CIVIL LAW REVIEWER Chapter I.

GENERAL PROVISIONS

Chapter I. General Provisions

OBLIGATIONS & CONTRACTS TEAM

OBLIGATIONS & CONTRACTS

Prof. Solomon Lumba I. CLASSIFICATION
Faculty Editor
II. ELEMENTS
Leo Ledesma III. STAGES
Lead Writer IV. CHARACTERISTICS
Krizel Malabanan
Ivy Velasco Article 1305, Civil Code. A contract is a meeting of
Tin Reyes minds, between two persons whereby one binds
Frances Domingo
himself, with respect to the other, to give something
Hazel Abenoja
Writers or to render some service.

CIVIL LAW 122

I. Classification of Contracts

CONTRACTS
Kristine Bongcaron
Patricia Tobias
Subject Editors
A. To formation:
1. Consensual: consent is enough; e.g.
ACADEMICS COMMITTEE sale
Kristine Bongcaron 2. Real: consent and delivery is required;
Michelle Dy e.g. deposit, pledge
Patrich Leccio 3. Solemn or formal: special formalities are
Editors-in-Chief required for perfection e.g. donation of
realty
PRINTING & DISTRIBUTION
Kae Guerrero B. To relation to other contracts:
1. Principal: may exist alone; e.g. lease
DESIGN & LAYOUT
2. Accessory: depends on another contract
Pat Hernandez for its existence; e.g. guaranty
Viktor Fontanilla 3. Preparatory: a preliminary step towards
Rusell Aragones
the celebration of a subsequent
Romualdo Menzon Jr.
Rania Joya contract; e.g. agency

LECTURES COMMITTEE C. To nature of vinculum

Michelle Arias 1. Unilateral: only one party is bound by
Camille Maranan the prestation; e.g. commodatum
Angela Sandalo 2. Bilateral (synallagmatic): where both
Heads parties are bound by reciprocal
Katz Manzano Mary Rose Beley prestations; e.g. sale
Sam Nuñez Krizel Malabanan
Arianne Cerezo Marcrese Banaag D. To fulfillment of prestations
Volunteers
1. Commutative: fulfillment is determined in
MOCK BAR COMMITTEE advance
2. Aleatory: fulfillment is determined by
Lilibeth Perez chance
BAR CANDIDATES WELFARE
E. By equivalence of prestations
Dahlia Salamat 1. Gratuitous: no correlative prestation is
LOGISTICS received by a party
2. Onerous: there is an exchange of
Charisse Mendoza correlative prestations
3. Remuneratory: the prestation is based
SECRETARIAT COMMITTEE
on services or benefits already received
Jill Hernandez
Head F. By the time of fulfillment
Loraine Mendoza Faye Celso 1. Executed: obligation is fulfilled at the
Mary Mendoza Joie Bajo time contract is entered into
Members 2. Executory: fulfillment does not take
place at the time the contract is made

G. To their purpose
CIVIL LAW REVIEWER Chapter I. GENERAL PROVISIONS

1. Transfer of ownership, e.g. sale III. Stages of Contracts

2. Conveyance of Use, e.g. Commodatum
3. Rendition of Service, e.g. agency
A. Preparation, conception or generation:
period of negotiation and bargaining, ending
H. To their subject matter
at the moment of agreement
1. Things, e.g. sale, deposit
2. Services, e.g. agency
B. Perfection or birth: the moment when the
parties come to agree on the terms of the
I. To their designation
contract
1. Nominate: the law gives the contract a
special designation or particular name
C. Consummation or death: the fulfillment or
e.g. deposit 123
performance of the terms agreed upon
2. Innominate: the contract has no special

CONTRACTS
name

Article 1305, Civil Code. INNOMINATE IV. Charactertics of Contracts (MARCO)

CONTRACTS shall be regulated by the stipulations
of the parties, by the general provisions of Titles I
and II of [the Civil Code], by the rules governing the
most analogous nominate contracts, and by the
customs of the place.
Classes of Innominate Contracts
1. Do ut des: I give so that you may give
2. Do ut facias: I give so that you may do
3. Facio ut facias: I do so that you may do
4. Facio ut des: I do so that you may give
II. Elements of Contracts
A. Essential: Those without which the contract
would not exist (consent, object, causa).
B. Natural: Those which are derived from the
nature of the contract and ordinarily
accompany the same-they are presumed to
exist unless the contrary is stipulated e.g.
warranty in sales
C. Accidental: Those which exist only if
stipulated
A. MUTUALITY
The contract must bind both contracting parties;
its validity or compliance cannot be left to the will
of one of them (Art.1308).
Taylor v. Uy Teng Piao, 1922: [BUT] a contract may
expressly confer upon one party the right to cancel
the contract because the exercise of that right is a
fulfillment of the provisions of the contract itself
 The release must be binding on both parties.
 The determination of the performance may
rd
be left to a 3 person, whose decision shall
NOT be binding if:
 It is evidently inequitable (the courts will
decide)
 The decision had not been made known
to both parties (Art.1309)
B. AUTONOMY
The contracting parties may establish such
stipulations, clauses, terms and conditions as
they may deem convenient, provided they are
not contrary to law, morals, good customs,
public order, or public policy (Art. 1306).

Solemn Real Consensual

Common Consent, subject matter, causa C. RELATIVITY
Elements Contracts take effect only between parties, their
Special Formality Delivery None assigns and heirs UNLESS, obligations arising
Elements from the contract are not transmissible by their
Example Donationo Loan, Others (1) nature, (2) by stipulation or (3) by provision of
f personal pledge law. The heir is not liable beyond the value of
property the property he received from the decedent. (Art.
more than
1311)
P5K
Exception: Strangers may enforce the contract
in their favor in the ff. cases:
1. Stipulations Pour Autrui—
If a contract should contain some stipulation
in favor of a third person, he may demand its
fulfilment provided he communicated his
CIVIL LAW REVIEWER
acceptance to the obligor before its
revocation. A mere incidental benefit or
interest of a person is not sufficient. The
contracting parties must have clearly and
deliberately conferred a favour upon a third
person (Art.1311).
Requisites:
a. There must be a stipulation in favor of a
third person
b. The stipulation must be part, not the
whole of the contract
c. The contracting parties must have
clearly and deliberately conferred a
favor upon a third person, NOT a mere
incidental benefit or interest.
d. The third person must have
communicated his acceptance to the
obligor before its revocation
e. No relation of agency exists between
any of the parties and the third person
favored
Florentino v. Encarnacion, 1977:
a. Contracts to perform personal acts
which cannot be as well performed by
others are discharged by the death of
the promissor. Conversely, where the
service or act is of such a character that
it may as well be performed by another,
or where the contract, by its terms,
shows that performance by others
was contemplated, death does not
terminate the contract or excuse
nonperformance.
b. In this case the stipulation is a
stipulation pour atrui because the true
intent of the parties is to confer a direct
and material benefit upon a third party.
Accion Directa: Where the statute
authorizes the creditor to sue on his
debtor’s contract, e.g. lessor v. sub-
lessee (Art. 1651,1652) (J.B.L. Reyes)
2. Third Person In Possession—
When the third person comes into
possession of the object of a contract
creating real rights (Art 1312)
3. Fraud—
Where the contract is entered into in order to
defraud a person (Art. 1313)
4. Tortuous Interference—
Where the third person induces a
contracting party to violate his contract
(Art.1314).
Chapter I. GENERAL PROVISIONS
Requisites:
a. Existence of a valid contract
b. Knowledge of the third person of the
existence of the contract; and
c. Interference by third person without
legal justification or excuse
D. CONSENSUALITY
Contracts are perfected by mere consent and
from that moment, the parties are bound not only
to the fulfillment of what has been expressly
stipulated but also to all consequences which, 124
according to their nature, may be in keeping with
CONTRACTS
good faith, usage and law, (Art.1315) EXCEPT
real contracts, such as deposit, pledge and
commodatum, are not perfected until the
delivery of the object of the obligation.
(Tolentino)
E. OBLIGATORY FORCE
Art. 1159, Civil Code. Obligations arising from
contracts have the force of law between the
contracting parties and should be complied with in
good faith.
Art. 1308, Civil Code. The contract must bind both
contracting parties; its validity or compliance cannot
be left to the will of one of them.
Art. 1315, Civil Code. Contracts are perfected by
mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping
with good faith, usage and law.
Art. 1356, Civil Code. 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.
CIVIL LAW REVIEWER Chapter II. ESSENTIAL REQUISITES

OFFER TERMINATES upon:

Chapter II. Essential Requisites a. Rejection by the offeree
b. Incapacity (death, civil interdiction,
I. CONSENT insanity, or insolvency) of the offeror or
II. OBJECT
offeree before acceptance is conveyed
III. CAUSE
c. Counter-offer
d. Lapse of the time stated in the offer
without acceptance being conveyed
I. Consent e. Revocation of the offer before learning
of acceptance
Conformity of the parties to the terms of the f. Supervening illegality before acceptance
contract; the acceptance by one of the offer (J.B.L. Reyes) 125
made by the other. (Manresa)

2. Acceptance
Requisites:
1. It must be manifested by the concurrence of
the offer and acceptance (Arts. 1319-1326)
2. The contracting parties must possess the
necessary legal capacity (Arts. 1327-1329)
3. It must be intelligent, free, spontaneous, and
real (not vitiated) (Arts. 1330-1346)
A. Concurrence
1. Offer: a unilateral proposition which one
party makes to the other for the celebration
of the contract. (Tolentino)
Requisites:
a. Definite
b. Intentional
c. Complete
CONTRACTS
Requisites:
a. Unqualified and Unconditional, i.e. it
must conform with all the terms of the
offer, otherwise it is a counter-offer (Art.
1319)
b. Communicated to the offeror and
learned by him (Arts. 1319, 1322). If
made through an agent, the offer is
accepted from the time the acceptance
is communicated to such agent.
c. Express/Implied, but is not presumed
OPTION CONTRACT: A preparatory
contract in which one party grants to the
other, for a fixed period, the option to decide
whether or not to enter into a principal
contract. (Art. 1324)

Invitations to make offers With consideration Without consideration

(advertisements) Offeror cannot Offeror may withdraw by
 Business advertisements of things for unilaterally withdraw his communicating withdrawal
sale, are NOT definite offers, just offer to the offeree before
acceptance
invitations to make an offer, UNLESS
the contrary appears (Art. 1325)
 Advertisements for bidders are
B. Capacity
invitations to make proposals, advertiser
1. Incapacitated to Give Consent
is NOT bound to accept lowest or
a. Minors, UNLESS, the minor’s consent
highest bid, UNLESS contrary appears;
is operative in contracts:
the bidder is the offeror (Art. 1326).
 Statements of intention: no contract  For necessaries (Art.1427)
results even if accepted  Where the minor actively
misrepresents his age (estoppel)
Rosenstock v. Burke, 1924:
FACTS: Elser, in a letter, informed Burke that he was  Mercado v. Espiritu, 1917:
‘in a position and is willing to entertain’ the purchase Minors held in estoppel through
of the yacht under some terms. active misrepresentation
HELD: The word “entertain” applied to an act does not  Bambalan v. Maramba, 1928:
mean the resolution to perform said act, but simply a There is no estoppel if the minority
position to deliberate for deciding to perform or not to was known.
perform said act. It was merely a position to deliberate b. Insane or demented persons,
whether or not he would purchase the yacht and
UNLESS, they contract during a lucid
invitation to a proposal being made to him, which
might be accepted by him or not.
interval
c. Deaf-mutes who do not know how to
read and write.
CIVIL LAW REVIEWER Chapter II. ESSENTIAL REQUISITES

2. Disqualified to Contract (Art. 1329): 2. Intimidation

a. Those under Civil interdiction for
transactions inter vivos (RPC Art. 34)
b. Undischarged insolvents (Insolvency
Law, Sec.24)
c. Husband and wife: cannot donate (Art.
123 FC) to each other, nor sell if the
marriage is under ACP (Art.1490)
d. The ff. cannot purchase (Art. 1491):
 The guardian: his ward’s property
 The agent: the principal’s property
 Executors and administrators:
When one of the contracting parties is
compelled by a reasonable and well-
grounded fear of an imminent and grave evil
upon his person or property, or upon the
person or property of his spouse,
descendants or ascendants, to give his
consent (Art. 1335).
Martinez v. HSBC, 1910: The conveyance of several
properties by to her husband’s creditors, though
126
reluctant is still consent. She assented to the
requirements of the defendants, the civil and criminal

CONTRACTS
property under administration
actions against them would be dropped. A contract is
 Public officers-state property under
valid even though one of the parties entered into it
their administration against his wishes and desires, or even against his
 Justices, judges, prosecutors, clerks better judgment. Contracts are also valid even though
of court, lawyers-property attached they are entered into by one of the parties without
in litigation. hope of advantage or profit.
e. Members of Ethnic Minorities: their
contracts (excluding sale of personal 3. Violence
property or personal service contracts) Irresistible force used to extort consent
must be approved by the Governor or (J.B.L. Reyes)
his representative. (Public Land Act)
4. Undue Influence
Incapacity to Give Disqualification to When a person takes improper advantage of
Consent (Art. 1327) Contract (Art.1329) his power over the will of another, depriving
Restrains the exercise of Restrains the very right the latter of a reasonable freedom of choice
the right to contract itself (Art. 1337).
Based on subjective Based on public policy
circumstances of certain and morality
persons Circumstances:
a. Relationship of the parties (family,
Voidable Void spiritual, confidential etc.)
b. That the person unduly influenced was
suffering from infirmity (mental
C. Vices of Consent (Art. 1330, CC) (MIVUF) weakness, ignorance etc.) (Art.1337)
1. Mistake
Inadvertent and excusable disregard of a 5. Fraud
circumstance material to the contract. (J.B.L. When through insidious words or
Reyes) machinations of one of the contracting
 In order that mistake may invalidate parties, the other is induced to enter into a
consent, it should refer to the contract which, without them, he would not
substance of the thing which is the have agreed to (Art. 1338).
object of the contract, or to those
conditions which have principally moved Art. 1339, Civil Code. Failure to disclose facts, when
one or both parties to enter into the there is a duty to reveal them, as when the parties are
bound by confidential relations, constitutes fraud.
contract (Art.1331)
Art. 1340, Civil Code. The usual exaggerations in
Mistake of Fact Mistake of Law Mutual Mistake
trade, when the other party had an opportunity to
When one or When one or  Must be as know the facts, are not in themselves fraudulent.
both contracting both parties to the legal
parties believe arrive at an effect of an
Art. 1341, Civil Code. A mere expression of an
that a fact exists erroneous agreement
opinion does not signify fraud, unless made by an
when in reality it conclusion on  Must be
expert and the other party has relied on the former's
does not, or vice the mutual
special knowledge.
versa interpretation of  Real purpose
a question of of the parties
law or the legal must have Art. 1342, Civil Code. Misrepresentation by a third
effects been person does not vitiate consent, unless, such
frustrated misrepresentation has created substantial mistake
CIVIL LAW REVIEWER Chapter II. ESSENTIAL REQUISITES

and the same is mutual. Aleatory contract: where one of the contracting
parties assumes the risk that the thing will never
Art. 1343, Civil Code. Misrepresentation made in come into existence, e.g. insurance
good faith is not fraudulent but may constitute error.
III. Cause
SIMULATION OF CONTRACTS (Art. 1345-
1346): Declaration of a non-existent will made
deliberately for the purpose of producing the It is the impelling reason for which a party
appearance of a transaction that does not exist, assumes an obligation under a contract.
or which is different from the one which actually
arose. (J.B.L. Reyes) Requisites:
a. Existing
Absolute Relative b. Licit or Lawful 127
No real transaction is Real transaction is hidden c. True

CONTRACTS
intended
Fictitious contract Disguised contract Cause in:
Void Bound as to hidden
agreement, so long as it Onerous Renumeratory Pure
does not prejudice a third Contracts Contracts Beneficence
person and is not contrary As to each of The service or Mere
to law, morals, good the contracting benefit which is liberality of
customs, public order or parties is remunerated the
public policy understood to benefactor
be the
undertaking or
II. Object the promise of
the thing or
service by the
The thing right or service which is the subject other party
matter of the obligation arising from the contract.
In Villaroel v. Estrada (1940), where a moral
Requisites: obligation is based upon a previous civil obligation,
a. Lawful: Not contrary to law, morals, good which has already been barred by the statute of
customs, public order or public policy. limitations at the time the contract is entered into, it
b. Actual or possible constitutes a sufficient cause or consideration to
support a contract (Natural Obligation).
c. Transmissible: Within the commerce of man BUT,
d. Determinate or determinable In Fisher v. Robb (1939), if the moral obligation arises
wholly from ethical consideration, it cannot constitute
All things or services may be the object of a sufficient cause to support an onerous contract, as
contracts, EXCEPT: when the promise is made on the erroneous belief
 Things which are outside the commerce of that one was morally responsible for the failure of an
men enterprise (Moral Obligation).
 Intransmissible rights
 Future inheritance except in cases Cause Defined Effect
authorized by law Lack of Absence or total The contract
 Impossible things or services Cause lack of cause confers no right
and has no legal
 Objects which are indeterminable as to their
effect
kind, the genus should be expressed Illegality of Contrary to law, Null and Void
Cause morals, good
In order that a thing, right or service may be the customs, public
object of a contract, it should be in existence at policy and
the moment of the celebration of the contract, or public order
at least, it can exist subsequently or in the Falsity of Cause is stated Void if it should
future. cause but is untrue not be proved that
it was founded
A FUTURE THING may be the object of a upon another
cause which was
contract, such contract may be interpreted as a: true and lawful
 Conditional contract: where its efficacy Lesion or Cause is not Shall not invalidate
should depend upon the future existence of inadequacy proportionate to the contract
the thing of cause object except when
CIVIL LAW REVIEWER Chapter II. ESSENTIAL REQUISITES

a)there is fraud,
mistake, undue
influence
b)when parties
intended a
donation

Liguez v. CA (1957): In making the donation in

question, Lopez was not moved exclusively by the
desire to benefit Liguez, but also to secure her
cohabiting with him, so that he could gratify his sexual
impulses. The donation was an onerous transaction
and clearly predicated upon an illicit causa.
128

CONTRACTS
CIVIL LAW REVIEWER Chapter III. FORMS OF CONTRACTS

d. The cession of actions or rights

Chapter III. Forms of Contracts proceeding from an act appearing in
a public document.
I. RULES e. All other contracts where the
II. KINDS OF FORMALITIES amount involved exceeds five
hundred pesos must appear in
writing, even a private one. But
I. Rules sales of goods, chattels or things in
action are governed by Articles,
1403, No. 2 and 1405.
Contracts shall be obligatory, in whatever form
they may have been entered into, provided all
2. Donation of immovable properties (Art. 129
the essential requisites for their validity are
749)
present. (Art. 1356)

Spiritual System of the Spanish Code: The law looks
more on the spirit rather than the form of contracts.
Exceptions:
 When the law requires that a contract be in
some form for validity (Arts. 1357-1358)
 When the law requires that contract be in
some form to be enforceable (Statute of
Frauds)
CONTRACTS
3. Partnership where immovable property
or real rights are contributed to the
common fund (Arts.1771 and 1773)
BF Corporation v. CA, 1998: A contract may be
encompassed in several instruments even though
every instrument is not signed by the parties since it is
sufficient if the unsigned instruments are clearly
identified or referred to and made part of the signed
instruments.

II. Kinds of Formalities

A. Contracts Which Must Appear in Writing:

1. Donation of personal property whose
value exceeds five hundred pesos (Art
748)
2. Sale of a piece of land or any interest
therein through an agent (Art 1874)
3. Antichresis (Art 2134)
4. Agreements regarding payment of
interests in contracts of loans (Art. 2314)

B. Contracts Which Must Appear in a Public

Document
1. Art. 1358:
a. 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 a
governed by Articles 1403, No. 2,
and 1405;
b. The cession, repudiation or
renunciation of hereditary rights or
of those of the conjugal partnership
of gains;
c. 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;
CIVIL LAW REVIEWER Chapter IV. REFORMATION OF CONTRACTS
Chapter V. INTERPRETATION OF CONTRACTS

Chapter IV. Reformation of Contracts Chapter V. Interpretation of Contracts

Reformation of Contracts (Art 1359-1369) RULES ON DOUBTS (Art. 1378)

REFORMATION: is that remedy in equity by
means of which a written instrument is made or Principal Gratuitous Onerous
construed so as to express or conform to the Objects Contracts Contracts
real intention of the parties when some error or Doubts where Absolutely Absolutely
mistake has been committed. (J.B.L. Reyes) it cannot be impossible to impossible to
known what settle doubts by settle doubts by
Requisites (Art 1359): may have the rules and the rules and
1. There must be a meeting of the minds of the been the only refer to only refer to
contracting parties; intention or incidental incidental 130
will of the circumstances circumstances
2. Their true intention is not expressed in the

CONTRACTS
parties, the the least the doubt shall
instrument; contract shall transmission be settled in
3. Such failure to express their true intention is be null and of rights and favor of the
due to mistake, fraud, inequitable conduct, void. interests shall greatest
or accident; and prevail. reciprocity of
4. There is clear and convincing proof of interests.
mistake, fraud, inequitable conduct, or
accident.

If the mistake, fraud, inequitable conduct, or accident

has prevented the meeting of the minds of the parties,
the proper remedy is not reformation but annulment of
the contract. (See also Art 1390)

Who May Ask for Reformation (Art. 1368):

1. Either party or his successors in interest, if
the mistake was mutual; otherwise,
2. Upon petition of the injured party, or his
heirs and assigns.

NO REFORMATION in (Art. 1366):

1. Simple donations inter vivos wherein no
condition is imposed;
2. Wills;
3. When the real agreement is void.

Implied Ratification (Art. 1367): The action to

enforce the instrument bars subsequent action
to reform.
CIVIL LAW REVIEWER Chapter VI. DEFECTIVE CONTRACTS

Chapter VI. Defective Contracts

I. RESCISSIBLE
II. VOIDABLE
III. UNENFORCEABLE
IV. VOID OR INEXISTENT

I. Rescissible Contracts (Arts. 1380-1389)

What are the 131

Contracts are
rescissible Contracts in Contracts refer

CONTRACTS
Contracts of entered into to
contracts? (Art representation to things in
guardians defraud existing
1381; see also Art of absentees litigation
creditors
1382)
What makes it When the acts of When the acts When the creditors If entered into by
defective? administration of administration cannot in any other the defendant
cause LESION or cause LESION manner collect the without the
damage to the or damage to claims due them knowledge &
WARD they the ABSENTEE approval of the
represent by more they represent litigants or
than 25% of the by more than competent judicial
value of the thing 25% of the value authority
of the thin
Effect on the Valid until rescinded (Art 1380)
Contract
How to rescind? Direct Action (different from action for Accion Pauliana for Contracts in Fraud of
rescission under Art 1191) Creditors

NO rescission if: NO rescission if:

1. Injured party has other legal 1. Injured party has other legal means to
means to obtain reparation (Art obtain reparation (Art 1383)
1383). 2. Plaintiff cannot return his part of the
2. Plaintiff cannot return his part of obligation (Art 1385 par 1)
the obligation (Art 1385 par 1) 3. Object of the contract is in the hands of
3. Object of the contract is in the third person, onerously acquired by
hands of third person, onerously him in good faith (Art 1385 par 2)
acquired by him in good faith (Art
1385 par 2)
4. If the court approves the
contracts under Art 1381 par 1
and 2 (Art 1386)
Who can rescind? In general, by By absentee By creditor(s) By party litigant
injured party

By ward, or by
guardian ad litem
of ward during
incapacity of ward
in an action
against the
original guardian
When to rescind Within four years Within 4 years Within 4 years from Within 4 years
(Art 1389) from [re-] gaining from knowledge knowledge of from knowledge of
capacity of domicile of fraudulent contract fraudulent contract
absentee
CIVIL LAW REVIEWER Chapter VI. DEFECTIVE CONTRACTS

II. Voidable Contracts (Arts. 1390-1402)

What makes it
Incapacity of one party to the Consent vitiated by mistake, violence,
defective? (Art
contract intimidation, undue influence or fraud
1390)
Effect on the Valid until annulled by competent court (Art 1390 last par)
Contract
How to annul? 1. Directly, by an action for annulment
2. Indirectly, by counterclaim asking for positive action of the court to set aside the
contract

Annulment cannot proceed when: 132

1. the object of the contract is lost through fraud or deceit of the person with right to

CONTRACTS
institute proceedings (art 1401 par 1);
2. the right of action is based upon the incapacity of any one of the contracting
parties and the thing is lost through the fault or fraud of the plaintiff (Art 1401 par
2)
Who can/cannot 1. Parties who are obliged principally or subsidiarily
annul? 2. Persons who are capable cannot allege the incapacity of those with whom they
(Art 1397) contracted
3. Persons who exerted intimidation, violence, or undue intimidation, or employed
fraud, or caused mistake, cannot base their action upon these flaws of the
contract
When? (Art 1391) Within four years after guardianship of Within four years
minors or incapacitated persons 1. After intimidation, violence or undue
ceases influence ceases
2. From the time of discovery of mistake
or fraud
Effect of 1. Mutual restitution of the things delivered, along with fruits and price paid with
Annulment interest (Art 1398)
2. Damages to be paid by party who caused defect of the contract, by virtue of
Article 20 and 21 of the Civil Code
How to Cure 1. Express (written or oral manifestation) or tacit ratification (acts or conduct) by
Defect? (Arts injured party, or guardian of incapacitated person.
1392 - 1396) - Ratification does not require the conformity of the contracting party
who has no right to bring the action for annulment (Art 1395)
CIVIL LAW REVIEWER Chapter VI. DEFECTIVE CONTRACTS

III. Unenforceable Contracts (Arts. 1403-1408)

What are the Contracts covered by

unenforceable Statute of Frauds which
Contract entered into Contract where both
contracts? (Art did not comply with the
without authority of, or parties are incapable
1403) written memorandum
in excess of authority of giving consent to
requirement
given by owner contract
(See Art 1403 par 2)

Effect on the No effect unless ratified. Cannot be enforced by a proper action in court.
Contract
How to assail? Not by direct action. Not by direct action. Not by direct action. 133
1. As a defense, by 1. As a defense, by motion 1. As a defense, by

motion to dismiss the
complaint on the
ground that the contract
is unenforceable
Who can assail? By person whose name
*an the contract was entered
unenforceable into; By owner of property.
contract cannot
be assailed by
third persons (Art
1408)
When? When a party asks the court to enforce the contract
to dismiss the complaint
on the ground that the
contract is unenforceable;
2. Objection to the
presentation of oral
evidence to prove an oral
contract (See Art 1405)
By party against whom the
contract is being enforced;
or his privies.
CONTRACTS
motion to dismiss the
complaint on the
ground that the
contract is
unenforceable
By party against whom
the contract is being
enforced; or his privies;
or parents or guardians
persons, as it is a
personal defense

How to Cure 1. Ratification by person 1. Ratification by party 1. By ratification of

Defect? (Art whose name the against whom the party against whom
1403) contract was entered the contract is being
into
contract is being enforced; or his
enforced privies; or parents or
2. By failure to object to the guardians
presentation of oral  The ratification by
evidence to prove an oral one party converts
contract or by the the contract into a
acceptance of benefits voidable contract (Art
under the contract (Art 1407)
1405)
CIVIL LAW REVIEWER Chapter VI. DEFECTIVE CONTRACTS

IV. Void or Inexistent Contracts (Arts. 1409-1422)

What makes it Contract’s Cause, Object Inexistent contracts, or Contracts expressly

defective? of Purpose is contrary to contracts whose essential prohibited or declared
morals, good customs, elements are absent void by law (Art 1409
public order or public (Art Art 1409 par 2, 3, 4,5) par 7); contracts
policy which are direct
(Art 1409 par 1) results of a previous
illegal contract (art
1422)
Contracts which 1.Those whose Cause, Object of Purpose is contrary to morals, good customs,
are inconsistent public order or public policy 134
and void from the 2.Those which are absolutely simulated or fictitious

CONTRACTS
beginning (Art 3.Those whose cause or object did not exist at the time of the transaction
1409) 4.Those whose object is outside the commerce of men
5.Those which contemplate an impossible service
6.Those where the intention of the parties relative to the principal object of the
contract cannot be ascertained
7.Those expressly prohibited or declared void by law

How to assail? 1. File for action for declaration of inexistence or nullity of contract
2.As a defense during trial (Art 1409 last par). Such defense not available to third
persons not directly affected by contract (Art 1421)
3.In pari delicto applies when cause or object of contract constitutes a criminal
offense (Art 1411)
Who can assail? 1. Innocent party Art 1. Any of the parties 1. Any person whose
1411 par 2; Art 1412 2. Any person whose interests are
par2) interests are directly directly affected by
2. Less-guilty party, upon affected by the contract the contract Art
court discretion (Art 1421) (1421)
3. Incapacitated person 2. By party for whose
who is a party to an protection the
illegal contract, upon prohibition of the
court discretion (Art law is designed (Art
1415) 1416)
4. Any person whose
interests are directly
affected by the
contract (Art 1421)
When? The action or defense does not prescribe (Art 1410)

- end of Contracts -