Arts.

1319-1346 OBLIGATIONS AND CONTRACTS

Contracts
Consent

spective functions; this prohibition includes the act of acquir-

ing by assignment and shall apply to lawyers, with respect to
the property and rights which may be the object of any litiga-
tion in which they may take part by virtue of their profession;
(f) Any others specially disqualified by law.

47. Distinguish between incapacity to enter into a

contract and prohibition to enter into a contract.
ANS: Incapacity to enter into a contract and prohibition to
enter into a contract may be distinguished from each other in the
following ways:
(1) Incapacity restrains the exercise of the right to contract,
whereas prohibition to contract restrains the very right itself; in
other words, in the first, the incapacitated person may still enter
into the contract, but with the consent of his parents or guardian,
whereas in the second, the disqualified person cannot;
(2) Incapacity is based upon subjective circumstances of
certain persons which compel the law to suspend for a definite or
indefinite period their right to contract, whereas prohibition to
contract, which has been improperly called special incapacity by
certain authors, is based upon public policy and morality; and
(3) A contract entered into by an incapacitated person is
merely voidable in accordance with Art. 1390 of the NCC, whereas
that entered into by one against whom a prohibition is directed
is void in accordance with Arts. 5 and 1409, No. 7, of the NCC. (3
Castan, 7th Ed., p. 255.)

48. What are the vices of consent?

ANS: According to Castan, the vices of consent may be
divided into two (2) distinct groups - vices of the will (vicious de
la formacion de la voluntad) and vices of declaration (vicious de la
declaracion). The first comprehends mistake, violence, intimidation,
undue influence, and fraud; the second comprehends all forms of
simulated contracts. (3 Castan, 7th Ed., p . 330; Art. 1330, NCC.)

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Arts. 1350-1355 OBLIGATIONS AND CONTRACTS
Contracts
Cause

(2) The cause is the objective or juridical reason of a contract,

whereas the motives are the psychological or personal reasons.
(3) The cause for a certain contract is always the same,
whereas the motives will differ or vary depending upon who are the
parties.
(4) The cause can affect the validity of a contract, whereas
the motives cannot.

73. Is there any exception to the rule that the particular

motives of the parties in entering into a contract are different
from the cause of the contract? If there is, what is it? Give
examples.
ANS: There is an exception to the ru1e and that is when the
contract is conditioned upon the attainment of the motive of either
contracting party. In other words, the motive may be regarded as
causa when it predetermines the purpose of the contract. (Liguez us.
Court of Appeals, 102 Phil. 577.)
The best examples are the decided cases. Thus -
(1) Where a married man of mature years donated a parcel
of land to a girl of 16 subject to the condition that the latter shall
cohabit with him, and such condition is accepted, it is clear that the
donation is conditioned upon the attainment of the motive of the
donor; in other words, it predetermines the purpose of the contract.
Thus considered, the conveyance is clearly predicated upon an illegal
causa. Consequently, it is void. Therefore, under what is now Art.
1412 of the NCC, there can be no recovery ofwhat has already been
delivered. (Liguez vs . CA, supra.)
(2) Where a mother sold two (2) fishponds to a daughter and
the latter, in turn, resold the same fishponds to her and her step-
father, as a consequence of which said fishponds were converted
into conjugal properties, it is clear that the motive or purpose is to
circumvent the law against donations between spouses. (Art. 133,
NCC.) This motive or purpose is the illegal causa rendering the con-
tract void. Consequently, the ru1e of in pari delicto non oritur actio,
now enunciated in Art. 1412 of the NCC, is applicable. (Rodriguez
us. Rodriguez, 20 SCRA 908.)

856
Arts. 1350-1355 OBLIGATIONS AND CONTRACTS
Contracts
Cause

The same is true if the cause stated in the contract is false, unless it
can be proved that the contract is, in reality, founded upon another
cause which is true and lawful. (Art. 1353, NCC.)

76. W, wife of H and daughter ofF, while employed in

a pawnshop owned by P, embezzled P2,000 belonging to said
pawnshop. In order to prevent her criminal prosecution for
estafa, H and F signed a document obligating themselves
jointly and severally to pay to P the am~unt embezzled
including interest. Because of their failure to comply with
their promise, the latter brought an action against them for
collection. Will the action prosper? Reasons. (2000)
ANS: The action will not prosper. The consideration for the
agreement is clearly illicit, which fact is apparent on the face of the
contract, and the case is accordingly governed by Art. 1352 of the
NCC.
There has been no period since contract law 1·eached the state
of consciousness, when the maxim ex turpi causa non oritur actio
was not recognized. A contract based upon an unlawful object is and
always has been void ab initio by the common law, by the civil law,
moral law, and all laws whatsoever. It is immaterial whether the
illegal character is revealed in the matter of the consideration, in the
promise as expressed in the agreement or in the purpose which the
agreement, though legal in expression, is intended to accomplish. If
the illegality lurks in any element, or even subsists exclusively in
the purpose of the parties, it is fatal to the validity of the contract.
By the universal consensus of judicial opinion in all ages it has
been considered contrary to public policy to allow parties to make an
agreement designed to prevent or stifle prosecution for crime. (Velez
us. Ramas, 40 Phil. 787.)

77. A gave to B P2,000, to be used in the purchase of

palay, with the obligation to return said amount within 10
days, if not spent for said purpose. B neither bought palay
nor returned said amount. As a result, A accused him of
estafa. When the case was about to be heard, X, a common
friend, acting upon B's request prevailed upon A to move for
the dismissal of the case and be contented with a promissory
note to be executed by B. The note was executed, and

858
Arts. 1359-1369 OBLIGATIONS AND CONTRACTS
Contracts
Reformation of lnsb·uments

88. (a) What is a contract of adhesion? (b) Are contracts

of adhesion void or prohibited?
ANS: In the case of Development Bank of the Philippines us.
Perez (G.R. No. 148541, November 11, 2004), the Court held that:
(a) A contract of adhesion is so-called because its terms are
prepared by only one party while the other party merely affixes his
signature signifying his adhesion thereto.
(b) A contTact of adhesion is just as binding as ordinary
contracts. It is true that we have, on occasion, struck down such
contracts as void when the weaker party is imposed upon in dealing
with the dominant bargaining party and is reduced to the alternative
of taking it or leaving it, completely deprived of the opportunity to
bargain on equal footing. Nevertheless, contracts of adhesion are not
invalid per se; they are not entirely prohibited. The one who adheres
to the contract is in reality free to reject it entirely; if he adheres, he
gives his consent.
In the case of Sps. Francisco us. BPI Family Savings Bank,
Inc. (G. R. Nos. 149840-41, March 31, 2006), where the petitioner
spouses undertook to secure the P15M loan of Transbuilders
Resources & Development Corporation to BPI-FSB "and other credit
accommodations of whatever nature obtained by the Borrower I
Mortgagor" under the Real Estate Mortgage they executed in
favor of BPI-FSB, the SC held that while the stipulation proved to
be onerous to the petitioners, neither the law nor the courts will
extricate a party from an unwise or undesirable contract entered
into with all the required formalities and with full awareness of its
consequences. Petitioners voluntarily executed the REM on their
property infavor ofBPI-FSB to secure the loan. They cannot now be
allowed to repudiate their obligation to the bank after Transbuilder's
default. While petitioner's liability was written in fine print and in
a contract written by BPI-FSB, it has been the consistent holding
of the Court that contracts of adhesion footing are not invalid per
se. On numerou s occasions, the SC has upheld the binding effects of
such contracts.

89. Comment on the acceptability/validity of stipulations

of the credit card company that (i) it is not responsible if
the card is not honoured by any merchant affiliate for any

866
Arts . 1403-1408 OBLJGATIONS AND CONTRACTS
Contracts
Unenforceable Contracts

the bank, withdrew the necessary amount, and returned to

"A,, for the consummation of the contract. "A/' however, had
changed his mind and refused to go through with the sale.
Is the agreement valid? Will an action by "B'' against "An for
specific performance prosper? Reason. (1982)
ANS: It must be observed that there are two (2) questions in
the case at bar. They are:
(1) Is the agreement valid? The answer is yes. It is a time
honored rule that even a verbal agreement to sell land is valid so
long as there is already an agreement with respect to the object and
the purchase price.
(2) Will an action by ''B" against "A" for specific performance
prosper? The answer is no, unless it is ratified. The reason is
obvious. The property is covered by the Statute of Frauds. It cannot,
therefore, be enforced by a court action because it is not evidenced
by any note or memorandum or writing properly subscribed by the
party charged.

(Note: The above answer is based on No. 2 of Art. 1403 of the

NCC and on decided cases.)

129. (a) What is the "Statute of Frauds,'? {b) What is its

purpose?
ANS: (a) The "Statute of Frauds" is descriptive of statutes
which require certain classes of contracts to be in writing. The
contract shall be unenforceable by action unless the same or some
note or memorandum thereof be in writing and subscribed by the
party charged or by his agent. Evidence of the contract, therefore,
cannot be received without the writing or a secondary evidence of its
content. (Art. 1403[2], NCC.)
(b) The purpose of the Statute of Frauds is to prevent
fraud and perjury in the enforcement of obligations depending for
their evidence on the unassisted memory of witnesses by requiring
certain enumerated contracts and transactions to be evidenced by a
writing a signed by the party to be charged. rRosencor Development
C01p. vs. Inquing, supra.)

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Arts. 1458-1637 OBLIGATIONS AND CONTRACTS
Special Contracts
Sales

property, the true owner who had lost it or who has been unduly
deprived of it can still recover the same from the vendee. However,
if the latter had acquired it in good faith, such owner cannot obtain
its return without reimbmsing the price paid therefore. (Art. 559 of
the NCC is applicable.)

47. Define negotiable document of title.

ANS: A document of title in which it is stated that the goods
referred to therein will be delivered to the bearer, or to the order
of any person named in such document is a negotiable document of
title. (Art. 1507, NCC.)

48. How may a negotiable document of title be negoti-

ated by delivery?
ANS: A negotiable document of title may be negotiated by
delivery:
(1) Where by the terms of the document the carrier,
warehouseman or other billee issuing the same undertakes to deliver
the goods to the bearer; or
(2) Where by the terms of the document the carrier,
warehousemen or other bailee issuing the same undertakes to
deliver the goods to the order of specified person, and such person or
a subsequent indorsee of the document has indorsed it in blank or to
the bearer.
Where by the terms of a negotiable document of title the goods
are deliverable to bearer or where a negotiable document of title
has been indorsed in blank or to bearer, any holder may indorse
the same to himself or to any specified person, and in such case the
document shall thereafter be negotiated only by the indorsement of
such indorsee. (Art. 1508, NCC.)

49. How may a negotiable document of title be

negotiated by indorsement?
ANS: A negotiable document of title may be negotiated by the
indorsement of the person to whose order the goods are by the terms
of the document deliverable. Such indorsement may be in blank to
bearer or to a specified person. If indorsed to a specified person, it

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