Oblicon Notes Finals 3 3

7/24/2019 Oblicon Notes Finals 3 3

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OBLIGATIONS AND CONTRACTS | FINALS | AUF SOL 2014 Page 1 | Ban

JAN. 28, 2014

CONDONATIONone of the ways of extinguishing obligations.

Even at the time of Jesus, there is already such thing: forgive us

our debts.

It is basically a gratuitous act motivated by feelings of liberality

where the creditor simple forgives and does not give anything in

return.

The law requires that it must also be ACCEPTED.

! BASIS: Nobody can force you to accept their generosity.

!

It is to protect and enhance human dignity.

EXPRESS CONDONATION IMPLIED CONDONATION

Must comply with the formalities(Art 748 to 749; under the law ondonations.

ART. 1271, par. 1: if the creditorvoluntarily delivers the privatedocument to the creditor,PRESUMPTION: IMPLIEDcondonation.

MOVABLE / PERSONAL

1. May be done ORALLY /VERBALLY; simultaneouswith delivery.

- Once it is condoned, youneed not have to deliverthe thing. The debtor isrelieved.

2. Must be in a WRITTENPRIVATE DOCUMENT if thething is higher than P5,000.

ART. 1272: whenever the privatedocument in which the debtappears is found in the possessionof the debtor, PRESUMPTION: thecreditor VOLUNTARILY deliveredit to him.

- Only prima facie evidences;can be rebutted by contraryevidence.

REAL PROPERTY: always needsto be in a PUBLIC DOCUMENT.

- The land might be small andin a remote brgy. Regardlessof its value, as long as realproperty is involved.

- Both for the CONDONATIONand the ACCEPTANCE: canbe in the same document orin a separate publicdocument.

- The donor must beNOTIFIED in an authenticform; must be NOTED in bothof the INSTRUMENTS.

If A owes B P10,000 and Bexecuted a promissory note inwhich the debt appears in favourof A, and the promissory note islater found on Bs possession, thepresumption that A voluntarily

delivered it to B rises.

A obliged B to deliver his pen to A. Can A verbally condone Bsobligation?

- YES. It is less than P5,000.- But if the pen is worth P13,000, then it must be IN WRITING.- The acceptance must also be IN WRITING.

If B has to deliver a real property to A and if A just wanted to condonethe obligation, what must he do?

- A must execute the condonation in a public document and Bmust accept it, as well.

- What if A and B did not comply with one of the requirements (e.g.

it was not made in a public document), is there a vacondonation?! NO. They must always comply with the requirements.! Can that be deemed as implied condonation, then?

NO. Otherwise, if every time that happens, thattantamount to circumventing the law.

As a matter of fact, according to JURADIMPLIED CONDONATIONS are found in A1271 to 1274.

NOTE: when the law speaks of PRIVATE DOCUMENTS.

Why does the law limit it to private documents?

! If it is public (e.g. when it is notarized), there will definit

be many copies (at least 4).

! The notary will have two copies, one of which will

forwarded to courts, then to the National Archives.

! The possession by the debtor of a copy of the pub

document will not have the same effect intended by t

law, as compared to possession of a private docume

WHY? Chances are, the public document is not the o

copy.

The duplicate of a public document: does

mean much.

In effect, the creditor is giving up his most patent weapon.

It is more difficult to prove in another way. Supposing that the private document has copies (carbon cop

Which one will produce the presumption?

! The original one (the top-most page).

TRANS-PACIFIC INDUSTRIAL SUPPLIES VS. CA

- It is the original-original which has to be surrendered and befound on the debtors possession to produce the assumption.

ART. 1271, par. 2: INOFFICIOUS DONATIONS

The debtor and his heirs may uphold it by proving that tdelivery of the document was made in virtue of payment

the debt.

SOME COMMENTATORS SIR (DEAN NAVARRO)

Something is wrong with this. Thelaw is teaching the debtor to lie.

It has no immoral connotation. Itthe law itself which establishes tfunction***

***Supposing that the real reason why the debtor and his heirs have th

private document is because in fact, the debtor has PAID.

Is it wrong to establish the truth? That should erase any ideas

the provision being immoral.

INOFFICIOUS: condonation donation the creditor gives

his rights.

A owed B P1M and B condoned it, its like B just gave A P1M, andaccepted it.


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Since condonation is just like a donation, it is subject to the

limitations of donations.

SYSTEM OF LEGITIME

Part of a persons estate that the law reserves for his compulsory

heirs.

We are all compulsory heirs (of our parents).

A LEGITIMATE CHILD: cannot receive anything less than ! of

his parents estate.

! His parent can give the other half to other people but the

first half is RESERVED to their compulsory heirs. To protect the legitime COLLATION: a way of protecting the

legitimes.

There is a possibility that A has a legitimate child, B, and for one

reason or another, A does not want to give him anything when he

dies. So A gave all his properties to his brothers (through

donation).

! To prevent that from happening: COLLATION will be

done.

! When A dies, the value of all of his current properties and

those he donated will be collated and will be considered

part of his estate.

1975 X 2005Fowed X P100,000

and X returned thepromissory note to F:CONDONED.

DEATH

Gross estate:P200,000DEBTS: P200,000

SON

Will the SON still inherit anything despite his parents gross

estate is equivalent to the latters debts?

! YES. There is collation of all of the parents gratuitous

donations by adding it to his estate.

! DONATION (P100,000) + NET ESTATE (0) = P100,000.

P50,000 is the legitime of the SON.

P50,000 is the FREE PORTION.

Thus, half the amount X condoned is

INOFFICIOUS, and must be returned to thecompulsory heir of X.

If Freally paid the SON cannot come after him.

In determining WON a donation is inofficious, you will judge WON

it has exceeded the free portion.

! The extent it exceeds, it is inofficious.

ART. 1273

If the debt is secured by a guarantee or a mortgage, the

condonation of the principal debt shall extinguish the accessory

obligation.

Waiver of the latter shall leave the former in force.

ART. 1274

PLEDGE: what you enter into a pawnshop.

PRESUMPTION: the accessory obligation of pledge has been

remitted when the thing pledged, after its delivery to the creditor,

is found in the possession of the debtor, or of a third person who

owns the thing.

CONFUSION

Automatically extinguishes the obligation at the merger of the

characteristics of the debtor and the creditor.

REASON: you cannot sue yourself.

CHITTICK VS. CA

- Spouses were suing each other and were survived by thcommon children.

- Since the Chittick children as heirs of respondent-creditor aalso the heirs of petitioner-debtor, the obligation sued upon hbeen extinguished by the merger in their persons of the characof creditor and debtor of the same obligation (Art. 1275, CCode).

ART. 1276

Merger which takes place in the person of the princi

debtor or creditor = benefits the guarantors.

Confusion which takes place in the person of any of the latte

does not extinguish the obligation.

A owes B P12,000, guaranteed by G. Later on, A acquires the rights of= the obligation is extinguished.

- If G inherits As estate the principal obligation will subsist.

JAN. 30, 2014

COMPENSATION

One of the modes of extinguishing obligations.

You weigh the two obligations simultaneously with the aim

extinguish them up to the concurrent amounts.

A. TOTAL: when the two debts are equal.

B. PARTIAL: when the two debts are unequal.

A owes B P700 and B owes P500 the two obligations will extinguished up to the concurrent amount.

1. The obligation of B to A is extinguished.2. The obligation of A to B remains: P200.

LEGAL COMPENSATION: takes effect by operation of law.

VOLUNTARY COMPENSATION: by agreement of the parties.

JUDICIALCOMPESATION: by judicial decree.

LEGAL COMPENSATION

Can there be legal compensation if one of the parties is insane

incapacitated?

! Legal compensation does not require CONSENT.

! If there is no consent, it does not matter. Tcompensation takes effect by law.

! What is one of the parties is actually comatose, or in t

ICU? YES, there will still be legal compensation.

Takes place at the moment all the requirements are prese

whether or not the parties are aware of it, or not.

VOLUNTARY COMPENSATION

By agreement.


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Can there be voluntary compensation when one of the parties are

incapacitated?

! NO; there will be no meeting of the minds.

JUDICIAL COMPENSATION

Takes effect by judicial decree.

When one of the parties has a claim for damages and the other

sets it of by proving his right to said damages and the amount

thereof.

A sued B for P1M because B owes A. In Bs answer, B said A also oweshim P1M of damages.

- Whatever the court finds out JUDICIAL COMPENSATION.

FACULTATIVE COMPENSATION

By the will of only one party and the other one cannot choose

compensation by any impediment.

Assume that A borrowed a bicycle from B. They happen to be neighborsand B lent it to A. when a person borrows something, there is an implicit

understanding that the borrower should return it. B would not have lent Athe bicycle if B did not trust A. later on, they entered into anothertransaction and B became obligated to deliver a bicycle of the same kindto A. Can there be legal compensation?

- NO. Commodatum.- Can B tell A that the two obligations will be deemed

compensated? YES. FACULTATIVE compensation.- The same if for depositum (for safekeeping), otherwise, there will

be breach of trust and confidence.

Obligations that cannot be compensated (ART. 1287 to 1288):

obligations arising from criminal offenses.

! The offender cannot invoke compensation, but the injured

party can.

ART. 1279

REQUISITES OF LEGAL COMPENSATION:

1. That each one of the obligors be bound principally, and

that he be at the same time a principal creditor of the

other;

2. That both debts consist in a sum of money, or if the

things due are consumable, they be of the same kind,

and also of the same quality if the latter has been

stated;

! Should have been FUNGIBLES: there can still be

compensation even when things are NOT

consumables.

3. That the two debts be due;

! Can there be compensation when one of the

debts is not yet due? YES, as long as the parties

agreed to it.

Of by the party for which the benefit of the

period was constituted.

PNB MADECOR VS. UY

- One of the debts is payable by demand, and there was none.

Consequently, the debt is still not due (st ill no delay).- When one of the debts is not yet due, then there is no leg

compensation (one of the requisites not present).

4. That they be liquidated and demandable;

5. That over neither of them there be any retention

controversy, commenced by third persons a

communicated in due time to the debtor.

Is A deposited P12,000 in the bank and later, he became indebted to tbank for the same amount, can there be compensation?

- YES. WHY? 1strequisite present. When A deposited his monto the bank, he is in fact lending money to it; A becomes tbanks creditor. Upon obtaining a loan from the bank, A becamthe debtor of the bank.

- Why do you say that? You cannot get the very same notes thyou deposited.! Thats how they make money. When you deposit, t

interest is less than 3% but when they lend it, they haatrocious interest rates.

- CONTRACT OF LOAN.

If A is a stockholder of San Miguel Corp. and A bought many casesbeer from the same corporation, can there be legal compensation?

- NO. Being a stockholder does not mean you are the corporatiocreditor.

- It will be different if you are an INVESTOR, as you are paowner, and can be considered a creditor.

FRANCIA VS. IAC

- The government expropriated petitioners properties and tpetitioner failed to pay taxes. Can there be legal compensation!

Paying taxes are duties to the government: NOcontracts.! The State cannot be deemed as a debtor to the petition

Assume that:P12,000

A B

P12,000P12,000

C

Does this mean all of the obligations are deemed compensated?

- NO. None of them are mutually creditor and debtor of each othbound principally.


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P12,000A B

P12,000

G

Can there be legal compensation between B (creditor) and the G(guarantor)? NO.

P12,000A B

P4,000

P8,000

G

Assuming that A cannot be found, Can G set up legal compensation?

- YES. How much can B collect from G? NONE.- ART. 1280: G can invoke what the B owes A, aside from what B

owes to G.

RETENTION CONTROVERSY

The application of the credits ofone of the parties to thesatisfaction of the claims of a thirdperson.

Refers to a case in which a thirdperson has a claim to the creditor(order; writ of attachment).

Must be communicated in due time.

P12,000D C Jan. 7, 2014C D Jan. 28, 2014

P10,000

On Jan. 15, there was an order from the court (X vs. D) attaching Dsproperties. Was the controversy communicated in due time?

- YES. It was before the second debt became due, thus, there wasstill no legal compensation.

But if X got the court order on Jan. 30, was the controversycommunicated in due time?

- NO. There had already been legal compensation since Jan. 28,2014. The court order was too late.

ART. 1285

Assignment of rights.

PAR. 1: debtor consented he WAIVES his right and he cannot

set up compensation.

! EXCEPTION: when he RESERVES his right to set

compensation.

PAR. 2: If the debtor was notified of the assignment without t

consent, he can set up compensation for the debts.

! Previous to the cession, but not to the subsequent ones

PAR. 3 (worst case scenario): when the debtor is not notified.

! All debts which became due before he had knowledge

the assignment.

A B Jan. 07P10,000

B A Feb. 11P20,000

A B Apr. 10P5,000

Let us assume that A assigned his credit to X and the assignment wmade on Mar. 07. How much can X collect from B?

- There is already legal compensation upon the assignm(between the first and second transaction).

- SCENARIO NO. 1: B gave his consent to the assignment.! B cannot set up compensation. If the debtor gives

consent, he waives the legal compensation which htaken place.

! POINT: is he gives his consent without reserving

WAIVING.! X can still collect: P20,000.! If B consented to it but reserved his right: P10,000.

- SCENARIO 2: B was notified but he did NOT give his consent.! B can set up by way of compensation.! X can collect P10,000 only.

- SCENARIO 3: no notification; all debts before Bs knowledge,can set up compensation.! If B only found out of the assignment on May 08, X c

only collect P5,000 from B.

FEB. 04, 2014

NOVATION

Different from the other modes of extinguishing payment.

Instead of extinguishing the obligation, you create or substitu

the old to a new one.

! REAL NOVATION.

Three ways of effecting novation:

1. Changing the object or the principal conditions.

2. Substituting of the debtor.

3. Subrogating of a third person the rights of the creditor.

The REQUISITES of a valid novation.

1. EXISTING VALID OLD OBLIGATION

If there is none, then there is nothing to novate.

SPOUSES BAUTISTA VS. PILLAR DEVT.

- The first promissory note was cancelled by the express termsthe second promissory note validly novated.

- If the first PN was not valid, then the execution of the second odoes not constitute novation.

2. AGREEMENT OF THE PARTIES TO THE NEW OBLI

Is it a requirement that all parties must agre

NO. Expromision: the debtors consent is n

necessary.


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3. INTENT AND ACTUAL EXTINGUISHMENT OF THE

OLD OBLIGATION

4. VALID NEW OBLIGATION

Is it necessary that for there to be valid novation that there must

be an agreement? Generally, not ALL of the parties consents are

required.

NOVATION BY SUSBSTITUTION OF THE DEBTOR (2ndtype).

! EXPROMISION: effected with the consent of the creditor

at the instance of the new debtor even without the

knowledge or against the will of the old debtor.

! DELEGACION: effected with the consent of the creditor

at the instance of the old debtor with the concurrence ofthe new debtor.

EXPRESS: declared in unequivocal terms.

IMPLIED: the old and the new obligation are incompatible with

each other on every point.

! They cannot stand together.

! Otherwise, there will be no novation.

WHEN THERE IS NOVATION WHEN THERE IS NO NOVATION

A has to deliver his car to B. Athen said he will deliver a certainhorse instead.

- CHANGE OF OBJECT.

A and B agreed that A will deliverto B a car and B will pay himP500,000. Instead, they agreedlater on that B will pay himP400,000.

- REMISSION (partial).

A and B agreed that A will deliverto B a car and B will pay himP500,000. Instead, they agreedlater on that B will pay himP700,000.

- UPWARD CHANGE INCONSIDERATION.

A is to pay B P1M within a yearfrom the date of their contract.They later decided that A can paywithin TWO years.

- EXTENTION OF TIMEFOR PAYMENT.

- PERIOD AFFECTSPERFORMANCE.

A is to pay B P1M within a yearfrom the date of their contract.They later decided that A needs topay within SIX MONTHS.

- REDUCTION;SUBSTANTIALCHANGE IN TERMS

A has to build a two-storey buildingfor B according to certain plansand specifications. Instead of 4windows, B now wants A to build8.

- SLIGHT ALTERATIONIN THE CONS.

- NOT EXTINCTIVE; justMODIFICATORY.

A has to pay B a certain amount ofmoney with 12% interest. Theinterest was increased to 14%.

- ADDITIONALINTEREST DOES NOTCONSTITUTE NOV.

A executed a promissory note to Bfor P1M and later on, A gave him acheck.

- PN and CHECK:COMPATIBLE.

GARCIA VS. LLAMAS

- The promissory note and the check can stand together.- There was no agreement between the parties that the check w

substitute the promissory note/cash.- NO NOVATION.

MERCANTILE INSURANCE CO. VS. CA

- The additional security does not operate to novate the fsecurity: no express stipulation.

- There is no agreement that the first debtor shall be released froresponsibility and the creditor can still enforce the obligatiagainst the original debtor.

- NO NOVATION.

YOUNG VS. CA

- Change in signatories does NOT constitute novation.- Where the text of the two contracts will show that the only chan

introduced in the second contract was the substitution byperson with his wife as signatory, there was clearly no impli

novation for lack of an essential change in the object, cause, principal conditions of the obligation.

AJAX MARKETING VS. CA

- A certain enterprise started out a partnership and changed names. It contracted certain obligations and those loans weconsolidated and were restructured.

- NO novation.

Compare it with

SPS. BAUTISTA VS. PILLAR DEVELOPMENT CORP.

- YES; there was novation in this case.- There was an EXPRESS stipulation that the first promissory no

was being cancelled in lieu of the second one.! There is certainly no doubt that there has been novation

A owes B P100k and when the debt was about to be due, C offeredpay it for A and B said okay. C gave P10k as partial payment. Is theresubstitution of the debtor?

- NO; A is still liable to B.! It was not expressly stated that A is being released fr

the obligation.- Absent any agreement that C (new debtor) will release B (

debtor) from the obligation, then there is no substitution; toriginal debtors obligation remains.! There must be an agreement for the release of

debtor.- C might just be deemed as a co-debtor, or a guarantor,


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A owes B P100k. C (third person) and A went to B and they told B that Cwill assume the debt while A will be released from the obligation. Bagrees. Is there a substitution of the debtor?

- YES; delegacion.- When the debt became due, C did not pay despite him having the

means. Can B run after A instead?! NO. Not anymore.

- Would it make any difference when C was actually insolventwhich was already existing and known to A when the substitutionwas made?! YES, it would make a difference.! ART. 1295: B can now run after A.

- GENERAL RULE: there is no revival of liability of the old debtorin delegacion? NO.

- EXCEPTION (only in extremely restricted terms): in case of theinsolvency of the new debtor which was existing at the time ofdelegation and was of public knowledge or known to the olddebtor.

A owes B P100k and C came to B. C told B that he will take As placeand that C will pay B P100k instead. This is done with the knowledgeand consent of A, and the initiative came from C.

- Can B run after A upon non-payment of C? NO; ART. 1294.

TOLENTINO JURADO

It should have been if it is in theinitiative of the third person.

- FAULTYCODIFICATION.

NON-FULFILMENT covers amultitude of things thecodifiers could not have intendedthe old debtor to be liable formany reasons, while fordelegacion, its only for the thirdpersons insolvency.

PROFESSOR: NO REVIVAL.EVER.

If the substitution is done with theknowledge and consent of theold debtor, then there would berevival of the obligation.

- LITERALINTERPRETATION.

ART. 1296

GENERAL RULE: When the principal obligation is extinguished

in consequence of a novation, accessory obligations will also be

extinguished.

EXCEPTION: the accessory obligation may subsist only insofaras they may benefit third persons who did not give their consent.

WHEN NOT APPLICABLE: in case of the subrogation of the third

person on the rights of the creditor.

! SUBROGATION (ART. 1303): the persons subrogated

the credit with all the rights either against the debtor or

against third person

ART. 1297

No valid new obligation NO NOVATION.

No valid old obligation NOTHING TO NOVATE.

OLD OBLIGATION NEW OBLIGATION RULE

Object: car. Object: herion. Old: SUBSISTS.

New: VOID.

Gambling loss(P100k).

Deliver a particularhorse.

Old: VOID.

NO NOVATION.

Car, with debtorsconsent vitiated.

Horse, with thedebtors consent notvitiated.

Old: voidable.

NOVATION: nobligation operatesratify / validate tobligation.

Car, if it rains onChristmas Day(suspensivecondition)

Horse, nothingmentioned about thecondition (silent).

ART. 1299: nobligation is subjectthe same conditiounless the contrarystipulated.

Car, when it rains onChristmas Day.

Horse, when yougraduate with ageneral average of95.

If both NOT complwith, NO NOVATIO

MUST BEFULFILLED.

MUST BEFULFILLED.

If compatible.

DEEMEDEXTINGUISHED.

MUST BESUSTAINED; latestexpression of the willof the parties.

If not compatible.

SUBROGATION

a. CONVENTIONAL: by agreement of the parties.

b. LEGAL: by operation of law.

CONVENTIONALSUBROGATION

ASSIGNMENT OF RIGHTS

Debtors consent is required. Debtors consent is notrequired

Has the effect of extinguishing theold obligation and gives rise to anew obligation.

Has the effect of transmitting trights of the creditor to anothperson without modifying extinguishing the obligation.

Defects or vices in the originalobligation are cured.

Defects or vices in the origiobligation are not cured.

Effect arises from the moment ofnovation or subrogation.

Arises from the moment the debis notified of the cession.


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Affords better protection becauseof the necessity of the debtorsconsent.

ART 1302

LEGAL SUBROGATION: must not be presumed.

EXCEPTIONS:

1. When a creditor pays another creditor who is

preferred, even without the debtor's knowledge;

P12,000 (secured)D C

P, 12,000P1,000

B

C is a preferred (mortgage) creditor. If B pays C P12,000, B will besubrogated with Cs right (including the security).

- But the obligations remain distinct. The mortgage security onlyapplied to the P12,000 debt, not to the P1,000.

- If D will not pay P12,000, B can foreclose the mortgage.

2. When a third person, not interested in the obligation,

pays with the express or tacit approval of the debtor;

3. When, even without the knowledge of the debtor, a

person interested in the fulfillment of the obligation

pays, without prejudice to the effects of confusion as to

the latter's share.

ART. 1304

P12,000D C

For 2 instalments.

G

When the first instalment became due, D was nowhere to be found. Gthen paid the first one.

- G is now subrogated to the rights of C only as regards to the firstinstalment.

- When the second instalment became due, D only has P6,000with him. To whom will he pay?! C is a preferred creditor than G.

FEB. 06, 2014

CONTRACTS

Can there be a contract where there is only one party? NO. No

exceptions.

! A person cannot contract with himself.

! AUTO-CONTRACTS: the person is just acting in

representation and with the authorization of another.

! WHY NOT? One must always bound himself with respect

to another.

ELEMENTS OF A CONTRACTS

A. ESSENTIAL ELEMENTS: present in all contracts.

1. COMMON: present in all: consent, object, cause

2. SPECIAL: present only in certain types or class

of contracts.

Delivery in real contracts.

Form in solemn contract.

3. EXTRAORDINARY: unique to a special contrac

Price in contract of sale.

Only present in that particular kind

contract.

B. NATURAL ELEMENTS: derived from the nature a

ordinarily accompanies the same.! Warranties.

C. ACCIDENTAL ELEMENTS: when parties expres

provide for them.

! How do natural elements and accidental eleme

differ from one another? What is their point

distinction? For accidental elements, they are o

present upon agreement of the parties while

natural ones, they are there, but the parties c

do away without them.

CHARACTERISTICS

1. OBLIGATORY FORCE: must be complied by the partie

2. MUTUALITY: based on the principle of equality.

3. AUTONOMY: must not be contrary to law.

4. RELATIVITY: takes effect only between contracti

parties, their assigns and heirs (PRINCIPLE ORELATIVITY).

! GENERALLY: third parties cannot produce a

effects; they cannot sue on the basis of t

contract.

! EXCEPTIONS: quasi-delict liabilities of th

persons (e.g. driver; while the contract is on

between the passenger and the owner of t

vehicle/operator).

5. ***CONSENSUALITY: while all contracts need conse

not all of them are perfected upon consent.

! Some needs delivery to be made first.

STAGES

1. GENERATION: period of negotiation.

2. PERFECTION: parties come to agree.3. CONSUMMATION : fulfilment or performance.

ART. 1306: AUTONOMY

Parties are free to agree as long as it is not contrary to la

morals, good customs, public policy and public order.

1. LAW: always have to take precedence.

2. MORALS: universally admitted.

! More or less universal in acceptance.

! Example: to kill is something that is not universa

accepted.

! More limited.

3. GOOD CUSTOMS: brought about by repeated conduct

! Accepted and sanctioned by the practices

community.4. PUBLIC POLICY: broader that public order.

! Whatever has the tendency to be injurious to t

public good.

! It is not necessary that there is actual injury

long as there are clear evidences of the tenden

of such alone.

SY SUAN VS. REGALA


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- The company needed to import and it authorized somebody forthe application for a license with the Import Control Office for theimportation of industrial starch for candy manufacture. Thatsomebody will follow up the application, with 10% commission.

- Against public policy? YES. There is a clear import: injurious tothe common good.

The agent will then do everything, good or bad, to securethat application.

LEAL VS. IAC

- A sold B his land on the condition that B can only sell the land toA at the same price.

- Contrary to public policy? YES. It vests a perpetual restriction toownership.

- Property should be allowed to go around.

YSMAEL & CO. VS. BARRETO

- Cases of silk were asked to be delivered by company, with eachcase amounting to P2,500. It was stipulated in the bill of ladingthat the carrier shall not be liable for loss or damage from anycausebeyond an amount exceeding P300 for any single package

of the cargo. Four cases got lost.- Contrary to public policy? YES. ANY CAUSE can mean many

things, even the captains or crew members stealing thosecargos.

- REASON: we are an archipelago and during that time, theprincipal form of transportation from one place to another isthrough ships.

If the companys policy will be allowed, nobodywill shiptheir goods anymore.

Commerce will grind to a halt and economy will suffer.

CUI VS. ARELLANO UNIVERSITY

- A student has been a scholar of the university for 3 !semestersand on his last semester, he wanted to transfer. The universitythen asked him to reimburse.

- Is it contrary to public policy? YES.

Scholarships grants are awarded on the basis of merits ofthe students and not just merely to entice good students.

! Restrictions to the exercise of trade are ALLOWED, as

long as they are limited as to time and place, and is

necessary for the protection of the other party.

DEL CASTILLO VS. RICHMOND

- A drugstore hired a person and that person is restricted fromopening any drugstore within four miles from the municipality ofLegaspi. It is to prevent the threat of competition.

- Contrary to public policy? NO. During that time, Legaspi was asmall community and having two drugstores in that place willrender drugstores nota viable enterprise.

FERRAZZINI VS. GSELL

- The restriction is NOT valid.- The restriction would have entailed the person leaving t

country for it is too broad (in the Philippines).

ORTIGAS VS. FEATI BANK

- There is an implied reservation of the states exercise of polipower, which is the least limitable of the inherent powers of tstate.

- Mere contractual stipulations must yield.

TRIAS VS. ARANETA

- There was no police power of the state involved.- There was a restriction that no factories will be built; o

residential ones.- Court: EASEMENT is a valid restriction.

5. PUBLIC ORDER

NOMINATE

Those that have their own distinctive individuality and a

regulated by special provisions of law.

ART. 1307: INNOMINATE

Governed by agreement of the parties (stipulations), etc.

1. Do ut des

2. Do ut facias

3. Facio ut des

4. Facio ut facias

PEREZ VS. POMAR

- Involves the services of an interpreter.- Facio ut des: I do that you may give.

ART. 1308: MUTUALITY

What is equitable for the parties.

1. Cannot be left to the will of one of the parties.

2. When left to the will of a third person, it must be ma

known to the parties.

3. Can be left to chances.

RUSTAN PULP VS. IAC

- Involves the supply of raw materials.- NOT VALID for only one party (Rustan) will determine when t

delivery of the raw materials may start or may be stopped.

LEASE CONTRACTS: for example, when a tenant claims that

long as he will pay, he can stay.

! Thats not the case. Such violates the mutuality

contracts.


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CONTRACTS OF LOANS: in fixing the rates of interest.

! Is it possible that there will be a stipulation that one party

can unilaterally increase the interest rates? NO.

! If there is a provision providing for escalation, then there

must also be one for de-escalation.

! It cannot be left solely to the will of the LENDER.

! The weaker party must be protected from abuse.

FLORENDO VS. CA

- An employee secured a housing loan to her company. When she

resigned, the company increased the interest rates.- NOT ALLOWED; unwarranted.- The bank could have included such stipulation in the contract but

it did not, so it could not increase the rates now.

There are some agreements that render mutuality ILLUSORY.

LIEBENOW VS. PHIL. VEGETABLE OIL CO.

- One of the parties obliged itself to give a certain amount of bonusthat is to be determined by the Board of Directors.

FEB. 13, 2014

ART. 1311: RELATIVITY OF CONTRACTS

RULE: a contract is binding only upon its contracting parties, their

assigns and heirs.

! It is only fair and reasonable that when someone is not a

party to the country, he need not be bound.

EXCEPTIONS:

1. Where the contract contains astipulation in favor of a

3rdperson (stipulation pour autrui).

2. Where the 3rdperson comes in possession of the object

of a contract creating a real right (ART. 1312).

3. Where the contract is entered into in order to defraud a3rd person (ART. 1313) covered by topic on rescissible

contracts.

4. Where the 3rd person induces a contracting party to

violate his contract (ART. 1314).

5. Contracts creating status (e.g. contract of marriage).

When two people get married, everyone else is

bound by their marriage. Someone cannot ask

them to be married to another again.

6. Group contracts (e.g. Collective Bargaining Agreements).

Rights acquired are NOT transmissible (they are only in between

parties).

! Is a lease contract transmissible? YES, though it is not

personal.

! Let us assume that X Co. has a credit against A. X Co.

owns all of the shares of Y Co (its subsidiary). Can Y Co.

maintain an action against A for collection? NO.

! Can a subsidiary company collect a debt owed by its

parent company? NO.

Despite the subsidiary companys shares are

owned by the parent company, the does not

entitle the former to collect on the latters behalf.

GENERAL RULE: Even if a certain companys

shares are owned by another, it still has its

independent character.

POUR AUTRUI(beneficial stipulation)

It is essential that the parties have CLEARLY a

DELIBERATELY conferred to the third person such favour.

It must NOT be a mere or incidental benefit insufficient.

UY VS. LEONARD

- The surety guaranteed the contractor will fulfil its obligation to tCity of Manila, which is to provide the latter with crushed rockThe stipulation included that the contractor must then faithfu

comply with the obligation and shall promptly make payments its supplier of materials. Then the suppliers were not paid. Athe suppliers covered by the beneficial stipulation?! NO.

- Court: such is a mere incidental benefit.! There was no intent to clearly and deliberately confe

favour on the suppliers part.- So why did the surety include such statement (shall promp

make payments for its supplier of materials)?! It is only by way of extreme cautionbecause at that tim

it is not sure that the City of Manila can be held liablethe materials supplied.

Would it be possible to have a pour autrui stipulation when one

the parties owed the other and a third person is used to pay sudebt? YES.

A is obliged to build B a building, and B will pay A P10M. A rememberthat he owed C P1M. So there was a stipulation that B will pay A P9and C P1M.

- Is that a beneficial stipulation in favour of C? YES.! When-one-party-owes-a-third-person kind of benefic

stipulation.- What if A did not really owe C P1M but they still chose to give

P1M, is that still a stipulation pour autrui? YES.! Gratuitous kind of beneficial stipulation.

- Can it be revoked? YES.! Provided there is mutual agreement between parties.! Must be done before there is acceptance.

KAUFFMAN VS. PNB

- Plaintiff was not paid.- There was a stipulation pour autruifor the benefit of Kauffman.- There was NO revocation: there was no mutual agreeme

between Phil. Fiber and PNB.! OR at the instance of the party making the exchan

Phil. Fibers decisions to revoke it for such stipulatiwas made by it.

EXCEPTION

UY VS. CA

- Petitioners cannot be indemnified.- The two agents negotiated with NHA in behalf of the owners

the land. Initially, NHA was supposed to buy 8 parcels of lanbut it realized 3 out of 8 of them are not suitable for developme(prone to landslides). NHA then talked to the owners directly allow them to buy just 5 out of 8 of the lands.

- Petitioners commission, as seller agents, will then be reduc


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since only 5 parcels were sold.- Court: petitioners cannot maintain an action because they are not

parties to the contract.! They were mere agents representing their own interest.

ART. 1312

Where the 3rd person comes in possession of the object of a

contract creating a real right.

A mortgaged to B his land as a security of his P1M debt. Then A sold theland to C. Is C bound by the contract?

- YES. B has a REAL RIGHT over the property mortgaged andsuch follows him.

ART. 1313

Where the contract is entered into in order to defraud a 3rd

person covered by topic on rescissible contracts.

ART. 1314

Where the 3rd person induces a contracting party to violate his

contract.

What is your source of obligation? QUASI-DELICT.

! REQUISITES:

1. Existence of a valid contract

2. Knowledge on the part of the 3rd person of the

existence of such contract.

3. Interference of the 3rd person without legal

justification or excuse.

There is an employment contract between a multinational company andA where A has to go to Baghdad or to Kabul (dangerous places). Badvised A not to go and A did not. Can B be held liable by the company?

- NO. Everyone knows it is dangerous to go to those places.

A is a singer and he has a contract with B that A will perform exclusivelyon Bs restaurant (exclusive contract). C then asked A to perform on hisrestaurant instead and A agreed. Is C liable?

- YES; there is no legal justification of Cs action.- C was principally and solely motivated to profit from As

performance.

ART. 1315 ART. 1316

Contracts areperfected by mereconsent.

REAL CONTRACTS:delivery is required.

SOLEMNCONTRACTS*

Commodatum: what Aborrowed from B

needs to be deliveredfirst.

*A and B entered into a contract of loan with chattel mortgage oncertain vehicle on Dec. 01. The contract was notarized on Dec. 02, andwas registered on Dec. 03.

- The compliance of the registration is what constitutes perfectof the contract.

* ART. 1317

A contract entered into in the name of another by one w

has no authority or legal representation, or who has act

beyond his powers, shall be UNENFORCEABLE.

However, in some SC cases, they are declared void.

A entered a contract on Bs name.

- WHAT IT ACTUALLY MEANS: B had not consented.- There was absolutely no consent from B as he may not even

aware of the contract.! One essential requisite is lacking: VOID O

INEXISTENT.- Chances are, B has not even benefited from such contract.

SEVILLA VS. SEVILLA

- Deed of Extra-judicial Partition was voidab initio, and not merunenforceable.

- Court: there was no consent given to the execution of the deeand therefore, there is no contract to speak of.

- Felisa had no legal capacity to give consent to the Deed Partition at the time of its execution inasmuch as she was neiththe owner nor the authorized representative of respondent

whom she previously transmitted ownership of her undividshare.

But according to the Civil Code, those contracts

unenforceable.

ESCUETA VS. LIM

- The sale by Virginia to respondent is not binding.- Petitioner Rubio did not authorize Virginia to transact business

his behalf pertaining to the property.! His acceptance and encashment of the check was no

ratification of the contract of sale.

GOZUN VS. MERCADO

- Contracts entered into in the name of another person by one whas been given no authority or legal representation or who hacted beyond his powers are classified as UNAUTHORIZECONTRACTS and are declared UNENFORCEABLE, unless thare ratified.

- A special power of attorney is necessary for an agent to, as


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this case, borrow money.

FEB. 18, 2014

ART. 1318: COMMON ESSENTIAL REQUISITES OF A CONTRACT

1. Consent of the contracting parties;

2. Object certain which is the subject matter of the contract;

3. Cause of the obligation which is established.

ART. 1319

How is consent manifested? It must be manifested by the

concurrence of the offer and the acceptance of the thing.

! There must be a meeting of the offer and the acceptance

upon a thing.

A wrote B a letter, stating that A is offering to sell to the latter his houseand lot for P5M, cash. B replied by sending a letter, as well, stating thathe is accepting the offer and the he will buy it for P5M, but he will onlypay P2.5M as down payment now, and pay the rest (P2.5M) viainstalment for a period of six months.

- Is there perfection of the contract? NO.

- For there to be perfection, the terms of each party must meet onevery point.! The acceptance must mirror the offer.! There must be no variance.

A told B that he is presently contemplating of selling his house for P5M toB. B then wrote to A that he is accepting the latters offer.

- Is there perfection? NONE, as there was really no offer.! A merely stated that hes thinking about selling it.

- The offer must be CERTAIN.

A wrote B a letter, stating that A is offering to sell to the latter his houseand lot for P5M, cash. B replied by sending a letter, as well, stating thathe is accepting the offer and the he will buy it for P5M, but he will onlypay P2.5M as down payment now, pay the rest (P2.5M) via instalmentfor a period of six months, and the balance will be secured in a mortgageof property.

- Is there perfection? NO.- A then replied that he is agreeing to sell it for P5M, with P2.5M as

down payment, the other P2.5M payable through instalment forsix months, with a mortgage to secure the balance.! Is there perfection? Finally, YES.! There is now a meeting on each and every point of the

terms.

Let us assume that A sent B a letter offering his property to the latter forP5M. B received the letter on Jan. 01, and he immediately decided thathe will accept As offer, so he wrote A a letter.

1. B mailed the letter on Jan. 02.2. The letter was delivered at As residence on Jan. 03, but A was in

Cebu during that time.3. A returned to his residence on Jan. 04 and he read Bs letter.

QUESTION: do they have a perfected contract? When?

- YES, on Jan. 04 (COGNITION THEORY).- In accordance with the Civil Code.- Through the MANIFESTATION THEORY: Jan. 01- Through the EXPEDITION THEORY: Jan. 02- Through the REDEMPTION THEORY: Jan. 03

Let us assume that A sent B a letter offering his property to the latter fP5M. B received the letter on Jan. 01, he mailed his reply accepting Aoffer on Jan. 02, and his letter was delivered toAs residence on Jan. 0But during that time, even though A was at home, he was alreaentertaining second thoughts about the sale of his property to B. A not open Bs letter, and instead, A called his messenger and asked tlatter to mail his revocation.

- Is there perfection? YES.! There was a perfection of contract even if the offe

withdrew his offer before his knowledge of the offereereply.

- REASON: Even if we adhere to the Cognition Theory, we afollow the rule on CONSTRUCTIVE KNOWLEDGE.

Until when can an offeror withdraw his offer? As long as he s

does not have knowledge of the offerees acceptance.

A sent B a letter offering his property to the latter for P5M. B received tletter on Jan. 01, he mailed his reply accepting As offer on Jan. 05 andwas delivered to As residence on Jan. 10. In the meantime, on Jan. 0

A sent B a letter stating his withdrawal of the offer, and As letter wdelivered on Jan. 12.

- Is there perfection of the contract? NO.- NOTE: a withdrawal of an offer is immediately effective. T

offeree need not to have knowledge of the withdrawal for it to effective.! It does not even matter that the offeree has read t

offerors letter.

Can an offeree withdraw his acceptance of the letter? YES,

long as the offeror still has no knowledge of the forme

acceptance.

MANRESA TOLENTINO

The offeree cannot withdraw hisoffer anymore.

The offeree can withdraw his offe

The offeree knows that there isalready meeting of the minds, andof the offer and acceptance.

There is only one moment perfection of the contract: tacceptance coming to tknowledge of the offeror.

There are two moments ofperfection:

1. When offeree signified hisacceptance.

2. When the offeror hasknowledge of the

BETTER VIEW: there is only omoment of perfection of tcontract and anytime before thboth the offeror and the offercan be allowed to withdraw thoffer and their acceptancrespectively.


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acceptance.

A sent B a letter offering B to sell him 100 bottles of a certain red wine atP300/bottle. B accepted his offer and he said he was willing to buy 300bottles.

- Is there perfection of the contract? YES.- AMPLIFIED ACCEPTANCE: there is perfection of the contract

as regards to the 100 bottles A offered.! There is only a counter-offer for the additional bottles.

- UNLESS B makes it clear that he is not willing to buy from Aanything less than 300 bottles.! There is no meeting of the minds. Such is a mere

counter-offer that the offeror can accept or not.

ART 1322

An offer may be made through an agent.

There is perfection when the acceptance was communicated with

the agent (a person who has been authorized).

NOTE: an agent is different from a MERE MESSENGER (e.g. mailman).

The time of perfection of the contract during that time is when the offeror

himself comes to the knowledge of the acceptance of the offer.

ART. 1321

The offeror may fix the time, place, and manner of acceptance.

! All of which must be complied with.

A offered to B his house and lot for P5M cash, and if B decides to buy it,he must provide a written acceptance and such must reach A beforenoon of Feb. 14, 2014.

- The letter is delivered on Feb. 15, is there perfection? NO.- A has every right to make such determinations.- It does not even matter if the messenger or the one carrying Bs

letter had an accident, which caused the delay of the delivery.

COGNITION THEORY

Is it the only theory we follow here? NO.

MANIFESTATION THEORY: Code of Commerce.

ART. 1323

An offer becomes ineffective upon the DEATH, CIVIL

INTERDICTION, INSANITY, or INSOLVENCY of either party

before acceptance is conveyed.

! It renders the offer INEFFECTIVE.

REASONS:1. DEATH: extinguishes personality and juridical capacity.

One can no longer enter a contract.

2. CIVIL INTERDICTION: affects ones authority to manage

his properties and could not execute acts inter vivos.

But he can execute acts in mortis causa.

3. INSANITY: no valid consent.

4. INSOLVENCY: limits a persons capacity to act.

LIMKETKAI VS. CA

- COURT: the evidence is clear that there is an agreemebetween BPI and petitioner for the sale of the land P1,000/square meter.

- NOTE: this is a better decision as the evidence had been clear

LIMKETKAI VS. CA RESOLUTION

- The Court completely changed its stance: There was no evidenof the agreement of the sale because the petitioners acceptanwas QUALIFIED.! Such counter-offer must be accepted by LIMKETKAI fir

- There was NO perfected contract.

NOTE: in the meantime, before this cases resolution, there had bechanges in the court and to the justices per division.

TAN VS. PPI

- GENERAL RULE (Art. 1319): consent is manifested by tconcurrence of the offer and of the acceptance.

- Court: this rule does NOT apply when there are certain mattersdetails (causal considerations) that must be concurred with, asifrom the object agreed upon.! The agreement must be to all points.

- Without concurrence of all of those terms and conditioconsidered material by the parties beforehand, there is N

CONTRACT.

MANILA METAL CORP. VS. PNB

- There was NO perfection of the contract.- The acceptance must mirror the offer.- If one of the parties involved is a corporation, its agreement m

involve the concurrence of its board of directors, or throughvalidly authorized agent.

FEB. 20, 2014

ART. 1324: CONSENT

In the cases decided by the SC, there has been some proble

concerning consent.

! There has been a long and running debate betwe

Justice Vitug and Panganiban concerning the law, w

respect to the application of the RIGHT OF FIRS

REFUSAL.

Obviously, an OPTION CONTRACT is a contract, thus it mu

bear all the essential elements of a contract.

! If there is no cause and consideration then, such is NO

binding to the parties.

Let us assume that A and B entered into an agreement that A will sell hhouse and lot to B for P5M cash, and that B has 30 days to think abo

As offer.

- The following week, they met and A immediately told B, leforget about the offer. Can A validly do such?! YES. Although B was given an option to buy, such is NO

BINDING because of the absence of a CAUSACONSIDERATION.

- But if B gave A P10K, can A still validly withdraw his offer on thsame week?! NOT ANYMORE. If A does such, A will be held liable


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breach of the option contract.! The withdrawal must not have been whimsically or

arbitrarily made, otherwise, such is a violation of Art. 19 ofthe CC, under the tenets of civilization.

It is a liability for breach of common relations.

In an OPTION CONTRACT, a person acquires a right.

! Upon perfection, the right to acquire the property is

vested to the buyer, but not the actually property itself

(NOT YET).

! REQUIREMENT: must be supported by a causalconsideration.

Assuming that there is no causal consideration made, a week after A andBs agreement, B told A that B is buying the latters property. A then toldB that he decided not to sell the house and lot anymore.

- Can A validly withdraw such offer?

SANCHEZ VS. RIGOS: NOT ANYMORE.

- At that point, there is already perfection and it does not matter at

all if there is a valid option contract or not.! Such is no longer relevant.

- An offer becomes binding when it is ABSOLUTELY ACCEPTED.- Dean thinks this makes more sense, than applying PAR. 2, ART.

1479 regarding an accepted unilateral promise to buy or sellsomething.! Here, even if there has been acceptance, if the promise is

NOT supported by a consideration distinct from the price,then it can still be validly withdrawn.

NATINO VS. IAC

- In this case, the Court invoked Art. 1479, instead of Art. 1324.

RIGHT OF FIRST REFUSAL OPTION AGREEMENT

They are not the same; they are different from each other.

The price and other terms andconditions are NOT YET fixed; willonly be known then the ownerindeed decides to sell the property.

The price is already fixed, as wellas the other terms and conditions.Everything is already determined.

This is usually given to a tenant,incorporated in a lease contractthat if the owner decides to sellthe property, he will first offer it tothe tenant.

The person granted the option hasthe choice to exercise the option ornot.

The causal considerationsupporting the lease contract willalso support the ROFR containedin the agreement.

Causal consideration REQUIRED.

A is renting Bs property and was granted the ROFR. After several yeaB sold the property for P1M to X, completely disregarding As ROFFurthermore, X had knowledge that A had the ROFR to the property.

RIGHTS OF A according to ANGYU ASUNCION VS. CA

Rights of A according to GUZMAVS. BONNEVIE aEQUATORIAL REALTY VMAYFAIR THEATER

To recover damages because of

the breach of principles of humanrelations.

Right to ask for the rescission

the sale between the infractor athe third person.

- Can sue for the annulmentthe contract.

Other than that, there is no otherjuridical relation between A and B.

To recover damages.

To compel the infractor to sell the injured party the property the same price the former sold itthe third person.

NOTE: in all of the cases of the SC, the third person is usually a buyer

bad faith.

In EQUATORIAL REALTY VS. MAYFAIR THEATER, t

petitioner was aware of the existence of the ROFR.

If the purchase was done in GOOD FAITH, then the innocent purchas

for value is protected NO RESCISSION.

ART. 1325

Business advertisements of things for sale are not defin

offers, but mere invitations to make an offer.

In a newspaper, there was an advertisement of a house and lot for sa these are not definite offers.

- Simply an invitation.

ART. 1326

Same as for bidders.

There is usually a reservation written: the company reserves t

right to reject.

***ART. 1327

There are persons who are not supposed to enter to contracts

they are INCAPACITATED to give consent.

1. UNEMANCIPATED MINORS: then the Family Code w

not yet effective.

! Before, there were such things as unemancipat

minors; those who are not yet free from paren

authority.

! The marrying age before is 14 years old

woman and 16 years old for men.


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! There must be VOLUNTARY CONCESSION to

execute a document when the minor is at least 18

years old.

! No such thing like this anymore.

! Persons who are under guardianship are not

capacitated to enter contracts ON THEIR OWN.

GENERAL RULE: A contract entered into by a minor is VOIDABLE.

EXCEPTIONS:

1. When the minor misrepresents that he has already passed theage of puberty guilty of ACTIVE MISREPRESENTATION. ! There are minors who can claim that they are already of

age as they look mature enough.

Of course, a 7-year-old boy can never pass assomeone who is of age.

SIA SUAN VS. ALCANTARA: dissenting opinion:minors are incapacitated to enter into contracts asthey lack the wisdom and maturity to protectthemselves from abuse and bad faith. Even if they have ACTIVELY

misrepresented themselves, it is logical tomake the contract VOIDABLE preciselybecause minors would not be aware ofsuch act, despite being done actively.

But this was NOT the majority opinion.

2. Necessaries: NOT VOIDABLE.! As when a minor buys ice cream, or medicine.3. Minors who are at least 7 years old are allowed to open a savings

account.! To encourage young people to save.! Technically, they are entering a contract with the bank:

contract of LOAN with the bank as the borrower and thechild as the creditor.

! Via a PD of Marcos.

INCOMPETENT (SEC. 2 OF RULE 92 OF THE NEW RULES OF

COURT) INCLUDES:

1. Persons suffering from civil interdiction.

2. Hospitalized lepers.3. Prodigals.

4. Deaf and dumb who are unable to read.

5. Who are of unsound mind.

6. *Spendthrifts.

7. Those who by reason of age, weak mind or other similar cases,

cannot, without aid from other, take care of themselves and

manage their property becoming thereby easy prey from deceit

and exploitation.

2. INSANE OR DEMENTED PERSONS AND DEAF-

MUTES WHO DO NOT KNOW HOW TO WRITE.

! When they enter a contract during a LUCID

INTERVAL VALID.

There are days of sunshine of the mind.

! Different from an IMBECILE: can NEVER enter

into contracts.

Its a perpetual eclipse of the mind.

No lucid intervals.

REMEMBER: the difference between INCAPACITY and

PROHIBITION/DISQUALIFICATION to enter into contracts.

Those PROHIBITED to enter in contractual relations:

1. HUSBAND AND WIFE, without the consent of their

spouse (even those in a common law relationship).

MATABUENA VS. CERVANTES

- Reason and logic dictate, as long as marriage is the cornerstoof a relationship.

- The requirement attaches even in a common law relationship.- This was during the time when the Family Code has not yet tak

effect.- UNUSUAL CASE because the SC cited a decision of the CA. b

it wouldnt come as a surprise as the ponente of that case wJBL Reyes himself.

2. Insolvency.

ART. 1330: VICES OF CONSENT: with any of these present, consent

deemed vitiated VOIDABLE.

1. MISTAKE: not every kind of mistake justifies annulment.

! Mistake that would result to vitiated consent must refer

the SUBSTANCE of the thing.

A sold B a ring, saying that it is gold, when it turns out to be just madebrass.

! MISTAKE OF ACCOUNT remedy is CORRECTIO

NOT annulment.

A sold his land to B for P10/square meter. The land is made up of 1,0square meters. They thought B only had to pay P1,000.

- NOT VOIDABLE.- The price can merely be corrected; from P1,000 to P10,000.

! MISTAKE OF IDENTITY generally does NOT jus

annulment, unless the identity of the infractor is wh

primarily moved the injured party to enter into a contrawith the former.

A entered into a contract of lease with B, and B said his name is C.

- NOT voidable.- Mere mistake of name, which is not what principally moved A

enter a contract with B.

A hired B because B said he was a math teacher. A has a daughter ahe wanted B to tutor her, when it turns out that he was not. He wactually a convicted rapist.

- Contract is VOIDABLE.- Bs misrepresentation certainly affected A in entering a contra

with the former.

! MISTAKE IN MOTIVES

A bought an engagement ring to B, telling B that he will propose to girlfriend, C. when A popped the question, C rejected him. A is now su


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for the annulment of sale between him and B.

- The contract is NOT voidable.

! MISTAKE TO POSSIBLE PROFITS: differences in the

profits that one person hoped to derive.

A bought 100 bags of cement from B for P100/bag, intending to sell thecement bags in his hometown for P120/bag. It turns out that the price of

cement in As hometown is P90/bag.

- A can NOT ask for the annulment of the contract.

! MISTAKE AS TO THE ACCIDENTAL QUALITIES OF

THE OBJECT.

A went to the National Book Store and he saw a pocket book. On itsback, it says very interesting. He bought it and the book turns out to bevery boring.

- Its still a pocket book. NOT voidable.

A bought Bs residential lot in QC, thinking that Christine Reyes wasoccupying the house beside it. It turns out that she does not.

- A can NOT sue B.

ART. 1322

One of the social justice provisions in the Civil Code.

When one of the parties is unable to read, or if the contract is

in a language not understood by him, and mistake or fraud is

alleged, the person enforcing the contract must show that theterms thereof have been fully explained to the former.

ART. 1333

A sold a parcel of land to B in a distant barangay. A told B that he wasnot sure exactly how big it is, but perhaps the property is for 100hectares and that it produces around 100 sacks of rice. B bought it and itturns out its only 70 hectares and produces 85 sacks of rice.

- NOT voidable.- A informed B of the doubt, contingency or risk of the sale he

said he was not exactly sure.

ART. 1334

A and B entered into a contract of sale, when the contract was really oneof lease.

ART. 1335

2. VIOLENCE: when serious or irresistible force is employed.

! There is ACTUAL use of force.

3. INTIMIDATION : generated through a reasonable and we

grounded fear of an imminent and grave danger upon his pers

or property, or upon the person or property of his spous

descendants or ascendants.

! The enumeration is NOT exclusive, as long as there

compulsion that resulted to a vitiated consent.

! Determined by the physical condition and status of t

person threatened.

Castillejos threated Ticman that she will kill him by strangulation if he wnot sign their contract.

- NOT tenuous considering the relative strengths of the parties.- The woman cannot make good of such a threat that involves a

of physical strength.

PAR. 4: principle mostly used in Persons and Family Relations.

There are many cases in the SC of male law students, thinking thgirlfriends were impregnable, yet they were impregnated. The girlfrienthen threatened the law students to support their children.

- Not the kind of intimidation cited in the Civil Code; it is merelythreat.

- Does NOT operate to vitiate consent.

NOTE: vitiated consent through intimidation is NOT THE SAME

reluctant consent.

MARTINEZ VS. HONGKONG ANG SHANGHAI BANK

- Even if consent was reluctantly given, it is still consent just tsame NOT annullable.

- The husband was charged with embezzlement and fled tcountry, leaving her poor wife behind. The creditors told the w

she had two options: first, for her to assign all her husbandproperty to the creditors; second, the wife will never see hhusband again but she can keep all her husbands propertieRELUCTANTLY, she agreed to do the first and they arrived asettlement.

- Is her consent vitiated? NO.

ART. 1336 ART. 1342

VIOLENCE AND INTIMIDATIONfrom third persons.

MISREPRESENTATION from thpersons.

RESULT: vitiated consent; even ifit came from a third person who isnot a party to the contract.

Does not generally vitiate conse

EXCEPTION: when it resulted MUTUAL ERROR.

WHY ARE THEY DIFFERENT? THEY DIFFER FROM THE MATTEOF AVAILABILITY OF CHOICE.

NO CHOICE AT ALL (e.g. A and Bare signing a contract, and out of

Contracting party has a choice believe the third person or not.


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nowhere, C appeared and held Bat gunpoint, asking him to sign thecontract. Even if what C did wassomething unexpected, even by A,the result is vitiated consent of B).

has no one to blame but himself.

ART. 1337

4. UNDUE INFLUENCE: power over the will of another.

! The will of a party was so overpowered that it echoes the

dictates of the will of the other.! BUT the law does not prohibit any form of influence.

Man is by nature a social being.

We interact in a daily basis with different people.

RESULT: constant interaction. We cannot avoid

being influenced by other people, and vice versa.

BUT, as long as we can still express our wills,

regardless of the influence of others, then our

consents are NOT vitiated.

! Difficult ground to annul even in laws of succession,

there is only one case where one party was able to prove

undue influence.

! Involves ACTUAL overpowering.

ART. 1337

TOLENTINO: in a period of acute public want, in a land that is far

away from civilization where only ONE person has all the goods,

he can then dictate the prices of the goods UNDUE

INFLUENCE.

ART. 1338

5. FRAUD: NOT breach of obligation.

! Depending on its nature, it results to vitiated consent (AT

THE TIME OF PERFECTION OF THE CONTRACT).

DOLO CAUSANTE DOLO INCIDENTE

RESULT: VOIDABLE contract. Indemnity of damages.

Not the principal moving force thatinduced the party to enter into acontract.

EGUARAS VS. GREAT EASTERN LIFE ASSURANCE

- A fellow is applying for an insurance policy and he asked anotherperson to undergo the medical check-up for him.

- NOT a valid insurance; there is fraud on the part of the fellow.

! JOKE: a company asked all of his employers to submit a

sample of their urine. A man used another persons urine

and he passed the drug test. He was then called by the

president of the company. The president said,

congratulations! You are pregnant!

Causal fraud.

WOODHOUSE VS. HALILI

- Halili is a business tycoon and he had a lot of business interesHe was the biggest businessman during that time. He thentered into an agreement with a soft drinks factory. Woodhouagreed and told Halili that he had the franchise of Mission SDrinks. Because of that, Halili gave him 30% of the profits.turns out that Woodhouse did not have the franchise.

- Fraud is merely INCIDENTAL.- It is clear that Halili would still have entered a contract w

Woodhouse even if the latter did not have Mission Soft Drinfranchise.! He will just give him a LESSER share.

ART. 1339

Failure to disclose facts, when there is a duty to reveal them,

when the parties are bound by confidential relations, constitut

fraud.

A is an owner of a parcel of land in Mabalacat City. B learned from sources that Henry See will be putting a big mall there, so B offered buy As property. B did not tell A the news he had heard. Two weelater, Henry See announced that indeed, he will open up a big mall the

The price of land shot up from P100/square meter to P1,000/squameter.

- A can NOT sue for annulment.- There is no duty for B to reveal the information to A.- They are not bound by confidential relations.

A and B are partners and they have a land in Mabalacat City as onetheir assets. A told B that since nothing is happening in their land Mabalacat City, he will just buy B out for P100/square meters. In realA just learned that Henry See will be putting up a big mall there.

- B CAN sue for annulment.- When two people are partners, they are bound by the highe

degree of trust and confidence.- A has the DUTY to reveal such information to B.

ART. 1340

Intended to give a little elbow room for dealing talks.

There is a natural tendency to exaggerate products.

USUAL exaggeration of trade NOT fraudulent.

Professor was in National Book Store (pen section) and he saw a pen display that a certain ink is manufactured by a certain Americcompany and that certain ink refill was used by astronauts totoo nga

ART. 1341

Expression of opinion NOT fraudulent.

UNLESS that person is an EXPERT.

A went to B and he told B that the ring was made of gold with its s tomade up of diamond. After B bought it, B had it examined and it turout, it was NOT gold, but bronze and the stone was mere cut glass.


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- Can A sue for annulment of the sale? YES.! By MISTAKE, but not of fraud; unless A is a legitimate

jeweller. In that case, he is considered an EXPERT.

ART. 1344

Substantial error.

RURAL BANK OF CALOOCAN VS. CA

- Both the bank and the old woman made a mistake.- There was misrepresentation coming from a third person,

resulting to mutual substantial error.

ABSOLUTE SIMULATION RELATIVE SIMULATION

VOID. BINDING.

If the parties do not intend to bebound by the contract at all.

Happens when the real agreementis hidden or concealed.

Pakana lang yan.

EXAMPLE: When a person isrunning from his creditors and hemakes it appear that he sold hisproperties to other people.

The parties do not intend to bebound by the contract of sale at all.

EXAMPLE: when a father gives hisproperty to his favourite son/daughter through a deed of sale.

REAL CONTRACT: deed ofdonation.

The parties are still bound to theREAL agreement as long as it isnot prejudicial to a third personand is not contrary to law, etc.

FEB. 27, 2014

OBJECT

One of the three common essential elements of a contract.

All must be present for there to be a valid contract: CAUSE,

OBJECT, CONSENT.

The WHAT of the contract; what the contract is all about.

GENERAL RULE:It can be anything, as long as it can be LAWFULLY

APROPRIATED / transferred.

EXCEPTION: contracts involving FUTURE INHERITANCE.

REASON: such is in the realm of expectancy.

The rights of the compulsory heirs of a certain person can only befixed or transmitted after that persons death.

Prior to that, the heirs so not know what they will inherit.

EXCEPTION TO THE EXCEPTION:

1. ART. 1080: a person partitioning his estate by an act inter

vivos, as long as such is not prejudicial to his compulsory

heirs.

NOW: THIS IS THE ONLY EXCEPTION.

Pseudo-generis: as long as the causante lives, he

can still chance his mind and the contents of his

will.

2. ART. 130: there used to be a provision about futu

spouses donating to one another, but this is not replicat

in the Family Code anymore.

ART. 1349:OBJECT MUST BE DETERMINATE

But what if the quantity is not specified? STILL VALID, as long

is possible to determine the same, without the need of a ne

contract between the parties.

A and B entered into a contract obliging A to sell all of the horses in farm. Will that invalidate the contract?

- NO, it is possible to determine the exact number of horses in Afarm, even if such is not stated in the contract.

- HOW? Just count the horses.- No need for a new contract.

A and B entered into a contract that A cannot run for public offanymore and B will pay him P100K.

- The contract is NOT BINDING.- The object (prohibition to run for public office) is contrary

PUBLIC POLICY.

CONTRACTS INVOLVING FUTURE INHERITANCE

BLAS VS. SANTOS: the contract here would seem like a contract future inheritance.

- A man married twice. His first wife was Marta, and they hadchildren. His second wife is Maxima and they did not have achildren. After the death of Marta, there was no liquidation of tproperties of the spouses. When the man was nearing his deahe declared that all of his properties were conjugal propertiesthe second marriage, giving Maxima ! of all of his propertieThe mans children in the first marriage complained so Maxim

promised to them that she will covey half of all of the maproperty to them. She then died without complying with hpromise.

- Was there consideration? YES.! WHAT: to prevent litigation.! The compromise that she signed if to prevent the childr

from questioning the will of the childrens father.- NOT a contract involving future inheritance.- RATIO FOR THE PROHIBITION: the properties a

Indeterminate since the heirs would have to wait for the persondie to know what exactly they will inherit.

- HERE, the properties are already DETERMINATE from tmoment of Martas death. From that point on, the children of tfirst marriage has already inherited part of Martas share to tconjugal partnership.! The properties were already there.! Here, the subject matter of the contract is already w

defined properties existing at the time of the agreement

CAUSA / CONSIDERATION

The WHY of the contract.

The OBJECTIVE / JURIDICAL reason for entering into

contract.


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CAUSA MOTIVE

OBJECTIVE REASON: remainsthe same regardless of who theparties of the contract are.

PERSONAL REASON: dependsupon who the person entering acontract is.

ART. 1350

ONEROUS CONTRACT: a mere promise is considered asufficient consideration.

A promised to pay P500K to B and B is obliged to deliver his car to A inreturn. B delivered his car to A, but A did not pay B. Can B sue forannulment of the contract for lack of causa?

- NO, B cannot.- There is a consideration: As promise, his honest to goodness

promise that he will pay B.- REMEDY OF B:

1. Rescission / resolution, with damages.2. Specific performance.

LADANGA VS. CA 131 SCRA 361

- It was simply made to appear that the old woman had received acertain amount of money, when actually, she did not.

- VOID: there was total absence of cause/consideration.- There was no promise to pay at all.- The seller was not even aware of the existence of that contract.

REMUNERATORY CONTRACT:

A has a doctor neighbour named B and B had been rendering free

service to A and to As family without pay for years. A then gives B aparcel of land.

- Causa: Bs medical services to A and As family.

PURE BENEFICENCE: cause liberality/generosity.

CONTRACT OF SALE OF DIAMOND RING

VENDOR VENDEE

CAUSA Acquisition of thePURCHASE PRICE.

Acquisition of theOBJECT.

OBJECT(TOLENTINO)

RING: it is the starting point of all thenegotiations.

- 2 different causes, but only 1 object ofthe obligation.

GENERAL RULE: MOTIVE CAUSA

MOTIVE: does not affect the legality of the contract.

A sold three knives to B, C and D.

a. To B, for P300, and B plans to use it in his kitchen.b. To C, for P300, and C plans to use it in his garden.c. To D, for P300, and D plans to use it to kill B.

NOTE: all of the contracts of sale are VALID.

- Motive of the parties do not affect a contracts validity.- Causa is the same:

1. SELLER: acquisition of the price.2. BUYER: acquisition of the knife.

EXCEPTION: MOTIVE = CAUSA

When the motive PREDETERMINES the contract.

That is when the line between motive and causadisappears.

The ILLICIT MOTIVE of one party becomes the cau

necessitating the need for the contract.

AFFECTS the validity/legality of the contract.

LIGUEZ VS. CA

- Conchita, who was a young lady (16 years old) during that timaccepted a donation from a man, Lopez, with the consideratthat she will agree to be his mistress. After the death of Lopehis heirs commenced an action against Conchita. Conchaverred that there is nothing wrong with the contract as it wasPURE BENEFICENCE.

- SC: Lopez would not have donated his property to her if shadnt agreed to be his mistress.! The contract was conditioned upon an illicit motive

Lopez.- Conchita was a minor during that time, and minors occupy

privileged position in law.! Conchita and Lopez are not in pari delicto.

- EQUITABLE SOLUTION: to allow her to retain the property to textent that is not prejudicial to Lopezs compulsory heirs.

PHIL. BANKING CORP. VS. LUI SHE: CLASSIC CASE

- An old, rich woman (Doa Santos) owned a really big estateManila. A Chinese was leasing a part of the estate and woperating a restaurant there. Doa Santos and the Chinese weold friends. She did not have any known relatives during that timand her only source of happiness is when the children of tChinese came to visit her and she taught them how to pray. Sthen wanted to give her property to him, but foreigners are nallowed to own properties here.! There was a constitutional obstacle.! She then leased her property to the Chinese a

extended it for maximum periods with an option to buy.- A snoopy newspaperman learned about this and wrote a sto

about it out of human interest about this rich woman with relatives. That was the beginning of the end.

- Long lost relatives began to appear and they were successenough to place the old woman under guardianship. They thproceeded to nullify those acts.

- PREVIOUS SC CASES: SC had invariably ruled that the Filipseller and the foreign buyer are in pari delicto.! Both of them cannot recover the property.! Who can recover? THE STATE ALONE.


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- In this case, SC applied one of the exceptions of the in paridelictorule.! Merely prohibited plaintiffs were allowed to recover the

property.- CASTRO: if you look at the contracts individually, there is nothing

illegal about them. But if you look at them collectively, theysubvert the law by indirectly doing what is subverted: tocircumvent a constitutional prohibition.! The ill motives of the parties tainted the cause of the

contract.! The Chinese had virtual ownership of the property.

ACCESSORY OBLIGATIONS

Has the same causa as that of the principal.

A borrowed from a bank and asked B if he could use Bs property asmortgage. B agreed. A was unable to pay the loan.

- Can B allege that there is no causal consideration of themortgage of his property by saying that he did not receive asingle centavo of the loaned amount? NO.

- There IS a consideration: The loan received by A.

MORAL OBLIGATION

FISHEL VS. ROBB

- The project did not push through and the organizer said that outof sense of moral duty, he will give back the investments of theinvestors.! NOT a binding promise.

VILLAROEL VS. ESTRADA

- VALID civil obligation: a person made a loan and subsequentlydied. Her child said he will pay his mothers loan instead, eventhough prescription had already set it.

- BINDING: the prescription of the civil obligation converted it to anatural obligation.

ARTS. 1352 to 1355

EFFECT OF LACK OF CAUSE, UNLAWFUL CAUSE, FALSE CAUSE

AND LESION

CAUSE EFFECT

LACK OFCAUSE

There is total lack orabsence of cause.

The contract confers noright and produces nolegal effect.

- Justifies nullity.

ILLEGALITYOF CAUSE

The cause is contrary tolaw, morals, goodcustoms, public order andpublic policy.

The contract is null andvoid.

FALSITY OFCAUSE

The cause is stated butnot true.

The contract is void ifshould not be proved ththey were founded upanother case which true and lawful.

LESION ORINADEQUACYOF PRICE

Shall not invalidate tcontract UNLESS:

1. There is fraumistake or und

influence(annullable).

2. When the partintended donation or somother contract.

CARANTES VS. CA

- After the death of Carantes, his children executed a deed assignment to their co-heir, Maximillo, with a consideration P1.00. Additionally, during the lifetime of the deceased father, had been saying that Maximillo is the rightful owner of t

property.- SC: it is not mere inadequacy of cause the will justify nullity.- There is a consideration of P1.00.- Of great legal import, as well: the admission of the late father.

! Valuable causal consideration.! No basis for the declaration of nullity of the deed.

BERCERO VS. CAPITOL DEVELOPMENT CORP., GR. NO. 154765

- Respondent corporation is an owner of a property and leased itNicolas Merchandising, Inc. for 10 years. RC Nicolas thsubleased it to Bercero. Respondent corporation then filed ejectment suit for non-payment of RC Nicolas. Pending litigatio

respondent then leased the property to Bercero.- SC: the contract between Capitol and Bercero is VOID.! No causal consideration; inexistent.! At that time, Capital did not have the right to lease it

Bercero since the lease of Nicolas is still valid aexisting.

MAR. 04, 2014

FORM OF CONTRACTS

We follow the SPIRITUAL SYSTEM as far as form of contracts

concerned.

GENERAL RULE: contracts are binding no matter what fo

they have. EXCEPTION: when the law specifies for another form for th

VALIDITY, ENFORCEABILITY and CONVENIENCE.

A and B entered into a VERBAL contract of loan for P1,000.

- Is this a valid contract? YES.

MUST BE IN WRITING; OTHERWISE, NOT VALID:


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1. Donations of personal property whose value exceeds five

hundred pesos.

2. Sale of a piece of land or any interest therein through an agent

SPA.

RECIO VS. AGUEDO

- A certain parcel of land was inherited and owned by the heirs ofan old woman and one of the heirs sold it. The sale is only validin so far as that heirs share is concerned, without any proof ofthe following (the law is categorical):

1. The agent must be authorized in writing.2. Special power of attorney.- Sale is NOT valid as far as for the shares of the others are

concerned.

3. Agreement of payment of interest in contracts of loan.

4. Antichresis.

MUST BE REGISTERED:

1. Chattel mortgage.

2. Sale of large cattles.

MUST APPEAR IN A PUBLIC DOCUMENT:

1. Donations of immovable properties.

2. Partnerships where immovable property or real rights are

contributed to the common fund.

ART. 1358

All other contracts where the amount involved exceeds five

hundred pesos must appear in writing, even a private one.

Suppose A loaned P1,000 from B, though such was NOT executed in apublic document.

- Is the contract of loan valid? YES. Enforceable? YES.

- Why the law requires such: only for greater EFFICACY orCONVENIENCE.

The cession, repudiation or renunciation of hereditary rights or of

those of the conjugal partnership of gains the contract will still

be VALID despite not in a public document.

The non-compliance of a the requirement does NOT affect the

validity of those contracts.

ART. 1357

A and B entered into a contract which has already been perfected, but

was not in a public document.

- The law allows one party to execute it in a public document.

DAUDEN-HERNAEZ VS. DE LOS ANGELES

- The actresss professional fee of P14,700 remained unpaid,though such agreement was not made into writing.

- TCL dismissed her claims; invoked Art. 1358.

- Court: Art. 1358 does not affect the VALIDITY and tENFORCEABILITY of contracts.

ART. 1359: REFORMATION

Presupposes a VALID CONTRACT.

Does NOT involve vitiation of the consent of either of the partie

PROBLEM IT ADDRESSES: when the true intention of t

parties to a perfected and valid contract are not expressed in t

instrument purporting to embody their agreement by reason

mistake, fraud, inequitable conduct or accident, one of the part

may ask for the reformation of the instrument so that such tr

intention may be expressed.

! In other words, the written document does not embo

the parties true intent.

A and B entered into a contract of sale, whereby A will sell Lot. No. 1B for P500,000. B agreed. In the document, though, what was writtwas Sale of Lot. No. 3.

- What is the proper remedy? REFORMATION, NOT annulment- What if the Lot. No. was correct, but the secretary erroneou

typed $500,000, instead of P500,000? Is reformation still a propremedy?!

YES. There was a prior meeting of the minds.

What if A made a will and testament and when he died, there had beallegations that his will failed to reflect his true intentions.

- Can this be subject to REFORMATION? NO.

ART. 1366: WHEN THERE CAN BE NO REFORMATION

1. Simple donations inter vivos wherein no condition is imposed.

2. Wills.

3. When the agreement is void.

INTERPRETATION OF CONTRACTS: things to remember:

1. WHEN THE LANGUAGE IS CLEAR: no room for interpretation

! Only to implement or to enforce.

2. WHEN THERE ARE SOME APPARENT CONFLICT IN T

WORDS AND THE INTENTION OF THE PARTIES: the intenti

of the parties will prevail.

3. GUIDE OF ASCERTAINING INTENTION (for judges): throu

contemporaneous and subsequent acts.

4. The one who caused the ambiguity, the words will be interpre

against him.

! CONTRACTS OF ADHESION: doubt is construed agai

the party who prepared it.

ART. 1378: when doubt is impossible to settle:

1. Doubt refers to circumstances of a GRATUITOUS CONTRAC

the least transmission of rights and interest shall prevail.

2. Doubt refers to circumstances of an ONEROUS CONTRACT: t

greatest reciprocity of interest.

CENTRAL PHILIPPINE UNIVERSITY VS. CA


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- Petitioner was not able to fulfil the condition for the donation.

MAR. 06, 2014

RESCISSIBLE CONTRACTS

Earlier this semester, we took time to discuss Art. 1191

speaks of rescission of reciprocal obligations.

RESOLUTION FOR BREACH OFSTIPULATION

RESCISSION BY REASON OFLESION OR DAMAGE

PRINCIPAL ACTION; retaliatoryaction against the other party.

SUBSIDIARY ACTION andinvolves partial resolution.

Requires mutual restitution: to return what the parties have received,including the fruits and interest***

- Does that arise when an obligation is rescinded in Art. 1191?YES.

***The Supreme Court said in ONE CASE that there is no suchobligation.

Do parties, aft

Oblicon Notes Finals 3 3

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