Buslaw 1

De La Salle University
Comlaw Department
Obligations and Contracts
Book IV, New Civil Code
Title 2, Chapter 3
Forms of Contract
CHAPTER 3. – Forms of Contract
ARTICLE 1356. Contracts should be obligatory, in whatever form they may
have been entered into, provided all the essential requisites for their validity
is present. However, when the law requires that a contract be in some form
in order that it may be valid or enforceable, or that a contract be proved in a
certain way, that requirement is absolute and indispensable. In such cases,
the right of the parties stated in the following article cannot be exercised.
Generally, contracts may be created in any form (oral, private or public document) so
long as all the requisites for its validity are present.
However, where the law requires a certain form to be followed, then such form must
be complied with for the contract to be valid and enforceable.
CHAPTER 3. – Forms of Contract
ARTICLE 1357. If the law requires a document or other special form, as in
the acts and contracts enumerated in the following article, 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
against the contract.
In addition to all the rights provided by law, where the parties enter into a contract
that needs a specific form, the parties may force each other to comply with such form.
This right may be exercised even when there has been a breach of the contract
together with the action for specific performance and/or damages.
CHAPTER 3. – Forms of Contract
ARTICLE 1358. The following must appear in a public document:

1. Acts and contracts which have been for their object the creation, transmission,
modification, extinguishment of real rights over immovable property; sales of real
property or an interest therein are governed by articles 1403, No. 2, and 1405;
2. The cession, repudiation or renunciation of hereditary rights or those of the conjugal
partnership of gains;
3. The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third
person
4. The cession of action or rights proceeding from an act appearing in a public document.

All other contracts where the amount involve exceeds five hundred pesos must
appear in writing, even a private one. But sales of goods, chattel or things in action
are governed by articles 1403, No. 2 and 1405.
CHAPTER 3. – Forms of Contract
Public Documents are documents which are enforceable and binding even to
parties who are not parties to the contract. Contracts become public
documents when they are duly notarized with a Notary Public/any official
authorized to administer oath or are admitted into the public record (i.e.
evidence).
Making contracts a public document provides the contract with some
legitimacy and regularity even against third parties.
While creating public document may not affect the validity of the contract, it
does make it easier to prove and prevent third parties from disregarding the
contract.
Obligations and Contracts
Book IV, New Civil Code
Title 2, Chapter 4
Reformation of a Contract
CHAPTER 4. – Reformation of a Contract
General Provisions
ARTICLE 1359. When, there having been a meeting of the minds of the
parties to a contract, their true intention is not expressed in the instrument
purporting to embody the agreement, by reason of mistake, fraud,
inequitable conduct or accident, one of the parties may ask for the
reformation of the instrument to the end that such true intention may be
expressed.

If mistake, fraud, inequitable conduct or accident has prevented a meeting

of the minds of the parties, the proper remedy is not reformation of he
instrument but annulment of the contract.

Reformation is a remedy provided by law in order to fix improperly prepared written

documents that “evidences” a contract
CHAPTER 4. – Reformation of a Contract
Remedies available to resolve confusing contracts:
Interpretation of the Contract
Reformation of the Contract

Requisites for Reformation

There had been a meeting of minds between the parties
The written instrument does not reflect the true agreement or intents of the parties
The failure to reflect the intents was by reason of mistake, fraud, inequitable conduct
or accident
An action for reformation is filed before the court with jurisdiction over the case
There is clear and convincing evidence of the mistake, fraud, inequitable conduct or
accident.
CHAPTER 4. – Reformation of a Contract
Reformation is not the remedy when the mistake, fraud, inequitable conduct or
accident prevented the parties from coming to an agreement in the first place.

When there was failure on the part of the parties to come to an agreement, then there is
no contract due to the absence of a valid consent. And if there is no contract in the first
place, there is nothing to reform.

ARTICLE 1360. The principles of the general law on the reformation of

instruments are hereby adopted insofar as they are not in conflict in the
provisions of this Code.

This Article provides that in cases of contracts, the Civil Code will prevail over any
general law governing reformation of instruments.
CHAPTER 4. – Reformation of a Contract
ARTICLE 1361. When a mutual mistake of the parties causes the
failure of the instrument to disclose their real agreement, said
instruments may be reformed.
ARTICLE 1362. If one party was mistaken or the other acted fraudulently or
inequitably in such a way that the instrument does not show their true
intention, the former may ask for the reformation of the instrument.

While mutual mistake of the parties in reducing their agreement in writing may give
rise to reformation, mutual mistake is not necessary for a party to claim for reformation
of the contract.

Again, a distinction must be made where the act of the guilty party resulted in
an error in the document or whether it was causal fraud.
CHAPTER 4. – Reformation of a Contract
ARTICLE 1363. When one party was mistaken or the other knew or
believed that the instrument did not state their real agreement, but
concealed that fact from the former, the instrument may be reformed.
Why Reformation and not Annulment?
In this article, the parties knew what their original agreement was, only that the
document was not written correctly.
So is this not a case of Incidental Fraud that can make the contract rescissible?
 Yes, but the innocent party may opt to enforce the original contract instead of rescinding
the contract.
Because the party hiding the mistake in documentation is guilty of fraud, only
the innocent party can bring an action for Reformation.
CHAPTER 4. – Reformation of a Contract
ARTICLE 1364. When through the ignorance, lack of skill, negligence
or bad faith on the part of the person drafting the instrument or of the
clerk or typist, the instrument does not express the true intention of the
parties, the courts may order that the instrument be reformed.

ARTICLE 1365. If two parties agree upon the mortgage or pledge of

real or personal property but the instrument states that the property is
sold absolutely or with the right of repurchase, reformation of the
instrument is proper.

In these two articles, Reformation is the remedy available for the parties because
the document clearly did not express the real intentions of the party.
CHAPTER 4. – Reformation of a Contract
ARTICLE 1366. There shall be no reformation in the following cases:
(1) Simple donations inter vivos wherein no condition is imposed;
(2) Wills;
(3) When the real agreement is void.

In simple donation inter vivos with no condition imposed the document can
only be so basic that there can be no confusion with the intents of the parties.
In Wills, reformation is not available because the one preparing the document
is already dead so the real intent cannot be ascertained.
In Void Agreements, there is no agreement to reform.
CHAPTER 4. – Reformation of a Contract
ARTICLE 1367. When one of the parties has brought an action to
enforce the instrument, he cannot subsequently ask for its reformation.

This is a case where a person cannot have one’s cake and eat it too.
If a person has brought an action to enforce the terms of the Contract as it is
written in the instrument, it is inconsistent for him to say that the contents of
the instrument did not contain the true intents of the parties.

ARTICLE 1368. Reformation may be ordered at the instance of either

party or his successor in interest, if the mistake was mutual; otherwise
upon petition of the injured party, or his heir or assigns.

This article enumerates who are the parties who can ask for Reformation of the
Contract
CHAPTER 4. – Reformation of a Contract
ARTICLE 1369. The procedure for the reformation of the instruments
shall be governed by rules of court to be promulgated by the Supreme
Court.

Actions for Reformation is filed in the proper court as prescribed by the Rules of
Court of the Philippines. [Rule 63. Rules of Court]
Obligations and Contracts
Book IV, New Civil Code
Title 2, Chapter 5
Interpretation of a Contract
CHAPTER 5. – Interpretation of a Contract
ARTICLE 1370. If the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its stipulations
shall control.

If the words appear to be contrary to the evident intention of the parties, the
latter shall prevail over the former.

Reformation is a remedy provided by law in order to fix improperly prepared written

documents that “evidences” a contract

Ex. Usage of terms that may be subject to different meaning (“prenda”, or “transfer”)
CHAPTER 5. – Interpretation of a Contract
ARTICLE 1371. In order to judge the intention of the contracting parties,
their contemporaneous and subsequent acts shall be principally considered.
In interpreting what the intentions of the parties were in a contract, a lot can be gleaned
from the acts of the parties during and after the creation of the contracts.

ARTICLE 1372. However general the terms of a contract may be, they shall
not be understood to comprehend things that are distinct and cases that are
different from those upon which the parties intended to agree.

Again, in interpreting contracts, the intents of the parties is paramount.

ARTICLE 1373. If some stipulation of any contract should admit of several

meanings, it shall be understood as bearing that import which is more
adequate to render it effectual.

Again, the note on words that are susceptible to double meanings.

CHAPTER 5. – Interpretation of a Contract
ARTICLE 1374. The various stipulation of a contract shall be interpreted
together, attributing to the doubtful ones that sense which may result from
all of them taken jointly.

Like everything else, when interpreting contracts, the bigger picture often provides a
better understanding of the contract than just the specific provisions.

ARTICLE 1375. Words which may have different significations shall be

understood in that which is most in keeping with the nature and object of the
contract.

More notes on terms and words that are subject to different meanings.
CHAPTER 5. – Interpretation of a Contract
ARTICLE 1376. The usage or customs of the pace shall be borne in mind in
the interpretation of the ambiguities of a contract, and shall fill the omission
of stipulations which are ordinarily established.

When interpreting contracts one must also take into consideration where and who were
creating the contract to resolve confusion. “Longest bridge”

ARTICLE 1377. The interpretation of obscure words or stipulations of a

contract shall not favor the party who cause the obscurity.

“He who caused the confusion must not benefit from the confusion”
CHAPTER 5. – Interpretation of a Contract
ARTICLE 1378. When it is absolutely impossible to settle doubts by the rules
established in the preceding articles, and the doubts refer to incidental
circumstances of a gratuitous contract, the least transmission of rights and
interest shall prevail. If the contract is onerous, the doubt shall be settled in
favor of the greatest reciprocity of interests.

If the doubt are cast upon the principal object of the contract 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 void. .

Rules in case the doubts could not be ascertained:

In Gratuitous Contracts – the least onerous interpretation prevails
In Reciprocal Contracts – the greatest reciprocity will prevail
When all else fails – failure of meeting of minds.
CHAPTER 5. – Interpretation of a Contract
ARTICLE 1379. The principles of interpretation stated in Rule 123 of the
Rules of Court shall likewise be observed in the construction of contracts.
Buslaw 1
Study Guide
MODIFIED TRUE OR FALSE
1. The form of the contract is essential for the enforcement of a contract.
2. Unless provided for by law, contracts do not need to be in any form.
3. If a contract need to be in a specific form then the parties are duty bound to
make the contract in that particular form.
4. A public document is one which is known to the public.
5. Contracts of leases are required to be in a public document.
6. Renunciation of a hereditary right is contrary to good customs and shall not
be valid regardless of the form it takes.
7. Public documents can be made in any form.
8. All Powers of attorney need to be in a public document in order to be valid.
9. Revocation of a power of attorney must be done in a public document.
10. Forms of contract refers to the need for a contract to be in writing.
MODIFIED TRUE OR FALSE
11. Reformation of the contract refers to the act of re-writing a contract
according to the terms actually agreed upon by the parties.
12. Reformation is required where the parties, by mistake, failed to agree on
what was really the object of the contract.
13. Parties who mistakenly signed a deed of sale when their agreement was for
a contract of lease may resort to reformation.
14. Mistake must be mutual for reformation to take place.
15. A party who acted fraudulently to have the other party sign a document
that was not the intent of their contract can ask the court for reformation to
correct the same before it is implemented.
16. Fraud in the execution of the contract is a ground for rescission of the
contract.
MODIFIED TRUE OR FALSE
17. An error committed by a third person in the documentation of a contract
may be reformed by the parties in the contract.
18. Last wills and testaments may be reformed prior to the death of the testator.
19. Simple donations inter vivos are pure obligations with no period or
condition and are not subject to reformation.
20. A party who enforced an erroneous written contract cannot later assail the
same and ask for reformation.
21. Only the parties to a contract can validly ask for reformation.
22. Reformation is a judicial act.
23. Interpretation of the contract is the remedy in case of foreign contracts
written in a foreign language.
24. Interpretation of the contract is trying to make sense of the same.
MODIFIED TRUE OR FALSE
25. In interpretation of contracts, acts and behaviors of the parties are the
controlling factor in determining intent.
26. Where the terms of the contract can be understood in several ways, the
meaning that makes the contract more reasonable is adapted.
27. In the interpretation of the contract, the provisions are interpreted in
relation with each other and not separately.
28. In interpretation of contracts, the party who prepared the contract being
interpreted will be asked to explain the meaning of the words he used in the
contract to understand the contract.
29. A contract that cannot be interpreted or understood is a contract that does
not exist.
30. The rules of interpretation and reformation of contracts are all in provided
for in the civil code.
ENUMERATIONS/DEFINITIONS
1. What does form of contracts mean?
2. What are public documents?
3. Which contracts must be in a public document?
4. Which contracts must be in writing?
5. What are the remedies for confusing contracts?
6. What is reformation of contracts?
7. What are the requisites for reformation?
8. Which contracts cannot be reformed?
9. What is interpretation of contracts?
10. What are the rules in case the doubts could not be resolved with
interpretation of contracts.
PROBLEM SOLVING
Problem 1. – Kardo and Pedro entered into a contract for the use of Kardo’s
motor tractor to Pedro for Pedro to use in his rice fields. The agreement was for
the payment of P10,000 for 5 weeks use of Pedro with Pedro paying for all the
supplies of the use of the tractor. Pedro drafted a contract of deposit which the
parties signed where Pedro can use the tractor that was delivered to him by
Kardo and which he was allowed to keep for 5 weeks and paid a deposit for the
tractor in the amount of P10,000. At the end of the 5 weeks, Pedro was
returning the tractor and was asking for the P10,000 deposit. Kardo did not
want to return the deposit saying that it was compensation for the use of the
tractor.
Can Pedro ask for interpretation of contract? Justify.
Can Pedro ask for reformation of the contract? Justify.
PROBLEM SOLVING
Problem 2. – Candy ordered a textbook from the bookstore at La Salle and paid
P1,000 for the same. She was issued an invoice for the same and was told to
return after 5 days. When she returned for the book, the bookstore was manned
by a different salesperson who said that she has no records of any order placed
in the bookstore. Candy insisted that she had placed an order showing her
invoice to the salesperson. However, the salesperson insisted that given the
price of the book, the contract Candy had ordering the book cannot be proved
and enforced if there was no specific contract/document outlining the same.
Furthermore, given that Candy was a minor, the salesperson said that unless
Candy’s parents were present to ask for the order, the salesperson cannot
process the order because Candy could not enter into any contract in the first
place. Is the salesperson correct? Justify.
Buslaw 1