Obligation n Contract

8/3/2019 Obligation n Contract

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h t t p : / / w w w . s c r i b d . c o m / d o c / 2 3 32 2 1 0 8 / O b l i g a t i o n s - a n d -C o n t r a c t s

O B L I G A T I O N S A N DC O N T R A C T S T I T L E 1 -O B L I G A T I O N Art. 1156.

An obligation is a juridical necessity to give, to do or not to do. (n)

CHAPTER 1. GENERAL PROVISIONSSee

Arts. 1156 - 1162ELEMENTS OF AN OBLIGATION:1.

Active subject(obligee/creditor):

one in whosefavor the obligation is constituted

2.Passive subject(obligor/debtor):one who hasthe duty of giving, doing or not doing

3.Object: prestation; the conduct which has to beobserved by the debtor/obligor REQUISITES

1. it must be licit (otherwise it is void)2. it must be possible, physically and juridically(otherwise it is void)3. it must be determinate or determinable(otherwise it isvoid)4. it must have pecuniary valuea.Vinculum Juris: juridical/legal tie; binds theparties to the obligationb.Causa(causa debendi/causa obligationes):why obligation existsSOURCES OF OBLIGATIONArt. 1157.Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissionspunished by law; and (5) Quasi-delicts. (1089a)LAW (OBLIGATION EX LEGE)

Must be expressly or impliedly set forth andcannot be presumedCONTRACT (OBLIGATION EX CONTRACTU)

Must be complied with in good faith


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it is the law between parties;

neither party may unilaterally evade his obligationin the contract, unless:a. Contractauthorizes itb. Other party assents

Parties may freely enter into any stipulationsprovided they are not contrary to law,morals,good customs, public order or public policyQUASI-CONTRACT (OBLIGATION EX QUASI-CONTRACTU)

Juridical relation resulting fromlawful, voluntary and unilateralacts, which has for its purpose, thepayment of indemnity to the end that no one shallbeunjustly enriched or benefited at the expenseof another.

Distinguished from other Sources1. act giving rise to a quasi contract must beLAWFULdistinguishing it from delict;2. act must be VOLUNTARY distinguishing it fromquasi-

delict which is based on fault ornegligence;3.act must be UNILATERAL distinguishing it fromcontract which is based on agreement.(Tolentino, Volume IV, p. 68)KINDS OF QUASI-CONTRACT

Negotiorum gestio: unauthorized management;arises whenever a person voluntarily takescharge of theagency or management ofanothers abandoned business or propertywithout the lattersauthority

Solutio indebiti: undue payment. Arises when aperson unduly delivers a thing through mistaketoanother who has no right to demand it (must notbe through liberality or some other cause)DELICTS (OBLIGATION EX MALEFICIO OR EXDELICTO )RPC: Art. 100

Every person criminally liable for a felony is also civilly liable.GOVERNING RULES1. Articles 100-113 of the RPC and other penal lawssubject to Art 2177 Civil Code(quasi-delict);2. Chapter 2, Preliminary title, on Human Relations( Civil Code )3. Title 18of Book IV of the Civil Code on damagesSCOPE OF CIVIL LIABILITY1. Restitution

2. Reparation for damage caused3. Indemnity for Consequential damagesEFFECT OF ACQUITTAL IN CRIMINAL CASE


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1. When due to reasonable doubt no civil liability2. When due to exemptingcircumstances there iscivil liability3. When there is preponderance of evidence thereis civil liabilityCRIMES WITHOUT CIVIL LIABILITY1. Contempt2. Insults to persons in authority3. gambling4. violations of traffic

regulations(De Leon, 2003 ed.,p. 23)

QUASI-DELICT/TORTS (OBLIGATION EX QUASI-DELICTO Or EX QUASIMALEFICIO )

It is an act or omission arising from fault ornegligence which causes damage toanother,there being no pre-existing contractual relationsbetween the parties

ELEMENTS:

1. There must be an act or omission2. There must be fault or negligence attributabletothe person charged3. There must be damage or injury4. There must be a directrelation of cause andeffect between the act arising from fault ornegligence and thedamage or injury (proximatecause );5. There is no pre-existing contractualrelationbetween the parties.NEGLIGENCE

Failure to observe for the protection of theinterests of another person, that degree of care,precaution and vigilance which the circumstances justly demand, whereby suchother personsuffers injury. (US v. Barrias, 23 Phil. 434 [1912])CHAPTER 2. NATURE & EFFECTS OFOBLIGATIONSSee

Arts. 1163 - 1178NATURE OF OBLIGATIONS1.Personal Obligations: obligations to do or notto do; where the subject matter is an act to bedone or not to bedonea. Positive obligation to dob. Negative obligation not to do2.Real Obligations:obligations to give; where thesubject matter is a thing which the obligor mustdeliver tothe obligeea. Determinate or specific object is particularlydesignated or physicallysegregated from allother things of the same classb. Generic object is designated by itsclass orgenu sc. Limited Generic generic objects confined toa particular classEx:

An obligation to deliver one of my horses (Tolentino, Volume IV, p. 91; De Leon, 2003ed.,p. 7)

EFFECT OF OBLIGATIONSDUTIES OF DEBTOR IN AN OBLIGATION TO GIVEADETERMINATE THING (


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See Arts. 1163, 1164,1166.)1. To preserve or take care of the thing due with thediligence of a good father of a family

DILIGENCE OF A GOOD FATHER OF A FAMILY

ordinary care or that diligence which an average orreasonably prudent person wouldexercise over hisown propertyNOTE:Rule on Standard of Care

That which the law requires; or

That stipulated by the parties; or

In the absence of the two, diligence of a goodfather of a family

2. Todeliver the fruits of the thing:

Right to thefruits of the thing from the time the obligation todeliver it arisesWHEN OBLIGATION TO DELIVER ARISES

GENERAL RULE:From the time of theperfection of the contract (i.e. meeting of theminds between theparties)

EXCEPTIONSa. when the parties made a stipulation asregards the right of the creditor to the fruitsofthe thingb. when the obligation is subject to asuspensive condition or period; arisesuponfulfillment of the condition or arrival of theperiod

PERSONAL V. REAL RIGHT Personal Real Jus ad rem,

a rightenforceable onlyJus in re,a rightenforceable against


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against a definite person or group of persons the whole worldRight

pertaining to a personto demand from another , as a definite passive subject,The fulfillment of the prestationto give, to do or not to do. Right pertaining to a person over a specific thing, without adefinite passive subject

against whom the right may be personallyenforced3. Todeliver its accessions and accessories

Accessions additions to or improvements upon a thing.Ex:air conditioner in a car.

Accessories things joined to, or included with the principal thing for its better use,embellishment or completion. Ex:key of a house; frame of a picture (De Leon, 2003 ed., pp. 37-38)4. To

deliver the thing itself 5. To

pay damagesin case of breach of the obligation by reason of delay, fraud, negligence or contravention of the tenor of the obligation.DUTIES OF DEBTOR IN AN OBLIGATION TO GIVEA GENERIC THING1. To deliver the thing which is neither of superior nor of inferior quality2. To paydamages in case of breach of the obligation by reason of delay, fraud, negligence or contravention of the tenor of the obligation.REMEDIES OF THE CREDITOR IN CASE OF NON-PERFORMANCE (See

Arts 1165 1168)1.

Specific Performance: Performance by the debtor of the pre station itself 2.

Substitute Performance: someone else performs or something else is performed at the expense of debtor


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3.

Equivalent Performance: damages

Specific performanceX

X

Xundo the things already done

equivalent performanceX

X

Can only be demanded if oblig ation is not very personalX

Substitute performanceX

XUndo the things already done at debtor's expense

rescission/ cancellationXX

X

BREACH OF OBLIGATIONS (See

Arts. 1170 1174)1.Voluntary debtor in the performance of theobligation is guilty of:

fraud (Dolo)

negligence (culpa)

delay (


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mora)

contravention of the tenor of the obligation

NOTE:debtor is liable for damages2.Involuntary debtor is unable to comply with his obligation due to fortuitous event/s

NOTE:Debt or is not liable for damagesFRAUD (Dolo)

It is the deliberate or intentional evasion of the normal fulfillment of an obligation. (8Manresa 72)Oleary Macondray & Co., 45 Phil. 812 [1924

[ It implies some kind of malice or dishonesty and it cannot cover cases of mistake anderrors of judgment made in good faith. It is synonymous to b a d f a i t hTYPES OF FRAUD1.Causal Fraud (Dolo Causante): fraud employed2.in the execution of the contract3.Incidental Fraud (Dolo Incidente):

fraud in performance of obligation already existing because of a contractD e l e t e d :Corliss v. Manila Railroad The law presumes or requires a man to possess ordinary capacity to avoid harminghis neighbors unless a clear and manifest incapacity is shown and the law does not holdhim liable for unintentional injury unless, possessing such capacity, he might and oughtto have foreseen the danger.Fraud in Presentduring theperformanceof a pre-existingobligationPresentduringtheperfection of acontractPresentduring theperfection of acontractPurpose is toevade


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thenormalfulfillment ofthe obligationPurpose is tosecure theconsent ofanother toenter into thecontractPurpose is tosecure theconsent of theother party but

the fraud wasnot theprincipalinducement inmaking the

contractResults in thebreach of anobligationResults invitiationofconsent;voidablecontractDoes notresult in thevitiation ofconsentGives rise to aright infavorof the creditorto recoverdamagesGives rise to aright of aninnocent partyto annulthecontractGives rise to aright of aninnocent partyto claim fordamagesNOTE:Future fraud cannot be waived. However, thelaw does not prohibit renunciation of theaction fordamages on the ground of fraudalready committed.REMEDIES OF DEFRAUDED PARTY

Insist on specific performance (Art 1233)

Resolve contract (Art 1191)

Claim damages, in either caseNEGLIGENCE

Consists in the omission of that diligence which isrequired by the nature of theobligation andcorresponds with the circumstances of thepersons, of the time and of theplace.KINDS OF NEGLIGENCE1.Quasi-Delict (Culpa aquiliana/culpa extra contractual)- source of obligation

2.Contractual Negligence (Culpa Contractual)-negligence in the performance of a contract

NOTE:Negligence can be waived except incases where the nature of the obligation or publicpolicy requires another standard of care.

EXCEPTIONS:Nature of Obligation of aCommon carrier


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FRAUD V. NEGLIGENCE

Fraud

Negligence

There is deliberateintention to causedamage.There is no deliberateintention tocausedamage.Liability cannot be

mitigated.Liability may be

mitigated.Waiver for future fraudis void.Waiver for futurenegligence may beallowed incertaincasesKINDS OF NEGLIGENCE, DISTINGUISHED Culpa Aquiliana Culpa Contractual Negligence issubstantive andindependentNegligence merely anincident of performanceof an obligationThere may or maynot be a pre-existingcontractualobligationThere is a pre-existingcontractual relationSource of theobligation is

thenegligence itselfSource of the obligationis the breach of thecontractual obligationNegligence must beprovedProof of existing of thecontract and its breachisprima faciesufficientto warrant recoveryDiligence in theselection andsupervision of theemployees isadefenseDiligence in theselection andsupervision of theemployees is notavailable as adefenseEFFECTS OF CONTRIBUTORY NEGLIGENCE OFTHE CREDITOR

GENERAL RULE: Reduces or mitigates thedamages which he can recover

EXCEPTION:

If the negligent act or omission ofthe creditor is theproximate causeof the eventwhich led to the damage or injury complained of,he cannot recover.DELAY (MORA)1. Ordinary Delay failure to perform an obligationon time2. Legal Delay/ Default

failure to perform an obligation on time which failure constitutes abreach of the obligation. (De Leon, 2003 ed., p.42)REQUISITES OF DELAY

1. Obligation must be due, demandable andliquidated;2. Debtor fails to perform hispositive obligation onthe date agreed upon;3. A demand (not merely a reminder or


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notice), judicial or extra-judicial, made by the creditorupon the debtor to fulfill, perform or comply withhis obligation otherwise, he will be in default; and4. Failure of the debtor tocomply with suchdemand.KINDS OF DELAY1.

Mora Solvendi default on the part of the debtor:

Mora Solvendi Ex re default in realobligations

Mora Solvendi Ex persona

default inpersonal obligations

REQUISITES:a. The obligation must be due, enforceableand already liquidated or determinate

inamount;b. There must be non-performance; andc. There must be a demand,unlessdemand is not required.

GENERAL RULE: Those obliged to deliveror to do something incur in delay from thetime the obligee

judicially or extrajudiciallydemands from them the fulfillment of theirobligation.

EXCEPTIONS(no demand necessary)a. When the obligation or the law expresslyso declare; orb.When from the nature and thecircumstances of the obligation itappears that thedesignation of the timewhen the thing is to be delivered or theservice is to be renderedwas acontrolling motive for the establishmentof the contract; orc. When demand wouldbe useless, aswhen the obligor has rendered it beyondhis power to perform

EFFECTS:a. Debtor is guilty of breach of theobligationb. Liability: If obligation to pay money-mustpay interest. If no extra-judicial demand,interest runs from the filing of thecomplaint. In other obligations, paydamages.c. Obligations to deliver adeterminatething, liable for fortuitous events. If debtorcan prove that loss would haveresultedeven if he had not been in default, thecourt may equitably mitigate thedamages(Art. 2215[4])d. Resolution (Art 1170, in proper cases)2.


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Mora Accipiendi

default on part of creditorwhen he unjustifiably refuses to accept theperformance of the obligation.

REQUISITES:a. Offer of performance by the debtor

b.Offer must be to comply with theprestation as it should be performedc.Creditor refuses the performance without just cause

EFFECTS:a. Responsibility of debtor is limited tofraud and gross negligenceb. Debtor is exempted

from risk of lossof thing; creditor bears risk of lossc. Expenses by debtor for preservationof thing after delay is chargeable tocreditord. If obligation bears interest,debtor doesnot have to pay from time of delaye. Creditor liable for damagesf. Debtor may relieve himself ofobligation by consigning thething3.Compensatio morae

both parties are indefault (in reciprocal obligations); there is noactionable default on thepart of both parties

Rule in Reciprocal Obligations:In reciprocalobligations, neither party incurs in delay if theother does not comply or isnot ready to complyin a proper manner with what is incumbent uponhim. From themoment one of the parties fulfillshis obligation, delay by the other begins.

Performance must be simultaneousunlessdifferent dates for the performance of theobligation were fixed by the partiesCESSATION OF THE EFFECTS OF MORA:

renunciation (express or implied)

prescription

NOTE:There is no delay in negative obligationsand natural obligations.FORTUITOUS EVENT


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An event which could not before seen, or which though foreseen, was inevitableREQUIREMENTS: (Nakpil and Sons vs. CA):1. The cause of the breach of the obligation must beindependent of the will of thedebtor2. The event must be either unforeseeable orunavoidable3. The event must besuch as to render itimpossible for the debtor to fulfill his obligation ina normal manner4.

The debtor must be free from any participation in,or aggravation of injury to the creditor RULE ON FORTUITOUS EVENT:

GENERAL RULE: No liability for fortuitous event

EXCEPTIONS:1. When expressly declared by law ( bad faith,subject matter is generic, debtor is in

delay )2. When expressly declared by stipulation orcontract3. When nature of obligationrequires assumption ofrisk4. When the obligor is in default or has promised todeliver thesame thing to two or more personswho do not have the same interest (Art. 1165[3])EFFECT OF FORTUITOUS EVENT DeterminateObligationGeneric Obligation Obligation isextinguishedObligation is

notextinguishedbased on therule that the genus neverperishes (genus nunquam peruit)

Art. 1176The receipt of the principal by the creditor,without reservation with respect to theinterest, shall give rise to the presumption that said interest has been paid.The receiptof a later installment of a debt without reservation as to prior installments, shall likewiseraise the presumption that such installments have been paid.PRINCIPLE IN ARTICLE 1176

Before the presumption that a prior installmenthad been paid may arise, the receiptmustspecify the installment for which payment ismade.

Art. 1177The creditors, after having pursued the property in possession of the debtor to satisfytheir claims, may exercise all rights and bring all the actions of the latter for the samepurpose, save those which are inherent in his person; they may also impugn the actswhich the debtor may have done to defraud them. (1111)

Art. 1178Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. (1112)

Art. 1191.


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The power to rescind obligations is implied in reciprocal ones, in case one of theobligors should not comply with what is incumbent upon him.The injured party maychoose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosenfulfillment, if the latter should become impossible.The court shall decree the rescission

claimed, unless there be just cause authorizing the fixing of a period.This is understoodto be without prejudice to the rights of third persons who have acquired the thing,in accordance with Articles 1385 and 1388 and the Mortgage Law. (1124)

Art. 1192.In case both parties have committed a breach of the obligation, the liability of thefirst infractor shall be equitably tempered by the courts. If it cannot be determined whichof the parties first violated the contract, the same shall be deemed extinguished, andeach shall bear his own damages.(n)REMEDIES AVAILABLE TO CREDITORS FOR THESATISFACTION OF THEIRCLAIMS1.

Exact fulfillment of the obligation by specific orsubstitute performance with a right todamages ineither case;

2.In case of reciprocal obligations, petition the court to resolve the contract;

3.Pursue the leviable (not exempt from attachmentunder the law) property of the debtor;

4. Accion directa(Arts. 1729 and 1652):Right ofthe lessor to go directly to sublessee for unpaidrents of the lessee. Right of the laborers orpersons who furnish materials for a piece of workundertaken by a contractor to go directly to theowner for any unpaid claims due tothe contractor

5. Accion subrogatoria to be subrogated to allthe rights and actions of the debtor save thosewhich areinherent in his person

REQUISITES:a. The debtor to whom the right of actionproperly pertains must be indebted tothecreditor;b. The creditor must be prejudiced by theinaction or failure of the debtor toproceedagainst the third person;c. The creditor must have pursued first orexhausted allthe properties of the debtorwhich are not exempt from execution;d. The debtor's assetsare insufficient to satisfyhis claims; and


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e. The right of account is not purely personal6. Accion Pauliana

asking the court to rescind orto impugn all the acts which the debtor may havedone todefraud the creditors (Arts. 1380-1389)

REQUISITES:a.There is a credit in favor of plaintiff b.The debtor has performed an act subsequentto the contract, giving advantage to

otherpersonsc.The creditor is prejudiced by the debtor's actwhich are in favor of 3rdparties andrescission will benefit the creditor d.The creditor has no other legal remedye.The debtor's acts are fraudulentCHAPTER 3. - DIFFERENT KINDS OFOBLIGATIONSSee

Arts. 1179 - 1230PRIMARY CLASSIFICATION OF OBLIGATIONSUNDER THE CIVILCODE1.Demandabilitya. pure,b. conditionalc. with a period2.Plurality of objecta. simpleb. alternativec. facultative3.Plurality of subjecta. Simpleb. Jointc. solidary

4.

Performancea.Divisibleb.indivisible5.

Sanctions for breach


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a.with a penal clauseb.without a penal clausePURE AND CONDITIONAL OBLIGATIONS(

See Arts. 1179 1190)PURE one whose effectivity or extinguishmentdoes not depend upon the fulfillment or non-fulfillment of a condition or upon the expiration of aperiod and is demandable at onceCONDITIONAL one whose effectivity issubordinated to the fulfillment or non-fulfillment of afuture

AND uncertain event or upon a past eventunknown to the partiesCONDITION- Future and uncertain event or a pastevent unknown to the parties1.Suspensive happening of condition gives riseto obligation

Effects:a. Effectivity retroacts to the day of theconstitution of the obligationb. No retroactivitywith reference to fruits orinterest and prescriptionc. Creditor may preserve rightsd.Debtor recovery of payment by mistake oreven w/o mistakeRULES ON LOSS, DETERIORATION, ANDIMPROVEMENTS DURING PENDENCYOF ASUSPENSIVE CONDITION (Art. 1189)REQUISITES FOR THE APPLICATIONOFARTICLE 1189a. 1.The obligation must be a real obligationb. 2.The object is a specific or determinatethingc. The obligation is subject to a suspensiveconditiond. The condition is fulfillede.There is loss, deterioration or improvement ofthe thing during the pendency of thehappening of the condition2.Resolutory

happening of conditionextinguishes obligationEFFECTS:a. No retroactive effectb. Obligation extinguishedc. Restore to each other what wasreceivedplus interest/fruits3.Potestative dependent on sole will of 1 party; ifon part of debtor and suspensive void4.Casual

dependent on chance or hazard5.Mixed

chance, or any of parties6.


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With term

Without thefault of thedebtorWith the fault of thedebtor LossObligation isextinguishedDebtor obliged to paydamagesDeterioration

Impairmentborne by thecreditorCreditor may choosebetween rescissionor its fulfillmentwithdamages in eithercaseImprovementIf by nature orby time

inures to thebenefit of thedebtorIf at the expense ofthe debtor

debtorsright is only that of ausufructuary

a. Positive extinguished if time expires orindubitable of condition to happenb. Negative

effective from moment of timeelapsed or evident it can't happenIMPOSSIBLE AND ILLEGAL

CONDITIONS

GENERAL RULE:They shall annul theobligationwhich depends upon them

EXCEPTIONS:a. pre-existing obligationb. if obligation is divisiblec. in simple or remuneratorydonationsd. testamentary dispositionse. conditions not to do an impossible thingOBLIGATIONS WITH A PERIODWITH A PERIOD

An obligation which depends on afuture and certain event (See

Arts 1193, 1196)WHEN STIPULATION SAYS PAYABLE WHENABLE IT IS WITH A PERIOD,REMEDY:1. Agreement among parties2. Court shall fix period of payment whenparties unable toagreeKINDS:1.


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Resolutory( in diem ) demandable at once butterminates upon arrival of the day certain

Day certain that which must necessarilycome, although it may not be known when2.Suspensive

( ex die ) obligation becomesdemandable on the day stipulatedTERM CONDITION Interval of time whichis future and certainFact or event which isfuture or uncertain or apast event unknown tothe partiesTime w/c mustnecessarily comealthough it may notbeknown whenFuture and uncertain factor event which may ormay not happenExerts aninfluenceupon the time ofdemandability orextinguishment of anobligationExerts aninfluence uponthe very existence of theobligation itself

Does not have any

retroactive effectunless there is anagreement to theHas retroactive effectcontraryWhen

it is leftexclusively to the willof the debtor, theexistence of theobligation is affectedWhenit is left exclusivelyto the will of the debtor,the obligation is voidWHEN COURTS MAY FIX PERIOD:1.If the obligation does not fix a period, but from itsnature and circumstances it can beinferred that aperiod was intended by the parties2.If the duration of the period depends upon the willof the debtor 3.In case of reciprocal obligations, when there is a just cause for fixing a period4.If the debtor binds himself when his meanspermit him to do soPERIOD FOR WHOSE BENEFIT

GENERAL RULE:When a period is designatedfor the performance or fulfillment of an obligation,it ispresumed to have been established for thebenefit of both creditor and debtor.

EXCEPTION:When it appears from the tenor ofthe obligation or other circumstances that theperiodhas been established in favor of one or theother.PERIOD FOR THE BENEFIT OF THE CREDITOR

Creditor may demand the fulfillment of theobligation at any time but the debtor cannotcompel him to accept before the expiration of theperiodPERIOD FOR THE BENEFIT OF THE DEBTOR


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Debtor may oppose any premature demand ofthe creditor but he may renounce thebenefit ofthe period by performing his obligation inadvance (Manresa)WHEN DEBTOR LOSES RIGHT TO PERIOD

:

Insolvency of debtor, unless security provided

Did not deliver security promised

Impaired security through his own acts or throughfortuitous event unless he gives newsecuritiesequally satisfactory

Violates undertaking in consideration ofextension of period

Attempts to abscond

ALTERNATIVE OBLIGATIONS (See

Arts. 1199 1206)FACULTATIVE -only one prestation has beenagreed upon but another may be given in substitutionEFFECT OF LOSS OR DETERIORA0TION THRUNEGLIGENCE, DELAY OR FRAUDOF OBLIGOR:

Of thing intended as substitute - no liability

Of the substitute after substitution is made withliability ALTERNATIVE bound by different prestations butonly one is dueRIGHT OF CHOICE IN ALTERNATIVEOBLIGATIONS

As a general rule the right of choice belongs todebtor EFFECT OF LOSS OF OBJECTS OFALTERNATIVE OBLIGATIONS1. If the right of choice belongs to the debtor

If through a fortuitous event all were lost,debtor cannot be held liable for damages

If 1 or more but not all of the things are lostor one or some but not all of theprestationscannot be performed due to fortuitous eventor fault of the debtor, creditor cannot hold thedebtor liable for damages because the debtorcan still comply with hisobligation


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If all things, except one, were lost, the debtormust comply by performing that whichremain

If all were lost by fault of the debtor the lateris liable for the value of the last thingorservice which became impossible

2. If right of choice belongs to the creditor If 1 of the things is lost through a fortuitousevent, the debtor shall perform theobligationby delivering that which the creditor shouldchoose from among the remainder or thatwhich remains if only 1 subsists

If the loss of 1 of the things occurs throughthe fault of the debtor, the creditor mayclaimany of those subsisting or the price of thatwhich, through the fault of the former,hasdisappeared with a right to damages

If all the things are lost through the fault ofthe debtor, the choice by the creditor shall

fallupon the price of any 1 of them, also withindemnity for damages.REQUISITES FOR MAKING THE CHOICE:1. Made properly so that creditor or his agent willactually know2. Made with fullknowledge that a selection isindeed being made3. Made voluntarily and freely4. Madein due time before or upon maturity5. Made to all proper persons6. Made w/oconditions unless agreed by thecreditor7. May be waived, expressly or impliedly

ALTERNATIVE vs. FACULTATIVE A L T E R N A T I V EF A C U L T A T I V E a) Variousthings are due butthe giving principallyof one is sufficienta) Only one thing isduebut a substitute may begiven to renderpayment/fulfillment easyb) If oneofprestations is illegal,others may be valid

but obligationremainsb) If principal obligationsis void and there is nonecessity of givingthe

substitute; nullity of Pcarries with it nullity of Sc) If it is impossibleto give all exceptone,the last onemust still be givenc) If it is impossibleto give the principal, thesubstitute doesnot haveto be given; if it isimpossible to give thesubstitute, the principalmust still begivend) Right to choosemay be given eitherto debtor or creditord) The right of choiceisgiven only to the debtor JOINT AND SOLIDARY OBLIGATIONS (See

Arts.1207 1222)JOINT

presumption when two or more creditors ortwo or more debtors concur in one and thesameobligationEXCEPTIONS TO THE PRESUMPTION1. when expressly stated that there is solidarity2. when the law requires solidarity3.when the nature of the obligation requiressolidarity4. when a charge or condition is


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imposed uponheirs or legatees and the testament expresslymakes the charge or condition in solidum(Manresa)

5. when a solidary responsibility is imputed by afinal judgment upon several defendants(Gutierrez v. Gutierrez)

EFFECTS OF JOINT LIABILITY1. Demand on one produces delay only with respectto the debt2. Interruption inpayment by one does not benefitor prejudice the other3. Vices of one debtor to creditor has no effect onthe others4. Insolvency of one debtor does not affect otherdebtorsJOINT DIVISIBLE OBLIGATIONS1. Each creditor can demand for the payment of hisproportionate share of the credit,while eachdebtor can be held liable only for the payment ofhis proportionate share of

the debt2. A joint creditor cannot act in representation of theother creditors while a joint debtor cannot becompelled to answer for the acts or liability of theother debtorsJOINT INDIVISIBLE OBLIGATIONS

1. If there are 2 or more debtors, the fulfillment of orcompliance with the obligationrequires theconcurrence of all the debtors, although each forhis own share. Theobligation can be enforcedonly by proceeding against all of the debtors.

2. If there are 2 or more creditors, the concurrenceor collective act of all the creditors,although eachfor his own share, is also necessary for theenforcement of the obligationEFFECT OF BREACH

If one of the joint debtors fails to comply withhis undertaking, the obligation can nolongerbe fulfilled or performed. Consequently, it isconverted into one of indemnity for damages.Innocent joint debtor shall not contribute to theindemnity beyond their corresponding share ofthe obligation.INDIVISIBILITY SOLIDARITY Refers to theprestation whichconstitutes the objectof the obligationRefers to the legal tieandconsequently to thesubjects or parties of theobligation

Plurality of subjects is

not requiredPlurality of subjects is

indispensableIn case of breach,obligation is convertedinto 1 of indemnity fordamagesbecause ofWhen there is liability onthe part of the debtorsbecause of the breach,thesolidarilty among thebreach, indivisibility ofthe obligation isterminateddebtors remainsSOLIDARY


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must be expressed in stipulation orprovided by law or by nature of obligation1.

Active

on the part of creditor or oblige

EFFECTS:

Death of 1 solidary creditor transmits shareto heirs (but collectively)

Each creditor represents the other in the actof recovery of payment

Credit is divided equally between creditors asamong themselves

Debtor may pay any of the solidary creditors2.Passive on the part of debtors or obligors

EFFECTS:

Each debtor may be requested to pay wholeobligation with right to recover from co-debtors

Interruption of prescription to one creditoraffects all

Interest from delay on 1 debtor is borne by all3.Mixed on the part of the obligors and obligees,or the part of the debtors and the creditors4.Conventional

agreed upon by the parties5.Legal

imposed by law

Instanceswhere law imposes solidaryobligation:


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a. Obligations arising from tortb. Obligations arising from quasi-contractsc. Legalprovisions regarding obligation ofdevisees and legateesd. Liability of principals,accomplices, andaccessories of a felonye. Bailees in commodatum

EFFECTS:a. Payment made before debt is due, nointerest can be charged, otherwise interestcan be chargedb. Insolvency of one others are liable forshare pro-ratac. If different terms and conditions collect onlywhat is due, later on collect from anyd. Noreimbursement if payment is made afterprescription or became illegale. Remissionmade after payment is made co-debtor still entitled to reimbursementf. Effect of insolvency or death of co-debtor still liable for whole amountg. Fault of any debtor every one isresponsible price, damage and interest

unjustly refused or circumstances makingprevious tender exemptc. Prior Notice of Consignation had been givento the person interested in performance ofobligation (1stnotice)d. Actual deposit/Consignation with proper judicial authoritiese. Subsequentnotice of Consignation (2ndnotice)

EFFECTS: EXTINGUISHMENT OF OBLIGATIONa. Debtor may ask judge to order cancellation ofobligationb. Running of interest is

suspendedc. Before creditor accepts or before judgedeclares consignation has beenproperlymade, obligation remains ( debtor bears riskof loss at the meantime, after acceptance bycreditor or after judge declares thatconsignation has been properly made

riskof loss is shifted to creditor)CONSIGNATION W/O PRIOR TENDER

allowed in:a. Creditor absent or unknown/ does not appearat the place of paymentb.Incapacitated to receive payment at the timeit is duec. Refuses to issue receipt w/o justcaused. 2 or more creditor claiming the same right tocollecte. Title of obligation hasbeen lost5. LOSS OF THE THING DUELOSS OF THE THING DUE

partial or total/ includes impossibility of performanceWHEN IS THERE A LOSSa. When the object perishes (physically)b. When it goes out of commercec. When itdisappears in such a way that: itsexistence is unknown or it cannot berecoveredWHEN IS THERE IMPOSSIBILITY OFPERFORMANCE:a.


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Physical impossibilityb.

Legal impossibilityi. Directly caused as when prohibited bylawii. Indirectly caused as when debtor

isrequired to enter a military draft

OBLIGATION TO DELIVER A SPECIFIC THING

GENERAL RULE: Extinguished

EXCEPTIONS:

a. Debtor is at faultb. Debtor is made liable for fortuitous eventbecause of a provision of law, contractualstipulation or the nature of the obligationrequires assumption of risk onpart of debtor OBLIGATION TO DELIVER A GENERIC THING

GENERAL RULE: Not extinguished

EXCEPTIONS:

a. If the generic thing is delimitedb. If the generic thing has already beensegregatedc.Monetary obligationOBLIGATION TO DO

GENERAL RULE: Debtor is released whenprestation becomes legally or physicallyimpossible withoutfault on part of debtor EFFECT OF PARTIAL LOSS

a. When loss issignificant may be enough toextinguish obligationb. When lossinsignificant

not enough toextinguish obligationNOTE: judicial determination of extent is necessaryWHEN THING IS LOST IN THE POSSESSION OFTHE DEBTOR


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Presumption: Loss due to debtors fault(disputable)

Exception:

natural calamity, earthquake, flood,storm5. REBUS SIC STANTIBUSREBUS SIC STANTIBUS

-agreement is valid only ifthe same conditions prevailing at time of contractingcontinue toexist at the time of performance; Obligormay be released in whole or in part based onthisground.REQUISITESa. The event or change could not have beenforeseen at the time of the execution of thecontractb. The performance is extremely difficult, butnot impossible (because if it isimpossible, itis extinguished by impossibility)c. The event was not due to the act of any

ofthe partiesd. The contract is for a future prestation6. CONDONATION

CONDONATION/REMISSION OF THE DEBT

gratuitous abandonment of debt; right to claim;donation; rules of donation applies;express orimpliedREQUISITES:

a. There must be an agreementb. There must be a subject matter (object of theremission, otherwise there would be nothingto condone)c. Cause of considerationmust be liberality(Essentially gratuitous, an act of liberality )d. Parties must becapacitated and mustconsent; requires acceptance by obligor;implied in mortis causaand expressed intervivose. Formalities of a donation are required in thecase of anexpress remissionf. Revocable subject to rule on inofficiousdonation ( excessive,legitime is impaired )and ingratitude and condition not followedg. Obligation remittedmust have beendemandable at the time of remissionh. Waivers or remission are not tobe presumedgenerallyForms: Extent: Kinds: a. Express formalities ofdonationa. total a. Principal accessoryalso condonedb.Implied conduct issufficientb. partial b. accessory principalstill outstandingc.accessory obligationof pledge condoned;presumption only,rebuttableREQUISITES OF IMPLIED CONDONATION1.Voluntary delivery presumption; whenevidence of indebtedness is w/ debtor presumed voluntarilydelivery by creditor;rebuttable2.Effect of delivery of evidence of indebtednessis conclusion that debt iscondoned


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already conclusion; voluntarydelivery of private documenta. If in hands of joint debtor only his share iscondonedb. If in hands of solidary debtor - whole debt iscondonedc.Tacit

voluntary destruction of instrument bycreditor; made to prescribe w/o demanding6.CONFUSION OR MERGERCONFUSION OR MERGER OF RIGHTS

characterof debtor and creditor is merged in same person withrespect to sameobligationREQUISITES:a. It must take place between principal debtorand principal creditor onlyb. Merger mustbe clear and definitec. The obligation involved must be same andidentical oneobligation onlyd. Revocable, if reason for confusion ceases,the obligation is revived7. COMPENSATIONCOMPENSATION

Set off; it is a mode of extinguishment to theconcurrent amount the obligation of personswho arein their own right reciprocally debtors or creditors

REQUISITES:a. Both parties must be mutually creditors anddebtors - in their own right and asprincipalsb. Both debts must consist in sum of money orif consumable , of the samekind or qualityc. Both debts are dued. Both debts are liquidated anddemandable(determined)e. Neither debt must be retained in acontroversy commencedby 3rdperson andcommunicated w/ debtor (neither debt isgarnished)KINDS OF COMPENSATIONa.Legal by operation of law; as long as 5requisites concur- even if unknown to partiesand if payable in diff places; indemnity forexpense of exchanges; even if not equaldebts onlyup to concurring amountb.Conventional

agreement of parties isenough, forget other requirement as long asboth consentedc.Facultative

one party has choice ofclaiming/opposing one who has benefit ofperiod may choose tocompensate:i. Not all requisites are presentii. Depositum; commodatum;criminaloffense; claim for future support; taxes

d.Judicial


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set off; upon order of the court;needs pleading and proof; all requirementsmust concur except liquidatione.Total

when 2 debts are of the sameamountf.Partial

when 2 debts are not of the sameamountEFFECT OF ASSIGNMENT OF CREDIT TO 3RDPERSON; CAN THERE STILL BECOMPENSATION

a. If made after compensation took place noeffect; compensation already perfectedb.If made before compensation took place dependsi. With consent of debtor debtor

isestopped unless he reserves his rightand gave notice to assigneeii. With knowledgebut w/o consent ofdebtor compensation may be set up asto debts maturing prior toassignmentiii. W/o knowledge compensation may beset-up on all debts prior to hisknowledge8.NOVATIONNOVATION

extinguishment of obligation by creating/ substitutinga new one in its place

Changing object or principal conditions

Substituting person of debtor

Subrogating 3rdperson in right of creditor REQUISITES:a. Valid obligationb. Intent to extinguish old obligation expressed or implied:completely/substantially incompatible old andnew obligation on every pointc.Capacity and consent of parties to the newobligationd. Valid new obligationEFFECTS OF NOVATION:a. Extinguishment of principal carriesaccessory, except:i. Stipulation to contraryii.Stipulationpour autruiunless beneficiaryconsentsiii. Modificatory novation only; obliged to w/cis lessonerousiv. Old obligation is voidb. Old obligation subsists if new obligationisvoid or voidablebut annulled already(except: intention of parties)c. If old obligation has conditioni. If


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Resolutoryand it occurred oldobligation already extinguished; no newobligation since nothing tonovateii. If Suspensiveand it never occurred asif no obligation; also nothing to novated. If old obligation has

condition, must becompatible with the new obligation; if new isw/o condition deemedattached to newe. If new obligation has conditioni. If resolutory: validii. If suspensiveand did not materialize:old obligation is enforcedKINDS OF NOVATION:a.REAL/OBJECTIVE change object,cause/consideration or principal condition

b.PERSONAL/SUBJECTIVEi.Substituting person of debtor (passive)

EXPROMISION;initiative is from 3rdperson or new debtor; new debtor andcreditor to consent; old debtor releasedfrom

obligation; subject to fullreimbursement and subrogation if madew/ consent of olddebtor; if w/o consentor against will , only beneficialreimbursement; if new debtor isinsolvent, not responsible since w/o hisconsent

DELEGACION;initiative of old debtor; allparties to consent; full reimbursement; ifinsolvent new debtor not responsibleold debtor because obligationextinguished by valid novationunless:insolvency already existing and of publicknowledge or know to him at timeofdelegacion1. Delegante old debtor2. Delegatario - creditor3. Delegado newdebtorii.Subrogating 3rdperson to rights ofcreditor ( active )1. Conventional - agreement andconsent of all parties; clearlyestablished2.Legal-


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takes place by operation oflaw; no need for consent; notpresumed except as providedfor inlaw:PRESUMED WHEN-

the offeror may accept or reject.RULE ON ADVERTISEMENTS AS OFFERS

Business advertisements Not a definite offer,but mere invitation to make an offer, unless itappears otherwise

Advertisement for Bidders only invitation tomake proposals and advertiser is not bound toaccept the highest or

lowest bidder, unlessappears otherwise*Ang Yu v. CA (1994

)states that a unilateral promise to buy or sell, if not supported by adistinct consideration, may be withdrawn but may not be done whimsically or arbitrarily;the right of the grantee here is damages and not specific performance;Equatorial v. Mayfair(264 SCRA 483

)held that an option clause in order to be valid and enforceable must indicate the definiteprice at which the person granting the option is willing to sell,contract can be enforcedand not only damages;Paranaque Kings V CA (1997

)states that right of OPTION-option may be withdrawn anytime beforeacceptance is communicated but not whensupportedby a consideration other than purchase price: optionmo neyPERSONS WHO CANNOT GIVE CONSENT TO ACONTRACT:1. Minors2. Insane or demented persons3. Illiterates/ deaf-mutes who do not know howtowrite4. Intoxicated and under hypnotic spell5. Art 1331 - person under mistake;mistake maydeprive intelligence6. Art 1338 - person induced by fraud (dolocausante)

NOTE:


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Dolus bonus (usual exaggerations intrade) are not in themselves fraudulentRULE ON CONTRACTS ENTERED INTO BYMINORS

GENERAL RULE

:VOIDABLE

EXCEPTIONS:a. Upon reaching age of majority they ratifythe sameb. They were entered unto by aguardian andthe court having jurisdiction had approvedthe samec. They were contractsfor necessities such asfood, but here the persons who are bound togive them supportshould pay thereford. Minor is estopped for having misrepresentedhis age and misledthe other party (when ageis close to age of majority as in the Mercadov Espiritu and Sia

Suan v Alcantara cases.*In theSia Suan v Alcantaracase, there is a strong dissent by J.Padilla to the effect that the minor cannot beestopped if he is too young to give consent; one that is too young to give consent is tooyoung to be estopped. Subsequently, inBraganza v Villa-Abrille, the dissent became the ruling. Minors could not be estopped.DISQUALIFIED TO ENTER INTO CONTRACTS:(contracts entered into are void)1. Those under civil interdiction2. Hospitalized lepers3.Prodigals4. Deaf and dumb who are unable to read and write5. Those who by reason of age, disease, weak mindand other similar causes, cannot without outsideaid, take careof themselves and manage theirproperty, becoming an easy prey for deceitandexploitation

Incapacity Disqualification Restrains the exerciseof the right to contractRestrains the very rightitselfMay still enter into

contract throughparent, guardian orlegal represemtativeAbsolutely disqualifiedBasedupon subjectivecircumstance ofcertain personBased upon public policyandmoralityContracts entered intoare merely voidableContracts entered intoare voidCAUSES WHICH VITIATE FREEDOM1. Violence

REQUISITESa. Irresistible physical forceb. Such force is the determining cause forgiving consent2. Intimidation


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REQUISITES:a. Determining cause for the contractb. Threatened act is unjust and unlawfulc. Realand serious

d. Produces a well grounded fear that theperson making it will carry it over 3. Undue influenceSIMULATED CONTRACTS1.

Absolute

no intention to be bound at all,fictitious only void from beginning2.Relative there is intention to be bound butconcealed; concealed contract binds:a. No prejudiceto 3rdpersonsb. Not contrary to law, morals, etc.OBJECTREQUISITES:1. Within the commerce of man - either existing orin potency2. Licit or not contrary tolaw, good customs3. Possible4. Determinate as to its kind or determinable w/oneed toenter into a new contract5. TransmissibleTHINGS WHICH CANNOT BE THE OBJECT OFCONTRACT:1. things which are outside the commerce of men2. intransmissible rights3. futureinheritance, except in cases expresslyauthorized by law4. services which are contrary tolaw, morals, goodcustoms, public order or public policy5. impossible things or services6.objects which are not possible of determinationas to their kindCAUSACAUSA

immediate, direct and most proximate

reasonwhy parties enter into contract

REQUISITES:1. It must exist2. It must be true3. It must be licitMOTIVE

purely private reason; illegality does notinvalidate contract except when itpredeterminespurpose of contract; when merged into oneCause Motive


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Direct and mostproximate reason of acontractIndirect or remotereasonsObjective and juridical

reason of contractPsychological or purely

personal reasonCause us always samefor each contractingpartyThe motive differsforeach contracting party

NOTE:Legality or illegality of cause affects theexistence of validity of the contract; Legalityorillegality of motive does not affect the existenceor validity of contractCAUSA IN SOME CONTRACTS:1.Onerous contracts

the prestation of promiseof a thing or service by the other2.

Remuneratory contracts the service or benefitremunerated3.Pure Beneficence

mere liberality of the donoror benefactor4. Accessory identical with cause of principalcontract, the loan which it derived its life andexistence(ex: mortgage or pledge)CHAPTER 3. FORM OF CONTRACTSSee

Arts. 1356 - 1358FORM

in some kind of contracts only as contractsare generally consensual; form is a manner in whicha contract is executed or manifested1.Informal

may be entered into whatever formas long as there is consent, object and cause2.Formal

required by law to be in certainspecified form such as: donation of realproperty,stipulation to pay interest, transfer of large cattle,sale of land thru agent,contract of antichresis,contract of partnership, registration of chattel

Absence OfCausaVoid - produce no legal effectIllegality OfCausaVoid - produce no legal effectFalsity OfCausaVoidable party must prove thatcause is untruthful; presumption ofvalidity butrebuttableCausa NotStated InContractPresumed to Exist - burden of proof ison the person assailing its existenceInadequacyOf Causa


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Does not Invalidate Contract per seExceptions:

fraud

mistake

undue influence

cases specified by law- contracts entered when ward sufferslesion of more than 25%

mortgage, donation of personal prop in excess of5,0003.Real

creation of real rights over immovableprop must be writtenWHEN FORM IS IMPORTANT:1. For validity (formal/solemn contracts)2. For enforceability (statute of frauds)3. For convenience

GENERAL RULE: contract is valid and binding inwhatever form provided that 3 essentialrequisites concur

EXCEPTIONSa. Law requires contract to be in some formfor validity - donation and acceptance ofrealpropertyb. Law requires contract to be in some form tobe enforceable - Statute of Frauds; contractis valid but right to enforce cannot beexercised; need ratification tobeenforceablec. Law requires contract to be in some formfor convenience - contract isvalid andenforceable, needed only to bind 3rdpartiesEx: public documents needed for the ff:i. Contracts w/c object is creation,transmission or reformation of realrights over immovablesii. Cession, repudiation, renunciation ofhereditary rights/CPGiii. Power toadminister property foranotheriv. Cession of action of rights proceedingfrom an actappearing in a public inst.v. All other docs where amount involvedis in excess of 500 (must be writteneven private docs )

NOTE: RA 8792 (E-COMMERCE ACT) formalrequirements to make contracts effective asagainst third persons and toestablish theexistence of acontract are deemed complied withprovided that theelectronic document isunaltered and can be authenticated as to beuseable for futurereference.CHAPTER 4. REFORMATION OF INSTRUMENTS

See


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Arts. 1359 - 1369REFORMATION OF CONTRACTS remedy toconform to real intention of parties due to mistake,fraud, inequitable conduct,accidentCAUSES/GROUNDS:1. Mutual: instrument includes something w/c shouldnot be there or omit what should be there

a.Mutualb.Mistake of factc.clear and convincing proof d.causes failure of instrument to express trueintention2. Unilaterala. one party was mistakenb. other either acted fraudulently or inequitablyor knew but

concealedc. party in good faith may ask for reformation

3. Mistakeby 3rd persons due to ignorance, lackof skill, negligence , bad faith of drafter,clerk,typist4.Others specified by law

to avoid frustration oftrue intent

Requisites:a. There is a written instrumentb. There is meeting of mindsc. True intention notexpressed in instrumentd. Clear and convincing proofe. Facts put in issue in pleadings

NOTE:

prescribes in 10 years from date ofexecution of instrumentWHEN REFORMATION NOT AVAILABLE:1. Simple donation inter vivos2. Wills3. When real agreement is void4. Estoppel whenparty has brought suit to enforce itCHAPTER 5. INTERPRETATION OFCONTRACTSSee

Arts. 1370 - 1379CHAPTER 6. - DEFECTIVE CONTRACTSSee

Arts. 1370 - 1422KINDS OF DEFECTIVE CONTRACTS:1.RESCISSIBLE CONTRACTS

Those whichhave caused a particular economic damageeither to one of the parties or to a 3rd


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person andwhich may be set aside even if valid. It may beset aside in whole or in part,to the extent of thedamage caused'REQUISITES:a. Contract must be rescissiblei.Under art 1381

: Contracts entered into bypersons exercising fiduciary capacity:

extrinsic defect; produce legal effects only afterratifiedKINDS:a.Unauthorized or No sufficient authority

entered into in the name of another when:

i.No authority conferredii.In excess of authority conferred ( ultravires)b.Curable by Ratification -Both partiesincapable of giving consent -2 minor or 2insane persons

c.Curable by Acknowledgment -Failure tocomply with Statute of Fraudsi. Agreement to be performed within a yearafter making contractii. Special promise to answer for debt,default or miscarriage of anotheriii. Agreement made in consideration ofpromise to marryiv. Agreement for saleof goods, chattels orthings in action at price not less than500; exception: auction whenrecordedsale in sales bookv. Agreement for lease of property for morethan one year and sale of real propertyregardless of pricevi. Representation as to credit of another TWO WAYS OF CURING UNENFORCEABLECONTRACTS:a.Failure of defendant to object in time, tothe presentation of parole evidence in court,the defect of unenforceability is curedb.

Acceptance of benefits under thecontract. If there is performance in eitherpart and there is acceptance of performance,it takes itout of unenforceable contracts; alsoestoppel sets in by accepting performance,thedefect is waived4.VOID OR INEXISTENT of no legal effectCHARACTERISTICS:a. It produces no effect whatsoever eitheragainst or in favor of anyoneb. There is noaction for annulment necessaryas such is ipso jure. A judicial declaration tothat effect ismerely a declarationc. It cannot be confirmed, ratified or curedd. If performed,restoration is in order, except ifpari delicto will applye. The right to set up the defense of


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nullitycannot be waivedf. Imprescriptibleg. Anyone may invoke the nullity of thecontractwhenever its juridical effects are assertedagainst himKINDS OF VOID CONTRACT:a.Those lacking in essential elements

: noconsent, no object, no cause (inexistentones) essential formalities are notcompliedwith ( ex: donation propter nuptias shouldconform to formalities of a donationto bevalid )i. Those w/c are absolutely simulated orfictitious no causeii. Those whichcause or object did not existat the time of the transaction nocause/objectiii. Thosewhose object is outside thecommerce of man no objectiv. Those w/c contemplate animpossibleservice no objectv. Those w/c intention of parties relative toprincipal objectof the contract cannot beascertainedb.Prohibited

by lawc.

Those expressly prohibited or declaredvoid by law- Contracts w/c violate any legalprovision, whether it amounts to a crime ornotd.Illegal/Illicit ones

Those whose cause,object or purpose is contrary to law, morals,good customs, publicorder or public policy ;Ex: Contract to sell marijuana

KINDS OF ILLEGAL CONTRACTS

PARI DELICTO DOCTRINE

Both parties are guilty, no action against eachother; those who come in equity mustcome withclean hands; applies only to illegal contracts andnot to inexistent contracts;does not apply when asuperior public policy intervenes

EXCEPTION TO PARI DELICTO RULE- Ifpurpose has not yet been accomplished and Ifdamage has not been caused to any 3rdpersonOTHER EXCEPTIONS:a. Payment of Usurious interestb. payment of money or delivery of property foran illegalpurpose, where the party who paidor delivered repudiates the contract beforethepurpose has been accomplished, orbefore any damage has been caused to a 3rdpersonc. payment of money or delivery of propertymade by an incapacitated persond.

agreement or contract which is not illegal perse and the prohibition is esigned for theprotection of the plaintiffe. payment of any amount in excess of themaximum price of any article or commodityfixed by law or regulation by competentauthorityf. contractwhereby a laborer undertakes towork longer than the maximum number ofhours fixed


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by lawg. one who lost in gambling because offraudulent schemes practiced on himisallowed to recover his losses (Art. 313 RPC)even if gambling is prohibited.REQUISITES OF ILLEGAL CONTRACTS:a. Contract is for an illegal purposeb. Contract must be repudiated by any of theparties

before purpose is accomplished ordamage is caused to 3

rdpartiesc. Court believes that public interest will beserved by allowing recovery(discretionaryupon the court ) based on remorse;illegality is accomplished whenparties

entered into contract; before it takes effect party w/c is remorseful prevents itWHERE LAWS ARE ISSUED TO PROTECTCERTAIN SECTORS: CONSUMERPROTECTION,LABOR, USURY LAWa.Consumer protection

if price ofcommodity is determined by statute, anyperson paying an amount in excess

of themaximum price allowed may recover suchexcessb.Labor if law sets the minimum wage forlaborers, any laborer who agreed to receiveless maystill be entitled to recover thedeficiency; if law set max working hoursand laborer whoundertakes to work longermay demand additional compensationc. Interest paid inexcess of the interestallowed by theusury lawmay berecovered by debtor with interest from dateof paymentEFFECTS OF ILLEGAL CONTRACTSa. If one party is incapacitated, courts mayallow recovery of money, propertydeliveredby incapacitated person in the interest of justice; pari delicto cannot applybecause anCONTRACTCONSTITUTECRIMINAL OFFENSEDOES NOTCONSTITUTECRIMINALOFFENSEbut is ILLEGAL/UNLAWFUL PER SE Partiesare inparidelictoa. No action forspecificperformanceh. No action forrestitution oneither side.The lawwillleave youwhere you arei. Both shall beprosecuted j. Thing/price tobe confiscatedinfavor ofgovernmenta. No action forspecificperformanceb. No action forrestitutiononeither side. Thelaw will leaveyou where youarec. No confiscationOnlyoneparty isguiltya. No action forspecificperformanceb. Innocent partyis entitled torestitutionc. Guilty partyis

not entitled torestitutiond. Guilty party willbe prosecutede. Instrument ofcrime willbeconfiscated infavor of govt.a. No action forspecificperformanceb. Innocent partyisentitled torestitutionc. Guilty party is

not entitled torestitution


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1. estoppel in pais (by conduct)incapacitated person does not know what heis enteringinto; unable to understand theconsequences of his own actionc. estoppel by silenced.

estoppel by acceptance of benefits2. Technical estoppela. Estoppel by deedb. Estoppelby recordb. If agreement is not illegal per se but merelyprohibited and prohibition isdesignated forthe protection of the plaintiff may recoverwhat he has paid or deliveredby virtue ofpublic policyc. Estoppel by judgmentd. Estoppel by lachesLACHES OR STALE DEMANDSMUTUAL RESTITUTION IN VOID CONTRACTS

GENERAL RULE:parties should return to eachother what they have given by virtue of the voidcontract incaseLACHES

Failure or neglect, for an unreasonable andunexplained length of time to do that which,byexercising due diligence, could or should havebeen done earlier; it is negligence or omission toassert a right within reasonable time warranting apresumption that the partyentitled to assert iteither has abandoned it or declined to assert it

ELEMENTS

Where nullity arose from defect in essentialelements

a. return object of contract and fruitsb. return price plus interest

EXCEPTION: No recovery can be had in caseswhere nullity of contract arose from illegalityofcontract where parties are in pari delicto; except:a. incapacitated not obliged toreturn what hegave but may recover what he has given1. conduct on part of thedefendant, or of one underwhom he claims, giving rise to the situation ofwhichcomplaint is made and for which thecomplaint seeks a remedyb. other party is lessguilty or not guilty2.delay in asserting the complainants rights, thecomplainant having knowledge or notice,of thedefendants conduct and having been affordedthe opportunity to institute a suit3.lack of knowledge or notice on the part of thedefendant that the complainant wouldassert theright on which he bases his suitTITLE 3. NATURAL OBLIGATIONSSee


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Arts. 1423 - 1430NATURAL OBLIGATIONS

they are real obligations to which the law deniesan action, but which the debtor mayperformvoluntarily.4.

injury to the defendant in the event relief isaccorded to the complainant, or the suit innotheld to be barred.

It is patrimonial, and presupposes a prestation.

The binding tie of these obligations is in theconscience of man, for under the law, theydo nothave the necessary efficacy to give rise to anaction.LACHES PRESCRIPTION Concerned witheffect of delayConcerned with fact of delayQuestion ofinequity ofpermitting theclaim to beenforcedQuestion or matter of time

Not statutoryStatutoryEXAMPLES OF NATURAL OBLIGATIONSENUMERATED UNDER THE CIVIL CODE:1. Performance after the civil obligation hasprescribed2. reimbursement of a thirdperson for a debt thathas prescribed3. restitution by minor after annulment of contract4.Delivery by minor of money or fungible thing infulfillment of obligation

Applies in equity Applies at law5. Performance after action to enforce civilobligation has failedNot based on afixed timeBased on a fixed time6. payment by heir of debt exceeding value ofproperty inherited7.payment of legacy after will have been declaredvoiKINDS

TITLE 4. ESTOPPELSee

Arts. 1431 - 1439ESTOPPEL- a condition or state by virtue ofwhich an admission or representation is rederedconclusive uponthe person making it andcannot be denied or disproved as against theperson relying thereon.

Obligation n Contract

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