THE AWESOME NOTES

CONTRACTS

PRELIMINARY
CONTRACTS; defined
is a meeting of minds between 2 persons
whereby one binds himself, with respect to the
other, to give something or to render some
service

DUTY OF THE COURT IN INTERPRETING

CONTRACTS
limited lang dito, it cannot alter a contract by
construction, supply material stipulations, or to
make a new contract for the parties.

EFFECT OF COMPROMISE
AGREEMENT BETWEEN THE
PARTIES
for a valid compromise agreement
between parties
- it has the effect and authority of res
judicata, with respect to the matter
definitely stated therein, or which by
implication from its terms should be
deemed to have been included therein.
- remains true even if the CA is not
judicially approved.

DIFFERENT PHASES OR STAGES IN THE

LIFE OR BIOLOGY OF A CONTRACT
1. G E N E R AT I O N ; t h e p r e l i m i n a r y o r
preparation process for the formation of the
contract
2. BIRTH OF THE CONTRACT;
3. FULFILLMENT OF THE PURPOSE, for
which the contract was constituted

WHEN DOES CA BECOME BINDING

TO THE PARTIES
being consensual contract, it binds the
party from execution and not on its
court approval.

HOWEVER; for it to have the forceof

res judicata
- it must be approved by final order of
the court

FOR CA TO BE VALID
it must be based on real claims and
actually agreed upon in gf, and not
contrary to LMPPG

Q: what is the status of a contract of

employment prohibiting an employee who
is separated (resigns to terminated) from
work, that he shall not engaged in another
employment for 5 years from termination?

A: void, contrary to public policy

there is an undue restraint of trade.

BREACH OF CONTRACT; defined

The failure, without legal reason, to comply
with the terms of the contract, or perform any
promise which forms the whole or part of the
contract.

REQUISITES FOR THERE TO HAVE

NO UNDE RESTRAINT OF TRADE
1. there is a limitation as to the time
or place
2. t h e p r o h i b i t i o n r e a s o n a b l y
necessary for the protection of the
parties

L I M I TAT I O N S O N A U T O N O M Y O F
CONTRACT
SO LONG AS : it is not contrary to law, morals,
good customs, public order and public policy.

COMPROMISE; defined
Is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or
put an end to the one already commenced.

4 MOST ESSENTIAL CHARACTERISTICS

OF A CONTRACT
1. the obligatory force or character of
contracts (obligatoriedad del contrato), or
the principle that once contract is perfected,
it shall be of obligatory force upon both of
the contracting parties
2. the autonomy of contracts, or the principle
that the contracting parties are free to enter
into contract and to establish such
stipulations, clauses, terms and conditions
as they may deem convenient
3. the mutuality of contracts, or the essential
equality of the contracting parties whereby
the contract must bind both of them; and
4. the relativity of contracts (relatividad del
contrato), or the principle that the contract
take effect only between the parties, their
assigns and heirs.

Page 1 of 22

- ang pwede wag lang absolute

prohibition for other employment, only
limited to similar industry for a period
of time from termination. hence, there
is a valid interest of the employer to
protect its trade secrets, thus justifying
the condtion of the contract.

insert. page 812-17 jurado book

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

Page 2 of 22

Q: A and B entered into contract. C induces

A to break the contract and offers a better
terms to A for the same subject matter as in
the contract of A to B. A agreed. can B sue
C for damages?

4 KINDS OF INNOMINATE CONTRACT

1. DO UT DES; i give that you give
2. DO UT FACIAS; i give that you do
3. FACIO UT DES; i do that you give
4. FACIO UT FACIAS; i do that you do

A: yes
NCC any third person who induces another to
violate his contract shall be liable for damages
to the other contracting party.

THEY SHALL BE REGULATED BY

the general provisions or principles of
obligations and contracts,
by the rules governing the most
analogous nominate contracts and
by the customs of the place

REQUISITES FOR IT TO BE ACTIONABLE

1. there is an existing valid contract
2. knowledge on part of the third person of the
existence of a valid contract; and
3. interference by the third person without
legal justification or excuse

SO if the case is one which A induced

B to break his contract of employment
to C, for the purpose of liberating B
from C for unjust terms (ie. piso per
hour of work)
- A cannot be held liable for damages

Q: A was a scholar of Arellano Universtity.

when he signed the scholarship grant, it
provides a provision that should he transfer
to other school, he is liable to refund the
previous grants that he received. is the
stipulation valid?

A: no. null and void for being contrary to

public policy
Scholarship grants are awarded in recognition
of the merit and not to attract and keep brilliant
students in school for their propaganda value.
to looks at such grants as a business scheme
designed to increase the business potential of
an educational institution is not only
inconsistent with sound public policy but also
good morals.

Q: what is the status of a contract with

"influence peddlers" and "ten percenters"
akin to fixers

A: null and void, being contrary to public

policy
no need of proof of actual injury, as what is
violated here is public policy.
- as when public policy is violated, it is already
sufficient to establish as such depending on its
purpose and tendency.

Hence; all agreement the purpose of

which is to create a situation which
tends to operate to the detriment of the
public interest
- are aginst public policy na agad
agad, regardless on WON the purpose
of the agreement is effected.

MUTUALITY OF CONTRACTS; defined

the position of essential equality which must be
occupied by both of the contracting parties in
relation to the contract.

ART. 1308 NCC

contract must bind both contracting parties; its
validity or compliance cannot be left to the will
of one of them

ART. 1308 PROHIBITS THE FF

DELEGATION
1. delegation of the power to
determine whether the contract
shall be valid or nog
2. the delegation of the power to
determine whether the contract
shall be complied or not.

HENCE; should there is a delegation

to BOD for the determination of the
amount to be receive by an employee
who resigns from the corp (bonus)
- if only granted 100 pesos as bonus, it
cannot complain and assail violation of
Art, 1308, as it such not amount to any
prohibited delegation.
- in fact ,the BOD recognizes its
promise when it awarded 100 pesos
as bonus. yun nga lang, 100 lang.

Q: is the stipulation in a loan

agreement authorizing the creditor
to increase the rate of interest
within the limits allowed by law,
constitute a violation of mutuality of
contracts?

A: yes
as what the law provide is that, parties
are free to stipulate on any adjustment
in the interest rate on a loan or
forbearance of money,
- and does not authorized any
unilateral increase in the interest rate
by one party without the consent of the
other.

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS
RELATIVITY OF CONTRACTS
a contract can only bind the parties who had
entered into it or their successor who have
assumed their personality or their juridical
position,
and as a consequence, such contract
can neither favor nor prejudice third
person.
res inter alios acta aliis beque nocet
prodest.

EXE: to relativity of contracts

1. where a contract contains a
beneficial stipulation in favor of a
third person, provided that such
third person had communicated
his acceptance to the obligor
before it is revoked.
2. where a third person comes into
the possession of the object of a
contract creating a real right
3. where the contract entered into in
order to defraud a third person
4. where the third person induces a
contracting party to violate his
contract

Page 3 of 22

NOTE: once acceptance was made,

and the same was intimated prior to
the revocation by the parties
- the third person may demand for its
compliance.
- this operates as an exception to the
mutuality of contracts

HOW CONTRACTS ARE PERFECTED

would depend upon the nature of the contract.
WHILE AS A GENRAL RULE:
since contract are consensual, it is perfected
by mere consent.
UNLESS: it is a real contract
- wherein, it is deemed perfected by
delivery of the object of the contract by
one of the contracting party to the
other.

STIPULATION POUR AUTRUI

a stipulation in a contract clearly and
deliberately conferred by the
contracting parties as a favor upon a
third person,
who must communicate his
acceptance of the favor or
benefit to the obligor before it
could be revoked

in here; neither of the parties

contracting the stipulation pour atrui
acting as an agent of the third personbeneficiary

REQUISITES OF STIPULATION
POUR ATRUI
1. that the stipulation in favor of the
third person should be a part, not
the whole of the contract
2. that the favorable stipulation
should not be conditioned or
compensated by any kind of
obligation whatever; and
3. neither of the contracting parties
bears the legal representation or
authorization of the third person
4. acceptance of the benefit by the
third person communicated to the
obligor before it could be revoked.

NOTE: the acceptance of the third

person in whose favor the stipulation
pour atrui was constituted need not be
express
- the law admits implied acceptance.

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS
ESSENTIAL REQUISITES OF
CONTRACT
ESSENTIAL REQUISITES OF CONTRACTS
1. consent of the contracting parties
2. object certain which is the subject matter of
the contract; and
3. cause of the obligation which is established

CONSENT
CONSENT; defined as applied in contracts
signifies the concurrence of the will of the
contracting parties with respect to the object
and the cause which shall constitute the
contract

NCC defined it as:

meeting of the offer and the acceptance upon
the thing and the cause which are to constitute
the contract

ELEMENTS
1. the consent must be manifested by the
c o n c u r r e n c e o f t h e o ff e r a n d t h e
acceptance
2. the contracting parties must possess the
necessary legal capacity; and
3. the consent must be intelligent, free,
spontaneous and real

CONTRACTS ARE PERFECTED

GEN RULE
from the moment that there is a manifestation
of the concurrence between the offer and the
acceptance with respect to the object and the
cause which shall constitute the contract

IF
A C C E P TA N C E
IS
COMMUNICATED BY LETTER OR
TELEGRAM

In General:
- from the moment that the offeror has
knowledge of such acceptance

EXE: for purely commercial contracts

(joint-accounts, maritime contracts)
- from the moment an answer is made
accepting the offer.

Page 4 of 22

FF THEORIES WHEN ACCEPTANCE

IS MANIFESTED BY LETTER OR
TELEGRAM

M A N I F E S TAT I O N T H E O R Y
(manifestacion)
- the contract is perfected from the
moment the acceptance is declared or
made. this is what Code of Commerce
follows

EXPEDITION THEORY (expedicion)

- the contract is perfected from the
moment the offeree transmits the
notification of acceptance to the
offeror, as when the letter is placed in
the mailbox
- this is what American Courts ffs.

RECEPTION THEORY (recepcion)

the contract is perfected from the
moment that the notification of
acceptance is in the hand of the offeror
in such a manner that he can, under
ordinary conditions, procure the
knowledge of its contents, even if he is
not able actually to acquire such
knowledge by reason of absence,
sickness or some other cause.
- German Courts

COGNITION THEORY
- the contract is perfected from the
moment the acceptance comes to the
knowledge of the offeror
- Spanish Civil Code, what Phil ffs

Q: gulo nung example sa book ni

jurado pg 833
Q: A offered to B through letter a
lease agreement. B accepted the
same through letter and sent it to A.
this was sent 1pm and was received
by A at 4pm. however, A sent B a
letter withdrawing the offer at 2pm.
is there a perfected contract of
lease?

A: NO
contracts are perfected from the
moment the offeror acquires
knowledge of the acceptance of the
offeree.
- in the given problem, although A
acquires knowledge of the acceptance
at 4pm, but there was a prior
withdrawal made by the same at 2pm.
hence, at the time A acquires
knowledge of the acceptance, there is
no longer any offer. hence, no
perfected contract is created.

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

Page 5 of 22

note: revocation of the acceptance

may also be made through telegram
- so long as there is no perfected
contract yet, the parties are not yet
bound, and there is no juridical reason
why the offeree cannot revoke his
acceptance.

death ni offeree. plus, agent, if acting

within the scope of his authority, can
bind the principal.
- or was it treated as ineffective kasi in
contract of insurance, the insured is
the offeror while the insurer as the
offeree?

NOTE: there is no acceptance when the

parties failed to agree on the size of the land
sold

OPTION PERIOD WITHIN WHICH TO

ACCEPT, MAY THE OFFEROR STILL
WITHDRAW THE OFFER?

NOTE: in case of proposal instead of

acceptance, it constitute as a counter-offer and
a rejection of the original offer.

IT DEPENDS

Q: is there a perfected contract of sale

where the buyer after his acceptance,
moved for the postponement of payment of
the contract price until certain event has
been complied with, and the evnt has
become impossible due to fortuitous
event?

IF THE OPTION IS COUPLED WITH

CONSIDERATION
- offeror may still withdraw, but he is liable for
damages.

A: YES
as there is already a concurrence between the
offer and the acceptance with respect to the
object and the cause which shall constitute the
contract

Q: what is the nature of the promise to pay

(whether with a term or conditional); when
the agreement states "upon arrival in this
port?"

A: the promise to pay is with a term

- as the promise to pay is upon the arrival and
not if the steamer arrive at the port...

WHEN NO PERIOD WITHIN WHICH

ACCEPTANCE IS TO BE MADE, WHEN
SHOULD ACCEPTANCE SHOULD BE MADE
- the acceptance must be made immediately

EFFECT OF DEATH, CIVIL INTERDICTION,

INSANITY, OR INSOLVENCY OF EITHER
THE OFFEROR OR OFFEREE BEFORE THE
ACCEPTANCE IS CONVEYED
- the acceptance becomes ineffective

Hence; in one of the example of

Jurado.
- insurance contract. notice of
acceptance (by the head office in
Canada) was received by the insured
at his received a day after his death,
sabi ni jurado, the acceptance
becomes ineffective,
- ang labo lang, kasi may provisional
receipt na inissue yung local office sa
Phil.. talos diba, once acceptance has
been made effective na, may
perfection na. so irrelevant na yung

URIBE: mali si Jurado, or rather, he

begs to disagree
- kasi sabi nya, dapat lagi voluntary, so
he cannot be compelled to accept, vis
a vis, wait for the period to expire
- so should he disregard theo period,
he is only liable for damages.
- note, there is no perfected contract of
sale here, only a perfected contract of
option to sell.

IF THE OPTION IS NOT COUPLED WITH

CONSIDERATION
- the offeror may withhdraw his offer by
communicating such withdrawal to the offeree
at any time before the acceptance

NOTE: old case, once option contract has

been perfected and still within the terms of the
agreement, pwede i compel the offeree si
offeror na ituoly yung contract.
- pero sabi ni uribe, mali to kasi nga voluntary
dapat, consensual pa. so offeror cannot ve
compelled, but in case such is supported by
option money, he is liable for damages, since
the offer wad withdrawn clearly in bf and a
violation of the perfected option contract.

NOTE: an unaccepted proposal of dacion en

pago does not results to extinguishment of the
contract.

NOTE: advertisements for bidders are simply

invitations to make proposal, and the
advertisers is not bound to accept the highest
or the lowest bidder, unless the contrary
appears

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

Page 6 of 22

WHO ARE INCAPACITATED TO GIVE

CONSENT
1. minors (wala nang unemancipated minor)
2. insane or demented persons
3. deaf-mutes who do not know how to read
and write
4. married women in cases specified by law
5. persons suffering from civil interdiction; and
6. incompetents under guardianship

THE FF ARE PROHIBITED TO ENTER INTO

CONTRACTS
1. insolvents
2. husband and wife during their marriage, as
a general rule.
3. persons who are prohibited from giving
each other any donation or advantage
4. persons holding a fiduciary relations with
respect to certain properties

NOTE: advanced years of age or by

reason of physical infirmities does not
automatically incapacitates a person to
give consent
- dapat, such impair his mental
faculties to the extent that he is unable
to properly, intelligently and fairly
understand the provisions of said
contract

Art. 1490. The husband and the wife

cannot sell property to each other,
except:
1. When a separation of property
was agreed upon in the marriage
settlements; or
2. When there has been a judicial
separation or property under
Article 191.

EXE TO THE RULE THAT CONTRACTS

ENTERED INTO BY MINORS WITHOUT THE
C O N S E N T O F T H E I R PA R E N T S O R
GUARDIANS ARE VOIDABLE
1. when the contract is entered into by a minor
who misrepresents his age, applying the
doctrine of estoppel (note, dapat active
misrepresentation amounting to fraud,
whether it be active or constructive. pero
pag mere silence, it cannot be said that
there is fraud)
2. where the contract involves the sale and
delivery of necessaries to the minor
3. when it is a life, health or accident
insurance taken on the life of the minor,
provided that the beneficiary is the minor's
esrate, his parents or his siblings
4. when it involves a natural obligation and
fulfilled by the minor voluntarily

MINORITY IS ONLY A PERSONAL DEFENSE

HENCE; between co-debtors (joint), the
minority of other debtors does not results to
nullity of the contract of loan they contracted.
to those who are capacitated, they cannot
assail the minority of their co-debtors as a
defense.
EXE: as regards the part of the debt
for which the minor are responsible.

Art. 1491. The following persons

cannot acquire by purchase, even at a
public or judicial auction, either in
person or through the mediation of
another:
1. The guardian, the property of the
person or persons who may be
under his guardianship;
2. Agents, the property whose
administration or sale may have
been entrusted to them, unless the
consent of the principal has been
given;
3. Executors and administrators, the
property of the estate under
administration;
4. Public officers and employees, the
property of the State or of any
subdivision thereof, or of any
government-owned or controlled
corporation, or institution, the
administration of which has been
intrusted to them; this provision
shall apply to judges and
government experts who, in any
manner whatsoever, take part in
the sale;
5. Justices, judges, prosecuting
attorneys, clerks of superior and
inferior courts, and other officers
and employees connected with the
administration of justice, the
property and rights in litigation or
levied upon an execution before
the court within whose jurisdiction
or territory they exercise their
respective functions; this
prohibition includes the act of
acquiring by assignment and shall
apply to lawyers, with respect to
the property and rights which may
be the object of any litigation in

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

which they may take part by virtue

of their profession.
6. Any others specially disqualified
by law.
INCAPACITY TO
ENTER INTO
CONTRACTS

PROHIBITION TO
ENTER INTO
CONTRACTS

restraints the
exercise of the right
to contract

restraints the very

right itself

based
upon
s u b j e c t i v e
circumstances of
certain persons
which compel the
law to suspend for a
definite or indefinite
period their right to
contract

based upon public

policy and morality

in case of violation,
the contract entered
into by incapacitated
person is merely
voidable

the contract entered

into is void

Page 7 of 22

vitiates consent,
resulting to voidable
character of the
contract created
thereto

does not result to

vitiation of consent,
- ff the rule that
ignorance of the law
excuses no one
from compliance
therewith.

EXE:
mutual error as to
the legal effect of an
agreement, when
the real purpose of
the parties us
frustrated
- amounting to
vitiation of consent
WHAT MISTAKE OF FACT WHICH
WILL RENDER A CONTRACT
VOIDABLE

MISTAKE AS TO THE OBJECT OF

THE CONTRACT (ERROR IN RE)
which may refer to either of the ff
1. mistake as to the identity of the
thing (error in corpore)
2. mistake as to the substance of the
thing (error in substancia)
3. mistake as to the condition of the
thing, provided that such condition
has principally moved one or both
of the parties to enter into the
contract
4. mistake as to the quantity of the
thing (error quantitate), provided
that the extent or dimension of the
thing was one of the principal
reasons of one or both of the
parties for entering into the
contract

VICES OF CONSENT
VICES OF WILL
(vicious de la formacion de la voluntad)
1. mistake
2. violence
3. intimidation
4. undue influence
5. fraud

VICES OF DECLARATION
all forms of simulated contracts
MISTAKE OF FACT

MISTAKE OF LAW

when one or both of

the contracting
parties believe that a
fact exists when in
reality it does not or
that such fact does
not exists when in
reality it does

when one or both of

the contracting
arties arrive at an
e r r o n e o u s
conclusion regarding
the interpretation of
a question of law or
the legal effects of a
certain act or
transaction

MISTAKE AS TO PERSON (ERROR

IN PERSONA)
- mistake with regard to the identity or
with regard to the qualification of one
of the parties

VIOLENCE AND INTIMIDATION

REQUISITES FOR VIOLENCE TO
A M O U N T T O V I T I AT I O N O F
CONSENT
1. that the force employed to wrest
consent must be serious or
irresistible
2. it must be the determining cause
for the party upon whom it is
employed in entering into the
contract

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS
REQUISITES FOR INTIMIDATION TO
VITIATE CONSENT
1. one of the contracting parties is
compelled to give has consent by
a reasonable and well-grounded
fear of an evil
2. the evil must be imminent and
grave
3. the evil must be unjust; and
4. the evil must be the determining
cause for the party upon whom it
is employed in entering into the
contract
INTIMIDATION

external

internal

prevents the
expression of the
will substituting it
with a material act
dictated by another

i n fl u e n c e s t h e
operation of the will,
inhibiting it in such a
way that the
expression thereof is
apparently that of a
person who has
freely given his
consent

a
physical
compulsion

1. fraud in the perfection of the contract; in

securing the consent of the contracting
parties (Art. 1338)
2. fraud in the performance of the obligation
(Art. 1170)

CLASSIFICATION OF FRAUD PRESENT OR

EMPLOYED AT THE TIME OF THE BIRTH OR
PERFECTION OF THE CONTRACT

UNDUE INFLUENCE
when a person takes improper advantage of
his power over the will of another, depriving the
latter of a reasonable freedom of choice

DOLO CAUSANTE

DOLO INCIDENTE

fraud is present only

at the time of the
birth
of
the
obligation

fraud is present only

during
the
performance of the
obligation

fraud is employed
- for the purpose of
securing the consent
of the other party to
enter into the
contract

fraud is employed
- in order to evade
the normal fulfillment
of an obligation

results to
- vitiation of consent

results to
- non-fulfillment or
breach of the
obligation

rights of the creditor/

obligee/ innocent
party
- to ask for
annulment of he
contract; or
- f u l fi l l m e n t p l u s
damages

rights of the creditor/

obligee
- to recover
damages from the
debtor or obligor

serious in character

not serious in
character
refers
to
deceptions or
misrepresentations
employed by one
party without which
the other party
would still
have
entered into the
contract

makes the contract

voidable

only entitle the

injured party for
damages

the fraud is in the

cause of the
contract

in here, not in the

cause

a moral compulsion

FACTORS TO BE CONSIDERED
1. family, spiritual and other relations
between the parties
2. the fact that the person alleged to
have been influenced was
suffering from mental weakness
was ignorant or
in financial distress

FRAUD
through insidious words or machination of one
of the contracting parties, the other is induced
to enter into a contract which, without them, he
would not have agreed to.

REQUISITES FOR IT TO VITIATE

CONSENT
1. it was employed by a contracting
party upon the other
2. it was serious
3. it resulted in damages and injury
to the third party seeking
annulment

KINDS OF FRAUD

VIOLENCE

Page 8 of 22

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

W H E N D O E S FA I L U R E TO
DISCLOSE FACTS CONSTITUTE AS
FRAUD

SIMULATION OF CONTRACTS
AKA: VICES OF DECLARATION

WHEN DOES EXAGGERATION IN

TRADE CONSTITUTE AS FRAUD

ABSOLUTE
- when there is colorable contract but it has no
substance as the contracting parties do not
intend to be bound by the contract at all.
(ie. creditor simulates a contract of
sale over his properties, in order to
prevent their possible attachment by
creditors)

SO LONG AS
1. not a usual exaggeration of trade;
and
2. the other party has no opportunity
to know the facts

STATUS OF THE CONTRACT

- void ab initio
- the parties may recover from each
other what they may have given under
the contract

ONLY WHEN
- there is a duty to disclose it
as when they are bound by
confidential relation

EXPRESSION OF OPINION
CONSTITUTE AS FRAUD
AS AN EXCEPTION TO THE RULE;
when
1. made by an expert; and
2. the other party has relied on the
former's special knowledge

RELATIVE
- when the contracting parties state a false
cause in the contract to conceal their true
agreement
(ie, conceal a donation by simulating a
contract of sale, for the purpose of
accomplishing tax evasion)

PRIMARY CONSIDERATION IN
DETERMINING THE TRUE
INTENTION OF THE PARTIES
- by the express terms of their
agreement as well as from their
contemporaneous and subsequent
acts.

NOTE: fraud cannot be raised

against a person or entity who is
not a party to the fraud
so the proper defense would be
- substantial mistake, as a
consequence of the fraud employed

ART. 1342
Misrepresentation by a third person
does not vitiate consent,
unless such misrepresentation
has created substantial
mistake and the same is
mutual

Page 9 of 22

ie, through fraud of B, a was lead to

sign a promissory note in which he
never intended to be bound. now, the
Bank demands for the payment of the
PN executed by A, can A raise the
defense of fraud employed by B?
A: no. dapat, i follow nya yung 1342

STATUS OF THE CONTRACT

remains to be valid and binding, ad
enforceable between the parties and
their successor in interest, long as:
it does not prejudice third person;
and
not intended for any purpose
contrary to law, morals, good
customs, public order or public
policy

NOTE: based from the foregoing, the law

still presumes the validity of contracts.
HENCE; the burden of proof rests upon the
party who assails the regularity and its validity.

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

OBJECT
DEFINITION
the thing, right or service which is the subject
matter of the obligation which is created or
established

REQUISITES IN ORDER A THING, RIGHT

OR SERVICE MAY BE THE OBJECT OF
CONTRACTS
1. that the object should be within the
commerce of men; susceptible of
appropriation and transmissible from one
person to another
2. the object should be real or possible; it
should exist at the moment of the
celebration of the contract, or, at least, it
can exists subsequently or in the future
3. the object should be licit; it should not be
contrary to law, morals, good customs,
public order or public policy
4. the object should be determinate, or at
least possible of determination

THE FF ARE THOSE THAT CANNOT BE AN

OBJECT OF A CONTRACT
1. things which are outside the commerce of
men
2. intransmissible rights
3. future inheritance, except in cases
expressly authorized by law
4. impossible thing or service
5. service which are contrary to law, morals,
good customs, public order or public policy
6. objects which are not determinable as to
their kind

OTHERWISE; the contract entered whose

object are any of the ff as mentioned above,
the contract is void.

EXE WITH REGARD TO FUTURE

INHERITANCE; when it may be an
object of a contract
1. ART. 130 FC; future spouse to
give or donate to each other in
their marriage settlement their
future property to take effect upon
the death of the donor and to the
extent laid down by the provisions
of the NCC relating to
testamentary succession
2. ART. 1080 NCC; allows a person
to make partition of his estate
among his heirs by an act inter
vivos, provided that the legitime of
the compulsory heirs are not
prejudiced
3. also, cesti que trust.

Page 10 of 22

NOTE: mere failure to indicate the exact

location of the object of the contract, does
not negate the certainty of the object.

- hence; pag indicated lang by Lot number,

jurisprudence that it is deemed sufficient.
such failure is treated only as a mere
error occasioned by the parties' failure
to describe wth particularity the subject
property,
- which does not indicate the absence
of the principal object as to render the
contract void.

CAUSE
DEFINITION
the essential reason which moves the
contracting parties to enter into the contract.
- it is the immediate, direct or most proximate
reason which explains and justifies the
creation of an obligation through the will of the
contracting parties

IN ONEROUS CONTRACT
- the cause is understood to be for
each contracting party, the prestation
or promise of a thing or service by the
other

IN REMUNERATORY CONTRACTS
- the service or benefit which is
remunerated

IN CONTRACT OF PURE
BENEFICENCE
- the liberality of the benefactor

CAUSE

CONSIDERATION

use in the Philippines interchangeably.

CAUSE
IN
REMUNERATORY
CONTRACTS
the service or
b e n e fi t w h i c h i s
remuneraed
IN CONTRACT OF
P
U
R
E
BENEFICIENCE
the liberality of the
benefactor

OBJECT

is the thing which is

given
in
remuneration

the thing donated

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS
IN ONEROUS
CONTRACT
the prestation or the
promise of a thing or
service by the other

the thing or the

service itself

REQUISITES FOR THERE TO HAVE A

SUFFICIENT CAUSE UPON WHICH
CONTRACT MAY BE FOUNDED
1. the cause should be in existence
2. the cause should be licit or lawful
3. the cause should be true

ie. contract of sale

- for the seller; it is
the acquisition of the
purchase price
- for the buyer;
acquisition of the
thing sold

NOTE: if the contract is not supported by a

sufficient cause, there is no contract perfected,
or the contract entered into is void from the
beginning.

CAUSE OF A
CONTRACT

Page 11 of 22

MOTIVES

is the direct or
proximate reason of
a contract

the indirect or
remote reasons

the objective or
juridical reason of a
contract

the psychological or
personal readins

the cause of a
certain contract is
always the sane

motives will differ or

vary depending
upon who are the
parties

can affect the

validity of a contract

cannot

NOTE: void ab inition if based on a false

cause.
UNLESS: proven that it is founded
upon another cause which is true and
lawful.

ie of an illegal cause.
- a contract of loan was executed in order to
allow the parties to make an agreement
designed to prevent or stifle prosecution of
crime.

IN RE: MOTIVES
RULE:
the particular motives of the parties in entering
into a contract are different from the cause of
the contract.

Q: may a moral obligation constitute a

sufficient cause to support an onerous
contract

A:
NO; when
the moral obligation arises wholly from
ethical considerations, unconnected
with any civil obligation, and as such is
demandable only be conscience, and
not in law

YES; when
the moral obligation is based upon a
previous civil obligation which has
already been barred by the statute of
limitation at the time when the contract
is entered into

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

FORMALITY
WHAT IS THE REQUIRED FORM OF A
C O N T R A C T F O R I T T O H AV E A N
OBLIGATORY FORCE

GEN RULE
the form in which a contract is executed has no
effect as to the obligatory force, provided all
the essential requisites for its validity are
present.

EXE:
1. SOLEMN CONTRACTS; when the law
requires that the contract must be in a
certain form in order to be valid; and
2. when the law requires that the contract
must be in a certain form in order to be
enforceable

DIFFERENT KINDS OF FORMALITIES

WHICH ARE PRESCRIBED BY LAW FOR
CERTAIN CONTRACTS
1. those which are for the convenience or for
the purpose of binding 3rd persons
2. those which are necessary for the validity of
the contract
3. those which are necessary for the
enforcement of the contract

THE FF ARE FORMALITIES FOR

THE CONVENIENCE OF THE
PARTIES
THE FF MUST APPEAR IN PUBLIC
DOCUMENT
1. acts and contracts which have for
their object the creation,
transmission, modification or
extinguishment of real rights over
immovable property, sale of real
property or of an interest therein
(ART. 1403 no. 3 and 1405)
2. t h e c e s s i o n , r e p u d i a t i o n o r
renunciation of hereditary rights,
or of those conjugal partnership of
gains
3. the power to administer property,
or any other power which has for
its object an act appearing or
which should appear in a public
document, or should prejudice a
third person
4. the cession of action or rights
proceeding from an act appearing
in a public instrument

Page 12 of 22

THE FF ARE FORMALITIES WHICH ARE

NECESSARY FOR THE VALIDITY OF
CONTRACTS

THE FF WHICH THE LAW REQUIRES THAT

IT MUST BE IN WRITING FOR IT TO BE
VALID
1. donation of personal property, the value of
which exceeds 5k
2. sale of a piece of land or any interest
therein by an agent, the authority of the
agent must be in writing
3. in contract of antichresis, the amount of the
principal and the interest must be specified
in writing
4. agreement regarding payment of interest,
as no interest shall be due unless expressly
stipulated in writing

FF CONTRACTS WHICH MUST APPEAR IN A

PUBLIC DOCUMENT
1. donation of an immovable property, as well
as the acceptance which may be made
either on the same deed of donation or in a
separate public instrument
2. in partnership, where immovable property
or real rights are contributed to the common
fund

FF CONTRACTS WHICH MUST BE

REGISTERED
1. sale or transfer of large cattel (and a
certificate of transfer is secured)
2. chattel mortgage (the subject personal
property must be recorded in the Chattel
Mortgage Register as a security for the
performance of an obligation. in case of
non-compliance. instead the personal
property is delivered yo a third person, it is
treated as a pledge and not as a chattel
mortgage)

MUST BE IN WRITING, EVEN IN

INSTRUMENT
- all other contracts where the amount
involved exceeds 500

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS
REFORMATION OF
INSTRUMENTS
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.

REQUISITES
1. there must be a meeting of the minds of the
parties
2. their true intention is not expressed in the
instrument; and
3. such failure to express their true intention is
due to MFIA

FF INSTRUMENTS WHICH CANNOT BE

REFORMED
1. simple donation inter vivos wherein no
condition is imposed
2. wills; and
3. those where the real agreement is void

WHERE SHALL THE ACTION FOR

REFORMATION OF INSTRUMENT BE
INSTITUTED
- in a special civil action of declaratory relief

STATUS OF THE CONTRACT

valid and binding, just like any ordinary
contract

INSTANCES WHERE REFORMATION OF

INSTRUMENT IS POSSIBLE
1. when a mutual mistake of the parties
causes the failure of the instrument to
disclose their real agreement
2. if one of the party was mistaken and the
other acted fraudulently or inequitable in
such a way that the instrument does not
show their true intention
3. when one party was mistaken and the other
knew or believed that the instrument did not
state their real agreement, but concealed
the fact from the former
4. when through the ignorance, lack of skill,
negligence or bf on the part of the person
drafting the instrument or of the clerk or
typist, the instrument does not express the
true intention of the parties
5. if 2 or more parties agree upon the
mortgage or pledge of real or personal
property, but the the instrument states that
the property is sold absolutely, or with right
of repurchase

-------------------------------------------

CONTRACT OF ADHESION
contracts where its terms are prepared by one
one party while the other party merely affixes
his signature signifying his adhesion thereto

IF NO MEETING OF MINDS
- the proper remedy is for the
annulment of the contract

#2-5; the injured party, or his heirs or

assigns

BASIS OF REFORMATION OF CONTRACT

based on the principle of equity where,
- to express the true intention of the
contracting parties, an instrument already
executed is allowed by law to be reformed

Page 13 of 22

BUT SOME OF ITS PROVISIONS

MAY BE DISREGARDED BY THE
COURT; when
1. when some of its provisions are
vague, that any ambiguity shall be
construed against the party who
prepared the contract
2. when it is unconscionable

RULE IN INTERPRETATION OF CONTRACT

THE TERMS OF THE CONTRACT ARE
CLEAR AND LEAVE NO DOUBT UPON THE
INTENTION OF THE PARTIES
- literal meaning shall control

when the terms of an agreement have

been reduced to writing, it is cinsidered
as containing all the terms agreed
upon and there can be, between the
parties and their successor-in-interest,
no evidence of such terms other than
the contents of the written agreement.

IN CASE OF AMBIGUITY
1. if the words appear to be contrary to the
evident intention of the parties, the latter
shall prevail over the former
2. contemporaneous and subsequent acts are
principally considered

WHO CAN BRING THE ACTION

#1; either party or their successor-ininteres

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

DEFECTIVE CONTRACTS
4 MAIN CLASSES OF DEFECTIVE
CONTRACTS
1. rescissible contracts
2. voidable contracts
3. unenforceable contracts; and
4. void and inexistent contracts

ESSENTIAL
F E AT U R E S
OR
CHARACTERISTICS OF DEFECTIVE
CONTRACTS

RESCISSIBLE CONTRACTS
1. their defect consist in injury or damage
either to one of the contracting parties or to
third persons
2. before rescission, they are valid and
therefore legally effective
3. they are susceptible of convalidation only
by prescription and not by ratification
4. they can be attacked directly only, not
collaterally
5. they can be attacked either by a contracting
party who suffers injury or by a third person
who is defraud

VOIDABLE CONTRACTS
1. their defect consists in the vitiation of
consent or in the legal incapacity of one of
the contracting parties
2. they are binding until they are annulled by a
competent court
3. they are susceptible of convalidation either
by ratification or prescription
4. they cannot be attacked or assailed by a
third persons

UNENFORCEABLE CONTRACTS
1. their defect consists either in the fact that
they were entered into in excess or without
any authority, or they do not comply with
the statute of frauds, or both contracting
parties are legally incapacitated
2. they cannot be enforced by a proper action
in court
3. they are susceptible of convalidation by
ratification
4. they cannot be attacked or assailed by their
persons

Page 14 of 22

VOID AND INEXISTENT CONTRACTS

1. their defect consists in the fact that they
lack absolutely either in fact or in law one or
some of the elements of a valid contract
2. as a general rule, they produces no legal
effects
3. they are not susceptible of convalidation
either by ratification of by prescription
4. the rights to set up the defense of absolute
nullity or inexistence cannot be renounced
5. they can be attacked or assailed either by a
contracting party or by a third person
whose interest is directly affected.

RESCISSIBLE CONTRACTS
CONCEPT
is a valid contract as it contains all of the
essential requisites prescribed by law,
but which is defective because of
injury or damage to either of the
contracting parties or to third persons,
- as a consequence of which, it may be
rescinded by means of a proper action
for rescission

RECSISSION; defined
is a remedy granted by law to the contracting
parties, and event to third persons,
- to secure the reparation of damages caused
to them by a contract, even if the same should
be valid,
by means of
- restoration of things to their condition
prior to the celebration of the contract

RESCISSION OF
CONTRACTS
PA RT Y W H O M AY
INITIATE THE ACTION
- by a party to the contract
and by third persons
AS TO THE CAUSE
there are several causes

AS TO THE POWER OF
THE COURT
- if there is a gorund for
rescission, the court has
no power to grant
extension of time for the
performance of the
obligation

RESCISSION OR
RESOLUTION OF
RECIPROCAL OBLI

- only by a party to the

contract
only; failure of one of the
contracting parties to
comply with what is
incumbent upon him

- the court has the

discretionary power to
grant extension of time for
the performance of the
obli,
Provided: there is a just
cause

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS
AS TO CONTRACTS
WHICH
M AY
BE
RESCINDED
OR
RESOLVED
- whether reciprocal or
unilateral contracts

- only reciprocal contracts

may be resolved.

Art. 1381.
The following contracts are rescissible:
1. Those which are entered into by guardians
whenever the wards whom they represent
suffer lesion by more than one-fourth of the
value of the things which are the object
thereof;
2. Those agreed upon in representation of
absentees, if the latter suffer the lesion
stated in the preceding number;
3. Those undertaken in fraud of creditors
when the latter cannot in any other manner
collect the claims due them;
4. Those which refer to things under litigation
if they have been entered into by the
defendant without the knowledge and
approval of the litigants or of competent
judicial authority;
5. All other contracts specially declared by law
to be subject to rescission.

REQUISITES TO RESCIND A
CONTRACT BASED ON FRAUD OF
CREDITORS
1. there must be a credit existing
prior to the celebration of the
contract
2. there must be a fraud, or at least
the intent to commit fraud, to the
prejudice of the creditor seeking
the rescission
3. the creditor cannot in any other
legal manner collect his credit
4. the object of the contract must not
be legally in the possession of a
third person who did not act in bf

Art. 1382.
Payments made in a state of insolvency
for obligations to whose fulfillment the
debtor could not be compelled at the
time they were effected, are also
rescissible.

NOTE: violation of a third party's right of first

refusal, is also rescissible.

NATURE OF ACTION FOR RESCISSION

SUBSIDIARY
- it cannot be instituted except when the party
suffering damages has no other legal means to
obtain reparation for the same
- as a remedy of last resort

TIMEFRAME OF FILING
WITHIN 4 YEARS,
- from the time the cause of rescission
transpired

EXE:
1. for wards; from the time they
reached the age of majority
2. for absentees; from the time the
domicile is known

REQUISITES FOR CONTRACTS

MAY BE RESCINDED ON THE
GROUND OF LESION
1. the contract must be entered into
by the guardian in behalf of his
ward or by the legal representative
in behalf of an absentee
2. the ward or absentee suffered
lesion of more than 1/4 of the
value of the property which is the
object of the contract
3. the contract must be entered into
without judicial approval
4. there must be no other legal
means for obtaining reparation for
the lesion
5. the person bring the action must
be able to return whatever he may
be obliged to restore
6. the object of the contract must not
be legally in the possession of a
third person who did not act in bf

THE FF ARE RESCISSIBLE CONTRACTS

Page 15 of 22

E S S E N T I A L T H AT F R A U D B E
PROVEN;
EXE: when it is presumed; as in the ff
instances
a. alienation of property by gratuitous
title if the debtor has not reserved
sufficient property to pay all of his
debts before such alienation
b. alienation of property by onerous
title, if made by a debtor against
whom some judgment has been
rendered in any instances or some
writ of attachment has been
issued. note, the writ of
attachment beed not refer to the
property alienated, and need not
have been obtained by the party
seeking rescission.

PARTIES WHO MAY INSTITUTE AN ACTION

FOR THE RESCISSION OF CONTRACTS
1. the person who is prejudiced
2. their representatives
3. their heirs; and

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS
4. their creditors by virtue of the subrogatory
action as defined in Art. 1177

BADGES OF FRAUD
circumstances from which fraud may be
inferred.
1. the fact that the cause or consideration of
the conveyance is inadequate
2. a transfer made by a debtor after a suit has
been begun and while it is pending against
him
3. a sale on credit by an insolvent debtor
4. evidence of large indebtedness or simple
insolvency
5. the transfer of all or nearly all of his
property by a debtor, especially when he is
insolvent or greatly embarrassed financially
6. the fact that the transfer is made between
father and sone, when there are present
other of the above circumstances
7. the failure of the vendee to take exclusive
possession of all the property

VOIDABLE CONTRACTS
DEFINITION
those in which all of the essential elements for
the validity are present,
but the element of consent is vitiated,
either by:
lack of legal capacity of one of the
contraction parties, or
by mistake, violence, intimidation,
undue influence or fraud.
RESCISSIBLE
CONTRACTS

intrinsic defect
- because it consists
of a vice which
vitiate consent

extrinsic defect
- because it only
consist damage or
prejudice either to
one
of
the
contracting parties
or to a 3rd person

damage or prejudice
is not required

required

annulability of the
contract is based on
law

rescissibility of the
contract is based in
equity

HENCE;
annulment is not
only a remedy, but a
sanction.
- public interest is
involved

HENCE;
rescission is merely
a remedy

- only private
interest is involved

different cause
susceptible of
ratification

not

may be invoked only

the contracting party

may be invoked not

only
by
the
contracting party but
as well ad by a third
person prejudiced
thereby

FF ARE VOIDABLE CONTRACTS

1. those where one of the contracting parties
is incaable of giving consent
2. those where the consent is vitiated by
FIUVM

HOW VOIDABLE CONTRACTS MAY BE

CONVALIDATED
1. by prescription of the action for annulment
2. by ratification or confirmation; and
3. by the loss of the thing which is the object
of the contract through the fraud or fault of
the person who is entitled to institute the
action for the annulment of the contract

PRESCRIPTION PERIOD
4 years
from---- for fraud; from discovery
for incapacity; from the time incapacity
ceases

VOIDABLE
CONTRACTS

Page 16 of 22

NOTE: if the action is for the recovery

of ownership, and not for annulment of
contract, over an immovable
- the prescriptive period is 10 years

RATIFICATION OF VOIDABLE CONTRACT

AKA: confirmation
- the act or means by virtue of which efficacy is
given to a contract which suffers from a vice of
curable nullity

REQUISITES
1. the contract should be tainted with
a vice which is susceptible of
being cured
2. t h e c o n fi r m a t i o n s h o u l d b e
effected by the person who is
entitled to do so under the law
3. i t s h o u l d b e e f f e c t e d w i t h
knowledge of the reason which
renders the contract voidable
4. the reason which renders the
contract voidable should have
already disappear.

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

Page 17 of 22

FORMS

EFFECT OF VOIDABLE CONTRACT

EXPRESS RATIFICATION
ratification made with the knowledge of
the reason which renders the contract
voidable and such reason having
ceased,
- the person who has the right to
invoke it should expressly declare his
renunciation of his right to annul the
contract

IN AN OBLIGATION TO GIVE
the parties shall restore to each other
the things which have been the subject
matter of the contract with their fruits; and
the price with its interest
EXE: in cases provided by law.

TACIT RATIFICATION
with knowledge of the reason which
renders the contract voidable and such
reason having ceased,
- the person who has a right to invoke
it should execute an act which
necessarily implies an intention to
waive his rights

IN AN OBLIGATION TO DO / NOT TO DO
there will have to be an apportionment of
damages based on the value of such
prestation with corresponding interest.
- mutual restitution shall ensue.

EFFECT OF RATIFICATION
1. extinguishes the action to annul
the contract
2. cleanses the contract of its defects
from the moment it was
constituted

REQUISITES FOR A PERSON TO ACQUIRE

RIGHT TO INSTITUTE ACTION FOR THE
ANNULMENT OF VOIDABLE CONTRACTS
1. the plaintiff must have an interest in the
contract in the sense that he is obliged
thereby, either principally or subsidiarily;
and
2. the plaintiff is the victim and not the party
responsible for the vices or defect

NOTE: MUTUAL RESTITUTION

FOLLOWING THE ANNULMENT THE
CONTRACT WILL NOT APPLY TO
- incapacitated person, when the
defect of the contract consists in the
incapacity of one of the contracting
parties
as the incapacitated person is
not obliged to make any
restitution
EXE: insofar as he has been
benefited thereby

EXE FOR #1
even though the plaintiff is neither
principally or subsidiarily obliged on
voidable contracts; when
a. he is prejudiced in his rights with
respect to one of the contracting
parties; and
b. can show detriment which would
positive,y results to him from the
contract in which he has no
intervention

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

UNENFORCEABLE CONTRACTS
DEFINITION
those which cannot be enforced by a proper
action in court, unless they are ratified,
because either
they are entered into without or in
excess of authority
they do not comply with the Statute
of Frauds; or
both of the contracting parties do
not possess the required legal
capacity

UNENOFRCEABLE

RESCISSIBLE

cannot be enforced
by a proper action in
court

valid
and
enforceable unless
rescinded

susceptible of
ratification

not

cannot be assailed
by 3rd person

pwede, so long as
he was prejudiced
thereby

UNENFORCEABLE

VOIDABLE

cannot be enforced
by a proper action in
court

valid
and
enforceable unless
annulled by a proper
action is court

UNENFORCEABLE

VOID

valid, but they

cannot be enforced
by a proper action in
court

do not produce, as a
general rule, any
effect whatsoever

- susceptible of
ratification

- not

Page 18 of 22

THE FF ARE UNENFORCEABLE

CONTRACTS

Art. 1403. The following contracts are

unenforceable, unless they are ratified:
Those 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;

Those that do not comply with the Statute of

Frauds as set forth in this number. In the
following cases an agreement hereafter
made shall be unenforceable by action,
unless the same, or some note or
memorandum, thereof, be in writing, and
subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement
cannot be received without the writing, or a
secondary evidence of its contents:
1. An agreement that by its terms is not to
be performed within a year from the
making thereof;
2. A special promise to answer for the
debt, default, or miscarriage of
another;
3. An agreement made in consideration
of marriage, other than a mutual
promise to marry;
4. An agreement for the sale of goods,
chattels or things in action, at a price
not less than five hundred pesos,
unless the buyer accept and receive
part of such goods and chattels, or the
evidences, or some of them, of such
things in action or pay at the time some
part of the purchase money; but when
a sale is made by auction and entry is
made by the auctioneer in his sales
book, at the time of the sale, of the
amount and kind of property sold,
terms of sale, price, names of the
purchasers and person on whose
account the sale is made, it is a
sufficient memorandum;
5. An agreement of the leasing for a
longer period than one year, or for the
sale of real property or of an interest
therein;
6. A representation as to the credit of a
third person.

Those where both parties are incapable of

giving consent to a contract.
NOTE: unenforceable contracts are valid
contracts. di nga lang pwede i-enforce.

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS
STATUE OF FRAUDS
is a descriptive of a statue which requires
certain classes of contracts to be in writing, to
render it enforceable

PURPOSE
to prevent fraud and perjury in the
enforcement of the obligation pending
their evidence on the unassisted
memory of witnesses by requiring
certain enumerated contracts and
transactions to be evidence by a
writing, signed by the party to be
charged.

DOES NOT APPLY IN TRANSACTION

I N V O LV I N G R I G H T O F F I R S T
REFUSAL OVER AN IMMOVABLE
- as such contractual grant is not a
perfected contract of sale of a real
property
- hence, enforceable and valid even
entered into by oral agreement

Page 19 of 22

RATIFICATION OF UNENFORCEABLE
CONTRACTS; by
1. failure to object to the presentation of oral
evidence to prove the same
2. by the acceptance of benefits under them

RATIFICATION
the act by which
a contract is
entered into by a
person in behalf
of another
without or in
excess
of
authority

CONFIRMATIO
N
the act by which
a voidable
contract was
cured of its vices
or defect

RECOGNITION
defect of proof

but presently under the civil code

- ratification is now used to designate the act of validating
ANY KIND of defective contract

STATUTE OF FRAUDS APPLIES

ONLY TO
- executory contracts, and not to
executed contracts, whether it be total
or partial.

RATION:
the purpose why contracts
should be in writing would no
longer lie.
- further, in excluding parole
evidence, it would rather assist
the party in perpetuating fraud
and/or bf.

HENCE; kung may partial

payment na, the contract is
deemed partially executed and
therefore removed from the
requirement of statute of
frauds

Q: may utang si B kay A, payable

after 2 years from date. di
nakabayad si B. C assumed the
payment without knowledge of B, in
which A accepted. when A filed an
action against C for payment, can C
interpose the defense of statute of
fraud, should the assumption of
debt was made orally?

A: no
as the promise of A is independent or
original

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

Page 20 of 22

VOID OR INEXISTENT
CONTRACTS
DEFINITION
those which
lack absolutely either in fact or in law one or
some or all of those elements which are
essential for its validity, or
which while possessing all the essential
requisites prescribed by law for contracts, but
the cause, object or purpose is contrary to
law, morals, good customs, public order or
public policy, or they are prohibited by law or
declared by law to be void

VOID
CONTRACT

INEXISTENT
CONTRACT

where all of the

requisites of a
contract are present
BUT
the cause, object or
purpose is contrary
to law, morals, good
customs, public
policy or public
order, or the contract
itself is prohibited or
declared void by law

where one or some

or all of those
requisites which are
essential for validity
are absolutely
lacking

in pari delicto
applies

not applicable

VOID / INEXISTENT
CONTRACTS

RESCISSIBLE
CONTRACTS

produces no effect
whatsoever

valid, unless
rescinded

defect consist of
- absolute lack in
fact or in law of one
or some or all of the
essential elements
of a contract

- lesion or damage
to one of the
contracting parties
or to third person

nullity is based on
law

rescissibility is
based on equity

imprescriptibe

4 yrs

cannot be assailed
as a rule by 3rd
person

pwede

VOID CONTRACTS

VOID / INEXISTENT
CONTRACTS

RESCISSIBLE
CONTRACTS

there is in law or in
reality, no contract at
all

there is a valid
contract
- which cannot be
enforced by a court
action, unless it is
ratified

not susceptible of
ratification

pwede

can be assailed by
3rd person whose
interest is directly
affected

hindi pwede

VOIDABLE

produces no effect
whatsever

valid, until annulled

not susceptible for

ratification

pwede

imprescriptible

4yrs

defense of nullity or
inexistence of
contract is available
to 3rd persons
whose interest are
directly affected
thereby

not available to 3rd

persons

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

Page 21 of 22

THE FF CONTRACTS ARE VOID OR

INEXISTENT CONTRACTS
1. Those whose cause, object or purpose is
contrary to law, morals, good customs,
public order or public policy;
2. Those which are absolutely simulated or
fictitious;
3. Those whose cause or object did not exist
at the time of the transaction;
4. Those whose object is outside the
commerce of men;
5. Those which contemplate an impossible
service;
6. Those where the intention of the parties
relative to the principal object of the
contract cannot be ascertained;
7. Those expressly prohibited or declared void
by law.

2. before any damage has

been caused to a third
person.
In such case, the courts may, if the
public interest will thus be subserved,
allow the party repudiating the
contract to recover the money
or property.

PLUS
a. those which are the direct result of previous
illegal contracts
b. those where there is no concurrence
between the offer and acceptance with
regard to the object and the cause of the
contract; and
c. those which do not comply with the
required form where such form is essential
for validity

Art. 1416.
When the agreement is not illegal per
se but is merely prohibited,
and the prohibition by the law
is designated for the protection
of the plaintiff,
- he may, if public policy is
thereby enhanced, recover
what he has paid or delivered.

These contracts cannot be ratified. Neither can

the right to set up the defense of illegality be
waived.

IN RE: USURIOUS INTEREST,

- the debt due to be considered without the
stipulation of the excessive interest.
- instead, a legal interest will be added in place
of the excessive interest formerly imposed
- also; since interest is merely an accessory to
the principal obligation of paying the principal
sum owed, the usurious interest is void and
shall not affect the principal

IN PARI DELICTO
when the defect of a void contract consists in
the illegality of the cause or the object of the
contract, and both of the parties are at fault or
in pari delicto,
the law refuses them every remedy
and leaves them where they are

EXE:
Art. 1414.
When money is paid or property
delivered for an illegal purpose,
the contract may be
repudiated by one of the
parties
1. before the purpose has
been accomplished, or

Art. 1415.
Where one of the parties to an illegal
contract is incapable of giving consent,
the courts may,
if the interest of justice so
demands
- allow recovery of money or
property delivered by the
incapacitated person.

ie. prohibition to alienate real

property to aliens.

Art. 1417.
When the price of any article or
commodity is determined by statute, or
by authority of law,
any person paying any amount
in excess of the maximum
price
- allowed may recover such
excess.

Art. 1418.
When the law fixes, or authorizes the
fixing of the maximum number of hours
of labor, and
a contract is entered into
whereby a laborer undertakes
to work longer than the
maximum thus fixed,
- he may demand additional
compensation for service
rendered beyond the time
limit.

Art. 1419.
When the law sets, or authorizes the
setting of a minimum wage for
laborers, and
a contract is agreed upon by
which a laborer accepts a
lower wage,

AAA - BASTE / ATB

prepared by: ronie ablan

THE AWESOME NOTES

CONTRACTS

Page 22 of 22

- he shall be entitled to recover

the deficiency.

ALSO; in homestead; as the purpose

of the law or public policy dictates that
the homesteader or his heirs should be
allowed to reacquire the land event if it
has been sold

Q: A executed a deed of donation in favor

of B, who was a minor, in consideration that
B shall cohabit with him. B agreed. after
several years, A files an action for nullity of
the donation based on illegal cause. will the
action prosper?

A: no. in pari delicto applies

however, since B was still a minor then, she
occupies a privileged position under the law.

contracts having illegal cause, when executed

(not merely executory), will produce the effect
of barring any action by a guilty party to
recover what he has already given under the
contract

AAA - BASTE / ATB

prepared by: ronie ablan