ART. 1355.
Except in cases specified by law, lesion or real property must be in a public instrument in order
inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue
influence. (n)
‘Lesion’ Defined
It is inadequacy of cause, like an insufficient price for a
thing sold.
Rules on Lesion General Rule — Lesion or inadequacy
of price does not invalidate a contract.
Exceptions:
(a) When, together with lesion, there has been:
1) fraud
2) mistake
3) or undue influence
In cases expressly provided by law (in the
following, the contracts may be rescinded):
1) “Those which are entered into by guardians
whenever the wards they represent suffer lesion
by more than one-fourth of the value of the things
which are the objects thereof.” (Art. 1381, par. 1,
Civil Code).
2) “Those agreed upon in representation of
absentees, if the latter suffer the lesion stated in
the preceding number.” (Art. 1381, par. 2, Civil
Code).
3) Partition among co-heirs, when anyone of them
received things with a value less by at least one-
fourth than the share to which he is entitled. (Art.
1098, Civil Code)
4. Art. 1470
Chapter 3 FORM OF CONTRACTS
ART. 1356. Contracts shall be obligatory, in whatever
form they may have been entered into, provided all
the essential requisites for their validity are present.
However, when the law requires that a contract be
in some form in order that it may be valid or
enforceable, or that a contract be proved in a certain
way, that requirement is absolute and indispensable.
In such cases, the right of the parties stated in the
following article cannot be exercised. (1278a)
Generally, Form Is Not Required
In general, form does not matter for the validity of a
contract. It is enough that there be consent, subject
matter, and cause. This rule applies, however, to
CONSENSUAL CONTRACTS.
FORMAL CONTRACTS (SOLEMN CONTRACTS) require
a certain specified form, in addition to consent,
subject matter, and cause. (Example: A donation of
to be valid, even as between the parties.)
(b) REAL CONTRACTS require DELIVERY to be
valid as a real contract even as between the
parties, in addition to consent, subject matter,
and cause.]
When Form Is Important
Form may be important:
(a) For VALIDITY (This is true in formal or solemn
contracts.)
(b) For ENFORCEABILITY [This is true for the
agreements enumerated under the Statute of Frauds,
but of course this requirement may be waived by
acceptance of benefits (partial) or by failure to object
to the presentation of oral (parol) evidence. (See Art.
1403, Civil Code).]
(c) For CONVENIENCE (This is true for the contracts
enumerated for example under Art. 1385, Civil Code).
ART. 1357. If the law requires a document or other
special form, as in the acts and contracts
enumerated in the following article, the contracting
parties may compel each other to observe that form,
once the contract has been perfected. This right may
be exercised simultaneously with the action upon
the contract. (1279a)
Right of One Party to Compel the Other to Execute
the Necessary Form
The Article applies only when form is needed only for
convenience, not for validity or enforceability.
In other words, before the contracting parties
may be compelled to execute the needed form, it is
essential that the contract be:
(a) perfected (valid) (Art. 1357);
(b) enforceable under the Statute of Frauds.
(Art. 1356).
ART. 1358. The following must appear in a public
document:
(1) Acts and contracts which have for their object the
creation, transmission, modification or
extinguishment of real rights over immovable
property; sales of real property or of an interest
therein are governed by Articles 1403, No. 2, and
1405;
(2) The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal
partnership of gains;
(3) The power to administer property, or any other
power which has for its object an act appearing or
which should appear in a public document, or should
prejudice a third person;
(4) The cession of actions or rights proceeding from
an act appearing in a public document.
All other contracts where the amount involved
exceeds five hundred pesos must appear in writing,
even a private one. But sales of goods, chattels or
things in action are governed by Articles 1403, No. 2
and 1405. (1280a)
Chapter 4 REFORMATION OF INSTRUMENTS (n)
ART. 1359. When, there having been a meeting of
the minds of the parties to a contract, their true
intention is not expressed in the instrument
purporting to embody the agreement, by reason of
mistake, fraud, inequitable conduct or accident, one
of the parties may ask for the reformation of the
instrument to the end that such true intention may
be expressed.
If mistake, fraud, inequitable conduct, or
accident has prevented a meeting of the minds of
the parties, the proper remedy is not reformation of
the instrument but annulment of the contract.
Distinctions Between ‘Reformation’ and ‘Annulment’
(a) Where there has been a meeting of the minds, but
there is mistake, fraud, inequitable conduct or
accident in the contract as written, the remedy is
REFORMATION. When there has been no meeting of
the minds, because of vitiated consent, the proper
remedy is ANNULMENT.
(b) Reformation does not invalidate a contract;
annulment invalidates a contract.
ART. 1360. The principles of the general law on the
reformation of instruments are hereby adopted
insofar as they are not in conflict with the provisions
of this Code.
ART. 1361. When a mutual mistake of the parties
causes the failure of the instrument to disclose their
real agreement, said instrument may be reformed.
When Reformation May Be Asked Because of Mutual
Mistake
(a) Under this Article, the mistake must be mutual.
(b) The mistake may be unilateral under the
conditions set forth in Arts. 1362 and 1363 of the Civil
Code.
(c) The mistake must be of fact — usually. Therefore,
generally an error of law is not enough.
ART. 1362. If one party was mistaken and the other
acted fraudulently or inequitably in such a way that
the instrument does not show their true intention,
the former may ask for the reformation of the
instrument.
Unilateral Mistake
In this Article, the mistake is unilateral but the other
party acted fraudulently or inequitably.
Mistake on one side, fraud or inequitable conduct on
the other.
Under Article 1362, the right to ask for reformation is
granted only to the party who was mistaken in good
faith. Here, the mistake is not mutual.
ART. 1363. When one party was mistaken and the
other knew or believed that the instrument did not
state their real agreement, but concealed that fact
from the former, the instrument may be reformed.
Unilateral Mistake Also
(a) Here again, the mistake is unilateral but the other
party is guilty of concealment.
(b) Only the party in good faith can ask for
reformation.
ART. 1364. When through the ignorance, lack of skill,
negligence or bad faith on the part of the person
drafting the instrument or of the clerk or typist, the
instrument does not express the true intention of
the parties, the courts may order that the instrument
be reformed.
ART. 1365. If two parties agree upon the mortgage
or pledge of real or personal property, but the
instrument states that the property is sold absolutely
or with a right of repurchase, reformation of the
instrument is proper.
ART. 1366. There shall be no reformation in the
following cases:
(1) Simple donations inter vivos wherein no condition
is imposed;
(2) Wills;
(3) When the real agreement is void.
ART. 1367. When one of the parties has brought an
action to enforce the instrument, he cannot
subsequently ask for its reformation.
Effect of an Action to Enforce the Instrument
(a) This Article presents another instance when
reformation cannot prosper.
(b) Basis is estoppel, waiver or ratification
ART. 1368. Reformation may be ordered at the
instance of either party or his successors in interest,
if the mistake was mutual; otherwise, upon petition
of the injured party, or his heirs and assigns.
Plaintiffs in Action for Reformation/ persons entitled
for reformation
(a) If the mistake is mutual, either party or his
successors in interest;
 (b) In all other cases:
1) the injured party;
2) his heirs and assigns.
ART. 1369. The procedure for the reformation of
instruments shall be governed by rules of court to be
promulgated by the Supreme Court.
Chapter 5 INTERPRETATION OF CONTRACTS
ART. 1370. If the terms of a contract are clear and
leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall
control.
If the words appear to be contrary to the
evident intention of the parties, the latter shall
prevail over the former. (1281)
Meaning of interpretation of contracts.
Interpretation of a contract is the determination of
the meaning of the terms or words used by the parties
in their contract.
**the literal meaning controls when the language is
clear.
in case of conflict, the evident intention of the parties
prevails over the terms of the contract.
ART. 1371. In order to judge the intention of the
contracting parties, their contemporaneous and
subsequent acts shall be principally considered.
(1282)
ART. 1372. However general the terms of a contract
may be, they shall not be understood to comprehend
things that are distinct and cases that are different
from those upon which the parties intended to
agree. (1283)
ART. 1373. If some stipulation of any contract should
admit of several meanings, it shall be understood as
bearing that import which is most adequate to
render it effectual. (12)
Effect of an Interpretation Upholding the Validity of
the Contract
If one interpretation makes a contract valid and
illegal, the former interpretation must prevail.
ART. 1374. The various stipulations of a contract
shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of
them taken jointly. (1285)
A contract must be interpreted as a whole and the
intention of the parties is to be gathered from the
entire instrument and not from particular words,
phrases, or clauses, having in mind the intention of
the parties and the purpose to be achieved, consistent
with their contemporaneous and subsequent acts (Art.
1371.) as regards the execution of the contract. All
provisions should, if possible, be so interpreted as to
harmonize with each other,
ART. 1375. Words which may have different
significations shall be understood in that which is
most in keeping with the nature and object of the
contract. (1286)
ART. 1376. The usage or custom of the place shall be
borne in mind in the interpretation of the
ambiguities of a contract, and shall fi ll the omission
of stipulations which are ordinarily established.
(1287)
Interpretation of words with different significations.
If a word is susceptible of two or more meanings, it is
to be understood in that sense which is most in
keeping with the nature and object of the contract in
line with the cardinal rule that the intention of the
parties must prevail. (Art. 1370.)
If this cannot be determined, then the “terms
of a writing are presumed to have been used in their
primary and general acceptation.”
ART. 1377. The interpretation of obscure words or
stipulations in a contract shall not favor the party
who caused the obscurity. (1288)
Reasons for the law: Since he caused the obscurity,
the party who drew up the contract with ambiguous
terms should be responsible therefor; so the obscurity
must be construed against him. The drafter of the
terms of the contract should, therefore, be careful.
ART. 1378. When it is absolutely impossible to settle
doubts by the rules established in the preceding
articles, and the doubts refer to incidental
circumstances of a gratuitous contract, the least
transmission of rights and interest shall prevail. If the
contract is onerous, the doubt shall be settled in
favor of the greatest reciprocity of interests.
If the doubts are cast upon the principal
object of the contract in such a way that it cannot be
known what may have been the intention or will of
the parties, the contract shall be null and void.
(1289)
ART. 1379. The principles of interpretation stated in
Rule 123 of the Rules of Court shall likewise be
observed in the construction of contracts. (n)

Principles of interpretation in the Rules of Court

applicable.
The rules in the Rules of Court on the interpretation of
documents are now contained in Rule 130, Sections 10
to 19.