The Civil Code of the Philippines Preliminary Title, on Human Relations, and of

AN ACT TO ORDAIN AND INSTITUTE THE CIVIL Title XVIII of this Book, regulating damages.
CODE OF THE PHILIPPINES (1092a)

BOOK IV Art. 1162. Obligations derived from quasi-delicts

shall be governed by the provisions of Chapter
OBLIGATIONS AND CONTRACTS 2, Title XVII of this Book, and by special laws.
(1093a)
Title. I. - OBLIGATIONS

CHAPTER 1 CHAPTER 2
GENERAL PROVISIONS NATURE AND EFFECT OF OBLIGATIONS

Art. 1156. An obligation is a juridical necessity Art. 1163. Every person obliged to give
to give, to do or not to do. (n) something is also obliged to take care of it with
the proper diligence of a good father of a family,
Art. 1157. Obligations arise from: unless the law or the stipulation of the parties
requires another standard of care. (1094a)
(1) Law;
Art. 1164. The creditor has a right to the fruits of
(2) Contracts; the thing from the time the obligation to deliver it
arises. However, he shall acquire no real right
(3) Quasi-contracts; over it until the same has been delivered to him.
(1095)
(4) Acts or omissions punished by law;
and Art. 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the
(5) Quasi-delicts. (1089a) right granted him by Article 1170, may compel
the debtor to make the delivery.
Art. 1158. Obligations derived from law are not
presumed. Only those expressly determined in If the thing is indeterminate or generic, he may
this Code or in special laws are demandable, ask that the obligation be complied with at the
and shall be regulated by the precepts of the expense of the debtor.
law which establishes them; and as to what has
not been foreseen, by the provisions of this If the obligor delays, or has promised to deliver
Book. (1090) the same thing to two or more persons who do
not have the same interest, he shall be
Art. 1159. Obligations arising from contracts responsible for any fortuitous event until he has
have the force of law between the contracting effected the delivery. (1096)
parties and should be complied with in good
faith. (1091a) Art. 1166. The obligation to give a determinate
thing includes that of delivering all its
Art. 1160. Obligations derived from quasi- accessions and accessories, even though they
contracts shall be subject to the provisions of may not have been mentioned. (1097a)
Chapter 1, Title XVII, of this Book. (n)
Art. 1167. If a person obliged to do something
Art. 1161. Civil obligations arising from criminal fails to do it, the same shall be executed at his
offenses shall be governed by the penal laws, cost.
subject to the provisions of Article 2177, and of
the pertinent provisions of Chapter 2,
This same rule shall be observed if he does it in Art. 1172. Responsibility arising from negligence
contravention of the tenor of the obligation. in the performance of every kind of obligation is
Furthermore, it may be decreed that what has also demandable, but such liability may be
been poorly done be undone. (1098) regulated by the courts, according to the
circumstances. (1103)
Art. 1168. When the obligation consists in not
doing, and the obligor does what has been Art. 1173. The fault or negligence of the obligor
forbidden him, it shall also be undone at his consists in the omission of that diligence which
expense. (1099a) is required by the nature of the obligation and
corresponds with the circumstances of the
Art. 1169. Those obliged to deliver or to do persons, of the time and of the place. When
something incur in delay from the time the negligence shows bad faith, the provisions of
obligee judicially or extrajudicially demands from Articles 1171 and 2201, paragraph 2, shall
them the fulfillment of their obligation. apply.

However, the demand by the creditor shall not If the law or contract does not state the
be necessary in order that delay may exist: diligence which is to be observed in the
performance, that which is expected of a good
(1) When the obligation or the law father of a family shall be required. (1104a)
expressly so declare; or
Art. 1174. Except in cases expressly specified
(2) When from the nature and the by the law, or when it is otherwise declared by
circumstances of the obligation it stipulation, or when the nature of the obligation
appears that the designation of the time requires the assumption of risk, no person shall
when the thing is to be delivered or the be responsible for those events which could not
service is to be rendered was a be foreseen, or which, though foreseen, were
controlling motive for the establishment inevitable. (1105a)
of the contract; or
Art. 1175. Usurious transactions shall be
(3) When demand would be useless, as governed by special laws. (n)
when the obligor has rendered it beyond
his power to perform. Art. 1176. The receipt of the principal by the
creditor without reservation with respect to the
In reciprocal obligations, neither party incurs in interest, shall give rise to the presumption that
delay if the other does not comply or is not said interest has been paid.
ready to comply in a proper manner with what is
incumbent upon him. From the moment one of The receipt of a later installment of a debt
the parties fulfills his obligation, delay by the without reservation as to prior installments, shall
other begins. (1100a) likewise raise the presumption that such
installments have been paid. (1110a)
Art. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or Art. 1177. The creditors, after having pursued
delay, and those who in any manner contravene the property in possession of the debtor to
the tenor thereof, are liable for damages. (1101) satisfy their claims, may exercise all the rights
and bring all the actions of the latter for the
Art. 1171. Responsibility arising from fraud is same purpose, save those which are inherent in
demandable in all obligations. Any waiver of an his person; they may also impugn the acts which
action for future fraud is void. (1102a) the debtor may have done to defraud them.
(1111)
Art. 1178. Subject to the laws, all rights acquired The condition not to do an impossible thing shall
in virtue of an obligation are transmissible, if be considered as not having been agreed upon.
there has been no stipulation to the contrary. (1116a)
(1112)
Art. 1184. The condition that some event happen
at a determinate time shall extinguish the
CHAPTER 3 obligation as soon as the time expires or if it has
DIFFERENT KINDS OF OBLIGATIONS become indubitable that the event will not take
place. (1117)
SECTION 1. - Pure and Conditional Obligations
Art. 1185. The condition that some event will not
Art. 1179. Every obligation whose performance happen at a determinate time shall render the
does not depend upon a future or uncertain obligation effective from the moment the time
event, or upon a past event unknown to the indicated has elapsed, or if it has become
parties, is demandable at once. evident that the event cannot occur.

Every obligation which contains a resolutory If no time has been fixed, the condition shall be
condition shall also be demandable, without deemed fulfilled at such time as may have
prejudice to the effects of the happening of the probably been contemplated, bearing in mind
event. (1113) the nature of the obligation. (1118)

Art. 1180. When the debtor binds himself to pay Art. 1186. The condition shall be deemed
when his means permit him to do so, the fulfilled when the obligor voluntarily prevents its
obligation shall be deemed to be one with a fulfillment. (1119)
period, subject to the provisions of Article 1197.
(n) Art. 1187. The effects of a conditional obligation
to give, once the condition has been fulfilled,
Art. 1181. In conditional obligations, the shall retroact to the day of the constitution of the
acquisition of rights, as well as the obligation. Nevertheless, when the obligation
extinguishment or loss of those already imposes reciprocal prestations upon the parties,
acquired, shall depend upon the happening of the fruits and interests during the pendency of
the event which constitutes the condition. (1114) the condition shall be deemed to have been
mutually compensated. If the obligation is
Art. 1182. When the fulfillment of the condition unilateral, the debtor shall appropriate the fruits
depends upon the sole will of the debtor, the and interests received, unless from the nature
conditional obligation shall be void. If it depends and circumstances of the obligation it should be
upon chance or upon the will of a third person, inferred that the intention of the person
the obligation shall take effect in conformity with constituting the same was different.
the provisions of this Code. (1115)
In obligations to do and not to do, the courts
Art. 1183. Impossible conditions, those contrary shall determine, in each case, the retroactive
to good customs or public policy and those effect of the condition that has been complied
prohibited by law shall annul the obligation with. (1120)
which depends upon them. If the obligation is
divisible, that part thereof which is not affected Art. 1188. The creditor may, before the
by the impossible or unlawful condition shall be fulfillment of the condition, bring the appropriate
valid. actions for the preservation of his right.
The debtor may recover what during the same to the debtor, are laid down in the preceding
time he has paid by mistake in case of a article shall be applied to the party who is bound
suspensive condition. (1121a) to return.

Art. 1189. When the conditions have been As for the obligations to do and not to do, the
imposed with the intention of suspending the provisions of the second paragraph of Article
efficacy of an obligation to give, the following 1187 shall be observed as regards the effect of
rules shall be observed in case of the the extinguishment of the obligation. (1123)
improvement, loss or deterioration of the thing
during the pendency of the condition: Art. 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the
(1) If the thing is lost without the fault of obligors should not comply with what is
the debtor, the obligation shall be incumbent upon him.
extinguished;
The injured party may choose between the
(2) If the thing is lost through the fault of fulfillment and the rescission of the obligation,
the debtor, he shall be obliged to pay with the payment of damages in either case. He
damages; it is understood that the thing may also seek rescission, even after he has
is lost when it perishes, or goes out of chosen fulfillment, if the latter should become
commerce, or disappears in such a way impossible.
that its existence is unknown or it
cannot be recovered; The court shall decree the rescission claimed,
unless there be just cause authorizing the fixing
(3) When the thing deteriorates without of a period.
the fault of the debtor, the impairment is
to be borne by the creditor; This is understood to be without prejudice to the
rights of third persons who have acquired the
(4) If it deteriorates through the fault of thing, in accordance with Articles 1385 and 1388
the debtor, the creditor may choose and the Mortgage Law. (1124)
between the rescission of the obligation
and its fulfillment, with indemnity for Art. 1192. In case both parties have committed a
damages in either case; breach of the obligation, the liability of the first
infractor shall be equitably tempered by the
(5) If the thing is improved by its nature, courts. If it cannot be determined which of the
or by time, the improvement shall inure parties first violated the contract, the same shall
to the benefit of the creditor; be deemed extinguished, and each shall bear
his own damages. (n)
(6) If it is improved at the expense of
the debtor, he shall have no other right
than that granted to the usufructuary. SECTION 2. - Obligations with a Period
(1122)
Art. 1193. Obligations for whose fulfillment a day
Art. 1190. When the conditions have for their certain has been fixed, shall be demandable
purpose the extinguishment of an obligation to only when that day comes.
give, the parties, upon the fulfillment of said
conditions, shall return to each other what they Obligations with a resolutory period take effect
have received. at once, but terminate upon arrival of the day
certain.
In case of the loss, deterioration or improvement
of the thing, the provisions which, with respect
A day certain is understood to be that which (2) When he does not furnish to the creditor the
must necessarily come, although it may not be guaranties or securities which he has promised;
known when.
(3) When by his own acts he has impaired said
If the uncertainty consists in whether the day guaranties or securities after their
will come or not, the obligation is conditional, establishment, and when through a fortuitous
and it shall be regulated by the rules of the event they disappear, unless he immediately
preceding Section. (1125a) gives new ones equally satisfactory;

Art. 1194. In case of loss, deterioration or (4) When the debtor violates any undertaking, in
improvement of the thing before the arrival of consideration of which the creditor agreed to the
the day certain, the rules in Article 1189 shall be period;
observed. (n)
(5) When the debtor attempts to abscond.
Art. 1195. Anything paid or delivered before the (1129a)
arrival of the period, the obligor being unaware
of the period or believing that the obligation has
become due and demandable, may be SECTION 3. - Alternative Obligations
recovered, with the fruits and interests. (1126a)
Art. 1199. A person alternatively bound by
Art. 1196. Whenever in an obligation a period is different prestations shall completely perform
designated, it is presumed to have been one of them.
established for the benefit of both the creditor
and the debtor, unless from the tenor of the The creditor cannot be compelled to receive part
same or other circumstances it should appear of one and part of the other undertaking. (1131)
that the period has been established in favor of
one or of the other. (1127) Art. 1200. The right of choice belongs to the
debtor, unless it has been expressly granted to
Art. 1197. If the obligation does not fix a period, the creditor.
but from its nature and the circumstances it can
be inferred that a period was intended, the The debtor shall have no right to choose those
courts may fix the duration thereof. prestations which are impossible, unlawful or
which could not have been the object of the
The courts shall also fix the duration of the obligation. (1132)
period when it depends upon the will of the
debtor. Art. 1201. The choice shall produce no effect
except from the time it has been communicated.
In every case, the courts shall determine such (1133)
period as may under the circumstances have
been probably contemplated by the parties. Art. 1202. The debtor shall lose the right of
Once fixed by the courts, the period cannot be choice when among the prestations whereby he
changed by them. (1128a) is alternatively bound, only one is practicable.
(1134)
Art. 1198. The debtor shall lose every right to
make use of the period: Art. 1203. If through the creditor's acts the
debtor cannot make a choice according to the
(1) When after the obligation has been terms of the obligation, the latter may rescind
contracted, he becomes insolvent, unless he the contract with damages. (n)
gives a guaranty or security for the debt;
Art. 1204. The creditor shall have a right to in substitution, the obligation is called
indemnity for damages when, through the fault facultative.
of the debtor, all the things which are
alternatively the object of the obligation have The loss or deterioration of the thing intended
been lost, or the compliance of the obligation as a substitute, through the negligence of the
has become impossible. obligor, does not render him liable. But once the
substitution has been made, the obligor is liable
The indemnity shall be fixed taking as a basis for the loss of the substitute on account of his
the value of the last thing which disappeared, or delay, negligence or fraud. (n)
that of the service which last became
impossible.
SECTION 4. - Joint and Solidary Obligations
Damages other than the value of the last thing
or service may also be awarded. (1135a) Art. 1207. The concurrence of two or more
creditors or of two or more debtors in one and
Art. 1205. When the choice has been expressly the same obligation does not imply that each
given to the creditor, the obligation shall cease one of the former has a right to demand, or that
to be alternative from the day when the each one of the latter is bound to render, entire
selection has been communicated to the debtor. compliance with the prestation. There is a
solidary liability only when the obligation
Until then the responsibility of the debtor shall expressly so states, or when the law or the
be governed by the following rules: nature of the obligation requires solidarity.
(1137a)
(1) If one of the things is lost through a
fortuitous event, he shall perform the Art. 1208. If from the law, or the nature or the
obligation by delivering that which the wording of the obligations to which the
creditor should choose from among the preceding article refers the contrary does not
remainder, or that which remains if only appear, the credit or debt shall be presumed to
one subsists; be divided into as many shares as there are
creditors or debtors, the credits or debts being
(2) If the loss of one of the things considered distinct from one another, subject to
occurs through the fault of the debtor, the Rules of Court governing the multiplicity of
the creditor may claim any of those suits. (1138a)
subsisting, or the price of that which,
through the fault of the former, has Art. 1209. If the division is impossible, the right
disappeared, with a right to damages; of the creditors may be prejudiced only by their
collective acts, and the debt can be enforced
(3) If all the things are lost through the only by proceeding against all the debtors. If
fault of the debtor, the choice by the one of the latter should be insolvent, the others
creditor shall fall upon the price of any shall not be liable for his share. (1139)
one of them, also with indemnity for
damages. Art. 1210. The indivisibility of an obligation does
not necessarily give rise to solidarity. Nor does
The same rules shall be applied to obligations to solidarity of itself imply indivisibility. (n)
do or not to do in case one, some or all of the
prestations should become impossible. (1136a) Art. 1211. Solidarity may exist although the
creditors and the debtors may not be bound in
Art. 1206. When only one prestation has been the same manner and by the same periods and
agreed upon, but the obligor may render another conditions. (1140)
Art. 1212. Each one of the solidary creditors Art. 1218. Payment by a solidary debtor shall
may do whatever may be useful to the others, not entitle him to reimbursement from his co-
but not anything which may be prejudicial to the debtors if such payment is made after the
latter. (1141a) obligation has prescribed or become illegal. (n)

Art. 1213. A solidary creditor cannot assign his Art. 1219. The remission made by the creditor of
rights without the consent of the others. (n) the share which affects one of the solidary
debtors does not release the latter from his
Art. 1214. The debtor may pay any one of the responsibility towards the co-debtors, in case
solidary creditors; but if any demand, judicial or the debt had been totally paid by anyone of
extrajudicial, has been made by one of them, them before the remission was effected. (1146a)
payment should be made to him. (1142a)
Art. 1220. The remission of the whole obligation,
Art. 1215. Novation, compensation, confusion or obtained by one of the solidary debtors, does
remission of the debt, made by any of the not entitle him to reimbursement from his co-
solidary creditors or with any of the solidary debtors. (n)
debtors, shall extinguish the obligation, without
prejudice to the provisions of Article 1219. Art. 1221. If the thing has been lost or if the
prestation has become impossible without the
The creditor who may have executed any of fault of the solidary debtors, the obligation shall
these acts, as well as he who collects the debt, be extinguished.
shall be liable to the others for the share in the
obligation corresponding to them. (1143) If there was fault on the part of any one of them,
all shall be responsible to the creditor, for the
Art. 1216. The creditor may proceed against any price and the payment of damages and interest,
one of the solidary debtors or some or all of without prejudice to their action against the
them simultaneously. The demand made against guilty or negligent debtor.
one of them shall not be an obstacle to those
which may subsequently be directed against the If through a fortuitous event, the thing is lost or
others, so long as the debt has not been fully the performance has become impossible after
collected. (1144a) one of the solidary debtors has incurred in delay
through the judicial or extrajudicial demand
Art. 1217. Payment made by one of the solidary upon him by the creditor, the provisions of the
debtors extinguishes the obligation. If two or preceding paragraph shall apply. (1147a)
more solidary debtors offer to pay, the creditor
may choose which offer to accept. Art. 1222. A solidary debtor may, in actions filed
by the creditor, avail himself of all defenses
He who made the payment may claim from his which are derived from the nature of the
co-debtors only the share which corresponds to obligation and of those which are personal to
each, with the interest for the payment already him, or pertain to his own share. With respect to
made. If the payment is made before the debt is those which personally belong to the others, he
due, no interest for the intervening period may may avail himself thereof only as regards that
be demanded. part of the debt for which the latter are
responsible. (1148a)
When one of the solidary debtors cannot,
because of his insolvency, reimburse his share
to the debtor paying the obligation, such share SECTION 5. - Divisible and Indivisible
shall be borne by all his co-debtors, in Obligations
proportion to the debt of each. (1145a)
Art. 1223. The divisibility or indivisibility of the
things that are the object of obligations in which The penalty may be enforced only when it is
there is only one debtor and only one creditor demandable in accordance with the provisions
does not alter or modify the provisions of of this Code. (1152a)
Chapter 2 of this Title. (1149)
Art. 1227. The debtor cannot exempt himself
Art. 1224. A joint indivisible obligation gives rise from the performance of the obligation by paying
to indemnity for damages from the time anyone the penalty, save in the case where this right
of the debtors does not comply with his has been expressly reserved for him. Neither
undertaking. The debtors who may have been can the creditor demand the fulfillment of the
ready to fulfill their promises shall not contribute obligation and the satisfaction of the penalty at
to the indemnity beyond the corresponding the same time, unless this right has been clearly
portion of the price of the thing or of the value of granted him. However, if after the creditor has
the service in which the obligation consists. decided to require the fulfillment of the
(1150) obligation, the performance thereof should
become impossible without his fault, the penalty
Art. 1225. For the purposes of the preceding may be enforced. (1153a)
articles, obligations to give definite things and
those which are not susceptible of partial Art. 1228. Proof of actual damages suffered by
performance shall be deemed to be indivisible. the creditor is not necessary in order that the
penalty may be demanded. (n)
When the obligation has for its object the
execution of a certain number of days of work, Art. 1229. The judge shall equitably reduce the
the accomplishment of work by metrical units, or penalty when the principal obligation has been
analogous things which by their nature are partly or irregularly complied with by the debtor.
susceptible of partial performance, it shall be Even if there has been no performance, the
divisible. penalty may also be reduced by the courts if it is
iniquitous or unconscionable. (1154a)
However, even though the object or service may
be physically divisible, an obligation is Art. 1230. The nullity of the penal clause does
indivisible if so provided by law or intended by not carry with it that of the principal obligation.
the parties.
The nullity of the principal obligation carries with
In obligations not to do, divisibility or it that of the penal clause. (1155)
indivisibility shall be determined by the
character of the prestation in each particular
case. (1151a) CHAPTER 4
EXTINGUISHMENT OF OBLIGATIONS

SECTION 6. - Obligations with a Penal Clause GENERAL PROVISIONS

Art. 1226. In obligations with a penal clause, the Art. 1231. Obligations are extinguished:
penalty shall substitute the indemnity for (1) By payment or performance:
damages and the payment of interests in case
of noncompliance, if there is no stipulation to (2) By the loss of the thing due:
the contrary. Nevertheless, damages shall be
paid if the obligor refuses to pay the penalty or (3) By the condonation or remission of
is guilty of fraud in the fulfillment of the the debt;
obligation.
(4) By the confusion or merger of the
rights of creditor and debtor;
 (5) By compensation; him in his rights, such as those arising from a
mortgage, guaranty, or penalty. (1159a)
(6) By novation.
Art. 1238. Payment made by a third person who
Other causes of extinguishment of obligations, does not intend to be reimbursed by the debtor
such as annulment, rescission, fulfillment of a is deemed to be a donation, which requires the
resolutory condition, and prescription, are debtor's consent. But the payment is in any case
governed elsewhere in this Code. (1156a) valid as to the creditor who has accepted it. (n)

SECTION 1. - Payment or Performance Art. 1239. In obligations to give, payment made

by one who does not have the free disposal of
Art. 1232. Payment means not only the delivery the thing due and capacity to alienate it shall not
of money but also the performance, in any other be valid, without prejudice to the provisions of
manner, of an obligation. (n) Article 1427 under the Title on " Natural
Obligations ." (1160a)
Art. 1233. A debt shall not be understood to
have been paid unless the thing or service in Art. 1240. Payment shall be made to the person
which the obligation consists has been in whose favor the obligation has been
completely delivered or rendered, as the case constituted, or his successor in interest, or any
may be. (1157) person authorized to receive it. (1162a)

Art. 1234. If the obligation has been Art. 1241. Payment to a person who is
substantially performed in good faith, the obligor incapacitated to administer his property shall be
may recover as though there had been a strict valid if he has kept the thing delivered, or
and complete fulfillment, less damages suffered insofar as the payment has been beneficial to
by the obligee. (n) him.

Art. 1235. When the obligee accepts the Payment made to a third person shall also be
performance, knowing its incompleteness or valid insofar as it has redounded to the benefit
irregularity, and without expressing any protest of the creditor. Such benefit to the creditor need
or objection, the obligation is deemed fully not be proved in the following cases:
complied with. (n)
(1) If after the payment, the third person
Art. 1236. The creditor is not bound to accept acquires the creditor's rights;
payment or performance by a third person who
has no interest in the fulfillment of the (2) If the creditor ratifies the payment to
obligation, unless there is a stipulation to the the third person;
contrary.
(3) If by the creditor's conduct, the
Whoever pays for another may demand from the debtor has been led to believe that the
debtor what he has paid, except that if he paid third person had authority to receive the
without the knowledge or against the will of the payment. (1163a)
debtor, he can recover only insofar as the
payment has been beneficial to the debtor. Art. 1242. Payment made in good faith
(1158a) to any person in possession of the
credit shall release the debtor. (1164)
Art. 1237. Whoever pays on behalf of the debtor
without the knowledge or against the will of the Art. 1243. Payment made to the creditor by the
latter, cannot compel the creditor to subrogate debtor after the latter has been judicially
ordered to retain the debt shall not be valid. The delivery of promissory notes payable to
(1165) order, or bills of exchange or other mercantile
documents shall produce the effect of payment
Art. 1244. The debtor of a thing cannot compel only when they have been cashed, or when
the creditor to receive a different one, although through the fault of the creditor they have been
the latter may be of the same value as, or more impaired.
valuable than that which is due.
In the meantime, the action derived from the
In obligations to do or not to do, an act or original obligation shall be held in the abeyance.
forbearance cannot be substituted by another (1170)
act or forbearance against the obligee's will.
(1166a) Art. 1250. In case an extraordinary inflation or
deflation of the currency stipulated should
Art. 1245. Dation in payment, whereby property supervene, the value of the currency at the time
is alienated to the creditor in satisfaction of a of the establishment of the obligation shall be
debt in money, shall be governed by the law of the basis of payment, unless there is an
sales. (n) agreement to the contrary. (n)

Art. 1246. When the obligation consists in the Art. 1251. Payment shall be made in the place
delivery of an indeterminate or generic thing, designated in the obligation.
whose quality and circumstances have not been
stated, the creditor cannot demand a thing of There being no express stipulation and if the
superior quality. Neither can the debtor deliver a undertaking is to deliver a determinate thing, the
thing of inferior quality. The purpose of the payment shall be made wherever the thing might
obligation and other circumstances shall be be at the moment the obligation was constituted.
taken into consideration. (1167a)
In any other case the place of payment shall be
Art. 1247. Unless it is otherwise stipulated, the the domicile of the debtor.
extrajudicial expenses required by the payment
shall be for the account of the debtor. With If the debtor changes his domicile in bad faith or
regard to judicial costs, the Rules of Court shall after he has incurred in delay, the additional
govern. (1168a) expenses shall be borne by him.

Art. 1248. Unless there is an express stipulation These provisions are without prejudice to venue
to that effect, the creditor cannot be compelled under the Rules of Court. (1171a)
partially to receive the prestations in which the
obligation consists. Neither may the debtor be
required to make partial payments. SUBSECTION 1. - Application of Payments

However, when the debt is in part liquidated and Art. 1252. He who has various debts of the
in part unliquidated, the creditor may demand same kind in favor of one and the same creditor,
and the debtor may effect the payment of the may declare at the time of making the payment,
former without waiting for the liquidation of the to which of them the same must be applied.
latter. (1169a) Unless the parties so stipulate, or when the
application of payment is made by the party for
Art. 1249. The payment of debts in money shall whose benefit the term has been constituted,
be made in the currency stipulated, and if it is application shall not be made as to debts which
not possible to deliver such currency, then in the are not yet due.
currency which is legal tender in the Philippines.
If the debtor accepts from the creditor a receipt (2) When he is incapacitated to receive
in which an application of the payment is made, the payment at the time it is due;
the former cannot complain of the same, unless
there is a cause for invalidating the contract. (3) When, without just cause, he refuses
(1172a) to give a receipt;

Art. 1253. If the debt produces interest, payment (4) When two or more persons claim the
of the principal shall not be deemed to have same right to collect;
been made until the interests have been
covered. (1173) (5) When the title of the obligation has
been lost. (1176a)
Art. 1254. When the payment cannot be applied
in accordance with the preceding rules, or if Art. 1257. In order that the consignation of the
application can not be inferred from other thing due may release the obligor, it must first
circumstances, the debt which is most onerous be announced to the persons interested in the
to the debtor, among those due, shall be fulfillment of the obligation.
deemed to have been satisfied.
The consignation shall be ineffectual if it is not
If the debts due are of the same nature and made strictly in consonance with the provisions
burden, the payment shall be applied to all of which regulate payment. (1177)
them proportionately. (1174a)
Art. 1258. Consignation shall be made by
depositing the things due at the disposal of
SUBSECTION 2. - Payment by Cession judicial authority, before whom the tender of
payment shall be proved, in a proper case, and
Art. 1255. The debtor may cede or assign his the announcement of the consignation in other
property to his creditors in payment of his debts. cases.
This cession, unless there is stipulation to the
contrary, shall only release the debtor from The consignation having been made, the
responsibility for the net proceeds of the thing interested parties shall also be notified thereof.
assigned. The agreements which, on the effect (1178)
of the cession, are made between the debtor
and his creditors shall be governed by special Art. 1259. The expenses of consignation, when
laws. (1175a) properly made, shall be charged against the
creditor. (1178)
SUBSECTION 3. - Tender of Payment and
Consignation
Art. 1260. Once the consignation has been duly
made, the debtor may ask the judge to order the
Art. 1256. If the creditor to whom tender of
cancellation of the obligation.
payment has been made refuses without just
cause to accept it, the debtor shall be released
from responsibility by the consignation of the Before the creditor has accepted the
thing or sum due. consignation, or before a judicial declaration
that the consignation has been properly made,
the debtor may withdraw the thing or the sum
Consignation alone shall produce the same
deposited, allowing the obligation to remain in
effect in the following cases:
force. (1180)
(1) When the creditor is absent or
Art. 1261. If, the consignation having been
unknown, or does not appear at the
made, the creditor should authorize the debtor
place of payment;
to withdraw the same, he shall lose every
preference which he may have over the thing. the debtor shall not be exempted from the
The co-debtors, guarantors and sureties shall payment of its price, whatever may be the cause
be released. (1181a) for the loss, unless the thing having been
offered by him to the person who should receive
it, the latter refused without justification to
SECTION 2. - Loss of the Thing Due accept it. (1185)

Art. 1262. An obligation which consists in the Art. 1269. The obligation having been
delivery of a determinate thing shall be extinguished by the loss of the thing, the
extinguished if it should be lost or destroyed creditor shall have all the rights of action which
without the fault of the debtor, and before he the debtor may have against third persons by
has incurred in delay. reason of the loss. (1186)

When by law or stipulation, the obligor is liable

even for fortuitous events, the loss of the thing SECTION 3. - Condonation or Remission of the
does not extinguish the obligation, and he shall Debt
be responsible for damages. The same rule
applies when the nature of the obligation Art. 1270. Condonation or remission is
requires the assumption of risk. (1182a) essentially gratuitous, and requires the
acceptance by the obligor. It may be made
Art. 1263. In an obligation to deliver a generic expressly or impliedly.
thing, the loss or destruction of anything of the
same kind does not extinguish the obligation. (n) One and the other kind shall be subject to the
rules which govern inofficious donations.
Art. 1264. The courts shall determine whether, Express condonation shall, furthermore, comply
under the circumstances, the partial loss of the with the forms of donation. (1187)
object of the obligation is so important as to
extinguish the obligation. (n) Art. 1271. The delivery of a private document
evidencing a credit, made voluntarily by the
Art. 1265. Whenever the thing is lost in the creditor to the debtor, implies the renunciation of
possession of the debtor, it shall be presumed the action which the former had against the
that the loss was due to his fault, unless there is latter.
proof to the contrary, and without prejudice to
the provisions of article 1165. This presumption If in order to nullify this waiver it should be
does not apply in case of earthquake, flood, claimed to be inofficious, the debtor and his
storm, or other natural calamity. (1183a) heirs may uphold it by proving that the delivery
of the document was made in virtue of payment
Art. 1266. The debtor in obligations to do shall of the debt. (1188)
also be released when the prestation becomes
legally or physically impossible without the fault Art. 1272. Whenever the private document in
of the obligor. (1184a) which the debt appears is found in the
possession of the debtor, it shall be presumed
Art. 1267. When the service has become so that the creditor delivered it voluntarily, unless
difficult as to be manifestly beyond the the contrary is proved. (1189)
contemplation of the parties, the obligor may
also be released therefrom, in whole or in part. Art. 1273. The renunciation of the principal debt
(n) shall extinguish the accessory obligations; but
the waiver of the latter shall leave the former in
Art. 1268. When the debt of a thing certain and force. (1190)
determinate proceeds from a criminal offense,
Art. 1274. It is presumed that the accessory (5) That over neither of them there be
obligation of pledge has been remitted when the any retention or controversy,
thing pledged, after its delivery to the creditor, is commenced by third persons and
found in the possession of the debtor, or of a communicated in due time to the debtor.
third person who owns the thing. (1191a) (1196)

Art. 1280. Notwithstanding the provisions of the

SECTION 4. - Confusion or Merger of Rights preceding article, the guarantor may set up
compensation as regards what the creditor may
Art. 1275. The obligation is extinguished from owe the principal debtor. (1197)
the time the characters of creditor and debtor
are merged in the same person. (1192a) Art. 1281. Compensation may be total or partial.
When the two debts are of the same amount,
Art. 1276. Merger which takes place in the there is a total compensation. (n)
person of the principal debtor or creditor
benefits the guarantors. Confusion which takes Art. 1282. The parties may agree upon the
place in the person of any of the latter does not compensation of debts which are not yet due.
extinguish the obligation. (1193) (n)

Art. 1277. Confusion does not extinguish a joint Art. 1283. If one of the parties to a suit over an
obligation except as regards the share obligation has a claim for damages against the
corresponding to the creditor or debtor in whom other, the former may set it off by proving his
the two characters concur. (1194) right to said damages and the amount thereof.
(n)

SECTION 5. - Compensation Art. 1284. When one or both debts are

rescissible or voidable, they may be
Art. 1278. Compensation shall take place when compensated against each other before they are
two persons, in their own right, are creditors and judicially rescinded or avoided. (n)
debtors of each other. (1195)
Art. 1285. The debtor who has consented to the
Art. 1279. In order that compensation may be assignment of rights made by a creditor in favor
proper, it is necessary: of a third person, cannot set up against the
assignee the compensation which would pertain
(1) That each one of the obligors be to him against the assignor, unless the assignor
bound principally, and that he be at the was notified by the debtor at the time he gave
same time a principal creditor of the his consent, that he reserved his right to the
other; compensation.

(2) That both debts consist in a sum of If the creditor communicated the cession to him
money, or if the things due are but the debtor did not consent thereto, the latter
consumable, they be of the same kind, may set up the compensation of debts previous
and also of the same quality if the latter to the cession, but not of subsequent ones.
has been stated;
If the assignment is made without the
(3) That the two debts be due; knowledge of the debtor, he may set up the
compensation of all credits prior to the same
(4) That they be liquidated and and also later ones until he had knowledge of
demandable; the assignment. (1198a)
Art. 1286. Compensation takes place by obligations be on every point incompatible with
operation of law, even though the debts may be each other. (1204)
payable at different places, but there shall be an
indemnity for expenses of exchange or Art. 1293. Novation which consists in
transportation to the place of payment. (1199a) substituting a new debtor in the place of the
original one, may be made even without the
Art. 1287. Compensation shall not be proper knowledge or against the will of the latter, but
when one of the debts arises from a depositum not without the consent of the creditor. Payment
or from the obligations of a depositary or of a by the new debtor gives him the rights
bailee in commodatum. mentioned in Articles 1236 and 1237. (1205a)

Neither can compensation be set up against a Art. 1294. If the substitution is without the
creditor who has a claim for support due by knowledge or against the will of the debtor, the
gratuitous title, without prejudice to the new debtor's insolvency or non-fulfillment of the
provisions of paragraph 2 of Article 301. (1200a) obligations shall not give rise to any liability on
the part of the original debtor. (n)
Art. 1288. Neither shall there be compensation if
one of the debts consists in civil liability arising Art. 1295. The insolvency of the new debtor,
from a penal offense. (n) who has been proposed by the original debtor
and accepted by the creditor, shall not revive
Art. 1289. If a person should have against him the action of the latter against the original
several debts which are susceptible of obligor, except when said insolvency was
compensation, the rules on the application of already existing and of public knowledge, or
payments shall apply to the order of the known to the debtor, when the delegated his
compensation. (1201) debt. (1206a)

Art. 1290. When all the requisites mentioned in Art. 1296. When the principal obligation is
Article 1279 are present, compensation takes extinguished in consequence of a novation,
effect by operation of law, and extinguishes both accessory obligations may subsist only insofar
debts to the concurrent amount, even though as they may benefit third persons who did not
the creditors and debtors are not aware of the give their consent. (1207)
compensation. (1202a)
Art. 1297. If the new obligation is void, the
original one shall subsist, unless the parties
SECTION 6. - Novation intended that the former relation should be
extinguished in any event. (n)
Art. 1291. Obligations may be modified by:
(1) Changing their object or principal Art. 1298. The novation is void if the original
conditions; obligation was void, except when annulment
may be claimed only by the debtor or when
(2) Substituting the person of the ratification validates acts which are voidable.
debtor; (1208a)

(3) Subrogating a third person in the Art. 1299. If the original obligation was subject
rights of the creditor. (1203) to a suspensive or resolutory condition, the new
obligation shall be under the same condition,
Art. 1292. In order that an obligation may be unless it is otherwise stipulated. (n)
extinguished by another which substitute the
same, it is imperative that it be so declared in Art. 1300. Subrogation of a third person in the
unequivocal terms, or that the old and the new rights of the creditor is either legal or
conventional. The former is not presumed, Art. 1306. The contracting parties may establish
except in cases expressly mentioned in this such stipulations, clauses, terms and conditions
Code; the latter must be clearly established in as they may deem convenient, provided they are
order that it may take effect. (1209a) not contrary to law, morals, good customs,
public order, or public policy. (1255a)
Art. 1301. Conventional subrogation of a third
person requires the consent of the original Art. 1307. Innominate contracts shall be
parties and of the third person. (n) regulated by the stipulations of the parties, by
the provisions of Titles I and II of this Book, by
Art. 1302. It is presumed that there is legal the rules governing the most analogous
subrogation: nominate contracts, and by the customs of the
place. (n)
(1) When a creditor pays another
creditor who is preferred, even without Art. 1308. The contract must bind both
the debtor's knowledge; contracting parties; its validity or compliance
cannot be left to the will of one of them. (1256a)
(2) When a third person, not interested
in the obligation, pays with the express Art. 1309. The determination of the performance
or tacit approval of the debtor; may be left to a third person, whose decision
shall not be binding until it has been made
(3) When, even without the knowledge known to both contracting parties. (n)
of the debtor, a person interested in the
fulfillment of the obligation pays, without Art. 1310. The determination shall not be
prejudice to the effects of confusion as obligatory if it is evidently inequitable. In such
to the latter's share. (1210a) case, the courts shall decide what is equitable
under the circumstances. (n)
Art. 1303. Subrogation transfers to the persons
subrogated the credit with all the rights thereto Art. 1311. Contracts take effect only between
appertaining, either against the debtor or the parties, their assigns and heirs, except in
against third person, be they guarantors or case where the rights and obligations arising
possessors of mortgages, subject to stipulation from the contract are not transmissible by their
in a conventional subrogation. (1212a) nature, or by stipulation or by provision of law.
The heir is not liable beyond the value of the
Art. 1304. A creditor, to whom partial payment property he received from the decedent.
has been made, may exercise his right for the
remainder, and he shall be preferred to the If a contract should contain some stipulation in
person who has been subrogated in his place in favor of a third person, he may demand its
virtue of the partial payment of the same credit. fulfillment provided he communicated his
(1213) acceptance to the obligor before its revocation.
A mere incidental benefit or interest of a person
is not sufficient. The contracting parties must
Title II. - CONTRACTS have clearly and deliberately conferred a favor
upon a third person. (1257a)
CHAPTER 1
GENERAL PROVISIONS Art. 1312. In contracts creating real rights, third
persons who come into possession of the object
Art. 1305. A contract is a meeting of minds of the contract are bound thereby, subject to the
between two persons whereby one binds provisions of the Mortgage Law and the Land
himself, with respect to the other, to give Registration Laws. (n)
something or to render some service. (1254a)
Art. 1313. Creditors are protected in cases of
contracts intended to defraud them. (n) Art. 1319. Consent is manifested by the meeting
of the offer and the acceptance upon the thing
Art. 1314. Any third person who induces another and the cause which are to constitute the
to violate his contract shall be liable for contract. The offer must be certain and the
damages to the other contracting party. (n) acceptance absolute. A qualified acceptance
constitutes a counter-offer.
Art. 1315. Contracts are perfected by mere
consent, and from that moment the parties are Acceptance made by letter or telegram does not
bound not only to the fulfillment of what has bind the offerer except from the time it came to
been expressly stipulated but also to all the his knowledge. The contract, in such a case, is
consequences which, according to their nature, presumed to have been entered into in the place
may be in keeping with good faith, usage and where the offer was made. (1262a)
law. (1258)
Art. 1320. An acceptance may be express or
Art. 1316. Real contracts, such as deposit, implied. (n)
pledge and Commodatum, are not perfected
until the delivery of the object of the obligation. Art. 1321. The person making the offer may fix
(n) the time, place, and manner of acceptance, all
of which must be complied with. (n)
Art. 1317. No one may contract in the name of
another without being authorized by the latter, or Art. 1322. An offer made through an agent is
unless he has by law a right to represent him. accepted from the time acceptance is
communicated to him. (n)
A contract entered into in the name of another
by one who has no authority or legal Art. 1323. An offer becomes ineffective upon the
representation, or who has acted beyond his death, civil interdiction, insanity, or insolvency of
powers, shall be unenforceable, unless it is either party before acceptance is conveyed. (n)
ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is Art. 1324. When the offerer has allowed the
revoked by the other contracting party. (1259a) offeree a certain period to accept, the offer may
be withdrawn at any time before acceptance by
communicating such withdrawal, except when
CHAPTER 2 the option is founded upon a consideration, as
ESSENTIAL REQUISITES OF CONTRACTS something paid or promised. (n)

GENERAL PROVISIONS Art. 1325. Unless it appears otherwise, business

advertisements of things for sale are not definite
Art. 1318. There is no contract unless the offers, but mere invitations to make an offer. (n)
following requisites concur:
(1) Consent of the contracting parties; Art. 1326. Advertisements for bidders are simply
invitations to make proposals, and the advertiser
(2) Object certain which is the subject is not bound to accept the highest or lowest
matter of the contract; bidder, unless the contrary appears. (n)

(3) Cause of the obligation which is Art. 1327. The following cannot give consent to
established. (1261) a contract:

SECTION 1. - Consent (1) Unemancipated minors;

 (2) Insane or demented persons, and Art. 1335. There is violence when in order to
deaf-mutes who do not know how to wrest consent, serious or irresistible force is
write. (1263a) employed.

Art. 1328. Contracts entered into during a lucid There is intimidation when one of the
interval are valid. Contracts agreed to in a state contracting parties is compelled by a reasonable
of drunkenness or during a hypnotic spell are and well-grounded fear of an imminent and
voidable. (n) grave evil upon his person or property, or upon
the person or property of his spouse,
Art. 1329. The incapacity declared in Article descendants or ascendants, to give his consent.
1327 is subject to the modifications determined
by law, and is understood to be without To determine the degree of intimidation, the
prejudice to special disqualifications established age, sex and condition of the person shall be
in the laws. (1264) borne in mind.

Art. 1330. A contract where consent is given A threat to enforce one's claim through
through mistake, violence, intimidation, undue competent authority, if the claim is just or legal,
influence, or fraud is voidable. (1265a) does not vitiate consent. (1267a)

Art. 1331. In order that mistake may invalidate Art. 1336. Violence or intimidation shall annul
consent, it should refer to the substance of the the obligation, although it may have been
thing which is the object of the contract, or to employed by a third person who did not take
those conditions which have principally moved part in the contract. (1268)
one or both parties to enter into the contract.
Art. 1337. There is undue influence when a
Mistake as to the identity or qualifications of one person takes improper advantage of his power
of the parties will vitiate consent only when such over the will of another, depriving the latter of a
identity or qualifications have been the principal reasonable freedom of choice. The following
cause of the contract. circumstances shall be considered: the
confidential, family, spiritual and other relations
A simple mistake of account shall give rise to its between the parties, or the fact that the person
correction. (1266a) alleged to have been unduly influenced was
suffering from mental weakness, or was ignorant
Art. 1332. When one of the parties is unable to or in financial distress. (n)
read, or if the contract is in a language not
understood by him, and mistake or fraud is Art. 1338. There is fraud when, through
alleged, the person enforcing the contract must insidious words or machinations of one of the
show that the terms thereof have been fully contracting parties, the other is induced to enter
explained to the former. (n) into a contract which, without them, he would
not have agreed to. (1269)
Art. 1333. There is no mistake if the party
alleging it knew the doubt, contingency or risk Art. 1339. Failure to disclose facts, when there
affecting the object of the contract. (n) is a duty to reveal them, as when the parties are
bound by confidential relations, constitutes
Art. 1334. Mutual error as to the legal effect of fraud. (n)
an agreement when the real purpose of the
parties is frustrated, may vitiate consent. (n) Art. 1340. The usual exaggerations in trade,
when the other party had an opportunity to know
the facts, are not in themselves fraudulent. (n)
Art. 1341. A mere expression of an opinion does policy may likewise be the object of a contract.
not signify fraud, unless made by an expert and (1271a)
the other party has relied on the former's special
knowledge. (n) Art. 1348. Impossible things or services cannot
be the object of contracts. (1272)
Art. 1342. Misrepresentation by a third person
does not vitiate consent, unless such Art. 1349. The object of every contract must be
misrepresentation has created substantial determinate as to its kind. The fact that the
mistake and the same is mutual. (n) quantity is not determinate shall not be an
obstacle to the existence of the contract,
Art. 1343. Misrepresentation made in good faith provided it is possible to determine the same,
is not fraudulent but may constitute error. (n) without the need of a new contract between the
parties. (1273)
Art. 1344. In order that fraud may make a
contract voidable, it should be serious and
should not have been employed by both SECTION 3. - Cause of Contracts
contracting parties.
Art. 1350. In onerous contracts the cause is
Incidental fraud only obliges the person understood to be, for each contracting party, the
employing it to pay damages. (1270) prestation or promise of a thing or service by the
other; in remuneratory ones, the service or
Art. 1345. Simulation of a contract may be benefit which is remunerated; and in contracts
absolute or relative. The former takes place of pure beneficence, the mere liberality of the
when the parties do not intend to be bound at benefactor. (1274)
all; the latter, when the parties conceal their true
agreement. (n) Art. 1351. The particular motives of the parties
in entering into a contract are different from the
Art. 1346. An absolutely simulated or fictitious cause thereof. (n)
contract is void. A relative simulation, when it
does not prejudice a third person and is not Art. 1352. Contracts without cause, or with
intended for any purpose contrary to law, unlawful cause, produce no effect whatever. The
morals, good customs, public order or public cause is unlawful if it is contrary to law, morals,
policy binds the parties to their real agreement. good customs, public order or public policy.
(n) (1275a)

Art. 1353. The statement of a false cause in

SECTION 2. - Object of Contracts contracts shall render them void, if it should not
be proved that they were founded upon another
Art. 1347. All things which are not outside the cause which is true and lawful. (1276)
commerce of men, including future things, may
be the object of a contract. All rights which are Art. 1354. Although the cause is not stated in
not intransmissible may also be the object of the contract, it is presumed that it exists and is
contracts. lawful, unless the debtor proves the contrary.
(1277)
No contract may be entered into upon future
inheritance except in cases expressly Art. 1355. Except in cases specified by law,
authorized by law. lesion or inadequacy of cause shall not
invalidate a contract, unless there has been
All services which are not contrary to law, fraud, mistake or undue influence. (n)
morals, good customs, public order or public
 CHAPTER 3 All other contracts where the amount involved
FORM OF CONTRACTS exceeds five hundred pesos must appear in
writing, even a private one. But sales of goods,
Art. 1356. Contracts shall be obligatory, in chattels or things in action are governed by
whatever form they may have been entered into, Articles, 1403, No. 2 and 1405. (1280a)
provided all the essential requisites for their
validity are present. However, when the law CHAPTER 4
requires that a contract be in some form in order REFORMATION OF INSTRUMENTS (n)
that it may be valid or enforceable, or that a
contract be proved in a certain way, that Art. 1359. When, there having been a meeting
requirement is absolute and indispensable. In of the minds of the parties to a contract, their
such cases, the right of the parties stated in the true intention is not expressed in the instrument
following article cannot be exercised. (1278a) purporting to embody the agreement, by reason
of mistake, fraud, inequitable conduct or
Art. 1357. If the law requires a document or accident, one of the parties may ask for the
other special form, as in the acts and contracts reformation of the instrument to the end that
enumerated in the following article, the such true intention may be expressed.
contracting parties may compel each other to
observe that form, once the contract has been If mistake, fraud, inequitable conduct, or
perfected. This right may be exercised accident has prevented a meeting of the minds
simultaneously with the action upon the of the parties, the proper remedy is not
contract. (1279a) reformation of the instrument but annulment of
the contract.
Art. 1358. The following must appear in a public
document: Art. 1360. The principles of the general law on
the reformation of instruments are hereby
(1) Acts and contracts which have for adopted insofar as they are not in conflict with
their object the creation, transmission, the provisions of this Code.
modification or extinguishment of real
rights over immovable property; sales of Art. 1361. When a mutual mistake of the parties
real property or of an interest therein a causes the failure of the instrument to disclose
governed by Articles 1403, No. 2, and their real agreement, said instrument may be
1405; reformed.

(2) The cession, repudiation or Art. 1362. If one party was mistaken and the
renunciation of hereditary rights or of other acted fraudulently or inequitably in such a
those of the conjugal partnership of way that the instrument does not show their true
gains; intention, the former may ask for the reformation
of the instrument.
(3) The power to administer property, or
any other power which has for its object Art. 1363. When one party was mistaken and
an act appearing or which should the other knew or believed that the instrument
appear in a public document, or should did not state their real agreement, but
prejudice a third person; concealed that fact from the former, the
instrument may be reformed.
(4) The cession of actions or rights
proceeding from an act appearing in a Art. 1364. When through the ignorance, lack of
public document. skill, negligence or bad faith on the part of the
person drafting the instrument or of the clerk or
typist, the instrument does not express the true
intention of the parties, the courts may order Art. 1372. However general the terms of a
that the instrument be reformed. contract may be, they shall not be understood to
comprehend things that are distinct and cases
Art. 1365. If two parties agree upon the that are different from those upon which the
mortgage or pledge of real or personal property, parties intended to agree. (1283)
but the instrument states that the property is
sold absolutely or with a right of repurchase, Art. 1373. If some stipulation of any contract
reformation of the instrument is proper. should admit of several meanings, it shall be
understood as bearing that import which is most
Art. 1366. There shall be no reformation in the adequate to render it effectual. (1284)
following cases:
Art. 1374. The various stipulations of a contract
(1) Simple donations inter vivos wherein shall be interpreted together, attributing to the
no condition is imposed; doubtful ones that sense which may result from
all of them taken jointly. (1285)
(2) Wills;
Art. 1375. Words which may have different
(3) When the real agreement is void. significations shall be understood in that which
is most in keeping with the nature and object of
Art. 1367. When one of the parties has brought the contract. (1286)
an action to enforce the instrument, he cannot
subsequently ask for its reformation. Art. 1376. The usage or custom of the place
shall be borne in mind in the interpretation of
Art. 1368. Reformation may be ordered at the the ambiguities of a contract, and shall fill the
instance of either party or his successors in omission of stipulations which are ordinarily
interest, if the mistake was mutual; otherwise, established. (1287)
upon petition of the injured party, or his heirs
and assigns. Art. 1377. The interpretation of obscure words
or stipulations in a contract shall not favor the
Art. 1369. The procedure for the reformation of party who caused the obscurity. (1288)
instrument shall be governed by rules of court to
be promulgated by the Supreme Court. Art. 1378. When it is absolutely impossible to
settle doubts by the rules established in the
preceding articles, and the doubts refer to
CHAPTER 5 incidental circumstances of a gratuitous
INTERPRETATION OF CONTRACTS contract, the least transmission of rights and
interests shall prevail. If the contract is onerous,
Art. 1370. If the terms of a contract are clear the doubt shall be settled in favor of the greatest
and leave no doubt upon the intention of the reciprocity of interests.
contracting parties, the literal meaning of its
stipulations shall control. If the doubts are cast upon the principal object
of the contract in such a way that it cannot be
If the words appear to be contrary to the evident known what may have been the intention or will
intention of the parties, the latter shall prevail of the parties, the contract shall be null and
over the former. (1281) void. (1289)

Art. 1371. In order to judge the intention of the Art. 1379. The principles of interpretation stated
contracting parties, their contemporaneous and in Rule 123 of the Rules of Court shall likewise
subsequent acts shall be principally considered. be observed in the construction of contracts. (n)
(1282)
 CHAPTER 6 contract, together with their fruits, and the price
RESCISSIBLE CONTRACTS with its interest; consequently, it can be carried
out only when he who demands rescission can
Art. 1380. Contracts validly agreed upon may be return whatever he may be obliged to restore.
rescinded in the cases established by law.
(1290) Neither shall rescission take place when the
things which are the object of the contract are
Art. 1381. The following contracts are legally in the possession of third persons who
rescissible: did not act in bad faith.

(1) Those which are entered into by In this case, indemnity for damages may be
guardians whenever the wards whom demanded from the person causing the loss.
they represent suffer lesion by more (1295)
than one-fourth of the value of the
things which are the object thereof; Art. 1386. Rescission referred to in Nos. 1 and 2
of Article 1381 shall not take place with respect
(2) Those agreed upon in representation to contracts approved by the courts. (1296a)
of absentees, if the latter suffer the
lesion stated in the preceding number; Art. 1387. All contracts by virtue of which the
debtor alienates property by gratuitous title are
(3) Those undertaken in fraud of presumed to have been entered into in fraud of
creditors when the latter cannot in any creditors, when the donor did not reserve
other manner collect the claims due sufficient property to pay all debts contracted
them; before the donation.

(4) Those which refer to things under Alienations by onerous title are also presumed
litigation if they have been entered into fraudulent when made by persons against whom
by the defendant without the knowledge some judgment has been issued. The decision
and approval of the litigants or of or attachment need not refer to the property
competent judicial authority; alienated, and need not have been obtained by
the party seeking the rescission.
(5) All other contracts specially declared
by law to be subject to rescission. In addition to these presumptions, the design to
(1291a) defraud creditors may be proved in any other
manner recognized by the law of evidence.
Art. 1382. Payments made in a state of (1297a)
insolvency for obligations to whose fulfillment
the debtor could not be compelled at the time Art. 1388. Whoever acquires in bad faith the
they were effected, are also rescissible. (1292) things alienated in fraud of creditors, shall
indemnify the latter for damages suffered by
Art. 1383. The action for rescission is them on account of the alienation, whenever,
subsidiary; it cannot be instituted except when due to any cause, it should be impossible for
the party suffering damage has no other legal him to return them.
means to obtain reparation for the same. (1294)
If there are two or more alienations, the first
Art. 1384. Rescission shall be only to the extent acquirer shall be liable first, and so on
necessary to cover the damages caused. (n) successively. (1298a)

Art. 1385. Rescission creates the obligation to Art. 1389. The action to claim rescission must
return the things which were the object of the be commenced within four years.
For persons under guardianship and for necessarily implies an intention to waive his
absentees, the period of four years shall not right. (1311a)
begin until the termination of the former's
incapacity, or until the domicile of the latter is Art. 1394. Ratification may be effected by the
known. (1299) guardian of the incapacitated person. (n)

Art. 1395. Ratification does not require the

CHAPTER 7 conformity of the contracting party who has no
VOIDABLE CONTRACTS right to bring the action for annulment. (1312)

Art. 1390. The following contracts are voidable Art. 1396. Ratification cleanses the contract
or annullable, even though there may have been from all its defects from the moment it was
no damage to the contracting parties: constituted. (1313)
(1) Those where one of the parties is
incapable of giving consent to a Art. 1397. The action for the annulment of
contract; contracts may be instituted by all who are
thereby obliged principally or subsidiarily.
(2) Those where the consent is vitiated However, persons who are capable cannot
by mistake, violence, intimidation, allege the incapacity of those with whom they
undue influence or fraud. contracted; nor can those who exerted
intimidation, violence, or undue influence, or
These contracts are binding, unless they are employed fraud, or caused mistake base their
annulled by a proper action in court. They are action upon these flaws of the contract. (1302a)
susceptible of ratification. (n)
Art. 1398. An obligation having been annulled,
Art. 1391. The action for annulment shall be the contracting parties shall restore to each
brought within four years. other the things which have been the subject
matter of the contract, with their fruits, and the
This period shall begin: price with its interest, except in cases provided
by law.
In cases of intimidation, violence or
undue influence, from the time the In obligations to render service, the value
defect of the consent ceases. thereof shall be the basis for damages. (1303a)

In case of mistake or fraud, from the Art. 1399. When the defect of the contract
time of the discovery of the same. consists in the incapacity of one of the parties,
the incapacitated person is not obliged to make
And when the action refers to contracts entered any restitution except insofar as he has been
into by minors or other incapacitated persons, benefited by the thing or price received by him.
from the time the guardianship ceases. (1301a) (1304)

Art. 1392. Ratification extinguishes the action to Art. 1400. Whenever the person obliged by the
annul a voidable contract. (1309a) decree of annulment to return the thing can not
do so because it has been lost through his fault,
Art. 1393. Ratification may be effected expressly he shall return the fruits received and the value
or tacitly. It is understood that there is a tacit of the thing at the time of the loss, with interest
ratification if, with knowledge of the reason from the same date. (1307a)
which renders the contract voidable and such
reason having ceased, the person who has a Art. 1401. The action for annulment of contracts
right to invoke it should execute an act which shall be extinguished when the thing which is
the object thereof is lost through the fraud or (c) An agreement made in
fault of the person who has a right to institute consideration of marriage, other
the proceedings. than a mutual promise to marry;

If the right of action is based upon the (d) An agreement for the sale of
incapacity of any one of the contracting parties, goods, chattels or things in
the loss of the thing shall not be an obstacle to action, at a price not less than
the success of the action, unless said loss took five hundred pesos, unless the
place through the fraud or fault of the plaintiff. buyer accept and receive part of
(1314a) such goods and chattels, or the
evidences, or some of them, of
Art. 1402. As long as one of the contracting such things in action or pay at
parties does not restore what in virtue of the the time some part of the
decree of annulment he is bound to return, the purchase money; but when a
other cannot be compelled to comply with what sale is made by auction and
is incumbent upon him. (1308) entry is made by the auctioneer
in his sales book, at the time of
the sale, of the amount and kind
CHAPTER 8 of property sold, terms of sale,
UNENFORCEABLE CONTRACTS (n) price, names of the purchasers
and person on whose account
Art. 1403. The following contracts are the sale is made, it is a
unenforceable, unless they are ratified: sufficient memorandum;
(1) Those entered into in the name of
another person by one who has been (e) An agreement of the leasing
given no authority or legal for a longer period than one
representation, or who has acted year, or for the sale of real
beyond his powers; property or of an interest
therein;
(2) Those that do not comply with the
Statute of Frauds as set forth in this (f) A representation as to the
number. In the following cases an credit of a third person.
agreement hereafter made shall be
unenforceable by action, unless the (3) Those where both parties are
same, or some note or memorandum, incapable of giving consent to a
thereof, be in writing, and subscribed by contract.
the party charged, or by his agent; Art. 1404. Unauthorized contracts are governed
evidence, therefore, of the agreement by Article 1317 and the principles of agency in
cannot be received without the writing, Title X of this Book.
or a secondary evidence of its contents:
Art. 1405. Contracts infringing the Statute of
(a) An agreement that by its Frauds, referred to in No. 2 of Article 1403, are
terms is not to be performed ratified by the failure to object to the
within a year from the making presentation of oral evidence to prove the same,
thereof; or by the acceptance of benefit under them.

(b) A special promise to answer Art. 1406. When a contract is enforceable under
for the debt, default, or the Statute of Frauds, and a public document is
miscarriage of another; necessary for its registration in the Registry of
Deeds, the parties may avail themselves of the Art. 1410. The action or defense for the
right under Article 1357. declaration of the inexistence of a contract does
not prescribe.
Art. 1407. In a contract where both parties are
incapable of giving consent, express or implied Art. 1411. When the nullity proceeds from the
ratification by the parent, or guardian, as the illegality of the cause or object of the contract,
case may be, of one of the contracting parties and the act constitutes a criminal offense, both
shall give the contract the same effect as if only parties being in pari delicto, they shall have no
one of them were incapacitated. action against each other, and both shall be
prosecuted. Moreover, the provisions of
If ratification is made by the parents or the Penal Code relative to the disposal of
guardians, as the case may be, of both effects or instruments of a crime shall be
contracting parties, the contract shall be applicable to the things or the price of the
validated from the inception. contract.

Art. 1408. Unenforceable contracts cannot be This rule shall be applicable when only one of
assailed by third persons. the parties is guilty; but the innocent one may
claim what he has given, and shall not be bound
to comply with his promise. (1305)
CHAPTER 9
VOID AND INEXISTENT CONTRACTS Art. 1412. If the act in which the unlawful or
forbidden cause consists does not constitute a
Art. 1409. The following contracts are inexistent criminal offense, the following rules shall be
and void from the beginning: observed:
(1) Those whose cause, object or
purpose is contrary to law, morals, good (1) When the fault is on the part of both
customs, public order or public policy; contracting parties, neither may recover
what he has given by virtue of the
(2) Those which are absolutely contract, or demand the performance of
simulated or fictitious; the other's undertaking;

(3) Those whose cause or object did not (2) When only one of the contracting
exist at the time of the transaction; parties is at fault, he cannot recover
what he has given by reason of the
(4) Those whose object is outside the contract, or ask for the fulfillment of
commerce of men; what has been promised him. The other,
who is not at fault, may demand the
(5) Those which contemplate an return of what he has given without any
impossible service; obligation to comply his promise. (1306)

(6) Those where the intention of the Art. 1413. Interest paid in excess of the interest
parties relative to the principal object of allowed by the usury laws may be recovered by
the contract cannot be ascertained; the debtor, with interest thereon from the date of
the payment.
(7) Those expressly prohibited or
declared void by law. Art. 1414. When money is paid or property
delivered for an illegal purpose, the contract
These contracts cannot be ratified. Neither can may be repudiated by one of the parties before
the right to set up the defense of illegality be the purpose has been accomplished, or before
waived. any damage has been caused to a third person.
In such case, the courts may, if the public Title III. - NATURAL OBLIGATIONS
interest will thus be subserved, allow the party
repudiating the contract to recover the money or Art. 1423. Obligations are civil or natural. Civil
property. obligations give a right of action to compel their
performance. Natural obligations, not being
Art. 1415. Where one of the parties to an illegal based on positive law but on equity and natural
contract is incapable of giving consent, the law, do not grant a right of action to enforce
courts may, if the interest of justice so demands their performance, but after voluntary fulfillment
allow recovery of money or property delivered by the obligor, they authorize the retention of
by the incapacitated person. what has been delivered or rendered by reason
thereof. Some natural obligations are set forth in
Art. 1416. When the agreement is not illegal per the following articles.
se but is merely prohibited, and the prohibition
by the law is designated for the protection of the Art. 1424. When a right to sue upon a civil
plaintiff, he may, if public policy is thereby obligation has lapsed by extinctive prescription,
enhanced, recover what he has paid or the obligor who voluntarily performs the contract
delivered. cannot recover what he has delivered or the
value of the service he has rendered.
Art. 1417. When the price of any article or
commodity is determined by statute, or by Art. 1425. When without the knowledge or
authority of law, any person paying any amount against the will of the debtor, a third person
in excess of the maximum price allowed may pays a debt which the obligor is not legally
recover such excess. bound to pay because the action thereon has
prescribed, but the debtor later voluntarily
Art. 1418. When the law fixes, or authorizes the reimburses the third person, the obligor cannot
fixing of the maximum number of hours of labor, recover what he has paid.
and a contract is entered into whereby a laborer
undertakes to work longer than the maximum Art. 1426. When a minor between eighteen and
thus fixed, he may demand additional twenty-one years of age who has entered into a
compensation for service rendered beyond the contract without the consent of the parent or
time limit. guardian, after the annulment of the contract
voluntarily returns the whole thing or price
Art. 1419. When the law sets, or authorizes the received, notwithstanding the fact the he has
setting of a minimum wage for laborers, and a not been benefited thereby, there is no right to
contract is agreed upon by which a laborer demand the thing or price thus returned.
accepts a lower wage, he shall be entitled to
recover the deficiency. Art. 1427. When a minor between eighteen and
twenty-one years of age, who has entered into a
Art. 1420. In case of a divisible contract, if the contract without the consent of the parent or
illegal terms can be separated from the legal guardian, voluntarily pays a sum of money or
ones, the latter may be enforced. delivers a fungible thing in fulfillment of the
obligation, there shall be no right to recover the
Art. 1421. The defense of illegality of contract is same from the obligee who has spent or
not available to third persons whose interests consumed it in good faith. (1160A)
are not directly affected.
Art. 1428. When, after an action to enforce a
Art. 1422. A contract which is the direct result of civil obligation has failed the defendant
a previous illegal contract, is also void and voluntarily performs the obligation, he cannot
inexistent. demand the return of what he has delivered or
the payment of the value of the service he has them is misled by a person with respect to the
rendered. ownership or real right over the real estate, the
latter is precluded from asserting his legal title
Art. 1429. When a testate or intestate heir or interest therein, provided all these requisites
voluntarily pays a debt of the decedent are present:
exceeding the value of the property which he
received by will or by the law of intestacy from (1) There must be fraudulent
the estate of the deceased, the payment is valid representation or wrongful concealment
and cannot be rescinded by the payer. of facts known to the party estopped;

Art. 1430. When a will is declared void because (2) The party precluded must intend that
it has not been executed in accordance with the the other should act upon the facts as
formalities required by law, but one of the misrepresented;
intestate heirs, after the settlement of the debts
of the deceased, pays a legacy in compliance (3) The party misled must have been
with a clause in the defective will, the payment unaware of the true facts; and
is effective and irrevocable.
(4) The party defrauded must have
acted in accordance with the
Title IV. - ESTOPPEL (n) misrepresentation.

Art. 1431. Through estoppel an admission or Art. 1438. One who has allowed another to
representation is rendered conclusive upon the assume apparent ownership of personal
person making it, and cannot be denied or property for the purpose of making any transfer
disproved as against the person relying thereon. of it, cannot, if he received the sum for which a
pledge has been constituted, set up his own title
Art. 1432. The principles of estoppel are hereby to defeat the pledge of the property, made by
adopted insofar as they are not in conflict with the other to a pledgee who received the same in
the provisions of this Code, the Code of good faith and for value.
Commerce, the Rules of Court and special laws.
Art. 1439. Estoppel is effective only as between
Art. 1433. Estoppel may be in pais or by deed. the parties thereto or their successors in
interest.
Art. 1434. When a person who is not the owner
of a thing sells or alienates and delivers it, and
later the seller or grantor acquires title thereto, Title V. - TRUSTS (n)
such title passes by operation of law to the
buyer or grantee. CHAPTER 1
GENERAL PROVISIONS
Art. 1435. If a person in representation of
another sells or alienates a thing, the former Art. 1440. A person who establishes a trust is
cannot subsequently set up his own title as called the trustor; one in whom confidence is
against the buyer or grantee. reposed as regards property for the benefit of
another person is known as the trustee; and the
Art. 1436. A lessee or a bailee is estopped from person for whose benefit the trust has been
asserting title to the thing leased or received, as created is referred to as the beneficiary.
against the lessor or bailor.
Art. 1441. Trusts are either express or implied.
Art. 1437. When in a contract between third Express trusts are created by the intention of
persons concerning immovable property, one of
the trustor or of the parties. Implied trusts come being disputably presumed that there is a gift in
into being by operation of law. favor of the child.

Art. 1442. The principles of the general law of Art. 1449. There is also an implied trust when a
trusts, insofar as they are not in conflict with this donation is made to a person but it appears that
Code, the Code of Commerce, the Rules of although the legal estate is transmitted to the
Court and special laws are hereby adopted. donee, he nevertheless is either to have no
beneficial interest or only a part thereof.

CHAPTER 2 Art. 1450. If the price of a sale of property is

EXPRESS TRUSTS loaned or paid by one person for the benefit of
another and the conveyance is made to the
Art. 1443. No express trusts concerning an lender or payor to secure the payment of the
immovable or any interest therein may be debt, a trust arises by operation of law in favor
proved by parol evidence. of the person to whom the money is loaned or
for whom its is paid. The latter may redeem the
Art. 1444. No particular words are required for property and compel a conveyance thereof to
the creation of an express trust, it being him.
sufficient that a trust is clearly intended.
Art. 1451. When land passes by succession to
Art. 1445. No trust shall fail because the trustee any person and he causes the legal title to be
appointed declines the designation, unless the put in the name of another, a trust is established
contrary should appear in the instrument by implication of law for the benefit of the true
constituting the trust. owner.

Art. 1446. Acceptance by the beneficiary is Art. 1452. If two or more persons agree to
necessary. Nevertheless, if the trust imposes no purchase property and by common consent the
onerous condition upon the beneficiary, his legal title is taken in the name of one of them for
acceptance shall be presumed, if there is no the benefit of all, a trust is created by force of
proof to the contrary. law in favor of the others in proportion to the
interest of each.

CHAPTER 3 Art. 1453. When property is conveyed to a

IMPLIED TRUSTS person in reliance upon his declared intention to
hold it for, or transfer it to another or the
Art. 1447. The enumeration of the following grantor, there is an implied trust in favor of the
cases of implied trust does not exclude others person whose benefit is contemplated.
established by the general law of trust, but the
limitation laid down in Article 1442 shall be Art. 1454. If an absolute conveyance of property
applicable. is made in order to secure the performance of
an obligation of the grantor toward the grantee,
Art. 1448. There is an implied trust when a trust by virtue of law is established. If the
property is sold, and the legal estate is granted fulfillment of the obligation is offered by the
to one party but the price is paid by another for grantor when it becomes due, he may demand
the purpose of having the beneficial interest of the reconveyance of the property to him.
the property. The former is the trustee, while the
latter is the beneficiary. However, if the person Art. 1455. When any trustee, guardian or other
to whom the title is conveyed is a child, person holding a fiduciary relationship uses trust
legitimate or illegitimate, of the one paying the funds for the purchase of property and causes
price of the sale, no trust is implied by law, it the conveyance to be made to him or to a third
person, a trust is established by operation of law Art. 1462. The goods which form the subject of a
in favor of the person to whom the funds belong. contract of sale may be either existing goods,
owned or possessed by the seller, or goods to
Art. 1456. If property is acquired through be manufactured, raised, or acquired by the
mistake or fraud, the person obtaining it is, by seller after the perfection of the contract of sale,
force of law, considered a trustee of an implied in this Title called " future goods ."
trust for the benefit of the person from whom the
property comes. There may be a contract of sale of goods,
whose acquisition by the seller depends upon a
Art. 1457. An implied trust may be proved by contingency which may or may not happen. (n)
oral evidence.
Art. 1463. The sole owner of a thing may sell an
undivided interest therein. (n)
Title VI. - SALES
Art. 1464. In the case of fungible goods, there
CHAPTER 1 may be a sale of an undivided share of a
NATURE AND FORM OF THE CONTRACT specific mass, though the seller purports to sell
and the buyer to buy a definite number, weight
Art. 1458. By the contract of sale one of the or measure of the goods in the mass, and
contracting parties obligates himself to transfer though the number, weight or measure of the
the ownership and to deliver a determinate goods in the mass is undetermined. By such a
thing, and the other to pay therefor a price sale the buyer becomes owner in common of
certain in money or its equivalent. such a share of the mass as the number, weight
or measure bought bears to the number, weight
A contract of sale may be absolute or or measure of the mass. If the mass contains
conditional. (1445a) less than the number, weight or measure
bought, the buyer becomes the owner of the
Art. 1459. The thing must be licit and the vendor whole mass and the seller is bound to make
must have a right to transfer the ownership good the deficiency from goods of the same kind
thereof at the time it is delivered. (n) and quality, unless a contrary intent appears. (n)

Art. 1460. A thing is determinate when it is Art. 1465. Things subject to a resolutory
particularly designated or physical segregated condition may be the object of the contract of
from all other of the same class. sale. (n)

The requisite that a thing be determinate is Art. 1466. In construing a contract containing
satisfied if at the time the contract is entered provisions characteristic of both the contract of
into, the thing is capable of being made sale and of the contract of agency to sell, the
determinate without the necessity of a new or essential clauses of the whole instrument shall
further agreement between the parties. (n) be considered. (n)

Art. 1461. Things having a potential existence Art. 1467. A contract for the delivery at a certain
may be the object of the contract of sale. price of an article which the vendor in the
ordinary course of his business manufactures or
The efficacy of the sale of a mere hope or procures for the general market, whether the
expectancy is deemed subject to the condition same is on hand at the time or not, is a contract
that the thing will come into existence. of sale, but if the goods are to be manufactured
specially for the customer and upon his special
The sale of a vain hope or expectancy is void. order, and not for the general market, it is a
(n) contract for a piece of work. (n)
Art. 1468. If the consideration of the contract Art. 1473. The fixing of the price can never be
consists partly in money, and partly in another left to the discretion of one of the contracting
thing, the transaction shall be characterized by parties. However, if the price fixed by one of the
the manifest intention of the parties. If such parties is accepted by the other, the sale is
intention does not clearly appear, it shall be perfected. (1449a)
considered a barter if the value of the thing
given as a part of the consideration exceeds the Art. 1474. Where the price cannot be
amount of the money or its equivalent; determined in accordance with the preceding
otherwise, it is a sale. (1446a) articles, or in any other manner, the contract is
inefficacious. However, if the thing or any part
Art. 1469. In order that the price may be thereof has been delivered to and appropriated
considered certain, it shall be sufficient that it by the buyer he must pay a reasonable price
be so with reference to another thing certain, or therefor. What is a reasonable price is a
that the determination thereof be left to the question of fact dependent on the circumstances
judgment of a special person or persons. of each particular case. (n)

Should such person or persons be unable or Art. 1475. The contract of sale is perfected at
unwilling to fix it, the contract shall be the moment there is a meeting of minds upon
inefficacious, unless the parties subsequently the thing which is the object of the contract and
agree upon the price. upon the price.

If the third person or persons acted in bad faith From that moment, the parties may reciprocally
or by mistake, the courts may fix the price. demand performance, subject to the provisions
of the law governing the form of contracts.
Where such third person or persons are (1450a)
prevented from fixing the price or terms by fault
of the seller or the buyer, the party not in fault Art. 1476. In the case of a sale by auction:
may have such remedies against the party in
fault as are allowed the seller or the buyer, as (1) Where goods are put up for sale by
the case may be. (1447a) auction in lots, each lot is the subject of
a separate contract of sale.
Art. 1470. Gross inadequacy of price does not
affect a contract of sale, except as it may (2) A sale by auction is perfected when
indicate a defect in the consent, or that the the auctioneer announces its perfection
parties really intended a donation or some other by the fall of the hammer, or in other
act or contract. (n) customary manner. Until such
announcement is made, any bidder may
Art. 1471. If the price is simulated, the sale is retract his bid; and the auctioneer may
void, but the act may be shown to have been in withdraw the goods from the sale unless
reality a donation, or some other act or contract. the auction has been announced to be
(n) without reserve.

Art. 1472. The price of securities, grain, liquids, (3) A right to bid may be reserved
and other things shall also be considered expressly by or on behalf of the seller,
certain, when the price fixed is that which the unless otherwise provided by law or by
thing sold would have on a definite day, or in a stipulation.
particular exchange or market, or when an
amount is fixed above or below the price on (4) Where notice has not been given
such day, or in such exchange or market, that a sale by auction is subject to a
provided said amount be certain. (1448) right to bid on behalf of the seller, it
 shall not be lawful for the seller to bid not correspond with the description or the
himself or to employ or induce any sample, and if the contract be by sample as well
person to bid at such sale on his behalf as description, it is not sufficient that the bulk of
or for the auctioneer, to employ or goods correspond with the sample if they do not
induce any person to bid at such sale on also correspond with the description.
behalf of the seller or knowingly to take
any bid from the seller or any person The buyer shall have a reasonable opportunity
employed by him. Any sale contravening of comparing the bulk with the description or the
this rule may be treated as fraudulent by sample. (n)
the buyer. (n)
Art. 1482. Whenever earnest money is given in
Art. 1477. The ownership of the thing sold shall a contract of sale, it shall be considered as part
be transferred to the vendee upon the actual or of the price and as proof of the perfection of the
constructive delivery thereof. (n) contract. (1454a)

Art. 1478. The parties may stipulate that Art. 1483. Subject to the provisions of the
ownership in the thing shall not pass to the Statute of Frauds and of any other applicable
purchaser until he has fully paid the price. (n) statute, a contract of sale may be made in
writing, or by word of mouth, or partly in writing
Art. 1479. A promise to buy and sell a and partly by word of mouth, or may be inferred
determinate thing for a price certain is from the conduct of the parties. (n)
reciprocally demandable.
Art. 1484. In a contract of sale of personal
An accepted unilateral promise to buy or to sell property the price of which is payable in
a determinate thing for a price certain is binding installments, the vendor may exercise any of the
upon the promissor if the promise is supported following remedies:
by a consideration distinct from the price.
(1451a) (1) Exact fulfillment of the obligation,
should the vendee fail to pay;
Art. 1480. Any injury to or benefit from the thing
sold, after the contract has been perfected, from (2) Cancel the sale, should the vendee's
the moment of the perfection of the contract to failure to pay cover two or more
the time of delivery, shall be governed by installments;
Articles 1163 to 1165, and 1262.
(3) Foreclose the chattel mortgage on
This rule shall apply to the sale of fungible the thing sold, if one has been
things, made independently and for a single constituted, should the vendee's failure
price, or without consideration of their weight, to pay cover two or more installments.
number, or measure. In this case, he shall have no further
action against the purchaser to recover
Should fungible things be sold for a price fixed any unpaid balance of the price. Any
according to weight, number, or measure, the agreement to the contrary shall be void.
risk shall not be imputed to the vendee until they (1454-A-a)
have been weighed, counted, or measured and
delivered, unless the latter has incurred in Art. 1485. The preceding article shall be applied
delay. (1452a) to contracts purporting to be leases of personal
property with option to buy, when the lessor has
Art. 1481. In the contract of sale of goods by deprived the lessee of the possession or
description or by sample, the contract may be enjoyment of the thing. (1454-A-a)
rescinded if the bulk of the goods delivered do
Art. 1486. In the case referred to in two (2) Agents, the property whose
preceding articles, a stipulation that the administration or sale may have been
installments or rents paid shall not be returned entrusted to them, unless the consent of
to the vendee or lessee shall be valid insofar as the principal has been given;
the same may not be unconscionable under the
circumstances. (n) (3) Executors and administrators, the
property of the estate under
Art. 1487. The expenses for the execution and administration;
registration of the sale shall be borne by the
vendor, unless there is a stipulation to the (4) Public officers and employees, the
contrary. (1455a) property of the State or of any
subdivision thereof, or of any
Art. 1488. The expropriation of property for government-owned or controlled
public use is governed by special laws. (1456) corporation, or institution, the
administration of which has been
intrusted to them; this provision shall
CHAPTER 2 apply to judges and government experts
CAPACITY TO BUY OR SELL who, in any manner whatsoever, take
part in the sale;
Art. 1489. All persons who are authorized in this
Code to obligate themselves, may enter into a (5) Justices, judges, prosecuting
contract of sale, saving the modifications attorneys, clerks of superior and inferior
contained in the following articles. courts, and other officers and
employees connected with the
Where necessaries are those sold and delivered administration of justice, the property
to a minor or other person without capacity to and rights in litigation or levied upon an
act, he must pay a reasonable price therefor. execution before the court within whose
Necessaries are those referred to in Article 290. jurisdiction or territory they exercise
(1457a) their respective functions; this
prohibition includes the act of acquiring
Art. 1490. The husband and the wife cannot sell by assignment and shall apply to
property to each other, except: lawyers, with respect to the property
and rights which may be the object of
(1) When a separation of property was any litigation in which they may take
agreed upon in the marriage part by virtue of their profession.
settlements; or
(6) Any others specially disqualified by
(2) When there has been a judicial law. (1459a)
separation or property under Article 191.
(1458a) Art. 1492. The prohibitions in the two preceding
articles are applicable to sales in legal
Art. 1491. The following persons cannot acquire redemption, compromises and renunciations.
by purchase, even at a public or judicial auction, (n)
either in person or through the mediation of
another: CHAPTER 3
(1) The guardian, the property of the EFFECTS OF THE CONTRACT
person or persons who may be under WHEN THE THING SOLD HAS BEEN LOST
his guardianship;
Art. 1493. If at the time the contract of sale is
perfected, the thing which is the object of the
contract has been entirely lost, the contract Art. 1498. When the sale is made through a
shall be without any effect. public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is
But if the thing should have been lost in part the object of the contract, if from the deed the
only, the vendee may choose between contrary does not appear or cannot clearly be
withdrawing from the contract and demanding inferred.
the remaining part, paying its price in proportion
to the total sum agreed upon. (1460a) With regard to movable property, its delivery
may also be made by the delivery of the keys of
Art. 1494. Where the parties purport a sale of the place or depository where it is stored or
specific goods, and the goods without the kept. (1463a)
knowledge of the seller have perished in part or
have wholly or in a material part so deteriorated Art. 1499. The delivery of movable property may
in quality as to be substantially changed in likewise be made by the mere consent or
character, the buyer may at his option treat the agreement of the contracting parties, if the thing
sale: sold cannot be transferred to the possession of
the vendee at the time of the sale, or if the latter
(1) As avoided; or already had it in his possession for any other
reason. (1463a)
(2) As valid in all of the existing goods
or in so much thereof as have not Art. 1500. There may also be
deteriorated, and as binding the buyer tradition constitutum possessorium . (n)
to pay the agreed price for the goods in
which the ownership will pass, if the Art. 1501. With respect to incorporeal property,
sale was divisible. (n) the provisions of the first paragraph of article
1498 shall govern. In any other case wherein
said provisions are not applicable, the placing of
CHAPTER 4 the titles of ownership in the possession of the
OBLIGATIONS OF THE VENDOR vendee or the use by the vendee of his rights,
with the vendor's consent, shall be understood
SECTION 1. - General Provisions as a delivery. (1464)

Art. 1495. The vendor is bound to transfer the Art. 1502. When goods are delivered to the
ownership of and deliver, as well as warrant the buyer "on sale or return" to give the buyer an
thing which is the object of the sale. (1461a) option to return the goods instead of paying the
price, the ownership passes to the buyer of
Art. 1496. The ownership of the thing sold is delivery, but he may revest the ownership in the
acquired by the vendee from the moment it is seller by returning or tendering the goods within
delivered to him in any of the ways specified in the time fixed in the contract, or, if no time has
Articles 1497 to 1501, or in any other manner been fixed, within a reasonable time. (n)
signifying an agreement that the possession is
transferred from the vendor to the vendee. (n) When goods are delivered to the buyer on
approval or on trial or on satisfaction, or other
similar terms, the ownership therein passes to
SECTION 2. - Delivery of the Thing Sold the buyer:

Art. 1497. The thing sold shall be understood as (1) When he signifies his approval or
delivered, when it is placed in the control and acceptance to the seller or does any
possession of the vendee. (1462a) other act adopting the transaction;
 (2) If he does not signify his approval or consignee named therein, one who purchases in
acceptance to the seller, but retains the good faith, for value, the bill of lading, or goods
goods without giving notice of rejection, from the buyer will obtain the ownership in the
then if a time has been fixed for the goods, although the bill of exchange has not
return of the goods, on the expiration of been honored, provided that such purchaser has
such time, and, if no time has been received delivery of the bill of lading indorsed by
fixed, on the expiration of a reasonable the consignee named therein, or of the goods,
time. What is a reasonable time is a without notice of the facts making the transfer
question of fact. (n) wrongful. (n)

Art. 1503. When there is a contract of sale of Art. 1504. Unless otherwise agreed, the goods
specific goods, the seller may, by the terms of remain at the seller's risk until the ownership
the contract, reserve the right of possession or therein is transferred to the buyer, but when the
ownership in the goods until certain conditions ownership therein is transferred to the buyer the
have been fulfilled. The right of possession or goods are at the buyer's risk whether actual
ownership may be thus reserved delivery has been made or not, except that:
notwithstanding the delivery of the goods to the
buyer or to a carrier or other bailee for the (1) Where delivery of the goods has
purpose of transmission to the buyer. been made to the buyer or to a bailee
for the buyer, in pursuance of the
Where goods are shipped, and by the bill of contract and the ownership in the goods
lading the goods are deliverable to the seller or has been retained by the seller merely
his agent, or to the order of the seller or of his to secure performance by the buyer of
agent, the seller thereby reserves the ownership his obligations under the contract, the
in the goods. But, if except for the form of the goods are at the buyer's risk from the
bill of lading, the ownership would have passed time of such delivery;
to the buyer on shipment of the goods, the
seller's property in the goods shall be deemed (2) Where actual delivery has been
to be only for the purpose of securing delayed through the fault of either the
performance by the buyer of his obligations buyer or seller the goods are at the risk
under the contract. of the party in fault. (n)

Where goods are shipped, and by the bill of Art. 1505. Subject to the provisions of this Title,
lading the goods are deliverable to order of the where goods are sold by a person who is not the
buyer or of his agent, but possession of the bill owner thereof, and who does not sell them
of lading is retained by the seller or his agent, under authority or with the consent of the owner,
the seller thereby reserves a right to the the buyer acquires no better title to the goods
possession of the goods as against the buyer. than the seller had, unless the owner of the
goods is by his conduct precluded from denying
Where the seller of goods draws on the buyer the seller's authority to sell.
for the price and transmits the bill of exchange
and bill of lading together to the buyer to secure Nothing in this Title, however, shall affect:
acceptance or payment of the bill of exchange,
the buyer is bound to return the bill of lading if (1) The provisions of any factors' act,
he does not honor the bill of exchange, and if he recording laws, or any other provision of
wrongfully retains the bill of lading he acquires law enabling the apparent owner of
no added right thereby. If, however, the bill of goods to dispose of them as if he were
lading provides that the goods are deliverable to the true owner thereof;
the buyer or to the order of the buyer, or is
indorsed in blank, or to the buyer by the
 (2) The validity of any contract of sale whose order the goods are by the terms of the
under statutory power of sale or under document deliverable. Such endorsement may
the order of a court of competent be in blank, to bearer or to a specified person. If
jurisdiction; indorsed to a specified person, it may be again
negotiated by the endorsement of such person
(3) Purchases made in a merchant's in blank, to bearer or to another specified
store, or in fairs, or markets, in person. Subsequent negotiations may be made
accordance with the Code of Commerce in like manner. (n)
and special laws. (n)
Art. 1510. If a document of title which contains
Art. 1506. Where the seller of goods has a an undertaking by a carrier, warehouseman or
voidable title thereto, but his title has not been other bailee to deliver the goods to bearer, to a
avoided at the time of the sale, the buyer specified person or order of a specified person
acquires a good title to the goods, provided he or which contains words of like import, has
buys them in good faith, for value, and without placed upon it the words "not negotiable," "non-
notice of the seller's defect of title. (n) negotiable" or the like, such document may
nevertheless be negotiated by the holder and is
Art. 1507. A document of title in which it is a negotiable document of title within the
stated that the goods referred to therein will be meaning of this Title. But nothing in this Title
delivered to the bearer, or to the order of any contained shall be construed as limiting or
person named in such document is a negotiable defining the effect upon the obligations of the
document of title. (n) carrier, warehouseman, or other bailee issuing a
document of title or placing thereon the
Art. 1508. A negotiable document of title may be words "not negotiable," "non-negotiable," or the
negotiated by delivery: like. (n)

(1) Where by the terms of the document Art. 1511. A document of title which is not in
the carrier, warehouseman or other such form that it can be negotiated by delivery
bailee issuing the same undertakes to may be transferred by the holder by delivery to a
deliver the goods to the bearer; or purchaser or donee. A non-negotiable document
cannot be negotiated and the endorsement of
(2) Where by the terms of the document such a document gives the transferee no
the carrier, warehouseman or other additional right. (n)
bailee issuing the same undertakes to
deliver the goods to the order of a Art. 1512. A negotiable document of title may be
specified person, and such person or a negotiated:
subsequent endorsee of the document
has indorsed it in blank or to the bearer. (1) By the owner therefor; or

Where by the terms of a negotiable document of (2) By any person to whom the
title the goods are deliverable to bearer or possession or custody of the document
where a negotiable document of title has been has been entrusted by the owner, if, by
indorsed in blank or to bearer, any holder may the terms of the document the bailee
indorse the same to himself or to any specified issuing the document undertakes to
person, and in such case the document shall deliver the goods to the order of the
thereafter be negotiated only by the person to whom the possession or
endorsement of such endorsee. (n) custody of the document has been
entrusted, or if at the time of such
Art. 1509. A negotiable document of title may be entrusting the document is in such form
negotiated by the endorsement of the person to that it may be negotiated by delivery. (n)
Art. 1513. A person to whom a negotiable appears. The negotiation shall take effect as of
document of title has been duly negotiated the time when the endorsement is actually
acquires thereby: made. (n)
(1) Such title to the goods as the person
negotiating the document to him had or Art. 1516. A person who for value negotiates or
had ability to convey to a purchaser in transfers a document of title by endorsement or
good faith for value and also such title delivery, including one who assigns for value a
to the goods as the person to whose claim secured by a document of title unless a
order the goods were to be delivered by contrary intention appears, warrants:
the terms of the document had or had
ability to convey to a purchaser in good (1) That the document is genuine;
faith for value; and
(2) That he has a legal right to negotiate
(2) The direct obligation of the bailee or transfer it;
issuing the document to hold
possession of the goods for him (3) That he has knowledge of no fact
according to the terms of the document which would impair the validity or worth
as fully as if such bailee had contracted of the document; and
directly with him. (n)
(4) That he has a right to transfer the
Art. 1514. A person to whom a document of title title to the goods and that the goods are
has been transferred, but not negotiated, merchantable or fit for a particular
acquires thereby, as against the transferor, the purpose, whenever such warranties
title to the goods, subject to the terms of any would have been implied if the contract
agreement with the transferor. of the parties had been to transfer
without a document of title the goods
If the document is non-negotiable, such person represented thereby. (n)
also acquires the right to notify the bailee who
issued the document of the transfer thereof, and Art. 1517. The endorsement of a document of
thereby to acquire the direct obligation of such title shall not make the endorser liable for any
bailee to hold possession of the goods for him failure on the part of the bailee who issued the
according to the terms of the document. document or previous endorsers thereof to fulfill
their respective obligations. (n)
Prior to the notification to such bailee by the
transferor or transferee of a non-negotiable Art. 1518. The validity of the negotiation of a
document of title, the title of the transferee to negotiable document of title is not impaired by
the goods and the right to acquire the obligation the fact that the negotiation was a breach of
of such bailee may be defeated by the levy of an duty on the part of the person making the
attachment of execution upon the goods by a negotiation, or by the fact that the owner of the
creditor of the transferor, or by a notification to document was deprived of the possession of the
such bailee by the transferor or a subsequent same by loss, theft, fraud, accident, mistake,
purchaser from the transfer of a subsequent duress, or conversion, if the person to whom the
sale of the goods by the transferor. (n) document was negotiated or a person to whom
the document was subsequently negotiated paid
Art. 1515. Where a negotiable document of title value therefor in good faith without notice of the
is transferred for value by delivery, and the breach of duty, or loss, theft, fraud, accident,
endorsement of the transferor is essential for mistake, duress or conversion. (n)
negotiation, the transferee acquires a right
against the transferor to compel him to endorse Art. 1519. If goods are delivered to a bailee by
the document unless a contrary intention the owner or by a person whose act in
conveying the title to them to a purchaser in Demand or tender of delivery may be treated as
good faith for value would bind the owner and a ineffectual unless made at a reasonable hour.
negotiable document of title is issued for them What is a reasonable hour is a question of fact.
they cannot thereafter, while in possession of
such bailee, be attached by garnishment or Unless otherwise agreed, the expenses of and
otherwise or be levied under an execution incidental to putting the goods into a deliverable
unless the document be first surrendered to the state must be borne by the seller. (n)
bailee or its negotiation enjoined. The bailee
shall in no case be compelled to deliver up the Art. 1522. Where the seller delivers to the buyer
actual possession of the goods until the a quantity of goods less than he contracted to
document is surrendered to him or impounded sell, the buyer may reject them, but if the buyer
by the court. (n) accepts or retains the goods so delivered,
knowing that the seller is not going to perform
Art. 1520. A creditor whose debtor is the owner the contract in full, he must pay for them at the
of a negotiable document of title shall be contract rate. If, however, the buyer has used or
entitled to such aid from courts of appropriate disposed of the goods delivered before he
jurisdiction by injunction and otherwise in knows that the seller is not going to perform his
attaching such document or in satisfying the contract in full, the buyer shall not be liable for
claim by means thereof as is allowed at law or in more than the fair value to him of the goods so
equity in regard to property which cannot readily received.
be attached or levied upon by ordinary legal
process. (n) Where the seller delivers to the buyer a quantity
of goods larger than he contracted to sell, the
Art. 1521. Whether it is for the buyer to take buyer may accept the goods included in the
possession of the goods or of the seller to send contract and reject the rest. If the buyer accepts
them to the buyer is a question depending in the whole of the goods so delivered he must pay
each case on the contract, express or implied, for them at the contract rate.
between the parties. Apart from any such
contract, express or implied, or usage of trade Where the seller delivers to the buyer the goods
to the contrary, the place of delivery is the he contracted to sell mixed with goods of a
seller's place of business if he has one, and if different description not included in the contract,
not his residence; but in case of a contract of the buyer may accept the goods which are in
sale of specific goods, which to the knowledge accordance with the contract and reject the rest.
of the parties when the contract or the sale was
made were in some other place, then that place In the preceding two paragraphs, if the subject
is the place of delivery. matter is indivisible, the buyer may reject the
whole of the goods.
Where by a contract of sale the seller is bound
to send the goods to the buyer, but no time for The provisions of this article are subject to any
sending them is fixed, the seller is bound to usage of trade, special agreement, or course of
send them within a reasonable time. dealing between the parties. (n)

Where the goods at the time of sale are in the Art. 1523. Where, in pursuance of a contract of
possession of a third person, the seller has not sale, the seller is authorized or required to send
fulfilled his obligation to deliver to the buyer the goods to the buyer, delivery of the goods to
unless and until such third person acknowledges a carrier, whether named by the buyer or not, for
to the buyer that he holds the goods on the the purpose of transmission to the buyer is
buyer's behalf. deemed to be a delivery of the goods to the
buyer, except in the case provided for in Article
1503, first, second and third paragraphs, or Art. 1526. Subject to the provisions of this Title,
unless a contrary intent appears. notwithstanding that the ownership in the goods
may have passed to the buyer, the unpaid seller
Unless otherwise authorized by the buyer, the of goods, as such, has:
seller must make such contract with the carrier
on behalf of the buyer as may be reasonable, (1) A lien on the goods or right to retain
having regard to the nature of the goods and the them for the price while he is in
other circumstances of the case. If the seller possession of them;
omit so to do, and the goods are lost or
damaged in course of transit, the buyer may (2) In case of the insolvency of the
decline to treat the delivery to the carrier as a buyer, a right of stopping the goods in
delivery to himself, or may hold the seller transitu after he has parted with the
responsible in damages. possession of them;

Unless otherwise agreed, where goods are sent (3) A right of resale as limited by this
by the seller to the buyer under circumstances Title;
in which the seller knows or ought to know that
it is usual to insure, the seller must give such (4) A right to rescind the sale as
notice to the buyer as may enable him to insure likewise limited by this Title.
them during their transit, and, if the seller fails
to do so, the goods shall be deemed to be at his Where the ownership in the goods has not
risk during such transit. (n) passed to the buyer, the unpaid seller has, in
addition to his other remedies a right of
Art. 1524. The vendor shall not be bound to withholding delivery similar to and coextensive
deliver the thing sold, if the vendee has not paid with his rights of lien and stoppage in transitu
him the price, or if no period for the payment where the ownership has passed to the buyer.
has been fixed in the contract. (1466) (n)

Art. 1525. The seller of goods is deemed to be Art. 1527. Subject to the provisions of this Title,
an unpaid seller within the meaning of this Title: the unpaid seller of goods who is in possession
of them is entitled to retain possession of them
(1) When the whole of the price has not until payment or tender of the price in the
been paid or tendered; following cases, namely:

(2) When a bill of exchange or other (1) Where the goods have been sold
negotiable instrument has been without any stipulation as to credit;
received as conditional payment, and
the condition on which it was received (2) Where the goods have been sold on
has been broken by reason of the credit, but the term of credit has
dishonor of the instrument, the expired;
insolvency of the buyer, or otherwise.
(3) Where the buyer becomes insolvent.
In Articles 1525 to 1535 the
term "seller" includes an agent of the seller to The seller may exercise his right of lien
whom the bill of lading has been indorsed, or a notwithstanding that he is in possession of the
consignor or agent who has himself paid, or is goods as agent or bailee for the buyer. (n)
directly responsible for the price, or any other
person who is in the position of a seller. (n) Art. 1528. Where an unpaid seller has made
part delivery of the goods, he may exercise his
right of lien on the remainder, unless such part
delivery has been made under such Goods are no longer in transit within the
circumstances as to show an intent to waive the meaning of the preceding article:
lien or right of retention. (n) (1) If the buyer, or his agent in that
behalf, obtains delivery of the goods
Art. 1529. The unpaid seller of goods loses his before their arrival at the appointed
lien thereon: destination;

(1) When he delivers the goods to a (2) If, after the arrival of the goods at
carrier or other bailee for the purpose of the appointed destination, the carrier or
transmission to the buyer without other bailee acknowledges to the buyer
reserving the ownership in the goods or or his agent that he holds the goods on
the right to the possession thereof; his behalf and continues in possession
of them as bailee for the buyer or his
(2) When the buyer or his agent lawfully agent; and it is immaterial that further
obtains possession of the goods; destination for the goods may have
been indicated by the buyer;
(3) By waiver thereof.
(3) If the carrier or other bailee
The unpaid seller of goods, having a lien wrongfully refuses to deliver the goods
thereon, does not lose his lien by reason only to the buyer or his agent in that behalf.
that he has obtained judgment or decree for the
price of the goods. (n) If the goods are delivered to a ship, freight train,
truck, or airplane chartered by the buyer, it is a
Art. 1530. Subject to the provisions of this Title, question depending on the circumstances of the
when the buyer of goods is or becomes particular case, whether they are in the
insolvent, the unpaid seller who has parted with possession of the carrier as such or as agent of
the possession of the goods has the right of the buyer.
stopping them in transitu, that is to say, he may
resume possession of the goods at any time If part delivery of the goods has been made to
while they are in transit, and he will then the buyer, or his agent in that behalf, the
become entitled to the same rights in regard to remainder of the goods may be stopped in
the goods as he would have had if he had never transitu, unless such part delivery has been
parted with the possession. (n) under such circumstances as to show an
agreement with the buyer to give up possession
Art. 1531. Goods are in transit within the of the whole of the goods. (n)
meaning of the preceding article:
Art. 1532. The unpaid seller may exercise his
(1) From the time when they are right of stoppage in transitu either by obtaining
delivered to a carrier by land, water, or actual possession of the goods or by giving
air, or other bailee for the purpose of notice of his claim to the carrier or other bailee
transmission to the buyer, until the in whose possession the goods are. Such notice
buyer, or his agent in that behalf, takes may be given either to the person in actual
delivery of them from such carrier or possession of the goods or to his principal. In
other bailee; the latter case the notice, to be effectual, must
be given at such time and under such
(2) If the goods are rejected by the circumstances that the principal, by the exercise
buyer, and the carrier or other bailee of reasonable diligence, may prevent a delivery
continues in possession of them, even if to the buyer.
the seller has refused to receive them
back.
When notice of stoppage in transitu is given by public or private sale. He cannot, however,
the seller to the carrier, or other bailee in directly or indirectly buy the goods. (n)
possession of the goods, he must redeliver the
goods to, or according to the directions of, the Art. 1534. An unpaid seller having the right of
seller. The expenses of such delivery must be lien or having stopped the goods in transitu,
borne by the seller. If, however, a negotiable may rescind the transfer of title and resume the
document of title representing the goods has ownership in the goods, where he expressly
been issued by the carrier or other bailee, he reserved the right to do so in case the buyer
shall not obliged to deliver or justified in should make default, or where the buyer has
delivering the goods to the seller unless such been in default in the payment of the price for
document is first surrendered for cancellation. an unreasonable time. The seller shall not
(n) thereafter be liable to the buyer upon the
contract of sale, but may recover from the buyer
Art. 1533. Where the goods are of perishable damages for any loss occasioned by the breach
nature, or where the seller expressly reserves of the contract.
the right of resale in case the buyer should
make default, or where the buyer has been in The transfer of title shall not be held to have
default in the payment of the price for an been rescinded by an unpaid seller until he has
unreasonable time, an unpaid seller having a manifested by notice to the buyer or by some
right of lien or having stopped the goods in other overt act an intention to rescind. It is not
transitu may resell the goods. He shall not necessary that such overt act should be
thereafter be liable to the original buyer upon communicated to the buyer, but the giving or
the contract of sale or for any profit made by failure to give notice to the buyer of the intention
such resale, but may recover from the buyer to rescind shall be relevant in any issue
damages for any loss occasioned by the breach involving the question whether the buyer had
of the contract of sale. been in default for an unreasonable time before
the right of rescission was asserted. (n)
Where a resale is made, as authorized in this
article, the buyer acquires a good title as Art. 1535. Subject to the provisions of this Title,
against the original buyer. the unpaid seller's right of lien or stoppage in
transitu is not affected by any sale, or other
It is not essential to the validity of resale that disposition of the goods which the buyer may
notice of an intention to resell the goods be have made, unless the seller has assented
given by the seller to the original buyer. But thereto.
where the right to resell is not based on the
perishable nature of the goods or upon an If, however, a negotiable document of title has
express provision of the contract of sale, the been issued for goods, no seller's lien or right of
giving or failure to give such notice shall be stoppage in transitu shall defeat the right of any
relevant in any issue involving the question purchaser for value in good faith to whom such
whether the buyer had been in default for an document has been negotiated, whether such
unreasonable time before the resale was made. negotiation be prior or subsequent to the
notification to the carrier, or other bailee who
It is not essential to the validity of a resale that issued such document, of the seller's claim to a
notice of the time and place of such resale lien or right of stoppage in transitu. (n)
should be given by the seller to the original
buyer. Art. 1536. The vendor is not bound to deliver the
thing sold in case the vendee should lose the
The seller is bound to exercise reasonable care right to make use of the terms as provided in
and judgment in making a resale, and subject to Article 1198. (1467a)
this requirement may make a resale either by
Art. 1537. The vendor is bound to deliver the whole area, he must pay for the same at the
thing sold and its accessions and accessories in contract rate. (1470a)
the condition in which they were upon the
perfection of the contract. Art. 1541. The provisions of the two preceding
articles shall apply to judicial sales. (n)
All the fruits shall pertain to the vendee from the
day on which the contract was perfected. Art. 1542. In the sale of real estate, made for a
(1468a) lump sum and not at the rate of a certain sum
for a unit of measure or number, there shall be
Art. 1538. In case of loss, deterioration or no increase or decrease of the price, although
improvement of the thing before its delivery, the there be a greater or less area or number than
rules in Article 1189 shall be observed, the that stated in the contract.
vendor being considered the debtor. (n)
The same rule shall be applied when two or
Art. 1539. The obligation to deliver the thing more immovables as sold for a single price; but
sold includes that of placing in the control of the if, besides mentioning the boundaries, which is
vendee all that is mentioned in the contract, in indispensable in every conveyance of real
conformity with the following rules: estate, its area or number should be designated
in the contract, the vendor shall be bound to
If the sale of real estate should be made with a deliver all that is included within said
statement of its area, at the rate of a certain boundaries, even when it exceeds the area or
price for a unit of measure or number, the number specified in the contract; and, should he
vendor shall be obliged to deliver to the vendee, not be able to do so, he shall suffer a reduction
if the latter should demand it, all that may have in the price, in proportion to what is lacking in
been stated in the contract; but, should this be the area or number, unless the contract is
not possible, the vendee may choose between a rescinded because the vendee does not accede
proportional reduction of the price and the to the failure to deliver what has been
rescission of the contract, provided that, in the stipulated. (1471)
latter case, the lack in the area be not less than
one-tenth of that stated. Art. 1543. The actions arising from Articles 1539
and 1542 shall prescribe in six months, counted
The same shall be done, even when the area is from the day of delivery. (1472a)
the same, if any part of the immovable is not of
the quality specified in the contract. Art. 1544. If the same thing should have been
sold to different vendees, the ownership shall be
The rescission, in this case, shall only take transferred to the person who may have first
place at the will of the vendee, when the inferior taken possession thereof in good faith, if it
value of the thing sold exceeds one-tenth of the should be movable property.
price agreed upon.
Should it be immovable property, the ownership
Nevertheless, if the vendee would not have shall belong to the person acquiring it who in
bought the immovable had he known of its good faith first recorded it in the Registry of
smaller area of inferior quality, he may rescind Property.
the sale. (1469a)
Should there be no inscription, the ownership
Art. 1540. If, in the case of the preceding article, shall pertain to the person who in good faith was
there is a greater area or number in the first in the possession; and, in the absence
immovable than that stated in the contract, the thereof, to the person who presents the oldest
vendee may accept the area included in the title, provided there is good faith. (1473)
contract and reject the rest. If he accepts the
 SECTION 3. - Conditions and Warranties authority in fact or law, for the sale of a thing in
which a third person has a legal or equitable
Art. 1545. Where the obligation of either party to interest. (n)
a contract of sale is subject to any condition
which is not performed, such party may refuse SUBSECTION 1. - Warranty in Case of Eviction
to proceed with the contract or he may waive
performance of the condition. If the other party Art. 1548. Eviction shall take place whenever by
has promised that the condition should happen a final judgment based on a right prior to the
or be performed, such first mentioned party may sale or an act imputable to the vendor, the
also treat the nonperformance of the condition vendee is deprived of the whole or of a part of
as a breach of warranty. the thing purchased.

Where the ownership in the thing has not The vendor shall answer for the eviction even
passed, the buyer may treat the fulfillment by though nothing has been said in the contract on
the seller of his obligation to deliver the same as the subject.
described and as warranted expressly or by
implication in the contract of sale as a condition The contracting parties, however, may increase,
of the obligation of the buyer to perform his diminish, or suppress this legal obligation of the
promise to accept and pay for the thing. (n) vendor. (1475a)

Art. 1546. Any affirmation of fact or any promise Art. 1549. The vendee need not appeal from the
by the seller relating to the thing is an express decision in order that the vendor may become
warranty if the natural tendency of such liable for eviction. (n)
affirmation or promise is to induce the buyer to
purchase the same, and if the buyer purchase Art. 1550. When adverse possession had been
the thing relying thereon. No affirmation of the commenced before the sale but the prescriptive
value of the thing, nor any statement purporting period is completed after the transfer, the
to be a statement of the seller's opinion only, vendor shall not be liable for eviction. (n)
shall be construed as a warranty, unless the
seller made such affirmation or statement as an Art. 1551. If the property is sold for nonpayment
expert and it was relied upon by the buyer. (n) of taxes due and not made known to the vendee
before the sale, the vendor is liable for eviction.
Art. 1547. In a contract of sale, unless a (n)
contrary intention appears, there is:
Art. 1552. The judgment debtor is also
(1) An implied warranty on the part of responsible for eviction in judicial sales, unless
the seller that he has a right to sell the it is otherwise decreed in the judgment. (n)
thing at the time when the ownership is
to pass, and that the buyer shall from Art. 1553. Any stipulation exempting the vendor
that time have and enjoy the legal and from the obligation to answer for eviction shall
peaceful possession of the thing; be void, if he acted in bad faith. (1476)

(2) An implied warranty that the thing Art. 1554. If the vendee has renounced the right
shall be free from any hidden faults or to warranty in case of eviction, and eviction
defects, or any charge or encumbrance should take place, the vendor shall only pay the
not declared or known to the buyer. value which the thing sold had at the time of the
eviction. Should the vendee have made the
This Article shall not, however, be held to render waiver with knowledge of the risks of eviction
liable a sheriff, auctioneer, mortgagee, pledgee, and assumed its consequences, the vendor
or other person professing to sell by virtue of shall not be liable. (1477)
Art. 1555. When the warranty has been agreed Art. 1558. The vendor shall not be obliged to
upon or nothing has been stipulated on this make good the proper warranty, unless he is
point, in case eviction occurs, the vendee shall summoned in the suit for eviction at the instance
have the right to demand of the vendor: of the vendee. (1481a)

(1) The return of the value which the Art. 1559. The defendant vendee shall ask,
thing sold had at the time of the within the time fixed in the Rules of Court for
eviction, be it greater or less than the answering the complaint, that the vendor be
price of the sale; made a co-defendant. (1482a)

(2) The income or fruits, if he has been Art. 1560. If the immovable sold should be
ordered to deliver them to the party who encumbered with any non-apparent burden or
won the suit against him; servitude, not mentioned in the agreement, of
such a nature that it must be presumed that the
(3) The costs of the suit which caused vendee would not have acquired it had he been
the eviction, and, in a proper case, aware thereof, he may ask for the rescission of
those of the suit brought against the the contract, unless he should prefer the
vendor for the warranty; appropriate indemnity. Neither right can be
exercised if the non-apparent burden or
(4) The expenses of the contract, if the servitude is recorded in the Registry of Property,
vendee has paid them; unless there is an express warranty that the
thing is free from all burdens and
(5) The damages and interests, and encumbrances.
ornamental expenses, if the sale was
made in bad faith. (1478) Within one year, to be computed from the
execution of the deed, the vendee may bring the
Art. 1556. Should the vendee lose, by reason of action for rescission, or sue for damages.
the eviction, a part of the thing sold of such
importance, in relation to the whole, that he One year having elapsed, he may only bring an
would not have bought it without said part, he action for damages within an equal period, to be
may demand the rescission of the contract; but counted from the date on which he discovered
with the obligation to return the thing without the burden or servitude. (1483a)
other encumbrances that those which it had
when he acquired it.
SUBSECTION 2. - Warranty Against Hidden
He may exercise this right of action, instead of Defects
enforcing the vendor's liability for eviction. of or Encumbrances Upon the Thing Sold

The same rule shall be observed when two or Art. 1561. The vendor shall be responsible for
more things have been jointly sold for a lump warranty against the hidden defects which the
sum, or for a separate price for each of them, if thing sold may have, should they render it unfit
it should clearly appear that the vendee would for the use for which it is intended, or should
not have purchased one without the other. they diminish its fitness for such use to such an
(1479a) extent that, had the vendee been aware thereof,
he would not have acquired it or would have
Art. 1557. The warranty cannot be enforced until given a lower price for it; but said vendor shall
a final judgment has been rendered, whereby not be answerable for patent defects or those
the vendee loses the thing acquired or a part which may be visible, or for those which are not
thereof. (1480) visible if the vendee is an expert who, by reason
of his trade or profession, should have known of the hidden faults or defects in the thing sold.
them. (1484a) (1485)

Art. 1562. In a sale of goods, there is an implied Art. 1567. In the cases of Articles 1561, 1562,
warranty or condition as to the quality or fitness 1564, 1565 and 1566, the vendee may elect
of the goods, as follows: between withdrawing from the contract and
demanding a proportionate reduction of the
(1) Where the buyer, expressly or by price, with damages in either case. (1486a)
implication, makes known to the seller
the particular purpose for which the Art. 1568. If the thing sold should be lost in
goods are acquired, and it appears that consequence of the hidden faults, and the
the buyer relies on the seller's skill or vendor was aware of them, he shall bear the
judgment (whether he be the grower or loss, and shall be obliged to return the price and
manufacturer or not), there is an implied refund the expenses of the contract, with
warranty that the goods shall be damages. If he was not aware of them, he shall
reasonably fit for such purpose; only return the price and interest thereon, and
reimburse the expenses of the contract which
(2) Where the goods are brought by the vendee might have paid. (1487a)
description from a seller who deals in
goods of that description (whether he be Art. 1569. If the thing sold had any hidden fault
the grower or manufacturer or not), at the time of the sale, and should thereafter be
there is an implied warranty that the lost by a fortuitous event or through the fault of
goods shall be of merchantable quality. the vendee, the latter may demand of the
(n) vendor the price which he paid, less the value
which the thing had when it was lost.
Art. 1563. In the case of contract of sale of a
specified article under its patent or other trade If the vendor acted in bad faith, he shall pay
name, there is no warranty as to its fitness for damages to the vendee. (1488a)
any particular purpose, unless there is a
stipulation to the contrary. (n) Art. 1570. The preceding articles of this
Subsection shall be applicable to judicial sales,
Art. 1564. An implied warranty or condition as to except that the judgment debtor shall not be
the quality or fitness for a particular purpose liable for damages. (1489a)
may be annexed by the usage of trade. (n)
Art. 1571. Actions arising from the provisions of
Art. 1565. In the case of a contract of sale by the preceding ten articles shall be barred after
sample, if the seller is a dealer in goods of that six months, from the delivery of the thing sold.
kind, there is an implied warranty that the goods (1490)
shall be free from any defect rendering them
unmerchantable which would not be apparent on Art. 1572. If two or more animals are sold
reasonable examination of the sample. (n) together, whether for a lump sum or for a
separate price for each of them, the redhibitory
Art. 1566. The vendor is responsible to the defect of one shall only give rise to its
vendee for any hidden faults or defects in the redhibition, and not that of the others; unless it
thing sold, even though he was not aware should appear that the vendee would not have
thereof. purchased the sound animal or animals without
the defective one.
This provision shall not apply if the contrary has
been stipulated, and the vendor was not aware The latter case shall be presumed when a team,
yoke pair, or set is bought, even if a separate
price has been fixed for each one of the animals and not arising from the redhibitory fault or
composing the same. (1491) defect. (1498)

Art. 1573. The provisions of the preceding Art. 1580. In the sale of animals with redhibitory
article with respect to the sale of animals shall defects, the vendee shall also enjoy the right
in like manner be applicable to the sale of other mentioned in article 1567; but he must make
things. (1492) use thereof within the same period which has
been fixed for the exercise of the redhibitory
Art. 1574. There is no warranty against hidden action. (1499)
defects of animals sold at fairs or at public
auctions, or of live stock sold as condemned. Art. 1581. The form of sale of large cattle shall
(1493a) be governed by special laws. (n)

Art. 1575. The sale of animals suffering from

contagious diseases shall be void. CHAPTER 5
OBLIGATIONS OF THE VENDEE
A contract of sale of animals shall also be void if
the use or service for which they are acquired Art. 1582. The vendee is bound to accept
has been stated in the contract, and they are delivery and to pay the price of the thing sold at
found to be unfit therefor. (1494a) the time and place stipulated in the contract.

Art. 1576. If the hidden defect of animals, even If the time and place should not have been
in case a professional inspection has been stipulated, the payment must be made at the
made, should be of such a nature that expert time and place of the delivery of the thing sold.
knowledge is not sufficient to discover it, the (1500a)
defect shall be considered as redhibitory.
Art. 1583. Unless otherwise agreed, the buyer of
But if the veterinarian, through ignorance or bad goods is not bound to accept delivery thereof by
faith should fail to discover or disclose it, he installments.
shall be liable for damages. (1495)
Where there is a contract of sale of goods to be
Art. 1577. The redhibitory action, based on the delivered by stated installments, which are to be
faults or defects of animals, must be brought separately paid for, and the seller makes
within forty days from the date of their delivery defective deliveries in respect of one or more
to the vendee. instalments, or the buyer neglects or refuses
without just cause to take delivery of or pay for
This action can only be exercised with respect one more instalments, it depends in each case
to faults and defects which are determined by on the terms of the contract and the
law or by local customs. (1496a) circumstances of the case, whether the breach
of contract is so material as to justify the injured
Art. 1578. If the animal should die within three party in refusing to proceed further and suing for
days after its purchase, the vendor shall be damages for breach of the entire contract, or
liable if the disease which cause the death whether the breach is severable, giving rise to a
existed at the time of the contract. (1497a) claim for compensation but not to a right to treat
the whole contract as broken. (n)
Art. 1579. If the sale be rescinded, the animal
shall be returned in the condition in which it was Art. 1584. Where goods are delivered to the
sold and delivered, the vendee being buyer, which he has not previously examined,
answerable for any injury due to his negligence, he is not deemed to have accepted them unless
and until he has had a reasonable opportunity of
examining them for the purpose of ascertaining to accept them. If he voluntarily constitutes
whether they are in conformity with the contract himself a depositary thereof, he shall be liable
if there is no stipulation to the contrary. as such. (n)

Unless otherwise agreed, when the seller Art. 1588. If there is no stipulation as specified
tenders delivery of goods to the buyer, he is in the first paragraph of article 1523, when the
bound, on request, to afford the buyer a buyer's refusal to accept the goods is without
reasonable opportunity of examining the goods just cause, the title thereto passes to him from
for the purpose of ascertaining whether they are the moment they are placed at his disposal. (n)
in conformity with the contract.
Art. 1589. The vendee shall owe interest for the
Where goods are delivered to a carrier by the period between the delivery of the thing and the
seller, in accordance with an order from or payment of the price, in the following three
agreement with the buyer, upon the terms that cases:
the goods shall not be delivered by the carrier to
the buyer until he has paid the price, whether (1) Should it have been so stipulated;
such terms are indicated by marking the goods
with the words "collect on delivery," or (2) Should the thing sold and delivered
otherwise, the buyer is not entitled to examine produce fruits or income;
the goods before the payment of the price, in
the absence of agreement or usage of trade (3) Should he be in default, from the
permitting such examination. (n) time of judicial or extrajudicial demand
for the payment of the price. (1501a)
Art. 1585. The buyer is deemed to have
accepted the goods when he intimates to the Art. 1590. Should the vendee be disturbed in the
seller that he has accepted them, or when the possession or ownership of the thing acquired,
goods have been delivered to him, and he does or should he have reasonable grounds to fear
any act in relation to them which is inconsistent such disturbance, by a vindicatory action or a
with the ownership of the seller, or when, after foreclosure of mortgage, he may suspend the
the lapse of a reasonable time, he retains the payment of the price until the vendor has
goods without intimating to the seller that he has caused the disturbance or danger to cease,
rejected them. (n) unless the latter gives security for the return of
the price in a proper case, or it has been
Art. 1586. In the absence of express or implied stipulated that, notwithstanding any such
agreement of the parties, acceptance of the contingency, the vendee shall be bound to make
goods by the buyer shall not discharge the seller the payment. A mere act of trespass shall not
from liability in damages or other legal remedy authorize the suspension of the payment of the
for breach of any promise or warranty in the price. (1502a)
contract of sale. But, if, after acceptance of the
goods, the buyer fails to give notice to the seller Art. 1591. Should the vendor have reasonable
of the breach in any promise of warranty within grounds to fear the loss of immovable property
a reasonable time after the buyer knows, or sold and its price, he may immediately sue for
ought to know of such breach, the seller shall the rescission of the sale.
not be liable therefor. (n)
Should such ground not exist, the provisions of
Art. 1587. Unless otherwise agreed, where Article 1191 shall be observed. (1503)
goods are delivered to the buyer, and he refuses
to accept them, having the right so to do, he is Art. 1592. In the sale of immovable property,
not bound to return them to the seller, but it is even though it may have been stipulated that
sufficient if he notifies the seller that he refuses upon failure to pay the price at the time agreed
upon the rescission of the contract shall of right reasonable price, and if the provisions of article
take place, the vendee may pay, even after the 1596, fourth paragraph, are not applicable, the
expiration of the period, as long as no demand seller may offer to deliver the goods to the
for rescission of the contract has been made buyer, and, if the buyer refuses to receive them,
upon him either judicially or by a notarial act. may notify the buyer that the goods are
After the demand, the court may not grant him a thereafter held by the seller as bailee for the
new term. (1504a) buyer. Thereafter the seller may treat the goods
as the buyer's and may maintain an action for
Art. 1593. With respect to movable property, the the price. (n)
rescission of the sale shall of right take place in
the interest of the vendor, if the vendee, upon Art. 1596. Where the buyer wrongfully neglects
the expiration of the period fixed for the delivery or refuses to accept and pay for the goods, the
of the thing, should not have appeared to seller may maintain an action against him for
receive it, or, having appeared, he should not damages for nonacceptance.
have tendered the price at the same time,
unless a longer period has been stipulated for The measure of damages is the estimated loss
its payment. (1505) directly and naturally resulting in the ordinary
course of events from the buyer's breach of
contract.
CHAPTER 6
ACTIONS FOR BREACH OF CONTRACT OF Where there is an available market for the
SALE OF GOODS goods in question, the measure of damages is,
in the absence of special circumstances
Art. 1594. Actions for breach of the contract of showing proximate damage of a different
sale of goods shall be governed particularly by amount, the difference between the contract
the provisions of this Chapter, and as to matters price and the market or current price at the time
not specifically provided for herein, by other or times when the goods ought to have been
applicable provisions of this Title. (n) accepted, or, if no time was fixed for
acceptance, then at the time of the refusal to
Art. 1595. Where, under a contract of sale, the accept.
ownership of the goods has passed to the buyer
and he wrongfully neglects or refuses to pay for If, while labor or expense of material amount is
the goods according to the terms of the contract necessary on the part of the seller to enable him
of sale, the seller may maintain an action to fulfill his obligations under the contract of
against him for the price of the goods. sale, the buyer repudiates the contract or
notifies the seller to proceed no further
Where, under a contract of sale, the price is therewith, the buyer shall be liable to the seller
payable on a certain day, irrespective of delivery for labor performed or expenses made before
or of transfer of title and the buyer wrongfully receiving notice of the buyer's repudiation or
neglects or refuses to pay such price, the seller countermand. The profit the seller would have
may maintain an action for the price although made if the contract or the sale had been fully
the ownership in the goods has not passed. But performed shall be considered in awarding the
it shall be a defense to such an action that the damages. (n)
seller at any time before the judgment in such
action has manifested an inability to perform the Art. 1597. Where the goods have not been
contract of sale on his part or an intention not to delivered to the buyer, and the buyer has
perform it. repudiated the contract of sale, or has
manifested his inability to perform his
Although the ownership in the goods has not obligations thereunder, or has committed a
passed, if they cannot readily be resold for a breach thereof, the seller may totally rescind the
contract of sale by giving notice of his election rescind, or if he fails to return or to offer
so to do to the buyer. (n) to return the goods to the seller in
substantially as good condition as they
Art. 1598. Where the seller has broken a were in at the time the ownership was
contract to deliver specific or ascertained goods, transferred to the buyer. But if
a court may, on the application of the buyer, deterioration or injury of the goods is
direct that the contract shall be performed due to the breach or warranty, such
specifically, without giving the seller the option deterioration or injury shall not prevent
of retaining the goods on payment of damages. the buyer from returning or offering to
The judgment or decree may be unconditional, return the goods to the seller and
or upon such terms and conditions as to rescinding the sale.
damages, payment of the price and otherwise,
as the court may deem just. (n) Where the buyer is entitled to rescind
the sale and elects to do so, he shall
Art. 1599. Where there is a breach of warranty cease to be liable for the price upon
by the seller, the buyer may, at his election: returning or offering to return the goods.
If the price or any part thereof has
(1) Accept or keep the goods and set up already been paid, the seller shall be
against the seller, the breach of liable to repay so much thereof as has
warranty by way of recoupment in been paid, concurrently with the return
diminution or extinction of the price; of the goods, or immediately after an
offer to return the goods in exchange for
(2) Accept or keep the goods and repayment of the price.
maintain an action against the seller for
damages for the breach of warranty; Where the buyer is entitled to rescind
the sale and elects to do so, if the seller
(3) Refuse to accept the goods, and refuses to accept an offer of the buyer
maintain an action against the seller for to return the goods, the buyer shall
damages for the breach of warranty; thereafter be deemed to hold the goods
as bailee for the seller, but subject to a
(4) Rescind the contract of sale and lien to secure payment of any portion of
refuse to receive the goods or if the the price which has been paid, and with
goods have already been received, the remedies for the enforcement of
return them or offer to return them to such lien allowed to an unpaid seller by
the seller and recover the price or any Article 1526.
part thereof which has been paid.
(5) In the case of breach of warranty of
When the buyer has claimed and been quality, such loss, in the absence of
granted a remedy in anyone of these special circumstances showing
ways, no other remedy can thereafter be proximate damage of a greater amount,
granted, without prejudice to the is the difference between the value of
provisions of the second paragraph of the goods at the time of delivery to the
Article 1191. buyer and the value they would have
had if they had answered to the
Where the goods have been delivered to warranty. (n)
the buyer, he cannot rescind the sale if
he knew of the breach of warranty when
he accepted the goods without protest, CHAPTER 7
or if he fails to notify the seller within a EXTINGUISHMENT OF SALE
reasonable time of the election to
 Art. 1603. In case of doubt, a contract
Art. 1600. Sales are extinguished by the same purporting to be a sale with right to repurchase
causes as all other obligations, by those stated shall be construed as an equitable mortgage. (n)
in the preceding articles of this Title, and by
conventional or legal redemption. (1506) Art. 1604. The provisions of Article 1602 shall
also apply to a contract purporting to be an
SECTION 1. - Conventional Redemption absolute sale. (n)

Art. 1601. Conventional redemption shall take Art. 1605. In the cases referred to in Articles
place when the vendor reserves the right to 1602 and 1604, the apparent vendor may ask
repurchase the thing sold, with the obligation to for the reformation of the instrument. (n)
comply with the provisions of Article 1616 and
other stipulations which may have been agreed Art. 1606. The right referred to in Article 1601,
upon. (1507) in the absence of an express agreement, shall
last four years from the date of the contract.
Art. 1602. The contract shall be presumed to be
an equitable mortgage, in any of the following Should there be an agreement, the period
cases: cannot exceed ten years.

(1) When the price of a sale with right to However, the vendor may still exercise the right
repurchase is unusually inadequate; to repurchase within thirty days from the time
final judgment was rendered in a civil action on
(2) When the vendor remains in the basis that the contract was a true sale with
possession as lessee or otherwise; right to repurchase. (1508a)

(3) When upon or after the expiration of Art. 1607. In case of real property, the
the right to repurchase another consolidation of ownership in the vendee by
instrument extending the period of virtue of the failure of the vendor to comply with
redemption or granting a new period is the provisions of article 1616 shall not be
executed; recorded in the Registry of Property without a
judicial order, after the vendor has been duly
(4) When the purchaser retains for heard. (n)
himself a part of the purchase price;
Art. 1608. The vendor may bring his action
(5) When the vendor binds himself to against every possessor whose right is derived
pay the taxes on the thing sold; from the vendee, even if in the second contract
no mention should have been made of the right
(6) In any other case where it may be to repurchase, without prejudice to the
fairly inferred that the real intention of provisions of the Mortgage Law and the Land
the parties is that the transaction shall Registration Law with respect to third persons.
secure the payment of a debt or the (1510)
performance of any other obligation.
Art. 1609. The vendee is subrogated to the
In any of the foregoing cases, any money, fruits, vendor's rights and actions. (1511)
or other benefit to be received by the vendee as
rent or otherwise shall be considered as interest Art. 1610. The creditors of the vendor cannot
which shall be subject to the usury laws. (n) make use of the right of redemption against the
vendee, until after they have exhausted the
property of the vendor. (1512)
Art. 1611. In a sale with a right to repurchase, (1) The expenses of the contract, and
the vendee of a part of an undivided immovable any other legitimate payments made by
who acquires the whole thereof in the case of reason of the sale;
article 498, may compel the vendor to redeem
the whole property, if the latter wishes to make (2) The necessary and useful expenses
use of the right of redemption. (1513) made on the thing sold. (1518)

Art. 1612. If several persons, jointly and in the Art. 1617. If at the time of the execution of the
same contract, should sell an undivided sale there should be on the land, visible or
immovable with a right of repurchase, none of growing fruits, there shall be no reimbursement
them may exercise this right for more than his for or prorating of those existing at the time of
respective share. redemption, if no indemnity was paid by the
purchaser when the sale was executed.
The same rule shall apply if the person who sold
an immovable alone has left several heirs, in Should there have been no fruits at the time of
which case each of the latter may only redeem the sale and some exist at the time of
the part which he may have acquired. (1514) redemption, they shall be prorated between the
redemptioner and the vendee, giving the latter
Art. 1613. In the case of the preceding article, the part corresponding to the time he possessed
the vendee may demand of all the vendors or the land in the last year, counted from the
co-heirs that they come to an agreement upon anniversary of the date of the sale. (1519a)
the purchase of the whole thing sold; and should
they fail to do so, the vendee cannot be Art. 1618. The vendor who recovers the thing
compelled to consent to a partial redemption. sold shall receive it free from all charges or
(1515) mortgages constituted by the vendee, but he
shall respect the leases which the latter may
Art. 1614. Each one of the co-owners of an have executed in good faith, and in accordance
undivided immovable who may have sold his with the custom of the place where the land is
share separately, may independently exercise situated. (1520)
the right of repurchase as regards his own
share, and the vendee cannot compel him to
redeem the whole property. (1516) SECTION 2. - Legal Redemption

Art. 1615. If the vendee should leave several Art. 1619. Legal redemption is the right to be
heirs, the action for redemption cannot be subrogated, upon the same terms and
brought against each of them except for his own conditions stipulated in the contract, in the place
share, whether the thing be undivided, or it has of one who acquires a thing by purchase or
been partitioned among them. dation in payment, or by any other transaction
whereby ownership is transmitted by onerous
But if the inheritance has been divided, and the title. (1521a)
thing sold has been awarded to one of the heirs,
the action for redemption may be instituted Art. 1620. A co-owner of a thing may exercise
against him for the whole. (1517) the right of redemption in case the shares of all
the other co-owners or of any of them, are sold
Art. 1616. The vendor cannot avail himself of to a third person. If the price of the alienation is
the right of repurchase without returning to the grossly excessive, the redemptioner shall pay
vendee the price of the sale, and in addition: only a reasonable one.

Should two or more co-owners desire to

exercise the right of redemption, they may only
do so in proportion to the share they may The right of redemption of co-owners excludes
respectively have in the thing owned in that of adjoining owners. (1524a)
common. (1522a)

Art. 1621. The owners of adjoining lands shall CHAPTER 8

also have the right of redemption when a piece ASSIGNMENT OF CREDITS AND OTHER
of rural land, the area of which does not exceed INCORPOREAL RIGHTS
one hectare, is alienated, unless the grantee
does not own any rural land. Art. 1624. An assignment of creditors and other
incorporeal rights shall be perfected in
This right is not applicable to adjacent lands accordance with the provisions of Article 1475.
which are separated by brooks, drains, ravines, (n)
roads and other apparent servitudes for the
benefit of other estates. Art. 1625. An assignment of a credit, right or
action shall produce no effect as against third
If two or more adjoining owners desire to person, unless it appears in a public instrument,
exercise the right of redemption at the same or the instrument is recorded in the Registry of
time, the owner of the adjoining land of smaller Property in case the assignment involves real
area shall be preferred; and should both lands property. (1526)
have the same area, the one who first requested
the redemption. (1523a) Art. 1626. The debtor who, before having
knowledge of the assignment, pays his creditor
Art. 1622. Whenever a piece of urban land shall be released from the obligation. (1527)
which is so small and so situated that a major
portion thereof cannot be used for any practical Art. 1627. The assignment of a credit includes
purpose within a reasonable time, having been all the accessory rights, such as a guaranty,
bought merely for speculation, is about to be re- mortgage, pledge or preference. (1528)
sold, the owner of any adjoining land has a right
of pre-emption at a reasonable price. Art. 1628. The vendor in good faith shall be
responsible for the existence and legality of the
If the re-sale has been perfected, the owner of credit at the time of the sale, unless it should
the adjoining land shall have a right of have been sold as doubtful; but not for the
redemption, also at a reasonable price. solvency of the debtor, unless it has been so
expressly stipulated or unless the insolvency
When two or more owners of adjoining lands was prior to the sale and of common knowledge.
wish to exercise the right of
Even in these cases he shall only be liable for
pre-emption or redemption, the owner whose the price received and for the expenses
intended use of the land in question appears specified in No. 1 of Article 1616.
best justified shall be preferred. (n)
The vendor in bad faith shall always be
Art. 1623. The right of legal pre-emption or answerable for the payment of all expenses, and
redemption shall not be exercised except within for damages. (1529)
thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the Art. 1629. In case the assignor in good faith
case may be. The deed of sale shall not be should have made himself responsible for the
recorded in the Registry of Property, unless solvency of the debtor, and the contracting
accompanied by an affidavit of the vendor that parties should not have agreed upon the
he has given written notice thereof to all duration of the liability, it shall last for one year
possible redemptioners.
only, from the time of the assignment if the Art. 1635. From the provisions of the preceding
period had already expired. article shall be excepted the assignments or
sales made:
If the credit should be payable within a term or
period which has not yet expired, the liability (1) To a co-heir or co-owner of the right
shall cease one year after the maturity. (1530a) assigned;

Art. 1630. One who sells an inheritance without (2) To a creditor in payment of his
enumerating the things of which it is composed, credit;
shall only be answerable for his character as an
heir. (1531) (3) To the possessor of a tenement or
piece of land which is subject to the
Art. 1631. One who sells for a lump sum the right in litigation assigned. (1536)
whole of certain rights, rents, or products, shall
comply by answering for the legitimacy of the CHAPTER 9
whole in general; but he shall not be obliged to GENERAL PROVISIONS
warrant each of the various parts of which it may
be composed, except in the case of eviction Art. 1636. In the preceding articles in this Title
from the whole or the part of greater value. governing the sale of goods, unless the context
(1532a) or subject matter otherwise requires:
(1) "Document of title to goods" includes
Art. 1632. Should the vendor have profited by any bill of lading, dock warrant,
some of the fruits or received anything from the "quedan," or warehouse receipt or order
inheritance sold, he shall pay the vendee for the delivery of goods, or any other
thereof, if the contrary has not been stipulated. document used in the ordinary course of
(1533) business in the sale or transfer of
goods, as proof of the possession or
Art. 1633. The vendee shall, on his part, control of the goods, or authorizing or
reimburse the vendor for all that the latter may purporting to authorize the possessor of
have paid for the debts of and charges on the the document to transfer or receive,
estate and satisfy the credits he may have either by endorsement or by delivery,
against the same, unless there is an agreement goods represented by such document.
to the contrary. (1534)
"Goods" includes all chattels personal
Art. 1634. When a credit or other incorporeal but not things in action or money of
right in litigation is sold, the debtor shall have a legal tender in the Philippines. The term
right to extinguish it by reimbursing the assignee includes growing fruits or crops.
for the price the latter paid therefor, the judicial
costs incurred by him, and the interest on the "Order" relating to documents of title
price from the day on which the same was paid. means an order by endorsement on the
documents.
A credit or other incorporeal right shall be
considered in litigation from the time the "Quality of goods" includes their state or
complaint concerning the same is answered. condition.

The debtor may exercise his right within thirty "Specific goods" means goods identified
days from the date the assignee demands and agreed upon at the time a contract
payment from him. (1535) of sale is made.
 An antecedent or pre-existing claim, Art. 1641. As to all matters not specifically
whether for money or not, constitutes provided for in this Title, barter shall be
"value" where goods or documents of governed by the provisions of the preceding
title are taken either in satisfaction Title relating to sales. (1541a)
thereof or as security therefor.

(2) A person is insolvent within the Title VIII. - LEASE

meaning of this Title who either has
ceased to pay his debts in the ordinary CHAPTER 1
course of business or cannot pay his GENERAL PROVISIONS
debts as they become due, whether
insolvency proceedings have been Art. 1642. The contract of lease may be of
commenced or not. things, or of work and service. (1542)

(3) Goods are in a "deliverable Art. 1643. In the lease of things, one of the
state" within the meaning of this Title parties binds himself to give to another the
when they are in such a state that the enjoyment or use of a thing for a price certain,
buyer would, under the contract, be and for a period which may be definite or
bound to take delivery of them. (n) indefinite. However, no lease for more than
ninety-nine years shall be valid. (1543a)
Art. 1637. The provisions of this Title are subject
to the rules laid down by the Mortgage Law and Art. 1644. In the lease of work or service, one of
the Land Registration Law with regard to the parties binds himself to execute a piece of
immovable property. (1537a) work or to render to the other some service for a
price certain, but the relation of principal and
Title VII. - BARTER OR EXCHANGE agent does not exist between them. (1544a)

Art. 1638. By the contract of barter or exchange Art. 1645. Consumable goods cannot be the
one of the parties binds himself to give one subject matter of a contract of lease, except
thing in consideration of the other's promise to when they are merely to be exhibited or when
give another thing. (1538a) they are accessory to an industrial
establishment. (1545a)
Art. 1639. If one of the contracting parties,
having received the thing promised him in
barter, should prove that it did not belong to the CHAPTER 2
person who gave it, he cannot be compelled to LEASE OF RURAL AND URBAN LANDS
deliver that which he offered in exchange, but
he shall be entitled to damages. (1539a) SECTION 1. - General Provisions

Art. 1640. One who loses by eviction the thing Art. 1646. The persons disqualified to buy
received in barter may recover that which he referred to in Articles 1490 and 1491, are also
gave in exchange with a right to damages, or he disqualified to become lessees of the things
may only demand an indemnity for damages. mentioned therein. (n)
However, he can only make use of the right to
recover the thing which he has delivered while Art. 1647. If a lease is to be recorded in the
the same remains in the possession of the other Registry of Property, the following persons
party, and without prejudice to the rights cannot constitute the same without proper
acquired in good faith in the meantime by a third authority: the husband with respect to the wife's
person. (1540a) paraphernal real estate, the father or guardian
as to the property of the minor or ward, and the SECTION 2. - Rights and Obligations of the
manager without special power. (1548a) Lessor and the Lessee

Art. 1648. Every lease of real estate may be Art. 1654. The lessor is obliged:
recorded in the Registry of Property. Unless a
lease is recorded, it shall not be binding upon (1) To deliver the thing which is the
third persons. (1549a) object of the contract in such a
condition as to render it fit for the use
Art. 1649. The lessee cannot assign the lease intended;
without the consent of the lessor, unless there is
a stipulation to the contrary. (n) (2) To make on the same during the
lease all the necessary repairs in order
Art. 1650. When in the contract of lease of to keep it suitable for the use to which it
things there is no express prohibition, the lessee has been devoted, unless there is a
may sublet the thing leased, in whole or in part, stipulation to the contrary;
without prejudice to his responsibility for the
performance of the contract toward the lessor. (3) To maintain the lessee in the
(1550) peaceful and adequate enjoyment of the
lease for the entire duration of the
Art. 1651. Without prejudice to his obligation contract. (1554a)
toward the sublessor, the sublessee is bound to
the lessor for all acts which refer to the use and Art. 1655. If the thing leased is totally destroyed
preservation of the thing leased in the manner by a fortuitous event, the lease is extinguished.
stipulated between the lessor and the lessee. If the destruction is partial, the lessee may
(1551) choose between a proportional reduction of the
rent and a rescission of the lease. (n)
Art. 1652. The sublessee is subsidiarily liable to
the lessor for any rent due from the lessee. Art. 1656. The lessor of a business or industrial
However, the sublessee shall not be responsible establishment may continue engaging in the
beyond the amount of rent due from him, in same business or industry to which the lessee
accordance with the terms of the sublease, at devotes the thing leased, unless there is a
the time of the extrajudicial demand by the stipulation to the contrary. (n)
lessor.
Art. 1657. The lessee is obliged:
Payments of rent in advance by the sublessee
shall be deemed not to have been made, so far (1) To pay the price of the lease
as the lessor's claim is concerned, unless said according to the terms stipulated;
payments were effected in virtue of the custom
of the place. (1552a) (2) To use the thing leased as a diligent
father of a family, devoting it to the use
Art. 1653. The provisions governing warranty, stipulated; and in the absence of
contained in the Title on Sales, shall be stipulation, to that which may be
applicable to the contract of lease. inferred from the nature of the thing
leased, according to the custom of the
In the cases where the return of the price is place;
required, reduction shall be made in proportion
to the time during which the lessee enjoyed the (3) To pay expenses for the deed of
thing. (1553) lease. (1555)
Art. 1658. The lessee may suspend the payment Art. 1663. The lessee is obliged to bring to the
of the rent in case the lessor fails to make the knowledge of the proprietor, within the shortest
necessary repairs or to maintain the lessee in possible time, every usurpation or untoward act
peaceful and adequate enjoyment of the which any third person may have committed or
property leased. (n) may be openly preparing to carry out upon the
thing leased.
Art. 1659. If the lessor or the lessee should not
comply with the obligations set forth in Articles He is also obliged to advise the owner, with the
1654 and 1657, the aggrieved party may ask for same urgency, of the need of all repairs
the rescission of the contract and included in No. 2 of Article 1654.
indemnification for damages, or only the latter,
allowing the contract to remain in force. (1556) In both cases the lessee shall be liable for the
damages which, through his negligence, may be
Art. 1660. If a dwelling place or any other suffered by the proprietor.
building intended for human habitation is in such
a condition that its use brings imminent and If the lessor fails to make urgent repairs, the
serious danger to life or health, the lessee may lessee, in order to avoid an imminent danger,
terminate the lease at once by notifying the may order the repairs at the lessor's cost.
lessor, even if at the time the contract was (1559a)
perfected the former knew of the dangerous
condition or waived the right to rescind the lease Art. 1664. The lessor is not obliged to answer
on account of this condition. (n) for a mere act of trespass which a third person
may cause on the use of the thing leased; but
Art. 1661. The lessor cannot alter the form of the lessee shall have a direct action against the
the thing leased in such a way as to impair the intruder.
use to which the thing is devoted under the
terms of the lease. (1557a) There is a mere act of trespass when the third
person claims no right whatever. (1560a)
Art. 1662. If during the lease it should become
necessary to make some urgent repairs upon Art. 1665. The lessee shall return the thing
the thing leased, which cannot be deferred until leased, upon the termination of the lease, as he
the termination of the lease, the lessee is received it, save what has been lost or impaired
obliged to tolerate the work, although it may be by the lapse of time, or by ordinary wear and
very annoying to him, and although during the tear, or from an inevitable cause. (1561a)
same, he may be deprived of a part of the
premises. Art. 1666. In the absence of a statement
concerning the condition of the thing at the time
If the repairs last more than forty days the rent the lease was constituted, the law presumes
shall be reduced in proportion to the time - that the lessee received it in good condition,
including the first forty days - and the part of the unless there is proof to the contrary. (1562)
property of which the lessee has been deprived.
Art. 1667. The lessee is responsible for the
When the work is of such a nature that the deterioration or loss of the thing leased, unless
portion which the lessee and his family need for he proves that it took place without his fault.
their dwelling becomes uninhabitable, he may This burden of proof on the lessee does not
rescind the contract if the main purpose of the apply when the destruction is due to
lease is to provide a dwelling place for the earthquake, flood, storm or other natural
lessee. (1558a) calamity. (1563a)
Art. 1668. The lessee is liable for any The ejectment of tenants of agricultural lands is
deterioration caused by members of his governed by special laws. (1569a)
household and by guests and visitors. (1564a)
Art. 1674. In ejectment cases where an appeal
Art. 1669. If the lease was made for a is taken the remedy granted in Article 539,
determinate time, it ceases upon the day fixed, second paragraph, shall also apply, if the higher
without the need of a demand. (1565) court is satisfied that the lessee's appeal is
frivolous or dilatory, or that the lessor's appeal
Art. 1670. If at the end of the contract the lessee is prima facie meritorious. The period of ten
should continue enjoying the thing leased for days referred to in said article shall be counted
fifteen days with the acquiescence of the lessor, from the time the appeal is perfected. (n)
and unless a notice to the contrary by either
party has previously been given, it is understood Art. 1675. Except in cases stated in Article
that there is an implied new lease, not for the 1673, the lessee shall have a right to make use
period of the original contract, but for the time of the periods established in Articles 1682 and
established in Articles 1682 and 1687. The other 1687. (1570)
terms of the original contract shall be revived.
(1566a) Art. 1676. The purchaser of a piece of land
which is under a lease that is not recorded in
Art. 1671. If the lessee continues enjoying the the Registry of Property may terminate the
thing after the expiration of the contract, over lease, save when there is a stipulation to the
the lessor's objection, the former shall be contrary in the contract of sale, or when the
subject to the responsibilities of a possessor in purchaser knows of the existence of the lease.
bad faith. (n)
If the buyer makes use of this right, the lessee
Art. 1672. In case of an implied new lease, the may demand that he be allowed to gather the
obligations contracted by a third person for the fruits of the harvest which corresponds to the
security of the principal contract shall cease current agricultural year and that the vendor
with respect to the new lease. (1567) indemnify him for damages suffered.

Art. 1673. The lessor may judicially eject the If the sale is fictitious, for the purpose of
lessee for any of the following causes: extinguishing the lease, the supposed vendee
cannot make use of the right granted in the first
(1) When the period agreed upon, or paragraph of this article. The sale is presumed
that which is fixed for the duration of to be fictitious if at the time the supposed
leases under Articles 1682 and 1687, vendee demands the termination of the lease,
has expired; the sale is not recorded in the Registry of
Property. (1571a)
(2) Lack of payment of the price
stipulated; Art. 1677. The purchaser in a sale with the right
of redemption cannot make use of the power to
(3) Violation of any of the conditions eject the lessee until the end of the period for
agreed upon in the contract; the redemption. (1572)

(4) When the lessee devotes the thing Art. 1678. If the lessee makes, in good faith,
leased to any use or service not useful improvements which are suitable to the
stipulated which causes the use for which the lease is intended, without
deterioration thereof; or if he does not altering the form or substance of the property
observe the requirement in No. 2 of leased, the lessor upon the termination of the
Article 1657, as regards the use thereof. lease shall pay the lessee one-half of the value
of the improvements at that time. Should the understood to have been for all the time
lessor refuse to reimburse said amount, the necessary for the gathering of the fruits which
lessee may remove the improvements, even the whole estate leased may yield in one year,
though the principal thing may suffer damage or which it may yield once, although two or more
thereby. He shall not, however, cause any more years have to elapse for the purpose. (1577a)
impairment upon the property leased than is
necessary. Art. 1683. The outgoing lessee shall allow the
incoming lessee or the lessor the use of the
With regard to ornamental expenses, the lessee premises and other means necessary for the
shall not be entitled to any reimbursement, but preparatory labor for the following year; and,
he may remove the ornamental objects, reciprocally, the incoming lessee or the lessor is
provided no damage is caused to the principal under obligation to permit the outgoing lessee to
thing, and the lessor does not choose to retain do whatever may be necessary for the gathering
them by paying their value at the time the lease or harvesting and utilization of the fruits, all in
is extinguished. (n) accordance with the custom of the place.
(1578a)
Art. 1679. If nothing has been stipulated
concerning the place and the time for the Art. 1684. Land tenancy on shares shall be
payment of the lease, the provisions or Article governed by special laws, the stipulations of the
1251 shall be observed as regards the place; parties, the provisions on partnership and by the
and with respect to the time, the custom of the customs of the place. (1579a)
place shall be followed. (1574)
Art. 1685. The tenant on shares cannot be
ejected except in cases specified by law. (n)
SECTION 3. - Special Provisions for Leases
of Rural Lands SECTION 4. - Special Provisions of the Lease
of Urban Lands
Art. 1680. The lessee shall have no right to a
reduction of the rent on account of the sterility Art. 1686. In default of a special stipulation, the
of the land leased, or by reason of the loss of custom of the place shall be observed with
fruits due to ordinary fortuitous events; but he regard to the kind of repairs on urban property
shall have such right in case of the loss of more for which the lessor shall be liable. In case of
than one-half of the fruits through extraordinary doubt it is understood that the repairs are
and unforeseen fortuitous events, save always chargeable against him. (1580a)
when there is a specific stipulation to the
contrary. Art. 1687. If the period for the lease has not
been fixed, it is understood to be from year to
Extraordinary fortuitous events are understood year, if the rent agreed upon is annual; from
to be: fire, war, pestilence, unusual flood, month to month, if it is monthly; from week to
locusts, earthquake, or others which are week, if the rent is weekly; and from day to day,
uncommon, and which the contracting parties if the rent is to be paid daily. However, even
could not have reasonably foreseen. (1575) though a monthly rent is paid, and no period for
the lease has been set, the courts may fix a
Art. 1681. Neither does the lessee have any longer term for the lease after the lessee has
right to a reduction of the rent if the fruits are occupied the premises for over one year. If the
lost after they have been separated from their rent is weekly, the courts may likewise
stalk, root or trunk. (1576) determine a longer period after the lessee has
been in possession for over six months. In case
Art. 1682. The lease of a piece of rural land, of daily rent, the courts may also fix a longer
when its duration has not been fixed, is
period after the lessee has stayed in the place no case shall physical violence be used upon
for over one month. (1581a) the house helper.

Art. 1688. When the lessor of a house, or part Art. 1695. House helper shall not be required to
thereof, used as a dwelling for a family, or when work more than ten hours a day. Every house
the lessor of a store, or industrial establishment, helper shall be allowed four days' vacation each
also leases the furniture, the lease of the latter month, with pay.
shall be deemed to be for the duration of the
lease of the premises. (1582) Art. 1696. In case of death of the house helper,
the head of the family shall bear the funeral
expenses if the house helper has no relatives in
CHAPTER 3 the place where the head of the family lives,
WORK AND LABOR with sufficient means therefor.

SECTION 1. - Household Service (n) Art. 1697. If the period for household service is
fixed neither the head of the family nor the
Art. 1689. Household service shall always be house helper may terminate the contract before
reasonably compensated. Any stipulation that the expiration of the term, except for a just
household service is without compensation shall cause. If the house helper is unjustly dismissed,
be void. Such compensation shall be in addition he shall be paid the compensation already
to the house helper's lodging, food, and medical earned plus that for fifteen days by way of
attendance. indemnity. If the house helper leaves without
justifiable reason, he shall forfeit any salary due
Art. 1690. The head of the family shall furnish, him and unpaid, for not exceeding fifteen days.
free of charge, to the house helper, suitable and
sanitary quarters as well as adequate food and Art. 1698. If the duration of the household
medical attendance. service is not determined either by stipulation or
by the nature of the service, the head of the
Art. 1691. If the house helper is under the age family or the house helper may give notice to
of eighteen years, the head of the family shall put an end to the service relation, according to
give an opportunity to the house helper for at the following rules:
least elementary education. The cost of such
education shall be a part of the house helper's (1) If the compensation is paid by the
compensation, unless there is a stipulation to day, notice may be given on any day
the contrary. that the service shall end at the close of
the following day;
Art. 1692. No contract for household service
shall last for more than two years. However, (2) If the compensation is paid by the
such contract may be renewed from year to week, notice may be given, at the latest
year. on the first business day of the week,
that the service shall be terminated at
Art. 1693. The house helper's clothes shall be the end of the seventh day from the
subject to stipulation. However, any contract for beginning of the week;
household service shall be void if thereby the
house helper cannot afford to acquire suitable (3) If the compensation is paid by the
clothing. month, notice may be given, at the
latest, on the fifth day of the month, that
Art. 1694. The head of the family shall treat the the service shall cease at the end of the
house helper in a just and humane manner. In month.
Art. 1699. Upon the extinguishment of the Art. 1709. The employer shall neither seize nor
service relation, the house helper may demand retain any tool or other articles belonging to the
from the head of the family a written statement laborer.
on the nature and duration of the service and
the efficiency and conduct of the house helper. Art. 1710. Dismissal of laborers shall be subject
to the supervision of the Government, under
SECTION 2. - Contract of Labor (n) special laws.

Art. 1700. The relations between capital and Art. 1711. Owners of enterprises and other
labor are not merely contractual. They are so employers are obliged to pay compensation for
impressed with public interest that labor the death of or injuries to their laborers,
contracts must yield to the common good. workmen, mechanics or other employees, even
Therefore, such contracts are subject to the though the event may have been purely
special laws on labor unions, collective accidental or entirely due to a fortuitous cause,
bargaining, strikes and lockouts, closed shop, if the death or personal injury arose out of and
wages, working conditions, hours of labor and in the course of the employment. The employer
similar subjects. is also liable for compensation if the employee
contracts any illness or disease caused by such
Art. 1701. Neither capital nor labor shall act employment or as the result of the nature of the
oppressively against the other, or impair the employment. If the mishap was due to the
interest or convenience of the public. employee's own notorious negligence, or
voluntary act, or drunkenness, the employer
Art. 1702. In case of doubt, all labor legislation shall not be liable for compensation. When the
and all labor contracts shall be construed in employee's lack of due care contributed to his
favor of the safety and decent living for the death or injury, the compensation shall be
laborer. equitably reduced.

Art. 1703. No contract which practically amounts Art. 1712. If the death or injury is due to the
to involuntary servitude, under any guise negligence of a fellow worker, the latter and the
whatsoever, shall be valid. employer shall be solidarily liable for
compensation. If afellow worker's intentional
Art. 1704. In collective bargaining, the labor malicious act is the only cause of the death or
union or members of the board or committee injury, the employer shall not be answerable,
signing the contract shall be liable for non- unless it should be shown that the latter did not
fulfillment thereof. exercise due diligence in the selection or
supervision of the plaintiff's fellow worker.
Art. 1705. The laborer's wages shall be paid in
legal currency.
SECTION 3. - Contract for a Piece of Work
Art. 1706. Withholding of the wages, except for
a debt due, shall not be made by the employer. Art. 1713. By the contract for a piece of work the
contractor binds himself to execute a piece of
Art. 1707. The laborer's wages shall be a lien on work for the employer, in consideration of a
the goods manufactured or the work done. certain price or compensation. The contractor
may either employ only his labor or skill, or also
Art. 1708. The laborer's wages shall not be furnish the material. (1588a)
subject to execution or attachment, except for
debts incurred for food, shelter, clothing and Art. 1714. If the contractor agrees to produce
medical attendance. the work from material furnished by him, he
shall deliver the thing produced to the employer
and transfer dominion over the thing. This Art. 1720. The price or compensation shall be
contract shall be governed by the following paid at the time and place of delivery of the
articles as well as by the pertinent provisions on work, unless there is a stipulation to the
warranty of title and against hidden defects and contrary. If the work is to be delivered partially,
the payment of price in a contract of sale. (n) the price or compensation for each part having
been fixed, the sum shall be paid at the time
Art. 1715. The contract shall execute the work in and place of delivery, in the absence if
such a manner that it has the qualities agreed stipulation. (n)
upon and has no defects which destroy or
lessen its value or fitness for its ordinary or Art. 1721. If, in the execution of the work, an act
stipulated use. Should the work be not of such of the employer is required, and he incurs in
quality, the employer may require that the delay or fails to perform the act, the contractor
contractor remove the defect or execute another is entitled to a reasonable compensation.
work. If the contract fails or refuses to comply
with this obligation, the employer may have the The amount of the compensation is computed,
defect removed or another work executed, at the on the one hand, by the duration of the delay
contractor's cost. (n) and the amount of the compensation stipulated,
and on the other hand, by what the contractor
Art. 1716. An agreement waiving or limiting the has saved in expenses by reason of the delay or
contractor's liability for any defect in the work is is able to earn by a different employment of his
void if the contractor acted fraudulently. (n) time and industry. (n)

Art. 1717. If the contractor bound himself to Art. 1722. If the work cannot be completed on
furnish the material, he shall suffer the loss if account of a defect in the material furnished by
the work should be destroyed before its delivery, the employer, or because of orders from the
save when there has been delay in receiving it. employer, without any fault on the part of the
(1589) contractor, the latter has a right to an equitable
part of the compensation proportionally to the
Art. 1718. The contractor who has undertaken to work done, and reimbursement for proper
put only his work or skill, cannot claim any expenses made. (n)
compensation if the work should be destroyed
before its delivery, unless there has been delay Art. 1723. The engineer or architect who drew
in receiving it, or if the destruction was caused up the plans and specifications for a building is
by the poor quality of the material, provided this liable for damages if within fifteen years from
fact was communicated in due time to the the completion of the structure, the same should
owner. If the material is lost through a fortuitous collapse by reason of a defect in those plans
event, the contract is extinguished. (1590a) and specifications, or due to the defects in the
ground. The contractor is likewise responsible
Art. 1719. Acceptance of the work by the for the damages if the edifice falls, within the
employer relieves the contractor of liability for same period, on account of defects in the
any defect in the work, unless: construction or the use of materials of inferior
quality furnished by him, or due to any violation
(1) The defect is hidden and the of the terms of the contract. If the engineer or
employer is not, by his special architect supervises the construction, he shall
knowledge, expected to recognize the be solidarily liable with the contractor.
same; or
Acceptance of the building, after completion,
(2) The employer expressly reserves his does not imply waiver of any of the cause of
rights against the contractor by reason action by reason of any defect mentioned in the
of the defect. (n) preceding paragraph.
The action must be brought within ten years Art. 1729. Those who put their labor upon or
following the collapse of the building. (n) furnish materials for a piece of work undertaken
by the contractor have an action against the
Art. 1724. The contractor who undertakes to owner up to the amount owing from the latter to
build a structure or any other work for a the contractor at the time the claim is made.
stipulated price, in conformity with plans and However, the following shall not prejudice the
specifications agreed upon with the land-owner, laborers, employees and furnishers of materials:
can neither withdraw from the contract nor
demand an increase in the price on account of (1) Payments made by the owner to the
the higher cost of labor or materials, save when contractor before they are due;
there has been a change in the plans and
specifications, provided: (2) Renunciation by the contractor of
any amount due him from the owner.
(1) Such change has been authorized by
the proprietor in writing; and This article is subject to the provisions of
special laws. (1597a)
(2) The additional price to be paid to the
contractor has been determined in Art. 1730. If it is agreed that the work shall be
writing by both parties. (1593a) accomplished to the satisfaction of the
proprietor, it is understood that in case of
Art. 1725. The owner may withdraw at will from disagreement the question shall be subject to
the construction of the work, although it may expert judgment.
have been commenced, indemnifying the
contractor for all the latter's expenses, work, If the work is subject to the approval of a third
and the usefulness which the owner may obtain person, his decision shall be final, except in
therefrom, and damages. (1594a) case of fraud or manifest error. (1598a)

Art. 1726. When a piece of work has been Art. 1731. He who has executed work upon a
entrusted to a person by reason of his personal movable has a right to retain it by way of pledge
qualifications, the contract is rescinded upon his until he is paid. (1600)
death.

In this case the proprietor shall pay the heirs of SECTION 4. - Common Carriers (n)
the contractor in proportion to the price agreed
upon, the value of the part of the work done, SUBSECTION 1. - General Provisions
and of the materials prepared, provided the
latter yield him some benefit. Art. 1732. Common carriers are persons,
corporations, firms or associations engaged in
The same rule shall apply if the contractor the business of carrying or transporting
cannot finish the work due to circumstances passengers or goods or both, by land, water, or
beyond his control. (1595) air, for compensation, offering their services to
the public.
Art. 1727. The contractor is responsible for the
work done by persons employed by him. (1596) Art. 1733. Common carriers, from the nature of
their business and for reasons of public policy,
Art. 1728. The contractor is liable for all the are bound to observe extraordinary diligence in
claims of laborers and others employed by him, the vigilance over the goods and for the safety
and of third persons for death or physical of the passengers transported by them,
injuries during the construction. (n) according to all the circumstances of each case.
Such extraordinary diligence in the vigilance Art. 1737. The common carrier's duty to observe
over the goods is further expressed in Articles extraordinary diligence over the goods remains
1734, 1735, and 1745, Nos. 5, 6, and 7, while in full force and effect even when they are
the extraordinary diligence for the safety of the temporarily unloaded or stored in transit, unless
passengers is further set forth in Articles 1755 the shipper or owner has made use of the right
and 1756. of stoppage in transitu .

Art. 1738. The extraordinary liability of the

SUBSECTION 2. - Vigilance Over Goods common carrier continues to be operative even
during the time the goods are stored in a
Art. 1734. Common carriers are responsible for warehouse of the carrier at the place of
the loss, destruction, or deterioration of the destination, until the consignee has been
goods, unless the same is due to any of the advised of the arrival of the goods and has had
following causes only: reasonable opportunity thereafter to remove
(1) Flood, storm, earthquake, lightning, them or otherwise dispose of them.
or other natural disaster or calamity;
Art. 1739. In order that the common carrier may
(2) Act of the public enemy in war, be exempted from responsibility, the natural
whether international or civil; disaster must have been the proximate and only
cause of the loss. However, the common carrier
(3) Act of omission of the shipper or must exercise due diligence to prevent or
owner of the goods; minimize loss before, during and after the
occurrence of flood, storm or other natural
(4) The character of the goods or disaster in order that the common carrier may
defects in the packing or in the be exempted from liability for the loss,
containers; destruction, or deterioration of the goods. The
same duty is incumbent upon the common
(5) Order or act of competent public carrier in case of an act of the public enemy
authority. referred to in Article 1734, No. 2.

Art. 1735. In all cases other than those Art. 1740. If the common carrier negligently
mentioned in Nos. 1, 2, 3, 4, and 5 of the incurs in delay in transporting the goods, a
preceding article, if the goods are lost, natural disaster shall not free such carrier from
destroyed or deteriorated, common carriers are responsibility.
presumed to have been at fault or to have acted
negligently, unless they prove that they Art. 1741. If the shipper or owner merely
observed extraordinary diligence as required in contributed to the loss, destruction or
Article 1733. deterioration of the goods, the proximate cause
thereof being the negligence of the common
Art. 1736. The extraordinary responsibility of the carrier, the latter shall be liable in damages,
common carrier lasts from the time the goods which however, shall be equitably reduced.
are unconditionally placed in the possession of,
and received by the carrier for transportation Art. 1742. Even if the loss, destruction, or
until the same are delivered, actually or deterioration of the goods should be caused by
constructively, by the carrier to the consignee, the character of the goods, or the faulty nature
or to the person who has a right to receive them, of the packing or of the containers, the common
without prejudice to the provisions of Article carrier must exercise due diligence to forestall
1738. or lessen the loss.
Art. 1743. If through the order of public authority irresistible threat, violence or force, is
the goods are seized or destroyed, the common dispensed with or diminished;
carrier is not responsible, provided said public
authority had power to issue the order. (7) That the common carrier is not
responsible for the loss, destruction, or
Art. 1744. A stipulation between the common deterioration of goods on account of the
carrier and the shipper or owner limiting the defective condition of the car, vehicle,
liability of the former for the loss, destruction, or ship, airplane or other equipment used
deterioration of the goods to a degree less than in the contract of carriage.
extraordinary diligence shall be valid, provided it
be: Art. 1746. An agreement limiting the common
carrier's liability may be annulled by the shipper
(1) In writing, signed by the shipper or or owner if the common carrier refused to carry
owner; the goods unless the former agreed to such
stipulation.
(2) Supported by a valuable
consideration other than the service Art. 1747. If the common carrier, without just
rendered by the common carrier; and cause, delays the transportation of the goods or
changes the stipulated or usual route, the
(3) Reasonable, just and not contrary to contract limiting the common carrier's liability
public policy. cannot be availed of in case of the loss,
destruction, or deterioration of the goods.
Art. 1745. Any of the following or similar
stipulations shall be considered unreasonable, Art. 1748. An agreement limiting the common
unjust and contrary to public policy: carrier's liability for delay on account of strikes
(1) That the goods are transported at or riots is valid.
the risk of the owner or shipper;
Art. 1749. A stipulation that the common
(2) That the common carrier will not be carrier's liability is limited to the value of the
liable for any loss, destruction, or goods appearing in the bill of lading, unless the
deterioration of the goods; shipper or owner declares a greater value, is
binding.
(3) That the common carrier need not
observe any diligence in the custody of Art. 1750. A contract fixing the sum that may be
the goods; recovered. by the owner or shipper for the loss,
destruction, or deterioration of the goods is
(4) That the common carrier shall valid, if it is reasonable and just under the
exercise a degree of diligence less than circumstances, and has been fairly and freely
that of a good father of a family, or of a agreed upon.
man of ordinary prudence in the
vigilance over the movables Art. 1751. The fact that the common carrier has
transported; no competitor along the line or route, or a part
thereof, to which the contract refers shall be
(5) That the common carrier shall not be taken into consideration on the question of
responsible for the acts or omission of whether or not a stipulation limiting the common
his or its employees; carrier's liability is reasonable, just and in
consonance with public policy.
(6) That the common carrier's liability
for acts committed by thieves, or of Art. 1752. Even when there is an agreement
robbers who do not act with grave or limiting the liability of the common carrier in the
vigilance over the goods, the common carrier is employees, although such employees may have
disputably presumed to have been negligent in acted beyond the scope of their authority or in
case of their loss, destruction or deterioration. violation of the orders of the common carriers.

Art. 1753. The law of the country to which the This liability of the common carriers does not
goods are to be transported shall govern the cease upon proof that they exercised all the
liability of the common carrier for their loss, diligence of a good father of a family in the
destruction or deterioration. selection and supervision of their employees.

Art. 1754. The provisions of Articles 1733 to Art. 1760. The common carrier's responsibility
1753 shall apply to the passenger's baggage prescribed in the preceding article cannot be
which is not in his personal custody or in that of eliminated or limited by stipulation, by the
his employee. As to other baggage, the rules in posting of notices, by statements on the tickets
Articles 1998 and 2000 to 2003 concerning the or otherwise.
responsibility of hotel-keepers shall be
applicable. Art. 1761. The passenger must observe the
diligence of a good father of a family to avoid
injury to himself.
SUBSECTION 3. - Safety of Passengers
Art. 1762. The contributory negligence of the
Art. 1755. A common carrier is bound to carry passenger does not bar recovery of damages for
the passengers safely as far as human care and his death or injuries, if the proximate cause
foresight can provide, using the utmost diligence thereof is the negligence of the common carrier,
of very cautious persons, with a due regard for but the amount of damages shall be equitably
all the circumstances. reduced.

Art. 1756. In case of death of or injuries to Art. 1763. A common carrier is responsible for
passengers, common carriers are presumed to injuries suffered by a passenger on account of
have been at fault or to have acted negligently, the wilful acts or negligence of other passengers
unless they prove that they observed or of strangers, if the common carrier's
extraordinary diligence as prescribed in Articles employees through the exercise of the diligence
1733 and 1755. of a good father of a family could have
prevented or stopped the act or omission.
Art. 1757. The responsibility of a common
carrier for the safety of passengers as required
in Articles 1733 and 1755 cannot be dispensed SUBSECTION 4. - Common Provisions
with or lessened by stipulation, by the posting of
notices, by statements on tickets, or otherwise. Art. 1764. Damages in cases comprised in this
Section shall be awarded in accordance with
Art. 1758. When a passenger is carried Title XVIII of this Book, concerning Damages.
gratuitously, a stipulation limiting the common Article 2206 shall also apply to the death of a
carrier's liability for negligence is valid, but not passenger caused by the breach of contract by
for wilful acts or gross negligence. a common carrier.

The reduction of fare does not justify any Art. 1765. The Public Service Commission may,
limitation of the common carrier's liability. on its own motion or on petition of any
interested party, after due hearing, cancel the
Art. 1759. Common carriers are liable for the certificate of public convenience granted to any
death of or injuries to passengers through the common carrier that repeatedly fails to comply
negligence or wilful acts of the former's
with his or its duty to observe extraordinary (4) The receipt by a person of a share of
diligence as prescribed in this Section. the profits of a business is prima facie
evidence that he is a partner in the
Art. 1766. In all matters not regulated by this business, but no such inference shall be
Code, the rights and obligations of common drawn if such profits were received in
carriers shall be governed by the Code of payment:
Commerce and by special laws.

(a) As a debt by installments or

Title IX. - PARTNERSHIP otherwise;

CHAPTER 1 (b) As wages of an employee or

GENERAL PROVISIONS rent to a landlord;

Art. 1767. By the contract of partnership two or (c) As an annuity to a widow or

more persons bind themselves to contribute representative of a deceased
money, property, or industry to a common fund, partner;
with the intention of dividing the profits among
themselves. (d) As interest on a loan, though
the amount of payment vary
Two or more persons may also form a with the profits of the business;
partnership for the exercise of a profession.
(1665a) (e) As the consideration for the
sale of a goodwill of a business
Art. 1768. The partnership has a judicial or other property by installments
personality separate and distinct from that of or otherwise. (n)
each of the partners, even in case of failure to
comply with the requirements of Article 1772, Art. 1770. A partnership must have a lawful
first paragraph. (n) object or purpose, and must be established for
the common benefit or interest of the partners.
Art. 1769. In determining whether a partnership
exists, these rules shall apply: When an unlawful partnership is dissolved by a
judicial decree, the profits shall be confiscated
(1) Except as provided by Article 1825, in favor of the State, without prejudice to the
persons who are not partners as to each provisions of the Penal Code governing the
other are not partners as to third confiscation of the instruments and effects of a
persons; crime. (1666a)

(2) Co-ownership or co-possession does Art. 1771. A partnership may be constituted in

not of itself establish a partnership, any form, except where immovable property or
whether such-co-owners or co- real rights are contributed thereto, in which case
possessors do or do not share any a public instrument shall be necessary. (1667a)
profits made by the use of the property;
Art. 1772. Every contract of partnership having a
(3) The sharing of gross returns does capital of three thousand pesos or more, in
not of itself establish a partnership, money or property, shall appear in a public
whether or not the persons sharing them instrument, which must be recorded in the Office
have a joint or common right or interest of the Securities and Exchange Commission.
in any property from which the returns
are derived;
Failure to comply with the requirements of the inheritance, legacy, or donation cannot be
preceding paragraph shall not affect the liability included in such stipulation, except the fruits
of the partnership and the members thereof to thereof. (1674a)
third persons. (n)
Art. 1780. A universal partnership of profits
Art. 1773. A contract of partnership is void, comprises all that the partners may acquire by
whenever immovable property is contributed their industry or work during the existence of the
thereto, if an inventory of said property is not partnership.
made, signed by the parties, and attached to the
public instrument. (1668a) Movable or immovable property which each of
the partners may possess at the time of the
Art. 1774. Any immovable property or an interest celebration of the contract shall continue to
therein may be acquired in the partnership pertain exclusively to each, only the usufruct
name. Title so acquired can be conveyed only in passing to the partnership. (1675)
the partnership name. (n)
Art. 1781. Articles of universal partnership,
Art. 1775. Associations and societies, whose entered into without specification of its nature,
articles are kept secret among the members, only constitute a universal partnership of profits.
and wherein any one of the members may (1676)
contract in his own name with third persons,
shall have no juridical personality, and shall be Art. 1782. Persons who are prohibited from
governed by the provisions relating to co- giving each other any donation or advantage
ownership. (1669) cannot enter into universal partnership. (1677)

Art. 1776. As to its object, a partnership is either Art. 1783. A particular partnership has for its
universal or particular. As regards the liability of object determinate things, their use or fruits, or
the partners, a partnership may be general or specific undertaking, or the exercise of a
limited. (1671a) profession or vocation. (1678)

Art. 1777. A universal partnership may refer to

all the present property or to all the profits. CHAPTER 2
(1672) OBLIGATIONS OF THE PARTNERS

Art. 1778. A partnership of all present property SECTION 1. - Obligations of the

is that in which the partners contribute all the Partners Among Themselves
property which actually belongs to them to a
common fund, with the intention of dividing the Art. 1784. A partnership begins from the moment
same among themselves, as well as all the of the execution of the contract, unless it is
profits which they may acquire therewith. (1673) otherwise stipulated. (1679)

Art. 1779. In a universal partnership of all Art. 1785. When a partnership for a fixed term or
present property, the property which belongs to particular undertaking is continued after the
each of the partners at the time of the termination of such term or particular
constitution of the partnership, becomes the undertaking without any express agreement, the
common property of all the partners, as well as rights and duties of the partners remain the
all the profits which they may acquire therewith. same as they were at such termination, so far
as is consistent with a partnership at will.
A stipulation for the common enjoyment of any
other profits may also be made; but the property A continuation of the business by the partners or
which the partners may acquire subsequently by such of them as habitually acted therein during
the term, without any settlement or liquidation of Art. 1790. Unless there is a stipulation to the
the partnership affairs, is prima facie evidence contrary, the partners shall contribute equal
of a continuation of the partnership. (n) shares to the capital of the partnership. (n)

Art. 1786. Every partner is a debtor of the Art. 1791. If there is no agreement to the
partnership for whatever he may have promised contrary, in case of an imminent loss of the
to contribute thereto. business of the partnership, any partner who
refuses to contribute an additional share to the
He shall also be bound for warranty in case of capital, except an industrial partner, to save the
eviction with regard to specific and determinate venture, shall he obliged to sell his interest to
things which he may have contributed to the the other partners. (n)
partnership, in the same cases and in the same
manner as the vendor is bound with respect to Art. 1792. If a partner authorized to manage
the vendee. He shall also be liable for the fruits collects a demandable sum which was owed to
thereof from the time they should have been him in his own name, from a person who owed
delivered, without the need of any demand. the partnership another sum also demandable,
(1681a) the sum thus collected shall be applied to the
two credits in proportion to their amounts, even
Art. 1787. When the capital or a part thereof though he may have given a receipt for his own
which a partner is bound to contribute consists credit only; but should he have given it for the
of goods, their appraisal must be made in the account of the partnership credit, the amount
manner prescribed in the contract of shall be fully applied to the latter.
partnership, and in the absence of stipulation, it
shall be made by experts chosen by the The provisions of this article are understood to
partners, and according to current prices, the be without prejudice to the right granted to the
subsequent changes thereof being for account other debtor by Article 1252, but only if the
of the partnership. (n) personal credit of the partner should be more
onerous to him. (1684)
Art. 1788. A partner who has undertaken to
contribute a sum of money and fails to do so Art. 1793. A partner who has received, in whole
becomes a debtor for the interest and damages or in part, his share of a partnership credit,
from the time he should have complied with his when the other partners have not collected
obligation. theirs, shall be obliged, if the debtor should
thereafter become insolvent, to bring to the
The same rule applies to any amount he may partnership capital what he received even
have taken from the partnership coffers, and his though he may have given receipt for his share
liability shall begin from the time he converted only. (1685a)
the amount to his own use. (1682)
Art. 1794. Every partner is responsible to the
Art. 1789. An industrial partner cannot engage partnership for damages suffered by it through
in business for himself, unless the partnership his fault, and he cannot compensate them with
expressly permits him to do so; and if he should the profits and benefits which he may have
do so, the capitalist partners may either exclude earned for the partnership by his industry.
him from the firm or avail themselves of the However, the courts may equitably lessen this
benefits which he may have obtained in violation responsibility if through the partner's
of this provision, with a right to damages in extraordinary efforts in other activities of the
either case. (n) partnership, unusual profits have been realized.
(1686a)
Art. 1795. The risk of specific and determinate within a period of three months from the time he
things, which are not fungible, contributed to the had knowledge thereof, complain of such
partnership so that only their use and fruits may decision.
be for the common benefit, shall be borne by the
partner who owns them. The designation of losses and profits cannot be
intrusted to one of the partners. (1690)
If the things contribute are fungible, or cannot
be kept without deteriorating, or if they were Art. 1799. A stipulation which excludes one or
contributed to be sold, the risk shall be borne by more partners from any share in the profits or
the partnership. In the absence of stipulation, losses is void. (1691)
the risk of the things brought and appraised in
the inventory, shall also be borne by the Art. 1800. The partner who has been appointed
partnership, and in such case the claim shall be manager in the articles of partnership may
limited to the value at which they were execute all acts of administration despite the
appraised. (1687) opposition of his partners, unless he should act
in bad faith; and his power is irrevocable without
Art. 1796. The partnership shall be responsible just or lawful cause. The vote of the partners
to every partner for the amounts he may have representing the controlling interest shall be
disbursed on behalf of the partnership and for necessary for such revocation of power.
the corresponding interest, from the time the
expense are made; it shall also answer to each A power granted after the partnership has been
partner for the obligations he may have constituted may be revoked at any time. (1692a)
contracted in good faith in the interest of the
partnership business, and for risks in Art. 1801. If two or more partners have been
consequence of its management. (1688a) intrusted with the management of the
partnership without specification of their
Art. 1797. The losses and profits shall be respective duties, or without a stipulation that
distributed in conformity with the agreement. If one of them shall not act without the consent of
only the share of each partner in the profits has all the others, each one may separately execute
been agreed upon, the share of each in the all acts of administration, but if any of them
losses shall be in the same proportion. should oppose the acts of the others, the
decision of the majority shall prevail. In case of
In the absence of stipulation, the share of each a tie, the matter shall be decided by the partners
partner in the profits and losses shall be in owning the controlling interest. (1693a)
proportion to what he may have contributed, but
the industrial partner shall not be liable for the Art. 1802. In case it should have been stipulated
losses. As for the profits, the industrial partner that none of the managing partners shall act
shall receive such share as may be just and without the consent of the others, the
equitable under the circumstances. If besides concurrence of all shall be necessary for the
his services he has contributed capital, he shall validity of the acts, and the absence or disability
also receive a share in the profits in proportion of any one of them cannot be alleged, unless
to his capital. (1689a) there is imminent danger of grave or irreparable
injury to the partnership. (1694)
Art. 1798. If the partners have agreed to intrust
to a third person the designation of the share of Art. 1803. When the manner of management has
each one in the profits and losses, such not been agreed upon, the following rules shall
designation may be impugned only when it is be observed:
manifestly inequitable. In no case may a partner
who has begun to execute the decision of the (1) All the partners shall be considered
third person, or who has not impugned the same agents and whatever any one of them
 may do alone shall bind the partnership, accruing to him from his transactions, and shall
without prejudice to the provisions of personally bear all the losses. (n)
Article 1801.
Art. 1809. Any partner shall have the right to a
(2) None of the partners may, without formal account as to partnership affairs:
the consent of the others, make any
important alteration in the immovable (1) If he is wrongfully excluded from the
property of the partnership, even if it partnership business or possession of
may be useful to the partnership. But if its property by his co-partners;
the refusal of consent by the other
partners is manifestly prejudicial to the (2) If the right exists under the terms of
interest of the partnership, the court's any agreement;
intervention may be sought. (1695a)
(3) As provided by article 1807;
Art. 1804. Every partner may associate another
person with him in his share, but the associate (4) Whenever other circumstances
shall not be admitted into the partnership render it just and reasonable. (n)
without the consent of all the other partners,
even if the partner having an associate should SECTION 2. - Property Rights of a Partner
be a manager. (1696)
Art. 1810. The property rights of a partner are:
Art. 1805. The partnership books shall be kept, (1) His rights in specific partnership
subject to any agreement between the partners, property;
at the principal place of business of the
partnership, and every partner shall at any (2) His interest in the partnership; and
reasonable hour have access to and may
inspect and copy any of them. (n)
(3) His right to participate in the
management. (n)
Art. 1806. Partners shall render on demand true
and full information of all things affecting the
Art. 1811. A partner is co-owner with his
partnership to any partner or the legal
partners of specific partnership property.
representative of any deceased partner or of
any partner under legal disability. (n)
The incidents of this co-ownership are such that:
Art. 1807. Every partner must account to the
partnership for any benefit, and hold as trustee (1) A partner, subject to the provisions
for it any profits derived by him without the of this Title and to any agreement
consent of the other partners from any between the partners, has an equal right
transaction connected with the formation, with his partners to possess specific
conduct, or liquidation of the partnership or from partnership property for partnership
any use by him of its property. (n) purposes; but he has no right to
possess such property for any other
purpose without the consent of his
Art. 1808. The capitalist partners cannot engage
partners;
for their own account in any operation which is
of the kind of business in which the partnership
is engaged, unless there is a stipulation to the (2) A partner's right in specific
contrary. partnership property is not assignable
except in connection with the
assignment of rights of all the partners
Any capitalist partner violating this prohibition
in the same property;
shall bring to the common funds any profits
 (3) A partner's right in specific the profits, and of any other money due or to fall
partnership property is not subject to due to him in respect of the partnership, and
attachment or execution, except on a make all other orders, directions, accounts and
claim against the partnership. When inquiries which the debtor partner might have
partnership property is attached for a made, or which the circumstances of the case
partnership debt the partners, or any of may require.
them, or the representatives of a
deceased partner, cannot claim any The interest charged may be redeemed at any
right under the homestead or exemption time before foreclosure, or in case of a sale
laws; being directed by the court, may be purchased
without thereby causing a dissolution:
(4) A partner's right in specific
partnership property is not subject to (1) With separate property, by any one
legal support under Article 291. (n) or more of the partners; or

Art. 1812. A partner's interest in the partnership (2) With partnership property, by any
is his share of the profits and surplus. (n) one or more of the partners with the
consent of all the partners whose
Art. 1813. A conveyance by a partner of his interests are not so charged or sold.
whole interest in the partnership does not of
itself dissolve the partnership, or, as against the Nothing in this Title shall be held to deprive a
other partners in the absence of agreement, partner of his right, if any, under the exemption
entitle the assignee, during the continuance of laws, as regards his interest in the partnership.
the partnership, to interfere in the management (n)
or administration of the partnership business or
affairs, or to require any information or account SECTION 3. - Obligations of the Partners
of partnership transactions, or to inspect the With Regard to Third Persons
partnership books; but it merely entitles the
assignee to receive in accordance with his Art. 1815. Every partnership shall operate under
contract the profits to which the assigning a firm name, which may or may not include the
partner would otherwise be entitled. However, in name of one or more of the partners.
case of fraud in the management of the
partnership, the assignee may avail himself of Those who, not being members of the
the usual remedies. partnership, include their names in the firm
name, shall be subject to the liability of a
In case of a dissolution of the partnership, the partner. (n)
assignee is entitled to receive his assignor's
interest and may require an account from the Art. 1816. All partners, including industrial ones,
date only of the last account agreed to by all the shall be liable pro rata with all their property and
partners. (n) after all the partnership assets have been
exhausted, for the contracts which may be
Art. 1814. Without prejudice to the preferred entered into in the name and for the account of
rights of partnership creditors under Article the partnership, under its signature and by a
1827, on due application to a competent court person authorized to act for the partnership.
by any judgment creditor of a partner, the court However, any partner may enter into a separate
which entered the judgment, or any other court, obligation to perform a partnership contract. (n)
may charge the interest of the debtor partner
with payment of the unsatisfied amount of such Art. 1817. Any stipulation against the liability
judgment debt with interest thereon; and may laid down in the preceding article shall be void,
then or later appoint a receiver of his share of except as among the partners. (n)
Art. 1818. Every partner is an agent of the Art. 1819. Where title to real property is in the
partnership for the purpose of its business, and partnership name, any partner may convey title
the act of every partner, including the execution to such property by a conveyance executed in
in the partnership name of any instrument, for the partnership name; but the partnership may
apparently carrying on in the usual way the recover such property unless the partner's act
business of the partnership of which he is a binds the partnership under the provisions of the
member binds the partnership, unless the first paragraph of article 1818, or unless such
partner so acting has in fact no authority to act property has been conveyed by the grantee or a
for the partnership in the particular matter, and person claiming through such grantee to a
the person with whom he is dealing has holder for value without knowledge that the
knowledge of the fact that he has no such partner, in making the conveyance, has
authority. exceeded his authority.

An act of a partner which is not apparently for Where title to real property is in the name of the
the carrying on of business of the partnership in partnership, a conveyance executed by a
the usual way does not bind the partnership partner, in his own name, passes the equitable
unless authorized by the other partners. interest of the partnership, provided the act is
one within the authority of the partner under the
Except when authorized by the other partners or provisions of the first paragraph of Article 1818.
unless they have abandoned the business, one
or more but less than all the partners have no Where title to real property is in the name of one
authority to: or more but not all the partners, and the record
does not disclose the right of the partnership,
(1) Assign the partnership property in the partners in whose name the title stands may
trust for creditors or on the assignee's convey title to such property, but the partnership
promise to pay the debts of the may recover such property if the partners' act
partnership; does not bind the partnership under the
provisions of the first paragraph of Article 1818,
(2) Dispose of the good-will of the unless the purchaser or his assignee, is a holder
business; for value, without knowledge.

(3) Do any other act which would make Where the title to real property is in the name of
it impossible to carry on the ordinary one or more or all the partners, or in a third
business of a partnership; person in trust for the partnership, a conveyance
executed by a partner in the partnership name,
(4) Confess a judgment; or in his own name, passes the equitable
interest of the partnership, provided the act is
(5) Enter into a compromise concerning one within the authority of the partner under the
a partnership claim or liability; provisions of the first paragraph of Article 1818.

(6) Submit a partnership claim or Where the title to real property is in the name of
liability to arbitration; all the partners a conveyance executed by all
the partners passes all their rights in such
property. (n)
(7) Renounce a claim of the partnership.
Art. 1820. An admission or representation made
No act of a partner in contravention of a
by any partner concerning partnership affairs
restriction on authority shall bind the partnership
within the scope of his authority in accordance
to persons having knowledge of the restriction.
with this Title is evidence against the
(n)
partnership. (n)
Art. 1821. Notice to any partner of any matter being made in a public manner he is liable to
relating to partnership affairs, and the such person, whether the representation has or
knowledge of the partner acting in the particular has not been made or communicated to such
matter, acquired while a partner or then present person so giving credit by or with the knowledge
to his mind, and the knowledge of any other of the apparent partner making the
partner who reasonably could and should have representation or consenting to its being made:
communicated it to the acting partner, operate
as notice to or knowledge of the partnership, (1) When a partnership liability results,
except in the case of fraud on the partnership, he is liable as though he were an actual
committed by or with the consent of that partner. member of the partnership;
(n)
(2) When no partnership liability results,
Art. 1822. Where, by any wrongful act or he is liable pro rata with the other
omission of any partner acting in the ordinary persons, if any, so consenting to the
course of the business of the partnership or with contract or representation as to incur
the authority of co-partners, loss or injury is liability, otherwise separately.
caused to any person, not being a partner in the
partnership, or any penalty is incurred, the When a person has been thus represented to be
partnership is liable therefor to the same extent a partner in an existing partnership, or with one
as the partner so acting or omitting to act. (n) or more persons not actual partners, he is an
agent of the persons consenting to such
Art. 1823. The partnership is bound to make representation to bind them to the same extent
good the loss: and in the same manner as though he were a
partner in fact, with respect to persons who rely
(1) Where one partner acting within the upon the representation. When all the members
scope of his apparent authority receives of the existing partnership consent to the
money or property of a third person and representation, a partnership act or obligation
misapplies it; and results; but in all other cases it is the joint act or
obligation of the person acting and the persons
(2) Where the partnership in the course consenting to the representation. (n)
of its business receives money or
property of a third person and the Art. 1826. A person admitted as a partner into
money or property so received is an existing partnership is liable for all the
misapplied by any partner while it is in obligations of the partnership arising before his
the custody of the partnership. (n) admission as though he had been a partner
when such obligations were incurred, except
Art. 1824. All partners are liable solidarily with that this liability shall be satisfied only out of
the partnership for everything chargeable to the partnership property, unless there is a
partnership under Articles 1822 and 1823. (n) stipulation to the contrary. (n)

Art. 1825. When a person, by words spoken or Art. 1827. The creditors of the partnership shall
written or by conduct, represents himself, or be preferred to those of each partner as regards
consents to another representing him to anyone, the partnership property. Without prejudice to
as a partner in an existing partnership or with this right, the private creditors of each partner
one or more persons not actual partners, he is may ask the attachment and public sale of the
liable to any such persons to whom such share of the latter in the partnership assets. (n)
representation has been made, who has, on the
faith of such representation, given credit to the
actual or apparent partnership, and if he has CHAPTER 3
made such representation or consented to its DISSOLUTION AND WINDING UP
 partnership to be carried on or for the
Art. 1828. The dissolution of a partnership is the members to carry it on in partnership;
change in the relation of the partners caused by
any partner ceasing to be associated in the (4) When a specific thing which a
carrying on as distinguished from the winding up partner had promised to contribute to
of the business. (n) the partnership, perishes before the
delivery; in any case by the loss of the
Art. 1829. On dissolution the partnership is not thing, when the partner who contributed
terminated, but continues until the winding up of it having reserved the ownership
partnership affairs is completed. (n) thereof, has only transferred to the
partnership the use or enjoyment of the
Art. 1830. Dissolution is caused: same; but the partnership shall not be
dissolved by the loss of the thing when
it occurs after the partnership has
(1) Without violation of the agreement acquired the ownership thereof;
between the partners:
(a) By the termination of the (5) By the death of any partner;
definite term or particular
undertaking specified in the (6) By the insolvency of any partner or
agreement; of the partnership;

(b) By the express will of any (7) By the civil interdiction of any
partner, who must act in good partner;
faith, when no definite term or
particular is specified; (8) By decree of court under the
following article. (1700a and 1701a)
(c) By the express will of all the
partners who have not assigned Art. 1831. On application by or for a partner the
their interests or suffered them court shall decree a dissolution whenever:
to be charged for their separate (1) A partner has been declared insane
debts, either before or after the in any judicial proceeding or is shown to
termination of any specified be of unsound mind;
term or particular undertaking;
(2) A partner becomes in any other way
(d) By the expulsion of any incapable of performing his part of the
partner from the business bona partnership contract;
fide in accordance with such a
power conferred by the (3) A partner has been guilty of such
agreement between the conduct as tends to affect prejudicially
partners; the carrying on of the business;

(2) In contravention of the agreement (4) A partner wilfully or persistently

between the partners, where the commits a breach of the partnership
circumstances do not permit a agreement, or otherwise so conducts
dissolution under any other provision of himself in matters relating to the
this article, by the express will of any partnership business that it is not
partner at any time; reasonably practicable to carry on the
business in partnership with him;
(3) By any event which makes it
unlawful for the business of the
 (5) The business of the partnership can Art. 1834. After dissolution, a partner can bind
only be carried on at a loss; the partnership, except as provided in the third
paragraph of this article:
(6) Other circumstances render a (1) By any act appropriate for winding
dissolution equitable. up partnership affairs or completing
transactions unfinished at dissolution;
On the application of the purchaser of a
partner's interest under Article 1813 or 1814: (2) By any transaction which would bind
(1) After the termination of the specified the partnership if dissolution had not
term or particular undertaking; taken place, provided the other party to
the transaction:
(2) At any time if the partnership was a
partnership at will when the interest was (a) Had extended credit to the
assigned or when the charging order partnership prior to dissolution
was issued. (n) and had no knowledge or notice
of the dissolution; or
Art. 1832. Except so far as may be necessary to
wind up partnership affairs or to complete (b) Though he had not so
transactions begun but not then finished, extended credit, had
dissolution terminates all authority of any nevertheless known of the
partner to act for the partnership: partnership prior to dissolution,
(1) With respect to the partners: and, having no knowledge or
(a) When the dissolution is not notice of dissolution, the fact of
by the act, insolvency or death dissolution had not been
of a partner; or advertised in a newspaper of
general circulation in the place
(b) When the dissolution is by (or in each place if more than
such act, insolvency or death of one) at which the partnership
a partner, in cases where article business was regularly carried
1833 so requires; on.

(2) With respect to persons not The liability of a partner under the first
partners, as declared in article 1834. (n) paragraph, No. 2, shall be satisfied out of
Art. 1833. Where the dissolution is caused by partnership assets alone when such partner had
the act, death or insolvency of a partner, each been prior to dissolution:
partner is liable to his co-partners for his share (1) Unknown as a partner to the person
of any liability created by any partner acting for with whom the contract is made; and
the partnership as if the partnership had not
been dissolved unless: (2) So far unknown and inactive in
(1) The dissolution being by act of any partnership affairs that the business
partner, the partner acting for the reputation of the partnership could not
partnership had knowledge of the be said to have been in any degree due
dissolution; or to his connection with it.

(2) The dissolution being by the death The partnership is in no case bound by any act
or insolvency of a partner, the partner of a partner after dissolution:
acting for the partnership had (1) Where the partnership is dissolved
knowledge or notice of the death or because it is unlawful to carry on the
insolvency. business, unless the act is appropriate
for winding up partnership affairs; or
 (2) Where the partner has become Art. 1836. Unless otherwise agreed, the
insolvent; or partners who have not wrongfully dissolved the
partnership or the legal representative of the
(3) Where the partner has no authority last surviving partner, not insolvent, has the
to wind up partnership affairs; except by right to wind up the partnership affairs,
a transaction with one who: provided, however, that any partner, his legal
representative or his assignee, upon cause
(a) Had extended credit to the shown, may obtain winding up by the court. (n)
partnership prior to dissolution
and had no knowledge or notice Art. 1837. When dissolution is caused in any
of his want of authority; or way, except in contravention of the partnership
agreement, each partner, as against his co-
(b) Had not extended credit to partners and all persons claiming through them
the partnership prior to in respect of their interests in the partnership,
dissolution, and, having no unless otherwise agreed, may have the
knowledge or notice of his want partnership property applied to discharge its
of authority, the fact of his want liabilities, and the surplus applied to pay in cash
of authority has not been the net amount owing to the respective partners.
advertised in the manner But if dissolution is caused by expulsion of a
provided for advertising the fact partner, bona fide under the partnership
of dissolution in the first agreement and if the expelled partner is
paragraph, No. 2 (b). discharged from all partnership liabilities, either
by payment or agreement under the second
Nothing in this article shall affect the liability paragraph of Article 1835, he shall receive in
under Article 1825 of any person who, after cash only the net amount due him from the
dissolution, represents himself or consents to partnership.
another representing him as a partner in a
partnership engaged in carrying business. (n) When dissolution is caused in contravention of
the partnership agreement the rights of the
Art. 1835. The dissolution of the partnership partners shall be as follows:
does not of itself discharge the existing liability
of any partner. (1) Each partner who has not caused
dissolution wrongfully shall have:
A partner is discharged from any existing liability
upon dissolution of the partnership by an (a) All the rights specified in the
agreement to that effect between himself, the first paragraph of this article,
partnership creditor and the person or and
partnership continuing the business; and such
agreement may be inferred from the course of (b) The right, as against each
dealing between the creditor having knowledge partner who has caused the
of the dissolution and the person or partnership dissolution wrongfully, to
continuing the business. damages breach of the
agreement.
The individual property of a deceased partner
shall be liable for all obligations of the (2) The partners who have not caused
partnership incurred while he was a partner, but the dissolution wrongfully, if they all
subject to the prior payment of his separate desire to continue the business in the
debts. (n) same name either by themselves or
jointly with others, may do so, during
the agreed term for the partnership and
 for that purpose may possess the the party entitled to rescind is, without prejudice
partnership property, provided they to any other right, entitled:
secure the payment by bond approved (1) To a lien on, or right of retention of,
by the court, or pay any partner who has the surplus of the partnership property
caused the dissolution wrongfully, the after satisfying the partnership liabilities
value of his interest in the partnership at to third persons for any sum of money
the dissolution, less any damages paid by him for the purchase of an
recoverable under the second interest in the partnership and for any
paragraph, No. 1 (b) of this article, and capital or advances contributed by him;
in like manner indemnify him against all
present or future partnership liabilities. (2) To stand, after all liabilities to third
persons have been satisfied, in the
(3) A partner who has caused the place of the creditors of the partnership
dissolution wrongfully shall have: for any payments made by him in
respect of the partnership liabilities; and

(a) If the business is not (3) To be indemnified by the person

continued under the provisions guilty of the fraud or making the
of the second paragraph, No. 2, representation against all debts and
all the rights of a partner under liabilities of the partnership. (n)
the first paragraph, subject to
liability for damages in the Art. 1839. In settling accounts between the
second paragraph, No. 1 (b), of partners after dissolution, the following rules
this article. shall be observed, subject to any agreement to
the contrary:
(b) If the business is continued (1) The assets of the partnership are:
under the second paragraph,
No. 2, of this article, the right as (a) The partnership property,
against his co-partners and all
claiming through them in (b) The contributions of the
respect of their interests in the partners necessary for the
partnership, to have the value of payment of all the liabilities
his interest in the partnership, specified in No. 2.
less any damage caused to his
co-partners by the dissolution, (2) The liabilities of the partnership shall
ascertained and paid to him in rank in order of payment, as follows:
cash, or the payment secured
by a bond approved by the (a) Those owing to creditors
court, and to be released from other than partners,
all existing liabilities of the
partnership; but in ascertaining (b) Those owing to partners
the value of the partner's other than for capital and
interest the value of the good- profits,
will of the business shall not be
considered. (n) (c) Those owing to partners in
respect of capital,
Art. 1838. Where a partnership contract is
rescinded on the ground of the fraud or (d) Those owing to partners in
misrepresentation of one of the parties thereto, respect of profits.
(3) The assets shall be applied in the Art. 1840. In the following cases creditors of the
order of their declaration in No. 1 of this dissolved partnership are also creditors of the
article to the satisfaction of the person or partnership continuing the business:
liabilities. (1) When any new partner is admitted
into an existing partnership, or when
(4) The partners shall contribute, as any partner retires and assigns (or the
provided by article 1797, the amount representative of the deceased partner
necessary to satisfy the liabilities. assigns) his rights in partnership
property to two or more of the partners,
(5) An assignee for the benefit of or to one or more of the partners and
creditors or any person appointed by the one or more third persons, if the
court shall have the right to enforce the business is continued without liquidation
contributions specified in the preceding of the partnership affairs;
number.
(2) When all but one partner retire and
(6) Any partner or his legal assign (or the representative of a
representative shall have the right to deceased partner assigns) their rights in
enforce the contributions specified in partnership property to the remaining
No. 4, to the extent of the amount which partner, who continues the business
he has paid in excess of his share of the without liquidation of partnership affairs,
liability. either alone or with others;

(7) The individual property of a (3) When any partner retires or dies and
deceased partner shall be liable for the the business of the dissolved
contributions specified in No. 4. partnership is continued as set forth in
Nos. 1 and 2 of this article, with the
(8) When partnership property and the consent of the retired partners or the
individual properties of the partners are representative of the deceased partner,
in possession of a court for distribution, but without any assignment of his right
partnership creditors shall have priority in partnership property;
on partnership property and separate
creditors on individual property, saving (4) When all the partners or their
the rights of lien or secured creditors. representatives assign their rights in
partnership property to one or more
(9) Where a partner has become third persons who promise to pay the
insolvent or his estate is insolvent, the debts and who continue the business of
claims against his separate property the dissolved partnership;
shall rank in the following order:
(5) When any partner wrongfully causes
a dissolution and the remaining partners
(a) Those owing to separate continue the business under the
creditors; provisions of article 1837, second
paragraph, No. 2, either alone or with
(b) Those owing to partnership others, and without liquidation of the
creditors; partnership affairs;

(c) Those owing to partners by (6) When a partner is expelled and the
way of contribution. (n) remaining partners continue the
business either alone or with others
 without liquidation of the partnership legal representative, in lieu of interest, the
affairs. profits attributable to the use of his right in the
property of the dissolved partnership; provided
The liability of a third person becoming a partner that the creditors of the dissolved partnership as
in the partnership continuing the business, against the separate creditors, or the
under this article, to the creditors of the representative of the retired or deceased
dissolved partnership shall be satisfied out of partner, shall have priority on any claim arising
the partnership property only, unless there is a under this article, as provided Article 1840, third
stipulation to the contrary. paragraph. (n)

When the business of a partnership after Art. 1842. The right to an account of his interest
dissolution is continued under any conditions set shall accrue to any partner, or his legal
forth in this article the creditors of the dissolved representative as against the winding up
partnership, as against the separate creditors of partners or the surviving partners or the person
the retiring or deceased partner or the or partnership continuing the business, at the
representative of the deceased partner, have a date of dissolution, in the absence of any
prior right to any claim of the retired partner or agreement to the contrary. (n)
the representative of the deceased partner
against the person or partnership continuing the
business, on account of the retired or deceased CHAPTER 4
partner's interest in the dissolved partnership or LIMITED PARTNERSHIP (n)
on account of any consideration promised for
such interest or for his right in partnership Art. 1843. A limited partnership is one formed by
property. two or more persons under the provisions of the
following article, having as members one or
Nothing in this article shall be held to modify more general partners and one or more limited
any right of creditors to set aside any partners. The limited partners as such shall not
assignment on the ground of fraud. be bound by the obligations of the partnership.

The use by the person or partnership continuing Art. 1844. Two or more persons desiring to form
the business of the partnership name, or the a limited partnership shall:
name of a deceased partner as part thereof,
shall not of itself make the individual property of (1) Sign and swear to a certificate,
the deceased partner liable for any debts which shall state -
contracted by such person or partnership. (n)
(a) The name of the partnership,
Art. 1841. When any partner retires or dies, and adding thereto the
the business is continued under any of the word "Limited" ;
conditions set forth in the preceding article, or in
Article 1837, second paragraph, No. 2, without (b) The character of the
any settlement of accounts as between him or business;
his estate and the person or partnership
continuing the business, unless otherwise (c) The location of the principal
agreed, he or his legal representative as against place of business;
such person or partnership may have the value
of his interest at the date of dissolution (d) The name and place of
ascertained, and shall receive as an ordinary residence of each member,
creditor an amount equal to the value of his general and limited partners
interest in the dissolved partnership with being respectively designated;
interest, or, at his option or at the option of his
(e) The term for which the insanity or insolvency of a
partnership is to exist; general partner; and

(f) The amount of cash and a (n) The right, if given, of a

description of and the agreed limited partner to demand and
value of the other property receive property other than
contributed by each limited cash in return for his
partner; contribution.

(g) The additional contributions, (2) File for record the certificate in the
if any, to be made by each Office of the Securities and Exchange
limited partner and the times at Commission.
which or events on the A limited partnership is formed if there has been
happening of which they shall substantial compliance in good faith with the
be made; foregoing requirements.

(h) The time, if agreed upon, Art. 1845. The contributions of a limited partner
when the contribution of each may be cash or property, but not services.
limited partner is to be returned;
Art. 1846. The surname of a limited partner shall
(i) The share of the profits or not appear in the partnership name unless:
the other compensation by way
of income which each limited (1) It is also the surname of a general
partner shall receive by reason partner, or
of his contribution;
(2) Prior to the time when the limited
(j) The right, if given, of a partner became such, the business has
limited partner to substitute an been carried on under a name in which
assignee as contributor in his his surname appeared.
place, and the terms and
conditions of the substitution; A limited partner whose surname appears in a
partnership name contrary to the provisions of
(k) The right, if given, of the the first paragraph is liable as a general partner
partners to admit additional to partnership creditors who extend credit to the
limited partners; partnership without actual knowledge that he is
not a general partner.
(l) The right, if given, of one or
more of the limited partners to Art. 1847. If the certificate contains a false
priority over other limited statement, one who suffers loss by reliance on
partners, as to contributions or such statement may hold liable any party to the
as to compensation by way of certificate who knew the statement to be false:
income, and the nature of such
priority; (1) At the time he signed the certificate,
or
(m) The right, if given, of the
remaining general partner or (2) Subsequently, but within a sufficient
partners to continue the time before the statement was relied
business on the death, upon to enable him to cancel or amend
retirement, civil interdiction, the certificate, or to file a petition for its
 cancellation or amendment as provided the right so to do is given in the
in Article 1865. certificate.

Art. 1848. A limited partner shall not become Art. 1851. A limited partner shall have the same
liable as a general partner unless, in addition to rights as a general partner to:
the exercise of his rights and powers as a (1) Have the partnership books kept at
limited partner, he takes part in the control of the principal place of business of the
the business. partnership, and at a reasonable hour to
inspect and copy any of them;
Art. 1849. After the formation of a lifted
partnership, additional limited partners may be (2) Have on demand true and full
admitted upon filing an amendment to the information of all things affecting the
original certificate in accordance with the partnership, and a formal account of
requirements of Article 1865. partnership affairs whenever
circumstances render it just and
Art. 1850. A general partner shall have all the reasonable; and
rights and powers and be subject to all the
restrictions and liabilities of a partner in a (3) Have dissolution and winding up by
partnership without limited partners. However, decree of court.
without the written consent or ratification of the
specific act by all the limited partners, a general A limited partner shall have the right to receive a
partner or all of the general partners have no share of the profits or other compensation by
authority to: way of income, and to the return of his
contribution as provided in Articles 1856 and
(1) Do any act in contravention of the 1857.
certificate;
Art. 1852. Without prejudice to the provisions of
(2) Do any act which would make it Article 1848, a person who has contributed to
impossible to carry on the ordinary the capital of a business conducted by a person
business of the partnership; or partnership erroneously believing that he has
become a limited partner in a limited
(3) Confess a judgment against the partnership, is not, by reason of his exercise of
partnership; the rights of a limited partner, a general partner
with the person or in the partnership carrying on
(4) Possess partnership property, or the business, or bound by the obligations of
assign their rights in specific such person or partnership, provided that on
partnership property, for other than a ascertaining the mistake he promptly renounces
partnership purpose; his interest in the profits of the business, or
other compensation by way of income.
(5) Admit a person as a general partner;
Art. 1853. A person may be a general partner
(6) Admit a person as a limited partner, and a limited partner in the same partnership at
unless the right so to do is given in the the same time, provided that this fact shall be
certificate; stated in the certificate provided for in Article
1844.
(7) Continue the business with
partnership property on the death, A person who is a general, and also at the same
retirement, insanity, civil interdiction or time a limited partner, shall have all the rights
insolvency of a general partner, unless and powers and be subject to all the restrictions
of a general partner; except that, in respect to
his contribution, he shall have the rights against Art. 1857. A limited partner shall not receive
the other members which he would have had if from a general partner or out of partnership
he were not also a general partner. property any part of his contributions until:

Art. 1854. A limited partner also may loan (1) All liabilities of the partnership,
money to and transact other business with the except liabilities to general partners and
partnership, and, unless he is also a general to limited partners on account of their
partner, receive on account of resulting claims contributions, have been paid or there
against the partnership, with general creditors, a remains property of the partnership
pro rata share of the assets. No limited partner sufficient to pay them;
shall in respect to any such claim:
(2) The consent of all members is had,
(1) Receive or hold as collateral security unless the return of the contribution may
and partnership property, or be rightfully demanded under the
provisions of the second paragraph; and
(2) Receive from a general partner or
the partnership any payment, (3) The certificate is cancelled or so
conveyance, or release from liability if amended as to set forth the withdrawal
at the time the assets of the partnership or reduction.
are not sufficient to discharge
partnership liabilities to persons not Subject to the provisions of the first paragraph,
claiming as general or limited partners. a limited partner may rightfully demand the
return of his contribution:
The receiving of collateral security, or payment, (1) On the dissolution of a partnership;
conveyance, or release in violation of the or
foregoing provisions is a fraud on the creditors
of the partnership. (2) When the date specified in the
certificate for its return has arrived, or
Art. 1855. Where there are several limited
partners the members may agree that one or (3) After he has six months' notice in
more of the limited partners shall have a priority writing to all other members, if no time
over other limited partners as to the return of is specified in the certificate, either for
their contributions, as to their compensation by the return of the contribution or for the
way of income, or as to any other matter. If such dissolution of the partnership.
an agreement is made it shall be stated in the
certificate, and in the absence of such a In the absence of any statement in the
statement all the limited partners shall stand certificate to the contrary or the consent of all
upon equal footing. members, a limited partner, irrespective of the
nature of his contribution, has only the right to
Art. 1856. A limited partner may receive from the demand and receive cash in return for his
partnership the share of the profits or the contribution.
compensation by way of income stipulated for in
the certificate; provided that after such payment A limited partner may have the partnership
is made, whether from property of the dissolved and its affairs wound up when:
partnership or that of a general partner, the
partnership assets are in excess of all liabilities (1) He rightfully but unsuccessfully
of the partnership except liabilities to limited demands the return of his contribution,
partners on account of their contributions and to or
general partners.
 (2) The other liabilities of the A substituted limited partner is a person
partnership have not been paid, or the admitted to all the rights of a limited partner who
partnership property is insufficient for has died or has assigned his interest in a
their payment as required by the first partnership.
paragraph, No. 1, and the limited
partner would otherwise be entitled to An assignee, who does not become a
the return of his contribution. substituted limited partner, has no right to
require any information or account of the
Art. 1858. A limited partner is liable to the partnership transactions or to inspect the
partnership: partnership books; he is only entitled to receive
(1) For the difference between his the share of the profits or other compensation
contribution as actually made and that by way of income, or the return of his
stated in the certificate as having been contribution, to which his assignor would
made; and otherwise be entitled.

(2) For any unpaid contribution which he An assignee shall have the right to become a
agreed in the certificate to make in the substituted limited partner if all the members
future at the time and on the conditions consent thereto or if the assignor, being
stated in the certificate. thereunto empowered by the certificate, gives
the assignee that right.
A limited partner holds as trustee for the
partnership: An assignee becomes a substituted limited
(1) Specific property stated in the partner when the certificate is appropriately
certificate as contributed by him, but amended in accordance with Article 1865.
which was not contributed or which has
been wrongfully returned, and The substituted limited partner has all the rights
and powers, and is subject to all the restrictions
(2) Money or other property wrongfully and liabilities of his assignor, except those
paid or conveyed to him on account of liabilities of which he was ignorant at the time
his contribution. he became a limited partner and which could not
be ascertained from the certificate.
The liabilities of a limited partner as set forth in
this article can be waived or compromised only The substitution of the assignee as a limited
by the consent of all members; but a waiver or partner does not release the assignor from
compromise shall not affect the right of a liability to the partnership under Articles 1847
creditor of a partnership who extended credit or and 1848.
whose claim arose after the filing and before a
cancellation or amendment of the certificate, to Art. 1860. The retirement, death, insolvency,
enforce such liabilities. insanity or civil interdiction of a general partner
dissolves the partnership, unless the business is
When a contributor has rightfully received the continued by the remaining general partners:
return in whole or in part of the capital of his
contribution, he is nevertheless liable to the (1) Under a right so to do stated in the
partnership for any sum, not in excess of such certificate, or
return with interest, necessary to discharge its
liabilities to all creditors who extended credit or (2) With the consent of all members.
whose claims arose before such return.
Art. 1861. On the death of a limited partner his
Art. 1859. A limited partner's interest is executor or administrator shall have all the
assignable. rights of a limited partner for the purpose of
setting his estate, and such power as the (6) Those to general partners in respect
deceased had to constitute his assignee a to capital.
substituted limited partner.
Subject to any statement in the certificate or to
The estate of a deceased limited partner shall subsequent agreement, limited partners share in
be liable for all his liabilities as a limited partner. the partnership assets in respect to their claims
for capital, and in respect to their claims for
Art. 1862. On due application to a court of profits or for compensation by way of income on
competent jurisdiction by any creditor of a their contribution respectively, in proportion to
limited partner, the court may charge the the respective amounts of such claims.
interest of the indebted limited partner with
payment of the unsatisfied amount of such Art. 1864. The certificate shall be cancelled
claim, and may appoint a receiver, and make all when the partnership is dissolved or all limited
other orders, directions and inquiries which the partners cease to be such.
circumstances of the case may require.
A certificate shall be amended when:
The interest may be redeemed with the separate
property of any general partner, but may not be (1) There is a change in the name of the
redeemed with partnership property. partnership or in the amount or
character of the contribution of any
The remedies conferred by the first paragraph limited partner;
shall not be deemed exclusive of others which
may exist. (2) A person is substituted as a limited
partner;
Nothing in this Chapter shall be held to deprive
a limited partner of his statutory exemption. (3) An additional limited partner is
admitted;
Art. 1863. In setting accounts after dissolution
the liabilities of the partnership shall be entitled (4) A person is admitted as a general
to payment in the following order: partner;

(1) Those to creditors, in the order of (5) A general partner retires, dies,
priority as provided by law, except those becomes insolvent or insane, or is
to limited partners on account of their sentenced to civil interdiction and the
contributions, and to general partners; business is continued under Article
1860;
(2) Those to limited partners in respect
to their share of the profits and other (6) There is a change in the character of
compensation by way of income on their the business of the partnership;
contributions;
(7) There is a false or erroneous
(3) Those to limited partners in respect statement in the certificate;
to the capital of their contributions;
(8) There is a change in the time as
(4) Those to general partners other than stated in the certificate for the
for capital and profits; dissolution of the partnership or for the
return of a contribution;
(5) Those to general partners in respect
to profits;
 (9) A time is fixed for the dissolution of A certificate is amended or cancelled when
the partnership, or the return of a there is filed for record in the Office of the
contribution, no time having been Securities and Exchange Commission, where
specified in the certificate, or the certificate is recorded:

(10) The members desire to make a (1) A writing in accordance with the
change in any other statement in the provisions of the first or second
certificate in order that it shall paragraph, or
accurately represent the agreement
among them. (2) A certified copy of the order of the
court in accordance with the provisions
Art. 1865. The writing to amend a certificate of the fourth paragraph;
shall:
(1) Conform to the requirements of (3) After the certificate is duly amended
Article 1844 as far as necessary to set in accordance with this article, the
forth clearly the change in the certificate amended certified shall thereafter be for
which it is desired to make; and all purposes the certificate provided for
in this Chapter.
(2) Be signed and sworn to by all
members, and an amendment Art. 1866. A contributor, unless he is a general
substituting a limited partner or adding a partner, is not a proper party to proceedings by
limited or general partner shall be or against a partnership, except where the
signed also by the member to be object is to enforce a limited partner's right
substituted or added, and when a against or liability to the partnership.
limited partner is to be substituted, the
amendment shall also be signed by the Art. 1867. A limited partnership formed under
assigning limited partner. the law prior to the effectivity of this Code, may
become a limited partnership under this Chapter
The writing to cancel a certificate shall be by complying with the provisions of Article 1844,
signed by all members. provided the certificate sets forth:

A person desiring the cancellation or (1) The amount of the original

amendment of a certificate, if any person contribution of each limited partner, and
designated in the first and second paragraphs the time when the contribution was
as a person who must execute the writing made; and
refuses to do so, may petition the court to order
a cancellation or amendment thereof. (2) That the property of the partnership
exceeds the amount sufficient to
If the court finds that the petitioner has a right to discharge its liabilities to persons not
have the writing executed by a person who claiming as general or limited partners
refuses to do so, it shall order the Office of the by an amount greater than the sum of
Securities and Exchange Commission where the the contributions of its limited partners.
certificate is recorded, to record the cancellation
or amendment of the certificate; and when the A limited partnership formed under the law prior
certificate is to be amended, the court shall also to the effectivity of this Code, until or unless it
cause to be filed for record in said office a becomes a limited partnership under this
certified copy of its decree setting forth the Chapter, shall continue to be governed by the
amendment. provisions of the old law.

Title X. - AGENCY
 who received the special information, and in the
CHAPTER 1 latter case with regard to any person.
NATURE, FORM AND KINDS OF AGENCY
The power shall continue to be in full force until
Art. 1868. By the contract of agency a person the notice is rescinded in the same manner in
binds himself to render some service or to do which it was given. (n)
something in representation or on behalf of
another, with the consent or authority of the Art. 1874. When a sale of a piece of land or any
latter. (1709a) interest therein is through an agent, the
authority of the latter shall be in writing;
Art. 1869. Agency may be express, or implied otherwise, the sale shall be void. (n)
from the acts of the principal, from his silence or
lack of action, or his failure to repudiate the Art. 1875. Agency is presumed to be for a
agency, knowing that another person is acting compensation, unless there is proof to the
on his behalf without authority. contrary. (n)

Agency may be oral, unless the law requires a Art. 1876. An agency is either general or
specific form. (1710a) special.

Art. 1870. Acceptance by the agent may also be The former comprises all the business of the
express, or implied from his acts which carry out principal. The latter, one or more specific
the agency, or from his silence or inaction transactions. (1712)
according to the circumstances. (n)
Art. 1877. An agency couched in general terms
Art. 1871. Between persons who are present, comprises only acts of administration, even if
the acceptance of the agency may also be the principal should state that he withholds no
implied if the principal delivers his power of power or that the agent may execute such acts
attorney to the agent and the latter receives it as he may consider appropriate, or even though
without any objection. (n) the agency should authorize a general and
unlimited management. (n)
Art. 1872. Between persons who are absent, the
acceptance of the agency cannot be implied Art. 1878. Special powers of attorney are
from the silence of the agent, except: necessary in the following cases:

(1) When the principal transmits his (1) To make such payments as are not
power of attorney to the agent, who usually considered as acts of
receives it without any objection; administration;

(2) When the principal entrusts to him (2) To effect novations which put an end
by letter or telegram a power of attorney to obligations already in existence at the
with respect to the business in which he time the agency was constituted;
is habitually engaged as an agent, and
he did not reply to the letter or telegram. (3) To compromise, to submit questions
(n) to arbitration, to renounce the right to
appeal from a judgment, to waive
Art. 1873. If a person specially informs another objections to the venue of an action or
or states by public advertisement that he has to abandon a prescription already
given a power of attorney to a third person, the acquired;
latter thereby becomes a duly authorized agent,
in the former case with respect to the person (4) To waive any obligation gratuitously;
 (5) To enter into any contract by which conducive to the accomplishment of the purpose
the ownership of an immovable is of the agency. (1714a)
transmitted or acquired either
gratuitously or for a valuable Art. 1882. The limits of the agent's authority
consideration; shall not be considered exceeded should it have
been performed in a manner more
(6) To make gifts, except customary advantageous to the principal than that
ones for charity or those made to specified by him. (1715)
employees in the business managed by
the agent; Art. 1883. If an agent acts in his own name, the
principal has no right of action against the
(7) To loan or borrow money, unless the persons with whom the agent has contracted;
latter act be urgent and indispensable neither have such persons against the principal.
for the preservation of the things which
are under administration; In such case the agent is the one directly bound
in favor of the person with whom he has
(8) To lease any real property to another contracted, as if the transaction were his own,
person for more than one year; except when the contract involves things
belonging to the principal.
(9) To bind the principal to render some
service without compensation; The provisions of this article shall be understood
to be without prejudice to the actions between
(10) To bind the principal in a contract of the principal and agent. (1717)
partnership;

(11) To obligate the principal as a CHAPTER 2

guarantor or surety; OBLIGATIONS OF THE AGENT

(12) To create or convey real rights over Art. 1884. The agent is bound by his acceptance
immovable property; to carry out the agency, and is liable for the
damages which, through his non-performance,
(13) To accept or repudiate an the principal may suffer.
inheritance;
He must also finish the business already begun
(14) To ratify or recognize obligations on the death of the principal, should delay entail
contracted before the agency; any danger. (1718)

(15) Any other act of strict dominion. (n) Art. 1885. In case a person declines an agency,
he is bound to observe the diligence of a good
Art. 1879. A special power to sell excludes the father of a family in the custody and
power to mortgage; and a special power to preservation of the goods forwarded to him by
mortgage does not include the power to sell. (n) the owner until the latter should appoint an
agent or take charge of the goods. (n)
Art. 1880. A special power to compromise does
not authorize submission to arbitration. (1713a) Art. 1886. Should there be a stipulation that the
agent shall advance the necessary funds, he
shall be bound to do so except when the
Art. 1881. The agent must act within the scope
principal is insolvent. (n)
of his authority. He may do such acts as may be
Art. 1887. In the execution of the agency, the Art. 1893. In the cases mentioned in Nos. 1 and
agent shall act in accordance with the 2 of the preceding article, the principal may
instructions of the principal. furthermore bring an action against the
substitute with respect to the obligations which
In default thereof, he shall do all that a good the latter has contracted under the substitution.
father of a family would do, as required by the (1722a)
nature of the business. (1719)
Art. 1894. The responsibility of two or more
Art. 1888. An agent shall not carry out an agents, even though they have been appointed
agency if its execution would manifestly result in simultaneously, is not solidary, if solidarity has
loss or damage to the principal. (n) not been expressly stipulated. (1723)

Art. 1889. The agent shall be liable for damages Art. 1895. If solidarity has been agreed upon,
if, there being a conflict between his interests each of the agents is responsible for the non-
and those of the principal, he should prefer his fulfillment of agency, and for the fault or
own. (n) negligence of his fellows agents, except in the
latter case when the fellow agents acted beyond
Art. 1890. If the agent has been empowered to the scope of their authority. (n)
borrow money, he may himself be the lender at
the current rate of interest. If he has been Art. 1896. The agent owes interest on the sums
authorized to lend money at interest, he cannot he has applied to his own use from the day on
borrow it without the consent of the principal. (n) which he did so, and on those which he still
owes after the extinguishment of the agency.
Art. 1891. Every agent is bound to render an (1724a)
account of his transactions and to deliver to the
principal whatever he may have received by Art. 1897. The agent who acts as such is not
virtue of the agency, even though it may not be personally liable to the party with whom he
owing to the principal. contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving
Every stipulation exempting the agent from the such party sufficient notice of his powers. (1725)
obligation to render an account shall be void.
(1720a) Art. 1898. If the agent contracts in the name of
the principal, exceeding the scope of his
Art. 1892. The agent may appoint a substitute if authority, and the principal does not ratify the
the principal has not prohibited him from doing contract, it shall be void if the party with whom
so; but he shall be responsible for the acts of the agent contracted is aware of the limits of the
the substitute: powers granted by the principal. In this case,
however, the agent is liable if he undertook to
(1) When he was not given the power to secure the principal's ratification. (n)
appoint one;
Art. 1899. If a duly authorized agent acts in
(2) When he was given such power, but accordance with the orders of the principal, the
without designating the person, and the latter cannot set up the ignorance of the agent
person appointed was notoriously as to circumstances whereof he himself was, or
incompetent or insolvent. ought to have been, aware. (n)

All acts of the substitute appointed against the Art. 1900. So far as third persons are
prohibition of the principal shall be void. (1721) concerned, an act is deemed to have been
performed within the scope of the agent's
authority, if such act is within the terms of the
power of attorney, as written, even if the agent commission, he shall bear the risk of collection
has in fact exceeded the limits of his authority and shall pay the principal the proceeds of the
according to an understanding between the sale on the same terms agreed upon with the
principal and the agent. (n) purchaser. (n)

Art. 1901. A third person cannot set up the fact Art. 1908. The commission agent who does not
that the agent has exceeded his powers, if the collect the credits of his principal at the time
principal has ratified, or has signified his when they become due and demandable shall
willingness to ratify the agent's acts. (n) be liable for damages, unless he proves that he
exercised due diligence for that purpose. (n)
Art. 1902. A third person with whom the agent
wishes to contract on behalf of the principal may Art. 1909. The agent is responsible not only for
require the presentation of the power of fraud, but also for negligence, which shall be
attorney, or the instructions as regards the judged with more or less rigor by the courts,
agency. Private or secret orders and instructions according to whether the agency was or was not
of the principal do not prejudice third persons for a compensation. (1726)
who have relied upon the power of attorney or
instructions shown them. (n)
CHAPTER 3
Art. 1903. The commission agent shall be OBLIGATIONS OF THE PRINCIPAL
responsible for the goods received by him in the
terms and conditions and as described in the Art. 1910. The principal must comply with all the
consignment, unless upon receiving them he obligations which the agent may have
should make a written statement of the damage contracted within the scope of his authority.
and deterioration suffered by the same. (n)
As for any obligation wherein the agent has
Art. 1904. The commission agent who handles exceeded his power, the principal is not bound
goods of the same kind and mark, which belong except when he ratifies it expressly or tacitly.
to different owners, shall distinguish them by (1727)
countermarks, and designate the merchandise
respectively belonging to each principal. (n) Art. 1911. Even when the agent has exceeded
his authority, the principal is solidarily liable with
Art. 1905. The commission agent cannot, the agent if the former allowed the latter to act
without the express or implied consent of the as though he had full powers. (n)
principal, sell on credit. Should he do so, the
principal may demand from him payment in Art. 1912. The principal must advance to the
cash, but the commission agent shall be entitled agent, should the latter so request, the sums
to any interest or benefit, which may result from necessary for the execution of the agency.
such sale. (n)
Should the agent have advanced them, the
Art. 1906. Should the commission agent, with principal must reimburse him therefor, even if
authority of the principal, sell on credit, he shall the business or undertaking was not successful,
so inform the principal, with a statement of the provided the agent is free from all fault.
names of the buyers. Should he fail to do so,
the sale shall be deemed to have been made for The reimbursement shall include interest on the
cash insofar as the principal is concerned. (n) sums advanced, from the day on which the
advance was made. (1728)
Art. 1907. Should the commission agent receive
on a sale, in addition to the ordinary Art. 1913. The principal must also indemnify the
commission, another called a guarantee agent for all the damages which the execution of
the agency may have caused the latter, without
fault or negligence on his part. (1729) CHAPTER 4
MODES OF EXTINGUISHMENT OF AGENCY
Art. 1914. The agent may retain in pledge the
things which are the object of the agency until Art. 1919. Agency is extinguished:
the principal effects the reimbursement and (1) By its revocation;
pays the indemnity set forth in the two preceding
articles. (1730) (2) By the withdrawal of the agent;

Art. 1915. If two or more persons have (3) By the death, civil interdiction,
appointed an agent for a common transaction or insanity or insolvency of the principal or
undertaking, they shall be solidarily liable to the of the agent;
agent for all the consequences of the agency.
(1731) (4) By the dissolution of the firm or
corporation which entrusted or accepted
Art. 1916. When two persons contract with the agency;
regard to the same thing, one of them with the
agent and the other with the principal, and the (5) By the accomplishment of the object
two contracts are incompatible with each other, or purpose of the agency;
that of prior date shall be preferred, without
prejudice to the provisions of Article 1544. (n) (6) By the expiration of the period for
which the agency was constituted.
Art. 1917. In the case referred to in the (1732a)
preceding article, if the agent has acted in good
faith, the principal shall be liable in damages to Art. 1920. The principal may revoke the agency
the third person whose contract must be at will, and compel the agent to return the
rejected. If the agent acted in bad faith, he document evidencing the agency. Such
alone shall be responsible. (n) revocation may be express or implied. (1733a)

Art. 1918. The principal is not liable for the Art. 1921. If the agency has been entrusted for
expenses incurred by the agent in the following the purpose of contracting with specified
cases: persons, its revocation shall not prejudice the
latter if they were not given notice thereof.
(1) If the agent acted in contravention of (1734)
the principal's instructions, unless the
latter should wish to avail himself of the Art. 1922. If the agent had general powers,
benefits derived from the contract; revocation of the agency does not prejudice
third persons who acted in good faith and
(2) When the expenses were due to the without knowledge of the revocation. Notice of
fault of the agent; the revocation in a newspaper of general
circulation is a sufficient warning to third
(3) When the agent incurred them with persons. (n)
knowledge that an unfavorable result
would ensue, if the principal was not Art. 1923. The appointment of a new agent for
aware thereof; the same business or transaction revokes the
previous agency from the day on which notice
(4) When it was stipulated that the thereof was given to the former agent, without
expenses would be borne by the agent, prejudice to the provisions of the two preceding
or that the latter would be allowed only articles. (1735a)
a certain sum. (n)
Art. 1924. The agency is revoked if the principal Art. 1932. If the agent dies, his heirs must notify
directly manages the business entrusted to the the principal thereof, and in the meantime adopt
agent, dealing directly with third persons. (n) such measures as the circumstances may
demand in the interest of the latter. (1739)
Art. 1925. When two or more principals have
granted a power of attorney for a common
transaction, any one of them may revoke the Title XI. - LOAN
same without the consent of the others. (n)
GENERAL PROVISIONS
Art. 1926. A general power of attorney is
revoked by a special one granted to another Art. 1933. By the contract of loan, one of the
agent, as regards the special matter involved in parties delivers to another, either something not
the latter. (n) consumable so that the latter may use the same
for a certain time and return it, in which case the
Art. 1927. An agency cannot be revoked if a contract is called a commodatum; or money or
bilateral contract depends upon it, or if it is the other consumable thing, upon the condition that
means of fulfilling an obligation already the same amount of the same kind and quality
contracted, or if a partner is appointed manager shall be paid, in which case the contract is
of a partnership in the contract of partnership simply called a loan or mutuum .
and his removal from the management is
unjustifiable. (n) Commodatum is essentially gratuitous.

Art. 1928. The agent may withdraw from the Simple loan may be gratuitous or with a
agency by giving due notice to the principal. If stipulation to pay interest.
the latter should suffer any damage by reason of
the withdrawal, the agent must indemnify him In commodatum the bailor retains the ownership
therefor, unless the agent should base his of the thing loaned, while in simple loan,
withdrawal upon the impossibility of continuing ownership passes to the borrower. (1740a)
the performance of the agency without grave
detriment to himself. (1736a) Art. 1934. An accepted promise to deliver
something by way of commodatum or simple loan
Art. 1929. The agent, even if he should withdraw is binding upon parties, but the commodatum or
from the agency for a valid reason, must simple loan itself shall not be perfected until the
continue to act until the principal has had delivery of the object of the contract. (n)
reasonable opportunity to take the necessary
steps to meet the situation. (1737a)
CHAPTER 1
Art. 1930. The agency shall remain in full force COMMODATUM
and effect even after the death of the principal,
if it has been constituted in the common interest SECTION 1 - Nature of Commodatum
of the latter and of the agent, or in the interest
of a third person who has accepted the Art. 1935. The bailee in commodatum acquires
stipulation in his favor. (n) the used of the thing loaned but not its fruits; if
any compensation is to be paid by him who
Art. 1931. Anything done by the agent, without acquires the use, the contract ceases to be
knowledge of the death of the principal or of any a commodatum . (1941a)
other cause which extinguishes the agency, is
valid and shall be fully effective with respect to Art. 1936. Consumable goods may be the
third persons who may have contracted with him subject of commodatum if the purpose of the
in good faith. (1738)
contract is not the consumption of the object, as (4) If he lends or leases the thing to a
when it is merely for exhibition. (n) third person, who is not a member of his
household;
Art. 1937. Movable or immovable property may
be the object of commodatum . (n) (5) If, being able to save either the thing
borrowed or his own thing, he chose to
Art. 1938. The bailor in commodatum need not save the latter. (1744a and 1745)
be the owner of the thing loaned. (n)
Art. 1943. The bailee does not answer for the
Art. 1939. Commodatum is purely personal in deterioration of the thing loaned due only to the
character. Consequently: use thereof and without his fault. (1746)

(1) The death of either the bailor or the Art. 1944. The bailee cannot retain the thing
bailee extinguishes the contract; loaned on the ground that the bailor owes him
something, even though it may be by reason of
(2) The bailee can neither lend nor expenses. However, the bailee has a right of
lease the object of the contract to a retention for damages mentioned in Article
third person. However, the members of 1951. (1747a)
the bailee's household may make use of
the thing loaned, unless there is a Art. 1945. When there are two or more bailees
stipulation to the contrary, or unless the to whom a thing is loaned in the same contract,
nature of the thing forbids such use. (n) they are liable solidarily. (1748a)

Art. 1940. A stipulation that the bailee may make

use of the fruits of the thing loaned is valid. (n) SECTION 3. - Obligations of the Bailor

SECTION 2. - Obligations of the Bailee Art. 1946. The bailor cannot demand the return
of the thing loaned till after the expiration of the
Art. 1941. The bailee is obliged to pay for the period stipulated, or after the accomplishment of
ordinary expenses for the use and preservation the use for which the commodatum has been
of the thing loaned. (1743a) constituted. However, if in the meantime, he
should have urgent need of the thing, he may
Art. 1942. The bailee is liable for the loss of the demand its return or temporary use.
thing, even if it should be through a fortuitous
event: In case of temporary use by the bailor, the
contract of commodatum is suspended while the
(1) If he devotes the thing to any thing is in the possession of the bailor. (1749a)
purpose different from that for which it
has been loaned; Art. 1947. The bailor may demand the thing at
will, and the contractual relation is called a
(2) If he keeps it longer than the period precarium, in the following cases:
stipulated, or after the accomplishment
of the use for which (1) If neither the duration of the contract
the commodatum has been constituted; nor the use to which the thing loaned
should be devoted, has been stipulated;
(3) If the thing loaned has been or
delivered with appraisal of its value,
unless there is a stipulation exemption (2) If the use of the thing is merely
the bailee from responsibility in case of tolerated by the owner. (1750a)
a fortuitous event;
Art. 1948. The bailor may demand the Art. 1955. The obligation of a person who
immediate return of the thing if the bailee borrows money shall be governed by the
commits any act of ingratitude specified in provisions of Articles 1249 and 1250 of this
Article 765. (n) Code.

Art. 1949. The bailor shall refund the If what was loaned is a fungible thing other than
extraordinary expenses during the contract for money, the debtor owes another thing of the
the preservation of the thing loaned, provided same kind, quantity and quality, even if it should
the bailee brings the same to the knowledge of change in value. In case it is impossible to
the bailor before incurring them, except when deliver the same kind, its value at the time of
they are so urgent that the reply to the the perfection of the loan shall be paid. (1754a)
notification cannot be awaited without danger.
Art. 1956. No interest shall be due unless it has
If the extraordinary expenses arise on the been expressly stipulated in writing. (1755a)
occasion of the actual use of the thing by the
bailee, even though he acted without fault, they Art. 1957. Contracts and stipulations, under any
shall be borne equally by both the bailor and the cloak or device whatever, intended to
bailee, unless there is a stipulation to the circumvent the laws against usury shall be void.
contrary. (1751a) The borrower may recover in accordance with
the laws on usury. (n)
Art. 1950. If, for the purpose of making use of
the thing, the bailee incurs expenses other than Art. 1958. In the determination of the interest, if
those referred to in Articles 1941 and 1949, he it is payable in kind, its value shall be appraised
is not entitled to reimbursement. (n) at the current price of the products or goods at
the time and place of payment. (n)
Art. 1951. The bailor who, knowing the flaws of
the thing loaned, does not advise the bailee of Art. 1959. Without prejudice to the provisions of
the same, shall be liable to the latter for the Article 2212, interest due and unpaid shall not
damages which he may suffer by reason thereof. earn interest. However, the contracting parties
(1752) may by stipulation capitalize the interest due
and unpaid, which as added principal, shall earn
Art. 1952. The bailor cannot exempt himself new interest. (n)
from the payment of expenses or damages by
abandoning the thing to the bailee. (n) Art. 1960. If the borrower pays interest when
there has been no stipulation therefor, the
provisions of this Code concerning solutio
CHAPTER 2 indebiti , or natural obligations, shall be applied,
SIMPLE LOAN OR MUTUUM as the case may be. (n)

Art. 1953. A person who receives a loan of Art. 1961. Usurious contracts shall be governed
money or any other fungible thing acquires the by the Usury Law and other special laws, so far
ownership thereof, and is bound to pay to the as they are not inconsistent with this Code. (n)
creditor an equal amount of the same kind and
quality. (1753a)
Title XII. - DEPOSIT
Art. 1954. A contract whereby one person
transfers the ownership of non-fungible things to CHAPTER 1
another with the obligation on the part of the DEPOSIT IN GENERAL AND ITS DIFFERENT
latter to give things of the same kind, quantity, KINDS
and quality shall be considered a barter. (n)
 deposit, or by the latter himself if he should
Art. 1962. A deposit is constituted from the acquire capacity. (1764)
moment a person receives a thing belonging to
another, with the obligation of safely keeping it Art. 1971. If the deposit has been made by a
and of returning the same. If the safekeeping of capacitated person with another who is not, the
the thing delivered is not the principal purpose depositor shall only have an action to recover
of the contract, there is no deposit but some the thing deposited while it is still in the
other contract. (1758a) possession of the depositary, or to compel the
latter to pay him the amount by which he may
Art. 1963. An agreement to constitute a deposit have enriched or benefited himself with the thing
is binding, but the deposit itself is not perfected or its price. However, if a third person who
until the delivery of the thing. (n) acquired the thing acted in bad faith, the
depositor may bring an action against him for its
Art. 1964. A deposit may be constituted judicially recovery. (1765a)
or extrajudicially. (1759)

Art. 1965. A deposit is a gratuitous contract, SECTION 2. - Obligations of the Depositary

except when there is an agreement to the
contrary, or unless the depositary is engaged in Art. 1972. The depositary is obliged to keep the
the business of storing goods. (1760a) thing safely and to return it, when required, to
the depositor, or to his heirs and successors, or
Art. 1966. Only movable things may be the to the person who may have been designated in
object of a deposit. (1761) the contract. His responsibility, with regard to
the safekeeping and the loss of the thing, shall
Art. 1967. An extrajudicial deposit is either be governed by the provisions of Title I of this
voluntary or necessary. (1762) Book.

If the deposit is gratuitous, this fact shall be

CHAPTER 2 taken into account in determining the degree of
VOLUNTARY DEPOSIT care that the depositary must observe. (1766a)

SECTION 1. - General Provisions Art. 1973. Unless there is a stipulation to the

contrary, the depositary cannot deposit the thing
Art. 1968. A voluntary deposit is that wherein the with a third person. If deposit with a third person
delivery is made by the will of the depositor. A is allowed, the depositary is liable for the loss if
deposit may also be made by two or more he deposited the thing with a person who is
persons each of whom believes himself entitled manifestly careless or unfit. The depositary is
to the thing deposited with a third person, who responsible for the negligence of his employees.
shall deliver it in a proper case to the one to (n)
whom it belongs. (1763)
Art. 1974. The depositary may change the way
Art. 1969. A contract of deposit may be entered of the deposit if under the circumstances he
into orally or in writing. (n) may reasonably presume that the depositor
would consent to the change if he knew of the
Art. 1970. If a person having capacity to facts of the situation. However, before the
contract accepts a deposit made by one who is depositary may make such change, he shall
incapacitated, the former shall be subject to all notify the depositor thereof and wait for his
the obligations of a depositary, and may be decision, unless delay would cause danger. (n)
compelled to return the thing by the guardian, or
administrator, of the person who made the
Art. 1975. The depositary holding certificates, Art. 1980. Fixed, savings, and current deposits
bonds, securities or instruments which earn of money in banks and similar institutions shall
interest shall be bound to collect the latter when be governed by the provisions concerning
it becomes due, and to take such steps as may simple loan. (n)
be necessary in order that the securities may
preserve their value and the rights Art. 1981. When the thing deposited is delivered
corresponding to them according to law. closed and sealed, the depositary must return it
in the same condition, and he shall be liable for
The above provision shall not apply to contracts damages should the seal or lock be broken
for the rent of safety deposit boxes. (n) through his fault.

Art. 1976. Unless there is a stipulation to the Fault on the part of the depositary is presumed,
contrary, the depositary may commingle grain or unless there is proof to the contrary.
other articles of the same kind and quality, in
which case the various depositors shall own or As regards the value of the thing deposited, the
have a proportionate interest in the mass. (n) statement of the depositor shall be accepted,
when the forcible opening is imputable to the
Art. 1977. The depositary cannot make use of depositary, should there be no proof to the
the thing deposited without the express contrary. However, the courts may pass upon
permission of the depositor. the credibility of the depositor with respect to
the value claimed by him.
Otherwise, he shall be liable for damages.
When the seal or lock is broken, with or without
However, when the preservation of the thing the depositary's fault, he shall keep the secret
deposited requires its use, it must be used but of the deposit. (1769a)
only for that purpose. (1767a)
Art. 1982. When it becomes necessary to open
Art. 1978. When the depositary has permission a locked box or receptacle, the depositary is
to use the thing deposited, the contract loses presumed authorized to do so, if the key has
the concept of a deposit and becomes a loan or been delivered to him; or when the instructions
commodatum, except where safekeeping is still of the depositor as regards the deposit cannot
the principal purpose of the contract. be executed without opening the box or
receptacle. (n)
The permission shall not be presumed, and its
existence must be proved. (1768a) Art. 1983. The thing deposited shall be returned
with all its products, accessories and
Art. 1979. The depositary is liable for the loss of accessions.
the thing through a fortuitous event:
Should the deposit consist of money, the
(1) If it is so stipulated; provisions relative to agents in article 1896 shall
be applied to the depositary. (1770)
(2) If he uses the thing without the
depositor's permission; Art. 1984. The depositary cannot demand that
the depositor prove his ownership of the thing
(3) If he delays its return; deposited.

(4) If he allows others to use it, even Nevertheless, should he discover that the thing
though he himself may have been has been stolen and who its true owner is, he
authorized to use the same. (n) must advise the latter of the deposit.
If the owner, in spite of such information, does the removal of the thing deposited. In these
not claim it within the period of one month, the cases, the depositary must immediately inform
depositary shall be relieved of all responsibility the depositor of the attachment or opposition.
by returning the thing deposited to the depositor. (1775)

If the depositary has reasonable grounds to Art. 1989. Unless the deposit is for a valuable
believe that the thing has not been lawfully consideration, the depositary who may have
acquired by the depositor, the former may return justifiable reasons for not keeping the thing
the same. (1771a) deposited may, even before the time designated,
return it to the depositor; and if the latter should
Art. 1985. When there are two or more refuse to receive it, the depositary may secure
depositors, if they are not solidary, and the thing its consignation from the court. (1776a)
admits of division, each one cannot demand
more than his share. Art. 1990. If the depositary by force majeure or
government order loses the thing and receives
When there is solidarity or the thing does not money or another thing in its place, he shall
admit of division, the provisions of Articles 1212 deliver the sum or other thing to the depositor.
and 1214 shall govern. However, if there is a (1777a)
stipulation that the thing should be returned to
one of the depositors, the depositary shall return Art. 1991. The depositor's heir who in good faith
it only to the person designated. (1772a) may have sold the thing which he did not know
was deposited, shall only be bound to return the
Art. 1986. If the depositor should lose his price he may have received or to assign his right
capacity to contract after having made the of action against the buyer in case the price has
deposit, the thing cannot be returned except to not been paid him. (1778)
the persons who may have the administration of
his property and rights. (1773)
SECTION 3. - Obligations of the Depositor
Art. 1987. If at the time the deposit was made a
place was designated for the return of the thing, Art. 1992. If the deposit is gratuitous, the
the depositary must take the thing deposited to depositor is obliged to reimburse the depositary
such place; but the expenses for transportation for the expenses he may have incurred for the
shall be borne by the depositor. preservation of the thing deposited. (1779a)

If no place has been designated for the return, it Art. 1993. The depositor shall reimburse the
shall be made where the thing deposited may depositary for any loss arising from the
be, even if it should not be the same place character of the thing deposited, unless at the
where the deposit was made, provided that time of the constitution of the deposit the former
there was no malice on the part of the was not aware of, or was not expected to know
depositary. (1774) the dangerous character of the thing, or unless
he notified the depositary of the same, or the
Art. 1988. The thing deposited must be returned latter was aware of it without advice from the
to the depositor upon demand, even though a depositor. (n)
specified period or time for such return may
have been fixed. Art. 1994. The depositary may retain the thing in
pledge until the full payment of what may be due
This provision shall not apply when the thing is him by reason of the deposit. (1780)
judicially attached while in the depositary's
possession, or should he have been notified of Art. 1995. A deposit its extinguished:
the opposition of a third person to the return or
 (1) Upon the loss or destruction of the caused by the servants or employees of the
thing deposited; keepers of hotels or inns as well as strangers;
but not that which may proceed from any force
(2) In case of a gratuitous deposit, upon majeure. The fact that travellers are constrained
the death of either the depositor or the to rely on the vigilance of the keeper of the
depositary. (n) hotels or inns shall be considered in determining
the degree of care required of him. (1784a)
CHAPTER 3
NECESSARY DEPOSIT Art. 2001. The act of a thief or robber, who has
entered the hotel is not deemed force majeure,
Art. 1996. A deposit is necessary: unless it is done with the use of arms or through
(1) When it is made in compliance with an irresistible force. (n)
a legal obligation;
Art. 2002. The hotel-keeper is not liable for
(2) When it takes place on the occasion compensation if the loss is due to the acts of the
of any calamity, such as fire, storm, guest, his family, servants or visitors, or if the
flood, pillage, shipwreck, or other loss arises from the character of the things
similar events. (1781a) brought into the hotel. (n)

Art. 1997. The deposit referred to in No. 1 of the Art. 2003. The hotel-keeper cannot free himself
preceding article shall be governed by the from responsibility by posting notices to the
provisions of the law establishing it, and in case effect that he is not liable for the articles
of its deficiency, by the rules on voluntary brought by the guest. Any stipulation between
deposit. the hotel-keeper and the guest whereby the
responsibility of the former as set forth in
The deposit mentioned in No. 2 of the preceding articles 1998 to 2001 is suppressed or
article shall be regulated by the provisions diminished shall be void. (n)
concerning voluntary deposit and by Article
2168. (1782) Art. 2004. The hotel-keeper has a right to retain
the things brought into the hotel by the guest, as
Art. 1998. The deposit of effects made by the a security for credits on account of lodging, and
travellers in hotels or inns shall also be supplies usually furnished to hotel guests. (n)
regarded as necessary. The keepers of hotels or
inns shall be responsible for them as
depositaries, provided that notice was given to CHAPTER 4
them, or to their employees, of the effects SEQUESTRATION OR JUDICIAL DEPOSIT
brought by the guests and that, on the part of
the latter, they take the precautions which said Art. 2005. A judicial deposit or sequestration
hotel-keepers or their substitutes advised takes place when an attachment or seizure of
relative to the care and vigilance of their effects. property in litigation is ordered. (1785)
(1783)
Art. 2006. Movable as well as immovable
Art. 1999. The hotel-keeper is liable for the property may be the object of sequestration.
vehicles, animals and articles which have been (1786)
introduced or placed in the annexes of the hotel.
(n) Art. 2007. The depositary of property or objects
sequestrated cannot be relieved of his
Art. 2000. The responsibility referred to in the responsibility until the controversy which gave
two preceding articles shall include the loss of, rise thereto has come to an end, unless the
or injury to the personal property of the guests court so orders. (1787a)
Art. 2008. The depositary of property amount lost, and subsidiarily from the operator
sequestrated is bound to comply, with respect to or manager of the gambling house. (1799a)
the same, with all the obligations of a good
father of a family. (1788) Art. 2015. If cheating or deceit is committed by
the winner, he, and subsidiarily the operator or
Art. 2009. As to matters not provided for in this manager of the gambling house, shall pay by
Code, judicial sequestration shall be governed way of exemplary damages, not less than the
by the Rules of Court. (1789) equivalent of the sum lost, in addition to the
latter amount. If both the winner and the loser
have perpetrated fraud, no action for recovery
Title XIII. - ALEATORY CONTRACTS can be brought by either. (n)

GENERAL PROVISIONS Art. 2016. If the loser refuses or neglects to

bring an action to recover what has been lost,
Art. 2010. By an aleatory contract, one of the his or her creditors, spouse, descendants or
parties or both reciprocally bind themselves to other persons entitled to be supported by the
give or to do something in consideration of what loser may institute the action. The sum thereby
the other shall give or do upon the happening of obtained shall be applied to the creditors'
an event which is uncertain, or which is to occur claims, or to the support of the spouse or
at an indeterminate time. (1790) relatives, as the case may be. (n)

CHAPTER 1 Art. 2017. The provisions of Article 2014 and

INSURANCE 2016 apply when two or more persons bet in a
game of chance, although they take no active
Art. 2011. The contract of insurance is governed part in the game itself. (1799a)
by special laws. Matters not expressly provided
for in such special laws shall be regulated by Art. 2018. If a contract which purports to be for
this Code. (n) the delivery of goods, securities or shares of
stock is entered into with the intention that the
Art. 2012. Any person who is forbidden from difference between the price stipulated and the
receiving any donation under Article 739 cannot exchange or market price at the time of the
be named beneficiary of a life insurance policy pretended delivery shall be paid by the loser to
by the person who cannot make any donation to the winner, the transaction is null and void. The
him, according to said article. (n) loser may recover what he has paid. (n)

Art. 2019. Betting on the result of sports,

CHAPTER 2 athletic competitions, or games of skill may be
GAMBLING prohibited by local ordinances. (n)

Art. 2013. A game of chance is that which Art. 2020. The loser in any game which is not
depends more on chance or hazard than or skill one of chance, when there is no local ordinance
or ability. For the purposes of the following which prohibits betting therein, is under
articles, in case of doubt a game is deemed to obligation to pay his loss, unless the amount
be one of chance. (n) thereof is excessive under the circumstances. In
the latter case, the court shall reduce the loss to
Art. 2014. No action can be maintained by the the proper sum. (1801a)
winner for the collection of what he has won in a
game of chance. But any loser in a game of
chance may recover his loss from the winner, CHAPTER 3
with legal interest from the time he paid the LIFE ANNUITY
 on account of the obligations of the recipient of
Art. 2021. The aleatory contract of life annuity the annuity. If the annuity was constituted in
binds the debtor to pay an annual pension or fraud of creditors, the latter may ask for the
income during the life of one or more execution or attachment of the property. (1807a)
determinate persons in consideration of a
capital consisting of money or other property, Art. 2027. No annuity shall be claimed without
whose ownership is transferred to him at once first proving the existence of the person upon
with the burden of the income. (1802a) whose life the annuity is constituted. (1808)

Art. 2022. The annuity may be constituted upon

the life of the person who gives the capital, upon Title XIV. - COMPROMISES AND
that of a third person, or upon the lives of ARBITRATIONS
various persons, all of whom must be living at
the time the annuity is established. CHAPTER 1
COMPROMISES
It may also be constituted in favor of the person
or persons upon whose life or lives the contract Art. 2028. A compromise is a contract whereby
is entered into, or in favor of another or other the parties, by making reciprocal concessions,
persons. (1803) avoid a litigation or put an end to one already
commenced. (1809a)
Art. 2023. Life annuity shall be void if
constituted upon the life of a person who was Art. 2029. The court shall endeavor to persuade
already dead at the time the contract was the litigants in a civil case to agree upon some
entered into, or who was at that time suffering fair compromise. (n)
from an illness which caused his death within
twenty days following said date. (1804) Art. 2030. Every civil action or proceeding shall
be suspended:
Art. 2024. The lack of payment of the income
due does not authorize the recipient of the life (1) If willingness to discuss a possible
annuity to demand the reimbursement of the compromise is expressed by one or both
capital or to retake possession of the property parties; or
alienated, unless there is a stipulation to the
contrary; he shall have only a right judicially to (2) If it appears that one of the parties,
claim the payment of the income in arrears and before the commencement of the action
to require a security for the future income, or proceeding, offered to discuss a
unless there is a stipulation to the contrary. possible compromise but the other party
(1805a) refused the offer.

Art. 2025. The income corresponding to the year The duration and terms of the suspension of the
in which the person enjoying it dies shall be paid civil action or proceeding and similar matters
in proportion to the days during which he lived; shall be governed by such provisions of the
if the income should be paid by installments in rules of court as the Supreme Court shall
advance, the whole amount of the installment promulgate. Said rules of court shall likewise
which began to run during his life shall be paid. provide for the appointment and duties of
(1806) amicable compounders. (n)

Art. 2026. He who constitutes an annuity by Art. 2031. The courts may mitigate the damages
gratuitous title upon his property, may provide at to be paid by the losing party who has shown a
the time the annuity is established that the same sincere desire for a compromise. (n)
shall not be subject to execution or attachment
Art. 2032. The court's approval is necessary in Art. 2038. A compromise in which there is
compromises entered into by guardians, mistake, fraud, violence, intimidation, undue
parents, absentee's representatives, and influence, or falsity of documents, is subject to
administrators or executors of decedent's the provisions of Article 1330 of this Code.
estates. (1810a)
However, one of parties cannot set up a mistake
Art. 2033. Juridical persons may compromise of fact as against the other if the latter, by virtue
only in the form and with the requisites which of the compromise, has withdrawn from a
may be necessary to alienate their property. litigation already commenced. (1817a)
(1812a)
Art. 2039. When the parties compromise
Art. 2034. There may be a compromise upon the generally on all differences which they might
civil liability arising from an offense; but such have with each other, the discovery of
compromise shall not extinguish the public documents referring to one or more but not to all
action for the imposition of the legal penalty. of the questions settled shall not itself be a
(1813) cause for annulment or rescission of the
compromise, unless said documents have been
Art. 2035. No compromise upon the following concealed by one of the parties.
questions shall be valid:
But the compromise may be annulled or
(1) The civil status of persons; rescinded if it refers only to one thing to which
one of the parties has no right, as shown by the
(2) The validity of a marriage or a legal newly-discovered documents. (n)
separation;
Art. 2040. If after a litigation has been decided
(3) Any ground for legal separation; by a final judgment, a compromise should be
agreed upon, either or both parties being
(4) Future support; unaware of the existence of the final judgment,
the compromise may be rescinded.
(5) The jurisdiction of courts;
Ignorance of a judgment which may be revoked
(6) Future legitime. (1814a) or set aside is not a valid ground for attacking a
compromise. (1819a)
Art. 2036. A compromise comprises only those
objects which are definitely stated therein, or Art. 2041. If one of the parties fails or refuses to
which by necessary implication from its terms abide by the compromise, the other party may
should be deemed to have been included in the either enforce the compromise or regard it as
same. rescinded and insist upon his original demand.
(n)
A general renunciation of rights is understood to
refer only to those that are connected with the
dispute which was the subject of the CHAPTER 2
compromise. (1815) ARBITRATIONS

Art. 2042. The same persons who may enter into

Art. 2037. A compromise has upon the parties
a compromise may submit their controversies to
the effect and authority of res judicata; but there
one or more arbitrators for decision. (1820a)
shall be no execution except in compliance with
a judicial compromise. (1816)
Art. 2043. The provisions of the preceding It may also be constituted, not only in favor of
Chapter upon compromises shall also be the principal debtor, but also in favor of the
applicable to arbitrations. (1821a) other guarantor, with the latter's consent, or
without his knowledge, or even over his
Art. 2044. Any stipulation that the arbitrators' objection. (1823)
award or decision shall be final, is valid, without
prejudice to Articles 2038, 2039, and 2040. (n) Art. 2052. A guaranty cannot exist without a
valid obligation.
Art. 2045. Any clause giving one of the parties
power to choose more arbitrators than the other Nevertheless, a guaranty may be constituted to
is void and of no effect. (n) guarantee the performance of a voidable or an
unenforceable contract. It may also guarantee a
Art. 2046. The appointment of arbitrators and natural obligation. (1824a)
the procedure for arbitration shall be governed
by the provisions of such rules of court as the Art. 2053. A guaranty may also be given as
Supreme Court shall promulgate. (n) security for future debts, the amount of which is
not yet known; there can be no claim against the
guarantor until the debt is liquidated. A
Title XV. - GUARANTY conditional obligation may also be secured.
(1825a)
CHAPTER 1
NATURE AND EXTENT OF GUARANTY Art. 2054. A guarantor may bind himself for less,
but not for more than the principal debtor, both
Art. 2047. By guaranty a person, called the as regards the amount and the onerous nature
guarantor, binds himself to the creditor to fulfill of the conditions.
the obligation of the principal debtor in case the
latter should fail to do so. Should he have bound himself for more, his
obligations shall be reduced to the limits of that
If a person binds himself solidarily with the of the debtor. (1826)
principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be observed. Art. 2055. A guaranty is not presumed; it must
In such case the contract is called a suretyship. be express and cannot extend to more than
(1822a) what is stipulated therein.

Art. 2048. A guaranty is gratuitous, unless there If it be simple or indefinite, it shall compromise
is a stipulation to the contrary. (n) not only the principal obligation, but also all its
accessories, including the judicial costs,
Art. 2049. A married woman may guarantee an provided with respect to the latter, that the
obligation without the husband's consent, but guarantor shall only be liable for those costs
shall not thereby bind the conjugal partnership, incurred after he has been judicially required to
except in cases provided by law. (n) pay. (1827a)

Art. 2050. If a guaranty is entered into without Art. 2056. One who is obliged to furnish a
the knowledge or consent, or against the will of guarantor shall present a person who possesses
the principal debtor, the provisions of Articles integrity, capacity to bind himself, and sufficient
1236 and 1237 shall apply. (n) property to answer for the obligation which he
guarantees. The guarantor shall be subject to
Art. 2051. A guaranty may be conventional, legal the jurisdiction of the court of the place where
or judicial, gratuitous, or by onerous title. this obligation is to be complied with. (1828a)
Art. 2057. If the guarantor should be convicted Art. 2061. The guarantor having fulfilled all the
in first instance of a crime involving dishonesty conditions required in the preceding article, the
or should become insolvent, the creditor may creditor who is negligent in exhausting the
demand another who has all the qualifications property pointed out shall suffer the loss, to the
required in the preceding article. The case is extent of said property, for the insolvency of the
excepted where the creditor has required and debtor resulting from such negligence. (1833a)
stipulated that a specified person should be the
guarantor. (1829a) Art. 2062. In every action by the creditor, which
must be against the principal debtor alone,
except in the cases mentioned in Article 2059,
CHAPTER 2 the former shall ask the court to notify the
EFFECTS OF GUARANTY guarantor of the action. The guarantor may
appear so that he may, if he so desire, set up
SECTION 1. - Effects of Guaranty such defenses as are granted him by law. The
Between the Guarantor and the Creditor benefit of excussion mentioned in Article 2058
shall always be unimpaired, even if judgment
Art. 2058. The guarantor cannot be compelled to should be rendered against the principal debtor
pay the creditor unless the latter has exhausted and the guarantor in case of appearance by the
all the property of the debtor, and has resorted latter. (1834a)
to all the legal remedies against the debtor.
(1830a) Art. 2063. A compromise between the creditor
and the principal debtor benefits the guarantor
Art. 2059. The excussion shall not take place: but does not prejudice him. That which is
entered into between the guarantor and the
(1) If the guarantor has expressly creditor benefits but does not prejudice the
renounced it; principal debtor. (1835a)

(2) If he has bound himself solidarily Art. 2064. The guarantor of a guarantor shall
with the debtor; enjoy the benefit of excussion, both with respect
to the guarantor and to the principal debtor.
(3) In case of insolvency of the debtor; (1836)

(4) When he has absconded, or cannot Art. 2065. Should there be several guarantors of
be sued within the Philippines unless he only one debtor and for the same debt, the
has left a manager or representative; obligation to answer for the same is divided
among all. The creditor cannot claim from the
(5) If it may be presumed that an guarantors except the shares which they are
execution on the property of the respectively bound to pay, unless solidarity has
principal debtor would not result in the been expressly stipulated.
satisfaction of the obligation. (1831a)
The benefit of division against the co-guarantors
Art. 2060. In order that the guarantor may make ceases in the same cases and for the same
use of the benefit of exclusion, he must set it up reasons as the benefit of excussion against the
against the creditor upon the latter's demand for principal debtor. (1837)
payment from him, and point out to the creditor
available property of the debtor within Philippine
territory, sufficient to cover the amount of the SECTION 2. - Effects of Guaranty
debt. (1832) Between the Debtor and the Guarantor
 shall reimburse the guarantor for the amount
Art. 2066. The guarantor who pays for a debtor paid. (1842a)
must be indemnified by the latter.
Art. 2071. The guarantor, even before having
The indemnity comprises: paid, may proceed against the principal debtor:

(1) The total amount of the debt; (1) When he is sued for the payment;

(2) The legal interests thereon from the (2) In case of insolvency of the principal
time the payment was made known to debtor;
the debtor, even though it did not earn
interest for the creditor; (3) When the debtor has bound himself
to relieve him from the guaranty within a
(3) The expenses incurred by the specified period, and this period has
guarantor after having notified the expired;
debtor that payment had been
demanded of him; (4) When the debt has become
demandable, by reason of the expiration
(4) Damages, if they are due. (1838a) of the period for payment;

Art. 2067. The guarantor who pays is (5) After the lapse of ten years, when
subrogated by virtue thereof to all the rights the principal obligation has no fixed
which the creditor had against the debtor. period for its maturity, unless it be of
such nature that it cannot be
If the guarantor has compromised with the extinguished except within a period
creditor, he cannot demand of the debtor more longer than ten years;
than what he has really paid. (1839)
(6) If there are reasonable grounds to
Art. 2068. If the guarantor should pay without fear that the principal debtor intends to
notifying the debtor, the latter may enforce abscond;
against him all the defenses which he could
have set up against the creditor at the time the (7) If the principal debtor is in imminent
payment was made. (1840) danger of becoming insolvent.

Art. 2069. If the debt was for a period and the In all these cases, the action of the guarantor is
guarantor paid it before it became due, he to obtain release from the guaranty, or to
cannot demand reimbursement of the debtor demand a security that shall protect him from
until the expiration of the period unless the any proceedings by the creditor and from the
payment has been ratified by the debtor. danger of insolvency of the debtor. (1834a)
(1841a)
Art. 2072. If one, at the request of another,
Art. 2070. If the guarantor has paid without becomes a guarantor for the debt of a third
notifying the debtor, and the latter not being person who is not present, the guarantor who
aware of the payment, repeats the payment, the satisfies the debt may sue either the person so
former has no remedy whatever against the requesting or the debtor for reimbursement. (n)
debtor, but only against the creditor.
Nevertheless, in case of a gratuitous guaranty, if
the guarantor was prevented by a fortuitous SECTION 3. - Effects of Guaranty as Between
event from advising the debtor of the payment, Co-Guarantors
and the creditor becomes insolvent, the debtor
 Art. 2079. An extension granted to the debtor by
Art. 2073. When there are two or more the creditor without the consent of the guarantor
guarantors of the same debtor and for the same extinguishes the guaranty. The mere failure on
debt, the one among them who has paid may the part of the creditor to demand payment after
demand of each of the others the share which is the debt has become due does not of itself
proportionally owing from him. constitute any extention of time referred to
herein. (1851a)
If any of the guarantors should be insolvent, his
share shall be borne by the others, including the Art. 2080. The guarantors, even though they be
payer, in the same proportion. solidary, are released from their obligation
whenever by some act of the creditor they
The provisions of this article shall not be cannot be subrogated to the rights, mortgages,
applicable, unless the payment has been made and preference of the latter. (1852)
by virtue of a judicial demand or unless the
principal debtor is insolvent. (1844a) Art. 2081. The guarantor may set up against the
creditor all the defenses which pertain to the
Art. 2074. In the case of the preceding article, principal debtor and are inherent in the debt; but
the co-guarantors may set up against the one not those that are personal to the debtor.
who paid, the same defenses which would have (1853)
pertained to the principal debtor against the
creditor, and which are not purely personal to
the debtor. (1845) CHAPTER 4
LEGAL AND JUDICIAL BONDS
Art. 2075. A sub-guarantor, in case of the
insolvency of the guarantor for whom he bound Art. 2082. The bondsman who is to be offered in
himself, is responsible to the co-guarantors in virtue of a provision of law or of a judicial order
the same terms as the guarantor. (1846) shall have the qualifications prescribed in Article
2056 and in special laws. (1854a)

CHAPTER 3 Art. 2083. If the person bound to give a bond in

EXTINGUISHMENT OF GUARANTY the cases of the preceding article, should not be
able to do so, a pledge or mortgage considered
Art. 2076. The obligation of the guarantor is sufficient to cover his obligation shall be
extinguished at the same time as that of the admitted in lieu thereof. (1855)
debtor, and for the same causes as all other
obligations. (1847) Art. 2084. A judicial bondsman cannot demand
the exhaustion of the property of the principal
Art. 2077. If the creditor voluntarily accepts debtor.
immovable or other property in payment of the
debt, even if he should afterwards lose the A sub-surety in the same case, cannot demand
same through eviction, the guarantor is the exhaustion of the property of the debtor of
released. (1849) the surety.

Art. 2078. A release made by the creditor in

favor of one of the guarantors, without the Title XVI. - PLEDGE, MORTGAGE AND
consent of the others, benefits all to the extent ANTICHRESIS
of the share of the guarantor to whom it has
been granted. (1850) CHAPTER 1
PROVISIONS COMMON TO PLEDGE AND
MORTGAGE
 From these provisions is expected the case in
Art. 2085. The following requisites are essential which, there being several things given in
to the contracts of pledge and mortgage: mortgage or pledge, each one of them
(1) That they be constituted to secure guarantees only a determinate portion of the
the fulfillment of a principal obligation; credit.

(2) That the pledgor or mortgagor be the The debtor, in this case, shall have a right to the
absolute owner of the thing pledged or extinguishment of the pledge or mortgage as the
mortgaged; portion of the debt for which each thing is
specially answerable is satisfied. (1860)
(3) That the persons constituting the
pledge or mortgage have the free Art. 2090. The indivisibility of a pledge or
disposal of their property, and in the mortgage is not affected by the fact that the
absence thereof, that they be legally debtors are not solidarily liable. (n)
authorized for the purpose.
Art. 2091. The contract of pledge or mortgage
Third persons who are not parties to the may secure all kinds of obligations, be they pure
principal obligation may secure the latter by or subject to a suspensive or resolutory
pledging or mortgaging their own property. condition. (1861)
(1857)
Art. 2092. A promise to constitute a pledge or
Art. 2086. The provisions of Article 2052 are mortgage gives rise only to a personal action
applicable to a pledge or mortgage. (n) between the contracting parties, without
prejudice to the criminal responsibility incurred
Art. 2087. It is also of the essence of these by him who defrauds another, by offering in
contracts that when the principal obligation pledge or mortgage as unencumbered, things
becomes due, the things in which the pledge or which he knew were subject to some burden, or
mortgage consists may be alienated for the by misrepresenting himself to be the owner of
payment to the creditor. (1858) the same. (1862)

Art. 2088. The creditor cannot appropriate the

things given by way of pledge or mortgage, or CHAPTER 2
dispose of them. Any stipulation to the contrary PLEDGE
is null and void. (1859a)
Art. 2093. In addition to the requisites
Art. 2089. A pledge or mortgage is indivisible, prescribed in Article 2085, it is necessary, in
even though the debt may be divided among the order to constitute the contract of pledge, that
successors in interest of the debtor or of the the thing pledged be placed in the possession of
creditor. the creditor, or of a third person by common
agreement. (1863)
Therefore, the debtor's heir who has paid a part
of the debt cannot ask for the proportionate Art. 2094. All movables which are within
extinguishment of the pledge or mortgage as commerce may be pledged, provided they are
long as the debt is not completely satisfied. susceptible of possession. (1864)

Neither can the creditor's heir who received his Art. 2095. Incorporeal rights, evidenced by
share of the debt return the pledge or cancel the negotiable instruments, bills of lading, shares of
mortgage, to the prejudice of the other heirs stock, bonds, warehouse receipts and similar
who have not been paid. documents may also be pledged. The instrument
proving the right pledged shall be delivered to
the creditor, and if negotiable, must be indorsed. In case of a pledge of animals, their offspring
(n) shall pertain to the pledgor or owner of animals
pledged, but shall be subject to the pledge, if
Art. 2096. A pledge shall not take effect against there is no stipulation to the contrary. (1868a)
third persons if a description of the thing
pledged and the date of the pledge do not Art. 2103. Unless the thing pledged is
appear in a public instrument. (1865a) expropriated, the debtor continues to be the
owner thereof.
Art. 2097. With the consent of the pledgee, the
thing pledged may be alienated by the pledgor Nevertheless, the creditor may bring the actions
or owner, subject to the pledge. The ownership which pertain to the owner of the thing pledged
of the thing pledged is transmitted to the vendee in order to recover it from, or defend it against a
or transferee as soon as the pledgee consents third person. (1869)
to the alienation, but the latter shall continue in
possession. (n) Art. 2104. The creditor cannot use the thing
pledged, without the authority of the owner, and
Art. 2098. The contract of pledge gives a right to if he should do so, or should misuse the thing in
the creditor to retain the thing in his possession any other way, the owner may ask that it be
or in that of a third person to whom it has been judicially or extrajudicially deposited. When the
delivered, until the debt is paid. (1866a) preservation of the thing pledged requires its
use, it must be used by the creditor but only for
Art. 2099. The creditor shall take care of the that purpose. (1870a)
thing pledged with the diligence of a good father
of a family; he has a right to the reimbursement Art. 2105. The debtor cannot ask for the return
of the expenses made for its preservation, and of the thing pledged against the will of the
is liable for its loss or deterioration, in creditor, unless and until he has paid the debt
conformity with the provisions of this Code. and its interest, with expenses in a proper case.
(1867) (1871)

Art. 2100. The pledgee cannot deposit the thing Art. 2106. If through the negligence or wilful act
pledged with a third person, unless there is a of the pledgee, the thing pledged is in danger of
stipulation authorizing him to do so. being lost or impaired, the pledgor may require
that it be deposited with a third person. (n)
The pledgee is responsible for the acts of his
agents or employees with respect to the thing Art. 2107. If there are reasonable grounds to
pledged. (n) fear the destruction or impairment of the thing
pledged, without the fault of the pledgee, the
Art. 2101. The pledgor has the same pledgor may demand the return of the thing,
responsibility as a bailor in commodatum in the upon offering another thing in pledge, provided
case under Article 1951. (n) the latter is of the same kind as the former and
not of inferior quality, and without prejudice to
Art. 2102. If the pledge earns or produces fruits, the right of the pledgee under the provisions of
income, dividends, or interests, the creditor the following article.
shall compensate what he receives with those
which are owing him; but if none are owing him, The pledgee is bound to advise the pledgor,
or insofar as the amount may exceed that which without delay, of any danger to the thing
is due, he shall apply it to the principal. Unless pledged. (n)
there is a stipulation to the contrary, the pledge
shall extend to the interest and earnings of the Art. 2108. If, without the fault of the pledgee,
right pledged. there is danger of destruction, impairment, or
diminution in value of the thing pledged, he may Art. 2113. At the public auction, the pledgor or
cause the same to be sold at a public sale. The owner may bid. He shall, moreover, have a
proceeds of the auction shall be a security for better right if he should offer the same terms as
the principal obligation in the same manner as the highest bidder.
the thing originally pledged. (n)
The pledgee may also bid, but his offer shall not
Art. 2109. If the creditor is deceived on the be valid if he is the only bidder. (n)
substance or quality of the thing pledged, he
may either claim another thing in its stead, or Art. 2114. All bids at the public auction shall
demand immediate payment of the principal offer to pay the purchase price at once. If any
obligation. (n) other bid is accepted, the pledgee is deemed to
have been received the purchase price, as far
Art. 2110. If the thing pledged is returned by the as the pledgor or owner is concerned. (n)
pledgee to the pledgor or owner, the pledge is
extinguished. Any stipulation to the contrary Art. 2115. The sale of the thing pledged shall
shall be void. extinguish the principal obligation, whether or
not the proceeds of the sale are equal to the
If subsequent to the perfection of the pledge, amount of the principal obligation, interest and
the thing is in the possession of the pledgor or expenses in a proper case. If the price of the
owner, there is a prima facie presumption that sale is more than said amount, the debtor shall
the same has been returned by the pledgee. not be entitled to the excess, unless it is
This same presumption exists if the thing otherwise agreed. If the price of the sale is less,
pledged is in the possession of a third person neither shall the creditor be entitled to recover
who has received it from the pledgor or owner the deficiency, notwithstanding any stipulation to
after the constitution of the pledge. (n) the contrary. (n)

Art. 2111. A statement in writing by the pledgee Art. 2116. After the public auction, the pledgee
that he renounces or abandons the pledge is shall promptly advise the pledgor or owner of
sufficient to extinguish the pledge. For this the result thereof. (n)
purpose, neither the acceptance by the pledgor
or owner, nor the return of the thing pledged is Art. 2117. Any third person who has any right in
necessary, the pledgee becoming a depositary. or to the thing pledged may satisfy the principal
(n) obligation as soon as the latter becomes due
and demandable.(n)
Art. 2112. The creditor to whom the credit has
not been satisfied in due time, may proceed Art. 2118. If a credit which has been pledged
before a Notary Public to the sale of the thing becomes due before it is redeemed, the pledgee
pledged. This sale shall be made at a public may collect and receive the amount due. He
auction, and with notification to the debtor and shall apply the same to the payment of his
the owner of the thing pledged in a proper case, claim, and deliver the surplus, should there be
stating the amount for which the public sale is to any, to the pledgor. (n)
be held. If at the first auction the thing is not
sold, a second one with the same formalities Art. 2119. If two or more things are pledged, the
shall be held; and if at the second auction there pledgee may choose which he will cause to be
is no sale either, the creditor may appropriate sold, unless there is a stipulation to the
the thing pledged. In this case he shall be contrary. He may demand the sale of only as
obliged to give an acquittance for his entire many of the things as are necessary for the
claim. (1872a) payment of the debt. (n)
Art. 2120. If a third party secures an obligation mortgage may be validly constituted, that the
by pledging his own movable property under the document in which it appears be recorded in the
provisions of Article 2085 he shall have the Registry of Property. If the instrument is not
same rights as a guarantor under Articles 2066 recorded, the mortgage is nevertheless binding
to 2070, and Articles 2077 to 2081. He is not between the parties.
prejudiced by any waiver of defense by the
principal obligor. (n) The persons in whose favor the law establishes
a mortgage have no other right than to demand
Art. 2121. Pledges created by operation of law, the execution and the recording of the document
such as those referred to in Articles 546, 1731, in which the mortgage is formalized. (1875a)
and 1994, are governed by the foregoing
articles on the possession, care and sale of the Art. 2126. The mortgage directly and
thing as well as on the termination of the immediately subjects the property upon which it
pledge. However, after payment of the debt and is imposed, whoever the possessor may be, to
expenses, the remainder of the price of the sale the fulfillment of the obligation for whose
shall be delivered to the obligor. (n) security it was constituted. (1876)

Art. 2122. A thing under a pledge by operation Art. 2127. The mortgage extends to the natural
of law may be sold only after demand of the accessions, to the improvements, growing fruits,
amount for which the thing is retained. The and the rents or income not yet received when
public auction shall take place within one month the obligation becomes due, and to the amount
after such demand. If, without just grounds, the of the indemnity granted or owing to the
creditor does not cause the public sale to be proprietor from the insurers of the property
held within such period, the debtor may require mortgaged, or in virtue of expropriation for
the return of the thing. (n) public use, with the declarations, amplifications
and limitations established by law, whether the
Art. 2123. With regard to pawnshops and other estate remains in the possession of the
establishments, which are engaged in making mortgagor, or it passes into the hands of a third
loans secured by pledges, the special laws and person. (1877)
regulations concerning them shall be observed,
and subsidiarily, the provisions of this Title. Art. 2128. The mortgage credit may be alienated
(1873a) or assigned to a third person, in whole or in
part, with the formalities required by law. (1878)

CHAPTER 3 Art. 2129. The creditor may claim from a third

MORTGAGE person in possession of the mortgaged property,
the payment of the part of the credit secured by
Art. 2124. Only the following property may be the property which said third person possesses,
the object of a contract of mortgage: in the terms and with the formalities which the
(1) Immovables; law establishes. (1879)

(2) Alienable real rights in accordance Art. 2130. A stipulation forbidding the owner
with the laws, imposed upon from alienating the immovable mortgaged shall
immovables. be void. (n)

Nevertheless, movables may be the object of a Art. 2131. The form, extent and consequences
chattel mortgage. (1874a) of a mortgage, both as to its constitution,
modification and extinguishment, and as to
Art. 2125. In addition to the requisites stated in other matters not included in this Chapter, shall
Article 2085, it is indispensable, in order that a be governed by the provisions of the Mortgage
Law and of the Land Registration Law. (1880a) property. In this case, the Rules of Court on the
foreclosure of mortgages shall apply. (1884a)

CHAPTER 4 Art. 2138. The contracting parties may stipulate

ANTICHRESIS that the interest upon the debt be compensated
with the fruits of the property which is the object
Art. 2132. By the contract of antichresis the of the antichresis, provided that if the value of
creditor acquires the right to receive the fruits of the fruits should exceed the amount of interest
an immovable of his debtor, with the obligation allowed by the laws against usury, the excess
to apply them to the payment of the interest, if shall be applied to the principal. (1885a)
owing, and thereafter to the principal of his
credit. (1881) Art. 2139. The last paragraph of Article 2085,
and Articles 2089 to 2091 are applicable to this
Art. 2133. The actual market value of the fruits contract. (1886a)
at the time of the application thereof to the
interest and principal shall be the measure of
such application. (n) CHAPTER 5
CHATTEL MORTGAGE
Art. 2134. The amount of the principal and of the
interest shall be specified in writing; otherwise, Art. 2140. By a chattel mortgage, personal
the contract of antichresis shall be void. (n) property is recorded in the Chattel Mortgage
Register as a security for the performance of an
Art. 2135. The creditor, unless there is a obligation. If the movable, instead of being
stipulation to the contrary, is obliged to pay the recorded, is delivered to the creditor or a third
taxes and charges upon the estate. person, the contract is a pledge and not a
chattel mortgage. (n)
He is also bound to bear the expenses
necessary for its preservation and repair. Art. 2141. The provisions of this Code on
pledge, insofar as they are not in conflict with
The sums spent for the purposes stated in this the Chattel Mortgage Law shall be applicable to
article shall be deducted from the fruits. (1882) chattel mortgages. (n)

Art. 2136. The debtor cannot reacquire the

enjoyment of the immovable without first having Title XVII. - EXTRA-CONTRACTUAL
totally paid what he owes the creditor. OBLIGATIONS

But the latter, in order to exempt himself from CHAPTER 1

the obligations imposed upon him by the QUASI-CONTRACTS
preceding article, may always compel the debtor
to enter again upon the enjoyment of the Art. 2142. Certain lawful, voluntary and
property, except when there is a stipulation to unilateral acts give rise to the juridical relation
the contrary. (1883) of quasi-contract to the end that no one shall be
unjustly enriched or benefited at the expense of
Art. 2137. The creditor does not acquire the another. (n)
ownership of the real estate for non-payment of
the debt within the period agreed upon. Art. 2143. The provisions for quasi-contracts in
this Chapter do not exclude other quasi-
Every stipulation to the contrary shall be void. contracts which may come within the purview of
But the creditor may petition the court for the the preceding article. (n)
payment of the debt or the sale of the real
 SECTION 1. - Negotiorum Gestio (1) If he undertakes risky operations
which the owner was not accustomed to
Art. 2144. Whoever voluntarily takes charge of embark upon;
the agency or management of the business or
property of another, without any power from the (2) If he has preferred his own interest
latter, is obliged to continue the same until the to that of the owner;
termination of the affair and its incidents, or to
require the person concerned to substitute him, (3) If he fails to return the property or
if the owner is in a position to do so. This business after demand by the owner;
juridical relation does not arise in either of these
instances: (4) If he assumed the management in
(1) When the property or business is not bad faith. (1891a)
neglected or abandoned;
Art. 2148. Except when the management was
(2) If in fact the manager has been assumed to save property or business from
tacitly authorized by the owner. imminent danger, the officious manager shall be
liable for fortuitous events:
In the first case, the provisions of Articles 1317, (1) If he is manifestly unfit to carry on
1403, No. 1, and 1404 regarding unauthorized the management;
contracts shall govern.
(2) If by his intervention he prevented a
In the second case, the rules on agency in Title more competent person from taking up
X of this Book shall be applicable. (1888a) the management. (n)

Art. 2145. The officious manager shall perform Art. 2149. The ratification of the management by
his duties with all the diligence of a good father the owner of the business produces the effects
of a family, and pay the damages which through of an express agency, even if the business may
his fault or negligence may be suffered by the not have been successful. (1892a)
owner of the property or business under
management. Art. 2150. Although the officious management
may not have been expressly ratified, the owner
The courts may, however, increase or moderate of the property or business who enjoys the
the indemnity according to the circumstances of advantages of the same shall be liable for
each case. (1889a) obligations incurred in his interest, and shall
reimburse the officious manager for the
Art. 2146. If the officious manager delegates to necessary and useful expenses and for the
another person all or some of his duties, he damages which the latter may have suffered in
shall be liable for the acts of the delegate, the performance of his duties.
without prejudice to the direct obligation of the
latter toward the owner of the business. The same obligation shall be incumbent upon
him when the management had for its purpose
The responsibility of two or more officious the prevention of an imminent and manifest
managers shall be solidary, unless the loss, although no benefit may have been
management was assumed to save the thing or derived. (1893)
business from imminent danger. (1890a)
Art. 2151. Even though the owner did not derive
Art. 2147. The officious manager shall be liable any benefit and there has been no imminent and
for any fortuitous event: manifest danger to the property or business, the
owner is liable as under the first paragraph of
the preceding article, provided:
 (1) The officious manager has acted in Art. 2157. The responsibility of two or more
good faith, and payees, when there has been payment of what
is not due, is solidary. (n)
(2) The property or business is intact,
ready to be returned to the owner. (n) Art. 2158. When the property delivered or
money paid belongs to a third person, the payee
Art. 2152. The officious manager is personally shall comply with the provisions of article 1984.
liable for contracts which he has entered into (n)
with third persons, even though he acted in the
name of the owner, and there shall be no right Art. 2159. Whoever in bad faith accepts an
of action between the owner and third persons. undue payment, shall pay legal interest if a sum
These provisions shall not apply: of money is involved, or shall be liable for fruits
(1) If the owner has expressly or tacitly received or which should have been received if
ratified the management, or the thing produces fruits.

(2) When the contract refers to things He shall furthermore be answerable for any loss
pertaining to the owner of the business. or impairment of the thing from any cause, and
(n) for damages to the person who delivered the
thing, until it is recovered. (1896a)
Art. 2153. The management is extinguished:
(1) When the owner repudiates it or puts Art. 2160. He who in good faith accepts an
an end thereto; undue payment of a thing certain and
determinate shall only be responsible for the
(2) When the officious manager impairment or loss of the same or its
withdraws from the management, accessories and accessions insofar as he has
subject to the provisions of Article 2144; thereby been benefited. If he has alienated it,
he shall return the price or assign the action to
(3) By the death, civil interdiction, collect the sum. (1897)
insanity or insolvency of the owner or
the officious manager. (n) Art. 2161. As regards the reimbursement for
improvements and expenses incurred by him
who unduly received the thing, the provisions of
SECTION 2. - Solutio Indebiti Title V of Book II shall govern. (1898)

Art. 2154. If something is received when there is Art. 2162. He shall be exempt from the
no right to demand it, and it was unduly obligation to restore who, believing in good faith
delivered through mistake, the obligation to that the payment was being made of a legitimate
return it arises. (1895) and subsisting claim, destroyed the document,
or allowed the action to prescribe, or gave up
Art. 2155. Payment by reason of a mistake in the pledges, or cancelled the guaranties for his
the construction or application of a doubtful or right. He who paid unduly may proceed only
difficult question of law may come within the against the true debtor or the guarantors with
scope of the preceding article. (n) regard to whom the action is still effective.
(1899)
Art. 2156. If the payer was in doubt whether the
debt was due, he may recover if he proves that Art. 2163. It is presumed that there was a
it was not due. (n) mistake in the payment if something which had
never been due or had already been paid was
delivered; but he from whom the return is
claimed may prove that the delivery was made
out of liberality or for any other just cause. his objection, he shall be liable to pay the
(1901) expenses.

Art. 2170. When by accident or other fortuitous

SECTION 3. - Other Quasi-Contracts event, movables separately pertaining to two or
more persons are commingled or confused, the
Art. 2164. When, without the knowledge of the rules on co-ownership shall be applicable.
person obliged to give support, it is given by a
stranger, the latter shall have a right to claim the Art. 2171. The rights and obligations of the
same from the former, unless it appears that he finder of lost personal property shall be
gave it out of piety and without intention of governed by Articles 719 and 720.
being repaid. (1894a)
Art. 2172. The right of every possessor in good
Art. 2165. When funeral expenses are borne by faith to reimbursement for necessary and useful
a third person, without the knowledge of those expenses is governed by Article 546.
relatives who were obliged to give support to the
deceased, said relatives shall reimburse the Art. 2173. When a third person, without the
third person, should the latter claim knowledge of the debtor, pays the debt, the
reimbursement. (1894a) rights of the former are governed by Articles
1236 and 1237.
Art. 2166. When the person obliged to support
an orphan, or an insane or other indigent person Art. 2174. When in a small community a
unjustly refuses to give support to the latter, any nationality of the inhabitants of age decide upon
third person may furnish support to the needy a measure for protection against lawlessness,
individual, with right of reimbursement from the fire, flood, storm or other calamity, any one who
person obliged to give support. The provisions objects to the plan and refuses to contribute to
of this article apply when the father or mother of the expenses but is benefited by the project as
a child under eighteen years of age unjustly executed shall be liable to pay his share of said
refuses to support him. expenses.

Art. 2167. When through an accident or other Art. 2175. Any person who is constrained to pay
cause a person is injured or becomes seriously the taxes of another shall be entitled to
ill, and he is treated or helped while he is not in reimbursement from the latter.
a condition to give consent to a contract, he
shall be liable to pay for the services of the
physician or other person aiding him, unless the CHAPTER 2
service has been rendered out of pure QUASI-DELICTS
generosity.
Art. 2176. Whoever by act or omission causes
Art. 2168. When during a fire, flood, storm, or damage to another, there being fault or
other calamity, property is saved from negligence, is obliged to pay for the damage
destruction by another person without the done. Such fault or negligence, if there is no
knowledge of the owner, the latter is bound to pre-existing contractual relation between the
pay the former just compensation. parties, is called a quasi-delict and is governed
by the provisions of this Chapter. (1902a)
Art. 2169. When the government, upon the
failure of any person to comply with health or Art. 2177. Responsibility for fault or negligence
safety regulations concerning property, under the preceding article is entirely separate
undertakes to do the necessary work, even over and distinct from the civil liability arising from
negligence under the Penal Code. But the
plaintiff cannot recover damages twice for the caused by their pupils and students or
same act or omission of the defendant. (n) apprentices, so long as they remain in their
custody.
Art. 2178. The provisions of Articles 1172 to
1174 are also applicable to a quasi-delict. (n) The responsibility treated of in this article shall
cease when the persons herein mentioned prove
Art. 2179. When the plaintiff's own negligence that they observed all the diligence of a good
was the immediate and proximate cause of his father of a family to prevent damage. (1903a)
injury, he cannot recover damages. But if his
negligence was only contributory, the immediate Art. 2181. Whoever pays for the damage caused
and proximate cause of the injury being the by his dependents or employees may recover
defendant's lack of due care, the plaintiff may from the latter what he has paid or delivered in
recover damages, but the courts shall mitigate satisfaction of the claim. (1904)
the damages to be awarded. (n)
Art. 2182. If the minor or insane person causing
Art. 2180. The obligation imposed by Article damage has no parents or guardian, the minor
2176 is demandable not only for one's own acts or insane person shall be answerable with his
or omissions, but also for those of persons for own property in an action against him where a
whom one is responsible. guardian ad litem shall be appointed. (n)

The father and, in case of his death or Art. 2183. The possessor of an animal or
incapacity, the mother, are responsible for the whoever may make use of the same is
damages caused by the minor children who live responsible for the damage which it may cause,
in their company. although it may escape or be lost. This
responsibility shall cease only in case the
Guardians are liable for damages caused by the damage should come from force majeure or
minors or incapacitated persons who are under from the fault of the person who has suffered
their authority and live in their company. damage. (1905)

The owners and managers of an establishment Art. 2184. In motor vehicle mishaps, the owner
or enterprise are likewise responsible for is solidarily liable with his driver, if the former,
damages caused by their employees in the who was in the vehicle, could have, by the use
service of the branches in which the latter are of the due diligence, prevented the misfortune. It
employed or on the occasion of their functions. is disputably presumed that a driver was
negligent, if he had been found guilty or
Employers shall be liable for the damages reckless driving or violating traffic regulations at
caused by their employees and household least twice within the next preceding two
helpers acting within the scope of their assigned months.
tasks, even though the former are not engaged
in any business or industry. If the owner was not in the motor vehicle, the
provisions of Article 2180 are applicable. (n)
The State is responsible in like manner when it
acts through a special agent; but not when the Art. 2185. Unless there is proof to the contrary,
damage has been caused by the official to it is presumed that a person driving a motor
whom the task done properly pertains, in which vehicle has been negligent if at the time of the
case what is provided in Article 2176 shall be mishap, he was violating any traffic regulation.
applicable. (n)

Lastly, teachers or heads of establishments of Art. 2186. Every owner of a motor vehicle shall
arts and trades shall be liable for damages file with the proper government office a bond
executed by a government-controlled (4) By emanations from tubes, canals,
corporation or office, to answer for damages to sewers or deposits of infectious matter,
third persons. The amount of the bond and other constructed without precautions suitable
terms shall be fixed by the competent public to the place. (1908)
official. (n)
Art. 2192. If damage referred to in the two
Art. 2187. Manufacturers and processors of preceding articles should be the result of any
foodstuffs, drinks, toilet articles and similar defect in the construction mentioned in Article
goods shall be liable for death or injuries caused 1723, the third person suffering damages may
by any noxious or harmful substances used, proceed only against the engineer or architect or
although no contractual relation exists between contractor in accordance with said article, within
them and the consumers. (n) the period therein fixed. (1909)

Art. 2188. There is prima facie presumption of Art. 2193. The head of a family that lives in a
negligence on the part of the defendant if the building or a part thereof, is responsible for
death or injury results from his possession of damages caused by things thrown or falling from
dangerous weapons or substances, such as the same. (1910)
firearms and poison, except when the
possession or use thereof is indispensable in his Art. 2194. The responsibility of two or more
occupation or business. (n) persons who are liable for quasi-delict is
solidary. (n)
Art. 2189. Provinces, cities and municipalities
shall be liable for damages for the death of, or
injuries suffered by, any person by reason of the Title XVIII. - DAMAGES
defective condition of roads, streets, bridges,
public buildings, and other public works under CHAPTER 1
their control or supervision. (n) GENERAL PROVISIONS

Art. 2190. The proprietor of a building or Art. 2195. The provisions of this Title shall be
structure is responsible for the damages respectively applicable to all obligations
resulting from its total or partial collapse, if it mentioned in Article 1157.
should be due to the lack of necessary repairs.
(1907) Art. 2196. The rules under this Title are without
prejudice to special provisions on damages
Art. 2191. Proprietors shall also be responsible formulated elsewhere in this Code.
for damages caused: Compensation for workmen and other
employees in case of death, injury or illness is
(1) By the explosion of machinery which regulated by special laws. Rules governing
has not been taken care of with due damages laid down in other laws shall be
diligence, and the inflammation of observed insofar as they are not in conflict with
explosive substances which have not this Code.
been kept in a safe and adequate place;
Art. 2197. Damages may be:
(2) By excessive smoke, which may be
harmful to persons or property; (1) Actual or compensatory;

(3) By the falling of trees situated at or (2) Moral;

near highways or lanes, if not caused by
force majeure; (3) Nominal;
 (4) Temperate or moderate; family to minimize the damages resulting from
the act or omission in question.
(5) Liquidated; or
Art. 2204. In crimes, the damages to be
(6) Exemplary or corrective. adjudicated may be respectively increased or
lessened according to the aggravating or
Art. 2198. The principles of the general law on mitigating circumstances.
damages are hereby adopted insofar as they are
not inconsistent with this Code. Art. 2205. Damages may be recovered:

CHAPTER 2 (1) For loss or impairment of earning

ACTUAL OR COMPENSATORY DAMAGES capacity in cases of temporary or
permanent personal injury;
Art. 2199. Except as provided by law or by
stipulation, one is entitled to an adequate (2) For injury to the plaintiff's business
compensation only for such pecuniary loss standing or commercial credit.
suffered by him as he has duly proved. Such
compensation is referred to as actual or Art. 2206. The amount of damages for death
compensatory damages. caused by a crime or quasi-delict shall be at
least three thousand pesos, even though there
Art. 2200. Indemnification for damages shall may have been mitigating circumstances. In
comprehend not only the value of the loss addition:
suffered, but also that of the profits which the (1) The defendant shall be liable for the
obligee failed to obtain. (1106) loss of the earning capacity of the
deceased, and the indemnity shall be
Art. 2201. In contracts and quasi-contracts, the paid to the heirs of the latter; such
damages for which the obligor who acted in indemnity shall in every case be
good faith is liable shall be those that are the assessed and awarded by the court,
natural and probable consequences of the unless the deceased on account of
breach of the obligation, and which the parties permanent physical disability not
have foreseen or could have reasonably caused by the defendant, had no
foreseen at the time the obligation was earning capacity at the time of his
constituted. death;

In case of fraud, bad faith, malice or wanton (2) If the deceased was obliged to give
attitude, the obligor shall be responsible for all support according to the provisions of
damages which may be reasonably attributed to Article 291, the recipient who is not an
the non-performance of the obligation. (1107a) heir called to the decedent's inheritance
by the law of testate or intestate
Art. 2202. In crimes and quasi-delicts, the succession, may demand support from
defendant shall be liable for all damages which the person causing the death, for a
are the natural and probable consequences of period not exceeding five years, the
the act or omission complained of. It is not exact duration to be fixed by the court;
necessary that such damages have been
foreseen or could have reasonably been (3) The spouse, legitimate and
foreseen by the defendant. illegitimate descendants and
ascendants of the deceased may
Art. 2203. The party suffering loss or injury must demand moral damages for mental
exercise the diligence of a good father of a anguish by reason of the death of the
deceased.
Art. 2207. If the plaintiff's property has been (10) When at least double judicial costs
insured, and he has received indemnity from the are awarded;
insurance company for the injury or loss arising
out of the wrong or breach of contract (11) In any other case where the court
complained of, the insurance company shall be deems it just and equitable that
subrogated to the rights of the insured against attorney's fees and expenses of
the wrongdoer or the person who has violated litigation should be recovered.
the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, In all cases, the attorney's fees and expenses of
the aggrieved party shall be entitled to recover litigation must be reasonable.
the deficiency from the person causing the loss
or injury. Art. 2209. If the obligation consists in the
payment of a sum of money, and the debtor
Art. 2208. In the absence of stipulation, incurs in delay, the indemnity for damages,
attorney's fees and expenses of litigation, other there being no stipulation to the contrary, shall
than judicial costs, cannot be recovered, except: be the payment of the interest agreed upon, and
in the absence of stipulation, the legal interest,
(1) When exemplary damages are which is six per cent per annum. (1108)
awarded;
Art. 2210. Interest may, in the discretion of the
(2) When the defendant's act or court, be allowed upon damages awarded for
omission has compelled the plaintiff to breach of contract.
litigate with third persons or to incur
expenses to protect his interest; Art. 2211. In crimes and quasi-delicts, interest
as a part of the damages may, in a proper case,
(3) In criminal cases of malicious be adjudicated in the discretion of the court.
prosecution against the plaintiff;
Art. 2212. Interest due shall earn legal interest
(4) In case of a clearly unfounded civil from the time it is judicially demanded, although
action or proceeding against the the obligation may be silent upon this point.
plaintiff; (1109a)

(5) Where the defendant acted in gross Art. 2213. Interest cannot be recovered upon
and evident bad faith in refusing to unliquidated claims or damages, except when
satisfy the plaintiff's plainly valid, just the demand can be established with reasonably
and demandable claim; certainty.

(6) In actions for legal support; Art. 2214. In quasi-delicts, the contributory
negligence of the plaintiff shall reduce the
(7) In actions for the recovery of wages damages that he may recover.
of household helpers, laborers and
skilled workers; Art. 2215. In contracts, quasi-contracts, and
quasi-delicts, the court may equitably mitigate
(8) In actions for indemnity under the damages under circumstances other than
workmen's compensation and the case referred to in the preceding article, as
employer's liability laws; in the following instances:

(9) In a separate civil action to recover (1) That the plaintiff himself has
civil liability arising from a crime; contravened the terms of the contract;
 (2) That the plaintiff has derived some (3) Seduction, abduction, rape, or other
benefit as a result of the contract; lascivious acts;

(3) In cases where exemplary damages (4) Adultery or concubinage;

are to be awarded, that the defendant
acted upon the advice of counsel; (5) Illegal or arbitrary detention or
arrest;
(4) That the loss would have resulted in
any event; (6) Illegal search;

(5) That since the filing of the action, (7) Libel, slander or any other form of
the defendant has done his best to defamation;
lessen the plaintiff's loss or injury.
(8) Malicious prosecution;

CHAPTER 3 (9) Acts mentioned in Article 309;

OTHER KINDS OF DAMAGES
(10) Acts and actions referred to in
Art. 2216. No proof of pecuniary loss is Articles 21, 26, 27, 28, 29, 30, 32, 34,
necessary in order that moral, nominal, and 35.
temperate, liquidated or exemplary damages,
may be adjudicated. The assessment of such The parents of the female seduced, abducted,
damages, except liquidated ones, is left to the raped, or abused, referred to in No. 3 of this
discretion of the court, according to the article, may also recover moral damages.
circumstances of each case.
The spouse, descendants, ascendants, and
SECTION 1. - Moral Damages
brothers and sisters may bring the action
mentioned in No. 9 of this article, in the order
Art. 2217. Moral damages include physical
named.
suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and Art. 2220. Willful injury to property may be a
similar injury. Though incapable of pecuniary legal ground for awarding moral damages if the
computation, moral damages may be recovered court should find that, under the circumstances,
if they are the proximate result of the such damages are justly due. The same rule
defendant's wrongful act for omission. applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
Art. 2218. In the adjudication of moral damages,
the sentimental value of property, real or
personal, may be considered. SECTION 2. - Nominal Damages

Art. 2221. Nominal damages are adjudicated in

Art. 2219. Moral damages may be recovered in
order that a right of the plaintiff, which has been
the following and analogous cases:
violated or invaded by the defendant, may be
vindicated or recognized, and not for the
(1) A criminal offense resulting in purpose of indemnifying the plaintiff for any loss
physical injuries; suffered by him.
(2) Quasi-delicts causing physical Art. 2222. The court may award nominal
injuries; damages in every obligation arising from any
source enumerated in Article 1157, or in every temperate, liquidated or compensatory
case where any property right has been damages.
invaded.
Art. 2230. In criminal offenses, exemplary
Art. 2223. The adjudication of nominal damages damages as a part of the civil liability may be
shall preclude further contest upon the right imposed when the crime was committed with
involved and all accessory questions, as one or more aggravating circumstances. Such
between the parties to the suit, or their damages are separate and distinct from fines
respective heirs and assigns. and shall be paid to the offended party.

Art. 2231. In quasi-delicts, exemplary damages

SECTION 3. - Temperate or Moderate Damages may be granted if the defendant acted with
gross negligence.
Art. 2224. Temperate or moderate damages,
which are more than nominal but less than Art. 2232. In contracts and quasi-contracts, the
compensatory damages, may be recovered court may award exemplary damages if the
when the court finds that some pecuniary loss defendant acted in a wanton, fraudulent,
has been suffered but its amount can not, from reckless, oppressive, or malevolent manner.
the nature of the case, be provided with
certainty. Art. 2233. Exemplary damages cannot be
recovered as a matter of right; the court will
Art. 2225. Temperate damages must be decide whether or not they should be
reasonable under the circumstances. adjudicated.

Art. 2234. While the amount of the exemplary

SECTION 4. - Liquidated Damages damages need not be proved, the plaintiff must
show that he is entitled to moral, temperate or
Art. 2226. Liquidated damages are those agreed compensatory damages before the court may
upon by the parties to a contract, to be paid in consider the question of whether or not
case of breach thereof. exemplary damages should be awarded. In case
liquidated damages have been agreed upon,
Art. 2227. Liquidated damages, whether although no proof of loss is necessary in order
intended as an indemnity or a penalty, shall be that such liquidated damages may be recovered,
equitably reduced if they are iniquitous or nevertheless, before the court may consider the
unconscionable. question of granting exemplary in addition to the
liquidated damages, the plaintiff must show that
Art. 2228. When the breach of the contract he would be entitled to moral, temperate or
committed by the defendant is not the one compensatory damages were it not for the
contemplated by the parties in agreeing upon stipulation for liquidated damages.
the liquidated damages, the law shall determine
the measure of damages, and not the Art. 2235. A stipulation whereby exemplary
stipulation. damages are renounced in advance shall be null
and void.

SECTION 5. - Exemplary or Corrective

Damages Title XIX. - CONCURRENCE AND
PREFERENCE
Art. 2229. Exemplary or corrective damages are OF CREDITS
imposed, by way of example or correction for
the public good, in addition to the moral, CHAPTER 1
 GENERAL PROVISIONS duties, on the movables, money or
securities obtained by them;
Art. 2236. The debtor is liable with all his
property, present and future, for the fulfillment of (3) Claims for the unpaid price of
his obligations, subject to the exemptions movables sold, on said movables, so
provided by law. (1911a) long as they are in the possession of
the debtor, up to the value of the same;
Art. 2237. Insolvency shall be governed by and if the movable has been resold by
special laws insofar as they are not inconsistent the debtor and the price is still unpaid,
with this Code. (n) the lien may be enforced on the price;
this right is not lost by the
Art. 2238. So long as the conjugal partnership immobilization of the thing by
or absolute community subsists, its property destination, provided it has not lost its
shall not be among the assets to be taken form, substance and identity; neither is
possession of by the assignee for the payment the right lost by the sale of the thing
of the insolvent debtor's obligations, except together with other property for a lump
insofar as the latter have redounded to the sum, when the price thereof can be
benefit of the family. If it is the husband who is determined proportionally;
insolvent, the administration of the conjugal
partnership of absolute community may, by (4) Credits guaranteed with a pledge so
order of the court, be transferred to the wife or long as the things pledged are in the
to a third person other than the assignee. (n) hands of the creditor, or those
guaranteed by a chattel mortgage, upon
Art. 2239. If there is property, other than that the things pledged or mortgaged, up to
mentioned in the preceding article, owned by the value thereof;
two or more persons, one of whom is the
insolvent debtor, his undivided share or interest (5) Credits for the making, repair,
therein shall be among the assets to be taken safekeeping or preservation of personal
possession of by the assignee for the payment property, on the movable thus made,
of the insolvent debtor's obligations. (n) repaired, kept or possessed;

Art. 2240. Property held by the insolvent debtor (6) Claims for laborers' wages, on the
as a trustee of an express or implied trust, shall goods manufactured or the work done;
be excluded from the insolvency proceedings.
(n) (7) For expenses of salvage, upon the
goods salvaged;

CHAPTER 2 (8) Credits between the landlord and the

CLASSIFICATION OF CREDITS tenant, arising from the contract of
tenancy on shares, on the share of each
Art. 2241. With reference to specific movable in the fruits or harvest;
property of the debtor, the following claims or
liens shall be preferred: (9) Credits for transportation, upon the
(1) Duties, taxes and fees due thereon goods carried, for the price of the
to the State or any subdivision thereof; contract and incidental expenses, until
their delivery and for thirty days
(2) Claims arising from thereafter;
misappropriation, breach of trust, or
malfeasance by public officials (10) Credits for lodging and supplies
committed in the performance of their usually furnished to travellers by hotel
 keepers, on the movables belonging to (5) Mortgage credits recorded in the
the guest as long as such movables are Registry of Property, upon the real
in the hotel, but not for money loaned to estate mortgaged;
the guests;
(6) Expenses for the preservation or
(11) Credits for seeds and expenses for improvement of real property when the
cultivation and harvest advanced to the law authorizes reimbursement, upon the
debtor, upon the fruits harvested; immovable preserved or improved;

(12) Credits for rent for one year, upon (7) Credits annotated in the Registry of
the personal property of the lessee Property, in virtue of a judicial order, by
existing on the immovable leased and attachments or executions, upon the
on the fruits of the same, but not on property affected, and only as to later
money or instruments of credit; credits;

(13) Claims in favor of the depositor if (8) Claims of co-heirs for warranty in the
the depositary has wrongfully sold the partition of an immovable among them,
thing deposited, upon the price of the upon the real property thus divided;
sale.
(9) Claims of donors or real property for
In the foregoing cases, if the movables pecuniary charges or other conditions
to which the lien or preference attaches imposed upon the donee, upon the
have been wrongfully taken, the creditor immovable donated;
may demand them from any possessor,
within thirty days from the unlawful (10) Credits of insurers, upon the
seizure. (1922a) property insured, for the insurance
premium for two years. (1923a)
Art. 2242. With reference to specific immovable
property and real rights of the debtor, the Art. 2243. The claims or credits enumerated in
following claims, mortgages and liens shall be the two preceding articles shall be considered
preferred, and shall constitute an encumbrance as mortgages or pledges of real or personal
on the immovable or real right: property, or liens within the purview of legal
(1) Taxes due upon the land or building; provisions governing insolvency. Taxes
mentioned in No. 1, Article 2241, and No. 1,
(2) For the unpaid price of real property Article 2242, shall first be satisfied. (n)
sold, upon the immovable sold;
Art. 2244. With reference to other property, real
(3) Claims of laborers, masons, and personal, of the debtor, the following claims
mechanics and other workmen, as well or credits shall be preferred in the order named:
as of architects, engineers and
contractors, engaged in the (1) Proper funeral expenses for the
construction, reconstruction or repair of debtor, or children under his or her
buildings, canals or other works, upon parental authority who have no property
said buildings, canals or other works; of their own, when approved by the
court;
(4) Claims of furnishers of materials
used in the construction, reconstruction, (2) Credits for services rendered the
or repair of buildings, canals or other insolvent by employees, laborers, or
works, upon said buildings, canals or household helpers for one year
other works;
preceding the commencement of the (13) Gifts due to public and private
proceedings in insolvency; institutions of charity or beneficence;

(3) Expenses during the last illness of (14) Credits which, without special
the debtor or of his or her spouse and privilege, appear in (a) a public
children under his or her parental instrument; or (b) in a final judgment, if
authority, if they have no property of they have been the subject of litigation.
their own; These credits shall have preference
among themselves in the order of
(4) Compensation due the laborers or priority of the dates of the instruments
their dependents under laws providing and of the judgments, respectively.
for indemnity for damages in cases of (1924a)
labor accident, or illness resulting from
the nature of the employment; Art. 2245. Credits of any other kind or class, or
by any other right or title not comprised in the
(5) Credits and advancements made to four preceding articles, shall enjoy no
the debtor for support of himself or preference. (1925)
herself, and family, during the last year
preceding the insolvency; CHAPTER 3
ORDER OF PREFERENCE OF CREDITS
(6) Support during the insolvency
proceedings, and for three months Art. 2246. Those credits which enjoy preference
thereafter; with respect to specific movables, exclude all
others to the extent of the value of the personal
(7) Fines and civil indemnification property to which the preference refers.
arising from a criminal offense;
Art. 2247. If there are two or more credits with
(8) Legal expenses, and expenses respect to the same specific movable property,
incurred in the administration of the they shall be satisfied pro rata, after the
insolvent's estate for the common payment of duties, taxes and fees due the State
interest of the creditors, when properly or any subdivision thereof. (1926a)
authorized and approved by the court;
Art. 2248. Those credits which enjoy preference
(9) Taxes and assessments due the in relation to specific real property or real rights,
national government, other than those exclude all others to the extent of the value of
mentioned in Articles 2241, No. 1, and the immovable or real right to which the
2242, No. 1; preference refers.

(10) Taxes and assessments due any Art. 2249. If there are two or more credits with
province, other than those referred to in respect to the same specific real property or real
Articles 2241, No. 1, and 2242, No. 1; rights, they shall be satisfied pro rata, after the
payment of the taxes and assessments upon the
(11) Taxes and assessments due any immovable property or real right. (1927a)
city or municipality, other than those
indicated in Articles 2241, No. 1, and Art. 2250. The excess, if any, after the payment
2242, No. 1; of the credits which enjoy preference with
respect to specific property, real or personal,
(12) Damages for death or personal shall be added to the free property which the
injuries caused by a quasi-delict; debtor may have, for the payment of the other
credits. (1928a)
Art. 2251. Those credits which do not enjoy any Art. 2256. Acts and contracts under the regime
preference with respect to specific property, and of the old laws, if they are valid in accordance
those which enjoy preference, as to the amount therewith, shall continue to be fully operative as
not paid, shall be satisfied according to the provided in the same, with the limitations
following rules: established in these rules. But the revocation or
modification of these acts and contracts after
(1) In the order established in Article 2244; the beginning of the effectivity of this Code,
shall be subject to the provisions of this new
(2) Common credits referred to in Article 2245 body of laws. (Rule 2a)
shall be paid pro rata regardless of dates.
(1929a) Art. 2257. Provisions of this Code which attach
a civil sanction or penalty or a deprivation of
rights to acts or omissions which were not
TRANSITIONAL PROVISIONS penalized by the former laws, are not applicable
to those who, when said laws were in force, may
Art. 2252. Changes made and new provisions have executed the act or incurred in the
and rules laid down by this Code which may omission forbidden or condemned by this Code.
prejudice or impair vested or acquired rights in
accordance with the old legislation shall have no If the fault is also punished by the previous
retroactive effect. legislation, the less severe sanction shall be
applied.
For the determination of the applicable law in
cases which are not specified elsewhere in this If a continuous or repeated act or omission was
Code, the following articles shall be observed: commenced before the beginning of the
(Pars. 1 and 2, Transitional Provisions). effectivity of this Code, and the same subsists
or is maintained or repeated after this body of
Art. 2253. The Civil Code of 1889 and other laws has become operative, the sanction or
previous laws shall govern rights originating, penalty prescribed in this Code shall be applied,
under said laws, from acts done or events which even though the previous laws may not have
took place under their regime, even though this provided any sanction or penalty therefor. (Rule
Code may regulate them in a different manner, 3a)
or may not recognize them. But if a right should
be declared for the first time in this Code, it Art. 2258. Actions and rights which came into
shall be effective at once, even though the act being but were not exercised before the
or event which gives rise thereto may have been effectivity of this Code, shall remain in full force
done or may have occurred under prior in conformity with the old legislation; but their
legislation, provided said new right does not exercise, duration and the procedure to enforce
prejudice or impair any vested or acquired right, them shall be regulated by this Code and by the
of the same origin. (Rule 1) Rules of Court. If the exercise of the right or of
the action was commenced under the old laws,
Art. 2254. No vested or acquired right can arise but is pending on the date this Code takes
from acts or omissions which are against the law effect, and the procedure was different from that
or which infringe upon the rights of others. (n) established in this new body of laws, the parties
concerned may choose which method or course
Art. 2255. The former laws shall regulate acts to pursue. (Rule 4)
and contracts with a condition or period, which
were executed or entered into before the Art. 2259. The capacity of a married woman to
effectivity of this Code, even though the execute acts and contracts is governed by this
condition or period may still be pending at the Code, even if her marriage was celebrated
time this body of laws goes into effect. (n) under the former laws. (n)
Art. 2260. The voluntary recognition of a natural to testify against his parents and
child shall take place according to this Code, ascendants;
even if the child was born before the effectivity
of this body of laws. (n) (2) Articles 101 and 88, providing
against collusion in cases of legal
Art. 2261. The exemption prescribed in Article separation and annulment of marriage;
302 shall also be applicable to any support,
pension or gratuity already existing or granted (3) Articles 283, 284, and 289,
before this Code becomes effective. (n) concerning the proof of illegitimate
filiation;
Art. 2262. Guardians of the property of minors,
appointed by the courts before this Code goes (4) Article 838, authorizing the probate
into effect, shall continue to act as such, of a will on petition of the testator
notwithstanding the provisions of Article 320. (n) himself;

Art. 2263. Rights to the inheritance of a person (5) Articles 1359 to 1369, relative to the
who died, with or without a will, before the reformation of instruments;
effectivity of this Code, shall be governed by the
Civil Code of 1889, by other previous laws, and (6) Articles 476 to 481, regulating
by the Rules of Court. The inheritance of those actions to quiet title;
who, with or without a will, die after the
beginning of the effectivity of this Code, shall be (7) Articles 2029 to 2031, which are
adjudicated and distributed in accordance with designed to promote compromise. (n)
this new body of laws and by the Rules of Court;
but the testamentary provisions shall be carried Art. 2267. The following provisions shall apply
out insofar as they may be permitted by this not only to future cases but also to those
Code. Therefore, legitimes, betterments, pending on the date this Code becomes
legacies and bequests shall be respected; effective:
however, their amount shall be reduced if in no (1) Article 29, Relative to criminal
other manner can every compulsory heir be prosecutions wherein the accused is
given his full share according to this Code. acquitted on the ground that his guilt
(Rule 12a) has not been proved beyond reasonable
doubt;
Art. 2264. The status and rights of natural
children by legal fiction referred to in article 89 (2) Article 33, concerning cases of
and illegitimate children mentioned in Article defamation, fraud, and physical injuries.
287, shall also be acquired by children born (n)
before the effectivity of this Code. (n)
Art. 2268. Suits between members of the same
Art. 2265. The right of retention of real or family which are pending at the time this Code
personal property arising after this Code goes into effect shall be suspended, under such
becomes effective, includes those things which terms as the court may determine, in order that
came into the creditor's possession before said compromise may be earnestly sought, or, in
date. (n) case of legal separation proceedings, for the
purpose of effecting, if possible, a reconciliation.
Art. 2266. The following shall have not only (n)
prospective but also retroactive effect:
Art. 2269. The principles upon which the
(1) Article 315, whereby a descendant preceding transitional provisions are based
cannot be compelled, in a criminal case, shall, by analogy, be applied to cases not
specifically regulated by them. (Rule 13a)

REPEALING CLAUSE

Art. 2270. The following laws and regulations

are hereby repealed:
(1) Those parts and provisions of the
Civil Code of 1889 which are in force on
the date when this new Civil Code
becomes effective:

(2) The provisions of the Code of

Commerce governing sales, partnership,
agency, loan, deposit and guaranty;

(3) The provisions of the Code of Civil

Procedure on prescription as far as
inconsistent with this Code; and

(4) All laws, Acts, parts of Acts, rules of

court, executive orders, and
administrative regulations which are
inconsistent with this Code. (n)