SECTION 4 : JOINT AND SOLIDARY OBLIGATONS
== JOINT LIABILITY
ART. 1207 – The concurrence of two or more creditors or two
of more debtors and one and the same obligation does not imply
that each one of the former has a right to demand, or that each
one of the latter is bound to render, entre compliance with the
prestation.
There is a solidary liability only when the obligation expressly
so states, or when the law or the nature of the obligation requires
solidarity.
JOINT O. – each obligor answers only for a part of the whole
liability and to each oblige belongs only part of the correlate
rights ; “TO EACH HIS OWN”
SOLDARY O. – “ONE FOR ALL, ALL FOR ONE.”
EX: A and B are solidary debtors of C to the amount
of 1M. C can demand the whole 1M from A. A in turn, after
paying C can ask for reimbursement from B to the amount of
500k.
General rule: where there are two or more debtors or two or
more creditors, the obligation is JOINT
Exceptions:
 When there is a stipulation in the contract that the
oblation is solidary
 The nature of the obligation requires liability to be
solidary
 The law declares the obligation to be solidary
INSTANCES WHEN THE LAW IMPOSES SL
 Obligations arise from tort
 O arise from quasi-contracts
 Legal provisions re: the obligations of devisees and
legatees
 Liability of PAA of a felony
 Bailees in commodatum
A and B are joint detos of CDE, and F, solidary creditors to the
amount of 1M. How much can C collect from A?
C is a solidary creditor,so presumably he can collect
the whole debt. But since a is only a joint debtor, C is entitled to
collect 500k from A.
Art. 1208 –
PRESUMPTION THAT OBLIGATION IS JOINT
**When there are 2 or more debtors or 2 or more creditors, the
obligation is joint and as a consequence:
 debt shall be divided into as many equal shares as there
are creditors or debtor,
 the credits or debt will be considered distinct from one
another, but re: the bringing of the action in court, the
rules of court governing the multiplicity of suits will be
followed.
SYNONYMS
JOINT O. – mancomunada ; mancomunada simple;
proportionate ; pro rata
SOLIDARY O. – joint and several; in solidum; mancomunada
solidaria; juntos o separadamente; individually and collectively;
each will pay the whole value
“We promise to pay, “ when there are two o more signatures
“ I promise to pay, “ when there are two or more signatures ==
SOLIDARY LIABLITY
SOME CONSEQUENCES OF JOINT LIABILTY
 Vitiated consent on the part of one debtor does not
affect the others.
 Insolvency of one debtor does not make others
responsible for his share.
 Demand by the creditor on one joint debtor puts him in
default, but not the others since the debt are distinct.
 When the creditor interrupts the running of the pp by
demanding judicially from one, the others are not
affected.
 Defenses of one debtor are not necessarily available to
the others.
LIABLITIES OF PARTNERS
If it arises out of the contract == liability is joint or pro rata;
EXCEPTION: If the dependents of an employee claim
compensation for the employees death in line of duty
If it arises out of a crime or a quasi-delict == liability is
solidary
LIABLITIES OF AGENTS
In general it is JOINT, even if appointed at the same time,
unless solidarity has been agreed upon.
LIABLITIES OF CO-PRINCIPALS (AGENCY)
Solidary
LIABLITIES OF HUSBAND AND WIFE
After the conjugal funds have been exhausted, the H and W are
liable JONTLY to creditors of the CPG
LIABLITIES OF VIOLATORS
The law does not expressly say so but it is believed to be held
liable in SOLIDUM
LIABLITIES OF EMPLOYER AND EMPLOYEE
Employer = primary and solidary
Art. 1209 — If the division is impossible, the right of the
creditors may be prejudiced only by their collective acts, and the
debt can be enforced only by proceeding against all the debtors.
If one of the latter should be insolvent, the others shall not be
liable for his share.
INDIVISIBLE JOINT O. – indivisible referring to the object;
joint referring to the tie between parties who are merely
proportionately liable, unless solidarity has been stipulated by
the parties or the law, in which case it is called a solidary
indivisible obligation.
CHARACTERISTICS:
 O is joint but since the object is indivisible, the creditor
must proceed against all the joint debtors, for
compliance is possible only of all the joint debtors
would act together.
 Demand must be made on all the joint debtors
  If any one of the debtors does not comply with his The creditor who may have executed any of these acts, as well
monetary obligation for damages as he who collects the debt, shall be liable to the others for the
 If any of the joint debtors be insolvent, the others shall share in the obligation corresponding to them.
not be liable for his share
 If there be joint creditors, delivery must be made to all, EFFECT OF NOVATION: Novation is the modification by
and not merely to one, unless that one be specifically changing its object or principal conditions, or by substituting he
authorized by others. person of the debtor, or by subrogating the person of the debtor,
 Each joint creditor is allowed to renounce his or by subrogating a third person in the rights of creditor.
proportionate credit.
EFFECT OF COMPENSATION: Compensation is that which
Art. 1210 – The indivisibility of an obligation does not takes place when two persons, n their own right, are creditors
necessarily give rise to solidarity. Nor does solidarity of itself and debtors of each other.
imply indivisibility.
Indivisibility as distinguished from Solidarity EFFECT OF CONFUSION OR MERGER: Confusion or
 I = refers to the subject matter merger is that which takes place when the characters of creditor
 S = refers to the tie between the parties and debtor are merged in the same person, s when my check in
EXAMPLES: the course of negotiation, is eventually endorsed to me.
 Joint divisible O – A and B are jointly liable to X for
EFFECT OF REMISSION OR WAIVER: Remission or
1M
waiver is that act of liberality whereby a creditor condones the
 Joint Indivisible O – A and B are jointly liable to give
obligation of the debtor; that where the creditor tells the debtor
X this car
to forget about the whole thing.
 Solidary Divisible O – A and B are solidary bound to
give X 1M
Art. 1216. The creditor may proceed against any one of the
 Solidary Indivisible O – A and B are solidary bound solidary debtors or some or all of them simultaneously. The
to give X this car demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the others, so
KINDS OF SOLIDARITY long as the debt has not been fully collected.
 ACTIVE = on the part of the creditors or obliges
 PASSIVE = on the part of the debtors or obligors EFFECT OF NOT PROCEEDING AGAINST ALL
 MIXED = both If the creditor sues only one, or two or several of the debtors,
 CONVENTIONAL = agreed upon by the parties there is no waiver against those no yet sued. They may be
 LEGAL = imposed by law proceeded against later.
Art. 1211 – Solidarity may exist although the creditors and the APPLICABLITY: applicable only to solidary obligations, not
debtors may not be bound in the same manner and by the same to joint ones; applies to passive and mixed solidarity
periods and condition.
PASSIVE SOLIDARTY: solidarity among debtors
WAYS IN WHICH DEBTORS MAY BE BOUND (ACCDG
TO SANCHEZ)
PASSIVE S. SURETYSHIP
UNIFORM – when the debtors are bound by the same
stipulations and clauses
Both guarantees for another person
OTHERWISE – where the obligors though liable for the same
Both can demand reimbursements
prestation, are nevertheless not subject to the same secondary
 indebted for his own  indebted for the
stipulations and clauses.
share only share of the principal
debtor
Art. 1212 – Each one of the solidary creditors may do whatever
 can be reimbursed for  can be reimbursed fo
may be useful to the others, but no anything which may be
what he has paid everything he has
prejudicial to the latter.
minus his own share paid
Art. 1213 – A solidary creditor cannot assign his rights without
 if there’s an  if a principal debtor
the consent of the others.
extension of the receives an extension,
period of payment— without the surety’s
Art. 1214 – The debtor may pay any one of the solidary
the others are still consent, the surety s
creditors; but if any demand, judicial or extrajudicial, has been
liable for the whole released.
made by one of them, payment should be made to him.
obligation now minus
the share of the
Art. 1215 – Novation, compensation, confusion or remission
debtor who has
of the debt, made by any of the solidary creditors or with any
received the
of the solidary debtors, shall extinguish the obligation, without
extension
prejudice to the provisions of article 1219.
Art. 1217 – Payment made by one of the solidary debtors
extinguishes the obligation. If two or more solidary debtors
offer to pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors
only the share which corresponds to each, with the interest
for the payment already made. If the payment is made before
the debt is due, no interest for the intervening period may be
demanded.
When one of the solidary debtors cannot, because of his
insolvency, reimburse his share to the debtor paying the
obligation, such share shall be borne by all his co-debtors, in
proportion to the debt of each.
PAYMENT = one of the ways by which an obligation is
extinguished and consists in the delivery of the thing or the
rendition of the service which is the object of the obligation.
Art. 1218 – Payment by a solidary debtor shall not entitle him
to reimbursement from his co-debtors if such payment is made
after the obligation has prescribed or become illegal
EFFECT OF PAYMENT OF AN ILLEGAL OBLGATION
**No reimbursement
Art. 1219 – The remission made by the creditor of the share
which affects one of the solidary debtors does not release the
latter from his responsibility towards the co-debtors, in case the
debt had been totally paid by anyone of them before the
remission was effected.
Art. 1220 – The remission of the whole obligation, obtained by
one of the solidary debtors, does not entitle him to
reimbursement from his co-debtors.
only as regards that part of the debt for which the latter are
responsible.
KINDS OF DEFENSES
**those derived from the nature of the obligation (complete
defense)
 Lack of consideration or cause
 absolute simulation
 illegal consideration
 extinguishment of the obligation
 non-fulfillment of the suspensive condition
 statute of frauds
 when all the debtors were incapacitated to give
consideration
 when there are vices of consent
**those personal to the debtor sues (in general it is a
complete defense, but if the defense is non-fulfillment yet of
a condition or the non-arrival yet of the term, this is only a
partial defense)
 vitiated consent – complete defense
 incapacity to give consent (minor) – complete defense
 non-fulfillment of the condition imposed regarding hs
share – partial defense
 non-arrival of term – partial defense
** those personal to the others – same as partial defense re:
share of others involved
SECTION 5: DIVISIBLE AND INDIVISIBLE
OBLIGATIONS
DIVISIBLE = capable of partial performance
INDIVISIBLE = one not capable of partial performance

Art. 1221 – If the thing has been lost or if the prestation SOLIDARITY INDIVISIBLITY
has become impossible without the fault of the solidary o tie between parties o nature of the
debtors, the obligation shall be extinguished. o needs at least 2 obligation
debtors or creditors o may exists even if
If there was fault on the part of any one of them, all shall be
o the fault of one is the there is only 1 debtor
responsible to the creditor, for the price and the payment of
fault of the others and 1 creditor
damages and interest, without prejudice to their action against
o the fault of one is not
the guilty or negligent debtor.
the fault of the others.
If through a fortuitous event, the thing is lost or the
performance has become impossible after one of the solidary CLASSES OR KINDS OF INDIVISIBILITY
debtors has incurred in delay through the judicial or  conventional indivisibility
extrajudicial demand upon him by the creditor, the  natural or absolute ind.
provisions of the preceding paragraph shall apply.  legal ind.

EFFECT OF LOSS OR IMPOSSIBILITY KINDS OF DIVISION

 WITHOUT FAULT = no liability
 WITH FAULT = there is liability also for damages
and interest
 LOSS BEC. OF FE AFTER DEFAULT = there will
be liability because of the default
Art.1222 – A solidary debtor may, in actions filed by the
creditor, avail himself of all defenses which are derived from the
nature of the obligation and of those which are personal to him,
or pertain to his own share. With respect to those which
personally belong to the others, he may avail himself thereof
 Quantitative = depends on quantity
 Qualitative = quality
 Intellectual or Moral = exists only in mind
Art. 1224 — A joint indivisible obligation gives rise to
indemnity for damages from the time anyone of the debtors does
not comply with his undertaking. The debtors who may have
been ready to fulfill their promises shall not contribute to the
indemnity beyond the corresponding portion of the price of the
thing or of the value of the service in which the obligation
consists.

EFFECT OF NON-COMPLIANCE
 The obligation is converted into a monetary one for
indemnity.
Art. 1225 –
OBLIGATIONS THAT ARE DEEMED INDIVISIBLE
o Obligations to give definite things
o Those which are no susceptible of partial performance
o Even if the thing is physically divisible, it may be
indivisible f so provided by law
o Even if the thing is physically divisible, it may be
indivisible if such was the intention of the parties
concerned.
OBLIGATIONS THAT ARE DEEMED DIVISIBLE
o When the object of the obligation is the execution of a
certain number of days of work
o When the object o the obligation is he accomplishment
of work by metrical units
o When the purpose of the obligation is to pay a certain
amount in installments
o When the object of the obligation is the
accomplishment of wok susceptible of partial
performance
SECTION 6: OBLIGATIONS WITH A PENAL CLAUSE
Art. 1226 – In obligations with a penal clause, the penalty shall
substitute the indemnity for damages and the payment of
interests in case of noncompliance, if there is no stipulation to
the contrary. Nevertheless, damages shall be paid if the obligor
refuses to pay the penalty or is guilty of fraud in the fulfillment
of the obligation.
The penalty may be enforced only when it is demandable in
accordance with the provisions of this Code.
PENAL CLAUSE = a coercive means to obtain from the debtor
compliance from the debtor
PURPOSE: insure the performance of an obligation and also to
substitute for damages and the payment o interest in case of
non-compliance.
EXCEPTIONS TO THE GEN. RULE THAT THE
PENALTY TAKES THE PLACE OF INDEMNITY FOR
DAMAGES AND FOR THE PAYMENT OF NTEREST
o When there is express stipulation
o When the ebtor refuses to pay the penalty imposed the
obligation
o When the debtor is guilty of fraud or dolo in the
fulfillment of the obligation
Art. 1227 – The debtor cannot exempt himself from the
performance of the obligation by paying the penalty, save in the
case where this right has been expressly reserved for him.
Neither can the creditor demand the fulfillment of the obligation
and the satisfaction of the penalty at the same time, unless this
right has been clearly granted him. However, if after the creditor
has decided to require the fulfillment of the obligation, the
performance thereof should become impossible without his
fault, the penalty may be enforced.
Art. 1228 – Proof of actual damages suffered by the creditor is
not necessary in order that the penalty may be demanded.
Art. 1229 – The judge shall equitably reduce the penalty when
the principal obligation has been partly or irregularly complied
with by the debtor. Even if there has been no performance, the
penalty may also be reduced by the courts if it is iniquitous or
unconscionable.
Art. 1230 – The nullity of the penal clause does not carry with it
that of the principal obligation.
The nullity of the principal obligation carries with it that of the
penal clause
CHAPTER 4: Extinguishment of Obligations
Art. 1230 – Obligations are extinguished
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of
creditor and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as
annulment, rescission, fulfillment of a resolutory condition, and
prescription, are governed elsewhere in this Code.
Art. 1232. – Payment means not only the delivery of money but
also the performance, in any other manner, of an obligation.
Art. 1233 – A debt shall not be understood to have been paid
unless the thing or service in which the obligation consists has
been completely delivered or rendered, as the case may be.
HOW PAYMENT OR PERFORMANCE IS MADE
 MONETARY O. = delivery of the money
 DELIVERY OF THINGS = by delivery of the things
 PERSONAL UNDERTAKING = performance of P. U
 NOT DOING OF SOMETHING = refraining from
doing the act
PROOF OF PAYMENT = receipt
BURDEN OF PROOF = creditor
Art. 1234 – If the obligation has been substantially performed in
good faith, the obligor may recover as though there had been a
strict and complete fulfillment, less damages suffered by the
obligee.
Art.1235 – When the obligee accepts the performance, knowing
its incompleteness or irregularity, and without expressing any
protest or objection, the obligation is deemed fully complied
with.
Art. 1236 –The creditor is not bound to accept payment or
performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to the
contrary.
Whoever pays for another may demand from the debtor what he
has paid, except that if he paid without the knowledge or against
the will of the debtor, he can recover only insofar as the
payment has been beneficial to the debtor.
PAYMENT BY THIRD PERSON
The third person may pay:
 With the knowledge and consent of the debtor
 Without the debtor’s knowledge or against his will
(here the payor is not entitled to subrogation;
moreover, he is allowed only by beneficial
reimbursements)
Art. 1237 – Whoever pays on behalf of the debtor without the
knowledge or against the will of the latter, cannot compel the
creditor to subrogate him in his rights, such as those arising
from a mortgage, guaranty, or penalty.
SUBROGATION = act of putting somebody into the shoes of
the creditor, hence enabling the former to exercise all the rights
and actions that could have been exercised by the latter.
TO WHOM PAYMENT MUST BE MADE:
 To the person whose favor the obligation has been
constituted
 To the successor-in-interest
 To any person authorized to receive it
Art. 1241 – Payment to a person who is incapacitated to
administer his property shall be valid if he has kept the thing
delivered, or insofar as the payment has been beneficial to him.
Payment made to a third person shall also be valid insofar as
it has redounded to the benefit of the creditor. Such benefit to
the creditor need not be proved in the following cases:
1. If after the payment, the third person acquires the
creditor's rights;
2. If the creditor ratifies the payment to the third person;
3. If by the creditor's conduct, the debtor has been led to
believe that the third person had authority to receive
the payment.
Art. 1242 — Payment made in good faith to any person in
possession of the credit shall release the debtor.

SOME RIGHTS WHICH MAY BE EXECISED BY THE
PERSON SUBROGATED IN THE PLACE OF THE
CREDITOR
Rights arising from:
 Mortgage
 Guaranty
 Penalty or penal clause
SUBROGATION
 Recourse can be had
to the M, G or pledge
 The debt is
extinguished in one
sense, but a new
credtor which has he
same righs as the old
ones appears on the
scene
 There is something
more than a personal
action of recovery
Art. 1243 — Payment made to the creditor by the debtor after
the latter has been judicially ordered to retain the debt shall not
be valid.
PAYMENT MADE AFTER JUDICIAL ORDER TO
RETAIN
 The JO may have been prompted by an order of
attachment, injunction or garnishment
REIMBURSEMENT
GARNISHMENT= proceeding by which a debtor’s creditor is
 No recourse subjected to the payment of his own debt to another
INTERPLEADER = technical name of the action in which a
 The new creditor has certain person in possession of certain property wants claimants
different rights, so t is to litigate among themselves for the same.
as if there has deed INJUNCTION = a judicial process by virtue of which a person
been an is generally ordered to refrain from doing something.
extinguishment of PRELIMINARY INJUNCTION = takes place if the
obligation prohibition is during the pendency of certain proceedings
 There is only a Article 1244 – The debtor of a thing cannot compel the
personal action to creditor to receive a different one, although the latter may be
recover the amount of the same value as, or more valuable than that which is due.

Art.1238 – Payment made by a third person who does not
intend to be reimbursed by the debtor is deemed to be a
donation, which requires the debtor's consent. But the payment
is in any case valid as to the creditor who has accepted it.
REASON WHY DEBTOR HAS TO CONSENT: No one
should be compelled to accept the generosity of others.
Art. 1239—
Payment made by an Incapacitated person
GEN. RULE: not valid
If accepted: creditor cannot be compelled to accept it ; the
remedy of consignation will not be proper
Art. 1240—
In obligations to do or not to do, an act or forbearance cannot be
substituted by another act or forbearance against the obligee's
will.
Art. 1244 does not apply in case of:
 Facultative obligations
 There is another agreement resulting in either dation in
payment or novation
 Waiver
Art. 1245 –
DATION IN PAYMENT = mode of extinguishing an
obligation whereby the debtor alienates in favor of the creditor,
property for the satisfaction of monetary debt
 SYNONYMS: datio in solutum of payment only when they have been cashed, or when through
Adjudicacion en pago the fault of the creditor they have been impaired.

SALE DATION IN PAYMENT In the meantime, the action derived from the original obligation
1. No pre-existing 1. Pre-existing credit shall be held in the abeyance.
credit
2. Gives rise to O 2. Extinguishes O Art. 1250—In case an extraordinary inflation or deflation of the
3. CAUSE: 3. CAUSE: currency stipulated should supervene, the value of the currency
 price (seller)  Extinguishment of at the time of the establishment of the obligation shall be the
 object (buyer) debt (debtor) basis of payment, unless there is an agreement to the contrary.
 Acquisition of the
object offered in INFLATION = sharp sudden increase of money or credit or
credit (creditor) both without a corresponding increase in the business
4. greater freedom in 4. Less freedom transaction.
the determination DEFLATION = opposite of inflation
of the price
5. Price=ends the O 5. Object= completely or Art. 1251--
partially extinguishes Where payment must be made:
the O IF THERE IS A STIPULATION = place designated
NO STIPULATION:
CONDITIONS N WHICH A DATION IN PAYMENT  Determinante thing = place where the thing might be at
WOULD BE VALID the the time the obligation was constituted
 If the creditor consents  Generic = domicile of the debtor
 If the dation in payment will not prejudice the other
creditors Art. 1252—
 If the debtor is not judicially declared insolvent SPECIAL FORMS OF PAYMENT
1. Application or imputation of payments
Art. 1246— When the obligation consists in the delivery of an 2. Dation in payment
indeterminate or generic thing, whose quality and circumstances 3. Assignment in favor of creditors
have not been stated, the creditor cannot demand a thing of 4. Tender of payment and consignation
superior quality. Neither can the debtor deliver a thing of APPLICATION OF PAYMENT = designation of the debt to
inferior quality. The purpose of the obligation and other which should be applied a payment made by a debtor who owes
circumstances shall be taken into consideration. several debts in favor of the same creditor.
REQUISITES :
Art. 1247 – 1. Two or more debts
GEN. RULE : Debtor pays for extrajudicial expenses 2. Debts must be of the same kind
EXCEPTION: stipulation to the contrary 3. The debtors are owed by the same debtor in favor of
the same creditor
Art. 1248 – 4. All the debts must be due
G. R = performance should be complete 5. The payment is not enough to extinguish all the debts
EXC. = partial performance is allowed when; PREFERENTIAL RIGHT OF DEBTOR
a) There is stipulation The D is the one who has the right to select which of
b) Different prestations are subject to different conditions his debts will he pay
or terms EXCEPTIONS:
c) When a debt is in part liquidated and in part  Contrary agreement
unliquidated  The debtor cannot choose to pay part of the
d) A joint debtor pays his share or the creditor demands principal ahead of the interest
the same HOW APPLICATION OF PAYMENT IS MADE
e) A solidary debtor pays only the part demandable  D makes the designation
f) In case of compensation, when one debt s larger than  If not, the C makes it, by so stating in the receipt that
the other, t follows that a balance is left he issues
g) When a work is done by parts  By operation of law
***NO REVOCATION OF THE APPLICATION OF
PAYMENT CAN BE MADE
Art. 1249—The payment of debts in money shall be made ***APP. OF PAYMENT MUST BE MADE AT THE TIME
in the currency stipulated, and if it is not possible to deliver WHEN THE PAYMENT BY THE DEBTOR IS MADE, NOT
such currency, then in the currency which is legal tender in AFTERWARDS
the Philippines. APP. OF PAYMENTS CANNOT BE AVAILED OF IN
THE CASE OF:
The delivery of promissory notes payable to order, or bills of  Partner-creditor
exchange or other mercantile documents shall produce the effect  The right cannot be invoked by a surety or a solidary
guarantor

Art. 1253— INTEREST MUST BE PAID FIRST
WHAT INTEREST IS SUPPOSED TO BE PAID:
 I by way of compensation
 I by way of damages due to default
Art. 1254—
RULES IN CASE NO APP.OF PAYMENT HAS BEEN
VOLUNTARLY MADE;
 Apply it to the most onerous
 If the debts are of the same nature and burden,
application shall be made proportionately
ONEROUS DEBTS:
1. Older ones in running accounts
2. Interest-bearing debts
3. Of two interest-bearing debts
4. Debts secured by mortgage or pledge
5. Debts with penalty clause
6. Advances for subsistence are more onerous than cash
advances
7. A debt where the debtor is in mora
8. Exclusive debt
Art. 1255—
CESSION OR ASSIGNMENT IN FAVOR OF THE
CREDITOR
 Process by which a debtor transfers all the properties
not subject to execution in favor of his creditors so that
the latter may sell them, and thus apply the proceeds to
their credits.
KINDS OF ASSIGNMENT;
 LEGAL
 VOLUNTARY
REQUISITES;
 More than 1 debt
 More than 1 creditor
 Complete or partial insolvency of the debtor
 Abandonment of all debtors property
 Acceptance or consent
EFFECT OF VA
 C do not become owners
 D is released up to the amount of the net proceeds of
the sale
 C will collect credits in the order of preference agreed
upon, or n default of the agreement
TENDER OF PAYMENT = act of offering the creditor what is
due him together with a demand that the creditor accept the
same
CONSIGNATION = act of depositing the thing due with the
court or judicial authorities whenever the creditor cannot accept
or refuses to accept payment
Art. 1256— If the creditor to whom tender of payment has
been made refuses without just cause to accept it, the debtor
shall be released from responsibility by the consignation of the
thing or sum due. Consignation alone shall produce the same
effect in the following cases:
(1) When the creditor is absent or unknown, or does not appear
at the place of payment;
(2) When he is incapacitated to receive the payment at the time
it is due;
(3) When, without just cause, he refuses to give a receipt;
(4) When two or more persons claim the same right to collect;
(5) When the title of the obligation has been lost. (1176a)
EFFECT OF TENDER W/O CONSIGNATION
o Debt is not extinguished. Consignation should always
follow
WHEN CONSIGNATION IS SUFFICIENT EVEN
WTHOUT A PROR TENDER
o When the creditor is absent or unknown or does not
appear
o When the C is incapacitated to receive payment
o When, without just cause, the creditor refuses to give a
receipt
o When 2 or more persons claim the same right to collect
o When the title of the obligation has been lost
o When the debtor had previously been notified by the
creditor that the latter would not accept any payment
Art. 1257—
REQUISITES OF CONSIGNATION
1. Existence of a valid debt
2. Valid prior tender
3. Prior notice of consignation
4. Actual consignation
5. Subsequent notice of consignaton
Art. 1258—Consignation shall be made by depositing the things
due at the disposal of judicial authority, before whom the tender
of payment shall be proved, in a proper case, and the
announcement of the consignation in other cases
Art. 1259— The expenses of consignation, when properly
made, shall be charged against the creditor.
Art. 1260—
EFFECTS IF CONSIGNATION HAS BEEN DULY MADE
o The debtor may ask the judge to order the cancellation
of the obligation.
o The running of interest is suspended.
RISK OF LOSS = creditor
EFFECTS OF IMPROPER CONSIGNATION
o Obligation remains
o The debtor will be in default
EFFECTS OF DISMISSAL OF THE CASE = none
WHEN DEBTOR MAY WITHDRAW THE THING OR
SUM CONSIGNED
o As a matter of right
1. Before the creditor has accepted the
consignation
2. OR before there is a judicial declaration that
the consignation has been properly made
o As a matter of privilege
1. When after consignation had been properly
made, the creditor authorizes the debtor to
withdraw the thing.
Art. 1261— If, the consignation having been made, the creditor
should authorize the debtor to withdraw the same, he shall lose
every preference which he may have over the thing. The co-
debtors, guarantors and sureties shall be released.
SECTION 2; Loss of the Thing Due
LOSS = impossibility of performance
WHEN THERE IS LOSS:
o When the object perishes
o When it goes out of commerce
o When it disappears in such a way that its existence is
unknown or it cannot be recovered.
IMPOSSIBILITY OF PERFORMANCE INCLUDES;
o Physical impossibility
o Legal imp. – directly or indirectly
o Moral Imp.
Art. 1262—
TWO KINDS OF OBLGATIONS TO GIVE
 To give a generic thing
 OR to give a specific thing
EFFECT OF LOSS ON AN OBLGATION TO DELIVER A
SPECIFIC THING
GEN. RULE : Obligation is extinguished
EXCEPTIONS:
 Debtor is at fault
 The debtor is made liable for a FE because of
the provisions of law; of contractual
stipulation or the nature of the obligation
requires the assumption of risk on the part of
the debtor.
INSTANCES WHEN THE LAW REQUIRES LIABILITY
IN THE CASE OF FE.
 Debtor is in default
 The debtor has promised to delve the same thing to
two or more persons who do not have the same interest
 The obligation arises from a crime
 The borrower of an object has lent the thing to another
who is not a member of his own household
 The thing has been delivered with appraisal of the
value, unless there is a stipulation
 The payee in solutio indebiti is in bad faith
Art.1263— In an obligation to deliver a generic thing, the loss
or destruction of anything of the same kind does not extinguish
the obligation.
EXCEPTIONS:
 If the thing is delimited
 If the generic thing has already been segregated or set
aside
Article 1264—The courts shall determine whether, under the
circumstances, the partial loss of the object of the obligation is
so important as to extinguish the obligation.
Art. 1265— Whenever the thing is lost in the possession of the
debtor, it shall be presumed that the loss was due to his fault,
unless there is proof to the contrary, and without prejudice to the
provisions of article 1165. This presumption does not apply in
case of earthquake, flood, storm, or other natural calamity
Art. 1266— The debtor in obligations to do shall also be
released when the prestation becomes legally or physically
impossible without the fault of the obligor.
Art. 1267—When the service has become so difficult as to be
manifestly beyond the contemplation of the parties, the obligor
may also be released therefrom, in whole or in part.
Art. 1268—When the debt of a thing certain and determinate
proceeds from a criminal offense, the debtor shall not be
exempted from the payment of its price, whatever may be the
cause for the loss, unless the thing having been offered by him
to the person who should receive it, the latter refused without
justification to accept it.
Art. 1269--The obligation having been extinguished by the loss
of the thing, the creditor shall have all the rights of action which
the debtor may have against third persons by reason of the loss.
SECTION 3 Condonation or Remission of the Debt
Art. 1270— Condonation or remission is essentially
gratuitous, and requires the acceptance by the obligor. It
may be made expressly or impliedly.
One and the other kind shall be subject to the rules which
govern inofficious donations. Express condonation shall,
furthermore, comply with the forms of donation.
REQUISITES FOR REMISSION:
1. Agreement
2. Parties must be capacitated and must consent
3. Subject matter
4. Cause or consideration must be liberality
5. Obligation remitted must have been demandable
6. The remission must not be inofficious
7. Formalities of a donation are required in case of an
express remission
CLASSES:
1. As to effects = total; partial
2. As to its date of effectivity = Inter vivos (during life) ;
mortis causa (after death)
3. As to its form = Implied or tacit; express or formal
Art. 1271—The delivery of a private document evidencing
a credit, made voluntarily by the creditor to the debtor,
implies the renunciation of the action which the former had
against the latter.
If in order to nullify this waiver it should be claimed to be
inofficious, 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.
Art.1272—Whenever the private document in which the debt
appears is found in the possession of the debtor, it shall be
presumed that the creditor delivered it voluntarily, unless the
contrary is proved.
Art.1273—The renunciation of the principal debt shall
extinguish the accessory obligations; but the waiver of the latter
shall leave the former in force
Article 1274. It is presumed that 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.
Art. 1275— The obligation is extinguished from the time the
characters of creditor and debtor are merged in the same person.
MERGER OR CONFUSION = meeting in one person of the
qualities of creditor and debtor with respect to the same
obligation.
REQUISITES:
1. It should take place between the principal debtor and
creditor.
2. the merger must be clear and definite
3. the very obligation involved must be the same or
identical
EFFECT OF TRANSFER OF RIGHTS:
Mere transfer to 3rd person of rights belonging to both the debtor
and the debtor and the creditor bu not the credit as against the
debt does not result in merger.
EXTINCTION OF REAL RIGHTS:
Real rights such as usufruct over property, may be extinguished
by merger when the naked owner himself becomes usufructuary.
REVOCABILITY OF MERGER:
If the reason for the obligation ceases, the obligation is revived.
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.
EX: A owes 700000k guaranteed by C. B assigns his credit to
X. X assigns the credit to Y. Y assigns the credit to A. A’s
obligation is extinguished and C is released from his obligation
as guarantor.
Article 1277. Confusion does not extinguish a joint obligation
except as regards the share corresponding to the creditor or
debtor in whom the two characters concur.
EX: A and B jointly owe C 1m. If C assigns the entire credit to
A, A’s share is extinguished, but V’s share remains. In other
words, B would still owe A the sum of 500k. In a joint obligatin,
the debts are distinct and separate from each other.
Art. 1278—Compensation shall take place when two persons,
in their own right, are creditors and debtors of each other.
COMPENSATION= sort of balancing between two
obligations; extinguishment of the concurrent amount of the
obligations of those persons who are reciprocally debtors and
creditors of each other.
COMPENSATION MERGER PAYMENT
*partial *Complete an d whether the plural cases arose out of the same or different
extinguishment is indivisible
allowed
*takes place by *involves delivery
operation of law
*there must be 2 *One person in
persons who are whom is merged
mutually creditor the qualities of C
and debtor to each and D
other
* #of O = 2 * #of O = 1
COMPENSATION COUNTERCLAIM/ SET-
OFF
*takes place by operation of *must be pleaded to be
law effectual
* *works as a sort of judicial
compensation, provided that
the Rules of Court are
observed.
KINDS OF COMPENSATION
1. Accdng to effects = TOTAL; PARTIAL
2. Origin = LEGAL; VOLUNTARY
3. Judicial = MUST BE PLEADED
4. Facultative = one of the parties has the choice of
claiming the compensation of opposing it
Article 1279. In order that compensation may be proper, it is
necessary:
(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;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and communicated in
due time to the debtor. (1196)
Article 1280. Notwithstanding the provisions of the preceding
article, the guarantor may set up compensation as regards what
the creditor may owe the principal debtor.
REASON: Extinguishment of principal obligatin extinguishes
the guaranty.
Article 1281. Compensation may be total or partial. When the
two debts are of the same amount, there is a total compensation
Article 1282. The parties may agree upon the compensation of
debts which are not yet due.
Article 1283. If one of the parties to a suit over an obligation
has a claim for damages against the other, the former may set it
off by proving his right to said damages and the amount thereof.
JURISDICTION OF THE COURT RE; THE VALUE OF
THE DEMAND
GEN. RULE = the jurisdiction of the court depends upin the
totality of the demand in all the causes of action., irrespective of
transactions.
EXCEPTIONS:
 When the claim joined under the same complaint are
separately owed by, or due to, different parties
 Where not all the causes of action joined are demands
or claims of money
Art. 1284. When one or both debts are rescissible or voidable,
they may be compensated against each other before they are
judicially rescinded or avoided.
Art. 1285 –
Assignment may be made with the consent of the debtor =
compensation cannot be set up because there has been consent
and therefore a waiver.
EXCEPTION: if the right to the compensation is reserved
Assignment made with the knowledge but without the
consent or against the will of the debtor = compensation can
be set up regarding debts previous to the cession or assignment.
This refers to debts maturing before the assignment,that is
before the notice. Legal compensation has taken place here.
Assignment made without the knowledge of the debtor = D
can set up the compensation as a defense for all the debts
maturing prior to his knowledge of the assignment whether
debts matured before or after the assignment.
Art. 1286—Compensation takes place by operation of law, even
though the debts may be payable at different places, but there
shall be an indemnity for expenses of exchange or transportation
to the place of payment.
 WHOEVER CLAIMS COMPENSATION MUST
PAY FOR THE EXCHANGE RATE OF THE
FOREIGN CURRENCY.
FOREIGN EXCHANGE = conversion of an amount of money
or currency of one country in to an equivalent amount of money
or currency of another
Art. 1287—
Legal compensation cannot take place in the ff:
 When one debt arises from a depositum
PURPOSE: prevent breach of trust
 When one debt arises from a depositary
**dito yung depositary e obliged na itago yung pera ng
safely tpos kapag kukunin na ng may-ari ibabalik
dapat ng buo
 When one debt arises from the obligations of a bailee
in commodatum
 When one debt arises because of a claim for support
due to a gratuitous title
Art. 1288— No compensation if debt arises from a crime
Art. 1289— If a person should have against him several debts
which are susceptible of compensation, the rules on the
application of payments shall apply to the order of the
compensation.
Art. 1290— When all the requisites mentioned in article 1279
are present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even though
the creditors and debtors are not aware of the compensation.
AUTOMATIC COMPENSATION IF ALL REQ. ARE
PRESENT:
 Legal Compensation takes place automatically unless
there has been valid waiver
 Compensation which extinguishes principal obligations
also extinguishes accessory obligations
 To the concurrent amount means that if one debt is
larger than the other, the balance subsists as debt
Art. 1291— Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor
KINDS OF NOVATION
*Object or Purpose = real or objective (changing the object or
the principal conditions of the obligation
*Personal or Subjective = change of persons
--Substituting the person of the debtor ( expromision or
delegacion)
--subrogating a third person in the rights of the creditor (change
of creditor may be by agreement = legal subrogation)
*Mixed
*Form = express or implied
*Extent to its extent or effects = total or extinctive ; partial or
modificatory (imperfect N)
REQUISITES OF NOVATION
o valid old obligation
o intent to extinguish or to modify the old obligation by
substantial difference
o capacity and consent of all the parties
Art. 1292— In order that an obligation may be extinguished by
another which substitute the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.
**NOVATION IS NOT PRESUMED, IT HAS TO HAVE A
CLEAR PROOF.
NO NOVATION IN THE FF:
o slight alterations or modifications
o when the new contract contains supplementary
agreement
o additional interest is agreed upon
o additional security is given
o final judgment in a contract was entered into
o guarantor enters into an agreement with the creditor
o creditor refrains from suing the debtor
o place of payment was changed
o public instrument was executed to confirm a valid
contract
o payment of the purchase price for a thing was made
thru a promissory note
Art. 1293— Novation which consists in substituting a new
debtor in the place of the original one, may be made even
without the knowledge or against the will of the latter, but not
without the consent of the creditor. Payment by the new debtor
gives him the rights mentioned in articles 1236 and 123
Substitution of the debtor may be in the form of:
o EXPROMISSION = initiative comes from 3rd person
= old debtor is released from his
obligation
o DELEGACION = initiative comes from debtor
  Method of novation caused by the
replacement of the old debtor by a new debtor
who has proposed him to the creditor, and
which replacement has been agreed
 PARTIES :
DELEGANTE = orig debtor
DELEGATORIO = creditor
DELEGADO = new creditor
Art. 1294—If the substitution is without the knowledge or
against the will of the debtor, the new debtor's insolvency or
nonfulfillment of the obligations shall not give rise to any
liability on the part of the original debtor.
**Kapag na-bankrupt si new debtor, walang pakialam si old D.
No liability si Old D.
Art. 1295— The insolvency of the new debtor, who has been
proposed by the original debtor and accepted by the creditor,
shall not revive the action of the latter against the original
obligor, except when said insolvency was already existing and
of public knowledge, or known to the debtor, when the
delegated his debt.
This article does not apply if there was no extinctive novation:
 When the 3rd person was only an agent, messenger or
employee of the debtoe
 3rd person acted as a guarantor
 New debtor merely agreed to make himself solidarily
liable for the obligation
 New debtor merely agreed to make himself jointly or
partly responsible for the obligation
Art. 1296—When the principal obligation is extinguished in the
consequence of a novation = accessory obligation may subsist
**If the modified O is more onerous, they are liable only for the
original obligation
**Modified O is less onerous = the guarantors and sureties are
still responsible
Art. 1297—When the new O is VOID = original one shall
subsists UNLESS the parties intended to make the former
relation be extinguished in any event.
**Kapag yung bagong O eh may condition tapos din na-fulfill,
yung old obligation eh magsa-subsist
Art. 1298—Novation is void if the orig O is void except when
annulment may be claimed only by the debtor or when a
ratification validates acts which are voidable
EFFECTS OF VIODABLE OBLIGATION OF
NOVATION BY EXPROMISSION
 Debtor is released from his obligation
 When the new D after payment sues the old debtor for
beneficial reimbursement, the old debtor can set up
defenses that he could set up against the creditor
Art. 1299— If the old O is subject to a suspensive or resolutory
condition = yung bagong obligation dapat eh subject din dun
UNLESS there is a CONTRARY STIPULATION.
Art. 1300—Subrogation of a 3rd person in the rights of the
creditor is either legal or conventional. Yung pagiging
conventional is not presumes, dapat it is clearly established para
mag-take effect.
SUBROGATION = transfer to a 3rd person of all the rights
appertaining to the creditor, including the rights to proceed
againt guarantor or possessor of a mortgage
KINDS:
**Cause or Origin = Conventional or Voluntary (agreement
and consent of the orig parties + creditor) ; Legal
**Extent = Total ; Partial
Art. 1301
CONVENTIONAL SUBROGATION = requires the consent
of the orig parties and of the 3 rd person
Art. 1302— It is presumed that there is legal subrogation:
(1) When a creditor pays another creditor who is
preferred, even without the debtor's knowledge;
(2) When a third person, not interested in the
obligation, pays with the express or tacit approval of the debtor;
(3) When, even without the knowledge of the debtor, a
person interested in the fulfillment of the obligation pays,
without prejudice to the effects of confusion as to the latter's
share.
Art. 1303— Subrogation transfers to the persons subrogated the
credit with all the rights thereto appertaining, either against the
debtor or against third person, be they guarantors or possessors
of mortgages, subject to stipulation in a conventional
subrogation.
EX: D owes C 1M. G is the Guarantor. A stanges, S paid C the
1M with the consent of D and C. S is now subrogates in the
place of C. If D cannot pay the 1M, S proceed against G.
Art. 1304— A creditor, to whom partial payment has been
made, may exercise his right for the remainder, and he shall be
preferred to the person who has been subrogated in his place in
virtue of the partial payment of the same credit.
**In here, there are two creditors:
1. OLD = remains as a creditor to balance
2. NEW = creditor to the extent what he has paid the
creditor.
3.
Art. 1305—A contract is a meeting of minds between two
persons whereby one binds himself, with respect to the other, to
give something or to render some service.
ELEMENTS:
*ESSENTIAL = consent; subject matter; cause or consideration
( Others consider form and delivery as E also)
*NATURAL = those which are presumes to exists; examples eh
yung implied warranty sa CoS
*ACCIDENTAL = stipulations
CLASSIFICATION
*FORMATION = consensual ; real (delivery); formal
*CAUSE= onerous; gratuitous or lucrative ; remunerative
(prestation is given as a benefit for the service rendered)
*IMPORTANCE = principal (stands alone) ; accessory
(depends for the existence of others) ; preparatory (parties do
not consider the contract as an end itself but as a means thru
which future transactin or contracts may be made)
*PARTIES OBLIGATED = unilateral (one party has an O ex:
commodatum) ; bilateral (both)
*NAME OR DESIGNATION = nominate (special name);
innominate
*RISK OF FULFILLMENT = commutative (parties
contemplate a real fulfillment EX: SALE) ; aleatory (fulfillment
is dependent upon chance EX: INSURANCE CONTRACT)
*TIME OF PERFORMANCE = executed ; executory
*SUBJECT MATTER = things ; rights or credits; services
*REGARDED BY LAW = ordinary ; institutional
*EVIDENCE = oral; written
STAGES:
1.PREPARATION = negotiations
2. PERFECTION = may agreement na; consent
3. CONSUMMATION = terms are performed
Art. 1306— The contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
Art. 1307—
Innominate Contracts
 DO UT DES = I give that you may give
 DO UT FACIAS = I give that you may do
 FACIO UT DES = I do that you may give
 FACIO UT FACIAS = I do that you may do
Art. 1308— The contract must bind both contracting parties; its
validity or compliance cannot be left to the will of one of them.
Article 1309. The determination of the performance may be
left to a third person, whose decision shall not be binding
until it has been made known to both contracting parties. (n)
Article 1310. The determination shall not be obligatory if it is
evidently inequitable. In such case, the courts shall decide what
is equitable under the circumstances.
Art. 1311 – PRINCIPLE OF RELATIVITY = Contracts are
generally effective between the parties, their assigns and their
heirs.
EXCEPTIONS:
 Obligations are not transmissible by their nature,
stipulations or by provision by law
 Stipulations in favor of a 3rd party
 When a 3rd person induces another to violate his
contract
 When a 3rd person may be adversely affected by a
contract
 When the law authorizes the creditor to sue on a
contract
Art. 1312 – Contracts creating real rights = subject to the
provisions of Mortgage law and land registration law
Art. 1313— Creditors are protected from contracts intended to
defraud them.
Art. 1314—A 3rd person who induces another to violate his
contract shall be liable for damages to the other party.
Art. 1315—Consensuality of Contracts ( perfection by mere
consent)
CONSEQUENCES: both are bound to fulfill the O as
stipulated as well as to its consequences
Art. 1316—Real contracts require consent, subject matter,
cause or consideration and delivery.
REAL CONTRACTS are referred to as DEPOSIT, PLEDGE
OR COMMODATUM
CONTRACT OF CARRIAGE: consensual ; real contract, for
not until the carrier is actually used can we consider the contract
perfected.
Art. 1317—Unathorized person contracted in behalf of another
= UNENFORCEABLE
REQUISITE FOR A PERSON TO CONTRACT IN THE
NAME OF ANOTHER:
 He must be duly authorized
 OR he must have by law a righ to represent him
 OR the contract must be subsequently ratified
EFFECTS OF RATIFICATIUON: cleanses the contract from all
its defects from the moment the contract was entered int.
Art. 1318—REQUISITES OF A CONTRACT
1. Consent of the contracting parties
2. Object certain which is the subject matter of the
contract
3. Cause of the obligation is established
Additional Requisites for a real contract (delivery); solemn or
formal contracts (compliance with the formalities required by
law)
CONSENT presupposes legal capacity.
NO CONSENT = in a case of a joke (no contract)
ABSOLUTELY SIMULATED CONTRACT = inexistent;
void; one where the parties never intended to be bound
Art. 1319—
CONSENT = is manifested by the meeting of the offer and
acceptance upon the thing and the cause which are to constitute
the contract. Offer must be CERTAIN and ABSOLUTE.
ACCEPTANCE made by LETTER OR TELEGRAM does not
bind the offeror except from the time it came to his knowledge
REQUISITES:
 Two or more parties
 Parties must be capacitated or capable
 No vitiation of consent
 No conflict
 Intent must be properly declared
REQUISITES FOR THE MEETING OF THE MINDS:
 Offer must be certain
 AND acceptance must be unqualified and absolute
Art. 1320—Acceptance may be express or implied
Art. 1321—Things that may be foxed by the Offerer: TIME, Art. 1330—Contract where consent is given thru mistake, fraud,
PLACE, and the MANNER OFACCEPTANCE intimidation, undue influence or fraud is voidable. (VITIATED
OR VICES OF CONSENT)
CONTRACT TO PURCHASE which does not give specific ** A voidable contract is binding and valid UNLESS annulled
description of the objects to be purchased == MERE by a proper action in court
PRELIMINARY AGREEMENT
Art. 1331—
Art. 1322— An offer made thru an agent is accepted from the *MISTAKE OR ERROR = false belief about something
time acceptance is communicated to him. REQUISITES for mistake to vitiate consent:
1. object
Art. 1323—An offer becomes ineffective upon the death, civil 2. conditions which principally moved or induced one of
interdiction, insanity, or insolvency of either party before the parties
acceptance is conveyed. 3. error in personae
OTHER INSTANCES WHEN THE OFFER BECOMES 4. error must not be excusable (not caused by negligence,
INEFFECTIVE: excusable kapag caused ng negligence)
 Offeree expressly or impliedly rejects the offer 5. error must be a mistake of fact
 Offer is accepted with a condition
 Before acceptance is communicated, the subject matter Art. 1332— When one of the parties is unable to read, or if the
has become illegal or impossible contract is in a language not understood by him, and mistake or
 When the offer is revoke in due time fraud is alleged, the person enforcing the contract must show
that the terms thereof have been fully explained to the former.
Art. 1324— When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn at any time before Art. 1333—
acceptance by communicating such withdrawal, except when *Knowledge of the doubt or risk does not vitiate consent
the option is founded upon a consideration, as something paid or REASON= assumes that the party was willing to take the risk;
promised. aleatory contracts
OPTION = contract granting a person the privilege to buy or
not to buy certain objects at any time within the agreed period at Art. 1334— Mutual error as to legal effect of an agreement
a fixed price. when the real purpose of the parties is frustrated, may vitiate
consent
Art. 1325—Business advertisements of things for sale are not REQUISITES FOR MUTUAL ERROR TO VITIATE
definite offers; mere invitations to make an offer CONSENT:
 mutual error
Art. 1326—Advertisement for Bidders = simply invitations  error must refer to the legal effect in the agreement
to make proposals, and the advertiser is not bound to accept the  real purpose was frustrated
highest or lowed bidder
Art. 1335—
Art. 1327—the ff. cannot give consent to a contract:  Violence refers to physical coercion, intimidation, to
1. Unemancipated Minor (minors who have not been moral coercion
emancipated by marriage, attaintment of the age of REQUISITES: employment of serious or
majority or by parental authority) irresistible force; it must have been the reason
2. Insane or demented person and deaf-mutes who do why the contract was entered into
not know how to write  Intimidation
3. REQUISITES: reasonable and well-grounded
Art. 1328— fear; imminent and grave evil; upon his
LUCID INTERVALS= valid kapag matino yung insane at the person, property or property of his relatives;
time he entered in a contract. reason why the contract was entered into;
STATE OF DRUNKENNESS AND HYPNORTIC SALE = threat must be unjust
voidable
Art.1336—undue influence
ART. 1329—incapacity in 1327 is subject to the modifications REQUISITES:
determined by law and is understood to be without prejudice to  Improper advantage
special disqualification established in the laws  Power over the will of another
 Deprivation of the latter’s will of a reasonable freedom
INCOMPETENTS UNDER THE RULES OF COURT of choice
 under civil interdiction CIRCUMSTANCES TO BE CONSIDERED:
 hospitalized lepers  Confidentiality
 prodigals  Mental weakness
 deaf and dumb who are unable to read and write  Ignorance
 unsound mind even though they have lucid interval  Financial distress
by reason of age, disease, weak mind and other similar
causes
Art. 1337—fraud = insidious words or machinations of one of
the contracting parties; other is induced
KINDS:
Fraud In celebration
DOLO CAUSANTE (CASUAL FRAUD) =
 if not for fraud, other party will not consent
 use of insidious words and machinations
 REQUISITES:
a) Fraud must be material and serious
b) F must be employed by only 1 of the
contracting parties
c) Deliberate internt to deceive or induce
d) Other party relied on the untrue instrument
DOLO INCIDENTE (INCIDENTAL FRAUD)
 EFFECT: contract is valid; action for damages
Fraud in performance
Art. 1339—Failure to disclose facts= FRAUD
Art. 1340—usual exaggeration in trade = not fraudulent (caveat
emptor)
Art. 1341— Mere expression of opinion = does not signify
fraud unless made by an expert and other party has relied on the
former’s special knowledge
Art. 1342—Misrepresentation by a 3rd person = does not vitiate
consent, unless such misrepresentation has created substantial
mistake and the same is mutual
Art. 1343—Misrepresentation made in GF = not fraudulent
Art. 1344—
REQUISITES FOR FRAUD TO VITIATE CONSENT
1. Fraud must be serious
2. The parties must not be in pari delicto
Art. 1345—
SIMULATION OF CONTRACT: process of intentionally
deceiving others by producing the appearance of a contract tha
really does not exist or which is different from the true
agreement
REQUISITES:
1. Outward declaration of will different from the will of
the parties
2. False appearance must have been intended by mutual
agreement
3. Purpose is to deceive third person
Art. 1346—
Simulated or Fictitious Contracts = VOID
KINDS:
*ABSOLUTELY SIMULATED FICTITOUS
CONTRACTS
 Simulados
 Ex: joke
*RELATIVELY SIMULATED DISGUISED CONTRACTS
 Parties conceal their true agreement
 EFFECT: the parties are bound to the real agreement
except if it a) prejudice third persons b) or if the
purpose is contrary to law, morals, good customs,
public order or public policy
Art. 1347—Object of Contracts
 Within the commerce of man
 Transmissible
 Not contrary to law, morals, good customs, public
order or public policy
 Not impossible
 Determinate
Art. 1348 – IMPOSSIBLE THINGS OR SERVICES = cannot
be the object of contracts
IMPOSSIBILITY may be:
1. Because of the nature of the transaction or law
2. Absolute
3. Relative (subsequently impossible)
Art. 1349—Object must be determinate or determinable
(without the need of a new agreement); If not, it is VOID
Art. 1350— In onerous contracts the cause is understood to be,
for each contracting party, the prestation or promise of a thing
or service by the other; in remuneratory ones, the service or
benefit which is remunerated; and in contracts of pure
beneficence, the mere liberality of the benefactor.
CAUSE = essential and impelling reason why a party assumes
an obligation
CLASSIFICATION:
1. Onerous – the cause is, for each contracting party, the
prestation or promise of a thing or service by the other
ex: sale
2. Remunatory— the past service or benefit which by
itself is recoverable debt
3. Gratuitous— contracts of pure beneficience
ex: donation
Art. 1351— The particular motives of the parties in entering
into a contract are different from the cause thereof.
**ILLEGAL CAUSE = void
**ILLEGAL MOTIVE = does not necessarily rendered the
transaction void
Art. 1352—
REQUISITES OF CAUSE:
 Present at the time the contract was entered into
 It must be true
 It must be lawful
NO EXISTING CAUSE = contract is void
TRUE CAUSE = If the cause is false, the contract is not valid
unless some other cause which is lawful really exists
EFFECTS If CAUSE IS ILLEGAL:
 If one party is innocent he cannot be compelled to
perform his obligation and he may recover what he has
already given
 If both are guilty, neither can sue
Art. 1353--Statement of False Cause = void
Art. 1354—cause is not stated = it is presumed that it exists and
is lawful
TAKE NOTE OF STATUTES OF FRAUD
Art. 1355— Lesion or inadequacy of cause shall not invalidate Art. 1363— When one party was mistaken and the other knew
a contract unless there has been fraud, mistake or undue or believed that the instrument did not state their real agreement,
influence but concealed that fact from the former, the instrument may be
LESION = inadequacy of cause like an insufficient price for the reformed.
thing sold
Art. 1364—
The ff. contracts may be rescinded: Failure to convey the true intent:
 Those which are entered into by guardians whenever **The court may order reformation because of IGNORANCE;
the wards they represent suffer lesion by more thatn ¼ LACK OF SKILL; BAD FAITH OF ( the drafter or the clerk or
of the value the typist)
 Those agreed upon by the representation of the
absentees Art. 1365— If two parties agree upon the mortgage or pledge of
 Partition among co-heirs real or personal property, but the instrument states that the
property is sold absolutely or with a right of repurchase,
Art. 1356—Contracts shall be obligatory in whatever form they reformation of the instrument is proper.
may have entered into, provided all the essential requisites are
Art.1366. There shall be no reformation in the following cases:
present
 Simple donations inter vivos wherein no condition is
imposed;
WHEN FORM IS IMPORTANT:
 Wills;
*FOR VALIDITY = solemn or formal contracts (donation of
 Real agreement is void
real property or personal property; stipulations of interest in
loans; transfer of large cattle; sale of land thru an agent;
Art. 1367— When one of the parties has brought an action to
antiochresis—principal loan and the interest must be in writing)
enforce the instrument, he cannot subsequently ask for its
*ENFORCEABILITY= statute of frauds
reformation.
*CONVENIENCE = Art. 1385
Art. 1368— Reformation may be ordered at the instance of
Art. 1357— if the law requires such form = parties shall be
either party or his successors in interest, if the mistake was
compelled to comply
mutual; otherwise, upon petition of the injured party, or his heirs
and assigns.
Art.1358—The ff. must appear in a public instrument:
1. Acts and contracts which have for their object the
Article 1369. The procedure for the reformation of instrument
creation, transmission, modification or extinguishment
shall be governed by rules of court to be promulgated by the
of real rights
Supreme Court.
2. Cession, repudiation or renunciation of hereditary
rights of the CPG
3. Power to administer property
4. Cession of actions or rights

Art. 1359—
REFORMATION = remedy in equity by means of which a
written instrument is made or construed so as to express or
conform the real intention of the parties when some error or
mistake has been committed
**REQUISITES:
 Meeting of minds
 True intention is not expressed in the
instrument
 Clear and convincing proof
 Brought within the proper prescriptive period
 Do not refer to simple unconditional donation
inter vivos

Art. 1360--Principles of the general law on reformation prevails

over the NCC

Art. 1361-- Mutual mistake of the parties caused the failure of

the instrument to disclose the real agreement = instrument ,may
be reformed

Art. 1362—UNILATERAL MISTAKE = the mistake is

unilateral but the other party acted fraudulently or inequitably;
ask for reformation