Lecture Aid in Obligations

8/22/2019 Lecture Aid in Obligations

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LECTURE AID OBLIGATIONS

OBLIGATION a juridical necessity to give, to do or not to doPersonal vs. Real Obligation Personal vs. Real RightPersonal vs. Real Defense Personal vs. Real Property

SOURCES OF OBLIGATIONS1. Law (obligation ex lege)2. Contracts (obligation ex contractu)3. Quasi-contracts

a. Negotiorum gestio voluntary management of the property or affairs ofanother without the knowledge or consent of the latter

b. Solutio indebiti juridical relationship which is created when something isreceived when there is no right to demand for it and it was delivered throughmistake

4. Delicts (crimes or acts or omissions punishable by law)5. Quasi-delicts (culpa aquiliana or torts)

REQUISITES1. Passive subject known as the obligor or debtor2. Active subject known as the obligee or creditor3. The fact, prestation or service constituting the object of the obligation4. juridical or legal tie

RELATED TERMS:1. Specific or determinate thing a thing which is particularly designated or

physically segregated from all of the same class.2. Generic or indeterminate thing a thing which refers only to a class or genus

to which it pertains and cannot be pointed out with particularity. 3. Accessions fruits of a thing or anything produced by it, attached or

incorporated thereto as an addition or improvement.Kinds: Natural, Industrial and Civil

4. Accessories things joined to the principal thing for its Better use,Embellishment or Completion

RULE: The creditor shall be entitled to the fruits of the thing at the time the obligationto the principal thing arises. However the creditor will acquire real right orownership over the fruit only after the same has been delivered to him.

OBLIGATIONS OF THE DEBTOR:In obligation to give determinate things:

1. specific performance;

2. take care of the thing with the proper diligence of a good father of a family;(unless another degree of diligence will be required by law or stipulation ofthe parties)

3. deliver all accessions and accessories of the thing even though they may nothave been mentioned;

4. pay damages in case of breach of the obligation by reason of delay, fraud,negligence or contravention of the tenor thereof.

In generic obligations:1. deliver the thing which is neither of superior nor inferior quality;2. to pay damages in case of breach of the obligation by reason of delay, fraud,

negligence or contravention of the tenor thereof.

CIRSUMSTANCES AFFECTING OBLIGATIONSRULE: A person in the performance of his obligation will be liable to pay DAMAGES

in case he will be guilty of: Delay. Fraud, Negligence or Contravention of thetenor of the obligation (breach of obligation)

DELAY (Mora)Kinds:

a. Mora Solvendi delay on the part of the debtorb. Mora accipiendi delay on the part of the creditorc. Compensatio morae delay on the part of both parties in

reciprocal obligations

GENERAL RULE: Demand (judicial/extra-judicial) is necessary before oneincurs in delay.


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EXCEPTIONS:1. the law expressly so declares;2. the obligation itself so stipulates;3. time if of the essence;4. demand is useless as when obligor has rendered it beyond his

power to perform;

5. when there is performance by a party in reciprocal obligations

FRAUD (Dolo)

must be present during the performance of the obligation and notfraud at the time of the birth of the obligation.

Kinds of Dolo:1. Dolo Causante casual fraud, vitiating consent2. Dolo incidente incidental fraud, giving rise to the right to

demand damages

NEGLIGENCE (Culpa)

Consists in the omission of that diligence which is required by the

nature of the obligation corresponding to the circumstances of theperson, of the time and of the place.

TEST: Diligence of a good father of a family.Kinds of Negligence:1. Culpa contractual2. Culpa criminal3. Culpa aquiliana

FRAUD NEGLIGENCE1. Deliberate intention to cause damage

or injury1. No such intention exists

2. Waiver of the liability for future fraud

void

2. Waiver of future negligence may be

allowed in certain cases3. Must be clearly proven 3. Can be presumed from the violation of

a contractual obligation4. Liability cannot be mitigated or reduced

by courts4. Liability may be reduced according to

the circumstances

BREACH OF OBLIGATIONS:Kinds:

1. Voluntary debtor or obligor is liable for damages if the debtor orobligor in the performance of his obligation is guilty of:

a. Default (mora)b. Fraud (dolo)

c. Negligence (culpa)d. In any manner contravene the nature thereof

RIGHTS OF THE CREDITOR:In determinate obligations:1. ask for specific performance;2. damages, exclusive or in addition to specific performance.

In generic obligations:1. ask for specific performance;2. ask that the obligation be complied with at the debtors

expense;3. damages.

2. Involuntary debtor is not liable for damages.

FORTUITOUS EVENT events that cannot be foreseen or although foreseeable areinevitable

Essential characteristics:1. cause is independent of the will of the debtor;2. the event must be unforeseeableor unavoidable;3. occurrence must be such as to render it impossible for the debtor to fulfill his

obligation in a normal manner;4. the debtor must be free from any participation in the aggravation of the injury

resulting to the creditor.


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GENERAL RULE: No liability in case of fortuitous eventEXCEPTIONS:

1. when expressly declared by law;2. when expressly declared by stipulation;3. when the nature of the obligation requires the assumption of risk4. when the debtor has incurred in delay or is guilty of fraud, negligence or

contravention of the tenor of the obligation5. when he has promised to deliver the same thing to 2 or more different

persons who do not have the same interest;6. when the thing to be delivered is indeterminate/generic7. when the obligation to deliver a specific thing arises from a crime.

RELATED RULES:1. all rights acquired by virtue of an obligation are transmissible

Exceptions:a. when the law prohibits the transfer of rightsb. when the stipulation of the parties prohibits the transfer of rights

2. the creditor has the following remedies to satisfy his claims against his

debtor:a. exact fulfillmentb. pursue the leviable properties of the debtorc. accion subrogatoria exercise all rights and actions of the debtor except

those which are inherent in his persond. accion pauliana rescind contracts entered into by the debtor to defraud

the creditor

PRESUMPTIONS: (disputable)1. when the creditor received the principal amount of an obligation without

reserving his right with respect to the interest, it is presumed that said interesthas been paid.

2. when the creditor received a later installment of a debt without reserving hisright as to the prior installments, it is presumed that such prior installmentshave been paid

KINDS OF OBLIGATIONSunilateral and bilateral real and personaldeterminate and generic positive and negativecivil and natural legal and conventional

PRIMARY CLASSIFICATIONPure obligation - an obligation which is not subject to any condition, no specific

date is mentioned for its fulfillment; demandable at once.

RULE: an obligation is demandable at once a. when it is pureb. when it is subject to a resolutory conditionc. when it is subject to a resolutory period

Conditional obligationAn obligation which is subject to the fulfillment of a condition

Characteristics of a condition:a. future and uncertainb. past but unknownc. must not be impossible

Two principal kinds of condition:1. Suspensive condition (condition precedent or condition antecedent) or one

the fulfillment of which will give riseto an obligation.2. Resolutory condition(condition subsequent) or one the fulfillment of which will

extinguishan obligation.

Suspensive Condition Resolutory Condition1. If fulfilled, obligation arises or becomes

effective1. If fulfilled, obligation is extinguished

2. If NOT fulfilled, NO juridical relation iscreated

2. If NOT fulfilled, juridical relation isconsolidated

3. Rights are not yet acquired, but there ishope or expectancy that they will soon

3. Rights are already acquired, butsubject to the threat or danger of


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be acquired extinction

Other kinds:a. Possible capable of fulfillment, legally or physicallyb. Impossible if the condition is not capable of fulfillment, legally or physicallyc. Positive an act is supposed to be performed

d. Negative an act is supposed to be omittede. Potestative the condition depends upon the will of one of the contracting partiesf. Casual the condition depends upon chance or upon the will of a third persong. Mixed the condition depends partly upon chance and partly upon the will of a

third person

Rules in case of imposition of impossible conditions1. suspensive positive impossible condition shall annul the obligation

Exceptions:a. pre-existing obligations;b. if obligation is divisible;c. in simple and remuneratory donation;

d. in testamentary disposition;e. in case of conditions not to do an impossible thing

2. suspensive negative impossible condition obligation is valid, implied fulfillmentof condition.

Retroactive effect of the fulfillment of a condition:1. LOSS

a. Without debtors fault obligation is extinguishedb. With debtors fault debtor pays damages

There is loss when the thing:a. Perishes;b. Goes out of commerce;

c. Disappears in such a way that its existence is unknown or itcannot be recovered

2. DETERIORATIONa. Without debtors fault impairment to be borne by the creditorb. With debtors fault creditor may choose between the rescission of the

obligation and its fulfillment with indemnity for damages in either case

3. IMPROVEMENTa. By the things nature or by time improvement shall inure to the benefit of the

creditorb. At the debtors expense debtor shall have no other right than that granted to

a usufructuary

Obligation with a period

An obligation with a period is one whose consequences are subjected in one wayor another to the expiration of said period or term.

A period is a future and certain event upon the arrival of which the obligationsubject to it either arises or is terminated.

In an obligation with a period, it is presumed that the period have beenestablished for the benefit of both the debtor and the creditor unless from thetenor or other circumstances of the obligation, it should appear that the periodwas established in favor of either the debtor or the creditor.

PERIOD CONDITION1. Certain event 1. Uncertain event (it may or may not

happen)2. Refers to the future 2. Refers to a future event and an

unknown past event3. Merely fixes the time for the

efficaciousness of an obligation3. Causes an obligation to arise or

cease4. Arrival of a period does not have any

retroactive effect, absent anyagreement to the contrary

4. The happening of a condition has aretroactive effect

5. If the period depends upon the will ofthe debtor, the court will fix the duration

of the obligation

5. If the fulfillment of the conditiondepends upon the sole will of the

debtor, the obligation is void


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WHEN THE DEBTOR LOSES THE RIGHT TO MAKE USE OF THE PERIOD1. debtor becomes Insolvent unless he gives a guaranty or a surety for the debt;2. debtor fails to furnish creditor the Guaranties promised;3. debtors own acts has Impaired said guaranties, or when through a fortuitous

event they disappear, unless he immediately gives new ones equally satisfactory4. debtor Violates any undertaking, in consideration of which the creditor agreed to

the period5. debtor attempts to Abscond

Alternative obligation

an obligation where several prestations are due but the performance of one issufficient

General rule: the right to choose the prestation belongs to the debtorExceptions:

1. it may be exercised by the creditor but only when it was expressly granted to

him;2. by a third person when the right is given to him by common agreement of the

parties.

Limitations:1. the debtor cannot choose those prestations which are:

a. impossible;b. unlawful;c. which could not have been the object of the obligation

2. the debtor has no more right to choose when, among the prestationswhereby alternatively bound, only one is practicable.

3. the debtor cannot choose part of one prestation and part of anotherprestation.

Facultative obligation

an obligation where only one prestation has been upon but the obligor may

render another in substitution.Effect of loss in facultative obligations:

1. before substitution if the principal thing is lost through a fortuitous event, theobligation is extinguished; otherwise the debtor is liable for damages. Theloss of the thing intended as a substitute with or without the fault of the debtordoes not render him liable.

2. after substitution if the principal thing is lost, the debtor is not liablewhatever may be the cause of the loss, because it is no longer due. If thesubstitute is lost, the liability of the debtor depends upon whether or not theloss is due to his fault.

Facultative obligations Alternative obligations

1. Only one object is due 1. Several objects are due2. May be complied with any substitution

of one that was due2. May be complied with by fulfilling any

of those alternately due3. Choice pertains only to the debtor 3. Choice pertain even to the creditor or

a 3rd person4. Fortuitous loss of prestation

extinguishes the obligation4. Fortuitous loss of all prestations will

extinguish the obligation5. Culpable loss of the original obliges the

debtor to deliver substitute prestationwithout liability to the creditor

5. Culpable loss of any object due willgive rise to liability to the creditor

Joint obligation

An obligation where the whole obligation is to be paid or fulfilled proportionatelyby the different debtors and/or is to be demanded proportionatelyby the differentcreditors.

Words used to indicate joint liability:Mancomunada; mancomunadamente; pro rata; proportionately; separately; wepromise to pay signed by two or more personsRULES:1. insolvency of one debtor does not make the others liable for his share2. vitiated consent on the part of one debtor does not affect consent of the others


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Solidary obligation

an obligation where each one of the debtors is bound to render, and/or each oneof the creditors has a right to demand from any of the debtors, entire compliancewith the prestation

Words to indicate solidary liability:

Solidaria; in solidum; together and/or separately; individually and/or collectively;jointly and/or severally; I promise to pay signed by two or more personsGeneral rule: obligation is presumed to be joint if there is concurrence of two or

more debtors and/or two or more creditors in the same obligation.Exception: there is solidarity only when:

1. the stipulation of the parties expressly so states;2. the law requires solidarity;3. the nature of the obligation requires solidarity

Kinds of Solidarity:1. active creditors2. passive debtors

3. mixed creditors and debtors

RELATED RULES:1. the insolvency of one of the debtors will obligate the others to shoulder his share

in proportion to their respective obligation2. a solidary debtor paying the entire obligation shall be entitled to reimbursement

plus interest computed as follows:a. if paid at or after maturity, interest shall run from the date of payment until

reimbursement is made.b. If paid before maturity, interest shall run from the date of maturity until

reimbursement is made3. remission or condonation of the share of one of the creditors will not affect his

liability as a solidary debtor4. remission of the entire obligation in favor of one of the creditors shall NOT give

rise to the right to demand reimbursement from the other debtors5. remission that will take place after payment was made by one of the debtors will

not bar the debtor who made the payment from demanding reimbursement6. payment made by one of the debtors after the prescription of the obligation shall

NOT give rise to the right to demand reimbursement

Divisible obligation

an obligation where the object in its delivery or performance, is capable of partialfulfillment

Indivisible obligation an obligation where the object in its delivery or performance, is not capable of

partial fulfillmentTEST: the purpose of the obligation or the intention of the parties.

Joint indivisible obligation where the parties are merely proportionatelyliable but the object or subject matter thereof is not physically divisiblein different parts

INDIVISIBILITY SOLIDARITY1. It refers to the prestation or object of

the contract1. It refers to the vinculum or tie existing

between the subjects or parties to theobligation

2. It does not require plurality of subjectsor parties

2. It requires plurality of subjects orparties

3. It is converted into one of indemnity fordamages. As a result, indivisibility ofthe obligation is terminated and soeach debtor is liable only for his part ofthe indemnity

3. When there is breach of the obligation,the liability of the solidary debtorsalthough converted into one ofindemnity for damages shall remainsolidary

4. The heirs of the debtor remain boundto perform the same prestation

4. The debt of the solidary debtorterminates the solidary tie or vinculumbeing intransmissible to the heirs


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Obligation with a penal clause

An obligation which contains an accessory undertaking to pay a previouslystipulated indemnity in case of breach.

GENERAL RULE: the penalty fixed by the parties is a compensation or substitutefor damages in case of breach of obligation.

EXCEPTIONS: (oblige can recover penalty plus damages)1. stipulation to the contrary;2. obligor is sued for refusal to pay the agreed penalty;3. obligor is guilty of fraud.

When penalty may be reduced:a. if the principal obligation has been partly complied with;b. if the principal obligation has been irregularly complied with;c. if the penalty is iniquitous or unconscionable even if there has been no

performance.

MODES OF EXTINGUISHING AN OBLIGATION:1. payment or performance;

2. loss of the thing due;3. condonation or remission of the debt;4. confusion or merger of rights of the debtor and the creditor;5. compensation;6. novation;7. annulment;8. rescission;9. fulfillment of a resolutory condition;10. prescription;11. death in personal obligations;12. mutual desistance/withdrawal;13. arrival of resolutory period;

14. compromise;15. impossibility of fulfillment;16. happening of fortuitous event.

PAYMENT OR PERFORMANCEGeneral rule: creditor is not bound to accept payment or performance by a third

person.Exceptions:1. when made by a third person who has an interest in the fulfillment of the

obligation;2. contrary stipulation.

Rights of the third party who paid the obligation of another:1. payment with the knowledge and consent of the debtor

a. can recover entire amount paid;b. can be subrogated to all of the rights of the creditor

2. payment without the knowledge or against the will of the debtor can recoveronly insofar as payment has been beneficial to the debtor.

Rules in Monetary obligations:1. payment in cash must be made in the currency stipulated, if not possible, then

in the legal tender in the Philippines.2. payment in check or other negotiable instrument not considered payment, they

are not considered legal tender and may be refused by the creditor.

Exceptions:a. when the document has been cashed;b. when it had been impaired through the fault of the creditor.

APPLICATION OF PAYMENT

designation of the debt to which the payment must be applied when the debtorhas several obligations of the same kind in favor of the same creditor.

Requisites:1. one debtor and one creditor2. two or more debts of the same kind3. all debts must be due

4. amount paid by the debtor must not be sufficient to cover all debts


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DATION IN PAYMENT

property alienated by the debtor to the creditor in satisfaction of the debt inmoney; the transmission of the ownership of a thing by the debtor to the creditoras an accepted equivalent of the performance of the obligation.

Governed by the law on Sales

PAYMENT BY CESSION Debtor abandons all of his properties for the benefit of his creditors in order that

from the proceeds thereof the latter may obtain payment of their credits.

DATION IN PAYMENT PAYMENT IN CESSION1. One creditor 1. Plurality of creditors2. Not necessarily in state of financial

difficulty2. Debtor must be partially or relatively

insolvent3. Thing delivered which is considered as

equivalent of performance3. Universality of property of debtor is

what is ceded4. Payment extinguishes obligation to the

extent of the value of the thingdelivered as agreed upon, proved orimplied from the conduct of the creditor

4. Merely releases debtor for netproceeds of things ceded or assigned,unless there is contrary intention

CONSIGNATION

Deposit of the object of the obligation in a competent court in accordance withthe rules prescribed by law after refusal or inability of the creditor to accept thetender of payment.

Rule: Consignation shall produce effects of payment only if there is a valid tender ofpayment.

Exceptions:1. creditor is absent or unknown, or does not appear at the place of payment;2. creditor is incapacitated to receive payment at the time it is due;3. when two or more persons claim the right to collect;4. when the title of the obligation has been lost;5. when without just cause the creditor refuses to give a receipt.

LOSS OF THE THING DUEA thing is considered loss when:1. it perishes;2. goes out of commerce;3. disappears in such a way that its existence is unknown or it cannot be recovered

EFFECT OF LOSS1. In determinate obligations to give: will extinguish the obligation if the thing is

lost.Except:a. When by law, obligor is liable even for fortuitous eventb. When by stipulation, obligor is liable even for fortuitous eventc. When the nature of the obligation requires the assumption of riskd. When the loss of the thing is due partly to the fault of the debtore. When the loss of the thing occurs after the debtor incurred in delayf. When the debtor promised to deliver the same thing to two or more

persons who do not have the same interestsg. When the debt of a certain and determinate thing proceeds from a

criminal offense

2. in generic obligations to give: obligation is not extinguished; the genus of thething cannot perish.Exception: in case of a generic obligation whose object is a particular classor group with specific or determinate qualities (limited generic obligations)

3. in obligations to do: obligation is extinguished when the prestation becomeslegally or physically impossible

REMISSION OR CONDONATION

the gratuitous abandonment by the creditor of his right against the debtor. It isthus a form of donation.


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Requisites:1. there must be an agreement2. the parties must be capacitated3. there must be a subject matter4. the cause or consideration is generosity/gratuitous5. obligation is demandable at the time of remission

6. remission must not be inofficious7. must be accepted by the obligor8. if made expressly, it must comply with the forms of donation

CONFUSION OR MERGER OF RIGHTS

merger of the characteristics of the creditor and the debtor in one the sameperson by virtue of which the obligation is extinguished

COMPENSATION

extinguishment in the concurrent amount of the obligation of those persons whoare reciprocally debtors and creditors of each other

Requisites of compensation:1. that each one of the obligors be bound principally, and that he be at the same

time a principal creditor of the other;2. that both debts consist in a sum of money, or if the things due are

consumable, they be of the same kind, and also of the same quality if thelatter has been sated;

3. that the debts be due;4. that they be liquidated and demandable;5. that over neither of them there be any retention or controversy, commenced

by third persons and communicated in due time to the debtor.

Compensation Payment

1. Takes effect by operation of law 1. Takes effect by action of the parties2. Capacity to give and to acquire not

necessary2. Capacity to give and to acquire

essentialCompensation Confusion

1. Two or more persons who are mutualcreditors of each other

1. One person where qualities of debtorand creditor are merged

2. There must be at least two obligations 2. Only one obligation

Debts not susceptible of compensation:1. debts arising from contract of deposit2. debts arising from contract of commodatum3. claims for support due by gratuitous title

4. obligations arising from criminal offense5. certain obligations in favor of government

NOVATION

substitution or change of an obligation by another, resulting in the extinguishmentor modification either by:a. changing the object or principal conditions (objective)b. substituting another in place of debtor (passive subjective)c. by subrogating a third person in the rights of the creditor (active subjective)

Requisites:1. a previous valid obligation

2. capacity and intention of the parties to modify or extinguish the obligation3. the modification or extinguishment of the obligation4. the creation of a new and valid obligation

Kinds of novation:a. legal or conventionalb. real, personal or mixed

Two forms of subrogating a third person in the rights of the creditor:1. Expromission substitution of the old debtor by a third person without the

knowledge or against the will of the old debtor but the third person acts on hisown initiative to assume the debtors obligation with the consent of the creditor. It

is essential that rthe old debtor be released from his obligation.


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2. Delegacion substitution of the old debtor when the creditor accepts a thirdperson to take the place of the debtor at the instance of the latter. The creditormay withhold approval. All parties, the old debtor, the new debtor and thecreditor must agree.

General rule: subrogation cannot be presumed

Except:1. creditor pays another creditor who is preferred, without debtors knowledge2. a third person not interested in the obligation, pays with the express or tacit

approval of the debtor3. when even without the debtors knowledge, a person interested in the

fulfillment of the obligation pays, without prejudice to the effects of confusionas to the latters share.

**********************************The End*********************************


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LECTURE AID CONTRACTS

CONTRACT a contract is a meeting of minds between two persons whereby onebinds himself, with respect to the other, to give something or to rendersome service.

Essential elements:1. consent2. object3. cause4. delivery in real contracts5. formalities required by law in solemn contracts6. price certain in a contract of sale

Stages in the life of a contract:1. preparation/generation (negotiations are in progress)2. perfection/birth (meeting of the minds/meeting of offer and acceptance)

3. performance/death (execution/consummation/termination)

Characteristics of contracts:

1. Autonomy (Liberty or freedom to stipulate) As long as not contrary to law, morals, good customs, public order or public

policy2. Mutuality

Both parties must be bound

Parties cannot revoke or renounce a contract without the consent of the other3. Obligatoriness

Obligations arising from contract have the force of law between the

contracting parties and should be complied with in good faith4. Relativity

General rule: a contract is binding only between the parties, their assigns andheirs

Exceptions:a. Obligations arising from contracts are not transmissible by nature,

stipulation or by provision of lawb. Stipulation pour autrui (in favor of a third person)c. Third person includes another to violate his contract, the third person will

be liable for damagesd. In some other case, third persons may be adversely affected by a

contract where they did not participate

e. Law authorizes creditor to sue on a contract entered into by his debtor

Classification of contracts

1. according to perfection or formation:a. consensualb. realc. formal or solemn

2. according to degree of dependence:a. preparatoryb. principalc. accessory

3. according to the parties obligated:a. unilateralb. bilateral or reciprocal

4. according to cause or equivalence of value of prestation:a. onerousb. gratuitousc. remunerative or remuneratory

5. according to risk involved:a. commutativeb. aleatory

6. according to name or designation:a. nominate

b. innominate7. according to time of performance:


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a. executedb. executoryc. partially executory

STIPULATION POUR AUTRUI (stipulation in favor of a third party)Requisites:

1. the stipulation must be part, not whole of the contract2. the contracting parties must have clearly and deliberately conferred a favor upon

a third person3. the third person must have communicate his acceptance4. neither of the contracting parties bears the legal representation of the third party

CONSENT meeting of minds between parties on the subject matter and the cause ofthe contract, even if neither one has been delivered

GENERAL RULE: contracts (except real contracts) are perfected from the momentthere is a manifestation of concurrence between the offer and the acceptanceregarding the object and the cause

EXCEPT: acceptance by letter or telegram which does not bind the offeror except fromthe time it came to his knowledge (Cognition theory)

Persons incapacitated to give consent:1. unemancipated minors

Except:a. contracts for necessariesb. contracts by guardians or legal representativesc. contracts where the minor is estopped to urge minority through his own

mmisrepresentationd. contracts of deposit with the postal Savings Bank provided that the minor is

over seven years of age

2. insane or demented persons unless the contract was entered into during lucidinterval

3. deaf-mutes who do not know how to write

Rule: if the offeror has allowed the offeree a certain period to accept, offer may bewithdrawn at any time before acceptance of the thing offered by communicatingsuch withdrawal

Exception: When option is founded upon a consideration as something paid orpromised

VICES OF CONSENT:1. mistake or error

2. violence or force3. intimidation or threat or duress4. undue influence5. fraud or deceit

SIMULATION OF CONTRACTS1. absolute no real transaction is intended

Effect: simulated contract is inexistent2. relative the real transaction is hidden

Effect: the apparent contract is void, but the hidden contract is valid if it is lawfulhas the necessary requisites

As to third persons without notice the apparent contract is valid on the

principle of estoppel

OBJECT OF CONTRACTSRequisites:a. within the commerce of menb. transmissiblec. not contrary to law, morals, good customs, public order or public policyd. not impossible thing or servicee. determinate as to its kind or determinate without the need of a new contract

CAUSE OF CONTRACTS

must be present at the time the contract was entered into, otherwise the contract

is void must be true and lawful


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NOTE: cause is always presumed to exist in a contractEffect of:

Absence of cause The contract confers no right and producesno legal effect

Failure of cause Does not render the contract void

Illegality of cause The contract is null and voidFalsity of cause The contract is void unless the parties can

show that there is another cause which istrue and lawful

Lesion Does not invalidate the contract unless: there is fraud, mistake or undue

influence when the parties intended a

donation or some other contract

FORM OF CONTRACTS:1. contracts shall be obligatory, in whatever form they may have been entered into,

provided all the requisites for their validity are present.2. contracts must be in a certain form when the law requires that a contract be in

some form to be:a. validb. enforceablec. for the convenience of the parties

3. the parties may compel each other to reduce the verbal agreements to writingExcept:1. solemn contracts such as the following:

a. donations of real estate or of movables if exceeding Php5,000b. transfer of large cattlec. stipulation to pay interest in loans

d. sale of land through an agent (authority must be in writing)e. partnership to which immovable are contributedf. stipulation limiting carriers liability to less than extra-ordinary diligenceg. contracts of antichresish. sale of vesselsNote: in such case, if the contract is not in writing it is void

2. real contracts that require delivery for perfection3. in contracts under the Statute of Frauds where the party sued makes a timely

objection to the absence of a written memorandum.

REFORMATION OF INSTRUMENTSRequisites:

1. simple, unconditional donations inter vivos2. wills3. when the agreement is void

INTERPRETATION OF CONTRACTSa. terms/wordings of the contract must be followedb. in case of conflict between the wordings and the intent of a contract, the latter

shall prevailc. if some stipulation of any contract should admit of several meanings, it shall be

understood as a bearing that import which is most adequate to render it effectuald. stipulations shall be read togethere. interpretation must be in keeping with the object and nature of the contract

f. usage or custom shall be borne in mind

CLASSES OF DEFECTIVE CONTRACTS:1. rescissible2. voidable3. unenforceable4. void

RESCISSIBLE CONTRACTS1. those entered into by guardians where the ward suffers lesion of more than of

the things which are objects thereof2. those agreed upon in representation of absentees, if the latter suffer lesion by

more than of the value of the things which are subject thereof


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3. those undertaken in fraud of creditors when the latter cannot in any matter claimwhat are due them

4. those which refer to things under litigation if they have been entered into by thedefendant without the knowledge and approval of the litigants and the court

5. all other contracts especially declared by law to the subject to rescission

VOIDABLE CONTRACTS1. those where one of the contracting parties is incapable of giving consent2. those where the consent is vitiated by mistake, violence, intimidation, undue

influence or fraudNOTE: contracts entered into during sate of drunkenness or hypnotic spell arevoidable

Causes of extinction of action to annul:1. prescription

the action must be commenced within four years from: the time the incapacity ends the time the violence, intimidation, undue influence ends the time the mistake or fraud was discovered

2. ratificationrequisites:a. voidableb. such reason there must be knowledge of the reason which renders the

contract must have ceasedc. the injured party must have executed an act which expressly or impliedly

conveys an intention to waive his right3. by loss of the thing which is the object of the contract through fraud or fault

of the person who is entitled to annul the contract

UNENFORCEABLE CONTRACTS

1. Those entered into in the name of another by one without or acting in excess ofauthority

2. those where both parties are incapable of giving consent3. those which do not comply with the Statute of Frauds

Agreements within the scope of the Statute of Frauds:a. agreements not to be performed within one year from the making thereofb. promise to answer for the debt, default or miscarriage of anotherc. agreement in consideration of marriage other than a mutual promise to

marryd. contracts of lease for a period longer than one yeare. agreements for the sale of real property or interest therein

f. representation as to credit of a third person

Modes of ratification:1. for contracts infringing the Statute of Frauds:

expressly impliedly by failure to object to the presentation of oral evidence to

prove the contract, or by the acceptance of benefits under the contract2. if both parties are incapacitated, ratification by their parents or guardian shall

validate the contract retroactively

VOID OR INEXISTENT CONTRACTS1. those whose cause, object or purpose is contrary to law, morals, good customs,

public policy or public order2. those whose object is outside the commerce of men3. those which contemplate an impossible service4. those where the intention of the parties relative to the principal obkect of the

contract cannot be ascertained5. those expressly prohibited or declared void by law

The following contracts are INEXISTENT:1. those which are absolutely simulated or fictitious2. those whose cause or object did not exist at the time of the transaction

COMPARATIVE TABLE OF DEFECTIVE CONTRACTS

BASIS RESCISSIBLE VOIDABLE UNENFORCEABLE VOID


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CONTRACTS CONTRACTS CONTRACTS CONTRACTS

1. Origin of thedefect

1. economicdamage orlesion toone of theparties or to

a thirdperson

2. a specialdeclarationby law thatthe contractis subject torescission

1. incapacityof one ofthecontracting parties

to giveconsent

2. vitiatedconsentdue to thevices ofconsent

1. it was enteredinto in behalf ofanother person

a. withoutauthority

b. in excess ofauthority

2. non-compliancewith the Statuteof Frauds

3. incapacity ofbothcontractingparties to giveconsent

Absence ofany of theessentialrequisites of acontract

(consent,object, cause)

2. Damage or

prejudice

There must be

damage/lesionor prejudice toone of thecontractingparties or thirdperson

Damage or

prejudice tothe otherparty is notnecessary

Damage or

prejudice is notnecessary

Damage or

prejudice isnot necessary

3. Legal effect They areconsideredvalid andlegallyenforceableuntil judicially

rescinded

They areconsideredvalid, bindingandenforceableuntil judicially

annulled

They areinoperative untilratified. They arenot enforceable incourt without properratification

Generally,they do notproduce legaleffects; thereare fewexceptions

(e.g. voidmarriagesunder Art. 36and Art. 53,Family Code,producelegitimatechildren (SeeArt. 165Family Code)

4. Remedy/action Rescission orrescissory

action

Annulment ofcontract

This is just apersonal defense

when the plaintiffpursues a specificperformance caseor complaint fordamages based onbreach of contract

Declaration ofnullity of the

contract

5. Persons whocan file theaction

Contractingparty.Exception:creditors whoare defrauded

Gen. Rule:contractingpartyprincipally orsubsidiaryobliged under

the contractException: athird personwho isprejudiced

Contracting party.Third personscannot assail it.

Third personscannot assailthe contractunless hisinterests aredirectly

affected.

6. Susceptibilityof ratification

Need not beratified

Susceptible ofratification

Susceptible ofratification

Notsusceptible ofratification

7. susceptibilityof prescription

Action forrescissionprescribesafter four

years

Action forannulmentalsoprescribes

after four

Action for recoveryor action for specificperformance or fordamages for breach

of contract, also

Action fordeclaration ofnullity or theputting of the

defense of


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years prescribe. Therebeing no specifiedperiod, it could be10 years if the basisof the action is awritten contract; or 6

years if unwritten.

nullity of thecontract doesnot prescribe.

Documents

Lecture Aid in Obligations