Syllabus - Law 101: Obligations and Contracts Course (Tan)

UniversityofthePhilippines CollegeofLaw Law101:Obligationsand Law101:ObligationsandContracts Contracts CourseOutline Prof.MaryRoseS.Tan Semester2,AY2011-2012

Cont Contac act tIInfor nform mati ation: on:

mary maryro rose se.t .tan an@g @gma mail il.c .com om +639178871555

CourseSc Schedule:

Monda ndaysan andF dFridays,6 ,6:30p. p.m. to9: 9:00 p.m p.m. Room200(PadillaRoom)

AttendanceReq AttendanceRequirem uirement: ent: CollegeofLa CollegeofLawrule wrulesonat sonattendanc tendanceshal eshallbestr lbestrictly ictlyapplie applied. d. Studentsmayonlybeabsentforanycauseforamaximumof8 sessions.  Assessment:   (1) Class participation 30% (2) Midterm examination 20% (3) Final Exam 50% Pres Prescr crib ibed edT Tex extb tboo ook: k:

Tole Tolent ntin ino, o,C Civ ivil ilC Cod odeo eof fth the ePh Phil ilip ippi pines nes,V ,Vol ol.I .IV V

INTRODUCTION A. CourseOverview B. CommonLawTraditionandtheCivilLawTradition

 Agabin,P.A.,Mestizo:TheStoryofthePhilipp ineLegalSystem(2011),  Agabin,P.A.,Mestizo:TheStoryofthePhilippineLegalSystem(2011), Chapter7,pp.169-216 PARTONE:OBLIGATIONS A. GeneralProvisions 1. Definition(Article1156,CivilCode) 2. Elements a. ActiveSubject b. PassiveSubject c. ObjectorPrestation d. EfficientCauseorJuridicalTie  ♦

BasedontheCourseOutlineofProf.EduardoLabitag.

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

3. NaturalObligations a. b. c. d.

Definition(Art.1423,CC) Examples(Articles1424to1430) DifferencebetweenNaturalandCivilObligation(Art.1423) Distinguishedfrommoralobligations

Villaroelv.Estrada,71Phil.140(1940) Fisherv.Robb,69Phil101(1939) e. ConversiontoCivilObligation bynovation byratification • •

4. SourcesofObligations(Art.1157) a. Law(Art.1158) b. Contracts(Art.1159,1305) c. Quasi‐contracts(Art.1160,2142) Kinds: i. Negotiorumgestio(Art.2144) Negotiorumgestio(Art.2144) ii. Solutioindebiti(Art.2154) Solutioindebiti(Art.2154) iii. Others(Art.2164to2175) •

d. DelictsorCrime(Art.1161) e. Quasi‐delicts(Art.1162,2176) Distinctionbetweencrimesandquasi‐delicts Vicariousliability(Art.2180,Art.218‐219,FamilyCode) Civilliabilityarisingfromcrime(Art.1161;Rule111,RevisedRulesof CriminalProcedure) • • •

Barredov.Garcia,73Phil607(1942) Mendozav.Arrieta,91SCRA113(1975) 5. ClassificationofObligations a. b. c. d. e. f.

PureandConditionalObligations(Art.1179‐1192) WithaPeriodoraTerm(Art.1193‐1198) AlternativeandFacultative(Art.1199‐1206) JointandSolidary(Art.1207‐1222) DivisibleandIndivisible(Art.1223‐1225) WithaPenalClause(Art.1226‐1230)

B. NatureandEffectsofObligations 1. KindsofPrestation 2

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

a. Togive i.

specificthing topreservethething(Art.1163) todelivertheaccessionsandaccessories(Art1166) todeliverthefruits(Art.1164,par.1) todeliverthethingitself(Art.1244) ii. genericthing(Art.1246) • • • •

b. Todo(Art.1244) c. Nottodo(Art.1244) 2. BreachofObligation a. Concept  SongFov.HawaiianPhilippines,47Phil.821(1928) Velardeetal.v.CourtofAppeals,361SCRA56(2001)  Angelesv.Calasanz,135SCRA323(1985) DeltaMotorCorporationv.Genuino,170SCRA29(1989) VermenRealtyv.CourtofAppeals,224SCRA549(1993) b. ModesofBreach •

Delayormora Delayormora(Art.1169) (Art.1169) i. morasolvendi

CetusDevelopmentv.CourtofAppeals,176SCRA72(1989)  AerospaceChemicalIndustriesv.CourtofAppeals,315SCRA92(1999)  AerospaceChemicalIndustriesv.CourtofApp eals,315SCRA92(1999)  SantosVenturaHocormaFoundationv.Santos,441SCRA472(2004) Vazquezv.AyalaCorporation,443SCRA231(2004)  Abellav.Francisco,55SCRA447(1931) delaCruzv.Legaspi,98SCRA43(1955) ii.

moraaccipiendi(Seealso1268) moraaccipiendi(Seealso1268)

Villaroelv.ManilaMotorCo.,Inc.,104Phil.926(1958) iii.

compensationmorae

CentralBankv.CourtofAppeals,139SCRA46(1985) •

Fraudordolo Fraudordolo(Art.1171) (Art.1171) doloincidenteanddoloc doloincidenteanddolocausante ausante

Woodhousev.Halili,93Phil.526(1953) Geraldezv.CourtofAppeals(1994) 3

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

•

Negligence(Art.1172,1173) -culpav.dolo -culpaaquilianov.culpa -culpaaquilianov.culpacontractual contractual -standardofcarerequired 

Gutierrezv.Gutierrez,56Phil.177(1932) Vasquezv.Borja,74Phil.560(1944) deGuiav.ManilaElectricCorporation,40Phil706(1920) USv.Barias,23Phil434(1912)  Sarmientov.SpousesCabrido,401SCRA122(2003) Crisostomov.CourtofAppeals,409SCRA528(2003) •

Contraventionofthetenor(Art.1172)

Chavesv.Gonzales,32SCRA547(1970) Telefastv.Castro,158SCRA445(1988)  Arrietav.NARIC,10SCRA79(1964) Magatv.Medialdea,206Phil341(1983) c. Remediesincaseofbreach i.

Performance • •

Specificperformance(Art.1165;Section10,Rule39,RulesofCourt) Substitutedperformance ‐ inanobligationtogivegenericthing(Art.1165,par.2) ‐ undoingofpoorworkinanobligationtodo(Art.1167)

Chavesv.Gonzales,32SCRA547(1970) Tanguiligv.CourtofAppeals,266SCRA78(1997) ‐ ii. iii.

undoinginanobligationnottodo(Art1168)

Rescission(Art.1191‐1192) Damages(Art.1170)

d. SubsidiaryRemediesofCreditor i. ii.

AccionSubrogatoria(Art.1177) AccionPauliana(Art.1177;1381,par.3)

KheHongChengv.CourtofAppeals,355SCRA701(2001)  Siguanv.Lim,318SCRA725(1999) iii.

OtherSpecificRemedies(Art.1652,1729,1608,1893) 4

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

e. FortuitousEvent(Art.1174) i. ii.

Effect:ExtinguishmentofLiability ExceptionstoExtinguishment(Art.1174,1165par.3,552,1942, 1979,2001,2147)

 JuanNakpil&Sonsv.CourtofAppea ls,144SCRA597(1986)  JuanNakpil&Sonsv.CourtofAppeals,144SCRA597(1986) Republicv.LuzonStevedoringCo.,21SCRA279(1967) Dioquinov.Laureano,33SCRA65(1970)  Austriav.CourtofAppeals,39SCRA527(1971) NationalPowerCorporationv.CourtofAppeals,161SCRA334(1988) Yobidov.CourtofAppeals,281SCRA1(1997) Bacolod-MurciaMillingv.CourtofAppeals,182SCRA24 Philcomsatv.GlobeTelecom,430SCRA(2004) f.

UsuriousTransactions(Art.1175,1413,1961) PD858;PD1685 CentralBankCircular416 MonetaryBoardCircularNo.905;No.2209

EasternShippingLinesv.CourtofAppeals,234SCRA781(1994) CrisminaGarmentsv.CourtofAppeals,304SCRA356(1999) KengHuaProductsv.CourtofAppeals,286SCRA257(1998)  SecurityBankv.RegionalTrialCourtMakati,263SCRA453(1996)  Almedav.CourtofAppeals,256SCRA292(1996)  AngelWarehousingv.Chelsea,23SCRA19(1968) FirstMetroInvestmentv.EstedelSol,369SCRA(2001) C. DifferentKindsofObligations 1. PureandConditionalObligations • •

PureObligations(Art.1179,par.1) ConditionalObligations(Art.1181) ‐ Concept ‐ Conditionv.PeriodorTerm

Gait Gaite ev. v.Fo Fona naci cier er,2 ,2SC SCRA RA8 830 30( (19 1961 61) ) Gonzales v. Heirs of Tomas and Paula Cruz, 314 SCRA 585 (1999) •

KindsofConditions a. Astotheeffectontheobligation(Art1181)

Gonzales v. Heirs of Tomas and Paula Cruz, supra. 5

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

i.

SuspensiveConditionorConditionprecedent Retroactiveeffectwhenconditionisfulfilled(Art.1187)

•

Coronelv.CourtofAppealsandAlcaraz,263SCRA15(1996) •

Rightsofthecreditoranddebtorbeforefulfillmentofthe condition(Art.1188)

ii. ResolutoryConditionorConditionsubsequent

Parksv.ProvinceofTarlac,49Phil.142(1927) Central Philippine University v. Court of Appeals, 245 SCRA 511 (1995) Quijada v. Court of Appeals, 299 SCRA 695 (1998) b. Astothecauseororigin(Art1182) i.

Potestative •

•

Effectoffulfillmentofconditiondependssolelyonthewillofthe debtor Debtor’spromisetopaywhenhecanisnotacondition(Art1180)

LaoLimv.CourtofAppeals,191SCRA150(1990) ii. Causal

NagaTelephoneCo.v.CourtofAppeals,230SCRA351(1994) iii. Mixed

Osmenav.Rama,14Phil.99(1909) Hermosa v. Longora, 93 Phil. 971 (1953) Taylor v. Uy Tieng Piao, 43 Phil. 873 (1922) Smith Bell v. Matti, 44 Phil. 875 (1922) Rustan Pulp and Paper Mills, 214 SCRA 665 (1993) Romero v. Court of Appeals, 250 SCRA 250 SCRA 223 (1995) c. Astopossibility(Art.1183)

RomanCatholicArchdioceseofManilav.CourtofAppeals, 198SCRA300(1991) d. Astomode:positiveornegative(Art.1184‐1185) •

Rulesincaseofloss,deteriorationorimprovementpendingthehappeningof thecondition(Art.1189–1190) 6

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

HeirsofTimoteoMorenov.MactanCebuInternationalAirportAuthority, 413SCRA502(2003) a. Definitionofloss,deteriorationandimprovement b. Effectoflossordeterioration Withoutdebtor’sfault Withdebtor’sfault • •

c. Effectofimprovement Bynatureortime Duetodebtor’seffortandexpense • •

•

Effectofpreventionofthefulfillmentoftheconditionbytheobligor(Art 1186) Taylorv.UyTiengPiao,supra. Herrerav.Leviste,135SCRA129(1985)

2. ReciprocalObligations(Art.1191‐1192) a. Concept b. Alternativeremediesofinjuredpartiesoncaseofbreach i. •

ii. • • •

actionforspecificperformance effectwhenfulfillmentnolongerpossible actionforrescission requisites howmade effects

 SongFov.HawaiianPhilippines,47Phil.821(1925) Boysawv.InterphilPromotions,148SCRA365(1987) UniversityofthePhilippinesv.delosAngeles,35SCRA365(1989) DeErquiagav.CourtofAppeals,178SCRA1(1989)  Angelesv.Calasanz,135SCRA323(1985)  JamesG.Ongv.CourtofAppeals,310SCRA1(1999) Iringanv.CourtofAppeals,366SCRA41(2001) VisayanSawMillv.CourtofAppealsandRJTrading,219SCRA378(1993) Deiparinev.CourtofAppealsandTrinidad,221SCRA503(2003) GraceParkEngineeringCo.Inc.v.Dimaporo,107SCRA266(1981) Roquev.Lapuz,96SCRA741(1980)  Suriav.IntermediateAppellateCourt,151SCRA661(1987)  Suriav.IntermediateAppellate Court,151SCRA661(1987) •

Read:Art1786,1788,1484‐86,RepublicActNo.6552

7

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

3. ObligationswithaPeriod(Art.1193,1180) a. ComparePeriod/Termv.Condition b. KindsofPeriod i.

Astoeffect Suspensive(Art1193,par.1) Resolutory(Art1193,par.2) Astoexpression Express Implied Astodefiniteness Definite Indefinite Astosource Voluntary Legal Judicial • •

ii.

• •

iii.

• •

iv.

• • •

c. Rulesincaseofloss,deteriorationorimprovementbeforearrivalofthe period(Art.1194and1189) d. EffectofPaymentinAdvance(Art.1195;1197,par.3) e. BenefitofPeriod(Art1196) i. Forwhosebenefit Creditor Debtor Both ii. Effects iii. Presumption(Art.1196) • • •

Lachicav.Araneta,47OfficialGazetteNo.11,5699(1949) PoncedeLeonv.Syjuco,90Phil311(1951) Bucev.CourtofAppeals,332SCRA151(2000) iv. f.

Whendebtorlosesrighttomakeuseofperiod(Art.1198)

WhenCourtMayFixAPeriod i. Periodisimplied ii. Perioddependsonsolewillofthedebtor

 Aranetav.PhilippineSugarEstateDeve lopmentCo.,20SCRA330(1967)  Aranetav.PhilippineSugarEstateDevelopmentCo.,20SCRA330(1967) Central Philippine University v. Court of Appeals, supra. Deudor v. J.M. Tuason, 2 SCRA 129 (1961)

8

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

4. AlternativeObligations a. b. c. d. e. f.

Concept(Art.1199) RightofChoice(Art.1200) EffectofNoticeofChoice WhenNoticeProducesEffect(Art.1201) Effectoflossorimpossibilityofoneorallprestations(Art.1202to1205) FacultativeObligation(Art.1206) i. Concept ii. DistinguishedfromAlternativeObligations iii. EffectofSubstitution

5. JointandSolidaryObligations a. JointObligations i.

Concept Requisites Wordsusedtoindicatejointobligations • •

ii. iii.

Presumption(Art.1207,1208) Effects(Art.1207,1208) Extentofliabilityofdebtor Extentofrightofcreditor Incaseofnovations,compensation,confusion(Art1277)or remission

• • •

b. SolidaryObligations i.

Concept • •

ii.

Requisites Wordsusedtoindicatesolidaryobligations

Kinds Astosource(Art.1208) o Legal(Art.1915,1945,2194,Art119oftheRPC) Conventional o Real o Astopartiesbound Active o o Passive Mixed o Astouniformity Uniform o Varied/non‐uniform(Art.1211) o •

•

•

9

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

Ynchaustiv.Yulo,34Phil.978(1916) Inciongv.CourtofAppeals,257SCRA578(1996) RCBCv.CourtofAppeals,178SCRA739(1989) LafargeCementPhil.V.ContinentalCement,443SCRA522(2004) iii.

Effects Solidarycreditorinrelationto: o commondebtor righttodemand(Art.1214‐1216;1217,par.1) incaseofnovation,compensation,confusion, remissionbyacreditor(Art.1215,par.1) o solidaryco‐creditors incaseofnovation,compensation,confusion, remissionbyaco‐creditor(Art1215,par.2) prejudicialactsprohibited(Art.1212) assignmentofrightsnotallowed(Art.1213) •

 



 

•

Solidarydebtorinrelationto: o commoncreditor obligationtoperform(Art.1207) incaseofnovation,compensation,confusion, remissionbyacreditor(Art.1215,par.1) solidaryco‐debtor o incaseofpaymentbyaco‐debtor(Art.1217‐1220) incaseoffortuitousevent(Art.1221)  

 

 Jaucianv.Querol,38Phil.718(1918) Rehabilitation Finance Corporation v. Court of Appeals, Official Gazette No. 6, p. 2467 Quiombing v. Court of Appeals, 189 SCRA 325 (1990) Inciong v. Court of Appeals, 257 SCRA 578 (1996) iv.

DefensesAvailabletoaSolidaryDebtorAgainsttheCreditor(Art. 1222) Types thosederivedfromthenatureoftheobligations o o personaldefenses defensespertainingtohisshares o thosepersonallybelongingtotheotherco‐debtors o •

•

Effects

Ynchaustiv.Yulo,supra. Alipio v. Court of Appeals, 341 SCRA 441 (2000)

10

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

c. JointIndivisibleObligations i.

Concept Distinguishedfromjointobligations Distinguishedfromsolidaryobligations • •

ii. Indivisibilitydistinguishedfromsolidarity(Art.1210) iii. Effects(Art.1209,1224) 6. DivisibleandIndivisibleObligations a. DivisibleObligations i. Concept ii. Effects(Art.1223,1233) b. IndivisibleObligations i.

Concept:distinguishedfromsolidaryobligations

ii. Kinds Natural(Art.1225,par.1) Legal(Art.1225,par.3) Conventional(Art.1225,par.3) • • •

iii. Presumptionsofdivisibilityandindivisibility(Art.1225) iv. Divisibilityandindivisibilityinobligationsnottodo(Art.1225,par.3) v. Effects(Art.1223,1223,1224) vi. CessationofIndivisibility 7. ObligationswithaPenalClause a. Concept • • • • •

Principalv.AccessoryObligation Distinguishedfromconditionalobligations Distinguishedfromalternativeobligations Distinguishedfromfacultativeobligations Distinguishedfromguaranty

11

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

b. KindsofPenalClause •

•

•

Astoeffect Subsidiary o Complimentary o Astosource Conventional o Legal o Astopurpose Punitive o o Reparatory

c. DemandabilityofPenalty(Art.1226,par.2) d. EffectsofPenalClause:GeneralRuleandExceptions Substituteforindemnityfordamagesandpaymentofinterest(Art.1226) •

MakatiDevelopmentCorp.v.EmpireInsuranceCo.20SCRA557(1967) Tan v. Court of Appeals, 367 SCRA 571 (2001) Country Bankers Insurance v. Court of Appeals, 201 SCRA 458 (1991) •

•

•

Notexemptdebtorfromperformance(Art.1227) Creditorcannotdemandbothperformanceandpenaltyatthesametime (Art.1227) Creditorcannotcollectotherdamagesinadditiontopenalty(Art.1226)

e. Whenpenaltyshallbeequitablyreduced(Art.1229) f.

NullityofPrincipalObligationofPenalClause(Art.1230)

D. ExtinguishmentofObligations(Art.1231) 1. PaymentorPerformance(Art.1232) a. Concept(Art.1232) b. Requisites i.

Whocanpay •

GeneralRule

•

Exceptions:

12

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012 o

o

o

o

thirdpersonwhoisaninterestedparty;effects(Art.1302[3]) thirdpersonwhoisnotaninterestedpartybutwiththeconsentof debtor(Art.1302[2],1236,par.1) thirdpersonwhoisnotaninterestedpartyandwithoutthe consentofthedebtor,withouttheknowledgeoragainstthewillof thedebtor(Art.1236,par.2;Art.1237,1236,par.1) thirdpersonwhodoesnotintendtobereimbursed(Art1238)

•

inanobligationtogive(Art.1239,1427)

•

incaseofactivesolidarity(Art.1214)

ii. Towhompaymentcanbemade •

Generalrule(Art.1240)

•

Exceptions: o

incapacitatedperson(Art.1241,par.1)

o

thirdperson(Art.1241,par.2)

o

whenproofofbenefitnotrequired(Art.1241,par.3;Art.1242)

o

incaseofactivesolidarity(Art.1214)

iii. Whatistobepaid(Identity) •

GeneralRule

•

Specificcases: o

Togiveaspecificthing(Art.1244)

o

Togiveagenericthing(Art.1246)

o

Topaymoney(Art.1249,1250;R.A.529,R.A.4100,R.A.8183)

Arrieta v. NARIC, supra Kalalo v. Luz, 34 SCRA 377 (1970) St. Paul Fire and Marine Insurance v. Macondray, 70 SCRA 122 (1976) Papa v. A.V. Valencia, 284 SCRA 643 (1998) Philippine Airlines v. Court of Appeals, 181 SCRA 557 (1990)

13

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012 •

PaymentofInterest(Art.1956)

iv. Howpaymentistobemade(Integrity) •

GeneralRule(Art.1233) o

Partialpaymentisnotallowed;exceptions(Art.1248)

•

Substantialperformanceingoodfaith(Art.1234)

•

Estoppel(Art.1235)

•

Presumptionsinpaymentofinterestsandinstallments(Art.1176)

v. Whenispaymenttobemade • •

GeneralRule(Art1169) Nodemand,nodelay;Exceptions

vi. Wherepaymentistomade Placeexpresslydesignated(Art.1251,par.1) Whenplaceofpaymentisnotexpresslydesignated(Art.1251, paragraphs2to4) • •

vii. Whopaysforexpensesformakingpayment(Art.1247) c. ApplicationofPayments i. Concept(Art.1252)

ReparationsCommissionv.UniversalDeepFishing,83SCRA764(1978) Paculdov.Regalado,345SCRA134(2000) ii.

Requisites

iii.

RulesinApplicationofPayments(Art.1252‐1253) Ifrulesarenotapplicableorcannotbeinferred(Art.1254) Meaningofthe“mostonerousdebtor” • •

d. PaymentbyCession i. ii. iii. iv.

Concept(Art.1255) Requisites Effects ComparedtoAssignmentofReceivables

e. DationinPayment

14

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

i.

Concept(Art.1245) DistinguishedfromPaymentbyCession •

DevelopmentBankofthePhilippinesv.CourtofAppeals,284SCRA14 (1998) ii. iii.

Requisites Effects

FilinvestCreditCorporationv.PhilippineAcetylene,111SCRA421(1982) f.

TenderofPaymentandConsignation i.

TenderofPayment Concept Requisites • •

ii.

Consignation ConceptandPurpose •

•

•

Requisites Whentenderandrefusalnotrequired(Art.1256,par.2) o Twonoticerequirement(Art.1257,par.1;Art.1258,par. o 2);Effectsofnon‐compliance Effects(Art.1260,par1) o Withdrawalbydebtorbeforeacceptancebycreditoror approvalofcourt(Art.1260,par.2) Withdrawalbydebtorafterproperconsignation(Art. o 1261) Withcreditorapproval Withoutcreditorapproval  

ExpensesofConsignation    DeGuzmanv.CourtofAppeals,137SCRA730(1985) TLGInternationalContinentalEnterprising,Inc.v.Flores,47SCRA437 (1972) McLaughlinv.CourtofAppeals,144SCRA693(1986)  Socov.Militante,123SCRA160(1983)  Sottov.Mijares,28SCRA17(1969) Reisenbeckv.CourtofAppeals,209SCRA657(1992) RuralBankofCaloocanv.CourtofAppeals,104SCRA151(1981) Licuananv.Diaz,175SCRA530(1989) Chanv.CourtofAppeals,230SCRA685(1994) MeatPackingCorp.v.Sandiganbayan,359SCRA409(2001) •

15

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

2. LossorImpossibility a. LossoftheThingDue i.

Concept(Art.1189,par.2)

ii.

Kinds Total Partial • •

iii.

Requisites(Art.1262)

iv.

Presumption(Art.1266,1267)

v.

Effects Inanobligationtogiveaspecificthing(Art.1262,1268) Inanobligationtogiveagenericthing(Art.1263) Incaseofpartialloss(Art1264) Actionagainstthirdpersons(Art.1269) • • • •

b. ImpossibilityofPerformance i.

Concept(Art.1266,1267)

ii.

Kinds Total Partial • •

iii.

Requisites(Art.1266)

iv.

Effects •

Inobligationstodo(Art.1266‐1267;Art.1262,par.2)

•

Impossibilitydistinguishedfromdifficulty

•

Incaseofpartialimpossibility(art.1264)

Occeñav.CourtofAppeals,73SCRA637(1976) Naga Telephone Company v. Court of Appeals, 230 SCRA 351 (1994) PNCC v. Court of Appeals, 272 SCRA 183 (1997)

16

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

3. CondonationorRemission a. Concept b. Kinds Totalorpartial Expressorimplied(Art.1270,par.1) • •

c. Requisites(Art.1270,par.2)

Yamv.CourtofAppeals,303SCRA1(1999) d. Presumptions(Art.1271‐1271;1274) e. Effects Ingeneral Incaseofjointorsolidaryobligations • •

f.

GoverningRules(Art.1270)

g. RenunciationofPrincipalorAccessoryObligation(Art.1273) 4. ConfusionorMerger a. Concept b. Requisites c. Effects • •

Ingeneral(Art.1275) Incaseofjointorsolidaryobligations(Art.1277)

d. ConfusioninPrincipalorAccessoryObligations(Art.1276)  5. Compensation a. Concept(Art.1278);distinguishedfromConfusion b. Kinds i. ii. iii. iv. v.

TotalorPartial Legal Conventional(Art.1279,Art.1282) Judicial(Art.1283) Facultative

17

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

c. LegalCompensation i.Requisites(Art.1279‐1280):Duedistinguishedfromdemandable

Gantionv.CourtofAppeals,28SCRA235(1969) BankofthePhilippineIslandsv.Reyes,255SCRA571(1996) PhilippineNationalBankv.SapphireShipping,259SCRA174(1996) CKHIndustrialDevelopmentv.CourtofAppeals,272SCRA333(1997) Mirasolv.CourtofAppeals,351SCRA44(2001)  AssociatedBankv.Tan,446SCRA282(2004) Villanuevav.Tantuico,182SCRA263(1990) Perezv.CourtofAppeals,127SCRA636(1984)  SilahisMarketingCorp.v.IntermediateAppellateCourt,180SCRA21  SilahisMarketingCorp.v.IntermediateApp ellateCourt,180SCRA21 (1989) BankofthePhilippineIslandsv.CourtofAppeals,255SCRA___(1996) ii.Effects(Art.1290,1289) d. WhenCompensationisnotallowed(Art.1287‐1288) e. CompensationofDebtsPayableinDifferentPlaces(Art.1268) f.

EffectofNullityofDebtstobeCompensated(Art.1284)

g. EffectsofAssignmentofCredit i. withconsentofdebtor(Art.1285,par.1) ii. withknowledgebutwithoutconsentofdebtor(Art.1285,par.2) iii. withoutknowledgeofdebtor(Art.1285,par.3) 6. Novation a. Concept(Art.1291) Changeindebtor Changeinobject Changeinthirdpersonwhoissubrogated Changeincreditorwithitsconsentoratitsinstanceisnotnovation • • • •

b. Kinds i. Astoform:expressorimplied ii. Astoorigin:conventionalorlegal iii. Astoobject objectiveorreal subjectiveorpersonal mixed • • •

c. Requisites(Art.1292) 18

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

Millarv.CourtofAppeals,38SCRA642(1971) Dormitoriov.Fernandez,72SCRA388(1976) MagdalenaEstatev.Rodriguez,18SCRA967(1966) Reyesv.SecretaryofJustice,264SCRA35(1996) Cochingyanv.RBSuretyandInsurance,151SCRA339(1987) BroadwayCentrumCondominiumCorporationv.TropicalHut,224SCRA 302(1993) Molinov.SecurityDinersInternational,363SCRA358(2001) Garciav.Llamas,417SCRA292(2003) CaliforniaBusLinesv.StateInvestment,418SCRA297(2003) Babstv.CourtofAppeals,350SCRA341(2001) d. Effects(Art.1296) e. EffectsoftheStatusoftheOriginalandNewObligation i. nullityorv nullityorvoidabi oidabilityo lityofori foriginal ginalobliga obligation( tion(Art.1 Art.1298) 298) ii. nullityorv nullityorvoidabi oidabilityo lityofnew fnewobliga obligation( tion(Art.1 Art.1297) 297) iii. suspensiveorresolutoryconditionororiginalobligation(Art.1299) f.

ObjectiveNovation

g. SubjectiveNovation i.

Bychangeofdebtor •

•

Expromision Requisites(Art.1293) o Effects(Art.1294) o Delegacion Requisites(Art.1293) o Effects(Art.1295) o

Garciav.Llamas,417SCRA292(2003) Quinto v. People, 305 SCRA 709 (1999) ii.

Bychangeofcreditor–subrogationofathirdpersonintherightsofthe creditor(Art.1300) •

Conventionalsubrogation o Requisites(Art.1301) Distinguishedfromassignmentofcredit o Effects(Art.1303‐1304) o

Licarosv.Gatmaitan,(2001) 19

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

•

LegalSubrogation

o

Requisites Whenpresumed(Art.1302)

o

Effects(Art.1303‐1304)

o

 AstroElectronicsCorp.v.PhilippineExportandForeignLoanGuar antee  AstroElectronicsCorp.v.PhilippineExportandForeignLoanGuarantee Corporation(2003)

20

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

PARTTWO:CONTRACTS I.

Introduction A. ConceptandDefinition(Art.1305) B. ClassificationofContracts 1. Accordingtosubjectmatter:thingsorservices 2. Accordingtoname:nominateandinnominatecontracts(Art.1307) 3. Accordingtoperfection:bymereconsent(Art.1315)orbydeliveryofobject (Art.1316) 4. Accordingtoitsrelationtoothercontracts:preparatory;principal;oraccessory 5. Accordingtoform:informalorformal 6. Accordingtopurpose 7. Accordingtonatureoflegaltiecreated:unilateral,bilateralorreciprocal 8. Accordingtocause:onerousorgratuitous 9. Accordingtorisk:commutativeoraleatory

Dizonv.Gaborro,83SCRA688(1978) C. Characteristics 1. ObligatoryForcebetweentheParties(Art.1308) a. GeneralRule:FreedomtoContract(Art.1306)

Gabrielv.MontedePiedad,71Phil.497(1941) PakistanInternationalAirlinesv.Ople,190SCRA90(1990) b. Exceptions: i. Whenitisinequitable(Art.1310) ii. Specialdisqualifications: Art.87,FamilyCode Articles1490and1491 Article1782 iii. Whatmaynotbestipulated ContrarytoLaw (a) pactumcommis (a)  pactumcommisorium orium(Art.2088) (Art.2088) (b) pactumleon (b) pactumleonina ina(Art.1799) (Art.1799) (c)  pactumdenonalienado (Art.2130)  pactumdenonalienado(Art.2130) (d) otherlimitations:LaborCode,CorporationCode Contrarytomorals Contrarytogoodcustoms Contrarytopublicorder Contrarytopublicpolicy • • •

•

• • • •

21

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

Cuiv.Arellano,2SCRA205(1961)  Arroyov.Berwin,36Phil386(1917) FilipinasCompañiadeSegurosv.Mandanas,17SCRA391(1966) Bustamantev.Rosel,319SCRA413(1999) c. Effectofcontractastothirdparties i. ii. iii. iv.

Performancemaybedeterminedbythirdparties(Art.1309) Whenpossessionoftheobjectofthecontractiswithathirdperson(Art.1312) Creditorsofcontractingparties(Art1313,1177,1381) Interferencebythirdparties(Art.1314)

Daywaltv.LaCorporacióndelosPadresAgustinosRecoletos,etal., 39Phil.587(1919)  SoPingBunv.CourtofAppeals,314SCRA751(1999) Lagonv.CourtofAppeals,453SCRA616(2005) 2. Mutuality(Art.1308to1310;1473)

GSISv.CourtofAppeals,228SCRA183(1993) ProfessionalAcademicPlans,Inc.etal.v.Crisostomo,453SCRA342(2005) 3. RelativityorPrivityofContracts(Art.1311) a. Contractstakeeffectonlybetweentheparties,theirassignsandheirs

ManilaRailroadCo.v.LaCompaniaTransatlantica,38Phil.875(1918) DKCHoldingsCorp.CourtofAppeals,329SCRA666(2000) b. Noonemaycontractinthenameofanother(Art.1317)

GutierrezHermanosv.Orense,28Phil.571(1914) c. Stipulationsinfavorofthirdpersons(Art.1311,par.2)

Florentinov.Encarnacion,79SCRA192(1977) Coquiav.FieldmenInsuranceCo.,26SCRA178(1968) Constantinov.Espiritu,39SCRA178(1968) Youngv.CourtofAppeals,169SCRA213(1989) MarmontResortv.Guiang,168SCRA373(1988) MandarinVillav.CourtofAppeals,257SCRA538(1996)

22

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

II. II.

Esse Essent ntiialR alReq equi uisi site tes sof ofC Con ontr trac acts ts A. Consent:Requisites(Art.1319) 1.

PerfectionofContract:OfferandAcceptance a. Offer mustbecertain(Art.1319) whatmaybefixedbytheofferor(At.1321) whenmadethroughanagent(Art.1322) whenofferbecomesineffective(Art.1323) businessadvertisementsofthingsforsale(Art.1325) advertisementsforbidders(Art.1326) • • • • • •

b. • •

• •

Acceptance mustbeabsolute(Art.1319) kinds: express(Art.1320) o implied(Art.1320) o o qualified(Art.1319) periodofacceptance(Art.1324) optioncontract(Art.1324)

 Sanchezv.Rigos,45SCRA368(1972) c.

TerminationofOffer

d.

PerfectionofContract Fourtheorieswhencontractisperfected: Manifestationtheory o Expeditiontheory o Receptiontheory o Cognitiontheory(Art.1319[2]) o

•

Rosenstockv.Burke,46Phil.217(1924) Malbarosav.CourtofAppeals,402SCRA168(2003)  SanLorenzoDevelopmentCorporationv.CourtofAppeals,449SCRA99(2005)  SanLorenzoDevelopmentCorporationv.CourtofAppeal s,449SCRA99(2005) MMDAv.Jancom,G.R.No.147465,January30,2002 2.

LegalCapacityoftheParties a. Minors,insaneordementedpersons,anddeaf‐muteswhodonotknow howtowrite(Art.1327) b. Whenofferoracceptanceismadeduringalucidinterval,intoxication, duringhypnoticspell(Art.1328) c. Corporations(Sections23and36,CorporationCode) 23

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

3.

VicesofConsent:ConsentmustbeIntelligent,Free,SpontaneousandReal (Art.1330to1346) a. MistakeorError i. MistakeofFact Astosubstanceoftheobject Astoprincipalconditions Astoidentityorqualificationsoftheparties Astoquantity,asdistinguishedfromsimplemistakeofaccount • • • •

 Asiainv.Jalandoni,45Phil296(1923) HeirsofWilliamSevillav.Sevilla,402SCRA501(2003)  Andresv.ManufacturersHanoverandTrust,177SCRA618  Andresv.ManufacturersHanoverand Trust,177SCRA618  SpousesTheisv.CourtofAppeals,268SCRA167(1997)  SpousesTheisv.CourtofAppeals, 268SCRA167(1997) ii. MistakeorErrorofLaw GeneralRule:Ignoranceofthelawexcusesnoone(Art.3) Exception:MutualErrorofLaw(Art.1334) • •

iii. Mistakewhenonepartyisunabletoread(Art.1332)

Dumasugv.Modelo,34Phil252(1916) Hemedesv.CourtofAppeals,316SCRA347(1990) Lustanv.CourtofAppeals,266SCRA663(1997) Katipunanv.Katipunan,375SCRA199(2002) Leonardov.CourtofAppeals,438SCRA201(2004) iv. Inexcusablemistake(Art.1333) b. ViolenceorIntimidation(Art.1335)

Martinezv.HSBC,15Phil.252(1910) Leev.CourtofAppeals,201SCRA405(1991) c. UndueInfluence(Art.1337) d. FraudorDolo FraudorDolo(Art.1338) (Art.1338) •

Kinds: i. Dolocausante(Art.1338) Dolocausante(Art.1338) ii. Doloincidente(Art.1344[2]) Doloincidente(Art.1344[2])

Hillv.Veloso,31Phil.161(1915) Woodhousev.Halili,supra. Geraldezv.CourtofAppeals,230SCRA320(1994)  Sierrav.CourtofAppeals,211SCRA785(1992)

24

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012 •

FailuretoDiscloseFactswhenthereisadutytorevealthem(Art.1339)

Tuasonv.Marquez,45Phil381(1923) RuralBankofSta.Mariav.CourtofAppeals,314SCRA255(1999) •

Usualexaggerationsintrade:opportunitytoknowthefacts(Art.1340)

 Azarragav.Gay,52Phil.599(1928) Trinidadv.IntermediateAppellateCourt,204SCRA524(1991) •

Mereexpressionofopinion(Art.1341);Effects(Art.1344)

 Songcov.Sellner,37Phil.254(1917) e. Misrepresentation i. byathirdperson(Art.1342) ii. madeingoodfaith(Art.1343) iii. activeorpassive

Mercadov.Espiritu,37Phil.215(1917) Braganzav.VillaAbrille,105Phil.456(1959) 4.

SimulationofContracts

Rodriguezv.Rodriguez,28SCRA229(1914)  Suntayv.CourtofAppeals,251SCRA430(1995) Pangadiletal.v.CourtofFirstInstance,G.R.No.L-32437,August31,1982 Umaliv.CourtofAppeals,G.R.No.89561,September13,1990 a. Kinds:AbsoluteandRelative(Art.1345) b. Effects(Art.1346) B. Object Mustbedeterminateastoitskind(Art.1379) WhatmayNOTbeobjectsofcontracts(Art.1347) • •

a. Allthingsoutsidethecommerceofman b. Allintransmissiblerights c. Thoseserviceswhicharecontrarytolaw,morals,goodcustoms,public order,orpublicpolicy d. Futureinheritance,exceptwhenauthorizedbylaw e. Impossiblethingsorservices(Art.1348)

Blasv.Santos,1SCRA899(1961)  JLTAgro,Inc.v.Balansag,G.R.No.141882,March11,2005

25

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

C. Cause 1. MeaningofCause(Art.1350) a. inonerouscontracts b. inremuneratorycontracts c. incontractsofpurebeneficence 2. DistinguishedfromMotive(Art.1351) 3. Presumption:ExistenceandLawfulnessofCause(Art.1354) 4. DefectiveCausesandEffects: a. AbsenceofCauseorUnlawfulCause(Art.1352) b. StatementofFalseCause(Art.1355) c. InadequacyofCauseorLesion(Art.1355)

Liguezv.CourtofAppeals,102Phil.577(1957) Carantesv.CourtofAppeals,76SCRA514(1977)  SpousesBuenaventurav.CourtofAppeals,416SCRA263  SpousesBuenaventurav.CourtofAppeals, 416SCRA263 III. III. 

Forrmof Fo mofC Con ontr trac acts ts

A. GeneralRule:Contractsareobligatoryinwhateverform,providedallessential requisitesarepresent(Art.1356) B. Exception:Whenthelawrequiresthecontracttobeinaspecificforminorderforit tobevalidorenforceable(Art.1356) •

Kindofformalitiesrequiredbylaw: 1. Forvalidity(Articles748,749,1874,2134,1771,1773) 2. Tomakeiteffectiveastothirdparties(Articles1357and1358) 3. Forpurposesofprovingexistenceofcontract(StatuteofFraudsinArt.1403)

Hernaezv.delosAngeles,27SCRA1276(1969) Resuenav.CourtofAppeals,G.R.No.128338,March28,2005 IV. IV.

Inte Interp rpre reta tati tion ono of fCo Cont ntra ract cts s A. ComparewithRulesofStatutoryConstruction B. PrimacyofIntention(Articles1370,1372)

Borromeov.CourtofAppeals,47SCRA65(1972) Kasilagv.Rodriguez,69Phil.217(1939)  Santiv.CourtofAppeals,G.R.No.93625,227SCRA541(1993) C. DeterminingIntention(Art.1371)

Rapanutv.CourtofAppeals,246SCRA323(1995) 26

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

D. RulesofContractInterpretation 1. UndertheCivilCode a. Whenitcontainsstipulationswhichadmitofseveralmeanings(Art.1373)

OilandNaturalGasCommissionv.CourtofAppeals,G.R.No.114323, July July 23, 1998 b. Whenitcontainsvariousstipulations,someofwhicharedoubtful(Art.1374)

 SpousesRigorv.ConsolidatedOrixLeasingandFinanceCorporat ion,G.R.  SpousesRigorv.ConsolidatedOrixLeasingandFinanceCorporation,G.R. 136423,August20,2002 c. Whenitcontainswordswithdifferentmeanings(Art.1375) d. Whenitcontainsambiguitiesandomissionofstipulations(Art.1376)

Chuav.CourtofAppeals,G.R.No.119255,April9,2003 e. Withrespecttothepartywhocausedtheobscurity(Art.1377)

RizalCommercialBankingCorporationv.CourtofAppeals,G.R.No. 133107,March25,1999 f.

Whenitisimpossibletosettledoubtsusingtheabove‐citedrules(Art.1378) Ingratuitouscontracts

•

Gacosv.CourtofAppeals,G.R.Nos.85962-63,August3,1992 •

Inonerouscontracts

g. Whendoubtsarecastupontheprincipalobjectsothatthetrueintention cannotbeknown(Art.1378)

V.

2. UndertheRulesofCourt(Rule130,Sections10to19)  Reformati ationof of Instruments A. Requisites(Art.1359) 1. Meetingoftheminds 2. Trueintentionofthepartiesarenotexpressedintheinstrument 3. Failuretoexpresstrueintentionduetomistake,fraud,inequitableconduct,or accident

27

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

Garciav.Bisaya,97Phil.609(1955) Bentirv.Leande,330SCRA591(2000) Quirosv.Arjona,G.R.No.158901,March9,2004 B. WhenReformationisnotallowed(Art.1366) C. ImpliedRatification(Art.1367) D. Whomayaskforreformation(Art.1368) E. Procedureforreformation(Art.1369)  Atilanov.Atilano,28SCRA2232(1969) Carantesv.CourtofAppeals,76SCRA514(514)  Sarmingv.Dy,383SCRA131(2002) VI. VI.

Defe Defect ctiiveC veCon ontr trac acts ts A. RescissibleContracts 1. Kinds(Art.1381) 2. Characteristics a. Thedefectconsistsininjuryordamageeithertooneofthecontracting partiesoftoathirdperson b. Contractisvalidbeforerescission c. Attackmayonlybedirecton,notcollaterally d. Attackmaybedonebycontractingpartyorbyathirdpersonwhoisinjured ordefrauded e. Validatedonlybyprescriptionandnotbyratification 3. Definition(Art.1380):DistinguishedfromRescissioninArt.1191(Resolution)

UniversalFoodCorporationv.CourtofAppeals,33SCRA1(1970)  SpousesCannuv.SpousesGalang,G.R.No.139523,May26,2005 Iringanv.CourtofAppeals,G.R.No.129107,September26,2001 Riverav.delRosario,G.R.No.144934,January15,2004 EquatorialRealtyv.MayfairTheatre,G.R.No.133879,November21,2001 4. Requisites a. Contractisrescissible b. Partyaskingforrescissionhasnootherlegalmeanstoobtainreparation (Art.1383)

UnionInsuranceSocietyofCantonv.CourtofAppeals,G.R.No.100319,  August8,1996 28

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

c. Heisabletoreturnwhathemaybeobligedtorestoreifrescissionisgranted (Art.1385)

Riverav.delRosario,G.R.No.144934,January15,2004 5. EffectofRescission(Art.1385) a. Astothirdpersonswhoacquiredthingingoodfaith(Art.1385[2]and[3] b. Astothirdpersonswhoacquiredthingsinbadfaith,whenalienationwasin fraudofcreditors(Art.1388) 6. ExtentofRescission(Art.1387)

 Siguanv.Lim,318SCRA725(1999) 7. BadgesofFraud(Art.1387)

Oriav.McMicking,21Phil,243(1912)  Siguanv.Lim,318SCRA725(1999)  Suntayv.CourtofAppeals,251SCRA430(1995) ChinaBankingCorporationv.CourtofAppeals,G.R.No.129644,March7,2000 MRHoldingsLimitedv.Carlos,G.R.No.138104,April11,2002 B. VoidableorAnnullableContracts 1. Kinds(Art1390) 2. Characteristics a. Thereisadefectinconsentofoneofthecontractingparties b. Bindinguntilannulledbyacompetentcourt c. Maybevalidatedbyratificationorprescription

Felipev.HeirsofAldon,120SCRA628(1983) 3. Annulment a. DistinguishedfromRescission b. Grounds(Art.1390) c. WhoMayorMayNotInstituteActionforAnnulment(Art.1397)

 Singsongv.IsabelaSawmill,88SCRA623(1979)  SamahanngMagsasakasaSanJosepv.Valisno,430SCRA629(2004)  SamahanngMagsasakasaSanJ osepv.Valisno,430SCRA629(2004) Malabananv.GawChing,181SCRA84(1990)  Armentiav.Patriarca,18SCRA1253(1966)

29

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

d. Prescription(Art.1391)

Carantesv.CourtofAppeals,76SCRA514(514) e. Effect:MutualRestitution(Art.1398and1402)

Cadwallader&Co.v.Smith,Bell&Co.,7Phil.461(1907) Velardeetal.v.CourtofAppeals,361SCRA56(2001) Inesv.CourtofAppeals,247SCRA312(1995)  ArraRealtyCorporationv.GuaranteeDevelopmentCorporation,438  ArraRealtyCorporationv.GuaranteeD evelopmentCorporation,438  SCRA441(2004) i.

Whenonthepartiesisincapacitated(Art1399)

Katipunanv.Katipunan,375SCRA199(2002) ii.

f.

Whenthethingislostthroughthefaultofthepartyobligedtoreturnthe sam(Art.1400)

ExtinguishmentofActionforAnnulment i. byratification(Art.1392) ii. Whenthethingislostthroughthefaultofthepersonwhohastherightto filetheaction(Art.1401)

4. Ratification a. Requisites  i. Contractisvoidable ii. Ratificationismadewithknowledgethatcontractisvoidable iii. Atthetimeofratification,thecausefornullityhasalreadyceasedtoexist b. Forms i. Expressortacit(Art.1393) ii. Bythepartiesthemselvesorbytheguardianinbehalfofanincapacitated party(Art.1394) c. Effects i.

actiontoannulisextinguished(Art.1392)

UySooLimv.TanUnchuan,38Phil.552(1918) ii. contractiscleansedretroactivelyfromallitsdefects(Art.1396)

30

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

C. UnenforceableContracts 1. Characteristics a. Validbutcannotbeenforcesbyaproperactionincourt b. Canberatified c. Cannotbeassailedbythirdpersons 2. Kinds(Art.1403) a. Unauthorizedcontracts(Art.1404) b. ContractscoveredbyStatuteofFrauds i.

PurposeofStatuteofFrauds

 AsiaProductionCo.Inc.v.JudgePano,205SCRA458(1992) WesternMindanaoCo.v.Medalle,79SCRA703(1977) Limketkai&Sonsv.CourtofAppeals,250SCRA523(1995) Babaov.Perez,102Phil.756(1957) Reissv.Memije,15Phil.350(1910) Villanuevav.CourtofAppeals,267SCRA89(1997) ii.

HowRatified(Art.1405)

PhilippineNationalBankv.PhilippineVegetableOilCo.49Phil.857(1927) Carbonnellv.Poncioetal,103Phil.655(1958) FirstPhilippineInternationalBankv.CourtofAppeals,252SCRA259 (196) iii.

RightofthePartieswhenaContractisenforceablebutapublicdocument isnecessaryforitsregistration(Art.1406)

c. Contractsexecutedbypartieswhoarebothincapableofgivingconsent i. ii.

Effectofratificationbytheparentsorguardianofoneoftheparties(Art. 1407) Effectofratificationbytheparentsorguardianofbothparties(Art.1407)

 D. VoidorInexistentContracts 1. Characteristics • • •

Voidfromthebeginning Producesnoeffectwhatsoever Cannotberatified(Art.1409)

31

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

Tongoyv.CourtofAppeals,123SCRA99(1983) Cuiv.Arellano,2SCRA205(1961) Chavezv.PresidentialCommissiononGoodGovernment,307SCRA372(1999) Guiangv.CourtofAppeals,291SCRA372(1998) Castillov.Galvan,85SCRA526(1978) 2. Kinds a. VoidContracts i.

Thosewhosecause,objectorpurposeiscontrarytolaw,morals,good customs,publicorderorpublicpolicy • •

Whentheactconstitutesacriminaloffense(Art.1411) Whentheactisunlawfulbutdoesnotconstituteacriminaloffense (Art.1412) o Inparidelictorule Inparidelictorule

Menchavezv.Teves,449SCRA380(2005)  Angelv.AledoandModales,420SCRA645(2004) •

•

Whenthepurposeisillegalandmoneyispaidorproperty deliveredtherefore(Art.1414) Whenthecontractisillegalandoneofthepartiesisincapableof givingconsent(Art.1415)

Liguezv.CourtofAppeals,102Phil.577(1957) Rellosav.GawCheenHum,93Phil827(1953) •

Whentheagreementisnotperseillegalbutprohibited(Art. 1416)

PhilippineBankingCorporationv.LuiShe,21SCRA52(1967) Frenzelv.Catito,406SCRA55(2003)  AcabalandNicolasv.Acabal,454SCRA555(2005)  AcabalandNicolasv.Acaba l,454SCRA555(2005) •

•

• •

Whentheamountpaidexceedthemaximumfixedbylaw9Art. 1417) Whenbyvirtueofacontractalabourerundertakestoworklonger thanthemaximumnumberofhoursofworkfixedbylaw(Art. 1418) Whenthecontractisdivisible(Art.1420) Whenthecontractisthedirectresultofapreviouslillegalcontract (Art.1422)

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Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

ii. Thosewhoseobjectisoutsidethecommerceofman iii. Thosewhichcontemplateanimpossibleservice iv. Thosewheretheintentionofthepartiesrelativetotheprincipal objectofthecontractcannotbeascertained v. Thoseexpresslyprohibitedbylaw b. InexistentContracts i. thosewhichareabsolutelysimulatedorfictitious(Articles1345to 1346) ii. thosewhosecauseorobjectdidnotexistatthetimeofthetransaction 3. NoWaiverofDefenseofIllegality(Art.1409) 4. ActionorDefensefortheDeclarationoftheInexistenceofaContract Noprescriptionperiod(Art.1410) Notavailabletothirdpersonsnotdirectlyaffected(At.1421) • •

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Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

PARTTHREE:SPECIFICEXAMPLESOFO PARTTHREE:SPECIFICEXAMPLESOFOBLIGATIONS BLIGATIONS ObligationsCreatedbyLaw A. Estoppel 1. Definition(Art.1431)

Kalalov.Luz,34SCRA337(1970) 2. Kinds a. Technicalestoppel i. byrecord ii. bydeed(Art.1433) b. Equitableestoppelorestoppel Equitableestoppelorestoppelinpais inpais(Art.1433) (Art.1433) 3. PersonsBound(Art.1439)

ManilaLodgeNo.761BenevolentandProtectiveOrderoftheElksv.Court ofAppeals,73SCRA168(1976) 4. Application(Art.1434to1438) Miguelv.Catalino,26SCRA234(1969) Read:Annotation32SCRA542 Mendozav.ReyesandCourtofAppeals,G.R.No.L-31618,August17,1983 B. Trusts 1. Definition(Art.1442) 2. Parties(Art.1440) a. Trustor b. Trustee c. Beneficiaryorcestuique Beneficiaryorcestuiquetrust trust

 Salaov.Salao,70SCRA168(1976) 3. Kinds(Art.1441) a. Expresstrusts i. ii. iii. iv.

Proofrequired(Art.1443) Form(Art.1444) Wantoftrustee(Art.1445) Acceptancebythebeneficiary(Art.1441) 34

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

b. ImpliedTrusts i. ii. iii.

Howestablished(Art1441) Howproved(Art.1457) Specificcases(Art.1448to1456)

Fabianv.Fabian,22SCRA231(1968) Buenov.Reyes,27SCRA1179(1969) Tamayov.Callejo,46SCRA27(1972) HeirsofSanjorjov.Quijano,G.R.No.140457,January19,2005)  AznarBrothersRealtyCompanyv.Aying,G.R.No.144773,May16,2005.  AznarBrothersRealtyCompanyv.Ay ing,G.R.No.144773,May16,2005. ‐o‐

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Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

36

Law101:ObligationsandContractsProf.MaryRoseS.Tan Semester2,AY2011-2012

37