LAW FINALS REVIEWER
and condition of person shall bear in mind
1330. A contract where consent is given through
mistake, violence, intimidation, fraud, or undue
influence is voidable.
Consent requires the ff.
 Offer + acceptance and must be …
 Intelligent with accurate perception of matter
 Free
 Spontaneous
Intelligence is violated by error
Freedom by violence
Spontaneity by fraud
Causal fraud: fraud used to induce people into entering
a contract whose remedy is annulment of the contract
plus damages
Incidental fraud: fraud incident to the performance of
an obligation whose remedy is damages
Defect in consent renders contract voidable. But the
lack of valid consent must be established by clear and
convincing evidence. Mere allegations are not enough
to prove vitiated consent.
Vices of consent: must refer to the substance of the
thing
1331. In order that that mistake may invalidate consent,
it should refer to the substance of the thing which is
the object of the contract, or to those conditions which
have principally moved one or both parties to enter the
contract.
 Mistake as to the identity or qualifications of
one of the parties will vitiate consent only
when such things have been the principal
cause of the contract.
 A simple mistake of account shall give rise to
its correction
1332. When one of the parties is unable to read, or if
the contract is in a language not understood by him
AND mistake or fraud is alleged, the person enforcing
the contract must prove that the terms have been fully
explained to the former.
1334. Mutual error as to the legal effect of an
agreement when the real purpose of the parties is
frustrated, may vitiate consent.
1335.
 Violence: serious/irresistible force employed
to wrest consent
 Intimidation: contracting parties compelled
by reasonable fear of evil that may come to
his/her person, property, spouse, descendants,
or ascendants to give consent
 To determine degree of consent – age, sex,
 Threat to enforce claim through competent
authority doesn’t vitiate consent
1337. There is undue influence when a person takes
improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of
choice. The ff. shall be considered: confidential, family,
spiritual and other relations of parties as well as mental
weakness, ignorance, or financial distress
1338. There is causal fraud when insidious words or
machinations of one of the parties causes the other to
enter a contract, which without these insidious
machinations, they never would have agreed to
1339. Failure to disclose facts when there is a duty to
reveal them, as when the parties are bound by
confidential relations constitutes fraud
1340. Sales talk is not in itself fraudulent
1344. In order that fraud may make a contract voidable,
it should be serious and should not have been
employed by both contracting parties. Incidental fraud
only obliges the person employing it to pay damages
1345. Simulation of a contract may be:
 Absolute: parties do not intend to be bound
 Relative: when parties conceal true agreement
1346.
 Absolute simulation is void
 Relative simulation (when it doesn’t prejudice
a third party and is not contrary to morals)
binds parties to their REAL agreement
1347. All things which are not outside the commerce
of men including future things may be the object of a
contract. All transmissible rights may also be the
object of contracts.
 No contracts may be entered into upon future
inheritance except in cases authorized by law
 All services which are not contrary to law,
morals, good customs, public order/policy may
likewise be the object of a contract
1350.
 onerous contracts: the cause is understood to
be the prestation or promise of a thing/service
by the other
 renumeratory contracts: the cause is the
service or benefit which is renumerated
 pure beneficence: liberality of benefactor
1351. The particular motives of parties in entering into
a contract are different from the cause thereof
1352. Contracts without cause or with unlawful cause
cease to exist and produce no effect whatsoever. The
cause is unlawful if it is contrary to law/public morals
1355. The statement of a false cause in contracts shall
render them void, if it should not be proved that they
were founded upon another cause which is true and
lawful.
1356. Contracts shall create obligation in whatever
form they have been entered into, provided all the
essential requisites for their validity are present.
However, when the law requires that a contract need
be in some form to be enforceable, then that
requirement is absolute.
1358. The following must appear in a public
document:
a) acts and contracts which have for their object the
creation, transmission, modification, or extinguishment
of real rights over immovable property
b) cession, repudiation, or renunciation of hereditary
rights of those of the conjugal partnership of gains
c) power to administer property or any other power
which has for its object an act appearing or which
should appear in a public document or should
prejudice a 3rd person
d) the cession of actions or rights proceeding from an
act appearing in a public document
 all contracts where amount involved exceeds
500php must appear in writing, even private
1359. When true intention is not expressed in the
instrument after a meeting of the minds by reason of
fraud, mistake, inequitable conduct, or accident; ones
of the parties may ask for reformation of instrument to
the end that true intention may be expressed
1361. When mutual mistake of parties causes failure of
the instrument to disclose real agreement, said
instrument may be reformed
1362. If one party was mistaken and the other acted
fraudulently in such a way that the instrument doesn’t
show true intention, the former may ask for
reformation of the instrument.
1363. When one party was mistaken and the other
knew or believed that the instrument did not state their
real agreement but concealed that fact from the former,
the instrument may be removed
1364. When through ignorance, lack of skill,
negligence, or bad faith on the part of the person
drafting the instrument or the clerk or typist; the
instrument does not express the true intention of the
parties and thus the courts may order that the
instrument be reformed.
1366. There shall be no reformation in the ff. cases:
 simple donations while alive wherein no
condition is imposed
 wills because person is dead
 when real agreement is void
1367. When one of the parties has brought an action to
enforce the instrument, he cannot subsequently ask for
its reformation because the very act of asking for
enforcement means that the person agrees to the terms.
1370. If contract terms are clear and leave no doubt
upon the intention of the contracting parties, the literal
meaning of its stipulations shall control. If the words
appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former.
1371. In order to judge the intention of contracting
parties, their contemporaneous and subsequent acts
shall be principally considered.
1380. Contracts validly agreed upon may be rescinded
in the cases established by law.
1381. The ff. contracts are rescissible:
(1) those which are entered into by guardians
whenever the wards whom they represent
suffer lesion by more than one fourth of the
things which are the object thereof
(2) those agreed upon in representation of
absentees, if the latter suffers the lesion stated
in the preceding number
(3) those undertaken in fraud of creditors when
the latter cannot in any other manner collect
the claims due them
(4) those which refer to things under litigation if
they have been entered into by the defendant
without the knowledge and approval of
litigants or of competent juridical authority
(5) all other contracts declared by law to be
subject to rescission
Lesion: damage, injury, or detriment caused by
inadequate price.
1390. Void Contracts: can’t be ratified, don’t exist
 they lack one of the elements or
 purpose is illegal
 consent obtained through fraud/mistake
 object is contrary to morals
1391. The action for annulment shall be brought within
four years. This period shall begin…
- in cases of intimidation, violence, or undue
influence: from time that the defect of consent
ceases. In cases of mistake or fraud, same.
- From time that the guardianship ceases when
action refers to contracts entered into by
minors or incapacitated persons
1392. Ratification extinguishes action to annul a
voidable contract.
1293. Ratification can be effected expressly or tacitly.
There is tacit ratification if the person still agrees to
the contract even if there is knowledge that the
contract is voidable.
1403. Unenforceable contracts
1) entered into the name of another person by one
who has been given no authority or legal
representation who has acted beyond his powers
2) those that do not comply with statute of frauds
Corporation
 artificial identity registered in its own name
 needs certificate of incorporation by SEC
 gained prestigious reputation due to success in
fields and are the ideal way to do business
 power comes from Revised Corporation Code
 Regulatory body: Securities and Exchange
Commission or the SEC
 Board of directors required to meet in person
once a year
CORP AS ARTIFICAL BEING
 exist and act like a person: buy property, do
business, make money, incur liability, and be
liable for damages
 primarily to do business for profit, which can
be divided and distrib. as dividends, allowed to
expand and grow its business
 not limited by organic existence due to right of
succession – can exist perpetually
 can be formed by natural persons, associations,
partnerships, or other corps – previously, only
natural persons can form corporations
 formed to run a business
ADVANTAGES OF A CORP.
 limited liability unlike sole proprietor
(creditors and legal actions are against the
corporation, not the owners)
 better growth potential/opportunities
 collaboration opportunities
 more capital to start with
 taxes: standard 40% deduction
ADVANTAGES OF A ONE-PERSON CORP.
 can change into a regular corporation and vice
versa
 advantageous where 95% are
micro/small/medium businesses
 perpetual existence through nominees
- Dissolution requires stockholders’ vote
#1 thing needed in business accdg. to sir = guidance
CAN A CORP EXERCISE POWERS IT DOESN’T
HAVE?
- no, powers beyond those given by law and not
in the articles of incorporation are not allowed
- however, these are not necessarily void and
can be ratified unless illegal
CORPORATIONS CANNOT BE USED AS A
FRONT FOR ILLEGAL ACTIVITIES
- piercing the corporate veil is allowed when the
separate personality of corp is used as a means
to perpetrate fraud/illegal cats OR when the
corporation itself is only a farce
Right of succession
- a corporation is always created for a fixed
period wherein to years is the maximum.
However, this is subject to renewal for another
50-year period. The term can also be decreased.
There is no limit to the amount of renewals.
ALL THE POWERS OF A CORPORATION
a) to sue and be sued in its corporate name
b) of succession by its corporate name for the
period of time specified in the articles and
certificate of incorporation
c) to adopt and use a corporate seal
d) to amend its AOC in accordance with this code
e) to adopt by-laws not contrary to law, morals
f) for stock corporations, to sell and issue stocks
to subscribers and sell treasury stocks
g) for non-stock corp, admit members into the
corporation
h) to purchase, receive, take, grant, hold, convey,
sell, lease, dispose of real and personal
property including securities and bonds of
other corporations – must be lawful,
reasonable, and subject to law’s limitations
i) to make donations as long as these are not in
the aid of political parties
j) to establish pension, retirement, and other
plans for the benefit of directors, trustees,
employees, officers
k) exercise power as necessary to carry out
purposes stated in articles of incorp.