ATTY. GERTRUDE JOY D.

GAMONNAC

Rules and Regulations:

1. ALWAYS BRING YOUR OWN CODAL
2. GADGETS are absolutely prohibited (no browsing while in class)

OBLIGATIONS AND CONTRACTS

TITLE I: OBLIGATIONS:

CHAPTER I: GENERAL PROVISIONS

I. Concept

A. Definition: Art 1156

B. Elements:
1. Juridical Tie or Vinculum Juris
2. Active Subject (Obligee/Creditor)
3. Passive Subject (Obligor/Debtor)
4. Object – prestation; the conduct require to be observed by the
debtor/obligor

C. Distinction between Natural and Civil Obligations

1. As to enforceability
2. As to basis

II. Sources of Obligation: Art 1157

A. Law – Art 1158

B. Contracts – Art 1159, 1305

C. Quasi-Contracts – Art 1160, 2142

1. Negotiorum gestio – Art 2144
2. Solutio Indebiti – Art 2154
3. Other Quasi-Contracts – Art 2164 to 2175

D. Acts and omissions punished by law – Art 1161, 2177, 2202, 19-26 (Human
Relations), Art 100 of the Revised Penal Code

E. Quasi-Delicts – Art 1162, 2176

1. Distinction between quasi-delicts and crimes
2. Liability for the fault of others – Art 2180, Art 218 and 219 of the
Family Code
3. Civil Liability Arising From Crime – Art 1161; Rule 111 Rules of Court

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 § Barredo v. Garcia; 73 Phil 607 (8 July 1942)
§ Mendoza v. Arrieta; 91 SCRA 113 (29 June 1979)
§ PSBA v. CA; 205 SCRA 315 (4 February 1992)
§ Amadora v. CA; 160 SCRA 315 (15 April 1988)
§ Air France v. Carrascoso; 18 SCRA 155 (28 September 1966)

III. Classification of Obligations

A. Primary Classification Under the Civil Code

1. Pure and Conditional – Art. 1179 to 1192
2. With a period or term – Art. 1193 to 1198
3. Alternative or Facultative – Art. 1199 to 1206
4. Joint and Solidary – Art. 1207 to 1222
5. Divisible and Indivisible – Art. 1223 to 1225
6. With a penal clause – Art. 1226 to 1230

B. Secondary Classification
1. Legal (Art. 1158); Conventional (Art. 1159); Penal (Art. 1161)
2. Real (to give) and Personal (to do or not to do)
3. Determinate and Generic (as to subject matter of obligation)
4. Positive (to give, to do) and Negative (not to give, not to do)
5. Unilateral and Bilateral
6. Individual and Collective
7. Accessory and Principal
8. Object or Prestation
a. Simple and Multiple
b. Conjunctive and Distributive
c. Alternative and Facultative
9. Possible and Impossible

CHAPTER II: NATURE AND EFFECT OF OBLIGATIONS (Art. 1163 – 1178)

I. Kinds of Prestation

A. Obligation to give
1. A specific thing
a. Deliver the thing itself – Art 1244
b. To take care of the thing with the proper diligence of a good father
of a family – Art 1163
c. To deliver the accessions and accessories – Art 1166
d. To deliver the fruits – Art 1164 par 1

2. A generic thing – Art 1246

B. Obligation to do – Art 1244, 1167

C. Obligation not to do – Art 1244, 1168

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 D. Rights of the Creditor – Art 1165
§ Agcaoili v. GSIS; 30 Aug. 1988

II. Breach of Obligation – Art 1167 to 1168

A. Concept
Distinction between substantial and casual/slight breach

CASES:
§ Song Fo v. Hawaiian Phils.; 47 Phil 821 (16 September 1925)
§ Velarde et al v. CA; 361 SCRA 56 (11 July 2001)
§ Angeles et. al. v. Ursula Calasanz; G.R. No. L-42283 (18 March 1985)
§ Vermen Realty v. CA; G.R. 101762 (6 July 1993)

B. Modes of Breach – Art. 1170

1. Delay/Default (Mora) – Art 1169

a. Mora solvendi
i. Requisites
ii. General Rule: Creditor should make a demand before the
creditor incurs delay
§ Cetus Development v. CA; 7 August 1989
§ Aerospace Chemical Industries v. CA; 23 September 1999
§ Santos Ventura Hocorma Foundation v. Santos; 4 November
2004

iii. Exceptions
§ Abella v. Francisco; 20 December 1930
§ Dela Cruz v. Legaspi & Concordia Samperoy; 29 November
1955

b. Mora accipiendi
c. Compensation Morae

2. Fraud (Dolo) – Art. 1170, 1171

• Dolo incidente v. Dolo causante
§ Woodhouse v. Halili; 31 July 1952
§ Geraldez v. CA and Kenstar Travel Corporation; 23 February 1994

3. Negligence – Art 1172

a. Culpa v. Dolo
b. Culpa aquiliana v. Culpa Contractual
§ Guttierez v. Guttierez; 23 September 1931
§ Vasquez v. Borja; 23 February 1944

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 c. Standard of Care Required – Art. 1173 par 2
§ De Guia v. Manila Electric Co.; 28 January 1920
§ Sarmiento v. Sps. Cabrido; 9 April 2003
§ Crisostomo v. CA; 25 August 2003

4. Contravention of the Tenor of the Obligation

§ Telefast v. Castro; 29 February 1988
§ Arrieta v. NARIC; 31 January 1964
§ Magat v. Medialdea; 20 April 1983

III. Remedies of the Creditor in Case of Breach

A. Action for Performance

1. Action for specific performance in obligation to give a specific thing –

Art. 1165 par 1; ROC 39 sec 10
2. Action for substituted performance in obligation to give a generic thing
– Art. 1165 par 2
3. Action for substituted performance or undoing of poor work in
obligation to do – Art. 1167
§ Tanguilig v. CA; 2 January 1997

4. Action for undoing in obligation not to do – Art. 1168

B. Action for Damages – Art. 1170

C. Action for Rescission – Art. 1191, 1192

IV. Subsidiary Remedies of Creditor

A. Accion subrogatoria – Art. 1177

EXCEPTION: Inherent rights of debtor – Art. 772

B. Accion Pauliana – Art. 1177, 1381 par. 3

§ Khe Hong Cheng v. CA; 20 March 2001
§ Siguan v. Lim; 19 November 1999

C. Other specific remedies – Art. 1652, 1729, 1608, 1893

V. Extinguishment of Liability in Case of Breach Due to Fortuitous Event – Art

1174

A. Concept of Fortuitous Event

1. Act of God
2. Act of Man

B. Requisites; Effect of Concurrent Fault

§ Nakpil and Sons v. CA; 3 October 1986

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 § Republic v. Luzon Stevedoring; 29 September 1967
§ Austria v. CA; 10 June 1971
§ Yobido v. CA; 17 October 1997

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

VI. Usurious Transactions – Art 1175, 1413, 1961

A. PD 858; PD 1685
B. Central Bank Circular 416
C. Monetary Board Circular 905 lifting the interest rate ceiling vs Art 2209
§ First Metro Investment v. Este Del Sol; 15 November 2001
§ Angel Warehousing Co., Inc v. Chelda Enterprises; 24 April 1968
§ Security Bank and Trust Company; 23 October 1996
§ Crismina Garments v. CA; 9 March 1999
§ Keng Hua Paper Products v. CA; 12 February 1998
§ Eastern Shipping Lines v. CA; 12 July 1994

VII. Fulfillment of Obligations

A. Extinguishment of Obligations
B. Presumptions in payment of Interest – Art. 1176

VIII. Transmissibility of Rights – Art. 1178

CHAPTER III: DIFFERENT KINDS OF OBLIGATIONS

I. Pure and Conditional Obligations

A. Pure Obligations – Art. 1179 par 1

B. Conditional Obligations – Art. 1181

1. Condition
a. Concept
b. Condition v. Period/Term
§ Gaite v. Fonacier; 31 July 1961

2. Kinds of Condition
a. As to effect on obligation – Art. 1181
§ Gonzales v. Heirs of Thomas; 16 September 1999

i. Suspensive (condition precedent)

• Retroactive effect when condition is fulfilled – Art. 1187
• Rights of creditor and debtor before fulfillment of condition –
Art. 1188

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 § Romulo Coronel v. Concepcion Alcaraz; 7 October 1996

ii. Resolutory (condition subsequent)

§ Parks v. Province of Tarlac; 13 July 1926
§ Central Philippine University v. CA; 17 July 1995
§ Quijada et. al. v. CA; 4 December 1998

b. As to cause or origin – Art 1182

i. Potestative
- effect if fulfillment of condition depends solely on the will of
the debtor
- debtor’s promise to pay when he can is not a conditional
obligation – Art 1180
§ Francisco Lao Lim v. CA; 31 October 1990

ii. Casual
§ Naga Telephone Co. Inc. v. CA; 24 February 1994

iii. Mixed
§ Virgilio Romero v. CA; 23 November 1995
§ Rustan Pulp and Paper Mills v. IAC; 19 October 1992
§ Hermosa v. Longara; 27 October 1953
§ Smith Bell v. Matti; 9 March 1922

c. As to possibility – Art. 1183

§ Roman Catholic Archbishop of Manila v. CA; 19 June 1991

d. As to mode
i. Positive – Art. 1184
ii. Negative – Art. 1185

3. Rules in case of loss, deterioration or improvement pending the

happening of the condition – Art. 1189, 1190
§ Heirs of Timoteo Moreno v. Mactan International Airport; 15 October
2003

a. Meaning of “loss” (Art. 1189 [2]), “deterioration” and

“improvement”
b. Effect of loss or deterioration
i. Without debtor’s fault
ii. With debtor’s fault
c. Effect of improvement
i. By nature or time
ii. At the debtor’s expense

4. Effect of prevention of the fulfillment of the condition by the obligor –

Art. 1186

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II. Reciprocal Obligations – Art. 1191, 1192

A. Concept

B. Alternative remedies of injured party in case of breach

1. Action for fulfillment
• When fulfillment no longer possible; effect

2. Action for Rescission; See also Art. 1786, 1788; Art. 1484 to 1486; Art.
6552
a. Requisites
b. How made
c. Effects
§ Song Fo v. Hawaiian Philippines; 16 September 1925
§ UP v De Los Angeles; 29 September 1970
§ Angeles v. Calasanz; 18 March 1985
§ Iringan v. CA; 26 September 2001
§ Deiparine v. CA and Trinidad; 23 April 1993
§ Margarita Suria v. IAC; 30 June 1987
§ Visayan Sawmill v. CA; 3 March 1993

III. Obligation with a Period – Art. 1193, 1180

A. Period or Term
1. Concept
2. Period/Term vs. Condition

B. Kinds of Period/Term
1. As to effect
a. Suspensive (Ex die) – Art. 1193 par 1
b. Resolutory (In diem) – Art. 1193 par 2

2. As to expression
a. Express
b. Implied

3. As to definiteness
a. Definite
b. Indefinite

4. As to source
a. Voluntary
b. Legal
c. Judicial

C. Rules in case of loss, deterioration or improvement before arrival of

period – Art. 1194, 1189

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 D. Effect of payment in advance – Art. 1195
Note: Art. 1197 par 3

E. Benefit of Period

1. For whose benefit

a. Creditor
b. Debtor
c. Both

2. Effects

3. Presumption – Art. 1196

§ Buce v. CA; 12 May 2000

4. When debtor loses right to make use of period – Art. 1998

F. When court may fix period – Art. 1197

1. Period is implied
2. Period depends solely on the will of the debtor
§ Araneta v. Philippine Sugar Estate Development; 31 May 1967
§ Central Philippine University v. CA, Supra

IV. Alternative Obligations

A. Concept – Art. 1199

B. Right of Choice – Art. 1200

C. Effect of Notice of Choice

D. When Notice Produces Effect – Art. 1201

E. Effect of loss or impossibility of one or all

F. Facultative Obligation – Art. 1206

1. Concept
2. Distinguished from Alternative Obligation
3. Effect of Substitution

V. Joint and Solidary Obligations

A. Joint Obligations
1. Concept
a. Requisites
b. Words used to indicate joint obligations

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 2. Presumption – Art. 1207, 1208

3. Effects – Art. 1207, 1208

a. Extent of liability of debtor
b. Extent of right of creditor
c. In case of novation, compensation, confusion (Art. 1277), remission

B. Solidary Obligation

1. Concept
a. Requisites
b. Words used to indicate solidary obligations

2. Kinds

a. As to source – Art. 1208

i. Legal – Art. 1915, 1945, 2194; Art. 119 of RPC
ii. Conventional
iii. Real

b. As to parties bound
• Active, Passive or Mixed

c. As to uniformity – Art. 1211

§ Ynchausti v. Yulol 25 March 1914
§ RCBC v. CA and Phil Blooming Mills; 27 October 1989

3. Effects
a. Solidary creditor in relation to:
i. Common debtor
• Right to demand – Art. 1215, 1214, 1216, 1217 par. 1
• In case of novation, compensation, confusion, remission
by a creditor – Art. 1215 par. 1

ii. Solidary co-creditors

• In case of novation, compensation, confusion, remission
– Art. 1215 par. 2
• Prejudicial acts prohibited – Art. 1212
• Assignment of rights not allowed – Art. 1213

b. Solidary debtor in relation to:

i. Common creditor
• Obligation to perform – Art. 1207
• In case of novation, compensation, confusion, remission
by a creditor – Art. 1215 par. 1

ii. Solidary co-debtor

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 • In case of payment by a co-debtor – Art. 1217, 1218, 1219,
1220
• In case of fortuitous event – Art. 1221
§ Jaucian v. Querol; 5 October 1918
§ Quiombing v. CA; 30 August 1990
§ Inciong v. CA; 26 June 1996

4. Defenses available to a solidary debtor against the creditor – Art. 1222

a. Types
b. Effects
§ Ynchausti v. Yulo, supra
§ Alipio v. CA; 29 September 2000

C. Joint Indivisible Obligations

1. Concept
2. Indivisibility distinguished from solidarity – Art. 1210
3. Effects – Art. 1209
Liability for damages in case of breach – Art. 1224

VI. Divisible and Indivisible Obligations

A. Divisible Obligations – Art. 1223, 1233

B. Indivisible Obligations
1. Concept
2. Kinds (Distinguish from solidary obligations)
a. Natural – Art. 1225 par. 1
b. Legal – Art. 1225 par. 3
c. Conventional – Art. 1225 par. 3

3. Presumptions
4. Divisibility and Indivisibility in obligations not to do – Art. 1225 par. 3
5. Effects – Arts. 1223, 1233, 1224
6. Cessation of indivisibility

VII. Obligations with a Penal Clause

A. Concept
1. Principal v. Accessory Obligations
2. Distinguished from Conditional Obligations
3. Distinguished from Alternativel Obligations
4. Distinguished from Facultative Obligations
5. Distinguished from Guaranty

B. Kinds of Penal Clause

1. As to effect: Subsidiary v. Complementary
2. As to source: Conventional v. Legal
3. As to purpose: Punitive v. Reparatory

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 C. Demandability of Penalty – Art. 1226 par. 2

D. Effects of Penal Clause

1. Substitute for indemnity for damages and payment of interest – Art.
1226
§ Makati Development Corp v. Empire Insurance Co.; 30 June 1967
§ Antonio Tan v. CA; 19 October 2001
§ Country Bankers Insurance v. CA; 9 September 1991

2. Not exempt debtor from performance – Art. 1227

3. Creditor cannot demand both performance and penalty – Art. 1227
4. Creditor cannot collect other damages in addition to penalty – Art.
1226

E. When Penalty shall be equitably reduced – Art. 1229

F. Nullity of Principal Obligations or Penal Clause – Art. 1230

CHAPTER IV: EXTINGUISHMENT OF OBLIGATIONS

I. Modes of Extinguishment – Art. 1231

A. Payment or performance
B. Loss or impossibility
C. Condonation or Remission
D. Confusion or Merger
E. Compensation
F. Novation
G. Other Causes

II. Payment or Performance

A. Concept – Art. 1232

B. Requisites

1. Who can pay

a. In general
b. Third person who is an interested party – Art. 1302 [3]
c. Third person who is not an interested party but with the consent of
debtor – Art. 1302[2], 1236 par. 1
d. Third person who is not an interested party and without knowledge
or against the will of the debtor – Art. 1236 par. 2, 1237, 1236 par. 1
e. Third person who does not intend to be reimbursed – Art. 1238
f. In obligation to give – Art. 1239, 1427
g. In case of active solidarity – Art. 1214

2. To whom payment may be made

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 a. In general – Art. 1240
b. Incapacitated person – Art. 1241 par. 1
c. Third person – Art. 1241 par. 2, 1241 par. 3, 1242
d. In case of active solidarity

3. What is to be paid (“Identity”)

a. In general
b. In obligations to:
i. Give a specific thing – Art. 1244
ii. Give a generic thing – Art. 1246
iii. Pay money – Art. 1249, 1250, RA 529, RA 4100
§ Papa v. Valencia; 23 January 1998
§ Kalalo v. Luz; 31 July 1970
§ PAL v. CA; 30 January 1990

c. Payment of interest – Art. 1956

4. How is payment to be made (“Integrity”)

a. In general – Art. 1233
b. Exceptions – Art. 1248
c. Substantial performance in good faith – Art. 1234
d. Estoppel – Art. 1235
e. Presumptions in payment of interests and installments – Art. 1176

5. When payment is to be made – Art. 1169

6. Where payment is to be made – Art. 1251

7. Expenses of making payment – Art. 1247

C. Application of Payments

1. Concept – Art. 1252

2. Requisites
3. Rules in application of payments – Art. 1252, 1253, 1254
§ Reparations Commission v. Universal Deep Sea Fishing; 27 June 1978
§ Paculdo v. Regaladol 20 November 2000

D. Payment by Cession

1. Concept – Art. 1255

2. Requisites
3. Effects

E. Dation in Payment
1. Concept – Art. 1245
• Distinguish from Payment by Cession

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 2. Requisites

3. Effects
§ Development Bank of the Philippines v. CA; 5 January 1998
§ Filinvest Credit Corp v. Philippine Acetylene; January 1982

F. Tender of Payment and Consignation

1. Tender of Payment

2. Consignation
a. Concept
b. Requisites
i. When tender and refusal not required – Art. 1256 par. 2
ii. Two notice requirement – Art. 1257 par. 1, 1258 par. 2

c. Effects – Art. 1260 par. 1

d. Withdrawal by debtor before acceptance by creditor or
approval by court – Art. 1260 par. 2
e. Withdrawal by debtor after proper consignation – Art.
1261
f. Expenses of consignation – Art. 1259
• De Guzman v. CA; 23 July 1985
• Soco v. Militante; 28 June 1983
• Riesenbeck v. CA; 9 June 1992
• Soto v. Mijares; 8 May 1969

III. Loss or Impossibility

A. Loss of Thing Due

1. Concept – Art. 1189 par 2
2. Kinds
3. Requisites – Art. 1262
4. Presumption – Art. 1265, 1165
5. Effects
g. In obligation to give a specific thing – Art 1262, 1268
h. In obligation to give a generic thing – Art. 1263
i. In case of partial loss – Art. 1264
j. Action against third persons – Art. 1269

B. Impossibility of Performance
1. Concept – Art. 1266, 1267
2. Kinds
3. Requisites – Art. 1266
4. Effects
a. In obligations to do – Art. 1266, 1267, 1262 par 2 (by analogy)
b. In case of partial impossibility – Art. 1264
§ Occena v. CA; 29 October 1976
§ Naga Telephone Co. v. CA; 24 February 1994

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 § PNCC v. CA; 5 May 1997
IV. Condonation or Remission

A. Concept

B. Kinds
1. As to Extent
• Total v. Partial

2. As to Form – Art. 1270 par. 1

• Express v. Implied

C. Requisites – Art. 1270 par. 2

• Yam v. CA; 11 February 1999

D. Presumptions – Art. 1271, 1272, 1274

E. Effects

F. Governing Rules – Art. 1270

G. Renunciation of Principal or Accessory Obligation – Art. 1273

V. Confusion or Merger of Rights

A. Concept
B. Requisites
C. Effects – Art. 1275, 1277
D. Confusion in Principal or Accessory Obligation – Art. 1276

VI. Compensation

A. Concept – Art. 1278

B. Kinds
1. As to extent
k. Total
l. Partial

2. As to origin
c. Legal
d. Conventional – Art. 1279 inapplicable, 1282
e. Judicial – Art. 1283
f. Facultative

C. Legal Compensation – Art. 1279, 1280, 1290 and 1289

§ CKH Industrial Development v CA; 7 May 1997
§ BPI v CA; 29 March 1996

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 § Gan Tion v. CA; 21 May 1969
§ Associated Bank v Vicente Henry Tan; 14 December 2004

D. When Compensation is not allowed – Art. 1287, 1288

E. Compensation of Debts Payable to be Compensated – Art. 1286

F. Effect of Nullity of Debts to be Compensated – Art. 1284

G. Effects of Assignment of Credit

1. With consent of debtor – Art. 1285 par. 1
2. With knowledge but without consent of debtor – Art. 1285 par. 2
3. Without knowledge of debtor – Art. 1285 par. 3

VII. Novation

A. Concept – Art. 1291

B. Kinds
1. As to form
• Express v. Implied

2. As to Origin
• Conventional v. Legal

3. As to object
• Objective or Real v. Subjective or Personal

C. Requisites – Art. 1292

§ Dormitoryo v Fernandez; 21 August 1976
§ Reyes v. Secretary of Justice; 4 November 1996
§ Cochingyan Jr. v. R&B Surety and Insurance Co; 30 June 1987
§ Chester Babst v. CA; 26 January 2001

D. Effects – Art. 1296

E. Effect of the Status of the Original or New Obligation

F. Objective Novation

G. Subjective Novation
1. By change of debtor
m. Expromision – Art. 1293, 1294
n. Delegacion – Art. 1293, 1295
§ Garcia v. Llamas; 8 December 2003

2. By change of creditor: Subrogation of a third person in the rights of the

creditor – Art. 1300

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 g. Conventional subrogation – Art. 1301, 1303, 1304
• Distinguish from assignment of credit
§ Licaros v. Gatmaitan; 9 August 2001

h. Legal subrogation – Art. 1302, 1303, 1304

§ Astro Electronics Corp v. Philippine Export and Foreign Loan
Guarantee Corp; 23 September 2003

TITLE II: CONTRACTS:

CHAPTER I: GENERAL PROVISIONS

I. Definition – Art. 1305

II. Elements

A. Essential Elements
1. Consent
2. Object
3. Cause

B. Natural Elements

C. Accidental Elements

III. Characteristics

A. Obligatory Force – Art. 1308

B. Mutuality – Art. 1308 – 1310 (see also Art. 1473)
• GSIS v C.A. and Sps. Raul and Esperanza Leuterio; 25 November 1993

C. Relativity
1. Contracts take effect only between the parties, their assigns and heirs –
Art. 1311
• Manila Railroad Co. v. La Compania Transatlantica; 26 October 1918
• DKC Holdings v. CA; 5 April 2000

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

§ Gutierrez Hermanos v. Orense; 4 December 1914

IV. Parties

A. Auto-contracts
B. Freedom to contract – Art. 1306
§ Gabriel v. Monte de Piedad; 14 April 1941
§ Pakistan International Airlines v. Ople; 28 September 1990

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 1. Special disqualifications
• Art. 87, Family Code
• Art. 1490, 1491
• Art. 1782

C. What they may not stipulate – Art. 1306

1. Contrary to law
• pactum commissorium – Art. 2088
• pactum leonine – Art. 1799
• pactum de non alienado – Art. 2130

2. Contrary to morals
3. Contrary to good customs
4. Contrary to public order
5. Contrary to public policy
§ Cui v. Arellano; 30 May 1961
§ Arroyo v. Berwin; 3 March 1917
§ Bustamante v. Rosel; 29 November 1999

V. Classification

I. According to subject-matter
1. Things
2. Services

II. According to name

1. Nominate
2. Innominate – Art. 1307
• do ut des
• do ut facias
• facio ut facias
• facio ut des
§ Dizon v. Gaborro; 22 June 1978
§ Corpuz v. CA and David; 30 June 1980

III. According to perfection

1. By mere consent (consensual) – Art. 1315
2. By delivery of the object (real) – Art. 1316

IV. According to its relation to other contracts

1. Preparatory
2. Principal
3. Accessory

V. According to form
1. Common or informal
2. Special or formal

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 VI. According to purpose
1. Transfer of ownership, e.g. sale
2. Conveyance of use, e.g. commodatum
3. Rendition of services, e.g. agency

VII. According to the nature of the vinculum produced

1. Unilateral
2. Bilateral
3. Reciprocal
VIII. According to cause
1. Onerous
2. Gratuitous or lucrative

IX. According to risk

1. Commutative
2. Aleatory

VI. Stages
A. Preparation
B. Perfection
C. Consummation or death

VII. As distinguished from a perfected promise and an imperfect promise

(policitacion)

VIII. With respect to third persons

A. Stipulations in favor of third persons (stipulations pour autrui) – Art. 1311, 2nd
par
§ Florentino v. Encarnacion; 30 September 1977
§ Coquia v. Fieldmen’s Insurance Co.; 29 November 1968
§ Marmont Resort Hotel v. Guiang; 8 December 1988

B. Possession of the object of contract by third persons – Art. 1312

C. Creditors of the contracting parties – Art. 1313
D. Interference by third persons – Art. 1314
§ Daywalt v. Corp; 4 February 1919
§ Jose Lagon v. CA and Lapuz; 18 March 2005

CHAPTER II: ESSENTIAL REQUISITES OF CONTRACTS

I. Consent

A. Requisites – Art. 1319

1. Must be manifested by the concurrence of the offer and acceptance

§ Rosenstock v. Burke; 26 September 1924
§ Malbarosa v. CA; 30 April 2003

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 a. Offer
• Must be certain – Art. 1319
• What may be fixed by the offeror – Art. 1321
• When made through an agent – Art. 1321
• Circumstances when offer becomes ineffective – Art. 1323
• Business advertisements of things for sale – Art. 1325
• Advertisements for bidders – Art. 1326

b. Acceptance
• Must be absolute – Art. 1319
• Kinds
i. Express – Art. 1320
ii. Implied – Art. 1320
iii. Qualified – Art. 1319

• If made by letter or telegram – Art. 1319, 2nd par.

Four theories on when the contract is perfected:
i. Manifestation theory
ii. Expedition theory
iii. Reception theory
iv. Cognition theory – Art. 1319. 2nd par 2

• Period of Acceptance – Art. 1324

§ Sanchez v. Rigos; 14 June 1972

• Contract of option – Art. 1324

2. Necessary legal capacity of the parties

a. Who cannot give consent – Art. 1327
b. When offer and/or acceptance is made
• During a lucid interval
• In a state of drunkenness
• During a hypnotic spell

3. The consent must be intelligent, free, spontaneous, and real – Art. 1330 –
1346
a. Effect – Art. 1330
b. Vices of Consent
i. Mistake or error

§ Asiain v. Jalandoni; 23 October 1923

§ Dometila Andres v. Manufacturers Hanover and Trust Corporation;
15 September 1989
§ Spouses Theis v. CA; 12 February 1997

• KINDS: Mistake of fact vs. Error of law

• GENERAL RULE: Ignorantia legis neminem excusat – Art. 3

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 • EXCEPTION: Mutual error of law – Art. 1334
• When one of the parties is unable to read – Art. 1332
§ Dumasug v. Modelo; 16 March 1916
§ Katipunan v. Katipunan; 30 January 2002

• Inexcusable Mistake – Art. 1333

ii. Violence and intimidation – Art. 1335

• EFFECT – Art. 1336
§ Martinez v. Hongkong and Shanghai Bank; 19 February
1910

iii. Undue Influence – Art. 1337

iv. Fraud or dolo – Art. 1338

• dolo causante (Art. 1338) vs dolo incidente (Art. 1344, 2nd
par.)
§ Hill v. Veloso; 24 July 1915
§ Geraldez v. CA; 23 February 1994
§ Sierra v. CA; 24 July 1992

• Failure to disclose facts; duty to reveal them – Art. 1339

§ Rural Bank of Sta. Maria v. CA; 14 September 1999

• Usual exaggerations in trade; opportunity to know the facts

– Art. 1340
§ Laureta Trinidad v. IAC; 3 December 1991

• Mere expressions of an opinion – Art. 1341, 1344

§ Songco v. Sellner; 4 December 1917

v. Misrepresentation – Art. 1342, 1343

§ Mercado and Mercado v. Espiritu; 1 December 1917
§ Braganza v. Villa Abrille; 13 Aprile 1959

vi. Simulation of Contracts – Art. 1345, 1346

§ Suntay v. CA; 19 December 1995
§ Pangadil v. CFI; 31 August 1982

II. Object of Contracts

A. What may be the objects of contracts – Art. 1347

1. All things not outside the commerce of man
2. All rights not intransmissible
3. All services not contrary to law, morals, good customs, public policy

B. Requisite – Art. 1349

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 C. What may not be the objects of contracts
1. Future inheritance, except when authorized by law – Art. 1347
§ Blas v. Santos; 29 March 1961
§ JLT Agro Inc. v. Balansag and Cadayday; 11 March 2005

2. Impossible things or services – Art. 1348

III. Cause of Contracts

A. Meaning of Cause – Art. 1350

B. As distinguished from motive – Art. 1351
C. Defective causes and their effects
1. Absence of cause and unlawful cause – Art. 1352
§ Liguez v. CA; 18 December 1957

2. Statement of a false cause in the contract – Art. 1353

3. Lesion or inadequacy of cause – Art. 1355
§ Spouses Buenaventura v. CA; 20 November 2003

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

the contract – Art. 1354

CHAPTER III. FORM OF CONTRACTS

I. General rule: Contracts shall be obligatory, in whatever form they may have
entered into, provided all the essential requisites for their validity are present. –
Art. 1356

II. Exception: When the law requires that a contract be in some form in order that it
may be valid or enforceable – Art. 1356
§ Dauden-Hernaez v. De los Angeles; 30 April 1969

III. Kinds of formalities required by law:

A. Those required for the validity of contracts, such as those referred to in Art.
748, 1874, 2134, 1771, 1773
B. Those required, not for validity, but to make the contract effective as against
third persons, such as those covered by Arts. 1357 and 1358; and
C. Those required for the purpose of proving the existence of the contract, such
as those under the Statute of Frauds in Art. 1403
§ Resuena v. CA; 28 March 2005

CHAPTER IV. REFORMATION OF INSTRUMENTS

I. Requisites – Art. 1359

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 A. Meeting of the minds upon the contract
B. The true intention of the parties is not expressed in the instrument; and
C. The failure of the instrument to express the true agreement is due to
mistake, fraud, inequitable conduct, or accident
§ Garcia v. Bisaya; 28 September 1955
§ Bentir v. Leande; 12 April 2000
§ Quiros v. Arjona; 9 March 2004

II. Cases where no reformation is allowed – Art. 1366

III. Implied ratification – Art. 1367
IV. Who may ask for reformation – Art. 1368
V. Procedure of reformation – Art. 1369
§ Atilano v. Atilano; 21 May 1969
§ Sarming v. Cresencio Dy et. al; 6 June 2002

CHAPTER V. INTERPRETATION OF CONTRACTS (Compare with Rules on

Statutory Construction)

I. Primacy of Intention – Art. 1370, 1372

§ Borromeo v. CA; 6 June 2002
§ Kasilag v. Rodriguez; 7 December 1939
§ Santi v CA; 8 November 1993

II. How to determine intention – Art. 1371

§ Rapanut v. CA; 14 July 1995

III. How to interpret a contract

A. When it contains stipulations that admit several meanings – Art. 1373

§ Oil and Natural Gas Commission v. CA; 23 July 1998

B. When it contains various stipulations, some of which are doubtful – Art.

1374
§ Spouses Rigor v Consolidated Orix Leasing and Finance Corporation; 20
August 2002

C. When it contains words that have different significations – Art. 1375

D. When it contains ambiguities and omissions of stipulations – Art. 1376

§ Chua v. CA; 9 April 2003

E. With respect to the party who caused the obscurity – Art. 1377
§ Rizal Commercial Banking Corp v CA; 25 March 1999

F. When it is absolutely impossible to settle doubts by the rules above – Art.

1378
§ Gacos v. CA; 3 August 1992

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 G. When the doubts are cast upon the principal object so that the intention
cannot be known – Art. 1378

IV. Applicability of Rule 130 sec. 10 to 19 Rules of Court

DECEPTIVE CONTRACTS

CHAPTER VI. RESCISSIBLE CONTRACTS

I. Kinds – Art. 1381

II. Characteristics

A. Their defect consists in injury or damage either to one of the contracting

parties or to third persons
B. They are valid before rescission
C. They can be attacked directly only, and not collaterally
D. They can be attacked only either by a contracting party or by a third person
who is injured or defrauded
E. They can be convalidated only by prescription, and not by ratification

III. Rescission – Art. 1380

A. Definition

B. As distinguished from rescission under Art. 1191

§ Universal Food Corp v. CA; 13 May 1970
§ Iringan v. CA; 26 September 2001
§ Rivera v. Del Rosario; 15 January 2004

C. Requisites
1. The contract is rescissible
2. The party asking for rescission has no other legal means to obtain
reparation – Art. 1383
§ The Union Insurance Society of Canton v. CA; 8 August 1996

3. He is able to return whatever he may be obliged to restore if rescission is

granted – Art. 1385
§ Rivera v. Del Rosario; 15 January 2004

4. The object of the contract has not passed legally to the possession of a
third person acting in good faith – Art. 1385
5. The action for rescission is brought within the prescriptive period of four
(4) years – Art. 1389

D. Effect of rescission – Art. 1385

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 E. Extent of rescission – Art. 1384

F. Presumption of Fraud – Art. 1387

§ Oria v. Mckmicking; 18 January 1912
§ Siguan v. Lim; supra

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

CHAPTER VII. VOIDABLE OR ANNULLABLE CONTRACTS

I. Kinds – Art. 1390

II. Characteristics

A. Their defect consists in the vitiation of consent of one of the contracting

parties
B. They are binding until they are annulled by a competent court
C. They are susceptible of convalidation by ratification or by prescription
§ Felipe v. Heirs of Aldon; 16 February 1983

III. Annulment

A. As distinguished from rescission

B. Grounds – Art. 1390
C. Who may and may not institute action for annulment – Art. 1397
§ Singsong v. Isabel Sawmill; 28 February 1979
§ Malabanan v. Gaw Ching; 17 January 1990
§ Samahan ng Magsasaka sa San Josep v. Valisno; 3 June 2004

D. Prescription – Art. 1391

§ Carantes v. CA; 25 April 1977

E. Effect
Mutual restitution – Art. 1398 and 1402
§ David Ines v. CA; 14 August 1995
§ Arra Realty Corporation v. Guarantee; 20 September 2004
§ Velarde v. CA, supra

1. When one of the parties is incapacitated – Art. 1399

§ Katipunan v. Katipunan, supra

2. When the thing is lost through the fault of the party obliged to
return the same – Art. 1400

F. Extinguishment of the action

1. By ratification – Art. 1392

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 2. When the thing is lost through the fault of the person who has the right
to file the action – Art. 1401

IV. Ratification

A. Requisites
1. The contract is voidable
2. The ratification is made with knowledge of the cause for nullity
3. At the time of the ratification, the cause of nullity has already ceased to
exist

B. Forms
1. Express or tacit – Art. 1393
2. By the parties themselves or by the guardian in behalf of an incapacitated
party – Art. 1394

C. Effects
1. Action to annul is extinguished – Art. 1392
§ Uy Soo Lim v. Tan Unchuan; 7 September 1918

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

CHAPTER VIII. UNENFORCEABLE CONTRACTS

I. Characteristics

A. They cannot be enforced by a proper action in court

B. They are susceptible of ratification
C. They cannot be assailed by third persons

II. Kinds – Art. 1403

A. Unauthorized contracts – Art. 1404

B. Contracts covered by the Statute of Frauds

§ Asia Production Co., Inc v. Pano; 27 January 1992
§ Limketkai Sons Milling Co., v. Medalle; 1 December 1995
§ Reiss v. Memije; 1 March 1910
§ Bienvenido Babao v. Perez; 28 December 1957
§ Carbonnel v. Poncio; 12 May 1958

1. Purpose of Statute
2. How Ratified – Art. 1405
3. Right of the parties when a contract is enforceable but a public document
is necessary for its registration – Art. 1406

C. Contracts executed by parties who are both incapable of giving consent to a

contract

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 1. Effect of ratification by the parents or guardians of one of the parties –
Art. 1407
2. Effect of ratification by the parents or guardians of both parties – Art.
1407

CHAPTER IX. VOID OR INEXISTENT CONTRACTS

I. Characteristics
A. Void from the beginning
B. Produces no effect whatsoever
C. Cannot be ratified – Art. 1409
§ Guiang v. CA; 26 June 1998
§ Castillo v. Galvan; 20 October 1978

II. Kinds – Art 1409

A. Contracts that are void

1. Those whose cause, object, or purpose is contrary to law, morals, good

customs, public order or public policy

a. When the act constitutes a criminal offense – Art. 1411

b. When the act is unlawful but does not constitute a criminal offense –
Art. 1412
§ Menchacez v. Tevez; 26 January 2005
§ Spouses Angel v. Aledo and Modales; 22 January 2004

c. When the purpose is illegal, and money is paid or property delivered

therefore – Art. 1414

d. When the contract is illegal and one of the parties is incapable of

giving consent – Art. 1415
§ Liguez v. CA, supra
§ Rellosa v. Gaw Cheen Hun; 29 September 1953

e. When the agreement is not illegal per se but is prohibited – Art. 1416
§ PNB v. Lui She; 12 September 1967
§ Frenzel v. Catito; 11 July 2003

f. When the amount paid exceeds the maximum fixed by law – Art.
1417

g. When by virtue of a contract a laborer undertakes to work longer

than the maximum number of hours of work fixed by law – Art. 1418

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 h. When the laborer agrees to accept a lower wage than that set by law
– Art. 1419

i. When the contract is divisible – Art. 1420

j. When the contract is the direct result of a previous illegal contract –

Art. 1422

2. Those whose object is outside the commerce of man

3. Those which contemplate an impossible service

4. Those where the intention of the parties relative to the principal object of
the contract cannot be ascertained

5. Those expressly prohibited or declared void by law

B. Contracts that are inexistent

1. Those which are absolutely simulated or fictitious – Art. 1345, 1346
2. Those whose cause or object did not exist at the time of the transaction

III. Right to set up defense of illegality cannot be waived – Art. 1409

IV. The action or defense for the declaration of the inexistence of a contract

A. Does not prescribe – Art. 1410

B. Is not available to third persons whose interest is not directly affected – Art.
1421

TITLE III: NATURAL OBLIGATIONS

I. Definition – Art. 1423

II. As distinguished from civil obligations – Art. 1423

III. As distinguished from moral obligations

IV. Conversion to civil obligation

A. By Novation
B. By Ratification

V. Examples – Art. 1424 – 1430

§ Villaroel v. Estrada; 19 December 1940

§ Fisher v. Robb; 2 November 1939

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TITLE IV: ESTOPPEL

I. Definition – Art. 1431

II. Kinds
A. Technical estoppel
a. Record
b. By deed – Art. 1433

B. Equitable estoppel or estoppel in pais – Art. 1433

III. Persons Bound – Art. 1439

IV. Cases where estoppel applies – Art. 1434 – 1438

§ Kalalo v. Luz; 31 July 1970
§ Manila Lodge No. 761 v. CA; 30 September 1976
§ Miguel v. Catalino; 29 November 1968
§ Mendoza v. Reyes; 17 August 1983

TITLE V: TRUST

I. Definition

II. Government Rules – Art. 1442

III. Parties – Art. 1440

A. Trustor
B. Trustee
C. Beneficiary or cestui que trust

IV. Kinds – Art. 1441

A. Express Trusts
1. Proof Required – Art. 1443
2. Form – Art. 1444
3. Want of trustee – Art. 1445
4. Accepted by the beneficiary – Art. 1441

B. Implied Trusts
1. How established – Art. 1441
2. How proved – Art. 1457
3. Examples – Art. 1448 – 1456
§ Fabian v. Fabian; 29 January 1968
§ Aznar Brothers Realty Company v. Aying; 16 May 2005
§ Tamayo v. Callejo; 28 July 1972
§ Bueno v. Reyes; 28 April 1969

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