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OBLIGATION juridical necessity to give, to do or not

to do
4 ELEMENTS OF OBLIGATION
1. ACTIVE
SUBJECT
(creditor/obligee)
whose
obligation is constituted
2. PASSIVE SUBJECT (debtor/obligor) has duty to give,
to do or not to do
3. OBJECT/PRESTATION subject matter
4. JURIDICAL/LEGAL TIE (vinculum/efficient cause)
reason
CIVIL OBLIGATION
derived from positive law
enforceable by court action

NATURAL OBLIGATION
derived from equity &
justice
not enforceable by court
action

5 SOURCES OF OBLIGATION
1. LAW
2. CONTRACTS
3. QUASI-CONTRACTS arise from lawful, voluntary
acts; no one shall be unjustly enriched...
2Kinds
a. Solutio indebiti something received (delivered
on a mistake), no right to demand it
b. Negotiorum
gestio
voluntary
mgt
of
property/affairs of another w/o his knowledge/consent
4. QUASI-DELICT/TORTS/CULPA AQUILIANA arise from
damage; fault/negligence
5. CRIMES/ACTS/OMISSIONS punished by law arise
from civil liability that is a consequence of a criminal
offense
DILIGENCE OF A GOOD FATHER OF A FAMILY
- care need to be exercised by a debtor to
deliver/give determinate thing
Exception: When law/stipulation of parties requires a
differnt standard of care (slight/extraordinary
diligence).
When creditor is entitled to the fruits
Rule: The creditor has personal right (right to ask for
delivery) from the time the obligation to deliver arises.
But NO real right (right enforceable against the whole
world) until it is delivered.
3 KINDS OF FRUITS
1. NATURAL w/o human intervention
2. INDUSTRIAL w/ human intervention
3. CIVIL derived by virtue of juridical relation
Creditors rights if debtor fails to comply w/ the
obligation
1. Determinate
a. Performance
b. Damages
2. Generic
a. Performance
b. Damages
c. Obligation be complied at debtors expense

Creditors rights if debtor does in contravention


1. Damages
2. Ask it be UNDONE at debtors expense
FORTUITOUS EVENT cannot be foreseen, if foreseen,
inevitable
General Rule: No person liable to fortuitous event.
Exceptions:
1. Law states
2. Stipulation/contract states
3. Assumption of risk
4. Delay
5. Debtor promises deliver to 2/more persons who do
not have same interest (bad faith)
EFFECTS OF FORTUITOUS EVENT to thing to be
delivered
- extinguish the obligation if determinate; generic does
not extinguish the obligation
3 MISCELLANEOUS RULES ON PERFORMANCE OF
OBLIGA-TION
1. When to deliver determinate, accessions (additions/
improvements) and accessories (joined/included with
the principal) are INCLUDED even not mentioned.
2. If debtor fails to do, it shall be DONE AT HIS
EXPENSE, same with doing the contravention; poorly
done be undone.
3. In obligation not to do, and obligor does what is
forbidden, shall be UNDONE AT HIS EXPENSE.
4 GROUNDS; debtor liable for damages
1. Default/mora
2. Fraud/dolo
3. Negligence/culpa
4. Contrary to terms of obligation
1. DEFAULT/MORA delay
3kinds
a. Mora solvendi debtors delay to give (real ob.),
to do (personal ob.)
b. Mora accipiende creditors delay to accept
c. Compensatio Morae delay of both in reciprocal
obligation
CONCEPT OF DELAY
General Rule: No demand, No delay
Exceptions:
1. Law states
2. Obligation states
3. Time is the essence
4. Demand be useless if delay
5. Debtor guilty of delay

EFFECTS OF DELAY
1. Damages
2. When to deliver determinate thing, STILL LIABLE in
fortuitous event.
2. FRAUD/DOLO conscious, deliberate, intentional
evasion of fulfillment
2Kinds
a. Dolo causante/Causal fraud fraud in obtaining
consent; consent is defective, contract is voidable.
Remedy: annulment
b. Dolo incidente/Incidental fraud fraud w/c
vitiates consent. Remedy: damages
3. NEGLIGENCE/CULPA voluntary act/omission; no
bad faith intended
3Kinds
a. Culpa
aquiliana/Civil
negligence
quasidelict/torts
b. Culpa contractual/Contractual negligence
breach
c. Culpa criminal/Criminal negligence crime/delict
4. Contrary to the terms of obligation
2 RULES OF PRINCIPAL & INSTALLMENT
1. Receipt of principal w/o mention of interest,
presumed interest is paid also.
2. Receipt of latter installment w/o mention of prior
installment, presumed prior installment is paid also.
4 SUCCESSIVE RIGHTS OF CREDITOR to satisfy claim
against DEBTOR
1. Exact payment
2. Attach debtors properties
3. Accion subrogatoria exercise rights & actions
except inherent in person
4. Accion pauliana cancel acts/contracts by debtor to
defraud creditor
TRANSMISSIBILITY OF RIGHTS
General Rule: ALL RIGHTS are transmissible.
Exceptions:
1. Law states
2. Contract states
3. Obligation is purely personal
10 Kinds of Obligation
1. Pure
2. Conditional
3. Alternative
4. Facultative
5. Joint
6. Solidary
7. Divisible
8. Indivisible
9. Obligation w/ a period
10. Obligation w/ a penal clause

1. PURE OBLIGATION
- w/o condition, demandable at once (pure has
resolutory condition/period)
2. CONDITIONAL OBLIGATION
- there is condition in performance; future & uncertain
2Kinds
a. Suspensive condition happening of condition
gives RISE to obligation
b. Resolutory condition happening of condition
EXTINGUISHES obligation
6
MISCELLANEOUS
RULES
ON
CONDITIONAL
OBLIGATION
1. Impossible conditions, contrary to law, shall ANNUL
obligation.
2. The condition not to do an impossible thing is
considered not agreed upon.
3. The condition that happens in determinate time,
EXTINGUISHES obligation.
4. The condition that happens in INDETERMINATE time,
obligation only effective at arrival.
5. The condition is fulfilled if DEBTOR prevents
fulfillment.
6. The effect of conditional obligation, once fulfilled:
- to give: retroact to the day of constitution of
obligation
- has reciprocal prestations: fruits & interests be
mutually compensated
- has unilateral obligation: debtor shall give fruits &
interests
RULES in case of Loss, Improvement, or Deterioration
of thing during the pendency of condition
1. LOST
a. w/ debtors fault damages
b. w/o debtors fault extinguishes obligation
2. DETERIORATION
a. w/ debtors fault - (1) cancel obligation & damages;
or (2) fulfill obligation w/ damages
b. w/o debtors fault creditor suffer impairment
3. IMPROVEMENT
a. By nature/time benefit to creditor
b. at expense of debtor debtor no right than that
granted to usufructuary (debtor no right to compensate
amount for improvement)
EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITION
General Rule: The obligation becomes effective
retroactively to the day obligation was constituted.
Exceptions:
1. In reciprocal obligation, fruits & interests during
pendency of condition shall compensate each other.
2. In unilateral obligation, debtor gets fruits &
interests unless there is a contrary intent.

3 EFFECTS OF FULFILLMENT OF RESOLUTORY


CONDITION
1. Extinguish obligation.
2. Both parties restore what they received plus fruits &
interests.
3. The rule on L, D, or I will apply to person who has to
return the thing.
When one of debtors in reciprocal obligation does
not comply w/ his obligation
1. The right of injured party is (1) cancel contract &
damages; or (2) fulfill obligation & damages
3 Kinds of Obligation (Accdng to PERSON OBLIGED)
1. UNILATERAL only 1 party obliged to comply
2. BILATERAL both parties; performance not same
time
3. RECIPROCAL both parties; performance same time
3. OBLIGATION W/ A PERIOD
- demandability/extinguishment
expiration of period

subject

PERIOD
interval
of
time;
either
demandability or produces extinguishment

to

the

suspends

DAY CERTAIN must come, not known when


7 CASES CONSIDERED TO BE OBLIGATION W/ A
PERIOD
1. Little by little
2. In partial payment
3. Payable ASAP
4. When I can afford it
5. When I have the money
6. When I am able to
7. When my means permit me to do so
PERIOD
certain
future only
(*influence upon obligation)
only upon its demandability

CONDITION
uncertain
future/past but unknown
(*) on the very existence of
obligation itself

FOR WHOSE BENEFIT IS THE PERIOD?


General Rule: Both the debtor & creditor.
Therefore, NEITHER of them can demand performance
of obligation.
Exception: If the term of obligation has to favor one of
them.

5. FACULTATIVE OBLIGATION
- w/ ONLY 1 prestation but can be substituted.
ALTERNATIVE prestations LOST w/ debtors fault
Creditor entitled to damages but needs ff requisites:
1. Debtor can choose.
2. All prestations lost/become impossible due to
debtors fault.
ALTERNATIVE OBLIGATION
several prestations due,
giving one is sufficient
right to choose (debtor)
unless granted to creditor
If 1 of the prestation is
illegal, others may be valid,
obligation remains
loss/impossibility of ALL
prestations due, w/o
debtors fault, extinguishes
obligation

FACULTATIVE OBLIGATION
one prestation due, but can
be subtituted
right to choose DEBTOR ONLY
nullity of principal carries
w/ it nullity of accessory/
substitute
loss/impossibility of prestation due, w/o debtors fault,
extinguishes obligation

(3) SUMMARY OF RULES, OBLIGATIONS, & RIGHTS OF


DEBTOR IN ALTERNATIVE OBLIGATION
1. If 1 of prestations lost through fortuitous event,
shall still be perform by choosing (creditor) from the
remainder.
2. If 1 of prestations lost through debtors fault,
creditor may claim any of remainders w/ damages.
3. If ALL prestations lost through debtors fault,
creditor choose price w/ damages.
RULES on LOSS/DETERIORATION of the thing intended
as SUBSTITUTE in FACULTATIVE OBLIGATION
1. If there is a loss/deterioration of thing intended as
substitute, debtor is NOT liable if NOT HIS FAULT.
But if substitution is already made, debtor is liable for
loss of substitute when in DELAY, NEGLIGENCE, or
FRAUD.
6. JOINT OBLIGATION
- obligation is to be paid proportionately by debtors or
to be demanded proportionately by creditors
7. SOLIDARY OBLIGATION
- each one of debtors has right to render or each one of
creditors has right to demand the entire compliance w/
prestation
MAXIMS & SYNONYMS

5 INSTANCES WHEN DEBTOR LOSES RIGHT TO USE


PERIOD
1. Debtor is insolvent.
2. Debtor attempts to abscond.
3. Impairment of guarantees/securities.
4. Failure to furnish guarantees/securities promised.
5. Violation of undertaking.
4. ALTERNATIVE OBLIGATION
- w/ 2 or more prestations, only 1 is due.

JOINT Obligation
SOLIDARY
Obligation

MAXIMS
To each his
own
One for all, all
for one

SYNONYMS
proportionate
individually &
collectively

(3) SOLIDARY OBLIGATION EXIST ONLY IF: *RULES

1. Law states
2. Stipulation states
3. Nature of obligation requires
2 PRESUMPTIONS THAT OBLIGATION IS JOINT
1. The debts be divided as many shares as there are
debtors/creditors.
2. The debtors/creditors are distinct from one another.
8. DIVISIBLE OBLIGATION
- prestation is capable of partial performance
9. INDIVISIBLE OBLIGATION
- prestation incapable of partial performance
10. OBLIGATION W/ A PENAL CLAUSE
- one w/ accessory undertaking attached to obligation
to assume greater liablity in case of breach/nonfulfillment of obligation
3 PURPOSES OF PENAL CLAUSE
1. Ensure performance of obligation
2. Substitute for damages & interest in case of
noncompli-ance
3. Penalize debtor in case of breach
In case obligation has a PENAL CLAUSE
General Rule: Penalty takes the place of damages &
interest in case of non-compliance.
Exceptions:
1. Stipulation states.
2. Debtor refuse to pay penalty.
3. Debtor guilty of fraud in performance of obligation.
NULLITY OF PRINCIPAL OBLIGATION OR THE PENAL
CLAUSE
Nullity of principal obligation = nullity of penal clause
Nullity of penal clause = NOT nullity of principal
obligation
10 MODES OF EXTINGUISHMENT OF OBLIGATIONS
1. Payment or performance
2. Prescription
3. Compensation
4. Confusion/merger
5. Condonation/remission
6. Fulfillment of resolutory condition
7. Annulment
8. Rescission
9. Novation
10. Loss of thing due
1. PAYMENT/PERFORMANCE
- Payment means delivery of money & performance of
obligation
2 PLACE OF PAYMENT
1. At place agreed upon
2. If w/o agreement
a. Object is indeterminate paid at domicile of
DEBTOR
b. Object is determinate place of thing at the time of
constitution of obligation

4 SPECIAL MODES OF PAYMENT


a. Application of payment
b. Cession
c. Tender of payment & consignation
d. Dacion in payment
a. APPLICATION OF PAYMENT
- designation of debt to w/c payment must be
applied when debtor has several obligations of same
kind in favor of same creditor.
3 REQUISITES OF APPLICATION OF PAYMENT
1. Only 1 debtor & 1 creditor
2. 2 or more debts, same kind
3. All debts are due
4. Insufficient payment to exinguish ALL debts
3 RIGHTS TO MAKE APPLICATION OF PAYMENT
1. Right belongs to CREDITOR.
2. If debtor does not avail, creditor can give him
receipt designating the debt from which payment will
be applied.
3. If debtor accepts the receipt, he cannot complain
unless THERE IS just cause to invalidate the contract.
b. CESSION
- debtor abandons ALL his property for creditors
benefit to obtain payment from proceeds of his
property
5 REQUISITES OF VALID CESSION
1. 1 debtor & 2 or more creditors
2. Debtor is in partial/total insolvency.
3. Debtor to deliver ALL his property to creditors
4. Debt is due & demandable.
5. Creditors must sell the properties & apply the
proceeds to their respective credits proportionately.
c. DACION IN PAYMENT (dacion en pago)
- alienation of property to the creditor in satisfaction
of debt
3 REQUISITES OF DACION IN PAYMENT
1. Consent of creditor
2. NOT prejudicial to another creditor
3. Debtor not insolvent declared by a judicial decree
CESSION
all properties
require more than 1 creditor
NOT act of novation
NOT transfer ownership
requires partial/total insolvency

DACION IN PAYMENT
NOT all properties
NOT require all creditors
act of novation
transfer ownership
may happen
during solvency of debtor

d. TENDER OF PAYMENT & CONSIGNATION


TENDER OF PAYMENT act of offering the creditor
what is due to him w/ a demand that the creditor
accept it

CONSIGNATION act of depositing thing due w/ the


court when creditor cannot/refuses acceptance of
payment

1. As to effect
a. TOTAL obligations completely extinguished.
b. PARTIAL a balance remains

5 REQUISITES OF CONSIGNATION
1. Debt due.
2. Creditor refused the tender of payment w/o just
cause
3. Notice of consignation already given to persons
interested in fulfillment of obligation
4. Consignation of thing/amount due
5. Subsequent notice of consignation to interested
persons

2. As to origin or cause
a. LEGAL by law
b. VOLUNTARY/CONVENTIONAL agreement of parties
c. JUDICIAL order from the court
d. FACULTATIVE 1 of parties can choose/oppose
claiming compensation

5 VALID CONSIGNATION W/O PREVIOUS TENDER OF


PAYMENT
1. Creditor is absent/unknown.
2. Creditor is incapacitate to receive at time it is due.
3. Creditor refused give a receipt, w/o just cause.
4. 2 or more persons claim the right to collect.
5. Title of obligation lost.

6. NOVATION
- substitution/change of obligation
- substitution of debtor
- subrogation of creditor

2. LOSS OF THING DUE


- perishes, disappears, or goes out of commerce;
existence is unknown; cannot be recovered

(3) OBLIGATIONS MAY BE MODIFIED BY:


1.
Changing
object/principal
conditions. (REAL
NOVATION)
2. Changing the person of debtor/creditor. (PERSONAL
NOVATION)
a. Substitution change of debtor
b. Subrogation change of creditor
3. Changing person of the parties & the objects of
principal condition. (MIXED NOVATION)

3 REQUISITES TO EXTINGUISH OBLIGATION DUE TO


LOSS
1. Determinate thing.
2. W/o debtors fault.
3. No delay.

4 REQUISITES OF NOVATION
1. Old valid obligation.
2. Agreement of parties to new obligation.
3. Extinguishment of old obligation.
4. Validity of new obligation.

3. CONDONATION/REMISSION
- gratuitous abandonment of right by the creditor

2 FORMS OF NOVATION BY SUBSTITUTION OF DEBTOR


1. EXPROMISION w/ consent of creditor, NO consent of
old debtor
2REQUISITES
a. Initiative of 3rd person.
b. Consent of creditor.
2. DELEGACION all must agree (creditor, old debtor,
new debtor)
3REQUISITES
a. Initiative from old debtor.
b. Consent of debtor.
c. Acceptance by creditor.

3 REQUISITES OF A VALID CONDONATION/REMISSION


1. It must be gratuitous.
2. Accepted by obligor.
3. Obligation is demandable.
4. CONFUSION/MERGER
- meeting in 1 person of qualities of debtor & creditor
w/ same obligation
3 REQUISITES OF VALID CONFUSION/MERGER
1. The merger of characters of debtor & creditor must
be in same person.
2. Take place between principal debtor & creditor.
3. Clear & definite.
5. COMPENSATION
- 2 persons are debtors & creditors of each other
6 ESSENTIAL REQUISITES OF COMPENSATION
1. Parties both principal debtors & creditors of each
other.
2. Compensation is not prohibited by law.
3. No retention/controversy by 3rd person.
4. 2 debts are due & demandable.
5. 2 debts are liquidated.
6. 2 debts both in money/consumable things.
(2) CLASSES OF COMPENSATION

7. SUBROGATION
- change of creditor
2 KINDS OF SUBROGATION
1. CONVENTIONAL consent of original parties &
3rd person
2. LEGAL by law
a. creditor pays another preferred creditor even
w/o debtors knowledge
b. 3rd person pays the express approval of debtor
c. 3rd person pays even w/o knowledge of debtor

b. Contracts involving rights/credits


c. Contracts involving services
CONTRACT meeting of minds between 2 persons to
give something or to render service.
3 ELEMENTS OF CONTRACT
1. ESSENTIAL w/o them, contract cannot exist
a. CONSENT of contracting parties
b. OBJECT CERTAIN subject matter
c. CAUSE/CONSIDERATION
In some contracts, ff are also essential:
d. FORM
e. DELIVERY
2. NATURAL found in certain contract, presumed to
exist unless stipulated
3. ACCIDENTAL various particular stipulations that
may be agreed upon by contracting parties
(7) CLASSIFICATION OF CONTRACTS
According to:
1. PERFECTION/FORMATION
a. CONSENSUAL perfected by mere consent
b. REAL perfected by delivery
c. FORMAL/SOLEMN
special
formalities
essential before perfection of contract

5
BASIC
PRINCIPLES/CHARACTERISTICS
OF
CONTRACT
1. PRINCIPLE OF AUTONOMY (liberty to contract)
Provided they are not contrary to:
a. Law
b. Morals
c. Good customs
d. Public order
e. Public policy

2. MUTUALITY OF CONTRACTS
- the contract must bind both parties; its
validity/compliance cannot be left to the will of one of
them
are

2. PARTIES OBLIGATED
a. UNILATERAL only 1 has obligation
b. BILATERAL both parties require to render
reciprocal prestations
3. CAUSE
a. ONEROUS exchange of considerations
b. GRATUITOUS no consideration received in
exchange of what is given
c. REMUNERATORY something is given for
benefit/service that had been rendered previously
4. RISK OF FULFILLMENT
a. COMMUTATIVE equivalent values are given by
both parties
b. ALEATORY fulfillment of contract depends on
chance (eg. insurance)
5. IMPORTANCE
a. PRINCIPAL contract may stand alone (eg. sale,
partnership)
b. ACCESSORY existence depends on another
contract (pledge, guarantee)
c. PREPARATORY contract not an end by itself but a
means thru w/c other contracts may be made (eg.
agency)
6. NAME
a. NOMINATE contract given a particular/special
name (eg. partnership)
b. INNOMINATE not given special name (eg. I give
that you may give)
7. SUBJECT MATTER
a. Contracts involving things

3 STAGES OF CONTRACT
1. PREPARATION/CONCEPTION preparatory steps to
perfect contract
2. PERFECTION/BIRTH meeting of minds between 2
contracting parties
3. CONSUMMATION/TERMINATION terms of contract
are performed, & contract is fully executed

3. RELATIVITY OF CONTRACTS
- Contracts take effect only between the parties, their
assigns & heirs except when there are rights &
obligations not transmissible:
a. by their nature
b. by stipulation (stipulation por autri)
c. by provision of law
4. CONSENSUALITY OF CONTRACTS
- Contracts are perfected by mere consent
Exceptions:
a. REAL CONTRACTS perfected by delivery
b. FORMAL/SOLEMN CONTRACTS special
required for its perfection

form

5. OBLIGATORINESS OF CONTRACTS
- The contract, once perfected, has the force of law
between parties which bound to comply in good faith
4 KINDS OF INNOMINATE CONTRACTS
1. I give that you may give
2. I do that you may do
3. I give that you may do
4. I do that you may give
4 RULES FOR INNOMINATE CONTRACTS
1. Agreement of parties
2. Law on Obligations & Contracts
3. Rules on most analogous nominate contract
4. Customs of place
STIPULATION POR AUTRI
- stipulation in favor of 3rd person
5 REQUISITES OF STIPULATION POR AUTRI
1. Stipulation in favor of 3rd person

2. Stipulation is only PART, not the whole of the


contract.
3. Both parties must conferred upon a favor of
3rd person
4. 3rd person must accept & say it to debtor before its
revocation/cancellation
5. Neither of both parties be the legal
representation/autho-rization of 3rd person

- NOTE: When there is a DEFECTIVE CONSENT of EITHER


of parties, contract is voidable; Remedy:annulment of
contract.
1. MISTAKE/ERROR
2. FRAUD/DECEIT
3. VIOLENECE
4. INTIMIDATION
5. UNDUE INFLUENCE

CONSENT
meeting
of offer
(absolute) upon a thing

1. MISTAKE/ERROR
- wrong conception & lack of knowledge upon a thing

(certain)

&

acceptance

(2) MISTAKES W/C VITIATES CONSENT


It should refer to:
1. substance of thing that is the OBJECT of contract
2. conditions w/c MOVED either/both parties to enter
into contract

5 REQUISITES OF CONSENT
1. Must be given by 2 or more parties
2. Parties are capacitate to enter in contract
3. No vitiation of consent
4. No conflict between declared & intended
5. Legal formalities must be complied
7 RULES ON OFFER/ACEPTANCE
1. An offer must be certain.
2. Business advertisements for sale are NOT offers but
ONLY invitations to make an offer.
3. Advertisements for bidders are ONLY invitations.
4. An acceptance made by letter/telegram does NOT
bind offeror EXCEPT from the TIME it came to his
knowledge.
5. An offer made through an agent is accepted from
the TIME the acceptance is done through an agent.
6. An offer is ineffective upon death, insanity,
insolvency, of EITHER party BEFORE acceptance is
made.
7. When offeror allowed offeree a certain period
to accept, offer MAY be withdrawn AT ANYTIME unless
there is something PAID/PROMISED.
3 persons who CANNOT GIVE CONSENT
contract (if entered into, contract is voidable)
1. UNEMANCIPATED MINORS
2. INSANE/DEMENTED PERSONS (unless they
DURING LUCID INTERVAL)
3. DEAF-MUTES who DO NOT know how to write

to

acted

DEMENTED PERSON NOT exactly insane; difficult to


distin-guish right from wrong
LUCID INTERVAL period when an INSANE has acquired
SANITY temporarily, therefore, capacitated to enter
into a valid contract
2 RULES on persons WHO CANNOT GIVE CONSENT to a
contract
1. Age of majority is 18 yrs old
2. A contract entered into by UNEMANCIPATED MINOR
w/o parents/guardians consent is voidable, except:
a. Minor MISREPRESENTS his age (estoppel)
b. Contract involves sale & delivery of necessities to
minor
5 VICES OF CONSENT

4 RULES ON MISTAKE
1. Mistake to identity/qualifications of either of
parties will vitiate consent ONLY when IT is
theprincipal cause of contract.
2. Simple mistake of account must be corrected.
3. No mistake if parties knew the risk/doubt affecting
OBJECT of contract.
4. When one of parties is unable to read or the contract
is in language not understood by him, & mistake/fraud
is alleged, the person enforcing the contract must
FULLY explained the terms to him.
2. FRAUD/DOLO
- when through insidious words/machinations of one of
the parties, INDUCED the other to enter into a
contract, & w/o them, he will not agree.
DOLO CAUSANTE
Serious
cause induces party to ENTER
into contract
make contract voidable

DOLO INCIDENTE
Not serious
NOT the cause to enter into
contract
contract is valid; liable
fordamages

7 RULES OF FRAUD
1. Failure to disclose facts when these needs to be
revealed, is a fraud.
2. Fraud should be SERIOUS (dolo causante) & SHOULD
NOT be done by BOTH parties to make
contractvoidable.
3. Incidental fraud (dolo incidente) ONLY obliges person
to PAY DAMAGES.
4. Usual exaggerations in trade, when other party know
the real facts, is NOT FRAUD.
5. A mere expression of opinion is NOT FRAUD UNLESS
made by an expert & the other party relies on his
special knowledge.
6. Misrepresentation made in good faith is NOT FRAUD
but may constitute an error.
7. Misrepresentation by 3rd person DOES NOT vitiate
consent UNLESS it created substantial mistake.
3. VIOLENCE
- serious/irresistible force is employed.

2 RULES ON VIOLENCE
1. Serious/irresistible
force is
employed
w/c
constitutes the reason why one entered into a contract.
2. Violence ANNULS obligation although it is DONE by
3rd person not part of contract.

4. INTIMIDATION
- 1 of the parties is compelled by a reasonable & wellgrounded fear of an imminent & grave evil upon his
person/property to give his consent.
3 RULES ON INTIMIDATION
1. Age, sex, & condition of person must used to
determine the degree of intimidation.
2. Intimidation ANNULS obligation although it is DONE
by 3rd person not part of contract.
3. A threat to enforce ones claim (claim must be just
& legal), DOES NOT vitiate consent.
VIOLENCE
External
Physical contact/coercion

2. Services not contrary to law, morals, good customs,


public order, public policy
3. Services/things must NOT be legally/physically
impossible
4. Services/things are w/in commerce of man including
future things
5. Rights are NOT TRANSMISSIBLE.
6. Determinate (kind) or determinable ( w/o the need
of new contract/agreement)
7.
NO
contract
be
entered
for future
inheritance UNLESS law states
4 REQUISITES OF CAUSE
1. It is just & equitable.
2. It exists.
3. It is lawful.
4. It is true.
LESION
- inadequacy of cause (eg. insufficient price for thing
sold)

INTIMIDATION
RULES ON LESION
Internal
NO physical coercion; ONLY - Lesion DOES NOT invalidate contract, except there is:
a. Fraud
MENTAL/MORAL coercion
b. Mistake
c. Undue influence

5. UNDUE INFLUENCE
- a person takes improper advantage of his power over
others will, depriving the other to hisreasonable
freedom of choice.
3 RULES ON UNDUE INFLUENCE
1. There is a person who takes improper advantage of
his power over others will, depriving the other to
his reasonable freedom of choice.
2. Undue influence ANNULS obligation although it is
DONE by 3rd person not part of contract.
3. To constitute undue influence, ff circumstances must
be considered: (1) confidential, family, spiritual, &
other relations of parties; or (2) the aggrieved party is
suffering from mental weakness; or (3) ignorant; or (4)
in financial distress.

SIMULATION OF CONTRACT
- process of INTENTIONALLY deceiving others by
producing a contract not really exist (absolute
simulation), or
w/c
is
different
from
true
agreement (relative simulation).
2 KINDS OF SIMULATED CONTRACT
1. ABSOLUTE SIMULATION (the parties DO NOT intend
to be bound at all)
- completely fictitious/make-believe; VOID
2. RELATIVE
SIMULATION (parties
conceal
their
true/real agreement)
- parties are bound to real/true agreement, EXCEPT:
a. contract prejudice 3rd person
b. purpose is contrary to law, morals, good customs,
public order, public policy
7 REQUISITES OF OBJECT OF CONTRACT
1. Specific & certain

2 FORM OF CONTRACTS
1. Contracts in writing
2. Contracts in a public instrument
1. Contracts w/c must be IN WRITING to be valid:
a. Donation of personal property exceeds P5000.
b. Agents authority in sale of land/any interest.
c. Contract of antichresis.
d Stipulation to pay interest on loans.
e. Stipulation to reduce common carriers
extraordinary diligence & to limit its liability.
2. Contracts w/c must be IN A PUBLIC INSTRUMENT to
be valid:
a. Donation of real property (both the donation &
accep-tance).
b. Sale of real property.
c. Partnership where real property/rights is
contributed; or when capital contribution exceeds
P3000.
REFORMATION OF INSTRUMENTS
- REMEDY in equity in w/c a written instrument is
made/construed to the REAL intention of parties when
there is an error/mistake.
(5) CASES REFORMATION OF INSTRUMENT IS
AVAILABLE
1. Mutual mistake of parties.
2. One party was mistaken & the other acted fraud.
3. One party was mistaken & the other knew/believed
that the instrument did not state their REAL
agreement.

4. Ignorance, lack of skill, negligence, or bad faith of


person drafting the instrument DOES NOT state the
TRUE INTENTION of parties
5. Two parties agree on mortgage/pledge of
personal/real property BUT the instrument states the
property is sold ABSOLUTELY, or w/ the right to
repurchase.

(3) NO REFORMATION OF INSTRUMENT WHEN:


1. Simple donation inter vivos where NO CONDITION is
imposed.
2. Will.
3. Real agreement is VOID.
4 KINDS OF DEFECTIVE CONTRACTS
1. RESCISSIBLE valid until rescinded; has ALL essential
requisites but because of injury/damage to one of the
parties, the contract may be rescinded.
2. VOIDABLE valid until annulled; has ALL essential
requisites but because of defect in consent, contract
may be annulled.
3. UNENFORCEABLE cannot be sued/enforced unless
ratified; no effect NOW but may take effect upon
ratification.
4.
VOID
NO
effect
at
all; cannot
be
ratified/validated.
5 RESCISSIBLE CONTRACTS
1. Those entered by guardians & suffered LESION by
more than of value of the value that is the OBJECT.
2. Those agreed upon in representation of absentees, if
the absentees suffered LESION.

3. Those undertaken in FRAUD of creditors when the


creditors cannot further claim.
4. If entered into contract w/o knowledge/approval of
litigants under litigation.
5. Contracts subjected to rescission declared by law.
3 VOIDABLE CONTRACTS
1. One of the parties INCAPABLE of giving consent to a
contract.
2. Those where consent vitiates by vices of consent.
(MFVIU)
3. Those agreed in the state of drunkenness/hypnotic
spell.
3 UNENFORCEABLE CONTRACTS
1. Those entered in name of other person, or who
acted BEYOND his powers.
2. Those who do not comply w/ the Statute of Frauds.
3. Both parties are incapable of giving consent to a
contract.
7 VOID/INEXISTENT CONTRACTS
1. Those w/c are ABSOLUTELY simulated/fictitious.
2. Those w/c contemplate an impossible service.
3. Those whose OBJECT is outside the commerce of
man.
4. Those whose CAUSE/OBJECT did not exist at time of
tran-saction.
5. Those whose CAUSE/OBJECT/PURPOSE is contrary to
law, morals, good customs, public order, or public
policy.
6. Those where INTENTION of parties to principal
object CANNOT be ascertained.
7. Those expressly prohibited/declared VOID by law.