Oblicon Finalsready

OBLICON FINALS READY! d.
Delicts
e. Quasi-Delicts
Obligation
- An obligation is a juridical relation whereby one party, called the creditor, may Basic Remedies in case of Breach in an Obligation (General Rule)
demand from another, called the debtor the observance of a determinative conduct 1. Specific Performance (with or without Damages)5
and in case of breach, may demand satisfaction from the assets of the latter. 2. Resolution (with or without Damages) 6
Makati Stock Exchange case 3. Damages
Four Essential Elements of Obligation Remedies in Obligation to GIVE

1. Active Subject : Creditor 1. Specific Performance
2. Passive Subject : Debtor 2. Right to compel for the delivery of the thing, its fruits, its accessories, and its
3. Subject Matter : Prestation accessions
4. Juridical Tie / Efficient Cause : Sources of an Obligation 3. Resolution
4. Damages
# 1 and 2 : CREDITOR and DEBTOR a.k.a. The Parties
Requisites: Remedies in Obligation to DO
a. Must be determinate or determinable based on the source of obligation. 1 1. Specific Performance7
Example: 2. Substitute Performance
i. Contract of Sale 3. Resolution
ii. Promissory Note 4. And/Or Damages
iii. Bearer Note 5. Rectification of Services or Recant
iv. Payment of Taxes
Remedies in Obligation NOT to DO
# 3: PRESTATION a.k.a. “To Give, To Do, or Not To Do”2 (ART. 1156) 1. Injunction
Requisites: 2. Reversal
a. Must be performed in good faith (ART. 1159) 3. Damages
b. Must be performed with ordinary diligence, except when extraordinary
diligence is required by law or by the contract expressly stipulated the REMEDIES
parties (ART 1163) These remedies presupposes the existence of a valid and enforceable obligation,
c. In obligations to give, the thing, its fruits, its accessories, and its accessions and that debtor violated the obligation. Otherwise, remedies would be
must be delivered. (ART 1164) unavailing.
d. Must also be physically and juridically possible
e. Must have monetary value
4
Solutio Indebiti (Unjust Enrichment) & Negotiorium Gesti (Voluntary administration of
# 4 : JURIDICAL TIE / EFFICIENT CAUSE a.k.a. Sources of Obligation3
Property)
Sources: 5
May later claim for Resolution should this option become impossible (ART. 1191).
a. Laws 6
The court may grant this option, unless there be just cause authorizing the fixing of a period
b. Contracts (ART. 1191).
c. Quasi-Contracts4 Suria v. IAC: Resolution will not be available as a remedy if you have a COS where the payment
is in installments and is secured by a REM on a property sold. The remedy should be
foreclosure because with the mortgage, there was a deemed consummation or cash payment of
1
If you cannot identify the parties, then you don’t have an obligation based on the source of the purchase price.
7
obligation. You cannot avail of this remedy if the debtor does not want to perform because it will be
2
There must be an observance of exact prestation. contrary to law against involuntary servitude. In which case, the creditor will only be entitled to
3
The sources are exclusive. If it is not part of the list, then you don’t have an obligation. damages.
FINALS READY IN OBLI-CON - H.V. ORTEGA 2021 Page 1
To avail Resolution: 3. Legal Delay
1. Specific Performance must be unavailing. 4. Contravene the Tenor of the Obligation
2. There must be a substantial breach.
Substantial breach to be entitled Resolution (with or without Damages) # 1 FRAUD as a breach of obligation (INCIDENTAL FRAUD)
- Failure to fulfill an essential term, condition, or part of the obligation. There exists an obligation and in the performance thereof, there is incidental fraud.
“Essential” means such is the principal or primary consideration of the party in There is fraud when there is bad faith in the compliance of an obligation, when
entering into the contract or obligation. there is malice or ill will, or when there is intent to harm or cause damage to
- 18% left unpaid would suffice as substantial breach. (Cannu v. Galang) another.
-19% left unpaid was not a substantial breach. (Reyes v. Tuparan -controlling)
- A violation of the principal condition of the contract would amount as substantial Substantial breach is tantamount to fraud.
breach (Lalicon v. NHA)
-Thing delivered was different from their original agreement. There was a failure Article 1171 : Responsibility arising from fraud shall be demandable in all
to deliver the exact prestation. Even if it is an upgrade, it would still be a obligations. Any waiver of an action for future fraud is void.10
substantial breach. (Cathay Pacific v. Vasquez)
# 2 NEGLIGENCE as breach of obligation (ART. 1172 & 1173)
Slight breach may only be entitled to Specific Performance plus damages. Examples:
However, if there is already a court order for SP and there is still a breach, this will 1. FEU v. Saludaga
amount to substantial breach due to violation of court mandate. FEU is negligent in failing to provide a safe environment for Saludaga when
the latter was shot by a security guard. They only accepted the security guard
Damages by the recommendation of Galaxy. They did not check the qualifications of
Nominal Damage : “other damages”, if there is no bad faith the security guard.
Moral Damage : if there is bad faith
2. MERALCO v. Ramoy
Difference between “Contract of Sale” and “Contract to Sell” Meralco is negligible in not checking whether the court order presented to
Contract of Sale : There is an immediate transfer of title from the seller to the them was final and executory before they cut their electrical services from
buyer. May demand for specific performance, in case of breach. Ramoy. Even assuming they new it was not yet final and executory, there will
bad faith and they will still be liable.
Contract to Sell : There is a positive suspensive condition, which is the payment
of the price, that must happen prior the existence of an obligation. 8 *Check # 3 LEGAL DELAY or DEFAULT as breach of obligation (ART. 1169)
Articles 1181 and 1190. Requisites:
1. There must be an obligation that is due and demandable, and is determinate/
Usual Causes of Breach of an Obligation (ART. 1170)9 liquidated.
1. Fraud 2. The debtor failed to perform the required prestation.
2. Negligence 3. There is a judicial or extrajudicial demand of the creditor for the performance
by the debtor for the required prestation, unless it falls under the exceptions in
8
Without the happening of the positive suspensive condition, there can be no obligation. Hence, the requirement of demand.
specific perfomance as a remedy is unavailing. However, there is a case saying that aggrieved
party may be entitled to damages. Article 1184 provides that obligation is extinguished when GR rule in Reciprocal Obligation11: (ART. 1169)
the condition that shall happen at a determinate time does not happen, or when it has become A party defaults if one party does not perform the required prestation and the other
indubitable that the condition will not take place. party has already complied or at least is ready, willing, and able to perform.
Reyes v. Tuparan provides that sometimes, even if the creditor (seller) is entitled to rescission, if
10
it can be seen that there is only a slight breach, or the debtor has paid substantial amount, the The reason for this is because it will negate compliance in good faith if such waiver is
Court would just require the debtor to continue paying the remaining fee. allowed. Then there will be no obligation anymore. It will negate the juridical tie.
9 11
Persons guilty will be liable for damages. Jurisprudence defines reciprocal obligation as an obligation
Except when you have a successive performance of the prestation, demand be performance.
is needed to set the other party in default. (Solar Harvest v. Davao
Corrugated) GR: If the court can determine who the first infractor was, the court will be the
one to apply offsetting. 13
3 Types of Legal Delay or Default EXN: If the court cannot determine who first incurred a violation to the
1. Default of the Debtor / Mora Solvendi obligation, the obligation would be extinguished. Each party will bear his or her
Failure of the debtor to perform the required prestation on due date upon own damages.
demand.
Exceptions in the Requirement of Demand
2. Default of the Creditor / Mora Accipiendi 1. When the obligation or the law expressly so declares
Failure of the creditor to accept the performance of the required prestation 2. When time is of the essence
without justification or legal basis. 3. When demand would be useless
Upon receiving the tender of payment, creditor refuses to accept it without When time is of the essence
justification and without legal basis. The remedy is to consign the entire In order to be considered that time is of the essence, debtor must convey
payment to the court. It will be tantamount to payment. Otherwise, interest will information to the creditor, who must agree that performance should be exact as
be due once creditor decided to get payment at later date, but not penalty12 stipulation by the parties.
because mere refusal does not extinguish the obligation.
There must be a statement of date and a consequence. (Lorenzo Shipping v. BJ
Liability on Loss of Thing During Mora Accipiendi (ART 1189) Marthel)
a. Not Fault of the Debtor :
Obligation is extinguished. Parties shall return to each other what they have When demand would be useless
received. (ART 1190) Sometimes, liability can be born by the creditor. Demand would be useless when upon receipt of demand by the creditor, the debtor
cannot immediately perform the required prestation.
b. Gross Negligence or Fault of the Debtor:
Debtor is liable on the rule that there can be no waiver of an action for future Grace Period
fraud or gross negligence. - It is a period that will incur after the failure of performance by the debtor from
the due date. It is not an obligation. It is a right; hence, demand is not necessary
c. Simple Negligence of the Debtor to make it effective. When a due date arrives and there is no fulfillment of
It is possible to free debtor from liability. prestation, the grace period will be automatically triggered.
Exceptions on Mora Accipiendi Fortuitous Event as a defense from breach (ART. 1174)
1. When debtor pays when he does not have the free disposal of the thing due - It excuses the debtor for the nonperformance of the required prestation. It can
and capacity to alienate it happen that the obligation will remain and should be performed after the
2. Proceeds from a crime expiration of the fortuitous event. There is just an excuse or exemption from
3. Incomplete payment liability during the subsistence of the fortuitous event.
3. Default of Both Parties / Compensatio Morae (ART. 1192) However, it does not extend the term of contract. The term in a contract is
Both are liable for damages. Unless they can compute the damages with uninterrupted in case of a fortuitous event. 14 (Ace-Agro v. CA)
exactitude, then there will just be offsetting of the damages. Also, there can still
13
[JSP’s advice] If you are the party who will much likely pay more in the offsetting, confuse
12
Penalty will only be due once there is default on the part of the debtor. Default must be upon the court (e.g. not volunteer info) so it cannot determine who the first infractor was.
14
demand by the creditor. Debtor cannot be in default in mora accipiendi because it is the seller To get away with this:
who refuses to accept payment. (1) stipulate in the contract that “in case of a fortuitous event, the term shall extend by a period
3. There is no other remedy.
Requisites of a Fortuitous Event: 4. The transaction if the debtor to a third person is fraudulent.
1. It must be independent from the will of the debtor beyond his control 5. The third person is not buyer in good faith.
2. It must be unforeseeable or unavoidable
3. It must render impossible for the debtor to fulfill his obligation in a normal RESOLUTION (ART. 1191) & RESCISSION (ART. 1381)
manner. It should not just be difficult. RESOLUTION RESCISSION
4. The obligor/debtor must be free from any participation in the aggravation of It is a principal remedy. The It is a subsidiary remedy. It
the injury resulting to the creditor. moment there’s substantial can only be availed when the
breach, creditor may avail aggrieved party has no other
Exception to Fortuitous Event: Main resolution. legal means to obtain
1. When expressly specified by law15 Distinctions reparation for the damage.
2. Expressly stipulated by the parties Creditor is a party in the (ART. 1383)
3. When the nature of the obligation requires the assumption of risk16 subject contract.
Creditor is not a party in the
Effect of Negligence in a Fortuitous Event: subject contract.
It lacks the 4th requirement of a Fortuitous Event. Hence, there would be default It is granted only to the extent
and debtor is not exempted from liability. Such negligence would humanize the necessary to cover the
fortuitous event. damages caused. (ART. 1384)
It completely cancels the
Effect
contract.
ACCION SUBROGATORIA ACCION PAULIANA Mutual restitution subject to
(ART. 1177) (ART. 1385) right of the aggrieved party to
This is an action by the creditor to It is a remedy afforded to a creditor claim for damages.
collect payments by exercising the right defrauded by a debtor. Lesion or economic prejudice
of the debtor except those rights Basis Substantial breach
recognized by law
inherent in the debtor’s person. Creditor is going after a contract to Mutual restitution for both
which the creditor is not a party. parties however, creditor will
Creditors may also impugn the acts Mutual restitution for both
Consequence not return anything because
which the debtor may have done to parties
creditor did not receive
defraud them. anything
Creditors may also use this action to

annul a voidable contract entered into
by his defaulting debtor.
Requisites of Accion Pauliana (Rescission under ART. 1381)

1. The creditor, who is the plaintiff, should have credit before a rescissible Example scenarios for Rescission:
contract. Third Party Fourth Party Effect
2. Debtor executed all his properties in favor of third person. 3rd Party is
protected because
corresponding to the duration of such fortuitous event” ; or Creditor he is an innocent
Good faith -
(2) For an automatic extension, show that the parties agree that “n” number of days is needed to purchaser of
fulfill the prestation. value. Creditor
15
Examples: Article 1165 and Commodatum (borrowing for free or no interest). may claim for
16
Means that the risk would not have been there if the party did not venture into that business.
damages from SUSPENSIVE CONDITIONS UNDER ART. 1185
debtor. If the condition doesn’t happen during
Creditor may go the given period or it is clear that it
Bad faith - after 3rd party and won’t happen, the obligation is
rescind contract. extinguished.
Creditor may Positive Suspensive Condition
Bad faith (but no However, there is a case saying that if
Good faith claim for damages
other assets) the condition has been substantially
from the debtor.
fulfilled, the Court may order for the
TRANSMISSIBLE RIGHTS (ART. 1178) debtor to finish the prestation.
All rights acquired by an obligation are transmissible, unless there is a law 17 or The obligation becomes effective as
stipulation to the contrary. 18 Negative Suspensive Condition soon as it is clear that the negative
condition will not happen.
PRESUMPTIONS UNDER ART. 1176
1. Receipt of the principal payment by the creditor without reservation as to the PURE OBLIGATION
interest means presumption of payment of interest. It is an obligation not subject to a condition or term. The stipulation must provide
2. Receipt of the later installment without reservation to prior installment means a that there is an absolute and unconditional conveyance of property of the Seller
presumption of payment of earlier installments. to Buyer.19
CONDITIONAL OBLIGATION (also check Contract to Sell) EFFECT OF CONDITIONAL OBLIGATION TO GIVE (ART. 1187)
Condition Future and uncertain THE THING If the condition was done:
Term Future and certain Ownership will retroact to the day of
Relevance of condition to an obligation Obligation may or may not exist, the constitution of the obligation (back
depending upon the condition to Day 1).
Kinds of condition Resolutory (extinguishes the obligation) FRUITS AND INTEREST If the condition was done:
and Suspensive (suspends the existence Such will be deemed as mutually
of an obligation) compensated.
CONSTRUCTIVE FULFILLMENT (ART. 1186) PROTECTION OF RIGHT OF CREDITOR (ART. 1188)

The condition shall be deemed fulfilled when the obligor voluntarily prevents its “The creditor may, before the fulfillment of the condition, bring the appropriate
fulfillment. Negligence is also a voluntary act that may fall under this. actions for the preservation of his right.”
IMPOSSIBLE CONDITIONS (ART. 1183) (Extrajudicial) : The creditor may notify the 3rd party that he and the seller has a
Positive Impossible Condition: Condition and Obligation are void. deal on subject thing/service, and should not interfere with the transaction,
Negative Impossible Condition: Condition will be deemed as not having been otherwise 3rd party would be a buyer in bad faith.
agreed upon. Obigation is valid and will become pure obligation.
(Judicial) : Buyer can also file for an injunction of the 2nd sale.
17 PAYMENT BY MISTAKE PRIOR TO THE OCCURENCE OF

Example of noncommunicable rights recognized by laws:
(1) Right to consortium SUSPENSIVE CONDITION (ART. 1188)
(2) Right to receive support, except support in arrears “The debtor may recover what during the same time he has paid by mistake in
(3) Conjugal rights
(4) Parental authority
18 19
Remember: RIGHTS only are transmissible, not OBLIGATIONS. Even if the parties say that it is CTS, it would be construed to be COS.
case of a suspensive condition.” property owner decides to sell, he should first offer the property for sale to the
owner of right to first refusal. It must be upon the same terms that the seller
1. If Buyer paid by mistake in good faith and exercised due diligence, B can offers the property to others.
recover especially of there is non-fulfillment of conditions. In that case, there b. Purely Potestative Condition Dependent on the Sole Will of the Creditor
are no obligation. - Seller as creditor will decide when B should pay (upon demand).
2. If Buyer paid by mistake, exercised due diligence, and the condition is c. Valid Purely Potestative Resolutory Condition Dependent on the Sole
fulfilled, B can no longer recover but might be entitled for a recovery of Will of the Creditor - Lessor can terminate lease contract any time with or
damages because S got the price when S was not entitled to it. without cause.26
3. If Buyer paid the price knowing fully well that the condition has not yet been
fulfilled, it would be tantamount to waiver. The obligation becomes pure 2. Casual : It depends upon chance or upon the will of a third person (other
obligation, no longer subject to condition. than the will of one parties).
4. If Buyer paid the price by mistake and he is simply negligent or negligent,
but it was never the intention as can be established by competent proof for B to 3. Mixed : One whose fulfillment is a combination of the two preceding
waive the condition. If this condition is not fulfilled, B can recover the price classifications.27
because there is no obligation in that case.20
TACIT RESOLUTORY CONDITION (ART. 119128)
RULES ON THE “The power to rescind 29 is implied in reciprocal ones, in case one of the
THING DURING obligors should not comply30 with that is incumbent upon him.”
WITH FAULT OF WITHOUT FAULT OF
THE PENDENCY
DEBTOR22 DEBTOR
OF CONDITION21
(ART. 1189) HOW TO RESOLVE AN OBLIGATION
Debtor is obliged to pay The obligation is GR: Judicial resolution is opted, especially when there is successive performance
THING LOST of prestations.31
for damages. extinguished.
The creditor may choose The impairment is borne
THING between rescission of the by the creditor.23 EXNs:
DETERIORATED obligation and its (1) When it is stipulated by the parties that they would allow extrajudicial
fulfillment, with damages. resolution32. There must be notice33 to the other party.
Debtor only has right It shall be inure to the
THING IMPROVED
granted to the usufructuary. benefit of the creditor. 26
This is valid because there is already an existing obligation. It does not negate the juridical
tie.
27
TYPES OF CONDITIONS OF AN OBLIGATION Catungal v. Rodriguez: Road right of way is a mixed condition, because there is a need for an
1. Potestative : When the fulfillment of the condition depends upon the sole agreement between the buyer and the owner of the property objected to the right of way.
will of the debtor (the one obliged to convey), the conditional obligation is void.24 Del Castillo v. Naguiat: It is not purely potestative when it is stipulated by the parties for the
buyer to be liable for the interest if he fails to pay for the rent.
The conditional obligation is not void when it is 28
In a reciprocal obligation requiring simultaneous performance, a party incurs delay upon
25
a. Right of First Refusal - (Simple suspensive potestative condition) If a fulfillment by the other of latter’s prestation. Conversely, if the party has not fulfilled his
respective prestation in a reciprocal obligation, the other party will never be in default.
29
The one entitled to resolve is the creditor in a reciprocal obligation, who is willing, ready,
20
Otherwise, if it cannot be established, such negligence would tantamount to waiver to and able to perform the prestation.
30
recover. There must be substantial breach- non performance of an ESSENTIAL TERM,
21
These rules apply only in an obligation to give a determinate thing. CONDITION, or CONSIDERATION.
22 31
It is the seller or the one obliged to convey the property. Co v. CA doctrine: Otherwise, or in improperly resorting to extrajudicial resolution, the
23
It is the buyer or the one to receive the property. aggrieved party is risking itself to allow the other party in default to rehabilitate itself and
24
Ex. “...when the seller will sell” become the one RWA to comply with the obligation, become entitled to resolution, and set the
25
Unlike an option, it is not an offer. There is an object but no cause. Hence, even if the owner aggrieved party in default.
32
of the right of first refusal accepts, nothing happens. (Lack of essential element) UP v. De Los Angeles: Extrajudicial rescissions may be availed when it is expressly stipulated
(2) Resolution in a lease contract. 34 Term Future and certain (ART. 1193)
(3) Remedy of Cancellation / Notice of Cancellation35 Relevance of a term or a period to an It suspends the demandability or
(4) Insertion of Arbitration Clause in Contracts36 obligation determines the extinction of an
obligation.
EXN to EXN on Notice: “Payment shall be made upon the expiration of the
grace period. Should there be no payment, contract will be canceled Obligation may or may not be due and
automatically without need of notice.”37 demandable yet, subject to proof
presented before the court. Hence, it
may be proven that debtor is not yet in
CANCELLATION RESOLUTION TERMINATION default, and enjoy the benefit of a
Extra-judicially done- GR: Judicial Stipulated in the period that may be fixed by the court.
sending of prior contract Kinds of term Resolutory - ART. 1193(2) (usufruct39)
Nature notice Extra-judicially and Suspensive (“...payable on date”)
done- sending of Fortuitous event in obligation subject of It does not extend the term in an
prior notice a term or a period obligation. (Ace-Agro case)
Motive predetermines Substantial breach Breach on the
Cause cause; negation of by the other party grounds stated in In Radiowealth v. Del Rosario, the Court held that even though the promissory
cause the contract note did not stipulate on what date the respondents should pay, there was a term
Void ab initio ; mutual Void ab initio ; Valid until intended to be fulfilled. There was an acceleration clause40 and a late payment
restitution mutual restitution terminated ; plus penalty. The payable within 12 months-rule and the respondents’ act of actually
Effect
plus damages what is stipulated paying the checks proved that there was knowledge that the obligation was
as penalty38 demandable.
OBLIGATION SUBJECT OF A TERM OR A PERIOD In Macasaet v. Macasaet, the Court held that the agreement on the possession of
Condition Future and uncertain (ART. 1193) land was based on a resolutory condition- the tolerance of the parents and their
affection to their son which can terminate the verbal lease agreement. It was held
that the “continuing love and affection” may or may not happen. 41
by parties, subject to judicial review upon filing of proper action in court.
33
Palay v. Clave: Automatic cancellation clause is invalid to give the other party in a reciprocal
obligation a chance to question the basis of the rescission or the resolution. WHEN COURTS MAY FIX THE PERIOD42 (ART. 1197)
34
Chua v. Victorio: Rule 70 of the Rules of Court provides that a lessor, in case of breach, can GR : Parties fix the period.
sue for ejectment. A prerequisite for filing an ejectment case is a demand by the lessor for the EXN : This article provides:
lessee to vacate the property together with the resolution. Hence, that demand presumes an (1) When the parties contemplated a term, but failed to stipulate in the contract
extrajudicial resolution, including a demand for the lessee to vacate the property. (Radiowealth case)
35
Uy v. CA: It must be shown that the motive predetermines the cause. When motive is
frutrated, the cause for the debtor was also negated. So, if there’s no cause, then there is also no
39
contract. JSP Ex. : Property is owned by a child, but in the lifetime of the parents, they shall have use
Cancellation is not resolution. Hence, it is not covered by the GR that it should be done of the property. It is resolutory because usufruct will end upon death of parents.
40
judicially. You can send notice of cancellation that says that there is frustration of the purpose of When a debtor defaults, the entire obligation becomes due.
41
the contract. JSP : It may be deduced from various jurisprudence that in order to prove an agreement as
36
[This is JSP’s suggestion.] JSP’s explanation on problem with the GR of Judicial Resolution: subject to a term, you prove the purpose of the agreement and the reasonableness of
It gives the burden of litigation costs (and losses) to the aggrieved party, the one RWA to payment upon demand. In this case, if it can be proved the the possession of land was for
comply- especially when thre is no stipulation between parties that they will allow extrajudicial construction business of the son, then the agreement may be considered as subject to a period.
resolution. (e.g. “You gave us this property to allow us to grow the business. We can prosper in this kind of
37
JSP’s suggested loophole to the Palay case. business only within this number of months or days. If you’re going to eject us, then you’re
38
Pryce v. PAGCOR: If the court finds the penalty to be unconscionable, they can reduce the defeating the very purpose of our agreement.”)
penalty. However, they cannot remove it altogether. ART 1229 42
There must be an obligation,even if it’s an implied contract. No obligation, no term to fix.
(2) When the term depends on the sole will of the debtor 43 4. When there is substantial breach of obligation (basically the reason for
acceleration); and
*Once the court fixed the term, it cannot be changed by them. However, the 5. When the the debtor attempts to abscond.
parties can, by means of amending the contract or through novation (entering
into a new contract). The courts may only fix the period, not the terms and OBLIGATIONS WITH MULTIPLE OBJECTS OR PRESTATIONS
conditions of a contract. CONJUNCTIVE ALTERNATIVE FACULTATIVE
Only 1, with at least
RULES on PAYMENT BEFORE THE PERIOD(ART. 1195) # of Principal
Several Several 1 accessory or
Requisites: Prestations
substitute prestation
1. Anything is paid or delivered before the arrival of period/term Only one of the
2. The debtor is unaware of the period or believed the obligation has become due # of Principal Only 1, if can’t be
All of them Principal
and demandable Prestations performed, then one
(qualified by the Prestations
Obliged to of the substitutes
term ‘and’) (qualified by the
Perform will take over
GR : Debtor may recover what was paid or conveyed, with its fruits and interests word ‘or’)
EXN : refer to ART. 1196 Who Not necessary since Debtor47, unless the
Chooses the all must be parties agree Only the debtor 49
RULES on BENEFITS OF THE PERIOD ART. 1196 Prestation complied otherwise 48
GR : If there is a period designated, it is presumed to it is for the benefit of both Loss or

the creditor and the debtor.44 deterioration of the
EXN : From the tenor of the same or other circumstances, it should appear that the principal obligation
period has been established in favor of one or of the other.45 Ex: would invalidate
the entire
For the benefit of debtor: “The borrower should pay the lender on or before Loss or obligation.
12/31/2017.” The borrower will have the option to max the period. Loss or deterioration of one However, if it’s
deterioration of one would allow the only the accessory
For the benefit of the creditor: “The borrower shall pay the lender on or EFFECT
would amount to debtor to choose or substitute
before 12/31/2017, with the lender having the right or option to demand default. among remaining prestation, then it’s
payment before 12/31/2017.” prestations. still valid; or
WHEN CAN THE DEBTOR LOSE THE BENEFIT OF THE if nullity is

PERIOD/TERM46 (ART. 1198) triggered by the
1. When debtor becomes insolvent after the obligation has been contracted, penalty of the
unless there is a guaranty or security for the debt; obligation.
2. When debtor does not furnish to the creditor the guarantees or securities 1. Rule on integrity of payment applies - the prestation must be
which were promised; RULES TO completely delivered. Debtor cannot choose one part of the
3. When debtor loses the established guarantees or securities by his fault or by ALL prestation and one part of the other. (ART. 1199(2))
fortuitous event, unless debtor provides substitute security (equally satisfactory); 2. Prestations which are impossible, unlawful, or which could
43 47
This is different from purely potestative condition dependent on the sole will of the debtor, If on due date, the debtor does not choose, the creditor should sue. If creditor wins, the court
which makes the condition void. will allow creditor to choose because the debtor waived his right to choose.
44 48
Neither of the parties can accelerate the payment. The debtor cannot be forced to pay before If creditor does not choose on due date, the debtor may not do anything. He will not be in
the period, neither can the seller be forced to accept payment before the period. default.
45 49
One of the practical uses of this is to avoid the accrual of interest. If on due date, the debtor does not choose, the creditor should sue. If creditor wins, the court
46
In this case, the creditor may collect judicially or extrajudicially. will allow creditor to choose because the debtor waived his right to choose.
not have been the object of the obligation cannot be chosen as Nature General Rule.51 Exception.
prestation. (ART. 1200(2))
Applies when:
[ALTERNATIVE AND FACULTATIVE] - obligation expressly so
1. The choice shall have no effect until it has been states;
communicated. It may be done implicitly50 or expressly. - when the law requires;
(ART. 1201) It will then become a pure obligation. (ART. 1205) - when the nature of the
2. Obligation becomes pure obligation when among one obligation requires
prestations, only one is practicable. (ART. 1202) solidarity
Division of Equal shares (proportional) One debtor may provide for
LIABILITIES IN ALTERNATIVE & FACULTATIVE OBLIGATIONS Obligation as there are creditors or the entire or part of the
debtors obligation to one or all
EVENT EFFECT creditors.
1. Through creditor’s act, the debtor Debtor may rescind the contract with EXN: There is a proof to
cannot make a choice according to the damages. (ART 1203) contrary. One creditor may claim for
terms of the obligation. the entire52 or part of the
2. Through the fault of debtor, all the Creditor is entitled for indemnity for obligation from one or all
things which are objects of alternative damages. (ART. 1204) debtors.
prestations have been lost, or the In case of death As per the share of the Creditor can continue with
compliance of the obligation has Indemnity is fixed based on the value of during litigation particular deceased debtor, the case. The remaining
become impossible. the last thing which last became provision in the Rules of living debtors will be
impossible to convey. Other indemnity Court provides that creditor retained as solidary
for damages may also be awarded. should file in the settlement debtors.53
3. One of the things is lost by fortuitous Debtor shall perform the obligation of estate proceedings.
event which the creditor should choose Rule on Mutuality Only the party privy to an Rule on mutual agency or
among the remainder, or which remains act shall be bound or representation applies:
if only one subsists. (ART. 1205) affected by the said act. 54
4. Loss of one of the things by fault of Creditor may claim any of those Each debtor in relation to
debtor subsisting, or the price of which has the creditors is regarded as
disappeared, plus damages. an agent or as a
(ART. 1205) representative of others,
5. Loss of the substitute or accessory Debtor not liable. Principal prestation and vice versa.
prestation through negligence of the would still be done. Rule on Default on Creditor: Must sue all Creditor may sue one or all
debtor (ART. 1206) Delivery of debtors for specific debtors.
6. Loss of the chosen substitute or Debtor is liable for the loss. Indivisible Object performance or resolution.
accessory prestation trough his delay, (ART. 1206)
negligence, or fraud 51
JSP said that in answering in the exam, “Joint without any special circumstance.”
52
Except when there are different period or condition applied to solidary debtors. E.g.:
OBLIGATIONS WITH MULTIPLE PARTIES C1 cannot demand to D1 to pay in whole the obligation because D2 has been given the benefit
ARTS. 1207-1222 JOINT SOLIDARY of the period. So D1 may only give a portion of his share to give effect to the period.
53
Boston v. CA doctrine. Solidary creditor can go after one or all debtors by virtue of the Civil
Code. Rule of Court cannot prevail over the Rule of Court on settlement of in the estate
proceedings, although creditor may choose this as an option.
50 54
By destroying the other choices, the debtor impliedly chose the remaining prestation. Citibank v. Sabiano: The foreign branch and local branch of a bank are separate entities.
Debtor: Default of one is RULE BETWEEN AND AMONG DEBTORS & CREDITORS
If SP is not possible, the default of all. Active Solidarity : Solidary Creditors
obligation will be Passive Solidarity : Solidary Debtors
converted to monetary 1. Debtor can pay any creditor.
liability plus damages. The 2. If there is a demand, payment should be made to
debtor who is RWA to ACTIVE SOLIDARITY the demanding creditor.
comply is liable only to the BETWEEN DEBTORS & 3. Each creditor can extinguish the obligation by
value of the thing CREDITORS any possible means.
corresponding to his share. 4. Rule on mutual agency applies: each creditor
The defaulting party is represents each other.
liable for his share plus 1. Rule on mutual agency applies: each creditor
damages. represents each other.
2. Assignment cannot be made to third party
Same rule goes for without consent of other creditors.
ACTIVE SOLIDARITY
creditors in mora 3. If a creditor performs a prejudicial act, he must
accipiendi. All of them AMONG CREDITORS
reimburse other creditors.
should be in default, 4. Collecting creditor has to account- liable to the
although it doesn’t mean others for the share of obligation corresponding to
that they are solidary them.
creditors. (ART. 1224) 1. Each or all debtors shall be liable to the creditor.
PASSIVE SOLIDARITY 2. If two or more debtors offer to pay, the creditor
Marsman v. Philippine Geoanalytics: There was a joint venture agreement to BETWEEN DEBTORS & has an option on which offer to accept.
which PGI was not a party. Hence, it should not adversely affect PGI. CREDITORS 3. Rule on mutual agency applies: each debtor
represents each other.
Terms Used to Indicate Solidarity in Obligation 1. If a debtor pays on behalf of other debtors, other
1. Jointly and Severally debtors should reimburse. 57
2. Jointly 2. There is no reimbursement if there is
3. Solidarily PASSIVE SOLIDARITY remission 58 (ART. 1220), obligation has
4. Each AMONG DEBTORS prescribed, or is illegal (ART. 1218).
5. Individually 3. There is no reimbursement from one debtor who
6. An accommodation party is solidary liable based on Negotiable Instruments becomes insolvent at the time of reimbursement.
Law55 (ART. 1217 (3))
7. Section 31 of the Corp. Code- a director who is guilty of bad faith or negligence
will be solidary liable with the other directors who approved the same act. DEFENSES AVAILABLE TO SOLIDARY DEBTORS (ART. 1222)
8. Liabilities based on tort or quasi-delict56 1. Personal defenses59
2. Defenses pertaining to the obligation itself60
55
Applied in Gonzales v. PCIB. In this case it provided for the requisites of an accommodation
party:
57
1. Signed as a drawer, maker, etc. ART. 1217 provides that paying debtor may also claim for interest for the payment already
2. Without receiving value therefor made, except if the payment is made before the debt is due.
58
3. For the purpose of lending his name to some other person. Except when one solidary debtor has already paid before the remission.
56
Applied in Lafarge Cement v. Continental Cement. Moreover, JSP provided for an example 59
Debtor 1 may offset the liability with Creditor’s existing liability to the former. Other debtors
where liabilities based on fraud is solidary. (Buying stocks without paying the price, setting it may raise also raise this as defense.
60
under REM in a loan, having it foreclosed, and thereafter buying it from the foreclosing bank). Debtor may challenge the obligation as void or has already prescribed.
RULES ON THE THING LOST IN PASSIVE OBLIGATION (ART. 1221) -When debtor defaulted in the payment of penalty
Event Effect -When debtor is guilty of fraud in the non-fulfillment of obligation
Without fault of the solidary debtors Obligation is extinguished. Mutual
restitution without damages. Purpose of Penalty Clause
By fault even of one solidary debtors All debtors are liable to the creditor for 1. As liquidated damages - it depends on the necessity of for the parties to prove
the price and the payment of damages the actual prejudice caused to the aggrieved party
and interest. 2. To ensure performance - to compel performance
Innocent solidary debtors may file an WHEN THE COURTS CAN REDUCE PENALTY (ART. 1229)
action against the guilty or negligent 1. When there is partial or irregular performance63
solidary debtor. 2. When the penalty is unconscionable or iniquitous 64
By fortuitous event after incurring All debtors are liable to the creditor for
default the price and the payment of damages MODES OF EXTINGUISHING AN OBLIGATION (ART. 1231)
and interest. 1. Payment
2. Loss of thing due
Innocent solidary debtors may file an 3. Condonation
action against the defaulting solidary 4. Confusion or Merger
debtor. 5. Compensation
6. Novation
DIVISIBLE AND INDIVISIBLE OBLIGATION (ART. 1223 - 1225) 7. Rescission
An obligation may be divisible or indivisible depending on: 8. Prescription
1. Agreement of the parties 9. Annulment
2. Object of the contract
3. Nature of the thing Other modes: Cancellation, Termination, Death, and Waiver.
4. Other special circumstances
PAYMENT (ART.1232)
Effect of Indivisible Obligation - It is not only delivery of money, but also performance or fulfillment of the
The debtor can perform the prestation in parts and the creditor cannot demand mandated prestation.
complete fulfillment of the obligation.
Requisites of Payment:
GR: The divisibility of the obligation does not alter the default rule of joint 1. Integrity65 of Payment - an obligation should be performed completely
obligation. (ART. 1210) 2. Identity of Payment- exact performance of the obligation
OBLIGATIONS WITH A PENAL CLAUSE

Kinds of Penalty (2) “Should this transaction turn out to be void, X shall pay _ amount.”
GR : Subsidiary / Alternative61 (ART. 1226) 63
In this case, the Court should determine whether the penalty is for reparation or
EXN : Joint / Cumulative (ART. 1226) compensation.
- When expressly stipulated by parties 62 Reparation: The penalty should be reduced based on the extent of performance.
Compensation: The penalty should not be reduced if it’s meant as punishment, except when it is
unconscionable or iniquitous.
61 64
However, under this kind, ART. 1227 provides that the debtor cannot exempt himself from To get away with this, JSP said that party must show its reasonableness- show that the penalty
the performance of the obligation by paying the penalty, except when this right is expressly is the basis of a contract and must be complied with in good faith; that the parties truly
granted to him. The same applies to the creditor. Exception to this is when the obligation should negotiated the contract; and that there is a completely informed consent on the penalties.
become impossible to be performed without fault. 65
Exceptions: Debtor’s substantial compliance in good faith, and waiver of an irregular or
62
(1) “In addition to any and all rights and remedies under the contract or under relevant laws.” incomplete performance by creditor.
TENDER OF PAYMENT is an offer to pay.66 It is the intention, willingness, and In other cases, at the domicile of the debtor or borrower.69
ability of the debtor to pay the creditor. It is not a payment nor does it extinguish
an obligation. RULES ON FULFILLMENT OF OBLIGATIONS
Basis Event Effect
GR: Pay in cash ART. 1234 Substantial compliance in Debtor may recover as
EXN: There is prior agreement or creditor accepted67 payment. good faith though there had been a strict
and complete performance
BSP Circular on limits of coins: less damages
Php 1, 5 & 10 coins : Valid tender until P 1,000 IHC v. Joaquin If there is only slight Quantum meruit applies:
Php .25 centavo : Valid tender until P 100 Suarez70 compliance + good faith
Equitable compensation to
New Pacific v. Seneris: A manager’s check is legal tender because it is as good as the work done.
cash.
OPTION
Tibajia v. CA: Checks issued by the debtor are not legal tender. - It is an outstanding offer to entering into a contract. The other party only needs to
notify the offeror to create a new contract.
Go Cinco v. CA : Generally, an SPA is not a tender of payment. However, in this
case, it has been held that the SPA68 is equivalent to such. Hence, there was an If there is no option money, the grantor can withdraw anytime, as long as there is
unjust refusal on the part of private lender to accept payment (SPA). no exercise of the option or acceptance by the grantee. Option money must be a
consideration distinct from the price. Earnest money71 is considered as part of the
WAIVER TO THE INTEGRITY OF PAYMENT (ART. 1235) consideration of the object (down payment).
1. Creditor knows that the payment is incomplete or irregular
2. Creditor does not protest or object RULES ON PAYMENT
3. Creditor accepted payment without any reservation GR: Debtor should pay.
EXN: Third party may pay.
Requisites: EVENT EFFECT
1. Existence of a valid right
PAYMENT BY
2. Information from the parties
Payment by third party Lender is not obliged to receive payment,
unless there is stipulation to the contrary.
Effect: The obligation is deemed fully complied with.
(ART. 1236)
RULES ON PAYMENT (ART.1251)
If X doesn’t want to reimburse It will be considered as donation, although such
GR : Shall be made in the place designated in the obligation
donation may lack requisites 72 of valid
EXNs :
donation.73
If it is to deliver a determinate thing, place where the object (thing) was at the
time the obligation was constituted
69
If debtor changes domicile in bad faith or after incurring delay, he shall borne the additional
expenses.
70
To get away with this problem, JSP said that you should establish compensated milestones
or % of completion. Otherwise, if you follow IHC facts, you should have a premium fee for
66
Generally, in monetary obligations, it happens when you present the money. the accomplishment of the main objective.
67 71
Far East Bank v. Diaz Realty: Since Far East accepted the check (even if it is as a deposit), it If grantee wants to consider this as an option money, there should bee a receipt stating that it
was held as a waiver of the requirement that the payment must be in Legal Tender. is an option to be exercised within a period of time.
68
This SPA grants the lender to receive the proceeds of the loan that his debtor would obtain 72
Donation and its acceptance must be in writing. Otherwise, it’s void.
73
from another lender (PNB). As far as the lender is concerned, the obligation has been extinguished.
be the basis of payment, unless there is an agreement to the contrary.
If X wants reimbursement:
Debtor knows about such X can compel creditor to subrogate him in his LEGAL COMPENSATION
payment rights, e.g. arising from mortgage, guaranty, or It is a mode of extinguishing to the concurrent amount, the obligations of those
penalty. persons who in their own right are reciprocally debtors and creditors of each other.
Debtor doesn’t know about X can only recover the amount which It takes place by operation of law, although it must be invoked.74
such payment redounded to the benefit of the debtor.
Requisites:
Payment by third party
If lender accepted, 1. Both parties are principally bound as debtor and creditor of the other on 2
incapacitated to pay Representatives of X can recover. separate transactions75;
PAYMENT TO 2. Both debts must consist in sum of money76, or if consumable, of the same kind
Debtor has the burden of recovering the of quality;
Payment is made to the wrong 3. Both debts are liquidated77, due78 and demandable;
payment. However, creditor may also claim to
party 4. Neither debt must be retained in a controversy commenced by third person and
the receiving third party.
Valid if: (ART. 1241) communicated with debtor (neither debt is garnished); and
- Creditor retained the thing delivered 5. Compensation must not be prohibited by law.
To the incapacitated creditor - Payment has been beneficial to him
INVALID COMPENSATION:
Otherwise, invalid. 1. Obligations arising from support
Valid if: (ART. 1241) 2. Obligations arising from criminal offense
- It has redounded to the benefit of the creditor. OTHER TYPES OF COMPENSATION
1. Conventional Compensation
No proof require if: -Compensation pursuant to the agreement of parties.
-After the payment, the 3 rd party acquires the
To the third party creditor’s rights 2. Faculatative Compensation
-The creditor ratifies the payment to the 3 rd -Combination of legal and conventional compensation. It is when compensation
party can take place at the option of a party who have some certain contractual or
-By creditor’s conduct, the debtor has been led legal benefit.
to believe that the third person had authority to
receive the payment RULE ON ESCALATION CLAUSE
To the creditor after the debtor Payment is invalid. Equitable v. Ng : If there is an escalation clause, there should be a deescalation
has been judicially ordered to
retain the debt 74
Compared to conventional compensation, which takes place when the parties agree to
compensate their mutual obligations even in the absence of some requisites. Also, the party who
EXTRAORDINARY INFLATION (ART. 1250) has the benefit of the relevant law can invoke the compensation, but the other cannot.
75
Requisites: Mondragon v. Sola: Since Sola undertook, in writing, to pay the obligation of his wife, he
1. A proclamation by the BSP that there is extraordinary inflation/deflation; became a debtor to Mondragon. Legal compensation applies.
76
United Airlines v. CA: There can bo no offsetting with respect to taxes.
2. A contractual relation between parties; and 77
First United v. Bayanihan: The amount of the repairs has been liquidated as the judgment of
3. Stipulation that parties recognize the effect of extraordinary inflation/deflation. the RTC determined the price. Hence, legal compensation is valid.
Lao v. Special Plans: Receipt of the repairs made, not mere provision of quotation, must be
Effect: given for the obligation to be considered liquidated.
78
The value of the currency at the time of the establishment of the obligation shall Benefit of the period must be respected. To get away with this, one who has the benefit may
waive his right in order to have legal compensation.
clause. Otherwise, it will violate the mutuality of contracts- the compliance with
the contract for the determination of the terms and conditions of the contract CESSION (ART. 1255)
cannot be left to the will of one of the parties. A debtor ceding all assets to the creditors so the creditors may liquidate the assets
and apply the proceeds to payment of the obligation to the creditors.
A contract of adhesion79 is construed against the one who drafted the contract
because any ambiguity would have been caused by the person who drafted it. It Debtor authorizes the creditors for the disposal of his assets to pay for the
does not violate mutuality of contracts. obligation. This is done through a valid SPA. 83
RULE ON MULTIPLE OBLIGATIONS ON ONE CREDITOR (ART. 1252) REQUISITES OF VALID CONSIGNATION84
RULE EFFECT 1. There MUST be a debt due.
Debtor will choose which obligation to -Without prejudice to the rights 80 of the 2. Creditor unjustly refused tender of payment or for some reason, payment cannot
pay. creditor be made.
If debtor doesn’t choose, creditor will -This must be with consent 81 of the 3. There must be prior notice.
choose. debtor. 4. There must be an action for consignation in court together with the payment.
Application of payment will apply by -Payment of penalty and interest first, 5. There must be a second notice after consignation.
operation of law. (Article 1254) then principal. 6. Court decision.
Payment will be applied to the most
onerous (most burdensome) obligation. In consignation, debtor may withdraw payment prior court approval or acceptance
If the debts due are of the same nature by the creditor. Creditor may also accept payment, and if such payment is short, he
and burden, the payment shall be should accept it with reservation.
applied to all of them proportionately.
Article 1254 Legaspi v. CA85 : The mere tender of payment before consignation should suffice
However, JSP said that this runs for the seller to exercise his right to repurchase.
counter to the rule on integrity of
payment. Also, it’s difficult to account. Hulganza v. CA : The filing of an action is sufficient to preserve the right to
repurchase because it is an enforcement of the right to repurchase.
DACION EN PAGO (ART. 1245)
It is the act of giving or transferring of ownership of property to the creditor as EXCEPTION (CONSIGNATION ITSELF WOULD SUFFICE)
accepted payment for monetary obligation. (ART. 1256)
1. Creditor is absent, unknown, or not present at the place of payment.
Extent of Extinguishment of Obligation in DEP 2. Creditor is incapacitated to receive payment.
Luzon Bank v. Enriquez: Dacion en Pago shall extinguish the obligation to the 3. Without just cause, the creditor refuses to issue a receipt.
extent of the value of the property (1) as agreed upon by parties, or (2) as may 4. Two or more persons claim the same right to collect. (Multiple claimants)
be proved. (Acceptance is material to extinguish).82
agreement. In this case, Luzon accepted the properties subject of the dacion without reservation.
79
You are presented a form and you will just affix your signature. 83
JSP : You do cession only if it’s possible for you to get complete discharge of the obligation.
80
Examples.: Otherwise, it does not make sense. It would be better to file an action under the Financial
(1) Integrity of payment - Excess payments shall not be applied to other obligation, unless Rehabilitation and Insolvency Act (FRIA) - debtor surrenders all his assets in an insolvency
creditor acknowledged such. In which case, the creditor must accept the payment with proceeding in the court. The Court will then decide how the assets should be distributed
reservation, e.g. “as partial payment”, because otherwise, implied waiver on his right to integrity following the rules and procedures in FRIA.
84
of payment would rule. These steps must be strictly followed because upon court decision granting consignation, the
(2) Benefit of the period - Creditor cannot be forced to accept payment not due and creditor will be liable for the consignation costs. Available remedy for the creditor to avoid such
demandable, unless it is stipulated by the parties. is to accept payment.
81 85
Notice to debtor would suffice. No objection = implied consent. In this case, buyer tendered his payment within the prescriptive period (5 yrs.) of his right to
82
Luzon Bank v. Enriquez: A dacion en pago completely extinguishes obligation due to the repurchase. However, he only consigned the payment after the prescriptive period.
5. When the title of the obligation has been lost. REQUISITES:
1. Parties could not have foreseen the event or change in circumstance.
Heirs of Luis Bacus v. CA: In an option to buy, if there is an option money or 2. The event or change in circumstance makes the performance of the contract
consideration distinct from the price, the lessor cannot withdraw option within the extremely difficult but not impossible.
option period. 3. It is not due to the act of the party in the difficulty of performing the prestation.
: Notice is sufficient to preserve right under option. 4. The contract is for a future prestation.
LOSS86 OF THE THING DUE (ART. 1262) Naga Telephone v. CA: Reformation is not the proper remedy but the Doctrine on
It is the impossibility of performing an prestation after the constitution of the Unforeseen Event (Rebuc Sic Stantibus) should apply. However, it was still
obligation. Otherwise, if it is during the time of the constitution of the obligation, granted by virtue of Rules on Equity.
it will be void.
PNCC v. CA: ART. 1266 pertains in an obligation to do, while ART. 1267
SCENARIO EFFECT contemplates all prestations.89
GR: Obligation is extinguished.
EXN: Difficulty in payment and change in political climate does not apply in this
- by law or stipulation, doctrine.
- by nature of the obligation requires
Loss of a determinate thing +
assumption of risk
without fault of debtor, or
-Proceed from a criminal offense87 CONDONATION or REMISSION
before debtor incurs default It is a gratuitous extinction of an obligation and partakes the nature of a
Then debtor is liable even for donation90. Hence, there must be an acceptance by the debtor. It has to comply the
fortuitous event. Debtor is liable for formal requirements of a donation, which is offer and acceptance must be in
damages. writing.
GR: Obligation is not extinguished.
EXN: The court shall determine Invalid or inofficious condonations:
whether, under the circumstances, the 1. Impairment of legitimes91
Loss of a generic thing 2. Done in fraud of creditors
partial loss of the obligation is so
important as to extinguish the
obligation. MERGER OR CONFUSION
GR: Presumption of debtor’s fault It is a mode of extinguishing an obligation through the combination of the debtor
EXNs: and the creditor in one person.
- There is proof to contrary, without
Loss of a thing in possession of debtor COMPENSATION
prejudice to ART. 1165
- There is earthquake, flood, storm, or It is offsetting of debts. It pertains to legal compensation92, which takes place by
other calamity. operation of law.
Physical or legal impossibility of Debtor shall be released from the
obligation to do + obligation. (ART. 1266) NOVATION
Without fault of debtor
88
The concerned party may ask the court for release from the obligation based on this doctrine.
DOCTRINE OF UNFORESEEN EVENTS88 (ART. 1267) 89
However, in this case the Court did not grant ART. 1267 because they held that PNCC should
have known the change in circumstance. (Change of political climate)
86 90
Loss will be subject to the Rules on Sale depending on who has ownership and who will be To avoid donation, creditor may resort to prescription of obligation and waiver of right.
91
bearing the loss. Legal entitlement of a certain heir to the estate of the deceased.
87 92
Exception: If the person who should receive it unjustly refuses. See p. 13 on Legal Compensation..
It is the extinguishment of an obligation by the substitution or change of the the contract cannot be left to the will of
obligation by a subsequent one which extinguishes or modifies the first, either- either contracting parties. Both parties
by changing the object or principal conditions93; or must consent to the object and the cause
by substituting another in place of the debtor; or of the contract. Either party should not
by subrogating a third person in the rights of the creditor. be allowed to maintain unilaterally the
terms and conditions of the contract.
Requisites of Novation: The parties to a contract may stipulate
1. There should be an old valid obligation anything in the contract as long as it is
3. Autonomy of Contract98
2. A new valid obligation not contrary to law 99 , morals, good
3. The new valid obligation should extinguish or modify the old obligation customs, public order or public policy.
GR: The contract binds and affects only
Two Ways of Novating an Obligation the parties, heirs, assignees.
1. Express Novation - by stipulation or agreement by the parties
2. Implied Novation - by utter incompatibility of the 2 obligations 94 EXN:
1. Contracts creating real rights bind
Milla v. People : Novation cannot extinguish criminal liability. 4. Principle of Relativity100 third persons (ART. 1312)
2. Protection from contracts intended to
CONTRACTS defraud creditors (ART.1313)
Essential Elements of a Contract95 3. Tortious interference (ART. 1314)
1. Consent of contracting parties 4. Stipulation in favor of 3rd party /
2. Object Stipulation pour autrui (ART. 1311(2))
3. Cause or consideration
Stages of a Contract 1. Contracts creating real rights bind third persons (ART. 1312)
1. Negotiation - discussion of the terms of the contract a. Registered mortgage will bind even third parties, if such registered mortgage
2. Perfection - meeting of the minds; happens upon delivery of prestation was sold or obtained by the third party. The mortgage will follow the property
3. Consummation - completion or performance of the terms agreed upon
Corporation may terminate this contract.” = VOID (to cure, add notice prior termination)
RULES ON CONTRACT PNB v. Rocamora: Escalation clause; Silence does not mean consent when there is no obligation
The contract is a law between parties to reply. To make this valid, the parties must include the clause granting the borrower the right to
1. Obligatory Force of Contract96 that should be complied with good accept and reject the adjustment. In case of rejection, the borrower must prepay- just like in
faith. Solidbank v. Permanent Homes.
98
2. Mutuality of Contract97 The determination of the stipulations in Tiu v. Platinum Plans: A non-compete clause is valid as long as there is reasonable limitations
as to time, place, and trade. [A restriction on the use of property is also valid.] However, this is
assailable under Philippine Competition Act which provides that act imposing restrictions on the
93
PNB v. Soriano: Incompatibility must be in the essential elements (prestation) of the sale of services concerning where, to whom, or in what form services may be sold or traded or
obligation. imposing conditions not to deal with competing entities, is prohibited. The reason is it would
94
Kwong v. Gargantos: There cannot be a Deed of Conditional Sale and Deed of Absolute Sale deprive the employee of a source of livelihood.
99
at the same time. There was also a change of objects. Ex.: Pactum commissorium (automatic appropriation by the creditor of the thing pledged or
95
The moment the parties agree on the object and cause, then you will have a valid contract. mortgaged upon the failure of the debtor to pay the principal obligation) cannot apply wherein
96
DOH v. HTMC: DOH requested the amendments to the consultancy agreements pursuant to the foreigner is the lender and a Filipino is the borrower and the thing mortgaged is the land.
guidelnines issued by the NEDA. HTMC did not agree. Hence, there’s no new contract or Should there be default, foreigner cannot automatically appropriate the land because by virtue of
meeting of the minds, and the original contract subsists in which the parties are bound to the Constitution, foreigners cannot own land.
100
comply. NAPOCOR v. Province of Quezon: NPC cannot claim tax exemption from tax in behalf of
97
GF Equity v. Valenzona: “If at any time during the contract, the Coach, in the sole opinion of NPC because the latter is not a privy to the contract between Mirant and Quezon. Also,
the Corporation, failts to exhibit sufficient skill or competitive ability to coach the team, the Province of Quezon can’t impose tax o NPC.
and will bind anyone who possess the property. CONSENT
b. Third party may have a claim after an attached (and also mortgaged to Requisites:
another party) property filed by him. Should the property be foreclosed, the first 1. Two distinct contracting parties
priority will be the amount due to the person in favor of the mortgage. The 2. Consent freely given by a capacitated party
residual value will go to the third party (attaching creditor). 3. Informed consent
c. Pledged shares sold to innocent buyers who exercised due diligence is
protected. Otherwise, buyers will be bound. GR: Consent must be expressed
EXN: When there is an obligation to reply, you have to accept or reject. Otherwise,
2. Protection from contracts intended to defraud creditors (ART.1313) silence means consent.
3. Tortious interference (ART. 1314) Pelayo v. Perez: Wife signed as witness in a contract is deemed as consent. Hence,
Requisites: sale of conjugal asset is a consensual contract that is perfected by mere consent.
a. There is a valid contract.
b. The third party is aware of the existence of the valid contract. 101 OFFER
c. The third party interferes without legal justification or excuse. 102 It is an invitation to create a contract. There is already a consent 105 by one party,
an object, and a cause. The only element missing is the acceptance of the other
EXN: party to trigger the existence of an obligation.
Tayag v. Lacson: There is no tortious interference when there is an enforcement
of the law. In this case, the 3 rd party merely prevents another from Acceptance must be unconditional and unqualified. It must be made during the
consummating an unlawful contract. 103 subsistence of offer.
4. Stipulation in favor of 3rd party / Stipulation pour autrui 104 (ART. 1311(2)) An offer cannot be accepted, or an acceptance would not result into a contract,
Limitless v. Quilala: Requisites: if at the time of the acceptance the offeror revoked it or the offeror loses legal
1. The stipulation in favor of the third person should only be a part, not the capacity through death, civil interdiction, insanity, or insolvency106.
whole, of the contract.
2. The contracting parties must have clearly and deliberately conferred a Change in terms of payment (cause or consideration) will not create an agreement.
favor in upon a third person, not a mere incidental benefit or interest. It will be a counter offer.
3. The favorabler stipulations should not be conditioned or compensated by
any kind of obligation. Crisscrossing
4. Neither of the contracting parties should represent the third party. If there is crisscrossing of an offer, revocation, and acceptance, receipt may be the
5. The third party must have communicated his acceptance to the obligor reckoning point; whichever is received ahead will prevail over later in
before its revocation. communication.
The mere acceptance but not reading the same would not allow the offeror to skirt
101 the effect of acceptance resulting in a contract because it would open a window for
Lagon v CA: There must be an exercise of due diligence to avoid tortious interference.
102
Gilchrist v. Cuddy: Malice is not yet required for award of damages to injured party. Mere fraud.
interference, even just for furtherance of financial interest is subject to damages. If there is
malice, then the award of damages will be higher. ART. 1325 :
Contrary to: Advertisements of sale are not yet a complete offer, unless they appear to be given
So Ping Bun v. CA: No claim for damages when motive is for financial interest but there is still
tortious interference. In effect, there is as if no tortious interference because the third party will
105
not be liable for damages. Except when offer is made in jest, wherein the party does not intend to be bound by the
103
JSP: The inducement must be the cause for the breach in tortious interference. If it was only obligation.
incidental, it cannot be a liability based on tortious interference. 106
Villanueva v. CA: The insolvency of the bank restrict the bank’s capacity to act, especially in
104 rd
Ex. Proceeds that go to 3 party relation to its property, by virtue of Art. 1323 CC.
otherwise. It means that the offer is complete and an acceptance will result to a EXN:
valid contract. Burden of proof is shifted in case the one who alleges the mistake or fraud is
illiterate or does not understand the language of the contract and the
ART. 1326 : contract was not explained to that party.114
Bidding107 is not yet a complete offer. The title is not yet transferred to the highest
or lowest bidder, unless the contrary is stated. Vice of consent ma be so intensive as to amount to lack of consent.115
WHO CAN GIVE CONSENT?

1. Juridical person
2. Natural persons Vices of Consent (Voidable Contract)
3. If married, spouse with other spouse’s consent 1. Mistake116
Requisites:
LEGALLY INCAPACITATED TO ENTER A CONTRACT108 a. It must be either regarding the identity or qualification of one of thee
1. Minor109 contracting parties
2. Insane110 b. Identity or qualification must have been the principal consideration of the
3. Deaf-mute who cannot write party in entering the contract.
4. Person with impaired mental facilities or legal incapacity (under influence of
drugs or intoxicated)111 2. Violence
5. Under hypnotic spell It is the use of physical force to get the consent.
6. Those suffering from special disqualifications 112
a. Under guardianship 3. Intimidation
b. Civil interdiction Requisites:
c. Conjugal Property a. It produces a well-rounded evil and fear
d. Entities under receivership b. It is unlawful117
c. It is against the person’s property or person, or the person/property of his
VITIATED CONSENT (ART. 1330 - 1334) spouse, ascendants or descendants
GR: One who alleges fraud or mistake or any vice of consent should prove it with d. It is the cause of consent
competent evidence.113
4. Undue Influence
107
Public Estates v. Bolinao: The reservations in bidding entitles the government to reject any It involves moral coercion. The influence exerted must have so overpowered
bid, including the best bid. [The reservation clause in biddings is not exclusive for government or subjugated the mind of a contracting party as to destroy the latter’s free
transactions.]
108
Contracts entered into by these persons are VALID BUT VOIDABLE. As a vice of consent,
this must be proven.The law presumes that their consent is not complete. mental faculties to the extent that he is unable to properly, intelligently and fairly understand the
109
The contract is valid to the extent that it benefits the minor. To make contract completely provisions of said contract. This must be proven by clear and convincing evidence.
114
valid: Dela Cruz v. Sison: An illiterate party must first establish such fact in order for the burden to
ADMINISTRATION : Legal representative / guardian can do it. shift to other party to prove that there is no vitiation of consent on the part of illiterate person.
DISPOSITION : Get court approval. There is a presumption of validity of notarized and other public documents.
110
The contract is valid if it is done during lucid interval. Same rules as with minors apply to 115
Paragas v. Heirs of Balacano: “Gregorio purportedly executed a deed during the last stages
make contract completely valid. of his battle against his disease...” raises serious doubt as to whether Gregorio could’ve fully
111
Case to case basis. Voidable as long as the mental faculties are impaired. read or understood the contents of the documents he signed or of the consequences of his act.
112 116
If disqualified pursuant o a specific special law, the rule generally is that contract will be Unavailing if te party is in a position to know the facts by mere exercise of due diligence.
117
void. There is no intimidation if:
113
Yason v. Arciaga: Mere weakness of mind alone, without imposition of fraud, is not ground a. A party is merely exercising a lawful claim or right.
for vacating a contract. A person is not incapacitated to enter into a contract merely because of b. The party is not capable of inflicting the injury threatened.
advanced years or by reason of physical infirmities, unless such age and infirmities impair his c. Intimidation is not the cause of the party.
agency, making such party express the will of another rather than his own. 118 lawful, unless the debtor proves the contrary124. (ART. 1354)
5. Causal Fraud119 ART. 1355 : Lesion or inadequacy of cause shall not invalidate a contract, except:
Requisites: a. In cases specified by law
a. The contracting party should perpetrate the fraud to get the consent of the b. There had been fraud, mistake and undue influence
other party120
b. The fraud should be the cause for the consent of the party NEGATION OF CAUSE
c. The fraud must be serious GR: Motive don’t affect contracts.
d. It must result in damage or injury to the aggrieved party EXN: When it predetermines the cause. 125 Hence, contract is void.
SIMULATED CONTRACTS (ART. 1345 - 1346)
1. Absolutely Simulated Contracts121 OBJECT ART. 1347 - 1349
The parties do not intend to be bound by the contract. Consent or cause is This refers to service, or any undertaking that is the subject matter of the
missing. Hence, void. obligation. It is the prestation. In a reciprocal obligation, object and cause may
sometimes be interchangeable.
Remedy of Creditor 122: Sue for specific performance, since it is still an asset of
the debtor. Requisites:
1. Must be physically and juridically possible
2. Relatively Simulated Contracts123 2. Must be determinate or determinable based on the source of an obligation
The parties have a real contract but they conceal their true agreement. (based on contract)
3. Must have pecuniary value
Remedy: Reformation
ART. 1447 : Contracts on future inheritance126 is void.
CAUSE
It is the principal or essential reason or consideration of a party in entering a FORM OF CONTRACTS
contract. It is the prestation. In a reciprocal obligation, object and cause may GR: The moment parties agree on the cause and the object, they will have a
sometimes be interchangeable. contract.
EXN: WHen law requires for validity, enforceability, and proof (a specific form).
Although it does not appear in the contract, it is presumed that it exists and is
Example of Contracts that has Requirement to be Valid127:
118
DBP v. CA: There is no undue influence if it is a threat to enforce a just or legal claim 1. Donation : Donation and acceptance must be in writing.
through competent authority. 2. Pre-nuptial agreement : There are formal requirements under Family Code.
119
Exceptions: 3. Agreement or payment of interest : Must be in writing.
1. Usual exaggerations in trade when the other party had opportunity to know the facts. (ART.
1340) Example of Contracts that has Requirement to be Enforceable128:
2. An opinion (ART. 1341), unless he is an expert and the other party relied on his expertise.
120 1. Contracts involving those listed under Statute of Fraud must be in writing.
If it is done by third party, it can be mistake but not fraud.
121
Manila Bank v. Silverio: Characteristics of ASC: 2. Real estate mortgages should be registered with the relevant registry of deeds
(a) Insufficient consideration, or (b) not a result of fair and regular private transaction
Cruz v. Bancom Finance: Deed of sale, in which stated consideration had not in fact been paid,
124
was a false contract; hence void. It was executed not to effect transaction, but for the other party Jurisprudence provides that mere allegation, even if under oath, is not enough. It must be
to have acquire loan. proven.
122 125
JSP prefers creditors to use this because unlike in rescissible contracts, creditor need not be a See E. Razon v. Philippine Ports & Uy v. CA.
126
creditor prior the conveyance and there is no prescriptive period. Trick is to check whether there This means succession has not yet opened at the time of the execution of the contracts.
is payment of price. Succession will not open until the ascendant dies, by operation of law.
123 127
Heirs of Balite v. Lim: If the parties state a false cause in the contract to conceal their real Failure to meet requirement would render the contract void.
128
agreement, then such a contract is relatively simulated. Contract is valid (it has all the essential requisites), but is unenforceable.
in order to be enforceable against third persons. Requisites:
3. Pledge can be enforceable against third parties if it is public instrument, 1. Meeting of the minds of the parties to the contract
meaning acknowledged before a notary public. 2. Instrument does not express the true intention of the parties
3. Due to mistake132, fraud, inequitable conduct133 or accident. 134
Example of Contracts that has Requirement for Proof:

1. Express trust 129 involving real property should be proved by a written Emilio v. Rapal: The burden of proof is on the party seeking reformation and they
instrument. Parole evidence cannot be used to establish the existence of an express should make the proper allegations in the complaint when filed in proper court.
trust involving real property or an immovable.
ART. 1357 : Remedy that entitles party to a contract to compel the other party to Cases Wherein Reformation is Not Available (by law)
execute the proper form. This remedy assumes that the contract is valid and 1. Simple Donation Inter Vivos - gratuitous act
enforceable. It does not apply if the form is necessary for its validity or 2. Wills - gratuitous act
enforceability. 3. Void Contract
ART. 1358 : This requires list130 of of documents to be in public document INTERPRETATION OF CONTRACTS (ART. 1370)
(notarized). However, it is not a requirement for validity, enforceability or proof. It GR : There must be an ambiguity. Otherwise, or if the contract is clear, there is no
is only for convenience- as readily available as admissible evidence. room for interpretation.
In case wherein this is the problem (meaning, not notarized), neither party can If there are doubts referring to incidental circumstances, we have to distinguish:
raise this article to nullify a contract because it is a private instrument. Party can Gratuitous Contract : Interpretation should be in favor of the least transmission
compel the other to execute the proper form pursuant to Article 1357. of rights because the law assumes that the party will preserve its lease rights, if
possible.
REFORMATION131 (ART 1359)
It is a remedy of a contracting party to make a contract or documentation reflect Onerous Contract : Interpretation should be in favor of the greatest reciprocity
the true agreement of the parties. of interest.
FOUR INFIRM OR DEFECTIVE CONTRACTS:

129
A. Rescissible Contracts
TRUST : It is when the real owner (trustor/beneficiary) buys a property and places it under
the name of the trustee. Owner is the real owner of the property but does not want to appear as
B. Voidable Contracts
owner on record. C. Unenforceable Contracts
130
The following must appear in a public document: D. Void Contracts
(1) Acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property; RESCISSIBLE CONTRACTS
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal -All elements are present.
partnership of gains;
-Valid until rescinded
(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 document, or should prejudice a third person -Due to economic prejudice or lesion (recognized by law) caused to the
(representation); contracting party or some party
(4) The cession of actions or rights proceeding from an act appearing in a public document. -Prescriptive period commences from the day it has become clear that there are no
All other contracts where the amount involved exceeds P500 must appear in writing, even a other legal remedies by which the creditor can satisfy his claims.
private one.
131
PCI LEasing v. Trojan: The Court reformed the contract to be a loan with chattel mortgage,
and not a financial leasing. “Financial leasing contemplates the extension of credit to assist a 132
Same with fraud: Typographical errors.
133
buyer in acquiring movable property, which he can use and eventually own. If the movable Insertion of an extra page with other provision in a contract.
134
property already belonged to the borrower-lessee, the transaction between parties was a loan wth These only prevent the documentation from reflecting the true agreement, unlike in vices of
mortgage in the guise of lease.” consent.
-Mutual restitution on the part of the parties in a rescissible contract Reliance on badges of fraud is also not enough. You have to establish fraud by
also:
(ART 1381): 3. Showing extraordinary discrepancy between the FMV and the price to pay;
(1) Those which are entered into135 by guardians whenever the wards whom they 4. Other factors like the relationship between X and the shareholder;
represent suffer lesion by more than 1/4 of the value of the things which are object 5. Buyer is not alleging his right over the property.
thereof;136
(2) Those agreed upon in representation of absentees, if the absentee suffer lesion VOIDABLE CONTRACTS
by more than 1/4 of the value of the things which are object thereof; 137 -There is an infirmity with respect to an essential element - consent
(3) Those undertaken in fraud of creditors when the latter cannot in any other -Valid until annulled
manner collect the claims due them; -Mutual restitution141 plus damages
(4) Those which refer to things under litigation if they have been entered into by -Relevant party whose consent is vitiated may annul the contract 142 (see footnote
the defendant without the knowledge and approval of the litigants or of competent 108)
judicial authority (lis pendens); -Whoever alleges mistake or fraud has the burden of proving it, unless you have
(5) All other contracts declared by law to be rescissible. the rule of shifting burden143.
-May be ratified by party whose consent is vitiated
(ART. 1382):
Payments made in a state of insolvency for obligations to whose fulfillment the The Roman Catholic Church v. Pante: There can be no fraud when the person
debtor could not be compelled at the time they were effected, are also alleging fraud is in a position to know such.
rescissible.138
Sps. Viloria v. Continental: Failure to establish fraud because the basis was only
BADGES OF FRAUD (ART. 1387) the testimony of the husband. It must be based on clear and convincing evidence.
These are the acts that are presumed fraudulent 139:
1. Donation done when the donor did not reserve sufficient property to pay all To cure defects of contract:
debts contracted before the donation 1. Minor : Appropriate legal representative.
2. Onerous conveyance of title (sale of all properties) when there is a judgment 2. Express and Implied144 Ratification
against debtor.
When prescription starts:
Union Bank v. Ong: There is a presumption of validity of contracts 140 when (1) 1. Minor : prior reaching legal age
there was sufficient consideration, and (2) it is a result of a fair and regular private 2. Insane : during lucid interval
transaction. In fraudulent contracts, insolvency is not necessary to constitute a 3. Intimidation, violence, undue influence : From the time of cessation of vice of
transaction to be in defrauding of creditors. consent.
4. Mistake or fraud : From the time of knowledge of such
135
*As long as vice of consent continues, the period does not commence.
It involves act of administration, not involving acts of dominion or ownership because it
needs court approval.
136
The ward may rescind, not the legal representative. If it is made before prescription (4 yrs.), UNENFORCEABLE CONTRACTS (ART. 1403)
there will be mutual restitution.
137 141
The absentee may rescind, not the legal representative. If it is made before prescription (4 If thing can no longer be returned, then its monetary value would be the alternate plus
yrs.), there will be mutual restitution. damages. In cases of minors at the time of loss, they are not obliged to return, unless the minor
138
Example: Before the first debt to Creditor 1 became due, debtor paid for his second debt retained the property or somehow benefited from it.
142
(secured by REM) to Creditor 2 which was not yet due. Then, debtor became insolvent. Benefit In some case, legal representatives, and creditors pursuant to accion subrogatoria may also
of the period wasn’t lost when he became insolvent, as far as the second debt is concerned. annul.
143
Creditor 1 can rescind payment to second debt. See footnote 114.
139 144
In effect, burden of proof shifts. Manzano v. Lazaro: There is implied ratification by silence and accepting benefits of the
140
This was well-established in this case. contract.
VOID CONTRACTS (ART. 1409)
Categories of Unenforceable Contracts: -Don’t have prescriptive period
1. Those entered by unauthorized agents145 -Remedy: Re-execution
2. Those entered by parties both legally incapacitated
3. Those violating the Statute of Frauds GR: Parties cannot take actions against each other. They cannot recover what they
have been given.
Statute of Frauds : The following must be in writing and subscribed by the party EXN: Parties can recover what they have given if the policy of the law will be
charged: served. Unjust enrichment may be a defense.
a. Agreement that will be performed after one year from the making
b. Special promise to answer for debt, default or miscarriage of another Kinds:
(surety/guarantee) 1. Those lacking essential element
c. Agreement made in consideration of a marriage other than usual promise to 2. Those contrary to law
marry
d. Sale of personal property at a price not less than 500 pesos NATURAL OBLIGATIONS
e. Agreement for the leasing for a longer period than one year146, or sale of real All elements of obligation are present, except the juridical tie. There is no
property, or of an interest therein compulsion on the concerned party to perform the prestation.
f. A representation as to the credit of a third person
When the debtor knew fully well that the obligation has already prescribed,
Orduna v. Fuentebella: When there has already been a partial performance, it is however, he nonetheless paid, he cannot recover. (ART 1424)
taken out of coverage of the Statute of Frauds. Hence, valid and enforceable.
When the debtor knew fully well that the obligation has already prescribed, a third
Torcuator v. Bernabe: The written note or memorandum, as contemplated by Art. person paid for his debt, and he nonetheless paid the third person, he cannot
1403 of the CC, should embody the essentials of the contract. The SPA does not recover. (ART 1425)
contain the essential elements of the purported contract and, more tellingly, dos
not even refer to any agreement for the sale of property. ESTOPPEL (ART. 1431)
An admission or representation is rendered conclusive upon the person making it,
Rosencor v. Inquing: Lists under Statute of Frauds are exclusive and right of first and cannot be denied or disproved as against the person relying thereon.
refusal is not included.
Requirements of the party claiming estoppel:
Dao Heng Bank v. Laigo: Dacion en Pago should also comply with Statute of 1. Lack of knowledge or means of the knowledge of the true as the facts in
Frauds because it is also a form of sale of real property. question
2. Reliance in good faith upon the conduct or the statements of the party to be
estopped
145
3. Action or inaction based on the conduct or statement of the party to be estopped
Specific performance is unavailing, except when: (1) the person being unauthorizedly
resulting to injury, detriment, or prejudice.
represented has an apparent relationship with unauthorized agent; (2) the person is estopped
from questioning the authority of unauthorized agent; or (3) by the person’s acts, creditor was
led to believe that unauthorized agent has authority to enter into a contract. However, creditor Requirements of the parties sought to be estopped:
may go after unauthorized agent. 1. Conduct amounting to false representation or concealment of material facts or
calculated to convey impression that the facts are otherwise done those which the
Alcantara v. Nido: Unenforceable contracts must be valid. However, sale of real property by an parties subsequently attempts to assert
agent without SPA from the principal is void due to lack of consent by the owner.
146
Example: Extension of Lease for Another more than 1 year.
2. Intent or at least expectation that this conduct shall be acted upon or at least
GR: It should be in writing influenced by the other party. The misrepresentation or conduct is done for the
Defense: Argue that it is an amendment of contract, not another contract extending lease. Hence, purpose of leading the other party to act in a particular way.
not covered by Statute of Frauds.
3. Knowledge of the actual facts. record and he will be first to get sued in case of litigation.
Kinds of Estoppel (ART. 1433) 2. Implied :

1. In pais : Where a person is bound by certain acts or representation acted upon -Created by operation of law
another -It is when the real owner (trustor/beneficiary) buys a property and places it
2. By deed: Estoppel in writing or acts - deeds under the name of the trustee. Owner is the real owner of the property but does
Others: not want to appear as owner on record.
3. Estoppel by judgment
4. Estoppel by laches - Doctrine of Stale Demands. It is the failure of the party to -Oco v. Limbaring: The purchase of things for the children is presumed to be a
assert a right within a reasonable time despite the benefit to do so. gift or donation rather than an implied resulting trust. The burden or proving the
5. Agency by estoppel - When you allow agents to represent you. implied trust is incumbent upon the person alleging the trust.
Laches -Creditor may go after the trustor/beneficiary if creditor is able to prove that the
The failure or neglect for unreasonable and unexplained length of time to do that trustor/beneficiary is the principal and the trustee is only an agent, unless, the
which by due diligence could have been exercised by the party. trustor/beneficiary and the trustee acted by fraud. It will be solidary liability
based on a tort.
GR: The party is entitled to the prescriptive period
EXN: In special cases, a relevant party can invoke this- especially when debtor is -Tala Realty v. CA: Implied trust cannot exist if it is contrary to law for being
led to believe that there will be no legal actions forthcoming. void.
Estoppel in State -Ringor v. Ringor: Express trust involving immovable may be proven by parole
GR: State cannot be estopped evidence when there is partial execution. Express trust may be established by
EXN: In a case involving monetary board with respect to a rural bank, the Court oral declaration. Express trust cannot prescribe, unless repudiated by the trustee.
allowed estoppel to be claimed against the government. There was a deliberate Torrens title does not vest ownership and cannot be used to repudiate the trust.
attempt to lead the party claiming estoppel that the government would act in a
particular way. CONSTRUCTIVE IMPLIED TRUST (ART. 1453)
Sale of a property whereby third party will hold the property on behalf of the
TRUST owner.147
It is when the real owner (trustor/beneficiary) buys a property and places it under
the name of the trustee. Owner is the real owner of the property but does not want SECURITY ARRANGEMENT IN TRUST (ART. 1454)
to appear as owner on record. If an implied trust (created by law) was made in order to secure an obligation and
such obligation has been fulfilled when it becomes due, grantor may demand the
The 10 year prescriptive period is from the time the trustee rejects or renounces reconveyance of property to him.
the trust.
Manila Bank v. Teodoro: The Court characterized the transaction as a pledge,
Kinds of Trust: wherein certificate of stocks representing the shares are delivered to the lender,
1. Express : and the lender holds it as long as the obligation is unpaid. [JSP]: Compared to ART.
-Created by contract 1454, there is no transfer of ownership, but a delivery of the personal property
-Takes form of a Declaration of Trust or a Trust Agreement (but no required used as a collateral. You have a new set of rules governing the transaction and it is
form) outside the trust provisions because in this case, it will deal on foreclosure.
-As trustor, you can stipulate that the trustee should account for and remit all the
fruits and should only act as per instruction of the trustor CLASSIC CONSTRUCTIVE TRUST (ART. 1456)
-Trustee should ask for an indemnity agreement because the trustee holds all the
147
Usually done by lenders to acquire security in a loan.
Of the property is acquired through mistake or fraud, the person obtaining it is, by a. Adverse
force of law, considered a trustee of an implied trust for the benefit of the person b. Public
from whom the property comes. c. Peaceful
d. Uninterrupted151
Aznar Brothers v. Aying: Of the heirs, 7 out of 9 conveyed the land to buyer. With TACKING PRESCRIPTION
respect to the 2 heirs, the contract is void. There is mistake and fraud on the part of The possession of former possessor from which the current possessor acquired the
the 7 heirs because they represented that they owned the entire land. There became property will be tacked to his possession. There must be a relation, conveyance or
an implied constructive trust. The 10-year prescriptive period148 is from the time some mode of acquisition. Otherwise, there is no tacking.
of registration of the sale because it is a constructive trust without fiduciary
relation. However, in this case, there was a void registration. So the reckoning date PRESCRIPTION OF ACTIONS
is the date of notice to the 2 heirs about the sale. Actions prescribed by mere lapse of time takes by law. The reckoning of the
commencement of the prescriptive period:
But if the heirs were in possession of property, the prescription will constinue
because they can ask for reconveyance. Rescissible contracts :
PRESCRIPTION 1 year -Forcible entry and detainer

Kinds of Prescription -Defamation
1. Acuisitive149 - Mode of acquiring ownership 4 years -Injury to the rights of the plaintiff
ORDINARY EXTRAORDINARY -Quasi-delict
Real Property 10 years 30 years 5 years All other actions whose periods are not fixed or are in other laws
Personal Property 4 years 8 years [from the time the right of action accrues]
6 years -Oral contract
2. Extinctive - Extinction of the right of action -Quasi contract
8 years Actions to recover movables from the time the possession is lost
Who can have the benefit of prescription: 10 years -A mortgage action
GR: Anyone who is in a position to defend himself (ART. 1107) -From the time the right of action accrues:
EXN: The State, between husband and wife (ART. 1109) -upon a written contract
EXN to the EXN: Patrimonial property of the State -upon an obligation created by law
-upon a judgment
Persons with capacity to alienate a property may renounce prescription already 30 years Real actions over immovables
obtained, but not the right to prescribe in the future.
Requisites of Ordinary Acquisitive Prescription

1. Possession in the concept of the owner*
2. Good faith
3. Just title150
*Possession must be:
148
It’s a prescription to recover, not to declare the contrat void.
149
Any property that is a proper object of a contract may be bound by acquisitive prescription,
151
except state property/patrimonial property. Interruption may be:
150
Tan v. Ramirez:Just title could not be based on a compromise agreement [except, when there a. NATURAL: physical possession is interrupted (more than a year or so).
is a provision conveying ownership]. It may be a means of terminating litigation. b. CIVIL: Effected through service of judicial summons, except possessor wins the case.
COMMENCEMENT OF PRESCRIPTION OF ACTIONS
Rescissible contracts When all the requisites of a given cause
of action arise.
In case of breach From the time breach of contract
occurred.
All kinds of prescriptions when there is From the day they may be brought
no special provision which ordains
otherwise
Enforcement of obligations to pay From the last payment of annuity or of
principal with interest or annuity the interest
Action to demand the fulfillment of From the time judgment became final
obligations declared by a judgment
Action to demand accounting From the day the persons who should
render the same cease in their functions
Action arising from the result of the From the date hen said result was
accounting recognized by agreement of interested
parties
Fortuitous event Not to be reckoned against creditor
INTERRUPTION OF PRESCRIPTION OF ACTIONS

-Written extrajudicial demand by the creditor
-Acknowledgment of debt by the debtor
-Action filed before the court
END
Good Luck! :)
-H. V. Ortega Batch 2021

Oblicon Finalsready

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Oblicon Finalsready

Caricato da

Copyright:

Formati disponibili

OBLICON FINALS READY! d.

Four Essential Elements of Obligation Remedies in Obligation to GIVE

Creditors may also use this action to

Requisites of Accion Pauliana (Rescission under ART. 1381)

CONSTRUCTIVE FULFILLMENT (ART. 1186) PROTECTION OF RIGHT OF CREDITOR (ART. 1188)

17 PAYMENT BY MISTAKE PRIOR TO THE OCCURENCE OF

GR : If there is a period designated, it is presumed to it is for the benefit of both Loss or

WHEN CAN THE DEBTOR LOSE THE BENEFIT OF THE if nullity is

OBLIGATIONS WITH A PENAL CLAUSE

WHO CAN GIVE CONSENT?

Example of Contracts that has Requirement for Proof:

FOUR INFIRM OR DEFECTIVE CONTRACTS:

Kinds of Estoppel (ART. 1433) 2. Implied :

PRESCRIPTION 1 year -Forcible entry and detainer

Requisites of Ordinary Acquisitive Prescription

*Possession must be:

INTERRUPTION OF PRESCRIPTION OF ACTIONS

FINALS READY IN OBLI-CON - H.V. ORTEGA 2021 Page 25

Potrebbero piacerti anche