Obligations and Contracts TITLE I.

OBLIGATIONS
Chapter 1. General Provisions
I. Concept A. Definition Art. 1156 criticism of definition B. Elements 1. Active Subject 2. Passive Subject 3. Prestation or Object 4. Efficient cause or juridical tie or vinculum juris C. Distinction Between Natural and Civil Obligations 1. As to enforceability 2. As to basis Sources of Obligations Art. 1157 A. Law Art. 1158 B. Contracts Art. 1159, 1305 C. Quasi-Contracts Art. 1160, 1305 1. Kinds a. Negotiorum gestio Art. 2144 b. Solutio indebiti Art. 2154 c. Other quasi-contracts Art. 2164 to Art. 2175 D. Acts or omissions punished by law Art. 1161 E. Quasi-Delicts Art. 1162, 2176 1. Distinction between quasi-delicts and crimes 2. Liability for fault of others Art. 2180; Art. 218, 219 FC 3. Civil liability arising from crime Art. 1161; Rule 111 ROC
Cases Barredo v. Garcia Mendoza v. Arrieta PSBA v. CA Amadora v. CA

II.

III. Classification of Obligations A. Primary Classification Under the CC 1. Pure and Conditional (Art. 1179-1192) 2. With a period or term (Art. 1193-1198) 3. Alternative and Facultative (Art. 1199-1206) 4. Joint and Solidary (Art. 1207-1222) 5. Divisible and Indivisible (Art. 1223-1225) 6. With a penal clause (Art. 1226-1230) B. Secondary Classification 1. Legal (Art. 1158); Conventional (Art. 1159) Penal (Art. 1161) 2. Real (to give) and Personal (to do or not to do) 3. Determinate and Generic (as to subject matter of obligation) 4. Positive (to give, to do) and Negative (not to give, not to do) 5. Unilateral and Bilateral 6. Individual and Collective 7. Accessory and Principal 8. As to object or prestation: a. Simple b. Multiple 1) Conjunctive or 2) Distributive a) Alternative b) Facultative 9. Possible and Impossible

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Chapter 2. Nature and Effects of Obligations

I. Kinds of Prestation A. Obligation to give 1. A specific thing a. Duties of the obligor i. To deliver thing itself Art. 1244 ii. To preserve thing Art. 1163 iii. To deliver the accessions and accessories Art. 1166 - distinction between accession and accessory iv. To deliver the fruits Art. 1164 par. 1 2. A generic thing Art. 1246 B. Obligation to do Art. 1244 C. Obligation not to do Art. 1244 Breach of Obligation A. Concept 1. Distinction between substantial and casual/slight breach
Cases: Song Fo v. Hawaiian Phils. Velarde, et al v. CA

II.

B.

Modes of Breach Art. 1170 1. Fraud (dolo) a. Concept i. dolo (1171) vs. dolo incidente ii. dolo (1171) vs. dolo causante
Cases Woodhouse v. Halili Geraldez v. CA

2.

b. Nonwaiver Art. 1171 c. Effects Negligence Art. 1172 a. Concept Art. 1173 i. culpa v. dolo ii. culpa aquiliana v. culpa contractual
Cases Gutierrez v. Gutierrez Vasquez v. Borja

b.

Standard of care required Art. 1173 par. 2

Cases De Guia v. Manila Electric Co. Sarmiento v. Sps. Cabrido Crisostomo v. CA

c.

Effects

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3.

Delay (Mora) Art. 1169 a. Concept b. Kinds i. mora solvendi - requisites - General Rule: Creditor should make demand before debtor incurs delay Art. 1169
Cases Cetus Development Corp. v. CA Santos Ventura Hocoma Foundation v. Santos Vasquez v. Ayala Corporation

- Exceptions Art. 1169

Case Abella v. Francisco

ii.

mora accipiendi - requisites - see also Art. 1268

Cases Vda. de Villaruel v. Manila Motor Co., Inc. Tengco v. CA

iii.

compensation morae - requisites

Case Central Bank v. CA

4.

c. Effects Contravention of the tenor

Cases Chavez v. Gonzales Telefast v. Castro Arrieta v. NARIC Magat v. Medialdea

5.

Non-payment

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III. Remedies of Creditor in Case of Breach A. Action for performance 1. Action for specific performance in obligation to give a specific thing Art. 1165 par. 1; ROC 39, Sec. 10 2. Action for substituted performance in obligation to give a generic thing Art. 1165 par. 2 3. Action for substituted performance or undoing of poor work in obligation to do Art. 1167
Cases Chavez v. Gonzales Tanguilig v. CA

4. B. C.

a. Exception Action for undoing in obligation not to do Art. 1168 a. Exception Action for damages Art. 1170 Action for rescission Art. 1191, 1192

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IV. Subsidiary Remedies of Creditor A. Accion Subrogatoria Art. 1177 1. Concept 2. Requisites 3. Exceptions inherent rights of debtor, Art. 772 B. Accion Pauliana Art. 1177, 1381 par. 3 1. Concept a. Distinction between accion pauliana and accion subrogatoria 2. Requisites
Cases Khe Hong Cheng v. CA Siguan v. Lim

C.

Other Specific Remedies Art. 1652, 1729, 1608, 1893

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V.

Extinguishment of Liability in Case of Breach Due to Fortuitous Event Art. 1174 A. Concept of Fortuitous Event 1. Act of God 2. Act of Man B. Requisites 1. Effect of concurrent fault
Cases Juan Nakpil & Sons v. CA Republic v. Luzon Stevedoring Co. Dioquino v. Laureano Austria v. CA NPC v. CA Yobido v. CA Bacolod-Murcia Milling v. CA Philcomsat v. Globe Telecom

C.

Extinguishment of Liability; Exceptions Art. 1174, 1165 par. 3, 552, 1942, 1979, 2001, 2147

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VI. Usurious Transactions Art. 1175, 1413, 1961 A. PD 858; PD 1685; PD 116 B. Central Bank Circular 416 C. Monetary Board Circular 905 lifting the interest rate ceiling v. Art. 2209
Cases Eastern Shipping Lines v. CA Crismina Garments v. CA Keng Hua Products v. CA Security Bank v. RTC Makati Almeda v. CA First Metro Investment v. Este Del Sol

VII. Fulfillment of Obligations A. see Chapter 4: Payment B. Presumptions in payment of interests and installments Art. 1176 VIII. Transmissibility of Rights Art. 1178

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Chapter 3. Different Kinds of Obligations

I. Pure and Conditional Obligations A. Pure Obligations Art. 1179 par. 1 B. Conditional Obligations Art. 1181 1. Condition a. Concept b. Condition v. Period/Term
Cases Gaite v. Fonacier Gonzales v. Heirs of Thomas

2.

Kinds of conditions a. As to effect on obligation Art. 1181

Case Gonzales v. Heirs of Thomas

i.

Suspensive (condition precedent) - retroactive effect when condition is fulfilled Art. 1187 - rights of creditor and debtor before fulfillment of condition Art. 1188
Case Coronel v. CA

ii.

Resolutory (condition subsequent)

Cases Parks v. Province of Tarlac Central Philippine University v. CA Quijada v. CA Taylor v. Uy Tieng Piao

b.

As to cause or origin Art. 1182 i. Potestative - effect if fulfillment of condition depends solely on the will of the debtor (Cf. term) - debtors promise to pay when he can is not a conditional obligation Art. 1180
Case Lim v. CA

ii. iii.

Casual Art. 1267

Case Naga Telephone Co, Inc. v. CA

Mixed
Cases Osmea v. Rama Hermosa v. Longora Smith Bell v. Sotelo Matti Rustan Pulp and Paper Mills v. IAC Romero v. CA

c.

As to possibility Art. 1183 i. Possible ii. Impossible -effect

Case Roman Catholic Arch of Manila v. CA

d.

3.

As to mode i. Positive Art. 1184 ii. Negative Art. 1185 Rules in case of loss, deterioration or improvement pending the happening of the condition Art. 1189, 1190 a. Meaning of loss (Art. 1189[2]), deterioration and improvement b. Effect of loss or deterioration i. Without debtors fault ii. With debtors fault c. Effect of improvement i. by nature or time ii. at the debtors expense

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4.

Effect of prevention of the fulfillment of the condition by the obligor Art. 1186
Case Taylor v. Uy Tieng Piao Herrera v. Leviste

C.

Reciprocal Obligations Art. 1191, 1192 1. Concept 2. Alternative remedies of injured party in case of breach a. Action for Fulfillment i. when fulfillment no longer possible; effect b. Action for Rescission i. requisites ii. how made iii. effects See also Art. 1786, 1788; Arts. 1484-86; RA 6552
Cases Song Fo v. Hawaiian-Philippines Boysaw v. Interphil Promotions U.P. v. De Los Angeles Iringan v. CA De Erquiaga v. CA James G. Ong v. CA Visayan Saw Mill v. CA Ernesto Deiparine v. CA Vda. De Mistica v. Sps. Naguiat

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II.

Obligation with a Period Art. 1193, 1180 A. Period or Term 1. Concept 2. Period/Term v. Condition B. Kinds of Period/Term 1. As to effect a. Suspensive (Ex die) Art. 1193 par. 1 b. Resolutory (In diem) Art. 1193 par. 2 2. As to expression a. Express b. Implied 3. As to definiteness a. Definite b. Indefinite 4. As to source a. Voluntary b. Legal c. Judicial C. Rules in case of loss, deterioration or improvement before arrival of period Art. 1194, 1189 D. Effect of payment in advance Art. 1195 Note: Art. 1197 par. 3 E. Benefit of Period 1. For whose benefit a. creditor b. debtor c. both 2. Effects 3. Presumption Art. 1196
Cases Ponce de Leon v. Syjuco Buce v. CA

F.

4. When debtor loses right to make use of period Art. 1198 When Court may Fix Period Art. 1197 1. Period is implied 2. Period depends solely on will of debtor (Cf. condition)
Cases Araneta v. Philippine Sugar Estate Development Co. Central Philippine University v. CA

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III. Alternative Obligations A. Concept Art. 1199 B. Right of choice Art. 1200 C. Effect of notice of choice D. When notice produces effect Art. 1201 E. Effect of loss or impossibility of one or all prestations Art. 1202 to Art. 1205 F. Facultative Obligation Art. 1206 1. Concept 2. Distinguished from Alternative Obligation 3. Effect of Substitution

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IV. Joint and Solidary Obligation A. Joint Obligations 1. Concept a. Requisites b. Words used to indicate joint obligations 2. Presumption Art. 1207, 1208 3. Effects Art. 1207, 1208 a. Extent of liability of debtor b. Extent of right of creditor c. In case of novation, compensation, confusion (Art. 1277), remission B. Solidary Obligations 1. Concept a. Requisites b. Words used to indicate solidary obligations 2. Kinds a. As to source Art. 1208 i. Legal Art. 1915, 1945, 2194; Art. 119 RPC ii. Conventional iii. Real b. As to parties bound i. Active ii. Passive iii. Mixed c. As to uniformity i. Uniform ii. Varied/Non-uniform Art. 1211 - effects
Cases Inchausti v. Yulo Lafarge Cement Phil. v. Continental Cement

3.

Effects a. Solidary creditor in relation to: i. common debtor - right to demand- Art. 1215, 1214, 1216, 1217 par. 1 - in case of novation, compensation, confusion, remission by a creditor- Art. 1215 par. 1 ii. solidary co-creditor/s - in case of novation, compensation, confusion, remission Art. 1215 par. 2 - prejudicial acts prohibited Art. 1212 - assignment of righs not allowed Art. 1213 b. Solidary debtor in relation to: i. common creditor - obligation to perform Art. 1207 - in case of novation, compensation, confusion, remission by a creditor Art. 1215 par. 1 ii. solidary co-debtor - in case of payment by a co-debtor Art. 1217, 1218, 1220, 1219 - in case of fortuitous event Art. 1221
Cases Jaucian v. Querol RFC v. CA Quiombing v. CA Inciong v. CA

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4.

Defenses available to a solidary debtor against the creditor Art. 1222 a. Types i. Those derived from the nature of the obligation ii. Personal defenses iii. Defenses pertaining to his share iv. Those personally belonging to the other co-debtors b. Effects
Cases Inchausti v. Yulo Alipio v. CA

C.

Joint Indivisible Obligations 1. Concept a. Distinguished from Joint Obligations b. Distinguished from Solidary Obligations 2. Indivisibility distinguished from solidarity Art. 1210 3. Effects Art. 1209 a. Liability for damages in case of breach Art. 1224

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V.

Divisible and Indivisible Obligations A. Divisible Obligations 1. Concept 2. Effects Art. 1223, 1233 B. Indivisible Obligations 1. Concept a. Distinguished from solidary obligations 2. Kinds a. Natural Art. 1225 par. 1 b. Legal Art. 1225 par. 3 c. Conventional Art. 1225 par. 3 3. Presumptions a. Of indivisibility Art. 1225 par. 1 b. Of divisibility Art. 1225 par. 2 4. Divisibility and indivisibility in obligations not to do Art. 1225 par. 3 5. Effects Ar. 1223, 1233, 1224 - see Joint Indivisible Obligations 6. Cessation of indivisibility

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VI. Obligations with a Penal Clause A. Concept 1. Principal v. Accessory Obligation 2. Distinguished from Conditional Obligations 3. Distinguished from Alternative Obligations 4. Distinguished from Facultative Obligations 5. Distinguished from Guaranty B. Kinds of Penal Clause 1. As to effect a. Subsidiary b. Complementary 2. As to source a. Conventional b. Legal 3. As to purpose a. Punitive b. Reparatory C. Demandability of Penalty Art. 1226 par. 2 D. Effects of Penal Clause 1. Substitute for indemnity for damages and payment of interest Art. 1226 a. Exception Art. 1226
Cases Makati Devt Corp. v. Empire Insurance Co. Tan v. CA Country Bankers Insurance v. CA

2.

E. F.

Not exempt debtor from performance Art. 1227 a. Exception Art. 1227 3. Creditor cannot demand both performance and penalty at the same time Art. 1227 a. Exceptions Art. 1227 4. Creditor cannot collect other damages in addition to penalty Art. 1226 a. Exceptions Art. 1226 When penalty shall be equitably reduced Art. 1229 Nullity of Principal Obligation or Penal Clause 1. Effects Art. 1230 2. Rationale

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Chapter 4. Extinguishment of Obligations

I. Modes of Extinguishment Art. 1231 A. Payment or Performance B. Loss or Impossibility C. Condonation or Remission D. Confusion or Merger E. Compensation F. Novation G. Other Causes

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II.

Payment or Performance A. Concept Art. 1232 B. Requisites 1. Who can pay a. in general b. third person who is an interested party i. meaning of interested party ii. effects Art. 1302[3] c. third person who is not an interested party but with consent of debtor i. effects Art. 1302[2], 1236 par. 1 d. third person who is not an interested party and without knowledge or against the will of the debtor i. effects Art. 1236 par. 2, 1237, 1236 par. 1 e. third person who does not intend to be reimbursed Art. 1238 f. in obligation to give Art. 1239, 1427 i. effect of incapacity g. in case of active solidarity Art. 1214 2. To whom payment may be made a. in general Art. 1240 incapacited person Art. 1241 par. 1 i. requisites b. third person- Art. 1241 par. 2 i. requisites ii. when proof of benefit not required Art. 1241 par. 3, 1242 c. in case of active solidarity Art. 1214 3. What is to be paid (Identity) a. in general b. in obligations to: i. give a specific thing Art. 1244, Art. 1166, 1164 par. 1 ii. give a generic thing Art. 1246 iii. pay money Art. 1249, 1250; RA 529, RA 4100
Cases Arrieta v. NARIC Kalalo v. Luz St. Paul Fire and Marine Insurance v. Macondray Papa v. A.V. Valencia, et al. PAL v. CA

4.

5.

6. 7.

c. payment of interest Art. 1956 How is payment to be made (Integrity) a. in general Art. 1233 GR: Partial payment is not allowed Art. 1248 Exp: Art. 1248 b. substantial performance in good faith Art. 1234 c. estoppel Art. 1235 d. presumptions in payment of interests and installments Art. 1176 When payment is to be made a. in general Art. 1169 b. see Chapter 2: Delay Where payment is to be made Art. 1251 par. 1 a. if no place is expressly designate Art. 1251 par. 2 to par. 4 Expenses of making payment Art. 1247

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C.

Application of Payments 1. Concept Art. 1252

Cases Reparations Commission v. Universal Deep Sea Fishing Paculdo v. Regalado

2. 3.

D.

E.

Requisites Rules in application of payments Art. 1252, 1253 a. if rules inapplicable and application cannot be inferred Art. 1254 1) meaning of most onerous to debtor Payment by Cession 1. Concept Art. 1255 2. Requisites 3. Effects Dation in Payment 1. Concept Art. 1245 a. Distinguished from Payment by Cession
Case DBP v. CA

2. 3. F.

Requisites Effects
Case Filinvest Credit Corporation v. Philippine Acetylene

Tender of Payment and Consignation 1. Tender of Payment a. Concept b. Requisites 2. Consignation a. Concept 1) Purpose b. Something 1) When tender and refusal not required Art. 1256 par. 2 2) Two notice requirement Art. 1257 par. 1, 1258 par. 2 - effects of noncompliance c. Effects Art. 1260 par. 1 d. Withdrawal by debtor before acceptance by creditor or approval by court; effects Art. 1260 par. 2 e. Withdrawal by debtor after proper consignation Art. 1261 1) With creditors approval; effects 2) Without creditors approval; effects f. Expenses of consignation Art. 1259
Cases De Guzman v. CA TLG International Continental Enterprising, Inc. v. Flores McLaughlin v. CA Meat Packing Corp. v. Sandiganbayan Pabugais v. Sahijwani

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III. Loss or Impossibility A. Loss of Thing Due 1. Concept Art. 1189[2] 2. Kinds a. As to extent i. Total ii. Partial 3. Requisites Art. 1262 4. Presumption Art. 1265, 1165 a. When not applicable 5. Effects a. In obligation to give a specific thing Art. 1262, 1268 b. In obligation to give a generic thing Art. 1263 c. In case of partial loss Art. 1264 d. Action against third persons Art. 1269 B. Impossibility of Performance 1. Concept Art. 1266, 1267 2. Kinds a. As to extent i. Total ii. Partial b. As to source i. Legal ii. Physical 3. Requisites Art. 1266 4. Effects a. In obligations to do Art. 1266, 1267, 1262 par. 2 (by analogy) i. impossibility distinguished from difficulty
Cases Occea v. Jabson Naga Telephone Co. v. CA PNCC v. CA

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IV. Condonation or Remission A. Concept B. Kinds 1. As to extent a. Total b. Partial 2. As to form Art. 1270 par. 1 a. Express b. Implied C. Requisites 1. When formalities required - Art. 1270 par. 2
Case Yam v. CA

D. E.

F. G.

Presumptions Art. 1271, 1272, 1274 Effects 1. In general 2. In case of joint or solidary obligations Governing Rules Art. 1270 Renunciation of Principal or Accessory Obligation 1. Effects Art. 1273 2. Rationale

V.

Confusion or Merger of Rights A. Concept B. Requisites C. Effects 1. In general Art. 1275 2. In case of joint (Art. 1277) or solidary obligations D. Confusion in Principal or Accessory Obligation Art. 1276

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VI. Compensation A. Concept Art. 1278 1. Distinguished from Confusion B. Kinds 1. As to extent a. Total b. Partial 2. As to origin a. Legal b. Conventional Art. 1279 inapplicable, 1282 c. Judicial Art. 1283 d. Facultative C. Legal Compensation 1. Requisites Art. 1279, 1280 a. due distinguished from demandable
Cases Gan Tion v. CA Silahis Marketing Corp. v. IAC BPI v. CA & Reyes PNB v. CA & Sapphire Shipping Mirasol v. CA

D. E.

2. Effects Art. 1290, 1289 When Compensation is Not Allowed Art. 1287, 1288 Effects of Assignment of Credit 1. With consent of debtor- Art. 1285 par. 1 2. With knowledge but without consent of debtor Art. 1285 par. 2 3. Without knowledge of debtor Art. 1285 par. 3 a. Rationale

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VII. Novation A. Concept Art. 1291 B. Kinds 1. As to form a. Express b. Implied 2. As to origin a. Conventional b. Legal 3. As to object a. Objective or Real b. Subjective or Personal C. Requisites Art. 1292
Cases Magdalena Estate v. Rodriguez Reyes v. Secretary of Justice Cochingyan v. RB Surety and Insurance Broadway Centrum Condominium Corp. v. Tropical Hut California Bus Lines v. State Investment

D.

E.

F. G.

Effects 1. In general Art. 1296 2. When accessory obligation may subsist Art. 1296 Effect of the Status of the Original or New Obligation 1. Nullity or voidability of original obligation Art. 1298 2. Nullity or voidability of new obligation Art. 1297 3. Suspensive or resolutory condition of original obligation Art. 1299 Objective Novation 1. Meaning of principal conditions Subjective Novation 1. By change of debtor a. Expromision i. Requisites Art. 1293 ii. Effects Art. 1294 b. Delegacion i. Requisites (vs. Art. 1293) ii. Effects Art. 1295
Cases Garcia v. Llamas Quinto v. People

2.

By change of creditor: Subrogation of a third person in the rights of the creditor Art. 1300 a. Conventional subrogation i. Requisites art. 1301 ii. Distinguished from Assignment of Credit iii. Effects Art. 1303, 1304
Case Licaros v. Gatmaitan

b.

Legal Subrogation i. Requisites ii. When presumed Art. 1302 iii. Effects Art. 1303, 1304
Case Astro Electronics Corp. v. PhilGuarantee

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TITLE II. CONTRACTS

I. General Provisions
A. B. Definition Art. 1305 Elements 1. Essential elements (see Chapter II, infra) a. Consent b. Object c. Cause 2. Natural elements 3. Accidental elements (see D., 3., infra) Characteristics 1. Obligatory force Art. 1308 2. Mutuality Arts. 1308 to Art. 1310 (see also Art. 1473)
Case GSIS v. CA

C.

3.

Relativity a. Contracts take effect only between the parties, their assigns and heirs Art. 1311
Cases Manila Railroad Co. v. La Compaia Transatlantica DKC Holdings Corp. v. CA

b. D.

No one may contract in the name of another Art. 1317

Case Gutierrez Hmnos. V. Orense

Parties 1. Auto-contracts 2. Freedom to contract Art. 1306 Cases

Gabriel v. Monte de Piedad Pakistan International Airlines v. Ople

a.

3.

Special disqualifications 1) Art. 87 FC 2) Arts. 1490-1491 CC 3) Art. 1782 CC What they may not stipulate Art. 1306 a. Contrary to law, e.g.: 1) Pactum commissorium (Art. 2088) 2) Pactum leonina (Art. 1799) 3) Pactum de non alienado (Art. 2130) b. Contrary to morals c. Contrary to good customs d. Contrary to public order e. Contrary to public policy
Cases Cui v. Arellano Arroyo v. Berwin Filipinas Compaia de Seguros v. Mandanas Bustamante v. Rosel

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E.

Classification 1. According to subject matter a. Things b. Services 2. According to name a. Nominate b. Innominate Art. 1307
Case Dizon v. Gaborro

F.

G. H.

1) Do ut des 2) Do ut facias 3) Facio ut facias 4) Facio ut des 3. According to perfection a. By mere consent (consensual) Art. 1315 b. By delivery of the object (real) Art. 1316 4. According to its relation to other contracts a. Preparatory b. Principal c. Accessory 5. According to form a. Common or informal b. Special or formal 6. According to purpose a. Transfer of ownership, e.g., sale b. Conveyance of use, e.g., commodatum c. Rendition of services, e.g., agency 7. According to the nature of the vinculum produced a. Unilateral b. Bilateral c. Reciprocal 8. According to cause a. Onerous b. Gratuitous or lucrative 9. According to risk a. Commutative b. Aleatory Stages 1. Preparation 2. Perfection 3. Consummation or death As distinguished from a perfected promise and an imperfect promise (policitacion) With respect to third persons 1. Stipulations in favor of third persons (stipulations pour autrui) Art. 1311, par. 2
Cases Florentino v. Encarnacion Coquia v. Fieldmens Insurance Cp. Constantino v. Espiritu Integrated Packaging Corp. v. CA

2. 3. 4.

Possession of the object of contract by third persons Art. 1312 Creditors of the contracting parties Art. 1313 Interference by third persons Art. 1314
Cases Daywalt v. La Corporacion de los Padres Agustinos Recoletos So Ping Bun v. CA

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II.

Essential Requisites of Contracts

A. Consent 1. Requisites Art. 1319 a. Must be manifested by the concurrence of the offer and acceptance
Cases Rosenstock v. Burke Malbarosa v. CA

1)

Offer a) Must be certain Art. 1319 b) What may be fixed by the offeror Art. 1321 c) When made through an agent Art. 1322 d) Circumstances when offer becomes ineffective Art. 1323 e) Business advertisements of things for sale Art. 1325 f) Advertisements for bidders Art. 1326
Case Jardine Davies v. CA

2)

Acceptance a) Must be absolute Art. 1319 b) Kinds i. Express Art. 1320 ii. Implied Art. 1320 iii. Qualified Art. 1319 c) If made by letter or telegram Art. 1319 par. 2 i. Four theories on when the contract is perfected 1. Manifestation theory 2. Expedition theory 3. Reception theory 4. Cognition theory Art. 1319 par. 2 d) Period of acceptance Art. 1324
Case Sanchez v. Rigos

e) b.

Contract of option Art. 1324

Case Adelfa Properties v. CA

Necessary legal capacity of the parties 1) Who cannot give consent Art. 1327 2) When offer and/or acceptance is made a) During a lucid interval b) In a state of drunkenness c) During a hypnotic spell

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c.

The consent must be intelligent, free, spontaneous, and real Art 1330 to Art. 1346 1) Effect Art. 1330 2) Vices of consent a) Mistake or error i. Kinds 1. Mistake of fact a. As to substance of the object b. As to principal conditions c. As to identity or qualification of one of the parties d. As to quantity, as distinguished from a simple mistake of account
Cases Asiain v. Jalandoni Theis v. CA Heirs of William Sevilla, et al v. Leopoldo Sevilla

2.

ii.

Error of law a. General rule: Ignorantia legis neminem excusat Art. 3 b. Exception: Mutual error of law Art. 1334 When one of the parties is unable to read Art. 1332
Cases Dumasug v. Modelo Hemedes v. CA Katipunan v. Katipunan

b)

iii. Inexcusable mistake Art. 1333 Violence and intimidation Art. 1335 i. Effect Art. 1336 Case
Martinez v. Hongkong and Shanghai Bank

c) d)

Undue influence Art. 1337 Fraud or dolo Art. 1338

Cases Hill v. Veloso Woodhouse v. Halili Geraldez v. CA

i.

ii.

Kinds 1. Dolo causante Art. 1338 2. Dolo incidente Art. 1344 par. 2 Failure to disclose facts; duty to reveal them Art. 1339
Cases Tuason v. Marquez Rural Bank of Sta. Maria v. CA

iii.

Usual exaggerations in trade; opportunity to know the facts Art. 1340

Cases Azarraga v. Gay Laureta Trinidad v. IAC

iv.

Mere expression of an opinion Art. 1341 1. Effects Art. 1344

Case Songco v. Sellner

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e)

Misrepresentation i. By a third person Art. 1342 ii. Made in good faith Art. 1343 iii. Active/Passive
Cases Mercado and Mercado v. Espiritu Braganza v. Villa Abrille

f)

Simulation of Contracts
Cases Rodriguez v. Rodriguez Suntay v. CA Blanco v. Quasha

i.

ii.

Kinds Art. 1345 1. Absolute 2. Relative Effects Art. 1346

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B.

Object of Contracts 1. What may be the objects of contracts Art. 1347 a. All things not outside the commerce of man b. All rights not intransmissible c. All servicers not contrary to law, morals, good customs, public, or public policy 2. Requisite must be determinate as to its kind Art. 1349 3. What may not be the objects of contracts Art. 1347 a. Future inheritance, except when authorized by law
Cases Blas v. Santos Tanedo v. CA

b. C.

Impossible things or services Art. 1348

Cause of Contracts 1. Meaning of cause Art. 1350 a. In onerous contracts b. In remuneratory contracts c. In contracts of pure beneficence 2. As distinguished from motive Art. 1351 3. Defective causes and their effects: a. Absence of cause and unlawful cause Art. 1352
Case Liguez v. CA

b. c.

Statement of a false cause in the contract Art. 1353 Lesion or inadequacy of cause Art. 1355
Cases Carantes v. CA Sps. Buenaventura, et al v. CA

d.

Presumption of the existence and lawfulness of a cause, though it is not stated in the contract Art. 1354

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III. Form of Contracts

A. B. General Rule: Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. (Spiritual system of the Spanish Code) Art. 1356 Exception: When the law requires that a contract be in some for in order that it may be valid or enforceable. (Anglo-American principle) Art. 1356
Case Hernaez v. De los Angeles

C.

Kinds of formalities required by law: 1. Those required for the validity of contracts, such as those referred to in Art. 748, 749, 1874, 2134, 1771, 1773; 2. Those required, not for validity, but to make the contract effective as against third persons, such as those covered by Art. 1357, 1358; and 3. Those required for the purpose of proving the existence of the contract, such as those under the Statute of Frauds in Art. 1403.

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IV. Reformation of Instruments

A. Requisites Art. 1359: 1. Meeting of the minds upon the contract; 2. The true intention of the parties is not expressed in the instrument; and 3. The failure of the instrument to express the true agreement is due to mistake, fraud, inequitable conduct, or accident.
Cases Garcia v. Bisaya Bentir v. Leande

B. C. D. E.

Cases where no reformation is allowed Art. 1366 Implied Ratification Art. 1367 Who may ask for reformation Art. 1368 Procedure of reformation Art. 1369
Cases Atilano v. Atilano Carantes v. CA Sarming, et al v. Cresencio Dy, et al

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V. Interpretation of Contracts (Compare w/ Rules on StatCon)

A. Primacy of intention Arts. 1370, 1372
Cases Borromeo v. CA Kasilag v. Rodriguez

B. C.

D.

How to determine intention Art. 1371 How to interpret a contract 1. When it contains stipulations that admit several meanings Art. 1373 2. When it contains various stipulations, some of which are doubtful Art. 1374 3. When it contains words that have different significations Art. 1375 4. When it contains ambiguities and omission of stipulations Art. 1376 5. With respect to the party who caused the obscurity Art. 1377 6. When it is absolutely impossible to settle doubts by the rules above Art. 1378 a. In gratuitous contracts b. In onerous contracts 7. When the doubts are cast upon the principal object so that the intention cannot be known Art. 1378 Applicability of Rule 123, Rule of Court (now Secs. 10-19, Rule 130)

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DEFECTIVE CONTRACTS VI. Rescissible Contracts

A. B. Kinds Art. 1381 Characteristics 1. Their defect consists in injury or damage either to one of the contracting parties or to third persons. 2. They are valid before rescission. 3. They can be attacked directly only, and not collaterally. 4. They can be attacked only either by a contracting party or by a third person who is injured or defrauded. 5. They can be convalidated only by prescription, and not by ratification. Rescission Art. 1380 1. Definition 2. As distinguished from rescission under Art. 1191
Case Universal Food Corp. v. CA

C.

3.

4. 5. 6.

Requisites: a. The contract is rescissible; b. The party asking for rescission has no other legal means to obtain reparation Art. 1383; c. He is able to return whatever he may be obliged to restore if rescission is granted Art. 1385; d. The object of the contract has not passed legally to the possession of a third person acting in good faith Art. 1385 e. The action for rescission is brought within the prescriptive period of 4 years Art. 1389 Effect of rescission Art. 1385 a. With respect to third persons who acquired the thing in good faith Art. 1385, par. 2 & par. 3 Extent of rescission Art. 1384 Presumptions of fraud Art. 1387 a. Badges of fraud
Cases Oria v. Mcmicking Siguan v. Lim Suntay v. CA

7.

Liability for acquiring in bad faith the things alienated in fraud of creditors Art. 1388

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VII. Voidable or Annullable Contracts

A. B. Kinds Art. 1390 Characteristics 1. Their defect consists in the vitiation of consent of one of the contracting parties. 2. They are binding until they are annulled by a competent court. 3. They are susceptible of convalidation by ratification or by prescription. Annulment 1. As distinguished from rescission 2. Grounds Art. 1390 3. Who may and may not institute action for annulment Art. 1397
Case Singsong v. Isabela Sawmill

C.

4. 5.

Prescription Art. 1391 Effect a. Mutual restitution Arts. 1398 and 1402
Cases Cadwallader & Co. v. Smith, Bell & Co. Velarde v. CA

D.

1) When one of the parties is incapacitated Art. 1399 2) When the thing is lost through the fault of the party obliged to return the same Art. 1400 6. Extinguishment of the action a. By ratification Art. 1392 b. When the thing is lost through the fault of the person who has the right to file the action Art. 1401 Ratification 1. Requisites a. The contract is voidable; b. The ratification is made with knowledge of the cause for nullity; c. At the time of the ratification, the cause of nullity; 2. Forms a. Express or tacit Art. 1393 b. By the parties themselves or by the guardian in behalf of an incapacitated party Art. 1394 3. Effects a. Action to annul is extinguished Art. 1392
Case Uy Soo Lim v. Tan Unchuan

b.

The contract is cleansed retroactively from all its defects Art. 1396

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VIII. Unenforceable Contracts

A. Characteristics 1. They cannot be enforced by a proper action in court. 2. They are susceptible of ratification. 3. They cannot be assailed by third persons. Kinds Art. 1403 1. Unauthorized contracts a. Governing rules Art. 1404 2. Contracts covered by the Statute of Frauds a. Purpose of Statute
Cases Philippine National Bank v. Philippine Vegetable Oil, Co. Limketkai Sons Milling Inc. v. CA Swedish Match v. CA

B.

b.

How ratified Art. 1405

Case Carbonnel v. Poncio, et al.

3.

c. Right of the parties when a contract is enforceable but a public document is necessary for its registration Art. 1406 Contracts executed by parties who are both incapable of giving consent to a contract a. Effect of ratification by the parents or guardian of one of the parties Art. 1407 b. Effect of ratification by the parents or guardian of both parties Art. 1407

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IX. Void or Inexistent Contracts A. Characteristics 1. Void from the beginning 2. Produces no effect whatsoever 3. Cannot be ratified Art. 1409 B. Kinds Art. 1409 1. Contracts that are void a. Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy 1) When the act constitutes a criminal offense Art. 1411 a) In pari delicto rule
Case Ubarra v. Mapalad

2)

When the act is unlawful but does not constitute a criminal offense Art. 1412 a) In pari delicto rule
Case Modina v. CA

3) 4)

When the purpose is illegal, and money is paid or property delivered therefor Art. 1414 When the contract is illegal and one of the parties is incapable of giving consent Art. 1415
Cases Liguez v. CA Relloza v. Gaw Cheen Hum

5)

When the agreement is not illegal per se but is prohibited Art. 1416
Cases Philippine Banking Corp. v. Lui She Frenzel v. Catito

C. D.

When the amount paid exceeds the maximum fixed by law Art. 1417 When by virtue of a contract a laborer undertakes to work longer than the maximum number of hours of work fixed by law Art. 1418 8) When a laborer agrees to accept a lower wage than that set by law Art. 1419 9) When the contract is divisible Art. 1420 10) When the contract is the direct result of a previous illegal contract Art. 1422 b. Those whose object is outside the commerce of man c. Those which contemplate an impossible service d. Those where the intention of the parties relative to the principal object of the contract cannot be ascertained e. Those expressly prohibited or declared void by law 2. Contracts that are inexistent a. Those which are absolutely simulated or fictitious Arts. 1345, 1346 b. Those whose cause or object did not exist at the time of the transaction Right to set up defense of illegality cannot be waived Art. 1409 The action or defense for the declaration of the inexistence of a contract 1. does not prescribe Art. 1410 2. is not available to third persons whose interest is not directly affected Art. 1421

6) 7)

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TITLE III. NATURAL OBLIGATIONS

A. B. C. Definition Art. 1423 As distinguished from civil obligations Art. 1423 As distinguished from moral obligations
Cases Villaroel v. Estrada Fisher v. Robb

D.

E.

Conversion to civil obligation 1. By novation 2. By ratification Examples Art. 1424 1430

TITLE IV. ESTOPPEL

A. B. Definition Art. 1431
Case Kalalo v. Luz

C. D.

Kinds 1. Technical estoppels a. By record b. By deed Art. 1433 2. Equitable estoppels or estoppels in pais Art. 1433 Persons bound Art. 1439
Case Manila Lodge No. 761 Benevolent and Protective Order of the Elks v. CA

Cases where estoppels applies Arts. 1434 to 1438

Case Miguel v. Catalino

TITLE V. TRUSTS
A. B. C. Definition Governing rules Art. 1442 Parties Art. 1440 1. Trustor 2. Trustee 3. Beneficiary or cestui que trust Kinds Art. 1441
Case Salao v. Salao

D.

1.

2.

Express Trusts i. Proof required Art. 1443 ii. Form Art. 1444 iii. Want of trustee Art. 1445 iv. Acceptance by the beneficiary Art. 1441 Implied Trusts a. How established Art. 1441 b. How proved Art. 1457 c. Examples Arts. 1448 to 1456
Cases Fabian v. Fabian Bueno v. Reyes Tamayo v. Callejo

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