Contracts Reviewer

FRATERNAL ORDER OF UTOPIA
Title II
CONTRACTS
Chapter I
General Provisions
Art. 1305. A contract is a meeting o min!s "et#een t#o persons #here"$ one "in!s himsel%
#ith respect to the other% to give something or to ren!er some service.
WHAT IS A CONTRACT?
Art. 1305 provides that A contract is a eetin! o" inds #et$een t$o persons $here#% one #inds
hise&" $ith respect to the other' to !ive soethin! or to render soe service.(
WHAT )I**+R+NTIAT+S A CONTRACT *RO, OTH+R -IN)S O* O./I0ATIONS?
In a contract' there is necessari&% a eetin! o" the inds #et$een the parties in contrast to other
1inds o" o#&i!ations $hich are &a$' 23asi4contracts' acts or oissions p3nished #% &a$ and 23asi4de&icts.
WHAT )I**+R+NTIAT+S A CONTRACT *RO, AN O./I0ATION?
516 There can #e no contract i" there is no o#&i!ation. .3t an o#&i!ation a% e7ist $itho3t a
contract.
586 Contract is one o" the so3rces o" o#&i!ations. On the other hand' o#&i!ation is the &e!a& tie or
re&ation that e7ists a"ter a contract has #een entered into.
536 Contract invo&ves a eetin! o" the inds or consent o" the parties. In a&& other o#&i!ations' it
is not necessar% that there #e a eetin! o" the inds or consent o" the parties' as $hen the
o#&i!ation "o3nded #% &a$.
HOW ,A9 CONTRACTS .+ C/ASSI*I+)?
&asis 'in!s ()amples
)e!ree o" dependence :repator%
:rincipa&
Accessor%
A!enc%
/ease' Sa&e
,ort!a!e':&ed!e' S3ret%ship
:er"ection Consens3a&
Rea&
:3rchase
Coodat3
So&enit% or "or Coon "or
Specia& *or
/oan'
)onations' ,ort!a!es o"
Iova#&e propert%
:3rpose Trans"er o" o$nership
Conve%ance o" 3se
Rendition o" service
Sa&e' .arter
Coodat3
A!enc%
S3#;ect ,atter Thin!s
Services
Sa&e' :&ed!e' ,ort!a!e
)eposit' A!enc%' /ease o"
Service
Nat3re o" O#&i!ation :rod3ced .i&atera&
<ni&atera&
:3rchase' Sa&e
Coodat3' 0rat3ito3s
deposit
Ca3se Onero3s
Re3nator%
:3rchase' Sa&e
<tan! na &oo#
0rat3ito3s Coodat3
Ris1 Co3tative
A&eator%
/ease
Ins3rance
Nae Noinate
Innoinate
Sa&e' /ease' etc
I !ive' %o3 !ive
I !ive' %o3 do
I do' %o3 do
I do' %o3 !ive
WHAT AR+ TH+ *O<R 5=6 :RINCI:/+S O* CONTRACTS?
The% are the princip&es o">
1. A3tono%
*. ,3t3a&it%
3. Re&ativit%
+. O#&i!ator% *orce
WHAT IS TH+ :RINCI:/+ O* A<TONO,9?
Art.130?> The contractin! parties a% esta#&ish s3ch stip3&ations' c&a3ses' ters and conditions
as the% a% dee convenient' provided the% are not contrar% to &a$' ora&s' !ood c3stos' p3#&ic order' or
p3#&ic po&ic%.(
WHAT IS +,.O)I+) IN TH+ :RINCI:/+ O* A<TONO,9?
1. *reedo To Contract. The ri!ht to enter into a &a$"3& contract constit3tes one o" the &i#erties
o" the peop&e o" the state. I" that ri!ht #e str3c1 do$n or ar#itrari&% inter"ered $ith' there is a
s3#stantia& ipairent o" the &i#ert% o" the peop&e 3nder the constit3tion. 5:eop&e v. :oar'
=? :hi& ==06 Ho$ever' the constit3tiona& provision on ipairent o" the o#&i!ation o"
contracts re"ers on&% t contracts &e!a&&% e7ec3ted. 5San )ie!o v. ,3nicipa&it% o" Na3;an'
*e#r3ar% 8@' 1@?06
8. Aa&idit% o" Stip3&ations. The contract is the &a$ #et$een the parties and sho3&d inc&3de a&& the
thin!s the% are s3pposed o have a!reed 3pon. What does not appear on the "ace o" the contract
sho3&d #e re!arded ere&% as dee&erBs( or traderBs ta&1( $hich cannot #ind either part%.
5:3%at v. Arco C8 :hi& =086
WHAT IS TH+ /I,ITATION ON TH+ *R++)O, TO CONTRACT?
Art. 130? provides that 7 7 provided' the% are not contrar% to>
,1- /AW. The contract entered into 3st #e in accordance $ith ano not rep3!nant to an
app&ica#&e stat3te.
,*- ,ORA/S. ,ora&s dea& $ith nors o" !ood and ri!ht cond3ct evo&ved in a co3nit%. These
nors a% di""er at di""erent ties and p&aces and $ith each !ro3p o" peop&e.
,3- 0OO) C<STO,S. C3stos consist o" ha#its and practices $hich thro3!h &on! 3sa!e have
#een "o&&o$ed and en"orced #% societ% or soe part o" it as #indin! r3&es o" cond3ct.
,+- :<./IC OR)+R. :3#&ic order does not si!ni"% the ateria& 1eepin! o" p3#&ic order' #3t
represents the p3#&ic' socia& and &e!a& interest in private &a$ that $hich is peranent and
essentia& in instit3tions' $hich' even i" "avorin! soe individ3a& to $ho the ri!ht pertains'
cannot #e &e"t to his o$n $i&&.
,5- :<./IC :O/IC9. This is #roader than p3#&ic order. :3#&ic po&ic% re"ers not on&% to p3#&ic
sa"et% #3t a&so to considerations $hich are oved #% the coon !ood. It a% #e said' in
!enera&' that a contract $hich is neither prohi#ited #% &a$ nor condened #% ;3dicia&
decision' nor contrar% to p3#&ic &e!is&ation or constit3tiona& prohi#ition' is not a!ainst p3#&ic
po&ic%. In order to dec&are a contract void as a!ainst p3#&ic po&ic%' a co3rt 3st "ind that the
contract as to the consideration or the thin! to #e done' contravenes soe esta#&ished interest
o" societ%' or is inconsistent $ith so3nd po&ic% and !ood ora&s' or tends c&ear&% to 3nderine
the sec3rit% o" individ3a& ri!hts.
.(A. /. IAC 155 SCRA 30+
1acts2 In 1@=1' a doc3ent ' the Copraventa( $ritten in Spanish' $as e7ec3ted #% Aicente Santia!o
and his #rothers in "avor o" Ciri&o /ea& !ivin! /ea& o$nership o" three parce&s o" &and o$ned #% the
Santia!os. In the Copraventa(' there is a stip3&ation that the% sha&& not se&& to others these three &ots #3t
on&% to the ori!ina& se&&er Aicente Santia!o or to his heirs or s3ccessors "or the pricee o" :5'?00 $hen the
&atter is a#&e to pa% it(. In 1@5C' Aicente Santia!o o""ered to rep3rchase the propert% "or :5'?00 #3t the
heirs o" /ea&' $ho no$ has the possession o" the &and' re"3sed.
Santia!o no$ represented #% his heirs "i&ed a case $ith the co3rt to cope& the heirs o" /ea& to se&&
the the propert% #ased on the a#ove4entioned stip3&ation. The co3rt disissed the case and the
Santia!os appea&ed. At the sae tie' the /ea&s $ent to co3rt to have the a#ove4entioned conditions
reoved. In 1@D3' the IAC rendered a ;3d!ent in "avor o" the heirs o" Aicente Santia!o orderin! the /ea&s
to accept the :5'?00 and to trans"er o$nership o" the &ands to the Santia!os. Hence' this appea&.
Iss3e2 45N the stip3lation in 63estion vali!7
R3ling2 No. In contracts' the contractin! parties a% esta#&ish s3ch stip3&ations' c&a3ses' ters and
conditiona as the% a% dee convenient' provided the% are not contrar% to &a$' ora&s' !ood c3stos'
p3#&ic order or p3#&ic po&ic%. The stip3&ation that the petitioners cannot a&ienate the 3 parce&s o" &and is
contrar% to p3#&ic po&ic% #eca3se it is a virt3a& perpet3a& restriction o" the o$nership ri!hts o" the
individ3a&.
The co3rt a&so said that the Santia!os did not have the ri!ht or rep3rchase #eca3se the stip3&ation
contep&ates in case the /ea&s $ant to se&&' not i" the Santia!os $ish to #3%. To end' the co3rt said that the
ri!ht to rep3rchase "or a propert% i" there is no stip3&ation as to the tie is "o3r 5=6 %ears provided that the
ri!ht is reserved in the contract and the a7i3 stip3&ation that a propert% cannot #e a&ienated is ten 5106
%ears.
Art. 1308. Innominate contracts shall "e reg3late! "$ the stip3lations o the parties% "$ the
provisions o Titles I an! II o this &oo9% "$ the r3les governing the most analogo3s
nominate contracts% an! "$ the c3stoms o the place.
AR+ TH+ CO<RTS .O<N) .9 TH+ NA,+ OR TIT/+ O* TH+ CONTRACT?
To deterine the nat3re o" the contract' co3rts are not #o3nd to re&% 3pon the nae or tit&e !iven it
#% the contractin! parties' sho3&d there #e a controvers% as to $hat the% rea&&% had intended to enter into'
#3t the $a% the contractin! parties do or per"or their respective o#&i!ation stip3&ated or a!reed 3pon #e
sho$n and in23ired into' and sho3&d s3ch per"orance con"&ict $ith the nae or tit&e !iven the contract #%
the parties the "orer 3st prevai& over the &atter.
The va&idit% o" the a!reeent' as e#odied #% the princip&e o" a3tono% is' one thin!' and the
;3dicia& 23a&i"ication o" the contract res3&tin! there"ro is distinct&% another.
Art. 130:. The contracts m3st "in! "oth contracting parties; its vali!it$ an! compliance
cannot "e let to the #ill o one o them.
WHAT IS TH+ :RINCI:/+ O* ,<T<A/IT9?
Art. 130D provides that The contract 3st #ind #oth contractin! partiesE its va&idit% or
cop&iance cannot #e &e"t to the $i&& o" one o" the.(
A contract is an a!reeent $hich !ives rise to o#&i!ation. It 3st #ind #oth parties in order that it
can #e en"orced a!ainst either. Witho3t this e23a&it% #et$een the parties' it cannot #e said that the contract
has the "orce o" &a$ #et$een the. It is an e&eentar% r3&e that no part% can reno3nce or vio&ate the &a$ o"
the contract $itho3t the consent o" the other.
)O+S THIS :RINCI:/+ COA+R T+R,INATION O* TH+ CONTRACT?
No. Terination is not prohi#ited 3nder the artic&e.
Art. 1300. The !etermination o the perormance ma$ "e let to a thir! person% #hose
!ecision shall not "e "in!ing 3ntil it has "een ma!e 9no#n to "oth contracting parties.
IS IT :OSSI./+ THAT TH+ CONTRACTIN0 :ARTI+S A0R++ THAT )+T+R,INATION O*
:+R*OR,ANC+ .+ 0IA+N TO A THIR) :+RSON?
9+S. Art. 130@ provides that The deterination o" the per"orance a% #e &e"t to a third person
$hose decision sha&& not #e #indin! <NTI/ it has #een ade 1no$n to #oth contractin! parties.
This 3st #e distin!3ished "ro the act o" enterin! into the contract. This is &e"t to the vo&3ntar%
decision o" the parties. The third person a% coe in so &on! as it does !o to the ver% essentia& o#;ects or
ca3ses o" the contract.
This third person $o3&d nora&&% #e an e7pert. *or e7ap&e' in va&3ation o" propert%' a person in
a3thorit% 1no$s ho$ to cop3te "or the parties a% #e approached.
The parties $i&& nora&&% #e #o3nd #% this decision o" the third part%.

WH+N )O+S TH+ )+CISION O* TH+ THIR) :ART9 .+CO,+ .IN)IN0 <:ON TH+ :ARTI+S?
Art. 130@ 7 7 $hose decision sha&& not #e #indin! <NTI/ it has #een ade 1no$n to #oth
contractin! parties.(
The contract #ecoes #indin! the oent the parites are noti"ied and NOT "ro the tie the%
!ive their consent to the deterination o" the third person. The parties are not re23ired to !ive their consent
to the deterination #% the third person so &on! as the% have a!reed at $ho the third person is.
Art. 1310. The !etermination shall not "e o"ligator$ i it is evi!entl$ ine63ita"le. In s3ch
case% the co3rts shall !eci!e #hat is e63ita"le 3n!er the circ3mstances.
WH+N ,A9 TH+ :ARTI+S NOT .+ .O<N) .9 TH+ THIR) :+RSONBS )+CISION?
Art. 1310 provides that The deterination sha&& not #e o#&i!ator% i" it is evident&% ine23ita#&e. In
s3ch case' the co3rts sha&& decide $hat is e23ita#&e 3nder the circ3stances.
Art. 1311. Contracts ta9e eect onl$ "et#een the parties% their assigns an! heirs% e)cept in
case #here the rights an! o"ligations arising rom the contract are not transmissi"le "$
their nat3re% or "$ stip3lation or "$ provision o la#. The heir is not lia"le "e$on! the val3e
o the propert$ he receive! rom the !ece!ent. I the contract sho3l! contain some
stip3lation in avor o a thir! person% he ma$ !eman! its 3lillment provi!e! he
comm3nicate! his acceptance to the o"ligor "eore its revocation. A mere inci!ental "eneit
or interest o a person is not s3icient. The contracting parties m3st have clearl$ an!
!eli"eratel$ conerre! a avor 3pon a thir! person.
Art. 131*. In contracts creating real rights% thir! persons #ho come into possession o the
o"<ect o the contract are "o3n! there"$% s3"<ects to the provisions o the =ortgage .a#
an! the .an! Registration .a#s.
Art. 1313. Cre!itors are protecte! in cases o contract s inten!e! to !era3! them.
Art. 131+. An$ thir! person #ho in!3ces another to violate his contract shall "e lia"le or
!amages to the other contracting part$.
WHAT IS TH+ :RINCI:/+ O* R+/ATIAIT9?
Art. 1311 provides that Contracts ta1e e""ect on&% #et$een the parties' their assi!ns and heirs 7 7(
*or e7ap&e' C% is inde#ted to ,ar1 in the ao3nt o" :1'000. On the d3e date o" the o#&i!ation'
,ar1 dies 5$a! naan sana6 &eavin! his son' An!e& as his so&e heir. In s3ch sase' C% 3st pa% the ao3nt
o" :1'000 to An!e&' the heir &e"t #% ,ar1. This is so #eca3se the ri!ht o" ,ar1 is transissi#&e to his heir'
An!e&.
WHAT AR+ TH+ +FC+:TIONS TO THIS :RINCI:/+?
)ean de& Casti&&o divides the e7ceptions into 8 !ro3ps.
*irst' there are those $hich &iit the o#&i!ation to ON/9 the parties and NOT to the heirs.
What are invo&ved in this "irst !ro3p are the ri!hts and o#&i!ations $hich are not transissi#&e.
Ri!hts and o#&i!ations a% #e non4transissi#&e>
516 .9 STI:</ATION. Char&es entered into a contract $ith C%' $here#% Char&es a!reeed to se&&
his CRA to C% "or :50'000 on Gan3ar% 85' 8003. The% stip3&ated that in case either o" the
dies #e"ore that date the ri!ht or o#&i!ation o" the deceased sha&& not pass to his heirs. Char&es
dies #e"ore Gan3ar% 85'8003. His son 5#% $ho? Orienta& &oo1in! din 1a%a?6 cannot #e
cope&&ed to se&& the CRA to C% #eca3se the parties stip3&ated a!ainst the transission o"
ri!hts and o#&i!ations.
586 .9 :ROAISION O* /AW. An!e&' Ron and Andre are partners in a d3&% or!aniHed
partnership 5<S4&ed Anti4IRAI coa&ition6 contri#3tin! :1'000 each to the coon "3nd. In
case' Ron dies' the partnership sha&& #e disso&ved. His heirs cannot #e partners in her stead
<N/+SS there is an a!reeent to the contrar%. This is so #eca3se 3nder the &a$' the death o"
a partner ca3ses the disso&3tion o" the partnership.
536 .9 TH+ CONTRACTSB A+R9 NAT<R+. The noted criina& &a$%er' Att%. )onato *a%&ona
5na1s p3rihin an! #rod' te1a criina& &a$%er n!a #a s%a?6 $as hired #% the noted criina&
C%ri& Acasio 53ahahah6' to de"end hi in case. I" Att%. *a%&ona dies 53ahaha' na1a!anti na
a1o' a% na1a!ets #a?6 #e"ore the case is heard his o#&i!ation to de"end C%ri& cannot #e
transitted to his $i"e' #eca3se the persona& 23a&i"ications o" Att%. *a%&ona as a &a$%er are
invo&ved.
Second' there are those' $hich NOT ON/9 #ind the parties and their heirs and assi!ns .<T
A/SO third persons as $e&&.
A third person is one $ho has not ta1en part in a contract and is' there"ore' a stran!er to the
contract. As a !enera& r3&e' a third person has no ri!hts and o#&i!ations 3nder a contract to $hich
he is a stran!er. He has no standin! to deand the en"orceent o" a contract or assai& its va&idit%.
Third persons a% #e #o3nd>
516 IN CONTRACTS :O<R A<TR<I. A stip3&ation po3r a3tr3i con"ers a "avor 3pon a third
person a ri!ht to deand its "3&"i&&ent provided he co3nicates his acceptance to the
o#&i!or #e"ore its revocation.
Acceptance a% #e e7press or ip&ied' #3t 3st #e"ore revocation #% the parties $ho ade a
stip3&ation po3r a3tr3i.
The% a% act3a&&% #e divided into 8 c&asses>
5a6 Those $here the stip3&ation is intended "or the so&e #ene"it o" s3ch third person. This
stip3&ation in e""ects con"ers a !i"t' it #ein! necessar% in s3ch case to app&% the r3&es
re&atin! to donations inso"ar as the "or o" acceptance is concerned. 5The third part% in
this case is ca&&ed a donee #ene"iciar%6
5#6 Those $here an o#&i!ation is d3e "ro the proisee to the third person $hich the "orer
see1s to dischar!e #% eans o" s3ch stip3&ation' as "or instance $here a trans"er o"
propert% is co3p&ed $ith the #3%erBs proise to pa% a de#t o$in! "ro the se&&er to a
third person. 5The third part% in this case is ca&&ed a creditor #ene"iciar%.6
Re23isites o" a stip3&ation po3r a3tr3i are the "o&&o$in!>
5a6 There 3st #e a stip3&ation in "avor o" a third personE
5#6 The stip3&ation sho3&d #e a part' not the $ho&e' o" the contractE
5c6 The contractin! parties 3st have c&ear&% and de&i#erate&% con"erred a "avor 3pon a third
person' not a ere incidenta& #ene"it or interestE
5d6 The third person 3st have co3nicated his acceptance to the o#&i!or #e"ore its
revocationE
5e6 Neither o" the contractin! parties #ears the &e!a& representation or a3thoriHation o" the
third part%.
In order to constit3te a va&id stip3&ation po3r a3tr3i' it 3st #e the p3rpose and intnent o" the
stip3&atin! parties to #ene"it the third person and that it is not s3""icient that the third person
a% #e incidenta&&% #ene"itted #% the stip3&ation. 5*&orentino v. +ncarnacion6
586 IN CONTRACT CR+ATIN0 R+A/ RI0HTS. Art. 1318 provides that In contract creatin!
rea& ri!hts' third persons $ho coe into possession o" the o#;ect o" the contract are #o3nd
there#%' S<.G+CT to the provisions o" the ,ort!a!e /a$ and the /and Re!istration /a$s.(
A rea& ri!ht direct&% a""ects propert% s3#;ect to it. Hence' $hoever coes into possession o"
s3ch propert% 3st respect that rea& ri!ht. .3t note that not a&& contracts entered into are
contracts that create rea& ri!hts.
536 IN ACCION :A</IANA. This is an action $here#% a part% a% rescind "ra3d3&ent
red3ctions o" the properties o" the de#tor $hich constit3te a !3arant% o" his de#ts.
Art. 13D1 provides that The "o&&o$in! contracts are rescissi#&e 7 7 those 3nderta1en in "ra3d
o" creditors $hen the &atter cannot in an% other atter co&&ect the c&ais d3e theE 7 7(
*or e7ap&e' C% is inde#ted to Char&es in the ao3nt o" :10'000. No$' i" C% se&&s a parce& o"
&and to An!e&o in order that Char&es a% not attach the &and in pa%ent o" his de#t and C%
has no propert%' Char&es $ho is a stran!er in the contract #et$een C% and An!e&o' is !iven #%
&a$ the ri!ht to as1 "or the rescission or cance&&ation o" the sa&e in order that he a% #e paid
his c&ai. The e""ect o" this is that the properties "ra3d3&ent&% trans"erred are ret3rned to the
de#tor and the creditor a% no$ !o a"ter these properties.
The "o&&o$in! re23isites are necessar% in order that a contract a% #e rescinded as one ade
in "ra3d o" creditors>
5a6 That the p&ainti"" as1in! "or rescission has a credit prior to the a&ienation' a&tho3!h
deanda#&e &aterE
5#6 That the de#tor has ade a s3#se23ent contract conve%in! a patrionai& #ene"it to a third
personE
5c6 That the creditor has no other &e!a& reed% to satis"% his c&ai' #3t $o3&d #ene"it #% the
rescission o" the conve%ance to third personE
5d6 That the act ip3!ned is "ra3d3&entE and
5e6 That the third person $ho received the propert% conve%ed' i" it is #% onero3s tit&e has
#een on accop&ice in the "ra3d.
Writers !enera&&% reco!niHe the avai&a#i&it% o" the accion pa3&iana even $hen the a&ienation is
prior to the credit' $hen the de#tor p3rpose&% and in #ad "aith deprives hise&" o" the a#i&it%
to eet the conse23ences o" o#&i!ation he intends to inc3r in the "3t3re. The a&ienation can #e
rescinded i" it $as ade precise&% in vie$ o" s3ch "3t3re o#&i!ation and "or the p3rpse o"
deprivin! in advance the creditor o" the !3arant% on $hich he co3&d have re&ied.
*3rtherore' there are parties $ho a% appear to have #ecoe creditors a"ter a&ienation' #3t
$ho a% #e considered as havin! a prior ri!ht and entit&ed to the accion pa3&iana in cases &i1e
5a6 those $hose c&ais $ere ac1no$&ed!ed #% the de#tor a"ter the a&ienation' #3t the ori!in o"
$hich antedated the a&ienationE the reco!nition does not !ive rise to the credit' #3t ere&%
con"irs its e7istence' and 5#6 those $ho #ecoe s3#ro!ated' a"ter the a&ienation' in the ri!hts
o" creditors $hose credits $ere prior to the a&ienation.
Accion :a3&iana is &iited on&% to the ao3nt that creditor has #een pre;3diced.
5=6 .9 THIR) :ARTI+S WHO IN)<C+ :ARTI+S TO AIO/AT+ CONTRACT. This
reco!niHes a sit3ation $here a stran!er to a contract can #e s3ed #% reason o" his 3n$arranted
inter"erence in the contract. The in;3red part% a% #rin! an action "or daa!es.
Art 131= provides that an% third person $ho ind3ces another to vio&ated his contract sha&& #e
&ia#&e "or daa!es to the other contractin! part%.(
*or e7ap&e' ,other /i&% entered into a contract $ith ,r. *erdie :io&o :asc3a&( )ino
$here#%' the &atter #o3nd hise&" "or a period o" tie to act in a ovie that she is prod3cin!'
and no$here e&se. A third part%' 1no$in! o" the e7istence o" this contract' and' as the
dec&aration a&&e!ed' a&icio3s&% intendin! to in;3re the p&ainti""'( enticed and proc3red ,r.
)ino to &eave p&ainti"" ,other /i&%Bs ep&o%ent. It $as he&d that the p&ainti"" $as entite&d to
recover daa!es.
The essentia& e&eent here is that o" ind3ceent.
556 .9 ACCION S<.RO0ATORIA. This is an action $hich the creditor a% e7ercise in the
p&ace o" his ne!&i!ent de#tor in order to preserve or recover "or the patrion% o" the de#tor
the prod3ct o" s3ch action' and then o#tain there"ro the satis"action o" his o$n credit.
*or e7ap&e' C% entered into a contract $ith Char&es so that the &atter a% #3i&d his ho3se.
Char&es hires &a#orers and see1s the services o" s3pp&iers so as to coence $ith the
constr3ction. The &a#orers and s3pp&iers $o3&d not nora&&% #e entit&ed to s3e C% in case
Char&es "ai&s to pa% the. Ho$ever' $e have speci"ic provisions o" &a$ $here#% the o$ner is
direct&% &ia#&e to the &a#orers and s3pp&iers in the event o" the de"a3&t o" the contractor. S3ch
&ia#i&it% o" C% sha&& #e ded3cted "ro the ao3nt he o$es Char&es.
The sae princip&e prevai&s in a sit3ation invo&vin! a &essor' a &essee' and a s3#4&essee. In the
event o" the de"a3&t o" the &essee' the &a$ a&&o$s the &essor to co&&ect direct&% "ro the
s3#&essee.
5?6 IN CO//+CTIA+ .AR0AININ0 A0R++,+NTS. +ven i" %o3 are not part% to the
Co&&ective .ar!ainin! A!reeent' once %o3 ;oin a copan% in $hich there is a C.A' %o3
#ecoe #o3nd #% the provisions o" s3ch contract.
O>ANO /. CA *11 SCRA 8+0
1acts2 OWN+R o$ns the ship ,JA )on /3an O3ano. OWN+R &eased the sae to a certain /+SS++ "or
:?0-. <nder the &ease' /+SS++ $o3&d !ive do$n pa%ent o" :30- and another :30- a"ter 80 da%s. A&so'
/+SS++ can on&% 3se the vesse& "or /+SS++BS o$n #ene"it and /+SS++ cannot s3#&ease it. /+SS++'
ho$ever' e7ec3ted a "i7t3re note( $orth :=?- $ith CO,:AN9 F to transport 13'000 #a!s o" ceent to
I&i!an Cit% consi!ned to CONSI0N++. Ha&" o" the pa%ent to #e !iven $hen the ceent $as ta1en "ro
CO,:AN9 F and the other ha&" is to #e !iven #% CONSI0N++ $hen the ceent arrives.
OWN+R heard o" the dea&. OWN+R ca&&ed CONSI0N++ and to&d the &atter to ho&d pa%ent' #3t
CONSI0N++ did not heed OWN+RBS ca&&. OWN+R then "i&ed a case a!ainst /+SS++' CONSI0N++ and
even CO,:AN9 F "or the c&ai o" daa!es and "or the non4pa%ent o" the :30- $hich $as d3e to
OWN+R. The RTC r3&ed in "avor o" OWN+R' #3t CONSI0N++ and CO,:AN9 F appea&ed the case.
The CA r3&ed that CONSI0N++ and CO,:AN9 F $as not a part% to the contract o" OWN+R and
/+SS++' th3s' CONSI0N++ and CO,:AN9 F are e7onerated "ro an% &ia#i&it%.
Iss3e2 45N CONSIGN(( an! CO=PAN? @ are lia"le
R3ling2 No. It is a #asic princip&e in civi& &a$ that' $ith on&% certain e7ceptions' a contract can on&% #ind
the parties $ho had entered into it or their s3ccessors $ho ass3ed their persona&ities or their ;3ridica&
positions. Th3s' a contract can neither pre;3dice nor "avor third persons. Ass3in! that there $as a s3#4
&ease to third parties' the third parties cannot #e &ia#&e "or the #reach since the% are not the parties #o3nd #%
it. On&% persons 5$ith certain e7ceptions6 $ho are the parties to contract can #e #o3nd #% the stip3&ation
therein.
&AN' O1 A=(RICA /. IAC 1+5 SCRA +10
1acts2 The contract provides that .an1 o" Aerica 5.A6 $i&& pa% ao3nts to a third part% #ene"iciar%
3pon re23est #% -%o$a .an1 o" Gapan 5-9OWA6' the re23est $i&& have a coded si!nat3re. On 3 Octo#er
1@D1' .A received te&e7 advise "ro -9OWA> KA)AIS+ :A9 <S)/S 83'5@5LTO 9O<BR+ AJC N.R
8=50?40C4C O* A.C. TRAA+/ COR:ORATION ,R. Toshi%31i ,inai' :resident o" ACTC.
.A credited <S)/S 83'5@5 to acco3nt N3#er 3=50?40C4C. On 3 Octo#er 1@D1' Toshi%31i
,inai $ithdre$ <S)/S 83'5@5 "ro .A on Acco3nt N3#er 8=50?4014C. ACTC c&ais that the ao3nt
sho3&d have #een credited to ACTC Acco3nt not Toshi%31i ,inai Acco3nt. ACTC deanded restit3tion
a!ainst .A and Toshi%31i ,inai.
/o$er co3rts a!reed #eca3se there $as do3#t $ith the 3se o" Toshi%31i ,inaiBs nae and
Acco3nt N3#er #3t at the sae tie $ith the 3se o" ACTCBs nae. In $hich case' the &o$er co3rt said
that .A sho3&d have chec1ed. 5.A did tr% to do3#&e chec1 $ith the sender' #3t !ot no response.6
R3ling2 SC disa!reed $ith the &o$er co3rts. The 3se o" Toshi%31i ,inaiBs nae and Acco3nt N3#er
sho3&d have #een !iven ore $ei!ht.
When -9OWA as1ed .A to pa% an ao3nt to a #ene"iciar% 5either ACTC or ,inai6' the
contract $as #et$een -9OWA and .A and it had a stip3&ation po3r a3tr3i.
The identit% o" the #ene"iciar% sho3&d #e in accordance $ith the identi"ication ade #% -9OWA
at the #ehest o" the part% 5in this case' To1%o To3rist Corporation MTTCN 6 $ho $ants to reit credit to s3ch
#ene"iciar%' and ACTC cannot 23estion that identi"ication as it is not a part% to the arran!eent #et$een
-9OWA and .A.
.A acted at the re23est o" -9OWA d3e to a contract3a& re&ation. -9OWA ade the re23est at the
#ehest o" TTC. The stip3&ation po3r a3tr3i in the contract #et$een .A and -9OWA re"ers to TTC.ACTC is
not part o" the e23ation as "ar as .A and -9OWA is concerned. 5I" ACTC $as rea&&% a victi o" an error in
the creditin!' it sho3&d have cope&&ed TTC to deand s3ch restit3tion since it is $ith TTC $hich ACTC
has an% &e!a& ties' i" an%.6
&A.>?OT /. CA 311 SCRA *0
1acts2 .a&3%ot et a& have #een occ3p%in! Cr3H na /i!as area. Their c&ai over the propert% $as
reco!niHed #% the :resident o" the :hi&ippines thro3!h an Indorseent $hich 3r!ed <: to approve a
donation o" the said site to the residents. The donation did not p3sh thro3!h #eca3se the petitioners
#ar!ained "or ore &and $hich <: $as not read% to !ive. <: event3a&&% donated the area to the residents
thro3!h the I3eHon Cit% 0overnent "or the #est interest o" the residents and "or their #ene"it #% reason o"
&and deve&opent 5irri!ation' $ater' e&ectricit%' etc.6. The petitioners oved "or an in;3nction o" s3ch
donation #eca3se the% see it ere&% as a va&id $a% to "orce the to #e e;ected "ro the propert% and
"ina&iHe the deo&ition o" the "ar&ands and rice&ands $here <: started to erect a residentia& ho3se pro;ect.
Iss3e2 45N the contract "et#een >P an! AC Government contains stip3lation po3r a3tr3i
Bel!2 ?es. The SC r3&ed that that the contract #et$een <: and IC co3nci& contained stip3&ation po3r
a3tr3i.
The "o&&o$in! are the re23isites that 3st #e present in order to have a stip3&ation po3r a3tr3i>
1. There 3st #e a stip3&ation in "avor o" a third person
8. The stip3&ation 3st #e a part' not the $ho&e contract
3. The contractin! parties 3st have c&ear&% and de&i#erate&% con"erred a "avor 3pon a third person'
not a ere incidenta& #ene"it or interest.
=. The third person 3st have co3nicated his acceptance to the o#&i!or #e"ore its revocation
5. Neither o" the contractin! parties #ears the &e!a& representation or a3thoriHation o" the third part%
Art 1315. Contracts are perecte! "$ mere consent% an! rom that moment the parties are
"o3n! not onl$ to the 3lillment o #hat has "een e)pressl$ stip3late! "3t also to all the
conse63ences #hich% accor!ing to their nat3re% ma$ "e in 9eeping #ith goo! aith% 3sage
an! la#.
WHAT IS TH+ :RINCI:/+ O* O./I0ATOR9 *ORC+?
Art. 1315 provides that 7 7 "ro that oent 5o" per"ection o" the contract6 the parties are #o3nd
not on&% to the "3&"i&&ent o" $hat has #een e7press&% stip3&ated #3t a&so to a&& conse23ences $hich'
accordin! to their nat3re' a% #e in 1eepin! $ith !ood "aith' 3sa!e and &a$.(
This provision re"ers to consens3a& contracts' or those $hich are per"ected #% ere consent.
<n&i1e rea& contracts' no de&iver% is necessar% in order that it a% #e per"ected. There #ein! a eetin! o"
inds o" the parties' the% are &ia#&e not on&% as to $hat has #een a!reed 3pon e7press&%' #3t a&so as to the
conse23ences thereo" $hich are in 1eepin! $ith !ood "aith' 3sa!e' and &a$.
In consens3a& contracts' once %o3 have !iven %o3r consent' %o3 are a&read% #o3nd.
*or e7ap&e' %esterda% Char&es and C% entered into a contract $here#% Char&es #o3nd hise&" to
se&& his CRA to C% "or :C0'000 toorro$. The contract $as per"ected %esterda%' #% reason o" the eetin!
o" the inds o" the parties as to the thin! to #e so&d and as to the price' a&tho3!h there $as' as %et' no
de&iver% o" the car and pa%ent o" the price.
WHAT IS TH+ 0+N+RA/ R</+ AS R+0AR)S :+R*+CTION O* CONTRACTS?
As a !enera& r3&e' contracts are per"ected #% consent o" the parties re!ardin! the s3#;ect atter.
+7ceptions are the rea& contracts $hich are per"ected not ere&% #% consent #3t #% the de&iver%' act3a& or
constr3ctive' o" the o#;ect o" the o#&i!ation. Another e7ception is $hen the &a$ re23ires that a contract #e
in soe "or to #e va&id "or its per"ection.
Ree#er that there are severa& sta!es in the &i"e o" a contract>
There is :R+:ARATION or CONC+:TION $hich inc&3des a&& the steps ta1en #% the parties
&eadin! to the per"ection o" the contract. At this sta!e' the parties have not %et arrived at an% de"inite
a!reeent.
There is :+R*+CTION or .IRTH $hen the parties have to a de"inite a!reeent or eetin! o" the
inds re!ardin! the s3#;ect atter and ca3se o" the contract.
There is CONS<,,ATION or T+R,INATION $hen the parties have per"ored their respective
o#&i!ations and the contract a% #e said to have #een "3&&% accop&ished or e7ec3ted.
RO?A. .IN(S /. CA 1+3 SCRA C0:
1acts2 SHI:.<I/)+R entered into a contract $ith OWN+R $here#% SHI:.<I/)+R $i&& convert
OWN+RBs %acht into a passen!er and car!o vesse& "or :181'@D0. SHI:.<I/)+R $as a#&e to per"or its
part o" the contract. SHI:.<I/)+R' ho$ever' inc3rred e7tra e7penses as it did additiona& $or1 on the
ship.
SH<I:.<I/)+R deanded pa%ent d3e to additiona& $or1 doneE OWN+R re"3sed #eca3se the
additiona& $or1 done $as not a3thoriHed in $ritin!. OWN+R re&ied on Art. 1C8= re23irin! $ritten
a3thoriHation in chan!es in p&ans "or str3ct3res o" &ando$ners "or there to have an increase in the contract
price.
Iss3e2 45N there #as a perecte! contract
R3ling2 ?es. The ori!ina& contract o" service $as in $ritin!' it does not "o&&o$' ho$ever' that a&&
s3pp&eenta& contracts sho3&d a&so #e in $ritin!.
In the ori!ina& contract' it $as stip3&ated that the OWN+R a% send a representative $hi&e the
$or1 is #ein! per"ored on the vesse&' in $hich case s3ch e7tra $or1 sha&& #e s3#;ect o" another contract.
This provision did not e7p&icit&% a!ree that the s3pp&eenta& contract sho3&d a&so #e in $ritin!.
The CA "o3nd that there $as a representative sent #% R/ $ho re23ested the e7tra $or1. +ven tho3!h the
contract "or s3ch e7tra $or1 $as not in $ritin!' the ver#a& a!reeent is sti&& #indin! on the parties as &on!
as there $as a eetin! o" inds.
Note> Art. 1C8= is not contro&&in!. This on&% re"ers to str3ct3res #3i&t on &and' not vesse&s.
WHAT AR+ *OR,A/ CONTRACTS?
The% are traditiona&&% 3nderstood to ean those in $hich cop&iance $ith specia& e7terna&
"ora&ities is necessar% "or the va&idit% o" the contract. The% are not distin!3ished "ro consens3a&
contracts $here on&% consent necessar% to per"ect the contract.
Art. 131C. Real contracts% s3ch as !eposit% ple!ge an! commo!at3m% are not perecte! 3ntil
the !eliver$ o the o"<ect o the o"ligation.
WHAT AR+ R+A/ CONTRACTS?
Art. 131? provides that Rea& contracts' s3ch as deposit' p&ed!e' and coodat3' are not
per"ected 3nti& the de&iver% o" the o#;ect o" the o#&i!ation.(
A rea& contract is not per"ected #% ere consentE de&iver% o" the thin! is a&so re23ired. It is the
de&iver% o" the o#;ect $hich "ors the #asis o" the o#&i!ations 3nder the contract.
WHAT IS A )+:OSIT?
A deposit is constit3ted "ro the oent a person recieves a thin! #e&on!in! to another' $ith the
o#&i!ation o" sa"e&% 1eepin! it and o" ret3rnin! the sae. I" the sa"e1eepin! o" the thin! de&ivered is not the
principa& p3rpose o" the contract' there is no deposit #3t soe other contract. 5Art. 1@?86
WHAT IS :/+)0+?
A p&ed!e is a contract #% virt3e o" $hich one person de&ivers to another a ova#&e' or instr3ent
evidencin! incorporea& ri!hts' "or the p3rpose o" sec3rin! a principa& o#&i!ation' $ith the 3nderstandin!
that $hen the o#&i!ation is "3&"i&&ed the thin! or the instr3ent sha&& #e ret3rned #% the creditor to the
de#tor $ith its "r3its and accessories.
WHAT IS A CO,,O)AT<,?
Coodat3 is a specie o" #ai&ent' #% $hich one o" the parties #inds hise&" to ret3rn to the
other certain persona& chatte&s $hich the &atter de&ivers to hi to #e 3sed #% hi $itho3t re$ard. It is
act3a&&% a &oan "or 3se.
WHAT TH+N' AR+ TH+ 0+N+RA/ )ISTINCTIONS .+TW++N A CONS+NS<A/' R+A/' AN)
*OR,A/ CONTRACT?
A CONS+NS<A/ CONTRACT is per"ected #% ,+R+ CONS+NT.
A R+A/ CONTRACT is per"ected #% the three e&eents> CONS+NT' O.G+CT' and CA<S+ p&3s
)+/IA+R9 "or p3rposes o" va&idit%.
A *OR,A/ CONTRACT is per"ected #% the three e&eents p&3s a "ora&it%' "or e7ap&e' a
contract o" donation in cases o" a donation.
Art. 1318. No one ma$ contract in the name o another #itho3t "eing a3thoriDe! "$ the
latter% or 3nless he has "$ la# a right to represent him.
,A9 ON+ +NT+R INTO A CONTRACT IN TH+ NA,+ O* A C+RTAIN :+RSON WITHO<T .+IN0
A<THORIO+) .9 TH+ /ATT+R?
Art. 131C provides that No one a% contract in the nae o" another $itho3t #ein! a3thoriHed #%
the &atter' or <N/+SS he has #% &a$ a ri!ht to represent hi.(
A contract entered into in the nae o" another #% one $ho has no &e!a& representation or a3thorit%
or $ho has acted #e%on! his po$ers sha&& #e 3nen"orcea#&e <N/+SS it is rati"ied e7press&% or ip&ied&% #%
the person on $hose #eha&" it has #een e7ec3ted' #e"ore it is revo1ed #% the other contractin! part%.
WHAT *OR, SHO</) TH+ RATI*ICATION TA-+?
The rati"ication a% #e e7press or ip&ied.
WHAT IS TH+ +**+CT O* RATI*ICATION?
The rati"ication o" a contract #% the person in $hose nae it has #een entered into $itho3t
a3thorit%' va&idates the act "ro the oent o" its ce&e#ration' and not ere&% "ro the tie o" its
rati"ication' "or the rati"ication operates 3pon or app&ies to the act a&read% per"ored.
Chapter *
(ssential Re63isites O Contracts
General Provisions
Art. 131:. There is no contract 3nless the ollo#ing re63isites conc3r2
1. Consent o the contracting parties;
*. O"<ect certain #hich is the s3"<ect matter o the contract;
3. Ca3se o the o"ligation #hich is esta"lishe!.
WHAT AR+ +SS+NTIA/ +/+,+NTS O* A CONTRACT?
The a#sence o" one o" the essentia& e&eents $i&& not res3&t in a per"ected contract.
These e&eents are>
1. CONS+NT o" the contractin! parties.
8. O.G+CT or the s3#;ect atter $hich is certain
3. CA<S+ or consideration o" the o#&i!ation $hich is esta#&ished.
WHAT AR+ TH+ -IN)S O* CONTRACTS?
1. CONS+NS<A/ $herein ere consent per"ects the contract. In a contract o" sa&e' the deed is
not rea&&% necessar%. It is ade' not p3rposes o" va&idit% #3t "or the ere convenience o" the
parties.
*. R+A/ contracts $herein in addition to the a#oveentioned e&eents' de&iver% is sti&&
necessar%. S3ch de&iver% is not "or the p3rpose o" per"ectin! the contract. This is de""erent
"ro a p&ed!e or coodat3 $hich are contracts' $hich i" not de&ivered' do not res3&t' at
a&&' in a per"ected contract.
3. *OR,A/ contracts are those' $hich in addition to the essentia& re23isites' re23ire that a
certain "or #e "o&&o$ed in the e7ec3tion o" the contract' "or e7ap&e' a donation.
Section 1
Consent
Art. 1310. Consent is manieste! "$ the meeting o the oer an! the acceptance 3pon the
thing an! the ca3se #hich are to constit3te the contract. The oer m3st "e certain an! the
acceptance a"sol3te. A 63aliie! acceptance constit3tes a co3nterEoer.
Art. 13*0. An acceptance ma$ "e e)press or implie!.
Art. 13*1. The person ma9ing the oer ma$ i) the time% place% an! manner o acceptance%
all o #hich m3st "e complie! #ith.
Art. 13**. An oer ma!e thro3gh an agent is accepte! rom the time acceptance is
comm3nicate! to him.
WHAT IS CONS+NT?
The essence o" the consent is the con"orit% o" the parties to the ters o" the contract. Hence' it is
de"ined as the conc3rrence o" the o""er and the acceptance over the thin! and the ca3se $hich constit3te the
contract.
WHAT AR+ TH+ R+I<ISIT+S N+C+SSAR9 *OR CONS+NT TO .+ AA/I)?
1. There 3st #e at &east 586 parties. This does not re"er to persons since there can #e on&% one
person #3t that person represents 8 interests. In other $ords' the sae person a% a1e a
contract $ith hise&"' actin! in the nae o" another in one capacit% and in his o$n nae.
8. The person !ivin! consent 3st have &e!a& capacit%.
In order that there #e a va&id consent' the persons eittin! the consent 3st have &e!a&
capacit%.
Art. 138C provides that inors and insane or deented persons' and dea"43tes $ho do not
1no$ ho$ to $rite cannot !ive consent.
CONS+NT ,<ST .+ ,ANI*+ST+)' WH+N ,<ST THIS .+?
Art. 131@ provides that consent is ani"ested #% the eetin! o" the o""er and the acceptance 3pon
the thin! and the ca3se $hich are to constit3te the contract.
I" there is no o""er' there is no contractE i" there is no acceptance' there is no contract.
WHAT AR+ TH+ CHARACT+RISTICS O* CONS+NT?
1. It 3st #e INT+//I0+NT P there is capacit% to act.
8. It 3st #e *R++ and AO/<NTAR9 P there is no vitiation o" consent #% reason o" vio&ence or
intiidation.
3. It is CONSCIO<S and S:ONTAN+O<S P there is no vitiation o" consent #% reason o"
ista1e' 3nd3e in"&3ence' or "ra3d.
HOW )O AIC+S O* CONS+NT A**+CT TH+S+ CHARACT+RISTICS?
1. INT+//+CT P It prevents the perso "ro 1no$in! the tr3e "acts and that a#sence o"
contract !ives rise to the contract.
,ista1e or "ra3d a""ects the inte&&ect. There is no cop3&sion #3t the person de"ra3ded is
actin! in an erroneo3s or "ra3d3&ent act.
8. WI// and AO/ITION P Here' the person 1no$s the tr3e "acts #3t he a% not have #een
$i&&in! to enter into the contract. He' neverthe&ess' did #eca3se o" 3nd3e in"&3ence'
intiidation' or vio&ence.
WHAT IS AN O**+R?
An o""er is the proposa& to a1e a contract. It is a 3ni&atera& proposition $hich one part% a1es to
the other "or the p3rpose o" ce&e#ratin! a contract. It can #e ade to a de"inite person or to the $or&d at
&ar!e.
WHAT AR+ TH+ R+I<IR+,+NTS O* A AA/I) O**+R?
1. It 3st #e de"inite or certain.
It is de"inite and certain o" the part% a1in! the o""er c&ear&% sho$s his intention to enter into
a contract. It 3st #e cop&ete in its ters and conditions.
8. Cop&eteness
This eans that the o#;ect ters and conditions o" the o""er 3st #e identi"ied. One 3st &oo1
into the ver% $ordin! o" the o""er. Th3s' "or e7ap&e in a contract o" sa&e' the o""er 3st
speci"% the o#;ect' the price and the ters thereo".
3. O""eror has the intention to #e #o3nd.
We 3st a&$a%s #e certain o" this intention. O3r c3&t3re is "3&& o" e7pressions o" co3rtes% that
one a% #e &ed to #e&ieve that an o""er has #een ade $hen in "act the person there $as none.
An e7ap&e $o3&d #e $hen a host te&&s his !3est to consider his ho3se as his.(
WHAT IS ACC+:TANC+?
Acceptance is the 3nconditiona& and 3n23a&i"ied a!reeent to the o""er. A 23a&i"ied acceptance
constit3tes a co3nter4o""er.
WHAT AR+ TH+ R+I<ISIT+S O* ACC+:TANC+?
1. A.SO/<T+. There is an a#so&3te acceptance i" the acceptance corresponds e7act&% to the
ters o" the contract. The acceptance 3st #e identica& $ith the o""er to create a contract.
I" the o""er is "or :100'000' then the acceptance 3st #e "or the :100'000
8. <NI<A/I*I+). It is necessar% that the acceptance #e 3ne23ivoca& and 3nconditiona& and the
acceptance and the proposa& sha&& #e $itho3t an% variation $hatesover. An% odi"ication or
variation "ro the ters o" the o""er ann3&s the &atter and "rees the o""eror' #eca3se it is
considered a 23a&i"ied acceptance or a co3nter4o""er and a co3nter4o""er has the e""ect o"
e7tin!3ishin! the o""er.
3. CO,,<NICATION 5or 1no$&ed!e o" o""eror6 In order that the acceptance a% #ind the
o""eror' o3r &a$ re23ires that the sae 3st #e 1no$n to hi. The second para!raph o" Art.
131@ provides that acceptance ade #% &etter or te&e!ra does not #ind the o""eror e7cept
"ro the tie it cae to his 1no$&ed!e.
WHAT IS TH+ R</+ I* /+TT+R O* ACC+:TANC+ IS WITH)RAWN OR R+AO-+)?
A . C ) +
O""er $as ade in point A. Acceptance $as on point .. The &etter o" acceptance $as received on
point ) #3t a &etter o" revocation $as sent #% the o""eree on point C. Was there a eetin! o" inds?
516 I" the revocation $as received #e"ore point )' there is no eetin! o" the inds.
586 I" the revocation $as received on point +' a"ter the acceptance $as received' there $as
a&read% a eetin! o" inds. Th3s' to #e s3re' that there #e no contract at a&&' the revocation
&etter 3st reach the o""eror #e"ore the &atter recieves the acceptance.
WHAT IS TH+ R</+ ON ACC+:TANC+ .9 INT+R,+)IARI+S?
In Art. 1388' it is provided that an o""er ade thro3!h an a!ent is accepted "ro the tie
acceptance is co3nicated to hi. This pres3pposes that the a!ent is a rea& one and not a ere
interediar% $ho has no po$er to #ind the o""eror or the o""erree. There a!ent 3st #e a3thoriHed to #ind
the principa&.
WHAT I* AN O**+R WAS ,A)+ :+RSONA//9 .9 TH+ :RINCI:A/ .<T TH+ ACC+:TANC+
WAS ,A)+ TO TH+ A0+NT?
I" the a!ent is d3&% a3thoriHed' s3ch an acceptance $o3&d #e a&&o$ed.
IS A CONTRACT :+R*+CT+) I* ACC+:TANC+ IS ,A)+ TO A :+RSON WHO IS NOT
A<THORIO+)?
0enera&&%' no. The e7ception is $hen 1no$&ed!e is conve%ed to the principa&. The contract is th3s
per"ected "ro the tie the principa& is act3a&&% in"ored.
WHAT AR+ TH+ *OR,S O* ACC+:TANC+?
1. It a% #e e7press. S3ch an acceptance a% #e ora& or $ritten.
8. It a% #e ip&ied. This 1ind o" acceptance is in"erred "ro the act or cond3ct.
CAN TH+R+ .+ ACC+:TANC+ .9 SI/+NC+?
0enera& r3&e> NO.
An e7ception $o3&d #e the pres3ed acceptance on the part o" the heir to re;ect the inheritance
$ithin 30 da%s "ro notice o" the order o" the co3rt distri#3tin! the estate.
)e /eon !ives 3 other instances' nae&%
516 Where the parties a!ree e7press&% or ip&ied&%' that it sha&& ao3nt to acceptanceE
586 Where speci"ic provisions &a$ so dec&areE and
536 Where 3nder the circ3stances s3ch si&ence constit3tes estoppe&.
The "o&&o$in! e7ap&e a% a&so #e a&&o$ed> $hen one is ade to se&& tic1ets and he is re23ired to
ret3rn the 3nso&d tic1ets $ithin a certain period other$ise it is deeed to have #een so&d. The 23a&i"ication
is' in the case o" schoo& 1ids $ho are %et to 3nderstand transactions as se&&in! o" tic1ets.
A&so' the practice o" soe copanies to de&iver or send cons3ers their prod3cts $ith the
accopan%in! condition that s3ch prod3cts 3st #e ret3rned $ithin a n3#er o" da%s or e&se the% $o3&d #e
deeed to have #een so&d in the cons3erBs "avor. This is #ad #3siness practice' and 3st not #e to&erated.
SA.ONGA /. 1(RRA.(S 105 SCRA 350
1acts2 /+SS++ A' .' C' )' and + are &essees o" a parce& o" &and o$ned #% ORI0INA/4S+//+R.
ORI0INA/4S+//+R conve%ed the said parce& o" &and to .<9+R4NOW S+//+R. .<9+R4NOW
S+//+R "i&ed an e;ectent case a!ainst /+SS++S "or non4pa%ent o" renta&s. The Cit% Co3rt r3&ed in
"avor o" .<9+R4NOW S+//+R and ordered /+SS++S to vacate the said &and and to pa% the renta&s in
arrears. /+SS++4A appea&ed the decision o" the Cit% Co3rt to the C*I. Whi&e the appea& is pendin! in the
C*I' .<9+R4NOW S+//+R and the other /+SS++S' e7cept /+SS++4A' had a coproise a!reeent
$herein .<9+R4NOW S+//+R $o3&d se&& to the the &ot that the% occ3p%. /+SS++4A' "or his part' a&so
proposed to .<9+R4NOW S+//+R that /+SS++4A $o3&d a&so #3% the &and /+SS++4A occ3pies "or a
reasona#&e ao3nt' #3t the sae $as re"3sed #% .<9+R4NOW S+//+R and insisted on the e7ec3tion o"
the decision o" the Cit% Co3rt. In the eantie' the C*I 3phe&d the decision o" the Cit% Co3rt. Hence' this
case.
Iss3e2 45N .(SS((EA can compel &>?(RENO4 S(..(R to conve$ the lot "$ virt3e o his
proposal
R3ling2 No. It is e&eentar% that consent is an essentia& e&eent "or the e7istence o" a contract' and $here
it is $antin!' the contract is non4e7istent. The essence o" consent is the con"orit% o" the parties on the
ters o" the contract' the acceptance #% one o" the o""er ade #% the other. The contract to se&& is a #i&atera&
contract. Where there is ere&% an o""er #% one part%' $itho3t the acceptance o" the other' there is no
consent.
In the case at #ar' .<9+R4NOW S+//+R re;ected the o""er o" /+SS++4A. There #ein! no
consent' there is' there"ore' no contract to se&& to spea1 o".
PN& v. CA *3: SCRA *0
1acts2 In 1@D8' .ORROW+R o#tained a &oan "ro /+N)+R in the ao3nt o" :50-' to #e paid in 3
%ears at an ann3a& interest o" 18Q. To sec3re the &oan' .ORROW+R e7ec3ted a rea& estate ort!a!e and a
chatte& ort!a!e. <nder the Credit A!reeent' there is a stip3&ation that the /+N)+R can increase the
interest rate $ithin the &iits provided #% &a$. This stip3&ation is a&&o$ed 3nder :) 1?D= and C. Circ3&ar
No. @05.
In 1@D=' /+N)+R 3ni&atera&&% increased the interest rate to 85Q' then to 30Q' then to =8Q.
Therea"ter' .ORROW+R e7erted e""orts to !et the /+N)+R to re4adopt the 18Q ori!ina& interest' #3t to
no avai&. .ORROW+R "i&ed a case a!ainst /+N)+R to cope& the to re4adopt the said interest rate. The
RTC disissed the case' #3t he CA' on appea&' reversed the decision and ordered /+N)+R to re4adopt the
18Q interest rate.
Iss3e2 45N .(NF(R can 3nilaterall$ increase the interest rate as allo#e! 3n!er PF 1C:+ an! C&
Circ3lar 005
R3ling2 No. /+N)+R cannot 3ni&atera&&% increase the interest rate. :) 1?D= and C. Circ3&ar @05 had
#een constr3ed #% the SC to on&% a&&o$ the contractin! parties to "ree&% stip3&ate re!ardin! an% s3#se23ent
ad;3stent in the interest rate o" the &oan #3t the &a$s did not a3thoriHe either part% to 3ni&atera&&% raise the
interest rate $itho3t the otherBs consent.
It is #asic that there can #e no contract in the tr3e sense in the a#sence o" the e&eent o" a!reeent
or 3t3a& assent o" the parties. Sii&ar&%' contract chan!es 3st #e ade $ith the consent o" the
contractin! parties. In the case o" &oan contracts' the rate o" interest is a&$a%s a vita& coponent' hence' an%
chan!e 3st #e 3t3a&&% a!reed 3pon.
SC "3rther said that no one receivin! a proposa& to chan!e a contract to $hich he is a part% is
o#&i!ed to ans$er the proposa&' and his si&ence per se cannot #e constr3ed as an acceptance.
O&ANA /. CA 135 SCRA 558
1acts2 S+//+R $as approached #% .<9+R $ho o""ered to p3rchase "ro S+//+R 1C0 cavans o"
c&ean rice at the price o" :3C.85 per cavan' de&iver% to #e ade at 3
R)
:ART9Bs store. S+//+R accepted
the o""er as he 1ne$ 3
R)
:ART9 and had previo3s transactions $ith hi.
As a!reed' the 1C0 cavans o" rice $ere transported the "o&&o$in! da% on a tr3c1 #e&on!in! to
S+//+R to 3
R)
:ART9Bs store. <pon arriva& thereat' the !oods $ere 3n&oaded #3t $hen tr3c1 driver
attepted to co&&ect the p3rchase price "ro .<9+R' the &atter $as no$here to #e "o3nd. The driver tried
to co&&ect "ro 3
R)
:ART9' #3t the &atter re"3sed statin! that he had p3rchased the !oods "ro .<9+R at
:33 per cavan and that the price there"or had a&read% #een paid to .<9+R.
3
R)
:ART9' d3rin! tria& in the C*I' aditted that three da%s a"ter the de&iver%' he $as repaid #%
.<9+R.
Iss3e2 45N there #as a perecte! sale
R3ling2 ?es. We a!ree $ith .<9+R that there $as a per"ected sa&e. Artic&e 1=C5 o" the Civi& Code &a%s
do$n the !enera& r3&e that there is per"ection $hen there is consent 3pon the s3#;ect atter and price' even
i" neither is de&ivered.
The contract o" sa&e is per"ected at the oent there is a eetin! o" inds 3pon the thin! $hich
is the o#;ect o" the contract and 3pon the price 777(
At the ver% &east' .<9+R had a rescissi#&e tit&e to the !oods "or the non4pa%ent o" the p3rchase
price' #3t $hich has not #een rescinded at the tie o" the sa&e to 3
R)
:ART9.
Havin! #een repaid the p3rchase price #% .<9+R' the sa&e as #et$een the had #een vo&3ntari&%
rescinded' and 3
R)
:ART9 $as there#% divested o" an% c&ai to the rice. 3
R)
:ART9 sho3&d ret3rn the rice
to S+//+R or the va&3e thereo".
Art. 13*3. An oer "ecomes ineective 3pon the !eath% civil inter!iction% insanit$% or
insolvenc$ o either part$ "eore acceptance is conve$e!.
WH+N IS TH+ O**+R +FTIN0<ISH+)?
1. <pon the death' civi& interdiction' insanit%' or inso&venc% o" either part%. 5Art. 13836E
*. <pon the re;ection o" the o""ereeE
3. <pon the &apse o" the period stated in the o""er $itho3t acceptance #ein! conve%edE
+. <pon 23a&i"ied or conditiona& acceptance 5co3nter4o""er6E
5. <pon revocation o" the o""er #e"ore the 1no$&ed!e o" acceptance.
/I..AN>(/A /. CA *++ SCRA 305
1acts2 O**+ROR4ON+ tried to reac23ire the propert% #% #iddin! in the a3ction. 5O**+ROR4ON+ $as
s$ind&ed #% ep&o%ees o" S+//+R4.AN-' her propert% $as ta1en "ro her' #3t this $as not an iss3e
here6. O**+ROR4ON+Bs #id $ent 3p as hi!h as :110'=1C in a sea&ed #id $hich she sent to S+//+R4
.AN-.
O**+ROR4TWO too1 interest in the properties d3rin! a3ction and act3a&&% ade an o""er $ith a
deposit o" :10-. O**+ROR4TWOBs o""er $as approved #% S+//+R4.AN- $ith the condition that the
p3rchase price sha&& #e :110- &ess :10- deposit pa%a#&e in cash $ithin 15 da%s "ro the receipt o" the
approva& o" the o""er. S3ch approva& $as not received since O**+ROR4TWO $as o3t o" the co3ntr%.
S+//+R4.AN- $as then p&aced 3nder receivership. O**+ROR4TWO ade pa%ent o" his #a&ance $a%
#e%ond the 154da% period' #3t $hich $as accepted #% the Centra& .an1 5C.6 s3#;ect to C. &i23idatorBs
approva&. A"ter$ards' O**+ROR4TWO deanded "or the deed o" conve%ance. O**+RO4TWO $as not
ans$ered.
O**+ROR4TWO &ost the vested ri!ht created #% the :A. #oard reso&3tion approvin! his o""er
d3e to prescription $hen O**+ROR4TWO "ai&ed to pa% $ithin the 154da% period entioned in the
reso&3tion. O**+ROR4ON+ is estopped "ro 23estionin! the transactions ade #% the :A. o""icer $ho
s$ind&ed her #eca3se she $as a co4participant to the esta"a 5at &east to the e7tent o" O**+ROR4ON+Bs
3ndivided R con;3!a& share $hich &ater #ecae the 1J3 hereditar% share estate o" O**+ROR4ON+Bs &ate
h3s#and6. Neverthe&ess' O**+ROR4ON+ $as the person the tria& co3rt a&&o$ed to p3rchase the &ots at
:110'=1?.80 #id.
O**+ROR4TWO $ent to the CA $hich reversed the decision #eca3se the CA "o3nd O**+ROR4
TWOBs "ai&3re to pa% the #a&ance $ithin the prescri#ed period $as e7c3sa#&e as he $as not noti"ied or even
ans$ered $hen he dec&ared his readiness to pa% the #a&ance.
O**+ROR4ON+ "i&ed this petition "or revie$ on certiorari to the SC.
Iss3e2 45N O11(RORET4OGs oer #as eective
R3ling2 No. <nder Art. 1383 o" the Civi& Code' an o""er #ecoes ine""ective 3pon the death' civi&
interdiction' insanit%' or inso&venc% o" either part% #e"ore acceptance is conve%ed.
The assets o" an instit3tion 3nder receivership or &i23idation sha&& #e deeed in c3stodia &e!is in
the hands o" the receiver or &i23idator and sha&&' "ro the oent o" s3ch receivership or &i23idation' #e
e7ept "ro an% order or !arnishent' &ev%' attachent' or e7ec3tion.
In a n3tshe&&' the inso&venc% o" a #an1 and the conse23ent appointent o" a receiver restrict the
#an1Bs capacit% to act' especia&&% in re&ation to its propert%. App&%in! Art. 1383 o" the Civi& Code'
O**+ROR4TWOBs o""er to p3rchase the s3#;ect &ots #ecae ine""ective #eca3se S+//+R4.AN- #ecae
inso&vent #e"ore the #an1s acceptance o" the o""er cae to his 1no$&ed!e. Hence' the p3rported contract o"
sa&e #et$een the did not reach the sta!e o" per"ection.
Note on the iss3e o" the C.Bs acceptance o" O**+ROR4TWOBs &ate pa%ent> The acceptance #%
an ep&o%ee o" the C. o" O**+RO4 TWOBs &ate pa%ent $as "o3nd to have #een preconditioned on a note
ade $hich reads pa%ent ade is accepted s3#;ect to the approva& o" C. &i23idator(. The C.
&i23idatorBs "indin! sa%s> that the propert% is in c3stodia &e!is and is disposa#&e on&% #% p3#&ic a3ction
s3#;ect to the approva& o" the &i23idation co3rt 5$ho act3a&&% "o3nd in "avor not o" O**+OR4TWO #3t
O**+ROR4ON+6' $hich ade the acceptance inva&id.
Art. 13*+. 4hen the oerer has allo#e! the oeree a certain perio! to accept% the oer ma$
"e #ith!ra#n at an$ time "eore acceptance "$ comm3nicating s3ch #ith!ra#al% e)cept
#hen the option is o3n!e! 3pon a consi!eration% as something pai! or promise!.
WHAT IS AN O:TION?
It is the period !ranted to the o""eree $ithin $hich to accept the o""er. It is separate and distinct
"ro the contract $hich $i&& #e per"ected 3pon the acceptance o" the o""er. I" the period e7pires and there is
no acceptance' the o""er is a3toatica&&% e7tin!3ished.
I* TH+R+ IS AN O:TION' CAN TH+ O**+R .+ WITH)RAWN AT AN9 TI,+?
0enera& r3&e> The o""er a% #e $ithdra$n at an% tie #e"ore acceptance.
+7ception> When the option is "o3nded 3pon a consideration' as soethin! paid or proised in
$hich case' the o""er a% not #e $ithdra$n #e"ore the &apse o" the option period.
WHAT IS O:TION AN) +ARN+ST ,ON+9?
Option one% is the one% paid or proised to #e paid in consideration o" the option. It is not to
#e con"3sed $ith earnest one%' $hich is act3a&&% a partia& pa%ent o" the p3rchase price and is considered
as proo" o" the per"ection o" the contract.
AF(.1A PROP(RTI(S /S. CA *+0 SCRA 5C5
1acts2 A)+/*A and GI,+N+O e7ec3ted an +7c&3sive Option to :3rchase( "or $hich the &and in
23estion $i&& #e so&d "or :8'D5?'150.00. A)+/*A paid a s3 o" :50'000.00 as option one%' #3t sha&& #e
credited as partia& pa%ent 3pon the cons3ation o" the sa&e.
.e"ore A)+/*A co3&d a1e pa%ent' A)+/*A received s3ons on Nove#er 8@' 1@D@'
to!ether $ith a cop% o" a cop&aint "i&ed #% the nephe$s and nieces o" GI,+N+O "or recover% o"
o$nership o" the propert%.
As a conse23ence A)+/*A in"ored GI,+N+O that it $o3&d ho&d pa%ent o" the "3&& p3rchase
price and s3!!ested that GI,+N+O sett&e the case $ith her nephe$s and nieces' addin! that S i" possi#&e'
a&tho3!h Nove#er 30' 1@D@ is a ho&ida%' $e $i&& #e $aitin! "or %o3 and said p&ainti""s at o3r o""ice 3p to
C>00 p..( GI,+N+O re"3sed to heed the s3!!estion o" petitioner and attri#3ted the s3spension o" pa%ent
o" the p3rchase price to &ac1 o" $ord o" honor.(
On )ece#er 1=' 1@D@' GI,+N+O in"ored A)+/*A that GI,+N+O $as cance&in! the
transaction. On *e#r3ar% 83' 1@@0' the Re!iona& Tria& Co3rt o" ,a1ati disissed the case "i&ed #% the
nieces a!ainst GI,+N+O. On the sae da%' GI,+N+O e7ec3ted a )eed o" Conditiona& Sa&e in "avor o" 3
R)
:ART9 over the sae parce& o" &and "or :3'08@'850.00' o" $hich :1'500'000.00 $as paid to GI,+N+O on
said date $ith the #a&ance to #e paid 3pon the trans"er o" tit&e to the speci"ied one4ha&" portion.
On Apri& 1?' 1@@0' A)+/*A $rote GI,+N+O in"orin! the &atter that in vie$ o" the disissa& o"
the case a!ainst the' A)+/*A $as $i&&in! to pa% the p3rchase price and A)+/*A re23ested that the
correspondin! deed o" a#so&3te sa&e #e e7ec3ted. This $as i!nored #% GI,+N+O.
On G3&% 8C' 1@@0' GI,+N+O sent a &etter to A)+/*A enc&osin! therein a chec1 "or :85'000.00
representin! the re"3nd o" "i"t% percent o" the option one% paid 3nder the e7c&3sive option to p3rchase.
Then GI,+N+O re23ested A)+/*A to ret3rn the o$nerBs d3p&icate cop% o" the certi"icate o" tit&e o"
respondent Sa&3d GiineH. A)+/*A "ai&ed to s3rrender the certi"icate o" tit&e' hence GI,+N+O "i&ed a case
"or ann3&ent o" contract $ith daa!es' pra%in! aon! others' that the e7c&3sive option to p3rchase #e
dec&ared n3&& and void' that A)+/*A #e ordered to ret3rn the o$nerBs d3p&icate certi"icate o" tit&e' and that
the annotation o" the option contract on #e cance&&ed. 3
R)
:ART9' the s3#se23ent p3rchaser o" the &ot' "i&ed
a cop&aint in intervention.
The TC rendered ;3d!ent therein ho&din! that the a!reeent entered into #% the parties $as
ere&% an option contract' and dec&arin! that the s3spension o" pa%ent #% A)+/*A constit3ted a co3nter4
o""er $hich' there"ore' $as tantao3nt to a re;ection o" the option. It &i1e$ise r3&ed that A)+/*A co3&d not
va&id&% s3spend pa%ent in "avor o" GI,+N+O on the !ro3nd that the vindicator% action "i&ed #% the &atterBs
1in did not invo&ve the $estern portion o" the &and covered #% the contract #et$een A)+/*A and
GI,+N+O. The tria& co3rt then directed the cance&&ation o" the e7c&3sive option to p3rchase' dec&ared the
sa&e to intervenor 3
R)
:ART9 as va&id and #indin!' and ordered A)+/*A to pa% daa!es and attorne%Bs
"ees to GI,+N+O' $ith costs.
On appea&' CA a""ired in toto the decision o" the co3rt a 23o and he&d that the "ai&3re o"
A)+/*A to pa% the p3rchase price $ithin the period a!reed 3pon $as tantao3nt to an e&ection #%
A)+/*A not to #3% the propert%E that the s3spension o" pa%ent constit3ted an iposition o" a condition
$hich $as act3a&&% a co3nter4o""er ao3ntin! to a re;ection o" the option. Hence the case at #ar.
Iss3e2 45N the agreement "et#een Sal3! an! AF(.1A #as an option contract.
R3ling2 No. The SC he&d in this case that the contract #et$een A)+/*A and Sa&3d $as not an option
contract #3t a cons3ated Contract to Se&& #eca3se the ao3nt paid #% A)+/*A to Sa&3d $as not a
consideration distinct "ro the p3rchase price #3t is part o" the p3rchase price and o$nership is not
trans"erred iediate&% #3t on&% 3pon "3&& pa%ent o" the p3rchase price. Ho$ever' Sa&3d va&id&%
rescinded the contract $hi&e A)+/*A' "or its part' "ai&ed to consi!n the reainin! #a&ance o" the p3rchase
price to the Co3rts. Hence' the cance&&ation o" the contract is va&id and the sa&e to 3
R)
:ART9 is a&so va&id
and #indin!.
The SC had the opport3nit% to disc3ss the distinction #et$een O:TION and CONTRACT' s3ch as
contract to se&&. It noted>
An O:TION' as 3sed in the &a$ on sa&es' is a contin3in! o""er or contract #% $hich the o$ner
stip3&ates $ith another that the &atter sha&& have the ri!ht to #3% the propert% at a "i7ed price $ithin a certain
tie' or 3nder' or in cop&iance $ith' certain ters and conditions' or $hich !ives to the o$ner o" the
propert% the ri!ht to se&& or deand a sa&e. It is a&so soeties ca&&ed an 3naccepted o""er.( An option is
not o" itse&" a p3rchase' #3t ere&% sec3res the privi&e!e to #3%. It is not a sa&e o" propert% #3t a sa&e o" the
ri!ht to p3rchase. It is sip&% a contract #% $hich the o$ner o" propert% a!rees $ith another person that he
sha&& have the ri!ht to #3% his propert% at a "i7ed price $ithin a certain tie. He does not se&& his &andE he
does not then a!ree to se&& itE #3t he does se&& soethin!' that is' the ri!ht or privi&e!e to #3% at the e&ection
or option o" the other part%. Its distin!3ishin! characteristic is that it iposes no #ondin! o#&i!ation on the
person ho&din! the option' aside "ro the consideration "or the o""er. <nti& acceptance' it is not proper&%
spea1in!' a contract' and does not vest' trans"er' or a!ree to trans"er an% tit&e to or an% interest or ri!ht in
the s3#;ect atter' #3t is ere&% a contract #% $hich the o$ner o" propert% !ives the optionee the ri!ht or
privi&e!e o" acceptin! the o""er and #3%in! the propert% on certain ters.
On the other hand' a CONTRACT' &i1e a CONTRACT TO S+//' invo&ves a eetin! o" inds
#et$een t$o persons $here#% one #inds hise&" $ith respect to the other' to !ive soethin! or to render
soe service. Contracts' in !enera&' are per"ected #% ere consent' $hich is ani"ested #% the eetin! o"
the o""er and the acceptance 3pon the thin! and the ca3se $hich are to constit3te the contract. The o""er
3st #e certain and the acceptance a#so&3te. The distinction #et$een an option( and a contract o" sa&e is
that an option is an 3naccepted o""er. It states the ters and conditions on $hich the o$ner is $i&&in! to se&&
his &and' i" the ho&der e&ects to accept the $ithin the tie &iited. I" the ho&der does so e&ect' he 3st !ive
notice to the other part%' and the accepted o""er there3pon #ecoes a va&id and #indin! contract. I" an
acceptance is not ade $ithin the tie "i7ed' the o$ner is no &on!er #o3nd #% his o""er' and the option is at
an end. A contract o" sa&e' on the other hand' "i7es de"inite&% the re&ative ri!hts and o#&i!ations o" #oth
parties at the tie o" its e7ec3tion. The o""er and the acceptance are conc3rrent' since the inds o" the
contractin! parties eet in the ters o" the a!reeent.
CO /. CA 31* SCRA 5*:
1acts2 .<9+R entered into a ver#a& contract $ith S+//+R "or the p3rchase o" the &atterBs ho3se and &ot
"or and in consideration o" the s3 o" T100'000. .<9+R paid to S+//+R the ao3nts o" T1'000 and
:=0'000 as earnest one%' in order that the sae a% #e reserved "or her p3rchase' said earnest one% to
#e ded3cted "ro the tota& p3rchase price.
A&tho3!h the period o" pa%ent had a&read% e7pired' .<9+R paid to S+//+R the s3 o"
T30'000 as partia& pa%ent o" the p3rchase price. S+//+RBs co3nse& $rote a &etter to .<9+R deandin!
that she pa% the #a&ance o" TC0'000' and not receivin! an% response thereto' said co3nse& $rote another
&etter to .<9+R in"orin! her that she has &ost her Koption to p3rchaseB the propert% s3#;ect o" this case
and o""ered to se&& another propert%.
The co3nse& "or .<9+R $rote a &etter to S+//+R in"orin! the &atter that .<9+R is no$ read%
to pa% the reainin! #a&ance to cop&ete the s3 o" T100'000.
Iss3e2 45N the contract entere! into is an option contract.
R3ling2 No. An O:TION is a contract !rantin! a privi&e!e to #3% or se&& $ithin an a!reed tie and at a
deterined price. It is a separate and distinct contract "ro that $hich the parties a% enter into 3pon the
cons3ation o" the option. It 3st #e s3pported #% consideration
On the other hand' a CONTRACT O* SA/+ is a consens3a& contract and is per"ected at the
oent there is a eetin! o" the inds 3pon the thin! $hich is the o#;ect o" the contract and 3pon the
price. The e&eents o" a va&id contract o" sa&e 3nder Artic&e 1=5D o" the Civi& Code are 516 consent or
eetin! o" the indsE 586 deterinate s3#;ect atterE and 536 price certain in one% or its e23iva&ent.
In the case at #ar' a&& the three e&eents o" a contract o" sa&e are present in the transaction #et$een
the parties. .<9+RBs o""er to p3rchase the ho3se and &ot at a price o" T100'000 $as accepted #% S+//+R.
+arnest one% in the ao3nts o" T1'000 and :=0'000 $as a&read% received #% S+//+R.
ANG ?> /S. CA *3: SCRA C0*
1acts> /+SSORS are tenants o" residentia& and coercia& spaces o$ned #% OWN+RS. /+SSORS have
occ3pied said spaces since 1@35. On severa& occasions prior to Octo#er @' 1@D?' OWN+RS in"ored
/+SSORS that the% are o""erin! to se&& the preises and are !ivin! the priorit% to ac23ire the sae.
OWN+RS o""ered a price o" :?4, $hi&e /+SSORS ade a co3nter4o""er o" :54,. /+SSORS $rote
OWN+RS on Octo#er 8=' 1@D? as1in! OWN+RS to speci"% the ters and conditions o" sa&e. *or "ai&3re o"
the OWN+RS to rep&%' the /+SSORS $rote another &etter $hich $as &i1e$ise 3nheeded. .eca3se o" the
OWN+RBS "ai&3re or re"3sa& to speci"% the ters and conditions o" sa&e and #eca3se o" an in"oration the
/+SS++S received that the OWN+RS are a#o3t to se&& the propert%' /+SS++S "i&ed a cop&aint to cope&
the OWN+RS to se&& the propert% to /+SS++S .
The TC r3&ed in "avor o" the OWN+RS s3ari&% disissin! the cop&aint. The TC ho$ever
decreed that i" the OWN+RS s3#se23ent&% decide to se&& the propert% "or :114, or &o$er' the /+SS++S
have the ri!ht o" "irst re"3sa&. The CA 3phe&d the decision o" the TC s3#;ect to the odi"ication that the
/+SS++SB ri!ht o" "irst re"3sa& sha&& accr3e i" the propert% is to #e so&d "or a price in e7cess o" :114,.
,ean$hi&e' pendin! consideration #% the CA' the OWN+RS so&d the propert% to 3
R)
:ART9 "or
:154,.
On A3!3st 8C' 1@@1' the/+SS++S "i&ed to the TC a petition "or a $rit o" e7ec3tion p3rs3ant to the
r3&in! o" the CA. On A3!3st 30' 1@@1' the TC iss3ed the $rit o" e7ec3tion orderin! the OWN+RS to se&&
the propert% to the /+SS++S "or :154, in reco!nition o" the &atterBs ri!ht o" "irst re"3sa&. The TC "3rther
ordered that a&& previo3s transactions invo&vin! the said propert% #e set aside havin! #een e7ec3ted in #ad
"aith. On Septe#er 88' 1@@1' the sae TC iss3ed another order directin! the )ep3t% Sheri"" to ip&eent
the $rit o" e7ec3tion. Said orders $ere appea&ed to the CA' and $ere dec&ared $itho3t "orce and e""ect.
Hence this revie$ "or certiorari.
Iss3e2 45N there #as a perecte! option contract
R3ling2 No. The SC a""ired the decision o" the appe&&ate co3rt. The SC he&d that an accepted 3ni&atera&
proise $hich speci"ies the thin! to #e so&d and the price to #e paid' $hen co3p&ed $ith a va&3a#&e
consideration distinct and separate "ro the p3rchase price' is $hat a% proper&% tered as a per"ected
contract o" option 5see Art 1=C@6. The optionee has the ri!ht #3t not the o#&i!ation to #3%. I" the option is
e7ercised on tie' #oth parties are then reciproca&&% #o3nd to cop&% $ith their respective 3nderta1in!s.
I" the period is not itse&" "o3nded 3pon or s3pported #% a consideration' the o""eror is sti&& "ree and
has the ri!ht to $ithdra$ the o""er #e"ore it is accepted' or i" acceptance has #een ade' #e"ore the o""erorBs
coin! to 1no$ o" s3ch "act' #% co3nicatin! that $ithdra$a& to the o""eree. The ri!ht to $ithdra$'
ho$ever' 3st not #e e7ercised $hisica&&% or ar#itrari&% in vie$ o" Art. 1@ o" the Civi& Code.
I" the period is s3pported #% a consideration' it $o3&d #e a #reach o" the contract i" the o""er is
$ithdra$n d3rin! the a!reed period. The option ho$ever is an independent contract #% itse&". It is
independent o" the s3#;ect atter o" the option. There"ore' in case the option is #reached' the a!!rieved
part% cannot s3e "or speci"ic per"orance #eca3se there is nothin! to per"or. The optioner4o""eror
ho$ever renders hise&" &ia#&e "or daa!es "or #reach o" the option.
In the case at #ar' there is not even an option. What the CA !ranted is ere&% a ri!ht o" "irst
re"3sa&. The $rit o" e7ec3tion is there"ore not $arranted #eca3se there is nothin! to e7ec3te. To 3pho&d the
$rit o" e7ec3tion $o3&d ipair the e&eent o" consens3a&it% in contracts. Ho$ever' an 3n;3sti"ied disre!ard
o" the ri!ht o" "irst re"3sa& can $arrant recover% o" daa!es 3nder Art 1@ o" the Civi& Code. The reed%
there"ore "or the p&ainti""s is not an action "or speci"ic per"orance #3t "or daa!es to #e in initiated in a
proper "or3.
S(RRA /. CA *00 SCRA C0
1acts2 /+SSOR is the o$ner o" a parce& o" &and. In 1@C5' /+SS++ ne!otiated $ith /+SSOR the sa&e o"
the then 3nre!istered propert%. Ho$ever' on&% a Contract o" /ease $ith Option to .3% $as a!reed 3pon.
<nder the said a!reeent' /+SS++ $i&& &ease the propert% "or 85 %ears and $i&& have an option to #3% the
propert% $ithin 10 %ears provided that /+SSOR' $ithin the sae period' re!ister the propert%. *3rther' the
contract a&so stip3&ates that /+SS++ can constr3ct a #3i&din! #3t i" a"ter the ten4%ear period the option to
#3% $as not e7ercised #% /+SS++' then the #3i&din! constr3cted $i&& #ecoe the propert% o" /+SSOR
a"ter the 85 %ears &ease4period.
/+SS++ constr3cted a #3i&din! and $ithin three %ears' /+SSOR re!istered the propert%. A"ter
re!isterin! the propert%' /+SSOR 1ept p3rs3in! the ana!er o" the #an1. It $as not 3nti& 1@D= that
/+SS++ decided to e7ercise its option' ho$ever' /+SSOR said that he is no &on!er interested in se&&in! the
propert%. /+SS++ "i&ed #e"ore the RTC an action "or speci"ic per"orance to cope& /+SSOR to se&& the
propert%. RTC disissed the case sa%in! that the option is 3nen"orcea#&e #eca3se it &ac1ed a consideration
distinct "ro the p3rchase price. Ho$ever' on otion "or reconsideration' RTC reversed its decision and
decided in "avor o" /+SS++' and ordered /+SSOR to se&& the propert%. The CA &i1e$ise 3phe&d the
decision o" the RTC.
Iss3e2 45N the contract e)ec3te! "$ the parties is reall$ an option contract
R3ling2 ?es. The SC 3phe&d the decision o" the &o$er co3rts. Accordin! to the SC' Artic&e 138= o" the
Civi& Code provides that $hen an o""eror has a&&o$ed the o""eree a certain period to accept' the o""er a%
#e $ithdra$n at an%tie #e"ore acceptance #% co3nicatin! s3ch $ithdra$a&' e7cept $hen the option is
"o3nded 3pon consideration' as soethin! is paid or proised.
On the other hand' Art. 1=C@ o" the Civi& Code provides that an accepted 3ni&atera& proise to #3%
and se&& a deterinate thin! "or a price certain is #indin! 3pon the proisor i" the proise is s3pported #% a
consideration distinct "ro the price.
In a 3ni&atera& proise to se&&' $here the de#tor "ai&s to $ithdra$ the proise #e"ore the
acceptance #% the creditor' the transaction #ecoes a #i&atera& contract to se&& and to #3%' #eca3se 3pon
acceptance #% the creditor o" the o""er to se&& #% the de#tor' there is a&read% a eetin! o" the inds o" the
parties as to the thin! $hich is deterinate and the price $hich is certain. In $hich case' the parties a%
then reciproca&&% deand per"orance.
In the instant case' the SC considered the #3i&din! as the consideration distinct "ro the p3rchase
price #eca3se /+SSOR $o3&d have !otten it on the instance that /+SS++ $i&& not e7ercise its option.
Art. 13*5. >nless it appears other#ise% "3siness a!vertisements o things or sale are not
!einite oers% "3t mere invitations to ma9e an oer.
WHAT A.O<T A)A+RTIS+,+NTS?
Advertiseents are not considered as speci"ic o""ers. Rather' the% are seen as !enera& e""ects. The%
are 3s3a&&% considered as invitiations to a1e an o""er. The reason is that the% are not de"inite eno3!h in
order to constit3te an o""er.
Ho$ever' as &on! as %o3 a1e a speci"ic' de"inite intention to #e #o3nd' an ad a% #e considered
as a va&id o""er. ,ere acceptance $o3&d then per"ect the contract.
*or e7ap&e
516 *or sa&e> HON)A CRA 8000> This is not a de"inite o""er #3t a ere invitation to a1e one.
586 *or sa&e> HON)A CRA 8000. Ta7 paid' "3&&% &oaded' :@50'000> This is a de"inite o""er.
C&assi"ied ads are !enera&&% not an o""er.
Art. 13*C. A!vertisements or "i!!ers are simpl$ invitations to ma9e proposals% an! the
a!vertiser is not "o3n! to accept the highest or lo#est "i!!er% 3nless the contrar$ appears.
WHAT A.O<T INAITATIONS TO .I)?
The person cond3ctin! the #id is not the one $ho is a1in! the o""er. With s3ch an invitation' the
#idder is' in "act' as1in! the p3#&ic to a1e an o""er as #idders. The #iddee' ho$ever' has the discretion to
accept or not to accept the o""er. He $i&& not #e #o3nd to accept the hi!hest or &o$est #idder' 3n&ess the
contrar% appears.
C H C CO==(RCIA. CORP. /S. =(NOR 1*0 SCRA 11*
1acts2 In a mandamus case' the TC iss3ed an order directin! the NAWASA to a&&o$ CUC to participate as
a 23a&i"ied #idder in the p3#&ic #iddin! "or the s3pp&% o" as#estos ceent press3re pipes to the NAWASA in
spite o" the "act that it had a pendin! ta7 case and had no ta7 c&earance certi"icate. NAWASA did not appea&
hence the decision #ecoe "ina&.
CUC participated in the #iddin! and $as "o3nd to #e the &o$est #idder. NAWASA' ho$ever'
re23ired CUC to s3#it the ta7 c&earance certi"icate re23ired in the :residentia& Adinistrative Order No.
??. NAWASA said that the re23ireent as to the ta7 c&earance certi"icate $as andator% as he&d #% the
0overnent Corporate Co3nse& in his Opinion No. 15@' Series o" 1@?C.
CUC therea"ter "i&ed a otion to the C*I pra%in! that the NAWASA #e ordered to a$ard the
contract to CUC and to restrain the sae "ro a$ardin! the contract to another #idder. The otion $as
!ranted. NAWASA appea&ed the s3#se23ent decision. :endin! appea&' CUC "i&ed another otion "or
mandamus pra%in! "or the sae re&ie".
,ean$hi&e' NAWASA a$arded the contract to OTH+R .I))+R as the &o$est cop&%in!
#idder(. This propted CUC to see1 reco3rse to the SC. NAWASA opposed said petition contendin! that
there $as nothin! ore to #e en;oined.
Iss3e2 45N CHC can participate in the "i!!ing.
R3ling2 No. NAWASA $as ;3sti"ied in not a$ardin! the contract to CUC #eca3se CUC had no ta7
c&earance certi"icate. It $as not the inisteria& d3t% o" NAWASA to a$ard the contract to CUC even i" it
$as the &o$est #idder. In the invitation to #id' NAWASA reserved the ri!ht to re;ect the #id o" an% #idder(.
There"ore a #idder $hose #id $as re;ected has no ca3se "or cop&aint a!ainst NAWASA.
,oreover'advertiseentS "or #idders are sip&% invitations to a1e proposa&s' and the advertiser is not
#o3nd to accept the hi!hest or &o$est #idder' 3n&ess the contrar% appears.
5Note> The dissent o" G3stice )e Castro is $orth readin!6
Art. 13*8. The ollo#ing cannot give consent to a contract2
,1- >nemancipate! minors;
,*- Insane or !emente! persons% an! !eaEm3tes #ho !o not 9no# ho# to #rite.
Art. 13*:. Contracts entere! into !3ring a l3ci! interval are vali!. Contracts agree! to in a
state o !r3n9enness or !3ring a h$pnotic spell are voi!a"le.
Art. 13*0. The incapacit$ !eclare! in Art. 13*8 is s3"<ect to the mo!iication !etermine! "$
la#% an! is 3n!erstoo! to "e #itho3t pre<3!ice to special !is63aliications esta"lishe! in the
la#s.
WH+N ,<ST TH+R+ .+ INSANIT9 TO A**+CT CONS+NT?
The insanit% 3st e7ist at the tie o" contractin!. <n&ess proved other$ise' a person is pres3ed
sane.
WHO AR+ )+A*4,<T+S?
The% are person $ho are dea" and d3#. Ho$ever' o" the dea"43te 1no$s ho$ to $rite the
contract is va&id "or he is capa#&e o" !ivin! inte&&i!ent consent. A person $ho does not 1no$ ho$ to $rite'
does not 1no$ ho$ to read' and $ho 1no$s ho$ to read necessari&% 1no$s ho$ to $rite. A contract entered
into #% a dea"43te $ho 1no$s ho$ to read is there"ore' va&id' a&tho3!h he cannot $rite #eca3se o" soe
ph%sica& reasons.
WHAT IS TH+ R+ASON *OR TH+ )ISI<A/I*ICATION?
The persons entioned can easi&% #e victis o" "ra3d as the% are not capa#&e o" 3nderstandin! or
1no$in! the nat3re or iport o" their actions. The% can enter into a contract on&% thro3!h a parent or
!3ardian.
I* TH+9 +NT+R INTO A CONTRACT WO</) TH+ CONTRACT .+ AA/I)?
It depends.
0enera& r3&e> A person is not &e!a&&% 23a&i"ied $itho3t a !3ardian. I" he enters into a contract
$itho3t a !3ardian' the contract is AOI)A./+ eanin! it can #e ann3&&ed #% the representative or the
person hise&" "ro the oent he ac23ires &e!a& capacit%.
WHAT I* TWO 586 INSAN+ :+RSONS +NT+R+) INTO A CONTRACT?
Then there $o3&d #e an <N+N*ORC+A./+ CONTRACT. It cannot #e en"orced #% co3rt
processes 3n&ess rati"ied #% the !3ardians or the insane $hen he ac23ires #ac1 his sanit%.
S3ch a contract has no &e!a& #indin! e""ect so that one is !iven the chance to choose #et$een a
voida#&e and 3nen"orcea#&e contract' a voida#&e contract is #etter since the de"ect is !reater in the &atter.
The va&idit% o" the contract rea&&% depends on the nat3re o" the contract' the nat3re o" the
re&ationship #et$een the personsJparties to the contract and other circ3stances. She then !ave the e7ap&e
o" the h3s#and and $i"e $ho cannot e7ec3te a contract o" sa&e or donation #et$een these&ves. There
$o3&d sip&% #e no &e!a& e""ect.
Art. 1330. A contract #hose consent is given thro3gh mista9e% violence% intimi!ation% 3n!3e
inl3ence% or ra3! is voi!a"le.
WHAT IS TH+ +**+CT O* AIC+S O* CONS+NT ON TH+ CONTRACT?
It a1es it voida#&e. 5Art. 13306
Art. 1331. In or!er that mista9e ma$ invali!ate consent% it sho3l! reer to the s3"stance o
the thing #hich is the o"<ect o the contract% or to those con!itions #hich have principall$
move! one or "oth parties to enter into the contract.
Art. 133*. 4hen on o the parties is 3na"le to rea!% or i the contract is in a lang3age not
3n!erstoo! "$ him% an! mista9e o ra3! is allege!% the person enorcing the contract m3st
sho# that the terms thereo have "een 3ll$ e)plaine! to the ormer.
Art. 1333. There is no mista9e i the part$ alleging it 9ne# the !o3"t% contingenc$ or ris9
aecting the o"<ect o the contract.
Art. 133+. =3t3al error as to the legal eect o an agreement #hen the real p3rpose o the
parties is r3strate!% ma$ vitiate consent.
WHAT IS ,ISTA-+?
It is a "a&se notionJ#e&ie" o" a thin! or a "act ateria& to the contract.
WHAT AR+ TH+ +SS+NTIA/ R+I<ISIT+S O* ,ISTA-+?
1. It 3st #e past or a present "act.
8. The ista1e 3st have ind3ced the consent.
3. The ista1e 3st not #e ip3ta#&e to the part% ista1en' that is' that the ista1e is
inadvertent and e7c3sa#&e. So' i" the part% a&&e!in! the ista1e is !3i&t% o" ne!&i!ence ' the
sae is not inadvertent and there"ore $i&& not #e a !ro3nd to ann3& the contract.
=. The ista1e 3st #e o" "act and not o" &a$.
WHAT AR+ TH+ -IN)S O* ,ISTA-+?
1. ,ista1e o" /a$
This is 3s3a&&% not a !ro3nd "or ann3&ent. Art. 3 provides that i!norance o" the &a$ e7c3ses
no one "ro cop&iance there$ith.
8. ,ista1e o" *act
Art. 1331 re"ers to this t%pe o" ista1e. In order that the ann3&ent o" the contract $i&&
prosper' the ista1e 3st re"er to>
5a6 the s3#stance o" the thin! $hich is the o#;ect o" the contractE it a% re"er to the 23antit%
or 23a&it%.
I<A/IT9. A se&&s to . a C) sin!&e o" :io&o :asc3a&. It t3rned o3t to #e on&% a C) o" his
#rother' *erdinand )ino. Th3s' there is a de"ect in the s3#stance o" the thin!.
,3st the se&&er de"ra3d the #3%er? 9es and it can a&so #e ann3&&ed #3t not on the !ro3nd
o" ista1e #3t on the !ro3nd o" "ra3d.
To constit3te ista1e' there 3st #e no "ra3d3&ent act. The part% 3st have acted on the
#asis o" the ista1e.
I<ANTIT9. When the parties #e&ieved that the% $ere contractin! $ith respect to an
o#;ect $ith an area o" 50 hectares' $hen in rea&it% it had on&% =0 hectares.
NOT(2 What i" there $as an error in acco3nt or cop3tation?
A sip&e ista1e o" acco3nt does not n3&&i"% a contract #eca3se it does not
a""ects its essentia& re23isites. The de"ect is ere&% in the cop3tation o" the
acco3nt $hich can #e corrected.
5#6 ista1e in the essentia& condition o" the contract.
In order to deterine $hich is the essentia& condition o" the contract' the 23estion to as1
is IS THIS TH+ ,AIN R+ASON THAT HA) ,OA+) OR CO,:+//+) TH+
:ARTI+S TO +NT+R INTO TH+ CONTRACT?( I" the ans$er is 9+S' it is an essentia&
condition.
WHAT I* TH+R+ WAS A ,ISTA-+ R+0AR)IN0 I)+NTIT9?
The !enera& r3&e is that it does not vitiate consent.
The e7ception is $hen s3ch identit% or 23a&i"ications have #een the principa& ca3se o" the contract.
WHAT IS TH+ +**+CT O* -NOW/+)0+ O* RIS-?
As provided in Art. 1333' i" the part% 1ne$ #e"orehand the do3#t' contin!enc%' or ris1 a""ectin!
the o#;ect o" the contract' it is to #e ass3ed that he $as $i&&in! to ta1e chances and cannot' there"ore'
c&ai ista1e.
+7ap&es $o3&d #e en!a!in! in stoc1s and coodities tradin!.
Art. 1335. There is violence #hen in or!er to #rest consent% serio3s or irresisti"le orce is
emplo$e!.
There is intimi!ation #hen one o the contracting parties is compelle! "$ a
reasona"le an! #ellEgro3n!e! ear o an imminent an! grave evil 3pon his person or
propert$% or 3pon the person or propert$ o his spo3se% !escen!ants or ascen!ants% to give
his consent.
To !etermine the !egree o the intimi!ation% the age% se) an! con!ition o the person
shall "e "orne in min!.
A threat to enorce oneGs claim thro3gh competent a3thorit$% i the claim is <3st an!
legal !oes not vitiate consent.
Art. 133C. /iolence or intimi!ation shall ann3l the o"ligation% altho3gh it #as emplo$e! "$
a thir! person #ho !i! not ta9e part in the contract.
Art. 1338. There is 3n!3e inl3ence #hen a person ta9es improper a!vantage o his po#er
over the #ill o another% !epriving the latter o a reasona"le ree!om o choice. The
ollo#ing circ3mstances shall "e consi!ere!2 the coni!ential% amil$% spirit3al% an! other
relations "et#een the parties% or the act that the person allege! to have "een 3n!3l$
inl3ence! #as s3ering rom a mental #ea9ness% or #as ignorant or in inancial !istress.
WHAT IS AIO/+NC+?
There is vio&ence $hen in order to $rest consent' serio3s or irresisti#&e "orce is ep&o%edE Art.
1335 does not re23ire that the "orce #e #oth irresisti#&e and serio3s. It is eno3!h that it is either irresisti#&e
or not so' it is serio3s to s3ch de!ree that the victi has no other co3rse #3t to s3#it.
WHAT IS INTI,I)ATION?
There is intiidation $hen one o" the parties is cope&&ed #% a reasona#&e and $e&& !ro3nded "ear
o" an iinent and !rave evi& 3pon the person and propert%' $hich prod3ces the consent. *3rtherore' the
threat 3st #e 3n;3st.
The threat is 3n;3st i" the eans threatened to #e 3sed to in"&ict the evi& or har is 3n&a$"3&& or
i&&e!a& or there is no ri!ht to in"&ict the in;3r% "eared. I" there is no threatened $ron! even tho3!h there is
threat' there is no vitiation o" consent.
WHAT I* TH+ THR+AT IS TO :ROS+C<T+? )O+S IT AITIAT+ CONS+NT?
It depends. I" the c&ai is ;3st or &e!a&' it $i&& not vitiate consent.
An e7ap&e $o3&d #e $here a person is threatened $ith prosec3tion "or sed3ction 3n&ess he
arries the !ir& sed3ced.
A threat' ho$ever' $o3&d #e 3n;3st i" a s3it is threatened #ased on a "or!ed or pretended c&ai' "or
this is tantao3nt to #&ac1ai&.
WHAT IS TH+ )I**+R+NC+ .+TW++N AIO/+NC+ AN) INTI,I)ATION?
In vio&ence' ph%sica& "orce is ep&o%ed $hi&e in intiidation' ora& cop3&sion' as in threat is
ep&o%ed.
In vio&ence' the "orce ep&o%ed 3st #e s3""icient so that the part% has no choice #3t to enter into
the contract. In intiidation' there 3st not on&% #e "ear o" rea& dan!er #3t it 3st a&so #e iinent or
iediate&% "orthcoin!.
WHO +,:/O9S AIO/+NC+ AN) INTI,I)ATION?
One o" the parties or a third person.
WHO IS TH+ R+CI:I+NT O* TH+ AIO/+NC+?
He 3st #e a part% to the contract. The vio&ence 3st #e in"&icted on the person o" the part%
hise&". I" the vio&ence is ep&o%ed on soeone e&se or on his propert%' the !ro3nd "or ann3&ent is
intiidation.
WHO IS TH+ R+CI:I+NT O* TH+ INTI,I)ATION?
Art. 1335 586 provides that There is intiidation $hen one o" the contractin! parties is cope&&ed
#% a reasona#&e and $e&& !ro3nded "ear o" an iinent and !rave evi& 3pon his person or his propert% or
3pon the person or propert% o" his spo3se' descendants or ascendants' to !ive his consent.
WHAT I* TH+R+ WAS AIO/+NC+ ON TH+ :RO:+RT9 O* ON+ O* TH+ :ARTI+S' /I-+ S+TTIN0
HIS HO<S+ ON *IR+? OR TH+ SON O* ON+ O* TH+ :ARTI+S IS .+AT+N TO 0+T IS CONS+NT?
<N)+R WHAT AIC+ IS HIS CONS+NT AITIAT+)?
S3ch act $o3&d "a&& 3nder intiidation. There $o3&d #e no vio&ence on the person o" the part% #3t
there $o3&d #e "ear on his part o" &osin! his propert%. As s3ch' the !ro3nd "or intiidation is vio&ence.
The r3&e is to ree#er is to $ho or to $hich the vio&ence $as in"&icted. I" it $as on the person
o" the part% to the contract' then it is vio&ence. Other$ise' it is intiidation.
WHAT IS <N)<+ IN*/<+NC+?
In this case' the person e7ertin! 3nd3e in"&3ence on one o" the contractin! parties has soe "or
o" ora& ascendanc% over one o" the &atter. It a% #e d3e to their re&ationship' stat3s in &i"e' "ai&%' spirit3a&
and other re&ations #et$een the parties. )e /eon adds that enta& $ea1ness' i!norance or "inancia& distress
o" the person a&&e!ed to have #een 3nd3&% in"&3enced are other circ3stances to #e deterined $hether
there $as 3nd3e in"&3ence.
What is iportant to ree#er here is that one person is a1in! 3se o" his advanta!e over
another.
WHAT IS R+A+R+NTIA/ *+AR?
It is the "ear o" disp&easin! a person to $ho respect and o#edience is d3e. Here' there is no
3nreasona#&e restraint in the choice o" the other part%' and hence' $i&& not vitiate consent.
Art. 133:. There is ra3! #hen% thro3gh insi!io3s #or!s or machinations o one o the
contracting parties% the other is in!3ce! to enter into a contract #hich% #itho3t them% he
#o3l! not have agree! thereto.
WHAT IS *RA<)?
Art. 133D provides that there is "ra3d $hen thro3!h insidio3s $ords or achination o" one o" the
contractin! parties' the other is ind3ced to enter into a contract $hich' $itho3t the' he $o3&d not have
a!reed to.
IS ANN</,+NT A//OW+) IN A// *OR,S O* *RA<)?
No' not a&& "ra3ds are s3""icient as !ro3nds "or ann3&ent. I" ann3&ent is not a&&o$ed' the person
de"ra3ded a% see1 reparation #% $a% o" daa!es.
WHAT AR+ TH+ -IN)S O* *RA<)?
516 *ra3d in the per"orance o" the o#&i!ation other$ise ca&&ed as a&ice or #ad "aith. This is the
"ra3d dea&t $ith in Art. 11C1.
*or e7ap&e' A is o#&i!ed to de&iver to . 10 cases o" red $ine. When . de&ivers' instead o"
red $ine' he de&ivers 10 cases o" vine!ar.
Here' there is a va&id and s3#sistin! contract. *ra3d $as not coitted "or the p3rpose o"
a1in! one enter into the contract. Instead' the "ra3d coes a"ter the contract $as a&read%
per"ected' the "ra3d $as 3sed in the per"orance o" the o#&i!ation.
*or e7ap&e' A has an o#&i!ation to paint the ho3se o" . $ith 3 coatin!s o" )3tch#o% paint.
There is a va&id contract. I" A' in the per"orance o" his o#&i!ation' 3ses a s3#4standard paint
or paints on&% 8 coatin!s' there $o3&d #e "ra3d in the per"orance o" the o#&i!ation.
586 *ra3d in the ce&e#ration o" the contract other$ise ca&&ed deceit. This the "ra3d re"erred to in
Art. 133D. This "or o" "ra3d is the reason $hich &ed one o" the contractin! parties to enter
into the contract. It 3st precede or at &east #e si3&taneo3s $ith the ce&e#ration o" the
contract.
This 1ind o" "ra3d can #e "3rther s3#divided into>
5a6 )o&o ca3sante 5s3#stantia& "ra3d6 P it is that $hich a""ects the s3#stance o" the
a!reeent so that $itho3t it the part% $o3&d not have consented.
5#6 )o&o incidente 5incidenta& "ra3d6 P that $hich a""ects' not the s3#stance' #3t the
incidenta&s o" the a!reeent' so that $itho3t it' the part% $o3&d sti&& have consented
#3t 3nder a di""erent ter.
What is contro&&in! is $hether or not the person $as cope&&ed to enter into the
contract #eca3se o" the isrepresentation. It $o3&d then #e a atter o" evidence i"
the isrepresentation' indeed' $as the reason "or the sa&e.
Art. 1330. 1ail3re to !isclose acts% #hen there is a !3t$ to reveal them% as #hen the parties
are "o3n! "$ coni!ential relations% constit3tes ra3!.
Art 13+0. The 3s3al e)aggerations in tra!e% #hen the other part$ ha! an opport3nit$ to
9no# the acts% are not in themselves ra3!3lent.
WHAT A.O<T +FA00+RATIONS O* TRA)+?
This is to&erated "ra3d. These are sanctioned #% the practice and coercia& 3sa!es and 1no$n as
dea&ers ta&1(. There are' ho$ever' to&erated so &on! as the% do not !o to the e7tent o" a&ice or #ad "aith'
s3ch as chan!in! the appearance o" the thin! #% "a&se devices' and provided "3rther' that the other part% had
an opport3nit% to 1no$ the "acts.
Art. 13+1. A mere e)pression o an opinion !oes not signi$ ra3!% 3nless ma!e "$ an e)pert
an! the other part$ has relie! on the ormerGs special 9no#le!ge.
WHAT IS TH+ R</+ ON +F:R+SSIONS ,A)+ .9 +F:+RTS?
0enera& R3&e> it $i&& not constit3te "ra3d.
+7ception>
I" the e7pert is ep&o%ed #% the person is&ed' he $i&& have to s3""er "or the acts o" his
ep&o%ee' 3n&ess there is connivance $ith the other part%.
I" and independent e7pert is 3sed' there is 3t3a& error. This pres3pposes that #oth the
contractin! parties acted on s3ch ista1e. The r3&e on ista1e $o3&d then app&%.
Art. 13+*. =isrepresentation "$ a thir! person !oes not vitiate consent% 3nless s3ch
misrepresentation has create! s3"stantial mista9e an! the same is m3t3al.
WHAT I* TH+ *RA<) IS CO,,ITT+) .9 A THIR) :+RSON?
0enera& R3&e> ,isrepresentation #% a third person does not vitiate consent.
+7ception>
516 <n&ess the third person connives $ith one o" the parties.
586 The isrepresentation #% the third person $as re&ied 3pon #% #oth the contractin! parties. The
!ro3nd "or ann3&ent in this case $o3&d #e ista1e.
a. ,3t3a& ista1e
#. ,ista1e is s3#stantia&
The error created sho3&d #e s3#stantia& and sho3&d #e 3t3a& to the contractin!
parties' other$ise' the on&% reed% is an action "or daa!es #% the in;3red part%.
Art. 13+3. =isrepresentation ma!e in goo! aith is not ra3!3lent "3t ma$ constit3te error.
Art 13++. In or!er that ra3! ma$ ma9e a contract voi!a"le% it sho3l! "e serio3s an! sho3l!
not have "een emplo$e! "$ "oth contracting parties.
WHAT I* .OTH :ARTI+S CO,,ITT+) *RA<)?
The% $o3&d #e in pari de&icto and the &a$ $i&& &eave the as the% are. The contract is va&id.
Art. 13+5. Sim3lation o a contract ma$ "e a"sol3te or relative. The ormer ta9es place
#hen the parties !o not inten! to "e "o3n! at all; the latter% #hen the parties conceal their
tr3e agreement.
Art. 13+C. An a"sol3tel$ sim3late! or ictitio3s contract is voi!. A relative sim3lation% #hen
it !oes not pre<3!ice a thir! person an! is not inten!e! or an$ p3rpose contrar$ to la#%
morals% goo! c3stoms% p3"lic or!er or p3"lic polic$ "in!s the parties to their real
agreement.
WHAT IS SI,</ATION?
Si3&ation is the dec&aration o" a "ictitio3s intent ani"ested de&i#erate&% and in accordance $ith
the a!reeent o" the parties in order to prod3ce "or the p3rpose o" deceivin! others the appearance o" a
transaction $hich does not e7ist or $hich is di""erent "ro their tr3e a!reeent.
The n3&&it% o" a si3&ated contract is #ased on the a#sence o" tr3e consent o" the parties.
WHAT AR+ TH+ -IN)S O* SI,</ATION?
516 A#so&3te P there is in rea&it% no tr3e contract #eca3se there is no intention to #e #o3nd. It is
"ictitio3s and i&&3sor% and void "ro the ver% #e!innin!.
586 Re&ative P the contract entered into #% the parties is di""erent "ro their tr3e a!reeent. The
!enera& r3&e is that since there is tr3e consent a&tho3!h concea&ed' the contract reains va&id.
Ho$ever' $hat is en"orcea#&e is the tr3e intention o" the parties. Th3s' the concea&ed contract
#inds the parties.
a. The e7ception is $hen the &atter contract pre;3dices a third person or has an i&&icit
5i&&e!a&6 p3rpose s3ch as to evade ta7es. The contract $i&& then #e en"orced 3nder the
apparent contract.
#. In re&ative si3&ated contract' there are 8 contracts 516 there is the apparent contract
and s3ch contract is "or sho$ on&%. And there is the 586 rea& contract' $hich is
concea&ed. .oth the parties 1ne$ and a!reed to enter into s3ch a contract. In
re"oration' #oth a!reed to enter into a contract #3t not to concea& the contract. In
this case' there $as soe ista1e in the contract' $hich needs to #e corrected.
WH9 +NT+R A SI,</AT+) CONTRACT IN TH+ *IRST :/AC+?
There are an% reasons. One o" the a% #e to de"ra3d the creditor.
WHAT IS TH+ CO,,ON :RACTIC+ TO)A9?
I" A se&&s his propert% to . and the rea& price is :100T' #3t the price is &o$ered or 3nderva&3ed and
ade to appear' "or e7ap&e as :50T' so that the parties $i&& pa% &ess ta7.
Since this case "a&&s 3nder the e7ception 5i&&icit p3rpose6' the parties $o3&d #e #o3nd to pa% on&%
:50T. S3ch act o" &o$erin! the ao3nt is pena&iHed $ith the r3&e. There is a ris1 to ta1e so it $o3&d #e
#etter to co&&ect "irst #e"ore %o3 si!n the contract #eca3se the other contractin! part% i!ht tr% to p3t one
over %o3 #% sa%in! the rea& o#&i!ation is on&% :50T.
FI.AG /S. IAC 15* SCRA +50
1acts2 AR+//ANO $as the "ather o" AICTI, $ho died in the vehic3&ar accident invo&vin! a tr3c1
o$ned #% )I/A0 S:O<S+S. The TC a$arded the s3 o" :1='500 p&3s ora& daa!es o" :?'000 p&3s
attorne%Bs "ees o" :1'000. The decision #ecae "ina& and a $rit o" e7ec3tion $as iss3ed p3rs3ant thereto.
The )I/A0 S:O<S+S "i&ed otion pra%in! that the decision #e set aside in vie$ o" a
coproise a!reeent #et$een the parties. Said otion $as denied "or "ai&3re o" the spo3ses to si!n it.
:3rs3ant to the Writ o" +7ec3tion' a Notice o" /ev% o" +7ec3tion $as annotated to the TCT o" a parce& o"
&and o$ned #% the )I/A0 S:O<S+S. Said propert% $as s3#se23ent&% p3t in p3#&ic a3ction $here it $as
so&d to AR+//ANO "or :35'580.
The )I/A0 CHI/)R+N ean$hi&e "i&ed a case "or the ann3&ent o" the sa&e ade to
AR+//ANO a&&e!in! that it $as i&&e!a& since the ;3d!ent $as e7ec3ted a!ainst a propert% no &on!er
o$ned #% the )I/A0 S:O<S+S. The )I/A0 CHI/)R+N c&ai that the &and $as a&read% so&d to the.
Iss3e2 45N the sale o the lan! to the FI.AG CBI.FR(N #as a"sol3tel$ sim3late!
R3ling2 ?es. The SC too1 in consideration the "indin!s o" the CA $hich proves the si3&ation o" the
transaction #et$een spo3ses and their chi&dren. In 1@C@' %ears a"ter the a&&e!ed sa&e $as ade in "avor o"
their chi&dren' a contract o" &ease $as entered into #% the )I/A0 S:O<S+S $ith )avid )iancin' c&ear&% an
act a1in to o$nershipE in 1@D1' the sae propert% $as a!ain the s3#;ect o" another deed o" sa&e in "avor o"
the chi&dren "or the ins3""icient consideration o" :30'000' $hen in "act the said propert% $as ort!a!ed
$ith the ).: "or :D?'000E in 1@D3' S3ssie )i&a! e7ec3ted a notaria& rescission o" the &ease contract entered
into #% the )I/A0 S:O<S+S $ith )iancin in 1@C@' indicatin! that the there $as a va&id contract o" &ease
#et$een the )I/A0 S:O<S+S and )iancin.
The SC o#served that the )I/A0 CHI/)R+N had to re&% on another tit&e iss3ed to the in 1@D1'
instead on re&%in! on the "irst deed o" sa&e e7ec3ted in their "avor in 1@C=. This indicates that the chi&dren
do not rea&&% consider the 1@C= deed o" sa&e va&id and &e!a&. The SC "3rther noted that the tit&e in the nae
o" the )I/A0 CHI/)R+N $as iss3ed severa& da%s ahead o" the deed o" sa&e. The deed o" a#so&3te sa&e in
"avor o" the chi&dren $as c&ear&% a si3&ated and "ictitio3s transaction desi!ned to de"ra3d Are&&ano.
RO&.(IA /S. CA 18+ SCRA 35
1acts2 S:O<S+S RO./+OA so&d to S:O<S+S TAN t$o parce&s o" &and s3pposed&% "or and in
consideration o" :10'000. 0O)SON( is the #aptisa& !odson o" the Ro#&eHas.
On G3&% 8D' 1@C@' 0O)SON e7ec3ted a proissor% note in "avor o" COR:ORATION in the
ao3nt o" :88D'3?8. A deed o" ort!a!e coverin! the said parce& o" &and $as e7ec3ted to sec3re the
proissor% note. The ort!a!e $as s3#se23ent&% "orec&osed "or "ai&3re o" 0O)SON to pa% his o#&i!ation
to the COR:ORATION. The tit&e o" the propert% $as therea"ter trans"erred to the COR:ORATION.
S:O<S+S RO./+OA "i&ed a case "or the n3&&i"ication o" the sa&e ade in "avor o" 0O)SON "or
$ant o" consideration and "or the cance&&ation o" the TCT iss3ed in "avor o" the COR:ORATION.
S:O<S+S RO./+OA c&ai that the% have a&$a%s #een in possession o" the said propert%E that neither the
S:O<S+S TAN nor the COR:ORATION ever too1 possession thereo"E and that COR:ORATION acted in
#ad "aith' havin! #een in"ored o" the character o" the transaction #et$een the S:O<S+S RO./+OA and
the S:O<S+S TAN.
Iss3e2 45N there #as a"sol3te sim3lation.
R3ling2 No. I" the contract has no ca3se' it is void "ro the ver% #e!innin! and $i&& not prod3ce an% e""ect.
It is the tota& a#sence o" ca3se that renders the contract void. Ho$ever' the "act o" pa%ent or non4pa%ent
is not the contro&&in! criterion in dec&arin! the contract n3&& and void "or $ant o" consideration. Non4
pa%ent o" the contract price res3&ts in a #reach o" contract "or non4per"orance and $arrants an action "or
rescission or speci"ic per"orance 3nder Artic&e 11@1.
The contract o" a#so&3te sa&e in the case at #ar cannot #e dec&ared void. There $as on&% a re&ative
si3&ation. The parties intended to #e #o3nd e7cept that the contract did not re"&ect their tr3e a!reeent.
S:O<S+S RO./+OA cate!orica&&% adit that the tr3e consideration $as :50'000 "or each &ot. There $as
a&read% partia& pa%ent o" :10'000 and as s3ch an action "or the dec&aration o" n3&&it% $i&& not prosper.
SC ho$ever !ranted the reed% o" reso&3tion to the S:O<S+S RO./+OA not #eca3se o"
a#so&3te si3&ation #3t #eca3se o" #reach 50O)SONBS non4cop&iance $ith the rea& a!reeent6. The
po$er to rescind is ip&ied in reciproca& o#&i!ations. The SC a&so "o3nd the COR:ORATION to #e in #ad
"aith. SC "3rther considered the contin3o3s possession o" the S:O<S+S RO./+OA o" the propert% $hich
indicated that the COR:ORATION reco!niHed S:O<S+S RO./+OA o$nership and the i&&e!a&it% o" the
ort!a!e.
CR>I /. &ANCO= 1INANC( CORP. GR 1+88::
1acts2 S</IT a"ter #ein! introd3ced #% SANCH+O to OWN+R' o""ered to p3rchase OWN+RBs &and.
S</ITBs as1in! price "or the &and $as :C00- #3t S</IT on&% had :85- $hich OWN+R accepted as
earnest one% $ith the a!reeent that tit&e $o3&d #e trans"erred to S</IT 3pon pa%ent o" the #a&ance o"
:?C5-. S</IT "ai&ed to pa% the #a&ance. Neverthe&ess' S</IT s3cceeded in havin! OWN+R e7ec3te a
doc3ent o" sa&e o" the &and in "avor o" SANCH+O $ho $o3&d then o#tain a #an1 &oan in her nae 3sin!
OWN+RBs &and as co&&atera&.
On the sae da%' SANCH+O e7ec3ted another )eed o" Sa&e over the &and in "avor o" S</IT. In
#oth doc3ents' it appeared that the cosideration "or the sa&e o" the &and $as on&% :150-. S</IT $as a#&e
to e""ect the trans"er o" the tit&e to the &and in her nae. S</IT ass3ed SANCH+OBs o#&i!ation'
stip3&atin! to pa% OWN+R the said ao3nt.
Iss3e2 45N the contracts o sale #ere a"sol3tel$ sim3late!
R3ling2 ?es. In Rongavilla v. CA $e he&d that a deed o" sa&e' in $hich the stated consideration had not in
"act #een paid' $as a "a&se contract( that is void a# initio.( *3rtherore' Ocejo v. Flores, r3&ed that a
contract o" p3rchase and sa&e is n3&& and void and prod3ces no e""ect $hatsoever $here it appears that the
sae is $itho3t consideration' $hich sho3&d have #een thee otive thereo"' or the p3rchase price $hich
appears thereon as paid #3t $hich in "act has never #een paid #% the p3rchaser to the vendor.(
In the case at #ar' a&tho3!h the )eed o" Sa&e #et$een OWN+R and SANCH+O stip3&ated a
consideration o" :150-' there $as act3a&&% no e7chan!e o" one% #et$een the.
The records c&ear&% sho$ that the t$o )eeds o" A#so&3te Sa&e $ere e7ec3ted over the sae
propert% on the sae date' G3ne 81' 1@CD. Si7 da%s therea"ter' on G3ne 8C' 1@CD' it $as ort!a!ed #%
S</IT to INS<RANC+ CO,:AN9 "or :500-. The ort!a!e $as cance&&ed $hen she a!ain ort!a!ed
the propert% to .ANCO, *INANC+ CO,:AN9 "or :5?@- on A3!3st 88' 1@C@. It is a&so 3ndisp3ted that
OWN+R did not receive an% portion o" the proceeds o" the &oan.
C&ear&% the )eeds o" Sa&e $ere e7ec3ted ere&% to "aci&itate the 3se o" the propert% as co&&atera&
to sec3re a &oan "ro a #an1. .ein! ere&% a s3#ter"3!e' these a!reeents co3&d not have #een the so3rce
o" an% consideration "or the s3pposed sa&es. Indeed' the e7ec3tion o" the t$o doc3ents on the sae da%
s3stains the position o" OWN+RS that the Contracts o" Sa&e $ere a#so&3te&% si3&ated' and that the%
receive no consideration thereo".
The "ai&3re o" S</IT to ta1e possession o" the propert% p3rported&% so&d to her $as a c&ear #ad!e
o" si3&ation that rendered the $ho&e transaction void and $itho3t "orce and e""ect' p3rs3ant to Artic&e
1=0@. A si3&ated deed o" sa&e has no &e!a& e""ectE conse23ent&% an% trans"er certi"icate o" tit&e 5TCT6
iss3ed in conse23ence thereo" sho3&d #e cance&&ed. A si3&ated contract is not a reco!niHed ode o"
ac23irin! o$nership.
PANGAFI. /. C1I O1 COTA&ATO 11C SCRA 3+8
1acts2 Soetie in )ece#er 1@=1' )+C+)+NT conve%ed a parce& o" &and in "avor respondent. The
said transaction' the nat3re o" $hich the H+IRS insist to #e a ort!a!e and not a sa&e as c&aied #%
respondents' $as ere&% ora& and not evidenced in $ritin!.
On )ece#er 80' 1@=?' 0<AR)IAN "i&ed in co3rt Act3acion +specia& No. 33( pra%in! "or her
appointent as !3ardian o" her inor #rother and sisters. The avo$ed p3rpose o" the said !3ardianship
proceedin! $as to ena#&e the H+IRS to e7ec3te the necessar% doc3ent to "ora&iHe the ver#a& sa&e
e7ec3ted #% )+C+)+NT in "avor or respondent e7ec3ted d3rin! the &i"etie o" )+C+)+NT. The petition
$as !ranted' 0<AR)IAN $as appointed !3ardian and too1 her oath as s3ch.
On *e#ra3r% 10' 1@=C' 0<AR)IAN e7ec3ted the 23estioned doc3ent Rati"icacion )e <na
Aenta( p3rs3ant to $hich H+IRS ac1no$&ed!ed the sa&e ade #% )+C+)+NT "or a consideration o" :C50.
<pon the said doc3ent #ein! presented to the !3ardianship co3rt' the sa&e $as approved' conse23ent&% the
!3ardianship proceedin! $as dec&ared c&osed.
On Gan3ar% C' 1@?@' the H+IRS "i&ed a case see1in! the ann3&ent o" the a"oreentioned
doc3ent. The #asis o" their c&ai is that the doc3ent it is a&&ed!ed&% "ictitio3s and contrar% to p3#&ic
po&ic%. It is s3pposed&% vio&ative o" p3#&ic po&ic% #eca3se it deprived the inor #rothers and sisters o"
0<AR)IAN o" their shares in the inheritance "ro decedent. It is s3pposed&% "ictitio3s #eca3se respondent
is&ed 0<AR)IAN into a""i7in! 0<AR)IANBS th3#ar1 to the 23estioned doc3ent on the
isrepresentation that it $as ere&% to rati"% an ora& contract o" ort!a!e.
Is33e2 45N there is a"sol3te sim3lation
R3ling2 No. The doc3ent in 23estion a% not #e deeed a#so&3te&% si3&ated or "ictitio3s. .% H+IRBS
o$n adission' the% intended to #e #o3nd there#%' the% ere&% contend that the% tho3!ht it $as to rati"% a
contract o" ora& ort!a!e' instead o" an ora& sa&e o" &and. In short' it is not a contract $herein the parties do
not intend to #e #o3nd at a&& $hich $o3&d there#% a1e it a#so&3te&% si3&ated and' there"ore' void.
On p3#&ic po&ic% iss3e> Aditted "acts sho$ that the conve%ance o" the &and in 23estion had #een
e""ected #% )+C+)+NT d3rin! )+C+)+NTBS &i"etie. It a% not #e said' there"ore' that in e7ec3tin! a
deed to rati"% said transaction e7ec3ted #% )+C+)+NT' 0<AR)IAN deprived the H+IRS o" their
s3pposed shares in the inheritance "ro their deceased "ather.
Iss3e on prescription> Ass3in! that the e7ec3tion o" the deed o" rati"ication $as attended #%
"ra3d' s3ch circ3stances $o3&d on&% a1e the contract voida#&e or ann3&&a#&e' and not an ine7istent and
void contract in accordance $ith Artic&e 1=0@ o" the Civi& Code. The action to ann3& a voida#&e contract is
not iprescripti#&e' 3n&i1e in the case o" an ine7istent contract.
Section *
O&J(CT O1 CONTRACTS
Art. 13+8. All things #hich are not o3tsi!e the commerce o men% incl3!ing 3t3re things%
ma$ "e the o"<ect o a contract. All rights #hich are not intransmissi"le ma$ also "e the
o"<ect o contracts.
No contract ma$ "e entere! into 3pon 3t3re inheritance e)cept in cases e)pressl$
a3thoriDe! "$ la#.
All services #hich are not contrar$ to la#% morals% goo! c3stoms% p3"lic or!er or
p3"lic polic$ ma$ li9e#ise "e the o"<ect o a contract.
Art. 13+:. Impossi"le things or services cannot "e the o"<ect o contracts.
Art. 13+0. The o"<ect o ever$ contract m3st "e !eterminate as to its 9in!. The act that the
63antit$ is not !eterminate shall not "e an o"stacle to the e)istence o the contract% provi!e!
it is possi"le to !etermine the same% #itho3t the nee! o a ne# contract "et#een the parties.
WHAT IS TH+ CONC+:T O* O.G+CT O* A CONTRACT?
The o#;ect o" a contract ans$ers to the 23estion $hat(. It is the s3#;ect atter o" the contract o"
the o#&i!ation arisin! or created #% the contract. S3ch o#&i!ation a% consist in either a thin! P persona& or
rea& ri!ht P 5to !ive6' a service 5to do6 or a#stention "ro a service 5not to do6' or a% invo&ve ri!hts.
WHAT AR+ TH+ R+I<ISIT+S O* THIN0S AS A /AW*</ O.G+CT O* A CONTRACT?
516 The thin! 3st #e $ithin the coerce o" en' that is' it can #e &e!a&&% the s3#;ect o"
coercia& transaction. +7ap&es o" thin!s o3tside o" p3#&ic o$nership s3ch as side$a&1s'
p3#&ic p&aces' #rid!es' streets' etc.
586 It 3st #e /ICIT or /AW*</. It sho3&d not #e prohi#ited #% &a$ s3ch as opi3' other$ise it
$o3&d #e considered AOI). It sho3&d not a&so #e ipossi#&e either ph%sica&&% or &e!a&&%.
536 It 3st #e in e7istence or capa#&e o" coin! into e7istence. So' as a 0+N+RA/ R</+>
*3t3re thin!s' those $hich are not %et o$ned #% the de#tor or has not %et #een an3"act3red
or prod3ced' a% #e the o#;ect o" a contract.
+7ceptions to the r3&e>
a. *3t3re inheritance 5one $here the so3rce o" propert% is sti&& a&ive6 cannot #e the
s3#;ect o" a contract.
#. *3t3re donations o" properties are a#so&3te&% prohi#ited.
+7ceptions to the e7ception
a. In the case o" partition o" propert% #% act inter vivos #% a person 5"or e7ap&e' o$ner
or so3rce o" the propert%6 to ta1e e""ect 3pon his death.
#. In cases o" arria!e sett&eents or ante4n3ptia& a!reeents. These are donations
#et$een "3t3re spo3ses to ta1e e""ect ortis ca3sa.
5=6 It 3st #e deterinate or capa#&e o" #ein! ade deterinate. +7ap&es o" s3ch $o3&d #e a&&
the cavans o" rice in a #ode!a' a&& the e!!s in a #as1et' % &and $ith the sa&&est area' etc.
)eterinate eans that the parties a!ree or provide in the contract the -IN) and the
S:+CI+. It is not eno3!h "or a de#tor to sip&% sa% I proise to !ive %o3 soethin!.(
The !enera& r3&e in the case o" 23antit% is that the &ac1 o" 23antit% does not a""ect the
va&idit% o" the contract' provided it is deterina#&e $itho3t a need "or a ne$ a!reeent.
R+I<ISIT+S O* S+RAIC+S AS A /AW*</ O.G+CT O* A CONTRACT?
516 The service 3st #e $ithin the coerce o" en. It 3st #e capa#&e o"
#ein! per"ored #% en and not #e contrar% to &a$' p3#&ic po&ic%' p3#&ic
ora&s' !ood c3stos or p3#&ic order' other$ise' the contract $o3&d #e
AOI).
586 The service 3st not #e ipossi#&e' ph%sica&&% or &e!a&&%. :h%sica&
ipossi#i&it% $ith re"erence to services a% #e>
A. A#so&3te> $hen the act cannot #e done in an% case so that no#od% can per"or it. *or
e7ap&e' !et soi& "ro G3piter or "&% &i1e a #ird a#so&3te ipossi#i&it% n3&&i"ies the
contract
&. Re&ative> $hen it arises "ro the specia& circ3stances o" the case or the specia&
conditions or 23a&i"ications o" the o#&i!or. *or e7ap&e' to paint a portrait #% a #&ind
person. I" re&ative ipossi#i&it% is teporar% it does not n3&&it%' i" peranent' then it
n3&&i"ies the contract.
NOT(2 /e!a& ipossi#i&it% $o3&d re"er to services $hich are contrar% to &a$' ora&s' !ood
c3stos' p3#&ic order or p3#&ic po&ic%. +7ap&es $o3&d #e the se&&in! o" opi3 or to a1e a
va&id donation o" rea& propert% $itho3t a p3#&ic instr3ent.
536 It 3st #e deterinate or capa#&e o" #ein! ade deterinate.
,A9 RI0HTS .+ AN O.G+CT O* A CONTRACT?
9es. I" the% are>
516 Transissi#&e' s3ch as ri!hts arisin! "ro contracts.
586 Not #e strict&% :+RSONA/ or :O/ITICA/' s3ch as parenta& a3thorit% and the ri!ht to vote.
Section 3
CA>S( O1 CONTRACTS
Art. 1350. In onero3s contracts the ca3se is 3n!erstoo! to "e% or each contracting part$% the
prestation or promise o thing or service "$ the other; in rem3nerator$ ones% the service or
"eneit #hich is rem3nerate!; an! in contracts o p3re "eneicence the mere li"eralit$ o the
"eneactor.
WHAT IS ,+ANT .9 CA<S+ O* CONTRACTS?
In !enera&' ca3se is the $h% o" the contract or the essentia& reason' $hich oves the contractin!
parties to enter into the contract. In other $ords' it is the iediate' direct or ost pro7iate reason $hich
e7p&ains and ;3sti"ies the creation o" an o#&i!ation thro3!h the $i&& o" the contractin! parties.
Strict&% spea1in!' there is no ca3se o" a contract' #3t there is a ca3se o" an o#&i!ation.
)ISTIN0<ISH .+TW++N CA<S+ AN) CONSI)+RATION.
Act3a&&%' in this ;3risdiction' ca3se and consideration are 3sed interchan!ea#&%. A"ter a&&' ca3se is
ere&% the civi& &a$ ter' $hi&e consideration is the coon &a$ ter. It is' ho$ever' 3ndisp3ted that
ca3sa in civi& &a$ ;3risdictions is #roader in scope than consideration in An!&o4Aerican ;3risdictions.
,an% a!reeents $hich cannot #e s3pported in An!&o4Aerican &a$ "or $ant o" consideration can #e
en"orced 3nder the #roader doctrine o" ca3sa.
There is essentia& di""erence #et$een the t$o concepts. <n&i1e the princip&e o" consideration' the
princip&e o" ca3se never re;ect an% ca3se as ins3""icient. Whatever ind3ceent is s3""icient to satis"% the
parties' is s3""icient to satis"% the &a$' even tho3!h it is nothin! ore than ca3se &i#era&itatis o" a vo&3ntar%
!i"t. In other $ords' $hi&e consideration re23ires a &e!a& detrient to the proisee $hich 3st #e ore
than a ora& d3t% ca3se need to #e ateria& at a&&' and a% consist in a ora& satis"action "or the
proissor%.
)ISTIN0<ISH TH+ CA<S+ *RO, TH+ O.G+CT O* CONTRACTS.
The ca3se 3st not #e con"3sed $ith the o#;ect o" the contract. O" co3rse' there can #e no
23estion a#o3t the di""erence #et$een the t$o in cases o" re3nerator% and !rat3ito3s contracts> th3s' in
the "irst the ca3se is the service or #ene"it $hich re3nerated' $hi&e the o#;ect is the thin! $hich is !iven
in re3neration' and in the second' the ca3se is the &i#era&it% o" the #ene"actor' $hi&e the o#;ect is the thin!
that is donated. In onero3s contracts' the ca3se "or each contractin! part% is the prestation or proise o" or
service #% the other' $hi&e the o#;ect is the thin! or service itse&". Th3s' in a contract o" sa&e' the ca3se "or
the vendor is the ac23isition o" the p3rchase price' $hi&e the ca3se "or the vendee is the ac23isition o" the
thin! so&d. The o#;ects' on the other hand' are the thin! $hich is so&d and the price is $hich is paid.
To&entino' ho$ever' $hi&e conc3rrin! $ith this vie$ $ith respect to the ca3se' aintains that the
o#;ect is the thin! that is so&d #eca3se it it the startin! point o" a!reeent $itho3t $hich the ne!otiations
$o3&d never have #e!3n.
WHAT IS TH+ CA<S+ IN AN ON+RO<S' R+,<N+RATOR9' AN) A 0RAT<ITO<S CONTRACT?
Art. 1350 provides that>
516 In onero3s contracts' the ca3se is 3nderstood to #e' "or each contractin! part%' the prestation
or proise o" a thin! or service #% the other.( In onero3s contracts there is prestation'
proise' or price in e7chan!e "or soethin! %o3 do.
586 In re3nerator% ones' the service or #ene"it $hich is re3nerated. Re3nerator% contracts
are those $here a part% !ives soethin! to another #eca3se o" soe service or #ene"it !iven
or rendered #% the &atter to the "orer' $here s3ch service or #ene"it $as not d3e as a &e!a&
o#&i!ation. I" "o3nded on a &e!a& o#&i!ation' then it is rea&&% an o#&i!ation "o3nded on &a$.
5o#&i!ations havin! di""erent so3rces6 <N/+SS o" co3rse' it is red3ced to a contract $here
there is 3t3a& consent' in $hich it a% #e considered as an onero3s contract.
This "a&&s #et$een the onero3s and !rat3ito3s contract. There is no o#&i!ation to pa%. And %et'
one part% !ives soethin! to another #eca3se o" soe service or #ene"it !iven or rendered #%
the &atter to the "orer. It is ca&&ed the de&iver% o" a thin! or per"orance o" an act in vie$ o"
3tan! na &oo# 5de#t o" !ratit3de6
536 And contracts o" p3re #ene"icence' the ere &i#era&it% o" the #ene"actor.( These are
!rat3ito3s contracts $hich are essentia&&% a!reeents to !ive donations.
IN ON+RO<S CONTRACTS' SHO</) TH+ CA<S+ .+ N+C+SSARI/9 A)+I<AT+?
NO. In onero3s contracts' the ca3se need not #e ade23ate or an e7act e23iva&ent in point o" act3a&
va&3e' especia&&% in dea&in! $ith o#;ects $hich have a rapid&% "&3ct3atin! price.
WHAT IS TH+ CA<S+ IN ACC+SSOR9 CONTRACTS S<CH AS ,ORT0A0+ OR :/+)0+?
0enera&&%' the ca3se is the sae as the ca3se "or the principa& contract o" &oan.
,A9 A ,ORA/ O./I0ATION CONSTIT<T+ A S<**ICI+NT CA<S+ TO S<::ORT AN ON+RO<S
CONTRACT?
Where the ora& o#&i!ation arises $ho&&% "ro ethica& considerations' 3nconnected $ith an% civi&
o#&i!ation' and as s3ch' is deanda#&e on&% in conscience' and not in &a$' it cannot constit3te a ca3se to
s3pport an onero3s contract.
.3t $here s3ch ora& o#&i!ation is #ased 3pon a previo3s civi& oi#&i!ation $hich has a&read% #een
#arred #% the stat3te o" &iitations at the tie $hen the contract is entered into' it constit3tes a s3""icient
ca3se and consideration to s3pport said contract.
WHAT R+I<ISIT+S ,<ST CONC<R IN OR)+R THAT TH+R+ WI// .+ S<**ICI+NT CA<S+
<:ON WHICH A CONTRACT ,A9 .+ *O<N)+)?
In order that there $i&& #e s3""icient ca3se 3pon $hich a contract a% #e "o3nded' it is essentia&
that the "o&&o$in! re23isites conc3r>
516 The ca3se sho3&d #e in e7istence.
586 The ca3se sho3&d #e &icit or &a$"3&.
536 The ca3se sho3&d #e tr3e.
Art. 1351. The partic3lar motives o the parties in entering into contract are !ierent rom
the ca3se thereo.
)ISTIN0<ISH TH+ CA<S+ O* A CONTRACT *RO, TH+ ,OTIA+S O* TH+ CONTRACTIN0
:ARTI+S.
Art. 1351 provides that The partic3&ar otives o" the parties in enterin! into a contract are
di""erent "ro the ca3se thereo".(
The ca3se o" a contract and the otives o" the parties in enterin! into a contract a% #e
distin!3ished "ro each other as "o&&o$s>
516 The ca3se is the direct or pro7iate reason o" a contract' $hereas the otives are the indirect
or reote reasons.
586 The ca3se is the o#;ective or ;3dicia& reason o" a contract' $hereas the otives are the
ps%cho&o!ica& or persona& reasons.
536 The ca3se "or a certain contract is a&$a%s the sae' $hereas the otives $i&& di""er or var%
dependin! 3pon $ho are the parties.
5=6 The ca3se can a""ect the va&idit% o" a contract' $hereas the otives cannot.
556 The ca3se is a&$a%s 1no$n' $here the otive a% #e 3n1no$n to the other.
5?6 An i&&e!a& ca3se a1es a contract void' $hi&e an i&&e!a& otive does not.
IS TH+R+ AN9 +FC+:TION TO TH+ R</+ THAT TH+ :ARTIC</AR ,OTIA+S O* TH+ :ARTI+S
IN +NT+RIN0 INTO A CONTRACT IS )I**+R+NT *RO, TH+ CA<S+ O* TH+ CONTRACT?
9+S. There is an e7ception to the r3&e and that is $hen the contract is conditioned 3pon the
attainent o" the otive o" either contractin! part%. In other $ords' the otive a% #e re!arded ca3sa
$hen it predeterines the p3rpose o" the contract.
,otive predeterines ca3se( arises on&% in shoc1in! and po&itica& circ3stances. Apparent&%'
these circ3stances precede an% en3nciation o" the otive predeterines ca3se( r3&e. .<T it 3st #e
stressed that as a !enera& r3&e the i&&e!a&it% o" the otive does not render the ca3se i&&e!a& and inva&id.
(. RAION /S. PPA 151 SCRA *33
1acts2 +. RAOON' INC. is a corporation or!aniHed in 1@?8 "or the ain p3rpose o" #iddin! "or the
contract to ana!e a&& piers in So3th Har#or' ,ani&a. +nri23e RaHon is the 100Q o$ner o" s3ch
corporation.
In 1@??' +. RAOON' INC. $as a$arded a 54%ear contract to operate the arrastre service o" :iers 3
and 5. It a&&e!ed&% inc3rred i&&ions o" pesos "or e23ipent.
Th3s' $hen the .3rea3 o" C3stos' in 1@C1 iss3ed an invitation to #id' +. RAOON' INC. "i&ed a
specia& civi& action "or certiorari' prohi#ition' anda3s' etc. +vent3a&&%' there $as a #iddin! he&d $ith +.
RAOON' INC. eer!in! as the 3nanio3s choice. It had a contract in 1@C= "or 5 %ears.
In 1@CC and 1@CD' +. RAOON' INC. initiated ne!otiations $ith :hi&ippine :orts A3thorit% 5::A6
to $hich ::A did not act. There happened a trans"er o" shares o" stoc1s "ro RaHon to persons "rontin! "or
,arcosB #rother4in4&a$ A&"redo .e;o Ro3a&deH in 1@CD. RaHon a&&e!ed that he did not receive a sin!&e
centavo.
+vent3a&&%' $hen the contract e7pired' it $as rene$ed "or another D %ears. A"ter +)SA
Revo&3tion' RaHon too1 over the ana!eent. The $or1ers $ent on stri1e.
Iss3e2 45N the ca3se o the contract is vali!.
R3ling2 No. The SC he&d that the contract had an 3n&a$"3& ca3se P that o" o#tainin! a !overnent contract
in vio&ation o" the &a$. Whi&e the !enera& r3&e is that the ca3se o" the contract 3st not #e con"3sed $ith the
otives o" the parties' this case s23are&% "its into the e7ception that the otive a% #e re!arded as ca3se
$hen it predeterines the p3rpose o" the contract.
On the part o" Ro3a&deH' the otive $as to #e a#&e to contract $ith the !overnent $hich he has
#een prohi#ited #% &a$ "ro doin! and on RaHonBs part' to #e a#&e to rene$ his ana!eent contract.
The contention that RaHon did not derived an% #ene"it is not contro&&in!' "or the Co3rt he&d that
$hether he is to derive an% #ene"it "ro the 3n&a$"3& 3se o" the s3#;ect atter is not the so&e test. A test
$hich has #een ore con"ora#&e to so3nd ora&it% is $hether he intends to aid the other in the 3n&a$"3&
o#;ect. He a% #e deeed to #e a participant in the 3n&a$"3& p3rpose' i"' $ith 1no$&ed!e thereo"' he does
an%thin! $hich "aci&itates the carr%in! o3t o" s3ch p3rpose.
O.(GARIO /S. CO>RT O1 APP(A.S *3: SCRA 0C
1acts2 Spo3ses ,arci&iano and A3re&ia O&e!ario o$ned parce& o" &and. The% $ere chi&d&ess #3t reared
ed3cated ,an3e&' :aH and Socorro. .oni"acio is the #rother o" ,arci&iano $hi&e Ade&aida is the niece o"
A3re&ia.
A3re&ia died. To prec&3de A3re&iaBs heirs "ro inheritin! and to avoid pa%ent o" ta7es'
,arci&iano e7ec3ted a )eed o" A#so&3te Sa&e o" the s3#;ect propert% to ,an3e&' :aH and Socorro.
,arci&iano then died intestate. The heirs 4 .oni"acio and Ade&aida e7ec3ted a )eed o" +7tra
G3dicia& Sett&eent o" the +state. The% event3a&&% so&d the propert% to +&ena Adaon and Nestor Te;on.
,an3e&' :aH and Socorro contested the ;3dicia& sett&eent. The% c&ai that the% $ere the o$ner o"
the propert%.
Iss3e2 45N the ca3se o the contract is vali!
R3ling2 No. The SC said that in a contract o" sa&e' consideration is' as a r3&e' di""erent "ro the otive o"
the parties. Consideration is de"ined as soe ri!ht' interest' #ene"it' or advanta!e con"erred 3pon the
proissor' to $hich he is other$ise not &a$"3&&% entit&ed. Or an% detrient' pre;3dice' &oss or disadvanta!e
s3""ered or 3nderta1en #% the proisee other than to s3ch as he is at the tie o" consent #o3nd to s3""er.
As contradistin!3ished' otive is the condition o" ind $hich incites to action' #3t inc&3des a&so
the in"erence as to the e7istence o" s3ch condition' "ro an e7terna& "act o" a nat3re to prod3ce s3ch a
condition. <nder certain circ3stances' ho$ever' the otive o" the parties a% #e re!arded as the
consideration $hen it predeterines the p3rpose o" the contract. When the% #&end to that de!ree' and the
otive is 3n&a$"3&' then the contract entered into is n3&& and void.
In this case' the priar% otive o" ,arci&iano is to "r3strate the heirs o" their inheritance and to
avoid pa%ent o" estate ta7es.
Art. 135*. Contracts #itho3t ca3se% or #ith 3nla#3l ca3se% pro!3ce no eect #hatever. The
ca3se is 3nla#3l i it is contrar$ to la#% morals% goo! c3stoms% p3"lic or!er or p3"lic polic$.
WHAT HA::+NS WH+N TH+R+ IS TOTA/ A.S+NC+ O* CA<S+?
Art. 1358 provides that Contracts $itho3t ca3se 7 7 prod3ce no e""ect $hatsoever. 7 7(
I" there is no ca3se $hatsoever' there contract is void. The ca3se 3st e7ist at the tie o" the
per"ection o" the contract' it need not e7ist &ater.
TORR(S /S. CO>RT O1 APP(A.S 3*0 SCRA +*:
1acts2 Sisters Antonia Torres and +eteria .arin! entered into a V;oint vent3re a!reeentV $ith ,an3e&
Torres "or the deve&opent o" a parce& o" &and into a s3#division. The% e7ec3ted a )eed o" Sa&e in "avor o"
,an3e&. The propert% $as priced at :85'000.00 #3t Antonia and +eteria did not act3a&&% receive the
pa%ent. The sa&e o" the s3#division &ots $i&& #e divided into ?0Q "or the sisters Antonia and +eteria and
=0Q "or ,an3e&. ,an3e& then ort!a!ed the propert% and o#tained a &oan o" :=0'000.00 "ro +23ita#&e
.an1. The pro;ect did not p3sh thro3!h and the &and $as "orec&osed #% the #an1.
Antonia and +eteria a&&e!ed that the pro;ect "ai&ed #eca3se o" ,an3e&Ws &ac1 o" "3nds or eans
and s1i&&s. ,an3e& a&&e!ed that he sec3red approva& "or the s3#division pro;ect' ca3sed the constr3ction o"
roads' c3r#s and !3tters' and entered into a contract $ith an en!ineerin! "ir. He added that the pro;ect
"ai&ed #eca3se Antonia and +eteria and their re&atives separate&% ca3sed the annotations o" adverse c&ais
on the tit&e $hich scared prospective #3%ers.
Antonia and +eteria as1ed the Co3rt to ann3& the contract "or the sa&e o" &and "or it $as i&&e!a&
and $itho3t va&id consideration.
Iss3e2 45N the contract #as #itho3t ca3se.
R3ling2 No. The Co3rt $as not pers3aded #% the t$o sistersB contention. The ;oint vent3re a!reeent
c&ear&% states that the consideration "or the sa&e $as the e7pectation o" pro"its "ro the s3#division pro;ect.
Considerations' ore proper&% denoinated as ca3se' can ta1e di""erent "ors' s3ch as the prestation or
proise o" a thin! or service #% another.
In the case at #ar' the ca3se o" the contract o" sa&e consisted not in the stated peso va&3e o" the
&and' #3t in the e7pectation o" pro"its "ro the s3#division pro;ect' "or $hich the &and $as intended to #e
3sed.
WHAT IS TH+ +**+CT O* AN <N/AW*</ CA<S+?
Art. 1358 provides that Contracts $itho3t ca3se' or $ith 3n&a$"3& ca3se' prod3ce no e""ect
$hatsoever. 7 7(
WHAT I* TH+ N<//IT9 :ROC++)S *RO, AN I//+0A/ CA<S+ AN) .OTH :ARTI+S AR+ AT
*A</T?
Art. 1=11 provides that When the n3&&it% proceeds "ro the i&&e!a&it% o" the ca3se or o#;ect o" the
contract' and the act constit3tes a criina& o""ense' #oth parties #ein! in pari de&icto' the% sha&& have no
action a!ainst each other and #oth sha&& #e prosec3ted. ,oreover' the provisions o" the Revised :ena& Code
re&ative to the disposa& o" e""ects o" a crie sha&& #e app&ica#&e to the thin!s or the price o" the contract.
WHAT I* N<//IT9 :ROC++)S NOT *RO, A CRI,INA/ O**+NS+?
Art. 1=18 provides that I" the act in $hich the 3n&a$"3& or "or#idden ca3se consists does not
constit3te a criina& o""ense' the "o&&o$in! r3&es sha&& #e o#served>
516 When the "a3&t is on the part o" #oth contractin! parties' neither a% recover $hat he has !ive
#% virt3e o" the contract' or deand the per"orance o" the otherBs 3nderta1in!.
586 When on&% one o" the contractin! parties is at "a3&t' he cannot recover $hat he has #een !iven
#% reason o" the contract' or as1 "or the "3&"i&&ent o" $hat has #een proised to hi. The
other' $ho is not at "a3&t' a% deand the ret3rn o" $hat he has !iven $itho3t an% o#&i!ation
to cop&% $ith his proise.(
Art 1353. The statement o a alse ca3se in contracts shall ren!er them voi!% i it sho3l! not
"e prove! that the$ #ere o3n!e! 3pon another #hich is tr3e an! la#3l.
WHAT I* TH+ CA<S+ IS *A/S+?
Art. 1353 provides that The stateent o" "a&se ca3se in contracts sha&& render the AOI)' i" it
sho3&d #e proved that the% $ere "o3nd 3pon another ca3se $hich is tr3e and &a$"3&.(
.3t ;3st #eca3se the ca3se stated is "a&se does not necessari&% ean that the contract is void. The
reason #ehind this is that the parties are !iven a chance to sho$ that a ca3se rea&&% e7ists' and that said
ca3se is tr3e and &a$"3&.
Th3s' 3nder the said artic&e' it $o3&d see that a contract $ith a stateent o" a "a&se case is not
void #3t ere&% revoca#&e or voida#&e.
Art. 135+. Altho3gh the ca3se is not state! in the contract% it is pres3me! that it e)ists an! is
la#3l% 3nless the !e"tor proves the contrar$.

IS IT N+C+SSAR9 TO STAT+ TH+ CA<S+ IN A CONTRACT?
No. It is pres3ed that the ca3se e7ists and is &a$"3&' <N/+SS the de#tor proves the contrar%.
Art. 135= provides that A&tho3!h the ca3se is not stated in the contract' it is pres3ed that it
e7ists and is &a$"3& <N/+SS the de#tor proves the contrar%.(
Soeties it is even #etter not to state the ca3se at a&&. *or a ca3se e7p&icit&% stated is s3#;ect to
ri!oro3s and direct scr3tin%.
<N)+R TH+ STAT<T+ O* *RA<)S' C+RTAIN A0R++,+NTS HAA+ TO .+ IN WRITIN0. IN
TH+S+ A0R++,+NTS' IS IT +SS+NTIA/ TO :<T )OWN TH+ CONSI)+RATION IN WRITIN0?
NO. .eca3se the pres3ption 3nder Art. 135= that the ca3se e7ists even $hen s3ch is not stated.
Art. 1355. ()cept in cases speciie! "$ la#% lesion or ina!e63ac$ o ca3se shall not invali!ate
a contract% 3nless there has "een ra3!% mista9e or 3n!3e inl3ence.
)O+S /+SION OR INA)+I<AC9 OR :RIC+ INAA/I)AT+ TH+ CONTRACT?
Art. 1355 provides that +7cept in cases speci"ied #% &a$' &esion or inade23ac% o" ca3se sha&& not
inva&idate a contract' <N/+SS there has #een "ra3d' ista1e' or 3nd3e in"&3ence.(
WHAT IS /+SION?
It is an inade23ac% o" ca3se' &i1e an ins3""icient price "or a thin! so&d. ,ore partic3&ar&% it is
de"ines as the di""erence in ao3nt #ased on its act3a& ar1et va&3e.
WH+N ,A9 A CONTRACT .+ INAA/I)AT+) *OR /+SION?
When' accordin! to Art. 1355' there is "ra3d' ista1e' or 3nd3e in"&3ence. .3t there 3st #e other
evidence to sho$ this. In e""ect' &esion is on&% ON+ o" the evidences to sho$ "ra3d' ista1e' or 3nd3e
in"&3ence.
WHAT AR+ CAS+S :ROAI)+) .9 /AW WH+R+IN CONTRACTS ,A9 .+ R+SCIN)+) )<+ TO
/+SION?
,1- Those $hich are entered into #% !3ardians $henever the $ords the% represent s3""er &esion #%
ore than one4"o3rth o" the va&3e o" the thin!s $hich are the o#;ects thereo".
,*- Those a!reed 3pon in representation o" a#sentees' i" the &atter s3""ers the &esion stated in the
precedin! n3#er. MArt. 13D1516 and 586N
Chapter 3
1orms O Contracts
Art. 135C. Contracts shall "e o"ligator$% in #hatever orm the$ ma$ have "een entere! into%
provi!e! all the essential re63isites or their vali!it$ are present. Bo#ever% #hen the la#
re63ires that a contract "e in some orm in or!er that it ma$ "e vali! or enorcea"le% or that
a contract "e prove! in a certain #a$% that re63irement is a"sol3te an! in!ispensa"le. In
s3ch cases% the right o the parties state! in the ollo#ing article cannot "e e)ercise!.
WHAT IS ,+ANT .9 *OR, O* CONTRACTS?
The "or o" contracts re"ers to the anner in $hich a contract is e7ec3ted or ani"ested. The
contract a% #e ora&' in $ritin! or part&% ora&' part&% in $ritin!. I" in $ritin!' it a% #e in a p3#&ic or
private instr3ent.
WH+N IS A CONTRACT CONSI)+R+) IN WRITT+N *OR,?
It is !enera&&% reco!niHed that to #e a $ritten contract' A// its ters 3st #e in $ritin!. So' a
contract part&% in $rin! and part&% ora& is' in &e!a& e""ect' an ora& contract.
WHAT AR+ TH+ C/ASS+S O* CONTRACTS ACCOR)IN0 TO *OR,?
1. In"ora& or coon contract or that $hich a% #e entered into in $hatever "or provided a&&
the re23isites "or their va&idit% are present. This re"ers on&% to Consens3a& contracts' s3ch as
the contract o" sa&e. An in"ora& contract a% #e ora& or in $ritin!.
8. *ora& or so&en contracts or that $hich is re23ired #% &a$ "or its e""icac% to #e in a certain
speci"ied "or. *or e7ap&e' a donation o" rea& propert% 3st #e in a p3#&ic instr3ent in
order to #e va&id' even as #et$een the parties.
Other e7ap&es o" "ora& contracts re23ired #% &a$ are>
a. )onation o" persona& propert% P re23ires a $ritten contract or doc3ent i" the donation
e7ceeds :5'000
#. Stip3&ations to pa% interest on &oans' interest "or the 3se o" one% P said stip3&ations 3st
#e in $ritin!.
c. Trans"er o" &ar!e catt&e P re23ires the trans"er certi"icate o" re!istration.
d. Sa&e o" &and thro3!h an a!ent P the a3thorit% o" the a!ent 3st #e in $ritin!' other$ise it
is n3&& and void.
e. Contract o" antichresis P the principa& &oan' and the interest i" an%' 3st #e speci"ied in
$ritin!' other$ise the contract o" antichresis is void.
". Contracts o" partnership P i" iova#&es are contri#3ted' it 3st #e in a p3#&ic
instr3ent to $hich sha&& #e attached a si!ned inventor% o" the iova#&e propert%
contri#3ted.
!. Re!istration o" chatte& ort!a!e.
IS *OR, AN +SS+NTIA/ R+I<ISIT+ O* A CONTRACT?
0enera&&%' in ordinar% contracts' "or is not an essentia& re23ireent. It a% #e ora& or $ritten' in
a private or p3#&ic instr3ent as &on! as there is CONS+NT' O.G+CT and CA<S+. This r3&e ho$ever
re"ers on&% to Consens3a& Contracts.
WH+N IS *OR, TH+N AN +SS+NTIA/ R+I<ISIT+?
1. A speci"ic "or is re23ired "or va&idit%. In this case the a#sence o" "or renders the contract
AOI)' as it a""ects the va&idit% o" the contractE this is tr3e in *ora& or So&en contracts.
5Art. 135?6
8. A speci"ic "or is re23ired "or en"orcea#i&it%. In this case "or is re23ired to a&&o$ a part% to
s3e 3pon the contract. I" the "or is not cop&ied $ith' then a part% a% not s3e on that #asis.
In the cases o" contracts covered #% the Stat3te o" *ra3ds' the &a$ re23ires that the% #e in
$ritin!' s3#scri#ed #% the part% char!ed or his a!ent. I" the contract is not in $ritin!' the
contract is va&id 5ass3in! that a&& the essentia& re23isites are present6 #3t it cannot #e proved
and' there"ore' it cannot #e en"orced 3n&ess it is rati"ied.
NOT+> <nen"orcea#&e contracts are those that cannot #e en"orced in co3rt or s3ed 3pon #%
reason o" de"ects provided #% &a$ 3nti& and 3n&ess the% are rati"ied accordin! to &a$.
3. A speci"ic "or is re23ired "or convenience. In this case' "or is re23ired "or the convenience
o" the parties in order that the contract a% #e re!istered $ith the proper re!istr% to a1e
e""ective' as a!ainst third persons' the ri!ht ac23ired 3nder s3ch contract. As #et$een the
parties' the "or is not indispensa#&e since the% are a&&o$ed #% &a$ to cope& the other to
o#serve the proper "or and this ri!ht a% #e e7ercised si3&taneo3s&% $ith the action to
en"orce the contract. It is essentia&' ho$ever' #e"ore a part% a% #e cope&&ed to e7ec3te the
re23ired "or' that the contract #e .OTH va&id and en"orcea#&e.
B(CBANO/A /S. AFI. 1++ SCRA +50
1acts2 A+N)OR e7ec3ted a contract o" sa&e $ith respect to three parce&s o" &and $ith .<9+R.
C/AI,ANT assai&ed s3ch sa&e c&aiin! the said &ands $ere ort!a!ed to hi A+N)OR' his co3sin. The
a&&ed!ed ort!a!ed $as contained in a private doc3ent. C/AI,ANT contended that s3ch sa&e $as
"ra3d3&ent and pra%ed that the sae #e dec&ared n3&& and void.
Iss3e2 45N a there #as vali! mortgage
R3ling2 No. The S3pree Co3rt said that the C/AI,ANT has no ca3se o" action. C/AI,ANT has no
standin! to 23estion the va&idit% o" the sa&e e7ec3ted #% S+//+R $ith the .<9+R. No va&id ort!a!ed
#et$een the #eca3se it $as in private doc3ent and not re!istered. The SC "3rther noted that even
ass3in! that the propert% $as va&id&% ort!a!ed to C/AI,ANT' the &atterBs reco3rse $as to "orec&ose the
ort!a!e' not to see1 ann3&ent o" the sa&e.
Note> .3t accordin! to S:' the ort!a!e $as va&id $ith respect to C/AI,ANT and S+//+R #3t it
cannot a""ect third persons #eca3se the sae $as not in p3#&ic doc3ent and not re!istered.
Art. 1358. I the la# re63ires a !oc3ment o other special orm% as in the acts an! contracts
en3merate! in the ollo#ing article% the contracting parties ma$ compel each other to
o"serve that orm% once the contract has "een perecte!. This right ma$ "e e)ercise!
sim3ltaneo3sl$ #ith the action 3pon the contract.
,A9 A :ART9 CO,:+/ TH+ OTH+R TO +F+C<T+ TH+ CONTRACT IN A N+C+SSAR9 *OR,?
9+S. Art. 135C provides that I" the &a$ re23ires a doc3ent o" other specia& "or' as in the acts
and contracts en3erated in the "o&&o$in! artic&e 5135D6' the contractin! parties a% cope& each other to
o#serve that "or' once the contract has #een per"ected. This ri!ht a% #e e7ercised si3&taneo3s&% $ith
the action 3pon the contract.
This r3&e app&ies on&% $hen "or is needed on&% "or convenience' not "or va&idit% or en"orcea#i&it%.
.e"ore the contractin! parties a% #e cope&&ed to e7ec3te the needed "or' it is essentia& that the
contract #e>
16 :er"ected 5Aa&id6
86 +n"orcea#&e 3nder the Stat3te o" *ra3ds.
C.ARIN /S. R>.ONA 1*8 SCRA 51*
1acts2 S+//+R and .<9+R entered into a contract o" sa&e $ith re!ard to the 10 hectares o" &and
constit3tin! S+//+RBS share o" &ot in .oho& "or :8'500. The conditions o" the sa&e $ere 516 do$n pa%ent
o" :1'000 $as to #e ade and 586 #a&ance o" :1'500 $as to #e paid in onth&% insta&&ent o" :100. As
sho$n #% the doc3ents .<9+R de&ivered the do$n pa%ent o" :1'000. Then another pa%ent o" :100
$as !iven "or the "irst insta&&ent. .<9+R a&&e!es that S+//+R and his $i"e vio&ated the ters o"
a!reeent o" the sa&e V#% ret3rnin! the do$n pa%ent #% their o$n vo&ition and $itho3t consent o" the
.<9+R.V )espite repeated deands to &et the sa&e contin3e the S+//+R re"3sed to cop&%.
Th3s' .<9+R "i&ed "or speci"ic per"orance.
Iss3e2 45N S(..(R can "e compelle! to e)ec3te the re63ire! orm.
R3ling2 ?es. There $as c&ear evidence that there $as a per"ected contract o" sa&e #et$een the. The
contract $as a&so partia&&% e7ec3ted and "3&"i&&ed. A contract o" sa&e is per"ected at the oent there is
eetin! o" the inds 3pon the thin! $hich is the o#;ect o" the contract and 3pon the price. S3ch contract is
#indin! in $hatever "or it a% have #een entered into. The acceptance o" the pa%ent c&ear&% sho$ed
S+//+RBS consent to the contract' th3s prec&3din! hi "ro re;ectin! its #indin! e""ect.
With the contract partia&&% e7ec3ted' the sae is no &on!er covered #% the re23ireents o" the
Stat3te o" *ra3ds to #e en"orcea#&e. There"ore' $ith the contract #ein! va&id and en"orcea#&e' the S+//+R
cannot avoid his o#&i!ationE on the contrar%' the S+//+R can even #e cope&&ed to e7ec3te a p3#&ic
doc3ent to e#od% their va&id and en"orcea#&e contract.
Art. 135:. The ollo#ing m3st appear in a p3"lic !oc3ment2
1. Acts an! contracts #hich have or their o"<ect the creation% transmission% mo!iication
or e)ting3ishment o real rights over immova"le propert$; sales o real propert$ or o
an interest therein are governe! "$ Articles 1+03% No. * an! 1+05;
*. The cession% rep3!iation or ren3nciation o here!itar$ rights or o those o the con<3gal
partnership o gains;
3. The po#er to a!minister propert$% or an$ other po#er #hich has or its o"<ect an act
appearing or #hich sho3l! appear in a p3"lic !oc3ment% or sho3l! pre<3!ice a thir!
person;
All other contracts #here the amo3nt involve! e)cee!s ive h3n!re! pesos ,P500- m3st
appear in #riting% even a private one. &3t sales o goo!s% chattels or things in action are
governe! "$ Articles 1+03% No. * an! 1+05.
WHAT CONTRACTS ,<ST A::+AR IN A :<./IC )OC<,+NT' *OR :<R:OS+S O*
CONA+NI+NC+?
1. Acts and contracts $hich have "or their o#;ect' the creation' transission' odi"ication' or
e7tin!3ishent or rea& ri!hts over iova#&e propert%E sa&es o" rea& propert% or o" an interest
therein are !overned #% Arts. 1=03586 and 1=05E
8. The cession' rep3diation' or ren3nciation o" hereditar% ri!hts or those o" con;3!a& partnership
o" !ainsE
3. The po$er to adinister propert%' or an% other po$er $hich has "or its o#;ect an act
appearin! or $hich sho3&d appear in a p3#&ic doc3ent' or sho3&d pre;3dice a third personE
=. The cession o" actions or ri!hts proceedin! "ro an act appearin! in a p3#&ic doc3ent.
5. A&& other contracts $here the ao3nt invo&ved e7ceeds "ive tho3sand pesos 3st appear in
$ritin!' even a private one. .3t sa&es o" !oods' chatte&s or thin!s are !overned #% Arts.
1=03586 and 1=05.
NOT(2 The necessit% "or the p3#&ic doc3ent in the contracts en3erated here is on&% "or
convenience not "or va&idit% and en"orcea#i&it%.
:3#&ic doc3ents or instr3ent is one $hich is ac1no$&ed!ed #e"ore a notar% p3#&ic or an%
o""icia& a3thoriHed to adinister and oath' #% the person $ho e7ec3ted the sae.
Chapter +
Reormation o Instr3ments
Art. 1350. 4hen% there having "een a meeting o the min!s o the parties to a contract% their
tr3e intention is not e)presse! in the instr3ment p3rporting to em"o!$ the agreement% "$
reason o mista9e% ra3!% ine63ita"le con!3ct or acci!ent% one o the parties ma$ as9 or the
reormation o the instr3ment to the en! that s3ch tr3e intention ma$ "e e)presse!.
I mista9es% ra3!% ine63ita"le con!3ct% or acci!ent has prevente! a meeting o the
min!s o the parties% the proper reme!$ is not reormation o the instr3ment "3t ann3lment
o the contract.
WHAT IS R+*OR,ATION?
Re"oration is that reed% #% eans o" $hich a $ritten instr3ent is aended or recti"ied so as
to e7press or con"or to the rea& a!reeent or intention o" the parties $hen #% reason o" 5a6 ista1e' 5#6
"ra3d' 5c6 ine23ita#&e cond3ct' or 5d6 accident' the instr3ent "ai&s to e7press s3ch a!reeent or intention.
WHAT IS TH+ R+ASON *OR R+*OR,ATION?
+23it% orders the re"oration o" an instr3ent in order that the tr3e intention o" the contractin!
parties a% #e e7pressed. The co3rts do not attept to a1e another contract "or the parties. The rationa&e
o" the doctrine is that it $o3&d #e 3n;3st and ine23ita#&e to a&&o$ the en"orceent o" a $ritten instr3ent
$hich does not re"&ect or disc&ose the rea& eetin! o" the inds o" the parties. The ri!ht o" the &e!a&istic
r3&e that a $ritten instr3ent sho3&d #e "ina& and in"&e7i#&e criterion and eas3re o" the ri!hts and
o#&i!ation o" the contractin! parties is tepered to "oresta&& the e""ects o" ista1e' "ra3d' ine23ita#&e
cond3ct or accident.
NOT(2 It is not the "3nction o" the reed% or re"oration to a1e a ne$ a!reeent' #3t to esta#&ish and
perpet3ate the tr3e e7istin! one. ,oreover' co3rts do not re"or instr3ents ere&% "or the sa1e o"
re"orin! the' .<T ON/9 to ena#&e soe part% to assert ri!hts 3nder the as re"ored.
WHAT AR+ TH+ R+I<ISIT+S O* A R+*OR,ATION?
1. There is a $ritten instr3ent
8. There is a eetin! o" the inds o" the parties to the contract.
3. There is a "ai&3re to e7press the tr3e intention o" the parties d3e to ista1e' "ra3d' ine23ita#&e
cond3ct' or accident.
=. The "acts 3pon $hich re&ie" #% $a% o" re"oration is so3!ht are p3t in iss3e #% the p&eadin!s.
5. There is c&ear and convincin! evidence o" the ista1e' "ra3d' ine23ita#&e cond3ct or accident.
NATIONA. IRRIGATION AF=INISTRATION /. GA=IT *15 SCRA +3C
1acts2 Soetie in G3ne 5' 1@C5' /+SSOR and /+SS++ entered into a CONTRACT O* /+AS+ over
the /+SSORBS parce& o" &and "or a consideration in the ao3nt o" 50.106 per s2' per %ear' "or ten 5106
%ears' "ro the date o" the e7ec3tion o" the instr3ent. /+SS++ $i&& constr3ct the Adinistration .3i&din!
and other "aci&ities "or )ivision III' ,a!at River ,3&ti4p3rpose :ro;ect at san ,an3e&' Isa#e&a.
/+SSOR a&&ed!ed that /+SS++ s3rreptitio3s&% inserted stip3&ations 3n1no$n to /+SSOR. The
said stip3&ations are> 516 That sho3&d /+SS++ decides to contin3e 3ti&iHin! the said propert% 777' then
/+SS++ a% p3rchase the propert% and all rentals paid to LESSOR be considered part of the purchase
price which shall not exceed P25K; 586 That si7 5?6 onths #e"ore the e7piration o" the ten 5106 %ear
period' /+SSOR sha&& re23est /+SS++' in $ritin! a#o3t the &atterBs "ina& intentionon the propert% &easedE
536 That 3pon pa%ent o" :85- to /+SSOR' the &atter sha&& have deeed to have ceded and conve%ed a&&
his ri!hts and interest on the s3#;ect propert% "ree "ro a&& &iens and enc3#rances in "avor o" the /+SS++.
.oth the TC and CA interpreted the contract #et$een the parties as a contract o" &ease $ith a ri!ht
to rep3rchase.
Iss3e2 45N an interpretation% an! not reormation% o contract is #arrante!
R3ling2 No. A per3sa& o" the cop&aint at #ar and the re&ie" pra%ed "or therein sho$s that it is c&ear&% a case
o" re"oration o" instr3ent 3nder Artic&es 135@ and 13?8 o" the Civi& Code.
The SC he&d that the TC erred in ho&din! that the iss3e in this case is a 23estion o" &a$ and not a
23estiono" "act #eca3se it ere&% invo&ves the interpretation o" contract #et$een the parties. It "ai&ed to
aprreciate the distinction #et$een interpretation and re"oration o" contracts. Whi&e the ai in
interpretation is to ascertain the tr3e intention o" the parties' the interpretation is not' ho$ever' e23iva&ent to
re"oration o" contracts.
Since the cop&aint in the case at #ar raises the iss3e that the contract o" &ease does not e7press the
tr3e intention or a!reeent o" the parties' the co3rt a 23o sho3&d have cond3cted a tria& and received the
evidence o" the parties "or the p3rpose o" ascertainin! the tr3e intention o" the parties $hen the% e7ec3ted
the instr3ent in 23estion. The SC reanded the case to the TC.
Note> The SC had the opport3nit% to disc3ss the distinction #et$een re"oration and intepretation
o" contracts.
B>I&ONBOA /S. CO>RT O1 APP(A.S 3*0 SCRA C*5
1acts2 /+SS++ entered into a 154%ear &ease contract $ith the /+SSORS $herein the "orer $o3&d &ease
a parce& o" &and. /+SS++ $as s3pposed to constr3ct a #3i&din! on the &and' $ith the "o&&o$in! provision>
V/+SS++BS o#&i!ation to pa% the renta& sha&& start on&% 3pon cop&etion o" the #3i&din!' #3t i" it is not
cop&eted $ithin D onths "ro date hereo"' the onth&% renta& sha&& a&read% accr3e(.
)3rin! the constr3ction o" the #3i&din!' Nino% A23ino $as assassinated' $hich event 3st have
ca3sed po&itica& and econoic insta#i&it%. The prices o" constr3ction ateria&s soared. /+SS++'
conse23ent&% $as not a#&e to pa% the "irst renta& 4 that is D onths a"ter the contract $as entered into.
No$' /+SS++ see1s re"oration since their tr3e intention as to $hen the onth&% renta& sho3&d
accr3e $as not e7pressed in the contract. Accordin! to /+SS++' their tr3e intention $as that no renta&
$o3&d accr3e d3rin! the entire period o" constr3ction' even #e%ond D onths.
Iss3e2 45N reormation o contract is #arrante!
R3ling2 NO. The stip3&ation is c&earE the o#&i!ation to pa% sho3&d start a"ter the cop&etion o" the
#3i&din!' #3t i" not cop&eted $ithin D onths a"ter date o" contract' the renta& $i&& start accr3in!.
Once the inds o" the contractin! parties eet' a va&id contract e7ists' $hether or not it is red3ced
to $ritin!. When the ters o" an a!reeent are red3ced to $ritin!' it is considered as containin! a&& the
ters a!reed 3pon. As s3ch' there can #e' #et$een the parties and their s3ccessors in interest' no evidence
o" s3ch ters other than the contents o" the $ritten a!reeent' e7cept $hen it "ai&s to e7press the tr3e intent
and a!reeent o" the parties. In s3ch an e7ception' one o" the parties a% #rin! an action "or re"oration.
In actions "or re"oration' the #3rden o" provin! that the tr3e intention o" the parties has not #een
acc3rate&% e7pressed in the contract is 3pon the part% see1in! re"oration. Here' /+SS++ "ai&ed to
dischar!e that #3rden.
Re"oration sho3&d not #e con"3sed $ith interpretation. Interpretation is the act o" a1in!
inte&&i!i#&e $hat $as #e"ore not 3nderstood' a#i!3o3s or not o#vio3s. On the other hand' re"oration is
that reed% in e23it% #% eans o" $hich a $ritten instr3ent is ade or constr3ed so as to e7press or
con"or to the rea& intention o" the parties. In !rantin! re"oration' there"ore' e23it% is not rea&&% a1in! a
ne$ contract "or the parties #3t is con"irin! and perpet3atin! the rea& contract #et$een the parties $hich
3nder the technica& r3&es o" &a$' co3&d not #e en"orced #3t "or s3ch re"oration. The rationa&e o" the
doctrine is that it $o3&d #e 3n;3st to a&&o$ the en"orceent o" a $ritten instr3ent $hich does not disc&ose
the tr3e intention o" the parties. .% #rin!in! an action "or re"oration' /+SS++ chose to re"or the
instr3ent and not the contract itse&". /+SS++ is th3s prec&3ded "ro insertin! stip3&ations that are not
e7tant in the contract itse&" &est the ver% a!reeent e#odied in the instr3ent is a&tered.
I" indeed a "ort3ito3s event deters the tie&% "3&"i&&ent o" a part%Ws o#&i!ation' he or she sho3&d
see1 rescission in order that the co3rt co3&d re&ease hi "ro per"orin! his o#&i!ation' instead o" "i&in! a
case "or re"oration.
NAGA T(.. CO.% INC. /S. CO>RT O1 APP(A.S *30 SCRA 351
1acts2 NA0AT+/ entered into a contract $ith +/+CTRIC COO: $here#% the "orer $o3&d 3se the
&atterWs e&ectric posts "or its o$n te&ephone $ires. In e7chan!e' NA0AT+/ insta&&ed 10 te&ephone 3nits in
respondent o""ice' "ree o" char!e. A"ter the contract had #een en"orced "or over 10 %ears' the +/+CTRIC
COO: "i&ed an action "or re"oration on the !ro3nd that it is too one4sided in "avor o" NA0AT+/.
NA0AT+/ never increased the n3#er o" te&ephone 3nits !iven to +/+CTRIC COO:' #3t the "orer has
added ore and ore $ires on the +/+CTRIC COO:BS posts.
Iss3e2 45N reormation is the proper reme!$
R3ling2 No. It is tr3e that the contract' thro3!h the %ears has #ecoe too disadvanta!eo3s to the
+/+CTRIC COO:. Ho$ever' re"oration cannot #e invo1ed since there $as no sho$in! o" a ista1e or
error in said contract on the part o" an% o" the parties so as to res3&t in its "ai&3re to e7press their tr3e intent.
This does not ean' ho$ever' that +/+CTRIC COO: is a#so&3te&% $itho3t a reed%. +/+CTRIC COO:
sho3&d #e re&ieved 3nder Artic&e 18?C $hich states> VWhen the service has #ecoe so di""ic3&t as to #e
ani"est&% #e%ond the contep&ation o" the parties' the o#&i!or a% #e re&eased there"ro' in $ho&e or in
part.V
Ho$ever' the SC did not end #% re&easin! the "ro their o#&i!ations. It too1 into acco3nt the
possi#&e conse23ences o" ere&% re&easin! the "ro their contract 5their #3siness $i&& #e disr3pted to the
pre;3dice o" the p3#&ic6. Th3s' the SC ordered NA0AT+/ to pa% "or the posts at :10 per onth' $hi&e
+/+CTRIC COO: $ere &i1e$ise ade to pa% "or the te&ephone 3nits provided #% NA0AT+/.
With re!ard to prescription> It is erroneo3s to sa% that the ri!ht o" action arose on&% a"ter said
contract had a&read% #ecoe disadvanta!eo3s d3e to s3#se23ent events. Whether the contract is
disadvanta!eo3s or not is irre&evant to re"oration and there"ore' cannot #e an e&eent in the deterination
o" the period "or prescription o" the action to re"or. In this case' +/+CTRIC COO:BS ri!ht o" action
accr3ed $hen the &atter ordered its co3nse& to st3d% the contract as it a&read% appeared disadvanta!eo3s.
HOW )O 9O< )ISTIN0<ISH R+*OR,ATION *RO, ANN</,+NT?
When there is a eetin! o" the inds' #3t there is ista1e' "ra3d' ine23ita#&e cond3ct or accident
in the contract as $ritten' the reed% is R+*OR,ATION.
When there has #een no eetin! o" the inds' #eca3se o" vitiated consent' the proper reed% is
ANN</,+NT.
A&so' re"oration does not inva&idate a contract' ann3&ent does.
In ters o" prescription' an action "or re"oration prescri#es in 10 %ears "ro date o" e7ec3tion o"
the $ritten instr3ent. The action "or ann3&ent prescri#es = %ears "ro the oent the vice o" consent
has ceased to e7ist.
WHAT IS TH+ )I**+R+NC+ .+TW++N R+*OR,ATION AN) R+/ATIA+ SI,</ATION?
Re"oration is resorted to $hen soe error' ista1e' "ra3d' ine23ita#&e cond3ct' or accident $as
coitted so that the tr3e intention o" the parties $as not e7pressed in the $ritten instr3ent.
In re&ative si3&ation' there is a eetin! o" the inds. The concea&ent o" the a!reeent $hich
the parties intended $as de&i#erate&% a!reed 3pon #% the parties.
:rescription is not rea&&% necessar% in re&ative si3&ation #eca3se a&& the co3rts $o3&d have to do
is to en"orce the tr3e a!reeent. There is no "ra3d' ista1e' ine23ita#&e cond3ct' or accident to spea1 o".
WHAT IS TH+ 0+N+RA/ +**+CT AN) O:+RATION O* A R+*OR,ATION ON AN
INSTR<,+NT?
<pon the re"oration o" an instr3ent' the !enera& r3&e is that it re&ates #ac1 to and ta1es e""ect
"ro the tie o" its ori!ina& e7ec3tion' especia&&% as #et$een the parties. Accordin!&%' 3pon the correction
#% the co3rt o" a deed $hich e""ective&% descri#es the preises' the e23ita#&e tit&e to $hich is in the vendee'
his &e!a& tit&e re&ated #ac1 to its e7ec3tion and de&iver%.
Art. 13C0. The principles o the general la# on the reormation o instr3ments are here"$
a!opte! insoar as the$ are not in conlict #ith the provisions o this Co!e.
0IA+N A CAS+ O* CON*/ICT .+TW++N TH+ :ROAISIONS O* TH+ N+W CIAI/ CO)+ AN)
TH+ :RINCI:/+S O* 0+N+RA/ /AW ON R+*OR,ATION' WHAT SHO</) :R+AAI/?
The princip&es o" the 0enera& /a$ on the Re"oration o" Instr3ents are adopted inso"ar as the%
do NOT con"&ict $ith the provisions o" the Civi& Code. 5Art. 13?06
Art. 13C1. 4hen a m3t3al mista9e o the parties ca3ses the ail3re o the instr3ment to their
real agreement% sai! instr3ment ma$ "e reorme!.
Art. 13C*. I one part$ #as mista9en an! the other acte! ra3!3lentl$ or ine63ita"l$ in s3ch
a #a$ that the instr3ment !oes not sho# their tr3e intention% the ormer ma$ as9 or the
reormation o the instr3ment.
Art. 13C3. 4hen one part$ #as mista9en an! the other 9ne# or "elieve! that the
instr3ment !i! not state their real agreement% "3t conceale! that act rom the ormer% the
instr3ment ma$ "e reorme!.
WH+N CAN ,<T<A/ ,ISTA-+ .+ TH+ .ASIS *OR R+*OR,ATION?
When a 3t3a& ista1e o" the parties ca3ses the "ai&3re o" the instr3ent to disc&ose their rea&
a!reeent' said instr3ent a% #e re"ored.
WHAT AR+ TH+ R+I<ISIT+S TO G<STI*9 R+*OR,ATION .AS+) <:ON ,<T<A/ ,ISTA-+?
The ista1e 3st #e>
1. O* *ACT. There is a ista1e o" "act $hen the $ritten evidence o" the a!reeent inc&3des
soethin! $hich sho3&d not #e there' or oits "ro s3ch instr3ent soethin! $hich sho3&d
#e there' or so e7presses their a!reeent that it sets "orth soethin! di""erent "ro $hat $as
intended.
I" the 3t3a& ista1e is o" &a$' the reed% is ann3&ent.
8. :ROA+) .9 C/+AR AN) CONAINCIN0 +AI)+NC+.
3. ,<T<A/. The% 3st #e coon to #oth parties to an instr3ent. To o#tain re"oration' the
parties 3st sho$ that there $as a va&id contract #et$een the' $hich contract is not
correct&% set "orth in $ritin! to #e re"ored.
=. A./+ TO CA<S+ TH+ *AI/<R+ O* TH+ INSTR<,+NTS TO +F:R+SS TH+IR TR<+
INT+NTION. The ao3nt o" evidence necessar% to s3stain a pra%er "or re&ie" $here it is
so3!ht to ip3!n a "act in $hich the doc3ent is a&$a%s ore than a ere preponderance o"
evidence.
NOT(2 There is a 3ni&atera& ista1e $hen one part% is !3i&t% o" concea&ent. On&% the part% in
!ood "aith can as1 "or re"oration.
Art. 13C+. 4hen thro3gh the ignorance% lac9 o s9ill% negligence or "a! aith on the part o
the person !rating the instr3ment or o the cler9 or t$pist% the instr3ment !oes not e)press
the tr3e intention o the parties% the co3rts ma$ or!er that the instr3ment "e reorme!.
WHAT ,ISTA-+ IS CO,,ITT+) .9 THIR) :+RSONS?
Art. 13?= provides that When thro3!h the
5a6 i!norance
5#6 &ac1 o" s1i&&
5c6 ne!&i!ence
5d6 or #ad "aith on the part o" the person dra"tin! the instr3ent or o" the c&er1 o" t%pist' the
instr3ent does not e7press the tr3e intention o" the parties' the co3rts a% order that the
instr3ent #e re"ored.(
Art. 13C5. I t#o parties agree 3pon the mortgage or ple!ge o real or personal propert$% "3t
the instr3ment states that the propert$ is sol! a"sol3tel$ or #ith a right o rep3rchase%
reormation o the instr3ment is proper.
Art. 13CC. There shall "e no reormation in the ollo#ing cases2
1. Simple !onation inter vivos #herein no con!ition is impose!;
*. 4ills;
3. 4hen the real agreement is voi!.
WH+N IS R+*OR,ATION NOT A//OW+)?
Art. 13?? provides that There sha&& #e no re"oration in the "o&&o$in! cases>
516 Sip&e donations inter vivos $herein NO condition is iposedE
586 Wi&&sE and
536 When the rea& a!reeent is void.(
WH9 CANBT W+ R+*OR, SI,:/+ )ONATIONS?
)onations are essentia&&% acts o" p3re &i#era&it%. Ho$ever' i" the donation is conditiona&'
re"oration a% #e resorted to so that the rea& or tr3e conditions intended #% the donor i!ht #e #ro3!ht
o3t. In case the donations is an onero3s one' re"oration is ver% 3ch in order inas3ch as in this case'
said donation $o3&d parta1e ver% 3ch o" the nat3re o" the contracts.
WH9 CANBT W+ R+*OR, WI//S?
Art. CD= provides that The a1in! o" a $i&& is a strict&% persona& actE it cannot #e &e"t in $ho&e or
in part to the discretion o" a third person' or accop&ished thro3!h the instr3enta&it% o" an a!ent or
attorne%.(
,oreover' A $i&& a% #e revo1ed #% the testator at an% tie #e"ore his death.( And an% $aiver or
restriction o" this is void.( 5Art. D8D6
.3t' a"ter the death o" testator' Art. CD@ provides that $here there is an iper"ect description' or
$hen no person or propert% e7act&% ans$ers the description' or $hen no person or propert% e7act&% ans$ers
the description' ista1es and oissions 3st #e corrected' i" the error appears "ro the conte7t o" the $i&&
or "ro e7trinsic evidence' e7c&3din! the ora& dec&arations p" th;e testator as to his intention.( .3t these
corrections do not ao3nt to a re"oration.
WH9 CANBT W+ R+*OR, AOI) A0R++,+NTS?
Re"oration is not a&&o$ed in case the rea& a!reeent is void #eca3se s3ch a proced3re $o3&d #e
3se&ess. Once re"oration is ade' the ne$ instr3ent $o3&d #e void precise&% #eca3se the tr3e a!reeent
and intention are void.
I" the ori!ina& a!reeent is void' the a!reeent that appears in the $ritten instr3ent $hich one
or #oth parties see1 to re"or stands.
Art. 13C8. 4hen one o the parties has "ro3ght an action to enorce the instr3ment% he
cannot s3"se63entl$ as9 or its reormation.
WHAT IS TH+ +**+CT I* ON+ :ART9 HAS .RO<0HT AN ACTION TO +N*ORC+ AN
INSTR<,+NT?
Art. 13?C provides that When one o" the parties has #ro3!ht an action to en"orce the instr3ent
he cannot s3#se23ent&% as1 "or its re"oration.(
The #asis here is estoppe&' $aiver' or rati"ication.
Art. 13C:. Reormation ma$ "e or!ere! at the instance o either part$ or his s3ccessors in
interets% i the mista9e #as m3t3al; other#ise% 3pon petition o the in<3re! part$% or his heir
or assigs.
Art. 13C0. The proce!3re or the reormation o instr3ments shall "e governe! "$ r3les o
co3rt to "e prom3lgate! "$ the S3preme Co3rt.
WHO ,A9 .+ :/AINTI**S IN AN ACTION *OR R+*OR,ATION?
Art. 13?D provides that Re"oration a% #e ordered at
516 at the instance o" either part% or his s3ccessors in interest' I* TH+ ,ISTA-+ WAS
,<T<A/' other$ise'
586 3pon petition o" the in;3red part%' or his heirs and assi!ns.
WHAT ,<ST TH+ CO,:/AINT A//+0+?
516 That the instr3ent to #e re"ored does not e7press the rea& a!reeent or intentions o" the
partiesE
586 What the rea& a!reeent or intention $as.
Chapter 5
Interpretation O Contracts
Art. 1380. I the terms o contract are clear an! leave no !o3"t 3pon the ointention o the
contracting parties% the literal meaning o its stip3lations shall control.
I the #or!s appear to "e contrar$ to the evi!ent intention o the parties% the latter
shall prevail over the ormer.
Art. 1381. In or!er to <3!ge the intention o the parties% their contemporaneo3s an!
s3"se63ent acts shall "e principall$ consi!ere!.
Art. 138*. Bo#ever general the terms o a contract ma$ "e% the$ shall not "e 3n!erstoo! to
comprehen! things that are !istinct an! cases that are !ierent rom those 3pon #hich the
parties inten!e! to agree.
WHAT IS TH+ R+ASON *OR TH+ INT+R:R+TATION O* CONTRACTS?
When there is no do3#t as re!ards the intention o" the contractin! parties' there is a need "or the
interpretation o" the contracts. .3t $hen the ters o" the contract is c&ear and 3na#i!3o3s that there is no
do3#t re!ardin! the intention o" the contractin! parties' ;3st app&% the ters o" the contract.
I* TH+R+ IS A CON*/ICT .+TW++N TH+ WOR)S O* TH+ CONTRACT AN) TH+ +AI)+NT
INT+NTION O* TH+ :ARTI+S' WHICH ,<ST :R+AAI/?
The intention 3st prevai&.
HOW IS TH+ INT+NT ASC+RTAIN+)?
a. *ro the contract as a $ho&e.
.3t the contract is not constr3ed as inc&3din! thin!s di""erent "ro those intended #% the
parties. 5Art. 13C86
#. *ro the conteporaneo3s and s3#se23ent cond3ct o" the parties. 5Art. 13C16
c. *ro 3sa!e or c3sto o" the co3nt%. 5Art. 13C?6
<sa!e and c3sto sho3&d #e p&eaded and proved.
NOT(2 A specia& provision contro&s a !enera& provision' a specia& intent prevai&s over a
!enera& intent.
Art. 1383. I some stip3lation o an$ contract sho3l! a!mit o several meanings% it shall "e
3n!erstoo! as "earing that import #hich is most a!e63ate to ren!er it eect3al.
Art. 138+. The vario3s stip3lations o a contract shall "e interprete! together% attri"3ting to
the !o3"t3l ones that sense #hich ma$ res3lt rom all o them ta9en <ointl$.
I* A CONTRACT CONTAINS S+A+RA/ STI:</ATIONS A),ITTIN0 S+A+RA/ ,+ANIN0S'
HOW SHO</) IT .+ INT+R:R+T+)?
It sha&& #e 3nderstood as #earin! that iport $hich is ost ade23ate to render it e""ect3a&.
HOW SHO</) TH+ AARIO<S STI:</ATIONS O* A CONTRACT .+ INT+R:R+T+)?
The vario3s stip3&ations sho3&d #e interpreted to!ether' attri#3tin! to the do3#t"3& ones that sense
$hich a% res3&t "ro a&& o" the ta1en ;oint&%.
HOW SHO</) WOR)S' WHICH ,A9 HAA+ )I**+R+NT SI0NI*ICATIONS IN A CONTRACT' .+
<N)+RSTOO)?
It sha&& #e 3nderstood in that $hich is ost in 1eepin! $ith the nat3re and o#;ect o" the contract.
I* TH+ A<THORIT9 IS 0IA+N TO +FACT :A9,+NT .9 /+0A/ ,+ANS( )O+S THIS
INC/<)+ A<THORIT9 TO *I/+ ACTIONS IN CO<RT *OR TH+ R+COA+R9 O* S<,S O*
,ON+9?
9+S. The c&a3se in 23estion eans the po$er to e7act pa%ent o" de#ts d3e the concerned #%
eans o" the instit3tion o" s3its "or their recover%. I" there co3&d #e an% do3#t as to the eanin! o" this
&an!3a!e ta1en #% itse&"' it $o3&d #e reoved #% a consideration o" the !enera& scope and p3rpose o" the
instr3ent in $hich it occ3rs.
Art. 1385. 4or!s #hich ma$ have !ierent signiications shall "e 3n!erstoo! in that #hich
is most in 9eeping #ith the nat3re an! o"<ect o the contract.
I* A WOR) IS S<SC+:TI./+ O* TWO OR ,OR+ ,+ANIN0S' WHAT ,+ANIN0 SHO</) .+
<S+)?
That in 1eepin! $ith the nat3re and o#;ect o" the contract.
I" this cannot #e deterined' then the ters o" $ritin! are pres3ed to have #een 3sed in their
priar% and !enera& acceptation.(
)+S:IT+ TH+ *ACT THAT TH+ T+R,S AR+ :R+S<,+) TO HAA+ .++N <S+) IN TH+IR
:RI,AR9 AN) 0+N+RA/ ACC+:TATION' ,A9 OTH+R ,+ANIN0S OR SI0NI*ICATIONS .+
:ROA)+)?
9+S. +vidence is adissi#&e to sho$ that the% have a &oca&' technica& or other$ise pec3&iar
si!ni"ication' and $ere so 3sed and 3nderstood in the partic3&ar instance' in $hich case' the a!reeent 3st
#e constr3ed accordin!&%.
Art. 138C. The 3sage or c3stom o the place shall "e "orne in min! in the interpretation o
the am"ig3ities o a contract% an! shall ill the omission o stip3lations #hich are or!inaril$
esta"lishe!.
I* A CONTRACT *OR /+AS+ O* S+RAIC+ )O+S NOT STAT+ HOW ,<CH CO,:+NSATION
SHO</) .+ 0IA+N' HOW ,<CH SHO</) .+ :AI)?
The c3sto o" the p&ace $here the services $ere rendered sho3&d deterine the ao3nt. 5Art.
13C?6
SHO</) C<STO,S AN) <SA0+ .+ :/+A)+)?
I" the c3stos and 3sa!es are !enera&' the% need not #e p&ead. Hence' even $itho3t previo3s&%
#ein! a&&e!ed the% a% #e proved in co3rt.
I" the c3stos and 3sa!es are ere&% &oca&' then the% have to #e #oth a&&e!ed 5p&eaded6 and
proved.
Art. 1388. The interpretation o o"sc3re #or!s or stip3lations in a contract shall not avor
the part$ #ho ca3se! the o"sc3rit$.
WH+N TH+R+ AR+ O.SC<R+ WOR)S OR STI:</ATIONS IN TH+ CONTRACT' HOW SHO</)
IT .+ INT+R:R+T+)?
It sho3&d #e interpreted a!ainst the part% $ho ca3sed the o#sc3rit%.
Art. 138:. 4hen it is a"sol3tel$ impossi"le to settle !o3"ts "$ the r3les esta"lishe! in the
prece!ing articles% an! the !o3"ts reer to inci!ental circ3mstances o a grat3ito3s contract%
the least transmission o rights an! interests shall prevail. I the contract is onero3s% the
!o3"t shall "e settle! in avor o the greatest reciprocit$ o interests.
I the !o3"ts are cast 3pon the principal o"<ect o the contract in s3ch a #a$ that it
cannot "e 9no#n #hat ma$ have "een the intention or #ill o the parties% the contract shall
"e n3ll an! voi!.
Art. 1380. The principles o interpretation state! in R3le 1*3 ,no# R3le 130- o the R3les o
Co3rt shall li9e#ise "e o"serve! in the constr3ction o contracts.
I* )O<.TS IN A CONTRACT IS A.SO/<T+/9 I,:OSSI./+ TO S+TT/+ .9 TH+ R</+S
+STA./ISH+) IN ARTS. 13C0 TO 13CC' AN) TH+ )O<.TS R+*+R TO INCI)+NTA/
CIRC<,STANC+S O* A 0RAT<ITO<S CONTRACT' HOW SHO</) IT .+ S+TT/+)?
It sho3&d #e sett&ed in the &east transission o" ri!hts and interest.
I* TH+ CONTRACT IS ON+RO<S' HOW SHO</) IT .+ S+TT/+)?
It sho3&d #e sett&ed in "avor o" the !reatest reciprocit% o" interest.
I* TH+ )O<.TS AR+ CAST <:ON TH+ :RINCI:A/ O.G+CT O* TH+ CONTRACT IN S<CH A
WA9 THAT IT CANNOT .+ -NOWN WHAT ,A9 HAA+ .++N TH+ INT+NTION OR WI// O*
TH+ :ARTI+S' HOW SHO</) IT .+ S+TT/+)?
Treat the contract as N<// and AOI).
NOT(2 The princip&es o" interpretation stated in R3&e 183 5no$ R3&e 1306 o" the R3&es o" Co3rt sha&&
&i1e$ise #e o#served in the constr3ction o" contracts.
Chapter C
Rescissi"le Contracts
WHAT AR+ TH+ *O<R -IN)S O* )+*+CTIA+( CONTRACTS?
The "o3r 1inds o" de"ective( contracts' ran1ed in order o" decreasin! va&idit% are>
516 rescissi#&e contracts
586 voida#&e contracts
536 3nen"orcea#&e contracts
5=6 void contracts.
Art. 13:0. Contracts vali!l$ agree! 3pon ma$ "e rescin!e! in the case esta"lishe! "$ la#.
WHAT IS A R+SCISSI./+ CONTRACT?
A rescissi#&e contract is a contract $ith an e7trinsic de"ect consistin! o" econoic daa!e d3e to
"ra3d' or &esion' as copared to an intrinsic de"ect consistin! in a de"ect in the consent' o#;ect' or ca3se o"
the contract. A rescissi#&e contract a% #e en"orced #e"ore rescission' #eca3se s3ch is considered va&id 3nti&
rescinded.
CO,:AR+ A R+SCISSI./+ CONTRACT AN) A AOI)A./+ CONTRACT.
A voida#&e contract is a contract $ith an intrinsic de"ect' 3s3a&&% consistin! o" vitiated consent.
S3ch contract is va&id 3nti& ann3&&ed. The di""erence #et$een a voida#&e contract and a rescissi#&e contract
is that in the "orer' the de"ect is intrinsic' $hi&e in the &atter' the de"ect is e7trinsic.
,A9 A AOI)A./+ CONTRACT .+ R+SCIN)+)?
9+S. A voida#&e contract a% #e rescinded #eca3se a&tho3!h rescission is per"ect&% copati#&e
$ith the va&idit% o" the contract' rescission does not re23ire s3ch va&idit% as an essentia& condition. Th3s' a
pre;3diced creditor a% #rin! an action to rescind a voida#&e contract' especia&&% i" the in;3red part% does
not care to as1 "or ann3&ent.
WHAT IS R+SCISSION?
Rescission is a reed% !ranted #% &a$ to the contractin! parties and even to third persons' to
sec3re the reparation o" daa!es ca3sed to the #% a contract' even i" this sho3&d #e va&id' #% eans o" the
restoration o" thin!s to their condition at the oent prior to the ce&e#ration o" said contract.
)I**+R+NTIAT+ R+SCISSION 5OR R+SO/<TION6 IN ART. 11@1 *RO, R+SCISSION :RO:+R.
Resol3tion ,Art. 1101- Rescission Proper
Spea1s o" reciproca& o#&i!ation Need not #e reciproca& in nat3re
The !ro3nd "or reso&3tion is non4per"orance or
#reach o" the other part%. +ven i" the person in
#reach o" the reciproca& o#&i!ation o""ers to pa% "or
the econoic daa!e s3""ered #% the other part%'
the part% $ho is $i&&in! and a#&e to per"or his part
o" the o#&i!ation sti&& aintains his ri!ht to rescind
5or reso&ve6 the contract.
The !ro3nd is &esion or "ra3d o" creditor. Th3s'
3nder rescission proper' the oent the econoic
pre;3dice is ade 3p "or' rescission $i&& not &ie
On&% one $ho can see1 reso&3tion is that part% $ho
is read% and $i&&in! to per"or
It co3&d #e either o" the parties or a third part% $ith
respect to that contract' s3ch as the creditor 5the
c&assic e7ap&e6
Not covered #% an% prescriptive period. *ro the
oent a part% is $i&&in! to per"or and the other
is not' the "orer can have the contract reso&ved.
Covered #% a prescriptive period 3nder Art. 13D@.
:aras and To&entino adds that' rescission 3nder 11@1
a% #e denied #% the co3rt $hen there is s3""icient
reason to ;3sti"% e7tension o" tie to the de"endant
in $hich to per"or his part o" the o#&i!ation
S3ch reason does not a""ect the ri!ht to as1
rescission I
:rincipa& reed% S3#sidiar% reed%' one to #e avai&ed o" $hen the
person in;3red has no other &e!a& reco3rse.
WHAT IS ,<T<A/ )ISS+NT?
,3t3a& dissent is an a!reeent o" the parties to cance& their contract 5and 3t3a&&% ret3rn the o;ect
and ca3se thereo".6
)I**+R+NTIAT+ ,<T<A/ )ISS+NT *RO, R+SCISSION
516 ,3t3a& dissent des not re23ire an% !ro3nd at a&&. It is the $i&& o" the parties that constit3tes the
#asis "or the cance&&ation o" the contract. In e""ect' 3t3a& dissent can res3&t in an
e7tin!3ishent o" an o#&i!ation $itho3t !ivin! rise to a ne$ one' or s3ch a!reeent co3&d
&ead to a novation.
586 In 3t3a& dissnet the parties are not #o3nd #% the r3&es o" restit3tion. This is s3#;ect to the
a!reeent o" the parties. I" the% a!ree to ret3rn $hat the% received' that is "ine and i" the%
a!ree to ;3st 1eep $hat the% receive that is as $e&& a&& ri!ht. In the case o" rescission' it is
necessar% that the parties 3st #e a#&e torestit3te #eca3se there is no prohi#ition that the part%
cannot avai& o" the reed% o" rescission i" the% cannot restit3te $hat the% have a&read%
received.
WHAT )O 9O< ,+AN WH+N 9O< SA9 R+SCISSI./+ CONTRACTS CANOT .+ ATTAC-+)
CO//AT+RA//9?(
This sip&% eans that #eca3se a rescissi#&e contract is va&id 3nti& rescinded and this' in the
eantie' can conve% tit&e' a direct action to rescind is re23ired' in order to rescind a contract.
WHAT AR+ TH+ R+I<ISIT+S O* R+SCISSION?
Accordin! to To&entino' in order that an action "or rescission a% prosper' the "o&&o$in! re23isites
3st conc3r>
,1- The contract 3st #e a rescissi#&e contract' s3ch as those entioned in Arts. 13D1 and 13D8.
,*- The part% as1in! "or rescission 3st have no other &e!a& eans to o#tain reparation "or the
daa!es s3""ered #% hi. 5Art. 13D36
,3- The person deandin! rescission 3st #e a#&e to ret3rn $hatever he a% #e o#&i!ed to
restore i" rescission is !ranted. 5Art. 13D56
,+- The thin!s $hich are the o#;ect o" the contract 3st not have passed &e!a&&% to the possession
a third person actin! in !ood "aith. 5Art. 13D56
,5- The action "or rescission 3st #e #ro3!ht $ithin the prescriptive period o" "o3r %ears. 5Art.
13D@6
Art. 13:1. The ollo#ing contracts are rescissi"le2
1. Those #hich are entere! into "$ g3ar!ians #henever the #ar!s #hom the$ represent
s3er lesion "$ more than oneEo3rth ,15+- o the val3e o the things #hich are the
o"<ect thereo;
*. Those agree! 3pon in the representation o a"sentees% i the latter s3er lesion state! in
the prece!ing n3m"er;
3. Those 3n!erta9en in ra3! o cre!itors #hen the latter cannot in an$ other manner
collect the claims !3e them;
+. Those #hich reer to things 3n!er litigation i the$ have "een entere! into "$ the
!een!ants #itho3t the 9no#le!ge an! approval o the litigants or o competent <3!icial
a3thorit$;
5. All other contracts speciall$ !eclare! "$ la# to "e s3"<ect to rescission.
WHAT CONTRACTS AR+ R+SCISSI./+?
Att%. )e& Casti&&o divided rescissi#&e contract into t$o a;or cate!ories>
516 Contracts entered into #% persons e7ercisin! their "id3ciar% capacit% 5$here
rescission is #ased on &esion6E and
586 Contracts $here rescission is #ased on the "ra3d coitted on the creditor.
Accordin! to Art. 13D1' the "o&&o$in! contracts are rescissi#&e>
516 Those $hich are entered into #% !3ardians $henever the $ards $ho the% represent
s3""er &esion #% ore than one4"o3rth o" the va&3e o" the thin!s $hich are the o#;ect
thereo"E
586 Those a!reed 3pon in representation o" a#sentees' i" the &atter s3""er the &esion states
in the precedin! n3#er&
536 Those 3nderta1ed in "ra3d o" creditors $hen the &atter cannot in an% other anner
co&&ect the c&ais d3e theE
5=6 Those $hich re"er to thin!s 3nder &iti!ation i" the% have #een enetered into #% the
de"endant $itho3t the 1no$&ed!e and approva& o" the &iti!ants or o" coepetent
;3dicia& a3thorit%E
556 A&& other contracts specia&&% dec&ared #% &a$ to #e s3#;ect to rescission.
WHAT IS TH+ *IRST T9:+ O* R+SCISSI./+ CONTRACT?
Those $hich are entered into #% !3ardians $henever the $ard $ho the% represent s3""ers &esion
#% ore than one4"o3rth o" the va&3e o" the thin!s $hich are the o#;ects thereo".
WHO AR+ 0<AR)IANS?
03ardians are persons appointed #% the co3rt to represent their $ards $ho are either inors or
incapacitated persons.
WHAT IS /+SION?
/esion is the in;3r%' $hich one o" the parties s3""ers #% virt3e o" a contract' $hich is
disadvanta!eo3s to hi' consistin!' !enera&&%' in the disparit% #et$een the price and the va&3e.
Note ho$ever that to deterine the &esion' the act3a& va&3ation o" the propert% sho3&d #e 1no$n.
The !3ardian a% th3s raise as a de"ense the "act that the price o" the o#;ect over $hich he e7ercised
po$ers o" o$nhership has no de"inite va&3e' or the va&3e 23oted #% the p&ainti"" is erroneo3s. That is $h%
odern docrtine does not re!ard "avora#&% the r3&e o" econoic pre;3dice 5&esion6 #ein! a !ro3nd "or
rescission' considerin! that !oods do not have a "i7ed tr3e va&3e #eca3se va&3e is a&$a%s varia#&e and
"&3ct3atin!' #ein! a "3nction o" s3pp&% and deand.
WHAT IS TH+ 0+N+RA/ R</+ R+0AR)IN0 TH+ 0<AR)IANBS :OW+R TO +NT+R INTO
CONTRACTS?
As a !enera& r3&e' $hen a !3ardian enters into a contract invo&vin! the disposition o" the $ardBs
propert%' s3ch as contracts o" sa&e' ort!a!e and other enc3#rance o" rea& estate' he 3st sec3re the
approva& o" the co3rt. Other$ise' the contract sha&& #e 3nen"orcea#&e $hether or not there is &esion. 5Art.
1=036
WHAT A.O<T IN CAS+S O* ACTS O* A),INISTRATION?
<se the "o&&o$in! ta#&e>
With co3rt approva& Witho3t co3rt approva&
With &esion o" ore than X NOT R+SCISS./+ R+SCISSI./+
Witho3t &esion o" &ess that X NOT R+SCISS./+ NOT R+SCISS./+
WHAT IS TH+ SIT<ATION CONT+,:/AT+) .9 TH+ /AW TH+N?
The &a$ here 3st #e &iited to contracts $hich constit3te ere acts o" adinistration' as opposed
to acts o" o$nership.
*or e7ap&e' i" a !3ardian se&&s the an!oes "ro the $ardBs "ar "or :D'000' $hen the act3a&
ar1et va&3e o" the an!oes is :10'000' is the contract resciss#&e?
NO' a&tho3!h there is &esion' s3ch is on&% 1J5.
,<ST TH+ 0<AR)IAN HAA+ ACT+) *RA<)</+NT/9?
NO. As &on! as the !3ardian e7ercises ere&% an act o" adinistration WITHO<T CO<RT
A::ROAA/' and the $ard s3""ers the re23ired &esion' the contract sha&& #e resciss#&e.
WHAT IS TH+ S+CON) T9:+ O* R+SCISS./+ CONTRACT?
Those a!reed 3pon in representation o" a#sentees' i" the &atter s3""ers the &esion states in the
precedin! n3#er.(
WHAT IS AN A.S+NT++?
He is one $ho has disappeared "ro doici&e. No#od% 1no$s $here he is. He is not 1no$n to #e
dead or a&ive p&3s the "act that he did not &eave an% a!ent at a&&. This does not re"er to a person $ho is
ere&% o3tside o" the co3ntr%.
Ree#er in :ersons $e too1 di""erent sta!es in a personBs a#sence. There are the :rovisiona&
,eas3res in case o" A#sence 5Arts. 3D1 to 3D36' the provisions on )ec&aration o" A#sence 5Arts. 3D= to
3D?6' and the :res3ption o" )eath 5Arts. 3@0 to 3@86
As to resciss#&e contracts' the a#sentee( #ein! re"erred is that $hich is entioned or descri#ed in
the :rovisiona& ,eas3res in case o" A#sence' to $it> When a person disappears "ro his doici&e' his
$herea#o3ts #ein! 3n1no$n' and $itho3t &eavin! an a!ent to adinister his propert%' the ;3d!e' at the
instance o" an interested part%' a re&ative' or a "riend' a% appoint a person to represent hi in a&& that a%
#e necessar%.( 5Art. 3D16
WHAT R+I<ISIT+S AR+ N+C+SSAR9 SO THAT THIS S+CON) T9:+ ,A9 .+ A::/I+)?
516 The contract 3st #e entered into #% the &e!a& representative in #eha&" o" the a#sentee.
586 The a#sentee s3""ered &esion o" ore than X o" the va&3e o" the propert% $hich is the o#;ect o"
the contract.
536 The contract 3st #e entered into $itho3t ;3dicia& approva&.
5=6 There 3st #e no other &e!a& eans "or o#tainin! reparation "or the &esion 5Art. 13D36
556 The person #rin!in! the action 3st #e a#&e to ret3rn $hatever he a% #e o#&i!ed to restore.
MArt. 13D5516N
5?6 The o#;ect o" the contract 3st not #e &e!a&&% in the possession o" a third person $ho did not
act in #ad "aith. MArt. 13D5586N
WHO HAS TH+ RI0HT TO R+SCIN) TH+ TRANSACTION?
The a#sentee has the ri!ht to #rin! action.
SHO</) TH+ CO<RT4A::OINT+) A0+NT N++) TH+ CO<RTBS A::ROAA/ *OR
TRANSACTIONS H+ ,A9 +NT+R INTO?
It depends. The sae distinction' as in the case o" !3ardians' is to #e ade #et$een acts o"
adinistration and acts o" o$nership.
I" it invo&ves acts o" o$nership' co3rt approva& is re23ired. And i" there is s3ch' re!ard&ess o"
$hether there is &esion or not' the contract is va&id.
I" it is $itho3t co3rt approva&' it is an 3na3thoriHed contract. I" it is an act o" adinistration $ith
co3rt approva&' the contract is va&id $hether or not there is &esion. I" there is no co3rt approva& and the
a#seentee s3""ers &esion o" ore than X o" the va&3e o" the thin!s $hich are the o#;ect o" the contract' the
contract is rescissi#&e.
NOT(2 <se the sae ta#&e invo&vin! !3ardians a#ove.

WHAT IS TH+ THIR) T9:+ O* R+SCISSI./+ CONTRACT?
Those 3nderta1en in "ra3d o" creditors $hen the &atter cannot in an% other anner co&&ect the
c&ai d3e the.(
This "a&&s 3nder the second cate!or% o" rescissi#&e contract )ean de& Casti&&o ta&1ed a#o3t.
Ree#er that those concernin! !3ardians and a!ents o" a#sentees are 3nder contracts entered into #%
persons e7ercisin! "idiciar% capacit% $here rescission is #ased on &esion.
Here $e are ta&1in! a#o3t contracts entered into $here rescission is #ased on the "ra3d coitted
on the creditor.
Action to rescind contracts ade in "ra3d o" creditors is ca&&ed accion pa3&iana.
WHAT R+I<ISIT+S ,<ST CONC<R .+*OR+ A CONTRACT +NT+R+) INTO IN *RA<) O*
CR+)ITORS CAN .+ R+SCIN)+)?
The "o&&o$in! re23isites are>
516 There 3st #e a credit e7istin! prior to the ce&e#ration o" the contract.
)ean de& Casti&&o ephasiHes the iportance o" the re23isites. She dissents to the notion that
an act a% to de"ra3d a% pertain to a credit that e7isted a"ter the cha&&en!ed transaction.
She !ives 8 reasons> 5a6 in s3ch a case it $o3&d then #e hard to ;3sti"% the intention to de"ra3d'
and 5#6 there is the necessar% pr3dence to #e e7ercised #% an% an #e"ore enterin! into a
contract' "or e7ap&e' he 3st "irst investi!ate the de#torBs a#i&it% to pa% or e&se he a% #e
!3i&t% o" ne!&i!ence "or enterinto into a contract $herein it $as evident that the de#tor co3&d
have no one% to pa%.
586 The contract 3st #e tainted $ith "ra3d.
I" "ra3d cannot #e proven' there is no #3siness o" rescindin! a contract. The #est proo"' o"
co3rse' is ACT<A/ +AI)+NC+ o" "ra3d.
.3t as )ean de& Casti&&o has apt&% p3t' )onBt cr% %o3r hearts o3t.( There are sti&&
pres3ptions o" "ra3d $ith $hich to 3se a!ainst a de#tor.
536 The creditor cannot in an% &e!a& anner co&&ect his credit. This eans that the creditor has no
other &e!a& reed% 3nder the &a$. Th3s' rescission is on&% a s3#sidiar% reed%. 5Art. 13D36
The reason "or this is #eca3se an accion pa3&iana is act3a&&% an action #% a stran!er or a third
part% to ann3& a contract. The &a$ as 3ch as possi#&e $o3&d not a&&o$ s3ch part% to #e
invo&ved in a contract.
5=6 The o#;ect o" the contract 3st not #e &e!a&&% in the possession o" a third person $ho did nto
act in #ad "aith.
WHAT AR+ :R+S<,:TIONS O* *RA<)?
We 3st "irst distin!3ish #et$een !rat3ito3s and onero3s contracts.
516 In a 0RAT<ITO<S contract' $here there is no consideration e7cept as to the p3re &i#era&it%
o" the !iver' there is the pres3ption o" "ra3d i" the donor did not reserve s3""icient properties
"or his other creditors.
Art. 13DC provides that A&& contracts #% virt3e o" $hich the de#tor a&ieantes propert% #%
!rat3ito3s tit&e are pres3ed to have #een entered into in "ra3d o" creditors' $hen the donor
did not reserve s3""icient propert%to pa% a&& de#ts contracted #e"ore the donation. 7 7(
586 In an ON+RO<S contract' "ra3d is pres3ed i" the contract is entered into #% a de#tor a!ainst
$ho a ;3d!ent has #een rendered in an% instance or soe $rit o" attachent has #een
iss3ed. The decision or attachent need not re"er to the propert% a&ienated' and need not have
#een o#tained #% the part% see1in! the rescission. 7 7(
Here the propert% so&d need not #e the sae propert% $hich is the s3#;ect o" the action "ro
$hich the ;3d!ent is rendered. +ven i" the propert% invo&ved in action $as di""erent "ro
that so&d' there is sti&& a pres3ption o" "ra3d.
A&so' the propert% need not #e covered #% a $rit o" attachent nor sho3&d it #e #ro3!ht #% the
creditor $ho "i&ed that action. As &on! as it can #e proven that there $as a ;3d!ent iss3ed
a!ainst the de#tor' that is eno3!h.
The $rit o" attachent does not have to #e "ina& $rit o" attachent. It co3&d app&% even to
pre&iinar% $rits o" attachent.
In cases $here ;3d!ent had #een rendered' the &a$ does not speci"% $hether it #e a "ina&
;3d!ent or not. There"ore' a decision #% the tria& co3rt $o3&d s""ice to c&ai "or the
rescission o" a contract.
NOT(2 .e reinded o" the third para!raph o" Art. 13DC' In addition to these pres3ption the
desi!n to de"ra3d creditors a% #e proved in an% other anner reco!niHed #% the &a$ o" evidence.
,A9 TH+S+ :R+S<,:TIONS .+ OA+RCO,+?
O" co3rse. These pres3ptions a% #e re#3tted #% co3nter evidence. In order to
overcoe the pres3ption o" "ra3d' it is necessar% to esta#&ish a""irative&% that the conve%ance $as ade
in !ood "aith and "or a s3""icient and va&3a#&e consideration.
WHAT IS TH+ *O<RTH T9:+ O* R+SCISSI./+ CONTRACT?
Those $hich re"er to thin!s 3nder &iti!ation i" the% have #een entered into #% the de"endant
$itho3t the 1no$&ed!e and approva& o" the &iti!ants or o" copetent ;3dicia& a3thorit%.(
WH+N IS A :RO:+RT9 AN O.G+CT O* TH+ /ITI0ATION?
The propert% is said to #e in &iti!ation a"ter the de"endant has received the service o" s3ons.
WHAT IS TH+ )I**+R+NC+ .+TW++N THIS AN) TH+ A.OA+4,+NTION+) ON
:R+S<,:TION ON *RA<) CONC+RNIN0 )IS:OSA/ O* :RO:+RT9 WH+N G<)0,+NT HAS
.++N R+N)+R+) OR A WRIT O* ATTACH,+NT ISS<+)?
Here in the "o3rth t%pe o" rescissi#&e contract' the thin! disposed o" is the o#;ect o" the &iti!ation.
Art. 13:*. Pa$ments ma!e in a state o insolvenc$ or o"ligations to #hose 3lillment the
!e"tor co3l! not "e compelle! at the time the$ #ere eecte!% are also rescissi"le.
WHAT IS TH+ *I*TH T9:+ O* R+SCISSI./+ CONTRACT?
Art. 13D8 provides that pa%ents ade in a state o" inso&venc% "or o#&i!ation to $hose
"3&"3&&ent the de#tor co3&d not #e cope&&ed at the tie the% $ere e""ected' are a&so rescissi#&e.(
The re23isites are the "o&&o$in!>
516 The de#tor4pa%er 3st have #een inso&vent.
586 The de#t 5paid6 $as not %et d3e and deanda#&e.
.oth conditions are re23ired.
The inso&venc% need not #e a ;3dicia&&% dec&ared one.
>? TONG /S. SI./A 13* SCRA ++:
1acts2 <% Ton! $as inde#ted to /opeH in the ao3nt o" :100'5C5. /opeH' in t3rn' is inde#ted to <% Ton!
"or renta&s o" a #3i&din! "ro *e#r3ar% 8D' 1@55 to G3ne 1?' 1@?1. Ho$ever' <% Ton! "i&ed a petition "or
vo&3ntar% inso&venc% proceedin!s on 85 ,a% 1@55.
Iss3e2 45N the pa$ment ,ass3ming pa$ment #as ma!e- o >$ Tong ater the iling o insolvenc$
procee!ings is rescissi"le
Bel!2 ?es. Artic&e 13D8 o" the Civi& Cod provides that> :a%ents ade in a state o" inso&venc% "or
o#&i!ations to $hose "3&"i&&ent the de#tor co3&d not #e cope&&ed at the tie the% $ere e""ected' are a&so
rescissi##&e.(
To a&&o$ so' $o3&d in e""ect !ive /opeH 3nd3e pre"erence over other creditors' as s3ch $i&& tota&&%
dep&ete the estate o" the inso&vent. This is contrar% to the p3rpose o" an inso&venc% proceedin!' $hich is to
e""ect an e23ita#&e distri#3tion o" the inso&ventWs estate aon! his creditors.
Art. 13:3. The action or rescission is s3"si!iar$; it cannot "e instit3te! e)cept #hen the
part$ s3ering !amage has no other legal means to o"tain reparation or the same.
Art. 13:+. Rescission shall "e onl$ to the e)tent necessar$ to cover the !amages ca3se!.
Art. 13:5. Rescission creates the o"ligation to ret3rn the things #hich #ere the o"<ect o the
contract% together #ith their 3rits% an! the price #ith its interest; conse63entl$% it can "e
carrie! o3t onl$ #hen he #ho !eman!s rescission can ret3rn #hatever he ma$ "e o"lige! to
restore.
Neither shall rescission ta9e place #hen the things #hich are the o"<ect o the
contract are legall$ in the possession o thir! persons #ho !i! not act in "a! aith.
In this case% in!emnit$ or !amages ma$ "e !eman!e! rom the person ca3sing the
loss.
WHAT SHO</) .+ R+T<RN+) IN R+SCIN)IN0 A CONTRACT?
Art. 13D5 provides that rescission creates the o#&i!ation>
516 to ret3rn the thin!s $hich $ere the o#;ect o" the contract'
586 to!ether $ith the "r3itsE and
536 the price' $ith its interest' 3st #e ret3rned.(
.3t conse23ent&%' it can #e carried o3t on&% $hen he $ho deands rescission can ret3rn $hatever
he a% #e o#&i!ed to restore.(
AN9 +FC+:TIONS?
,1- In the case o" creditors #eca3se the creditors did not receive an%thin! "ro the contract so3!ht
to #e rescinded.
,*- When the propert% is a&read% in the hand o" the creditor in !ood "aith. Art. 13D5 provides in
this case' indenit% "or daa!es a% #e deanded "ro the person ca3sin! the &oss.(
1.ORO (NT(RPRIS(S /S. CA *+0 SCRA 35+
1acts2 */ORO +NT+R:RIS+ and respondent :HI/. RA..IT entered into an a!reeent $here#%
*/ORO +NT+R:RIS+ $o3&d "3rnish the &atter certain e23ipent. Ho$ever' */ORO +NT+R:RIS+ "ai&ed
to de&iver soe o" the e23ipent $ith the proper speci"ications. <pon */ORO +NT+R:RIS+B ass3rances
that the% $i&& event3a&&% #e de&ivered' :HI/. RA..IT contin3ed to pa% "or and 3se the other e23ipent
de&ivered. .3t */ORO +NT+R:RIS+ did not a1e !ood its proise. :HI/. RA..IT' th3s proposed to
cance& the a!reeent and as1ed "or the ret3rn o" the e23ipent. Ho$ever' :HI/. RA..IT $o3&d ret3rn the
e23ipent on&% i" */ORO +NT+R:RIS+ ret3rns "irst the pa%ent $hich the "orer has paid the &atter.
Iss3e2 45N m3t3al restit3tion is #arrante!
45N Article 13:5 is applica"le
R3ling2 ?es. Since the parties 3t3a&&% a!reed to cance& the contract' the parties sho3&d #e restored to their
ori!ina& positions as "ar as practica#&e. Strict&% spea1in!' in order to restore the parties to their stat3s 23o
prevai&in! iediate&% prior to the e7ec3tion o" the a!reeent' the e23ipent sho3&d #e ret3rned to
*/ORO +NT+R:RIS+ $hi&e :HI/. RA..IT sho3&d #e rei#3rsed. .3t :HI/. RA..IT cannot #e "3&&%
rei#3rsed since it had a&read% 3sed and #ene"ited "ro the e23ipent. Th3s' the rei#3rseent sho3&d
ta1e into acco3nt the proper copensation "or the 3se o" the e23ipent.
No. The Co3rt noted here that Artic&e 13D5 sho3&d not #e invo1ed since this artic&e re"ers to
contracts that are rescissi#&e "or ca3ses speci"ied 3nder Artic&es 13D1 and 13D8. Ho$ever' the case at #ar
5invo&vin! disso&3tion o" a contract #% 3t3a& consent o" the parties6 does not "a&& 3nder an% o" the ca3ses
therein. Rather' the 3t3a& restoration is in consonance $ith the #asic princip&e that $hen an o#&i!ation has
#een e7tin!3ished or reso&ved' it is the d3t% o" the co3rt to re23ire the parties to s3rrender $hatever the%
a% have received "ro the other so that the% a% #e restored' as "ar as practica#&e' to their ori!ina&
sit3ation.
Art. 13:C. Rescission reerre! to in Nos. 1 an! * o article 13:1 shall not ta9e place #ith
respect to contracts approve! "$ the co3rts.
Art. 13:8. All contract "$ virt3e o #hich the !e"tor alienates propert$ "$ grat3ito3s title
are pres3me! to have "een entere! into in ra3! o cre!itors% #hen the !onor !i! not
reserve s3icient propert$ to pa$ all !e"ts contracte! "eore the !onation.
Alienations "$ onero3s title are also pres3me! ra3!3lent #hen ma!e "$ persons
against #hom some <3!gment has "een ren!ere! in an$ instance or some #rit o attachment
has "een iss3e!. The !ecision or attachment nee! not reer to the propert$ alienate!% an!
nee! not have "een o"taine! "$ the part$ see9ing rescission.
In a!!ition to these pres3mptions% the !esign to !era3! cre!itors ma$ "e prove! in
an$ other manner recogniDe! "$ the la# o evi!ence.
Art. 13::. 4hoever ac63ires in "a! aith the things alienate! in ra3! o cre!itors% shall
in!emni$ the latter or !amages s3ere! "$ them on acco3nt o the alienation% #henever
!3e to an$ ca3se% it sho3l! "e impossi"le or him to ret3rn them.
I there are t#o or more alienations% the irst ac63irer shall "e lia"le irst% an! so on
s3ccessivel$.
WHO ,A9 .+ A TRANS*+R++ IN 0OO) *AITH?
Art. 13DD provides that $hoever ac23ires in #ad "aith the thin!s a&ienated in "raid o" creditors'
sha&& indenit% the &atter "or daa!es s3""ered #% the on acco3nt o" the a&ienation' $henever' d3e to an%
ca3se' it sho3&d #e ipossi#&e "or hi to ret3rn the.(
A trans"eree in !ood "aith is one $ho ac23ires the propert% $itho3t an% 1no$&ed!e o" the de"ect.
A trans"eree is in &a$"3& possession i" $ith respect to persona& propert% he is in possession o" it.
Re!istration is not re23ired. .3t i" it invo&ves rea& propert%' the trans"eree is in &a$"3& possession "ro the
oent o" re!istration #eca3se it is on&% the act o" re!istration $hich #inds third persons. So i" the rea&
propert% is not re!istered' the creditor can sti&& rescind the contract #eca3se as a third part%' he is not #o3nd
#% the contract.
I" a trans"eree is in #ad "aith' the creditor can recover the propert% "ro the trans"eree #%
rescindin! the contract. The trans"eree is in #ad "aith i" he has 1no$&ed!e o" the de"ect or the "ra3d3&ent act
o" the de#tor. -no$&ed!e a% #e act3a& or constr3ctive. I" a &is pendens has #een annotated' the trans"eree
is considered to have constr3ctive 1no$&ed!e o" the de"ect and there"ore is in #ad "aith.
WHAT IS TH+ TRANS*+R++ IS IN .A) *AITH AN) /OS+S TH+ :RO:+RT9?
I" the tr3stee is in #ad "aith and &oses the propert%' the creditor can sti&& rescind the contract #3t the
propert% is no$ s3#stit3ted #% the va&3e o" the propert% &ost p&3s daa!es.
I" the ca3se o" the &oss is a "ort3to3s event' the trans"eree in #ad "aith is sti&& &ia#&e "or the va&3e
p&3s the daa!es.
WHAT HA::+NS I* TH+ TRANS*+R++ 5F6 A/I+NAT+) TH+ :RO:+RT9 TO ANOTH+R 596?
The cr3cia& point is the "irst trans"eree. I" the trans"eree is in !ood "aith' "or!et the !ood "aith or
the #ad "aith o" 9. The creditor cannot recover the propert%. His on&% reed% is to recover "ro F.
WHAT I* F WAS IN .A) *AITH?
The creditor can "i&e an action "or rescission. I" the propert% had a&read% #een trans"erred' it is
necessar% to deterine the !ood "aith or #ad "aith o" 9J
SO WHAT I* 9 WAS IN 0OO) *AITH?
The &a$ protects 9. Tho3!h F is sti&& re23ired to restore to the creditor $hat he has received' he
can on&% pa% to the creditor the va&3e o" the propert% p&3s daa!es i" 9 $o3&d ca&i his o$nership to the
trans"ereed propert%.
WHAT I* 9 WAS IN .A) *AITH?
The creditor can sti&& recover the propert% in his hands and rescind the contract. The propert% !oes
#ac1 to F and the creditor a% no$ satis"% his credit.
)O+S 9 HAA+ AN ACTION A0AINST F?
9 can recover "ro an% daa!es he a% have inc3rred.
Ho$ever' i" the% are in pari de&ctio' the co3rt $i&& &eave the as the% are.
WHAT I* 9 TRANS*+RR+) ONC+ ,OR+' THIS TI,+ TO W?
W is protected. The creditor is entit&ed to the indeint% "ro the one $ho ca3sed the &oss. *irst'
"ro F $ho is the "irst trans"eree. I" F is inso&vent' the creditor can recover "ro 9 and so "orth and so on.
This order 3st #e "o&&o$ed.
I" "or e7ap&e' F can on&% pa% :10'000' the creditor can r3n a"ter 9 "or the reainin! :@0'000.
Art. 13DD provides that i" there are t$o or ore a&ienations' the "irst ac23irer' sha&& #e &ia#&e "irst'
and so on s3ccessive&%.
Art. 13:0. The action to claim rescission m3st "e commence! #ithin o3r $ears.
1or persons 3n!er g3ar!ianship an! or a"sentees% the perio! o o3r $ears shall not
"egin 3ntil the termination o the ormerGs incapacit$% or 3ntil the !omicile o the latter is
9no#n.
Chapter 8
/oi!a"le Contracts
Art. 1300. The ollo#ing contracts are voi!a"le or ann3lla"le% even tho3gh there ma$ have
"een no !amage to the contracting parties2
,1- Those #here one o the parties is incapa"le o giving consent to a contract;
,*- Those #here the consent is vitiate! "$ mista9e% violence% intimi!ation% 3n!3e
inl3ence or ra3!.
These contracts are "in!ing% 3nless the$ are ann3lle! "$ a proper action in co3rt.
The$ are s3scepti"le o ratiication.
WHAT IS TH+ +**+CT O* A AOI)A./+ CONTRACT?
A voida#&e contract is va&id 3nti& ann3&&ed #% a proper action in co3rt. 5Art. 13@06
WHAT AR+ AOI)A./+ CONTRACTS?
The "o&&o$in! contracts are voida#&e or ann3&&a#&e' even tho3!h there a% have #een no daa!e
to the contractin! parties>
516 Those $here one o" the parties is incapa#&e o" !ivin! consent to a contractE
586 Those $here the consent is vitiated #% ista1e' vio&ence' intiidation' 3nd3e in"&3ence or
"ra3d.(
In s3ar%' voida#&e contracts have the de"ect o" incapacit% and vitiated consent. In #oth cases'
the de"ect is in the consent.
WHAT IS ,+ANT .9 INCA:ACIT9 O* 0IAIN0 CONS+NT?
The incapacit% is #eca3se o" insanit%' inorit%' or i#eci&it%. Incapacit% here is on&% on one part%.
Incapacit% in #oth parties $i&& res3&t in an 3nen"orcea#&e contract.
The incapacit% here entioned is &e!a& incapacit%. Ree#er that the consent here is !iven #% the
incapacitated part% and not #% his !3ardian or &e!a& representative. I" a contract is entered into #% the
!3ardian or &e!a& representative' then the contract is va&id.
WHO ,A9 *I/+ AN ACTION TO ANN</' I* TH+ 0RO<N) IS A AIC+ O* CONS+NT?
The innocent par% a% "i&e an action to ann3&.
WHAT IS TH+ )I**+R+NC+ .+TW++N A R+SCISSI./+ AN) A AOI)A./+ CONTRACT?
R+SCISSI./+ AOI)A./+
.ASIS /esion or econoic pre;3dice Incapacit% or vitiated consent
)+*+CT +7trinsic 5The contract is va&id #3t Intrinsic 5The de"ect is in one o"
the de"ect is d3e to &esion or the essentia& e&eents o" the
econoic pre;3dice contract and occ3rs at the tie
o" the ce&e#ration o" the
contract.
ACTION S3#sidiar% :rincipa&
:ARTI+S :&ainti"" a% #e a part% or a :&ainti"" 3st #e a part% to the
third person contract 5$hether #o3nd
principa&&% or s3#sidiari&% MArt.
13@CN6
)A,A0+S There 3st #e daa!e to the )aa!e to the p&ainti"" is
p&ainti"". Iateria&. 5Art. 13@06
:R+A+NTION To prevent rescission' To prevent ann3&ent'
rati"ication is not re23ired. Rati"ication is re23ired.
,<T<A/ 0enera& R3&e> No restit3tion' 0enera& R3&e> Restit3tion is
R+STIT<TION no rescission. necessar%.
+7ception> +7ception>
When contract is ade in "ra3d o" Art. 13@@. In case o" the
creditors incapacit% o" one o" the parties'
When the o#;ect is in the possession restit3tion is on&% 3p to the
o" a third person in !ood "aith. e7tent incapacitated persons
have #een #ene"ited.
A.CASIF /S. CO>RT O1 APP(A.S *38 SCRA +10
1acts2 OWN+R o$ns a parce& o" &and' $hich .<9+R $ishes to #3%. OWN+R $as $i&&in! to se&& her
share "or =.5 , $ith the condition that the co4o$ners $o3&d se&& their respective shares o" the &and.
OWN+R hired ATTORN+9 to ne!otiate re!ardin! the sa&e. ATTORN+9 $as a&so the co3nse& o" .<9+R.
ATTORN+9 con"ired that the co4o$ners $ere a&read% aena#&e to se&& their shares "or 1.5 ,. OWN+R
si!ned a )eed o" A#so&3te Sa&e #3t on&% to "ind o3t that the co4o$ners did not a!ree to s3ch sa&e.
OWN+R "i&ed "or the ann3&ent o" the sa&e d3e to "ra3d' ista1e and 3nd3e in"&3ence' $hich
vitiated OWN+RBS consent.
Iss3e2 45N the contract sho3l! "e ann3lle!.
R3ling2 No. In Artic&e 133D' in order that *RA<) a% vitiate consent and #e a ca3se o" the ann3&ent o"
the contract' the "o&&o$in! 3st conc3r>
1. It 3st have #een ep&o%ed #% one o" the contractin! part% 3pon the other.
8. It 3st have #een ind3ced the other part% to enter the contract.
3. It 3st have #een serio3s.
=. It 3st have res3&ted in daa!e and in;3r% to the part% see1in! ann3&ent.
These $ere not present in the instant case.
In Artic&e 1331' in order "or a ,ISTA-+ to inva&idate consent' the error 3st #e rea& and not one
that co3&d have #een avoided #% the part% a&&e!in! it. The error 3st arise "ro the "acts 3n1no$n to hi.
He cannot a&&e!e an error $hich re"ers to a "act 3n1no$n to hi or $hich he sho3&d have 1no$n #%
ordinar% di&i!ent e7aination.
In the case at #ar' OWN+R co3&d have avoided the a&&e!ed ista1e had OWN+R e7erted e""orts to
veri"% "ro her co4o$ners i" the% rea&&% consented to se&& their respective shares.
As "or <N)<+ IN*/<+NC+' it is a eans ep&o%ed 3pon a part% $hich he co3&d not resist and
$hich contro&&ed his vo&ition and ind3ced hi to !ive his consent to the contract. I" a copetent person has
once assented to a contract "ree&% and "air&%' he is #o3nd there#%.
The "indin!s o" the CA is that OWN+R e7ec3ted the contract on her o$n "ree $i&& and not "ro
d3ress since OWN+R $as !iven a &etter #% ATTORN+9 statin! that the &atter is a co3nse& o" .<9+R.
CA?A&?A& /S. IAC *3* SCRA 1
1acts2 CHI/)R+N $ere as1ed to vacate the &ot #% CA9A.9A.. CHI/)R+N "i&ed "or the ann3&ent o"
the )eed o" Sa&e e7ec3ted #% CA9A.9A. and their parents d3e to 3nd3e in"&3ence and $ith the reason
that the &ots $ere part o" their inheritance. CA9A.9A. contends that he va&id&% e7ec3ted the deed o" sa&e
o" the 1J3 portion o" &ots .' C and ) $ith CHI/)R+NBS parents "or :1'000' :3'?00 and :5'000
respective&%.
Iss3e2 45N the contract is voi!a"le
R3ling2 No. The !enera& r3&e is $hosoever a&&e!es "ra3d 3st s3#stantiate their a&&e!ations. This r3&e is
app&ied to notaria& doc3ents $hich are c&othed $ith pria "acie pres3ption. An e7ception to this r3&e is
Art. 1338' $hich provides that $hen one o" the parties is i&&iterate the #3rden is on the part% interested in
en"orcin! the contract and the &iterate part% sho3&d have e7p&ained "3&&% the ters and conditions o" the
contract.
CHI/)R+SBS parents $ere i&&iterate. The contract $as si!ned #% a th3# ar1 and $as $ritten in
+n!&ish. The $itness $ho e7p&ained the contract in :an!asinense $as not present. The #3rden o" proo"
shi"ted to CA9A.9A.. In addition' it $as not sho$n that the consideration "or the sa&e o" &ots $as ever
paid. There"ore' the contract is void.
TB(IS /S. CO>RT O1 APP(A.S *C: SCRA 1C8
1acts2 R+A/ +STAT+ CO,:AN9 o$ns three 536 ad;acent parce&s o" &and. Ad;acent to parce& no. 3 is a
vacant &ot denoinated as parce& no. =. R+A/ +STAT+ CO,:AN9 constr3cted a t$o4store% ho3se in
parce& no. 3. In a s3rve% cond3cted in 1@D5' parce& no. 3 $as erroneo3s&% indicated to #e covered #%
another TCT $hi&e parce& no. 1 and 8 $ere ista1en&% s3rve%ed to #e &ocated in parce& no. =.
R+A/ +STAT+ CO,:AN9 so&d the vacant &ot 5parce& no. =6 to .<9+R "or :=00'000. When
.<9+R ret3rned "ro 0eran%' .<9+R discovered that the &and .<9+R #o3!ht $as o$ned #% another
person.
)3e to ista1e' R+A/ +STAT+ CO,:AN9 o""ered parce& no. 1 and 8 in e7chan!e #3t .<9+R
re"3sed to accept and insisted on parce& no. 3 $ith the t$o4store% ho3se.R+A/ +STAT+ CO,:AN9
o""ered to ret3rn an ao3nt do3#&e the price paid #% .<9+R #3t a!ain .<9+R re"3sed to accept.
.<9+R "i&ed "or the ann3&ent o" the contract.
Iss3e2 45N the contract #as vio!a"le on the gro3n! o mista9e.
R3ling2 ?es. A contract a% #e ann3&&ed $here the consent o" one o" the contractin! parties $as proc3red
#% ista1e' "ra3d' intiidation' vio&ence or 3nd3e in"&3ence. R+A/ +STA+ CO,:AN9o#vio3s&%
coitted an honest ista1e in se&&in! parce& No. =. The !ood "aith o" R+A/ +STAT+ CO,:AN9 is
evident in the "act that $hen the ista1e $as discovered' R+A/ +STAT+ CO,:AN9 iediate&% o""ered
t$o other vacant &ots to .<9+R or to rei#3rse the $ith t$ice the ao3nt paid.
Art. 1331 provides "or the sit3ation $here#% ista1e a% inva&idate consent. In order that ista1e
a% inva&idate consent' it sho3&d re"er to the s3#stance o" the thin! $hich is the o#;ect o" the contract' or to
those conditions $hich have principa&&% oved one or #oth parties to enter into a contract.
The ista1e coitted #% R+A/ +STAT+ CO,:AN9 in se&&in! parce& No.= "a&&s $ithin the
second t%pe. Aeri&%' s3ch ista1e inva&idated its consent and as s3ch' ann3&ent o" the deed o" sa&e is
proper.
Note2 This can #e considered as a void contract since there $as no o#;ect or eetin! o" the inds.
A&so' R+A/ +STAT+ CO,:AN9 sho3&d #e &ia#&e "or daa!es d3e to ne!&i!ence since the% are in a rea&
estate deve&opent ind3str%.
Art. 1301. The action or ann3lment shall "e "ro3ght #ithin o3r $ears
This perio! shall "eing2
In cases o intimi!ation% violence or 3n!3e inl3ence% rom the time the !eect o the
consent ceases.
In case o mista9e or ra3!% rom the time o the !iscover$ o the same.
An! #hen the action reers to contracts entere! into "$ minors or other
incapacitate! persons% rom the time the g3ar!ianship ceases.
WH+N )O+S TH+ ACTION *OR ANN</,+NT :R+SCRI.+?
Art. 13@1 provides that the action "or ann3&ent sha&& #e #ro3!ht $ithin = %ears.(
This period sha&& #e!in in cases o" intiidation' vio&ence or 3nd3e in"&3ence' "ro the tie the
de"ect o" the consent ceases. In cases o" ista1e or "r3ad' "ro the tie the discover% o" the sae.
And $hen the action re"ers to contracts entered into #% inors' or other incapacitated persons'
"ro the tie the !3ardianship ceases.
The &apse o" the prescriptive period va&idates the de"ective contract. There"ore' no one can c&ai
that the contract is vodia#&e in action or as a de"ense.
Art. 130*. Ratiication e)ting3ishes the action to ann3l a voi!a"le contract.
HOW ,A9 TH+ ACTION TO ANN</ A AOI)A./+ CONTRACT .+ +FTIN0<ISH+)?
Art. 13@8 provides that rati"ication e7tin!3ishes the action to ann3& a voida#&e contract.(
The e""ect is that the contract is c&eansed o" its de"ect "ro the #e!innin! and #ecoes cop&ete&%
va&id. The parties are stopped "ro c&aiin! an ann3&ent.
WHAT AR+ TH+ R+I<ISIT+S O* A :RO:+R RATI*ICATION?
,1- The contract 3st #e voida#&e.
,*- The person rati"%in! 3st 1no$ the reason "or the contract #ein! voida#&e.
,3- The ca3se 3st not e7ist or contin3e to e7ist at the tie o" rati"ication.
,+- The rati"ication 3st have #een e7press&% or #% an act ip&%in! a $aiver o" the action to
ann3&
,5- The person rati"%in! 3st #e the in;3red part%.
Art. 1303. Ratiication ma$ "e eecte! e)pressl$ or tacitl$. It is 3n!erstoo! that there is a
tacit ratiication i% #ith 9no#le!ge o the reason #hich ren!ers the contract voi!a"le an!
s3ch reason having cease!% the person #ho has a right to invo9e it sho3l! e)ec3te an act
#hich necessaril$ implies an intention to #aive his right.
WHAT AR+ TH+ -IN)S O* RATI*ICATION?
Art. 13@3 provides that rati"ication a% #e e""ected e7press&% or tacit&%.( +7press #ein! ora& or
$ritten' tacit #ein! ip&ied as "ro the cond3ct ip&%in! a $aiver.
It is 3nderstood that there is tacit rati"ication i"' $ith the 1no$&ed!e o" the reason $hich renders
the contract voida#&e and s3ch reason havin! ceased' the person $ho has a ri!ht to invo1e it sho3&d e7ec3te
an act $hich necessari&% ip&ies an intention to $aive his ri!ht.( 5Art. 13@36
Art. 130+. Ratiication ma$ "e eecte! the g3ar!ian o the incapacitate! person.
Art. 1305. Ratiication !oes not re63ire the conormit$ o the contracting part$ #ho has no
right to "ring the action or ann3lment.
Art. 130C. Ratiication cleanses the contract rom all its !eects rom the moment it #as
constit3te!.
Art. 1308. The action or the ann3lment o contracts ma$ "e instit3te! "$ all #ho are
there"$ o"lige! principall$ or s3"si!iaril$. Bo#ever% persons #ho are capa"le cannot allege
the incapacit$ o those #ith #hom the$ contracte!; nor can those #ho e)erte! intimi!ation%
violence o 3n!3e inl3ence% or emplo$e! ra3!% or ca3se! mista9e "ase their action 3pon
these la#s o the contract.
HOW CAN AN INCA:ACITAT+) :+RSON RATI*9?
A"ter the incapacitated person has #ecoe capacitated' he either e7press&% or ip&ied&% revea&s #%
his acts that he is not contestin! the va&idit% o" the contract and in "act considers the contract va&id and
#indin!.
WHAT CAN :R+A+NT AN INCA:ACITAT+) :+RSON *RO, C/AI,IN0 IN ANN</,+NT?
I" the inor thro3!h his acts &eads the other part% to #e&ieve that he is capacitated to enter a
contract' the inor is prevented "ro c&aiin! ann3&ent. This is #ased on the princip&e o" estoppe& $here
a person a1in! certain representations cannot &ater on #e a&&o$ed #% the co3rts to contradict it.
When a 1C %ear o&d c&ais that he is o" &e!a& a!e and the other part% enters into a contract
#e&ievein! the inorBs c&ai' the inor can no &on!er ta1e #ac1 and in"or the other part% that he is in "ace
a inor and incapacitated to enter into a contract.
,A9 RATI*ICATION O* A AOI)A./+ CONTRACT .+ )ON+ .+*OR+ TH+ ,INOR CO,+S O*
A0+ OR .+*OR+ TH+ INCA:ACITAT+) :+RSON .+CO,+S CA:ACITAT+)?
Art. 13@= provides that rati"ication a% #e e""ected #% the !3ardian o" the incapacitated person.(
Ree#er that #e"ore the incapacitated person #ecoes capacitated 5"or e7ap&e' a inor
reachin! the a!e o" a;orit%' his !3ardian a% rati"% the voida#&e contract. Once he ac23ires his capacit%'
his !3ardian a% no &on!er rati"% the contract. The on&% part% that can rati"% the contract is the no$4
capacitated person #eca3se the a3thorit% o" the !3ardian ceases $hen the $ard ac23ires capacit%.
WI// ACC+:TANC+ O* .+N+*ITS A,O<NT TO RATI*ICATION?
*or incapacitated persons' this is ver% di""ic3&t #eca3se an incapacitated person is not a$are o" his
actions. There"ore' his action $hi&e sti&& incapacitated cannot ao3nt to rati"ication.
Art. 13@@ provides that $hen the de"ect o" the contract consists in the incapacit% o" one o" the
parties' the incapacitated person is not o#&i!ed to a1e an% restit3tion e7cept inso"ar as he has #een
#ene"itted #% the thin! or price received #% hi.
*or voida#&e contracts d3e to vitiated consent' this a% #e rati"ied. *or e7ap&e' $here are person
"orced to si!n a contract' then &ater a"ter the "orce ceases' the person accepts the p3rchase price. Rati"ication
can #e ded3ced "ro certain actions. What is iportant is that incapacit% and vitiated consent ceases then
rati"ication #% the person can #e e""ected.
WHO AR+ +NTIT/+) TO .RIN0 TH+ ACTION O* ANN</,+NT?
The !enera& r3&e is that on&% the innocent part% a% #irn! the action "or ann3&ent
+7ceptions to this are third parties $ho are s3#sidiari&% &ia#&e' as provided #% Art. 13@C. Third
parties $ho are pre;3diced in his ri!hts re!ardin! one o" the contractin! parties. 5Development Bank of the
Philippines v. Court of Appeals6 This e7ception has a ver% &iited conte7t pec3&iar to the "act o" the case.
There 3st #e a reasona#&e connection #et$een the properties concerned.
Art. 130:. An o"ligation having "een ann3lle!% the contracting parties shall restore to each
other the things #hich have "een the s3"<ect matter o the contract% #ith their r3its% an!
the price #ith its interest% e)cept in cases provi!e! "$ la#.
In o"ligations to ren!er service% the val3e thereo shall "e the "asis or !amages.
Art. 1300. 4hen the !eect o the contract consists in the incapacit$ o one o the parties% the
incapacitate! person is not o"lige! to ma9e an$ restit3tion e)cept insoar as he has "een
"eneite! "$ the thing or price receive! "$ him.
Art. 1+00. 4henever the person o"lige! "$ the !ecree o ann3lment to ret3rn the thing can
not !o so "eca3se it has "een lost thro3gh his a3lt% he shall ret3rn the r3its receive! an!
the val3e o the thing at the time o the loss% #ith interest rom the same !ate.
Art. 1+01. The action or ann3lment o contracts shall "e e)ting3ishe! #hen the thing #hich
is the o"<ect thereo is lost thro3gh the ra3! or a3lt o the person #ho has a right to
instit3te the procee!ings.
I the right o action is "ase! 3pon the incapacit$ o an$ one o the contracting
parties% the loss o the thing shall not "e an o"sta"le to the s3ccess o the action% 3nless sai!
loss too9 place thro3gh the ra3! or a3lt o the plainti.
Art. 1+0*. As long as one o the contracting parties !oes not restore #hat in virt3e o the
!ecree o ann3lment is "o3n! to ret3rn% the other cannot "e compelle! to compl$ #ith #hat
is inc3m"ent 3pon him.
WHAT IS TH+ :RINCI:/+ O* ,<T<A/ R+STIT<TION IN AOI)A./+ CONTRACTS?
Art. 13@D provides that an o#&i!ation havin! #een ann3&&ed' the contractin! parties sha&& restore to
each other the thin!s $hich have #een the s3#;ect atter o" the contract' $ith their "r3its and the price $ith
its interest e7cept in cases provided #% &a$.
In o#&i!ations to render services' the va&3e thereo" sha&& #e the #asis "or daa!es.
The parties 3st ret3rn to each other $hat the% have received. I" not' the action $i&& #e disissed.
WHAT I* TH+ :/AINTI** CANNOT R+T<RN WHAT H+ HAS R+C+IA+)?
I" it is cash' he 3st present the ao3nt received to the co3rt.
I" the thin! is &ost thro3!h the "a3&t o" the p&ainti""' Art. 1=01 provides that the action "or
ann3&ent o" contracts sha&& #e e7tin!3ished $hen the thin! $hich is the o#;ect thereo" is &ost thro3!h
"ra3d o" the person $ho has a ri!ht to instit3te the proceedin!s.
I" one o" the contractin! parties is incapacitated' Art. 1=01 a&so provides that the &oss o" the thin!
sha&& not #e an o#stac&e to the s3ccess o" the action' 3n&ess said &oss too1 p&ace thro3!h the "ra3d or "a3&t o"
the p&ainti"". )ean de& Casti&&o a&so sa%s that it is di""ic3&t to prove "ra3d or "a3&t( #eca3se an incapacitated
person is s3pposed to #e 3na$are o" the actions.
I" restit3tion is not possi#&e d3e to a "ort3ito3s event the parties are e7c3sed "ro ret3rnin! $hat
the% have received.
WHAT I* TH+ )+*+N)ANT CANNOT R+T<RN WHAT H+ HAS R+C+IA+)?
)e"endant 3st restit3te. I" he cannot' then he 3st pa% "or the va&3e o" the propert% p&3s the
"r3its p&3s the interest "ro the tie he received the propert%. I" the propert% is &ost thro3!h "ort3ito3s event
he sti&& has o#&i!ation. The on&% di""erence is that the interest stops "ro the oent o" &oss d3e to
"ort3tio3s event #eca3se the &oss $as not his "a3&t.
Chapter :
>nenorcea"le Contracts
Art. 1+03. The ollo#ing contracts are 3nenorcea"le% 3nless the$ are ratiie!2
,1- Those entere! into in the name o another person "$ one #ho has "een given no
a3thorit$ or legal representation% or #ho has acte! "e$on! his po#ers;
,*- Those that !o not compl$ #ith the Stat3te o 1ra3!s as set orth in this n3m"er.
In the ollo#ing cases an agreement hereater ma!e shall 3nenorcea"le "$
action% 3nless the same% or some note or memoran!3m thereo% "e in #riting%
an! s3"scri"e! "$ the part$ charge!% or "$ his agent; evi!ence% thereoreG o the
agreement cannot "e receive! #itho3t the #riting% or a secon!ar$ evi!ence o its
contents2
,a- an agreement that "$ its terms in not "e perorme! #ithin a $ear rom the
ma9ing thereo;
,"- a special promise to ans#er or the !e"t% !ea3lt% or miscarriage o another;
,c- an agreement ma!e in consi!eration o marriage% other than a m3t3al
promise to marr$;
,!- an agreement or the sale o goo!s% chattels or things in action% at a price not
less than ive h3n!re! pesos% 3nless the "3$er accept an! receive part o
s3ch goo!s an! chattels% or the evi!ences% or some o them% o s3ch things in
action% or pa$ at the time some part o the p3rchase mone$; "3t #hen the
sale is ma!e "$ a3ction an! entr$ is ma!e "$ the a3ctioneer in his sales
"oo9% at the time o the sale% o the amo3nt an! 9in! o propert$ sol!% terms
o sale% price% names o the p3rchasers an! person on #hose acco3nt the sale
is ma!e% it is a s3icient memoran!3m;
,e- an agreement or the leasing or a longer perio! than one $ear% or or the sale
o real propert$ or o an interest therein;
,- a representation as to the cre!it o a thir! person.
,3- Those #here "oth parties are incapa"le o giving consent to a contract.
Art. 1+0+. >na3thoriDe! contracts are governe! "$ Article 1318 an! the principles o
agenc$ in Title @ o this &oo9.
Art. 1+05. Contracts inringing the Stat3te o 1ra3!s% reerre! to in No.* o the Article 1+03%
are ratiie! "$ the ail3re to o"<ect to the presentation o oral evi!ence to prove the same% or
"$ the acceptance o "eneits 3n!er them.
Art. 1+0C. 4hen a contract is enorcea"le 3n!er the Stat3te o 1ra3!s% an! a p3"lic
!oc3ment is necessar$ or its registration in the Registr$ o Fee!s% the parties ma$ avail o
themselves o the right 3n!er Article 1358.
Art. 1+08. In a contract #here "oth parties are incapa"le o giving consent% e)press or
implie! ratiication "$ the parent% or g3ar!ian% as the case ma$ "e% o one o the contracting
parties shall give the contract the same eect as i onl$ one o them #ere incapacitate!.
I ratiication is ma!e "$ the parents or g3ar!ians% as the case ma$ "e% o "oth
contracting parties% the contract shall "e vali!ate! rom the inception.
Art. 1+0:. >nenorcea"le contracts cannot "e assaile! "$ thir! persons.
WHAT IS AN <N+N*ORC+A./+ CONTRACT?
An 3nen"orcea#&e contract is one $hich cannot #e s3ed 3pon or en"orced' 3n&ess it is rati"ied. 5Art.
1=036 An 3nen"orcea#&e contract then a% #e said to #e the opposite' in a sense' o" a rescissi#&e contract.
The de"ect o" an 3nen"orcea#&e contract is in its "or. Note that once there is a $ritten note or
eorand3 evidencin! the contract' s3ch contract is no &on!er 3nen"orcea#&e.
WHAT AR+ TH+ +**+CTS O* AN <N+N*ORC+A./+ CONTRACT?
<nen"orcea#&e contracts cannot #e s3ed 3pon or en"orced 3n&ess the% are rati"ied. The% have no
e""ect 3nti& the% are rati"ied. 5Reca&& that voida#&e and rescissi#&e contracts prod3ce &e!a& e""ect 3nti&
ann3&&ed or rescinded.6
WHAT AR+ <N+N*ORC+A./+ CONTRACTS?
Art. 1=03 provides that> the "o&&o$in! contracts are 3nen"orcea#&e' 3n&ess the% are rati"ied>
516 Those entered into in the nae o" another person #% one $ho has #een !iven no a3thorit% or
&e!a& representation' or $ho has acted #e%ond his po$ersE
586 Those that do not cop&% $ith the Stat3te o" *ra3ds as set "orth in this n3#er. In the
"o&&o$in! cases an a!reeent herea"ter ade sha&& #e en"orcea#&e #% action' 3n&ess the sae'
or soe note or eorand3 thereo"' #e in $ritin!' and s3#scri#ed #% the part% char!ed' or
#% his a!entE evidence' there"ore' o" the a!reeent cannot #e received $itho3t the $ritin!' or
a secondar% evidence o" its contents>
An a!reeent that #% its ters is not to #e per"ored $ithin a %ear "ro the a1in!
thereo"E
A specia& proise to ans$er "or the de#t' de"a3&t' or iscarria!e or anotherE
An a!reeent ade in consideration o" arria!e' other than a 3t3a& proise to
arr%E
An a!reeent "or the sa&e o" !oodsE chatte&s or thin!s in action' at a price not &ess
than :500' 3n&ess the #3%er accepts and receives part o" s3ch !oods and chatte&s' or
the evidences o" soe o" the' o" s3ch thin!s in action' or pa% at the tie soe part
o" the p3rchase one%E #3t $hen a sa&e is ade #% a3ction and entr% is ade #% the
a3ctioneer in his sa&es #oo1' at the tie o" the sa&e' o" the ao3nt and 1ind o"
propert% so&d' ters o" sa&e' price' naes o" the p3rcahsers and person on $hose
acco3nt the sa&e is ade' it is a s3""icient eorand3E
An a!reeent "or the &easin! "or a &on!er period than one %ear or "or the sa&e o" rea&
propert% or o" an interest thereinE
A representation as to the credit o" a third person
536 Those $here #oth parties are incapa#&e o" !ivin! consent to a contract.
WHAT AR+ TH+ -IN)S O* <N+N*ORC+A./+ CONTRACTS?
516 <na3thoriHed contracts.
586 Those that "ai& to cop&% $ith the Stat3te o" *ra3ds.
536 Those $here #oth parties are incapa#&e o" !ivin! consent.
WHAT IS TH+ :R+SCRI:TIA+ :+RIO) O* <N+N*ORC+A./+ CONTRACTS?
:rescription is the period o" tie $hen a person can "i&e the necessar% action. .3t in 3nen"orcea#&e
contracts' prescription cannot app&% to one $ho sets it 3p as a de"ense. There is no prescriptive period.
:rescription re23ires %o3 to "i&e an action. <nen"orcea#&e contracts are raised as a atter o" de"ense. It is
not the person $ho "i&es to dec&are the contract 3nen"orcea#&e. Rather it is a&read% 3nen"orcea#&e' it has no
e""ect.
:rescription here $i&& on&% &ie $ith the active part% $ho "i&es the action. *or a $ritten contract' 10
%ears. *or an ora& contract' = %ears. The other part% a% raise the de"ense o" 3nen"orcea#i&it% $ithin this
period.
HOW ,A9 AN <N+N*ORC+A./+ CONTRACT .+ RATI*I+)?
1. +7press.
Nora&&%' this app&ies to the "irst 1ind o" 3nen"orcea#&e contracts> 3na3thoriHed contracts. *or
e7ap&e' A enters into a contract $ith . $itho3t the proper a3thorit% "ro C. C a% &ater on
e7press&% rati"% the contract.
8. Ip&ied.
Tie&% "ai&3re to o#;ect to the presentation o" ora& evidence to prove the ora& a!reeent.
Acceptance o" #ene"its 3nder the. .ene"it here eans an% #ene"it. A #ene"it s3ch as the
e7tension o" period o" pa%ent is the acceptance o" #ene"it $hoich $i&& e""ective&%
reove the contract "ro the Stat3te o" *ra3ds.
When a person "i&ed an action to en"orce the contract' he $aives his ri!ht to c&ai the
de"ense o" 3nen"orcea#i&it%.
HOW AR+ <N+N*ORC+A./+ CONTRACTS RATI*I+)?
Art. 1=05 provides that s3ch contact are rati"ied #% the "ai&3re to o#;ect to the presentation o" ora&
evidence to prove the sae' or #% the accpetance o" #ene"its 3nder the.(
HOW ,A9 A CONTRACT .+ +NT+R+) INTO .9 TWO INCA:ACITAT+) :ARTI+S .+ RATI*I+)?
When one part% ceases to #e incapacitated and rati"ies the contract' the contract is no &on!er
3nen"orcea#&e #3t voida#&e. It #ecoes va&id 3nti& ann3&&ed. When it is a voida#&e contract' it a% #e
rati"ied #% the other incapacitated part% $hen he #ecoes capacitated or his &e!a& !3ardian.
WHAT AR+ <NA<THORIO+) CONTRACTS?
Art. 1=03 provides that those entered into in the nae o" another person #% one $ho has #een
!iven no a3thorit% or &e!a& representation' or $ho has acted #e%ond his po$ers.(
A3thorit% is 3s3a&&% vested in another #% a specia& po$er o" attorne% or an% "or o" a3thoriHation'
3n&ess it "a&&s 3nder those contracts $here the a3thorit% o" the a!ent 3st #e in a p3#&ic instr3ent.
A3thoriHation a% a&so #e desi!nated #% the co3rt. 9o3 3st either #e a3thoriHed #% the person hise&" or
#% the co3rt. 5Adinistrators' !3ardians' &e!a& representatives6
These are contracts $hich are 3nen"orcea#&e a!ainst the principa& #eca3se it &ac1s a3thorit% or is in
e7cess o" attorne%. I" the person has a3thorit%' the contract is va&id.
A is on&% !iven a specia& po$er to &ease the propert%. Instead o" &easin! the propert%' he se&&s it.
The contract o" sa&e is 3nen"orcea#&e. I" A is !iven the specia& po$er to se&& the propert% and he &eases the
propert%' the contract is va&id. This is #eca3se the po$er to se&& carries the ip&ied po$er to &ease. Another
#eca3se it $i&& not #e inc&3ded 3n&ess it is a &esser ri!ht. I" %o3 have the ri!ht to dispose propert%' %o3 a&so
have the &esser ri!hts.
&AFI..O /S. 1(RR(R 15* SCRA +08
1acts2 ,ACARIO died intestate and $as s3rvived #% his $i"e' C/ARITA' and 5 chi&dren. ,ACARIO
o$ns a CC4s2 o" &and $orth C'500. C/ARITA' as a !3ardian' e7ec3ted a )eed o" +7tra4;3dicia& :artition
and Sa&e o" the propert% to S:O<S+S RANA.
,O)+STA' sister o" ,ACARIO' o#tained !3ardianship over the persons and properties o" the
inors. ,O)+STA "i&ed "or the ann3&ent o" the sa&e and as1ed that the inors #e a&&o$ed to e7ercise the
ri!ht o" &e!a& redeption.
Iss3e2 45N the !ee! #as 3nenorcea"le.
R3ling2 ?es. The )eed o" +7tra4G3dicia& :artition and Sa&e is not a voida#&e contract #3t an 3nen"orcea#&e
contract 3nder Art. 1=03' those entered in the nae o" another person $itho3t a3thorit%. The naes o" the
inors $ere ere&% dra!!ed into the contract #% their other $ho c&aied a ri!ht to a represent the. The
other has no a3thorit% or acted #e%ond her po$ers in conve%in! the 3ndivided shares o" her inor
chi&dren in the propert%' as her po$er as the nat3ra& !3ardian covers on&% atters o" adinistration and
cannot inc&3de the po$ers o" disposition' and she sho3&d have "irst sec3red co3rt approva& #e"ore the
a&ienation o" the propert%.
WHAT IS STAT<T+ O* *RA<)S?
The stat3te o" "ra3ds re23ires the a!reeents en3erated therein #e in $ritin!. I" it does not
"o&&o$ this "or' the contract is 3nen"orcea#&e. The stat3te o" "ra3ds there"ore e7c&3des ora& contracts i"
the% are 1inds &isted therein.
It is intended to prevent "ra3d. To aid h3an eor%' to prevent the coission o" in;3stices'
d3e to "a3&t% eor%' to disco3ra!e intentiona& isrepresentations are the principa& ais o" the stat3te o"
"ra3ds.(
9o3 are preventin! parties "ro de&i#erate&% or 3nconscio3s&% "or!et that the% have entered into a
certain contracts. ,ost o" these contracts are &on!4ter contracts or contracts o" specia& si!ni"icance. This
is so that i" the% "or!et' the other person can present a $ritted contract to reind the other "or!et"3& part%.
WHAT AR+ TH+ CONTRACTS +FC/<)+) *RO, TH+ STAT<T+ O* *RA<)S?
The stat3te o" "ra3ds on&% app&ies to e7ec3tor% contracts. Once it is partia&&% or "3&&% e7ec3ted' the
de"ense o" 3nen"orcea#i&it% can no &on!er #e reaised. When partia& or "3&& #ene"its are accepted' the other
part% is deeed to have rati"ied the contract. To a&&o$ a person $ho has received partia& or "3&& #ene"its to
c&ai 3nen"orcea#i&it% $o3&d act3a&&% perpetrate "ra3d rather than prevent "ra3d.
FI4A /S. FONATO *3+ SCRA C0:
1acts2 S+//+RS so&d the a &ot to .<9+RS "or :50='000. The .<9+RS did not pa% in "3&&' th3s
.<9+RS $ere sti&& pa%in! the #a&ance o" :1?D'000 to S+//+RS' $hich is d3&% acco3nted "or $ith
correspondin! receipts.
)espite the cons3ation o" the sa&e' S+//+RS have not %et e7ec3ted a deed o" sa&e to the
.<9+RS and the &atter are no$ deandin! this #eca3se .<9+RS needed the deed to #e a#&e to start
constr3ction on a #3i&din!. .<9+RS are no$ s3in! "or speci"ic per"orance.
TC disissed their otion' statin! that one o" the re23isites needed to #e a#&e to s3e "or speci"ic
per"orance is that there 3st #e a contract and the contract 3st #e in $ritin! in accordance $ith the
stat3te o" "ra3ds. Accordin! to the TC' the receipts iss3ed #% the se&&ers are not to #e considered as
contracts.
Iss3e2 45N the agreement o the parties alls 3n!er the stat3te o ra3!s.
R3ling2 No. The TC erred $hen it he&d that speci"ic per"orance does not &ie a!ainst the se&&er' #%
app&%in! the stat3te o" "ra3ds. It is sett&ed that stat3e o" "ra3ds app&ies on&% to e7ec3tor% and not to
cop&eted' e7ec3ted' or partia&&% e7ec3ted contracts. Th3s' as ear&% as 1@85' $e he&d that $here the &and
has #een de&ivered 3nder the ora& contract o" sa&e' and the vendees have a&read% paid part o" the p3rchase
price' the heirs o" the vendor cannot invo1e the stat3te o" "ra3ds in a proceedin! $here the vendees see1 to
have the &and re!istered in their naes.
In the case at #ench' the a!reeent to se&& the &ot in 23estion $as a&read% partia&&% e7ec3ted $hen
the present action $as coenced. No speci"ic denia& $as ade #% the se&&ers that the #3%ers have paid a
part o" the contract price' and that possession o" the &and has #een de&ivered to the.
ROS(NCOR F(/GT CORP. /S. INA>ING 35+ SCRA 110
/+SSORS
1acts2 /+SS++S' since 1@C1' &eases the t$o4store% residentia& apartent o$ned #% the OWN+RS.
A&tho3!h the &ease $as not covered #% a $ritten doc3ent' the /+SS+S $ere a&&e!ed&% ver#a&&% !ranted #%
OWN+RS the pre4eptive ri!ht to p3rchase the propert% i" ever OWN+RS decide to se&& the sae.
<pon the death o" the OWN+RS' ana!eent o" the propert% $as trans"erred to /+SSORS. The
/+SS++S $ere a&&e!ed&% proised the sae pre4eptive ri!ht. The /+SS++S contin3ed to sta% in the
preises and spent a &ot o" one% "or its 3p1eep that $as never ded3cted "ro /+SS++SB renta&s to
/+SSORS.
In 1@@0' the /+SS++S received a &etter "ro ATTORN+9 deandin! that /+SS++S vacate the
preises so that the deo&ition o" the #3i&din! co3&d #e 3nderta1en. /+SS++S re"3sed to do so. /+SSORS
re"3sed to accept /+SS++SB renta& pa%ent and instead o""ered to se&& the the propert% "or :8i&&ion.
/+SS++S co3nter4o""ered at :1i&&ion' #3t /+SS++S received no ans$er "ro /+SSORS.
In Nove#er' 3
R)
:ART9 cae to the &eased preises and introd3ced hise&" as the ne$ o$ner.
/+SS++S as1ed /+SSORS $h% the &atter disre!arded the pre4eptive ri!hts. A"ter$ards the /+SS++S
discovered that the% $ere deceived #% the /+SSORS' since the sa&e #J$ /+SSORS and 3
R)
:ART9 too1
p&ace in Septe#er $hi&e /+SSORS ade the o""er to /+SS++ in Octo#er' a"ter the sa&e $ith 3
R)
:ART9
has #een cons3ated. /+SS++ a&so discovered that the propert% $as so&d on&% "or :C8?'000.
/+SS++S are no$ pra%in! "or the rescission o" the deed o" a#so&3te sa&e #et$een the /+SSORS
and 3
R)
:ART9. RTC disissed the cop&aint' sa%in! that the ri!ht o" redeption on $hich the cop&aint
$as #ased $as ere&% an ora& one and as s3ch' snd th3s' 3nen"orcea#&e 3nder the &a$. CA reversed. 3
R)
:ART9 appea&ed.
Iss3e2 45N a right o irst re3sal is covere! "$ the stat3te o ra3!s.
R3ling2 No. A ri!ht o" "irst re"3sa& is not aon! those &isted as 3nen"orcea#&e 3nder the stat3te o" "ra3ds.
The app&ication o" artic&e 1=03 par. 8 5e6 o" the ne$ civi& code pres3pposes the e7istence o" a per"ected'
a&#eit 3n$ritten contract o" sa&e.
A ri!ht o" "irst re"3sa&' s3ch as the one invo&ved in the instant case' is not #% an% eans a per"ected
contract o" sa&e o" rea& propert%. At #est' it is a contract3a& !rant' not o" the sa&e o" the rea& propert%
invo&ved' #3t o" the ri!ht o" "irst re"3sa& over the propert% so3!ht to #e so&d. It is th3s evident that the
stat3te o" "ra3ds does not contep&ate cases invo&vin! a ri!ht o" "irst re"3sa&. As s3ch a ri!ht o" "irst re"3sa&
need not #e $ritten to #e en"orcea#&e and a% #e proven #% ora& evidence.
The prevai&in! doctrine is that a contract o" sa&e entered into in vio&ation o" a ri!ht o" "irst re"3sa&
o" another person' $hi&e va&id' is rescissi#&e. There is' ho$ever a circ3stance $hich prevents the
app&ication o" this doctrine in the case at #ench. 3
R)
:ART9 $as not a$are o" the ri!ht o" "irst re"3sa& and
as s3ch' $as actin! in !ood "aith. .ad "aith on the side o" the /+SSORS does not ao3nt to #ad "aith on
3
R)
:ART9BS side. CA erred $hen it ordered the rescission o" the deed o" a#so&3te sa&e. Reed% "or the
/+SS++S is an action "or daa!es a!ainst the /+SSORS.
WH+N ,<ST TH+ )+*+NS+ O* <N+N*ORC+A.I/IT9 .+ S+T <:?
It 3st #e set 3p at the "irst avai&a#&e opport3nit%. As soon as the action is "i&ed' the other part%
3st "i&e a otion to disiss #ased on 3nen"orcea#i&it%. The de"ense 3st #e set 3p #e"ore the presentation
o" ora& evidence. Once ora& evidence is presented' the other part% has a&read% $aived his ri!ht to raise the
de"ense o" 3nen"orcea#i&it%.
WHAT IS ,+ANT .9 AN A0R++,+NT THAT .9 ITS T+R,S IS NOT TO .+ :+R*OR,+)
WITHIN A 9+AR *RO, TH+ ,A-IN0 TH+R+O*?
This is an a!reeent re23irin! nonper"orance 3nti& a"ter the period o" one %ear. The princip&e o"
the Stat3te o" *ra3ds is that peop&e $i&& ree#r $ithin one %ear and "or!et a"ter one %ear. The one4%ear
tie period $or1s &i1e a c3to"" period "or the eor% o" an.
This does not inc&3de a!reeents "or ne!ative o#&i!ations. An o#&i!ation not to do is iediate&%
e7ec3tor%. There"ore it does not "a&& 3nder the Stat3te o" *ra3ds.
WHAT IS ,+ANT .9 A S:+CIA/ :RO,IS+ TO ANSW+R *OR TH+ )+.T' )+*A</T' OR
,ISCARRIA0+ O* ANOTH+R?
9o3 are re"errin! to a sit3ation $here a person !3arantees or proises to ans$er "or the o#&i!ation
i" the principa& does not cop&% $ith the ters o" the o#&i!ation. This cannot app&% "or a person $ho
!3arantees his o$n de#t. The specia& proise 3st #e so to ans$er "or the de#t o" another person.
WHAT IS ,+ANT .9 AN A0R++,+NT ,A)+ IN CONSI)+RATION O* ,ARRIA0+' OTH+R
THAN A ,<T<A/ :RO,IS+ TO ,ARR9?
<nder the *ai&% Code' donations propter n3ptias 3st cop&% $ith the r3&es o" ordinar%
donations. There"ore' "ro is necessar% "or its va&idit%. The% no &on!er "a&& 3nder the Stat3te o" *ra3ds.
A&so' 3nder the *ai&% Code' anten3ptia& a!reeents 3st #e in $ritin!. There is no inconsistenc%
#et$een the Stat3te o" *ra3ds and the *ai&% Code. There"ore these are on&% contracts that can "a&& 3nder
a!reeents ade in consideration o" arria!e.
WHAT IS ,+ANT .9 AN A0R++,+NT *OR TH+ SA/+ O* 0OO)S' CHATT+/S OR THIN0S IN
ACTION AT A :RIC+ NOT /+SS THAT :500?
These invo&ve persona& properties' inc&3din! intan!i#&es' thin!s in action.
WHAT IS ,+ANT .9 AN A0R++,+NT *OR TH+ /+ASIN0 *OR A /ON0+R :+RIO) THAN ON+
9+AR' OR *OR TH+ SA/+ O* R+A/ :RO:+RT9 OR O* AN INT+R+ST TH+R+IN?
The a!reeents re"erred to here are>
1. /ease o" rea& propert% "or ore than one %ear.
8. Sa&e o" rea& propert%' re!ard&ess o" price.
WHAT IS ,+ANT .9 A R+:R+S+NTATION AS TO TH+ CR+)IT O* A THIR) :+RSON?
Here there is no proise to ans$er "or another personBs de#t. This is not a !3arant%. There is
ere&% an ass3rance that soe#od% has ac certain ao3nt o" credit that this personBs credit is !ood. The
person a1in! the representation is not a part% to the contract and cannot #e s3ed 3nder the contract. .3t
his ass3rance re!ardin! a third personBs credit a% #e considered a "or o" a!reeent. I" this ass3rance is
"ra3d3&ent s3ch as $hen a person is&eads another into #e&ievin! that another part% is capa#&e o" pa%ent
#3t is in "act inso&vent' the person !ivin! the ass3rance a% #e s3ed i" his ass3rance $as in $ritin!. The
&ia#i&it% in this case is #ased not on the contract #3t on torts.
WHAT IS TH+ )I**+R+NC+ .+TW++N ART. 135D AN) ART. 1=03?
In Art. 135D' contracts in p3#&ic "or convenience app&ies to a creation o" a rea& ri!ht over an
iova#&e propert% s3ch as a sit3ation i" %o3 ort!a!e %o3r propert% to !et a &oan "or %o3rse&".
In Art. 1=03' stat3te o" "ra3ds re"ers to rea& !3aranties. *or e7ap&e' %o3 ort!a!e a speci"ic
propert% to !et a &oan "ro a #an1 "or another person. 9o3 are not the de#tor. It is a specia& proise to
ans$er "or the de#t o" another. I" it is an ora& contract' it is 3nen"orcea#&e and the #an1 cannot cope& the
other person to e7ec3te it in the proper "or 5Art. 135?6 I" it is a $ritten contract' the #an1 can cope& %o3
to a1e the contract in the proper "or.
Art. 135D re23ires that sa&es o" rea& proper% $hatever the ao3nt #e in a p3#&ic doc3ent. The
other part% a% #e cope&&ed to a1e the contract in the proper "or.
Art. 1=03 re"ers to sa&e o" persona& properties in e7cess o" :500.00 $hich 3st #e in $ritin! to #e
en"orcea#&e.
WHAT -IN) O* *OR,A/ITI+S AR+ R+I<IR+) .9 TH+ STAT<T+ O* *RA<)S?
The stat3te o" "ra3ds re23ires that contracts #e in s3""icient not or eorand3. It need not #e a
private or p3#&ic $ritten instr3ent.
The !enera& r3&e is that it a% #e $ritten in an% "or' containin! description o" the contract 5e.!.
contract o" &oan sho3&d inc&3de the ao3nt &oaned6 and s3#scri#ed 5si!ned6 #% the person o#&i!ed. It can #e
in an% "or' it does not atter i" it is in hand$ritin! or t%pe$ritten. What is iportant is that there is soe
evidence o" their a!reeent in s3""icient note or eorand3.( I" #oth parties are o#&i!ed' then #oth
parties 3st si!n the note.
*or e7ap&e' s3""icient note a% #e on a nap1in' on the #ar1 o" a tree.
The e7ception is in an a3ction sa&e' the $ritten note need not #e si!ned. An a3ction sa&e is an%
"or o" sa&e $herein the hi!hest #idder recieves the thin!. It is s3""icient i" an entr% is ade in the
a3ctioneerBs sa&es #oo1 recordin! the tie o" sa&e' the ao3nt and 1ind o" propert% so&d' ters o" sa&e' and
naes o" the p3rchasers and person on $hose acco3nt the sa&e is ade. The reason "or this is that in
a3ctions' the person does not 3s3a&&% part $ith his propert% vo&3ntari&%. There"ore' it is 3n&i1e&% that he $i&&
a""i7 his si!nat3re on the contract o" sa&e.
WHAT OTH+R CONTRACTS ,A9 .+ <N+N*ORC+A./+?
An e7press tr3st on iovea#&e propert% 3st #e in $ritin! and cannot #e proven #% paro&e
evidence. It there"ore ta1es on the character o" a contract 3nder the Stat3te o" *ra3ds. An e7press tr3st is
3nen"orcea#&e 3n&ess it is in $ritin!.
Chapter 0
/oi! An! Ine)istent Contracts
WHAT IS A AOI) CONTRACT?
A void contract is one that has no e""ect at a&& 5#ein! ine7istnet or i&&e!a&6. Hence' void contacts
cannot #e rati"ied or va&idated' since there is no contract at a&&. In the strictest sense' there"ore' a void
contract is not even a de"ective contract' there #ein! no contract to spea1 o".
WHAT IS TH+ +**+CT O* AOI) CONTRACTS?
The% have no e""ect. The% cannot #e rati"ied. It is inc3ra#&e. There are contracts that are void "ro
the #e!innin!. The% are ine7istent contract. These contracts are iprescripti#&e' eanin! its n3&&it% can #e
raised at an%tie.
WHAT IS TH+ +FC+:TION TO TH+ R</+ THAT A AOI) CONTRACT HAS NO +**+CT?
The e7ception to this r3&e is $hen the parties are in pari de&icto' in $hich case' the &a$ sha&& &eave
the parties as the% are.
)O 9O< N++) G<)ICIA/ ACTION *OR TH+ )+C/ARATION THAT TH+ CONTRACT IS N<//
AN) AOI)?
NO. A void contract does not e7ist' "ro the ver% #e!innin! and its rati"ication cannot c3re it o" its
de"ects. The on&% e7ception to this r3&e is the contract o" arria!e $hich re23ires a ;3dicia& dec&aration o"
its n3&&it%. .3t %o3 a% "i&e an action "or the dec&aration o" n3&&it% and a&so raise it as a de"ense. Soeties
"or practica& p3rposes' a part% a% choose to "i&e an action "or ;3dicia& dec&aration o" n3&&it%. *or e7ap&e'
$hen the other part% re"3ses to ret3rn soethin! he has !ained "ro a void contract' a person a% choose
to "i&e the action rather than ta1e the &a$ into his o$n hands and ta1e the propert% "ro the re"3sin! part%.
Art. 1+00. The ollo#ing contracts are ine)istent an! voi! rom the "eginning2
,1- Those #hose ca3se% o"<ect or p3rpose is contrar$ to la#% morals% goo! c3stoms%
p3"lic or!er or p3"lic polic$;
,*- Those #hich are a"sol3tel$ sim3late! or ictitio3s;
,3- Those #hose ca3se or o"<ect !i! not e)ist at the time o the transaction;
,+- Those #hose o"<ect is o3tsi!e the commerce o men;
,5- Those #hich contemplate an impossi"le service;
,C- Those #here the intention o the parties relative to the principal o"<ect o the
contract cannot "e ascertaine!;
,8- Those e)pressl$ prohi"ite! or !eclare! voi! "$ la#
Art. 1+10. The action or !eense or the !eclaration o the ine)istence o a contract !oes not
prescri"e.
WHAT AR+ AOI) CONTRACTS?
Art. 1=@0 provides that the "o&&o$in! contracts are ine7istent and void "ro the #e!innin!>
516 Those $hose ca3se' o#;ect or p3rpose is contrar% to &a$' ora&s' !ood c3stos' p3#&ic order
or p3#&ic po&ic%.
586 Those $hich are a#so&3te&% si3&ated or "ictitio3s.
536 Those $hose ca3se or o#;ect did not e7ist at the tie o" transaction.
5=6 Those $hose o#;ect is o3tside the coerce o" en.
556 Those $hich contep&ate an ipossi#&e service
5?6 Those $here the int3ition o" the parties re&ative to the principa& o#;ect o" the contract cannot
#e ascertained.
5C6 Those e7press&% prohi#ited or dec&ared void #% &a$.
Aoid contracts &ac1 an essentia& e&eent o" the contract.
No consent P this re"ers to a tota& &ac1 o" consent s3ch as $hen consent is ere&% in ;est
No o#;ect P "or e7ap&e' those $hose o#;ect is o3tside the coerce o" an.
No ca3se P "or e7ap&e' an a#so&3te&% si3&ated contract.
Art. 1+11. 4hen the n3llit$ procee!s rom the illegalit$ o the ca3se or o"<ect o the
contract% an! the act constit3tes a criminal oense% "oth parties "eing in pari !elicto% the$
shall have no action against each other% an! "oth shall "e prosec3te!. =oreover% the
provisions o the Penal Co!e relative to the !isposal o eects or instr3ments o a crime
shall "e applica"le to the things or the price o the contract.
This r3le shall "e applica"le #hen onl$ one o the parties is g3ilt$; "3t the innocent
one ma$ claim #hat he has given% an! shall not "e "o3n! to compl$ #ith his promise.
Art. 1+1*. I the act in #hich the 3nla#3l or or"i!!en ca3se consists !oes not constit3te a
criminal oense% the ollo#ing r3les shall "e o"serve!2
1. 4hen the a3lt is on the part o "oth contracting parties% neither ma$ recover #hat
he has given "$ virt3e o the contract% or !eman! the perormance o the otherGs
3n!erta9ing;
*. 4hen onl$ one o the contracting parties is at a3lt% he cannot recover #hat he has
given "$ reason o the contract% or as9 or the 3lillment o #hat has "een promise!
him. The other% #ho is not at a3lt% ma$ !eman! the ret3rn o #hat ha has given
#itho3t an$ o"ligation to compl$ #ith his promise.
Art. 1+13. Interest pai! in e)cess o the interest allo#e! "$ the 3s3r$ la#s ma$ "e recovere!
"$ the !e"tor% #ith interest thereon rom the !ate o the pa$ment.
Art. 1+1+. 4hen mone$ is pai! or propert$ !elivere! or an illegal p3rpose% the contract
ma$ "e rep3!iate! "$ one o the parties "eor the p3rpose has "een accomplishe!% or "eore
an$ !amage has "eeen ca3se! to a thir! person. In s3ch case% the co3rts ma$% i the p3"lic
interest #ill th3s "e s3rserve!% allo# the part$ rep3!iating the contract to recover the
mone$ or propert$.
Art. 1+15. 4here one o the parties to an illegal contract is incapa"le o giving consent% the
co3rts ma$% i the interest o <3stice so !eman!s% allo# the recover$ o mone$ or propert$
!elivere! "$ the incapacitate! person.
Art. 1+1C. 4hen the agreement is not illegal per se "3t is merel$ prohi"ite!% an! the
prohi"ition "$ the la# is !esigne! or the protection o the plainti% he ma$% i p3"lic polic$
is there"$ enhance!% recover #hat ha has pai! or !elivere!.
Art. 1+18. 4hen the price o an$ article or commo!it$ is !etermine! "$ stat3te or "$
a3thorit$ o la#% an$ person pa$ing an$ amo3nt in e)cess o the ma)im3m price allo#e!
ma$ recover s3ch e)cess.
Art. 1+1:. 4hen the la# i)es% or a3thoriDes the i)ing o the ma)im3m n3m"er o ho3rs o
la"or% an! a contract is entere! into #here"$ a la"orer 3n!erta9es to #or9 longer than the
ma)im3m th3s i)e!% he ma$ !eman! a!!itional compensation or service ren!ere! "e$on!
the time limit.
Art. 1+10. 4hen the la# sets% or a3thoriDes the setting o a minim3m #age or la"orers% an!
a contract is agree! 3pon "$ #hich a la"orer accepts a lo#er #age% he shall "e entitle! to
recover the !eicienc$.
Art. 1+*0. In case o a !ivisi"le contract% i the illegal terms can "e separate! rom the legal
ones% the latter ma$ "e enorce!.
Art. 1+*1. The !eense o illegalit$ o contracts is not availa"le to thir! persons #hose
interests are not !irectl$ aecte!.
Art. 1+**. A contract #hich is the !irect res3lt o a previo3s illegal contract% is also voi! an!
ine)istent.
WHAT AR+ I//+0A/ CONTRACTS?
Contracts $hich vio&ate an% &e!a& provision $hether it ao3nts to a crie or not' $hether it is
a&3 per se or a&3 prohi#it3. A contract is i&&e!a& as &on! as it is contract to &a$ or p3#&ic po&ic%.
*or e7ap&e>
1. Contract o" sa&e #et$een h3s#and and $i"e are "or#idden #eca3se it a% pre;3dice creditors.
8. )onations need to #e in a p3#&ic instr3ent "or va&idit%. I" it is not the proper "or' the
donation is void.
3. <&tra vires contracts are not void contracts P contracts $hich are entered into o3tside the
corporate po$ers !ranted a corporation. I" %o3 are a&&o$ed to en!a!e in rea& estate and %o3
en!a!ed in #an1in!. Then %o3 have entered into an 3&tra vires contract. This &ac1 o" a3thorit%
and there"ore 3nen"orcea#&e.
WHAT IS TH+ R</+ ON :ARI )+/ICTO?
This is $hen #oth parties are e23a&&% !3i&t% the% sha&& have no action a!ainst each other.
)O+S TH+ :ARI )+/ICTO R</+ A::/9 TO A// AOI) CONTRACTS?
NO. :ari de&icto on&% app&ies to contracts that are void #eca3se the% are i&&e!a&' it does not app&% to
other void contracts.
WHAT IS TH+ +**+CT O* TH+ R</+ ON :ARI )+/ICTO?
:ari de&icto Where the act constit3tes a Where the act does not
criina& o""ense constit3te a criina& o""ense
+n"orceent .oth a% not !o to co3rt to .oth a% not !o to co3rt to en"orce
en"orce the contract. Rather the contract. No prosec3tion. The
.oth parties sha&& #e co3rt $i&& &eave the as the% are
:rosec3ted
Restit3tion .oth a% not as1 "or Neither part% a% recover $hat
Restit3tion #eca3se the e""ects he has !iven #% virt3e o" the
Or instr3ents o" the crie the contract. No con"iscation.
Wi&& #e con"iscated #% the
0overnent.
Art. 1=15 provides that $here one o" the parties to an i&&e!a& contract is incapa#&e o" !ivin! consent' the
co3rts a%' i" the interest o" ;3stice so deands' a&&o$ the recover% o" one% or propert% de&ivered #% the
incapacitated person.
I" a inor enters into an i&&e!a& contract' pari de&icto cannot app&% #eca3se incapacitated persons are
pres3ed not to 1no$ $hat the% are enterin! into. The incapacitated person is pres3ed to #e 3na#&e to
3nderstand the conse23ences o" his action. This r3&e "o&&o$s the !enera& princip&e that the parties are not
e23a&&% !3i&t%. In this case the inor or incapacitated person is &ess !3i&t% than a capacitated person $ho
3nderstands that he enters into an i&&e!a& contract.
Art. 1=1? provides that $hen the a!reeent is not i&&e!a& per se #3t ere&% prohi#ited' and the prohi#ition
#% the &a$ is desi!ned "or the protection o" the p&ainti""' he a%' i" p3#&ic po&ic% is there#% enhanced'
recover $hat he has paid or de&ivered.
*or e7ap&e' &and so&d in vio&ation o" the constit3tiona& prohi#iton a!ainst the trans"er o" &ands to a&iens
then s3#se23ent&% so&d to a *i&ipino a% #e recovered. This is done to preserve $hat the Constit3tion
dictates.
The prohi#ition o" sa&e #et$een h3s#and and $i"e is "or protection o" creditors. I" a $i"e $ho has
her o$n creditors and $ho has her o$n e7c&3sive propert%' trans"ers her propert% to her h3s#and. Then the
$i"eBs credtiors $i&& not have an% propert% 3pon $hich to en"orce their credit. Creditors cannot en"orce it
a!ainst a#so&3te co3nit% propert% #eca3se creditors o" the AC: can en"orce their credit on the AC:. In
the case o" con;3!a& partnership o" !ains' the $i"e a% trans"er the propert% as h3s#andBs e7c&3sive
propert%. It there"ore is o3t o" reach o" the creditors.
IN AOI) CONTRACTS' CAN ,<T<A/ R+STIT<TION .+ OR)+R+)?
F&P /S. CA *+0 SCRA 331
1acts2 ).: so&d a parce& o" 3nre!istered &and to S:O<S+S "or :85' 500. The deed o" a#so&3te sa&e $as
e7ec3ted #% ).: to the S:O<S+S' $hich contained a $aiver o" the ).:BS $arrant% a!ainst eviction.
S:O<S+S app&ied "or an ind3stria& tree4p&antin! &oan $ith ).:. ).: re23ired S:O<S+S to
s3#it a certi"ication "ro the .3rea3 o" *orest )eve&opent that the &and is a&iena#&e and disposa#&e. The
.3rea3 iss3ed a certi"icate indicatin! that the propert% $as c&assi"ied as ti#er&and' hence not s3#;ect to
disposition. The &oan $as neverthe&ess approved #% ).: in the s3 o" :1=0'000 on the 3nderstandin! o"
the parties that ).: $o3&d $or1 "or the re&ease o" the &and #% the ,inistr% o" Nat3ra& Reso3rces.
To sec3re pa%ent o" the &oan' S:O<S+S e7ec3ted a rea& estate ort!a!e on the &and. /oan $as
re&eased on a sta!!ered #asis' ao3ntin! to :11D'5=0 and $hen the S:O<S+S as1ed "or the reainin! part
o" the &oan' ).: did not act on it ostensi#&% #eca3se the re&ease o" the &and "ro the ,inistr% o" Nat3ra&
Reso3rces had not #een o#tained.
The spo3ses "i&ed a cop&aint a!ainst ).: see1in! the ann3&ent o" the sa&e on the !ro3nd that
the o#;ect o" the sa&e $as part o" the p3#&ic doain and ina&iena#&e and that ).: isrepresented itse&" as
the o$ner o" the &and. ).: averred that the ann3&ent o" the sa&e $o3&d redo3nd to the #ene"it o" the
spo3ses #3t to the ).:BS pre;3dice' since ).: had a&read% re&eased :11D'5=0 to S:O<S+S $hi&e it $o3&d
#e &e"t $itho3t an% sec3rit% "or the :1=0'000 &oan and that i" the &and is reverted to the p3#&ic doain'
S:O<S+S sho3&d #e ade to pa% :11D'5=0 $ith interest.
The TC ann3&&ed the deed o" a#so&3te sa&e and ordered ).: to ret3rn the p3rchase price p&3s
interest. CA a""ired $ith s&i!ht odi"ications.
Iss3e2 45N m3t3al restit3tion is #arrante!
R3ling2 ?es. The CA "o3nd that there had #een no #ad "aith on the part o" either part%. Correspondin!&%'
the co3rt correct&% app&ied the r3&e that i" #oth parties have no "a3&t or are not !3i&t%' the restoration o" $hat
$as !iven #% each o" the to the other is conse23ent&% in order. This is #eca3se the dec&aration o" n3&&it% o"
a contract $hich is void a# initio operates to restore thin!s to the state and condition in $hich the% $ere
"o3nd #e"ore the e7ec3tion thereo".
S:O<S+S are entit&ed to recover the one% paid #% the $here the contract is set aside #% reason
o" the 3t3a& ateria& ista1e o" the parties to the identit% or 23antit% o" the &and so&d. .3t the contract o"
&oan e7ec3ted #et$een the parties is entire&% di""erent and distinct "ro the deed o" sa&e the% entered into.
The ann3&ent o" the sa&e $i&& not have an e""ect on the e7istence and deanda#i&it% o" the &oan. One $ho
has received one% as a &oan is #o3nd to pa% to the creditor an e23a& ao3nt o" the sae 1ind and 23a&it%.
Title III
Nat3ral O"ligations
Art. 1+*3. O"ligations are civil or nat3ral. Civil o"ligations give a right o action to compel
their perormance. Nat3ral o"ligations% not "eing "ase! on positive la# "3t on e63it$ an!
nat3ral la#% !o not grant a right o action to enorce their perormance% "3t ater vol3ntar$
3lillment "$ the o"lior% the$ a3thoriDe the retention o #hat has "een !elivere! or
ren!ere! "$ reason thereo. Some nat3ral o"ligations are set orth in the ollo#ing articles.
Art. 1+*+. 4hen aright to s3e 3pon a civil o"ligation has lapse! "$ e)tinctive prescription%
the o"ligor #ho vol3ntaril$ perorms the contract cannot recover #hat he has !elivere! or
the val3e o the service he has ren!ere!.
Art. 1+*5. 4hen #itho3t the 9no#le!ge or against the #ill o the !e"tor% a thir! person pa$s
a !e"t #hich the o"ligor is not legall$ "o3n! to pa$ "eca3se the action thereon has
prescri"e!% "3t the !e"tor later vol3ntaril$ reim"3rse the thir! person% the o"ligor cannot
recover #hat he has pai!.
Art. 1+*C. 4hen a minor "et#een eighteen an! t#ent$Eone $ears o age entere! into a
contract #itho3t the consent o the parent or g3ar!ian% ater the ann3lment o the contract
vol3ntaril$ ret3rns the #hole thing or price receive!% noth#ithstan!ing the act that he has
not "een "eneite! there"$% there is no right t !eman! the thing or price th3s ret3rne!.
Art. 1+*8. 4hen a minor "et#een ighteen an! t#ent$Eone $ears o age% #ho has entere! into
a contract #itho3t the consent o the parent or g3ar!ian% vol3ntaril$ pa$s a s3m o mone$
or !elivers aa 3ngi"le thing in 3lillment o the o"ligation% there shall "e no right to
recover the same rom the o"ligee #ho has spent or cons3me! it in goo! aith.
Art. 1+*:. 4hen% ater an action to enorce a civil o"ligation has aile!% the !een!ant
vol3ntaril$ perorms the o"ligation% he cannot ret3rn #hat he has !elivere! or the pa$ment
o the val3e o the service he has ren!ere!.
Art. 1+*0. 4hen a testate or intestate heir vol3ntaril$ pa$s a !e"t o the !ece!ent e)cee!ing
the val3e o the propert$ #hich he receive! "$ #ill or "$ la# o intestac$ rom the estate o
the !ecease!% the pa$ment is vali! an! cannot "e rescin!e! "$ the pa$or.
Art. 1+30. 4hen a #ill is !eclare! voi! "eca3se it has not "een e)ec3te! in accor!ance #ith
the ormalities re63ire! "$ la#% "3t one o the intestate heirs% ater the settlement o the
!e"ts o the !ecease!% pa$s a legac$ in compliance #ith a cla3se in the !eective #ill% the
pa$ment is eective an! irrevoca"le.
WHAT IS TH+ )I**+R+NC+ .+TW++N NAT<RA/ AN) CIAI/ O./I0ATIONS?
Nat3ral O"ligations Civil O"ligations
+n"orcea#i&it% No ri!ht to en"orce per"orance There can #e a s3it or a ri!ht o"
action to cope& per"orance.
.asis Nat3ra& /a$J+23it% P .asic
princip&e that %o3 3st !ive to
each other $hat is d3e
/a$' Contracts' I3asi4Contracts'
)e&icts' and I3asi4)e&icts.
WHAT AR+ NAT<RA/ O./I0ATIONS?
Art. 1=83 provides that Nat3ra& o#&i!ations' not #ein! #ased on positive &a$ #3t on e23it% and
nat3ra& &a$' do not !rant a ri!ht o" action to en"orce their per"orance' #3t a"ter vo&3ntar% "3&"i&&ent #%
the o#&i!or' the% a3thoriHe the retention o" $hat has #een de&ivered or rendered #% reason thereo".(
The nat3ra& o#&i!ation en3erated in this section is not an e7c&3sive &ist. Rather' the% are
e7ap&es. Nat3ra& o#&i!ation a% arise o3tside the those en3erated "or a &on! as the% "o&&o$ the sae
!enera& r3&e.
)ISTIN0<ISH .+TW++N NAT<RA/ AN) ,ORA/ O./I0ATIONS.
A&tho3!h the ters nat3ra& o#&i!ations( and ora& o#&i!ations( are 3sed interchan!ea#&% in this
;3risdiction strict&% spea1in!' there are 8 essentia& di""erences #et$een the 8. The% are> "irst' in nat3ra&
o#&i!ation there is a ;3ridica& tie #et$een the parties $hich is not en"orcea#&e #% co3rt action' $hereas in
ora& o#&i!ations there is no ;3ridica& tie $hatsoeverE and second' vo&3ntar% "3&"i&&ent o" nat3ra&
o#&i!ations prod3ces &e!a& e""ects $hich the co3rt reco!niHe and protect' $hereas vo&3ntar% "3&"i&&ent o"
ora& o#&i!ations does not prod3ce an% &e!a& e""ect $hich the co3rts reco!niHe or protect.
0IA+ AN +FA,:/+ O* NAT<RA/ O./I0ATION.
The #est e7ap&e $o3&d #e the one that is re!3&ated #% Art. 1=8= o" the Civi& Code. Accordin! to
this artic&e' $hen a ri!ht to s3e 3pon a civi& o#&i!ation has &apsed #% e7tinctive prescription' the o#&i!or
$ho vo&3ntari&% per"ors the contract cannot recover $hat he has de&ivered or the va&3e o" the service he
has rendered.
Title I/. E (STOPP(. ,n-
Art. 1+31. Thro3gh estoppel an a!mission or representation is ren!ere! concl3sive
3pon the person ma9ing it% an! cannot "e !enie! or !isprove! as against the person
rel$ing thereon.
WHAT IS +STO::+/?
It is the r3&e o" e23it% $here one is prevented "ro den%in! $hat he has previo3s&% aditted or represented
a!ainst a part% $ho has re&ied on s3ch adission. It prevents one part% "ro !oin! #ac1 3pon his o$n acts
and representations to the pre;3dice o" the other part% $ho re&ied 3pon the.
Art. 1+3*. The principles o estoppel are here"$ a!opte! insoar as the$ are not in
conlict #ith the provisions o this Co!e% the Co!e o Commerce% the R3les o Co3rt
an! special la#s.
Art. 1+33. (stoppel ma$ "e in pais or "$ !ee!.
WHAT AR+ TH+ )I**+R+NT -IN)S O* +STO::+/?
1. +stoppe& in pais 5e23ita#&e estoppe&6 $hich is not #ased on $ritten contracts or stateents in a
co3rt o" record. It is #ased on cond3ct. It is app&ied to a sit3ation $here #eca3se o" soethin!
done or oitted #% a part% is denied the ri!ht to p&ead or prove an other$ise iportant "act.
8. +stoppe& #% deed 5technica& estoppe&6 $hich is an adission or representation in a $ritten
stateent or instr3ent. It is a #ar $hich prec&3des a part% to a deed and his privies "ro
assertin! as a!ainst the other' and his privies an% tit&e in dero!ation the deed' or "ro den%in!
the tr3th o" an% ateria& "act asserted in co3rt.
a. +stoppe& #% deed proper P this re"ers to a $ritten instr3ent
#. +stoppe& #% ;3d!ent as a co3rt record P res ;3dicata.
WHAT IS AN +FA,:/+ O* +STO::+/ IN :AIS?
I" *erdie 5A%an ah' sa na3313&an 6co3rts a !ir&' and the !ir& !oes o3t $ith hi' and she is ver%
"riend&% to hi' and she !ives hi a&& the indications that she is in &ove $ith hi' then *erdie can sa% that
she is a&read% estopped even i" she does not sa% an%thin! $hich is e7press &i1e I &ove %o3(. *erdie can sa%
that #% her actions' he $as is&ed. 5So !ir&s' do not &ead #o%s on' the% i!ht c&ai estoppe&. 6
CAN 9O< .+ +STO::+) ON TH+ .ASIS O* SI/+NC+?
The !enera& r3&e is that si&ence is a !ro3nd "or estoppe& on&% i" there is a d3t% to spea1 3p.
I" Char&es is co3rtin! soe#od% and sa%s I &ove %o3' do %o3 &ove e?( and that soe#od% does
not ans$er' is she a&read% estopped? When $i&& there #e estoppe& on the #asis o" si&ence then?
Si&ence per se does not a1e one &ia#&e. There sho3&d #e an o#&i!ation to spea1 o3t' other$ise %o3
si&ence cannot #e constr3ed as a conc3rrent acceptance.
NOT(2 <nder a contract o" &i"e ins3rance' there is an o#&i!ation to disc&ose diseases. I" one does not
disc&ose that to the ins3rer' and then he dies' the ins3rance copan% $i&& not #e o#&i!ed to pa%. A&so' in the
case o" a crie' $hen one $itnesses this' he is not cope&&ed to spea1 o3t. .3t once the co3rt s3ons
hi' and he appears in co3rt to ta1e the $itness stand' and he doesnBt disc&ose $hat he 1no$s' he can !o to
;ai& "or that.
WHAT IS +STO::+/ .9 )++)?
It is a #ar $hich prec&3des one part% to a deed and his privies "ro assertin! as a!ainst the other
part% and his privies an% ri!ht or tit&e in dero!ation o" the deed' or "ro den%in! the tr3th o" an% ateria&
"acts asserted in it.
NOT+> +ven i" one is not the ain part% to a case' #3t he a1es a stateent in the co3rt o" records' and the
other parties have re&ied on it' he can no &on!er #e peritted to den% it.
Art. 1+3+. 4hen a person #ho is not the o#ner o a thing sells or alienates an!
!elivers it% an! later the seller or grantor ac63ires title thereto% s3ch title passes "$
operation o la# to the "3$er or grantee.
Art. 1+35. I a person in representation o another sells or alienates a thing% the
ormer cannot s3"se63entl$ set 3p his o#n title as against the "3$er or grantee.
Art. 1+3C. A lessee or a "ailee is estoppe! rom asserting title to the thing lease! or
receive!% as against the lessor or "ailor.
Art. 1+38. 4hen in a contract "et#een thir! persons concerning immova"le
propert$% one o them is misle! "$ a person #ith respect to the o#nership or real
right over the real estate% the latter is precl3!e! rom asserting his legal title or
interest therein% provi!e! all these re63isites are present2
,1- There m3st "e ra3!3lent representation or #rong3l concealment o acts
9no#n to the part$ estoppe!;
,*- The part$ precl3!e! m3st inten! that the other sho3l! act 3pon the acts as
misrepresente!;
,3- The part$ misle! m3st have "een 3na#are o the tr3e acts; an!
,+- The part$ !era3!e! m3st have acte! in accor!ance #ith the
misrepresentation.
Art. 1+3:. One #ho has allo#e! another to ass3me apparent o#nership o personal
propert$ or the p3rpose o ma9ing an$ transer o it% cannot% i he receive! the s3m
or #hich a ple!ge has "een constit3te!% set 3p his o#n title to !eeat the ple!ge o
the propert$% ma!e "$ the other to a ple!gee #ho receive! the same in goo! aith
an! or val3e.
Art. 1+30. (stoppel is eective onl$ as "et#een the parties thereto or their
s3ccessors in interest.
A0AINST WHO CAN 9O< RAIS+ +STO::+/?
Art. 1=3@ provides that +stoppe& is e""ective on&% as #et$een the parties thereto or their
s3ccessors in interest.
+stoppe& does not #ind on&% the person $ho ade the adission #3t a&so his s3ccessors4in4
interest.
CAN 9O< RAIS+ +STO::+/ A0AINST INCA:ACITAT+) :+RSONS?
The !enera& r3&e is NO. As an incapacitated person is not deeed to to 1no$ $hat he is doin!.
An e7ception is "o3nd in the case o" .ra!anHa. *or estoppe& to &ie' the other part% 3st re&% on it.
+ven i" a inor sa%s I a o" inor a!e'( and he is C %ears o&d' o#vio3s&% the part% $o3&d not re&% on his
adissions. I" a person is a#o3t to reach the a!e o" a;orit% and he &oo1s &i1e a person $ho is eancipated
a&read%' then that action $i&& #e considered as an act o" active repression. There"ore' estoppe& $i&& &ie.
WO</) +STO::+/ /I+ A0AINST TH+ 0OA+RN,+NT?
NO. 0overnent acts thro3!h its a!ent #3t it is not #o3nd #% their actions #eca3se o" s3perior
p3#&ic po&ic%. *or e7ap&e' adinistrative r3&in! contrar% to &a$ $i&& not #ind the !overnent.
The !overnent is no estopped #% ista1e or error on the part o" its o""icia&s or a!ents' the
erroneo3s app&ication and en"orceent o" the &a% #% p3#&ic o""icers does not prevent the s3#se23ent correct
app&ication o" the stat3te.
WHAT A.O<T COR:ORATIONS? WI// COR:ORATIONS .+ .O<N) .9 ACTIONS OR
R+:R+S+NTATIONS .9 TH+IR O**IC+RS OR A0+NTS?
On&% i" a3thoriHed or c&othed $ith apparent a3thorit% #% the corporations.
WI// +STO::+/ /I+ IN TH+ CAS+ O* I//+0A/ ACTS?
+stoppe& cannot #e predicated on an i&&e!a& act. It is !enera&&% aditted that as #et$een the parties
to a contract' va&idit% cannot #e !iven to it #% estoppe& i" it is prohi#ited #% &a$ or is a!ainst p3#&ic po&ic%.
WHAT A.O<T TH+ :RINCI:/+ O* IN :ARI )+/ICTO(?
In essence' %o3 are not estopped #% the "act that the contract is i&&e!a&. Ho$ever' %o3 $i&& not #e
peritted to aintain a s3it not #eca3se o" the princip&e o" in pari de&icto( .3t i" there is no pari de&icto'
%o3 $i&& not #e estopped #% the &atter on sa%in! that the contract is n3&& and void.
.aches
WHAT IS /ACH+S?
It is the "ai&3re or ne!&ect "or an 3nreasona#&e and 3ne7p&ained &en!th o" tie' to do that $hich #%
e7ercisin! d3e di&i!ence co3&d or sho3&d have #een done ear&ier. It is ne!&i!ence or oission to assert a
ri!ht $ithin a reasona#&e tie $arrantin! a pres3ption that the part% entit&ed to assert it either has
a#andoned or dec&ined to assert it.
WH+N SHO</) /ACH+S .+ A::/I+)?
/aches app&ies on&% i" co3rt s3its' speci"ica&&% in cases $hen there has #een a series o" transactions
so 3ch so that the parties cannot #e #ro3!ht #ac1 in a sit3ation as #e"ore. There is no standard period'
$hen there are no r3&es on prescription' r3&es on &aches $i&& app&%.
WHAT AR+ TH+ )I**+R+NC+S .+TW++N :R+SCRI:TION AN) /ACH+S?

Prescription .aches
It is concerned $ith the "act o" de&a% It is concerned $ith the e""ect o" de&a%.
,atter o" tie I3estion o" ine23it% o" perittin! a c&ai to #e
en"orced.
Stat3tor% Non4stat3tor% 5discretionar% 3pon the co3rt6
App&ies at &a$ App&ies to e23it%
.ased on "i7ed tie No "i7ed tie
I* :RO:+RT9 IS STI// WITH 9O< AN) I .RIN0 IT ON TH+ 3?=
TH
)A9 A*T+R TH+ 3
R)
9+AR'
CAN I STI// .+ A./+ TO R+COA+R IT?
9+S. .eca3se it has not prescri#ed.
.3t i" there has #een a series o" trans"ers a&read% and it is no &on!er possi#&e to restore it to its
ori!ina& condition' it $i&& #e ver%' ver% di""ic3&t to a&&o$ it to aintain an action' other$ise %o3 $i&& have to
restore severa& parties to their ori!ina& positions and it is no &on!er possi#&e to do that.
Title /E TR>STS ,N-
Chapter 1
General Provisions
Art. 1++0. A person #ho esta"lishes a tr3st is calle! the tr3stor; one in #hom
coni!ence is repose! as regar!s propert$ or the "eneit o another person is 9no#n
as the tr3stee; an! the person or #hose "eneit the tr3st has "een create! is
reerre! to as the "eneiciar$.
Art. 1++1. Tr3sts are either e)press or implie!. ()press tr3sts are create! "$ the
intention o the tr3stor or o the parties. Implie! tr3sts come into "eing "$ operation
o la#.
Art. 1++*. The principles o the general la# o tr3sts% insoar as the$ are not in
conlict #ith this Co!e% the Co!e o Commerce% the R3les o Co3rt an! special la#s
are here"$ a!opte!.
Chapter *
()press Tr3sts
Art. 1++3. No e)press tr3sts concerning an immova"le or an$ interest therein ma$
"e prove! "$ parol evi!ence.
Art. 1+++. No partic3lar #or!s are re63ire! or the creation o an e)press tr3st% it
"eing s3icient that a tr3st is clearl$ inten!e!.
Art. 1++5. No tr3st shall ail "eca3se the tr3stee appointe! !eclines the !esignation%
3nless the contrar$ sho3l! appear in the instr3ment constit3ting the tr3st.
Art. 1++C. Acceptance "$ the "eneiciar$ is necessar$. Nevertheless% i the tr3st
imposes no onero3s con!ition 3pon the "eneiciar$% his acceptance shall "e
pres3me!% i there is no proo to the contrar$.
Chapter 3
Implie! Tr3sts
Art. 1++8. The en3meration o the ollo#ing cases o implie! tr3st !oes not e)cl3!e
others esta"lishe! "$ the general la# o tr3st% "3t the limitation lai! !o#n in Article
1++* shall "e applica"le.
Art. 1++:. There is an implie! tr3st #hen propert$ is sol!% an! the legal estate is
grante! to one part$ "3t the price is pai! "$ another or the p3rpose o having the
"eneicial interest o the propert$. The ormer is the tr3stee% #hile the latter is the
"eneiciar$. Bo#ever% i the person to #hom the title is conve$e! is a chil!%
legitimate or illegitimate% o the one pa$ing the price o the sale% no tr3st is implie!
"$ la#% it "eing !isp3ta"l$ pres3me! that there is a git in avor o the chil!.
Art. 1++0. There is also an implie! tr3st #hen a !onation is ma!e to a person "3t it
appears that altho3gh the legal estate is transmitte! to the !onee% he nevertheless is
either to have no "eneicial interest or onl$ a part thereo.
Art. 1+50. I the price o a sale o propert$ is loane! or pai! "$ one person or the
"eneit o another an! the conve$ance is ma!e to the len!er or pa$or to sec3re the
pa$ment o the !e"t% a tr3st arises "$ operation o la# in avor o the person to
#hom the mone$ is loane! or or #hom its is pai!. The latter ma$ re!eem the
propert$ an! compel a conve$ance thereo to him.
Art. 1+51. 4hen lan! passes "$ s3ccession to an$ person an! he ca3ses the legal title
to "e p3t in the name o another% a tr3st is esta"lishe! "$ implication o la# or the
"eneit o the tr3e o#ner.
Art. 1+5*. I t#o or more persons agree to p3rchase propert$ an! "$ common
consent the legal title is ta9en in the name o one o them or the "eneit o all% a
tr3st is create! "$ orce o la# in avor o the others in proportion to the interest o
each.
Art. 1+53. 4hen propert$ is conve$e! to a person in reliance 3pon his !eclare!
intention to hol! it or% or transer it to another or the grantor% there is an implie!
tr3st in avor o the person #hose "eneit is contemplate!.
Art. 1+5+. I an a"sol3te conve$ance o propert$ is ma!e in or!er to sec3re the
perormance o an o"ligation o the grantor to#ar! the grantee% a tr3st "$ virt3e o
la# is esta"lishe!. I the 3lillment o the o"ligation is oere! "$ the grantor #hen
it "ecomes !3e% he ma$ !eman! the reconve$ance o the propert$ to him.
Art. 1+55. 4hen an$ tr3stee% g3ar!ian or other person hol!ing a i!3ciar$
relationship 3ses tr3st 3n!s or the p3rchase o propert$ an! ca3ses the conve$ance
to "e ma!e to him or to a thir! person% a tr3st is esta"lishe! "$ operation o la# in
avor o the person to #hom the 3n!s "elong.
Art. 1+5C. I propert$ is ac63ire! thro3gh mista9e or ra3!% the person o"taining it
is% "$ orce o la#% consi!ere! a tr3stee o an implie! tr3st or the "eneit o the
person rom #hom the propert$ comes.
Art. 1+58. An implie! tr3st ma$ "e prove! "$ oral evi!ence.
WHAT IS A TR<ST?
It is the &e!a& re&ationship #et$een one person havin! an e23ita#&e o$nership in propert% and
another person o$nin! the &e!a& tit&e to s3ch propert%' the e23ita#&e o$nership o" the "orer entit&in! hi
to the per"orance o" certain d3ties and the e7ercise o" certain po$ers #% the &atter.
WHO IS TH+ TR<STOR' TH+ TR<ST++ AN) TH+ .+N+*ICIAR9?
Art. 1==0 provides that A person $ho esta#&ishes a tr3st is ca&&ed the tr3stor' one in $ho
con"idence is reposed as re!ards propert% "or the #ene"it o" another person is 1no$n as the tr3steeE and the
person "or $hose #ene"it the tr3st has #een created is re"erred to as the #ene"iciar%.
NOT(2 Tr3stor and #ene"iciar% can #e one and the sae person.
WHAT IS /+0A/ OWN+RSHI:?
It is the person $ho appears on record. One $ho appears on the tit&e or re!istr% as the re!istered
o$ner.
WHAT IS .+N+*ICIA/ OWN+RSHI:?
It is that person $ho ho&ds the o""icia& o$nership o" a propert% $hi&e in tr3th the o$ner is the
#ene"iciar%. Soe$hat &i1e an o$ner #% the nae.
I* 9O< HAA+ A TR<STOR WHO IS A/SO TH+ .+N+*ICIAR9' AN) 9O< HAA+ A TR<ST++
WHO IS TH+ /+0A/ OWN+R' WHO IS TH+ .+N+*ICIA/ OWN+R?
The tr3stor is the #ene"icia& o$ner and the tr3stee is the &e!a& o$ner.
Tr3st is reposed in the tr3stee' he is the one $ho can !o to ;ai& "or esta"a. The &ia#i&it% o" a tr3stee
$ho vio&ates a tr3st is persona&.
I* 9O< NA,+ A TR<ST++ IN A TR<ST )OC<,+NT AN) H+ )O+S NOT ACC+:T TH+ TR<ST'
WHAT HA::+NS?
9o3 can !o to co3rt' and as1 it to appoint one.
IS TH+R+ AN9 *OR,A/IT9 R+I<IR+) *OR TH+ ,O)+ O* ACC+:TANC+? IS TH+R+ AN9
WRITT+N OR :<./IC INSTR<,+NT R+I<IR+)?
I" there is onero3s consideration' acceptance 3st #e e7press. I" it is !rat3ito3s' there can #e
ip&ied acceptance.
WHAT IS TH+ R+I<IR+,+NT WITH R+S:+CT TO +F:R+SS TR<ST?
It 3st #e $ritten.
I* TH+ CR+ATION O* A TR<ST IS IN WRITIN0' ,<ST ITS ACC+:TANC+ .+ IN WRITIN0?
No. It is not re23ired to #e $ritten. Acceptance a% even #e ip&ied.
WHAT IS TH+ )I**+R+NC+ .+TW++N +F:R+SS TR<ST AN) I,:/I+) TR<ST?
1. +7press tr3st is created #% the intention o" the parties $hich is ani"ested in a private or
p3#&ic instr3ent. It can ora& e7cept an e7press tr3st invo&vin! an iova#&e. It can a&so #e
ded3ced "ro the acts o" the parties.
8. Ip&ied tr3st does not ean there is no e7press a!reeent #et$een the parties' on&% that it is
not created #% the intention o" the parties #3t #% operation o" &a$.
WHAT AR+ TH+ TWO -IN)S O* I,:/I+) TR<STS?
A res3&tin! tr3st' in its ore restricted sense' is a tr3st raised #% ip&ication o" &a$ and pres3ed
a&$a%s to have #een contep&ated #% the parties' the intention as to $hich is to #e "o3nd in the nat3re o"
their transaction' #3t not e7pressed in the deed or instr3ent o" conve%ance.
A constr3ctive tr3st' in its ore restricted sense as contradistin!3ished "ro a res3&tin! tr3st' is a
tr3st not created #% $ords' either e7press&% or ip&ied&% evincin! a direct intention to create a tr3st' #3t #%
the constr3ction o" e23it% in order to satis"% the deands o" ;3stice. I" a person o#tains &e!a& tit&e to
propert% #% "ra3d or concea&ent' co3rts o" e23it% $i&& ipress 3pon the tit&e a so4ca&&ed constr3ctive tr3st
in "avor o" the de"ra3ded part%. A constr3ctive tr3st is there there"ore not a tr3st in the technica& sense.
Title /. E PR(SCRIPTION
Chapter 1
General Provisions
Art. 110C. &$ prescription% one ac63ires o#nership an! other real rights thro3gh the
lapse o time in the manner an! 3n!er the con!itions lai! !o#n "$ la#.
In the same #a$% rights an! con!itions are lost "$ prescription. ,1030a-
)+*IN+ AN) C/ASSI*9 :R+SCRI:TION.
.% prescription' one ac23ires o$nership and other rea& ri!hts thro3!h the &apse o" tie in the
anner and 3nder the conditions &aid do$n #% &a$.
In the sae $a%' ri!hts and actions are &ost #% prescription.(
*ro this coda& de"inition' it is evident that there are t$o 1inds o" prescription P ac23isitive and
e7tinctive.
)ISTIN0<ISH .+TW++N ACI<ISITIA+ AN) +FTINCTIA+ :R+SCRI:TION.
Ac63isitive ()tinctive
As to e&eents A positive "act P possession #%
one $ho is not the o$ner.
A ne!ative e&eent P inaction o"
the o$ner.
As to p3rpose To prod3ce the ac23isition o"
o$nership and other rea& ri!hts.
To prod3ce the e7tinction o"
ri!hts.
As to e7tent App&ica#&e on&% to rea& ri!hts
$hich are s3scepti#&e o"
possession.
App&ica#&e to a&& 1inds o" ri!hts'
$hether rea& or persona&.
As to e""ect Ac23isition and e7tinction o" a
rea& ri!ht
On&% in the e7tinction o" a rea& or
persona& ri!ht.
Art. 1108. Persons #ho are capa"le o ac63iring propert$ or rights "$ the other legal
mo!es ma$ ac63ire the same "$ means o prescription. =inors an! other
incapacitate! persons ma$ ac63ire propert$ or rights "$ prescription% either
personall$ or thro3gh their parents% g3ar!ians or legal representatives. ,1031a-

Art. 110:. Prescription% "oth ac63isitive an! e)tinctive% r3ns against2
,1- =inors an! other incapacitate! persons #ho have parents% g3ar!ians or
other legal representatives;
,*- A"sentees #ho have a!ministrators% either appointe! "$ them "eore their
!isappearance% or appointe! "$ the co3rts;
,3- Persons living a"roa!% #ho have managers or a!ministrators;
,+- J3ri!ical persons% e)cept the State an! its s3"!ivisions.
Persons #ho are !is63aliie! rom a!ministering their propert$ have a right to
claim !amages rom their legal representatives #hose negligence has "een the
ca3se o prescription. ,103*a-
Art. 1100. Prescription !oes not r3n "et#een h3s"an! an! #ie% even tho3gh there
"e a separation o propert$ agree! 3pon in the marriage settlements or "$ <3!icial
!ecree.
Neither !oes prescription r3n "et#een parents an! chil!ren% !3ring the
minorit$ or insanit$ o the latter% an! "et#een g3ar!ian an! #ar! !3ring the
contin3ance o the g3ar!ianship. ,n-
)O+S :R+SCRI:TION R<N .+TW++N H<S.AN) AN) WI*+' OR .+TW++N :AR+NTS AN)
CHI/)R+N' OR .+TW++N 0<AR)IAN AN) WAR)?
:rescription does not r3n #et$een h3s#and and $i"e' even tho3!h there #e a separation o" propert%
a!reed 3pon in the arria!e sett&eents or #% ;3dicia& decree. Neither does prescription r3n #et$een
parents and chi&dren d3rin! the inorit% or insanit% o" the &atter' and #et$een !3ardian and $ard d3rin! the
contin3ance o" the !3ardianship. 5Art. 110@6
Art. 1110. Prescription% ac63isitive an! e)tinctive% r3ns in avor o% or against a
marrie! #oman. ,n-
Art. 1111. Prescription o"taine! "$ a coEproprietor or a coEo#ner shall "eneit the
others. ,1033-
Art. 111*. Persons #ith capacit$ to alienate propert$ ma$ reno3nce prescription
alrea!$ o"taine!% "3t not the right to prescri"e in the 3t3re.
Prescription is !eeme! to have "een tacitl$ reno3nce! #hen the ren3nciation
res3lts rom acts #hich impl$ the a"an!onment o the right ac63ire!. ,1035-
,A9 :R+SCRI:TION .+ R+NO<NC+)?
:ersons $ith capacit% to a&ienate propert% a% reno3nce prescription a&read% o#tained' #3t not the
rea& ri!ht to prescri#e in the "3t3re. :rescription is deeed to have #een tacit&% reno3nced $hen the
ren3nciation res3&ts "ro acts $hich ip&% the a#andonent o" the ri!ht ac23ired.
Art. 1113. All things #hich are #ithin the commerce o men are s3scepti"le o
prescription% 3nless other#ise provi!e!. Propert$ o the State or an$ o its
s3"!ivisions not patrimonial in character shall not "e the o"<ect o prescription.
,103Ca-
Art. 111+. Cre!itors an! all other persons intereste! in ma9ing the prescription
eective ma$ avail themselves thereo not#ithstan!ing the e)press or tacit
ren3nciation "$ the !e"tor or proprietor. ,1038-
Art. 1115. The provisions o the present Title are 3n!erstoo! to "e #itho3t pre<3!ice
to #hat in this Co!e or in special la#s is esta"lishe! #ith respect to speciic cases o
prescription. ,103:-
Art. 111C. Prescription alrea!$ r3nning "eore the eectivit$ o this Co!e shall "e
governe! "$ la#s previo3sl$ in orce; "3t i since the time this Co!e too9 eect the
entire perio! herein re63ire! or prescription sho3l! elapse% the present Co!e shall
"e applica"le% even tho3gh "$ the ormer la#s a longer perio! might "e re63ire!.
,1030-
WHAT /AW 0OA+RNS :R+SCRI:TION A/R+A)9 R<NNIN0 .+*OR+ TH+ +**+CTIAIT9 O*
TH+ N+W CIAI/ CO)+?
:rescription a&read% r3nnin! #e"ore the e""ectivit% o" the Ne$ Civi& Code sha&& #e !overned #% &a$
previo3s&% in "orceE #3t i" since the tie the Ne$ Civi& Code too1 e""ect' the entire period re23ired "or
prescription 3nder s3ch ne$ Code sho3&d e&apse' s3ch ne$ Code sha&& #e app&ica#&e' even tho3!h #% the
"orer &a$s a &on!er period i!ht #e re23ired. 5Art. 111?6
Chapter *
Prescription O O#nership An! Other Real Rights
Art. 1118. Ac63isitive prescription o !ominion an! other real rights ma$ "e
or!inar$ or e)traor!inar$.
Or!inar$ ac63isitive prescription re63ires possession o things in goo! aith
an! #ith <3st title or the time i)e! "$ la#. ,10+0a-
Art. 111:. Possession has to "e in the concept o an o#ner% p3"lic% peace3l an!
3ninterr3pte!. ,10+1-
Art. 1110. Acts o possessor$ character e)ec3te! in virt3e o license or "$ mere
tolerance o the o#ner shall not "e availa"le or the p3rposes o possession. ,10+*-
WHAT AR+ TH+ R+I<ISIT+S *OR ACI<ISITIA+ :R+SCRI:TION?
It depends.
In case o" ordinar% ac23isitive prescription' the "o&&o$in! re23isites 3st conc3r>
516 Capacit% to ac23ire #% prescriptionE
586 The o#;ect 3st #e s3scepti#&e o" prescriptionE
536 The possession 3st #e in concept o" o$ner' p3#&ic' peace"3&' contin3o3s' and 3ninterr3ptedE
5=6 The possession 3st #e in !ood "aithE
556 The possession 3st #e #% virt3e o" a ;3st tit&eE and
5?6 The period o" possession 3st #e = %ears i" the o#;ect is ova#&e or 10 %ears i" it is
iova#&e.
In case o" e7traordinar% ac23isitive prescription' the "o&&o$in! re23isites 3st conc3r>
,1- Capacit% to ac23ire #% prescriptionE
,*- The o#;ect 3st #e s3scepti#&e o" prescriptionE
,3- The possession 3st #e in concept o" o$ner' p3#&ic' peace"3&' contin3o3s' and 3ninterr3ptedE
and
,+- The period o" possession 3st #e D %ears i" the o#;ect is ova#&e or 30 %ears i" it is ova#&e.
Art. 11*0. Possession is interr3pte! or the p3rposes o prescription% nat3rall$ or
civill$. ,10+3-
Art. 11*1. Possession is nat3rall$ interr3pte! #hen thro3gh an$ ca3se it sho3l!
cease or more than one $ear.
The ol! possession is not revive! i a ne# possession sho3l! "e e)ercise! "$
the same a!verse claimant. ,10++a-
Art. 11**. I the nat3ral interr3ption is or onl$ one $ear or less% the time elapse!
shall "e co3nte! in avor o the prescription. ,n-
Art. 11*3. Civil interr3ption is pro!3ce! "$ <3!icial s3mmons to the possessor.
,10+5a-
Art. 11*+. J3!icial s3mmons shall "e !eeme! not to have "een iss3e! an! shall not
give rise to interr3ption2
,1- I it sho3l! "e voi! or lac9 o legal solemnities;
,*- I the plainti sho3l! !esist rom the complaint or sho3l! allo# the
procee!ings to lapse;
,3- I the possessor sho3l! "e a"solve! rom the complaint.
In all these cases% the perio! o the interr3ption shall "e co3nte! or the
prescription. ,10+Ca-
Art. 11*5. An$ e)press or tacit recognition #hich the possessor ma$ ma9e o the
o#nerKs right also interr3pts possession. ,10+:-
HOW ,A9 TH+ :+RIO) O* :OSS+SSION .+ INT+RR<:T+)?
Strict&% spea1in!' there are 3 $a%s #% $hich the period o" possession a% #e interr3pted. The% are
as "o&&o$s>
,1- Nat3ra&&% P $hen thro3!h an% ca3se' the possession sha&& cease "or ore than one %ear. 5Art.
1180 P816 I" the nat3ra& interr3ption is "or on&% one %ear or &ess' the tie e&apsed sha&& #e
co3nted in "avor o" the prescription. 5Art. 11886
,*- Civi&&% P $hen there is a ;3dicia& s3ons to the possessor. 5Art. 11836 Ho$ever' ;3dicia&
s3ons sha&& #e deeed not to have #een iss3ed and sha&& not !ive rise to interr3ption>
5a6 i" it sho3&d #e void "or &ac1 o" &e!a& so&enitiesE
5#6 i" the p&ainti"" sho3&d desist "ro the cop&aint or sho3&d a&&o$ the proceedin!s to &apseE
and
5c6 i" the possessor sho3&d #e a#so&ved "ro the cop&aint.
In a&& these cases' the period o" the interr3ption sha&& #e co3nted "or the prescription
5Art.118=6
,3- +7press or tacit reco!nition #% the possessor o" the o$nerBs ri!ht. 5Art. 11856
Art. 11*C. Against a title recor!e! in the Registr$ o Propert$% or!inar$ prescription
o o#nership or real rights shall not ta9e place to the pre<3!ice o a thir! person%
e)cept in virt3e o another title also recor!e!; an! the time shall "egin to r3n rom
the recor!ing o the latter.
As to lan!s registere! 3n!er the .an! Registration Act% the provisions o that
special la# shall govern. ,10+0a-
Art. 11*8. The goo! aith o the possessor consists in the reasona"le "elie that the
person rom #hom he receive! the thing #as the o#ner thereo% an! co3l! transmit
his o#nership. ,1050a-
WHAT IS ,+ANT .9 0OO) *AITH?
0ood "aith "or p3rposes o" prescription has 8 aspects. In its positive aspect' it consists in the
reasona#&e #e&ie" that the person "ro $ho the possessor received the thin! $as the o$ner thereo"' and
co3&d transit his o$nership. 5Art. 118C6 In its ne!ative aspect' it consists in the i!norance o" the possessor
o" an% "&a$ $hich $o3&d inva&idate his tit&e or ode o" ac23isition.
Art. 11*:. The con!itions o goo! aith re63ire! or possession in Articles 5*C% 5*8%
5*:% an! 5*0 o this Co!e are li9e#ise necessar$ or the !etermination o goo! aith
in the prescription o o#nership an! other real rights. ,1051-
Art. 11*0. 1or the p3rposes o prescription% there is <3st title #hen the a!verse
claimant came into possession o the propert$ thro3gh one o the mo!es recogniDe!
"$ la# or the ac63isition o o#nership or other real rights% "3t the grantor #as not
the o#ner or co3l! not transmit an$ right. ,n-
WHAT IS ,+ANT .9 G<ST TIT/+?
*or p3rposes o" prescription' there is ;3st tit&e $hen the adverse c&aiant cae into the possession
o" the propert% thro3!h one o" the odes reco!niHed #% &a$ "or the ac23isition o" o$nership or other rea&
ri!ht' #3t the !rantor $as not the o$ner or co3&d not transit an% ri!ht. 5Art. 118@6
Art. 1130. The title or prescription m3st "e tr3e an! vali!. ,1053-
Art. 1131. 1or the p3rposes o prescription% <3st title m3st "e prove!; it is never
pres3me!. ,105+a-
WHAT AR+ TH+ R+I<ISIT+S O* A G<ST TIT/+?
Its re23isites are>
,1- It 3st #e ;3st
,*- It 3st #e tr3e
,3- It 3st #e va&id
,+- It 3st #e proved. 5Arts. 111C' 1130 to 316
Art. 113*. The o#nership o mova"les prescri"es thro3gh 3ninterr3pte! possession
or o3r $ears in goo! aith.
The o#nership o personal propert$ also prescri"es thro3gh 3ninterr3pte!
possession or eight $ears% #itho3t nee! o an$ other con!ition.
4ith regar! to the right o the o#ner to recover personal propert$ lost or o
#hich he has "een illegall$ !eprive!% as #ell as #ith respect to mova"les ac63ire! in
a p3"lic sale% air% or mar9et% or rom a merchantKs store the provisions o Articles
550 an! 1505 o this Co!e shall "e o"serve!. ,1055a-
Art. 1133. =ova"les possesse! thro3gh a crime can never "e ac63ire! thro3gh
prescription "$ the oen!er. ,105Ca-
Art. 113+. O#nership an! other real rights over immova"le propert$ are ac63ire!
"$ or!inar$ prescription thro3gh possession o ten $ears. ,1058a-
Art. 1135. In case the a!verse claimant possesses "$ mista9e an area greater% or less
than that e)presse! in his title% prescription shall "e "ase! on the possession. ,n-
Art. 113C. Possession in #artime% #hen the civil co3rts are not open% shall not "e
co3nte! in avor o the a!verse claimant.
Art. 1138. O#nership an! other real rights over immova"les also prescri"e thro3gh
3ninterr3pte! a!verse possession thereo or thirt$ $ears% #itho3t nee! o title or o
goo! aith. ,1050a-
Art. 113:. In the comp3tation o time necessar$ or prescription the ollo#ing r3les
shall "e o"serve!2
,1- The present possessor ma$ complete the perio! necessar$ or prescription "$
tac9ing his possession to that o his grantor or pre!ecessor in interest;
,*- It is pres3me! that the present possessor #ho #as also the possessor at a
previo3s time% has contin3e! to "e in possession !3ring the intervening time%
3nless there is proo to the contrar$;
,3- The irst !a$ shall "e e)cl3!e! an! the last !a$ incl3!e!. ,10C0a-
HOW IS TH+ :+RIO) O* :OSS+SSION CO,:<T+)?
:ossession in $artie' $hen the civi& co3rts are not open sha&& not #e co3nted in "avor o" the
adverse c&aiant. 5Art. 113?6
In the cop3tation o" tie necessar% "or prescription' the "o&&o$in! r3&es sha&& #e o#served>
,1- The present possessor a% cop&ete the period necessar% "or prescription #% tac1in! his
possession to that o" his !rantor or predecessor in interestE
,*- It is pres3ed that the present possessor $ho $as a&so the possessor at a previo3s tie' has
contin3ed to #e in possession d3rin! the intervenin! tie' 3n&ess there is proo" to the
contrar%E
,3- The "irst da% sha&& #e e7c&3ded and the &ast da% inc&3ded. 5Art. 113D6
Chapter 3
Prescription O Actions
Art. 1130. Actions prescri"e "$ the mere lapse o time i)e! "$ la#. ,10C1-
Art. 11+0. Actions to recover mova"les shall prescri"e eight $ears rom the time the
possession thereo is lost% 3nless the possessor has ac63ire! the o#nership "$
prescription or a less perio!% accor!ing to Articles 113*% an! #itho3t pre<3!ice to
the provisions o Articles 550% 1505% an! 1133. ,10C*a-
Art. 11+1. Real actions over immova"les prescri"e ater thirt$ $ears.
This provision is #itho3t pre<3!ice to #hat is esta"lishe! or the ac63isition o
o#nership an! other real rights "$ prescription. ,10C3-
Art. 11+*. A mortgage action prescri"es ater ten $ears. ,10C+a-
Art. 11+3. The ollo#ing rights% among others speciie! else#here in this Co!e% are
not e)ting3ishe! "$ prescription2
,1- To !eman! a right o #a$% reg3late! in Article C+0;
,*- To "ring an action to a"ate a p3"lic or private n3isance. ,n-
Art. 11++. The ollo#ing actions m3st "e "ro3ght #ithin ten $ears rom the time the
right o action accr3es2
,1- >pon a #ritten contract;
,*- >pon an o"ligation create! "$ la#;
,3- >pon a <3!gment. ,n-
Art. 11+5. The ollo#ing actions m3st "e commence! #ithin si) $ears2
,1- >pon an oral contract;
,*- >pon a 63asiEcontract. ,n-
Art. 11+C. The ollo#ing actions m3st "e instit3te! #ithin o3r $ears2
,1- >pon an in<3r$ to the rights o the plainti;
,*- >pon a 63asiE!elict;
Bo#ever% #hen the action arises rom or o3t o an$ act% activit$% or con!3ct o an$
p3"lic oicer involving the e)ercise o po#ers or a3thorit$ arising rom =artial
.a# incl3!ing the arrest% !etention an!5or trial o the plainti% the same m3st "e
"ro3ght #ithin one ,1- $ear. ,As amen!e! "$ PF No. 1855% Fec. *+% 10:0.-
Art. 11+8. The ollo#ing actions m3st "e ile! #ithin one $ear2
,1- 1or orci"le entr$ an! !etainer;
,*- 1or !eamation. ,n-
Art. 11+:. The limitations o action mentione! in Articles 11+0 to 11+*% an! 11++ to
11+8 are #itho3t pre<3!ice to those speciie! in other parts o this Co!e% in the Co!e
o Commerce% an! in special la#s. ,n-
Art. 11+0. All other actions #hose perio!s are not i)e! in this Co!e or in other la#s
m3st "e "ro3ght #ithin ive $ears rom the time the right o action accr3es. ,n-
Art. 1150. The time or prescription or all 9in!s o actions% #hen there is no special
provision #hich or!ains other#ise% shall "e co3nte! rom the !a$ the$ ma$ "e
"ro3ght. ,10C0-
Art. 1151. The time or the prescription o actions #hich have or their o"<ect the
enorcement o o"ligations to pa$ principal #ith interest or ann3it$ r3ns rom the
last pa$ment o the ann3it$ or o the interest. ,1080a-
Art. 115*. The perio! or prescription o actions to !eman! the 3lillment o
o"ligation !eclare! "$ a <3!gment commences rom the time the <3!gment "ecame
inal. ,1081-
Art. 1153. The perio! or prescription o actions to !eman! acco3nting r3ns rom
the !a$ the persons #ho sho3l! ren!er the same cease in their 3nctions.
The perio! or the action arising rom the res3lt o the acco3nting r3ns rom
the !ate #hen sai! res3lt #as recogniDe! "$ agreement o the intereste! parties.
,108*-
Art. 115+. The perio! !3ring #hich the o"ligee #as prevente! "$ a ort3ito3s event
rom enorcing his right is not rec9one! against him. ,n-
Art. 1155. The prescription o actions is interr3pte! #hen the$ are ile! "eore the
co3rt% #hen there is a #ritten e)tra<3!icial !eman! "$ the cre!itors% an! #hen there
is an$ #ritten ac9no#le!gment o the !e"t "$ the !e"tor. ,1083a-
WHAT AR+ TH+ )I**+R+NT :R+SCRI:TIA+ :+RIO)S?
Perio! Cases
=0 da%s Redhi#itor% action #ased on de"ects o" ania&s 5Art.
15CC6
? onths Action "or red3ction o" price "or rescission in case
o" #reach o" sa&e o" rea& estate' either $ith a
stateent o" its area at a certain price "or a 3nit o"
eas3re or n3#er or a &3p s3 5Art. 15=84=3'
15=@6
Action "or $arrant% a!ainst hidden de"ects o" thin!s
so&d 5Art. 15C16
1 %ear Action #% h3s#and a!ainst $i"e to ip3!n chi&dBs
&e!itiac% i" h3s#and is in the sae p&ace as $i"e.
5Art 1C0' *ai&% Code6
Action "or revocation o" donation "or acts o"
in!ratit3de 5Art. C?@6
Action "or "orci#&e entr% or 3n&a$"3& detainer 5Art.
11=C6
Action "or de"aation 5Art. 11=C6
Action "or rescission or "or daa!es i" iova#&e
so&d is enc3#ered $ith non4apparent #3rden or
servit3de 5Art. 15?06
8 %ears Action to ip3!n chi&dBs &e!itiac% i" h3s#and is in
the :hi&ippines #3t not in sae p&ace as $i"e 5Art.
1C0' *ai&% Code6
3 %ears Action to ip3!n chi&dBs &e!itiac% i" h3s#and is
a#road 5Art. 1C0' *ai&% Code6
= %ears Action "or revocation or red3ction o" donation #ased
on s3pervenin! #irth' appearance' adoption o" a
chi&d. 5Art. C?36
Action "or revocation o" a donation #ased on non4
"3&"i&&ent o" condition 5Art. C?=6
Action "or recover% o" ova#&e 5rep&evin6 i"
possessor is in !ood "aith. 5Art. 11386
Action 3pon an in;3r% to ri!hts o" p&ainti"" 5Art.
11=?6
Action 3pon a 23asi4de&ict 5Art. 11=?6
Action "or rescission o" rescissi#&e contracts 5Art.
13D@6
Action "or ann3&ent o" voida#&e contracts 5Art.
13@16
5 %ears Action "or &e!a& separation 5Art. 5C' *ai&% Code6
Action "or ann3&ent o" arria!e 5Art. =C' *ai&%
Code6
Action to c&ai &e!itiac% o" chi&d sho3&d die
d3rin! inorit% or in state o" insanit% 5Art. 1C3'
*ai&% Code6
Action "or dec&aration o" incapacit% o" heir 5Art
10=06
Action "or $arrant% o" so&venc% o" de#tor i" credit is
assi!ned to co4heir d3rin! partition 5Art. 10@56
A&& other actions $hose periods are not "i7ed #% &a$
5Art. 11=@6
? %ears Action 3pon ora& contract 5Art.11=56
Action 3pon a 23asi4contract 5Art. 11=?6
D %ears Action "or recover% o" ova#&es 5rep&evin6 i"
possessor is in #ad "aith 5Art. 1138 and 11=06
10 %ears Action "or dec&aration o" n3&&it% o" arria!e #%
ps%cho&o!ica& incapacit% i" ce&e#rated #e"ore
enactent o" *ai&% Code
Action "or recover% o" possession o" iova#&es
5accion pa3&iana6 i" rea& ri!ht o" possession is &ost.
5Arts. 555' 113=6
Action "or recover% o" o$nership o" iova#&es
5acction reinvindicatoria6 i" possessor is in !ood
"aith 5Art. 113=6
Action "or ort!a!e contract 5Art. 11=86
Action 3pon a $ritten contract 5Art. 11==6
Action 3pon an o#&i!ation created #% &a$ 5Art.
11==6
Action 3pon a ;3d!ent 5Art. 11==6
/i"etie Action to c&ai &e!itiac% 5Art. 1C3' *ai&% Code6
Action to o#tain dec&aration o" i&&e!itiate "i&iation
5Art. 1C5' *ai&% Code6
HOW ,A9 :R+SCRI:TION O* ACTIONS .+ INT+RR<:T+)?
The prescription o" actions is interr3pted
516 $hen the% are "i&ed #e"ore the co3rt
586 $hen there is a $ritten e7tra;3dicia& deand #% the creditors' and
536 $hen there is an% $ritten ac1no$&ed!ent o" the de#t #% the de#tor. 5Art. 11556

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FRATERNAL ORDER OF UTOPIA

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