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SECTION 4 : JOINT AND SOLIDARY OBLIGATONS “We promise to pay, “ when there are two o more signatures

== JOINT LIABILITY
ART. 1207 – The concurrence of two or more creditors or two “ I promise to pay, “ when there are two or more signatures ==
of more debtors and one and the same obligation does not imply SOLIDARY LIABLITY
that each one of the former has a right to demand, or that each
one of the latter is bound to render, entre compliance with the SOME CONSEQUENCES OF JOINT LIABILTY
prestation.  Vitiated consent on the part of one debtor does not
affect the others.
There is a solidary liability only when the obligation expressly  Insolvency of one debtor does not make others
so states, or when the law or the nature of the obligation requires responsible for his share.
solidarity.  Demand by the creditor on one joint debtor puts him in
default, but not the others since the debt are distinct.
JOINT O. – each obligor answers only for a part of the whole  When the creditor interrupts the running of the pp by
liability and to each oblige belongs only part of the correlate demanding judicially from one, the others are not
rights ; “TO EACH HIS OWN” affected.
SOLDARY O. – “ONE FOR ALL, ALL FOR ONE.”  Defenses of one debtor are not necessarily available to
EX: A and B are solidary debtors of C to the amount the others.
of 1M. C can demand the whole 1M from A. A in turn, after
paying C can ask for reimbursement from B to the amount of LIABLITIES OF PARTNERS
500k. If it arises out of the contract == liability is joint or pro rata;
EXCEPTION: If the dependents of an employee claim
General rule: where there are two or more debtors or two or compensation for the employees death in line of duty
more creditors, the obligation is JOINT If it arises out of a crime or a quasi-delict == liability is
Exceptions: solidary
 When there is a stipulation in the contract that the
oblation is solidary LIABLITIES OF AGENTS
 The nature of the obligation requires liability to be In general it is JOINT, even if appointed at the same time,
solidary unless solidarity has been agreed upon.
 The law declares the obligation to be solidary

INSTANCES WHEN THE LAW IMPOSES SL LIABLITIES OF CO-PRINCIPALS (AGENCY)


 Obligations arise from tort Solidary
 O arise from quasi-contracts
 Legal provisions re: the obligations of devisees and LIABLITIES OF HUSBAND AND WIFE
legatees After the conjugal funds have been exhausted, the H and W are
 Liability of PAA of a felony liable JONTLY to creditors of the CPG
 Bailees in commodatum
LIABLITIES OF VIOLATORS
A and B are joint detos of CDE, and F, solidary creditors to the The law does not expressly say so but it is believed to be held
amount of 1M. How much can C collect from A? liable in SOLIDUM
C is a solidary creditor,so presumably he can collect
the whole debt. But since a is only a joint debtor, C is entitled to LIABLITIES OF EMPLOYER AND EMPLOYEE
collect 500k from A. Employer = primary and solidary

Art. 1208 – Art. 1209 — If the division is impossible, the right of the
PRESUMPTION THAT OBLIGATION IS JOINT creditors may be prejudiced only by their collective acts, and the
**When there are 2 or more debtors or 2 or more creditors, the debt can be enforced only by proceeding against all the debtors.
obligation is joint and as a consequence: If one of the latter should be insolvent, the others shall not be
 debt shall be divided into as many equal shares as there liable for his share.
are creditors or debtor,
 the credits or debt will be considered distinct from one INDIVISIBLE JOINT O. – indivisible referring to the object;
another, but re: the bringing of the action in court, the joint referring to the tie between parties who are merely
rules of court governing the multiplicity of suits will be proportionately liable, unless solidarity has been stipulated by
followed. the parties or the law, in which case it is called a solidary
indivisible obligation.
SYNONYMS
JOINT O. – mancomunada ; mancomunada simple; CHARACTERISTICS:
proportionate ; pro rata  O is joint but since the object is indivisible, the creditor
SOLIDARY O. – joint and several; in solidum; mancomunada must proceed against all the joint debtors, for
solidaria; juntos o separadamente; individually and collectively; compliance is possible only of all the joint debtors
each will pay the whole value would act together.
 Demand must be made on all the joint debtors
 If any one of the debtors does not comply with his The creditor who may have executed any of these acts, as well
monetary obligation for damages as he who collects the debt, shall be liable to the others for the
 If any of the joint debtors be insolvent, the others shall share in the obligation corresponding to them.
not be liable for his share
 If there be joint creditors, delivery must be made to all, EFFECT OF NOVATION: Novation is the modification by
and not merely to one, unless that one be specifically changing its object or principal conditions, or by substituting he
authorized by others. person of the debtor, or by subrogating the person of the debtor,
 Each joint creditor is allowed to renounce his or by subrogating a third person in the rights of creditor.
proportionate credit.
EFFECT OF COMPENSATION: Compensation is that which
Art. 1210 – The indivisibility of an obligation does not takes place when two persons, n their own right, are creditors
necessarily give rise to solidarity. Nor does solidarity of itself and debtors of each other.
imply indivisibility.
Indivisibility as distinguished from Solidarity EFFECT OF CONFUSION OR MERGER: Confusion or
 I = refers to the subject matter merger is that which takes place when the characters of creditor
 S = refers to the tie between the parties and debtor are merged in the same person, s when my check in
EXAMPLES: the course of negotiation, is eventually endorsed to me.
 Joint divisible O – A and B are jointly liable to X for
EFFECT OF REMISSION OR WAIVER: Remission or
1M
waiver is that act of liberality whereby a creditor condones the
 Joint Indivisible O – A and B are jointly liable to give
obligation of the debtor; that where the creditor tells the debtor
X this car
to forget about the whole thing.
 Solidary Divisible O – A and B are solidary bound to
give X 1M
Art. 1216. The creditor may proceed against any one of the
 Solidary Indivisible O – A and B are solidary bound solidary debtors or some or all of them simultaneously. The
to give X this car demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the others, so
KINDS OF SOLIDARITY long as the debt has not been fully collected.
 ACTIVE = on the part of the creditors or obliges
 PASSIVE = on the part of the debtors or obligors EFFECT OF NOT PROCEEDING AGAINST ALL
 MIXED = both If the creditor sues only one, or two or several of the debtors,
 CONVENTIONAL = agreed upon by the parties there is no waiver against those no yet sued. They may be
 LEGAL = imposed by law proceeded against later.
Art. 1211 – Solidarity may exist although the creditors and the APPLICABLITY: applicable only to solidary obligations, not
debtors may not be bound in the same manner and by the same to joint ones; applies to passive and mixed solidarity
periods and condition.
PASSIVE SOLIDARTY: solidarity among debtors
WAYS IN WHICH DEBTORS MAY BE BOUND (ACCDG
TO SANCHEZ)
PASSIVE S. SURETYSHIP
UNIFORM – when the debtors are bound by the same
stipulations and clauses
Both guarantees for another person
OTHERWISE – where the obligors though liable for the same
Both can demand reimbursements
prestation, are nevertheless not subject to the same secondary
 indebted for his own  indebted for the
stipulations and clauses.
share only share of the principal
debtor
Art. 1212 – Each one of the solidary creditors may do whatever
 can be reimbursed for  can be reimbursed fo
may be useful to the others, but no anything which may be
what he has paid everything he has
prejudicial to the latter.
minus his own share paid
Art. 1213 – A solidary creditor cannot assign his rights without
 if there’s an  if a principal debtor
the consent of the others.
extension of the receives an extension,
period of payment— without the surety’s
Art. 1214 – The debtor may pay any one of the solidary
the others are still consent, the surety s
creditors; but if any demand, judicial or extrajudicial, has been
liable for the whole released.
made by one of them, payment should be made to him.
obligation now minus
the share of the
Art. 1215 – Novation, compensation, confusion or remission
debtor who has
of the debt, made by any of the solidary creditors or with any
received the
of the solidary debtors, shall extinguish the obligation, without
extension
prejudice to the provisions of article 1219.
Art. 1217 – Payment made by one of the solidary debtors only as regards that part of the debt for which the latter are
extinguishes the obligation. If two or more solidary debtors responsible.
offer to pay, the creditor may choose which offer to accept.
KINDS OF DEFENSES
He who made the payment may claim from his co-debtors
only the share which corresponds to each, with the interest **those derived from the nature of the obligation (complete
for the payment already made. If the payment is made before defense)
the debt is due, no interest for the intervening period may be  Lack of consideration or cause
demanded.  absolute simulation
 illegal consideration
When one of the solidary debtors cannot, because of his  extinguishment of the obligation
insolvency, reimburse his share to the debtor paying the  non-fulfillment of the suspensive condition
obligation, such share shall be borne by all his co-debtors, in  statute of frauds
proportion to the debt of each.  when all the debtors were incapacitated to give
consideration
PAYMENT = one of the ways by which an obligation is  when there are vices of consent
extinguished and consists in the delivery of the thing or the
rendition of the service which is the object of the obligation. **those personal to the debtor sues (in general it is a
complete defense, but if the defense is non-fulfillment yet of
Art. 1218 – Payment by a solidary debtor shall not entitle him a condition or the non-arrival yet of the term, this is only a
to reimbursement from his co-debtors if such payment is made partial defense)
after the obligation has prescribed or become illegal  vitiated consent – complete defense
 incapacity to give consent (minor) – complete defense
EFFECT OF PAYMENT OF AN ILLEGAL OBLGATION  non-fulfillment of the condition imposed regarding hs
**No reimbursement share – partial defense
 non-arrival of term – partial defense
Art. 1219 – The remission made by the creditor of the share
which affects one of the solidary debtors does not release the ** those personal to the others – same as partial defense re:
latter from his responsibility towards the co-debtors, in case the share of others involved
debt had been totally paid by anyone of them before the
remission was effected. SECTION 5: DIVISIBLE AND INDIVISIBLE
OBLIGATIONS
Art. 1220 – The remission of the whole obligation, obtained by
one of the solidary debtors, does not entitle him to DIVISIBLE = capable of partial performance
reimbursement from his co-debtors. INDIVISIBLE = one not capable of partial performance

Art. 1221 – If the thing has been lost or if the prestation SOLIDARITY INDIVISIBLITY
has become impossible without the fault of the solidary o tie between parties o nature of the
debtors, the obligation shall be extinguished. o needs at least 2 obligation
debtors or creditors o may exists even if
If there was fault on the part of any one of them, all shall be
o the fault of one is the there is only 1 debtor
responsible to the creditor, for the price and the payment of
fault of the others and 1 creditor
damages and interest, without prejudice to their action against
o the fault of one is not
the guilty or negligent debtor.
the fault of the others.
If through a fortuitous event, the thing is lost or the
performance has become impossible after one of the solidary CLASSES OR KINDS OF INDIVISIBILITY
debtors has incurred in delay through the judicial or  conventional indivisibility
extrajudicial demand upon him by the creditor, the  natural or absolute ind.
provisions of the preceding paragraph shall apply.  legal ind.

EFFECT OF LOSS OR IMPOSSIBILITY KINDS OF DIVISION


 WITHOUT FAULT = no liability  Quantitative = depends on quantity
 WITH FAULT = there is liability also for damages  Qualitative = quality
and interest  Intellectual or Moral = exists only in mind
 LOSS BEC. OF FE AFTER DEFAULT = there will
be liability because of the default Art. 1224 — A joint indivisible obligation gives rise to
indemnity for damages from the time anyone of the debtors does
Art.1222 – A solidary debtor may, in actions filed by the not comply with his undertaking. The debtors who may have
creditor, avail himself of all defenses which are derived from the been ready to fulfill their promises shall not contribute to the
nature of the obligation and of those which are personal to him, indemnity beyond the corresponding portion of the price of the
or pertain to his own share. With respect to those which thing or of the value of the service in which the obligation
personally belong to the others, he may avail himself thereof consists.
performance thereof should become impossible without his
EFFECT OF NON-COMPLIANCE fault, the penalty may be enforced.
 The obligation is converted into a monetary one for
indemnity. Art. 1228 – Proof of actual damages suffered by the creditor is
not necessary in order that the penalty may be demanded.
Art. 1225 –
Art. 1229 – The judge shall equitably reduce the penalty when
OBLIGATIONS THAT ARE DEEMED INDIVISIBLE the principal obligation has been partly or irregularly complied
o Obligations to give definite things with by the debtor. Even if there has been no performance, the
o Those which are no susceptible of partial performance penalty may also be reduced by the courts if it is iniquitous or
o Even if the thing is physically divisible, it may be unconscionable.
indivisible f so provided by law
o Even if the thing is physically divisible, it may be Art. 1230 – The nullity of the penal clause does not carry with it
indivisible if such was the intention of the parties that of the principal obligation.
concerned.
The nullity of the principal obligation carries with it that of the
OBLIGATIONS THAT ARE DEEMED DIVISIBLE penal clause
o When the object of the obligation is the execution of a
certain number of days of work CHAPTER 4: Extinguishment of Obligations
o When the object o the obligation is he accomplishment
of work by metrical units Art. 1230 – Obligations are extinguished
o When the purpose of the obligation is to pay a certain (1) By payment or performance;
amount in installments (2) By the loss of the thing due;
o When the object of the obligation is the (3) By the condonation or remission of the debt;
accomplishment of wok susceptible of partial (4) By the confusion or merger of the rights of
performance creditor and debtor;
(5) By compensation;
SECTION 6: OBLIGATIONS WITH A PENAL CLAUSE (6) By novation.

Art. 1226 – In obligations with a penal clause, the penalty shall Other causes of extinguishment of obligations, such as
substitute the indemnity for damages and the payment of annulment, rescission, fulfillment of a resolutory condition, and
interests in case of noncompliance, if there is no stipulation to prescription, are governed elsewhere in this Code.
the contrary. Nevertheless, damages shall be paid if the obligor
refuses to pay the penalty or is guilty of fraud in the fulfillment Art. 1232. – Payment means not only the delivery of money but
of the obligation. also the performance, in any other manner, of an obligation.

The penalty may be enforced only when it is demandable in Art. 1233 – A debt shall not be understood to have been paid
accordance with the provisions of this Code. unless the thing or service in which the obligation consists has
been completely delivered or rendered, as the case may be.
PENAL CLAUSE = a coercive means to obtain from the debtor
compliance from the debtor HOW PAYMENT OR PERFORMANCE IS MADE
PURPOSE: insure the performance of an obligation and also to  MONETARY O. = delivery of the money
substitute for damages and the payment o interest in case of  DELIVERY OF THINGS = by delivery of the things
non-compliance.  PERSONAL UNDERTAKING = performance of P. U
 NOT DOING OF SOMETHING = refraining from
EXCEPTIONS TO THE GEN. RULE THAT THE doing the act
PENALTY TAKES THE PLACE OF INDEMNITY FOR
DAMAGES AND FOR THE PAYMENT OF NTEREST PROOF OF PAYMENT = receipt
o When there is express stipulation BURDEN OF PROOF = creditor
o When the ebtor refuses to pay the penalty imposed the
obligation Art. 1234 – If the obligation has been substantially performed in
o When the debtor is guilty of fraud or dolo in the good faith, the obligor may recover as though there had been a
fulfillment of the obligation strict and complete fulfillment, less damages suffered by the
obligee.
Art. 1227 – The debtor cannot exempt himself from the
performance of the obligation by paying the penalty, save in the Art.1235 – When the obligee accepts the performance, knowing
case where this right has been expressly reserved for him. its incompleteness or irregularity, and without expressing any
Neither can the creditor demand the fulfillment of the obligation protest or objection, the obligation is deemed fully complied
and the satisfaction of the penalty at the same time, unless this with.
right has been clearly granted him. However, if after the creditor
has decided to require the fulfillment of the obligation, the 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, unless there is a stipulation to the TO WHOM PAYMENT MUST BE MADE:
contrary.  To the person whose favor the obligation has been
constituted
Whoever pays for another may demand from the debtor what he  To the successor-in-interest
has paid, except that if he paid without the knowledge or against  To any person authorized to receive it
the will of the debtor, he can recover only insofar as the
payment has been beneficial to the debtor.
Art. 1241 – Payment to a person who is incapacitated to
PAYMENT BY THIRD PERSON administer his property shall be valid if he has kept the thing
The third person may pay: delivered, or insofar as the payment has been beneficial to him.
 With the knowledge and consent of the debtor
 Without the debtor’s knowledge or against his will Payment made to a third person shall also be valid insofar as
(here the payor is not entitled to subrogation; it has redounded to the benefit of the creditor. Such benefit to
moreover, he is allowed only by beneficial the creditor need not be proved in the following cases:
reimbursements)
1. If after the payment, the third person acquires the
Art. 1237 – Whoever pays on behalf of the debtor without the creditor's rights;
knowledge or against the will of the latter, cannot compel the 2. If the creditor ratifies the payment to the third person;
creditor to subrogate him in his rights, such as those arising 3. If by the creditor's conduct, the debtor has been led to
from a mortgage, guaranty, or penalty. believe that the third person had authority to receive
the payment.
SUBROGATION = act of putting somebody into the shoes of
the creditor, hence enabling the former to exercise all the rights Art. 1242 — Payment made in good faith to any person in
and actions that could have been exercised by the latter. possession of the credit shall release the debtor.

SOME RIGHTS WHICH MAY BE EXECISED BY THE Art. 1243 — Payment made to the creditor by the debtor after
PERSON SUBROGATED IN THE PLACE OF THE the latter has been judicially ordered to retain the debt shall not
CREDITOR be valid.
Rights arising from:
 Mortgage PAYMENT MADE AFTER JUDICIAL ORDER TO
 Guaranty RETAIN
 Penalty or penal clause  The JO may have been prompted by an order of
attachment, injunction or garnishment
SUBROGATION REIMBURSEMENT
GARNISHMENT= proceeding by which a debtor’s creditor is
 Recourse can be had  No recourse subjected to the payment of his own debt to another
to the M, G or pledge INTERPLEADER = technical name of the action in which a
 The debt is  The new creditor has certain person in possession of certain property wants claimants
extinguished in one different rights, so t is to litigate among themselves for the same.
sense, but a new as if there has deed INJUNCTION = a judicial process by virtue of which a person
credtor which has he been an is generally ordered to refrain from doing something.
same righs as the old extinguishment of PRELIMINARY INJUNCTION = takes place if the
ones appears on the obligation prohibition is during the pendency of certain proceedings
scene
 There is something  There is only a Article 1244 – The debtor of a thing cannot compel the
more than a personal personal action to creditor to receive a different one, although the latter may be
action of recovery recover the amount of the same value as, or more valuable than that which is due.

Art.1238 – Payment made by a third person who does not In obligations to do or not to do, an act or forbearance cannot be
intend to be reimbursed by the debtor is deemed to be a substituted by another act or forbearance against the obligee's
donation, which requires the debtor's consent. But the payment will.
is in any case valid as to the creditor who has accepted it.
Art. 1244 does not apply in case of:
REASON WHY DEBTOR HAS TO CONSENT: No one  Facultative obligations
should be compelled to accept the generosity of others.  There is another agreement resulting in either dation in
payment or novation
Art. 1239—  Waiver
Payment made by an Incapacitated person
GEN. RULE: not valid Art. 1245 –
If accepted: creditor cannot be compelled to accept it ; the DATION IN PAYMENT = mode of extinguishing an
remedy of consignation will not be proper obligation whereby the debtor alienates in favor of the creditor,
property for the satisfaction of monetary debt
Art. 1240—
SYNONYMS: datio in solutum of payment only when they have been cashed, or when through
Adjudicacion en pago the fault of the creditor they have been impaired.

SALE DATION IN PAYMENT In the meantime, the action derived from the original obligation
1. No pre-existing 1. Pre-existing credit shall be held in the abeyance.
credit
2. Gives rise to O 2. Extinguishes O Art. 1250—In case an extraordinary inflation or deflation of the
3. CAUSE: 3. CAUSE: currency stipulated should supervene, the value of the currency
 price (seller)  Extinguishment of at the time of the establishment of the obligation shall be the
 object (buyer) debt (debtor) basis of payment, unless there is an agreement to the contrary.
 Acquisition of the
object offered in INFLATION = sharp sudden increase of money or credit or
credit (creditor) both without a corresponding increase in the business
4. greater freedom in 4. Less freedom transaction.
the determination DEFLATION = opposite of inflation
of the price
5. Price=ends the O 5. Object= completely or Art. 1251--
partially extinguishes Where payment must be made:
the O IF THERE IS A STIPULATION = place designated
NO STIPULATION:
CONDITIONS N WHICH A DATION IN PAYMENT  Determinante thing = place where the thing might be at
WOULD BE VALID the the time the obligation was constituted
 If the creditor consents  Generic = domicile of the debtor
 If the dation in payment will not prejudice the other
creditors Art. 1252—
 If the debtor is not judicially declared insolvent SPECIAL FORMS OF PAYMENT
1. Application or imputation of payments
Art. 1246— When the obligation consists in the delivery of an 2. Dation in payment
indeterminate or generic thing, whose quality and circumstances 3. Assignment in favor of creditors
have not been stated, the creditor cannot demand a thing of 4. Tender of payment and consignation
superior quality. Neither can the debtor deliver a thing of APPLICATION OF PAYMENT = designation of the debt to
inferior quality. The purpose of the obligation and other which should be applied a payment made by a debtor who owes
circumstances shall be taken into consideration. several debts in favor of the same creditor.
REQUISITES :
Art. 1247 – 1. Two or more debts
GEN. RULE : Debtor pays for extrajudicial expenses 2. Debts must be of the same kind
EXCEPTION: stipulation to the contrary 3. The debtors are owed by the same debtor in favor of
the same creditor
Art. 1248 – 4. All the debts must be due
G. R = performance should be complete 5. The payment is not enough to extinguish all the debts
EXC. = partial performance is allowed when; PREFERENTIAL RIGHT OF DEBTOR
a) There is stipulation The D is the one who has the right to select which of
b) Different prestations are subject to different conditions his debts will he pay
or terms EXCEPTIONS:
c) When a debt is in part liquidated and in part  Contrary agreement
unliquidated  The debtor cannot choose to pay part of the
d) A joint debtor pays his share or the creditor demands principal ahead of the interest
the same HOW APPLICATION OF PAYMENT IS MADE
e) A solidary debtor pays only the part demandable  D makes the designation
f) In case of compensation, when one debt s larger than  If not, the C makes it, by so stating in the receipt that
the other, t follows that a balance is left he issues
g) When a work is done by parts  By operation of law
***NO REVOCATION OF THE APPLICATION OF
PAYMENT CAN BE MADE
Art. 1249—The payment of debts in money shall be made ***APP. OF PAYMENT MUST BE MADE AT THE TIME
in the currency stipulated, and if it is not possible to deliver WHEN THE PAYMENT BY THE DEBTOR IS MADE, NOT
such currency, then in the currency which is legal tender in AFTERWARDS
the Philippines. APP. OF PAYMENTS CANNOT BE AVAILED OF IN
THE CASE OF:
The delivery of promissory notes payable to order, or bills of  Partner-creditor
exchange or other mercantile documents shall produce the effect  The right cannot be invoked by a surety or a solidary
guarantor
(2) When he is incapacitated to receive the payment at the time
Art. 1253— INTEREST MUST BE PAID FIRST it is due;
(3) When, without just cause, he refuses to give a receipt;
WHAT INTEREST IS SUPPOSED TO BE PAID: (4) When two or more persons claim the same right to collect;
 I by way of compensation (5) When the title of the obligation has been lost. (1176a)
 I by way of damages due to default
EFFECT OF TENDER W/O CONSIGNATION
Art. 1254— o Debt is not extinguished. Consignation should always
RULES IN CASE NO APP.OF PAYMENT HAS BEEN follow
VOLUNTARLY MADE; WHEN CONSIGNATION IS SUFFICIENT EVEN
 Apply it to the most onerous WTHOUT A PROR TENDER
 If the debts are of the same nature and burden, o When the creditor is absent or unknown or does not
application shall be made proportionately appear
ONEROUS DEBTS: o When the C is incapacitated to receive payment
1. Older ones in running accounts o When, without just cause, the creditor refuses to give a
2. Interest-bearing debts receipt
3. Of two interest-bearing debts o When 2 or more persons claim the same right to collect
4. Debts secured by mortgage or pledge o When the title of the obligation has been lost
5. Debts with penalty clause o When the debtor had previously been notified by the
6. Advances for subsistence are more onerous than cash creditor that the latter would not accept any payment
advances
7. A debt where the debtor is in mora Art. 1257—
8. Exclusive debt REQUISITES OF CONSIGNATION
1. Existence of a valid debt
Art. 1255— 2. Valid prior tender
CESSION OR ASSIGNMENT IN FAVOR OF THE 3. Prior notice of consignation
CREDITOR 4. Actual consignation
5. Subsequent notice of consignaton
 Process by which a debtor transfers all the properties
not subject to execution in favor of his creditors so that
Art. 1258—Consignation shall be made by depositing the things
the latter may sell them, and thus apply the proceeds to
due at the disposal of judicial authority, before whom the tender
their credits.
of payment shall be proved, in a proper case, and the
KINDS OF ASSIGNMENT;
announcement of the consignation in other cases
 LEGAL
 VOLUNTARY
Art. 1259— The expenses of consignation, when properly
REQUISITES; made, shall be charged against the creditor.
 More than 1 debt
 More than 1 creditor
Art. 1260—
 Complete or partial insolvency of the debtor
EFFECTS IF CONSIGNATION HAS BEEN DULY MADE
 Abandonment of all debtors property o The debtor may ask the judge to order the cancellation
 Acceptance or consent
of the obligation.
EFFECT OF VA o The running of interest is suspended.
 C do not become owners
RISK OF LOSS = creditor
 D is released up to the amount of the net proceeds of
the sale
EFFECTS OF IMPROPER CONSIGNATION
 C will collect credits in the order of preference agreed o Obligation remains
upon, or n default of the agreement
o The debtor will be in default
EFFECTS OF DISMISSAL OF THE CASE = none
TENDER OF PAYMENT = act of offering the creditor what is
WHEN DEBTOR MAY WITHDRAW THE THING OR
due him together with a demand that the creditor accept the
SUM CONSIGNED
same
o As a matter of right
CONSIGNATION = act of depositing the thing due with the
1. Before the creditor has accepted the
court or judicial authorities whenever the creditor cannot accept
consignation
or refuses to accept payment
2. OR before there is a judicial declaration that
the consignation has been properly made
Art. 1256— If the creditor to whom tender of payment has
o As a matter of privilege
been made refuses without just cause to accept it, the debtor 1. When after consignation had been properly
shall be released from responsibility by the consignation of the
made, the creditor authorizes the debtor to
thing or sum due. Consignation alone shall produce the same
withdraw the thing.
effect in the following cases:
(1) When the creditor is absent or unknown, or does not appear
Art. 1261— If, the consignation having been made, the creditor
at the place of payment; should authorize the debtor to withdraw the same, he shall lose
every preference which he may have over the thing. The co- Art. 1266— The debtor in obligations to do shall also be
debtors, guarantors and sureties shall be released. released when the prestation becomes legally or physically
impossible without the fault of the obligor.
SECTION 2; Loss of the Thing Due
Art. 1267—When the service has become so difficult as to be
LOSS = impossibility of performance manifestly beyond the contemplation of the parties, the obligor
WHEN THERE IS LOSS: may also be released therefrom, in whole or in part.
o When the object perishes
o When it goes out of commerce Art. 1268—When the debt of a thing certain and determinate
o When it disappears in such a way that its existence is proceeds from a criminal offense, the debtor shall not be
unknown or it cannot be recovered. exempted from the payment of its price, whatever may be the
IMPOSSIBILITY OF PERFORMANCE INCLUDES; cause for the loss, unless the thing having been offered by him
o Physical impossibility to the person who should receive it, the latter refused without
o Legal imp. – directly or indirectly justification to accept it.
o Moral Imp.
Art. 1269--The obligation having been extinguished by the loss
Art. 1262— of the thing, the creditor shall have all the rights of action which
TWO KINDS OF OBLGATIONS TO GIVE the debtor may have against third persons by reason of the loss.
 To give a generic thing
 OR to give a specific thing SECTION 3 Condonation or Remission of the Debt
EFFECT OF LOSS ON AN OBLGATION TO DELIVER A
SPECIFIC THING Art. 1270— Condonation or remission is essentially
GEN. RULE : Obligation is extinguished gratuitous, and requires the acceptance by the obligor. It
EXCEPTIONS: may be made expressly or impliedly.
 Debtor is at fault
 The debtor is made liable for a FE because of One and the other kind shall be subject to the rules which
the provisions of law; of contractual govern inofficious donations. Express condonation shall,
stipulation or the nature of the obligation furthermore, comply with the forms of donation.
requires the assumption of risk on the part of
the debtor. REQUISITES FOR REMISSION:
INSTANCES WHEN THE LAW REQUIRES LIABILITY 1. Agreement
IN THE CASE OF FE. 2. Parties must be capacitated and must consent
 Debtor is in default 3. Subject matter
 The debtor has promised to delve the same thing to 4. Cause or consideration must be liberality
two or more persons who do not have the same interest 5. Obligation remitted must have been demandable
 The obligation arises from a crime 6. The remission must not be inofficious
 The borrower of an object has lent the thing to another 7. Formalities of a donation are required in case of an
who is not a member of his own household express remission
 The thing has been delivered with appraisal of the CLASSES:
value, unless there is a stipulation 1. As to effects = total; partial
 The payee in solutio indebiti is in bad faith 2. As to its date of effectivity = Inter vivos (during life) ;
mortis causa (after death)
Art.1263— In an obligation to deliver a generic thing, the loss 3. As to its form = Implied or tacit; express or formal
or destruction of anything of the same kind does not extinguish
the obligation. Art. 1271—The delivery of a private document evidencing
EXCEPTIONS: a credit, made voluntarily by the creditor to the debtor,
 If the thing is delimited implies the renunciation of the action which the former had
 If the generic thing has already been segregated or set against the latter.
aside
If in order to nullify this waiver it should be claimed to be
Article 1264—The courts shall determine whether, under the inofficious, the debtor and his heirs may uphold it by proving
circumstances, the partial loss of the object of the obligation is that the delivery of the document was made in virtue of payment
so important as to extinguish the obligation. of the debt.

Art. 1265— Whenever the thing is lost in the possession of the Art.1272—Whenever the private document in which the debt
debtor, it shall be presumed that the loss was due to his fault, appears is found in the possession of the debtor, it shall be
unless there is proof to the contrary, and without prejudice to the presumed that the creditor delivered it voluntarily, unless the
provisions of article 1165. This presumption does not apply in contrary is proved.
case of earthquake, flood, storm, or other natural calamity Art.1273—The renunciation of the principal debt shall
extinguish the accessory obligations; but the waiver of the latter
shall leave the former in force
Article 1274. It is presumed that the accessory obligation of persons who are whom is merged
pledge has been remitted when the thing pledged, after its mutually creditor the qualities of C
delivery to the creditor, is found in the possession of the debtor, and debtor to each and D
or of a third person who owns the thing. other
* #of O = 2 * #of O = 1
Art. 1275— The obligation is extinguished from the time the COMPENSATION COUNTERCLAIM/ SET-
characters of creditor and debtor are merged in the same person. OFF
*takes place by operation of *must be pleaded to be
MERGER OR CONFUSION = meeting in one person of the law effectual
qualities of creditor and debtor with respect to the same * *works as a sort of judicial
obligation. compensation, provided that
REQUISITES: the Rules of Court are
1. It should take place between the principal debtor and observed.
creditor.
2. the merger must be clear and definite KINDS OF COMPENSATION
3. the very obligation involved must be the same or 1. Accdng to effects = TOTAL; PARTIAL
identical 2. Origin = LEGAL; VOLUNTARY
EFFECT OF TRANSFER OF RIGHTS: 3. Judicial = MUST BE PLEADED
Mere transfer to 3rd person of rights belonging to both the debtor 4. Facultative = one of the parties has the choice of
and the debtor and the creditor bu not the credit as against the claiming the compensation of opposing it
debt does not result in merger.
EXTINCTION OF REAL RIGHTS: Article 1279. In order that compensation may be proper, it is
Real rights such as usufruct over property, may be extinguished necessary:
by merger when the naked owner himself becomes usufructuary. (1) That each one of the obligors be bound principally,
REVOCABILITY OF MERGER: and that he be at the same time a principal creditor of the other;
If the reason for the obligation ceases, the obligation is revived. (2) That both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind, and also of
Art. 1276—Merger which takes place in the person of the the same quality if the latter has been stated;
principal debtor or creditor benefits the guarantors. Confusion (3) That the two debts be due;
which takes place in the person of any of the latter does not (4) That they be liquidated and demandable;
extinguish the obligation. (5) That over neither of them there be any retention or
controversy, commenced by third persons and communicated in
EX: A owes 700000k guaranteed by C. B assigns his credit to due time to the debtor. (1196)
X. X assigns the credit to Y. Y assigns the credit to A. A’s
obligation is extinguished and C is released from his obligation Article 1280. Notwithstanding the provisions of the preceding
as guarantor. article, the guarantor may set up compensation as regards what
the creditor may owe the principal debtor.
Article 1277. Confusion does not extinguish a joint obligation REASON: Extinguishment of principal obligatin extinguishes
except as regards the share corresponding to the creditor or the guaranty.
debtor in whom the two characters concur.
Article 1281. Compensation may be total or partial. When the
EX: A and B jointly owe C 1m. If C assigns the entire credit to two debts are of the same amount, there is a total compensation
A, A’s share is extinguished, but V’s share remains. In other
words, B would still owe A the sum of 500k. In a joint obligatin, Article 1282. The parties may agree upon the compensation of
the debts are distinct and separate from each other. debts which are not yet due.

Art. 1278—Compensation shall take place when two persons, Article 1283. If one of the parties to a suit over an obligation
in their own right, are creditors and debtors of each other. has a claim for damages against the other, the former may set it
off by proving his right to said damages and the amount thereof.
COMPENSATION= sort of balancing between two
obligations; extinguishment of the concurrent amount of the JURISDICTION OF THE COURT RE; THE VALUE OF
obligations of those persons who are reciprocally debtors and THE DEMAND
creditors of each other.
GEN. RULE = the jurisdiction of the court depends upin the
COMPENSATION MERGER PAYMENT totality of the demand in all the causes of action., irrespective of
*partial *Complete an d whether the plural cases arose out of the same or different
extinguishment is indivisible transactions.
allowed EXCEPTIONS:
*takes place by *involves delivery  When the claim joined under the same complaint are
operation of law separately owed by, or due to, different parties
 Where not all the causes of action joined are demands
*there must be 2 *One person in or claims of money
Art. 1284. When one or both debts are rescissible or voidable,  Compensation which extinguishes principal obligations
they may be compensated against each other before they are also extinguishes accessory obligations
judicially rescinded or avoided.  To the concurrent amount means that if one debt is
larger than the other, the balance subsists as debt

Art. 1285 – Art. 1291— Obligations may be modified by:


Assignment may be made with the consent of the debtor = (1) Changing their object or principal conditions;
compensation cannot be set up because there has been consent (2) Substituting the person of the debtor;
and therefore a waiver. (3) Subrogating a third person in the rights of the creditor
EXCEPTION: if the right to the compensation is reserved
KINDS OF NOVATION
Assignment made with the knowledge but without the *Object or Purpose = real or objective (changing the object or
consent or against the will of the debtor = compensation can the principal conditions of the obligation
be set up regarding debts previous to the cession or assignment. *Personal or Subjective = change of persons
This refers to debts maturing before the assignment,that is --Substituting the person of the debtor ( expromision or
before the notice. Legal compensation has taken place here. delegacion)
--subrogating a third person in the rights of the creditor (change
Assignment made without the knowledge of the debtor = D of creditor may be by agreement = legal subrogation)
can set up the compensation as a defense for all the debts *Mixed
maturing prior to his knowledge of the assignment whether *Form = express or implied
debts matured before or after the assignment. *Extent to its extent or effects = total or extinctive ; partial or
modificatory (imperfect N)
Art. 1286—Compensation takes place by operation of law, even
though the debts may be payable at different places, but there REQUISITES OF NOVATION
shall be an indemnity for expenses of exchange or transportation o valid old obligation
to the place of payment. o intent to extinguish or to modify the old obligation by
 WHOEVER CLAIMS COMPENSATION MUST substantial difference
PAY FOR THE EXCHANGE RATE OF THE o capacity and consent of all the parties
FOREIGN CURRENCY.
FOREIGN EXCHANGE = conversion of an amount of money Art. 1292— In order that an obligation may be extinguished by
or currency of one country in to an equivalent amount of money another which substitute the same, it is imperative that it be so
or currency of another declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.
Art. 1287— **NOVATION IS NOT PRESUMED, IT HAS TO HAVE A
Legal compensation cannot take place in the ff: CLEAR PROOF.
 When one debt arises from a depositum
PURPOSE: prevent breach of trust NO NOVATION IN THE FF:
 When one debt arises from a depositary o slight alterations or modifications
**dito yung depositary e obliged na itago yung pera ng o when the new contract contains supplementary
safely tpos kapag kukunin na ng may-ari ibabalik agreement
dapat ng buo o additional interest is agreed upon
 When one debt arises from the obligations of a bailee o additional security is given
in commodatum o final judgment in a contract was entered into
 When one debt arises because of a claim for support o guarantor enters into an agreement with the creditor
due to a gratuitous title o creditor refrains from suing the debtor
o place of payment was changed
Art. 1288— No compensation if debt arises from a crime o public instrument was executed to confirm a valid
Art. 1289— If a person should have against him several debts contract
which are susceptible of compensation, the rules on the o payment of the purchase price for a thing was made
application of payments shall apply to the order of the thru a promissory note
compensation.
Art. 1293— Novation which consists in substituting a new
Art. 1290— When all the requisites mentioned in article 1279 debtor in the place of the original one, may be made even
are present, compensation takes effect by operation of law, and without the knowledge or against the will of the latter, but not
extinguishes both debts to the concurrent amount, even though without the consent of the creditor. Payment by the new debtor
the creditors and debtors are not aware of the compensation. gives him the rights mentioned in articles 1236 and 123
Substitution of the debtor may be in the form of:
AUTOMATIC COMPENSATION IF ALL REQ. ARE o EXPROMISSION = initiative comes from 3rd person
PRESENT: = old debtor is released from his
 Legal Compensation takes place automatically unless obligation
there has been valid waiver o DELEGACION = initiative comes from debtor
 Method of novation caused by the Art. 1300—Subrogation of a 3rd person in the rights of the
replacement of the old debtor by a new debtor creditor is either legal or conventional. Yung pagiging
who has proposed him to the creditor, and conventional is not presumes, dapat it is clearly established para
which replacement has been agreed mag-take effect.
 PARTIES :
DELEGANTE = orig debtor SUBROGATION = transfer to a 3rd person of all the rights
DELEGATORIO = creditor appertaining to the creditor, including the rights to proceed
DELEGADO = new creditor againt guarantor or possessor of a mortgage

Art. 1294—If the substitution is without the knowledge or KINDS:


against the will of the debtor, the new debtor's insolvency or **Cause or Origin = Conventional or Voluntary (agreement
nonfulfillment of the obligations shall not give rise to any and consent of the orig parties + creditor) ; Legal
liability on the part of the original debtor. **Extent = Total ; Partial
**Kapag na-bankrupt si new debtor, walang pakialam si old D.
No liability si Old D. Art. 1301
CONVENTIONAL SUBROGATION = requires the consent
Art. 1295— The insolvency of the new debtor, who has been of the orig parties and of the 3 rd person
proposed by the original debtor and accepted by the creditor,
shall not revive the action of the latter against the original Art. 1302— It is presumed that there is legal subrogation:
obligor, except when said insolvency was already existing and (1) When a creditor pays another creditor who is
of public knowledge, or known to the debtor, when the preferred, even without the debtor's knowledge;
delegated his debt. (2) When a third person, not interested in the
obligation, pays with the express or tacit approval of the debtor;
This article does not apply if there was no extinctive novation: (3) When, even without the knowledge of the debtor, a
 When the 3rd person was only an agent, messenger or
person interested in the fulfillment of the obligation pays,
without prejudice to the effects of confusion as to the latter's
employee of the debtoe
share.
 3rd person acted as a guarantor
 New debtor merely agreed to make himself solidarily Art. 1303— Subrogation transfers to the persons subrogated the
liable for the obligation credit with all the rights thereto appertaining, either against the
debtor or against third person, be they guarantors or possessors
 New debtor merely agreed to make himself jointly or of mortgages, subject to stipulation in a conventional
partly responsible for the obligation subrogation.
EX: D owes C 1M. G is the Guarantor. A stanges, S paid C the
Art. 1296—When the principal obligation is extinguished in the 1M with the consent of D and C. S is now subrogates in the
consequence of a novation = accessory obligation may subsist place of C. If D cannot pay the 1M, S proceed against G.
**If the modified O is more onerous, they are liable only for the
original obligation Art. 1304— A creditor, to whom partial payment has been
**Modified O is less onerous = the guarantors and sureties are made, may exercise his right for the remainder, and he shall be
still responsible preferred to the person who has been subrogated in his place in
virtue of the partial payment of the same credit.
Art. 1297—When the new O is VOID = original one shall **In here, there are two creditors:
subsists UNLESS the parties intended to make the former 1. OLD = remains as a creditor to balance
relation be extinguished in any event. 2. NEW = creditor to the extent what he has paid the
**Kapag yung bagong O eh may condition tapos din na-fulfill, creditor.
yung old obligation eh magsa-subsist 3.
Art. 1305—A contract is a meeting of minds between two
Art. 1298—Novation is void if the orig O is void except when persons whereby one binds himself, with respect to the other, to
annulment may be claimed only by the debtor or when a give something or to render some service.
ratification validates acts which are voidable
ELEMENTS:
EFFECTS OF VIODABLE OBLIGATION OF *ESSENTIAL = consent; subject matter; cause or consideration
NOVATION BY EXPROMISSION ( Others consider form and delivery as E also)
 Debtor is released from his obligation *NATURAL = those which are presumes to exists; examples eh
 When the new D after payment sues the old debtor for yung implied warranty sa CoS
beneficial reimbursement, the old debtor can set up *ACCIDENTAL = stipulations
defenses that he could set up against the creditor
CLASSIFICATION
Art. 1299— If the old O is subject to a suspensive or resolutory *FORMATION = consensual ; real (delivery); formal
condition = yung bagong obligation dapat eh subject din dun *CAUSE= onerous; gratuitous or lucrative ; remunerative
UNLESS there is a CONTRARY STIPULATION. (prestation is given as a benefit for the service rendered)
*IMPORTANCE = principal (stands alone) ; accessory Art. 1313— Creditors are protected from contracts intended to
(depends for the existence of others) ; preparatory (parties do defraud them.
not consider the contract as an end itself but as a means thru
which future transactin or contracts may be made) Art. 1314—A 3rd person who induces another to violate his
*PARTIES OBLIGATED = unilateral (one party has an O ex: contract shall be liable for damages to the other party.
commodatum) ; bilateral (both)
*NAME OR DESIGNATION = nominate (special name); Art. 1315—Consensuality of Contracts ( perfection by mere
innominate consent)
*RISK OF FULFILLMENT = commutative (parties CONSEQUENCES: both are bound to fulfill the O as
contemplate a real fulfillment EX: SALE) ; aleatory (fulfillment stipulated as well as to its consequences
is dependent upon chance EX: INSURANCE CONTRACT)
*TIME OF PERFORMANCE = executed ; executory Art. 1316—Real contracts require consent, subject matter,
*SUBJECT MATTER = things ; rights or credits; services cause or consideration and delivery.
*REGARDED BY LAW = ordinary ; institutional REAL CONTRACTS are referred to as DEPOSIT, PLEDGE
*EVIDENCE = oral; written OR COMMODATUM

STAGES: CONTRACT OF CARRIAGE: consensual ; real contract, for


1.PREPARATION = negotiations not until the carrier is actually used can we consider the contract
2. PERFECTION = may agreement na; consent perfected.
3. CONSUMMATION = terms are performed
Art. 1317—Unathorized person contracted in behalf of another
Art. 1306— The contracting parties may establish such = UNENFORCEABLE
stipulations, clauses, terms and conditions as they may deem REQUISITE FOR A PERSON TO CONTRACT IN THE
convenient, provided they are not contrary to law, morals, good NAME OF ANOTHER:
customs, public order, or public policy.  He must be duly authorized
 OR he must have by law a righ to represent him
Art. 1307—  OR the contract must be subsequently ratified
Innominate Contracts EFFECTS OF RATIFICATIUON: cleanses the contract from all
 DO UT DES = I give that you may give its defects from the moment the contract was entered int.
 DO UT FACIAS = I give that you may do
 FACIO UT DES = I do that you may give Art. 1318—REQUISITES OF A CONTRACT
 FACIO UT FACIAS = I do that you may do 1. Consent of the contracting parties
2. Object certain which is the subject matter of the
Art. 1308— The contract must bind both contracting parties; its contract
validity or compliance cannot be left to the will of one of them. 3. Cause of the obligation is established
Additional Requisites for a real contract (delivery); solemn or
formal contracts (compliance with the formalities required by
Article 1309. The determination of the performance may be law)
left to a third person, whose decision shall not be binding
until it has been made known to both contracting parties. (n) CONSENT presupposes legal capacity.
NO CONSENT = in a case of a joke (no contract)
Article 1310. The determination shall not be obligatory if it is ABSOLUTELY SIMULATED CONTRACT = inexistent;
evidently inequitable. In such case, the courts shall decide what void; one where the parties never intended to be bound
is equitable under the circumstances.
Art. 1319—
Art. 1311 – PRINCIPLE OF RELATIVITY = Contracts are
CONSENT = is manifested by the meeting of the offer and
generally effective between the parties, their assigns and their
acceptance upon the thing and the cause which are to constitute
heirs.
the contract. Offer must be CERTAIN and ABSOLUTE.
EXCEPTIONS:
ACCEPTANCE made by LETTER OR TELEGRAM does not
 Obligations are not transmissible by their nature, bind the offeror except from the time it came to his knowledge
stipulations or by provision by law REQUISITES:
 Stipulations in favor of a 3rd party  Two or more parties
 When a 3rd person induces another to violate his  Parties must be capacitated or capable
contract
 No vitiation of consent
 When a 3rd person may be adversely affected by a
 No conflict
contract
 Intent must be properly declared
 When the law authorizes the creditor to sue on a
REQUISITES FOR THE MEETING OF THE MINDS:
contract
 Offer must be certain
Art. 1312 – Contracts creating real rights = subject to the  AND acceptance must be unqualified and absolute
provisions of Mortgage law and land registration law
Art. 1320—Acceptance may be express or implied
Art. 1321—Things that may be foxed by the Offerer: TIME, Art. 1330—Contract where consent is given thru mistake, fraud,
PLACE, and the MANNER OFACCEPTANCE intimidation, undue influence or fraud is voidable. (VITIATED
OR VICES OF CONSENT)
CONTRACT TO PURCHASE which does not give specific ** A voidable contract is binding and valid UNLESS annulled
description of the objects to be purchased == MERE by a proper action in court
PRELIMINARY AGREEMENT
Art. 1331—
Art. 1322— An offer made thru an agent is accepted from the *MISTAKE OR ERROR = false belief about something
time acceptance is communicated to him. REQUISITES for mistake to vitiate consent:
1. object
Art. 1323—An offer becomes ineffective upon the death, civil 2. conditions which principally moved or induced one of
interdiction, insanity, or insolvency of either party before the parties
acceptance is conveyed. 3. error in personae
OTHER INSTANCES WHEN THE OFFER BECOMES 4. error must not be excusable (not caused by negligence,
INEFFECTIVE: excusable kapag caused ng negligence)
 Offeree expressly or impliedly rejects the offer 5. error must be a mistake of fact
 Offer is accepted with a condition
 Before acceptance is communicated, the subject matter Art. 1332— When one of the parties is unable to read, or if the
has become illegal or impossible contract is in a language not understood by him, and mistake or
 When the offer is revoke in due time fraud is alleged, the person enforcing the contract must show
that the terms thereof have been fully explained to the former.
Art. 1324— When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn at any time before Art. 1333—
acceptance by communicating such withdrawal, except when *Knowledge of the doubt or risk does not vitiate consent
the option is founded upon a consideration, as something paid or REASON= assumes that the party was willing to take the risk;
promised. aleatory contracts
OPTION = contract granting a person the privilege to buy or
not to buy certain objects at any time within the agreed period at Art. 1334— Mutual error as to legal effect of an agreement
a fixed price. when the real purpose of the parties is frustrated, may vitiate
consent
Art. 1325—Business advertisements of things for sale are not REQUISITES FOR MUTUAL ERROR TO VITIATE
definite offers; mere invitations to make an offer CONSENT:
 mutual error
Art. 1326—Advertisement for Bidders = simply invitations  error must refer to the legal effect in the agreement
to make proposals, and the advertiser is not bound to accept the  real purpose was frustrated
highest or lowed bidder
Art. 1335—
Art. 1327—the ff. cannot give consent to a contract:  Violence refers to physical coercion, intimidation, to
1. Unemancipated Minor (minors who have not been moral coercion
emancipated by marriage, attaintment of the age of REQUISITES: employment of serious or
majority or by parental authority) irresistible force; it must have been the reason
2. Insane or demented person and deaf-mutes who do why the contract was entered into
not know how to write  Intimidation
3. REQUISITES: reasonable and well-grounded
Art. 1328— fear; imminent and grave evil; upon his
LUCID INTERVALS= valid kapag matino yung insane at the person, property or property of his relatives;
time he entered in a contract. reason why the contract was entered into;
STATE OF DRUNKENNESS AND HYPNORTIC SALE = threat must be unjust
voidable
Art.1336—undue influence
ART. 1329—incapacity in 1327 is subject to the modifications REQUISITES:
determined by law and is understood to be without prejudice to  Improper advantage
special disqualification established in the laws  Power over the will of another
 Deprivation of the latter’s will of a reasonable freedom
INCOMPETENTS UNDER THE RULES OF COURT of choice
 under civil interdiction CIRCUMSTANCES TO BE CONSIDERED:
 hospitalized lepers  Confidentiality
 prodigals  Mental weakness
 deaf and dumb who are unable to read and write  Ignorance
 unsound mind even though they have lucid interval  Financial distress
by reason of age, disease, weak mind and other similar
causes
Art. 1337—fraud = insidious words or machinations of one of Art. 1347—Object of Contracts
the contracting parties; other is induced  Within the commerce of man
KINDS:  Transmissible
Fraud In celebration  Not contrary to law, morals, good customs, public
DOLO CAUSANTE (CASUAL FRAUD) = order or public policy
 if not for fraud, other party will not consent  Not impossible
 use of insidious words and machinations  Determinate
 REQUISITES:
a) Fraud must be material and serious Art. 1348 – IMPOSSIBLE THINGS OR SERVICES = cannot
b) F must be employed by only 1 of the be the object of contracts
contracting parties IMPOSSIBILITY may be:
c) Deliberate internt to deceive or induce 1. Because of the nature of the transaction or law
d) Other party relied on the untrue instrument 2. Absolute
DOLO INCIDENTE (INCIDENTAL FRAUD) 3. Relative (subsequently impossible)
 EFFECT: contract is valid; action for damages
Art. 1349—Object must be determinate or determinable
Fraud in performance (without the need of a new agreement); If not, it is VOID

Art. 1339—Failure to disclose facts= FRAUD Art. 1350— In onerous contracts the cause is understood to be,
Art. 1340—usual exaggeration in trade = not fraudulent (caveat for each contracting party, the prestation or promise of a thing
emptor) or service by the other; in remuneratory ones, the service or
benefit which is remunerated; and in contracts of pure
Art. 1341— Mere expression of opinion = does not signify beneficence, the mere liberality of the benefactor.
fraud unless made by an expert and other party has relied on the
former’s special knowledge CAUSE = essential and impelling reason why a party assumes
an obligation
Art. 1342—Misrepresentation by a 3rd person = does not vitiate
consent, unless such misrepresentation has created substantial CLASSIFICATION:
mistake and the same is mutual 1. Onerous – the cause is, for each contracting party, the
prestation or promise of a thing or service by the other
Art. 1343—Misrepresentation made in GF = not fraudulent ex: sale
Art. 1344— 2. Remunatory— the past service or benefit which by
REQUISITES FOR FRAUD TO VITIATE CONSENT itself is recoverable debt
1. Fraud must be serious 3. Gratuitous— contracts of pure beneficience
2. The parties must not be in pari delicto ex: donation

Art. 1345— Art. 1351— The particular motives of the parties in entering
SIMULATION OF CONTRACT: process of intentionally into a contract are different from the cause thereof.
deceiving others by producing the appearance of a contract tha **ILLEGAL CAUSE = void
really does not exist or which is different from the true **ILLEGAL MOTIVE = does not necessarily rendered the
agreement transaction void
REQUISITES:
1. Outward declaration of will different from the will of Art. 1352—
the parties REQUISITES OF CAUSE:
2. False appearance must have been intended by mutual  Present at the time the contract was entered into
agreement  It must be true
3. Purpose is to deceive third person  It must be lawful
NO EXISTING CAUSE = contract is void
Art. 1346— TRUE CAUSE = If the cause is false, the contract is not valid
Simulated or Fictitious Contracts = VOID unless some other cause which is lawful really exists
KINDS: EFFECTS If CAUSE IS ILLEGAL:
*ABSOLUTELY SIMULATED FICTITOUS  If one party is innocent he cannot be compelled to
CONTRACTS perform his obligation and he may recover what he has
 Simulados already given
 Ex: joke  If both are guilty, neither can sue
*RELATIVELY SIMULATED DISGUISED CONTRACTS
 Parties conceal their true agreement Art. 1353--Statement of False Cause = void
 EFFECT: the parties are bound to the real agreement Art. 1354—cause is not stated = it is presumed that it exists and
except if it a) prejudice third persons b) or if the is lawful
purpose is contrary to law, morals, good customs, TAKE NOTE OF STATUTES OF FRAUD
public order or public policy
Art. 1355— Lesion or inadequacy of cause shall not invalidate Art. 1363— When one party was mistaken and the other knew
a contract unless there has been fraud, mistake or undue or believed that the instrument did not state their real agreement,
influence but concealed that fact from the former, the instrument may be
LESION = inadequacy of cause like an insufficient price for the reformed.
thing sold
Art. 1364—
The ff. contracts may be rescinded: Failure to convey the true intent:
 Those which are entered into by guardians whenever **The court may order reformation because of IGNORANCE;
the wards they represent suffer lesion by more thatn ¼ LACK OF SKILL; BAD FAITH OF ( the drafter or the clerk or
of the value the typist)
 Those agreed upon by the representation of the
absentees Art. 1365— If two parties agree upon the mortgage or pledge of
 Partition among co-heirs real or personal property, but the instrument states that the
property is sold absolutely or with a right of repurchase,
Art. 1356—Contracts shall be obligatory in whatever form they reformation of the instrument is proper.
may have entered into, provided all the essential requisites are
Art.1366. There shall be no reformation in the following cases:
present
 Simple donations inter vivos wherein no condition is
imposed;
WHEN FORM IS IMPORTANT:
 Wills;
*FOR VALIDITY = solemn or formal contracts (donation of
 Real agreement is void
real property or personal property; stipulations of interest in
loans; transfer of large cattle; sale of land thru an agent;
Art. 1367— When one of the parties has brought an action to
antiochresis—principal loan and the interest must be in writing)
enforce the instrument, he cannot subsequently ask for its
*ENFORCEABILITY= statute of frauds
reformation.
*CONVENIENCE = Art. 1385
Art. 1368— Reformation may be ordered at the instance of
Art. 1357— if the law requires such form = parties shall be
either party or his successors in interest, if the mistake was
compelled to comply
mutual; otherwise, upon petition of the injured party, or his heirs
and assigns.
Art.1358—The ff. must appear in a public instrument:
1. Acts and contracts which have for their object the
Article 1369. The procedure for the reformation of instrument
creation, transmission, modification or extinguishment
shall be governed by rules of court to be promulgated by the
of real rights
Supreme Court.
2. Cession, repudiation or renunciation of hereditary
rights of the CPG
3. Power to administer property
4. Cession of actions or rights

Art. 1359—
REFORMATION = remedy in equity by means of which a
written instrument is made or construed so as to express or
conform the real intention of the parties when some error or
mistake has been committed
**REQUISITES:
 Meeting of minds
 True intention is not expressed in the
instrument
 Clear and convincing proof
 Brought within the proper prescriptive period
 Do not refer to simple unconditional donation
inter vivos

Art. 1360--Principles of the general law on reformation prevails


over the NCC

Art. 1361-- Mutual mistake of the parties caused the failure of


the instrument to disclose the real agreement = instrument ,may
be reformed

Art. 1362—UNILATERAL MISTAKE = the mistake is


unilateral but the other party acted fraudulently or inequitably;
ask for reformation