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Contracts that must appear in a public Instances when there can be no reformation:
document (for convenience. Oral agreement is
1. Simple unconditional donations inter vivos; 2.
still valid and binding between parties, not not
Wills; 3. When the agreement is void 4. When
against 3rd persons until registered. Formal
one of the parties has brought an action to
req. benefit third parties)
enforce the instrument, no subsequent
1. Acts and contracts which have for their reformation can be asked. (on basis of estoppel,
object the creation, transmission, waiver or ratification)
modification or extinguishment of real
Necessary to justify reformation of written
rights over immovable property; sales
instruments on ground of mistake
of real property or of an interest therein
are governed by Articles 1403 (SoF), No. 1. Mistake should be of fact
2, and 1405; 2. Proved by clear and convincing
2. The cession, repudiation or evidence
renunciation of hereditary rights or of 3. Common to both parties
4. Must cause failure to express true 8. The interpretation of obscure words or
intentions stipulations in a contract shall not favor
the party who caused the obscurity.
V. Interpretation of Contracts
9. When it is absolutely impossible to
Rules on Interpretation of Contracts settle doubts by the rules established in
the preceding articles, and the doubts
1. If the terms of a contract are clear and refer to incidental circumstances of a
leave no doubt upon the intention of gratuitous contract, the least
the contracting parties, the literal transmission of rights and interests shall
meaning of its stipulations shall control. prevail. If the contract is onerous, the
If the words appear to be contrary to doubt shall be settled in favor of the
the evident intention of the parties, the greatest reciprocity of interests. If the
latter shall prevail over the former. doubts are cast upon the principal
2. In order to judge the intention of the object of the contract in such a way that
contracting parties, their it cannot be known what may have
contemporaneous and subsequent acts been the intention or will of the parties,
shall be principally considered. the contract shall be null and void.
3. However general the terms of a 10. The principles of interpretation stated
contract may be, they shall NOT be in Rule 130 of the Rules of Court shall
understood to comprehend things that likewise be observed in the construction
are distinct and cases that are different of contracts.
from those upon which the parties
intended to agree. VI. REFER TO NOTES p129-152
4. If some stipulation of any contract
Defective Contracts
should admit of several meanings, it
shall be understood as bearing that 1. Void
import which is most adequate to 2. Voidable
render it effectual. 3. Rescissible
5. The various stipulations of a contract 4. Unenforceable
shall be interpreted together,
Compare Void, Voidable, Rescissible and
attributing to the doubtful ones that
Unenforceable Contract
sense which may result from all of them
taken jointly. 1. Cause of defect
6. Words which may have different 2. Legal effect
significations shall be understood in 3. Presciption
that which is most in keeping with the 4. Cure by prescription
nature and object of the contract. (if 5. Ratification
can't be determined, use primary and 6. Who can assail
general acceptation) 7. Method of assailment
7. The usage or custom of the place shall
be borne in mind in the interpretation What contracts are rescissible
of the ambiguities of a contract, and 1. those entered into by guardians where
shall fill the omission of stipulations the ward suffers lesion of more than ¼
which are ordinarily established.
of the value of the things which are 3. Sale upon credit by an insolvent debtor;
objects thereof; 4. Evidence of indebtedness or complete
2. those agreed upon in representation of insolvency
absentees, if the latter suffer lesion by 5. Transfer of all his property by a debtor
more than ¼ of the value of the things when he is financially embarrassed or
which are subject thereof; insolvent;
3. those undertaken in fraud of creditors 6. Transfer made between father & son,
when the latter cannot in any manner where there is present any of the above
claim what are due them; circumstances
4. those which refer to things under 7. Failure of the vendee to take exclusive
litigation if they have been entered into possession of all the property
by the defendant without the
Rescission in Article 1191
knowledge and approval of the litigants
and the court; 1. It is a principal action retaliatory in
5. all other contracts especially declared character.
by law to be subject to rescission; and 2. The only ground is non-performance of
6. payments made in a state of one’s obligation/s or what is incumbent
insolvency on account of obligations not upon him.
yet enforceable 3. It applies only to reciprocal obligation
4. Only a party to the contract may
Requisites of Rescission
demand fulfillment or seek the
1. the contract must be rescissible rescission of the contract.
2. the party asking for rescission must 5. Court may fix a period or grant
have no other legal meansb to obtain extension of time for the fulfillment of
reparation for the damages suffered by the obligation.
him 6. Its purpose is to cancel the contract.
3. the person demanding rescission must
Rescission Proper in Article 1381
be able to return whatever he may be
obliged to restore if rescission is 1. It is a subsidiary remedy.
granted 2. There are 5 grounds to rescind. Non-
4. the things w/c are the object ofthe performance by the other party is not
contract must not have passed legally important.
to the possession of a 3rd person acting 3. It applies to both unilateral and
in good faith reciprocal obligations.
5. the action for rescission must be 4. Even a 3rd person who is prejudiced by
brought w/in the prescriptive period of the contract may demand the rescission
4 years of the contract.
5. Court cannot grant extension of time
Badges of Fraud
for fulfillment of the obligation.
1. Consideration of the conveyance is 6. Its purpose is to seek reparation for the
inadequate or fictitious; damage or injury caused, thus allowing
2. Transfer was made by a debtor after a partial rescission of the contract.
suit has been begun and while it is
What are voidable contracts
pending against him;
1. Those where one of the parties is 1. Agreements not to be performed within
incapable of giving consent to a one year from the making thereof;
contract 2. Special promise to answer for the debt,
2. Those where the consent is vitiated by default or miscarriage of another;
mistake, violence, intimidation, undue NOTE: This does not refer to the original
influence or fraud or independent promise of the debtor
to his own creditor. It refers rather to a
Causes of extinction of action to annul
collateral promise.
1. Prescription 3. Agreement in consideration of marriage
2. Ratification other than a mutual promise to marry;
3. By loss of the thing which is the object 4. Agreement for the sale of goods, etc. at
of the contract through fraud or fault of a price not less than P500.00;
the person who is entitled to annul the 5. Contracts of lease for a period longer
contract. than one year;
6. Agreements for the sale of real property
Requisites to avoid Presciption or interest therein; and
• the action must be commenced within 4 7. Representation as to the credit of a
years from: a. the time the incapacity third person.
ends; b. the time the violence, Ratification of contracts in violation of the
intimidation or undue influence ends; Statute of Frauds
or c. the time the mistake or fraud is
discovered. 1. Failure to object to the presentation of
oral evidence to prove such contracts
Requisites of Ratification to extinct action for 2. Acceptance of benefits under these
annulment contracts
1. there must be knowledge of the reason What contracts are void
which renders the contract voidable
2. such reason must have ceased and 1. Those whose cause, object or purpose
3. the injured party must have executed is contrary to law, morals good
an act which expressly or impliedly customs, public order or public policy;
conveys an intention to waive his right 2. Those whose object is outside the
commerce of men;
What contracts are unenforceable 3. Those which contemplate an impossible
1. those entered into in the name of service;
another by one without or acting in 4. Those where the intention of the
excess of authority; parties relative to the principal object of
2. those where both parties are incapable the contract cannot be ascertained; and
of giving consent; and 5. Those expressly prohibited or declared
3. those which do not comply with the void by law.
Statute of Frauds What contracts are inexistent
Agreements within the scope of the Statute of 1. Those which are absolutely simulated or
Frauds fictitious; and
2. Those whose cause or object did not 2. Executory Contracts - Neither of the
exist at the time of the transaction. contracting parties can demand for the
fulfillment of any obligation from the
Exceptions to Principle of Pari Delicto
contract nor may be compelled to
1. Payment of usurious interest comply with such obligation
2. Payment of money or delivery of
VII. Natural Obligations
property for an illegal purpose, where
the party who paid or delivered Examples of natural obligations enumerated
repudiates the contract before the under the Civil Code:
purpose has been accomplished, or
1. Performance after the civil obligation
before any damage has been caused to
has prescribed;
a 3rd person.
2. Reimbursement of a third person for a
3. Payment of money or delivery of
debt that has prescribed;
property made by an incapacitated
3. Restitution by minor after annulment of
person
contract;
4. Agreement or contract which is not
4. Delivery by minor of money or fungible
illegal per se & the prohibition is
thing in fulfillment of obligation;
designed for the protection of the
5. Performance after action to enforce
plaintiff
civil obligation has failed;
5. Payment of any amount in excess of the
6. Payment by heir of debt exceeding
maximum price of any article or
value of property inherited; and
commodity fixed by law or regulation by
7. Payment of legacy after will have been
competent authority.
declared void.
6. Contract whereby a laborer undertakes
to work longer than the maximum # of VIII. Estoppel
hours fixed by law.
7. Contract whereby a laborer accepts a Kinds of Estoppel
wage lower than the minimum wage 1. Estoppel in Pais (by conduct)
fixed by law. A. Estoppel by silence
8. One who lost in gambling because of B. Estoppel by acceptance of benefits
fraudulent schemes practiced on him is 2. Technical Estoppel (impedimento
allowed to recover his losses [(Art. 315, técnico)
3 (b), RPC] even if gambling is a A. Estoppel by deed
prohibited one. B. Estoppel by record
Rules when only one of the parties is at fault: C. Estoppel by judgment
D. Estoppel by laches
1. Executed Contracts:
A. Guilty party is barred from Elements of Laches
recovering what he has given to the 1. Conduct on part of the defendant, or of
other party by reason of the one under whom he claims, giving rise
contract. to the situation of which complaint is
B. Innocent party may demand for the made and for which the complaint
return for the return of what he has seeks a remedy
given.
2. Delay in asserting the complainant’s
rights, the complainant having
knowledge or notice, of the defendant’s
conduct and having been afforded the
opportunity to institute a suit
3. Lack of knowledge or notice on the part
of the defendant that the complainant
would assert the right on which he
bases his suit
4. Injury to the defendant in the event
relief is accorded to the complainant, or
the suit in not held to be barred
• LACHES
1. concerned with effect of delay
2. question of inequity of permitting
the claim to be enforced
3. not statutory
4. applies in equity
5. not based on a fixed time
• PRESCRIPTION
1. concerned with fact of delay
2. question or matter of time
3. statutory
4. applies at law
5. based on a fixed