Oblicon Notes Finals 3 3

JAN.
28, 2014
it was not made in a public document), is there a valid

condonation?
o
NO. They must always comply with the requirements.
o
Can that be deemed as implied condonation, then?
NO. Otherwise, if every time that happens, that is
tantamount to circumventing the law.
As a matter of fact, according to JURADO,
IMPLIED CONDONATIONS are found in Art.
1271 to 1274.
CONDONATION one of the ways of extinguishing obligations.

Even at the time of Jesus, there is already such thing: forgive us
our debts.
It is basically a gratuitous act motivated by feelings of liberality
where the creditor simple forgives and does not give anything in
return.
The law requires that it must also be ACCEPTED.
o
BASIS: Nobody can force you to accept their generosity.
o
It is to protect and enhance human dignity.
EXPRESS CONDONATION
IMPLIED CONDONATION
Must comply with the formalities

(Art 748 to 749; under the law on
donations.
ART. 1271, par. 1: if the creditor

voluntarily delivers the private
document
to
the
creditor,
PRESUMPTION:
IMPLIED
condonation.
MOVABLE / PERSONAL
ART. 1272: whenever the private

document in which the debt
appears is found in the possession
of the debtor, PRESUMPTION: the
creditor VOLUNTARILY delivered
it to him.
1.
May be done ORALLY /

VERBALLY;
simultaneous
with delivery.
- Once it is condoned, you
need not have to deliver
the thing. The debtor is
relieved.
Must be in a WRITTEN
PRIVATE DOCUMENT if the
thing is higher than P5,000.
2.
NOTE: when the law speaks of PRIVATE DOCUMENTS.

Why does the law limit it to private documents?
o
If it is public (e.g. when it is notarized), there will definitely
be many copies (at least 4).
o
The notary will have two copies, one of which will be
forwarded to courts, then to the National Archives.
o
The possession by the debtor of a copy of the public
document will not have the same effect intended by the
law, as compared to possession of a private document.
WHY? Chances are, the public document is not the only
copy.
The duplicate of a public document: does not
mean much.
In effect, the creditor is giving up his most patent weapon.
It is more difficult to prove in another way.
Supposing that the private document has copies (carbon copy).
Which one will produce the presumption?
o
The original one (the top-most page).
Only prima facie evidences;

can be rebutted by contrary
evidence.
TRANS-PACIFIC INDUSTRIAL SUPPLIES VS. CA

-
REAL PROPERTY: always needs

to be in a PUBLIC DOCUMENT.
- The land might be small and
in a remote brgy. Regardless
of its value, as long as real
property is involved.
- Both for the CONDONATION
and the ACCEPTANCE: can
be in the same document or
in
a
separate
public
document.
- The
donor
must
be
NOTIFIED in an authentic
form; must be NOTED in both
of the INSTRUMENTS.
If A owes B P10,000 and B

executed a promissory note in
which the debt appears in favour
of A, and the promissory note is
later found on Bs possession, the
presumption that A voluntarily
delivered it to B rises.
A obliged B to deliver his pen to A. Can A verbally condone Bs

obligation?
-
YES. It is less than P5,000.

But if the pen is worth P13,000, then it must be IN WRITING.
The acceptance must also be IN WRITING.
If B has to deliver a real property to A and if A just wanted to condone

the obligation, what must he do?
-
A must execute the condonation in a public document and B

must accept it, as well.
What if A and B did not comply with one of the requirements (e.g.
OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014
It is the original-original which has to be surrendered and be

found on the debtors possession to produce the assumption.
ART. 1271, par. 2: INOFFICIOUS DONATIONS

The debtor and his heirs may uphold it by proving that the
delivery of the document was made in virtue of payment of
the debt.
SOME COMMENTATORS
SIR (DEAN NAVARRO)
Something is wrong with this. The

law is teaching the debtor to lie.
It has no immoral connotation. It is

the law itself which establishes the
function***
***Supposing that the real reason why the debtor and his heirs have that
private document is because in fact, the debtor has PAID.
Is it wrong to establish the truth? That should erase any ideas of
the provision being immoral.
INOFFICIOUS: condonation donation the creditor gives up
his rights.
A owed B P1M and B condoned it, its like B just gave A P1M, and A
accepted it.
Page 1 | Bantay
Since condonation is just like a donation, it is subject to the

limitations of donations.
CHITTICK VS. CA
SYSTEM OF LEGITIME
Part of a persons estate that the law reserves for his compulsory
heirs.
We are all compulsory heirs (of our parents).
A LEGITIMATE CHILD: cannot receive anything less than of
his parents estate.
o
His parent can give the other half to other people but the
first half is RESERVED to their compulsory heirs.
To protect the legitime COLLATION: a way of protecting the
legitimes.
There is a possibility that A has a legitimate child, B, and for one
reason or another, A does not want to give him anything when he
dies. So A gave all his properties to his brothers (through
donation).
o
To prevent that from happening: COLLATION will be
done.
o
When A dies, the value of all of his current properties and
those he donated will be collated and will be considered
part of his estate.
1975
F owed X P100,000
and X returned the
promissory note to F:
CONDONED.
REASON: you cannot sue yourself.
2005
DEATH
Gross estate:
P200,000
DEBTS: P200,000
SON
Will the SON still inherit anything despite his parents gross
estate is equivalent to the latters debts?
o
YES. There is collation of all of the parents gratuitous
donations by adding it to his estate.
o
DONATION (P100,000) + NET ESTATE (0) = P100,000.
P50,000 is the legitime of the SON.
P50,000 is the FREE PORTION.
Thus, half the amount X condoned is
INOFFICIOUS, and must be returned to the
compulsory heir of X.
If F really paid the SON cannot come after him.
In determining WON a donation is inofficious, you will judge WON
it has exceeded the free portion.
o
The extent it exceeds, it is inofficious.
ART. 1273
If the debt is secured by a guarantee or a mortgage, the
condonation of the principal debt shall extinguish the accessory
obligation.
Waiver of the latter shall leave the former in force.
ART. 1274
PLEDGE: what you enter into a pawnshop.
PRESUMPTION: the accessory obligation of pledge has been
remitted when the 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.
CONFUSION
Automatically extinguishes the obligation at the merger of the
characteristics of the debtor and the creditor.
Spouses were suing each other and were survived by their

common children.
Since the Chittick children as heirs of respondent-creditor are
also the heirs of petitioner-debtor, the obligation sued upon had
been extinguished by the merger in their persons of the character
of creditor and debtor of the same obligation (Art. 1275, Civil
Code).
ART. 1276
Merger which takes place in the person of the principal
debtor or creditor = benefits the guarantors.
Confusion which takes place in the person of any of the latter =
does not extinguish the obligation.
A owes B P12,000, guaranteed by G. Later on, A acquires the rights of B

= the obligation is extinguished.
-
If G inherits As estate the principal obligation will subsist.
JAN. 30, 2014

COMPENSATION
One of the modes of extinguishing obligations.
You weigh the two obligations simultaneously with the aim to
extinguish them up to the concurrent amounts.
A. TOTAL: when the two debts are equal.
B. PARTIAL: when the two debts are unequal.
A owes B P700 and B owes P500 the two obligations will be

extinguished up to the concurrent amount.
1.
2.
The obligation of B to A is extinguished.

The obligation of A to B remains: P200.
LEGAL COMPENSATION: takes effect by operation of law.

VOLUNTARY COMPENSATION: by agreement of the parties.
JUDICIALCOMPESATION: by judicial decree.
LEGAL COMPENSATION
Can there be legal compensation if one of the parties is insane or
incapacitated?
o
Legal compensation does not require CONSENT.
o
If there is no consent, it does not matter. The
compensation takes effect by law.
o
What is one of the parties is actually comatose, or in the
ICU? YES, there will still be legal compensation.
Takes place at the moment all the requirements are present,
whether or not the parties are aware of it, or not.
VOLUNTARY COMPENSATION
By agreement.
Page 2 | Bantay
Can there be voluntary compensation when one of the parties are

incapacitated?
o
NO; there will be no meeting of the minds.
Consequently, the debt is still not due (still no delay).

When one of the debts is not yet due, then there is no legal
compensation (one of the requisites not present).
JUDICIAL COMPENSATION
4.
5.
Takes effect by judicial decree.

When one of the parties has a claim for damages and the other
sets it of by proving his right to said damages and the amount
thereof.
A sued B for P1M because B owes A. In Bs answer, B said A also owes

him P1M of damages.
-
Whatever the court finds out JUDICIAL COMPENSATION.
FACULTATIVE COMPENSATION
By the will of only one party and the other one cannot choose
compensation by any impediment.
Assume that A borrowed a bicycle from B. They happen to be neighbors

and B lent it to A. when a person borrows something, there is an implicit
understanding that the borrower should return it. B would not have lent A
the bicycle if B did not trust A. later on, they entered into another
transaction and B became obligated to deliver a bicycle of the same kind
to A. Can there be legal compensation?
-
NO. Commodatum.
Can B tell A that the two obligations will be deemed
compensated? YES. FACULTATIVE compensation.
The same if for depositum (for safekeeping), otherwise, there will
be breach of trust and confidence.
That they be liquidated and demandable;

That over neither of them there be any retention or
controversy,
commenced
by third persons and
communicated in due time to the debtor.
Is A deposited P12,000 in the bank and later, he became indebted to the

bank for the same amount, can there be compensation?
-
YES. WHY? 1st requisite present. When A deposited his money

to the bank, he is in fact lending money to it; A becomes the
banks creditor. Upon obtaining a loan from the bank, A became
the debtor of the bank.
Why do you say that? You cannot get the very same notes that
you deposited.
o
Thats how they make money. When you deposit, the
interest is less than 3% but when they lend it, they have
atrocious interest rates.
CONTRACT OF LOAN.
If A is a stockholder of San Miguel Corp. and A bought many cases of

beer from the same corporation, can there be legal compensation?
-
NO. Being a stockholder does not mean you are the corporations
creditor.
It will be different if you are an INVESTOR, as you are partowner, and can be considered a creditor.
FRANCIA VS. IAC

Obligations that cannot be compensated (ART. 1287 to 1288):
obligations arising from criminal offenses.
o
The offender cannot invoke compensation, but the injured
party can.
ART. 1279
REQUISITES OF LEGAL COMPENSATION:
1. That each one of the obligors be bound principally, and
that he be at the same time a principal creditor of the
other;
2. That both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind,
and also of the same quality if the latter has been
stated;
o
Should have been FUNGIBLES: there can still be
compensation even when things are NOT
consumables.
3. That the two debts be due;
o
Can there be compensation when one of the
debts is not yet due? YES, as long as the parties
agreed to it.
Of by the party for which the benefit of the
period was constituted.
The government expropriated petitioners properties and the

petitioner failed to pay taxes. Can there be legal compensation?
o
Paying taxes are duties to the government: NOT
contracts.
o
The State cannot be deemed as a debtor to the petitioner.
Assume that:
P12,000
A
P12,000
P12,000
C
Does this mean all of the obligations are deemed compensated?
-
NO. None of them are mutually creditor and debtor of each other,
bound principally.
PNB MADECOR VS. UY

-
One of the debts is payable by demand, and there was none.
Page 3 | Bantay
EXCEPTION: when he RESERVES his right to set up

compensation.
PAR. 2: If the debtor was notified of the assignment without the
consent, he can set up compensation for the debts.
o
Previous to the cession, but not to the subsequent ones.
PAR. 3 (worst case scenario): when the debtor is not notified.
o
All debts which became due before he had knowledge of
the assignment.
o
P12,000
A
P12,000
G
Can there be legal compensation between B (creditor) and the G
(guarantor)? NO.
B Jan. 07
A
P10,000
A Feb. 11
B
P20,000
P12,000
B Apr. 10
P5,000
Let us assume that A assigned his credit to X and the assignment was
made on Mar. 07. How much can X collect from B?
P4,000
P8,000
G
Assuming that A cannot be found, Can G set up legal compensation?

-
YES. How much can B collect from G? NONE.

ART. 1280: G can invoke what the B owes A, aside from what B
owes to G.
RETENTION
CONTROVERSY
The application of the credits of

one of the parties to the
satisfaction of the claims of a third
person.
Refers to a case in which a third

person has a claim to the creditor
(order; writ of attachment).
There is already legal compensation upon the assignment

(between the first and second transaction).
SCENARIO NO. 1: B gave his consent to the assignment.
o
B cannot set up compensation. If the debtor gives his
consent, he waives the legal compensation which has
taken place.
o
POINT: is he gives his consent without reserving =
WAIVING.
o
X can still collect: P20,000.
o
If B consented to it but reserved his right: P10,000.
SCENARIO 2: B was notified but he did NOT give his consent.
o
B can set up by way of compensation.
o
X can collect P10,000 only.
SCENARIO 3: no notification; all debts before Bs knowledge, B
can set up compensation.
o
If B only found out of the assignment on May 08, X can
only collect P5,000 from B.
FEB. 04, 2014

Must be communicated in due time.
NOVATION
Different from the other modes of extinguishing payment.
Instead of extinguishing the obligation, you create or substitute
the old to a new one.
o
REAL NOVATION.
Three ways of effecting novation:
1. Changing the object or the principal conditions.
2. Substituting of the debtor.
3. Subrogating of a third person the rights of the creditor.
The REQUISITES of a valid novation.
1. EXISTING VALID OLD OBLIGATION
If there is none, then there is nothing to novate.
P12,000
D
C
C
D
Jan. 7, 2014
Jan. 28, 2014
P10,000
On Jan. 15, there was an order from the court (X vs. D) attaching Ds
properties. Was the controversy communicated in due time?
-
YES. It was before the second debt became due, thus, there was
still no legal compensation.
But if X got the court order on Jan. 30, was the controversy
communicated in due time?
-
NO. There had already been legal compensation since Jan. 28,
2014. The court order was too late.
SPOUSES BAUTISTA VS. PILLAR DEVT.

-
The first promissory note was cancelled by the express terms of

the second promissory note validly novated.
If the first PN was not valid, then the execution of the second one
does not constitute novation.
ART. 1285
Assignment of rights.
PAR. 1: debtor consented he WAIVES his right and he cannot
set up compensation.
2.
AGREEMENT OF THE PARTIES TO THE NEW OBLI

Is it a requirement that all parties must agree?
NO. Expromision: the debtors consent is not
necessary.
Page 4 | Bantay
3.
INTENT AND ACTUAL EXTINGUISHMENT OF THE

OLD OBLIGATION
4. VALID NEW OBLIGATION
Is it necessary that for there to be valid novation that there must
be an agreement? Generally, not ALL of the parties consents are
required.
NOVATION BY SUSBSTITUTION OF THE DEBTOR (2nd type).
o
EXPROMISION: effected with the consent of the creditor
at the instance of the new debtor even without the
knowledge or against the will of the old debtor.
o
DELEGACION: effected with the consent of the creditor
at the instance of the old debtor with the concurrence of
the new debtor.
EXPRESS: declared in unequivocal terms.
IMPLIED: the old and the new obligation are incompatible with
each other on every point.
o
They cannot stand together.
o
Otherwise, there will be no novation.
WHEN THERE IS NOVATION
WHEN THERE IS NO NOVATION
A has to deliver his car to B. A

then said he will deliver a certain
horse instead.
A and B agreed that A will deliver

to B a car and B will pay him
P500,000. Instead, they agreed
later on that B will pay him
P400,000.
CHANGE OF OBJECT.
A and B agreed that A will deliver

to B a car and B will pay him
P500,000. Instead, they agreed
later on that B will pay him
P700,000.
UPWARD CHANGE IN
CONSIDERATION.
The promissory note and the check can stand together.

There was no agreement between the parties that the check will
substitute the promissory note/cash.
NO NOVATION.
MERCANTILE INSURANCE CO. VS. CA

-
The additional security does not operate to novate the first

security: no express stipulation.
There is no agreement that the first debtor shall be released from
responsibility and the creditor can still enforce the obligation
against the original debtor.
NO NOVATION.
YOUNG VS. CA
-
Change in signatories does NOT constitute novation.

Where the text of the two contracts will show that the only change
introduced in the second contract was the substitution by a
person with his wife as signatory, there was clearly no implied
novation for lack of an essential change in the object, cause, or
principal conditions of the obligation.
REMISSION (partial).
A is to pay B P1M within a year

from the date of their contract.
They later decided that A can pay
within TWO years.
-
GARCIA VS. LLAMAS
EXTENTION OF TIME
FOR PAYMENT.
PERIOD
AFFECTS
PERFORMANCE.
AJAX MARKETING VS. CA

-
A certain enterprise started out a partnership and changed its

names. It contracted certain obligations and those loans were
consolidated and were restructured.
NO novation.
Compare it with
A is to pay B P1M within a year
from the date of their contract.
They later decided that A needs to
pay within SIX MONTHS.
-
REDUCTION;
SUBSTANTIAL
CHANGE IN TERMS
A has to build a two-storey building

for B according to certain plans
and specifications. Instead of 4
windows, B now wants A to build
8.
-
ADDITIONAL
INTEREST DOES NOT
CONSTITUTE NOV.
A executed a promissory note to B

for P1M and later on, A gave him a
check.
-
SLIGHT ALTERATION
IN THE CONS.
NOT EXTINCTIVE; just
MODIFICATORY.
A has to pay B a certain amount of

money with 12% interest. The
interest was increased to 14%.
-
SPS. BAUTISTA VS. PILLAR DEVELOPMENT CORP.

YES; there was novation in this case.
There was an EXPRESS stipulation that the first promissory note
was being cancelled in lieu of the second one.
o
There is certainly no doubt that there has been novation.
A owes B P100k and when the debt was about to be due, C offered to
pay it for A and B said okay. C gave P10k as partial payment. Is there a
substitution of the debtor?
-
NO; A is still liable to B.

o
It was not expressly stated that A is being released from
the obligation.
Absent any agreement that C (new debtor) will release B (old
debtor) from the obligation, then there is no substitution; the
original debtors obligation remains.
o
There must be an agreement for the release of old
debtor.
C might just be deemed as a co-debtor, or a guarantor,
PN
and
CHECK:
COMPATIBLE.
Page 5 | Bantay
No valid old obligation NOTHING TO NOVATE.

A owes B P100k. C (third person) and A went to B and they told B that C
will assume the debt while A will be released from the obligation. B
agrees. Is there a substitution of the debtor?
-
YES; delegacion.
When the debt became due, C did not pay despite him having the
means. Can B run after A instead?
o
NO. Not anymore.
Would it make any difference when C was actually insolvent
which was already existing and known to A when the substitution
was made?
o
YES, it would make a difference.
o
ART. 1295: B can now run after A.
GENERAL RULE: there is no revival of liability of the old debtor
in delegacion? NO.
EXCEPTION (only in extremely restricted terms): in case of the
insolvency of the new debtor which was existing at the time of
delegation and was of public knowledge or known to the old
debtor.
A owes B P100k and C came to B. C told B that he will take As place

and that C will pay B P100k instead. This is done with the knowledge
and consent of A, and the initiative came from C.
-
Can B run after A upon non-payment of C? NO; ART. 1294.

TOLENTINO
JURADO
It should have been if it is in the

initiative of the third person.
If the substitution is done with the

knowledge and consent of the
old debtor, then there would be
revival of the obligation.
FAULTY
CODIFICATION.
LITERAL
INTERPRETATION.
OLD OBLIGATION
Object: car.
Gambling
(P100k).
Deliver
horse.
particular
Old: VOID.
Horse,
with
the
debtors consent not
vitiated.
Old: voidable.
Car, if it rains on
Christmas
Day
(suspensive
condition)
Horse,
nothing
mentioned about the
condition (silent).
ART.
1299:
new
obligation is subject to
the same conditions
unless the contrary is
stipulated.
Car, when it rains on

Christmas Day.
Horse, when you

graduate
with
a
general average of
95.
If both NOT complied

with, NO NOVATION.
MUST
FULFILLED.
MUST
FULFILLED.
If compatible.
SUBROGATION
GENERAL RULE: When the principal obligation is extinguished

in consequence of a novation, accessory obligations will also be
extinguished.
EXCEPTION: the accessory obligation may subsist only insofar
as they may benefit third persons who did not give their consent.
WHEN NOT APPLICABLE: in case of the subrogation of the third
person on the rights of the creditor.
o
SUBROGATION (ART. 1303): the persons subrogated
the credit with all the rights either against the debtor or
against third person
loss
Car, with debtors

consent vitiated.
PROFESSOR:
EVER.
ART. 1296
Old: SUBSISTS.
NO NOVATION.
DEEMED
EXTINGUISHED.
REVIVAL.
Object: herion.
RULE
New: VOID.
NON-FULFILMENT covers a
multitude of things the
codifiers could not have intended
the old debtor to be liable for
many
reasons,
while
for
delegacion, its only for the third
persons insolvency.
NO
NEW OBLIGATION
a.
b.
BE
BE
MUST
BE
SUSTAINED;
latest
expression of the will
of the parties.
NOVATION:
new
obligation operates to
ratify / validate the
obligation.
If not compatible.
CONVENTIONAL: by agreement of the parties.

LEGAL: by operation of law.
CONVENTIONAL
SUBROGATION
ASSIGNMENT OF RIGHTS
Debtors consent is required.
Debtors consent is not required.
Has the effect of extinguishing the

old obligation and gives rise to a
new obligation.
Has the effect of transmitting the

rights of the creditor to another
person without modifying or
extinguishing the obligation.
Defects or vices in the original

obligation are cured.
Defects or vices in the original

obligation are not cured.
Effect arises from the moment of

novation or subrogation.
Arises from the moment the debtor

is notified of the cession.
ART. 1297
No valid new obligation NO NOVATION.
Page 6 | Bantay
A.
Affords better protection because

of the necessity of the debtors
consent.
ART 1302
LEGAL SUBROGATION: must not be presumed.
EXCEPTIONS:
1. When a creditor pays another creditor who
preferred, even without the debtor's knowledge;
is
P12,000 (secured)
C
P, 12,000
P1,000
B
C is a preferred (mortgage) creditor. If B pays C P12,000, B will be
subrogated with Cs right (including the security).
-
But the obligations remain distinct. The mortgage security only

applied to the P12,000 debt, not to the P1,000.
If D will not pay P12,000, B can foreclose the mortgage.
2.
When a third person, not

pays with the express or
When, even without the
person interested in the
pays, without prejudice to
the latter's share.
3.
interested in the obligation,

tacit approval of the debtor;
knowledge of the debtor, a
fulfillment of the obligation
the effects of confusion as to
ART. 1304
P12,000
D
C
For 2 instalments.
ESSENTIAL ELEMENTS: present in all contracts.

1. COMMON: present in all: consent, object, cause.
2. SPECIAL: present only in certain types or classes
of contracts.
Delivery in real contracts.
Form in solemn contract.
3. EXTRAORDINARY: unique to a special contract.
Price in contract of sale.
Only present in that particular kind of
contract.
B. NATURAL ELEMENTS: derived from the nature and
ordinarily accompanies the same.
o
Warranties.
C. ACCIDENTAL ELEMENTS: when parties expressly
provide for them.
o
How do natural elements and accidental elements
differ from one another? What is their point of
distinction? For accidental elements, they are only
present upon agreement of the parties while for
natural ones, they are there, but the parties can
do away without them.
CHARACTERISTICS
1. OBLIGATORY FORCE: must be complied by the parties.
2. MUTUALITY: based on the principle of equality.
3. AUTONOMY: must not be contrary to law.
4. RELATIVITY: takes effect only between contracting
parties, their assigns and heirs (PRINCIPLE OF
RELATIVITY).
o
GENERALLY: third parties cannot produce any
effects; they cannot sue on the basis of the
contract.
o
EXCEPTIONS: quasi-delict liabilities of third
persons (e.g. driver; while the contract is only
between the passenger and the owner of the
vehicle/operator).
5. ***CONSENSUALITY: while all contracts need consent,
not all of them are perfected upon consent.
o
Some needs delivery to be made first.
STAGES
1. GENERATION: period of negotiation.
2. PERFECTION: parties come to agree.
3. CONSUMMATION: fulfilment or performance.
ART. 1306: AUTONOMY
When the first instalment became due, D was nowhere to be found. G

then paid the first one.
-
G is now subrogated to the rights of C only as regards to the first

instalment.
When the second instalment became due, D only has P6,000
with him. To whom will he pay?
o
C is a preferred creditor than G.
FEB. 06, 2014

CONTRACTS
Can there be a contract where there is only one party? NO. No
exceptions.
o
A person cannot contract with himself.
o
AUTO-CONTRACTS: the person is just acting in
representation and with the authorization of another.
o
WHY NOT? One must always bound himself with respect
to another.
ELEMENTS OF A CONTRACTS
Parties are free to agree as long as it is not contrary to law,

morals, good customs, public policy and public order.
1. LAW: always have to take precedence.
2. MORALS: universally admitted.
o
More or less universal in acceptance.
o
Example: to kill is something that is not universally
accepted.
o
More limited.
3. GOOD CUSTOMS: brought about by repeated conduct.
o
Accepted and sanctioned by the practices of
community.
4. PUBLIC POLICY: broader that public order.
o
Whatever has the tendency to be injurious to the
public good.
o
It is not necessary that there is actual injury as
long as there are clear evidences of the tendency
of such alone.
SY SUAN VS. REGALA
Page 7 | Bantay
The company needed to import and it authorized somebody for

the application for a license with the Import Control Office for the
importation of industrial starch for candy manufacture. That
somebody will follow up the application, with 10% commission.
Against public policy? YES. There is a clear import: injurious to
the common good.
The agent will then do everything, good or bad, to secure
that application.
ORTIGAS VS. FEATI BANK

-
LEAL VS. IAC

-
A sold B his land on the condition that B can only sell the land to
A at the same price.
Contrary to public policy? YES. It vests a perpetual restriction to
ownership.
Property should be allowed to go around.
The restriction is NOT valid.

The restriction would have entailed the person leaving the
country for it is too broad (in the Philippines).
There is an implied reservation of the states exercise of police

power, which is the least limitable of the inherent powers of the
state.
Mere contractual stipulations must yield.
TRIAS VS. ARANETA

-
There was no police power of the state involved.

There was a restriction that no factories will be built; only
residential ones.
Court: EASEMENT is a valid restriction.
YSMAEL & CO. VS. BARRETO

-
Cases of silk were asked to be delivered by company, with each

case amounting to P2,500. It was stipulated in the bill of lading
that the carrier shall not be liable for loss or damage from any
cause beyond an amount exceeding P300 for any single package
of the cargo. Four cases got lost.
Contrary to public policy? YES. ANY CAUSE can mean many
things, even the captains or crew members stealing those
cargos.
REASON: we are an archipelago and during that time, the
principal form of transportation from one place to another is
through ships.
If the companys policy will be allowed, nobody will ship
their goods anymore.
Commerce will grind to a halt and economy will suffer.
CUI VS. ARELLANO UNIVERSITY

-
A student has been a scholar of the university for 3 semesters

and on his last semester, he wanted to transfer. The university
then asked him to reimburse.
Is it contrary to public policy? YES.
Scholarships grants are awarded on the basis of merits of
the students and not just merely to entice good students.
5.
PUBLIC ORDER
NOMINATE
Those that have their own distinctive individuality and are
regulated by special provisions of law.
ART. 1307: INNOMINATE
Governed by agreement of the parties (stipulations), etc.
1. Do ut des
2. Do ut facias
3. Facio ut des
4. Facio ut facias
PEREZ VS. POMAR

-
Involves the services of an interpreter.

Facio ut des: I do that you may give.
ART. 1308: MUTUALITY
What is equitable for the parties.

1. Cannot be left to the will of one of the parties.
2. When left to the will of a third person, it must be made
known to the parties.
3. Can be left to chances.
Restrictions to the exercise of trade are ALLOWED, as

long as they are limited as to time and place, and is
necessary for the protection of the other party.
DEL CASTILLO VS. RICHMOND

-
A drugstore hired a person and that person is restricted from

opening any drugstore within four miles from the municipality of
Legaspi. It is to prevent the threat of competition.
Contrary to public policy? NO. During that time, Legaspi was a
small community and having two drugstores in that place will
render drugstores not a viable enterprise.
FERRAZZINI VS. GSELL

RUSTAN PULP VS. IAC

-
Involves the supply of raw materials.

NOT VALID for only one party (Rustan) will determine when the
delivery of the raw materials may start or may be stopped.
LEASE CONTRACTS: for example, when a tenant claims that as

long as he will pay, he can stay.
o
Thats not the case. Such violates the mutuality of
contracts.
Page 8 | Bantay
CONTRACTS OF LOANS: in fixing the rates of interest.

o
Is it possible that there will be a stipulation that one party
can unilaterally increase the interest rates? NO.
o
If there is a provision providing for escalation, then there
must also be one for de-escalation.
o
It cannot be left solely to the will of the LENDER.
o
The weaker party must be protected from abuse.
FLORENDO VS. CA
-
An employee secured a housing loan to her company. When she

resigned, the company increased the interest rates.
NOT ALLOWED; unwarranted.
The bank could have included such stipulation in the contract but
it did not, so it could not increase the rates now.
There are some agreements that render mutuality ILLUSORY.
POUR AUTRUI (beneficial stipulation)

It is essential that the parties have CLEARLY
DELIBERATELY conferred to the third person such favour.
It must NOT be a mere or incidental benefit insufficient.
UY VS. LEONARD
-
LIEBENOW VS. PHIL. VEGETABLE OIL CO.

-
and
The surety guaranteed the contractor will fulfil its obligation to the
City of Manila, which is to provide the latter with crushed rocks.
The stipulation included that the contractor must then faithfully
comply with the obligation and shall promptly make payments for
its supplier of materials. Then the suppliers were not paid. Are
the suppliers covered by the beneficial stipulation?
o
NO.
Court: such is a mere incidental benefit.
o
There was no intent to clearly and deliberately confer a
favour on the suppliers part.
So why did the surety include such statement (shall promptly
make payments for its supplier of materials)?
o
It is only by way of extreme caution because at that time,
it is not sure that the City of Manila can be held liable to
the materials supplied.
One of the parties obliged itself to give a certain amount of bonus

that is to be determined by the Board of Directors.
Would it be possible to have a pour autrui stipulation when one of
the parties owed the other and a third person is used to pay such
debt? YES.
FEB. 13, 2014

ART. 1311: RELATIVITY OF CONTRACTS
RULE: a contract is binding only upon its contracting parties, their
assigns and heirs.
o
It is only fair and reasonable that when someone is not a
party to the country, he need not be bound.
EXCEPTIONS:
1. Where the contract contains astipulation in favor of a
3rd person (stipulation pour autrui).
2. Where the 3rd person comes in possession of the object
of a contract creating a real right (ART. 1312).
3. Where the contract is entered into in order to defraud a
3rd person (ART. 1313) covered by topic on rescissible
contracts.
4. Where the 3rd person induces a contracting party to
violate his contract (ART. 1314).
5. Contracts creating status (e.g. contract of marriage).
When two people get married, everyone else is
bound by their marriage. Someone cannot ask
them to be married to another again.
6. Group contracts (e.g. Collective Bargaining Agreements).
Rights acquired are NOT transmissible (they are only in between
parties).
o
Is a lease contract transmissible? YES, though it is not
personal.
o
Let us assume that X Co. has a credit against A. X Co.
owns all of the shares of Y Co (its subsidiary). Can Y Co.
maintain an action against A for collection? NO.
o
Can a subsidiary company collect a debt owed by its
parent company? NO.
Despite the subsidiary companys shares are
owned by the parent company, the does not
entitle the former to collect on the latters behalf.
GENERAL RULE: Even if a certain companys
shares are owned by another, it still has its
independent character.
A is obliged to build B a building, and B will pay A P10M. A remembered

that he owed C P1M. So there was a stipulation that B will pay A P9M
and C P1M.
-
KAUFFMAN VS. PNB

-
Plaintiff was not paid.

There was a stipulation pour autrui for the benefit of Kauffman.
There was NO revocation: there was no mutual agreement
between Phil. Fiber and PNB.
o
OR at the instance of the party making the exchange:
Phil. Fibers decisions to revoke it for such stipulation
was made by it.
EXCEPTION
UY VS. CA
-
Is that a beneficial stipulation in favour of C? YES.

o
When-one-party-owes-a-third-person kind of beneficial
stipulation.
What if A did not really owe C P1M but they still chose to give C
P1M, is that still a stipulation pour autrui? YES.
o
Gratuitous kind of beneficial stipulation.
Can it be revoked? YES.
o
Provided there is mutual agreement between parties.
o
Must be done before there is acceptance.
Petitioners cannot be indemnified.

The two agents negotiated with NHA in behalf of the owners of
the land. Initially, NHA was supposed to buy 8 parcels of land,
but it realized 3 out of 8 of them are not suitable for development
(prone to landslides). NHA then talked to the owners directly to
allow them to buy just 5 out of 8 of the lands.
Petitioners commission, as seller agents, will then be reduced
Page 9 | Bantay
since only 5 parcels were sold.

Court: petitioners cannot maintain an action because they are not
parties to the contract.
o
They were mere agents representing their own interest.
*A and B entered into a contract of loan with chattel mortgage on a

certain vehicle on Dec. 01. The contract was notarized on Dec. 02, and it
was registered on Dec. 03.
ART. 1312
Where the 3rd person comes in possession of the object of a
contract creating a real right.
A mortgaged to B his land as a security of his P1M debt. Then A sold the
land to C. Is C bound by the contract?
-
needs to be delivered
first.
The compliance of the registration is what constitutes perfection

of the contract.
* ART. 1317
YES. B has a REAL RIGHT over the property mortgaged and

such follows him.
A contract entered into in the name of another by one who

has no authority or legal representation, or who has acted
beyond his powers, shall be UNENFORCEABLE.
However, in some SC cases, they are declared void.
ART. 1313
Where the contract is entered into in order to defraud a 3rd
person covered by topic on rescissible contracts.
ART. 1314
Where the 3rd person induces a contracting party to violate his
contract.
What is your source of obligation? QUASI-DELICT.
o
REQUISITES:
1. Existence of a valid contract
2. Knowledge on the part of the 3rd person of the
existence of such contract.
3. Interference of the 3rd person without legal
justification or excuse.
A entered a contract on Bs name.

-
SEVILLA VS. SEVILLA

-
There is an employment contract between a multinational company and

A where A has to go to Baghdad or to Kabul (dangerous places). B
advised A not to go and A did not. Can B be held liable by the company?
-
NO. Everyone knows it is dangerous to go to those places.
YES; there is no legal justification of Cs action.

C was principally and solely motivated to profit from As
performance.
ART. 1315
Deed of Extra-judicial Partition was void ab initio, and not merely

unenforceable.
Court: there was no consent given to the execution of the deed,
and therefore, there is no contract to speak of.
Felisa had no legal capacity to give consent to the Deed of
Partition at the time of its execution inasmuch as she was neither
the owner nor the authorized representative of respondent to
whom she previously transmitted ownership of her undivided
share.
But according
unenforceable.
A is a singer and he has a contract with B that A will perform exclusively

on Bs restaurant (exclusive contract). C then asked A to perform on his
restaurant instead and A agreed. Is C liable?
-
WHAT IT ACTUALLY MEANS: B had not consented.

There was absolutely no consent from B as he may not even be
aware of the contract.
o
One essential requisite is lacking: VOID OR
INEXISTENT.
Chances are, B has not even benefited from such contract.
to
the
Civil
Code,
those
contracts
as
ESCUETA VS. LIM

-
The sale by Virginia to respondent is not binding.

Petitioner Rubio did not authorize Virginia to transact business in
his behalf pertaining to the property.
o
His acceptance and encashment of the check was not a
ratification of the contract of sale.
ART. 1316
GOZUN VS. MERCADO
Contracts
perfected
consent.
by
are
mere
REAL CONTRACTS:
delivery is required.
SOLEMN
CONTRACTS*
Commodatum: what A
borrowed
from
B
Contracts entered into in the name of another person by one who

has been given no authority or legal representation or who has
acted beyond his powers are classified as UNAUTHORIZED
CONTRACTS and are declared UNENFORCEABLE, unless they
are ratified.
A special power of attorney is necessary for an agent to, as in
Page 10 | Bantay
this case, borrow money.
FEB. 18, 2014

ART. 1318: COMMON ESSENTIAL REQUISITES OF A CONTRACT
1.
2.
3.
Consent of the contracting parties;

Object certain which is the subject matter of the contract;
Cause of the obligation which is established.
ART. 1319
How is consent manifested? It must be manifested by the
concurrence of the offer and the acceptance of the thing.
o
There must be a meeting of the offer and the acceptance
upon a thing.
A wrote B a letter, stating that A is offering to sell to the latter his house
and lot for P5M, cash. B replied by sending a letter, as well, stating that
he is accepting the offer and the he will buy it for P5M, but he will only
pay P2.5M as down payment now, and pay the rest (P2.5M) via
instalment for a period of six months.
-
Is there perfection of the contract? NO.

For there to be perfection, the terms of each party must meet on
every point.
o
The acceptance must mirror the offer.
o
There must be no variance.
A told B that he is presently contemplating of selling his house for P5M to

B. B then wrote to A that he is accepting the latters offer.
-
Is there perfection? NONE, as there was really no offer.

o
A merely stated that hes thinking about selling it.
The offer must be CERTAIN.
QUESTION: do they have a perfected contract? When?

-
Let us assume that A sent B a letter offering his property to the latter for
P5M. B received the letter on Jan. 01, he mailed his reply accepting As
offer on Jan. 02, and his letter was delivered to As residence on Jan. 03.
But during that time, even though A was at home, he was already
entertaining second thoughts about the sale of his property to B. A did
not open Bs letter, and instead, A called his messenger and asked the
latter to mail his revocation.
-
Is there perfection? NO.

A then replied that he is agreeing to sell it for P5M, with P2.5M as
down payment, the other P2.5M payable through instalment for
six months, with a mortgage to secure the balance.
o
Is there perfection? Finally, YES.
o
There is now a meeting on each and every point of the
terms.
Let us assume that A sent B a letter offering his property to the latter for
P5M. B received the letter on Jan. 01, and he immediately decided that
he will accept As offer, so he wrote A a letter.
1.
2.
3.
B mailed the letter on Jan. 02.

The letter was delivered at As residence on Jan. 03, but A was in
Cebu during that time.
A returned to his residence on Jan. 04 and he read Bs letter.
Is there perfection? YES.

o
There was a perfection of contract even if the offerer
withdrew his offer before his knowledge of the offerees
reply.
REASON: Even if we adhere to the Cognition Theory, we also
follow the rule on CONSTRUCTIVE KNOWLEDGE.
Until when can an offeror withdraw his offer? As long as he still

does not have knowledge of the offerees acceptance.
A sent B a letter offering his property to the latter for P5M. B received the
letter on Jan. 01, he mailed his reply accepting As offer on Jan. 05 and it
was delivered to As residence on Jan. 10. In the meantime, on Jan. 08,
A sent B a letter stating his withdrawal of the offer, and As letter was
delivered on Jan. 12.
-
A wrote B a letter, stating that A is offering to sell to the latter his house
and lot for P5M, cash. B replied by sending a letter, as well, stating that
he is accepting the offer and the he will buy it for P5M, but he will only
pay P2.5M as down payment now, pay the rest (P2.5M) via instalment
for a period of six months, and the balance will be secured in a mortgage
of property.
-
YES, on Jan. 04 (COGNITION THEORY).

In accordance with the Civil Code.
Through the MANIFESTATION THEORY: Jan. 01
Through the EXPEDITION THEORY: Jan. 02
Through the REDEMPTION THEORY: Jan. 03
Is there perfection of the contract? NO.

NOTE: a withdrawal of an offer is immediately effective. The
offeree need not to have knowledge of the withdrawal for it to be
effective.
o
It does not even matter that the offeree has read the
offerors letter.
Can an offeree withdraw his acceptance of the letter? YES, as

long as the offeror still has no knowledge of the formers
acceptance.
MANRESA
TOLENTINO
The offeree cannot withdraw his

offer anymore.
The offeree can withdraw his offer.
The offeree knows that there is

already meeting of the minds, and
of the offer and acceptance.
There is only one moment of

perfection of the contract: the
acceptance
coming
to
the
knowledge of the offeror.
There are
perfection:
BETTER VIEW: there is only one

moment of perfection of the
contract and anytime before that,
both the offeror and the offeree
can be allowed to withdraw their
offer and their acceptance,
respectively.
1.
2.
two
moments
of
When offeree signified his

acceptance.
When the offeror has
knowledge
of
the
Page 11 | Bantay
acceptance.
A sent B a letter offering B to sell him 100 bottles of a certain red wine at
P300/bottle. B accepted his offer and he said he was willing to buy 300
bottles.
-
Is there perfection of the contract? YES.

AMPLIFIED ACCEPTANCE: there is perfection of the contract
as regards to the 100 bottles A offered.
o
There is only a counter-offer for the additional bottles.
UNLESS B makes it clear that he is not willing to buy from A
anything less than 300 bottles.
o
There is no meeting of the minds. Such is a mere
counter-offer that the offeror can accept or not.
COURT: the evidence is clear that there is an agreement

between BPI and petitioner for the sale of the land for
P1,000/square meter.
NOTE: this is a better decision as the evidence had been clear.
LIMKETKAI VS. CA RESOLUTION

-
The Court completely changed its stance: There was no evidence

of the agreement of the sale because the petitioners acceptance
was QUALIFIED.
o
Such counter-offer must be accepted by LIMKETKAI first.
There was NO perfected contract.
NOTE: in the meantime, before this cases resolution, there had been
changes in the court and to the justices per division.
TAN VS. PPI

ART 1322
An offer may be made through an agent.
There is perfection when the acceptance was communicated with
the agent (a person who has been authorized).
NOTE: an agent is different from a MERE MESSENGER (e.g. mailman).
The time of perfection of the contract during that time is when the offeror
himself comes to the knowledge of the acceptance of the offer.
GENERAL RULE (Art. 1319): consent is manifested by the

concurrence of the offer and of the acceptance.
Court: this rule does NOT apply when there are certain matters or
details (causal considerations) that must be concurred with, aside
from the object agreed upon.
o
The agreement must be to all points.
Without concurrence of all of those terms and conditions
considered material by the parties beforehand, there is NO
CONTRACT.
ART. 1321
The offeror may fix the time, place, and manner of acceptance.
o
All of which must be complied with.
A offered to B his house and lot for P5M cash, and if B decides to buy it,
he must provide a written acceptance and such must reach A before
noon of Feb. 14, 2014.
-
The letter is delivered on Feb. 15, is there perfection? NO.

A has every right to make such determinations.
It does not even matter if the messenger or the one carrying Bs
letter had an accident, which caused the delay of the delivery.
MANILA METAL CORP. VS. PNB

-
There was NO perfection of the contract.

The acceptance must mirror the offer.
If one of the parties involved is a corporation, its agreement must
involve the concurrence of its board of directors, or through a
validly authorized agent.
FEB. 20, 2014

ART. 1324: CONSENT
In the cases decided by the SC, there has been some problems
concerning consent.
o
There has been a long and running debate between
Justice Vitug and Panganiban concerning the law, with
respect to the application of the RIGHT OF FIRST
REFUSAL.
Obviously, an OPTION CONTRACT is a contract, thus it must
bear all the essential elements of a contract.
o
If there is no cause and consideration then, such is NOT
binding to the parties.
COGNITION THEORY
Is it the only theory we follow here? NO.
MANIFESTATION THEORY: Code of Commerce.
ART. 1323
An offer becomes ineffective upon the DEATH, CIVIL
INTERDICTION, INSANITY, or INSOLVENCY of either party
before acceptance is conveyed.
o
It renders the offer INEFFECTIVE.
REASONS:
1. DEATH: extinguishes personality and juridical capacity.
One can no longer enter a contract.
2. CIVIL INTERDICTION: affects ones authority to manage
his properties and could not execute acts inter vivos.
But he can execute acts in mortis causa.
3. INSANITY: no valid consent.
4. INSOLVENCY: limits a persons capacity to act.
Let us assume that A and B entered into an agreement that A will sell his
house and lot to B for P5M cash, and that B has 30 days to think about
As offer.
-
LIMKETKAI VS. CA
The following week, they met and A immediately told B, lets

forget about the offer. Can A validly do such?
o
YES. Although B was given an option to buy, such is NOT
BINDING because of the absence of a CAUSAL
CONSIDERATION.
But if B gave A P10K, can A still validly withdraw his offer on that
same week?
o
NOT ANYMORE. If A does such, A will be held liable for
Page 12 | Bantay
breach of the option contract.

The withdrawal must not have been whimsically or
arbitrarily made, otherwise, such is a violation of Art. 19 of
the CC, under the tenets of civilization.
It is a liability for breach of common relations.
In an OPTION CONTRACT, a person acquires a right.

o
Upon perfection, the right to acquire the property is
vested to the buyer, but not the actually property itself
(NOT YET).
o
REQUIREMENT: must be supported by a causal
consideration.
A is renting Bs property and was granted the ROFR. After several years,
B sold the property for P1M to X, completely disregarding As ROFR.
Furthermore, X had knowledge that A had the ROFR to the property.
RIGHTS OF A according to ANG
YU ASUNCION VS. CA
Rights of A according to GUZMAN

VS.
BONNEVIE
and
EQUATORIAL
REALTY
VS.
MAYFAIR THEATER
To recover damages because of

the breach of principles of human
relations.
Right to ask for the rescission of

the sale between the infractor and
the third person.
-
Assuming that there is no causal consideration made, a week after A and

Bs agreement, B told A that B is buying the latters property. A then told
B that he decided not to sell the house and lot anymore.
-
Can A validly withdraw such offer?
Other than that, there is no other

juridical relation between A and B.
To recover damages.
To compel the infractor to sell to

the injured party the property at
the same price the former sold it to
the third person.
SANCHEZ VS. RIGOS: NOT ANYMORE.

-
Can sue for the annulment of

the contract.
At that point, there is already perfection and it does not matter at

all if there is a valid option contract or not.
o
Such is no longer relevant.
An offer becomes binding when it is ABSOLUTELY ACCEPTED.
Dean thinks this makes more sense, than applying PAR. 2, ART.
1479 regarding an accepted unilateral promise to buy or sell
something.
o
Here, even if there has been acceptance, if the promise is
NOT supported by a consideration distinct from the price,
then it can still be validly withdrawn.
NOTE: in all of the cases of the SC, the third person is usually a buyer in
bad faith.
In EQUATORIAL REALTY VS. MAYFAIR THEATER, the
petitioner was aware of the existence of the ROFR.
If the purchase was done in GOOD FAITH, then the innocent purchaser
for value is protected NO RESCISSION.
ART. 1325
NATINO VS. IAC

-
Business advertisements of things for sale are not definite

offers, but mere invitations to make an offer.
In this case, the Court invoked Art. 1479, instead of Art. 1324.
In a newspaper, there was an advertisement of a house and lot for sale

these are not definite offers.
RIGHT OF FIRST REFUSAL
OPTION AGREEMENT
Simply an invitation.
They are not the same; they are different from each other.
The price and other terms and
conditions are NOT YET fixed; will
only be known then the owner
indeed decides to sell the property.
The price is already fixed, as well

as the other terms and conditions.
Everything is already determined.
This is usually given to a tenant,

incorporated in a lease contract
that if the owner decides to sell
the property, he will first offer it to
the tenant.
The person granted the option has

the choice to exercise the option or
not.
The
causal
consideration
supporting the lease contract will
also support the ROFR contained
in the agreement.
Causal consideration REQUIRED.
ART. 1326
Same as for bidders.
There is usually a reservation written: the company reserves the
right to reject.
***ART. 1327
There are persons who are not supposed to enter to contracts as
they are INCAPACITATED to give consent.
1. UNEMANCIPATED MINORS: then the Family Code was
not yet effective.
o
Before, there were such things as unemancipated
minors; those who are not yet free from parental
authority.
o
The marrying age before is 14 years old for
woman and 16 years old for men.
Page 13 | Bantay
o
o
There must be VOLUNTARY CONCESSION to

execute a document when the minor is at least 18
years old.
No such thing like this anymore.
Persons who are under guardianship are not
capacitated to enter contracts ON THEIR OWN.
MATABUENA VS. CERVANTES

-
GENERAL RULE: A contract entered into by a minor is VOIDABLE.
Reason and logic dictate, as long as marriage is the cornerstone

of a relationship.
The requirement attaches even in a common law relationship.
This was during the time when the Family Code has not yet taken
effect.
UNUSUAL CASE because the SC cited a decision of the CA. but
it wouldnt come as a surprise as the ponente of that case was
JBL Reyes himself.
EXCEPTIONS:
1.
2.
3.
When the minor misrepresents that he has already passed the

age of puberty guilty of ACTIVE MISREPRESENTATION.
o
There are minors who can claim that they are already of
age as they look mature enough.
Of course, a 7-year-old boy can never pass as
someone who is of age.
SIA SUAN VS. ALCANTARA: dissenting opinion:
minors are incapacitated to enter into contracts as
they lack the wisdom and maturity to protect
themselves from abuse and bad faith.
Even
if
they
have
ACTIVELY
misrepresented themselves, it is logical to
make the contract VOIDABLE precisely
because minors would not be aware of
such act, despite being done actively.
But this was NOT the majority opinion.
Necessaries: NOT VOIDABLE.
o
As when a minor buys ice cream, or medicine.
Minors who are at least 7 years old are allowed to open a savings
account.
o
To encourage young people to save.
o
Technically, they are entering a contract with the bank:
contract of LOAN with the bank as the borrower and the
child as the creditor.
o
Via a PD of Marcos.
2.
ART. 1330: VICES OF CONSENT: with any of these present, consent is

deemed vitiated VOIDABLE.
1.
MISTAKE: not every kind of mistake justifies annulment.

o
Mistake that would result to vitiated consent must refer to
the SUBSTANCE of the thing.
A sold B a ring, saying that it is gold, when it turns out to be just made of
brass.
NOT VOIDABLE.
The price can merely be corrected; from P1,000 to P10,000.
INCOMPETENT (SEC. 2 OF RULE 92 OF THE NEW RULES OF

COURT) INCLUDES:
o
Persons suffering from civil interdiction.
Hospitalized lepers.
Prodigals.
Deaf and dumb who are unable to read.
Who are of unsound mind.
*Spendthrifts.
Those who by reason of age, weak mind or other similar cases,
cannot, without aid from other, take care of themselves and
manage their property becoming thereby easy prey from deceit
and exploitation.
2.
INSANE OR DEMENTED PERSONS AND DEAFMUTES WHO DO NOT KNOW HOW TO WRITE.
o
When they enter a contract during a LUCID
INTERVAL VALID.
There are days of sunshine of the mind.
o
Different from an IMBECILE: can NEVER enter
into contracts.
Its a perpetual eclipse of the mind.
No lucid intervals.
REMEMBER:
the
difference
between
INCAPACITY
PROHIBITION/DISQUALIFICATION to enter into contracts.
and
Those PROHIBITED to enter in contractual relations:

1. HUSBAND AND WIFE, without the consent of their
spouse (even those in a common law relationship).
MISTAKE OF ACCOUNT remedy is CORRECTION,

NOT annulment.
A sold his land to B for P10/square meter. The land is made up of 1,000
square meters. They thought B only had to pay P1,000.
-
1.
2.
3.
4.
5.
6.
7.
Insolvency.
MISTAKE OF IDENTITY generally does NOT justify

annulment, unless the identity of the infractor is what
primarily moved the injured party to enter into a contract
with the former.
A entered into a contract of lease with B, and B said his name is C.

-
NOT voidable.
Mere mistake of name, which is not what principally moved A to
enter a contract with B.
A hired B because B said he was a math teacher. A has a daughter and

he wanted B to tutor her, when it turns out that he was not. He was
actually a convicted rapist.
-
Contract is VOIDABLE.
Bs misrepresentation certainly affected A in entering a contract
with the former.
MISTAKE IN MOTIVES
A bought an engagement ring to B, telling B that he will propose to his

girlfriend, C. when A popped the question, C rejected him. A is now suing
Page 14 | Bantay
for the annulment of sale between him and B.

-
The contract is NOT voidable.
MISTAKE TO POSSIBLE PROFITS: differences in the

profits that one person hoped to derive.
A bought 100 bags of cement from B for P100/bag, intending to sell the
cement bags in his hometown for P120/bag. It turns out that the price of
cement in As hometown is P90/bag.
-
A can NOT ask for the annulment of the contract.
3.
o
There is ACTUAL use of force.
INTIMIDATION: generated through a reasonable and wellgrounded fear of an imminent and grave danger upon his person
or property, or upon the person or property of his spouse,
descendants or ascendants.
o
The enumeration is NOT exclusive, as long as there is
compulsion that resulted to a vitiated consent.
o
Determined by the physical condition and status of the
person threatened.
Castillejos threated Ticman that she will kill him by strangulation if he will
not sign their contract.
-
NOT tenuous considering the relative strengths of the parties.

The woman cannot make good of such a threat that involves a lot
of physical strength.
MISTAKE AS TO THE ACCIDENTAL QUALITIES OF

THE OBJECT.
PAR. 4: principle mostly used in Persons and Family Relations.
A went to the National Book Store and he saw a pocket book. On its
back, it says very interesting. He bought it and the book turns out to be
very boring.
-
Its still a pocket book. NOT voidable.
There are many cases in the SC of male law students, thinking their
girlfriends were impregnable, yet they were impregnated. The girlfriends
then threatened the law students to support their children.
-
Not the kind of intimidation cited in the Civil Code; it is merely a

threat.
Does NOT operate to vitiate consent.
A bought Bs residential lot in QC, thinking that Christine Reyes was

occupying the house beside it. It turns out that she does not.
-
A can NOT sue B.
ART. 1322
One of the social justice provisions in the Civil Code.
When one of the parties is unable to read, or if the contract is
in a language not understood by him, and mistake or fraud is
alleged, the person enforcing the contract must show that the
terms thereof have been fully explained to the former.
NOTE: vitiated consent through intimidation is NOT THE SAME as

reluctant consent.
MARTINEZ VS. HONGKONG ANG SHANGHAI BANK

-
ART. 1333
A sold a parcel of land to B in a distant barangay. A told B that he was
not sure exactly how big it is, but perhaps the property is for 100
hectares and that it produces around 100 sacks of rice. B bought it and it
turns out its only 70 hectares and produces 85 sacks of rice.
-
NOT voidable.
A informed B of the doubt, contingency or risk of the sale he
said he was not exactly sure.
ART. 1334
Even if consent was reluctantly given, it is still consent just the

same NOT annullable.
The husband was charged with embezzlement and fled the
country, leaving her poor wife behind. The creditors told the wife
she had two options: first, for her to assign all her husbands
property to the creditors; second, the wife will never see her
husband again but she can keep all her husbands properties.
RELUCTANTLY, she agreed to do the first and they arrived at a
settlement.
Is her consent vitiated? NO.
ART. 1336
ART. 1342
VIOLENCE AND INTIMIDATION

from third persons.
MISREPRESENTATION from third

persons.
RESULT: vitiated consent; even if

it came from a third person who is
not a party to the contract.
Does not generally vitiate consent.
A and B entered into a contract of sale, when the contract was really one
of lease.
EXCEPTION: when it resulted to

MUTUAL ERROR.
WHY ARE THEY DIFFERENT? THEY DIFFER FROM THE MATTER

OF AVAILABILITY OF CHOICE.
ART. 1335
2.
VIOLENCE: when serious or irresistible force is employed.
NO CHOICE AT ALL (e.g. A and B

are signing a contract, and out of
Contracting party has a choice to

believe the third person or not. He
Page 15 | Bantay
nowhere, C appeared and held B

at gunpoint, asking him to sign the
contract. Even if what C did was
something unexpected, even by A,
the result is vitiated consent of B).
has no one to blame but himself.

WOODHOUSE VS. HALILI
-
ART. 1337
4.
UNDUE INFLUENCE: power over the will of another.

o
The will of a party was so overpowered that it echoes the
dictates of the will of the other.
o
BUT the law does not prohibit any form of influence.
Man is by nature a social being.
We interact in a daily basis with different people.
RESULT: constant interaction. We cannot avoid
being influenced by other people, and vice versa.
BUT, as long as we can still express our wills,
regardless of the influence of others, then our
consents are NOT vitiated.
o
Difficult ground to annul even in laws of succession,
there is only one case where one party was able to prove
undue influence.
o
Involves ACTUAL overpowering.
ART. 1337
TOLENTINO: in a period of acute public want, in a land that is far
away from civilization where only ONE person has all the goods,
he can then dictate the prices of the goods UNDUE
INFLUENCE.
Halili is a business tycoon and he had a lot of business interests.

He was the biggest businessman during that time. He then
entered into an agreement with a soft drinks factory. Woodhouse
agreed and told Halili that he had the franchise of Mission Soft
Drinks. Because of that, Halili gave him 30% of the profits. It
turns out that Woodhouse did not have the franchise.
Fraud is merely INCIDENTAL.
It is clear that Halili would still have entered a contract with
Woodhouse even if the latter did not have Mission Soft Drinks
franchise.
o
He will just give him a LESSER share.
ART. 1339
Failure to disclose facts, when there is a duty to reveal them, as
when the parties are bound by confidential relations, constitutes
fraud.
A is an owner of a parcel of land in Mabalacat City. B learned from his

sources that Henry See will be putting a big mall there, so B offered to
buy As property. B did not tell A the news he had heard. Two weeks
later, Henry See announced that indeed, he will open up a big mall there.
The price of land shot up from P100/square meter to P1,000/square
meter.
-
A can NOT sue for annulment.

There is no duty for B to reveal the information to A.
They are not bound by confidential relations.
ART. 1338
5.
FRAUD: NOT breach of obligation.

o
Depending on its nature, it results to vitiated consent (AT
THE TIME OF PERFECTION OF THE CONTRACT).
DOLO CAUSANTE
RESULT: VOIDABLE contract.
DOLO INCIDENTE
Indemnity of damages.
Not the principal moving force that
induced the party to enter into a
contract.
A and B are partners and they have a land in Mabalacat City as one of
their assets. A told B that since nothing is happening in their land in
Mabalacat City, he will just buy B out for P100/square meters. In reality,
A just learned that Henry See will be putting up a big mall there.
-
B CAN sue for annulment.

When two people are partners, they are bound by the highest
degree of trust and confidence.
A has the DUTY to reveal such information to B.
ART. 1340
Intended to give a little elbow room for dealing talks.
There is a natural tendency to exaggerate products.
USUAL exaggeration of trade NOT fraudulent.
EGUARAS VS. GREAT EASTERN LIFE ASSURANCE

-
A fellow is applying for an insurance policy and he asked another

person to undergo the medical check-up for him.
NOT a valid insurance; there is fraud on the part of the fellow.
JOKE: a company asked all of his employers to submit a

sample of their urine. A man used another persons urine
and he passed the drug test. He was then called by the
president of the company. The president said,
congratulations! You are pregnant!
Causal fraud.
Professor was in National Book Store (pen section) and he saw a pen on
display that a certain ink is manufactured by a certain American
company and that certain ink refill was used by astronauts totoo nga.
ART. 1341
Expression of opinion NOT fraudulent.
UNLESS that person is an EXPERT.
A went to B and he told B that the ring was made of gold with its stone
made up of diamond. After B bought it, B had it examined and it turns
out, it was NOT gold, but bronze and the stone was mere cut glass.
Page 16 | Bantay
2.
Can A sue for annulment of the sale? YES.

o
By MISTAKE, but not of fraud; unless A is a legitimate
jeweller. In that case, he is considered an EXPERT.
ART. 130: there used to be a provision about future

spouses donating to one another, but this is not replicated
in the Family Code anymore.
ART. 1349: OBJECT MUST BE DETERMINATE

ART. 1344
But what if the quantity is not specified? STILL VALID, as long it

is possible to determine the same, without the need of a new
contract between the parties.
Substantial error.
RURAL BANK OF CALOOCAN VS. CA

-
Both the bank and the old woman made a mistake.

There was misrepresentation coming from a third person,
resulting to mutual substantial error.
A and B entered into a contract obliging A to sell all of the horses in his
farm. Will that invalidate the contract?
-
ABSOLUTE SIMULATION
RELATIVE SIMULATION
A and B entered into a contract that A cannot run for public office
anymore and B will pay him P100K.
VOID.
BINDING.
If the parties do not intend to be

bound by the contract at all.
Happens when the real agreement

is hidden or concealed.
Pakana lang yan.
EXAMPLE: when a father gives his

property to his favourite son/
daughter through a deed of sale.
EXAMPLE: When a person is

running from his creditors and he
makes it appear that he sold his
properties to other people.
The parties do not intend to be
bound by the contract of sale at all.
NO, it is possible to determine the exact number of horses in As

farm, even if such is not stated in the contract.
HOW? Just count the horses.
No need for a new contract.
REAL CONTRACT:
donation.
deed
of
The parties are still bound to the

REAL agreement as long as it is
not prejudicial to a third person
and is not contrary to law, etc.
CONTRACTS INVOLVING FUTURE INHERITANCE
BLAS VS. SANTOS: the contract here would seem like a contract of
future inheritance.
-
FEB. 27, 2014

OBJECT
One of the three common essential elements of a contract.
All must be present for there to be a valid contract: CAUSE,
OBJECT, CONSENT.
The WHAT of the contract; what the contract is all about.
GENERAL RULE: It can be anything, as long as it can be LAWFULLY
APROPRIATED / transferred.
EXCEPTION: contracts involving FUTURE INHERITANCE.
REASON: such is in the realm of expectancy.
The rights of the compulsory heirs of a certain person can only be
fixed or transmitted after that persons death.
Prior to that, the heirs so not know what they will inherit.
EXCEPTION TO THE EXCEPTION:
1. ART. 1080: a person partitioning his estate by an act inter
vivos, as long as such is not prejudicial to his compulsory
heirs.
NOW: THIS IS THE ONLY EXCEPTION.
Pseudo-generis: as long as the causante lives, he
can still chance his mind and the contents of his
will.
The contract is NOT BINDING.

The object (prohibition to run for public office) is contrary to
PUBLIC POLICY.
A man married twice. His first wife was Marta, and they had 3
children. His second wife is Maxima and they did not have any
children. After the death of Marta, there was no liquidation of the
properties of the spouses. When the man was nearing his death,
he declared that all of his properties were conjugal properties of
the second marriage, giving Maxima of all of his properties.
The mans children in the first marriage complained so Maxima
promised to them that she will covey half of all of the mans
property to them. She then died without complying with her
promise.
Was there consideration? YES.
o
WHAT: to prevent litigation.
o
The compromise that she signed if to prevent the children
from questioning the will of the childrens father.
NOT a contract involving future inheritance.
RATIO FOR THE PROHIBITION: the properties are
Indeterminate since the heirs would have to wait for the person to
die to know what exactly they will inherit.
HERE, the properties are already DETERMINATE from the
moment of Martas death. From that point on, the children of the
first marriage has already inherited part of Martas share to the
conjugal partnership.
o
The properties were already there.
o
Here, the subject matter of the contract is already welldefined properties existing at the time of the agreement.
CAUSA / CONSIDERATION
The WHY of the contract.
The OBJECTIVE / JURIDICAL reason for entering into a
contract.
Page 17 | Bantay
GENERAL RULE: MOTIVE CAUSA

MOTIVE
CAUSA
MOTIVE: does not affect the legality of the contract.

OBJECTIVE REASON: remains
the same regardless of who the
parties of the contract are.
PERSONAL REASON: depends

upon who the person entering a
contract is.
A sold three knives to B, C and D.

a.
b.
c.
To B, for P300, and B plans to use it in his kitchen.

To C, for P300, and C plans to use it in his garden.
To D, for P300, and D plans to use it to kill B.
ART. 1350
NOTE: all of the contracts of sale are VALID.
ONEROUS CONTRACT: a mere promise is considered a
sufficient consideration.
A promised to pay P500K to B and B is obliged to deliver his car to A in

return. B delivered his car to A, but A did not pay B. Can B sue for
annulment of the contract for lack of causa?
-
NO, B cannot.
There is a consideration: As promise, his honest to goodness
promise that he will pay B.
REMEDY OF B:
1. Rescission / resolution, with damages.
2. Specific performance.
EXCEPTION: MOTIVE = CAUSA

When the motive PREDETERMINES the contract.
That is when the line between motive and causa disappears.
The ILLICIT MOTIVE of one party becomes the causa,
necessitating the need for the contract.
AFFECTS the validity/legality of the contract.
LIGUEZ VS. CA
LADANGA VS. CA 131 SCRA 361

-
It was simply made to appear that the old woman had received a
certain amount of money, when actually, she did not.
VOID: there was total absence of cause/consideration.
There was no promise to pay at all.
The seller was not even aware of the existence of that contract.
REMUNERATORY CONTRACT:
A has a doctor neighbour named B and B had been rendering free
service to A and to As family without pay for years. A then gives B a
parcel of land.
-
Motive of the parties do not affect a contracts validity.

Causa is the same:
1. SELLER: acquisition of the price.
2. BUYER: acquisition of the knife.
Conchita, who was a young lady (16 years old) during that time,
accepted a donation from a man, Lopez, with the consideration
that she will agree to be his mistress. After the death of Lopez,
his heirs commenced an action against Conchita. Conchita
averred that there is nothing wrong with the contract as it was of
PURE BENEFICENCE.
SC: Lopez would not have donated his property to her if she
hadnt agreed to be his mistress.
o
The contract was conditioned upon an illicit motive of
Lopez.
Conchita was a minor during that time, and minors occupy a
privileged position in law.
o
Conchita and Lopez are not in pari delicto.
EQUITABLE SOLUTION: to allow her to retain the property to the
extent that is not prejudicial to Lopezs compulsory heirs.
Causa: Bs medical services to A and As family.
PHIL. BANKING CORP. VS. LUI SHE: CLASSIC CASE

PURE BENEFICENCE: cause liberality/generosity.
CONTRACT OF SALE OF DIAMOND RING

VENDOR
CAUSA
Acquisition of the
PURCHASE PRICE.
VENDEE
Acquisition
OBJECT.
of
the
-
OBJECT
(TOLENTINO)
RING: it is the starting point of all the

negotiations.
-
2 different causes, but only 1 object of

the obligation.
An old, rich woman (Doa Santos) owned a really big estate in

Manila. A Chinese was leasing a part of the estate and was
operating a restaurant there. Doa Santos and the Chinese were
old friends. She did not have any known relatives during that time
and her only source of happiness is when the children of the
Chinese came to visit her and she taught them how to pray. She
then wanted to give her property to him, but foreigners are not
allowed to own properties here.
o
There was a constitutional obstacle.
o
She then leased her property to the Chinese and
extended it for maximum periods with an option to buy.
A snoopy newspaperman learned about this and wrote a story
about it out of human interest about this rich woman with no
relatives. That was the beginning of the end.
Long lost relatives began to appear and they were successful
enough to place the old woman under guardianship. They then
proceeded to nullify those acts.
PREVIOUS SC CASES: SC had invariably ruled that the Filipino
seller and the foreign buyer are in pari delicto.
o
Both of them cannot recover the property.
o
Who can recover? THE STATE ALONE.
Page 18 | Bantay
In this case, SC applied one of the exceptions of the in pari

delicto rule.
o
Merely prohibited plaintiffs were allowed to recover the
property.
CASTRO: if you look at the contracts individually, there is nothing
illegal about them. But if you look at them collectively, they
subvert the law by indirectly doing what is subverted: to
circumvent a constitutional prohibition.
o
The ill motives of the parties tainted the cause of the
contract.
o
The Chinese had virtual ownership of the property.
FALSITY
CAUSE
OF
The cause is stated but

not true.
LESION OR
INADEQUACY
OF PRICE
The contract is void if it

should not be proved that
they were founded upon
another case which is
true and lawful.
Shall not invalidate the
contract UNLESS:
1.
ACCESSORY OBLIGATIONS
2.
Has the same causa as that of the principal.
There is fraud,
mistake or undue
influence
(annullable).
When the parties
intended
a
donation or some
other contract.
A borrowed from a bank and asked B if he could use Bs property as

mortgage. B agreed. A was unable to pay the loan.
-
Can B allege that there is no causal consideration of the

mortgage of his property by saying that he did not receive a
single centavo of the loaned amount? NO.
There IS a consideration: The loan received by A.
MORAL OBLIGATION
CARANTES VS. CA
-
FISHEL VS. ROBB

-
The project did not push through and the organizer said that out
of sense of moral duty, he will give back the investments of the
investors.
o
NOT a binding promise.
After the death of Carantes, his children executed a deed of

assignment to their co-heir, Maximillo, with a consideration of
P1.00. Additionally, during the lifetime of the deceased father, he
had been saying that Maximillo is the rightful owner of the
property.
SC: it is not mere inadequacy of cause the will justify nullity.
There is a consideration of P1.00.
Of great legal import, as well: the admission of the late father.
o
Valuable causal consideration.
o
No basis for the declaration of nullity of the deed.
BERCERO VS. CAPITOL DEVELOPMENT CORP., GR. NO. 154765

VILLAROEL VS. ESTRADA
-
VALID civil obligation: a person made a loan and subsequently

died. Her child said he will pay his mothers loan instead, even
though prescription had already set it.
BINDING: the prescription of the civil obligation converted it to a
natural obligation.
Respondent corporation is an owner of a property and leased it to

Nicolas Merchandising, Inc. for 10 years. RC Nicolas then
subleased it to Bercero. Respondent corporation then filed an
ejectment suit for non-payment of RC Nicolas. Pending litigation,
respondent then leased the property to Bercero.
SC: the contract between Capitol and Bercero is VOID.
o
No causal consideration; inexistent.
o
At that time, Capital did not have the right to lease it to
Bercero since the lease of Nicolas is still valid and
existing.
ARTS. 1352 to 1355

MAR. 04, 2014
EFFECT OF LACK OF CAUSE, UNLAWFUL CAUSE, FALSE CAUSE
AND LESION
LACK
CAUSE
OF
CAUSE
EFFECT
There is total lack or

absence of cause.
The contract confers no

right and produces no
legal effect.
-
ILLEGALITY
OF CAUSE
The cause is contrary to

law,
morals,
good
customs, public order and
public policy.
Justifies nullity.
The contract is null and

void.
FORM OF CONTRACTS
We follow the SPIRITUAL SYSTEM as far as form of contracts is
concerned.
GENERAL RULE: contracts are binding no matter what form
they have.
EXCEPTION: when the law specifies for another form for their
VALIDITY, ENFORCEABILITY and CONVENIENCE.
A and B entered into a VERBAL contract of loan for P1,000.

-
Is this a valid contract? YES.
MUST BE IN WRITING; OTHERWISE, NOT VALID:

Page 19 | Bantay
1.
2.
Donations of personal property whose value exceeds five

hundred pesos.
Sale of a piece of land or any interest therein through an agent
SPA.
Court: Art. 1358 does not affect the VALIDITY and the
ENFORCEABILITY of contracts.
ART. 1359: REFORMATION

RECIO VS. AGUEDO
-
3.
4.
Agreement of payment of interest in contracts of loan.

Antichresis.
MUST BE REGISTERED:
1.
2.
Presupposes a VALID CONTRACT.

Does NOT involve vitiation of the consent of either of the parties.
PROBLEM IT ADDRESSES: when the true intention of the
parties to a perfected and valid contract are not expressed in the
instrument purporting to embody their agreement by reason of
mistake, fraud, inequitable conduct or accident, one of the parties
may ask for the reformation of the instrument so that such true
intention may be expressed.
o
In other words, the written document does not embody
the parties true intent.
A certain parcel of land was inherited and owned by the heirs of

an old woman and one of the heirs sold it. The sale is only valid
in so far as that heirs share is concerned, without any proof of
the following (the law is categorical):
1. The agent must be authorized in writing.
2. Special power of attorney.
Sale is NOT valid as far as for the shares of the others are
concerned.
Chattel mortgage.
Sale of large cattles.
A and B entered into a contract of sale, whereby A will sell Lot. No. 1 to
B for P500,000. B agreed. In the document, though, what was written
was Sale of Lot. No. 3.
-
MUST APPEAR IN A PUBLIC DOCUMENT:

1.
2.
Donations of immovable properties.

Partnerships where immovable property or real rights are
contributed to the common fund.
ART. 1358
All other contracts where the amount involved exceeds five
hundred pesos must appear in writing, even a private one.
Suppose A loaned P1,000 from B, though such was NOT executed in a

public document.
-
What is the proper remedy? REFORMATION, NOT annulment.

What if the Lot. No. was correct, but the secretary erroneously
typed $500,000, instead of P500,000? Is reformation still a proper
remedy?
o
YES. There was a prior meeting of the minds.
Is the contract of loan valid? YES. Enforceable? YES.

Why the law requires such: only for greater EFFICACY or
CONVENIENCE.
What if A made a will and testament and when he died, there had been
allegations that his will failed to reflect his true intentions.
-
Can this be subject to REFORMATION? NO.
ART. 1366: WHEN THERE CAN BE NO REFORMATION

1.
2.
3.
Simple donations inter vivos wherein no condition is imposed.

Wills.
When the agreement is void.
INTERPRETATION OF CONTRACTS: things to remember:

The cession, repudiation or renunciation of hereditary rights or of
those of the conjugal partnership of gains the contract will still
be VALID despite not in a public document.
The non-compliance of a the requirement does NOT affect the
validity of those contracts.
ART. 1357
1.
2.
3.
4.
A and B entered into a contract which has already been perfected, but
was not in a public document.
-
The law allows one party to execute it in a public document.
ART. 1378: when doubt is impossible to settle:

1.
2.
DAUDEN-HERNAEZ VS. DE LOS ANGELES

-
The actresss professional fee of P14,700 remained unpaid,

though such agreement was not made into writing.
TCL dismissed her claims; invoked Art. 1358.
WHEN THE LANGUAGE IS CLEAR: no room for interpretation.

o
Only to implement or to enforce.
WHEN THERE ARE SOME APPARENT CONFLICT IN THE
WORDS AND THE INTENTION OF THE PARTIES: the intention
of the parties will prevail.
GUIDE OF ASCERTAINING INTENTION (for judges): through
contemporaneous and subsequent acts.
The one who caused the ambiguity, the words will be interpreted
against him.
o
CONTRACTS OF ADHESION: doubt is construed against
the party who prepared it.
Doubt refers to circumstances of a GRATUITOUS CONTRACT:

the least transmission of rights and interest shall prevail.
Doubt refers to circumstances of an ONEROUS CONTRACT: the
greatest reciprocity of interest.
CENTRAL PHILIPPINE UNIVERSITY VS. CA

Page 20 | Bantay
There must be PRIORITY OF CREDIT: for a creditor to be

defrauded due to the debtors alienation of his property, he must
be a creditor at that time already.
o
If the creditor was not yet a creditor during that time, then
he could not have been defrauded.
o
EXISTENCE OF CREDIT.
Petitioner was not able to fulfil the condition for the donation.
MAR. 06, 2014

RESCISSIBLE CONTRACTS
Earlier this semester, we took time to discuss Art. 1191
speaks of rescission of reciprocal obligations.
RESOLUTION FOR BREACH OF

STIPULATION
PRINCIPAL ACTION; retaliatory
action against the other party.
RESCISSION BY REASON OF
LESION OR DAMAGE
SUBSIDIARY
ACTION
involves partial resolution.
A owes B P1M. A then sold his only property to C for P1M and C knew
that A had an unpaid obligation to B, but C bought it just the same. Then
A squandered all of the proceeds.
-
and
-
Requires mutual restitution: to return what the parties have received,

including the fruits and interest***
-
Does that arise when an obligation is rescinded in Art. 1191?

YES.
***The Supreme Court said in ONE CASE that there is no such

obligation.
Do parties, after agreeing to RESCIND, have the obligation to
return everything? Whatever the consequences of the rescission
depend on their AGREEMENT,
More recent cases: GRACE PARK ENGINEERING CO., INC VS.
MOHAMAD ALI DIMAPORO and LAPERAL VS. SOLID
HOMES
LAPERAL VS. SOLID HOMES

-
Court applies Art. 1386 to a resolution of an obligation in Art.

1191.
It said that as long as Art. 1191 says rescission, we will use the
same terminology and the same rules for Art. 1358.
SAME OBLIGATION OF MUTUAL RESTITUTION.
Is B a defrauded creditor? Can he claim rescission? YES.

o
The intent to defraud him is clear that was As only
property and he sold it.
o
Will C, the third person, be protected? NO, he is in bad
faith. He knew A had an unpaid obligation and that was
his only property.
Supposing that C then sold the property to D and D bought it in
good faith.
o
Can A ask for the rescission of the sale between C and
D? NO, D here is an innocent purchaser for value.
o
REMEDY FOR A: to obtain damages from C.
ART. 1388, par. 2: If there are two or more
alienations, the first acquirer shall be liable first,
and so on successively.
Not the first alienator, B.
o
Why doesnt the law mention the debtor (B)?
He is already presumed to be insolvent.
If he has money, then rescission will not even be
a remedy available for the defrauded creditor.
Thats why it is a SUBSIDIARY REMEDY: it is
only availed of when there is no other means for
C to proceed.
A is Bs creditor for P5M and A donated his only property to C, who was
in good faith.
-
Can A recover the property? YES.

If the transfer is GRATUITOUS, good faith will not protect the
transferee.
REASON: the transferee never received anything.
INTENT IS ONLY IN THE MIND OF THE DEBTOR:

But there are circumstances showing fraudulent intent.
ART. 1381: the intent to defraud is there.
A is the guardian of B and A sold a parcel of land belonging to B worth

P5M. A only sold it for P500K.
-
What is the status of the contract? IT DEPENDS IF THE

CONTRACT IS APPROVED BY THE COURT.
a. If YES, then that sale is VALID. It cannot be rescinded,
regardless of the actual damages.
The law has so much faith to our courts.
To ensure there is no prejudice to the ward or to
the absentee.
b. If NOT approved by the court, its NOT RESCISSIBLE.
An UNENFORCEABLE CONTRACT.
There must be no acts of ownership for
guardians, otherwise, they would be acting in
excess or lack of authority.
CONTRACTS ENTERED INTO IN FRAUD OF HIS CREDITORS
A owes B P5M. A new corporation was formed and A gave and invested
his only property to it in exchange of the shares of stocks of the
corporation worth P5M. After several months, the value of those shares
dropped to 50% of its original value.
-
Can B sue for rescission of the investment on the ground of

fraud? NO. There is no intent of the debtor to defraud the
creditor.
Even if in consequence, there was an injury it was an honest
to goodness investment.
o
Not fraudulent.
INTENT IS IN THE MIND OF THE DEBTOR and one must rely to the
presumptions (ART. 1387: PRESUMPTION OF FRAUD) to establish
such:
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1.
2.
If the debtor did not reserve sufficient property to pay all of his
debts.
ONEROUS TITLE: when judgment has been rendered in any
instance or some writ of attachment has been issued.
o
Does it need to be final? Or can it be in any instance? IN
ANY INSTANCE, need not be final.
o
What if it is not yet served? YES. All that the law requires
is the issuance of the court.
BADGES OF FRAUD
1.
2.
3.
4.
5.
6.
The fact of inadequate or fictitious cause or consideration of the

conveyance.
Transfer by a debtor after suit has been begun and while it is
pending against him.
Sale on credit by an insolvent debtor.
Evidence of large indebtedness or complete insolvency.
Transfer of all or nearly all of debtors property by him, especially
when insolvent or greatly embarrassed financially.
Transfer between father and son, where others of the above
circumstances are present.
HONRADO VS. MARCAYDA

-
CABALIW VS. SADORRA

-
Petitioner Cabaliw was the second wife of Benigno. During their

marriage, they bought 2 parcels of land. They had a daughter
Soledad. Benigno abandoned his wife Cabaliw, thus the latter
filed an action in court for support. The Court ordered Benigno to
pay her P75 a month. However, Benigno did not pay and instead
sold their property to his son-in-law Soterro. The transaction was
done without Isidoras consent. Prior to the sale, Soterro already
knew that there was a judgment rendered against his father-inlaw but proceeded to buy the property anyway. When Cabaliw
found out, she instituted an action along with her daughter to
recover the properties.
The court ordered her to administer the conjugal property and
she discovered that the lands were sold to her son-in-law
(daughter of her husband on his first marriage). The husband
died and the Japanese came. The son-in-law then filled an
affidavit claiming that the case has already been decided in his
favour and caused the cancellation of the lis pendens. The wife
and her daughter then filed a case against the son-n-law and his
wife.
Court: the sale between the husband and his son-in-law
simulated and fictitious.
o
Did not uphold the rights of the purchaser; fraudulent.
o
Son-in-law knew about the judgment against Benigno but
proceeded to purchase the properties anyway.
The sale is very questionable:
1. There was already an executed judgment of support
when the sale was made.
2. There was a close relationship between the seller (fatherin-law) to the buyer (son-in-law).
The action for rescission is subsidiary = no other legal means.

WHO CAN SUE? PARTY.
o
Their representatives.
o
Their heirs: they can sue either as a representative of the
decedent or sue in their own right due to deprivation of
their legitimes.
o
In the same position as defrauded creditors.
o
Their creditors.
While it is clear in this provision that the action for rescission is
subsidiary, the rule on the subsidiary character should not be
applied on the SALE OF THINGS ON LITIGATION preserves
the REAL RIGHT.
A and B are litigating and A is in possession of the property under

litigation. Pending litigation and without any notice to the court, A sold it
to a third person who knew about the pending case. B then won the
case.
Failure of the vendee to take exclusive possession of all the

property.
PRESCRIPTIVE PERIOD: FOUR YEARS

1.
2.
3.
Action to claim rescission must be commenced within four years.

INCAPACITATED: from the termination of the formers
incapacity.
ABSENTEE: from the time when the domicile of the absentee
has been known.
SIKATUNA VS. GUEVARA

Third person purchased a parcel of land from Luisa Marcayda

although at the time the contract was executed, there was
already a judgment in favor of the plaintiff against the latter with
regard to the property and a writ of attachment had already been
issued.
Court: there was no notice of lis pendens annotated in the title.
o
Moreover, it was made with a consideration.
The property was LEGALLY PASSED to the third person who did
not act in bad faith.
***ART. 1383:
7.
Lessor: HERMANOS sold to SIKATUNA.

Lessee: Guevara.
There was an option for the lessor to purchase the house of the
tenant within one year. If such is not exercised, then the tenant
can buy the land. The lessor did not buy the house so the tenant
tried buying the land. The landowner refused and the lessee filed
a case. Meanwhile, the owner sold the property to Sikatuna and
recorded the transfer in the registry. Guevaras case was then
granted.
ISSUE: WON the rescission of the sale is proper.
Court: NO. Sikatuna already owns the property.
o
No rescission is possible if the property has already been
registered legally as that will make Sikatuna an acquirer
in good faith.
o
The mistake of Guevara is that it failed to annotate lis
pendens to the title that will serve as notice to Sikatuna.
Can A and the third person go to B and insist on just paying for
the value of the property, or can B insist on getting the property
itself (rescission of the sale between A and C)? B can get the
property itself.
o
He can insist of his REAL RIGHT over the property, and
not just the value of it.
o
Not merely subsidiary.
VOIDABLE CONTRACTS: types:

1.
2.
Vitiated consent by mistake, violence, intimidation, undue

influence or fraud.
ONE of the parties do not have the capacity to enter into a
contract (example: minors).
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VALID until ANNULLED.

FOUR YEARS PRESCRIPTION PERIOD
ACTION
ONE VIEW
Only applies here.
DEFENSE
REGISTERED LAND
Registration is an operative act: it serves as notice to the whole
world.
o
VOIDABLE CONTRACT FOUR YEARS from the time
of registration.
CARANTES VS. CA
A CANNOT sue for annulment of

the contract. Only B (minor) can.
B (vitiated)
C knew about it. C is not obliged to

have the contract annulled.
Pakealam niya dun.
NOTE: The Supreme Court recognized AN EXCEPTION:

If the heirs rights are prejudiced and there was showing that the
action was detrimental to them subsequently reiterated such in
many cases.
Applies here.
An incapacitated person has FOUR YEARS to sue
for annulment after the attainment of his majority. If
he sued for annulment, you cannot use minority as a
defense.
B (minor)
Does not apply here.
You can raise the voidable character of the contract

even AFTER FOUR YEARS.
PROFESSORS
VIEW
TEVES VS. PEOPLES HOMESITE: settled rule already.

-
ART. 1398
Court: there is a consideration of P1.00 and the admission of the

other heirs that their late father had wanted the property to
belong to Maximo.
Mere inadequacy of causa does not render a contract void.
Moreover, the action has PRESCRBED: more than 4 years had
passed since the registration of the property in Maximos name.
Consequence of annulment: MUTUAL RESTITUTION.

Restore to each other the things which have been the subject
matter of the contract.
SPECIAL RULE FOR INCPACITATED PERSONS (ART. 1399)
o
GENERAL RULE: payment to incapacitated persons is
not valid.
o
EXCEPTION: when the person has [1] kept and [2]
benefitted from it.
o
The incapacitated person is not obliged to make any
restitution except insofar as he has been benefited by the
thing or price received by him.
Because of this, an action for annulment will NOT prosper IF THE
PLAINTIFF IS NOT IN THE POSITION TO RETURN THE
THINGS.
ART.1392: RATIFICATION
Voidable contracts can be RATIFIED and such has a
RETROACTIVE effect (ART. 1396).
Cleanses the contract from all its defects from the moment it was
constituted.
KINDS:
1. EXPRESSLY
2. IMPLIEDLY: if the party, with full knowledge of the fraud,
execute an act which implies an intention to waive his
right.
A and B entered into an agreement whereby A will deliver his car to B

and B will pay P500K, though Bs consent was vitiated. A then delivered
his car to B.
-
A and B agreed that A will deliver his car and B will pay him P500K. But
As consent was vitiated; he was intimidated into agreeing.
-
If A sent a demand letter to B, then the contract is deemed

RATIFIED. He then impliedly waived any of his intent to sue for
the annulment of the contract.
Here was a person who applied for the housing award, and he
was entitled to it. A politician then intervened and the result was
the awarding of the property to another person.
The person then sued the buyer and PHHC.
He is not a party to the contract between the buyer and PHHC,
but the SC ALLOWED HIM.
If a third person is prejudiced in his rights with respect to one of
the contracting parties, and can show detriment which would
positively result to him from the contract in which he has no
intervention.
B is entitled to sue for the annulment of the contract (B vs. A), but
if he subsequently LOST THE CAR DUE TO HIS FAULT, he
CANNOT (ART. 1401).
o
If the defendant, A, lost the thing due to his fault, he
should return the value of the thing and the interest from
the time it was lost (ART. 1400).
What if the car was lost due to caso fortuito? YES, he CAN SUE.
o
The loss was not due to his fault.
o
No obligation to pay the interest.
ART. 1397: WHO CAN SUE?

Only the persons obliged principally or subsidiary under the
contract may sue for annulment.
Only persons whose consent was vitiated can.
NOTE: Art. 1401 is reconciled with Art. 1399, in so far as he has

benefitted to the thing or price.
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Par. 2: if the action is based on the incapacity, the loss of the

thing shall not be an obstacle for the success of the action,
unless said loss took place at the fault of plaintiff.
o
How can an incapacitated person be accused of fraud?
might have possibly committed fraud.
3.
MAR. 11, 2014

UNENFORCEABLE CONTRACTS
Last time, we talked about RESCISSIBLE CONTRATCS.
Unenforceable contracts are more defective than rescissible
ones: in unenforceable contracts, one cannot maintain an action.
IMPORTANT: to always know what acts and contracts are covered by

the Statute of Frauds.
1.
ART. 1403: THREE BASIC TYPES:

1.
2.
Those entered into without or in excess of authority.

o
As early as Art. 1317, the Code has established such.
o
In some cases, the SC held that they are void or
inexistent because of that total absence of consent,
cause or object.
o
In more recent cases, the SCs decisions were more in
accord with the provision of Art. 1317 and Art. 1403
UNENFORCEABLE.
Those that do not comply with the statute of frauds: requires
certain contracts to be in writing and subscribed by the party
being held liable.
o
OTHERWISE, unenforceable.
o
PURPOSE: to prevent the commission of fraud, and not
to protect the commission of fraud.
o
A note or memorandum will do, as long as it is signed.
Need not be in a single document.
Must contain all of the necessary details: price,
description of the property, the names of the
parties.
A (seller) and B (buyer) entered into a contract of sale of land. In reality,

there was a written contract but it was LOST.
-
Is it possible to prove the existence of the contract? YES; through

ORAL EVIDENCE.
o
But it must first be proven that there WAS a WRITTEN
CONTRACT, and that it is lost.
If the court is satisfied with the evidence, then the other terms
and conditions of the contract may be proved.
Only applies to EXECUTORY CONTRACTS: there must

be no performance, other partial or absolute.
If there is, the contract becomes an EXECUTED
one.
2.
You can prove that there has been partial payment through
ORAL EVIDENCE.
o
From the testimony of a witness, and of the party himself.
o
Need not be evidenced in a written document.
o
Once you are able to do that, you can prove the other
terms of the contract.
REASON WHY STATUTE OF FRAUDS IS ONLY APPLICABLE TO

EXECUTORY CONTRACTS: the purpose of the Statute is to prevent
fraud. If an injured party is not allowed to prove the partial payment
through oral evidence, then that protects the other party, the one who
An agreement that by its terms is not to be performed within a

year from the making thereof;
o
REASON: the law assumes that the maximum limit of
human memory is one year.
o
Chances are, after 7 months from the time you and
another person agreed something, both of you will have a
different recollection of the agreement.
o
To prevent this, the contract must be written.
o
Human memory is inherently unreliable.
o
This is a reasonable provision based on human
experience.
A special promise to answer for the debt, default, or
miscarriage of another;
o
The promise must be COLLATERAL and not
independent.
A borrowed P5M to B. C told B that C will guarantee As debt. A ended

up not paying B. Can B run after C?
-
NO; the special promise to answer must be in writing.

If there is no written document evidencing such, B cannot run
after C.
MORAL OF THE STORY: better write everything down and have the
parties sign it provides ample protection.
A promise to answer ones OWN debt is NOT COVERED.
A borrowed P10M to B and since B trusted A, they did not have a written
form of the contract. Can A invoke Statute of Frauds?
-
NO; CONTRACT OF LOAN is NOT covered by the SOF.

This is not a promise to pay anothers debt, but a promise to pay
ones own debt.
3.
An agreement made in consideration of marriage, other than a

mutual promise to marry;
o
MUTUAL PROMISE TO MARRY: NOT covered by the
SOF.
o
Usually, they are not expected to be in writing.
o
If one does not make good of his promise to marry
another, the other party can file a complaint on the basis
of injury.
A (seller) and B (buyer) entered into a sale of land whereby C has made
a partial payment, though the contract was not made into writing.
-
Both of the contracting parties do not possess the required legal

capacity.
o
When one of the parties ratifies such, then it becomes
VOIDABLE.
WASSMER VS. VELEZ

-
It is not the breach of promise to marry that was being sanctioned

but the manner it was committed.
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4.
An agreement for the sale of goods, chattels or things in

action, at a price not less than five hundred pesos;
LIMKETKAI VS. BPI

-
A and B agreed the delivery of a couple of items, one costing P300 and
the other P400.
-
5.
Is their agreement covered by the SOF? IT DEPENDS.

a. If the parties intent to have an INSEPARABLE contract,
then the TOTAL amount of the items must be calculated:
TOTAL P700; covered.
b. If not, then the aggregate amounts: P300 and P400 =
below than 500; not covered.
An agreement for the leasing for a longer period than one year,
or for the sale of real property or of an interest therein;
o
The agreement among CO-OWNERS for a part/precise
location of the boundary: NOT covered by the SOF
because it does not involve a sale of property.
A, B and C entered into a verbal agreement regarding the partition of a

parcel of land.
-
VOID CONTRACTS
VOID
INXISTENT
Contains all of the essential

requisites of a contract but one or
some of those requisites are
contrary to law.
If one or all of the essential

elements are totally lacking or
absent.
Cause prohibited by law.

The importance of the difference between the two is due to the IN PARI
DELICTO RULE, as such is only applicable to VOID CONTRACTS.
Is it covered by the SOF? NO.
SC decisions: SOF is limited only to those contracts

enumerated.
o
Promise to GIVE land for SERVICES PREVIOUSLY
rendered: NOT a sale of real property.
Not an executory contract: services had already
been rendered.
o
Oral agreement to EXTEND THE LEASE of a property:
COVERED.
The property must also be described, as well as
the period of the lease.
All of the necessary details must be stated.
A representation as to the credit of a third person.
o
6.
A party who has cross-examined about the oral contract cannot

invoke SOF.
The party, before doing so, must make a clear reservation of their
right to invoke SOF.
ART. 1409: CONTRACTS WHICH ARE INEXISTENT AND VOID AB

INITIO
1.
2.
3.
Those whose cause, object or purpose is contrary to law,

morals, good customs, public order or public policy;
Those which are absolutely simulated or fictitious;
Those whose cause or object did not exist at the time of the
transaction;
o
Not really accurate because you can have an object of a
FUTURE THING.
o
MORE ACCURATE: could not have come at the
existence at the time of the perfection of the contracts.
AGUINALDO VS. ESTEBAN

A borrowed money from B and B asked C if its a good idea to do so. C
then said yes, kahit P10M pa pautang mo sa kanya, kaya niyang
bayaran yan. B then lent A P5M. T ended up not paying.
-
Is C liable for the representations he made? NO; unless such

were made in writing.
When in writing, source of Cs liability: quasi-delict.
INIGO VS. ESTATE OF MALOTO

-
There had been partial performance, thus, oral evidence may be

allowed to prove the existence of those partial payments, and
then the terms of the contract.
4.
5.
6.
7.
There was this old illiterate man and his son and his son was
being given money (50 cents) every day. Three years after, a
contract of sale was executed.
Court: the money being given on a daily basis came from the old
mans own property. Ginisa sa sariling mantika.
There is NO valid contract: INEXISTENT due to the absolute
lacking of CONSIDERATION.
Those whose object is outside the commerce of men;

Those which contemplate an impossible service;
Those where the intention of the parties relative to the principal
object of the contract cannot be ascertained;
Those expressly prohibited or declared void by law.
REMEMBER THE RULES RE: VOID CONTRACTS:

HOW TO RATIFY AN UNENFORCEABLE CONTRACT:
1.
2.
Failure to object t the representation of oral evidence to prove the

existence of such contracts.
Acceptance of the benefits under those contracts.
1.
2.
3.
IMPRESCRIPTIBLE, though sometimes laches may set it.

NOT SUSCEPTIBLE to RATIFICATION.
Generally, has NO LEGAL EFFECTS (1411-1414).
o
EXECUTED CONTRACTS: the guilty party is bared from
recovering what he has given to the other party by reason
of the contract while the innocent party may demand for
the return of what he has given.
Page 25 | Bantay
4.
Generally covered by IN PARI DELICTO.

o
Bahala na kayo sa buhay niyo.
The sale was void due to the total absence of consent of the two
owners.
ISSUE: the case for declaration of nullity was filed some 30 years
after the purported sale.
Court: NOT barred by laches precisely because the heirs were
not aware of the sale.
o
The only time they learned about it was when they were
already being evicted.
Art. 1410 is applicable:
The court left them where they are.
EXCEPTIONS:
AZNAR VS. HEIRS OF AUGUSTO

-
1.
2.
3.
4.
ART. 1413: payment of usurious interest.

ART. 1414: payment of money or delivery of property for an
illegal purpose.
ART. 1415: payment of money or delivery of property for made
by an incapacitated person.
ART. 1416: agreement or contract not illegal per se, but merely
prohibited by law.
PHIL. BANKING VS. LUI SHE: LANDMARK CASE.

5.
The action or defense of nullity is IMPRESCRIPTIBLE.
CASTILLO VS. GALVAN

FRAUD IN SECURING ONES
CONSENT
Voidable: with 4
prescriptive period.
years
of
FRAUD IN SECURING ONES

SIGNATURE
Totally void; total absence of
consent what happened in
the case at bar.
FRENZEL VS. CATITO

-
FACTS: the property was sold for P500 only when its actual
value is P20K.
The old man did not realize that it was a deed of sale.
LAKAS VS. ACAYLAR

-
To circumvent a constitutional prohibition: contract of lease,

extension, option to buy.
o
Collectively, they reveal an evil motive.
EXCEPTION: the Court did not leave them where they are.
RATIO: instead of allowing a continuing violation of a
constitutional provision, the court nullified the contracts.
The deed of sale was thumb marked by an illiterate person,

selling his land of 13 hectares for the price of P200.
Even if the sale was made in the 1950s, P200 is still too
cheap.
If a foreigner is invoking the constitutional provision: CANNOT BE

DONE.
There, the foreigner bought a house, real estate and other
properties and named them all to Catito, but their relationship
eventually turned sour.
Court: Sorry ka, you cannot recover. He cannot even be a
transient owner so he can sell the property immediately.
Because of the principle of in pari delicto, the court will just leave
him be.
o
Neither of the parties can maintain an action against one
another.
Public policy will not be enhanced if he will be allowed to get
those properties back.
o
Actually, public policy will be prejudiced.
HULST VS. PR BUILDERS, GR 156364, 09/03/07

GENERAL RULE: when the defect of a void contract consists in the
illegality of the cause or object of the contract and both of the parties are
at fault or in pari delicto, the law refuses them any remedy and leaves
them where they are:
RAMIREZ VS. RAMIREZ, GR 165088, 03/17/06: in pari delicto rule was

applied.
-
A man had a daughter from a previous marriage. He filed a case

against his daughter nullifying the sale of the deed of donation
and the waiver of possessory rights, which were supposedly
executed by the man and his first wife. It turns out, the wife had
already died during the purported time they signed such.
SC: the obvious purpose of executing those documents is to
evade the payment of inheritance tax and notice of the estate.
The daughter also forged the signature of her mother.
In pari delicto applies.
An old man cannot recover because there is an illegal causa or
motive here, that is to avoid payment of the inheritance taxes.
o
The line between the motive and the causa disappears.
The act here is ILLEGAL (covered by Art. 1411).
o
FORGERY is a criminal act so the old man cannot
recover from the daughter.
Another case where the Court applied an exception of the in pari

delicto rule.
Here, the foreigner got lucky.
A foreigner couple, both of them Dutch nationals, bought a
property in a certain townhouse project in Batangas for P3M. The
problem arose when the when the developer was not able to
complete the project on time. The spouses then filed for a
rescission of the contract THEY WON.
The contract was rescinded and ordered the developer to refund
the foreigner spouses of their partial payments.
There are many issues in this case, but according to the Court,
there is one issue that was never raised: the issue of ALIEN
ACQUISITION OF PF PROPERTIES AND LANDS in the
Philippines.
o
But the court still resolved it: ordinarily, when an alien
acquires a property in the Philippines, then such is not
valid, as that violates a constitutional provision. But the fat
of the matter is the contract here is a CONTRACT TO
SELL, not a CONTRACT OF SALE.
o
Before there is actual sale, the rescission had already
happened.
o
Art. 1414 was applied. The parties were not in pari
delicto: one who repudiates the agreement and demands
his money before the illegal act has taken place is entitled
Page 26 | Bantay
5.
6.
7.
ART. 1417: payment of any amount in excess the maximum price

of any article or commodity fixed by law.
ART. 1418: contract whereby a labourer undertakes to work
longer than the maximum number of hours fixed by law.
ART. 1419: contract whereby a labourer accepts a wage lower
than the minimum wage fixed by law.
NATURAL OBLIGATIONS
What needs to be remembered here: once there is already
voluntary fulfilment of the obligor, then the obligee is authorized
to retain what has been delivered or rendered by reason thereof.
Different from PURELY MORAL OBLIGATIONS.
There must be a CIVIL OBLIGATION or a clear import of the
testator to give up his property.
As father died and left a will, which states that his father wanted B, his
friend, to have P100K, but the will did not comply with the correct form
and was thus defective.
-
Failure or neglect, for an unreasonable and unexplained length f

time, to do that which, by exercising due diligence, could or
should have been done earlier.
INORDINATE OR UNREASONABLE DELAY: it is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has
abandoned it or declined to assert it.
to recover.
The sale did not push through because of the action of the
foreigners: its like the Court put them out of harms way.
o
They backed out in time.
A then decided to give B P100K. After a week, can A change his

mind? NO, there is already VOLUNTARY FULFILLMENT.
ELEMENTS OF LACHES
1.
2.
3.
4.
NOTE: LACHES is not concerned on the number of years of delay,

unlike with PRESCRIPTION.
RODIGUEZ VS. RODRIGUEZ

-
A borrowed to B P1M, but it is not in written form. They litigated and As

lawyer was better, so the action was dismissed and the decision became
final. Then A went to B and said, biro lang and paid you his debt.
-
Can A change his mind? NO. ART. 1428.
A borrowed P1M to B and the debt prescribed. But since A was being
bothered by his conscience, he paid B.
-
A condition or state by virtue of which an admission or

representation is rendered conclusive upon the person making it
and cannot be denied or disproved as against the person relying
thereon.
Hindi pwedeng pabago bago isip mo, like when you first say that
the house you are selling is white, then claim it as black the next
day.
KINDS OF ESTOPPEL
1.
2.
3.
Can A change his mind and get back what he has paid? NO,
there has already been voluntary fulfilment. ART. 1424.
ESTOPPEL
Estoppel in pais.
Technical estoppel.
Estoppel by deed.
CONDUCT on the part of the defendant, or of one under whom

he claims, giving rise to the situation of which complainant is
made and for which the complaint seeks a remedy.
DELAY in asserting the complainants rights, the complainant
having had knowledge or notice of the defendants conduct and
having been afforded an opportunity to institute a suit.
o
Plaintiff had the opportunity to invoke his right, but he did
not.
LACK of knowledge or notice on the part of the defendant that
the complaint would assert the right on which he bases his suit.
INJURY or prejudice to the defendant in the event relief is
accorded to the complainant, or the suit is not held to be barred.
A woman was madly in love with her second husband. Her first
husband was Felipe Calderon (Malolos Constitution). She wanted
to give him so many properties, but there is a prohibition of
spouses from selling or donating to each other. So she sold her
properties to her daughter of first marriage and then the latter
sold to her and her second husband those properties back.
o
Circumvents the legislative prohibition.
o
The illegal motive becomes the causa.
Thereafter, the relationship between the woman and the children
of her second husband turned sour and she filed a case, alleging
that she was subject to duress upon signing the contract of sales
to her daughter.
o
Court: that action has already prescribed.
SC: what is clear is that the transfers were intended to
circumvent the law, which tainted the cause.
PRINCIPLE TROUBLE SHE HAD TO BEAR: it took her 28 years
to invoke your rights; laches had already set in.
o
In pari delicto also applies.
LACAMEN VS. LARUAN

-
Laruan sold a parcel of land to Lacamen with a TCT in 1928.

Lacamen then introduced improvements to the property, and paid
the corresponding taxes. In 1957, the heirs of Lacamen learned
that the heirs of the seller that the latter had secured a new title of
the land.
Court: the law is 90% possession.
Lower court: held the sale as VOID, since the buyer of the land
was an Igorot, and such sale must have been approved by the
Director of the Bureau of Non-Christian Tribes.
SC: the sale might have been void BUT IT WAS ALREADY OO
LATE: 30 years had already passed.
o
The heirs of the buyer will be prejudiced because they
had been in possession of the property for a long time.
ESTOPPEL BY LACHES
Page 27 | Bantay
BUCTON VS. GABAR

-
This is a story of in-law. Josefina was married to Sosimo Gabar

and Nicanora was married to Felix Bucton. Josefina bought from
the Villarinas a property. She then talked to Nicanora and told the
latter than they can both buy it (TOTAL: P3k; each of them had to
pay P1.5k). Nicanora agreed and paid her share. It was only later
that the VIllarins executed a deed of sale in favour of Josefina.
Meanwhile, Nicanors constructed a house of strong materials and
she is asking Josefina for the partition of the property. Pinatagal
ng pinatagal. After 10 years, Nicanora filed an action against
Josefina.
CA: the action has prescribed; more than 10 years had passed
and the action for the reconveyance had already prescribed.
SC: NO, Art. 1434 applies Nicanora and her husband had
already become the owner of half of the property when the
VIllarins had executed the deed of sale in favour of Josefina.
o
Automatic.
o
Be operation of law, that title includes Nicanor as one of
the owners.
In reality, this was an action for QUIETING of the title as long
as the plaintiff is in possession of the land: IMPRESCRIPTIBLE.
o
Such action can be filed if there is doubt or cloud; to quiet
the title.
o
WHY? As long as you are in possession of the property,
you waive your right as long as no one is questioning it.
o
CA erred.
ART. 1436
A is renting Bs apartment.
-
A is estopped from claiming later on that he owns the property. If

he owns it, then he need not pay.
The payment of rentals BARRED BY ESTOPPEL.
END
Page 28 | Bantay

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JAN.

it was not made in a public document), is there a valid

CONDONATION one of the ways of extinguishing obligations.

Must comply with the formalities

ART. 1271, par. 1: if the creditor

ART. 1272: whenever the private

May be done ORALLY /

NOTE: when the law speaks of PRIVATE DOCUMENTS.

Only prima facie evidences;

TRANS-PACIFIC INDUSTRIAL SUPPLIES VS. CA

REAL PROPERTY: always needs

If A owes B P10,000 and B

A obliged B to deliver his pen to A. Can A verbally condone Bs

YES. It is less than P5,000.

If B has to deliver a real property to A and if A just wanted to condone

A must execute the condonation in a public document and B

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014

It is the original-original which has to be surrendered and be

ART. 1271, par. 2: INOFFICIOUS DONATIONS

SIR (DEAN NAVARRO)

Something is wrong with this. The

It has no immoral connotation. It is

Since condonation is just like a donation, it is subject to the

REASON: you cannot sue yourself.

Spouses were suing each other and were survived by their

A owes B P12,000, guaranteed by G. Later on, A acquires the rights of B

If G inherits As estate the principal obligation will subsist.

JAN. 30, 2014

A owes B P700 and B owes P500 the two obligations will be

The obligation of B to A is extinguished.

LEGAL COMPENSATION: takes effect by operation of law.

Can there be voluntary compensation when one of the parties are

Consequently, the debt is still not due (still no delay).

Takes effect by judicial decree.

A sued B for P1M because B owes A. In Bs answer, B said A also owes

Whatever the court finds out JUDICIAL COMPENSATION.

Assume that A borrowed a bicycle from B. They happen to be neighbors

That they be liquidated and demandable;

Is A deposited P12,000 in the bank and later, he became indebted to the

YES. WHY? 1st requisite present. When A deposited his money

If A is a stockholder of San Miguel Corp. and A bought many cases of

FRANCIA VS. IAC

The government expropriated petitioners properties and the

PNB MADECOR VS. UY

One of the debts is payable by demand, and there was none.

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014

EXCEPTION: when he RESERVES his right to set up

Assuming that A cannot be found, Can G set up legal compensation?

YES. How much can B collect from G? NONE.

The application of the credits of

Refers to a case in which a third

There is already legal compensation upon the assignment

FEB. 04, 2014

SPOUSES BAUTISTA VS. PILLAR DEVT.

The first promissory note was cancelled by the express terms of

OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014

AGREEMENT OF THE PARTIES TO THE NEW OBLI

INTENT AND ACTUAL EXTINGUISHMENT OF THE

WHEN THERE IS NOVATION

WHEN THERE IS NO NOVATION

A has to deliver his car to B. A

A and B agreed that A will deliver

A and B agreed that A will deliver

The promissory note and the check can stand together.