Civil Law Review 2 (Atty. Uribe) Transcribed By: Licuanan, Apple Jade S. Arellano University School of Law

CONTRACTS NOT ALL AUTO CONTRACTS ARE VALID.
= Those enumerated
under Art. 1491 are void auto contracts
Nature of contract Ex: In a contract of sale When a guardian purchases the
property of his ward. In that sale, she is the seller because she
In the definition of a contract, at least one of the parties will is the representative of the ward and at the same time, she is
have an obligation to give or to render some service. also the buyer. Is that sale valid? – NO. under Art. 1491, this
people are prohibited from purchasing the property of their
If 2 persons had an agreement, does it mean that they ward. Hence, such contract is void.
entered into a contract? – NOT NECESSARILY. Because we can
have an agreement but if no obligation arise from such
agreement then this is not a contract. FUNDAMENTAL CHARACTERSITICS/PRINCIPLES OF
CONTRACTS
Macasaet vs. Macasaet : dation in payment is a contract (sir
does not agree). It is a special form of payment therefore it is 1. Consensuality - For a person to be bound, he must
a mode of extinguishment. A contract will give rise to give his consent freely and voluntarily.
obligation, it will not extinguish. Hence, Dation in payment
cannot be considered a contract. It’s not that consent is necessary but rather for a contract to
be valid, consent must be freely and voluntarily given.
Is dation in payment a contract? – NO. because a contract is Otherwise if there is a vitiation of consent, the contract will be
one of the source of obligation. With a contract, assuming it is voidable.
a valid contract, obligation should arise.
Without consent – VOID
But Dation in payment, because it is a special form of payment, Vitiated consent – VOIDABLE
obligation will be extinguished, They are exactly opposite.
Dation in payment requires an agreement but it’s effect is not Not even the government can compel anyone to enter into a
the same as that of a contract. contract.
Most contracts are bilateral in character. = It would result to Republic vs. PLDT. : The RP compelled PLDT to enter into an
reciprocal obligations interconnection agreement. (during that time, PLDT has
absolute monopoly in intercommunication industry in the
May an obligation not to do arise from a contract – YES. country) The government wanted to have a share or to use the
Ex: An obligation not to put up a fence. trunk lines of PLDT but the latter refused and filed the case.
Is there a need for 2 persons for a contract to be perfected? - SC: The government cannot compel anyone, even PLDT to
NO. enter into an agreement because a contract requires the
consent which must be voluntarily and freely given. However,
Ex: In a promissory note or in a deed of sale, if only one person this action can be considered as a form of expropriation
signed the document, is it possible for a contract to have been proceeding.
perfected? = YES.
Contract of Adhesion – It is considered void because it is
Auto contracts –Where a person contracts with himself. A acclaimed that one of the parties did not give consent or
contract may be perfected with this 1 person causing its because the terms and conditions have been prepared by the
perfection because he would act in 2 capacities. “stronger party” and practically, it was just presented to the
other party.
One, He may act on behalf of another but in the other
capacity, he would be acting for himself. Or also on behalf of SC: Contract of Adhesion is valid because even if the terms and
another third person. conditions are already prepared, the consent was considered
given when the party entered or adhered to the terms and
Common scenario in this kind of contract: Agency conditions.
If a person is authorized to borrow money, (agent) so in the Jurisprudence: A luggage of the passenger was lost. He sued
promissory note or in the loan agreement, he signs fort the PAL for damages. The latter raises the defense that it can only
principal. Is it possible that such agent is also the lender? – be held liable up to a maximum amount of 100.00 as stipulated
YES. The only requirement by the law is that the rate of interest in the contract. Was the stipulation of the 100.00 sustained
must be the current rate. by the SC? = YES. Though this contract is a contract of carriage,
Civil Law Review 2 (Atty. Uribe)

Transcribed by: Licuanan, Apple Jade S.
Arellano University School of Law
still the passenger gave his consent when she bought the
ticket.
2. Autonomy – enshrined in Art. 1306.
Jurisprudence: A case involving a REM where the principal
debtor defaulted, there was a foreclosure sale within the It will govern the rights and obligations of the parties. – These
prescribed period. The principal debtor-motrgagor manifested refers to the stipulations of the parties.
his intention to redeem the property but the mortgagee
informed the latter that it was stipulated in their agreement Under 1306, the contracting parties may establish a
that the debtor waived his right to redemption. stipulation, clauses and terms as they may be deemed
convenient provided that it is not contrary to law, morals, good
Was the mortgagor able to exercise the right of redemption in customs, public policy,
relation to this property? = despite the waiver, SC said YES.
Because it is contained in a contract of adhesion. It consistently What would primarily govern the relation of the parties in
ruled that waivers contained in a contract of adhesion are void. relation to a contract? = Stipulations as long as they are not
It does not go into the matter of public policy but into the contrary to law, morals, etc.
voluntariness of the act.
What is void is not the contract itself. What is void is merely
Jurisprudence: Travel agency who would obtain tickets by the stipulation.
credit. For that, so that they can get ticket or credit from IATA
members, there has to be that suretyship. The parties agreed Freedom of contract – refers to autonomy of contracts.
for a duration of 1 year. During that year, the travel agency did
not default but during the next year, they defaulted. IATA Acceleration clause = there has never been an issue as regards
demanded payment from Oriental insurance. The latter paid to the validity of such clause.
and it was subrogated. It demanded payment from sureties.
The sureties claimed that they only bound themselves for 1 2 clauses involved in autonomy of contracts principle:
year and that default happened after the period. a. Escalation clause = Not all Escalation clause in a
contract is considered valid.
There is a provision in the contract as to the renewal of the
surety bond. The sureties approved the renewal of the Ex: When an increase in the compensation of one party is
contract. dependent upon the sole will or caprice of one of the parties.
And not based on a valid and a reasonable standard (most
SC: Because of the provision in the contract. It is considered important requirement for this clause to be valid)
that they approved such renewal when they signed the
contract. In a contract of loan, the escalation clause pertains to the
interest rate. If the determination of the rate is dependent
Defense of sureties: This is a contract of adhesion and solely upon the whim of the bank, then it cannot be given an
therefore this contract is void. effect. = It should be based on the market value
Most contract of adhesion as the SC would tell us is not a void It violates the mutuality of contracts principle.
contract because the parties gave their consent. It is a very rare
case where the Supreme Court would declare such contract as b. Non-involvement clause = This clause is common in a
void because practically, one of the parties was not in a contract of employment.
position to bargain as to the terms and conditions.
Contract of Adhesion is not invalid per se. Examples on Escalation clause:
Newlyweds – couple was so unhappy for the service of the On July 1, 98, Bryan leased an office space in a building for a
hotel for their reception. The hotel claims that though there period of 5 years at a rental rate of P1,000.00 a month. The
was a delay in the service, there was sudden increase of contract contained the provision that in case of inflation or
guests. Was the contract between the hotel and the devaluation of pesos, the monthly rental will automatically
newlyweds a contract of adhesion? - YES. The terms and be increase or decrease depending on the devaluation or
conditions were prepared by the hotel. Newlyweds only inflation of peso to dollar. Starting March 1, 2001, the lessor
provided the number of guest and the menu. increased the rent to 2,000 a month because of the high
exchange rate from peso to dollar. Bryan refused to pay the
If yes, Is the contracts void? – NO. just because it is a contract increased rate and the building filed a case for unlawful
of adhesion does not mean that consent was not given. detainer against him. Will the action prosper – The answer

will depend on the validity of the provision. Here, It will not Defense of Chu: Because it amounts to an unreasonable
prosper because there is a valid standard which is the restraint of trade which is considered void under the
devaluation of peso which is very reasonable as basis for the constitution.
escalation clause. Here, it is based in a contract hence, there is
no need for an extra ordinary inflation or deflation which is not Does this really amount to an unreasonable restraint of trade?
reflected in the contract.
In other cases, The Supreme Court ruled that a non-
If the parties agreed that there will be an increase or decrease involvement clause for a duration of 1 year can result to an
in the amount to be paid, regardless if there is an extraordinary unreasonable restraint if during such period, the employee is
inflation or none, that should bind the parties unless contrary prohibited in engaging in any business or to be employed in
to law, morals, etc. but because there was an agreement which any industry.
is not contrary to law, morals, etc, the agreement is valid.
It will also be void if the prohibition is perpetual or even 20
Del Rosario vs, Shell – The SC sustained the validity of the years
escalation clause. For it to be valid, the most important
requirement is that there has to be a valid and a reasonable SC: This is a valid stipulation between the parties. The clause is
standard. The increase of compensation in one of the parties a reasonable limitation on the rights of the employee as this is
does not depend on the whim of such party, then that can be a reasonable protection to the rights of the employer. Also the
a valid escalation clause. limitation involved here is only within the Philippines.
Do not confuse as escalation clause to an acceleration clause. Reasons for validity as stated by the SC:
1. It is only for 2 years – not perpetual
In connection with loans, there is a central bank circular which 2. It refers only to specific industry (pre-need plan)
enumerates the requisites for an escalation clause to be given 3. Only limited in the Philippines
effect but that circular is only applicable to loans.
Why a stipulation may be considered void
1. There must be a de-escalation clause
2. Increase in the interest rate can only be made once a Alma was hired as a DH in Hongkong by Dragon services. She
year. executed a standard employment contract designed OWWA
3. Remaining period of the contract must be not less and POEA. It provided for an employment for 1 year for the
than 730 days salary of 1,000 dollars a month. It was submitted to and
approved by the POEA and she arrived in HK and was asked
In relation to contract for a piece of work, for the construction to sign another contract by the dragon services which
of a building, as to the compensation of the contractor, the reduced her salary to 600 a month. Having no other choice,
valid and reasonable standard would pertain to the minimum she signed the contract and upon her return in the
wage of the workers. If it is stipulated that the minimum wage Philippines, she filed an action for the salary differential.
will be increased by 1.00, the compensation would pertain to Dragon services claimed that the 2nd contract is valid under
such amount. the laws of HK and therefore binding on Alma. Is their claim
correct? = Such stipulation may be valid in the country where
And if the contractor also obliged itself to supply materials, the the contract was executed but not in our country because that
common escalation clause would have as a basis the consumer would be contrary to our public policy. (Our constitution
price index for the adjustment of compensation of contractor provides that the state shall provide protection to labor). Such
stipulation to reduce the compensation would be in violation
Examples of Non-Involvement clause: of public policy. Thus, it is void and cannot be applied in this
Jurisdiction.
Chu vs. Platinum plans: Chu was hired as a vice president in a
big company. In the employment contract, there iSs a non- Just because a contract is valid in the place where it was
involvement clause. In case of termination, she shall not within executed does not necessarily mean that it can be enforced
2 years engage or be involved in any corporation or entity here in the Philippines.
directly involved in the same industry. Despite such provision,
Chua transferred to another pre-need company. The other Cui vs. Arellano: Qui was once a student of Arellano and a
company now files a claim for the payment from Chu because scholar but on his 4th year, he transferred to another law
of her breach. school. When he was about to take the bar, he needs the grade
from Arellano. The latter however invoked a stipulation in the
scholarship program to the effect that if the scholar will
transfer to another law school, he must reimburse the school

for all the amounts which he should have paid if he would not -In succession, a waiver as to the right to revoke is also void.
be a scholar. Cui paid under protest. When he became a He can validly revoke at any time before his death.
lawyer, he sued arellano on the ground that such stipulation is
void. As to morals in relation to contracts:
In a contract of loan, It is contrary to morals if the interest
SC: The stipulation is void because it is contrary to public stipulation where the interest rate is unconscionable,
policy. Scholarships are granted on the basis of merit. It should exorbitant, excessive, inequitable.
not be used to bolster the reputation of the school. Since It is
based on merit, even if the student will transfer to another law Donna pledge a set of diamond ring and earrings to Jane for
school, he would not be required to reimburse the school. 200,000. She was made to sign an agreement that if she
cannot pay her debt within 6 months, Jane could immediately
Saura vs. Sandico: Agreement between 2 persons who are appropriate the jewelries to herself. After 6 months, Donna
buying for the position in the Nationalista party as congress. failed to pay. Jane then displayed the earrings and ring set in
They agreed that who ever would lose in the convention would her jewelry shop located in a mall. A buyer, Juana bought the
not run as an independent or rebel candidate. The one who jewelries for 300,000.
lost the convention ran and was able to win. The one who won
In the convention sued the other party on the basis of their Was the agreement which Donna signed with Jane valid? -
agreement. An agreement that if she cannot pay her debt within 6
months, Jane could immediately appropriate the jewelries to
SC: The stipulation is void for being contrary to public policy: herself. – This is a VOID stipulation because it constitutes
1. Right of the person to present himself as a candidate pactum commissorium.
cannot be limited by the agreement of 2 or more
persons ( At present, it is no longer a right ) Teachers were hired by UST. It is required by DECS that
teachers in the tertiary education level must have a masteral
2. Right of the electorate to choose who among the degree. Despite the requirements, They were hired but, they
candidates is fit for the position were not able to obtain a degree. Nonetheless, it is stated in
the SBA that if the professor does not have this degree, and he
The following contracts are void, except: (The question is was hired, such requirement is considered waived by the
wrong because the following are mere stipulation. A school.
stipulation is not a contract and a contract is not a stipulation.
If one stipulation in a contract is void, it does not mean that Whether the CBA is valid insofar as the requirement of the
the contract is already void) masteral degree for teacher? – NO. This is contrary to law
(here, the law is the education act of 1982). A stipulation that
Pactum commisorium – a stipulation in a contract of pledge is contrary to law is void. It is the stipulation which is void, not
where it states that upon default of the principal debtor, the the contract itself. (Art. 1306)
property pledged or mortgaged shall automatically belong to
the pledgee or the mortgagee = VOID
Pactum Aliendum – provision in a real estate mortgage that 3. Mutuality of contracts - The contracts must bind
the mortgagor cannot validly eliminate the property both parties and validity and effectivity can never be
mortgaged without the consent of the mortgagee. = VOID left to the will of one party.
Pactum Leonina – Stipulation in a contract of partnership If the increase in the compensation (escalation clause) is
which excludes 1 or some of the partners from the sharing in based on the whim of one of the parties = This will be a void
the profit = VOID stipulation because it violates the mutuality of contracts
principle.
Pacto De Retro – Stipulation in a contract of sale, giving the
seller the right to repurchase. = VALID If the parties agreed, in a contract of lease, that the lessee can
terminate the lease at any time by merely giving the lessor
Waiver as to future fraud = VOID notice of termination and such termination will take effect
after 15 days from receipt of notice. Does that violate the
Examples: mutuality of contracts principle? – NO. Because such principle
-In agency, a waiver as to the obligation to render an account pertains to the validity of the contract, not into the termination
on the part of the agent is a void waiver. of the contract.

Case: Spouses contracted a loan with SBC which they were not Contracts would take effect between whom? – Art. 1311 : Not
able to pay. The mortgage was foreclosed but they questioned only between the contracting parties but also their assigns and
the foreclosure on the ground that the stipulation is void as to heirs.(Privity of contracts principle) Such assigns and heirs are
the interest. It is provided in the agreement: the interest shall privy to the contract.
be SBC’s prevailing lending rate at the date of availment. Such
rate is fixed by the SBC based on their own factors and Under this principle, as a rule, when an action is filed by a third
parameters. person who is not a privy to the contract, but nonetheless he
filed an action in relation to a contract, against those privies,
Whether the provision on the interest rate in the credit line such action will not prosper. It will be dismissed on the ground
agreement is void for having violated the mutuality of that there is no privity of contract.
contracts
However, Contract is just one of the sources of obligations.
SC: The agreement is void because it violates the mutuality of They may not be privity of contracts between 2 persons but
contracts principle. The rate is solely fixed by the bank without they may be a cause of action under contract but under the
a valid reference rate or is not pegged on a market based other sources of obligation (Ex. The law so provides; or granted
reference rate as required by BSP. him such right)
General Rule: A person who is not a privy to the contract

4. Obligatory Force – Art. 1159 : Obligations arising cannot claim any rights under such contract. This will only
from contracts has the force of law between the apply to contracts which are in transmissible or the obligations
contracting parties and therefore, should be complied therein are purely personal in character.
with in good faith.
Exceptions: In case the contract is transmissible
It is a principle which holds that parties are bound not only by
what has been expressly provided in the contract but also to Instances when the rights an obligation arising from the
their natural consequences that flow out from such agreement contract would only take effect as to the parties. The heirs and
is covered by the obligatory force of contracts. assigns will not be bound. = It is where the rights and
obligations arising from the contract are intransmissble.
Premise of the provision: That the contract is a valid contract.
Reasons where the rights and obligations will be
When would the contract have the force of law between the intransmissible: (Art. 1311)
parties? - In general, upon perfection because it is the point in
time when either party can already demand fulfillment of the 1. By stipulation
other party’s obligation (assuming the obligation is reciprocal) Ex: In relation to a contract of lease, the right of the lessee to
sub lease. That is a right which is granted by stipulation
Perfection however is subject to other rules such as the statute
of frauds. A contract may have been perfected however, it 2. Because the law provides
cannot be enforceable maybe because it did not comply with Ex: As to heirs: Usufruct. By express provision of the civil code,
the statute of frauds. the rights of the usufructuary upon his death will not be
transmitted to his heirs. The usufruct will be extinguished by
Can there be a perfected contract if the contract is void? = his death (unless the parties so stipulated)
NEVER. Because it is only when the contract is perfected that
a party will have the right to demand fulfillment from the other 3. Because of the nature of the rights and obligation
party. This obligations are purely or strictly personal in character.
Thus, It cannot be transmitted to another person.
5. Relativity of contracts Ex: In a boxing contract involving Manny Pacquiao, He cannot

his obligation to mommy dionisia
Relativity of contracts principle: Contracts take effect only
between the parties and their assigns and heirs except if the When will the rights and obligations be purely personal? =
rights and obligations arising from the contract are not When the qualifications and skills of a party have been
transmissible by their nature, stipulation or by provision of law. considered in the constitution of the obligation.
In the latter case, the heirs and assigns are not bound by the
contract. Ultimately, Privity of contract principle may extend to a third
person:

Under Art. 1312, a third person may be bound
Under Art. 1313, a third party may have a cause of action
Under Art. 1314, a third person may be held liable Example under Art. 1314
Under Art. 1311, a third person may be benefited by a contract
Can the third person may be held liable in relation to a
Example Scenarios under Art. 1312: contract? – Art. 1314. If the third person maliciously induced
-A REM executed by A(mortgagor) and B(mortgagee). The law the party to the contract to violate such contract can also be
states that anyone who is in possession of the property where held liable under such contract (also called Interference by
real rights are involved shall be bound to this contract. In a third persons). The law required that there must be malice or
REM involving a parcel of land, the real rights attaches to the malicious inducement. The inducement to be malicious,
property and therefore whoever will be in possession will be necessarily, there must be knowledge of the contract.
bound
Words that connote malice: “Enticed” him by offering a better
The mortgagor during the effectivity of the contract sold the compensation package
property to a third person. May the latter acquire ownership?
= YES. He can be in possession so there can be delivery. As Who would be Liable under art. 1314? = Both the person who
discussed earlier, even if there is a provision in this contract induced and the person he induced who violated the
prohibiting A from alienating the property, that would be void. contract. The SC consistently held that Both are solidarily
That would constitute pactum de non aliendo. So X can acquire liable because they are considered as joint tortfeasors. Art.
ownership but he may be bound by this contract so if the 1314 have been considered consistently by the Supreme Court
principal debtor defaults, the mortgagee may have the as an extension of Quasi-delict.
mortgage foreclosed. This land may be sold for foreclosure sale
and his ownership will be terminated, it will go to the highest In one case the SC held that the liability of a third person
bidder. cannot be greater than the liability of the party who himself
violated the contract.
The premise to apply here is that this mortgage is registered.
As long as the mortgage is registered, anyone who is in A person may be bound to the contract if the contract is a
possession would be bound by this contract. contract creating real rights.
Exception: Even if the mortgage is not registered, a third A person is in possession of the object of the contract, so any
person may still be bound if he has actual knowledge of the one who is in possession of the contract which creates real
contract as the SC would tell us that actual knowledge has the rights will be bound to such contract but subject to the
same effect as that of registration. requirement provided in the code.: The contract must be
registered.
Examples under Art. 1313: Example: Contract of Mortgage of a parcel of Land but A sold
it to C who is not a party to the contract. May C be bound to
If A and B are the parties in a contract, X is a third person who the mortgage? – YES. Because if the principal debtor is unable
is not a privy to the contract. If he filed an action in relation to pay, B may foreclose the mortgage even if C already
to the contract, will the action be dismissed? – NOT acquired ownership, his ownership is subject to this mortgage
NECESSARILY. The action will not be dismissed if X has a cause because he will be bound to this contract.
of action because for example he is a creditor of A and this
contract was in fraud of creditors. = This is embodied in Article
1313 – action of X is called ACCION PAULIANA or an action to Examples under Art. 1311
impugn the contract for being in fraud of creditors.
Stipulation pour atrui or a stipulation for the benefit of a third
In relation to a third person who would have a cause of action, person.
Ordinarily, an action by a third person, like an action for
rescission, will be dismissed because there is not privity of Stipulation pour atrui – It is required by law:
contract but There is one 3rd person where an action for 1. It should not be the principal purpose of the parties.
rescission by way of Accion pauliana will prosper. The third It can only be a second matter.
person who is a creditor of one of the parties. If this contract
was in fraud of a creditor, this creditor under Art. 1313, would 2. The grant of the benefit to the third person must be
have the right to rescind this contract. His action will be an clear
action for rescission because this is in fraud of creditors.

A and B agreed that they will contribute 2 Million each, the majority is 18 yrs., he was no longer a minor at the time of
total amount is 4 million which will be given to a third person, the perfection of the contract.
X on a monthly basis for a period of 5 years. Is that a
stipulation pour atrui? = NO. because that is the entire Suppose XYZ corp. is impleaded as co-defendant, what would
purpose of the agreement. be the basis of its liabilities if any? = The basis is Art. 1314,
Interference by a third person. Again, when this third person
If for example, their agreement is only a simple loan. However, maliciously induced another to violate the contract, he can be
the stipulation in favor of a third person pertains to the held liable.
interest. In this case, it is a stipulation pour atrui since it is only
a secondary matter. Roland was under a contract to play exclusively for lady love
however, even before the basketball season could open, he
What if the beneficiary received a letter from the obligor. The was offered a more attractive pay plus fringe benefits by
tenor of the letter is that the benefit in his favor is hereby sweet taste. Upon his transfer, Lady love sues him and sweet
revoked. Signed by A, the obligor. This happened before the taste for breach of contract. Defendant claim that the
beneficiary communicated his acceptance. Is it still possible restriction to play for lady love alone is void. Hence,
for this beneficiary to be entitled to what was given to him in unenforceable as its constitutes an undue interference with
the agreement? = YES. As ruled by the SC in several cases, if the right of Roland to enter into contract and his impairment
this revocation was a unilateral act of one of the parties, such of his freedom to play and enjoy basketball can he be bound
revocation will have no effect because it will violate the by the contract he entered into with lady love or can he
mutuality of contracts principle. For a revocation to take disregard the same? Is he liable at all? Hoe about sweet
effect, it has to be with the consent of both parties. taste? Is it liable?
Communication of the acceptance is required for the right to 1st question : Is roland bound? = YES. As provided under Art
the benefit of the third person to be vested. Such 1159. Obligations arising from contract have the force of law
communication must be made to the obligor only as required between the contracting parties.
by law. The acceptance has no particular form. It can even be
implied from the acts of the third person. 2nd question: Is he liable? = YES. He can be held liable together
with sweet taste under Art. 1314 because this would be
If A and B are the parties and X is the beneficiary, In the first considered as malicious interference with the valid contract.
place, when would the benefit in favor of X be vested? – It is
from the time he communicated his acceptance but Which of the following contract statement is wrong?
acceptance to the obligor. It is then vested and the parties can a. Creditors are protected in cases of contracts intended
no longer revoke such benefit. to defraud them
b. Contracts take effect only between the parties,
What if before X could communicate his acceptance, he assigns and heirs
received a letter of revocation signed by A. May X be still c. If a contract should contain some stipulation in favor
entitled to the benefits? – YES. If the revocation is a unilateral of a third person, he may demand fulfillment
act of A, that will not bind B because that would violate the provided he communicates his acceptance to the
mutuality of contracts principle. For revocation to take effect, obligor before the revocation
it has to be by the consent of both parties. Otherwise, the d. In real contracts, creating real rights, 3rd persons who
revocation has no effect. come into possession are not bound. = To the
contrary, they are bound to such contracts. The law
The driver cannot be held liable for breach of contract of has a premise and requirement that the contract
carriage because he is not a privy to such contract. must be registered.
Francis Albert a citizen and resident of New jersey, under

whose law he was still a minor being only 20 years of age was CLASSIFICATION OF CONTRACTS
hired by ABC corp. of manila to serve for 2 years as its chief - Principal: Opposite is accessory. = The basis of
computer programmer but after serving for only 4 months, classification here is whether a contract can stand
he resigned to join XYZ corporation which enticed him by alone or will is dependent on another contract for its
offering more advantageous terms. His first employer sues validity
him in manila for damages arising from the breach of his - Real
contract of employment. He sets up his minority as a defense - Accessory : Guaranty, Suretyship, Chattel mortgage,
and asked for annulment of the contract on that ground. The Real estate mortgage and antichresis
plaintiff disputes this by alleging that since this contract is - Unilateral
executed in the Philippines, under whose law the age of - Nominate

- Consensual If the question is: Is there a perfected contract? You will be
- Solemn considering if the contract is real, consensual, formal or
- Bilateral solemn contract.
- Onerous : This classification goes into cause ( in
connection with gratuitous and remuneratory) Are all contracts perfected by mere consent? = NO. because
- Remuneratory other contracts are perfected only by delivery.
= All these are characteristics of a contract. However, not all Distinguish real from consensual contracts (Art. 1316)
these characteristics are present in a contract. Consensual contracts are perfected from the moment there is
a meeting of minds of the parties as to the object and the
What is the cause in a contract of sale? = It is an essentially cause.
onerous contract. If a contract is onerous, the civil code
provides that the cause in such contract as to each party is the Real contracts are perfected from the time of delivery.
promise or prestation to be performed by the other party.
Pledge, commodatum and deposit are all real contracts. Also
The cause is the essential reason why a party will enter into a under the law on loans, mutuum is perfected only upon the
contract. delivery of the thing borrowed.
As far as the seller is concern, the cause is the promise of the As to perfection: Is there a perfected contract? = You must
buyer to pay the price. As to the buyer, his cause is the promise determine first on what contract is involved from the purpose
of the seller to deliver and transfer ownership over the thing. of the parties and the cause.
What is the cause in a gratuitous contract? = The law provides “Offered to sell and accepted” = There is a perfected contract
that the cause is the liberality of the grantor (Example is a because a sale is a consensual contract, it is perfected upon the
commodatum which is a gratuitous contract) meeting of mind as to the thing and the price. (Promising to
pay upon arrival is a condition on the payment and not a
condition of the sale)
Ex: The purpose of deposit is for safe keeping. The depositary
would always incur expenses in relation to the preservation Can the buyers be made to immediately vacate on the ground
of the goods. Does he have the right to seek reimbursement that the sale was not perfected as claimed by the seller?=
from the depositor as to the said expenses? = It depends on There already meeting of the minds as to the object which is
whether the deposit is onerous or gratuitous. The answer will the house and lot and as to the price which is 8 million. Hence,
be yes if it is gratuitous. If it is onerous, no. There is no right to there is no problem with regards to the perfection of the
seek reimbursement. contract.
Because the law provides that he will only have the right to Even assuming that this sale was not perfected, the buyers
seek reimbursement if this is a gratuitous contract. However if cannot be made to immediately vacate the premises because
the contract is onerous, he cannot ask for reimbursement. they made the improvements as builders in good faith. Under
Art. 448, they cannot be made to vacate because they have the
In the first example, assuming that the contract is a sale, and right of retention until they are reimbursed.
there is an issue relating to the secondary matter in that
contract and it could not be resolved by considering the Merly offered to sell her car to violy for 60,000. After
intention of the parties, other provisions, etc. What rule inspecting the car, Violy offered to buy it for 50,000. This offer
should be applied? = Under the law, it either the rule which was accepted by Merly. Thenext day, Merly offered to deliver
pertains to the greatest reciprocity of interest or the rule which the car but violy, being short of funds, secured postponement
pertains to the least transmission of rights. The answer here is of the delivery promising to pay the price upon the arrival of
the greatest reciprocity of interest. Because this principle is the steamer Helena. The steamer however never arrived
applicable when there is such an ambiguity in an onerous because it was wrecked by a typhoon which caused it to sank.
contract because the sale is always an onerous contract. Is there a perfected contract in this case?
1st consideration: What contract was entered into? = Here,

CALSSIFICATION AS TO PERFECTION they entered into a contract of sale
Real, Consensual, Formal Characteristics = The basis of this 2nd consideration: What kind of contract is it as to cause or as
classification is PERFECTION to perfection? = Consensual contract

3rd consideration: was there a meeting of the minds as to the which is a lease contract. This is perfected by mere consent and
thing and the price in relation to the contract of sale? = Here, the law does not require such contract to be in a particular
there was meeting of minds form for its validity.
4th consideration: When was there meeting of the minds? = It

was the counter offer of Violy which was accepted by Merly. STAGES OF A CONTRACT
Upon the acceptance of Merly, that is when the contract was
perfected. a. Negotiation – There may be a contract which can be
perfected at this stage. This contract is called Option
Complication in the question: Can it be argued that there was contract
a condition for the perfection of the contract and the condition
was not fulfilled. Therefore the contract was not perfected. = b. Perfection
This argument cannot be taken
c. Consummation
It is clear from the facts that the arrival of the steamer Helena
was not a condition of perfection but only a condition for the As to perfection:
performance of an obligation. This is a condition for the
payment of the price. Not for the perfection of the sale. Art. 1475 is very clear. A contract of sale is perfected upon
the meeting of the minds of the parties as to the thing and
The premise of performance is that there is already a perfected the price.
contract.
How about sale of rights? Is this also a consensual contract?
Conclusion: Yes. there was already a perfected contract = YES. Because a provision in the code would consider Art.
because there is already a meeting of the minds as to the thing 1475 to be applicable to sale of rights. So upon meeting of
and the price. minds of the parties as to the right involved, and the price,
then there would also be a perfected sale.
In case of pledge which is a real contract under Art. 1316, you
must consider in the facts, was there delivery because it is only Before perfection, there can be an option agreement or
in delivery that a contract of pledge would be considered option contract.
perfected it being a real contract.
Option agreement vs. Option contracts
Real and formal contract would require another act aside from
the meeting of the minds as to the object and the cause. Option agreement in relation to contract of sale = earnest
money. As far as sales are concerned, the earnest money by
In real contract, the law requires delivery. definition forms part of the price. In a way, it is a proof that the
oferree is in earnest in buying the object.
In formal contracts, the law further would require a particular
form for the perfection of this contracts. However, the law is clear that earnest money is just a proof of
the perfection of the contract. Hindi sinabi ng batas na with
All contracts are required to have a valid consideration. earnest money, the contract had already been perfected. It is
just a proof and therefore they may be actually be NO
Solemn contracts – These contracts must be in writing for their perfected contract.
validity.
This can happen in so many scenarios.
Donations are not contracts but ACTS. Although, they may be
governed by the law on contracts when they are onerous by Ex: Consider the fact that the earnest money pertains only to
express provisions of law. one essential requisites. It pertains only to the cause (Price).
But there are other requisites. Nagkasundo nga kayo sa price
Stipulation is also not a contract. It is just a stipulation but you were not able to agree on the object of the contract.
Maski tatlong earnest money ang binigay, the contract will be
Sale of a land through an Agent. It is not the sale which is a void.
solemn contract. It is that the authority of the agent must be
in writing otherwise, the sale will be void. But even if there is earnest money, and even if the object of
the contract was so clear, there may not be a perfected sale if
Correct answer: construction contract of a building. It is a they were not able to agree on the total contract price.
contract for a piece of work which is a kind of lease of service Because earnest money is just considered part of the price.

Papano kung hindi sila nagkasundo sa total contract price? This is a clear example of Art. 1874. Here, the word used is
Kaya there will also no perfected contract of sale in that land.
scenario.
1st question = goes into validity
This is the case where if there is an option agreement but no 2nd question = goes into enforceability
consideration which is separate and distinct from the price, as
long as the offer was accepted before it was withdrawn, there In the problem, under the statute of frauds, the agreement
would be a perfected sale. Walang kailangang consideration appears to be valid because this is a sale of an immovable
ang isang offer. Since it is just an offer. If the offerer has not property though there was an agreement as to the object and
yet withdrawn or not yet conveyed the withdrawal to the the price, and therefore all the essential requisites of the
offeree, and the offeree conveyed his acceptance, to the contract are present.
offeror, there would be a perfected contract of sale because
this contract is a consensual contract. However, though valid, (Here, it is unenforceable and take
note, unenforceable contracts are valid contracts.) Will the
If under the terms of the agreement, it is not to be performed action prosper?. = Here, even if the agreement is valid, it
within one year = unenforceable. cannot be enforced if there is an objection this is a sale of an
immovable property and under the statute of frauds, this
Question involving movable: should have been in writing. Being merely a verbal sale, this is
unenforceable under Art. 1403
X came across an advertisement in the manila daily bulletin
about the ruch sale of 3 slightly used Toyota cars. Model 1989 Complication: after magkasundo sila, as to the thing and the
for only 200,000 each. Finding the price to be very cheap, and price, B went to the bank, withdraw the necessary amount
in order to be sure that he gets one unit ahead of the others, and returned to A for the consummation of the contract. Can
X immediately phoned the advertiser, Y and placed an order this be used as an argument that this contract was taken out
for 1 car. Y accepted the order and promised to deliver the of the operation of the statute of frauds under the doctrine
ordered unit on July 15, 1989. On the said date, however, Y of part performance? = NO. there is no partial performance
did not deliver the unit. X brings an action to compel Y to here. When B went to the bank, It is just preliminary to
deliver the unit. Will such action prosper? performance. Ang performance dito is in relation to payment.
Walang partial payment dito because the seller refused to
Considerations whether the action will prosper: push thru with t he sale. Kaya this contract is still covered by
Perfection – subject to the formalities prescribed by law. Statute of Frauds.
This is a sale of a movable but the price is more than 500.00 If there is partial performance of the obligation, then it will
and since the order was only phoned to the advertiser, this is be considered to have been taken out of the operation of
only a verbal agreement and thus, under the statute of frauds, Statute of frauds
it is UNENFORCEABLE.
Before perfection, if A make an offer to B, at that point, there
Therefore, will such action prosper? = NO. If there is a proper is no perfected contract yet. You can call the parties as offeror
obejection. Because unenforceable contracts can only be and offeree. The offeree may not be in a position to accept or
enforced if ratified. reject the offer right there and then so he may ask the offeror
within which to decide or the offeror himself may offer to the
offeree a period within which to decide. What do you call this
A and B entered into a verbal contract whereby A agreed to agreement? = This is only an option agreement. It cannot be
sell to B his only parcel of land for only 20,000 and B agreed an option contract because there is no consideration involved
to buy at the aforementioned price. B went to the bank, which is separate and distinct from the price.
withdraw the necessary amount and returned to A for the
consummation of the contract. A however had changed his Option agreement: If there is no consideration separate and
mind and refused to go through with the sale. Is that distinct from the price
agreement valid? Will an action by B against A for specific
performance prosper? Option contract: only if there is a consideration separate and
distinct from the price
Sale of an immovable is not the sale as a sale of land. As mush
as the sale of land is not the same as a sale of an immovable. Example: A said to B to give him 10 days to decide if he will buy
Land is an immovable but hindi lahat ng immovable ay land. the house or not to which B agreed to. Is there an option
Pag sinabi ng batas immovable, use the word immovable. Pag contract? NONE. There is no consideration separate and
sinabi ng batas na land, use land. Do not say immovable. distinct from the price. This is only an option agreement.

In several cases, even if the parties call the consideration only
Why the need to know if what is involved is an option as an option money, you must still read the intention of the
agreement or an option contract? = Because if this is just an parties. They may call it an option money but they have
option agreement, at any time the offeror can withdraw the intended that that money is considered as part of the price,
offer as long as acceptance has not been conveyed to him. It is that can already indicate that there was a perfected contract.
from the time the offeror had knowledge of the acceptance
that there would be a perfected contract. (Philippine law Option money is not the same as an earnest money. = Earnest
adopted cognition theory or from the time the offeror had money is part of the price. As an earnest money, it is actually a
knowledge of the acceptance It is no longer from the time the proof of the perfection of the contract.
Manifestation of the acceptance was made- manifestation
theory) Option money on the other hand is separate and distinct from
the price although option money can be considered as part of
However, if this is an option contract, where there is already a the price, but only by stipulation by the parties.
consideration, which is not necessarily paid but a mere
promise but is separate and distinct from the price, The offeror Marvin offered to construct the house of Carlos for a very
cannot validly withdraw the offer because that would violate reasonable price of 900,000. Giving the latter 10 days within
the option contract for which he can be held liable for damages which to accept or reject the offer. On the 5th day, before
because there is a breach of option contract. Carlos can make up his mind, Marvin withdrew his offer.
What is the effect of the withdrawal of Marvin’s offer?
In case the offeror withdraw the offer, can the offeree ask for
the performance of the obligation? = NO. It is a valid withdrawal. He cannot be held liable nor be
compelled to perform because he withdraws the offer before
If he would withdraw (contract of sale) despite the existence the acceptance could be conveyed to him.
of the option contract, he cannot be compelled to sell but he
can be held liable for damages for the breach of the option Here, there was merely an offer which was not accepted and it
contract was withdrawn, there being no consideration separate and
distinct from the price, Marvin (offeror) can withdraw at any
Even if there is no consideration that is separate and distinct time before acceptance is conveyed to him.
from the price, but the offeree accepted before the offeror
could withdraw, the contract will be considered perfected. Also, It appears that there is no consideration which is separate
Since this is not a contract but only a mere offer, as long as the and distinct from the price. As a mere option agreement, the
offer is still effective and there was an acceptance of the said offeror can withdraw the offer at anytime before acceptance
offer, a contract is said to have been perfected. is conveyed to him.
SC ruled that one of the misconception in an option contract

is that the consideration is in money. = This is not necessarily Will your answer be the same if Carlos paid Marvin 10,000 as
the case. The consideration in an option contract can be in consideration for that option?
any prestation. ( It can be that the offeror promised to offeree
that he would clean the car of the offeror everyday for the next The answer will not be the same. Because then, there would
30 days. This can be a sufficient consideration separate and be an option contract. So if there is an option contract, the
distinct from the price resulting in an option contract) offeror cannot validly withdraw the offer because that would
constitute a breach of contract.
May 1, 2002, S has offered to sell a specific car to B for The remedy of the other party cannot be specific performance
500,000.00. B sent his letter of acceptance to S on May 8, because the contract had not been perfected especially in this
2002. On May 10, 2002 however, S died a vehicular accident case. It can never be a specific performance because this is an
and his secretary received the letter on May 12 unaware that obligation to do. ( obligation to construct a house). The only
S had already died. Was the contract perfected? = NO. The remedy of Carlos is an action for damages.
contract was not perfected. At the time when the secretary of
the offeror received the acceptance letter, the offeror was
already dead. Death before knowledge of the acceptance by But supposing Carlos accepted the offer before Marvin could
the offeree extinguishes the offer and therefore, there can be communicate his withdrawal, discuss the legal consequences
no perfected contract. This is consistent with the cognition if there would be a perfected contract?
theory which provides that the contract shall be perfected
from the time of knowledge of the acceptance. Here, the contract which is for a piece of work is a consensual
contract. Therefore, if there was acceptance before

withdrawal is conveyed to the offeree, the would be a Would it result to both parties being bound to enter into
perfected contract. In this case, it cannot be specific contract? = NO.
performance because it involves an obligation to do. He can be
held liable for damages at the least. B the offeror is bound to enter into a contract with the
offeree whether or not the latter gave a consideration
Sergio was the owner of a 500 meter land. His friend, Marcelo separate and distinct. = FALSE. As discussed earlier, If there is
who has long been interested in the property succedded in no consideration which is separate and distinct from the price,
persuading Sergio to sell it to him. On June 2, 2012, they the offeror is not bound. He can withdraw at any time before
agreed on the purchase price of 600,000 and that Sergio acceptance is conveyed to him.
would give Marcelo upto June 30, 2012 within which to raise
the amount. Marcelo in a light tone said that they should seal Offeree is not bound to enter into a contract even if he gave
their agreement through a case of jack daniels and 5,000 a consideration separate and distinct from the price = TRUE.
pulutan money which he immediately handled to Sergio and If there is an option contract, meaning the offeree paid or at
which the latter accepted. The friends then sat down and least promised to pay a consideration separate and distinct
drank the 1st bottle from the case of bourbon. On june 15, from the price, the offeror is only the one bound but the
Sergio learned of another buyer, Roberto who was offering offeree is not bound. He may decide not to pursue the
8,000 in ready cash for the land. When Roberto confirmed contract. However, while offeree is not bound, if he did not
that he could pay in cash as soon as Sergio could get the continue with the contract, there would be consequences. He
documentation ready. Sergio decided to withdraw his offer would lose whatever he gave to the other party. The other
to Marcelo. Hoping to just explain the matter to his friend party would have the right to forfeit (option money, down
Marcelo. The latter however rejected when the withdrawal payment, etc.).
was communicated to him taking the position that they have
a frim and binding agreement that Sergio cannot simply walk In real estate transactions, this is called reservation fee. ( you
away from because he has an option to buy. That is it forfeit the reservation fee)
supported by a duly accepted valuable consideration. Does
Marcelo have a cause of action against Sergio? Neither the offeror nor the offeree is bound = This is not a
contract. If no one is bound, there can never be a contract.
Considering The circumstances in this question, there appears
to have been a perfected sale already. From the facts, it can be An offer becomes effective in any of the following grounds
seen that Marcelo succeeded in persuading Sergio to sell the except:
land to him. a. Death
b. Civil interdiction
In fact, He has the period of up to June 30 within which to raise c. Acceptance of the offer
the amount. This is already for the performance of his d. Qualified conditional acceptance – The offer becomes
obligation. ineffective because there will now be a new offer
which is the counter offer.
“should seal their agreement through a case of jack daniels and e. Subject matter becomes illegal before
5,000 pulutan money which he immediately handled to Sergio communication of acceptance – There can be no valid
and which the latter accepted.” – You can consider this obligation in relation to this.
argument in connection with the statute of frauds. That this
contract should be in writing. That there were other contracts A contract granting privilege to a person for which he had
which were not in writing that was performed by the parties. paid the consideration which gives him the right to buy
certain measures and specified property from another person
When the examiner said that “ Sergio decided to withdraw his at any time within the agreed period at a fixed price. What
offer” – That is not really accurate. He did not merely withdraw contract is being referred to is an option contract = This is not
his offer. He withdrew from the contract of sale. There being entirely accurate because the consideration need not pertain
already a perfected sale, You are not only withdrawing from to a scenario where it was paid. It may pertain only to a
the offer, but you are withdrawing from the contract. scenario where there was a promise to pay. “ a consideration
paid or promised”
Conclusion: Thus, Marcelo may have a cause of action here
against Sergio there being a perfected contract. Paredes vs. Espino : Espino who is from Luzon is the owner of
a parcel of land located in Puerto prinsesa Palawan. Paredes is
a resident of Puerto Prinsesa and apparently. Espino offered to
What is the effect of an option contract? sell his parcel of land to paredes at ang negotioation nila during
that time through letters and telegram. Espino wrote a letter
to Parades telling him that “ My wife and I agreed to sell to you

this parcel of land with TCT No…. So naka describe ang parcel a judgment against him. That would raise a presumption that
of land at this price like 25.00 per square meter, etc. this mortgage is in fraud of creditors?
However, the parties agreed that the deed of sale will be The SC ruled NO because the law speaks of alienation, onerous
executed or will be signed by the parties upon the arrival of in character and mortgage is not an alienation. It is not a
Espino in Puerto Prinsesa. When He arrived and Peredes asked conveyance of ownership.
him to sign the deed of sale, ayaw na ni Espino. He doesn’t
want to sell the land anymore to Paredes. A is the debtor of X. A donated to B his properties worth 7
Million. The amount of the properties left to a was only 3
Paredes filed this action to compel Espino to sell to him million. That does mean that the presumption arose that the
claiming that there was already a perfected sale. donation was in fraud of creditors? (This is an alienation,
gratuitous in character) = NOT NECESSARILY. It depends on the
Defense of Espino: Statute of Frauds. Because the agreement amount of the indebtedness.
was not put into writing because there was not Deed of sale
signed by the parties. The law provides that there will only be a presumption that the
alienation gratuitous in character was in fraud of creditors if
Is the Defense of Espino valid? the debtor did not receive sufficient properties to cover his
debts.
SC: NO. because of the letter of Espino. Because the law
provides that while the law requires the contract to be in If the amount of his debt is only 1 million, since there is enough
writing, if there is a note or memorandum signed by the party money (3 million) the presumption would not a rise. However,
charged, that would be sufficient compliance of the if the debt is more than 3 million, then the presumption would
requirement that this contract be in writing. arise that this alienation, gratuitous in character was in fraud
of creditors.
Take note, all the requisites are present in the letter. Nandoon
ang price, naka describe ang object and it was signed by Espino IN RELATION WITH THE INTERPRETATION OF CONTRACTS
and therefore, Espino cannot invoke the statute of frauds as a
defense in this action for specific performance. In an obligation to deliver a specific car, when this debtor
delivered the car to B, B noticed that the Stereo in the car was
missing. B asked A for the stereo alleging that he is entitled
OBLIGATION RULES IN CONNECTION WITH CAUSE to it. A on the other hand refused alleging the he is the owner
of the said stereo. Who is entitled to the stereo? = It will
A sold his only property to B. At the time of the sale, A was depend on which principle is applicable. Whether it is the
indebted to X. Is this sale in fraud of creditors? = The answer principle of the greatest reciprocity of interest or the principle
here is not automatically a yes. of the least transmission of rights.
Because he sold his only land to B, would it at least raise a We should apply the greatest reciprocity only if the contract
presumption that this sale is in fraud of creditors? = It involved is an onerous contract.
depends on the circumstances because if at the time of the
sale, there was already a judgment against A in favor of any But if the transaction is gratuitous, we should apply the least
creditor, The law already would raise a presumption that this transmission of rights.
sale is in fraud of creditors because a contract of sale is an
alienation onerous in character. Here, If the right of A arose from a contract of sale, which is an
onerous contract, then we should apply the principle of the
However, it cannot only be by a judgment. There can also be a greatest reciprocity of interest and therefore, B, the buyer will
scenario where after the sale, s court already issued the order be entitled to the stereo.
of garnishment or order of attachment.
If on the other hand, the transaction or contract is donation,
The law provides that if the alienation is onerous in character which is gratuitous, the law states that we should apply the
like a sale, there would be a presumption that this is in fraud principle of the least transmission of rights. Therefore, A, the
of creditors. donor will be entitled to the stereo.
Reason for the rule : The civil code provides that if the
If instead of sale, the debtor mortgaged the property to ambiguity pertains only to a secondary matter in a contract, (
another person. At the time of the mortgage, there is already if the transaction involved is onerous, we should apply the
greatest reciprocity and in case of gratuitous transaction, we

should apply the least transmission of rights) The premise is ESSENTIAL ELEMENTS OF A CONTRACT:
that the interpretation in relation to contracts are not
applicable or cannot be invoked to resolve the ambiguity or Essential elements = as to the validity of the contract. These
obscurity that is because ambiguity pertains to a secondary are not essential to the perfection of the contract.
matter.
Essential elements, they are so essential that if anyone of them
What if the ambiguity pertains to the principal object of the is wanting, there can be no valid contract.
contract? What is the effect? = Under the law, such contract
is void (Art. 1409 and under the rules on interpretation of 1. OBJECT = Not the same as thing. It is the subject
contracts) matter of the contract which may be rights or
services.
ON THE QUESTION ON WHO SHALL BE OBLIGED For a contract to be valid in relation to subject matter = Rights.
(IMPORTANCE OF KNOWING IF THE OBLIGATION IS The only requirement of the law for the right to be the subject
RECIPROCAL) matter of the valid contract is that the right must not be in
transmissible. (This is a double negative at may ibig sabihin
Who are obliged? = Ordinarily, most contracts are bilateral yan)
contracts. Most contracts would result into a reciprocal
obligations. As to services:
a. Must not be contrary to law, morals, etc
b. Must not be impossible
In conditional obligations, before the happening of the
condition, suspensive in character, what if the thing to be As to things: The most important requirement is that the thing
delivered bore fruits? As to who will be entitled to the fruits must not be outside the commerce of man.
depends on what obligation/s arose from the transaction.
If Bilateral and will result to reciprocal obligations, as provided Ex: Internal organs of humans as considered to be outside the
under Art. 1187, As to the fruits and interest which would commerce of man. You cannot sell your kidneys. Even if some
accrue, they are deemed mutually compensated. The obligor people are selling their organs, it does not mean that such sale
is the one entitled to the fruits. is valid.
On the other hand, if the contract is unilateral, therefore would All things owned in common are outside the commerce of man
result only in a unilateral obligation, (donation) the fruits that but the moment there is already appropriation of those things,
would accrue before the happening of the condition shall Then it can already be the subject of commercial transactions.
pertain to the debtor (donor in case of a donation) unless the
contrary intention was clear. Another important requirement as to thing is that they must
be licit – It must not be contrary to law, not impossible, etc.
As to rescission under Art. 1191, It is implied only in reciprocal
obligations. The requisite as to the rights and things are the same with
contracts in general except that under Art. 1458, the law
In case the contract is unilateral, The proper remedy is to mentions a determinate thing.
demand performance or ask for damages and not rescission.
What if the object of the contract is a generic thing? May it
As to the rule on demand and delay: Art. 1169 provides that be a valid sale? = While the definition says determinate thing
in relation to reciprocal obligations, from the moment one of under 1458, under Art. 1460 the law provides that this
the parties had already complied and the other had not requirement that the thing be determinate is sufficiently
complied, the party who had not complied will be considered complied with if the thing is capable of being made
in delay even if there was no demand. That is if the obligation determinate at the time the contract was entered into without
is reciprocal the need of a new or a further agreement.
Ex: Sale (but this is subject to eh stipulation of the parties) Clearly, in this provision, the law would tell us that a sale
involving a generic thing may be valid as long as the
requirements are complied with.
Ex: A sale of one bottle of vital mineral water, 500 ml. Is that
a sale of a determinate thing? – It is a generic thing.

Because as Art. 1460 would tell us, a thing is only considered AS TO THE PRICE: In the definition, the law does not require
determinate if it is particularly designated or physically that price to be in specific currency. The law only requires the
segregated from all other of the same class. price to be in money but the law requires it to be CERTAIN. The
price certain in money.
Would such sale be a valid contract? = YES. Because this thing
is a limited generic thing. Nonetheless, the thing is capable of However in lease, such is not required. But in sale, it has to be
being made determinate. How? = At the time the contract was certain in money.
entered into without the need of a new or further agreement.
Can the seller compel the buyer to pay in a currency which is
In a way, everything is capable of being determinate. But the not Philippine currency?
question is when? – When you buy a generic thing, the
moment it is delivered to you, it clearly becomes determinate Today, the answer is YES if it is agreed upon that the price will
because now, it is physically segregated from all others of the be paid in a currency which is not Philippines currency because
same class. However, this is not the only requirement. Aside the law would allow such stipulation under RA 8183 which took
from the capability of being made determinate, it should be at effect in 1996.
the time the contract was entered into. Not at any other point
of time and without the need of a new or a further agreement. Before that, by PD 529, even if the parties would stipulate, that
the amount that has to be paid in US dollars, the creditor
Requisites of a generic thing being a determinate thing: cannot compel payment in US dollars because that law, PD 529
1. Physically segregated from all others of the same class prohibits payment in any other currency as all those currencies
2. Capable of being determinate at the time the contract is supposed to be surrendered to the central bank within 24
was entered into hours from receipt by any resident of this country.
3. No need for a new or further agreement
The rules in obligations are equally applicable in sales:
In a contract of sale, what the parties agreed as the subject of
sale was a dog without an agreement as to its features.They Gross inadequacy of price as provided by law, as a rule does
agreed on the price worth 100,000. Again, the dog is a generic not affect the validity of the contract. The civil code will tell us
thing but is capable of being made determinate. But is it that it may actually reflect or be a manifestation that there was
capable of being made determinate at the time the contract vitiation of consent.
was entered into without the need for a further agreement?
= NO. For as you know, the seller can deliver an askal for But take note the fact that the price is grossly inadequate does
100,000. Papaya ba and buyer? Hindi siguro not even raise a presumption that there is vitiation of consent.
In other words, the one claiming like the seller who would
But even if the dog has a pedigree, but the age of the dog is 25 claim that there was vitiation of consent has the burden of
years old, hindi na din yan tatanggapin ng buyer. Kaya there proving that his consent was vitiated that’s why the price is
would be a need for further agreement in order for that grossly inadequate.
contract to be valid. Kaya, that contract per se is not a valid
sale involving a generic thing. It may also reflect that the true intention of the parties is
otherwise. Because if the price is grossly inadequate, it may be
Complete the thought: If at the time the contract of sale is that the true transaction is donation.
perfected, the thing which is the object of the contract has
been entirely lost. Then there can NEVER be a valid contract. As to sale of hope: A sale of lotto ticket (aleatory contract). The
law provides that it is only a sale of vain hope which is void.
If the contract of sale is void, then the buyer would never However, if the sale was not of vain hope, then it can be a valid
acquire ownership. Also, Philippine law follows res perit sale even if that is actually a sale of hope.
domino. ( Whoever was the owner of the thing at the time of
the loss will bear the loss). Therefore, the buyer will never be This is called emption spae as distinguished from emtio rae
the one to bear the loss sperati which is a sale of future things or goods.
Correct Answer: Letter B. The contract shall be without effect. Emtio Rae sperati = Philippines law recognizes also the validity
If only because the seller is not always the owner of the thing. of such sale as long as the thing has the potentiality of
Kaya if the seller is not the owner, he will not be the one to existence. Even if they are not existing at the time of the sale,
bear the loss. But this choice is always correct. That the that can be a valid sale.
contract shall have no effect.

Ex: Farmers can already sell their palay even before they can
plant. Example: To make it appear that he already sold his properties
so that the creditor will not be able to run after said properties
because even if the contract is simulated, the register of deeds
Can future inheritance be the subject of the contract of sale? will not know that such contract is really simulated.
This is Art. 1437.
The answer is NO. a contract of sale cannot have for its b. Relatively simulated – They simulated a particular
subject a future inheritance. The reason is that the seller owns contract but they actually intended another contract
no inheritance while his predecessors live. or transaction
In other words, public policy demands that if you will sell, you
must have the right to that things. Examples of simulated contract in relation with the case of
former chief justice corona.
The implication is that if the seller is not the owner the sale is
void. This is a wrong interpretation. There were contracts of sale allegedly entered into by CJ
Corona as claimed by the prosecution which were simulated
contracts.
2. CONSENT OF THE CONTRACTING PARTIES =The
consent must be given by both parties. If no consent In relation to absolutely simulated: The first which they claim
is given, necessarily, the contract will be void. to be absolutely simulated contract pertains to a contract of
sale involving a parcel of land somewhere in Marikina. The
buyer was a relative of the former CJ. Theory of prosecution is
Scenario where no consent was given: that it is only a simulated contract to make it appear that the
land was no longer owned by the former CJ and therefore, he
If there is no consent on the part of one or both parties, the
does not have the obligation to include the land in his SALN.
contract would be void because consent is one of the 3
essential elements. As rebuttal of the respondent, they presented the deed of sale.
Art. 1409 enumerates void contracts. Of these enumeration, To support this claim, the sale was dated about 10 years earlier
and the deed was also notarized.
it would include fictitious and simulated contracts
Fictitious vs. Simulated contract The prosecution was able to produce a certification from the
office of the clerk of court of Makati where the notary public
Fictitious = consent of one of the parties was not really given. allegedly had a commission. The certification stated that there
(forged signature) is no such person authorized to take oaths in the city of Makati
at least during such period or the date when the sale was
Common Scenario: Like in a contract of sale, In an instrument allegedly made.
(Deed of Sale), what would be the manifestation of consent?
= By the signature. In relation to relatively simulated: A contract of sale involving
a condominium unit. In this sale, The seller was the former CJ
But, if there is a signature above the name of the person, does and his wife and the buyer was one of their children.
that mean that that person gave consent? = NOT
NECESSARILY. Because that signature might be the result of a The theory of the prosecution was in the alternative. That this
forgery. Thus, there is really no consent and the contract will sale can be absolute or relatively simulated. As to absolute,
be void as this would be considered as a fictitious contract same reason. To make it appear that the condo is not owned
any more by CJ and therefore, he does not have the obligation
to include it in his SALN.
Simulated contracts = Made to appear that they actually
entered into the contract but in fact, they did not. The theory as far as relatively simulated was that their true
transaction was a donation. To make it appear that it is not
2 kinds of simulated contract: donation, they simulated a sale. The reason is for tax liability
a. Absolutely simulated – They simulated a contract but (tax evasion)
the parties never intended to be bound by such
contract or any other contract for that matter. Easiest way to prove that this is a simulated contract whether
absolute or relative: As SC held in many cases, it is the capacity
Common reason: To defraud somebody. of the buyer to buy.

with specific persons) Constitution, Sale, Family Code
The condominium cost was 14 Million but the buyer was only and Art. 1491
a by stander. The witness presented was commissioner Ynares.
She testified in relation to the income of the buyer a year prior
to the sale. The testimony is that the income of the buyer for Under Art, 1409, prohibited contracts are void. These are the
1 year prior to the sale was around 9,000.00. contracts which are considered void under Art. 1403
Possible Reason for the simulation: To circumvent the law on

legitimes because if this is a donation, Under the law on If there is relative incapacity on the part of one of the parties,
succession, It will be subject to collation. That contract would necessary be void.
Example where incapacity pertains to juridical persons:

2nd Scenario: A contract of sale where one of the parties is a corporation but
If both parties gave consent, (the premise is that there are no such corporation is not registered. So if there is no certificate
problem with the object and consideration) does that guaranty of registration, that corp. did not acquire juridical capacity to
that the contract is a valid contract? = NO. be a party to the contract.
The problem may pertain to the person giving consent. Maybe The SC would consider this contract to be void because one of
that person is incapacitated. the parties does not have juridical capacity
Incapacitated: When it comes to Natural persons:

a. Absolute = This person cannot validly enter into any All living natural persons have juridical capacity and it is death
contract with anyone in whatever capacity over which extinguishes juridical capacity.
anything. (Reason: Minority)
If one of the parties in a contract of sale is an alien, what
2 Kinds of capacity under the civil code: would be the status of the sale? = Such contract is not void.
a. Juridical – synonymous to juridical capacity. Fitness to
be the subject of a juridical or legal relation Are aliens prohibited from owning lands here in the
Philippines? – NO. They are only prohibited from acquiring
b. Capacity to act – pertains only to the power to do acts private lands although there are exceptions:
with legal effects. 1. Aliens may acquire ownership through Succession,
2. Sale for a private land residential purposes and they
are former natural born Filipino citizen.
The Contract will be VOIDABLE if only one of the parties is
incapacitated. At the time they acquired the land, they are Filipinos but they
migrated and because Canadian citizens. Thereafter, they
If the incapacity pertains to juridical capacity, necessarily, the went to the Philippines and filed an application for land
contract will be void registration. It was opposed by the OSG. Will the opposition
be granted? –NO. Because they did not acquire the land as
If the incapacity pertains to the legal capacity to act: Minority aliens. They were still Filipinos when they acquired the land.
is not lack of consent but only a restriction on his capacity to Such is not a prohibition under the constitution.
act which only makes the contract voidable. It can also be
insanity or civil interdiction. A foreign corporation bought a property from Krystal. After
buying the property, The corporation sold it to Gloria which
If there is a restriction on one’s capacity to act and there is Krystal discovered. She then filed an action for annulment
only one party who is incapacitated, that contract will only be and recovery. Will this action prosper? = NO. Although the
merely voidable. sale is void since a sale to a foreign corporation of private land
is void. However at the time the action was filed, the land was
However, If both parties are incapacitated, (minors) That will already acquired by a Filipino and thus, The SC would tell us
make the contract unenforceable. = Under Art. 1403 that whatever defect was there in the contract, it was cured
when thereafter, the land was acquired by a Filipino.
b. Relative =A person may be prohibited from entering
into a specific contract. But even in that contract, he Ultimately, if the buyer of a parcel of land is an alien, and
may be prohibited only in a specific capacity. ( If this thereafter, an action was filed by the seller for the recovery
is a sale, He can be the seller but he cannot be the of the parcel of land. Will the action prosper?
buyer or sometimes only involving specific things and

On its face, the sale is void unless the sale falls on the 4. Sale entered by Garry and Barry both minors which
exceptions. If the contract is void, then the seller will have the their parents later ratified = UNENFORCEABLE but can
right to recover. The in pari delicto rule does not apply to this now be enforced because of the ratification. Because
constitutional prohibition. That is why, the land can be unenforceable contracts are valid but they cannot be
recovered it being a void contract and the action to recover enforced unless ratified.
does not prescribe because it is a void contract.
5. Sale of the car in order to evade attachment= A
If at the time of the filing of the action this land is no longer contract in fraud of creditors. Under Art. 1381, This is
owned by the alien or the alien is no longer an alien, the action a RESCISSIBLE CONTRACT.
to recover cannot prosper anymore. Because the evil which is
supposed to be prevented by this rule is no longer present. 6. Contract without juridical capacity = VOID
Borromeo vs. Descallar

The money used in buying these parcels of land were from the 3. CAUSE OF THE OBLIGATION/ CONSIDERATION
salaries of the alien (Jambrich). Because it was prohibited to
registered the land in the name of the alien, When the spouses It will depend on what kind of contract is involved. Whether is
wanted to register the property, the register of deeds said that it onerous, gratuitous or remuneratory as to the cause in
the land must be registered in the name of the spouses. contract.
Later on, it turned out that the land was also registered in the What is the cause in a contract of sale? = It will depend if the
name of the Filipina wife. But in the DAS, all the names of contract is onerous, gratuitous or remuneratory.
Jambrich was only covered with correction tape but it can still
be seen. What is the cause in commodatum? = Liberality of the bailor.
Because commodatum is a gratuitous contract and in
After that, Jamrick used the land in payment for his debt to the gratuitous contracts, the cause is the liberality of the grantor.
supplier for the repair of his yacht.
In onerous contracts, like in sale, the cause as to each
SC: Even if the Contract turned out to be a sale where the buyer contracting party, is the promise or the prestation to
is an alien, Nonetheless, at the time of the filing of the action, performed by the other party. The cause is the essential
the land was already owned by a Filipino because it was reason why a person entered into the contract.
delivered to him by dacion en pago. He acquired ownership
giving him the right to have this certificate of titles annulled On the part of the buyer, his cause is for the seller to deliver
and a new one issued in the name of Borromeo. and transfer ownership of the object. On the part of the
seller, his cause is the promise of the buyer to pay the price.
What if in the deed of sale, there was no mention on the

Briefly explain whether the following contracts are valid, price. Not even the word price was mentioned in that
Rescissible, unenforceable or void: contract. May the contract be valid? = Yes. Because in fact, a
contract of sale may be valid even if it is not in writing.
1. Contract of Sale between A and B wherein A is 16 yrs.
Old agreed to sell her grand Piano for 25,000. = As a rule, contracts are obligatory in whatever form they may
VOIDABLE. Because one of the contracting parties have been entered into.
was incapable of giving consent because she was then
a minor when the contract was entered into. There is another basis why the answer is yes, the contract may
be valid. It is because the contract expressly provides that even
2. A contract of sale where both the Seller and the buyer if the cause is not stated in the contract, it is presumed to exist
is a minor = UNENFORCEABLE. The law provides that not only that, it is presumed to be lawful. Although this
in case both the parties are incapable of giving presumption is only disputable.
consent, the contract would be unenforceable. Since
both are minors, they are incapable of giving consent. Wisdom to this provision: Ordinarily, when one enters into a
contract, he has a cause. That is why even if that is not stated,
3. Contract of lease entered into between bitoy and elsa it is presumed that there is cause. Unless the contrary is proven
lease of the Philippines sea. = VOID. like for example that such is only a simulated contract.

Non- payment of the price does not necessarily mean that it is FORMS OF CONTRACTS
a simulated contract (pwedeng wala lang siyang pambayad).
But in simulated contract, they never intended the amount to When you buy a bottle of water, You do not need to sign a
be paid. But it goes into the intention. Not into the fact na hindi deed of sale. This reflect the general rule as to the form of
nakabayad. Contracts under Art. 1356
Hindi nakabayad may pertain to a valid contract but there was As a rule, Under Art. 1356 as a general rule, Contracts are
failure to persorm the obligation under the contract. The obligatory in whatever formed they may have been entered
remedy here is not declaration of nullity but RESCISSION kung into provided that all the essential requisites are present.
ayaw niya na doon sa contract na yon.
Hence, verbal contracts are valid contracts as a rule.
In a contract of sale involving a car, that value of the car at
that time was 260,000. But the price stated in the deed was 1 Exceptions:
peso. Deos that affect the validity of the contract? = NO. 1. The law requires a particular form for the validity =
At least as a rule, gross inadequacy of the price does not affect refers to solemn contracts. If the form is not complied
the validity of the contract. with, the contract will be void.
However if the price is grossly inadequate, more often than Ex: Antichresis because the law is clear that if the stipulation
not, there is another cause which is really the true cause or as to the principal is not in writing, Antichresis is void.
together with the cause stated in the deed. = That you have
already rendered service to the seller. In a way, the contract May mga particular contracts to be in a certain form for the
will be considered as remuneratory. validity but there are also contracts which are required to be
in a particular form only for the enforceability.
General rule: Gross inadequacy of the cause or the price does
not affect the validity of the contract. Solemn contracts does not go into enforceability.
Exceptions: Rescissible contracts. A contract of sale. Is this required to be in a particular form

If a guardian entered into a contract involving a property of his for its validity? = Under the civil code, wala. There is nothing
ward and the latter suffers lesion of more than ¼, of the value in the civil code which would require a contract of sale to be
of the property, the contract would be a defective contract. It in a particular form for its validity.
would be a rescissible contract.
But there is a special law in relation to sale of large cattle (The
A bought a gun. The purpose is to kill somebody else. He was Cattle Registration Decree which took effect 1906) – This law
able to kill that person. What is the status of the sale? The requires that:
question goes into the motive. If the motive is unlawful, Will 1. this contract to be in public instrument.
it affect the validity of the contract? 2. it has to be registered
3. the buyer has to obtain a certificate of title in order for
General Rule: NO. It will not. Because the civil code provides the sale to be valid
that the motive is different from the cause. The SC would rule
that the illegality of the motive does not affect the validity of So clearly, a form is necessary for the validity = That is a solemn
the contract. Contract.
Exception: If the motive is illegal or unlawful because it is

contracry to law, morals, etc. It may affect the validity of the 2. The law requires a particular form for the enforceability
contract if the motive predominates the purpose of the party = All these contracts are in the statute of frauds
in entering into this contract.
When a contract is unenforceable, actually it is valid but it
Ex: If the motive of the seller in selling his property is to cannot be enforced unless ratified or unless if there is a proper
defraud his creditors, that would affect the validity of the objection, it cannot be enforced.
contract. It would be a rescsissible contract.
Art. 1358 = The law requires a public instrument for all the
contracts enumerated in this article for the reason only of
greater efficacy. It cannot be registered unless it is in the form
of a public instrument.

Improper notarization : The parties to the contract did not
appear personally before the notary public. In this case, The A few instruments cannot be a subject of reformation like
SC held that despite improper notarization, the Contract is still wills. If the will does not reflect the intention of the testator,
valid. the solution is for the testator to make another will.
Sellers are required to execute a registrable deed of sale. For A simple donation for example, no conditions having been
the property to be registered in the name of the buyer. imposed by the donor cannot be the subject of reformation.
Reformation of Instrument: Reformation as a remedy is only If the instrument as written in its face is void, can it be the
proper if there is an instrument. A verbal contract cannot be a subject of reformation? = YES. If the real contract intended is
subject of reformation since there is nothing to reform if the a valid contract.
contract is verbal.
Pero ang baliktad, on its face valid, pero he wanted it to be
It is a remedy in equity because the instrument as written does reformed pero ang tunay na contract is void, hindi pwede ang
not reflect the real intention. In other words, ang parties have reformation
meeting of the minds na. Nagkasundo na sila but their
agreement is not accurately reflected in the instrument. There is another set of contract which would be
unenforceable in relation to form. But the form is not the form
Kaya if there is no meeting of the minds. Hindi reformation of the contract itself but the form of the authority of the agent
ang remedy. Ang remedy diyan ay Declaration for nullity who entered into that contract – these contracts are covered
because the contract would be void. by Art. 1878
So again, the premise ng remedy na ito: If the agent does not have a SPA, this contracts covered by
1. There is already meeting of the minds Art. 1878 would be UNENFORCEABLE.
2. The agreement of the parties is not accurately reflected
in the instrument as signed by the parties
Usually Asked in relation to a sale. “Deed of sale with a right to 3. The law requires a particular form as to how the contract
repurchase” but the intention of the parties was just to secure may be proved.
the fulfillment of an obligation. Their real transaction was
equitable mortgage. The SC would tell us that this goes into the efficacy or the
convenience of the parties. In other words, basically, this
Under the law on sales, the remedy is reformation because contract must be in a public instrument in order for the
the instrument does not reflect the real intention of the contract to be proven.
parties.
It is necessary that this contract must be in a public instrument
Possible reasons why the real intention of the parties are not to bind 3rd persons.
accurately reflected in the instrument:
1. Mistake Cases: The Register of deeds has no business in accepting
2. Ignorance of the party who drafted the instrument private instrument for registration. Take note, it is the
because of fraud committed by one of the parties or by a registration which binds everyone. So it goes into the greater
third person efficacy of the contract.
What are these contracts which are required by law to be in

Most important provision in the law on sales: Art. 1602 a public instrument for the greater efficacy = Enumerated
because there are around 5 instances when a presumption under Art. 1358.
would arise that this contract is merely an equitable mortgage.
Art. 1358 requires that these contracts and acts must be in a
Ex. In a sale where the seller remains in possession even after public instrument, but that form is not necessary for the
a lease contract was entered into, that raises a presumption validity neither is it necessary for the enforceability. This is
that it is just an equitable mortgage. only for the greater efficacy of the contract.
When the price is grossly inadequate, it also raises such Ex: In a sale of parcel of land must be in a public instrument
presumption that the transaction is merely an equitable to be valid = This is really WRONG. While Art. 1358 would
mortgage. cover conveyances involving immovable (that would include a
conract of sale over a parcel of land), Nonetheless, the same

article would tell us that a contract of sale involving But more than that, hindi lang siya nagbayad tuloy-tuloy, he
immovable is covered by Art. 1403 or the Statute of Frauds. also executed thereafter a REM. Why would you execute a
REM if your obligation had already been extinguished?
In other words, a contract of sale involving a parcel of land
only has to be in writing to be valid or to be enforceable Clearly, the subsequent acts of this person does not reflect his
between the parties. It is not required to be in a public claim that the deed of assignment was by way of dacion en
instrument to bind the parties. pago
Kayalang, if this is just an oral sale, that would be SC: Ultimately, it ruled that this is only a security arrangement.
unenforceable under the Statute of frauds and if the parties The deed of Assignment was a form of security in relation to
or one of them would want this contract to bind everyone, the indemnity agreement.
Kailangang nasa public instrument ito because it has to be
registered. Another important rule regarding interpretation of contracts is
that the obscurity or ambiguity in a contract shall be
Again, the document can only be registered if it is in a public interpreted against the interest of the party who caused the
instrument. obscurity.
In other words, ikaw ang nag draft ng contract, ayusin moa ng

INTERPRETATION OF CONTRACTS pagkaka draft because if there is any obscurity in the contract,
it will be interpreted against your interest.
If there are obscurity or ambiguities in a contract, How should
that obscurity be resolved? The rule as to the resolution of ambiguity involving a secondary
matter in a contract. If the other rules, interpretation of
The primordial consideration in the interpretation of contracts contracts are not applicable and this obscurity pertains only
is the intention of the parties. to the secondary matter of the contract, the interpretation
will depend on the nature of the contract as to cause.
Even if the instrument as written is so clear, the words and Whether is onerous or gratuitous.
phrases used by the parties or as written in the instrument are
so clear as to their meaning, but if they do not reflect the real If it is onerous, we apply the greatest reciprocity of interest
intention, it will be the intention which will prevail. If gratuitous, we apply the least transmission of rights.
SC: A contract is not what the parties may call it. It is what the Lino entered into a contract to sell with Ramon undertaking
law will consider such. to convey to the latter one of the 5 lots he owns without
specifying which lot it was for the price of 1 million. Later, the
If the terms and phrases are so clear as to their meaning, how parties could not agree which of the 5 lots he owned lino
would you know that the intention of the parties is undertook to sell to Ramon. What is the standing of the
otherwise? Na hindi pala it oang tunay na intention? contract?
The law would tell us that we should consider the The contract is void. This is covered not only under Art. 1409
contemporaneous and subsequent acts of the parties. but also a provision under the rules on interpretation of
contracts.
Sir thinks that this is a good rule because how a party acts to a
contract would depend on how he interpreted the contract. Art. 1409. The following contracts are inexistent and void from
On how he understood his contract. the beginning:
Citizen Surety vs. CA: The claim of Mr. Pascual was, a deed of (6) Those where the intention of the parties relative to the
assignment which he executed was by way of sacion en pago principal object of the contract cannot be ascertained.
which extinguishes obligations under an indemniy agreement
kasi sinisingil siya doon sa indemnity agreement.
But it turned out after the execution of the deed of STATUS OF CONTRACT
assignment, he continued to pay the monthly amortizations.
Kung tunay na dacion en pago yan, which already extinguished Consider a spectrum. On the opposite sides are void and valid.
his obligation, why would you continue to pay? Ang tatlo, nasa gitna. Out of the three, ang closest to the valid
is recsissible.

Closes to void ay unenforceable. Clearly, nasa gitna ang So if the person who will be injured will not rescind or will not
voidable. invoke the remedy of rescission, Eh forever valid ang contract
na ito.
Of these contracts, some if not all authors will enumerate
these as defective contracts. But the law did not so provide. Art. 1381: When will a contract be rescissible? = Only When
Walang naka enumerate sa batas na such contracts are the law so provides. When there is no law which states that
defective. Sir does not agree also because void contracts are such contract is rescissible, such is not rescissible.
not merely defective contracts. They are inexistent. Since it is
not existing, it cannot be repaired because it does not exist. Here, Rescission as a remedy is only subsidiary.
A better classification of contracts in relation to status ay Valid Example of a rescissible contract: Those enumerated under
and Void. Sa valid, merong in a way, valid and binding or Art. 1381.
enforceable between the parties pero may valid but defective.
Dito papasok ang tatlo (Rescissible, voidable and Problematic/ Most important of those contracts enumerated
unenforceable) – They are all valid contracts but never call under Art. 1381: Those undertaken in fraud of creditors when
them valid lang without discussing the defects. Otherwise, you the latter cannot in any other manner collect the claims die
may be discussing valid contracts without defects. them.
Are these contracts susceptible of being ratified? = the law is 1st problem: How to prove fraud. One way is to cite a
clear that voidable and unenforceable contracts can be presumption if it is applicable under the circumstances. If the
ratified. law would raise a presumption that the contract was in fraud
of creditors. The other way is to prove certain badges of fraud.
But there is nothing in the code which will tell us that However, the best is the combination of the two.
rescissible contracts are subject to ratification and the law will
not so provide because there is nothing to ratify. Wala ngang A single badge of fraud will not prove that the contract was
defect ang contracts na ito. There is no defect whatsoever as in fraud of creditors.
far as the essential elements are concerned. Its up to the
person who will suffer injury whether to rescind the contract The first scenario where a presumption would arise is when
or not. the alienation by the debtor being onerous in character ( like a
sale) was entered into after a judgment was entered against
Void contracts cannot be ratified. As provided under Art. him. In favor of any creditor.
1409.
Or this was entered into after an order of garnishment or
Is there a scenario where a void contract can be ratified? = attachment was issued by a court. Then a presumption of fraud
YES. Under Art. 1898 will arise but this is only a disputable presumption.
But under Art. 1898, When an agent enters into a contract, in The other presumption is when he alienated his properties
excess or outside the scope of his authority and the third gratuitously (like a donation) wherein he did not reserve
person was aware of such fact, the contract entered into by sufficient property to cover his debts.
this agent and the third person is void.
Kabaliw vs. sadora: The basis of the court in its conclusion that
However, the same article would tell us that such contract can indeed the deed of sale was in fraud of creditors, there is a
be ratified. There is difference because this is entered into by basis in the presumption because this sale was entered into
an agent kaya pwede ang ratification under the law. after a judgment was entered into. Take note the judgment
need not be final and executory para magkaroon
ngpresumption. The Sale happened between the parent and
1. Valid his child.
2. Rescissible – In these contracts, there are no defects in There were also badges of fraud in this case. Ang badge sa
the essential elements. It’s just that someone would tagalog ay “tatak”
suffer economic injury if that contract is not rescinded.
It’s either one of the parties or a third person. Examples of badges of fraud:
-close relationship between the parties of a contract
In one word, lesion. Somebody would suffer Lesion. Yun lang -When the debtor who is the seller in a contract of sale
kaya in a way, malapit siya sa valid. continued to be in possession of the property.
-When the price in a contract of sale is grossly inadequate

However, If the price fictitious, it will not only result in a the creditor does not have any other available legal remedy.
rescissible contract. It will result in a void contract. Hence, this remedy is subsidiary.
-When the debtor is already insolvent, you will sell your

property on credit 3. Voidable – May defect diyan pero ang defect nasa
consent. when there is only one restriction as to the
party’s capacity.
In relation to prescription: an action to impugn a contract is
called accion pauliana – It should be filed within 4 years from As to defect in consent, there are 2 aspects:
the discovery of the fraud. a. Because the person giving consent is incapacitated – This
If the contract is in fraud of creditors, the prescriptive period incapacity goes into the capacity to act. There is a
will start from the discovery of the fraud. restriction to act. (Ex: Minor, Insane)
In HSBC case, the SC ruled: If this contract which is claimed to b. Because there is vitiation of consent – when the person
be in fraud of creditors was registered, the 4 year period will giving consent is vitiated
start not from the time of the actual knowledge of the creditor
but from the time of registration.
This is also known as annullable contract and therefore,
Falling from the date of registration of the contract. Because annulment is the remedy.
the registration is a constructive notice. Even if the creditor
does not know, and there was registration, then the Declaration of nullity – for void contracts
prescriptive period will already start to run. Annulment – For voidable contracts
When HSBC filed the action on the theory that the contract As to voidable contracts, there can be ratification. However,
entered into by the debtor was in fraud of creditor, it was only Not both parties can ratify. Only the party who has the right
a few months after the discovery. However, it turned out that to institute the action for annulment can ratify.
it was filed more than 4 years from the registration of the sale.
Thus, the SC ruled that the action has already prescribed. Example: If the reason is that the contract is voidable because
of vitiation of consent (violence), Only the injured or the
Though the contract was entered into by a debtor with the aggrieved party can ratify said contract.
intention of defrauding his creditors, rescission would not be
a remedy if the thing is already in the possession of the In a contract where one of the parties is incapacitated
person who did not act in bad faith. because he is insane at that time when the contract was
entered into, ang pwede lang mag ratify ay siya. Kung medyo
Who is this person who did not act in bad faith? – The third naka recover na siya. Or yung guardian niya ang pwedeng mag
person here is the buyer. The buyer here is a third person in ratify. The party who was not incapacitated has no right to
relation to the debtor and the creditor. ratify the contract
Others would claim that in order for this rule to apply, dapat Manner of ratification:
the buyer sold it to a third person = WRONG a. Express
b. Implied
While the debtor alienated his property in fraud of his
creditor, the latter may not have the remedy of rescission if Example of implied ratification: When a contract of leas was
the third person (buyer) is in possession of the thing and he entered into, the lessor was only 17 years old. (voidable). Pero
did not act in bad faith. nag 18, 19, 20, he continued to receive the rentals in relation
to this contract.
Take note: If this is a donation, he cannot claim that he is a
buyer in good faith. The law protects buyers in good faith, not Even if within the period pa ang pag fifile ng action for
donees in good faith. annulment, it can no longer prosper because there was already
implied ratification when he accepted benefits from this
Not a rescissible contract: Contracts entered into by minors contract when he was no longer incapacitated.
are voidable contracts. Not rescissible.
Aside from ratification, what can be a reason why an action
Under Art. 1191, the rescission is a principal remedy. However for annulment may not prosper: Aside from Ratification,
here in rescissible contracts, rescission can be invoked only if would be prescription.

Ordinarily, an action for annulment has to be filed within 4 It can happen that one of the party’s consent was vitiated. If
years. But the question is: 4 years from when? – It will depend there was vitiation of consent, It is not the same as no consent
on what ground: or lack of consent.
a. Minority – from the time he reached the age of Vitiation – There is consent but in tagalog, “napilitan lang” or
majority fraud was committed kaya nagbigay siya ng consent. Since
b. Insanity – From the time he recovered there is consent given, it cannot be void. It is merely
c. Violence – from the time violence ceased to exist VOIDABLE.
Another reason why an action for annulment may not prosper: Do not confuse vitiation from lack of consent.
Take note, the effect of annulment is also mutual restitution.
Vitiated consent: The party gave consent but was only forced
Example: If the plaintiff who has the right to ask for annulment to do so. (There is violence, intimidation, etc.)
cannot return what he received from the other party, it may
result in the action not to prosper depending on the reason: Vices of Consent which results to a voidable contract:
- Mistake
a. Due to fortuitous event/fault of the other party: the - Fraud
action may still prosper - Violence
b. If the thing was lost due to his fault: The action will - Intimidation
not prosper - Undue influence
In relation to succession: as to the agreement of the heirs, in These vices can be divided into 2 groups:
an extra judicial settlement of estate, If one or more of the 1. Those that would affect cognition or awareness as to
heirs are minors, In that agreement, the law provides that the certain facts = Fraud and mistake
law on contracts shall apply. This agreement is voidable.
2. Those that would affect volition as the voluntariness
When bilateral contracts are vitiated with vices of consent, of the act. He was forced to give his consent. =
they are rendered VOIDABLE. Violence, Intimidation or undue influence
Not a characteristic of voidable contract: can be assailed only

by either party. Because Pwede naman ang mag pa annul ng What is the relevance of this classification?
contract ay ang guardians in relation to voidable contracts. -It goes into this scenario: If a third person employed undue
influence upon one of the contracting parties, assuming
By express provision of law, even if violence or intimidation without the connivance of the other party.
is employed by a third person against one of the contracting
parties, that would result in a voidable contract. A and B. X employed undue influence upon B without
knowledge of A. What would be the status of this contract? =
A threat to enforce one’s claim through competent authority This is not an undue influence employed by a party against the
if the claim is legal or just does not vitiate consent – this is other party. This is employed by a third person. Would it not
CORRECT. affect the validity of the contract?
Absolute simulation of contract always results in a void Because if you consider a provision in the code, That if violence
contract. – absolutely simulated contracts are void contracts. or intimidation is employed by a third person upon one of the
Ang mali dito ay the word result. Because through absolutely contracting parties, this contract would be void.
simulated, it may result to a valid contract between the buyer
for example and the third person. Because the third person Ang nakasulat sa provision is only violence and intimidation.
would have the right to believe that the buyer here Is the Hindi kasama ang undue influence.
registered owner if he was able to register the property in his
name. As long as the buyer is a buyer in good faith. Therefore, ang possible conclusion = It will not affect validity.
Because the code only provided violence and intimidation. And
VITIATED CONSENT the problem talks about undue influence.
If consent was given by both parties, and both parties have
the capacity to give consent, still it does not guaranty a valid However, the law commission tells us that even if the code did
contract. not provide undue influence employed by a third person, it
would have the same effect as if violence or intimidation is
employed because the three of these have the same effect.

All these 3 would affect the voluntariness of the act. Does it
matter kung walang violence, walang intimidation? = It does What if violence was employed not upon the party claiming
not matter as long as there is undue influence which also vititation, not upon his spouse, not upon any ascendant or
affects the voluntariness, it will result in a voidable contract. decendant. Can he invoke vitiation of consent?
Conclusion = The problem will result into a voidable contract. Sir would agree with some authors that it is possible but he
must prove that his consent was vitiated.
Another issue pertains to violence and intimidation. Does
Duress affect the validity of the contract? Does it vitiate Sir would consider to be a good rule: That the further in degree
consent? = Yes. But duress is not included in the 5 enumerated of the relationship of parties, as to the one invoking and the
vices of consent But it covers both violence and intimidation. person upon whom violence or intimidation was employed,
the harder it is to prove vitiation of consent.
If there is duress, There is violence and or there is also
intimidation. Example : ang binugbog para ka pumirma ay fiance mo and in
a few days, ikakasal ka na sa binubugbog. Natural, pipirma ka.
If the wife of the contracting parties who is invoking vitiation Ang fiancé mo ba ay asawa mo? Hindi pa. ascendant mo o
of consent dahil violence was being employed upon his wife. descendant mo? Hindi. But nonetheless you can prove vitiation
Would that result in a voidable contract? = the provision of consent.
relevant to this contract, one provision in relation to violence
walang nakalagay upon whom shall violence be employed in Kung may nakita kang binubugbog doon sa street habang
order for the contract to be considered voidable. naglalakad kas sa kanto ng taft avenue, and somebody
approached you and told you that you should sign this
The other would claim that the contract would be contract. Otherwise, we will continue to beat this person
voidable.violence must be mployed upon the party himself. hanggang mamatay. Are you going to sign? Hindi. Pakialam mo
Kung employed upon any other person, he cannot invoke doon.
violence as would vitiate his consent because there is another
provision which apparently would support this conclusion in
relation to intimidation. That even if intimidation was A was 16 when she inherited a townhouse but because she
employed not upon the party himself but upon his spouse, wanted to study, when sold the town house by signing a deed
ascendants or descendants, He can invoke vitiation of consent. of sale. When the buyer discovered that A was a minor, she
promised to execute another deed of sale when A turns 18.
The argument here is : If in intimidation, the law provides that But when A turned 25, and she was already working, she
vitiation can be invoked even if intimidation was employed wanted to annul the sale and return the buyer’s money. Was
upon the spouse, ascendant or descendants and as to violence, the contract of sale void, voidable or valid? Can A still recover
hinid sinabi ng batas, eh di it should only be upon the party. the property?
Otherwise, it is claimed dapat the law should have also
provided as provision similar to intimidation to cover the Ans: 1st . The sale is voidable because one of the party is a
spouse, ascendants and descendants. minor and she was incapable of giving consent.
Is that a good argument? = NO. If the sale is voidable, the proper remedy is annulment? =
FALSE. It is not automatic. There are defenses which may be
In other words, even if violence was employed upon the invoked by the other party in an action for annulment.
spouse, ascendants or descendants, that can be validly the
basis of a claim of vitiation of consent. Why? This goes into the Possible defenses:
very nature of intimidation as compared to violence. a. One of them is that when a party does not have a
personality to annul the contract.
Kung ang batas would already consider as a ground for
vitiation of consent yung intimidation palang, in relation to Example: A party who is not the minor filed an action for
the spouse, ascendants, descendants, then there is more annulment . Will that action prosper? NO. because the one
reason for the law to consider the contract to be voidable as who filed is not the minor. The party who has the right to
there was vitiation of consent if there was violence. institute is the minor the moment he attains the age of
majority or the guardian.
Because which is worse? Intimidation or violence? = Malayo
ang intimidation. Sa intimidation, threat palang, threat sa b. Prescription. Even if the contract was voidable when
wife mo, pwede na. Otherwise, you can invoke violence entered into, but because a period has a reckoning
employed upon spouse, ascendants or descendants. point, and the action was filed at the age of 25 (

reckoning point: 4 years upon attaining the age of A contract entered into by a person in representation of
majority), The action already prescribed. another without the authority of that person, such
contract is unenforceable unless he has authority under
c. Certification the law.
d. The plaintiff cannot return what he received from But if consent was given in the name of another person,
the other party. The effect of annulment is mutual without the authority of that person, as a rule, it is
restitution. unenforceable under Art. 1403.
If the reason why you cannot return the object is because of Under the contract, This person is representing another. But
the plaintiff’s fault, the action for annulment cannot prosper. no consent from that person. It is unenforceable UNLESS this
But if the reason is a fortuitous event or because of the fault of person acting on behalf of another has the authority under
the other party, Then annulment can be filed. the law ( ex. Guardian, receiver ). In this case, the contract will
be valid if he only acted in representation of another and there
2nd: A cannot recover the property. was no consent by the other party.
Contract was entered into because of Intimidation but the It is covered by the statute of frauds. It is a rule which requires
action for annulment was filed after more than 35 years = certain contracts to be in writing which can either be a private
under the circumstances, The action will still prosper because instrument or a public instrument.
there was only peace and order after 35 years. Only then can
they really file the action. This rule goes to the admissibility of evidence. Not on the
weight of evidence. If covered by the Statute of frauds, The
Under the law, the action for annulment must be filed within 4 court should not allow the evidence to be admitted.
years from the time the intimidation ceases. Hence, the action
will still proper even if 35 years after the contract was entered Agreements covered by the Statute of frauds: Enumerated
into. under Art. 1403
It is written in the advertisement that the condo area is 91 3. Those contracts under Art. 1878. Contracts where the
square meters which was bought by the foreigner. It turned law requires the agent who entered into this contract to
out that the area was only 70 square meters. It was discovered have a SPA
that in computing the area, the owner added the common
areas. 4. Those covered under Art. 1403 – Statute of frauds. – It
requires certain contracts to be in writing for the contract
SC: The contract is a voidable contract and was annulled. to be enforceable between the parties.
The statute of frauds does not require this contract to be in a

4. Unenforceable – As if they are void. Parang wala ang contract public instrument. Hindi kailangan, pero pwede. In writing
na ito. Because this cannot be enforced if there is a proper does not necessarily mean that it is a public instrument.
objection.
If you already have a written agreement and you want this to
In other words, by law, this can be enforced only if ratified. If be registered, what is your remedy? – Art. 1357. To compel
there is no proper objection, ang effect niyan, may implied the other party to have the contract in the form prescribed by
ratification. law.
4 groups of Unenforceable contracts: Micheal Fermin without the authority of Pascual lakas, owner
of a car sold the same car in the name of mr. Lakas to atty.
1. If both parties to a contract are incapacitated, the Buko. The contract between atty. Buko and Mr lakas is? =
contract is unenforceable. Either of the parties can ratify UNENFORCABLE. Because Fermin had the authority but he sold
the contract. However, If one of the parties ratified the the car to Mr. Lakas, who is the owner.
contract, what will be the effect? The contract will now
be merely voidable.
Only sale and lease are covered by the statute of frauds:
2. A contract entered into by an agent where the agent FALSE.
acted in excess or outside the scope of his authority.
Any contract may be covered by the SOF.

Any agreement if by its terms, is not to be performed within 1 If the lease is for more than one year, it has to be in writing =
year, it has to be in writing otherwise, it will be unenforceable. NOT NECESSARILY. It has to be a lease involving a real
property. The price is irrelevant
An agreement in consideration of marriage, is also covered by
the statute of frauds. (not in writing, therefore covered by the In case of movable, the price is relevant. If the price is 500 or
Statute of frauds) Except mutual promise to marry. more, It has to be in writing. Otherwise, the sale will be
unenforceable.
Kabagi vs. oksilyo : 4 persons have valid agreement. The father
and his son together with another father and his daughter had Doctrine of part performance : The Statute of frauds is only
an agreement that the son will be married to the daughter. applicable to wholly executory contracts.
Before this marriage, they agreed that the father and his son
will cause the repair of the house of the father and the If the obligation under this contract had been partially
daughter. Pursuant to this agreement, the father and his son performed (Esp if totally performed), It will be taken out of the
caused to repair the house and they spent more than 700.00. operation of the statute of frauds. The contract may now
When they already repair the house, the daughter did not therefore be proven by oral testimony.
marry the son.
Otherwise if covered, It cannot be proven by oral testimony
The father and son sued the father and daughter. under the statute of frauds.
SC: We have to consider the 2 causes of action: A townhouse was leased for a period of 3 years. There is no
1. As to the father against the father and the daughter written contract. = UNENFORCEABLE.
2. The son specifically against the daughter
Question: Can A compel B to reduce the said contract in
As far as the father is concerned, this will fall under the writing? = despite the fact that this contract when it was
agreement in consideration of marriage and thus, not being in entered into is unenforceable, Still the answer is YES. Because
writing is unenforceable (di pa uso ang doctrine of part this contract was taken out of the operation of statute of
performance sa panahong ito) frauds under the doctrine of part performance because under
the facts, it is stated that B has been paying rentals for more
As far as the son against the daughter, this contract will fall than a year.
under the qualification of the law, yung except Mutual
promise to marry. Basis why B can compel A to perform to reduce the contract
in writing? = Art. 1357 = If the contract has already been
Thus, the SC dismissed the case as to the father but remanded perfected and already in the form prescribed by law, a party
the case as to the son to the trial court for further proceeding. thereto can compel the other party to have that contract in the
form prescribed by law.
An action for breach of promise to marry kung mere breach of
promise to marry, the action will not prosper because it is not When a party partly performs the obligation which is to pay
actionable but the manner of the breach may be actionable the price and which the other party accepted the payment,
because it may be contrary to good customs kaya pwede mag though the contract was entered into under the statute of
prosper ang action for damages because of breach of promise frauds, it was taken out from the operation of the statute
to marry. because of partial performance.
Oral guaranties are valid and binding? = FALSE. It is Whether or not the oral partition is valid and binding : It is not
unenforceable Because one of the contracts covered by covered by the statute of frauds because the partition does not
Statute of frauds is a special promise to answer in case the involve conveyance of ownership. It merely the division of
debtor defaults which is a contract of guaranty. Thus, the shares among the heirs.
guaranty is required to be in writing under the statute of
frauds. As far as contracts of sale is concerned, in a way there are 3
scenarios where this contract would be unenforceable if not
When would a contract of lease be covered by the SOF: in writing:
1. If it involves a real property or an immovable
When the contract involves a real property and it is for more property – The price is irrelevant.
than 1 year. The contract of lease will only be covered by SOF
if it involves a real property and the period is for more than 1 2. In case of movables, it will only be covered by SOF if
year. the price is at least 500.00. It is the price which is
relevant, not the value of the thing.

Supposed an oral contract which by itself cannot be
3. Regardless if the subject matter is movable or performed within 1 year, one of the contracting parties has
immovable, if under the terms of the agreement, it is already complied within the year with the obligation imposed
not to be performed within 1 year. upon him by the said contract. Can the other party avoid
fulfillment of those incumbent upon him by invoking the
SOF? – NO. Because precisely, the rule is a good rule because
As to the nature of the SOF: otherwise it will be the word of one party against the word of
It does not go into the weight of the evidence. It goes into the another party. There is no separate proof as to the existence
admissibility of evidence. of the contract but if there is already a fulfillment of whatever
obligation arising from a contract, then there is already proof
If it is covered by SOF and there is effort to prove existence of of the existence of the contract and therefore, the rule is no
the contract through oral testimony, that evidence will never longer applicable.
be admitted.
Ang premise ng one of the parties has already complied, is that
In relation to this rule, if the plaintiff for example would want the other party accepted what was done by the other party.
to present a witness who does not have any document at
hand, so oral lang talaga ang testimony niya, may that Example: In a contract of sale, if the buyer would offer to pay,
witness be allowed to testify? – YES. But not to prove the at hindi tinatanggap nung seller, do you thing there is a
existence of the contract itself but to prove that there was performance of the obligation? WALA. Kaya it has to be with
partial fulfillment of the obligations under the contract. the consent of the other party that it can be said that the other
party had complied with what was incumbent upon him. Then,
Under the doctrine of part performance, these contracts will hindi na applicable ang SOF.
be unenforceable only when they are wholly executory in
character. If there is already partial fulfillment of the Fe, Esperanza and Caridad inherited from their parents a 500
obligations arising from this contract, the contract is taken out square meter lot which they leased to Maria for 3 years. One
of the operation of the SOF. year after, Fe claiming to have the authority to represent her
siblings, offered to sell the leased property to Maria which
To prove partial fulfillment, As SC Held, hindi kailangan ng the latter accepted. The sale was not reduced into writing but
documentary evidence. Maski oral testimony would suffice. maria started to make partial payments to Fe ehich the latter
Yun nga lang, the court would warn us that the judges have to received and acknowledged. After giving the full payment,
finally determine whether the testimony of the witnesses Maria demanded for the execution of a deed of absolute sale
would support the conclusion that there was really partial which esperanza and caridad refused to do. Worst, Maria
fulfillment. learned the the sibling sell the same property to Manuel. This
compelled Maria to file a complaint for the annulment of the
SC: A misconception in relation to this rule is that, for the sale with specific performance and damages. If you were the
doctrine of part performance to apply, there should be either judge, how will you decide the case?
partial payment or partial delivery. HINDI TOTOO YAN. Even if
there is no partial payment, no partial delivery, as long as there I will decide the case in favor of Maria only as far as the share
was performance of certain obligations verbally agreed upon of Fe in this parcel of land. Because this contract of sale was
in relation to this contract, then the contract may be taken out entered into by a co-owner without the consent of her co-
of the operation of the SOF. owners. Therefore the other co-owners which did not give
consent to the sale will not be bound. Only the co-owner who
In a case, the contract was a sale of a parcel of land. In their entered into this contract will be bound by this contract of sale
verbal agreement, the buyer was obliged to pay the real but the fact that this sale was not reduced into writing cannot
property taxes. She was obliged to have the land surveyed be invoked by Fe as a defense because from the facts, there
among others. GInawa niya ito. Was there partial payment or were already partial payments. At the time the action was
partial delivery? WALA. But the SC ruled that this contract was filed, The price was already fully paid. Thus, Fe cannot invoke
taken out of the operation of the SOF under the doctrine of the SOF as a defense in this action.
part performance.
Again, the action will prosper but only as to the share of Fe, the
Can Sergio claim that whatever they may have agreed upon seller without the consent of Esperanza and Caridad.
cannot be enforced because any agreement related to the
sale of real property must be supported by evidence in ½ of the parcel of land belonging to A and B was sold by X to
writing and they never reduced their agreement into writing? Y for the amount of 1,500.00. The sale was executed verbally.
You can claim again that there was already partial fulfillment One year later, A and B sold the entire land to X. Is the sale
of the obligations based on the agreement of the parties and executed verbally by X to Y valid and binding? Reasons.
therefore this is no longer covered by the SOF.
There are 2 contracts of sale involved: D. The contract between the parties is subject to
1. Sale between X and Y ratification by the parties. – Because this contract is
2. Sale between A&B and X unenforceable
At the time of the sale, it doesn’t appear that X has a right to The sale here is oral and in this scenario, you will never notice
sell. At that time of the sale to Y, the owners are A and B. It that there is payment. There is only an offer to pay.
does not also appear that X has the authority to sell from A and
B.
5. Void = Art. 1409 enumerates void contracts
Sir agrees to one alternative answer that this contract is
unenforceable. Because this is a sale of an immovable If the cause or the object of the contract is contrary to law,
property which is not in writing therefore covered by the SOF. moral, etc. then the contract would be void.
Suggested Answer: The sale between X and Y is valid and Ex: The parties entered into a contract of partnership to put up
binding because though verbal, there was already payment. a business (distribution of Shabu) – Void because the object is
Which took the contract out of the operation of the SOF. contrary to law
(doctrine of part performance)
A contract of partnership for restaurant business but one of
Sir: If you will read the facts carefully, you cannot support that the partners promised to contribute and his contribution is
answer because there was no payment. shabu – this time the reason is the cause which is contrary to
law and therefore would be a void contract
Another suggested answer: here will go into Art. 1434 under
the principle of estoppel. When a person sells something which
he does not own or does not have the right to sell at the time Contrary to public policy example:
of the sale, but subsequently, acquired ownership by whatever Lita enterprises vs. IAC – The spouses bought a few cars which
title, the law provides that ownership shall automatically pass they wanted to convert as a taxi cab. However, they do not
to his buyer. have a franchise. What they did is that they had an agreement
In other words, this seller will not be allowed to claim that with a franchise holder that these cars will be registered in the
“When I sold it to you, I had no right to sell. Therefore you did name of the franchise holder but the operators will be the
not acquire ownership over this parcel of land”. Under the spouses.
principle of Estoppel which is called as Estoppel by deed.
One of the vehicles figured in an accident for which a liability
Sir: Cannot agree to this also because Art. 1434 can only be for around 25,000 was imposed by the court. The one held
invoked if there was already delivery to the buyer. In the liable was the franchise holder. When the spouses wanted to
problem, there was no delivery. get the documents from the franchise holder, the latter
refused until he is reimbursed.
Aligada orally offered to sell his 2 hectare rice land to Balane. This case was filed by the spouses as owners for the recovery
The offer was orally accepted by agreement, the land was to of the said documents from the franchise holder.
be delivered through the execution of a notarized deed of
sale and the price was to be paid exactly one month from SC: The action did not prosper because the contract that they
their oral agreement. Which statement is most accurate? entered into is what is known as the kabit system which is
actually is contrary to public policy. This is the root corruption
A. If alegada refuses to deliver the land on the agreed in the government offices.
date despite payment by Balane, the latter may not
successfully sue Alegada because the contract was Distinguish inexistent from annullable
oral.
Annullable: Valid until annulled, Subject to ratification, Action
B. If Alegada refused to deliver the land, Balane may prescribes in 10 years
successfully sue for fulfillment of the obligation even
if he has not tendered payment of the price. Inexistent: The action to enforce will not prosper because it is
inexistent, any action to enforce will NEVER prosper. There is
C. The contract between the parties is rescissible nothing to enforce. (This is an ABSOLUTE RULE)
An action for the declaration of a void contract does not

prescribe.

enforce. But if the action I relation to a void contract is merely
What prescribes is the action for annulment of a voidable to recover what he delivered to the other party, It may
contract. prosper if not covered by the pari delicto rule. If covered,
there is still an exception.
Action for annulment is different from the action of
declaration of nullity. If the contract is void, it shall only be Under the civil code, this doctrine has exceptions. (Arts 1411,
declared as such. If voidable, It must be annulled because such 1412, 1414-16)
contract is valid until annulled. 1. If the contract is illegal but one of the parties is
incapacitated at the time the contract was entered into,
he may be allowed to recover what he delivered
Issue as to void contracts:
Qualification of the law: At the discretion of the court, if
If a contract is void, may an action to recover filed by one of public policy will be enhanced
the parties against the other prosper because even if the
contract is void, one of the parties may have delivered 2. Though the contract is illegal, this party who delivered
something to the other party. to the other party may be allowed to recover if he
repudiated the contract before the consummation of
If this is a contract of partnership, maybe one of the partners the contract or damage is caused to a third person.
delivered 10 million pesos to the other party as his
contribution. Will he be able to recover this 10 million? 3. Homestead law : if a land was sold within 5 years from
the award of such land, the sale is void. However, the
The law would tell us that if this contract Is contrary to law, dotrine will not apply because under Art. 1416, though
morals, etc. In other words if the contract is illegal or unlawful the law declares a contract to be void, but it was designed
which is different from a contract being void merely because to protect one of the parties, then that party may have
of the lack of one of the essential elements. Iba ang illegal na the contract declared null and void. The law was meant to
contract, iba ang void na contract merely because of the lack protect the grantee.
of one of the essential requisites.
In 1950, the Bureau of lands issued a homestead patent to A.
Ito, pag illegal, ditto papasok ang pari delicto rule. In other 3 years later, A sold the homestead to B. A died in 1990 and
words if the contract is illegal, unlawful, contrary to law, his heirs filed an action to recover the homestead from B on
morals, Etc, the SC would tell the lower courts not to give aid the ground that the sale of their father to the latter is void
to either party to the contract. They should be left as they are. under Sec. 118 of the public land act. B contends however
that the heirs of A cannot recover the homestead from him
Any action, even an action to recover will not prosper under anymore because their action has prescribed and
the pari delicto rule. furthermore, A was in Pari delicto. Decide.
Pari delicto rule: If the contract is void, is the doctrine I will decide in favor or the heirs.
applicable? = NOT NECESSARILY.
As to the claim of prescription: Not true because here, the
Under this doctrine, the court would tell the trial courts to contract is void because it is prohibited by law, any alienation
leave the parties as they are. No aid shall be given to either within 5 years from the date of award to A was a void
party to this contract because they entered into an illegal alienation.
contract.
As to the claim that A was in pari delicto: This is not true
Example: The contract is void because of the form : It is not because this pertains to one of the exception under the civil
covered by the rule. code. This is covered by Art. 1316. When a contract is void but
there is no inherent illegality in such contract, that is declared
However if the object is contrary to law, morals, public order, void by law, then he may still be able to recover despite the
it is covered by the pari delicto rule. If a person filed an action nullity of the contract. The pari delicto rule does not apply to
against the other, it may not prosper because the court should this scenario covered by Art. 1416 of civil code.
leave the parties as they are. They will have no aid because
the contract they entered into is illegal. Illegal transaction: covered by the pari delicto rule. Hence, no
court shall give aid to either of the parties. They should be left
as they are.
If the contract is void, an action to enforce the contract, that
contract will never prosper because there is nothing to

Common misconception: Pag sale ng parcel of land, ay oral,
such sale is void. – WRONG. The sale is not void. It is merely
unenforceable.
A sale of land by an agent in a public instrument where his

authority from the principal is oral – VOID. This is covered by
Art. 1874. As to agency = Correct answer
Donation of a wrist watch worth 4,500. 00 – This is not a

contract. Donation is not a contract it is an act. Also, the value
is less than 5,000. This is not required to be in writing as long
as there is simultaneous delivery, then this will be a valid
donation
Relatively simulated contract – not the best answer because

there is another transaction which is the real transaction
between the parties and they will be bound to such
transaction.


Civil Law Review 2 (Atty. Uribe) Transcribed By: Licuanan, Apple Jade S. Arellano University School of Law

Uploaded by

Civil Law Review 2 (Atty. Uribe) Transcribed By: Licuanan, Apple Jade S. Arellano University School of Law

Uploaded by

CONTRACTS NOT ALL AUTO CONTRACTS ARE VALID.

Civil Law Review 2 (Atty. Uribe)

Contract of Adhesion is not invalid per se. Examples on Escalation clause:

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

General Rule: A person who is not a privy to the contract

5. Relativity of contracts Ex: In a boxing contract involving Manny Pacquiao, He cannot

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

Francis Albert a citizen and resident of New jersey, under

Civil Law Review 2 (Atty. Uribe)

1st consideration: What contract was entered into? = Here,

Civil Law Review 2 (Atty. Uribe)

4th consideration: When was there meeting of the minds? = It

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

SC ruled that one of the misconception in an option contract

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

Possible Reason for the simulation: To circumvent the law on

Example where incapacity pertains to juridical persons:

Incapacitated: When it comes to Natural persons:

Civil Law Review 2 (Atty. Uribe)

Borromeo vs. Descallar

What if in the deed of sale, there was no mention on the

Civil Law Review 2 (Atty. Uribe)

Exceptions: Rescissible contracts. A contract of sale. Is this required to be in a particular form

Exception: If the motive is illegal or unlawful because it is

Civil Law Review 2 (Atty. Uribe)

What are these contracts which are required by law to be in

Civil Law Review 2 (Atty. Uribe)

In other words, ikaw ang nag draft ng contract, ayusin moa ng

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

-When the debtor is already insolvent, you will sell your

Civil Law Review 2 (Atty. Uribe)

Not a characteristic of voidable contract: can be assailed only

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

The statute of frauds does not require this contract to be in a

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

An action for the declaration of a void contract does not

Civil Law Review 2 (Atty. Uribe)

Civil Law Review 2 (Atty. Uribe)

A sale of land by an agent in a public instrument where his

Donation of a wrist watch worth 4,500. 00 – This is not a

Relatively simulated contract – not the best answer because

Civil Law Review 2 (Atty. Uribe)

You might also like