ENCARNACION, PM THE LAW ON OBLIGATIONS AND CONTRACTS

OBLIGATION – juridical necessity to give, to do or not to do

4 ELEMENTS OF OBLIGATION 4 GROUNDS; debtor liable for damages
1. ACTIVE SUBJECT (creditor/obligee) – whose 1. Default/mora
obligation is constituted 2. Fraud/dolo
2. PASSIVE SUBJECT (debtor/obligor) – has duty to 3. Negligence/culpa
give, to do or not to do 4. Contrary to terms of obligation
3. OBJECT/PRESTATION – subject matter DEFAULT/MORA – delay
4. JURIDICAL/LEGAL TIE (vinculum/efficient cause) 3 kinds
reason a. Mora solvendi – debtor’s delay to give (real ob.), to do
CIVIL OBLIGATION NATURAL OBLIGATION (personal ob.)
derived from positive law derived from equity & justice b. Mora accipiende – creditor’s delay to accept
enforceable by court action not enforceable by court c. Compensatio Morae – delay of both in reciprocal
action obligation

CONCEPT OF DELAY General Rule: No demand, No delay

5 SOURCES OF OBLIGATION
Exceptions:
1. LAW
1. Law states
2. CONTRACTS
2. Obligation states
3. QUASI-CONTRACTS – arise from lawful voluntary
3. Time is the essence
acts; no one shall be unjustly enriched
4. Demand be useless if delay
2 Kinds
5. Debtor guilty of delay
a. Solutio indebiti – something received (delivered
EFFECTS OF DELAY
on a mistake), no right to demand it
1. Damages
b. Negotiorum gestio – voluntary mgt of
2. When to deliver determinate thing, STILL LIABLE in
property/affairs of another w/o his
fortuitous event.
knowledge/consent
4. QUASI-DELICT/TORTS/CULPA AQUILIANA – arise
FRAUD/DOLO – conscious, deliberate, intentional evasion of
from damage; fault/negligence
fulfillment
5. CRIMES/ACTS/OMISSIONS punished by law– arise
2 Kinds
from civil liability that is a consequence of a criminal
a. Dolo causante/Causal fraud – fraud in obtaining consent;
offense
consent is defective, contract is voidable. Remedy:
DILIGENCE OF A GOOD FATHER OF A FAMILY
annulment
- care need to be exercised by a debtor to deliver/give
b. Dolo incidente/Incidental fraud – fraud w/c vitiates
determinate thing
consent. Remedy: damages
Exception: When law/stipulation of parties requires a differnt
standard of care (slight/extraordinary diligence)
NEGLIGENCE/CULPA – voluntary act/omission; no bad faith
When creditor is entitled to the fruits
intended
Rule: The creditor has personal right (right to ask for delivery)
3 Kinds
from the time the obligation to deliver arises. But NO real
a. a.Culpa aquiliana/Civil negligence – quasi-delict/torts
right (right enforceable against the whole world) until it is
b. Culpa contractual/Contractual negligence – breach
delivered.
c. c. Culpa criminal/Criminal negligence – crime/delict
KINDS OF FRUITS
CONTRARY TO THE TERMS OF OBLIGATION
1. NATURAL – w/o human intervention
2 RULES OF PRINCIPAL & INSTALLMENT
2. INDUSTRIAL – w/ human intervention
1. Receipt of principal w/o mention of interest, presumed
3. CIVIL – derived by virtue of juridical relation
interest is paid also.
Creditor’s rights if debtor fails to comply w/ the obligation
2. Receipt of latter installment w/o mention of prior
1. Determinate
installment, presumed prior installment is paid also
a. Performance
4 SUCCESSIVE RIGHTS OF CREDITOR to satisfy claim against
b. Damages
DEBTOR
2. Generic
1. Exact payment
c. Performance
2. Attach debtor’s properties
d. Damages
3. Accion subrogatoria – exercise rights & actions
e. Obligation be complied at debtor’s expense
except inherent in person
Creditor’s rights if debtor does in contravention
4. Accion pauliana – cancel acts/contracts by debtor to
1. Damages
defraud creditor
2. 2. Ask it be UNDONE at debtor’s expense
TRANSMISSIBILITY OF RIGHTS
FORTUITOUS EVENT – cannot be foreseen, if foreseen,
General Rule: ALL RIGHTS are transmissible.
inevitable
Exceptions:
General Rule: No person liable to fortuitous event.
1. Law states
Exceptions:
2. Contract states
1. Law states
3. Obligation is purely personal
2. Stipulation/contract states
3. Assumption of risk
10 Kinds of Obligation
4. Delay
1. Pure
5. Debtor promises deliver to 2/more persons who do
2. Conditional
not have same interest (bad faith)
3. Alternative
4. Facultative
5. Joint
3 MISCELLANEOUS RULES ON PERFORMANCE OF
6. Solidary
OBLIGATION
7. Divisible
1. When to deliver determinate, accessions (additions/
8. Indivisible
improvements) and accessories (joined/included with the
9. Obligation w/ a period
principal) are INCLUDED even not mentioned.
10. Obligation w/ a penal clause
2. If debtor fails to do, it shall be DONE AT HIS EXPENSE, same
with doing the contravention; poorly done be undone.
1. PURE OBLIGATION - w/o condition, demandable at once
3. In obligation not to do, and obligor does what is forbidden,
(pure has resolutory condition/period)
shall be UNDONE AT HIS EXPENSE.
 ENCARNACION, PM THE LAW ON OBLIGATIONS AND CONTRACTS

2. CONDITIONAL OBLIGATION - there is condition in General Rule: Both the debtor & creditor. Therefore, NEITHER
performance; future & uncertain of them can demand performance of obligation. Exception: If
2 Kinds the term of obligation has to favor one of them
a. Suspensive condition – happening of condition gives 5 INSTANCES WHEN DEBTOR LOSES RIGHT TO USE “PERIOD”
RISE to obligation 1. Debtor is insolvent.
b. Resolutory condition – happening of condition 2. Debtor attempts to abscond.
EXTINGUISHES obligation 3. Impairment of guarantees/securities.
4. Failure to furnish guarantees/securities promised.
6 MISCELLANEOUS RULES ON CONDITIONAL OBLIGATION 5. Violation of undertaking.
1. Impossible conditions, contrary to law, shall ANNUL 4. ALTERNATIVE OBLIGATION - w/ 2 or more prestations,
obligation. only 1 is due.
2. The condition not to do an impossible thing is considered 5. FACULTATIVE OBLIGATION - w/ ONLY 1 prestation but can
not agreed upon. be substituted.
3. The condition that happens in determinate time, ALTERNATIVE prestations LOST w/ debtor’s fault Creditor
EXTINGUISHES obligation. entitled to damages but needs ff requisites:
4. The condition that happens in INDETERMINATE time, 1. Debtor can choose.
obligation only effective at arrival. 2. All prestations lost/become impossible due to
5. The condition is fulfilled if DEBTOR prevents fulfillment. debtor’s fault.
6. The effect of conditional obligation, once fulfilled: ALTERNATIVE OBLIGATION FACULTATIVE OBLIGATION
- to give: retroact to the day of constitution of several prestations due, giving one prestation due, but can be
obligation one is sufficient subtituted
- has reciprocal prestations: fruits & interests be right to choose (debtor) unless right to choose DEBTOR ONLY
mutually compensated granted to creditor
- has unilateral obligation: debtor shall give fruits & If 1 of the prestation is illegal, nullity of principal carries w/ it
interest others may be valid, obligation nullity of accessory/ substitute
RULES in case of Loss, Improvement, or Deterioration of remains
thing during the pendency of condition
loss/impossibility of ALL loss/impossibility of presta-tion
1. LOST
prestations due, w/o debtor’s due, w/o debtor’s fault,
a. w/ debtor’s fault – damages
fault, extinguishes obligation extinguishes obligation
b. w/o debtor’s fault – extinguishes obligation
2. DETERIORATION
a. w/ debtor’s fault - (1) cancel obligation & damages; or (2) 3) SUMMARY OF RULES, OBLIGATIONS, & RIGHTS OF
fulfill obligation w/ damages DEBTOR IN ALTERNATIVE OBLIGATION
b. w/o debtor’s fault – creditor suffer impairment 1. If 1 of prestations lost through fortuitous event, shall still
3. IMPROVEMENT be perform by choosing (creditor) from the remainder.
a. By nature/time – benefit to creditor 2. If 1 of prestations lost through debtor’s fault, creditor
b. at expense of debtor – debtor no right than that granted to may claim any of remainders w/ damages.
usufructuary (debtor no right to compensate amount for 3. If ALL prestations lost through debtor’s fault, creditor
improvement choose price w/ damages.
EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITION
General Rule: The obligation becomes effective retroactively RULES on LOSS/DETERIORATION of the thing intended as
to the day obligation was constituted. SUBSTITUTE in FACULTATIVE OBLIGATION
Exceptions: 1. If there is a loss/deterioration of thing intended as
1. In reciprocal obligation, fruits & interests during pendency substitute, debtor is NOT liable if NOT HIS FAULT. But if
of condition shall compensate each other. substitution is already made, debtor is liable for loss of
2. In unilateral obligation, debtor gets fruits & interests unless substitute when in DELAY, NEGLIGENCE, or FRAUD.
there is a contrary intent.
3 EFFECTS OF FULFILLMENT OF RESOLUTORY CONDITION 6. JOINT OBLIGATION - obligation is to be paid
1. Extinguish obligation. proportionately by debtors or to be demanded
2. Both parties restore what they received plus fruits & proportionately by creditors
interests. 7. SOLIDARY OBLIGATION - each one of debtors has right to
3. The rule on L, D, or I will apply to person who has to render or each one of creditors has right to demand the
return the thing. entire compliance w/ prestation
When one of debtors in reciprocal obligation does not comply
w/ his obligation MAXIMS SYNONYMS
1. The right of injured party is (1) cancel contract & JOINT Obligation “To each his own” proportionate
damages; or (2) fulfill obligation & damage SOLIDARY Obligation “One for all, all individually &
for one” collectively
3 Kinds of Obligation (Accdng to PERSON OBLIGED)
1. UNILATERAL – only 1 party obliged to comply (3) SOLIDARY OBLIGATION EXIST ONLY IF: *RULES
2. BILATERAL – both parties;performance not same time 1. Law states
3. RECIPROCAL – both parties; performance same time 2. Stipulation states
3. Nature of obligation requires
3. OBLIGATION W/ A PERIOD- demandability/extinguishment 2 PRESUMPTIONS THAT OBLIGATION IS JOINT
subject to the expiration of period 1. The debts be divided as many shares as there are
PERIOD – interval of time; either suspends demandability or debtors/creditors.
produces extinguishment 2. The debtors/creditors are distinct from one another.
DAY CERTAIN – must come, not known when
PERIOD CONDITION 8. DIVISIBLE OBLIGATION - prestation is capable of partial
certain uncertain performance
future only future/past but unknown 9. INDIVISIBLE OBLIGATION - prestation incapable of partial
*influence upon obligation) *) on the very existence of performance
only upon its demandability obligation itself 10. OBLIGATION W/ A PENAL CLAUSE - one w/accessory
FOR WHOSE BENEFIT IS THE PERIOD? undertaking attached to obligation to assume greater liablity
in case of breach/non-fulfillment of obligation
3 PURPOSES OF PENAL CLAUSE PERIOD CONDITION
ENCARNACION, PM THE LAW ON OBLIGATIONS AND CONTRACTS

1. Ensure performance of obligation all properties NOT all properties

2. Substitute for damages & interest in case of noncompli- require more than 1 creditor NOT require all creditors
ance NOT act of novation act of novation
3. Penalize debtor in case of breach NOT transfer ownership transfer ownership
In case obligation has a PENAL CLAUSE requires partial/total may happen during solvency
General Rule: Penalty takes the place of damages & interest insol-vency of debtor
in case of non-compliance.
Exceptions:
1. Stipulation states. D. TENDER OF PAYMENT & CONSIGNATION TENDER OF
2. Debtor refuse to pay penalty. PAYMENT – act of offering the creditor what is due to him w/
3. Debtor guilty of fraud in performance of obligation. a demand that the creditor accept it

CONSIGNATION – act of depositing thing due w/ the court

NULLITY OF PRINCIPAL OBLIGATION OR THE PENAL CLAUSE
when creditor cannot/refuses acceptance of payment
Nullity of principal obligation = nullity of penal clause
5 REQUISITES OF CONSIGNATION
Nullity of penal clause = NOT nullity of principal obligation
1. Debt due.
2. Creditor refused the tender of payment w/o just cause
10 MODES OF EXTINGUISHMENT OF OBLIGATIONS
3. Notice of consignation already given to persons interested
1. Payment or performance
in fulfillment of obligation
2. Prescription
4. Consignation of thing/amount due
3. Compensation
5. Subsequent notice of consignation to interested persons
4. Confusion/merger
5 VALID CONSIGNATION W/O PREVIOUS TENDER OF
5. Condonation/remission
PAYMENT
6. Fulfillment of resolutory condition
1. Creditor is absent/unknown.
7. Annulment
2. Creditor is incapacitate to receive at time it is due.
8. Rescission
3. Creditor refused give a receipt, w/o just cause.
9. Novation
4. 2 or more persons claim the right to collect.
10. Loss of thing due
5. Title of obligation lost.
1. PAYMENT/PERFORMANCE - Payment means delivery of
2. LOSS OF THING DUE - perishes, disappears, or goes out of
money & performance of obligation
commerce; existence is unknown; cannot be recovered
2 PLACE OF PAYMENT
3 REQUISITES TO EXTINGUISH OBLIGATION DUE TO LOSS
1. At place agreed upon
1. Determinate thing.
2. If w/o agreement
2. W/o debtor’s fault.
a. Object is indeterminate – paid at domicile of DEBTOR
3. No delay.
b. Object is determinate – place of thing at the time of
constitution of obligation
3. CONDONATION/REMISSION - gratuitous abandonment of
4 SPECIAL MODES OF PAYMENT
right by the creditor
a) Application of payment
3 REQUISITES OF A VALID CONDONATION/REMISSION
b) Cession
1. It must be gratuitous.
c) Tender of payment & consignation
2. Accepted by obligor.
d) Dacion in payment
3. Obligation is demandable.
A. APPLICATION OF PAYMENT - designation of debt to w/c
4. CONFUSION/MERGER - meeting in 1 person of qualities of
payment must be applied when debtor has several
debtor & creditor w/ same obligation
obligations of same kind in favor of same creditor.
3 REQUISITES OF VALID CONFUSION/MERGER
3 REQUISITES OF APPLICATION OF PAYMENT
1. The merger of characters of debtor & creditor must be in
1. Only 1 debtor & 1 creditor
same person.
2. 2 or more debts, same kind
2. Take place between principal debtor & creditor.
3. All debts are due
3. Clear & definite.
4. Insufficient payment to exinguish ALL debts
3 RIGHTS TO MAKE APPLICATION OF PAYMENT
5. COMPENSATION - 2 persons are debtors & creditors of
1. Right belongs to CREDITOR.
each other
2. If debtor does not avail, creditor can give him receipt
6 ESSENTIAL REQUISITES OF COMPENSATION
designating the debt from which payment will be
1. Parties both principal debtors & creditors of each other.
applied.
2. Compensation is not prohibited by law.
3. If debtor accepts the receipt, he cannot complain
3. No retention/controversy by 3rd person.
unless THERE IS just cause to invalidate the contract
4. 2 debts are due & demandable.
.
5. 2 debts are liquidated.
B. CESSION - debtor abandons ALL his property for creditor’s
6. 2 debts both in money/consumable things.
benefit to obtain payment from proceeds of his property
(2) CLASSES OF COMPENSATION
5 REQUISITES OF VALID CESSION
1. As to effect
1. 1 debtor & 2 or more creditors
a. TOTAL – obligations completely extinguished.
2. Debtor is in partial/total insolvency.
b. PARTIAL – a balance remains
3. Debtor to deliver ALL his property to creditors
2. As to origin or cause
4. Debt is due & demandable.
a. LEGAL – by law
5. Creditors must sell the properties & apply the
b. VOLUNTARY/CONVENTIONAL – agreement of parties
proceeds to their respective credits proportionately.
c. JUDICIAL – order from the court
d. FACULTATIVE – 1 of parties can choose/oppose claiming
C. DACION IN PAYMENT (dacion en pago) - alienation of
property to the creditor in satisfaction of debt
3 REQUISITES OF DACION IN PAYMENT
1. Consent of creditor
2. NOT prejudicial to another creditor
3. Debtor not insolvent declared by a judicial decree
6. NOVATION - substitution/change of obligation -
substitution of debtor - subrogation of creditor
CESSION DACION IN PAYMENT
(3) OBLIGATIONS MAY BE MODIFIED BY:
ENCARNACION, PM THE LAW ON OBLIGATIONS AND CONTRACTS

1. Changing object/principal conditions. (REAL NOVATION) b. ACCESSORY – existence depends on another

2. Changing the person of debtor/creditor. (PERSONAL contract (pledge, guarantee)
NOVATION) c. PREPARATORY – contract not an end by itself but a
a. Substitution – change of debtor means thru w/c other contracts may be made (eg.
b. Subrogation – change of creditor agency)
3. Changing person of the parties & the objects of principal 6. NAME
condition. (MIXED NOVATION) a. NOMINATE – contract given a particular/special
4 REQUISITES OF NOVATION name (eg. partnership)
1. Old valid obligation. b. INNOMINATE – not given special name (eg. I give
2. Agreement of parties to new obligation. that you may give)
3. Extinguishment of old obligation. 7. SUBJECT MATTER
4. Validity of new obligation. a. Contracts involving things
2 FORMS OF NOVATION BY SUBSTITUTION OF DEBTOR b. Contracts involving rights/credits
1. EXPROMISION – w/ consent of creditor, NO consent of old c. Contracts involving services
debtor 3 STAGES OF CONTRACT
2REQUISITES 1. PREPARATION/CONCEPTION – preparatory steps to
a. Initiative of 3rd person. perfect contract
b. Consent of creditor. 2. PERFECTION/BIRTH – meeting of minds between 2
2. DELEGACION – all must agree (creditor, old debtor, new contracting parties
debtor) 3. CONSUMMATION/TERMINATION – terms of contract are
3REQUISITES performed, & contract is fully executed
a. Initiative from old debtor. 5 BASIC PRINCIPLES/CHARACTERISTICS OF A CONTRACT
b. Consent of debtor. 1. PRINCIPLE OF AUTONOMY (liberty to contract)
c. Acceptance by creditor. Provided they are not contrary to:
a. Law
7. SUBROGATION - change of creditor b. Morals
2 KINDS OF SUBROGATION c. Good customs
1. CONVENTIONAL – consent of original parties & 3rd person d. Public order
2. LEGAL – by law e. Public policy
a. creditor pays another preferred creditor even w/o debtor’s 2. MUTUALITY OF CONTRACTS - the contract must bind both
knowledge parties; its validity/compliance cannot be left to the will of
b. 3rd person pays the express approval of debtor one of them
c. 3rd person pays even w/o knowledge of debtor 3. RELATIVITY OF CONTRACTS - Contracts take effect only
between the parties, their assigns & heirs except when there
CONTRACT – meeting of minds between 2 persons to give are rights & obligations not transmissible:
something or to render service. a. by their nature
3 ELEMENTS OF CONTRACT b. by stipulation (stipulation por autri)
1. ESSENTIAL – w/o them, contract cannot exist c. by provision of law
a. CONSENT of contracting parties 4. CONSENSUALITY OF CONTRACTS - Contracts are perfected
b. OBJECT CERTAIN – subject matter by mere consent Exceptions:
c. CAUSE/CONSIDERATION In some contracts, ff are a. REAL CONTRACTS – perfected by delivery
also essential: b. FORMAL/SOLEMN CONTRACTS – special form
d. FORM required for its perfection
e. DELIVERY 5. OBLIGATORINESS OF CONTRACTS - The contract, once
2. NATURAL– found in certain contract, presumed to exist perfected, has the force of law between parties which bound
unless stipulated to comply in good faith
3. ACCIDENTAL – various particular stipulations that may be 4 KINDS OF INNOMINATE CONTRACTS
agreed upon by contracting parties 1. I give that you may give
(7) CLASSIFICATION OF CONTRACTS 2. I do that you may do
According to: 3. I give that you may do
1. PERFECTION/FORMATION 4. I do that you may give
a. CONSENSUAL – perfected by mere consent 4 RULES FOR INNOMINATE CONTRACTS
b. REAL – perfected by delivery 1. Agreement of parties
c. FORMAL/SOLEMN – special formalities are essential 2. Law on Obligations & Contracts
before perfection of contract 3. Rules on most analogous nominate contract
2. PARTIES OBLIGATED 4. Customs of place
a. UNILATERAL – only 1 has obligation
b. BILATERAL – both parties require to render STIPULATION POR AUTRI - stipulation in favor of 3rd person
reciprocal prestations 5 REQUISITES OF STIPULATION POR AUTRI
3. CAUSE 1. Stipulation in favor of 3rd person
a. ONEROUS – exchange of considerations 2. Stipulation is only PART, not the whole of the contract.
b. GRATUITOUS – no consideration received in 3. Both parties must conferred upon a favor of 3rd person
exchange of what is given 4. 3rd person must accept & say it to debtor before its
c. REMUNERATORY – something is given for revocation/cancellation
benefit/service that had been rendered previously 5. Neither of both parties be the legal representation/autho-
4. RISK OF FULFILLMENT rization
a. COMMUTATIVE – equivalent values are given by
both parties
b. ALEATORY – fulfillment of contract depends on
chance (eg. insurance)

CONSENT - meeting of offer (certain) & acceptance (absolute)

5. IMPORTANCE upon a thing
a. PRINCIPAL – contract may stand alone (eg. sale, 5 REQUISITES OF CONSENT
partnership) 1. Must be given by 2 or more parties
ENCARNACION, PM THE LAW ON OBLIGATIONS AND CONTRACTS

made through an
2. Parties are capacitate to enter in contract
3. No vitiation of consent
4. No conflict between declared & intended
5. Legal formalities must be complied
agent

7 RULES ON OFFER/ACEPTANCE

1. An offer
 is accepted from the
must be certain TIME the
 acceptance is done
through an agent
.
2. Business 
advertisements for sale .
are NOT offers but 6. An offer
ONLY 
invitations to make an is ineffectiv
offer. 
3. Advertisements for e upon death, insanity,
bidders are ONLY insolvency, of
invitations. EITHER
4. An acceptance party BEFORE
 acceptance is made.
made by 7. When offeror
letter/telegram does 
NOT allowed offeree
bind offeror 
 a certain period
EXCEPT from the to accept
TIME it came to his 
knowledge. , offer
5. An offer 

ENCARNACION, PM THE LAW ON OBLIGATIONS AND CONTRACTS

MAY be withdrawn 5. An offer

AT ANYTIME unless 
there is made through an
something agent
PAID/PROMISED 
1. An offer is accepted from the
 TIME the
must be certain acceptance is done
 through an agent
. 
2. Business .
advertisements for sale 6. An offer
are NOT offers but 
ONLY is ineffectiv
invitations to make an 
offer. e upon death, insanity,
3. Advertisements for insolvency, of
bidders are ONLY EITHER
invitations. party BEFORE
4. An acceptance acceptance is made.
 7. When offeror
made by 
letter/telegram does allowed offeree
NOT 
bind offeror a certain period
 to accept
EXCEPT from the 
TIME it came to his , offer
knowledge. 
ENCARNACION, PM THE LAW ON OBLIGATIONS AND CONTRACTS

MAY be withdrawn 5. An offer

AT ANYTIME unless 
there is made through an
something agent
PAID/PROMISED. 
1. An offer is accepted from the
 TIME the
must be certain acceptance is done
 through an agent
. 
2. Business .
advertisements for sale 6. An offer
are NOT offers but 
ONLY is ineffectiv
invitations to make an 
offer. e upon death, insanity,
3. Advertisements for insolvency, of
bidders are ONLY EITHER
invitations. party BEFORE
4. An acceptance acceptance is made.
 7. When offeror
made by 
letter/telegram does allowed offeree
NOT 
bind offeror a certain period
 to accept
EXCEPT from the 
TIME it came to his , offer
knowledge. 
ENCARNACION, PM THE LAW ON OBLIGATIONS AND CONTRACTS

MAY be withdrawn 
AT ANYTIME unless made through an
there is agent
something 
PAID/PROMISED. is accepted from the
 TIME the
must be certain acceptance is done
 through an agent
. 
2. Business .
advertisements for sale 6. An offer
are NOT offers but 
ONLY is ineffectiv
invitations to make an 
offer. e upon death, insanity,
3. Advertisements for insolvency, of
bidders are ONLY EITHER
invitations. party BEFORE
4. An acceptance acceptance is made.
 7. When offeror
made by 
letter/telegram does allowed offeree
NOT 
bind offeror a certain period
 to accept
EXCEPT from the 
TIME it came to his , offer
knowledge. 
5. An offer
ENCARNACION, PM THE LAW ON OBLIGATIONS AND CONTRACTS

MAY be withdrawn
2. FRAUD/DOLO - when through insidious
words/machinations of one of the parties, INDUCED the other
to enter into a contract, & w/o them, he will not agree

AT ANYTIME unless DOLO CAUSANTE DOLO INCIDENTE

there is
Serious Not serious
cause induces party to NOT the cause to enter into
ENTER into contract contract

something make contract voidable contract is valid; liable for

damages

PAID/PROMISED.
7 RULES OF FRAUD
1. Failure to disclose facts when these needs to be revealed,
is a fraud.
1. An offer must be certain.
2. Fraud should be SERIOUS (dolo causante) & SHOULD NOT
2. Business advertisements for sale are NOT offers but ONLY
be done by BOTH parties to make contract voidable.
invitations to make an offer.
3. Incidental fraud (dolo incidente) ONLY obliges person to
3. Advertisements for bidders are ONLY invitations.
PAY DAMAGES.
4. An acceptance made by letter/telegram does NOT bind
4. Usual exaggerations in trade, when other party know the
offeror EXCEPT from the TIME it came to his knowledge.
“real” facts, is NOT FRAUD.
5. An offer made through an agen is accepted from the TIME
5. Amere expression of opinion is NOT FRAUD UNLESS made
the acceptance is done through an agent.
by an expert & the other party relies on his special
6. An offer is ineffective upon death, insanity, insolvency, of
knowledge.
EITHER party BEFORE acceptance is made.
6. Misrepresentation made in good faith is NOT FRAUD but
7. When offeror allowed offeree a certain period to accept,
may constitute an error.
offer MAY be withdrawn AT ANYTIME unless there is
7. Misrepresentation by 3rd person DOES NOT vitiate consent
something PAID/PROMISED.
UNLESS it created substantial mistake.
3 persons who CANNOT GIVE CONSENT to a contract
3. VIOLENCE - serious/irresistible force is employed.
(if entered into, contract is voidable)
2 RULES ON VIOLENCE
1. UNEMANCIPATED MINORS
1. Serious/irresistible force is employed w/c constitutes the
2. INSANE/DEMENTED PERSONS (unless they acted DURING
reason why one entered into a contract.
LUCID INTERVAL)
2. Violence ANNULS obligation although it is DONE by 3 rd
3. DEAF-MUTES who DO NOT know how to write
person not part of contract.
DEMENTED PERSON – NOT exactly insane; difficult to distin-
4. INTIMIDATION - 1 of the parties is compelled by a
guish right from wrong
reasonable & well-grounded fear of an imminent & grave evil
LUCID INTERVAL – period when an INSANE has acquired
upon his person/property to give his consent.
SANITY temporarily, therefore, capacitated to enter into a
3 RULES ON INTIMIDATION
valid contract
1. Age, sex, & condition of person must used to determine
the degree of intimidation.
2 RULES on persons WHO CANNOT GIVE CONSENT to a
2. Intimidation ANNULS obligation although it is DONE by 3 rd
contract
person not part of contract.
1. Age of majority is 18 yrs old
3. A threat to enforce one’s claim (claim must be just & legal),
2. A contract entered into by UNEMANCIPATED MINOR w/o
DOES NOT vitiate consent.
parents/guardian’s consent is voidable, except:
a. Minor MISREPRESENTS his age (estoppel)
VIOLENCE INTIMIDATION
b. Contract involves sale & delivery of necessities to
External Internal
minor
5 VICES OF CONSENT Physical contact/coercion NO physical coercion; ONLY
NOTE: When there is a DEFECTIVE CONSENT of EITHER of MENTAL/MORAL coercion
parties, contract is voidable; Remedy: annulment of contract.
1. MISTAKE/ERROR 5. UNDUE INFLUENCE - a person takes improper advantage of
2. FRAUD/DECEIT his power over other’s will, depriving the other to his
3. VIOLENECE reasonable freedom of choice.
4. INTIMIDATION 3 RULES ON UNDUE INFLUENCE
5. UNDUE INFLUENCE 1. There is a person who takes improper advantage of his
6. power over other’s will, depriving the other to his reasonable
1. MISTAKE/ERROR - wrong conception & lack of knowledge freedom of choice.
upon a thing 2. Undue influence ANNULS obligation although it is DONE by
(2) MISTAKES W/C VITIATES CONSENT It should refer to: 3rd person not part of contract.
1. substance of thing that is the OBJECT of contract 3. To constitute undue influence, ff circumstances must be
2. conditions w/c MOVED either/both parties to enter into considered:
contract (1) confidential, family, spiritual, & other relations of parties;
4 RULES ON MISTAKE or (2) the aggrieved party is suffering from mental weakness;
1. Mistake to identity/qualifications of either of parties will or (3) ignorant; or (4) in financial distress.
vitiate consent ONLY when IT is the principal cause of
contract. SIMULATION OF CONTRACT - process of INTENTIONALLY
2. Simple mistake of account must be corrected. deceiving others by producing a contract not really exist
3. No mistake if parties knew the risk/doubt affecting OBJECT (absolute simulation), or w/c is different from true agreement
of contract. (relative simulation).
4. When one of parties is unable to read or the contract is in 2 KINDS OF SIMULATED CONTRACT
language not understood by him, & mistake/fraud is alleged, 1. ABSOLUTE SIMULATION (the parties DO NOT intend to be
the person enforcing the contract must FULLY explained the bound at all) - completely fictitious/make-believe; VOID
terms to him. 2. RELATIVE SIMULATION (parties conceal their true/real
agreement) - parties are bound to real/true agreement,
EXCEPT:
a. contract prejudice 3rd person
ENCARNACION, PM THE LAW ON OBLIGATIONS AND CONTRACTS

b. purpose is contrary to law, morals, good customs, public 3. UNENFORCEABLE – cannot be sued/enforced unless
order, public policy ratified; no effect NOW but may take effect upon ratification.
4. VOID – NO effect at all; cannot be ratified/validated.

7 REQUISITES OF OBJECT OF CONTRACT

1. Specific & certain
2. Services not contrary to law, morals, good customs, public
order, public policy
3. Services/things must NOT be legally/physically impossible 5 RESCISSIBLE CONTRACTS
4. Services/things are w/in commerce of man including future 1. Those entered by guardians & suffered LESION by more
things than ¼ of value of the value that is the OBJECT.
5. Rights are NOT TRANSMISSIBLE. 2. Those agreed upon in representation of absentees, if the
6. Determinate (kind) or determinable ( w/o the need of new absentees suffered LESION.
contract/agreement) 3. Those undertaken in FRAUD of creditors when the creditors
7. NO contract be entered for future inheritance UNLESS law cannot further claim.
states 4. If entered into contract w/o knowledge/approval of
4 REQUISITES OF CAUSE litigants under litigation.
1. It is just & equitable. 2. It exists. 3. It is lawful. 4. It is true. 5. Contracts subjected to rescission declared by law.
3 VOIDABLE CONTRACTS
LESION - inadequacy of cause (eg. insufficient price for thing
1. One of the parties INCAPABLE of giving consent to a
sold)
contract.
RULES ON LESION - Lesion DOES NOT invalidate contract,
2. Those where consent vitiates by vices of consent. (MFVIU)
except there is: a. Fraud b. Mistake c. Undue influence
3. Those agreed in the state of drunkenness/hypnotic spell.
2 FORM OF CONTRACTS
3 UNENFORCEABLE CONTRACTS
1. Contracts in writing
1. Those entered in name of other person, or who acted
2. Contracts in a public instrument
BEYOND his powers.
1. Contracts w/c must be IN WRITING to be valid:
2. Those who do not comply w/ the Statute of Frauds.
a. Donation of personal property exceeds P5000.
3. Both parties are incapable of giving consent to a contract.
b. Agent’s authority in sale of land/any interest.
7 VOID/INEXISTENT CONTRACTS
c. Contract of antichresis.
1. Those w/c are ABSOLUTELY simulated/fictitious.
d. d Stipulation to pay interest on loans.
2. Those w/c contemplate an impossible service.
e. Stipulation to reduce common carrier’s
3. Those whose OBJECT is outside the commerce of man.
extraordinary diligence & to limit its liability.
4. Those whose CAUSE/OBJECT did not exist at time of tran-
2. Contracts w/c must be IN A PUBLIC INSTRUMENT to be
saction.
valid:
5. Those whose CAUSE/OBJECT/PURPOSE is contrary to law,
a. Donation of real property (both the donation &
morals, good customs, public order, or public policy.
accep-tance).
6. Those where INTENTION of parties to principal object
b. Sale of real property.
CANNOT be ascertained.
c. Partnership where real property/rights is
7. Those expressly prohibited/declared VOID by law.
contributed; or when capital contribution exceeds
Company
P3000.

REFORMATION OF INSTRUMENTS - REMEDY in equity in w/c

a written instrument is made/construed to the REAL intention
of parties when there is an error/mistake.
(5) CASES REFORMATION OF INSTRUMENT IS AVAILABLE
1. Mutual mistake of parties.
2. One party was mistaken & the other acted fraud.
3. One party was mistaken & the other knew/believed that
the instrument did not state their REAL agreement.
4. Ignorance, lack of skill, negligence, or bad faith of person
drafting the instrument DOES NOT state the TRUE INTENTION
of parties
5. Two parties agree on mortgage/pledge of personal/real
property BUT the instrument states the property is sold
ABSOLUTELY, or w/ the right to repurchase.
(3) NO REFORMATION OF INSTRUMENT WHEN:
1. Simple donation inter vivos where NO CONDITION is
imposed.
2. Will.
3. Real agreement is VOID.

4 KINDS OF DEFECTIVE CONTRACTS

1. RESCISSIBLE – valid until rescinded; has ALL essential
requisites but because of injury/damage to one of the parties,
the contract may be rescinded.
2. VOIDABLE – valid until annulled; has ALL essential
requisites but because of defect in consent, contract may be
annulled.