OBLIGATION – juridical necessity to give, to do or not 3. In obligation not to do, and obligor does what is 2.

CONDITIONAL OBLIGATION
to do forbidden, shall be UNDONE AT HIS EXPENSE. - there is condition in performance; future & uncertain
4 ELEMENTS OF OBLIGATION 2Kinds
1. ACTIVE SUBJECT (creditor/obligee) – whose 4 GROUNDS; debtor liable for damages a. Suspensive condition – happening of condition
obligation is constituted 1. Default/mora gives RISE to obligation
2. PASSIVE SUBJECT (debtor/obligor) – has duty to 2. Fraud/dolo b. Resolutory condition – happening of condition
give, to do or not to do 3. Negligence/culpa EXTINGUISHES obligation
3. OBJECT/PRESTATION – subject matter 4. Contrary to terms of obligation
4. JURIDICAL/LEGAL TIE (vinculum/efficient cause) – 6 MISCELLANEOUS RULES ON CONDITIONAL
reason 1. DEFAULT/MORA – delay OBLIGATION
3kinds 1. Impossible conditions, contrary to law, shall ANNUL
CIVIL OBLIGATION NATURAL a. Mora solvendi – debtor’s delay to give (real ob.), obligation.
OBLIGATION to do (personal ob.) 2. The condition not to do an impossible thing is
derived from positive derived from equity & b. Mora accipiende – creditor’s delay to accept considered not agreed upon.
law justice c. Compensatio Morae – delay of both in reciprocal 3. The condition that happens in determinate time,
enforceable by court not enforceable by obligation EXTINGUISHES obligation.
action court action 4. The condition that happens in INDETERMINATE
CONCEPT OF DELAY time, obligation only effective at arrival.
5 SOURCES OF OBLIGATION General Rule: No demand, No delay 5. The condition is fulfilled if DEBTOR prevents
1. LAW Exceptions: fulfillment.
2. CONTRACTS 1. Law states 6. The effect of conditional obligation, once fulfilled:
3. QUASI-CONTRACTS – arise from lawful, voluntary 2. Obligation states - to give: retroact to the day of constitution of obligation
acts; no one shall be unjustly enriched... 3. Time is the essence - has reciprocal prestations: fruits & interests be
2Kinds 4. Demand be useless if delay mutually compensated
a. Solutio indebiti – something received (delivered on 5. Debtor guilty of delay - has unilateral obligation: debtor shall give fruits &
a mistake), no right to demand it interests
b. Negotiorum gestio – voluntary mgt of EFFECTS OF DELAY
property/affairs of another w/o his knowledge/consent 1. Damages RULES in case of Loss, Improvement, or
4. QUASI-DELICT/TORTS/CULPA AQUILIANA – arise 2. When to deliver determinate thing, STILL LIABLE in Deterioration of thing during the pendency of
from damage; fault/negligence fortuitous event. condition
5. CRIMES/ACTS/OMISSIONS punished by law – arise 1. LOST
from civil liability that is a consequence of a criminal 2. FRAUD/DOLO – conscious, deliberate, intentional a. w/ debtor’s fault – damages
offense evasion of fulfillment b. w/o debtor’s fault – extinguishes obligation
2Kinds
DILIGENCE OF A GOOD FATHER OF A FAMILY a. Dolo causante/Causal fraud – fraud in obtaining 2. DETERIORATION
- care need to be exercised by a debtor to deliver/give consent; consent is defective, contract is voidable. a. w/ debtor’s fault - (1) cancel obligation & damages;
determinate thing Remedy: annulment or (2) fulfill obligation w/ damages
Exception: When law/stipulation of parties requires a b. Dolo incidente/Incidental fraud – fraud w/c vitiates b. w/o debtor’s fault – creditor suffer impairment
differnt standard of care (slight/extraordinary diligence). consent. Remedy: damages
3. IMPROVEMENT
When creditor is entitled to the fruits 3. NEGLIGENCE/CULPA – voluntary act/omission; no a. By nature/time – benefit to creditor
Rule: The creditor has personal right (right to ask for bad faith intended b. at expense of debtor – debtor no right than that
delivery) from the time the obligation to deliver arises. 3Kinds granted to usufructuary (debtor no right to compensate
But NO real right (right enforceable against the whole a. Culpa aquiliana/Civil negligence – quasi- amount for improvement)
world) until it is delivered. delict/torts
b. Culpa contractual/Contractual negligence – EFFECTS OF FULFILLMENT OF SUSPENSIVE
3 KINDS OF FRUITS breach CONDITION
1. NATURAL – w/o human intervention c. Culpa criminal/Criminal negligence – crime/delict General Rule: The obligation becomes effective
2. INDUSTRIAL – w/ human intervention retroactively to the day obligation was constituted.
3. CIVIL – derived by virtue of juridical relation 4. Contrary to the terms of obligation Exceptions:
1. In reciprocal obligation, fruits & interests during
Creditor’s rights if debtor fails to comply w/ the 2 RULES OF PRINCIPAL & INSTALLMENT pendency of condition shall compensate each other.
obligation 1. Receipt of principal w/o mention of interest, presumed 2. In unilateral obligation, debtor gets fruits & interests
1. Determinate interest is paid also. unless there is a contrary intent.
a. Performance 2. Receipt of latter installment w/o mention of prior
b. Damages installment, presumed prior installment is paid also. 3 EFFECTS OF FULFILLMENT OF RESOLUTORY
2. Generic CONDITION
a. Performance 4 SUCCESSIVE RIGHTS OF CREDITOR to satisfy 1. Extinguish obligation.
b. Damages claim against DEBTOR 2. Both parties restore what they received plus fruits &
c. Obligation be complied at debtor’s expense 1. Exact payment interests.
2. Attach debtor’s properties 3. The rule on L, D, or I will apply to person who has to
Creditor’s rights if debtor does in contravention 3. Accion subrogatoria – exercise rights & actions return the thing.
1. Damages except inherent in person
2. Ask it be UNDONE at debtor’s expense 4. Accion pauliana – cancel acts/contracts by debtor to When one of debtors in reciprocal obligation does
defraud creditor not comply w/ his obligation
FORTUITOUS EVENT – cannot be foreseen, if 1. The right of injured party is
foreseen, inevitable TRANSMISSIBILITY OF RIGHTS (1) cancel contract & damages; or
General Rule: No person liable to fortuitous event. General Rule: ALL RIGHTS are transmissible. (2) fulfill obligation & damages
Exceptions: Exceptions:
1. Law states 1. Law states 3 Kinds of Obligation (Accdng to PERSON
2. Stipulation/contract states 2. Contract states OBLIGED)
3. Assumption of risk 3. Obligation is purely personal 1. UNILATERAL – only 1 party obliged to comply
4. Delay 2. BILATERAL – both parties; performance not same
5. Debtor promises deliver to 2/more persons who do 10 Kinds of Obligation time
not have same interest (bad faith) 1. Pure 3. RECIPROCAL – both parties; performance same
2. Conditional time
EFFECTS OF FORTUITOUS EVENT to thing to be 3. Alternative
delivered 4. Facultative 3. OBLIGATION W/ A PERIOD
- extinguish the obligation if determinate; generic does 5. Joint - demandability/extinguishment subject to the expiration
not extinguish the obligation 6. Solidary of period
7. Divisible
3 MISCELLANEOUS RULES ON PERFORMANCE OF 8. Indivisible PERIOD – interval of time; either suspends
OBLIGA-TION 9. Obligation w/ a period demandability or produces extinguishment
1. When to deliver determinate, accessions (additions/ 10. Obligation w/ a penal clause DAY CERTAIN – must come, not known when
improvements) and accessories (joined/included with
the principal) are INCLUDED even not mentioned. 1. PURE OBLIGATION 7 CASES CONSIDERED TO BE “OBLIGATION W/ A
2. If debtor fails to do, it shall be DONE AT HIS - w/o condition, demandable at once (pure has PERIOD”
EXPENSE, same with doing the contravention; poorly resolutory condition/period) 1. Little by little
done be undone. 2. In partial payment
3. Payable ASAP 2. If debtor does not avail, creditor can give him receipt
4. When I can afford it (3) SOLIDARY OBLIGATION EXIST ONLY IF: designating the debt from which payment will be
5. When I have the money *RULES applied.
6. When I am able to 1. Law states 3. If debtor accepts the receipt, he cannot complain
7. When my means permit me to do so 2. Stipulation states unless THERE IS just cause to invalidate the contract.
PERIOD CONDITION 3. Nature of obligation requires
certain uncertain b. CESSION
future only future/past but 2 PRESUMPTIONS THAT OBLIGATION IS JOINT - debtor abandons ALL his property for creditor’s benefit
unknown 1. The debts be divided as many shares as there are to obtain payment from proceeds of his property
(*influence upon (*) on the very debtors/creditors.
obligation) only upon its existence of obligation 2. The debtors/creditors are distinct from one another. 5 REQUISITES OF VALID CESSION
demandability itself 1. 1 debtor & 2 or more creditors
FOR WHOSE BENEFIT IS THE PERIOD? 8. DIVISIBLE OBLIGATION 2. Debtor is in partial/total insolvency.
General Rule: Both the debtor & creditor. - prestation is capable of partial performance 3. Debtor to deliver ALL his property to creditors
Therefore, NEITHER of them can demand performance 4. Debt is due & demandable.
of obligation. 9. INDIVISIBLE OBLIGATION 5. Creditors must sell the properties & apply the
Exception: If the term of obligation has to favor one of - prestation incapable of partial performance proceeds to their respective credits proportionately.
them.
10. OBLIGATION W/ A PENAL CLAUSE c. DACION IN PAYMENT (dacion en pago)
5 INSTANCES WHEN DEBTOR LOSES RIGHT TO - one w/ accessory undertaking attached to obligation to - alienation of property to the creditor in satisfaction of
USE “PERIOD” assume greater liablity in case of breach/non-fulfillment debt
1. Debtor is insolvent. of obligation
2. Debtor attempts to abscond. 3 REQUISITES OF DACION IN PAYMENT
3. Impairment of guarantees/securities. 3 PURPOSES OF PENAL CLAUSE 1. Consent of creditor
4. Failure to furnish guarantees/securities promised. 1. Ensure performance of obligation 2. NOT prejudicial to another creditor
5. Violation of undertaking. 2. Substitute for damages & interest in case of 3. Debtor not insolvent declared by a judicial decree
noncompli-ance CESSION DACION IN PAYMENT
4. ALTERNATIVE OBLIGATION 3. Penalize debtor in case of breach all properties NOT all properties
- w/ 2 or more prestations, only 1 is due. require more than 1 NOT require all
In case obligation has a PENAL CLAUSE creditor creditors
5. FACULTATIVE OBLIGATION General Rule: Penalty takes the place of damages & NOT act of novation act of novation
- w/ ONLY 1 prestation but can be substituted. interest in case of non-compliance. NOT transfer ownership transfer ownership
Exceptions: requires partial/total may happen during
ALTERNATIVE prestations LOST w/ debtor’s fault 1. Stipulation states. insol-vency solvency of debtor
Creditor entitled to damages but needs ff requisites: 2. Debtor refuse to pay penalty.
1. Debtor can choose. 3. Debtor guilty of fraud in performance of obligation. d. TENDER OF PAYMENT & CONSIGNATION
2. All prestations lost/become impossible due to TENDER OF PAYMENT – act of offering the creditor
debtor’s fault. NULLITY OF PRINCIPAL OBLIGATION OR THE
what is due to him w/ a demand that the creditor accept
ALTERNATIVE FACULTATIVE PENAL CLAUSE
it
OBLIGATION OBLIGATION Nullity of principal obligation = nullity of penal clause CONSIGNATION – act of depositing thing due w/ the
several prestations due, one prestation due, but Nullity of penal clause = NOT nullity of principal court when creditor cannot/refuses acceptance of
obligation
giving one is sufficient can be subtituted payment
right to choose (debtor) right to choose
10 MODES OF EXTINGUISHMENT OF 5 REQUISITES OF CONSIGNATION
unless granted to DEBTOR ONLY
OBLIGATIONS 1. Debt due.
creditor
1. Payment or performance
If 1 of the prestation is nullity of principal 2. Creditor refused the tender of payment w/o just cause
2. Prescription
illegal, others may be carries w/ it nullity of 3. Notice of consignation already given to persons
3. Compensation interested in fulfillment of obligation
valid, obligation accessory/
4. Confusion/merger 4. Consignation of thing/amount due
remains substitute
5. Condonation/remission
loss/impossibility of ALL loss/impossibility of 5. Subsequent notice of consignation to interested
6. Fulfillment of resolutory condition
prestations due, w/o presta-tion due, w/o persons
7. Annulment
debtor’s fault, debtor’s fault, 8. Rescission
extinguishes obligation extinguishes obligation 5 VALID CONSIGNATION W/O PREVIOUS TENDER
9. Novation
OF PAYMENT
10. Loss of thing due
(3) SUMMARY OF RULES, OBLIGATIONS, & RIGHTS 1. Creditor is absent/unknown.
OF DEBTOR IN ALTERNATIVE OBLIGATION 2. Creditor is incapacitate to receive at time it is due.
1. PAYMENT/PERFORMANCE 3. Creditor refused give a receipt, w/o just cause.
1. If 1 of prestations lost through fortuitous event, shall - Payment means delivery of money & performance of
still be perform by choosing (creditor) from the 4. 2 or more persons claim the right to collect.
obligation
remainder. 5. Title of obligation lost.
2. If 1 of prestations lost through debtor’s fault, creditor 2 PLACE OF PAYMENT
may claim any of remainders w/ damages. 1. At place agreed upon
3. If ALL prestations lost through debtor’s fault, creditor 2. LOSS OF THING DUE
2. If w/o agreement
choose price w/ damages. - perishes, disappears, or goes out of commerce;
a. Object is indeterminate – paid at domicile of DEBTOR existence is unknown; cannot be recovered
b. Object is determinate – place of thing at the time of
RULES on LOSS/DETERIORATION of the thing constitution of obligation
intended as SUBSTITUTE in FACULTATIVE 3 REQUISITES TO EXTINGUISH OBLIGATION DUE
OBLIGATION TO LOSS
1. If there is a loss/deterioration of thing intended as 1. Determinate thing.
4 SPECIAL MODES OF PAYMENT 2. W/o debtor’s fault.
substitute, debtor is NOT liable if NOT HIS FAULT. a. Application of payment
But if substitution is already made, debtor is liable for 3. No delay.
b. Cession
loss of substitute when in DELAY, NEGLIGENCE, or c. Tender of payment & consignation
FRAUD. 3. CONDONATION/REMISSION
d. Dacion in payment - gratuitous abandonment of right by the creditor
6. JOINT OBLIGATION a. APPLICATION OF PAYMENT
- obligation is to be paid proportionately by debtors or to 3 REQUISITES OF A VALID
- designation of debt to w/c payment must be applied
be demanded proportionately by creditors CONDONATION/REMISSION
when debtor has several obligations of same kind in 1. It must be gratuitous.
favor of same creditor. 2. Accepted by obligor.
7. SOLIDARY OBLIGATION
- each one of debtors has right to render or each one of 3. Obligation is demandable.
3 REQUISITES OF APPLICATION OF PAYMENT
creditors has right to demand the entire compliance w/ 1. Only 1 debtor & 1 creditor
prestation 4. CONFUSION/MERGER
2. 2 or more debts, same kind - meeting in 1 person of qualities of debtor & creditor w/
3. All debts are due
MAXIMS & SYNONYMS same obligation
4. Insufficient payment to exinguish ALL debts
MAXIMS SYNONYMS
JOINT “To each his proportionate 3 REQUISITES OF VALID CONFUSION/MERGER
3 RIGHTS TO MAKE APPLICATION OF PAYMENT 1. The merger of characters of debtor & creditor must
Obligation own” 1. Right belongs to CREDITOR.
SOLIDARY “One for all, individually & be in same person.
Obligation all for one” collectively 2. Take place between principal debtor & creditor.
3. Clear & definite.
5. COMPENSATION (7) CLASSIFICATION OF CONTRACTS 4 KINDS OF INNOMINATE CONTRACTS
- 2 persons are debtors & creditors of each other According to: 1. I give that you may give
1. PERFECTION/FORMATION 2. I do that you may do
6 ESSENTIAL REQUISITES OF COMPENSATION a. CONSENSUAL – perfected by mere consent 3. I give that you may do
1. Parties both principal debtors & creditors of each b. REAL – perfected by delivery 4. I do that you may give
other. c. FORMAL/SOLEMN – special formalities are
2. Compensation is not prohibited by law. essential before perfection of contract 4 RULES FOR INNOMINATE CONTRACTS
3. No retention/controversy by 3 rd person. 1. Agreement of parties
4. 2 debts are due & demandable. 2. PARTIES OBLIGATED 2. Law on Obligations & Contracts
5. 2 debts are liquidated. a. UNILATERAL – only 1 has obligation 3. Rules on most analogous nominate contract
6. 2 debts both in money/consumable things. b. BILATERAL – both parties require to render 4. Customs of place
reciprocal prestations
(2) CLASSES OF COMPENSATION STIPULATION POR AUTRI
1. As to effect 3. CAUSE - stipulation in favor of 3rd person
a. TOTAL – obligations completely extinguished. a. ONEROUS – exchange of considerations
b. PARTIAL – a balance remains b. GRATUITOUS – no consideration received in 5 REQUISITES OF STIPULATION POR AUTRI
2. As to origin or cause exchange of what is given 1. Stipulation in favor of 3rd person
a. LEGAL – by law c. REMUNERATORY – something is given for 2. Stipulation is only PART, not the whole of the
b. VOLUNTARY/CONVENTIONAL – agreement of benefit/service that had been rendered previously contract.
parties 3. Both parties must conferred upon a favor of 3rd person
c. JUDICIAL – order from the court 4. RISK OF FULFILLMENT 4. 3rd person must accept & say it to debtor before its
d. FACULTATIVE – 1 of parties can choose/oppose a. COMMUTATIVE – equivalent values are given by revocation/cancellation
claiming compensation both parties 5. Neither of both parties be the legal
b. ALEATORY – fulfillment of contract depends on representation/autho-rization of 3rd person
6. NOVATION chance (eg. insurance)
- substitution/change of obligation CONSENT
- substitution of debtor 5. IMPORTANCE - meeting of offer (certain) & acceptance (absolute)
- subrogation of creditor a. PRINCIPAL – contract may stand alone (eg. sale, upon a thing
partnership)
(3) OBLIGATIONS MAY BE MODIFIED BY: b. ACCESSORY – existence depends on another 5 REQUISITES OF CONSENT
1. Changing object/principal conditions. (REAL contract (pledge, guarantee) 1. Must be given by 2 or more parties
NOVATION) c. PREPARATORY – contract not an end by itself but 2. Parties are capacitate to enter in contract
2. Changing the person of debtor/creditor. (PERSONAL a means thru w/c other contracts may be made (eg. 3. No vitiation of consent
NOVATION) agency) 4. No conflict between declared & intended
a. Substitution – change of debtor 5. Legal formalities must be complied
b. Subrogation – change of creditor 6. NAME
3. Changing person of the parties & the objects of a. NOMINATE – contract given a particular/special 7 RULES ON OFFER/ACEPTANCE
principal condition. (MIXED NOVATION) name (eg. partnership) 1. An offer must be certain.
b. INNOMINATE – not given special name (eg. I give 2. Business advertisements for sale are NOT offers but
4 REQUISITES OF NOVATION that you may give) ONLY invitations to make an offer.
1. Old valid obligation. 3. Advertisements for bidders are ONLY invitations.
2. Agreement of parties to new obligation. 7. SUBJECT MATTER 4. An acceptance made by letter/telegram does NOT
3. Extinguishment of old obligation. a. Contracts involving things bind offeror EXCEPT from the TIME it came to his
4. Validity of new obligation. b. Contracts involving rights/credits knowledge.
c. Contracts involving services 5. An offer made through an agent is accepted from the
2 FORMS OF NOVATION BY SUBSTITUTION OF TIME the acceptance is done through an agent.
DEBTOR 3 STAGES OF CONTRACT 6. An offer is ineffective upon death, insanity,
1. EXPROMISION – w/ consent of creditor, NO consent 1. PREPARATION/CONCEPTION – preparatory steps insolvency, of EITHER party BEFORE acceptance is
of old debtor to perfect contract made.
2REQUISITES 2. PERFECTION/BIRTH – meeting of minds between 2 7. When offeror allowed offeree a certain period to
a. Initiative of 3rd person. contracting parties accept, offer MAY be withdrawn AT ANYTIME unless
b. Consent of creditor. 3. CONSUMMATION/TERMINATION – terms of there is something PAID/PROMISED.
2. DELEGACION – all must agree (creditor, old debtor, contract are performed, & contract is fully executed
new debtor) 3 persons who CANNOT GIVE CONSENT to a
3REQUISITES 5 BASIC PRINCIPLES/CHARACTERISTICS OF A contract (if entered into, contract is voidable)
a. Initiative from old debtor. CONTRACT 1. UNEMANCIPATED MINORS
b. Consent of debtor. 1. PRINCIPLE OF AUTONOMY (liberty to contract) 2. INSANE/DEMENTED PERSONS (unless they acted
c. Acceptance by creditor. Provided they are not contrary to: DURING LUCID INTERVAL)
a. Law 3. DEAF-MUTES who DO NOT know how to write
7. SUBROGATION b. Morals
- change of creditor c. Good customs DEMENTED PERSON – NOT exactly insane; difficult to
d. Public order distin-guish right from wrong
2 KINDS OF SUBROGATION e. Public policy
1. CONVENTIONAL – consent of original parties & 3rd LUCID INTERVAL – period when an INSANE has
person 2. MUTUALITY OF CONTRACTS acquired SANITY temporarily, therefore, capacitated to
2. LEGAL – by law - the contract must bind both parties; its enter into a valid contract
a. creditor pays another preferred creditor even w/o validity/compliance cannot be left to the will of one of
debtor’s knowledge them 2 RULES on persons WHO CANNOT GIVE
b. 3rd person pays the express approval of debtor CONSENT to a contract
c. 3rd person pays even w/o knowledge of debtor 3. RELATIVITY OF CONTRACTS 1. Age of majority is 18 yrs old
- Contracts take effect only between the parties, their 2. A contract entered into by UNEMANCIPATED
assigns & heirs except when there are rights & MINOR w/o parents/guardian’s consent is voidable,
CONTRACT – meeting of minds between 2 persons to obligations not transmissible: except:
give something or to render service. a. by their nature a. Minor MISREPRESENTS his age (estoppel)
b. by stipulation (stipulation por autri) b. Contract involves sale & delivery of necessities to
3 ELEMENTS OF CONTRACT c. by provision of law minor
1. ESSENTIAL – w/o them, contract cannot exist
a. CONSENT of contracting parties 4. CONSENSUALITY OF CONTRACTS 5 VICES OF CONSENT
b. OBJECT CERTAIN – subject matter - Contracts are perfected by mere consent - NOTE: When there is a DEFECTIVE CONSENT of
c. CAUSE/CONSIDERATION Exceptions: EITHER of parties, contract is voidable; Remedy:
In some contracts, ff are also essential: a. REAL CONTRACTS – perfected by delivery annulment of contract.
d. FORM b. FORMAL/SOLEMN CONTRACTS – special form 1. MISTAKE/ERROR
e. DELIVERY required for its perfection 2. FRAUD/DECEIT
3. VIOLENECE
2. NATURAL – found in certain contract, presumed to 5. OBLIGATORINESS OF CONTRACTS 4. INTIMIDATION
exist unless stipulated - The contract, once perfected, has the force of law 5. UNDUE INFLUENCE
between parties which bound to comply in good faith
3. ACCIDENTAL – various particular stipulations that
may be agreed upon by contracting parties
1. MISTAKE/ERROR 2. Undue influence ANNULS obligation although it is 4. Ignorance, lack of skill, negligence, or bad faith of
- wrong conception & lack of knowledge upon a thing DONE by 3rd person not part of contract. person drafting the instrument DOES NOT state the
3. To constitute undue influence, ff circumstances must TRUE INTENTION of parties
(2) MISTAKES W/C VITIATES CONSENT be considered: (1) confidential, family, spiritual, & other 5. Two parties agree on mortgage/pledge of
It should refer to: relations of parties; or (2) the aggrieved party is personal/real property BUT the instrument states the
1. substance of thing that is the OBJECT of contract suffering from mental weakness; or (3) ignorant; or (4) property is sold ABSOLUTELY, or w/ the right to
2. conditions w/c MOVED either/both parties to enter in financial distress. repurchase.
into contract
SIMULATION OF CONTRACT (3) NO REFORMATION OF INSTRUMENT WHEN:
4 RULES ON MISTAKE - process of INTENTIONALLY deceiving others by 1. Simple donation inter vivos where NO CONDITION is
1. Mistake to identity/qualifications of either of parties producing a contract not really exist (absolute imposed.
will vitiate consent ONLY when IT is the principal cause simulation), or w/c is different from true agreement 2. Will.
of contract. (relative simulation). 3. Real agreement is VOID.
2. Simple mistake of account must be corrected.
3. No mistake if parties knew the risk/doubt affecting 2 KINDS OF SIMULATED CONTRACT 4 KINDS OF DEFECTIVE CONTRACTS
OBJECT of contract. 1. ABSOLUTE SIMULATION (the parties DO NOT 1. RESCISSIBLE – valid until rescinded; has ALL
4. When one of parties is unable to read or the contract intend to be bound at all) essential requisites but because of injury/damage to
is in language not understood by him, & mistake/fraud - completely fictitious/make-believe; VOID one of the parties, the contract may be rescinded.
is alleged, the person enforcing the contract must 2. RELATIVE SIMULATION (parties conceal their 2. VOIDABLE – valid until annulled; has ALL essential
FULLY explained the terms to him. true/real agreement) requisites but because of defect in consent, contract
- parties are bound to real/true agreement, EXCEPT: may be annulled.
2. FRAUD/DOLO a. contract prejudice 3rd person 3. UNENFORCEABLE – cannot be sued/enforced
- when through insidious words/machinations of one of b. purpose is contrary to law, morals, good customs, unless ratified; no effect NOW but may take effect upon
the parties, INDUCED the other to enter into a contract, public order, public policy ratification.
& w/o them, he will not agree. 4. VOID – NO effect at all; cannot be ratified/validated.
7 REQUISITES OF OBJECT OF CONTRACT
DOLO CAUSANTE DOLO INCIDENTE 1. Specific & certain 5 RESCISSIBLE CONTRACTS
Serious Not serious 2. Services not contrary to law, morals, good customs, 1. Those entered by guardians & suffered LESION by
cause induces party to NOT the cause to enter public order, public policy more than ¼ of value of the value that is the OBJECT.
ENTER into contract into contract 3. Services/things must NOT be legally/physically 2. Those agreed upon in representation of absentees, if
make contract voidable contract is valid; liable impossible the absentees suffered LESION.
for damages 4. Services/things are w/in commerce of man including 3. Those undertaken in FRAUD of creditors when the
future things creditors cannot further claim.
7 RULES OF FRAUD 5. Rights are NOT TRANSMISSIBLE. 4. If entered into contract w/o knowledge/approval of
1. Failure to disclose facts when these needs to be 6. Determinate (kind) or determinable ( w/o the need of litigants under litigation.
revealed, is a fraud. new contract/agreement) 5. Contracts subjected to rescission declared by law.
2. Fraud should be SERIOUS (dolo causante) & 7. NO contract be entered for future inheritance
SHOULD NOT be done by BOTH parties to make UNLESS law states
contract voidable.
3. Incidental fraud (dolo incidente) ONLY obliges person 4 REQUISITES OF CAUSE 3 VOIDABLE CONTRACTS
to PAY DAMAGES. 1. It is just & equitable. 1. One of the parties INCAPABLE of giving consent to a
4. Usual exaggerations in trade, when other party know 2. It exists. contract.
the “real” facts, is NOT FRAUD. 3. It is lawful. 2. Those where consent vitiates by vices of consent.
5. A mere expression of opinion is NOT FRAUD 4. It is true. (MFVIU)
UNLESS made by an expert & the other party relies on 3. Those agreed in the state of drunkenness/hypnotic
his special knowledge. LESION spell.
6. Misrepresentation made in good faith is NOT FRAUD - inadequacy of cause (eg. insufficient price for thing
but may constitute an error. sold) 3 UNENFORCEABLE CONTRACTS
7. Misrepresentation by 3rd person DOES NOT vitiate 1. Those entered in name of other person, or who acted
consent UNLESS it created substantial mistake. RULES ON LESION BEYOND his powers.
- Lesion DOES NOT invalidate contract, except there is: 2. Those who do not comply w/ the Statute of Frauds.
3. VIOLENCE a. Fraud 3. Both parties are incapable of giving consent to a
- serious/irresistible force is employed. b. Mistake contract.
c. Undue influence
2 RULES ON VIOLENCE 7 VOID/INEXISTENT CONTRACTS
1. Serious/irresistible force is employed w/c constitutes 2 FORM OF CONTRACTS 1. Those w/c are ABSOLUTELY simulated/fictitious.
the reason why one entered into a contract. 1. Contracts in writing 2. Those w/c contemplate an impossible service.
2. Violence ANNULS obligation although it is DONE by 2. Contracts in a public instrument 3. Those whose OBJECT is outside the commerce of
3rd person not part of contract. man.
1. Contracts w/c must be IN WRITING to be valid: 4. Those whose CAUSE/OBJECT did not exist at time
4. INTIMIDATION a. Donation of personal property exceeds P5000. of tran-saction.
- 1 of the parties is compelled by a reasonable & well- b. Agent’s authority in sale of land/any interest. 5. Those whose CAUSE/OBJECT/PURPOSE is
grounded fear of an imminent & grave evil upon his c. Contract of antichresis. contrary to law, morals, good customs, public order, or
person/property to give his consent. d Stipulation to pay interest on loans. public policy.
e. Stipulation to reduce common carrier’s 6. Those where INTENTION of parties to principal
3 RULES ON INTIMIDATION extraordinary diligence & to limit its liability. object CANNOT be ascertained.
1. Age, sex, & condition of person must used to 7. Those expressly prohibited/declared VOID by law.
determine the degree of intimidation. 2. Contracts w/c must be IN A PUBLIC INSTRUMENT
2. Intimidation ANNULS obligation although it is DONE to be valid:
by 3rd person not part of contract. a. Donation of real property (both the donation &
3. A threat to enforce one’s claim (claim must be just & accep-tance).
legal), DOES NOT vitiate consent. b. Sale of real property.
c. Partnership where real property/rights is
VIOLENCE INTIMIDATION contributed; or when capital contribution exceeds
P3000.
External Internal
Physical NO physical coercion;
REFORMATION OF INSTRUMENTS
contact/coercion ONLY MENTAL/MORAL
- REMEDY in equity in w/c a written instrument is
coercion
made/construed to the REAL intention of parties when
there is an error/mistake.
5. UNDUE INFLUENCE
- a person takes improper advantage of his power over
(5) CASES REFORMATION OF INSTRUMENT IS
other’s will, depriving the other to his reasonable
AVAILABLE
freedom of choice. 1. Mutual mistake of parties.
2. One party was mistaken & the other acted fraud.
3 RULES ON UNDUE INFLUENCE
3. One party was mistaken & the other knew/believed
1. There is a person who takes improper advantage of
that the instrument did not state their REAL agreement.
his power over other’s will, depriving the other to his
reasonable freedom of choice.