University of the Philippines College of Law OUTLINE IN OBLIGATIONS AND CONTRACTS Prof. Eduardo A. Labitag Title I. Obligations Chapter I General Provisions I. Concept A. Definition- Art. 1156 - criticism of definition B. Elements 1. Active Subject 2. Passive Subject 3. Prestation or Object 4. Efficient cause or juridical tie or vinculum juris C. Distinction Between Natural and Civil Obligations 1. As to enforceability 2. As to basis II. Sources of Obligations- Art. 1157 A. Law- Art. 1158 B. Contracts- Art. 1159, 1305 C. Quasi-Contracts- Art.1160, 2142 1. Kinds a. Negotiorum gestio- Art.2144 b. Solutio indebiti- Art. 2154 c. Other quasi-contracts- Arts. 2164 to 2175 D. Acts or omissions punished by law- Art. 1161 E. Quasi-Delicts- Art.1162, 2176
Transcript
University of the PhilippinesCollege of Law
OUTLINE IN OBLIGATIONS AND CONTRACTSProf. Eduardo A. Labitag
Title I.Obligations
Chapter I General Provisions
I. Concept
A. Definition- Art. 1156- criticism of definition
B. Elements
1. Active Subject2. Passive Subject3. Prestation or Object4. Efficient cause or juridical tie or vinculum juris
C. Distinction Between Natural and Civil Obligations
1. As to enforceability2. As to basis
II. Sources of Obligations- Art. 1157
A. Law- Art. 1158
B. Contracts- Art. 1159, 1305
C. Quasi-Contracts- Art.1160, 2142
1. Kindsa. Negotiorum gestio- Art.2144b. Solutio indebiti- Art. 2154c. Other quasi-contracts- Arts. 2164 to 2175
D. Acts or omissions punished by law- Art. 1161
E. Quasi-Delicts- Art.1162, 2176
1. Distinction between quasi-delicts and crimes2. Liability for fault of others- Art. 2180; Art. 218, 219 of FC3. Civil liability arising from crime- Art. 1161; Rules on Criminal
Procedure (2000), Rule 111
CasesBarredo v. Garcia, 73 Phil. 607 (1942)
Mendoza v. Arrieta, 91 SCRA 113 (1975)PSBA v. CA, 205 SCRA 729 (1992)Amadora v. CA 160 SCRA 315 (1988)Air France vs. Carrascoso 18 SCRA 155 (1966)
III. Classification of Obligations
A. Primary Classification Under the Civil Code1. Pure and Conditional (Arts. 1179-1192)
2. Real (to give) and Personal (to do or not to do)3. Determinate and Generic (as to subject matter of obligation)4. Positive (to give, to do) and Negative (not to give, not to do)5. Unilateral and Bilateral6. Individual and Collective7. Accessory and Principal8. As to object or prestation:
i. To deliver thing itself- Art. 1244ii. To preserve thing- Art. 1163iii. To deliver the accessions and accessories- Art. 1166
- distinction between accession and accessoryiv. To deliver the fruits- Art.1164 par. 1
2. a generic thing- Art. 1246
B. Obligation to do- Art.1244
C. Obligation not to do- Art. 1244
II. Breach of Obligation
A. Concept1. Distinction between substantial and casual/slight breach
Cases:Song Fo v. Hawaiian Phils. 47 Phil 821 (1928)Velarde, et al v. CA 361 SCRA 56 (2001)
Angeles, et al. vs. Ursula Calasanz, et al., G.R. No. L-42283, March 18, 1985Delta Motor Corp. vs. Genuino & CA, G.R. No. 55665, February 8, 1989Vermen Realty vs. CA, GR 101762, July 6, 1993, 224 SCRA
B. Modes of Breach- Art.1170
1. Fraud (dolo)
a. Concepti. dolo (1171) vs. dolo incidenteii. dolo (1171) vs. dolo causante
Case
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Woodhouse v. Halili, 93 Phil. 526 (1953)Lydia L. Geraldez, vs. CA & Kenstar Travel Corporation, G.R. No. 108253, February 23, 1994.
b. Nonwaiver- Art. 1171
c. Effects
2. Negligence- Art. 1172
a. Concept- Art. 1173i. culpa v. doloii. culpa aquiliana v. culpa contractual
CasesGutierrez v. Gutierrez, 56 Phil. 177 (1932)Vasquez v. Borja, 74 Phil. 560 (1944)
b. Standard of care required- Art. 1173 par. 2
CasesDe Guia v. Manila Electric Co., 40 Phil. 706 (1920)US v. Barias, 23 Phil. 434 (1912)Sarmiento v. Sps. Cabrido, 401 SCRA 122 (2003)Crisostomo v. CA, 409 SCRA 528 (2003)
c. Effects
3. Delay (Mora)- Art. 1169a. Concept
b. Kindsi. mora solvendi
- requisites- General Rule: Creditor should make demand
before debtor incurs delay- Art. 1169
Case Cetus Development Corp. v. CA ,
SCRA 72 (1989)Aerospace Chemical Industries vs. CA, GR No. 108129, September 23,1999, 315 SCRASantos Ventura Hocorma Foundation vs. Santos, GR 153064, November 4, 2004 441 SCRA
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Dr. Daniel Vazquez & Ma. Luisa M. Vazquez, vs. Ayala Corporation, G.R. No. 149734, November 19, 2004.
Exceptions:- Art. 1169
CaseAbella v. Francisco, 55 Phil. 447 (1931)Eusebio De La Cruz vs. Apolonio Legaspi & Concordia Samperoy, G.R. No. L-8024. November 29, 1955.
ii. mora accipiendi- requisites- see also 1268
CaseVda. De Villaruel v. Manila Motor Co.,
Inc., 104 Phil. 926 (1958)
iii. compensatio morae- requisites
CaseCentral Bank v. CA, 139 SCRA 46 (1985)
c. Effects
4. Contravention of the tenor
CasesChavez v. Gonzales, 32 SCRA 547 (1970)Telefast v. Castro, 158 SCRA 445 (1988)Arrieta v. NARIC, 10 SCRA 79 (1964)Victoriano Magat vs. Medialdea (206 Phil 341)
III. Remedies Of Creditor in Case of Breach
A. Action for performance
1. Action for specific performance in obligation to give a specific thing- Art. 1165 par.1; ROC 39
Sec. 10
2. Action for substituted performance in obligation to give a generic thing- Art.1165 par. 2
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3. Action for substituted performance or undoing of poor workin obligation to do - Art. 1167
Cases:Chavez v. Gonzales, supra
Tanguilig v. CA, 266 SCRA 78 (1997)
a. Exception
4. Action for undoingin obligation not to do- Art. 1168a. Exception
B. Action for damages- Art.1170
C. Action for rescission- Art. 1191, 1192
IV. Subsidiary Remedies of Creditor
A. Accion Subrogatoria- Art.1177
1. Concept2. Requisites3. Exceptions- inherent rights of debtor; Art. 772
B. Accion Pauliana- Art. 1177, 1381 par. 3
1. Concepta. Distinction between accion pauliana and accion subrogatoria
2. Requisites
CaseKhe Hong Cheng v. CA, 355 SCRA 701 (2001)Maria Antonia Siguan vs. Rosa Lim, Linde Lim, Ingrid Lim and Neil Lim, G.R. No. 134685, November 19, 1999.
C. Other Specific Remedies- Art. 1652, 1729, 1608, 1893
V. Extinguishment of Liability in Case of Breach Due to Fortuitous Event- Art. 1174
A. Concept of Fortuitous Event1. Act of God 2. Act of Man
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B. Requisites1. Effect of concurrent fault
CasesJuan Nakpil & Sons v. CA, 144 SCRA 597 (1986)Republic v. Luzon Stevedoring Co., 21 SCRA 279 (1967)Dioquino v. Laureano, 33 SCRA 65 (1970)Austria v. CA, 39 SCRA 527 (1971)NPC v. CA, G.R. No. L-47379, 161 SCRA 334 (1988)Yobido v. CA, 281 SCRA 1 (1997)Bacolod-Marcia Milling vs. CA and Gatuslao, GR. No. 81100-01, Feb. 7, 1990, 182 SCRA Philcomsat vs. Globe Telecom, GR No. 147324, May 25, 2004, 430 SCRA
C. Extinguishment of Liability; Exceptions- Art. 1174, 1165 par. 3, 552, 1942, 1979, 2001, 2147
VI. Usurious Transactions- Art. 1175, 1413, 1961
A. PD 858; PD 1685B. Central Bank Circular 416C. Monetary Board Circular # 905 lifting the interest rate ceiling- (vs. 2209)
CasesEastern Shipping Lines v. CA, 234 SCRA 781 (1994)Crismina Garments v. CA, 304 SCRA 356 (1999)Keng Hua Products v. CA, 286 SCRA 257 (1998)Security Bank v. RTC Makati, 263 SCRA 453 (1996)Almeda v. CA, 256 SCRA 292 (1996)Angel Warehousing vs. Cheldea 23 SCRA 19 (1968) First Metro Investment vs. Este. Del Sol (Nov. 15, 2001, 369 SCRA)
VII. Fulfillment of Obligations
A. see Chapter 4: PaymentB. Presumptions in payment of interests and installments- Art. 1176
VIII. Transmissibility of Rights- Art. 1178
Chapter 3. Different Kinds of Obligations
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I. Pure and Conditional Obligations
A. Pure Obligations- Art. 1179 par. 1
B. Conditional Obligations- Art. 1181
1. Conditiona. Conceptb. Condition v. Period/Term
CasesGaite v. Fonacier, 2 SCRA 830 (1961)Gonzales v. Heirs of Thomas, 314 SCRA 585 (1999)
2. Kinds of Conditions
a. As to effect on obligation- Art. 1181Gonzales v. Heirs of Thomas, 314 SCRA 585 (1999) i. Suspensive (condition precedent)
- retroactive effect when condition is fulfilled- Art. 1187
Romulo A. Coronel, et. al., vs. CA and Concepcion D. Alcaraz , G.R. No. 103577, October 7, 1996.
- rights of creditor and debtor before fulfillment of condition- Art. 1188
ii. Resolutory (condition subsequent)
CasesParks v. Province of Tarlac, 49 Phil. 142 (1927)Central Philippine University v. CA, 246 SCRA
511 (1995)Alfonso Quijada, et al., vs. CA, G.R. No. 126444, December 4, 1998.
b. As to cause or origin- Art. 1182
i. Potestative- effect if fulfillment of condition depends solely
on the will of the debtor (Cf. term)- debtor’s promise to pay when he can is not a
conditional obligation- Art. 1180
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Francisco Lao Lim vs. CA, G.R. No. 87047, October 31, 1990.
ii. CasualNaga Telephone Co., Inc. (NATELCO) vs. CA, G.R. No. 107112, February 24, 1994.
iii. Mixed
CasesOsmeña v. Rama, 14 Phil. 99 (1909)Hermosa v. Longora, 93 Phil. 971 (1953)Taylor v. Uy Tieng Piao, 43 Phil. 873 (1922)Smith Bell v. Sotelo Matti, 44 Phil. 875 (1922)Rustan Pulp and Paper Mills v. IAC, 214 SCRA
665 (1992)Virgilio Romero vs. CA, GR No. 107207, November 23, 1995, 250 SCRA
c. As to possibility- Art. 1183
i. Possibleii. Impossible
- effect
CaseRoman Catholic Arch of Manila v. CA,
198 SCRA 300 (1991)
d. As to mode
i. Positive- Art. 1184ii. Negative- Art. 1185
3. Rules in case of loss, deterioration or improvement pending the happening of the condition- Art. 1189, 1190
Heirs of Timoteo Moreno vs. Mactan — Cebu International Airport Authority, G.R. No. 156273, October 15, 2003.
a. Meaning of “loss” (Art. 1189[2]), “deterioration” and “improvement”
b. Effect of loss or deteriorationi. without debtor’s fault
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ii. with debtor’s fault
c. Effect of improvementi. by nature or timeii. at the debtor’s expense
4. Effect of prevention of the fulfillment of the condition by the obligor- Art. 1186
CaseTaylor v. Uy Tieng Piao, supraJose V. Herrera vs. Leviste, G.R. No. 55744, February 28, 1985.
II. Reciprocal Obligations- Art. 1191, 1192
1. Concept
2. Alternative remedies of injured party in case of breach
a. Action for Fulfillmenti. when fulfillment no longer possible; effect
b. Action for Rescissioni. requisitesii. how madeiii. effects
CasesSong Fo v. Hawaiian-Philippines, 47 Phil. 821
(1925)Boysaw v. Interphil Promotions, 148 SCRA 365
(1987)U.P. v. De Los Angeles, 35 SCRA 365 (1970)De Erquiaga v. CA, 178 SCRA 1 (1989)Angeles v. Calasanz, 135 SCRA 323 (1985)James G. Ong v. CA, 310 SCRA 1 (1999)Iringan v. CA, 366 SCRA 41 (2001)Visayan Saw Mill vs. CA and RJ Trading, GR. 83851, March 3, 1993, 219 SCRAErnesto Deiparine vs. CA and Trinidad, GR. 96643, April 23, 1993Grace Park Engineering Co., Inc. vs. Mohamad Ali Dimaporo, G.R. No. L-27482. September 10, 1981.
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Felipe C. Roque vs. Nicanor Lapuz, G.R. No. L-32811, March 31, 1980.Margarita Suria vs. IAC, G.R. No. 73893, June 30, 1987.See also Art. 1786, 1788; Arts. 1484-86; RA 6552
II. Obligation With a Period- Art.1193, 1180
A. Period or Term 1. Concept2. Period/Term vs. Condition
B. Kinds of Period/Term1. As to effect
a. Suspensive (Ex die)- Art. 1193 par. 1b. Resolutory (In diem)- Art. 1193 par. 2
2. As to expressiona. Expressb. Implied
3. As to definitenessa. Definiteb. Indefinite
4. As to sourcea. Voluntaryb. Legalc. Judicial
C. Rules in case of loss, deterioration or improvement before arrival of period- Art. 1194, 1189
D. Effect of payment in advance- Art. 1195Note: Art.1197 par. 3
E. Benefit of Period
1. For whose benefita. creditorb. debtorc. both
2. Effects
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3. Presumption- Art. 1196
CasesLachica v. Araneta, 47 OG No. 11, 5699, August 4, 1949Ponce de Leon v. Syjuco, 90 Phil. 311 (1951)Buce v. CA, 332 SCRA 151 (2000)
4. When debtor loses right to make use of period- Art.1198
F. When Court May Fix Period- Art. 1197
1. Period is implied2. Period depends solely on will of debtor (Cf. condition)
CasesAraneta v. Philippine Sugar Estate Development Co., 20
SCRA 330 (1967)Central Philippine University v. CA, supraFlorencio Deudor vs. JM Tuason, GR 13768, May 30, 1961, 1 SCRA
III. Alternative Obligations
A. Concept- Art.1199
B. Right of choice- Art. 1200
C. Effect of notice of choice
D. When notice produces effect- Art. 1201
E. Effect of loss or impossibility of one or all prestations- Art. 1202 to 1205
F. Facultative Obligation- Art. 1206
1. Concept2. Distinguished from Alternative Obligation3. Effect of Substitution
IV. Joint and Solidary Obligations
A. Joint Obligations
1. Concept
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a. Requisitesb. Words used to indicate joint obligations
2. Presumption- Art. 1207, 1208
3. Effects- Art. 1207, 1208a. Extent of liability of debtorb. Extent of right of creditorc. In case of novation, compensation, confusion (Art. 1277),
remission
B. Solidary Obligations
1. Concepta. Requisitesb. Words used to indicate solidary obligations
2. Kinds
a. As to source- Art. 1208i. Legal- Art. 1915, 1945, 2194; Art. 119 of RPCii. Conventionaliii. Real
b. As to parties boundi. Activeii. Passiveiii. Mixed
c. As to uniformityi. Uniformii. Varied/Non-uniform- Art. 1211
- effects
CaseYnchausti v. Yulo, 34 Phil. 978 (1916)Baldomero Inciong vs. CA et al, GR 96405, June 26, 1996, 257 SCRARCBC vs. CA, GR 85396, Oct 1989, 178 SCRALafarge Cement Phil vs. Continental Cement, GR 155173, November 23, 2004, 443 SCRA
3. Effects
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a. Solidary creditor in relation to:
i. common debtor- right to demand- Art. 1215, 1214, 1216, 1217
par. 1- in case of novation, compensation, confusion,
remission by a creditor- Art. 1215 par. 1
ii. solidary co-creditor/s- in case of novation, compensation, confusion,
remission- Art. 1215 par. 2- prejudicial acts prohibited- Art. 1212- assignment of rights not allowed- Art. 1213
b. Solidary debtor in relation to:
i. common creditor- obligation to perform- Art. 1207- in case of novation, compensation, confusion,
remission by a creditor- Art. 1215 par. 1
ii. solidary co-debtor- in case of payment by a co-debtor- Art. 1217,
1218, 1220, 1219 - in case of fortuitous event- Art. 1221
CasesJaucian v. Querol, 38 Phil. 718 (1918)RFC v. CA, O.G. No. 6, p. 2467Quiombing v. CA, 189 SCRA 325 (1990)Inciong v. CA, 257 SCRA 578 (1996)
4. Defenses available to a solidary debtor against the creditor- Art. 1222
a. Types
i. those derived from the nature of the obligationii. personal defensesiii. defenses pertaining to his shareiv. those personally belonging to the other co-debtors
b. Effects
CasesYnchausti v. Yulo, supraAlipio v. CA, 341 SCRA 441 (2000)
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C. Joint Indivisible Obligations
1. Concepti. Distinguished from Joint Obligationsii. Distinguished from Solidary Obligations
2. Indivisibility distinguished from solidarity- Art. 1210
3. Effects- Art. 1209a. Liability for damages in case of breach- Art. 1224
V. Divisible and Indivisible Obligations
A. Divisible Obligations
1. Concept2. Effects- Art. 1223, 1233
B. Indivisible Obligations
1. Concepta. Distinguished from solidary obligations
a. Of indivisibility- Art. 1225 par. 1b. Of divisibility- Art. 1225 par. 2
4. Divisibility and indivisibility in obligations not to do- Art. 1225 par. 3
5. Effects- Art. 1223, 1233, 1224- see Joint Indivisible Obligations
6. Cessation of indivisibility
VI. Obligations with a Penal Clause
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A. Concept
1. Principal vs. Accessory Obligation2. Distinguished from Conditional Obligations3. Distinguished from Alternative Obligations4. Distinguished from Facultative Obligations5. Distinguished from Guaranty
B. Kinds of Penal Clause
1. As to effecta. Subsidiaryb. Complementary
2. As to sourcea. Conventionalb. Legal
3. As to purposea. Punitiveb. Reparatory
C. Demandability of Penalty- Art. 1226 par. 2
D. Effects of Penal Clause
1. Substitute for indemnity for damages and payment of interest- Art. 1226
a. Exception- Art. 1226
CasesMakati Development Corp. v. Empire Insurance Co., 20
SCRA 557 (1967)Antonio Tan v. CA, 367 SCRA 571 (2001)Country Bankers Insurance vs. CA, GR. 85161, Sept 9, 1991, 201 SCRA
2. Not exempt debtor from performance- Art. 1227a. Exception- Art. 1227
3. Creditor cannot demand both performance and penalty at the same time- Art. 1227a. Exceptions- Art. 1227
4. Creditor cannot collect other damages in addition to penalty- Art. 1226a. Exceptions- Art. 1226
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E. When penalty shall be equitably reduced- Art. 1229
F. Nullity of Principal Obligation or Penal Clause
1. Effects- Art. 12302. Rationale
Chapter 4. Extinguishment of Obligations
I. Modes of Extinguishment- Art. 1231
A. Payment or PerformanceB. Loss or ImpossibilityC. Condonation or RemissionD. Confusion or MergerE. CompensationF. NovationG. Other Causes
II. Payment or Performance
A. Concept- Art. 1232B. Requisites
1. Who can pay
a. in general
b. third person who is an interested partyi. meaning of “interested party”ii. effects- Art. 1302[3]
c. third person who is not an interested party but with consent of debtor
i. effects- Art. 1302[2], 1236 par. 1
d. third person who is not an interested party and without knowledge or against the will of the debtor
i. effects- Art. 1236 par. 2, 1237, 1236 par.1
e. third person who does not intend to be reimbursed- Art. 1238
f. in obligation to give- Art. 1239, 1427i. effect of incapacity
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g. in case of active solidarity- Art. 1214
2. To whom payment may be made
a. in general- Art. 1240
b. incapacitated person- Art. 1241 par. 1i. requisites
c. third person- Art. 1241 par. 2i. requisitesii. when proof of benefit not required- Art. 1241 par. 3,
1242
d. in case of active solidarity- Art. 1214
3. What is to be paid (“Identity”)
a. in general
b. in obligations to:i. give a specific thing- Art. 1244ii. give a generic thing- Art. 1246iii. pay money- Art. 1249, 1250; R.A. 529, R.A. 4100
CasesArrieta v. NARIC, supraKalalo v. Luz, 34 SCRA 377 (1970)St. Paul Fire and Marine Insurance v.
Macondray, 70 SCRA 122 (1976)Papa v. A.V. Valencia, et.al, 284 SCRA643 (1998)PAL vs. CA 181 SCRA 557 (1990)
c. payment of interest- Art. 1956
4. How is payment to be made (“Integrity”)
a. in general- Art. 1233General Rule: Partial payment is not allowed- Art. 1248
Exceptions:- Art. 1248
b. substantial performance in good faith- Art. 1234
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c. estoppel- Art. 1235
d. presumptions in payment of interests and installments- Art. 1176
5. When payment is to be made
a. in general- Art. 1169b. see Chapter 2: Delay
6. Where payment is to made- Art. 1251 par. 1a. if no place is expressly designated- Art. 1251 par. 2 to par. 4
7. Expenses of making payment- Art. 1247
C. Application of Payments
1. Concept- Art. 1252
CasesReparations Commission v. Universal Deep Sea Fishing,
83 SCRA 764 (1978)Paculdo v. Regalado, 345 SCRA 134 (2000)
2. Requisites
3. Rules in application of payments- Art. 1252, 1253
a. if rules inapplicable and application cannot be inferred- Art. 1254i. meaning of “most onerous to debtor”
D. Payment by Cession
1. Concept- Art. 12552. Requisites3. Effects
E. Dation in Payment
1. Concept- Art. 1245a. distinguished from Payment by Cession
Development Bank of the Philippines vs. Court Of Appeals, G.R. No. 118342, January 5, 1998.
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2. Requisites
3. Effects
CaseFilinvest Credit Corporation vs. Philippine Acetylene, GR L-50449, Jan 1982, 111 SCRA
F. Tender of Payment and Consignation
1. Tender of Payment
a. Conceptb. Requisites
2. Consignation
a. Concepti. purpose
b. Requisitesi. when tender and refusal not required- Art. 1256 par. 2
ii. two notice requirement- Art. 1257 par. 1, 1258 par. 2- effects of noncompliance
c. Effects- Art. 1260 par. 1
d. Withdrawal by debtor before acceptance by creditor or approval by court; effects- Art.1260 par. 2
e. Withdrawal by debtor after proper consignation- Art. 1261i. with creditor’s approval; effectsii. without creditor’s approval; effects
f. Expenses of consignation- Art.1259
CasesDe Guzman v. CA, 137 SCRA 730 (1985)TLG International Continental Enterprising, Inc. v. Flores,
47 SCRA 437 (1972)McLaughlin v. CA, 144 SCRA 693 (1986) Soco v. Militante, 123 SCRA 160 (1983) Sotto v. Mijares, 28 SCRA 17 (1969)Reisenbeck vs. CA, 209 SCRA 657 (1992)Rural Bank of Caloocan vs. CA (April 21, 1981, 104 SCRA) Licuanan vs. Diaz (175 SCRA, July 21, 1989)
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Chan vs. CA (March 3, 1994, 230 SCRA) Meat Packing Corp vs. Sandiganbayan (June 22, 2001, 359 SCRA)
III. Loss or Impossibility
A. Loss of Thing Due
1. Concept- Art. 1189[2]
2. Kindsa. As to extent
i. Totalii. Partial
3. Requisites- Art. 1262
4. Presumption- Art. 1265, 1165a. when not applicable
5. Effects
a. in obligation to give a specific thing- Art. 1262, 1268 b. in obligation to give a generic thing- Art. 1263c. in case of partial loss- Art. 1264d. action against third persons- Art. 1269
B. Impossibility of Performance
1. Concept- Art. 1266, 1267
2. Kindsa. As to extent
i. Totalii. Partial
b. As to sourcei. legalii. physical
3. Requisites- Art. 1266
4. Effects
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a. in obligations to do- Art. 1266, 1267, 1262 par. 2 (by analogy)i. “impossibility” distinguished from “difficulty”
CasesOcceña v. CA, 73 SCRA 637 (1976)Naga Telephone Co. v. CA, 230 SCRA 351 (1994)PNCC vs. CA, GR 116896, May 5, 1997, 272 SCRA
b. in case of partial impossibility- Art. 1264
IV. Condonation or Remission
A. Concept
B. Kinds
1. As to extenta. Totalb. Partial
2. As to form- Art. 1270 par. 1a. Expressb. Implied
C. Requisitesa. when formalities required- Art. 1270 par. 2YAM vs. CA, G.R. No. 104726, February 11, 1999.
D. Presumptions- Art. 1271, 1272, 1274
E. Effects
1. in general2. in case of joint or solidary obligations
F. Governing Rules- Art. 1270
G. Renunciation of Principal or Accessory Obligation
1. effects- Art. 12732. rationale
V. Confusion or Merger of Rights
A. Concept
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B. Requisites
C. Effects
1. in general- Art. 12752. in case of joint (Art. 1277) or solidary obligations
D. Confusion in Principal or Accessory Obligation- Art. 1276
VI. Compensation
A. Concept- Art. 12781. Distinguished from Confusion
B. Kinds
1. As to extenta. Totalb. Partial
2. As to origina. Legalb. Conventional- Art. 1279 inapplicable, 1282c. Judicial- Art. 1283d. Facultative
C. Legal Compensation
1. Requisites- Art. 1279, 1280a. “due” distinguished from “demandable”
CasesGan Tion v. CA, 28 SCRA 235 (1969)BPI v. Reyes, 255 SCRA 571 (1996)PNB v. Sapphire Shipping, 259 SCRA 174 (1996)CKH Industrial Development vs. CA (May 7, 1997, GR 111890, 272 SCRA) Mirasol vs. CA (GR 128448, Feb 1, 2001, 351 SCRA) Associated Bank vs. Vicente Henry Tan (GR 156940, Dec. 14, 2004)
Villanueva vs. Francisco Tantuico Jr. (GR. 53585, Feb 15, 1990, 82 SCRA)
Perez vs. CA (GR 56101, February 1984, 127 SCRA)
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Silahis Marketing Corp vs. IAC (Dec 7, 1989, 180 SCRA)
BPI vs. CA (GR 116792, March 29, 1996, 255 SCRA)
2. Effects- Art. 1290, 1289
D. When Compensation is Not Allowed- Art. 1287, 1288
E. Compensation of Debts Payable in Different Places- Art. 1286
F. Effect of Nullity of Debts to be Compensated- Art. 1284
G. Effects of Assignment of Credit
1. with consent of debtor- Art. 1285 par. 12. with knowledge but without consent of debtor- Art. 1285 par. 23. without knowledge of debtor- Art. 1285 par. 3
a. rationale
VII. Novation
A. Concept- Art. 1291
B. Kinds
1. As to forma. Expressb. Implied
2. As to origina. Conventionalb. Legal
3. As to objecta. Objective or Realb. Subjective or Personal
C. Requisites- Art. 1292
CasesMillar v. CA, 38 SCRA 642 (1971)
Dormitorio v. Fernandez, 72 SCRA 388 (1976)Magdalena Estate v. Rodriguez, 18 SCRA 967 (1966)
Reyes v. Secretary of Justice, 264 SCRA 35 (1996)Conchingyan vs. RB Surety and Insurance (June 30, 1987, 151 SCRA)
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Broadway Centrum Condominium Corp vs. Tropical Hut (July 5, 1993, 224 SCRA) Molino vs. Security Diners International (GR 136780, Aug. 16, 2001, 363 SCRA) Romeo Garcia vs. Dionisio Llamas (GR. 154127, December 8, 2003, 417 SCRA) California Bus Line vs. State Investment (GR 147950, December 11, 2003, 418 SCRA) Chester Babst vs. CA (GR 99398, Jan. 26, 2001, 350 SCRA)
D. Effects
1. in general- Art. 12962. when accessory obligation may subsist- Art. 1296
E. Effect of the Status of the Original or New Obligation
1. nullity or voidability of original obligation- Art. 12982. nullity or voidability of new obligation- Art. 12973. suspensive or resolutory condition of original obligation- Art. 1299
F. Objective Novation1. meaning of “principal conditions”
G. Subjective Novation
1. By change of debtor
a. Expromisioni. requisites- Art. 1293ii. effects- Art. 1294
b. Delegacioni. requisites- (vs. Art. 1293)ii. effects- Art. 1295
CaseGarcia v. Llamas, 417 SCRA 292 (2003)Quinto vs. People, G.R. No. 126712, April 14, 1999.
2. By change of creditor: Subrogation of a third person in the rights of the creditor- Art. 1300
a. Conventional subrogationi. requisites- Art. 1301
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ii. distinguished from Assignment of Creditiii. effects- Art. 1303, 1304
Licaros Vs. Gatmaitan, G.R. No. 142838, August 9, 2001.
b. Legal subrogationi. requisitesii. when presumed- Art. 1302iii. effects- Art. 1303, 1304Astro Electronics Corp. vs. Philippine Export And Foreign Loan Guarantee Corporation, G.R. No. 136729, September 23, 2003.
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Title II. Contracts
Chapter I. General Provisions
A. Definition – Art. 1305
B. Elements1. Essential elements (see Chapter II, infra)
a. Consentb. Objectc. Cause
2. Natural elements 3. Accidental elements (see D., 3., infra)
C. Characteristics1. Obligatory force – Art. 13082. Mutuality – Arts. 1308-1310 (see also Art. 1473)
CaseGSIS v. CA, 228 SCRA 183 (1993)Professional Academic Plans, Inc. Francisco Colayco and Benjamin Dino vs. Crisostomo (G.R. No. 148599, March 14, 2005.)
3. Relativity a) Contracts take effect only between the parties, their assigns and heirs -
Art. 1311Cases
Manila Railroad Co. v. La Compañia Trasatlantica, 83 Phil. 875 (1918)
DKC Holdings Corp. v. CA, 329 SCRA 666 (2000)b) No one may contract in the name of another – Art. 1317
Case Gutierrez Hmnos. v. Orense, 28 Phil. 571 (1914)
D. Parties
1. Auto-contracts2. Freedom to contract – Art. 1306
CasesGabriel v. Monte de Piedad, 71 Phil. 497 (1941)Pakistan International Airlines v. Ople, 190 SCRA 90 (1990)
a. Special disqualifications1) Art. 87, Family Code2) Arts. 1490 and 1491, CC
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3) Art. 1782, CC
3. What they may not stipulate – Art. 1306
a. Contrary to law, e.g.:1) pactum commissorium (Art. 2088)2) pactum leonina (Art. 1799)3) pactum de non alienado (Art. 2130)
b. Contrary to moralsc. Contrary to good customsd. Contrary to public ordere. Contrary to public policy
CasesCui v. Arellano, 2 SCRA 205 (1961)Arroyo v. Berwin, 36 Phil. 386 (1917)Filipinas Compañia de Seguros v. Mandanas,
17 SCRA 391 (1966)Bustamante v. Rosel, 319 SCRA 413 (1999)
E. Classification1. According to subject-matter
a. Thingsb. Services
2. According to namea. Nominateb. Innominate – Art. 1307
CaseDizon v. Gaborro, 83 SCRA 688 (1978)Corpuz vs. CA (93 SCRA 424)
1) do ut des2) do ut facias3) facio ut facias4) facio ut des
3. According to perfectiona. By mere consent (consensual) – Art. 1315b. By delivery of the object (real) – Art. 1316
4. According to its relation to other contractsa. Preparatoryb. Principalc. Accessory
5. According to forma. Common or informalb. Special or formal
6. According to purpose
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a. Transfer of ownership, e.g., saleb. Conveyance of use, e.g., commodatumc. Rendition of services, e.g., agency
7. According to the nature of the vinculum produceda. Unilateralb. Bilateralc. Reciprocal
8. According to causea. Onerousb. Gratuitous or lucrative
9. According to riska. Commutativeb. Aleatory
F. Stages1. Preparation2. Perfection3. Consummation or death
G. As distinguished from a perfected promise and an imperfect promise (policitacion)
H. With respect to third persons 1. Stipulations in favor of third persons (stipulations pour autrui) – Art. 1311, 2nd
par.Cases
Florentino v. Encarnacion, 79 SCRA 192 (1977)Coquia v. Fieldmen’s Insurance Co., 26 SCRA 178 (1968)Constantino v. Espiritu, 39 SCRA 206 (1971)Young vs. CA (169 SCRA 213) 1989Marmont Resort vs. Guiang (168 SCRA 373) 1988Mandarin Villa vs. CA (257 SCRA 538) 1996
2. Possession of the object of contract by third persons – Art. 13123. Creditors of the contracting parties – Art. 13134. Interference by third persons – Art. 1314
CasesDaywalt v. Corp., 39 Phil. 587 (1919)So Ping Bun v. CA, 314 SCRA 751 (1999)Jose Lagon vs. CA and Lapuz (G.R. No. 119107. March 18, 2005)
Chapter II. Essential Requisites of Contracts
A. Consent1. Requisites – Art. 1319
a. Must be manifested by the concurrence of the offer and acceptance
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CasesRosenstock v. Burke, 46 Phil. 217 (1924)Malbarosa v. CA, 402 SCRA 168 (2003)San Lorenzo Development Corporation vs. CA (G.R. No. 124242. January 21, 2005)MMDA vs. Jancom (G.R. No. 147465. January 30, 2002)Malbarosa vs. CA (G.R. No. 125761. April 30, 2003)
1) Offera) Must be certain – Art. 1319b) What may be fixed by the offeror – Art. 1321c) When made through an agent – Art. 1322d) Circumstances when offer becomes ineffective – Art. 1323e) Business advertisements of things for sale – Art. 1325f) Advertisements for bidders – Art. 1326
2) Acceptancea) Must be absolute – Art. 1319b) Kinds
i. Express – Art. 1320ii. Implied – Art. 1320
iii. Qualified – Art. 1319c) If made by letter or telegram – Art. 1319, 2nd par.
i. Four theories on when the contract is perfected: 1. Manifestation theory2. Expedition thory3. Reception theory4. Cognition theory – Art. 1319, 2nd par.
d) Period of acceptance – Art. 1324Case
Sanchez v. Rigos, 45 SCRA 368 (1972)
e) Contract of option – Art. 1324
b. Necessary legal capacity of the parties1) Who cannot give consent – Art. 13272) When offer and/or acceptance is made
a) during a lucid intervalb) in a state of drunkennessc) during a hypnotic spell
c. The consent must be intelligent, free, spontaneous, and real – Arts. 1330-1346
1) Effect – Art. 13302) Vices of consent
a) Mistake or error
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i. kinds1. Mistake of fact
a. as to substance of the objectb. as to principal conditionsc. as to identity or qualifications of
one of the partiesd. as to quantity, as distinguished
from a simple mistake of accountCase
Asiain v. Jalandoni, 45 Phil. 296 (1923)
Heirs of William Sevilla, et.al v. Leopoldo Sevilla,402 SCRA 501 (2003)
Dometilla Andres vs. Manufacturers Hanover and Trust (GR 82670, Sept. 15, 1989) Spouses Theis vs. CA (GR L126013, Feb 12, 1997)
2. Error of lawa. General rule: Ignorantia legis
neminem excusat – Art. 3b. Exception: Mutual error of law –
Art. 1334ii. When one of the parties is unable to read – Art.
1332Cases
Dumasug v. Modelo, 34 Phil. 252 (1916)
Maxina Hemedes v. CA, 316 SCRA(1990)
Lustan vs. CA (G.R. 111924, Jan 27, 1997)
Katipunan vs. Katipunan (G.R. No. 132415. January 30, 2002)Leonardo vs. CA et al (G.R. No. 125485. September 13, 2004)
iii. Inexcusable mistake – Art. 1333
b) Violence and intimidation – Art. 1335i. Effect – Art. 1336
Case
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Martinez v. Hongkong and Shanghai Bank, 15 Phil. 252 (1910)Lee vs. CA (G.R. No. 90423, September 6, 1991)
c) Undue influence – Art. 1337d) Fraud or dolo – Art. 1338
Cases Hill v. Veloso, 31 Phil. 161 (1915)Woodhouse v. Halili, supraGeraldez v. CA, 230 SCRA 320 (1994)Sierra vs. CA (G.R. No. 90270, July 24, 1992)
i. Kinds1. dolo causante – Art 13382. dolo incidente – Art. 1344, 2nd par.
ii. Failure to disclose facts; duty to reveal them – Art. 1339
Cases Tuason v. Marquez, 45 Phil. 381
(1923)Rural Bank of Sta. Maria v. CA,
314 SCRA 255 (1999)
iii. Usual exaggerations in trade; opportunity to know the facts – Art. 1340
Cases Azarraga v. Gay, 52 Phil. 599
(1928)Laureta Trinidad v. IAC, 204
SCRA 524 (1991)
iv. Mere expression of an opinion – Art. 13411. Effects – Art. 1344
CaseSongco v. Sellner, 37 Phil.
254 (1917)e) Misrepresentation
i. By a third person – Art. 1342ii. Made in good faith – Art. 1343
iii. Active/passiveCases
Mercado and Mercado v. Espiritu, 37 Phil. 215 (1917)
Braganza v. Villa Abrille, 105 Phil. 456 (1959)
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f) Simulation of ContractsCases
Rodriguez v. Rodriguez, 28 SCRA 229 (1914)Suntay v. CA, 251 SCRA 430 (1995)Pangadil et al vs. CFI (G.R. No. L-32437. August 31, 1982)Umali et al vs. CA (G.R. No. 89561. September 13, 1990)
i. Kinds – Art. 13451. Absolute2. RelativeMacapagal vs. Remorin, Caluza (G.R. No. 158380. May 16, 2005.)
ii. Effects – Art. 1346
B. Object of Contracts1. What may be the objects of contracts – Art. 1347
a. All things not outside the commerce of manb. All rights not intransmissible c. All services not contrary to law, morals, good customs, public, or
public policy2. Requisite - must be determinate as to its kind – Art. 13493. What may not be the objects of contracts
a. Future inheritance, except when authorized by law – Art. 1347Case
Blas v. Santos, 1 SCRA 899 (1961)J.L.T. Agro, Inc. vs. Balansag and Cadayday (G.R. No. 141882. March 11, 2005)
b. Impossible things or services – Art. 1348
C. Cause of Contracts1. Meaning of cause – Art. 1350
a. In onerous contractsb. In remuneratory contractsc. In contracts of pure beneficence
2. As distinguished from motive – Art. 13513. Defective causes and their effects:
a. Absence of cause and unlawful cause – Art. 1352Case
Liguez v. CA, 102 Phil. 577 (1957)
b. Statement of a false cause in the contract – Art. 1353c. Lesion or inadequacy of cause – Art. 1355
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CasesCarantes v. CA, 76 SCRA 514 (1977)Sps. Buenaventura, et. al. v. CA, 416 SCRA 263 (2003)
4. Presumption of the existence and lawfulness of a cause, though it is not stated in the contract – Art. 1354
Chapter III. Form of Contracts
A. General rule: Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. (“Spiritual system” of the Spanish Code) - Art. 1356
B. Exception: When the law requires that a contract be in some form in order that it may be valid or enforceable. (Anglo-American principle) - Art. 1356
Case Hernaez v. De los Angeles, 27 SCRA 1276 (1969)
C. Kinds of formalities required by law:1. Those required for the validity of contracts, such as those referred to in Arts. 748,
749, 1874, 2134, 1771, 1773;2. Those required, not for validity, but to make the contract effective as against third
persons, such as those covered by Arts. 1357 and 1358; and 3. Those required for the purpose of proving the existence of the contract, such as
those under the Statute of Frauds in Art. 1403.Case
Resuena vs.CA (G.R. No. 128338. March 28, 2005)
Chapter IV. Reformation of Instruments
A. Requisites (Art. 1359):1. Meeting of the minds upon the contract;2. The true intention of the parties is not expressed in the instrument; and3. The failure of the instrument to express the true agreement is due to mistake,
fraud, inequitable conduct, or accident.Cases
Garcia v. Bisaya, 97 Phil. 609 (1955)Bentir v. Leande, 330 SCRA 591 (2000)Quiros vs. Arjona [G.R. No. 158901. March 9, 2004.]
B. Cases where no reformation is allowed - Art. 1366
C. Implied Ratification – Art. 1367
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D. Who may ask for reformation –Art. 1368
E. Procedure of reformation – Art. 1369Cases
Atilano v. Atilano, 28 SCRA 2232 (1969)Carantes v. CA, supraSarming, et. al. v. Cresencio Dy, et. al., 383 SCRA 131 (2002)
Chapter V. Interpretation of Contracts (Compare with Rules on Statutory Construction)
A. Primacy of intention – Arts. 1370, 1372Cases
Borromeo v. CA, 47 SCRA 65 (1972)Kasilag v. Rodriguez, 69 Phil. 217 (1939)Santi vs. CA (GR 93625, 227 SCRA 541, 1993)
B. How to determine intention – Art. 1371Rapanut vs CA 246 SCRA 323 (1995)
C. How to interpret a contract1. When it contains stipulations that admit several meanings – Art. 1373
Oil And Natural Gas Commission vs. Court Of Appeals [G.R. No. 114323. July 23, 1998.]
2. When it contains various stipulations, some of which are doubtful – Art. 1374Spouses Rigor vs. Consolidated Orix Leasing And Finance Corporation [G.R. No. 136423. August 20, 2002.]
3. When it contains words that have different significations – Art. 1375
4. When it contains ambiguities and omission of stipulations – Art. 1376Chua vs. Court Of Appeals [G.R. No. 119255. April 9, 2003.]
5. With respect to the party who caused the obscurity – Art. 1377Rizal Commercial Banking Corporation vs. Court Of Appeals [G.R. No. 133107, March 25, 1999]
6. When it is absolutely impossible to settle doubts by the rules above – Art. 1378
a. in gratuitous contractsGacos vs. Court Of Appeals [G.R. Nos. 85962-63, August 3, 1992]
35
b. in onerous contracts
7. When the doubts are cast upon the principal object so that the intention cannot be known – Art. 1378
D. Applicability of Rule 123, Rules of Court (now Secs. 10-19, Rule 130)
DEFECTIVE CONTRACTS
Chapter VI. Rescissible Contracts
A. Kinds – Art. 1381
B. Characteristics1. Their defect consists in injury or damage either to one of the contracting
parties or to third persons.2. They are valid before rescission.3. They can be attacked directly only, and not collaterally.4. They can be attacked only either by a contracting party or by a third person
who is injured or defrauded.5. They can be convalidated only by prescription, and not by ratification.
C. Rescission – Art. 13801. Definition2. As distinguished from rescission under Art. 1191
Case Universal Food Corp. v. CA, 33 SCRA 1 (1970)
Pryce Corporation vs. PAGCOR (G.R. No. 157480. May 6, 2005)
Sps. Cannu vs. Sps. Galang [G.R. No. 139523. May 26, 2005.]Iringan vs. Court Of Appeals [G.R. No. 129107. September 26,
2001.]Rivera vs. Del Rosario [G.R. No. 144934. January 15, 2004.]Equatorial Realty Development vs. Mayfair Theatre (G.R. No.
133879. November 21, 2001)3. Requisites:
a. The contract is rescissible;b. The party asking for rescission has no other legal means to
obtain reparation – Art. 1383;The Union Insurance Society Of Canton vs. Court Of Appeals [G.R. No. 100319. August 8, 1996.]
c. He is able to return whatever he may be obliged to restore if rescission is granted – Art 1385;Rivera vs. Del Rosario [G.R. No. 144934. January 15,
2004.]
36
d. The object of the contract has not passed legally to the possession of a third person acting in good faith – Art. 1385;
e. The action for rescission is brought within the prescriptive period of four (4) years – Art 1389.
4. Effect of rescission – Art. 1385a. with respect to third persons who acquired the thing in good
faith – Art. 1385, 2nd and 3rd par. 5. Extent of rescission – Art. 1384
Siguan v. Lim, et. al. , 318 SCRA 725 (1999)
6. Presumptions of fraud – Art. 1387a. Badges of fraud
Cases Oria v. Mcmicking, 21 Phil. 243 (1912)Siguan v. Lim, et. al. , 318 SCRA 725 (1999)Suntay v. CA, supraChina Banking Corporation vs. Court Of Appeals [G.R. No. 129644. March 7, 2000.]MR Holdings Ltd vs. Carlos (G.R. No. 138104. April 11, 2002)
7. Liability for acquiring in bad faith the things alienated in fraud of creditors – Art. 1388
Chapter VII. Voidable or Annullable Contracts
A. Kinds – Art. 1390
B. Characteristics1. Their defect consists in the vitiation of consent of one of the contracting
parties.2. They are binding until they are annulled by a competent court.3. They are susceptible of convalidation by ratification or by prescription.
Case Felipe vs. Heirs of Aldon (120 SCRA 628)
C. Annulment1. As distinguished from rescission2. Grounds – Art. 13903. Who may and may not institute action for annulment – Art. 1397
Case Singsong v. Isabela Sawmill, 88 SCRA 623 (1979)Samahan Ng Magsasaka Sa San Josep vs. Valisno [G.R. No. 158314. June 3, 2004.]Malabanan vs. Gaw Ching (181 SCRA 84, 1990)
37
Armentia vs. Patriarca (18 SCRA 1253, 1966)
4. Prescription – Art. 1391Case
Carantes vs. CA (76 SCRA 514)
5. Effecta. Mutual restitution – Arts. 1398 and 1402
Cases Cadwallader & Co. v. Smith, Bell & Co., 7 Phil. 461
(1907)Velarde v. CA, supraDavid Ines vs.Court Of Appeals [G.R. No. 114051.
August 14, 1995.]Arra Realty Corporation vs. Guarantee Development
Corporation (G.R. No. 142310. September 20, 2004)
1) When one of the parties is incapacitated - Art. 1399Katipunan vs. Katipunan [G.R. No. 132415. January 30, 2002.]
2) When the thing is lost through the fault of the party obliged to return the same – Art. 1400
6. Extinguishment of the actiona. By ratification – Art. 1392b. When the thing is lost through the fault of the person who has the
right to file the action – Art. 1401
D. Ratification1. Requisites:
a. The contract is voidable;b. The ratification is made with knowledge of the cause for nullity;c. At the time of the ratification, the cause of nullity has already ceased
to exist.
2. Formsa. Express or tacit – Art. 1393
b. By the parties themselves or by the guardian in behalf of an incapacitated party – Art. 1394
3. Effects:a. Action to annul is extinguished – Art. 1392
Case Uy Soo Lim v. Tan Unchuan, 38 Phil. 552 (1918)
38
b. The contract is cleansed retroactively from all its defects – Art. 1396
Chapter VIII. Unenforceable Contracts
A. Characteristics1. They cannot be enforced by a proper action in court.2. They are susceptible of ratification.3. They cannot be assailed by third persons.
B. Kinds – Art. 14031. Unauthorized contracts
a. Governing rules – Art. 14042. Contracts covered by the Statute of Frauds
Case Asia Production Co., Inc. vs. Paño [G.R. No. 51058. January 27,
1992.]Western Mindanao Co. vs. Medalle (79 SCRA 703)Limketkai Sons vs. CA (250 SCRA 523)Babao vs. Perez (102 Phil 756)Reiss vs. Memije (15 Phil 350)Villanueva vs CA (G.R. No. 107624. January 28, 1997)
a. Purpose of StatuteCase
Philippine National Bank v. Philippine Vegetable Oil Co., 49 Phil. 857 (1927)
b. How ratified – Art. 1405Cases
Carbonnel v. Poncio, et al., 103 Phil. 655 (1958)First Philippine International Bank vs. CA (G.R. No. 115849. January 24, 1996)
c. Right of the parties when a contract is enforceable but a public document is necessary for its registration – Art. 1406
3. Contracts executed by parties who are both incapable of giving consent to a contract
a. Effect of ratification by the parents or guardian of one of the parties – Art. 1407
b. Effect of ratification by the parents or guardian of both parties – Art. 1407
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Chapter IX. Void or Inexistent Contracts
A. Characteristics1. Void from the beginning2. Produces no effect whatsoever3. Cannot be ratified – Art. 1409
CasesTongoy vs. CA (123 SCRA 99)Cui vs. Arellano University (2 SCRA 205)Chavez vs. PCGG (307 SCRA 394)Guiang vs. CA (291 SCRA 372)Castillo vs. Galvan (85 SCRA 526)
B. Kinds –Art. 14091. Contracts that are void
a. Those whose cause, object, or purpose is contrary to law, morals, good customs, public order or public policy
1) When the act constitutes a criminal offense – Art. 1411a) in pari delicto rule
2) When the act is unlawful but does not constitute a criminal offense – Art. 1412
a) in pari delicto ruleCases
Menchacez vs. Teves (G.R. No. 153201. January 26, 2005)Angel vs Modales(G.R. No. 145031. January 22, 2004)
3) When the purpose is illegal, and money is paid or property delivered therefor – Art. 1414
4) When the contract is illegal and one of the parties is incapable of giving consent – Art. 1415
CasesLiguez v. CA, supraRelloza v. Gaw Cheen Hum, 93 Phil. 827 (1953)
5) When the agreement is not illegal per se but is prohibited – Art. 1416
Cases Philippine Banking Corp. v. Lui She, 21 SCRA
52 (1967)Frenzel v. Catito, 406 SCRA 55 (2003)Acabal and Nicolas vs. Acabal (G.R. No. 148376.
March 31, 2005)
40
Frenzel vs. Catito (G.R. No. 143958. July 11, 2003)
6) When the amount paid exceeds the maximum fixed by law – Art. 1417
7) When by virtue of a contract a laborer undertakes to work longer than the maximum number of hours of work fixed by law – Art. 1418
8) When a laborer agrees to accept a lower wage than that set by law –Art. 1419
9) When the contract is divisible – Art. 142010) When the contract is the direct result of a previous illegal
contract – Art. 1422b. Those whose object is outside the commerce of manc. Those which contemplate an impossible serviced. Those where the intention of the parties relative to the principal
object of the contract cannot be ascertainede. Those expressly prohibited or declared void by law
2. Contracts that are inexistenta. Those which are absolutely simulated or fictitious (see Arts. 1345
and 1346)b. Those whose cause or object did not exist at the time of the
transaction
C. Right to set up defense of illegality cannot be waived – Art. 1409
D. The action or defense for the declaration of the inexistence of a contract1. does not prescribe – Art. 14102. is not available to third persons whose interest is not directly affected – Art.
1421
Title III. Natural Obligations
A. Definition – Art. 1423
B. As distinguished from civil obligations – Art. 1423
C. As distinguished from moral obligationsCases
Villaroel v. Estrada, 71 Phil. 140 (1940)Fisher v. Robb, 69 Phil. 101 (1939)
D. Conversion to civil obligation1. By novation
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2. By ratification
E. Examples – Arts. 1424-1430
Title IV. Estoppel
A. Definition – Art. 1431Case
Kalalo v. Luz, 34 SCRA 337 (1970)
B. Kinds1. Technical estoppel
a. By recordb. By deed – art. 1433
3. Equitable estoppel or estoppel in pais – Art. 1433
C. Persons bound – Art. 1439Case
Manila Lodge No. 761 Benevolent and Protective Order of the Elks v. CA, 73 SCRA 168 (1976)
D. Cases where estoppel applies – Arts. 1434-1438Case
Miguel v. Catalino, 26 SCRA 234 (1969)Read: Annotation, 32 SCRA 542Mendoza vs. Reyes and CA (G.R. No. L-31618. August 17, 1983)
Title V. Trusts
Chapter I. General Provisions
A. Definition
B. Governing rules – Art. 1442
C. Parties – Art. 14401. Trustor2. Trustee3. Beneficiary or cestui que trust
D. Kinds – Art. 1441
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Case Salao v. Salao, 70 SCRA 168 (1976)
1. Express Trustsa. Proof required – Art. 1443b. Form – Art. 1444c. Want of trustee – Art. 1445d. Acceptance by the beneficiary – Art. 1441
2. Implied Trustsa. How established – Art. 1441b. How proved – Art. 1457c. Examples – Arts. 1448-1456
CasesFabian v. Fabian, 22 SCRA 231 (1968)Bueno v. Reyes, 27 SCRA 1179 (1969)Tamayo v. Callejo, 46 SCRA 27 (1972)Heirs of Sanjorjo vs. Quijano (GR. No. 140457. January 19, 2005)Aznar Brothers Realty Company vs. Aying (GR No. 144773. May 16, 2005)
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