PART I

ME LAWS

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 REPUBLIC OF THE PHILIPPINES
CONGRESS OF THE PHILIPPINES
METRO MANILA

TENTH CONGRESS

THIRD REGULAR SESSION

Begun and held in Metro Manila, on Monday, the twenty-eight date of July,
nineteen hundred and ninety seven.

[ REPUBLIC ACT NO. 8495 ]

AN ACT REGULATING THE PRACTICE OF MECHANICAL

ENGINEERING IN THE PHILIPPINES

Be it enacted by the senate and House of Representatives of the Philippines

in the congress assembled:

ARTICLE 1
TITLE, STATEMENT OF THE POLICY AND
DEFINITION OF TERMS

Sec,1. Title - This act shall be known as the “Philippine Mechanical

Engineering Act of 1998.”

Sec, 2. Statement of Policy – The state recognizes the importance of

mechanical engineers in nation building and development. Their talents
through sustainable human development should be promoted. Thus, the
State shall develop and nurture competent, virtuous, productive and well-
rounded mechanical engineers whose standards of professional practice
and service shall be excellent, qualitative, world-class and globally
competitive through regulatory measures, programs and activities.

Sec, 3. Definition of Terms – As used in this Act, the following terms

shall mean as follows:

a) Practice of Mechanical Engineering – A person shall be deemed to

be practicing mechanical engineering of rendering mechanical engineering
service within the meaning and intent of this Act when he performs the
following:

(1) Consultation, valuation, investigation and management services

requiring mechanical engineering knowledge:

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 (2) Engineering design, preparation of plans, specifications and
project studies or estimates for mechanical equipment, machinery, or
processes in mechanical works, projects or plant;

(3) Management or supervision of the erection, installation, alteration,

testing and commissioning of mechanical equipment, machinery, or
processes in mechanical works, project or plant;

(4) Management, supervision, operation, tending or maintenance of

any mechanical equipment, machinery or processes in mechanical work,
projects or plants;

(5) Management or supervision of the manufacture, sale, supply or

distribution of mechanical equipment, parts or components;

(6) Teaching of mechanical engineering professional subjects in

government recognized accredited engineering schools; and

(7) employment in government as a professional mechanical

engineer, registered mechanical engineer, or certified plant mechanic if the
nature and the character of his work is in line with his profession requiring
professional knowledge of the science of the mechanical engineering;

b) Mechanical equipment or machinery – includes all prime moves

such as steam engines and turbines, internal combustion engines and gas
engines and turbines; steam generators such as boiler; furnaces; heat
exchanger such as cooling towers, kilns and dryers, coolers and heaters;
materials handling equipment, such as pumps, cranes, conveyors, hoist
elevators, escalators, mechanized dump-waiters, moving ramps and
walkways; heating, air conditioning, ventilating and refrigeration equipment
and machinery including compressors and centrifugal fans, mechanical
pollution abatement and environmental control system; piping system with a
working pressure of not less than 70 kPa., fired and unfired pressure
vessels, printing machine; mechanical working machines for metallic and
non-metallic materials and other mechanical equipment and machinery
whether installed on land, underground, or on board water craft.

c) Mechanical processes, works, projects or plants shall include

steam plants, geothermal plants, dendro-thermal plants, nuclear plants,
ocean thermal energy conservation (OTEC) plants, internal combustion
plants, hydraulic plants, pumping plants, compressed gas plants, all kinds of
mills, shops, factories, shipyard drydocks, heating, air conditioning,
ventilating and refrigeration plants containing any mechanical equipment,
machinery or processes deriving power from steam, fossil fuels, wind, air,
solar heat, nuclear energy, ocean waves and tides, or other energy sources.

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 d) Capacity of process works, projects or plant-rated capacity in
kilowatt of mechanical works, projects or plants for the purpose of this Act
shall be the total kilowatt ratings of all engines, motors, boilers, turbines, or
other primers installed for such in such works, projects or plants, whether in
operation or not, and without regard to the number of capacities of the
mechanical equipment, machinery or processes receiving power from or
intended to be driven by such prime movers.

ARTICLE II
BOARD OF MECHANICAL ENGINEERING

SEC. 4. Creation and Composition of the Board of Mechanical

Engineering. – there is hereby created a Board of Mechanical Engineering,
hereinafter called the Board, to be composed of a Chairman and two(2)
members to be appointed by the Presidents of the Philippines from a list of
three (3) recommendees for each position, chosen, ranked in the order of
preference and submitted by the Professional Regulation commission,
hereinafter referred to as the commission, form a list of five (5) nominees
submitted by the duly accredited association of mechanical engineers in the
Philippines. The board shall be organized not later than six (6) month from
the effectivity of this Act.

SEC 5.Qualification of Members of the Board. A member of the

Board shall, at the time of this appointment, possess the following
qualification:

(a) Natural born citizen and resident of the Philippines;

(b) Must be at least thirty-five (35) years of age;

(c) Holder of the degree of Bachelor of Science in Mechanical

Engineering or its equivalent, conferred by a school, academy, college, or
university in the Philippines or abroad that is accredited by the Commission
on Higher Education (CHED);

(d) A Professional Mechanical Engineer with a valid professional

license and an active practitioner as such, for not less than ten (10) years
prior to his appointment;

(e) Must not, for a period of three (3) consecutive years prior to
appointment, be a member of the faculty of any, school, academy, institute,
college or university where a regular course in mechanical engineering is
being taught, nor have pecuniary interest in or administrative supervision
over any such institute of learning;

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 (f) Must not, for a period of three (3) consecutive years prior to
appointment, be connected with a review center or in any group of
association where review classes or lectures in preparations for the
licensure examination are offered or conducted at the time of appointment;
and

(g) Has never been convicted of any offense involving moral

turpitude.

SEC 6. Term of Office. – A member of the Board shall hold office

for a term of three (3) years from the date of his appointment or until his
successor shall have been qualified and duly appointed, unless, however,
that such incumbent member shall been reappointed for another three (3)
year term. No member of the Board shall serve for more than two (2) regular
terms. Any vacancy occurring within the term of a member due to
resignation, conviction of any kind, disability or death, shall be filled with
appointment by the President of the Philippines; and such member
appointed shall serve for an unexpired portion of the term vacated without
prejudice to serve for a maximum of two (2) full terms. If the appointee
comes from the incumbent Board, he shall serve the remaining vacated term
in addition to the previous years he had already served and shall be
qualified for reappointment for his new position:

Provided, his aggregate number of years service shall not exceed

two (2) regular full terms.

Each member of the Board shall take his oath of office prior to the
official performance of the duties.

SEC 7. Compensation and Allowances of the Board Members. –

The Chairman and members of the Board shall receive compensation and
allowances comparable to the compensation and allowances being receive
by the Chairmen and members of existing regulatory boards with the
Commission and as may be provided for in the General Appropriations Act.

SEC 8. Supervision of the Board, Custodian of its Records.

Secretariat and Support Services. – The Board shall be under general
supervision of the Commission. All records of the Board, including
applications for examination, examination papers and results, minutes of
deliberation, administrative classes, and other investigative cases involving
the profession shall kept by the commission. The Commission shall
designate by the secretary of the board and shall provide the Secretariat
and other support services to implement the provisions of this act.

SEC 9. Power and duties of the Board. – The Board shall exercise
the following specific powers, functions, duties and responsibilities:

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 (a) To promulgate and adopt the rules and regulations necessary
for carrying out the provisions of this act;

(b) To supervise the registration, licensure and practice of

mechanical engineers in the Philippines;

(c) To administer oaths in connection with the successful

examinees entering the Practice of Mechanical Engineering;

(d) To issue the certificate of registration to successful examinees;

(e) To issue, suspend and/or revoke, after due process,

certificates of registration and issue, cancel and suspend professional
license or cancel special permits for the practice of mechanical engineering,
for cause provided by law;

(f) To adopt an official seal of the Board;

(g) To look in the conditions affecting the practice of the

mechanical engineering profession and whenever necessary, adopt such
measures as may be deemed proper for the enhancement and maintenance
of high professional and ethical standards for profession;

(h) To prescribe and/or adopt a Code of ethical and professional

Standards for the practice of the mechanical engineering profession;

(i) To hear and try administrative cases involving violations of the

act, its Implementing Rules and Regulations, the Code of Ethics for
Mechanical engineers, and for this purpose, to issue subpoena and
sudpoena duces tecum to secure the appearance of witnesses and the
production of documents in connection therewith;

(j) Prescribe guidelines in the Continuing Professional education

(CPE) program in coordination with accredited association of the mechanical
engineers;

(k) Prepare, adopt, issue or amend the syllabi of the subjects for
examination;

(l) Approve, issue, limit, or revoke temporary license to practice

mechanical engineering; and

(m) Discharge such other duties and functions as may be deemed

necessary for the enhancement of the mechanical engineering profession

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and the upgrading, development and growth of mechanical engineering
education in the Philippines.

SEC. 10. Annual Report. – The Board shall, at the close of each
calendar year, submit an annual report to the President of the Philippines
through the Professional Regulation Commission, giving a detailed account
of its proceedings and accomplishments during the year and making
recommendations for the adoption of measures that will upgrade and
improve the conditions affecting the practice of mechanical engineering in
the Philippines.

SEC. 11. Removal of board member. – The President upon

recommendation of the Commission may remove any member of the Board
on the following grounds: neglect of duty of incompetence, violation or
tolerance of the violation of this Act of the Code of Ethics for mechanical
Engineering, final judgment of crimes involving moral turpitude, after having
given the members an opportunity to be heard and/or depend himself in a
proper administrative investigation.

ARTICLE III
EXAMINATION, REGISTRATION AND LICENSE

SEC.12. Examination Required. – All applicants for registration for

the practice of mechanical engineering shall be required to undergo and
pass a written technical examination as provided for in this Act.

SEC. 13. Categories. – Certificates of registration for the practice

of mechanical engineering shall be of three (3) categories and in order of
rank as follows:

(a) Professional Mechanical Engineer;

(b) Mechanical Engineer; and

(c) Certified Plant Mechanic.

SEC. 14. Qualifications of Applicants for professional Mechanical

Engineer. – Any applicant to the professional mechanical engineering
examination must, at the time of filling of his application, establish to the
satisfaction of the Board that:

(a) He is a citizen of the Philippines;

(b) He must not have been convicted by a court of law of a crime

involving moral turpitude;

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 (c) He has valid certificate of registration and he is a registered
mechanical engineer and a holder of valid professional license;

(d) He has graduated from an engineering school or college of

recognized standing, after completing an approved course in mechanical
engineering;

(e) He has specific record of a total of four (4) years or more of

active mechanical engineering practice, reckoned for time he is registered a
mechanical engineering practice; and

(f) He is competent to practice, as attested to by at least two (2)

professional mechanical engineers.

SEC. 15. Qualifications of Applications for Mechanical Engineer. –

Any person applying for examination for a Certificate of Registration as
mechanical Engineer shall, prior to admission to the examinations, establish
to the satisfaction of the board that:

(a) He is a citizen of the Philippines;

(b) He must not have been convicted by a court of law of a crime

involving moral turpitude;

(c) He holds the degree of Bachelor of Science in mechanical

Engineering from a university, school, college, academy or institute duly
constituted and recognized as such by the government.

SEC. 16. Qualifications of Applicants for Certified Plant Mechanic.

– Any person applying for examination for certificate of registration as
Certified Plant Mechanic shall establish to the satisfaction of the Board that;

(a) He must not have been convicted by a court of law of a crime

involving moral turpitude;

(b) He has graduated from a vocational or trade school duly

recognized by the government after completing an approved course of not
less than two (2) years in stationary or power plant engineering of any
mechanical plant operation; and

(c) He has a specific record of an additional one (1) year or more

of active practice in mechanical plant operation of such character as
indicated in an affidavit of a registered professional mechanical engineer,
and likewise establish to the satisfaction of the Board, that the applicant is
competent to the undertake the operation, tending and maintenance and

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mechanical works, projects or plant of not less than one hundred (100)
kilowatts.

SEC. 17. Scope of examination. – The scope of the examination

and the methods of procedure shall be prescribed by the Board with special
reference to the applicant’s ability to perform the type of engineering work
pertaining to the particular category he is to be registered in.

(a) Professional Mechanical Engineer – The granting of

professional mechanical engineer Certificate of Registration shall be
testimonial in nature which shall include the submission of an enumeration
of an applicants experience including the presentation of an engineering
report/technical paper pertinent to his line of experience attested to by two
(2) or more professional mechanical engineers in an affidavit for this
purpose;

(b) Mechanical Engineer – The applicant shall pass a written

examination on different subjects or groups of subjects prescribed by the
Board, and within the syllabi prepared by the Board with emphasis of power
plant and industrial plant engineering, mathematics, engineering economics,
economic analysis laws and ethics and machine design.

The subjects in which the applicant for Mechanical Engineers shall

be examined are:

1. Machine Design, materials & shop Practice

2. Industrial & Power Plant Engineering

3. Mathematics, Engineering and basic engineering sciences

(c) Certified Plant mechanic – The examination for certified Plant

Mechanic may be written or oral on subject matters based on the following
submitted statement of experience:

1. Elements of Power Plant Machinery

2. Elements of Industrial Plant Machinery; and

3. Shop machinery Practice

Subject to the approval of the Commission, the Board may amend

or revise the subjects, their syllabi, passing average, and the system and
procedure in the licensure examinations for the practice of mechanical
engineering and the corresponding weight pursuant to implementing rules
and regulations issued for this purpose.

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 The said subjects and their syllabi may be amended by the Board
so as to conform to technological changes brought about by continuing
trends in the profession.

SEC. 18. Ratings. – To pass the examination, a candidate for a

professional mechanical engineer, a mechanical engineer, and certified
plant mechanic must obtain an average of seventy percent (70%) on all
subjects, with no rating below fifty percent (50%) in any subjects.

SEC. 19. Reports of Ratings. – The Board should submit to the

commission, the ratings obtain by each candidate within fifteen (15) days
after the examinations, unless extended for just cause.

SEC. 20. Re-examination. – An applicant who fails to pass the

examination for the third time shall be allowed to take another examination
only after the lapse of the year.

SEC. 21. Oath. – All successful candidates in the examination

shall be required to take an oath of profession before the Board or any
government official authorized to administer oaths, prior to entering upon the
practice of the mechanical engineering.

SEC. 22. Issuance of Certificates of Registration and Professional

License. – Upon payment of the registration fee as established by the
Commission, the Board shall issue a certificate of registration to any
applicant who has met all the requirements specified in this Act for the
particular category he is registered in.

All certificates of registration shall indicate to full name of the

registrants, signed by all the members of the Board, and the Commission
and affixed with the official seal of the Commission. The issuance of a
certificate of registration by the Board of registrant is evidence that the
person named therein is entitled to all the privileges of a registered and
license professional mechanical engineer, mechanical engineer or certified
plant mechanic, as the case may be, for as long as said certified remains
valid.

A professional license bearing the registration number, date of

issuance, expiry date and duly signed by the chairman of the Board, shall
likewise be issued to every registrant, provided that professional fees have
been paid. No person shall practice mechanical engineering in this country
unless such person shall have secured a license to practice mechanical
engineering in the matter herein provided. A licensed is entitled to practice
the profession with all the privileges appurtenant thereto until the expiration
of the validity of his license.

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 Subject to the approval of the Commission, certificates of specialty
shall be issued by the Board, to professional mechanical engineers who
have been screened and recommended by accredited mechanical
engineers association. These are for specific fields, in which the applicants
have specialized knowledge, training and experience and have documented
their competence and expertise. The Board shall subject to the approval of
the Commission, and after consultation with said association concerned,
prescribe and issue the necessary guidelines for the issuance of these
certificates.

SEC. 23. Integration and Accreditation of Mechanical Engineers. –

An integrated organization of mechanical engineers shall be created and
accredited by the Board of mechanical Engineering and the Professional
Regulation Commission. All persons whose names now appear in the roll of
professional mechanical engineers, and certified plant mechanics under the
custody of the Board and the Commission, or those who may hereafter be
included therein upon registration and payment of the required fees shall
automatically become members of the integrated and accredited
organization of mechanical engineers. The integration of the mechanical
engineering profession shall not be a bar to the formation of the voluntary
organization of the mechanical engineers which may coexist with the
integrated and accredited organization of mechanical engineers. The board,
subject to the approval by the commission and after consultation with the
existing accredited organization of mechanical engineers and other affiliated
organization of mechanical engineers and, if possible with the substantial
number of the mechanical engineers who are non-organization members,
shall provide the guidelines and mechanisms for the establishment and
creation, continued supervision of the integrated and accredited organization
of mechanical engineers. The registered and licensed engineers and
certified plant mechanics shall receive the benefits and privileges
appurtenant for the membership in duly integrated and accredited
mechanical engineering association only upon payment of the required fees
and dues.

SEC. 24. Seal of Professional Mechanical Engineers. – A

professional mechanical engineer shall, upon registration, obtain a seal of
such design prescribed by the Board, bearing the registrant’s name, the
certificate number and the legend “Professional Mechanical Engineer.”
Designs, plans, specifications, project feasibility studies, appraisals,
recommendations, technical reports, proposals and other professional
documents involving mechanical equipment, works, projects or plants shall
be stamped on every sheet with said seal of the registrant when filled with
government authorities or when submitted or used professionally: Provided,
that it is shall be unlawful for any one to stamp or seal any documents with
the said seal after the certificate shall have been revoked or cancelled.

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 SEC. 25. Non-issuance of Certificate on Certain Grounds. – The
Board shall not issue a certificate of registration to any person convicted by
court or competent jurisdiction of any crime involving moral turpitude, or
immoral or dishonorable conduct or any person of unsound mind declared
by a court of competent jurisdiction, furnishing the partly concerned a written
statement containing the reasons for such action, which statement shall be
incorporated in the records of the Board.

SEC. 26. Revocation and Suspension of Certificate. – The Board

shall have the power, upon proper notice and hearing, to suspend or revoke
any certificate of registration of any registrant for any cause specified in the
preceding section, or for the use in whatever way of any fraud or deceit in
containing a certificate of registration, or for gross negligence or
incompetence or for unprofessional or dishonorable conduct and for
violation of the code of ethics for the mechanical engineers and certified
plant mechanics: Provided, That the action of the Board shall be subject to
appeal the commission within fifteen days from notice, whose decision on
the matter shall be final.

SEC. 27. Ground for Suspension and Revocation of Licenses,

Cancellation of Temporary/Special Permit. – The Board shall have power,
upon due notice and hearing, to revoke or suspend the license of
mechanical engineers, or to cancel temporary/special permit for any cause
specified in the proceeding sections, including but not limited to: the use of
perpetuation of any fraud or deceit in obtaining a certificate registration, or
for incompetence, negligence, or for abatement of the illegal practice of
mechanical engineering, violation of the provisions of this Act, its
implementing Rules and Regulations and/or violations of Policies of the
Board including the Code of Ethics for mechanical Engineering: Provided
however, that such action of the board shall be subject to appeal without
prejudice to the right of the aggrieved party to apply with the proper
Regional Trial Court for appropriate relief

SEC.28. Reinstatement and Replacement of the Certificates. –

The Board, upon application and for reasons of equity and justice, may
reinstate the validity of a revoked certificate of registration and professional
license, upon payment of the required fees, at least two (2) years after
revocation. A new certificate of registration to replace any certificate lost,
destroyed or mutilated may be issued, subject to the rules of the Board, and
upon payment of the required fee.

SEC. 29. Renewal of License. – The professional license shall

serve as evidence that the licensee can lawfully practice his profession until
the expiration of its validity. However, renewal of license can only be done

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upon the payment of renewal fee corresponding to the three (3) consecutive
years.

SEC. 30. Vested Rights. – Automatic registration of Practicing

Mechanical Engineers. – All practicing Mechanical Engineers who are
registered at the time this act takes effect shall automatically be registered.

SEC. 31. Coverage of Temporary/Special permits. – The following

shall be required to secure Temporary/Special Permit from the Board
subject to the approval by the Commission:

a) Mechanical engineers, installation, commission or guarantee

engineers from other countries called in for consultation or for a specific
design installation, project not requiring more than three (3) months
residence in the Philippines in a twelve (12) month period: Provided, That
such engineers are legally qualified to practice mechanical engineering in
their own country or state in which the requirements and qualifications for
obtaining a certificate of registration are at least equal to or more that those
specified in this act as certified by the Board;

b) Foreigners employed as technical officers, training officers or

consultants on such special branches of mechanical engineering who, in the
judgment of the Board, are necessary and advantageous for the country
particularly in the aspects of the technology transfer, may be issued
temporary permits: Provided, that such engagements have satisfied
conditions, as may be deemed necessary, as follows:

1) Non-availability of a mechanical engineer and/or mechanic in

the country who is competent, able and willing at the time of engagement to
perform the service for which the foreigner is desired for;

2) The foreigner must have been in the prior employ of the

engaging firm, or its foreign business partner, outside of the Philippines for a
period of not less than one (1) year immediately preceding the date of his
engagement;

3) Any particular or specific engagement shall not be in excess of

six (6) months but may be renewed once, if necessary, except when such
engagement is for a newly established firm in which case the period of
engagement may be for a longer term but not to exceed a total term of two
(2) years.

SEC. 32. Indication of License and Professional Tax Receipt. -

The Mechanical Engineer shall be required to indicate his Professional
License number, the duration of validity, including the professional tax

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receipt on the documents he signs uses or issues in connection with
practice of his profession.

ARTICLE IV
PRACTICE OF THE PROFESSION

SEC. 33. Field of Action Authorized For Each Category

Prohibition. – It shall be unlawful for any reason, unless authorized under
this Act:

a) to be in responsible charge of preparation of plans, designs,

investigations, valuation, technical reports, specifications, project studies or
estimates or to be in performance of other professional mechanical
engineering activities unless he is duly licensed Professional Mechanical
Engineer.

b) to teach professional subjects in mechanical engineering

course unless he is duly licensed Professional Mechanical Engineer, or a
Master’s degree, or Doctorate degree holder in mechanical engineering.

c) to be in responsible charge of the construction, erection,

installation, alteration, or of the performance of a mechanical engineering
service in connection with the manufacture, sale, supply or distribution of
any mechanical works, project or plant either for himself or for other, unless
he is duly registered Professional Mechanical Engineer.

d) to operate, tend or maintain, or to be in-charge of the operation,

tending or maintenance of any mechanical works, projects, plant of 100 kW
or more but not more than 300kW unless he is duly licensed Professional
Mechanical Engineer, Mechanical Engineer or Certified Plant Mechanic.

e) to operate, tend or maintain, or be in-charge of the operation,

tending, or maintenance of any mechanical equipment, machinery or
process of any mechanical works, projects or plants or 300 kilowatts or
above or not more than 2000 kW unless he is duly licensed Professional
Mechanical or mechanical engineer.

f) to operate, tend or maintain, or be in-charge of the operation,

tending, or maintenance or any mechanical equipment, machinery process
for any mechanical works, projects or plants of over 2000 kW unless he is a
duly licensed Professional mechanical Engineer.

SEC. 34. Personnel Required in Mechanical Plant. – Every

mechanical work project or plant in operation shall have not less than the

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following complement of resident licensed professional mechanical
engineer: mechanical engineer, or certified mechanic:

a) 100 kW or over but not 300 kW: (1) certified plant mechanic or
one (1) professional mechanical engineer: Provided: That every mechanical
work, project or plant in this category in more than one shift in every twenty-
four hours, shall have addition to the minimum personnel herein required, or
one (1) certified plant mechanic, or one (1) mechanical engineer, or one (1)
professional mechanical engineer in-charge of each and every additional
shift.

b) 300 kW or over, but not more than 2000 kW: one (1)
mechanical engineer or one (1) professional mechanical engineer: Provided,
That every mechanical work, project, or plant in this category operating in
more than one shift every twenty-four (24) hours shall have, in addition to
the minimum personnel herein required at least one (1) mechanical
engineer, or one (1) professional mechanical engineer in-charge of each
and every additional shift.

c) Over 2000 kW: one (1) professional mechanical engineer:

Provided, That every mechanical work, project or plant in this category
operating in more than one shift in twenty-four (24) hours shall have, in
addition to the minimum personnel herein required at least one (1)
professional mechanical engineer in-charge of each and every additional
shift.

SEC. 35. Preparation of Plans and Supervision of Construction by

Licensed Engineers required. – It shall be unlawful for any person to order
or otherwise cause the fabrication, construction, erection, installation, or
alteration of any mechanical equipment, machinery or process for any
mechanical works, projects, or plants, unless the designs, layouts or
specifications have been prepared by or under the responsible charge of,
and duly signed and sealed by a Professional Mechanical Engineer.

Likewise, proposals and operations for the supply and fabrication

of mechanical equipment, works, projects, plants, mechanical pollution
abatement systems, mechanical fire protection systems, pressurized pipes
with a working pressure of not less that 70kPa, shall be duly signed and
sealed by a Professional Mechanical Engineer.

SEC. 36. Practice Not Allowed for Firms and Corporations. – The
practice of mechanical engineering is a professional service, admission to
which shall be determined upon the basis of an individual’s personal
qualifications.

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 No firm, company partnership association or corporation may be
registered or licensed as such for the practice of mechanical engineer:

Provided, however, That persons properly registered and licensed as

mechanical engineers may form and obtain registration with Security and
exchange Commission of a firm, partnership or using the term “Mechanical
Engineers”, and or “Architect and Mechanical Engineers” but nobody shall
be a member, partner or associate unless he is a duly registered and
licensed mechanical engineer, and the members who are mechanical
engineer shall only render work and services proper for mechanical
engineers as defined in this Act.

SEC. 37 Posting of Certificates. – The owner, manager, or other

person in-charge of any mechanical works, projects, or plants or one
hundred (100) kW or more, of a firm, co-partnership, corporation or joint-
stock association, shall post or cause to be posted in a conspicuous place
within such plant of business, the original certificate of registration of the
engineer or engineers and of the certified plant mechanic/s employed in
such plant, in a frame protected by transparent glass or its equivalent.

SEC. 38. Roster of Engineers and Mechanics. – A roster showing

the names and place of business of all registered professional mechanical
engineers, mechanical engineers and certified plant mechanics, shall be
prepared by the Commission which shall be made available to any
interested parties upon formal written request.

SEC. 39. Foreign Reciprocity. No foreign mechanical engineer or

mechanic shall be allowed to practice mechanical engineering or to be given
a certificate of resignation or be entitled to any of the privileges under this
Act unless he can prove in the matter provided by the rules of Court or by
specific provisions of law or regulations, permits Filipino mechanical
engineer and/or mechanics to practice within its territorial limits on the same
basis as the subject or citizen of such country or state.

SEC. 40. Enforcement of Act by the Officials of law. – The

professional Regulation Commission shall be the enforcement agency of the
Board. As such, the Commission shall implement the concerned provision of
this act, enforce its implementing rules and regulations as adopted by the
Board, conduct investigations or complaints including violations of the code
of conduct of the professional and prosecute when so warranted.

It shall be the duly constituted authorities through the officers of

the law of the national government, or any provincial, city or municipal
government or any political subdivision thereof, to enforce the provisions of
this act and to prosecute any person violating the same.

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 SED. 41. Qualification Requirements. – In a government or private
institution where a position requires a mater’s degree holder, a holder a
professional mechanical engineer license shall be eligible for the position.
Likewise, where a position requires a professional mechanical engineer’s
license, a holder of a master’s or doctorate degree in mechanical
engineering, with registered mechanical engineer’s license shall be
considered for the position.

ARTICLE V
PENAL AND CONCLUDING PROVISION

SEC. 42. Penalties. – In addition to the administrative sanctions

imposed under this Act any person who violates any of the provisions of this
Act and its rules and regulations shall, upon conviction be penalized by a
fine of not less than fifty thousand pesos (P 50,000.00) not more than two
hundred thousand pesos (P200,000.00), or imprisonment of not less than
six (6) months not more than three (3) years, or both fine and imprisonment
at the discretion of the court.

SEC. 43. Implementing Rules and Regulations. – The board shall

formulate and issue the implementing rules and regulations to carry out the
provision of this Act.

SEC. 44. Funding Provisions. Such sums may be necessary to

carry out provisions of this act shall be included in the General
Appropriations Act of the year following its enactment into law and
thereafter.

SEC. 46. Repealing Clause. – Commonwealth Act. No. 294, as

amended by Republic Act. No. 5336, is thereby repealed and ll other parts,
of law, ordinances, or regulations or relative to the practice of mechanical
engineering which are inconsistent with the provisions of this act are hereby
repealed or modified accordingly.

SEC. 47. Transitory Provisions. - a) Mechanical Engineers

possessing valid certificates of registration issued under Commonwealth
Act. No. 294 with BSME degree shall, after the approval of this act. Register
and be issued certificates as Professional mechanical Engineers to replace
their original certificate of registration upon payment of the required fees.

b) Faculty Members currently teaching mechanical engineering

professional subjects in universities, colleges, institutes or schools shall not
be allowed to be continue teaching after five (5) years from the approval of
this Act, unless they are or have become professional Mechanical Engineers
or at least Registered Mechanical Engineers with the master’s degree in

17
mechanical Engineering from duly recognized and accredited universities,
colleges, institutes or schools.

c) The present Board shall continue to function in the interim until;

such time as the new Board shall be constituted.

SEC. 48. Effectivity Cause. – This Act shall take effect fifteen (15)
days following its publication in the Official gazette or a major daily
newspaper of general circulation in the Philippines, whichever is earlier.

Approved.

JOSE DE VENECIA, JR. NEPTALI A. GONZALES

Speaker of the House President of the Senate
Of Representatives

This Act, which is a consolidation of Senate Bill No. 1793 and

House Bill No. 9806 was finally passed by the Senate and the House of
Representative on February 3, 1998 and January 28, 1998, respectively.

ROBERTO P. NAZARENO HAZEL P. GACUTAN

Secretary General Secretary of the
Senate
House of the Representatives

Approved: February 12, 1998

FIDEL V. RAMOS
President of the Philippines

18
 Republic of the Philippines
Professional Regulation Commission
Manila

BOARD OF MECHANICAL ENGINEERING

Resolution No. 16
Series of 1998

____________________________________________________________

RULES AND REGULATIONS IMPLEMENTING

REPUBLIC ACT NO. 8495
____________________________________________________________

The following rules and regulations are formulated and issued

pursuant to Section 43 and Article V of Republic Act No. 8495, know as the
“Philippine Mechanical Engineering Act of 1998” to carry out the provisions
of the said Act.

RULE I
TITLE, STATEMENT OF
POLICY AND DEFINITION OF TERMS

SEC. 1. Title. – This resolution shall be known an cited as the

“Rules and Regulations Implementing the Philippine Mechanical
Engineering Act of 1998” (RRIPMEA).

SEC. 2 Statement of Policy. – The Board of mechanical

Engineering concurs with and abides by the policy of the State in
recognizing the importance of the mechanical engineers in nation-building
and development, in promoting their talents through sustainable human
development and in developing and nurturing competent, virtuous,
productive and well-rounded mechanical engineers whose standard of
professional practice and service shall be excellent, qualitative, world-class
and globally competitive through regulatory measures, programs and
activities.

SEC. 3. Definition of Terms. – Unless otherwise provided, the

following shall be understand mean:

a. Board – Board of Mechanical Engineering (BME)

b. Board Chairman – Chairman, Board of mechanical Engineering

19
 c. Commission – Professional Regulation Commission (PRC)

d. Commission Chairman – Commissioner, Professional

Regulation Commission

e. CPE – Continuing Professional Education

f. C.A. No. 294, as amended by R.A. No. 5336 – Old Mechanical

Engineering Law

g. CHED – Commission of Higher Education

h. PME – Professional Mechanical Engineer

i. RME – Registered Mechanical Engineer

j. CPM – Certified Plant Mechanic

k. Integration – unification of all mechanical engineers including

certified plant mechanics into one national organization of mechanical
engineers to be accredited by the Board of Mechanical Engineering and the
Commission without prejudice to their membership in other associations of
mechanical engineers.

l. OTEC – Ocean Thermal Energy Conservation utilizing the

difference in temperature of deep ocean water and surface water to
generate electricity.

m. Practice of Mechanical Engineering – refers to the performance

of the following:

(1) Consultation, valuation, investigation and management

services requiring mechanical engineering knowledge;

(2) Engineering design, preparation of plans, specifications and

project studies or estimates for mechanical works, projects or plans;

(3) Management or supervision of the erection, installation,

alteration, testing and commissioning in mechanical equipment, machinery,
or processes in mechanical works, projects or plants;

(4) Management, supervision, operation, tending or maintenance

of any mechanical equipment, machinery or processes in mechanical works,
projects or plants;

20
 (5) Management and supervision of the manufacture, sale supply
or distribution of mechanical equipment, parts of components;

(6) Teaching of Mechanical Engineering professional subjects in

government recognized and accredited engineering schools; and

(7) Employment in government as a professional mechanical

engineer, registered mechanical engineer, or certified plant mechanic if the
nature and character of his work is in line with his professional knowledge of
the science of mechanical engineering.

n. Mechanical Engineering or Machinery – includes all prime

movers such as steam engines and turbines, internal combustion engines
and gas engines and turbines steam generators such as boiler; furnaces;
heat exchanger such as cooling towers, kilns and dyers coolers and heaters;
materials handling equipment, such as pumps, cranes, conveyors, hoists,
elevators, escalators, mechanized dumb-waiters, moving ramps and
walkways; heating, air conditioning, ventilating, and refrigeration equipment
and machinery, including compressors and centrifugal fans, mechanical
pollution abatement and environmental control system; piping system with a
working pressure of not less than 70 kPa, fired and unfired pressure
vessels, printing machines; mechanical working machine for metallic and
non-metallic materials and other mechanical equipment and machinery
whether installed on land, underground, or on board watercraft.

o. Mechanical processes, works, projects or plants – shall include

steam plants, geometrical plants, dendro-thermal plants, nuclear plants,
ocean thermal energy conservation (OTEC) plants, internal combustion
plants, hydraulic plants, pumping plants, compress gas plants, all kinds of
mills, shops, factories, shipyards, drydocks, heating, air conditioning any
mechanical equipment, machinery or process deriving power from steam,
fossil fuels, wind, air, gas, water, solar heat, nuclear energy, ocean waves
and tides, or other energy sources.

p. Capacity of process works, projects or plant-rated capacity in

kilowatt of mechanical works, projects of plants – shall be the total kilowatt
ratings of all engines, motors, boilers, turbines, or other prime movers
installed for use in such works, projects or plants, whether in operation or
not, and without regard to the number of capacities of the mechanical
equipment, machinery or processes receiving power from or intended to be
driven by such prime movers.

q. S.O. – Special Order issued by the CHED authorizing the

graduation of a student.

21
 r. Syllabi – an outline or table of specifications comprising the
contents of the subjects for licensure examination prescribed in a course of
study of the subjects systematically arranged according to topics and/or
subtopic from which test question for the licensure examination shall be
prepared within its scope.

RULE II
OFFICIAL SEAL OF THE BOARD

SEC. 4. Official Seal of the Board. – the official seal of the Board
shall be represented by a drawing of Hero’s steam engine. 1 st Century A.D.
consisting of a cylindrical kettle mounted on a three-legged metal support,
heated by firewood under the kettle with the two tubes attached vertically
inside the kettle opposite each other connected by a tube passing through a
spherical metal ball which revolves on its axis emitting steam at the opposite
side of the ball through small pipes.

RULE III
COMPOSITION, QUALIFICATIONS, TERMS OF
OFFICE AND MEETINGS OF THE BOARD

SEC. 5. Composition of the Board. – The Board shall be

composed of a chairman and of a two (2) members to be appointed by the
President of the Philippines from a list of three (3) recommendees for each
position, chosen and ranked in the order of preference and submitted by the
Commission, from a list of five (5) nominees submitted by the duly
accredited association of mechanical engineers in the Philippines.

SEC. 6. Qualification of Members of the Board. – A member of

the Board shall, at the time of his appointment, possess the following
qualifications:

(a) natural-born citizen and resident of the Ph8ilippines for at least

five (5) years;

(b) Must be at least thirty-five (35) years of age;

(c) Holder of the degree of Bachelor of Science in mechanical

Engineering or its equivalent, conferred by a school, academy, college or
university in the Philippines or abroad that is accredited by the commission
on higher Education;

22
 (d) A Professional Mechanical Engineer with a valid professional
license and an active practitioner of such, for not less that ten (10) years
prior to his appointment;

(e) Must not, for a period of three (3) consecutive years prior to
appointment, be a member of any school, academy, institute, college or
university where a regular course in mechanical engineering is being taught,
not have pecuniary interest in or administrative supervision over any such
institutions of learning;

(f) Must not, a period of three (3) consecutive years prior to

appointment, be connected with a review center or with any group or
association where review classes or lectures in preparation for the license
examination are offered or conducted at the time of the appointment;

(g) Has never been convicted of any offense involving moral

turpitude ; and

(h) Must not be a national officer of the accredited association of

Mechanical Engineers of the Philippines at the time of the appointment (E.O.
No. 496, S.1991).

SEC. 7. Term of Office. – A member of the Board shall hold

Office for a term of three (3) years from the date of his appointment or until
his successor shall have been duly appointed. No member shall serve more
than two (2) regular terms.

SEC. 8. Board, a Collegial Body. – The chairman and the

members of the Board shall act as a collegial body on all matters involving
the exercise of its powers and duties as well as policies laid down in R.A.
No. 8496. Action on such matters shall be effective only when approved by
the Commission.

SEC. 9. Meetings of the Board. – The Board shall hold its regular
meeting once a month within the premises of the Commission or in such
other places as may be agreed upon by the Board and approved by the
Chairman of the Commission. A special meeting may be called by the
Chairman or the two members. The chairman shall preside over all meetings
of the Board. In the absence of the Chairman, the senior member, if any, or
the member designated by the Chairman shall preside.

RULE IV
DUTIES AND RESPONSIBILITIES OF THE
CHAIRMAN AND THE MEMBERS OF THE BOARD

23
SEC. 10. Duties and Functions of Chairman. – The chairman shall be the
head of the Board and as such, he shall equitably assign the subjects for
examination to the members; designate the member or the members who
shall preside during the hearing or investigation of administrative cases
where the issue involve concerns the practice of the profession or the
occupation; delegate the hearing or investigation of administrative cases
filed before the Board to the legal or hearing officers of the Commission
except where the issue strictly concerns the practice of the profession and to
assign members who shall undertake the visitorial functions of the Board.
He shall be responsible for the assignment of the other duties and
responsibilities to the members as well as the supervision and management
of the work. The chairman shall be the spoke person of the Board in the
Commission and in other offices and agencies of the government in all the
pertains to and concerns the functions of the Board. He may delegate such
function to any of the members.

SEC. 11. Enforcement and Implementation of R.A. No. 8495

Including the Rules and Regulations Promulgated Thereunder. – The
Board shall, in the exercise of its powers and performance of its duties,
functions and responsibilities, be assisted and supported by the Commission
through its offices, divisions, sections and/or units in the enforcement and
implementation of the provision of R.A. No. 8495 including the Rules and
Regulations adopted by the Board and, whenever appropriate the
Commission shall request for the Board the assistance of duly constituted
law enforcement officers to enforce the penal provision of said Act.

SEC. 12. Action on Documents and Other Papers by the

Board. – The Board shall act on all papers, communications, certificates,
cases or other documents only within the premises is secured from the
Chairman of the Commission.

SEC. 13. Decisions, Orders or Resolutions and Other

Issuances of the Board. – In the promulgation of decisions or judgments
and the issuance of orders or resolutions which are not interlocutory in an
administrative case and in the implementation of the provision of R.A. No.
8495 which are not self-executing, the Board shall meet en bane to
deliberate and decide on such matters. The presence of the quorum shall be
sufficient to deliberate and act upon the matters above-mentioned and a
majority vote shall be required for the validity of the Act. The presence of the
two (2) members shall constitute a quorum and the vote of two (2) members
shall constitute a majority vote.

Any action of the Board meeting en banc on any matter, except

decisions of judgments in or those which are involved in or have arisen from
an administrative case, shall be valid and enforceable only if approved by
the Commission.

24
 Resolution of other issuance of the Board whose purpose s to
enforce of implement R.A. No. 8495 or which regulate the public must be
published in the Official Gazette for their effectivity.

SEC. 14. Official Business with the Commission. – In all official

business/meetings with the Commission, either upon call or by its request,
the Board shall be represented by its chairman or in his absence by the
senior member, if any, or by member designated.

SEC. 15. Interpretation of the Provision of R.A. No. 8495 and

the Rules and regulations Promulgated Thereunder. – The Board may at
first instance, resolve issues or questions arising from the implementation of
the provisions of R.A. No. 8495 in the form of opinions issued by the Board
through its chairman. It may also issue opinions on questions arising from
the implementation of its Rules and Regulations as well as the Code of
Ethics for mechanical Engineers.

SEC. 16. Records of the Board; Removal of such Papers, etc.

– All records of the Board including applications for examination,
examination papers and results, minutes of deliberation, administrative
cases shall be kept by the Commission. No papers, communications,
certificates, records of cases and of other documents shall be removed from
the premises of the Commission unless expressly authorized in writing by
the Chairman of the Commission.

SEC. 17. Annual Report. – The Board shall, at close of each

calendar year, submit an annual report for the president of the Philippines
through the Professional regulation Commission, giving a detailed account
of its proceedings and accomplishments during the year and making
recommendations for the adoption of measure that will upgrade and inform
the condition affecting the practice of mechanical engineering in the
Philippines.

RULE V
LICENSURE EXAMINATION FOR THE
PRACTICE OF MECHANICAL ENGINEERING

SEC. 18. Examination Required or the Practice of Mechanical

Engineering. – Unless expressly exempted by the provision of R.A. No.
8495, all persons desiring to practice the mechanical engineering profession
must take and pass the licensure examination for the practice of mechanical
engineering.

25
 SEC. 19. Application. – All applicants for examination shall file an
computerized application supplied by the Commission, free of charge, duly
accomplished in the Application Division of the Commission or in any of its
Regional Offices which are also designed as the test centers for the
profession accompanied by authentic or unauthenticated copies of the
required documents.

A Filipino citizen who graduated from a foreign educational

institution shall likewise attach to his application an endorsement for the
Commission on Higher Education (CHED).

SEC. 20. Categories of Mechanical Engineers. – Certificate of

Registration for the practice of mechanical engineering shall be of three (3)
categories in the order of rank as follows:

a) Professional Mechanical Engineer

b) Mechanical Engineer and

c) Certified Plant Mechanic

SEC. 21. Qualification of Applicants for Professional

Mechanical Engineer. – Any applicant to the professional mechanical
engineering examination must, at the time of filing of his application,
establish to the satisfaction of the Board that:

a) He is a citizen of the Philippines;

b) He has graduated from an engineering schools or college of

recognized standing, after completing an approved course in mechanical
engineering;

c) He has a valid certificate of registration or a registered

mechanical engineer and a holder of a valid professional license;

d) He has specific record of a total of four (4) years or more of

active mechanical engineering practice, reckoned from time he became a
Registered Mechanical Engineering;

e) He is competent to practice, as attested by at least two (2)

Professional mechanical Engineer;

f) He must not have been convicted by a court of law of a crime

involving moral turpitude;

26
 SEC. 22. Qualification of Applicants of Mechanical Engineer.
– Any person applying for examination for Certificate of registration as
mechanical Engineer shall, prior to admission to the examinations, establish
to the satisfaction of the Board that:

a) He is a citizen of the Philippines;

(b) He has graduated from a vocational or trade school duly

recognized by the government after completing an approved course of not
less than two (2) years in stationary or power plant engineering of any
mechanical plant operation including but not limited to machine shop
equipment and heavy equipment;

(c) He has a specific record of an additional one (1) year or more

of active practice in mechanical plant operation of such character as
indicated in an affidavit of a registered professional mechanical engineer,
and likewise establish to the satisfaction of the Board, that the applicant is
competent to the undertake the operation, tending and maintenance and
mechanical works, projects or plant of not less than one hundred (100)
kilowatts.

d) He has a working knowledge of and can read, write and speak

English or any of the major Philippines dialects; and

(e) He must not have been convicted by a court of law of a crime

involving moral turpitude.

SEC. 24. Scope of Examination. – The scope of examination

and the methods of procedure with special reference to the applicant’s
ability to perform the type of engineering work pertaining to the particular
category he is to registered in are hereby prescribe as follows:

I. Professional Mechanical Engineer – The granting of professional

mechanical engineer certificate of Registration shall be testimonial in
nature which shall include the submission of an enumeration of the
applicant’s experience including the presentation of an engineering
report/technical paper pertinent to his line of experience
attested to by at least two (2) Professional Mechanical Engineers in an
affidavit for this purpose;

Guidelines for Applicants in Professional Mechanical Engineers

Examination:

1. The following documents/papers must be submitted with the

application:

27
 a. Certificate of Competence under oath by a Professional
Mechanical Engineer

b. Affidavit of the Applicant

c. Certificate of Experience under oath executed by his superior

d. Detailed description of Machineries and Equipment

e. List of designs (if any) undertaken with the supervision of a

PME

f. Curriculum Vitae

g. At least two (2) titles of proposed reports, each with a short

write-up and table of contents. Reports must be permanent, allied or
relevant to the experience of the applicant.

2. Computerized applications duly accomplished shall be

submitted to the Application Division of the Commission during office hours
on any working day.

3. Evaluation of submitted applications shall be done by at least

two (2) members of the Board.

4. Applicant shall be informed of the approval or the disapproval of

his application within a reasonable number of days from receipt of
application.

5. In the evaluation of the experience of applicants, the following

should be considered:

Design Experience
Maintenance and Operation
Fabrication and shop Practices
Installation
Others

6. Every applicant shall be required to present himself before at

least two (2) members of the Board for two (2) members of the Board for
two (2) interviews.

The first interview shall be made before the submission of the

engineering report and may deal on any field or practice in mechanical
engineering, including the mechanical engineering law and Code of Ethics.

28
 The second interview will only deal on the engineering report
submitted by the applicant.

In both cases, the applicant shall be sent notices for interview.

Except in meritorious cases, non-appearance of applicant in the

scheduled interview shall mean failure.

7. Release of the Result of the Examination for Professional

Mechanical Engineers may or may not coincide with the release of the
results of the examination for Mechanical Engineers and Certified Plant
Mechanics. Applicants shall be individually from the date of the last
interview.

8. Any applicant who failed to pass the examination may apply for
re-examination after the lapse of at least one (1) year from the date of
notice of last failure.

9. The engineering report must be accompanied by the following:

a) Letter of Transmittal addressed to the Board

b) Affidavit of applicant

c) Affidavit of Competency

d) Curriculum Vitae of Applicant

e) Certificate of Experience

f) Engineering report
(The engineering report must conform with the following outline:)

f.1 Title Page

f.2. Table of Contents

f.2.1. Chapter I - Introduction

- Brief History of Plant, Firm, or
Establishment
- Subject of the Report
- Capitalization
- Ownership
- Organizational Set-up with Technical
Organization

29
 - Location (with maps)

f.2.2. Chapter II - Report Proper

f.2.3. Chapter III - Engineering economics analysis,

observation, comments and recommendations

f.3. Bibliography
Note: “b” and “e” may be placed as last pages on the
report.

10. Applicants must prepare five (5) copies of the engineering

report in legal size bond paper, type double space, book bound with hard
cover and color may be blue, maroon, black, green or red.

11. Ratings

Percentage Weight

a) Interview 50%

b) Report 50%

II. Mechanical Engineer – The applicant must pass a written examination

or different subjects or group with emphasis on power plant and industrial
plant engineering, mathematics, engineering economics, economic analysis,
laws and ethics and machine design.

The subjects in which the applicant for Mechanical Engineers shall

be examined with their corresponding percentage weights:

Percent Weight

1. Machine design, material and Shop Practice 30%

2. Industrial and Power Plant engineering 35%

3. Mathematics, Engineering Economics & Basic Eng’g. Services 35%

III. Certified Plant Mechanic – The examination for Certified Plant

Mechanic may be written or oral on submitted statement of experience
based on the following subject matters with their corresponding percentage
weighs:

30
 Percent Weight

1. Elements of Power Plant Machinery 30%

2. Elements of Industrial Plant Machinery; and 35%

3. Shop Machinery Practice 35%

SEC. 25. Holding of Examination. – Examination for the practice

of mechanical engineering in the Philippines shall be given twice a year in
the city of Manila and in such other places as may be determined by the
Board and approved by the Commission. The names, dates and venues of
Licensure Examination for each year shall be included in the schedule of
Professional Licensure Examination issued annually by the Commission.
Written or printed notice of such examination shall be posted on the bulletin
boards of the Main and Regional Offices of the Commission and furnished to
all schools, colleges and universities offering the courses for licensure
examination for dissemination to their graduates.

SEC. 26. Program of Examination. – The Board shall issue a

program for every scheduled examination not later than twenty (20) days
before the first day of examination which shall contain the following
information;
a) Name/s of licensure examination/s
b) Subjects for examination with their corresponding percentage
weights, time, dates and places/venues of examination.
c) Instruction to examinees.
d) Names and signatures of Chairman and Members of the Board.

SEC. 27. Publication of the Examination – The dates, time and

venues of the licensure examination shall, as far as practicable, be
published in a news paper of general circulation or in broadcast media. The
program of examination shall, upon its issuance, be turned to schools,
colleges and universities offering mechanical engineering courses for the
information and guidance of their graduates.

SEC. 28. Ratings. – To pass the examination, a candidate for

professional mechanical engineer, mechanical engineer and certified plant
mechanic must obtain an average of seventy (70%) percent in all subjects,
with no rating below fifty (50%) percent in any of the subjects.

31
 SEC. 29. Re-examination. – An applicant who fails to pass the
examination for the third time shall be allowed to take another examination
only after the lapse of one (1) year from the date of the last examination
taken.

SEC. 30. Formulation of Syllabi. – The board shall prepare,

adopt, issue or amend the syllabus for each of the subjects for examination.
Test questions that will be given in the examination shall be within the scope
of the syllabi.

SEC. 31. Full Computerization of Examination. – The licensure

examination for Mechanical Engineering shall be fully computerized. New
members of the Board assigned a particular subject shall prepare at least
500 test questions to be encode in the test questions data bank from which
the questions to be given in a particular licensure shall be extracted at
random from the computer. The test questions data bank of the Board
member shall be replenished within (60) days from the release of the result
of examination with at least three (300) hundred test questions every after
examination until the bank has reached a total of two (2,000) thousand
questions. Thereafter, the replenishment shall be equal to the number of
question extracted. The correction of the answer sheets of the examinees
shall be done by the computers.

RULE VI
REGISTRATION AND ISSUANCE OF
CERTIFICATES OF REGISTRATION AND LICENSES

SEC. 32. Registration of Successful Examinees. – All those

who passed the licensure examination for Professional Mechanical
Engineer, Mechanical Engineer and Certified Plant Mechanic shall, unless
specifically deferred for cause, by the Board, be registered after the taking
oath of a professional before the member of the Board or any person
authorized by law to administer oaths and upon payment of the prescribed
fees.

SEC. 33. Issuance of Certificates of Registration and

Professional Licenses. – Upon compliance with all the requirements for
registration, the Professional Mechanical Engineer, Mechanical Engineer or
Certified Plant Mechanics after his name has been entered therein. He shall
be issued a certificate of registration and the corresponding professional
license upon payment of the prescribed fees.

32
 SEC. 34. Renewal of Professional License. – the professional
license issued to Professional mechanical Engineers, Mechanical Engineers
or Certified Plant Mechanics shall be valid for three (3) years from its
issuance and less the holder thereof is exempt from CPE requirements,
shall be renewed every after three (3) years on the birth month of the
Professional Mechanical Engineer, Mechanical Engineer and Certified Plant
Mechanic upon presentation/submission of the required Continuing
Professional Education credit units earned and payment of prescribed fees.

SEC. 35. temporary Removal from the Roll of professional

Mechanical Engineers, or Certified Plant Mechanics. – A Professional
Mechanical Engineer, Mechanical Engineer or Certified Plant Mechanic who
has been delinquent in the payment of his license fees for five (5)
consecutive years or more from the year it was last paid shall, after due
process has been complied with, be considered suspended and his name
shall be dropped from the Roll of Professional Mechanical Engineers,
Mechanical Engineers or Certified Plant Mechanics for not having been in
good standing and may be reinstated only upon application, compliance with
CPE requirements and payment of the delinquent license fees and
surcharges and the fee for registration without examination.

SEC. 36. Lifting of Deferment of Registration. – If the cause/s

of deferment of the registration of the successful examinee has/have been
complied with, the examinee shall be allowed to register as Professional
Mechanical Engineer, Mechanical Engineer, or Certified Plant Mechanic, as
the case may be, after taking the oath of professional and payment of the
required fees.

SEC. 37. Automatic Registration. – All practicing Professional

Mechanical Engineers, Mechanical Engineers and Certified Plant Mechanics
who are registered with the Professional Regulation Commission in
accordance with the provision of Commonwealth Act. No. 294, as amended,
are hereby automatically registered without the payment of registration fees
and are authorized to continue practicing the Mechanical Engineering
Profession, provided their licenses have not expired.

Those Professional Mechanical Engineers, Mechanical Engineers

and Certified Plant Mechanics registered with Professional Regulation
Commission in accordance with the same Act who are delinquent in the
payment of their licensure fees at the time R.A. No. 8495 took effect shall
likewise be automatically registered only upon compliance with CPE
requirements and payments of their delinquent license fees including

33
penalties/surcharges. They can continue to practice their profession only
upon issuance of their professional license.

SEC. 38. Reinstatement of Certificate of Registration. – The

Board may, upon application or petition and for reasons or equity and
justice, reinstate the validity of a revoked certificate of registration and
professional license, upon compliance with the CPE requirements and
payment of the required fees at least two (2) years from the date of
revocation.

SEC. 39. Replacement of Certificates. – Upon payment of the

required fee, a new certificate of registration may be issued to replace ny
lost, destroy or mutilated certificate.

RULE VII
ADMINISTRATIVE PROCEEDINGS

SEC. 40. Administrative Investigations. – The investigations of

cases against a registered Professional Mechanical Engineer, Mechanical
Engineer or Certified Plant Mechanic shall be conducted by the Board with
the assistance with the legal/hearing offices of the Commission in
accordance with the pertinent provisions of the “Rules and Regulations
Governing the Regulation and Practice of Professionals” as amended, is
issued by the Commission. The revised Rules of Court shall be suppletory to
the said Rules.

SEC. 41. Grounds for the Suspension or Revocation of

certificates. – The Board may after due notice and hearing, suspend or
revoke the certificate of registration and license of a registered Professional
Mechanical Engineer or Certified Plant Mechanic or the temporary/special
permit issued to foreign mechanical engineers allowed by law to practice
mechanical engineering in the Philippines upon any of the following
grounds:

1) Use of perpetuation of a fraud or deceit in obtaining certificate

of registration.

2) Negligence

3) Unprofessional or dishonorable conduct

4) Unprofessional or dishonorable conduct

34
 5) Abatement of the illegal practice of Mechanical Engineering

6) Violation of the Code of Ethics for mechanical Engineers and

Certified Plant Mechanics

7) Violation of policies of the Board

8) Non-compliance of CPE requirements.

RULE VIII
REPORT ON THE PERFORMANCE OF THE
CANDIDATES OF SCHOOL, COLLEGES AND
UNIVERSITIES

SEC. 42. Report of the Board. - The Board shall, with the
assistance of the Public Information and Statistics Section of the
Professional Regulation Commission, prepare a report on the performance
of the examinees of schools, colleges or universities in the licensure
examinations for Mechanical Engineers and Certified Plant Mechanics. The
Board may recommend to the CHED: (1) the monitoring of schools,
colleges and universities, whether public or private, whose successful
examinees in three (3) consecutive licensure examination is less than 5% of
the total number of its candidates who took the said licensure examinations;
(2) the publication of the names of schools, colleges and universities whose
successful examinees in five (5) successive licensure examinations in a
particular profession is less than five (5) percent of total number of
examinees of said schools, colleges or universities in each of the licensure
examinations taken; and (3) the phase-out of the course program.

RULE IX
SEAL AND USE OF SEAL OF
PROFESSIONAL MECHANICAL ENGINEERS

SEC. 43. Seal of Professional Mechanical Engineer. - The

seal of a professional mechanical engineer shall be in a form of a gear. The
outer circle being 40 mm in diameter, the inner circle being 20 mm in
diameter, inside the upper circular band shall be inscribed the words
“Registered Professional” and in the lower circular band shall be inscribed
the words “Mechanical Engineer” their letters equally spaced and spread
inside the circular band; a rectangular band placed horizontally across the

35
center of the gear where the name of the professional shall ne inscribed;
two circular bands intersecting at the center of the gear joined at the center
by a circle and below the lower arc of the circle shall be the registration
number of the professional.

SEC. 44. Use of Seal. - Every Professional Mechanical

Engineer shall, upon registration, obtain a seal above-described which shall
be stamped/affixed on every sheet of designs, plans, specifications, project
feasibility studies, appraisals, recommendations, technical reports,
proposals and other professional documents involving mechanical
equipment, works, projects, or plants to be submitted or filed with
government authorities or to be signed, issued or used or used
professionally.

RULE X
REGISTRATION WITH OR WITHOUT EXAMINATION AND/
OR ISSUANCE OF SPECIAL/TEMPORARY
PERMITS TO FOREIGN MECHANICAL ENGINEERS

SEC. 45. Applicability of Guidelines Promulgated by the

Commission. - The “Guidelines on the Registration of Foreign
Professionals Allowed by Laws to Practice the Regulated Professions in the
Philippines”, as amended, promulgated by the Professional Regulation
Commission on January 20, 1998 shall be applicable to foreign Professional
Mechanical Engineers and Mechanical Engineers.

The Board of Mechanical Engineers shall adopt, issue or

promulgate rules providing for the procedure for the taking by foreigners of
the licensure examination of Professional Mechanical Engineer and
Mechanical Engineer and for the registration with or without examination
and issuance of licenses through reciprocity as well as the issuance of
temporary/special permits to foreign Professional Mechanical Engineers and
Mechanical Engineers allowed by other laws to practice their professions in
the Philippines.

RULE XI
PROHIBITIONS, ENFORCEMENT AND PENALTIES

SEC. 46. Prohibitions. - (1) No person shall practice

mechanical engineering in this country unless such person shall have

36
secured license to practice Mechanical Engineering in the manner provided
in R.A.8495.

(2) Unless authorized under R.A. 8495, it shall be unlawful for any
person:

(a) To be in responsible charge of the preparation of plans,

designs, investigations, valuation, technical reports,
specifications, project studies or estimates of other
professional mechanical engineering activities unless he is
duly licensed Professional Mechanical Engineer;

(b) To teach professional subjects in mechanical engineering

course unless they are or have become Professional
Mechanical Engineers or at least Registered Mechanical
Engineers with Master’s Degree in Mechanical Engineering
from duly recognized and accredited universities, colleges and
institutes or schools;

(c) To be responsible charge of the construction, erection,

installation, alteration, or of the performance of a mechanical
engineering service in connection with the manufacture, sale,
supply or distribution of any mechanical works, project or plant
either for himself or for other, unless he is a duly registered
Professional Mechanical Engineer or Mechanical Engineer;

(d) To operate, tend or maintain, or be in-charge of the operation,

tending, or maintenance of any mechanical works, project,
plant of 100 kW, or more but not more than 300 kW unless he
is a duly registered Professional Mechanical Engineer,
Mechanical Engineer or Certified Plant Mechanic;

(e) To operate, tend or maintain, or maintain, or be in-charge of

the operation, tending or maintenance of any mechanical
equipment, machinery process for any mechanical works,
projects or plants of 300 kW or above more than 2000 kW
unless he is duly licensed Professional Mechanical Engineer
or Mechanical Engineer;

(f) To operate, tend or maintain, or to be in-charge of operation,

tending or maintenance of any mechanical equipment,
machinery process for any mechanical works, projects or
plants for over 2000 kW unless he is a duly licensed
Professional Mechanical Engineer.

37
 (3) It shall also be unlawful for any one to stamp or seal any
document with a seal of a Professional Mechanical Engineer
after the certificate of registration shall have been revoked or
cancelled.

SEC. 47. Enforcement. - Without prejudice to the enforcement of

the provision of R.A. No. 8495, particularly Section 33 and 35 among others
by the duly constituted officers of the law of the national, provincial, city or
municipal government, the Commission through its hearing/legal officers
shall conduct investigations on complaints under oath filed by aggrieved
persons on any violation of the penal provisions of R.A. No. 8495 and, if the
evidence adduced to warrant, shall forward the records of the case to the
office of the city or provincial prosecutor which has jurisdiction over the case
for the prosecution of the offender/violator. The Commission may also refer
the case to the Board for hearing with the assistance of the hearing/legal
officers of the Commission if offender would likewise be liable for
admi9nistrative sanctions.

SEC. 48. Penalties. In addition to the administrative sanctions

imposed under R.A. No. 8495, any person who violates any of the
provisions of said Act and rules and regulations promulgated thereunder
shall, upon conviction, be penalized by fine of not less than fifty thousand
pesos (P50,000.00) nor more than two hundred thousand pesos
(P200,000.00) or imprisonment of not less than six (6) months nor more
than three (3) years, or both fine and imprisonment at the discretion of the
court.

RULE XII
INTEGRATION OF MECHANICAL ENGINEERS

SEC. 49. All registered Professional Mechanical Engineers and

Certified Plant Mechanics shall be integrated into one national organization
of Mechanical Engineers to be accredited by the Board of Mechanical
Engineering and the Professional Regulation Commission.

All persons whose means now appear in the rolls of professional

mechanical engineers, mechanical engineers and certified plant mechanics
under the custody of the Board and the Commission, on those who may
hereafter be included therein upon registration and payment of the required
fees shall automatically become members of the accredited integrated
organization of mechanical engineers.

38
 The integration of the mechanical engineers into one national
organization shall not be a ban to the formation of voluntary organization of
mechanical engineers which may co-exist with the accredited integral
organization of mechanical engineers.

The Board, subject to the approval of the Commission, shall issue

guidelines for the integration of all professional mechanical engineers,
mechanical engineers and certified plant mechanics into one national
organization of mechanical engineers which shall be accredited by the
Board and the Commission.

RULE XIII
MISCELLANEOUS PROVISION

SEC. 50. Code of Ethics and Professional Standards. - The

Board shall, in consultation with the accredited integrated organization of
mechanical engineers, adopt and promulgate a Code of Ethics and
Professional Standards for the Practice of Mechanical Engineering subject
to the approval of the Commission.

SEC. 51. Indication of License and Privilege Tax Receipt. - A

mechanical engineer shall indicate his registration/professional license
number, its expiry date, including his privilege tax receipt number on the
documents he signs, uses or issues in connection with the practice of his
profession.

SEC. 52. Teaching of Mechanical Engineering Professional

Subjects. - Only a duly registered and licensed Professional Mechanical
Engineer or Registered Mechanical Engineer with Master’s degree in
mechanical engineering from a public or government recognized and
accredited university, college, institute or school shall be allowed to teach
professional subjects in mechanical engineering courses offered in public or
government recognized school, colleges or universities.

SEC. 53. Appointment of Professional Mechanical Engineers in

Government. - Where a position in a government institution requires
master’s degree holder in mechanical engineering, a holder of a
professional mechanical engineer’s license shall be eligible for the position.
Where a position requires a licensed professional mechanical engineer shall
be eligible for the position. Where a position requires a licensed
professional mechanical engineer, a holder of a master’s degree or

39
doctorate degree in mechanical engineering with a registered mechanical
engineer’s license shall be qualified for the position in the absence of
licensed professional mechanical engineers.

SEC. 54. Practice of Mechanical Engineering not allowed in Firms

and Corporations. - Firms, companies, partnerships, associations or
corporations are not allowed to practice mechanical engineering. However,
persons who are registered and licensed as mechanical engineers may form
and register with the Securities and Exchange Commission a partnership or
association using the term “Mechanical Engineers” and/or “Architect and
Mechanical Engineers” provided that its partners or members are duly
registered and licensed mechanical engineers and members who are
mechanical engineers shall only render work and services proper for
mechanical engineers as defined by R.A. No. 8495.

RULE XIV
TRANSITORY PROVISIONS

SEC. 55. Mechanical Plant Engineers. - Mechanical Plant

Engineers possessing valid certificates of registration issued under
Commonwealth Act No. 294 with BSME degree shall, after the approval of
R.A. No. 8495, register and be issued certificates as professional
mechanical engineers to replace their original certificates of registration
upon payment of the required fees.

SEC. 56. The present Board shall continue to function in the interim
meeting such time as the new Board shall be constituted.

SEC. 57. Incumbent Faculty Members Teaching Mechanical

Engineering Professional Subjects. - Faculty members currently teaching
mechanical engineering professional subjects in universities, colleges,
institutes or schools shall not be allowed to continue teaching after five (5)
years from the approval of R.A. No. 8495 unless they are or have become
Professional Mechanical Engineers or at least Registered Mechanical
Engineers with a Master’s degree in Mechanical Engineering from duly
recognized and accredited universities, colleges, institutes or schools.

40
 RULE XV
SEPARABILITY AND EFFECTIVITY CLAUSE

SEC. 58. Separability Clause. If any section, paragraph, provision

or clause hereof shall be declared unconstitutional or invalid, such judgment
shall not affect, invalidate or impair any other part hereof, but such judgment
shall be merely confined to the section, paragraph, provision or clause
directly involved in the controversy in which such judgment has been
rendered.

SEC. 59. Effectivity. - This Rules and Regulations shall take effect
after thirty (30) days following its publication in full in the Official Gazette or
in a newspaper of general circulation, whichever comes earlier.

Done in the City of Manila this 30th day of September, 1998.

ANTONIO R. HERRERA
Chairman

DONATO K. KARAMIHAN JUANITO A. ELERIA

Member Member

ATTESTED:

CARLOS G. ALMELOR
Secretary, Professional Regulatory Board

APPROVED:

HERMOGENES P. POBRE
Chairman

ALFONSO G. ABAD AVELINA DE LA REA – TAN

Commission Member Commission Member

41
 PART II

CONTRACTS

42
 CHAPTER I

INTRODUCTION TO CONTRACTS

General consideration. Without being aware of it, each one of us

enters into a contract as often as the need arises. When we do little things
like buying a stick of cigarette or a detergent soap nearby, or ride in a jeep
or tricycle to or from the school or office, we in fact enter into a contract
which gives rise to rights and obligations. Contracts of bigger scale surely
awaits us in the future especially when we become professionals or
businessmen, hence, the need to study the law on contracts to which the
law on obligation is integrated.

Obligation defined. An obligation is a juridical necessity to give, to

do or not to do. It comes form the Latin word obligare which means to bind
through giving, doing or not doing something. It is a juridical necessity
because the rights and duties emanating from obligation may be enforced in
courts of justice which may order their performance if refused or neglected.

Meaning of obligation to give, to do or not to do. The obligation to

give is in the essence of a real obligation because a physical thing is
involved and delivery of the same extinguishes the obligation.

Example: X obliged to give Y a bicycle.

Requisites of an obligation. Every obligation has four essential

requisites, namely: a) juridical tie or vinculum which is the link that binds the
parties; b) the prestation which is the giving, doing or not doing of
something; c) the active subject which is the person who holds the right to
demand the prestation, called oblige or creditor; and d) the passive subject
which is the person against whom the prestation may be demanded, called
obligor or debtor. Example: X entered into a contract with Y whereby x
agreed to deliver an electric guitar. The juridical tie is the contract, the
prestation is the delivery of the guitar, the active subject is Y and the passive
subject is X.

Sources of obligation. Article 1157 of the Civil Code enumerates

the sources of obligations, namely: 1)laws; 2) contract; 3) quasi-contract; 4)
acts or omissions punishable by law; and 5) quasi-delicts.

43
 Obligations arising from law. Law is a rule of conduct, just,
obligatory and laid down by the legitimate authority for common observance
and benefit. Without it there will be no order in a society which will be ruled
by the maxim of what is might is right. Thus, everyone is presumed to know
the law, as ignorance of the law excuses no one from compliance therewith.

This kind of obligation is dictated bylaw like the obligation of husband

and wife to live with each other, observe mutual respect and fidelity, and
render mutual support, the obligation to pay taxes under the National
Internal Revenue Code, and the obligation of an employer to pay minimum
wage to the workers.

Obligation arising from contracts. A contract is the meeting of

minds between two persons whereby one binds himself with respect to the
other to give something or render some services. When duly entered into,
the obligation arising from contract has the full force of law between the
parties, hence should be complied with in good faith.

The contracts enumerated and treated in the Civil Code, among

others, are sale, barter, lease, partnership, agency, loan, deposit, insurance,
guaranty, pledge, mortgage and antichresis.

Obligations arising from quasi-contracts. There are two kinds of

quasi-contracts, namely: negotorium gestio and solutio indebiti. Negotorium
gestio is the voluntary administration or management of an abandoned
business or property belonging to another without his consent. Solutio
indebiti is the juridical relation which is created by virtue of a payment by
mistake consequently obliging the payee to return to payor what he
received.

Obligations arising from crimes. Acts or omissions punishable by

law are better known as crimes or delicts, like homicide or damage to
property through reckless imprudence. Under the law a person who is
convicted for a criminal offense may be imprisoned, and in addition, will be
required to indemnify the heirs of the victim. This obligation is what is
known as civil liability arising from crimes may be complied with in the form
of restitution, indemnification, or reparation of damages.

Obligation arising from quasi-delict. A quasi-delict is a legal wrong

committed through fault or negligence causing damage to a person or
property thereby obliging the wrongdoer to pay for the damage done,
provided that there exists no contractual relation between them. A typical

44
example of this is a pedestrian who was hit and suffered injuries by reason
of a speeding vehicle and death due to poisoning from beverages, foods,
etc. against the fabricators.

Diligence required in the performance of an obligation. Every

person obliged to give something is also obliged to take care of it with the
diligence of a good father of the family, unless the law or stipulation of the
parties requires another standard of care. This means that pending the
delivery of the thing, the obligor shall take care of it with the diligence and
concern that a prudent man will exercise in taking care of his property
depending upon the nature of the obligation and the circumstances of time,
person and place. On the other hand, if the obligation is personal in that it
consists in doing or not doing something, and the same is not done, or done
in contravention with the tenor of the obligation, the same shall be done or
undone, as the case may be, at the expense of the guilty party.

Rights to the fruits of the thing to be delivered. The creditor has

the right to the fruits of the thing from the time the obligation to deliver
arises. However, he shall acquire no real right over it until the same has
been delivered. This means that while the thing and the fruits have not been
delivered, the obligee acquires only a personal right. But once the thing is
delivered, the obligee acquires the real right of ownership.

Rule when obligor incurs delay. Those obliged to deliver or to do

something incur in delay from the time the obligee judicially or extra-
judicially demands from them the fulfillment of their obligation. However, the
demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declares; or

(2) When from the nature and circumstances of the obligation

it appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was the controlling motive
for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has

been rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does

not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfill his
obligation, delay by the other begins.

45
 Liability of obligor for fraud, negligence, delay, etc. Those who in
the performance of their obligation are guilty of fraud, negligence or delay,
and those who in any manner contravene the tenor thereof are liable for
damages. Delay exists when the obligor fails to fulfill his obligation on the
date agreed upon and after a demand by the oblige, either judicially (with
court intervention) or extra-judicially (outside a court) orally or in writing, has
been made on the obligor, whereas, fraud is simply the voluntary and
deliberate act of the obligor to evade or cheat for personal gain the
fulfillment of the obligation. In connection with negligence or fault, it consists
in the failure to observe for the protection of the interest of another person,
that degree of care, precaution and vigilance which is demanded by the
circumstances, and because of which the other party suffers damage or
injury.

Liability arising from fortuitous event. Except in cases expressly

authorized by law, or when it is otherwise declared by stipulation, or when
the nature of the obligation requires the assumption of risk, no person shall
be responsible for those events which could not be foreseen, or which
though foreseen, were inevitable. A fortuitous event is an unexpected event
or act of God which cannot be foreseen or resisted, like floods, earthquakes,
torrents, ship wreck, lightnings, and conflagration, to mention a few.

Kinds of obligations. The Civil Code classifies obligation into a)

pure and conditional; b) obligation with a period; c) alternative and
facultative; d) joint and solidary; e) divisible and indivisible; and f) obligation
with a penal clause.

Pure obligation. A pure obligation is one which is not subject to any

condition or burden and whose fulfillment is neither dependent upon a future
or uncertain or even a past event unknown to the parties, hence,
immediately demandable. Example: X promises to deliver a specific guitar
to Y. This obligation is immediately demandable because there is no
specific date or condition mentioned for its fulfillment.

Conditional obligation. A conditional obligation is one whose

performance is subject to a condition which may either be suspensive or
resolutory in effect. A suspensive condition is one which upon fulfillment
gives rise to the obligation dependent upon it. Example: X promises to give
Y a car if he passes the Board Exam for Mechanical Engineers.

46
 The Civil Code provides that in case of improvements, loss or
deterioration of the thing before the fulfillment of the suspensive condition,
the following rules shall govern:

(1) If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;

(2) If the thing is lost through the fault of the debtor, he shall
be obliged to pay damages; it is understood that the thing is lost
when it perishes or goes out of commerce, or disappears in such a
way that its existence is unknown or it cannot be recovered;

(3) When the thing deteriorates without the fault of the debtor,
the impairment is to be borne by the creditor; the creditor may chose
between rescission of the obligation and its fulfillment, with indemnity
of damages in either case;

(4) If the thing is improved by its nature, or by time, the

improvement shall inure to the benefit of the creditor; and

(5) If it is improved at the expense of the debtor, he shall have

no other right than that granted to the usufructuary

If the condition is resolutory, the happening of the condition

extinguishes the obligation and the parties are obliged to make mutual
restitution of whatever they have received by reason thereof.

Obligation with a period. An obligation with a period is one in which

a day certain has been fixed for its fulfillment. This obligation is different
from a conditional obligation because the condition imposed therein may or
may not happen, whereas, the period fixed in this obligation is sure to com
although the time as to when is uncertain, as in the death of a person.

Alternative obligation. An alternative obligation is one where

various prestations are due, but the performance of one, usually chosen by
the obligor, is sufficient. Example: X binds himself to deliver to Y a color TV
or betamax.

Facultative obligation. In this obligation, only one prestation is due

but the obligor or debtor may substitute another in lieu of the prestation due.

47
 Joint obligation. A joint obligation is one where the entire obligation
is to be fulfilled proportionately by the various obligors or debtors, and each
one of the obliges or creditors is entitled and can demand a proportionate
part of the credit due from each of them. Example: X and Y signed a
promissory note binding themselves to pay Z the sum of P10,000.00. Z can
demand from X P5,000.00, and from Y the same amount because the rule in
a joint obligation is that the debt or credit is divided into as many parts as
there are creditors or debtors or to each his own.

Solidary Obligation. A solidary obligation is exactly the opposite of

a joint obligation in the sense that each of the solidary debtors is liable for
the entire obligation as long as the same has not been performed, and each
of the creditors can demand compliance. A solidary obligation may exist
only when a) the obligation so provides; b) when the law so provides; and c)
the nature of the obligation requires solidarity. Example: X and Y bind
themselves jointly and severally to pay Z and M the sum of P10,000.00. In
this case, X or Y may be compelled by Z or M to pay the entire amount, and
after payment, the paying debtor can compel the other solidary debtor to
contribute his share. Among the terms usually indicating solidarity are
“jointly and severally”, “in solidum”, and “individually and collectively.”

Divisible obligations. A divisible obligation is one capable of being

performed partially. Example: X obliged himself to deliver 600 cubic feet
sand within a week. This may be complied with in two or three days. It is
not the rule, however, that because the subject matter id divisible the
obligation is divisible if the intent is to make it divisible.

Indivisible obligation. This is the exact opposite of divisible

obligation as no partial performance is permitted.

To determine whether the obligation is divisible or indivisible the test

is, did the parties intend partial performance? Thus, the object of the
obligation may be physically divisible, but they intended it to be indivisible or
if so provided by law the object is divisible.

Obligation with a penal clause. An obligation which contains an

accessory undertaking to assume a greater liability in case of breach is an
obligation with a penal clause. The penal clause is attached to the principal
obligation to insure its fulfillment. The penalty may either be subsidiary as
when only the penalty is demandable, or joint when both the principal and
the penalty can be enforced. Example: X borrowed from Y the sum of
P20,000.00 payable on May 31, 1985. They agreed in writing that if X fails

48
to pay the same on the said date, X shall in addition pay P4,000.00 as
penalty.

Modes of extinguishing obligations. Article 1231 of the Civil Code

provides that obligations are extinguished as follows: 1) by payment or
performance; 2) by loss of the thing due; 3) by condonation or remission of
the debt; 4) by confusion or merger of the rights of creditor and debtor; 5) by
compensation; 6) by novation. Elsewhere in the Code are other relative
modes, among which are: annulment, rescission, fulfillment of a resolutory
condition and prescription.

Payment or performance. This mode consist not only of delivery of

money but also the performance of an obligation in any other manner. It is
the essence of this mode that there must be a pre-existing obligation (not
option) otherwise, no payment could be made. Thus, a debt is not
considered to have been paid unless the thing or service in which the
obligation consists have been completely delivered or rendered, as the case
may be.

Payment may also be effected in various special forms, namely: 1)

dacion in payment or dacion en pago; 2) payment by cession; and 3) tender
of payment and consignation.

(1) Dacion in payment. Dacion en pago is the conveyance of the

ownership of a thing which is accepted by the oblige (creditor) as a payment
of a debt in lieu of money, thereby extinguishing the obligation. Example: X
is indebted to Y in the amount of P10,000.00. Instead of paying money, X
delivered a cd player worth the same amount which is accepted by Y.

(2) Payment by cession. Payment by cession consists of the

assignment of all the properties of the debtor to his creditors in order that the
same may be sold by the creditors to satisfy their credits. Unless there is a
stipulation to the contrary, the cession shall extinguish the liability of the
debtor to the extent of the net proceeds in the sale. Example: M is indebted
to X, Y and Z in the amount of P30,000.00. If M is insolvent, partially or
totally, he may assign or cede his properties to X, Y and Z who may sell
them and apply the proceeds to the payment proportionally to his various
debts.

Cession or assignment may be of two kinds, namely: (1) the voluntary

cession in which the consent of the creditors is needed, and (2) the legal or
judicial where the approval of the court is required. The latter is governed
by the Insolvency Law.

49
 (3) Tender of payment or consignation. This special form of payment
is done through the actual offering (not just a proposal) by the debtor to the
creditor of the thing or sum which he considers to be due. If this tender is
unjustly refused, the debtor shall complete this by making a consignation by
depositing the thing or the amount due with the court of competent
jurisdiction in accordance with the formalities required by law. Consignation
shall be made also to extinguish the obligation in the following cases: a)
when the creditor is absent or is unknown, or does not appear at the place
of payment; b) when he is incapacitated to receive payment at the time it is
due; c) when without just cause, he refuses to give a receipt; d) when two or
more persons claim the same right to collect; and e) when the title to the
obligation has been lost.

Loss of the thing. The thing due is considered lost when it perishes,
or goes out of commerce, or disappears in such a way that its existence is
unknown or cannot be recovered. When the obligation consists of doing
something, there is loss when the prestation becomes legally or physically
impossible. On the other hand, an obligation consisting in the delivery of a
determinate thing shall be extinguished if it is destroyed without fault of the
debtor and before he has incurred delay. Example: X obliged himself to
deliver a specific Australian horse to Y. Before the agreed date of delivery,
the horse died without X’s fault. In this case the obligation is extinguished
because it consists of the delivery of a determinate thing. But if the
obligation is to delivery a generic thing, the loss or destruction of anything of
the same kind does not extinguish the obligation.

Condonation or remission. It is an act of liberality by which the

oblige, who receives no price or equivalent thereof, renounces the
enforcement of an obligation, which is extinguished in whole or in part.
Example: Y is indebted to X in the amount of P5,000.00. On the due date of
the obligation, Y offered to pay but X renounces his right to collect as he
won in the sweepstakes. This is a complete remission. But if the
renunciation is only one-half, Y should still pay P2,500.00.

Confusion or merger. This mode takes place when the qualities of

the obligor and that of the obligee meet I one person, the effect of which
generally extinguishes the obligation. Example: X is indebted to Y for
P10,000.00 for which he issued a promissory note. Later, Y indorsed it to Z
who then indorsed it back to X. In this case, the obligation is extinguished
since X had become his own creditor and debtor.

50
 Compensation. Compensation takes place when two or more
persons, in their own rights, are creditors and debtors to each other. This
means that by operation of law, the debts of the parties who are creditors
and debtors in their own rights are extinguished to the concurrent amount
even if they do not know it. Example: X is indebted to Y in the amount of
P20,000.00 while Y is indebted to X in the same amount. If both debts are
due and demandable and no prohibition against any of them exists,
compensation shall take place since both are creditors and debtors in their
own right.

Distinction between confusion and compensation. The

differences are: (1) In confusion, there is only one person who becomes
both a creditor and debtor but in compensation, the personality of the
debtors and creditors is preserved; and (2) There is only one obligation in
confusion but not in the other where there are two.

Novation. Novation is the change, substitution, or renewal of an

obligatory relation, with the intention of extinguishing or modifying essentially
the former, debitum pro debito (new debt for an old debt). It may take place
by changing the object or principal conditions of the obligation or substitution
of another person in the place of the debtor or in subrogation to the rights of
the creditor or combination of both through a change in the person of the
parties or the object or principal condition.

Personal novation may either be in the form of expromision or

delegacion. Expromision takes place when a third person of his own accord
and even without the knowledge of the original debtor assumes the
obligation, with the consent of the creditor. Example: X is indebted to Y in
the amount of P10,000.00. Then Z, a third person, goes to Y and tell him
that he will be the one to pay the P10,000.00. If Y agrees, a novation by
expromision takes place even if X does not know or consent to it.
Delegacion takes place when the debtor asks the creditor to accept a third
person to take his place as the obligor. The creditor may withhold his
approval. Thus in the same example, if X goes to Y bringing Z and
proposes to Y that Z who is willing will pay the P10,000.00 and Y consents
to it, the novation by delegacion extinguishes the obligation.

51
 QUESTIONS AND PROBLEMS

1. What is an obligation and explain with illustrations its requisites?

2. What are the sources of obligations?

3. What is a quasi-contract and explain each kind?

4. What is a quasi-delict and how it is differentiated with delicts?

5. Enumerate and explain the special forms of payment.

6. When may an obligor be relieved from his obligation by reason of loss

of thing due?

7. X promises the use of his one-door apartment to Y provided the latter

passes the Board Examination for Mechanical Engineers. IN this
case, what kind of obligation is established? Explain.

ANSWERS

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53
 CHAPTER II

CONTRACTS

Definition of a contract. The law defines a contract as a “meeting of

the minds between two persons whereby one binds himself, with respect to
the other, to give something or to render some service.”

Much emphasis is made that for a contract to exist, there must be a

meeting of the minds of the parties who intend to be bound by a legal
relationship. For instance, if X offers to sell a violin to Y for P5,000.00 and
the latter agrees, an obligation to give is constituted where X must give Y
the violin and Y to pay the amount of P5,000.00 to X. If personal service is
contemplated, as when X offers to paint Y’s car for P10,000.00 and Y
accepts the offer, X should paint the car and Y to give him the agreed
amount.

Contract differentiated from agreement. Contract is often times

used interchangeably with the term agreement. A contract forms a
subdivision of the genus “agreement” from which follows that, while every
contract is based on agreement, not every agreement is a contract. In order
for an agreement to qualify as a contract, the parties must have clearly
intended to be bound by a legal tie, as distinguished from other relationship
like social and political. Moreover, a contract when breached can be
enforced in court, not in the case of an agreement.

Contract and obligation distinguished. Contract is one of the

sources of obligations. On the other hand, obligation is the legal tie or
relation itself that exists after a contract has been entered into.

Stages of a contract. Every contract passes through three distinct

stages, namely: (a) preparation or conception, (b) perfection or birth, and (c)
consummation or termination. Preparation or conception starts from the
inception and negotiation that may lead to the parties coming to the terms of
the contract, whereas, perfection or birth marks the time the parties agree
upon the object or subject matter and the cause or consideration of the
contract. The third stage is simply the implementation of the terms of the
contract, and simultaneous documentation in formal ones. For instance: In a
contract of sale involving a race horse of X to Y for P100,000.00,
preparation or conception would consist in the offering and the bringing by X
to Y, or talking by Y, the horse to test its running ability. Y may, after the
test, bargain for a lower price, say P70,000.00 and up to this time they are

54
merely doing things that may bring them to a consensus. If Y agrees to pay
P100,000.00 after the test, or if X accepts the counter- offer of P70,000.00,
then the second stage of perfection or birth of the contract is satisfied.
Finally, the last stage would consist of X delivering the race of horse to Y
and Y paying the amount agreed upon after proper documentation.

Classification of contracts. From the text of the pertinent provisions

of the Civil Code, the following classes may be deduced:

1. Express and implied contracts. A contract is express when the

intent of the parties is shown by words which may be verbal or written,
whereas, a contract is implied when the intent is manifested by the conduct
or behavior of the parties.

2. Unilateral and bilateral contracts. In a unilateral contract only one

of the parties has an obligation, as in commodatum or gratuitous deposit
while, in a bilateral contract, both parties are bound as in a contract of sale.
A unilateral contract is synonymous with a gratuitous contract as a bilateral
is with an onerous one.

3. Consensual and real contracts. A consensual contract is one

perfected by mere consent as in contract of sale, whereas, a real contract is
one perfected or completed by the delivery of the thing which is the object of
the contract, as in pledge, deposit and commodatum.

4. Executed and executory contracts: An executory contract is one

which is not yet implemented as where none of the parties has performed
the prestation or only a part thereof has been performed by each party.

5. Nominate and innominate contracts. Nominate contracts are those

which the law gives a special name as in contract of agency, sale,
partnership, etc. while those without designation are called innominate
contracts. The latter contracts are those which the parties may agree and
no name is given by law to their agreement, because they are too many and
cannot be forecasted or anticipated.

Freedom in contracts. The freedom to contract as guaranteed by

the Constitution is articulated in Article 1306 of the Code which provides that
“the contracting parties may establish such stipulations, clauses, terms, and
conditions as they may deem convenient, provided that they are not contrary
to law, morals, good customs, public order, and public policy.” This simply
means that for a contract to be valid, the terms and conditions thereof must
not be against the law, customs, morals, public order and public policy.
Example: X agrees to grade a rocky land belonging to Y who agreed to pay

55
P300,000.00 when completed. If later on diesel oil or the needed materials
will increase or double in costs, X cannot withdraw from the contract.

Contrary to law. The parties cannot stipulate on matters against the

law. If the object and the cause of the contract is prohibited or against the
law the contract will be held null and void. Typical examples of these are
contracts involving the killing or kidnapping an individual for a monetary
consideration or importation of prohibited drugs for resale.

Contrary to morals and good customs. Contract offending morals

or good customs are void and without effect like for instance where Mr. X
entered into an employment contract with Miss Y whereby the former will
employ Miss Y as cashier in his firm if the latter will live with him as wife
without marriage, or walking out from marriage by a woman to comply with
her obligation with a woman whose love affair with the supposed bridegroom
did not culminate in marriage.

. Equality of parties under the contract. The law gives equal

standing of treatment upon the parties such that the validity or compliance
with the contract cannot be left to the sole will of one of them. Example: X
obliged himself to sell his only car to Y if he buys another car.

The determination or the performance of the contract however, is

allowed by law to be left to the judgment of a third person whose decision
shall bind the parties when it is communicated to them, unless the same is
manifestly inequitable in which case the court shall decide the issue.

Parties bound under the contract, exception. The rule is that only
the parties to the contract and their assigns and heirs are bound thereto
unless the rights and obligations arising there from cannot be transferred to
the heirs and assigns of the parties because of their nature, or by stipulation
or, by specific provisions of law. In instances allowed by law the heirs or
assigns are not liable beyond the values of properties inherited or assigned.

Examples of intransmissible rights and obligations are:

1. By Law: X entered into a partnership contract with Y and Z, each

contributing P100,000.00 to the common fund. Upon death of either the
partners, the partnership is deemed dissolved under the law and their heirs,
or assigns cannot step into the shoes of their deceased father-partner
except to receive his interest at the time of liquidation of the partnership.

56
 2. By nature: X entered into a contract with y for the latter to draw a
plan and design of X’ house. If Y dies before completing the plan and
designs, such obligation will not pass to his son even if he is also an
architect because of the personal nature of the obligation.

3. By stipulation: On January 5, X entered into a contract of lease of

his car to Y to become effective on March 5 of the same year. If they
stipulate that death of either party before that date shall extinguish all rights
and obligations arising there from, the heirs of X and Y acquires no rights
thereto because of such stipulation.

Stipulations in favor of non-parties to the contract. If a contract

should contain stipulations granting a favor to a person not a party to the
contract, the later may demand its fulfillment provided he communicates his
acceptance to the obligor before revocation. This stipulation, better known:
as pour autri, must be clearly and deliberately intended in order to confer a
right to the third party. Thus, if X who owns a warehouse, rents it to Y for
P500,000.00 a month which is a agreed to be paid to Z, a niece of X, then Z
who is a stranger to the contract, acquires the right to the payment of rentals
provided that he accepted the same when communicated to him and before
it is revoked by X, his uncle.

Third parties interfering in the contract. Further, any third person

who induces another to violate his contract shall be liable for damages to
other party, an instance, where a stranger contract becomes liable for
damages.

Illustration: X, a theatre operator, enters into contract with Y, a

celebrity singer, where the latter will sing at X’s theatre for a period of twenty
days at an agreed compensation. After performing for two days in X’s
theatre, Z, another theatre operator, entices Y to sing in his theatre doubling
the compensation which the latter accepted – performing in Z’s theatre from
the 3rd to the 20th day. Z who is a third person is liable for damages.

Consensual contracts. Contracts are perfected by mere consent,

and from that moment, the parties are bound not only to the fulfillment of
what has been expressly stipulated but also for the consequences which,
according to their nature, may be in keeping with good faith, usage, and law.

The aforesaid provision refers to consensual contracts which are

perfected by mere consent or through the concurrence of the will of the
parties as to the object and cause of the contract. Unlike real contracts as in
pledge and commodatum, no delivery of the object is necessary for its

57
perfection. From the moment consent has been given, the parties become
liable for all the consequences that are in keeping with good faith, usage,
and law. Thus, a vendor of a Mercedez Benz car, even if already sold to be
delivered two weeks later, would be obliged to take good care of it as if still
the owner of the car, such that, if the car fades or is dented by reason of
omission of that degree of care during the interim he would be liable for
damages.

Contracts creating real rights. Real rights are those rights relating
to immovable properties ,i.e. land and buildings, like the right belonging to a
mortgagee or lessee of a piece of land. The law provides that in contracts
creating real rights, third persons come into possession of the object of the
contract are bound thereby subject to the provisions of the Mortgage Law
and Land Registration Law. Thus, a vendee of a piece of land which is the
subject of a mortgage or lease will be bound to respect the real right of the
mortgagee or lessee if the mortgage deed or lease contract is registered in
the Register of Deeds.

Protection to creditors. Creditors are protected in cases of contracts

intended to defraud them. Thus, a fictitious contract alienating the debtor’s
only property in order to escape paying his creditor or creditors may be
rescinded at the instance of the latter for being fraudulent.

Contracts entered in the name of another. A contract entered into

in the name of another without his authority, or without a legal right to
represent him or in excess of the authority given is unenforceable by action
unless the contract is ratified expressly or impliedly by him before the other
party revokes it. Example: X enters into a contract selling a sports car
belonging to Z without the latter’s consent to Y for P100,000.00. Three days
later, Y goes to Z offering to pay and demanding the delivery of the car. Z
can refuse because he has not given his authority to X to sell the car. But if
Z accepts the payment, in whole or in part, the acceptance amounts to
ratification, hence, he should deliver the car.

The ratification or confirmation of a contract by the person in whose

name the contract was entered into validates the act or contract from the
moment of its celebration, not merely from ratification or confirmation.

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 QUESTIONS AND ANSWERS

1. What is a contract?

2. What are the essential elements of a contract?

3. Explain the difference between a contract and an agreement.

4. What are the limitations on the freedom to contract?

5. What is meant by the clause “contract is the law between the

parties?”

6. Who are bound by the contract?

7. May determination or the performance of a contract be left to the

sole will of one of the parties? Reason.

8. What is a stipulation pour autri?

9. X entered into a partnership contract with Y and Z, each

contributing P100,000.00 to the common fund. Six moths later, X
died survived by son O. May X’s right under the contract as
partner be transferred to O on his death? Why?

10. X, a theatre operator enters into a contract with y, a celebrity

singer, where the latter will sing at X’s theatre for a period of 20
days. After two days performance, Z, another theatre operator,
enticed Y to sing in his theatre doubling Y’s compensation. Y
accepted right away and began to sing in Z’s theatre from the 3 rd
day and for 20 days. Discuss the liability of Z if any.

ANSWERS

59
60
 CHAPTER III

REQUISITES OF CONTRACT

Elements of a contract. There is no contract unless the following

elements are present: 1) consent of the contracting parties; 2) object certain
which is the subject matter of the contract; and 3) cause of the obligation
which is established. If the contract lacks any of the said elements, the
contract is null and void as if it had not existed at all.

Consent, meaning of. Consent is the conformity of wills of the

contracting parties upon the object and cause as well as to the other terms
and conditions of the contract. It is manifested through the meeting of the
offer which must be certain and the acceptance which must be absolute. If
the acceptance by the offeree is qualified, it becomes a counter offer hence,
there is no consent unless the offerer accepts the counter offer unqualifiedly.

That the offer must be certain means that no possible doubt

could arise on what the object and the cause is, in the same manner that
acceptance must in every respect meet and coincide exactly with the object
and the cause offered. Thus, if the offer is uncertain or indefinite, or that
the acceptance is not absolute there is no meeting of the minds, hence, no
contract. Example: XYZ firm offers ABC Construction Corporation the
construction of a four storey building for a cost of P5 million in accordance
with the plan and specifications prepared by the former’s engineer. An
absolute acceptance by the latter would call for its conformity on all terms
and conditions offered. If the latter proposes a modification of the terms,
i.e., cost of the construction or change of designs or materials to be used,
that would not constitute an absolute acceptance but a counter-offer. In
such a case XYZ firm must accept the terms sought to be changed,
otherwise the element of consent will be absent.

Acceptance made through letters, etc. Generally, acceptance

should be made right after the offer has been made or immediately
thereafter. Acceptance made through letters or telegrams does not bind the
offeror except from the time it comes to his knowledge. In such a case, the
contract is presumed to have been entered into the place where the offer
was made.

The declaration by law as to the place where the contract was

entered into is necessary to determine which court will resolve the
controversy which may arise between the contracting parties.

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 Rule on offer and acceptance. The general rule is that the person
making the offer has the inherent right to fix the time, place and manner of
acceptance. Once fixed, the acceptance must be made strictly in such
manner to give birth to the consent. If this fixation is not followed consent
may not be achieved.

Likewise, the offeror may give the offeree a period within which to
accept the offer and he may withdraw it any time by communicating such
withdrawal before the offer has been accepted by the offeree. However,
when the offeree had paid or promised the offeror a consideration for the
granting of the period within which to accept, the offeror cannot revoke the
option. For instance, if X offers to sell a concrete mixer to Y giving the latter
ten days within which to accept, X may revoke the offer at any time before Y
accepts it. But if Y had promised or given something to X in order that the
latter will give an option or extension of a period to accept, then X cannot
withdraw the same until the appointed or designated time.

When offer becomes ineffective. An offer may become ineffective

if before its acceptance by the offeree, the offeror will die or suffer civil
interdiction or becomes insane or insolvent. If any of these circumstances
will supervene after the acceptance has been made, the contracts will
continue to have force and effect but the rights and obligations arising
therefrom will descend to the heirs and assigns of the parties defending
upon whether they are transmissible by nature, by law or by stipulation.

Offer made through agent. An offer made through an agent is

accepted from the time acceptance is communicated to him by the offeree.
This is so because the agent in legal contemplation is considered as the
extension of his principal and so whatever he does in connection with the
agency will bind the principal.

Published advertisement not an offer. Business advertisements of

things which are for sale in newspaper ads or media are not definite offers
by mere invitations to make offer, and the same is true as regards
advertisements calling for bidders to make proposals based on given
specifications. In either case, the advertiser is not bound even if a person
responds completely to the terms published unless indications show
otherwise. Take the following illustration. An advertisement appears in the
Bulletin Today reading: “For Sale: 1980 Lancer 2-door, good running
condition and fully loaded P50,000.00, 200 G. Tuazon, Sampaloc, Manila,
See: Vangie Mendoza.” X immediately looks for and meets Miss Mendoza
informing her that he is buying the car and tendering the exact amount.
Miss Mendoza can refuse because advertisements are not definite offers.

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 An exception to the rule however could take the form of a reward for
an act specified in the advertisement. If one immediately acts on the reward
advertisement without knowing that a day after the ad was revoked in the
same paper, the reward may be claimed if the task has been done
conformably with the advertisement. These cases are prevalent in rewards
for the capture of underworld characters or information leading to detection
of tax evaders.

Persons who cannot give consent. Consent can only be given by

persons who have the capacity to act. If given by persons without capacity
to act or with disqualifications, their consent may not give birth to a contract.
Thus, the law states that unemancipated minors, insane or demented
persons, and deaf-mutes who do not know how to write cannot give consent
except through their natural or legal guardians.

The law, however, recognizes a situation when a person subject to

guardianship may have a period of lucid intervals (temporary sanity) such
that contracts entered into during this period are valid. Likewise, where
“necessaries” are those indispensable for sustenance, dwelling, clothing,
and medical attendance are sold and delivered to a minor or other person
without capacity to act, he must pay a reasonable price for it. But contracts
entered into in the state of drunkenness or during hypnotic spell are
voidable.

Vices of consent. The law enumerates five causes by which

consent may be vitiated or rendered defective. These are mistake, violence,
intimidation, undue influence and fraud. If the consent of a party to the
contract is given or secured through the use of any of these vices the
contract becomes voidable.

Mistake rendering contract defective. In order that mistake may

invalidate consent, it should refer to the substance of the thing which is the
object of the contract, or to those condition which have principally moved
one or both parties to enter into the contract. However, mistake as to the
identity or qualification of one of the parties will vitiate consent only when
such identity or qualification has been the primary cause of the contract. But
a simple mistake of account will give rise only to the correction of the
account.

A mistake in substance takes place when both parties thought that

the subject matter they are dealing into does not turn out to be what it
exactly is, such as when one sells and the other buys a sugar land believed

63
by them to have an area of 20 hectares and yielding 2,000 piculs per season
which actually had an area of 18 hectares and producing only about 700
piculs. Despite the consummation of the contract, the same may be
annulled in court at the initiative of the buyer.

A mistake of identity or qualification, on the other hand, takes place

when one party enters into the contract primarily because of such identity or
qualification of the other party which is not actually the case. To illustrate:
Assume that Art Locsin is the best construction engineer in the country.
Roxas, wanting a five storey building to be constructed by Art Locsin, meets
another engineer with the same name. Believing that the latter is the real
Locsin, he contracted the construction of the building with him. After the
second storey is finished, he discovered that he is not the famous Art
Locsin. In such a case, he may ask the court for annulment of the contract
because of the mistake of identity and qualification.

Circumstances not indicative of mistake. There is no mistake if

the party alleging it knew of the doubt, contingency, or risk affecting the
object of the contract as in the case of buying a car from a former carnap
convict or purchasing a thing at an extremely low price.

Ignorance of the law, likewise, does not constitute mistake because

under our legal system, “ignorance of the law excuses no one from
compliance therewith” except when the law is too difficult and controversial
that even calibrated lawyers and magistrates of high courts cannot come to
unanimity in interpretation.

Mistake of fact and mistake of account distinguished. Mistake of

account unlike mistake of fact will not avoid the contract. If a mistake of
account is committed the remedy is not annulment of the contract but
correction of the account. Example: Dealer X sells to Y 144 sacks of
cement at P54.20 per sack and Y paid only P7,104.80 due to mistake in
addition. Dealer X may demand payment of the difference after correction
of the error in the amount of P700.00.

Legal protection to the weak party. The law has its protective
concern to the no-read no-write or disadvantaged party to the contract.
Article 1332 of the Civil Code states that when one of the parties in unable
to read, or if the contract is written in a language not understood by him, and
mistake is alleged, the person enforcing the contract must show that the
terms thereof have been fully explained to the former before its execution.
Failure to do so will render the contract voidable. Example: X, an Ilonggo,
entered into a contract worded in Tagalog with Y. On the due date X

64
refused to comply with his obligation claiming that he erred in entering into it.
To enforce the contract in court, Y should prove by convincing evidence that
the contract was read and explained fully to the satisfaction of X before
signing it.

Violence and intimidation explained. Violence is an external act

characterized by the employment of serious and irresistible force by one
party or a third party for his account in order to secure the consent of the
other party to the contract. Employment of violence by a party or by a third
person for his account renders the contract voidable. Example: X, to secure
Y’s consent to sell his land, prepares a written document of sale to be
signed by Y. Then X, with the aid of armed men kidnapped and then beat Y
in a secluded place. To avoid further beating and injury, Y signs the
document. Under the circumstance, the consent of Y is vitiated by violence,
hence the contract is voidable.

There is intimidation when one of the contracting parties is compelled

to give his consent on account of a reasonable and well-grounded fear of an
imminent and grave peril employed by the other party or a person for his
account upon his person or property or upon the person or property of his
spouse, descendants, and ascendants. Unlike in violence where the
victim’s will is substituted with that of the perpetrator, in intimidation it is not
so because the intimidated party exercises his will which is not free because
of the fear of a forthcoming peril upon him or his property or his love ones’
person or property, thus rendering his consent defective and unfree. In the
example given, if instead of employing force by beating Y in a secluded
place, X threatens Y at his place that if he does not sign the contract left to
him within two or three days, he would throw sulfuric acid on a beautiful face
of his daughter, and because of which Y signs the document, the same
would be voidable as Y’s consent is vitiated by intimidation.

Degree of intimidation. In order to determine the degree of

intimidation the circumstance of age, sex and condition of the person
intimidated shall be borne in mind. This means that if the condition, sex or
age of the party claiming to have been intimidated is such that there is very
remote possibility of harm upon him or his property or that of his love ones,
the contract may not be avoided as his consent does not suffer from
infirmity. In the same example, if Y is much composed physically or bigger
and stronger in condition or is a bulky strong man while X is an elderly
woman whose condition or resources preclude the possibility of inflicting any
harm upon Y, the degree of intimidation would be insignificant to defeat the
free will of B. But in the reverse, there would be intimidation that would
vitiate the consent, hence the contract becomes voidable.

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 But a threat to enforce one’s claim through competent authority will
not vitiate consent when the claim is just and legal.

Undue influence. There is undue influence when a person takes

improper advantage of his power over the will of another, depriving the latter
of a reasonable freedom of choice. Undue influence may arise from the
following circumstances: confidential, family, spiritual, and other relations
between the parties, or from the fact that the person alleged to have been
unduly influenced was suffering from mental weakness or was ignorant or in
financial distress.

In order that undue influence may vitiate consent, it must be in a

magnitude that overpowers and subjugates the mind of the obligor such that
in effect, he does not express anymore his assent or will but that of the other
party to the contract. Thus, if the consent of the contract is given because of
the undue influence of a lawyer over his client on the latter’s property
disposition, or of an eldest son to his aged or ailing father over his business
affairs, or of a doctor over his cancer patient in the execution of the latter’s
will and testament, or by one party against the other party who is suffering
from mental weakness or in financial strain, the consent to the contract may
stand vitiated by undue influence.

Fraud in contracts. 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.

Generally, fraud renders the contract voidable. To warrant avoidance

of the contract, however, the fraud alleged and proved must be serious and
have not been employed by both contracting parties.

Fraud is classified into two kinds, namely: Fraud at or before the

perfection of contract (dolo causante) which when committed renders the
contract voidable, and fraud after perfection of the contract (dolo incidente)
which does not cause the invalidity of the contract. A good example of the
former is a case where a vendor sells a gold ring which he represents to be
mounted with a diamond when such is merely a stone glass. Here the
contract may be annulled by reason of fraud taking place before the
perfection of the contract. An example of the second is where after the
execution of the contract of deposit of imported linen textiles, the owner of
the warehouse untie the bulks and replaces the inner contents with local
fabrics and then dressing them in a manner that looks as if it has not been
touched at all. Here the fraud takes place after the contract, hence, the
depositor may only recover damage by reason of the replacement.

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 Instances not constituting fraud:

1. Usual exaggeration in trade. It is an admitted fact that dealers or

merchants exaggerate their wares to insure the immediate sale of their
products. For instance, is a sauce manufacturer advertises his products as
napakasarap or pinakamasarap, a buyer’s outright reliance thereof without
investigating on its truth will not constitute fraudulent representation. In
other words, if the buyer, having all the opportunities to investigate by
himself the truth of the representation, fails to do so, he cannot later on
complain that the contract is voidable if the goods brought turn out to be
opposite the dealer’s representation.

2. Expression of a favorable opinion. A mere expression of an

opinion by a party does not signify fraud, unless the same is made by an
expert and the other party relied on the former’s special knowledge. An
example of the latter would take the form of a seasoned mining engineer
who sells a lot represented to be loaded with mines, and the buyer, relying
on his expertise, buys it, only to discover nothing underneath the ground.

3. Misrepresentation made in good faith. A misrepresentation in

good faith is not fraudulent but may constitute error. This means that a
misrepresentation based on an erroneous belief and without intent to take
undue advantage of the other party will not avoid the contract. To illustrate:
X received a case of Scotch Whisky as a gift on his birthday. Believing it to
be imported and running out of cash, sold it to a grocery assuring it to be
imported. If it turned out to be local, the contract will not be avoided for
being fraudulent.

Duty to disclose material facts. Failure of either party to disclose

facts when there is a duty to reveal them as when the parties are bound by
confidential relations, constitute fraud.

When there is a duty to disclose facts as when they are bound by

confidential relations like that of a lawyer and client or principal and agent,
failure of the knowledgeable party to reveal such information amounts to
fraud, hence the contract is rendered voidable. Situations like this may also
occur in employment or insurance contracts where to get the employer or
insurer’s assent the prospective employee or insurance applicant who had
suffered a grave ailment conceals this fact or substitute an X-ray of a
healthy person for him.

Simulated contract. A contract is simulated when it is fictitious or

pretended in order to defraud the creditor or mislead the general public. It

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may be absolute or relative and in either case the apparent contract is not
really desired or intended to produce legal effects.

An absolute simulated contract takes place when the parties do not

intend to be bound at all, hence, the contract is void or inexistent as there is
no consent or cause although the object is certain. The purpose of the
contract is to defraud the creditors when the debtor entered into a fictitious
contract alienating his only property worth the debt to another in order to
place such property beyond the reach of his creditor.

A relatively simulated contract takes place when the parties

concealed their true agreement. In this instance the apparent contract is
void but not as to the real agreement of the parties, if the same does not
prejudice a third person and is not intended for any purpose not contrary to
law, morals, good custom, public order, and public policy. This kind of
simulation takes place when the contract entered into is merely to mislead
the public on the effects of their real contract. Example: Spouses A and B
own two Lancer cars for their personal and professional use everyday.
Owing to the prohibitive costs of fuels they decided to convert their cars into
taxis and in order to do so entered into a fictitious contract of sale with a
legitimate taxi operator, thereby misleading the public that the latter is the
owner of the two cars being operated as taxis. It is clear that the contract of
sale is not their true agreement but some sort of a lease contract for the use
of franchise for a monthly fee, locally known as kabit system.

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 QUESTIONS AND PROBLEMS

1. How is consent manifested in contracts?

2. What are the requisites of a contract?

3. Generally, an offer may be revoked at anytime before acceptance by

the offeree. When is the offeror precluded from revoking a offer?

4. When may an advertisement constitute a definite offer? Why?

5. What is a simulated contract? What are its types?

6. Differentiate an absolute simulated from a relatively simulated

contract.

7. State three cases or circumstances that may induce a party to enter

into a contract but which the law does not consider as fraud.

8. What are the different kinds of frauds? Explain each.

9. ABC Manufacturing Corporation advertised its detergent soap as

“washes clothes doubly clean”. X, relying on the representation of
the corporation, bought several bars of soaps and discovers that the
advertisement is not true. Can he ask for annulment of the contract
by reason of fraudulent representation? Why?

10. X is indebted to Y in the amount of P25,000.00. In order to escape

payment of his debt to Y he sold his only passenger jeepney to his
brother-in-law Z. State whether the contract is absolute or relative
simulation. Why?

ANSWERS

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70
 OBJECT OF CONTRACTS

Object certain. An object which must be certain is the second

element of a contract. All things which are within the commerce of man
including future things having potential existence, rights which are not
intransmissible and services which are not contrary to law, morals, good
customs, public order, and public policy, and not impossible of compliance
may be the object of a contract. No contract may, however, be entered into
upon future inheritance except in cases expressly authorized by law.

Moreover, things or services, as object of the contract must not be

physically or legally impossible otherwise the contract is void for lack of
object. As to service, impossibility may be absolute or relative. The former
renders the contract void, whereas, the latter may take place when the
prestation cannot completely be complied with, as in a contract of
partnership where a partner agreed to contribute a sum which he can ill
afford.

Kinds of object of contract. Object certain is the second essential

element of a valid contract. The object may be things (as in sale), rights (as
in assignment of credit), or services (as in agency).

Outside the commerce of man. It has been held that a municipal

council cannot sell or lease public property, such as plazas, streets,
common lands, rivers, bridges, etc. because they are outside the commerce
of man; and if it has been done so by leasing part of the plaza the lease is
null and void, for it is contrary to law, and the thing leased cannot be the
object of a contract. A thing or service may, though within the commerce of
man, later on become prohibited by law hence goes outside the commerce
of man. Thus, before slaughtering of carabaos for consumption or sale is
not banned, but in many municipalities, the same has been prohibited by
local ordinances hence goes outside the commerce of man.

Things having potential existence. Things having potential

existence are those which are sure to come barring only unforeseen events
although not yet possessed. To this classification may fall such things, like
mangoes from existing mango trees for the coming season; the grains that
may be harvested from a definite area of rice land; the milk that a cow will
yield in the coming year or young animals from a definite mother cow.

71
 Intransmissible rights and services. Rights which are
intransmissible cannot be the object of a contact because they are either too
personal to the parties or are not permitted by law to be the object of
contact. Such rights like right to vote and be voted upon, those emanating
from marriage and personal relationship are among those that may be
mentioned. For service however to be a valid object, it must be physically
and legally possible as it is not contrary to law, good costumes, public order
and public policy.

Future Inheritance. A contact involving a future inheritance is void

as this will likely entice an instituted heir or legatee to end up the life of the
benefactor. The test of whether an inheritance is future or not is the time of
death. If death of the benefactor had come ahead of the contract involving
the whole or part of an inheritance the contract is removed from the
prohibition.

Object must be determinate, exceptions. The object of the contract

must be determinate as to leave no doubt as to which is intended from the
kind where it belongs, or must have definite limits. However, the fact that the
quantity is not determinate is not an obstacle to the existence of the
contract, provided it is possible to determinate what the object is without the
need of a new contract between the parties. Thus a contract whose object is
described as the first batch of lanzones from a five-hectare land in Paete,
Laguna, in which the quantity is not capable of the determination at the time
the contract is perfected is a determinate one.

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 QUESTIONS AND PROBLEMS

1. What may be the object of contracts?

2. The law prohibits future inheritance to be an object of a contract.

When is an inheritance considered as future inheritance?

3. When may the object of a contract be considered as determinate/

4. When may a thing have potential existence? Explain.

5. May things which are within the commerce of man cease to be so?
Why?

6. May an possible service be the object of a contract? Why?

7. X own a 5-hectare lot planted with 300 lanzones trees which yield
about 900 baskets a season. Two months before the next season he
entered into a contract of sale with Y regarding the fruits which is may
yield in the next season. Is the object of the contract determinate?
Why?

8. X and Y are father and son. On January 15, 1984 Y enters into a
contract with Z whereby he sells a white race horse which he alone
will inherit in addition to the other properties of X. On January 20
same year, X dies. Discuss the effects of the sale.

ANSWERS

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74
 CAUSE OF CONTRACTS

Cause, meaning of. A cause which must be in existence at the time

of the contract is the last element of a valid contract. Cause or consideration
is the immediate, direct and proximate reason why a party enters into the
contract and without which the contract becomes a nullity. The cause may
either be onerous, remuneratory or gratuitous.

In onerous contracts the cause or consideration is understood to be,

for each contracting party, the prestation or promise of a thing or service by
another. Thus, if X sells his land to Y for P100,000.00, the onerous cause for
X is the P100,000.00 coming from Y, whereas, that of Y is the land coming
from X.

The cause or consideration in remuneratory contracts is the service

or benefit which is remunated or paid. A simple illustration of this is the
professional fee of an engineer who pursuant to a contract with a client
prepares the plan or design of the latter’s residential house.

In gratuitous contracts, or one of pure beneficence, the cause or

consideration is pure liberality of the part of the benefactor. Unlike in
onerous and remuneratory contracts where each party receives a valuable
or material consideration, in gratuitous contracts the obligor does not receive
any. The liberality or cause in this case is the inner satisfaction of the giver
of having done or given a valuable factor or help to the receiving party –
something which is biblically blessed. Donating a piece of land to a poor
community so that the youth can use it for their sport and common needs in
order to deviate their attention from gambling or other form of vice is a
perfect example of one having a gratuitous cause.

Motives in entering into a contract. The particular motives of the

parties in entering into a contract are different from the cause thereof. The
motive is the special or personal reason of a party why he entered into
contract, as distinguished from the cause of the contract. Thus, in a sale of a
new car for P120,000.00, the motive of the purchaser may be to give it to his
wife, whereas, the dealer’s motive is perhaps to reinvest the money strictly
for business profit which is also personal to him. In other words, motive has
reference to the person and cause refers to the contract.

Motive is further differentiated from the cause in that the former may
be unknown to the parties, and that illegality is motive does not invalidate
the contract, while illegality of cause renders the contract a nullity.

Contracts without cause or with illegal cause. Contracts without a

cause or with an illegal cause produce no effect whatsoever. The cause is

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unlawful if it is contrary in law, morals, good costumes, public order, and
public policy.

An example of a contract without a cause is when the deed of sale

states that the seller received the price of the thing when the truth of the
matter is that none has been received as the sale is merely a ploy to place
the object of the contract beyond the reach of the seller’s creditors. In this
case, even if there is a deed of sale, the contract is void as the last element
in lacking.

If the contract has an unlawful cause, it as if no contract has been

entered into because the law prohibits or considers the cause as illegal.
There are abundant examples of this, like a contract to distribute
contraband; to deal in prohibited drugs where both the manufacturer and
dealer are unlicensed; contracts restraining the flow of trade as when a party
hoards rice or sugar to create artificial shortage; or a contract to refrain from
prosecuting a crime for a monetary cause.

Statement of a false cause in contract. The statement of a false

cause in contracts shall render them void, if it should not be proved that is
founded upon another cause which is true and lawful. This means that it is
incumbent upon the party enforcing the contract to prove that there exists
another cause lawful if the other party claims the cause to be false.
Example: X signs a contract of sale stating that he sold and delivered a
Betamax to Y for P10,000.00 which is latter paid in cash. The truth of the
matter however is that Y did not pay any amount to X as the latter’s purpose
is to place the Betamax beyond and reach of an appliance firm to which he
had not paid the complete installment payments. Here, the cause stated is
false hence, the contract is void. But suppose, in an action to recover the
Betamax which was already paid by X to the company, Y proved that X has
an existing debt to him worth the same amount. In such a case, the contract
continues to enjoy the presumption of validity since the real and true cause
has been proven.

Presumption of consideration. Although the cause is not stated in

the contract, the same is presumed to exist and is lawful, unless the debtor
proves the contrary. This means that every contract is presumed to be
based on a cause or consideration which is lawful and existing, such that the
party against whom the contract is enforced is required to prove lack of or
illegal consideration, otherwise the contract continues to retain its validity.
Example: A negotiable instrument reading “Pay to J. Gonzales on demand
the sum of p1,000.00” or statement on the page of a diary of the creditor
stating “I.O.U. P1,000.00”, signed at the bottom of the writing by the debtor,
is presumed to have been issued or made with a consideration. To absolve
the maker from liability, he should prove that the document or writing has no
true and lawful consideration.

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 Lesion or inadequacy of cause. Except in cases specified by law,
lesion or inadequacy of cause shall not invalidate a contract, unless there
has been fraud or undue influence.

Lesion is simply the damage suffered by a party because the price is

unjust or influenced. It does not avoid or invalidate the contract unless the
price is so grossly inadequate as to amount to practically a fraud,
oppression or undue influence. Example: X, a Visayan resident, is the owner
of a 500 square meters residential lot in Tagaytay City. Without knowing that
the cost per square meter is P500.00, he sold it to Y at P300.00 per square
meter. Under the circumstances, the lesion of P200.00 per square meter he
suffered will not invalidate the contract. But if Y or a third person had
deliberately used fraud or undue influence, or Y had committed a substantial
mistake, lesion suffered may be a basis of an action to invalidate the
contract.

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 QUESTIONS AND PROBLEMS

1. What is meant by cause or consideration?

2. Differentiate motives in contract from causes in contracts/

3. What is the presumption on the existence of a cause?

4. How is a gratuitous cause distinguished from an onerous cause?

5. May lesion or inadequacy cause invalidate a contract? Why?

6. When is the cause of the contract considered unlawful?

7. X, a Visayan resident, is the owner of a 200 square meter lot in

Tagaytay City. Due to false information from Y, he (X) entered into a
contract with Y selling the land at P200.00 per square meter when the
market value of the same is P500.00 per square meter. Is the
contract valid? Why?

8. X signs a contract that he sold and delivered a Betamax to Y for

P10,000.00 which the latter paid in cash. X did this actually to place
the Betamax beyond the reach of his creditor Z, and as a matter of
fact he did not receive the amount of P10,000.00. Can the contract be
enforced? Reason.

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 CHAPTER IV

FORM OF CONTRACTS

Form not essential to be binding. Contracts shall be obligatory in

whatever form they have been entered into, provided all the essential
requisites for their validity are present. However, when the law requires that
a contract be in some form in order that it may be valid or enforceable, or
that the contract be proved in a certain way, that requirement is absolute
and indispensable.

When form is a requirement. A contract in whatever form – verbal

or written, is valid if all the essential elements are present, i.e., consent of
contracting parties, object certain which is the subject of the contract, and
cause or consideration. The exceptions to this rule are:

1. When law requires form for validity. If the law requires a

contract or agreement to be in writing or to be in a pubic instrument, a
contract which is not in such form is not valid, hence, cannot be enforced.
An example of the former is an undertaking to answer for the debt or default
of another, and in the latter, a donation of a real property which must be in a
public instrument and also accepted in the same manner.

2. When law requires a form for enforceability. When the law requires
a contract or agreement to be in writing or noted in any manner to be
enforceable, i.e., those contained in the Statute of Frauds, such shall be
complied with otherwise no action can be allowed to enforce the contract.

3. When law requires a form for convenience. If the contract is valid

and enforceable but not in a public instrument, a party interested in its
registration may compel the other party to rewrite it in the proper form or
complete it through placing the needed notarial acknowledgement.

Remedy if valid contract, not in public instrument. If the law

requires the contract or agreement to be in public document or in a special
form, the contracting parties may compel each other to observe that form
once the contract has been perfected. The remedy is available
simultaneously with the action upon the contract. Example: X sold to Y a
parcel of land but the contract is written only in an ordinary pad. Under the
law, sales of or real rights involving real property must be in a public
instrument. Since the contract is not in a public instrument Y may compel to
X to rewrite it in a public instrument so that it can be registered in the
Registry of Deeds thereby becoming binding to the whole world.

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 A public instrument may be defined as one where the act or contract
and other terms and stipulations thereof is acknowledged and sworn to by
the parties as their free and voluntary act or deed before a government
official authorized to administer oath or a notary public bearing his seal. An
act or contract embodied in a public instrument is generally binding to the
general public.

Acts which must appear in a public instrument. The following acts

must appear in a public instrument:

1. Acts and contracts which have for their object the creation,
transmission, modification or extinguishment of real rights over immovable
property; sales of real property or an interest therein are governed by
articles 1402, No.2 and 1405.

2. The cessation, repudiation or renunciation of hereditary rights or of

these of conjugal partnership of gains.

3. The power to administer property or any other power which has for
its object an act appearing or which should appear in a public instrument or
should prejudice third person.

4. The cessation of actions or rights proceeding from an act

appearing in a public document.

All other contracts where the involved exceeds five hundred pesos
must appear in writing, even a private one. But sale of goods, chattels or
things are governed by Articles 1403, No. 2 and 1404.

Real rights over immovable properties. Immovable properties are

those which by nature, location or intention of the parties are destined to be
immovable, i.e., land or machineries or equipments installed on surface or
underneath the ground. Thus, any act or contract that would create,
transmit, modify or terminate a right over these, such as those acquired by a
mortgagee, possessor, lessee, or usufructuary are among those which are
included in this number.

Cessation, repudiation or renunciation. Hereditary rights relate to

the rights of compulsory heirs to inherit from their parents upon the latter’s
demise, or vise versa, or the right of the designated heir in inherit as
provided in the law of succession, whereas conjugal rights refer to the right
of married spouse to the one-half of the conjugal partnership of gains in
case of dissolution of death of a spouse. Example. Don Mariano dies

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survived by four children. X, the eldest and a successful engineer and
already stable, renounced his share in the estate of his father. This
renunciation must be in a public instrument.

Power of administration. This power must also be in public

instrument to be binding to the whole world. The same is true with any other
power which has for its object acts appearing or which should appear in a
public instrument. A power to administer a business or a hacienda given to a
person while the owner is away properly falls under this group.

Cessation of actions or rights. Actions intended to be extinguished

or rights to be terminated like the release of a mortgage after payment of a
loan mortgage debt or cancellation of an encumbrance on an immovable
property squarely falls under this number.

Contracts partly written and partly oral, effect of. If a contract is

partly in writing and partly in oral, the oral ones are generally excluded from
the written document. Such being the case, disputes not resolvable by the
written document is deemed not written at all unless the matters claimed to
have been orally agreed and form part of the written instrument can be
proven by other evidence sanctioned by the law

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 QUESTIONS AND PROBLEMS

1. Does the law require a form of order that a contract may be

valid or enforceable? Explain.

2. What are the acts and contracts which must appear in a

public instrument?

3. What are some of the real rights that affect an immovable

property?

4. When may a party to the contract which is not in the

required form demand for the observance of the required
form from the other party?

5. X mortgaged a piece of land to Y which was written in a

private instrument. When Y sought registration of the
instrument, the Registry of Deeds refused to register the
same because it is not in the proper form. What is the
remedy of Y? Reason.

6. X and Y are husband and wife whose conjugal partnership

of gains stands to a net worth of P500,000.00. In order to
show his affection to his wife, Y, he executed a private
writing clearly repudiating and renouncing his share to the
partnership. Is the repudiation in the form required by law?
Why?

ANSWER

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83
 CHAPTER V

REFORMATION OF THE INSTRUMENT

Meaning of reformation. Reformation is that remedy in equity by

means of which a written instrument is made or construed so as to express
or reform to the real intention of the parties when some error or mistake has
been committed. In the reformation of the instrument, the courts do not
attempt to make another contract for the parties. They merely inquire into
the intention of the parties and having found it on the evidence presented or
upon inquiry, reform the written instrument (not the contract) in order that the
real intention may be expressed.

When reformation of the instrument is necessary. When, there

having been a meeting of the minds of the parties to a contract, their true
intention is not expressed in the instrument purporting to embody their
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 expressed. If mistake, fraud, inequitable
conduct, or accident has prevented the meeting of the minds of the parties,
the proper remedy is not reformation but annulment of the contract.

Requisites of reformation. In order that the action for reformation

will prosper the following requisites must concur: (1) meeting of the minds;
(2) written contract; (3) written contracts fails to express the true intention of
the parties; and (4) a clear and convincing proof of the real intention; and (5)
failure is due to mutual mistake, fraud, inequitable conduct, or accident.

Distinction between reformation and annulment. Reformation of

the instrument presupposes a meeting of the minds between the contracting
parties but their true intention is not expressed in the instrument, while the
remedy of annulment is proper when there is no meeting of the minds.
Example: X entered into a contract of sale of a piece of land to Y for
P100,000.00 with the understanding that the sale would include all existing
improvements therein. Through the mistake of X’s typist the phrase
“including existing improvements therein” was omitted in the Deed of Sale.
In this case, Y may ask for reformation of the instrument by reason of
mistake and failure of the instrument to express the true intention.

When reformation may be sought. In the following cases

reformation of the instrument in order because of the failure of the same to
disclose the intention or the real agreement of the parties:

1. Mutual mistake of the parties. When mutual mistake of the parties

causes the failure of the instrument to disclose the real agreement, one of

84
them may ask for reformation. Example: X entered into a contract of sale of
a car to Y. By mutual mistake, the parties drew a contract of mortgage. X or
Y may file an action for reformation.

2. One party was mistaken and the other acted fraudulently. 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 reformation. Example: X, a Cebuano entered into a contract whereby
he sells his house to Y, the contract being written in Tagalog of which he is
not conversant. Before signing, Y explained that the furnishings and
accessories thereof are not included in the sale. It turns out however that the
contract includes all furnishings and accessories such as furniture, air
conditioner, etc. X committed a mistake and can ask for reformation.

3. One party was mistaken and the other knowingly concealed the
mistake. When one party was mistaken and the other knew or believed that
the instrument did not state the real agreement, but concealed that fact from
the former, the instrument may be reformed. Example: In the proceeding
example, suppose that x thought that he was merely leasing the house, but
Y knew that the contract prepared by X with his signature was an absolute
sale of the house and kept silent about it. X may ask for reformation.

4. Ignorance, etc. of party drafting instrument. When through the

ignorance, lack of skill, negligence or bad faith on the part of the person
drafting the instrument or if his clerk or typist, the instrument does not
express the true intention of the parties, the courts may order that the
instrument be reformed. Example: MEC on August 30, 1920 wrote a letter
bidding to construct a building of CH in which the peso sign was used by it.
Later, on the basis of the letter, a contract was made between MEC and CH
adopting the peso sign as a basis of the contract by which MEC was to
construct certain buildings at so much per building, etc. On November 5,
1920 MEC submitted a bill of payment in dollars and so CH refused to pay.
The court allowed reformation of the instrument on the basis of the mistake
committed by the clerk when he miscopied in the original draft the sign
dollars to pesos and for the further fact that in the ordinary course of
business at the time CH should have known the mistake.

5. Mortgage or pledge written otherwise. 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. Example: X wanted to loan money from Y so he
offered to him by way of mortgage his land as security. Both agree on this
point but the contract as written is absolutely sale.

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 When reformation is not allowed. There shall be no reformation in
the following cases: (1) simple donations inter vivos, wherein no condition is
imposed; (2) wills; (3) when the real agreement is void.

Reason for the law. Donation is essentially an act of liberality

whereas, in case of a will which is not a contract, the intention should be
looked into from the words itself alone and may not be changed after the lips
of the testator has been sealed by death. As to the void agreement, when
the agreement is inexistent what use could reformation do when the contract
is really incurable?

Effect of action to enforce instrument. When one of the parties has

brought an action to enforce the instrument, he can not subsequently ask for
reformation. Example: X sold his house to Y. To defraud Y, X prepared a
contract of mortgage instead of sale as agreed. Both signed the contract,
the latter believing that the instrument was a sale. Y therefore has a right to
bring an action to for close the mortgage. By reason of this action to enforce
he cannot ask for reformation.

Party who can bring action for reformation. Reformation may be

ordered at the instance of either party or his successors in interest, if the
mistake was mutual; otherwise, upon petition of the injured party or his heirs
and assigns. Example: The written instrument between X and Y is a
mortgage although they intended a sale due to mutual mistake. In this case,
X or Y can file an action for reformation of the instrument. If any or both of
them die, the successors in interest may. Suppose however, that X through
fraud prepared the mortgage instrument in disregard of the real contract of
sale. In this case only Y or his heirs in case of his death may file the action.

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 QUESTIONS AND PROBLEMS

1. When may an instrument be reformed?

2. Differentiate the remedy of reformation from annulment.

3. Give two examples when no reformation is allowed.

4. What are the cases when reformation is allowed?

5. Who may file an action for reformation?

6. What is the effect if a reformation instrument is enforced by a party

entitled to the remedy/

7. X, a Cebuano, entered into a contract selling his house to Y, the

contract being written in Pilipino. Before signing X explained that the
furnishings and accessories thereof are not included. It turned out
however that the contract drawn by Y includes all the furnishings
therein. Is an action for reformation advisable? Why?

8. Although they intended a sale, the written instrument between X and

Y appears to be a mortgage due to their mutual mistake. If an action
for rescission is to be filed, who among them can file? Why?

ANSWERS

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88
 CHAPTER VI

INTERPRETATION OF CONTRACTS

Rule in the interpretation. If the term of the contract is clear and

leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control. If the words appear to be contrary
to the evident intention of the parties, the latter shall prevail over the former.
Thus, if the dispositive part of the contract reads: “For and in consideration
of the amount of P100,000.00, I hereby transfer and convey by way of
absolute sale my said piece of land,” this should be interpreted to be a sale
because the terms are clear and free from doubt. But suppose the phrase
“by way of absolute sale” does not appear although the contract recites that
the amount of P100,000.00 has been received which shall even bear
interest, then the contract shall be interpreted as a mortgage since the
evident intention is to secure the amount loaned.

How to judge intention of the parties. In order to judge the

intention of the contracting parties, their contemporaneous and subsequent
acts shall be considered.

Contemporaneous and subsequent acts. Acts of the parties

before and after the execution of the contract are leads necessary to prove
the intention of the parties. In addition to this, their conditions before and
after the contract are equally relevant to discover that intention. For
instance: X and Y enter into a contract entitled “Kasunduan sa Lupa”
(Contract Involving a Piece of Land) on February 8, 1983. It recites that
because of a debt of P100,000.00 of X to Y, X transfers and cedes the lot to
Y. Is this a sale or a mortgage? It appears however that before February 8,
1983, Y is a lessee of an apartment which is already too small for his family,
paying a high rental, had a feud at one time with the lessor, and that after
the contract X delivers the title of the land to Y, and X immediately paid its
unpaid taxes, and Y constructed a concrete bungalow. Under the
circumstances, there can be no doubt that the intention of the parties is that
of a sale.

General terms of contract, how construed. The general terms of

the contract shall not be construed as comprehending things that are distinct
and cases that are different from those upon which the parties intended to
agree. For instance: X sold his house and in the written contract is a
general phase “including all furniture therein”. If some furniture in the house
have been deposited by a friend of X for temporary accommodation, even if

89
all includes everything that belongs to his friend is excluded. Another
example is a general stipulation in the written Power of Attorney granting a
sugar hacienda overseer “with full powers to do any or all acts necessary to
manage the hacienda”. Even with that general power, the same shall not
include the selling of an unproductive portion of the hacienda.

Stipulations admitting several meanings. If some stipulations of

any contract should admit of several meanings, it should be understood as
bearing that import which is most adequate to render its effectual. Example:
X, a successful engineer, sells his car to Y which was not properly described
in the deed of sale. At the time of the sale, X owns two cars of the same
brand and model, one used in the exercise of his profession and another
which is reserved for the family use. In this case, the meaning that should
be given is the sale of the family-use car since the engineer’s car is needed
for his profession and would be in keeping with the intention of X.

Stipulations to be interpreted together. The various stipulations of

the contract shall be interpreted together, attributing the doubtful ones that
sense which may result from all of them taken jointly. This means that if any
clause of the contract admits of a different meaning, it must be interpreted in
relation to other clauses of the contract, giving to it the meaning which may
appear from a consideration of all of them together.

Interpretation of words having various meanings. Words which

may have different significations shall be understood in that which is most in
keeping with the nature and object of the contract.

Effects of usage or customs of the place. The usage or customs

of the place shall be borne in mind in the interpretation of the ambiguities of
the contract, and shall fill the omission of stipulations which are not ordinarily
established. Example: If several individuals are hired to thresh palay in a
locality and the compensation is not fixed, the customs of the place
regarding the fixation of compensation share at twenty-five or thirty percent
of the harvest will be used to supply the omission in the contract.

Interpretation against party causing obscurity. The interpretation

of obscure words or stipulation in a contract shall not favor the party who
caused the obscurity. Example: X borrowed P5,000.00 from Y payable after
one year from the making of the contract with interest. Y prepared the
contract and no fixed rate of interest was stated in the contract. In such a
case, all that Y could demand from X is the legal rate of interest at six

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percent even if Y originally intended to charge more because it is he who
caused the obscurity.

Rule on impossibility to settle doubts. When it is absolutely

impossible to settle doubts by the rules established in the preceding articles,
and the doubts referred 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.

If the doubts are cast upon the principal object 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.

Explanation and illustration:

The doubt may exist either on the principal object or on the incidental
circumstances of the contract. If there is a doubt in the principal object in
such a way that it cannot be determined what may have been the intention
or the will of the parties, the contract shall be absolutely null and void,
whereas if the doubt refers to incidental matters of the contract the rule will
depend on whether the contract is gratuitous and therefore the least
transmission governs; or onerous, hence the greatest reciprocity shall
prevail.

Doubt on incidental circumstances of a gratuitous contract.

Example: X entered into a contract donating a car which was not

described in the deed. He owns two cars – a Mercedes Benz and a Lancer.
In this case, The Lancer car shall be deemed donated since it has a lesser
value or involves a lesser transmission of interest.

Doubts on incidental circumstances of an onerous contract.

Example: X who is financially distressed entered into a contract with

Y letting his house to Y for an amount of P100,000.00 for five years which
was paid to X upon occupancy of the house by Y. The contract was
registered in the Registry of Deeds. Because of the refusal of Y to
surrender the house after five years, X filed an action to recover the
possession of the house. Y claims that the house has been sold to him for
that amount although the market value of the same is P250,000.00. In this
case, since the doubt refers to incidental circumstances of an onerous
contract, the transaction shall be deemed a contract of lease or an equitable
mortgage because it involves the greatest reciprocity of interests.

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 Principles of interpretation. The principles of interpretation stated
in Rule 123 of the Rules of Court shall likewise be observed in the
construction of the contract.

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 QUESTIONS AND PROBLEMS

1. What is the basic rule in the interpretation of contracts?

2. If the intention of the parties in a contract is not clear, how is the

intention usually judged?

3. What significance does usage and custom of a place play in the

interpretation of a contract? Explain.

4. How are general terms of the contract construed?

5. If a contract contains obscure words creating public doubts, against

whom may the doubt be resolved? Why?

6. If there is no way of resolving the doubt regarding the object of the

contract, what happens to the contract?

7. The dispositive portion of the contract reads: “For and in

consideration of the sum of P100,000.00, I hereby transfer and
convey by way of absolute sale my said piece of land to B. SGD. X”.
Will there be a need for the court to interpret the contract other than a
sale? Why?

8. X, who is financially distressed, entered into a contract letting his

house to Y for five years in consideration of the sum of P120,000.00
paid in cash. Because of refusal of Y to surrender the possession of
the house after five years, X filed an action to recover the possession
of the house. Y claims that the house had been sold to him for
P120,000.00. The appraised value of the house is P250,000.00.
How may the instrument be construed?

ANSWERS

93
94
 CHAPTER VII

DEFECTIVE CONTRACTS

Defective contracts are those which failed to meet or partially meet

the legal test of validity because they lack some essential element, or the
parties thereto lack the capacity to contract, or there is a vice in the consent
of one of the parties or lesion in certain case. The defective contracts in
order of their effectiveness are as follows: rescissible, voidable,
unenforceable and void or inexistent.

RESCISSIBLE CONTRACT

Concept and requisites of rescission. Rescission is a remedy

granted by law to the contracting parties or their successors in interest and
even to third persons, in order to secure reparation of damages caused
them by a contract, even if the contract is valid, by means of the restoration
of things to their condition prior to the celebration of things to their condition
prior to the celebration of the contract. In order that rescission may be
availed of by a party, the elements that must concur are: (1) a case
especially provided by law; (2) mutual restitution of what the parties have
received under the contract; (3) object of the contract must not be in the
possession of a third person who acquired in good faith and for value; (4) no
other legal remedy except by rescission; and (5) action has not prescribed.

Contracts that may be rescinded. The following contracts are

expressly provided by law to be rescissible:

1. Those which are entered into by guardians whenever the

wards whom they represent suffer lesion by more than one-fourth of the
value of things which are the object thereof;

2. Those agreed in representation of absentees if the latter suffer

the lesion stated in the preceding number;

3. Those undertaken in fraud of creditors when the latter cannot

in any other manner collect the claims due;

4. Those which refer to things under litigation if entered into by

defendant without the knowledge and approval of the litigants or competent
judicial authority;

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 5. Payments made under a contract where the debtor is in the
state of insolvency for obligations to whose fulfillment he could not be
compelled at the time they were effected; and

6. All other contracts specially declared by law to be subject to

rescission.

Meaning of lesion. Lesion is the damage or injury to the party

asking for rescission by reason of the fact that the price is unjust or
inadequate. To constitute lesion the damage must be substantial because
mere inadequacy of price, unless shocking to the conscience is not a
sufficient ground for setting aside a sale, if there is no showing that in the
event of resale a better price can be secured.

Illustrations and discussions:

Contracts in representation of wards. X, the guardian of minor Y,

sold to Z a piece of land belonging to Y in the amount of P100,000.00
although the market price at the time of sale in P150,000.00. By reason of
the sale Y suffered lesion of more than one-fourth of its value. Upon
reaching the age of majority Y can bring an action for rescission.

Contracts in representation of absentees. An absentee is a

person whose whereabouts is unknown and cannot be located in his last
official residence or address. Using the above example, if Y is an absentee,
he can file an action for rescission when he appears.

Those undertaken in fraud of creditors, etc. To enable the

creditors to exercise the remedy of rescission, it must be proven by the
prejudiced creditor that he cannot collect the claims due in any other
manner. Thus, if X to evade paying his debt to Y amounting to P50,000.00
enters into a contract selling his only Ford Fierra for the same amount to Z,
Y can file an action for rescission as the contract was made to defraud the
creditor.

Those referring to things in litigation. A thing is considered to be

in litigation when the respondent has already received service of summons
from the court taking cognizance of the case. Thus, if X sues Y for the
recovery of a car and pending trial the same is sold by Y to Z without the
approval of X or the court, the sale is rescissible.

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 Payment under a contract after insolvency. Insolvency here need
not be a judicially declared one, but may be under a situation where the
debtor is publicly known to have defaulted in the payment of obligations due
to various creditors. Thus, if a debtor, being insolvent, pays an obligation
which is not yet due, a creditor at the time of payment may ask the court to
rescind payment.

Contracts declared by law subject to rescission. These

comprises all other contracts scattered in the Civil Code, like judicial or
extra-judicial partition where one of the heirs received a share less than one-
fourth of his legitimate share, an unpaid seller of things, and breach of
reciprocal obligations under Article 1191, among others.

Contracts in behalf of wards or absentees approved by court not

rescissible. Contract set in these numbers (above) entered in behalf of a
minor by a guardian ad litem or by a legal representative in case of an
absentee and approved by the courts, are not rescissible. This is so
because intervention of the court is sufficient to protect the interest of the
minors as well as those who are considered as absentees.

Rescission without judicial intervention. Courts have held valid

however stipulation in a contract providing automatic revocation or
cancellation of the contract for violation of any terms and conditions thereof
without intervention of the courts. A simple example of these contracts is
the conditional sale on installments providing automatic rescission of the
contract if buyer defaults in two or more monthly installments. In this case,
rescission of the contract becomes automatic without action by the court.

Action for rescission not a principal remedy. The action for

rescission is subsidiary; it cannot be instituted except when the party
suffering damage has no other legal means of seeking redress or
reparations for the damage caused. If, therefore, it is found that the debtor
has other properties aside from that which is the object of the rescissible
contract, rescission will not prosper for the reason that the defrauded
creditor can collect in some other way by pursuing the debtor’s other
properties.

Extent of rescission. Rescission shall be only to the extent

necessary to cover damages caused. This means that partial rescission is
allowed since the purpose of remission is only to repair or cover up the

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damages caused and to respect and preserve as much as possible the
contract entered into by the parties. To illustrate: X, the guardian of minor Y,
sold to Z a piece of land belonging to Y in the amount of P100,000.00
although the market value was P150,000.00. Upon reaching the age of
majority, Y filed an action for rescission due to lesion. Z however is willing
to pay the damage of P50,000.00. In this case, rescission shall only be to
repair the damage of P50,000.00 to Y.

Effects of rescission. Rescission creates the obligation to return

the things which were the objects of the contract, together with fruits, and
the price with interest; consequently, it cannot be carried out when he who
demands rescission cannot return whatever he may be obliged to restore.

Neither shall rescission take place when things which are the object
of the contract are legally in the possession of a third person who did not act
in bad faith. In this case the indemnity for damage may be demanded from
the person causing the loss.

Requisites for an action for rescission to prosper. In order that

an action for rescission may prosper the plaintiff must be able to return what
he has received by virtue of a rescissible contract together with the fruits or
the price and interest, and that the object of the contract is not in the hands
of a third person who has acquired the same in good faith and for value.
Furthermore, there must be no other legal remedy and that the action be
brought within prescriptive period.

Mutual restitution of things received. The obligation of mutual

restitution includes not only the return of the thing together with the fruits but
also the price and its interest. For instance: X, guardian of minor Y, sold to
Z a piece of land belonging to Y in the amount of P100,000.00 although the
market price was P150,000.00. Upon reaching the age of majority, Y filed
an action for rescission due to lesion. Z is however willing to return the land
but Y cannot produce the proceeds of the sale. Rescission cannot take
place because he who demands rescission shall return what he may be
obliged to restore. But if Y can restore the price together with the interest
received between the period commencing from the date of the sale by X and
the filing of the action, and Z is willing to return the land and the fruits
received during the period, rescission will be in order.

Subject matter in possession of purchaser in good faith. A

purchaser in good faith is one who buys the thing for value and without
notice of defect of acquisition of the vendor. Thus if, in the preceding

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example, Z sold it to O who pays an amount of P150,000.00, and without
knowing of the flaw of Z’s title, registers in the Registry of Deeds, rescission
cannot likewise take place because O is a purchaser in good faith and for
value.

Alienations presumed in fraud of creditors. 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 donation.

Alienations by onerous title are presumed fraudulent when made by a

person against whom some judgment has been rendered in any instance or
some writ of attachment 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 recognized by the law on evidence.

Illustrations and explanation:

Alienation by gratuitous title. Contracts involving gratuitous

alienation take place when the debtor did not reserve sufficient property to
pay all debts contracted before the donation. Example: X donated to his
land to Y. Before he made the donation, he had several outstanding debts
did not reserve enough properties to pay his debts. The donation is
therefore presumed to be in fraud of the creditors if no proof is shown to
prove the contrary.

Alienation by onerous title. For an onerous alienation to be

presumed fraudulent, it must be made by a person against whom a
judgment has been rendered, or against whom a writ of attachment has
been issued by the court, and it is immaterial whether or not decision or writ
of attachment was obtained by the party seeking the rescission, or refers to
the property alienated as long as the alienation took place. Thus, a fitting
example of the former is where after judgment has been issued against him
by a court, X sold his property to Y, whereas, that of the latter is a case
where after X’s house at 1000 Ermita, Manila, was attached by the court, X
sold it or some other tangible property to Y.

Circumstance indicative of fraud. In considering whether or not

certain transactions were fraudulent, courts have laid down certain rules by

99
which the fraudulent character of a transaction may be determined. The
following are some of the circumstances attending sales which have been
denominated by the courts as badges of fraud:

1. The fact that consideration of a conveyance is fictitious or

inadequate;

2. A transfer made by a debtor after suit has been begun and

while it is pending against him;

3. A sale on credit by an insolvent debtor;

4. The transfer of all or nearly all of his property by a debtor

especially when he is insolvent or greatly embarrassed financially;

5. Evidence of large indebtedness or complete insolvency;

6. The fact that the transfer is made between father and son in
relation to the preceding circumstances; and

7. The failure of the vendee to take exclusive possession of all

the property.

Liability of acquirer in bad faith. Whoever acquired 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. If there are two or more
alienation, the first acquirer shall be liable first, and so on successively.

Concept of bad faith. Bad faith implies a deliberate disregard of a

known duty in order to get personal or economic advantage in manifest
disregard of the right of others. When employed, it is considered a fraud of
the creditor and the injured party can avail of the remedy of rescission and
recovering the property from the transferee in bad faith. If for any reason,
including fortuitous event, the property cannot be recovered, the party
entitled to recover may sue the transferee in bad faith for indemnity for
damages, and if there are more than one alienation, the first acquirer
becomes liable, and then the second party, and so on successively.
Example: X, to defraud his creditors, sold his only car to Y who knew of X’s
purpose, hence, in bad faith. Y alienated it to Z who later sold it to O. Both
Z and O are in bad faith. If the car is lost after rescission, Y is liable first. If
he cannot pay, O will be liable because the law says that if there are two or
more alienations, the first acquirer shall be liable first, and so on
successively.

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 Prescription period for action for rescission. The action to claim
rescission must be commenced within four years. For persons under
guardianship and for absentees, the period of four years shall not begin until
the termination of the former’s incapacity or until the domicile of the
absentee is known.

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 QUESTIONS AND PROBLEMS

1. Define rescission.

2. What are the requisites for an action for rescission to prosper?

3. Differentiate the remedy of rescission from annulment.

4. May a party choose the remedy of rescission if there are other

remedies available to him?

5. What are the contracts subject to rescission?

6. What is meant by lesion?

7. X is indebted to Y in the amount of P50,000.00. When X learned that

Y is filing an action against him in court, he immediately entered into
a contract selling his only passenger jeepney to z, his brother in law.
Can the remedy of rescission be availed of by Y? Why?

8. To defraud his creditors, X sold his only car to Y who knew the
purpose of X. Later on, Y alienated it to Z and then Z alienated it to O
who are likewise aware of the scheme of X. While in O’s possession,
the car was carnapped and cannot be recovered any more. Discuss
the liability of the parties.

ANSWERS

102
103
 VOIDABLE CONTRACTS

Meaning of voidable contracts. Voidable contracts are those that

possess all the requisites of a valid contract, namely: consent, object certain
and consideration, but have a defect or vice because the consent is vitiated
by mistake, violence, intimidation, undue influence and fraud, or that one of
the contracting parties is incapable of giving consent. A voidable contract is
valid until it is voided in court. Its validity becomes absolute once it is ratified
or not annulled within four years.

Voidable contracts under the Civil Code. The following contracts

are annullable, even though there may have been no damage to the
contracting parties:

(1) Those where one of the parties is incapable of giving consent

to contract; and

(2) 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 to ratification.

Distinctions between rescission and annulment. Among others,

the following are the basic differences between rescission and annulment:

1. The basis of rescission is lesion (damage) while that of

annulment is vitiated consent;

2. Rescission is a subsidiary remedy while annulment is a

principal remedy;

3. In rescission only the private interest of parties are affected

while in annulment public interest is the one essentially affected;

4. Defect in rescission is external (visual damage) while

annulment is internal; and

5. Damage to the plaintiff (person bringing the action) is essential

in rescission but not in annulment.

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 Prescription of action to annul contract. The action for annulment
of the contract shall be brought within four (4) years counted from: (a) the
time the defect of the consent ceases in cases of intimidation, violence, or
undue influence; (b) the time of discovery of the mistake or fraud; and (c) the
cessation of guardianship in cases of contracts entered into by minors and
incapacitated persons.

Effects of ratification of a voidable contract. Ratification

extinguished the action to annul a voidable contract. When ratification takes
place, the contract is cleansed from all its defects from the date the contract
was entered into.

Meaning of ratification. Ratification is the affirmance by a person of

a prior act made by him or by other persons for his account but did not bind
him in the beginning, and by reason of which gives an effect to the prior act
as if originally intended or consented to by him.

Ratification, how effected. Ratification may be effected expressly

or tacitly. It is understood that there is tacit ratification if, with knowledge of
the reason which renders the contract voidable and such reasons having
ceased, the person who has a right to invoke it should execute an act which
necessarily implies an intention to waive his rights. Examples of tacit
ratification are: (a) A minor bought a piece of land but sold the same after
reaching twenty one years of age to a third person; (b) A minor sold his land
and upon reaching majority age collected the unpaid balance of the selling
price; and (c) Voluntary performance by the injured party of his obligation
after the cause of nullity become known to him.

Ratification of guardians. The guardian of an incapacitated person

may ratify a voidable contract entered into by the latter. The ratification may
be made by the father or, in his absence, the mother because they are the
legal guardians of the minor children. In their absence or disqualification,
the court may appoint a guardian for the child’s property when his interest so
demand.

Person who may ask for annulment. The action for annulment of
contracts may be instituted by all who are thereby obliged principally or
subsidiarily. However, persons who are capable cannot allege the
incapacity of those whom they contracted; nor can those who exerted
intimidation, violence or undue influence, or employed fraud, or caused the
mistake, base their action upon these flaws of the contract.

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 Requisites for action to prosper. Two indispensable requirements
are needed for the action for annulment to prosper, namely: (a) that the
plaintiff has an interest in the contract either principally or subsidiarily; and
(b) that the victim and not the party responsible for the defect is the person
who must assert the same because equity can only be demanded if the
party seeking it has clean hands. Example: X, by means of intimidation,
secured the signature of Y in a Deed of Sale whereby the latter sold a yacht
for P500,000.00 to X on January 5, 1984 to be paid on January 30 of the
same year. Before the date of the payment, X learned that the price is
rather high and so he filed an action for annulment. In this case, the action
for annulment will not prosper since he caused the defect (intimidation) of
the contract. That is how equity works – go to the court with clean hands.

Obligation of the parties after decree of annulment. An obligation

having been annulled, the contracting parties shall restore to each other the
things which have been the subject matter of the contract together with the
fruits, and the price with interest, except in cases provided by law. However,
in obligations to render service, the value thereof shall be the basis of the
damage. Example: X, an uncle who wields undue influence over Y,
succeeded in having Y sign a contract selling to him a three-door apartment
on his birthday September 11, 1984 for P60,000.00 paying one-half and the
balance to be paid on September 30 of the same year. Each door earns
P2,000.00 a month. Because of the predominant influence of X, Y got the
nerve to file an action for annulment only in December. If the court will
decree the annulment of the contract on September 10, 1985, X will be
obliged to return to Y the apartment plus the rentals amounting to
P24,000.00 received by X, and Y to return X the sum of P60,000.00 with
interest.

Non-restitution by incapacitated party, exception. When the

defect of the contract consists in the incapacity of one of the parties, the
incapacitated person is not obliged to make any restitution except insofar as
he has benefited by the thing or price received by him. Example: X, a minor,
entered into a contract of sale of his car with Y for P30,000.00. P20,000.00
of this was placed in time deposit to mature on his reaching 21 years and
the rest were lost to gambling. After reaching the age of majority he filed an
action to annul the contract and the court voided it. Therefore, X must return
simultaneous with the return of the car by Y to him the P20,000.00 only
because he was benefited or was enriched to that extent.

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 Restitution through payment of value with interest. When the
person obliged by the decree of annulment to return the thing cannot 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 loss, with interest from the same
date.

If what is to be returned is lost through the fault of the party obliged to

return, the obligation is not extinguished. Instead, the value of the thing lost
shall be paid in the form of indemnity with interest plus the fruits received
from the time the thing was received until its loss. To illustrate: X forced Y to
sell to him the latter’s house which X took possession immediately. After
cessation of the violence, Y filed an action for annulment and the court
granted it but X could not return the house because it was burned through
the recklessness of X. Under the circumstances, X should return (a) the
rentals of the house from its delivery up to the time it was razed; (b) value of
the house; and (c) The interest of six percent of the value of house at the
time it was burned.

Effect of loss of object through fraud or fault of victim. The

action for annulment of contracts shall be extinguished when the thing which
is the object thereof is lost through fraud of the person who has a right to
institute the proceedings. If the right of action is based upon the incapacity
of anyone of the contracting parties, the loss of the thing shall not be an
obstacle to the success of the action unless the said loss took place through
the fault of the plaintiff. Example: X sold to Y who is a minor a motor boat
for P300,000.00. If the motor boat is thereafter lost through the fault or fraud
of Y, his right to file an action for annulment is lost. But if the same
disappears due to a strong typhoon or other fortuitous event his right to file
an action for annulment will not be extinguished even if the boat cannot be
returned. In this case, Y would merely be entitled to the return of the price
with interest.

Obligation to return is reciprocal. As long as one of the

contracting parties do not restore what in virtue of a decree of annulment he
is bound to return, the other party cannot be compelled to comply with what
is incumbent upon him.

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 QUESTIONS AND PROBLEMS

1. What is a voidable contract?

2. Distinguish a voidable contract from a rescissible contract.

3. How are voidable contracts classified?

4. What are the effects if a voidable contract is ratified?

5. How may ratification of a voidable contract be effected?

6. Who may initiate an action for annulment?

7. X, through intimidation, secured the signature of Y in a Deed os Sale

whereby the latter sold his yacht on January 15, 1984 for
P500,000.00 to X to be paid on January 30 of the same year. Before
the date of payment X learned that the price is rather high, and so he
filed an action for annulment. Can the action prosper? Why?

8. X, an uncle of y who wields undue influence upon him, succeeded in

having Y signed a contract selling to X on his birthday – September
11, 1984 – a 3-door apartment for P300,000.00. Each door earns
P2,000.00 a month. Because of the continuing influence of X, Y got
the nerve to file an action for annulment two months later. If the court
will decree the annulment on September 10, 1985, what will be the
obligation of X and Y?

ANSWERS

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109
 UNENFORCEABLE CONTRACTS

Meaning of unenforceable contracts. A contract is unenforceable

when it cannot be sued upon or enforced in court unless it is ratified. They
have all the elements of a valid contract but cannot be enforced because of
non-compliance with the requirements of law, i.e., writing or evidenced by a
note or memorandum. As regards the defectiveness, it occupies an
intermediate ground between a voidable contract and a void contract.

Unenforceable contracts under the Civil Code. The Code

classifies unenforceable contracts into three categories, namely: (1) those
entered into in the name of another without the latter’s authority or legal
representation, or beyond the agent’s power; (2) those which failed to
comply with the Statute of Frauds; and (3) those where both parties are
incapable of giving consent.

Article 1403. The following contracts are unenforceable, unless they

are ratified:

(1) Those entered into in the name of another person by one who
has been given no authority or legal representation, or who has acted
beyond his powers;

(2) Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement hereafter made
shall be unenforceable by action unless the same, or some note or
memorandum thereof, be in writing, and subscribed by the party charged, or
his agent; evidence, therefore, of the agreement cannot be received without
the writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed

within a year from the making thereof;

(b) A special promise to answer for the debt, default or

miscarriage of another;

(c) An agreement made in consideration of marriage, other

than a mutual promise to marry;

(d) An agreement for the sale of goods, chattels or things in

action, at a price not less than five hundred pesos, unless the buyer
accepts and receives part of such goods and chattels, or the
evidences, or some of them, of such things in action, or pays at the

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 time some part of the purchase money; but when the sale is made by
auction and entry is made by the auctioneer in his sales book, at the
time of the sale, of the amount and kind of property sold, terms of the
sale, price, names of the purchasers and person on whose account
the sale is made, it is sufficient memorandum;

(e) An agreement for the leasing for a longer period than

one year, or for the sale of real property or of an interest therein;

(f) A representation as to the credit of a third person.

(3) Those where both parties are incapable of giving consent to a

contract.

Illustrations and explanations:

(1) Unauthorized contracts. Without X’s authority, his brother Y

sold his car in his name to Z. The contract being unauthorized cannot bind
X unless he ratifies the same expressly or impliedly, as by accepting the
proceeds of the sale. In the event however that X will ratify the contract, he
will bound by it and the principles of agency shall be applied.

(2) Contracts in violation of the Statutes of Fraud. The purpose of

the Statutes of Fraud is to prevent the commission of frauds by requiring the
contract to be in writing and subscribed by the party charged because the
law considers the human brain unreliable to retain what has been orally
agreed upon by the parties. Thus, if any of the said contracts is not in
writing, it is generally unenforceable by action in court. In other words, the
writing itself is the only one acceptable as evidence to enforce the contract
in court, unless the party against whom it is enforced failed to object to the
presentation of oral evidence of the agreement.

(a) Agreement not to be performed within one year. On

June 16, 1983, X entered into a verbal contract with Y for the
construction of his house to start on June 30, 1984. If Y fails or
refused to construct or commence on the construction by June 30,
1984, X cannot enforce the agreement between them since the
contract is not in writing.

(b) Promise to answer for a debt, default, etc. X owes Y

P5,000.00. When Y asked that X puts up a security on the debt, Z
verbally committed to Y: “Don’t bother, if X does not pay, I will pay the
amount.” This promise must be in writing in order to be enforceable
in court.

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 (c) Agreement in consideration of marriage, etc. X made a
verbal promise to give his nephew Y a house and lot if Y married his
secretary Miss Z. Two months later, Y and Z was married. X refused
to abide with his promise to give Y the house and lot. Can Y sue x for
breach of contract? No, because the contract is not in writing.

(d) Agreement for sale of goods, chattels, etc. Today, X

agreed verbally to sell his car to Y to be delivered and paid a month
later. If on the designated time X will refuse to abide with the
contract, Y cannot enforce the contract for lack of writing. Another
example would be a contract where supplier X and dealer Y verbally
agreed to sell and buy merchandise worth P5,000.00 to be executed
on a later date. This again is unenforceable for lack of writing. But if
an the time of the agreement, X delivers part of the merchandise, or
Y paid partial payment, the contract will be removed from the
operation of the Statute of Frauds for being partially executed.

(e) Agreement of lease for more than one year, etc. Lease
of real property for more than one year and sale of real property or
interest therein, irrespective of the price, are agreement referred to in
this number. Example: Today X leased his 2-door apartment to Y
verbally for two years. If X ejects Y after six months the latter cannot
rely on the contract because it is not in writing.

(f) Representation as to credit of a third person. X, a

lawyer, in behalf of his client Y, negotiated for a loan with a bank.
When the bank asked about the credit of Y, X verbally assured that Y
is solvent and will secure the loan with several parcels of land which
is in X’s possession. This representation of X cannot be enforced
against him because it is not in writing.

(3) Contracts where both parties are incapacitated to give

consent. X, a minor, entered into a contract of sale of bicycle with Y, an
insane, to be performed a week later. If X refuses to comply with his
obligation, no action for specific performance by the guardian of Y can be
filed as the contract is unenforceable.

Statute of Frauds applicable only to executory contracts. The

Statute of Frauds is applicable only to executory contracts because the
commission of fraud is very probable due to lack of writing. According to the
court, the Statute has been enacted to prevent frauds. Thus, if a contract is
totally or partially performed, the exclusion of parol (oral) evidence to prove
the contract would promote frauds and bad faith as it would enable the
defendant to keep the benefits already derived by him from the transaction

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in litigation, and at the same time evade the obligations, responsibilities or
liabilities assumed or contracted by him thereby.

Ratification of contracts violative of Statute. Contracts violating

the Statute of Frauds are deemed ratified and therefore enforceable, for
failure to object to the presentation of oral evidence to prove the same in
court or by acceptance of benefits under the contract. Thus, if the plaintiff
presents at the beginning of the trial oral evidence to prove the verbal
contract and this is not objected by the defendant, the contract is deemed
ratified. Acceptance of the benefits under the contract takes place when
part of the obligation therein has been received by any party. It may also
take place when possession or building of improvements of the thing takes
place after the contract as when the tender of payment plus surveying of the
lots of buyer’s expense.

Compelling the execution of public instrument. When a contract

is enforceable under the Statute of Frauds because it is in writing and
therefore valid and enforceable, although not in the required form for
purposes of registration in the Registry of Deeds, the affected party may
compel the other party to have the contract reduced in the required form.

Example: X sells to Y a piece of land written in a writing pad.

Under the statute the contract is valid and enforceable between them
but the writing cannot be registered to bind third parties. Y can
compel X to rewrite or reduce it in a public instrument s that it can be
registered in the Registry of Deeds.

Contract where both parties are incapacitated. In a contract

where both parties are incapacitated of giving consent, express or implied,
ratification by the parent or guardian, as the case may be, of one of the
contracting parties shall give the contract the same effect as if one of them
is incapacitated. If ratification is made by the parents or guardians, as the
case may be, of both contracting parties, the contract shall be validated from
the inception.

Strangers cannot assail unenforceable contracts. Unenforceable

contracts cannot be assailed by third persons.

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 QUESTIONS AND PROBLEMS

1. What is an unenforceable contract?

2. Distinguish an unenforceable contract from a voidable contract.

3. Can an unenforceable contract be ratified? How?

4. How are unenforceable contracts classified under the Civil Code?

5. To what kind of contract is the Statute of Frauds applicable? Explain.

6. Who may ratify contracts entered into by person incapable of giving a

valid consent?

7. X mortgaged a piece of land to Y but the instrument is in a private

writing. When Y sought to register the mortgage, the Registry of
Deeds refused registration because it is not in a public instrument.
What is the remedy of Y? Explain.

8. Manufacturer X and dealer Y entered into a verbal contract of sale of

commercial goods worth P20,000.00 to be delivered a week later in a
C.O.D. basis. When X tried to deliver the goods, Y refused to accept
and to honor the contract. Can dealer Y go to the court to enforce the
contract? Why?

ANSWERS

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115
 VOID OR INEXISTENT CONTRACT

Meaning of void or inexistent contract. A void or an inexistent

contract is one which is absolutely without legal force and effect. Unlike a
voidable or an unenforceable contract, void or inexistent contract is not
susceptible to ratification. Moreover, the action or defense for declaration of
its inexistence does not prescribe despite the long lapse of time and not
available to strangers to the contract.

Article 1409. The following contracts are inexistent and void from the
beginning:

(1) Those whose cause, object or purpose is contrary to law,

morals, good customs, public order or public policy;

(2) Those which are absolutely simulated or fictitious;

(3) Those whose cause or object did not exist at the time of the
transaction;

(4) Those whose object is outside the commerce of men;

(5) Those which contemplate an impossible service;

(6) Those where the intention of the parties relative to the principal
object of the contract cannot be ascertained; and

(7) Those expressly prohibited or declared void by law.

These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.

Voidable and void contracts distinguished.

(a) Voidable contracts being valid until annulled produce legal

effects, while no legal effect is produced whatsoever by void contracts;

(b) The defect in voidable contracts arises from incapacity or

vitiated consent, while in void contracts the basis is public policy;

(c) Voidable contracts can be ratified, whereas no ratification can

take place in void contracts;

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 (d) A voidable contract becomes absolutely regular and cured
after the lapse of the prescriptive period to file an action to annul, while void
contracts cannot be cured through prescription;

(e) Defenses arising from voidable contracts are available only to

the parties, whereas those in void contracts are available to everybody.

Unenforceable and void contracts distinguished.

(a) In unenforceable contract a contract exists though cannot be

enforced, while no contract at all exists in a void contract;

(b) Unenforceable contract can be ratified while void contract

cannot; and

(c) Unenforceable contracts cannot be assailed by third persons

while void contracts can be assailed by any person affected.

Consequences of illegal and punishable contracts. When the

nullity of the contract proceeds from the illegality of the cause and the object
of the contract, and the act constitutes a criminal offense, both parties being
in pari delicto (both are guilty), they shall have no action against each other,
and both shall be prosecuted. Moreover, the provisions of the Penal Code
relative to the disposal of effects of the instruments of the crime shall be
applicable to the things or the price of the contract. When only one of the
parties is guilty, the same rule shall be applied, but the innocent one may
claim what he has given and shall not be bound to comply with his promise.

Explanation and illustration. When the cause of object of the

contract constitutes a criminal offense and both parties are guilty, no action
shall be maintained against each other and they shall be prosecuted
criminally. Moreover, the cause and object and other things used shall be
forfeited as instruments of the crime. For instance: X, Y and Z enters into a
contract of partnership to operate jueteng in Marikina, which is a prohibited
game. They agreed that the capital shall be P90,000.00. Pursuant to the
contract, and owing to lack of cash, X contributed a panel car worth
P50,000.00 and P20,000.00 in cash, the balance to be paid in one year
contributed a house and lot worth P150,000.00 plus P100,000.00 in cash,
the balance of P50,000.00 to be paid also within one year and Z contributed
in full cash of P300,000.00. After six (6) months operation, they were
discovered by the authorities and their operations stopped.

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 Applying the said article the following consequences shall follow: (1)
they shall have no action against each other to recover the balance of their
contributions since they are in pari delicto; (2) they shall be prosecuted
criminally for illegal gambling under the Penal Code; and (3) the object and
the cause of their partnerships contract – cash capital, the panel car and
other movable – purchased and needed in the operation, as well as the
house and lot and profits, if any, shall be confiscated as effects of the crime.
Suppose Y who lives in Cebu was not aware of the real purpose of the
partnership because X and Z represented that the partnership will engage in
general and merchandising business, what will be his right? His rights shall
be as follows: (1) ha can recover his house and lot as well as the
contribution of P100,000.00; (2) he cannot be compelled to pay the balance
of his contribution amounting to P50,000.00; and (3) he can be exempt from
criminal responsibility.

Rules when the contract through forbidden does not constitute a

criminal offense. If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following rules shall be
observed: (1) When the fault is on the part of both contracting parties,
neither may recover what he has given by virtue of the contract, or demand
performance of the other’s undertaking; (2) When only one of the contracting
parties is at fault, he cannot recover what he has given by reason of the
contract, or ask for the fulfillment of what has been promised him. The other
who is not at fault may demand the return of what he has given without any
obligation to comply with his promise.

The aforesaid rule refers to illegal contracts in which the object or

cause does not constitute a criminal offense but merely prohibited. This is
so because no matter how illegal or unlawful an act may be, the same will
not constitute a criminal offense if the law does not declare it as a
punishable crime.

Examples and effects of illegal contracts:

(1) Payment of usurious interest. Interest paid in excess of the

interest allowed by the usury laws may be recovered by the debtor with
interest from the date of payment.

(2) Payment in excess of regulated prices. When the price of an

article or commodity is determined by statute or by authority of law, any
person paying an amount in excess of the maximum price may recover such
excess.

(3) Non-payment of legal rate for overtime work. When the law
fixes or authorizes the fixing of the maximum number of hours of labor and a

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contract is entered into whereby a laborer undertakes to work longer than
the maximum thus fixed, he may demand additional compensation for
services rendered beyond the time limit.

(4) Payment of sub-minimum wages. When the law sets or

authorizes the setting of the minimum wage for laborers, and a contract is
agreed upon by which a laborer accepts a lower wage, he shall be entitled
to recover the deficiency.

Instances when a party to the illegal contract may recover:

(1) When money is paid or property delivered for an illegal

purpose, the contract may be repudiated by one of the parties before the
purpose has been accomplished, or before any damage has been caused to
a third person. In such case the courts may, if the public interest will thus be
served, allow the party repudiating the contract to recover the money or
property.

(2) When one of the parties to an illegal contract is incapable of

giving consent, the court may, if the interest of justice so demands, allow
recovery of money or property delivered by the incapacitated person.

Separability of valid terms in divisible contracts. In case of a

divisible contract, if the illegal terms can be separated from the legal ones,
the latter may be enforced. The situation contemplated here will rise if the
legal terms in the contract can be separated from the illegal ones. For
instance, in usurious transactions, the principal term is to pay the amount of
the loan and the accessory stipulation is to pay the stipulated interest. If the
stipulation on the interest is excessive or violative of the usury law this
stipulation would be illegal but the principal will always remain valid and
enforceable.

Contract resulting from previous illegal contract is void. A

contract which is the direct result of a previous illegal contract is void and
inexistent. Example: X promised to give Y a car as a reward after he killed
C, the mortal enemy of X. After the killing, the contract was changed to a
lease of a house for ten (10) years. The second contract being a direct
result of the illegal contract is therefore null and void.

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 QUESTIONS AND PROBLEMS

1. What is a void contract?

2. Distinguish a void contract from the other defective contracts.

3. Can a void contract be ratified? Why?

4. May interest in excess of interest allowed by law be recovered and

how much? Explain.

5. What are the legal consequences of an illegal contract whose object

and cause constitute a criminal offense?

6. Give an example of an illegal contract where one of the parties is

allowed to recover what has been paid or delivered.

7. Because of the terrible employment shortage, X signed a contract of

employment with ABC Corporation where he agreed to receive a
daily wage of les than the minimum wage prescribed by law. Is the
contract legal and what are its effects?

8. The price of cement is fixed by the Price Stabilization Council at

P45.00 per bag. Later, X purchased from Dealer Y 100 bags at
P60.00 per bag. Discuss the effects of the contract.

ANSWERS

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121
 CHAPTER VIII

PREPARING THE CONTRACT, SPECIFICATIONS, ETC.

Basic consideration. In the preceding chapters the nature and

effects of a contract and the rights and obligations that it carries, as well as
the forms and how interpreted, has been discussed at length to provide the
prospective engineer an overview of the fundamental guidelines in deeding
and conveyancing. Of course, drafting contracts is the business of a lawyer
but such should not be taken as an excuse for an engineer to prepare or
help in drafting in contract because in any instances the engineer has to
write or draft the contract himself in order to avoid omissions on what in his
opinion should be embodied in the contracts; and the same is true to
specifications which are traditionally and legally taken as part of the contract
by reference.

Points to reckon in contract writing. Before drafting the contract,

the engineer should among others, be aware of the following: a) the need of
the client; b) the terms and conditions desired including the subject matter
and considerations of the contract; and c) legality of the contemplated
contract. The first would cover what the client wants which may be the
personal to him as in the construction of his house or his business or
industrial needs. The second may consist upon what possible terms and
conditions the parties may agree for their need and convenience and the
third may center on whether the terms and conditions conform with the legal
requirements.

If all the above factors are favorably satisfied, the writing of the
contract may be undertaken. For this purpose, it would be best for the
engineer to pattern and test the same with the accepted legal format as
found in books in legal form which may be just on the shelves of a library
nearby. If the contract or agreement is one which is required to be in a
public instrument, which for practical purposes should be observed, and
registered to be binding to the whole world, then prepare the document in
such form to facilitate registration in the Registry of Deeds.

Parts of a contract. Like a business letter, a written contract has

different parts which – may be referred to as essential and optional. The
latter comprises those which are dispensable, like the salutation to the
public, usually coached as “KNOW ALL MEN BY THESE PRESENTS.” And
the title as CONTRACT OF SALE OR KASUNDUAN SA BILIHIN. In some
cases that part of the contract intended for instrumental witnesses, reading:
SIGNED IN THE PRESENCE OF: may be dispensed with also. But the

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mandatory parts are those which without them the agreement or contract,
may not be known or understood, and consequently, may cause infirmity to
the contract, i.e., body of the contract and signature of the parties.

If one will examine well written contract, he will readily discover the
following:

1. Title of Contract. The title of contract is usually at the top of the

document and generally derived from the agreement or dictated by the
parties to the contract of their representatives.

2. Salutation. This part is merely placed for the purpose of style: and
usually to impress the parties and the public who may glance or read the
contract. Often this is worded in bold letters at the top, reading: KNOW ALL
MEN BY THESE PRESENTS:

3. The BODY. The body is that part which identifies the contracting
parties, whether natural or juridical persons, as well as their intention to be
bound on the objects and cause as well as to the other terms and
conditions, and usually presented in the following order;

a) Introduction of the parties and the agreement. This part which is

usually worded “This Agreement or Contract of _______ entered into by and
between Jose R. Sanchez and Tirso Manalo, etc. “ describes the parties and
states what the agreement is all about. In difficult and complicated multiparty
transactions or agreement, however, and to provide a better and easier
understanding of the identity and intention parties and what the contract is.
“WHEREASES” are provided to serve as a preamble to the contract.

b) Terms and Conditions. This species in detail the terms and

conditions as intended by the parties, usually covering the following:

b.1. The subject matter which may be determinate things, rights, or

services and the cause or consideration of the contract.

b.2. The mechanics of what, where, when and how, and why in some
cases, and other details regarding the object to be delivered the services to
be rendered, i.e. construction of house or installation of a machine. In
connection with engineering contracts, the more technical ones are usually
embodied in the specifications as well as other documents like plans and
designs, which are incorporated in the contract by reference, hence,
becoming part and parcel of the contract.

c) Dispositive Clause. This part usually reading “IN WITNESS

WHEREOF, we have hereunto set our signatures etc.” is the affirmation of
the parties to be bound by the contract.

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 d) Date and place of execution. The date and place of execution is
the reference to when and where the contract has been perfected. These
are necessary for purposes of prescription of actions upon the contract and
to determine jurisdiction and venue of the courts in the event of legal dispute
on the contract.

4. Signatures of the parties. The signatures of the parties or their

legal representatives are proofs of their consent and give binding effect
thereto as without the same the instrument would just be an ordinary writing.
The signatures of the instrumental witnesses of the parties sometimes
appear therein, but unless required by law, i.e., wills and testaments, the
same may be dispensed with.

Notarial acknowledgment. The acknowledgment is not a part of the

contract and may be omitted in the document especially if the parties are
personally and intimately known to and trust each other. It is called notarial
acknowledgment because the parties acknowledged their identity as parties
to the contract, and the act as their free act and deed before a notary public
who signs and affixes his seal on the contract after administering an oath or
affirmation, thus, converting it into a public instrument. He also states the
document, its number, the book number, page number and series of what
year, to facilitate its identification when registered or filed in the notarial
registry.

Matters usually embodied in engineering contracts. Basic is the

rule that the contracting parties may stipulate on terms and conditions that
they may deem fit and convenient as long as they are not contrary to law,
morals, customs, public policy and public order. Guided by this, the
engineer preparing the contract must always take note, among others, of
the following which are generally contained in many engineering contracts:
(1) workmanship according to agreed plans and specifications; (2) materials
which must be the agreed quantity and quality or the average if none is
specified or available in the market; (3) responsibility on compliance with
legal requirements, i.e., licenses, permits and posting of legal abstracts in
the premises; (4) control and supervision of the work by the engineer to
fairly insure the accomplishment of the project; (5) bonds that must be put
up to secure the performance of the contract and other liabilities to which the
client-owner may be exposed; (6) contract modification or rescission for
willful breach of the terms and conditions of the contract; (7) risk or
additional cost or penalty by reason of defective workmanship; and (8) mode
and condition for payment.

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 Other Engineering documents. There are a variety of documents
that usually complement an engineering transaction. Typical examples of
these, in addition to the contract, are: (a) specifications proper; (b)
advertisements or invitation to bidders; (c) proposals; and (d) plans and
designs and performance bond. But from the many available documents
used in engineering transactions, it is safe to infer that the trust upon the
maker of these documents is to see to it that the purpose, need and intent is
understood clearly by those who are expected to use or respond in the light
of the intention and need, whether it is fair or reasonable.

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 ADDITIONAL PROBLEMS

1. S sold his horse to B for P15,000.00. No date or consideration was

stipulated for the delivery of the horse. While still in the possession of
S, the horse gave birth to a colt. Who has a right to the colt?

2. S offered to sell to B a ring, claiming that the stone on the ring is

diamond. S knows that it is not diamond but ordinary glass. May B
asked for the annulment of the contract? If yes, on what ground?

3. S agreed to deliver to B 500 cavans of rice at P6oo.00 per cavan. S

delivered only 490 cavans deliberately misrepresenting that the
delivery consisted of 500 cavans. Can B ask the court to annul the
contract on the ground of fraud? Why or why not?

4. S sold to B a commercial land for P1,000,000.00. S assured B that it

is certain that in two years time, the land would increase in market
value by 50% or P1,500,000.00. It turned our that the market value
of the land even decreased to about P800,000.00. Is S liable to B for
misrepresentation? Explain.

5. S and B entered into a contract of sale of a parcel of land. The sale

is embodied only in a private document and not in a public instrument
because it was not acknowledged before a notary public as required
by law. Is the sale valid? Why or why not?

6. S, a minor, sold his land to b. Upon reaching the age of majority, S,

with full knowledge of his rights in the premises, disposed of the
greater part of the proceeds and collected the unpaid balance of the
purchase price from B. Can S still ask for the annulment of the
contract? Explain.

7. S orally agreed to sell his piano for P7,000.00 to B who made a

partial payment of P1,000.00. Later, S denied there was such a sale.
Can B enforce the sale considering that the contract was oral and the
price was more than P500.00? Why or why not?

8. W agreed to stay in the house of M as the latter’s live-in partner for

one year I consideration of the latter’s promise to pay her
P100,000.00 after said period. W complied with her part of the
agreement but M reneged on his promise. Is W entitled to recover
from M? Explain.

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 PART III

ENGINEERING ETHICS

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 CHAPTER I

ENGINEERING ETHICS

Introduction. From the pre-historic times, artifacts have revealed of

the early engineering ingenuity. This had progressed in the modern times
that we now learn from accounted events of many amazing discoveries, i.e.,
landing on the moon, and many other engineering feats like satellite orbiting
the surface of the earth, all brought about by the activity called engineering.

It is obvious that the engineer’s expertise and technical skill, which

probably makes up engineering, contributes much to the survival and growth
of mankind. He is said to be a contriver of amazing things through utilization
of materials and forces of nature discovered by scientists and the application
of his knowledge of mathematical and natural sciences. As one Dean of
Engineering said: “the engineer systematizes and consolidates the gains of
scientific research and fashions that knowledge into system and designs all
for the social and economic benefit of man.” Thus, when the engineer plans
and constructs modern road, dams and port facilities, when he studies the
sources and uses of electrical energy, when he sets up industrial systems,
develop and designs new machines, and when he analyses sewerage and
water disposal these days, etc., he thereby becomes a living proof of man’s
capacity to contrive, and in doing so brings about the greatest economic and
social advancement. It is not farfetched that engineering, if improperly
exploited, may cause the destruction of mankind, as in the present race in
space conquest and nuclear weapons by elite nations, and in the process
destroying each other.

For all the aforesaid considerations, the role of an engineer in the

society becomes apparently unparalleled – a role unmatched by common
man thereby subjecting himself to certain professional responsibility
established under the Canons of Professional Ethics.

Ethics explained. In a broad sense, ethics is the discipline relating

to what is good or bad, right or wrong, or with moral duty and obligation. In
particular, it means a group or moral principles or set of values relating to
the conduct of an individual and his profession. Thus, gangster and
syndicates for a particular purpose, whether lawful and unlawful, do have
their own professional ethics.

It may be said that ethics does not have its sanction from legislation
or laws promulgated by the state which applies generally to all inhabitants,
irrespective of their status or calling. Rather, professional ethics
encompasses a group of people who are properly trained and equipped to

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engage in the practice of a discipline for which they have vowed to cultivate
its growth to the maximum while he makes use of it for his own benefit.
Ethics, therefore, derives its force through the submission of the
professional to the discipline of the professional group as established under
the Canons.

Guiding principles. In the absence of a prescribed norm of behavior

to an engineer, he should be guided by the highest principle of honor, justice
and courtesy. The engineer should at all times abide with such standard,
not by passive observance, but as a set of dynamic principles guiding his
conduct and way of life, seeing to it that at all times these are also observed
by those who like himself has been admitted to its fold. Moreover, as the
keystone for professional conduct in integrity, the engineer shall discharge
his duties with utmost fidelity to the public, his client or employer and with
fairness and impartiality to all.

Entry of the engineer to the profession. After undergoing the

prescribed academic training and practical experience in college, an
aspirant to practice engineering is required to pass the appropriate technical
examination given by the government. If he passes the same, he is called
upon to take a professional oath to fully defend the profession and for all
things it stands for before the Board of Examiners or other authorized
government officials. Thereafter, a certificate of registration is issued, save
when he has been convicted of a criminal offense involving moral turpitude
or has been found guilty of immoral or dishonorable conduct. If these have
been fulfilled, he thereby becomes bound to observe certain measures of
conduct or discipline called upon by the society. In particular, the duties and
responsibilities would include those pertaining to the general public, the
profession and the society of engineers as well as to the Professional
Regulations Commission – the state entity that regulates the admission to
the practice – the client or employer, and to his colleague and fellow
engineers.

Relationship to the general public. At all times and when feasible

the general public is entitled to share the knowledge and benefits of
engineering from the society. Along this direction, efforts should be made
that only fair, accurate, and true engineering matters are fed to the public for
their easy comprehension and appreciation of such matters. Specifically,
the following acts are among those enjoined and must be observed by him:

(1) Avoid misinformation. An engineer should assist the public to

arrive at a fair and correct understanding of technical engineering matters.
This may be done by using as much as practicable simple language which

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may be readily understood by people of average intelligence. If necessary
he may resort to using illustrations, designs or diagrams to make himself
easily understood. If statements affecting engineering work are issued in
the press or elsewhere, and in his conviction these are untruthful, unfair or
exaggerated leading to or are made for the purpose of inducing the public to
participate in unworthy enterprise, he should not hesitate to rise and
expound to the best of his ability what is true, fair and accurate to save the
public from the inevitable consequences that may arise from such
statements.

(2) Avoidance of rendering opinions in public on unverified

engineering matters. An engineer should refrain from rendering opinions in
public on technical engineering matters if not positively certain of its veracity
since this may create complications or add confusion to already
controversial transactions. He will express an opinion only when it is
founded on adequate knowledge and conviction while he is serving as a
witness before a court, commission or other duly constituted tribunals.
Likewise, he is enjoined to issue ex-parte statements, criticism or arguments
on matters connected with public policy which are inspired or paid for by
private interests as these are bias, unless he indicates in whose behalf he is
making the statement.

(3) Guard against public health and safety. Very many people are
witness to the fact that in public and private, as well as in industrial and
commercial entities, there is a prevalence of accidents costing the lives and
limbs not only of its workers but also strangers who may or may not have
connections thereto due to deleterious operations and the prevailing
conditions therein. An engineer is reputed to be the guardian of public
health and safety wherever these operations are. In the practice of his
profession or in the performance of his unique task, he is expected to be an
advocate of preventive and curative measures that will safeguard the health
and safety of the public and the client-employer he serves and its workers.

Relationship to the profession and engineering society. In his

professional life, an engineer is called upon by his profession to cooperate
by extending the effectiveness of the engineering profession through
interchanging information and experiences with other engineers and even
students of engineering, and by contributing to the work of engineering
societies, schools and scientific and engineering press. But even if it is so,
he is enjoined to advertise his work of merit in a self-laudatory manner, and
mandated to avoid all conduct or practices likely to discredit or work injuries
to the honor and dignity of the profession.

The aforesaid mandate serves as a parameter on how the engineer

should safeguard the profession and the engineering society against

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assaults to its inherent honor and dignity. Brief and general as they are,
certain specific restraints are deducible therefrom which a cursory reading of
the canons would not readily yield. The following details for instance would
amplify the vow:

(1) Loyalty. In the interest of the profession and the engineering

society and himself as a professional, loyalty to the profession is a must and
should prevail at all times in the heart and mind of an engineer. This duty
calls for unselfish protection of the profession by him both as an individual
and as a member of the profession.

A measure of effective protection to the profession, as in the law

profession, is to consider the practice as never a trade or business. Under
this precept, monetary consideration is not the primordial cause of every
professional service rendered since the admission to the broad criterion of
what is just, honorable, and decent. This means that unlike in trade or
business where the trader or businessman is not limited in his gains or
profit, in the practice of a profession the fee or consideration that the
engineer may collect from his client is limited to his capacity to pay. In fine,
the paramount consideration for the privilege to serve the engineering
profession is the honor and dignity it gives and never the economic gain.

(2) Identification with legitimate enterprise. The engineer should

at all times associate or deal only with legitimate enterprises. Illegal
enterprises may take the form of unlawful corporations, partnerships and
other organizations or undertaking whose purpose or objectives are
generally injurious to society as they are against the law, customs, good
morals, public order and public policy. Under no circumstance may the
engineer allow himself or his expertise or knowledge or any property under
his charge be used for illegal or immoral activities.

If an engineer finds himself directly or indirectly identified or

connected with an illegal enterprise, the logical thing to do is to advise and
help his client or employer to cure its organization, if the same legality
permissible, otherwise, he should promptly and without delay severe his
connections therewith. Failure on his part may render him liable under
existing civil and criminal statutes aside from the appropriate disciplinary
measure that may be brought against him motu proprio by or upon
complaint by an offended individual before the Professional Regulations
Commission.

(3) Continuous awareness of engineering laws. Universal principle

in all civilized society is that ignorance of the law excuses no one in
compliance therewith. Such being the rule it is with more reasons that
professionals including the engineer should comply not only with the general
laws but with the laws that are relevant to them and especially promulgated

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for their chosen discipline. After all nothing is more satisfying than being
able to know his bible and live in the light of what is propagates.

(4) Avoid discussing engineering matters in public. In being bound

to extend the effectiveness of the engineering profession by extending
information and experience with other engineers, etc., an engineer is
enjoined from conducting or participating in technical discussions on
engineering issues in public.

The influence that a false or erroneous engineering matter in the

formulation of a decision or deed to technical men and those generally
interested in the same is tremendous and irresistible. It would be
unfortunate and too late to cure the blunder or its effect after the impact
resulting from such error has been caused. But worst still than the
experience resulting from such blunder is the virtual disgrace and discredit
of the profession in terms of credibility to the public which harness at all
times to the usefulness of the engineering profession. If an engineer has
some good points to contribute on technical engineering he nay do so by
presenting the matter or participating in the discussions of the same in
accepted forms for technical discussions in the engineering societies and
engineering press.

Relationship to client and employer. The relationship of an

engineer with his client or employer is strictly contractual and anchored
essentially on mutual trust and confidence. If that relationship is established
on a higher professional level the linkage created is that of engineer-client
relationship where the professional is said to have been “retained” for his
expertise and technical knowledge. On the other hand, if the engineer is
hired unconditionally to carry out or implement wholly or partially the hirer’s
economic activity or business, he, like an ordinary worker is “employed”
such that the relationship established between them is merely one of
employer and employee. It is worth to note that in the former relation, the
consideration paid to the engineer is in the nature of professional fee,
usually for a temporary or on a non-continuing duration, whereas, that paid
in the latter relationship is denominated as wage or salary paid usually to
periodic intervals as mandated by applicable statutes. Finally, tenurial
privilege and rights like those emanating from existing legislations, i.e.,
minimum wage, eight-hour work per legal working day and additional
compensation for overtime work, etc. are provided for employee’s protection

Whether on strictly professional or employee level, the relationship

may be harnessed to succeed for a longer duration through observance of
certain norms of behavior for the food of the parties. As regards the
engineer and without being restrictive, the following norms may be
mentioned as among the obligations emanating from the relationship:

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 (1) Protection to client or employer. The engineer should consider
the protection of his client or employer as his professional obligation. Acts
that re especially inimical to the interest of the client or employer should be
studiously considered and avoided. He should be aware that in many
aspects he is an agent or trustee who should safeguard the interest of his
principal because in such capacity he gets confidential information and acts
on delicate matters affecting his benefactor.

In the course of the relationship, he becomes privy to the information

concerning the business affairs or technical processes or operations as well
as trade secrets, i.e., formula relating to the production of goods being dealt
with by his client or employer. Since these are in strict confidence it is his
prime duty to keep their confidentiality during and after the relationship,
otherwise, he may be accountable not only for damages to his client or
employer but for disciplinary actions that may be brought against him by a
concerned member of the engineering profession or the society itself.

The duty to protect the client or employer is not a license for an

engineer to trample upon the mandate of the existing laws and the legitimate
powers of duly constituted authorities. If the engineer finds himself directly
or indirectly linked with an illegal enterprise, the protection that may be given
is to persuade it or its management to cure its organization if the same is
legally permissible, else he would promptly and without delay severe his
relation.

(2) Quality and dedicated service. Service of a professional is one

that can be rendered only by a trained and knowledgeable individual who
has been licensed by the authorities after having proven his worth along the
discipline that he has chosen. With respect to the engineer, the service
shall be the best that he could give in relation to his professional standing,
training and expertise. The obligation is violated if the engineer, i.e. plant
engineer, will accept the part time jobs without the consent of his client or
employer. Unless his engagement is strictly on a retainer basis, he shall
divulge his part time employment with his employer and only upon his
consent or permission may he be allowed to continue his part time
engagement. This is so because his part time or other employment takes
away his attention and dedication from his employer’s business concern to
the extent that the effectiveness and dedication on the job for which he was
employed is impaired to the prejudice of the employer and those indirectly
benefiting from such services.

Providing professional and technical advice to a client or employer is

one of the many important obligations of an engineer. This should be given
only after having ascertained and weighed the facts of the case because an
erroneous and inaccurate professional advise may cut the blood and stream

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that provide life and momentum to the business or undertaking. For this
reason alone, the engineer who is responsible for the technical adequacy of
the engineering works would be fully accurate and precise in his decisions.

There are times however when an engineer finds himself uncertain of

the phase and technical aspect of a query even after extensive research and
study. Should such situation come, he should be honest enough to tell his
client or employer of his inadequacy and instead refer the same to an expert
for appropriate decision. Once an opinion has been rendered, it must be
relayed by the engineer to his client or employer who is expected to abide in
its context. If the client or employer does not agree with the expert opinion,
the engineer should present and explain the possible consequences of such
a decision in a language readily understandable by him even to the extent of
illustrating by diagrams or sketches.

(3) Reasonable professional fees. There is of course no uniform

rate for the fees that may be collected by a professional. Despite of this
absence, the engineer, like other professionals, is not permitted to demand
or collect exhorbitant charges which overcompensate his advice or service.

In fixing the professional charge, the professional is bound to take

into consideration certain moral and legal factors. For instance, the client’s
ability to pay cannot justify his demanding of a charge exceeding the value
of his services. However, if a client is indigent the professional is expected
to demand a low rate or none perhaps when the client stands to be deprived
of certain rights which are fundamentally granted to him by law.

Among the usual factors that may be considered in addition to the

ability to ay of a client are: (a) novelty of the work to be undertaken which
necessitates much of the time, effort, skill and experience of the engineer;
(b) whether the acceptance of the undertaking will deprive him of other
earning opportunities and needed professional advancement; (c) customary
charges for similar jobs in the locality; (d) character of the undertaking –
whether it is merely casual, regular or permanent; and (e) contingency or
certainty of being compensated.

(4) On commission, rebates, percentage, etc. The engineer

should refrain from accepting compensation, monetary or otherwise, directly
or indirectly from more than one interested person from the same
professional service, unless all parties are aware of and consent to it.

The foregoing inhibition is based on the principle of just and fair

treatment which must prevail between the parties not only during the
progress of the relationship but even after the severance of the same.
Although tips and other material considerations from those dealings with his
client or employer, i.e. contractors, suppliers, vendors, etc. may not at times

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conflict with the principle, it is but fair and just that he be informed
immediately so that he may be guided accordingly to his interest.
Furthermore, much liberality of this would create some sort of a dual loyalty
as the engineer may, having been used to receiving kickbacks or extra
income from dealers, expect that favor in some if not in every transaction.

(5) Disclosure of financial interest. A conflict of financial interest

between the engineer and his client or employer takes place when he or his
kins or their firms is engaged directly or indirectly in the same or related
business or products or services to which his client or employer is engaged.

The conflict contemplated is essentially financial in character such

that if the conflict is on other consideration, i.e. religious, political, social, etc.
the principle would have a doubtful application. A conflict of financial
interest between the engineer and his client or employer would surely impair
or strain the relationship. Thus, for a harmonious and lasting relationship, it
is incumbent upon him to disclose in the beginning his financial interest, if
any, in a business which may compete with or affect the business of his
client or employer. If acquiesced by the latter, such interest should not be
allowed to affect his decision regarding engineering work for which he was
retained or employed or for which he may be called upon to perform.

Also, he shall not be financially interested in bids as, or of a

contractor on competitive work. If financially interested in any machine,
appliances, processes or anything which may be used in connection with his
professional undertaking or duty, this must be timely communicated to guide
his client or employer.

Relationship with engineers. The engineer is in the course of his

professional career works with many people of various employment or
vocation. These may be his brothers in the profession who are retained or
employed by his client or employer and non-technical people who may
either be simple production line workers or manager of industrial firms or
representatives of financial agencies. Considering these people with whom
he works with, the ability to get along and establish harmonious professional
or working relations with them becomes indispensable and should be
developed at all costs.

Whether as an employee or as an employer, the following conduct

should be observed by an engineer if he has to be successful and true to his
concern over a colleague:

(1) Protection of fellow engineers. A respectable professional

reputation is a long range objective which every professional cherishes to
acquire over a considerable period of trials and frustrations to the challenges

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of the profession. His reputation and charisma is what attract people to avail
of his services, and once attained, it partakes the nature of a property which
the law protects in the same manner as the good will of a business. Thus,
every engineer should strive to protect all reputable engineers from
misrepresentation and from being misunderstood in his professional work.
Any act or omission that may cause injury directly or indirectly to the
professional reputation or practice of a colleague as well as his prospects of
advancement is deemed within the ambit of this mandate.

Protection may also be in the form of friendly persuasion of a

colleague to refrain from unethical, illegal or unprofessional practice if he is
so engaged or about to indulge in such if in his opinion the same is of such
nature and character. When a colleague has problems in the practice, the
engineer is called upon to help him resolve it in the best of his light. If the
problem involves act injurious to his bounties like the general public or the
profession and his advice is ignored he is expected to report the same to the
appropriate Engineering Committee for necessary action.

(2) Fairness and tolerance. For a professional brotherhood to be

desirable or lasting, it must have a solid foundation of equality both on
privileges and opportunities for advancement. This may be attained if every
engineer has a willing desire to help a brother in need of guidance or
assistance. When an engineer is new in the profession he needs a helping
hand or an inspiration to start with or to get his momentum in the practice. A
gesture of concern to a needy brother could be a moral booster to establish
in him a feeling of being home. Typical of this is having the lesson of his
experience, or lending personally or contributing reports and other paper
studies to engineering forums and technical press.

If an engineer begins or winds up as an employee, the engineer-

employer should, notwithstanding that edge, be liberally tolerant in all ways
that may contribute or enhance his advancement remembering always that
he is a professional brother who also wants a place in the society. For
instance, allowing him at times to participate in technical engineering
discussions on official time in seminars, studies or workshops or in other
engineering forums may provide him the chance of advancement which also
benefits the profession.

In matters of remuneration, the engineer should uphold the principle

of just and appropriate compensation for those employed in engineering
work in accordance with accepted standard. Among the factors that may be
relevant in fixing the compensation are the qualifications of the engineer, his
recorded experience in the field of technical engineering as well as non-
technical endeavors which has material bearing to the venture, prevailing
compensation for employed engineers in similar or related ventures, and the
quality of his work.

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 (3) Merits not due. Recognition in the field of engineering is a feat
that costs the engineer’s time, effort, money, etc. It is unethical for an
engineer to claim credit which is not due him. Neither it is proper for him to
acquiesce as his any engineering accomplishment erroneously attributed to
him. If he feels he had taken part in it, he should make clear his position
that the same is not wholly his accomplishment. After all humility and
candidness even on non-technical subjects is always a virtue to which the
Filipino is noted.

(4) Review of colleague’s work. The engineer should not make or

issue publicly undesirable comments or opinion regarding the work of a
colleague except to save the public and the profession from harm or injury.
If such necessity exists, it is advisable that he be informed through an
informal arrangement before an open review of his work is made, otherwise
the review or comment on an engineering work of a colleague should be
strictly on a professional level, disallowing at all times personality to slant in
the discussion.

More often than not, professional jealousy takes place between two
professionals aiming for recognition or struggling to survive in the field of
their expertise. Success or survival shall not be at the expense of another in
the profession but upon his merit. To avoid or at least minimize the effects
of such possibility there are factors which may deserve serious
consideration. Such factors like professional reputation, whether the
engineer is new or an old timer in the practice, gender at times and other
analogous matters are certainly a must for consideration.

(5) Controversies with colleague. In the struggle to attain a worthy

professional reputation an engineer may innocently step on the toe or run
across the path of another trying also to carve a name for his career. As
much as possible care should be observed to avoid a running conflict with
another engineering considering that the practice as repeated again and
again is a privilege and not a trade or business where unfair competition and
monopoly is often witnessed. The practice should be pursued on a high
level such that all his activities should be able to pass the test of objectivity.

In the event controversies arise or cannot be avoided the same

should be submitted to the Philippine Society of Engineering which may
create a board of arbitration composed of three members chosen by each
party, with the third being selected by the two members purposely to resolve
the conflict. After such submission the parties should be extra careful in
everything that may aggravate or lend flame to the controversy until the
same is fully resolved by the board for their guidance. Only upon failure of
the board to settle the controversy are parties permitted to resort to a court
suit.

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 (6) Solicitation of undertaking or clients. Solicitation takes place
when an engineer resorts to undesirable practices like underbidding for a
particular work, or reduces the normal charges or fees after becoming aware
of the charges proffered by the other in order to assure himself of the job or
capture the client of another. In most cases, solicitation is done
clandestinely although the more unscrupulous ones do it publicly in
complete disregard of good taste and tradition. Abhorred as it is in the field,
this kind of practice degrades the profession and converts it to s veritable
state of cutthroat competition which even in commercial circles is declared
unlawful and penalized when made deliberately under existing laws.

A form of solicitation may take place when an engineer without the

consent of the employer of another engineer, offers the latter salaried
position or higher remuneration and rebates or commission, or cause his
dismissal in order to later on absorb him in his fold. Another form would be
the drawing to himself a client of another engineer by giving him incentives
not usually offered by the latter or other engineers.

(7) Signing plans and specifications, etc. The preparation of plans

and specifications, etc. for an engineering work or project is a delicate task
which should be done solely by a registered engineer or one who has been
previously authorized by law. The engineer should not for any consideration
allow his signature or authority to be used o such documents if the same
has not been prepared by him or under his control and direction. Thus, his
signing of plans, specifications and designs or drawings prepared by an
unregistered engineer or an undergraduate or a flunker in the licensure
examination is grossly unethical, unless the same has been prepared by an
apprentice or subordinate who has some engineering background under his
direction.

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 CHAPTER II

LIABILITY OF TECHNICAL MEN

General consideration. After admission to the practice, the

engineer may carry his work in a direction and manner that in his light is not
contrary to existing law, morals, good customs, public order and public
policy, as well as existing ethics of the profession; but as a guardian of
public safety, he should probably anticipate probable risks to lives and limbs
that may occur from his work. For instance, when an architect is engaged to
draw a plan or design of a building, or when an engineer installs a boiler or a
machine in a factory or plant, the result should be in such a condition that
the same satisfies existing legal and technical requirements so that the lives
and limbs not only of those who would make use or work on the same but all
those that may be exposed to it directly or indirectly are not endangered. He
must be further aware that much reliance on his technical competence is
given by a client or employer so that in the final analysis he is not only an
agent of economy but also an insurer of safety and health of the general
public. In other words, people engage him for his domestic and industrial
needs because his technical expertise creates in their mind a belief that they
can buy their health and safety from him. For this reason, the law makes
sure that like an ordinary life and property insurer, he should protect against
the loss of the lives and limbs and properties of all those who availed of and
benefit from his service, thus imposing on him a certain liability for the
consequences of his engineering works during and after the conclusion of
his task.

Civil liability for damages. Barring certain liabilities created under

contract with a client or employer and other juridical relations, the Civil Code
of the Philippines prescribes in no uncertain meaning the liability of an
architect or engineer as well as the contractor who fails or neglects to live up
to that measure of responsibility. The Code provides in Article 1723 the
following:

“Art. 1723. The engineer or architect who draws up the plans

and specifications for a building is liable for damages if within fifteen
years from the completion of the structure the same should collapse
by reason of defect on those plans and specifications or due to the
defects of the ground. The contractor is likewise responsible for the
damages if the edifice falls within the same period on account of
defects in the construction or the use of materials of inferior quality
furnished by him, or due to any violation of the terms of the contract.
If the engineer or architect supervised the construction, he shall be
solidarily liable with the contractor.

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 “Acceptance of the buildings, after completion does not imply
waiver of any of the causes of action by reason of any defect
mentioned in the preceding paragraph.

“The action must be brought within ten years following the

collapse of the building.”

The person liable under the aforesaid article are engineers or

architects who drew the plans and specifications of the fallen structure and
the contractor if the fall of the building is by reason of defect in the
construction or the sue of inferior materials furnished by him or violation of
the terms of the contract.

Requirements for action to prosper. For them to be held

answerable for damages, however, there are certain elements which must
be shown to the satisfaction of the court. For an action against the engineer
or architect to prosper, it must be proven that: (a) the collapse of the building
took place within fifteen years from its completion; (b) the plans and
specifications of the structure were drawn by him; and (c) the cause of the
fall is defects I plans and specifications or defects of the ground. If the
engineer or architect supervised the construction, he shall be liable solidarily
with the contractor if the collapse or fall of the edifice is for reasons
attributed to the latter. Thus, if the cause is due to the defects of
construction or use of inferior materials, etc. the architect or the engineer
who supervised the construction shall be liable to pay for the entire amount
of damages to whomever it may be awarded.

As against the contractor, there must be a clear showing that the fall
of the edifice took place within fifteen years from the completion and that the
cause of the fall is due to the defects in the construction or use of inferior
quality of materials furnished by him or violation of the terms of the contract.

Warranty and prescription. The law further provides that the

acceptance of the building after completion does not imply a waiver of any of
the causes of action by reason of the defects mentioned.

This means that the engineer or architect or the contractor, as the

case may be, shall warrant the safety and strength of the building, and that
although the juridical relationship of the engineer or architect or the
contractor is terminated reason of the acceptance of the building. The law
still preserves in favor of the owner the right to sue the former for damages
arising from the defects that may later on be discovered as long as the
fifteen years has not expired. Furthermore, any legal action arising from the

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violation or breach of warranty is ordained to be filed in court within a period
of ten years from the date of the fall or from the discovery of the defect or
else any action arising therefrom is barred forever.

Damages defined. Damages is simply the sum of money which the

law awards or imposes as pecuniary compensation, recompense, or
satisfaction for any injury done or a wrong sustained as a consequence
either of a breach of contractual obligation or tortuous act. In relation to
engineering liability, it is the amount of money for which the engineer or
architect or contractor may be ordered to pay to the owner of the fallen
building or to whomever may suffer by reason of the collapse.

Penal liability. The different laws relevant to the practice of

engineering have enumerated in separate sections the specific professional
activities that a licensed engineer may undertake. These are exclusive and
autonomous although at times complementary with activities of other
classifications.

Although the law considers as illegal practice any interference by an

engineer in activities not within his field of expertise, it permits nevertheless
two classes of engineers to establish a professional partnership or firm for
the practice of their profession. A civil engineer can form a professional
partnership with an architect and vice versa, but this does not legalize nor
justify the architect in threading or meddling on work which is specifically
intended for a civil engineer. As a consequence, and for tenurial purposes,
the engineer should be cautious and discreet in the performance of his
professional vow because meddling in the perimeter of his partner’s
expertise or into the activities of another engineer is declared as a crime of
misdemeanor which carries a penalty upon conviction with a fine of not less
than one hundred pesos nor more than one thousand pesos, or
imprisonment for a period not exceeding three months, or both, in the
discretion of the court.

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 BIBLIOGRAPHY

Canons of Professional Ethics for Engineers

De Leon, Hector S., The Law on Obligations and Contracts. Quezon City:
Rex Book Store, Inc., 2003.

Jurado, Desiderio P., Civil Law Reviewer. Quezon City: Rex Book store,
Inc., 1999.

Jurado, Desiderio P., Comments and Jurisprudence on Obligations and

Contracts. Quezon City: Rex Book Store, 2002.

Mendoza, Quintin C., Engineering Contracts, Specifications and Ethics.

Quezon City: Rex Book Store, 2000.

New Civil Code of the Philippines.

Republic Act No. 8495, “An act regulating the Practice of Mechanical
Engineering in the Philippines”.

Rules and Regulations Implementing Republic Act No. 8495.

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