Title II.

- CONTRACTS CHAPTER 1 CONTRACTS, GENERAL PROVISIONS Article 1305 A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service It is a juridical convention manifested in legal form, by virtue of which, one or more persons (or parties) bind themselves in favor of another or others, or reciprocally, to the fulfillment of a prestation to give , to do or not to do It is the agreement of two or more persons for the purpose of creating, modifying or extinguishing a juridical relation between them

b$

)ccording to cause or e-uivalence of the value of prestations *$ "nerous + there is an interchange of e-uivalence valuable consideration ,$ Gratuitous or lucrative + this is /R%%, thus one party receives no e-uivalent prestation except a feeling that one has been generous or liberal .$ Remunerative + one prestation is given for a benefit or service that had been rendered 1R%2I"3&45 )ccording to importance or dependence of one upon another (according to their relation to other contracts) *$ 1rincipal + contract may stand alone by itself, without the need of other contracts ,$ )ccessory + #his depends for its existence upon another contract .$ 1reparatory + the parties do not consider the contract as an end by itself, but as a means thru which future transaction or contracts may be made' lead to the execution of other contracts )ccording to the parties obliged *$ 3nilateral + only one of the parties has an obligation ,$ 6ilateral + both parties are re-uired to render reciprocal )ccording to their name or designation *$ !ominate + given a particular or special name ,$ Innominate + contraltos innominados' not given any special name )ccording to the ris( of fulfillment *$ Commutative + parties contemplate a real fulfillment' therefore, e-uivalent values are given ,$ )leatory + the fulfillment is dependent upon chance, thus the values vary because of the ris( of chance (ex$ Insurance) )ccording to the time of performance of fulfillment *$ %xecuted + one completed at the time the contract is entered into ,$ %xecutory + one where the prestations are to be complied with at some future time )ccording to &ubject matter *$ Involving #hings ,$ Involving rights or transmissible) .$ Involving services

i$

)ccording to /orm *$ Common ,$ &pecial )ccording to 1urpose *$ #ransfer of ownership ,$ Conveyance of 3se .$ Rendition of &ervices )ccording to 2inculum (nature) which they produce *$ 3nilateral ,$ 6ilateral .$ "nerous + exchange of value 7$ Gratuitous + donation )ccording to the nature of the contract *$ 1ersonal ,$ Impersonal

j$

($

c$

l$

Element !" # C!ntr#ct GR written instrument is !"# necessary a$ %ssential %lements Consent &ubject matter or "bject Cause or Consideration !ote in some contracts form is also essential' still in others, delivery is li(ewise essential b$ !atural %lements #hose found in certain contracts, and presumed to exist, unless the contrary has been stipulated )ccidental %lements &tipulations that may be agreed upon by the contracting parties in a contract$ #hey may be present or absent, depending upon whether or not the parties have agreed upon them

d$

e$

St#$e !" # C!ntr#ct a$ 1reparation or Conception or !egotiation or Generacion 1arties are progressing with their negotiations' have not yet arrived at any definite agreement b$ 1erfection or 6irth #he 1arties have at long last came to a definite agreement %lements of definite subject matter and valid cause have been accepted by mutual consent #here is meeting of the minds' may now demand fulfillment c$ Consummation or 0eath or #ermination #he terms of the contract are performed !ote #wo persons refer to two parties$ 8hile a promissory note is unilateral, still such a contract includes two parties (debtor and creditor) %# ic Princi&le !r C'#r#cteri tic !" # C!ntr#ct for a contract to be binding, it must conform to this 9 general principles *$ /reedom (or liberality) to &tipulate + provided not contrary to law, morals, good customs, public order or public policy ()rt$ *.:;) ,$ "bligatory /orce and Compliance in Good /aith (art$ **9<, *.*9) + contract is the law between parties and must be complied with in good faith$ .$ 1erfection by mere Consent (Consensuality) as a rule ()rt$ *.*9) + GR contracts are perfected by mere consent (binding) 7$ 6oth 1arties are =utually 6ond ()rt$ *.:>) 9$ Relativity ()rt$ *.**) + Generally, it is binding only between the parties, their assigns, and heirs)s

f$

c$

Cl#

i"ic#ti!n !" C!ntr#ct a$ )ccording to perfection or formation *$ Consensual + perfected by mere consent ,$ Real + re-uires the . essential re-uisites plus delivery .$ /ormal or solemn + those where special formalities are essential before the contract may be perfected (ex$ 0onation inter vivos re-uires for its validity a public instrument)

g$

h$

credits

(should

be

Article 130( The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. )s a general rule, whatever the parties agree upon will be binding

community, then it shall be included within the scope or sphere of good customs 1ublic "rder Can only refer to the safety, as well as to the peace and order, of the country or a particular community 3sually overlaps with public policy !ote every contract affecting public interest suffers a congenital infirmity in that it contains an implied reservation of the police power 1ublic 1olicy ) principle of law which holds that no person can lawfully do that which has a tendency to be injurious to the public or against the public good #his varies according to the culture of a particular country' it is the public, social and legal interest in private law It is the manifest will of a &tate !ote 8ith respect to contracts which tend to restrain business trade, contract in restraint of trade is valid &r!)i*e* that there is a limitation upon either a time or &l#ce$ ) stipulation of 1erpetual Restriction with regards to ownership is prohibited by law$ !ote /urther #he name that the party gives to the contract should not be controlling, for a contract is what the parties intended it to be, not what they call it$ ) contract must be judged by its c'#r#cter, its n#t+re and its le$#l ,+#li"ic#ti!n $ Article 130Innominate contracts shall be regulated by the stipulations of the parties, by the provisions of Titles I and II of this Book, by the rules governing the most analogous nominate contracts, and by the customs of the place. Contemplates on innominate contracts Regulated by the cardinal principle of autonomy stipulation of the parties (what they have agreed upon) Ainds o 0o ut des + I give that you give o 0o ut facias + I give that you do o /acio ut des + I do that you give o /acio ut facias + I do that you do Regulated by o &tipulations of the parties o 6y the general principles of obligations and contracts

o o

6y the rules governing the most analogous nominate contracts 6y the customs of the place

1rinciple of /reedom?)utonomy?/reedom?4iberty of Contracts It is the free entrance into contracts generally without restraints is one of the liberties guaranteed to the people #his refers only to contract which are 4%G)4, not void or inexistent ones 4imitations of the !ature of &tipulations *$ 4aw ,$ =orals .$ Good Customs 7$ 1ublic "rder 9$ 1ublic 1olicy 4aw #hose which are mandatory or prohibitive in character #hose which, without being mandatory or prohibitive, nevertheless, are expressive of fundamental principles of justice, and therefore, cannot be overloo(ed by the contracting parties #hose which impose essential re-uisites without which the contract cannot exist !ote 0irectory and &uppletory laws need not to be complied with, since these are either discretionary or merely supply the omissions of the parties

Article 130. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. Contemplates on the /+t+#lit0 of contracts + both parties are bound #erms and conditions in a contract should be agreed upon by both parties$ #he principle is based on the essential e-uality of the parties Conse-uences of =utuality o ) party cannot revo(e or renounce a contract without the consent of the other, nor can it have it set aside on the ground that he had made a bad bargain !ote the free exercise of religious beliefs is superior to contractual rights$ Article 1301 The determination of the performance may be left to a third person, whose decision shall not be binding until it has been made known to both contracting parties. Contemplates on the determination by a third person In a contract of sale for example, one of the important stipulation is the price which should be agreed upon by both parties$ Bowever, the determination of the price may be delegated to a third party$ Bowever, for such decision to be binding, it should first be made (nown to both parties$ #hus, the final say is still somehow in the hands of the , contracting parties$

Pactum Commissiourim a clause providing that the mortgagee will automatically own the property mortgaged if the debt is not paid at maturity is !344 and 2"I0 =orals Referred to are those principles which are incontrovertible and are universally admitted and which have received social and practical recognition #here are some instances that the law does not prohibit but it is prohibited by laws It deals with right and wrong and with human conscience

Article 1310 The determination shall not be obligatory if it is evidently inequitable. In such case, the courts shall decide what is equitable under the circumstances. #he court can always come incase there is an agreement which is unfair or ine-uitable %ven if such has been agreed upon by both parties, there can still be a possibility that it cannot be granted$ #he court will determine what is reasonable for what is e-uitable is a -uestion of fact, to be ascertained form the attendant circumstances

Good Customs #hose that have received for a period of time practical and social confirmation If a moral precept or custom is not recogni@ed universally, but is sanctioned by practice of a certain

Article 1311 ontracts take effect only between the parties, their assigns and heirs, e!cept in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. Contemplates on the principle of Rel#ti)it0 Contract also binds the assigns and heirs GR contracts ta(e effect only between the parties, their assigns and heirs and therefore generally, its terms cannot determine the rights of third persons$ &trangers, therefore, cannot generally demand the enforcement of a contract nor can they demand its annulment ) buyer should respect the existing lease of a certain property 8hen he is aware that there is an existing lease or when the contract of lease is registered

.$ 7$ 9$

establishment, the credit card holder is the one who benefits) 8here a third person induces another to violate his contract + such third person is made liable as well for the damages caused 8here, in some cases, third persons may be adversely affected by a contract where they did not participate 8here the law authori@es the creditor to sue on a contract entered into by his debtor (Accion Directa)

Article 1315 ontracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been e!pressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. Contemplates on the Consensuality of Contracts or perfection by mere consent

Article 1312 In contracts creating real rights, third persons who come into possession of the ob"ect of the contract are bound thereby, sub"ect to the provisions of the #ortgage $aw and the $and %egistration $aws. #his article constitutes one of the exceptions to the general rule that a contract binds only the parties ) real right binds the property over which It is exercised %x$ ) buyer should respect the existing lease of a certain property 8hen he is aware that there is an existing lease or when the contract of lease is registered !ote registration is a notice to the whole world thus ma(es a third person bound to respect previous mortgage or lease

D Bow are contracts perfectedE ) a$ Consensual contracts + mere consent b$ Real contracts + perfected by delivery c$ /ormal or solemn contracts + special form is re-uired !ote Consensual contracts are perfected form the moment there is agreement (consent) on the subject matter, and the cause and consideration. D 8hat are the Conse-uences of 1erfectionE ) *$ #he parties are bound to the fulfillment of what has been %F1R%&&45 &#I134)#%0 + compliance must be in G""0 /)I#B !ote if the true intention is not expressed in a written agreement, in case one has been made, the proper remedy is R%/"R=)#I"! ,$ #he parties are )4&" bound to all the C"!&%D3%!C%& which, according to their nature, may be in (eeping with G""0 /)I#, 3&)G%, and 4)8

!ote as heirs, there is no legal obligation for you to pay a debt when you did not receive any inheritance from the principal !ote /urther in order that an heir can -uestion the validity of contracts entered into by his predecessor, he must be a compulsory or forced heir$ 5our liability as an heir is only up to the extent of the value of the property you received from the decedent 8hen a person dies, for the purpose of estate taxation, his !%# %&#)#% should be transmitted by the heirs to the creditors$ 8hat will be left to the heirs therefore is the gross value of properties minus the obligations$

Article 1313 reditors are protected in cases of contracts intended to defraud them. Creditors are protected in cases of contracts intended to defraud them 9th exception to the principle of relativity ) creditor can as( for the rescission of a contract entered into by his debtor with a third party which would defraud him !ote in a case of donation, you can only as( for the rescission of a donation if the donor has no other property to pay you

Article 131( %eal contracts, such as deposit, pledge and ommodatum, are not perfected until the delivery of the ob"ect of the obligation. Contemplates on Real contracts Re-uirements consent, subject matter, cause or consideration and 0%4I2%R5 Real Contracts referred to o 0eposit o 1ledge + accessory contract to a contract of loan' delivers a personal property as a security to a loan and is personally delivered to the creditor (collateral)

%xceptions to the 1rinciple of Relativity *$ 8here the obligations arising from the contract are not transmissible by their !)#3R%, by &#I13#4)#I"!, or by 1R"2I&I"! "/ 4)8 ,$ 8here there is a &#I134)#I"! 1"3R )3#R3I (a stipulation in favor of a third party, thus heirs and assigns cannot obtain that which was contemplated in the contract) + the contracting parties must have C4%)R45 and 0%4I6%R)#%45 conferred a /)2"R upon a third person and the stipulation must be 1)R# of the contract$ (ex$ Credit card + between ban( and business

Article 1313 Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. .rd exception to the principle of relativity Contemplates on an instance when a stranger to a contract can be sued in view of his unwarranted interference$ 8hoever is injured may properly sue for damages !ote inducement presupposes bad faithC #hus misrepresentation and good faith is a valid defense

Commodatum + a loan where the identical object must be returned (between lender and borrower)

!ote there can be no more ratification if the contract has previously been R%2"A%0 by the other contracting party

to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter/offer. Acceptance made by letter or telegram does not bind the offerer e!cept from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. Consent is the meeting of the minds between the parties on the subject matter and the cause of the contract, even if neither one has been delivered Re-uisites of Consent o Concurrence of offer and acceptance o Consent must be intelligent, free, spontaneous and real o #here must be , or more parties o #he parties must be capable or capacitated o #here must be no vitiation of consent o #here must be no conflict between what was expressly declared and what was really intended o #he intent must be declared properly, that is, whatever legal formalities are re-uired must be complied with Re-uisites for the meeting of the minds o "ffer must be C%R#)I! o )nd an acceptance that must be 3!D3)4I/I%0 and )6&"43#% !ote if the acceptance is -ualified, let us say by a condition, this merely constitutes a C"3!#%RI "//%R (no meeting of the minds until both parties consent)

!ote ) contract Gto ma(e a deposit, to ma(e a pledge, or to ma(e a commodatumH is a C"!&%!&3)4 contract$ )fter delivery, the contract becomes a R%)4 contract$ The ontract of arriage Contract to Carry (at some future time) + is C"!&%!&3)4 and is perfected by mere consent Contract of Carriage + is a R%)4 contract, fro not until the carrier is actually used can we consider the contract perfected !ote #he real contract of carriage is perfected even if the passenger has not yet paid, in fact, even if he has no money for his fair$ /urther, the allIimportant fact is that he has, with the express or implied consent of the carrier, placed a part of his body, or a portion of the goods on any part of the vehicle, such as the stepping platform or the running board$ Article 131&o one may contract in the name of another without being authori'ed by the latter, or unless he has by law a right to represent him. A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, e!pressly or impliedly, by the person on whose behalf it has been e!ecuted, before it is revoked by the other contracting party. GR !o one may contract in the name of another #his article contemplates on the exception and its re-uisites

CHAPTER 2 ESSENTIAL RE45ISITES O6 CONTRACTS, GENERAL PROVISION Article 131. There is no contract unless the following requisites concur( )*+ onsent of the contracting parties; ),+ -b"ect certain which is the sub"ect matter of the contract; ).+ ause of the obligation which is established. Contemplates on how consent is manifested %ssential re-uisites consent, object or subject matter, cause or consideration Real Contracts 7th re-uisite + delivery &olemn or /ormal Contracts 7tr re-uisite + compliance with the formalities re-uired by law

!ote consent presupposes 4%G)4 C)1)CI#5 and the fulfillment of conditions, should any be attached %ffects of !onIconsent *$ %x$ Jo(e, absolutely simulated contract + no contract' agreement may be considered inexistent or 2"I0 ,$ If there is vitiated consent + the contract is !"# 2"I0' it is merely 2"I0)64% Transportation Ticket as a Contract ) transportation tic(et is a complete written contract between the shipper and the passenger since it has all the elements of a complete contract a$ Consent passenger boards the ship and shipper accepts him b$ Cause or consideration fare paid c$ "bject transportation of the passenger !ote )n agreement on the price but a disagreement on the manner of its payment will not result in consent, thus, preventing the existence of a valid contract for lac( of consent$ #his lac( of consent is separate and distinct from lac( of consideration where the contract states that the price has been paid when in fact, it has never been paid$ Secti!n 1 CONSENT Article 1311 onsent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are -

Re-uisites for a 1erson to Contract in the !ame of )nother *$ Be must be duly authori@ed (expressly or impliedly) ,$ Be must have by law a right to represent him (ex$ Guardian or administrator) .$ #he contract must be &36&%D3%!#45 R)#I/I%0 (expressly or impliedly, by word or by deed %ffects of Ratification Cleanses the contract from all its defects from the moment the contract was entered into$ (retroactive effect)

Cert#in O""er + it must not be vague, misleading, or made as a jo(e$ !ote if the offer is withdrawn before it is accepted, there is no meeting of the minds$ If an offerer offers several distinct and separate items, and the offeree accepts one of them, the contract is perfected as to the item accepted Acceptance Thru orrespondence Rule acceptance made by letter or telegram does not bind the offerer except form the time it came to his (nowledge$ #he contract is such a case is presumed to have #he (nowledge may be actual or constructive (as when the letter of acceptance has been received in the house of the offerer by a person possessed of reasonable discernment$

!"#% what is important is when the telegram of approval was received by the offerer and he had gained (nowledge about such acceptanceIcommunication$ #he offeror can still withdraw his offer at anytime before he receives the letter of acceptance from C$ "fferee can also withdraw his acceptance as long as the withdrawal is received first by 6 before the acceptance letter$ D Can a buyer be compelled to accept a .rd offerE ) !"$ an offer not accepted absolutely is immediately extinguished Article 1320 An acceptance may be e!press or implied. /orms of )cceptance o %xpress o Implied + from conduct, or acceptance of unsolicited services o 1resumed by law as when there is failure to repudiate hereditary rights within the period fixed by law' or when there is &I4%C% (place the silent person in estoppels) Article 1321 The person making the offer may fi! the time, place, and manner of acceptance, all of which must be complied with. #hings that may be fixed by the "fferer o #ime o 1lace o =anner of acceptance !ote any act contrary to the prescribed terms really constitutes a counter offer or counterIproposal$ #his article also applies to an auction sale, whether private or public !ote ) Gcontract to purchase which does not give specific description of the objects to be purchased nor the price nor the rate of exchange to be used is a mere 1R%4I=I!)R5 )GR%%=%!#$ Article 1322 An offer made through an agent is accepted from the time acceptance is communicated to him. Contemplates on an offer made through an agent If you have constituted F as an agent to sell your car, what has been agreed upon by F and party is binding to F and the real owner of the property -

)rticle applies only when 6"#B acceptance are made thru an )G%!#

the

offer

and

Article 1323 An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. Gives 7 circumstances when the offer becomes ineffective o "ffer becomes ineffective upon the 0%)#B, o CI2I4 I!#%R0IC#I"!, o I!&)!I#5, o or I!&"42%!C5 "/ %I#B%R 1)R#5 before acceptance is conveyed If the acceptance did reach the creditor before he died, the heirs will be bound to the contract GConveyedH refers to that moment when the offeror has (nowledge of the acceptance by the offeree$ Bence, the article merely means that an offer becomes ineffective upon the death , etc$ of either party before the offeror has (nowledge of the acceptance by the offeree General %ffect of this article no meeting of the minds

Contemplates on a situation when the offeror gives the offeree a certain period of time to decide$ 6efore the lapse of the said period, the offeror can withdraw the offer by communicating such$ In order to bind the offeror not to withdraw, you as the offeree shall pay an "1#I"! ="!%5?C"!#R)C# (this is binding because it has its own consideration' not deductable to the original price)

If the option is without a consideration + the offeror may withdraw his offer by communicating such withdrawal to the offeree at anytime before acceptance (even before expiration of the period) If the option is with a consideration + the offeror cannot withdraw his offer within the period he has given$ "ption + contract granting a person the privilege to buy or not o buy certain objects at any time within the agreed period at a fixed price$ #he option must have its own cause or consideration R%D3I&I#%& 6%/"R% "//%R C)! 6% 8I#B0R)8 *$ #here is yet no acceptance by the offeree ,$ #he offeror must communicate to the offeree the decision to withdraw the offer .$ #he option must not be founded on a consideration "1#I"! ="!%5 vs$ %)R!%&# ="!%5 "1#I"! ="!%5 !ot part of the purchase price 1roof of the perfection of the option contract 8ould be buyer is not re-uired to buy %)R!%&# ="!%5 It is part of the purchase price (sort of a down payment) 1roof of the perfection of the contract (parties are already bound) 6uyer is bound to pay the balance

"ther Instances when the offer becomes ineffective *$ "fferee expressly or impliedly rejects the offer ,$ 8hen offer is accepted with a -ualification or condition (counterIoffer) .$ 8hen before acceptance is communicated, the subject matter has become illegal or impossible 7$ 8hen the period of time given to the offeree within which he must signify his acceptance has already lapsed 9$ 8hen the offer is revo(ed in due tim C"!#R)C# "/ )0B%&I"! #erms are prepared by one party while the other party merely affixes his signature signifying his adhesion thereto$ &uch contracts are not void in themselves$ #hey are binding as ordinary contracts$ In cases there are ambiguous terms, it shall be interpreted against the person who made it !ote as well that if the terms of the contracts are also clearly ini-uitous, the court can come into the picture Article 1323 0hen the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, e!cept when the option is founded upon a consideration, as something paid or promised.

Article 1325 1nless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to make an offer. )dvertisements are not definite offers rather are =%R% I!2I)#I"!& #" =)A% )! "//%R Bowever, if advertisement is very specific with regards to the terms and conditions, it is considered as a definite offer$

Article 132( Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. )dvertisements for bidders are simply invitations to ma(e proposals, and the advertiser is !"# 6"3!0 to accept the highest or lowest bidder, unless the contrary appears

Article 132The following cannot give consent to a contract( )*+ 1nemancipated minors; ),+ Insane or demented persons, and deaf/mutes who do not know how to write. #al(s about the persons who 0" !"# B)2% #B% C)1)CI#5 to give consent o 3nemancipated minors (now called minors) o Insane or demented person, o and deafImutes who do not (now how to write (note if they (now how to read, but do not (now how to write, it is submitted that the contract is valid, for they are capable of understanding, and therefore capacitated to give consent) #he capacity of contracting parties is an indispensable re-uisite for consent If any of the contracting parties is incapacitated, the contract is 2"I0)64% (valid until annulled and can be subject to ratification) If both parties are incapacitated, then the contract is 3!%!/"RC%)64%

Contracts of life insurance in favor of their parents, spouse, children, bro, sisters (minor should be *> years and above) o /orm of savings account (minor at least K years old) !ote #he mere silence when ma(ing a contract as to his age does not constitute a fraud which can be made the basis of an action for deceit$ #here should be an active (actual not constructive) misrepresentation$ o 1%R&"!& &1%CI)445 0I&D3)4I/I%0 Bere the transaction is 2"I0 *$ Busband and 8ife cannot &%44 to each nor can they 0"!)#% to each other (only those prejudiced can assail the validity of the transaction ,$ Insolvents .$ 1ersons dis-ualified because of /I03CI)R5 R%4)#I"!&BI1& (ex$ Guardian cannot purchase the property of ward' judge cannot purchase property under litigation) Article 132. ontracts entered into during a lucid interval are valid. ontracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. Contemplates on lucid interval valid 0run( and under hypnosis voidable GR a person is sane Bowever if you can prove the insanity, the only way to validate the contract, is to stress that during the construction of the contract, the person is sane

#hose who cannot with outside aid, ta(e care of themselves and manage their property

Article 1330 A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. %numerates the vices of consent (2I#I)#%0 C"!&%!#) o =ista(e (error) o /raud o 2iolence o Intimidation o 3ndue influence =a(es the contract 2"I0)64% however there must be clear and convincing evidence of the presence of vitiated consent

Article 1331 In order that mistake may invalidate consent, it should refer to the substance of the thing which is the ob"ect of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. #istake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract. A simple mistake of account shall give rise to its correction. 0efines when /ISTA7E can affect the consent It should refer to the substance of the thing which is the object of the contract or conditions which have principally moved one or both parties to enter into the contract %x$ If a person who has a hobby of horse raising enters into a contract with a seller of horses for the purposes of racing, however the contract entered into is a horse which can barely run, and the contract has already been executed' can the buyer file for an action for annulmentE 5es, there was a mista(e of the very object of the contract$ "ther aspect of mista(e identity or -ualification of one of the parties (if such identity is the principal cause of the contract) )s a GR it is only a mi t#8e !" "#ct which will vitiate consent thus rendering the contract voidable' a mista(e of law does not render the contract voidable because

%FC%1#I"!& where a contract entered into by an 3!%=)!CI1)#%0 =I!"R may have all the effects of a valid contract o 8hen it is entered into by a minor who misrepresents his age (=ercado vs$ %spiritu, .K 1hil$ ,*9) o 8hen it involves the sale and delivery of necessaries to the minor ()rt$ *7><, CC) o 8hen it involves a natural obligation and such obligation is fulfilled voluntarily by the minor, provided that such minor is between *> and ,* years of age, if female ()rt$ *7,9I,K, CC) L!"# )114IC)64%M o 3pon reaching the age of majority, they ratify the same o Contract entered into thru a guardian, and the court approved the same

Article 1321 The incapacity declared in Article *.,2 is sub"ect to the modifications determined by law, and is understood to be without pre"udice to special disqualifications established in the laws. Contemplates on modifications with regards to people who are incompetent to enter into contracts such ma(ing the contract void #he following are considered I!C"=1%#%!#& under the Rules of Court o #hose under CI2I4 I!#%R0IC#I"! o Bospitali@ed 4%1%R& o 1R"0IG)4& o 0%)/ and 03=6 who are unable to read and write o #hose of 3!&"3!0 =I!0 even though they have lucid intervals

ignorance of the law does not excuse anyone from compliance therewith$ R%D3I&I#%& *$ %rror must be substantial regarding a$ #he object of the contract b$ Conditions which principally moved or induced one of the parties c$ Identity or -ualification but only is such was the principal cause of the contract ,$ %rror must be %xcusable (n!t c#+ e* 90 ne$li$ence) .$ %rror must be a =I&#)A% of /)C#, and not of 4)8 Article 1332 0hen 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 show that the terms thereof have been fully e!plained to the former. Contemplates on the 0uty of the courts to be vigilant to protect persons who are considered as an underdog 1resumption one always acts with due care and signs with full (nowledge of all the contents of a document #his article gives an exemption to the presumption o 8hen one of the parties is unable to read (including blind person) o If the contract is in a language not understood by one of the parties 0efense of the other part prove that the terms thereof have been fully explained to the former

#utual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent !ature of the contract of mortgage over a real property Real property is still in the possession of the debtor )s far as the fruits is concerned, debtor is still the owner Creditor does not have any rights of the fruits of the property, it is the debtorNs responsibility to pay the creditor Bowever, if the lawyer drafts a contract of ANTICHRESIS (this involves a real property$ #he nature of the contract is the property which was given as a collateral, the fruits over that property will now be paid to the creditor and to be applied first on the interest and the excess will be paid to the principal), and the parties thought that the contract is a mortgage + this situation is a mutual error$ In which case, the consent is vitiated by mista(e$ Re-uisite *$ =ust be with respect to the legal effect of an agreement ,$ =ista(e must be mutual .$ Real purpose of the parties must have been frustrated Article 1335 There is violence when in order to wrest consent, serious or irresistible force is employed. There is intimidation when one of the contracting parties is compelled by a reasonable and well/grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent. To determine the degree of intimidation, the age, se! and condition of the person shall be borne in mind. A threat to enforce one3s claim through competent authority, if the claim is "ust or legal, does not vitiate consent. 2I"4%!C% 1resent when in order to wrest consent, serious or irresistible force is employed o #he manifestation of violence is physical I!#I=I0)#I"! one of the parties is compelled by a reasonable and wellIgrounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent o ="R)4 1R%&&3R% is exerted (person may not be touched at all by the other party) o #o determine the degree ta(e into account age, sex and condition of the person 4ast paragraph intimidation thru legal concerns does not vitiate consent (ex$ 1ayment of phone bills)

R%D3I&I#% /"R 2I"4%!C% #" 2I#I)#% C"!&%!# *$ %mployment of &%RI"3& or IRR%&I&#I64% force ,$ It must have been the reason why the contract was entered into R%D3I&I#% /"R I!#I=I0)#I"! #" 2I#I)#% C"!&%!# *$ Reasonable and wellIgrounded fear ,$ "f an I==I!%!# and GR)2% evil .$ 3pon his person, property or upon the person or property of his spouse, descendants or ascendants 7$ It must have been the reason why the contract was entered into 9$ #hreat must be of an 3!J3&# )C#, and )C#I"!)46% 8"R!G (#hus, a threat to prosecute is not considered as intimidation' if claim is just or legal, it does not vitiate consent) !ote #he right to enforce oneNs claim thru competent authority must not by itself constitute an unlawful act$ #hus, blac(mailing is considered as a vitiated consent$ Reverential /ear I /ear of displeasing persons to whom obedience and respect are due, the contract is still 2)4I0, for by itself reverential fear is !"# 8R"!G Article 133( 4iolence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in the contract. 2I"4%!C% or I!#I=I0)#I"! shall annul the obligation, although it may have been employed by a third person who did not ta(e part in the contract It is not necessary that the other party is the one who employs violence or intimidation$

Article 1333 There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the ob"ect of the contract. #here is !" =I&#)A% if the party alleging it A!%8 #B% 0"36#, C"!#I!G%!C5 or RI&A affecting the object of the contract #his article assumes that the party was 8I44I!G to ta(e the ris( ()4%)#"R5 I! !)#3R%) %x$ If the property you bought has a pending case, whatever is the decision of the court, you are bound to such decision It is your responsibility to chec( the status of the property

2I"4%!C% vs$ I!#I=I0)#I"! 2I"4%!C% I!#I=I0)#I"! %xternal Internal 1hysical compulsion =oral compulsion R%D3I&I#%& "/ 2I"4%!C% *$ /orce employed should be serious or irresistible ,$ It must be the determining cause for the party upon whom it is employed in entering the contract$ 8here it not for the violence you would have not entered into the contract R%D3I&I#%& "/ I!#I=I0)#I"! *$ "ne of the contracting parties is compelled to give his consent by reasonable and wellIgrounded fear of an evil

!ote if mista(e is caused by inexcusable negligence, the contract cannot be annulled$ Article 1333 -

,$ .$ 7$

%vil must be unjust %vil must be imminent and grave It must be the determining cause for th te party upon whom it is employed in entering the contract$ 8here it not for the violence you would have not entered into the contract

,$

/raud in the 1%R/"R=)!C% of the obligations stipulated in the contract

A mere e!pression of an opinion does not signify fraud, unless made by an e!pert and the other party has relied on the former3s special knowledge. =ere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the formerNs special (nowledge %x$ 6uying diamond ring in a jewel store

Article 133There 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 following circumstances shall be considered( the confidential, family, spiritual and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weakness, or was ignorant or in financial distress. Contemplates on 3!03% I!/43%!C% It is when a person ta(es improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice

0"4" C)3&)!#% vs$ 0"4" I!CI0%!#% 0"4" C)3&)!#% 0"4I I!CI0!#% %ffect Is to render the contract %ffect is to render or as( for voidable damages &erious in character !ot serious Cause which induces the !ot the cause party to enter in to the contract Re-uisites of fraud *$ Insidious words or machinations must have been employed by one of the contracting parties (if both committed fraud, the contract would remain valid ,$ =ust be material and serious .$ =ust have induced the other party to enter into the contract 7$ &hould not have been employed by both of the parties or .rd person 9$ #here must be a deliberate intent to deceive or to induce therefore, misrepresentation in G"""0 /)I#B is not fraud Article 1331 5ailure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud. /ailure to disclose facts (c!nce#lment) when there is a *+t0 t! re)e#l t'em, as when the parties are bound by confidential relations, constitutes /R)30 )pplicable if parties are bound by confidential relations as in the case of partners

!ote fraud is a bit difficult to prove because it is a state of mind$ 5ou prove it according to the state of every case$ Article 1332 #isrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual. =isrepresentation will only be considered fraud if it has created substantial mista(e and the same is mutual =isrepresentation 0one by the third person does not constitute fraud %x$ 6ro(er who as(s for a greater amount than what was really stipulated$ 5ou cannot annul the contract except if such representation is a substantial mista(e and the same is mutual %x of mutual mista(e lot which is believed to be residential when it fact it is really commercial$

D 8hat are the circumstances to be consideredE ) Confidential, /amily, &piritual and other relations between the parties' or person alleged to have been unduly influenced was suffering from =%!#)4 8%)A!%&&, or was IG!"R)!# or in /I!)!CI)4 0I&#R%&& R%D3I&%I#%& /"R 3!03% I!/43%!C% #" 2I#I)#% C"!&%!# *$ Improper )dvantage ,$ 1ower over the will of )nother .$ 0eprivation of the latterNs will of a reasonable freedom of choice !ote 3ndue influence exercised by a third party 2I#I)#%& consent, just li(e in the case of violence and intimidation Article 133. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. Contemplates on /R)30 (deceit) #hrough insidious words or machinations /raud was the reason why you entered into a contract (dolo causante)

Article 1333 #isrepresentation made in good faith is not fraudulent but may constitute error. =isrepresentation made in good faith is not fraudulent but may constitute %RR"R #his may be a ground for annulment but is due to %RR"R

Article 1330 The usual e!aggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent. 3sual exaggeration in trade, are not in themselves fraudulent #his is what is done in commercial (ex$ 6eauty products) #his article stresses the rule of GC)2%)4 %=1#"RH !ote ordinarily what does not appear on the face of the written contract should be regarded as G#R)0%RN& #)4AH "R GH0%)4%RN& #)4AH

Article 1333 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. #o be voidable it must be &%RI"3& and &B"340 !"# B)2% 6%%! %=14"5%0 65 6"#B C"!#R)C#I!G 1)R#I%& Incidental fraud will only result to damages

Ainds of /rauds *$ /raud in the C%4%6R)#I"! of the contract

Article 1331

Re-uisite for /raud to 2itiate Consent (for annulment) *$ /raud must be serious

,$

1arties must not be in 1)RI 0%4IC#" or else the contract therefore is considered 2)4I0

effective, and entered in such form as to circumvent a prohibited act O%:ECTS O6 CONTRACTS It may be defined as the thing, right or service which is the subject matter of the obligation which is created or established Article 133All things which are not outside the commerce of men, including future things, may be the ob"ect of a contract. All rights which are not intransmissible may also be the ob"ect of contracts. &o contract may be entered into upon future inheritance e!cept in cases e!pressly authori'ed by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the ob"ect of a contract. Contemplates on what can be considered as an object of a contract o &hould be within the commerce of man o &hould be transmissible (ex$ Right as a creditor can be assigned to someone else) o =ust not be contrary to law, morals, good customs, public order, or public policy o =ust not be impossible o =ust be determinate as to its (ind or determinable without the need of a new contract or agreement If the object is outside the commerce of man, the contract is void /urther, any part of your body is not a contract of sale, rather it is a donation /uture things may be an object of a contract (ex$ !ext harvest of your palay)

Article 1335 6imulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement. &imulation is the process of I!#%!#I"!)445 0%C%I2I!G others by producing the or appearing of a contract , types of simulation o A%SOL5TE + there was really n! intenti!n thus the contract is )!i* (circumstances will show however that the contract was absolutely simulated' ex son GbuysH the property when he has no means to pay it or when the property still remains to the seller and still posses all rights of the buyer) o RELATIVE +parties c!nce#l t'eir tr+e #$reement' you are bound to the real or true agreement except 1rejudice a third person If the purpose is contrary to law, morals, good customs, public policy, public order

8hat is important as well is the expectancy$ 3pon the death, the heirs can now sell the shares but subject to the estate tax (what the heir can transmit to buyer is what she can receive in the inheritance despite the fact that the obligation have not yet been settled and estate tax has not been paid yet) !ote what is transferred upon death is the 1R"1%R#5, RIGB#& and "64IG)#I"! %xcept if authori@ed by law the predecessor (owner of property) would already during his lifetime would partition the property to his heirs (in this situation, you can now sell despite the fact that he is not yet dead) &ervices can also be the subject of a contract subject to the limitation (4=1p1oGc) Article 133. Impossible things or services cannot be the ob"ect of contracts. Impossible things or services cannot be the object of contracts Impossibility may be o 6ecause of the nature of the transaction o 6ecause of the law o )bsolute (!" "!% can do it) o Relative (particular debtor cannot comply)

Article 133( An absolutely simulated or fictitious contract is void. A relative simulation, when it does not pre"udice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. %ffects of simulation If absolute void If relative binds the party to the real agreement (ta(e note of exceptions) &ale with a right to repurchase you are the owner of the property and you sell it$ 6ut within a period of time you are going to buy it bac($ &ometimes creditor will allow a debtor to sign a document with sale with a right to repurchase$ (this is really different from that of a mortgage) + in this case, you can as( for a reformation of the document

!ote Generally, the impossibility referred to by the law is absolute impossibility$ /urther, a showing of mere inconvenience, unexpected impediments, or increased expenses is not enough$ Article 1331 The ob"ect of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the e!istence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. "bject of every contract must be determinate as to its (ind or is determinable without the need of a new contract between parties %x$ Barvest (thoug you donNt (now the -uantity yet, it is still valid because it is determinable without the need of a new contract) %x$ 1arcel of land with no description (if the seller owns , parcel of land and it could not be ascertained which one is the object of the contract, then this case does not satisfy the re-uirement that the object must be determinate or determinable of its (ind' you need to enter into another contract which gives all the details)

!ote you cannot sell your right to vote or your right in the public office /uture inheritance is allowed if it is authori@ed by law$ !ote that as far as the right to succession, it is an inchoate right (expectancy)$ Bowever for a contract to be valid, the object must be existing at the time the contract is entered into$ 5our right to your inheritance can only be transmitted to you upon the death of the real owner$ Right to the property becomes vested upon the time of death$ It is not necessary that it has been distributed$

!ote In simulation, the contract is not really desired to produce an illegal effect or in any way alter the juridical situation of the parties' whereas an illegal contract is intended to be real and

&3==)R5 "/ "6J%C# "# 6% 2)4I0 *$ &hould be within the commerce of man ,$ &hould be real or possible .$ #he object should be determinate, or at least, possible of determination as to its (ind 7$ #he object should be licit or legal CA5SE O6 CONTRACTS Article 1350 In onerous contracts the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by the other; in remuneratory ones, the service or benefit which is remunerated; and in contracts of pure beneficence, the mere liberality of the benefactor. Cause is the essential and impelling reason why a party assumes an obligation Classification of contracts as to its cause o "!%R"3& + cause is understood to be the prestation of promise of a thing or service by the other , schools of thoughts =anresa + subject matter for one is the cause for the other /or both seller and buyer, there is just one object but different cause o R%=3!%R)#"R5 + ones the service or benefit which is renumerated' past service or benefit which by itself is a recoverable debt o GR)#3I#"3& + mere liberality of the beneficiaries

="#I2% Indirect or remote reason (ex$purpose in buying) 1sychological or purely personal reason 0ifferent from each contracting party Illegality of the motive will not affect the existence of the contract =ay be un(nown to the other

C)3&% 0irect of most proximate reason of a contract (ex$ #o get the gun) "bjective or juridical reason of a contract )lways the same Illegality will affect the validity of the contract )lways (nown

If there was no consideration at all or that the creditor did not receive any payment at all, it renders the contract void /or as long as there is a real consideration which is lawful and true, then the contract will remain valid (/alse cause merely revocable or voidable)

Article 1353 Although the cause is not stated in the contract, it is presumed that it e!ists and is lawful, unless the debtor proves the contrary. in a contract there is a presumption that there is cause and such is lawful It is not necessary to &#)#% the cause in the contract %x$ 1romissory note Hfor value received, I promise to pay x or bearer the sum of *:,::: pesosH$ In this case, it is founded on a consideration of the amount for which he issues a promissory note$ In case the statement says GI promise to pay F *:,::: on !ov$ ,:*:$H #his statement does not ma(e any statement on what the consideration of issuing such promissory note$ #he law presumes that it is founded in a considerations

!ote the presence of motive cannot cure the absence of cause Article 1352 ontracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy. Contracts without cause or with unlawful cause, produce no effect whatever If for example, in a fictitious sale, there is no consideration thus it is considered void Re-uisites for Cause *$ It must be present at the time the contract was entered into ,$ It must be true (note if the contract is false, the contract is not valid unless some other cause which is lawful really exists) .$ It must be lawful (note a contract with an illegal cause may produce effects under certain circumstances where the parties are not of e-ual guilt %ffects if the Cause is Illegal *$ If one party is innocent he cannot be compelled to perform his obligation, and he may recover what he has already given ,$ If both parties are guilty, in general , neither can sue the other Article 1353 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. &tatement of a false cause in contracts shall render them void %xcept if it can be proved that they were founded upon another cause which is true and lawful -

Article 1355 7!cept in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. 4esion inade-uacy of cause #he mere inade-uacy in consideration does not affect the validity of a contract, %FC%1# o #here has been /R)30 o =I&#)A% o 3!03% I!/43%!C% #he person is expected to ta(e care of his concerns, thus if one ma(es a bad bargain, it should not affect the validity of contract for as long as he freely gives his consent to the contract or that his consent has not been vitiated %xcept in cases specified by law (inade-uacy in consideration can affect the validity of a contract) o Rescissible Contracts (defective contracts) %ntered into by guardian involving the property of a ward and the contract has resulted to an inade-uacy in consideration of more than O of the value of the things which are the objects thereof Contract entered into a representation of an absentee$ If the absentee suffers

!ote 8hat may be the subject matter for one party will be the cause or consideration for the other party$ #he contract of guaranty is gratuitous, unless there is stipulation to the contrary &hoc(ing cause or consideration (to the conscience) is void$ Article 1351 The particular motives of the parties in entering into a contract are different from the cause thereof. =otive is different from cause =otives do not enter at all in the validity or invalidity of cause or consideration 4oo( at example of boo( (gun example)

="#I2% 2&$ C)3&%

lesion of more than O of the value of the property 1artition among coIheirs, when anyone of them received things with a value less by at least O than the share to which he is entitled

It is total absence of cause or consideration that renders a contract absolutely void and inexistent + Carantes vs$ C) (K; scra 9*7) 6OR/S O6 CONTRACTS Article 135( ontracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. 8owever, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be e!ercised. GR Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential re-uisites for their validity are present %xception however when law re-uires a certain form, such exceptions are indispensible and the absence of it ma(es the contract is void

person to put it in a written document because it is unenforceable$ #he defense of unenforceability can be raised if the contract is E;EC5TOR< (no performance yet on either side) when neither of the parties have performed their share in the contract) Lloo( at page ;>* for further explanation note partial payment is considered payment wherein you can no longer have the defense of unenforceability) !ote for sale of real property, it should be in a written document even if private, to be enforceable .$ C!n)enience (for the purpose of registration where form is re-uired by law' and for binding . rd persons)+ sale of a real property must be in a public document is not a re-uirement for validity and enforceability rather is only a re-uirement for convenience' this is for the full protection of your interest' to be protected, you should register your property in a public instrument' your remedy is you go to court if you are not given or the other party does not execute the public instrument (demand for the execution of the public document for as long as you have complied with the re-uirements for validity and enforceability)

the property which is made as a collateral to the payment of loan) C"!#R)C#& 8BICB =3&# )11%)R I! ) 1364IC 0"C3=%!# *$ 0onations of immovable property ,$ 1artnerships where immovable property or real rights are contributed to the common fund C"!#R)C#& 8BICB =3&# 6% R%GI&#%R%0 *$ Chattel mortgages ,$ &ale or transfer of large cattle Article 135If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be e!ercised simultaneously with the action upon the contract. It is not for validity or enforceability, rather for convenience alone Contemplates on contracts enumerated in the next article Contemplates on the right of one party to compel the other to execute the necessary form for convenience once they have complied with the validity and enforceability of said contract

D ) deed of donation of real property is signed by the donor in a private document$ 0onee accepted such a donation in the same private document$ In this situation, can the donee compel the donor to execute the registration of the property in a public documentE ) !o, because in this situation, the contract is not valid because with regards to a deed of donation it should be in a public document$ #hus, the contract is not valid neither is it enforceable$ =ONATION O6 A PERSONAL PROPERT< ) private document is valid for a donation of personal property if the amount is more than 19, :::$ GR whatever may be the form in which a contract may have been entered into, the general rule is that it shall be obligatory, provided all of the essential re-uisites for its validity are present$ C"!#R)C#& 8BICB =3&# )11%)R I! 8RI#I!G *$ 0onations of personal property whose value exceeds 9( ,$ &ale of a piece of land or any interest therein through an agent (authority must be in writing) .$ )greements regarding payment of interest in contracts of loan 7$ )ntichresis + involves contract of loan, fruits of property will be applied as payment of interest then after will be applied on principal$ (creditor is entitled to the fruits of

D what are the instances where form is re-uiredE (%FC%1#I"!&) ) *$ V#li*it0 + formal or solemn contracts' form is essential for validity (ex$ donation of real property must be in a public instrument' donation of a personal property where the amount is more than 9,:::' any stipulation with respect to interest li(e in the contract of loan must be in writing, otherwise it is not valid) ,$ En"!rce#9ilit0 + (discuss during the defective and unenforceable contracts)' there are specific contracts which says that contracts must be in writing to be enforceable' for purposes of enforcing the contract by court action, you must be able to present at least a written contract (ex$ &ale of a real property is a consensual contract which is perfected by mere consent' upon consent the contract is perfected however it is not yet consummated due to the absence of delivery' !ote however that in the statute of frauds, there is the need to put the sale of real property in writing' thus if an oral agreement of sale is made you cannot compel the

Article 135. The following must appear in a public document( )*+ Acts and contracts which have for their ob"ect the creation, transmission, modification or e!tinguishment of real rights over immovable property; sales of real property or of an interest therein a governed by Articles *9:., &o. ,, and *9:;; ),+ The cession, repudiation or renunciation of hereditary rights or of those of the con"ugal partnership of gains; ).+ The power to administer property, or any other power which has for its ob"ect an act appearing or which should appear in a public document, or should pre"udice a third person; )9+ The cession of actions or rights proceeding from an act appearing in a public document. All other contracts where the amount involved e!ceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles, *9:., &o. , and *9:;.

Contracts which are to appear in a public document (for c!n)enience only) o )cts and contracts which have for their object the creation, transmission, modification or extinguishment of a real rights over immovable property (ex$ Real estate mortgage for purposes of convenience must be in a public document' this is an accessory contract to a principal contract of a loan) + if made in a private document, it is valid for the law does not re-uire a specific form of validity since it is a consensual contract In the event that the owner mortgagor sells the property to another, the buyer of the property will be bound by the mortgage because the annotation of the real estate mortgage (or it is registered) is considered as a notice to the whole world$ 6ecause placing a contract in a public document is expensive, what the creditor usually as( is that the mortgagor is to deliver to the mortgagee the ownerNs duplicate property (title of the possession owner or transfer certificate title) o #he cession, repudation or renunciation of hereditary rights or those of the conjugal partnership of gains o #he 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 third person + issue a special power of attorney o #he cession of actions or rights proceeding from an act appearing in a public document$ + if you assign your right as a mortgagee to another, such assignment should be placed in a public document (real estate mortgage) o )ll other contracts where the amount involved exceeds five thousand pesos must appear in writing, even a private one (just for convenience)$ 6ut sales of goods, chattels or things in action are governed by articles *7:., !o$ ,, and *7:9

in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be e!pressed. If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties, the proper remedy is not reformation of the instrument but annulment of the contract. Gives the concept of reformation In reformation, there should first be the meeting of the minds$ It is the written contract which is different from what the party has primarily agreed upon Reason in order that the #R3% I!#%!#I"! of the contracting parties may be expressed

8hat should govern in case of conflict is the civil code$ 1rinciples of the general law on reformation only have suppletory effect$

Article *.<* = *.<9( instances when there can be reformation Article 13(1 0hen a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement, said instrument may be reformed. D what could be the reason why the instrument does not reflect the true agreementE ) #his article contemplates on the reason of =3#3)4 =I&#)A% of the parties R%D3IR%=%!# /"R R%/"R=)#I"! "/ ) 8RI##%! I!&#R3=%!# #" 1R"&1%R 31"! #B% GR"3!0 "/ =I&#)A% (mutual) *$ =ista(e should be of a /)C# ,$ =ista(e should be proved by clear and convincing evidence .$ =ista(e should be common to both parties to the instrument Article 13(2 If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument. D what could be the reason why the instrument does not reflect the true agreementE ) #his article contemplates on the reason that there is =I&#)A% on one party and the other acted /R3)034%!#45$ In this case, the 1%R&"! 8B" )C#%0 65 =I&#)A% is the proper party to raise the issue of reformation Article 13(3 0hen 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 reformed. D what could be the reason why the instrument does not reflect the true agreementE ) #his article contemplates on the reason that one of the parties C"!C%)4%0 the defects of the written instrument$ "nly the party in good faith can as( for reformation$ Article 13(3

R%D3I&I#%& I! "R%R #B)# #B%R% C)! 6% R%/"R=)#I"! *$ #here must be a meeting of the minds of the contracting parties ,$ #heir true intention is not expressed in the instrument .$ /ailure to express their true intention is *+e to mista(e, fraud, ine-uitable conduct or accident 7$ #here must be clear and convincing proof thereof 9$ It must be brought within the proper prescriptive period ;$ 0ocument must not refer to a simple unconditional donation inter vivos, or to will, or to a contract where the real agreement is void R%/"R=)#I"! vs$ )!!34=%!# R%/"R=)#I"! )!!34=%!# 1resupposes a perfectly valid 6ased on a defective contract contract in which there has in which there has been no already been a meeting of the meeting of the minds because minds of the contracting consent has been vitiated parties 0oes not invalidate a contract Invalidates a contract !ote Courts do not ma(e another contract for the parties$ #hey merely in-uire into the intention of the parties and having found it, reform the written instrument, not the content$ Article 13(0 The principles of the general law on the reformation of instruments are hereby adopted insofar as they are not in conflict with the provisions of this ode. The principles of the general law on the reformation of instruments are hereby adopted insofar as they are not in conflict with the provisions of this ode.

RE6OR/ATION O6 INSTR5/ENTS Article 1351 0hen, there having been a meeting of the minds of the parties to a contract, their true intention is not e!pressed

0hen through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist, the instrument does not e!press the true intention of the parties, the courts may order that the instrument be reformed. D what could be the reason why the instrument does not reflect the true agreementE ) #his article contemplates on the reason that there is IG!"R)!C%, 4)CA "/ &AI44, !%G4IG%!C% "R 6)0 /)I#B on the part of the person drafting the instrument (drafter of the instrument' cler(' typist) Article 13(5 If two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with a right of repurchase, reformation of the instrument is proper. 8hen you tal( about a mortgage or a pledge, these are accessory contract$ If the real agreement was such but what was executed is a deed of absolute sale, the instrument can be reformed

Article 13(0hen one of the parties has brought an action to enforce the instrument, he cannot subsequently ask for its reformation. 8hen one of the parties has brought an action to enforce the instrument he cannot subse-uently as( for its reformation %x$ If the person has already filed an action for the foreclosure of mortgage, you can no longer say that it should be reformed to be a sale with right to repurchase #his article contemplates on estoppel

If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former. some of the principles in statutory construction is similar to that in interpretation of contracts General Rule in contracts the literal wordings of the contract shall control It is only when there is doubt and ambiguity that you result to interpretation of contracts Intention vs$ wordings P intention will prevail

Article 13(. %eformation may be ordered at the instance of either party or his successors in interest, if the mistake was mutual; otherwise, upon petition of the in"ured party, or his heirs and assigns. who can as( for reformation o If mista(e is mutual either party or his successors in interest o "ther cases the injured party and?or his heirs and assigns (not the person who committed the fraud)

!ote if no beneficiary is named for the retirement benefits of a government employee, it is understood that the benefits will accrue to his estate Article 13-1 In order to "udge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. D how do you determine the intention of the parties when they enter into a contractE ) #a(e into consideration the C"!#%=1"R)!%"3& and &36&%D3%!# acts of the parties$ #hus, the real nature of a contract may be determined form the express terms of the agreement, as well as form the contemporaneous and subse-uent acts of the parties thereto Article 13-2 8owever general the terms of a contract may be, they shall not be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree. Bowever general the terms of a contract may be, they shall be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree "n its face it could possible that there is nothing wrong with the contract, but at the time of implementation, here comes the confusion due to ambiguity

D Bow do you judge the 1artiesN IntentE ) It can be judged from their C"!#%=1"R)!%"3& and &36&%D3%!# acts Article 13(( There shall be no reformation in the following cases( )*+ 6imple donations inter vivos wherein no condition is imposed; ),+ 0ills; ).+ 0hen the real agreement is void. 8here reformation is not allowed *$ 0onation ta(ing effect in the lifetime of the donor o If there is a mista(e in the document here, since it is gratuitous, the donee has no right to as( the donor to reform the instrument (you cannot demand but the donor has the option to reform it or not) ,$ 8ill (last will and testament) o #his is because ma(ing of a will is strictly a personal act which is free$ ) will may also be revo(ed at any time .$ 8hen the real agreement is void o #his is because the new instrument would be void as well because the true agreement and intention are void

Contracts of adhesion + the only participation of the other party is adhere$ #a(e it or leave it contract N!te> you will have to go to court if the other party is not willing to have the instrument reformed$ In court you have to prove the real agreement of the parties through oral evidence$ 6urden of prove is on your side to show that the instrument does not reflect the true agreement or intent of the parties$ Pre cri&ti)e Peri!* "!r Re"!rm#ti!n !" # C!ntr#ct *: years Article 13(1 The procedure for the reformation of instrument shall be governed by rules of court to be promulgated by the 6upreme ourt. 1rocedure for reformation shall be governed by Rules of Court

!ote &pecial intent prevails over a general intent Article 13-3 If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import which is most adequate to render it effectual.

INTERPRATION O6 CONTRACTS Article 13-0 If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.

If one interpretation ma(es a contract valid and illegal, the former interpretation must prevail

Article 13-3 The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken "ointly. &tipulations must be read together In case of two or more stipulations, the proper thing to do is to first reconcile the different stipulations

0hen it is absolutely impossible to settle doubts by the rules established in the preceding articles, and the doubts refer to incidental circumstances of a gratuitous contract, the least transmission of rights and interests shall prevail. If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests. If the doubts are cast upon the principal ob"ect of the contract in such a way that it cannot be known what may have been the intention or will of the parties, the contract shall be null and void. Contemplates on ambiguity of terms in gratuitous contract o Rule to apply the interpretation which result to the least transmission of rights and interest shall prevail In onerous contract o #he doubt shall be settled in favor of the greatest reciprocity of interest If the principal object or the intention of the parties cannot be determined, the contract shall be null and void

#hree (inds *$ Guardian lesion ,$ Representation of an absentee, suffers inade-uacy .$ Contracts entered into to defraud the creditors 2oidable contracts )ffects the consent #a(es into account the capacity of the contracting parties o 8hen cosent is vitiated o 8hen consent is entered into by a person who is incapacitated 3nenforciable 2alid but cannot be enforced through court action %x$ 3nauthori@ed contracts' with out complying to the re-uirements of statute of frauds' contract where both contracting parties are incapacitated to enter into such 2oid contracts If an essential re-uisite is absent, the contract is void #his cannot be ratified or validated Article 13.0 ontracts validly agreed upon may be rescinded in the cases established by law. Contracts validly agreed upon may be rescinded in the cases established by law 1rocess designated to render inefficacious a contract validly entered into and normally binding, by reason of %F#%R!)4 C"!0I#I"!&, causing an economic prejudice to a party or to his creditors Re-uisites for Rescission o ) valid or voidable contract at the beginning o #here is an economic or financial prejudice to someone o Re-uires mutual restitution #wo (inds of Rescission Rescission in general (article *.>:) o Is based on 4%&I"! or /R)30 upon creditors o #he action is instituted by either of the contracting parties or by third persons o #he courts cannot grant a period or term within which to comply o !onIperformance by the other party is immaterial Rescission under )rticle **<* (resolution) o 6ased on nonIperformance or nonIfulfillment of the obligation -

Article 13-5 0ords which may have different significations shall be understood in that which is most in keeping with the nature and ob"ect of the contract. 8ords in the contract should be interpreted in (eeping with the nature and object of the contract

D if a word is susceptible of two or more meanings, what meaning should be usedE ) *$ #hat in (eeping with the nature and object of the contract ,$ If this cannot be determined, then the Gterms of a writing are presumed to have been used in their primary and general acceptationH Article 13-( The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily established. #he usage or custom of the place shall be borne in the mind in the interpretation of the ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily established

Article 13-1 The principles of interpretation stated in %ule *,. of the %ules of ourt shall likewise be observed in the construction of contracts. #he principles of interpretation stated in Rule *,. of the Rules of Court shall li(ewise be observed in the construction of contracts

!otes 8hen an instrument consists partly of written words and partly of a printed form, and the two are inconsistent, the former controls the latter$ RESCISSI%LE CONTRACTS /our (inds of 0efective Contracts *$ Rescissible + there is a sort of extrinsic defect consisting of an economic damage or lesion ,$ 2oidable + valid until annulled but is subject to ratification .$ 3nenforceable + contract cannot be sued upon or enforced, unless it is ratified' it has no effect now, but it may be effective upon ratification 7$ 2oid (inexistent or illegal) + no effect at all' it cannot be ratified or validated Re ci i!n i #&&lic#9le ?'en@ Contract is valid on its face but what ma(es it defective is by reason of damage or injury to any of the party or prejudice a third person

Article 13-The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. #he interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity Reason &uch party should be responsible for his acts$ #he drafter of the terms of the contract should, therefore, be careful

Article 13-.

o o o

)ction may be instituted only by the injured party to the contract In some cases, court may grant a term !onIperformance by other party is important

,$ .$ 7$ 9$

!ote G=utual 6ac(ing "utH is different from rescission$ In this case, it is the will of the parties that constitutes the basis, whereas in rescission, it is the law that constitutes the basis Rescissible contract is not void' it is valid until rescinded$ It cannot be attac(ed collaterally (incidentally) upon the grounds for rescission in the course of another case$ ) direct action is re-uired$ /ictitious contracts cannot be rescinded for they are null and void$ Rescission presupposes a valid contract Ri$'t !" 6ir t Re"+ #l =eans identity of terms and conditions to be offered to the lessee and all other prospective buyers$ ) contract of sale entered into in violation of a right of first refusal of another person, while valid, is rescissible Article 13.1 The following contracts are rescissible( )*+ Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one/fourth of the value of the things which are the ob"ect thereof; ),+ Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number; ).+ Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; )9+ Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent "udicial authority; );+ All other contracts specially declared by law to be sub"ect to rescission. *$ Rescissible Contracts %ntered into by G3)R0I)! ward represented suffer lesion by more than O of the value of the things which are object thereof o Contracts which is an act of ownership court approval is re-uired otherwise it is unenforceable o If merely an act of administration with court approval is valid regardless of lesion' without

court approval is rescissible is lesion is more than O #hose agreed upon in representation of )6&%!#%% latter suffer lesion as stated in number *$ #hose underta(en in fraud of creditors o )ccion pauliana #hose which refer to things under litigation (entered into by the defendant without the (nowledge and approval of the litigants or of competent judicial authority "ther contracts specially declared by law to be subject to rescission

!ote only the creditor who has as(ed for rescission, not the other creditors, benefits from the rescission$ Article 13.5 %escission creates the obligation to return the things which were the ob"ect of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. &either shall rescission take place when the things which are the ob"ect of the contract are legally in the possession of third persons who did not act in bad faith. In this case, indemnity for damages may be demanded from the person causing the loss. %ffect of Rescission =3#3)4 R%&#I#3#I"! (return the object of the contract Q fruits Q price with its interest) Bowever, restitution could not ta(e effect if the object of the contract is legally in the possession of third person who did !"# )C# I! 6)0 /)I#B$ #hus what you can do is demand for damages from the person causing the loss

Le i!n + disparity between the price and value Article 13.2 >ayments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible. 1ayments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible %x$ ) is the debtor of 6 and C$ )Ns debt to C matured before that of 6 however ), before becoming insolvent paid 6 instead$ In this case, C may as( for the rescission of the contract between ) and 6$

#wo re-uisites *$ 0ebtorIpayer must have been insolvent ,$ 0ebt was not yet due and demandable Article 13.3 The action for rescission is subsidiary; it cannot be instituted e!cept when the party suffering damage has no other legal means to obtain reparation for the same. The action for rescission is subsidiary; it cannot be instituted e!cept when the party suffering damage has no other legal means to obtain reparation for the same. #he action for rescission is &36&I0I)R5, thus it cannot be instituted unless other legal means to obtain reparation for the same has been made

Re-uisites before )ction for Rescission Can be 6rought *$ 1laintiff must be able to R%#3R! what has been received ,$ #he thing object of the contract is !"# I! #B% 4%G)4 1"&&%&&I"! (ex$ Registration in the registry of property) of third persons in G""0 /)I#B .$ #here must be !" "#B%R legal remedy 7$ #he action must be brought 8I#BI! the proper 1R%&CRI1#I2% 1%RI"0 Article 13.( %escission referred to in &os. * and , of Article *.?* shall not take place with respect to contracts approved by the courts. If the sale entered into by a guardian or representative of absentee is )11R"2%0 by court, such cannot be rescinded despite the fact that there was 4%&I"!

Article 13.3 %escission shall be only to the e!tent necessary to cover the damages caused. Rescission shall be only to the extent necessary to cover the damages caused 1)R#I)4 R%&CI&&I"! is possible because the purpose of such is to repair or cover the damage caused

Article 13.All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation. Alienations by onerous title are also presumed fraudulent when made by persons against whom some

"udgment has been issued. The decision or attachment need not refer to the property alienated, and need not have been obtained by the party seeking the rescission. In addition to these presumptions, the design to defraud creditors may be proved in any other manner recogni'ed by the law of evidence. Contemplates on the 1R%&3=1#I"! "/ /R)30 in the cases of o Gratuitous )lienations 1resumed fraudulent when the debtor did not reserve sufficient property to pay all debts contracted 6%/"R% the donation o "nerous )lienations 1resumed fraudulent when made by persons (*) against whom some judgment has been rendered in any instances (even if not yet a final judgment)' (,) against whom some writ of attachment has been issued

If there are two or more alienations, the first acquirer shall be liable first, and so on successively. Contemplates on the effects of 6ad /aith in purchasing something to defraud creditors o #he ac-uirer must return or indemnify but only if the primary person who evaded creditors cannot pay (reason rescission is merely a secondary remedy) o G0ue to any causeH includes a fortuitous event Rules in &ubse-uent transfer o If the first transferee is in G""0 /)I#B, the good or bad faith of the next transferee is !"# important o If #he first transferee is in 6)0 /)I#B, the next transferee is liable only if he is also in bad faith

, alternatives in event that there is a voidable contract o 5ou attac( its validity by filing an action in court o Convalidate it either by ratification or prescription

C'#r#cteri tic !" )!i*#9le c!ntr#ct *$ #heir defect consists in the vitiation consent of one of the contracting parties ,$ #hey are biding until annulled .$ #hey are susceptible of convalidation by ratification or by prescription 7$ #heir defect or voidable character cannot be invo(ed by third persons In rescissible, there is no ratification but there can be convalidation$ In this situation, a third party can raise the rescission of a contract 2"I0)64% vs$ R%&CI&&I64% 2"I0)64% 0efect is intrinsic 0amage is not necessary' voidable even without damage or prejudice (basis is vitiated consent) )ction is 1rincipal )nnulablility of contract is based on law 1ublic interest predominates R%&CI&&I64% 0efect is external Rescissible only if thereNs damage or prejudice (basis is lesion) )ction is &ubsidiary Is based on e-uity 1rivate interest predominates + more concerned on the damage suffered by the contracting party !ot susceptible of ratification =ay be invo(ed either by a contracting party or by a . rd person who is prejudiced Compatible with the perfect validity of the contract

%#* 6#it' state of mind affirmatively operating with furtive design or with some motive or selfIinterest or illIwill or for an ulterior purpose, and implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obli-uity Article 13.1 The action to claim rescission must be commenced within four years. 5or persons under guardianship and for absentees, the period of four years shall not begin until the termination of the former3s incapacity, or until the domicile of the latter is known. GR #he action to claim rescission must be commenced within /"3R 5%)R& (7yrs) /or guardianship and absentee 7 years shall not begin until the termination of the formerNs incapacity, or until the domicile of the latter is (nown

#hus, if the case is &#I44 1%!0I!G, as long as there is no attachment issued, the sale is not presumed fraudulent$ !ote #he decision or attachment need !"# refer to the property alienated, and need not have been obtained by the party see(ing the rescission$ #hus, even if it was not you who won the judgment but you are also a creditor, you can still as( for rescission$ %#*$e !" 6r#+* alienation has been made in fraud of creditors' indicators that there is fraud *$ Consideration of the conveyance is fictitious or inade-uate ,$ ) transfer made by the debtor after suit has been begun and while it is pending against him .$ ) sale upon credit by an insolvent debtor 7$ #ransfer of all or nearly all his property by a debtor when he is insolvent or greatly embarrassed financially 9$ %vidence of large indebtedness or complete insolvency ;$ #ransfer is made between father and son K$ /ailure of the vendee to ta(e exclusive possession of all the property Article 13.. 0hoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter for damages suffered by them on account of the alienation, whenever, due to any cause, it should be impossible for him to return them.

&usceptible of ratification Invo(ed only by a contracting party ) defect is presupposed

D 8ho can bring the actionE ) *$ #he injured party (or defrauded person) ,$ Bis heir or successor in interest .$ Creditors of * and , (accion subrogatoria) VOI=A%LE CONTRACTS Covers two situation o Incapacity to contract o 2itiated consent )ll other essential elements are present except that of consent 3ntil it is annulled by the court, the contract remains valid and binding

Article 1310 The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties( )*+ Those where one of the parties is incapable of giving consent to a contract; ),+ Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification.

)CA!"84%0G=%!# + to remedy a deficiency of proof %numerates voidable contracts o "ne of the parties is incapable of giving consent (minor, insane, deaf mute who does not (now how to write' !"#% presumption is that a person is sane) (if both are incapable, the contract is 3!%!/"RCI)64%) o C"!&%!# I& 2I#I)#%0 65 =I&#)A%, 2I"4%!C%, %#C$ If consent is absolutely lac(ing or simulated, the contract is I!%FI&#%!%#, !"# 2"I0)64%C %ffects of Ratification *$ )ction to annul is extinguished (contract becomes a completely valid one) ,$ #he contract is cleansed of its defect from the beginning Re-uisites of Ratification *$ Contract must be a voidable one ,$ #he person ratifying must (now the reason for the contract being voidable (cause is (nown) .$ #he cause must not exist or continue to exist anymore at the time of ratification 7$ Ratification is made expressly or impliedly by a waiver of the action to annul 9$ #he person ratifying must be the injured party Article 1313 %atification may be effected e!pressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should e!ecute an act which necessarily implies an intention to waive his right. Bow ratification is made o %xpressly I ex$ executes a document ratifying a sale contracted while he is still a minor (oral or writte) o #acitly + it is understood that there is a tacit ratification if, with the (nowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invo(e it should execute an act which necessarily implies an intention to waive his right (ex$ Continuous demand of the balance of installment payment is an implied ratification of the sale which he transacted when he was still aminor)

%atification does not require the conformity of the contracting party who has no right to bring the action for annulment. Ratification does not re-uire the conformity of the contracting party who has no right to bring the action for annulment Guilty party cannot raise for annulment

Article 131( %atification cleanses the contract from all its defects from the moment it was constituted. Retroactive effect of ratification of a contract Ratification cleanses the contract from all its defects form the moment it was constituted !ote even if there is a retroactive effect, the rights of innocent third persons must not be prejudeced R%D3I&I#%& "/ R)#I/IC)#I"! *$ #he contract should be tainted with a vice which is susceptible of being cured ,$ #he confirmation should be effected by the person who is entitled to do so under the law .$ It should be effected with (nowledge the vice or defect of the contract 7$ #he cause of the nullity and defect should have already disappeared Article 131The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. 8owever, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who e!erted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract. D who can file an action for annulmentE ) Innocent 1arty, whether principal or subsidiary of the contract$ "nly the incapacitated party can file for annulment$ If vitiated, only the innocent party aswell can file R%D3I&I#%& #" I!&I#3#3% )C#I"! /"R )!!34=%!# *$ 1laintiff must have interest in the contract (principal or subsidiary) ,$ #he victim and not the party responsible for the vice or defect must be the person who must assert the same Article 131. An obligation having been annulled, the contracting parties shall restore to each other the things which have -

Article 1311 The action for annulment shall be brought within four years. This period shall begin( In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases. In case of mistake or fraud, from the time of the discovery of the same. And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardianship ceases. Contemplates on prescriptive period 8ithin /"3R 5%)R& o In cases of intimidation, violence or undue influence, form the time the defect of the consent ceases o In case of mista(e or fraud, from the time of the discovery of the same o )nd when the action refers to contracts entered into by minors or incapacitated person, form the time the guardianship ceases (until age ,,) If the action has prescribed, the contract can no longer be set aside

!ote Registration of the deeds with the Register of 0eeds as registration is C"!&#R3C#I2% !"#IC% to the 8"R40 Article 1312 %atification e!tinguishes the action to annul a voidable contract. Ratification extinguishes the action to annul a voidable contract

Article 1313 %atification may be effected by the guardian of the incapacitated person. 8hen one of the parties is incapacitated to give consent and is under guardianship, it is the guardian who is authori@ed under the law to ratify in behalf of the incapacitated person !ote Ratification can be made by the injured party himself, provided he is capacitated or he has become incapacitated Article 1315

C"!/IR=)#I"! + to cure a defect in a voidable contract R)#I/IC)#I"! + to cure the defect of lac( of authority in an authori@ed contract

been the sub"ect matter of the contract, with their fruits, and the price with its interest, e!cept in cases provided by law. In obligations to render service, the value thereof shall be the basis for damages. %ffect once the contract is annulled =3#3)4 R%&#I#3#I"! !ote the creditor s of the victim cannot as( for annulment for they are not bougt by contract&

As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him. if one does not restore, the other party cannot be compelled to do so as well (reciprocal obligation of restitution has been created)

Article 1311 0hen the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution e!cept insofar as he has been benefited by the thing or price received by him. If other party is incapacitated incapacitated person in not obliged to ma(e any restitution except insofar as he has been benefited by the thing he got

Article 1300 0henever the person obliged by the decree of annulment to return the thing can not do so because it has been lost through his fault, he shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date. if mutual restitution cannot be done due to the persons fault, he shall return the /R3I#& received and the value of the thing at the time of the loss, with interest from the same date

Article 1301 The action for annulment of contracts shall be e!tinguished when the thing which is the ob"ect thereof is lost through the fraud or fault of the person who has a right to institute the proceedings. If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an obstacle to the success of the action, unless said loss took place through the fraud or fault of the plaintiff. if lost through the fraud or fault of the person who has the right to instituted proceeding youNre right to file the action is %F#I!G3I&B%0 (contemplates on the principle of e-uity) you should be ready to return

Article 1302