Assignment-Exercises Nos.

15 to 26

Instructions:

Please Answer the Study Guide Questions pp. 329-330; 369-370; 376-377; 387; 394-395; 404;
414-415; 430; 442-443; 455-456; 472-473; and, 482 of our Reference Text: The Law on Obligations and
Contracts by De Leon, et.al.

OBLICON STUDY GUIDE page 329-330

I. Definitions
Define or give the meaning of the following:
1. Contract
- Contract is a meeting of the minds between two persons whereby one binds himself to
give something or render some service.
2. Stipulation pour autrui
- Stipulation pour autrui is a stipulation in a contract clearly and deliberately conferring a
favor upon a third person who has a right to demand its fulfi llment, provided, he communicates
his acceptance to the obligor before its revocation by the obligee or the original parties.
3. Real Contract
- Are agreements between parties to perform or refrain fromperforming an action in
respect to real property.
4. Perfection of Contract
- (Article 1315) Contracts are perfected by mere consent, and from that moment the
parties are bound not only to the fulfi llment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may be in keeping with good faith, usage
and law. (1258)

II. Discussions
1. May a third person acquire rights under a contract to which he is a stranger or be bound
thereby. Explain
Contracts take effect only between the parties, their assigns and heirs, exceptin case
where the rights and obligations arising from the contract are nottransmissible by their nature,
or by stipulation or by provision of law. The heiris not liable beyond the value of the property he
received from the decedent.
-If a contract should contain some stipulation in favor of a third person, he maydemand
its fulfillment provided he communicated his acceptance to theobligor before its revocation. A
mere incidental benefit or interest of a personis not sufficient. The contracting parties must
have clearly and deliberatelyconferred a favor upon a third person.
2. How are contracts perfected?
Contractis deemedperfectedor given force when the components of consent, objectand
consideration are present.
3. When will a person be bound by a contract entered into by another?
In order to be bound by a contract, a person must have the legal ability to form acontract
in the first place, calledcapacity to contract. A person who is unable, due to age or mental
impairment, to understand what she is doing when she signs acontract may lack capacity to
contract.
4. Give the effect of the perfection of a contract.
Contracts are perfected by mere consent, and from that moment the parties are bound
notonly to the fulfillment of what has been expressly stipulated but also to all the
consequenceswhich, according to their nature, may be in keeping with good faith, usage and
law.

III. Problems
Explain or state briefly the rule or reason for your answer.
1. A and B entered into a contract not specifically provided in the Civil Code. Is the contract
valid and binding?
The contract is invalid. A contract is only considered legitimate under the general
requirements of the Philippine Civil Code if it contains the three elements of consent, object,
and cause. Because the contract isn't clearly mentioned in the Philippine Civil Code, I'm
assuming that the contract signed by A and B is illegal. It's probably safe to assume that there
are inconsistencies in the contract signed by A and B. The contract is void if it lacks the three
requirements, according to the law, specifically the Civil Code of the Philippines.
2. S (seller) and B (buyer) entered into a contract of sale. It was agreed that the price shall be
determined by T, a third person. Can S or B refuse to be bound by T’s determination
of the price if he does not agree with the amount thereof?
S or B may not refuse to be bound by T's determination of the price even if he does not
agree with the amount. T, in this case, is a third person. According to Article 1309, the
determination of the performance may be left to a third persons whose decision shall not be
binding until it has been made known to both contracting parties. In compliance with the
stipulations under this Code, S and B were already bound by T’s decision regarding the price the
moment it has been made known to both of them.
3. D owes C P20,000. Both are house painters. It was agreed that D instead of paying C, will
paint the house of E to which E expressed his conformity to C whose service as painter was
previously contracted by E. Has B the right to enforce the stipulation between C and D?
Since B did not take part in the contract, he is a stranger or a third person to the
contract. As a general rule, B has no right and obligation under the contract entered into by D
and C. Moreover, he has no lawful right to demand the enforce the stipulation between D and
C. In this case, however, applying paragraph 2 of Article 1311, it is E who has the right to enforce
the stipulation between C and D. Stipulation pour autrui is a stipulation in a contract clearly and
deliberately conferring a favor upon a third person who has a right to demand its fulfillment
provided that he communicates his acceptance to the obligor.
4. X made an office desk for Y. X told Y that the latter may pay whatever amount he would like
to pay for it. When the desk was finished Y offered to pay P2,000 but X instead demanded
P3,000, its fair value. Is X entitled to P3,000?
X is not entitled to P3,000 as the agreement for the payment was "whatever amount he
would like to pay for it." Therefore X may demand whatever amount he wants from Y but Y is
also free to ignore his demands and pay nothing, P2,000, P3,000, or P123,456,789. The will is
left to Y as agreed by both parties.

OBLICON STUDY GUIDE page 369-370

I. Definitions
Define or give the meaning of the following:
1. Consent

- Consent is the conformity of wills and with respect to contracts, it is the agreement of the will
of one contracting party with that of another or others, upon the object and terms of the contract

2. Acceptance

- Acceptance is the manifestation by the offeree of his assent to the terms of the offer. Without
acceptance, there can be no meeting of the minds between the parties. (Art. 1305.) A mere offer
produces no obligation.

3. Natural Elements

- Those that are presumed to exist in certain contracts unless the contrary is expressly stipulated
by the parties, like warranty against eviction, or warranty against hidden defects in sale

4. Option contract

- Option contract is a preparatory contract giving a person for a consideration a certain period
and under specifi ed conditions within which to accept the offer of the offerer. It is separate and distinct
from the projected main agreement or principal contract itself (subject matter of the option) which the
parties may enter into upon the consummation of the option or which will be perfected upon the
acceptance of the offer.

5. Mistake of law

- Mistake of law is that which arises from an ignorance of some provisions of law, or from an
erroneous interpretation of its meaning, or from an erroneous conclusion as to the legal effect of an
agreement, on the part of one of the parties.

II. Discussions
1. When is contract voidable or annullable?

According to Art.1330, a contract is voidable when consent is given through mistake, violence,
intimidation, undue influence or fraud.

2. Is it always required that he who alleges fraud or mistake in entering into a contract, must prove his
allegation?

No. According to Art.1332, when one of the parties is unable to read or if the contract is in a
language not understood by him, it is the party enforcing the contract who is duty-bound to show that
there has been no fraud or mistake and the terms of the contract have been fully explained to the
former.

3. Give the requisites in order that intimidation may vitiate or annul consent of a party to a contract.

According to Art.1335, the requisites are that (1) it must produce a reasonable and wellgrounded
fear of an evil, (2) the evil must be imminent and grave, (3) the evil must be upon his person or property,
or that of his spouse, descendants, or ascendants, and (4) it is the reason why he enters into the
contract.

4. May fraud be committed by a party to a contract though there is no misrepresentation on his part?
Explain.

Yes. According to Art.1339, concealment is equivalent to misrepresentation when there is a

neglect or failure to communicate that which a party to a contract knows and ought to communicate.

5. Will the acceptance of a business advertisement of a thing for sale produce the perfection of a
contract? Explain.

No. According to Art.1325, business advertisements of things for sale are not definite offers,
acceptance of which will perfect a contract, but are merely invitations to the reader to make an offer.

III. Problems
Explain or state briefly the rule or reason for your answer.
1. In a contract containing an option period, when is the offeror not allowed to withdraw his offer
even before acceptance by the offeree? When is the offeror allowed to withdraw his offer even after
acceptance?

According to Art.1324, the offeree may not withdraw his offer even before acceptance if the
option is founded upon a consideration, as something paid or promised. According to Art.1479, the
offeree is allowed to withdraw the offer even after the acceptance if it is a unilateral promise to buy or
sell a determinate thing not supported by any consideration distinct from the price for which the thing
was intended to be sold by or to the promisee.

2. S sold his house to B believing that B was C. Can S legally withdraw from the contract on the ground
of mistake?
 S can legally withdraw from the contract on the ground of mistake because under Article 1331, In
order that mistake may invalidate consent, it should refer to the substance of the thing which is the
object of the contract, or to those conditions which have principally moved one or both parties to enter
into the contract. Mistake as to the identity or quality of one of the parties will vitiate consent only when
such identity or qualifications have been the principal cause of the contract. A simple mistake of account
shall give rise to the correction.

3. S agreed to deliver to B 500 cavans of rice at P1,000.00 per cavan. S delivered only 490 cavans
deliberately misrepresenting that delivery consisted of 500 cavans. Can B ask the court to annul the
contract on the ground of fraud?

B can ask the court to annul the contract on the ground of fraud because this situation is a
representation of Causal Fraud (fraud used by a party to induce the other to enter into a contract
without which the latter would not have agreed to, taking into account the circumstances of the case) or
fraud employed to secure the consent of the other party, which is a ground for the annulment of a
contract although it may give rise to an action for damages.

4. S sold to B a commercial lot for P 1 million. S assured B that it is certain that in two years time the
land would increase in market value by 50%, B relied on the representation of S and bought the lot. It
turned out that the market value even decreased to P 800,000.00. Is S liable to B for the
misrepresentation?

Under Article 1340, The usual exaggerations in trade, when the other party had an opportunity
to know the facts, are not in themselves fraudulent. (n) The article refers to the usual exaggerations in
trade which are not fraudulent by themselves when the party has the opportunity to investigate and
know the true facts.

5. Suppose in the same problem, What S sold to B, a hardware owner, was 500 bags of cement. S had
every reason to believe that the price of the cement will go down but did not told B of such fact. Has B
the right to have the contract annulled?

The sale is valid and B does not have the right to have the contract annulled because S was not
bound to make disclosure of his reasons for his belief. Under Article 1339, Failure to disclose facts, when
there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.

OBLICON STUDY GUIDE page 376-377

I. Definitions
Define or give the meaning of the following:
1. Future Inheritance

- Is any property or right, not in existence or capable ofdetermination at the time of the contract,
that a person may inherit in thefuture, such person having only an expectancy of a purely hereditary
right.

2. Physical Impossibility
 - When the thing or service in the very nature of thingscannot exist or be performed. With
particular reference to services (see Arts.1206, 1207.), the impossibility may be:

a. Absolute – when the act cannot be done in any case so that nobodycan perform it; orb.

b. Relative – when it arises from the special circumstances of the case orthe special conditions or
qualifications of the obligor.

II. Discussions
1. Give the requisites of things as object of a contract.

In order that things may be the object of a contract, the followingrequisites must be present:

(1) The thing must be within the commerce of men, that is, it can legallybe the subject of
commercial transaction (Art. 1347.);

(2) It must not be impossible, legally or physically (Art. 1348.);

(3) It must be in existence or capable of coming into existence (see Arts.1461, 1493, 1495.); and

(4) It must be determinate or determinable without the need of a newcontract between the
parties. (Arts. 1349, 1460, par. 2.)

2. Give the requisites of service as object of a contract.

In order that service may be the object of a contract, the following requisites must concur:

(1) The thing must be within the commerce of men;

(5) It must not be impossible, legally or physically (Art. 1348.); and

(6) It must be determinate or capable of being made determinate. (Arts.1318[2], 1349.)

III. Problems
Explain or state briefly the rule or reason for your answer.
1. S sold to B for P100,000 a parcel of land belonging to S located in his hometown without specifying
its exact location and area. Is the sale valid?

According to Article 1349, The object of every contract must be determinate as to its kind. The
fact that the quantity is not determinate shall not be an obstacle to the existence of the contract,
provided it is possible to determine the same, without the need of a new contract between the parties .

• The contract is void if the particular land sold cannot be determined without new agreement
between the parties

2. S has several pigs. Under a contract of sale, S binds himself to deliver a pig to a B for P3,000 if the
pig has a weight of at least 30 kilos. State the binding effect of sale.

According to Article 1349, The object of every contract must be determinate as to its kind. The
fact that the quantity is not determinate shall not be an obstacle to the existence of the contract,
provided it is possible to determine the same, without the need of a new contract between the parties.

• The delivery of the pig should be determinate for the reason that the object of every contract
must be determinate to its kind. Also, the contract is not perfected until the weight of the pig is
agreed upon.

OBLICON STUDY GUIDE page 387

I. Definitions
Define or give the meaning of the following:
1. Cause

- Cause is an essential element of a contract which is more proximate purpose that the
contracting parties have in view at the time ofentering into the contract. It is also called causa which is
the immediate ordirect reason. The effect of the absence of cause makes no right and creates no legal
effect on the validity of the court.

2. Motive

- Motive is the purely personal or private reason which a party hasin entering into a contract.
The illegality of one’s motive does not render thecontract void. It may be regarded as the cause in a
contract if it is foundedupon a fraudulent purpose to prejudice a third person.

3. Inadequacy of cause

- Inadequacy of cause is not a ground for relief and from failure ofcause which does not
convert the contract into one without cause orconsideration. It means that the said contract
failed to present the right causefor the contract. Inadequacy of cause is not being essential to the
existence of cause but the contract is void for being without cause.

II. Discussions
1. Give the requisites of cause in a contract.

A contract without cause confers no right and makes no legaleffect whatever. In order to validate
the contract, there are important things toconsider and it must include all of these things.

First, it must exist at the time the contract is entered into which means that the contract must
have a cause in order to make its effect be effective. Next is that it must be valid under the constitutions
of the law or to make it short, as a lawful cause because if these causes verified as unlawful,the contract
produce no effect at all. Lastly, the cause must be true or real.
2. State the effect if the cause of a contract is found to be false.

The contract states a valid consideration but such statement isnot true is meant by falsity of
cause. This false statements cause the contractstend to be void or null. Next is it does not always
produce this effect because itmay happen that the hidden but true cause is sufficient to support the
contract. If the parties can show that there is another cause and that said cause is trueand lawful, then
the parties shall be bound by their true agreement.

3. What is the object and what is the cause in a contract of sale?

The thing or the object of the contract of sale is a bilateral or reciprocal contract which is the
cause for one is the subject matter or object forthe other, and vice versa. Hence, the distinction is only a
matter of viewpoint.

The object of the contract of sale also must be determinate or capable of being determinate. It
also needs to be licit or lawful, that is, it should not be contrary to law, morals, good customs, public
order, and public policy. Third, it should not be impossible. The object of the contract must be within the
commerce of men, which means that it is legal and its ownership istransferable.

III. Problems
Explain or state briefly the rule or reason for your answer.
1. S sold his fishing boat to B who intends to use the boat for smuggling. Is the contract of sale illegal?

According to Article 1351, The particular motives of the parties entering into a contract are
different from the cause thereof.

• B has the right to ask the court for rescission or cancellation of the sale.

2. S sold to B a specific parcel of land for P500,000. B failed to pay. Has C the right to have the sale
declared void by the court on the ground of absence of cause for non-payment of the price?

In the scenario, C is just the third person which doesn’t concern any fulfillment of obligation on
the contract. C doesn’t have any right to have the sale declared void by the court on the ground of
absence of cause for non-payment of the price. C didn’t exist at the time of the transaction of the
contracting parties and it’s not his responsibility to declared that the contract of sale is void. Only the
agreement of the contracting parties has the rights to do anything about the contract.

3. X gave P10,000 to Y who signed a receipt stating: “This is to acknowledge payment by X in the
amount of P12,000”. X later complains that he received nothing from Y for the P10,000. Is Y bound to
return the P10,000?

According to Article 1354, Although the cause is not stated in the contract, it is presumed that it
exists and is lawful, unless the debtor proves the contrary

• Yes, this is because o the receipt which was acknowledged by the both parties. Therefore, the
law presumes that X must received P10,000 to Y or there’s a consideration that should be
received.
4. S sold to B his car worth of P250,000 for only P200,000. There is no question that the purchase price
is grossly inadequate. Has S the right to have the sale annulled?

According to Article 1355, Except in cases specified by law, lesion or inadequacy of cause shall
not invalidate a contract, unless there has been fraud, mistake or undue influence.

• Contract is valid although the price is inadequate. In addition, when both parties are form an
independent judgement regarding the transaction does not mean that the contract between
them is cancelled.

OBLICON STUDY GUIDE page 394-395

I. Definitions
Define or give the meaning of the following:
1. Form of Contract

- The form of a contract refers to the manner in which a contract is executed or manifested.

2. Informal contract

- Informal or common contract or that which may be entered into in whatever form, provided, all
the essential requisites for their validity are present. (Art. 1356.) This refers only to consensual contracts
(Art. 1356.), such as the contract of sale. An informal contract may be oral or written.

II. Discussions
1. What may be the form of contract?

• The contract may be (a) parol or oral, or (b) in writing, or (c) partly oral and partly in writing. If in
writing, it may be in a public or a private instrument.

• A contract need not be contained in a single writing. It may be collected from different writings
which do not confl ict with each other and which when connected, show the parties, subject
matter, terms and consideration, as in contracts entered into by correspondence. (17 C.J.S. 727-
728.)

• A contract may be encompassed in several instruments even though every instrument is not
signed by the parties since it is suffi cient if the unsigned instruments are clearly identifi ed or
referred to and made part of the signed instrument or instruments. (Ibid., p. 728.)

• Similarly, a written agreement of which there are two copies, one signed by each of the parties
is binding on both to the same extent 634 635 as though there had been only one copy of the
agreement and both had signed.

2. If the law requires a contract to be in writing, will the contract be invalid if it is not in writing?
 - As long as an agreement satisfies all of the aforesaid three elements, then there exists a valid
contract regardless of whether or not it is in writing. For this reason, a contract is a contract in whatever
form it may be, unless the law requires that it be in writing for it to be valid or enforceable.

III. Problems
Explain or state briefly the rule or reason for your answer.
1. S(seller) and B (buyer) entered into a contract of sale of a parcel of land. The sale is embodied only
in a private document and not in a public instrument because it was not acknowledged before a
notary public as required by law. Is the sale valid?

2. In the same example, what rights, if acquired by any, are the contracting parties?

OBLICON STUDY GUIDE page 404

I. Definitions
Define or give the meaning of the following:
1. Reformation

- Reformation is that remedy allowed by law by means of which a written instrument is amended
or rectified so as to express or conform to thereal agreement or intention of the parties when by reason
of mistake, fraud,inequitable conduct, or accident, the instrument fails to express suchagreement or
intention.

2. Mutual mistake

- Mutual Mistake is an error of both parties to a contract, where by each operates under the
identical misconception concerning a past or existing material fact.

II. Discussions
1. What is the reason why the law in certain cases permits a written instrument to be reformed or
corrected?

A written instrument is amended or rectified so as to the parties when by reason of mistake,

fraud, inequitable conduct, or accident, theinstrument fails to express such agreement or intention. This
written document can be formally attributed to its author, records and formally expresses a legal
enforceable act, process, or agreement.

2. In what way is reformation of written instrument distinguished from the annulment of a contract?
 Reformation means changing the contract into correct one and improves it. In the process of
reformation, it includes the meeting of the minds of the contracting parties on what they will gonna
change or remove on theconsideration of the contract.

III. Problems
Explain or state briefly the rule or reason for your answer.
1. S sold his horse “X” to B under a written contract of sale. What B thought S was selling him is horse
“Y”. Can S ask for the reformation of the contract against the objection of B who is agreeable to the
sale of horse “X”?

The instance resulted to mutual mistake of fact which the written instrument failed to express
the true intention of the contracting parties. S can ask for the reformation of the contract due to the
mutual mistake even though B agreed to receive the horse X.

2. Suppose in the same example, S was intending to sell his horse “Y.” Give the three (3) cases when
he can ask for the reformation of the contract.

On the same example mention above, there are 3 cases where in the seller can ask for the
reformation of the contract. First, the seller’s reformation will only be granted if he/she was mistaken in
good faith. In this case, the mistake is only acted by one party not mutual. Next case is when one party
was mistaken and the other knew or believed that the instrument did not state their real agreement, but
concealed that fact from the former thatconstitutes fraud, the instrument may be reformed. And lastly is
when the person who is drafting the written instrument tends to practice ignorance, lackof skill,
negligence or bad faith while drafting the contract which resulted to themistake which does not express
the true intention of the parties, the courtsmay order that the instrument be reformed.

OBLICON STUDY GUIDE page 414-415

I. Definitions
Define or give the meaning of the following:
1. Interpretation of contract

- Interpretation of a contract is the determination of the meaning ofthe terms or words used by
the parties in their written contract.

2. Contract of adhesion

- Contracts of adhesion is a contracts most of the terms of which do not result from mutual
negotiation between the parties as they are usually prescribed in printed forms prepared by one party to
which the other may“adhere” if he chooses but which he cannot change.

II. Discussions
1. What should be followed in the interpretation of a contract,its terms or the intention of the parties?
Explain.

Based on Article 11370, in the interpretation of a contract,the intention of the parties is one of
the important to consider in creating the contract. The intention of the parties should always prevail
because their will has the force of law between them. Terms are just created afterthe intention of the
parties has been created.

2. Suppose a stipulation or word in a written contract issusceptible of various interpretations, what

interpretation ormeaning should be given to it?

There are some instances that the word or stipulation of contract has susceptible meanings. In
this case, one of which would render it effectual,it should be given that interpretation. Thus, if one
interpretation makes acontract valid and the other makes it illegal, the former interpretation is onewhich
is warranted. Also, it is to be understood in that sense which is most inkeeping with the nature and
object of the contract in line with the cardinal rulethat the intention of the parties must prevail.

3. State the rule of interpretation where there are various stipulations of a contract.

Under Article 1374, which stated, “The various stipulations of acontract shall be interpreted
together, attributing to the doubtful ones that sense which may result from all of them taken jointly”
said that the contract must be interpreted as a whole and the intention of the parties is to be gathered
from the entire instrument and not from particular words, phrases, orclauses. All provisions should, if
possible, be so interpreted as to harmonize with each other.

III. Problems
Explain or state briefly the rule or reason for your answer.
1. S sold to B his condominium unit “including all its contents.” In the unit, there is an antique chair
belonging to X which X agreed to sell to S. Is the chair to be included in the sale of the unit?

The decision that’ll be made is based upon the article 1372which explained about the
particular matter that may be included and excluded on the terms of the contract. In this illustration, if S
already paid the antique chair to X, this chair can be considered to be part of the agreement. And if S is
not yet paid, this chair is still belonging of X so it is not included on the contract that says, “including all
its contents”.

2. X, architect, designed and supervised the construction of the house of Y. The parties failed to
agree beforehand the professional fee of X. how much is Y bound to pay X?

In this case it will be based on Article 1376 which tackled about the doubtful or ambiguous in a
contract which the contracting parties are entered into. A fine example of this Article was mentioned
above which the amount must be determined by the rate customarily paid in the place wherethe
services were rendered. They must also consider the quality of the workand other factors that may affect
the price of the work of X.

3. Suppose in the same problem, the professional fee was agreed upon, but it is not clear from the
written contract prepared by X upon the request of Y whether it should be the fixed amount of
P200,000 or 6% of the cost of construction. How much is Y liable to pay?

In this problem, X is the party who draft the contract that could have prevented mistakes or
ambiguity in the meaning by careful choice of words and also the party who causes the obscurity acts
with ulterior motives.The terms of the contract does not result to the mutual negotiation they’d created
and most of it was based upon the one party which is the X. Theliability of Y is what will he/she chooses
from the terms of the contract. Reformation also can be made if Y chooses to reform the contract.

OBLICON STUDY GUIDE page 430

I. Definitions
Define or give the meaning of the following:
1. Rescissible contract

- Rescissible contracts are those validly agreed upon because all the essential elements exist and,
therefore, legally effective, but in the cases established by law, the remedy of rescission is granted in the
interest of equity.

2. Rescission

- Rescission is an equitable remedy granted by law to the contracting parties and sometimes
even to third persons in order to secure reparation of damages caused them by a valid contract, by
means of the restoration of things to their condition prior to the celebration of said contract.

II. Discussions
1. State the rule on the liability of the acquires in bad faith of property alienated in fraud creditors.

2. In what cases is rescission not allowed although the contract is found to be rescissible under the
law?

III. Problems
Explain or state briefly the rule or reason for your answer.
1. D owes C P100,000. Since D fails to pay, C expressed its willingness to accept the car of D, with the
same value, more or less, in payment of his debt. D, in bad faith, sold the car to X. Has C the right to
ask for the rescission of the sale?

2. F, guardian of M (minor), sold to B a property of M with a market value ofP50,000 for only P37,000,
or a difference of more than ¼ (P12,500) of the value. If the rescission of the sale is
demanded, what possible defense under the law can B present to avoid rescission?

OBLICON STUDY GUIDE page 442-443

I. Definitions
Define or give the meaning of the following:
1. Voidable contract

- Voidable or annullable contracts are those which possess all the essential requisites of a valid
contract but one of the parties is legally incapable of giving consent, or consent is vitiated by mistake,
violence, intimidation, undue infl uence, or fraud.

2. Annulment

- Annulment is a remedy as well as a sanction provided by law, for reason of public interest, for
the declaration of the ineffi cacy of a contract based on a defect or vice in the consent of one of the
contracting parties in order to restore them to their original position in which they were before the
contract was executed.

3. Ratification

- Ratifi cation means that one under no disability voluntarily adopts and gives sanction to some
defective or unauthorized contract, act, or proceeding which, without his subsequent sanction or
consent, would not be binding or him. It is this voluntary choice, knowingly made, which amounts to a
ratifi cation of what was theretofore unauthorized and becomes the authorized act of the party so
making the ratifi cation

II. Discussions
1. Give the requisites for the ratification of avoidable contract.

(1) The requisites for implied ratifi cation are the following:

(a) There must be knowledge of the reason which renders the contract voidable;

(b) Such reason must have ceased; and

(c) The injured party must have executed an act which necessarily implies an intention to waive his right.

2. State the rule on the right of strangers to a contract to bring an action for its annulment.

3. Under the law, what contracts are voidable or annullable?

III. Problems
Explain or state briefly the rule or reason for your answer.
1. S, a minor, sold a property to B. Later, the sale is annulled on the ground of the minority of S. Is S
bound to return the price received by him?

Yes, S is required to return the price he received from B. From Article 1399, S is obliged to
provide restitution only to the degree that he was benefited by the price he got.

2. In the same problem, suppose S, upon reaching the age of majority, decided to ratify or respect the
contract. Has B the right to refuse the ratification and demand mutual restitution of the property and
the price?

Yes, B has the right to decline ratification and demand mutual property and price recovery.
Because S signed to the contract while he was a minor, he waives his rights if the contract has any faults,
according to Article 1395. As a result, even though he reaches the age of adulthood, B can conveniently
ignore S's requests that he follow the contract.

3. Again, in the same problem, suppose the sale was annulled by the court, what are the rights of the
parties if the property was lost or destroyed?

(a) without the fault of B?

According to Article 1400, if the property was lost or destroyed without B's fault, B is no
longer obligated to return the contract's subject matter.

(b) through the fault of B?

B's obligation is not discharged if the property is lost or destroyed due to his fault, but he
is liable for damages. B is required to pay damages in the amount of the item's value at the time of the
loss, plus interest from the same date, under Article 1400.

OBLICON STUDY GUIDE page 455-456

I. Definitions
Define or give the meaning of the following:
1. Unenforceable contract

- Unenforceable contracts are those that cannot be enforced in court or sued upon by reason of
defects provided by law until and unless they are ratifi ed according to law.

2. Statute of Frauds

- The term “statute of frauds’’ is descriptive of statutes which require certain classes of contracts
to be in writing. This statute does not deprive the parties of the right to contract with respect to the
matters therein involved, but merely regulates the formalities of the contract necessary to render it
enforceable. The effect of non-compliance is simply that no action can proved unless the requirement is
complied with.

3. Unauthorized contract

- Unauthorized contracts are those entered into in the name of another person by one who has
been given no authority or legal representation or who has acted beyond his powers.

II. Discussions
1. What are the kinds of unenforceable contract?

Under Article 1403, the following contracts are unenforceable:

(1) Those entered into in the name of another by one without or acting in excess of authority;

(2) Those that do not comply with the Statute of Frauds; and

(3) Those where both parties are incapable of giving consent.

A party to an unenforceable contract may bring an action to enforce it subject to the defense of the lack
of the required form (Statute of Frauds) or absence of authority or in excess thereof. The law expressly
provides that such a contract cannot be assailed by a third person. (Art. 1408.)

2. How may contracts violating the Statute of Frauds be ratified?

3. State the purpose of the Statute of Frauds.

The Statute of Frauds has been enacted not only to prevent fraud and perjury in the
enforcement of obligations depending for their evidence on the unassisted memory of witness but also
to guard against the mistakes of honest men by requiring that certain agreements specified (Art. 1403,
No. 2[a-f].) must be in writing signed by the party to be charged; otherwise, they are unenforceable by
action in court. (see Shoemaker vs. La Tondeña, Inc., 68 Phil. 24 [1939]; Rosencor Development
Corporation vs. Inquing, supra.) Unless they be in writing, there may be no palpable evidence of the
intention of the contracting parties and the court must perforce rely upon no other evidence than the
mere recollection or memory of witnesses, which in many times faulty and unreliable. (see Facturan vs.
Sabanal, 81 Phil. 513 [1948].) Thus, by requiring that such agreements can only be proved by a writing,
the object is effectually attained since the writing becomes its own interpreter. Since the Statute of
Frauds was enacted for the purpose of preventing frauds, it should not be made the instrument to
further them. (Phil. National Bank vs. Phil. Vegetable Oil Co., supra; Cuyugan vs. Santos, 34 Phil. 100
[1916].) Thus, where a party has entirely complied with his obligations under an oral contract, the other
cannot avoid the fulfi llment of those incumbent upon him under the same contract by invoking the
Statute of Frauds. Equity demands that oral evidence be admitted to prove the contract because the
statute aims to prevent and not to protect fraud. (Shoemaker vs. La Tondeña, supra.)
III. Problems
Explain or state briefly the rule or reason for your answer.
1. L an insane person, entered into a contract with M. a minor. What is the effect of ratification

(a) by either; and

If either of the parties regains capacity through their guardian wherein it ratifies the contract,
therefore the contract become voidable since according to article 1407 if ratification is made by the
parents or guardians, as the case may be, of both contracting parties, the contract shall be validated
from the inception. Since either of the parties only has ratification then the contract is invalid

(b) by both, after becoming incapacitated?

If both of the parties regain capacity through their guardian wherein it ratifies the
contract, therefore the contract becomes validated since according to article 1407 if ratification
is made by the parents or guardians, as the case may be, of both contracting parties, the
contract shall be validated from the inception. Since both of the parties have ratification then
the contract is invalid.

2 D (debtor) owes C (creditor) P10,000. T (third person) orally promised to assume the obligation of D.
Can the promise of T be proved by the testimony of a witness who was present when T made the
same?

3. S orally agreed to sell his piano for P7,000 to B who made a partial payment of P1,000. Later, S
denied there was such a sale. Can B enforce the sale considering that the contract was oral and the
price was more than P500?

OBLICON STUDY GUIDE page 472-473

I. Definitions
Define or give the meaning of the following:
1. Void Contract

- Void contracts are those which, because of certain defects, generally produce no effect at all.
They are considered as inexistent from its inception or from the very beginning.

2. Inexistent contract

- Inexistent contracts refer to agreements which lack one or some or all of the elements (i.e.,
consent, object, and cause) or do not comply with the formalities which are essential for the existence of
a contract.

3. Indivisible contract
 -

II. Discussions
1. What are the characteristics of a void or inexistent contract?

They are as follows:

(1) Generally, it produces no effect whatsoever, being void or inexistent from the beginning;

(2) It cannot be cured or validated either by time or ratifi cation1 (Art. 1409, par. 2.);

(3) The right to set up the defense of illegality, inexistence, or absolute nullity cannot be waived (Ibid.);

(4) The action or defense for the declaration of its illegality, inexistence, or absolute nullity does not
prescribe (see Art. 1410.);

(5) The defense of illegality, inexistence, or absolute nullity is not available to third persons whose
interests are not directly affected (see Art. 1421.);

(6) It cannot give rise to a valid contract. (see Art. 1422.); and

(7) Its invalidity can be questioned by anyone affected by it. (see Nazareno vs. Court of Appeals, 343
SCRA 637 [2000].)

The above characteristics distinguish a void contract from the other defective contracts.

2. Give the rules where the contract is unlawful and the act constitutes a crime, and both parties are
equally guilty.

According to Article 1411, it must be shown that the nullity of the contract proceeds from an
illegal cause or object, and the act of executing said contract constitutes a criminal offense.

1) Where both parties are in pari delicto. — The following are the effects of a contract whose
cause or object constitutes a criminal offense and both parties are equally guilty in pari delicto:

(a) The parties shall have no action against each other, or as stated in the legal maxim: In pari delicto
melior est conditio defendentis;

(b) Both shall be prosecuted; and

(c) The things or the price of the contract, as the effects or instruments of the crime, shall be confiscated
in favor of the government.

3. Give the rules where the contract is unlawful but the act does not constitute a criminal offense, and
only one party is guilty or both parties are not equally guilty.

(1) Where both parties in pari delicto. — If the cause of the contract is unlawful or forbidden but
there is no criminal offense, the rules are as follows:
(a) Neither party may recover what he has given by virtue of the contract; and

(b) Neither party may demand the performance of the other’s undertaking. (see Heirs of M. Avila vs.
Court of Appeals, 145 SCRA 541 [1986]; see Villegos vs. Rural Bank of Tanjay, Inc., 588 SCRA 436 [2009].)

No relief can be granted to either party; the law will leave them where they are. The principle of pari
delicto is grounded on two (2) premises: first, that courts should not lend their good offi ces to mediating
disputes among wrongdoers; and second, that denying relief to an admitted wrongdoer is an effective
means of deterring illegality.

III. Problems
Explain or state briefly the rule or reason for your answer.
1. S (seller) and B (buyer) entered an absolutely simulated contract of sale of a parcel of land. S
brought action in court to recover the land only after 20 years. Is it correct for the court to dismiss the
action because of the long lapse of time?

No, The court cannot dismiss the action. According to Article 1410, the action or defense for the
declaration of the inexistence of a contract does not prescribe. So, if a contract is invalid (absolutely
simulated contract), a party to it can always bring a court action to declare it void or inexistent; and,
notwithstanding the passage of time, a party seeking to enforce a void contract can always raise the
defense of nullity.

2. In consideration of P10, 000 given by X to Y, the latter agreed to burn the house of Z. Later, X told Y
to forget the agreement and to return the money. Y refused. Is X entitled to recover from Y?

3. W (woman) agreed to stay in the house of M (man) as the latter's live-in partner for one year in
consideration of the latter's promise to pay her P100,000 after said period. W complied with her part
of the agreement but M reneged on his promise. Is W entitled to recover from M?

OBLICON STUDY GUIDE page 482

I. Definitions
Define or give the meaning of the following:
1.

2.

-
3.

II. Discussions

III. Problems
Explain or state briefly the rule or reason for your answer.