1305 – Concept of Contracts

1306 – Autonomy of Contracts

1307 – Innominate Contracts
1308 – Mutuality of Contracts
1309 – Determination of Performance by Third Person
1310 – If determination of performance by Third Person is Evidently Inequitable
1311 – Relativity of Contracts; XPN 01 – When contract has stipulation in favor of 3rd person
1312 – If the object of contract is in possession of a third person
1313 – If contract was to defraud a third person creditor
1314 – If third person induces one of contracting party to violate contract
1315 – Consensual Contracts
1316 – Real Contracts
1317 – Contracts Entered into in the Name of Another

1318 – Requisites of Contract

1319 – Consent
1323 – Ineffectivity of Offer upon Death, Civil Interdiction, Insanity, Insolvency
1327 – Who cannot give consent to contract? Unemancipated Minors, Insane or demented
persons. Deaf-mute who cannot write.
1328 – Contracts entered into during: lucid interval = valid; drunkenness or hypnotic spell =
voidable
1330 – Vices of Consent = mistake, violence, intimidation, undue influence
1331 – Mistake should refer to either the object of obligation or conditions which principally
moved the parties to enter contract
1335 – Violence, Intimidation
1336 – Violence and Intimidation shall annul obligation
1337 – Undue Influence
1338 – Fraud
1339 – Failure to disclose information = fraud
1340 – Exaggerations of Trade (not fraud)
1341 – Expression of Opinion (not fraud)
1342 – Misrepresentation of Third Person (not fraud)
1343 – Misrepresentation in Good Faith (not fraud)
1347 – What can be objects of Contracts?
1350 – Cause of Contracts:
Onerous Contracts – the prestation of a thing or service by the other
Remuneratory Contracts – the service or benefit which is renumerated
Pure Beneficence – mere liberality of the benefactor
1358 – What must appear in a public document?
1. Real rights over immovable property
2. Hereditary rights or of conjugal partnership of gains
3. Power to Administer property
4. Cession of acts or rights proceeding from public documents
1380 – Rescissible Contracts
1381 – What are rescissible contracts?
Wards; entered by guardian, provided lesion suffered be more ¼ of the object of
contract
Absentee; entered by representative , provided the lesion above.
Fraud against third person creditors
Litigation
All other contracts declared by law to be subject of rescission
1382 – Insolvency; payments made in the state thereof
1385 – Effects of Rescission
1387 – Presumptions of Fraud
Alienation of Property through Gratuitous Title
Alienations of Property through Onerous Title

Badges of Fraud
(1) The fact that the cause or consideration of the conveyance is 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) Evidence of large indebtedness or complete insolvency.
(5) The transfer of all or nearly all of his property by a debtor, especially when he is
insolvent or greatly embarrassed financially.
(6) The fact that the transfer is made between father and son, when there are
present others of the above circumstances.
(7) The failure of the vendee to take exclusive possession of all the property.

1389 – Prescriptive Period

4 yrs.
For guardianship: will commence after termination of the former’s incapacity
For absentee: until domicile of the latter is known

1390 – Voidable Contract

(1) Those where one of the parties is incapable of giving consent to a contract;
(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 of ratification.

1403 – Unenforceable Contracts

They are: first, those contracts entered into in the name of another person by one
without any authority or in excess of his authority; second, those which do not comply with
the Statute of Frauds; and third, those where both contracting parties are legally
incapacitated.

Characteristics. — Although they are essentially different from each other, yet all
unenforceable contracts possess the following characteristics:
(1) They cannot be enforced by a proper action in court;
(2) They are susceptible of ratification;
(3) They cannot be assailed by third persons.

Statues of Fraud

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 by 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 accept and receive part of such goods and chattels, or the evidences, or some of them,
of such things in action, or pay at the time some part of the purchase money, but when a 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 sale, price, names of the purchasers and person on whose account the sale is made,
it is a 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.

Essential features. — The essential features of the different classes of defective contracts are:

1. As to defect:
(a) In rescissible contracts, there is damage or injury either to one of the contracting parties or to third persons;
(b) In voidable contracts, there is vitiation of consent or legal incapacity of one of the contracting parties;
(c) In unenforceable contracts, the contract is entered into in excess or without any authority, or does not comply
with the Statute of Frauds, or both contracting parties are legally incapacitated;
(d) In void or inexistent contracts, one or some of the essential requisites of a valid contract are lacking either in fact
or in law.

2. As to effect:
(a) The fi rst are considered valid and enforceable until they are rescinded by a competent court;
(b) The second are considered valid and enforceable until they are annulled by a competent court;
(c) The third cannot be enforced by a proper action in court;
(d) The fourth do not, as a general rule, produce any legal effect.

3. As to prescriptibility of action or defense:

(a) In the fi rst, the action for rescission may prescribe;
(b) In the second, the action for annulment or the defense of annulability may prescribe;
(c) In the third, the corresponding action for recovery, if there was total or partial performance of the unenforceable
contract under No. 1 or No. 3 of Art. 1403, may prescribe.
(d) In the fourth, the action for declaration of nullity or inexistence or the defense of nullity or inexistence does not

4. As to susceptibility of ratification:
(a) The first are not susceptible of ratification;
(b) The second are susceptible of ratifi cation;
(c) The third are susceptible of ratifi cation;
(d) The fourth are not susceptible of ratifi cation.

5. As to who may assail contracts:

(a) The first maybe assailed not only by a contracting party but even by a third person who is prejudiced or damaged
by the contract;
(b) The second may be assailed only by a contracting party;
(c) The third may be assailed only by a contracting party;
(d) The fourth may be assailed not only by a contracting party but even by a third person whose interest is directly
affected.

6. As to how contracts may be assailed:

(a) The fi rst may be assailed directly only, and not collaterally;
(b) The second may be assailed directly or collaterally;
(c) The third may be assailed directly or collaterally;
(d) The fourth may be assailed directly or collaterally.prescribed.
Estoppel (Article 1431)
1. An admission;
2. Is rendered conclusive
3. Upon the person making it; and
4. Cannot be denied or disproved against the person relying thereon

Concept of Estoppel

Estoppel is a bar which precludes a person from denying or asserting anything to the contrary of
that which has, in contemplation of law, been established as the truth, either by the acts of
judicial or legislative officers or by his own deed or representation, either expressed or implied.

It concludes the truth in order to prevent fraud and falsehood, and imposes silence on a party only
when in conscience and honesty he should not be allowed to speak.

Distinguished from Waiver

A waiver is a voluntary and intentional abandonment or relinquishment of a known right. It carries

no implication of fraud. It involves the act or conduct of only one of the parties.

An equitable estoppel may arise, however, even where there is no intention on the part of the
person estopped to relinquish any existing right and frequently carries the implication of fraud. It
involves the conduct of both parties.

In Lopez v. Ochoa (L- 7955, May 30, 1958), the Supreme Court held that waiver and estoppel are
frequently used as convertible terms. The doctrine of waiver belongs to the family of, is of the
nature of, is based on, estoppel. The essence of waiver is estoppel and where there is no
estoppel, there is no waiver. This is especially true where the waiver relied upon is constructive or
implied from the conduct of a party.

Distinguished from Ratification

In ratification, the party is bound because he intended to be bound; in estoppel, the party is
bound notwithstanding the fact that there was no such intention because the other party will be
prejudiced and defrauded by his conduct unless the law treats him as legally bound.

Distinguished from Fraud

Estoppel exists with or without a contract; fraud presupposes an attempt to enter into a valid
agreement or contract.

While estoppel may raised as a defense, fraud may properly be a cause of action on account of the
vitiated consent that it produces.

Admissions

A party may be estopped to insist upon a claim, assert an objection, or take a position which is
inconsistent with an admission which he had previously made and in reliance upon which the other
party has changed his position.
Silence or Inaction

This is sometimes referred to as estoppel by “standing by” or “laches.” Mere innocent silence will
not work an estoppel. There must also be some element of turpitude or negligence connected
with the silence by which another is misled to his injury. But one who invokes this doctrine of
estoppel must show not only unjustified inaction but also some unfair injury would result to him
unless the action is held barred.

Estoppel by acquiescence is closely related to estoppel by silence. In the former, a person is

prevented from maintaining a position inconsistent with one in which he has acquiesced.

Nature of Laches

Laches is failure or neglect, for an unreasonable and unexplained length of time, to do that which,
by exercising due diligence, could or should have been done earlier; it is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party entitled to assert
it either has abandoned or declined to assert it.

Elements of Laches
1. Conduct on the part of the defendant or of one under whom he claims, giving rise to the
situation complained of;
2. Delay in asserting complainant’s rights after he had knowledge of the defendant’s conduct and
after he has had an opportunity to sue;
3. Lack of knowledge or notice on the part of the defendant that the complainant would assert the
right on which he bases his suit;
4. Injury or prejudice to the defendant in the event relief is accorded to the complainant.
Laches and Prescription Distinguished
PRESCRIPTION LACHES

Concerned with the fact of delay Concerned with the fact of delay

Principally a question of inequity founded on

some change in the condition of the
A matter of time property or the relation of the parties

Statutory Not statutory

Applies to law Applies to equity

Based on a fixed time Not based on a fixed time

Kinds of Estoppel
1. Technical Estoppels
1. Estoppel by record – the preclusion to deny the truth of matters set forth in a record, whether
judicial or legislative, and also to deny the facts adjudicated by a court of competent
jurisdiction
Example: the conclusiveness of a judgment on the parties to a case
1. Estoppel by deed – a bar which precludes one party to a deed and his privies from asserting as
against the other party and his privies any right or title in derogation of the deed, or from
denying the truth of any material facts asserted in it; a written instrument is necessary for there
to be estoppel by deed

Æ Some doctrines:

1. If the deed or instrument is null and void because of the contract, there is no estoppel
 2. Ordinarily, the person estopped must be capacitated; but a minor is clever enough to deceive
others, estoppel may result
3. If a person, who is not a party to the instrument, notarizes the same, he is not in estoppel

2. Equitable Estoppel or Estoppel in Pais

It arises when one by his acts, representations or admissions, or by his silence when he ought to
speak out, intentionally or through culpable negligence, induces another to believe certain facts
to exist, and such other rightfully relies and acts on such belief, so that he will be prejudiced if
the former is permitted to deny the existence of such facts. It takes place in a situation where
because if a party’s action or omission, he is denied the right to plead or prove an otherwise
important fact.

This may be estoppel:

1. by conduct or by acceptance of benefits

2. by representation or concealment
3. by silence
4. by omission
5. by laches

Æ Some doctrines:

1. Conduct because of ignorance or mistake does not result in estoppel

2. Estoppel by laches bars an action to create a vested right (executory interest) but does not bar
an action to protect a vested right (executed interest)
3. Just because a person is silent does not necessarily mean that he will be in estoppel; there
should have been a duty or obligation to speak
4. A mere promise to perform or to omit at some future time does not necessarily result in
estoppel (promissory estoppel); for this to exist, the promise must have been relied upon and
prejudice would result unless estoppel is applied

Elements of Estoppel in Pais

In relation to the party sought to be estopped:
1. Conduct amounting to false representation or concealment of material facts or at least
calculated to convey the impression that the facts are otherwise than and consistent with those
which the party subsequently attempts to assert;
2. Intent or at least expectation that this conduct shall be acted upon by at least influence the
other party;
3. Knowledge, actual or constructive, of the real facts
In relation to the party claiming the estoppel:
1. Lack of knowledge or of the means of knowing the truth as to the facts in question;
2. Reliance, in good faith, upon the conduct or statement as to the facts in question;
3. Action or inaction based thereon of such character as to change the position or status of the
party claiming the estoppel to his injury, detriment, or prejudice

Estoppel against Owner

When in a contract between third persons concerning immovable property, one of them is misled
by a person with respect to the ownership of real right over the real estate, the latter is
precluded from asserting his legal title or interest therein, provided all these requisites are
present:
 1. There must be fraudulent representation or wrongful concealment of facts known to the party
estopped;
2. The party precluded must intend that the other should act upon the facts as misrepresented;
3. The party misled must have been unaware of the true facts; and
4. The party defrauded must have acted in accordance with the misrepresentation.

Æ An estoppel operates on the parties to the transaction out of which it arises and their privies.

Æ The government is not estopped by mistake or error on the part of its officials or agents; the
erroneous application and enforcement of the law by public officers does not prevent a
subsequent correct application of the statute.

Natural Law
1. Immutable and independent of all human regulations
2. Includes those rules which are neither written nor promulgated, but are derived from reason and
nature
Types of Obligations:
1. Moral obligations – duties of conscience completely outside the field of law
2. Natural obligations – not sanctioned by any action but have a relative juridical effect
3. Civil obligations – juridical obligations which apparently are in conformity with positive law but
are contrary to juridical principles and susceptible of being annulled
4. Mixed obligations – have full juridical effect
Conditions Necessary for Natural Obligation to Arise:
1. Juridical tie which is not prohibited by law
2. This tie is not given effect by law

Æ When a debtor offers a guarantor for his natural obligation, he impliedly accepts the coercive
remedies to enforce the guaranty, and therefore, the transformation of the natural obligation into
a civil obligation.