., a car with a specific plate number).
○​ If lost without fault of the obligor due to a fortuitous event, the obligation is
extinguished.

Duties of a Debtor to Deliver a Specific Thing

1.​ Preserve or take care of the thing

Diligence. The attention and care required of a person in a given situation and is the opposite
of negligence
 a.​ Diligence of a good father of a family. Ordinary care or that diligence which an
average person exercises over his own property.
b.​ Another standard of care. Another standard of care which the law or the stipulation
of the parties provide.
c.​ Factors to be considered. The diligence required depends on the nature of the
obligation, circumstances of the person, time, and place.
■​ General Rule: Debtor is not liable if his failure to preserve the thing is not
due to his fault or negligence but to fortuitous events
■​ Fortuitous events – an event of natural or human origin that could not have
been reasonably foreseen or expected
2.​ To deliver the fruits of the thing
3.​ To deliver the accessions and accessories
4.​ To deliver the thing itself
5.​ Answer for damages in case of non-fulfillment

RIGHTS OVER FRUITS

●​ Article 1164. The creditor has a right to the fruits of the thing from the time the obligation
to deliver it arises. However, he shall acquire no real right over it until the same has been
delivered to him.

Kinds of Fruits

1.​ Natural Fruits. Products of the soil (produced without the intervention of human labor),
and the young and other products of animals
a.​ e.g., young of animals, natural growths
2.​ Industrial Fruits. Products of land cultivation or human labor
a.​ e.g., crops from farming
3.​ Civil Fruits. Those derived by virtue of a juridical relation
a.​ e.g., rent from a leased property
 DELIVERY

Kinds of Delivery

●​ Traditio real (actual delivery). Physically handing over the object.

●​ Traditio symbolica (symbolic delivery). Delivery through a symbol (e.g., handing over car
keys or a title document).
●​ Traditio longa manu (long-hand delivery). Delivery by pointing at the object.
●​ Traditio brevi manu (short-hand delivery). When the buyer already possesses the item but
changes status from possessor to owner.

●​ Article 1165. When what is to be delivered is a determinate thing, the creditor, in addition to
the right granted him by Article 1170, may compel the debtor to make the delivery.
●​ If the thing is indeterminate or generic, he may ask that the obligation be complied with at
the expense of the debtor.
●​ If the obligor delays or has promised delivery to multiple people, they are liable for
fortuitous events until delivery is completed.
●​ The obligation to give a determinate thing includes that of delivering all its accessions and
accessories, even though they may not have been mentioned.

OBLIGATIONS TO DO

●​ Article 1167. If a person obliged to do something fails to do it, the same shall be executed at
his cost. This shall be observed if he does it in contravention of the tenor of the obligation.
○​ The obligee may have it executed at the obligor’s cost, plus damages.
○​ If done contrary to the terms of the obligation, it can be redone at the obligor’s
expense.
○​ If the work is poorly done, a court may order it to be undone and redone correctly.
 DELAY

Delay

●​ Article 1169. Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
●​ However, the demand by the creditor shall not be necessary in order that delay may exist:
○​ When the obligation or the law expressly so declares; or
○​ When from the nature and the circumstances of the 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
○​ When demand would be useless, as when the obligor has rendered it beyond his
power to perform.
●​ In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is Incumbent upon him. From the moment
one of the parties fulfills his obligation, delay by the other begins.

Requisites of Delay by the Debtor

●​ Failure of the debtor to perform his (positive obligation) on the data agreed upon
●​ Demand (not mere reminder or notice) made by the creditor to perform his obligation
which demand may either be judicial or extrajudicial
●​ Failure of the debtor to comply with such demand

Ordinary Delay vs Legal Delay

Ordinary Delay Legal Delay

Failure to perform on time but not yet legally Delay that results in liability for damages.
liable for damages. The obligee must make a judicial or
extrajudicial demand for performance. Until a
demand is made, the obligor is only in ordinary
delay.

Kinds of Delay

1.​ Mora Solvendi. Delay on the part of the obligor

○​ Effects:
■​ Breach of the obligation
■​ Liable for interest (obligation to pay money)
■​ Liable even for fortuitous event
■​ Generic thing: the debtor is not relieved from liability
2.​ Mora Accipiendi. Delay on the part of the creditor to accept the object of the obligation,
without any justifiable or valid reason
○​ Effects:
■​ Breach of the obligation
■​ Liable for damages suffered by the debtor
■​ Bears the risk or loss of the thing due
■​ The debtor is not liable for interest from the time of the creditor‘s delay
■​ The debtor may release himself from the obligation by the consignation of
the thing or sum due
 3.​ Compensatio Morae. Delay on the party of both, in which case the liabilities of both shall
be offset equitably. This is the kind of default that arises in a reciprocal obligation
○​ Effects:
■​ The delay of the obligor cancels out the effects of the delay of the obligee and
vice versa.

When Demand Is Not Necessary To Put Debtor In Delay

1.​ When the obligation so provides

2.​ When the law so provides
3.​ When time is of the essence
4.​ When demand would be useless
5.​ When there is performance by a party in reciprocal obligations

VIOLATIONS OF OBLIGATIONS

●​ Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are liable
for damages.

Grounds for Liability

1.​ Fraud. Deliberate or intentional evasion of the normal fulfillment of an obligation

a.​ Dolo Incidente (Incidental Fraud) – Committed in the performance of the
obligation. The contract is voidable. It is invalid until it is voided.
b.​ Dolo Causante (Causal Fraud) – Committed in the execution of the contract in
order to get the consent of the other party to enter into a contract which makes the
contract VOIDABLE.
2.​ Negligence. Voluntary act or omission, there being no malice, which prevents the normal
fulfillment of the obligation. It is the failure to exercise the degree of care required.
Responsibility arising from negligence in the performance of every kind of obligation is
also demandable, but such liability may be regulated by the courts, according to the
circumstances.
a.​ Contractual Negligence (Culpa Contractual) – negligence in contracts resulting in
their breach
i.​ The action can be pursued by proving the existence of the contract, and the
fact that the obligor failed to comply with the same.
b.​ Civil Negligence (Culpa Acquiliana) – negligence which by itself is the source of an
obligation between the parties not formally bound before by any pre-existing
contract (tort or quasi-delict)
i.​ The negligence or fault should be clearly established because it is the basis
of the action.
ii.​ The defendant may claim that it exercises due care, unlike in contractual
negligence.
c.​ Criminal Negligence (Culpa Criminal) – negligence resulting in the commission of
a crime
d.​ The level of negligence depends on:
i.​ Nature of the obligation
ii.​ Person, time, and place

3.​ Delay. Failure to comply with one's obligation with respect to time. Delay in the
performance of the obligation must either be malicious or negligent
4.​ Contravention of the terms of the obligation. The violation of the terms and conditions of
the agreement
 FORTUITOUS EVENTS

●​ Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not be foreseen, or which, though
foreseen, were inevitable.
●​ Fortuitous events. These are are unforeseen, or even if foreseen, are inevitable.
a.​ In general: those which are absolutely independent of human intervention. They are
sometimes called "acts of God", such as earthquakes, flash floods, tsunamis, intense
hurricanes, etc.
b.​ Force majeure (Caso Fortuito): those which are brought about by the acts,
legitimate or otherwise, of a person other than the obligor
i.​ Ordinary Fortuitous Events – those events which are common and which
the contracting parties could reasonably foresee (e.g., rain)
ii.​ Extraordinary Fortuitous Events – events which are uncommon and
which the contracting parties could not have reasonably foreseen (e.g.,
earthquake, fire, war, unusual flood)
●​ The following requisites must concur:
a.​ The event must be independent of the will of the debtor
b.​ The event is unforeseen or, if foreseen, is inevitable
c.​ The event must render impossible for the debtor to fulfill the obligation in a normal
manner
d.​ The debtor must be free of participation or the aggravation of the injury to the
creditor
e.​ In case of an obligation to give, the thing to be delivered is a specific object.
●​ No person shall be responsible for unforeseen or inevitable events (force majeure), except:
a.​ When expressly stated by law.
b.​ When stipulated in the contract.
c.​ When the nature of the obligation requires assuming risk (e.g., insurance contracts).
 ●​ Genus never perishes (Genus nunquam perit): If the obligation is to deliver a generic item,
its destruction does not excuse performance.
●​ If the object is specific, the obligation is extinguished by a fortuitous event.

PRESUMPTION OF PAYMENT

●​ Article 1176. The receipt of the principal by the creditor, without reservation with respect to
the interest, shall give rise to the presumption that said interest has been paid.
●​ The receipt of a later installment of a debt without reservation as to prior installments, shall
likewise raise the presumption that such installments have been paid.
●​ By presumption. Inference of a fact not actually known arising from its usual connection
with another which is known or proved. If something is presumed, it is not absolute.
Therefore, it can still be proven otherwise.

Kinds of Presumptions

●​ Conclusive Presumption. Cannot be contradicted like the presumption that everyone is

conclusively presumed to know the law
●​ Disputable (or Rebuttable) Presumption. One which can be contradicted or rebutted by
presenting proof to the contrary like the presumption established in Article 1167.

When Presumptions Do Not Apply

●​ With reservation as to interest

●​ Receipt for a part of principal: Only when the principal is fully receipted for, may failure to
reserve the claim for interest give rise to the presumption that said interest has been paid.
●​ Receipt Without Indication of Particular Installment Paid
●​ Payment of taxes
●​ Non-payment proven
 RIGHTS OF CREDITORS

●​ Article 1177. The creditors, after having pursued the property in possession of the debtor to
satisfy their claims, may exercise all the rights and bring all the actions of the latter for the
same purpose, save those which are inherent in his person; they may also impugn the acts
which the debtor may have done to defraud them.
●​ In case the debtor does not comply with his obligation, Article 1177 refers to the remedies
available to creditor against the debtor for the satisfaction of their claims:
a.​ Exact fulfillment or collection of the said amount (specific performance) with the
right to damages
b.​ If the debtor is still unable to pay, pursue the properties of the debtor. However, the
creditor was forbidden to possess all of it (Alienation of property).

●​ Accion Subrogatoria. An action where the creditor whose claims had not been fully
satisfied, may go after the debtors (third persons) of the defendant-debtor
a.​ The debtor can transfer payment collection rights to their debtor through court
action, provided they have someone with a debt on them.
●​ Accion Pauliana. An action where the creditor files an action in court for the rescission of
acts or contracts entered into by the debtor designed to defraud the former
a.​ If a debtor intentionally sells all their property to prove insolvency, the creditor can
seek court intervention to cancel the debtor's defrauding acts or contracts.
 CHAPTER 3: DIFFERENT KINDS OF
OBLIGATIONS
Major Classifications of Obligations According to the Civil Code

●​ An obligation can be classified as belonging to one or more of these obligations:

●​ Pure
●​ Conditional
●​ Obligations with a period
●​ Alternative
●​ Facultative
●​ Joint
●​ Solidary
●​ Divisible
●​ Indivisible

PURE & CONDITIONAL

Pure Obligation

●​ Does not have a condition and does not have a period

●​ Demandable Immediately

Conditional Obligation

●​ Depends on a future and uncertain event or a past event unknown to the parties.
●​ Not demandable immediately because it depends on the condition happening

​ Condition
○​ A future and uncertain event or a past event unknown
■​ Ex.: A will give B Php. 1M if he wins the lottery (Future).
■​ Ex.: H will give J Php. 10k if he wore a blue shirt while teaching at DLSU on
September 13, 2015 (Past).
○​ SUSPENSIVE & RESOLUTORY CONDITIONS
■​ Suspensive Conditions: Suspends the effect of the obligation until the
condition happens
●​ Ex.: K will give L Php. 1M if they win the grand prize.
■​ Resolutory Condition: Extinguishes the obligation and terminates the
rights once the condition happens.
●​ M will give N Php. 10K as his allowance until he finishes his first
degree program in college. The obligation ends once N graduates.

○​ POTESTATIVE, CASUAL, AND MIXED CONDITIONS

■​ Potestative Condition: Depends exclusively on the will of one of the

parties.

●​ If dependent solely on the debtor's will, the obligation is null and

void.

○​ Ex.: Q (debtor) will give R (creditor) Php. 10k if he (debtor)

wants to (Invalid because there is no juridical necessity).

●​ If dependent on the creditor’s will, the obligation is valid.

○​ Ex.: S (debtor) will give T (creditor) Php. 10k if T wants it

(Valid because it depends on the creditor).

■​ Casual Condition: Depends on chance or the will of a third person.

●​ Ex.: U will give V Php. 10k if their bet for Ms. Universe wins.

■​ Mixed Condition: Partly dependent on the will of one party and partly on
chance or a third person.

●​ Ex.: A will pay B Php. 10k if B gets a promotion (Valid because it

involves external factors).

○​ IMPOSSIBLE CONDITIONS
 ■​ Physically impossible or contrary to law, morals, public order, public policy,
or good customs.

●​ If attached to an obligation, the obligation is null and void.

●​ Ex.: W will give X Php. 10k if he can go to the moon on foot

(Physically impossible).

●​ Ex.: Y will give Z Php. 10k if he finds him a supplier of illegal drugs
(Contrary to law).

Obligation with a Period

●​ A period is presumed to benefit both debtor and creditor unless stated otherwise.
○​ Ex.: J will give K Php. 10k on December 25, 2030.
■​ Debtor's Benefit: The creditor cannot demand payment before Dec. 25,
2030.
■​ Creditor's Benefit: The debtor cannot compel the creditor to accept
payment before Dec. 25, 2030.
●​ Courts can fix the period when the obligation is indefinite.
○​ Ex.: L wants to give M Php. 10k when they have the means. M can request the court
to set a definite period.
●​ Loss of Benefit of the Period: The debtor loses this benefit if they:
○​ Become insolvent or bankrupt.
○​ Fail to provide collateral as promised.
○​ Deliver collateral but its value is lost, impaired, or invalidated.
○​ Violate any undertaking.
○​ Attempt to evade obligations (e.g., fleeing to another country).

Period
●​ A future and uncertain event or a past event unknown
■​ Ex.: A will give B Php. 1M if he wins the lottery (Future).
■​ Ex.: H will give J Php. 10k if he wore a blue shirt while teaching at DLSU on
September 13, 2015 (Past).

Period vs Condition

Fulfillment

●​ Period: Certain to happen

 ●​ Condition: Uncertain to happen

Time

●​ Period: Future
●​ Condition: Future (uncertain) or past (unknown to parties)

Effect

●​ Period: Fixes the time of demandability

●​ Condition: Causes the obligation to arise (suspensive) or cease (resolutory)

DISTRIBUTIVE (ALTERNATIVE AND FACULTATIVE)

Alternative Obligation

●​ The debtor may choose among multiple prestations.

○​ Ex.: N obliges to give O either their car, their condo, or Php. 25M.
○​ The creditor cannot demand a combination, only one prestation.
○​ If the creditor prevents the debtor from choosing, the debtor may rescind the contract.

Facultative Obligation

●​ One prestation is agreed upon, but there is an optional substitute.

○​ Ex.: P obliges to sing at Q’s birthday, but if unable, will send a Php. 25k gift.
 JOINT AND SOLIDARY OBLIGATIONS

JOINT AND SOLIDARY OBLIGATIONS

Article 1207. The concurrence of two or more creditors or of two or more debtors in one
and the same obligation does not imply that each one of the former has a right to
demand, or that each one of the latter is bound to render, entire compliance with the
prestation. There is a solidary liability only when the obligation expressly so states, or
when the law or the nature of the obligation requires solidarity.

KINDS OF OBLIGATIONS ACCORDING TO THE

NUMBER OF PARTIES
●​ Individual obligation – one where there is only one (1) obligor or one (1) obligee
●​ Collective obligation – one where there are two (2) or more debtors and/or two (2)
or more creditors. It may be joint or solidary.

JOINT OBLIGATIONS
●​ One where the whole obligation is to be paid or fulfilled proportionately by the
different debtors and/or is to be demanded proportionately by the different
creditors.
●​ Joint Debtors – means there are two or more debtors or solidary collective
debtors
●​ Joint Creditors – two or more creditors
●​ If the obligation is joint, all debtors are only obliged for the proportionate share of
the obligation. Meaning the creditor cannot the whole amount if the debtor has
no ability to pay the whole amount.

SOLIDARY OBLIGATIONS
●​ One where each one of the debtors is bound to render, and/or each one of the
creditors has a right to demand from any of the debtors, entire compliance with
the prestation.
●​ In solidary obligation, all debtors are considered as one person. Meaning, either of
them can pay the whole amount.
●​ Article 1211. If the obligation is solidary and the creditor demands payment of the
whole amount, one of the debtors may pay only what he can pay. But he can still
go to each of the debtors for the remaining balance.
 ●​ Solidarity may exist when it is imposed in a final judgment against several
defendants.
KINDS OF SOLIDARITY ACCORDING TO THE PARTIES BOUND:
●​ Passive Solidarity – solidarity on the part of the debtors
●​ Active Solidarity – solidarity on the part of the creditors
●​ Mixed Solidarity – solidarity on the part of the debtors and creditors

KINDS OF SOLIDARITY ACCORDING TO THE

PARTIES BOUND:

●​ Conventional Solidarity – solidarity agreed by the parties

●​ Legal Solidarity – solidarity imposed by the law
●​ Real Solidarity: solidarity imposed by the nature of the obligation

Article 1208. If from the law, or the nature or the wording of the obligations to which the
preceding article refers, the contrary does not appear, the credit or debt shall be
presumed to be divided into as many equal shares as there are creditors or debtors, the
credits or debts being considered distinct from one another, subject to the Rules of Court
governing the multiplicity of suits.

Article 1209. If the division is impossible, the right of the creditors may be prejudiced
only by their collective acts, and the debt can be enforced only by proceeding against all
the debtors. If one of the latter should be insolvent, the others shall not be liable for his
share.

Article 1210. The indivisibility of an obligation does not necessarily give rise to solidarity.
Nor does solidarity of itself imply indivisibility.

Article 1211. Solidarity may exist although the creditors and the debtors may not be
bound in the same manner and by the same periods and conditions.
KINDS OF SOLIDARY OBLIGATION ACCORDING TO THE LEGAL TIES:
●​ Uniform – when the parties are bound by the same stipulation
●​ Non-uniform or Varied – when the parties are not subject to the same
stipulations

Article 1212. Each one of the solidary creditors may do whatever may be useful to the
others, but not anything which may be prejudicial to the latter.
Article 1213. A solidary creditor cannot assign his rights without the consent of the
others.

Article 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.

Article 1215. Novation, compensation, confusion, or remission of the debt made by any of
the solidary creditors or with any of the solidary debtors shall extinguish the obligation,
without prejudice to the provisions of Article 1219. The creditor who may have executed
any of these acts, as well as he who collects the debt, shall be liable to the others for the
share in the obligation corresponding to them.

MODES OF EXTINGUISHMENT OF OBLIGATION:

●​ Novation – The terms of the original obligation has been modified or altered that
rises to a new obligation. Therefore, the old obligation has been extinguish, but
there‘s still a new obligation.
●​ Compensation – Compensation is when you have obligation to person who is
also obliged to you.
●​ Confusion – The personality of the debtor and creditor is now merged and there’s
a confusion as to who is liable to the obligation which effects to the
extinguishment of the obligation.
●​ Remission or Condonation – The debt was condoned or forgiven. But in case
there’s a solidary debtor, the creditor who effected the remission will make a
reimbursement to the other debtors for their share.

Article 1216. The creditor may proceed against any one of the solidary debtors or some or
all of them simultaneously. The demand made against

one of them shall not be an obstacle to those which may subsequently be directed
against the others, so long as the debt has not been fully collected.

Article 1217. Payment made by one of the solidary debtors extinguishes the obligation. If
two or more solidary debtors offer to pay, the creditor may choose which offer to accept.
 He who made the payment may claim from his co-debtors only the share which
corresponds to each, 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 demanded.

When one of the solidary debtors cannot, because of his insolvency, reimburse his
share to the debtor paying the obligation, such share shall be borne by all his co-debtors,
in proportion to the debt of each.

EFFECTS OF PAYMENT BY A SOLIDARY DEBTOR:

●​ Between the solidary debtors and creditor(s): Payment made by one of the
solidary debtors extinguishes the obligation. (When speaking of payment that
extinguishes an obligation, the law refers to payment in full.) However, the
creditor for his protection is given the right to choose which offer to accept if two
(2) or more solidary debtors offer to pay. (par. 1.)
●​ Among the solidary debtors: After payment of the debt, the paying solidary
debtor can demand reimbursement from his co-debtors for their proportionate
shares with (legal) interest only from the time of payment.
●​ Among the solidary creditors: There receiving creditor is jointly liable to the
others for their corresponding share. The receiving creditor has the obligation to
give the corresponding share in the credit to his other co-creditors

Article 1218. Payment by a solidary debtor shall not entitle him to reimbursement from
his co-debtors if such payment is made after the obligation has prescribed or become
illegal.

Article 1219. The remission made by the creditor of the share which affects one of the
solidary debtors does not release the latter from his responsibility towards the
co-debtors, in case the debt had been totally paid by anyone of them before the
remission was effected.

Article 1220. The remission of the whole obligation obtained by one of the solidary
debtors, does not entitle him to reimbursement from his co-debtors.

Article 1221. If the thing has been lost or if the prestation has become impossible
without the fault of the solidary debtors, the obligation shall be extinguished.
 If there was fault on the part of any one of them, all shall be responsible to the
creditor, for the price and the payment of damages and interest, without prejudice to
their action against the guilty or negligent debtor.
If through a fortuitous event, the thing is lost or 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 preceding
paragraph shall apply.

Article 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all
defenses which are derived from the nature of the obligation and of those which are
personal to him, or pertain to his own share. With respect to those which personally
belong to the others, he may avail himself thereof only as regards that part of the debt
for which the latter are responsible.

DIVISIBLE AND INDIVISIBLE OBLIGATIONS

Article 1223. The divisibility or indivisibility of the things that are the object of
obligations in which there is only one debtor and only one creditor does not alter or
modify the provisions of Chapter 2 of this Title.

DIVISIBLE OBLIGATIONS
●​ One the object of which, in its delivery or performance, is capable of partial
fulfillment.

INDIVISIBLE OBLIGATIONS
●​ One the object of which, in its delivery or performance, is not capable of partial
fulfillment.

Article 1224. A joint indivisible obligation gives rise to indemnity for damages from the
time anyone of the debtors does not comply with his undertaking. The debtors who may
have been ready to fulfill their promises shall not contribute to the indemnity beyond
the corresponding portion of the price of the thing or of the value of the service in which
the obligation consists.
Article 1225. For the purposes of the preceding articles, obligations to give definite
things and those which are not susceptible of partial 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 accomplishment of work by metrical units, or analogous things which by their
nature are susceptible of partial performance, it shall be divisible.

However, even though the object or service may be physically divisible, an

obligation is indivisible if so provided by law or intended by the parties.

In obligations not to do, divisibility or indivisibility shall be determined by the

character of the prestation in each particular case.

OBLIGATIONS WITH A PENAL CLAUSE

Article 1226. A joint indivisible obligation gives rise to indemnity for damages from the
time anyone of the debtors does not comply with his undertaking. The debtors who may
have been ready to fulfill their promises shall not contribute to the indemnity beyond
the corresponding portion of the price of the thing or of the value of the service in which
the obligation consists.

PENAL CLAUSE
●​ An accessory undertaking attached to an obligation to assume greater liability in
case of breach, ie, the obligation is not fulfilled, or is partly or irregularly complied
with.

PURPOSES OF PENAL CLAUSE:

●​ To insure their performance by creating an effective deterrent against breach,
making the consequences of such breach as onerous as it may be possible. This is
the general purpose of a penal clause.
●​ To substitute a penalty for the indemnity for damages and the payment of
interests in case of non-compliance (Art. 1226.); or to punish the debtor for the
non-fulfillment or violation of his obligation.

KINDS OF PENAL CLAUSE:

●​ As to its origin:
○​ Legal penal clause: when it is provided by law;
 ○​ Conventional penal clause: when it is provided for by stipulation of the
parties.
●​ As to its purpose:
○​ Compensatory penal clause: when the penalty takes the place of damages;
and is
○​ Punitive penal clause: when the penalty imposed merely as punishment for
breach.
●​ As to its demandability or effect:
○​ Subsidiary or alternative penal clause: when only the penalty can be
enforced;
○​ Joint or cumulative penal clause: when both the principal obligation and
the penal clause can be enforced.

Article 1227. The debtor cannot exempt himself from the performance of the obligation
by paying the penalty, save in the case where this right has been expressly reserved for
him. Neither can the creditor demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time, unless this right has been clearly granted
him. However, if after the creditor has decided to require the fulfillment of the obligation,
the performance thereof should become impossible without his fault, the penalty may be
enforced.

Article 1228. Proof of actual damages suffered by the creditor is not necessary in order
that the penalty may be demanded

Article 1229. The judge shall equitably reduce the penalty when the principal obligation
has been partly or irregularly complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.

Article 1230. The nullity of the penal clause does not carry with it that of the principal
obligation.

The nullity of the principal obligation carries with it that of the penal clause
 CHAPTER 4: EXTINGUISHMENT OF
OBLIGATIONS

Payment/Performance Most common manner of extinguishing obligations; the debtor

fulfills the obligation.

Loss of Thing Due If the specific thing to be delivered is lost due to no fault of the
debtor, the obligation is extinguished.

Condonation/Remission When the creditor voluntarily waives his right to collect payment.
of Debt

Confusion/Merger When the creditor and debtor become the same person.

Compensation When two persons who are mutually creditors and debtors—this
sets off their respective obligations.

Novation When a new obligation is substituted for an old one, either by

changing its object, principal conditions, or replacing the debtor
or creditor.

Additional causes include annulment, rescission, fulfillment of a resolutory condition, and prescription.

PAYMENT OR PERFORMANCE

●​ Delivery of money or performance in any other manner of an obligation.

 ●​ Article 1232:PAYMENT/PERFORMANCE: Payment means not only the delivery of money
but also the performance, in any other manner, of an obligation.
●​ Article 1233: PAYMENT SHOULD BE COMPLETE. A debt shall not be understood to have
been paid unless the thing or service in which the obligation consists has been completely
delivered or rendered, as the case may be.
●​ Article 1234: SUBSTANTIAL PERFORMANCE. If an obligation is substantially performed in
good faith, it may be considered complete, but subject to damages.
●​ Article 1235: ACCEPTANCE WITHOUT PROTEST. If the creditor accepts incomplete or
irregular performance without protest, the obligation is deemed fulfilled.
●​ Article 1236: PAYMENT BY A THIRD PERSON. The creditor is not obliged to accept
payment from a third party unless stipulated. However, if the third person pays without
debtor’s consent, they can only recover to the extent the debtor benefited.
●​ Article 1237: SUBROGRATION. A third person paying a debt cannot demand the rights of
the creditor unless expressly subrogated.
●​ Article 1238: PAYMENT AS DONATION. If a third party pays a debt without expecting
reimbursement, it is considered a donation. Requires the debtor’s consent.

Article 1240: Receiving of Payment

●​ Payment must be made to:

○​ Creditor
○​ Successor in interest
○​ Any person authorized to receive
■​ If paid to someone else, the obligation is not extinguished.
Article 1241: Payment to Incapacitated Person

●​ Payment to a third party is valid only if:

○​ The third person benefited the creditor.
○​ The creditor later ratifies the payment.
○​ The creditor’s actions led the debtor to believe the third person was authorized.

Article 1244: Obligation to Deliver Specific Things

●​ A debtor cannot compel the creditor to accept a different object or amount than what was
agreed upon, even if it's of greater value.

Article 1245: Dation in Payment (Dación en Pago)

●​ Dation in Payment happens when a debtor transfers ownership of property to the creditor
as the equivalent of payment/performance
●​ Governed by the law on sales.

Example of use of Dation in Payment (Dación en Pago)

●​ A owes B ₱1,000,000 but is struggling financially. A offers a piece of
land worth ₱1,000,000 as payment. If B accepts, the debt is
extinguished.

Article 1249: Legal Tender

●​ Debts must be paid in legal tender (Philippine currency issued by the BSP)
●​ Checks and promissory notes are not legal tender unless encashed.

Example of use of Legal Tender

●​ A owes B ₱5,000. A offers a check. B can refuse and demand cash.
Article 1250: Inflation and Deflation

●​ If extraordinary inflation or deflation happens, the original value of the currency is used
unless agreed otherwise.

Example of use of Inflation and Deflation

●​ A owes B $10,000 when $1 = ₱50. If the peso devalues to $1 = ₱100, A
still owes the same dollar amount unless otherwise agreed.

Article 1251: Place of Payment

●​ Payment location follows the contract.

●​ If unspecified, it happens:
○​ Where the object was when the contract was made (for specific goods).
○​ At the debtor’s residence (for generic obligations).

Articles 1252 - 1254: Application of Payments

●​ If a debtor has multiple debts to one creditor, they can choose which debt their payment
applies to.
●​ If the debtor does not choose, the payment will apply to the most burdensome debt.

Example of use of Application of Payments

●​ A owes B:
○​ ₱50,000 (high-interest loan)
○​ ₱100,000 (no interest)
■​ A pays ₱50,000.
■​ A can choose which debt it applies to.
Article 1255: Payment by Cession (Cession in Payment)

●​ A debtor can cede/assign all properties to creditors when unable to pay debts.
●​ The creditors sell the properties and divide the proceeds.
●​ This cession, unless there is a stipulation to the contrary, shall only release the debtor from
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 creditors shall be governed by
special laws.
●​ Requisites:
○​ There must be two or more creditors;
○​ The debtor must be (partially) insolvent;
○​ The assignment must involve all the properties of the debtor; and
○​ The cession must be accepted by the creditors.

LOSS OF THE THING DUE

●​ Article 1262-1265. An obligation which consists in the delivery of a determinate

thing shall be extinguished if it should be lost or destroyed without the fault of the
debtor, and before he has incurred in delay. When by law or stipulation, the obligor
is liable even for fortuitous events, the loss of the thing does not extinguish the
obligation, and he shall be responsible for damages. The same rule applies when the
nature of the obligation requires the assumption of risk.
●​ If an obligation involves a specific object and it is lost without fault, the obligation is
extinguished.
-​ In an obligation to deliver a generic thing, the loss or destruction of
anything of the same kind does not extinguish the obligation.
●​ If the debtor is at fault, they must pay damages.
●​ If the loss is partial, whether the obligation is extinguished or not is up to the courts.
 Example of use of Loss of the Thing Due
●​ A must deliver a painting, but it burns in a fire before delivery. The
obligation is extinguished unless A was negligent.

●​ Article 1266: IMPOSSIBLE OBLIGATIONS. The debtor in obligations to do shall also be

released when the prestation becomes legally or physically impossible without the fault of
the obligor.
●​ Article 1267: IMPOSSIBLE OBLIGATIONS. Article 1267. When the service has become so
difficult as to be manifestly beyond the contemplation of the parties, the obligor may also
be released therefrom, in whole or in part.
●​ Article 1268: CRIMINAL OFFENSES. When the debt of a thing certain and determinate
proceeds from a criminal offense, the debtor shall not be exempted from the payment of its
price.
●​ Article 1269: PRESUMPTION OF FAULT IN THE LOSS OF A THING. The obligation having
been extinguished by the loss of the thing, the creditor shall have all the rights of action
which the debtor may have against third persons by reason of the loss.

CONDONATION/REMISSION OF DEBT

●​ Article 1270. Condonation (Remission) – The creditor forgives the debt without
accepting any payment.
●​ Requires acceptance by the debtor.

Example of use of Condonation/Remission of Debt

●​ X owes Y P10,000. Y, out of generosity, forgives the debt. If X accepts,
the obligation is extinguished.
●​ Article 1272: IF A DOCUMENT PROVING A DEBT IS IN THE HANDS OF THE DEBTOR.
Whenever the private document in which the debt appears is found in the possession of the
debtor, it shall be presumed that the creditor delivered it voluntarily, unless the contrary is
proved.
●​ Article 1273: ACCESSORY OBLIGATIONS. The renunciation of the principal debt shall
extinguish the accessory obligations; but the waiver of the latter shall leave the former in
force.

CONFUSION/MERGER OF RIGHTS

●​ Article 1275. The obligation is extinguished from the time the characters of creditor
and debtor are merged in the same person.

Example of use of Confusion/Merger of Rights

●​ B borrows P1M from his father, A. If A dies and B inherits the debt,
the obligation is extinguished.

COMPENSATION

●​ Article 1278. Compensation shall take place when two persons, in their own right,
are creditors and debtors of each other.
●​ When two persons are reciprocally debtors and creditors, debts may be offset
against each other.
●​ Requisites:
-​ Both parties must be mutually creditors and debtors in their own right and
as principals;
-​ Both debts must consist of a sum of money or if consumable, of the same
kind or quality;
-​ Both debts are due;
-​ Both debts are liquidated and demandable; and
-​ Neither debt must be retained in a controversy commenced by third person
and communicated with debtor (neither debt is garnished).

Example of use of Compensation

●​ A owes B P20,000, while B owes A P15,000. The debts offset, and A
only needs to pay B P5,000.

COMPENSATION

●​ Article 1278. Compensation shall take place when two persons, in their own right,
are creditors and debtors of each other.
●​ When two persons are reciprocally debtors and creditors, debts may be offset
against each other.
●​ Requisites:
-​ Both parties must be mutually creditors and debtors in their own right and
as principals;
-​ Both debts must consist of a sum of money or if consumable, of the same
kind or quality;
-​ Both debts are due;
-​ Both debts are liquidated and demandable; and
-​ Neither debt must be retained in a controversy commenced by third person
and communicated with debtor (neither debt is garnished).

Example of use of Compensation

●​ A owes B P20,000, while B owes A P15,000. The debts offset, and A
only needs to pay B P5,000.

NOVATION

●​ Article 1291. Obligations may be modified by:

-​ Changing their object or principal conditions;
-​ Substituting the person of the debtor;
-​ Subrogating a third person in the rights of the creditor.
●​ The total or partial extinction of an obligation through the creation of a new one
that substitutes it.
●​ Operates both as a means to extinguish an old obligation and to create a new one.

Example of use of Novation

●​ C owes D P100,000, payable in cash. They agree that C will pay with a
car instead. The original obligation is extinguished through
novation.
 CHAPTER 5: CONTRACTS
Contract

●​ A contract is a meeting of minds between two persons whereby one binds himself with
respect to the other, to give something or to render some service. (Binding agreements)
●​ Must be between 2 contracting parties.
●​ A single person may create a contract by himself where he represents distinct interests.
●​ Meeting of minds takes place when an offer by one party is accepted by the other.
●​ A contract does not necessarily need to be written except for contracts that the law requires.
●​ It is also a source of an obligation

Form of Contracts

●​ As a general rule, contracts do not have to be in a certain form in order for them to be valid.
However, there are certain cases which are an exception to this general rule.

CONTRACT vs. OBLIGATION

●​ Contract is one of the sources of obligation
●​ Obligation is the legal tie or relation itself that exists after a contract has been
entered into
●​ Hence, there can be no contract if there is no obligation. But an obligation may
exist without a contract.

CONTRACT vs. AGREEMENT

-​ All contracts are agreements but not all agreements are contracts
●​ Valid Contract - those that meet all legal requisites for the type of
agreement involved (legally binding and enforceable).
●​ Mutuality of Contracts - contracts must bind both parties, it’s validity and
compliance must be mutual.
 ●​ Freedom to Contract - the right to enter into legally valid contracts. An
individual dies not have an absolute right to enter into any kind of contract.
○​ Limitations on the Freedom to Contract:
■​ Law - contract entered into must be in accordance with the
law
■​ Police power - all contractual obligations are subject ti the
possible exercise of the police power of the state.
●​ Exclusivity of Contracts - contracts take effect only between contracting
parties, their assigns, and heirs. A contract will not bind third persons or
the whole wold.
○​ Exceptions:
■​ Stipulation pour atrui (third-party stipulations)
■​ Contracts creating real rights
■​ Contracts entered into to defraud creditors
■​ Contracts violdated due to the inducement of a third person
●​ Public Order - refers to public safety although considered to mean also the
public weal.
●​ Public Policy - broader than public order; may not only refer to public
safety but also considerations which are moved by common good.
●​ Nominate Contracts - has a specific name or designation in law
●​ Innominate Contracts - no specific name or designation in law; shall be
regulated by stipulations of parties.
○​ Kinds:
■​ I give that you may give
■​ I give that you may do
■​ I do that you may give
■​ I do that you may do
●​ Solemn Contract - requires compliance with certain formalities prescribed by law
(donation of real property which must be in a public instrument)

Cases when third person may be affected by a contract:

●​ In contracts containing a stipulation in favor of a third person
●​ In contracts creating real rights
●​ In contracts entered into to defraud creditors
●​ In contracts which have been violated at the inducement of a third person.

STAGES IN LIFE OF A CONTRACT:

 ●​ Preparation or Negotiation - parties have not yet arrived at any definite
agreement.
●​ Perfection or Birth - parties have come to a definite agreement or meeting of
minds regarding the subject matter and cause of contract.
●​ Consummation or Termination - parties have performed their respective
obligations and contract may be said to have been fully accomplished and
executed. A contract may also be terminated after its perfection, not by
performance but by mutual agreement of the parties.

CLASSIFICATIONS OF CONTRACTS
1.​ According to Perfection or Formation
a.​ Consensual - perfected by mere agreement /consent of parties (sales,
lease)
b.​ Real - Requires not only the consent of the parties for perfection, but also
the delivery of the object by 1 party to the other (deposit, pledge)
c.​ Formal - Requires some particular form (donation, mortgage)
2.​ According to Cause or equivalent value of prestation
a.​ Onerous - each of the parties aspire to procure for himself a benefit
through the giving of an equivalent or compensation (sale)
b.​ Gratuitous - one of the parties proposes to give to the other a benefit
without any equivalent or compensation (commodatum)
c.​ Remunerative - For service previously rendered
3.​ According to Degree of Dependence
a.​ Principal - one which can subsist independently from other contracts and
whose purpose can be fulfilled by themselves (sales, lease)
b.​ Accessory - one which can exist only as a consequence of, or in relation
with, another prior contract (pledge, mortgage)
c.​ Preparatory - one which has for its object the establishment of a condition
in law which is necessary as a preliminary step towards the celebration of
another subsequent contract (partnership, agency)
4.​ According to Parties Obligated
a.​ Unilateral - One which gives rise to an obligation for only one of the
parties (commodatum, gratuitous deposit)
b.​ Bilateral - One which gives rise to reciprocal obligations for both parties
(sale, lease)
5.​ According to Name or Designation
 a.​ Nominate - One which has a name and is regulated by special provisions of
law (sale, deposit, agency, lease)
i.​ Innominate - No specific name or designation in law
b.​ According to Subject Matter
a.​ Involving things (sale, deposit, pledge)
b.​ Involving rights or credits (usufruct, assignment of credits)
c.​ Involving services (agency, lease of services)
c.​ According to Number of Persons Who Participated in the Drafting of
Contracts
i.​ Ordinary (sale)
ii.​ Contract of adhesion - Provisions are drafted by only one party and
the only participation of the other party is to sign his name, his
signature or his adhesion to the contract (insurance)

ESSENTIAL REQUISITES OF CONTRACTS

CONSENT OF THE CONTRACTING PARTIES
1.​ Offer (certain) + Acceptance (absolute, made known) = Consent
a.​ Is made or achieved by both parties when somebody initiates and we call
that as an offer, an offer to enter in a contract is initiated by one party and
the offer must be certain, it must be something that is definitive and the
moment the offer is accepted by the other party consent is already
achieved.
b.​ The acceptance of the other party must be absolute, categorical and the
moment it is made known by the authority to the author, since there is
already the presence of offer which is certain and acceptance that is
absolute then consent is already achieved.
i.​ If acceptance is qualified it is a counter offer. No consent can be
achieved in order to perfect a valid contract.
c.​ Necessary Legal Capacity
i.​ At Least 18 years old
ii.​ Not insane
iii.​ Not a deaf-mute, does not know how to write. The parties giving the
offer and acceptance are able to express freely their will or their
agreement or consent to the offer or acceptance.
d.​ No “Vice” (defect) of Consent Fraud - Vices of Consent
i.​ Mistake - must pertain to the condition or the object which
principally entities or moved one or both parties to enter to a
 contract in good faith meaning that had they known about the risk
doubt about the contingency very well they have not given the
consent to the contract. A mistaken consent if not a valid consent
ii.​ Violence - whether there is a physical serious irresistible force
employed by one party as against the other in order to secure the
giving of consent just like intimidation.
iii.​ Intimidation - but in intimidation there is no serious physical force
yet but rather there is unreasonable but very well grounded fear of
an imminent or grave danger if the party will not provide his or her
consent to their contract is intimidation.
e.​ Undue Influence - when somebody exercises moral ascendancy to exude a
proper advantage or power over the will of another, consent even if given is
defective because of the undue influence of the person to another.
2.​ Fraud (Causal Fraud) - is that which will make the given of consent defective
because the person would not have agreed or not given his or her consent.
Incidental Fraud, there is commission of fraud only at the time of the
performance of the obligation or contract but consent at the time of perfection
had already been validly given. If Dolo Incidente = Damages only.

OBJECT CERTAIN
●​ subject matter of the contract

THING RIGHT SERVICE

Not outside the commerce Not Intransmissible (one Law, morals, good
of man person to another person) customs,
public order or public
policy

Existing Determinate/Determinable

Licit Not impossible

Determinate/Determinable

Not impossible

CAUSE OF THE OBLIGATION WHICH IS ESTABLISHED

 ●​ The reason why are the contracting parties entering into that particular contract.
It is the why of the contract. The reason why the debtor and creditor agreed with
the contract.
●​ Requisites:
○​ It must exist at the time the contract is entered into;
○​ It must be lawful;
○​ It must be true or real.

MOTIVE vs. CAUSE

CAUSE MOTIVE

Cause is the immediate or direct reason Motive is the indirect reason

Cause is always known to the other party Motive may be unknown

Cause is an essential element of a contract Motive is not an essential element of a

contract

Illegality of the cause affects the validity Illegality of a motive does not render a
of a contract contract void

FORM
●​ The form of a contract may be oral, in writing, parly oral or partly in writing
●​ As a general rule, the form does not not affect the validity of a contract, provided
the three essential requisites (consent, object, cause) are present.
●​ Exception:
○​ When the law states otherwise

Art 1358. Cases requiring that a Contract must be in certain form / appear in a public
document (must be in writing and notarized):

1.​ Contracts involving the creation, transmission, modification, or extinguishment

of real rights over immovable property;
2.​ Renunciation of hereditary rights;
3.​ The power to administer property;
4.​ Cession of actions or rights.
-​ Failure to comply with the required form would still make the contract valid but
will remain UNENFORCABLE until the parties have observed the proper form.
REFORMATION
●​ A REMEDY wherein an already valid, existing contract is amended to reflect the
contracting parties’ real intention or agreement.
●​ The rationale is that it is considered unjust to allow enforcement of a contract that
does not precisely reflect the parties’ intentions, and the courts do not attempt to
make another contract for the parties.

INTERPRETATION
2 Basic Rules:
●​ If the provisions of the contracts is clear, DON’T interpret; hence, parties must
follow the literal meaning of the terms under the contract.
●​ If the provisions of the contract is vague, interpret by taking into ocnsideration
the INTENTION of the parties.

DEFECTIVE CONTRACTS
RESCISSIBLE CONTRACTS
●​ Least defective contract
●​ Valid contracts that are deemed defective by reason of lesion.
●​ Lesion - economic damage or injury/loss
●​ Rescission - remedy granted by law to contracting parties and sometimes even
third persons to secure reparation of damages caused by a valid contract, by
means of restoration of things to condition in which they were prior to
celebration of said contract.
●​ 5 Instances where contracts are Rescissible:
1.​ Contracts entered into by guardians on behalf of minors or incapacitated
persons;
2.​ Contracts entered into by an absentee’s representative in an event where
the absentee suffer a lesion by more than ¼ of the value of the object;
a.​ Absentee - person who disappears from his domicile and his
whereabouts being unknown, without leaving an agent to
administer his property.
3.​ Contracts formed to deceive creditors;
4.​ Contracts entered into without the knowledge of the litigant of judicial
authority;
5.​ All other contracts specially declared by law to be subject to rescission.
VOIDABLE CONTRACTS
●​ Valid contracts until annulled
●​ The defect lies on the consent as it was vitiated by mistake, violence,
intimidation, undue influence, or fraud
●​ Art 1390: Voidable even though there may have been no damage to parties
●​ 2 Instances:
○​ One of the parties is incapable of giving consent;
○​ Consent was vitiated by mistake, violence, intimidation,fraud or undue
influence (MVIFU).
●​ Art 1395: Ratification - ratification extinguishes the action to annual a contract. It
cleanses the contract from all its defect–curing the contract or making it valid;
Ratification may be implied (through actions) or expressed (through words or in
writing)
●​ Mutual Restitution - a remedy where whatever was received by the contracting
parties must be returned to each other. The purpose is to restore the parties to
their original state prior to the formation od the contract. This applies to
RESCISSIBLE and VOIDABLE contracts.
●​ Remedy: Annulment/Ratification

UNENFORCEABLE CONTRACTS
●​ Contracts that are unenforceable (unless ratified)
●​ 3 Instances:
1.​ Contracts entered into the name of another person, who is given no
authority or legal representation;
2.​ Contracts that do not compy with the Statute of Frauds;
3.​ Contracts where both parties are incapable of giving consent.
●​ Statute of Frauds - a statute that requires certain contracts to be in a certain form
or in writing. Failure to comply will make the contract unenforceable.
●​ Instances where a contract is within the Statute of Frauds:
○​ Agreement not to be performed within 1 year from the making of the
contract;
○​ Promise to answer for debt, default, or miscarriage of another;
○​ Agreement in consideration of marriage other than mutual promise to
marry;
●​ Agreement for sale of goods at a price not less than 500 pesos;
●​ Agreement for leasing for a period of more than 1 year;
●​ Agreement for the sale of real property or an interest therein;
 ●​ Representation as to the credit of a third person.

VOID OR INEXISTENT CONTRACTS

●​ Invalid contracts with no legal effects due to the absence of at least one (1) of the
essential requisites of a contract.
●​ 7 Instances:
1.​ Contracts where cause, object, or purpose is contrary to law, morals, good
customs, public order or policy;
2.​ Contracts that are absolutely simulated or fictitious;
3.​ Contracts without cause or object;
4.​ Contracts whose object or cause is outside the commerce of men;
5.​ Contracts which contemplate an impossible service;
6.​ Contracts where the intention of parties relative to the principal object of
the contract cannot be determined;
7.​ Contracts that are expressly prohibited or declared void by law.
 For any concerns or inquiries, you may contact:

UNIT/POSITION NAME CONTACT DETAILS

BATCH LEGISLATORS

BLAZE2025 Juan Inaki Saldana TG | @inakiSALDANA

Email | juan_saldana@dlsu.edu.ph

BLAZE2026 Jami Añonuevo TG | @jamiANONUEVO

Email | jianna_anonuevo@dlsu.edu.ph

BLAZE2027 Naomi Conti TG | @naomiCONTI

Email | naomi_conti@dlsu.edu.ph

BLAZE2026 ACADEMICS COMMITTEE

Chairperson Blake Huit TG | @huitblake

Email | blake_huit@dlsu.edu.ph

Chairperson Aerin Neves TG | @aerinneves

Email | aerin_paulina_neves@dlsu.edu.ph

Vice-Chairperson Angela Padama TG | @angelapadama

Email | angela_marie_padama@dlsu.edu.ph