Atty Uribe - Civil Law Review 2 - Codal Provisions

CIVIL

Based on the outline of ATTY. CRISOSTOMO URIBE

LAW REVIEW 2

I. OBLIGATIONS II. CONTRACTS a. SPECIAL CONTRACTS 1) SALE 2) BARTER 3) LEASE 4) LOAN 5) DEPOSIT 6) ALEATORY CONTRACTS 7) GUARANTY AND SURETYSHIP 8) PLEDGE, MORTGAGE, ANTICHRESIS b. PREPARATORY CONTRACTS 1) AGENCY 2) PARTNERSHIP 3) TRUSTS III. EXTRA-CONTRACTUAL OBLIGATIONS a. LAW b. QUASI-CONTRACTS c. DELICTS d. QUASI-DELICTS IV. DAMAGES

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LAW REVIEW 2 C. DISJUNCTIVE– there are several obligations and only one or some of them must be fulfilled

I. OBLIGATIONS (A.) IN GENERAL (B.) SOURCES (C.) COMPLIANCE (D.) KINDS OF CIVIL OBLIGATIONS (E.) BREACH (F.) REMEDIES FOR BREACH (G.) MODES OF EXTINGUISHMENT

4. AS TO PERFORMANCE OF PRESTATION (ARTS. 1221-1225, 1209-1210)

(A.) IN GENERAL

5. AS TO THE PRESENCE OF AN ACCESSORY UNDERTAKING IN CASE OF BREACH

A. DIVISIBLE B. INDIVISIBLE C. JOINT INDIVISIBLE D. SOLIDARY INDIVISIBLE

1. DEFINITION – Art. 1156

WITH A PENAL CLAUSE (distinguish from liquidated damages) (ARTS. 122601230)

2. KINDS OF OBLIGATIONS AS TO BASIS & ENFORCEABILITY – Arts. 1423-1430; 1139-1155 Title III. - NATURAL OBLIGATIONS

(E.) BREACH OF OBLIGATIONS (ART 1170)

PRESCRIPTION OF ACTIONS

I. Manner of Breach

3. ELEMENTS OF OBLIGATIONS

1. FRAUD (ARTS. 1171, 1338, 1344) 2. NEGLIGENCE (ARTS. 1171-1173) 3. DELAY – (ARTS. 1169, 1165, 1786, 1788, 1896, 1942) 4. ANY OTHER MANNER OF CONTRAVENTION

(B.) SOURCES OF OBLIGATIONS 1. 2. 3.

4. 5.

LAW – Art. 1158 CONTRACTS – Arts. 1159, 1305 QUASI-CONTRACTS – Arts. 1160, 2142-2175 a. NEGOTORIUM GESTIO b. SOLUTIO INDEBITI c. OTHER QUASI-CONTRACTS DELICTS (ACTS OR OMISSIONS PUNISHABLE BY LAW) QUASI-DELICTS

(C.) COMPLIANCE WITH OBLIGATIONS - ARTS. 19, 1163-66,1244, 1246, 1460, 440, 442

II. Excuse for non-performance 1. FORTUITOUS EVENT – (ARTS. 1174, 552, 1165, 2147, 2159) 2. ACT OF CREDITOR (F.) REMEDIES FOR BREACH OF OBLIGATIONS NCC Arts. 1165-68, 1170, 1177-78, 1191-92, 2236 FC Arts. 153, 155 Rule 39 Sec. 13 I.

HUMAN RELATIONS - Art. 19.

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NATURE AND EFFECT OF OBLIGATIONS - Art. 1163.

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RIGHT OF ACCESSION - Art. 440, Art. 442.

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(D.) KINDS OF CIVIL OBLIGATIONS

1. 2. 3.

1. AS TO PERFECTION AND EXTINGUISHMENT A. PURE B. CONDITIONAL C. WITH A TERM OR PERIOD 2. AS TO PLURALITY OF PRESTATION A. CONJUNCTIVE B. ALTERNATIVE (ARTS. 1199-1205) C. FACULTATIVE (ART. 1206) 3. AS TO RIGHTS & OBLIGATIONS OF MULTIPLE PARTIES A. JOINT (Arts. 1207-1222) B. SOLIDARY (NCC ARTS 927, 1824, 1911, 1945, 2157, 2194, 2146; FC ARTS 94, 121; RPC ART. 90)

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EXTRA-JUDICIAL REMEDIES EXPRESSLY GRANTED BY LAW – ARTS. 1786, 1788, 1526 STIPULATED JUDICIAL REMEDIES PRINCIPAL REMEDIES – ARTS. 1191, 1170 SUBSIDIARY REMEDIES – ARTS. 1380, 1177 ANCILLARY REMEDIES – RULES OF COURT

(G.) MODES OF EXTINGUISHMENT OF OBLIGATIONS – Art. 1231 1.

PAYMENT OR PERFORMANCE – ARTS. 1232-44, 1246-51, 1302 RA 8183 PD 72, SECS. 31-32 SPECIAL FORMS OF PAYMENT A. DATION IN PAYMENT – ART. 1245 B. APPLICATION OF PAYMENTS – ARTS. 1252-54, 1248 C. PAYMENT BY CESSION OR ASSIGNMENT – ART. 1255 D. TENDER OF PAYMENT AND CONSIGNATION – ARTS. 1256-61

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Based on the outline of ATTY. CRISOSTOMO URIBE

LAW REVIEW 2 2.

LOSS OF THE THING DUE OR IMPOSSIBILITY OF PERFORMANCE – ARTS. 1262-69, 1189, 1174, 1165, 1268, 1942, 1979, 2147, 2159

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CONDONATION OR REMISSION OF THE DEBT – ARTS. 1270-74, 748, 749

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CONFUSION OR MERGER OF RIGHTS – ARTS. 127577, 1215, 1217

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COMPENSATION – ARTS. 1278-1290, 1243, 1215 KINDS OF COMPENSATION A. LEGAL B. CONVENTIONAL/FACULTATIVE C. JUDICIAL

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NOVATION – ARTS. 1291-1304, 1215

KINDS OF NOVATION A. AS TO ITS NATURE 1. SUBJECTIVE OR PERSONAL 2. OBJECTIVE RO REAL B. AS TO ITS FORM 1. EXPRESS 2. IMPLIED 7.

OTHER MODES - ACT OF CREDITOR

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I. OBLIGATIONS

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A. IN GENERAL 1. DEFINITION – Art. 1156 Art. 1156. An obligation is a juridical necessity to give, to do or not to do. 2. KINDS OF OBLIGATIONS AS TO BASIS & ENFORCEABILITY – Arts. 1423-1430; 1139-1155 Title III. - NATURAL OBLIGATIONS Art. 1423. Obligations are civil or natural.  Civil obligations o Give a right of action to compel their performance.  Natural obligations o Not being based on positive law but on equity and natural law, o Do not grant a right of action to enforce their performance, o But after voluntary fulfillment by the obligor, o They authorize the retention of what has been delivered or rendered by reason thereof.  Some natural obligations are set forth in the following articles. Art. 1424. When a right to sue  Upon a civil obligation  Has lapsed by extinctive prescription,  The obligor who voluntarily performs the contract  Cannot recover o What he has delivered or o The value of the service he has rendered. Art. 1425. When  Without the knowledge of the debtor or  Against the will of the debtor, o A third person pays a debt o Which the obligor is not legally bound to pay o Because the action thereon has prescribed, o But the debtor later voluntarily reimburses the third person,  The obligor cannot recover what he has paid. Art. 1426. When a minor  Between 18 and 21 years of age  Who has entered into a contract

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Without the consent of the parent or guardian, o After the annulment of the contract Voluntarily returns the whole thing or price received,  notwithstanding the fact the he has not been benefited thereby, There is no right to demand the thing or price thus returned.

Art. 1427. When a minor  Between eighteen and twenty-one years of age,  Who has entered into a contract  Without the consent of the parent or guardian, o Voluntarily pays a sum of money or o Delivers a fungible thing in fulfilment of the obligation,  There shall be no right to recover the same  From the obligee o Who has spent or consumed it in good faith. Art. 1428. When, o after an action to enforce a civil obligation has failed  The defendant voluntarily performs the obligation,  He cannot demand o The return of what he has delivered or o The payment of the value of the service he has rendered. Art. 1429. When a testate or intestate heir  Voluntarily pays a debt of the decedent  Exceeding the value of the property  Which he received o By will or o By the law of intestacy from the estate of the deceased,  The payment is valid and  Cannot be rescinded by the payer. Art. 1430. When a will is declared void o Because it has not been executed o In accordance with the formalities required by law,  But one of the intestate heirs, after the settlement of the debts of the deceased,  Pays a legacy o In compliance with a clause in the defective will,  The payment is effective and irrevocable. PRESCRIPTION OF ACTIONS Art. 1139. Actions prescribe  By the mere lapse of time  Fixed by law.

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LAW REVIEW 2 Art. 1140. Actions to recover movables  Shall prescribe eight years  From the time the possession thereof is lost, o Unless the possessor o Has acquired the ownership by prescription o For a less period, o According to Article 1132  Art. 1132. The ownership of movables prescribes through uninterrupted possession for four years in good faith. o and without prejudice to the provisions of o Article 559  Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. If the possessor of a movable lost or which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. o Article 1505, and  Art. 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell. Nothing in this Title, however, shall affect:

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(1) The provisions of any factors' act, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof; (2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction; (3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce and special laws. Article 1133  Art. 1133. Movables possessed through a crime can never be acquired through prescription by the offender.

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Art. 1141. Real actions over immovable  Prescribe after thirty years. Art. 1142. A mortgage action  Prescribes after ten years. Art. 1143. The following rights,  Are not extinguished by prescription: (1) To demand a right of way, a. Regulated in Article 649; Art. 649. The owner, or any person who by virtue of a real right may cultivate or use any immovable, which is surrounded by other immovables pertaining to other persons and without adequate outlet to a public highway, is entitled to demand a right of way through the neighboring estates, after payment of the proper indemnity. Should this easement be established in such a manner that its use may be continuous for all the needs of the dominant estate, establishing a permanent passage, the indemnity shall consist of the value of the land occupied and the amount of the damage caused to the servient estate. In case the right of way is limited to the necessary passage for the cultivation of the estate surrounded by others and for the gathering of its crops through the servient estate without a permanent way, the indemnity shall consist in the payment of the damage caused by such encumbrance. (SECTION 3. - Easement of Right of Way) (2) To bring an action to abate a public or private nuisance. Art. 1144. The following actions  Must be brought within ten years  From the time the right of action accrues: Upon (1) Written contract; (2) Obligation created by law; (3) Judgment. Art. 1145. The following actions  Must be commenced within six years , upon (1) Oral contract; (2) Quasi-contract. Art. 1146. The following actions  General Rule: Must be instituted within four years, upon (1) Injury to the rights of the plaintiff; (2) Quasi-delict; 

Exception: However, when the action o Arises from or out of any o Act, activity, or conduct of o Any public officer

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LAW REVIEW 2 Involving the exercise of powers or authority arising from Martial Law o Including the arrest, detention and/or trial of the plaintiff, The same must be brought within one year. o

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Art. 1147. The following actions  Must be filed within one year, for (1) Forcible entry and detainer; (2) Defamation. Art. 1148. The limitations of action  Mentioned in Articles 1140 to 1142, and 1144 to 1147  Are without prejudice to  Those specified in other parts of this Code, in the Code of Commerce, and in special laws.

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By a fortuitous event From enforcing his right Is not reckoned against him.

Art. 1155. The prescription of actions  Is interrupted when: a. They are filed before the court, b. There is a written extrajudicial demand by the creditors, and c. There is any written acknowledgment of the debt by the debtor.

Art. 1149. All other actions  Whose periods are not fixed  In this Code or in other laws  Must be brought within five years  From the time the right of action accrues. Art. 1150. The time for prescription for all kinds of actions,  When there is no special provision which ordains otherwise,  Shall be counted from  The day they may be brought. Art. 1151. The time for the prescription of actions  Which have for their object  The enforcement of obligations to pay principal  With interest or annuity  Runs from the last payment of the o Annuity or o Interest. Art. 1152. The period for prescription of actions  To demand the fulfillment of  Obligation declared by a judgment  Commences from the time  The judgment became final. Art. 1153. The period for prescription of actions  To demand accounting  Runs from the day  The persons who should render the same  Cease in their functions.     

The period for the action Arising from the result of the accounting Runs from the date When said result was recognized By agreement of the interested parties.

Art. 1154. The period during which the obligee  Was prevented

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LAW REVIEW 2 3. ELEMENTS OF OBLIGATIONS

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B. SOURCES OF OBLIGATIONS

Title XVII. - EXTRA-CONTRACTUAL OBLIGATIONS CHAPTER 1 QUASI-CONTRACTS

LAW – Art. 1158 CONTRACTS – Arts. 1159, 1305 QUASI-CONTRACTS – Arts. 1160, 21422175 a. NEGOTORIUM GESTIO b. SOLUTIO INDEBITI c. OTHER QUASI-CONTRACTS 9. ACTS OR OMISSIONS PUNISHABLE BY LAW 10. QUASI-DELICTS 6. 7. 8.

Art. 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts. 1. LAW - Art. 1158 Art. 1158. Obligations derived from law  Are not presumed.  Only those expressly determined in this Code or  In special laws are o Demandable, and o Shall be regulated by the precepts of the law which establishes them; and  As to what has not been foreseen, o By the provisions of this Book. 2. CONTRACTS - Arts. 1159, 1305 Art. 1159. Obligations arising from contracts  Have the force of law  Between the contracting parties and  Should be complied with in good faith. Art. 1305. A contract  Is a meeting of minds  Between two persons  Whereby one binds himself, with respect to the other, to o Give something or o Render some service.

3. QUASI-CONTRACTS - Arts. 1160, 2142-2175 Art. 1160. Obligations derived from quasi-contracts

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Shall be subject to the provisions of Chapter 1, Title XVII, of this Book.

Art. 2142. Certain o Lawful, o Voluntary and o Unilateral acts  Give rise to the juridical relation of quasi-contract  To the end that o No one shall be unjustly enriched or o Benefited at the expense of another. Art. 2143. The provisions for quasi-contracts  In this Chapter  Do not exclude other quasi-contracts  Which may come within the purview of the preceding article. a. NEGOTORIUM GESTIO SECTION 1. - Negotiorum Gestio Art. 2144. Whoever  Voluntarily takes charge  Of the agency or management of the  Business or property of another,  Without any power from the latter, is  Obliged to continue the same o Until the termination of the affair and its incidents, or  To require the person concerned to substitute him, o If the owner is in a position to do so.  This juridical relation does not arise in either of these instances: (1) When the property or business is not neglected or abandoned; (2) If in fact the manager has been tacitly authorized by the owner. 

In the first case, the provisions of Articles 1317, 1403, No. 1, and 1404 regarding unauthorized contracts shall govern. o Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed,

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before it is revoked by the other contracting party. (UNENFORCEABLE CONTRACTS) Art. 1403. The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; Art. 1404. Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this Book.

In the second case, the Rules on Agency in Title X of this Book shall be applicable.

Art. 2145. The officious manager  Shall perform his duties  With all the diligence of a good father of a family, and  Pay the damages  Which through his fault or negligence  May be suffered by o The owner of the property or o Business under management.  The courts may, however,  Increase or moderate the indemnity  According to the circumstances of each case. Art. 2146. If the officious manager  Delegates to another person  All or some of his duties,  He shall be liable for the acts of the delegate,  Without prejudice to  The direct obligation of the latter  Toward the owner of the business.  

The responsibility of two or more officious managers Shall be solidary, o Unless o The management was assumed o To save the thing or business o From imminent danger.

Art. 2147. The officious manager  Shall be liable for any fortuitous event: (1)  If he undertakes risky operations  Which the owner was not accustomed to embark upon; (2)  If he has preferred his own interest  To that of the owner; (3)  If he fails to return the property or business

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After demand by the owner;

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If he assumed the management In bad faith.

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Art. 2148. General Rule: The officious manager shall be liable for fortuitous events if: (1)  He is manifestly unfit  To carry on the management; (2)  By his intervention  He prevented a more competent person  From taking up the management. Exception:  Except when the management was  Assumed to save property or business  From imminent danger Art. 2149. The ratification of the management by the owner of the business  Produces the effects of an express agency, o Even if the business may not have been successful. Art. 2150. Although the officious management may not have been expressly ratified,  The owner of the property or business o who enjoys the advantages of the same  Shall be liable for obligations incurred in his interest, and  Shall reimburse the officious manager for the necessary and useful expenses and for the damages which the latter may have suffered in the performance of his duties. 

The same obligation shall be incumbent upon him o When the management had for its purpose o The prevention of an imminent and manifest loss,  Although no benefit may have been derived.

Art. 2151. Even though the owner did not derive any benefit and there has been no imminent and manifest danger to the property or business,  The owner is liable as under the first paragraph of the preceding article, provided: (1) The officious manager has acted in good faith, and (2) The property or business is intact, ready to be returned to the owner. Art. 2152. The officious manager  Is personally liable for  Contracts which he has entered into

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With third persons, o Even though he acted in the name of the owner, and o There shall be no right of action between the owner and third persons.

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These provisions shall not apply: (1) If the owner has  Expressly or tacitly ratified the management, or (2) When the contract  Refers to things  Pertaining to the owner of the business.

Art. 2159. Whoever in bad faith accepts an undue payment,  Shall pay legal interest o If a sum of money is involved, or  Shall be liable for fruits received or which should have been received o If the thing produces fruits.  He shall furthermore be answerable o For any loss or impairment of the thing from any cause, and o For damages to the person who delivered the thing, until it is recovered.

Art. 2153. The management is extinguished: (1) When the owner a. Repudiates it or b. Puts an end thereto; (2) When the officious manager a. Withdraws from the management, subject to the provisions of Article 2144; (3) By a. The death, b. Civil interdiction, c. Insanity or d. Insolvency Of the owner or the officious manager. b. SOLUTIO INDEBITI SECTION 2. - Solutio Indebiti Art. 2154.  If something is received when there is no right to demand it, and  It was unduly delivered through mistake, o The obligation to return it arises. Art. 2155. Payment by reason of a mistake  In the construction or application of a doubtful or difficult question of law  May come within the scope of the preceding article. Art. 2156. If the payer was in doubt whether the debt was due,  He may recover  If he proves that it was not due.

The payee shall comply with the provisions of article 1984.

Art. 1984. The depositary cannot demand that the depositor prove his ownership of the thing deposited.

Art. 2160. He who in good faith accepts an undue payment of a thing certain and determinate  Shall only be responsible for the o Impairment or loss of the same or o Its accessories and accessions  Insofar as he has thereby been benefited. 

If he has alienated it, o He shall return the price or o Assign the action to collect the sum.

Art. 2161. As regards the reimbursement for improvements and expenses incurred by him who unduly received the thing,  The provisions of Title V of Book II* shall govern. *BOOK II - PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS. Title V - POSSESSION

Art. 2162. He shall be exempt from the obligation to restore  Who, believing in good faith that the payment was being made of a legitimate and subsisting claim, o Destroyed the document, or o Allowed the action to prescribe, or o Gave up the pledges, or o Cancelled the guaranties for his right. 

He who paid unduly may proceed only against o The true debtor or the guarantors  With regard to whom the action is still effective.

Art. 2157. The responsibility of two or more payees,  When there has been payment of what is not due, o Is solidary.

Art. 2163. It is presumed that there was a mistake in the payment  If something which had never been due or had already been paid o Was delivered;

Art. 2158. When the property delivered or money paid belongs to a third person,

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But he from whom the return is claimed

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May prove that the delivery was made out of liberality or for any other just cause.

C. OTHER QUASI-CONTRACTS SECTION 3. - Other Quasi-Contracts Art. 2164. When, without the knowledge of the person obliged to give support, it is given by a stranger,  The latter (stranger) shall have a right to claim the same from the former, o Unless it appears that he gave it out of piety and o Without intention of being repaid. Art. 2165. When funeral expenses are borne by a third person,  Without the knowledge of those relatives  Who were obliged to give support to the deceased, o Said relatives shall reimburse the third person,  Should the latter claim reimbursement. Art. 2166.  When the person obliged to support o An orphan, or o An insane or o other indigent person unjustly  refuses to give support to the latter, o Any third person may furnish support to the needy individual, o With right of reimbursement from the person obliged to give support. 

The provisions of this article apply o When the father or mother of a child under 18 years of age o Unjustly refuses to support him.

Art. 2167. When through an accident or other cause  A person is injured or becomes seriously ill, and  He is treated or helped  While he is not in a condition to give consent to a contract, o He shall be liable to pay for the services of o The physician or other person aiding him,  Unless the service has been rendered  Out of pure generosity. Art. 2168. When during a fire, flood, storm, or other calamity, property is saved from destruction  By another person  Without the knowledge of the owner, o The latter (owner) is bound to pay the former o Just compensation.

Art. 2169. When the government, upon the failure of any person to comply with health or safety regulations concerning property,  Undertakes to do the necessary work,  Even over his objection, o He shall be liable to pay the expenses. Art. 2170. When by accident or other fortuitous event,  Movables separately pertaining to two or more persons  Are commingled or confused, o The rules on co-ownership shall be applicable. Art. 2171. The rights and obligations of the finder of lost personal property  Shall be governed by Articles 719 and 720*. Art. 719. Whoever finds a movable, which is not treasure, must return it to its previous possessor. If the latter is unknown, the finder shall immediately deposit it with the mayor of the city or municipality where the finding has taken place. The finding shall be publicly announced by the mayor for two consecutive weeks in the way he deems best. If the movable cannot be kept without deterioration, or without expenses which considerably diminish its value, it shall be sold at public auction eight days after the publication. Six months from the publication having elapsed without the owner having appeared, the thing found, or its value, shall be awarded to the finder. The finder and the owner shall be obliged, as the case may be, to reimburse the expenses. Art. 720. If the owner should appear in time, he shall be obliged to pay, as a reward to the finder, one-tenth of the sum or of the price of the thing found.

Art. 2172. The right of every possessor in good faith to reimbursement for necessary and useful expenses is governed by Article 546. Art. 2173. When a third person, without the knowledge of the debtor, pays the debt,  The rights of the former (third person) are governed by Articles 1236 and 1237. Art. 1236. The creditor is not bound to accept  Payment or performance by a third person

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Who has no interest in the fulfillment of the obligation, o Unless there is a stipulation to the contrary.

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Whoever pays for another o May demand from the debtor o What he has paid,

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Except that if he paid Without the knowledge or Against the will of the debtor,

He can recover Only insofar as the payment

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Has been beneficial to the debtor.

Art. 1237. Whoever pays on behalf of the debtor  Without the knowledge or

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Against the will of the debtor, o Cannot compel the creditor o To subrogate him (creditor) in his (creditor’s) rights, o Such as those arising from a mortgage, guaranty, or penalty.

Art. 2174. When in a small community a majority of the inhabitants of age  Decide upon a measure  For protection against lawlessness, fire, flood, storm or other calamity, o Any one who objects to the plan and refuses to contribute to the expenses o But is benefited by the project as executed o Shall be liable to pay his share of said expenses. Art. 2175. Any person who is constrained to pay the taxes of another  Shall be entitled to reimbursement  From the latter. 4. ACTS OR OMISSIONS PUNISHED BY LAW - NCC Arts. 1167, 2177 - RPC Arts. 100, 104 Art. 1167. If a person obliged to do something  Fails to do it,  The same shall be executed  At his cost.

Chapter Two WHAT CIVIL LIABILITY INCLUDES Art. 104. What is included in civil liability  The civil liability established in  Articles 100, 101, 102, and 103 of this Code includes: 1. Restitution 2. Reparation  Of the damage caused; 3. Indemnification  For consequential damages. 5. QUASI-DELICTS - Arts. 1162, 2176 Art. 1162. Obligations derived from  Quasi-delicts  Shall be governed by  The provisions of Chapter 2, Title XVII of this Book (Quasi-Delicts), and by special laws. Art. 2176. Whoever by act or omission  Causes damage to another,  There being fault or negligence,  Is obliged to pay for the damage done.     

Such fault or negligence, If there is no pre-existing contractual relation Between the parties, Is called a Quasi-Delict and is Governed by the provisions of this Chapter.

CHAPTER 2 QUASI-DELICTS Art. 2177. Responsibility for fault or negligence  Under the preceding article is  Entirely separate and distinct from the  Civil liability  Arising from negligence under the Penal Code.   

But the plaintiff cannot recover damages Twice for the same act or omission Of the defendant.

REVISED PENAL CODE CIVIL LIABILITY Chapter One PERSON CIVILLY LIABLE FOR FELONIES

Art. 100. Civil liability of a person guilty of felony Every person criminally liable  For a felony is also  Civilly liable.

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LAW REVIEW 2 C. COMPLIANCE WITH OBLIGATIONS - ARTS. 19, 1163-66,1244, 1246, 1460, 440, 442 CHAPTER 2 HUMAN RELATIONS Art. 19. Every person must,  In the exercise of his rights and  In the performance of his duties, o Act with justice, o Give everyone his due, and o Observe honesty and good faith. CHAPTER 2 NATURE AND EFFECT OF OBLIGATIONS Art. 1163.  General Rule: Every person  Obliged to give something  Is also obliged  To take care of it  With the proper diligence of a good father of a family  Exception: o Unless the law or o The stipulation of the parties o Requires another standard of care. Art. 1164. The creditor  Has a right  To the fruits of the thing  From the time the obligation to deliver it arises. 

However, he shall acquire no real right over it



Until the same has been delivered to him.

Art. 1165. When what is to be delivered is  A determinate thing, o The creditor, o In addition to the right granted him by Article 1170*, o May compel the debtor o To make the delivery. 

If the thing is indeterminate or generic, o He may ask that the obligation o Be complied with o At the expense of the debtor.



If the obligor o Delays, or o Promised to deliver the same thing to two or more persons who do not have the same interest, o He shall be responsible for any fortuitous event o Until he has effected the delivery.

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*Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. Art. 1166. The obligation to give  A determinate thing  Includes that of delivering  All its accessions and accessories,  Even though they may not have been mentioned. Art. 1244. The debtor of a thing  Cannot compel the creditor  To receive a different one,  Although the latter o May be of the same value as, or o More valuable than o That which is due. 

In obligations to do or not to do, an act or forbearance o Cannot be substituted o By another act or forbearance o Against the obligee's will.

Art. 1246. When the obligation consists in the delivery  Of an indeterminate or generic thing,  Whose quality and circumstances  Have not been stated,  The creditor cannot demand a thing of superior quality.  Neither can the debtor  Deliver a thing of inferior quality.  The purpose of the obligation and other circumstances shall be taken into consideration. Art. 1460. A thing is determinate  When it is particularly designated or  Physical segregated  From all other of the same class. CHAPTER 3 RIGHT OF ACCESSION GENERAL PROVISIONS Art. 440. The ownership of property  Gives the right by accession  To everything which is o Produced thereby, or o Incorporated or attached thereto, o Either naturally or artificially. Art. 442.  Natural fruits are the o Spontaneous products of the soil, and the o Young and other products of animals. 

Industrial fruits are those

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Produced by lands of any kind Through cultivation or labor.

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D. KINDS OF CIVIL OBLIGATIONS 1. AS TO PERFECTION AND EXTINGUISHMENT A. PURE B. CONDITIONAL C. WITH A TERM OR PERIOD A. PURE

In conformity with the provisions of this Code.

Art. 1183.  Impossible conditions,  Those contrary to good customs or public policy and  Those prohibited by law o Shall annul the obligation  Which depends upon them.

CHAPTER 3 DIFFERENT KINDS OF OBLIGATIONS SECTION 1. - Pure and Conditional Obligations



Art. 1179.  Every obligation o Whose performance o Does not depend upon a:  Future or uncertain event, or  Past event unknown to the parties, o Is demandable at once.

If the obligation is divisible, o That part thereof o Which is not affected by o The impossible or unlawful condition  Shall be valid.

 

The condition not to do an impossible thing Shall be considered as o Not having been agreed upon.



Every obligation o Which contains a resolutory condition o Shall also be demandable,  Without prejudice to the  Effects of the happening of the event.

Art. 1197. If the obligation  Does not fix a period, o But from its nature and the circumstances o It can be inferred o That a period was intended,  The courts may fix the duration thereof. B. CONDITIONAL Art. 1181. In conditional obligations,  The acquisition of rights, as well as  The extinguishment or loss of those already acquired, o Shall depend upon the happening of the event o Which constitutes the condition. Art. 1182. When the fulfillment of the condition  Depends upon the sole will of the debtor, o The conditional obligation shall be void.  

If the fulfillment of the condition Depends upon o Chance or o The will of a third person, o The obligation shall take effect

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Art. 1184. The condition that  Some event happen  At a determinate time  Shall extinguish the obligation o As soon as the time expires or o If it has become indubitable that the event will not take place. Art. 1185. The condition that  Some event will not happen  At a determinate time  Shall render the obligation effective o From the moment the time indicated has elapsed, or o If it has become evident that the event cannot occur. 

If no time has been fixed, o The condition shall be deemed fulfilled o At such time as may have probably been contemplated, o Bearing in mind the nature of the obligation.

Art. 1186. The condition shall be deemed fulfilled  When the obligor  Voluntarily prevents its fulfillment. Art. 1187. The effects of a conditional obligation to give  Shall retroact to the day of the constitution of the obligation o Once the condition has been fulfilled  

Nevertheless, when the obligation imposes Reciprocal prestations upon the parties,

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The fruits and interests During the pendency of the condition  Shall be deemed to have been mutually compensated.

(3) When the thing deteriorates  Without the fault of the debtor,  The impairment is to be borne by the creditor;

 

If the obligation is unilateral, The debtor shall appropriate the fruits and interests received, o Unless from the nature and circumstances of the obligation o It should be inferred that the intention of o The person constituting the same o Was different.

(4) If it deteriorates  Through the fault of the debtor,  The creditor may choose between i. The rescission of the obligation and ii. Its fulfillment,  With indemnity for damages in either case;



In obligations to do and not to do, o The courts shall determine, in each case, o The retroactive effect of the condition  That has been complied with.

(5) If the thing is improved  By its nature, or  By time,  The improvement shall inure to  The benefit of the creditor; (6) If it is improved  At the expense of the debtor,  He shall have no other right  Than that granted to the usufructuary.

Art. 1188. The creditor may bring  The appropriate actions  For the preservation of his right o Before the fulfillment of the condition. 

The debtor may recover what,  During the same time o He has paid by mistake o In case of a suspensive condition.

Art. 1189.  When the conditions have been imposed  With the intention of suspending the efficacy of an obligation to give,  The following rules shall be observed  In case of the o Improvement, o Loss or o Deterioration of the thing  During the pendency of the condition: (1) If the thing is lost  Without the fault of the debtor,  The obligation shall be extinguished; (2) If the thing is lost  Through the fault of the debtor,  He shall be obliged to pay damages; 

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It is understood that the thing is lost i. When it perishes, or ii. Goes out of commerce, or iii. Disappears in such a way that its existence is unknown or it cannot be recovered;

Art. 1190. When the conditions have for their purpose  The extinguishment of an obligation to give,  The parties,  Upon the fulfillment of said conditions, o Shall return to each other o What they have received. 

  



In case of the o Loss, o Deterioration or o Improvement of the thing, The provisions which, With respect to the debtor, Are laid down in the preceding article o Shall be applied to the party o Who is bound to return. As for the obligations to do and not to do, o The provisions of the second paragraph* of Article 1187  Shall be observed  As regards the effect of the extinguishment of the obligation.

* In obligations to do and not to do, o The courts shall determine, in each case, o The retroactive effect of the condition o That has been complied with.

C. WITH A TERM OR PERIOD

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LAW REVIEW 2 Art. 1180. When the debtor binds himself to pay  When his means permit him to do so, o The obligation shall be deemed to be  One with a period, o Subject to the provisions of Article 1197*. *Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. The courts shall also fix the duration of the period when it depends upon the will of the debtor. In every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them. SECTION 2. - Obligations with a Period Art. 1193. Obligations for whose fulfillment  A day certain has been fixed, o Shall be demandable  Only when that day comes.  

 



Obligations with a resolutory period Take effect at once, o But terminate upon o Arrival of the day certain. A day certain Is understood to be o That which must necessarily come,  Although it may not be known when. If the uncertainty consists in o Whether the day will come or not,  The obligation is conditional, and  It shall be regulated  By the rules of the preceding Section.

Art. 1194. In case of o Loss, o Deterioration or o Improvement  Of the thing  Before the arrival of  The day certain,  The rules in Article 1189 shall be observed. Art. 1195. Anything paid or delivered  Before the arrival of the period,  The obligor o Being unaware of the period or o Believing that the obligation has become due and demandable,  May be recovered,  With the fruits and interests.

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Art. 1196.  General Rule: Whenever in an obligation a period is designated, o It is presumed o To have been established  For the benefit of both the creditor and the debtor, 

Exception: Unless from the tenor of the same or other circumstances o It should appear o That the period has been established  In favor of one or of the other.

Art. 1197. If the obligation does not fix a period,  But from its nature and the circumstances  It can be inferred  That a period was intended, o The courts may fix the duration thereof. 

The courts shall also fix o The duration of the period  When it depends upon  The will of the debtor.



In every case, o The courts shall determine such period o As may under the circumstances  Have been probably contemplated by the parties.



Once fixed by the courts, o The period cannot be changed by them.

Art. 1198. The debtor shall lose  Every right to make use of the period: 1.  When after the obligation has been contracted,  He becomes insolvent,  Unless he gives i. A guaranty or ii. Security for the debt; 2.  When he does not furnish  To the creditor  The guaranties or securities  Which he has promised; 3.  When by his own acts  He has impaired said guaranties or securities  After their establishment, and 

When through a fortuitous event  They disappear, - Unless he immediately gives

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When the debtor violates Any undertaking,  In consideration of which  The creditor agreed to the period;



When the debtor attempts to abscond.

5.

2. AS TO PLURALITY OF PRESTATION A. CONJUNCTIVE B. ALTERNATIVE (ARTS. 1199-1205) C. FACULTATIVE (ART. 1206) A. CONJUNCTIVE B. ALTERNATIVE

Art. 1203. If through the creditor's acts  The debtor cannot make a choice  According to the terms of the obligation, o The debtor may o Rescind the contract o With damages. Art. 1204. The creditor shall have a right  To indemnity for damages o When, through the fault of the debtor, o All the things which are alternatively the object of the obligation  Have been lost, or  The compliance of the obligation has become impossible.   

The indemnity Shall be fixed Taking as a basis o The value of the last thing which disappeared, or o That of the service which last became impossible.

  

Damages Other than the value Of the last thing or service o May also be awarded.

SECTION 3. - Alternative Obligations Art. 1199. A person alternatively bound  By different prestations o Shall completely perform one of them.  

The creditor cannot be compelled To receive o Part of one and o Part of the other undertaking.

Art. 1200. GENERAL RULE: The right of choice  Belongs to the debtor, EXCEPTION: Unless right of choice has been expressly granted*  To the creditor.  

The debtor shall have no right to choose Those prestations which are o Impossible, o Unlawful or o Which could not have been the object of the obligation.

*Article 1205 Art. 1201. The choice  Shall produce no effect o Except from the time  It has been communicated. Art. 1202. The debtor shall lose  The right of choice o When among the prestations o Whereby he is alternatively bound,  Only one is practicable.

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Art. 1205. When the choice  Has been expressly given  To the creditor, o The obligation shall cease to be alternative  From the day when the selection  Has been communicated to the debtor.  Until then  The responsibility of the debtor  Shall be governed by the following rules: (1)  If one of the things is lost  Through a fortuitous event, Debtor shall perform the obligation By delivering that Which the creditor should choose from ii. Among the remainder, or iii. That which remains if only one subsists; (2)  If the loss of one of the things  Occurs through the fault of the debtor, The creditor may claim ii. Any of those subsisting, or iii. The price of that which, through the fault of the debtor, has disappeared, With a right to damages; (3)

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If all the things are lost Through the fault of the debtor, The choice by the creditor Shall fall upon the price of Any one of them, i. Also with indemnity for damages.

The same rules shall be applied to o Obligations to do or not to do  In case one, some or all of the prestations  Should become impossible.

C. FACULTATIVE Art. 1206. When only one prestation  Has been agreed upon, o But the obligor may render another in substitution, o The obligation is called facultative. GENERAL RULE: The loss or deterioration of  The thing intended as a substitute, o Through the negligence of the obligor,  Does not render him liable. EXCEPTION: But once the substitution has been made,  The obligor is liable for o The loss of the substitute  On account of his  Delay,  Negligence or  Fraud.

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LAW REVIEW 2 3. AS TO RIGHTS & OBLIGATIONS OF MULTIPLE PARTIES A. JOINT (Arts. 1207-1222) B. SOLIDARY (NCC ARTS 927, 1824, 1911, 1945, 2157, 2194, 2146; FC ARTS 94, 121; RPC ART. 90) C. DISJUNCTIVE A. JOINT (Arts. 1207-1222) SECTION 4. - Joint and Solidary Obligations Art. 1207. The concurrence of o Two or more creditors or o Two or more debtors  In one and the same obligation  Does not imply o That each one of the former has a right to demand, or o That each one of the latter is bound to render,  Entire compliance with the prestation.  

There is a solidary liability Only when: o The obligation expressly so states, or o The law or the nature of the obligation requires solidarity.

Art. 1208. If from o The law, or o The nature or the wording of the obligations  To which the preceding article refers o The contrary does not appear,  The credit or debt  Shall be presumed to be divided  Into as many shares as there are creditors or debtors,  The credits or debts being considered o Distinct from one another,  Subject to the Rules of Court governing the multiplicity of suits. Art. 1209. If the division is impossible,  The right of the creditors  May be prejudiced o Only by their collective acts, and  The debt can be enforced o Only by proceeding against all the debtors. 

If one of the latter should be insolvent, o The others shall not be liable o For his share.

Art. 1210. The indivisibility of an obligation

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 

Does not necessarily give rise To solidarity.



Nor does solidarity of itself o Imply indivisibility.

Art. 1211. Solidarity may exist  Although the creditors and the debtors  May not be bound o In the same manner and o By the same periods and conditions. Art. 1212. General Rule: Each one of the solidary creditors  May do whatever  May be useful to the others, o Exception: But not anything o Which may be prejudicial to the latter (other solidary creditors). Art. 1213. A solidary creditor  Cannot assign his rights  Without the consent of the others. Art. 1214. The debtor may pay  Any one of the solidary creditors;  But if any demand, o Judicial or o Extrajudicial,  Has been made by one of them,  Payment should be made to him. Art. 1215. o Novation, o Compensation, o Confusion or o Remission of the debt,  Made by  Any of the solidary creditors or  With any of the solidary debtors,  Shall extinguish the obligation, o Without prejudice to the provisions of Article 1219.  

The creditor o Who may have executed o Any of these acts, as well as He who collects the debt,  Shall be liable to the others  For the share in the obligation  Corresponding to them.

Art. 1216. The creditor may proceed against  Any one of the solidary debtors or  Some or all of them o Simultaneously.

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The demand made against One of them o Shall not be an obstacle o To those which may subsequently be directed o Against the others, So long as the debt o Has not been fully collected.

Before the remission was effected.

Art. 1220. The remission of the whole obligation, o Obtained by one of the solidary debtors,  Does not entitle him (one of the solidary debtors)  To reimbursement o From his co-debtors.

Art. 1217. Payment made by  One of the solidary debtors o Extinguishes the obligation.

Art. 1221.  If the thing has been lost or  If the prestation has become impossible o Without the fault of the solidary debtors,  The obligation shall be extinguished.

 

If two or more solidary debtors Offer to pay, o The creditor may choose  Which offer to accept.

 

 

He who made the payment May claim from his co-debtors o Only the share o Which corresponds to each,  With the interest  For the payment already made.

 

If the payment is made Before the debt is due, o No interest o For the intervening period o May be demanded.



When one of the solidary debtors cannot, o Because of his insolvency, Reimburse his share To the debtor paying the obligation,  Such share shall be borne  By all his co-debtors,  In proportion to the debt of each.

 

Art. 1218. Payment by a solidary debtor  Shall not entitle him  To reimbursement o From his co-debtors  If such payment is made o After the obligation has o Prescribed or become illegal. Art. 1219. The remission made by the creditor  Of the share o Which affects one of the solidary debtors  Does not release the latter (one of the solidary debtors)  From his responsibility o Towards the co-debtors, o In case the debt had been totally paid  By anyone of them

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

 



If there was fault On the part of any one of them, o All shall be responsible o To the creditor, for  The price and  The payment of damages and interest, Without prejudice to o Their action against o The guilty or negligent debtor. If through a fortuitous event, o The thing is lost or o The performance has become impossible After one of the solidary debtors o Has incurred in delay o Through the  Judicial or  Extrajudicial demand o Upon him by the creditor, The provisions of the preceding paragraph shall apply.

Art. 1222. In actions filed by the creditor  A solidary debtor  May avail himself of  All defenses which are o Derived from the nature of the obligation and o Of those which are personal to him, or pertain to his own share. 

With respect to those which personally belong to the others (other solidary debtors), o He may avail himself thereof o Only as regards that part of the debt o For which the latter (other solidary debtors) are responsible.

B. SOLIDARY (NCC ARTS 927, 1824, 1911, 1945, 2157, 2194, 2146; FC ARTS 94, 121; RPC ART. 90) Art. 927

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If two or more heirs take possession of the estate, o They shall be solidarily liable o For the loss or destruction of  A thing devised or bequeathed,  Even though only one of them  Should have been negligent.

Art. 1824. All partners are liable solidarily with the partnership  For everything chargeable to the partnership o Under Articles 1822 and 1823. o

o

Art. 1822. Where, by any wrongful act or omission of any partner  Acting in the ordinary course of the business of the partnership or  With the authority of co-partners,  Loss or injury is caused to any person, not being a partner in the partnership, or  Any penalty is incurred, o The partnership is liable therefor o To the same extent as the partner so acting or omitting to act. Art. 1823. The partnership is bound to make good the loss: (1) Where one partner acting within the scope of his apparent authority  Receives money or property of a third person and  Misapplies it; and (2) Where the partnership in the course of its business  Receives money or property of a third person and  The money or property so received is misapplied by any partner while it is in the custody of the partnership.

Art. 1911. Even when the agent has exceeded his authority,  The principal is o Solidarily liable with the agent  If the former (principal)  Allowed the latter (agent)  To act as though he (agent) had full powers. Art. 1915. If two or more persons have appointed an agent

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For a common transaction or undertaking, They shall be solidarily liable o To the agent  For all the consequences of the agency. o



Art. 1945. When there are two or more bailees  To whom a thing is loaned  In the same contract, o They (bailees) are liable solidarily. Art. 2157. The responsibility of two or more payees,  When there has been payment  Of what is not due, o Is solidary. Art. 2194. The responsibility of two or more persons  Who are liable for quasi-delict o Is solidary. Art. 2146. If the officious manager delegates  To another person  All or some of his duties, o He shall be liable o For the acts of the delegate,  Without prejudice to o The direct obligation of the latter (delegate) o Toward the owner of the business. Family Code Art. 94. The absolute community of property  Shall be liable for: 1.

The support of  The spouses,  Their common children, and  Legitimate children of either spouse; o However, the support of o Illegitimate children Shall be governed by The provisions of this Code on Support;

2.

All debts and obligations  Contracted during the marriage o By the designated administrator-spouse For the benefit of the community, or o By both spouses, or o By one spouse With the consent of the other;

3.

Debts and obligations  Contracted by either spouse

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Without the consent of the other o To the extent that the family o May have been benefited;

4.

All taxes, liens, charges and expenses,  Including major or minor repairs,  Upon the community property;

5.

All taxes and expenses  For mere preservation made o During marriage  Upon the separate property  Of either spouse o Used by the family;

6.

7.

Expenses  To enable either spouse  To commence or complete o A professional or vocational course, or o Other activity for self-improvement;

5.

All taxes and expenses  For mere preservation made - During the marriage  Upon the separate property - Of either spouse;

6.

Expenses  To enable either spouse  To commence or complete - A professional, vocational course, or - Other activity for self-improvement;

7.

Ante-nuptial debts  Of either spouse  Insofar as they have redounded  To the benefit of the family;

8.

The value  Of what is donated or promised  By both spouses - In favor of their common legitimate children - For the exclusive purpose of o Commencing or completing - A professional or vocational course or - Other activity for self-improvement; and

9.

Expenses of litigation  Between the spouses - Unless the suit is found to be groundless.



If the conjugal partnership is insufficient o To cover the foregoing liabilities,  The spouses shall be solidarily liable  For the unpaid balance  With their separate properties.

Ante-nuptial debts  Of either spouse o Insofar as they have redounded o To the benefit of the family;

Section 4. Charges Upon and Obligations of the Conjugal Partnership Art. 121. The conjugal partnership  Shall be liable for: 1.

The support of  The spouse,  Their common children, and  The legitimate children of either spouse; - However, the support of - Illegitimate children o Shall be governed by o The provisions of this Code on Support;

2.

3.

4.

All debts and obligations  Contracted during the marriage - By the designated administrator-spouse o For the benefit of the conjugal partnership of gains, or - By both spouses or - By one of them o With the consent of the other; Debts and obligations  Contracted by either spouse  Without the consent of the other - To the extent that the family - May have benefited; All taxes, liens, charges, and expenses,  Including major or minor repairs  Upon the conjugal partnership property;

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Revised Penal Code Art. 90. Prescription of crime i. Crimes punishable by o Death, o Reclusion perpetua or o Reclusion temporal  Shall prescribe in twenty years. ii.

Crimes punishable o By other afflictive penalties  Shall prescribe in fifteen years.

iii. General Rule: Those punishable by a correctional penalty (1m & 1d to 6 y)  Shall prescribe in ten years;  Exception: With the exception of those punishable by arresto mayor (1m & 1d to 6m),

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Which shall prescribe in five years.

iv. The crime of libel or Other similar offenses  Shall prescribe in one year. v.

The crime of o Oral defamation and o Slander by deed  Shall prescribe in six months.

vi. Light offenses (arresto menor 1 d to 30 d)  Prescribe in two months. C. DISJUNCTIVE Disjunctive – there are several obligations and only one or some of them must be fulfilled

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LAW REVIEW 2 4. AS TO PERFORMANCE OF PRESTATION (ARTS. 1221-1225, 1209-1210) A. DIVISIBLE B. INDIVISIBLE C. JOINT INDIVISIBLE D. SOLIDARY INDIVISIBLE Art. 1221.  If the thing has been lost or  If the prestation has become impossible o Without the fault of the solidary debtors,  The obligation shall be extinguished. 

If there was fault on the part of any one of them (solidary debtors), o All (solidary debtors) shall be responsible to the creditor, for  The price and  The payment  of damages and  Interest

 

Without prejudice to Their action against o The guilty or negligent debtor.



If through a fortuitous event, o The thing is lost or o The performance has become impossible  After one of the solidary debtors  Has incurred in delay  Through the  Judicial or  Extrajudicial demand  Upon him by the creditor,  All (solidary debtors) shall be responsible to the creditor, for o The price and o The payment  of damages and o Interest

Art. 1222. In actions filed by the creditor  A solidary debtor may avail himself of o All defenses which are 1. Derived from the nature of the obligation and 2. Of those which are personal to him, or pertain to his own share. 

With respect to those which personally belong to the others (other solidary debtors), o He may avail himself thereof  Only as regards that part of the debt  For which the latter (other solidary debtors) are responsible.

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A. DIVISIBLE B. INDIVISIBLE SECTION 5. - Divisible and Indivisible Obligations Art. 1223. The divisibility or indivisibility of the things  That are the object of obligations  In which there is o Only one debtor and o Only one creditor  Does not alter or modify  The provisions of Chapter 2 (NATURE AND EFFECT OF OBLIGATIONS Arts 11631178) of this Title. C. JOINT INDIVISIBLE Art. 1224. A joint indivisible obligation  Gives rise to indemnity o For damages  From the time any one of the debtors  Does not comply with his undertaking. 

The debtors o Who may have been ready to fulfill their promises  Shall not contribute to the indemnity  Beyond the corresponding portion of  The price of the thing or  The value of the service  In which the obligation consists.

Art. 1225. For the purposes of the preceding articles,  GENERAL RULE: Obligations to give o Definite things and o Those which are not susceptible of partial performance  Shall be deemed to be indivisible. 

When the obligation has for its object o The execution of a certain number of days of work,  The accomplishment of work by metrical units, or o Analogous things  Which by their nature are susceptible of partial performance,  It shall be divisible.



EXCEPTION: However, even though the object or service May be physically divisible, o An obligation is indivisible if



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

1. So provided by law or 2. Intended by the parties. In obligations not to do, o Divisibility or indivisibility o Shall be determined by  The character of the prestation in each particular case.

Art. 1209. If the division is impossible,  The right of the creditors  May be prejudiced o Only by their (creditors’) collective acts, and 

The debt can be enforced only by o Proceeding against o All the debtors.

 

If one of the debtors Should be insolvent, o The other debtors o Shall not be liable for his share.

D. SOLIDARY INDIVISIBLE Art. 1210. The indivisibility of an obligation  Does not necessarily give rise  To solidarity.  

Nor does solidarity of itself Imply indivisibility.

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LAW REVIEW 2 5. AS TO THE PRESENCE OF AN ACCESSORY UNDERTAKING IN CASE OF BREACH WITH A PENAL CLAUSE (distinguish from liquidated damages) (ARTS. 122601230) SECTION 6. - Obligations with a Penal Clause Art. 1226. In obligations with a penal clause,  The penalty  Shall substitute o The indemnity for damages and o The payment of interests  In case of noncompliance,  If there is no stipulation to the contrary.  

Nevertheless, damages shall be paid If the obligor a. Refuses to pay the penalty or b. Is guilty of fraud in the fulfillment of the obligation.



The penalty may be enforced o Only when it is demandable o In accordance with the provisions of this Code.

Art. 1229. The judge shall equitably reduce the penalty  When the principal obligation  Has been partly or irregularly complied with  By the debtor. 

Even if there has been no performance, o The penalty may also be reduced by the courts o If it is  Iniquitous or  Unconscionable.

Art. 1230. The nullity of the penal clause  Does not carry with it o Nullity of the principal obligation.  

The nullity of the principal obligation Carries with it o Nullity of the penal clause.

E. BREACH OF OBLIGATIONS (ART 1170)

Art. 1227. General Rule:  The debtor cannot exempt himself  From the performance of the obligation  By paying the penalty, Exception: o Save in the case where o This right has been expressly reserved for him. General Rule:  Neither can the creditor demand o The fulfillment of the obligation and o The satisfaction of the penalty at the same time, Exception: o Unless this right has been clearly granted him.  

However, if after the creditor has decided To require the fulfillment of the obligation, o The performance thereof should become impossible o Without his fault,  The penalty may be enforced.

Art. 1228. Proof of actual damages  Suffered by the creditor o Is not necessary o In order that the penalty may be demanded.

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1. FRAUD (ARTS. 1171, 1338, 1344) 2. NEGLIGENCE (ARTS. 1171-1173) 3. DELAY – (ARTS. 1169, 1165, 1786, 1788, 1896, 1942) 4. ANY OTHER MANNER OF CONTRAVENTION II. Excuse for non-performance





1. FORTUITOUS EVENT – (ARTS. 1174, 552, 1165, 2147, 2159) 2. ACT OF CREDITOR Art. 1170.  Those who o In the performance of their obligations are o Guilty of  Fraud, negligence, or delay, and  Those who o In any manner o Contravene the tenor thereof,  Are liable for damages.



 

1. FRAUD (ARTS. 1171, 1338, 1344)

 

Any waiver of An action for future fraud o Is void.

Art. 1338. There is fraud when,  Through insidious words or machinations o Of one of the contracting parties,  The other is induced  To enter into a contract o Which without them, o He would not have agreed to. Art. 1344. In order that fraud  May make a contract voidable, it o Should be serious and o Should not have been employed by both contracting parties.

When negligence shows bad faith, o The provisions of Articles 1171 and 2201, paragraph 2, shall apply.  Art. 1171. Responsibility arising from fraud  Is demandable in all obligations.   

I. MANNER OF BREACH

Art. 1171. Responsibility arising from fraud  Is demandable in all obligations.

Diligence Which is required by the nature of the obligation and Corresponds with o The circumstances of the  Persons,  Time, and  Place.  

I. Manner of Breach

  

Any waiver of An action for future fraud Is void.

Art. 2201, paragraph 2: In case of o Fraud, o Bad faith, o Malice or o Wanton attitude, The obligor shall be responsible for All damages o Which may be reasonably attributed to the o Non-performance of the obligation.

If the law or contract Does not state the diligence o Which is to be observed in the performance, That which is expected of a good father of a family o Shall be required.

3. DELAY – (ARTS. 1169, 1165, 1786, 1788, 1896, 1942) Art. 1169. Those obliged to deliver or to do something GENERAL RULE:  Incur in delay  From the time the obligee/creditor o Judicially or extrajudicially demands from them o The fulfillment of their obligation.

2. NEGLIGENCE (ARTS. 1171-1173) Art. 1171. Responsibility arising from fraud  Is demandable in all obligations.  

Any waiver of An action for future fraud o Is void.

Art. 1172. Responsibility arising from negligence  In the performance of every kind of obligation  Is also demandable, o But such liability may be regulated by the courts, o According to the circumstances. Art. 1173. The fault or negligence of the obligor  Consists in o The omission of that

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EXCEPTION:  However, the demand by the obligee/creditor  Shall not be necessary  In order that delay may exist: (1) When the obligation or the law  Expressly so declares; or (2) When from the nature and circumstances of the obligation  It appears that the designation of the time when o The thing is to be delivered or o The service is to be rendered  Was a controlling motive o For the establishment of the contract; or (3) When demand would be useless,

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As when the obligor has rendered it beyond his power to perform.

 

In reciprocal obligations, Neither party incurs in delay if the other o Does not comply or o Is not ready to comply  In a proper manner  With what is incumbent upon him.



From the moment one of the parties fulfills his obligation, o Delay by the other begins.

Art. 1165.,  When what is to be delivered is a determinate thing  The creditor, o In addition to the right granted him by Article 1170,  May compel the debtor  To make the delivery. *Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.  

  

If the thing to be delivered is indeterminate or generic, He may ask that the obligation o Be complied with o At the expense of the debtor. If the obligor delays, or has promised to deliver The same thing to two or more persons o Who do not have the same interest, He shall be responsible for any fortuitous event o Until he has effected the delivery.

Art. 1786.  Every partner  Is a debtor of the partnership o For whatever he may have promised to contribute to the partnership.    



o

His liability shall begin from  The time he converted the amount to his own use.

Art. 1896. The agent owes interest  On the sums he has applied to his own use  From the day on which he did so, and  On those which he still owes o After the extinguishment of the agency. Art. 1942. The bailee is liable for the loss of the thing,  Even if it should be through a fortuitous event: (1) If he devotes the thing o To any purpose o Different from that for which it has been loaned; (2) If he keeps it o Longer than the period stipulated, or o After the accomplishment of the use  For which the commodatum has been constituted; (3) If the thing loaned has been delivered o General Rule: With appraisal of its value,  Exception: Unless there is a stipulation o Exempting the bailee from responsibility o In case of a fortuitous event; (4) If he lends or leases the thing  To a third person,  Who is not a member of his household; (5) If, being able to save either  The thing borrowed or  His own thing, o He chose to save the latter (his own thing). 4. ANY OTHER MANNER OF CONTRAVENTION

He (partner) shall also be bound for warranty In case of eviction o With regard to specific and determinate things Which he may have contributed to the partnership, In the same cases and in the same manner as o The vendor is bound with respect to the vendee. He shall also be liable for the fruits thereof o From the time they should have been delivered, o Without the need of any demand.

Art. 1788. A partner who  Has undertaken to contribute a sum of money and  Fails to do so o Becomes a debtor o For the interest and damages  From the time he should have complied with his obligation. 

The same rule applies to o Any amount he may have taken from the partnership coffers, and

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If he fails to return the property or business After demand by the owner;

 

If he assumed the management In bad faith.

 II. EXCUSE FOR NON-PERFORMANCE 1. FORTUITOUS EVENT – (ARTS. 1174, 552, 1165, 2147, 2159) Art. 1174.  General Rule: No person shall be responsible for those events o Which could not be foreseen, or o Which though foreseen, were inevitable.  Exception: Except in cases o Expressly specified by the law, or o When it is otherwise declared by stipulation, or o When the nature of the obligation  Requires the assumption of risk, Art. 552. A possessor in good faith  General Rule: Shall not be liable for o The deterioration or o Loss of the thing possessed,  Exception: Except in cases in which it is proved that o He has acted with  Fraudulent intent or  Negligence, o After the judicial summons.   

(4)

Art. 2159. Whoever in bad faith accepts an undue payment,  Shall pay legal interest o If a sum of money is involved, or  Shall be liable for fruits received or which should have been received o If the thing produces fruits.   

He shall furthermore be answerable For any loss or impairment of the thing o From any cause, and For damages to the person who delivered the thing, o Until it is recovered.

2. ACT OF CREDITOR

A possessor in bad faith Shall be liable for deterioration or loss In every case, o Even if caused by a fortuitous event.

Art. 1165.,  When what is to be delivered is a determinate thing  The creditor, o In addition to the right granted him by Article 1170,  May compel the debtor  To make the delivery. *Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.  

  

If the thing to be delivered is indeterminate or generic, He may ask that the obligation o Be complied with o At the expense of the debtor. If the obligor delays, or has promised to deliver The same thing to two or more persons o Who do not have the same interest, He shall be responsible for any fortuitous event o Until he has effected the delivery.

Art. 2147. The officious manager  Shall be liable for any fortuitous event: (1)  If he undertakes risky operations  Which the owner was not accustomed to embark upon; (2)  If he has preferred his own interest  To that of the owner; (3)

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LAW REVIEW 2 F. REMEDIES FOR BREACH OF OBLIGATIONS NCC Arts. 1165-68, 1170, 1177-78, 1191-92, 2236 FC Arts. 153, 155 Rule 39 Sec. 13 III.

EXTRA-JUDICIAL REMEDIES 1. 2.

IV.

EXPRESSLY GRANTED BY LAW – ARTS. 1786, 1788, 1526 STIPULATED

JUDICIAL REMEDIES 1. 2. 3.

PRINCIPAL REMEDIES – ARTS. 1191, 1170 SUBSIDIARY REMEDIES – ARTS. 1380, 1177 ANCILLARY REMEDIES – RULES OF COURT

F. REMEDIES FOR BREACH OF OBLIGATIONS NCC Arts. 1165-68, 1170, 1177-78, 1191-92, 2236 FC Arts. 153, 155 Rule 39 Sec. 13 Art. 1165.,  When what is to be delivered is a determinate thing  The creditor, o In addition to the right granted him by Article 1170,  May compel the debtor  To make the delivery. *Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.  

  

If the thing to be delivered is indeterminate or generic, He may ask that the obligation o Be complied with o At the expense of the debtor. If the obligor delays, or has promised to deliver The same thing to two or more persons o Who do not have the same interest, He shall be responsible for any fortuitous event o Until he has effected the delivery.

Art. 1166. The obligation to give a determinate thing o Includes that of delivering  All its accessions and accessories, o Even though they may not have been mentioned. Art. 1177. The creditors, o After having pursued the property  In possession of the debtor o To satisfy their claims,  May exercise all the rights and  Bring all the actions of the debtor o For the same purpose (to satisfy their claims),  Save those which are inherent in his (debtor’s) person;  They may also impugn o The acts which the debtor o May have done to defraud them. Art. 1178. Subject to the laws,

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General rule:  All rights acquired o In virtue of an obligation  Are transmissible, Exception: o If there has been no stipulation to the contrary. *Art. 1191. The power to rescind obligations  Is implied in reciprocal ones,  In case one of the obligors o Should not comply o With what is incumbent upon him.  



The injured party May choose between (1) The fulfillment or (2) The rescission of the obligation,  With the payment of damages in either case. He may also seek rescission, o Even after he has chosen fulfillment,  If the fulfillment should become impossible.



The court shall decree the rescission claimed, o Unless there be just cause o Authorizing the fixing of a period.

 

This is understood to be without prejudice to The rights of third persons o Who have acquired the thing, o In accordance with Articles 1385 and 1388 and o The Mortgage Law.

Art. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. In this case, indemnity for damages may be demanded from the person causing the loss. Art. 1388. Whoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter for damages suffered by them on account of the alienation, whenever, due to any cause, it should be impossible for him to return them. If there are two or more alienations, the first acquirer shall be liable first, and so on successively.

Art. 1192. In case both parties  Have committed a breach of the obligation, o The liability of the first infractor o Shall be equitably tempered by the courts.   

If it cannot be determined Which of the parties First violated the contract, o The contract shall be deemed extinguished, and o Each shall bear his own damages.

Art. 2236. The debtor is liable  With all his property, o Present and future,  For the fulfillment of his obligations, o Subject to the exemptions provided by law.

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LAW REVIEW 2 Art. 302.  Neither the right to receive legal support  Nor any money or property obtained as such support or  Any pension or gratuity from the government o Is subject to attachment or execution. Art. 1708. The laborer's wages General Rule  Shall not be subject to execution or attachment, Exception:  Except for debts incurred for  Food,  Shelter,  Clothing and  Medical attendance. Family Code Art. 153. The family home  Is deemed constituted  On a house and lot o From the time it is occupied as a family residence. o From the time of its constitution and  So long as any of its beneficiaries actually resides therein,  The family home continues to be such and  Is exempt from  Execution,  Forced sale or  Attachment  Except as hereinafter provided and to the extent of the value allowed by law. Art. 155. General Rule: o The family home shall be exempt from execution, forced sale or attachment Exception: o Except for: (1) Non-payment of taxes; (2) Debts incurred  Prior to the constitution of the family home; (3) Debts  Secured by mortgages on the premises  Before or after such constitution; and (4) Debts due to  Labourers, mechanics, architects, builders, materialmen and others  Who have rendered service or  Who furnished material o For the construction of the building.



Land necessarily used in connection therewith;

(b) Ordinary tools and implements  Personally used by him  In his trade, employment, or livelihood; (c) Three horses, or three cows, or three carabaos, or other beasts of burden  Such as the judgment obligor may select  Necessarily used by him  In his ordinary occupation; (d) His necessary clothing and articles for ordinary personal use,  Excluding jewelry; (e) Household furniture and utensils  Necessary for housekeeping, and  Used for that purpose o By the judgment obligor and his family,  Such as the judgment obligor may select,  Of a value not exceeding P100; (f) Provisions  For individual or family use  Sufficient for 4 months; (g)          

The professional libraries and equipment of Judges, Lawyers, Physicians, Pharmacists, Dentists, Engineers, Surveyors, Clergymen, Teachers, and Other professionals, o Not exceeding P300,000 in value;

(h)   

One fishing boat and accessories Not exceeding the total value of P100,000 Owned by a fisherman and By the lawful use of which he earns his livelihood;

(i) So much of the salaries, wages, or earnings  Of the judgment obligor  Of his personal services o Within the 4 months preceding the levy  As are necessary for the support of his family; (j) Lettered gravestones; (k) Monies benefits, privileges, or annuities  Accruing or in any manner growing out of o Any life insurance;

RULE 39 - EXECUTION, SATISFACTION AND EFFECT OF JUDGMENTS

(l) The right to receive  Legal support, or money or property o Obtained as such support, or  Any pension or gratuity from the Government;

Sec. 13. Property exempt from execution.

(m) Properties specially exempt by law.

  



Except as otherwise expressly provided by law, The following property, and no other, Shall be exempt from execution: (13)

(a) The judgment obligor's  Family home as provided by law, or  The homestead in which he resides, and

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 

But no article or species of property mentioned in his section Shall be exempt from execution Issued upon a judgment o Recovered for its price or o Upon a judgment of foreclosure of a mortgage thereon.

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Where the ownership has passed to the buyer.

2. STIPULATED

1. EXPRESSLY GRANTED BY LAW – ARTS. 1786, 1788, 1526

II. JUDICIAL REMEDIES Art. 1786.  Every partner  Is a debtor of the partnership o For whatever he may have promised to contribute to the partnership.    



He (partner) shall also be bound for warranty In case of eviction o With regard to specific and determinate things Which he may have contributed to the partnership, In the same cases and in the same manner as o The vendor is bound with respect to the vendee. He shall also be liable for the fruits thereof o From the time they should have been delivered, o Without the need of any demand.

Art. 1788. A partner who  Has undertaken to contribute a sum of money and  Fails to do so o Becomes a debtor o For the interest and damages  From the time he should have complied with his obligation. 

The same rule applies to o Any amount he may have taken from the partnership coffers, and o His liability shall begin from  The time he converted the amount to his own use.

Art. 1526. Subject to the provisions of this Title, notwithstanding  That the ownership in the goods may have passed to the buyer, o The unpaid seller of goods, as such, has: (1) A lien  On the goods or right to retain them  For the price  While he is in possession of them; (2) A right of stopping the goods in transitu  After he has parted with the possession of them  In case of the insolvency of the buyer; (3) A right of resale  As limited by this Title; (4) A right to rescind  The sale as likewise limited by this Title.  

Where the ownership in the goods Has not passed to the buyer, o The unpaid seller has,  In addition to his other remedies o A right of withholding delivery  Similar to and coextensive with  His rights of lien and stoppage in transitu

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1. PRINCIPAL REMEDIES – ARTS. 1191, 1170 * Art. 1191. The power to rescind obligations  Is implied in reciprocal ones,  In case one of the obligors o Should not comply o With what is incumbent upon him.  



The injured party May choose between (1) The fulfillment or (2) The rescission of the obligation,  With the payment of damages in either case. He may also seek rescission, o Even after he has chosen fulfillment,  If the fulfillment should become impossible.



The court shall decree the rescission claimed, o Unless there be just cause o Authorizing the fixing of a period.

 

This is understood to be without prejudice to The rights of third persons o Who have acquired the thing, o In accordance with Articles 1385 and 1388 and o The Mortgage Law.

Art. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. In this case, indemnity for damages may be demanded from the person causing the loss. Art. 1388. Whoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter for damages suffered by them on account of the alienation, whenever, due to any cause, it should be impossible for him to return them. If there are two or more alienations, the first acquirer shall be liable first, and so on successively.

Art. 1170.  Those who o In the performance of their obligations are o Guilty of  Fraud, negligence, or delay, and  Those who o In any manner o Contravene the tenor thereof,  Are liable for damages.

2. SUBSIDIARY REMEDIES – ARTS. 1380, 1177 Art. 1380. Contracts validly agreed upon  May be rescinded

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In the cases established by law.

Art. 1177. The creditors, o After having pursued the property  In possession of the debtor o To satisfy their claims,  May exercise all the rights and  Bring all the actions of the debtor o For the same purpose (to satisfy their claims),  Save those which are inherent in his (debtor’s) person;  They may also impugn o The acts which the debtor o May have done to defraud them. 3. ANCILLARY REMEDIES – RULES OF COURT

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G. MODES OF EXTINGUISHMENT OF OBLIGATIONS – Art. 1231 8.

PAYMENT OR PERFORMANCE – ARTS. 123244, 1246-51, 1302 RA 8183 PD 72, SECS. 31-32 SPECIAL FORMS OF PAYMENT A. DATION IN PAYMENT – ART. 1245 B. APPLICATION OF PAYMENTS – ARTS. 1252-54, 1248 C. PAYMENT BY CESSION OR ASSIGNMENT – ART. 1255 D. TENDER OF PAYMENT AND CONSIGNATION – ARTS. 1256-61

9.

LOSS OF THE THING DUE OR IMPOSSIBILITY OF PERFORMANCE – ARTS. 1262-69, 1189, 1174, 1165, 1268, 1942, 1979, 2147, 2159

10. CONDONATION OR REMISSION OF THE DEBT

– ARTS. 1270-74, 748, 749

Rescission, Fulfillment of a resolutory condition, and Prescription,  Are governed elsewhere in this Code.

1. PAYMENT OR PERFORMANCE ARTS. 1232-44, 1246-51, 1302 RA 8183 PD 72, SECS. 31-32 SECTION 1. - Payment or Performance Art. 1232. Payment means  Not only the delivery of money  But also the performance, o In any other manner,  Of an obligation. Art. 1233. A debt shall not be understood to have been paid  Unless the thing or service o In which the obligation consists  Has been completely delivered or rendered, o As the case may be.

11. CONFUSION OR MERGER OF RIGHTS – ARTS.

1275-77, 1215, 1217 12. COMPENSATION – ARTS. 1278-1290, 1243,

1215 KINDS OF COMPENSATION A. LEGAL B. CONVENTIONAL/FACULTATIVE C. JUDICIAL 13. NOVATION – ARTS. 1291-1304, 1215

KINDS OF NOVATION A. AS TO ITS NATURE I. SUBJECTIVE OR PERSONAL II. OBJECTIVE RO REAL B. AS TO ITS FORM I. EXPRESS II. IMPLIED 14. OTHER MODES

ACT OF CREDITOR G. MODES OF EXTINGUISHMENT OF OBLIGATIONS – Art. 1231 Art. 1231. Obligations are extinguished by: 1. Payment or performance: 2.

Loss of the thing due:

3.

Condonation or remission of the debt;

4.

Confusion or merger of the rights of creditor and debtor;

5.

Compensation;

6.

Novation.



Other causes of extinguishment of obligations, such as  Annulment,

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Art. 1234. If the obligation has been substantially performed in good faith,  The obligor may recover  As though there had been a strict and complete fulfillment, o Less damages o Suffered by the obligee. Art. 1235. When the obligee accepts the performance,  Knowing its incompleteness or irregularity, and  Without expressing any protest or objection, o The obligation is deemed fully complied with. Art. 1236. The creditor is not bound to accept  Payment or performance by a third person  Who has no interest in the fulfillment of the obligation, o Unless there is a stipulation to the contrary. 

Whoever pays for another o May demand from the debtor o What he has paid,  Except that if he paid  Without the knowledge or  Against the will of the debtor,  He can recover  Only insofar as the payment  Has been beneficial to the debtor.

Art. 1237. Whoever pays on behalf of the debtor  Without the knowledge or  Against the will of the debtor, o Cannot compel the creditor o To subrogate him (creditor) in his (creditor’s) rights, o Such as those arising from a mortgage, guaranty, or penalty. Art. 1238. Payment made  By a third person o Who does not intend to be reimbursed

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 

o By the debtor Is deemed to be a donation, o Which requires the debtor's consent. But the payment is in any case Valid as to the creditor o Who has accepted it.

Art. 1239. In obligations to give,  Payment made by one o Who does not have the  Free disposal of the thing due and  Capacity to alienate it  Shall not be valid, o Without prejudice to the provisions of Article 1427 under the Title on "Natural Obligations."

o

o o o o

Art. 1241.  Payment to a person o Who is incapacitated to administer his property  Shall be valid o If he has kept the thing delivered, or o Insofar as the payment has been beneficial to him.  

Payment made to a third person Shall also be valid o Insofar as it has redounded to the benefit of the creditor. o Such benefit to the creditor o Need not be proved in the following cases: (1) If after the payment, o The third person acquires the creditor's rights; (2) If the creditor ratifies o The payment to the third person; (3) If by the creditor's conduct, o The debtor has been led to believe o That the third person had authority o To receive the payment.

Art. 1242. Payment made in good faith o To any person o In possession of the credit o Shall release the debtor. Art. 1243. Payment made to the creditor o By the debtor o After the debtor has been judicially ordered o To retain the debt o Shall not be valid. Art. 1244. The debtor of a thing o Cannot compel the creditor o To receive a different one,

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In obligations to do or not to do, An act or forbearance Cannot be substituted by o Another act or forbearance Against the obligee's will.

Art. 1246. When the obligation consists in the delivery  Of an indeterminate or generic thing, o Whose quality and circumstances have not been stated,  The creditor cannot demand a thing of superior quality. 

Art. 1427. When a minor between eighteen and twenty-one years of age, who has entered into a contract without the consent of the parent or guardian, voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation, there shall be no right to recover the same from the obligee who has spent or consumed it in good faith.

Art. 1240. Payment shall be made to  The person o In whose favor the obligation has been constituted, or  His successor in interest, or  Any person authorized to receive it.

Although the latter may be  Of the same value as, or  More valuable than that which is due.

Neither can the debtor o Deliver a thing of inferior quality.  The purpose of the obligation and  Other circumstances  Shall be taken into consideration.

Art. 1247. Unless it is otherwise stipulated,  The extrajudicial expenses o Required by the payment  Shall be for the account of the debtor. 

With regard to judicial costs, o The Rules of Court shall govern.

Art. 1248. Unless there is an express stipulation to that effect,  The creditor cannot be compelled o Partially to receive the prestations  In which the obligation consists.  Neither may the debtor be required o To make partial payments. 



However, when the debt is o In part liquidated and o In part unliquidated, The creditor may demand and the debtor may effect o The payment of the creditor  Without waiting for the liquidation of the debtor.

Art. 1249.  The payment of debts in money o Shall be made in the currency stipulated, and o If it is not possible to deliver such currency,  Then in the currency which is legal tender in the Philippines.  The delivery of o Promissory notes payable to order, or o Bills of exchange or o Other mercantile documents  Shall produce the effect of payment  Only when they have been cashed, or  When through the fault of the creditor  They have been impaired. 

In the meantime, the action derived from the original obligation o Shall be held in the abeyance.

Art. 1250. In case an extraordinary inflation or deflation  Of the currency stipulated o Should supervene,  The value of the currency

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At the time of the establishment of the obligation Shall be the basis of payment, o Unless there is an agreement to the contrary. o



Art. 1251. Payment shall be made  in the place designated in the obligation.  









There being no express stipulation and If the undertaking is to deliver a determinate thing, o The payment shall be made o Wherever the thing might be  At the moment the obligation was constituted. In any other case o The place of payment shall be o The domicile of the debtor. If the debtor o Changes his domicile in bad faith or o After he has incurred in delay,  The additional expenses  Shall be borne by him.

Section 1. Every provision contained in, or made with respect to, any obligation o Which provision purports to give the obligee o The right to require payment  In gold or in a particular kind of coin or currency  Other than Philippine currency or  In an amount of money of the Philippines measured thereby, o Be as it is hereby declared against public policy, and null, void and of no effect, and  No such provision shall be contained in, or made with respect to,  Any obligation hereafter incurred. o

These provisions are without prejudice to venue under the Rules of Court.

o o

Art. 1302. It is presumed that there is legal subrogation: (1) When a creditor pays another creditor  Who is preferred, o Even without the debtor's knowledge; (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.

o

REPUBLIC ACT NO. 529 o o

June 16, 1950 As repealed by RA 8183



AN ACT TO ASSURE UNIFORM VALUE TO PHILIPPINE COIN AND CURRENCY



Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::



WHEREAS, the value of Philippine coin and currency o Affects public interest and o Is subject to regulation by the Congress of the Philippines; and



WHEREAS, it has been disclosed that the provisions of certain obligations contracted in the Philippines o Purport to give the obligee o The right to require payment o In gold or o In a particular kind of coin or currency or o In an amount in money of the Philippines measured thereby, o Thus  Obstructing the power of the Congress to regulate the value of the money of the Philippines and  Contravening the policy of the Congress, here declared,

  

Every obligation  Heretofore or hereafter incurred,  Whether or not any such provision as to payment is contained therein or made with respect thereto, Shall be discharged upon payment In any coin or currency  Which at the time of payment is legal tender  For public and private debts: Provided, That, if the obligation was  Incurred prior to the enactment of this Act and required payment in a particular kind of coin or currency other than Philippine currency,  It shall be discharged in Philippine currency  Measured at the prevailing rates of exchange at the time the obligation was incurred,  Except in case of a loan made in a foreign currency  Stipulated to be payable in the same currency o In which case the rate of exchange o Prevailing at the time of the stipulated date of payment o Shall prevail.  All coin and currency, including Central Bank notes, heretofore or hereafter issued and declared by the Government of the Philippines o Shall be legal tender o For all debts, public and private.

Section 2. All acts and parts of acts inconsistent with this Act are hereby repealed. Section 3. This Act shall take effect upon its approval. Approved: June 16, 1950

REPUBLIC ACT NO. 8183  



AN ACT REPEALING REPUBLIC ACT NUMBERED 529 AS AMENDED, ENTITLED "AN ACT TO ASSURE THE UNIFORM VALUE OF PHILIPPINE COIN AND CURRENCY." Section 1. All monetary obligations shall be settled o In the Philippine currency  Which is legal tender in the Philippines. o

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To maintain at all times the equal and stable power of every peso coined or issued by the Philippines, in the markets and in the payment of debts; Now, therefore.

However, the parties may agree

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That the obligation or transaction Shall be settled in any other currency At the time of payment.



Sec. 2. - R.A. No. 529, as amended entitled "An Act to Assume the Uniform Value of Philippine Coin and Currency," o Is hereby repealed.



Approved: June 11, 1996

PRESIDENTIAL DECREE No. 72 o November 29, 1972 o Amending RA 265, entitled "The Central Bank Act" 

Section 31. Section 34 of the same Act (RA 265) is hereby amended to read as follows:

o

"Sec. 54. Legal tender power.  All notes and coins issued by the Central Bank  Shall be fully guaranteed by the Government of the Republic of the Philippines and  Shall be legal tender in the Philippines  For all debts, both public and private: 



Provided, however, That coins shall be legal tender  In amounts not exceeding fifty pesos  For denominations from ten centavos to one peso, and  In amounts not exceeding twenty pesos for denominations of five centavos or less."



In favor of one and the same creditor, o May declare  At the time of making the payment, o To which of them the same must be applied.  Unless  The parties so stipulate, or  When the application of payment  Is made by the party  For whose benefit  The term has been constituted,  Application shall not be made  As to debts which are not yet due.

  

If the debtor accepts from the creditor A receipt In which an application of the payment is made, o The former cannot complain of the same, o Unless there is a cause for invalidating the contract.

Art. 1253. If the debt produces interest,  Payment of the principal  Shall not be deemed to have been made o Until the interests have been covered. Art. 1254. When the payment cannot be applied o In accordance with the preceding rules, or  If application cannot be inferred from other circumstances,  The debt which is most onerous to the debtor, o Among those due,  Shall be deemed to have been satisfied. 

Section 32. Section 63 of the same Act (RA 529) is hereby amended to read as follows: o

"Sec. 63. Legal character.  Checks representing deposit money  Do not have legal tender power and  Their acceptance in the payment of debts, both public and private,  Is at the option of the creditor:  

  

Provided, however, That A check which has been cleared and credited o To the account of the creditor Shall be equivalent to a delivery to the creditor Of cash In an amount equal to the amount credited to his account."

SPECIAL FORMS OF PAYMENT A. DATION IN PAYMENT – ART. 1245 Art. 1245. Dation in payment,  Whereby property is alienated  To the creditor  In satisfaction of a debt in money, o Shall be governed by the law of sales. B. APPLICATION OF PAYMENTS – ARTS. 1252-54, 1248 SUBSECTION 1. - Application of Payments Art. 1252. He who has various debts of the same kind

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If the debts due are of the same nature and burden, o The payment shall be applied o To all of them proportionately.

Art. 1248. Unless there is an express stipulation to that effect,  The creditor cannot be compelled o Partially to receive the prestations  In which the obligation consists.  Neither may the debtor be required o To make partial payments. 





However, when the debt is o In part liquidated and o In part unliquidated, The creditor may demand and the debtor may effect o The payment of the creditor Without waiting for the liquidation of the debtor.

C. PAYMENT BY CESSION OR ASSIGNMENT – ART. 1255 SUBSECTION 2. - Payment by Cession Art. 1255. The debtor may cede or assign his property  To his creditors o In payment of his debts. 

 

This cession, o Unless there is stipulation to the contrary, Shall only release the debtor From responsibility o For the net proceeds o Of the thing assigned.

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The agreements which, o On the effect of the cession, Are made between the debtor and his creditors o Shall be governed by special laws.

D. TENDER OF PAYMENT AND CONSIGNATION – ARTS. 1256-61 SUBSECTION 3. - Tender of Payment and Consignation Art. 1256. If the creditor o To whom tender of payment has been made  Refuses to accept it, o Without just cause  The debtor shall be released from responsibility  By the consignation of o The thing or sum due.   



Before a judicial declaration o That the consignation has been properly made,  The debtor may withdraw the thing or the sum deposited,  Allowing the obligation to remain in force.

Art. 1261. If, the consignation having been made, the creditor should authorize the debtor to withdraw the same,  He shall lose o Every preference which he may have o Over the thing.  The co-debtors, guarantors and sureties o Shall be released.

Consignation alone Shall produce the same effect In the following cases: 1. When the creditor is  Absent or unknown, or  Does not appear at the place of payment; 2. When creditor is  Incapacitated to receive the payment  At the time it is due; 3. When, without just cause, creditor  Refuses to give a receipt; 4. When two or more persons  Claim the same right to collect; 5. When the title of the obligation  Has been lost.

Art. 1257.  In order that the consignation of the thing due  May release the obligor, o It must first be announced o To the persons o Interested in the fulfillment of the obligation.   

The consignation shall be ineffectual If it is not made strictly In consonance with the provisions o Which regulate payment.

Art. 1258. Consignation shall be made  By depositing o The things due  At the disposal of judicial authority, o Before whom the tender of payment shall be proved, in a proper case, and  The announcement of the consignation in other cases.  

The consignation having been made, The interested parties o Shall also be notified thereof.

Art. 1259. The expenses of consignation,  When properly made,  Shall be charged against the creditor. Art. 1260. Once the consignation has been duly made,  The debtor may ask the judge o To order the cancellation of the obligation. 

Before the creditor o Has accepted the consignation, or

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LAW REVIEW 2  2. LOSS OF THE THING DUE OR IMPOSSIBILITY OF PERFORMANCE ARTS. 1262-69, 1189, 1174, 1165, 1268, 1942, 1979, 2147, 2159

  

Unless the thing having been offered by him To the person who should receive it, The latter refused Without justification to accept it.

SECTION 2. - Loss of the Thing Due Art. 1262.  An obligation o Which consists in the delivery o Of a determinate thing  Shall be extinguished  If it should be lost or destroyed  Without the fault of the debtor, and  Before he has incurred in delay. 

When by law or stipulation, o The obligor is liable o Even for fortuitous events,  The loss of the thing  Does not extinguish the obligation, and  He shall be responsible for damages. o The same rule applies when o The nature of the obligation  Requires the assumption of risk.

Art. 1269. The obligation having been extinguished  By the loss of the thing,  The creditor shall have all the rights of action o which the debtor may have  Against third persons o By reason of the loss. Art. 1189.  When the conditions have been imposed o With the intention of o Suspending the efficacy of an obligation to give,  The following rules shall be observed  In case of the o Improvement, o Loss or o Deterioration of the thing  During the pendency of the condition: (1) If the thing is lost  Without the fault of the debtor,  The obligation shall be extinguished;

Art. 1263. In an obligation to deliver a generic thing,  The loss or destruction  Of anything of the same kind o Does not extinguish the obligation.

(2) If the thing is lost  Through the fault of the debtor,  He shall be obliged to pay damages;  It is understood that the thing is lost i. When it perishes, or ii. Goes out of commerce, or iii. Disappears in such a way that its existence is unknown or it cannot be recovered;

Art. 1264. The courts shall determine whether, under the circumstances,  The partial loss of the object of the obligation  Is so important o As to extinguish the obligation. Art. 1265.  Whenever the thing is lost o In the possession of the debtor,  It shall be presumed that the loss  Was due to his fault, o Unless there is proof to the contrary, and o Without prejudice to the provisions of article 1165.  

(3) When the thing deteriorates  Without the fault of the debtor,  The impairment is to be borne by the creditor; (4) If it deteriorates  Through the fault of the debtor,  The creditor may choose between i. The rescission of the obligation and ii. Its fulfillment,  With indemnity for damages in either case;

This presumption does not apply In case of o Earthquake, o Flood, o Storm, or o Other natural calamity.

(5) If the thing is improved  By its nature, or  By time,  The improvement shall inure to  The benefit of the creditor;

Art. 1266. The debtor in obligations to do  Shall also be released o When the prestation becomes o Legally or physically impossible  Without the fault of the obligor. Art. 1267. When the service has become so difficult  As to be manifestly beyond  The contemplation of the parties, o The obligor may also be released therefrom, o In whole or in part. Art. 1268.  When the debt o of a thing certain and determinate  Proceeds from a criminal offense, o The debtor shall not be exempted from o The payment of its price, o Whatever may be the cause for the loss,

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(6) If it is improved  At the expense of the debtor,  He shall have no other right  Than that granted to the usufructuary. Art. 1174.  General Rule: No person shall be responsible o For those events o Which could not be foreseen, or o Which though foreseen, were inevitable. 

Exception: Except in cases 1. Expressly specified by the law, or 2. When it is otherwise declared by stipulation, or 3. When the nature of the obligation

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Requires the assumption of risk,

Art. 1165. When what is to be delivered is  A determinate thing, o The creditor, o In addition to the right granted him by Article 1170*, o May compel the debtor o To make the delivery. 

If the thing is indeterminate or generic, o He may ask that the obligation o Be complied with o At the expense of the debtor.



If the obligor o Delays, or o Promised to deliver the same thing to two or more persons who do not have the same interest, o He shall be responsible for any fortuitous event o Until he has effected the delivery.

Art. 1268.  When the debt o of a thing certain and determinate  Proceeds from a criminal offense, o The debtor shall not be exempted from o The payment of its price, o Whatever may be the cause for the loss,  Unless the thing having been offered by him  To the person who should receive it,  The latter refused  Without justification to accept it.

3. 4.

 Without the depositor's permission; If he delays its return; If he allows others to use it,  Even though he himself may have been authorized to use the same.

Art. 2147. The officious manager  Shall be liable for any fortuitous event: (1)  If he undertakes risky operations  Which the owner was not accustomed to embark upon; (2)  If he has preferred his own interest  To that of the owner; (3)  If he fails to return the property or business  After demand by the owner; (4)  If he assumed the management  In bad faith. Art. 2159. Whoever in bad faith accepts an undue payment,  Shall pay legal interest o If a sum of money is involved, or  Shall be liable for fruits received or which should have been received o If the thing produces fruits.    

He shall furthermore be answerable For any loss or impairment of the thing o From any cause, and For damages to the person who delivered the thing, Until it is recovered.

Art. 1942. The bailee is liable for the loss of the thing,  Even if it should be through a fortuitous event: (1)   

If he devotes the thing To any purpose Different from that For which it has been loaned;

(2) If he keeps it  Longer than the period stipulated, or  After the accomplishment of the use o For which the commodatum has been constituted; (3) If the thing loaned has been delivered  General Rule: With appraisal of its value, o Exception: Unless there is a stipulation o Exempting the bailee from responsibility  In case of a fortuitous event; (4) If he lends or leases the thing  To a third person,  Who is not a member of his household; (5)   

If, being able to save either The thing borrowed or His own thing, He chose to save the latter (his own thing).

Art. 1979. The depositary is liable  For the loss of the thing  Through a fortuitous event if: 1. It is so stipulated; 2. He uses the thing

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LAW REVIEW 2 3. CONDONATION OR REMISSION OF THE DEBT ARTS. 1270-74, 748, 749 SECTION 3. - Condonation or Remission of the Debt Art. 1270. Condonation or remission is  Essentially gratuitous, and  Requires the acceptance by the obligor.  It may be made o Expressly or impliedly. 

One and the other kind o Shall be subject to the rules o Which govern inofficious donations.  Express condonation  Shall, furthermore, comply with the forms of donation.

Art. 1271. The delivery of a private document  Evidencing a credit, o Made voluntarily o By the creditor to the debtor,  Implies the renunciation of the action o Which the creditor had against the debtor. 

If in order to nullify this waiver o It should be claimed to be inofficious,



The debtor and his heirs may uphold it o By proving that the delivery of the document o Was made in virtue of payment of the debt.

Art. 749. In order that the donation of an immovable  May be valid, o It must be made in a public document, o Specifying therein  The property donated and  The value of the charges which the donee must satisfy. 





The acceptance may be made o In the same deed of donation or o In a separate public document, But it shall not take effect o Unless it is done o During the lifetime of the donor. If the acceptance is made in a separate instrument, o The donor shall be notified thereof o In an authentic form, and o This step shall be noted in both instruments.

Art. 1272.  Whenever the private document o In which the debt appears  Is found in the possession of the debtor,  It shall be presumed o That the creditor delivered it voluntarily,  Unless the contrary is proved. Art. 1273. The renunciation of the principal debt  Shall extinguish the accessory obligations; o But the waiver of the accessory obligations o Shall leave the principal debt in force. Art. 1274. It is presumed that the accessory obligation of pledge  Has been remitted  When the thing pledged, o after its delivery to the creditor,  Is found in the possession o of the debtor, or o of a third person  Who owns the thing. Art. 748. The donation of a movable  May be made orally or in writing. 

An oral donation o Requires the simultaneous delivery  of the thing or  of the document o Representing the right donated.



If the value of the personal property donated o Exceeds five thousand pesos, The donation and the acceptance o Shall be made in writing,  Otherwise, the donation shall be void.



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LAW REVIEW 2 4. CONFUSION OR MERGER OF RIGHTS ARTS. 1275-77, 1215, 1217 SECTION 4. - Confusion or Merger of Rights

Reimburse his share to the debtor paying the obligation, Such share shall be borne by all his co-debtors, o In proportion to the debt of each. o



Art. 1275. The obligation is extinguished  From the time the characters o Of creditor and debtor  Are merged in the same person. Art. 1276.  Merger o Which takes place in the person of o The principal debtor or creditor  Benefits the guarantors.  Confusion o Which takes place in the person of o Any of the latter  Does not extinguish the obligation. Art. 1277. Confusion does not extinguish  A joint obligation o Except as regards the share o Corresponding to the creditor or debtor  In whom the two characters concur. Art. 1215. o Novation, o Compensation, o Confusion or o Remission of the debt,  Made by any of the solidary creditors or  With any of the solidary debtors,  Shall extinguish the obligation,  Without prejudice to the provisions of Article 1219. 



The creditor o Who may have executed any of these acts, o As well as he who collects the debt, Shall be liable to the others o For the share in the obligation o Corresponding to them.

Art. 1219. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors, in case the debt had been totally paid by anyone of them before the remission was effected.

Art. 1217.  Payment made  By one of the solidary debtors o Extinguishes the obligation.  

If two or more solidary debtors o Offer to pay, The creditor may choose o Which offer to accept.



He who made the payment o May claim from his co-debtors  Only the share which corresponds to each,  With the interest for the payment already made.



If the payment is made before the debt is due, o No interest for the intervening period o May be demanded.



When one of the solidary debtors cannot,  Because of his insolvency,

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LAW REVIEW 2  5. COMPENSATION ARTS. 1278-1290, 1243, 1215



KINDS OF COMPENSATION A. LEGAL – ARTS. 1279, 1286, 1290 B. CONVENTIONAL– ART. 1282 FACULTATIVE – ARTS. 1287, 1288 C. JUDICIAL- ART. 1283 

If the creditor communicated the cession to him (debtor) o But the debtor did not consent thereto, o The latter (debtor) may set up the compensation of debts o Previous to the cession,  But not of subsequent ones.

 

If the assignment is made Without the knowledge of the debtor, o He may set up the compensation of all credits o Prior to the same and o Also later ones  Until he had knowledge of the assignment.

SECTION 5. - Compensation Art. 1278. Compensation shall take place  When two persons, o in their own right,  Are creditors and debtors of each other. LEGAL Art. 1279. In order that compensation may be proper, it is necessary that: 1. Each one of the obligors  Be bound principally, and  That he be at the same time a principal creditor of the other; 2. 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; 3. The two debts be due; 4. They be liquidated and demandable; 5. Over neither of them  There be any retention or controversy,  Commenced by third persons and  Communicated in due time to the debtor. Art. 1280. Notwithstanding the provisions of the preceding article,  The guarantor may set up compensation o As regards what the creditor may owe the principal debtor. Art. 1281. Compensation may be o Total or partial. 

When the two debts are of the same amount, o There is a total compensation.

CONVENTIONAL Art. 1282. The parties may agree upon the compensation of debts which are not yet due. JUDICIAL Art. 1283. If one of the parties to a suit  Over an obligation  Has a claim for damages against the other, o The former may set it off o By proving his right  To said damages and  the amount thereof. Art. 1284. When one or both debts o Total or partial.  They may be compensated against each other  Before they are judicially rescinded or avoided. Art. 1285.  The debtor who has consented to the assignment of rights o Made by a creditor o In favor of a third person,  Cannot set up against the assignee

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The compensation which would pertain to him Against the assignor,  Unless the assignor was notified by the debtor  At the time he gave his consent,  That he reserved his right to the compensation.

LEGAL Art. 1286. Compensation takes place  By operation of law, o Even though the debts may be payable o At different places,  But there shall be an indemnity  For expenses of  Exchange or  Transportation to the place of payment. FACULTATIVE Art. 1287. Compensation shall not be proper  When one of the debts arises o From a depositum or o From the obligations  Of a depositary or  Of a bailee in commodatum. 

Neither can compensation be set up against a creditor o Who has a claim for support o Due by gratuitous title,  Without prejudice to the provisions of paragraph 2 of Article 301.

Art. 301. The right to receive support cannot be renounced; nor can it be transmitted to a third person. Neither can it be compensated with what the recipient owes the obligor. However, support in arrears may be compensated and renounced, and the right to demand the same may be transmitted by onerous or gratuitous title.

FACULTATIVE Art. 1288. Neither shall there be compensation  If one of the debts consists in civil liability  Arising from a penal offense. Art. 1289. If a person should have against him several debts  Which are susceptible of compensation, o The rules on the application of payments o Shall apply to the order of the compensation. LEGAL Art. 1290. When all the requisites mentioned in Article 1279 are present,  Compensation takes effect

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o By operation of law, and Extinguishes both debts o To the concurrent amount, Even though the creditors and debtors Are not aware of the compensation.

Art. 1243. Payment made to the creditor by the debtor  After the latter has been judicially ordered to retain the debt  Shall not be valid. Art. 1215. o Novation, o compensation, o confusion or o remission of the debt,  Made by o Any of the solidary creditors or o With any of the solidary debtors,  Shall extinguish the obligation,  Without prejudice to the provisions of Article 1219.    

The creditor Who may have executed Any of these acts, As well as he who collects the debt, o Shall be liable to the others o For the share in the obligation Corresponding to them. Art. 1217.  Payment made  By one of the solidary debtors o Extinguishes the obligation. 

If two or more solidary debtors Offer to pay, o The creditor may choose o Which offer to accept.



He who made the payment o May claim from his co-debtors o Only the share which corresponds to each,  With the interest for the payment already made.



If the payment is made before the debt is due, o No interest for the intervening period may be demanded.



When one of the solidary debtors cannot, o Because of his insolvency, Reimburse his share to the debtor o Paying the obligation, Such share shall be borne by all his co-debtors, o In proportion to the debt of each.

 

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LAW REVIEW 2 6. NOVATION ARTS. 1291-1304, 1215 KINDS OF NOVATION A. AS TO ITS NATURE I. SUBJECTIVE or PERSONAL – ART. 1291 # 2, 3 II. OBJECTIVE or REAL - ART. 1291 # 1 B. AS TO ITS FORM I. EXPRESS – ART. 1292 II. IMPLIED – ART. 1292 C. OTHER MODES SECTION 6. - Novation Art. 1291. Obligations may be modified by: 1. Changing their object or principal conditions; 2. Substituting the person of the debtor; 3. Subrogating a third person in the rights of the creditor. B. AS TO ITS FORM I. EXPRESS – ART. 1292 II. IMPLIED – ART. 1292 Art. 1292. In order that an obligation may be extinguished  By another o Which substitutes the same,  It is imperative o That it be so declared  In unequivocal terms, or o That the old and the new obligations  Be on every point incompatible with each other. Art. 1293. Novation which consists in  Substituting a new debtor o In the place of the original one,  May be made even o Without the knowledge or o Against the will of the latter (original one),  But not without the consent of the creditor. 

Payment by the new debtor o Gives him the rights o Mentioned in Articles 1236 and 1237.

Art. 1294. If the substitution is o Without the knowledge or o Against the will of the debtor,  The new debtor's insolvency or  Nonfulfillment of the obligations  Shall not give rise to any liability  On the part of the original debtor. Art. 1295. The insolvency of the new debtor,  Who has been proposed by the original debtor and  Accepted by the creditor, o Shall not revive the action of the latter o Against the original obligor,  Except when said insolvency  Was already existing and of public knowledge, or  Known to the debtor, when the delegated his debt.

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Art. 1296. When the principal obligation is extinguished  In consequence of a novation, o Accessory obligations may subsist o Only insofar as they may benefit third persons  Who did not give their consent. Art. 1297. If the new obligation is void,  The original one shall subsist, o Unless  The parties intended  That the former relation should be extinguished  In any event. Art. 1298. The novation is void  If the original obligation was void, o Except  When annulment may be claimed only by the debtor or  When ratification validates acts which are voidable. Art. 1299. If the original obligation was subject to  A suspensive or resolutory condition, o The new obligation o Shall be under the same condition,  Unless it is otherwise stipulated. Art. 1300. Subrogation of a third person  In the rights of the creditor o Is either legal or conventional. 

The former (legal subrogation) is not presumed, o Except in cases expressly mentioned in this Code;



The latter (conventional subrogation) must be clearly established o In order that it may take effect.

CONVENTIONAL SUBROGATION Art. 1301. Conventional subrogation of a third person  Requires the consent o Of the original parties and o Of the third person. LEGAL SUBROGATION Art. 1302. It is presumed that there is legal subrogation when: 1. A creditor pays another creditor  Who is preferred,  Even without the debtor's knowledge; 2. A third person, not interested in the obligation, pays  With the express or tacit approval  Of the debtor; 3. 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. 1303. Subrogation  Transfers to the persons subrogated o The credit  With all the rights thereto appertaining,  Either  Against the debtor or  Against third person,

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Be they guarantors or possessors of mortgages, Subject to stipulation in a conventional subrogation.

Art. 1304. A creditor, to whom partial payment has been made,  May exercise his right for the remainder, and  He shall be preferred  To the person who has been subrogated in his place o In virtue of the partial payment o Of the same credit. Art. 1215. o Novation, o compensation, o confusion or o remission of the debt,  Made by o Any of the solidary creditors or o With any of the solidary debtors,  Shall extinguish the obligation,  Without prejudice to the provisions of Article 1219.    

The creditor Who may have executed Any of these acts, As well as he who collects the debt, o Shall be liable to the others o For the share in the obligation Corresponding to them.

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LAW REVIEW 2 9. ACCORDING TO SUBJECT MATTER i. THING ii. RIGHT iii. SERVICE

II. CONTRACTS ARTS. 1305-1422 A. IN GENERAL 1. DEFINITION – ARTS. 1305 AUTO-CONTRACT –ARTS. 1491, 1646, 1890 2. ELEMENTS OF CONTRACTS i. ESSENTIAL ii. NATURAL iii. ACCIDENTAL B. FUNDAMENTAL CHARACTERISTICS/PRINCIPLES OF CONTRACTS 1. CONSENSUALITY OF CONTRACTS – ARTS. 1305, 1317 CONTRACT OF ADHESION 2. AUTONOMY OF CONTRACTS – ARTS. 1306, 1799, 2088, 2130 3. MUTUALITY OF CONTRACTS – ARTS. 1308-10, 1182 ACCELERATION CLAUSE ESCALATION CLAUSE 4. OBLIGATORY FORCE OF CONTRACTS – ARTS. 1159, 131516, 749 5. RELATIVITY OF CONTRACTS – ARTS. 1311-14, 1177-78, 1381(3) PRIVITIY OF CONTRACTS C. CLASSIFICATION OF CONTRACTS 1. ACCORDING TO DEGREE OF DEPENDENCE i. PREPARATORY – ARTS. 1479, 1767, 1868 ii. PRINCIPAL – ARTS. 1458, 1638, 1642, 1933, 1962 iii. ACCESSORY – ARTS. 2047, 2085 2. ACCORDING TO PERFECTION i. CONSENSUAL – ARTS. 1315, 1475 ii. REAL – ARTS. 1316, 1934 iii. FORMAL – ARTS. 1356 3. ACCORDING TO SOLEMNITY OR FORM – ARTS. 1356 i. ANY FORM ii. SPECIAL FORM 4. ACCORDING TO PURPOSE i. TRANSFER OF OWNERSHIP – ARTS. 725, 1458, 1638 ii. CONVEYANCE OF USE – ARTS. 562, 1642, 1933 iii. RENDITION OF SERVICE – ARTS. 1642, 1868 5. ACCORDING TO NATURE OF OBLIGATION PRODUCED i. BILATERAL – ARTS. 1642, 1458 ii. UNILATERAL – ARTS. 2047, 2093 6. ACCORDING TO CAUSE – ARTS. 1350 i. ONEROUS – ARTS. 1458, 1638, 1642 ii. GRATUITOUS OR LUCRATIVE – ARTS. 725, 1933 iii. REMUNERATORY 7. ACCORDING TO RISK i. COMMUTATIVE ii. ALEATORY – ART. 2010 8. ACCORDING TO NAME i. NOMINATE ii. INNOMINATE – ART. 1307

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D. STAGES OF CONTRACTS 1. NEGOTIATION CONTRACT OF OPTION – ARTS. 1324, 1479, 1482 2. PERFECTION 3. PERFORMANCE 4. CONSUMMATION E. ESSENTIAL ELEMENTS OF CONTRACTS – ART. 1318 1. CONSENT OF THE CONTRACTING PARTIES – ARTS. 1319-46, 37-42, 739, 1476 (4), 1490-91, 1533 (5), 1646, 1782, 1409 (7), 5 ARTS. 87, 124, 234 FC RA 6809 ART. XII, SECS. 7 & 8 CONSTITUTION COGNITION THEORY MANIFESTATION THEORY 2. OBJECT CERTAIN, WHICH IS THE SUBJECT MATTER OF THE CONTRACT – ARTS. 1347-49, 1311, 1178 3. CAUSE OF THE OBLIGATION – ARTS. 1350-55 4. DELIVERY 5. DUE OBSERVANCE OF PRESCRIBED FORMALITIES F.

FORM OF CONTRACTS – ARTS. 1356-58 1. ANY FORM – ORAL 2. SPECIAL FORM i. VALIDITY – ARTS 748, 749, 1744, 1773, 1874, 1956, 2134, ACT 1147 SEC. 22 ii. ENFORCEABILITY – ARTS. 1403, 1878 iii. GREATER EFFICACY OR CONVENIENCE – ARTS. 1358

G. REFORMATION OF CONTRACTS – ARTS. 1359 – 69 H. INTERPRETATION OF CONTRACTS – ARTS. 1370-79 I. KINDS OF CONTRACTS AS TO VALIDITY 1. VALID AND BINDING 2. VALID BUT DEFECTIVE i. RESCISSIBLE CONTRACTS – ARTS. 1380-89, 1191 ii. VOIDABLE CONTRACTS – ARTS. 1390-1402, 132728, 1330 iii. UNENFORCEABLE CONTRACTS – ARTS. 140308, 1317, 1878 3. VOID OR INEXISTENT – ARTS. 1409-22, 1318, 1353, 1378, 1491, 1898

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II. CONTRACTS A. IN GENERAL 1. DEFINITION – ARTS. 1305 AUTO-CONTRACT –ARTS. 1491, 1646, 1890 2. ELEMENTS OF CONTRACTS i. ESSENTIAL ii. NATURAL iii. ACCIDENTAL 1. DEFINITION Art. 1305. A contract  Is a meeting of minds  Between two persons  Whereby one binds himself, with respect to the other, to o Give something or o Render some service.

Any others specially disqualified by law.

*Art. 1646. The persons disqualified to buy  Referred to in Articles 1490 and 1491, o Are also disqualified o To become lessees of the things mentioned therein. Art. 1890.  If the agent has been empowered to borrow money, o He may himself be the lender o At the current rate of interest. 

If he has been authorized to lend money at interest, o He cannot borrow it o Without the consent of the principal.

AUTO-CONTRACT –ARTS. 1491, 1646, 1890 *Art. 1491. The following persons cannot acquire by purchase,  Even at a public or judicial auction,  Either in person or through the mediation of another: 1. The guardian,  The property of  The person or persons who may be under his guardianship; 2. Agents,  The property  Whose administration or sale may have been entrusted to them, o Unless the consent of the principal has been given; 3. Executors and administrators,  The property of the estate under administration; 4. Public officers and employees,  The property o Of the State or o Of any subdivision thereof, or o Of any government-owned or controlled corporation, or institution,  The administration of which has been intrusted to them;  This provision shall apply to judges and government experts  Who, in any manner whatsoever, take part in the sale; 5. Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice,  The property and rights o In litigation or levied upon an execution before the court o Within whose jurisdiction or territory they exercise their respective functions; o This prohibition includes the act of acquiring by assignment and o Shall apply to lawyers,  With respect to the property and rights  Which may be the object of any litigation  In which they may take part  By virtue of their profession.

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LAW REVIEW 2 B. FUNDAMENTAL CHARACTERISTICS/PRINCIPLES OF CONTRACTS 1. CONSENSUALITY OF CONTRACTS – ARTS. 1305, 1315, 1317  CONTRACT OF ADHESION - Perfection by mere consent of consensual contracts: Consensual contracts are perfected by mere consent. 2. AUTONOMY OF CONTRACTS – ARTS. 1306, 1799, 2088, 2130 - Freedom to stipulate: The parties are free to create or establish stipulations, clauses, terms and conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order, or public policy (Art. 1306).

o

Art. 1315. Contracts are perfected by mere consent, and  From that moment the parties are bound o Not only to the fulfillment of what has been expressly stipulated o But also to all the consequences  Which, according to thFeir nature,  May be in keeping with good faith, usage and law. *Art. 1317. No one may contract in the name of another  Without being authorized by the latter, or  Unless he has by law a right to represent him. 

3. MUTUALITY OF CONTRACTS – ARTS. 1308-10, 1182  ACCELERATION CLAUSE  ESCALATION CLAUSE - Mutuality of contracts: A contract binds both contracting parties and its validity or the compliance therewith cannot be left to the will of only one party (Art. 1308). 4. OBLIGATORY FORCE OF CONTRACTS – ARTS. 1159, 1308, 1315-16, 749 - Obligatory force of contracts: Obligations arising from contracts have the force of law between the contracting parties, and should be complied with in good fiath. 5. RELATIVITY OF CONTRACTS – ARTS. 1311-14, 1177-78, 1381(3)  PRIVITY OF CONTRACTS - Relativity of contracts: Contracts take effect only between the parties, their assigns, and heirs. Except where the rights and obligations arising from the contract are not transmissible by their nature, by stipulation, or by provision of law (Art. 1311) in which case the assigns or heirs are not affected anymore. 1. CONSENSUALITY OF CONTRACTS – ARTS. 1305, 1315, 1317 CONTRACT OF ADHESION Contract of Adhesion - A contract in which one party has already prepared a form of a contract, containing stipulations desired by him and he simply asks the other party to agree to them if he wants to enter into the contract. Adhesion contracts are not entirely prohibited. The one who agrees to the contract is in reality, free to reject it entirely; if he adheres, he gives his consent. Void if there is UNDUE ADVANTAGE on the part of the dominant party. Ambiguity construed strictly against the drafter. Art. 1305. A contract is  A meeting of minds  Between two persons  Whereby one binds himself, with respect to the other, o To give something or

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To render some service.

A contract entered into in the name of another o By one  Who has no authority or legal representation, or  Who has acted beyond his powers, o Shall be unenforceable,  Unless it is ratified,  Expressly or impliedly,  By the person  On whose behalf it has been executed,  Before it is revoked by the other contracting party.

2. AUTONOMY OF CONTRACTS – ARTS. 1306, 1799, 2088, 2130 Art. 1306. The contracting parties may establish such  Stipulations,  Clauses,  Terms and conditions o As they may deem convenient,  Provided they are not contrary to  Law,  Moral,  Good customs,  Public order, or  Public policy. Art. 1799. A stipulation which excludes  One or more partners  From any share in the profits or losses o Is void. Art. 2088. The creditor cannot  Appropriate the things o Given by way of pledge or mortgage, or  Dispose of them. 

Any stipulation to the contrary o Is null and void.

Art. 2130. A stipulation forbidding the owner  From alienating the immovable mortgaged o Shall be void. 3. MUTUALITY OF CONTRACTS – ARTS. 1308-10, 1182  ACCELERATION CLAUSE ACCELERATION CLAUSE, or the stipulation stating that on the occasion of the mortgagor’s default, the whole sum remaining unpaid automatically becomes due and demandable. It is ALLOWED

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ESCALATION CLAUSE

Requirements for a valid escalation clause a. Increase is provided by law/resolution by the monetary board b. There is a corresponding deescalation clause c. The effectivity of the clause is on or after the effect of increase ordered on the maximum interest In lease, a clause authorizing the lessor to increase the rent should real estate taxes or operating costs increase. Art. 1308.  The contract must bind both contracting parties; 

Its validity or compliance o Cannot be left o To the will of one of them.

Art. 1309. The determination of the performance  May be left to a third person, o Whose decision shall not be binding o Until it has been made known  To both contracting parties. Art. 1310. The determination shall not be obligatory  If it is evidently inequitable. o In such case, o The courts shall decide  What is equitable  Under the circumstances. Art. 1182  When the fulfillment of the condition o Depends upon the sole will of the debtor, o The conditional obligation shall be void.  If it depends upon chance or  Upon the will of a third person, o The obligation shall take effect o In conformity with the provisions of this Code. 4. OBLIGATORY FORCE OF CONTRACTS – ARTS. 1159, 1315-16, 749 Art. 1159. Obligations arising from contracts  Have the force of law  Between the contracting parties and o Should be complied with in good faith. Art. 1308.  The contract must bind both contracting parties; 

Its validity or compliance o Cannot be left o To the will of one of them.

Art. 1315. Contracts are perfected by mere consent, and  From that moment  The parties are bound o Not only to the fulfillment of what has been expressly stipulated o But also to all the consequences  Which, according to their nature,  May be in keeping with  Good faith, usage and law.

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Art. 1316. Real contracts,  Such as deposit, pledge and commodatum, o Are not perfected o Until the delivery o Of the object of the obligation. Art. 749. In order that the donation of an immovable  May be valid, o It must be made in a public document, o Specifying therein  The property donated and  The value of the charges which the donee must satisfy. 





The acceptance may be made o In the same deed of donation or o In a separate public document, But it shall not take effect o Unless it is done o During the lifetime of the donor. If the acceptance is made in a separate instrument, o The donor shall be notified thereof o In an authentic form, and o This step shall be noted in both instruments.

5. RELATIVITY OF CONTRACTS – ARTS. 1311-14, 1177-78, 1381(3) PRIVITY OF CONTRACTS *Art. 1311. Contracts take effect only between  The parties,  Their assigns and heirs, o Except in case where o The rights and obligations arising from the contract o Are not transmissible  By their nature, or  By stipulation or  By provision of law. o The heir is not liable  Beyond the value of the property  He received from the decedent.  

If a contract should contain Some stipulation in favor of a third person, o He may demand its fulfillment  Provided he communicated his acceptance  To the obligor  Before its revocation.



A mere incidental benefit or interest of a person is not sufficient. o The contracting parties o Must have clearly and deliberately conferred o A favor upon a third person.

Art. 1312. In contracts creating real rights,  Third persons who come into possession of the object of the contract  Are bound thereby, o Subject to the provisions of the o Mortgage Law and the Land Registration Laws. Art. 1313. Creditors are protected  In cases of contracts o Intended to defraud them. Art. 1314. Any third person who induces another  To violate his contract

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Shall be liable for damages To the other contracting party.

Art. 1178. Subject to the laws,  All rights acquired o In virtue of an obligation  Are transmissible, o If there has been no stipulation to the contrary. Art. 1177. The creditors, o After having pursued the property  In possession of the debtor o To satisfy their claims,  May exercise all the rights and  Bring all the actions of the latter (debtor) o For the same purpose,  Save those which are inherent in his person;  They may also impugn o The acts which the debtor o May have done to defraud them.

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LAW REVIEW 2  C. CLASSIFICATION OF CONTRACTS 1. ACCORDING TO DEGREE OF DEPENDENCE I. PREPARATORY – ARTS. 1479, 1767, 1868 II. PRINCIPAL – ARTS. 1458, 1638, 1642, 1933, 1962 III. ACCESSORY – ARTS. 2047, 2085 2. ACCORDING TO PERFECTION I. CONSENSUAL – ARTS. 1315, 1475 II. REAL – ARTS. 1316, 1934 III. FORMAL – ART. 1356 3. ACCORDING TO SOLEMNITY OR FORM – ARTS. 1356 I. ANY FORM II. SPECIAL FORM 4. ACCORDING TO PURPOSE I. TRANSFER OF OWNERSHIP – ARTS. 725, 1458, 1638 II. CONVEYANCE OF USE – ARTS. 562, 1642, 1933 III. RENDITION OF SERVICE – ARTS. 1642, 1868 5. ACCORDING TO NATURE OF OBLIGATION PRODUCED I. BILATERAL – ARTS. 1642, 1458 II. UNILATERAL – ARTS. 2047, 2093 6. ACCORDING TO CAUSE – ARTS. 1350 I. ONEROUS – ARTS. 1458, 1638, 1642 II. GRATUITOUS OR LUCRATIVE – ARTS. 725, 1933 III. REMUNERATORY 7. ACCORDING TO RISK I. COMMUTATIVE II. ALEATORY – ART. 2010 8. ACCORDING TO NAME I. NOMINATE II. INNOMINATE – ART. 1307 9. ACCORDING TO SUBJECT MATTER I. THING II. RIGHT III. SERVICE

1. ACCORDING TO DEGREE OF DEPENDENCE I. PREPARATORY – ARTS. 1479, 1767, 1868 Art. 1479. A promise to buy and sell a determinate thing  For a price certain o Is reciprocally demandable. 

An accepted unilateral promise to buy or to sell a determinate thing

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For a price certain o Is binding upon the promissor  If the promise is supported by a consideration  Distinct from the price.

Art. 1767. By the contract of partnership  Two or more persons bind themselves o To contribute money, property, or industry o To a common fund,  With the intention of o Dividing the profits among themselves. 

Two or more persons may also form o A partnership for the exercise of a profession.

*Art. 1868. By the contract of agency  A person binds himself o To render some service or o To do something  In representation or on behalf of another, o With the consent or authority of the latter. 1. ACCORDING TO DEGREE OF DEPENDENCE II. PRINCIPAL ARTS. 1458, 1638, 1642, 1933, 1962 *Art. 1458. By the contract of sale  One of the contracting parties o Obligates himself  To transfer the ownership and  To deliver a determinate thing, and  The other o To pay therefor o A price certain in money or its equivalent. 

A contract of sale may be o Absolute or conditional.

Art. 1638. By the contract of barter or exchange  One of the parties binds himself o To give one thing o In consideration of the other's promise  To give another thing. * Art. 1642. The contract of lease may be of a. Things, or b. Work and service. *Art. 1933. By the contract of loan,  One of the parties delivers to another, either o Something not consumable  So that the latter may use the same  For a certain time and return it,  In which case the contract is called a Commodatum; or o Money or other consumable thing,  Upon the condition that  The same amount  of the same kind and quality shall be paid,  In which case the contract is simply called a Loan or Mutuum. 

Commodatum is essentially gratuitous.



Simple loan may be o Gratuitous or o With a stipulation to pay interest.



In Commodatum

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LAW REVIEW 2 The bailor retains the ownership of the thing loaned, While in simple loan, o Ownership passes to the borrower. o 

Art. 1475. The contract of sale is perfected  At the moment there is a meeting of minds o Upon the thing  Which is the object of the contract and o Upon the price. 

Art. 1962. A deposit is constituted  From the moment a person o Receives a thing belonging to another, o With the obligation  Of safely keeping it and  Of returning the same. 

If the safekeeping of the thing delivered o Is not the principal purpose of the contract,  There is no deposit  But some other contract.

1. ACCORDING TO DEGREE OF DEPENDENCE III. ACCESSORY – ARTS. 2047, 2085 *Art. 2047. By Guaranty  A person, called the guarantor, o Binds himself to the creditor o To fulfill the obligation of the principal debtor  In case the latter should fail to do so.  

o

If a person binds himself solidarily With the principal debtor, o The provisions of Section 4, Chapter 3, Title I of this Book (Joint and Solidary Obligations) o Shall be observed. In such case the contract is called a Suretyship.

Art. 2085  The following requisites are essential o To the contracts of pledge and mortgage: 1.That they be constituted To secure the fulfillment Of a principal obligation; 2.That the pledgor or mortgagor Be the absolute owner Of the thing pledged or mortgaged; 3.That the persons constituting the pledge or mortgage Have the free disposal of their property, and  In the absence thereof,  That they be legally authorized for the purpose. 

Third persons who are not parties to the principal obligation o May secure the latter (principal obligation) o By pledging or mortgaging o Their own property.

2. ACCORDING TO PERFECTION I. CONSENSUAL – ARTS. 1315, 1475 Art. 1315. Contracts are perfected by mere consent, and  From that moment  The parties are bound o Not only to the fulfillment of what has been expressly stipulated o But also to all the consequences  Which, according to their nature,  May be in keeping with  Good faith, usage and law.

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From that moment, o The parties may reciprocally demand performance,  Subject to the provisions of the law  Governing the form of contracts.

2. ACCORDING TO PERFECTION II. REAL – ARTS. 1316, 1934 Art. 1316. Real contracts,  Such as deposit, pledge and commodatum, o Are not perfected o Until the delivery o Of the object of the obligation. Art. 1934. An accepted promise  To deliver something by way of commodatum or simple loan o Is binding upon parties, 

But the commodatum or simple loan itself o Shall not be perfected o Until the delivery o Of the object of the contract.

2. ACCORDING TO PERFECTION III. FORMAL – ART. 1356 *Art. 1356.  Contracts shall be obligatory, o In whatever form they may have been entered into,  Provided all the essential requisites for their validity are present. 

However, when the law requires o That a contract be in some form o In order  That it may be valid or enforceable, or  That a contract be proved in a certain way, o That requirement is absolute and indispensable.



In such cases, o The right of the parties stated in the following article o Cannot be exercised.

*Art. 1357.  If the law requires a o Document or o Other special form,  As in the acts and contracts enumerated in the following article,  The contracting parties may compel each other to observe that form, o Once the contract has been perfected. 

This right may be exercised o Simultaneously with the action upon the contract.

3. ACCORDING TO SOLEMNITY OR FORM – ARTS. 1356

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LAW REVIEW 2 I. ANY FORM II. SPECIAL FORM * Art. 1356.  Contracts shall be obligatory, o In whatever form they may have been entered into,  Provided all the essential requisites  For their validity  Are present. 

  

However, when the law requires o That a contract be in some form o In order  That it may be valid or enforceable, or  That a contract be proved in a certain way, o That requirement is absolute and indispensable. In such cases, The right of the parties stated in the following article Cannot be exercised.

* Art. 1933. By the contract of loan,  One of the parties delivers to another, either o Something not consumable  So that the latter may use the same  For a certain time and return it,  In which case the contract is called a Commodatum; or o Money or other consumable thing,  Upon the condition that  The same amount  of the same kind and quality shall be paid,  In which case the contract is simply called a Loan or Mutuum. 

Commodatum is essentially gratuitous.



Simple loan may be o Gratuitous or o With a stipulation to pay interest.



In Commodatum o The bailor retains the ownership of the thing loaned, While in simple loan, o Ownership passes to the borrower.

 4. ACCORDING TO PURPOSE I. TRANSFER OF OWNERSHIP – ARTS. 725, 1458, 1638 *Art. 725. Donation  Is an act of liberality 



Whereby a person disposes gratuitously of o A thing or o Right In favor of another, o Who accepts it.

*Art. 1458. By the contract of sale  One of the contracting parties o Obligates himself  To transfer the ownership and  To deliver a determinate thing, and  The other o To pay therefor o A price certain in money or its equivalent. 

A contract of sale may be o Absolute or conditional.

* Art. 1638. By the contract of barter or exchange  One of the parties binds himself o To give one thing o In consideration of the other's promise o To give another thing. 4. ACCORDING TO PURPOSE II. CONVEYANCE OF USE – ARTS. 562, 1642, 1933 Art. 562. Usufruct  Gives a right o To enjoy the property of another  With the obligation o Of preserving its form and substance,  Unless o The title constituting it or o The law  Otherwise provides. * Art. 1642. The contract of lease may be of o Things, or o Work and service.

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4. ACCORDING TO PURPOSE III. RENDITION OF SERVICE – ARTS. 1642, 1868 Art. 1642. The contract of lease may be of a. Things, or b. Work and service. *Art. 1868. By the contract of agency  A person binds himself o To render some service or o To do something  In representation or on behalf of another,  With the consent or authority of the latter. 5. ACCORDING TO NATURE OF OBLIGATION PRODUCED I. BILATERAL – ARTS. 1642, 1458 * Art. 1642. The contract of lease may be of a. Things, or b. Work and service. *Art. 1458. By the contract of sale  One of the contracting parties o Obligates himself  To transfer the ownership and  To deliver a determinate thing, and  The other o To pay therefor o A price certain in money or its equivalent. 

A contract of sale may be o Absolute or conditional.

5. ACCORDING TO NATURE OF OBLIGATION PRODUCED II. UNILATERAL – ARTS. 2047, 2093 *Art. 2047. By Guaranty  A person, called the guarantor, o Binds himself to the creditor o To fulfill the obligation of the principal debtor

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o



In case the latter should fail to do so.

If a person binds himself solidarily With the principal debtor, o The provisions of Section 4, Chapter 3, Title I of this Book (Joint and Solidary Obligations) o Shall be observed. In such case the contract is called a Suretyship.

Art. 2093.  In addition to the requisites prescribed in Article 2085*, o It is necessary,  In order to constitute  The contract of pledge, o That the thing pledged  Be placed in the possession  Of the creditor, or  Of a third person  By common agreement. *Art. 2085. The following requisites are essential to the contracts of pledge and mortgage: (1) That they be constituted to secure the fulfillment of a principal obligation; (2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged; (3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose. Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.

o

In which case the contract is called a Commodatum; or Money or other consumable thing,  Upon the condition that  The same amount  of the same kind and quality shall be paid,  In which case the contract is simply called a Loan or Mutuum.



Commodatum is essentially gratuitous.



Simple loan may be o Gratuitous or o With a stipulation to pay interest.



In Commodatum o The bailor retains the ownership of the thing loaned, While in simple loan, o Ownership passes to the borrower.



6. ACCORDING TO CAUSE – ARTS. 1350 III. REMUNERATORY 

In remuneratory ones, o The service or benefit o Which is remunerated; and

Remuneratory – those contracts where one party gives something or renders service to another in consideration of a previous or past deeds of the other.

6. ACCORDING TO CAUSE – ARTS. 1350 I. ONEROUS – ARTS. 1458, 1638, 1642 *Art. 1350.  In onerous contracts o The cause o Is understood to be, o For each contracting party,  The prestation or  Promise of  A thing or service o By the other; 

In remuneratory ones, o The service or benefit o Which is remunerated; and



In contracts of pure beneficence, o The mere liberality of the benefactor.

6. ACCORDING TO CAUSE – ARTS. 1350 II. GRATUITOUS OR LUCRATIVE – ARTS. 725, 1933 *Art. 725. Donation  Is an act of liberality 



Whereby a person disposes gratuitously of o A thing or o Right In favor of another, o Who accepts it.

* Art. 1933. By the contract of loan,  One of the parties delivers to another, either o Something not consumable  So that the latter may use the same  For a certain time and return it,

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7. ACCORDING TO RISK I. COMMUTATIVE - Those contracts where the contracting parties contemplate the assured fulfillment of the terms and conditions of their agreement such as contracts of mortgage and pledge. Here, generally, there is no risk to anticipate. II. ALEATORY – ART. 2010 Art. 2010. By an aleatory contract,  One of the parties or both  Reciprocally bind themselves o To give or o To do something  In consideration of o What the other shall give or do o Upon the happening of an event  Which is uncertain, or  Which is to occur at an indeterminate time. 8. ACCORDING TO NAME I. NOMINATE - Those which have been given particular names or denominations by law. - E.g. Sale, barter, mortgage, lease, agency, partnership, commodatum, deposit, insurance, antichresis II. INNOMINATE – ART. 1307 Art. 1307. Innominate contracts  Shall be regulated by the 1) Stipulations of the parties, 2) Provisions of Title I (OBLIGATIONS) and Title II – (CONTRACTS) of this Book,

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LAW REVIEW 2 3) Rules governing the most analogous nominate contracts, and 4) Customs of the place. 9. ACCORDING TO SUBJECT MATTER I. THINGS - Contracts covering things such as contract of sale, deposit, pledge. II. RIGHT - Contract covering transmissible rights or credits such as a contract of usufruct, assignment of credits. III. SERVICE - Contracts covering services such as carriage whether common or simple, agency, deposit.

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- Begins when the parties perform their respective undertakings under the contract, culminating in the extinguishment thereof

1.NEGOTIATION CONTRACT OF OPTION – ARTS. 1324, 1479, 1482 2. PERFECTION 3. PERFORMANCE 4. CONSUMMATION 1. NEGOTIATION CONTRACT OF OPTION – ARTS. 1324, 1479, 1482 Art. 1324.  When the offerer  Has allowed the offeree o A certain period to accept,  

The offer may be withdrawn o At any time before acceptance By communicating such withdrawal,  Except when the option  Is founded upon a consideration,  As something paid or promised.

Art. 1479.  A promise to buy and sell  A determinate thing o For a price certain  Is reciprocally demandable.  

An accepted unilateral promise to buy or to sell A determinate thing o For a price certain  Is binding upon the promissor  If the promise is supported  By a consideration  Distinct from the price.

Art. 1482. Whenever earnest money is given in a contract of sale,  It shall be considered o As part of the price and o As proof of the perfection of the contract. 2. PERFECTION Art. 1315. Contracts are perfected by mere consent, and  From that moment  The parties are bound o Not only to the fulfillment of what has been expressly stipulated o But also to all the consequences  Which, according to their nature,  May be in keeping with  Good faith, usage and law. 3. PERFORMANCE/PAYMENT/FULFILLMENT SECTION 1. - Payment or Performance Art. 1232. Payment means  Not only the delivery of money  But also the performance, o In any other manner,  Of an obligation. 4. CONSUMMATION

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E. ESSENTIAL ELEMENTS OF CONTRACTS – ART. 1318 1. CONSENT OF THE CONTRACTING PARTIES ARTS. 1319-46, 37-42, 739, 1476 (4), 1490-91, 1533 (5), 1646, 1782, 1409 (7), 5 ARTS. 87, 124, 234 FC RA 6809 ART. XII, SECS. 7 & 8 CONSTITUTION COGNITION THEORY MANIFESTATION THEORY 2. OBJECT CERTAIN, WHICH IS THE SUBJECT MATTER OF THE CONTRACT ARTS. 1347-49, 1311, 1178 3. CAUSE OF THE OBLIGATION – ARTS. 1350-55

Does not bind the offerer  Except from the time  It came to the offerer’s knowledge.  The contract, in such a case,  Is presumed to have been entered into  In the place where the offer was made.

Art. 1320. An acceptance may be  Express or  Implied. Art. 1321. The person making the offer  May fix the o Time, o Place, and o Manner  Of acceptance,  All of which o Must be complied with.

4. DELIVERY 5. DUE OBSERVANCE OF PRESCRIBED FORMALITIES

Art. 1322. An offer made through an agent  Is accepted o From the time acceptance o Is communicated to the offerer.

CHAPTER 2 - ESSENTIAL REQUISITES OF CONTRACTS GENERAL PROVISIONS *Art. 1318. There is no contract  Unless the following requisites concur: (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. 1. CONSENT OF THE CONTRACTING PARTIES ARTS. 1319-46, 37-42, 739, 1476 (4), 1490-91, 1533 (5), 1646, 1782, 1409 (7), 5 ARTS. 87, 124, 234 FC RA 6809 ART. XII, SECS. 7 & 8 CONSTITUTION COGNITION THEORY MANIFESTATION THEORY

SECTION 1. - Consent Art. 1319. Consent is manifested by  The meeting of the offer and  The acceptance upon o The thing and o The cause  Which are to constitute the contract.  

The offer must be certain and The acceptance absolute.



A qualified acceptance o Constitutes a counter-offer.



Acceptance made by letter or telegram

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Art. 1323. An offer becomes ineffective upon the  Death,  Civil interdiction,  Insanity , or  Insolvency o Of either party  Before acceptance is conveyed. Art. 1324.  When the offerer  Has allowed the offeree o A certain period to accept,  The offer may be withdrawn  At any time before acceptance  By communicating such withdrawal, o Except when the option  Is founded upon a consideration,  As something paid or promised. Art. 1325.  Business advertisements o Of things for sale  Are not definite offers, o But mere invitations to make an offer.  Unless it appears otherwise Art. 1326. Advertisements for bidders  Are simply invitations to make proposals, and 

The advertiser is not bound o To accept the highest or lowest bidder,  Unless the contrary appears.

*Art. 1327. The following cannot give consent to a contract: (1) Unemancipated minors; (2) Insane or Demented persons, and (3) Deaf-mutes Who do not know how to write. Art. 1329. The incapacity declared in Article 1327  Is subject to the modifications o Determined by law, and

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Is understood to be o Without prejudice to o Special disqualifications established in the laws.

*Art. 1328.  Contracts entered into during a lucid interval o Are valid.  Contracts agreed to in a state of drunkenness or during a hypnotic spell o Are voidable. *Art. 1330.  A contract where consent  Is given through o Mistake, o Violence, o Intimidation, o Undue influence, or o Fraud  Is voidable. Art. 1331. In order that mistake may invalidate consent,  It should refer o To the substance of the thing  Which is the object of the contract, or o To those conditions  Which have principally moved one or both parties  To enter into the contract. 

Mistake as to the identity or qualifications of one of the parties o Will vitiate consent o Only when such identity or qualifications o Have been the principal cause of the contract.



A simple mistake of account o Shall give rise to its correction.

Art. 1332.  When one of the parties is unable to read, or  If the contract is in a language not understood by him, and o Mistake or fraud is alleged,  The person enforcing the contract  Must show that the terms thereof  Have been fully explained to the former. Art. 1333. There is no mistake  If the party alleging it  Knew the doubt, contingency or risk o Affecting the object of the contract. Art. 1334. Mutual error  As to the legal effect of an agreement  When the real purpose of the parties is frustrated, o May vitiate consent. Art. 1335.  There is violence o When in order to wrest consent, o Serious or irresistible force is employed. 

There is intimidation o When one of the contracting parties o Is compelled by o A reasonable and well-grounded fear o Of an imminent and grave evil  Upon his person or property, or

Upon the person or property of his spouse, descendants or ascendants, To give his consent. 

 

To determine the degree of intimidation, o The age, sex and condition of the person o Shall be borne in mind.



A threat to enforce one's claim o Through competent authority, o If the claim is just or legal,  Does not vitiate consent.

Art. 1336. Violence or intimidation  Shall annul the obligation,  Although it may have been employed o By a third person o Who did not take part in the contract. Art. 1337. There is undue influence  When a person takes improper advantage of his power o Over the will of another,  Depriving the latter o Of a reasonable freedom of choice.  

The following circumstances Shall be considered: o The confidential, family, spiritual and other relations between the parties, or o The fact that the person alleged to have been unduly influenced  Was suffering from mental weakness, or  Was ignorant or in financial distress.

Art. 1338. There is fraud when,  Through insidious words or machinations o Of one of the contracting parties,  The other is induced  To enter into a contract o Which, without them, o He would not have agreed to. Art. 1339. Failure to disclose facts,  When there is a duty to reveal them, o As when the parties are bound o By confidential relations,  Constitutes fraud. Art. 1340. The usual exaggerations in trade,  When the other party had an opportunity to know the facts, o Are not in themselves fraudulent. Art. 1341. A mere expression of an opinion  Does not signify fraud, o Unless made by an expert and o The other party has relied on the former's special knowledge. Art. 1342. Misrepresentation by a third person  Does not vitiate consent, o Unless such misrepresentation  Has created substantial mistake and  The same is mutual. Art. 1343. Misrepresentation made in good faith

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Is not fraudulent o But may constitute error.

Art. 1344. In order that fraud may make a contract voidable,  It should be serious and  Should not have been employed by both contracting parties. 

Incidental fraud o Only obliges the person employing it o To pay damages.

Art. 1345. Simulation of a contract  May be o Absolute or o Relative. 



Absolute o Takes place when o The parties do not intend o To be bound at all; Relative o When the parties o Conceal their true agreement.

Art. 1346.  An absolutely simulated or fictitious contract  Is void.  A relative simulation, o When it does not prejudice a third person and o Is not intended for any purpose contrary to law, morals, good customs, public order or public policy  Binds the parties  To their real agreement. Art. 1476. In the case of a sale by auction: Where notice has not been given  That a sale by auction is subject to a right to bid o On behalf of the seller,  It shall not be lawful for the seller o To bid himself or o To employ or induce any person  To bid at such sale  On his behalf or for the auctioneer, o To employ or induce any person  To bid at such sale  On behalf of the seller or  Knowingly to take any bid from the seller or any person employed by him. 

Any sale contravening this rule o May be treated as fraudulent o By the buyer.

Art. 1490. The husband and the wife cannot sell property to each other,  Except: (1) When a separation of property  Was agreed upon in the marriage settlements; or (2) When there has been a judicial separation of property under Article 191. *Art. 1491. The following persons cannot acquire by purchase,

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 

Even at a public or judicial auction, Either in person or through the mediation of another: 7. The guardian,  The property of  The person or persons who may be under his guardianship; 8. Agents,  The property  Whose administration or sale may have been entrusted to them, o Unless the consent of the principal has been given; 9. Executors and administrators,  The property of the estate under administration; 10. Public officers and employees,  The property o Of the State or o Of any subdivision thereof, or o Of any government-owned or controlled corporation, or institution,  The administration of which has been intrusted to them;  This provision shall apply to judges and government experts  Who, in any manner whatsoever, take part in the sale; 11. Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice,  The property and rights o In litigation or levied upon an execution before the court o Within whose jurisdiction or territory they exercise their respective functions; o This prohibition includes the act of acquiring by assignment and o Shall apply to lawyers,  With respect to the property and rights  Which may be the object of any litigation  In which they may take part  By virtue of their profession. 12. Any others specially disqualified by law.

*Art. 1646. The persons disqualified to buy  Referred to in Articles 1490 and 1491, o Are also disqualified o To become lessees of the things mentioned therein. Art. 1782. Persons who are prohibited from giving each other any donation or advantage  Cannot enter into universal partnership. Art. 1409. The following contracts are inexistent and void from the beginning: (7) Those expressly prohibited or declared void by law. FC Art. 87. Every donation or grant of gratuitous advantage, Direct or indirect, Between the spouses during the marriage Shall be void, o Except moderate gifts o Which the spouses may give each other o On the occasion of any family rejoicing.

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The prohibition shall also apply To persons living together as husband and wife Without a valid marriage.

FC Art. 124. The administration and enjoyment of the conjugal partnership Shall belong to both spouses jointly. -

In case of disagreement, The husband's decision shall prevail, o Subject to recourse to the court o By the wife for proper remedy, o Which must be availed of within five years o From the date of the contract implementing such decision.

-

2. OBJECT CERTAIN, WHICH IS THE SUBJECT MATTER OF THE CONTRACT – ARTS. 1347-49, 1311, 1178 SECTION 2. - Object of Contracts Art. 1347. All things which are not outside the commerce of men, Including future things, o May be the object of a contract.

FC Art. 234. Emancipation takes place By the attainment of majority. o Unless otherwise provided, o Majority commences at the age of 21 years. (Now 18, RA 6809) -

Emancipation also takes place: (1) By the marriage of the minor; or (2) By the recording in the Civil Register of an agreement in a public instrument executed by the parent exercising parental authority and the minor at least eighteen years of age. Such emancipation shall be irrevocable.

RA 6809 December 13, 1989 AN ACT LOWERING THE AGE OF MAJORITY FROM 21 TO 18 YEARS, AMENDING FOR THE PURPOSE EXECUTIVE ORDER NUMBERED TWO HUNDRED NINE, AND FOR OTHER PURPOSES

"Art. 234. Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commences at the age of 18 years." Section 4. Upon the effectivity of this Act, existing wills, bequests, donations, grants, insurance policies and similar instruments containing references and provisions favorable to minors will not retroact to their prejudice. Approved: December 13, 1989 ARTICLE XII - NATIONAL ECONOMY AND PATRIMONY Section 7. Save in cases of hereditary succession, o No private lands shall be transferred or conveyed  Except to individuals, corporations, or associations  Qualified to acquire or hold lands of the public domain. Section 8. Notwithstanding the provisions of Section 7 of this Article, A natural-born citizen of the Philippines

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All rights which are not intransmissible o May also be the object of contracts.

-

No contract may be entered into Upon future inheritance o Except in cases expressly authorized by law.

-

All services Which are not contrary to law, morals, good customs, public order or public policy o May likewise be the object of a contract.

Art. 1348. Impossible things or services Cannot be the object of contracts. Art. 1349. The object of every contract Must be determinate As to its kind. -

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:: Section 1. Article 234 of Executive Order No. 209, the Family Code of the Philippines, is hereby amended to read as follows:

Who has lost his Philippine citizenship o May be a transferee of private lands, o Subject to limitations provided by law.

The fact that the quantity is not determinate Shall not be an obstacle To the existence of the contract, o Provided it is possible to determine the same, o Without the need of a new contract between the parties.

*Art. 1311. Contracts take effect only between  The parties,  Their assigns and heirs, o Except in case where o The rights and obligations arising from the contract o Are not transmissible  By their nature, or  By stipulation or  By provision of law. o The heir is not liable  Beyond the value of the property  He received from the decedent.  

If a contract should contain Some stipulation in favor of a third person, o He may demand its fulfillment  Provided he communicated his acceptance  To the obligor  Before its revocation.



A mere incidental benefit or interest of a person is not sufficient. o The contracting parties o Must have clearly and deliberately conferred o A favor upon a third person.

Art. 1178. Subject to the laws,

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All rights acquired in virtue of an obligation Are transmissible, If there has been no stipulation to the contrary.

3. CAUSE OF THE OBLIGATION – ARTS. 1350-55 *Art. 1350.  In onerous contracts o The cause o Is understood to be, o For each contracting party,  The prestation or  Promise of  A thing or service o By the other; 

In remuneratory ones, o The service or benefit o Which is remunerated; and



In contracts of pure beneficence, o The mere liberality of the benefactor.

Art. 1351. The particular motives of the parties In entering into a contract Are different from the cause thereof. Art. 1352.  Contracts without cause, or  With unlawful cause, o Produce no effect whatever.  -

The cause is unlawful If it is contrary to law, morals, good customs, public order or public policy.

*Art. 1353. The statement of a false cause in contracts Shall render them void, o If it should not be proved o That they were founded upon another cause o Which is true and lawful. Art. 1354. Although the cause is not stated in the contract, It is presumed that it exists and is lawful, o Unless the debtor proves the contrary. Art. 1355. Except in cases specified by law, Lesion or inadequacy of cause o Shall not invalidate a contract,  Unless there has been fraud, mistake or undue influence. 4. DELIVERY 5. DUE OBSERVANCE OF PRESCRIBED FORMALITIES

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5) All other contracts  Where the amount involved exceeds P500  Must appear in writing,  Even a private one.

FORM OF CONTRACTS – ARTS. 1356-58

1. ANY FORM – ORAL 2. SPECIAL FORM i. ii. iii.

VALIDITY – ARTS 748, 749, 1744, 1773, 1874, 1956, 2134, ACT 1147 SEC. 22 ENFORCEABILITY – ARTS. 1403, 1878 GREATER EFFICACY OR CONVENIENCE – ARTS. 1358

FORM OF CONTRACTS *Art. 1356.  Contracts shall be obligatory, o In whatever form they may have been entered into,  Provided all the essential requisites for their validity are present. 



However, when the law requires o That a contract be in some form o In order  That it may be valid or enforceable, or  That a contract be proved in a certain way, o That requirement is absolute and indispensable. In such cases, o The right of the parties stated in the following article o Cannot be exercised.

*Art. 1357.  If the law requires a o Document or o Other special form,  As in the acts and contracts enumerated in the following article,  The contracting parties may compel each other to observe that form, o Once the contract has been perfected. 

This right may be exercised o Simultaneously with the action upon the contract.



1. ANY FORM – ORAL 2. SPECIAL FORM i.

Sales of real property or of an interest therein a governed by Articles 1403, No. 2, and 1405; 2) The cession, repudiation or renunciation  Of hereditary rights or  Of those of the conjugal partnership of gains; 3) The power to administer property, or any other power  Which has for its object  An act i. Appearing or which should appear in a public document, or ii. Should prejudice a third person; 4) The cession of actions or rights  Proceeding from an act  Appearing in a public document. 

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VALIDITY – ARTS 748, 749, 1744, 1773, 1874, 1956, 2134, ACT 1147 SEC. 22

Art. 748. The donation of a movable  May be made orally or in writing. 

An oral donation o Requires the simultaneous delivery  of the thing or  of the document o Representing the right donated.



If the value of the personal property donated o Exceeds five thousand pesos, The donation and the acceptance o Shall be made in writing,  Otherwise, the donation shall be void.



Art. 749. In order that the donation of an immovable  May be valid, o It must be made in a public document, o Specifying therein  The property donated and  The value of the charges which the donee must satisfy. 



 *Art. 1358. The following must appear in a public document: 1) Acts and contracts  Which have for their object  The creation, transmission, modification or extinguishment i. Of real rights over immovable property;

But sales of goods, chattels or things in action  Are governed by Articles, 1403, No. 2 and 1405.

The acceptance may be made o In the same deed of donation or o In a separate public document, But it shall not take effect o Unless it is done o During the lifetime of the donor. If the acceptance is made in a separate instrument, o The donor shall be notified thereof o In an authentic form, and o This step shall be noted in both instruments.

Art. 1744. A stipulation between the common carrier and the shipper or owner  Limiting the liability of the common carrier  For the loss, destruction, or deterioration of the goods  To a degree less than extraordinary diligence o Shall be valid,  Provided it be: 1. In writing,  Signed by the shipper or owner; 2. Supported by a valuable consideration  Other than the service rendered by the common carrier; and 3. Reasonable, just and not contrary to public policy. Art. 1773. A contract of partnership is void,  Whenever immovable property is contributed thereto,  If an inventory of said property is not

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Made, Signed by the parties, and Attached to the public instrument.

Art. 1874. When a sale of a piece of land or any interest therein  Is through an agent, o The authority of the agent o Shall be in writing;  Otherwise, the sale shall be void. Art. 1956. No interest shall be due  Unless it has been expressly stipulated in writing. Art. 2134. The amount of the principal and of the interest  Shall be specified in writing; o Otherwise , the contract of antichresis o Shall be void.

e.

f. ii.

o Some of them, of such things in action or - Pay at the time o Some part of the purchase money;  But when a sale is made by auction and - Entry is made by the auctioneer in his sales book, at the time of the sale, - Of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made,  it is a sufficient memorandum; An agreement of the leasing  For a longer period than 1 year, or  For the sale of real property or of an interest therein; A representation  As to the credit of a third person.

ENFORCEABILITY – ARTS. 1403, 1878 3. CHAPTER 8 - UNENFORCEABLE CONTRACTS *Art. 1403. The following contracts are unenforceable, unless they are ratified: 1.

Those entered into in the name of another person - By one who has been given no authority or legal representation, or - Who has acted beyond his powers;

2.

Those that do not comply with the Statute of Frauds as set forth in this number. - In the following cases - An agreement hereafter made - Shall be unenforceable by action,  Unless (1) The same, or (2) Some note or (3) Memorandum, thereof,  Be in writing, and  Subscribed by the party charged, or by his agent; - Evidence, therefore, of the agreement  Cannot be received  Without the writing, or a secondary evidence of its contents: a. An agreement  That by its terms  Is not to be performed  Within a year from the making thereof; b. A special promise  To answer for the debt, default, or miscarriage  Of another; c. An agreement made  In consideration of marriage,  Other than a mutual promise to marry; d. An agreement for the sale  Of goods, chattels or things in action,  At a price not less than P500, - Unless the buyer - Accepts and receives o Part of such goods and chattels, or o The evidences, or

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Those where both parties - Are incapable of giving consent - To a contract.

*Art. 1878. Special powers of attorney Are necessary in the following cases: 1. To make such payments As are not usually considered as acts of administration; 2. To effect novations Which put an end to obligations Already in existence at the time the agency was constituted; 3. To compromise, To submit questions to arbitration, To renounce the right to appeal from a judgment, To waive objections to the venue of an action or To abandon a prescription already acquired; 4. To waive any obligation Gratuitously; 5. To enter into any contract By which the ownership of an immovable Is transmitted or acquired Either gratuitously or for a valuable consideration; 6. To make gifts, Except customary ones For charity or Those made to employees in the business managed by the agent; 7. To loan or borrow money, Unless the latter act Be urgent and indispensable For the preservation of the things which are under administration; 8. To lease any real property To another person For more than 1 year; 9. To bind the principal To render some service Without compensation; 10. To bind the principal In a contract of partnership; 11. To obligate the principal As a guarantor or surety; 12. To create or convey real rights Over immovable property; 13. To accept or repudiate an inheritance;

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LAW REVIEW 2 14. To ratify or recognize obligations Contracted before the agency; 15. Any other act of strict dominion.

iii.

GREATER EFFICACY OR CONVENIENCE – ARTS. 1358 * Art. 1358. The following must appear in a public document: 1) Acts and contracts  Which have for their object  The creation, transmission, modification or extinguishment  Of real rights over immovable property;  Sales of real property or of an interest therein a governed by Articles 1403, No. 2, and 1405; 2) The cession, repudiation or renunciation  Of hereditary rights or  Of those of the conjugal partnership of gains; 3) The power to administer property, or any other power  Which has for its object  An act i. Appearing or which should appear in a public document, or ii. Should prejudice a third person; 4) The cession of actions or rights  Proceeding from an act  Appearing in a public document. 5) All other contracts  Where the amount involved  Exceeds P500  Must appear in writing,  Even a private one. i. But sales of goods, chattels or things in action ii. Are governed by Articles, 1403, No. 2 and 1405.

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LAW REVIEW 2 G. REFORMATION OF CONTRACTS ARTS. 1359 – 69 CHAPTER 4 - REFORMATION OF INSTRUMENTS Art. 1359. There having been a meeting of the minds Of the parties to a contract When their true intention is not expressed in the instrument o Purporting to embody the agreement, By reason of o Mistake, fraud, inequitable conduct or accident,  One of the parties may ask for the reformation of the instrument  To the end that such true intention may be expressed. -

If mistake, fraud, inequitable conduct, or accident Has prevented a meeting of the minds of the parties, The proper remedy o Is not reformation of the instrument o But annulment of the contract.

Art. 1360. The principles of the general law On the reformation of instruments o Are hereby adopted Insofar as they are not in conflict o With the provisions of this Code.

Art. 1366. There shall be no reformation in the following cases: 1. Simple donations inter vivos wherein no condition is imposed; 2. Wills; 3. When the real agreement is void. Art. 1367. When one of the parties has brought an action To enforce the instrument, He cannot subsequently ask for its reformation. Art. 1368. Reformation may be ordered At the instance of either party or his successors in interest, If the mistake was mutual; -

Otherwise, upon petition of the injured party, or his heirs and assigns.

Art. 1369. The procedure for the reformation of instrument Shall be governed by rules of court To be promulgated by the Supreme Court.

Art. 1361. When a mutual mistake of the parties Causes the failure of the instrument To disclose their real agreement, o Said instrument may be reformed. Art. 1362. If one party was mistaken and The other acted fraudulently or inequitably In such a way that the instrument Does not show their true intention, o The former may ask o For the reformation of the instrument. Art. 1363. When one party was mistaken and The other knew or believed That the instrument did not state their real agreement, But concealed that fact from the former, o The instrument may be reformed. Art. 1364. When through the Ignorance, Lack of skill, Negligence or Bad faith o On the part of the person drafting the instrument or o Of the clerk or typist, The instrument does not express the true intention of the parties, The courts may order that the instrument be reformed. Art. 1365. If two parties agree upon the mortgage or pledge of real or personal property, But the instrument states That the property is sold o Absolutely or with a right of repurchase, Reformation of the instrument is proper.

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LAW REVIEW 2  H. INTERPRETATION OF CONTRACTS ARTS. 1370-79 Art. 1370. If the terms of a contract Are clear and leave no doubt upon the intention of the contracting parties, o The literal meaning of its stipulations o Shall control. -

If the words appear to be contrary To the evident intention of the parties, o The evident intention o Shall prevail over the words.

Art. 1371. In order to judge the intention of the contracting parties, Their contemporaneous and subsequent acts Shall be principally considered.

Shall prevail.



If the contract is onerous, o The doubt shall be settled  In favor of the greatest reciprocity of interests.



If the doubts are cast upon the principal object of the contract o In such a way that it cannot be known o What may have been the intention or will of the parties,  The contract shall be null and void.

Art. 1379. The principles of interpretation  Stated in Rule 123 of the Rules of Court o Shall likewise be observed in the construction of contracts.

Art. 1372. However general the terms of a contract may be, They shall not be understood to comprehend o Things  That are distinct and o Cases  That are different from those  Upon which the parties intended to agree. Art. 1373. If some stipulation of any contract Should admit of several meanings, o It shall be understood as o Bearing that import o Which is most adequate o To render it effectual. Art. 1374. The various stipulations of a contract Shall be interpreted together, o Attributing to the doubtful ones o That sense which may result o From all of them taken jointly. Art. 1375. Words which may have different significations Shall be understood o In that which is most in keeping with o The nature and object of the contract. Art. 1376. The usage or custom of the place Shall be borne in mind o In the interpretation of the ambiguities of a contract, and Shall fill the omission of stipulations o Which are ordinarily established. Art. 1377. The interpretation of obscure words or stipulations in a contract Shall not favor the party Who caused the obscurity. *Art. 1378.  When it is absolutely impossible to settle doubts o By the rules established in the preceding articles, and  The doubts refer to o Incidental circumstances of a gratuitous contract,  The least transmission of rights and interests

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o o

KINDS OF CONTRACTS AS TO VALIDITY

Has no other legal means To obtain reparation for the same.

1. VALID AND BINDING 2. VALID BUT DEFECTIVE I. RESCISSIBLE CONTRACTS – ARTS. 1380-89, 1191 II. VOIDABLE CONTRACTS – ARTS. 1390-1402, 1327-28, 1330 III. UNENFORCEABLE CONTRACTS – ARTS. 140308, 1317, 1878 3. VOID OR INEXISTENT – ARTS. 1409-22, 1318, 1353, 1378, 1491, 1898

Art. 1384. Rescission shall be  Only to the extent  Necessary to cover the damages caused. Art. 1385. Rescission creates the obligation  To return the things o Which were the object of the contract,  Together with o Their fruits, and o The price o With its interest;

1. VALID AND BINDING



Consequently, it can be carried out only o When he who demands rescission o Can return o Whatever he may be obliged to restore.



Neither shall rescission take place o When the things  Which are the object of the contract o Are legally in the possession of third persons o Who did not act in bad faith.  In this case, indemnity for damages  May be demanded from the person causing the loss.

2. VALID BUT DEFECTIVE I. RESCISSIBLE CONTRACTS – ARTS. 1380-89, 1191 RESCISSIBLE CONTRACTS Art. 1380. Contracts validly agreed upon  May be rescinded  In the cases established by law. Art. 1381. The following contracts are RESCISSIBLE: 1.

Those which are entered into by guardians  Whenever the wards whom they represent  Suffer lesion  By more than 1/4 of the value of the things  Which are the object thereof

2.

Those agreed upon in representation of absentees,  If the absentees suffer the lesion  By more than 1/4 of the value of the things  Which are the object thereof

3.

Those undertaken in fraud of creditors  When the creditors cannot in any other manner  Collect the claims due them;

4.

Those which refer to things under litigation  If they have been entered into by the defendant  Without the knowledge and approval  Of the litigants or of competent judicial authority;

5.

All other contracts  Specially declared by law  To be subject to rescission.

Art. 1382. Payments made in a state of insolvency  For obligations  To whose fulfillment  The debtor could not be compelled  At the time they were effected, o Are also rescissible. Art. 1383. The action for rescission is subsidiary;  It cannot be instituted  Except when the party suffering damage

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Art. 1386. Rescission referred to in Nos. 1 and 2 of Article 1381  Shall not take place o With respect to contracts o Approved by the courts. Art. 1387.  All contracts by virtue of which the debtor alienates property by gratuitous title  Are presumed to have been entered into  In fraud of creditors,  When the donor did not reserve sufficient property  To pay all debts contracted before the donation. 

Alienations by onerous title o Are also presumed fraudulent o When made by persons  Against whom some judgment has been issued.



The decision or attachment o Need not refer to the property alienated, and o Need not have been obtained by the party seeking the rescission.



In addition to these presumptions, o The design to defraud creditors o May be proved o In any other manner recognized by the law of evidence.

Art. 1388. Whoever acquires in bad faith  The things alienated  In fraud of creditors, o Shall indemnify the creditors o For damages suffered by them o On account of the alienation,  Whenever, due to any cause, it should be impossible for him to return them.

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Art. 1389. The action to claim rescission  Must be commenced within 4 years.   

For persons under guardianship and for absentees, The period of four years Shall not begin o Until the termination of incapacity of the persons under guardianship, or o Until the domicile of the absentee is known.

*Art. 1191. The power to rescind obligations  Is implied in reciprocal ones,  In case one of the obligors o Should not comply o With what is incumbent upon him.  

The injured party May choose between o The fulfillment and o The rescission of the obligation,  With the payment of damages in either case.



He may also seek rescission, o Even after he has chosen fulfillment,  If the latter should become impossible.



The court shall decree the rescission claimed, o Unless there be just cause o Authorizing the fixing of a period.

 

(2) Those where the consent is vitiated by Mistake, Violence, Intimidation, Undue influence or Fraud.

If there are two or more alienations, o The first acquirer shall be liable first, and o So on successively.



These contracts are binding, o Unless they are annulled o By a proper action in court.



They are susceptible of ratification.

Art. 1391. The action for annulment Shall be brought within 4 years. -

Art. 1392. Ratification extinguishes The action to annul A voidable contract. Art. 1393. Ratification may be effected Expressly or tacitly. 

This is understood to be without prejudice to The rights of third persons o Who have acquired the thing, o In accordance with Articles 1385 and 1388 and o The Mortgage Law.

Art. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.

This period shall begin:  In cases of intimidation, violence or undue influence,  From the time the defect of the consent ceases.  In case of mistake or fraud,  From the time of the discovery of the same.  Contracts entered into by minors or other incapacitated persons,  From the time the guardianship ceases.

It is understood that there is a tacit ratification if, o With knowledge of the reason which renders the contract voidable and o Such reason having ceased,  The person who has a right to invoke it  Should execute an act  Which necessarily implies an intention to waive his right.

Art. 1394. Ratification may be effected By the guardian of the incapacitated person. Art. 1395. Ratification does not require The conformity of the contracting party Who has no right to bring the action for annulment.

In this case, indemnity for damages may be demanded from the person causing the loss.

Art. 1396. Ratification cleanses the contract From all its defects From the moment it was constituted.

Art. 1388. Whoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter for damages suffered by them on account of the alienation, whenever, due to any cause, it should be impossible for him to return them.

Art. 1397. The action for the annulment of contracts May be instituted By all who are thereby obliged o Principally or subsidiarily.

If there are two or more alienations, the first acquirer shall be liable first, and so on successively.



II. VOIDABLE CONTRACTS – ARTS. 1390-1402, 1327-28, 1330 Art. 1390. The following contracts are VOIDABLE OR ANNULLABLE,  Even though there may have been no damage to the contracting parties: (1) Those where one of the parties Is incapable of giving consent To a contract;

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However, persons who are capable Cannot allege the incapacity of those with whom they contracted; Nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake o Base their action o Upon these flaws of the contract.

Art. 1398. An obligation having been annulled, The contracting parties Shall restore to each other o The things

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LAW REVIEW 2 Which have been the subject matter of the contract,  With their fruits, and The price with its interest,  Except in cases provided by law. 

o -

In obligations to render service, o The value thereof o Shall be the basis for damages.

Art. 1399. When the defect of the contract consists in  The incapacity of one of the parties, o The incapacitated person o Is not obliged to make any restitution  Except insofar as he has been benefited  By the thing or price received by him. Art. 1400.  Whenever the person o Obliged by the decree of annulment o To return the thing  Cannot do so o Because it has been lost through his fault,  He shall return o The fruits received and o The value of the thing  At the time of the loss,  With interest from the same date. Art. 1401. The action for annulment of contracts  Shall be extinguished o When the thing which is the object thereof o Is lost  Through the fraud or fault of the person  Who has a right to institute the proceedings.  



If the right of action Is based upon o The incapacity of any one of the contracting parties, The loss of the thing o Shall not be an obstacle  To the success of the action, o Unless said loss took place through the fraud or fault of the plaintiff.

Art. 1402. As long as one of the contracting parties  Does not restore  What he is bound to return o In virtue of the decree of annulment,  The other cannot be compelled o To comply with what is incumbent upon him. *Art. 1327. The following cannot give consent to a contract: (1) Unemancipated minors; (2) Insane or Demented persons, and (3) Deaf-mutes who do not know how to write. *Art. 1328.  Contracts entered into during a lucid interval o Are valid.  Contracts agreed to in a state of drunkenness or during a hypnotic spell o Are voidable.

*Art. 1330.

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 

A contract where consent Is given through o Mistake, o Violence, o Intimidation, o Undue influence, or o Fraud  Is voidable.

III. UNENFORCEABLE CONTRACTS – ARTS. 140308, 1317, 1878 CHAPTER 8 - UNENFORCEABLE CONTRACTS *Art. 1403. The following contracts are unenforceable, unless they are ratified: 4.

Those entered into in the name of another person - By one who has been given no authority or legal representation, or - Who has acted beyond his powers;

5.

Those that do not comply with the Statute of Frauds as set forth in this number. - In the following cases - An agreement hereafter made - Shall be unenforceable by action,  Unless (1) The same, or (2) Some note or (3) Memorandum, thereof,  Be in writing, and  Subscribed by the party charged, or by his agent; - Evidence, therefore, of the agreement  Cannot be received  Without the writing, or a secondary evidence of its contents: g. An agreement  That by its terms  Is not to be performed  Within a year from the making thereof; h. A special promise  To answer for the debt, default, or miscarriage  Of another; i. An agreement made  In consideration of marriage,  Other than a mutual promise to marry; j. An agreement for the sale  Of goods, chattels or things in action,  At a price not less than P500, - Unless the buyer - Accepts and receives o Part of such goods and chattels, or o The evidences, or o Some of them, of such things in action or - Pay at the time o Some part of the purchase money;  But when a sale is made by auction and - Entry is made by the auctioneer in his sales book, at the time of the sale, - Of the amount and kind of property sold, terms of sale, price, names of the purchasers

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l. 6.

and person on whose account the sale is made,  it is a sufficient memorandum; An agreement of the leasing  For a longer period than 1 year, or  For the sale of real property or of an interest therein; A representation  As to the credit of a third person.

*Art. 1317. No one may contract in the name of another  Without being authorized by the latter, or  Unless he has by law a right to represent him. 

Those where both parties - Are incapable of giving consent - To a contract.

Art. 1404. Unauthorized contracts  Are governed by Article 1317 and  The principles of agency in Title X of this Book. Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party

Art. 1405.  Contracts infringing the Statute of Frauds, o Referred to in No. 2 of Article 1403,  Are ratified  By the failure to object  To the presentation of oral evidence to prove the same, or  By the acceptance of benefit under them.

*Art. 1878. Special powers of attorney

3. VOID OR INEXISTENT ARTS. 1409-22, 1318, 1353, 1378, 1491, 1898 CHAPTER 9 - VOID AND INEXISTENT CONTRACTS Art. 1409. The following contracts are  INEXISTENT AND VOID from the beginning: 1. 2.

Art. 1406.  When a contract is enforceable o Under the Statute of Frauds, and  A public document is necessary o For its registration in the Registry of Deeds,  The parties may avail themselves of o The right under Article 1357. Art. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.

Art. 1407.  In a contract where both parties are incapable of giving consent, o Express or implied  Ratification by the parent, or guardian, as the case may be,  Of one of the contracting parties  Shall give the contract the same effect  As if only one of them were incapacitated. 

If ratification is made by the parents or guardians, as the case may be, o Of both contracting parties,  The contract shall be validated from the inception.

Art. 1408. Unenforceable contracts  Cannot be assailed by third persons.

Those whose cause, object or purpose Is contrary to law, morals, good customs, public order or public policy; Those which are absolutely simulated or fictitious;

3.

Those whose cause or object Did not exist at the time of the transaction;

4.

Those whose object Is outside the commerce of men;

5.

Those which contemplate an impossible service;

6.

Those where the intention of the parties Relative to the principal object of the contract Cannot be ascertained;

7.

Those expressly prohibited or declared Void by law.



These contracts cannot be ratified.



Neither can the right o To set up the defense of illegality o Be waived.

Art. 1410. The action or defense For the declaration of the inexistence of a contract Does not prescribe. Art. 1411. When the nullity proceeds from The illegality of the cause or object of the contract, and The act constitutes a criminal offense, o Both parties being in pari delicto,  They shall have no action against each other, and  Both shall be prosecuted. -

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A contract entered into in the name of another o By one  Who has no authority or legal representation, or  Who has acted beyond his powers, o Shall be unenforceable,  Unless it is ratified,  Expressly or impliedly,  By the person  On whose behalf it has been executed,  Before it is revoked by the other contracting party.

Moreover, the provisions of the Penal Code

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Relative to the disposal of effects or instruments of a crime o Shall be applicable to the things or the price of the contract. This rule shall be applicable When only one of the parties is guilty; o But the innocent one may claim o What he has given, and o Shall not be bound to comply with his promise.

Art. 1412.  If the act o In which the unlawful or forbidden cause consists  Does not constitute a criminal offense, o The following rules shall be observed: 1.

2.

When the fault is on the part of both contracting parties, neither may Recover what he has given by virtue of the contract, or Demand the performance of the other's undertaking;

When only one of the contracting parties is at fault, He cannot i. Recover what he has given by reason of the contract, or ii. Ask for the fulfillment of what has been promised him. The other, who is not at fault, May demand the return of what he has given Without any obligation to comply his promise.

Art. 1413. Interest paid  In excess of the interest allowed by the usury laws o May be recovered by the debtor, o With interest thereon  From the date of the payment. Art. 1414. When money is paid or property delivered for an illegal purpose,  The contract may be repudiated  By one of the parties o Before the purpose has been accomplished, or o Before any damage has been caused to a third person. 

In such case, the courts may, if the public interest will thus be subserved, o Allow the party repudiating the contract o To recover the money or property.



Recover what he has paid or delivered.

Art. 1417. When the price of any article or commodity is determined  By statute, or  By authority of law, o Any person paying any amount o In excess of the maximum price allowed  May recover such excess. Art. 1418.  When the law fixes or authorizes the fixing of the maximum number of hours of labor and  A contract is entered into o Whereby a laborer undertakes to work o Longer than the maximum thus fixed,  He may demand additional compensation  For service rendered beyond the time limit. Art. 1419. When the law sets, or authorizes  The setting of a minimum wage for laborers, and  A contract is agreed upon o By which a laborer accepts a lower wage,  He shall be entitled to recover the deficiency. Art. 1420. In case of a divisible contract,  If the illegal terms can be separated  From the legal ones, o The legal terms may be enforced. Art. 1421. The defense of illegality of contract  Is not available to third persons o Whose interests are not directly affected. Art. 1422. A contract which is the direct result  Of a previous illegal contract, o Is also void and inexistent. *Art. 1318. There is no contract  Unless the following requisites concur: (4) Consent  Of the contracting parties (5) Object  Certain  Which is the subject matter of the contract (6) Cause  Of the obligation  Which is established.

Art. 1415. Where one of the parties to an illegal contract  Is incapable of giving consent,  The courts may, if the interest of justice so demands, allow o Recovery of money or o Property delivered by the incapacitated person.

*Art. 1353. The statement of a false cause in contracts Shall render them void, o If it should not be proved o That they were founded upon another cause o Which is true and lawful.

Art. 1416. When the agreement is not illegal per se  But is merely prohibited, and  The prohibition by the law o Is designated for the protection of the plaintiff,  He may, if public policy is thereby enhanced,

*Art. 1378.  When it is absolutely impossible to settle doubts o By the rules established in the preceding articles, and  The doubts refer to o Incidental circumstances of a gratuitous contract,

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

The least transmission of rights and interests Shall prevail.

If the contract is onerous, o The doubt shall be settled  In favor of the greatest reciprocity of interests. If the doubts are cast upon the principal object of the contract o In such a way that it cannot be known o What may have been the intention or will of the parties,  The contract shall be null and void.

o



It shall be void  If the party with whom the agent contracted  Is aware of the limits of the powers granted by the principal.

In this case, however, o The agent is liable o If he undertook to secure o The principal's ratification.

*Art. 1491. The following persons cannot acquire by purchase,  Even at a public or judicial auction,  Either in person or through the mediation of another: 1. The guardian,  The property of  The person or persons who may be under his guardianship; 2. Agents,  The property  Whose administration or sale may have been entrusted to them, o Unless the consent of the principal has been given; 3. Executors and administrators,  The property of the estate under administration; 4. Public officers and employees,  The property o Of the State or o Of any subdivision thereof, or o Of any government-owned or controlled corporation, or institution,  The administration of which has been intrusted to them;  This provision shall apply to judges and government experts  Who, in any manner whatsoever, take part in the sale; 5. Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice,  The property and rights o In litigation or levied upon an execution before the court o Within whose jurisdiction or territory they exercise their respective functions; o This prohibition includes the act of acquiring by assignment and o Shall apply to lawyers,  With respect to the property and rights  Which may be the object of any litigation  In which they may take part  By virtue of their profession. 6.

Any others specially disqualified by law.

Art. 1898. If the agent contracts in the name of the principal,  Exceeding the scope of his authority, and  The principal does not ratify the contract,

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LAW REVIEW 2 SPECIAL CONTRACTS A. SALES 1. IN GENERAL 2. ELEMENTS 3. OBLIGATIONS OF SELLER/BUYER 4. REMEDIES 5. EXTINGUISHMENT OF SALE B. BARTER OR EXCHANGE C. LEASE 1. IN GENERAL 2. ELEMENTS 3. OBLIGATIONS OF LESSOR/LESSEE 4. REMEDIES 5. TERMINATION OF LEASE D. LOAN 1. IN GENERAL 2. KINDS OF LOAN i. COMMODATUM ii. MUTUUM 3. NATURE/CHARACTERISTICS 4. SUBJECT MATTER 5. RIGHTS AND OBLIGATIONS OF BAILOR AND BAILEE 6. MODES OF EXTINGUISHMENT E. DEPOSIT – WAREHOUSE RECEIPTS LAW / TRUST RECEIPTS LAW 1. IN GENERAL 2. KINDS OF DEPOSIT i. JUDICIAL ii. EXTRA-JUDICIAL 1. VOLUNTARY 2. NECESSARY 3. NATURE/CHARACTERISTICS 4. SUBJECT MATTER 5. RIGHTS AND OBLIGATIONS OF DEPOSITOR AND DEPOSITARY 6. MODES OF EXTINGUISHMENT F. ALEATORY CONTRACTS – INSURANCE, GAMBLING, LIFE ANNUITY SPECIAL CONTRACTS: ACCESSORY CONTRACTS G. GUARANTY AND SURETYSHIP 1. DEFINITION 2. NATURE/CHARACTERISTICS/EXTENT 3. EFFECTS OF GUARANTY, BETWEEN i. GUARANTOR AND CREDITOR ii. GUARANTOR AND DEBTOR iii. CO-GUARANTORS 4. MODES OF EXTINGUISHMENT H. PLEDGE, MORTGAGE, AND ANTICHRESIS 1. IN GENERAL 2. ESSENTIAL ELEMENTS 3. EFFECTS/RIGHTS AND OBLIGATIONS 4. EXTINGUISHMENT/FORECLOSURES

8. LIMITED PARTNERSHIP C. TRUSTS 1. IN GENERAL 2. KINDS i. EXPRESS ii. IMPLIED

III. EXTRA-CONTRACTUAL OBLIGATIONS A. B. C. D.

LAW QUASI-CONTRACTS DELICTS QUASI-DELICTS

IV. DAMAGES A. IN GENERAL B. KINDS OF DAMAGES 1. ACTUAL OR COMPENSATORY 2. MORAL 3. NOMINAL 4. TEMPERATE OR MODERATE 5. LIQUIDATED 6. EXEMPLARY

SPECIAL CONTRACTS: PREPARATORY CONTRACTS (BUSINESS ASSOCIATIONS AND RELATIONS) A. AGENCY 1. IN GENERAL 2. KINDS, CREATION, AND EXISTENCE 3. OBLIGATIONS OF THE AGENT/PRINCIPAL 4. MODES OF EXTINGUISHMENT OF AGENCY B. PARTNERSHIP 1. IN GENERAL 2. CLASSES OF PARTNERSHIPS AND PARTNERS 3. CREATION AND DURATION 4. OBLIGATIONS OF PARTNERS TO ONE ANOTHER 5. PROPERTY RIGHTS OF A PARTNER 6. RELATIONS AND DEALINGS WITH THIRD PERSONS 7. DISSOLUTION, WINDING UP, AND TERMINATION

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LAW REVIEW 2 SPECIAL CONTRACTS D. SALES 1. 2. 3. 4. 5.

IN GENERAL ELEMENTS OBLIGATIONS OF SELLER/BUYER REMEDIES EXTINGUISHMENT OF SALE

Articles / Laws to Remember: 1458, 1467, 1477 transfer of ownership, 1505, 559 who can transfer xxx, 1504, 1544, 1484 Recto Law, R.A. 6552, 1602, 1606, 1620, 1623, Redemption xxx Articles / Laws to Remember: 1458, 1467, 1477 transfer of ownership, 1505, 559 who can transfer xxx, 1504, 1544, 1484 Recto Law, R.A. 6552, 1602, 1606, 1620, 1623, Redemption xxx

Art. 1458. By the contract of sale  One of the contracting parties obligates himself o To transfer the ownership and o To deliver a determinate thing, and  The other o To pay therefor a price certain in money or its equivalent. 

A contract of sale may be o Absolute or conditional.

Art. 1467.  A contract for the delivery at a certain price of an article o Which the vendor in the ordinary course of his business o Manufactures or procures for the general market, o Whether the same is on hand at the time or not,  Is a contract of sale, 

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But if the goods are to be manufactured o Specially for the customer and upon his special order, and o Not for the general market, It is a contract for a piece of work.

Art. 1475. The contract of sale is perfected  At the moment there is a meeting of minds o Upon the thing which is the object of the contract and o Upon the price. 

From that moment, the parties may reciprocally demand performance, o Subject to the provisions of the law governing the form of contracts.

*Art. 1350.  In onerous contracts o The cause o Is understood to be, o For each contracting party,  The prestation or  Promise of  A thing or service o By the other;

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In remuneratory ones, o The service or benefit o Which is remunerated; and

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In contracts of pure beneficence, o The mere liberality of the benefactor.

Art. 2010. By an aleatory contract,  One of the parties or both  Reciprocally bind themselves o To give or o To do something  In consideration of o What the other shall give or do o Upon the happening of an event  Which is uncertain, or  Which is to occur at an indeterminate time. Art. 1477. The ownership of the thing sold  Shall be transferred to the vendee o Upon the actual or constructive delivery thereof. Art. 559.  The possession of movable property acquired in good faith o Is equivalent to a title. 

Nevertheless, one who o Has lost any movable or o Has been unlawfully deprived thereof  May recover it from the person in possession of the same.

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If the possessor of a movable lost or which the owner has been unlawfully deprived, o Has acquired it in good faith at a public sale,  The owner cannot obtain its return  Without reimbursing the price paid therefor.

Art. 1504. Unless otherwise agreed, the goods remain at the seller's risk  Until the ownership therein is transferred to the buyer, 

But when the ownership therein is transferred to the buyer o The goods are at the buyer's risk o Whether actual delivery has been made or not, o Except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer,  In pursuance of the contract and  The ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, o The goods are at the buyer's risk o From the time of such delivery; (2) Where actual delivery has been delayed through the fault of either the buyer or seller o The goods are at the risk of the party in fault. Art. 1505. Subject to the provisions of this Title, where goods are sold by a person  Who is not the owner thereof, and

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Who does not sell them under authority or with the consent of the owner, o The buyer acquires no better title to the goods than the seller had,  Unless the owner of the goods is by his conduct  Precluded from denying the seller's authority to sell.

 Nothing in this Title, however, shall affect: (1) The provisions of  Any factors' act,  Recording laws, or  Any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof; (2) The validity of any contract of sale  Under statutory power of sale or  Under the order of a court of competent jurisdiction; (3) Purchases made  In a merchant's store, or  In fairs, or markets, o In accordance with the Code of Commerce and special laws. Art. 1537. The vendor is bound to deliver  The thing sold and  Its accessions and accessories o In the condition in which they were o Upon the perfection of the contract. 

All the fruits shall pertain to the vendee o From the day on which the contract was perfected.

Art. 1544. If the same thing should have been sold to different vendees,  The ownership shall be transferred to the person who may have first taken possession thereof in good faith, o If it should be movable property. 

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Should it be immovable property, o The ownership shall belong to the person acquiring it o Who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to o The person who in good faith was first in the possession; and, o In the absence thereof, to the person who presents the oldest title, provided there is good faith.

Art. 1545.  Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party o May refuse to proceed with the contract or o He may waive performance of the condition. 

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If the other party has promised that the condition should happen or be performed, o Such first mentioned party o May also treat the nonperformance of the condition as a breach of warranty. Where the ownership in the thing has not passed,

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The buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale As a condition of the obligation of the buyer to perform his promise to accept and pay for the thing.

Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566,  The vendee may elect between o Withdrawing from the contract and o Demanding a proportionate reduction of the price,  With damages in either case. Art. 1592.  In the sale of immovable property, o Even though it may have been stipulated o That upon failure to pay the price at the time agreed upon o The rescission of the contract shall of right take place,  The vendee may pay, o Even after the expiration of the period, o As long as no demand for rescission of the contract has been made upon him o either judicially or by a notarial act. o After the demand, the court may not grant him a new term. Art. 1570. The preceding articles of this Subsection (SUBSECTION 2. - Warranty Against Hidden Defects of or Encumbrances Upon the Thing Sold)  Shall be applicable to judicial sales, o Except that the judgment debtor shall not be liable for damages. Art. 1484. In a contract of sale of personal property the price of which is payable in installments,  The vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold,  If one has been constituted, should the vendee's failure to pay cover two or more installments. o In this case, he shall have no further action against the purchaser o To recover any unpaid balance of the price. o Any agreement to the contrary shall be void. Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold  At the time and place stipulated in the contract. o

If the time and place should not have been stipulated,  The payment must be made  At the time and place of the delivery of the thing sold.

Art. 1524. The vendor shall not be bound to deliver the thing sold,  If the vendee has not paid him the price, or  If no period for the payment has been fixed in the contract.

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LAW REVIEW 2 Art. 1525. The seller of goods is deemed to be an unpaid seller within the meaning of this Title: (1) When the whole of the price has not been paid or tendered; (2) When a bill of exchange or other negotiable instrument has been received as conditional payment, and  The condition on which it was received  Has been broken by reason of o The dishonor of the instrument, the insolvency of the buyer, or otherwise. 

In Articles 1525 to 1535 the term "seller" includes o An agent of the seller to whom the bill of lading has been indorsed, or o A consignor or agent who has himself paid, or is directly responsible for the price, or o Any other person who is in the position of a seller.

Art. 1526. Subject to the provisions of this Title, notwithstanding  That the ownership in the goods may have passed to the buyer, o The unpaid seller of goods, as such, has: (5) A lien  On the goods or right to retain them  For the price  While he is in possession of them; (6) A right of stopping the goods in transitu  After he has parted with the possession of them  In case of the insolvency of the buyer; (7) A right of resale  As limited by this Title; (8) A right to rescind  The sale as likewise limited by this Title.  

Where the ownership in the goods Has not passed to the buyer, o The unpaid seller has,  In addition to his other remedies o A right of withholding delivery  Similar to and coextensive with  His rights of lien and stoppage in transitu o Where the ownership has passed to the buyer.

Art. 1601. Conventional redemption shall take place  When the vendor reserves the right to repurchase the thing sold,  With the obligation to comply with o The provisions of Article 1616 and o Other stipulations which may have been agreed upon. Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of a sale with right to repurchase  Is unusually inadequate; (2) When the vendor remains in possession  As lessee or otherwise;

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(3) When upon or after the expiration of the right to repurchase  Another instrument extending the period of redemption or granting a new period  Is executed; (4) When the purchaser retains for himself  A part of the purchase price; (5) When the vendor binds himself  To pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that  The real intention of the parties is  That the transaction shall secure o The payment of a debt or o The performance of any other obligation. 

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise o Shall be considered as interest o Which shall be subject to the usury laws.

Art. 1606. The right referred to in Article 1601, in the absence of an express agreement,  Shall last four years  From the date of the contract. o Should there be an agreement, o The period cannot exceed ten years. 

However, the vendor may still exercise the right to repurchase o Within thirty days o From the time final judgment was rendered in a civil action  On the basis that the contract was a true sale with right to repurchase.

Art. 1620.  A co-owner of a thing may exercise the right of redemption o In case the shares of all the other co-owners or of any of them, o Are sold to a third person.  If the price of the alienation is grossly excessive,  The redemptioner shall pay only a reasonable one. 

Should two or more co-owners desire to exercise the right of redemption, o They may only do so o In proportion to the share they may respectively have in the thing owned in common.

Art. 1623.  The right of legal pre-emption or redemption shall not be exercised o Except within thirty days from the notice in writing  By the prospective vendor, or  By the vendor, as the case may be. 

The deed of sale shall not be recorded in the Registry of Property, o Unless accompanied by an affidavit of the vendor o That he has given written notice thereof to all possible redemptioners.

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The right of redemption of co-owners o Excludes that of adjoining owners.

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