OBLIGATIONS AND CONTRACTS property of another without any power or authority

from the latter.

CHAPTER 1. GENERAL PROVISIONS
2. Solutio indebiti – a juridical relation which arises
whenever a person unduly delivers a thing through
Art 1156 – obligation is a juridical necessity to give, to do or mistake to another who has no right to demand it.
not to do.

Requisites of Obligations: Art. 1161 - Obligations derived from DELICTS

1. Juridical or legal tie – binds the parties to the obligation Civil obligations arising from offenses shall be
2. Active subject (creditor) – can demand the fulfillment of the governed by the penal laws, subject to the provisions of Art
obligation 2177, Chapter 2 on Human Relations and Title 18 of the Civil
3. Passive subject (debtor) – against whom the obligation is Code on damages.
juridically demandable.
4. Prestation – object of the obligation Article 100 RPC Every person criminally liable is civilly liable. A
crime has a dual aspect – criminal and civil aspect.

Art 1157 – Sources of Obligation ENFORCEMENT OF CIVIL LIABILITY

1. Law General rule: The civil action is deemed impliedly instituted in

2. Contracts the criminal action.
3. Quasi-contracts
4. Delicts (Acts or omissions punished by law) Exception:
5. Quasi-delicts 1. Expressly waives the civil action
2. Reserves his right to institute it separately
Art 1158 - Obligations derived from LAW 3. Institutes the civil action prior to the criminal
action
Obligations derived from law are not presumed. Only
those expressly determined in the Civil Code or in special laws INDEPENDENT CIVIL ACTIONS (Articles 31, 32, 33, 34, 2176)
are demandable. A civil action entirely separate and distinct from the criminal
action may be brought by the injured party during the
pendency of the criminal case. Such shall proceed
Art 1159 - Obligations derived from CONTRACTS independently of the criminal prosecution and shall require
only a preponderance of evidence.
Obligations arising from contracts have the force of
law between the contracting parties and should be complied Two kinds of independent civil actions
with in good faith.
1. Civil action based on an obligation NOT arising from
CONTRACT - Meeting of minds between two persons whereby an act or omission complained of as a felony
one binds himself with respect to the other, to give something (law, contract, quasi-contract or quasi-delict)
or render some service.
2. Civil action entirely separate and distinct from the
Two kinds of of Contract: criminal action. (Articles 31, 32, 33, 34, 2176)

1. Consensual contract – perfected by mere consent. Once

the contract is perfected, the valid contract has the force of
law binding the parties to comply therewith in good faith, Art 1162 - Obligations derived from QUASI - DELICTS
where neither one may renege therefrom without the consent
of the other. QUASI-DELICT - Obligations which do not arise from
law, contracts, quasi-contracts or criminal offenses. Fault or
2. Real contract - not perfected until the delivery of negligence which causes damage to another, there being no
the object of the obligation. (pledge, commodatum, deposit) pre-existing contractual relations between the parties. (Article
2176)

Obligations derived from quasi-delicts shall be governed by the

provisions of Chapter 2, Title 17 of the Civil Code and by special
Art 1160 - Obligations derived from QUASI - CONTRACTS laws. (Article 1162)

QUASI-CONTRACT - A juridical relation arising from lawful, Requisites of liability

voluntary and unilateral acts, by virtue of which the parties
become bound to each other, based on the principle that no 1. fault or negligence of the defendant
one shall be unjustly enriched or benefited at the expense of 2. damage suffered by the plaintiff
another. 3. relation of the cause and effect

Kinds of Quasi-Contracts
CHAPTER 2. NATURE AND EFFECTS OF OBLIGATIONS
1. Negotiorum gestio – a juridical relation which
arises whenever a person voluntarily takes charge of Art 1163 – Obligation to Give
the agency or management of the business or
An obligation to give may be either: 4. To be liable for damages in case of breach of obligation by
1. Determinate – when the object is particularly reason of delay, fraud, negligence of contravention of the
designated or physically segregated from all others of the same tenor thereof.
class
2. Generic – when the object is designated merely by its In generic obligations
class or genus without any particular designation. 1. To deliver a thing which is neither of superior nor
inferior quality.
STANDARD OF CARE - Every person obliged to give something 2. To be liable for damages for damages in case of
is also obliged to take of it with the proper diligence of a good breach of the obligation by reason of delay, fraud,
father or family, unless the law or the stipulation of the parties negligence of contravention of the tenor thereof.
requires another standard of care.
Art 1166 – The obligation to give a determinate thing includes
WHEN DOES THE OBLIGATION TO DELIVER THE THING ARISE? that of delivering all its accessions and accessories, even
though they may not have been mentioned.
Depends upon the nature of the obligation itself.

1. From the time designated by the provisions of the Art 1167 – Obligation to do
Civil Code or of special laws creating them (If
obligation arises from law, quasi-contracts, quasi- If a person obliged to do something fails to do it, the same
delicts and delicts) shall be executed at his cost. The same rule shall be observed if
2. From the moment of the perfection of the he does it in contravention of the tenor of the obligations.
contract (If obligation arises from a contract) Furthermore, what has been poorly done be undone.

Exception: when the obligation is subject to a suspensive EFFECTS OF BREACH: If the obligor fails to do that which he
condition (obligation to deliver only arises from the moment has obligated himself to do, the obligee can have the
the condition is fulfilled) obligation performed or executed at the expense of the
former, and demand for damages by reason of breach.

WHAT IS PROHIBITED - The creditor cannot compel the obligor

for specific performance because the law recognizes the
Art 1164 - NATURE OF RIGHT individual’s freedom to choose between doing that which he
promised and not doing it, otherwise it would result to
The creditor has a right to the thing as well as the fruits thereof involuntary servitude.
from the time the obligation to deliver it arise.

1. Personal right – A right pertaining to a person REMEDIES AVAILABLE FOR CREDITOR IN OBLIGATIONS
to demand from another; enforceable only against a TO DO
1. Have the obligation executed at the
definitive person (jus ad rem) expense of the debtor
2. Real right – A right pertaining to a person 2. Ask for damages
over a specific thing; enforceable against the whole
world (jus in re) Art 1168 – OBLIGATIONS NOT TO DO

Therefore, before delivery, the creditor in obligations to give, When the obligation consists in not doing, and the
has merely a personal right against the debtor (to ask for obligor does what has been forbidden him, it shall be
delivery of the thing and the fruits thereof). Once the thing and undone at his expense. The object of the obligation is
the fruits are delivered, he then acquires a real right fulfilled so long as that which is forbidden is not done by the
over them, a right enforceable against the whole world. obligor.

Art 1165 EFFECTS OF BREACH: If the obligor does what has been
forbidden him, two remedies are available to the obligee:
RIGHTS OF CREDITOR
1. To have it undone at the expense of the obligor(Art 1168)
In determinate obligations 2. Ask for damages (Art 1170)
1. To compel specific performance
2. To recover damages for breach of obligations Delay or mora is not possible

In generic obligations In obligations not to do, delay is not possible

1. To ask for performance of the obligation because in negative obligations, the obligation is either
2. To ask that the obligation be complied with at the expense fulfilled or not fulfilled.
of the debtor
3. To recover damages for breach of the obligation Instances where 1st remedy is not available

OBLIGATIONS OF DEBTOR 1. Where the effects of the act which is forbidden is

definite in character
2. Where it would be physically or legally impossible to
In determinate obligations undo what has been done because of the nature of the act
1. To perform the obligation specifically itself, because of a provision of the law or because of
2. To take care of the thing with the proper diligence of a good conflicting rights of third persons.
father of a family
Art 1169 – Art 1173 - BREACH OF OBLIGATIONS
3. To deliver all accessions and accessories of the things,
even though they may not have been mentioned Two kinds of breach of obligation:
 circumstances of the persons, of the time and the place;
1. Voluntary (default, fraud, negligence, contravention) absence of due care required by the nature of the obligation.
2. Involuntary (fortuitous event)
Kinds of negligence
1. Criminal negligence
VOLUNTARY BREACH THROUGH DEFAULT 2. Civil negligence
DEFAULT – Signifies the idea of delay in the a. Culpa contractual – fault or negligence of the
performance of an obligation with respect to time. debtor by virtue of which he is unable to perform
his obligation arising from a pre-existing contract
Three kinds of default: because of the omission of the diligence which is
required of the obligation.
1. Mora solvendi – delay of the debtor to b. Culpa aquiliana (quasi-delict) – fault or negligence
perform his obligation. (Mora solvendi ex re – of a person who, because of the omission of the
obligation to give; Mora solvendi ex persona – diligence which is required by the nature of the
obligation to do) obligation, causes damage to another.

2. Mora accipiendi – delay of the creditor to VOLUNTARY BREACH THOUGH CONTRAVENTION OF TENOR
accept the delivery of the thing which is the object
of the obligation Debtor is bound to indemnify the creditor for the
damages caused thereby. Contravention of the tenor of the
3. Compensation morae – delay of the parties in
reciprocal obligations. obligation includes every kind of defective performance.

When demand is not necessary Art 1174 – Fortuitous Events

1. When the obligation or the law expressly so declares FORTUITOUS EVENT – An event which could not be foreseen,
2. When it appears that the designation of time or which, though foreseen, was inevitable.
was the controlling motive for the establishment of
the contract
Acts of God - Those which are absolutely independent of
3. When demand would be useless as when the human intervention, such as rains, typhoons, floods,
debtor has rendered it beyond his power to perform. cyclones, earthquakes or any other similar calamity brought
about by natural forces.
Default in negative obligations
Force majeure – Events which arise from legitimate or
The debtor can not incur delay in negative obligations.
illegitimate acts of persons other than the obligor, such as
Fulfillment and violation are possible, but never delay.
commotions, riots, wars, robbery and similar acts.
Default in reciprocal obligations
CLASSIFICATIONS OF FORTUITOUS EVENT
Reciprocal obligations – those which are created or
established at the same time, out of the same cause and As to human intervention
which result in mutual relationships of creditor ad debtor 1. Fortuitous event proper (act of God) – event
between the parties. absolutely independent of human intervention
2. Force majeure – event which arises from
legitimate or illegitimate acts of persons other than
Requisites of default:
the obligor.
1. The obligation is demandable and already liquidated
2. The obligor delays performance
3. The creditor requires the performance judicially or As to forseeability
extra- judicially 1. Ordinary – Event which usually happens or which
could be reasonably foreseen
Default in positive obligations 2. Extraordinary – Event which does not usually happen
and which could not have been reasonably foreseen, such
In obligations to give or to do, the debtor incurs in as war, pestilence, earthquake, etc.
EFFECT UPON OBLIGATION
delay from the time the creditor demands from him the
fulfillment of the obligation. Demand may either be: If the obligor is unable to comply with his obligation by
reason of fortuitous event:
1. Judicial – creditor files a complaint against the
General rule:
debtor in court for the fulfillment of the
obligation Obligation is extinguished. Obligor is exempted from any
2. Extrajudicial – creditor demands from the debtor liability.
either orally or in writing.
Exceptions
VOLUNTARY BREACH THROUGH FRAUD
1. When the obligation is generic (the genus of a
thing can never perish)
FRAUD – consists in the conscious and intentional proposition 2. Where such liability is expressly specified by law
to evade the normal fulfillment of an obligation. 3. Where it is declared by stipulation of the parties
4. Where the nature of the obligation requires
Effect of Fraud: If there is breach or non-fulfillment of the the assumption of risk (no wrong is done to one who
obligation by reason of fraud on the part of the debtor, he
can be held liable for damages. consents)
5. When the object of the obligation is lost and the
VOLUNTARY BREACH THROUGH NEGLIGENCE OR CULPA
loss is due partly to the fault of the debtor
NEGLIGENCE – omission of that diligence which is required 6. When the object of the obligation is lost and
by the nature of the obligation and corresponds with the the loss occurs after the debtor has incurred in delay
 7. When the debtor promised to deliver the same General Rule: Rights of obligations or those rights which are
thing to two or more persons who do not have the acquired by virtue of an obligation are transmissible in
same interest character. Hence, can be alienated or assigned to third
8. When the obligation to deliver arises from a persons.
criminal offense
Exceptions:
ESSENTIAL CONDITIONS 1. Where they are not transmissible by their very nature
(purely personal right)
1. The event must be independent of the will of the 2. Where there is a stipulation of the parties that they are
obligor not transmissible (not implied; must be clearly established)
2. The event must be either unforeseeable or inevitable 3. Where they are not transmissible by operation of law
3. The event must be of such character as to
render it impossible for the obligor to fulfill his
obligation in a normal manner CHAPTER 3. DIFFERENT KINDS OF OBLIGATIONS
4. The obligor must be free from any participation
in the aggravation of the injury resulting to the oblige Section 1. Pure and Conditional Obligations

Art 1175 – Usurious Transactions

Art 1179 – 1180
USURY – Contracting for or receiving something in
excess of the amount allowed by law for the loan or PURE OBLIGATION
forbearance of money, goods.
An obligation that is demandable at once; whose
effectivity or extinguishment does not depend upon the
Art 1176 fulfillment of a condition or upon the expiration of a term or
period.
The receipt of the principal by the creditor without reservation
with respect to the interest, shall give rise to the presumption CONDITIONAL OBLIGATION
that said interest has been paid.
An obligation whose effectivity is subordinate to
The receipt of a later installment of a debt without reservation the fulfillment or nonfulfillment of a condition.
as to prior installments, shall likewise raise the presumption
that such installments have been paid. 
Condition
A future and uncertain fact or event upon which
an obligation is subordinate or made to depend.
Art 1177
Requisites of a condition
REMEDIES OF CREDITOR TO PROTECT CREDIT 1. The fact or event must be future
2. The fact of event must be uncertain
1. Exact payment
2. To exhaust the property in possession of the debtor Past event unknown to the parties not a condition
3. To be subrogated to all of the rights and actions of The event can never constitute a condition because
the in order that it can be classified as such, the requisites of
debtor, save those which are inherent in his person futurity and uncertainty must be present.
4. To impugn all of the acts which the debtor
may have done to defraud him Term or Period
That which necessarily must come (like 2005)
EXHAUSTION OF DEBTOR’S PROPERTY whether the parties know when it will happen or not
(like death, since this is sure)
The principal remedy of the creditor to protect
and enforce his credit, generally by attachment.
Art 1181 – Suspensive and Resolutory Conditions

ACCION SUBROGATORIA (SUBROGATORY ACTION) SUSPENSIVE CONDITION

Effectivity of obligation is suspended until the
Right of the creditor to exercise all of the rights and
bring all of the actions which the debtor may have against happening or fulfillment of the condition.
third persons.
Effect: The acquisition of rights shall depend upon the
Exception happening of the condition. What is acquired by the
Rights which are purely personal in the sense that creditor upon the constitution of the obligation is only a
they are inherent in the person of the debtor. mere hope or expectancy.

ACCION PAULIANA Example: I will give you my car if you pass the
Bar examinations.
Right of the creditor to impugn or directly attack
acts or contracts done by the debtor to third persons to RESOLUTORY CONDITION
defraud the former. Effectivity of obligation is extinguished upon the
happening or fulfillment of the obligation.
Art 1178 - TRANSMISSIBILITY OF RIGHTS
 Effect: Although rights are immediately vested in the creditor Art 1186 – Constructive Fulfillment of Suspensive Condition
upon the constitution of the obligation, such rights are
always subject to the threat or danger of extinction. Doctrine of Constructive Fulfillment of Suspensive Conditions

The condition shall be deemed fulfilled when the obligor

voluntarily prevents its fulfillment. The debtor must have
actually voluntarily and willfully prevented the creditor from
complying with the condition.
Art 1182 – Potestative, Casual and Mixed Conditions

Art 1187 - RETROACTIVE APLICATION OF CONDITIONAL

POTESTATIVE CONDITION OBLIGATIONS

One whose fulfillment depends exclusively upon the OBLIGATIONS TO GIVE

will of either of the parties to the obligation.

CASUAL CONDITION The effects of a conditional obligation to give, once

the condition has been fulfilled, shall retroact to the day of the
One whose fulfillment depends exclusively upon constitution of the obligation.
chance and/or the will of a third person.
If reciprocal obligation
Effect: The obligation including such condition shall take effect The fruits and interests during the pendency of the
condition shall be deemed to have been mutually
Example: I will give you my car if Aquino gets elected as compensated
President If unilateral obligation
The debtor shall appropriate the fruits and
MIXED CONDITION obligations received, unless from the nature and
One whose fulfillment depends jointly upon the will circumstances of the obligation, it should be inferred that the
of either of the parties and upon chance/will of a third intention of the person constituting the same was different.
person.
OBLIGATIONS TO DO AND NOT TO DO
Effect: The obligation including such condition shall take
The courts shall determine in each case, the
effect.
retroactive effect or the condition that has been complied
Example: I promise to pay my debt as soon as I receive funds with.
derived from the sale of my house
EFFECT OF SUSPENSIVE CONDITIONS BEFORE FULFILLMENT
Art 1183 – POSSIBLE AND IMPOSSIBLE CONDITIONS
Effect on creditor
POSSIBLE CONDITION The demandability as well as the acquisition or
effectivity of rights arising from the obligation is suspended
Capable of realization, not only according to its pending the happening of the condition. Thus, the
nature, but also according to law, good customs and public creditor has only a mere hope or expectancy.
policy.
Right of creditor to preserve such right
This hope or expectancy is protected by law. Thus, if
IMPOSSIBLE CONDITION
the obligor promises to sell a parcel of land to the obligee
upon the happening of a condition, and subsequently, before
Not capable of realization either according to its
the fulfillment of the condition, he changes his mind and
nature or according to law, good customs or public policy.
decides to sell the land to another person, the obligee can
bring an appropriate action, such as a petition for the
Art 1184 – Art 1185 - POSITIVE AND NEGATIVE CONDITIONS issuance of a writ of injunction to prevent the sale in order
to preserve his right.
POSITIVE CONDITION - Involves the performance of an act or
fulfillment of an event Effect on debtor
During the pendency of the condition, the
debtor’s obligation to comply with the prestation is
Effect: The condition that some event happen at a determinate suspended until the fulfillment of the condition.
time shall extinguish the obligation as soon as the time expires
or if it becomes indubitable that the event will not take place. Right of debtor
If he has paid anything by mistake during the
Example: I will give you P2,000 if you pass the bar exam in pendency of the condition, he can recover what he has been
your first attempt. (If he flunks the exam, the obligation is paid.
extinguished)
EFFECT OF SUSPENSIVE CONDITIONS AFTER FULFILLMENT
NEGATIVE CONDITION - Involves the non-performance or an
act or nonfulfillment of an event. Once the event which constitutes the condition
is fulfilled, the obligation arises or becomes effective.
Effect: The condition that some event will not happen at a
Effect on creditor
determinate time shall render the obligation effective from the The right of the creditor, which, before the
moment the time indicated has elapsed or if it becomes fulfillment of the condition, was a mere hope or expectancy,
evident that the event cannot occur. is perfected. It becomes effective and demandable.
Effect on debtor Such rights are consolidated and become
The debtor can be compelled to comply with absolute in character.
what is incumbent upon him.
If resolutory condition is fulfilled
Such rights are extinguished altogether and
Art 1189 - LOSS, DETERIORATION OR IMPROVEMENT whatever may have been delivered upon the
constitution of the obligation shall be returned upon
LOSS the fulfillment of the condition. Thus, there is return to
The thing is lost when:
the status quo.
1. It perishes
2 It goes out of commerce
3 It disappears in such a way that its existence is RETROACTIVITY OF EFFECT OF RESOLUTORY
unknown or cannot be recovered CONDITIONS
There are no exceptions or limitations to
Loss is either: the principle of retroactivity.
1. Without the fault of the debtor Reason: In obligations with a resolutory
Effect: The obligation is extingusihed condition, the fulfillment of the condition and its
2. Through the fault of the debtor retroactivity have the effect of signifying the
Effect: The obligation is converted into one of indemnity nonexistence of the obligation and what is
for damages nonexistent must not give rise t any effect whatsoever.
DETERIORATION
Obligations to give
Without the fault of the debtor Upon the fulfillment of the resolutory condition, the
Effect: Impairment is to be borne by the creditor parties shall return to each other what they have
received. This rule is applicable whether the obligation is
Through the fault of the debtor
Effect: Creditor may choose between rescission of the reciprocal or unilateral.
obligation with damages and bringing an action for specific
performance Obligations to do or not to do
The retroactivity of effects of the resolutory
condition shall depend upon the discretion of the courts
IMPROVEMENTS
as in the case of suspensive conditions.

By its nature or by time

Art 1191 - RESCISSION OF OBLIGATIONS
Effect: The improvement shall inure to the benefit of the
The power to rescind obligations is implied in
creditor
reciprocal ones, in case one of the obligor should not comply
At the expense of the debtor
with what is incumbent upon him.
Effect: Debtor cannot have any other right than granted to a
usurfructuary. He cannot ask for reimbursement for the
CONCEPT OF RECIPROCAL OBLIGATIONS
expenses incurred for useful improvements or for
Reciprocal obligations are those which are created
improvements for mere pleasure. (Except: Reimbursement for
or established at the same time, out of the same cause and
necessary expenses)
which result in mutual relationships of creditor and debtor
between the parties.
Art 1190 - EFFECTS OF RESOLUTORY CONDITIONS ANENT
ITS FULFILLMENT Example: In a contract of sale, the obligation of
the vendee to pay the price is a correlative of the
EFFECT OF RESOLUTORY CONDITIONS BEFORE obligation of the vendor to deliver the thing sold.
FULFILLMENT
TACIT RESOLUTORY CONDITION
Effect on creditor If one of the parties fails to comply with what is
The right which the creditor has acquired by virtue of incumbent upon him, there is a right on the part of the other
the obligation is always subject to the threat of to rescind. Since it has the effect of extinguishing rights which
are already acquired or vested, it is resolutory in character.
extinction during the pendency of the condition.
NECESSITY OF JUDICIAL ACTION
Effect on debtor The right to rescind the obligation is a right which
Debtor is placed in a position which is very similar to belongs to the injured party alone. However, it is essential
that of the creditor in suspensive conditions. He also has that it must be invoked judicially. The court shall decree the
hope or expectancy during the pendency of the condition rescission, unless there be a just cause authorizing the fixing
because when the resolutory condition is fulfilled, he will of a period.
reacquire whatever he may have delivered to the
creditor. General rule
Rescission of the obligation shall be invoked
EFFECT OF RESOLUTORY CONDITIONS AFTER judicially. It is the judgment of the court which produces the
rescission.
FULFILLMENT
Exception
If the resolutory condition is not fulfilled Where the contract itself contains a resolutory
provision by virtue of which the obligation may be cancelled
or extinguished by the injured party in case of breach. Thus,
judicial permission to cancel or rescind the contract is no Hence, the creditor cannot demand performance
longer necessary. nor can the debtor perform the obligation before the
expiration of the designated period.
Limitation: The rescission must not be contrary to
law, morals, good customs, public order or public policy. Example: On January 1, D borrowed from E P100,
000 payable on December 31 at 15% interest. (D cannot pay
Art 1192 - EFFECT OF BREACH OF BOTH PARTIES before December 31 without the consent of E and neither
In case both parties have committed a breach of the can E compel D to pay before the expiration of the term.
obligation, the liability of the first infractor shall be equitably
tempered by the courts. If it cannot be determined which of Mutual benefit: Both are benefited here because D
the parties first violated the contract, the same shall be can use the money for one year, and E can benefit from the
deemed extinguished, and each shall bear his own damages. interest the money would earn for one year.

Section 2. Obligation with a Period EXCEPTION

Art 1193 If it can be established either from the tenor of
the obligation or from other circumstances that the period
OBLIGATION WITH A PERIOD or term has been established in favour of the creditor or the
One whose demandability or extinguishment is debtor, the general rule on presumption shall not apply.
subject to the expiration of a term or period.
Term is for the benefit of the debtor alone
CONCEPT OF TERM OR PERIOD He cannot be compelled to pay prematurely, but
An interval of time, which, exerting an influence on he can, if he desires, to do so.
an obligation as a consequence of juridical act, either
suspends its demandability or produces its extinguishment. Examples:
1. B borrowed from C P100, 000 to be paid within 1
Period – A future and certain event upon the arrival year without interest.
of which, the obligation subject to it either arises or is 2. B promised to pay his debt on or before December
terminated. It is a day certain which must necessarily 31, 2000.
come (ex. Year 2019, next Christmas), although it may 3. B promised to pay his debt within five years.
not be known when (ex. Death of a person)
Term is for the benefit of the creditor
Condition – A future and uncertain event upon He may demand fulfillment even before the arrival
which an obligation is made to depend. of the term but the debtor cannot compel him to accept
payment before the expiration of the stipulated period.

EFFECT OF FORTUITOUS EVENT Example:

In obligations with a term or period, any stipulation 1. B borrowed from C P100, 000 payable on
in the contract to the effect that in case of a fortuitous event December 31, with a stipulation that B cannot make
the contract shall be deemed suspended during the term or payment before the lapse of the period but C may
period, does not mean that the happening of the fortuitous demand fulfillment even before said date.
event shall stop the running of the term or period agreed
upon. ACCELERATION BY DEBTOR OF TIME OF PAYMENT
Three reasons why a creditor may not be bound to
Effect: Only to relieve the contracting parties from
the fulfillment of their respective obligations during the term receive payment before maturity:
or period.
1. Payment of interest
2. Creditor may want to keep his money
invested safely instead of having it in his hands
Art 1194 - Art 1195 – EFFECT OF ADVANCED PAYMENT OR 3. Creditor, by fixing a period, protects
DELIVERY himself against sudden decline of purchasing power
of the currency loaned.
If the obligor, being unaware of the period or
believing that the obligation has become due and Art 1197 - JUDICIAL TERM OR PERIOD JUDICIAL TERM OR
demandable, paid or delivered something before the arrival PERIOD
or expiration of the period A term or period is judicial when the duration
thereof is fixed by a competent court in accordance with
Remedy: He may recover what he has paid or cause expressly recognized by law. Once fixed, the period can
delivered with fruits and interests. no longer be judicially changed.
Restrictions:
Conditions 1. Cannot be applied to contracts for services
1. Only applies to obligations to give 2. Cannot be applied to pure obligations
2. Payment or delivery must have been made by the debtor
because he was unaware of the period or believed that the Two instances where the courts can fix the duration of the
obligation had become due and demandable. period:
1. If the obligation does not fix a period, but from its
nature, and the circumstances, it can be inferred
Art 1196 - BENEFIT OF TERM OR PERIOD that a period was intended.
Examples:
When a person is designated for the performance
a. Donation of a parcel of land to the City of
or fulfillment of an obligation, it is presumed to have
Manila subject to the condition that it shall be
been established for the benefit of both the creditor and the
converted into a public square, but silent with
debtor.
 regard to the period for fulfillment of the The indemnity shall be fixed taking as a basis the value of the
condition. last thing which disappeared, or that of the service which last
b. Failure to fix a definite period within which became impossible
the debtor was to complete the construction of a
house.
Damages other than the value of the last thing or service may
2. When the period depends upon the will of the also be awarded
debtor.
Examples: Art 1205 When the choice has been expressly given to the
a. I will pay my indebtedness when my means creditor, the obligation shall cease to be alternative from the
permit me to do so. day when the selection has been communicated to the debtor
b. I will pay as soon as possible.
c. I will pay as soon as I have the money. Until then the responsibility of the debtor shall be governed by
the following rules:
NATURE OF ACTION
(1) If one of the things is lost through a fortuitous event, he
The only action that can be maintained under Art. shall perform the obligation by delivering that which the
1197 is an action to ask the court to fix the duration of the creditor should choose from among the remainder, or that
term or period. It is only after the duration has been fixed by a
proper court that any other action involving the fulfillment of which remains if only one subsists;
the obligation can be maintained.
(2) If the loss of one of the things occurs through the fault of
Express request in complaint not necessary the debtor, the creditor may claim any of those subsisting, or
It is not necessary that the creditor should expressly the price of that which, through the fault of the former, has
ask the court, in his complaint, to fix the duration of the disappeared, with a right to damages;
period. Where the essential allegations of the pleadings
describe an obligation with an indefinite period, the court
can fix the duration of the period. (3) If all the things are lost through the fault of the debtor, the
choice by the creditor shall fall upon the price of any one of
Art 1198 - EXTINGUISHMENT OF DEBTOR’S RIGHT TO PERIOD them, also with indemnity for damages

WHEN OBLIGATION CAN BE DEMANDED BEFORE LAPSE OF The same rules shall be applied to obligations to do or not to
PERIOD do in case one, some or all of the prestations should become
impossible
General Rule
Obligation is not demandable before the lapse of the Art 1206 When only one prestation has been agreed upon, but
period. the obligor may render another in substitution, the obligation
is called facultative
Exceptions
The debtor shall lose every right to make use of the The loss or deterioration of the thing intended as a substitute,
period, that is, the period is disregarded and the obligation
becomes pure and demandable. through the negligence of the obligor, does not render him
liable But once the substitution has been made, the obligor is
Section 3. Alternative and Facultative Obligation liable for the loss of the substitute on account of his delay,
negligence or fraud
Art 1199 A person alternatively bound by different prestations
shall completely perform one of them
The creditor cannot be compelled to receive part of one and Section 4. Joint and Solidary Obligations
part of the other undertaking
Art 1207 The concurrence of two or more creditors or of two
Art 1200 The right of choice belongs to the debtor, unless it or more debtors in one and the same obligation does not imply
has been expressly granted to the creditor that each one of the former has a right to demand, or that
The debtor shall have no right to choose those prestations each one of the latter is bound to render, entire compliance
which are impossible, unlawful or which could not have been with the prestation There is a solidary liability only when the
the object of the obligation obligation expressly so states, or when the law or the nature of
the obligation requires solidarity
Art 1201 The choice shall produce no effect except from the
time it has been communicated Art 1208 If from the law, or the nature or the wording of the
obligations to which the preceding article refers the contrary
Art 1202 The debtor shall lose the right of choice when among does not appear, the credit or debt shall be presumed to be
the prestations whereby he is alternatively bound, only one is divided into as many shares as there are creditors or debtors,
practicable the credits or debts being considered distinct from one
another, subject to the Rules of Court governing the
Art 1203 If through the creditor's acts the debtor cannot make multiplicity of suits
a choice according to the terms of the obligation, the latter
may rescind the contract with damages Art 1209 If the division is impossible, the right of the creditors
may be prejudiced only by their collective acts, and the debt
Art 1204 The creditor shall have a right to indemnity for can be enforced only by proceeding against all the debtors. If
damages when, through the fault of the debtor, all the things one of the latter should be insolvent, the others shall not be
which are alternatively the object of the obligation have been liable for his share
lost, or the compliance of the obligation has become
impossible Art 1210 The indivisibility of an obligation does not necessarily
give rise to solidarity. Nor does solidarity of itself imply
indivisibility
Art 1211 Solidarity may exist although the creditors and the debtors has incurred in delay through the judicial or
debtors may not be bound in the same manner and by the extrajudicial demand upon him by the creditor, the provisions
same periods and conditions of the preceding paragraph shall apply

Art 1212 Each one of the solidary creditors may do whatever Art 1222 A solidary debtor may, in actions filed by the creditor,
may be useful to the others, but not anything which may be avail himself of all defenses which are derived from the nature
prejudicial to the latter of the obligation and of those which are personal to him, or
pertain to his own share With respect to those which
Art 1213 A solidary creditor cannot assign his rights without personally belong to the others, he may avail himself thereof
the consent of the others only as regards that part of the debt for which the latter are
responsible
Art 1214 The debtor may pay any one of the solidary creditors;  
but if any demand, judicial or extrajudicial, has been made by Section 5. Divisible and Indivisible Obligations
one of them, payment should be made to him
Art 1223 The divisibility or indivisibility of the things that are
Art 1215 Novation, compensation, confusion or remission of the object of obligations in which there is only one debtor and
the debt, made by any of the solidary creditors or with any of only one creditor does not alter or modify the provisions of
the solidary debtors, shall extinguish the obligation, without Chapter 2 of this Title
prejudice to the provisions of Article 1219
Art 1224 A joint indivisible obligation gives rise to indemnity
The creditor who may have executed any of these acts, as well for damages from the time anyone of the debtors does not
as he who collects the debt, shall be liable to the others for the comply with his undertaking The debtors who may have been
share in the obligation corresponding to them ready to fulfill their promises shall not contribute to the
indemnity beyond the corresponding portion of the price of
Art 1216 The creditor may proceed against any one of the the thing or of the value of the service in which the obligation
solidary debtors or some or all of them simultaneously. The consists
demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the others, Art 1225 For the purposes of the preceding articles, obligations
so long as the debt has not been fully collected to give definite things and those which are not susceptible of
partial performance shall be deemed to be indivisible
Art 1217 Payment made by one of the solidary debtors
extinguishes the obligation. If two or more solidary debtors When the obligation has for its object the execution of a
offer to pay, the creditor may choose which offer to accept certain number of days of work, the accomplishment of work
by metrical units, or analogous things which by their nature are
He who made the payment may claim from his co-debtors only susceptible of partial performance, it shall be divisible
the share which corresponds to each, with the interest for the
payment already made. If the payment is made before the However, even though the object or service may be physically
debt is due, no interest for the intervening period may be divisible, an obligation is indivisible if so provided by law or
demanded intended by the parties

When one of the solidary debtors cannot, because of his In obligations not to do, divisibility or indivisibility shall be
insolvency, reimburse his share to the debtor paying the determined by the character of the prestation in each
obligation, such share shall be borne by all his co-debtors, in particular case.
proportion to the debt of each

Art 1218 Payment by a solidary debtor shall not entitle him to CHAPTER 4
reimbursement from his co-debtors if such payment is made EXTINGUISHMENT OF OBLIGATIONS GENERAL PROVISIONS
after the obligation has prescribed or become illegal Art 1231 Obligations are extinguished:

Art 1219 The remission made by the creditor of the share (1) By payment or performance:
which affects one of the solidary debtors does not release the (2) By the loss of the thing due:
latter from his responsibility towards the co-debtors, in case (3) By the condonation or remission of the debt;
the debt had been totally paid by anyone of them before the (4) By the confusion or merger of the rights of creditor
remission was effected and debtor;
(5) By compensation;
Art 1220 The remission of the whole obligation, obtained by (6) By novation
one of the solidary debtors, does not entitle him to
reimbursement from his co-debtors Other causes of extinguishment of obligations, such as
annulment, rescission, fulfillment of a resolutory condition,
Art 1221 If the thing has been lost or if the prestation has and prescription, are governed elsewhere in this Code
become impossible without the fault of the solidary debtors,  
the obligation shall be extinguished SECTION 1 - Payment or Performance

If there was fault on the part of any one of them, all shall be Art 1232 Payment means not only the delivery of money but
responsible to the creditor, for the price and the payment of also the performance, in any other manner, of an obligation
damages and interest, without prejudice to their action against
the guilty or negligent debtor Art 1233 A debt shall not be understood to have been paid
unless the thing or service in which the obligation consists has
If through a fortuitous event, the thing is lost or the been completely delivered or rendered, as the case may be
performance has become impossible after one of the solidary
Art 1234 If the obligation has been substantially performed in In obligations to do or not to do, an act or forbearance cannot
good faith, the obligor may recover as though there had been a be substituted by another act or forbearance against the
strict and complete fulfillment, less damages suffered by the obligee's will
obligee
Art 1245 Dation in payment, whereby property is alienated to
Art 1235 When the obligee accepts the performance, knowing the creditor in satisfaction of a debt in money, shall be
its incompleteness or irregularity, and without expressing any governed by the law of sales
protest or objection, the obligation is deemed fully complied
with Art 1246 When the obligation consists in the delivery of an
indeterminate or generic thing, whose quality and
Art 1236 The creditor is not bound to accept payment or circumstances have not been stated, the creditor cannot
performance by a third person who has no interest in the demand a thing of superior quality. Neither can the debtor
fulfillment of the obligation, unless there is a stipulation to the deliver a thing of inferior quality The purpose of the obligation
contrary and other circumstances shall be taken into consideration

Whoever pays for another may demand from the debtor what Art 1247 Unless it is otherwise stipulated, the extrajudicial
he has paid, except that if he paid without the knowledge or expenses required by the payment shall be for the account of
against the will of the debtor, he can recover only insofar as the debtor With regard to judicial costs, the Rules of Court
the payment has been beneficial to the debtor shall govern
Art 1248 Unless there is an express stipulation to that effect,
Art 1237 Whoever pays on behalf of the debtor without the the creditor cannot be compelled partially to receive the
knowledge or against the will of the latter, cannot compel the prestations in which the obligation consists. Neither may the
creditor to subrogate him in his rights, such as those arising debtor be required to make partial payments
from a mortgage, guaranty, or penalty
However, when the debt is in part liquidated and in part
Art 1238 Payment made by a third person who does not intend unliquidated, the creditor may demand and the debtor may
to be reimbursed by the debtor is deemed to be a donation, effect the payment of the former without waiting for the
which requires the debtor's consent. But the payment is in any liquidation of the latter
case valid as to the creditor who has accepted it
Art 1249 The payment of debts in money shall be made in the
Art 1239 In obligations to give, payment made by one who currency stipulated, and if it is not possible to deliver such
does not have the free disposal of the thing due and capacity currency, then in the currency which is legal tender in the
to alienate it shall not be valid, without prejudice to the Philippines
provisions of Article 1427 under the Title on "Natural
Obligations" The delivery of promissory notes payable to order, or bills of
exchange or other mercantile documents shall produce the
Art 1240 Payment shall be made to the person in whose favor effect of payment only when they have been cashed, or when
the obligation has been constituted, or his successor in through the fault of the creditor they have been impaired
interest, or any person authorized to receive it
In the meantime, the action derived from the original
Art 1241 Payment to a person who is incapacitated to obligation shall be held in the abeyance
administer his property shall be valid if he has kept the thing
delivered, or insofar as the payment has been beneficial to him Art 1250 In case an extraordinary inflation or deflation of the
currency stipulated should supervene, the value of the
Payment made to a third person shall also be valid insofar as it currency at the time of the establishment of the obligation
has redounded to the benefit of the creditor. Such benefit to shall be the basis of payment, unless there is an agreement to
the creditor need not be proved in the following cases: the contrary

(1) If after the payment, the third person acquires the Art 1251 Payment shall be made in the place designated in the
creditor's rights; obligation

(2) If the creditor ratifies the payment to the third person; There being no express stipulation and if the undertaking is to
deliver a determinate thing, the payment shall be made
(3) If by the creditor's conduct, the debtor has been led to wherever the thing might be at the moment the obligation was
believe that the third person had authority to receive the constituted
payment
In any other case the place of payment shall be the domicile of
Art 1242 Payment made in good faith to any person in the debtor
possession of the credit shall release the debtor
If the debtor changes his domicile in bad faith or after he has
Art 1243 Payment made to the creditor by the debtor after the incurred in delay, the additional expenses shall be borne by
latter has been judicially ordered to retain the debt shall not be him
valid
These provisions are without prejudice to venue under the
Art 1244 The debtor of a thing cannot compel the creditor to Rules of Court
receive a different one, although the latter may be of the same
value as, or more valuable than that which is due  
SUBSECTION 1 - Application of Payments
Art 1252 He who has various debts of the same kind in favor of
one and the same creditor, may declare at the time of making Art 1259 The expenses of consignation, when properly made,
the payment, to which of them the same must be applied shall be charged against the creditor
Unless the parties so stipulate, or when the application of
payment is made by the party for whose benefit the term has Art 1260 Once the consignation has been duly made, the
been constituted, application shall not be made as to debts debtor may ask the judge to order the cancellation of the
which are not yet due obligation

If the debtor accepts from the creditor a receipt in which an Before the creditor has accepted the consignation, or before a
application of the payment is made, the former cannot judicial declaration that the consignation has been properly
complain of the same, unless there is a cause for invalidating made, the debtor may withdraw the thing or the sum
the contract deposited, allowing the obligation to remain in force

Art 1253 If the debt produces interest, payment of the Art 1261 If, the consignation having been made, the creditor
principal shall not be deemed to have been made until the should authorize the debtor to withdraw the same, he shall
interests have been covered lose every preference which he may have over the thing. The
co-debtors, guarantors and sureties shall be released
Art 1254 When the payment cannot be applied in accordance
with the preceding rules, or if application can not be inferred  SECTION 2 - Loss of the Thing Due
from other circumstances, the debt which is most onerous to
the debtor, among those due, shall be deemed to have been Art 1262 An obligation which consists in the delivery of a
satisfied determinate thing shall be extinguished if it should be lost or
destroyed without the fault of the debtor, and before he has
If the debts due are of the same nature and burden, the incurred in delay
payment shall be applied to all of them proportionately
  When by law or stipulation, the obligor is liable even for
SUBSECTION 2 - Payment by Cession fortuitous events, the loss of the thing does not extinguish the
obligation, and he shall be responsible for damages. The same
Art 1255 The debtor may cede or assign his property to his rule applies when the nature of the obligation requires the
creditors in payment of his debts This cession, unless there is assumption of risk
stipulation to the contrary, shall only release the debtor from
responsibility for the net proceeds of the thing assigned The Art 1263 In an obligation to deliver a generic thing, the loss or
agreements which, on the effect of the cession, are made destruction of anything of the same kind does not extinguish
between the debtor and his creditors shall be governed by the obligation
special laws
Art 1264 The courts shall determine whether, under the
  circumstances, the partial loss of the object of the obligation is
SUBSECTION 3 - Tender of Payment and Consignation so important as to extinguish the obligation

Art 1256 If the creditor to whom tender of payment has been Art 1265 Whenever the thing is lost in the possession of the
made refuses without just cause to accept it, the debtor shall debtor, it shall be presumed that the loss was due to his fault,
be released from responsibility by the consignation of the thing unless there is proof to the contrary, and without prejudice to
or sum due the provisions of article 1165 This presumption does not apply
in case of earthquake, flood, storm, or other natural calamity
Consignation alone shall produce the same effect in the
following cases: Art 1266 The debtor in obligations to do shall also be released
(1) When the creditor is absent or unknown, or does when the prestation becomes legally or physically impossible
not appear at the place of payment; without the fault of the obligor
(2) When he is incapacitated to receive the payment
at the time it is due; Art 1267 When the service has become so difficult as to be
(3) When, without just cause, he refuses to give a manifestly beyond the contemplation of the parties, the
receipt; obligor may also be released therefrom, in whole or in part
(4) When two or more persons claim the same right to Art 1268 When the debt of a thing certain and determinate
collect; proceeds from a criminal offense, the debtor shall not be
(5) When the title of the obligation has been lost exempted from the payment of its price, whatever may be the
cause for the loss, unless the thing having been offered by him
Art 1257 In order that the consignation of the thing due may to the person who should receive it, the latter refused without
release the obligor, it must first be announced to the persons justification to accept it
interested in the fulfillment of the obligation
Art 1269 The obligation having been extinguished by the loss
The consignation shall be ineffectual if it is not made strictly in of the thing, the creditor shall have all the rights of action
consonance with the provisions which regulate payment which the debtor may have against third persons by reason of
the loss
Art 1258 Consignation shall be made by depositing the things
due at the disposal of judicial authority, before whom the  
tender of payment shall be proved, in a proper case, and the SECTION 3 - Condonation or Remission of the Debt
announcement of the consignation in other cases
Art 1270 Condonation or remission is essentially gratuitous,
The consignation having been made, the interested parties and requires the acceptance by the obligor It may be made
shall also be notified thereof expressly or impliedly
One and the other kind shall be subject to the rules which Art 1282 The parties may agree upon the compensation of
govern inofficious donations. Express condonation shall, debts which are not yet due
furthermore, comply with the forms of donation
Art 1283 If one of the parties to a suit over an obligation has a
Art 1271 The delivery of a private document evidencing a claim for damages against the other, the former may set it off
credit, made voluntarily by the creditor to the debtor, implies by proving his right to said damages and the amount thereof
the renunciation of the action which the former had against
the latter Art 1284 When one or both debts are rescissible or voidable,
they may be compensated against each other before they are
If in order to nullify this waiver it should be claimed to be judicially rescinded or avoided
inofficious, the debtor and his heirs may uphold it by proving
that the delivery of the document was made in virtue of Art 1285 The debtor who has consented to the assignment of
payment of the debt rights made by a creditor in favor of a third person, cannot set
up against the assignee the compensation which would pertain
Art 1272 Whenever the private document in which the debt to him against the assignor, unless the assignor was notified by
appears is found in the possession of the debtor, it shall be the debtor at the time he gave his consent, that he reserved
presumed that the creditor delivered it voluntarily, unless the his right to the compensation
contrary is proved
If the creditor communicated the cession to him but the
Art 1273 The renunciation of the principal debt shall extinguish debtor did not consent thereto, the latter may set up the
the accessory obligations; but the waiver of the latter shall compensation of debts previous to the cession, but not of
leave the former in force subsequent ones

Art 1274 It is presumed that the accessory obligation of pledge If the assignment is made without the knowledge of the
has been remitted when the thing pledged, after its delivery to debtor, he may set up the compensation of all credits prior to
the creditor, is found in the possession of the debtor, or of a the same and also later ones until he had knowledge of the
third person who owns the thing assignment

  Art 1286 Compensation takes place by operation of law, even

SECTION 4 - Confusion or Merger of Rights though the debts may be payable at different places, but there
shall be an indemnity for expenses of exchange or
Art 1275 The obligation is extinguished from the time the transportation to the place of payment
characters of creditor and debtor are merged in the same
person Art 1287 Compensation shall not be proper when one of the
debts arises from a depositum or from the obligations of a
Art 1276 Merger which takes place in the person of the depositary or of a bailee in commodatum
principal debtor or creditor benefits the guarantors Confusion
which takes place in the person of any of the latter does not Neither can compensation be set up against a creditor who has
extinguish the obligation a claim for support due by gratuitous title, without prejudice to
Art 1277 Confusion does not extinguish a joint obligation the provisions of paragraph 2 of Article 301
except as regards the share corresponding to the creditor or
debtor in whom the two characters concur Art 1288 Neither shall there be compensation if one of the
debts consists in civil liability arising from a penal offense

SECTION 5 - Compensation Art 1289 If a person should have against him several debts
which are susceptible of compensation, the rules on the
Art 1278 Compensation shall take place when two persons, in application of payments shall apply to the order of the
their own right, are creditors and debtors of each other compensation

Art 1279 In order that compensation may be proper, it is Art 1290 When all the requisites mentioned in Article 1279 are
necessary: present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even
(1) That each one of the obligors be bound principally, and that though the creditors and debtors are not aware of the
he be at the same time a principal creditor of the other; compensation
(2) That both debts consist in a sum of money, or if the things  
due are consumable, they be of the same kind, and also of the SECTION 6 - Novation
same quality if the latter has been stated;
(3) That the two debts be due; Art 1291 Obligations may be modified by:
(4) That they be liquidated and demandable; (1) Changing their object or principal conditions;
(5) That over neither of them there be any retention or (2) Substituting the person of the debtor;
controversy, commenced by third persons and communicated (3) Subrogating a third person in the rights of the
in due time to the debtor creditor

Art 1280 Notwithstanding the provisions of the preceding Art 1292 In order that an obligation may be extinguished by
article, the guarantor may set up compensation as regards another which substitute the same, it is imperative that it be
what the creditor may owe the principal debtor so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other
Art 1281 Compensation may be total or partial. When the two
debts are of the same amount, there is a total compensation
Art 1293 Novation which consists in substituting a new debtor CHAPTER 1. GENERAL PROVISIONS
in the place of the original one, may be made even without the CONTRACTS
knowledge or against the will of the latter, but not without the
consent of the creditor Payment by the new debtor gives him Art 1305 A contract is a meeting of minds between two
the rights mentioned in Articles 1236 and 1237 persons whereby one binds himself, with respect to the other,
to give something or to render some service.
Art 1294 If the substitution is without the knowledge or
against the will of the debtor, the new debtor's insolvency or
Obligatory force or character of contracts
non-fulfillment of the obligations shall not give rise to any
Once the contract is perfected, it shall be of
liability on the part of the original debtor
obligatory force upon both of the contracting parties.
Consequently, they are bound to the fulfillment of what has
Art 1295 The insolvency of the new debtor, who has been
been expressly stipulated and to all of the consequences
proposed by the original debtor and accepted by the creditor,
thereof.
shall not revive the action of the latter against the original
obligor, except when said insolvency was already existing and
of public knowledge, or known to the debtor, when the Autonomy of contracts
delegated his debt Contracting parties may establish such agreements
as they may deem convenient, provided they are not contrary
Art 1296 When the principal obligation is extinguished in to law, morals, good customs, public order or public policy.
consequence of a novation, accessory obligations may subsist
only insofar as they may benefit third persons who did not give Mutuality of contracts
their consent Position of essential equality that is occupied by
both contracting parties in relation to the contract. The
Art 1297 If the new obligation is void, the original one shall contract must be binding upon both the parties and its
subsist, unless the parties intended that the former relation validity or compliance cannot be left at the will of just one of
should be extinguished in any event them

Art 1298 The novation is void if the original obligation was Relativity of contracts
void, except when annulment may be claimed only by the Contracts take effect only between the parties, their
debtor or when ratification validates acts which are voidable assigns and heirs. Consequently, they cannot, as a general
rule, produce any effect upon third persons, in conformity
Art 1299 If the original obligation was subject to a suspensive with the principle of res inter alios aliis negue nocet prodest.
or resolutory condition, the new obligation shall be under the
same condition, unless it is otherwise stipulated Art 1306

Art 1300 Subrogation of a third person in the rights of the RIGHT TO CONTRACT
creditor is either legal or conventional. The former is not The contracting parties are free to establish any
presumed, except in cases expressly mentioned in this Code; stipulation, clause, term or condition, so long as they are not
the latter must be clearly established in order that it may take against law, good customs, public order or public policy.
effect
Both a statutory and constitutional right
Art 1301 Conventional subrogation of a third person requires The freedom to contract is both a constitutional and
the consent of the original parties and of the third person statutory right. Hence, to uphold this right, the courts
should move with all the necessary caution and prudence
Art 1302 It is presumed that there is legal subrogation: in holding contracts void.

(1) When a creditor pays another creditor who is preferred, Art 1307. Innominate contracts shall be regulated by the
even without the debtor's knowledge; stipulations of the parties, by the provisions of Titles I and
(2) When a third person, not interested in the obligation, pays II of this Book, by the rules governing the most analogous
with the express or tacit approval of the debtor; nominate contracts, and by the customs of the place.
(3) When, even without the knowledge of the debtor, a person
interested in the fulfillment of the obligation pays, without Art 1308 – Art 1310
prejudice to the effects of confusion as to the latter's share
MUTUALITY OF CONTRACTS
Art 1303 Subrogation transfers to the persons subrogated the This Article stresses the principle of mutuality of
credit with all the rights thereto appertaining, either against contracts — that is, both parties are bound. The principle is
based on the essential equality of the parties. It is
the debtor or against third person, be they guarantors or repugnant to bind one party, and yet leave the other free.
possessors of mortgages, subject to stipulation in a
conventional subrogation Consequences of mutuality

1. The validity or fulfillment of a contract cannot be left

Art 1304 A creditor, to whom partial payment has been made,
to the will of one of the contracting parties. What is
may exercise his right for the remainder, and he shall be
prohibited is:
preferred to the person who has been subrogated in his place
in virtue of the partial payment of the same credit a) The power to determine whether or not the
contract shall be valid
b) The power to determine whether or not the
contract shall be fulfilled

2. The validity or fulfillment may be left to the will of a

third person whose decision shall only be binding when
it has been made known to each of the contracting
parties, provided that it is not evidently unequitable.
 3. The validity or fulfillment can be left to chance. This Article represents another instance when a third
person can interfere with another’s contract.
Art 1311 – Relavity of Contracts
CONTRACTS IN FRAUD OF CREDITORS
PERSONS BOUND BY CONTRACT
Although a third person cannot ask for the
General rule: Contracts can take effect only between annulment of a contract, nevertheless, if he is a
the parties, their assigns and heirs. Therefore, creditor of one of the contracting parties, and it can
generally, its terms cannot determine the rights of third be established that the contract was entered into
persons. with the intention of defrauding him, he may ask for
its rescission.
A. Even though the contract may have been
executed ostensibly in the name of another Art 1314. Any third person who induces another to violate
person, it shall produce effect only insofar as the his contract shall be liable for damages to the other
real contracting party is concerned, provided, contracting party.
that such fact was known to the other party.
AN EXCEPTION
B. An assignment or transfer has the effect of This Article gives an instance when a stranger to a
contract can be sued in view of his unwarranted
subrogating the assignee to all of the rights and interference. Whoever is injured may properly sue for
obligations of the assignor. damages.

INTERFERENCES WITH CONTRACTUAL

Exceptions RELATIONS
Any third person who induces another to violate
The rule that an assignee or heir shall be bound by the his contract shall be liable for damages to the other
terms of a contract IS NOT ABSOLUTE in character. The contracting party.
rule is not applicable if the rights and obligations arising
from the contract are NOT transmissible: Rationale: The right to perform a contract and to
reap the profits resulting from such performance, and also
1. By their nature, as when the special or personal the right to performance by the other party, are property
qualification of the obligor constitutes one of the rights which entitle each party to protection, and to seek
principal motives for the establishment of the compensation by an action in tort for any interference
contract therewith

2. By stipulation of the parties, as when the

contract expressly provides that the obligor shall CHAPTER 2
perform an act by himself and not through Essential Requisites of Contracts
another General Provisions
Article 1318. There is no contract unless the following
3. By provision of law, as in the case of those requisites concur:
arising from a contract of partnership or of (1) Consent of the contracting parties;
agency (2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.

Art 1312 SECTION 1

Consent
AN EXCEPTION Art 1319. Consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to
This article constitutes one of the exceptions to the constitute the contract. The offer must be certain and the
general rule that a contract binds only the contracting parties. acceptance absolute. A qualified acceptance constitutes a
Reason: Because a real right binds the property over which it is counter-offer.
exercised.
CONTRACTS CREATING REAL RIGHTS Acceptance made by letter or telegram does not bind the
offerer except from the time it came to his knowledge. The
Real right – A right belonging to a person over a specific contract, in such a case, is presumed to have been entered into
thing, without a passive subject individually determined, in the place where the offer was made.
against whom such right may be personally enforced. Such
a right, therefore, is enforceable against the whole world. Art 1320. An acceptance may be express or implied.

Effect: A third person who comes into the possession of the Art 1321. The person making the offer may fix the time, place,
object of a contract creating a real right will have to be bound and manner of acceptance, all of which must be complied with.
by such right, subject to the provisions of:
Art 1322. An offer made through an agent is accepted from the
1. Mortgage Law time acceptance is communicated to him.
2. Land Registration Laws
Art 1323. An offer becomes ineffective upon the death, civil
Art 1313. Creditors are protected in cases of contracts interdiction, insanity, or insolvency of either party before
intended to defraud them. acceptance is conveyed.

AN EXCEPTION
Art 1324. When the offerer has allowed the offeree a certain Art 1332. When one of the parties is unable to read, or if the
period to accept, the offer may be withdrawn at any time contract is in a language not understood by him, and mistake
before acceptance by communicating such withdrawal, except or fraud is alleged, the person enforcing the contract must
when the option is founded upon a consideration, as show that the terms thereof have been fully explained to the
something paid or promised. former.

Art 1325. Unless it appears otherwise, business Art 1333. There is no mistake if the party alleging it knew the
advertisements of things for sale are not definite offers, but doubt, contingency or risk affecting the object of the contract.
mere invitations to make an offer.
Art 1334. Mutual error as to the legal effect of an agreement
Art 1326. Advertisements for bidders are simply invitations to when the real purpose of the parties is frustrated, may vitiate
make proposals, and the advertiser is not bound to accept the consent.
highest or lowest bidder, unless the contrary appears.
Art 1335. There is violence when in order to wrest consent,
Art 1327. The following cannot give consent to a contract: serious or irresistible force is employed.
(1) Unemancipated minors; There is intimidation when one of the contracting parties is
(2) Insane or demented persons, and deaf-mutes who do not compelled by a reasonable and well-grounded fear of an
know how to write. imminent and grave evil upon his person or property, or upon
the person or property of his spouse, descendants or
Art 1328. Contracts entered into during a lucid interval are ascendants, to give his consent.
valid. Contracts agreed to in a state of drunkenness or during a
hypnotic spell are voidable. To determine the degree of intimidation, the age, sex and
condition of the person shall be borne in mind.
Art 1329. The incapacity declared in Art 1327 is subject to the A threat to enforce one's claim through competent authority, if
modifications determined by law, and is understood to be the claim is just or legal, does not vitiate consent.
without prejudice to special disqualifications established in the
laws. Art 1336. Violence or intimidation shall annul the obligation,
although it may have been employed by a third person who did
Art 1330. A contract where consent is given through mistake, not take part in the contract.
violence, intimidation, undue influence, or fraud is voidable.
Art 1337. There is undue influence when a person takes
VICES DEFINED improper advantage of his power over the will of another,
depriving the latter of a reasonable freedom of choice. The
A. Violence – when in order to wrest consent, serious following circumstances shall be considered: the confidential,
or irresistible force is employed. family, spiritual and other relations between the parties, or the
B. Intimidation – when one of the contracting parties fact that the person alleged to have been unduly influenced
is compelled by a reasonable & well-grounded fear of was suffering from mental weakness, or was ignorant or in
an imminent financial distress.
& grave evil upon his person or property, or
upon the person or property of his spouse,
descendants or ascendants, to give his Art 1338. There is fraud when, through insidious words or
consent. machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he
C. Mistake – should refer to the substance of the thing
would not have agreed to.
which is the object of the contract, or to those
conditions which have principally moved one or both
Art 1339. Failure to disclose facts, when there is a duty to
parties to enter into the contact. (Exception: Mutual
reveal them, as when the parties are bound by confidential
error)
relations, constitutes fraud.
D. Fraud – when, through insidious words or machinations Art 1340. The usual exaggerations in trade, when the other
of 1 of the contracting parties, the other is induced to party had an opportunity to know the facts, are not in
enter into a contract which, without them, he would not themselves fraudulent.
have agreed to.
Art 1341. A mere expression of an opinion does not signify
E. Undue influence – when a person takes improper fraud, unless made by an expert and the other party has relied
advantage of his power over the will of another, on the former's special knowledge.
depriving the latter of a reasonable freedom of choice.
Art 1342. Misrepresentation by a third person does not vitiate
F. Simulation of Contracts – when the contracting
parties do not intend to be bound by the contract consent, unless such misrepresentation has created substantial
at all. Thus, an absolutely simulated contract is VOID. mistake and the same is mutual.

Art 1343. Misrepresentation made in good faith is not

Art 1331. In order that mistake may invalidate consent, it fraudulent but may constitute error.
should refer to the substance of the thing which is the object
of the contract, or to those conditions which have principally Art 1344. In order that fraud may make a contract voidable, it
moved one or both parties to enter into the contract. should be serious and should not have been employed by both
contracting parties.
Mistake as to the identity or qualifications of one of the parties
will vitiate consent only when such identity or qualifications Incidental fraud only obliges the person employing it to pay
have been the principal cause of the contract. damages.
A simple mistake of account shall give rise to its correction.
Art 1345. Simulation of a contract may be absolute or relative. requisites for their validity are present. However, when the law
The former takes place when the parties do not intend to be requires that a contract be in some form in order that it may
bound at all; the latter, when the parties conceal their true be valid or enforceable, or that a contract be proved in a
agreement. certain way, that requirement is absolute and indispensable. In
such cases, the right of the parties stated in the following Art
Art 1346. An absolutely simulated or fictitious contract is void. cannot be exercised.
A relative simulation, when it does not prejudice a third person
and is not intended for any purpose contrary to law, morals, Art 1357. If the law requires a document or other special form,
good customs, public order or public policy binds the parties to as in the acts and contracts enumerated in the following Art,
their real agreement. the contracting parties may compel each other to observe that
form, once the contract has been perfected. This right may be
exercised simultaneously with the action upon the contract.
SECTION 2
Object of Contracts Art 1358. The following must appear in a public document:

Art 1347. All things which are not outside the commerce of (1) Acts and contracts which have for their object the creation,
men, including future things, may be the object of a contract. transmission, modification or extinguishment of real rights
All rights which are not intransmissible may also be the object over immovable property; sales of real property or of an
of contracts. interest therein are governed by Arts 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary
No contract may be entered into upon future inheritance rights or of those of the conjugal partnership of gains;
except in cases expressly authorized by law. (3) The power to administer property, or any other power
which has for its object an act appearing or which should
All services which are not contrary to law, morals, good appear in a public document, or should prejudice a third
customs, public order or public policy may likewise be the person;
object of a contract. (4) The cession of actions or rights proceeding from an act
appearing in a public document.
Art 1348. Impossible things or services cannot be the object of All other contracts where the amount involved exceeds five
contracts. hundred pesos must appear in writing, even a private one. But
sales of goods, chattels or things in action are governed by
Art 1349. The object of every contract must be determinate as Arts, 1403, No. 2 and 1405.
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 CHAPTER 4
contract between the parties. Reformation of Instruments 

SECTION 3 Art 1359. When, there having been a meeting of the minds of

Cause of Contracts the parties to a contract, their true intention is not expressed
Art 1350. In onerous contracts the cause is understood to be, in the instrument purporting to embody the agreement, by
for each contracting party, the prestation or promise of a thing reason of mistake, fraud, inequitable conduct or accident, one
or service by the other; in remuneratory ones, the service or of the parties may ask for the reformation of the instrument to
benefit which is remunerated; and in contracts of pure the end that such true intention may be expressed.
beneficence, the mere liberality of the benefactor.
If mistake, fraud, inequitable conduct, or accident has
Art 1351. The particular motives of the parties in entering into prevented a meeting of the minds of the parties, the proper
a contract are different from the cause thereof. remedy is not reformation of the instrument but annulment of
the contract.
Art 1352. Contracts without cause, or with unlawful cause,
produce no effect whatever. The cause is unlawful if it is Art 1360. The principles of the general law on the reformation
contrary to law, morals, good customs, public order or public of instruments are hereby adopted insofar as they are not in
policy. conflict with the provisions of this Code.

Art 1353. The statement of a false cause in contracts shall Art 1361. When a mutual mistake of the parties causes the
render them void, if it should not be proved that they were failure of the instrument to disclose their real agreement, said
founded upon another cause which is true and lawful. instrument may be reformed.

Art 1354. Although the cause is not stated in the contract, it is Art 1362. If one party was mistaken and the other acted
presumed that it exists and is lawful, unless the debtor proves fraudulently or inequitably in such a way that the instrument
the contrary. does not show their true intention, the former may ask for the
reformation of the instrument.
Art 1355. Except in cases specified by law, lesion or inadequacy
of cause shall not invalidate a contract, unless there has been Art 1363. When one party was mistaken and the other knew or
fraud, mistake or undue influence. believed that the instrument did not state their real
agreement, but concealed that fact from the former, the
instrument may be reformed.
CHAPTER 3
Form of Contracts Art 1364. When through the ignorance, lack of skill, negligence
or bad faith on the part of the person drafting the instrument
Art 1356. Contracts shall be obligatory, in whatever form they or of the clerk or typist, the instrument does not express the
may have been entered into, provided all the essential
true intention of the parties, the courts may order that the Art 1377. The interpretation of obscure words or stipulations
instrument be reformed. in a contract shall not favor the party who caused the
obscurity.
Art 1365. If two parties agree upon the mortgage or pledge of
real or personal property, but the instrument states that the Art 1378. When it is absolutely impossible to settle doubts by
property is sold absolutely or with a right of repurchase, the rules established in the preceding Arts, and the doubts
reformation of the instrument is proper. refer to incidental circumstances of a gratuitous contract, the
least transmission of rights and interests shall prevail. If the
Art 1366. There shall be no reformation in the following cases: contract is onerous, the doubt shall be settled in favor of the
(1) Simple donations inter vivos wherein no condition is greatest reciprocity of interests.
imposed;
(2) Wills; If the doubts are cast upon the principal object of the contract
(3) When the real agreement is void. in such a way that it cannot be known what may have been the
intention or will of the parties, the contract shall be null and
Art 1367. When one of the parties has brought an action to void.
enforce the instrument, he cannot subsequently ask for its
reformation.
Art 1379. The principles of interpretation stated in Rule 123 of
the Rules of Court shall likewise be observed in the
Art 1368. Reformation may be ordered at the instance of
construction of contracts.
either party or his successors in interest, if the mistake was
mutual; otherwise, upon petition of the injured party, or his
heirs and assigns.

Art 1369. The procedure for the reformation of instrument CHAPTER 6

shall be governed by rules of court to be promulgated by the Rescissible Contracts
Supreme Court.
Art 1380 – Art 1389

RESCISSIBLE CONTRACTS IN GENERAL

A contract which is valid because it has all the essential

requisites prescribed by law, but which is defective because of
injury or damage
CHAPTER 5 to either of the contracting parties or to third persons,
Interpretation of Contracts as a
consequence of which, it may be rescinded.
Art 1370. If the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal Take note: A rescissible contract can only be attacked directly.
meaning of its stipulations shall control.
Characteristics

If the words appear to be contrary to the evident intention of A. Their defect consists in injury or damage either to
the parties, the latter shall prevail over the former. one of the contracting parties or to third persons
B. Before rescission, they are valid and legally effective.
C. They can be attacked directly only, and not collaterally.
Art 1371. In order to judge the intention of the contracting D. They can be attacked only either by a contracting
parties, their contemporaneous and subsequent acts shall be party or by a third person who is injured or defrauded
E. They are susceptible of convalidation only by
principally considered. prescription,
and NOT by ratification.
Art 1372. However general the terms of a contract may be,
they shall not be understood to comprehend things that are CONCEPT OF RESCISSION
distinct and cases that are different from those upon which the
parties intended to agree. A remedy granted by law to parties and even to third
persons, to secure the reparation of damages caused to them
Art 1373. If some stipulation of any contract should admit of by a contract, even if the same should be valid, by means of
several meanings, it shall be understood as bearing that import the restoration of things to their condition prior to the
which is most adequate to render it effectual. celebration of the contract.

INSOLVENCY
Art 1374. The various stipulations of a contract shall be
Insolvency in its popular and NOT technical sense – Financial
interpreted together, attributing to the doubtful ones that
situation of the debtor by virtue of which it is impossible for
sense which may result from all of them taken jointly.
him to fulfill his obligations. Assets < liabilities. Judicial
declaration of insolvency is NOT necessary.
Art 1375. Words which may have different significations shall
be understood in that which is most in keeping with the nature Requsites
and object of the contract. 1. Payment must have been made in a state of
insolvency
2. Obligation must have been one which the debtor
Art 1376. The usage or custom of the place shall be borne in could not be compelled to pay at the time such
mind in the interpretation of the ambiguities of a contract, and payment was effected
shall fill the omission of stipulations which are ordinarily
established. Obligations contemplated by this Article
1. Those with a term
2. Those subject to a suspensive condition
 3. Void and natural obligations 1. Attack its validity (direct or collateral)
4. Those condoned or which have prescribed 2. Convalidate it either by ratification or by prescription

ACQUISITION BY THIRD PERSON IN GOOD FAITH CHARACTERISTICS

1. Defect is the vitiation of consent of one of the parties

The test of fraudulent conveyance: Does it prejudice the
2. Binding until annulled
rights of creditors? – NOT APPLICABLE if the conveyance is 3. Susceptible of convalidation by ratification or prescription
made in good faith 4. Voidable character cannot be invoked by third person
or with a bona fide intent and for a valuable cause or
consideration.
Two general classes of voidable contracts
Effect: Contract of conveyance is NOT rescissible. 1. Incapacity to give consent (minors, insane, deaf-mute)
2. Vitiated by reason of mistake, violence, intimidation, undue
influence or fraud.
ACQUISITION BY THIRD PERSON IN BAD FAITH Damage is immaterial
Even though there may have been no damage to the
If property is acquired by one who is NOT a purchaser in contracting parties, it is still voidable, regardless of whether
the contract has already been consummated or is merely
good faith and for value – Contract of conveyance is executory.
rescissible.

PRESCRIPTIVE PERIOD Two general classes of voidable contracts

1. Incapacity to give consent (minors, insane, deaf-mute)
General Rule: Action for rescission must be commenced 2. Vitiated by reason of mistake, violence, intimidation, undue
within four years from the date the contract was entered influence or fraud.
into. Damage is immaterial
Even though there may have been no damage to the
Exceptions: contracting parties, it is still voidable, regardless of whether
the contract has
1. Persons under guardianship – 4 years from already been consummated or is merely executory.
termination of incapacity
2. Absentees – 4 years from the time the domicile is RATIFICATION
known. The act or means by virtue of which efficacy is given to a
3. Fraud of creditors and properties under litigation contract which suffers from a vice of curable nullity.
– 4 years from the discovery of the fraud Requisites
4. Others – six months or even 40 days from the
time of delivery 1. Contract is tainted by a vice susceptible of being
cured.
2. Ratification by the person who is entitled to do so by
Example
law.
At the time he was 12 years old, A was under a guardian
A. Incapacitated person – him upon regaining
who sold, in behalf of the ward but without judicial capacity or by his guardian
authority, the harvest of the ward’s farm, and in so doing B. Other vices – only the innocent party
the ward suffered a lesion of more than one-fourth of
the property. How many years will be given the ward to 3. Effected with knowledge of the vice
4. cause of defect should have already disappeared
rescind the contract?
LOSS DUE TO DEFENDANT’S FAU LT
Answer: The ward will be given 4 years after reaching the When the person obliged by the annulment decree cannot
age of majority (the time the guardianship ceases); return the thing because the same has been lost through his
fault –
hence, before reaching 22 years of age, the former ward
should already have sued for the rescission of the Effect: Contract can still be annulled.
contract.
A. Return the fruits received
B. Return the value of the thing at the time of the loss,
Who can bring the action with interest.
1. Injured party LOSS DUE TO PLAINTIFF’S FAULT
2. His heir or successor-in-interest
3. Creditors of A and B by virtue of Art 1177 (accion When the loss is due to the fraud or fault of the party
entitled to institute the proceedings –
subrogatoria)
Effect: Contract can no longer be annulled.

CHAPTER 7
Voidable Contracts CHAPTER 8
Unenforceable Contracts
Art 1390 – Art 1402
Art 1403 – Art 1408
VOIDABLE CONTRACTS
A contract where all the essential elements for validity are Those which cannot be enforced by a proper action in court,
present, although the element of consent is vititiated by unless they are ratified, because:
reason of lack of legal
capacity or by mistake, violence, fraud, etc. A. They are entered into without or in excess of
authority
Essential feature: Binding until annulled by a competent court. B. Non-compliance with the Statute of Frauds
Two remedies
 C. Both contracting parties do not possess legal EFFECTS
capacity
Inexistent contracts – produces no legal effects
Void contracts – bars any action by a guilty party to
CONTRACTS WITHOUT OR IN EXCESS OF AUTHORITY recover what he has already given under the contract.
Contracts entered into the name of another person by
Art 1410 – Art 1422
one who was not given legal representation, or who has
acted beyond his powers – Effect: Unenforceable
IN PARI DELICTO
Principles
1. No one may contract in the name of another When the defect of a void contract consists in the illegality
without being authorized by the latter or unless has of the cause or object of the contract, and both are at fault or
has a right to represent him. If duly authorized, in pari delicto – law refuses them remedy and leaves them
must act within the scope of his powers. where they are.

Effect – unenforceable. Applicability of the in pari delicto

rule
2. However, it may be ratified (express or implied) by Applies only to cases of existing contracts with an illegal
the person in whose behalf it has been executed, cause or object and NOT to simulated or fictitious contracts
before it is revoked by the other contracting party. nor to whose which are inexistent for lack of an essential
requisite such as cause or consideration.
CONTRACTS WHERE BOTH PARTIES ARE INCAPACITATED
Effect if only one party is at
Voidable – if only one is incapacitated fault
Uneforceabe – if both are incapacitated
IT DEPENDS.
Ratification
1. Expressly A. Executed contract
2. Impliedly
Guilty party – barred from recovering what he has given to
Who can ratify? the other party. It is repugnant for a party to invoke his own
1. By the parents of guardians of the contracting parties. guilt as a reason for relief.
2. By the parties themselves upon attaining capacity
Innocent party – may demand for the return of what he has
Effect:
Voidable – if only one ratified given.
Valid from inception – if both ratified
B. Executory contract

Cannot produce any legal effect whatsoever. Neither of

the contracting parties can demand its fulfillment nor be
compelled to comply.
CHAPTER 9
Void and Inexistent Contracts EXCEPTIONS
The in pari delicto is not absolute in
Art 1409 The following contracts are inexistent and void from character.
the beginning:
1. Payment of usurious interest – Law allows
(1) Those whose cause, object or purpose is contrary to law, debtor to recover the interest paid in excess of that
morals, good customs, public order or public policy; allowed by the usury laws, with interest from the
(2) Those which are absolutely simulated or fictitious; date of payment.
(3) Those whose cause or object did not exist at the time of the
transaction; 2. Payment or delivery for an illegal purpose, where
(4) Those whose object is outside the commerce of men; the party who paid repudiates the contract before
(5) Those which contemplate an impossible service; the purpose has been accomplished, or before an
(6) Those where the intention of the parties relative to the damages has been caused to a third person –
principal object of the contract cannot be ascertained; recover what was paid or delivered.
(7) Those expressly prohibited or declared void by law.
Example: For a reward, A promised to kill C
These contracts cannot be ratified. Neither can the right to set
for B. B gave the reward. Before A could kill C, B
up the defense of illegality be waived.
repudiated the contract. Is B allowed to do so? Yes,
because here, the purpose has not yet been
Other void contracts
accomplished and no damage has as yet been
1. No concurrence between the offer and acceptance
2. Non-compliance with the required form essential for caused to a third person. May B recover what he
validity has paid? It depends on the discretion of the court.

CHARACTERISTICS 3. Payment or delivery of property by an

incapacitated person – recover what was paid or
A. They produce no legal effects whatsoever (quod delivered.
nullum est nullum producit effectum)
B. Not susceptible of ratification 4. Agreement or contract which is not illegal per se
C. Right to set up the defense of inexistence or
absolute nullity cannot be waived or renounced but is merely prohibited by law, and the prohibition
D. Action or defense is imprescriptible is designed for the protection of the plaintiff –
E. Cannot be invoked by a person whose interests
are not directly affected latter can recover what he has paid or delivered.
 Example: A donated to B everything that he which he received by will or by the law of intestacy from the
(A) possessed and owned, leaving nothing for estate of the deceased, the payment is valid and cannot be
himself. This is prohibited but not illegal per se. rescinded by the payer.
Since public policy is hereby enhanced, A will be
allowed to recover, at least that necessary for his Art 1430. When a will is declared void because it has not been
own support and the support of his relatives. executed in accordance with the formalities required by law,
but one of the intestate heirs, after the settlement of the debts
5. Payment in excess of the maximum price of
any article fixed by law – Buyer may recover the of the deceased, pays a legacy in compliance with a clause in
excess the defective will, the payment is effective and irrevocable.
6. Contract whereby a labou]rer undertakes to
TITLE IV
work longer than the maximum number of hours
ESTOPPEL 
fixed by law –Laborer may demand for overtime
pay.
Art 1431. Through estoppel an admission or representation is
7. Contract whereby a labourer accepts a wage rendered conclusive upon the person making it, and cannot be
lower than the minimum fixed by law –Laborer denied or disproved as against the person relying thereon.
may demand for a deficiency.
Art 1432. The principles of estoppel are hereby adopted
insofar as they are not in conflict with the provisions of this
Code, the Code of Commerce, the Rules of Court and special
TITLE III laws.
NATURAL OBLIGATIONS
Art 1433. Estoppel may in pais or by deed.
Art 1423. Obligations are civil or natural. Civil obligations give a
right of action to compel their performance. Natural Art 1434. When a person who is not the owner of a thing sells
obligations, not being based on positive law but on equity and or alienates and delivers it, and later the seller or grantor
natural law, do not grant a right of action to enforce their acquires title thereto, such title passes by operation of law to
performance, but after voluntary fulfillment by the obligor, the buyer or grantee.
they authorize the retention of what has been delivered or
rendered by reason thereof. Some natural obligations are set Art 1435. If a person in representation of another sells or
forth in the following Arts. alienates a thing, the former cannot subsequently set up his
own title as against the buyer or grantee.
Art 1424. When a right to sue upon a civil obligation has lapsed
by extinctive prescription, the obligor who voluntarily performs Art 1436. A lessee or a bailee is estopped from asserting title
the contract cannot recover what he has delivered or the value to the thing leased or received, as against the lessor or bailor.
of the service he has rendered.
Art 1437. When in a contract between third persons
Art 1425. When without the knowledge or against the will of concerning immovable property, one of them is misled by a
the debtor, a third person pays a debt which the obligor is not person with respect to the ownership or real right over the real
legally bound to pay because the action thereon has estate, the latter is precluded from asserting his legal title or
prescribed, but the debtor later voluntarily reimburses the interest therein, provided all these requisites are present:
third person, the obligor cannot recover what he has paid.
(1) There must be fraudulent representation or
Art 1426. When a minor between eighteen and twenty-one wrongful concealment of facts known to the party
years of age who has entered into a contract without the estopped;
consent of the parent or guardian, after the annulment of the
contract voluntarily returns the whole thing or price received, (2) The party precluded must intend that the other
notwithstanding the fact that he has not been benefited should act upon the facts as misrepresented;
thereby, there is no right to demand the thing or price thus
returned.
(3) The party misled must have been unaware of the
true facts; and
Art 1427. When a minor between eighteen and twenty-one
years of age, who has entered into a contract without the
(4) The party defrauded must have acted in
consent of the parent or guardian, voluntarily pays a sum of
accordance with the misrepresentation.
money or delivers a fungible thing in fulfillment of the
obligation, there shall be no right to recover the same from the
obligee who has spent or consumed it in good faith. (1160A) Art 1438. One who has allowed another to assume apparent
ownership of personal property for the purpose of making any
transfer of it, cannot, if he received the sum for which a pledge
Art 1428. When, after an action to enforce a civil obligation has
has been constituted, set up his own title to defeat the pledge
failed the defendant voluntarily performs the obligation, he
of the property, made by the other to a pledgee who received
cannot demand the return of what he has delivered or the
the same in good faith and for value.
payment of the value of the service he has rendered.

Art 1439. Estoppel is effective only as between the parties

Art 1429. When a testate or intestate heir voluntarily pays a
thereto or their successors in interest
debt of the decedent exceeding the value of the property