CIVIL LAW SEMI-FINALSFeb 20, 2015

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.

Contract – contractus (Latin), contract (French)- A juridical convention manifested in legal form, by virtue of which, one or

more persons or parties bind themselves in favor of another or others, or reciprocally, to the fulfilment of a prestation to give, to do, or not to do.

- A meeting of minds between two persons whereby one binds himself with respect to the other, to give something or to render some service

- Agreement of two or more persons for the purpose of creating, modifying, or extinguishing a juridical relation between them

Elements:1. Essential elements – without which a contract cannot exist

Consent, subject matter, cause/consideration + form / delivery2. Natural elements – found in certain contracts, presumed to exist, unless

stipulated to the contraryWarranty against eviction and against hidden defects

3. Accidental elements – various particular stipulations that may be agreed upon by the contracting parties in a contract. Called accidental because they may be present/absent depending upon agreement.

Stipulation to pay credit/interest, designation of the place for delivery/payment

Classification:A. Accdg. to perfection / formation:

1) Consensual – perfected by mere consent (ex. sale)2) Real – perfected by delivery (ex. depositum, pledge, commodatum)3) Formal / solemn – special formalities are essential before the contract

may be perfected (ex. donation inter vivos of real property req. a public instrument)

B. Accdg. to cause / equivalence of the value of prestations:1) Onerous – interchange of equivalent valuable consideration2) Gratuitous / lucrative – FREE, one party receives no equivalent

prestation except a feeling that one has been generous/ liberal3) Remunerative – one prestation is given for a benefit or service that had

been rendered previouslyC. Accdg. to importance or dependence of one upon another:

1) Principal – contract stand alone by itself

2) Accessory – depends its existence upon another contract (ex. mortgage where principal contract is loan)

3) Preparatory – contract is a means thru which future transaction/ contracts may be made (ex. agency / partnership)

D. Accdg. to the parties obligated:1) Unilateral – one party has an obligation (ex. commodatum – like

borrowing of bicycle) – giving of consent must still be mutual2) Bilateral / synalagmatic – both parties are required to render reciprocal

prestations (ex. sale)E. Accdg. to their name/designation:

1) Nominate – contract is given a special name (ex. sale, partnership, agency, deposit, commodatum)

2) Innominate (contratos innominados) – not given any special name (ex. do ut des – I give that you may give)

F. Accdg. to the risk of fulfilment:1) Commutative – contemplate real fulfilment; equivalent values are given

(ex. sale, lease)2) Aleatory – fulfilment is dependent upon chance; values vary because of

risk/chance (ex. insurance)

Contract of adhesion – one prepared by a company and is sought to be accepted or adhered to by the other party on “take it or leave it” basis.

Stages:a. Preparation/ conception/ generacion – progressing with negotiations; not

arrived at any definite agreement, preliminary offer & bargainingb. Perfection/ birth – came to a definite agreement, the elements of definite

subject matter and valid cause have been accepted by mutual consentc. Consummation/ death/ termination – terms are performed, contract have

been fully executed

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.

Principle of freedom – free entrance into contracts generally without restraint is one of the liberties guaranteed to the people.

Limitation on the nature of the stipulation:(a) Law

Pactum commissorium – a clause providing that the mortgagee will automatically own the property mortgaged if the debt is not paid at maturity = NULL and VOID

Upset price – a specified price below which the mortgaged property is not supposed to be sold at the execution sale = NOT allowed

(b) Morals(c) Good customs(d) Public order(e) Public policy

ART. 1307. Innominate contracts shall be regulated by the stipulations of the parties, by the provision of Titles I and II of this Book, by the rules governing the most analogous nominate contracts, and by the customs of the place.

Do ut des – I give that you may giveDo ut facias – I give that you may doFacio ut des – I do that you may giveFacio ut facias – I do that you may do

CORPUS vs CAIn the absence of any agreement, a lawyer can still charge attorney’s fees to a close friend because of the innominate contract of facio ut des based on the principle that one cannot unjustly enrich himself at another’s expense.

ART. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.

Mutuality of contracts – both parties are bound. The principle is based on the essential equality of the parties.

Consequences of mutuality:(a) A party cannot revoke/renounce contract without the other’s consent, nor

set aside on the ground of a bad bargain.(b) When the fulfilment of the condition depends upon the sole will of the

debtor, the conditional obligation is void if the condition is suspensive. If resolutory, valid.

ART. 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.

*Fixing of price/ delivery date can be left to third person.

ART. 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. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain some stipulation in favor of a third person, he may demand its fulfilment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.

Principle of relativity – contracts are generally effective only between the parties, their assigns and their heirs.

Exceptions:a. Obligations arising from contract are not transmissible by nature,

stipulation or provision of lawb. Stipulation pour autrui – a stipulation in favor of third party conferring a

clear and deliberate favor upon him, and which stipulation is merely part of a contract entered into by parties, neither of whom acted as agent.

Requisites:(1) Stipulation in favor of a third person(2) Stipulation must be a part, not the whole of a contract(3) Contracting parties must have clearly and deliberately conferred a favor

upon a third person, not a mere incidental benefit or interest(4) Third person must have communicated his acceptance to the obligor

before its revocation(5) Neither of the contracting parties bears the legal representation or

authorization of the third partyc. Third persons induces another to violate contractd. Third persons may be adversely affected by a contract where they did not

participatee. Law authorizes the creditor to sue on a contract entered into by his debtor

ART. 1312. In contracts creating real rights, third persons who come into possession of the object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration Laws.

ART. 1313. Creditors are protected in cases of contracts intended to defraud them.

ART. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party.

ART. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfilment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.

CONSENSUALITY of contracts – perfection by mere consent

How contracts are perfected:a. Consensual contracts – by mere consent *general rule* COC (ex. sale)b. Real contracts – perfected by delivery *COC+delivery (ex. deposit and

pledge)c. Formal/ solemn contracts – a special form is required *COC+required

document (ex. donation inter vivos must be in public instrument)Consequences of perfection:

1. Parties are bound to the fulfilment of what has been expressly stipulated, and compliance must be in good faith.

2. Parties are bound to all the consequences which, accdg. to their nature, may be in keeping with good faith, usage and law.

ART. 1316. Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation.

ART. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him.A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party.

Requisites to contract in the name of another:(a) Must be duly authorized(b) Or must have by law a right to represent (guardian/administrator)(c) Or contract must be subsequently ratified expressly or impliedly by word or

deed

ART. 1318. There is not contract unless the ff. requisites concur:(1) Consent of the contracting parties;(2) Object certain which is the subject matter of the contract;(3) Cause of the obligation which is established.

C-O-CConsent – presupposes legal capacity and the fulfilment of conditions

ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the first place where the offer was made.

Consent – meeting of the minds between parties on the subject matter and the cause of the contract, even in neither one has been delivered.

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

Requisites:a. Two/more partiesb. Capable / capcitatedc. No vitiation of consentd. No conflict between what was expressly declared and what was really

intendede. Intent must be declared properly; whatever legal formalities are required to

be complied with

Requisites for the meeting of minds:(a) Offer must be certain – must not be vague, misleading or made as a joke.(b) Acceptance must be unqualified and absolute – no concurrence of mind in

qualified or not absolute acceptance, only counter-offer.

Offer that is CERTAIN:1. Must not be vague2. Must not be misleading3. Must not be made as a joke

No meeting of minds – offer is expressly rejected / completely no acceptanceQualified / not absolute – counter-offer

Q: A offered 20fountain pens to B for 1k each, and B answered that he was willing to purchase 30pens at said price. Is the contracted perfected?A: > No perfection if B wanted 30 and wouldn’t be satisfied for less; acceptance is considered qualified.

If B was content with 20 but desired 10 more if possible, there is perfected sale regarding original 20 and an offer with 10. Unless accepted, there would be no contract yet with respect to the additional 10.

ART. 1322. An offer made through an agent is accepted from the time acceptance is communicated to him.

If principal himself made offer, and acceptance is communicated to the agent, as a general rule, there is no meeting of minds for the agent may be an ordinary one, not authorized to receive acceptance for the particular transaction. If the agent was expressly authorized to receive acceptance, or if the offeree had been told that acceptance could be made direct with the agent, who would then be given freedom to act or to proceed, there can be a meeting of the minds and a perfection of the contract.

ART. 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed.

Other instances:(a) Offeree expressly/impliedly rejects offer(b) Offer is accepted with qualification or condition(c) Before acceptance is communicated, subject matter becomes

illegal/impossible(d) Period of time given to signify acceptance has already lapsed(e) Offer is revoked in due time

ART. 1324. When the offerer has allowed the offeree certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised,

Option – a contract granting a person the privilege to buy or not to buy a certain objects at any time within the agreed period at a fixed price.

ART. 1325. Unless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to make an offer.

If a business advertisement appears to be a definite offer containing all the specific particulars needed in a contract, it really is a definite offer.

ART. 1326. Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.ART. 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable.

Vices of consent – causes of vitiated consent:(a) Mistake / error – affect intellect, cognition(b) Fraud / deceit(c) Violence – affect will, volition(d) Intimidation(e) Undue influence

VOIDABLE contract – binding and valid unless annulled by a proper action in court

- Susceptible of ratification before annulment

ART. 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract.Mistakes as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract.A simple mistake of account shall give rise to its correction.

Mistake / error – false belief about something

Requisites for mistake to vitiate consent:a. Error must be substantial regarding:

a. Objectb. Conditions which principally moved or induced a partyc. Identity / qualifications, if principal cause

b. Error must be excusable c. Error must be a mistake of fact, not law.

Substantial error – consent was given due to error

ART. 1332. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former.

ART. 1333. There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract.

ART. 1334. Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent.

Requisites:1. Mutual error2. Must refer to the legal effect of the agreement3. Real purpose of the parties is frustrated

ART. 1335. There is violence when in order to wrest consent, serious or irresistible force is employed,There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent.To determine the degree of the intimidation, the age, sex and condition of the person shall be borne in mind.A threat to enforce one’s claim through competent authority, if the claim is just or legal, does not vitiate consent.

Violence – physical coercionRequisites:

1. Employment of serious / irresistible force2. Reason why the contract was entered into

Intimidation – moral coercionRequisites:

a. Reasonable & well-grounded fearb. Of imminent and grave evilc. Upon his person, property or of his spouse, descendants or ascendantsd. Reason why the contract was entered intoe. Threat must be of an unjust act, and actionable wrong

ART. 1336. Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in the contract.

ART. 1337. There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the confidential, family, spiritual and other relations between

the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weakness, or was ignorant or in financial distress.

Requisites:(a) Improper advantage(b) Power over will of another (ex. superior bargaining power)(c) Deprivation of the latter’s will of a reasonable freedom of choice –

influence exerted must be of a kind that overpowers the mind as to destroy the party’s free agency

Circumstances to be considered:a. Confidential, family, spiritual, and other relationsb. Mental weaknessc. Ignoranced. Financial distress

Contracts of ADHESION – contracts where one party signs carefully prepared contracts by big companies should be strictly interpreted against the company and liberally in favor of the individual, since the individual is usually helpless to bargain for better terms.

ART. 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.

Kinds of fraud:(a) In celebration of contract

1. DOLO CAUSANTE (causal fraud) – there would be no consent without fraud (voidable)

2. DOLO INCIDENTE (incidental fraud) – even w/o fraud, the parties would have agreed the same; fraud was only incidental in causing consent. (valid but there may be action for damages)

(b) In performance of obligations

Dolo causante – use of insidious words and machinations by one party to induce the other to enter into a contract, w/o w/c he would not have agreed.

Requisites:1. Fraud must be material and serious; that really induced consent2. Must have been employed by only one of the parties (if both, contract is

valid)

3. A deliberate intent to deceive or to induce (misrepresentation in good faith is not fraud)

4. Other party must have relied on the untrue statement & must not be guilty of negligence in ascertaining the truth

ART. 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.

ART. 1340. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent.

Caveat emptor – let the buyer beware. / buyer must be on his guard

ART. 1341. A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former’s special knowledge.

Reason for rule: expert’s opinion is almost in the same category as a fact, especially when relied upon.

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

Force or intimidation by a third person makes contract voidable.Fraud by a third person does NOT make contract voidable unless –

a. The representation has created SUBSTANTIAL mistakeb. Mistake is mutual

ART. 1343. Misrepresentation made in good faith is not fraudulent but may constitute error.

ART. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement.

SIMULATION of a contract – process of intentionally deceiving others by producing the appearance of a contract that really does not exist (absolute simulation) or which is different from the true agreement (relative simulation).

Requisites:1. Outward declaration of will different from will of parties2. False appearances must have been intended by mutual agreement3. Purpose is to deceive third persons

ART. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purposes contrary to law, morals, good customs, public order, or public policy binds the parties to their real agreement.

Kinds of simulated contracts:a. Absolutely simulated (simulados) fictitious contracts:

1. Parties do not intend to be bound2. Effect: Void

b. Relatively simulated (disimulados) disguised contracts:1. Parties conceal their true agreement2. Effect: bound to real/true agreement except –

a. If contract prejudice third personb. Purpose is contrary to law, morals, good customs, public

order/policy.

ART. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts.No contract may be entered into upon future inheritance except in cases expressly authorized by law.All services which are not contrary to law, moral, good customs, public order or public policy may likewise be the object of a contract.

Object (subject matter) of a contract – to create or to end obligations which may involve things/services

Requisites:a. Thing/service must be w/in the commerce of manb. Transmissiblec. Not contrary to law, morals, good customs, public order/policyd. Must not be impossiblee. Determinate as to its kind / determinable w/o need of a new

contract/agreement

Q: when his father died, before the delivery of the property, a son sold his share of the property inherited. Valid?A: yes, since the inheritance is not future inheritance, but existing although yet undelivered. Ownership is transferred automatically to heir upon death of decedent.

Q: father still alive, A sold property he expected to receive. Valid?

A: no, because object of the contract is future inheritance, and the particular contract is not one authorized by law.

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.

Q: if a particular piano is sold for P500k, what is the object and what is the cause?A: for the seller the object is the piano and the cause is the price; for the buyer the object is the price and the cause is the piano. (Manresa)

Classification:a. Onerous – the cause is the prestation or promise of a thing/service by

anotherb. Remuneratory – past service/benefit which is a recoverable debtc. Gratuitous – cause is the mere liability of the benefactor

ART. 1351. The particular motives of the parties in entering into a contract are different from the cause thereof.

As distinguished from cause:MOTIVE CAUSE

May vary although entered into the same kind of contract

Always the same

May be unknown to other Always knownPresence cannot cure absence of cause

Illegal cause – makes a contract voidIllegal motive – not necessarily render transaction void

Because: Motive is not an essential element

ART. 1352. Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy.

Requisites for cause:(a) Must be present at the time the contract was entered into(b) true

(c) Lawful

LIGUEZ vs CAA married man donated a land to 15-yr-old to have sexual relationship. Heirs refused to give the land after his death.Held: since Lopez was at fault, he could not have invoked immorality because he was the one at fault. Conchita is entitled to the land.Motion for reconsideration by heirs + SC answers:

a. Donation being null and void, should have no effect – an illegal donation is void and neither party may invoke its unlawful character as a ground for relief

b. Lopez may be estopped from questioning its legality but his heirs are not – if Lopez cannot question, his heirs cannot also question for they can have no better right than the predecessor whom they replaced. Any question should be on some other ground, like its being inofficious

c. In pari delicto/conchita has not been given actual possession therefore cannot claim the same – pari delicto rule cannot apply as the guilt of a minor cannot be judged with equal severity as that of an adult. Minors occupy privileged position under law

d. Guilty of estoppel by latches – cannot apply to conchita otherwise the court would be prevented from enforcing the principle that a party to an illegal contract cannot recover what he has given pursuant thereto.

ART. 1353. The statement of a false clause in contracts shall render them void, if it should not be proved that they were founded upon another cause which is true and lawful.

ART. 1354. Although the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary.

ART. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence.

Lesion – inadequacy of cause, like an insufficient price for a thing sold

General rule – lesion does not invalidate a contractExceptions:

a. When together with lesion there has been: FRAUD, MISTAKE / UNDUE INFLUENCE

b. Cases expressly provided by law1. Entered into by guardians whenever wards suffer lesion by more than a

quarter of the value of the things which are the objects thereof

2. In representation of absentees where latter suffer same lesion3. Partition among co-heirs, when any received a value less by at least ¼

to which he is entitled

ART. 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the rights of the parties stated in the ff. article cannot be exercised.

Form may be important:1. For VALIDITY2. For ENFORCEABILITY3. For CONVENIENCE

ART. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the ff. article, he contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.

ART. 1358. The ff. must appear in a public document:(1) Acts and contracts which have for their object the creation, transmission,

modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein are governed by Art. 1403, No.2, and 1405;

(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;

(3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person;

(4) The cession of actions or rights proceeding from an act appearing in a public document.

All other contracts where the amount involved exceeds 500pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Art. 1403, No.2 and 1405.

Reformation – remedy in equity by means of which a written instrument is made/construed so as to express or conform to the real intention of the parties when some error or mistake has been committed.

Rationale: it would be unjust and inequitable to allow the enforcement of a written instrument which does not reflect/disclose real meeting of minds of parties.

ART. 1359. When, there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed.If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties, the proper remedy is not reformation of the instrument but annulment of the contract.

Distinction from annulment:REFORMATION ANNULMENT

There has been meeting of minds but there is mistake, fraud, inequitable conduct / accident in the contract as written

No meeting of minds because of vitiated consent

Does not invalidate a contract Invalidates a contract

Requisites for action for reformation:(a) Meeting of minds(b) True intention not expressed in the instrument(c) Clear and convincing proof thereof – mere preponderance of evidence not

sufficient(d) Must be brought w/in the proper prescriptive period – 10yrs from execution

of documents(e) Document must not refer to a simple unconditional donation inter vivos, to

wills, or to a contract where real agreement is void.

ART. 1361. When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement, said instrument may be reformed.

ART. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument.

ART. 1363. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but concealed that fact from the former, the instrument may be reformed.

ART. 1364. When through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist, the

instrument does not express the true intention of the parties, the courts may order that the instrument be reformed.

ART. 1365. If two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with a right of repurchase, reformation of the instrument is proper.

ART. 1366. There shall be no reformation in the ff. cases:(1) Simple donations inter vivos wherein no condition is imposed;(2) Will;(3) When the real agreement is void.

ART. 1367. When one of the parties has brought an action to enforce the instrument he cannot subsequently ask for its reformation.

ART. 1368. Reformation may be ordered at the instance of either party or his successors in interest, if the mistake was mutual; otherwise, upon petition of the injured party, or his heirs and assigns.

ART. 1370. If the terms of contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.

Intention must prevail in case of conflict with words of the contract.

ART. 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.

How to judge intent:1. If interpretation to terms of their contract have been placed by parties, it

must in general be followed2. Contract of the parties may result in estoppel3. Courts may consider the relations existing between parties and purpose of

contract, particularly when made in good faith between mutual friends.

ART. 1372. However general the terms of a contract may be, they shall be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree.

Just as a special provision controls a general provision, a special intent prevails over a general intent.

ART. 1373. If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import which is most adequate to render it effectual.

ART. 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.

ART. 1375. Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract.

Word having 2 or more meanings; meaning that prevails:1. That in keeping with the nature & object of the contract2. If undetermined, “the terms of a writing are presumed to have been used in

their primary and general acceptation”*if evidence is admissible to show that they have a LOCAL, TECHNICAL, or otherwise peculiar signification, the agreement must be construed accordingly.

ART. 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily established.

If customs and usages are general, they need not be pleaded (even w/o being alleged they may be proved in court.)If merely local, then they have to be both alleged (pleaded) and proved.

ART. 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.

Reasons – since he caused the obscurity, the party who drew up the contract with ambiguous terms should be responsible; the obscurity must be construed against him.

ART. 1378. When it is absolutely impossible to settle doubts by the rules established in the preceding articles, and the doubts refer to incidental circumstances of a gratuitous contract, the least transmission of rights and interests shall prevail. If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have been the intention or will of the parties, the contract shall be null and void.

ART. 1379. The principles of interpretation stated in rule 123 of the Rules of Court shall likewise be observed in the constructions of contracts.

“the language of a writing is to be interpreted accdg. to the legal meaning it bears in the place of its execution, unless the parties intended otherwise” – Sec. 8, Rule 130 Revised rules of court

“the terms of a writing are presumed to have been used in their primary and general acceptation, but evidence is admissible to show that they have a local, technical, or otherwise peculiar signification, and were so used and understood in the particular instance, in which case, the agreement must be construed accdgly.” – Sec. 12, Rule 130

“when an instrument consists partly of written words and partly of a printed form, and the two are inconsistent, the former controls the latter.” – Sec. 13

4kinds of DEFECTIVE contracts:(a) Rescissible – valid until rescinded; extrinsic defect consisting of an

economic damage / lesion.(b) Voidable – valid until annulled. May not be annulled if there was

ratification. Intrinsic defect, as of vitiated consent.(c) Unenforceable – cannot be sued upon or enforced unless ratified.(d) Void – has no effect at all; cannot be ratified or validated.

3-2-071. Define a contract: give its elements and classification as to perfection, cause,

importance and name or designation. 1305 comment # 2, 3a, b, c, e

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. The elements of a contract are:

1) Essential elements, without which a contract cannot exist;2) Natural elements, which are presumed to exist unless contrary has been

stipulated; and3) Accidental elements, which may be present or absent depending upon the

stipulations agreed by the parties.Classification as to perfection:

1) Consensual, which is perfected by mere consent;2) Real, which is perfected by delivery; and3) Formal or solemn, where special formalities are essential before the

contract may be perfected.Classification as to cause:

1) Onerous2) Gratuitous or lucrative3) Remunerative

Classification as to importance:1) Principal2) Accessory3) Preparatory

Classification as to name/designation:1) Nominate2) innominate

2. What is a synalagmatic contract? 1305 comment # 3d2

Synalagmatic or bilateral contract is a contract where both parties are required to render reciprocal prestations.

3. What is meant by a “pactum commissorium” and is it valid or not? 1306 comment # 3c

A Pactum commissorium is a clause providing that the mortgagee will automatically own the property mortgaged if the debt is not paid at maturity. Such clause is null and void.

4. What are innominate contracts? Give its governing rules and kinds. 1307 comment # 1 & 2

Innominate contracts are contracts that are not given any special name. innominate contracts are regulated by the stipulations of the parties, by the provisions of Title I and II of the Book IV Obligations and Contracts, by the rules governing the most analogous nominate contracts, and by the customs of the place. There are four kinds of innominate contracts, which are:

1) Do ut des, which means that I give that you may give2) Do ut facias - I give that you may do3) Facio ut des – I do that you may give4) Facio ut facias – I do that you may do

5. What is the “principle of relativity of contracts” and give its exceptions? 1311 comment # 1 & 2

The principle of relativity states that contracts are generally effective only between the parties, their assigns, and their heirs. The exceptions to this principle are:

1. Where obligations arising from the contract are not transmissible by their nature, by stipulation, or by provision of law;

2. Where there is a stipulation pour autrui, or a stipulation in favor of a third party;

3. Where a third person induces another to violate his contract;4. Where third persons may be adversely affected by a contract where they

did not participate; and5. Where the law authorizes the creditor to sue on a contract entered into by

his debtor.

6. How are contracts perfected? 1315 comment # 2

Consensual contracts are perfected by mere consent, a valid object and cause. Real contracts are perfected by consent, object, cause and delivery. Formal or solemn contracts require a special form for perfection aside from consent, object and cause. In other words, there should be required documents.

7. What are the requisites for a person to contract in the name of another? 1317 comment # 1

In order for a person to contract in the name of another, he must be duly authorized either expressly or impliedly, or he must have by law a right to represent such person such as a guardian or administrator, or the contract must be subsequently ratified expressly or impliedly, by word or by deed.

8. Venecio offered 20pens to Jennifer for P500 each. Jennifer answered by letter that she was willing to purchase 30pens at the said price at P500 each. Is the contract perfected? 1319 comment # 7

The contract is perfected if Jennifer is content with 20pens, but merely desired to get 10 more. The contract is perfected only as much as where the original 20pens are concerned. The additional 10 pens is altogether another offer, and unless accepted, there would be no contract with respect to the additional 10 pens. If Jennifer wanted 30pens and would not be satisfied with less, there is no meeting of minds, therefore the contract is not perfected. There is only a counter-offer.

9. Suppose the principal himself made the offer and acceptance is communicated to the agent. Would there be a meeting of the minds? 1322 comment # 2

As a general rule, there would not be a meeting of minds, for the agent may be an ordinary one who is not authorized to receive acceptance for the particular transaction. However, if the agent was authorized expressly to receive such acceptance, or if the offeree has been told that acceptance can be made directly to the agent, there can be a meeting of the minds and a perfection of the contract.

10. Are business advertisements of things for sale definite offers? 1325 comment # 1

If such advertisement appears to be a definite offer containing all the specific particulars needed in a contract, it really is a definite offer. But if important details are left out, it is not a definite offer, but a mere invitation to make an offer.

11. What are the requisites for intimidation to vitiate consent? 1335 comment # 3

The requisites for intimidation to vitiate consent are:1) Reasonable and well-grounded fear2) Of an imminent and grave evil3) Upon his person, property, or upon the person or property of his spouse,

descendants or ascendants4) It must be the reason why the contract was entered into5) Such threat must be of an unjust act, an actionable wrong.

12. Are simulated contracts valid? 1346 comment # 1

Absolutely simulated fictitious contracts where the parties do not intend to be bound are void. Relatively simulated disguised contracts where the parties conceal their true agreement are valid but only as to the real or true agreement except if the contract would prejudice a third person or if the purpose is contrary to law, good customs, morals, public order or public policy.

13. While his father was still alive, a son sold his expected share to somebody. Is the contract valid? Why? 1347 comment # 5c2

No contract may be entered into upon future inheritance except in cases expressly authorized by law. The contract is invalid because the object of the contract is a future inheritance, which the law expressly prohibits except in cases authorized by law. In the case at bar, the particular contract is not one of those authorized by law regarding inheritance.

14. If a particular piano is sold for P50,000, what is the object and what is the cause? 1350 comment # 3

For the seller, the object is the piano and the cause is the price of P50,000; for the buyer the object is the price and the cause is the piano.In another school of thought, the object is the piano for both the seller and buyer. The cause for the seller is the price, and the cause for the buyer is the delivery of the piano.

15. In the Liguez case, what are the four grounds upon which the Heirs of Lopez anchored its motion for reconsideration and how each of them was answered by the Supreme Court? 1352 comment # 5

Motion for reconsideration by heirs + SC answers:a. Donation being null and void, should have no effect – an illegal donation is

void and neither party may invoke its unlawful character as a ground for relief

b. Lopez may be estopped from questioning its legality but his heirs are not – if Lopez cannot question, his heirs cannot also question for they can have no better right than the predecessor whom they replaced. Any question should be on some other ground, like its being inofficious

c. In pari delicto/conchita has not been given actual possession therefore cannot claim the same – pari delicto rule cannot apply as the guilt of a minor cannot be judged with equal severity as that of an adult. Minors occupy privileged position under law

d. Guilty of estoppel by latches – cannot apply to conchita otherwise the court would be prevented from enforcing the principle that a party to an illegal contract cannot recover what he has given pursuant thereto.

16. What are lesion and the rules on lesion? 1355 comment # 1 & 2

Lesion is the inadequacy of the cause, such as an insufficient price for a thing sold. As a general rule, it does not invalidate a contract except when there has been fraud, mistake or undue influence together with lesion, or in cases provided by law:

1) Those which are entered into by guardians whenever their wards suffer lesion by more than one-fourth of the value of the things which are the objects

2) Those agreed upon in representation of absentees if the latter suffer lesion by more than one-fourth of the value of the things which are the objects

3) Partition among co-heirs, when anyone of them received things with a value less by atleast one-fourth than the share to which he is entitled.

17. What is the form of contracts? 1356 codal

Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the rights of the parties stated in the ff. article cannot be exercised.

18. Give the requisites for the action for reformation. 1359 comment # 2

The requisites for the action for reformation are:1) There must be meeting of the minds2) True intention is not expressed in the instrument3) There must be clear and convincing proof thereof4) It must be brought within the proper prescriptive period5) The document must not refer to a simple unconditional donation inter vivos

or to a contract where the real agreement is void.

19. Give at least 5rules of interpretation of contracts. 1370-1379

The rules of interpretation of contracts are:1) If the terms of a contract are clear and unambiguous, the literal meaning

governs. If the words appear to contradict the evident intention of parties, the latter shall prevail over the former.

2) In order to judge the intention of the parties, their contemporaneous and subsequent acts shall be principally considered.

3) However general the terms of a contract may be, they shall be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree.

*special intent prevails over general intent4) If a stipulation should admit several meanings, it shall be understood as

bearing that import which is most adequate to render it effectual5) Various stipulations shall be interpreted together, attributing to the doubtful

ones that sense which may result from all of them taken jointly6) Words are to be interpreted in keeping with the nature and object of the

contract7) Usage of custom of the place shall be borne in mind in the interpretation of

the ambiguities of a contract8) Interpretation of obscure words/stipulations shall not favor the party who

caused the obscurity9) When it is absolutely impossible to settle doubts by the rules established in

the preceding articles, and the doubts refer to incidental circumstances of a gratuitous contract, the least transmission of rights and interests shall prevail. If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have been the intention or will of the parties, the contract shall be null and void.

10) The principles of interpretation stated in *rule 123 of the Rules of Court shall likewise be observed in the constructions of contracts *rule 130 revised rules of court

2-261-8 not included

9. What is meant by the principle of “freedom in contracts”? 1306

The principle of freedom in contracts means that the free entrance into contracts generally without restraint is one of the liberties guaranteed to by the people. However, the constitutional prohibition against the impairment of contractual obligations refers only to contract which are legal, not void or inexistent ones.

10. An attorney renders legal services for a close friend. Can the former still charge attorney’s fees even in the absence of any agreement thereon? Why? 1308 comment # 3

CORPUS vs CAIn the absence of any agreement, a lawyer can still charge attorney’s fees to a close friend because of the innominate contract of facio ut des based on the principle that one cannot unjustly enrich himself at another’s expense.

11. Give the meaning of the principle of relativity and give the exceptions? 1311 comment # 1 & 2

The principle of relativity states that contracts are generally effective only between the parties, their assigns, and their heirs. The exceptions to this principle are:

1. Where obligations arising from the contract are not transmissible by their nature, by stipulation, or by provision of law;

2. Where there is a stipulation pour autrui, or a stipulation in favor of a third party;

3. Where a third person induces another to violate his contract;4. Where third persons may be adversely affected by a contract where they

did not participate; and5. Where the law authorizes the creditor to sue on a contract entered into by

his debtor.

12. How are contracts perfected? 1315 comment # 2

Consensual contracts are perfected by mere consent, a valid object and cause. Real contracts are perfected by consent, object, cause and delivery. Formal or solemn contracts require a special form for perfection aside from consent, object and cause. In other words, there should be required documents.

13. If an offerer has allowed the offeree a certain period to accept, can he withdraw his offer? Why? 1324 codal

When the offerer has allowed the offeree certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.

14. Suppose the principal himself made the offer and the acceptance is communicated to the agent, would there be already a meeting of the minds? Why? 1322 comment # 2

If principal himself made offer, and acceptance is communicated to the agent, as a general rule, there is no meeting of minds for the agent may be an ordinary one, not authorized to receive acceptance for the particular transaction. If the agent was expressly authorized to receive acceptance, or if the offeree had been told that acceptance could be made direct with the agent, who would then be given freedom to act or to proceed, there can be a meeting of the minds and a perfection of the contract.

15. What is the rule as to the offer and acceptance? 1319 comment # 4 & 5

ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the first place where the offer was made.

2-8-081-4- not included

5. What is the meaning of “autonomy of contracts”? 1306 pp. 545

The principle of freedom in contracts means that the free entrance into contracts generally without restraint is one of the liberties guaranteed to by the people. However, the constitutional prohibition against the impairment of contractual obligations refers only to contract which are legal, not void or inexistent ones.

6. What is a pactum commissorium? Is it valid? Why? 1306 com # 3 pp 548

A Pactum commissorium is a clause providing that the mortgagee will automatically own the property mortgaged if the debt is not paid at maturity. Such clause is null and void because it is contrary to law.

7. Enumerate the 4kinds of innominate contracts and give the governing rules in the order? 1307 com # 1 & 2

There are four kinds of innominate contracts, which are:1) Do ut des, which means that I give that you may give2) Do ut facias - I give that you may do3) Facio ut des – I do that you may give4) Facio ut facias – I do that you may do

Innominate contracts are regulated by the stipulations of the parties, by the provisions of Title I and II of the Book IV Obligations and Contracts, by the rules governing the most analogous nominate contracts, and by the customs of the place.

8. Explain the meaning of “mutuality of contracts” and give its consequences? 1308 com # 2

Mutuality of contracts means that both contracting parties are bound. The principle is based on the essential equality of the parties.

Consequences of mutuality:(a) A party cannot revoke/renounce contract without the other’s consent, nor

set aside on the ground of a bad bargain.(b) When the fulfilment of the condition depends upon the sole will of the

debtor, the conditional obligation is void if the condition is suspensive. If resolutory, valid.

9. What is meant by the “consensuality of contracts” and give the consequences? 1315 (codal) com # 2

Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfilment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.

CONSENSUALITY of contracts – perfection by mere consent

Consequences of perfection:1. Parties are bound to the fulfilment of what has been expressly stipulated,

and compliance must be in good faith.2. Parties are bound to all the consequences which, accdg. to their nature,

may be in keeping with good faith, usage and law.

10. When is consent manifested? 1319 Codal

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

11. A offered ten ballpens to B at P500 each. B answered by letter that he was willing to buy 20 ballpens at said price each. Is the contract perfected? 1319 comment # 7

The contract is perfected if B is content with 20pens, but merely desired to get 10 more. The contract is perfected only as much as where the original 20pens are concerned. The additional 10 pens is altogether another offer, and unless accepted, there would be no contract with respect to the additional 10 pens. If B wanted 30pens and would not be satisfied with less, there is no meeting of minds, therefore the contract is not perfected. There is only a counter-offer.

12. Give the vices of consent and when is violence and intimidation sufficient to vitiate consent? 1330 codal

Vices of consent – causes of vitiated consent:(f) Mistake / error – affect intellect, cognition(g) Fraud / deceit(h) Violence – affect will, volition(i) Intimidation(j) Undue influence

There is violence when in order to wrest consent, serious or irresistible force is employed.There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent.To determine the degree of the intimidation, the age, sex and condition of the person shall be borne in mind.A threat to enforce one’s claim through competent authority, if the claim is just or legal, does not vitiate consent.

13. Give the kinds and meaning of simulated contracts, and are they valid or not? 1335 codal or comment # 2 & 3

14. If a particular violin is sold for P50,000, what is the object and what is the cause? 1350 comment # 3

15. Define lesion and give the rules and exceptions on lesion? 1355 comment # 1 & 2

16. What is the form of contracts? 1356 codal

17. Enumerate the requisites for the action for reformation? 1359 comment # 2

18. Give atleast 5rules in the interpretation of contracts? 1370-1379

19. In the case of Liguez vs CA, what are the grounds relied upon by the heirs of Lopez in their motion for reconsideration and how did the supreme court answer their contention? 1352 comment # 5