1156-1170

1. Prescription: of right of action: Resolution 10yrs; Rescission 4yrs (Lalicon v

NHA)
1169
1. Credit card transactions involve 3 contracts : sales contract, loan agreement
and the promise to pay. (Pantaleon v AMEX)
2. Without demandable obligation, no finding of default. Credit card companies
have no obligation to approve purchase requests. (Panteleon v AMEX)
1169
1. In determining whether time is of the essence in a contract, ultimate criterion
is the actual or apparent intention of the parties and before time may be so
regarded by a court, there must be a sufficient manifestation, either in the
contract itself or the surrounding circumstances of that intention. (Lorenzo
Shipping v BJ Martel)
a. When the time of delivery is not fixed or is stated in general or
indefinite terms, time is not of the essence of the contract
2. The party who deems the contract breached may consider it resolved or
rescinded, and act accordingly, without previous court action, but it proceeds
at its own risk. (Lorenzo Shipping v BJ Marthel)
a. Must be made known to other party, and it is provisional subject to
scrutiny
3. In reciprocal obligation, the general rule is that the fulfillment of the parties
respective obligations, if the period for the fulfillment of the obligation is
fixed, demand upon the obligee is still necessary before the obligor can be
considered in default and before a cause of action will accrue. (Solar Harvest
v Davao Corrugated)
a. Without previous demand, no cause of action for rescission
1174
1. One who creates a dangerous condition cannot escape liability although an
act of God may have intervened (Juan Nakpil & Sons v CA)
2. The period during which work is suspended due to force majeure does not
justify an extension of the term of the contract. (Ace-Agro v CA)
1190-1192
1. Rescission: Effect of unilateral rescission without court intervention.
a. There is nothing in the law that prohibits the stipulation that would
cause cancellation without court intervention. (UP v de los Angeles)
2. Rescission: absence of an express stipulation authorizing the sellers to
extrajudicially rescind the contract of sale, such COS cannot unilaterally and
extrajudicially rescind the COS. (Co v CA)
3. Rescission: absence of a contrary stipulation the power to rescind
obligations must be invoked judicially, it cannot be exercised soley on a
partys own judgment that the other has committed a breach of the
obligation. (Tan v CA)
4. Rescission: Notice to defaulting lot buyer in his payments, indispensable;
judicial action for rescission CTS not necessary, provided written notice is
sent to defaulter informing him. (Palay v Clave)
 5. Contract to sell: failure to pay in full the purchase price is not the breach of
contract contemplated under 1191 but rather just an event the seller from
conveying title to the buyer. (Reyes v Tuparan)
6. Rescission: Rescission of contract of lease under 1659 is not one that
requires an independent action, unlike resolution of reciprocal obligations
under 1191. Lessor has an option to extrajudicially terminate the contract of
lease by simply serving notice upon the lessee (Chua v Victorio)
7. Rescission: Rescission distinguished from termination of contracts.
Rescission, mutual restitution; Termination, not restored to original
situation. (Pryce v PAGCOR)
1207-1222
1. Partnership: Joint Venture being a form of partnership it is to be governed
by the laws on partnership. Joint liability. exo(Marsman v Philippine Geo)
2. Accommodation Party: a person who has signed the instrument as maker,
drawer, acceptor or indorser without receiving value therefor and for the
purpose of lending his name to some other person. Solidary liability.
(Gonzales v PCIB)
3. Death of solidary debtor: if one of the alleged solidary debtors dies during
the pendency of the collection case, the court where said case is pending
retains jurisdiction to continue hearing the charge as against the surviving
defendants (solidary co-debtors). (PNB v Independent Planters Assoc)
4. The responsibility of two or more persons who are liable for a quasi-delict is
solidary. (Rubio v CA)
1226-1230
1. Distinction between a penalty clause imposed essentially as penalty in case
of breach and a penalty clause imposed as indemnity for damages should be
made in cases where there has been neither partial nor irregular compliance.
If there is, no difference. Liquidated damages, whether intended as indemnity
or a penalty, shall be equitably reduced if they are iniquitous or
unconscionable. (Filinvest Land v CA)
1236-1243
1. Payment by judgment debtor to the wrong party does not extinguish
judgment debt. Debtor has burden to recover supposed payment. (Aranas v
Tutaan)
1249
1. Cashiers check deemed as cash. Not an ordinary check but a cashiers check
of a bank of good standing and reputation. (New Pacific v Seneris)
2. Certification of check of drawee bank equivalent to acceptance. (New Pacific)
3. Payment: Central Bank Act; A check is not legal tender and that a creditor
may validly refuse payment by check, whether it be a managers, cashiers or
personal check. (Tibajia v CA)
1250
1. The currency during the time of establishment of obligation in case of
extraordinary inflation or deflation declared by proper authorities
(Telengtan v US Lines)
1245
 1. Dacion en Pago; the contractual intention determines whether the property
subject of the dation will be considered as the full equivalent of the debt and
will therefore serve as full satisfaction for the debt. (Luzon Development
Bank v Enriquez)
2. Without any reservation or condition, the Dacion stated that the assigned
properties served as full payment of the total obligation (Ibid)
1256-1261
1. Offer of payment by certified check is valid tender of payment. (McLaughlin v
CA)
2. When an obligor fails to follow a valid tender of payment with a court
consignation, the court may allow him time to pay his obligation without
rescinding the deed of sale. (McLaughlin v CA)
3. Right repurchase, valid tender of payment sufficient. Tender of payment is
enough if made on time as a basis for an action to compel the vendee a retro
to resell the property (Legaspi v CA)
4. Mere letter expressing intention to pay without accompanying payment is
not a valid tender of payment. (Vda de Zulueta v Octaviano)
5. Bona fide tender of the redemption price or its equivalent consignation of
said price in court is not essential or necessary in the case at bar where the
filing of the action itself is equivalent to a formal offer to redeem. (Hulganza v
CA)
6. Option Contract: notice of the creditors decision to exercise his option to
buy need not be coupled with actual payment of the price, so long as this is
delivered to the owner of the property upon performance of his part of the
agreement. (Heirs of Bacus v CA)
7. Consignation: failure to comply strictly with any of the requisites of a valid
consignation will render the consignation void; substantial compliance is not
enough.
a. Thus failure to notify the persons interested in the performance of the
obligation will render the consignation void.
b. All interested parties are to be notified of the consignation.
Compliance with this requisite is mandatory. (Dalton v FGR)
1262-1269
1. The obligation to pay rentals or deliver the thing in a contract of lease falls
within the prestation to give; hence it is not covered within the scope of
1266 which is to do (PNCC v CA)
1278-1290
1. Compensation: there is no compensation where the parties are not creditors
and debtors of each other. (PNB v Vda de Onbg Acero)
2. Compensation: Internal Revenue Taxes can not be subject of set-off or
compensation. (Francia v IAC)
3. Compensation: a claim is not a debt which is not enforceable in court (EGV v
CA)
4. Compensation: Money market no notice is given to borrower or issuer of
commercial paper of its sale to the investor. 1285 applicable in such cases as
 to bar legal compensation between debtor and assignee of creditors rights.
(Perez v CA)
1291-1304
1. Novation: may be either extinctive or modificatory. Extinctive novation is
never presumed. (Kwong v Gargantos)
2. Deed of conditional sale and deed of absolute sake cannot co-exist as these
are of different nature and provide for separate and distinct obligations. A
COS is absolute when title to the property passes to the vendee upon delivery
of the thing sold. In a conditional sale, as in a CTS, ownership remains with
the vendor and does not pass to the vendee until full payment of the
purchase price. (Kwong v Gargantos)
3. The creditors acceptance of another check, which replaced an earlier
dishonored check, does not result in novation where there was no express
agreement to establish that the debtor was already discharged from his
liability. (Salazar v JY Bros Mkt Corp)
4. Novation: must be clearly proved since its existence is not presumed. A deed
of cession of the right to repurchase a piece of land does not supersede a
contract of lease over the same property. (Espina v CA)
5. There is no novation: a Real Estate Mortgage was executed as new additional
security to the chattel mortgage previously entered into by the parties.
Absence of existence of an explicit novation no incompatibility between the
old and the new agreements. (Peoples Bank Trust Co v Syvel Inc)
6. It is not established that respondent was released from responsibility under
PN, this does not constitute novation by substitution. Therefore, payments
accepted by petitioner from a third person like respondent, who has assumed
the obligation, will result merely to the addition of debtors and not novation.
(Servicewide Specialist v IAC)
7. Assignment of credit is not conventional subrogation. AOC requires not mere
consent of debtor, but merely notice to him. Conventional Subrogation
requires agreement/consent of all original parties. (Licaros v Gatmaitan)

1305-1317
1. The terms of the original contract shall continue to govern over both parties
if no amendments were ever initiated. Absence of a new perfected contract
between HTMC and DOH, both parties shall continue to be bound by the
stipulations of the original contract and all its natural effects. (DOH v HTMC)
2. A pre-termination condition which provides that, in the sole opinion of
the corporation the corporation may terminate the contract clearly
transgresses the principle of mutuality of contracts. Nullify a contract
containing a condition which makes its fulfillment or pre-termination
exclusively upon the uncontrolled will of one of the contracting parties. (GF
Equity v Valenzona)
3. Land Registration: Prohibitory to sell property to 3rd parties which is
indefinite and unlimited as to time, which shall continue to be applicable
even beyond the life of the original parties to the contract, is a nullity. It is a
 perpetual restriction of an owners right to freely dispose of his properties
(Leal v IAC)
4. Redemption: right to redeem must be expressly stipulated in the contract of
sale to have legal existence. In no uncertain term the right to repurchase.
(Leal v IAC)
5. Escalation clause: any increase in the rate of interest made pursuant to an
escalation clause must be the result of an agreement between the parties any
change must be mutually agreed upon, otherwise, the change carries no
binding effect. Left soley to the will of one of the parties is void, stipulation
goes against principle of mutuality. (PNB v Rocamora)
6. Non-involvement clause: not necessarily void for being in restraint of trade
as long as there are reasonable limitations as to time, trade, and place. As
long as there are reasonable limitations as to time, trade and place. (Tiu v
Platinum Plans Phils)
7. Option Contract: is a contract by which the owner of the property agrees
with another person that he shall have the right to buy his property that he
shall have the right to buy his property at a fixed price within a certain time.
It is a separate and distinct contract from which the parties may enter into
upon the conjunction of the option. Deeds of assignments are not perfect
option contracts.
a. it imposes no binding obligation on the person holding the option,
aside from the consideration for the offer. Until accepted, it is not
treated as a contract. (Tayag v Lacson)
8. Legal Interest: Not vested with the requisite interest to protest the tax
assessment as it is not an entity having legal title over the machineries.
Absolutely no claim. (NAPOR v Province of Quezon)
9. Gilchrist: Introduce two schools of thought: [1] there is no malice when in
furtherance of economic interest, but there is still tortious interference. [2]
there is no malice when in furtherance of economic interest, there is NO
tortious interference. The latter was ruled in Gilchrist.
a. When there was no malice in the interference of a contract, and the
impulse behind ones conduct lies in a proper business interest rather
than in wrongful motives, a party cannot be a malicious interferer. (So
Ping Bun v CA)
b. A financial or profit motivation will not necessarily make a person an
officious interferer liable for damages as long as there is no malice or
bad faith involved. (Lagon v CA)
10. Elements of Tort Interference: [1] existence of a valid contract [2]
knowledge on the part of the 3rd person of the existence of contract [3]
interference of the 3rd person is without legal justification or excuse. (So Ping
Bun v CA)
11. Stipulation Pour Autrui: 3rd party beneficiary may accept the benefit in any
form, does not require the acceptance to be in writing. (Limitless v Quilala)
12. Stipulation Pour Autrui: Lessor is a stranger to the relationship between
the lessee and sublessee. (Limitless v Quilala)
1318-1324
 1. Wife by affixing her signature to a deed of sale on the space provided for
witnesses is deemed to have given her implied consent to the contract of sale.
Wifes consent does not always have to be explicit or set forth in any
particular document so long as it is show by acts of wife that such consent or
approval was indeed given. (Pelayo v Perez)
2. Insolvency: Receivership is equivalent to an injunction to restrain the bank
officer from intermeddling with the property of the bank in any way
a. insolvency through receivership before acceptance of an offer, offer
ineffective. (Villanueva v CA)
3. Option Contract: unaccepted offer, no binding obligation on the person
holding the option, aside from the consideration. (Adelfa Prop v CA)
a. the test determining whether a contract is a contract of sale or
purchase or a mere option is whether or not the agreement could
be specifically enforced
4. Option: an accepted unilateral promise which specifies the thing to be sold
and the price to be paid, when coupled with a valuable consideration, distinct
and separate from the price may be termed a perfected option contract. (Ang
Yu v CA)
5. Period: is given to the offeree within which to accept the offer
a. if a period is not itself founded upon or supported by a valuable
consideration, the offeror is still free and has the right to withdraw
the offer before its acceptance
b. if period has a separate consideration, a contract option is deemed
perfected, and it would be a breach of that contract to withdraw the
offer during the agreed period. (Ang Yu v CA)
6. Right of first refusal: is an innovative juridical relation, but cannot be
deemed a perfected contract of sale.
a. right dependent on grantors eventual intention to enter in a juridical
relation
b. price yet to be later firmed up
7. Breach of a right of first refusal decreed under final judgment does not entitle
the aggrieved party to a writ of execution of the judgment but to an action for
damages. (Ang Yu v CA)
8. Right of First Refusal: Integral part of the contract of lease. The
consideration is built into the reciprocal obligations of the parties.
(Equatorial v Mayfair)
9. Specific Performance: you can sue right to first refusal or an option. The
object of suing is to use the option, not necessarily to exercise the option to
buy the property. (Equatorial v Mayfair)
10. An option contract needs to be supported by a consideration (?) (Bible
Baptist v CA)
1327-1344
1. Whoever alleges fraud must substantiate his allegation. Exception, where a
party who is illiterate, or cannot understand the language in which the
contract is written, the burden shifts to the one enforcing the contract.
(Cayabyab v IAC)
 2. A persons is not incapacitated to enter into a contract merely because of
advanced years or by reason of physical infirmities, unless such age and
infirmities impair his mental faculties to the extent that he is unable to
properly, intelligently and fairly understand the provisions of the contract.
(Yason v Arciaga)
3. A contract of the sale executed by one who is already advanced age and
senile is null and void when such infirmities have impaired the mental
faculties. (she has liver cirrhosis that caused serious doubts as to her
capacity) General rule: not incompetent to contract. (Paragas v Heirs)
1345-1346
1. An indication of simulation of contract is the complete absence of an attempt
in any manner on the part of the ostensible buyer to assert rights of
ownership over the subject properties. (MBC v Silverio)
1350-1355
1. Ordinarily a partys motives for entering into a contract do not affect the
contract, but when the motive predetermines the cause, the motive may be
regarded as the cause. (Uy v CA)
1356-1358
1. Payment acceptance of payment, an indication of partys consent to the
contract. (Clarin v Rulona)
2. 1358 must appear in a public document. Does not affect validity and
enforceability. This is not a requirement, only for convenience. (Clarin v
Rulona)
1359-1369
1. As long as the party abide in the true agreement, no action for reformation.
2. As a rule, give credence to written contract. During litigation, show parol
evidence.
3. Parol Evidence: when the issue does not express the intention of the parties
and the proper foundation is laid therefor, the court should hear the evidence
for the purpose of ascertaining the true intention of the parties. (NIA v
Gamit)
4. In actions for reformation of contract, the onus probandi is upon the party
who insists that the contract be reformed (Huibonhoa v CA)
5. In reformation of contracts, what is reformed is not the contract itself, but
the instrument embodying the contract. (Naga v CA)
1378
1. Conservation of ones assets:
a. Gratuitous contract, least transmission of rights
b. Onerous, greatest reciprocity of interest
1380-1389
1. Fraud: existence of fraud or the intent to defraud creditors cannot plausibly
be presumed from the fact that the price paid is perceived to be slightly
lower than its market value. (Union Bank v Ong)
2. Creditor fails to show that he has no other legal recourse to obtain
satisfaction for his claim, the he is not entitled to the rescission asked. (Union
Bank v Ong)
1390-1402
1. Error in mistake must include both ignorance:
a. Absence of knowledge with respect to a thing, and mistake which is a
wrong conception about said thing or;
b. Belief in the existence of some circumstance, fact or even which in
reality does not exists (Theis v CA)
1403-1408
1. Warehousing: properties are placed in the name of the children
2. Statute of Frauds Alibaba and the 40 Thieves
a. Mortals like you do not remember well, so you need to put it in
writing
3. Special Power of Attorney: A sale of an immovable property by an agent
without authority is void. A SPA is also necessary to enter into any contract
by which the ownership of an immovable is transmitted or acquired for a
valuable consideration. (Alcantara v Nido)
a. Sale of real property, the SPA must be given to agent in writing
4. The form required under statute of frauds is for convenience or evidentiary
purposes only. It does not declare them invalid because they are not reduced
to writing.
a. Ratified by acceptance of benefits under the contract (Orduna v
Fuentebella)
5. SPA and Summary Agreement does not suffice as notes or memoranda as
contemplated in Art 1403 [2] (Torcuator v Bernabe)
6. Right of first refusal is not among those listed as unenforceable under the
Statue of Frauds as such it need not be written to be enforceable and may
be proven by oral evidence. (Rosencor v Inquing)
1440-1457
1. The rule that a trustee cannot acquire by prescription ownership over
property entrusted to him until and unless he repudiates the trust applies
only express trusts and resulting implies trust. (Lopez v CA)
a. Constructive trusts, prescription may supervene
b. 10 year prescriptive period
2. Express trust: immovable real property cannot be proven by parol evidence
3. The character of the transaction between the parties is to be determined by
their intention regardless of what language was used or what the form of
transfer was. (Manila Banking Corp v Teodoro)