SECTION 4 Joint and Solidary Obligations

Imagine three friends, Alice, Bob, and Charlie, decide to rent an apartment together.
They each sign a rental agreement with the landlord. Here's how the articles apply:
1. Solidary Liability: Unless their rental agreement specifically says otherwise,
Alice, Bob, and Charlie are jointly responsible for paying the rent. This means if
one of them can't pay their share, the others are still responsible for covering it.
2. Division of Credit or Debt: The rent payment is presumed to be divided equally
among Alice, Bob, and Charlie. If the rent is $1,500 per month, each of them is
responsible for $500, unless they've agreed otherwise.
3. Indivisibility vs. Solidarity: Even though they each have their share of the rent,
their obligation to the landlord is solidary. This means if one of them doesn't pay
their $500 share, the landlord can demand the full $1,500 from any of them.
4. Rights and Duties: If Alice pays the full rent one month, she can't demand
immediate reimbursement from Bob and Charlie. However, if she paid late fees
because Bob didn't pay on time, she could ask Bob to cover his portion of the
late fees.
5. Payment and Extinguishment of Obligation: If Alice pays the full rent for the
month, the landlord can't demand payment from Bob and Charlie for that month
anymore. The obligation is considered fulfilled.
6. Remission and Reimbursement: If the landlord forgives part of the rent owed
by Alice because she made improvements to the apartment, Alice can't ask Bob
and Charlie to pay her back for their shares of the forgiven rent.
7. Loss of Thing or Impossibility of Performance: If the apartment burns down
due to a fire, and it's not the fault of any of them, their obligation to pay rent is
extinguished.
8. Defenses and Actions: If the landlord tries to evict them unfairly, Alice, Bob, and
Charlie can each defend themselves individually. But if it's because Bob
damaged the apartment, the landlord can demand compensation from any or all
of them.

SECTION 5
Divisible and Indivisible Obligations
1. Divisibility or Indivisibility of Things: Whether the object of the obligation is
divisible or indivisible doesn't change the rules outlined in the previous sections.
This means that even if what's being obligated is a single, indivisible thing, the
principles of joint and solidary obligations still apply (Article 1223).

1
 2. Joint Indivisible Obligations and Damages: If multiple debtors are jointly
responsible for fulfilling an obligation, and that obligation involves an indivisible
thing (like a unique piece of artwork), failure by any one of the debtors to fulfill
their part leads to damages. The debtors who were ready to fulfill their part are
not responsible for damages beyond their share of the value of the thing or
service (Article 1224).
3. Defining Indivisibility: Obligations involving specific, indivisible things or those
not susceptible to partial performance are considered indivisible. For example, if
two people jointly agree to buy a unique painting, the obligation is indivisible
because the painting cannot be split into parts. However, if the obligation
involves a certain number of days of work, it's divisible because each day's work
can be considered separately. Even if the object or service is physically divisible,
it can still be considered indivisible if the law or the parties intend it to be so
(Article 1225).

SECTION 6
Obligations with a Penal Clause
1. Substitution of Penalty for Damages and Interests: If an obligation includes a
penal clause, the penalty stated will replace the indemnity for damages and the
payment of interests in case the obligation is not fulfilled, unless there's a specific
agreement stating otherwise. However, if the debtor refuses to pay the penalty or
commits fraud, they still have to pay damages (Article 1226).
Example: Suppose Alice agrees to deliver a product to Bob by a certain date, with a
penalty clause stating that if she fails to do so, she'll pay Bob $100. If Alice misses the
deadline, she owes Bob $100 as per the penalty clause instead of him having to prove
any actual damages.
2. Exemption and Concurrent Fulfillment: The debtor can't avoid fulfilling the
obligation by just paying the penalty, unless explicitly allowed. Similarly, the
creditor can't demand both the fulfillment of the obligation and the penalty unless
expressly granted. However, if fulfilling the obligation becomes impossible
without the creditor's fault, the penalty can be enforced (Article 1227).
Example: If Alice fails to deliver the product to Bob and Bob demands either the product
or the penalty, he can't demand both at the same time unless it's explicitly stated in their
agreement.
3. Reduction of Penalty: If the debtor partially fulfills the obligation or if the penalty
is deemed unfair, the court can reduce the penalty to make it fair (Article 1229).
Example: If Alice delivers the product a day late, the court might reduce the penalty to
$50 instead of the full $100 stated in the agreement.

2
 4. Nullity of Penal Clause: If the penal clause is declared null, it doesn't affect the
validity of the principal obligation. However, if the principal obligation is null, the
penal clause becomes null too (Article 1230).
Example: If a court rules that the penalty clause in Alice and Bob's agreement is unfair,
it might nullify the penalty while still enforcing Alice's obligation to deliver the product to
Bob.

CHAPTER 4
Extinguishment of Obligations
General Provisions
1. Payment or Performance: Obligations are fulfilled when the debtor pays what
they owe or performs their obligation as agreed upon.
2. Loss of the Thing Due: If the object of the obligation is lost or destroyed without
the fault of the debtor, the obligation is extinguished because it's no longer
possible to fulfill it.
3. Condonation or Remission of Debt: If the creditor forgives or cancels the debt
owed by the debtor, the obligation is extinguished.
4. Confusion or Merger of Rights: If the rights of the creditor and debtor are
merged into one, such as when the debtor becomes the owner of the creditor's
rights, the obligation is extinguished.
5. Compensation: When two persons, in their own right, are creditors and debtors
of each other, they can compensate their obligations and extinguish them to the
extent of the smaller obligation.
6. Novation: When the parties to an obligation replace or modify it with a new one,
the original obligation is extinguished.
Other causes of extinguishment, like annulment, rescission, fulfillment of a resolutory
condition, and prescription, are addressed elsewhere in the Civil Code.
In simple terms, these are the ways in which obligations can come to an end, either
through fulfillment, agreement, loss, or legal changes in the terms of the obligation.

SECTION 1
Payment or Performance
Subsection 1: Application of Payments

3
 1. Declaration of Application: If a debtor owes several debts of the same kind to
the same creditor, they can specify which debt the payment should be applied to
at the time of payment, unless otherwise agreed. If not specified, the payment
will not be applied to debts not yet due (Article 1252).
2. Payment of Interest: If a debt produces interest, payment of the principal is not
considered complete until the interest is covered (Article 1253).
3. Application of Payment: If the payment cannot be applied according to previous
rules, or if application cannot be inferred from circumstances, the most
burdensome debt to the debtor among those due will be deemed satisfied. If
debts are of the same nature and burden, payment is applied proportionately
(Article 1254).
Subsection 2: Payment by Cession
1. Cession of Property: A debtor can assign their property to creditors to pay
debts, but this releases the debtor only from the responsibility for the net
proceeds of the assigned thing (Article 1255).
Subsection 3: Tender of Payment and Consignation
1. Refusal of Payment: If a creditor unjustly refuses a tender of payment, the
debtor is released from responsibility by consigning the thing or sum due.
Consignation alone has the same effect in specific cases (Article 1256).
2. Announcement of Consignation: The consignation must be announced to
interested parties for it to release the debtor, and it must strictly adhere to the
rules governing payment (Article 1257).
3. Process of Consignation: Consignation is made by depositing the things due
with judicial authority, proving the tender of payment in a proper case, and
notifying interested parties (Article 1258).
4. Expense of Consignation: The expenses of consignation, when properly made,
are borne by the creditor (Article 1259).
5. Cancellation of Obligation: Once consignation is duly made, the debtor can ask
the judge to cancel the obligation. Before the creditor accepts consignation or a
judicial declaration of proper consignation, the debtor may withdraw the
deposited thing, keeping the obligation in force (Article 1260).
6. Authorization to Withdraw: If the creditor authorizes the debtor to withdraw the
consigned thing, they lose any preference they had over it, and co-debtors,
guarantors, and sureties are released (Article 1261).
These articles provide detailed procedures for payment, consignation, and application of
payments, ensuring fairness and clarity in the settlement of debts.

4
SECTION 2
Loss of the Thing Due
These articles outline the circumstances under which obligations are extinguished due
to the loss or destruction of the subject matter of the obligation, and the consequences
thereof:
1. Loss of Determinate Thing: If the specific thing that is the subject of the
obligation is lost or destroyed without the fault of the debtor and before they are
in default, the obligation is extinguished (Article 1262).
2. Liability for Fortuitous Events: However, if the obligor is liable for fortuitous
events either by law or agreement, the loss of the thing does not extinguish the
obligation, and the obligor is responsible for damages. This also applies when
assuming the risk is inherent to the nature of the obligation (Article 1262).
3. Generic Thing Obligation: If the obligation is to deliver a generic thing (i.e., a
thing that is not specifically identified), the loss or destruction of one of the same
kind does not extinguish the obligation (Article 1263).
4. Partial Loss Determination: The courts will decide whether partial loss of the
object of the obligation is significant enough to extinguish the obligation,
considering the circumstances (Article 1264).
5. Presumption of Fault: If the thing is lost while in the possession of the debtor, it
is presumed to be due to their fault unless proven otherwise, except in cases of
natural calamities like earthquakes, floods, or storms (Article 1265).
6. Impossibility of Performance: If the performance of the obligation becomes
legally or physically impossible without the fault of the obligor, they are released
from the obligation (Article 1266).
7. Difficulty Beyond Contemplation: If the service becomes so difficult that it is
beyond what the parties originally anticipated, the obligor may be released from
the obligation, either wholly or partially (Article 1267).
8. Debt from Criminal Offense: If the debt arises from a criminal offense, the
debtor cannot be exempted from paying its price unless they offered the thing to
the victim and the victim unjustifiably refused to accept it (Article 1268).
9. Rights of Action: If the obligation is extinguished due to the loss of the thing, the
creditor retains all rights of action that the debtor may have against third parties
because of the loss (Article 1269).
These articles ensure fairness and clarity regarding the effects of the loss or destruction
of the subject matter of an obligation.

5
SECTION 3
Condonation or Remission of the Debt
These articles elaborate on the concepts of condonation or remission of debt, as well as
the implications of delivering a private document evidencing a credit:
1. Nature of Condonation or Remission: Condonation or remission of debt is
essentially gratuitous, meaning it's given freely, and it requires acceptance by the
obligor (the debtor). This can be done expressly (directly stated) or impliedly
(indirectly implied). Both forms are subject to the rules governing inofficious
donations (Article 1270).
2. Delivery of Private Document: If a creditor voluntarily delivers a private
document that evidences a credit to the debtor, it implies the renunciation of any
legal action the creditor had against the debtor regarding the debt. If this
renunciation is challenged as inofficious (not in the interest of the creditor), the
debtor and their heirs can defend it by proving that the delivery of the document
was made in exchange for payment of the debt (Article 1271).
3. Presumption of Voluntary Delivery: If the private document evidencing the
debt is found in the possession of the debtor, it is presumed that the creditor
voluntarily delivered it, unless proven otherwise (Article 1272).
4. Effect on Accessory Obligations: Renunciation of the principal debt
extinguishes any accessory obligations tied to it. However, waiver of accessory
obligations doesn't affect the principal debt (Article 1273).
5. Presumption of Remission of Pledge: It is presumed that the accessory
obligation of pledge has been remitted when the pledged item, after being
delivered to the creditor, is found in the possession of the debtor or a third person
who owns the item (Article 1274).
These articles provide guidelines and presumptions regarding the remission of debt and
the implications of delivering documents evidencing credit, ensuring fairness and clarity
in debt-related transactions.

SECTION 4
Confusion or Merger of Rights

These articles discuss the concept of merger and confusion in the context of
obligations:
1. Merger of Characters: When the roles of creditor and debtor are combined in
the same person, the obligation is extinguished. This means if someone owes a
debt to themselves, they effectively cancel it out (Article 1275).

6
 2. Benefit to Guarantors: If the merger occurs in the principal debtor or creditor, it
benefits the guarantors. However, if the merger happens in a guarantor, it does
not extinguish the obligation (Article 1276).
3. Effect on Joint Obligations: Confusion (merger) does not extinguish a joint
obligation entirely. Instead, it only affects the share corresponding to the creditor
or debtor in whom the merger occurs (Article 1277).
In essence, these articles clarify how the merging of roles in the same person impacts
obligations and the rights of guarantors in such situations.

SECTION 5
Compensation
These articles explain the concept and conditions of compensation, a legal mechanism
where two parties owe each other debts which are of equal value:
1. Definition of Compensation: Compensation occurs when two persons, in their
own right, are both creditors and debtors of each other (Article 1278).
2. Conditions for Proper Compensation: For compensation to be valid, certain
conditions must be met:
• Both parties must be bound principally and must be principal creditors of
each other.
• The debts must be of equal value and both must be due, liquidated, and
demandable.
• There must be no retention or controversy over either debt, initiated by
third parties and communicated to the debtor (Article 1279).
3. Rights of Guarantor: A guarantor may also use compensation against what the
creditor owes the principal debtor (Article 1280).
4. Total or Partial Compensation: Compensation can be total (when both debts
are of the same amount) or partial (Article 1281).
5. Compensation of Future Debts: Parties may agree to compensate debts that
are not yet due (Article 1282).
6. Compensation in Legal Proceedings: If one party has a claim for damages
against the other in a legal proceeding, they can set it off by proving their right to
said damages (Article 1283).

7
 7. Compensation with Rescissible Debts: Rescissible or voidable debts may be
compensated against each other before they are judicially rescinded or avoided
(Article 1284).
8. Compensation and Assignment of Rights: If a creditor assigns their rights to a
third person and the debtor consents, they cannot use compensation against the
assignee unless certain conditions are met (Article 1285).
9. Operational Mechanism: Compensation takes place automatically by operation
of law, even if the parties are unaware of it. However, there may be indemnity for
exchange or transportation expenses (Article 1286).
10. Exceptions to Compensation: Compensation is not applicable in certain cases,
such as debts arising from deposits, gratuitous support, or civil liability from a
penal offense (Articles 1287-1288).
11. Application of Payments: When a person has several debts that can be
compensated, the rules on the application of payments determine the order of
compensation (Article 1289).
12. Effectiveness of Compensation: When all conditions are met, compensation
takes effect automatically and extinguishes both debts, even if the parties are
unaware of it (Article 1290).
These articles outline the rules and conditions surrounding the legal concept of
compensation, ensuring fairness and clarity in debt-related transactions.

SECTION 6
Novation
Novation is like giving a makeover to an existing obligation. It can happen in three ways:
1. Changing the terms: This is like altering the rules of a game. For example, if
you owe someone $100 for a borrowed bike, you might negotiate to pay $50 and
return the bike later.
2. Substituting the person: It's as if you're swapping players in a team. For
instance, if you owe money to Alice, you might arrange for Bob to take your place
and repay Alice instead.
3. Subrogating a third person: Think of this as passing the baton in a relay race.
Instead of you repaying Alice directly, Charlie steps in and takes over the debt,
becoming responsible for paying Alice.
Now, let's break it down with an example:
Imagine you borrowed $500 from your friend Alice to buy a laptop. Later, you negotiate
with Alice and agree to change the terms. Instead of paying back $500 in cash, you
8
decide to give her your old camera, which she accepts. This change in how you repay
the debt is an example of novation by changing the terms of the obligation.

TITLE II
CONTRACTS
CHAPTER 1
General Provisions
1. Definition of Contract: A contract is when two people agree to something. For
example, if you promise to walk your neighbor's dog for $10, that's a contract.
2. Freedom to Contract: You can make any agreement you want, as long as it's
legal and fair. For instance, if you agree to sell your old bike for $50, that's okay
because it's legal and a fair price.
3. Innominate Contracts: These are contracts that don't have a specific name but
still follow rules. Let's say you agree to help your friend fix their car for $20. Even
though it's not a common type of contract, it still has rules to follow.
4. Mutual Consent: Both people have to agree to the contract. If you agree to mow
your friend's lawn for $15, and your friend agrees to pay you, that's mutual
consent.
5. Third-Party Determination: Sometimes, a third person might need to decide
something in the contract. For example, if you and your friend can't agree on
when the lawn should be mowed, you might ask another friend to decide.
6. Effects of Contracts: Contracts affect the people who made them, their heirs
(like their kids), and anyone they pass the contract to. So, if you promise to give
your bike to your cousin when you're done with it, that promise affects both of
you.
7. Protection of Third Parties: If a contract benefits someone who isn't part of the
agreement, they can still get the benefit if they agree to it. For instance, if you
promise to give your bike to a charity, they can accept it if you haven't changed
your mind.
8. Real Contracts: Some contracts need something to be delivered to be valid. If
you agree to lend your friend a book, the contract isn't complete until you give
them the book.
9. Contracting in Another's Name: You can't sign a contract for someone else
unless they say you can or if the law lets you. So, you can't sell your friend's bike
for them unless they give you permission.

9
CHAPTER 2
Essential Requisites of Contracts
General Provisions
This article outlines the essential requirements for a contract to be valid. Let's simplify
each requirement:
1. Consent: Both parties must agree to the contract. This means they must freely
agree without being forced or tricked. For example, if you agree to sell your
phone to someone and they agree to buy it, that's consent.
2. Certain Object: The contract must be about something specific. It can't be
vague. For instance, if you agree to sell your phone (specific item) instead of just
saying you'll sell "something," that's a certain object.
3. Cause of the Obligation: This means there must be a reason or purpose for
making the contract. For example, if you agree to sell your phone to buy
groceries, the reason for selling the phone is to get money for groceries. That's
the cause of the obligation.
So, to have a valid contract, all three things must be present: agreement from both
parties, a specific thing or service involved, and a clear reason for making the contract.

SECTION 1
Consent
1. Consent: For a contract to be valid, both parties must agree to the same thing.
This agreement is shown through an offer from one party and the acceptance of
that offer by the other party. The offer and acceptance must be clear and definite.
For example, if you offer to sell your bike to someone for $100, and they agree to
buy it for that price, that's consent.
2. Mistake, Violence, Intimidation, Undue Influence, and Fraud: If consent to a
contract is obtained through any of these means, the contract is voidable. This
means that the injured party has the option to cancel the contract. Mistake can
be about the thing being sold, the person you're dealing with, or the legal effect of
the agreement. Violence refers to physical force, while intimidation involves
threats that make someone agree to a contract out of fear. Undue influence
happens when someone takes advantage of another person's vulnerability or
lack of freedom to make their own decision. Fraud involves deceitful tactics used
to make someone agree to a contract.
3. Simulation: This occurs when parties pretend to make a contract but don't
actually intend to be bound by it. Absolute simulation is when there's no intention
to be bound at all, while relative simulation happens when the parties conceal

10
 their true agreement. Absolute simulation makes the contract void, while relative
simulation binds the parties to their real agreement if it doesn't harm anyone else
or break the law.
These articles lay out various scenarios where consent to a contract may be affected,
either by mistakes, threats, deceit, or other factors. It's crucial for contracts to be
entered into freely and with a clear understanding of the terms involved.

SECTION 2
Object of Contracts
1. Object of the Contract: Basically, anything that can be bought, sold, or agreed
upon can be part of a contract, as long as it's legal and possible. This includes
things like goods, services, and even future rights or inheritances. However, you
can't make a contract to inherit something in the future unless the law specifically
allows it.
2. Determinacy: When you make a contract, you need to know exactly what you're
agreeing to. For example, if you're buying a car, you need to know the make and
model. However, if the exact quantity isn't known but can be figured out later
without making a new contract, that's okay.
3. No Impossible Things: You can't make a contract for something that's
impossible to do or provide. For instance, you can't agree to sell someone a
flying car if flying cars don't exist.
So, contracts need to have clear and possible things or services as their subject, and
you can't agree to inherit something in the future unless it's allowed by law.

SECTION 3
Cause of Contracts
1. Cause of the Contract: The cause is the reason why parties enter into a
contract. It depends on the type of contract:
• In contracts where both parties give something (like buying a car), the
cause is each party's promise or action.
• In contracts where one party receives something in return for a service or
benefit (like hiring a plumber), the cause is the service or benefit being
paid for.
• In contracts where one party gives something without expecting anything
in return (like a gift), the cause is the giver's generosity.

11
 2. Difference Between Cause and Motives: The reasons why people make
contracts might be personal (like wanting a new car or helping a friend), but the
cause of the contract is different—it's about what each party is getting or giving.
3. Effects of Cause: Contracts need to have a valid cause to be effective. If a
contract has no cause or the cause is illegal (against the law, morals, etc.), it's
void. If a false cause is stated but the real cause is legal, the contract can still be
valid. If the cause isn't mentioned, it's assumed to be legal unless proven
otherwise. However, just because the value exchanged seems unfair (like selling
a car for too little), it doesn't automatically invalidate the contract unless there's
fraud, mistake, or undue influence involved.

CHAPTER 3
Form of Contracts
1. Form of Contracts: Contracts are usually valid regardless of the form they take,
as long as they meet all the essential requirements. However, if the law
specifically requires a contract to be in a certain form to be valid or enforceable,
that requirement is crucial. In such cases, the parties cannot ignore the required
form.
2. Requirement of Document or Special Form: If the law demands a specific
document or form for certain types of contracts (like those listed in the next
article), the parties must follow that requirement once the contract is finalized.
They can enforce this requirement together with their rights under the contract.
3. Contracts Requiring a Public Document: Certain contracts need to be in a
public document, which is a written document authenticated by a notary public or
other authorized official. These include:
• Acts and contracts involving real estate rights or transactions (like buying
or selling land).
• Assignments, disclaimers, or waivers of inheritance rights.
• Powers to manage property or other acts affecting third parties.
• Assignments of rights from a contract that's in a public document.
• Other contracts involving amounts exceeding five hundred pesos (if the
law requires).
In summary, while many contracts are valid in any form, some require specific
documentation or forms, especially those involving real estate or significant amounts of
money.

12
CHAPTER 4
Reformation of Instruments (n)
1. Reformation of Contracts: If there is a contract, but it doesn't accurately reflect
what both parties agreed upon due to mistake, fraud, unfair conduct, or accident,
one party can ask for the contract to be reformed or corrected. The goal is to
make sure the true intentions of the parties are accurately represented.
2. Types of Mistakes: Reformation can happen in cases of mutual mistake (both
parties were mistaken), mistake by one party combined with fraud or unfair
behavior by the other, or when one party was mistaken and the other knew but
didn't say anything.
3. When Reformation Isn't Allowed: Reformation isn't allowed for simple gifts,
wills, or if the original agreement was void. Once a party has taken legal action
based on the contract, they can't later ask for reformation.
4. Who Can Request Reformation: Either party or their successors (like heirs or
those who inherit their rights) can request reformation if the mistake was mutual.
Otherwise, only the injured party or their successors can ask for it.
5. Legal Procedure: The process for getting a contract reformed will follow rules
set by the court.
In essence, reformation corrects mistakes in contracts to accurately reflect what the
parties intended when they entered into the agreement.

CHAPTER 5
Interpretation of Contracts
Clear Intent Matters: If a contract's terms are clear and everyone understands what
they mean, then those terms control. But if the words don't match what the parties
clearly intended, then the intention of the parties wins.
Actions Speak Louder: To understand what the parties really meant, we look at what
they did before and after making the contract.
Specific vs. General: Even if a contract uses broad language, it doesn't cover
everything under the sun. It only applies to what the parties specifically agreed on.
Choosing the Best Meaning: If a word or phrase in a contract can mean different
things, we pick the meaning that makes the most sense and makes the contract work.
Looking at the Whole Picture: We interpret all the terms of a contract together, not in
isolation, to understand their combined meaning.
Fitting the Context: Words should be understood in a way that makes sense for the
contract's purpose.
13
Local Customs Matter: If there's any confusion, we consider local customs to help
clarify what the contract means.
Obscurity isn't a Get-Out: If a contract is unclear, we don't favor the person who made
it confusing.
Resolving Doubts: If we still can't figure out what the contract means, we look at
what's most fair and balanced for both parties. But if we can't even understand what the
contract is about, it's invalid.
Guidance from Rules: Finally, we use the rules set by the court to help us interpret
contracts.

CHAPTER 6
Rescissible Contracts
Chapter 6 discusses rescissible contracts. These are agreements that can be cancelled
or rescinded under certain circumstances. Let's break down the key points:
Rescissible Contracts Defined: Rescissible contracts are those where one or both
parties can request cancellation due to certain specific reasons.
Reasons for Rescission: Contracts can be rescinded for various reasons, such as
when there is fraud, undue influence, or some other kind of damage caused to one of
the parties.
Time Limit: There is usually a time limit within which a party must request rescission. If
this time limit passes, the contract may become binding and rescission may no longer
be possible.
Legal Process: Rescission typically involves legal proceedings, where a court may
decide whether the contract should be cancelled based on the circumstances
presented.
Effects of Rescission: If a contract is rescinded, it's like it never happened. The parties
are usually restored to their original positions before the contract was made, with any
benefits or payments made being returned.
Protection from Unfair Contracts: Rescission provides a safeguard against
agreements that were entered into unfairly or under false pretenses, allowing parties to
undo the contract and avoid any harm.
In summary, rescissible contracts offer a way to correct agreements that were made
under questionable circumstances, providing a legal mechanism to cancel such
contracts and restore fairness to the parties involved.

14
CHAPTER 7
Voidable Contracts
1. Voidable Contracts: These are contracts that can be canceled or annulled by
one of the parties involved because there's a problem with how the agreement
was made. For example, if someone was forced into signing a contract because
of threats, that contract could be voidable.
2. Time Limit for Annulment: If someone wants to cancel a voidable contract, they
need to do it within four years. The clock starts ticking from the time they realize
there's a problem with the contract. For contracts involving minors or people who
couldn't fully understand what they were agreeing to, the time limit starts when
they are no longer under guardianship.
3. Ratification: If the parties decide to go ahead with the contract despite its
issues, they can ratify it. This means they accept the contract as valid, flaws and
all.
4. Who Can Annul: Usually, anyone who is affected by the contract can ask for it to
be canceled. However, if someone knew about the problems with the contract or
behaved badly themselves, they might not be able to use those issues to cancel
the contract.
5. Restitution: If a contract is canceled, the parties need to give back what they got
from the contract. For example, if someone bought a car under a voidable
contract and then canceled it, they'd have to return the car and any money they
received from selling it.
6. Compensation for Loss: If someone can't return what they got from the
contract, like if they lost or damaged it, they might need to pay the other party the
value of what was lost plus interest.
7. Reciprocity: If one party doesn't hold up their end of the bargain, the other party
doesn't have to either. This means both sides need to fulfill their obligations for
the contract to be valid.
So, let's say you signed a contract to buy a house, but later you found out that the seller
lied about the condition of the house. You could ask to cancel the contract within four
years of finding out about the lie. If the seller agrees to fix the issues or you decide to
keep the house despite the problems, you've ratified the contract. If the seller refuses to
fix the issues, you might be able to cancel the contract and get your money back.

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CHAPTER 8
Unenforceable Contracts (n)
1. Unauthorized Contracts: Contracts made by someone without the authority to
do so or beyond their powers are not enforceable unless ratified (confirmed).
2. Statute of Frauds: Certain types of contracts must be in writing to be
enforceable. These include:
• Contracts not to be performed within a year.
• Promises to answer for someone else's debt.
• Agreements made in consideration of marriage.
• Contracts for the sale of goods over a certain amount.
• Leases or sales of real estate for more than a year.
• Representations about someone else's credit. If these contracts aren't in
writing and signed by the party being charged, they are unenforceable
unless ratified or if there's evidence of acceptance or benefit.
3. Incapacity of Both Parties: Contracts where both parties are incapable of giving
consent are not enforceable. However, if one party's parent or guardian ratifies
the contract, it becomes valid. If both parties' parents or guardians ratify it, the
contract is valid from the start.
4. Ratification: Unauthorized contracts can be ratified, and this makes them valid.
Ratification can be expressed or implied.
5. Effect of Ratification: When ratified, unauthorized contracts become
enforceable as if they were authorized from the beginning.
6. Third-Party Challenge: Contracts that are unenforceable cannot be challenged
by third parties. This means people who aren't directly involved in the contract
can't contest its validity.

CHAPTER 9
Void and Inexistent Contracts
1. Contracts that are Inexistent and Void from the Beginning:
• Contracts with causes, objects, or purposes against the law, morals, good
customs, public order, or public policy are void.
• Contracts that are absolutely fake or simulated are void.

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 • Contracts where the cause or object didn't exist at the time of the
agreement are void.
• Contracts with objects outside the scope of what can be legally traded are
void.
• Contracts involving impossible tasks are void.
• Contracts where the parties' intentions about the main purpose can't be
figured out are void.
• Contracts expressly prohibited by law are void, and they cannot be ratified
or validated.
2. Prescription of Action:
• The right to challenge a contract's inexistence does not expire over time.
3. Legal Consequences:
• If both parties are equally at fault in an illegal contract, neither can
demand what they agreed upon.
• If only one party is at fault, they can't demand what they agreed upon, but
the innocent party can reclaim what they gave without fulfilling their
promise.
4. Recovery in Certain Circumstances:
• Interest paid in excess of what's allowed by law can be reclaimed, along
with interest on that excess.
• Money or property given for an illegal purpose can be reclaimed before
the purpose is fulfilled or damages occur.
• If one party in an illegal contract is incapable of consent, recovery may be
allowed by the courts if it serves justice.
• In cases of prohibition for the plaintiff's protection, they may reclaim what
they've paid or delivered if it enhances public policy.
5. Maximum Price and Wage Regulations:
• If a price or wage is set by law and excess is paid, it can be reclaimed.
• If a laborer works beyond the legally set hours, they can demand
additional compensation.
• If a laborer agrees to a wage below the legally set minimum, they can
reclaim the shortfall.
6. Divisible Contracts:

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 • If an illegal term in a contract can be separated from the legal ones, the
legal parts may still be enforceable.
7. Third-Party Defense and Resulting Contracts:
• Third parties not directly impacted by the illegal contract can't use its
illegality as a defense.
• Contracts resulting directly from a previous illegal contract are also void.

TITLE III
NATURAL OBLIGATIONS
1. Types of Obligations:
• There are two types of obligations: civil and natural.
• Civil obligations give the right to enforce their performance through legal
action.
• Natural obligations, based on equity and natural law rather than positive
law, don't grant the right to legal action to enforce them. However, after
voluntary fulfillment by the obligor, they allow for the retention of what has
been delivered or rendered.
2. Voluntary Performance and Recovery:
• If a civil obligation lapses due to prescription, the obligor who voluntarily
fulfills it can't reclaim what they've given or the value of services rendered.
• If a third party pays a debt without the debtor's knowledge or against their
will, and the debtor later repays the third party voluntarily, the initial payer
can't recover what they paid.
• If a minor between 18 and 21 years old enters a contract without parental
consent and voluntarily returns what they received from the contract, they
can't demand it back even if they weren't benefited.
• If such a minor voluntarily pays money or delivers something to fulfill the
obligation, and the obligee spends or consumes it in good faith, the minor
can't recover it.
• If a defendant in a failed lawsuit voluntarily fulfills the obligation, they can't
demand what they've given or the value of services rendered.
• If a testate or intestate heir pays a debt of the deceased exceeding the
value of what they received from the estate, the payment is valid and can't
be undone.

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 • If a will is declared void due to improper execution, but an intestate heir
pays a legacy according to the defective will after settling the deceased's
debts, the payment is effective and cannot be revoked.

TITLE IV
ESTOPPEL (n)
1. Estoppel Defined:
• Estoppel makes an admission or representation binding upon the person
who made it. It cannot be denied or disproved by that person against
someone who relied on it.
2. Adoption of Estoppel Principles:
• The principles of estoppel are adopted as long as they don't conflict with
the Civil Code, the Code of Commerce, the Rules of Court, or special
laws.
3. Forms of Estoppel:
• Estoppel can be in pais (by conduct or words) or by deed (through written
documents or actions).
4. Title Transfer by Operation of Law:
• If someone who isn't the owner of something sells it and later becomes the
owner, the title automatically passes to the buyer.
5. Estoppel in Sales and Representation:
• If someone sells something they don't own, then later acquires it, they
can't reclaim it from the buyer.
• Similarly, a lessee or bailee can't claim ownership of the leased or
received property against the lessor or bailor.
6. Estoppel in Misrepresentation of Ownership:
• If someone misleads another about ownership of real estate in a contract,
they can't later assert their own legal title or interest if certain conditions
are met.
7. Protection of Pledgee:
• If someone allows another to appear as the owner of personal property
and receives payment for it, they can't later claim ownership to defeat a
pledge made by the apparent owner to someone who received it in good
faith as security for a debt.

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 8. Scope of Estoppel:
• Estoppel only applies between the parties involved or their successors in
interest.

TITLE V
TRUSTS (n)
CHAPTER 1
General Provisions
1. Trustor: This is the person who establishes the trust, often by transferring
property to the trustee to manage for the benefit of the beneficiary.
2. Trustee: The trustee is the individual or entity entrusted with managing the
property or assets held in the trust for the benefit of the beneficiary.
3. Beneficiary: The beneficiary is the person or entity for whom the trust has been
created, and who ultimately benefits from the trust arrangement.
4. Types of Trusts:
• Express Trusts: These trusts are created intentionally by the trustor or
through an agreement between the parties involved.
• Implied Trusts: These trusts come into existence automatically by
operation of law, rather than by explicit intention or agreement.
5. Adoption of General Trust Law Principles: The general principles of trust law
are adopted, as long as they do not conflict with other relevant laws such as the
Civil Code, the Code of Commerce, the Rules of Court, or special laws.

CHAPTER 2
Express Trusts
1. Proof of Express Trusts: Express trusts concerning immovable property or any
interest in it cannot be established solely through verbal or parol evidence. This
means that there must be a written document or instrument to prove the
existence of such trusts.
2. Creation of Express Trusts: There are no specific or particular words required
to create an express trust. As long as the intention to create a trust is clear from
the language used, the trust will be valid.

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 3. Trustee's Declination: If the appointed trustee refuses or declines to accept the
designation, the trust does not automatically fail. However, this rule may vary if
the trust instrument specifically states otherwise.
4. Beneficiary's Acceptance: The acceptance of the beneficiary is necessary for
the trust to be valid. However, if the trust does not impose any burdensome
conditions on the beneficiary, their acceptance will be presumed unless proven
otherwise.

CHAPTER 3
Implied Trusts
1. Implied Trusts: Implied trusts can arise in situations not explicitly mentioned in
the law but are recognized based on general principles of trust law, as long as
they don't conflict with the provisions of the Civil Code.
2. Sale of Property with Payment by Another: An implied trust exists when
someone pays for a property but the legal title is granted to another person. The
payer is the beneficiary, and the recipient of the legal title is the trustee.
However, if the buyer is a child of the payer, it's presumed to be a gift to the child.
3. Donation with Reservation of Beneficial Interest: An implied trust is created
when a donation is made, but it's clear that the recipient either has no beneficial
interest in the property or only a partial interest.
4. Loan for Purchase of Property: If someone loans money to another person to
buy property, and the legal title is conveyed to the lender to secure the debt, an
implied trust is established in favor of the borrower. The borrower has the right to
redeem the property by repaying the loan.
5. Succession with Legal Title in Another's Name: When someone inherits
property but puts the legal title in another person's name, an implied trust is
created for the true owner's benefit.
6. Joint Purchase with Legal Title in One Person's Name: If multiple people
agree to buy property and the legal title is held by one of them for the benefit of
all, an implied trust is created for the other buyers.
7. Conveyance Based on Intention to Hold for Another: If property is transferred
to someone based on their intention to hold it for or transfer it to another person,
an implied trust is created for the intended beneficiary.
8. Conveyance to Secure Performance of Obligation: When property is
conveyed to secure the performance of an obligation, an implied trust is
established. The grantor can demand the property back if they fulfill the
obligation.

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 9. Use of Trust Funds for Property Purchase: If a trustee or fiduciary uses trust
funds to buy property, an implied trust is established for the rightful owner of the
funds.
10. Property Acquired Through Mistake or Fraud: If someone acquires property
through mistake or fraud, they are considered a trustee of an implied trust for the
benefit of the original owner.
11. Proof of Implied Trusts: Implied trusts can be proven by oral evidence.

TITLE VI
SALES
CHAPTER 1
Nature and Form of the Contract
1. Definition of Sale: A contract of sale involves one party obligating to transfer
ownership and deliver a specific thing, while the other party agrees to pay a
certain price in money or its equivalent.
2. Absolute or Conditional Sale: A sale can be absolute (unconditional) or
conditional.
3. Validity of Object: The thing being sold must be lawful, and the seller must have
the right to transfer ownership at the time of delivery.
4. Determinacy of the Thing: The thing being sold must be determinate or capable
of being made determinate without further agreement between the parties.
5. Sale of Potential Existence: Things with potential existence can be sold,
subject to the condition that they come into existence.
6. Existing Goods vs. Future Goods: Goods sold can be existing ones owned by
the seller or future goods to be acquired after the contract is made.
7. Undivided Interest and Fungible Goods: The sole owner of a thing can sell an
undivided interest in it. In the case of fungible goods, an undivided share of a
specific mass can be sold.
8. Resolutory Condition and Characteristics of Sale vs. Agency to Sell:
Property subject to resolutory conditions can be sold. Contracts containing
characteristics of both sale and agency to sell will be construed by considering
the essential clauses of the entire instrument.
9. Nature of the Contract: A contract for the delivery of goods manufactured for
the general market is a sale, while one for goods manufactured specifically for a
customer's order is a contract for a piece of work.

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 10. Consideration and Price: The price can be fixed with reference to another
certain thing or left to the judgment of a special person. Gross inadequacy of
price doesn't affect the contract, except if it indicates a defect in consent or an
intention other than sale.
11. Perfection and Transfer of Ownership: The contract is perfected when there is
a meeting of minds on the object and price. Ownership transfers upon actual or
constructive delivery.
12. Sale by Auction: Sale by auction involves separate contracts for each lot, with
the sale being perfected by the auctioneer's announcement.
13. Other Provisions: The contract may stipulate that ownership passes only upon
full payment. Promises to buy or sell are reciprocally demandable if supported by
separate consideration. Injury to or benefit from the thing sold after perfection but
before delivery is governed by specific provisions. Earnest money is considered
part of the price. The contract can be made in writing, orally, or inferred from
conduct. The vendor has remedies if the price is payable in installments, and
expenses for execution and registration are borne by the vendor unless
otherwise stipulated.

CHAPTER 2
Capacity to Buy or Sell
1. Sale of Necessaries to Minors or Persons Without Capacity: Necessaries
sold to minors or individuals without capacity to act must be paid for at a
reasonable price. Necessaries are those items essential for maintaining one's
standard of living as defined in Article 290.
2. Sale Between Spouses: Generally, spouses cannot sell property to each other,
except when there is a separation of property agreed upon in the marriage
settlements, or when there has been a judicial separation of property under
Article 191.
3. Prohibited Acquisitions: Certain persons are prohibited from acquiring property
through purchase, even at public or judicial auctions, either personally or through
intermediaries. These include guardians, agents, executors, administrators,
public officers and employees, and others specified by law. This prohibition
extends to sales in legal redemption, compromises, and renunciations.

CHAPTER 3
Effects of the Contract When the Thing Sold Has Been Lost

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1. Complete Loss of Object: If the object of the sale is entirely lost at the time the
contract is perfected, the contract becomes void.
2. Partial Loss of Object: If the object is partially lost, the buyer has two options:
• Withdraw from the contract entirely.
• Demand the remaining part of the object, paying its price in proportion to
the total agreed-upon sum.
3. Deterioration of Goods: If specific goods are sold, and without the seller's
knowledge, they have either partially perished or deteriorated in quality to the
extent of substantially changing their character, the buyer can choose:
• To avoid the sale altogether.
• To consider the sale valid for the existing goods or the part that has not
deteriorated. If the sale was divisible, the buyer must pay the agreed price
for the goods in which the ownership will pass.

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