JUMIE - Aligada Notes Obligations and Contracts

8/9/2019 JUMIE - Aligada Notes Obligations and Contracts

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OBLIGATIONS AND CONTRACTS, Notes 2nd Semester, SY 2011-2012, Dean AugustoAligada

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At what stage of the obligation is the identity of the creditor essential?

-only at the time of the performance of the obligation

-not essentially during perfection

Who can act as active & passive subject of an obligation?

Natural and Juridical persons- because the law does not make a distinction

** These persons do not have the same rights

Natural persons can do anything as long as the law does not prohibit them

Juridical persons have limited rights

25 November 2011

Object of the Obligation- always a PRESTATION

-to give

-to do

-not to do which includes not to give

Object of the prestation

-depends upon the prestation

Efficient cause

-reason for the existence of the obligation

-answers the question, why does the obligation exist?

Sources of an Obligation

1.

Law

-it is the law that creates the obligation

-cannot be presumed

-the law must exist first before the obligation




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What role is played by the law in the obligation

CREATOR of the obligation, therefore it is the source of the obligation

2.

Contract

-whatever the parties agree on, it shall be the law between them

Right to stipulate

The parties have the right to decide whatever should be in the contract

Limitation under Article 13061

Right to contract

-right to enter into a contract of his choice

3. Quasi-Contract

-is juridical relationship resulting from lawful, voluntary, unilateral act for the

purpose of providing compensation to the end that no one should be unjustlyenriched at the expense of another

28 November 2011

A unilateral act can never give rise to a contract, hence it is not a contract

2 Kinds of Quasi-Contracts (not the only kind, but the most common)

1.

Negotiorum Gestio (unauthorized management)

-there must be no agreement between the parties

-takes place only when there has been abandonment

-unauthorized/inofficious management of an abandoned business

-obligation that is said to arise, is to compensate the gestor

-basis: services rendered

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-even if the gestor brings in losses instead of profits, he shall still be compensated

because the basis of the obligation to compensate is/are service/s rendered2. Solutio Indebiti (payment by mistake)

-obligation that is said to arise, to return what has been paid by mistake

UST Cooperative vs. City of Manila

Issue: Is the petitioner entitled to a refund for what it has paid?

According to Respondent :

NO, because, payment was:

1.

voluntary

2.

not made under protest

3.

already used for the construction & maintenance of roads. Petitioner was oneof its beneficiaries

Held:

-judgment in favor of Petitioner, ordered respondent to make a refund

-a case of solutio indebiti, under such principle, whenever something was paid bymistake, the recipient acquires no right to that payment

4. Crimes

-acts/omissions punishable by law

Governed by:

-penal laws

-human relations

-Obligation and Contracts

-damages2

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What is the obligation that arises from crime?

Civil Liability

-basis is Art. 100 of the Revised Penal Code3

-but not in all instances

** Acquittal based on reasonable doubt, a civil action can still be instituted

because there is no certainty that he did not commit the offense charged

** Acquittal beyond reasonable doubt/ the accused did not commit the offense,there is no civil liability.

29 November 2011

Crime as an obligation:

** Without prejudiced to Art. 2177 of the Civil Code4

-prohibits double recovery for damages

Barredo vs. Garcia

-a person entitled to recover damages from both law should choose which law torecover from

Bunyag (breach of promise to marry)

-no law that provides for recovery of damages for breach of promise to marry made

by the father

02 December 2011

What are the sources of DAMAGES?

a.

Fraud

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b.

Negligence

c.

Delay

d.

Breach of contract

e.

In some cases, fortuitous events

1.

How many KINDS OF FRAUD/DOLO are there?

2 (TWO)

a. Dolo Causante- employed in getting the consent of a person to a contract.

- not a source of damages

b. Dolo Incidente- employed in the performance of an obligation.5

Which of the two kinds of DOLO is a source of damage6? Why?

Dolo Incidente

The law provides in Art. 1170 of the Civil Code that those who in the performance ofan obligation are guilty of FRAUD, shall be liable for damages.

What is Dolo Causante then?

It is a kind of fraud, which is a ground for annulment of contract , because it is a

kind of fraud, which is employed in getting the consent to a contract.

Example: Article 45 of Family Code 7

There are two kinds of CIVIL NEGLIGENCE in the lawa. CULPA AQUILANA

b. CULPA CONTRACTUAL

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NEGLIGENCE may either be SIMPLE or GROSS negligence.

May an action for future negligence BE WAIVED?

Under the law, an action for future negligence may be waived, provided, it is

SIMPLE NEGLIGENCE because gross negligence is tantamount to fraud which cannotbe waived.

(Art. 1171. Responsibility arising from fraud is demandable in all obligations. ANYWAIVER OF AN ACTION FOR FUTURE FRAUD IS VOID.)

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Therefore, under the law, waiver of an action for FUTURE FRAUD or GROSSNEGLICENCE is not allowed.

What is DELAY?

It is the non-performance of an obligation with respect to time after demand

has been made when demand is required by law, due to causes imputable to thedebtor.

**9 Mere non-performance of a duty does not necessarily put a debtor in delay

because when the law speaks of delay, it means, CULPABLE DELAY (delay due to the

fault of the debtor).

** If the non-performance is not due to the fault of the debtor, then there is nodelay.

KINDS OF DELAY/MORA:

Mora Solvendi- is delay on the part of the debtor to perform.

Mora Accipiendi- is delay on the part of the creditor to accept performance offered by the debtor.

Compensatio Morae- since both parties are in delay, the delay of one compensatesthat of the other.

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-when both parties are in delay, there is no effect.

-it applies only in reciprocal obligations.

What are the KINDS OF MORA SOLVENDI?

** Generally, there are 3 kinds of Mora, however, Mora Solvendi is further classified

in to 2 kinds.

a.

Ex Rae- demand is not necessary

b. Ex Persona- demand is always necessary to put the debtor in delay

** General Rule- no demand, no delay. Mora Solvendi Ex Rae is an exception.

Four cases in Article 1169 where demand is not necessary:

1.

Where there is an express stipulation to that effect.

2.

Where the law so provides.

3.

When the period is a controlling motive or the principal inducement for thecreation of the obligation.

4.

Where demand would be useless.10

05 December 2011

Duties of an Obligor

In an Obligation, there are 3 prestations, to give, to do, or not to do, including not togive.

What are the duties of an Obligor in general?

It is not the Obligor who makes the distinction. (to give)

The distinction between specific & generic thing must be made.

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If the Obligation is:

TO GIVE- must distinguish between specific & generic thing.

-determined by the nature of the thing agreed upon.

SPECIFIC THING:

1. To give the VERY (principal duty) thing promised

** In Specific Obligation, there can be no substitution.

In ADDITION to that duty, he has the duty to:

1.

Preserve the thing promised (Art. 1163).11

2.

Deliver the fruits (Art. 1164).12

3.

Deliver the accessions & accessories (Art. 1166).13

If the thing to be given however, is GENERIC, the principal duty of the Obligor is to

give the thing promised, and that’s all.

-as a rule, that’s the only duty.

TO DO- involves the performance of an act.

-duty of an Obligor is to do what he promised to do.

NOT TO DO/GIVE- duty of the obligor is to desist from doing or from giving what he

promised not to do or not to give.

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** If the source of the Obligation is a contract, and the obligation is to give, even if

the contract is silent of these additional duties, they are part & parcel of the obligationTO GIVE.

** The contract may be silent or may provide only the primary duty.

** Additional duties may also arise from contracts; all of them may come down asprincipal duties.

In the duty TO PRESERVE, when does it begin?

From the moment of perfection of contract and continues until the moment ofdelivery.

Therefore, it ends upon the delivery of the thing promised.

What degree of care should the debtor exercise?

The degree of care that the law requires in the preservation of the thing is the

diligence of a good father of a family.

Why is it only a good father and not of a mother?This has been used by the law in its abstract sense.

It is deemed to include the mothers

Is the degree of care required by law should always be equal to the diligence of agood father of a family?

What does the law provide?

Can we say that the degree of care depends upon the agreement in the contract or

what the law provides?It depends upon those two.

1.

If the contract is silent, the general rule on the standard of care shall be applied.

2.

But the parties/law can provide for another degree of care.




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Can the parties agree on a higher or lower degree of care?

There is no such provision on lower degree of care.

The law only provides for a higher standard of care.17

Why can the parties not agree on a lower standard of care?

-because it will violate public policy.

What does the law require the debtor to preserve?

-not only the thing due, but also the fruits, as well as the accessories &accessions.

The second additional duty of the Obligor is To DELIVER THE FRUITS.

To what kind of fruits does the law refer under Art. 1164?

1.

Natural Fruits- spontaneous product of the soil and the young of an animal nomatter how they are produced.

2.

Industrial Fruits- product of the soil and the young of an animal with theintervention of a human being.18

3. Civil Fruits-

** They are Natural Fruits if they came to existence as a product of the soil, but if

they are planted by persons, they are no longer spontaneous products of the soil, they

become Industrial Fruits.

Can the obligation to preserve the thing due, deliver the fruits, accessories &accessions be waived?

Obligations cannot be waived, only rights, but even waiver of rights is subject tolimitations.19

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Can the waiver of rights here be waived?

What can be waived?

Can the creditor waive his right to the:

Duty to Preserve- cannot be waived, because it would be against public policy.

Duty to Deliver the Fruits- can be waived.

Duty to Deliver the Accessories & Accessions- can be waived.

-DELAY-

If the parties have fixed the date for the fulfillment of an Obligation, is demand still

necessary?

When will delay occur in a reciprocal obligation?

When one of the parties offers to perform or actually performs and the otherparty is not ready to comply with what is incumbent upon him, delay exists.

What is RECIPROCAL OBLIGATION?

Is an Obligation where the parties are creditors and debtors of each other but

their respective obligations arise from the same cause, so that performance by one is

conditioned by the performance of the other.

Is Reciprocal Obligation the same with Bilateral Obligation?

NO.

Bilateral Obligation- their Obligations do not arise from the same cause.

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When is demand not necessary?

1.

In Mora Solvendi Ex Rae

2.

In Reciprocal Obligations

06 December 2011

If the Obligation is Reciprocal, what takes the place of demand is an offer or actual

performance of one and the other party is not yet ready to comply with what isincumbent upon him.

In Bilateral Obligations, obligations are imposed on both sides, but their respectiveobligation does not arise from the same cause, that is why it is not called reciprocal.

If demand is necessary in order to put the debtor in delay, when must demand be

made?

Obligation outside Article 1169.20

What do you understand by the phrase Due Date?

It is the time when the creditor acquires the right to enforce the obligation.

Before the arrival of the due date, the creditor does not have a right.

When may an Obligation been said to be due?

What will happen if demand is made before the due date?

Where should demand be made?

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There is no specific provision where demand should be made, however in as

much as you make a demand, you expect payment, therefore-At the proper place of payment.

How do you determine the proper place of payment?

What happens if there was no agreement to where demand should made?21

For purposes of determining where demand should be made, what are the rules to beobserved?

Where Obligation is to be performed.

Rules:

1. Go by the terms of the contract.

If the contract specifies where payment should be made, then it should be made asagreed upon.

If the contract is silent where payment should be made.

2.

You have to make a distinction between specific or generic thing referring tothe thing due.

Specific- the place where the thing was at the time of the constitution of the contractexcept where the thing is in motion or in transit, then in the domicile of the debtor.

Generic- is always the domicile of the debtor.

Is the domicile the same as residence?

What is domicile?

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The place where a person may be absent from but has the intention of returning

to. It is PERMANENT.Can residence be referred to domicile? Yes

-One’s domicile is one’s residence.

Residence is characterized as a rule, by temporariness.

If the proper place of payment is the debtor’s domicile, and the debtor keeps on

changing his domicile to evade payment, where will be the proper place ofpayment?

It is still the debtor’s new domicile whether in good faith or bad faith.What will be the effect produced by bad faith?

The debtor who changes his domicile in bad faith shall be liable for all the

expenses incurred by the creditor in tracking down the whereabouts of the debtor.

If demand is required by law, how should demand be made?

Either in writing or orally.

Can demand be made through the air? (Dean A gave a situation)

Not valid if it was a mere reminder

A demand is not a reminder, it must indicate that he wants to enforce the obligation.

(Dean A gave a situation on TV Announcement by creditor)

It will be a valid demand if he has a TV set, but even if he has a TV set, if it is out of

order, or he is tune in another channel, then it is invalid.

The law requires that demand must reach the other party.

03 January 2011

A transaction is said to be Usurious when it involves charging of interest at a ratebeyond what is provided by law.

The law makes a distinction between a secure and non-secure obligation.




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Secure- there is collateral, 12%per annum.

Non secure- there is no collateral, security, or guaranty, 14% per annum.

However, in so far as the rate of interest is concern, the Monetary Board, who is

authorized to regulate & fix the charging of interest, removed the ceiling on interestrate through a resolution.

In view of the abolition, the law in Usury is now considered suspended.

The Anti-Usury law is not in effect anymore for as long as the suspension exists.

At present, there is no more ceiling on the interest rate.

The Monetary Board is the only government agency that is authorized to fix, regulate &supervise the rate of interest in the country.

While the Monetary Board is within the Central Bank

Kinds of Interest under the law

1.

Moratory Interest

Interest paid for the use of money of somebody else. (Premium)

2.

Compensatory Interest

Interest paid in the form of penalty or punishment or sanction.

Art. 1956, Civil Code

Unless an agreement for the payment of interest appears in writing, no interest

can be charge. (Must be understood to apply only in Moratory Interest).

Can Interest be charged if there is no agreement in the payment of interest?

Moratory- No

Compensatory- Yes

Compensatory- agreement is not necessary

In what form may interest be charged?

1. Money/ cash- no problem, amount easily be determined

2.

Kind- determined based on the value of the thing at the time of payment




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NATURAL OBLIGATION- valid but not enforceable and not recoverable. Sanction is

justice, equity, & conscience.Article 1175

Special Laws – Anti- Usury At

1980- abolished, became effective 1 Jan 1981

There is no more Usurious Transaction.

Does party may now stipulate on any rate of interest to a contract?

In the case of Medel vs. CA

Z

does not mean that parties can just stipulate on any rate

Z

exorbitant, unconscionable interest rate is unenforceable

Z

the Court said it was unconscionable but it did not say what was conscionable

Z there is still an invisible limit

Monetary Board Resolution increased the legal rate of interest.

Civil Code- 6 % per annum

MB Resolution- 12% per annum

When does an interest become a legal rate?

If the parties to a contract agreed but failed to stipulate on the rate

If the parties agreed on the payment of interest and fixed the rate of interest, the legal

rate cannot be applied.

When will the legal rate of 12% apply?

Did the MB Resolution abolished, repealed, modified the 6% per annum sanctioned bythe Civil Code?

Philippine Rabbit Lines vs. Hon. Leoardo Cruz




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Whether the MB Resolution repealed the Civil Code, the answer is NO.22

MB is not a lawmaking body, although it is vested with the power to promulgate rules& regulations, it does not have the power to repeal laws.

Loan- 12% per annum

Liability not arising from loan nor forbearance of money, 6% per annum must be thelegal rate.

When the obligation involves a loan or arises from a loan, forbearance of money,chattels, credit, or judgment thereon, the legal rate of 12% should apply.

Several years after..Eastern Shipping Lines vs. CA

-wharfage dues- not a loan

-if the judgment becomes final and executory, still the judgment debtor refuses to

pay, the obligation becomes a forbearance of money, in which case, a legal rate of12 % per annum is justified.

06 January 2012Should a debtor fail to comply with his obligations, what remedy or remedies does the

law provide to the creditor?

The law gives the creditor 3 remedies:

1.

Specific Performance

2.

Rescission

3.

Damages

** These are the 3 PRINCIPAL REMEDIES the law grants to a creditor

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You can combine Specific Performance or Rescission with Damages, but not Specific

Performance & Rescission because they are incompatible with each other.SPECIFIC PERFORMANCE- enforcing the obligation

RESCISSION- not to enforce but unmake or undo the obligation

DAMAGES- to take the place of whatever injury may have suffered by the creditor asa consequence of the debtor’s non fulfillment of the obligation

Is the remedy of Specific Performance available to all kinds of Obligations?

Specific Performance is never applicable to Obligations TO DO

In addition to the 3 Principal Remedies, what are the ancillary remedies provided bylaw?

1.

Levying on the debtors property

2.

Bringing of an Action of Subrogatoria

3.

An Action Pauliana

When and how may it be availed of?

1. Levying on the debtors property

- Go after the debtor’s properties, but before you can levy, you must first become a

judgment creditor.

-must first go to court, bring an action, and if you get a favorable decision, then you

can enforce the judgment against the debtor.

For how long can that judgment be enforced?

-5 years, from the time the judgment becomes final and executory

** It means the creditor has 5 years to execute the judgment

If the judgment remains unsatisfied, what will be next remedy of the creditor?

(assuming there is no property)




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-to bring another action against the same debtor

1st Action

-enforcing the Obligation

-by means of Specific Performance

-5 years lifetime to enforce (first 5 years)

2nd Action

-enforcing the 1st judgment

-based on the 1st judgment rendered

-5 years lifetime to enforce (second 5 years)

The 1 st and 2nd actions are not the same.

If after the second 5 years, the creditor still has nothing to collect, what now is his nextremedy?

-it is the end, 10 years is considered long enough

-the creditor has no more remedy

What do you mean against the property of the debtor ? Can the creditor choose?

Under the Rules of Court , whenever a creditor levies on the debtor’s property, he

cannot execute on the real property without exhausting first the personal property ofthe debtor.

Personal Property- movable

Real Property- immovable




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In levying the property, can you levy on any property as long as it is personal?

Yes, any property. However, a debtor is given by law the right to claimexemption (for practice of profession) up to a certain amount determined by law.

(Fixed by law)

It cannot go beyond the value fixed by law

To be entitled to the exemption, the debtor must claim this exemption

Suppose the judgment could not be executed for lack of properties, what is the second ancillary remedy?

What kind of an action is a Subrogatory Action? An Indirect Action

Why?

-because the creditor cannot bring the action in his own name

In whose name must the action be named?

Debtor

Why?

-because there is no privity of contract

What is privity of contract?

-there are no ties that bind the creditor to the debtor’s debtor.

-the creditor has no cause of action against the debtor’s debtor

Is it always an Indirect Action?

No.

When will it not become indirect?

In Lease Contracts

Z

sub-lessor should be authorized by the contract to sub-lease

Z

even if the sub-lessee is up to date, if the sub-lessor is not, the lessor may kickthem out both




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Z

the sub-lessee’s right depends upon the right of the sub-lessor

Z

therefore, the action need not be indirect

3rd Ancillary Remedy

Action Pauliana

Is an action brought to question or assail acts or contracts entered into by

persons for the purpose of defrauding his creditor.

To illustrate:

Pedro is the debtor, Jose is the creditor

Pedro has no known asset

-no asset named on him

-only a vintage car, but does not want to lose because of personal & sentimentalreason

-he tried to conceal that car to his creditor

-he brought the car to his friend Anton

-creditor learned of the arrangement

-Pedro made it appear it was sold to Anton a year before to Antonio

What now is the remedy?

Can the creditor avail of Action Pauliana?

No, because the contract must be valid, if it is void, it does not lie.

RESCISSION

- remedy of last resort

-harsh remedy, so that availment of such is allowed by law only after the creditor hasexhausted all the remedy

subsidiary remedy-can be invoked only after exhausting all the remedies




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** False Agreement cannot be the subject of rescission

-must be declared an absolute nullity

Common Purpose

Subrogatory & Rescission

-to reach out assets or properties of a debtor which has been concealed

-to bring it back to the property of the debtor

All Ancillary Remedies must be availed first in order to avail Rescission as a remedy

Preliminary Examinations

13 January 2012

Obligations may either be:

1. Immediately demandable OR

2. Cannot be demanded immediately

If an obligation is subject to a condition, it depends

Difference between condition & period

Condition

Future AND uncertain event

It must not only be future, but ALSO uncertain

It gives birth or provides extinguishment to an obligation

E.g. cause of death




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Period

Future AND certain even

Sometimes you may not know when it will come but it is certain

E.g. death

Table 1

DISTINCTION

CONDITION PERIOD

Elements:

1.

Futurity

2.

Uncertainty

Elements:

1.

Futurity

2.

Certainty

If an obligation is subject to a

suspensive condition, the happening

or fulfillment of the condition effectsthe birth of the obligation


suspensive period, the arrival of the

period effects not the birth of the

obligation but the demandability of the

obligation

In a suspensive condition , no obligation

exist yet during the pendency of thecondition

In a suspensive period, the pendency

of the period does not suspend the

birth of the obligation, the obligation is

already there, but is not yetdemandable


suspensive condition, the fulfillment orhappening of the condition shall make

the conditional obligation take effect

retroactively from the day of theconstitution of the contract

(entire conditional obligation retroacts)

There is no retroactivity




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suspensive condition, & the fulfillmentor happening of the condition is

dependent upon the will of the debtor

alone, the entire conditional obligationis not valid


suspensive period, & the arrival of theperiod is dependent upon the will of

the debtor alone, the obligation

remains valid, but will authorize thecourt to fix the duration of the period

03 February 2012

What obligations are immediately demandable?

If an obligation is subject to an illegal or impossible condition, what effect will beproduced by the attachment of it to an obligation?

The mere attachment of these conditions does not necessarily make the obligation

void.

Find out if the obligation is divisible or not .

1. If you can separate from the rest of the obligation and it can stand, only those thatare subject to illegal, impossible or negative condition are void.

2.

If you cannot separate, find out how it was attached.

If it was attached negatively (not to do/not to give), obligations remain valid.

Negative Obligation + illegal or impossible condition= valid obligation

If it was attached positively (to do/to give illegal, impossible or negativeservice/thing), the obligation is void.

Positive Obligation + illegal or impossible condition= void obligation

If the obligation is subject to a period, when may the performance of the obligation bedemanded?

The effect that will be produced will depend for whose benefit the period has been

attached.




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Article 1198 contemplates a period, which is suspensive in character but in order that

Article 1198 may be applicable to any given case, the period agreed upon which issuspensive must be for the benefit of the debtor alone, if not, Article 1198 will never

apply, so that, if the period agreed is for the benefit of the creditor alone or both

parties, Article 1198 does not apply.

Notice that Article 1198 speaks of the debtor losing the benefit of a period, the periodreferred to is suspensive and before he loses the same, it must be for his benefit

The debtor cannot lose something, which he does not have

06 February 2012

An obligation may either be immediately demandable or not.

Immediately Demandable Obligations:

1.

Pure Obligations- obligations that are neither subject to a condition nor a period.

2.

Obligations subject to a resolutory condition

3.

Obligations subject to a resolutory period

4.

Obligations subject to a negative impossible or illegal condition5.

Obligations subject to a suspensive period but the debtor has lose the right to make

use of the period

GO BACK TO ENUMERATION OF ARTICLE 1198

Article 1198. The debtor shall lose every right to make use of the period:

1.

When after the obligation has been contracted, he becomes insolvent, unless he

gives a guaranty or security for the debt;INSOLVENCY must exist AFTER the obligation has been contracted,

EXCEPTION: But even if the insolvency exists before the obligation, if the creditor

does not know he is insolvent, then the debtor will also lose the right to make use

of the period.

What KIND OF INSOLVENCY does the law talk about?




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There are two kinds of insolvency

1.

Insolvency In Fact- there is no court proceeding, the debtor simply cannotmeet his obligations

2.

Judicial Insolvency- by judicial declaration

Since the law does not distinguish, both are covered.

Insolvency means your liability is more than your assets.

Judicial Insolvency

1. Voluntary- if the debtor himself goes to court and asks to declare him insolvent.

2.

Involuntary- when it is the creditor who goes to court and asks to declare the

debtor insolvent.

Will it release the debtor from his obligation when he is declared insolvent?

No, not necessarily.

When the court issues a DISCHARGE, that will release him from his obligations

Not the declaration of Insolvency but the issuance of a Discharge

Suspension of payment does not mean the debtor is insolvent, but that he is not liquid.

Suspension of payment is not the same as Insolvency.

An insolvent person does not mean he is property less; or even if he does not

have a single property in his name, there can still be a third person because under the

law on guarantee, if he can find a friend to bail him out and provide the guarantee for

him.

2. When he does not furnish to the creditor the guaranties or securities which he

has promised;

What is the basis of losing the period under paragraph 2?

-the basis is breach of promise

Will it make any difference under paragraph 2 if instead of what was given ismore valuable than what was promised?




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-yes, because there is non-compliance

-if there was no compliance, it amounts to breach (basis)

-because paragraph 2 is concerned whether the debtor complied or not?

-therefore, as long as the debtor did not comply, there is no exception, the rule

is absolute

3. When by his own acts he has impaired said guaranties or securities after their

establishment, and when through a fortuitous event they disappear, unless he gives

new ones equally satisfactory; -the impairment must take place after the establishment of the guaranty or

security

-because if the impairment comes before the establishment, paragraph 3cannot apply

Causes of Impairment:

1.

The impairment must be by the act of the debtor- not necessarily to beloss

2.

Fortuitous event (Act of God), if not paragraph 3 will not apply-impairment not enough, it must get lost

Force Majeure – Act of Man

EXCEPTION: Unless he immediately gives a new security

The debtor is not entitled to be given time, he is not given the luxury of time

What kind of new security must he give?

Equally satisfactory to the one that got lostWho will be the judge to determine if it is equal? The debtor or creditor?

Neither of them

-the one who will determine is not the debtor or creditor alone, it should be both

parties, if the parties cannot agree, let the court determine.




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4. When the debtor violates any undertaking, in consideration of which the creditor

agreed to the period; If the debtor makes the creditor agree to an undertaking, if there are 5

undertakings, and the debtor violates 4 of these undertakings, will he lose the benefitto the period?

Not necessarily

It depends, if those 4 were not the undertaking that made the creditor

agree to the period, then he can still make use of the period, but if it were or one of

those was the undertaking that made the creditor agree to the period, then he losesthe right to make use of the period

-the undertaking that was violated should be the one that made the creditor

agree to it

The RULE IS ABSOLUTE

5. When the debtor attempts to abscond.

Abscond literally is not escape, it is to go into hiding

Not actual absconding, mere attempt to hide from the creditor is what is

provided by the law

Mere attempt is sufficient

The debtor must go into hiding where his whereabouts is unknown to the creditor

Absconding- go into hiding without making your whereabouts known to thecreditor

Will the mere presence of all the 5 make the debtor lose the right to make use of theperiod?

No, if the period agreed upon is not for the benefit of the debtor alone, this

provision will not apply.

This Article applies for suspensive period and for the benefit of the debtor alone.

The obligation subject to a suspensive period here is automatically converted into a

pure obligation, thus, making it immediately demandable




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07 February 2012 AM (make-up class)

An obligation may be subject to a condition or period

Article 1179 defines what a condition is but the codal definition does not truly satisfy

It must be future AND it must be uncertain, notice the conjunction “AND” used, in the

codal definition “OR” was used.

If we will follow the codal definition, it is not true that the elements of condition arefuturity and uncertainty

Common element of a condition and period – FUTURITY

If it is a thing in the past, technically it is not a condition anymore, but the law says thateven if it is a thing in the past but it is uncertain, it becomes a condition

Event + Uncertainty = Condition

Event + Certainty= Period

Death is a certain event, but if the cause of death is specified, then it becomes acondition

GO BACK TO TABLE 1

Does that mean that all Potestative conditions are void?

-NO

What is the status of a potestative condition?

-the potestative condition will only be void if it depends solely upon the debtor alone

because it will render the obligation nugatory

-If the potestative condition depends upon the will of the creditor, it is valid, because

between the two parties, the creditor is the most interested in the performance of theobligation.

What is a Potestative Condition?




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A potestative condition is one, which depends upon the will of one of the contracting

parties.A casual condition is one, which depends exclusively upon chance or other factors

and not upon the will of the contracting parties.

A mixed condition is one, which depends upon the will of one of the contractingparties and other circumstances, including the will of a third person.

When it comes to period, there is a different rule.

Even if the period is dependent upon the will of the debtor alone, obligation is still

valid, only that the court becomes empowered to fix the duration of the period.

Article 1197. If the obligation does not fix a period, but from its nature and the

circumstances it can be inferred that a period was intended, the courts may fix

the duration thereof.

The courts shall also fix the duration of the period when it depends upon the willof the debtor.

In every case, the courts shall determine such period as may under the

circumstances have been probably contemplated by the parties. Once fixed by thecourts, the period cannot be changed by them.

When are courts empowered to fix the duration of the period?

The court does not have the power to determine whether there is a period or not.

Period and duration are not the same, it is given that the obligation has a period.

2 Instances:

1.

If the parties to an obligation have agreed on a period but they failed to stipulateon the duration of the period.

2.

If an obligation is subject to a suspensive period but dependent solely on the will of

the debtor.

Both instances, there is a period, what is not known is the duration of the period

How should the court fix the duration of the period?

Gregorio Araneta, Inc v. The Philippine Sugar Estate Company, Ltd. (1967)




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The Court cannot fix a period merely because in its opinion it is or should be

reasonable, but must set the time that the parties are shown to have intended.-What is in the mind of the court to be reasonable is not material, it should not be the

basis in fixing the duration of the period.

-The basis should be what the parties contemplated

After the court shall have fixed the duration of the period, can it be changed? Bythem? Who is them?

-them means the COURT

-the Court cannot change it because once the duration of period has been fixed, itbecomes part and parcel of the contract.

How about the parties?

-Yes, provided that change was not made unilaterally

-As long as it was made mutually

What will then be the effect?

-It will novate the period fixed by the Court.

When an obligation subject to a period or condition, it can happen that an obligationbecomes immediately demandable

GO BACK TO ENUMERATION OF Immediately Demandable Obligations

Nos. 2 & 3 Obligations subject to a resolutory condition or period.

The moment it is fulfilled, the obligation is extinguished.

Effects.

Article 1190. When the conditions have for their purpose the extinguishment of

an obligation to give, the parties, upon the fulfillment of said conditions, shall return toeach other what they have received.

In case of the loss, deterioration or improvement of the things, the provisions,

which, with respect to the debtor, are laid down in the preceding article, shall be

applied to the party who is bound to return.




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As for obligations to do and not to do, the provisions of the second paragraph

of Article 1187 shall be observed as regards the effect of the extinguishment of theobligation.

But this should be understood to include also the rights of the creditor.

The creditor acquires all the rights of ownership.

1.

Jus Utendi (the right to use)

2.

Jus Fuendi (the right to enjoy the fruits)

3.

Jus Disponendi (the right to dispose)

4.

Jus Abutendi (the right to abuse)

5. Jus Vindicandi (the right to recover)

6.

Jus Possidendi (the right to possess)

Pending such return, subject to Article 1189.

Article 1189. When the conditions have been imposed with the intention of

suspending the efficacy of an obligation to give, the following rules shall be observed

in case of the improvement, loss or deterioration of the thing during the pendency of

the condition:1.

If the thing is lost without the fault of the debtor, the obligation shall be

extinguished;

2. If the thing is lost through the fault of the debtor, he shall be obliged to

pay damages; it is understood that the thing is lost when it perishes, or

goes out of commerce, or disappears in such a way that its existence isunknown or it cannot be recovered;

3.

When the thing deteriorates without the fault of the debtor, theimpairment is to be borne by the creditor;

4.

If it deteriorates through the fault of the debtor, the creditor may choose

between the rescission of the obligation and its fulfillment, with indemnity

for damages in either case;

5.

If the thing is improved by its nature, or by time, the improvement shallinure to the benefit of the creditor;




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6.

If it is improved at the expense of the debtor, he shall have no other right

than that granted to the usufructuary.Should it happen that the creditor loses not only his right to the obligation but also the

ownership of the object, he is obliged to return the object.

No. 4 Obligations subject to a negative impossible or illegal condition.

No. 5 Obligations subject to a suspensive period but the debtor lose the right to makeuse of the period.

The obligation subject to a suspensive period here is automatically converted into a

pure obligation, thus, making it immediately demandable.

Joint and Solidary

Can there be solidary obligation with only 1 debtor and 1 creditor?

-NEVER

-For it to exist, there must always be plurality of parties, and this may exist under the

debtor’s side or the creditor’s side or on both sides.

---------------- in order that an obligation may become solidary? (missing part) -No

-The law does not require for an obligation to become solidary that the name be used,as long as the ------------ ---------------- solidary

Joint & Solidary

Solidarily

In solidium

-As long as what is intended is solidarity.

Ernesto Ronquillo v. Court of Appeals (1984)

In this case, a creditor brought an action against 4 persons, against 4 differentdefendants, 1 of whom was Ronquillo.

Action for a sum of money, a collection suit.

Jointly and individually




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Sum of money which the Plaintiff was seeking from the 3 defendants

Before the case was decided, the parties entered into a compromise agreement

Condition:

1.

Plaintiff agreed to reduce his claim to 110,000 pesos, from 117,000 pesos,

condoning the 17,000 pesos.

2.

The 4 defendants shall pay 50% of the 110,000 pesos on the day specified in the

compromise agreement. The balance of 50% specified in the compromiseagreement shall also be paid.

3.

For all obligations above mentioned, we------- hereby bind ourselves to thePlaintiff, jointly and individually. ---signed.

The Compromise Agreement was presented in court, basis of judgment

-no payment was made

-none of the 2 installments were paid

Plaintiff immediately sought a judgment based on the Compromise Agreement

Plaintiff asked the 3 defendants to be solidarily liable

Ronquillo, manifested to the court that he was willing to pay his share in the obligation

-According to him, they bound themselves jointly but not solidarily

What is the meaning of jointly and individually; does it connote joint obligation or

solidary?

SC:

This is issue is not new because we have ruled on this in a prior case Parot vs. Gemora

- juntos or separadamente

-parties bind themselves Jointly & Individually

We ruled that Jointly & Individually, this should be understood to be solidary

Interpretation to be given, it means SOLIDARY




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In Solidary Obligations, solidarity can exist in the following:

1.

ACTIVE SOLIDARITY- on the creditor’s side

2.

PASSIVE SOLIDARITY- on the debtor’s side

3.

MIXED SOLIDARITY- on both sides

In Active Solidarity, the law says, anyone of the solidary creditors can demand

payment from any solidary debtor.

In Passive Solidarity, the law says, anyone of the solidary debtor can pay the entireobligation to any solidary creditor.

07 February 2012 PM

What is the basis of the provision of the law?

Why is each and every one given the right to demand payment from any solidarydebtor?

-Because the PRINCIPLE of MUTUAL AGENCY governs the relationship existing amongsolidary creditors

Mutual Agency- means that whenever anyone of the solidary creditor acts, saidcreditor acts not only on his own behalf, but also in behalf of the other solidary

creditors.

-each creditor is an agent of each other

in Passive Solidarity, each and every debtor can be compelled to pay the entireobligation

Mutual Guarantee- means that each solidary debtor guarantees payment for the

other solidary debtors.

So that…

When anyone of the solidary creditor demands fulfillment to any solidary debtor, the

debtor who receives the demand can only pay to the demanding creditor.




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Should a solidary debtor pay to a solidary creditor who did not demand, payment is

considered paid to a third person, that solidary debtor can be compelled to repeat such payment.

Solidary Obligations are never presumed.

Solidarity is never presumed. (Juliet) Only Joint Obligation, WHY?

-Because in solidarity,

if it exists on the creditor’s side, the law grants in each solidary creditortremendous power because anyone of them can demand full payment.

If it exist on the debtor’s side, the law imposes in each solidary debtortremendous burden because anyone can be compelled to pay the entire obligation.

It is because of these reasons that solidarity is never presumed.

In how many ways may solidarity exists?

Solidarity can exist only in 3 ways

1. When there is a law that provides for solidarity

2. When the parties themselves have stipulated & agreed on solidarity

3. When the nature of the obligation requires solidarity

Solidarity can exist only in these instances

So much so that those 3 things that were just mentioned, they are said to be the test of

solidarity.

So that when you are given a problem whether they are solidary or not,

1.

Is there a law that says that it is solidary?

2. Did the parties stipulate on solidarity?

3.

Does the nature of the obligation require solidarity?

If still the answer is no, the presumption of the law is it is joint obligation.

It is Joint Obligation that is presumed and never solidary. (Juliet Juliet)

Example:




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Negotiable Instruments Law

Section 17 paragraph G. Where an instrument containing the word “I promise topay” is signed by two or more persons, they are deemed to be jointly and

severally liable thereon.

-That is if a promissory note, the pronoun “I” is used but the note is signed by several

makers, if the promise to pay uses the pronoun “I”, but there are several makers, the

obligation is solidary.

-If the pronoun “WE” is used and there are several makers of the note, the obligation is

joint only.

WHY?

Because with the use of “I” with several makers under the note, each one of themakers makes an individual promise to pay the obligation.

Because with the use of “WE”, with several makers under the note, the several makers

are making a collective promise to pay, therefore, the obligation simply becomes joint

& not solidary.

If a promissory note is not negotiable because words of negotiability do not appear,

then it does not become solidary obligation.

If an instrument is not negotiable, despite the use of the pronoun “I”, it does not

become solidary.

What are these:

Negotiable Instruments Law

Section 1. Form of negotiable instruments. - An instrument to be negotiable must

conform to the following requirements:

•

(a) It must be in writing and signed by the maker or drawer;•

•

(b) Must contain an unconditional promise or order to pay a sum certain in

money;

•

• (c) Must be payable on demand, or at a fixed or determinable future time;

•

•

(d) Must be payable to order or to bearer; and




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•

•

(e) Where the instrument is addressed to a drawee, he must be named orotherwise indicated therein with reasonable certainty.

Illustration No. 1:

ABC are solidary creditors

XYC bound themselves solidarily

Mixed Solidarity because solidarity exists on both sides.

Situation: A, one of the solidary creditors demand payment from XTo whom can X pay?

While the general rule is that, the debtor can pay to any of solidary creditor, the

exception is when there is demand.

Payment can only be made to the demanding solidary creditor

If payment is not made to the demanding solidary creditor, payment is

considered paid to a third person.

Therefore, X can only pay to AWhat about Y & Z? to whom can they pay?

Since no demand was made to them, the general rule can apply.

Before X can pay, Y or Z pays to B or C, will it be valid?

YES

Can Y or Z compel A to accept the payment?

If Y or Z pays to A, can he refuse?

No, A cannot refuse to accept the payment; he can be compelled by Y or Z to

accept the payment.

What will apply to X is the general rule because there was no demand made toY or Z.

Illustration No. 2:




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Valid only as between the debtors themselves, because they bound themselves

solidarily to the creditors, said agreement would not bind the creditors becausethe creditors were not parties to the agreement.

The creditors can still demand from any of the solidary debtor the full amountregardless of the agreement of the solidary debtors.

Cases:

1.

2.

There can be no subrogation in what case?

13 February 2012

Illustration No. 3:

ABC are solidary debtors

XYC are solidary creditors

From whom may XYZ collect the debt of 30,000 pesos

A or B or C

If any of them paid, the obligation is extinguished

How much may X or Y or Z collect from A or B or C?

What is the relationship governing the creditors?

Principle of Mutual Agency

Each one of them is an agent of the other

So that, should any one of them acts, that creditor acts not only on behalf ofhimself but also in behalf of Y & Z

The moment one creditor acts, made a demand, with respect to the debtor,mutual agency ceases because the rights of Y & Z are fully concentrated.

When there is judicial or extrajudicial demand from the creditorto any of the of the solidary debtors. The solidary debtor mustpay the obligation even though there is such agreement.Reason: the solidary nature of the obligation which guaranteesfull performance of the obligation from either of the solidarydebtors

Trick question. The debtor who made full payment of the obligation is notsubrogated with the rights of the creditor. The debtor only acquires the rightto reimbursement from his co-debtors.




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The powers of X, Y, Z are concentrated to the demanding creditor

Can B or C pay the debt?

Since there is no demand yet, the principle of mutual agency still exists.

The general rule applies.

If B or C offers to pay X, can he refuse to accept?

No

Because in so far as B & C are concerned, since no demand has been made

yet, the mutual agency exist including X

What will apply to them is the general rule

That is, the principle of mutual agency

In the case of A, because demand has already been made, mutual agency ceases,he cannot pay to Y or Z

All the rights that belong to Y and Z are FULLY CONCENTRATED to X, but not with respectto B & C.

Suppose X made a demand to A, A pays, will the obligation be extinguished?

Yes, if payment was in full.

In Solidarity, does the law require that the parties (debtors) be bound by the sameterms?

NO, parties in solidary obligation need not be bound by the same terms and

conditions.

Illustration No. 4

ABCDE bound themselves solidarily in favor of X

DATE of Payment SOLIDARYDEBTORS

SHARE in the debt CREDITOR

Jan 10 A 300 X

Insofar as solidary debtors B and C are concerned




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Mar 10 B 200

April 5 C 500

June 6 D 300

Dec 10 E 200

TOTAL DEBT: 1,500 pesos

Parties are not bound by the same terms (dates)

VALID

On Jan 10, only 300 should be paid because that is the amount that fell due.

X can collect from A or B or C or D or E the 300 that is due on Jan 10

If A paid the 200 due on Mar 10

A will have the right to seek reimbursement only from B because what hasbecome due is only the 200, share of B

Because that is what corresponds to his share that has become due

Illustration No. 5

The law says, none of the solidary creditors may do anything prejudicial to the othercreditors, only those that are beneficial.

XYZ creditors

ABC debtors

To whom does that provision apply?

That applies only to the active subjects (creditors), XYZ.

What is the basis of such provision?

Principle of Mutual Agency

How does it relate to what the law provides?

Why does the law not allow it?




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Principle of Mutual Agency, under the law on Agency, the agent cannot do

anything prejudicial to his principal because he is always considered as extension ofthe personalities of the principal.

Illustration No. 6

Article 1215

A, debtor of XYZ, paid the obligation with a DOG to X

-X’s act is prejudicial to Y & Z because they hate dogs

Provided the acting creditor delivers the respective share of the other creditors

-This must first be complied with

Whether the obligation was performed or not becomes immaterial because thecreditors receive what is due them.

Should the acting creditor, after performing the act he did, becomes insolvent, what

will be the status of the act of the creditor?

-If he cannot deliver?

The obligation remains extinguished

-What are the remedies?

None. There is no remedy.

This is a lapse in the law.

He might not be able to deliver; creditors cannot go after the debtor.

The remedy should have been to recover from the acting creditor but because of

insolvency, they do not have remedy.

THIS IS AN OVERSIGHT IN THE LAW.

AMMEND THAT PARTICULAR PROVISION.

14 February 2012 AM

ALTERNATIVE OBLIGATIONS

Compensation, novation, confusion and remission




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-there is a “reservation of the right” to render a substitution of the thing due

-there is right of choice

-the right of choice is given to the debtor

-this right of choice can never be transferred to anyone

If an obligation is Alternative, there is a right of choice, is the right to choose absolute?

No, because the law imposes a limit on the right to choose.

The debtor cannot choose an object that is illegal, impossible, & which was notcontemplated by the parties

If the right of choice belongs to the debtor, once the debtor has made the choice,can he change?

It depends. As long as the choice of the debtor has not come to the knowledgeof the creditor, it is still alternative

If it comes to the knowledge of the creditor, it becomes simple and pureobligation, alternative obligation ceases

In Facultative obligation

The right of choice always remains with the debtor.

What is it that makes the obligation Facultative?

It is the presence of the reservation of the right to render a substitute

Suppose the principal thing due is lawful, and the debtor intended to substitute that

unlawful?

*Not valid

What determines the legality or validity of an obligation is the validity of the principal

thing due




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Effect of Loss in Alternative

Shall be determined by how the last thing got lost

Causing the lost, it is like exercising the right to choose, what determines if

the debtor is liable or is how the last thing got lost

Last thing got lost- - without the fault of the debtor

-debtor not liable

Last thing got lost -with the fault of the debtor

-debtor is liable for damages

Can there be Condonation or Remission in Solidary Obligations?

Yes

What is the effect of Condonation if the obligation is solidary?

Will depend in the object of condonation

If only part of has been condoned, there is partial extinguishment

If specific share of one solidary debtor that has been condoned or remitted will

result to partial extinguishment, it shall be reduced to what has been condoned

If not part but only the solidary tie, what will be extinguished is only the tie that

binds the debtor to the creditor

From Solidary to Joint

A solidary tie is extinguished, converting it to a joint obligation

If the sources of Solidarity is law

As in the case of loan

-Commodatum

The loan of a non-consumable length

For a definite person or specific purpose

What passes from lender to borrower is the possession and use of the thing




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Ownership remains to lender

Obligation to the lender is to return the very thing borrowed

Not equal to it but must be the very thing borrowed

There is no substitution

That is why the object is non-consumable

To grant to the borrower the right to possess & use the thing borrowed is the

purpose of the law

If consumable, cannot be returned

Not the same as non-fungible objects- cannot be substituted

Consumable objects are susceptible of substitution

Consumable- cannot be used without consuming (money)

Muutum or Simple Loan

The object is always a fungible good or thing

Bank deposit- not governed by law on deposit, contract is governed by law on loan

Contract of loan

You: Lender

Bank: Borrower

Time deposit- expiration of time agreed upon

Ordinary- subject at any time

-equivalent to demand note = withdrawal slip

In solidary obligations, should the thing get lost through the fault of only one of the

solidary debtors:




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All the debtors will be liable to the creditor, not only the value of the thing lost

but also the interest and for damagesHowever, the law says, should the thing due get lost through the fault of one of

the solidary debtors, if one who was made to pay is an innocent debtor , such debtor,

despite his innocence shall be liable for the value of the thing due, interest &

damages, he is given by law the right of recourse against the guilty debtor.

Up to the extent of the entire amount paid by the innocent debtor

So that, in the end, it is the guilty debtor who pays the full amount

Should the guilty debtor be made to pay, he shall be liable for the value of the thing

due, interest, & damages, and without the right of recourse.

SAME RULE applies in DELAY

OBLIGATION with a PENAL CLAUSE

An obligation that contains a penal clause

What is a penal clause?

A penal clause is an accessory (additional) undertaking made by a party to acontract to answer for greater responsibility or greater liability in case of breach.

What is their purpose?

Following the provision of the law, the purpose of the penalty is to serve as asubstitute for indemnification for damages.

Suppose in an obligation without a penal clause, breach is committed, may the

innocent/injured party recover damages as the consequence of the breach of theguilty party?

YES. Provided such injured party can prove that he suffered injury/damage bythe breach of the guilty party (this proof is indispensable)

That is, if an obligation does not contain a penal clause and breach is

committed, recovery of damages is dependent from the proof of injury suffered

(condition precedent)




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If it contains a penal clause and breach is committed, recovery of damages as a rule,

the answer is NO.Because the remedy of the innocent party is to claim for the penalty but he

does not have to prove that he suffered a damage/injury but he has to prove thatthere is breach

RULE IS NOT ABSOLUTE because of the 3 INSTANCES

If an obligation contains a penal clause, can the injured party recover both damages

& penalty?

Yes.

3 INSTANCES:

1.

When the parties so stipulate

2.

When the debtor refuses to pay the penalty

3.

When the debtor is guilty of fraud in the performance of the obligation (DoloIncidente- kind of fraud which is a source of damages)

Only in those instances can there be recovery of penalty & damages

REMEMBER:If an obligation does not contain a penal clause, and breach was committed, only

damages can be claimed

Always predicated based on proof that damage was suffered, if no suchdamage, damages cannot be recovered.

If the obligation contains a penal clause & breach is committed,

1.

Automatically, he acquires the right of penalty

2.

Damage suffered need not be proven3.

Basis to claim is not damage but breach- which must be established

What penalties may be agreed upon?

Any kind of penalty as long as that agreed upon is not contrary to law, morals,

good customs, public order or public policy




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Subject to the limitation of the right to stipulate as well as the right to contract

Art. 1306Suppose the parties have agreed on a penalty that can be recovered in case breach

is committed, can that penalty be reduced?

Yes.

The kind of penalty that can be reduced by the court is one that is valid and not

a null & void penalty because it does not exist in the eyes of the law, therefore,

nothing can be reduced

GROUNDS to reduce by the court

1.

When there has been partial performance of the obligation

2.

When there has been irregular performance of the obligation

3.

Even if there has been no performance at all, if the penalty is found to be iniquitousand unconscionable

What is the difference between partial & irregular?

Partial

There has been performance but not total, only in partAnswers the question, how much of the obligation has been performed?

Extent of performance

Irregular

There can be total performance but not within the tenor of the obligation

Answers the question, how was it performed?

Manner of performance

Unconscionable

Subject to reduction of the court

When does it become unconscionable?

When the agreed penalty becomes shocking to the conscience of the world




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When may this provision be availed of, the power of the court to reduce the penalty?

Commercial Credit Corporation CDO vs. The Court of Appeals and The CDOColiseum, Inc. (1989)

ART. 1229. The Judge shall equitably reduce the penalty when the principal

obligation has been partly or irregularly complied with by the debtor. Even if

there has been no performance, the penalty may also be reduced by the

courts if it is iniquitous or unconscionable.

“The foregoing provision of the law applies only to obligations or contract, subject of a

litigation, the condition being that the same has been partly or irregularly complied

with by the debtor. The provision also applies even if there has been no performance,as long as the penalty is iniquituous or unconscionable. It cannot apply to a final andexecutory judgment.”

The benefits of this provision can be availed of only when the obligation with a penalclause became a subject of court litigation.- DA

As long as it is not brought to a court, the penalty agreed upon cannot be reduced in

accordance with the provision.

It is only the court who has authority

Not when parties agreed to reduce an agreed penalty, this can be done.

14 February 2012 PM

When it comes to modes of Extinguishment of Obligations, the law provides thePrincipal causes & the Additional causes

The additional causes are:

1.

Annulment which includes rescission

2.

Fulfillment or arrival of resolutory period or condition3.

Prescription

4. Death

Prescription

Does Prescription extinguish an Obligation?

Principal causes1. Payment or performance2. Loss

3. Condonation or remission of debt4. Confusion or merger of rights ofcreditor and debtor5. Compensation6. Novation




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IK

-The Court in the case of DBP, said, that Prescription does not extinguish an obligation;

what is extinguished is the right of the creditor to enforce the obligation.Such that, after an Obligation has prescribed and the creditor still seeks to enforce the

same, the debtor can invoke Prescription as a defense on the claim that once anObligation has prescribed, the creditor loses the same.

Civil Obligation ceases to exist and is transformed to a Natural Obligation.

What is extinguished is the Civil Nature of the Obligation.

How is Civil Obligation distinguished from a Natural Obligation?

-In Civil Obligation, the sanction is court action, whereas in Natural Obligation, thesanction is justice & equity.

The entire Chapter in Natural Obligation is new which was taken from the AmericanLaw.

A Natural Obligation is valid but cannot be enforced, and if voluntarily complied orperformed with, the Obligor cannot recover what he has paid.

If involuntary, that is recoverable by the debtor, he can bring an action to recover.

Why is Civil Obligation, though prescribed, is not extinguished?

For example, an Obligation involving debt in money exists; let us assume that the

Obligation is in writing, under the Law on Prescription, what is the period of

prescription? -10 years.

(Juliet Juliet)

If the creditor does not enforce the Obligation within that prescription of 10 years, theObligation is not extinguished.

Prescription does not extinguish an obligation, it continues to remain, but it undergoes

a change, it ceases to be a Civil Obligation and is converted into a Natural Obligation.

Even if the obligation remains unpaid for 50 years, it remains an obligation.

If on the 90th year, assuming parties are still alive, the debtor offers to pay and the

creditor accepts the payment, is the obligation extinguished?

-Yes, what extinguishes the obligation is still the payment, not the prescription.

Can death be considered also as a mode for extinguishment of an obligation?




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-When only the debtor can perform the obligation, that is, when the obligation is

purely personal to the debtor.-If an obligation can still be performed even after the death of the debtor, then the

obligation is not extinguished.

What if the creditor dies?

-It depends, if the obligation cannot be performed because of the death of thecreditor, it can lead to extinguishment.

Example: Obligation to paint the creditor

*The personal character of an obligation is not only determined through the debtor’sside, but also through the creditor’s side.

How is payment defined by law?

-Simply means that payment does not only apply to obligation to give, it also appliesto obligation to do or not to do.

-Payment can be made to all kinds of obligation. (in Socorro)

What are the Characteristics of Payment ?

1.

Integrity of Payment2.

Identity of Payment

3.

Indivisibility of Payment

What is Identity of Payment ?

-Simply means that what is performed must always conform to the thing due.

-They cannot vary

-The moment one varies from the other, Identity is absent.

-The object must be identical to what is due

Is there an exception to that?

-Yes

1. Dation in Payment




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Why is that considered an exception to Identity of Payment?

-Because what the creditor receives is not exactly the thing due, he receivessomething different.

What is Integrity of Payment ?

-Performance must always be in full.

Is there an exception?

-Yes

1. Substantial performance

2. Waiver by the creditor or Estoppel

Substantial Performance

-Liability for damages still attaches

-The debtor who does not perform in full is still liable

Estoppel/ Waiver

-There can be no liability for damages

Why?

Z

In substantial performance, there is no total/complete performance of the

obligation, the obligation is performed only substantially and because theperformance is not total, he is still liable.

Z

In estoppel, the creditor knowing, accepts the performance without any protest orobjection, then the debtor is not liable

Z

The creditor has the right to insist the fulfillment of the obligation, such right may be

waived by the creditor.

What is Indivisibility of Payment?

-There is a seeming similarity with Integrity of Payment

-Must be performed as a whole, but this is also subject to some exception

Exception




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IV

1.

When the parties have agreed on divided performance

2.

---

In which case, partial performance is allowed

Are Characteristics the same with Requisites of Payment?

-Requisites of Payment refers to manners, which are indispensable to the validity of

payment in the obligation

-it answers the question, “When will payment be valid?”.

-Characteristics of Payment refers to manners, which are merely descriptive on how

payment should be made

-have nothing to do with the validity of payment

-it answers the question, “How should payment be made?”.

What is the effect of payment if made by an incapacitated person?

-When payment is made by an incapacitated person, it shall not be valid

When the law says it is not valid, does it mean that the payment it is void?

-It does not mean that the payment is void, this is without prejudiced to the provision ofArticle 1427

-Should be read in conjunction with RA 6809, which reduced the age of majorityfrom 21- 19

-Speaks of a minor 21-18

-The minor referred to in Article 1427 is no longer a minor in RA 6809

-Under the Civil Code, they are minors, but under RA 6809, they are of age of majority

17 February 2012




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KW

We said before that Requisites of Payment are not the same with Characteristics of

Payment, why? Juliet Marie Daza

Requisites of Payment - matters affecting the validity of payment

Characteristics of Payment - merely describes how payment should be made

What are the Requisites of Payment ?

1.

Parties- are always two, the one who makes the payment, the other one is the onewho receives payment

2.

Object - the thing to be paid

3. Time, manner & place the payment should be made

Time

When payment should be made?

When may an obligation be demanded?

-on the due date

When can we say that an obligation has become due?

-The moment the creditor acquires the right to demand the obligation

-When that time comes, that is the DUE DATE

If the due date falls on a Sunday or a holiday?

-The general rule is that obligation must be paid on the date if fells due

Exception

When there is a law that provides otherwise

Example: Negotiable Instrument Law

-falls on a Sunday or Holiday, that instrument must be presented on the succeedingday

-if it does not fall under any of the obligation, the obligation must be paid on that dayeven if it is on a Sunday or a holiday




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-payment must be paid on a reasonable hour of a business hour

What do you understand with the manner of payment ?

Can payment be made in any currency?

RA 529 Uniform Currency Act

-provides that any stipulation in a contract which authorizes the creditor to demand

payment in gold or currency other than Philippine legal tender is void

-only the stipulation is void, said obligation must be discharged in Philippine legaltender or currency

What is Legal Tender ?

-That currency which when offered in payment of a debt, the creditor cannot refuseto accept

-Whether public or private

Is the Uniform Currency Act still in effect?

-It has been repealed by RA 8183

What does RA 8183 provide?

-Payment on monetary

-When the parties have so agreed

-In the absence of an agreement, the debt must always be discharged in legal tender

-so that the debtor cannot compel the creditor to accept payment in other currency,or that the creditor cannot demand payment from the debtor in other currency

When may demand be made?

-the proper place of payment

-the law is silent in the place of demand, but in as much as you make a demand, you

expect to be paid, then it must be made in the proper place of payment

Where is the proper place of payment ?

1st Rule




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Follow the terms of the contract

If the contract is silent on the proper place of payment

2nd Rule

Make a distinction between specific & generic thing

If Specific

Then in the place where the thing is located at the time of the constitution of the

contract.

If the thing is in motion or transit, then in the domicile of the debtor

If Generic

The proper place of payment will be the domicile of the debtor

-the law says domicile and not residence

What is the difference?

-Domicile is always permanent; residence may be temporary or permanent

-Domicile is a place where a person may be absent from but has the intention of

returning to

What is the effect of changing one’s domicile?

-If an obligation is payable in the debtor’s domicile, the proper place will be the new

domicile of the debtor, but he becomes liable to the creditor for all the expenses

incurred in tracking down his whereabouts

20 February 2012

What are the Characteristics of Payment

1. Identity of Payment

-the thing that is offered must be the same as the thing due

Exception




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Dation in Payment is one of the special form of payment

Give me another form of payment

Application of Payment

-The designation of the payment to which the debtor wants it to apply

When does it take place?

- Application of Payment is proper when the debtor has several debts of the

same kind due in favor of the same creditor but the payment of the debtor is

not enough

Is that absolutely dependent on the debtor?

-Primarily the right to make an Application of Payment is vested by law to the

debtor, but if he does not make an Application of Payment, the creditor may

suggest how he has applied the payment in which case, when the debtoragrees, the obligation is extinguished.

If both did not apply

-The payment shall then be applied in accordance with lawWhat do you understand with “the most burdensome to the debtor”?

What if all are of the same burden?

-It will be divided to as many debts equally

Basis of Law- EQUAL DISTRIBUTION

When is an Application of Payment made?

-at the time of payment

Is there an absolute right on the part of the debtor to choose how the payment

should be made?

-It is not an absolute right because the exercise of this right is subject tolimitations by law

What are the LIMITATIONS?

Art. 1254

Legal application ofpayment of the law

Making of payment




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1.

The debtor cannot make an application of payment in such a manner as

to compel the creditor to accept partial payment, so as not violateintegrity of payment as to indivisibility

2.

It should be applied to interest first, should there be excess, such excesscan be applied to the principal

3.

It cannot be applied to obligations that are not yet due or liquidated

4.

If the parties have stipulated on how payment should be applied

Payment by Cession

-cession means to cede, to surrender, to give to another

What is it that the debtor is ceding when he makes a payment in cession?

-Only the right to sell, but insofar as the property is concerned, it is not beingceded to the creditor, ownership remains to the debtor.

Why is it necessary?

-because with out it, the creditors will not have the power to sell, what does notbelong to them cannot be sold by them

In making a Payment by Cession, what does the law require?

-The consent of all the creditors is necessary, there must be unanimity

What will be the remedy of the debtor if one creditor objects?

-The remedy is for the debtor to resort to Insolvency Proceedings

Insolvency may take place in two ways

Voluntary- it is the debtor who is the one who goes to court and asks the court to

declare him insolent

Involuntary- it is not the debtor but any one of his creditors who goes to courtand asks the court to declare the debtor insolvent




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Tender of Payment & Consignation

-The only form of payment that consists of two acts

-One is a prelude to the other

Tender of Payment - offering of payment

-always precede the Consignation

-it does not extinguish an obligation because it is merely an offer

Can Consignation be made without Tender of Payment?

-Yes

Five Insatances

1.

When the creditor is absent or unknown or does not appear at the place

of payment

2.

When he is incapacitated to receive the payment at the time it is due

3.

When without just cause, he refuses to give a receipt

4.

When two or more persons claim the same right to collect

5.

When the title of the obligation has been lost

What kind of proceeding is Consignation?

1. Judicial – when consignation is made pursuant to the Civil Code

2. Extra Judicial- when consignation is made pursuant to BP 25

Is that a matter of choice on the part of the debtor?

-Consignation under BP 25 is allowed only when the things due are rentals in

arrears

If the debtor resorted to Judicial Consignation, is deposit to the court necessary?

-

If the debtor deposits the thing to Judicial disposal, is the obligation extinguished




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-1. The obligation is extinguished when the creditor claims the thing due that is

deposited to the court-2. When the court makes a declaration that consignation was properly done,

the debtor will be discharged of the obligation

If the debtor consigns the thing due to the court, and the creditor wants to

claim the thing, can the debtor prevent the creditor from claiming the thing

due?

-the debtor can prevent the creditor if the creditor is withdrawing the thing with

reservation, meaning, that the thing consigned is not equal to extinguishment ofobligation

=WITHDRAWAL with RESERVATION

-the debtor can ask the court to settle first how much is the total amount due

After consigning, can the debtor be prevented by the creditor to withdraw?

-Yes he can, by claiming the thing consigned

-because the debtor, pending the consignation, still owns the thing

When is consignation not proper ?

-The Court in Vda de Quirino v. P said that Consignation is not proper in twothings, if what is involved is the right of redemption or right of option.

-Because there is no debt due, there is nothing to pay, consignation will never lie

-What is involve in those two instances is merely the exercise of a right

-Consignation is a form of payment

Where should it be made?

-must always be made in the proper place of payment-in as much as it is a form of payment, it is subject to the rules of payment

What will be the effect if it was made in the wrong place?

-Case: Chua kay v lim chang




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21 February 2012

Characteristics of Payment

-these has nothing to do with the validity of payment

1. Integrity of Payment

Exceptions:

a. Substantial Performance

Is there a total performance?

-There is none

Is there a claim for damages?

-There is

Why?

-Because of the absence of the total performance, the debtor is not relieved of the

entire obligation

b. Estoppel

Is there a total performance?

-There is none

Is there a claim for damages?

-There is none

Why?

-Because it is marked by Estoppel

2. Identity of Payment

a. Dation in Payment- consent of creditor is always necessary because the debtor

is giving something different from the thing due

Should the creditor accept the Dation in Payment, what would be the effect to theobligations?




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KV

-Dation in Payment will not always result to the extinguishment of the obligation,

because the value of the thing offered may be less than the thing due. It depends onthe agreement of the parties.

3. Indivisibility

Exceptions:

a. When the parties have agreed partial performance

b. When the full performance of the obligation becomes impractical

If payment is made by an incapacitated person, what is the status of the payment?

-Art. 1239. In obligations to give, payment made by one who does not have the free

disposal of the thing due and capacity to alienate it shall not be valid, without

prejudice to the provisions of Art. 1427 under the Title on Natural Obligations

-Provisions of Art. 1427 that makes payment voidable because under 1427, a minor

can recover what he has paid for as long as what has been paid is still in thepossession of the creditor.

When will Art. 1427 apply?

When the one who makes the payment is a minor between 18-21, however, ageof majority was reduced to 18 by RA 6809, thus a minor is below 18 years of age

Therefore, when payment is made by a person below 18 years of age

What is the effect of payment if it is made to an incapacitated person?

Payment shall not be valid, except or unless,

Art. 1231. Payment to a person who is incapacitated to administer his property

shall be valid if:

1.

he has kept the thing delivered, OR

2.

insofar as payment has been beneficial to him (even if he did not keep the thing

paid)

Insofar as benefit is concerned, it refers to ALL KINDS of BENEFITS, the ONLY EXCEPTIONrefers to SENSUAL BENEFIT .

1241

Derived pleasure and satisfaction




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Must payment be always made by a debtor for it to be valid?

-No

What is the effect of payment if it is made by a third person?

2 Effects to consider if payment is made by a 3 rd person

1. Status of Payment

2.

What rights does the payer acquire from the principal debtor

Explanation:

1.

The mere fact of payment by a third person does not make the payment void,for as long as the creditor accepts the payment, it is valid.

What is essential is the acceptance of the creditor

2. You have to make a distinction between a third person who seeksreimbursement and a third person who does not seek reimbursement.

If the third person who makes the payment, has the intention of seekingreimbursement:

First question is whether the principal debtor consented to the payment?

If the third person pays without the consent or knowledge of the principal debtor,he only acquires the right of BENEFICIAL REIMBURSEMENT

Beneficial Reimbursement means that the third person is entitled to

reimbursement up to the extent that was beneficial to the principal debtor

If payment was accepted by the creditor, the obligation is extinguished

If no benefit redounded to the principal debtor, he cannot seek reimbursement

His remedy is to go after the creditor (since creditor condoned the obligation, e.g.

Condonation)

Suppose payment was authorized by the principal debtor, the third person acquires 2rights:

1.

Right of Absolute Reimbursement

2.

Right of Subrogation




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Right of Absolute Reimbursement

Whether or not debtor benefitted, the third person is entitled to reimbursement

Right of Subrogation

Acquisition of all the rights of the creditor which-----------------

What will be the effect of payment made by a third person who has no intention of

seeking reimbursement?

What will make it a donation is when the principal debtor consents to suchpayment

Consent of debtor is necessary to give rise to a donation

The donee must accept the donation for it to be valid, in this case, the debtor

must consent to the payment in order to become a donation (the donee is the

debtor)

There can be no donation unless the donee accepts the donation

What is the effect of payment if made by a debtor not to the creditor but to a third

person?

Payment is valid provided it redounds to the benefit of the creditor , however,such benefit must be proven by the debtor.

Proof of payment is required, w/o proof , payment is not valid.

Proof of payment is not required in the following:

Article 1241. Payment to a person who is incapacitated to administer his

property shall be valid if he has kept the thing delivered, or insofar as the payment has

been beneficial to him.

Payment made to a third person shall also be valid insofar as it has redounded

to the benefit of the creditor. Such benefit to the creditor need not be proved in thefollowing cases:

(1) If after the payment, the third person acquires the creditor's rights;

(2) If the creditor ratifies the payment to the third person;

With respect to guaranty, mortgage, or ple




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(3) If by the creditor's conduct, the debtor has been led to believe that the third

person had authority to receive the payment. (1163a)Proof of payment is always necessary, why is proof being dispense here by the law?

1. If after the payment, the third person acquires the creditor's rights;

The fact that the third person who received the payment has now acquired the rights

of the creditor, the third person becomes the creditor, thus, as a creditor, he does not

need to issue a proof.

2. If the creditor ratifies the payment to the third person;

The act of ratifying the payment is an act of validation. The creditor validates the

payment.

3. If by the creditor's conduct, the debtor has been led to believe that the third person

had authority to receive the payment.

24 February 2012

REAL NOVATION

Substituting the person of the debtor

Two ways

Expromision

A third person may substitute himself in place of the debtor

Consent of the old debtor is immaterial

What is essential is the consent of the new debtor & creditor

Delegacion

Consent of all the parties is essential




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Suppose all parties come to an agreement whereby the new debtor will assume the

obligation, if the new debtor fails to comply, what remedy does the creditor have?Against who the creditor may run after?

All, the creditor may run after the old debtor as well

Will the old debtor not be released of the obligation?

No

Assuming the obligation by the new debtor does not necessarily release the old

debtor

There is only an increase in the number of debtor

Lopez v. Court of Appeals

What will release the old debtor will be an agreement between the 3 parties to release

the old debtor from the obligation

Unless there is release, NO NOVATION TAKES PLACE.

Suppose the new debtor assumes the obligation of the old debtor, should new debtor

become insolvent, what would be the effect?

Make a distinction between the 2 kinds of substitution

1. By Expromision- liability of the debtor is not revived

2. By Delegacion- liability of the old debtor is still not revived but there are

exemptions.

If at the time of the substitution, the insolvency of the new debtor is

existing and is publicly known or is known to the old debtor.

How many kinds of subrogation are there under the law?

There are 2 Kinds of Subrogation:

1.

Conventional Subrogation- never presumed, since it is created by

agreement, it must be established by proof




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2.

Legal Subrogation- presumed by law

27 February 2012

CONTRACTS

The codal definition of obligation has been the topic of criticism, many as inaccurate

as well as incomplete because it views only from the standpoint of the obligor.

The definition of obligation has been said to be very incomplete because it does not

mention the other party.

It is the obligee who gets what the obligor gives

We have the same problem under the definition of contract

The codal definition of contract is likewise defective

It is an agreement of two person, which is not true

Because it is not the plurality of persons that is necessary but the plurality of

parties

In auto-contracts, which is very common under the Law on Agency

e.g. A principal may authorized his agent to borrow money for the principal, the

agent himself can be the lender himself

And when a promissory note is executed, the agent can execute the promissory

note not only as the lender but also as the agent, borrower of the principal

What about contracts?

Where only 1 party prepares all the conditions, will that kind of contract be valid? Will

there be mutuality?

YES




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Simply means, parties to a contract are bound not only to what they have

expressly provided for in the contract but also to whatever naturally flows from thecontract as a natural consequence.

So that, if parties do not agree on natural consequences, they are still bound

Mutuality of contracts

The validity as well as effectivity not only of the contract but also of the terms

thereof are never left to the will of one of the parties, there must be mutuality.

Reason: To prevent a contract from becoming illusory, useless, because if

the validity and/or effectivity of a contract is left to the will of one of the parties, thatparty will control the birth of the contract.

He will have the power, this is what will make the contract illusory

However, the law say, if instead of validity & effectivity, what is left is the

termination, it will be valid

Because what is sought to be prevented takes place already

The contract becomes potestative but if what is left is not the birth but only the

extinguishment, that is not prohibited by law

It does not defeat the existence of the contract

Relativity of contracts

Answers the question who are bound by the contract

The answer to that depends on the rights involved in the contract

If Transmissible Rights

Not only between parties but also upon their heirs, assigns & successors in

interest

If Intransmissible Rights

Only as between the parties




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Relativity of contracts tells us how rights become transmissible or intransmissible

The right involved is very material

Whether transmissible or not

How does a right become transmissible or intransmissible?

1.

Depends primarily upon the law

If no applicable law

2.

Stipulation of the parties

If no applicable law, and the parties have not stipulated

3.

Last test is the nature of the right

In so far as Relativity of Contract is concerned, there is an EXCEPTION

Stipulation Pour Atrui- stipulation between parties to a contract where parties

deliberately confer a benefit to a third person.

In case of an Insurance Contract

Insured & Insurer = beneficiary

May this benefit be withdrawn?

As long as they have not been accepted by the beneficiary,YES.

Once accepted, only with the conformity of the beneficiary

The grant of this benefit must always be deliberate

If the grant is merely incidental & not deliberate, it is not Stipulation Pour

Atrui

If benefit is decided to be withdrawn, who can withdraw?

In as much as the benefits are conferred by the parties, it is only the




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2.

The representative must act within the authority given to him

Should any one of this is missing, the contract is still valid but not enforceable to

the person sought to be represented

So that in so far as the person making the representation, he answers to the

contract

It is valid and enforceable to him (representative)

Because someone must be answerable

3 Kinds of Unenforceable Contracts

1.

Lack of Authority

2.

Contracts covered by the Statute of Frauds that fail to comply with its requirement

3.

Both parties do not have capacity to give consent to a contract

What are Innominate Contracts?

Contracts as a rule are either innominate or nominate

Innominate Contracts are contracts without names; they do not occupy a definite

position in our legal system

Nominate Contracts are contracts which are given specific names; they occupy adefinite position in our legal system

What will govern?

Article 1307. Innominate contracts shall be regulated by the stipulations of the

parties, by the provisions of Titles I and II of this Book, by the rules governing the most

analogous nominate contracts, and by the customs of the place.




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Perfected by the delivery of the object

A contract has 3 Essential Elements to be valid. Consent. Object. Cause. (COC)

What is Policitation?

In English, Imperfect Contract, refers to an offer that has never been accepted.

It can never give rise to a contract

Of the 3 essential elements of a contract, number 1 is Consent, the law does not givea definition of consent, what the law provides is how consent is manifested

Article 1319. Consent is manifested by the meeting of the offer and the

acceptance upon the things and the cause which are to constitute the contract. The

offer must be absolute. A qualified acceptance constitute a counter-offer.

On the basis of that provision, Consent has 2 Elements

1.

Offer

2.

Acceptance

What are the requisites?

Once an offer is made, may it be withdrawn?

As long as the offer has not yet been accepted, it can be withdrawn at anytime

Suppose the offeror in making an offer gives the offeree an option period within which

to accept or reject the offer, can the offer be withdrawn?

Mere grant of an option does not preclude the offeror from withdrawing the

offer, no liability will attach , unless the withdrawal is made arbitrarily or in abuse of

rights

If an offeree wants to make sure that the offer is not withdrawn within the option

period?




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He must give a separate consideration for the grant of option period

What do you call that consideration?

Option Money

How much should it be to be valid?

There is no law that fixes the amount, it all depends upon the agreement of the

parties

What is the effect of giving an option money?

It gives rise to the creation of an OPTION CONTRACT

Not a principal contract, only a preparatory contract, preparatory to the

principal contract

For whose benefit is an Option Contract?

Always for the benefit of the offeree and never the offeror.

Why?

Because the option of whether to proceed with the principal contract or not is

given to the offeree.

While the offeree can compel the offeror to proceed with the principal

contract, the converse is not true

The option is not given to the offeror, it is always given to the offeree

What is the effect of giving an option money?

1.

Gives rise to an Option Contract

2.

The option is given to the offeree and never to the offeror

3.

As long as the option period has not yet expired, the offeror cannot withdraw his

offer




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Suppose an option contract is created by the grant of an option money, and the

principal contract does not push through, may it be recovered?

NEVER. Even if the parties agreed that it is refundable, it will not be valid (the

agreement)

Because it is in consideration of the option contract

Is it the same as Earnest Money?

No. It is always part of the purchase price.

Purpose is to show that the person is earnest in buying

Any amount as agreed upon

But unlike option money, earnest money is refundable if agreed upon by the

parties

If an offer is made but is not accepted, IMPERFECT CONTRACT.

If an offer can be withdrawn in accordance with the rule, how about an

acceptance?

Remember, acceptance is one of the elements of consent

An acceptance to be valid must always be clear, never should it vary the offer,

the moment it deviates from the offer, no matter how significant, that is not valid.

A qualified acceptance is not a valid consent

Because there is no meeting of the minds

It is said, the law said, under paragraph 2 Article 1319, if an acceptance is made eitherby letter or telegram, not between persons who are face to face with each other, the

acceptance will not bind the offeror unless the acceptance comes to the knowledge

of the offeror

Then immediately, the offeror can learn of the acceptance

Can take place even if persons are not face-to-face




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What is the effect of withdrawal of an acceptance?

As long as withdrawal was made before acceptance has come to the

knowledge of the offeror, there is no consent

What about the crossing of the acceptance and withdrawal?

Laudico vs. Arias

28 February 2012

Who cannot give consent to a contract?

1.

Unemancipated minors

2.

Insane or demented persons and deaf mutes who do not know how to write

3.

Alienage

4. Drunkenness

Unemancipated minors

By virtue of Republic Act 6809, should be read as simply minors

Because minors are emancipated upon reaching the age of majority (18 years

old)

Therefore, minors cannot give consent to a contract? Are they absolutely prohibited

from giving consent?

NO, because under the Law on Sales, minors are allowed to enter into a

contract without their parents or guardians if the object of the sale is of NECESSITIES.

This provision must be read subject to other laws because here, minors, despite

minority are allowed provided the object of contract are of necessities (food, clothing,

medicine, for sustenance)




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Insane or demented persons

These two are not the same

Although both are mental illness, damage is greater in insanity than dementia

Demented persons

Have limited use of their mental faculties

Have the mental faculty of children, think and act like a kid

Insane persons

Do not enjoy the free use of mind

Have total loss of their mental faculties

Deafness

Inability to hear

If a person is totally deaf in 1 ear, is he totally disqualified from giving consent?

No, because the term deafness should mean total/absolute deafness

Muteness

A person who cannot speak

One who does not know how to write?

Refers to a case of absence (lack) of knowledge of writing) not about the ability

or power to write

Deaf mutes who do not know how to write

A person who cannot hear, speak and write.

Alienage




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Not allowed to engage into a contract due to citizenship

When does it become a disqualification?

Not all aliens are prohibited from giving consent to a contract

It depends on the contract being entered into

E.g. where aliens are disqualified from giving consent to a contract

Aliens are not authorize to acquire or own immovable properties with the

exception of succession (contracts of acquisition of real/immovable properties)

Drunkenness

Not all persons who are under the influence of alcohol are disqualified from

giving consent to a contract, it is when the degree of influence of alcohol is so much

as to deprive such person of the use of his mental faculty, that’s when he is

disqualified.

It depends on a case-to-case basis

VICES OF CONSENT

1.

Mistake

2.

Violence

3.

Intimidation

4.

Undue Influence

5.

Fraud

Mistake

The mistake referred here by law is a Mistake of Fact.




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Table No. 2

DISTINCTION

Mistake of Fact Mistake of Law

Refers to a misapprehension of facts Refers to misapprehension of what the

law says or means

Can be an excuse Never excuses anyone from the

consequence of his ---

If the mistake is substantial, it will vitiate the consent but if it is accidental or

incidental, it will not.

The mistake must be a unilateral mistake to vitiate consent

It should be a unilateral and substantial mistake as to the substance of the thing

which is the object of the contract

As a rule, in order that mistake may vitiate consent, it should be a unilateral

mistake.

Exception: Mutual or bilateral mistake can be a ground to vitiate consent, when

there is Mutual Error as to the legal effect of an agreement, if the real purpose of

the parties are FRUSTRATED

When a person does not know how to read or even if he knows, and contract iswritten in a language not known to him, and he claims mistake, what obligation does

the law impose upon the parties?

Article 1332. When one of the parties is unable to read, or if the contract is in a

language not understood by him, and mistake of fraud is alleged, the person

enforcing the contract must show that the terms thereof have been fully explained to

the former .

Mistake in law




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Teodora Gonzales BUNYI vs. Sabina REYES et. al and CA (1971)

When will the obligation of the enforcing party to show that the terms have been fully

explained to the party alleging mistake of fraud arise?

SC: the obligation to show that the terms have been fully explained to the party

alleging mistake of fraud will only arise after it has been shown or established that the

party alleging mistake does not know how to read or that the language of the

contract is unknown to him.

VIOLENCE and INTIMIDATION

Both involve the employment of FORCE

In both vices, force is employed for the purpose of getting the consent of a

person to a contract (Juliet)

Table No. 3

DISTINCTION

VIOLENCE INTIMIDATION

External force is used Internal force is used

Physical force is used Moral force is used

Must be serious or irresistible Must be a reasonable and well

grounded fear of an imminent or grave

evil upon his person or property of theperson and property of his spouse,

ascendant or descendant

(mother in law included under the term

ascendant)




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Intimidation must be to commit an

unjust or unlawful act

RUIZ vs. ATIENZA (1903)

An action for Annulment of marriage due to intimidation employed by the father of his

wife to obtain his consent to their marriage

CA: Intimidation employed should be an unlawful threat, the threat employed by thefather was not to commit an unlawful act since it is the right of every parent to

vindicate the honor of his child.

Suppose violence & intimidation is employed by a third person, will it vitiate consent?

Under the Law on Fraud, if fraud is employed by a third person, that kind of fraud will

never vitiate consent unless that third person acted in collusion with one of the

contracting parties, will this rule in case of fraud apply to violence or intimidation?

It does not apply to violence or intimidation employed by a third person

because in the case of fraud, fraud does not produce immediate effect, wherein in

violence or intimidation, it produces immediate effect , therefore, even if violence or

intimidation is employed by a third person, it will vitiate consent.

UNDUE INFLUNCE

Table No. 4

DISTINCTION

VIOLENCE INTIMIDATION UNDUE INFLUENCE

External force is used Internal force is used No employment of force

(violence or intimidation)

Physical force is used Moral force is used Imposition of one’s will




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over another takes place

Must be serious or

irresistible

Must be a reasonable

and well grounded fear

of an imminent or grave

evil upon his person or

property the person and

property of his spouse,

ascendant or

descendant

(mother in law included

under the termascendant)

No fear nor threat

employed

There is a deprivation of

freedom of choice even

without force employed

Result is immediate,

therefore, even if it is

employed by a third

person, it could vitiate

consent whether there is

connivance or not

Intimidation must be

unjust or unlawful

FRAUD (1st N)

Fraud means deceit, although the law does not define what fraud is. It simply tells us

how fraud may be committed, because under the law, fraud is committed through

the use of insidious words, or machinations for the purpose of inducing another to

enter into a contract without which the party would not have entered into such

contract.

When must fraud be committed in order that it may vitiate consent?

At the time the contract has been entered into, in other words, fraud must be

employed in getting one’s consent to a contract. (DOLO CAUSANTE)

If fraud is employed in the performance of the obligation, it will not become a

ground for annulment, but it becomes a ground for damages. (DOLO INCIDENTE)




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Fraud may be committed either through false misrepresentation by the performance

of positive acts and through omission or concealment by failing to disclose or revealcertain information when he is bound to do so.

SIMULATION OF CONTRACTS

Declaration of false will

May either be absolute or relative

Absolute Simulation

Parties never intend to be bound by the contract

Contract is null & void

Relative Simulation

Parties intend to be bound but not in the manner which appears in the contract

because the parties conceal their true agreement

Contract is valid as long as it does not prejudice a third person and it does not

violate the law

The first kind cannot be ratified nor reformed, but while the second kind may be

ratified, it cannot be reformed because contracts are not subject to reformation. It is

the instrument, which can be reformed, and not the agreement.

OBJECT OF CONTRACTS (1stN)

May either be:

1.

Things that are within the commerce of man

What do you understand by this?

Can mean/refer to existing or present thing or future thing

What are future things that can be made the object of a contract?

Those, which may not exist at the present but with potential existence in




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the present

What do you mean by potential existence?

Capability of something to come into existence as a natural increment of

something which is in existence

Despite the non-existence of the thing at present, it may be the object of the

contract.

What is the effect if the future thing made as the object of the contract does

not come into existence?

The contract becomes void for lack of object

Is it necessary for the validity of the contract that the object be in existence at the

time of perfection?

No, because future things that have potential existence may be the object of

contracts

2.

Right

Must be both lawful and transmissible

3.

Services

Must be both lawful and possible

CAUSE OF CONTRACTS

How many kinds of cause are there?

There are 3 kinds

1.

Remuneratory

2.

Onerous




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3.

Gratuitous

Cause of contracts is the general reason for the existence of a contract.

Is cause the same as motive?

No, cause is an essential element of contract whereas motive is not.

Motive is the personal reason of the party in entering into a contract.

Motive may be known only to one of the parties, cause must always be known

to both parties.

General rule, motive has nothing to do with cause. Cause is not affected by

motive. Even if the motive is unlawful, if the cause is lawful, the contract is still valid, but

if the cause is unlawful, even if the motive is lawful, the contract is void.

Exception, is when the motive forms an integral part of the cause so that when

the realization of cause depends upon the realization of motive. If motive is unlawful, it

will affect the validity of contracts because cause is made to depend in the motive.

What presumptions are created by law with respect to cause?

The law presumes every contract has a cause and that the cause of every

contract is valid.

It is not necessary that cause should be stated in the contract, it is always

presumed to exist.

FORMS OF CONTRACTS

In what form must a contract be to be considered valid?

Art. 1356. Contracts shall be obligatory, in whatever form they may have beenentered into, provided all the essential requisites for their validity are present. However,

when the law requires that a contract be in some form in order that it may be valid

and enforceable, or that a contract be proved in a certain way, that requirement is

absolute and indispensible. In such cases, the right of the parties stated in the following

article cannot be exercised.

General Rule: It can come in any form. Provided all the essential requisites are present




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Di the case

of Dauden comply with Art. 1358?

NO.

What was the status of the contract?

SC: The contract was valid

There is nothing in the law and the Chapter of Forms of Contract that says that

failure to comply with the requirements of 1358 will make the contract null and void.

However, under Article 1357,

Art. 1357. If the law requires a document or other special form, as in the acts

and contracts enumerated in the following article, the contracting parties may

compel each other to observe that form, once the contract has been perfected. This

right may be exercised simultaneously with the action upon the contract.

REFORMATION OF INSTRUMENTS

A remedy whereby the true intention or agreement of the parties are made to reflect

in the instrument as reformed

It presupposes that there is a valid agreement, but in spite of the validity of the

agreement, the instrument does not reveal the real intent and agreement of the

parties due to mistake, fraud, inequitable conduct, and accident.

Reformation of Instrument & Contract

The law allows both, under circumstances, as long as both parties agree

DISTINCTION

Reformation of Instrument Reformation of Contract

The contract/agreement is not

changed, what is being changed is

The parties change their contract or

agreement




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the instrument

The purpose is to reflect in the

instrument being reformed the

real/true agreement of the parties in

the contract

The purpose is to change the

agreement of the parties

Right is granted to the parties only on

specific causes enumerated below

Right is granted to the parties to

change their agreement anytime

There is no change or abandonment

of the original agreement or contract.

There is simply an act by the parties tomake the original contract reflect in

the new instrument. There is no new

contract so to speak.

You either modify or change or

completely abandon the old contract

giving rise to a new contract, which isno longer, the same as the original

one. So much so that the original

contract is discarded and replaced by

the new contract.

Causes for Reformation of Instrument

1.

Mistake

2.

Fraud

3.

Inequitable conduct

4.

Accident

Who can ask for reformation of instruments?

It depends on the grounds for reformation of instrument

If it is mutual mistake, either party may ask for the reformation of instrument

If it is a unilateral mistaken, it must be the mistaken party, but there must be an

accompanying fraud committed by the other party.

Why is fraud by the other party necessary?




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Suppose there is mistake but without an accompanying fraud, the contract

becomes voidable?

If there is mistake on one side, the remedy is not reformation of instrument but

annulment of contract.

Can be availed of either judicially or extra-judicially

When does Reformation of Instrument not lie?

1.

In simple donations inter vivos wherein no condition is imposed and

2.

Wills, because both are gratuitous, and reformation being in the nature of specificperformance requires a valuable consideration

3.

When the real agreement is void, because even if corrected, the instrument will

remain void and inoperative. It will not produce any effect. It will be useless.

4.

When a party to a contract has sought to enforce the instrument, that party cannot

later on ask for reformation, because an action to enforce and action to reform

are incompatible with each other. In the former, you are admitting/recognizing the

existing instrument, while in the latter, you are denying/ not recognizing the

instrument sought to be reformed.

DEFECTIVE CONTRACTS

Under the law, there are four defective contracts. What are these?

1. Rescissible Contracts

2.

Voidable Contracts

3.

Unenforceable Contracts

4.

Void or Inexistent Contracts

But, there are only two truly defective contracts.

1.

Voidable Contracts

XPN: imperfect or erroneous description of persons or property in the will




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2.

Unenforceable Contracts

RESCISSIBLE CONTRACTS

They are not truly defective contracts because they do not suffer from any defect . The

only reason why they are rescissible is because of the effect produced by the contract

upon one of the parties or upon third persons.

One proof that these contracts are not defective is that there is no provision in this

chapter for ratification.

Because there is nothing to ratify.

Who can bring an action to rescind?

The party who has suffered injury/damage or a third person provided he

suffered injury because of the contract sought to be rescinded. (Action Pauliana)

Requisites of Rescission

1.

The contract must be rescissible under Art. 1381 or 1382

2.

The party seeking for rescission must have no other legal means by which to

obtain reparation for the injury suffered.

3.

The object of the contract must not have passed to the possession of a third

person who has acquired it in good faith.

4.

That the party seeking for rescission must be able to return whatever he has

received by virtue of the contract if rescission is granted by the court

5.

That the action to rescind must be brought within the period of prescription

Discuss each.

1.

The contract must be rescissible under Art. 1381 or 1382

What are these contracts?

Art. 1381. The following contracts are rescissible:

4years from perfection of contract or when specific performance is no longer possible




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Contracts entered into by the husband in violation of this prohibition are

voidable and subject to annulment at the instance of the aggrieved wife.

If prior approval of the court is necessary, the act is not rescissible, but unenforceable

because the guardian/representative does not have the authority.

The amount of damage in Unenforceable contract is immaterial, whereas in

Rescissible contracts, it is material.

2. The party seeking for rescission must have no other legal means by which to

obtain reparation for the injury suffered.

Rescission is a subsidiary remedy, it can only be availed as a remedy of last

resort. It is a harsh remedy because it affects third persons.

What is the difference between Rescission & Resolution?

DISTINCTION

RESCISSION RESOLUTION

Available:

1.

Party to the contract

2.

Third person provided he

suffered injury because of the

contract sough to be rescinded

Available:

1. Only to a party to the contract

Subsidiary remedy Primary remedy

Based on:

1. Lesion or damage

Based on:

1. Non-performance

Once the ground for rescission has

been established, the court cannot

Even if the ground for resolution has

been established, for just reasons, the




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refuse to grant rescission. court may grant the guilty party a

period of time within which to complywith what is incumbent upon him

3. The object of the contract must not have passed to the possession a third person

who acquired it in good faith.

Acquisition of the 1st transferee determines if the contract can be rescinded or

not.

Rosencor Development Corporation vs. Paterno Inquing et. al. 2001

Contract entered into was oral

Lessee was given the right of first refusal

Oral evidence presented

Rosencor: Invoked the Statute of Frauds

SC:

Statute of Frauds does not apply outside the contracts enumerated therein,

therefore, if it involves oral agreement, oral evidence may be accepted.

SC in Hernandez, not all cases involving real properties are covered by the Statute of

Frauds

The case at hand does not involve a contract of lease or sale.

In the case of Mindanao Lumber, the SCourt held: Right of way is not covered by the

Statute of Frauds, even if it involves real properties.

Inquing was allowed by the Court to prove the right of first refusal

He was allowed to present oral evidence

Rosencor was not aware of the right of first refusal of Inquing




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Rosencor acted in good faith

Good faith is always presumed; it is incumbent upon the party alleging bad faith to

show proof.

The contract of sale is not rescissible

4. The party seeking for rescission must be able to return whatever he has received

by virtue of the contract.

What are the effects produced by Rescission?

1.

Abrogation- absolute

2.

Mutual Restitution- not absolute

Why does the law require the ability to return whatever he might have received?

Because one of the effect of rescission is abrogation of contract, that is

termination of the contract as if there has been no contract entered into. The purpose

of the law in abrogation is to return the parties to status quo ante, and the only way to

realize this is by requiring restitution.

Mutual Restitution is not absolute if it will violate the principle of unjust erichment .

For example, in a contract of lease, the lessee is required to return the leased premises

to the lessor, if the lease contract is rescinded, but the lessor is not required to return

the rentals paid by the lessee during which he occupied the leased premises, in so far

as the rentals paid in advance, the lessor must return the same.

Occupying the leased premises for free will amount to unjust enrichment by the

lessee.

5. The action to rescind must be brought within the period of prescription.

What is the period of prescription?

4 years




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Counted from when?

From the date of contract being rescinded

Is that an absolute rule?

No

Exception: Article 1191

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case

one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the

obligation, with payment of damages in either case. He may also seek rescission even

after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause

authorizing the fixing of a period.

Power to rescind is implied, it need not be agreed upon in the contract.

Ground: BREACH

What are the remedies provided in Article 1191?

1.

Specific Performance

2.

Rescission

-with damages in either case

What is the nature of these remedies?

They are alternative, you cannot choose both.

Rescission can be availed of initially.

Period of prescription is 4 years

General rule will apply




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Rescission availed as alternative/substitute to Specific Performance

Period of prescription is 4 years

Exception: To be counted from the day Specific Performance has become

impossible

VOIDABLE CONTRACTS

Is a voidable contract a truly defective contract?

YES.

Is it the same as rescissible contracts?

Are rescissible contracts also defective contracts?

No.

Where lies the difference?

The defect lies in the consent of one of the parties.

If the defect is on both parties?

It becomes an Unenforceable Contract- not enforceable

Is this kind of contract valid?

YES.

It is valid until annulled.

Both contracts are valid, both produces effect until they are annulled or rescinded .

Grounds for Annulment of Contract?

1.

Those where one of the parties is incapable of giving consent to a contract;




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2.

Those where the consent is vitiated by mistake, violence, intimidation, undue

influence or fraud.

Period of Prescription: 4 years.

When will an action to annul not lie?

1.

When the defect has been ratified

2.

When the action has prescribed

3.

When the object of the contract has been lost through the fault of the party

entitled to the action

4.

If the minor is guilty of ACTIVE MISREPRESENTATION of his age.

What is the difference between Active & Passive misrepresentation?

Braganza v. De Villa Abrille (1959)

Mercado Case:

The Court made a distinction

Active Misrepresentation

The minor expressly and positively misrepresented his age to of major age when

in truth he is not

A positive act is committed by the minor

He is barred by estoppel from bringing an action to annul on the ground of

minority

It means, he cannot later on deny the truth of whatever representation he has

made. (estoppel)

Passive Misrepresention

The minor kept silent with regard to his age,




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No positive act is committed by the minor

He is not only entitled to set up minority as a defense, he can also bring an

action for annulment on the ground of minority

If he does not bring an action to annul, and allow the action the prescribe, can he still

invoke minority as a defense?

Yes, but he cannot seek for annulment

Compare voidable and rescissible contracts

Both contracts are valid, and because they are valid, they produce effect.

Rescissible contracts are not defective contracts, they do not suffer from any defect,

the only reason why they are rescissible is because of the effect produced by the

contract to one of the parties or to a third person.

As such, since it is not defective, it cannot be ratified as there is nothing to ratify, in

fact, the chapter in rescission does not contain provision for ratification.

In Voidable contracts, the law provides a cure

Rescission produces two effects, abrogation and mutual restitution, the same effect is

produced by annulment.

In rescission, the right to bring an action is not limited to the party in a contract, third

persons may also bring an action provided he suffered injury because of the contract

sought to be rescinded.

In voidable contracts, while the law says only those parties to a contract may bring an

action to annul, yet in the case of DBP, there is an exception.

DBP v. CA (1980)

The general rule is that the action for the annulment of contracts can only be

maintained by those who are bound either principally or subsidiarily by virtue thereof.11 There is, however, an exception to the rule. This Court, in Teves v. People's Homesite

and Housing Corporation, 12 held that "a person who is not obliged principally or

subsidiarily in a contract may exercise an action for nullity of the contract if he is

prejudiced in his rights with respect to one of the contracting parties, and can show




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the detriment which could positively result to him from the contract in which he had

no intervention."

UNENFORCEABLE CONTRACTS

Art.1403. The following contracts are unenforceable, unless they are ratified:

1.

Those entered into in the name of another person by one who has been

given no authority or legal representation, or who has acted beyond his

authority;

2.

Those that do not comply with the Statute of Frauds as set forth in this

number. In the following agreement hereafter made shall beunenforceable by action, unless the same, or some note or memorandum

thereof, be in writing, and subscribed by the party charged, or by his

agent, evidence, therefore, of the agreement cannot be received

without the writing, or a secondary of its contents:

a.

An agreement that by its terms is not to be performed within a year

from the making thereof;

b.

A special promise to answer for the debt, default, or miscarriage of

another;

c.

An agreement made in consideration of marriage, other than a

mutual promise to marry;

d.

An agreement for the sale of goods, chattels or things in action, at a

price not less than five hundred pesos, unless the buyer accept and

receives part of such goods and chattels, or the evidences, or some of

them, of such things in action or pay at the time some part of the

purchase money; but when a sale is made by auction and the entry is

made by the auctioneer in his sales book, at the time of the sale, of the

amount and kind of property sold, terms of sale, price ,names of thepurchasers and person on whose account the sale is made, it is a

sufficient memorandum;

e.

An agreement of the leasing for a longer period than one year, or for

the sale of real property or of an interest therein;




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f.

A representation as to the credit of a third person.

3.

Those where both parties are incapacitated of giving consent to a

contract.

A contract, which cannot be enforced through court action.

What is the legal status?

It is valid, it produces no effect unless it is ratified

How many kinds of Unenforceable Contracts are there under the law?

3

What are these contracts?

1.

Due to lack of authority

2.

Contracts which are covered by the Statute of Frauds but failed to comply with the

Statute of Frauds

3.

Due to incapacity of both parties

They must be ratified first before they produce effect

What does the Statute of Frauds require?

Contracts covered by the Statute of Frauds are required to appear in a note,

memorandum,or in a writing

If a contract is covered by the Statute of Frauds, but fails to comply, what will be the

effect of such failure?

The oral agreement cannot be proven by oral evidence because the

requirement of writing is the best proof of the existence of the agreement.

What is the purpose of the Statute of Frauds?

The purpose is to prevent the commission of perjury through reliance on

memory.




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One’s memory is not always accurate, the tendency always is either to expand

or retract , resulting to the commission of perjury.

Most reliable proof- in writing.

What do you understand y the provision of law “in note, memorandum, in writing, duly

subscribed by the parties?

What will amount compliance to that?

Cirilo PAREDES vs. Jose ESPINO (1968)

Court said, that requirement does not necessarily mean that everything must bewritten; only the essentials in the agreement are required to be in writing.

What contracts are covered by the Statute of Frauds?

Only the first five are truly covered by the Statute of Frauds.

The 6th one is a misplaced one.

What is the nature of the enumeration?

They are exclusive character, any other contract not included in the

enumeration are deemed excluded.

1.

An agreement that by its terms is not to be performed within a year from the

making thereof;

If a contract is to be performed within one year, is it covered?

No

If beyond one year?

Yes

Partly within a year, partly beyond 1 year?

Yes




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marry;

What are these agreement covered by this paragraph?

1.

Donation Propter Nuptias

2. Marriage Settlements

Under the provision of the New Civil Code, they are covered by the Statute of

Frauds.

It meant that an oral marriage settlement or oral donation propter nuptias,

regardless of the kind of property, whether real or personal, they are both valid,but they are not enforceable.

The writing is required not for validity but for enforceability

What does the Family Code say?

A marriage settlement must be in writing, executed and duly signed by

the parties

A radical change by the law

Donation Propter Nuptias, distinguish:

Existing property- as to form, they will be governed by the formalities observed

by donation.

Article 748 & 749

Mandatory, so that failure to comply will invalidate the donation

Future property- it must be governed by Testamentary Successions andFormalities of Wills.

Donation Propter Nuptias and Marriage Settlements are no longer covered by

the Statute of Frauds, because the writing is now required no longer for purposes

of enforceability but for validity

4.

An agreement for the sale of goods, chattels or things in action, at a price not less




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than five hundred pesos,

This paragraph, applies to sale of personal properties, it has no application to

sale of real properties. The latter is covered by paragraph 5.

If the object of sale is a personal property, it is covered by paragraph 4

If the price is not less than 500 pesos, it must be in note, memorandum or in

writing.

The test is in the price if it is covered by the Statute of Frauds.

Paragraph 4 provides a general rule, 1st part.

Exception: 2nd part- Auction Sale

Entries made by the auctioneer, considered a sufficient memorandum if these

are complied with.

Writing in the Auction book is considered compliance with the Statute of

Frauds.

5.

An agreement of the leasing for a longer period than one year, or for the sale of

real property or of an interest therein;

Object of lease and sale must always be a real property.

Period must be more than 1 year no matter how short the excess.

What will be the status of the sale of real properties if it was made orally?

An oral sale of real property is valid, regardless of the amount involved but

it is not registerable.

Because in registration, the law requires that only public documents can be

recorded or registered.

Sale of real property under the Statute of Frauds should not be confused with the Sale

of property under the Law on Agency.

What does the Law on Agency provide?




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If the sale of an immovable is made through an agent, if the authority of

the agent is not in writing, the sale will be VOID.

It applies only to sale of immovable/real property.

Under that provision, what the law requires to be in writing is not the sale,

but the authority of the agent.

In Statute of Frauds, the sale itself is required to be in writing.

Validity of transaction is one thing, enforceability is another thing.

Under the Statute of Frauds. The price of an immovable is immaterial & the writing isnot for validity but for enforceability.

Hernandez v. Court of Appeals

Mindanao Lumber

Rosencor v. Inquing

(answers in Rescission)

Vda. De Espina v. Abaya

Partition agreement, even if they involve real properties are not covered by the

Statute of Frauds.

Because in partition, there is not lease for more than 1 year or sale of real property

involved, what is involved is only the adjudication of the share of the owners of the

property subject of partition.

May Unenforceable Contracts be ratified? How?

1. By recognizing or owning the contract

2. In Statute of Frauds

1.

By cross examining the witness in a prohibited manner which will tend to

prove the oral agreement of the parties. Because what cannot be proven

by the plaintiff cannot be proven by the defendant




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2.

By failing to make timely objections in the presentation of oral evidence

3.

By receiving or accepting fruits or benefits from the questioned contract

3. Either or both the parents or guardians of the parties as long as they are

incapacitated.

If both parties ratify: Enforceable

If only one party ratifies: Voidable

Unenforceable contracts although valid do not produce effect unless ratified.

This is one kind of valid contract, which does not produce effect, this is what

differentiates it from Rescissible and Voidable contracts.

But remember also,

Unenforceable contracts cannot be assailed by third persons, unlike in

Rescissible and Voidable contracts.

VOID CONTRACTS

Void contracts do not produce effect.

They do not suffer defect because in the eyes of the law, they do not exist.

An action for nullity of contracts is imprescriptible.

Statute of Limitation does not apply

Can be brought at anytime or by anyone

Can be assailed either directly or collaterally

No rights are created




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Art. 1409 enumerates but it does not mean that these are the only void contracts

under the law.

There are others though not included under Art.1409

Remember the doctrine of Pari-delicto as distinguished from In-delicto

In-delicto- both parties are at fault, but it does not mean that they are equally at fault

Pari-delicto- both are at fault & equally at fault

Neither one can bring an action

As a rule, what has been given cannot be recovered or enforce the

performance of the obligation

Exception: Enumerated by law, refers to right of recovery

There can be recovery but it is not a matter of right, it is upon the sound

discretion of the court whether to grant recovery or not.

But in some instance, it is a matter of right, in violation of the Labor Law.

In what instances will the doctrine of Pari Delicto not apply?

Under the Family Code

The doctrine of pari delicto does not apply to actions for declaration of Nullity

under Article 36.

Navarro v. Navarro

Because nothing can prevent the court from declaring that both parties are

psychologically incapacitated

If granted by the court, only one spouse is declared

In this case, while defense of the wife is pari delicto

Court

EG. Husband and Wife cannot sell property to each other. Guardian purchasing or acquiring property of his ward.

Since it was petitioner who brought the action for nullity of marriage on the ground of psychological incapacity notwithstandinthe fact that it was him who was psychologically incapacitated




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If it is considered covered by the doctrine of pari-delicto

It can be set up as a defense

When parties are in pari delicto, neither one may bring an action

Also, the doctrine of pari delicto does not apply to violation of Homestead Law

Under the Homestead Law, whenever a patent is issued to a homesteader, it is always

understood to be subject to one condition

That the grantee cannot encumber, alienate or otherwise dispose within a

period of 5 years after the grant.

3 Acts are prohibited

1.

Encumbrance

2.

Alienation

3.

Disposition

But should the grant be violated because of the performance of any of the 3

within 5 years, will pari delicto apply?

No

Torres v. Ventura

Court:

Pari Delicto does not apply to violation of the Homestead Law, so that, should the

patentee act in violation of the law, and the one who bought it knew of the violation,

makes parties both in pari-delicto

Does it mean that the state can bring an action, for reversion to the public domain?

The state is not precluded from reverting the Homestead to the public domain

should the patentee act in violation of the condition of the patent

Under the Law on Sales,




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When the same thing is sold twice by the same seller but to different buyers, the

case is what we call double sale.

Art. 1544. If the same thing should have been sold to different vendees, the

ownership shall be transferred to the person who may have first taken possession

thereof in good faith, if it sshould be movable property.

Should it be immovable property , the ownership shall belong to the person

acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in

good faith was first in the possession ; and in the absence thereof, to the person who

presents the oldest title, provided there is good faith.

Caram v. Laureta

Court recognized the sale made to Laureta, rejected the sale made to Caram

Caram:

By what law are you declaring my contract void?

Article 1409 does not involve, even Art. 1554 that if one transaction is recognized

and the other is rejected by the court, the latter is void

Court: How stupid can you get??????

Common sense dictates that if one transaction is recognized and the other is rejected,

the latter is not valid, because if not, dispute will never end!

These enumeration should not be interpreted to be exclusive.

Example of void contract not included in art 1409




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JUMIE - Aligada Notes Obligations and Contracts

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Transcript of JUMIE - Aligada Notes Obligations and Contracts