Obligations and Contract Clint

8/13/2019 Obligations and Contract Clint

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OBLIGATIONS (BOOK IV TITLE I)Arts. 1156-1304

I. General r!"#s#!ns ($%a&ter 1) Arts. 1156-1162

Obligation juridical necessity to give, to do or not to do (Art. 1156)

Ele'ents ! an O l#*at#!n

S!+r,es ! O l#*at#!ns Art. 11571. La . (!ot "resu#ed Art. 115$)2. %ontracts&. 'uasi-%ontracts. Acts or #issions "unis*ed +y La5. 'uasi- elicts

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ela ! "s. La+r!n (1 %#l 453)(Re: Article 1158, Civil Code) Medical services rendered by a physician for delivery of

the child are chargeable to the h sband, not to the parents!in!la" of the "ife, even if it "as the parents!in!la" "ho bro ght the da ghter!in!la" to the physician#

$r+/ "s. N!rt%ern T%eatr#,al Enter&r#ses ( 5 %#l 3 )$hile it is to the interest of the e%ployer to give legal help to, and defend, its e%ployees

charged cri%inally in co rt, in order to sho" that he "as not g ilty of any cri%e eitherdeliberately or thro gh negligence, beca se sho ld the e%ployee be finally held cri%inally liable

and he is fo nd to be insolvent, the e%ployer "o ld be s bsidiarily liable, s ch legal assistance%ight be regarded as a %oral obligation b t it does not at present co nt "ith the sanction of%an!%ade la"s# &f the e%ployer is not legally obliged to give legal assistance to its e%ployeeand provide hi% "ith a la"yer, nat rally said e%ployee %ay not a recover fro% his e%ployer thea%o nt he %ay have paid a la"yer hired by hi%#

'AR & * $+ MA- . + /0 R *' *&./ 2 R 0AMA3 *# 4 &f despite theabsence of any cri%inal responsibility on the part of the e%ployee he "as acc sed of ho%icide,the responsibility for the i%proper acc sation %ay be laid at the door of the heirs of thedeceased at "hose instance the action "as filed by the *tate thro gh the 2iscal# hisresponsibility can not be transferred to his e%ployer, "ho in no "ay intervened, % ch lessinitiated the cri%inal proceedings and "hose only connection or relation to the "hole affair "asthat it e%ployed plaintiff to perfor% a specific d ty or tas , "hich "as perfor%ed la"f lly and"itho t negligence#

II. Nat+re an2 E e,t ! O l#*at#!ns ($%a&ter ) Arts. 116&-117$

A. /ligation 0o ive (Art. 1165)1. A eter#inate r eci3ic 0*ing


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Individuali4ed and can /e identi3ied or distinguis*ed 3ro# ot*erso3 its ind

2. An Indeter#inate r eneric 0*ingIndicated only /y its ind, it*out /eing distinguis*ed 3ro# ot*erso3 t*e sa#e ind.

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A2!ra le "s. $A (31 S$ A 00) ( eal rig*t8 distinguis*ed 3ro# "ersonal rig*t8) Re: (Art# 1167) A real right,9 li e rights of o"nership and possession is the po"er

belonging to a person over a specific thing, "itho t a passive s b ect individ ally deter%inedagainst "ho% s ch right %ay be personally e;ercised< it gives a person a direct and i%%ediate

ridical po"er over a thing, "hich can be e;ercised not only against a deter%inate person, b tagainst the "hole "orld# A personal right9 on the other hand, is the po"er belonging to one

person to de%and of another, as a definite passive s b ect, the f lfill%ent of a prestation to give,to do, or not to do#

A. /ligation 0o o r !ot 0o o (Arts. 1167 9 116$)%. +reac*es 3 /ligations

1. %o# lete :ailure 0o "er3or#2. e3ault, elay r ;ora !o e3ault ?ce tions (Art. 116@)

Delay, default or Mora delay in t*e 3ul3ill#ent o3 o/ligations= it is non-3ul3ill#ent it* res ect to ti#e

i33erent inds o3 ;oraa. Mora solvendi

/. Mora accipiendic. Co%pensatio %orae

Re= isites of 0efa lt 0*at t*e o/ligation /e de#anda/le and liBuidated 0*at t*e de/tor delays er3or#ance 0*at t*e creditor de#ands er3or#ance judicially or e?trajudicially,

su/ject to t*e e?ce tions rovided /y la .

&. :raud In 0*e "er3or#ance 3 /ligation

a. Caiver 3 :uture :raud Is Doid (Art. 1171)

Fraud ( olo) (Art. 1171)0*e deli/erate and intentional evasion o3 t*e nor#al 3ul3ill#ent o3o/ligations. It i# lies #alice or dis*onesty and it cannot covercases o3 #ista eEerror in judg#ent


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Fraud ( olo) (Art. 11&$):raud in t*e negotiation, er3ection or consu##ation o3 t*econtract entitles t*e aggrieved arty t*e re#edy o3 rescission lusda#ages

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S&s. T!n*s!n "s. E'er*en, a ns%!& B+la In,. (610 S$ A 150) 2ra d in the negotiation, perfection or cons %%ation of contract entitles aggrieved

party to the re%edy of rescission pl s da%ages#

. !egligence (%ul a) In 0*e "er3or#ance 3 /ligation (Art. 117&)a. iligence !or#ally eBuired Is rdinary iligence r iligence

3 A ood :at*er 3 A :a#ily= >?ce tions %o##on %arrierseBuiring >?traordinary iligence (Arts. 1@@$-2FF2)

> 0ifferent ?inds of egligence As *o rce of bligation

%ul a contractual %ul a aBuiliana (Buasi delict) %ul a cri#inal

0est o3 !egligence - i3 de3endant did not use ordinary care and caution*ic* an ordinary rudent #an ould *ave used in t*e sa#esituation

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Valen,#a "s. 7$ an2 $A (103 %#l. 444)

(Re: Article 1186, Civil Code) he condition to p t p a bond by the "inning bidder toconstr ct a b ilding, %ay be "aived by the o"ner, and fail re of "inning bidder to p t p abond, "ill %a e "inning bidder liable for breach of contract and da%ages, beca se of fail re of"inning bidder to proceed "ith the constr ction# h s, p rs ant to Article 1186, Civil Code,the condition shall be dee%ed f lfilled "hen the obligor (the "inning bidder) vol ntarily

prevents its f lfill%ent9#

#,art "s. S'#t% (3 %#l 805)(Re: Article 115@, n %bers 7 and 5, Civil Code) he principal iss e is "hether or not

petitioners, heirs of deceased Arsenio irata, can prosec te a civil action for da%ages based on= asi!delict against both Ma;i%o .orilla (driver e%ployee) and ictorio choa (o"ner!

e%ployer) that b %ped Arsenio irata, "hile the cri%inal action for ho%icide thr rec lessi%pr dence "as still pending against Ma;i%o .orilla, the driver!e%ployees# -es, p rs ant to

Article B1@@, Civil Code< ho"ever, the plaintiff cannot recover da%ages t"ice for the sa%e actor o%ission of the defendant#

5. %ontravention 3 0*e 0enor 3 /ligation6. Legal >?cuse :or +reac* 3 /ligation :ortuitous >vent= eBuisites

(Art. 117 )


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. e#edies Availa/le 0o %reditor In %ases 3 +reac*1. eci3ic "er3or#ance

a. u/stituted "er3or#ance /y a t*ird erson in /ligation to delivergeneric t*ing and in o/ligation to do, unless a urely ersonal act

2. escission (resolution in reci rocal o/ligations)

&. a#ages, in any event. u/sidiary e#edies 3 %reditors (Art. 1177)a. Accion s brogatoria

/. Accion pa lianac. Accion directa (Arts. 1652 lessorGs rig*t to sue directly su/lessee ,16F$- vendorGs rig*t to sue directly assignee o3 vendee in acto de retro sale ,172@-la/orerGsE#aterial su lierGs rig*t to sue directly o ner ,1$@&- rinci alGs rig*t to sue directly su/-agent )

III. K#n2s ! O l#*at#!ns ($%a&ter 3) Arts. 117@-12&F

A. +re an2 $!n2#t#!nal O l#*at#!ns - (Se,t#!n 1) Arts. 117@-11@2

Pure /ligation it*out a condition or ter# (Arts. 117@-11$F)- de#anda/le atonce

Conditional /ligation it* a condition (Art. 11$1)

1. Classifications of Conditions:

a. "otestative E%asualE;i?ed

i. Potestative it de ends e?clusively on t*e ill o3 one o3 t*e arties

a. "otestative on art o3 e/tor I3 also sus ensive void

I3 also resolutory - valid /. "otestative o3 t*e art o3 t*e %reditor - valid

B ?inds of 'otestative Conditions: i# le "otestative (valid) I3 a decide to sell #y *ouse, t*e 3irst

o33er ill /e to you (t*e rig*t o3 3irst re3usal) "urely "otestative (void) I ill sell #y *ouse to you i3 I li e

ii. Casual its 3ul3ill#ent de ends u on c*ance or t*e ill or a t*ird ersoniii. Mixed its 3ul3ill#ent de ends u on t*e ill o3 a arty= t*e

o/ligation u on c*ance or t*e ill or a t*ird erson.

/. us ensive vs. esolutory

Suspensive Condition *a ening o3 condition gives rise to o/ligation


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Resolutory Condition *a ening o3 condition e?tinguis*es o/ligation

1. >33ect 3 0*e Ha ening 3 A us ensive %ondition (Art. 11$7)= esolutory%ondition

K#n2 ! O l#*at#!n $!n2#t#!n 7+l #lle2 etr!a,t#"#t0o give us ensive etroacts to day o3 constitution o3o/ligation

0o do or not to do us ensive %ourts s*all deter#ine retroactive e33ect0o give, to do or not to do esolutory !o retroactivity

2. >33ect 3 Loss 3 eci3ic 0*ing r eterioration or i# rove#ent o3 s eci3ict*ing /e3ore sus ensive condition (Art. 11$@)= i3 t*is occurs in resolutorycondition in o/ligation to do or not to do (11@F, ar. &)

E"ent art es&!ns# le E e,t On O l#*at#!n

0*ing Lost !o 3ault o3 de/tor >?tinguis*ed:ault o3 de/tor e/tor "ays a#ages

0*ing deteriorates !o 3ault o3 de/tor I# air#ent /orne /y %reditor :ault o3 de/tor %reditor #ay c*oose /et een rescission and

3ul3ill#ent it* da#ages in eit*er case0*ing I# roves ue to natureEti#e I# rove#ent to creditor

ue to de/tor e/tor *as rig*ts o3 usu3ructuary 3or t*ei# rove#ents

&. "o er 0o escind In eci rocal /ligations (Art. 11@1)

Reciprocal Obligations - arise 3ro# t*e sa#e cause, and in *ic* eac* is ade/tor and a creditor o3 t*e ot*er, suc* t*at t*e o/ligation o3 one is de endentu on t*e o/ligation o3 t*e ot*er. 0*ey are to /e er3or#ed si#ultaneously sot*at t*e er3or#ance o3 one is conditioned u on t*e er3or#ance o3 t*e ot*er.

Art# 11G1 0oes ot Apply &n:In sale o3 i##ova/le ro erty it* a roviso t*at in case /uyer 3ails to

ay, seller can rescind. Art. 15@2 a lies *ic* grants t*e /uyer t*e rig*tto ay as long as t*ere is no judicial or notarial de#and 3or rescission.

In contracts o3 lease /ecause *ile Art. 11@1 grants t*e court t*e o er to3i? a longer eriod 3or co# liance, Art. 165@ (on lease) suc* discretionary

o er is not granted to t*e courts.

In contract to sell o3 i##ova/le ro erty = *ence no judicial nor notarialde#and is needed to resolve(rescind) t*e contract. elate to ;aceda La( A 6552). :ailure to ay install#ent or /alance o3 t*e 3ull urc*ase riceis a ositive sus ensive condition, t*e 3ailure o3 *ic* is not a /reac*casual or serious /ut si# ly an event *ic* revented t*e o/ligation o3


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vendor to convey title . 0*e trans3er o3 o ners*i and title ould occura3ter 3ull ay#ent o3 urc*ase rice.

Art# 11G1 Applies &n: In a lease contract *ic* rovides t*at in case o3 non- ay#ent o3 rentals,

t*e lessor can eject it*out judicial roceedings, /ecause suc* rovision isvalid as even under Art. 11@1, lease contract /eing reci rocal contract, can /e rescinded in t*e event o3 non-3ul3ill#ent (%onsing vs. a#andre 6% A 1)

In a sale o3 #ova/le ro erties in *ic* case, no judicial a roval isnecessary i3 /uyer does not ay rice on date sti ulated.

%ase tudies $!ns#n* "s. ;a'an2re (64 S$ A 1)

(Re: Article 11G1, Civil Code) he contract bet"een s blessor and s blesseea thoriFing s blessor to ta e possession of leased pre%ises in case of breach of contract "itho t

dicial action, is valid and binding# his stip lation is in the nat re of a resol tory condition< dicial per%ission to cancel agree%ent is not necessary as dicial per%ission is needed only inthe absence of a special provision granting the po"er of cancellation# he s blessee cannotco%plain of deprivation of rights "itho t d e process of la"#

L#+ "s. L! ;r. (405 S$ A 316) Altho gh the la" allo"s the e;tra! dicial cancellation of a contract to sell pon fail re

of the party to co%ply "ith his obligation, notice of s ch cancellation % st still be given to the party "ho is at fa lt# he notice of cancellation to the other party is one of the re= ire%ents for

a valid cancellation of a contract to sell, aside fro% the e;istence of a la"f l ca se, citing thecase of /i% v# Co rt of Appeals, 3#R# o# 85@>>, B> 2ebr ary 1GGH, 18B *CRA 567, 5@1 . here"as no valid cancellation of the contract to sell, not even an i%plied one "here there "as no"ritten notice of the cancellation given to .enito /i or 2ran /i ## he letter does not %entionanything abo t rescinding or canceling the contract to sell#

B. O l#*at#!ns


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*en 3ro# nature or circu#stances, it can /e in3erred t*at eriodas intended

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B!rr!'e! "s. $A (4 S$ A 65)

he co%plaint by the creditor %ay e%body the fi;ing of the period "ithin "hich thedebtor "as to pay and also the collection of the a%o nt that ntil then "as not paid# An actionco%bining both feat res "as approved by the * pre%e Co rt# &n iglao v# he Manila

Railroad Co%pany:( G8 'hil# 181 (1G56)# D he d ration of the ter% sho ld be fi;ed in a separate action for that e;press p rpose b t there are good reasons for not adhering totechnicalities in its desire to do s bstantial stice#D (&bid, 187#) 0efendant does not clai% thatif a separate action "ere instit ted to fi; the d ration of the ter% of its obligation, it co ld

present better proofs than those already add ced in the present case# * ch separate action"o ld, therefore, be a %ere for%ality and "o ld serve no p rpose other than to delay#D (&bid,185#) here is no legal obstacle then to the action for collection filed by the creditor#

/. %reditor ;ust As %ourt 0o et 0*e "eriod, /e3ore *e can de#and ay#ent

c. e/tors *all Lose ig*t 0o ;a e , Civil Code) "hich provides that debtor shall se the right to%a e se of the period "hen the sec rity of the obligation disappear thr fort ito s event#

$. Alternat#"e O l#*at#!ns - (Se,t#!n 3) Arts. 11@@-12F6


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Alternative Obligation one *ere out o3 2 or #ore restations *ic* #ay /egiven, only one is due. ig*t to c*oice given to de/torunless e? ressly granted to creditor

Facultative Obligation one *ere only one restation *as /een agreed u on /ut

t*e o/ligor #ay render anot*er in su/stitution. ig*t toc*oose given only to de/tor

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A*!n,#ll! "s. ;a"#er (38 %#l. 4 4)(Re: Article 1BHH, Civil Code) Alternative bligations: he agree%ent to convey the

ho se and lot in the event of fail re to pay a debt in pay%ent, is si%ply an nderta ing that if thedebt is not paid in %oney, it "ill be paid in another "ay, or a case of alternative obligations, andtherefore valid# &t is not pacto co%%issorio9, "hich is prohibited nder Article BH88, CivilCode, "hich provides: he creditor cannot appropriate the things given by "ay of pledge or

%ortgage or dispose of the%# Any stip lation to the contrary shall be void#9 ( ote: &t is thea to%atic transfer of the o"nership of the %ortgaged property pon defa lt that is prohibited aspact % co%%issorio#9)


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Obligations n !"ic" #"e $a% Re&uires Solidarity I3 2 or #ore *eirs ta e ossession o3 t*e estate, t*ey are solidarily lia/le

3or t*e lossEdestruction All artners are lia/le solidarily 3or everyt*ing c*argea/le to t*e

artners*i under Arts. 1$22 (Buasi-delict) and 1$2& (cri#es) "rinci al and agent are lia/le solidarily to t*ird ersons i3 rinci al

allo ed t*e latter to act as t*oug* *e *ad aut*ority 2 or #ore rinci als are lia/le solidarily to a co##on agent 3or all t*e

conseBuences o3 t*e agency. 2 or #ore /ailees o3 t*e sa#e t*ing are lia/le solidarily to t*e /ailor. 2 or #ore o33icious #anagers are lia/le solidarily. 2 or #ore ayees in a negotioru# gestio are solidarily lia/le. 2 or #ore joint tort3easor are lia/le solidarily. 2 or #ore rinci alsEacco# licesEaccessories in eac* res ective class in

t*e co##ission o3 t*e cri#e are lia/le solidarily.

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Str!n*%!l2 Ins+ran,e "s. e&+ l#, Asa%# Glass $!r& (4 S$ A 1 ) Respondent creditor %ay s e, separately or together, the principal debtor and the

petitioner herein, in vie" of the solidary nat re of their liability# he death of the principaldebtor "ill not "or to convert, decrease or n llify the s bstantive right of the solidary creditor#

0espite the death of the principal debtor, respondent creditor %ay still s e petitioner alone, inaccordance "ith the solidary nat re of the latterJs liability nder the perfor%ance bond# As a

s rety, petitioner is solidarily liable "ith principal debtor in accordance "ith the Civil Code,"hich provides as follo"s: DArt# BH7@#.y g aranty a person, called the g arantor, binds hi%self

to the creditor to f lfill the obligation of the principal debtor in case the latter sho ld fail to do so# D&f a person binds hi%self solidarily "ith the principal debtor, the provisions of *ection 7, 1@Chapter >, itle & of this .oo shall be observed# &n s ch case the contract is called a s rety#

Art# 1B16# he creditor %ay proceed against any one of the solidary debtors or so%e or all ofthe% si% ltaneo sly# he de%and %ade against one of the% shall not be an obstacle to those"hich %ay s bse= ently be directed against the others, so long as the debt has not been f llycollected#D

Ka r!2+,ts In, "s. $A (464 S$ A 544) &n labor cases, corporate directors and officers are solidarily liable "ith the corporation

for the ter%ination of e%ploy%ent of corporate e%ployees done "ith %alice or in bad faith

( ichico v# ational /abor Relations Co%%ission, 3#R# o# 1B17>7, B I ne 1GG@, B@> *CRA>5#)# he president of a corporation, "ho actively %anages the b siness, falls "ithin the%eaning of an De%ployerD as conte%plated by the /abor Code, and %ay be held ointly and

severally liable for the obligations of the corporation to its dis%issed e%ployees ag iat v# /RC (3#R# o# 1161B>, 1> March 1GG@, B6G *CRA 567#)

E. =#"#s# le an2 In2#"#s# le O l#*at#!ns - (Se,t#!n 5) Arts. 122&-1225


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Divisible Obligation one ca a/le o3 artial er3or#ance

7. O l#*at#!ns #t% a enal $la+se (Se,t#!n 6) Arts. 1226, 122$-12&F

Purposes of a Penal Clause(a) Insurance 0o insure t*e er3or#ance o3 t*e o/ligation=(/) %o# ensation to liBuidate t*e a#ount o3

da#ages to /e a arded t*e injured arty in caseo3 /reac* o3 t*e o/ligation

(c) "unitive to unis* t*e o/ligor in case o3 /reac*o3 t*e rinci al o/ligation

Alt*oug* t*e sa#e as liBuidated da#ages (Art. 2226), a enalty in its unitive as ect is di33erent /ecause t*e creditor can recover da#ages in

addition to t*e enalty *en t*e de/tor re3uses to ay t*e enalty or *ent*e de/tor is guilty o3 3raud%ase tudy

IBAA "s. S&!+ses Sala/ar (15 S$ A 133)(Re: 'enal Cla se, Article 1BB6, Civil Code)# he Civil Code per%its the agree%ent

pon a penalty apart fro% the interest# he penalty does not incl de the interest, and as s ch,the t"o are different and distinct things "hich %ay be de%anded separately#

ID. ECt#n*+#s%'ent O O l#*at#!ns ($%a&ter 4) Arts. 12&1-1&F

A. a 'ent Or er !r'an,e - (Se,t#!n 1)Arts. 12&2-1261

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B I "s. !Cas (536 S$ A 168) &n &nternational Corporate .an v# *po ses 3 eco, (7H7 *CRA >5> (BHH1), it "as held

that a cashierJs chec is really the ban Js o"n chec and %ay be treated as a pro%issory note"ith the ban as the %a er# he chec beco%es the pri%ary obligation of the ban "hich iss esit and constit tes a "ritten pro%ise to pay pon de%and# &n e" 'acific i%ber K * pply Co#

&nc# v# *eLeris, (3#R# o# 71@67, 0ece%ber 1G, 1G8H, 1H1 *CRA 686), this Co rt too dicialnotice of the D"ell! no"n and accepted practice in the b siness sector that a cashierJs chec isdee%ed as cashD beca se the %ere iss ance of a cashierJs chec is considered acceptancethereof '

Ne a,# #, T#' er "s. Sener#s (101 S$ A 686)(Re: Article 1B7G, Civil Code) Article 1B7G provides: he delivery of pro%issory notes,

bills of e;change or other %ercantile doc %ents shall prod ce the effect of pay%ent only "henthey have been encashed or "hen thr the fa lt of the debtor they have been i%paired#9 A


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cashier s chec is dee%ed as cash "hen certified by dra"ee ban "hich for all intents and p rposes, the payee beco%es the depositor of the dra"ee ban # he certification i%plies that thechec is dra"n pon s fficient f nds in the hands of the dra"ee ban < that they have been setapart for its satisfaction and that they shall be so applied "henever the chec is presented for

pay%ent#:

!'an $at%!l#, B#s%!& ! @al!l!s In, "s. IA$ (1 1 S$ A 411) (Re: Article 1B7G, Civil Code) A certified personal chec is not legal tender< a chec

"hether %anager s chec or ordinary chec , is not a legal tender and an offer of a chec in pay%ent of a debt, is not a valid tender of pay%ent< hence, if creditor ref sed to accept, the s bse= ent consignation did not operate to discharge private respondent fro% his obligation to petitioner#

See als! .A. 8183 An A,t e&eal#n* A 5 (Dn# !r' $+rren, La )1. >?traordinary In3lation r e3lation Art. 125F

%ase tudy

$#t# an9 "s. Sa en#an! (514 S$ A 441)(Re: Article 1B5H, Civil Code) ;traordinary inflation or deflation9 e;ists "hen there

is a decrease or increase in the p rchasing po"er of the 'hilippine c rrency "hich is n s al orbeyond the co%%on fl ct ation in the val e of said c rrency, and s ch increase or decreaseco ld not have been reasonably foreseen or "as %anifestly beyond the conte%plation of the

parties at the ti%e of the establish%ent of the obligation# Article 1B5H of the Civil Code is basedon e= itable considerations# . t only the .ang o *entral ng 'ilipinas (.*') and not the co rt ,can declare the e;istence of e;traordinary inflation# #

$!''. O + l#, ?#*% a s "s. B+r*!s ( 6 S$ A 831) Article 1B5H of the e" Civil Code see%s to be the only provision in o r stat tes "hich

provides for pay%ent of an obligation in an a%o nt different fro% "hat has been agreed pon bythe parties beca se of the s pervention of e;tra!ordinary inflation or deflation# &t applies only tocases "here a contract or agree%ent is involved and does not apply "here the obligation to payarises fro% la", independent of contract# he ta ing of private property by the 3overn%ent inthe e;ercise of its po"er of e%inent do%ain does not give rise to a contract al obligation#

a'!s "s. $A ( 5 S$ A 16 )(Re: Article 1B5H, Civil Code) . t petitionerJs last contention (that private respondents

failed to pay increased rent despite s pervening inflation or deval ation of the 'hilippine peso)is ntenable# he provision of Art# 1B5H re= ires for its application a declaration of inflation bythe Central .an # $itho t s ch declaration creditors cannot de%and an increase of "hat is d ethe%# (Mobil il 'hilippines, &nc# v# Co rt of Appeals, 18H *CRA 651 (1G8G)#

7#l#n! #&e : 7!+n2r $!r&. "s. NA


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or "as %anifestly beyond the conte%plation of the parties at the ti%e of the establish%ent of theobligation# ( olentino Co%%entaries and I rispr dence on the Civil Code ol# & , p# B87#) he

price inde; of co%%odities, "hich is the s al evidence of the val e of the c rrency has beenrising# here is a "orld"ide occ rrence, b t this is hardly proof that the inflation ise;traordinary in the sense conte%plated by Article 1B5H of the Civil Code, "hich "as adopted

by the Code Co%%ission to provide Da st sol tionD to the J ncertainty and conf sion as a res ltof contracts entered into or pay%ents %ade d ring the last "ar#D (Report of the CodeCo%%ission, 1>B!1>>#)

2. ecial :or#s 3 "ay#entsa. =a,#!n In a 'ent ( acion >n "ago) Art. 12 5

/. A&&l#,at#!n ! a 'ents ( u/section 1)Arts. 1252-125

Re&uisites of Application of Pay(ents 0 o or #ore de/ts /et een sa#e de/tor and creditor e/ts #ust /e o3 t*e sa#e ind All de/ts #ust /e due "ay#ent #ust not /e enoug* to e?tinguis* all de/ts

c. a 'ent $ess#!n ( u/section 2) Arts. 1255C*en de/tor cedes or assigns *s.is ro erty to *is creditors in ay#ent o3*is de/t

)inds of Pay(ent by Cession %ontractual (Art. 1255)= Doluntary and Involuntary LiBuidation o3 Individual 9 %or orate

e/tors ( A 1014 (7 IA) LA


15/43

he right to redee% is a R&3+ , not an obligation, therefore, there is no consignationre= ired (0e Ies s v# 3arcia, C#A# 7@ #3# B7H6< Rosales v# Reyes, B5 'hil# 7G5, da# deN irino v# 'alarca, /!B8B6G, A g# 16, 1G6G) to preserve the right to redee% ( illegas v#Capistrano, G 'hil# 716)#

B. L!ss O T%e T%#n* =+e - (Se,t#!n ) Arts. 1262-126$ (/roadly #eans legal or *ysical i# ossi/ility o3 er3or#ance)

+xceptions #o Rule #"at $oss of Deter(inate #"ing /y Fortuitous +vent +xtinguis"es #"e Obligation :

C*en t*e la e? ressly rovides C*en /y e? ress sti ulation t*e o/ligor is #ade lia/le even i3 loss is /y

3ortuitous event C*en t*e nature o3 t*e o/ligation reBuires t*e assu# tion o3 ris C*en t*e 3aultEnegligence o3 t*e o/ligor concurs it* t*e 3ortuitous event C*en t*e loss occurs a3ter t*e de/tor *as incurred in delay (Art. 116@) C*en t*e de/tor *as ro#ised to deliver t*e sa#e t*ing to 2 or #ore ersons

*o do not *ave t*e sa#e rig*ts C*en t*e o/ligation to deliver a deter#inate t*ing arises 3ro# a cri#inal act

%ase tudies

Ort#*as : $! "s. 7eat# Ban9 : Tr+st $!. ( 4 S$ A 533)(Re: Article 1B66, Civil Code) A contract al stip lation annotated on the title that the

land p rchased shall be sed e;cl sively for residential p rposes is e;ting ished and ceases tobe binding bet"een parties pon the enact%ent of an ordinance or resol tion of the M nicipalCo ncil reclassifying the area as co%%ercial# he resol tion or rdinance, nder the general"elfare cla se, is a valid e;ercise of the police po"er of the /3 and is s perior to thecontract al stip lations bet"een the parties on the se of the land even if said conditions areannotated on the title#

Na*a Tele&%!ne $! In,. "s. $A ( 30 S$ A 351)( Re: Article 1B6@, Civil Code) he ter% service9 in Article 1B6@ is nderstood to

%ean perfor%ance9 of the obligation "hich in the present case, is the obligation of allo"ing petitioners to se posts of respondent for ten (1H) free telephone connections, "hich has beco%every onero s against the respondent# Article 1B6@, Civil Code, provides: $hen the service hasbeco%e so diffic lt has to be %anifestly beyond the conte%plation of the parties, the obligor %ayalso be released therefro% in "hole or in part#9 his is the doctrine of nforeseen event, and isbased on the discredited theory reb s sic stantib s9 in ' blic &nternational /a"# nder thetheory, the parties stip late in the light of certain prevailing conditions, and one of theseconditions cease to e;ist, the contract also ceases to e;ist# Considering practical needs and thede%ands of e= ity and good faith, the disappearance of the basis of the contract gives right torelief in favor of the party pre diced#

$. $!n2!nat#!n Or e'#ss#!n O =e t - (Se,t#!n 3)Arts. 127F-127


16/43

Condonation0Re(ission t*e gratuitous a/andon#ent /y t*e creditor o3 *is rig*t.It is an act o3 li/erality /y virtue o3 *ic* t*e o/lige,it*out receiving any rice or its eBuivalent, renouncest*e en3orce#ent o3 t*e o/ligation as a result o3 *ic* it

is e?tinguis*ed in its entirety or in art.

1. >? ress :or#ality o3 onation art. 127F2. I# lied Arts. 1271, 1272, 127

=. $!n +s#!n Or @er*er ! #*%ts - (Se,t#!n 4) Arts. 1275-1277

Confusion0Merger t*e #eeting in one erson o3 t*e Buali3ies o3 creditor andde/tor *ic* res ect to t*e sa#e o/ligation e?tinguis*eso/ligation

E. $!'&ensat#!n - (Se,t#!n 5) Arts. 127$-12@F

Co(pensation ta es lace *en 2 ersons, in t*eir o n rig*t, are creditors andde/tors o3 eac* ot*er

)ind s Arts. 127$, 127@a. Legal %o# ensation Arts. 12$6-12@F

/. Agree#ent Art. 12$2c. Doluntary Art. 12$2d. udicial Art. 12$&e. :acultative

%ase tudies

G+llas "s. NB (6 %#l 51 )3 llas, "ho had a chec ing acco nt "ith ' ., endorsed and encashed a chec "ith

' .# he chec "as later dishonored and ' . applied the balance of the chec ing acco nt of3 llas by "ay of co%pensation9 "ith the obligation of 3 llas as endorser of the dishonoredchec # here can be co%pensation "here the depositor in a ban has an indebtedness in favorof the ban # his old r ling in the 3 llas case is f rther strengthened by Article 1G8H (ne")Civil Code, "hich provides: 2i;ed, savings and c rrent deposits of %oney in ban s and si%ilarinstit tions shall be governed by the provisions concerning si%ple loan#9

Ban9 ! t%e %#l Islan2s "s. $A ( 3 S$ A 30 ) Article 1G8H of the Civil Code provides that DOfPi;ed, savings, and c rrent deposits of

%oney in ban s and si%ilar instit tions shall be governed by the provisions concerning si%pleloan#D &n *errano vs# Central .an of the 'hilippines, (G6 *CRA G6 O1G8HP# *ee also, 3 ingonavs# City 2iscal of Manila, 1B8 *CRA 5@@ O1G87P< 'eople vs# ng, BH7 *CRA G7B O1GG1P), "eheld that ban deposits are in the nat re of irreg lar deposits9< they are really loans beca se


17/43

they earn interest# he relationship then bet"een a depositor and a ban is one of creditor anddebtor# he deposit nder the = estioned acco nt "as an ordinary ban deposit< hence, it "as

payable on de%and of the depositor# (1H A% I r Bd, .an s, * >56)

Obligations 0Debts #"at Are 1ot Co(pensable

e/ts arising 3ro# contracts o3 de ositu# e/ts arising 3ro# contracts o3 co##odatu# %lai#s 3or su ort due /y gratuitous title /ligations arising 3ro# cri#inal o33enses %ertain o/ligations in 3avor o3 t*e govern#ent suc* as ta?es, 3ees,

duties and ot*ers o3 si#ilar nature

%ase tudies

Gar,#a "s. L#' $%+ S#n* (5 %#l 56 )(Re: Article 1B@G, Civil Code) A stoc holder s shares of stoc of the Mercantile .an

of China do not constit te an indebtedness of the ban to the stoc holder and therefore there canbe no co%pensation "ith the latter s indebtedness to the ban # *toc holders are not creditors ofthe corporation# he capital stoc of the corporation is a tr st f nd9 as sec rity of creditors ofthe corporation "ho pres %ably deal "ith it on the credit of its capital stoc #

NB "s. $A ( 5 S$ A 1 4) A local ban , "hile acting as local correspondent ban , does not have the right to

intercept f nds being co rsed thro gh it by its foreign co nterpart for trans%ittal and depositto the acco nt of an individ al "ith another local ban , and apply the said f nds to certainobligations o"ed to it by the said individ al# 'etitioner ban "as not legally stified in %a ingthe co%pensation or set!off against the t"o re%ittances co rsed thro gh it in favor of privaterespondent to recover on the do ble credits it erroneo sly %ade in 1G8H and 1G81, based on the

principle of sol tio indebiti#

7. N!"at#!n - (Se,t#!n 6) Arts. 12@1-1&F

1ovation is t*e su/stitution o3 c*ange o3 an o/ligation /y anot*er, resulting in itse?tinguis*#ent or #odi3ication, eit*er /y c*anging its o/ject o3

rinci al conditions, or /y su/stituting t*e erson o3 t*e de/tor, or /ysu/rogating a t*ird erson in t*e rig*ts o3 a creditor #

An e?tension o3 t*e eriod o3 ay#ent no novationAgree#ent to s*orten eriod o3 ay#ent novation /ecause o3inco# ati/ility /et een old and ne o/ligations

2 +ssential Re&uisites of 1ovation : A revious valid o/ligation Agree#ent o3 t*e arties to t*e ne o/ligation >?tinguis*#ent o3 t*e old o/ligation


18/43

Dalidity o3 t*e ne o/ligation

3 )inds of 1ovation /y Substitution of Debtors4

+xpro(ision *First )ind. su/stitution o3 de/tors it* t*e consent o3

creditors at t*e instance o3 ne de/tors . !e de/tor and creditor #ustconsent.

+xpro(ision *Second )ind. su/stitution o3 de/tors it*out t*eno ledge or against t*e ill o3 t*e old de/tor. InsolvencyEnon-3ul3ill#ento3 ne de/tor ill not give rise to any lia/ility on t*e art o3 old de/tor.

Delegacio n su/stitution o3 de/tors it* t*e consent o3 t*e creditor(delegatario) at t*e instance o3 t*e old de/tor (delegante) it* t*econcurrence o3 t*e ne de/tor (delegado). !e and old de/tors andcreditor #ust consent.

Subrogation 0rans3er to t*e erson su/rogated t*e credit it* all t*e rig*ts

t*ereto a ertaining, eit*er against t*e de/tor or against t*ird ersons, /e t*ey guarantors or ossessors o3 #ortgage, su/ject tosti ulations in conventional su/rogation

3 For(s of Subrogation Of Creditors

%onventional u/rogation ta es lace /y t*e agree#ent o3 t*e originalcreditor, t*e t*ird erson su/stituting t*e original creditor and de/tor(Art. 1&F1)

Legal u/rogation ta es lace /y o eration o3 la (Art. 1&F2)

C*en creditor ays anot*er creditor *o is re3erred even it*outde/torGs no ledgeC*en a & rd erson, not interested in o/ligation, ays it* e? ressEtacita roval o3 de/tor C*en, even it*out no ledge o3 de/tor, a erson interested in t*e3ul3ill#ent o3 o/ligation ays, it*out rejudice to e33ect o3 con3usion inlatterGs s*are

$!n"ent#!nal S+ r!*at#!n Ass#*n'ent ! $re2#tgoverned /y Arts. 1&F1, 1&F&, 1&F = governed /y Arts. 162 9

1627e?tinguis*es t*e o/ligation and creates a ne one credit is not e?tinguis*edeBuires de/torGs consent oes not reBuire de/torGs

consente3ect o3 old creditErig*t #ay /e cured and neo/ligation /eco#es entirely valid

e3ect in creditErig*t is notcured

%ase tudies


19/43

@a*2alena Estate "s. !2r#*+e/ (18 S$ A 6 ) =+n*! "s. L!&ena (6 S$ A 100 ) eArt#,le 1 $#"#l $!2e

ovation is never pres %ed< it % st be established that the old and the ne" contracts areinco%patible on every point, or that the "ill to novate appear by e;press agree%ent of the

parties# here is no i%plied novation, if in the second contract a bond is filed or a third personass %es pay%ent of the obligation and the creditor accepts partial pay%ent fro% the third person, so long as the creditor did not agree that the first debtor shall be released fro% theobligation#

e!&le "s. Ner (10 S$ A 44) Re: Article 1BGB, Civil Code Acc sed "ho "as charged for estafa for %isappropriating

the proceeds of dia%ond rings consigned to her for sale, cannot escape cri%inal liability by thedefense of novation# he pro%issory note e;ec ted by the acc sed in favor of co%plainante;ec ted pending trial at the R C did not convert the relationship bet"een parties to a contractof loan fro% a contract of agency to sell# he novation theory %ay perhaps apply prior to the

filing of the cri%inal infor%ation in co rt by the *tate 'rosec tors beca se p to that ti%e theoriginal tr st relation %ay be converted by the parties into an ordinary creditor!debtor sit ation, thereby placing co%plainant in estoppel to insist on the original tr st# A cri%e beingan offense against the *tate, only the latter can reno nce it#

G+#n*!na "s. $#t 7#s,al ! @an#la (1 8 S$ A 5 )i%e and savings deposits "ith the ban are contracts of si%ple loan or % t %# he

relationship bet"een the depositor and ban is that of creditor and debtor# . t even if ban failed to pay the ti%e and savings deposits of depositor, violating paragraph 1(b) of Article >15of the Revised 'enal Code, there "as no cri%inal liability# $hen the ban "as placed nderreceivership by the Central .an , petitioners 3 ingona and Martin ass %ed the obligation ofthe ban to depositor, thereby res lting in the novation of the original contract al obligationarising fro% deposit into a contract of loan and converting the original tr st relation bet"eenthe ban and depositor into an ordinary debtor!creditor relation bet"een the petitioners and

private respondent# +ence, the fail re of the ban or petitioners 3 ingona and Martin to pay thedeposits of depositor "o ld not constit te a breach of tr st b t "o ld %erely be a fail re to paythe obligation as a debtor#

$ONT A$TS (BOOK IV TITLE II)Arts.1305-14

I. General r!"#s#!ns ($%a&ter 1) Arts. 1&F5-1&17

Perfect Pro(ise tends only to assure and ave t*e ay 3or t*e cele/ration o3 t*econtract in t*e 3uture, *ereas a contract esta/lis*es and deter#ines t*eo/ligations arising t*ere3ro#=

(perfect Pro(ise *Policitation ) is a #ere unacce ted o33er


20/43

Pact a s ecial art o3 t*e contract, #erely incidental and se ara/le 3ro# t*e rinci alagree#ent

Stipulation re3ers to t*e essential and dis ositive art o3 t*e contract, as distinguis*ed3ro# t*e e? osition o3 t*e 3acts and antecedents on *ic* it is /ased

Contract juridical convention #ani3ested in legal 3or#, /y virtue o3 *ic* one or #ore ersons /ind t*e#selves in 3avor o3 anot*er or ot*ers, or reci rocally, to t*e3ul3ill#ent o3 t*e restation to give to do or not to do ( *ancheF Ro%an)

Stages of a Contract41. "re aration, %once tion or eneration eriod o3 negotiation and /argaining,

ending at t*e #o#ent o3 agree#ent /et een t*e arties2. "er3ection or +irt* o3 t*e %ontract t*e #o#ent *en t*e arties co#e to agree

on t*e ter#s o3 t*e contract=&. %onsu##ation or eat* t*e 3ul3ill#ent or er3or#ance o3 t*e ter#s agreed

u on in t*e contract ( oler vs. %A, &5$ % A 6&)

#"eories !"en Or #"e Mo(ent Of Perfection Of A Contract41. ;ani3estation t*eory t*e contract is er3ected 3ro# t*e #o#ent t*e acce tance is

declared or #ade (Art. 5 %ode o3 %o##erce)2. >? edition 0*eory t*e contract is er3ected 3ro# t*e #o#ent t*e o33eree trans#its

t*e letterEnoti3ication o3 acce tance to t*e o33eror, as *en t*e letter is laced in#ail/o? (


21/43

he binding effect of any agree%ent bet"een parties to a contract is pre%ised on t"o settled principles: (1) that any obligation arising fro% contract has the force of la" bet"een the parties< and (B) that there % st be % t ality bet"een the parties based on their essentiale= ality# Any contract "hich appears to be heavily "eighed in favor of one of the parties so as tolead to an nconscionable res lt is void# Any stip lation regarding the validity or co%pliance of

the contract "hich is left solely to the "ill of one of the parties, is li e"ise, invalid#

7l!#ren2! "s. @etr! an9 (53 S$ A 43) &ncreases of interest rate nilaterally i%posed by respondent ban "itho t petitionerJs

assent are violative of the principle of % t ality of contracts ordained in Article 1>H8 of theCivil Code# he provision in the pro%issory note a thoriFing respondent ban to increase,decrease or other"ise change fro% ti%e to ti%e the rate of interest andEor ban charges D"itho tadvance noticeD to petitioner, Din the event of change in the interest rate prescribed by la" orthe Monetary .oard of the Central .an of the 'hilippines,D does not give respondent bannrestrained freedo% to charge any rate other than that "hich "as agreed pon# +ere, the%onthly p"ardEdo"n"ard ad st%ent of interest rate is left to the "ill of respondent ban

alone# &t violates the essence of % t ality of the contract#

D$ B "s. Bel+s! (530 S$ A 56 )he provision stating that the interest shall be at the Drate indicative of 0.0 retail rate

or as deter%ined by the .ranch +eadD is indeed dependent solely on the "ill of petitioner C'.and violates Art# 1>H8 of the Civil Code# +ere, petitioner C'. has t"o choices on "hat theinterest rate shall be: (1) a rate indicative of the 0.0 retail rate< or (B) a rate as deter%ined bythe .ranch +ead## &f either of these t"o choices presents an opport nity for C'. to fi; the rateat "ill, the ban can easily choose s ch an option, th s %a ing the entire interest rate provisionviolative of the principle of % t ality of contracts#

S#n*s!n En,arna,#!n "s. Bal2!'ar ( %#l 4 0)he contin ance and f lfill%ent of the contract of lease cannot be %ade to depend solely

and e;cl sively pon the free and ncontrolled choice of the lessees bet"een contin ing payingthe rentals or not, co%pletely depriving the o"ner of all say in the %atter# &f this "ere allo"ed,

so long as defendants elected to contin e the lease by contin ing the pay%ent of the rentals, theo"ner "o ld never be able to discontin e it< conversely, altho gh the o"ner sho ld desire thelease to contin e, the lessees co ld effectively th"art his p rpose if they sho ld prefer toter%inate the contract by the si%ple e;pedient of stopping pay%ent of the rentals# his, ofco rse, is prohibited by article 1B56 (no" Art# 1>H8) of the Civil Code#

La!l#' "s. $A (1 1 S$ A 150)he disp ted stip lation Dfor as long as the defendant needed the pre%ises and can %eet

and pay said increasesD is a p rely potestative condition beca se it leaves the effectivity anden oy%ent of leasehold rights to the sole and e;cl sive "ill of the lessee# he contin ance,effectivity and f lfill%ent of a contract of lease cannot be %ade to depend e;cl sively pon the

free and ncontrolled choice of the lessee bet"een contin ing the pay%ent of the rentals or not,co%pletely depriving the o"ner of any say in the %atter# M t ality does not obtain in s ch acontract of lease and no e= ality e;ists bet"een the lessor and the lessee since the life of thecontract is dictated solely by the lessee#


22/43

;es&aF! ealt $!r&. "s. $A (3 0 S$ A )he contention of the petitioner that a provision in a contract that the lease period shall

s bsist for Jan indefinite period provided the lessee is p!to!date in the pay%ent of his %onthlyrentalsJ is contrary to Art# 1>H8 of the Civil Code is not pla sible# As e;po nded by the Co rt in

the case of 'hilippine .an ing Corporation vs# / i *he (B1 *CRA 5B, 58 (1G6@)):D$e have hadoccasion to delineate the scope and application of Article 1>H8 in the early case of aylor v# yieng 'iao# (7> 'hil# 8@> (1GBB)# $e said in that case: JArticle 1B56 Ono" Art# 1>H8P of the CivilCode in o r opinion creates no i%pedi%ent to the insertion in a contract for personal service ofa resol tory condition per%itting the cancellation of the contract by one of the parties# * ch a

stip lation, as can be readily seen, does not %a e either the validity or the f lfill%ent of thecontract dependent pon the "ill of the party to "ho% is conceded the privilege of cancellationH8 of the ne" Civil Code# he validity or co%pliance thereof is notentirely left to the "ill of one of the contracting parties, b t it %erely gives the vendor the rightto declare s ch contract cancelled and of no effect# &ndeed, the po"er th s granted cannot be

said to be i%%oral, % ch less nla"f l, for it co ld not be arbitrarily e;ercised "itho t theother party co%%itting the breach of contract for nonpay%ent of the install%ents agreed pon#bvio sly, all that said party had to do to prevent the other fro% e;ercising the po"er to cancel"as for hi% to co%ply "ith his part of the contract#

%ase tudies (>?ce tions to "rinci le o3 elativity o3 %ontracts)

$! +#a "s. 7#el2'en s Ins+ran,e $!. ( 6 S$ A 1 8) ( ti ulation our autrui) Altho gh, in general, only parties to a contract %ay bring an action based thereon, this

r le is s b ect to e;ceptions, one of "hich is fo nd in the second paragraph of Article 1>11 ofthe Civil Code of the 'hilippines, reading: D&f a contract sho ld contain so%e stip lation in


23/43

favor of a third person, he %ay de%and its f lfill%ent provided he co%% nicated his acceptanceto the obligor before its revocation# A %ere incidental benefit or interest of a person is not

s fficient# he contracting parties % st have clearly and deliberately conferred a favor pon athird person#D his is a restate%ent of a "ell! no"n principle concerning contracts po r a tr i,the enforce%ent of "hich %ay be de%anded by a third party for "hose benefit it "as %ade,

altho gh not a party to the contract, before the stip lation in his favor has been revo ed by thecontracting parties#

he ins rance policy contains stip lations p rs ant to "hich the ins rance co%panyD"ill inde%nify any a thoriFed 0river "ho is driving the Motor ehicleD of the &ns red and, inthe event of death of said driver, the Co%pany shall, li e"ise, Dinde%nify his personalrepresentatives,D and the Co%pany D%ay, at its option, %a e inde%nity payable directly to theclai%ants or heirs of clai%ants # # # in other "ords, third parties# his is typical of contracts

po r a tr i# his character being %ade %ore %anifest by the fact that the deceased driver paid fifty percent (5HQ) of the corresponding pre%i %s, "hich "ere ded cted fro% his "ee lyco%%issions# nder these conditions, it is clear that the sole heirs of the deceased 4 have a

direct ca se of action against the Co%pany ( y a% v# /eonard, >H 'hil# 7@1, 785!786< ?a ff%an v# 'hilippine ational .an , 7B 'hil# 18B, 18@, 18G), and, since they co ld have%aintained this action by the%selves, "itho t the assistance of the ins red it goes "itho t sayingthat they co ld and did properly oin the latter in filing the co%plaint herein (3 ingon v# Capital

&ns rance K * rety Co#, &nc#, /!BBH7B, A g# 1@, 1G6@)#

@an2ar#n V#lla In,. "s. $A ( 5 S$ A 538) ( ti ulation our autrui)$hile private respondent %ay not be a party to the said agree%ent, the above!= oted

stip lation conferred a favor pon the private respondent, a holder of credit card validly iss edby .A ?AR0# his is a stip lation po r a tr i and nder Article 1>11 of the Civil Code, privaterespondent %ay de%and its f lfill%ent provided he co%% nicated his acceptance to the

petitioner before its revocation# &n this case, private respondentJs offer to pay by %eans of his .A ?AR0 credit card constit tes not only an acceptance of the said stip lation b t also ane;plicit co%% nication of his acceptance to the obligor#

Ka+ 'an "s. NB (4 %#l 18 ) ( ti ulation our autrui) A person in "hose favor a ban sells telegraphic e;change on a foreign co ntry %ay, in

case pay%ent is ref sed by the ban of destination, %aintain an action against the ban sellingthe e;change, "itho t regard to "hether s ch payee "as an i%%ediate party to the p rchase ofthe e;change or not# A stip lation in favor of a third person cannot be revo ed by the obligated

party alone, "itho t the confor%ity of the other contracting party#

II. Essent#al e +#s#tes (%*a ter 2) - Arts. 1&1$-1&5

a. $!nsent (Se,t#!n 1) Arts. 1&1@-1& 6

Option - contract granting a erson t*e rivilege to /uy or not to /uy certaino/jects at any ti#e it*in t*e agreed eriod at a 3i?ed rice.


24/43

Rig"t of First Refusal identity o3 ter#s and conditions o33ered to lessee and ros ective /uyers

#*%t ! 7#rst e +sal "s. O&t#!n (Arts. 1&2 and 1 7@)In a contract o3 lease it* &F-day e?clusive o tion to urc*ase (leased

re#ises), t*e roviso is valid even i3 t*ere is no agreed urc*ase rice t*econsideration is t*e contract o3 lease itsel3. 0*is is not covered /y Art. 1&2and 1 7@ *ic* reBuires consideration distinct 3ro# t*e ruca*se ri

#%o )inds Of 5ices of Consent4Dices o3 eclaration si#ulated contracts (Arts. 1& 5E1& 6)Dices o3 t*e Cill #ista e, violence, inti#idation, undue in3luence, and3raud (Art. 1&&F)

Classes of Fraud :1. In general cri#inal 3raud and civil 3raud

2. %ivil 3raud /. :raud in t*e er3or#ance o3 an e?isting o/ligation (Art. 117F)c. :raud e# loyed /y t*e arty to a contract in securing t*e consent

o3 t*e ot*er arty (Art. 1&&$)

Classifications of Fraud n Securing #"e Consent Of Ot"er Party1. olo causante (causal 3raud) dece tions or #isre resentations o3 a

serious c*aracter e# loyed /y one arty it*out *ic* t*e ot*er artyould not *ave entered into t*e contract

2. olo incidente (incidental 3raud )incidental dece tions or#isre resentations it*out *ic* t*e ot*er arty ould still *ave

entered into t*e contract

%ase tudies

Vales "s. V#lla (35 %#l 6 ) All %en are pres %ed to be sane and nor%al and s b ect to be %oved by s bstantially

the sa%e %otives# $hen of age and sane, they % st ta e care of the%selves# &n their relations"ith others in the b siness of life, "its, sense, intelligence, training, ability and dg%ent %eetand clash and contest, so%eti%es "ith gain and advantage to all, so%eti%es to a fe" only, "ithloss and in ry to others# &n these contests %en % st depend pon the%selves 4 pon their o"nabilities, talents, training, sense, ac %en, dg%ent# ; ; ; he foolish %ay lose all they have to

the "ise< b t that does not %ean that the la" "ill give it bac to the% again# Co rts cannot follo" one every step of his life and e;tricate hi% fro% bad bargains, protect hi% fro% n"iseinvest%ents, relieve hi% fro% one!sided contracts, or ann l the effects of foolish acts# Co rtscannot constit te the%selves g ardians of persons "ho are not legally inco%petent# Co rtsoperate not beca se one person has been defeated or overco%e by another, b t beca se he hasbeen overco%e illegally# Men %ay do foolish things, %a e ridic lo s contracts, se %iserable

dg%ent, and lose %oney by the% 4 indeed, all they have in the "orld< b t not for that alonecan the la" intervene and restore# here % st be, in addition, a violation of la", the co%%ission


25/43

of "hat the la" no"s as an actionable "rong, before the co rts are a thoriFed to lay hold ofthe sit ation and re%edy it#

San,%e/ "s. #*!s (45 S$ A 368)

; ; an option to sell can still be "ithdra"n, even if accepted, if the sa%e is not s pported by any consideration, and the reaffir%ance of the doctrine in At ins, ?roll K Co#, &nc#vs# C a +ian e , (1HB 'hil G78) holding that Dan option i%plies # # # the legal obligation to eepthe offer (to sell) open for the ti%e specifiedB7) $here a ti%e is stated in an offer for its acceptance, the offer is

ter%inated at the e;piration of the ti%e given for its acceptance# he offer %ay also beter%inated "hen the person to "ho% the offer is %ade either re ects the offer o tright or %a esa co nter!offer of his o"n# (Minneapolis K *#/# Rail"ay v# Col %b s Rolling Mill, 11G * 17G,>H / d# >@6 (1886))

E +at!r#al ealt "s. @a a#r T%eater In,. ( 64 S$ A 483)(Re: Article 1>B7) $here an action for ann l%ent (rescission "o ld have been proper)

"as granted, setting aside a contract of sale by the lessor in favor of a third person, in violationof the Right f 2irst Ref sal,9 in the contract of lease bet"een lessor and lessee# he co rt%ade a distinction bet"een option9 and the right of first ref sal9 in that in an option,9 anoption %oney is necessary, b t not in the right of first ref sal#


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Tan* "s. $A ( 0 S$ A 36)(Re: Article 1>>B) A deliberate conceal%ent on the part of the ins red of %aterial facts

abo t his physical condition and history entitles the ins rer to rescind the contract . nder Article 1>>B, the obligation to sho" that the ter%s of the contract had been f lly e;plained to the party "ho is nable to read or nderstand the lang age of the contract, "hen fra d or %ista e is

alleged, devolves in the party see ing to enforce it# $here fra d or %ista e is not alleged, andthe one see ing to enforce the contract is the illiterate party, the party against "ho% the actionis bro ght and "ho is see ing to avoid the perfor%ance of the contract is nder no obligation to

prove that the ter%s of the contracts "ere f lly e;plained to the other party# &n a life ins rancecontract, "here the ins rer is see ing to avoid its perfor%ance on the gro nd of conceal%ent onthe part of the ins red, the ins rer is not nder obligation to prove that the ter%s of the contract"ere f lly e;plained to the ins red "ho "as an illiterate# . t even if "e "ere to say that theins rer is the one see ing the perfor%ance of the contract by avoiding paying the clai%, Article1>>B is inapplicable "here there has been no i%p tation of %ista e or fra d by the ins red"hose personality is represented by the beneficiary#

+. O Fe,t ! $!ntra,ts (Se,t#!n ) Arts. 1& 7-1& @ Ob6ect vs' Cause In a /ilateral contract li e sale, t*e o/ject is t*e t*ing sold

/ecause it is t*e starting oint o3 negotiation= t*e cause 3or t*e vendor ist*e rice aid, *ile t*e cause 3or t*e vendee is t*e acBuisition o3 t*et*ing sold.

;ay include 3uture t*ings and trans#issi/le rig*ts.

3 +xceptions #o Pro"ibition of Contracts Of Future n"eritancea. Art. $ o3 :a#ily %ode on donations o3 3uture s ouses to eac* ot*er in

donations ro ter nu tias (3or#alities o3 a ill #ust /e 3ollo ed) /. Art. 1F$F !%%. A erson #ay artition intervivos *is estate so long as

legiti#e is not i# aired.

%. $a+se ! $!ntra,ts (Se,t#!n 3) Arts. 1&5F-1&55

Cause of Contract *y o3 t*e contract8 t*e i##ediate and #ost ro?i#ate ur ose o3 t*e contract, t*e essential reason *ic* i# els t*e contracting arties to enter into it.

0istinction .et"een Motive and Ca se (Art# 1>51)

$a+se @!t#"et*e direct ro?i#ate reason o3 a contract t*e indirect or re#ote reasons=t*e o/jective or juridical reason o3 a contract t*e syc*ological or ersonal reasonscause 3or a certain contract is al ays t*e sa#e #otives ill di33er or vary u on *o are

t*e artiescan a33ect t*e validity o3 a contract cannot a33ect validity o3 contract


27/43

%ase tudies

D "s. $A (314 S$ A 6 ) he realiFation by the b yer of the %ista e as regards the = ality of the land res lted in

the negation of the %otiveEca se th s rendering the contract ine;istent# nder Article 1>18 ofthe Civil Code, there is no contract nless there is consent, ob ect certain and ca se# Ca se isthe essential reason "hich %oves the contracting and is the essential reason for the contract,

sho ld be disting ished fro% %otive, "hich is the partic lar reason of a contracting party "hichdoes not affect the other party# rdinarily, a partyJs %otives for entering into the contract do notaffect the contract# $hen the %otive predeter%ines the ca se, the %otive %ay be regarded as theca se# &n /ig eF vs# Co rt of Appeals, this Co rt, spea ing thro gh I stice I#.#/# Reyes, held: # ## &t is "ell to note, ho"ever, that Manresa hi%self ( ol# 8, pp# 671!67B), "hile %aintaining the

distinction and pholding the inoperativeness of the %otives of the parties to deter%ine thevalidity of the contract, e;pressly e;cepts fro% the r le, those contracts that are conditionedpon the attain%ent of the %otives of their party# he sa%e vie" is held by the * pre%e Co rt of*pain, in its decisions of 2ebr ary 7, 1G71, and 0ece%ber 7, 1G76, holding that the %otive %aybe regarded as ca sa "hen it predeter%ines the p rpose of the contract#

?rs. ! Bal#te "s. L#' (446 S$ A 56)(Re: Article 1>75) Article 1>75 of the Civil Code provides that the si% lation of a

contract %ay either be absol te or relative# &n absol te si% lation, there is a colorable contractb t "itho t any s bstance, beca se the parties have no intention to be bo nd by it# An absol tely

si% lated contract is void, and the parties %ay recover fro% each other "hat they %ay have given nder the DcontractD# n the other hand, if the parties state a false ca se in the contract toconceal their real agree%ent, s ch a contract is relatively si% lated# +ere, the partiesJ realagree%ent binds the%#

Vele/ "s. a'as (40 %#l 8 )(Re: Article 1>5B) A pro%ise given in consideration of a pro%ise on the part of the

obligee to refrain fro% instit ting a cri%inal prosec tion is void on acco nt of the illicitcharacter of the consideration#

@a,tal "s. @ele*r#t! (1 S$ A 63)(Re: Article 1>5B) $here the defendant ad%its his indebtedness, and the dis%issal of the

estafa case against hi% %erely f rnished the occasion for the e;ec tion of a pro%issory noteac no"ledging said indebtedness, the consideration is the pre!e;isting obligation and not thedis%issal of the cri%inal case, hence the pro%issory note is valid and enforceable#

On* "s. On* (13 S$ A 133) Altho gh the ca se is not stated in the contract it is pres %ed that it is e;isting nless the

debtor proves the contrary (Article 1>57 of the Civil Code)# ne of the disp table pres %ptionsis that there is a s fficient ca se of the contract (*ection 5, (r), R le 1>1, R les of Co rt)# &t is a


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legal pres %ption of s fficient ca se or consideration s pporting a contract even if s ch ca seis not stated therein (Article 1>57, e" Civil Code of the 'hilippines "hich cannot be overco%eby a si%ple assertion of lac of consideration especially "hen the contract itself states thatconsideration "as given, and the sa%e has been red ced into a p blic instr %ent "ith all d e

for%alities and sole%nities# o overco%e the pres %ption of consideration the alleged lac of

consideration % st be sho"n by preponderance of evidence in a proper action# (*a%anilla vs#Ca co%, et al#, 1H@ 'hil# 7>B)# .ad faith and inade= acy of the %onetary consideration do notrender a conveyance ine;istent, for the assignorJs liberality %ay be s fficient ca se for a validcontract (Article 1>5H, Civil Code), "hereas fra d or bad faith %ay render either rescissible orvoidable, altho gh valid ntil ann lled, a contract concerning an ob ect certain entered into"ith a ca se and "ith the consent of the contracting parties, as in the case at bar#D

L#*+e/ "s. $A (10 %#l 5 )(Re: Article 1>5H)# nder Article 1B@7, of the Civil Code of 188G (no" Art# 1>5H, CC),

liberality of the donor is dee%ed ca sa only in those contracts that are of Dp reD beneficiencethat is to say, contracts designed solely and e;cl sively to proc re the "elfare of the

beneficiary, "itho t any intent of prod cing any satisfaction for the donor< contacts, in other"ords, in "hich the idea of self!interest is totally absent on the part of the transferor# Article1B@7 (no" Art# 1>5H, CC) provides that in re% neratory contracts, the consideration is the

service or benefit for "hich the re% neration is given< ca sa is not liberality in these casesbeca se the contract or conveyance is not %ade o t of p re beneficience, b t Dsolvendi ani%oD#he %otive of the parties %ay be regarded as ca sa "hen it predeter%ines the p rpose of thecontract#

E. a/!n In,. "s. %#l !rts A+t%!r#t (151 S$ A 33)(Re: Article 1>5B) he invalidity of the transfer of shares of stoc springs not fro%

vitiated consent nor absol te "ant of %onetary consideration, b t for its having had annla"f l ca se 4 that of obtaining a govern%ent contract in violation of la"# $hile the

general r le is that the ca sa of the contract % st not be conf sed "ith the %otives of the parties, this case s= arely fits into the e;ception that the %otive %ay be regarded as ca sa"hen it predeter%ines the p rpose of the contract# (/ig eF v# Co rt of Appeals, 1HB 'hil# 5@@)#n the part of Ro% aldeF, the %otive "as to be able to contract "ith the govern%ent "hich he"as then prohibited by la" fro% doing, and on petitioner RaFonJs part, to be able to rene" his%anage%ent contract##

III. 7!r' ! $!ntra,ts ($%a&ter 3) Arts. 1&56-1&5$

)inds of ContractsA. %onsensual er3ected /y #ere consent+. eal er3ected u on delivery%. :or#al or ole#n

onations eal "ro erty (Art. 7 @) "ersonal "ro erty e?ceeding "50 (Art. 7 $)ti ulation 0o %*arge Interest Art. 1@56ale 3 Large %attleAgency 0o ell eal "ro erty r An Interest 0*erein Art. 1$7Antic*resis Art. 21&


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"artners*i C*ere eal "ro erty %ontri/uted Arts. 1771, 177&ti ulation Li#iting %o##on %arrierGs uty 3 >?traordinary iligence 0ordinary iligence Art. 17%*attel ;ortgage

%ase tudies

Tan "s. L#' ( 6 S$ A 455)(Re: Article 1>56 in relation to Article 17H>, o# B *tat te of 2ra ds)# here is no

provision of la" re= iring a note or %e%orand % for a contract of partition to be valid#Contracts are obligatory in "hatever for% they %ay have been entered into provided allessential re= ire%ents are present# A note, transfer certificate of title, s bdivision plan or%e%orand % are not necessary for the enforceabilityEvalidity of an oral contract of partition# Acontract of partition is not one of the contracts %entioned in Article 17H> of the Civil Code"hich lists the li%ited instances "hen "ritten proof of a contract is essential for enforceability#

=a+2en-?ernae/ "s. =e L!s An*eles ( S$ A 1 6)(Re: Article 1>56)# 2or% (oral and "ritten) is irrelevant to the binding effect inter partes

of a contract that possesses the three validating ele%ents of consent, s b ect %atter and ca sa, Article 1>56 of the Civil Code establishes only t"o e;ceptions, to "it: (a) Contracts of "hich thela" itself re= ires that they be in so%e partic lar for% ("riting) in order to %a e the% valid andenforceable (the so!called sole%n contracts)# f these the typical e;a%ple are the donation ofi%%ovable property (Article @7G) and donation of %ovables "orth %ore than '5,HHH#HH (Article@7>)< contracts to pay interest on loans (% t %) (Article 1G56)< and the agree%entsconte%plated by Articles 1@77, 1@@>, 18@7 and B1>7 of the present Civil Code# (b) Contractsthat the la" re= ires to be proved by so%e "riting (%e%orand %) of its ter%s, as in thosecovered by the old *tat te of 2ra ds, no" Article 17H>(B) of the Civil Code# heir e;istence not

being provable by %ere oral testi%ony ( nless "holly or partly e;ec ted), these contracts aree;ceptional in re= iring a "riting e%bodying the ter%s thereof for their enforceability by actionin co rt# he contract s ed pon by petitioner (co%pensation for services) need not be in "ritten

for%# &t is tr e that it appears incl ded in Article 1>58, last cla se, providing that Dall othercontracts "here the a%o nt involved e;ceeds five h ndred pesos % st appear in "riting, even a

private one#D . t Article 1>58 no"here provides that the absence of "ritten for% in this case"ill %a e the agree%ent invalid or nenforceable# n the contrary, Article 1>5@ clearlyindicates that contracts covered by Article 1>58 are binding and enforceable by action or s itdespite the absence of "riting#

Valen,#a "s. Tant!,! ( %#l 8 4)

A recital in a p blic doc %ent celebrated "ith all the legal for%alities nder the safeg ard of a notarial certificate is Devidence against the partiesD and Da high degree of proofis necessary to overco%e the legal pres %ption that s ch recital is tr e#D he biased, interestedtesti%ony of plaintiff can not overco%e the evidentiary force of the provisional contract of lease"hich "as ratified before a notary p blic, and, hence, a p blic doc %ent#

ID. e !r'at#!n O Instr+'ents ($%a&ter 4) Arts. 1&5@-1&6@


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0*is is t*e re#edy i3 t*ere is a #eeting o3 #inds o3 t*e arties /ut true intention is note? ressed in t*e instru#ent /ecause o3 #ista e, 3raud, ineBuita/le conduct or accident

Code Co%%ission >Buity dictates t*e re3or#ation o3 an instru#ent in order t*at t*e trueintention o3 t*e contracting arties #ay /e e? ressed. 0*e rigor o3 t*e

legalistic rule t*at a ritten instru#ent s*ould /e t*e 3inal and in3le?i/lecriterion and #easure o3 t*e rig*ts and o/ligations o3 t*e arties, is t*uste# ered, to 3orestall t*e e33ects o3 #ista e, 3raud or ineBuita/le conduct.

1o Refor(ation Allo%ed n4o i# le donations inter vivos *ere no condition i# osedo Cillso C*en t*e real agree#ent is void

D. Inter&retat#!n ! $!ntra,ts ($%a&ter 5) Arts. 1&7F - 1&7@

%ase tudies @an#la Ele,tr#, $!'&an "s. B!ar2 ! + l#, Dt#l#t $!''#ss#!ners (30 %#l 38 )

he franchise granted by the city of Manila to the Manila lectric Railroad and /ightCo%pany is a contract, and the constr ction placed thereon by the parties, for a long period ofti%e, sho ld have great "eight in a controversy bet"een the% as to its scope and %eaning# hata proposed stat te "as a%ended in the co rse of its enact%ent %ay be considered by this co rt@H, 1>@1, 1>@@ CC)

sho ld be applied in constr ing the contract# here sho ld be no co%plete detach%ent fro% theantecedent circ %stances and the cond ct of the parties at the ti%e of %a ing the contract and

s bse= ently thereto sho ld not be disregarded#

DI. es,#ss# le $!ntra,ts ($%a&ter 6) Arts. 1&$F-1&$@

Rescissible Contracts4(1) 0*ose *ic* are entered into /y guardians *enever t*e ards *o# t*ey

re resent su33er lesion /y #ore t*an one-3ourt* o3 t*e value o3 t*e t*ings *ic*are t*e o/ject t*ereo3=


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(2) 0*ose agreed u on in re resentation o3 a/sentees, i3 t*e latter su33er t*e lesionstated in t*e receding nu#/er=

(&) 0*ose underta en in 3raud o3 creditors *en t*e latter cannot in any ot*er #annercollect t*e clai#s due t*e#=

( ) 0*ose *ic* re3er to t*ings under litigation i3 t*ey *ave /een entered into /y t*e

de3endant it*out t*e no ledge and a roval o3 t*e litigants or o3 co# etent judicial aut*ority=(5) All ot*er contracts s ecially declared /y la to /e su/ject to rescission.

Re&uisites for Action for Rescission :a. "lainti33 #ust /e a/le to return *at *as /een received

/. 0*e o/ject o3 t*e contract is not in t*e legal ossession o3 a t*ird erson ingood 3ait*

c. 0*ere #ust /e no ot*er legal re#edyd. 0*e action #ust /e /roug*t it*in t*e rescri tive eriod

Prescriptive Period years *ic* s*all /egin in cases o3 ersons under guardians*i and3or a/sentees until t*e ter#ination o3 inca acity or until do#icile o3a/sentee is no n.

Re&uisites for Rescission of Contracts n Fraud of Creditorsa. %redit e?isting rior to cele/ration o3 contract to /e rescinded

/. :raud or intent to co##it 3raud to rejudice creditor c. %reditor cannot in any ot*er legal #anner collect *is creditd. /ject o3 contract not it* t*ird erson *o acted in good good 3ait*

olentino >ven i3 de/tor alienated ro erty 3raudulently, i3 trans3eree acBuired ro ertyin good 3ait* and 3or valua/le consideration, rescission ill not /e allo ed.Ho ever, i3 trans3er is /y gratuitous title, good 3ait* o3 trans3eree ill not /e a

/ar to rescission, /ut trans3eree is entitled to rig*ts o3 ossessor in good 3ait*%ase tudies

Or#a "s. @,@#,9#n* ( 1 %#l 43) Ba2*es ! 7ra+2(Re: Article 1>8@, par# > Rescissible Contracts) &n deter%ining "hether or not a sale is

fra d lent, the follo"ing circ %stances, attending s ch sale, are indications of fra d:1# he fact that the consideration of the conveyance is fictitio s or is inade= ate#B# A transfer %ade by a debtor after s it has been beg n and "hile it is pending

against hi%#># A sale pon credit by an insolvent debtor#7# vidence of large indebtedness or co%plete insolvency#5# he transfer of all or nearly all of his property by a debtor, especially "hen he is

insolvent or greatly e%barrassed financially#6# he fact that the transfer is %ade bet"een father and son, "hen there are present

other of the above circ %stances#@# he fail re of the vendee to ta e e;cl sive possession of all of the property#


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DII. V!#2a le $!ntra,ts ($%a&ter ) Arts. 1&@F-1 F2

5oidable0Annullable Contracts ( /inding, unless t*ey are annulled /y a ro er action incourt)(1) 0*ose *ere one o3 t*e arties is inca a/le o3 giving consentJ to a contract=

(2) 0*ose *ere t*e consent is vitiated /y #ista e, violence, inti#idation, unduein3luence or 3raud .

H .A. 680 (An Act Lo ering t*e Age o3 ;ajority 3ro# 0 enty- ne to >ig*teen Kears,A#ending 3or t*e "ur ose >?ecutive rder !u#/ered 0 o Hundred !ine, and 3or t*er"ur oses.)

#"e validity of an annullable contract (ay be attac7ed :1. irectly /y an action 3or t*at ur ose=2. Indirectly /y ay o3 a de3ense= *o ever, 3ro# t*e urely rocedural as ect, t*is

cannot /e set u #erely as an a33ir#ative de3ense /ut /y ay o3 counterclai#, and

de3endant #ust as 3or an order o3 #utual restitution under Art. 1&@$

Prescriptive Period years= counted 3ro#C*en t*ere is 3raud, #ista e 3ro# ti#e o3 discovery*en t*ere is inti#idation, violence, or undue in3luence, 3ro# ti#e itceases

Confir(ation is a lica/le to annulla/le contracts, *ile rati3ication a lies tounen3orcea/le contracts or contracts *ere consent is totally a/sent. 0*e act /y*ic* a erson entitled to /ring an action 3or annul#ent it* no ledge o3 t*ecaue 3or annul#ent and a3ter it *as ceased to e?ist, validates t*e contract, eit*ere? ressly or i# liedly.

Ratification is t*e act o3 a roving a contract entered into /y anot*er it*out aut*orityor /eyond t*e sco e o3 aut*ority o3 t*e agent.

Re&uisites for Ratification0Confir(ation : 0*e contract is voida/leEannula/le. 0*e con3ir#ation is #ade it* t*e no ledge o3 t*e cause o3

nullity. At t*e ti#e o3 t*e con3ir#ation is #ade, t*e cause o3 nullity *as

ceased to e?ist.

Confir(ation and Ratification cures t*e de3ect o3 nullity, *ile ac7no%ledge(en tre#edies t*e de3iciency o3 roo3= t*us *en a contract is entered into t*roug*error is a roved, t*ere is con3ir#ationErati3ication. C*en an oral contract is utin riting or *en a rivate riting is converted into a u/lic instru %ent, there isac no"ledg%ent#

DIII. Dnen !r,ea le $!ntra,ts ($%a&ter 8) Arts. 1 F&-1 F$


33/43

8nenforceable Contracts *unless ratified.(1) 0*ose entered into in t*e na#e o3 anot*er erson /y one *o *as /een given no

aut*ority or legal re resentation, or *o *as acted /eyond *is o ers=(2) 0*ose t*at do not co# ly it* t*e tatute o3 :rauds as set 3ort* in t*is nu#/er. In

t*e 3ollo ing cases an agree#ent *erea3ter #ade s*all /e unen3orcea/le /y action,unless t*e sa#e, or so#e note or #e#orandu#, t*ereo3, /e in riting, andsu/scri/ed /y t*e arty c*arged, or /y *is agent= evidence, t*ere3ore, o3 t*eagree#ent cannot /e received it*out t*e riting, or a secondary evidence o3 itscontents(a) An agree#ent t*at /y its ter#s is not to /e er3or#ed it*in a year 3ro#

t*e #a ing t*ereo3=(/) A s ecial ro#ise to ans er 3or t*e de/t, de3ault, or #iscarriage o3

anot*er=(c) An agree#ent #ade in consideration o3 #arriage, ot*er t*an a #utual

ro#ise to #arry=

(d) An agree#ent 3or t*e sale o3 goods, c*attels or t*ings in action, at a ricenot less t*an 3ive *undred esos, unless t*e /uyer acce t and receive arto3 suc* goods and c*attels, or t*e evidences, or so#e o3 t*e#, o3 suc*t*ings in action, or ay at t*e ti#e so#e art o3 t*e urc*ase #oney= /ut*en a sale is #ade /y auction and entry is #ade /y t*e auctioneer in *issales /oo , at t*e ti#e o3 t*e sale, o3 t*e a#ount and ind o3 ro erty sold,ter#s o3 sale, rice, na#es o3 t*e urc*asers and erson on *ose accountt*e sale is #ade, it is a su33icient #e#orandu#=

(e) An agree#ent 3or t*e leasing 3or a longer eriod t*an one year, or 3or t*esale o3 real ro erty or o3 an interest t*erein=

(3) A re resentation as to t*e credit o3 a t*ird erson.(&) 0*ose *ere /ot* arties are inca a/le o3 giving consent to a contract.

Funda(ental Principles of t"e Statute of Frauds A lies only to e?ecutory contracts= %annot a ly i3 action is neit*er 3or s eci3ic er3or#ance nor 3or da#ages

/ecause o3 a violation= >?clusive= ;ay /e aived= Is a ersonal de3ense= !ot void /ut #erely unen3orcea/le= ule o3 e?clusion eter#ine ad#issi/ility o3 evidence, not #erely credi/ility.

%ase tudies

B7 $!r&. "s. $A ( 88 S$ A 6 )(Re: Article 17H>, o# B *tat te of 2ra ds) A contract, to be enforceable nder the

*tat te of 2ra ds, need not be contained in a single "riting# &t %ay be collected fro% several


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different "ritings "hich do not conflict "ith each other and "hich, "hen connected, sho" the parties, s b ect %atter, ter%s and consideration, as in contracts entered into by correspondence# &t %ay be enco%passed in several instr %ents even tho gh every instr %ent it not signed by the parties, since it is s fficient if the nsigned instr %ents are clearly identified or referred to and%ade part of the signed instr %ent or instr %ents# *i%ilarly, a "ritten agree%ent of "hich there

are t"o copies, one signed by each of the parties, is binding on both to the sa%e e;tent as tho ghthere had been only one copy of the agree%ent and both had signed it#

!sen,!r =e"t. $r!& "s. In +#n* (354 S$ A 11 )(Re: Right of 2irst Ref sal)# he ter% Dstat te of fra dsD re= ire certain classes of

contracts to be in "riting b t does not deprive the parties of the right to contract "ith respect tothe %atters therein involved# &t %erely reg lates the for%alities of the contract necessary torender it enforceable to prevent fra d and per ry in the enforce%ent of obligations depending

for their evidence on the nassisted %e%ory of "itnesses by re= iring certain en %eratedcontracts and transactions to be evidenced by a "riting signed by the party to be charged# &trefers to specific inds of transactions and cannot apply to any other transaction that is not

en %erated therein# &t pres pposes the e;istence of a perfected contract# A right of first ref salis not a%ong those listed as nenforceable nder the stat te of fra ds# Article 17H>, par# B(e) ofthe e" Civil Code pres pposes the e;istence of a perfected, albeit n"ritten, contract of sale# Aright of first ref sal, s ch as the one involved in the instant case, is not by any %eans a perfectedcontract of sale of real property# At best, it is a contract al grant, not of the sale of the real

property involved, b t of the right of first ref sal over the property so ght to be sold# &t is th sevident that the stat te of fra ds does not conte%plate cases involving a right of first ref sal# As

s ch, a right of first ref sal need not be "ritten to be enforceable and %ay be proven by oralevidence#

are2es "s. Esn! ( S$ A 1000)he *tat te of 2ra ds, e%bodied in Article 17H>, Civil Code of the 'hilippines, does not

re= ire that the contract itself be in "riting# he plain te;t of Art# 17H>, paragraph (B) is clearthat a "ritten note or %e%orand %, e%bodying the essentials of the contract and signed by the

party charged, or his agent, s ffices to %a e the verbal agree%ent enforceable, ta ing it o t ofthe operation of the stat te# he letter, sent by defendant!appellee co pled "ith that one %ar edas appendi; ., constit te an ade= ate %e%orand % of the transaction# hey are signed by thedefendant!appellee< refer to the property sold, give its area and the p rchase price # $e have inthe%, therefore, all the essential ter%s of the contract, and they satisfy the re= ire%ents of the*tat te of 2ra ds# $e have r led that a s fficient %e%orand % %ay be contained in t"o or%ore doc %ents# (.erg vs# Magdalena state, &nc#, GB 'hil#, 11H, 115)#

S +#a "s. $A (151 S$ A 505 ) 'roof of the alleged verbal ass rance of a lease rene"al cannot be allo"ed both nder

the 'arol vidence R le and the *tat te of 2ra ds for fail re to p t in "riting said alleged stip lation#

Ber* "s. @a*2alena Estate ( %#l 110)D o partic lar for% of lang age or instr %ent is necessary to constit te a %e%orand %

or note in "riting nder the stat te of fra ds< any doc %ent or "riting, for%al or infor%al,


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"ritten either for the p rpose of f rnishing evidence of the contract or for another p rpose,"hich satisfies all the re= ire%ents of the stat te as to contents and signat re, as disc ssedrespectively infra secs# 1@8!BHH, and infra secs# BH1!B15, is a s fficient %e%orand % or note# A%e%orand % %ay be "ritten as "ell "ith lead pencil as "ith pen and in # &t %ay also be filled inon a printed for%#D (>@ C#I#*#, 65>! 657#)

D he note or %e%orand % re= ired by the stat te of fra d need not be contained in a single doc %ent, nor, "hen contained in t"o or %ore papers, need each paper be s fficient as tocontents and signat re to satisfy the stat te# "o or %ore "ritings properly connected %ay beconsidered together, %atters %issing or ncertain in one %ay be s pplied or rendered certain byanother, and their s fficiency "ill depend on "hether, ta en together, they %eet there= ire%ents of the stat te as to contents and the re= ire%ents of the stat te as to signat re, asconsidered respectively infra secs# 1@G!BHH and secs# BH1!B15#


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3#R# o# 666G6, I ly 17, 1G86)# he b yer, as a party to an illegal transaction, cannot recover"hat she has given by reason of the contract nor as for the f lfill%ent of "hat has been

pro%ised her nder Art# 171B#

TeFa @ar9et#n* "s. IA$ (148 S$ A 34 )

he parties herein operated nder a D abit syste%D "hereby a person "ho has been granted a certificate of p blic convenience allo"s another person "ho o"ns %otor vehicles tooperate nder s ch franchise for a fee# &t has been identified as one of the root ca ses of the

prevalence of graft and corr ption in the govern%ent transportation offices# A certificate of p blic convenience is: (a) a special privilege conferred by the govern%ent and % st not beab sed< (b) is invariably recogniFed as being contrary to p blic policy and, therefore, void andine;istent nder Article 17HG of the Civil Code# he co rt "ill not aid either party to enforce anillegal contract, b t "ill leave both "here it finds the% nder Article 171B of the Civil Code#

a'#re/ "s. a'#re/ (485 S$ A ) 2orging a personJs signat re corresponds to the felony of falsification nder *ection 7,

itle & of the Revised 'enal Code# he act of forging 0oloresJs signat re constit tes a cri%inaloffense nder the ter%s of Article 1711 of the Civil Code# nder Article 1711 of the Civil Code,it % st be sho"n that the n llity of the contract proceeds fro% an illegal ca se or ob ect, and theact of e;ec ting said contract constit tes a cri%inal offense# he second re= ire%ent hasalready been disc ssed and is fo nd to be present# b ect and ca se are t"o separate ele%entsof a donation and the illegality of either ele%ent gives rise to the application of the doctrine of

pari delicto##

7ren/el "s. $at#t! (406 S$ A 55) 'etitioner, an alien, cannot feign ignorance of the constit tional proscription, nor clai%

that he acted in good faith, let alone assert that he is less g ilty than the respondent "ho "as hisco%%on la" "ife in "hose na%e the properties "ere registered# 'etitioner is f lly a"are that he"as dis= alified fro% ac= iring and o"ning lands nder 'hilippine la" even before he

p rchased the properties in = estion< and, to s irt the constit tional prohibition, he had the deedof sale placed nder the respondentJs na%e as the sole vendee thereof# .eing a party to anillegal contract, petitioner cannot co%e into a co rt of la" and as to have his illegal ob ectivecarried o t beca se one "ho loses his %oney or property by no"ingly engaging in a contractor transaction "hich involves his o"n %oral t rpit de %ay not %aintain an action for his losses#o allo" petitioner to recover the properties or the %oney sed in the p rchase of the parcels ofland "o ld be s bversive of p blic policy#

A,a al "s. A,a al (454 S$ A 555) ven ass %ing that the sale of land violated the retention li%its of Rep blic Act o#

665@( Co%prehensive Agrarian Refor% /a"), he "o ld still have no re%edy nder the la" as heand /eonardo "ere in pari delicto# +e is not entitled to affir%ative relief 4 one "ho see se= ity and stice % st co%e to co rt "ith clean hands# &n pari delicto potior est conditiodefendentis# o action arises, in e= ity or at la", fro% an illegal contract< no s it can be%aintained for its specific perfor%ance, or to recover the property agreed to be sold ordelivered, or the %oney agreed to be paid, or da%ages for its violation# $here the parties are in

pari delicto, no affir%ative relief of any ind "ill be given to one against the other# he


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principle of pari delicto is gro nded on t"o pre%ises: first, that co rts sho ld not lend their good offices to %ediating disp tes a%ong "rongdoers< and second, that denying dicial reliefto an ad%itted "rongdoer is an effective %eans of deterring illegality# o co rt "ill lend its aidto a %an "ho fo nds his ca se of action pon an i%%oral or an illegal act#

(ii) EC,e&t#!ns t! ar#-=el#,t! Arts. 1 1&- 1&1@

@en,%a"e/ "s. Te"es (44 S$ A 380)here are e;ceptions to the pari delicto r le that per%it the ret rn of that "hich %ay

have been given nder a void contract# (I stice it g cites so%e of these e;ceptions, nder"hich recovery %ay be %ade by any of the follo"ing: D(a) he innocent party (Arts# 1711!171B, Civil Code)< D(b) he debtor "ho pays s rio s interest (Art# 171>, Civil Code)< D(c) he

party rep diating the void contract before the illegal p rpose is acco%plished or before da%ageis ca sed to a third person and if p blic interest is s bserved by allo"ing recovery (Art# 1717,Civil Code)< D(d) he incapacitated party if the interest of stice so de%ands (Art# 1515, CivilCode)< D(e) he party for "hose protection the prohibition by la" is intended if the agree%ent is

not illegal per se b t %erely prohibited and if p blic policy "o ld be enhanced by per%ittingrecovery (Art# 1716, Civil Code)< and D(f) he party for "hose benefit the la" has beenintended s ch as in price ceiling la"s (Art# 171@, Civil Code) and labor la"s (Arts# 1718!171G,Civil Code)#D it g, Civil /a" Annotated, ol# &&& (BHH>), pp# 15G!16H#

ne of the e;ceptions is fo nd in Article 171B of the Civil Code, "hich states:

DArt# 171B# &f the act in "hich the nla"f l or forbidden ca se consists does notconstit te a cri%inal offense, the follo"ing r les shall be observed:

D(1) $hen the fa lt is on the part of both contracting parties, neither %ay recover"hat he has given by virt e of the contract, or de%and the perfor%ance of the otherJsnderta ing?a# les of oid Contracts:

o 'act % Co%%issori % - Arts. 2F$$, 21&F, 1&@FA sti ulation aut*ori4ing creditor to auto#atically a ro riate t*e t*ings#ortgagedE ledged in case o3 de3ault, is void.

o 'act % de non Alienando Art. 21&FA sti ulation 3or/idding t*e o ner 3ro# alienating t* e i##ova/le #ortgaged, isvoid.

o 'act % /eonina Art. 17@@A sti ulation *ic* e?cludes one or #ore artners 3ro# any s*ares in ro3its and

losses, is void.

NATD AL OBLIGATIONS (BOOK IV- TITLE III)Arts. 1 2&-1 &F

1atural Obligations not /eing /ased on ositive la , /ut on eBuity and natural la , do notgrant a rig*t o3 action to en3orce t*eir er3or#ance, /ut voluntary 3ul3ill#ent

/y t*e o/ligor, t*ey aut*ori4e t*e retention o3 *at *as /een delivered orrendered /y reason t*ereo3. 0*ey are #id ay /et een civil o/ligations and urely #oral o/ligations. 0*e ter# 3ul3ill#ent8 does not re3er only to t*edelivery o3 t*ings /ut also t*e er3or#ance o3 an act, t*e giving o3 security,t*e e?ecution o3 a docu#ent, t*e a/andon#ent o3 an act.

Conditions of 1atural Obligations41. uridical 0ie /et een 2 ersons


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2. uridical 0ie as suc* is not given e33ect /y la0*e 3irst condition distinguis*es natural o/ligation 3ro# #oral o/ligation. 0*e secondcondition distinguis*es natural o/ligation 3ro# civil o/ligation.

A %inor (belo" 18 years)T "ho entered into a contract "itho t consent of parentEg ardian "ho:

a. Doluntarily returns *ole t*ingE rice received (even i3 #inor as not /ene3ited) (Art.1 26) cannot de#and t*ingE rice returned /. Doluntarily ays su# o3 #oney, delivers a 3ungi/le t*ing in 3ul3ill#ent o3 o/ligation

(Art. 1 27) cannot recover #oneyE3ungi/le t*ing delivered i3 o/ligee s ent or consu#edit in good 3ait*

H .A. 680 (An Act Lo ering t*e Age o3 ;ajority 3ro# 0 enty- ne to >ig*teen Kears,A#ending 3or t*e "ur ose >?ecutive rder !u#/ered 0 o Hundred !ine, and 3or t*er"ur oses.)

ESTO EL (BOOK IV TITLE IV)

Arts. 1 &1 - 1 &@

+stoppel - 0*roug* esto el, an ad#ission or re resentation is rendered conclusive u on t*e erson #a ing it and it cannot /e denied or dis roved against t*e erson relyingt*ereon.

9 )inds of +stoppel4

1. >sto el In "ais r /y %onduct arises *en one, /y *is acts, re resentations, orad#issions, or /y *is silence *en *e oug*t to s ea out, intentionally or t*roug*cul a/le negligence, induces anot*er to /elieve certain 3acts to e?ist, and suc* ot*errig*t3ully relies and acts u on suc* /elie3, as a conseBuence o3 *ic* *e ould /e

rejudiced i3 t*e 3or#er is er#itted to deny t*e e?istence o3 suc* 3acts=

2. >sto el +y eed or +y ecord tec*nical esto els /y *ic* a arty to a deed and *is rivies are recluded 3ro# asserting as against t*e ot*er arty and *is rivies any rig*tor title in derogation to t*e deed or 3ro# denying any #aterial 3act asserted t*erein.

&. Lac*es t*e 3ailure or neglect, 3or an unreasona/le and une? lained lengt* o3 ti#e to dot*at *ic*, /y e?ercising due diligence, could or s*ould *ave done earlier= it isnegligence or o#ission to assert a rig*t it*in a reasona/le ti#e arranting t*eassu# tion t*at t*e arty entitled to assert it, eit*er *as a/andoned or declined it.

+le(ents Of $ac"es (a) conduct on t*e art o3 t*e de3endant, or o3 one under *o# *e clai#s, giving rise to

t*e situation o3 *ic* co# laint is #ade and 3or *ic* t*e co# laint see s are#edy=

(/) delay in asserting t*e co# lainantMs rig*ts, t*e co# lainant *aving *ad no ledge ornotice, o3 t*e de3endantMs conduct and *aving /een a33orded an o ortunity toinstitute a suit=


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(c) lac o3 no ledge or notice on t*e art o3 t*e de3endant t*at t*e co# lainant ouldassert t*e rig*t on *ic* *e /ases *is suit= and

(d) injury or rejudice to t*e de3endant in t*e event relie3 is accorded to t*eco# lainant, or t*e suit is not *eld to /e /arred(Me ia de / cas vs# 3a%ponia, 3#R# o# /!G>>5, ctober >1, 1G56, 1HH 'hil B@@, <

Rafols vs# .arba (11G *CRA 176)

%ase tudies

$r#st! al "s. @el,%!r ( 8 S$ A 1 5)/aches is the fail re or neglect for an nreasonable and ne;plained length of ti%e to

do that "hich, by e;ercising d e diligence, co ld or sho ld have been done earlier< it isnegligence or o%ission to assert a right "ithin a reasonable ti%e, "arranting the pres %ptionthat the party entitled thereto either has abandoned it or declined to assert it#9 ( i a% vs#*ibonghanoy, B> *CRA >5)#

= Or! Lan2. ealt =e"t. $!r&. "s. $la+nan (516 S$ A 681)(*ee Me ia de / cas vs# 3a%ponia above , especially ( c ) and (d)# ) "lease note t*eele#ents o3 lac*es a/ove. he third and fo rth ele%ents of laches are not present beca serespondents, being %ere s= atters, ca

Documents

Obligations and Contract Clint